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Sen. Susan Collins. Photo: Sarah Silbiger/Getty Images

The FBI is investigating what it describes as a massive scheme to illegally finance Sen. Susan Collins' 2020 re-election bid, Axios has learned.

What's happening: A recently unsealed search warrant application shows the FBI believes a Hawaii defense contractor illegally funneled $150,000 to a pro-Collins super PAC and reimbursed donations to Collins' campaign. There's no indication that Collins or her team were aware of any of it.

  • Collins helped the contractor at issue, then called Navatek and since renamed the Martin Defense Group, secure an $8 million Navy contract before most of the donations took place.
  • Former Navatek CEO Martin Kao was indicted last year for allegedly bilking the federal government of millions in coronavirus relief loans.

What they're saying: "The Collins for Senator Campaign had absolutely no knowledge of anything alleged in the warrant," Collins spokesperson Annie Clark told Axios in an emailed statement.

The big picture: Federal prosecutors say Kao used a shell company to funnel $150,000 in Navatek funds to a pro-Collins super PAC called 1820 PAC.

  • According to the FBI, Kao and his wife set up a sham LLC called the Society for Young Women Scientists and Engineers. Navatek then wrote the LLC a $150,000 check, investigators say, which was passed on to the super PAC.
  • Government contractors are barred from donating to federal political committees, and investigators suspect the donations were attempts to evade that prohibition.

Investigators say bank records also show that Kao illegally reimbursed family members who donated to Collins' campaign and that Navatek reimbursed some of Kao's colleagues for their contributions.

  • That's known as a "straw" donation, and it's prohibited by law. The Collins campaign's fundraising solicitations also require donors to certify that they are in fact donating their own funds.
  • The allegedly reimbursed donations came in clusters, according to federal contribution records, between June and September 2019, and amounted to less than 0.2% of the Collins campaign's total fundraising.
  • The warrant application quotes an email exchange between Kao, who had just maxed out to Collins' campaign, and the senator's Maine finance director: "If you have friends or family members that would be willing to donate please don’t hesitate to send them my way," the Collins staffer wrote.

Read the search warrant application:

Editor's note: This story has been updated with comments from Collins' spokesperson.

Go deeper

DOJ signals scrutiny of popular fundraising gimmick

Illustration: Shoshana Gordon/Axios

A little-noticed line in a recent criminal filing suggests federal prosecutors consider a popular political fundraising tactic to be legally questionable.

Why it matters: Fundraisers often boast of "5x" or other contribution matches to coax small-dollar donations. The Justice Department indicated in a court filing Monday this could amount to "material misrepresentations" if, as critics often contend, there's no evidence the match ever occurs.

Fed signals it could yank economic support quicker as inflation sticks around

Federal Reserve chairman Jerome Powell testifies during a hearing before Senate Banking, Housing and Urban Affairs Committee today. Photo: Alex Wong/Getty Images

The Federal Reserve will consider pulling back economic support sooner "as the threat of persistently high inflation has grown," chair Jerome Powell said during a congressional hearing on Tuesday.

Why it matters: This is the biggest signal yet the Fed is backing away from its stance that soaring prices would be fleeting — a change that could shift its policies that underpin the economy.

Felix Salmon, author of Capital
Updated 28 mins ago - Economy & Business

Crypto meets the real world

Illustration: Megan Robinson/Axios

The two largest countries in the world seem intent on effectively banning their citizens from participating in crypto, which poses a serious threat to the crypto agenda.

Why it matters: The crypto world is global — but the real world is fragmented into nation-states, each of which claims control of what happens within its borders.