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Do Even the Koch Brothers Deserve Some Privacy?

The privacy interests of charitable donors and the transparency interests of the state clash in California.

February 24, 2015

Disclosures from charities can cause a clash between the transparency interests of states and the privacy interests of charitable donors.  These matters are largely being resolved through contentious litigations where only the party involved and the state’s lawyers get to make narrow arguments about whether the donor’s right of privacy or the public’s right to know should prevail in a given fight over disclosure.  The public should keep an eye on these litigations.

One such fight is ongoing in a case between California and the Americans for Prosperity Foundation, which according Bloomberg News is affiliated with the Koch Brothers.  These are the same Koch Brothers that made news a month ago when they announced their plan to spend $889 million in the 2016 federal elections.

The general counsel for Koch Industries, Mark V. Holden, submitted a declaration to the court in the Americans for Prosperity Foundation case describing threats of harassment that the Koch Brothers have received.

On February 17, 2015, the U.S. District Court for the Central District of California ruled that the California Attorney General Kamala Harris cannot take action against the Americans for Prosperity Foundation (APF) for failing to disclose identifying information about the group’s major donors, which if Bloomberg is right, would include the Koch Brothers.  The case is Americans for Prosperity Foundation v. Harris.  The group sued the California Attorney General after her office asked for more details about the group’s donors.  They argue that they have a right to keep their donors private.  The Attorney General argues she needs the information to investigate potential fraud.

The judge in the APF case, Manuel Real, pointed to the fact that a similar case over the privacy of donors to charities is currently being litigated in the Ninth Circuit Court of Appeals.  That Ninth Circuit case is Center for Competitive Politics (CCP) v. Harris, where CCP was recently granted an injunction against Attorney General Harris stating “The Attorney General shall take no action against the Center for Competitive Politics for failure to file an un-redacted IRS Form 990 Schedule B pending further order of this court.”

In CCP v. Harris, CCP is suing California Attorney General Kamala Harris for the same reason as the Americans for Prosperity Foundation.  They do not think the state Attorney General is entitled to see their donors even if they are raising money in California.

The Attorney General is responsible for overseeing charities that solicit contributions in the State of California where both APF and CCP raise money.  She asserts that California law requires charities that wish to solicit in California to file an unredacted copy of its IRS Form 990 Schedule B with the state under Cal. Code Regs. tit.11, § 301 (2014), which would list the donors to each organization.  However, importantly, the Schedule B would be kept confidential by California and not released publicly.

CCP is making a First Amendment argument that its donors will be chilled if their names are given to California.  As their opening brief states, “As the United States Supreme Court first recognized in the civil rights cases of the 1950s, the anonymity of contributors to nonprofit educational organizations is generally protected, lest an individual be subject to retaliation for supporting an organization that educates the public on an unpopular topic.”  Then they cite to the NAACP line of cases which allow for membership lists to be kept private in the face of a threat of harassment.

This rhetorical move of claiming the protection of the NAACP line of cases is also taking place in the campaign finance sphere by groups who do not want to be subject to generally applicable campaign finance disclosure laws that help inform the voting public about the sources of money in politics. As I wrote about here, this issue may be resolved by the Supreme Court if they grant cert. in ProtectMarriage v. Bowen.  We should know whether the Supreme will take that case on February 27.

The Supreme Court has treated campaign finance disclosure as being supported by three constitutionally compelling state interests: (1) informing voters; (2) preventing circumvention of other campaign finance laws and (3) fighting political corruption or its appearance.   

The Protect Marriage case may not resolve the issue in CCP and APF cases since ProtectMarriage is about campaign spending in a ballot initiative and at least from the outside, there does not appear to be an allegation of political spending by either group, which is consistent with CCP’s and APF’s 501(c)(3) tax status, which bars both groups from political interventions.  

But as the Nonprofit Quarterly put it, the CCP and APF cases “raise questions about the importance of nonprofit confidentiality or, most specifically, whether donor confidentiality should be sacrosanct in this day and age of big money manipulating and contorting electoral processes.”

So do the Koch Brothers deserve some privacy?  At least one federal judge thinks so as the APF and CCP cases continue through the litigation process.  Meanwhile, California also has an interest in regulating the charities that are fundraising in their state and regulating while blindfolded will be untenable.  But who will win this particular fight in the long run is really up in the air.  

(Photo: Thinkstock)

The views expressed are the author’s own and not necessarily those of the Brennan Center for Justice.