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Analysis

How Politicians Use Nonprofits to Hide Dark Money

Politicians are increasingly using nonprofits capable of accepting unlimited dark money funds to advance their agendas.

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.