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Anonymous Donors Underwrite Campaign Against Democracy

In Citizens United v. Federal Elections Commission (FEC), the Supreme Court ruled that corporations and unions enjoy the same First Amendment rights as individuals, giving them the green light to flood elections with independent political spending.  Though most prominent, publicly-traded companies have stayed out of the fray, a surprising number of 501(c)-designated organizations have quickly surfaced to take advantage of the ruling and the Court’s new attitude toward money in politics.  Unlike 527's, which are subject to strict disclosure laws, these 501(c) groups are not required to disclose the identities of their donors unless contributions are specifically earmarked for electioneering – an attractive benefit if one plans on spending millions of dollars to sway electoral races.

Accordingly, 501(c) groups outside the Republican and Democratic parties, financed largely by privately-held companies and wealthy individuals, have outdone themselves for this year’s midterm elections; spending to influence the outcomes of races has increased exponentially compared to the same period in 2006.  By the end of last week, two major Karl Rove-backed GOP groups – 501(c)4 Crossroads GPS and its sister 527 organization, American Crossroads – spent $18 million combined on attack ads.  This week, Republican groups are spending an unprecedented $50 million on advertising. Generally, Republican-leaning organizations have outspent their Democratic counterparts on TV ads by a 6 to 1 margin.

At the same time, disclosure has plummeted and less than a third of donors have been revealed to the public -- a shocking figure compared to 2006’s 96% disclosure rate.  News outlets have been able to glean some information about donors, but not much:

  • Though the 527 group American Crossroads has raised a significant amount of money, Karl Rove and Ed Gillespie (chairman of the Republican State Leadership Committee) formed a 501(c)4 - a designation typically reserved for social welfare groups - spin-off called Crossroads GPS in June, that gives donors the cloak of anonymity that a 527 and its disclosure rules cannot.  Results have been predictable: Crossroads GPS brought in more money in its first month than American Crossroads was able to raise in four.  Reports also show that wealthy individuals have cut six- and seven-figure checks to Crossroads GPS, and the group recently received a check for several million dollars from a single anonymous donor.
  • Another individual, declining to be named, gave $1 million to the Tea Party Patriots in September.
  • Americans for Prosperity, co-founded by billionaire oil and gas magnate David Koch, is presumably funded by him and his billionaire brother, Charles Koch.  The Koch brothers have outspent industry leaders like ExxonMobil to fund organizations that deny climate change and work to obstruct the regulation of carbon emissions.  They are currently leading the Prop 23 campaign in California to reverse AB 32, California's Global Warming Solutions Act.
  • Americans for Job Security (AJS), a "501(c)6 tax-exempt business league," sidesteps disclosure by reporting all of its revenue as membership dues.  However, "membership" ebbs and flows in step with the electoral cycle: AJS reported $0 in membership revenue for 2007, but "membership dues and assessments" skyrocketed to $12.2 million in time for the 2008 elections.  AJS spent $6 million on ads during the primary season alone, and are spending millions more to influence the general election.

According to Public Citizen, only one in ten Republican-aligned groups that produced election ads during the 2010 primary disclosed its funders as required under the Bipartisan Campaign Finance Reform Act of 2002 (BCRA) - though Democrat-leaning groups did not fare much better, with a paltry 50% disclosure rate.  The public is currently suffering from an unprecedented lack of information regarding the undue influences on political races, and bringing these anonymous donors to light will help voters make more informed choices at the polls.

To address the ways in which these practices undermine democracy, Progressive States Network is working with the Brennan Center and People for the American Way to help legislators expand disclosure requirements in their states.  Improvements would not only include basic reporting on independent political expenditures, but also basic reporting on the financial backers of these outside groups.  For more information, please contact Cristina Francisco-McGuire, Election Reform Policy Specialist, at cfm@progressivestates.org or (212) 680-3116 x118.