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EXCLUSIVE: State regulators reveal new fine against Sidney Powell, could lead to felony charges in Florida
Mississippi's Secretary of State caught Powell's group breaking the law. Hiding the problem from another state regulator could be her biggest problem.
Public records requests reveal a new enforcement action and Consent Decree against former Trump 2020 campaign lawyer Sidney Powell’s organization Defending the Republic Inc. of Texas for making false statements to solicit funds in the state of Mississippi.
The document also reveals the existence of a never before reported cease and desist order by the Mississippi Secretary of State on June 28th and a Consent Decree that Powell ratified through counsel on December 2nd to settle her violations and allow her to keep raising money in that state.
Also known as DTR, Sidney Powell’s group agreed to a consent order with Mississippi in October (embedded below) which allowed it to keep raising funds there. She has raised nearly $15 million according to a recent audit.
She was cited in Florida earlier this year and signed an agreement admitting to using a deceptive solicitation.
Crucially, Florida regulators indicated over the course of the last week that Powell did not submit any notices of the Mississippi enforcement action to Florida regulators.
A nonprofit’s failure to disclose out-of-state fines and enforcement orders can result in criminal charges in Florida.
This six-month-long investigation also unravels who is on the board of directors for Defending the Republic, Inc., why the original directors departed, and some of the group’s questionable activities over the course of the last year.
In addition, public records searches allow this report to reveal for the first time authentic copies of the group’s bylaws and its tax-exempt application with the IRS.
Defending the Republic, Inc. is Powell’s 501(c)4 charitable fundraising vehicle which applied late for tax-exempt status with the IRS (application linked) on September 13th, 2021, which has never been reported before. She’s its president and treasurer. Late filers take the risk of not receiving retroactive tax-exempt status, which would be problematic for a group that raised most of its money in its first few months.
Phone calls for comment to Powell’s offices and to the listed phone number for Defending the Republic Inc. went straight to voicemail each time. The voicemail box is full. The group's lawyer Jessie Binall, who also so represents Donald J. Trump, did not return a request for comment either.
Her fundraising group was compelled to register in Florida earlier this year after it got caught soliciting without a license, falsely informing the public it had permission to raise funds.
Three days after she registered there, Mississippi cited Powell’s group for making the same false statement about their state.
Mississippi’s voluntary compliance agreement with DTR is the second state enforcement action this year against Sidney Powell’s nonprofit for deceptive solicitation practices, exclusively revealed in this newsletter.
More importantly, the infraction in Mississippi was an event that Florida law requires to be reported to its regulators within 10 days.
Failing to report another state regulatory action to Florida after registration can be punished administratively, civilly, or criminally as a 3rd-degree felony if done knowingly and willingly, even against a lawyer claiming advice of counsel.
That same Florida statute also requires disclosure of registration to raise money in other states within 10 days, which Powell hasn’t done with 14 new solicitation licenses that her group obtained, according to public database searches.
Multiple public records requests to Florida’s Department of Agriculture and Consumer Services (FDACS) confirm Powell has not disclosed her troubles in the Magnolia State to the Sunshine State’s regulators through the date of publication.
In the late summer months, DTR applied for 21 new state registrations according to a filing with the North Carolina Secretary of State.
A search of online charity lookups shows that Powell’s organization completed 14 new charitable registrations with the states of Arkansas, Connecticut, Hawaii, Kansas, Kentucky, Minnesota, Mississippi, North Carolina, Oregon, Pennsylvania, South Carolina, Utah, Virginia, and Wisconsin.
At least two of the applications for charity registration, those in North Carolina and Hawaii, disclosed to the other state regulators there was an ongoing process to enter into a “voluntary compliance” agreement in Mississippi.
So it is clear the organization knew it faced a major adverse event when it applied for the other licenses.
In fact, the attorney Powell is required by law to report DTR’s Mississippi regulatory problems within a 10-day period to Florida regulators—who filed an administrative complaint against her group in early June. Missing that report, along with her failure to report 14 new state registrations to solicit funds within a 10-day period are both grave violations of the state’s charitable solicitation laws.
Florida statute 496.405 1 (a) requires disclosure to FDACS of new state registrations and six categories of major adverse events within 10-days of the event taking place.
Specifically, Florida law demands nonprofits disclose when “the charitable organization or sponsor has had its registration or authority denied, suspended, or revoked by any governmental agency, together with the reasons for such denial, suspension, or revocation”
On October 12th, Defending the Republic agreed to a Consent Order in Mississippi which admitted making false statements to the public about its authority to solicit funds in the state in violation of the Mississippi Charities Act. The group agreed to a fine of $2,500 which doesn’t foreclose the state from further prosecuting the matter if they find any other false statements or material noncompliance and admitted that they published false statements.
An attorney for Mississippi’s Secretary of State signed the order on December 2nd, just eleven days ago.
As of Friday at 5 pm, Florida did not have any 10-day notices from Defending the Republic or any documents submitted since November’s audit. A follow-up phone call and email today at 4 pm did not yield a response.
While Powell’s group is required to report the above agreement to Florida, as of now it has not.
How serious of an offense is it to miss 10-day filing deadlines?
The statewide precedent for upholding a criminal conviction for failure to report major adverse events to Florida’s consumer protection regulators includes an instance where a lawyer challenged his conviction on the grounds that advice of counsel should be a defense.
“Barry Allen Krumpkin lost a 2013 appeal in the 1st District Court of Florida. The court concluded that he had a duty to follow the plain language of the law when his counsel was giving bad advice and affirmed his criminal conviction for failure to report detrimental legal decisions,” attorney George David of Coral Gables, Florida said about violating the same provision of law Powell’s group has not complied with. “Based on the Krumpkin case, lawyers may have a higher level of criminal culpability when managing a Florida registered nonprofit because of its requirement to report of adverse events.”
Initially, this investigation aimed to determine if failure to report the addition of new board members to Florida’s regulators “must be updated when any change occurs in the information that was previously filed with the initial registration statement” according to the law.
It’s not entirely clear in the statute if failing to report new directors between registration statements is unlawful, so this newsletter consulted with an attorney who broke down the statutory construction of that requirement.
“I couldn’t find a case involving section 494.405(2)g., but my advice to a client would be to give an update to the state of Florida on your new directors immediately to ensure compliance with the law,” says Florida lawyer David Winker about the requirement to inform the state of new directors when changes occur inside nonprofits.
“Read as a whole, the intent of the statute is that the enumerative items on the list are there because the intent of the statute is to protect the public through transparency,” says Winker. Indeed, Florida’s legislature left a very plain statement in the law that it intends transparency as a bulwark against fraud and abuse in nonprofit fundraising.
Considering that Florida regulators were actively negotiating an agreement for failure to register while DTR was shuffling its board of directors in secret, there could be ramifications for its failure to report those events.
Defending the Republic’s bylaws has never been publicly reported before now, but they were obtained for this story from the state of North Carolina’s Secretary of State website.
DTR’s board must give unanimous written consent to take action without a meeting.
This newsletter exclusively reported six months ago that Powell’s former Board members Gen. Michael Flynn (famously her former client) and his brother Joeseph Flynn had quit on April 9th.
But her former associate Patrick Byrne refused further comment on the reasons behind the split, until now.
“We said we needed to look into any account that fed into DTR Florida, even higher upstream than the DTR Texas account with Wells Fargo,” said Byrne this week, referencing Powell’s personal and law firm accounts which she used as a sponsor of the nonprofit venture, “and that every penny in every account got swept into DTR Florida. If there was for example ‘$102.19 in interest accrued’ in her law firm account, that we’d calculate that and send it along too. She didn’t seem to get it initially or deflected it. I didn’t think she would push back.”
“We hired a new CFO. Ten days later he and I raised the issue with her. Two days after the CFO and I confronted her on the issue,” Byrne explained naming the source of the schism in the group, “she sent an email to all of us saying ‘I’m in charge here, I built this and I make the decisions without addressing the audit, but it sent everyone out the door.”
A recently released audit report given to the state of Florida only shows the time period from December 1st through July 30th without looking into the time period Byrne described where Powell raised funds to her law firm’s accounts, which is a sole proprietorship meaning those accounts are nothing more than her own personal accounts. Conducting nonprofit activities before incorporation, as Powell did, is called being the sponsor of a charity, and it confers direct personal liability for all acts during that time period.
Last November, while working for the Trump 2020 campaign, Powell appeared on the Rush Limbaugh Show to raise money with her website defendingtherepublic.org but without filing any sort of nonprofit corporation.
New audit records show that from December 1st, 2020 through the end of this July, those efforts yielded nearly $15 million, but do not account for the prior month when people were directed to mail checks to Powell’s law office and the various fictitious names she purported to use.
Significantly, Byrne’s recollection points to a potential gap of more than two months where Defending the Republic may have had fewer than three directors for most of April, all of May, and most of June, which is the minimum number required by section 22 of the Texas Business Organizations Code.
A federal grand jury is reportedly investigating if Powell listed two directors falsely on her initial certificate of formation in Texas, but the Flynn brothers took their place only 4 days later in an amended filing.
It’s unknown if Powell took any major actions during those four days, but there is a lot more potential for taking action without authorization during the gap between the Flynn brothers’ departure and the addition of two additional directors in June, Victor Sperandeo best known as the author “Trader Vic” who wrote “Methods of a Wall Street Master" and North Carolina real estate developer and former lawyer Charles “Neal” Coker.
Some documents also characterize her General Counsel Peter Haller as a “Director,” including documents submitted to North Carolina, Florida, and to the IRS in its application for tax-exempt status. What appears to be Haller’s signature is in the North Carolina registrations simply identifying him as a “Finance Committee Member.”
All three men were listed on Powell’s June 25th solicitation registration with Florida.
Reached for comment via text message to his DC bar listed phone number on July 26th, Haller replied he “was never a director,” and declined further comment referring me to “the filed articles.” He did not respond to any recent text messages for comment.
The conflict of interest policy for DTR which Powell provided to Florida says that it only began in June, although seven months of decisions preceded its initiation.
Powell and Coker signed the conflict policy which the former attested to, but Sperandeo did not.
When contacted by email on July 27th, Sperandeo informed me that he had resigned as of July 25th due to his position with DTR presenting a conflict with his business obligations.
“He’s an honest guy who doesn’t stand for Sidney's bs,” says a person familiar with C. Neal Coker, who explained that he’s a real estate developer who, “likes Sidney Powell as a friend.” The Triangle Business Journal reports Coker declared corporate bankruptcy nine years ago to avoid a foreclosure.
Recent email and phone messages to Coker seeking comment for this story have not been returned.
Inside of Powell’s recent 501(c)4 application to the IRS a new director who has never been reported upon before is listed.
He is an Ear Nose and Throat medical doctor in Maryland named Dr. Michael R. Abidin.
Dr. Abidin was seeing patients when a message was left seeking comment for this story at his practice, Metropolitan ENT & Facial Plastic Surgery. In a follow-up call, the doctor’s staff said he was aware of the request for comment.
He has not replied.
None of this information about new directors is on file with the Texas Secretary of State, nor Florida’s nonprofit regulators.
This newsletter sent a request to DTR’s registered agent Capitol Services Inc. of Austin, Texas to obtain a copy of their annual report. By law, nonprofits are only required to report quadrennially but they have to hold an annual meeting and annual report.
Texas law requires annual reports to be stored with registered agents and provides for criminal misdemeanor penalties against nonprofits who fail to comply with the record-keeping requirements. There is also a misdemeanor penalty against nonprofits who fail to make their financial records and annual reports open to the public for inspection with their registered agents.
“We have forwarded your request to our client, we cannot compel them to supply the records,” wrote back an agent for Capitol Services about Defending the Republic. “It will be up to our client to respond.”
Four days later, there is no response from DTR.
This newsletter also exclusively uncovered Florida’s investigation into Defending the Republic Inc. this past may May and endeavored to uncover the tangled web of current and former members of its Board of Directors.
However, the statement that claimed active registration in twelve states turned out to be false, and the deceptive statement about Florida alone led to a settlement and a $10,000 fine for deceptive practices.
Now we know Mississippi cited the same false statement (excerpted below) inside its Consent Order.