Republican Lacy Johnson makes $1 million bet to challenge Ilhan Omar

Lacy Johnson likens his bid for Congress to "climbing a political Mount Everest." The relative newcomer to politics is running as a Republican in a Minneapolis-based district that hasn't gone for the GOP in decades.

But even with long odds and a limited public profile, the north Minneapolis businessman is swimming in campaign cash. He's raised $1.1 million for his bid so far, including more than $650,000 in the first three months of 2020.

So what's fueling the flow of cash? Johnson is running against one of the nation's most visible — and polarizing — members of Congress: Minnesota U.S. Rep. Ilhan Omar.

Political operatives say the deluge of cash in a safe seat reflects a growing trend in campaign fundraising: The rise of social media and small-dollar donors have opened the floodgates for challengers to well-known incumbents across the country. Such scenarios have been a boon for a cadre of political consultants and strategists whose lucrative fees are supported by campaign contributions — no matter the odds.

Omar won the Fifth Congressional District with 78% of the vote in 2018. Republicans are seen as having little chance of winning in the state's most staunchly Democratic district. Still, the contest has attracted intense interest and fundraising levels more fitting of a battleground swing seat. More than $5.6 million in campaign donations have poured into the race, with six months to go until Election Day. The vast majority on both sides comes from donors outside the district.

"One of the effects of the increasing polarization of Congress is that pretty much every high-profile race is a national race," said Adav Noti, a former Federal Election Commission attorney serving as chief of staff for the Campaign Legal Center. "The money comes in, both [through] big money donors and small-money donors, from out of state and out of the district."

Johnson isn't the only Omar challenger amassing large amounts of money. Omar's rivals, including DFL candidate Antone Melton-Meaux, raised a combined $1 million in the first quarter, with three reporting six-figure hauls. Omar, a prolific fundraiser, has a $1.3 million campaign war chest.

But Johnson, a one-time state legislative candidate with a history of tax problems, outraised every federal challenger in the state in the first quarter, including U.S. Senate candidate Jason Lewis. And he's burning cash at a higher rate than those running in far more competitive races: Johnson's latest federal disclosures show he spent $687,000 in the first three months of 2020 — more than the $655,000 he took in over the same period — ending March with just $65,608 in the bank.

Johnson, one of three candidates seeking the GOP endorsement Wednesday, knows the challenges of winning in a Democratic stronghold. He lost an overlapping state House seat by 65 percentage points in 2018, winning 3,357 votes.

"We all know if you put an 'R' in front of anyone's name in this district, it's tough," he said. "I could be running against Popeye and if Popeye had a 'D' behind his name, I'm in trouble."

Despite the political math, Johnson believes he can attract swing voters and Democrats disillusioned with Omar.

To do that, he's centered his campaign on deep ties to the district and commitments to fiscal conservatism and closing the achievement gap for students of color. As an African-American entrepreneur in a racially diverse district, he has encouraged black voters to leave the Democratic Party under the banner of "Blexit."

His campaign website touts his experience running a charter school and leading a tech support and job training company called Young Entrepreneurs of America. Public documents show a mixed track record. Johnson was removed from the charter post in 2007, following allegations of mismanagement. He also faced a number of state and federal tax liens in the 1990s. In March, he renamed his company UrbanStar Business Exchange (UBX), which he described as an investment fund and incubator seeking to attract technology companies to north Minneapolis. A website for the fund has yet to launch, though Johnson said he has secured relocation commitments from a number of startups.

While his case to voters is based on his business background and community ties, his fundraising success — and spending — appears to be the result of an aggressive strategy that puts Omar at the center of the pitch. The campaign fills Facebook feeds with ads urging potential supporters to "chip in $5 … to make Ilhan Omar's first term her last term." Letters sent to potential donors across the country criticize Omar, a refugee from Somalia, as an "immigrant who has received so much from you and me and yet remains profoundly ungrateful to it all." An August segment on Fox News boosted his profile — and donations.

Billy Grant, one of several consultants on Johnson's payroll, said the strategy follows a model often used by candidates running against high-profile incumbents, including House Speaker Nancy Pelosi and Senate Majority Leader Mitch McConnell.

The cash acquisition comes at high cost. Johnson paid $120,000 in credit card processing and fundraising fees, about 20 cents for each dollar raised. He spent about $466,000 — more than two-thirds of his total fundraising for the quarter — on direct mail firms. Johnson said much of those costs were related to fundraising. It appears little if any has arrived in district mailboxes.

It's not unusual for campaigns to pay large amounts to consulting firms — Omar herself paid a firm co-owned by her husband $292,000, more than half her fundraising total, for advertising, fundraising and other services in the first quarter.

But Noti said high burn rates, especially in noncompetitive districts, can also reflect a "consultant complex that bleeds money out of the system and fleeces unsophisticated donors for no larger political benefit."

"[Candidates] don't have to do this, they don't have to authorize these practices, but they do," he said. "The consultants are the ones who really profit from it. It's not a legal problem, per se, but it's not ideal from a democratic perspective."

Johnson said the high spending and consultant fees "surprised me too." But he described it as the cost of ramping up a campaign.

It's not clear donors understand the political dynamics or contours of the race. New Jersey resident Naomi Drummond donated a total of $400 to Johnson after receiving fundraising solicitations in the mail. The 91-year-old retired administrative law judge has never been to Minnesota, but she doesn't like things she's read about Omar.

Johnson, she said, sounded "like a good man" based on the letters describing his childhood in Mississippi and work in business and IT. The retiree was "really surprised" to learn about his odds in a liberal Minnesota district. "Somebody's giving him bad advice," she said. "Bad advice or no advice."

Still, she was moved by one of his latest letters asking for her help. She wrote a $100 check along with a letter offering words of advice, and dropped it in the mail.