Federal law requires political committees to disclose basic information about the contributions they receive, including who contributed the money and when. Transparency regarding the sources of funding for our elections and how that money is spent has long been a central tenet of our democracy.
But many big donors prefer to keep their election spending secret, and one way they do that is by funneling their contributions through vaguely named shell companies that allow them to wield influence without the public knowing.
Since the U.S. Supreme Court’s 2010 decision in Citizens United v. Federal Election Commission (FEC) opened the floodgates for unlimited election spending, money has poured into our electoral system from corporations and other wealthy special interests.
Much of it has gone to super PACs: political committees that can freely raise and spend unlimited amounts, including money from corporations, labor unions and wealthy individuals, so long as they don't coordinate with a candidate's campaign. But super PACs, like other political committees, must still publicly disclose their donors.
Wealthy special interests that would prefer to conceal their election spending have therefore pursued other means to keep that spending secret. One popular and well-documented strategy is the use of "dark money" groups – entities that may spend millions to influence elections, but which do not disclose their funding sources.
Another increasingly popular strategy to conceal electoral spending involves funneling contributions to super PACs through shell companies.
In this scenario, money is directed to a super PAC through an obscure company that isn't publicly associated with the contributor — and which may have been created for the sole purpose of concealing the true source of the money — so that the company's name, not the true contributor’s name, appears on the super PAC’s campaign finance reports.
Many of these entities are registered in states that allow anyone to register a company without disclosing basic information to the public, such as who owns the company or where it's located.
While this practice is becoming more common, it isn’t new; it’s been happening since Citizens United and the advent of super PACs. In 2011, for instance, a mysterious company called W Spann LLC gave $1 million to Restore Our Future, a super PAC supporting Mitt Romney’s presidential candidacy.
W Spann LLC was formed a short time before the contribution, and it shut down not long after it, strongly suggesting that it only existed to make the $1 million contribution.
Only after widespread press reporting, and the filing of formal complaints by CLC and other watchdog groups demanding that authorities investigate the contribution, did the true contributor — Romney’s friend and Bain Capital executive Edward Conard — reveal that he provided the money to the super PAC.
Making a political contribution through a shell company that conceals the true contributor’s identity is illegal. Both the Federal Election Campaign Act and FEC regulations have long recognized that it is illegal for anyone to make a political contribution using a false name or give money to someone for them to make a political contribution in their own name.
Unfortunately, although CLC and other watchdog groups have filed numerous complaints seeking enforcement of these longstanding legal provisions, the FEC has not prioritized the enforcement of these violations; special interests, meanwhile, have continued to use this approach to hide their political spending.
In some instances, watchdog efforts and journalists’ inquiries have revealed the true contributors attempting to surreptitiously influence elections. In other cases, however, the true contributors have remained hidden despite the best efforts of reporters, public interest attorneys, and watchdog groups like CLC.
This shell game continues today. As the 2022 midterm cycle ramps up, CLC has uncovered new instances of electoral spending concealed in this fashion:
In September 2021, "Camson LLC" gave $50,000 to Make America Great Again Action Inc., a super PAC that spent over $500,000 to support candidates publicly endorsed by former President Donald Trump. Its purported address is a strip mall in Florida, but there is no "Camson LLC" registered anywhere in the state. It's a total mystery where that $50,000 really came from.
In May 2021, "Teeter Jay, LLC" gave $100,000 to The Freedom Forward Fund, a super PAC that spent $94,000 the same month on ads opposing a single congressional candidate in a special election. Virtually all the super PAC’s funding came from this unknown company, which appears to have disclosed a fake address to the FEC, and which has no website, social media pages, Chamber of Commerce membership, or anything else that would suggest it conducts any actual business. These red flags indicate that the company may have been used to conceal the true contributor’s identity. That’s why CLC filed a complaint with the FEC requesting that the agency investigate these contributions and enforce the law.
"Sunbelt Services, LLC" has given over $150,000 to Our Way of Life PAC and Conservative Outsider PAC, super PACs that seek to influence a gubernatorial election in Kansas and have engaged in major electoral spending on congressional races in 2020 and 2022. Sunbelt Services, LLC disclosed only a P.O. box in Kansas, and Kansas has no record of any LLC by that name. In the absence of any indication that the company exists or conducts any business, there’s no way to tell where this money actually came from.
"1799 Heritage Preservation LLC" gave $75,777 in October 2021 to Hudson United PAC, a super PAC that disclosed no other source of funding, and which spent nearly the entire amount — over $70,000 — on digital political ads the following day. The LLC and super PAC were registered just four days apart, and after its one-off spending blitz, Hudson United PAC has done nothing else. The LLC provided only a P.O. Box and has no website or social media pages, so there's no available information to suggest that it conducts any business. The public has no way to know where the five-figure sum that it gave to a super PAC actually came from.
In each of these cases, a company appears to have been used as a "straw donor" to hide the true source of political spending. The Citizens United decision allowed companies to engage in political spending using their own funds, but too often, wealthy special interests have abused that power by funneling their money through shell companies to conceal their identities.
By doing so, they're not just breaking the law, they're denying voters a basic right to know who is spending money to influence elections.
There’s another danger: If we don’t know who’s behind political spending, our electoral system remains vulnerable to corruption and manipulation by hostile actors. A super PAC contribution from an obscure LLC could be a well-concealed effort by a government contractor to help reelect a congressman whose support is crucial to the contractor’s business. That’s both illegal and blatantly corrupt.
Foreign nationals or governments trying to manipulate U.S. elections could also use shell companies to engage in untraced political spending. Federal law prohibits foreign nationals from spending — or even participating in a decision to spend — money to influence U.S. elections.
But if we don’t know who’s behind an LLC’s contribution, there’s no way to tell whether foreign nationals are surreptitiously spending money to influence elections.
These troubling possibilities illustrate why transparency is of paramount importance to the integrity of our elections. CLC will continue to monitor efforts to use shell companies, dark money groups and other mechanisms to inject secret money into our electoral system.