The Freedom Foundation watchdog group filed three complaints with state and federal authorities, including the FBI and IRS, which outline a scheme in which the Pennsylvania State Education Association (PSEA) illegally laundered $1.5 million from its general treasury through the Fund for Student Success (FSS) to the Democratic Governors Association (DGA), which contributed it to Shapiro’s 2022 campaign.
The PSEA is the largest public-sector union in Pennsylvania and is a major player in state politics. Its political fund, PSEA-PACE (Political Action Committee for Education), is funded by voluntary contributions from PSEA members and is properly registered as a political organization with the IRS and as a political committee with the state government.
The FSS was created by the PSEA in 2018 and is registered as a political organization with the IRS, but not as a political committee with the state government. It’s also funded directly from the union’s general treasury, and not by voluntary contributions.
The first complaint was filed with the Pennsylvania Department of State, the Pennsylvania Office of Attorney General, and the Dauphin County District Attorney. It alleges violations of the Election Code and certain criminal statutes by the PSEA, FSS, and DGA.
The second complaint was filed with the Pennsylvania Labor Relations Board, alleging the PSEA violated the Public Employee Relations Act, specifically the prohibition in 43 P.S. § 1101.1701 against employee organizations using general treasury funds to “make any contribution… either directly or indirectly to any political party or organization or in support of any political candidate for public office”.
The third complaint was filed with the IRS, the U.S. Attorney for the Middle District of Pennsylvania, and the FBI’s Philadelphia office. It alleges the FSS submitted a fraudulent 2022 tax return.
The FSS made two contributions totaling $1.475 million to the DGA in 2022: the first was on May 17, 2022, for $925,000. The second was on May 31, 2022, for $550,000. They did not report these contributions to the DGA on their IRS Form 990. They did, however, report $1.475 million in contributions to Put Pennsylvania First, an independent political fund that only existed from April to December of 2022. Put Pennsylvania First never reported receiving these funds.
On June 1, 2022, the DGA contributed $500,000 to Shapiro’s campaign and made further contributions through that summer. The total contributions to his campaign by the DGA were $5.65 million, most of which were made after they received the FSS contributions. The DGA is registered as a political organization with the IRS and as a political committee with the state government, but it did not report the FSS’s May 2022 contributions on its reports to the state government.
During his 2022 campaign, Governor Shapiro spoke in favor of the Lifeline Scholarships’ school-choice program for low-income students, a policy and program the PSEA and other teachers’ unions oppose. He then flip-flopped on the issue after he was elected by vetoing funding for the program which was included in the 2023 state budget.
While some of the alleged violations may result in civil fines under Pennsylvania law and the Internal Revenue Code, most will be treated as criminal misdemeanors or felonies punishable with financial penalties or imprisonment.
