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Flood of Secret Campaign Cash: It’s Not All Citizens United

The Internal Revenue Service, the Federal Elections Commission and Congress have all played a role in the emergence of undisclosed contributions in the 2012 elections.

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The emergence of nonprofits as the leading conduit for anonymous spending in this year's presidential campaign is often attributed to the Supreme Court's 2010 Citizens United ruling, which opened the money spigot, allowing corporations and unions to buy ads urging people to vote for or against specific candidates.

But a closer look shows that there are several reasons that tens of millions of dollars of secret money are flooding this year's campaign. Actions — and inaction — by both the Federal Election Commission and the Internal Revenue Service have contributed just as much to the flood of tens of millions of dollars of secret money into the 2012 campaign. Congress did not act on a bill that would have required disclosure after Citizens United and other court rulings opened the door to secret political spending.

To understand how all this happened, it's worth returning to Justice Anthony Kennedy's opinion in Citizens United, and the political system the court envisioned. In the decision's key finding, Kennedy and four other justices said the First Amendment entitled corporations and unions to the same unlimited rights of political speech and spending as any citizen.

But in a less-noticed portion of the ruling, Kennedy and seven of his colleagues upheld disclosure rules and emphasized the role of transparency. Undue corporate or union influence on elections, he wrote, could be addressed by informed voters and shareholders who would instantly access campaign finance facts from their laptops or smart phones.

"With the advent of the Internet," Kennedy wrote, "prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters."

If a company wasted money on politics, the justices agreed, its shareholders could use the publicly available information to "determine whether their corporation's political speech advances the corporation's interest in making profits." Separately, the sunshine of public disclosure will let "citizens see whether elected officials are 'in the pocket' of so-called moneyed interests."

"The First Amendment protects political speech; and disclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way," Kennedy concluded. "This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages."

A very different system has taken shape. As our reporting this week showed, money for political ads is pouring into non-profits ostensibly dedicated to promoting social welfare. These groups are paying for many of the negative ads clogging the airwaves, but are not disclosing their donors.

As a result, it's entirely unclear whether these ads are being paid for by unions and corporations empowered by Citizens United or by wealthy individuals.

Separately, corporations have resisted calls to list their donations to political social welfare nonprofits or other political spending. So far, the Securities and Exchange Commission has not responded to a rulemaking petition asking for it to develop rules to require public companies to disclose that spending.

The Supreme Court's opening of the door to hefty flows of secret money began years before Citizens United. In a 2007 case (PDF) involving a nonprofit called Wisconsin Right to Life, the justices ruled that unions and corporations could buy ads that mentioned a candidate in the weeks before an election as long as the commercials stopped short of directly advocating the candidate's election or defeat. Even if these ads, known as "electioneering communications," clearly attacked the positions of one candidate, they were permissible unless they were "susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate."

The flood began and the identities of hardly any of the donors were disclosed. The reason? A decision by the FEC, the oversight panel with three Republicans and three Democrats who frequently deadlock.

After Wisconsin Right to Life, the FEC told social welfare nonprofits that they had to disclose only if the donors specifically earmarked the money for political ads. "It proved to be the exception that swallowed the rule," said Paul S. Ryan, general counsel of the Campaign Legal Center, a nonprofit, non-partisan group that tracks campaign finance. The day the FEC adopted this rule, Ryan wrote on his blog that it would allow massive amounts of secret money into politics. He proved correct.

In 2006, ads bought by groups that didn't disclose their donors amounted to less than 2 percent of outside spending, excluding party committees, research by the Center for Responsive Politics shows. By 2008, that number hit 25 percent; by 2010, more than 40 percent.

All of this raises an intriguing question: Was Kennedy aware when he drafted the January 2010 Citizens United opinion that nonprofits were being widely used to avoid public disclosure of political spending?

At the least, critics say, Kennedy was poorly informed.

"Justice Kennedy was living in a fantasy land," said Ciara Torres-Spelliscy, a professor at Stetson University College of Law who tracks campaign finance issues. "I wish the world he envisaged exists. It doesn't."

Instead, this is the disclosure world that exists: Someone who gives up to $2,500 to the campaign of President Barack Obama or challenger Mitt Romney will have his or her name, address and profession listed on the FEC website for all to see. But that same person can give $1 million or more to a social welfare group that buys ads supporting or attacking those same candidates and stay anonymous.

This year, a federal judge struck down the FEC rule stemming from Wisconsin Right to Life. The FEC announced in July that major donors to electioneering communications — ads that focus on issues without directly advocating for candidates — would have to be named.

Already, groups are looking for work-arounds. They're running different kinds of ads. Some will name other social welfare nonprofits as their donors.

The loose oversight by the FEC helped bring so much anonymous money into campaign finance. But no one expects the commission to take a more assertive role anytime soon. Dan Backer, a lawyer who represents several conservative nonprofits, likened the deadlocked agency to a "cute bunny” while referring to the IRS as a "500-pound gorilla.”

The IRS or Congress are more plausible avenues for change, experts say. Ryan said he was hopeful that Congress and the IRS might some day limit ads from groups that don't disclose their donors. The 2012 campaign, though, appears to be a lost cause. "I think this election will be mired and perhaps overwhelmed by secret money," Ryan said.

Right.  Go to Congress.  Because they’ll bite the hands that feed them.

The article also (just barely) misses the endgame.  It’s not that the non-profits will donate to each other, though they surely will.  They’ll donate everything to a SuperPAC.  Full secrecy can directly feed limitless spending.  At that point, the only restriction is that you can’t donate money you don’t have…

As I’ve said, though, the solution is to keep the tactics from paying off.  Don’t vote for any candidate supported by them, even if that means writing someone in.  Voting against only one isn’t enough.  Nobody with any secret backing is a “lesser evil.”

When a major-party President wins with substantially less than half the popular vote, he’ll be faced with the appearance of illegitimacy.  And since politics really is perception, guess how easily that President will be able to push his agenda…

Nothing so wrong with what’s going on. Flood of secret cash will recede. New tax rules have the answer.
Politics is only a part of our prosperity.
The economy is not going back to Medieval system - no tax, no rules of governments but some free royal lunches once in a while.
It’s an evolving, electronically connected newer world of 21st century where a royal prince of Arabian desert and a laborer in the US gas-field, both have to play by the same tax rules.
It takes all of us, who are AWARE of things like this ProPublica, to make the change.

I contacted the Federal Election Commission about Romney’s illegal
fund-raisers in London and Israel.  I was told they wouldn’t investigate unless I had proof that Romney had received contributions from foreign nationals.  When I told them he clearly had fund-raisers in foreign countries they said that many Americans live in London and Israel.  They clearly are refusing to investigate illegal contributions made by foreign citizens. The fact that fund-raising events were held with the press banned from the events is evidence enough to at least warrant an investigation in any agency that has not been compromised.

this piece almost reads like simple analytic journalism—although the “Closer Look” tag is the barest nod toward Society of Professional Journalism’s code of ethics that says analysis shall be clearly labeled as such differentiated from news. But ProPublica’s off-the-record marketing by way of e-mail to readers goes much further—making it clear that this is an expression of pure opinion—not balanced as news at all.

Says the e-mail link mailed from ProPublica to readers: “In addition to Justice Kennedy’s misunderstanding of transparency, the Internal Revenue Service, the Federal Elections Commission and Congress have all played a role in the emergence of undisclosed contributions in the 2012 elections.”

By claiming that a Supreme Court Justice misunderstands “transparency” and ostensibly U.S. law with regard to transparency he is sworn to interpret ProPublica places itself above the judicial branch, albeit outside the ethical boundaries of the journalism profession by co-mingling news with opinion. Perhaps it is ProPublica that misunderstands transparency when it uses dark money from politically motivated patrons in an effort to sway voters by publishing advocacy behind the guise of news reporting.

Dirty, dirty dirty!

Rick, you do have to appreciate the logic, though, behind refusing to investigate something unless there’s already proof.  I feel like one of us doesn’t understand what “investigate” actually means…

Albert, we are ALL above the judicial system, and the legislative system, and the executive power.  The country’s laws are clear—no matter what the elites have tried to claim—that this is a nation “for the people,” and not for the noble family appointed to the court.  Each of us, including ProPublica, has the right and even duty to question what our representatives say and do.

People founded this country to get AWAY from aristocracies, not to create another indistinguishable one.  Public debates, rather than public screaming, are essential to preventing the country from turning into one.

Personally, I happen to think that Justice Kennedy made the only call available to him, because Constitutionality of a single law isn’t a conditional judgement, subject to the arrangement of other laws.  But Engleberg and Barker disagree, and consulted people like Torres-Spelliscy with actual law educations for their opinion, rather than a lowly programmer, and it’s their sandbox.  (Something I do disagree with the court over, unilaterally, and most recently mentioned in the ObamaCare decision, is the idea that the court should feel an obligation to find laws Constitutional, even if it means using obscure or unlikely interpretations of the law.  If the goal is to always find in favor of Congress, then the checks and balances have collapsed.)

@john—wearing their journalists hats, media might nominally be co-equals of the court, though liberal ideology might place the court in a superior position in so far as it is representative of the electorate. Whether peers of the court or in some other undefined place not above the law journalists are ethically bound by the standards of their own profession just as are officers of the court. In this instance, ProPublica violated it’s professions rules of conduct by publishing opinion without clearly labeling it as such. In doing so, ProPublica degrades the journalists profession. It erodes trust in a impartial fifth estate by deigning to claim in a news voice a Supreme court doesn’t understand the law. ProPublica makes a mockery of its thinly veiled attack on “dark money” when it uses patrons millions to represent their opinions as news.

all this gets a bit confusing….