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How the Murder of Mollie Tibbetts Shined a Light On the GOP’s Dark Money Propaganda Machine

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, 2018

IOWA 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.

...

———-

“The Man Accused of Killing Mol­lie Tib­betts Lived on Land Owned by GOP Fundrais­er” by RYAN J. FOLEY; Asso­ci­at­ed Press; 08/24/2018 [6]

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:

...
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
Muck­rak­er

Shad­owy GOP-Linked Group Plans Bar­rage Of 2010 Robo-Calls

By Zachary Roth
Novem­ber 23, 2009 8:10 am

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.

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.

...

———–

“Shad­owy GOP-Linked Group Plans Bar­rage Of 2010 Robo-Calls” by Zachary Roth; Talk­ing Points Memo; 11/23/2009 [11]

“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:

...
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.
...

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:

...
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.
...

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:

...
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.
...

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:

...
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.
...

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 pm

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.

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.

...

———-

“GOP Group Under­min­ing Robo-Call Laws Has Ties To DCI” by Zachary Roth; Talk­ing Points Memo; 11/24/2009 [20]

“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:

...
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.
...

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 ads

By 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.”

...

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.

...

———–

“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:

...
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.

...

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.
...

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):

...
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.
...

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:

...
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.

...

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.
...

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:

...
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:

...
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 did Cit­i­zens Unit­ed change? Sad­ly, not as much as Amer­i­cans often assume, which is reflec­tion of how long the dys­func­tion­al influ­ence of mon­ey in US pol­i­tics has been the norm. The biggest change is that cor­po­ra­tions and unions can now donate direct­ly to 501(c)(4)s, which was pre­vi­ous­ly banned. So, pre-Cit­i­zens Unit­ed, the 501(c)(4) enti­ties could take unlim­it­ed amounts of mon­ey from indi­vid­u­als like the Koch broth­ers but not direct­ly for the Kochs’ cor­po­ra­tions. Post-Cit­i­zens Unit­ed, the Kochs and their cor­po­rate enti­ties could all donate as much as they want­ed. And the source of that spend­ing would all remain a secret as long as they suc­cess­ful­ly pre­tend­ed to be social wel­fare non­prof­its [41].

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 Schwartz

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.

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-Ed

Dark Mon­ey Pol­i­tics

By Thomas B. Edsall
June 12, 2013 9:39 pm

In 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.

...

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.

———-

“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:

...
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 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’:

...
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].
...

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:

...
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.
...

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:

...
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.
...

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:

...
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.
...

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):

...
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).
...

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:

...
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.
...

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:

...
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.

...

“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, 2013

There’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.

...

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.

———-

“Exclu­sive: Largest Dark Mon­ey Donor Groups Share Funds, Hide Links” by Robert Maguire and Vive­ca Novak; Open Secrets; 09/10/2013 [91]

“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:

...
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.
...

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:

...
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.
...

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:

...
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.
...

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:

...
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 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:

...
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.
...

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:

...
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.
...

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:

...
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.
...

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:

...
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.
...

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:

...
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.
...

$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:

...
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.
...

Sean Noble, the founder of CPPR, is also a known Koch oper­a­tive:

...
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.
...

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:

...
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.
...

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:

...
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.
...

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:

...
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.
...

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, 2014

WASHINGTON — 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.

...

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.

———-

“Dark Mon­ey Groups That Spent Mil­lions In 2012 Van­ish In 2014” by Paul Blu­men­thal; The Huff­in­g­ton Post; 09/12/2014 [118]

“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:

...
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.
...

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:

...
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.

...

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.
...

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:

...
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.
...

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:

...
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.”
...

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:

...
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.

...

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.
...

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:

...
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.
...

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:

...
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.
...

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, 2016

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.

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.

...

———-

“Exiled from Koch orbit, Amer­i­can Future Fund turns to GOP estab­lish­ment for cash” by Robert Maguire; OpenSecrets.org; 03/07/2016 [143]

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:

...
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.

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:

...
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.
...

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:

...
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:

...
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, 2018

A 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.

...

———-

“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
DC

GOP Group Launch­es Bid To Shut Dems Out Of Key Cal­i­for­nia House Races

By Cameron Joseph
May 23, 2018 5:06 pm

A 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.

...

———-

“GOP Group Launch­es Bid To Shut Dems Out Of Key Cal­i­for­nia House Races” by Cameron Joseph; Talk­ing Points Memo; 05/23/2018 [179]

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 super PAC secret­ly pro­mot­ed can­di­dates in Cal­i­for­nia” by ALEX ISENSTADT and ELENA SCHNEIDER; Politi­co; 06/05/2018 [181]

“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, 2018

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.

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.

———-

“Supreme Court Lets Stand a Deci­sion Requir­ing ‘Dark Mon­ey’ Dis­clo­sure” by Dave Levinthal and Sarah Klein­er; The Atlantic; 09/18/2018 [184]

“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, 2018

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.

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.

...

———-

“Polit­i­cal non­prof­its seek answers after court deci­sion tar­get­ing ‘dark mon­ey’” by Michelle Ye Hee Lee; The Wash­ing­ton Post; 09/21/2018 [200]

“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. EDT

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.

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.

———-

“Why the IRS’ Recent Dark Mon­ey Deci­sion May Be Less Dire Than It Seems” by Ian Mac­Dougall; ProP­ub­li­ca; 07/25/2018 [209]

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].