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Context of 'January 28, 2011: Democrats Considering Challenging Tax-Exempt ‘Nonprofit’ Political Organizations’ Tax Status; if Successful, Organizations Would Be Forced to Disclose Donors'

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Democrats are aghast at the amount of corporate spending they expect to be used against them in the 2010 elections, according to media reports. The US Chamber of Commerce (see September 20, 2010, September 30, 2010, and October 2010) projects that it will spend $75 million this year, over double its spending of $35 million in 2008, to oppose Democrats running for federal and state office. USCoC officials say that spending could go even higher. Other organizations, such as American Crossroads, a right-wing political group headed by former Bush political advisor Karl Rove (see September 20, 2010 and February 21, 2012), are on track to raise and spend tens of millions, again to fund political activities designed to prevent Democrats from being elected. A report circulating among Democratic Congressional leaders says that some $300 million has been raised for the 2010 campaign, all coming from 15 conservative tax-exempt organizations. Sheila Krumholz of the Center for Responsive Politics says: “A commitment of $300 million from just 15 organizations is a huge amount, putting them in record territory for groups on the right or left. With control of Congress hanging in the balance, this kind of spending could have a major impact.” Chris Van Hollen (D-MD), chairman of the Democratic Congressional Campaign Committee (DCCC), says the amount of corporate funding for Republican political activities is “raising the alarm bell.” The DCCC spent $177 million in all of 2008’s Congressional races. Labor unions and other groups allied with Democrats plan heavy spending of their own, but nothing to compare to conservative corporate funding. The Service Employees International Union (SEIU), for example, plans to spend $44 million on election-related spending this year. Political scientist Anthony J. Corrado Jr. says: “What we are seeing is that major businesses and industries are taking advantage of the recent court ruling and favorable political environment. They are already committing substantially more money than they have in any previous election cycles.” Corrado is referring to the controversial Citizens United Supreme Court decision (see January 21, 2010) that has overturned almost a century’s worth of campaign spending limitations. USCoC officials also point to a 2007 Supreme Court ruling that overturned the ban on political issue advertising by corporations and labor unions close to an election (see June 25, 2007). The Los Angeles Times reports that the heavy corporate fundraising for Republican political interests is driven largely by corporate opposition to the Democrats’ focus on health care reform, and a bill passed in July that established stricter government monitoring and regulation of the financial system. Roger Nicholson of the International Coal Group, a mining company, recently wrote to fellow executives urging them to contribute money to defeat the “fiercely anti-coal Democrats” in Washington, specifically targeting a number of Democrats in Kentucky and West Virginia. Five of the largest health insurers, including Aetna, Cigna, and United HealthCare, are banding together to create and fund a new nonprofit group to help influence elections. The group has not yet been formed, but reports say that it will spend some $20 million to defeat Democrats. [Los Angeles Times, 8/2/2010]

Entity Tags: Karl C. Rove, Anthony J. Corrado Jr., American Crossroads, Aetna, Chris Van Hollen, International Coal Group, Service Employees International Union, US Supreme Court, Los Angeles Times, Roger Nicholson, UnitedHealth Group, Cigna, US Chamber of Commerce, Sheila Krumholz

Timeline Tags: Civil Liberties, 2010 Elections

American Crossroads logo.American Crossroads logo. [Source: American Crossroads]American Crossroads, a political advocacy group backed by former Bush administration political adviser Karl Rove, is spending millions on attack advertisements targeting Democrats for the 2010 midterm elections. Ninety-one percent of the funding for American Crossroads comes from three right-wing billionaires. In August, American Crossroads raised $2,639,052. $2.4 million of that, or 91 percent of that total, comes from Trevor Rees-Jones, Robert Rowling, and Carl Linder. Rees-Jones is president of Chief Oil and Gas, a Dallas-based firm; he contributed $1 million in August to go with the $1 million he contributed earlier in the year. Rowling is CEO of TRT Holdings; like Rees-Jones, he gave $1 million in August to go with a previous $1 million contribution. Linder owns American Financial Group (AFG), a Cincinnati-based firm. Linder used to own Chiquita, the fruit corporation, and owns a partial stake in the Cincinnati Reds. AFG donated $400,000 in August. In July, billionaire Jerry Perenchio, who in 2008 chaired presidential candidate Senator John McCain (R-AZ)‘s national finance committee, gave $1 million to American Crossroads. American Crossroads has a partner group, American Crossroads GPS (for Grassroots Political Strategies), that is organized under a section of the tax code that does not require disclosure of donors. The group is raising millions of dollars, but refuses to identify the donors. The two groups were organized earlier in the year by Rove and former Republican National Committee chairman Ed Gillespie. Another political advocacy group, American Action Network, shares a downtown Washington office with the Crossroads group; both are working alongside other right-wing advocacy groups such as Americans for Prosperity and the US Chamber of Commerce. [Salon, 9/20/2010; Politico, 9/20/2010]

Entity Tags: Ed Gillespie, American Crossroads, American Action Network, American Crossroads GPS, Carl Linder, Robert Rowling, US Chamber of Commerce, A. Jerrold Perenchio, Karl C. Rove, Americans for Prosperity, Trevor Rees-Jones

Timeline Tags: Civil Liberties, 2010 Elections

A conservative super PAC, American Action Network (AAN), launches a $19 million advertizing blitz against Democrats in 22 House districts. AAN was founded by former US Senator Norm Coleman (R-MN) and former Nixon administration official Fred Malek. AAN has already pumped $5 million into races featuring Republican Senate candidates. Founded in February, the group was formed, according to Malek, to “counter what the labor unions are doing on the Democratic side.” The group is split into two parts: the Action Forum, a 501(c)(3), which allows donations to be tax-deductible but limits political activities, and the Action Network, a 501 (c)(4), in which contributions are not deductible or disclosed but the group can advocate for political causes. AAN president Rob Collins says: “This Democrat-controlled Congress has already voted for higher taxes and promises next month to raise taxes on America’s families and businesses. This is simply unacceptable and something we wanted to call attention to.” AAN is part of a larger network of conservative super PACs (see March 26, 2010), including American Crossroads, that plans to spend as much as $50 million on Congressional races. AAN shares office space with American Crossroads. [Politico, 10/13/2010; New York Times, 10/17/2010; CT Mirror, 10/17/2010]
Objectionable Ads - The AAN ads airing in Connecticut draw fire after accusing Democrats Christopher Murray (D-CT) and Jim Himes (D-CT) of voting to provide free health care to illegal immigrants and Viagra to sex offenders. Murray accuses AAN of being linked to a number of Republicans in the Bush administration, and asks who is providing the money for the ads. Campaign finance law allows the donors to organizations such as AAN to remain anonymous. “This is one of the biggest TV buys this district has ever seen,” Murphy says. “And what we deserve to know is who is standing behind it. I want to know. I think that’s what the voters want as well.… These ads on TV right now, fronted by a shadowy, anonymous group of billionaire donors and multi-national corporations are a clear sign of what the difference is in this election.” An AAN spokesman refuses to discuss the finances behind the organization, saying only: “What we do is we comply with the letter of the law. That’s all we have to offer about that.” Murray calls the ad’s allegations “laughable.” Both claims have been debunked by independent fact-checking organizations, though Murray’s opponent Sam Caligiuri (R-CT) says the ad’s content is “verifiable,” and says even if the ad is questionable, Murray has told lies of his own about Caligiuri.
AAN Co-Founder Involved in Criminal Activities as Nixon Administration Official - CT Mirror notes that Malek, a Wall Street millionaire and the co-founder of AAN, was not only a member of the Nixon administration (whose crimes and excesses concerning the Watergate scandal led to a round of campaign finance reforms—see 1974 and May 11, 1976), but was also involved in a recent investment scandal. The New York Times goes further in its examination of Malek, noting that he was heavily involved in the 1972 “Townhouse operation” that raised illegal corporate cash in so-called “slush funds” and distributed the monies in key Senate races (see December 1, 1969, Early 1970, March 23, 1971, and August 18, 1974). Malek, the White House personnel chief in 1972, helped dispense illegal patronage deals to Nixon donors and served as deputy director of CREEP (the Committee to Re-Elect the President), an organization heavily involved in criminal activities. And the liberal news Web site Think Progress notes that Malek was the Nixon administration’s unofficial “Jew counter” (see July 3, 1971 and September 1971) and was part of the administration’s illegal persecution of Jews who worked in the federal government. During the Watergate investigation, Malek admitted that some of CREEP’s activities might have “bordered on the unethical.” Malek worked with American Crossroads co-founder Karl Rove during the Nixon administration, when Rove worked to re-elect Nixon as the executive director of the College Republican National Committee. Malek is a member of the Weaver Terrace Group, an informal amalgamation of Republican strategists from “independent” groups who regularly meet, trade political intelligence, and make joint fund-raising trips. The group is named after the street where Rove used to live. Former Watergate prosecutor Roger Witten says: “It creates all the appearances of dirty dealings and undue influence because our candidates are awash in funds the public is ignorant about. This is the problem that was supposedly addressed after Watergate.” [New York Times, 10/17/2010; Think Progress, 10/18/2010]

Entity Tags: Jim Himes, Christopher Murray, CT Mirror, American Crossroads, American Action Network, Fred Malek, Weaver Terrace Group, Sam Caligiuri, Committee to Re-elect the President, Think Progress (.org), Nixon administration, Rob Collins, Norm Coleman, Roger Witten, Karl C. Rove, New York Times

Timeline Tags: Civil Liberties

The progressive magazine Mother Jones reports on Congressional Democrats’ plans to curb the effects of the Supreme Court’s Citizen United decision, which allows unlimited contributions to campaign organizations by corporate and union donors (see January 21, 2010). Last year, Senate Republicans refused to allow a campaign finance reform bill, the DISCLOSE Act, to come to the floor for a vote (see July 26-27, 2010). Now Democratic leaders say they are considering filing challenges to the nonprofit tax statuses of many of the groups that were so influential in the 2010 elections. Representative Chris Van Hollen (D-MD) tells a Mother Jones reporter about the plan. According to Van Hollen, two of the groups they plan to target are Karl Rove’s Crossroads GPS and the American Action Network (AAN—see Mid-October 2010), headed by former Senator Norm Coleman (R-MN). Together, the two groups spent over $43 million supporting conservative candidates and targeting Democrats, accounting for some 23 percent of all outside conservative spending between them. According to Van Hollen, “People are looking at different legal strategies through the courts because there’s emerging evidence that these groups have abused the rules.” Representative David Price (D-NC) agrees. “I think there are ample goals for challenging the way those groups have acted,” he says. Crossroads GPS spokesperson Jonathan Collegio says in return, “Van Hollen is irresponsibly making claims on zero evidence whatsoever and this is extremely irresponsible for an elected official holding high office.” No one from AAN is willing to respond to the Mother Jones reporting. Both Crossroads GPS and AAN, like many other such groups, are organized under the IRS’s 501(c)4 tax status—tax-exempt, not-for-profit groups whose purpose under the IRS code is “primarily to further the common good and general welfare of the people of the community” (see 2000 - 2005). The law allows such groups to engage in political advocacy, such as running ads for or against candidates, but such “electioneering” activities must not be those groups’ “primary activity.” As far as is known, Crossroads GPS and AAN have no other purpose except electioneering. 501(c) groups do not have to register as political action committees (PACs) and are allowed to conduct their business with very little outside scrutiny. However, if the Federal Election Commission or the IRS determine a group has violated the rules, that group would be forced to register as a PAC and disclose the sources of its funding. If the Democrats challenge the status of these groups, they would be following in the footsteps of private organizations. A coalition of public advocacy groups has filed complaints against Crossroads GPS and another 501(c)4 group, American Future Fund (AFF—see October 12, 2010), claiming that their primary functions are, according to the Crossroads GPS complaint, to “influence the 2010 federal elections and to elect Republicans to office.” The complaints are still pending. In September 2010, Senator Max Baucus (D-MT) asked the IRS to examine several 501(c) groups to “ensure that political campaign activity” wasn’t their primary activity (see September 28, 2010). [Mother Jones, 1/28/2011]

Entity Tags: David E. Price, American Crossroads GPS, American Action Network, American Future Fund, DISCLOSE Act of 2010, Max Baucus, Norm Coleman, Jonathan Collegio, Karl C. Rove, Chris Van Hollen, Mother Jones, US Congress

Timeline Tags: Civil Liberties

Chris Van Hollen, in an undated appearance on Fox News.Chris Van Hollen, in an undated appearance on Fox News. [Source: Associated Press / Politico]Representative Chris Van Hollen (D-MD) and other prominent Democrats file a lawsuit against the Federal Election Commission (FEC) asking that entity to force the disclosure of political campaign donor information. In 2007, after a Supreme Court ruling (see June 25, 2007), the FEC drastically rewrote its disclosure requirements, creating what Van Hollen calls a “major loophole” that many 501(c)4 entities funded by corporate or labor union donations are using to operate “under a veil of anonymity.” Van Hollen and his colleagues say they want to force wealthy corporations and individuals to disclose who they are and how much they donate to political organizations. Currently, the Citizens United decision (see January 21, 2010) allows such donors to remain anonymous, and the organizations that receive their donations to conceal the amounts they are receiving. Van Hollen cites the 2002 Bipartisan Candidate Reform Act (BCRA—see March 27, 2002) as applying in this instance. In the brief he submits for the lawsuit, Van Hollen writes: “The US Chamber of Commerce, a Section 501(c) corporation, spent $32.9 million in electioneering communications in the 2010 Congressional elections, and disclosed none of its contributors; American Action Network (AAN—see Mid-October 2010), a Section 501(c) corporation, spent $20.4 million in electioneering communications in the 2010 Congressional elections, and disclosed none of its contributors; Americans for Job Security, a Section 501(c) corporation, spent $4.6 million in electioneering communication in the 2010 Congressional elections, and disclosed none of its contributors.” The lawsuit comes almost simultaneously with news that the White House is considering issuing an executive order that would require federal contractors to reveal their donations (see April 20, 2011). Democrats admit that even as they push the lawsuit forward, and President Obama publicly criticizes the practice of secret donations, they, too, are raising undisclosed donations for the various 2012 campaigns. Experts note that in most cases, Democrats’ efforts to raise undisclosed donations are far smaller than efforts by Republicans, and the amounts they are receiving are, so far, much smaller. Fred Wertheimer of Democracy 21, who is leading Van Hollen’s legal team, acknowledges that the lawsuit will not alter campaign finance policy before the 2012 elections, though he says it is possible that the lawsuit could receive a favorable decision and force disclosure while appeals are pending.
Similarities to DISCLOSE Act - Both the lawsuit and the executive order are similar to sections of the DISCLOSE Act, a legislative package drafted by Van Hollen and other Congressional Democrats that was blocked by Senate Republicans from coming to a vote (see July 26-27, 2010). USCOC spokesperson Blair Latoff says the lawsuit and the order comprise a “desperate attempt by the White House and House Democrats to resurrect the corpse of the DISCLOSE Act.” (Law professor Steven D. Schwinn will refute Latoff’s accusation, writing that Van Hollen’s lawsuit in no way seeks to force the DISCLOSE Act into law via the courts.) Like the failed legislation, the lawsuit and the proposed executive order would work to curtail the effects of the Supreme Court’s controversial Citizens United decision, which allows virtually unlimited and anonymous political spending by corporations and other entities. The lawsuit argues that the concealment of donor identities contradicts both the law and the Court’s ruling, citing the following language in the majority ruling: “With the advent of the Internet, prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable.”
Seeks Change in FEC Regulations - The lawsuit specifically challenges an FEC regulation adopted in 2007 that contravened language in the 2002 Bipartisan Campaign Reform Act (see March 27, 2002) that required disclosure of donations of $1,000 or more if the donations were made for the purpose of furthering “electioneering communications.” Another petition filed by Van Hollen’s group asks the FEC to revise a regulation that “improperly allowed nonprofit groups to keep secret the donors” whose funds were being used to pay for so-called independent expenditures in federal elections. [van Hollen, 4/21/2011 pdf file; Los Angeles Times, 4/21/2011; New York Times, 4/21/2011; Steven D. Schwinn, 4/25/2011; Think Progress, 4/27/2011]
'Sign of Weakness' - Bradley A. Smith, a former FEC commissioner and the head of the Center for Competitive Politics, a conservative advocacy group, says of the lawsuit: “This is a sign of weakness by a group that’s afraid they’re going to lose, and lose big. Again and again, you see evidence that their real purpose is to try to shut down their political opposition.” Smith and other conservatives say Democrats want to “chill” free speech. [New York Times, 4/21/2011]
FEC Will Refuse to Consider Accompanying Petition - In December 2011, the FEC will refuse to consider an accompanying petition on a 3-3 vote. [Commission, 12/16/2011; Commission, 12/16/2011] The vote is along partisan lines, with the three Democrats on the commission voting to consider the petition and the three Republicans voting against. The law prohibits the FEC from having a majority of commissioners from either party. [Think Progress, 1/21/2012]
Judge Will Rule in Favor of Plaintiff - In March 2012, a district judge will rule in favor of Van Hollen in the lawsuit (see March 30, 2012).

Entity Tags: Bipartisan Campaign Reform Act of 2002, Americans for Job Security, Barack Obama, American Action Network, Blair Latoff, Bradley A. (“Brad”) Smith, Steven D. Schwinn, US Chamber of Commerce, DISCLOSE Act of 2010, Chris Van Hollen, Fred Wertheimer, Federal Election Commission

Timeline Tags: Civil Liberties

The Washington Post reports that an anonymous donor gave the political advocacy organization Crossroads GPS $10 million to run television ads attacking President Obama and Democratic policies, part of the almost $77 million in secret donations the group has received. It also received another $10 million from an anonymous donor to use during the 2010 midterm elections. The Post says the donations are emblematic of “the money race that is defining the 2012 presidential campaign.” According to data provided by the Center for Public Integrity, $76.8 million of the money raised in 2010 and 2011—62 percent—was secretly contributed to Crossroads GPS. The money came from fewer than 100 individual donors, which works out as an average donation of over $750,000; 90 percent of its donors gave over $1 million in individual donations. Crossroads GPS is a conservative nonprofit 501(c)(4) group co-founded by former Bush administration political advisor Karl Rove. The information about the donations comes from draft tax returns that provide a limited insight into the donations received by the group. Under the law (see January 21, 2010 and March 26, 2010), Crossroads GPS is not required to identify its donors. The Post says it is possible both donations came from the same source, but it has no way to confirm that supposition.
Explanations and Criticisms - Crossroads GPS is the sister organization of American Crossroads, the super PAC also co-founded by Rove. The two groups share the same president (Steven Law), the same spokesperson, the same staffers, and the same mailing address. Together, they have raised $100 million for the 2012 election cycle and have already run millions of dollars of television ads. Crossroads GPS spokesperson Jonathan Collegio says that the organization “advocates for free markets, free trade, limited government, and personal responsibility.” The group’s donors are “individuals and businesses that support our vision of lower taxes and smaller government. We believe President Obama’s tax and regulatory policies are strangling economic growth through excessive regulation and government spending that is crowding out private investment.” Bill Allison of the Sunlight Foundation, which advocates for transparency in government and politics, says that the two groups are “certainly not a grassroots movement.… These donors can have a very disproportionate effect on politics, and the fact that we don’t know who they are and what kind of favors they will ask for is very troubling.” Allison speculates that some of the anonymous Crossroads GPS donors may be large public corporations, which according to the Post have “for the most part… not donated to super PACs or other groups that disclose donors.” American Crossroads is required to disclose its donors, which include Texas billionaire Harold Simmons ($12 million) and Texas home builder Bob Perry ($2.5 million). The Republican Jewish Coalition has identified itself on its tax returns as a donor to Crossroads GPS, having given $4 million to the organization. (Crossroads GPS donated back $250,000.) Sunlight and other critics have questioned Crossroads GPS’s status as a nonprofit “social welfare” group. Under IRS regulations, such groups cannot have as their primary purpose influencing elections, but they can spend up to half their money on political campaigning. The group has asked the IRS to grant it tax-exempt status. Critics have asked the IRS to revoke the group’s nonprofit status, saying that it is patently a political organization. A complaint filed by the Campaign Law Center and Democracy 21 in December 2011 said in part, “We are deeply concerned about the failure of the IRS to take any public steps to show that the agency is prepared to enforce the tax laws.” Crossroads GPS claims it has spent $17 million on direct election activities and $27 million on “grassroots issue advocacy,” including a $16 million expenditure in the summer of 2011 on ads pushing against tax increases during debate on raising the debt ceiling (see August 5, 2011). It has also given some $16 million to a network of conservative advocacy groups, including $4 million to Americans for Tax Reform (ATR), $3.7 million to the National Federation of Independent Business, and $2 million to the National Right to Life Committee. According to Crossroads GPS, all of its donation recipients are instructed to use the funds “only for exempt purposes and not for political expenditures.” In 2010, ATR spent $4 million—almost exactly the amount it received from Crossroads GPS—on political ads in 2010. Melanie Sloan of Citizens for Responsibility and Ethics in Washington (CREW) says that even if ATR did not spend the Crossroads GPS money on ads, the donation allowed it to divert $4 million of its own money to election ads. “It’s the same amount—does that seem likely to be a coincidence to you?” she asks a reporter. An ATR spokesperson says the Crossroads GPS donation was “in support of our work fighting tax hikes.” [Washington Post, 4/13/2012; iWatch News, 4/20/2012; Think Progress, 4/20/2012]
High Compensation - Steven Law, the former deputy secretary of labor under President Bush and the former general counsel for the US Chamber of Commerce who serves as the president of both organizations, pulled down $1.1 million in salaries and bonuses for the two groups. Collegio explains the high compensation to a reporter, saying: “Crossroads is a serious organization. Free market conservative donors know that hiring top CEO talent requires real compensation.” [iWatch News, 4/20/2012]

Entity Tags: American Crossroads, National Right to Life Committee, Karl C. Rove, Barack Obama, American Crossroads GPS, Washington Post, National Federation of Independent Business, Americans for Tax Reform, Melanie Sloan, Campaign Law Center, Bill Allison, Jonathan Collegio, Steven Law, Harold Simmons, Center for Public Integrity, Democracy 21, Republican Jewish Coalition, Bobby Jack Perry

Timeline Tags: Civil Liberties, 2012 Elections

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