More money, less transparency in U.S. politics after Citizens United

WTF Citizens United analysis hp 1.24.12

 
The Supreme Court’s landmark decision in Citizens United has opened the floodgate of corporate spending and influence in American politics but the disclosure rules to ensure transparency and deter corruption are being undermined by corporations and political action committees that take advantage of regulatory loopholes to obscure the true sources of the money they spend to shape elections.  


Two years after the Supreme Court struck down restrictions to corporate campaign contributions, so-called “Super PACs” have poured nearly $33.2 million (so far) into the 2012 presidential election, according to the Sunlight Foundation, a non-profit, non-partisan organization that promotes transparent governance.

Following the SpeechNow.org ruling by the D.C. Circuit Court of Appeals, these “independent expenditure only political action committees” are permitted to raise unlimited funds from corporation, non-profit organizations, unions, or individuals as long as they do not directly coordinate their independent expenditures – such as TV, radio and print ads – with the candidates or campaigns they are supporting.

Buying influence through Super PACs? 

The ban on coordinating expenditures is supposed counter any quid pro quo effects of allowing corporations and individuals to contribute unlimited funds to Super PACs. The theory is that if a Super PAC can’t directly coordinate with a candidate it supports, then corporations and individuals would not be able to buy influence by giving millions to the Super PAC in exchange for favorable treatment or access if a candidate is elected.

But whether the non-coordination rule is sufficient to safeguard public interest is debatable especially considering that the top-spending Super PACs in the 2012 presidential election are operated by people with close ties to the candidates running for president.

Two notable examples in the Republican primary are:

  • Restore Our Future, a pro-Romney Super PAC that is run by Charles R. Spies, Carl Forti, and Larry McCarthy. So far the PAC has spent nearly $12 million in the 2012 presidential race. Charles Spies, an attorney with Clark Hill, was the Chief Financial Officer for Mitt Romney’ 2008 presidential campaign. Carl Forti, a media strategist at the Black Rock Group, was the Deputy Campaign Manager/Political Director for Romney’s presidential campaign. Larry McCarthy, a media consultant at McCarthy Hennings Media, Inc., served on Romney’s media team in 2008. In April 2011, a shell corporation called W Spann LLC contributed $1 million to Restore Our Future, according to the PAC’s mid-year disclosure filings. W Spann LLC was dissolved months after making the contribution. Under pressure from the media, Edward Conard, a former managing director at Bain Capital LLC (the private equity firm led by Romney), came forward and admitted that he was behind W Spann LLC’s $1 million contribution. Restore Our Future later amended its filing to show Conard’s $1 million donation that was received on the same date under the same transaction ID number as W Spann LLC. Click here to download Restore Our Future’s disclosure reports filed with the FEC.
  • Winning Our Future, a pro-Gingrich Super PAC and has spent more than $7.7 million in the 2012 presidential race. Becky Burkett is the PAC’s president. Rick Tyler is the PAC’s senior adviser. Burkett previously served as a fundraiser for Newt Gingrich’s now-defunct American Solutions PAC. Tyler was the press secretary for Gingrich for over a decade. Although not disclosed yet by the Super PAC, the New York Times reported that the Winning Our Future received a $5 million contribution in early January from Sheldon Adelson, the billionaire casino owner and CEO of the Las Vegas Sands Corp. Click here to download Winning Our Future’s disclosure reports filed with the FEC.

“This idea that independent expenditures are non-corrupting…is quite frankly ludicrous to anybody who’s ever dealt with the realities of our political system,” said Mimi Marziani, Counsel for the Democracy Program at the Brennan Center for Justice at New York University School of Law. “It belays all logic to think, for instance, that an individual [or corporation] could give $5 million to my closely affiliated Super PAC – I know all about it – [and] that infusion of money, let’s say, is given to me at a critical moment in my campaign and necessary for me to achieve a key win. It is crazy to think that I will not feel indebted to that individual [or corporation] in some way.”

Super PACs present challenges to transparency & accountability 

But even as Super PACs are growing in influence, some argue that existing disclosure rules are inadequate to track the huge influx of political money made possible by the Citizens United and SpeechNow.org decisions.

“It’s more difficult now to follow the money than it once might have been,” said Eliza Newlin Carney, who covers lobbying and influence for CQ Roll Call and coined the term “Super PAC” to describe the independent-expenditure only multi-candidate non-connected political action committee.

Election experts highlighted three transparency challenges presented by Super PACs during a recent panel discussion hosted by the Sunlight Foundation.

First, Super PACs are able to accept contributions from non-profit organizations, and this practice enables Super PACs to conceal the identities of donors who finance the non-profit entities. Under current disclosure rules, a Super PAC is only required to identify the donors (in this case, non-profit organizations) and the amounts contributed. Non-profits are not required to disclose the identities of donors.

“So even if the Super PAC discloses and says, ‘Here are our donors, and one of our donors of X million dollars is this non-profit group,’ you still don’t know who funded the non-profit,” Carney pointed out.

Second, some Super PACs are exploiting the non-profit disclosure loophole and have established affiliated non-profit entities to funnel money and to maintain the anonymity of individual or corporate donors. An example cited by Carney is the Karl Rove’s American Crossroads Political Action Committee and its 501(c)(4) non-profit organization, Crossroads GPS.

“These two groups together have predicted that they plan to raise and spend on the order of $240 million in this election, which is actually twice as much as they predicted they would be spending originally. And my guess is that a pretty good chunk of that – maybe half of it, maybe even more – is going to go through the non-profit, which means we’ll never know where the money came from,” said Carney.

(To learn more, check out these satirical clips from the Colbert Report explaining the use of 401c3 to launder money to PACs. Clip one: Karl Rove’s American Crossroads and Crossroads GPS. Clip two: Stephen Colbert creates a shell corporation to fund his own PAC.)

Third, Super PACs can circumvent the timely filing of disclosure reports by changing its filing frequency, which is allowed once every calendar year.

For instance, Winning Our Future notified the FEC that it will be filing reports monthly instead of quarterly. Under the FEC’s rule, the Super PAC’s year-end report for Dec. 13, 2011 through Dec. 31, 2011 is now due on Jan. 31, 2012, and its monthly report for Jan. 1, 2012 – Jan. 31, 2012 is now due on Feb. 20, 2012. The filing dates for these reports are well after the Iowa caucus (held on Jan. 3, 2012), the New Hampshire primary (held on Jan. 10, 2012), and the South Carolina primary (held on Jan. 21, 2012). Thus, voters in these key primary states were unable to access crucial information to help them independently assess the credibility of the people and corporations funding the attack ads that they saw on television.

The loopholes combined with tactics employed by Super PACs make it much harder for American voters to figure out the true sources of the money spent in elections. Even the Supreme Court noted the importance of prompt and sufficient campaign finance disclosure to help voters make informed decisions. In Citizens United, the court contended that:

“A campaign finance system that pairs corporate independent expenditures with effective disclosure has not existed before today…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 for their positions and supporters. Shareholders can determine whether their corporation’s political speech advances the corporation’s interest in making profits, and citizens can 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. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.”

In a nutshell, the Citizens United decision has made it possible for corporations and wealthy individuals to buy elections through Super PACs. At the same time, disclosure loopholes have made it much more difficult for American voters to find out about the people and/or corporations funding the political ads – information voters need to make informed judgments on what they see, hear, or read before casting their ballots.

Efforts to reform the system

  1. Sen. Bernie Sanders (I-Vt.) has filed a constitutional amendment to overturn Citizens United. He has gathered nearly 195,000 signatures to support the “Saving American Democracy Amendment” since December. “In my view, a corporation is not a person. In my view, a corporation does not have First Amendment rights to spend as much money as it wants without disclosure on a political campaign. In my view, corporations should not be able to go into their treasuries, spend millions and millions of dollars on a campaign in order to buy elections. I do not believe that is what American democracy is supposed to be about,” Sander said as he introduced the amendment in the Senate. A constitutional amendment must be approved by a super majority or two-thirds of both the House and Senate or be ratified by the three-fourth – or 38 – of the states. To learn more about the amendment or sign the petition, visit Sander’s website.
  2. The Sunlight Foundation has drafted a SuperPAC Act to “establish comprehensive disclosure requirements with respect to spending in federal elections, creating a system of real-time, online transparency.” The drafted bill calls for real-time, online disclosure of all reports and require that the data are provided to the public in a searchable and sortable format. Right now, the FEC disclosure reports are available in a PDF format, which makes analyzing the data a much more time-consuming and tedious task. To learn more or to comment on the bill, visit SunlightFoundation.com.
  3. The DISCLOSE Act, sponsored by Rep. Chris Van Hollen (D-Md.), seeks to enhance disclosure and disclaimer requirements for political independent expenditures. The bill passed the House by a vote of 219 to 206 but has since languished in the Senate. To learn more, visit DiscloseAct.com.

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