New Reports Show Why the FEC Needs to Clarify Disclosure Requirements for Dark Money Groups—and Why Congress Should Go Even Further

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A "dark" roll of hundred dollar bills

In final stretch of 2018 race, $50.7 million was spent on independent expenditures subject to disclosure, but only eight percent was accounted for, according to a new CLC analysis.

A D.C. District Court decision last year held the promise of secret money becoming less secret. But new reports show that the public is still largely being kept in the dark.

September’s decision in CREW v. FEC struck down a Federal Election Commission (FEC) rule, and held that the law required politically active groups to disclose certain donors giving over $200 when those groups advertise for or against political candidates. The first quarterly reports reflecting only activity in the months after that decision took effect – Oct. 1 through Dec. 31, 2018 – were due on January 31.

Of the 101 organizations that should have reported donors by last week’s disclosure deadline, only 24 named any contributors. In total, $50.7 million was spent on independent expenditures subject to reporting after the CREW decision, but only eight percent of that spending was accounted for with even nominally disclosed contributions, according to CLC’s analysis.

Under the statute and the court’s decision, groups making independent expenditures—ads that expressly advocate for or against the election of candidates—must disclose all donors who gave for “political purposes” and for the purpose of furthering any of the group’s independent expenditures.

It fell to the FEC to clarify the distinction between reportable and non-reportable donations. But instead of writing new rules, the FEC issued a press release that only restated the court’s decision and the statute.

Last week’s new reports show the consequences of that inaction. Without clear guidance, groups are continuing to choose their own ways to navigate the grey area—often to the detriment of transparency. 

According to CLC’s analysis, 101 groups other than registered political committees reported independent expenditures during the last quarter of 2018, and should have filed year-end reports naming certain contributors by the January 31, 2019 deadline.[1] 28 groups did not file any reports at all by the deadline. The 73 groups that did file reports together spent $48.5 million on independent expenditures in October, November, and December, yet only a fraction of the contributors who funded those ads were disclosed.

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Those 73 groups fell into two categories: those that claimed they didn’t receive any reportable contributions, and those that did report some contributions—but that in many cases continued to leave voters in the dark about the underlying sources. Specifically:

1. Two-thirds (49) of the groups reported $0 in contributions.

Majority Forward, the 501(c)(4) arm of the Democratic super PAC Senate Majority PAC, was the top-ranking “dark money” group throughout the 2018 election, according to an Issue One analysis. This pattern continued into the election’s final stretch: it reported $19.2 million in independent expenditures supporting Democrats in the final quarter of 2018.

But despite Majority Forward spending more than any other nonprofit on independent expenditures, it did not disclose a single dollar in contributions—instead, it claimed that it “does not accept funds earmarked for independent expenditure activity or for other political purposes in support or opposition to federal candidates.” Patriot Majority USA (which spent $4.66 million) and Texas Organizing Project (which spent $358,560) provided identical explanations for failing to report their contributors.

It strains credulity for groups like Majority Forward, Patriot Majority USA, and Texas Organizing Project to claim that no donors gave for political purposes. Nine other groups, supporting candidates of both parties, used similar arguments to keep their donors secret. These groups may be calculating that the FEC is unlikely to second-guess these implausible assertions. 

For at least one group, there is public evidence that undermines such claims. Heritage Action for America, which spent $1.6 million on independent expenditures supporting Republicans in the fourth quarter, told the FEC that “the independent expenditures disclosed on this report were paid for from general treasury funds and, to the best of my knowledge, information, and belief at the time of filing, no reportable contributions were made for the purpose of furthering these expenditures.”

However, as CLC outlined in its complaint following Heritage Action’s identical claim on its October quarterly report, the group’s executive director publicly stated last year, “What we’re telling donors is, every dollar we raise over our budget we can effectively pour more into” the same 12 races in which Heritage Action reported independent expenditures. Under the D.C. District Court’s decision and the FEC’s guidance, Heritage Action should have reported donors on its quarterly report. The complaint is still pending with the FEC.

37 groups, which together reported $14.3 million on independent expenditures, provided no explanation for why they failed to report any contributors. This includes groups like the Environmental Defense Action Fund, which reported spending over $3 million supporting Democrats, and Citizens for Responsible Energy Solutions, which reported spending over $760,000 supporting Republicans.

In some cases, the omission of contributors might indicate that the spender used general treasury funds. The outdoor company Patagonia, for example, reported almost $54,000 in independent expenditures supporting Montana’s Jon Tester; the for-profit company publicly endorsed Tester’s candidacy on their website and ran ads from the Patagonia Facebook page, so it is possible that the company used general treasury funds, rather than contributions from other sources. [2]

2. Only $3.8 million, or eight percent, of these groups’ fourth quarter spending was accounted for with some form of reported contributions.[3]

24 organizations did report some contributors on their quarterly reports—but in many cases, the disclosure information was incomplete or unilluminating, and those groups that did disclose were far from the biggest spenders.

Some organizations appeared to comply with the new disclosure requirements. Groups like People for the American Way, MomsRising Together, United We Dream Action, and Communities for a New California reported contributions from individuals, unions, and non-profit corporations. These groups were far from the top spenders, and in some cases the reported contributions did not account for the entirety of the funds spent, but the fact that any contributors were reported at all suggests that disclosure in the wake of the CREW decision is far from an impossible task.

However, many groups disclosed only nominally—and the disclosure provided little to no information about where the funds actually came from. As a result, even 8%  overstates the real level of disclosure.

Several organizations that disclosed contributors only reported receiving funds from other dark money groups, meaning that the ultimate sources of their spending remained mysterious. VoteVets.org Action Fund, for example, spent $812,560 supporting Democrats and only reported $400,000 in contributions from the Democratic dark money group Patriot Majority USA. But Patriot Majority USA, which itself spent $4.7 million on independent expenditures, did not disclose a single contributor. (To explain why it did not think it needed to disclose, it used the same explanation, verbatim, that Majority Forward did.)

Similarly, Case Action Fund reported spending $222,283, and reported two contributors: both 501(c)(4) groups that themselves don’t disclose their donors. One of those (c)(4) groups was America Votes, from which four other Democratic dark money groups also reported receiving funds. One nonprofit group, Gun Owners of America, Inc., reported itself as the sole contributor.

The disclosure that some groups did provide on these latest filings signals that it should not be difficult for others to follow suit —but the biggest dark money players are still banking on the FEC not enforcing the law.

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Last week’s reports are consistent with what we observed on a smaller scale last fall, when only four of the 17 groups making independent expenditures in the weeks after the CREW court’s decision reported any contributors. Now, more than four months since the court’s decision, the consequences of the FEC’s inaction are even more apparent.   

In the wake of the most expensive midterms in history, we learned not only that dark money spending will soon pass the $1 billion mark, but also that in 2018, for the first time, Democratic dark money groups outspent Republican dark money groups. Across the board, secret political spending is only becoming more attractive in the face of continued FEC and congressional inaction. Fortunately, there is no shortage of available solutions.  

As we enter the 2020 election cycle, is up to the FEC to write new rules clarifying the disclosure requirements for these dark money groups--and it is also up to Congress to pass legislation combatting this problem more comprehensively. H.R. 1 has a provision (drawn from the DISCLOSE Act) that would do just that. H.R. 1 would require all groups making campaign-related expenditures, including certain transfers to other politically active groups, to disclose contributions of $10,000 or more. This, combined with clear FEC regulations, would have given voters much more information about who was spending over $50 million to influence their votes in the final stretch of the midterms.

 

 

[1] CLC identified 101 groups other than registered political committees that had filed 24- or 48-hour reports of independent expenditures reporting spending between October 1, 2018 and December 31, 2018. As the FEC explains, committees must file those reports for “independent expenditures with respect to the same election that either: 1) aggregate $10,000 or more and are made more than 20 days before the election (‘48- hour reports’); or 2) aggregate $1,000 or more and are made less than twenty days before the election (‘48-hour reports’). Instructions for Form 05 and Related Schedules, Fed Election Comm’n 1 (Sept. 2013), https://www.fec.gov/resources/cms-content/documents/fecfrm5i.pdf. Groups making independent expenditures must additionally file a quarterly report disclosing contributors and expenditures. 11 C.F.R. § 109.10(b). Of those 101 groups, 73 groups filed fourth-quarter year-end reports by the January 31, 2019 deadline. For the 73 groups that filed year-end reports, the independent expenditure sum appearing on the first page of those reports was the figure used for the purposes of the aggregate sum. For the groups that did not file year-end reports, CLC tabulated the fourth quarter independent expenditures from those groups’ 24- and 48-hour reports on file with the FEC as of February 1, 2019.

[2] The FEC’s failure to provide guidance has led to certain inconsistencies in how spenders report potentially similar activity. For example, national unions like the American Federation for Teachers (AFT) and AFSCME did not report any contributors on their year-end report, whereas SEIU and the union federation AFL-CIO disclosed themselves as contributors.

[3] A few groups reported contributions that exceeded their fourth quarter spending on independent expenditures; in those cases, the figure that was used for the purposes of this sum was simply the independent expenditure sum. Therefore, $3.8 million is not a sum of the total contributions disclosed on the year-end reports, but, rather, it reflects the amount of independent expenditures accounted for with reported contributions.

Brendan directs CLC’s work before federal regulatory agencies, such as the Federal Election Commission (FEC).
Maggie is a researcher and investigator, following leads on campaign finance issues.
Experts on Dark Money
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Director, Federal Reform
Maggie Christ.PNG
Researcher/Investigator, Campaign Finance