Republican Senate candidate faces questions concerning alleged personal use of charity funds

Nevada Republican candidate Danny Tarkanian, who is involved in a primary campaign against incumbent GOP Sen. Dean Heller, has found himself suddenly involved in a fundraising scandal after a local television station uncovered a paper trail suggesting that Tarkanian may have misused funds that were donated to a charity under his control.

What are the allegations?

Tarkanian is the son of legendary former University of Nevada Las Vegas men's basketball coach Jerry Tarkanian and a prominent Las Vegas businessman. He is also the founder of the nonprofit charity Tarkanian Basketball Academy. He has repeatedly run for office (and lost), including an unsuccessful campaign for Congress in 2012.

According to tax documents and FEC filings obtained by KLAS-TV, the Tarkanian Basketball Academy loaned a company known as JAMD, LLC $40,000 on June 28, 2012. According to KLAS, Danny Tarkanian is listed as one of the managers of JAMD, LLC. On the same day, $40,000 was transferred from JAMD, LLC to a personal account owned by Danny Tarkanian. The next day, according to FEC documents reviewed by KLAS, Tarkanian loaned $40,000 from his personal account to the Tarkanian for Congress campaign fund, raising the obvious implication that Tarkanian allegedly donated $40,000 to his campaign from the funds of a charity that he controls.

It would have been illegal for a 501(c)(3) to contribute any amount of money directly into a political account, as tax-exempt charities are not allowed to engage in political activity or donate directly to political campaigns. Additionally, it would have been illegal for an LLC to donate that amount of money to Tarkanian's campaign, even if the LLC was treated as a partnership under federal election law. However, candidates are allowed to loan their own campaigns as much money as they want.

According to FEC documents, on July 11, 2012, the campaign transferred $53,755 back to Tarkanian personally as repayment of the loan. On July 12, 2012, KLAS reports that Tarkanian paid $300,000 to a bank as part of a mortgage payment on a house that Tarkanian personally owned. The unusual series of transactions has caused some to question whether Tarkanian essentially used funds that were donated tax-exempt to a charity in order to help make a mortgage payment on a house that he owned.

When reached for comment by KLAS, Tarkanian claimed that he had loaned his LLC "thousands" of dollars over the years, and that the $40,000 was a "repayment" of those loans. He claims that he put the money into his campaign account in order to pay bills that came due at the end of the primary campaign, which he won on June 12, 2012. Tarkanian then repaid the loan he made to himself during the general election, and made the $300,000 mortgage payment in order to keep from losing his home. Tarkanian, by his own admission, was facing a potential $17 million judgment from the FDIC at the time.

Tarkanian's statement did not explain, however, how or why the charity made the initial $40,000 loan to his LLC. For obvious reasons, loans by charities to officers/directors of the charity are considered suspect and are highly scrutinized by the IRS and other regulatory agencies.

Tarkanian told KLAS that the charity was repaid in full in 2014.

Even if the transactions are not technically illegal, questions about the propriety of using charitable funds (even on loan) in order to help get Tarkanian out of a sticky financial situation are likely to become a political issue in the upcoming campaign.

Tarkanian has run for office unsuccessfully on six previous occasions, including two campaigns for the U.S. House of Representatives (in 2012 and 2016) and a prior campaign for U.S. Senate in 2010.