The disclosure of who is giving money to candidates for public office has long been a basic tenet of our elections. Even with the rise of outside spending, (supposedly) independent of candidates’ campaigns, disclosure of donors was assumed. In the Supreme Court’s 2010 Citizens United decision (which ruled that wealthy individuals, corporations, and other organizations could engage in unlimited outside spending), the five justices who supported the ruling believed that the independence of the spending and the disclosure of the donors would prevent corruption of candidates who benefitted from the unlimited campaign spending.
However, wealthy individual and corporate campaign donors are typically anxious to hide their identities. This protects them from negative repercussions from, for example, sponsoring TV ads that are typically negative and sometimes outright nasty or untruthful.
As a result, “dark” money spending in campaigns, where the true donors are hidden, is growing dramatically. Dark money in the 2016 elections is up 34% over this point in the 2014 Congressional elections and is 5 times what it was at this point in the last presidential election in 2012. [1] Donor secrecy means there is no accountability, typically for negative or questionably truthful TV ads. It also prevents voters from knowing who is behind the political ads and messages that are trying to influence their votes. This means voters can’t assess the interests and biases of the sponsors of the ads, or even tell if there are conflicts of interest or a potential for corruption.
Large donors have found multiple ways to keep their identities secret. The two main strategies are engaging in political activity through non-profit organizations that don’t have to disclose their donors and laundering money through multiple entities to make it hard (if not impossible) to trace the actual donor. These strategies come on top of the fact that enforcement of existing disclosure laws has been weak at best. The Federal Election Commission (FEC), the primary enforcer of election laws, is hamstrung by the intense partisanship in Washington.
As required by Internal Revenue Service (IRS) regulations, the non-profit organizations that are being used for political activity maintain that political activity is not their primary purpose. However, for many of them, this fiction can only be maintained because the IRS’s regulations and enforcement are weak. The IRS’s efforts in this area have been undermined by political attacks, including claims that its efforts to control the illegal political use of non-profit groups reflect partisan bias.
The other major strategy for hiding the identities of donors is money laundering. This is accomplished by passing money for political spending through a series of groups, typically non-profits and super PACs. When the final entity that actually engages in political activity (e.g., pays for the TV ads) reports its donors, they are super PACs and non-profits not the actual original donors.
Some of the campaign money laundering is done through “ghost” organizations. These are typically corporations that are established solely for the purpose of channeling money to super PACs. Many of these ghost corporations make large donations, e.g., hundreds of thousands or millions of dollars, only days after they are created. Little information is available about them and sometimes they are disbanded shortly after making their donations. Hence, tracing the donors of this money is extremely difficult if not impossible. [2]
Many election law experts consider the use of ghost organizations a violation of the long-standing federal ban on straw donors, i.e., one person giving money to another person or entity to use to make a political contribution. However, with the regulatory agencies, particularly the FEC, politically deadlocked, enforcement and even investigation of such activity is lacking.
The explosion of campaign spending where donors are secret is particularly insidious and damaging to democracy. Voters are not be able to consider the credibility and motives of the funders behind these efforts to sway their votes. Moreover, the megaphone that unlimited outside money provides to wealthy corporations and individuals can drown out other voices that provide important information to voters.
Unlimited election spending by a tiny slice of our society, coupled with secrecy about who is paying for the messages being disseminated, means that voters will receive skewed information and will be unable to evaluate its credibility. Furthermore, they may be discouraged from voting because the bulk of these messages tend to be negative messages that attack the quality of candidates and the effectiveness of our government.
To support well informed voting, full disclosure of all donors to campaign spending is essential. Furthermore, unlimited spending by wealthy interests in our elections undermines the basic principle of democracy – that government is of, by, and for all the people.
My next post will provide more information on how wealthy campaign donors are maintaining their secrecy and what you can do about it.
[1] OpenSecrets.org, retrieved 10/22/16, “Top election spenders: Who are the biggest dark money spenders?” Center for Responsive Politics (https://www.opensecrets.org/dark-money/top-election-spenders)
[2] Gold, M. & Narayanswamy, A., 3/18/16, “How ‘ghost corporations’ are funding the 2016 election,” The Washington Post
Lippitt's Policy and Politics Blog 