Trailhead, the 527 group that is funding negative campaign tactics designed to favor of Republican political candidates across Colorado, anyway, is a Delaware limited liability company. As noted here, previously, it didn’t obtain a certificate of authority to conduct business as a foreign limited liability company until Friday, when our story broke. Besides the embarassment of having a blogger-journalist get first dibs on your name in the state, is there anything wrong with that?
Yes. Under Colorado law, the answer is that this is illegal, and that the person in charge of enforcing those laws, Republican Attorney General John Suthers, may have failed to do so because he benefits from the organization’s donors, creating a conflict of interest for him.In Colorado:
A foreign entity shall not transact business or conduct activities in this state . . . until its statement of foreign entity authority is filed in the records of the secretary of state.
Section 7-90-801(1), Colorado Revised Statutes.
The spokesperson for Colorado Secretary of State Gigi Dennis has confirmed for Colorado Confidential that entities conducting activities in Colorado must obtain authority by filing with the Secretary of State’s office.
There is a long list of activities that don’t constitute transacting business or conducting activities in the state. Section 7-90-801(2), Colorado Revised Statutes.
But, most of those exceptions involve either passive management of property from outside the state, or the conduct of an organization’s internal affairs. When an entity like Trailhead maintains an office for the conduct of its activities in Denver, and is actively involved in political campaigns all across the State of Colorado, while having essentially no activities anywhere else, it is hard to deny that it is conducting activities or transacting business in Colorado. Participating in elections for state offices in Colorado in quintessentially Colorado activity.
What are the penalties?
1. It can’t bring lawsuits in Colorado. Section 70-90-802(1), Colorado Revised Statutes.
2. It owes up to $100 per calendar year or partial calendar year that it didn’t have the authority to operate in Colorado. Section 70-90-802(2), Colorado Revised Statues.
3. It can be assessed a civil fine of up to $5,000. Section 7-90-802(3), Colorado Revised Statutes.
4. It can be enjoined from “the further transaction of business or conducting of activities by the foreign entity . . . until all amounts plus any interest and court costs that the court may assess have been paid” and it has obtained a certificate of authority to conduct business in the state.
Who is in charge?
The amounts due to this state . . . may be recovered in an action brought by the attorney general in the district court in and for the city and county of Denver.
Section 7-90-802(4) (emphasis added).
Thus, it is Republican Attorney General John Suthers’ job to enforce the law, and the job of Republican Secretary of State Gigi Dennis to impliment it in the ordinary course short of a lawsuit, since it is her office that is cheated.
As the Colorado Springs Independent has noted, there is heavy overlap between the major contributors to Trailhead, and the major contributors to John Suthers’ Attorney General campaign. This appears to create a conflict of interest, which may explain why Trailhead is comfortable that it will escape any penalties in this case.