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Disclosure
By David Earley – 05/18/12
According to a new study by the Michigan Campaign Finance Network, four nonprofit organizations have spent $3.4 million in the state on “a steady barrage of campaign-style ads criticizing the Obama administration” since the start of the year all without disclosing their donors. Because these organizations — Americans for Prosperity, American Future Fund, American Energy Alliance, and the 60 Plus Association — are nonprofit “501(c)(4)” organizations and were careful to run their advertisements just outside the 30 day federal reporting window, they will never have to reveal information about their underlying donors.
All of this is completely legal. That federal disclosure requirements are so easily evaded — by entities spending millions of dollars to influence elections — underscores the need to reform federal disclosure laws.
Under federal campaign finance disclosure law, organizations that run “electioneering communications” must disclose their donors to the Federal Election Commission, which in turn releases the list of donors to the public. Electioneering communications are broadcast advertisements (TV or radio) that refer to a specific candidate for federal office and air within 30 days of a primary election or 60 days of a general election. Before disclosure of electioneering communications was required, only ads that expressly said things like “vote for” or “vote against” candidates had to be reported. Groups easily evaded disclosure under that regime by running “sham issue ads,” advertisements that are often highly critical of a candidate but stop short of telling voters to vote against the candidate. Instead they say things like “call Senator Smith and tell her not to tamper with Social Security.” Voters understood these as appeals to vote for or against candidates, but because they avoided the “magic words” they didn’t have to be reported. By requiring electioneering communications to be disclosed, Congress ensured voters would know who paid for sham issue ads run just before an election.
The groups in Michigan avoided disclosure by running their ads outside the 30-day window before the state’s primary. They also avoided disclosure by being registered as 501(c)(4) organizations, or “social welfare” organizations under the tax code. Consequently, these organizations are prohibited from having political activity be their “primary” focus, but can still engage in significant political spending. Had these nonprofits instead registered as so-called “527 organizations” — the intended designation for political organizations under the tax code — their donors would have to be disclosed. By exploiting the dual weaknesses of the current electioneering communication definition and the tax code, the people behind these kitschy organizational names will never be known.
Activity like this is why members of Congress recently introduced the DISCLOSE Act of 2012 to address the weaknesses of federal disclosure requirements. Under the proposed legislation, the reporting window would be greatly expanded. Donors behind electioneering communications would have to be disclosed if the advertisement runs within 120 days of the first presidential primary, and continuing until the general election. Ads mentioning congressional candidates would require disclosure if they ran on or after January 1 of an election year. By expanding the disclosure period, the law would ensure voters have both greater knowledge going to the ballot box and the ability to better scrutinize the dealings between independent organizations and the candidates they support.
Because the Michigan groups didn’t report their spending, the magnitude of the campaigns would have gone unnoticed. But the Michigan Campaign Finance Network carefully combed through public files of Michigan broadcasters and cable companies, meticulously analyzing their contracts to air the groups’ political commercials. The effort should certainly be applauded, as it brought to light spending that would otherwise have remained secret. But such effort shouldn’t be necessary — the public has a right to know who is trying to influence the voters and elected officials and how much they are spending in the process. Our federal disclosure laws should reflect that by making this information easily accessible so that everybody can know who is behind the money. Expanding the electioneering communication reporting window, as the DISCLOSE Act would accomplish, is an important first step.
Tags: Democracy, Campaign Finance Reform, Disclosure
By Alina Mejer & Mary Kate Hogan – 04/27/12
Recently, Rhode Island Governor Lincoln Chaffee teamed up with Senate President Paiva Weed and House Speaker Gordon Fox to propose legislation that would mandate full disclosure of previously unregulated political expenditures. With an eye toward Rhode Island’s upcoming election and promoting values like transparency and accountability, the legislators worked with reform groups like Common Cause and Democracy Matters to draft the much-needed legislation.
Despite this widespread support, the legislation has faced opposition at both Senate and House hearings. But opponents are misguided.
The Brennan Center fully supports the proposed legislative efforts. Rhode Island is taking an important step in creating a system that promotes transparent elections.
Among the provisions, the legislation calls for reporting of “independent expenditures” and “electioneering communications,” in line with the type of disclosure condoned by the Supreme Court and lower courts. Additionally, strengthened disclaimer requirements would reveal more information about who is funding the increasingly ubiquitous political advertisements. The legislation also provides a way for nonprofit groups to protect non-political donors from disclosure, while still reporting to the public the sources of the money they spend on political activities.
Elected officials should pass the proposed legislation without delay. In the words of Senate President Paiva-Weed: “Campaign finance disclosure is absolutely vital to the health of our representative democracy.” We agree.
Tags: Democracy, Disclosure
By Mimi Murray Digby Marziani – 04/24/12
Last month, distracted by Super Tuesday, March Madness, and "The Hunger Games," you may have missed the news from Delaware. Here’s the exciting update: Governor Jack Markell introduced two proposals to strengthen the state’s democratic processes — one to make lobbying more transparent; the other to shine light on money in politics. Together, these reforms would represent a big step for this small state.
The first proposal is simple. Senate Bill 185 would require lobbyists to file reports online about their lobbying activity within five days of contacting a state official to discuss a bill, resolution, or regulation. Basically, the law would eliminate back-door meetings; when a lobbyist decides to use her clout to try to influence the legislative process, she must come through the front door and leave her calling card.
The second takes a minute more to explain. The Delaware Elections Disclosure Act is focused upon outside spending — i.e., spending by third parties rather than by candidates or political parties — in state elections. The bill would expand the reach of campaign finance disclosure requirements to capture “electioneering communications” — campaign advertisements that identify a candidate and are released right before an election. This is necessary to close a gaping loophole in current law. Now, outside spenders can skirt all reporting requirements simply by avoiding certain magic words like “vote for” or “vote against.”
The new campaign finance bill would also make information about outside spending more accessible to the public. Any person or group spending over $500 on campaign advertisements would have to file a disclosure report within 24 hours that would be available on the Election Commission’s website. In addition, all ads would have to include a disclaimer identifying who paid for the ad and showing a website with more information.
Both bills promote transparency in ways that would improve Delaware’s democratic process. A front-door lobbying policy puts Delawareans on notice about the special interests seeking to affect lawmaking. Similarly, and as the U.S. Supreme Court has emphasized time and again, voters have a right to know who is spending big bucks to influence election results. This information helps voters judge the persuasiveness of the campaign ads they see and hear, and ultimately facilitates an informed choice at the ballot box.
Today, the General Assembly is back from spring break, and ready to get back to work. Before moving on to other matters, the Senate should advance lobbying reform, and the House should push forward the campaign finance bill. Shrug off other distractions and keep your eyes glued on Delaware.
Tags: Democracy, Campaign Finance Reform, Disclosure
By Mary Kate Hogan – 04/16/12
For decades, the one piece of campaign finance reform that Democrats and Republicans agreed about was the importance of disclosure. For example, in 2000, House Republican Amo Houghton explained that "[w]e need disclosure by section 527 organizations, but when 501(c) groups intervene in the political process, they should disclose what they are doing and who is paying for it as well.” Lately, though, the GOP has changed its mind about political transparency, and the current debate over increased disclosure requirements for independent election spending has sharply divided on partisan lines.
Given the huge volumes of money being spent to swing the 2012 election — with millions being spent by non-profit 501(c) groups with secret donors — it’s long past time for a new bipartisan consensus in favor of transparency. Democrats like Sen. Sheldon Whitehouse (D-RI), who recently introduced the DISCLOSE Act of 2012 in the Senate, are leading the way, but they need a new generation of Republican leaders to join them.
The DISCLOSE Act of 2012 represents a promising first step in implementing what both parties used to call for: making sure that all politically active groups — including super PACs, “social welfare” 501(c)(4) groups, unions, trade organizations, and corporations — disclose who funds their political activities. The new DISCLOSE Act is a simplified version of legislation proposed in 2010, which passed the House but, despite the support of 59 Senators, fell one vote shy of overcoming a Republican filibuster in the Senate. The new bill strips out the provisions that led to GOP opposition in 2010, and should have broad support.
The new DISCLOSE Act aims at a major problem with current disclosure law — the fact that disclosure of political activity is now essentially optional. Groups like 501(c)(4)s and unions that spend money on electioneering exploit a loophole created by an FEC rule. The regulation says these groups are only required to file a report if that donor expressly indicates that their contributions were made for a particular ad. Vanishingly few contributors do so, meaning that the voting public is bombarded by campaign ads funded by these groups, without any idea who is paying for the ads.
While super PACs have to report their contributors, a super PAC donor who wants to remain anonymous simply has to route their money through a non-profit group to ensure that the ultimate source of the money stays secret. For example, during the 2010 election cycle, the Environment Colorado Action Fund, a super PAC, received about 99 percent of its funding from Environment Colorado, a 501(c)(4) organization. The super PAC discloses that all its donations came from the (c)(4) groups, but the real donors to the super PAC remain secret. Donors just give to the (c)(4), remain anonymous, and know the money ends up being used by the Super PAC. Disclosure defeated.
The DISCLOSE Act of 2012 solves this problem. It ensures that funds used to influence the political process and voters themselves are accounted for and donors are made public. It also makes the leaders of shadowy groups involved in electioneering “stand by their ads,” by requiring disclaimers like those for candidates, who have to approve each commercial’s message.
The Act also protects donors who want to support a group’s mission, but not its political ads. The Act allows a donor to remain anonymous by earmarking their contribution not to be used for political advertisements. This protects people who want to support nonprofit groups but do not want their money to fund campaign ads or other regulated political activity.
The DISCLOSE Act 2012 is an important first step toward transparency in elections. As Congress returns from recess this week, and the general election heats up, it should be a first priority. Sen. Chuck Schumer (D-NY) held a hearing before the Senate Rules Committee, and it’s time for the full Senate to consider the bill. The House should take up a parallel bill introduced by Rep. Chris Van Hollen (D-MD).
As politically active groups continue to find new ways to circumvent disclosure laws, it is Congress’s duty to close the loopholes that allow them to do so. Democrats and Republicans should come together on political transparency — their constituents uniformly support it, by substantial margins. By passing DISCLOSE 2012, Congress can show American voters that it is serious about giving them what they want: a political process open to voters so they can make informed choices in the political marketplace. Democracy depends on it.
Tags: Democracy, Campaign Finance Reform, Disclosure
By Sari Bernstein – 03/29/12
Russian dolls are an attractive toy for children — peel back the layers of wooden figurines until the smallest doll is revealed. But imagine a campaign finance system in which the identity of political donors is shielded from public knowledge. Peel back the layers of this doll and rather than learning who is financing a political advertisement, all you get is the name of a benign-sounding group. Such is the state of disclosure laws today, which were made worse after the influx of new money allowed by Citizens United. The DISCLOSE Act of 2012, being considered today by the Senate Committee on Rules and Administration, goes a long way to remedy this problem — as Brennan Center testimony illustrates.
Under the current iteration of the FEC’s disclosure rules, politically active nonprofits (usually organized under section 501(c)(4) or (c)(6) of the tax code) can easily hide the identities of their donors. And, while Super PACs must reveal their contributors, they may receive unlimited donations from these dark groups. Thus, many — if not most — Super PACs now operate with an affiliated nonprofit to give camera-shy donors a means to contribute large sums of money without public scrutiny. Not surprisingly, the Center for Responsive Politics found that thus far during the 2012 election cycle, at least five Super PACs received almost all of their funding this way.
The DISCLOSE Act would plug this loophole. Under the bill, major donors — those who have contributed more than $10,000 to a group spending money on campaign ads during an election cycle — must be named in public reports to the FEC. Indirect campaign spending, called “covered transfers,” must also be reported.
And what of disclaimers? Federal disclaimers currently identify only the funding organization. Now, picture the Yellow Pages if it permitted fake names and addresses — useless. One New York Times reporter found that the “Coalition to Protect Seniors” identifies itself as an address at a Mail Boxes Etc. store in Wilmington, Delaware. Similarly, the Sunlight Foundation found that “Citizens for Strength and Security,” which spent nearly $3 million in 2010 to benefit Democratic candidates, lists only a UPS store on M Street in Washington.
The DISCLOSE Act helps remedy this problem by enhancing disclaimer requirements on radio and television campaign advertisements. The highest-ranking official of the spending organization must expressly approve the message and list the top funders who paid for the advertisement.
Strong disclosure rules should be a no-brainer for Congress — after all, voters have a right to know who is spending the big bucks to influence elections. That is why the vast majority of the Supreme Court voted — eight to one — to uphold challenged disclosure requirements in Citizens United. Since then, lower federal courts spanning the nation have robustly defended the constitutionality of campaign finance disclosure laws. And, at one time or another, politicians of all strokes have agreed that transparency of money in politics is vital to the success of our democratic system.
The Senate Rules Committee today is taking a meaningful step towards bringing necessary disclosure requirements into federal law. Following this hearing, Congress should pass the DISCLOSE Act without delay.
Tags: Democracy, Campaign Finance Reform, Disclosure
By Alina Mejer – 03/07/12
For decades, the tobacco industry fought tooth and nail against restrictions on cigarettes and smoking. Now, some of Big Tobacco’s soldiers have moved on — to partisan politics. One of their primary strategies is to attack political disclosure laws that ensure transparency of money in politics — so that deep-pocketed interest groups like Big Tobacco can try to buy elections in the dark.
The Center for Individual Freedom (CFIF), a group founded by former tobacco industry executives, is a leader in this effort. While CFIF once worked to demonstrate the political downside of voting for anti-smoking laws, its mission statement now says it’s dedicated to protecting individual constitutional rights. But, in fact, CFIF’s attacks on political transparency undermine voters’ constitutional right to know who is trying to buy their votes.
CFIF recently sued two states — West Virginia and Illinois — to advance its efforts to invalidate laws that require groups seeking to influence elections to disclose information about their expenditures and donors. CFIF usually does not mention that it was among the top ad buyers within state Supreme Court elections from 2000 to 2009 — spending to the tune of $1,824,140. But, because CFIF would rather operate in the dark, it argues that disclosure laws violate the Constitution and serve no legitimate purpose. It is wrong on both accounts.
Voters are entitled to relevant information about those who are trying to influence elections. As the Brennan Center explained in a brief in the West Virginia litigation, the Supreme Court has repeatedly upheld robust campaign finance disclosure schemes because of the key governmental interests in providing the electorate with information, deterring corruption, and gathering data necessary to enforce other campaign finance rules. And, strong state disclosure laws have never been more important: A February 2012 report by the National Institute on Money in State Politics shows that individuals and organizations who gave at least $25,000 to federal super PACs in 2011 also donated an estimated $36.8 million to state campaigns between 2008 and 2010. Without robust transparency rules, voters have no way of following these dollars to their source and the political system is left vulnerable to corruption.
For all of these reasons, the American people should fight back against CFIF’s crusade to hide election spending in a cloud of second-hand smoke.
Tags: Democracy, Campaign Finance Reform, Disclosure
By Jonathan Backer – 02/27/12
On Friday, SEC Commissioner Luis Aguilar spoke out on the need for the Securities and Exchange Commission to address the lack of adequate disclosure of corporate spending unleashed by Citizens United. Aguilar’s comments are a welcome and important response to a chorus of voices — including the Brennan Center and a broad range of groups — who have urged the SEC to issue rules that would require public corporations to provide their shareholders with information about the use of corporate resources for political activities.
In 2011, for-profit corporations made $17 million in contributions to Super PACs. This is 18 percent of the total itemized Super PAC funding. That sum, however, does not include corporate donations to non-profits engaged in political activity — which are not required to disclose their donors — or corporate donations to non-profits that the groups then transfer to Super PACs. Aguilar’s speech to the SEC staff should goad the other Commissioners to take action on this critical issue.
Aguilar recognized that there are numerous reasons why the SEC’s mandate to protect investors requires affirmative steps to ensure corporate disclosure of political activity. First, disclosure is essential to help individuals make investment decisions. People may not want to invest in companies that choose to engage in political activity or to support candidates with whom they disagree. Second, disclosure is necessary in order to ensure that political spending decisions reflect the shareholders’ interests, rather than just those of the corporate managers. Finally, transparency in corporate spending combats pay-to-play corruption and rent-seeking, which distort the marketplace and efficiently functioning capital markets.
The amount of unregulated corporate spending in the 2012 election raises serious concerns of corruption. Senator John McCain recently said: “I predict to you there will be a major scandal associated with the Supreme Court decision on Citizens versus United [sic]. There is too much money washing around.” It is up to our government agencies to take proactive steps to prevent scandal before it occurs. Aguilar warned that Enron and other scandals of the previous decade stemmed in part from the SEC’s failure to adopt a pay-to-play rule proposed in 1999 until 2010. “The cost of Commission inaction — particularly in the face of compelling evidence for the Commission to act — can be devastating, as we have seen over and over again.”
Comments like McCain’s and Aguilar’s are proverbial canaries in the coal mine. Neither our economy nor our democracy will function in the interest of all Americans if corporate political activity occurs in secret, with shareholders — and voters — kept in the dark. It’s time for the SEC to heed repeated calls for action and promulgate common sense disclosure rules for corporate political spending.
Tags: Democracy, Campaign Finance Reform, Disclosure
By Adam Skaggs – 02/15/12
Crossposted at The Hill's Congress Blog.
Today, the Federal Election Commission will hold a public forum to explain its campaign spending reports, and to solicit input on a new “disclosure portal” it hopes will “provide one-stop shopping for campaign finance data.” Shedding light on how government works is commendable. But an FEC forum on disclosure sounds a bit like a seminar on responsible home finance run by the banks that just agreed to pay $26 billion for their mortgage lending abuses.
Federal law requires the FEC to collect and publish data on spending by candidates and groups seeking to influence federal elections. The data is useful in the horse race handicapping that constitutes contemporary political analysis: FEC numbers show what candidates raised the most, and who has the most cash on hand.
But the FEC has carved loopholes in federal law that allow the real sources of much of today’s political spending to remain hidden. The agency charged with shining disinfecting sunlight on political spending is allowing millions of dollars of dark money to swamp our elections.
Groups that didn’t provide any information about their donors accounted for about half the money spent by outside groups in the last election — more than $135 million. Thus far in the 2012 presidential contest, about 40 percent of TV advertising — more than $24 million worth — has been funded by nonprofit groups that will never reveal their contributors. Six of the ten Super PACs that raised the most money last year took money from groups that won’t disclose any information about their donors.
Recent reports from Karl Rove’s Crossroads groups prove that donors willing to spend millions of dollars in elections often prefer to do so secretly. To support Republican candidates, Rove set up two groups in 2010, American Crossroads and Crossroads GPS — one a Super PAC that names its donors, the other a nonprofit that doesn’t. Nearly two-thirds of the more than $50 million the groups raised last year went to the nonprofit that conceals its donors from the public.
Some of the blame for allowing nonprofits to spend millions on electioneering while shielding donors’ names falls on the IRS, which hasn’t said clearly how much nonprofits dedicated to “social welfare” can spend on politics without losing their tax exemption. But the FEC has exacerbated the problem.
Under federal law, organizations — including nonprofits — that run political advertisements must disclose the name of every donor who contributed more than a certain amount to the organization. The duty to disclose in the federal statute is clear. But the FEC has issued rules that eviscerate the requirement.
The FEC’s rules say a group only has to report a donor if he or she specifically earmarks the contribution for the advertisement. Almost nobody does so — contributors just write checks with a wink and a nod, knowing the money will be used for political advertising, and knowing that they’ll remain anonymous.
Because of the FEC’s swiss-cheese regulations, secretive nonprofits are poised to dominate the 2012 election. Thankfully, there are champions of transparency in Washington willing to fight against the secret money trying to hijack democracy.
Representative Chris Van Hollen of Maryland deserves special praise. He filed a petition with the FEC asking it to overturn one of its faulty regulations, and he has brought a lawsuit to force the agency to implement, and not undermine, federal disclosure law.
Last week, Van Hollen — along with Rep. Robert Brady and other representatives—introduced the DISCLOSE 2012 Act, which represents a critical step forward. The bill builds on the original DISCLOSE Act introduced in response to the Citizens United ruling in 2010. Unlike its predecessor, which would have restricted election spending by various groups, the new bill focuses exclusively on disclosure — and presents a clear question for members of Congress: Do you support transparency or secret money in elections?
The DISCLOSE 2012 Act would require reporting of campaign expenditures over $10,000 by Super PACs, unions, corporations, and other groups. It would require these groups to approve their messages, and to disclose top donors in their ads. The bill would make unions and corporations disclose their political spending to their members or shareholders. Finally, it would mandate that lobbyists report their political expenditures, to ensure that the public can monitor attempts to purchase influence over elected officials.
There is much that Congress can do to fix the current campaign finance fiasco, including reforming — or replacing — the FEC. In the meantime, adopting the DISCLOSE 2012 Act would bring immediate — and needed — change.
The Act will provide voters with the information they need to make informed decisions. It will let shareholders and members hold corporations and unions accountable for their political spending. And it will grant the public the tools it requires to detect corruption engendered by currently anonymous campaign spending. Congress should pass it without delay.
Tags: Democracy, Campaign Finance Reform, Disclosure
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