Ted Cruz allies 'mystified' over super PAC sitting on $10 million

Story highlights

  • Major donor gave $10 million to pro-Ted Cruz super PAC, but it's not airing ads
  • Toby Neugebauer has discussed pulling his money, sources say
  • "We've all come to grips with the fact that it's never going to get spent"

(CNN)Ted Cruz is struggling to unite the Republican Party's anti-Donald Trump vote and needs every dollar he can get. So why is the backer behind a $10 million super PAC last year not spending any money with no ad buys in sight?

That's the question Cruz allies are asking ahead of "Super Tuesday 3" and critical votes in five states that could determine whether or not Republicans have a chance of defeating front-runner Trump.
    Almost one year after Keep the Promise II was founded with a $10 million donation from Toby Neugebauer, an energy investor and son of a Texas Republican congressman, the group he controls still retains almost all of its funds. Questions about the group's intentions, once whispered and optimistically explained away, are growing.
    Neugebauer previously said his group would spend its cash on TV ads in February and March, but it has not done so. He told CNN he is prepared to invest his money in winner-take-all states deeper into the calendar, but declined to be more specific and did not commit to spending the full $10 million he donated.
    "I'm proud of what I have done. I think I've been a good steward of capital," he said.
    But according to two individuals close to Cruz's constellation of super PACs, he has discussed the possibility about withdrawing his cash -- which while legal, is highly unusual.
    Officials in the other Keep the Promise groups are no longer banking on Neugebauer and planning budgets as if his money does not exist, five people close to the super PACs told CNN.
    "I'm just mystified, to be honest," said Lee Hanley, a wealthy donor who hosted Neugebauer and Cruz's inner circle in 2014 when they plotted Cruz's presidential strategy. Hanley's wife is the treasurer of the new committee and communicates frequently with Neugebauer. Hanley said he confronted Neugebauer last December at a philanthropic event in Palm Beach, Florida about his lack of spending, the Texan brushed the concern off.
    "If Ted were to lose by one vote -- and that was Toby's vote," Hanley said, "I think Toby would have great regret for the rest of his life."
    Neugebauer is a close friend of Cruz and the architect of the Keep the Promise fundraising network, which gave Cruz immediate viability when they announced they had raised $36 million in the opening weeks of his presidential campaign. And despite being described by people close to Cruz's campaign as disorganized and high-intensity, Neugebauer is praised by all corners for his ability to raise the initial money that gave Cruz a crush of earned media and paved the path for him to be a top presidential candidate today.
    The Cruz campaign is barred from coordinating with the super PACs and did not respond to a request for comment.
    Neugebauer has been highly skeptical of the effectiveness of large, negative advertising buys this cycle. He scrapped a long-planned advertising campaign in South Carolina last fall, and then later declined to work with other Cruz groups for an ad buy there last month that the groups hoped would prevent his disappointing finish there, according to three people familiar with the discussions.
    He did make a big offer earlier this year. During the Iowa caucuses, he and another family offered a total of $1.5 million to a charity of Trump's choosing if Trump agreed to a one-on-one debate with Cruz. Trump declined.
    Neugebauer said any conversations about pulling the cash have always been in hypothetical in nature.
    "I sincerely put the money in, and I am sincerely actively looking for ways to invest the money," he said. "I always thought that was a long road, and my deal with Ted to White House was a $10 million donation."
    Asked directly if he would withdraw the donation, he said, "What if Ted loses every state the next two weeks and the election's over? I'm in it until Ted is either the president of the United States -- or no longer viable."

    Keep the Promise redesign

    Questions about the Cruz outside groups are peaking because of a major organizational revamp announced last week.
    The Keep the Promise groups instituted a structure called Trusted Leadership PAC designed to move away from having four separate groups dominated by different donors, who have frequently clashed amid competing priorities. Conspicuously absent from the new committee was Keep the Promise II, a decision that is intensifying the anger directed toward Neugebauer.
    "Toby's a persona non grata," said one super PAC official, who requested anonymity to protect a sensitive relationship with someone they work with closely. "We've all come to grips with the fact that it's never going to get spent."
    Hard-charging, mercurial and a big-game hunter whose family grew close to that of Ted and Heidi Cruz, Neugebauer moved from his Houston post to raise his children in Puerto Rico a few years ago. He became a known quantity in the Texas Republican money world, raising money for Rick Perry in 2012 and being tasked in the lead-up to Cruz's presidential campaign to organize the big-money network that would support him independently.
    Three of the super PACs were set up so that three families, including Neugebauer's, could have complete control over their group's spending, an arrangement at the time hailed as innovative by some and foolhardy by others. It also made it easier for a donor to not spend cash at all.
    Keep the Promise I is funded by New York hedge funder Bob Mercer. It has spent nearly $11 million on pro-Cruz television and radio advertising, and just began a new wave of fundraising. Keep the Promise III, financed by two brothers made rich by Texas oil and helmed by a group of digital organizers active in the anti-abortion movement, has spent half of its seed money on things like Facebook ads targeted finely in early-voting states.
    And Keep the Promise PAC, a group set up to win over the donors not from those families, ran a well-regarded field program in states like Iowa, lining the state with more yard signs than did the official campaign.
    "There's a lot of cooks in the kitchen. Everyone wants to be the head chef," Neugebauer said. "And they didn't need a retired chef."
    The group's only expenditures reported to the Federal Election Commission are a $570,000 payout for the shared data analytics program that undergirds the super PACs' work and production costs for a fall 2015 advertising buy that CNN has reported was canceled at the last-minute. Neugebauer said new election reports will show that he had spent a total of $1 million -- or 10% of the cash in his war chest.
    Sources in Cruz World say Neugebauer does not participate in daily strategy calls. Group officials hear from him as much in press stories as they do in person. A business associated with him gave to a splinter pro-Cruz super PAC network through a limited liability company.
    Neugebauer said he does indeed talk with all the principal players privately, and remains in close contact on strategic decisions, including multiple conversations just this week.
    Cruz allies say the stakes for Neugebauer grow more the longer he waits.
    "It's like if you miss an email that would've taken a three-word response. A week later, and now your response needs to be a little longer," said one person close to the groups. "A little while longer, and now it takes a phone call."
    "Now he's waited this long and he's got to do something huge," the person continued. "He's now waiting for the perfect pitch -- and it's just never going to come."