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N. Carolina investigation into questionable donations finds no violation of state finance law

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RALEIGH, North Carolina — An investigation into more than $270,000 in questionable donations to the campaigns of top North Carolina officials from an Oklahoma Internet sweepstakes magnate has found no violations of state campaign finance law.

The N.C. State of Board of Elections released details Wednesday of the agency's two-year investigation into Chase Burns. Elections Director Kim Strach said her staff conducted more than 200 interviews with witnesses and reviewed more than 13,000 documents as part of the probe.

Burns and his wife were among the top donors to North Carolina candidates in 2012, as the industry was lobbying lawmakers to overturn the state's ban on the games.

Advocacy group Democracy North Carolina filed a complaint in 2013 alleging Burns violated state laws against using corporate money for donations.

Court records show the bank account used to issue the checks to the North Carolina candidates received regular transfers directly from accounts tied to Burns' sweepstakes company: International Internet Technologies of Anadarko, Oklahoma. That bank account and others were later seized as part of a criminal investigation into Burns, with prosecutors describing the money as the proceeds of an illegal gambling enterprise.

But state elections investigators determined the checking account was originally opened by Burns in 2005 as a personal savings account. Therefore, Strach concluded, the campaign money flowing to North Carolina politicians from the account should be considered personal contributions.

Members of the elections board expressed frustration Wednesday with ambiguities in state campaign finance laws.

"If I were head of a drug cartel, and I hire a lobbying firm to get heroin legalized and they advise me to contribute to political campaigns, all I have to do is take the proceeds of my heroin sales, put it in my personal account, and from that account I can make campaign contributions," said Elections Board Member Maja Kricker, expressing her disbelief.

Board chairman Josh Howard agreed.

"The laws, as they apply here, appear to be, regrettably or not, making this permissible," said Howard, a lawyer.

A second part of the investigation dealt with how the checks from Burns and other sweepstakes donors were collected and sent to the campaigns.

Investigators found that Burns mailed the checks to Christopher Clifton, an attorney at Winston-Salem based Grace, Tisdale & Clifton. Once Clifton received the checks, he mailed them to Moore & Van Allen, a Charlotte lobbying firm that had hired Pat McCrory before he was elected governor in November, 2012. Then the lobbying firm would mail the checks to the candidates' political committees.

Investigators found that Burns paid $7.8 million to Grace, Tisdale & Clifton and $129,000 to Moore & Van Allen between 2009 and March 2013, when Burns was arrested and his accounts frozen.

In an interview with the Associated Press in 2013, sweepstakes operator William George said he and another colleague hired Moore & Van Allen to push a bill legalizing sweepstakes games through the Legislature, and they picked the firm because McCrory was considered a shoo-in for governor.

Telephone messages left for Randel E. Phillips, general counsel at Moore & Van Allen, were not immediately returned Wednesday.

Democracy North Carolina executive director Bob Hall says the sweepstakes donations flowing to McCrory and others highlighted weakness in state campaign finance laws that need to be corrected by lawmakers.

"If you look at the report, you will see the inside of a sophisticated pay-to-play operation that is trying to buy new polices for an illegal enterprise and turn it into a legitimate business."

Hall suggested a state or federal law enforcement agency with subpoena powers should examine the issue. When witnesses are interviewed by elections investigators, they aren't under oath.

Strach said that during the two year probe, her office shared information with the State Bureau of Investigation and the U.S. Justice Department. Two FBI agents sat quietly in the back of the meeting room Wednesday as Strach addressed the elections board.

Before the report was released, board member Paul Foley recused himself from the discussion. Foley was not in the room, but was attending the meeting by speakerphone.

Foley has been under scrutiny since last week when the AP reported that he failed to recuse himself for 17 months from the state election agency's investigation of Burns, who was represented by other lawyers at the law firm where Foley is a partner. During that time, he demanded regular updates from staff about the progress and details of the investigation. He recused himself only after staff learned that Burns had paid nearly $1.3 million to Foley's firm: Kilpatrick Townsend & Stockton.

In his statement, Foley said he "was never involved with any representation" of Burns or his company. He "first learned that the law firm had received significant legal fees" in September and immediately recused himself, he said.

But Foley's written statement did not address whether he was generally aware that his law partners were representing Burns.

A spokesman for McCrory, who appointed Foley to the elections board in 2013, told AP last week that the potential conflict of interest wasn't disclosed to the governor.

Late Wednesday afternoon, McCrory said he's seeking to remove Foley from the board.

McCrory said he asked Foley to resign, but Foley refused. Now McCrory says he will use another law to throw Foley off the board. That law cites "misfeasance, malfeasance or nonfeasance."

Foley said in an email statement: "I do not believe it is appropriate for the Governor to ask a member of an independent board with ongoing oversight authority over him to resign. I did nothing wrong and, therefore, there is no reason to resign."


Follow Associated Press writer Michael Biesecker at Twitter.com/mbieseck

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