After donors gave a House candidate more than $8 million, a single firm took nearly half of it

U.S. House candidate Kim Klacik walked onto Mike Huckabee's cable talk show last August as the latest conservative celebrity, riding high on a viral campaign ad that had attracted 10 million views and was shared on social media by President Donald Trump and his eldest son.

"We raised close to $2 million," the Republican congressional hopeful said of the three-minute spot, which showed her marching in a red dress and high heels past abandoned buildings in Baltimore, asserting that Democrats do not care about Black lives.

But later that night, Klacik's staff told her it would be best to stop disclosing how much money the ad had raised for her campaign against Democratic Rep. Kweisi Mfume - because she wouldn't be keeping much of it, Klacik recounted in an interview.

The company that produced the video, Arsenal Media Group, would take a cut. And a firm hired to promote the video, Olympic Media, would keep up to 70 percent of the money it generated, some of which was not disclosed in Klacik's initial campaign finance filings.

Klacik, a self-described college dropout who launched a nonprofit organization to help disadvantaged women before running for office, said she did not personally approve or know about the contract with Olympic Media until that conversation.

"When I saw it, I almost passed out," she said.

Her campaign is an example of how some consulting firms are profiting handsomely from Republican candidates who have robust appeal in today's politically charged environment - even when they are running in deep-blue districts where it is virtually impossible for them to win. The more viral the candidate goes, the more money the companies make - a model possible only through the online outrage machine of hyperpartisan politics.

Fundraising companies say their fees are well-earned and still leave candidates with more money than they would have if their ads had not been shared widely. But critics, including Klacik and some other 2020 candidates, say the system is deceptive, trapping first-time politicians in onerous contracts that siphon away cash their donors intended for them.

"It sounds like part of the swamp that needs to be drained," said Bruce Dale, a Klacik donor from Michigan, who was aghast to learn that a chunk of his $800 in donations may not have made it to her. "They can say it's legal, but there are a lot of things that are legal that are wrong. This is wrong."

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High-margin fundraising fees - sometimes in excess of 90 percent of a donor's first contribution - have sucked resources out of conservative politics ever since the movement organized in the 1970s around the costly medium of direct mail. Social media, email and text-message fundraising brought those same steep margins online.

By the end of Klacik's campaign, she would raise a staggering $8.3 million and pay nearly $3.7 million of it to Olympic Media, according to campaign finance filings and her campaign manager. Klacik, now a frequent Fox News and Newsmax commentator, lost to Mfume in Maryland's 7th Congressional District by more than 40 percentage points.

"I actually lost sleep over this," she said of the high share of donations claimed by Olympic. "These companies - it's a racket. Unfortunately, this is why we ask people to send us checks directly to our P.O. box."

Olympic's founder and chief executive, Ryan Coyne, a former U.S. rower, countered that his company's work allowed Klacik - and Republicans in general - to amplify their voice in a traditionally Democratic part of the country and create a platform for future campaigns.

"It's true, advertising costs related to getting your name out are the biggest driver of campaign expenses," he said. "We are proud to have raised and netted millions of dollars for the Klacik campaign - helping turn her into a household name, generating many millions of dollars in earned media."

Another Republican long-shot candidate in a deep-blue district, Lacy Johnson, also worked with Olympic. But his campaign manager, Anton Lazzaro, considered the firm's rates reasonable in comparison with those of other vendors they encountered.

Lazzaro stopped working with digital fundraiser Bryan Rudnick, for example, after signing a contract that gave Rudnick's firm 80 percent of the money it brought in for Johnson from new donors.

Johnson was challenging Rep. Ilhan Omar, D-Minn., a national target of conservative scorn. Like Klacik, he urged Black voters to abandon the Democratic Party, saying it had served them poorly. Like Klacik, he lost by a wide margin - nearly 40 percentage points.

He raised about $12 million from donors across the country. After Olympic's share and other fundraising costs were deducted, just $5 million remained, Lazzaro estimated.

"There are so many vultures in GOP small-dollar fundraising," Lazzaro said. "It can be extremely difficult for first-time candidates to recognize legitimate fundraising vendors and self-serving operators taking upwards of 80 to 90 percent of gross donations."

Rudnick's firm, LGM Consulting Group, is suing Johnson's campaign for alleged breach of contract, saying its fees, along with a five-year no-cancellation clause and certain exclusivity rights, were appropriate.

"LGM invests significant time, effort and expense towards its client's campaign before it receives its first dollar," the company argued in a court filing. Rudnick referred questions to his attorney, who declined to comment.

Several GOP consultants, speaking on the condition of anonymity to protect their clients, said that some first-time or long-shot candidates in desperate need of money and name recognition may have no choice but to agree to expensive contracts.

But the consultants said that siphoning off such a large share of donations is counterproductive to achieving the greater conservative cause, because it redirects money that could be spent more directly on winning elections.

"It probably needs to be changed," Klacik's campaign manager, Greg Stewart, said of the fundraising system he encountered. "A lot of us new candidates are getting into it and are like, 'What the heck?' But you are on the spot. Election Day is in X amount of time. Are you going to be able to change the system before the election? The answer is more than likely not."

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Before the release of Klacik's viral ad, in mid-July, she had about $56,000 in the bank. She was mostly known as the person whose 2019 video highlighting trash and abandoned buildings in Baltimore caught the attention of then-President Donald Trump, who used it to attack then-Rep. Elijah Cummings, D-Md., who was chairman of the House Oversight Committee.

The campaign ad that would launch her onto Fox News and back into Trump's orbit took on a similar tone: blaming Baltimore's crime and blight on Democratic policies.

Arsenal contracted with Benny Johnson, a Newsmax TV host and the chief creative officer at Turning Point USA, to script and direct the ad, which the firm asked prominent Republican activists to share online.

Olympic took over the job of further prospecting for campaign contributions, Stewart said, placing the video in digital ads and sending it to lists of potential donors via email, text messages, and in Facebook posts.

Rather than a traditional contract, where a client pays a fixed fee for products or services, Arsenal and Olympic each received $5,000 up front, with the promise of additional income based on how much money came in from donors.

The ad was released online only. Klacik spent a relatively paltry $66,000 on traditional cable or broadcast advertising in her district, believing that she would draw more productive attention if her spots spread across social media.

"We just felt like digital was the new wave," she said. "That's how President Donald Trump reached a lot of people."

Klacik's campaign finance filings show she paid Arsenal just over $500,000 by the end of the campaign. That included about $100,000 in production and commission costs for the Baltimore ad and a second shoot later in the cycle, plus about $400,000 for a digital marketing campaign in her district, Stewart said.

Initially the campaign disclosed a total of $1.6 million paid to Olympic by the end of 2020. A Feb. 1 amendment to federal filings revealed $1.2 million more paid to the company, and Stewart disclosed an additional $800,000 after questions from The Washington Post - bringing the total to nearly $3.7 million.

The discrepancy was caused by an accounting mistake involving fees paid through WinRed, a GOP fundraising platform that allows vendors such as Olympic to deduct their share of donations automatically as the money comes in.

Klacik reported paying millions of dollars to WinRed that actually went through the donation processor to other vendors. Stewart and a WinRed spokesman confirmed the error. Other Republican candidates, including Johnson and Rep. Jim Jordan, R-Ohio, also misreported expenses to vendors, WinRed said.

Both the Klacik and Johnson campaigns said they are amending their filings. Jordan's campaign, which also hired Olympic Media for digital services, did not respond to a request for comment.

WinRed said in a statement that it "proactively insists that campaigns report fees accurately" with the Federal Election Commission, and that it's "the responsibility of each campaign to manage their own agencies and their own FEC compliance."

Stewart called the arrangement with Olympic the "price of doing business." He said Olympic - which also did work for Rep. Madison Cawthorn, R-N.C. - fit with the campaign's insurgent brand and "did good work for us" by repackaging the Arsenal video.

But although Klacik said she thought Arsenal's fees were fair, given the company's creative work, she took issue with Olympic's digital marketing rates.

"Whoever's over there is making a killing," she said.

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Klacik certainly got something for the millions she paid her vendors: a national political platform.

Within days of the Baltimore ad's release, she landed a speaking slot at the Republican National Convention. By October, she'd taken in more than $6 million - mostly from small-dollar donors across the country.

She spent more than $50,000 on private jets. She joined Donald Trump Jr. at a rally in Arizona, and the president himself in Atlanta to announce a plan to increase capital in Black communities. She traveled her district on a customized bus and spent thousands of dollars on a campaign event at Trump's hotel in downtown Washington.

Part of the reason Klacik's ad took off so rapidly was the influencers, including Trump Jr., that Arsenal and Benny Johnson brought Klacik who were willing to praise and share the spot on their social media accounts.

The company shot similar ads for a half-dozen other GOP politicians, including a viral spot for Rep. Lauren Boebert, R-Colo., that shows her walking the streets of D.C. promising to carry a Glock pistol to Congress. Joe Collins, a Republican who raised more than $10 million in his losing bid against veteran Rep. Maxine Waters, D-Calif., said his deal with Arsenal left him with more money than he would have had otherwise, and a list of donors he is using for his next campaign.

A contract between Arsenal and another 2020 Republican campaign, which was obtained by The Post, showed in detail how the payment structure can work.

After an upfront production fee of $20,000, the two parties used WinRed fundraising links to track how much money came in as a result of people viewing the spot in freely shared social media posts. The campaign kept the first $20,000, to reimburse production costs. It split the next $40,000 50-50, and forfeited 25 percent of the money raised above $60,000.

Klacik and several campaign managers who worked with Arsenal and Johnson in 2020 said their arrangement worked out well because they were able to attract donors who otherwise might never have heard of the candidates.

"Without (Benny Johnson) taking my message and putting it into a video forum, we would have never been on the level we were on," Klacik said. This month, she launched her own political-action committee, Red Renaissance PAC, which she said she will use to raise money for other Republicans.

Jason Cole, the managing partner at Arsenal, said the company works "with all types of groups to tell their stories. Often their budgets are limited, and we try to figure out creative solutions," he said. "We will always bet on our candidates and our work."

Once campaigns have the donors' names, email addresses and phone numbers, they can seek repeat donations and keep 100 percent of the proceeds. But if a candidate takes off as a national fundraising target, as Klacik and Lacy Johnson did, the share of the money raised by the fundraisers spikes as well.

"If you're a candidate who doesn't have money, that makes sense," said one GOP consultant, speaking on the condition of anonymity to protect the identity of his clients. "It's just that ultimately, the campaigns aren't paying for it. The donors are."

Suzanne Salata, who is active in Republican politics in San Jose, Calif., researched Klacik and gave her $500 after seeing her initial viral video on Fox News.

"I knew she was a long shot, but I felt it was worth investing in her," said Salata, who also donated to Lacy Johnson and other GOP hopefuls.

But Salata found it "ridiculous" that companies would take a sizable cut of a candidate's fundraising money. "Like at a nonprofit, if their overhead was 40 or 50 percent, you wouldn't give to them," she said. "It's not exactly apples to apples. But I've never heard of a kickback like this (in campaigns)."

Greg Ruggles, of Bettendorf, Iowa, sent Klacik $100 after stumbling onto her Baltimore campaign ad. He said he felt a little "duped"after learning a large chunk may have gone to a vendor.

"If you're giving money to a cause," he said, "you want it to go to the cause, not to the company creating the ad."

In the future, he added, "I'll certainly be more cautious about my donations."

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The Washington Post's Anu Narayanswamy, Erin Cox and Alice Crites contributed to this report.