Crossroads political machine funded mostly by secret donors

Introduction

Sixty-two percent of funds raised by two conservative groups associated with former Bush adviser Karl Rove have come from mystery donors, a statistic that shows the increasingly important role being played by nonprofits in a post-Citizens United political world.

American Crossroads, a super PAC, and Crossroads Grassroots Policy Strategies, a nonprofit, were founded in 2010 by Rove and another former Bush adviser, Ed Gillespie. Together, they raised $123 million through the end of 2011, according to a Center for Public Integrity review of Federal Election Commission data and Internal Revenue Service filings.

Of that sum, $76.8 million, or 62 percent, went to Crossroads GPS, which is a nonprofit, “social welfare” group organized under Section 501(c)(4) of the U.S. tax code. Like American Crossroads, Crossroads GPS can pay for advertising that attacks political opponents by name and urges viewers to vote against them.

But unlike the super PAC, GPS is prohibited from making politics its “primary purpose,” according to the IRS, a rule that these politically active nonprofits have interpreted to mean they can spend up to 49 percent of their funds on such advertising.

As a nonprofit, the group is not required to publicly name its donors, except if they give “for the purpose of furthering” a political advertisement. (GPS has told the FEC that it has not “solicited or received” contributions earmarked for such expenditures.)

Jonathan Collegio, the communications director of Crossroads GPS, said that the group’s unnamed donors, which number fewer than 100, are “individuals and businesses that support its vision of lower taxes and smaller government.”

Election law expert Rick Hasen, a professor at the University of California-Irvine law school, told the Center for Public Integrity that he wasn’t surprised that more money was flowing into Crossroads’ “secret money option.”

“For every Bob Perry who craves the attention, there are many others, including corporations, who hope to influence politicians and policy without any public accountability,” he said.

Perry is a well-known donor to conservative causes, and he was one of the financiers behind the Swift Boat attacks in 2004 on former Democratic presidential candidate Sen. John Kerry of Massachusetts.

Both Crossroads groups are allowed to accept unlimited contributions from individuals, corporations and other groups for political advertisements, thanks to changes in the country’s campaign finance system in the wake of the U.S. Supreme Court’s Citizens United decision and a lower court ruling called SpeechNow.org v. Federal Election Commission.

American Crossroads is required to report its donors to the FEC and does not have the same limitations on spending as its sister organization.

American Crossroads, which was launched in March of 2010, quickly established itself as the biggest super PAC, raising $28 million by the end of 2010, according to records filed with the IRS and FEC. It pulled in another $18.4 million last year – with millions more flowing into its coffers this year.

Records show that Texas billionaire homebuilder Perry, along with fellow billionaire businessmen Harold Simmons and Robert Rowling, rank as the super PAC’s top donors, having collectively donated $24.5 million through the end of 2011, through their personal and corporate accounts.

Meanwhile, Crossroads GPS, which was created a few months after the super PAC, collected a total of $76.8 million between June 1, 2010, and Dec. 31, 2011, according to tax forms released by the group Tuesday.

Earlier this year, the Center for Responsive Politics reported that the Republican Jewish Coalition gave Crossroads GPS $4 million, and the Center for Public Integrity previously reported that casino executive Sheldon Adelson gave the group a seven-figure check for an unspecified amount.

Little is known about the group’s other donors.

The tax forms released by Crossroads GPS show 96 contributors, two dozen of which gave at least $1 million, including one for $10 million and one for $10.1 million.

The two Crossroads groups have a combined fundraising goal of at least $240 million for the 2012 election cycle, as the Center for Public Integrity previously reported, and they are already spending heavily on negative ads targeting President Barack Obama, as well as Democrats in several top-tier U.S. Senate races.

Through the end of 2011, Crossroads GPS paid the Virginia-based Crossroads Media more than $38 million, according to the tax forms released by the group Tuesday – money that frequently went toward placing issue ads and ads that expressly advocated for or against federal candidates.

Crossroads Media, which describes itself as the “premier Republican media services firm,” was founded in 2001 by GOP political operative Michael Dubke.

According to Crossroads GPS’s tax filings, it has spent more than $17 million on “direct” political expenditures and more than $27 million on “grassroots issue advocacy” through the end of 2011. But only some of this spending was required to be reported to the government agency tasked with regulating federal elections.

According to the group’s FEC filings, it spent $16 million on ads expressly advocating for or against federal candidates in 2010 and another $1.1 million on issue ads mentioning a specific candidate ahead of high-profile elections in 2010 and 2011.

Its tax forms indicate that the big spending on “paid advertising, mailings, emails and web-based advocacy tools” is to “influence policymaking outcomes through grassroots mobilization.”

It also allotted nearly $16 million in grants to a total of 13 other conservative organizations.

That includes $4 million to anti-tax crusader Grover Norquist’s Americans for Tax Reform, $3.7 million to the National Federation of Independent Business, $2 million to the National Right to Life Committee, $600,000 to the lobbying arm of the National Rifle Association, $500,000 to the conservative nonprofit American Action Network and $250,000 to the Republican Jewish Coalition.

These grants are accompanied by a letter stating that “the funds are to be used only for exempt purposes, and not for political expenditures,” according to Crossroads GPS’s tax filings.

Steven Law, the president of both Crossroads organizations, worked 60 hours a week, split between the two groups – with more time being spent aiding Crossroads GPS during the second half of 2011.

For his work, Law – who served as President George W. Bush’s deputy secretary of Labor and later general counsel of the U.S. Chamber of Commerce – collected a combined $1.1 million in salary and other compensation for both groups, including $270,000 in bonuses.

“Crossroads is a serious organization,” Collegio told the Center for Public Integrity. “Free market conservative donors know that hiring top CEO talent requires real compensation.”