Every election cycle, wealthy special interests spend record-breaking amounts of money to influence elections. Transparency regarding the sources of that election spending is essential to our democracy because it enables voters to know who is spending money to influence their votes and allows them to fully evaluate the electoral messages that such spending produces.
Straw donor schemes undermine this electoral transparency by circumventing the disclosure required by federal campaign finance laws. A straw donor scheme involves a person making a contribution through another person or entity — either advancing or reimbursing the money to make the contribution — so that donor (here called the “straw donor”) is disclosed to the public in campaign finance reports instead of the true source of the funds.
Using LLCs or other corporate entities as straw donors has become an increasingly common mechanism in recent cycles to funnel money into elections.
This appears to be what happened with a half a million-dollar contribution to the super PAC “SOS America PAC,” which was recently in the news for deploying a fundraising stunt — enticing prospective donors with a chance to win a college scholarship — to raise money for the presidential campaign of Miami Mayor Francis Suarez. SOS America has already reported spending over $3 million backing Suarez’s presidential candidacy.
In October 2022, SOS America appears to have received a $500,000 contribution from an obscure company registered in Delaware, “PassionForest, LLC.” Publicly available information indicates that PassionForest did not have the financial means to make a contribution of this magnitude without some other person or entity providing the funds to be funneled through the company to the super PAC — exactly what the laws banning “straw donor” schemes are in place to prevent. At the time of the contribution, the LLC had been around for just eleven months, during which its only known activity was selling artificial flowers online.
Campaign Legal Center (CLC) has filed a complaint urging the Federal Election Commission (FEC) to investigate this half a million-dollar contribution and enforce the federal laws that prohibit straw donation schemes.
By making a contribution in PassionForest’s name, the true contributor(s) remain unknown to the public and voters remain unable to properly evaluate the messaging coming out of SOS America PAC.
The true contributors’ anonymity in this case presents an additional potential danger: the funds used to make the contribution may have come from a foreign national, a group that is categorically prohibited from spending money to influence U.S. elections.
CLC’s complaint raises concerns about the fact that both PassionForest’s apparent principal place of business, as shown on its online storefront, and the address of an individual that applied to trademark “PassionForest” are both in China.
This straw donor scheme may have been used to conceal an unlawful foreign national contribution, which only further demonstrates the need for transparency and the necessity of laws preventing “straw donor” schemes.
For voters to make informed decisions and evaluate candidates, they need to know the true source of the money being spent to influence elections. Federal campaign finance law recognizes that voters have this right by requiring the complete and accurate disclosure of a contribution’s true source.
The FEC, as the independent regulatory agency responsible for civil enforcement of federal campaign finance law, has an obligation to act. In fact, in an October 2022 decision, the FEC did enforce the law against a similar straw donor scheme using an LLC — an unusual result for the oft-deadlocked agency.
The FEC must do its job here as well. To protect the integrity of our elections and deter future noncompliance, the FEC must hold accountable those who use straw donor schemes to undermine transparency in our elections.
This blog was authored by CLC Legal Intern Stephanie Camhi