How nonprofits may be evading state campaign finance laws

Introduction

A California organization receives $11 million from another group based in Arizona, which received the cash from a separate group, which in turn had it funneled from a fourth, based near Washington, D.C. Drug cartel money headed for an offshore account? No, just state electioneering in a post-Citizens United world.

The current state of campaign finance affairs, laid out in a report Thursday from Stateline, exemplifies how the growing role of independent national political groups is causing problems for state officials trying to enforce their own election laws. Independent spending had unprecedented influence on state elections this year, with millions of dollars in corporate and other outside money shaping races across the country.

The issue in the California case centers on so-called 501(c)4 groups, which under federal can law hide their donors’ names provided that political spending is not the groups’ primary purpose. Several states require these groups to disclose their donors despite the federal law. As Stateline details, however, some organizations have been able to move their money through separate organizations in different states to get around these tougher state laws.

Take the case of American Tradition Partnership, which made a name for itself by successfully fighting Montana’s ban on corporate campaign contributions. As questions about the group’s funding piled up earlier this year, investigations by the Center for Public Integrity and ProPublica found that the group may have misled the Internal Revenue Service about its status while raising hundreds of thousands of dollars from other groups, which in turn do not disclose their donors.

American Tradition Partnership was already involved in a Montana lawsuit accusing it of illegally coordinating with political campaigns, which led to another twist to the case earlier this month when a judge ruled that the group had to turn over its bank records as part of that case. The order revealed a trove of financial data that would normally remain hidden because the group, as a 501(c)4, does not have to reveal its donors.

Or take the Republican Governors Association, which can accept unlimited corporate funds though it does have to disclose its donors. The fact that cash came from corporations would appear to restrict the group’s donations in states that ban corporate funds, but the RGA used its own state-based PACs to funnel money to state races and evade the bans. In Pennsylvania, for example, the RGA channeled a $1.5 million donation to Pennsylvania’s Gov. Tom Corbett by moving the money through its Wisconsin PAC before sending it on to its Pennsylvania PAC, which finally gave the money to Corbett’s campaign.

RGA spokesman Mike Schrimpf told the Center by email several weeks ago that, “The RGA worked with both Pennsylvania and Wisconsin campaign finance authorities in 2010 to ensure we were complying with the law.” However, as the Center report explained, it was impossible to track who exactly gave the $1.5 million that made it to Corbett’s coffers and whether there was any corporate money mixed in.

In the California case, the state’s Fair Political Practices Commission, which oversees campaign finance, went so far as to call the practice money laundering. In a statement, the commission accused Americans for Responsible Leadership, the Arizona group that sent the money to California, of violating state law.

The group did not immediately reply to an email asking for comment. Robert Graham, one of the group’s directors, also did not return a phone message. A letter filed last week with Fair Political Practices Commission by Michael Bopp, a lawyer for Americans for Responsible Leadership, said the group did not admit any wrongdoing, the Sacramento Bee reported.

The $11 million donation was sent to a California PAC that opposed a tax-hike initiative, which ultimately passed, backed by Gov. Jerry Brown. The Fair Political Practices Commission said Thursday that it is launching an investigation into the case to find out where exactly the money came from.