How Politicians Use Nonprofits to Hide Dark Money

Politicians are increasingly using nonprofits capable of accepting unlimited dark money funds to advance their agendas. Congress can and should act now to stop the flow of unregulated cash into post-election day politicking.

March 29, 2018

Since Watergate, it’s been illegal for anyone to secretly donate millions to a federal candidate’s election campaign. Congress decided at the time that capping contributions was a price worth paying to deter corruption. For the same reason, campaign finance law requires candidates to publicly disclose donations above a certain amount. Sunlight, as the Supreme Court likes to say, is the best disinfectant.

But such rules — designed to prevent would-be officeholders from being “bought” by wealthy donors — don’t apply to a burgeoning new mode of self-promotion that politicians are embracing once they actually take office.

Like so-called “buddy PACs” – unlimited spending groups that support a single candidate during campaign season – the new must-have accessory for successful politicians is the officeholder-controlled nonprofit. These entities, launched after the campaigning is over, can raise unlimited amounts in secret donations to spend on promoting officeholders and their agendas. And they are gaining popularity among elected officials at every level of government.

The time has come to enact common-sense regulations to stop these nonprofits from corrupting our politics.

Among the most prominent examples: America First Policies, a 501(c)(4) social welfare nonprofit that President Trump’s top advisors founded a week after his inauguration. Earlier this year, CNBC reported the group has conducted polling worth as much as seven figures — work that typically fuels political ad campaigns. Among other promotions of Trump administration positions, the nonprofit produced a TV ad last fall that featured flattering footage of the president and called on viewers to “stand with President Trump to cut taxes, now.” The donors to America First Policies remain secret.    

In a recent report, we at the Brennan Center for Justice found that at least two presidents, seven governors, and several prominent mayors – from both major parties – have established nonprofits that allow them to raise unlimited, anonymous funds for political spending after election day.

Since 2010, these elected officials — including Republicans like embattled Missouri Governor Eric Greitens and progressives like campaign finance warrior Bernie Sanders — have altogether raised as much as $150 million for nonprofits that they are able to control and use to promote their respective agendas.

Allowing elected officials to take unlimited cash from usually secret donors through these nonprofits opens the door to conflicted loyalties and corruption. Occasional exposés reveal some of these donors have specific business interests before the elected officials whose nonprofits they support – and likely see their donation as a means to win government decisions that will benefit them.

In New York State, for example, gambling companies donated $2 million to a nonprofit affiliated with Governor Andrew Cuomo just before the he declared his support for increasing gambling in his 2012 State of the State address. And in Los Angeles, a pipe manufacturing executive made it clear that his million-dollar pledge to the mayor’s nonprofit was meant to gain influence in a city that forbids campaign contributions by companies seeking government business. He told the Los Angeles Times, “We want to influence the government leaders to make the right decisions so that we can be more competitive.”

Some of these nonprofits have taken steps at self-regulation. President Obama’s Organizing for Action wrote the playbook on turning these types of nonprofits into publicity juggernauts. In the spirit of being “open and transparent,” OFA decided early on to voluntarily disclose its donors. But hoping that officeholder-controlled nonprofits will voluntarily disclose funders is hardly a plan to ensure ethical governance.

Americans deserve to have confidence that decisions about who builds bridges or treats drinking water are based on the most qualified, competitive bid – not who gives the most to an elected official’s nonprofit. For this reason, we recommend a straightforward set of laws to bring transparency to these nonprofits and limit the influence of those with specific business interests before government, and we’re urging legislators across the country to adopt it.    

First, we should identify those nonprofits that pose a major risk of corruption – determining whether an elected official or close associates control the group and, if so, whether the group spends substantial amounts on promoting the official. Then, for the small set of entities this test would identify, we propose two key safeguards that are well-established components of anti-corruption law. One is public disclosure of who is giving money, and how much, to an officeholder-controlled nonprofit. The second is contribution limits for donors who have concrete business interests that the politician has the power to affect.

Some jurisdictions have already started following this model. In New York City, similar legislation kicked in this year following a federal investigation into Mayor Bill de Blasio’s nonprofit and allegations of ethical transgressions. And in early 2017, the Missouri legislature considered a measure to require certain nonprofit groups to report donations, though the effort fell short.

To be sure, nonprofits associated with elected officials may do work that serves the public. They may use the officeholder’s high profile to attract private funding for education, economic development, antipoverty work, and more. The beauty of a legal solution that focuses on control by the elected official and spending to promote that official is that these public benefits can go on, uninterrupted.

But with officeholders’ increasing reliance on private donors even outside of campaign season, requiring transparency and limiting donations by those seeking government business are crucial starting points for protecting government integrity. To ignore this growing problem of money in our politics, where a handful of ultrarich donors already wield grossly outsized influence, would ignore an unacceptable threat to representative democracy.