POLITICS
04/10/2013 03:26 pm ET | Updated Apr 11, 2013

Haley Barbour Leaves American Crossroads Amid Concerns Over Conservative Victory Project

The powerful fundraising team that American Crossroads deployed in 2012 to pull in more than $300 million has lost ace fundraiser Haley Barbour, according to three GOP operatives close to the super PAC.

The departure of Barbour, a former Republican National Committee chairman and governor of Mississippi who volunteered in 2011 with his fundraising connections to boost American Crossroads' drive to defeat President Barack Obama, comes at a sensitive moment for the super PAC and for Crossroads GPS, its tax-exempt advocacy arm. After devastating losses in 2012, the two groups are revamping their operations and launching a new affiliate that plans to spend millions of dollars in GOP primaries to knock off certain conservative candidates that the group considers unviable -- an effort that quickly sparked a firestorm on the right.

According to two GOP operatives with knowledge of Crossroads' operations, Barbour was upset with the way the new affiliate, the Conservative Victory Project, was rolled out on the front page of The New York Times in early February by the group's president, Steven Law. "Barbour was blindsided and appalled at Law's announcement in The New York Times about taking on the grassroots," said one of the operatives. The three GOP operatives who spoke to The Huffington Post all requested anonymity to preserve their ties to the Crossroads groups.

Still, Barbour has indicated that he sees a rationale for the new victory project, calling it "a bad idea whose time has come." Barbour's comment was cited in an email that Law sent to Crossroads donors, according to a Politico report.

Barbour, who took on his part-time fundraising mission largely to oust Obama, is focusing more on the lobbying business he co-founded in the early 1990s, now called BGR Group, and giving speeches.

Crossroads spokesman Jonathan Collegio told The Huffington Post that "Gov. Barbour's involvement with Crossroads was always connected to the 2012 presidential election." Barbour was traveling and did not respond to a request for comment.

But Crossroads has moved quickly to offset Barbour's departure and gear up for the 2014 elections. It has lured two former RNC finance chairs -- Ron Weiser, who ran the party's fundraising operation in 2012, and Mel Sembler, a Florida shopping mall magnate and former ambassador -- to join a heavy-hitting advisory board that means to raise tens of millions for Crossroads' operations in the next elections.

A key mission of the new advisory board is to set up meetings for Crossroads co-founder and fundraiser-in-chief Karl Rove with new and older donors. Last month, Weiser and Sembler arranged a meet-and-greet for Rove in St. Petersburg, Fla.

Other new fundraising muscle for the Conservative Victory Project is expected from New York Jets owner Woody Johnson, who raised money for Mitt Romney's presidential drive, according to two GOP operatives.

The Crossroads makeover underscores the central roles that the outfits play in the sprawling GOP universe of "dark money" fundraising that has emerged since federal court rulings in early 2010 cleared the way for corporations, individuals and unions to write unlimited checks to outside groups that can directly support candidates.

But despite the shifts at Crossroads, Rove, the former Bush administration political guru, has seen his stature diminished by the 2012 election results. The Crossroads groups not only didn’t put Romney in the White House, but they also failed to help the GOP regain the Senate majority, their other top priority.

And conservatives have made Rove a punching bag in part because of the new victory project. "Karl is a double-edged sword" in the fundraising world, one of the GOP operatives told HuffPost. In Texas and Florida, two states vital to GOP fundraising, Rove is "still the man," he added. "But for some more conservative donors, Rove has lost a lot of luster. He's seen as part of the old-boy network that raised a lot of money but did very little good in the last elections."

The growing tensions between Crossroads and the GOP's more conservative elements were palpable at last month's Conservative Political Action Conference. Former Alaska Gov. Sarah Palin (R) was one of a few speakers to take direct shots at Rove, citing his lackluster record in 2012 and adding that if he felt so strongly about what kind of candidates emerge from primaries, he ought to "buck up and run."

Rove quickly defended the new project, noting that Palin had urged Missouri Senate candidate Todd Akin to drop out of the race after his incendiary comments about rape became public. "Sarah Palin should be agreeing with this," Rove told Chris Wallace on "Fox New Sunday." And Rove took a shot back at Palin, saying, "If I did run for office and win, I would serve out my term," Rove quipped to Wallace in reference to Palin's early departure from office.

Separately, Crossroads president Law appeared on a CPAC panel where he defended the victory project and spent time working the conservative crowd in an effort to mollify some disgruntled activists.

Law's appearance at CPAC suggested that he was trying to tamp down the frictions with the right, according to two GOP operatives. One added that Law seemed "humbled" by last year's electoral setbacks.

Despite -- or perhaps because of -- the conservative backlash over the victory project, fundraising for the new venture is said to be going well. According to two GOP operatives, some sizable pledges have come from loyal Rove fans, such as billionaire casino magnate Sheldon Adelson and billionaire investor Harold Simmons, who in 2012 between them kicked in tens of millions to Crossroads.

Crossroads, though, isn't only fending off attacks from the right. Simultaneously, Crossroads GPS faces increasing fire from a few campaign finance watchdog groups that have challenged its tax-exempt nonprofit status, citing, among other things, the almost $70 million it spent on political activities in the last elections.

Watchdog groups such as Democracy 21 have urged the IRS to deny Crossroads GPS the coveted status of a 501(c)(4) social welfare group, which allows it to keep donors' names secret. The IRS has stipulated that social welfare groups can't make political activity their primary purpose, but must devote the majority of their funds to issue and educational advocacy. The IRS is still weighing GPS' application for tax-exempt status, which was filed almost two years ago.

Further, some former IRS officials and Democracy 21 have pointed out that even if Crossroads GPS shows that the majority of its spending has not been for political purposes, the IRS could still turn down its application because of a related issue that the agency has weighed in its decisions: Some 501(c)(4) groups don't qualify because their activities provide a substantial "private benefit" to a political operation.

"The IRS has in the past challenged 501(c)(4)s on the grounds of providing an excessive private benefit to a particular party or candidate," Marc Owens, the former director of the agency's tax-exempt unit and now a partner at the law firm Caplin & Drysdale, told The Huffington Post.

Crossroads GPS has repeatedly stressed that it is complying fully with IRS rules and regulations.

And another watchdog group, Citizens for Responsibility and Ethics in Washington, last November sent strongly worded complaints to the Federal Election Commission and the FBI, charging that Rove and Crossroads GPS had violated federal election laws and may have been involved in a criminal conspiracy.

CREW alleged that Rove and GPS improperly earmarked millions of dollars for an independent expenditure in Ohio to help Republican challenger Josh Mandel in his race against Sen. Sherrod Brown (D). CREW's complaints noted that federal election law "requires any outside group that makes an independent expenditure to disclose the donors who contributed to pay for such ads." That FEC provision depends on evidence that a specific donation was made for a particular ad.

The complaint was sparked by comments Rove made to a gathering of wealthy donors at last summer's GOP convention in Tampa, Fla., which were first reported by Bloomberg Businessweek. Rove was quoted as telling donors that one out-of-state contributor told him, "I'll give ya $3 million, matching challenge," adding that "Bob Castellini, owner of the Cincinnati Reds, is helping raise the other $3 million for that one."

Crossroads GPS has previously defended its spending as proper and said that it's aware of election laws and has followed them.

This article has been updated with a comment from Crossroads spokesman Jonathan Collegio.

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