cutler files doc 2

8/3/2019 Cutler Files Doc 2.

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UNITED STATES DISTRICT COURT

DISTRICT OF MAINE

DENNIS BAILEY, ))

Plaintiff ))v. ) Civil No.:1:11-cv-00179-NT

)STATE OF MAINE COMMISSION ON )GOVERNMENTAL ETHICS )AND ELECTION PRACTICES )

)Defendant )

and ))

ELIOT CUTLER ))Intervenor-Defendant )

)

JOINT STATEMENT OF MATERIAL FACTS

OF DEFENDANT STATE OF MAINE COMMISSION ON

GOVERNMENTAL ETHICS AND ELECTION PRACTICES

AND INTERVENOR ELIOT CUTLER

1. On November 2, 2010, the State of Maine held a general election. The ballot listed fivecandidates for the office of Governor, including Republican Paul LePage, Democrat Elizabeth

Mitchell, and independent candidates Eliot Cutler, Shawn Moody and Kevin Scott. Agency

Record 1 at 31.

2. Rosa Scarcelli was a Democratic candidate for Governor who competed in theDemocratic primary election of June 8, 2010. Agency Record 1 at 4.

3. Dennis Bailey is a well-known political and public relations professional based in Mainewho has worked on a number of candidate and ballot question campaigns.Agency Record 1 at 4.

1 The Agency Record is filed in this matter as Docket #4. For ease of reference, documents from that record that arecited herein are attached.

Case 1:11-cv-00179-NT Document 70 Filed 02/08/12 Page 1 of 30 PageID #: 1746


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4. Dennis Bailey is the owner and principal of Savvy, Inc., a public relations firm located inPortland, Maine that he founded in 2000. BAILEY DEP. 11/9-11, 20-23.

5. Savvy, Inc. describes itself as Maines premier public relations firm offeringprofessional expertise in media and public relations, crisis communications, political campaign

management, speechwriting and more. Savvy, Inc. advises corporate, non-profit and political

campaign clients on media relations and communications strategies and presents itself as having

expertise in message development, grassroots strategy, speechwriting, [and] paid and earned

media management. BAILEY DEP. 19/19-21; BAILEY DEP. 18/9-15 and DEP. EX. 1 at 1, 2;

see also BAILEY DEP. 20/5-8; BAILEY DEP. 7/19-21; 12/1, 7-8.

6. All public relations work that Dennis Bailey does is through Savvy, Inc. BAILEY DEP.21/13-18.

7. Whatever Dennis Bailey writes is written in furtherance of the aims of his clients forwhatever project he has been hired for. BAILEY DEP. 23/4-8.

8. As part of his work for political campaigns through Savvy, Inc., Bailey writes direct mailpieces, press releases, flyers and web sites. BAILEY DEP. 20/12-15, 24-25.

9. Savvy, Inc. also designs and prepares collateral productions for political campaigns.BAILEY DEP. 23/9 -16.

10. Collateral productions are things like handouts, buttons and websites produced to furthera political campaign. BAILEY DEP. 24/13-20.

11. A blog could be collateral production. BAILEY DEP. 25/16-19.12. Savvy, Inc. is not a printer or a publisher. BAILEY DEP. 22/17.13. Between 1990 and 2000, Dennis Bailey worked full time as a press secretary toGovernor Angus King and former Congressman Thomas Andrews, and as a public relations



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strategist and speech writer on the gubernatorial campaigns of both Governor King and former

Congressman Thomas Allen. BAILEY DEP. 6/22-24; 9/5-11/11.

14. Bailey worked for various newspapers prior to 1990. BAILEY DEP. 5/22- 6/14.15. Dennis Bailey is the principal spokesperson for Casinos No!a political actioncommittee (PAC) formed in 2002 and active since then in opposing several ballot question

campaigns for casinos and slot machine facilities in Maine, including in the 2010 general

election. Agency Record 1 at 4; Wayne Aff. 14.

16. The Casinos No! PAC has paid Savvy, Inc. for Baileys services in this capacity duringevery year since 2002 in which the PAC has been involved in a ballot question campaign. Wayne

Aff. 14.

17. Dennis Bailey first began doing work for Rosa Scarcellis company, StanfordManagement, when Ms. Scarcelli called him in 2008. BAILEY DEP. 28/12-22.

18. During the period in which he was working on retainer for Stanford Management, Mr.Bailey began counseling Ms. Scarcelli about a potential bid for Maine governor. BAILEY DEP.

39/17-20.

19. Rosa Scarcelli publicly announced her candidacy and registered with the Commission asa Democratic candidate for Governor on or about July 20, 2009. Wayne Aff. 4and Aff. Ex. A.

20. In connection with her campaign for governor, Scarcelli signed a pledge which providedas follows:

I shall not participate in and I shall condemn defamation of and other attacks on anyopposing candidate or party that I do not believe to be truthful, provable and relevant tomy campaign.

I shall not use or authorize and I shall condemn material relating to my campaign thatfalsifies, misrepresents or distorts the facts, including, but not limited to, malicious orunfounded accusations creating or exploiting doubts as to the morality, patriotism ormotivations of any party or candidate.



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I shall promptly and publicly repudiate the support of any individual or group that resorts,on behalf of my candidacy or in opposition to that of an opponent, to methods inviolation of the letter or spirit of this code.

Wayne Aff. 5 and Aff. Ex. C.

21. In or around September, 2009, Savvy Inc. entered into a contract with Ms. Scarcelliscampaign organization, Rosa for Maine, to provide public relations, press relations and campaign

consulting services. BAILEY DEP. 40/23-41/4; BAILEY DEP. 40/3-8 and DEP. EX. 32;

SCARCELLI DEP. 11, 14-15. The contract provided that Savvy, Inc. would be paid a monthly

retainer of $2,000. See DEP. EX. 3.

22. During the period from September 1, 2009 through June 10, 2010, the Rosa for Mainecampaign paid Savvy, Inc. a total of $33,000 for Baileys services in the primary election

campaign, plus $868.02 for reimbursement of expenses for online advertising. Wayne Aff. 9.

23. Bailey does not record his time or keep track of the number of hours he works for anyparticular client. BAILEY DEP. 28/10-11; 42/17.

24. Bailey played a central role in the Scarcelli campaign, helping to assemble the campaignstaff, handling press and public relations, writing the campaign plan and advising on campaign

strategy. BAILEY DEP. 48/5-9, 49/4-6.

25. Bailey was in charge of communications and strategy on the Rosa for Maine Campaign.SCARCELLI DEP. 14/13-15.

26. When it came to communications on the Rosa for Maine campaign, Bailey had theauthority to make decisions himself. SCARCELLI DEP. 15/18-20.

27. Thomas Rhoads is married to Rosa Scarcelli. RHOADS DEP. 13/7-8.

2A number of documents marked as exhibits were initially designated as Confidential-Subject to Protective Orderbut had the designation removed by order of this Court. (Docket Item 64). Although exhibits attached hereto stillbear the designation, no document that remains confidential is attached.



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28. Rhoads has never had a job as a journalist or a writer. RHOADS DEP. 13/3-629. When the Scarcelli campaign began, Rhoads was working full time at his own firm,Elmington Management, as a financial advisor. RHOADS DEP. 14/21-15/4.

30. Rhoads also volunteered on the campaign. RHOADS DEP. 15/5-6.31. Rhoads work on the campaign included helping to draft the campaign plan and policyplatforms, as well as giving strategy advice and responding to emails. RHOADS DEP. 15/7-10,

15, 18-19.

32. Rhoads participated in campaign strategy meetings with Scarcelli, Bailey and Scarcelliscampaign manager and was involved in campaign decisions. RHOADS DEP. 129/22- 130/8;

BAILEY DEP. 52/20-22.

33. Initially, Bailey did not know Rhoads. BAILEY DEP. 51/8-9.34. Eventually, however, Mr. Rhoads would call Mr. Bailey frequently to discuss mattersrelevant to Rosas campaign. BAILEY DEP. 52/7-11.

35. In the initial months, communication between Rhoads and Bailey related almostexclusively to the Rosa for Maine Campaign. BAILEY DEP. 75/19-24.

36. Rhoads began doing research on Eliot Cutler in the late summer of 2009, after he learnedat a July 4th party that Eliot Cutler was going to be running for Governor. RHOADS DEP.

17/18-21; 126/4-22; Agency Record 1 at 4.

37. During the course of his research, Rhoads downloaded a number of articles from theInternet about Eliot Cutler. He collected this material in a three-ring notebook, a copy of which

he eventually gave to Dennis Bailey. RHOADS DEP. 137/3-14; 164/5-17; 177/3-18; Agency

Record 1 at 4.



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38. Rhoads also obtained, through the Scarcelli campaign, voter history informationindicating the number of times that Eliot Cutler and his wife had voted absentee since 1999,

despite claiming to live in Cape Elizabeth, Maine during that period. RHOADS DEP. 133/15-

134/3; 135/10-11.

39. This voter information is not available to the general public but may be obtained bycandidate committees and political parties for purposes and activities directly related to a

campaign.Id.; 21-A M.R.S. 196-A(1)(B).

40. The Rosa for Maine campaign reported spending a total of $10,000 to purchase voterregistration data through the Maine Democratic Party, beginning with an initial payment on

October 27, 2009. Wayne Aff. 11.

41. As early as October 19, 2009, Scarcelli knew that Rhoads was doing research on Cutler.RHOADS DEP. 34/20 -35/13.

42. According to Scarcelli, her husbands interest in Cutler related to making a strongshowing to the Democratic Governors Association(the DGA) that she was the best

Democratic candidate. SCARCELLI DEP. 55/2356/1.

43. Rhoads viewed Cutler as a threat to any Democratic nominee and thus to Rosa Scarcelliif she won the primary. RHOADS DEP. 87/25-88/10. Both Bailey and Rhoads believed Rosa

Scarcelli was the only Democratic candidate with a chance to beat Cutler in the general election.

RHOADS DEP. 141/3-22; BAILEY DEP. 78/15-79/1.

44. In mid-October, 2009, Rhoads reported to Bailey that he was thinking of doing a topten list on Cutler along the lines of the opposition research report that had been done for

Scarcellis campaign. RHOADS DEP. 31/8-18 and DEP. EX. 48.



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45. On October 19, 2009, Rhoads sent to Bailey a document that he had drafted, entitledTop Ten Eliot CutlerVulnerabilities, and asked him for feedback on it. BAILEY DEP. 68/9-

12 and DEP. EX. 5; ROHADS DEP. 34/20-35/4; 37/22-23.

46. Rhoads believed his Top Ten document to be similar to opposition research thatcampaign consultants prepare on candidates. RHOADS DEP. 36/4-11; 37/11-16.

47. Rhoads and Bailey subsequently referred to this document as his oppo research, oppodoc, Op research and blackops report on Cutler in email communications with each other.

See DEP. EX. 5; BAILEY DEP. 124/3-11 and DEP. EX. 18; RHOADS DEP. 48/17-49/4 and

DEP. EX. 51.

48. Much of the content in the Top Ten document was included in the Cutler Files website.BAILEY DEP. 69/9-12; compare DEP. EX. 5 with Agency Record 49.

49. In addition to speaking with Bailey about research he was doing on Cutler, Rhoads alsospoke about it with Rosa Scarcellis campaign manager, Patsy Wiggins. RHOADS DEP. 23/1-6.

50. On November 24, 2009, there was an email discussion within the Rosa for MaineCampaign between, among others, Rosa Scarcelli, her campaign manager Patsy Wiggins, her

husband Thom Rhoads, and Dennis Bailey, about the possibility of developing a strategy to take

Cutler out now. BAILEY DEP. 62/3-10; BAILEY DEP. 61/19-62/10 and DEP. EX. 4.

51. In Rosa Scarcellisopinion I feel we need to dislodge him before he develops roots. Ithink its highly important to start a blog campaign against him like the anti-Richardson

movement. SeeDEP. EX. 4 (emphasis added); SCARCELLI DEP. 21/2-6.; see also BAILEY

DEP. 63/20-24; (Q. . . Theres no doubt that Rosa Scarcelli raised the issue of creating a blog

against Eliot Cutler as of November 24. A. Correct.).



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52. Rosa for Maine campaign manager Patsy Wiggins asked Rhoads to send informationabout his Cutler research to a staff person at the DGA. RHOADS DEP. 96/11-14 and DEP. EX.

58.

53. Ms. Scarcelli also asked for a briefing book on Cutler. BAILEY DEP. 79-12-23 andDEP. EX. 7.

54. At the end of November, 2009, Rhoads prepared an internal briefing memo for Scarcelliin connection with her trip to Washington to meet with the DGA as part of her campaign (the

DGA Memo). Hewey Aff. 4 and Aff. Ex. A; RHOADS DEP. 23/15-21.

55.

In the DGA Memo, Mr. Rhoads identified Eliot Cutler as a serious threat to the

Democrats in the Governors race. Hewey Aff. 4 and Aff. Ex. A. In the memorandum, Rhoads

states: Besides the Democrats themselves, the main threat to Democrats holding on to the

governorship is Eliot Cutler. He adds: The good news is that Cutler has a litany of potentially

very serious background issues. The bad news is that no one knows about them yet.Id.

56. Rhoads communicated the same points to Dennis Bailey and to Rosa Scarcelli in an emailmessage on November 24, 2009. See DEP. EX. 4.

57. In the DGA memorandum, Rhoads discussed the question of when would be the besttiming to reveal [b]ackground/opposition research into Cutler.Id. He opined:

Timing is an important question. There are diverging thoughts on this subject. Onesays Democrats shouldn't play their hand too early (Brennan's mistake with King).Background/opposition research into Cutler could start now, but it isn't clear whetherCutler will be able to strike a chord with regular Maine voters. To attack him too earlywould be to elevate him unnecessarily to a level of viability he could not have achievedon his own. The other way of thinking is that Cutler is brilliant, rich and highlymotivated. He is the V1 rocket waiting in the bunker. It would be much easier, and muchless costly, to blunt him before he 'launches' than in mid-flight. We know or can find hismajor weaknesses now, and most of the Democrats he will undoubtedly siphon offotherwise would be highly skeptical of Cutler if this information was public. Making hima pariah and putting him on the defensive early could kill Cutler's chances of ever



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achieving critical momentum state-wide. If the past weeks news cycle is any guide, wethink the latter, more aggressive approach deserves careful consideration.

Hewey Aff. Ex. A.

58.

Rhoads sent to Bailey and to Scarcellis campaign manager, Patsy Wiggins, via email on

December 3, 2009, additional material he had gathered concerning Eliot Cutlers role in

Thornburg Mortgage, Inc. and another firm called Skanska AB. See DEP. EX. 58.

59. On or about December 9, 2009, Eliot Cutler announced his candidacy for Governor.Wayne Aff. 6 and Aff. Ex. B; RHOADS DEP. 45/6-23 and DEP. EX. 50. In response to an

email from Bailey to Rhoads, Rosa Scarcelli and Patsy Wiggins about Cutlers announcement,

Rhoads reported that the DGA had expressed interest in see[ing] what we have on Cutler. Id.

60. In response to an inquiry from the DGA staff, Scarcellis campaign manager PatsyWiggins asked Rhoads to provide the DGA with links to the sources of his research. BAILEY

DEP. 80/21-81/12; DEP. EX. 8; See DEP. EX. 58.

61. These discussions of his research on Cutler werepart of Rhoads work on the Scarcellicampaign. RHOADS DEP. 41/5-9; See DEP. EX. 8.

62. Rhoads next sought advice about his research and writing on Cutler from a consultant atLink Strategies, a campaign consulting firm that had conducted opposition research on Rosa

Scarcelli for the Rosa for Maine campaign. RHOADS DEP. 41/14- 42/1, 44/1-5; BAILEY DEP.

84/1-9 and DEP. EX. 10. The Rosa for Maine campaign paid Link Strategies a total of $20,000

between August 10 and October 30, 2009. Wayne Aff. 10.

63. Rhoads emailed a copy of his Top Ten Eliot Cutler Vulnerabilities document to theLink Strategies consultant on or about December 21, 2009 and asked for his thoughts on it.

RHOADS DEP. 142/25 -143/15 and DEP. EX. 64.



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64. The Link Strategies consultant responded, stating this document looks really good, andits an extremely solid start to any research project. Im not sure how the other consultants

would feel, but Id think that the sooner we get this out there, the better. Id like to see people

start to question how much dirt is out there and how electable this guy really isespecially

before he gets any momentum. See DEP. EX. 10.

65. The Link Strategies consultants message concluded with a page and a half of textcontaining suggestions for how to re-phrase things in the Top Ten document. Id.

66. The Link Strategies consultant offered that there were several ways to get the informationout: from the Rosa for Maine campaign, (which he opined was kinda awkward), by pitch from

the DGA to reporters, or by having a blogger write about this stuff. See DEP. EX. 10.

67. On January 14, 2010, during the time period when both Bailey and Rhoads were activelyinvolved in the Rosa for Maine Campaign, Bailey sent Rhoads a revised version of material

regarding Eliot Cutler, entitled Is Eliot Cutler Fudging his Resume and Residency? asking

Rhoads How do you think this would look on a blogfor starters? BAILEY DEP. 83/8-13

and DEP. EX. 9; BAILEY DEP. 89/1-8.

68. Rhoads responded: This is great stuff. More compelling and complete than what Ihad. See DEP. EX. 9.

69. Bailey replied: Thats what I think. Just a taste that raises a few questions about hishonesty. His website barely mentions his China years. Hell try to laugh this off and say sure I

spent a few years in China after 1999 and once hes admitted that, we hammer him on exactly

what he did in China during those missing years. RHOADS DEP. 50/22-51/24 and DEP. EX.

52.



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70. Bailey tried to give information about Eliot Cutler to various members of the press whilehe was working on the Rosa for Maine campaign, but they were not interested. BAILEY DEP.

108/2-10.

71. On January 20, 2010, Bailey wrote to Rhoads that Id like to explore with [the LinkStrategies consultant] about putting up a website. I know how to do it, I just want to make

absolutely sure we can do it with no fingerprints. Untraceable. Id like to just put it out there,

piece by piece. BAILEY DEP. 90/9-14 and DEP. EX. 11.

72. Bailey was referring to a website about Eliot Cutler. BAILEY DEP. 92/1-3.73.

Bailey didnt want, you know, people who were involved to be implicated. BAILEY

DEP. 94/17-18.

74. As of one month later, on February 20, 2010, Scarcelli was aware that Rhoads and Baileywere preparing to release some of the information they had written about Cutler, as a teaser to

a local television reporter. RHOADS DEP. 69/6-10; see DEP. EX. 54.

75. In an email on February 20, 2010, that Rhoads testified was at least partially written aspart of his duties with the Rosa for Maine campaign, RHOADS DEP. 70/16-25, Rhoads wrote

[m]y only concern with [this television reporter]is keeping our names out of it. He absolutely

cant say where he got it. Do we trust him? Makes me nervous because its so close to home.

On the other hand, Id love to see a huge expose hit the airwaves soon. RHOADS DEP. 67/21-

68/8 and DEP. EX. 54.

76. On March 29, 2010, Rhoads wrote to Bailey proposing several possibilities with respectto publicizing the information gathered about Cutler, one of which was for us to simply pull the

trigger and get our stuff out there by any means necessary and let the chips fall where they may.

See RHOADS DEP. 71/6-15 and DEP. EX. 55.



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77. Bailey responded on April 1, 2010, suggesting that he could provide to another newsreporter that 2 pager I did that takes Cutler down on his residency (Ive updated it a bit)... Its

pretty devastating. BAILEY DEP. 105/18-23 and DEP. EX. 13. Bailey then asked Rhoads to

Give me a couple of more points, issue oriented, that demonstrate his [Cutlers] opportunism.

Maybe some stuff about how he worked for towns and cities advising them on loopholes in the

clean air act, which he claims he helped write. More examples of his hypocrisy. DEP. EX. 13.

78. Bailey recommended in a follow-up message to Rhoads the next day that he did not wantto give the news reporter the whole book but rather a teaser with hints of more to come. Id.

He was referring to the notebook of material that Rhoads had compiled on Cutler. Id.; BAILEY

DEP. 106/22-107/1 and /6-7.

79. Rhoads responded If you dont want to lower the boom just yet, you might instead wantto talk about the Toccoa dam disaster on his watch at OMB. DEP. EX. 13. He summarized a

story that was reported in Los Angeles Times in 1977, adding This is actually a good one

Cutler part of a new administration coming in, high hopes for change and lots of campaign

rhetoricthen look what happened when he actually took control. Good parallel to question his

executive capability.Id.

80. On or around April 14, 2010, the news reporter communicated his intention not to publishthe Cutler research to Bailey in an email in which he wrote Thanks for the great research. You

may be right after the primary could be too late butwe have our hands full . . . RHOADS

DEP. 77/12-18 and DEP. EX. 56.

81. The next reference to anonymous publication of negative material about Eliot Cutler wasfrom Rhoads to Bailey on April 10, 2010, when Rhoads asked Can we get in there anonymously

and stir things up? BAILEY DEP. 108/24109/1; BAILEY DEP. 18/11-23 and DEP. EX. 14.



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82. The reference to we meant people on the Rosa for Maine campaign. BAILEY DEP.109/16-18.

83. Baileys discussions with Rhoads about how to get negative information about EliotCutler out to the public occurred while Savvy, Inc. was working on the Rosa for Maine

campaign. BAILEY DEP. 111/17-20.

84. Bailey claims, nonetheless, that the conversations had nothing to do with the campaign.BAILEY DEP. 111/22.

85. Rosa Scarcelli lost the Democratic primary election on June 8, 2010. Agency Record 1 at4; BAILEY DEP. 113/21-24.

86. She continued, however, to have political aspirations for the future. See DEP. EX. 18;Plaintiffs Motion to Retain Documents as Confidential, (Docket Item # 27) at p. 6.

87. The Rosa for Maine campaign had on-going financial activity in July and August, 2010,as shown on its campaign finance reports filed with the Commission on July 20 and December

30, 2010. Wayne Aff. 12. The campaign committee officially terminated upon filing its last

report on December 30, 2010. Id.

88. After the June 2010 primary, Shawn Moody hired Savvy, Inc. to work for hisgubernatorial campaign. Agency Record 15 at 7-8. Moody was an independent candidate who

had registered with the Commission in April and was running for Governor in the general

election in November 2010. Wayne Aff. 7.

89. Dennis Bailey played a central role in Moodys campaign, serving as its only strategicpolitical consultant. Agency Record 15 at 7-8. His principal duties included creating a

campaign plan, writing press releases and television advertisements, speaking to news reporters

on behalf of the campaign, advising on campaign strategy, speechwriting, and preparing the



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candidate for debates. Agency Record 1 at 6; Agency Record 15 at 7-8; BAILEY DEP. 240/25-

241/17.

90. In connection with his campaign for governor, Moody signed a pledge which providedas follows:

I shall not participate in and I shall condemn defamation of and other attacks on anyopposing candidate or party that I do not believe to be truthful, provable and relevant tomy campaign.

I shall not use or authorize and I shall condemn material relating to my campaign thatfalsifies, misrepresents or distorts the facts, including, but not limited to, malicious orunfounded accusations creating or exploiting doubts as to the morality, patriotism ormotivations of any party or candidate.

I shall promptly and publicly repudiate the support of any individual or group that resorts,on behalf of my candidacy or in opposition to that of an opponent, to methods inviolation of the letter or spirit of this code.

Wayne Aff. 8 and Aff. Ex. D.

91. During the period from June 17 through November 16, 2010, Shawn Moodys campaignpaid Savvy, Inc. a total of $35,000 for Baileys services related to the general election. Wayne

Aff.13. The fees were based on a monthly retainer of $5,000. Id.; BAILEY DEP. 241/23-

243/8.

92. Even while Bailey was working for Moody he continued to generate collateralproduction for Scarcelli by writing and editing her blog. BAILEY DEP. 155/12-20 and DEP

EX. 27 (August 17, 2010 email from Rhoads to Bailey offering to write a section of the Cutler

Files if youll edit it for consistency with your voice on the other issues. Also if youll write

Rosa ablog post.); BAILEY DEP. 155/6-18.

93. Bailey also communicated with Rhoads and Scarcelli about the Moody campaign and itspotential effect on Cutler, writing to them on July 3, 2010, As Rosa predicted, Libby [Mitchell]



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will be third. We can get Moody in the 7-8% range and Cutler will be toast. BAILEY DEP.

134/18135/8 and DEP. EX. 21.

94. As late as January, 2011, Bailey was providing advice and editorial assistance to Scarcelliwith regard to her public statement concerning the Cutler Files. BAILEY DEP. 191/10-17.

95. After Rosa Scarcelli lost the primary, she and Rhoads attempted to sell the informationthat had been collected about Eliot Cutler. SCARCELLI DEP. 31/11-13.

96. The reason for this, according to Rhoads was that Rosa and I were personally owed a lotof money and it would have been nice to have had some value out of the hours that I put in

creating the book. RHOADS DEP. 83/1-3.

97. Scarcelli and Rhoads told Bailey that they were seeking $30,000 for the book ofinformation about Eliot Cutler. BAILEY DEP. 120/13-15.

98. The price was calculated in part based on the amount of time that went into compiling theinformation. BAILEY DEP. 121/21-23; RHOADS DEP. 83/1-3.

99. It was also based on the amount Link Strategies had charged the Scarcelli campaign foropposition research, and Rhoads assessment that his notebook on Cutler was just as good.

BAILEY DEP. 121/23-122/3; RHOADS DEP. 80/3-6; SCARCELLI DEP. 32/22-33/3; 33/15-18.

100. Scarcelli offered the information to Elizabeth Mitchells campaign and wrote to Rhoadsand Bailey: If they pass, we move on. They have the money. This is strategic. See DEP. EX.

18.

101. Rhoads responded that in addition to cash, we need firm assurances of support fromLibby [Mitchell] and the Party for our next move. Firm. Id.



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102. Bailey did not put much value in this idea, and he wrote Im fine with selling the bookto Libby but doubt very much theyll agree to supporting you as a condition, or if they do it

wont be worth much. They certainly wont support you in a primary with Chellie.Id.

103. No one bought the research, and efforts to sell it stopped in mid-June, 2010.SCARCELLI DEP. 38/2539/2.

104. Bailey and Rhoads met at a coffee shop on July 1, 2010, to discuss details regardingposting the information they had gathered on the web. RHOADS DEP. 90/1891/4.

105. They wondered what level of anonymity they needed. BAILEY DEP. 127/20-128/24and DEP. EX. 19.

106. Rhoads wrote to Bailey [a]rguments could be made for high -- is my identityindistinguishable from Rosas in the eye of public perception. See DEP. EX. 19.

107. Rhoads continued Anonymity has more than one purpose. The obvious one is to protectthe messenger, but equally important is to protect the integrity of the message. If you put it up

on your personal blog, all your detractors (and we know there are many) would attach the

message as dirty tricks and list their personal grievances with you. Message gets lost. Same

with meFolks will wonder why Rosas having her husband do herdirty work and look

suspiciously on what were saying. RHOADS DEP. 89/1-8; DEP. EX. 19.

108. Rhoads also worried about how it would look if they were discovered:The question I have is how it would look. If weve really done some of this stuffVisagift cards purchased with cash, using false identities to set up accounts, etc.well lookreally bad, like we genuinely have something to hide ourselves.

See DEP. EX. 19.



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topics, including in particular Cutlers involvement as a director of Thornburg Mortgage, Inc.

shortly before Thornburg declared bankruptcy. BAILEY DEP. 140/13-24 and DEP. EX. 23;

BAILEY DEP. 149/18-25 and DEP. EX. 24; BAILEY DEP. 151/7-22 and DEP. EX. 25;

BAILEY DEP. 153/7-13 and DEP EX. 26; BAILEY DEP. 154/12-20 and DEP EX. 27; BAILEY

158/1-10 and DEP. EX. 28; BAILEY DEP. 160/24-161/7 and DEP. EX. 29; BAILEY DEP.

163/7-164/5 and DEP. EX. 31.

119. Bailey and Rhoads asked an attorney employed at Rosa Scarcellis company, StanfordManagement, who had previously been employed by the Rosa for Maine Campaign to provide

them with a briefing on all the lawsuits involving Thornburg Mortgage, Inc. SCARCELLI DEP.

47/5-6; 107/14-16; RHOADS DEP. 103/3-17; BAILEY DEP. 151/10-21; 153/11-17; See DEP.

EX. 26.

120. They asked the Stanford attorney to do this rather than having to pay an attorney.RHOADS DEP. 103/18-23.

121. The Stanford attorney provided material in response, some of which Bailey incorporatedinto the text of the web site. RHOADS DEP. 166/10-21 and DEP. EX. 71; Agency Record 49 at

24.

122. Bailey does not know if the Stanford attorney was paid for this work. BAILEY DEP.154/4-7.

123. Bailey created the topical organization of the web site and designed the graphics usingsoftware installed on his computer. Agency Record 1 at 5; BAILEY DEP. 144/8-12.

124. He wrote or edited all of the text on the web site, drawing from Rhoads Top TenVulnerabilities document, the articles and real estate information collected by Rhoads and

Bailey, the Cutlers voter history information provided by the campaign, the material written by



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Bailey in January, 2010, entitled Is Eliot Cutler Fudging His Resume? and the material

provided by the Stanford attorney on August 15, 2010. Agency Record 1 at 5; See Agency

Record 49 and DEP. EXS. 5, 9, 26 and 71.

125. Bailey estimates that he spent three days over a weekend in August putting together theweb site. BAILEY DEP. 143/22 -144/7.

126. Bailey registered a domain for the website on or around August 4, 2010 and, throughSavvy, Inc., paid the fees associated with registration plus two months of hosting the site on the

web. Agency Record 1 at 5; Agency Record 15 at 8.

127.

As of August 17, 2010, Bailey was ready to pull the trigger on the website. See DEP.

EX. 28. However, he wanted someone else to upload the material so I dont have to lie when

the press calls. Id.

128. The Cutler Files website was posted (i.e., made publicly accessible) on the Internet (atwww.cutlerfiles.com) on August 30, 2010. Complaint 13; Agency Record 1 at 1.

129. The home page for the web site as of September 1, 2010, appeared with the heading TheSecret File on Eliot Cutler, a photograph of Cutler captioned alleged independent candidate for

Maine Governor and the headline Just Who Is Eliot Cutler? Agency Record 49 at 1. The

narrative began: Hes a phony and a fraud. Hes rewriting and revising his history and profile

to fit a carefully created campaign persona, fudging the facts, ignoring the truth and fooling the

voters. Id. The page questioned Cutlers independence as a candidate and alleged that he had

left Bangor, Maine to attend an elite private school. Id. It added He brags about his time at

the Office of Management and Budget (OMB). But his foot-dragging and bureaucratic

incompetence may have led to the deaths of 39 people. Id. The page continued:

These are just some of the confusing contradictions and outright lies that Eliot Cutler istelling on the campaign trail. Over the next several weeks, THE SECRET FILE ON

http://www.cutlerfiles.com/http://www.cutlerfiles.com/http://www.cutlerfiles.com/


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ELIOT CUTLER will reveal the facts about his life, facts youll find nowhere else, tohelp voters see the full picture of the manhis arrogance and ego, his ties to bigcorporations and foreign countries, and how he has spent a lifetime working directlyagainst the interests of Maine and the U.S. Youll see why Cutler is unfit to be Mainesgovernor.

Id. at 2; Agency Record 68.

130. The entire content of the web site was focused on Eliot Cutler, and the text containednumerous references to Cutler as a candidate for Governor. Agency Record 1 at 3; see Agency

Record 49 and 59.

131. The home page of the Cutler Files web site, when it was initially posted, stated we are agroup of researchers, writers and journalistsunaffiliated with any candidate or political party.

Agency Record 68.

132. When it was posted on the Internet, the Cutler Files web site did not include a statementidentifying the name and address of the person who had paid for or authorized it, nor did it

include any statement indicating whether it was authorized by any candidate. Agency Record 1

at 1; Agency Record 68.

133. On September 7, 2010, the Commission received a complaint filed by the Cutlercampaign requesting an investigation of the Cutler Files web site for possible violations of 21-A

M.R.S. 1014. Agency Record 1 at 1; Agency Record 67.

134. At a public meeting on September 9, 2010, the Commission staff requested and obtainedauthorization by the Commission to conduct an investigation into the Cutler Files web site, based

on the staffs analysis that the web site expressly advocated for the defeat of Eliot Cutler and did

not include the statutorily required statements indicating who had paid for and authorized the

web site, and whether it was authorized by any candidate. Agency Record 64. The staff also



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noted that there could be other reporting violations depending upon how much the web site cost.

Id. at 2.

135. On September 9 or 10, 2010, the text of the italicized statement at the bottom of the homepage was revised by Bailey to state:

Who we are: We are a group of researchers, writers and journalists who arefrustrated that Maines mainstream media is either unwilling or incapable of adequatelyinvestigating the backgrounds of candidates for higher office. We are not authorized byor affiliated with any candidate or political party, and we have not been compensated inany way for our effort.

Agency Record 1 at 6 (emphasis in original).

136.

This language remained on the web site from September 9 to October 29, 2010, when the

site was removed from the web. Id.

137. On September 9 or 10, 2010, the disclaimer NOT PAID FOR OR AUTHORIZED BYANY CANDIDATE was added at the bottom of the home page, as well as on several of the

separate pages on the web site. Agency Record 49at 2, 7, 15, 21, 28, 30, 31.

138. By the end of September or the beginning of October, 2010, the Cutler Files web siteconsisted of nine pages, on different topics related to Eliot Cutler, in addition to the home page.

Agency Record 49.

139. The page entitled Cutler Loves Bangor Or Does He? included text written by Baileyin January 2010. See DEP. EX. 9. It also included material from the Top Ten Vulnerabilities

piece written by Rhoads. See DEP. EX. 5 at DB 404; Agency Record 49 at 3-4.

140. The page entitled Cutler in Maine the Spin vs. the Facts included material from theTop Ten Vulnerabilities piece written by Rhoads, see DEP. EX. 5 at DB 403-404, plus the text

written by Bailey and emailed to Rhoads in January 2010. See DEP. EX. 9; Agency Record 49 at



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5-7. It included voter history information on Eliot and Melanie Cutler obtained by the Scarcelli

campaign, which is not available to the general public. Id. at 7; See DEP. EX. 5.

141. A third page labeled Eliot Cutler and the Toccoa Falls Dam Disaster included textwritten by Rhoads in his Top Ten Vulnerabilities document and drawn from a 1977 Los Angeles

Times article which was purchased on line. See DEP. EX. 5 at DB 406-407; Agency Record 49

at 8-10.

142. The page entitled Making His Millions on Both Sides of the Runway included textwritten by Rhoads in his Top Ten Vulnerabilities document. See DEP. EX. 5 at DB 410-411;

Agency Record 49 at 11, 13.

143. The page entitled Cutler Means Jobs in China included text written by Rhoads in hisTop Ten Vulnerabilities document. See DEP. EX. 5 at DB 407-410; Agency Record 49 at 16-21.

144. The page entitled Eliot Cutler: Just Like Wall Street, was largely written by Bailey andincorporated text sent by Bailey to Rhoads on August 22, 2010. RHOADS DEP. 159/17-160/12

and DEP. EX. 69. The page also included material provided by the Stanford attorney, based on

her review of the securities litigation involving Thornburg Mortgage, Inc., See DEP. EX. 71, and

drew on information obtained about Cutlers home mortgage from the Cumberland County

Registry of Deeds. Agency Record 49 at 22-28.

145. The page entitled Baby Eliots Childhood Dream was largely written by Bailey butincorporated material from Rhoads Top Ten Vulnerabilities document. See DEP. EX. 5 at DB

404; Agency Record 49 at 29-30.

146. In response to a message from Jonathan Wayne, the Executive Director of theCommission, on September 9, 2010, asking for an opportunity to interview him in connection

with the Commissions investigation, Bailey responded that he had limited info regarding the



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website but Im certainly willing to share what I know. BAILEY DEP. 168/6-9; BAILEY

167/2-15 and DEP. EX. 32.

147. According to Bailey, this was his short hand way of saying he wasnt going to name Mr.Rhoads. BAILEY DEP. 168/19-20.

148. Bailey met with Jonathan Wayne on September 13, 2010. BAILEY DEP. 174/6-9;Agency Record 62 at 1.

149. According to Bailey, I think I said [to Wayne] I was not directly involved in thematerial. I didnt write the material. BAILEY DEP. 174/22-24.

150.

On September 27, 2010, as Bailey prepared for an interview with the press, Rhoads asked

him What will you say if he asks you on the air about CF [Cutler files]? RHOADS DEP.

113/14-20 and DEP.]; DEP EX. 60.

151. Bailey responded Not much, Ill slither by it. Id.152. At a Commission meeting on September 30, 2009, the attorney representing the author(s)of the Cutler Files argued that they had a right to remain anonymous under the First Amendment

and urged the Commission to find 21-A M.R.S. 1014 inapplicable and to terminate the

investigation. Agency Record 1 at 2. He argued that a de miminis amount of money had been

expended to finance the web site and that the site was a form of citizen journalism that should be

exempt from the definition of expenditure, under 21-A M.R.S. 1012(3)(B)(1). Id. He

contended that Maines statute was overbroad because it required ordinary individuals spending

modest amounts of their own money to speak about candidates to disclose their identities. Id.

The Cutler campaign urged the Commission to continue its investigation on a number of

grounds. Id. The Commission declined to terminate its investigation but instructed its staff to

proceed in a manner that would protect the anonymity of the persons involved in the web site



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during the investigation, under the provisions of 21-A M.R.S. 1003(3-A). Id.; Agency Record

46.

153. At its regular meeting on October 20, 2009, the Commission considered an affidavitauthored by Rhoads but presented with his name redacted, which responded to a number of

factual questions posed by Commission staff. Agency Record 39. The Commission also heard

arguments presented by attorneys for the Cutler Files and for the Cutler campaign. Agency

Record 32. The Commission authorized its staff to continue the investigation of the Cutler Files

web site for possible violations of 21-A M.R.S. 1014 as well as 21-A M.R.S. 1019-B

(independent expenditure reporting) and to do so in a confidential manner. Id. 32 at 3.

154. On October 28, 2010, Bailey, Rhoads and Scarcelli conversed by email concerningpredictions that Cutler might win the election. SCARCELLI DEP. 50/17-21 and DEP. EX. 80.

155. In response to Rhoads comment that it appeared Cutler might win, Scarcelli responded:Lepage better turn out the votes. It would be great if moody could grab some attention.We need a plan for what we do if he [Cutler] wins.

Id.

156. Bailey, however, predicted that LePage would pull it out, DEP. EX. 80, and Scarcelliresponded Im starting a prayer circle for him. DEP. EX.80; SCARCELLI DEP. 50/22-23.

157. The Cutler Files web site was discontinued on October 29, 2010, four days before thegeneral election on November 2, 2010. Agency Record 1 at 4. The web site was publicly

accessible for two months. Id.

158. Bailey met again with Wayne on December 1, 2010. Agency Record 22.159. Bailey told Wayne during that meeting that he had no role in research prior to theprimary. DEP. EX. 40; Agency Record 22 at 3; BAILEY DEP. 213/3-5.



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160. In the affidavit that his attorney submitted to the Commission, among other things,Rhoads represented that the idea of a website did not emerge until the summer of 2010.

RHOADS DEP. 60/17-24 and DEP EX. 53; Agency Record 39.

161. Scarcelli issued a statement to the press on January 27, 2011, in which she said, amongother things, [l]et me be clear as I have said from the beginning, there was no involvement by

me or my campaign in the Cutler Files websitein any way, shape or form. SCARCELLI

DEP. 67/8-21 and DEP. EX. 83.

162. Bailey and others worked with her in drafting this statement. SCARCELLI DEP. 67/12-21, 73/14-18, 75/14-19 and DEP. EX. 83.

163. Shawn Moody reported to Commission staff during the investigation that he firstbecame aware of the Cutler Files web site after it was discussed in newspaper reports in

September 2010. Agency Record 9. It was brought to his attention by his campaign workers at

the time.Id. He looked at the website quickly after Labor Day and saw that it included

subjective personal comments about Eliot Cutler. Id. Moody told Commission staff that he ran

a clean campaign and would not have condoned a negative website like the Cutler Files. Id.

164. Shawn Moody did not authorize Dennis Bailey to create the Cutler Files web site. Id.165. At no time during the period from August 30 to October 29, 2010, when it was publiclyaccessible on the Internet, did the Cutler Files web site include the name and address of the

person who had authorized or paid for it. Agency Record 1 at 4; see Agency Record 49.

166. On each of the 35 days before the electionfrom September 28 until the site wasremoved from public view on October 29, 2010the Cutler Files web site clearly identified

Eliot Cutler, by name and in photographs, and referenced his campaign and candidacy for

Governor, including his motivations for running. Agency Record 1 at 4; Agency Record 49.



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The text of the web site continued to challenge his qualifications for office. Agency Record 1 at

4; see Agency Record 49 at 1-31.

167. A report provided by Dennis Bailey to the Commission staff reveals that visitors to theCutler Files web site during the period from September 18 through October 29, 2010, made

46,989 page requests. Agency Record 23; Agency Record 1 at 6..

168. Based on review of invoices produced by Rhoads and Bailey during the Commissionsinvestigation, the Commission determined that a total of $91.38 had been spent to create and

publish the web site. Agency Record 1 at 5; Agency Record 15 at 8. This included the costs of

registering the Cutler Files domain name ($20.86), paying web hosting fees for two months

($9.82), and purchasing research material to develop content for the web site including

downloading articles from the internet ($21.70), and obtaining copies of documents at the

Cumberland County Registry of Deeds ($39.00). Agency Record 15 at 8.

169. Documents produced by Bailey in discovery revealed three additional out-of-pocket coststhat were not included in the tally made by the Commission staff: an article purchased by Bailey

or Savvy, Inc., on August 2, 2010 for $3.95; an article purchased by Bailey or Savvy, Inc. on

August 6, 2010 for $4.95; and an article purchased by Rhoads in December, 2009, for $2.95 and

included in the notebook given to Bailey. Wayne Aff. 15-16 and DEP. EX. 39; RHOADS

DEP. 167/3-168/13 and DEP. EX. 72.

170. Bailey acknowledged that Savvy, Inc. might have made these expenditures related to theweb site (as the Commission found), but he does not differentiate between money expended by

him personally and money spent by his company, noting I might have used the company credit

card but its all of my money. BAILEY DEP. 200/2-7; See Agency Record 15 at 8 and Agency

Record 1 at 5.



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171. These articles were used as source material for the web site. See Agency Record 49 at11-15.

172. Inclusion of these additional items revealed after the Commission had made its finaldetermination bring the total out-of-pocket costs for the Cutler Files web site to $103.23. Wayne

Aff. 15-16.

173. The Commission staff reported the results of their investigation in a confidentialmemorandum to the Commission, dated December 16, 2010 (Agency Record 15), along with a

public memorandum, dated December 17, 2010, outlining the staffs analysis (Agency Record

14). A copy of the confidential memorandum was provided to Bailey and Rhoads through their

attorney, who was given an opportunity to object to the findings. Agency Record 15 (cover

email).

174. At its meeting on December 20, 2010, the Commission voted to find Bailey, but notRhoads, in violation of 21-A M.R.S. 1014, but did not disclose the identities of either

individual at that time. Agency Record 12 at 4-5. The Commission instructed staff to prepare

written findings of fact and order for consideration at the Commissions next meeting on January

27, 2011. Agency Record 1 at 3.

175. Dennis Bailey publicly disclosed his involvement in the Cutler Files web site sometimeshortly after the Commissions December 20, 2010 meeting. Agency Record 2.

176. After hearing final arguments from the parties and reviewing the staffs proposedfindings of fact and order, the Commission took a final vote on the matter at its meeting on

January 27, 2011. Agency Record 2. The written determination was signed by the Chairman on

January 31, 2011. Agency Record 1.



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177. After the vote and while the Commission was still in session, Rhoads and Scarcelli bothissued statements to the press, acknowledging Rhoads role in the creation of the web site.

Wayne Aff. 17 and Aff. Ex. E; DEP. EX. 83.

178. The Commission found that the web site existed for a specific and limited time only,just prior to the gubernatorial election and, further, that it did not have any of the indicia of a

periodical publication that may be exempted from the definition ofexpenditure in 21-A

M.R.S.. 1012(3)(B)(1). Agency Record 1 at 7.

179. The Commission thus concluded that Bailey made expenditures for the web site that didnot qualify for the press exemption in 21-A M.R.S. 1012(3)(B)(1). Id. at 7 A.

180. The Commission found that the web site expressly advocated for the defeat of EliotCutler in the gubernatorial election. Id. at 3, 7 B. The Commission also found that, for the

entire 35-day period leading up to the general electioni.e., after September 28, 2010the

Cutler Files web site named and depicted Eliot Cutler as a clearly identified candidate for

Governor. Id. at 8 D; Agency Record 49, 1-33.

181. The Commission found that all of the expenditures made to design, register, post andmaintain the web site on the Internet were incurred by Dennis Bailey, through Savvy, Inc.

Agency Record 1 at 5; Agency Record 2 at 3.

182. The Commission found that although Rhoads had contributed some writing to the website, Bailey had edited all of the content, designed all the graphics for the web site, and made all

the modifications to the content of the web site during the time it was publicly accessible on the

Internet. Agency Record 1 at 5.

183. The Commission determined that the $91.38 in costs related to the creation andpublication of the web site was not a de minimis expenditure.Id. at 5-6.



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184. The Commission found no evidence suggesting that any candidate in the 2010 generalelection had authorized the web site and thus concluded that Bailey had violated the disclaimer

provision of 21-A M.R.S. 1014(1)-(2) because, during the period from August 30 to September

9, 2009, the web site did not state that it was not authorized by any candidate. Id. at 7.

185. The Commission concluded that Bailey had violated the attribution provisions of 21-AM.R.S. 1014(2) and (2-A) by failing to disclose on the web site his name and address as the

person who had financed the communication. Id. at 7-8.

186.

The Commission found that the statements on the web site describing its creators as a

group of researchers, writers, and journalistsnot affiliated with any candidate were

misleading to the public, given that Dennis Bailey was affiliated with (as a political consultant)

an opposing gubernatorial candidate, Shawn Moody, during the entire period the web site was

publicly available. Id. at 7, 8.

187. Two Commissioners concluded that this misleading statement warranted imposition of apenalty of up to $5,000 pursuant to 21-A M.R.S. 1014(4), but the majority of the Commission

found this provision of the statute to be inapplicable because the web site did not contain a

statement that falsely identified another specific person or organization as the one who had

financed it. Id. at 7, 8 and n.3.

188. For violating section 1014(2) and (2-A), the Commission imposed on Mr. Bailey a civilfine of $200. Id. at 8.

189. Based on its finding that a total of $91.38 (less than $100) was expended to create andpublish the web site, the Commission concluded that no independent expenditure report was



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required to be filed under 21-A M.R.S. 1019-B. Id. at 5, 8 F.

Dated: February 8, 2011 /s/ Phyllis Gardiner

Phyllis GardinerAssistant Attorney GeneralAttorney General's Office6 State House StationAugusta, ME [email protected]

Dated: February 8, 2011 /s/ Melissa A. HeweyMelissa A. Hewey, Bar No. 3587

David M. Kallin, Bar No. 4558Drummond Woodsum84 Marginal Way, Suite 600Portland, ME [email protected]

CERTIFICATE OF SERVICE

I hereby certify that on February 8, 2011, I electronically filed the Joint Statement ofMaterial Facts with the CM/ECF system, which will send notification of such filings to allcounsel of record, by email.

/s/ Melissa A. Hewey

mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]