A business entity of the Michigan Automobile Dealers Association rented the second floor apartment of this building on North Walnut Street in downtown Lansing to state Rep. Lee Chatfield from 2015 through the end of 2020. Todd McInturf / The Detroit News
Lansing — The Michigan Automobile Dealers Association was former House Speaker Lee Chatfield’s landlord while the lawmaker had the power to sway decisions on laws governing car dealers, a financial arrangement that experts say potentially conflicted with a disclosure law covering lobbyists.
Terry Burns, executive vice president for the auto dealers association, confirmed in an interview with The Detroit News that Chatfield rented an apartment in a downtown Lansing building, owned by the organization through a business entity, for the six years the Levering Republican was in office.
Burns said Chatfield sometimes paid the rent by using funds from his nonprofit organization, which raised money from secret donors and was supposed to spend its dollars promoting social welfare.
“We did receive some funds from them,” Burns said of Chatfield’s Peninsula Fund.
Under state requirements, financial transactions of $1,350 or more between a registered lobbyist and a public official must be disclosed by the lobbyist if they are not “carried out during the ordinary course of business of a lobbyist.”
The Michigan Automobile Dealers Association and its Auto Dealers of Michigan legislative arm are registered lobbyists and did not disclose the apartment rental with Chatfield in the six years he was a member of the House, records show.
The renting of an apartment, which was also available to the public, at a fair market rate to a public official is not a reportable transaction, Burns contended in a statement.
“Fair market rent was charged and collected on this apartment for the duration of the rental agreement,” Burns said.
For the final two years of his time in Lansing, 2019 and 2020, Chatfield held the top position in the House, giving him the ability to set the agenda for the chamber. The House voted on an array of bills impacting auto dealers during that time, including approving a controversial one, supported by dealers, that would have limited the ability of electric vehicle manufacturers to sell their cars directly to customers.
Chatfield’s housing deal was one of multiple ways the Republican lawmaker from Emmet County tested ethics laws, including one requiring financial transactions with lobbyists to be reported. This raised concerns among colleagues and staffers about who was influencing his actions, according to a wide-ranging investigation by The Detroit News, which involved interviews with more than 30 sources and a review of previously unreported documents.
Burns didn’t reveal how much Chatfield was paying in rent each month, but said, “He was paying the going rate.”
Chatfield’s rental arrangement was between him and an entity that shares the address of the auto dealers association, Walnut Tree Properties, not with the organization itself, Burns said. That detail might or might not matter in determining whether the arrangement should have been reported under the state’s lobbying law, depending on whether the auto dealers controlled the entity, said Chris Thomas, Michigan’s former 36-year elections director whose office oversaw lobbying disclosures.
The question would likely have to be examined by investigators for Attorney General Dana Nessel’s office to find an answer, Thomas said.
“It could definitely be a live issue,” Thomas said.
Burns acknowledged the auto dealers did control the entity that rented the apartment to Chatfield.
Under the lobby law, a violation could bring a misdemeanor penalty “punishable by a fine of not more than $1,000.” But there is an exemption from disclosure for transactions “carried out during the ordinary course of business” of a lobbyist, according to a state manual.
There is a precedent for lobbyists to disclose leases with public officials. Another lobbying business, Manny Lentine Inc., disclosed in 2018 that it was renting office space to Rick Johnson, who was then chairman of a state marijuana licensing board, state records show.
Chatfield, the former speaker who served in the House from 2015 through 2020, is facing a probe by Nessel’s office into allegations he engaged in a “criminal enterprise,” involving embezzlement and bribery. Nessel’s investigation began in January after Lee Chatfield’s sister-in-law, Rebekah Chatfield accused him of sexually abusing her, beginning when she was 15 years old.
Lee Chatfield has denied wrongdoing and said he had a consensual affair.
“Mr. Chatfield believes that an objective review of the facts — rather than mere speculation designed to gain media attention and the public’s interest — will show that his actions and all financial actions were in accord with the law,” said Mary Chartier, Lee Chatfield’s attorney.
More:Lee Chatfield suspected of engaging in criminal enterprise
It’s common for Michigan lawmakers who live far distances from Lansing to rent housing near the Capitol where they live during weeks the Legislature is in session.
The building that includes the apartment that Chatfield rented is owned by Walnut Tree Properties, according to county property records. In state business records, Walnut Tree Properties listed the East Lansing address of the Michigan Automobile Dealers Association and Burns as its resident agent.
The Michigan Automobile Dealers Association describes itself as representing “the unique interests of the more than 600 franchised new vehicle dealerships.”
For 2019, the association’s political action committee was the 21st largest in Michigan, raising nearly $300,000. The Michigan Automobile Dealers Association spent about $39,000 on lobbying state officials over Chatfield’s two years as speaker. The connected Auto Dealers of Michigan, which serves as the association’s “legislative entity,” according to its website, spent $78,000 on lobbying during that period.
On its lobbying disclosure, the Auto Dealers of Michigan listed the address of the office building, which featured Chatfield’s apartment in a different suite. The Auto Dealers of Michigan also has an office in the building.
The Auto Dealers of Michigan has been represented, in part, by the lobbying firm Governmental Consultant Services Inc., which maintained a close relationship with the former speaker. And Chatfield supported multiple bills backed by the auto dealerships while living in the apartment owned by their Lansing-based lobbying organization.
In December 2020, just weeks before Chatfield left office, the Michigan House voted 65-39, with Chatfield in support, for a bill that sought to prevent some electric vehicle manufacturers, like Rivian and Lucid, from being able to circumvent the dealer network and sell cars directly to customers.
The bill, which stalled in the Senate, banned vehicle manufacturers from directly or indirectly owning a motor vehicle repair or service center. The allowance for indirectly owned motor vehicle service or repair facilities in Michigan was a key provision of an agreement between the state and Tesla that ended a Michigan direct vehicle sales ban.
Former Rep. Aaron Miller, a Republican from Sturgis, said he viewed the auto legislation as the “highest possible form of favoritism you could have,” meaning the legislation unfairly benefited the auto dealers group and Tesla, which already had a deal with the state.
“That is the type of thing that I fought against during my six years,” said Miller, who left the House because of term limits at the end of 2020.
The Michigan Automobile Dealers Association’s Burns argued it would have been discriminatory not to allow Chatfield to rent the apartment simply because of his job.
While Burns didn’t reveal how much the rent was, he said he believed Chatfield used various methods to pay it.
Burns said Chatfield occasionally used checks from the nonprofit social welfare organization Peninsula Fund, through which the speaker raised more than $1.3 million from secret donors over 2019 and 2020, to finance his rent.
Asked later if he would provide transaction logs to detail payments from the nonprofit, Burns responded, “I don’t think it is proper to release that type of information on any renter unless the renter requests it or it is a legal request.”
In 2020, the Peninsula Fund reported spending $454,337 on food, dining, travel and entertainment.
Mark Brewer, an election lawyer and former chairman of the Michigan Democratic Party, said using a nonprofit social welfare organization to pay rent for someone’s apartment would be an improper use of funds because the spending doesn’t benefit the public overall.
The earnings of a social welfare organization cannot be used for the benefit of any private shareholder or individual, according to the Internal Revenue Service.
The nonprofit’s payments for rent would raise the issue of whether the group was providing an improper personal benefit to Chatfield, said Brett Kappel, an expert on campaign finance law with the Washington, D.C., based firm Harmon Curran.
“It’s difficult to see how that could be a legitimate expense for a 501(c)(4) organization,” Kappel said of the section of Internal Revenue Code covering Chatfield’s Peninsula Fund.
Investigators for the Attorney General’s office have been examining how Chatfield used his fundraising accounts, including the Peninsula Fund, according to search warrant affidavits previously obtained by The News. In February, Michigan State Police troopers searched the Lansing area home of Chatfield’s top political and legislative staffers, Anne and Rob Minard. On tax filings, the Peninsula Fund listed the same address as the Minards’ consulting firm.
State investigators interviewed Anne Minard on Feb. 15. She told them that she wasn’t aware of “any unethical or illegal use” of funds but she described Lee Chatfield’s spending as “excessive,” according to a search warrant affidavit obtained by The Detroit News.
cmauger@detroitnews.com
Staff Writer Beth LeBlanc contributed.
