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Bernie Sanders's accusation that Clinton is running a "money laundering scheme," explained

(Andrew Burton/Getty Images)

Bernie Sanders is still running for the Democratic nomination. And his campaign still has some attacks on Hillary Clinton.

Early this week, after a Politico report examined the workings of Clinton's fundraising apparatus, Sanders's campaign accused Clinton of running a "money-laundering scheme."

At issue is Clinton's "joint fundraising committee" — an organization set up to help Clinton raise money with the Democratic National Committee and 32 separate state Democratic parties.

Clinton has said the money for the committee would also be used to help fund Democrats' state parties. But Politico reported on Monday that the state parties have gotten less than 1 percent of the total cash raised, and that it's instead being sent to the DNC and Clinton's presidential campaign.

Bernie Sanders standing behind a podium at a 2016 campaign rally where signs read, “A future to believe in.” Andrew Burton/Getty Images

This may not sound like such a big deal. After all, don't most Democrats think keeping the White House should be the party's top priority?

The problem, according to campaign finance experts, isn't necessarily the final result but how they got there: by giving the superrich one more back door to avoid campaign spending limits.

What is a "joint fundraising committee," and how is it supposed to work?

At their most basic level, the joint committees exist as a way for separate political organizations to come together to maximize their ability to raise money from donors. Rather than each try to hit up the same individuals separately, the organizations form an umbrella group — here called the Hillary Victory Fund — to which donors can give directly.

Under the current law, the most an individual donor can give to a presidential campaign committee is $2,700 per election. An individual donor can also give up to $33,400 to the DNC, and up to $10,000 to each state party committee.

Democratic presidential candidate Hillary Clinton speaks at the Broward College Ð Hugh Adams Central Campus on October 2, 2015, in Davie, Florida.
(Joe Raedle/Getty Images)

By existing as a group, the "joint committee" can get a big fat check that would be far too large for it to legally receive if its members were fundraising alone, according to Bob Biersack, a senior fellow at the Center for Responsive Politics. So a single donor could give around $353,000 to the Hillary Victory Fund, on the principle that money would go to the presidential committee, the DNC, and 32 state parties.

"They say, ‘We’re going to raise money collectively, and split it up according to the specific limits for each of us,’" says Biersack, who worked for three decades at the US Federal Election Commission. "And it's very efficient for the donors: You just write one check, and you’ve given to everyone involved."

The group then divvies up the donations, Biersack says, and everyone walks away happy. At least in theory.

What happened with Clinton’s "joint fundraising committee"

Clinton’s "joint committee" has three major parts — her presidential campaign committee, the Democratic National Committee, and 32 different Democratic state party committees from around the country.

At first, it appeared that all three had a great deal of mutual interest: Clinton would bring her big-money donors to the table, giving groups like the Democratic Party of Utah access to George Clooney’s wallet that it would never otherwise get. In exchange, Clinton could broaden her fundraising pitch by saying — as she did on several occasions — that she was raising money not just for herself but for the benefit of the entire Democratic Party.

Hillary Clinton and Bernie Sanders, behind podiums, at a presidential debate
Hillary Clinton and Bernie Sanders. (Getty)

And this is how we get to the current controversy.

While Clinton’s "joint fundraising committee" was marketed as a way to help all three groups involved, Politico’s reporting showed that 99 percent of the money raised by the committee has ended up going to the DNC or to Clinton's campaign directly.

At first, $3.8 million was sent to the state parties in line with the campaign finance laws, according to Politico. But rather than use that cash for their own operations, the state officials just sent 88 percent of it back to the DNC — apparently out of pressure from national headquarters. That's left many of the state officials feeling that they were getting a raw deal, according to Politico’s reporting.

"It’s a one-sided benefit," one state party official, speaking on condition of anonymity, told Politico. "Everyone who entered into these agreements was doing it because they were asked to, not because there are immediately clear benefits."

The Clinton campaign has pushed back at that report, telling CNN that $9 million of the Hillary Victory Fund's $46 million would later be transferred to state parties for down-ballot races. But it's not clear when that will happen.

Hillary Clinton on the debate stage with Martin O'Malley. (MANDEL NGAN/AFP/Getty)

If the state parties were getting screwed by the arrangement, why did they agree to play ball? It turns out that Clinton loyalists control many of the state party operations, and, moreover, many of the committees have no real bargaining power to fight back against the national command, according to Biersack.

"What are the state parties going to do?" Biersack said. "The DNC will help in a battleground state. But if a place like North Dakota doesn’t play along, the DNC might not send staff and resources for other races."

How Clinton's committee exploited a loophole in campaign finance law

As a matter of law, there’s nothing illegal going on here: State parties are allowed to transfer as much money as they want back to national headquarters, with essentially no limitations.

Here's the problem: Campaign finance rules exist to put a cap on how much one person can spend on a presidential campaign. If that money really does go to the state committees, then there's no issue.

But if the vast majority of that money is essentially funneled to the national campaign anyway, the original restriction on giving to national committees appears pretty meaningless.

"It's a circumvention of the contribution limits on the national party," says Michael Malbin, executive director of the Campaign Finance Institute. "The victim here is anybody who thinks there's anything meaningful left to contribution limits."

Why campaign finance experts think this is such a problem

I interviewed three of the country's top campaign finance experts for this story, and they all said that Clinton appeared to be exploiting a loophole in election law to render restrictions on contributions essentially meaningless.

"Collusion is a nasty word, but if every dollar you give to the state parties ends up going to the DNC, it just puts a lie to the idea that there’s a $33,000 limit on what you can give to the DNC," Biersack said.

Bernie Sanders
(Matt McClain/ The Washington Post via Getty Images)

And that feeds the real danger here: that by opening the door for this kind of backdoor maneuvering, the superrich are going to have much greater sway over the political process.

"If you’re raising $150,000 from one person, what’s the cost? What are those people going to expect in return? What are they going to get in return?" Biersack says.

This dynamic, Malbin and Biersack said, is even more dangerous now after a 2014 Supreme Court decision, McCutcheon v. FEC, stretched this loophole much further.

Before the ruling, an individual could only donate to about a dozen different state parties once every two years. The Supreme Court’s decision tossed out that restriction, giving donors the ability to donate $10,000 to all 50 states every year.

"This was always possible, up to a point," Biersack says, "but this year it's so much bigger because of the McCutcheon decision."

Clinton's defense: This is still ultimately money for the party

It's easy to see why Sanders's team pounced on Politico's reporting: It appears to show that Clinton is stretching election law to maximize the amount of money her campaign apparatus can get from the super wealthy.

But there are some important defenses of the campaign's actions here, too, and it's important to understand why her team may have opted for the structure of the joint fundraising committee.

For one, it's not as if the money from the state parties is being directed back for personal use by Clinton. It's not: It's instead going back to the DNC, which would presumably support whomever the nominee ends up being.

Hillary Clinton
(Paul J Richards/AFP/Getty)

"If Bernie Sanders were in a different position and leading the race, he'd be poised to take advantage of this huge war chest that's been amassed at the DNC," says Josh Stewart, deputy communications director at the Sunlight Foundation, a watchdog group for money in politics. "If Sanders had won, this money would be his — and a lot would be from the Clinton machine that helped raise it."

Then there's the fact that the DNC is going to be using the money in a way that they at least say will benefit the state parties in meaningful ways. Politico reports that much of the cash directed back to the DNC will go toward "enhancing national voter data, and research and communications efforts" — efforts that will redound to the states' benefit.

"There's no conceivable way each state would have the capacity to build the database that's being built here," Malbin says. "It takes a lot of money and technical knowledge to do it, and the states don't have that."

And while some state party committee members told Politico that they felt like they were being unfairly treated, others — like Jeremy Kennedy, the executive director of the Maine Democratic State Committee — said they were happy with the arrangement. One of the defenses here is that if the DNC uses the money running general election ads, that will ultimately help the state parties for which the money was intended.

"If the DNC runs attacks on Donald Trump and on Republican senators, how is that not helping every Democrat on the ballot in every specific state?" Stewart says.

Are Democrats able to reform a corrupt system if they participate in it?

The fight over the fundraising committee is about a pretty specific question: whether it's above board for the state parties to funnel money back to the DNC.

But there's a deeper divide over the role of money in politics between the two candidates that may have made this argument unavoidable.

A series of Supreme Court decisions over the past few years have opened the floodgates for unprecedented spending on presidential elections — through Super PACs, dark-money, and other forms of outside spending groups.

Clinton has been clear about the need to get big money out of politics, calling for a return of public financing of campaigns and a constitutional amendment to overturn the Citizens United Supreme Court decision.

Sanders sees the joint fundraising committee as evidence that Clinton isn't being honest about her commitment to reform. As with Clinton's speaking fees from Goldman Sachs, Sanders thinks taking money from the superrich is incompatible with the promise to get them to stop pouring cash into politics.

"You cannot exploit a broken campaign finance system one day and vow to get big money out of politics the next," Jeff Weaver, a Sanders aide, said in a statement.

But to Clinton, this attack may ignore the reality of the world as it is. Sure, it would be ideal if nobody had to raise money for elections. But is Clinton really to blame for working within the system as it exists?

"None of these loopholes she's using were created because of anything Hillary Clinton did," Stewart says. "And I think Clinton has made it no secret that she and her allies, including the party, will use every tool at their disposal to compete in the general election."