Politicians Using Nonprofits to Cloak Spending After Election Day

New York, N.Y. –  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, according to a new report by the Brennan Center for Justice at NYU School of Law.

The report, Elected Officials, Secret Cash, is the first comprehensive analysis of a yawning gap in rules that govern money in politics and government ethics, and poses a serious risk of corruption. The report found that spending by nonprofits that coordinate with elected officials after they take office goes almost entirely unchecked, and calls for new laws to limit political funding by officeholder-controlled nonprofits. 

“In recent years, the risk of dark money in our elections has become apparent. But we pay less attention to the politicking that happens after election day – specifically when it comes to dark money channeled through secretive nonprofits,” said Chisun Lee, lead author of the report and senior counsel at the Brennan Center for Justice. “Donors and politicians have exploited a regulatory gap that allows them to raise political funds using nonprofits without the public disclosure and other oversight that would apply if they were doing that during campaign season. If we continue to let these groups operate in secrecy, we risk further allowing shadowy funding to dominate our politics.”

Elected Officials, Secret Cash comes on the heels of recent reports that a nonprofit affiliated with President Trump, America First Policies, has conducted expensive polling  that would typically fall to the Republican National Committee – but unlike the RNC, the nonprofit does not disclose its donors. America First Policies had already drawn attention earlier when founder Rick Gates pleaded guilty in Robert Mueller’s investigation of Russian interference in the 2016 election, raising the possibility of an unusually acute risk: secret foreign influence over U.S. politics, channeled through secretive nonprofits.
 
Drawing on case studies from across the nation, Elected Officials, Secret Cash shows how donors and politicians have used nonprofits to turn millions of outside dollars into publicity juggernauts. Among the report’s findings: 
 

• Officeholder-controlled nonprofits have multiplied in recent years, with elected officials including Donald Trump, Bernie Sanders, and Barack Obama profiting politically from these organizations’ efforts.
• Officeholder-controlled nonprofits can take unlimited amounts from wealthy donors who, in most cases, remain anonymous to the public.
• Often these wealthy donors hold economic interests that the officeholder they are financing has the power to affect. In New York state, for example, gambling companies donated $2 million to a nonprofit affiliated with Governor Cuomo just before the governor declared his support for increasing gambling in his 2012 State of the State address. 

 
Finally, the report proposes a straightforward roadmap for laws that could help bring transparency to the activity of these nonprofits: 

• Identifying the entities that post the most serious risk of corruption. The report proposes a two-factor test that identifies the groups that pose the greatest risk of corruption: how closely affiliated their leadership is with an officeholder, and how much they spend to promote the officeholder’s name and image in their advertising. 
• New regulations for highest-risk nonprofits. For the nonprofits that meet the threshold test, the Brennan Center proposes two rules that are standard components of campaign finance and conflict of interest laws: donor disclosure and donation limits.    

 
Read the full report, Elected Officials, Secret Cash.
Read more about the Brennan Center’s work on Money in Politics.

To set up an interview with any of our experts, please contact Beatriz Aldereguia at (646)292–8369 or aldereguiab@brennan.law.nyu.edu.

*This press release has been updated.