What does the death of Mollie Tibbetts, an Iowa college student murdered by an undocument farm worker in Iowa back in July [1], have in common with downfall of America? Well, if you had asked Fox News or President Trump [2] in the days following the revelation that Mollie’s murderer was ‘an illegal’, they would have told you illegal immigration is what the murder and America’s downfall have in common.
But then the real common link between Mollie’s murder and the downfall of America was discovered and the right-wing noise machine suddenly stopped talking about Mollie’s murder. Because that common link turned out to be a person. The person who illegally employed and housed for years Tibbetts’s murderer. A person the Republican party and the billionaires it works for would rather the American public not read about because she happens to be one of the Republican Party’s masters of the dark arts of wielding ‘dark money’ in American politics: Nicole Schlinger, an influential Iowan Republican fundraiser and an important figure in a network of Republican political operatives who founded and operate American Future Fund (AFF), a 501(c)(4) (‘social welfare’) political super PAC.
Nicole was AFF’s first president. And it turns out the story of AFF, which was started in 2008, two years before Citizens United, is the story of what was wrong with the US campaign finance system in the pre-Citizens United era and the story of how it got much worse in the post-Citizen United era.
The story of American Future Fund is also a story about how the mega-donor networks operated by the Koch brothers and Karl Rove were responsible for the vast majority of new ‘dark money’ flowing into the US political system post-Citizens United. The right-wing donor networks operated by the Kochs and Rove have played a massive role in that worsening post-Citizens United situation and Nicole Schlinger’s AFF was an important tool for both networks in exploiting that worsening situation. AFF provides a full spectrum of political services, but one of its most important services is operating largely in the dark without the public knowing what its doing and who hired it.
Schlinger also runs CampaignHQ, a call-center business that provides robo-calling and fundraising services for a number of the most anti-immigrant GOP politicians today, from Ted Cruz to Corey Stewart (the ‘Alt Right’ GOP gubernatorial candidate in Virginia this year [3]). And in Ted Cruz’s and Corey Stewart’s cases, Schlinger raised funds for them in their races this year. Keep in mind that Cruz was locked in an exceptionally tight reelection race this year when this story broke [4], so this the kind of story that could have had significant political ramifications if it ended up making Cruz look like a hypocrite who will defend the employers of undocumented workers when they’re raising money for him. And Corey Stewart straight up says in the first article below that he doesn’t really care with Schlinger does “in her personal life” as long as she’s good a fundraising.
That’s all part of why the Republican Party would likely prefer the American public remains in the dark about the story of Nicole Schlinger, her career as a Republican fundraiser and officer in dark money entities like American Future Fund, and her propensity for hiring undocumented immigrants. And in the context of the current fixation within the GOP today on illegal immigration, the fact that a key Republican master of dark money politics is the person who illegally hired Tibbetts murderer is a perfect storm story for shining a light on American’s dark money infrastructure.
So when the right-wing noise machine suddenly stopped talking about Mollie’s murder shortly after Nicole Schlinger’s name entered the story it’s hard to avoid the conclusion that a desire to keep Schlinger’s personal biography as a master of the dark money politics out of the news. A biography that, again, really is like the quintessential story of how right-wing billionaire money has infested American politics.
That’s the story we’re going to look at in this post. The story of the American Future Foundation. It’s a story that overlaps with Schlinger’s life but has a life of its own. A story with the following key points:
1. AFF was started in 2008 as a 501(c)(4) ‘social welfare’ nonprofit, with Schlinger as its first president. But Schlinger was just one of the Iowan Republican power brokers behind it. As we’re going to see, maintaining the pretense of being a ‘social welfare’ nonprofit is central to how dark money operates in American politics and AFF’s adoption of that ‘social welfare’ status is particularly emblematic of the farcical nature of dark money entities claiming ‘social welfare’ status.
2. By 2009, AFF was lobbying the Federal Election Commission (FEC) to weaken state regulations on political robo-calling in anticipation of robo-calling campaigns explicitly advocating for and against politicians in the 2010 mid-terms. As we’re going to see, the rules for 501(c)(4)s for political attack ads that directly advocate for or against a candidate require the disclosure of how much was spent on the ads but not who paid for them. And lack of donor disclosure requirements is a critical feature of 501(c)(4)s that make them ideal for letting billionaires inject massive amounts of money in politics anonymously.
3. AFF appears to be closely affiliated with DCI Group, a shady Republican lobbying firm known for taking on clients like RJ Reynolds Tobacco and the Burmese Junta. AFF was contracting a DCI Group affiliate in 2009 and both AFF and DCI Group were hired by Doral Financial Group in 2014 to lobbying the government of Puerto Rico.
4. Two of the key figures behind the formation of AFF were previously associated two of the sleaziest political attacks in modern American presidential politics: the hyper-racist Willie Horton ad from 1988 used against Michael Dukakis and the ‘Swiftboat Veterans for Truth’ smear campaign used against John Kerry in 2004. Specifically, Ben Ginsberg — the former chief outside counsel to the Bush-Cheney 2004 campaign who resigned after it was revealed that he was also providing advice to Swift Boat Veterans for Truth — was AFF’s legal council. AFF’s media strategist was Larry McCarthy, the guy who produced the 1988 Willie Horton ad.
5. When the 501(c)(4) system was started nearly a century ago, these ‘social welfare’ entities were expected to “exclusively” focus on social welfare causes and avoid explicit partisan advocacy for or against politicians in American politics. But that was “exclusively” rule was changed in 1959 to “primarily” and suddenly 501(c)(4) ‘social welfare’ entities were allowed to spend up to half of their expenditures on political attack ads. But that 50 percent cap can effectively be raised to almost 100 percent via the use of networks of affiliated 501(c)(4)s all donating to each other. AFF can, and does, act as such a for-hire node in networks of 501(c)(4)s.
6. 501(c)(4)s can run “Issue ads” — ads that don’t directly advocate for or against a candidate — that don’t count as political attack ads. So a 501(c)(4) could spend half of its money on political attack ads advocating for or against candidates and spend the other half on “issue ads” that are also indirectly advocating for or against a candidate. In the past, the difference between a political attack ad and an issue is a nebulous issue that largely comes down to whether or not certain “magic words” were used in the ad based on the 1976 Buckley v Valeo Supreme Court Case. Today, the rules aren’t quite so arbitrary and the FEC has the power to factor in the larger context of an ad can be used to determine whether or not its a political attack ad, but Republicans on the FEC board consistently prevent the FEC from using that broader power and the “magic words” criteria remains the de facto rule. AFF is an expert in navigating these grey lines.
7. The amount of money flowing into 501(c)(4)s exploded over the past decade. in 2006, $5.2 million was raised by 501(c)(4)s. It grew to $310 million by By 2012. The Supreme Court’s Citizens United ruling was in January of 2010. The vast majority of that rise in 501(c)(4) donations was to right-wing groups $265.2 million of the $310 million). AFF was a major recipient of that money. Almost all of AFF’s donations during this period were from the Koch network. The Koch and Rove donor networks played the largest roles in this spike in 501(c)(4) donations.
8. Other key entities in the Koch network of 501(c)(4)s include 60 Plus (supposedly a conservative version of the A.A.R.P. that actually works as lobbying mercenary), the TC4 Trust and the Center to Protect Patient Rights (CPPR). TC4 and CPPR were dubbed “shadow money mailboxes” after it was revealed how they acted as key middle-men organizations that would accept donations from the Koch network and then re-gift that money to other entities in the Koch network to the obscure the money flows. The money trail was further obscured by TC4 and CPPR using “disregardable entities”, which are sub-units of 501(c)(4)s that use different names to the public. The use of these “disregardable entities” was further obscured by incorrect IRS filings that left out the existence of these “disregardable entities” and were only corrected in later years with tax filing amendments.
9. Following the 2012 election, AFF was largely kicked out of the Koch network after it was revealed that AFF’s work on a 2012 California ballot initiative violated California law. A Koch-based entity, Americans for Job Security, gave $24 million to CPPR. CPPR, in turn, gave $7 million to AFF and $13 million to Americans for Responsible Leadership, another Koch-backed 501(c)(4). AFF and Americans for Responsible Leadership then passed the money along to various California ballot initiatives. This was considered campaign money laundering by California law.
10. AFF responded to getting cut off from the Koch funds by finding other clients. Like corporate lobbying for Doral Financial Group. In 2014, Karl Rove’s Crossroads GPS 501(c)(4) hired AFF to get involved in the North Carolina senate race. But AFF didn’t back the Republican. AFF backed the Libertarian candidate as part of a strategy to bleed off younger voters away from the Democrat by emphasizing the Libertarian’s advocacy for legalizing marijuana. The Republican candidate won that race.
11. By 2016, AFF’s clients included the establishment Republican mega-donors backing Marco Rubio’s run for the White House. Rubio’s campaign directly hired AFF for the general election after Marco Rubio dropped out of the presidential race and jumped back into the Senate race.
12. In 2016, AFF donated $3 million to the National Rifle Association, highlighting its service as a middle-man donor.
13. In 2018, AFF was used by the House Republican leadership to secretly get involved in California’s unusual “Jungle” primaries (where all candidates from all parties run in a single primary and the top two head to a general election run-off). This included providing services like hiring an army of door-knockers across three California districts that knocked on 400,000 doors. At the time, Republicans were openly anxious about the lack of national Republican party involvement but it was later revealed that the Republican party leadership wanted their hiring of AFF to remain a secret over concerns that their moves could anger the Republican base.
14. While the spending by 501(c)(4)s is tax free, the donations to 501(c)(4)s has been subject to the gift tax since the 1980s, but the IRS never consistently enforced this rule and many large donors never paid it. In 2011, the IRS attempted to audit five large 501(c)(4) donors over whether or not they paid their gift taxes on previous donations. The Republicans in Congress pressure the IRS to shut down the audit. In 2015, Congress was passed a law eliminating the gift tax for all nonprofits, including 501(c)(4)s, citing that 2011 audit attempt as justification.
15. In July of this year, the IRS declared that 501(c)(4)s no longer need to disclose the identities of large donors to the IRS itself. This is seen as potentially inconsequential because the IRS almost never audits 501(c)(4)s anyway. The 2015 lifting of the gift tax on 501(c)(4)s by congress was used as a justification for this move. The right-wing hysteria and outrage over the fake ‘IRS was targeting conservatives’ scandal of 2013 was also used as a justification. And while experts see this as largely inconsequential since the IRS rarely audits 501(c)(4)s anyways, one area that experts do see this impact is watching out for foreign donations. Although groups like AFF or Limited Liability Corporations can be used to obscure foreign donations so it still might not matter.
16. In September of this year, the Supreme Court actually made a potentially historic ruling that 501(c)(4)s do actually have to disclose donor identities for the money used for political attack ads (i.e. ads that explicitly advocate for or against a particular candidate). But experts expect this ruling to have a limited impact on the disclosure of donor identities thanks to the use of groups like AFF that can act as middle-men entities between the donor and the entities that run the actual ads (i.e., the only donors that will be disclosed will be the names of groups like AFF, not the names of the people who donated to AFF).
That’s the story we’re going to be looking at in this post. The story of how 501(c)(4) ‘social welfare’ organizations were used by wealthy right-wing donors to unleashed a flood of unlimited anonymous political spending in America’s campaigns. That’s the story of American Future Fund. A story that’s one degree removed from the murder of Iowa college student Mollie Tibbetts.
So let’s start off with an article looking at how Nicole Schlinger and her husband Eric Lang just happen to own the farm that employed and housed Cristhian Bahena Rivera, the undocumented immigrant who killed Mollie Tibbetts. Rivera was one of 10 other undocumented immigrants employed by the farm. The story was immediately promoted by the Republican party as somehow the most important story in the country after Rivera was identified as the murderer [5]. It’s a particularly awkward situation for not just Schlinger but her Republican clients too. Clients that include some of the most anti-immigrant politicians running in 2018 like Ted Cruz and Corey Stewart. And yet, as the article notes, Schlinger and her husband have somehow managed to avoid the media spotlight, an impressive feat the couple has managed to maintain to this day [6]:
Associated Press
The Man Accused of Killing Mollie Tibbetts Lived on Land Owned by GOP Fundraiser
By RYAN J. FOLEY
Aug. 24, 2018IOWA CITY, Iowa (AP) — A top Republican fundraiser whose firm works for several prominent immigration hardliners is the partial owner of the land where the Mexican man accused of killing Iowa college student Mollie Tibbetts lived rent-free, a farm spokeswoman said Friday.
Nicole Schlinger has long been a key fundraiser and campaign contractor for GOP politicians in Iowa and beyond, including this cycle for Texas Sen. Ted Cruz and Virginia Senate candidate Corey Stewart.
Schlinger is the president of Campaign Headquarters, a call center that makes fundraising calls, identifies supporters and helps turn out voters for conservative candidates and groups. Her business is one of the largest in Brooklyn, the central Iowa town where Tibbetts disappeared while out for a run on July 18.
Schlinger is married to Eric Lang, the president of the family-owned dairy that has acknowledged providing employment and housing for the last four years to Cristhian Bahena Rivera, the man charged with murder in Tibbetts’ death.
The couple — along with her husband’s brother Craig Lang and his wife — own farmland outside Brooklyn that includes trailers where some of the dairy’s employees live for free as a benefit of their employment, farm spokeswoman Eileen Wixted confirmed.
She said Rivera lived there for the duration of his employment, and about half of the farm’s other 10 workers do so as well. Under the arrangement, the farming company pays the couples to rent the land but workers do not have to pay, she said.
In an email Friday, Schlinger said that she was “shocked and deeply saddened” by Tibbetts’ death and had never met Rivera. “The perpetrator should be punished to the fullest extent of the law, and when he meets his maker, suffer the consequences he deserves,” she wrote.
She said that she was gifted an ownership interest in the land many years ago from her husband’s family and that she has no role in the farming operation.
Still, the fact that one of its own operatives has indirect ties to the case could complicate GOP efforts to highlight the gruesome slaying in its political messaging ahead of the November midterm election. Dairy co-owner Craig Lang also was a Republican candidate for Iowa agriculture secretary, finishing third in a five-way race in the June primary.
Republicans such as President Donald Trump and Iowa Gov. Kim Reynolds [7] called for stricter immigration laws and enforcement almost immediately after Rivera, who is suspected of being in the country illegally, was charged Tuesday. Some have blamed Democratic policies for the slaying, even though studies have disputed the notion that those in the country illegally are more likely to commit violent crime.
“Every victim below would be alive today if we enforced our immigration laws,” U.S. Rep. Steve King of Iowa tweeted Friday, above a picture of Tibbetts and other victims. “Leftists sacrificed thousands, including their own, on the altar of Political Correctness.”
Schlinger’s business calls itself “the best conservative call center in America.” Her biography claims she is the most prolific fundraiser in Iowa GOP history, having brought in more than $50 million for politicians and causes. She has said her business has made millions of phone calls for candidates seeking offices ranging from president to city council since its founding in 1999. Her firm’s client list includes several politicians who routinely call for stricter immigration enforcement.
Federal Election Commission records show that Cruz’s re-election campaign has paid CampaignHQ nearly $1.7 million since the beginning of 2017. A Cruz campaign spokeswoman had no immediate comment.
Stewart, who has made stepping up deportations of immigrants in the country illegally a major campaign theme, has also employed the firm, along with the campaigns of Sen. Mike Lee of Utah and Rep. Joe Wilson of South Carolina. The now-defunct Stop Sanctuary Cities PAC paid the firm $3,449 for its services in March.
In an interview Friday, Stewart said he had no problem with Schlinger’s property ties to the suspect, saying her firm does a “great job” raising money.
“I hire people for their ability to do the work for my campaign,” he said. “Whatever she does in her personal life is her business.”
After Rivera was charged, Reynolds denounced an immigration system that “allowed a predator like this to live in our community.” CampaignHQ was a top vendor for the campaigns of former Iowa Gov. Terry Branstad, who selected Reynolds as his running mate in 2010, and has also done some work directly for Reynolds’ campaigns, state records show.
Investigators say that Rivera came to the country from Mexico illegally several years ago when he was in the late teens. He is accused of stalking Tibbetts while she was out for a run a few miles from his home, killing her after she threatened to call police on him, and dumping her body in a cornfield. Preliminary autopsy results [8] show that Tibbetts died from multiple “sharp force injuries.”
Schlinger and her husband have managed to largely avoid the intense media spotlight that has followed the case. They did not speak at a press conference Wednesday when farm manager Dane Lang said Rivera presented an out-of-state identification and Social Security number with a different name when he was hired in 2014. Dane Lang said he was shocked to learn to that Rivera’s allegedly not in the country legally.
But others around town, including Rivera’s defense lawyer, question whether the family had to have had suspicions, if not known, about Rivera’s immigration status.
...
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“Still, the fact that one of its own operatives has indirect ties to the case could complicate GOP efforts to highlight the gruesome slaying in its political messaging ahead of the November midterm election. Dairy co-owner Craig Lang also was a Republican candidate for Iowa agriculture secretary, finishing third in a five-way race in the June primary.”
The killer’s employers are big time Republicans. It’s quite a complication for the GOP efforts to capitalize on the gruesome slaying. Not only is it obviously politically embarrassing, but Nicole Schlinger is also a key fundraiser for politicians in Iowa and beyond via her CampaignHQ call center company. That includes fundraising for two candidates in tough races this year: Ted Cruz in Texas and Corey Stewart in Virginia:
...
Nicole Schlinger has long been a key fundraiser and campaign contractor for GOP politicians in Iowa and beyond, including this cycle for Texas Sen. Ted Cruz and Virginia Senate candidate Corey Stewart.Schlinger is the president of Campaign Headquarters, a call center that makes fundraising calls, identifies supporters and helps turn out voters for conservative candidates and groups. Her business is one of the largest in Brooklyn, the central Iowa town where Tibbetts disappeared while out for a run on July 18.
...
And Schlinger and her husband Eric Lang didn’t just employ Rivera for the last four years. They also provided his housing free of charge along with 10 other workers. That sure sounds like the kind of arrangement that a company that knew it was employing undocumented workers would do:
...
Schlinger is married to Eric Lang, the president of the family-owned dairy that has acknowledged providing employment and housing for the last four years to Cristhian Bahena Rivera, the man charged with murder in Tibbetts’ death.The couple — along with her husband’s brother Craig Lang and his wife — own farmland outside Brooklyn that includes trailers where some of the dairy’s employees live for free as a benefit of their employment, farm spokeswoman Eileen Wixted confirmed.
She said Rivera lived there for the duration of his employment, and about half of the farm’s other 10 workers do so as well. Under the arrangement, the farming company pays the couples to rent the land but workers do not have to pay, she said.
...
Then there’s the fact that a number of Schlinger’s clients are viruently anti-immigrant politicians:
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Schlinger’s business calls itself “the best conservative call center in America.” Her biography claims she is the most prolific fundraiser in Iowa GOP history, having brought in more than $50 million for politicians and causes. She has said her business has made millions of phone calls for candidates seeking offices ranging from president to city council since its founding in 1999. Her firm’s client list includes several politicians who routinely call for stricter immigration enforcement.Federal Election Commission records show that Cruz’s re-election campaign has paid CampaignHQ nearly $1.7 million since the beginning of 2017. A Cruz campaign spokeswoman had no immediate comment.
Stewart, who has made stepping up deportations of immigrants in the country illegally a major campaign theme, has also employed the firm, along with the campaigns of Sen. Mike Lee of Utah and Rep. Joe Wilson of South Carolina. The now-defunct Stop Sanctuary Cities PAC paid the firm $3,449 for its services in March.
...
It’s a tricky situation for GOP: extreme opportunity coupled with possible political peril. Political peril exemplified by Corey Stewart’s response to the revelation that one of fundraisers, Schlinger, was blatantly employing undocumented workers: Stewart simply said he sees no problem and it was none of his business what Schlinger did with her business. It’s the kind of answer Trump’s base probably didn’t like:
...
In an interview Friday, Stewart said he had no problem with Schlinger’s property ties to the suspect, saying her firm does a “great job” raising money.“I hire people for their ability to do the work for my campaign,” he said. “Whatever she does in her personal life is her business.”
...
“Whatever she does in her personal life is her business.”
That’s quite a statement from an Alt Right candidate who has defined his political persona with his fixation on the dangers of illegal immigration [9].
And yet, despite the politically explosive nature of this twist in the murder of Mollie Tibbetts, Schlinger’s ties to this story received hardly any coverage:
...
In an email Friday, Schlinger said that she was “shocked and deeply saddened” by Tibbetts’ death and had never met Rivera. “The perpetrator should be punished to the fullest extent of the law, and when he meets his maker, suffer the consequences he deserves,” she wrote.She said that she was gifted an ownership interest in the land many years ago from her husband’s family and that she has no role in the farming operation.
...
Schlinger and her husband have managed to largely avoid the intense media spotlight that has followed the case. They did not speak at a press conference Wednesday when farm manager Dane Lang said Rivera presented an out-of-state identification and Social Security number with a different name when he was hired in 2014. Dane Lang said he was shocked to learn to that Rivera’s allegedly not in the country legally.
But others around town, including Rivera’s defense lawyer, question whether the family had to have had suspicions, if not known, about Rivera’s immigration status.
...
And as we now know months later, the ties Schlinger and Lang have to the murder of Mollie has largely stayed out of the media spotlight, in large part because the murder of Mollie just suddenly became a non-story not long after Schlinger and Lang’s ties were revealed.
Nichol Schlinger’s American Future Fund is the Story of the Present Day American Dark Money Nightmare
That’s all part of what is complicating what would normally be a prime opportunity for GOP anti-immigrant demagoguery. But as we’re going to see in this post, the political consequences of serious media attention to Nicole Schlinger could have significant repercussion. Repercussions that could, and should, shine significant light on the public’s understanding of how political ‘dark money’ operates in America’s broken campaign finance system. The story of Nichole Schlinger’s American Future Fund is a profoundly symbolic story about how the flood of money from anonymous wealthy donors is actually put to use to influence elections.
Because American Future Fund is both a provider of campaign services — everything from developing and running TV ad campaigns to hiring armies of door knockers to sign petitions — and a for-hire ‘social welfare’ organization node in a larger network of ‘social welfare’ 501(c)(4)s organizations. Like the Koch network of politically active 501(c)(4) ‘social welfare’ organizations. And Karl Rove’s network of politically active 501(c)(4) ‘social welfare’ organizations. AFF has worked for both networks. Specifically, after the Koch network kicked AFF out of its network in 2013 after AFF was caught breaking the 501(c)(4) rules in California, AFF found a new home in Karl Rove’s network. We’re going to see that story play out in the articles below.
So let’s start off our tour of American Future Fund (AFF) and the shadowy world of political 501(c)(4) political ‘social welfare’ entities by looking at this November 2009 Talking Points Memo piece about Schlinger’s AFF informing the Federal Election Commission that it’s planning on running a series of robo-call ads in the 2010 mid-term elections that are going to be explicitly advocating for or against candidates. AFF was advocating that federal laws on robo-calls override Iowa’s more stringent state laws on robo-calls and asking the FEC to make a ruling. As the article notes, it was a request for an FEC ruling that would have impacted all US states, not just Iowa.
So in 2009, AFF was trying to weaken the nation’s laws regulating robo-calls in anticipation of its 2010 robo-calling campaigns on behalf of Republicans. Or at least that was one of the things AFF was up to in 2009. As we’ll see, it’s often up to a lot.
As the article also notes, AFF back in 2009 consisted more people affiliated with the Republican party than just Nichole Schlinger. Jason Torchinsky, a lawyer for AFF’s political action group that would be carrying out the robo calls, was one of the architects of the American Center for Voting Rights (ACVR), a faux “voting-rights” outfit that was set up by GOP operatives in 2005 to “give ‘think tank’ academic cachet to the unproven idea that voter fraud is a major problem in elections.”
Jason Torchinsky worked at the time for a law firm run by Alex Vogel and his wife, Virginia State Senator Jill Holtzman Vogel. Alex Vogel was ACVR’s executive director and a former RNC lawyer. His wife Jill had a track record of hardball tactics, including having her babysitter level a campaign finance irregularity allegations against her primary opponent and a local prosecutor who was a supporter investigate it. She won the primary. The charges were dropped. Given the fact that the legal existence of something AFF is a giant violation of prudent campaign finance law, it’s ironic to have someone affiliated with the AFF with a history of making fraudulent campaign finance violation allegations as a political dirty trick.
Also keep in mind that this was just a couple months before the January 2010 Citizens United Supreme Court decision that sanctioned unlimited secret corporate and union political spending through 501(c)(4)s. Unlimited money that would pay for a lot of robo-calls. Although it’s also important to point out that AFF withdrew its request for the FEC to rule [10] that federal robo-call regulations overruled stricter state regulations just a couple months later in January of 2010. So this was more of an aspiration attempt to weaken American’s robo-calling laws. The key point in the article is that AFF was boldly announcing plans for overly political advertising advocating for and against specific candidates in the 2010 mid-terms. In other words, it was behaving exactly like a highly partisan political entity. And yet it’s legally allowed to masquerade as a nonprofit ‘social welfare’ entity, granting it all sorts of privileges, like hiding its donors from the public.
Finally, as the article notes, because the AFF is a 501(c)(4), it’s not required to publicly disclose very much information. We’ll take a much closer look into those disclosure laws below. And the AFF fully embraced that lack of required disclosure by having no one talk to the media. It was operating as a black box entity and a very large political mega-phone simultaneously. And Nichole Schlinger was president at the time. So the article makes clear, avoiding media exposure is something Nichole Schlinger has long had experience with. It’s an integral aspect of her line of work as a dark money political operative [11]
Talking Points Memo
MuckrakerShadowy GOP-Linked Group Plans Barrage Of 2010 Robo-Calls
By Zachary Roth
November 23, 2009 8:10 amA shadowy conservative group with ties to the operatives behind a host of GOP dirty tricks is working to undermine state restrictions on political robo-calls, as it gears up to unleash a barrage of such calls in 2010 races.
Last month, American Future Fund Political Action (AFFPA) informed the FEC that it’s planning robo-calls in congressional races. Jason Torchinsky, a lawyer for AFFPA, wrote that the group “wishes to distribute pre-recorded telephone calls … as part of a nationwide program of political outreach.” The calls, wrote Torchinsky, “will expressly advocate the election or defeat of one or more clearly identified candidates for Federal office.”AFFPA was asking the FEC for an advisory opinion on whether state laws restricting robo-calls should apply, or whether, as AFFPA argues, they’re pre-empted by a less restrictive federal law that sought to standardize the regulation of robo-calls. An FEC ruling in AFFPA’s favor would badly undermine state laws such as Minnesota’s, which requires the listener to actively consent to hearing a recorded message before the message can be played.
That’s worth paying attention to in itself. But behind the robo-call effort is a team of high-powered GOP operatives behind a slew of sleazy campaign tactics over the years.
You might remember Torchinsky, AFFPA’s lawyer, as one of the architects of the American Center for Voting Rights (ACVR), the bogus “voting-rights” group that was set up by GOP operatives in 2005 to “give ‘think tank’ academic cachet to the unproven idea that voter fraud is a major problem in elections,” as election law expert Rick Hasen has written [12].
For several months, ACVR’s executive director was Alex Vogel, a former RNC lawyer whose consulting firm reportedly [13] was paid $75,000 for the ACVR gig. (Also involved with ACVR: TPMmuckraker favorite Pat Rogers, the New Mexico GOP activist who helped get David Iglesias fired for not pursuing bogus voter fraud complaints.)
Vogel also appears to have a hand in AFF: Torchinsky, a former Bush campaign lawyer, works for the law firm run by Vogel and his wife, Virginia State Senator Jill Holtzman Vogel.
Holtzman Vogel’s own political career may owe something to similarly hardball tactics. A former RNC counsel herself, she faced a tight primary in her Virginia Senate race, but prevailed after her opponent, Mike Tate, was indicted [14] for campaign finance irregularities. The person who brought the complaint to the attention of authorities was Holtzman Vogel’s baby-sitter, and the local prosecutor who initially handled it was a Holtzman Vogel supporter. The charges against Tate were eventually dropped.
As for AFF itself, the group already has earned a reputation for trafficking in vicious and misleading shots against Democrats. A typical recent ad alleged [15] that the government “planned to give flu shots to detainees at Guantanamo.”
It also has worked closely with Dick Armey’s FreedomWorks to help promote the Tea Party rallies against health-care reform. Republican heavy-hitters Jan Van Lohuizen, Ed Tobin, Ben Ginsberg are all reportedly [16] involved with the group.
Because AFF is a 501c4, it’s not required by law to release much information about itself, and no one seems eager to speak on its behalf. Torchinsky declined to speak to TPMmuckraker on the record. Tim Albrecht, an Iowa GOP activist who now works for the gubernatorial campaign of Terry Branstad, was quoted earlier this month [17] as a spokesman for the group, but told TPMmuckraker that he could no longer serve in that capacity, and declined to pass our inquiry on to any other specific representative, saying only that he could forward it to the group’s general mailbox. A separate email to that address went unreturned. AFF’s website lists Sandra Greiner, another Iowa Republican, as president, while the Iowa secretary of states database lists Nicole Schlinger, a local GOP consultant as president. Neither Greiner nor Schlinger returned a call.
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“A shadowy conservative group with ties to the operatives behind a host of GOP dirty tricks is working to undermine state restrictions on political robo-calls, as it gears up to unleash a barrage of such calls in 2010 races.”
The attempted undermining of political robo-calling regulations in anticipation of a big political ad campaign the next year. It’s just one of the many political activities AFF was up to in 2009:
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Last month, American Future Fund Political Action (AFFPA) informed the FEC that it’s planning robo-calls in congressional races. Jason Torchinsky, a lawyer for AFFPA, wrote that the group “wishes to distribute pre-recorded telephone calls … as part of a nationwide program of political outreach.” The calls, wrote Torchinsky, “will expressly advocate the election or defeat of one or more clearly identified candidates for Federal office.”AFFPA was asking the FEC for an advisory opinion on whether state laws restricting robo-calls should apply, or whether, as AFFPA argues, they’re pre-empted by a less restrictive federal law that sought to standardize the regulation of robo-calls. An FEC ruling in AFFPA’s favor would badly undermine state laws such as Minnesota’s, which requires the listener to actively consent to hearing a recorded message before the message can be played.
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And while AFF isn’t technically a branch of the Republican Party, it clearly should be seen as such based on the people behind it. People like Jason Torchinksy and Alex and Julia Vogel:
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That’s worth paying attention to in itself. But behind the robo-call effort is a team of high-powered GOP operatives behind a slew of sleazy campaign tactics over the years.You might remember Torchinsky, AFFPA’s lawyer, as one of the architects of the American Center for Voting Rights (ACVR), the bogus “voting-rights” group that was set up by GOP operatives in 2005 to “give ‘think tank’ academic cachet to the unproven idea that voter fraud is a major problem in elections,” as election law expert Rick Hasen has written [12].
For several months, ACVR’s executive director was Alex Vogel, a former RNC lawyer whose consulting firm reportedly [13] was paid $75,000 for the ACVR gig. (Also involved with ACVR: TPMmuckraker favorite Pat Rogers, the New Mexico GOP activist who helped get David Iglesias fired for not pursuing bogus voter fraud complaints.)
Vogel also appears to have a hand in AFF: Torchinsky, a former Bush campaign lawyer, works for the law firm run by Vogel and his wife, Virginia State Senator Jill Holtzman Vogel.
Holtzman Vogel’s own political career may owe something to similarly hardball tactics. A former RNC counsel herself, she faced a tight primary in her Virginia Senate race, but prevailed after her opponent, Mike Tate, was indicted [14] for campaign finance irregularities. The person who brought the complaint to the attention of authorities was Holtzman Vogel’s baby-sitter, and the local prosecutor who initially handled it was a Holtzman Vogel supporter. The charges against Tate were eventually dropped.
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Nicole Schlinger was then the president of AFF, but she nor anyone else associated with AFF were interested in talking about its political activities and could get away with this thanks to the secrecy benefits that 501(c)(4) organizations get:
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Because AFF is a 501c4, it’s not required by law to release much information about itself, and no one seems eager to speak on its behalf. Torchinsky declined to speak to TPMmuckraker on the record. Tim Albrecht, an Iowa GOP activist who now works for the gubernatorial campaign of Terry Branstad, was quoted earlier this month [17] as a spokesman for the group, but told TPMmuckraker that he could no longer serve in that capacity, and declined to pass our inquiry on to any other specific representative, saying only that he could forward it to the group’s general mailbox. A separate email to that address went unreturned. AFF’s website lists Sandra Greiner, another Iowa Republican, as president, while the Iowa secretary of states database lists Nicole Schlinger, a local GOP consultant as president. Neither Greiner nor Schlinger returned a call.
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Yep, it turns out that American Future Fund (AFF) listed Nicole Schlinger as its president and “principle officer” back in 2009. It’s worth noting that Iowa state senator Sandra Grenier was president of AFF as of February of 2011 [18], so Schlinger’s time as president was relatively short. But as the first president of AFF that signifies a particularly close association with the people behind it.
And it’s important to note another activity AFF was up to in 2009: working to promote the then-nascent Tea Party on behalf of the Koch-financie FreedomWorks:
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As for AFF itself, the group already has earned a reputation for trafficking in vicious and misleading shots against Democrats. A typical recent ad alleged [15] that the government “planned to give flu shots to detainees at Guantanamo.”It also has worked closely with Dick Armey’s FreedomWorks to help promote the Tea Party rallies against health-care reform. Republican heavy-hitters Jan Van Lohuizen, Ed Tobin, Ben Ginsberg are all reportedly [16] involved with the group.
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One of the reasons this work by AFF in 2009 to promote the Tea Party is important to note is because the fact that billionaire-backed entities like the AFF were promoting the Tea Party in 2009, and this was publicly known, doubles as a justification for the scrutiny give by the IRS to the flood of new Tea Party groups filing for 501(c)(4) status in 2010–2012. That scrutiny led to right-wing outcry 2013 charging that the IRS was targeting conservative 501(c)(4)s in a partisan manner. Scrutiny designed to investigate whether or not these groups applying for 501(c)(4) social welfare status truly were social welfare groups and weren’t just political entities masquerading as social welfare entities.
And as we’ll see below, that outcry in 2013 over ‘IRS targeting Tea Party’ groups was also used to justify the further weakening of campaign finance laws in recent years. So the fact that AFF was working with the Koch brothers’ FreedomWorks 2009 to promote the Tea Party highlights the fact that the question of whether or not the IRS should have applied scrutiny to groups applying for 501(c)(4) status is really a question of whether or not billionaire-backed groups like AFF that are clearly deeply political entities should be allowed to call themselves a nonprofit 501(c)(4) social welfare organization and get all of the tax and secrecy benefits that come with that nonprofit status [19]. The Supreme Court may have allowed for unlimited money to flow into 501(c)(4)s with the 2010 Citizens United ruling, but the decision by regulatory agencies to let blatantly partisans entities like AFF pretend to be social welfare organization and obtain that 501(c)(4) status also plays a critical role in introducing unlimited spending on US election.
The American Future Fund’s For-Hire Corporate Lobbying Services And the DCI Group: It’s Another One of AFF’s ‘Social Welfare’ Services
Talking Points Memo followed up the above look at AFF the next day with the following article that pointed out one of the more egregious aspects of AFF’s claim of ‘social welfare’ status: AFF appeared to have ties to DCI Group, a Republican lobbying firm with a reputation for for dirty tricks and shady clients like RJ Reynolds Tobacco and the Burmese Junta [20]:
Talking Points Memo
GOP Group Undermining Robo-Call Laws Has Ties To DCI
By Zachary Roth
November 24, 2009 12:37 pmAmerican Future Fund (AFF), the shadowy conservative advocacy group working to undermine state laws against robo-calling [21], has ties to DCI Group, a Republican lobbying firm with a reputation for dirty tricks and shady clients. And a closer look at AFF suggests the group has been designed to carry out political attacks while escaping scrutiny from the press and public.
AFF paid $249,000 last year to McKenna & Associates for fundraising work, according to a copy of AFF’s 990 form for 2008 that was obtained by TPMmuckraker. The Arlington, Virginia-based firm is run by Andrew McKenna, a GOP operative and former senior vice-president [22] of DCI Group. McKenna did not immediately respond to TPMmuckraker’s request for comment.DCI Group, a Republican lobbying and PR shop with close ties to Karl Rove, has represented the Burmese junta [23]. In the 1990s, it worked [24] to develop “smokers’ rights” groups on behalf of RJ Reynolds Tobacco, and later helped the Bush administration gin up [24] fake grassroots support for privatizing social security. A DCI offshoot, FLS Connect, recently announced it would conduct an internal audit after its seedy fundraising techniques were exposed [25] by TPMmuckraker and others [25]. FLS also launched its own robo-call attacks against Barack Obama last fall, that were so vicious and misleading that they were denounced [26] even by some Republicans.
Despite its plans to launch a barrage of robo-calls next year, and its ongoing misleading political attacks [15] against supporters of health-care reform, AFF is taking pains to avoid disclosing information on its funding, and to create confusion about its organizational structure.
AFF reported a total revenue of just under $7.5 million last year, according to the 990 form, which, as a public copy, does not include the identify of the group’s contributors.
When the Des Moines Register reported [17] on AFF’s effort to undermine robo-call laws, it spoke to Nick Ryan, who it identified as the chair of AFF’s board. But Ryan, an Iowa GOP political operative, appears to play a more active role. The contact phone number listed both on AFF’s website and on its 990 goes to the Concordia Group, a Des-Moines-based political consulting and lobbying firm that Ryan founded and runs. A press release [27] sent out by AFF this week — praising Iowa’s Republican senator, Chuck Grassley, for his vote in opposition to health-care reform, and slamming Democratic senator Tom Harkin for his vote in support — lists Jill Latham as a contact for AFF. Like Ryan, Latham works for the Concordia Group. And AFF paid Concordia $300,000 for “consulting” last year, according to the 990 formDes Moines Register.
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“American Future Fund (AFF), the shadowy conservative advocacy group working to undermine state laws against robo-calling [21], has ties to DCI Group, a Republican lobbying firm with a reputation for dirty tricks and shady clients. And a closer look at AFF suggests the group has been designed to carry out political attacks while escaping scrutiny from the press and public.”
Yep, not only does AFF have ties to DCI Group, described as “a Republican lobbying firm with a reputation for dirty tricks and shady clients”, but AFF appears to have been designed to carry out political attacks while escaping scrutiny from the press and public. It’s, again, a reminder Nicole Schlinger’s ability to escape scrutiny isn’t just useful in the context of the Mollie Tibbetts murder. Avoiding attention and scrutiny is a core service of entities like AFF. A service that requires maintaining its 501(c)(4) status and the absurd pretense that it’s a ‘social welfare’ organization.
But while AFF was already working in the Koch brothers orbit by 2009 — like with its FreedomWorks Tea Party promotion work — it sounds like Karl Rove may have been one of the key people behind DCI Group.
And DCI Group isn’t just offering services to political parties. It also represented clients like the Burmese Junta and developed a fake grassroots “smokers’ rights” campaign for RJ Reynolds. And AFF was found to have paid a firm in 2008 for “fundraising work” run by Andrew McKenna, a former DCI Group senior vice-president:
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AFF paid $249,000 last year to McKenna & Associates for fundraising work, according to a copy of AFF’s 990 form for 2008 that was obtained by TPMmuckraker. The Arlington, Virginia-based firm is run by Andrew McKenna, a GOP operative and former senior vice-president [22] of DCI Group. McKenna did not immediately respond to TPMmuckraker’s request for comment.DCI Group, a Republican lobbying and PR shop with close ties to Karl Rove, has represented the Burmese junta [23]. In the 1990s, it worked [24] to develop “smokers’ rights” groups on behalf of RJ Reynolds Tobacco, and later helped the Bush administration gin up [24] fake grassroots support for privatizing social security. A DCI offshoot, FLS Connect, recently announced it would conduct an internal audit after its seedy fundraising techniques were exposed [25] by TPMmuckraker and others [25]. FLS also launched its own robo-call attacks against Barack Obama last fall, that were so vicious and misleading that they were denounced [26] even by some Republicans.
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RJ Reynolds and the Burmese Junta. DCI Group is that kind of entity. Snd while the above article described how AFF hired a consulting firms run by a DCI Group former senior vice president in 2008 for fundraising work, as we’re going to see below, DCI Group actually hired AFF to run lobbying campaigns on behalf of DCI’s corporate clients. In particular, AFF was hired to run a lobbying campaign in Puerto Rico on behalf of Doral Financial Group at the same time DCI Group was lobbying for Doral. DCI Group denied it subcontracted AFF to do this work [28]. We’ll look at that scheme more later on.
The Roots of the American Future Fund: Willie Horton Meets the Swift Boaters
But AFF’s associations to the people behind DCI Group is far from the only collection of the AFF’s ties to ethically dubious hyper-partisans. As the following profile of the American Future Fund in the Iowa Independent (available via the Wayback Machine [29]) informs us, some the key figures behind AFF itself include people involved with both the 2004 “Swiftboat” smear ads against John Kerry in 2004 and the 1988 racist Willie Horton ads used by George H. W. Bush against Michael Dukakis.
Specifically, the piece points out that Ben Ginsberg — the former chief outside counsel to the Bush-Cheney 2004 campaign who resigned after it was revealed that he was also providing advice to Swift Boat Veterans for Truth — was AFF’s legal council. In addition, AFF’s media strategist was Larry McCarthy, the guy who produced the 1988 Willie Horton ad.
The profile is from 2008, the year the AFF formed, and is a particularly important report on the AFF at the time given that almost nothing was listed on its website about its leadership and who was funding it.
What the article doesn’t list is who exactly was financing AFF at this time. The article also describes how it is that AFF was able to operate with so little known about who is financing it: AFF claims to be a “social welfare organization”, making it a 501(c)(4) entity under the US tax code. And thanks to various loopholes in US campaign finance laws — loopholes that predate the notorious 2010 Citizens United Supreme Court ruling — as long as an organization doesn’t spend the majority of its funds on political advocacy and as long as its political ads avoid certain things (like explicitly saying to vote for a certain candidate), that organization can largely avoid US campaign finance laws and keep its donors entirely secret. Which is exactly how AFF operates: In the dark, hiding behind the pretense that it’s a “social welfare” organization.
And as we’re going to see in subsequent article excerpts, the secret donors behind the AFF went from the Koch brothers (who were almost entirely funding the group by 2012), then shifted to Karl Rove’s fundraising network and other Republican establishment donors, including the Republican House leadership. In other words, the AFF isn’t just any ‘ol shady 501(c)(4) dark money entity. It’s been quietly one of the key dark money entities used by some of the most powerful forces behind the Republican party. It’s, again, why the connection between Nicole Schlinger and the AFF is potentially such a sensitive story. The story of the AFF is the story of the rise of the ascendance of dark money in US politics [30]:
Iowa Independent
Secrets of the American Future Fund
Iowa-based conservative advocacy group includes masterminds of Swift Boat and Willie Horton adsBy Jason Hancock 8/19/08 12:29 PM
A network of Iowa Republicans is playing a leading role in a secretive group advocating nationally on behalf of “conservative and free market ideals” in congressional races around the country. Among the group’s leaders are two media consultants who played key roles in the Swift Boat Veterans for Truth ads in 2004 and the Willie Horton ad in 1988, both of which helped defeat Democratic presidential candidates.
The American Future Fund [31] (AFF), operating out of Des Moines, is sponsoring advocacy advertisements in closely contested congressional races from New York to Louisiana to Minnesota and Colorado. It is one of the most ambitious conservative independent expenditure groups to emerge in 2008. Most observers expect AFF to begin increasing its role in elections around the country, stoking speculation that it will spend heavily to prop up lightly funded Republican campaign committees.
Because of the way the group is organized under Internal Revenue Service guidelines for nonprofit organizations it does not have to disclose its donors and is not governed by the Federal Election Commission (FEC).
But an Iowa Independent investigation has found the group has deep roots in state Republican politics. And, unlike MoveOn.org, a similar group advocating liberal causes, it’s hard to determine who is actually behind the AFF. The key players include:
Nicole Schlinger, the group’s president, the former executive director of the Republican Party of Iowa.
Tim Albrecht, a former spokesman for Republicans in the Iowa House who worked for Mitt Romney’s presidential campaign and spent a short time this year working for the Republican Party of Iowa, is the group’s communications director.
David Kochel, another former state GOP executive director and a senior adviser to the Romney campaign, who has served as spokesman [32] for AFF, although Albrecht said he is no longer associated with the group.
The Washington Post reported in March [33] – and Albrecht confirmed to Iowa Independent — that Ben Ginsberg, of the high-powered D.C. law firm Patton Boggs, is the group’s legal counsel. Ginsberg resigned as chief outside counsel [34] to the Bush-Cheney campaign in August 2004 when it was revealed that he was also providing advice to Swift Boat Veterans for Truth, a group that sponsored error-laden attacks on the military service record of 2004 Democratic presidential nominee John Kerry.
Larry McCarthy, president of D.C.-based media firm McCarthy Marcus Hennings, is AFF’s media strategist [35]. In 1988, McCarthy produced the infamous, racially tinged Willie Horton television ad [36] that helped then-Vice President George H.W. Bush bury Michael Dukakis under charges that he was soft on crime.
Public records show the AFF also has connections to Iowa businessman Bruce Rastetter, who is widely believed to be considering a run for governor in 2010. Rastetter is a regular donor to the Republican Party and founder of Hawkeye Renewables, the fourth largest ethanol producer in the nation. Eric Peterson, business manager at Summit Farms, another of Rastetter’s companies, is listed on documents filed with the Iowa Secretary of State’s office as president, secretary and director of Iowa Future Fund, a conservative nonprofit that essentially morphed into American Future Fund.
The address listed on an AFF ad buy in Minnesota is a post office box used by Nick Ryan, a Des Moines lobbyist [37] who works primarily for Rastetter’s companies and who served as campaign manager for 2006 Republican gubernatorial candidate Jim Nussle. In February, Ryan was acting as spokesman for Hawkeye Renewables when 29,000 gallons of ethanol was accidentally spilled at the company’s Iowa Falls plant.
The many faces of AFF
The Iowa Future Fund, technically the first incarnation of AFF, gained public attention in March when it ran a series of television and radio ads accusing Gov. Chet Culver of increasing spending by 20 percent over the past two years and raising taxes and fees by $100 million.
“Culver raises taxes and spends more money and wants to use your tax dollars to benefit Microsoft,” the ad’s narrator said, referring to a tax package that Culver backed and that the legislature passed geared to lure companies like Microsoft Corp. and Google to the state.
The Iowa Democratic Party filed a complaint with the Iowa Ethics and Campaign Disclosure Board to determine whether the ads constituted political advertising, which would require disclosure of the group’s donors.
Charlie Smithson, executive director of the Iowa Ethics Campaign and Disclosure Board, said the complaint has not yet been fully settled.
“It is still under investigation,” he said. “The determination was made that it did not violate the state campaign laws because it did not ‘expressly advocate’ for or against Gov. Culver or a clearly identified candidate for office. The issue the Board is now looking at is whether any of the state lobbying laws were triggered.”
The next Ethics Board meeting is Aug. 28.
In April, Iowa Future Fund effectively split into two groups: AFF, which focuses on federal races around the country, and the Iowa Progress Project, which puts its resources toward state issues.
Albrecht said AFF and Iowa Future Fund “are completely unrelated.” But they share an organizational history. AFF and IFF were incorporated on the same day by the same Virginia law firm. David Kochel served for a time as spokesman for IFF and AFF before becoming president of Iowa Progress Project.
In March, an ad run by AFF [38] in the race between Democrat Al Franken and Republican Sen. Norm Coleman for Minnesota’s U.S. Senate seat caused the state’s Democratic-Farmer-LaborParty to file a formal complaint [39] with the FEC alleging that the group violated federal election law and that its ads constitute blatant electoral advocacy.
“The American Future Fund is a shadowy nonprofit organization,” the complaint said. “It purports to be exempt from tax under section 501(c)(4) of the Internal Revenue Code. But its notion of ‘promoting the social welfare’ is to send valentines to electorally troubled Republican Senate candidates. The Commission should take immediate steps to enforce the law and expose this group’s secret financing to light of day.”
Under federal election law, the organization is prohibited from engaging solely in “express advocacy,” which would include asking voters to vote for or against a certain candidate. But so long as the ad hasn’t been coordinated with a campaign and doesn’t outright say “vote for” or “vote against,” it is not considered express advocacy, according to Paul S. Ryan, FEC program director for the Campaign Legal Center, a Washington, D.C.-based organization.
“An organization that is careful about how it writes the script of its ad can fly under the radar or stay outside of the net of campaign finance activity,” he said.
The ad in question didn’t ask voters to vote for Coleman, but rather asked voters to “call Norm Coleman and thank him for his agenda for Minnesota.”
In 2004, several groups filed complaints against so-called independent expenditure committees saying they ignored campaign finance law. It took the FEC two years to rule on the complaints. In the end, the groups had to pay less than 2 percent of the fund they illegally raised and spent.
Brad Smith, a former chairman of the FEC and currently a professor of law at Capital University Law School in Columbus, Ohio, said that if a group’s “major purpose” is not trying to affect elections, “they are not regulated by the FEC.” But Smith added the definition of “major purpose” is not clear, which could open the door for some nonprofit groups to face a challenge on their tax status.
“I think there would be an opening for someone who wanted to prosecute a group who is spending millions of dollars on advertising,” said Smith, a Republican who has been a vocal critic of campaign finance reform.
Albrecht said there is no validity to claims that AFF is anything but an issues-focused organization.
“We are an issues organization,” he said. “That is evident by the things that are prominently displayed on our Web site and in our work.”
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Albrecht said AFF is simply a reaction to liberal groups like MoveOn.org who have dominated this realm of politics for years.
“For far too long the left has been on the field with no opposition,” he said. “American Future Fund has said it’s time to play ball. We’re not going to sit on the sidelines any longer. It’s important for free market, conservative principles to be highlighted in public, and that’s what we intend to do.”
The difference is that MoveOn.org, a decade-old liberal group, identifies its leadership on its Web site, boasts more than a million members and never shies away from the spotlight as a means for amplifying its message. AFF is decidedly lower-profile, disclosing nothing about its leaders, history or membership on its Web site, and it makes little or no effort on public appearances, press conferences and media bookings.
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“Secrets of the American Future Fund” by Jason Hancock; Iowa Independent; 08/19/2008 [30]
“Because of the way the group is organized under Internal Revenue Service guidelines for nonprofit organizations it does not have to disclose its donors and is not governed by the Federal Election Commission (FEC).”
That’s one of the core elements of the scandalous nature of the American Future Fund: it’s able to do what it does in secret by simply organizing itself in a way that technically makes it a nonprofit organization. A nonprofit entity that tried to water-down robo-calling regulations in 2009 in anticipation of its planned 2010 partisan robo-calling campaign on behalf of Republican candidates.
And the AFF is typical, at least in terms of exploiting these 501(c)(4) rules. But it’s not typical in terms of who was behind it at its inception. As we saw, it was a who’s who of Iowa’s Republican establishment:
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A network of Iowa Republicans is playing a leading role in a secretive group advocating nationally on behalf of “conservative and free market ideals” in congressional races around the country. Among the group’s leaders are two media consultants who played key roles in the Swift Boat Veterans for Truth ads in 2004 and the Willie Horton ad in 1988, both of which helped defeat Democratic presidential candidates....
But an Iowa Independent investigation has found the group has deep roots in state Republican politics. And, unlike MoveOn.org, a similar group advocating liberal causes, it’s hard to determine who is actually behind the AFF. The key players include:
Nicole Schlinger, the group’s president, the former executive director of the Republican Party of Iowa.
Tim Albrecht, a former spokesman for Republicans in the Iowa House who worked for Mitt Romney’s presidential campaign and spent a short time this year working for the Republican Party of Iowa, is the group’s communications director.
David Kochel, another former state GOP executive director and a senior adviser to the Romney campaign, who has served as spokesman [32] for AFF, although Albrecht said he is no longer associated with the group.
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Public records show the AFF also has connections to Iowa businessman Bruce Rastetter, who is widely believed to be considering a run for governor in 2010. Rastetter is a regular donor to the Republican Party and founder of Hawkeye Renewables, the fourth largest ethanol producer in the nation. Eric Peterson, business manager at Summit Farms, another of Rastetter’s companies, is listed on documents filed with the Iowa Secretary of State’s office as president, secretary and director of Iowa Future Fund, a conservative nonprofit that essentially morphed into American Future Fund.
The address listed on an AFF ad buy in Minnesota is a post office box used by Nick Ryan, a Des Moines lobbyist [37] who works primarily for Rastetter’s companies and who served as campaign manager for 2006 Republican gubernatorial candidate Jim Nussle. In February, Ryan was acting as spokesman for Hawkeye Renewables when 29,000 gallons of ethanol was accidentally spilled at the company’s Iowa Falls plant.
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Note that Iowa businessman Bruce Rastetter was characterized in 2015 by Politico as Iowa’s GOP “Kingmaker” [40]. Don’t forget the outsized importance Iowa has in American politics with the early Iowa causes in the primaries. So being an Iowan GOP kingmaker is an extra big deal in American politics.
And then there were the two people that don’t appear to be based in Iowa but who had histories in the dark arts of political communication: Ben Ginsberg (Swift Boat smears) and Larry McCarthy (Willie Horton race-baiting):
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The Washington Post reported in March [33] – and Albrecht confirmed to Iowa Independent — that Ben Ginsberg, of the high-powered D.C. law firm Patton Boggs, is the group’s legal counsel. Ginsberg resigned as chief outside counsel [34] to the Bush-Cheney campaign in August 2004 when it was revealed that he was also providing advice to Swift Boat Veterans for Truth, a group that sponsored error-laden attacks on the military service record of 2004 Democratic presidential nominee John Kerry.Larry McCarthy, president of D.C.-based media firm McCarthy Marcus Hennings, is AFF’s media strategist [35]. In 1988, McCarthy produced the infamous, racially tinged Willie Horton television ad [36] that helped then-Vice President George H.W. Bush bury Michael Dukakis under charges that he was soft on crime.
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Note that it was April of 2008 that the AFF officially formed. But it really was just the result of the Iowa Future Fund splitting its federal and state operations into the AFF (federal) and the Iowa Progress Project (state). So the AFF really predates 2008 and it’s also a reflection of the national ambitions of this group of Iowa Republicans.
Of course, as we’ll see, it’s also a vehicle for laundering national GOP establishment money by mega-donors like the Koch network and Karl Rove’s donor network. So whether or not the AFF primarily represented the national ambitions of ‘Kingmaker’ Bruce Rastetter or whether it was acting as a laundering outfit for national entities like the Kochs and Rove from the start is an interesting question. But regardless of how it started, The AFF has clearly become a laundering entity for GOP mega-donors at this point:
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The many faces of AFFThe Iowa Future Fund, technically the first incarnation of AFF, gained public attention in March when it ran a series of television and radio ads accusing Gov. Chet Culver of increasing spending by 20 percent over the past two years and raising taxes and fees by $100 million.
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In April, Iowa Future Fund effectively split into two groups: AFF, which focuses on federal races around the country, and the Iowa Progress Project, which puts its resources toward state issues.
Albrecht said AFF and Iowa Future Fund “are completely unrelated.” But they share an organizational history. AFF and IFF were incorporated on the same day by the same Virginia law firm. David Kochel served for a time as spokesman for IFF and AFF before becoming president of Iowa Progress Project.
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And from the very beginning, the mercenary AFF maintained a pretense of being a “social welfare” advocacy group. Because that absurd nonprofit pretense is what’s required to qualify as a 501(c)(4) entity and avoid reporting donors to the FEC and avoid scrutiny by the IRS:
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In March, an ad run by AFF [38] in the race between Democrat Al Franken and Republican Sen. Norm Coleman for Minnesota’s U.S. Senate seat caused the state’s Democratic-Farmer-LaborParty to file a formal complaint [39] with the FEC alleging that the group violated federal election law and that its ads constitute blatant electoral advocacy.“The American Future Fund is a shadowy nonprofit organization,” the complaint said. “It purports to be exempt from tax under section 501(c)(4) of the Internal Revenue Code. But its notion of ‘promoting the social welfare’ is to send valentines to electorally troubled Republican Senate candidates. The Commission should take immediate steps to enforce the law and expose this group’s secret financing to light of day.”
Under federal election law, the organization is prohibited from engaging solely in “express advocacy,” which would include asking voters to vote for or against a certain candidate. But so long as the ad hasn’t been coordinated with a campaign and doesn’t outright say “vote for” or “vote against,” it is not considered express advocacy, according to Paul S. Ryan, FEC program director for the Campaign Legal Center, a Washington, D.C.-based organization.
“An organization that is careful about how it writes the script of its ad can fly under the radar or stay outside of the net of campaign finance activity,” he said.
The ad in question didn’t ask voters to vote for Coleman, but rather asked voters to “call Norm Coleman and thank him for his agenda for Minnesota.”
In 2004, several groups filed complaints against so-called independent expenditure committees saying they ignored campaign finance law. It took the FEC two years to rule on the complaints. In the end, the groups had to pay less than 2 percent of the fund they illegally raised and spent.
...
The whole absurd situation is exemplified by the quote from Tim Albrecht, AFF’s founding communications director, who declared “We are an issues organization, that is evident by the things that are prominently displayed on our Web site and in our work,” while referencing a website that disclosed nothing about its leaders, history or membership. It’s a blatant black box squawking about how transparent it is. And it is transparent in the sense that it’s transparently opaque:
...
Albrecht said there is no validity to claims that AFF is anything but an issues-focused organization.“We are an issues organization,” he said. “That is evident by the things that are prominently displayed on our Web site and in our work.”
...
Albrecht said AFF is simply a reaction to liberal groups like MoveOn.org who have dominated this realm of politics for years.
“For far too long the left has been on the field with no opposition,” he said. “American Future Fund has said it’s time to play ball. We’re not going to sit on the sidelines any longer. It’s important for free market, conservative principles to be highlighted in public, and that’s what we intend to do.”
The difference is that MoveOn.org, a decade-old liberal group, identifies its leadership on its Web site, boasts more than a million members and never shies away from the spotlight as a means for amplifying its message. AFF is decidedly lower-profile, disclosing nothing about its leaders, history or membership on its Web site, and it makes little or no effort on public appearances, press conferences and media bookings.
...
And note how the AFF was expected to become a national player in elections with heavy spending back in 2008. It was obviously backed by big money despite the lack of disclosure. The writing was on the wall from the beginning:
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The American Future Fund [31] (AFF), operating out of Des Moines, is sponsoring advocacy advertisements in closely contested congressional races from New York to Louisiana to Minnesota and Colorado. It is one of the most ambitious conservative independent expenditure groups to emerge in 2008. Most observers expect AFF to begin increasing its role in elections around the country, stoking speculation that it will spend heavily to prop up lightly funded Republican campaign committees.
...
So the American Future Fund was clearly a tool of the Iowan Republican establishment when it was set up in 2008 and was already working closely with people involved with the Rove-connected DCI group by 2009, during Nicole Schlinger’s tenure as AFF’s president and “principal officer”. The AFF was literally a right-wing ‘social welfare nonprofit’-for-hire in the pre-Citizen’s United era.
Citizens United: More Steroids for 501(c)(4)s That Were Already on Steroids
But as we’re going to see, it was 2010 when the AFF’s ability to influence US politics exploded. More so. 2010 is of course the year when the potential influence of all 501(c)(4)s ‘social welfare nonprofit’ entities exploded in the US thanks, of course, to the Citizens United Supreme Court ruling. But as we saw from the above review of the AFF’s pre-Citizens United days, the situation for 501(c)(4) organizations was already absured. Corporate mercenary entities like the AFF could already claim ‘social welfare nonprofit’ status and their donors didn’t need to be disclosed.
So what do 501(4)©s need to do in order maintain that “social nonprofit” pretense? Don’t spend a majority of their money on open advocacy for or against a candidate. But spending 49.9999% of their money on attack ads is fine. As long as they spend the rest of their money on “social welfare”. And issue ads that don’t talk about a candidate (like an ad that extolls the virtues of low taxes on billionaires) count as “social welfare” spending. So as long as an entity like the AFF spends 50% + 1 dollars on issue ads instead of attack ads, it can claim to be a social welfare nonprofit with full secrecy protections for donors with no caps on the donations.
In other words, when the Kochs give $10 million to one of their 501(c)(4) groups like the AFF or Americans For Prosperity, that’s seen as basically charity under the tax code and unlimited funds can be poured into them without disclosure. And what makes an entity like the AFF so notable in this landscape is that a group like Americans For Prosperity is obviously backed by the Kochs. They started it and fund it. The AFF, on the other hand, is much more mercenary in nature than Americans for Prosperity. Maybe the Kochs and their network are primarily financing the AFF’s activities at some point. Or maybe it’s Karl Rove and his non-Koch ‘establishment’ network. Or perhaps the DCI Group is sub-contracting AFF’s services. It’s a for-hire entity of choice for a number of different clients. And that ambiguity is part of why mercenary groups like the AFF are potentially so useful for how mega-donors influence politics with big donations in secret. Even when they have to disclose how much they’ve spent, they don’t have to say who paid for it and it’s not always obvious who their clients are because they have lots lf different clients.
The following article also describes one of the key loopholes 501(c)(4)s must jump through in order to maintain the pretense that their “issue ads” aren’t actually political ads designed to influence an election which is all part of the “social welfare” facade. It all goes back to the 1976 Supreme Court decision of Buckley v. Valeo, where the court speculated in a footnote that there were certain phrases that would make it clear that an ad was a campaign ad (designed to influence the outcome of an election) and not an issue ad. Those phrases — “vote for,” “elect,” “support,” “cast your ballot for,” “Smith for Congress,” “vote against,” “defeat,” and “reject” — became known as the “magic words” that 501(c)(4)s needed to avoid in their ‘issue ads’ being declared campaign ads. Don’t forget that 501(c)(4)s can’t get caught spending a majority of their funds on campaign ads (but 49.999% is fine). So the “magic words” became an important guideline that helped keep “social welfare” sham of secret unlimited campaign spending going in US politics for the past four decades.
As the article notes, the IRS still has the power to revoke a 501(c)(4) entity’s nonprofit status if it determines the entity is primarily engaged in campaigning even if the entity avoids those “magic words”. The IRS now says it looks at the “the facts and circumstances” of a 501(c)(4)‘s ad. But in practice that rarely happens because IRS audits of 501(4)©s almost never happen in the first place. So explosion of ‘dark money’ in US politics is simultaneously rooted in an absurd set of rules that, if followed, make regulator scrutiny much less likely coupled with the reality that the regulators are barely scrutinizing anything in the first place. It’s a full-spectrum sham [42]:
Frontline
The Rules That Govern 501(c)(4)s
October 30, 2012
by Emma SchwartzNearly a century ago, Congress created the complicated legal framework that governs these tax-exempt nonprofits, also known as 501(c)(4)s for the part of the tax code they fall under. That rule said they were supposed to operate “exclusively for the promotion of social welfare” — a definition that includes groups ranging from local fire departments to the Sierra Club to the National Right to Life Committee.
While these nonprofits have always been allowed to lobby for change, in 1959, regulators opened the door [43] to political activity by interpreting “exclusively” to mean that groups had to be “primarily” engaged in social welfare and helping the community.
But regulators never defined exactly how they would measure this balance. Part of the reason, said Marcus Owens, a former head of the IRS division overseeing nonprofits, is because the IRS didn’t want to limit what it could evaluate in deciding what was political activity.
However, the lack of clarity has created a unique type of organization when it comes to politics — chief among those differences being what the public must be told about these nonprofits’ donors.
Why Don’t 501(c)(4)s Have to Disclose Their Donors?
Social welfare nonprofits don’t fall under the Federal Election Commission’s standard definition of a political committee, which, under FEC guidelines, must disclose its donors. Because 501(c)(4)s say their primary purpose is social welfare, they can keep their donors secret. The only exception is if someone gives them money and specifically states the funds are for a political ad.
And unlike political committees, social welfare nonprofits have a legal right to keep their donors secret. That stems from the landmark 1958 Supreme Court case, NAACP v. Alabama [44], which held the NAACP didn’t have to identify its members because disclosure could lead to harassment.
Fast forward to the post-Citizens United [45] world of campaign finance where outside groups can now spend unlimited amounts of money to influence elections so long as they are independent of candidates. Seeing the advantages offered by groups that can engage in political activity while keeping their donors secret, both Democrats and Republicans have seized onto this opening in the tax code.
That’s why in recent years, many new 501(c)(4)s have popped up right before the election season, focusing heavily on television advertising, usually attacking, though sometimes promoting, candidates running for office.
These nonprofits do have to report some of their activities to the FEC. When they run ads directly advocating for the election or defeat of a candidate, they have to tell regulators how much and what they spend money on — but not where the money comes from.
Since they can’t make these types of ads their sole activity, many 501(c)(4)s focus on so-called issue ads, which they only have to report to the FEC in defined windows before an election.
The Debate Over “Issue Ads”
But what exactly defines an issue ad?
The key starting point is a 1976 Supreme Court case, Buckley v. Valeo [46], in which the court speculated in a footnote that if certain words were used in an ad, it was clearly a campaign ad. The eight phrases listed in the footnote –“vote for,” “elect,” “support,” “cast your ballot for,” “Smith for Congress,” “vote against,” “defeat,” and “reject” — became known as the “magic words” and for decades served as a bright line test between an issue ad and a campaign ad.
But many campaign finance reformers saw that distinction as a sham, especially as increasing amounts of federal campaign dollars headed to political parties where the soft money loophole allowed unlimited money to be spent on issue ads. While avoiding the magic words, these issue ads typically focused on one candidate running for office and ran just before an election. In other words, the reformers argued, they were clearly trying to influence elections.
The reformers tried to address this loophole in the Bipartisan Campaign Finance Reform Act of 2002, otherwise known as the McCain-Feingold bill. In a 2003 case, McConnell v. FEC [47], the Supreme Court appeared to agree, saying that the magic words were “functionally meaningless.”
But the decision didn’t bar states from using the magic words and the court has since backed away from its earlier stance. And so legal debate continues. For instance, earlier this year, the Colorado Supreme Court upheld the magic words test [48] as the bright line between issue ads and direct campaign ads.
Today, both the FEC and the IRS use tests broader than just the magic words to determine what counts as an issue ad. The FEC says that any ad that mentions a candidate during defined windows before an election must be disclosed, even if it doesn’t include the magic words. The IRS looks at what it calls “the facts and circumstances” surrounding an ad. Tax experts say that many of the issue ads that fall outside FEC reporting windows would be considered political by the IRS.
But the reality on the ground for groups like 501(c)(4)s is less clear: Because three of the FEC commissioners sympathize with the magic words test they have “refused to apply the broader test in recent years,” says Paul Ryan, senior counsel at the Campaign Legal Center, a group that pushes for more campaign finance reforms.
...
What that means for 501(c)(4)s is this: by avoiding the magic words, social welfare nonprofits have a better chance of convincing regulators they are focused on issues and not politics.
Of course, the IRS could revoke a nonprofit’s tax-exempt status if it engages in too much political activity. In practice, that hasn’t happened much. But the IRS has indicated it is starting to look into some of these groups and recently sent a letter [49] (pdf) to Congress saying it had more than 70 “ongoing examinations” of 501(c)(4)s.
Whatever it does, the IRS remains limited in what it can do to watch over these groups. As a recent ProPublica investigation found [50]: “One reason the IRS struggles is that it can’t match the speed of politics.” In other words, by the time these groups submit tax returns, they have often stopped operating or created new groups under new names.
———-
“The Rules That Govern 501(c)(4)s” by Emma Schwartz; Frontline; 10/30/2012 [42]
“Nearly a century ago, Congress created the complicated legal framework that governs these tax-exempt nonprofits, also known as 501(c)(4)s for the part of the tax code they fall under. That rule said they were supposed to operate “exclusively for the promotion of social welfare” — a definition that includes groups ranging from local fire departments to the Sierra Club to the National Right to Life Committee.”
Yes, it was nearly a century ago when Congress set up the legal framework for 501(c)(4)s to be treated as nonprofits. But, crucially, it was only if they operated exclusively for the promotion of social welfare. It was in 1959 that the rules got loosened by regulators to simply require that 501(c)(4)s operate primarily on ‘social welfare’. But the definition of what it meant to be “primarily” on social welfare was never defined:
...
While these nonprofits have always been allowed to lobby for change, in 1959, regulators opened the door [43] to political activity by interpreting “exclusively” to mean that groups had to be “primarily” engaged in social welfare and helping the community.But regulators never defined exactly how they would measure this balance. Part of the reason, said Marcus Owens, a former head of the IRS division overseeing nonprofits, is because the IRS didn’t want to limit what it could evaluate in deciding what was political activity.
However, the lack of clarity has created a unique type of organization when it comes to politics — chief among those differences being what the public must be told about these nonprofits’ donors.
...
And it was one year earlier, in 1958, that the Supreme Court ruled in NAACP v. Alabama that 501(c)(4)s can keep their donors secret specifically because they maintain that their primary purpose is social welfare. Ironically, it was a case brought forward by the NAACP — a group that really was fighting for social welfare and really did have members who had legitimate reasons to want their identities to remain secret — that created the legal precedent that today allows individuals like the Koch brothers and Karl Rove to hide behind ‘social welfare’ secrecy. It a reminder of how immensely challenging it is to write laws that won’t be abused by the unscrupulously powerful, which is one of the meta-challenges facing humanity:
...
Why Don’t 501(c)(4)s Have to Disclose Their Donors?Social welfare nonprofits don’t fall under the Federal Election Commission’s standard definition of a political committee, which, under FEC guidelines, must disclose its donors. Because 501(c)(4)s say their primary purpose is social welfare, they can keep their donors secret. The only exception is if someone gives them money and specifically states the funds are for a political ad.
And unlike political committees, social welfare nonprofits have a legal right to keep their donors secret. That stems from the landmark 1958 Supreme Court case, NAACP v. Alabama [44], which held the NAACP didn’t have to identify its members because disclosure could lead to harassment.
Fast forward to the post-Citizens United [45] world of campaign finance where outside groups can now spend unlimited amounts of money to influence elections so long as they are independent of candidates. Seeing the advantages offered by groups that can engage in political activity while keeping their donors secret, both Democrats and Republicans have seized onto this opening in the tax code.
That’s why in recent years, many new 501(c)(4)s have popped up right before the election season, focusing heavily on television advertising, usually attacking, though sometimes promoting, candidates running for office.
...
And even when 501(c)(4)s like the American Future Fund or Americans For Prosperity do engage in open political activities (i.e. using the “magic words” in their ads), they only have to report the amount spent. But not report who paid for them. Which, again, is why mercenary entities with numerous clients like the American Future Fund are so useful for maintaining secrecy. If the AFF spends $1 million on attack ads it only needs to say it spent $1 million on attack ads. It doesn’t need to say if it the ‘donors’ (clients) were Rove’s network or the Kochs’ network, or maybe RJ Reynolds. We only get to know some entity paid for the ads, not which entity:
...
These nonprofits do have to report some of their activities to the FEC. When they run ads directly advocating for the election or defeat of a candidate, they have to tell regulators how much and what they spend money on — but not where the money comes from.
...
But 501(c)(4)s still have to limit their spending on open political ads to less than 50% of their expenditures, all of the rest of their ad spending needs to be on “issue ads”. Which are basically campaign ads without the “magic words” laid out by the 1976 Buckley v. Valeo Supreme Court decision. As long as these groups to spend 49.999% of their funds on open campaign advocacy (i.e. campaign ads that include the “magic words”) and the rest of their funds on ‘issue ads’ (i.e. campaign ads that don’t include the “magic words”) they are highly unlikely to face any IRS scrutiny and can maintain their donors’ secrecy:
...
Since they can’t make these types of ads their sole activity, many 501(c)(4)s focus on so-called issue ads, which they only have to report to the FEC in defined windows before an election.The Debate Over “Issue Ads”
But what exactly defines an issue ad?
The key starting point is a 1976 Supreme Court case, Buckley v. Valeo [46], in which the court speculated in a footnote that if certain words were used in an ad, it was clearly a campaign ad. The eight phrases listed in the footnote –“vote for,” “elect,” “support,” “cast your ballot for,” “Smith for Congress,” “vote against,” “defeat,” and “reject” — became known as the “magic words” and for decades served as a bright line test between an issue ad and a campaign ad.
...
And despite the fact that the “magic words” criteria for distinguishing between political ads and issue ads has been recognized as a sham, it’s still a significant loophole to be exploited. Congress addressed it in the 2002 ‘McCain-Feingold’ campaign finance bill and the Supreme Court in 2003 with McConnell v. FEC. But state regulators could still choose to rely on the “magic word” criteria and the Supreme Court basically reaffirmed the “magic words” criteria in 2004 in FEC v. Wisconsin Right to Life [51]. In other words, the “magic words” have had a seemingly magical ability remain in place for decades despite being a blatantly absurd loophole. The enduring nature of teh blatantly absurd is one of the big themes of the history of US campaign finance law:
...
But many campaign finance reformers saw that distinction as a sham, especially as increasing amounts of federal campaign dollars headed to political parties where the soft money loophole allowed unlimited money to be spent on issue ads. While avoiding the magic words, these issue ads typically focused on one candidate running for office and ran just before an election. In other words, the reformers argued, they were clearly trying to influence elections.The reformers tried to address this loophole in the Bipartisan Campaign Finance Reform Act of 2002, otherwise known as the McCain-Feingold bill. In a 2003 case, McConnell v. FEC [47], the Supreme Court appeared to agree, saying that the magic words were “functionally meaningless.”
But the decision didn’t bar states from using the magic words and the court has since backed away from its earlier stance. And so legal debate continues. For instance, earlier this year, the Colorado Supreme Court upheld the magic words test [48] as the bright line between issue ads and direct campaign ads.
...
Flash forward to the post-Citizens United landscape, and we have both the FEC and IRS declaring that they will go beyond simply applying the “magic words” criteria. But despite that, three of the FEC commissioners themselves continued to sympathize with the “magic words” standard and refused to apply a broader test. Keep in mind that article was from 2012, so the structure of the FEC is going to change. But it points to the fact that whether or not the “magic words” gets used as the sole criteria is still going to remain up to the FEC commissioners and, in turn, the political makeup of the FEC board. So if you have a Republican-dominated FEC it’s likely going to revert back to exclusively relying on the “magic words” sham. Similarly, the IRS could applying a broader test than the “magic words” test. But in practice that rarely happens. It underscores the importance of the ideological makeup of the FEC’s board in cleaning up the American campaign finance system:
...
Today, both the FEC and the IRS use tests broader than just the magic words to determine what counts as an issue ad. The FEC says that any ad that mentions a candidate during defined windows before an election must be disclosed, even if it doesn’t include the magic words. The IRS looks at what it calls “the facts and circumstances” surrounding an ad. Tax experts say that many of the issue ads that fall outside FEC reporting windows would be considered political by the IRS.But the reality on the ground for groups like 501(c)(4)s is less clear: Because three of the FEC commissioners sympathize with the magic words test they have “refused to apply the broader test in recent years,” says Paul Ryan, senior counsel at the Campaign Legal Center, a group that pushes for more campaign finance reforms.
And some outside groups are trying to keep it that way.
What that means for 501(c)(4)s is this: by avoiding the magic words, social welfare nonprofits have a better chance of convincing regulators they are focused on issues and not politics.
Of course, the IRS could revoke a nonprofit’s tax-exempt status if it engages in too much political activity. In practice, that hasn’t happened much. But the IRS has indicated it is starting to look into some of these groups and recently sent a letter [49] (pdf) to Congress saying it had more than 70 “ongoing examinations” of 501(c)(4)s.
Whatever it does, the IRS remains limited in what it can do to watch over these groups. As a recent ProPublica investigation found [50]: “One reason the IRS struggles is that it can’t match the speed of politics.” In other words, by the time these groups submit tax returns, they have often stopped operating or created new groups under new names.
...
Also noted that when you read “But the IRS has indicated it is starting to look into some of these groups and recently sent a letter [49] (pdf) to Congress saying it had more than 70 “ongoing examinations” of 501(c)(4)s,” that’s actually an early reference to the IRS investigations that eventually exploded into the fake ‘IRS targeting conservative groups’ scandal [52]. When the IRS actually did what it was supposed to do in 2010–2012 and investigated whether or not the many 501(c)(4) groups that popped up in the 2012 election where actually “social welfare” organization, that was contorted by the right-wing noise machine into some sort of IRS attack on conservatives, which makes sense given how much the right-wing noise machine depends on the lack of campaign finance law enforcement.
501(c)(4)s: The Gift That Keeps On Giving. To Itself. As Charity. Because That’s How the Scam Works
So we just saw how the 501(c)(4) system started off with a Congressional act that allowed these groups to count as social welfare organizations for tax purposes as long as they are exclusively dedicated to social welfare. Congress made the massive change to that rule in 1959 when it ruled that organizations only had to be primarily focused on social welfare in order to keep their tax treatment, allowing for up to half of a 501(c)(4)‘s spending on political advocacy like attack ads. That congressional move followed the 1958 NAACP v. Alabama ruling that allowed 501(c)(4)s to keep their donors secret from the public, which is a very reasonable request for an organization like the NAACP but the billionaires get to stay secret too.
501(c)(4)s still have to report to the IRS how much they spend on political ads, which can be up to half their spending. And they still have to report their donors to the IRS. But their donor names were redacted from the public tax filings of these organizations. The right to donor secrecy to the public is one of the key things that differentiates 501(c)(4)s from their “super PAC” counterparts.
Then, in 1976, Buckley v. Valeo created the “magic words” standard for determining whether or not an ad is considered an “issue ad” or a political ad, thus create a set of rules that could be easily overcome to allow for the creation of ‘issue ads’ that are clearly political ads in reality.
Flash forward to the 2010 Citizens United Supreme Court and we find that it basically just expanded to corporations and unions the luxury of unlimited undisclosed use of the 501(c)(4)s system that had been used by wealthy donors and organizations for decades. The ruling took an absurdly broken system and made it more absurdly broken.
In the following article, we’ll look at how allied networks of 501(c)(4)s can simply donate money to each other in a manner substantially raises the 50% cap for spending on political ads. How so? Because imagine a 501(c)(4) with $10 million spending $5 million on political ads and then donating the remaining $5 million to a different allied 501(c)(4). Now half of that donated $5 million gets to be spent on political ads too. So instead of a 50% cap on political spending it effectively becomes at 75% cap and the process can be repeated over and over, effectively raising the cap each time.
The article also notes how the reported money flowing into 501(c)(4) between 2006 and 2012 jumped from $5.2 million [53] to $310.8 million [54]. And as the article also notes, of the $310.8 million that flowed into these organizations in 2012, $34.7 million was spent by self-declared liberal groups compared to $265.2 million spent by self-described conservative organizations. So almost all of that explosion in money flowing into 501(c)(4)s in the years following Citizens United was flowing into right-wing organizations [55]:
The New York Times
Op-EdDark Money Politics
By Thomas B. Edsall
June 12, 2013 9:39 pmIn the world of nonprofit dark money” groups [56], nothing is as it seems: political committees, through the magic of the internal revenue code, become tax-exempt “social welfare” organizations; a partisan campaign ad becomes principled “issue advocacy”; and federal election law that requires public disclosure of donors is rendered toothless by regulatory loopholes.
The flow of cash through organizations asserting tax-exempt status under section 501(c)(4) [57] of the federal tax code has been rising exponentially, from just $5.2 million in 2006 to $310.8 million in 2012.
There is one reason for this growth: 501(c)(4) groups do not have to reveal their donors.
Two pie charts — Figure 1 [53] and Figure 2 [54] — drawn up by the Center for Responsive Politics [58] demonstrate the crucial role of conservative non-profits in driving this increase in spending.
[see Center for Responsive Politics pie chart that shows spending in 2006 by self-described liberal ($639.1k), conservative ($542.2k), and non-ideological ($4.1M) groups [59]]
[see Center for Responsive Politics pie chart that shows spending in 2012 by self-described liberal ($34.7M), conservative ($265.2M), and non-ideological ($10.9M) groups [59]]The Center, which has dug deeply into this submerged area of American politics, has gathered a lot of the relevant data about the influence of money on American politics at OpenSecrets.org [60]. It makes for instructive reading.
The controversy over the revelation that organizations whose names include the words “Tea Party” were targeted by the I.R.S. for review has provided new cover for politically active conservative organizations, allowing them to charge that investigations of the legitimacy of their tax-exempt status are politically motivated. Many of these groups have, in fact, been explicitly involved in federal election campaigns, as reported upon by The New York Times [61] and Politico [62].
Sheila Krumholz [63], the Center’s executive director, told me that despite the denials coming from conservative non-profits her organization has found increasing evidence of practices designed to evade I.R.S. rules governing tax-exempt status [64] and donor disclosure [65].
The actual I.R.S. rule is worth examining closely:
The promotion of social welfare does not include direct or indirect participation or intervention in political campaigns [66] on behalf of or in opposition to any candidate for public office. However, a section 501(c)(4) social welfare organization may engage in some political activities, so long as that is not its primary activity. However, any expenditure it makes for political activities may be subject to tax under section 527(f).
The phrase “not its primary activity” has been interpreted by campaign finance lawyers to mean that a 501(c)(4) organization can spend no more that 49.9% of its money on political activity, according to Krumholz.
In a process she refers to as “money churning,” a hypothetical tax-exempt organization, let’s call it the Good Government Coalition, has $10 million in revenues. The G.G.C. fulfills its obligation to spend just over half its money on non-political activity by giving $5 million plus $1 to another tax-exempt social welfare organization with an ambiguous name, the Liberty Bell Alliance. G.G.C. can now spend what it has left, $4,999,999 on political activity. The Liberty Bell Alliance, which now has $5 million plus $1, can spend just under half, $2,499,999, on political activity. The net result is that of the original $10 million, instead of only $4,999,999 going to political activity, $7,499,998, or 75 percent of the original $10 million, can be spent on politics.
Your eyes glaze over trying to follow money trail between organizations with names like TC4 Trust [67], the Center for the Protection of Patients’ Rights [68], Americans for Job Security [69], American Future Fund [70] and American Commitment [71] – not to mention the difficulty for a layperson, or even for a political professional, of keeping track of the differences between 501(c)(4)s, 501(c)(3)s, super PACs, Political Action Committees, independent expenditure groups, and political party committees — or God forbid 501(c)(6)s.
Let’s look at just one “social welfare” 501(c)(4) organization, the 60 Plus Association [72]. The purpose of 60 Plus is to serve as a conservative counter to the A.A.R.P., which many Republicans believe to be a subsidiary of the Democratic Party.
60 Plus claims to be [73] “a non-partisan seniors advocacy group.” Nonpartisanship is crucial for an organization seeking to get and maintain 501(c)(4) tax exempt status as a social welfare organization, which confers the magic right to conceal the identity of donors.
Generously interpreting the 49.9 percent guideline covering political activity, 60 Plus has pushed the non-partisanship rule beyond the limit. Its web site features items like these: “Shameful Democrats Rush to Defense of Their I.R.S. Political Partners”; “House Votes to Repeal Obamacare as Democrats Stand by Corrupt I.R.S.”; “Seniors Overwhelming Support for Romney Could Spell Trouble for Democrats Nationally”; “Democrat Deceptions on Full Display with Paul Ryan Joining GOP Ticket.”
James Martin [74], the chairman of 60 Plus, demonstrated his “nonpartisanship” just before the 2012 election thus [75]:
Senior citizens better than any other group understand how devastating President Obama’s policies have been to every generation. They won’t sit idly by as he continues to squander our nation’s greatness, and liquidate our future under trillions more in debt.
Martin continued in the same vein:
Never forget, America’s seniors fought in wars and bled to defend freedom and make this country everything it is today. For four long years we’ve watched as this President has trampled on everything that defines us as a nation, and now tramples on his opponent, his predecessor and the truth itself in a desperate plea for four more years. Seniors know a great leader when they see one, regardless of party, and this President falls far short of deserving our consideration or our vote.
In the past two elections, 60 Plus has invested heavily in overtly partisan independent expenditures. In 2012, the tax-exempt organization doled out [76] $4.62 million, $3.19 million of which was spent in support of Republicans, with the remaining $1.43 million spent to defeat Democratic candidates for federal office, including $321,933 to defeat Obama.
In the 2010 elections, 60 Plus spent even more money [77], $6.72 million, almost all of which, $6.67 million, was allocated to defeat Democratic candidates.
60 Plus is one of the major beneficiaries of the recent surge in the investment of conservative money in 501(c)(4) organizations.
In the two years from July 1, 2007 to June 30, 2009, the organization’s annual budgets were a modest $1.89 million and $1.81 million, according to 990 forms [78] filed with the I.R.S. and available through the Guidestar web site [79]. In 2009-10, 60 Plus receipts abruptly rose to $16.01 million, and then to $18.58 million in 2010-11. In 2011-12, the total fell to $11.8 million, which was still 650 percent larger than in 2008-09.
This burst of cash was in part the result of multi-million dollar grants to 60 Plus from two of the other “social welfare” groups I mentioned above, TC4 Trust and the Center for the Protection of Patient Rights. The Center for the Protection of Patient Rights has been the subject of investigations by the Center for Responsive Politics [80], by the California Fair Political Practices Commission [81], the web-based Republic Report [82] and the Los Angeles Times [68].
The L.A. Times reported that Charles and David Koch, the conservative billionaire brothers who own Koch Industries, “have several ties” to the Center for the Protection of Patient Rights:
It is run by Sean Noble, a Phoenix-based GOP consultant who is a key operative in the Kochs’ political activities, as noted by the investigative blog Republic [82] Report. One of the center’s original directors, Heather Higgins, is chairwoman of the Independent Women’s Forum, which has received funding from a Koch-controlled foundation. And Cheryl Hillen, a Connecticut-based consultant who raised $2.6 million for the center, was director of fundraising for the Koch-backed Citizens for a Sound Economy.
The Center for Responsive Politics found [83] that the Center to Protect Patient Rights gave 60 Plus a total of $11.39 million, TC4 Trust gave $4.06 million, and other groups gave smaller amounts, including Karl Rove’s Crossroads GPS ($50,000) and the American Petroleum Institute ($25,000).
This year, 60 Plus reported in lobbying disclosure forms [84] that in addition to issues affecting seniors, it is supporting off-shore drilling legislation and a measure to permit online gambling. Past issues it has supported have included opposition to the federal telephone excise tax and to legislation allowing drug imports, as well as support for Arctic drilling and the storage of nuclear waste at Yucca Mountain in Nevada.
60 Plus has been the subject of a number of attempts to restrain its activities, but it remains undaunted. In July 2012, for example, the Democratic Senatorial Campaign Committee filed a complaint [85] with the Federal Election Commission charging that 60 Plus, Crossroads GPS and Americans for Prosperity “are ‘political committees’ who have failed to register and disclose with the F.E.C.” The D.S.C.C. dismissed the organizations’ claims of 501(c)(4) status as “spurious” and “risible on their face.” The complaint is still pending before the F.E.C.
In July, 2012, well before the current I.R.S. controversy, Senator Carl Levin, Democrat of Michigan, called on the I.R.S [86] to investigate the political activities of a dozen 501(c)(4)s, including 60 Plus. Levin’s list included both Republican and Democratic-leaning 501(c)(4)s: Crossroads Grassroots Policy Strategies, Priorities U.S.A., Americans Elect, American Action Network, Americans for Prosperity, American Future Fund, Americans for Tax Reform, Patriot Majority USA, Club for Growth, Citizens for a Working America Inc. and the Susan B. Anthony List.
60 Plus was not cowed. It is pulling out the stops to capitalize on the controversy regarding the I.R.S. focus on Tea Party groups. In one of his many [87] denunciations of Democrats and the I.R.S., James Martin declared:
The shades of Watergate continue to hover over this scandal. We recall Nixon’s defenders dismissed that as a “3rd rate burglary.” With new revelations coming out by the day and more I.R.S. employees tucking tail, this disgraceful escapade is making Watergate look like a bad hair day by comparison.
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The current political activities of large numbers of 501© organizations in no way constitute the kind of charitable work for which the public would grant favorable tax status as a reward. One of the reasons the people involved with political nonprofits — operatives and donors alike — love secrecy is that they fear public repercussions if their activities have to be conducted in the open. It is by now abundantly clear that abuse of the 501(c)(4) loophole corrupts and corrodes a campaign-finance system that was hardly a model of rectitude to begin with.
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“Dark Money Politics” by Thomas B. Edsall; The New York Times; 06/12/2013 [55]
“The flow of cash through organizations asserting tax-exempt status under section 501(c)(4) [57] of the federal tax code has been rising exponentially, from just $5.2 million in 2006 to $310.8 million in 2012.”
From $5.2 million in 2006 to $310.8 million in 2012. A nearly 60-fold increase in money flowing into 501(c)(4). Although that’s not quite a fair comparison since 2006 was a mid-term election and 2012 was a presidential election. A better comparison is 2008 and 2012. And in 2008 we find $57.5 million going to conservative groups, $33.2 million going to liberal groups, and $11.7 to independent groups ($102.4 million in total) [88]. So it’s more like a tripling of spending between the pre- and post-Citizens United 501(c)(4) spending volumes in presidential years.
And note how the 2012 spending on liberal groups was $34.7 million, compared to $33.2 million in 2008. Which means the tripling in spending was due almost entirely to more spending by conservative groups:
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There is one reason for this growth: 501(c)(4) groups do not have to reveal their donors.Two pie charts — Figure 1 [53] and Figure 2 [54] — drawn up by the Center for Responsive Politics [58] demonstrate the crucial role of conservative non-profits in driving this increase in spending.
[see Center for Responsive Politics pie chart that shows spending in 2006 by self-described liberal ($639.1k), conservative ($542.2k), and non-ideological ($4.1M) groups [59]]
[see Center for Responsive Politics pie chart that shows spending in 2012 by self-described liberal ($34.7M), conservative ($265.2M), and non-ideological ($10.9M) groups [59]]
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The article also points out the right-wing outcry over the IRS ‘scandal’ — the IRS investigation of the numerous ‘Tea Party’ organizations (in addition to numerous left-leaning groups) to determine whether or not they were truly ‘social welfare’ organizations — was completely bogus since so many of those organizations really were explicitly and obviously involved in elections and not simply focused on ‘social welfare’:
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The Center, which has dug deeply into this submerged area of American politics, has gathered a lot of the relevant data about the influence of money on American politics at OpenSecrets.org [60]. It makes for instructive reading.The controversy over the revelation that organizations whose names include the words “Tea Party” were targeted by the I.R.S. for review has provided new cover for politically active conservative organizations, allowing them to charge that investigations of the legitimacy of their tax-exempt status are politically motivated. Many of these groups have, in fact, been explicitly involved in federal election campaigns, as reported upon by The New York Times [61] and Politico [62].
Sheila Krumholz [63], the Center’s executive director, told me that despite the denials coming from conservative non-profits her organization has found increasing evidence of practices designed to evade I.R.S. rules governing tax-exempt status [64] and donor disclosure [65].
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“Sheila Krumholz [63], the Center’s executive director, told me that despite the denials coming from conservative non-profits her organization has found increasing evidence of practices designed to evade I.R.S. rules governing tax-exempt status [64] and donor disclosure [65].”
Keep in mind that the fact that so many ostensibly ‘grass-roots’ Tea Party organizations were engaged in practices designed to evade IRS rules governing donor disclosure should be a clue about the ‘grass-roots’ nature of a lot of these organizations.
And then there’s the “money churning”. That’s the practice of one ‘social welfare’ organization making a donation to another ‘social welfare’ group for the purpose of effectively raising the 50% cap on the amount these grounds can spend on direct political advocacy ads. A group with $10 million to spend can only spend 50% , or $5 million ($4,999,999 really), on direct political ads. But if they hand the other $5 million to an allied group, that allied group can now spend just under half of that $5 million on direct political ads too, raising the effective political spending cap on that original $10 million from 50% to 75%. And there’s nothing stopping the process from repeating itself, each time effectively lifting the cap even more:
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The actual I.R.S. rule is worth examining closely:The promotion of social welfare does not include direct or indirect participation or intervention in political campaigns [66] on behalf of or in opposition to any candidate for public office. However, a section 501(c)(4) social welfare organization may engage in some political activities, so long as that is not its primary activity. However, any expenditure it makes for political activities may be subject to tax under section 527(f).
The phrase “not its primary activity” has been interpreted by campaign finance lawyers to mean that a 501(c)(4) organization can spend no more that 49.9% of its money on political activity, according to Krumholz.
In a process she refers to as “money churning,” a hypothetical tax-exempt organization, let’s call it the Good Government Coalition, has $10 million in revenues. The G.G.C. fulfills its obligation to spend just over half its money on non-political activity by giving $5 million plus $1 to another tax-exempt social welfare organization with an ambiguous name, the Liberty Bell Alliance. G.G.C. can now spend what it has left, $4,999,999 on political activity. The Liberty Bell Alliance, which now has $5 million plus $1, can spend just under half, $2,499,999, on political activity. The net result is that of the original $10 million, instead of only $4,999,999 going to political activity, $7,499,998, or 75 percent of the original $10 million, can be spent on politics.
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And note how the article refers to the American Future Fund when listing the organizations with confusing money flows between them. The AFF isn’t just a random 501(4)©. It’s both a major conduit and destination of right-wing dark money:
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Your eyes glaze over trying to follow money trail between organizations with names like TC4 Trust [67], the Center for the Protection of Patients’ Rights [68], Americans for Job Security [69], American Future Fund [70] and American Commitment [71] – not to mention the difficulty for a layperson, or even for a political professional, of keeping track of the differences between 501(c)(4)s, 501(c)(3)s, super PACs, Political Action Committees, independent expenditure groups, and political party committees — or God forbid 501(c)(6)s.
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Finally, the article covers focuses in on the “60 Plus Association” organization. It pretends to be a “a non-partisan seniors advocacy group.” A non-partisan group that coincidentally exclusively promotes Republicans and bashes Democrats. In 2010, 60 Plus spent $6.72 million on overtly partisan activities. $6.67 million of that was spent on defeating Democrats:
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Let’s look at just one “social welfare” 501(c)(4) organization, the 60 Plus Association [72]. The purpose of 60 Plus is to serve as a conservative counter to the A.A.R.P., which many Republicans believe to be a subsidiary of the Democratic Party.60 Plus claims to be [73] “a non-partisan seniors advocacy group.” Nonpartisanship is crucial for an organization seeking to get and maintain 501(c)(4) tax exempt status as a social welfare organization, which confers the magic right to conceal the identity of donors.
Generously interpreting the 49.9 percent guideline covering political activity, 60 Plus has pushed the non-partisanship rule beyond the limit. Its web site features items like these: “Shameful Democrats Rush to Defense of Their I.R.S. Political Partners”; “House Votes to Repeal Obamacare as Democrats Stand by Corrupt I.R.S.”; “Seniors Overwhelming Support for Romney Could Spell Trouble for Democrats Nationally”; “Democrat Deceptions on Full Display with Paul Ryan Joining GOP Ticket.”
James Martin [74], the chairman of 60 Plus, demonstrated his “nonpartisanship” just before the 2012 election thus [75]:
Senior citizens better than any other group understand how devastating President Obama’s policies have been to every generation. They won’t sit idly by as he continues to squander our nation’s greatness, and liquidate our future under trillions more in debt.
Martin continued in the same vein:
Never forget, America’s seniors fought in wars and bled to defend freedom and make this country everything it is today. For four long years we’ve watched as this President has trampled on everything that defines us as a nation, and now tramples on his opponent, his predecessor and the truth itself in a desperate plea for four more years. Seniors know a great leader when they see one, regardless of party, and this President falls far short of deserving our consideration or our vote.
In the past two elections, 60 Plus has invested heavily in overtly partisan independent expenditures. In 2012, the tax-exempt organization doled out [76] $4.62 million, $3.19 million of which was spent in support of Republicans, with the remaining $1.43 million spent to defeat Democratic candidates for federal office, including $321,933 to defeat Obama.
In the 2010 elections, 60 Plus spent even more money [77], $6.72 million, almost all of which, $6.67 million, was allocated to defeat Democratic candidates.
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And 60 Plus, of course, is also a major beneficiary of donations from other 501(c)(4) entities. It’s how the ‘money churning’ works. Specifically, donation from Koch-financed groups like TC4 Trust ($4.06 million) and the Center for the Protection of Patient Rights ($11.39 million), along with other entities like Karl Rove’s Crossroads GPS superPAC ($50,000) and the American Petroleum Institute ($25,000):
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60 Plus is one of the major beneficiaries of the recent surge in the investment of conservative money in 501(c)(4) organizations.In the two years from July 1, 2007 to June 30, 2009, the organization’s annual budgets were a modest $1.89 million and $1.81 million, according to 990 forms [78] filed with the I.R.S. and available through the Guidestar web site [79]. In 2009-10, 60 Plus receipts abruptly rose to $16.01 million, and then to $18.58 million in 2010-11. In 2011-12, the total fell to $11.8 million, which was still 650 percent larger than in 2008-09.
This burst of cash was in part the result of multi-million dollar grants to 60 Plus from two of the other “social welfare” groups I mentioned above, TC4 Trust and the Center for the Protection of Patient Rights. The Center for the Protection of Patient Rights has been the subject of investigations by the Center for Responsive Politics [80], by the California Fair Political Practices Commission [81], the web-based Republic Report [82] and the Los Angeles Times [68].
The L.A. Times reported that Charles and David Koch, the conservative billionaire brothers who own Koch Industries, “have several ties” to the Center for the Protection of Patient Rights:
It is run by Sean Noble, a Phoenix-based GOP consultant who is a key operative in the Kochs’ political activities, as noted by the investigative blog Republic [82] Report. One of the center’s original directors, Heather Higgins, is chairwoman of the Independent Women’s Forum, which has received funding from a Koch-controlled foundation. And Cheryl Hillen, a Connecticut-based consultant who raised $2.6 million for the center, was director of fundraising for the Koch-backed Citizens for a Sound Economy.
The Center for Responsive Politics found [83] that the Center to Protect Patient Rights gave 60 Plus a total of $11.39 million, TC4 Trust gave $4.06 million, and other groups gave smaller amounts, including Karl Rove’s Crossroads GPS ($50,000) and the American Petroleum Institute ($25,000).
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And as we should probably expect given the range of interests donating to 60 Plus, the group’s lobbying efforts included topics like supporting off-shore drilling legislation, Arctic drilling, online gambling, and nuclear waste storage. This from a group that peddles itself as a non-partisan senior advocacy organization:
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This year, 60 Plus reported in lobbying disclosure forms [84] that in addition to issues affecting seniors, it is supporting off-shore drilling legislation and a measure to permit online gambling. Past issues it has supported have included opposition to the federal telephone excise tax and to legislation allowing drug imports, as well as support for Arctic drilling and the storage of nuclear waste at Yucca Mountain in Nevada.
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And as we should also expect, 60 Plus was loudly complaining about unfair IRS scrutiny during the fake ‘IRS targeting the Tea Party’ scandal. A scandal that was particularly opportune for the organization given that it was facing calls for investigations before the ‘scandal’ even started:
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60 Plus has been the subject of a number of attempts to restrain its activities, but it remains undaunted. In July 2012, for example, the Democratic Senatorial Campaign Committee filed a complaint [85] with the Federal Election Commission charging that 60 Plus, Crossroads GPS and Americans for Prosperity “are ‘political committees’ who have failed to register and disclose with the F.E.C.” The D.S.C.C. dismissed the organizations’ claims of 501(c)(4) status as “spurious” and “risible on their face.” The complaint is still pending before the F.E.C.In July, 2012, well before the current I.R.S. controversy, Senator Carl Levin, Democrat of Michigan, called on the I.R.S [86] to investigate the political activities of a dozen 501(c)(4)s, including 60 Plus. Levin’s list included both Republican and Democratic-leaning 501(c)(4)s: Crossroads Grassroots Policy Strategies, Priorities U.S.A., Americans Elect, American Action Network, Americans for Prosperity, American Future Fund, Americans for Tax Reform, Patriot Majority USA, Club for Growth, Citizens for a Working America Inc. and the Susan B. Anthony List.
60 Plus was not cowed. It is pulling out the stops to capitalize on the controversy regarding the I.R.S. focus on Tea Party groups. In one of his many [87] denunciations of Democrats and the I.R.S., James Martin declared:
The shades of Watergate continue to hover over this scandal. We recall Nixon’s defenders dismissed that as a “3rd rate burglary.” With new revelations coming out by the day and more I.R.S. employees tucking tail, this disgraceful escapade is making Watergate look like a bad hair day by comparison.
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“60 Plus was not cowed. It is pulling out the stops to capitalize on the controversy regarding the I.R.S. focus on Tea Party groups.”
Yep, a group that was emblematic of how the “money churning” scam operates jumped at the opportunity to complain loudly about unfair targeting by the IRS. Because that’s how the system works. A system powered by cunning, gall, and endless reserves of shamelessness. Should billionaire-funded groups like AFF and 60 Plus be allowed to legitimately claim non-partisan ‘social welfare’ status? That’s the real question at the heart of the ‘IRS targeting conservatives’ fake scandal.
The TC4 Trust and the Center to Protect Patient Rights: The Koch Brothers’ Temporary “Shadow Money Mailbox” 501(c)(4)s Filled With “Disregardable Entities”
And 60 Plus was just one element node in the network of 501(c)(4) organizations used by the Koch donor network. Next, we’re going to take a closer look at how this larger network operates including some of the tricks used to obscure the money-trails. And keep in mind that, until around 2013, AFF was a significant component of the Koch network and it was only kicked out after it was caught breaking the 501(c)(4) rules.
Also keep in mind that the Kochs were a major influential force in American politics for decades before they became a household name around 2010 [89]. Long before their ‘coming out’ moment for with the 2010 rise of the Tea Party in 2010, the Kochs were financing major right-wing organizations like the Cato Institute and American Enterprise Institute [90]. And they did a remarkable job staying off the public’s radar all those years. Staying hidden was apparently no long possible with hundreds of millions of the Koch networks dollars flowing into US elections. But even after it’s become clear that the Kochs are spending fortunes on influencing the US electorate in election after election, the specifics of how they’re spending that money still remain heavily hidden. We know that money is out there, we just don’t know how it’s being spent. It’s one of the ways ‘dark money’ is a lot like ‘dark matter’: we know it’s there even if we can’t see it.
Yet every once in a while, we get a snapshot of how these dark money networks operate and that’s what happened in 2013 when some of the entities in the Koch network shutdown and publicly issued termination reports. And those termination reports included the recipients of these shut down groups’ donations, recipients that included other 501(c)(4) entities, yielding a number of fascinating insights into the techniques used by how these networks.
So let’s take a closer look at the two big funders of 60 Plus mentioned above, TC4 and the Center to Protect Patient Rights (CPPR), to get a better idea of how the system actually works. As we’re going to see, the two groups weren’t just generous donors to 60 Plus. They acted as “Shadow Money Mailboxes” that did little other than collect donations and disburse the money to other entities. TC4 was actually a very big donor to the CPPR too. Yes, even the Shadow Money Mailboxes donate to each other. Because, again, that’s how this system works.
But TC4 didn’t give directly to CPPR. TC4 reported giving $27.9 million in grants to other groups between July 1, 2011 and June 30, 2012 and $14.3 million of that was sent to a group called Corner Table LLC. Corner Table, of course, turns out to be a “disregardable entity” of CPPR. That’s a sub-unit that is ‘disregarded’ for tax purposes and treated as part of the parent entity.
TC4 reported that $27.9 million in spending in its 2013 termination report, which was its final report before shutting down. So who was behind Corner Table? Well, that only became clear two days after TC4 filed its termination report when CPPR filed some amendments to its 2010–2011 IRS filings. Those filings revealed that Corner Table was previously called Eleventh Edition which received $4.3 million from TC4 sometime between July 1, 2010 and June 30, 2011. This amendment by CPPR also contradicted its initial 2010–2012 filings with the IRS that stated it had no disregardable entities at all.
That points out one of the basic techniques 501(c)(4)s can use to obscure their money flow trails: change the name of the disregarded entity and then neglect to report donations up front and report them a year later as amendments so there’s a lag in what the public knows about what your 501(c)(4) spent. A lag that gives enough time to change names and obfuscate the public record even more. TC4 reports on its 2010–2011 that it gave $4.3 million to an entity called Eleventh Edition. But CPPR, the owner of Eleventh Edition, didn’t disclose receiving that money until its 2013 amendment. And this effectively hid from the public in 2012, an election year, the knowledge that TC4 gave $4.3 million to CPPR in 2010–2011. And then TC4 disbands in 2013, presumably to be replaced by a new Koch-backed front. And in its termination report it reveals that it donated $14.3 million to Corner Table LLC in 2011–2012, and the only public information that indicates that Corner Table is a CPPR sub-unit is the CPPR amendment to its 2010–2011 filings that belatedly reveal that Eleventh Edition exists and changed its name to Corner Table. So it order to trace the $4.3 million and $14.3 million donations made by TC4 back to CPPR in 2010–2012 you would have needed to view publicly disclosed tax information for both TC4 and the CPPR and connect the dots.
And Eleventh Edition/Corner Table wasn’t the only ‘disregardable entity’ CPPR disclosed in a 2013 amendment to its previous tax returns. CPPR also belatedly revealed in a 2013 amendment the existence of Meridian Edition LLC. The amendment also revealed that Meridian Edition had previously used the name American Committment, a name that has apparently been used by a number of other 501(c)(4)s, highlighting another way the dark money system obscures money flows: the temporary disregarable entities don’t just change their names. They share names too, making the IRS filings of these entities ambiguous. The CPPR 2013 amendment showed a $9.3 million donation to American Committment from TC4 in 2010–2011. And TC4 presumably disclose that donation in its initial filings. But it wasn’t until CPPR filed that amendment that it was publicly revealed that American Committment was a CPPR sub-unit.
The article also notes that an earlier donation from TC4 to American Committment was obscured because of a smudge on TC4’s tax filings. A smudge. That’s apparently also one of the obfuscation techniques. And it apparently worked.
There were a number of other Koch-affiliated entities getting grants from TC4. TC4 also gave $891,000 to PRDIST LLC, a disregarded entity of Americans for Prosperity, one of the Kochs’ primary political organizations. TC4 donated an additional $500,000 in its 2013 termination report.
One entity that received about $9 million in grants TC4 gave to POFN LLC, a sub-unit of SGC4 Trust, which does business under the name Public Notice. The executive director of Public Notice happens to be Gretchen Hamel, one of the founding members of TC4. It’s a small world in the world of 501(c)(4)s.
One of the biggest recipients of TC4’s $64 million in grants was Themis Trust, a conservative voter database project started in 2010 by the Koch brothers. And this, of course, also involved the use of disregarded entities to hide the money trail. TC4 gave $2.5 million to Themis under its own name, but then gave another $5.6 million to a Themis sub-unit called STN LLC and another $1.8 million to Themis sub-unit DAS MGR. In all, TC4 gave Themis Trust $9.9 million, and 75% of those grants were effectively hidden from the public using disregarded entities.
Themis Trust, in turn, made grants to some non-Koch entities. For example, TC4 donated $750,000 to an entity called ORRA LLC, a disregarded entity of Evangchr4 LLC. It turns out Evangchr4 is formally a related organization of Themis Trust. Evangchr4, in turn, donated $1.2 million to CitizenLink, a 501(c)(4) entity of the right-wing evangelical christian organization Focus on the Family. And CitizenLink ended up spending $2.6 million in 2012, largely in support of Mitt Romney. So we have TC4 giving money to a disregarded entity of Evangchr4, which itself is formally a related organization of Themis Trust. And Evangchr4 — a name that sounds like it was set up by evangelical Christians — gave money to Focus on the Family’s 501(c)(4) CitizenLink. Finally, CitizenLink spent millions promoting Mitt Romney in 2012. And this was all done under the pretense of these all being non-political social welfare organizations.
And as the following article notes, there were a number of entities listed as recipients of TC4’s donations in its termination report where Open Secrets couldn’t identify who was behind them. And that highlights one of the key aspects of this to keep in mind: even when these groups reveal in their public IRS reports how much money they gave and the recipients of that money, there’s still no guarantee that even investigative journalists like the people at Open Secrets will have the information they need to determine who is actually behind these groups. Because that’s how the system is currently designed. To be investigative-journalist-proof [91]:
Open Secrets
Exclusive: Largest Dark Money Donor Groups Share Funds, Hide Links
By Robert Maguire and Viveca Novak
September 10, 2013There’s a new dark money game in town, one meant to further cover the tracks of tax-exempt groups that have provided major sums to help Republican causes in the 2010 and 2012 elections.
Recent tax filings by the two largest “shadow money mailboxes” — groups that do virtually nothing but pass grants through to other politically active 501(c)(4) organizations, many of which have been big spenders on election ads benefiting the GOP — show their financial ties run far deeper than previously known.
The groups, TC4 Trust [92] and the Center to Protect Patient Rights [93] — both of which have connections to the billionaire industrialist Koch brothers — have been playing a high-stakes game of hide-the-ball, disguising transfers of millions of dollars from one to the other behind a veil of Delaware limited liability corporations.
All covered up
Already, under tax law, 501(c)(4) groups — like TC4, CPPR and nearly all the groups to which they’ve given money through the years — don’t have to disclose their donors. By further shrouding the recipient groups behind entities with different names (and, usually, different employer identification numbers), the donors are attempting to make it even more difficult to find out how the money is flowing.
TC4 is now out of business. But in its termination report [94], signed on May 14, 2013 and sent to the IRS, TC4 reported giving $27.9 million in grants to other groups between July 1, 2011 and June 30, 2012. The report was included in data posted yesterday Resource.org [95].
The largest grant by far — $14.3 million — was sent to a group called Corner Table LLC [96]. That’s a big chunk of change to a folksy-sounding but unknown — in the political or any other realm — organization.
But two days after TC4’s trustee finalized its termination report, the Center to Protect Patient Rights — the other big shadow money pass-through — signed off on amendments to its 2010 [97] and 2011 [98] tax filings that help solve the mystery.
The amendments say [99] that, contrary to CPPR’s earlier representations on IRS filings that it had no connected entities operating under a different name, it actually did.
One of them, according to one of the amendments, was called Eleventh Edition [100], which received $4.3 million [101] from TC4 sometime between July 1, 2010 and June 30, 2011. And not only was Eleventh Edition the same as CPPR, but it had taken on a new name: Corner Table LLC.
And CPPR’s other amendment indicates it has another of these units: Meridian Edition LLC [102] — which, the documents say, was originally called American Commitment LLC. American Committment had received a total of $9.3 million from TC4 in 2010 and 2011 (its earlier grant was unclear at first because the recipient’s name was smudged on TC4’s 990 return).
American Commitment is a name that has been used for several nonprofits. The incarnation that received the TC4 money (a group that seemed to disappear [103], along with its millions from TC4) — is the one that shows up in CPPR’s amended filing.
The image below shows TC4’s contributions to CPPR:
[See image showing TC4 Trust using different middle-men organizations 2009, 2010, and 2011 to funnel millions to the Center to Protect Patient Rights [104]]
The upshot: Now we know that CPPR — through its previously unknown sub-units — received a total of nearly $28 million from TC4 from August 2009 through June 2012. That’s a big chunk of CPPR’s overall $95 million revenue. The source of most of the rest of its funds remains publicly unknown.Disregarded no more
These wholly-owned sub-units of larger groups have a particular designation under the law: They’re known as “disregarded entities [105]” — meaning their different names and separate identification numbers are disregarded by the IRS for income tax purposes, and they must be reported on the same forms with their parent groups. Officially, they are “disregarded as an entity separate from its owner.” They are almost always single-member LLCs.
CPPR has given out more than $70 million in grants from its inception in 2009 through the end of 2011. And we don’t yet know — because of lag time in IRS filing schedules — what it spent in 2012, which could have been a big year for the organization.
TC4, which began operating the same year as CPPR, has made $64.7 million in grants. One of its main recipients has been a conservative voter database project, Themis Trust, started in early 2010 by David and Charles Koch, the billionaire industrialists who are major funders of the right.
Themis Trust, too, has hidden some of the grants it has received from TC4 by using disregarded entities. Under its own name, Themis received $2.5 million from TC4. But the donor group also gave $5.6 million to a Themis unit called STN LLC [106], and sent $1.8 million to yet another Themis LLC, DAS MGR [107]. The grants from TC4 to Themis total $9.9 million.
In addition, TC4’s final filing shows it gave a grant of $725,000 to something called ORRA LLC [108], which is a disregarded entity of Evangchr4 Trust [109].
The latter group is formally a “related organization [110]” of Themis, according to Themis’ 990. And Evangchr4 gave out $1.2 million in grants, almost all of which went to something called CitizenLink, the c4 arm of the social conservative group Focus on the Family. The last link in that particular daisy chain of grants, CitizenLink [111] reported to the FEC that it spent $2.6 million on independent expenditures in 2012, most of it on behalf of Republican presidential nominee Mitt Romney.
CitizenLink is just one of the tax-exempt, nondisclosing organizations that reported spending more than $250 million in the 2012 elections, according to filings made with the FEC.
TC4 has in the past given grants to several other disregarded entities of other groups, such as $891,000 it sent to PRDIST LLC — a unit of the much better-known Americans for Prosperity [112]. In its termination report, TC4 reported sending PRDIST another $500,000.
Then there was the $7.3 million TC4 sent to POFN LLC, a subsidiary of SGC4 Trust, which does business under the name Public Notice. TC4’s final report notes another $1.7 million contribution to POFN.
There are still grantees whose true identities OpenSecrets Blog hasn’t yet been able to learn: Something called TRGN LLC had earlier received $1.5 million from TC4, but the latest report shows another grant of $2.1 million. Three other groups appear on the termination report for the first time, receiving a total of a little less than $5 million: SLAH LLC, TDNA LLC and TOHE LLC. It’s not clear what these groups do or whether they are related to more well-known organizations.
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Things go better with Kochs
The connections between these groups and the Koch brothers, generous funders of conservative causes, are evident in their personnel as well as in grants.
Gretchen Hamel, the executive director of Public Notice, the recipient (through its sub-units) of $9 million from TC4, gave a presentation during at least one of the Kochs’ annual conservative strategy sessions. But that’s not all: Hamel was also a founding member [113] of TC4, which from its earliest days gave to the Kochs’ voter database project Themis.
Another presenter at that same conference was Sean Noble, a political consultant known for being closely connected to the Kochs’ operations. He founded CPPR, and is still its president and executive director. Noble knows his way around the world of politically focused 501(c)(4)s: He also founded all three versions of American Commitment — the most recent of which is now run by Phil Kerpen, who’s on the board of the Kochs’ large ©(4), Americans for Prosperity.
Americans for Prosperity — which spent more than $36 million in the 2012 election cycle, almost all of used for ads opposing President Obama’s re-election [114], according to reports filed with the FEC — has received a total of nearly $1.4 million from TC4, and at least another $4.3 million from Noble’s CPPR.
CPPR figured in a scheme last year in which a Americans for Responsible Leadership, a group founded by one of Noble’s clients, funneled $11 million to advocates mobilizing against a California ballot initiative (a temporary tax increase for education) and on behalf of another one (to ban unions from using dues for political purposes).
When California’s election watchdog won a court order to force ARL to disclose its donors, it revealed little: ARL got its money from CPPR, which had received it from another dark money group called Americans for Job Security. The money, then, had passed through a triple-layered curtain of nondisclosing groups, and its original source was still unknown. The state agency called it a plain case of “money laundering [115].” The Daily Beast has reported [116] that a grand jury has been empaneled to investigate the transactions.
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“Recent tax filings by the two largest “shadow money mailboxes” — groups that do virtually nothing but pass grants through to other politically active 501(c)(4) organizations, many of which have been big spenders on election ads benefiting the GOP — show their financial ties run far deeper than previously known.”
“Shadow money mailboxes”: It’s an apt label for groups like TC4 and CPPR that exist solely to take contributions and pass that money along to other 501(c)(4)s.
And while these ‘shadow money mailboxes’ already have the legal right to not disclose their donors to the public, they still use sub-‘shadow money mailboxes’ operating under different names (usually with different employer identification numbers) to make it as difficult as possible for the public to track the money flows that get publicly disclosed:
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All covered upAlready, under tax law, 501(c)(4) groups — like TC4, CPPR and nearly all the groups to which they’ve given money through the years — don’t have to disclose their donors. By further shrouding the recipient groups behind entities with different names (and, usually, different employer identification numbers), the donors are attempting to make it even more difficult to find out how the money is flowing.
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These sub-units are technically known as “disregarded entities”, which refers to how their separate identification numbers are are disregarded by the IRS for income tax purposes, and they must be reported on the same forms with their parent groups. But as the short-lived life four-year lives of the disregarded entities used by TC4 and CPPR make clear, they could also be described as discardable entities because they are clearly used as temporary organizations that get created, maybe change their names, and then disappear in a few years to be replaced by a new disregarded entity. They’re disposable entities used to obscure money-trails:
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Disregarded no moreThese wholly-owned sub-units of larger groups have a particular designation under the law: They’re known as “disregarded entities [105]” — meaning their different names and separate identification numbers are disregarded by the IRS for income tax purposes, and they must be reported on the same forms with their parent groups. Officially, they are “disregarded as an entity separate from its owner.” They are almost always single-member LLCs.
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And as the article makes clear, the largest donations to come out of these shadow money mailboxes were donations from TC4 to CPPR. Large donations that were obscured with the use of sub-units: of the $27.9 million in grants TC4 made in the one year period of from July 1 2011 to June 30, 2012, over half of that went to CPPR. But it actually sent to a CPPR sub-unit called Corner Table LLC:
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TC4 is now out of business. But in its termination report [94], signed on May 14, 2013 and sent to the IRS, TC4 reported giving $27.9 million in grants to other groups between July 1, 2011 and June 30, 2012. The report was included in data posted yesterday Resource.org [95].The largest grant by far — $14.3 million — was sent to a group called Corner Table LLC [96]. That’s a big chunk of change to a folksy-sounding but unknown — in the political or any other realm — organization.
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And it just happens to be the case that CPPR hid from the IRS the fact that Corner Table LLC — originally named Eleventh Edition — was one of its sub-units. This wasn’t disclosed until two days after TC4’s 2013 termination report when CPPR filed amendments to its 2010–2011 taxes. It was only after those amendments were filed in 2013 that researchers at Open Secrets were able to discover that TC4 was a major fund of CPPR:
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But two days after TC4’s trustee finalized its termination report, the Center to Protect Patient Rights — the other big shadow money pass-through — signed off on amendments to its 2010 [97] and 2011 [98] tax filings that help solve the mystery.The amendments say [99] that, contrary to CPPR’s earlier representations on IRS filings that it had no connected entities operating under a different name, it actually did.
One of them, according to one of the amendments, was called Eleventh Edition [100], which received $4.3 million [101] from TC4 sometime between July 1, 2010 and June 30, 2011. And not only was Eleventh Edition the same as CPPR, but it had taken on a new name: Corner Table LLC.
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And Corner Table/Eleventh Edition was just one of the CPPR sub-units used for these money flows between TC4 and CPPR. There was also Meridian Edition LLC — originally named American Committment LLC, which is a name apparently used by multiple nonprofits — which received almost $10 million from TC4 also in 2010–2011. This sub-unit was also only belatedly disclosed to the IRS in CPPR’s 2013 amendments:
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And CPPR’s other amendment indicates it has another of these units: Meridian Edition LLC [102] — which, the documents say, was originally called American Commitment LLC. American Committment had received a total of $9.3 million from TC4 in 2010 and 2011 (its earlier grant was unclear at first because the recipient’s name was smudged on TC4’s 990 return).American Commitment is a name that has been used for several nonprofits. The incarnation that received the TC4 money (a group that seemed to disappear [103], along with its millions from TC4) — is the one that shows up in CPPR’s amended filing.
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So between 2009–2012, these two sub-units of CPPR received $28 million from TC4. And each of which changed their name during this period. And CPPR didn’t disclose its relationship to them to the IRS until 2013. That’s how much work these Koch-backed entities did to obscure the money flows between these two key ‘shadow money mailboxes’. That $28 million was over a quarter of the $98 million CPPR took in from 2009–2012. And CPPR turned around and basically gave almost that same amount in grants of its own:
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The upshot: Now we know that CPPR — through its previously unknown sub-units — received a total of nearly $28 million from TC4 from August 2009 through June 2012. That’s a big chunk of CPPR’s overall $95 million revenue. The source of most of the rest of its funds remains publicly unknown....
CPPR has given out more than $70 million in grants from its inception in 2009 through the end of 2011. And we don’t yet know — because of lag time in IRS filing schedules — what it spent in 2012, which could have been a big year for the organization.
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And that’s why entities like TC4 and CPPR are shadow money mailboxes. They just act as middle-men in chains of donations across networks of organizations. The Koch network of mega-donors [117] give to organizations like TC4 that, in turn, give to sub-units of other money mailboxes like CPPR which gives the money out again. Or given to entities like AFF that might spend the money on actual campaigning or further donate to another 501(c)(4). And the tax filings are delayed and sub-unit names are changed to further obscure the trail of what’s publicly disclosed. In other words, the mega-donors aren’t just shielded by the fact that 501(c)(4)s don’t have to disclose their donors. They’re also obscured by convoluted delayed tax disclosures and a money flow across networks of organizations donating money to each other using temporary sub-organizations that pop-up, change their names in a few years, and disappear.
And then there’s Themis Trust, a Koch-backed entity that appears to be a hyrid between shadow money mailboxes and a conservative voter database project. Themis received $9.9 million from TC4 using a series of disregarded entites:
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TC4, which began operating the same year as CPPR, has made $64.7 million in grants. One of its main recipients has been a conservative voter database project, Themis Trust, started in early 2010 by David and Charles Koch, the billionaire industrialists who are major funders of the right.Themis Trust, too, has hidden some of the grants it has received from TC4 by using disregarded entities. Under its own name, Themis received $2.5 million from TC4. But the donor group also gave $5.6 million to a Themis unit called STN LLC [106], and sent $1.8 million to yet another Themis LLC, DAS MGR [107]. The grants from TC4 to Themis total $9.9 million.
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But in addition to its voter database project, Themis also gave $750,000 to Evangchr4 Trust, which appears to be focused on giving money to Focus on the Family. In that sense, Themis and its “related organization” Evangchr4 Trust were acting as a shadow money mailbox. One more mailbox in the chain to further obscure money flows:
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In addition, TC4’s final filing shows it gave a grant of $725,000 to something called ORRA LLC [108], which is a disregarded entity of Evangchr4 Trust [109].The latter group is formally a “related organization [110]” of Themis, according to Themis’ 990. And Evangchr4 gave out $1.2 million in grants, almost all of which went to something called CitizenLink, the c4 arm of the social conservative group Focus on the Family. The last link in that particular daisy chain of grants, CitizenLink [111] reported to the FEC that it spent $2.6 million on independent expenditures in 2012, most of it on behalf of Republican presidential nominee Mitt Romney.
CitizenLink is just one of the tax-exempt, nondisclosing organizations that reported spending more than $250 million in the 2012 elections, according to filings made with the FEC.
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If you think about it, TC4, CPPR, Themis Trust, and the rest of these Koch-financed entities, they really should all be declaring themselves “related organizations” because that’s exactly what they are. One big network of highly related Koch-financed organizations set up to maintain the pretense of being ‘social welfare’ organizations so they can get preferable tax treatment avoid disclosing their donors. It’s so Koch-centric that TC4 even gave to a disregarded entity of Americans for Prosperity, one of the Koch’s primary political organizations:
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TC4 has in the past given grants to several other disregarded entities of other groups, such as $891,000 it sent to PRDIST LLC — a unit of the much better-known Americans for Prosperity [112]. In its termination report, TC4 reported sending PRDIST another $500,000.
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$9 million was given by TC4 to an entity called Public Notice. The executive director of Public Notice was a founding member of TC4 Trust:
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Then there was the $7.3 million TC4 sent to POFN LLC, a subsidiary of SGC4 Trust, which does business under the name Public Notice. TC4’s final report notes another $1.7 million contribution to POFN....
Things go better with Kochs
The connections between these groups and the Koch brothers, generous funders of conservative causes, are evident in their personnel as well as in grants.
Gretchen Hamel, the executive director of Public Notice, the recipient (through its sub-units) of $9 million from TC4, gave a presentation during at least one of the Kochs’ annual conservative strategy sessions. But that’s not all: Hamel was also a founding member [113] of TC4, which from its earliest days gave to the Kochs’ voter database project Themis.
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Sean Noble, the founder of CPPR, is also a known Koch operative:
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Another presenter at that same conference was Sean Noble, a political consultant known for being closely connected to the Kochs’ operations. He founded CPPR, and is still its president and executive director. Noble knows his way around the world of politically focused 501(c)(4)s: He also founded all three versions of American Commitment — the most recent of which is now run by Phil Kerpen, who’s on the board of the Kochs’ large ©(4), Americans for Prosperity.
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It’s one big happy family because this whole network is really all one big distributed organization — the political influence operations of the Koch network — manifested as a network of separate organizations, giving money back and forth to each other’s sub-organizations. One big happy family of Koch network organizations masquerading as a collection of social welfare organizations and acting as one giant organization. Americans for Prosperity spent more than $36 million in the 2012 election cycle, almost $6 million of which came from TC4 and CPPR. And who knows how much of the rest of that $36 million was donated through other Koch entities. But it’s clear that when we’re looking at TC4 and CPPR and all the affiliated organizations like Themis Trust and Public Notice, we’re looking at a Koch-created network of ‘social welfare’ organizations set up for the purpose of laundering Koch donor network money and keeping the identities of those donors secret:
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Americans for Prosperity — which spent more than $36 million in the 2012 election cycle, almost all of used for ads opposing President Obama’s re-election [114], according to reports filed with the FEC — has received a total of nearly $1.4 million from TC4, and at least another $4.3 million from Noble’s CPPR.
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Note the case of money laundering involving CPPR and California ballot initiative and how CPPR was receiving money from Americans for Job Security and passing it along to a group called Americans for Responsible Leadership. We’ll be looking more closely at the in the next article below:
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CPPR figured in a scheme last year in which a Americans for Responsible Leadership, a group founded by one of Noble’s clients, funneled $11 million to advocates mobilizing against a California ballot initiative (a temporary tax increase for education) and on behalf of another one (to ban unions from using dues for political purposes).When California’s election watchdog won a court order to force ARL to disclose its donors, it revealed little: ARL got its money from CPPR, which had received it from another dark money group called Americans for Job Security. The money, then, had passed through a triple-layered curtain of nondisclosing groups, and its original source was still unknown. The state agency called it a plain case of “money laundering [115].” The Daily Beast has reported [116] that a grand jury has been empaneled to investigate the transactions.
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And as the Open Secret’s team noted, four of the recipients of TC4 grants in its termination report were organizations where it’s not clear whether they’re a disregarded entity or related organization of a more well known organization. And also not clear what they even do. And that lack of transparency more or less tells us what they do: act as shadow money mailboxes and/or hide the spending of that money in ways to influence the political process:
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There are still grantees whose true identities OpenSecrets Blog hasn’t yet been able to learn: Something called TRGN LLC had earlier received $1.5 million from TC4, but the latest report shows another grant of $2.1 million. Three other groups appear on the termination report for the first time, receiving a total of a little less than $5 million: SLAH LLC, TDNA LLC and TOHE LLC. It’s not clear what these groups do or whether they are related to more well-known organizations.
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So TC4 and CPPR are created in 2009, with TC4 giving millions to CPPR’s disregarded entities like Eleventh Edition and Meridian Edition. Then in 2010 we have Citizens United, opening the floodgates to unlimited corporate political donations. Eleventh Edition and Meridian Edition change their names to Corner Table and American Committment. TC4 continues giving millions to CPPR’s renamed disregarded entities. And in 2013 TC4 folds up — acting as a disposable shadow money mailbox — and CPPR belated informs the IRS that it has these disregarded entities, finally revealing to the IRS the fact that TC4 has been giving millions to CPPR from 2009–2012. And that’s just one thread of a story about how the Koch donor obscured itself by splitting up into multiple temporary sham social welfare entities.
The American Future Fund and Its Koch-backed Peers Get Exposed and Kicked Out of the Koch Orbit.
As we just saw, one of the Koch brothers’ major ‘shadow money mailboxes’ from 2009–2012 just suddenly folded up and disappeared in 2013. It was a temporary shadow money mailbox, which makes perfect sense given the clear purpose of entities like TC4 and CPPR of making the money flows for political expenses as unclear to the public as possible while simultaneously maintaining the guise of being a ‘social welfare’ organization.
And as we’ll see in the following 2014 article, TC4 wasn’t the only entity in this Koch-backed network of 501(c)(4)s to pull a disappearing act following the 2012 elections. By the time the 2014 elections came around there was almost no Koch money flowing into The American Future Fund (AFF). Funds flowing into 60 Plus, the Koch-backed ‘alternative to the AARP’ we looked at above, also dried up. Flows into Americans for Job Security, which we saw in the previous article was involved with a scheme the state of California described as campaign money laundering sending, also dried in the 2014 mid-terms. Even Grover Norquist’s Americans for Tax Reform saw its funds suddenly dry up in 2014.
So what caused all of these entities that were seen as key dark money funding vehicles in previous elections to suddenly get shunned? They all got caught cheating. And that points to one of the key features of this system: the 501(c)(4)s are disposable so when they get caught cheating they can just fade away and get replaced by a new ambiguously named entity.
60 Plus saw its funds dry up when it was caught cheating its funders. Specifically, 60 Plus’s founder, Sean Noble (who we looked at in the above article excerpt), was found to have charged exorbitant fees for an underwhelming 2012 ad campaign and this ended up getting him, and 60 Plus, exiled from the Koch network.
In the case of the AFF, it got caught in the same money laundering scandal that caused Americans for Job Security to fall out of favor: the laundering of millions of dollars into 2012 California ballot initiatives, where Americans for Job Security gave $24 million to CPPR, which, in turn, gave $7 million to the AFF and $13 million to Americans for Responsible Leadership, both a which passed the money along to ballot initiative purposes. This violated California law and was exposed, hence, these groups suddenly became a liability and their disposable nature was revealed when the money flows dried up in 2014.
Norquist’s Americans for Tax Reform got caught in a similar money laundering scandal. Karl Rove’s Crossroads GPS gave the group $26.4 million in 2012 and over half of it was spent on election ads, while it only reported to the IRS spending a third of the money on election ads. So in addition to breaching the 501(c)(4) rule of not spending over half of its money on political activity, Americans for Tax Reform also lied to the IRS. So Grover Norquist’s signature group got caught flagrantly making a mockery of the US campaign finance system in 2012 and ended up getting shut out in 2014 as punishment.
But unlike TC4, which folded up entirely after the 2012 elections, these other groups didn’t disappear entirely. Instead, they simply offered their services to other clients. Recall what we saw above in the AFF’s history: it was basically a right-wing mercenary outfit with a variety of clients and did work for the DCI Group and clients like the Burmese Junta. It’s a political mercenary outfit. So when the Koch money dried up, AFF found new clients. They didn’t have nearly as much money to spend, but they remained active.
Americans for Job Security and Americans for Tax Reform both went back to promoting a generic anti-tax, anti-union and pro-business agenda with much smaller budgets. And 60 Plus — cut off from that sweet, sweet Koch sugar — found work attacking the primary opponents of Arizona gubernatorial candidate Doug Ducey. So unlike TC4, which folded up entirely in 2013 after four yeras of serving its shadow money mailbox function, these other entities just kind of quietly hung around as they searched for new clients [118]:
The Huffington Post
Dark Money Groups That Spent Millions In 2012 Vanish In 2014
By Paul Blumenthal
09/12/2014 07:31 am ET Updated Sep 12, 2014WASHINGTON — The Iowa-based conservative nonprofit group American Future Fund released new advertisements nearly every week from the spring of 2012 through Election Day that year, hitting President Barack Obama or Democratic Senate candidates in competitive races. By mid-September, the group had spent $9.5 million. It went on to spend north of $30 million on federal races after receiving massive funding from the network operated by the network operated by the billionaire brothers Charles and David Koch [119].
This year, with eight weeks before the 2014 midterm elections, American Future Fund advertising is nowhere to be seen on the air. The nonprofit, which does not disclose donors, has spent less than $250,000 in federal campaigns and has announced little in the way of issue advocacy targeting candidates.
The American Future Fund is not the only nonprofit disappearing act. The conservative nonprofits 60 Plus Association, Americans for Tax Reform, and Americans for Job Security also have largely evaporated from the federal election scene after spending millions in both 2010 and 2012.
The disappearances show how nonprofit political networks use groups with the capability for electoral action as fronts for their own campaigns and, when they are no longer useful or become a distraction, how easily they can be cut loose.
Nonprofit groups have been a major feature of political campaigns since the Supreme Court’s 2007 Wisconsin right to life ruling, and they proliferated after the 2010 Citizens United decision. The groups can raise unlimited sums from corporations, unions and individuals, with the added bonus of keeping donors’ identities secret — so long as they abide by barely enforced rules requiring them to spend the majority of their time and money on the purpose they claimed to obtain tax-exempt status. Collectively, nonprofits have spent more than $142 million [120] on campaigns targeting federal candidates in 2014.
Running afoul of federal and state laws and regulations, or the desires of their funders, appears to be a prime reason for this year’s lack of spending from these nonprofits.
The disappearance of American Future Fund and Americans for Job Security, responsible for more than $15 million in reported 2012 election advertising, came after they were caught laundering campaign contributions [121] into two California ballot initiative campaigns. This revelation by California’s Fair Political Practices Commission led to a record settlement requiring the groups to disgorge improperly donated funds and to release a donor list that revealed identities of some secret funders [122]. Neither group responded to inquiries.
American Future Fund was almost entirely funded by the Koch political network. The group raised $68 million in 2012, with more than $60 million from Freedom Partners Chamber of Commerce and the Center to Protect Patient Rights. This total included $7 million passed from Americans for Job Security through the Center to Protect Patient Rights. Of that amount, $4 million landed in a California ballot campaign committee.
The Center to Protect Patient Rights, run by then-Koch point man Sean Noble [123], was used by Americans for Job Security to funnel money into the California ballot campaigns. The Virginia-based group sent $24 million through the Center to Protect Patient Rights. This contribution was split into the $7 million to the American Future Fund and $13 million to Americans for Responsible Leadership, both of which then passed contributions onto California groups.
Another disappearing group, the 60 Plus Association, formed in the early 1990s as a conservative counter to the AARP, was largely funded by the Koch network. The organization received more than $18 million from Freedom Partners and the Center to Protect Patient Rights in 2012, and spent $13 million on election and issue ads attacking federal candidates.
In 2014, the 60 Plus Association has spent $525,000 on advertising that targets members of Congress and other congressional candidates. The group’s big advertising campaign opposing a mortgage reform bill sponsored by Sens. Mike Crapo (R‑Idaho) and Tim Johnson (D‑S.D.) led to a rebuke by its funders. According to The Associated Press [124], political advisers in the Koch network were “frustrated” by the advertisements. The 60 Plus Association didn’t respond to a request for comment.
Anti-tax advocate Grover Norquist’s Americans for Tax Reform, meanwhile, has gone from spending $15.8 million in the 2012 election to less than $40,000 on the 2014 midterms. Crossroads GPS, a nonprofit founded by Karl Rove, provided $26.4 million to Americans for Tax Reform in what was supposed to be non-political spending. Norquist’s group, however, spent more than half of its funds on electoral advertisements, while claiming on tax filings to the Internal Revenue Service [125] to have spent less than one-third of its funds on election ads.
The controversial spending by Americans for Tax Reform has seemingly led to the end of its role as a dark money front. The group didn’t answer an inquiry from The Huffington Post. In an email conversation with New York Times reporter Tom Edsall [126], Crossroads spokesman Paul Lindsay wrote that the group has “implemented stricter due diligence” in determining which groups to fund.
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While American Future Fund, Americans for Job Security, Americans for Tax Reform and 60 Plus Association appear to have stopped being conduits for big sources of undisclosed money in federal elections, they remain a useful resource for other sources of money.
For Americans for Job Security and Americans for Tax Reform, the plan has been to simply go back to engaging in their declared social welfare purpose: Advancing a conservative anti-tax, anti-union and pro-business agenda.
Americans for Job Security is registered as a business trade association and has a long history [127] of serving as a hired gun for corporations [128]. Americans for Tax Reform has its staple of anti-tax policies to promote, including Norquist’s Taxpayer Protection Pledge, and has also done work for industry lobbying campaigns, including tobacco companies.
The two pro-business groups have, however, found themselves on opposite ends of business lobbying battles in Washington. Americans for Job Security, a routine ally of the retail industry, supported rules limiting swipe fees [129] imposed on stores for customer debit card purchases in 2011, and backs the current proposal to allow states to impose a sales tax on online purchases. Americans for Tax Reform took opposite positions on both issues.
The 60 Plus Association appears to have maintained a place in the orbit of Noble, who was excommunicated from the Koch network following his involvement in the California investigation and his exorbitant consulting fees [130]. The seniors group ran ads in the Arizona Republican gubernatorial primary attacking opponents of the eventual nominee Doug Ducey. What remains of Noble’s nonprofit network had mobilized outside support [131] for Ducey.
In Iowa, the American Future Fund continues to operate as a front for whomever has the funds. It received $750,000 from the Judicial Crisis Network, a conservative group promoting a right-wing judiciary and supporting Republican candidates in state attorney general races, and promptly gave $670,000 to the Republican Attorneys General Association, according to IRS documents.
After pro-gun control groups ran ads blasting Sen. Kelly Ayotte (R‑N.H.) for opposing background check legislation, the American Future Fund launched an advertising blitz on her behalf. Prior to and during the ad campaign, the nonprofit received $125,000 [132] from the leadership PACs of Ayotte’s Senate Republican colleagues.
The group spent $287,000 to boost Nebraska state Sen. Beau McCoy’s campaign for the Republican gubernatorial nomination — likely at the behest of McCoy’s sole donor: Nebraska businessman Charles Herbster. When asked by the Omaha World-Herald [133] whether he funded the American Future Fund ads, Herbster said, “That’s one of the questions I’m going to take the Fifth Amendment on, OK?” McCoy ultimately lost the GOP nomination to Pete Ricketts.
American Future Fund’s most recent advertising campaign is a far cry from its history of backing conservative candidates. For the past three months, the nonprofit has run ads in newspapers including Politico and The Wall Street Journal [134] as part of a lobbying campaign by Doral Financial Corp., a Puerto Rican bank. The bank is in a spat with the commonwealth government over a refund for overpaid tax bills it says it is due, and hired the DCI Group, a PR firm with longstanding ties to the American Future Fund [135], to pressure Congress to intervene on its behalf.
And so the world of dark money nonprofits turns.
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“This year, with eight weeks before the 2014 midterm elections, American Future Fund advertising is nowhere to be seen on the air. The nonprofit, which does not disclose donors, has spent less than $250,000 in federal campaigns and has announced little in the way of issue advocacy targeting candidates.”
After spending millions of dollars in Koch funds from 2009–2012 ($60 million from the CPPR in 2012 alone) on ads and other political influence operations, American Future Fund’s spending dried up to just $250,000 as of September of 2014:
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American Future Fund was almost entirely funded by the Koch political network. The group raised $68 million in 2012, with more than $60 million from Freedom Partners Chamber of Commerce and the Center to Protect Patient Rights. This total included $7 million passed from Americans for Job Security through the Center to Protect Patient Rights. Of that amount, $4 million landed in a California ballot campaign committee.The Center to Protect Patient Rights, run by then-Koch point man Sean Noble [123], was used by Americans for Job Security to funnel money into the California ballot campaigns. The Virginia-based group sent $24 million through the Center to Protect Patient Rights. This contribution was split into the $7 million to the American Future Fund and $13 million to Americans for Responsible Leadership, both of which then passed contributions onto California groups.
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And the AFF was just one of the prominent 501(c)(4)s acting as a shadow money mailbox that saw their millions in donations suddenly dry up. Did this reflect a dip in political spending by the Kochs and other right-wing mega-donors? Of course not. It reflected the bad press the AFF and other prominent shadow money mailboxes received when they got caught breaking the 501(c)(4) rules and/or cheating the donors:
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The American Future Fund is not the only nonprofit disappearing act. The conservative nonprofits 60 Plus Association, Americans for Tax Reform, and Americans for Job Security also have largely evaporated from the federal election scene after spending millions in both 2010 and 2012.The disappearances show how nonprofit political networks use groups with the capability for electoral action as fronts for their own campaigns and, when they are no longer useful or become a distraction, how easily they can be cut loose.
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Running afoul of federal and state laws and regulations, or the desires of their funders, appears to be a prime reason for this year’s lack of spending from these nonprofits.
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American Future Fund and Americans for Job Security both got kicked out of the Koch network after getting caught money laundering donations into two California ballot iniatives. In other words, they became real-world examples of the Kochs making a mockery of the ‘non-political social welfare’ pretense that 501(c)(4)s have to maintain:
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The disappearance of American Future Fund and Americans for Job Security, responsible for more than $15 million in reported 2012 election advertising, came after they were caught laundering campaign contributions [121] into two California ballot initiative campaigns. This revelation by California’s Fair Political Practices Commission led to a record settlement requiring the groups to disgorge improperly donated funds and to release a donor list that revealed identities of some secret funders [122]. Neither group responded to inquiries.
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Grover Norquist’s Americans for Tax Reform (ATR) also got caught breaking 501(c)(4) rules in 2012 by allocating more than half of its spending on election ads. So its donations dried up too in 2014:
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Anti-tax advocate Grover Norquist’s Americans for Tax Reform, meanwhile, has gone from spending $15.8 million in the 2012 election to less than $40,000 on the 2014 midterms. Crossroads GPS, a nonprofit founded by Karl Rove, provided $26.4 million to Americans for Tax Reform in what was supposed to be non-political spending. Norquist’s group, however, spent more than half of its funds on electoral advertisements, while claiming on tax filings to the Internal Revenue Service [125] to have spent less than one-third of its funds on election ads.The controversial spending by Americans for Tax Reform has seemingly led to the end of its role as a dark money front. Tie group didn’t answer an inquiry from The Huffington Post. In an email conversation with New York Times reporter Tom Edsall [126], Crossroads spokesman Paul Lindsay wrote that the group has “implemented stricter due diligence” in determining which groups to fund.
Lindsay provided a statement to The Huffington Post: “Like labor unions, we invest in a number of organizations that have complementary missions that help us advance our issue agenda. Our grants to other 501c4’s, which are made public in our 990, are predicated on a review of their financial records and a stipulation that the funds only be used for their exempt activity and not for political purposes.”
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Then there’s the 60 Plus Association, another major recipient of CPPR money. 60 Plus got kicked out of the Koch network — which consisted of 17 groups and raise $407 million in 2012 [117] — for paying the head of 60 Plus, long-time Koch operative Sean Noble, exorbitant fees while yielding questionable results. That was apparently the last straw for Noble. But 60 Plus found some new congressional clients. And 60 Plus was still pissing off the Koch network again in 2014 when its biggest ad campaign opposed a bipartisan mortgage reform bill that would have replaced Fannie Mae and Freddie Mac (that the Koch network apparently supported too) [136]. Presumably a new client determined 60 Plus’s stance. It’s an example of how even 501(c)(4)s that get caught scamming their donors, like 60 Plus, will still be kept alive by the right-wing billionaire network. There’s that much money and that much demand for the kinds of fake 501©(04) services groups like 60 Plus offers:
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Another disappearing group, the 60 Plus Association, formed in the early 1990s as a conservative counter to the AARP, was largely funded by the Koch network. The organization received more than $18 million from Freedom Partners and the Center to Protect Patient Rights in 2012, and spent $13 million on election and issue ads attacking federal candidates.In 2014, the 60 Plus Association has spent $525,000 on advertising that targets members of Congress and other congressional candidates. The group’s big advertising campaign opposing a mortgage reform bill sponsored by Sens. Mike Crapo (R‑Idaho) and Tim Johnson (D‑S.D.) led to a rebuke by its funders. According to The Associated Press [124], political advisers in the Koch network were “frustrated” by the advertisements. The 60 Plus Association didn’t respond to a request for comment.
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The 60 Plus Association appears to have maintained a place in the orbit of Noble, who was excommunicated from the Koch network following his involvement in the California investigation and his exorbitant consulting fees [130]. The seniors group ran ads in the Arizona Republican gubernatorial primary attacking opponents of the eventual nominee Doug Ducey. What remains of Noble’s nonprofit network had mobilized outside support [131] for Ducey.
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The American Future Fund also responded to the loss of the Kochs by finding new clients like Republican candidates and the Judicial Crisis Network and lobbying for Doral Financial Corp., a Puerto Rican bank that hired DCI Group to lobby Congress to force Puerto Rico over its claims of an overpaid tax bill:
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In Iowa, the American Future Fund continues to operate as a front for whomever has the funds. It received $750,000 from the Judicial Crisis Network, a conservative group promoting a right-wing judiciary and supporting Republican candidates in state attorney general races, and promptly gave $670,000 to the Republican Attorneys General Association, according to IRS documents.After pro-gun control groups ran ads blasting Sen. Kelly Ayotte (R‑N.H.) for opposing background check legislation, the American Future Fund launched an advertising blitz on her behalf. Prior to and during the ad campaign, the nonprofit received $125,000 [132] from the leadership PACs of Ayotte’s Senate Republican colleagues.
The group spent $287,000 to boost Nebraska state Sen. Beau McCoy’s campaign for the Republican gubernatorial nomination — likely at the behest of McCoy’s sole donor: Nebraska businessman Charles Herbster. When asked by the Omaha World-Herald [133] whether he funded the American Future Fund ads, Herbster said, “That’s one of the questions I’m going to take the Fifth Amendment on, OK?” McCoy ultimately lost the GOP nomination to Pete Ricketts.
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American Future Fund’s most recent advertising campaign is a far cry from its history of backing conservative candidates. For the past three months, the nonprofit has run ads in newspapers including Politico and The Wall Street Journal [134] as part of a lobbying campaign by Doral Financial Corp., a Puerto Rican bank. The bank is in a spat with the commonwealth government over a refund for overpaid tax bills it says it is due, and hired the DCI Group, a PR firm with longstanding ties to the American Future Fund [135], to pressure Congress to intervene on its behalf.
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It’s worth noting that the Judicial crisis Network was one of the leading dark money groups promoting the confirmation of Brett Kavanaugh on the Supreme Court, pouring millions of dollars into pro-Kavanaugh ads [137] and political bribes [138].
It’s also worth noting that the Judicial Crisis Network donors overlaps with members of the Koch donor network [139]. So while the Kochs may have kick out American Future Fund out of the Koch donor network in 2014, money from those Koch network donors was still flowing to the AFF.
Also note that Doral Financial was shut down by the government in 2017 [140] and the investigation into the 2011 execution-style shooting of a Doral executive who was hired to clean up the bank remains unsolved [141]. It was that kind of bank. So of course they hired both DCI Group and AFF to lobby for them. DCI Group claimed at the time that it wasn’t coordinating with AFF, although many were skeptical [28].
For Americans for Job Security and Americans for Tax Reform, they simply returned to generic anti-tax, anti-union and pro-big business agenda:
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While American Future Fund, Americans for Job Security, Americans for Tax Reform and 60 Plus Association appear to have stopped being conduits for big sources of undisclosed money in federal elections, they remain a useful resource for other sources of money.For Americans for Job Security and Americans for Tax Reform, the plan has been to simply go back to engaging in their declared social welfare purpose: Advancing a conservative anti-tax, anti-union and pro-business agenda.
Americans for Job Security is registered as a business trade association and has a long history [127] of serving as a hired gun for corporations [128]. Americans for Tax Reform has its staple of anti-tax policies to promote, including Norquist’s Taxpayer Protection Pledge, and has also done work for industry lobbying campaigns, including tobacco companies.
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So as we can see, these ‘social welfare’ groups might lose their existing donor base after they get caught breaking the rules or cheating their clients. But that doesn’t shut them down. They just quietly find new donors and carry on. There’s plenty of non-Koch right-wing and corporate dark money floating around out there.
From the Kochs to Karl Rove’s ‘Establishment’ Network: Meet the New Boss. Basically the Same as the Old Boss.
And then there’s Karl Rove donor network. Like the Koch network (and like dark matter), we know it exists. We just don’t necessarily know what it’s up to. And as the following 2016 OpenSecrets.org article makes clear, we should definitely want to know what Karl Rove’s donor network is up to because they are likely up to no good, as evidenced by the task Rove’s group hired the AFF to carry out in 2014 after the AFF got mostly cut off from the Koch network.
Specifically, it was Karl Rove’s “Crossroads GPS” super-PAC in 2014 that hired AFF’s services. For a particular dirty trick. Crossroads GPS was heavily involved in the North Carolina senate race that year, so it gave $2 million to AFF and AFF got involved in that race. But AFF didn’t back the Republican candidate. Nope, AFF backed Sean Haugh, a Libertarian candidate who supported marijuana legalization. AFF created a series of web ads near the end of the campaign with slogans like “More weed, Less War”. AFF spent $420k on that ad campaign (which is almost like trolling the FEC). So Karl Rove hired AFF to promote a Libertarian candidate as a means of siphoning off youth voters from the Democratic candidate by emphasizing his marijuana legalization stance. It seems like there’s a lesson there. Because that’s the kind of dirty trick that could be employed in all sorts of races. In that sense, it’s a dirty trick that also shares something in common with dark matter and dark money: we know it’s there, we just don’t know where.
By 2016, AFF appeared to be acting as basically a tool of the GOP establishment heading into the GOP primary, implicitly backing Marco Rubio with a string of attack ads against all of the major GOP candidates. Rubio was widely seen as the establishment’s preferred candidate in the 2016 GOP primaries. It was so obvious that AFF favored Rubio that when it ran a negative ad about a Trump University lawsuit in March of 2016, Trump tweeted back “Phony Rubio commercial. I could have settled, but won” [142]. His campaign went on to clarify its charge, asserting that AFF illegally coordinated with Rubio’s campaign. And while Trump’s campaign didn’t provide evidence of this charge, the behavior of AFF in 2016 (only leaving Rubio alone) is evidence itself.
And as the article also points out, it was AFF who was helping with the right-wing propaganda campaign of 2016 to promote the idea that the GOP shouldn’t allow any Supreme Court nominee submitted by the Obama administration to fill the late Associate Justice Antonin Scalia’s seat. This was part of their work for the Judicial Crisis Network. So the lack of public outrage over Senate Majority Leader Mitch McConnel’s decision to not consider any Obama Supreme Court nominee in the Senate — thus hyper-politicizing all Supreme Court openings in the fourth year of a presidential term — is thanks in part to AFF.
And that range of sleazy campaigns, from corporate lobbying campaigns to Karl Rove and the Kochs, is basically what AFF is all about: a right-wing shadow mercenary entity that specializes in offering the kinds of political services clients don’t want to be publicly associates with [143]:
OpenSecrets.org
Exiled from Koch orbit, American Future Fund turns to GOP establishment for cash
By Robert Maguire
March 7, 2016Last week, real estate mogul and current GOP presidential front-runner Donald Trump tweeted to his 6.6 million Twitter followers about a “phony Rubio commercial” that was making hay out of Trump’s ongoing legal troubles with the now-defuct Trump University.
Phony Rubio commercial. I could have settled, but won’t out of principle! See student surveys. https://t.co/KKHiBH554d [144]
— Donald J. Trump (@realDonaldTrump) February 29, 2016 [142]
The tweet links to a press release demanding “the immediate retraction of the ads.”
The spots weren’t sponsored by Sen. Marco Rubio’s campaign, however, but by a group called the American Future Fund, a 501(c)(4) social welfare organization with a long history that runs from its days as a core beneficiary of the Koch donor network [145] to its newer ties with GOP establishment groups.
New tax filings [146] obtained by OpenSecrets Blog suggest that, of all the still-existing groups that have been exiled from the Koch network, American Future Fund has been the most successful at surviving — mostly, it appears, as a ©(4)-for-hire, functioning as a conduit for establishment-leaning groups like Crossroads GPS, the granddaddy of politically active nonprofit groups that don’t disclose their donors.
Make American Future Fund Great Again
The Trump campaign’s statement alleges that American Future Fund “unlawfully coordinated with lightweight Senator Marco Rubio on these misleading commercials.” The release doesn’t offer evidence to back up the charge, and the Trump campaign didn’t respond to requests from OpenSecrets Blog to elaborate. If true, the coordination of strategy between the Florida senator’s campaign operation and AFF would be a violation of federal election laws, which require groups like AFF to act independently of candidates.
Coordinated or not, AFF’s pattern of ad buys does lend some credence to the idea that the group is at least acting as ground support for the Rubio campaign. AFF has spent more than any other nondisclosing “dark money” group [147] in the election so far, $4.9 million, and often on targets other than Trump. Days before the Iowa caucuses, AFF put $1.5 million into ads attacking Gov John Kasich [148] of Ohio, another GOP White House hopeful, as a supporter of Common Core and a “cheerleader for Medicaid expansion” under the Affordable Care Act.
About two weeks later, in the run-up to the New Hampshire primaries, AFF spent another $1.5 million accusing Texas Sen. Ted Cruz [149] for being weak on national security.
And with outlays of $1.9 million on a series of ads hitting Trump, Rubio is the only one of the remaining GOP presidential contenders who hasn’t been attacked by AFF. He also happens to be the establishment’s favored candidate [150] to lead the party into the November election.
Moving Closer to the Establishment
American Future Fund was one of the first politically active nonprofits on the scene after the Supreme Court’s 2007 decision in FEC v. Wisconsin Right to Life, which freed up 501© organizations to make electioneering communications — so-called “issue ads” run shortly before an election that often look like outright political ads. In the four elections from 2008 to 2014, AFF — and groups to which it funneled money via grants — spent more than $40 million bolstering Republican candidates.
Until late 2012, the vast majority of the group’s receipts — more than $77 million — flowed from donor hubs in the Koch network.
That changed after AFF was called out, with two other Koch network groups, in a cash shuffle that California regulators labeled “campaign money laundering [151].” Higher-ups in the Koch network — even more hush-hush then than it is now — weren’t pleased with all the attention the legal proceedings in California brought to their operations, and AFF and the two other groups involved were in effect thrown out in the cold.
Of the three organizations, though, AFF appears to have been the most successful in finding new sources of funds to keep its doors open. Revenues are less than they were in the days when Koch money was plentiful — about $6.9 million in 2014 — but the group managed to bring in about twice as much in 2013 and 2014 as American Encore, previously known as the Center to Protect Patient Rights; that organization, once the hub of Planet Koch, boasted receipts of more than $247 million over four years.
American Encore has found a second life as a sort of public relations outfit supporting Arizona Governor Doug Ducey [152].
But AFF — which has no employees and just two board members who each, according to the group’s filing, spend three hours per week on AFF business — appears to have become something of a dark money mercenary, a vehicle for political ads on behalf of donors who don’t want their involvement to be public.
North Carolina’s highs…
In the final days of the 2014 midterms, a series of web ads [153] came out supporting longshot Libertarian Senate candidate Sean Haugh. The ads played on the sound of Haugh’s last name — which sounds remotely like the word “high” if you are, indeed, high. The ad showed young people holding signs saying, “Get High, Get Haugh,” with slogans like “More weed, Less War.” FEC documents show that the campaign cost $420,000 — get it? — and AFF was footing the bill.
Haugh himself wasn’t too happy, tweeting [154] “While I appreciate the support, I now have a whole new reason to despise Koch brothers & their dark money.” Haugh could be excused for associating AFF with the Kochs, given that the only available information at the time — past tax filings from AFF and other Koch groups — showed overwhelming linkage.
It turns out that none of the core Koch organizations funded AFF in 2014. But another group with a big stake in the outcome of the Senate election in North Carolina did. Crossroads GPS, a politically active nonprofit linked to the GOP establishment, gave $2 million to American Future Fund, tax documents filed last year show [155].
Crossroads GPS was heavily invested in the Carolina race to unseat incumbent Democratic Sen. Kay Hagan. The group ultimately spent $4.9 million supporting her opponent Thom Tillis, and the OpenSecrets Blog found last fall [155] that GPS had provided nearly the entire budget of another nonprofit, Carolina Rising — which effectively spent close to 100 percent of that money supporting Tillis [156].
While Haugh wasn’t right about AFF being a Koch group anymore, he was right about one thing. GPS and AFF were probably using him to draw younger, more liberal voters away from Hagan.
“It’s all kind of surreal, frankly,” Haugh told NPR. “Obviously they want to try to use me to siphon votes away from Kay Hagan and maybe swing the election to Thom Tillis.”
GPS, then, funded two groups, including AFF, that mounted campaigns benefiting Tillis. GPS’ multifarious show of force ushered Tillis into the winners circle in 2014, helping swing the Senate into GOP control.
While GPS was its largest single supporter in 2014, AFF received more than $1 million apiece from two other donors; those three contributions made up 64 percent of AFFs revenue in 2014, according to the group’s latest tax filing.
One of those other donors, providing $1.35 million, was the Judicial Crisis Network (JCN), as OpenSecrets Blog has reported — which itself is entirely funded [157] by another shadowy group called the Wellspring Committee [158]. JCN and AFF, along with an AFF subsidiary called The Progress Project, then put $1.8 million [157] into the Republican Attorneys General Association.
But, while electing conservative attorneys general around the country has been a focus of JCN’s efforts, it hasn’t been the only one. The group has spent heavily in judicial races over the last two cycles — including more than $600,000 in the lead-up to Arkansas’ court elections last week, in which JCN’s favored candidate was the victor. After the voting was done, Arkansas Gov. Asa Hutchinson ® said that, “regrettably, a winner in yesterday’s campaign was dark money [159].” The group has also launched a “seven figure television, radio and digital advertising campaign [160]” praising several Republican senators in tight re-election battles for promising to block consideration of any Supreme Court nominee submitted by the Obama administration to fill the late Associate Justice Antonin Scalia’s seat.
…and Puerto Rico’s lows
Back in 2014, AFF rounded out its year with an ad campaign that had nothing to do with attorneys general or the congressional midterms, paying for a series of ads in Politico and the Wall Street Journal accusing the Democratic governor of Puerto Rico, Alejandro Garcia Padilla, of being a part of a “Culture of Corruption.” The ads were conspicuously timed to run just before a lawsuit brought by Doral Financial Group was to go to court, OpenSecrets Blog reported last year [160]. Doral Financial Group won its suit, receiving a $230 million tax refund [161] from the struggling Puerto Rican government, which is teetering on the brink of bankruptcy [162].
When AFF reported all of this spending to the IRS, it counted $3.4 million as “political expenditures” — just shy of the 49 percent limit the agency imposes on the political activity of social welfare groups. That’s assuming that AFF’s other expenditures on things like “production/writing” or “survey research” was for actual social welfare programs rather than supporting the group’s political agenda. And a larger question is whether the group provides an excessive private benefit [156] to a candidate or party, in this case the Republican party.
Its unlikely that the IRS will ever answer that question, though, as it only audits seven out of each 1,000 [163] returns filed every year.
The picture that has emerged of American Future Fund, post Koch, is one of a group that is something of a hired gun, where AFF — in the mold of other groups like Americans for Job Security — does the dirty work of others, particularly if it helps the GOP establishment.
...
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“New tax filings [146] obtained by OpenSecrets Blog suggest that, of all the still-existing groups that have been exiled from the Koch network, American Future Fund has been the most successful at surviving — mostly, it appears, as a ©(4)-for-hire, functioning as a conduit for establishment-leaning groups like Crossroads GPS, the granddaddy of politically active nonprofit groups that don’t disclose their donors.”
When one checkbook closes, another opens. That’s how things have worked out for the American Future Fund after it got largely shut out of the Koch network’s lucrative money flows. The rest of the GOP establishment had plenty of work for the them. And in the 2016 GOP primaries that work included acting as a shadow money attack dog for the establishment-preferred Marco Rubio. Granted, the AFF and its secret clients never explicitly said they were backing Marco Rubio. But the fact that the AFF was attacking every Republican candidate in the 2016 except for Marco Rubio eventually made that obvious. So obvious that then-candidate Donald Trump pointed out the obvious when it was his turn to get attacked by the AFF:
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Last week, real estate mogul and current GOP presidential front-runner Donald Trump tweeted to his 6.6 million Twitter followers about a “phony Rubio commercial” that was making hay out of Trump’s ongoing legal troubles with the now-defuct Trump University.Phony Rubio commercial. I could have settled, but won’t out of principle! See student surveys. https://t.co/KKHiBH554d [144]
— Donald J. Trump (@realDonaldTrump) February 29, 2016 [142]
The tweet links to a press release demanding “the immediate retraction of the ads.”
The spots weren’t sponsored by Sen. Marco Rubio’s campaign, however, but by a group called the American Future Fund, a 501(c)(4) social welfare organization with a long history that runs from its days as a core beneficiary of the Koch donor network [145] to its newer ties with GOP establishment groups.
...
Trump went as far as claiming that AFF was illegally coordinating with the Rubio campaign, which would be a violation of the 501(c)(4) rules. And while the Trump campaign couldn’t provide actual evidence of this, it was pretty obvious. And that’s how this system works: even when it’s obvious that a 501(c)(4) is working to benefit a particular candidate, it can’t be easily proven:
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Make American Future Fund Great AgainThe Trump campaign’s statement alleges that American Future Fund “unlawfully coordinated with lightweight Senator Marco Rubio on these misleading commercials.” The release doesn’t offer evidence to back up the charge, and the Trump campaign didn’t respond to requests from OpenSecrets Blog to elaborate. If true, the coordination of strategy between the Florida senator’s campaign operation and AFF would be a violation of federal election laws, which require groups like AFF to act independently of candidates.
Coordinated or not, AFF’s pattern of ad buys does lend some credence to the idea that the group is at least acting as ground support for the Rubio campaign. AFF has spent more than any other nondisclosing “dark money” group [147] in the election so far, $4.9 million, and often on targets other than Trump. Days before the Iowa caucuses, AFF put $1.5 million into ads attacking Gov John Kasich [148] of Ohio, another GOP White House hopeful, as a supporter of Common Core and a “cheerleader for Medicaid expansion” under the Affordable Care Act.
About two weeks later, in the run-up to the New Hampshire primaries, AFF spent another $1.5 million accusing Texas Sen. Ted Cruz [149] for being weak on national security.
And with outlays of $1.9 million on a series of ads hitting Trump, Rubio is the only one of the remaining GOP presidential contenders who hasn’t been attacked by AFF. He also happens to be the establishment’s favored candidate [150] to lead the party into the November election.
...
So who ultimately hired AFF to go after all of Marco Rubio’s 2016 primary opponents? That’s not entirely clear, but based on the sleazy job AFF was hired to do by Karl Rove’s Crossroads GPS 501(c)(4) in 2014, it seems like Crossroads GPS should be considered the likeliest suspect: Rove hired AFF to support a Libertarian candidate in the 2014 Senate race to siphon votes away from the Democrat. What was the logic here? Well, the Libertarian candidate, Sean Haugh, happened to be a big marijuana legalization proponent, and that made Haugh the kind of candidate that Karl Rove assumed would result in a net loss for the Democrats:
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North Carolina’s highs…In the final days of the 2014 midterms, a series of web ads [153] came out supporting longshot Libertarian Senate candidate Sean Haugh. The ads played on the sound of Haugh’s last name — which sounds remotely like the word “high” if you are, indeed, high. The ad showed young people holding signs saying, “Get High, Get Haugh,” with slogans like “More weed, Less War.” FEC documents show that the campaign cost $420,000 — get it? — and AFF was footing the bill.
Haugh himself wasn’t too happy, tweeting [154] “While I appreciate the support, I now have a whole new reason to despise Koch brothers & their dark money.” Haugh could be excused for associating AFF with the Kochs, given that the only available information at the time — past tax filings from AFF and other Koch groups — showed overwhelming linkage.
It turns out that none of the core Koch organizations funded AFF in 2014. But another group with a big stake in the outcome of the Senate election in North Carolina did. Crossroads GPS, a politically active nonprofit linked to the GOP establishment, gave $2 million to American Future Fund, tax documents filed last year show [155].
Crossroads GPS was heavily invested in the Carolina race to unseat incumbent Democratic Sen. Kay Hagan. The group ultimately spent $4.9 million supporting her opponent Thom Tillis, and the OpenSecrets Blog found last fall [155] that GPS had provided nearly the entire budget of another nonprofit, Carolina Rising — which effectively spent close to 100 percent of that money supporting Tillis [156].
While Haugh wasn’t right about AFF being a Koch group anymore, he was right about one thing. GPS and AFF were probably using him to draw younger, more liberal voters away from Hagan.
“It’s all kind of surreal, frankly,” Haugh told NPR [164]. “Obviously they want to try to use me to siphon votes away from Kay Hagan and maybe swing the election to Thom Tillis.”
GPS, then, funded two groups, including AFF, that mounted campaigns benefiting Tillis. GPS’ multifarious show of force ushered Tillis into the winners circle in 2014, helping swing the Senate into GOP control.
...
Note that the final results of that race was 47.3% for the Democrats, 48.8% fro the Republican, and 3.7% for Sean Haugh [165]. So assuming Rove’s calculus was correct and Haugh was drew more votes from the Democrats than the Republican, it really does look like Haugh cost the Democrats that seat and handed the Republicans control of the Senate that year [166]. AFF’s third-party vote-draining dirty trick worked!
But as we saw in the above article, Rove’s GPS Crossroads wasn’t the only big client of AFF in 2014. There was also the Judicial Crisis Network. And in 2016, the Judicial Crisis Network hired the AFF again. This time it was an ad campaign to support Republican senators who promised to block consideration for any of President Obama’s Supreme Court nominees following the death of Antonin Scalia:
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While GPS was its largest single supporter in 2014, AFF received more than $1 million apiece from two other donors; those three contributions made up 64 percent of AFF’s revenue in 2014, according to the group’s latest tax filing.One of those other donors, providing $1.35 million, was the Judicial Crisis Network (JCN), as OpenSecrets Blog has reported — which itself is entirely funded [157] by another shadowy group called the Wellspring Committee [158]. JCN and AFF, along with an AFF subsidiary called The Progress Project, then put $1.8 million [157] into the Republican Attorneys General Association.
But, while electing conservative attorneys general around the country has been a focus of JCN’s efforts, it hasn’t been the only one. The group has spent heavily in judicial races over the last two cycles — including more than $600,000 in the lead-up to Arkansas’ court elections last week, in which JCN’s favored candidate was the victor. After the voting was done, Arkansas Gov. Asa Hutchinson ® said that, “regrettably, a winner in yesterday’s campaign was dark money [159].” The group has also launched a “seven figure television, radio and digital advertising campaign [160]” praising several Republican senators in tight re-election battles for promising to block consideration of any Supreme Court nominee submitted by the Obama administration to fill the late Associate Justice Antonin Scalia’s seat.
...
So as the above 2016 piece by OpenSecrets.org makes clear, while the American Future Fund may have seen its finances shrink significantly after getting mostly cut off from the Koch network following the bad press it got in 2012 for violating the 501(c)(4) rules, there was still plenty of right-wing shadow money looking in search of the kinds of services the AFF offers. GOP ‘establishment’ money in search of services like Karl Rove’s dirty tricks. Or services like the corporate lobbying for companies like Dorral Financial Group or one of DCGI Group’s clients.
So how much in total did American Future Fund raise in 2016 with its establishment backers compared to 2012 when it was suckling the Koch teet? As the following OpenSecrets.org article from 2018 informs us, AFF managed to raise more than $29.4 million in 2016. That’s a little less than half of the $68 million in raised from the Koch network in 2012, which is still a substantial sum, especially when you consider that AFF got kicked out the Koch network for getting caught breaking the 501(c)(4) rules. Bouncing back in four years with $29 million after that is actually quite an accomplishment. An accomplishment that happens to signify the flood of dark money sloshing around in America’s political system
Another notable expenditure by AFF in 2016 was a $3 million donation to the National Rifle Association. Keep in mind that one of AFF’s clients presumably gave the money to AFF for the explicit purpose of having the AFF turn around and hand that money to groups like the NRA. It’s an example the AFF acting as a ‘shadow money mailbox’ in order to obscure the origins of these donations.
Amusingly, the following OpenSecrets.org piece also clarifies the relationship of the AFF with Marco Rubio. As we saw in the previous article, AFF appeared to be working on behalf of Rubio during the 2016 GOP presidential primary, but this was never proven. Well, by 2018 there was enough information publicly available for OpenSecrets.org to conclude that Rubio did indeed hire the AFF, but he actually hired them to help him win his senate race, after the presidential primary was over and after Rubio dropped out of the presidential race. So it’s still ambiguous who was paying AFF to attack all of Rubio’s primary opponent, but it’s clear that Rubio did hire the AFF for services later in 2016 to attack his Democratic senate opponent. Which, again, is an example of how much demand there is for an entity offering the kinds of political services AFF can provide [167]:
OpenSecrets.org
Secret donors come back to boost former-Koch group
By Robert Maguire
January 25, 2018A secretive political group that is little more than a mailbox [168] full of money in a Des Moines UPS Store raised more than $29.4 million in 2016, most of which was funneled into ads aimed at electing Republicans.
Tax documents [169] obtained by the Center for Responsive Politics show that American Future Fund (AFF), a 501(c)(4) social welfare organization that doesn’t have to disclose its donors, had a banner year in 2016.
The $29.4 million haul marks the group’s highest revenues since it was cut from the constellation of political organizations linked to billionaire industrialists Charles and David Koch [143] amidst a campaign money laundering [170] scandal in 2012. In 2015, the dark money group raised just a little over $350,000.
Bringing in such a considerable sum is no small feat for an organization that boasts no employees nor any measurable social welfare beyond its robust political spending. But in the world of secretive political groups, it’s not an anomaly.
A combination of unclear rules and lax oversight from both the IRS and the FEC has made it easy for nominally apolitical groups like AFF to become vehicles for secret political money, allowing wealthy corporate and individual donors to spend in elections without any public fingerprints.
Nearly 90 percent of American Future Fund’s revenue in 2016 came from donors giving between $1 million and $8 million. But because groups like AFF are not technically political organizations, and therefore not subject to the same disclosure requirements as political action committees (PACs), the entities fueling AFF with seven-figure checks will remain far from the public eye.
Stealth Rubio Group
...
Tax documents for a group called Conservative Solutions Project obtained by the Center for Responsive Politics show the group — which was set up by Rubio allies to boost his campaign [171] with money raised from anonymous donors — gave $1 million to AFF [172].
The CSP grant came after Rubio had dropped out of the presidential race. In the final weeks of the election, however, when Rubio was fighting to keep his Senate seat, AFF spent $2.8 million against his opponent, Patrick Murphy (D‑Fla), and Rubio clenched the victory.
AFF’s largest outlays — beyond its direct political spending — came in the form of more than $4.7 million in grants, the largest of which went to other dark money groups active in the 2016 elections.
Groups like AFF often disperse grants as a way to get around IRS limits on political spending [173] because they can count the grants to other 501© organizations as “social welfare” spending, even when the recipient groups are also spending the money on politics.
AFF gave $3 million to the National Rifle Association [174], boosting the gun rights group’s historic spending [175] in support of Donald Trump’s successful campaign.
It gave another $750,000 to Ending Spending and $708,500 to The Progress Project [176], it’s sister organization. Both groups were active in helping Republicans keep their majorities in the House and Senate in 2016.
...
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“Secret donors come back to boost former-Koch group” by Robert Maguire; OpenSecrets.org; 01/25/2018 [167]
“Tax documents [169] obtained by the Center for Responsive Politics show that American Future Fund (AFF), a 501(c)(4) social welfare organization that doesn’t have to disclose its donors, had a banner year in 2016.”
2016 was a banner year for American Future Fund. That’s the picture that emerged from its tax documents. Sure, that’s less than half of the $68 million AFF received in 2012 from the Koch network, but it’s still a remarkable rebound just four years later:
...
The $29.4 million haul marks the group’s highest revenues since it was cut from the constellation of political organizations linked to billionaire industrialists Charles and David Koch [143] amidst a campaign money laundering [170] scandal in 2012. In 2015, the dark money group raised just a little over $350,000.
...
And as OpenSecrets.org points out, while that $29.4 million might appear extra impressive for an entity like AFF which has almost no employees or any real ‘social welfare’ activity, it’s not at all anomalous. This is how the right-wing billionaire 501(c)(4) game is played and the only real service AFF provides is its ability to obscure donors as money is passed through it. You don’t need a lot of employees to do that:
...
Bringing in such a considerable sum is no small feat for an organization that boasts no employees nor any measurable social welfare beyond its robust political spending. But in the world of secretive political groups, it’s not an anomaly.A combination of unclear rules and lax oversight from both the IRS and the FEC has made it easy for nominally apolitical groups like AFF to become vehicles for secret political money, allowing wealthy corporate and individual donors to spend in elections without any public fingerprints.
Nearly 90 percent of American Future Fund’s revenue in 2016 came from donors giving between $1 million and $8 million. But because groups like AFF are not technically political organizations, and therefore not subject to the same disclosure requirements as political action committees (PACs), the entities fueling AFF with seven-figure checks will remain far from the public eye.
...
Keep in mind that with $29.4 million in revenues, AFF presumably spent half of that on direct political ads since that’s what the 501(c)(4) rules allow. The other half, ($14.7 million) was then presumably spent on ‘social welfare’. ‘Social welfare’ that can include simply giving the money to other groups like the NRA:
...
AFF’s largest outlays — beyond its direct political spending — came in the form of more than $4.7 million in grants, the largest of which went to other dark money groups active in the 2016 elections.Groups like AFF often disperse grants as a way to get around IRS limits on political spending [173] because they can count the grants to other 501© organizations as “social welfare” spending, even when the recipient groups are also spending the money on politics.
AFF gave $3 million to the National Rifle Association [174], boosting the gun rights group’s historic spending [175] in support of Donald Trump’s successful campaign.
It gave another $750,000 to Ending Spending and $708,500 to The Progress Project [176], it’s sister organization. Both groups were active in helping Republicans keep their majorities in the House and Senate in 2016.
...
Also discovered in the tax filings was that a group of anonymous Marco Rubio supporters did indeed give AFF $1 million in 2016, but it was during the general election after the GOP primaries when AFF was attacking all of Rubio’s primary opponents. So it seems very possible that it was the same group of Rubio backers that paid for that AFF’s services during the primaries and the general election, but we don’t get to know. That’s the point of the law:
...
Stealth Rubio Group...
Tax documents for a group called Conservative Solutions Project obtained by the Center for Responsive Politics show the group — which was set up by Rubio allies to boost his campaign [171] with money raised from anonymous donors — gave $1 million to AFF [172].
The CSP grant came after Rubio had dropped out of the presidential race. In the final weeks of the election, however, when Rubio was fighting to keep his Senate seat, AFF spent $2.8 million against his opponent, Patrick Murphy (D‑Fla), and Rubio clenched the victory.
...
So as we can see, AFF started off 2016 as a secret weapon of the GOP ‘Establishment’ (at least the non-Koch wing of the GOP establishment) in the primaries in favor or Marco Rubio. It eventually turned into a not-so-secret weapon when it became clear that AFF was attacking everyone but Rubio. Then Rubio drops out of the presidential primary, goes on to his Senate race (breaking his earlier pledge not to run for the Senate even if he lost the presidential primary [177]), and a bunch of his wealthy backers funnel millions of pro-Rubio ad spending through the AFF.
AFF in 2018: The Establishment’s Secret Weapon...For Meddling in GOP Primaries. And Mailers. And Door Knocking. It’s a Full Service ‘Social Welfare’ Entity
Flash forward to 2018 and we find out that secret meddling in GOP primaries is becoming an AFF specialty apparently. We also find out that AFF is working in California races again. Recall that it was getting caught breaking 501(c)(4) rules that in California races in 2012 that prompted the Kochs to cut off AFF from the Koch network.
So it’s going to be interesting to see if AFF breaks the rules again in California. As the following articles demonstrate, AFF is probably going to have plenty of opportunities to break those rules because it provides a very convenient service. A service specifically for GOP leadership: secretly picking favorites in primaries.
In 2016, AFF was the vehicle the GOP ‘Establishment’ (i.e. Karl Rove’s donor network) used to pick Marco Rubio as a favorite in the presidential primary. But in 2018, AFF was the vehicle for the actual Republican Party leadership secretly playing favorites. Specifically, House Speaker Paul Ryan’s Congressional Leadership Fund threw $1.5 million at several California “Jungle” primaries.
California adopted a “Jungle primary” system back in 2010, where all candidates from all parties run in one giant primary and the top two candidates head for a run off in the general election [178]. It was seen as a way of creating competitive races in Democrat-dominated California where a race between a Democrat and a Republican at a statewide-level is a foregone conclusion.
So California’s Jungle primary system created the real possibility that a party could get shut out of the general election. And not just shut out because its a very unpopular in a particular area. It’s also possible a party could field so many candidates that it dilutes the vote and none of them make it into the top two slots. It’s one of the unintended consequences of the Jungle primary system. The Jungle primaries do indeed make for more meaningful contests in the general election, but at the cost of the risk that the popular party loses on a technicality.
It’s worth keeping in mind that losing on a technicality has become a sadly common feature in American politics at the presidential level thanks to the electoral college. Both George W. Bush and Donald Trump won on electoral college technicalities. Technical losses happen. To Democrats. But in the case of the Jungle primary, where the party that fields the most candidates runs the risk of shutting itself out of the general election, that’s a technicality that both Democrats and Republicans. And for Republicans, making sure that didn’t happen to them and trying to do it to Democrats became the tasks House Speaker Paul Ryan hired American Future Fund to do. Secretly.
Specifically, the Congressional Leadership Fund superPAC, which is closely tied to Paul Ryan, pumped in $1.5 million into multiple California primaries in April. Six GOPers were assisted in all, some of them running in the same primary (in order to try and lock out the Democrats). And AFF didn’t just buy ads. AFF also sent out mailers and door-knockers across three districts. They claimed over 400,000 doors were knocked on.. That’s an aggressive full spectrum ad campaign, all provided by AFF.
But Paul Ryan and the House leadership did this quietly, as we can see in the following TPM piece from May 23, 2018, discussing the sudden set of ad buys by AFF a week earlier into three California primaries. It’s clear in the article that that no one knows the House GOP leadership hired AFF to get involved in these races a month earlier because there are lots of quotes from Republicans about their frustration with the national Republican party not getting involved in the new Jungle primaries to try and avoid a lock out disaster. The National Republican Campaign Committee (NRCC) takes the official position of not choosing candidates in primaries and this was clearly frustrating a number of party members.
As we’ll see in the next article, when AFF ran its ads they never mentioned the Congressional Leadership Fund was paying for them. This was at the request of the House Republican leadership, who didn’t want AFF to mention that the Congressional Leadership Fund was behind its activity because they didn’t want to anger the GOP primary candidates and conservative activists who didn’t get the AFF’s backing.
So AFF provided a way for the national Republicans get involved in California’s Jungle primaries secretly. While AFF couldn’t hide the fact that it was paying for these campaigns across California, the 501(c)(4) was still able to hide who was paying for it. And that’s what AFF did by not indicating at all who paid for their work. Who knows, when Republicans saw the reports of AFF getting involved in these primaries they probably assumed it was Karl Rove’s donor network behind it. It’s a reminder of how the more clients a group like AFF gets, the better it is at obscuring who is paying for a particular activity [179]:
Talking Points Memo
DCGOP Group Launches Bid To Shut Dems Out Of Key California House Races
By Cameron Joseph
May 23, 2018 5:06 pmA Republican super PAC is launching a last-minute effort to boost a handful of House GOP candidates in southern California. The goal is to block Democrats from getting a candidate into the general election in some key House races.
The American Future Fund, an Iowa-based GOP group, has dropped almost $700,000 to boost four GOP candidates in three districts, according to documents filed with the Federal Election Commission on Wednesday.
Their goals are to elevate some flagging Republicans and try to help them make the November ballot in districts that are key to Democrats’ hopes of winning the House this fall.
California’s “jungle” primary system allows the top two vote-getters to advance to the general election, regardless of party. That’s led to concerns among Democrats that their candidates could split the Democratic vote, allowing Republicans to finish in the top two spots in some congressional races and immediately costing them chances at a handful of winnable seats in the state.
National Democrats have been spending heavily to try to avoid that scenario [180].
Republicans had been surprisingly quiet in their response, considering how with some effort now they could guarantee victory in a few key House battles — as well as save themselves a lot of money in November in the expensive districts. But this buy suggests things may be starting to shift.
The GOP super-PAC’s buy includes almost $500,000 on advertising, direct mail and door-to-door voter outreach to boost Rocky Chavez and Diane Harkey, a pair of Republican candidates running for the seat currently held by Rep. Darrell Issa (R‑CA), who is retiring. That race is one in which both parties worry they might get shut out and fail to get a candidate through to the November election, though Democrats are more alarmed at the prospect.
The group is also spending $100,000 to boost Scott Baugh, a Republican running against controversial Rep. Dana Rohrabacher (R‑CA). That district is the one where Democratic concerns about being shut out, given their own crowded field, are most acute.
The GOP group is also chipping in about $100,000 to boost Young Kim, the GOP front-runner in the crowded race to replace retiring Rep. Ed Royce (R‑CA).
The efforts for Kim and Harkey began last week, but this is the first evidence that the group’s push is to block Democrats out in some of these districts, rather than help out particular GOP candidates. The group didn’t respond to requests for an explanation of their strategy.
Republicans had expressed growing frustration that their party wasn’t doing more to meddle in these primaries to ensure the best results. Democrats already have spent millions on the races.
Issa told TPM on Tuesday, before these ads had become public, that House Minority Leader Nancy Pelosi’s Democrats were doing a better job organizing in the state, even in traditionally conservative enclaves like his district.
“Pelosi naturally gets us better. That’s not to say anything against Steve,” Issa said, referring to National Republican Congressional Committee Chairman Steve Stivers (R‑OH). “It’s just that the observation in my district is the Democrats are playing a game that could well get one of their candidates in that otherwise wouldn’t if both sides were playing.”
Other Republicans have also griped about the lack of national intervention to help them.
“You wish the party would recognize this opportunity and lift us up,” GOP strategist John Thomas, who’s working with candidate Shawn Nelson in Royce’s district, told TPM. “They just don’t understand the top-two dynamic.”
Democrats have been spending heavily against Nelson and Bob Huff to avoid them getting into the runoff with Kim, the GOP front-runner, and Republicans still have done little in response to help them.
...
———-
“The American Future Fund, an Iowa-based GOP group, has dropped almost $700,000 to boost four GOP candidates in three districts, according to documents filed with the Federal Election Commission on Wednesday.”
So in mid-May of this year, AFF revealed to the FEC that it spent $700,000 on three California primary races. Races where the national Democratic party was already spending heavily but the national Republican party had been surprisingly uninvolved in given the risk of getting shut out entirely. Or at least that’s how it seemed:
...
National Democrats have been spending heavily to try to avoid that scenario [180].Republicans had been surprisingly quiet in their response, considering how with some effort now they could guarantee victory in a few key House battles — as well as save themselves a lot of money in November in the expensive districts. But this buy suggests things may be starting to shift.
...
Republicans had expressed growing frustration that their party wasn’t doing more to meddle in these primaries to ensure the best results. Democrats already have spent millions on the races.
Issa told TPM on Tuesday, before these ads had become public, that House Minority Leader Nancy Pelosi’s Democrats were doing a better job organizing in the state, even in traditionally conservative enclaves like his district.
“Pelosi naturally gets us better. That’s not to say anything against Steve,” Issa said, referring to National Republican Congressional Committee Chairman Steve Stivers (R‑OH). “It’s just that the observation in my district is the Democrats are playing a game that could well get one of their candidates in that otherwise wouldn’t if both sides were playing.”
Other Republicans have also griped about the lack of national intervention to help them.
“You wish the party would recognize this opportunity and lift us up,” GOP strategist John Thomas, who’s working with candidate Shawn Nelson in Royce’s district, told TPM. “They just don’t understand the top-two dynamic.”
...
So California Republicans were both worried and angry about a lack of national Republican party intervention in these Jungle primaries where the risk of getting shut out was very real. But as the follow article from June of this year reveals, the national Republicans were indeed already involved in these races. It was Paul Ryan’s Congressional Leadership Fund that had actually hired AFF back in April to get involved in these races. But they didn’t want to show their hand out of fear of angering conservative activists [181]:
Politico
Republican super PAC secretly promoted candidates in California
By ALEX ISENSTADT and ELENA SCHNEIDER
06/05/2018 02:00 PM EDT
A House GOP leadership-backed super PAC secretly picked favorites in three high-profile California primaries to be decided Tuesday that could help to decide control of the chamber.
Republican leadership typically stays out of contested primaries where incumbents are not seeking reelection. But in April, Congressional Leadership Fund, a group closely aligned with House Speaker Paul Ryan, funneled about $1.5 million to American Future Fund, an Iowa-based outside Republican organization, according to a CLF official.
American Future Fund, which is overseen by longtime GOP strategist Nick Ryan, then aired TV commercials, sent out mailers, and dispatched door-knockers across three sprawling Orange County-based districts. Over 400,000 doors were knocked on.
The advertising onslaught was aimed at boosting six Republicans competing in Tuesday’s “jungle primary,“ in which the top two vote-getters advance to the general election regardless of party affiliation.
None of the commercials identified Congressional Leadership Fund as a sponsor. The super PAC was concerned that if their meddling was known it could have unintended consequences by inviting blowback from conservative activists.
...
The strategy was borne in April, when Congressional Leadership Fund conducted surveys in the districts left vacant by the upcoming retirements of GOP Reps. Ed Royce and Darrell Issa. The polls, the CLF official said, found that Republicans were at risk of being locked out of the November general election in both races, a potentially disastrous scenario for the party, which is struggling to hold onto their 23-seat House majority.
In California’s 39th District, seven Republicans are running, but the Congressional Leadership Fund opted to elevate only two of them: Assemblywoman Young Kim and former state Senate Minority Leader Bob Huff.
The National Republican Campaign Committee stays out of open primaries, but it has added several California Republicans to its “Young Guns” program, which provides fundraising and infrastructure support to candidates. Some Young Guns did not receive help from Congressional Leadership Fund, including Gaspar.
But the NRCC did spend six-figures on digital ads in all three districts, aiming to amp up GOP turnout without naming any specific candidate.
House Democrats are also at risk of a top-two lockout in the three districts. It has led the Democratic Congressional Campaign Committee to endorse candidates in two of the races. The DCCC has also spent millions of dollars on TV ads to drive turnout.
———-
“Republican leadership typically stays out of contested primaries where incumbents are not seeking reelection. But in April, Congressional Leadership Fund, a group closely aligned with House Speaker Paul Ryan, funneled about $1.5 million to American Future Fund, an Iowa-based outside Republican organization, according to a CLF official.”
So back in April, the Republican leadership, which doesn’t normally get involved in contested primaries, did exactly that when it quietly dumped $1.5 million into AFF hat went to TV commercials, mailers, and even door-knockers.
...
A House GOP leadership-backed super PAC secretly picked favorites in three high-profile California primaries to be decided Tuesday that could help to decide control of the chamber....
American Future Fund, which is overseen by longtime GOP strategist Nick Ryan, then aired TV commercials, sent out mailers, and dispatched door-knockers across three sprawling Orange County-based districts. Over 400,000 doors were knocked on.
The advertising onslaught was aimed at boosting six Republicans competing in Tuesday’s “jungle primary,“ in which the top two vote-getters advance to the general election regardless of party affiliation.
...
The strategy was borne in April, when Congressional Leadership Fund conducted surveys in the districts left vacant by the upcoming retirements of GOP Reps. Ed Royce and Darrell Issa. The polls, the CLF official said, found that Republicans were at risk of being locked out of the November general election in both races, a potentially disastrous scenario for the party, which is struggling to hold onto their 23-seat House majority.
...
But AFF specifically did not identify Ryan’s Congressional Leadership Fund as the sponsor for these ads because it Republican leadership was concerned it could court blowback from the conservative base:
...
None of the commercials identified Congressional Leadership Fund as a sponsor. The super PAC was concerned that if their meddling was known it could have unintended consequences by inviting blowback from conservative activists.
...
And that’s just what AFF was up to earlier this year during the mid-term primaries for one client. A prominent client, but no doubt just one AFF’s many clients. It’s also undoubtedly the case that AFF has been engaged in all sorts of mercenary ‘social welfare’ activities during the mid-term general election too. We’ll presumably find out about that activity at some point, although we still won’t know who paid for it.
A Light at the End of the Dark Money Tunnel? Yes, But It’s a Dim Light That’s Easy to Turn Off
Or will we? That tantalizing possibility — that the donor secrecy rules and loopholes that make 501(c)(4)s so popular as ‘dark money’ tool of choice for secretly financing potentially unlimited amounts of political activities would finally be closed — suddenly became a reality less than two months ago thanks to a quiet Supreme Court decision that quietly took place in September.
The ruling has to do with 501(c)(4) spending on attack ads, as opposed to “issue ads” that don’t advocated for or against a candidate. Recall how 501(c)(4)s have to disclose the amounts spent on attack ads, but not the donor identities. Thanks to the new ruling, those attack ad donor identities might have to be revealed for all donors who give more than $200 for that attack ad spending.
Part of the lack of fanfare is due to the fact that the Supreme Court didn’t hear arguments and issue a new ruling. They merely reversed a stay on a lower court ruling. A stay on a lower court ruling that was initially provided by Chief Justice John Roberts. Crossroads GPS filed an emergency motion for a stay directly to Roberts following the decisions by a district court and appeals court not to grant Crossroads GPS’s stay request after a federal court ruled against them in a lawsuit.
The lower court ruling against Crossroads GPS addressed a loophole that was rooted in the FEC using a 1980 FEC ruling to avoid legal disclosure requirements that were made into law after the 1980 FEC ruling. The 1980 FEC ruling introduced a loophole in the disclosure of donor for “independent expenditures” — communications that explicitly call on voters to support or oppose certain candidates (i.e. attack ads) [182]. That 1980 FEC regulation ruled that 501©s could avoid disclosing their donors for political attack ads that if the donors’ contributions were not earmarked for specific advertisements.
So Roberts tried to keep the 1980 FEC loophole in place and the rest of the Supreme Court all ruled to reverse Roberts’s decision. It was a remarkable move. The Supreme Court may have just provided a significant correction to the current system of unlimited political spending by secret donors under the guise of ‘social welfare’. As we saw above, a number of different laws, court rulings, and regulatory actions over the past 50+ years all went into creating the US campaign finance system today. There isn’t a single campaign finance law, ruling, or regulation that could be reversed to ‘fix’ the problem. Numerous significant fixes are required, which can happen one fix at a time or all at once. So reversing that 1980 FEC ruling is just one of the many rules that needs fixing. But it’s a significant one.
The lawsuit against Crossroads GPS emerged from a complaint filed by Citizens for Responsibility and Ethics in Washington (CREW) with the FEC following the 2012 elections. CREW argued in the complaint that the laws required Crossroads GPS to disclose donors associated with its political attack ads. And while CREW was correct that the campaign finance laws required were written in a way that should have required Crossroads GPS to disclose its political ad donors, the FEC was choosing not to require this based on that 1980 FEC ruling. The FEC responded to the CREW complaint in 2015 with a 3–3 ruling that resulted in an FEC decision to not follow through with CREW’s complaint and not force Crossroads GPS to disclose its political ad donors. So CREW sued in 2016, and in August of 2018, a lower court ruled that CREW was correct and it was clearly spelled out in the law that the FEC had to required the disclosure of the donors for “independent expenditures” (political attack ads). Crossroads GPS sued for a temporary stay and the district and appeals courts denied the stay. Crossroads GPS followed with the direct emergency stay appeal to Roberts, who complied. And a few days later the rest of the court overturned him [183]. The final Supreme Court resolution to that entire case with potentially significant ramifications to US campaign finance laws all quietly just happened.
But another reason there hasn’t been much fanfare about this ruling is that that new rules still contains a significant loophole. And it’s exactly the kind of loophole that the ‘shadow money mailboxes’ like AFF or all the other entities we’ve looked at (TC4, CPPR, 60 Plus, etc) is designed to exploit. The new loophole is that it is still possible to avoid disclosing donors under the new ruling simply by having donor give their money to a middle-man organization first and having that organization make the donation to the 501(c)(4) that ultimately runs the political ads. For example, the Kochs might give $10 million to TC4 for generic advocacy purposes. TC4 then gives the money to AFF for more specific political advocacy purposes. Recall that this is basically the scheme that AFF was caught being involved in 2012 with California’s ballot initiatives that got AFF kicked out of the Koch network.
So when AFF is forced to disclose their donors for that advocacy under this new ruling, they only have to reveal that it was TC4 who made the donations but TC4 won’t have to reveal that it was the Kochs who ultimately made the donation. And as we’ve seen, that’s how things are already done because that’s how they maximize the amounts that can be spent on political ads. Remember the “money laundering” scenario that allowed the 50 percent cap on political spending rise with each successive middle-man entity? That behavior is perfectly situation to make this new Supreme Court ruling moot. So the potentially history Supreme Court ruling that could shake up the status quo is made moot by the status quo, which doesn’t mean this was an insignificant reform, but in order to see the benefits of this reform more fixes of this nature are needed [184]:
The Atlantic
Supreme Court Lets Stand a Decision Requiring ‘Dark Money’ Disclosure
Advocates for greater campaign-finance disclosure said the high court’s move would enable voters to find out who’s paying for the campaign ads they’re seeing on television.
Dave Levinthal and Sarah Kleiner
Sep 18, 2018Secret money in politics will soon be a lot less secret. The Supreme Court on Tuesday let stand a lower-court ruling [185] forcing politically active nonprofit groups to disclose the identity of any donor giving more than $200 when those groups advertise for or against political candidates.
Until now, such nonprofit organizations—generally those of the 501(c)(4) “social welfare” and 501(c)(6) “business league” varieties—could keep their donors secret [186] under most circumstances.
It wasn’t immediately clear whether nonprofit groups that advocate for and against political candidates must retroactively disclose their funders or only do so going forward, contingent on their future political spending.
Nevertheless, disclosure advocates hailed the Supreme Court’s “dark money” decision.
“This is a real victory for transparency,” said Ellen Weintraub, the vice chairwoman of the Federal Election Commission. “As a result, the American people will be better informed about who’s paying for the ads they’re seeing this election season.”
Representative John Sarbanes, a Democrat from Maryland who has called for overhauling the way money is spent in politics [187], concurred: “Now we’ll see how much comes down and how quickly in this particular case, but its broader implication can’t be denied. It’s a hugely positive step forward in terms of transparency.”
Others believe voters will wind up with less information before they cast their ballot in November. David Keating, the president of the Institute for Free Speech, which supports the deregulation of campaign finance, said the decision will almost certainly throw a wet blanket on independent expenditures from now to the November 6 midterm elections.
“We think that’s a real prospect—that a number of groups are going to choose silence rather than speech—and there are good reasons why they would do that,” Keating said. “Certainly not all but most of these groups may come to the conclusion this is too risky: ‘Our donors gave us money under the assumption they would remain confidential, and we don’t want to do things that would make them not give us money anymore.’”
Weintraub said it wouldn’t be surprising to see some groups “come up with clever ways of getting around the rules.” She expects FEC commissioners to come together soon in an effort to clarify which donors need to be disclosed. But that could be difficult, given that the FEC’s four remaining commissioners [188] are often at ideological odds with one another.
Today’s decision is six years in the making. It stems from a complaint filed by Citizens for Responsibility and Ethics in Washington (CREW), a campaign-finance-reform group, with the FEC against Crossroads GPS [189], a conservative nonprofit organization that has spent tens of millions of dollars to boost Republican political candidates. CREW alleged that Crossroads GPS was violating federal law by keeping its donors secret.
The FEC in 2015 deadlocked 3–3 on whether to investigate Crossroads GPS. In 2016, CREW then sued the FEC. Last month, U.S. District Court Chief Judge Beryl A. Howell ruled for CREW. She gave the FEC 45 days to issue a new regulation that would require donor disclosure in accordance with the law.
Crossroads GPS sought an emergency stay from the D.C. Circuit, which declined to grant it. Supreme Court Chief Justice John Roberts stayed the lower court’s decision on Saturday, but the stay was brief: The full Supreme Court vacated Roberts’s stay, allowing Howell’s ruling to stand.
The high court’s action is tempered by two considerations. The decision appears to leave a loophole: Some super PACs [190], which must disclose their donors publicly, accept money from nonprofit groups [191]. Conceivably, a super PAC could take money from a nonprofit group that doesn’t itself advocate for or against political candidates—meaning the super PAC could continue hiding the flesh-and-blood source of the cash funding its efforts, several election lawyers told the Center for Public Integrity [192]. Also, the original case that prompted today’s action, Citizens for Responsibility and Ethics in Washington v. Federal Election Commission and Crossroads GPS [193], remains under appeal, meaning today’s decision could be temporary—or not.
Thus, at least for the time being, Crossroads GPS and all other similarly politically active nonprofit groups [194], such as the Republican-leaning U.S. Chamber of Commerce [195], must begin reporting their donors to the FEC. That includes a growing number of Democrat-backing organizations that trade in secret money, such as Majority Forward [196].
...
The Supreme Court’s 2010 decision in Citizens United v. FEC [197] first allowed nonprofit organizations such as Crossroads GPS to spend unlimited amounts of money to directly advocate for or against political candidates. But while the Citizens United decision did note that “transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages,” it did not require that politically active nonprofits disclose their funders publicly [198], including to the FEC, which regulates and enforces federal campaign-finance laws.
Not all of Crossroads GPS’s money is secret. Issue One, a nonpartisan organization that advocates for stricter campaign-finance regulations, revealed this month that Crossroads GPS has been funded [199] by the Republican Jewish Coalition ($4 million), the Alliance for Quality Nursing Home Care ($500,000) and the American Health Care Association ($450,000), among others. But it’s not always clear who, in turn, funds these groups.
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“Secret money in politics will soon be a lot less secret. The Supreme Court on Tuesday let stand a lower-court ruling [185] forcing politically active nonprofit groups to disclose the identity of any donor giving more than $200 when those groups advertise for or against political candidates.”
It’s a tantalizing prospect: politically active 501(c)(4)s will have to disclose any donors who give more than $200 when those 501(c)(4)s. There could still be unlimited political spending, but at least the people financing that unlimited spending couldn’t do so in secret. That’s the kind of consequence to this new ruling that campaign finance advocates are hoping for.
And there’s even the possibility that this disclosure ruling will be enforced retroactively:
...
Until now, such nonprofit organizations—generally those of the 501(c)(4) “social welfare” and 501(c)(6) “business league” varieties—could keep their donors secret [186] under most circumstances.It wasn’t immediately clear whether nonprofit groups that advocate for and against political candidates must retroactively disclose their funders or only do so going forward, contingent on their future political spending.
...
But despite the fact that this ruling is unambiguously a step in the right direction, it remains highly ambiguous as to how big of a step it is. And a big reason for that ambiguity centers around the fact that there doesn’t appear to be anything preventing donors from remaining hidden by simply donating to a middle-man 501(c)(4) which will in-turn donate to another 501(c)(4) to do the actual political activity, so when the time comes to disclose the donors the only name disclosed is the name of the middle-man organization. Despite this ruling being a big step in the right direction, massive loopholes remain:
...
Nevertheless, disclosure advocates hailed the Supreme Court’s “dark money” decision.“This is a real victory for transparency,” said Ellen Weintraub, the vice chairwoman of the Federal Election Commission. “As a result, the American people will be better informed about who’s paying for the ads they’re seeing this election season.”
...
Weintraub said it wouldn’t be surprising to see some groups “come up with clever ways of getting around the rules.” She expects FEC commissioners to come together soon in an effort to clarify which donors need to be disclosed. But that could be difficult, given that the FEC’s four remaining commissioners [188] are often at ideological odds with one another.
...
The high court’s action is tempered by two considerations. The decision appears to leave a loophole: Some super PACs [190], which must disclose their donors publicly, accept money from nonprofit groups [191]. Conceivably, a super PAC could take money from a nonprofit group that doesn’t itself advocate for or against political candidates—meaning the super PAC could continue hiding the flesh-and-blood source of the cash funding its efforts, several election lawyers told the Center for Public Integrity [192]. Also, the original case that prompted today’s action, Citizens for Responsibility and Ethics in Washington v. Federal Election Commission and Crossroads GPS [193], remains under appeal, meaning today’s decision could be temporary—or not.
...
The effectiveness of this loophole is highlighted by the fact that when Crossroads GPS has disclosed its donors in the past for some activities, the only names disclosed in many cases are the names of other groups. Not the names of the actual donors:
...
Not all of Crossroads GPS’s money is secret. Issue One, a nonpartisan organization that advocates for stricter campaign-finance regulations, revealed this month that Crossroads GPS has been funded [199] by the Republican Jewish Coalition ($4 million), the Alliance for Quality Nursing Home Care ($500,000) and the American Health Care Association ($450,000), among others. But it’s not always clear who, in turn, funds these groups.
...
And, again, this is exactly what we saw above when AFF was part of the Koch network, receiving funds from ‘shadow money mailboxes’ like TC4. So when Crossroads GPS became one of AFF’s major clients, AFF would presumably just have to disclose the name Crossroad GPS for that political activity. Not the names of Crossroads GPS’s actual donors. And this ability to run ‘donations’ through networks of ‘social welfare’ 501(c)(4) organizations is why campaign finance experts are predicting that this Supreme Court decision probably isn’t going to shine nearly as much light on the identities of big dark money donors as many are hoping [200]:
The Washington Post
Political nonprofits seek answers after court decision targeting ‘dark money’
By Michelle Ye Hee Lee
September 21, 2018As politically active nonprofits scramble to figure out the implications of a recent court decision [201] requiring them to disclose some of their donors, experts said one thing is clear: There will be ways around the new rules.
Groups could accept money through shell corporations, said campaign finance lawyers and advocates of more regulation of money in politics. They could shift money to allied super PACs. They could adjust their ads so they come right up against the line that would trigger disclosure.
Such jockeying has become commonplace as advocates push for more transparency about political contributions, particularly the giving from undisclosed donors they call “dark money.”
“It’s always been kind of a cat-and-mouse game about disclosure,” said Richard Hasen, an election law expert at the University of California [202] at Irvine. “I don’t think people who are heralding the end of ‘dark money’ are going to be satisfied with what we end up seeing.”
Some of the biggest players in politics are nonprofits that don’t disclose their donors, including Americans for Prosperity on the right and the Sierra Club on the left. They typically influence elections by raising millions of dollars and running independent political ads urging voters to contact their lawmakers, or calling for the election or defeat of a specific candidate.
These groups have proliferated since the Supreme Court’s landmark 2010 Citizens United decision, which allowed corporations, including nonprofits, to spend unlimited money on political activity separate from candidates.
Nonprofit advocacy groups historically have not been required to publicly disclose their donors, as political committees must. But last month, in response to a long-running lawsuit from transparency advocates, a federal judge threw out a decades-old rule that allowed the groups to withhold donors’ identities, broadening the type of donors who would now be subject to disclosure.
The Supreme Court on Tuesday declined to intervene in the case and did not grant an emergency request to stay the ruling by Chief U.S. District Judge Beryl A. Howell. The ruling is under appeal, but Howell’s decision went into effect immediately.
...
Despite the expected efforts to protect donors’ identities, the decision will no doubt shed more light on the contributors to politically active nonprofits, although exactly how much is uncertain as groups and federal officials take stock of the decision.
“The bottom line is, we do not know yet how much disclosure we’re going to get,” said Fred Wertheimer, president of Democracy 21, a group that advocates for reducing the role of big money in politics. “What we know here is that this is a breakthrough decision, because the court clearly recognized that Congress wanted the donors disclosed who were funding election activities. But we are going to have a ways to go.”
In the absence of new regulation, nonprofit groups are left in a gray area, which could lead to new methods of avoiding disclosure and maintaining donor privacy, lawyers and advocates said.
One way groups could avoid disclosure is by having their donors give money through limited liability companies, or LLCs. It is almost impossible to figure out who finances LLCs or who set them up.
Another technique could be to accept donations and then give them to a connected super PAC. Such a transfer may not be considered a direct political expenditure, allowing the nonprofit to avoid disclosing its financiers.
It is unclear what will ultimately be permitted. The Federal Election Commission must now write a new rule, which will take at least several months. With a bare-minimum quorum, the FEC frequently deadlocks, which may lead to further delays in crafting the rule.
Still, some groups have begun shifting more activity to allied super PACs in anticipation of the ruling. Others are suggesting that donors give instead to an affiliated super PAC so that there is less confusion about the rules, even though it means their names will be publicly disclosed.
Donors are starting to ask how closely the public will follow their contributions and how often super PACs will be reporting their names, according to one GOP strategist who raises money for nonprofits and super PACs, and requested anonymity to speak about private donor conversations.
Some nonprofits expect that they will still be able to raise money for certain nonpolitical purposes — such as education programs — without disclosing donor identities, while separately carrying out political advertising campaigns.
But Wertheimer said such a strategy could push the envelope on what a “political purpose” is.
Similarly, some groups may begin using donors’ money for ads that do not specifically call for the election or defeat of a candidate — which triggers disclosure — but come as close to it as possible by attacking a candidate’s stance on a particular issue, or by urging voters to call lawmakers to tell them they support or oppose their position on an issue.
...
———-
“As politically active nonprofits scramble to figure out the implications of a recent court decision [201] requiring them to disclose some of their donors, experts said one thing is clear: There will be ways around the new rules.”
We don’t know what the new disclosure rules are ultimately going to be as a result of this Supreme Court ruling. But we can be confident that there’s going to be ways around the new rules. That’s the state of America’s campaign finance nightmare. Even when there’s a big win it’s still largely a symbolic win until more big wins are accrued.
As we saw above, there’s the obvious technique of donating to a middle-man 501©(4) which will, in turn, make the actual donation to another 501(c)(4) for the purpose of political activities. But another approach involves using shell corporations as the middle-man. Specifically, limited liability corporations that have the benefit of limiting knowledge of who is behind them:
...
“The bottom line is, we do not know yet how much disclosure we’re going to get,” said Fred Wertheimer, president of Democracy 21, a group that advocates for reducing the role of big money in politics. “What we know here is that this is a breakthrough decision, because the court clearly recognized that Congress wanted the donors disclosed who were funding election activities. But we are going to have a ways to go.”In the absence of new regulation, nonprofit groups are left in a gray area, which could lead to new methods of avoiding disclosure and maintaining donor privacy, lawyers and advocates said.
One way groups could avoid disclosure is by having their donors give money through limited liability companies, or LLCs. It is almost impossible to figure out who finances LLCs or who set them up.
Another technique could be to accept donations and then give them to a connected super PAC. Such a transfer may not be considered a direct political expenditure, allowing the nonprofit to avoid disclosing its financiers.
...
The other obvious technique for getting around the new rules is for the 501(c)(4) to avoid having its political activity explicitly advocate for or against a particular candidate. A tactic of reframing political ads targeting particular candidates in the form of ads supporting or opposing a policy that can be effectively associated with those candidates. That’s a gimmick that could easily be employed to get around disclosure rules as long as the rule that disclosure only needs to be done in the case of ads that explicitly advocate for or against a candidate remain in place:
...
Some nonprofits expect that they will still be able to raise money for certain nonpolitical purposes — such as education programs — without disclosing donor identities, while separately carrying out political advertising campaigns.But Wertheimer said such a strategy could push the envelope on what a “political purpose” is.
Similarly, some groups may begin using donors’ money for ads that do not specifically call for the election or defeat of a candidate — which triggers disclosure — but come as close to it as possible by attacking a candidate’s stance on a particular issue, or by urging voters to call lawmakers to tell them they support or oppose their position on an issue.
...
So going forward in America, when you see an ads saying “call your representative and tell them you’re upset about [insert issue here]”, that’s probably going to be an ad from a 501(c)(4) trying to skirt these new disclosure rules.
But at this point we still don’t know what those new rules will be. And as the 3–3 FEC deadlock in 2015 over this CREW vs Crossroads complaint reminds us, it’s entirely possible we’re going to see more deadlocks on the creation of new disclosure rules:
...
It is unclear what will ultimately be permitted. The Federal Election Commission must now write a new rule, which will take at least several months. With a bare-minimum quorum, the FEC frequently deadlocks, which may lead to further delays in crafting the rule.
...
So we don’t know what the new FEC rules are going to be and we don’t know when the FEC will issue them. But it’s going to happen at some point. And 501(c)(4)s are going to find a way around it.
And as the history of AFF reveals, there’s going to be minimum changes needed to the existing procedures to get around new rules for entities like the Koch network or Karl Rove’s network. Because they’re already operating with webs of 501(c)(4)s all donating to each other in a manner clearly intended to obscure their activities. These networks are already set up to allow each organization in the network to act as a middle-man between other entities in the network. And they’re already creating temporary ‘disregarded entities’ of sub-units operating under different names that are temporarily formed, used for a while, and thrown away. As we saw with TC 4 and CPPR above, incorrect IRS filings that are only belated updated can also be used to obscure the money trail. The infrastructure for evading meaningful disclosure is already a well oiled machine.
Also recall how AFF ads an extra layer of protection for its donors simply be being a mercenary ‘social welfare’ outfit with lots of different clients. Including corporate clients. If an organization is exclusively financed by the Koch network or Kark Rove’s network, simply naming that organization as the donor more or less reveals who is behind it. But if AFF is listed as the donor for a political ad we don’t really know which of AFF’s clients ultimately paid for it. Maybe it was Crossroads GPS. Maybe a politician like Marco Rubio. Or perhaps the DCI Group hired AFF on behalf of a corporate client. Or a foreign government (like the Burmese Junta). AFF has a lot of paymasters and that feature actually helps it conduct its work because a big part of AFF’s work is doing things in secret.
And if it turns out that the Koch network and Rove network prove to be resistant to new disclosure rules, it seems reasonable to assume that everyone is going to start emulating that model to the extent they can. Small donors that go over the $200 threshold will be the most likely to be disclosed. But the big donors will just set up lots of dummy middle-men organizations and LLCs and do what the GOP mega-donors are already doing. And if that happens and there’s an explosion of new networks of sham ‘social welfare’ entities like AFF to get around new disclosure requires, we can be sure that AFF will probably participate in those new networks to help muddy the paper trail waters ever more. A galaxy of sham ‘social welfare’ organizations and LLCs that all receive money and effectively launder away the identity of the original donor by passing it along through the network. That’s probably what we have to look forward to as a consequence of new disclosure requirements. Which is not to say that this campaign finance reform isn’t a net positive. It’s an important step. But just a step and the people pouring dark money into politics are going to respond to those steps with steps of their own.
The Other Recent Big Change to Campaign Finance Laws: Trump’s IRS Makes a ‘See No Tax-Frauds, Hear No Tax-Frauds, Audit No Tax-Frauds’ Rule Change
So while we should indeed applaud this recent change in US campaign finance laws, it’s important to keep in mind that the US has been increasingly eroding its campaign finance laws for decades and it’s going to probably take decades to really fix it. Sadly, a lot of steps in the right direction are going to be required.
Some of those future steps in the right direction will have to come from the courts. Some from lawmakers. And some from the regulatory agencies that enforce campaign finance laws. And as the following article from July of this year makes clear, some of those future steps in the right direction are going to have correct future steps in the wrong direction. Because, back in July, the IRS took a BIG step in the wrong direction when it ruled that 501(c)(4)s no longer need to even report to the IRS the names and addresses of major donors. Up until this decision, the IRS required all nonprofits, including 501(c)(4)s, to report the IRS the names and addresses of each major donor and the dollar amounts contributed that year. Starting next year, nonprofits will no longer have that reporting requirement to the IRS.
What was the IRS’s justification for this move? In part, they argued that enforcement of nonprofit status is the domain of the FEC and Treasury Department. Well, the IRS has the option of overriding this reporting requirement in certain cases when it determines that the information is “not necessary for the efficient administration of the internal revenue laws.” So they simply declared that this information isn’t necessarily in all cases. According to Treasury Secretary Steve Mnuchin, “The IRS simply does not need tax returns with donor names and addresses to do its job in this area.”
And what was the IRS’s justification for determining that this information is no longer necessary to do its job? That’s where things get extra sad. First, the IRS pointed out that the major donors themselves are no longer required to report on their own tax return their nonprofit donations thanks to a 2015 change to the tax code that exempted many gifts or contributions to nonprofits from taxation. This is in reference to a tax code change that was slipped into the omnibus spending bill at the end of 2015 [203]. Omnibus bills are notorious for having all sorts of highly questionable provisions because it’s of those areas where both parties have to come to an agreement or the government shuts down. And in December of 2015, a government shutdown was indeed looming [204]. So the GOP successfully leveraged the outrage over the fake ‘IRS was unfairly targeting conservative organizations applying for 501(c)(4) status’ scandal that erupted in 2013 and used that as a reason to formally make donations to 501(c)(4)s tax deductible. Yep, the fake ‘IRS targeted conservatives’ scandal of 2013 [19] was used to make all those donations to the Koch network of fake ‘social welfare’ groups tax deductible in 2015.
But the fake ‘IRS is targeting conservatives’ scandal wasn’t the only fake scandal used to justify expempting donations to 501(c)(4)s from the gift tax. Technically, when Congress made this change to the gift tax in the tax code in 2015 it really just formalized a long-time unofficial IRS practice. Until that 2015 change, the actual tax code required 35 percent gift taxes to be paid on donations to 501(c)(4)s over $13,000 annually [205]. Gifts to other types of nonprofits — like charities or gifts to 527 political action committees — aren’t subject to the gift tax. But the IRS did rule in the 1980’s that gifts to 501(c0(4) nonprofits are subject to the gift tax. However, the IRS never consistently enforced the gift tax on 501(c)(4)s and many wealthy donors simply left it off of their tax returns and didn’t pay the gift tax. So the gift tax officially applied to 501(c)(4) donations but unofficially didn’t really apply [206].
That lack of gift tax enforcement on donations to 501(c)(4)s briefly changed in 2011, the year following Citizens United, when the IRS decided to audit five big donors going back to their 2008 donations to see if they were indeed paying the gift tax.
This move by the IRS in 2011 infuriated the Republicans in Congress and the Republican chairman of the House ways and means committee sent a letter to then-IRS commissioner Doug Shulman demanding the names and titles of IRS staffers involved in the gift tax probe, and the criteria used to pick which donors to scrutinize. Much like with the ‘IRS targeted conservatives’ fake scandal, the Republicans portrayed this as a partisan attack by the IRS on conservative mega-donors and demanded that the IRS halt the audits. The IRS complied with those demands [206]. The IRS never released the names of those five mega-donors they decided to audit, but it’s worth noting that both David Koch and George Soros (a major contributor to left-wing groups) refused to comment on whether or not they paid the gift tax on their 501(c)(4) donations and whether they were among the five facing this IRS audit [207]. In other words, it doesn’t look like [208] the five mega donors selected by the IRS for this audit were all conservative mega donors which is unfortunately important point out given the right-wing strategy of demanding policy changes and new laws by portraying the IRS as partisan.
So in addition to the whipped up outrage over the ‘IRS targeting conservatives’ that whole episode from 2011 was also part of the justification for removing the gift tax for 501(c)(4)s when Republican lawmakers slipped the provision into the 2015 omnibus bill. Flash forward to 2018 and we find the IRS citing the 2015 lifting of the gift tax on donations to 501(c)(4)s as one of the primary reasons for the IRS lifting the requirement that 501(c)(4) report the names or their donors IRS. Yep, the IRS used the fact that the givers of donations no longer need to report their donations as an excuse for no longer requiring the receivers of those donations to report too.
But as bad as this move by the IRS sounds, it’s actually worse. Worse in the sense that it doesn’t appear to really matter that the IRS just removed the donor reporting requirements. That’s the assessment by a number of campaign finance experts in the following ProPublic article.
Why don’t experts think it will matter that the IRS is limiting its access to exactly the kind of information it needs to audit 501(c)(4)s and ensure they’re actually acting as ‘social welfare’ organizations? Because the IRS was almost never auditing 501(c)(4)s anyway, so access to donor information is already moot [209]:
ProPublica
Why the IRS’ Recent Dark Money Decision May Be Less Dire Than It Seems
With the tax agency already “toothless” on political cases, how much difference does it make if it’s now “deaf and blind,” too?by Ian MacDougall
July 25, 2018 1:20 p.m. EDTStarting next year, the Internal Revenue Service will no longer collect the names of major donors to thousands of nonprofit organizations, from the National Rifle Association to the American Civil Liberties Union to the AARP. Democratic members of Congress and critics of money in politics blasted the move, announced last week [210] by the Treasury Department, the IRS’ parent agency. The Democrats claim the new policy will expand the flow of so-called dark money — contributions from undisclosed donors used to fund election activities — in American politics. For their part, Republicans and conservative groups praised the decision as a much-needed step to avoid chilling the First Amendment rights of private citizens.
The Supreme Court’s decision in Citizens United unleashed these groups, typically organized as 501(c)(4) nonprofits, to spend unlimited amounts of money on campaign ads. Their role in American politics has grown increasingly central. In theory, the new IRS policy could have a significant impact on the tax agency’s ability to detect improper contributions — and thereby curb illegal campaign spending.
But in practice, even critics acknowledge that the IRS very rarely audits nonprofits. In other words, the IRS will no longer receive information that it was seemingly making little use of. And the information in question was already shielded from the public’s view.
Up to now, IRS regulations have required all types of nonprofits to report the names and addresses of each major donor, as well as the dollar amount the donor contributed that year, on their tax returns. But the IRS can override this reporting requirement in certain cases when it finds that the information is “not necessary for the efficient administration of the internal revenue laws.”
That’s what the IRS did last week [211] — relieving most nonprofits, excluding 501(c)(3) charities and foundations, of the need to report the names and addresses of major donors. “The IRS simply does not need tax returns with donor names and addresses to do its job in this area,” Treasury Secretary Steven Mnuchin said in a press release [210].
The Treasury Department pointed to 2015 changes to the tax code that exempted from taxation many gifts or contributions to nonprofits. Without the need to ensure that donors were paying taxes on their contributions, the department reasoned, there was no need for the identities of the donors.
Critics of the move, however, question the sincerity of that rationale. They note that a number of largely conservative organizations, like those affiliated with billionaire brothers Charles and David Koch [212], have lobbied [213] Congress and the Trump administration to eliminate this reporting requirement since 2017. Treasury’s “narrow argument that the gift tax has been eliminated so they don’t need this for the specific purpose of enforcing tax law — given the timing, that’s problematic,” said Brendan Fischer of the watchdog group Campaign Legal Center.
The Treasury also cited a more partisan reason for the decision: “Conservative tax-exempt groups were disproportionately impacted by improper screening in the previous Administration.” Allegations during the Obama administration that IRS officials had subjected Tea Party groups seeking tax-exempt status to improper scrutiny touched off a political firestorm that led several senior IRS officials to resign.
But a Treasury Department inspector general report ultimately found [214] that both conservative and liberal groups had been subject to such IRS scrutiny and that it had occurred during both the Bush and Obama administrations.
It remains unclear the extent to which the IRS’ decision will reduce oversight of election spending. As ProPublica and others have documented [215], nonprofits have become a common vehicle for election spending while shielding their donors from public view.
What the IRS makes public about donors to nonprofits, including those involved in political activities, however, has always been fairly limited. The public sees only the number of major contributors and how much each gave in a year. The identities of the donors are redacted. Still, journalists and groups like the Center for Responsive Politics have used the specific quantities contributed by individual donors — even without knowing who the donor is — to guide research [216] on money in politics [217].
Under the new IRS policy, the public will still have access to this information, according to the Treasury Department. “The same information about tax-exempt organizations that was previously available to the public will continue to be available,” Mnuchin said.
Critics of the new policy have also argued that the IRS decision will limit the agency’s ability to detect illegal political contributions by foreign nationals. It’s legal for foreign nationals to donate to nonprofits, though federal election law [218] bars them from spending money to influence American elections. Press [219] reports [220] suggest federal investigators are probing whether Russian nationals funneled campaign contributions through the NRA. (The NRA has denied the allegation.)
These critics note that, even though staffing and budget shortfalls [221] have led the IRS to do little policing of nonprofit contributions, that doesn’t excuse further hampering its potential to do so. “The IRS was already a toothless watchdog,” said Robert Maguire, who investigates politically active nonprofit groups at the Center for Responsive Politics. “Now it will also become a deaf and blind watchdog.”
Supporters of the new policy counter that it’s not the IRS’ job to enforce campaign finance laws and that there are limits on sharing tax information with government agencies responsible for enforcing those laws, the Federal Election Commission and the Justice Department. Where there is suspicion of an improper donation, they say, the IRS still has the ability to investigate by requesting information from the nonprofit.
...
Still, the change means it’s one step more difficult for the IRS to take action, in those rare cases when it’s inclined to do so.
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“Starting next year, the Internal Revenue Service will no longer collect the names of major donors to thousands of nonprofit organizations, from the National Rifle Association to the American Civil Liberties Union to the AARP. Democratic members of Congress and critics of money in politics blasted the move, announced last week [210] by the Treasury Department, the IRS’ parent agency. The Democrats claim the new policy will expand the flow of so-called dark money — contributions from undisclosed donors used to fund election activities — in American politics. For their part, Republicans and conservative groups praised the decision as a much-needed step to avoid chilling the First Amendment rights of private citizens.”
It’s the end of an IRS era! Sort of: Starting in 2019, the IRS will no longer even bother collecting the names of major donors to nonprofits. Sure, this information was already blocked from the public, but now it’s going to be blocked from the IRS too for all nonprofits. And that includes 501(c)(4) ‘nonprofits’ like Karl Rove’s Crossroads GPS or mercenary ‘nonprofits’ like AFF that will perform ‘social welfare’ political services to the highest right-wing bidder. The IRS officially no longer cares about knowing who is making large donations to these kinds of entities. All pretense has been dropped.
Sadly, as the various campaign finance experts pointed out, the IRS has unofficially not cared about knowing who is donating to these entities for years:
...
The Supreme Court’s decision in Citizens United unleashed these groups, typically organized as 501(c)(4) nonprofits, to spend unlimited amounts of money on campaign ads. Their role in American politics has grown increasingly central. In theory, the new IRS policy could have a significant impact on the tax agency’s ability to detect improper contributions — and thereby curb illegal campaign spending.But in practice, even critics acknowledge that the IRS very rarely audits nonprofits. In other words, the IRS will no longer receive information that it was seemingly making little use of. And the information in question was already shielded from the public’s view.
...
Still, we are assured that the IRS will still be able to get all of that donor information on the off chance that the IRS actually audits a nonprofit. Which may be be true, but that’s also assuming that the IRS never needs access to donor ids in the first place in order to determine whether or not an audit is required. Like keeping an eye out for foreign donations to politically active 501(c)(4)s. Plus, time has a way of making documents disappear:
...
Supporters of the new policy counter that it’s not the IRS’ job to enforce campaign finance laws and that there are limits on sharing tax information with government agencies responsible for enforcing those laws, the Federal Election Commission and the Justice Department. Where there is suspicion of an improper donation, they say, the IRS still has the ability to investigate by requesting information from the nonprofit....
Still, the change means it’s one step more difficult for the IRS to take action, in those rare cases when it’s inclined to do so.
...
Critics of the new policy have also argued that the IRS decision will limit the agency’s ability to detect illegal political contributions by foreign nationals. It’s legal for foreign nationals to donate to nonprofits, though federal election law [218] bars them from spending money to influence American elections. Press [219] reports [220] suggest federal investigators are probing whether Russian nationals funneled campaign contributions through the NRA. (The NRA has denied the allegation.)
These critics note that, even though staffing and budget shortfalls [221] have led the IRS to do little policing of nonprofit contributions, that doesn’t excuse further hampering its potential to do so. “The IRS was already a toothless watchdog,” said Robert Maguire, who investigates politically active nonprofit groups at the Center for Responsive Politics. “Now it will also become a deaf and blind watchdog.”
...
But this move by the IRS isn’t just cynically justified by pointing out that the IRS almost never audits nonprofits anyway, including ‘nonprofits’ like AFF or Crossroads GPS. It was also cynically justified by pointing to the 2015 change to the tax laws snuck into the omnibus bill that made donations to 501(c)(4)s no longer subject to the gift tax. Again, it’s an example of how the weakening of campaign finance laws are used to justify further weakening campaign finance laws:
...
The Treasury Department pointed to 2015 changes to the tax code that exempted from taxation many gifts or contributions to nonprofits. Without the need to ensure that donors were paying taxes on their contributions, the department reasoned, there was no need for the identities of the donors.Critics of the move, however, question the sincerity of that rationale. They note that a number of largely conservative organizations, like those affiliated with billionaire brothers Charles and David Koch [212], have lobbied [213] Congress and the Trump administration to eliminate this reporting requirement since 2017. Treasury’s “narrow argument that the gift tax has been eliminated so they don’t need this for the specific purpose of enforcing tax law — given the timing, that’s problematic,” said Brendan Fischer of the watchdog group Campaign Legal Center.
...
The Treasury Department went on to cite the faux ‘IRS targeting conservative 501(c)(4)s’ scandal of 2013, highlighting how whipped up outrage and fake scandals can continue to inflict damage years after they take place:
...
The Treasury also cited a more partisan reason for the decision: “Conservative tax-exempt groups were disproportionately impacted by improper screening in the previous Administration.” Allegations during the Obama administration that IRS officials had subjected Tea Party groups seeking tax-exempt status to improper scrutiny touched off a political firestorm that led several senior IRS officials to resign.But a Treasury Department inspector general report ultimately found [214] that both conservative and liberal groups had been subject to such IRS scrutiny and that it had occurred during both the Bush and Obama administrations.
...
And let’s not forget that eliminating donor information makes is substantially harder to determine if there’s a money laundering network of ‘dark money mailboxes’ — like TC4 and CPPR in the Koch networks — giving donations to each other ‘social welfare’ entities like AFF in order to effectively raise the amount they spend on political activities well above the 501(c)(4) 50 percent cap on political spending. Sure, the IRS clearly wasn’t looking into that anyway, but it’s going to be a lot harder to investigate such activities if the IRS does decide to look into this at some point in the future.
Let’s also note forget that the Supreme Court ruling this September that donors need to be publicly disclosed only applies when teh 501(c)(4) is engaged in overt political attack ads that explicitly advocate for or against a candidate. It doesn’t appear to apply to “issue ads”. So the controversy over whether or not the definition of an issue ad should come down to the use of the FEC’s “magic words” is going to be even more important going forward. The political makeup of the FEC board is also going to be more important.
The Future of the American Future Fund: More Useful Now Than Ever (Which is Probably a Reason the Murder of Mollie Tibbetts Became a Non-Story)
But let’s also not forget that, as we saw above, two months after the IRS declared that 501(c)(4)s no longer need to report the identities of major donors the Supreme Court rules that politically active 501(c)(4)s do need to publicly report the identities of donors who donated more than $200 dollars for attack ad campaigns. So does the Supreme Court decision forcing the disclosure of the major donors more or negate the IRS’s decision to no longer collect that information? At least when it comes to attack ads? After all, if 501(c)(4)s have to publicly disclose donor identities for political 501(c)(4)s that makes that information available to IRS agents too.
Well, as we also saw above, the expectation from campaign finance experts about the impact of that Supreme Court decision is that big money donors like the Koch network will find ways around that new disclosure requirement. And one of the likely techniques for getting around those new disclosure requirements is the utilization of networks of 501(c)(4)s and LLCs acting as middle-man organizations separating the original donors from the final political ad expenditures. Which, again, is exactly what the AFF is ideal for, especially because its mercenary nature results in numerous different clients. This period following that Supreme Court decision is arguably the time when an organization like the AFF, with its long history of different clients, is one of the most useful political dark money entities in existence.
So, returning to the interesting question of how it was that the story of the murder of Mollie Tibbetts — a story the right-wing media complex and Republican Party initially pounced on because almost perfectly situated to be used by the Republican Party during a time when hysteria of undocumented immigrants is a key political cudgel [222] — just fell off the news radar two months before the mid-term elections, it seems pretty obvious that the story of AFF and the profound lessons that story has for the American public is a big reason the Republican Party and right-wing media suddenly dropped the story of Mollie’s murder. There are other likely reasons Schlinger’s ties to the story were extremely inconvient for the Republican Party’s plans to politicize Mollie’s murder. like the fact that Trump and the GOP quietly shelved the push for mandating E‑Verify for US employers earlier this year [223]. But the story of AFF is surely a story the America’s right-wing billionaires would prefer not be told.
Sure, even if Schlinger wasn’t closely tied to AFF, the general awkwardness of having the murderer be employed and housed by a top Republican fundraiser would alone be awkward enough to prompt the Republican Party and President Trump to rapidly drop this story. But there’s no avoiding the fact that the housing and employing of undocumented immigrants for years that Nicole Schlinger and her husband Eric Lang engaged in was exactly the kind of thing that will enrage a huge portion of the American electorate, especially Trump’s voting base. So it was very possible a lot of public attention would have been paid to the history of Nicole Schlinger and AFF if the GOP and President Trump and the right-wing media complex had indeed continued making Mollie’s murder a gruesome daily talking point. And it’s hard to imagine that the Republican party’s mega-donors (the people who the party actually works for) weren’t perturbed by the risk of the story of AFF becoming a public topic with its highly instructive history as a right-wing billionaire ‘social welfare’ political organization that covers almost the full spectrum of dark money activity in American politics. The Republican Party’s mega-donors were/are American Future Fund’s primary clients, after all.
So the GOP has decided to deal with the emergence of story of AFF as possible topic of public focus by getting very quiet about it and anything associated with it. But what should the American public’s response be? Given the Citizens United ruling of 2010 there’s going to be a limit to what the public can do. Obviously, one of the first things the public should do is elect representatives (i.e. not Republicans) who will pass sensible campaign finance laws and confirm Supreme Court justices who won’t strike down those new laws. Another approach is to make it much hard for primarily political organizations to get 501(c)(4) status in the first place. The leadership of the FEC and IRS will need to play a role in that. The benefits of public financing of campaigns and spending caps is another option that should clearly be examined as a long-term post-Citizens United goal.
But there’s one thing the America public can do right now in response to dark money nightmare situation in American politics that doesn’t require any government action: recognize that almost all of that dark money is being spent on some form of advertising because propaganda works. That’s part of the solution. Simply recognizing that propaganda works. Propaganda in a variety of forms work on you and everyone else. That’s why so much money is spent on advertising. All advertising. Not just political. Because we really are suggestible creatures. And being aware of that vulnerabilty is the starting point of addressing it.
The story of AFF is a story of the business of modern propaganda. That’s the ultimate goal of all this dark money. Persuading people. Changing minds. And because AFF’s story is specifically a story of modern right-wing propaganda, it’s a story of propaganda designed to persuade people to vote against their best interesting and peddle right-wing misinformation. Don’t forget that AFF and its DCI Group allied firm weren’t just known as Republican public relations firms. They are also known as peddlers of dirty politics and misinformation. So the story of AFF is really a story of bad propaganda. There can be positive propaganda, like public awareness campaigns that encourage wearing your seat belt. One can easily see the ‘social welfare’ that would come from a pro-seat belt advertising campaign. It’s positive propaganda. AFF and its 501(c)(4) peers in the Koch and Rove network aren’t putting out that kind of positive propaganda. They’re pumping out right-wing billionaire propaganda. Which is almost always bad propaganda.
This is a story of bad right-wing billionaire propaganda. Which is tragically the overwhelming aspect of the overall story of propaganda in America today. Americans live is a sea of propaganda. Much of it commercial propaganda like ads. Some governmental or nonprofit (where you’ll potentially find real social welfare positive propaganda). But a outsized portion of the modern American sea of propaganda is bad right-wing billionaire garbage propaganda. The kind that’s designed to inflame the public with stories like outrage over the murder of an Iowan college student by an undocumented immigrant. Really, really bad propaganda.
And that’s part of how the tragic murder of Mollie Tibbetts became tragically intertwined with the world of dark money politics the modern downfall of America: the murder of Mollie was in the process of being turned into exactly the kind of bad right-wing propaganda that entities like AFF specialize in shoving at the American public in order to get them to vote for the politicians backed by the right-wing billionaires. The murder of Mollie was the process of being turned into a propaganda and the only thing that stopped it was the discover of that murderer’s long-time employer and houser was a key right-wing propaganda player.
So as the story of the investigation and prosecution of Mollie Tibbetts’s murder plays out, let’s hope the tangentially connected story of the vast right-wing billionaire funded bad propaganda network that was in the middle of propagandizing Mollie’s murder before it became tangentially connected to the murder [224] also gets told. It really is the story of the downfall of America [225]. The kind of downfall [90] that definitely can’t be blamed on illegal immigrants [226].