Investor Exits DeSantis Fundraiser To Avoid Pay-To-Play Issue

Ron DeSantis’ presidential campaign was ready to hold a fundraiser with a private equity executive whose firm manages hundreds of millions for Florida retirees — until The Lever reached out. As Andrew Perez and Matthew Cunningham-Cook detail in today’s featured story, the move would have directly tested federal pay-to-play rules designed to curb political corruption.

Rock the boat.

Republican presidential candidate and Florida Gov. Ron DeSantis (R) and his wife Casey, walk in the July 4th parade, July 4, 2023, in Merrimack, N.H. (AP Photo/Reba Saldanha)

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An investor who was scheduled to co-host a presidential campaign fundraiser later this month with Florida Gov. Ron DeSantis (R) has withdrawn from the event after The Lever reached out with questions about compliance with federal anti-corruption rules.

CNBC reported Wednesday that Geoffrey Rehnert, co-CEO and co-founder of the private equity firm Audax Group, would co-host a fundraiser for DeSantis in Cape Cod, Massachusetts, in late July. A fundraiser invitation obtained by CNBC listed Rehnert and his wife on the host committee for the event, which costs $3,300 to attend.

Rehnert’s firm has substantial Florida pension business, and manages hundreds of millions in retirement savings on behalf of state employees and retirees. As such, his involvement would have likely represented a textbook violation of a longstanding federal rule designed to curb political corruption.

“Geoff and Laura have not donated any money or made any other contributions to the DeSantis presidential campaign,” a spokesperson for the Rehnerts told The Lever on Thursday. “To avoid any incorrect assertions, Geoff has decided to withdraw his name from the referenced event. As residents of Florida, however, Geoff and Laura support their governor and will continue to do so.”

The DeSantis campaign did not respond to a request for comment.

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The Securities and Exchange Commission’s (SEC) pay-to-play rule bars campaign contributions from financial executives to state officials who control pension investment decisions — and also prohibits covered executives from soliciting donations to their campaigns. The rule was enacted in 2010 in response to a series of bribery scandals at state and local retirement systems.

Florida’s pension system, which manages retirement savings for teachers, police officers, and other state employees, has committed $550 million to funds managed by Rehnert’s firm, including a $200 million deal announced in 2020.

As one of three Republican officials who oversee Florida’s $180 billion pension fund, DeSantis is expressly covered by the SEC’s pay-to-play rule.

Since DeSantis took office in 2019, Florida’s pension system has buckled under the weight of high fees driven by a substantial increase in risky private equity and hedge fund deals — investments that could be expanded even further thanks to new legislation DeSantis signed in May.

The Lever previously reported that several donors to political groups backing DeSantis’ gubernatorial campaigns had scored lucrative contracts with the Florida pension fund. Those donations represented a potential test of the SEC rule’s anti-circumvention provision, which prohibits “acts done indirectly, which, if done directly, would violate the rule.”

Rehnert co-hosting a fundraiser for DeSantis’ presidential campaign would have represented a direct test of the SEC rule.

The Audax Group — a Boston-based private equity firm founded by executives from Mitt Romney’s Bain Capital — manages $36 billion in assets, with a concentration in health care.

For years, Audax co-owned Correct Care Solutions, now Wellpath, which provides health care services to prisoners. The company has attracted widespread controversy for providing inadequate care, including under Audax’s ownership.

In the event that the SEC finds a violation of the pay-to-play rule, firms can be barred from providing services from the pension fund in question. Typically, punishments have involved settlements with the SEC and fines.

It’s widely understood that the SEC rule poses potential fundraising problems for governors who want to run for president. The rule reportedly complicated fundraising efforts by former New Jersey Gov. Christie and then-Texas Gov. Rick Perry in their 2012 Republican presidential campaigns, and discouraged Mitt Romney from selecting the once-popular Christie as his running mate in 2012.

A top Christie adviser went on to complain that “there is no way around it and there are no loopholes.”

State Republican parties previously tried and failed to get the SEC rule thrown out in court.

After DeSantis announced his presidential campaign, the law firm Skadden, Arps, Slate, Meagher and Flom wrote in a client memo that “it is important to keep in mind that contributions made to or solicited on behalf of Gov. DeSantis’ campaign are subject to the prohibitions and restrictions under the federal pay-to-play rules,” including the SEC rule.

In June, the law firm Akin Gump similarly wrote that “federal pay-to-play rules will likely present a fundraising challenge for Governor DeSantis’ presidential campaign, and necessitate compliance measures for the donors covered under these rules.”

The firm further warned: “A single excessive contribution to DeSantis’ campaign by a covered employee could jeopardize a company’s ability to transact certain business with the state of Florida.”