LP Financial Collapse
Kevin O'Connell
Thursday, January 02, 2003

The Libertarian Party is for all practical purposes destitute, arrears in
payments to vendors as well as unable to pay back the dues money owed
their state affiliates.

The collapse of the Libertarian Party has been set into motion by several
factors. It is a combination of ineptness, breaking their own bylaws and
timidity.

There is a list of scandals going back several years where top
Libertarian Party officers and officials broke their own bylaws to insure
certain candidates, principally Harry Browne, received the party
nomination for office. For years top LP officials channeled support  and
scarce money to favored candidates. These actions fueled feelings of
distrust lending itself to feed the lowering of the total number of dues
paying members.

The first sign of trouble was in 2001 when then Treasurer Tuniewicz
warned that they were now in a financial crises. Apparently Tuniewicz had
been voicing concern for some time and the alert he issued was supposed
to avert the current disaster. Instead it only brought an efforts to
cover up the mishandling of the party's money. Tuniewicz was cut off from
the financial records he needed access to perform the duties of
Treasurer. He would get reports late and be denied access to the current
transaction records.

Rather than fulfill his duties and get a court order requiring the Party
officials to open the records to him Tuniewicz resigned his position in
2001. He went one step further and formally revoked his Libertarian Party
membership. (It is little known that Libertarian Party membership is for
life, not just the time one pays membership dues for. Ceasing to pay dues
one is to be taken off of the list of "Dues Paying Members" but is still
on the roles as a member of the  Party. One must give a formal, written
resignation to no longer be a member of the Libertarian Party.)
Tuniewicz's formal resignation as Party Treasurer  gave him some legal
separation from the money troubles. The formal withdrawal of membership
put him beyond the Party ordering him to give testimony at a Party
hearing at any future date.

The new Treasurer upon Tuniewicz's resignation performed as those that
created the financial crises wished, quietly. When Neale took the Chair's
position in July 2002 the Treasurer became more vocal or a much as Neale
would allow.

There are a number of system failures and mismanagement that contributed
to the current problem, I cannot point my finger at any one item as a
single culprit.

One of the problems was the inflating of the actual number of dues paying
members. During one of Harry Browne's Presidential campaigns people who
contributed money to his campaign were granted Party membership without
having to pay dues to the Party. This inflated the published number for
Party membership while not paying for increasing the costs of membership
maintenance.

Few realize it but the Newsletter also contributed to the problems, both
as an expense and contributing to membership loss. For this paragraph the
subject will be the expenses part of the newsletter's effect. The
newsletter was at first published quarterly and a manageable expense. The
stage for disaster was set when the newsletter went to monthly
publication which tripled the cost without increasing dues to pay to the
added issues. The effect of this increased cost would worsen when the UMP
(Unified Membership Plan) was installed, more on that later.

Another problem with the newsletter was advertising. It was found that
some LP members had obtained some kind of favored status, they did not
have to pay their advertising bills. Favored members were allowed to
place ad after ad without having paid for previous advertising. One
account amassed over $30,000 in unpaid ads and was not cut off from
placing further ads, again without payment. It was announced that an
investigation showed no favoritism yet the effect of favoritism was still
there.


An unrecognized factor to the current financial crises was the
recruitment program named Archemedes. At the time few Libertarians knew
the truth behind party membership numbers and only a few more understand
it now. The Libertarian Party has had a steady loss rate of 20% of it's
membership per year for over a decade. They loose 50% of their new
members after the first year, they just do not renew. 

I believe that the newsletter contributes to the loss rate. Many or most
people join the Libertarian Party after being drawn in on single issues
then discover the broad scope of the Libertarian Party goal, anarchy.
People are brought in on the issue of drug use but find this also means
the total lack of regulation of the manufacture of prescription
medications, a trade off they are unwilling to make. People are brought
in on the issue of the right to own and carry firearms but are turned off
that convicted criminals, children and the mentally ill also would have
ownership and carry rights to such weapons plus military grade
explosives.

The Libertarian Party had an aggressive recruiting program that needed to
recruit 20% of it's membership each year just to maintain numbers. This
program was aggressive enough to slowly produce an increase in numbers.
Part of this was the free memberships granted to contributors to Browne's
campaign machine. But the increase was too slow and any lessening of the
effort produced a negative growth rate. Seeing a need to increase
membership number more rapidly Project Archemedes was born.

Most Party members thought of Archemedes as a stand alone, original
project. In reality Archemedes was an enhanced version of the preexisting
recruitment program. In my outsider's view Archemedes was an excellent
idea poorly executed. Archemedes would add a long wish list to the
existing recruitment program; direct mail, e-mail, publication
advertising with each recruitment piece tailored to the demographics of
the forum.

The failings of the execution of Archemedes began when it's description
was given to the membership. The officials failed to explain that this
was only an enhancement of the pre-existing program and that they had a
20% loss rate to contend with. It was also presented as a self funding
project, that dues from new members would pay to recruit more new
members. This self deluding aspect was unrealistic from the beginning no
matter what contrived numbers were used as self justification /  delusion
to it's proponents. The concept of self funding is appealing to LP
members as it fits their general philosophy yet this was not a money
making venture, one must expect to pay where there is no free lunch.

Another failing of Archemedes was it's proposed scale, it was to be
massive. To do this took a large sum of money to be raised by donations,
less than half the needed amount was raised. This inevitably produced
results less than promised which disappointed the membership. The goals
to be obtained by Archemedes were to get very large numbers of new
members without additional funds other than the original contributions.
The announced goals turned out to be more optimistic than was practical,
especially given the lack of initial funding.

With Archemedes returning less than stellar figures, although still
providing Party growth, infighting among the membership on this subject
grew. The opponents finally got their way and Archemedes was abandoned.
The closing of Project Archemedes would contribute greatly to later
financial problems as the loss of the loss of the only real recruitment
program they had. They immediately went from Party growth to a 20% loss
rate. The actual gross figures for loss are less than 20% but this is net
loss after gaining a paltry few new members.

Now we have the UMP and with it several other factors come into play.
Under UMP each state affiliate member was also a National member, only
four affiliates refused to join into the UMP. This also would bolster
National membership numbers as members who previously were only Sate
members also became National members.

Under UMP total yearly dues were $25.00 which would be billed and
collected by National which now managed the membership database, renewal
notices and recruitment for the affiliates.  National's share of the
money was $13.00 and the State affiliates would get $12.00. The flaw was
that National would not give the affiliates a lump sum of $12.00 but
instead pay the states the $12.00 at the rate of $1.00 each month. The
major failing of UMP was that the agreement did not require National to
establish an escrow account to safeguard the affiliate's dues money,
instead it was co-mingled in with Nationals operating expenses bank
accounts.

Errors in the formation of the UMP now combined with the other mistakes
in a snowball down the hill effect that plunged the LP into the red. One
of the major errors in the formation of the UMP was the failure to
increase membership dues. Instead of National having $25.00 to cover
membership maintenance costs, and leave money for other party efforts,
National now had only $13.00 per member. There was an increase in
membership by the drafting of non-National affiliate members into the
National LP but these all had the basic costs of membership to cover from
their $13.00 without the additional $12.00 to cover expenses already
budgeted. The effect was National and the states had in the face of
rising costs reduced their membership dues. Even worse for the states was
that National was supposed to be recruiting new members and with the
closing of Archemedes had ceased meeting this responsibility.

The error in increasing the publication of the newsletter from quarterly
to monthly tripled the newsletter over all costs per member and now
severely cut into National's operating funds. I do not know the exact
cost of the newsletter but if the cost of composing, printing and mailing
is 75 cents an issued then $9.00 of National's $13.00 a year in dues is
spent leaving only $4.00 to cover other expenses.

Another blunder National made was to rent office space in the Watergate,
one of the more expensive commercial real estate offerings in the area.
This also was a good idea badly executed. The LP's previous office in DC
was in a run down townhouse in an area that can be described as a slum,
unsafe to walk the streets at night and look over your shoulder  even in
daylight. While they needed better quarters the move to the Watergate was
to provide an appearance of wealth and power they really did not have nor
could they afford. The Watergate offices cost something like $9,000 to
$10,000 a month which is low for the Watergate because they rented in the
lower level (basement?). While the suburbs offered a less prestigious
address the same square footage is available for at least half that
amount plus it would include parking.

The general membership got a slight glimpse of the extent of the problem
in about November of 2001. National sent out requests for "emergency
funding" contributions stating the cause was that dues were coming in
late. That this was due to mail quarantined due to anthrax attacks via
the postal system. The real reason was the bank accounts were low due to
overspending and general mismanagement. Had the quarantined mail been the
real problem then once the mail was released there would be no more
requests for extra contributions. There have been several requests for
funding by National, the quarantined mail only brought to light that a
problem existed. LP National turned off the light and covered up the
extent of the real problem.

All these thing were coming together; shutting down the recruitment
program resulting in less dues income, failing to increase dues with the
formation of the UMP effectively reducing dues by about 50%, increasing
expenses like tripling the newsletter publication schedule and an overly
expensive business office. All the factors combined with unrealistic
budgets and the failure to immediately cut their budgeted expenses when
the income drop occurred.

With all of this came mismanagement of Party funds. The 2002 Convention
is just one such an example. Like the UMP money the money reserved for
the Convention costs was not segregated into it's own bank accounts but
mingled with the funds for the general expenses. When faced with paying
routine expenses like rent and utilities National chose to spend the
money reserved for the Convention. The result was that 90 days after the
Convention National still owed over $60,000 to the convention hall and
various vendors that it had been unable to pay.

Apparently the LP had begun to rotate vendor payments, alternating who
got paid late by 30 days or more.

By the end of 2002 the debts owed by LP National were approaching a
quarter of a million dollars.

There is one debt that is not listed due to it being put into accounting
in such a way it is not called a debt, UMP. Faced with closing it's doors
or spending the State's share of dues money National did what it did with
the money reserved for the convention, it spent it all. 

For some time the UMP payments have been going out late, I believe these
late payments have also been rotated among the affiliates so as not to
make apparent that their money they trusted to National to keep for them
had been spent.

The problems with the UMP money, and all the finical problems, should
have come to the attention of the general membership in November of 2002.
No longer able to rob Peter to pay Paul by rotating late accounts LP
National sent the affiliates what they could, roughly 50 cents on the
dollar owed for UMP payments.

As of now Chair Neale is asking the affiliates to surrender their share
of balance of UMP payments for 2003. Given the circumstances the question
is useless, National already is not sending the money without first
asking permission. The state affiliates operating funds were spent by
National and it looks like the state must now fend for themselves.

While a reduced 2003 budget has been adopted the little I know of it I am
doubtful of. The figures are dependent on a static membership and the
loss 20% of the membership still cuts into projected income figures. To
correct the recruitment problem takes money, budget it all they want they
just don't have the amount of money needed to recruit 6,000 new members
just to keep the membership level from falling further. Increasing
membership is out of the question for now, it will continue to fall. It
appears that the newsletter will still publish monthly rather than go
back to quarterly, monthly publication has not been affordable for years.
There is talk of hiring an outside private firm to write the newsletter
but no significant cut like reducing the publication schedule. There is
no increase in membership dues to offset what was effectively a reduction
in dues charged created by UMP. There is some need to lay off employees
at National but this is largely offset by employees quitting and no money
to hire replacements anyway.

Some months back Chair Neale sent out another of their funding requests
that I found considerable fault with. He requested money top pay off the
arrears bills, a good thing. What was disturbing was he also wanted an
additional $138,000 in donations to purchase and install new accounting
software. The biggest problem with the existing software is not how it
operates but that the reports and information it generates is not being
forwarded to Party officials who have been shut out of needed information
much as the previous Treasurer Tuniewicz. Often when the reports do go
out it is at the eleventh hour immediately prior to the need to take
action allowing too little time for LNC members to react too. I also
understand that sometimes this needed background information is withheld
from LNC members until they sit down at a meeting to take action on it.
The software is not the main problem, the problem is manipulation of the
LNC by the withholding of needed information.

The major justification for spending the $138,000 was that it would
reduce operating costs by $5,000.00 a month. How this reduction would be
obtained was not detailed but it is reasonable to assume it would be by
firing staff who would be replaced by the software. 

Reducing operating costs by $5,000.00 a month with the purchase of new
software is in general a good thing, in Libertarian Party specifics it is
a terrible thing. The savings of $5000.00 a month would take 27 1/2
months to recover from the $138,000 acquisition and installation costs.
It would take almost two and a half years for a return on the
installation of the new software when the existing software is
serviceable. The thing is the current state of the LP needs $138,000
spent on immediate and urgent needs, not $5,000 a month two and a half
years from now. This is another in a series of blunders that will only
contribute to financial problems.

Equally troublesome is that Neale has already started the process and
committed to buying the software. I have not heard that the fund raising
effort raised enough money to pay off the back bills. From what I gather
Neale plans to pay off the arrears due over the next twelve months, not
giving the vendors any choice in the matter other than to sue. The
impression given, but not stated, in Neale's fund raising letter was that
the vendors would be paid first, then if there was money left the
software would be purchased. I think many members gave money thinking
they were paying off a debt that is still there.

Another ominous sign is what I heard the LNC has done, they altered how
minutes of meetings are being kept. I have not confirmed it to my
satisfaction but I understand the minutes will be greatly cut back. That
the Secretary will be restricted to detailing resolutions and the votes.
That discussion details will be eliminated pulling a shroud of secrecy
around the actions of the LNC. The minutes are how the real power of any
organization monitors it's officials. It is in the minutes the membership
sees what representative is supporting or opposing what idea, this has
now been hidden from view.

It was secrecy and keeping vital information from officials, LNC
representatives and the general membership that contributed to the
financial mess the LP is currently in. Like an infection this secrecy and
withholding of information has spread to the affiliates. For some time
UMP payments have been coming late and the general rank and file
membership was not advised. Now the LP National is failing to make full
payments and the membership of most affiliates have not been advised.
Instead Libertarians are getting donation requests from their affiliate
citing excuses such as contributions are low around the holidays. While
contributions are usually low around the holidays the real problem is
that National spent their dues money that they trusted to be returned to
their state affiliates.

Remarkably the Libertarians have behaved exactly as they say the people
they oppose behave.

As readers will have figured out by now I am not a LP member nor a
libertarian. I have opposed the Libertarian Party for some yeas now.
Libertarian proponents will pick apart this article citing semantics,
that such things as a percentage is not exactly right and so on. Still
you will find my information is well within the ballpark. If this
material is new to you then the important question is why you had to hear
it from me rather than your party officers.

After over thirty years the Libertarian Party is a remarkable failure. It
has a relatively few members elected to the many low level offices
available but many, if not most, of these ran in non partisan races not
disclosing their LP membership or got elected as members of other
political parties. It's infrastructure suffers from the infighting of
internal politics. It has been unable to manage it's bank accounts or to
make a simple and workable budget. It's internal problems are like a
cancer eating it from the inside. It really should be allowed to die a
dignified death without extreme measures that only prolong it's
suffering, if it were a horse you would shoot it.