After big U.S. Supreme Court win, Montana nonprofit suffers string of losses

Introduction

The secretive nonprofit known for its efforts to dismantle Montana’s campaign finance laws has had a rough go of it lately.

In November, American Tradition Partnership failed to sink Democrat Steve Bullock’s bid for governor despite plastering the state with issues of a fake newspaper, one of which displayed the Democrat’s photo alongside pictures of sex offenders.

Bullock beat Republican Rick Hill in a race punctuated by debates over the future of Montana’s stringent campaign finance laws. Bullock ran on his record of defending the state’s spending limits as attorney general, when he faced off with ATP in court.

Bullock’s victory was not the only setback for the organization.

Though the nonprofit and its lawyer, Jim Bopp, won a high-profile U.S. Supreme Court decision in June that knocked down Montana’s century-old ban on corporate and union spending on elections, ATP’s other court challenges to Montana’s disclosure rules and contribution limits have stalled.

ATP’s high-profile lawsuits have also exposed it to a wave of scrutiny regarding its funding and tactics.

In court proceedings, the state’s lawyers obtained the group’s bank records and early donors.

Meanwhile, media reports have laid out evidence of possible illegal coordination with candidate campaigns alongside indications that ATP may have misled the Internal Revenue Service.

The group, founded in 2008 to lob mailers into Montana and Colorado legislative races attacking environmentalists and moderate Republicans, has also come to represent the questionable tactics used by nonprofit groups to cover the tracks of donors and funnel unlimited money into elections, say reform advocates.

“This is cloak-and-dagger stuff,” said Edwin Bender of the National Institute on Money in State Politics.

A 501(c)(4) social welfare organization “may engage in political campaign activities” according to the IRS, as long as those activities “do not constitute the organization’s primary activity.”

According to Bender, law firms across the country have established an endless stream of (c)(4) groups “with innocuous sounding names that really exist to inject money into political campaigns.”

The law firms that establish these nonprofits, he says, “hide behind attorney-client privilege” to deflect questions about the political operations of (c)(4) groups.

Donors anonymous

Last month, the Center for Public Integrity revealed that the bulk of ATP’s early funding came from a network of obscure nonprofit (c)(4) groups established by a Denver law firm called Hackstaff Law — where current Colorado Secretary of State Scott Gessler was once a partner.

Gessler’s old firm also was involved in the establishment of ATP, representing it in a challenge to campaign finance limits in Longmont, Colo., in 2009, and is listed as its registered agent in Colorado.

Because nonprofit 501(c)(4) groups like ATP do not have to disclose donors to the public, they have become conduits for donors who wish to impact elections but would prefer to remain anonymous.

ATP operative Christian LeFer defended the use of (c)(4)s to conceal the identities of its donors in an email to the Center, citing fear of violence from radical environmental groups.

“There is no reason to provide unhinged political activists with ready-made enemies lists so they can target their opponents with threats of violence, economic retaliation and harassment.”

One nonprofit group, Coloradans for Economic Growth, made two donations totaling $500,000 to ATP in 2008. Another, called New Leadership Colorado, gave $45,000 to ATP. Both groups listed Hackstaff lawyers as their contacts, and have the Denver law firm as their sole address.

In 2010, another mysterious nonprofit called Spur Education Fund was also established through Hackstaff Law, and soon became ATP’s primary donor, sending $110,000 to the group via several wire transfers.

The three nonprofits appear to be inactive, and have been described as temporary conduits for anonymous donations to support other political committees and causes.

Tax experts say an individual or a law firm can create an unlimited number of nonprofit groups, which can then be dissolved before the IRS gets around to examining whether they played by the rules governing (c)(4) groups.

“They’re like mushrooms after the rain,” said Marcus Owens, the former director of the IRS Exempt Organizations Division. “They pop up, and after a day in the sunlight, they’re gone.”

The groups have no website and no spokesperson, and list only the phone number and email for Hackstaff’s Denver office.

“My client has instructed me not to reveal that information,” said Hackstaff attorney Mario Nicolais, when the Center inquired about the nonprofit groups’ contact information and leadership.

Nonprofit ninja tactics

In addition to their contributions to ATP, Coloradans for Economic Growth and New Leadership Colorado spent millions in a failed 2008 ballot effort to establish an anti-union “right-to-work” law in Colorado.

Such laws allow employees at union shops to remain covered by a union contract but opt out of their union dues payments, and have drained union membership in 23 states.

The $500,000 gift from Coloradans for Economic Growth to ATP in 2008 was actually on its way to another nonprofit group — the nation’s largest advocate for anti-union causes. In a matter of days, the half-million dollars went through bank accounts at three nonprofits.

It eventually landed in the Virginia bank account of the National Right to Work Committee, which sent $360,000 in grants to Montana’s Right to Work committee in the past three years — an organization that, until recently, was headed by LeFer.

The nonprofits managed by Hackstaff to fund ATP and other groups have since faded from public view. In a letter to the Center, the IRS reported there is “no record of the tax-exempt status” for the organizations.

The IRS also has no record of the groups’ yearly tax returns. If no such filings are made for three consecutive years, their exempt status can be revoked. In 2010, the IRS revoked the tax-exempt status for a group called New Leadership USA, which is based at Hackstaff Law.

The IRS has no record of ATP’s tax reports since 2008.

“If the IRS has cause to believe that ATP’s filings were inaccurate in any meaningful way, they have the authority and duty to contact the organization and seek answers to any questions they may have,” wrote ATP’s LeFer in an email.

LeFer hosts an online video seminar called “Starting a Nonprofit Organization in 5 Easy Steps,” which offers “nonprofit ninja tactics” for establishing a nonprofit “in five days or less.”

In its 2008 application for exempt status, ATP also appears to have misled the IRS by claiming a $300,000 donation from Colorado furniture tycoon Jacob Jabs was at risk if its status as a nonprofit wasn’t expedited. Jabs denies giving the money, and newly released bank records for the group appear to confirm his denial.

However, Jabs was aligned with anti-union efforts by Coloradans for Economic Growth, a group that made a $300,000 donation to ATP in 2008.

When ATP applied for tax-exempt status in 2008, it stated that it would not “spend any money attempting to influence the selection, nomination, election or appointment” of political candidates.

The group is arguing in court that its spending on mailers and other activities around elections serves an “educational” purpose, and therefore is not political campaign activity and does not need to be reported to state election officials.

Evidence of coordination?

Internal documents for ATP, obtained by the Montana Commission on Political Practices and reported on by the investigative news show Frontline on PBS in October, seem to support charges that ATP has coordinated with several candidate campaigns since 2008.

One of those making such claims is Debra Bonogofsky, a Republican who has run unsuccessfully for Montana’s state House of Representatives three times.

During her 2008 run, Bonogofsky was puzzled by a call from former state legislator John Sinrud, one of ATP’s founders, offering to lend a hand.

“They wanted to know if they could help with my campaign,” said Bonogofsky. “I didn’t know what they meant by that.”

Bonogofsky found out two years later, when she faced Republican Dan Kennedy in a 2010 primary contest for the state’s 57th District house seat. And this time, ATP did not call to offer her help.

Instead, ATP sent out a letter warning voters that Bonogofsky, a moderate Republican, was part of a movement by “radical environmentalists and their anti-business allies” to take control of Montana.

Kennedy knocked off Bonogofsky in the primary, and Bonogofsky filed a complaint with the state’s election commission, alleging that ATP and her opponent had coordinated illegally.

“These groups are convoluted and intertwined and are clearly meant to confuse and deceive Montana voters and circumvent Montana law,” her August 2010 complaint read.

Last month a judge released ATP’s bank records, giving more evidence of coordination between Kennedy and ATP. A $557 check from Kennedy’s campaign was made out to a company called “Direct Mail,” and deposited into the Wells Fargo bank account of ATP.

In November, Kennedy told the Associated Press that he made the payment to a printing house called Direct Mail and Communications to send fliers for his campaign — not to ATP.

The print house is owned and operated by Allison LeFer, the wife of ATP’s Christian LeFer.

Mr. LeFer told the Center his wife’s business is a separate operation from ATP. He told the investigative reporting group ProPublica that they have “scrupulously endeavored” to avoid illegal coordination with candidates.

Allison LeFer told the Center she is not involved in ATP, and referred questions to her husband.

When a Montana judge released the organization’s bank records in early November, they revealed that Ms. LeFer has actually been deeply involved in ATP’s day-to-day operations as a signer on many of the organization’s checks.

Montana 2012

While ATP was dealt a loss in the governor’s race, it maintained a presence in other important, if smaller, contests in the state. One was the race for state school superintendent, in which incumbent Democrat Denise Juneau has a narrow edge over Republican Sandy Welch in a race that is headed for a recount.

ATP sent mailers calling Juneau a “#1 Radical Environmentalist” who is “against developing coal resources.”

The race has implications for future land and resource development in the state. The superintendent of schools occupies one of five positions on the state’s land board alongside the governor, attorney general, secretary of state and state auditor. The five-member board votes on decisions about land leasing to private developers and mining companies in the state.

ATP’s efforts, however, were not enough to tip control of the Land Board to Republicans in 2012. Nor did ATP keep Montanans from overwhelmingly endorsing a non-binding referendum in response to the 2010 Citizens United U.S. Supreme Court decision that allowed corporations and unions to raise and spend unlimited sums on political campaigns.

Almost three-fourths of voters in both Montana and Colorado approved initiatives rebuking the high court’s ruling on unlimited political speech by corporations.

“The electorate has been sensitized by an election that saw more money than ever,” said Bender. “That a lot of it was undisclosed only further enraged people.”