The Ghost Of Jay Banning

With RNC members set to meet early next month in Kansas City, an old feud between chairman Michael Steele and key opponents on the national committee is reemerging -- one that could prove a more serious offense, in committee members' eyes, than any gaffe Steele has made so far.

In amended reports filed with the FEC, RNC Treasurer Randy Pullen asserts the committee has millions in unreported debts, publicly calling into question Steele's leadership of the party.

The RNC reported raising just $5.9M in June and spending $7.6M, with $10.9M in the bank. In addition, the committee said it had $2M in debts at the end of the month -- debts RNC spokesperson Doug Heye said have been paid off. That means the national committee had just under $9M, making it relatively cash-poor just before crucial midterm elections.

RNC members have worried about the committee's budget for more than a year, as fundraising got off to a slow start under the new chairman. And Pullen, along with a cadre of senior RNC members who have served on the party's budget committee for years, has openly feuded with Steele over spending authority.

Last year, a group of RNC members realized the committee had neglected to re-pass a rule at the Sept. '08 convention that instituted strict spending controls. The rule had been standard operating procedure at the RNC for years, but the oversight -- committed months before Steele won his position -- left most major spending decisions up to staff, rather than committee members themselves.

Those RNC members, among them Pullen, NJ committeeman David Norcross and MA committeeman Ron Kaufman, tried to pass a resolution reinstituting the old rule. Steele took that move as a personal affront, accusing members of trying to undermine his chairmanship by imposing the new restrictions.

And in fact the resolution was aimed at providing checks and balances at a committee long-time members believed was newly unstable. That belief had little to do with Steele and everything to do with a little-known accountant who for more than 3 decades kept constant vigil over the national committee's budget.

That accountant, Jay Banning, served as the party's chief financial officer. Former RNC officials and committee members say Banning ran the committee's books to exacting precision. Every bill that came in was reported and promptly paid, every expense report was questioned, and every penny was accounted for.

But Banning left the committee early last year, just after Steele took over. Sources said he was asked to resign; the committee held his going away party at the Tune Inn, a Capitol Hill dive bar blocks from the RNC. Banning's remaining staff dutifully reported that expense on the following month's FEC report.

Banning is media-shy, and loathe to discuss party business outside the confines of the RNC building itself, or with a handful of top RNC members who he's known for years (Over years of reporting on the RNC, I have never talked with Banning, despite my best efforts). But he's a recognized commodity in the political world; he remains on contract with the RNC, and the NRSC quickly hired him as their top accountant once he left his old job.

Norcross, Kaufman and Pullen trusted Banning to run the RNC completely by the book. Pullen does not trust Steele's new hires to do so; he spent several days in DC (He is chairman of the AZ GOP) between July 15 and when the FEC reports were filed July 20, and he has accused top Steele aides -- most notably RNC chief of staff Mike Leavitt -- of withholding information.

Pullen went so far as to refuse to sign some documents headed to the FEC, as first reported by Hotline OnCall. As treasurer, he is legally responsible for the reports' accuracy. And this month, he filed amended reports that reflect more than $7M in previously unreported debt the committee held. All that debt is now off the books, Heye said.

The biggest hole Banning has left, those with knowledge of his work say, is the absence of a regimented process. Without his watchful eye, RNC staffers paid out $2K to a consultant for an evening at a risque L.A. nightclub. Staffers have also voiced concerns over spending on outside vendors, including a former Steele advisor. That relationship has since soured.

Steele himself has taken steps to address the broken processes. Pullen's review of recent FEC filings is the latest in a series of investigations at the committee. Steele created an ethics panel that is looking into the nightclub expense, a panel that has already forced out the top 2 finance officials at the RNC. And Steele has hired Tom Josefiak, the highly-regarded former RNC general counsel, to conduct a closer look at the party's books. Heye said on Tuesday that the RNC has even hired Michael Toner, a former chairman of the FEC, to keep it on track.

Those independent looks at the RNC and its fiscal house already guaranteed the budget would play a huge role in next month's committee meetings in Kansas City. Pullen's allegations will infuse a usually-dry budget committee meeting with a tension that has been quietly bubbling beneath the surface.

And that tension is likely to spread beyond Steele's usual list of enemies. GOP state party chairmen are counting on money from the national party to fund Victory programs across the country. Already, budgets for those centers have been slashed. The RNC has opened more than 100 Victory centers and are planning to open 225 in 35 states before Election Day.

But while the RNC will have sent $2M to state parties by the end of the month, members are nervous the money they need may not be there. Though GOPers are likely to make major gains during the midterms, the amount of credit Steele gets from the 168 members of the RNC will depend in large part on whether those members believe the party left seats on the table because they couldn't compete financially.

Though Steele's occasional gaffes have gotten him in trouble, calls for his resignation are not serious threats to his chairmanship, and new calls will be seen by committee members as a distraction at a moment the party needs to be focused on winning races. But while he's safe for now, Steele is virtually assured of a challenge next year, when his term expires in Jan.

Ironically, it won't be Steele's verbal miscues that draw a challenge. Instead, his decision to send a long-time employee packing early in his tenure could prove the most decisive, and damaging, decision Steele made.