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Updated Aug 17, 2014 - 8:28 am

Officials: Arizona Free Enterprise Club violated election law

PHOENIX -- State elections officials have said the Arizona Free Enterprise Club has broken election laws by not declaring itself a political committee.

State Elections Director Christina Estes-Werther sent a formal notification toe the group Friday, saying there was ``reasonable cause'' indicating the corporation failed to report all campaign contributions and expenses and isn't primarily spending money on social welfare.

Fountain Hills resident Paul Ryan filed a complaint against the group July 31. Ryan said the Free Enterprise Club claims it is a nonprofit corporation but has spent more on candidate advocacy.

Nonprofits can engage in political activities without disclosing donors and spending as long as their primary purpose is related to social welfare rather than attempting to influence elections, according to federal law and IRS requirements.

Corporate entities that accept donations and exist primarily to influence elections are required to register as political action committees and share their donor lists.

According to the Free Enterprise Club, the group made more than $3 million in total expenditures between January 2013 and Aug. 8 of this year. Of that, $1.2 million, about 37 percent, of the expenditures were spent on election cycle activity since June 26.

But the Secretary of State's office argues that the group improperly failed to provide a specific breakdown of the remaining 63 percent of its expenditures. The group provided a general breakdown instead, listing spending categories including public education and outreach, ballot measure campaigns, and public policy.

The club said the Secretary of State's office was not authorized to enforce federal requirements, according to the response section of reasonable cause notice filed by Estes-Werther.

The matter will now go to Attorney General Tom Horne's office for enforcement action.

Michael Liburdi, the group's attorney, did not respond to a request for comment Saturday morning. A phone call to the group Saturday afternoon rang unanswered and a voicemail was not immediately returned.

The Free Enterprise Club describes itself as a free market policy and lobbying group focused on promoting the state's economy.

State elections officials have been looking into whether other groups have been spending money to sway political races without registering as political committees.

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