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untanglingwebs
F L I N T O I D
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Dark Money Groups Gone Wild
Why it's open season for renegade political groups in the 2012 elections.
—By Andy Kroll
| Thu Aug. 2, 2012 3:00 AM PDT.
You couldn't devise a better political hit-and-run.
In the summer of 2010, an unknown group called the Commission on Hope, Growth, and Opportunity (CHGO) asked (PDF) the Internal Revenue Service to grant it 501(c)(4) tax-exempt status. The organization told the IRS it didn't plan to spend a penny on politics. Once the IRS gave CHGO the green light, however, the group plunged into the 2010 political season. It would ultimately raise $4.8 million—$4 million of that from a single anonymous donor—and spend $2.3 million on TV ads attacking 11 House Democrats running for re-election. (Ten of them lost.)
Later, on its 2010 and 2011 tax returns, CHGO claimed it hadn't spent money on politics. Watchdogs filed complaints against CHGO alleging it had flouted tax and election laws. But sometime in 2011, after the Republicans' 2010 "shellacking," CHGO quietly disappeared. The group, and the anonymous individuals behind it, has yet to face any punishment.
The tale is a familiar one in the campaign finance world, illustrating the slow-moving, scattershot nature of justice when it comes to political money. The Federal Election Commission, the nation's top election cop, is gridlocked by ideological differences. The IRS, whose role includes policing nonprofits, moves at a glacial pace, and traditionally investigates a small sliver of groups under its watch. This lawlessness is even more relevant, say watchdog groups, in the aftermath of Citizens United and other key court decisions, which led to a surge in spending by super-PACs and dark-money nonprofits.
With more money and more outside groups playing in politics than ever before, watchdogs say federal regulators need to wake up and take action—fast. "What is the point of having laws on the books if they are not enforced?" says Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington. "With the November elections only five months away, these agencies need to act now to make sure this election isn’t a repeat of the 'anything goes' mentality of 2010."
The prime culprit in today's lawless political playing field, watchdogs say, is the FEC. The commission's three Republican commissioners have declared themselves ideologically opposed to much of the campaign finance law, and have succeeded in grinding the FEC's work to a halt on the most important issues. Among the FEC's six members, the number of deadlocks on enforcement actions averaged 1 percent between 2003 and 2007, then spiked to 16 percent in 2009 and 11 percent in 2010. "The FEC is now thoroughly broken, and when it comes to enforcement of the campaign finance law, we don't have any," says Craig Holman, a lobbyist with the ethics group Public Citizen. (The FEC declined to comment.)
Not that the FEC was much more effective when the commissioner relations were more cordial. The commission doled out millions of dollars in fines to the Democratic "527" groups America Coming Together and the Media Fund and the Republican 527 Swiftboat Veterans and POWs for Truth for breaking the law during the 2004 election. But the FEC only punished these groups years after the fact. By the time the FEC announced its settlement with America Coming Together, the group had been defunct for years and the 2008 presidential campaign was well underway.
In the eyes of campaign finance reformers and election experts, the Internal Revenue Service is no better. The IRS audits less than 1 percent of nonprofit groups, and when the agency begins an audit, the process can drag on for two years or more, according to Heidi Abegg, an attorney who represents nonprofit groups. The way tax law works, nonprofits like Karl Rove's Crossroads GPS and David Koch's Americans for Prosperity can engage in politics, but it can't be the groups' primary purpose. But as it stands, a renegade nonprofit could dupe to the IRS, dump most or all of its 2012 budget into attack ads, and still not face penalties until 2014.
The IRS emboldened dark-money groups by doing little during the 2010 elections to crack down on nonprofits like CHGO and Crossroads GPS, says Rick Hasen, an election law expert at the University of California-Irvine. Public Citizen's Craig Holman says the IRS is reticent to scrutinize nonprofits for fear of looking too political itself. It's clear why. In March, when the IRS pressed several tea party groups for more information on their activities, Republicans in Congress accused the IRS of buckling to public pressure and singling out GOPers. And Congress, of course, controls the flow of funding into the IRS. "The IRS doesn't want to take on Congress, doesn't want to take on the White House," Holman says, "and as a result they have been exceedingly shy of enforcement of political groups." (The IRS did not respond to a request for comment.)
That said, the IRS has in recent weeks suggested it's taking a closer look at nonprofits pushing the envelope. In a July 19 letter to reform groups, the IRS acknowledged for the first time problems with politically active nonprofits, adding that the agency "will consider proposed changes in this area." In June, the IRS raised eyebrows when it denied tax-exempt status to Emerge America, which trained female Democratic candidates. And more recently, the Wall Street Journal reported that the IRS had launched initial probes of Crossroads GPS and other politically active nonprofit groups.
But the threat of an IRS probe is hardly a deterrent, Hasen says. A fine, hefty or not, is just the cost of doing business. What's more, a nonprofit that loses its tax-exempt status can simply dissolve itself and start anew—after Election Day. Should Rove's dark-money group Crossroads GPS face an IRS backlash, Hasen says, "Karl Rove can come up with a new name for a brand new entity."
Andy Kroll
Reporter
Andy Kroll is a reporter at Mother Jones. For more of his stories, click here. Email him with tips and insights at akroll (at) motherjones (dot) com. Follow him on Twitter here. RSS | Twitter |
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Thu Aug 02, 2012 9:23 am |
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untanglingwebs
F L I N T O I D
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Karl Rove's Catch-22
Starting Saturday, Crossroads GPS and other politically active nonprofits face new pressure to reveal who bankrolls their ads. What's a dark-money group to do?
—By Andy Kroll
| Fri Jul. 27, 2012 3:00 AM PDT.
Tom Reel/San Antonio Express-News/ZUMA Press
For all the headlines and hand-wringing about super-PACs, it is dark-money nonprofits like Karl Rove's Crossroads GPS and Americans for Prosperity that dominate the political money wars. These politically oriented groups, which keep their donors secret, outspent super-PACs 3-to-2 in the 2010 elections. Through the spring of 2012, 91 percent of advertising by independent groups came from nonprofits and big business trade groups. And a growing pile of evidence suggests that it's these nonprofits, not super-PACs, hauling in the bulk of corporate political cash
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But come Saturday, the dark-money nonprofits face a dilemma. A high-profile court case known as Van Hollen v. FEC threatens to shine an unwelcome beam of sunlight on donors bankrolling these organizations. Nothing's stopping Crossroads GPS or AFP from running more "issue" ads hitting Obama and other Democrats (that is, ads that don't explicitly say "vote for" or "vote against"). Except now nonprofits will have to reveal who funded those spots.
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Dark-money nonprofits don't want to name names. Their pitch to donors includes the promise of anonymity and a shield from public scrutiny. This means that Crossroads GPS and other politically active nonprofits—which aren't supposed to make politicking their primary purpose—have to rethink their ad strategy, election experts say. Do they shift money to super-PACs? Go dark in the months before the election? Find another loophole to run ads and keep their donors secret?
Tax and election law experts say that, short of shutting down, any new strategy carries significant risks. Run-ins with the Internal Revenue Service or the Federal Election Commission, the federal elections watchdog, could be on the horizon. "It's a tough strategic choice for these groups," says Joseph Birkenstock, an election law attorney and former chief counsel at the Democratic National Committee.
Here's the quick-and-dirty version of how nonprofits including Crossroads GPS, Americans for Prosperity, and pro-Obama Priorities USA, among others, ended up in this bind. Until recently, nonprofits had exploited a federal loophole allowing them to run issue ads without disclosing the sources of their funding. These so-called social welfare organizations may also run ads directly backing or opposing candidates, but can't run too many of them at the risk of running afoul of the IRS for being too political.
In 2011, Rep. Chris Van Hollen (D-Md.) and pro-reform advocacy groups sued the Federal Election Commission to close that loophole. This March, a federal district court judge agreed with Van Hollen, and a second federal judge refused to stay that decision. The loophole was gone. (The case is currently on appeal.)
In other words, the rule book has changed mid-election for politically active nonprofits, and the first effects will be felt Saturday. Now, if AFP or Priorities USA runs a TV or radio ad mentioning Obama or Romney without endorsing or opposing a candidate, the group's donors must be named. Starting in early September, if they mention any federal candidate, donors must be named.
One dark-money heavyweight, the US Chamber of Commerce, has already said it will change its game plan. As Chamber president Tom Donohue explained in May, the Chamber will no longer run the thinly veiled "issue" ads mentioning a candidate that it did in 2010 and 2011. Instead, the group—which says it'll spend $50 million during the 2012 cycle—will run ads outright urging voters to oppose or support a candidate. The Chamber can get away with this because, after decades of conservatives and libertarians chipping away at the law, a loophole opened letting donors escape disclosure for "vote for" and "vote against" ads by nonprofit groups.
Donohue told reporters that the Chamber would refuse to let its donors be outed. Efforts to unmask the Chamber's donors, he insisted, are an effort "to intimidate people from participating" in politics. Van Hollen, one of Congress' most vocal supporters of disclosure, fired back by saying the Chamber's shift shows the "extraordinary...lengths these groups will go to in order to hide the sources of their funding."
The Chamber's strategy comes with risks. Marc Owens, a tax attorney and former director of the IRS division that monitored nonprofit groups, says those who mimic the Chamber by running "vote for" or "vote against" ads must be careful not to go overboard. After all, tax law requires 501(c)(4) nonprofits to prove that the majority of their work benefits the community at-large, not a single candidate or party. Running too many overtly political ads, Owens says, could imperil the group's tax status, which prevents them from making politicking their primary focus.
Crossroads GPS spokesman Jonathan Collegio declined to say if and how his group's strategy would change. "Crossroads is aware of the key dates, and closely follows all law and regulations that govern the process," he said in an email.
An official at Americans for Prosperity, the conservative nonprofit founded by David Koch, says AFP brass have met multiple times to discuss how to tweak the group's ad strategy. One option that's been discussed is ramping up the group's online advertising, which isn't affected by the beefed-up disclosure rule. The staffer stressed that any option forcing AFP to name its donors is off the table. The staffer added, however, that AFP would not go dark on the airwaves in the run-up to the November elections: "We're going to continue to be on the air and continue to follow the law, and we're gonna protect the identity of our donors."
Nonprofits could always gamble that the slow-moving IRS and gridlocked FEC won't target them even if they flout the law. And if they're caught, the blowback would be relatively minimal when compared with the potential for political gain, says Rick Hasen, an election law expert at the University of California-Irvine. It's unlikely that the IRS or FEC would crack down on lawbreakers before Election Day. And if a group got slapped with a six- or seven-figure fine after the election, or had to shut down, that's hardly the end of the world, Hasen says. "If a nonprofit has to sacrifice its name and pay a fee," he says, "and it helps keep the House, win back the Senate, and take back the White House, that's a small price to pay." |
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Thu Aug 02, 2012 9:28 am |
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untanglingwebs
F L I N T O I D
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Dems: Dark Money Groups Use "Secret Money to Subvert the Democratic Process"
—By Gavin Aronsen
| Mon Jul. 9, 2012 1:30 PM PDT.
chicagopublicmedia/Flickr
Democrats are continuing their offensive against conservative dark-money groups, arguing that they are not "social welfare" nonprofits as they claim but rather political committees flaunting donor disclosure rules. In a new complaint to the Federal Election Commission first reported by the New York Times, Democratic Senatorial Campaign Committee executive director Guy Cecil calls out Karl Rove's Crossroads GPS, the senior citizen-focused 60 Plus Association, and the Koch brothers-funded Americans for Prosperity. The three groups, Cecil writes, "are in the vanguard of using secret money to subvert the democratic process."
The complaint singles out a factually challenged ad from 60 Plus targeting Sen. Sherrod Brown (D-Ohio), a similarly fuzzy Crossroads ad targeting Sen. Jon Tester (D-Mont.), and an Americans for Prosperity ad attacking Senate candidate Tim Kaine (D-Va.). Cecil writes (PDF):
Each group shields its donors from disclosure by disavowing political committee status under FECA, and claiming exemption from tax under 501(c)(4) of the Internal Revenue Code. None has a legitimate claim...Outrageously, 60 Plus and AFP each told the Internal Revenue Service on its 2010 Form 990 that it engaged in no direct or indirect activities on behalf of or in opposition to candidates at all during the bulk of the 2010 cycle. These claims are risible on their face, given what is known publicly about these groups' activities.
Crossroads spokesman Jonathan Collegio told the Times that complaints that fail to mention similar groups supporting Democrats doing "exactly as their center-right counterparts are publicity stunts to promote partisan causes and are not taken seriously by serious people." Likewise, 60 Plus chairman James Martin said the complaint is "naked politics, pure and simple. They need to stop their whining and stop trying to achieve with lawyers what they can’t in the arena of public opinion."
Last week, Senate Minority Leader Mitch McConnell penned an op-ed for USA Today arguing that requiring 501(c)(4)s to reveal their donors could inspire a Nixonian enemies list used to harass big political donors.
While a federal appeals court ruled last month that the government must start determining the "major purpose" of 501(c)(4) groups like Crossroads GPS, the decision will likely be subject to more legal wrangling. And as the Times reminds us, the FEC "is usually slow to respond to such complaints, and any action is unlikely to affect the 2012 election."
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Thu Aug 02, 2012 9:33 am |
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untanglingwebs
F L I N T O I D
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Revealed: The Dark Money Group Attacking Sen. Sherrod Brown
by Justin Elliott
ProPublica, Sept. 7, 2012, 11:12 a.m.
In May, a previously unknown group started pouring money into Ohio’s U.S. Senate race, considered one of the most important in the country and currently the nation’s most expensive. The group, the Government Integrity Fund, has spent over $1 million so far on TV ads bashing Democratic incumbent Sen. Sherrod Brown and praising his Republican opponent, Josh Mandel
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Like many other such non-profit groups that are playing a dominant role in th.is year’s elections, the Government Integrity Fund is shrouded in mystery. It isn’t required to reveal donors, nor has it answered questions about who runs the group. The Fund’s barebones website lists no contact information beyond a P.O. Box.
The only name listed on incorporation papers for the group is a Columbus lawyer, William Todd, who told ProPublica, “I really have no role in their affairs.” (In June, Todd also declined to respond to questions from a Huffington Post reporter, citing attorney-client privilege.)
But previously unreported documents filed with an Ohio television station pull back the curtain a bit: the Government Integrity Fund is run by a state lobbyist who in turn employs a former top Mandel staffer.
The lobbyist, Tom Norris, is listed as the Government Integrity Fund’s chairman and treasurer. Norris owns an Ohio lobbying firm, Cap Square Solutions, and last year hired a top Mandel aide, Joel Riter, to work at the firm.
Riter’s role in the Government Integrity Fund, if any, is not clear. The former Mandel aide declined to say whether he is involved with the group that is chaired by his current boss and running ads in support of his former boss.
“I can’t talk to you about this,” he told ProPublica. “I’m not going to comment on any kind of involvement I have with anyone.”
Norris did not respond to requests for comment, nor did the Mandel campaign.
The documents identifying Norris as the chairman of the Fund are public because of a Federal Communications Commission rule requiring TV stations to keep detailed records about political advertisers. The files can be valuable, offering a look at exactly who is spending and how much. Until recently, the documents were only available by physically traveling to stations. ProPublica’s Free the Files project has spotlighted the issue and this summer the FCC passed a rule requiring the stations in the nation’s top markets to upload the files to agovernment website.
The documents were filed with a Cincinnati NBC affiliate, WLWT, one of the stations the group has been advertising on. Here is a Fund ad that attacks Senator Brown for purportedly turning his back on his younger, more honorable self. “Young Sherrod Brown was independent of Wall Street,” the announcer says. “Today Sherrod Brown takes big money from those same corporate interests.”
The Associated Press reported last month that outside groups have spent $15 million supporting Mandel compared to about $3 million on the Democratic side.
We still don’t know who is putting up the money for the Government Integrity Fund’s ads because the group is a non-profit “social welfare” group, which don’t have to release donor information or register with the Federal Election Commission. Such groups are supposed to be “primarily” engaged in promoting social welfare but they have been flooding the airwaves with political ads in the wake of the Supreme Court’s Citizens United case and decisions by regulatory agencies.
Besides identifying Norris as the chairman of the group, the form filed with the TV station shows that the Government Integrity Fund has an office at 208 East State Street, a few blocks from the state house in Columbus. Riter, the former Mandel aide, also has an office in the building.
Asked about his office at 208 East State Street, Riter said: “Whatever office Government Integrity Fund has is not mine.”
Outside groups are not allowed to coordinate with campaigns, but it is common for politicians’ former aides to be involved with such groups.
Riter first worked as an aide to Mandel during the candidate’s stint in the Ohio legislature. Riter then became field director for Mandel’s campaign for state treasurer, joining the treasurer’s office as constituent and executive agency liaison after Mandel won the race. Riter left his state job in the treasurer’s office after six months to become a lobbyist at Cap Square in 2011. According to state records, the firm lobbies for a range of interests, including the Ohio Ready Mixed Concrete Association and medical device companies.
Riter was featured in a Dayton Daily News article earlier this year investigating Mandel’s practice of hiring former campaign workers for state jobs. (That piece led a Democratic legislator to file an ethics complaint against Riter, who has contested the charges.)
The Fund was created in May 2011 and an affiliated super PAC, the Government Integrity Fund Action Network, registered with the Federal Election Commission two months later.
The super PAC, which does have to report its donors, has not been active and raised just $10,500 through the end of June, all but $500 from New York financier and benefactor of conservative causes Roger Hertog. Hertog also gave $5,000 directly to Mandel’s campaign last year. Hertog declined to comment.
Brown campaign spokesman Justin Barasky said that the Government Integrity Fund is the fourth largest outside group on the Republican side in Ohio, behind such national outfits as the Karl Rove-affiliated Crossroads GPS. “We don’t know anything else about them,” he said. “They are the only secretly funded group that is based here.”
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Tue Sep 11, 2012 12:16 am |
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untanglingwebs
F L I N T O I D
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Revealed: The Dark Money Group Attacking Sen. Sherrod Brown
by Justin Elliott
ProPublica, Sept. 7, 2012, 11:12 a.m.
In May, a previously unknown group started pouring money into Ohio’s U.S. Senate race, considered one of the most important in the country and currently the nation’s most expensive. The group, the Government Integrity Fund, has spent over $1 million so far on TV ads bashing Democratic incumbent Sen. Sherrod Brown and praising his Republican opponent, Josh Mandel
.
Like many other such non-profit groups that are playing a dominant role in th.is year’s elections, the Government Integrity Fund is shrouded in mystery. It isn’t required to reveal donors, nor has it answered questions about who runs the group. The Fund’s barebones website lists no contact information beyond a P.O. Box.
The only name listed on incorporation papers for the group is a Columbus lawyer, William Todd, who told ProPublica, “I really have no role in their affairs.” (In June, Todd also declined to respond to questions from a Huffington Post reporter, citing attorney-client privilege.)
But previously unreported documents filed with an Ohio television station pull back the curtain a bit: the Government Integrity Fund is run by a state lobbyist who in turn employs a former top Mandel staffer.
The lobbyist, Tom Norris, is listed as the Government Integrity Fund’s chairman and treasurer. Norris owns an Ohio lobbying firm, Cap Square Solutions, and last year hired a top Mandel aide, Joel Riter, to work at the firm.
Riter’s role in the Government Integrity Fund, if any, is not clear. The former Mandel aide declined to say whether he is involved with the group that is chaired by his current boss and running ads in support of his former boss.
“I can’t talk to you about this,” he told ProPublica. “I’m not going to comment on any kind of involvement I have with anyone.”
Norris did not respond to requests for comment, nor did the Mandel campaign.
The documents identifying Norris as the chairman of the Fund are public because of a Federal Communications Commission rule requiring TV stations to keep detailed records about political advertisers. The files can be valuable, offering a look at exactly who is spending and how much. Until recently, the documents were only available by physically traveling to stations. ProPublica’s Free the Files project has spotlighted the issue and this summer the FCC passed a rule requiring the stations in the nation’s top markets to upload the files to agovernment website.
The documents were filed with a Cincinnati NBC affiliate, WLWT, one of the stations the group has been advertising on. Here is a Fund ad that attacks Senator Brown for purportedly turning his back on his younger, more honorable self. “Young Sherrod Brown was independent of Wall Street,” the announcer says. “Today Sherrod Brown takes big money from those same corporate interests.”
The Associated Press reported last month that outside groups have spent $15 million supporting Mandel compared to about $3 million on the Democratic side.
We still don’t know who is putting up the money for the Government Integrity Fund’s ads because the group is a non-profit “social welfare” group, which don’t have to release donor information or register with the Federal Election Commission. Such groups are supposed to be “primarily” engaged in promoting social welfare but they have been flooding the airwaves with political ads in the wake of the Supreme Court’s Citizens United case and decisions by regulatory agencies.
Besides identifying Norris as the chairman of the group, the form filed with the TV station shows that the Government Integrity Fund has an office at 208 East State Street, a few blocks from the state house in Columbus. Riter, the former Mandel aide, also has an office in the building.
Asked about his office at 208 East State Street, Riter said: “Whatever office Government Integrity Fund has is not mine.”
Outside groups are not allowed to coordinate with campaigns, but it is common for politicians’ former aides to be involved with such groups.
Riter first worked as an aide to Mandel during the candidate’s stint in the Ohio legislature. Riter then became field director for Mandel’s campaign for state treasurer, joining the treasurer’s office as constituent and executive agency liaison after Mandel won the race. Riter left his state job in the treasurer’s office after six months to become a lobbyist at Cap Square in 2011. According to state records, the firm lobbies for a range of interests, including the Ohio Ready Mixed Concrete Association and medical device companies.
Riter was featured in a Dayton Daily News article earlier this year investigating Mandel’s practice of hiring former campaign workers for state jobs. (That piece led a Democratic legislator to file an ethics complaint against Riter, who has contested the charges.)
The Fund was created in May 2011 and an affiliated super PAC, the Government Integrity Fund Action Network, registered with the Federal Election Commission two months later.
The super PAC, which does have to report its donors, has not been active and raised just $10,500 through the end of June, all but $500 from New York financier and benefactor of conservative causes Roger Hertog. Hertog also gave $5,000 directly to Mandel’s campaign last year. Hertog declined to comment.
Brown campaign spokesman Justin Barasky said that the Government Integrity Fund is the fourth largest outside group on the Republican side in Ohio, behind such national outfits as the Karl Rove-affiliated Crossroads GPS. “We don’t know anything else about them,” he said. “They are the only secretly funded group that is based here.”
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Tue Sep 11, 2012 12:16 am |
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