The National Journal explains…
Sheldon Adelson became a national figure in 2012 when he funneled millions of dollars into a super PAC and upended the Republican primary. In 2016, another millionaire may do it again. The difference? We might never know that donor’s name.
The coming presidential contest is ushering in an epochal shift: the arrival of candidate-specific nonprofits, personalized vehicles for a politician’s supporters to raise and spend unlimited cash—completely clandestinely. It is poised to yield a campaign season more dominated by secret money than any election since Watergate, according to more than two dozen campaign strategists, election lawyers, donors, and worried watchdogs.
Already, at least four Republicans—Rick Perry, Rick Santorum, Bobby Jindal, and John Kasich—are linked to nonprofits staffed by allies helping to promote their vision for America. They have used these nonprofits to poll and formulate policy, to hire operatives and travel the country, to build national networks and keep themselves in the spotlight.
Such activities were once the province of campaign committees, where donors are named and expenses are tallied. But by raising money through “social welfare” nonprofits, these not-yet-candidates are avoiding disclosure of both their financiers and what, exactly, they are financing.
“This is the same kind of money that was at the heart of the Watergate scandals,” says Fred Wertheimer, who has worked to clamp down on limitless and undisclosed spending since 1971. “When you combine unlimited contributions with secrecy, you are dealing with the most dangerous kind of corrupting money.”
If super PACs, which can raise unlimited funds but must disclose where the money comes from, were popular in 2012, these auxiliary nonprofits are expected to be the breakout hit of 2016. “It’s not secret from the donors; it’s not going to be secret from the candidates; it is only going to be secret from the American people,” Wertheimer says.
“When you combine unlimited contributions with secrecy, you are dealing with the most dangerous kind of corrupting money.”
The current flurry of undisclosed activity—already totaling in the millions—could prove only a prelude. Many expect every major 2016 candidate to eventually have an adjunct nonprofit in addition to a super PAC. What’s more, the same political strategists can run both shops simultaneously.
“Politics is an efficient marketplace,” says Matt Brooks, the executive director of the Republican Jewish Coalition, whose board includes some of the wealthiest GOP donors in the country, among them Adelson. “These vehicles are going to come, and, if they’re proven successful and legal, then other people are going to start adopting them.”
So-called dark money isn’t new: Karl Rove’s Crossroads empire pioneered the combination super PAC/nonprofit, and Charles and David Koch’s vast conservative network operates almost entirely in the disclosure shadows. But the advent of individualized nonprofits raises the specter of untraceable donors propping up, or tearing down, candidates in Iowa, New Hampshire, and South Carolina next winter.
In other words, for the first time in a generation, there will be a clear avenue for America’s richest to secretly spend an unchecked sum to choose their party’s nominee for the White House.
Scott Jennings drafted the new secret-money road map. Sharp and affable, the 37-year-old strategist cut his teeth as a deputy to Rove in the Bush White House and on two of Sen. Mitch McConnell’s campaigns.
In 2014, he was simultaneously a senior adviser for a pro-McConnell super PAC and a 501(c)(4) nonprofit, the Kentucky Opportunity Coalition, which would emerge as the single biggest TV spender among outside groups in the race.
“There was some utility in that arrangement,” Jennings understatedly says of his dual roles. That’s because although outside groups are barred from communicating with the candidates they are helping, they are free to strategize with each other.
So when Jennings and others would solicit money, according to people familiar with the process, they would offer McConnell backers a choice: Give to the super PAC, have their money spent directly to benefit the senator and, in turn, be publicly disclosed; or give to the nonprofit, have the money spent on “issue ads” that would likely feature McConnell, and get to be kept in the shadows.
Not surprisingly, the secret-money option was popular: the nonprofit aired twice as many TV ads as the super PAC, according to a review by the Center for Public Integrity.
That race has now set the precedent for 2016: A de facto, single-candidate nonprofit can collect and spend millions, working hand in glove with a super PAC, all without revealing a single contributor.
“I see no reason why candidates in both parties wouldn’t be having some kind of a similar operation,” Jennings says. (In fact, supporters of President Obama created such a group in 2012, but it ended up giving away a majority of the money and not buying TV ads. And in 2014, candidate-linked nonprofits emerged in three states, including Oklahoma, where one of Jeb Bush’s top campaign lawyers, Charlie Spies, set up the operation.)
Anonymity could have a particularly strong appeal for contributors in a crowded GOP field, where donors may not want other candidates to know who is spending against them. Plus, the recent history of both parties demonizing donors—Republicans hitting Tom Steyer, Democrats slamming the Koch brothers—has only expanded contributors’ appetite for anonymity. “My giving will be more difficult for folks to quantify for several reasons,” Foster Friess, Santorum’s biggest 2012 patron, said in an email about his 2016 plans.
There are some limits to 501(c)(4) nonprofits. The biggest is that they can’t primarily exist for political purposes, at least legally. That’s one reason Jennings insists the “vast majority” of Kentucky Opportunity Coalition spending was on issue advocacy.
But many strategists believe the limits are nothing a good lawyer can’t get around, though none would say so on the record for fear of attracting regulators’ attention.
On paper, for instance, the Kentucky Opportunity Coalition has nothing to do with McConnell. It exists “to be a positive voice for those who seek to make our commonwealth a better place,” its website says. In reality, every TV ad the group aired—more than 12,000 of them, according to CPI’s tally—mentioned either McConnell or his Democratic opponent.
The line between prospective candidates’ political operations and supportive secret-money nonprofits is blurry, when visible at all.
Louisiana Gov. Bobby Jindal created America Next, a nonprofit, and hired Mitt Romney’s former Iowa state director, Jill Neunaber, as executive director. Neunaber is now in charge of both Jindal’s federal PAC and the nonprofit. Jindal himself has raised $3 million to $4 million for the group, according to Curt Anderson, Jindal’s longtime political adviser.
Jindal used the nonprofit to travel to more than a dozen states to promote defense, energy, and health care policy plans produced by the group. An education paper is forthcoming. He has scheduled meetings with donors and power brokers to coincide with the trips, too.
“He’s been all over the country with it, both giving speeches about his energy plan and his health care plan—I shouldn’t say ‘his,’ ” Anderson cuts himself short. “I should say ‘America Next’s’ plan. Jindal’s the honorary chairman.”
Anderson says Jindal is passionate about policy and would continue the nonprofit’s work, whether or not he runs for president.
Together, the two entities—which have the same logo and overlapping staff—have raised $8 million since June 2012, according to spokeswoman Virginia Davis. (She also works for both.)
Combined, the groups tout having built a national network of 150,000 activists—exactly the kind of 50-state infrastructure that benefits a presidential campaign. The nonprofit has kept Santorum in touch with key influencers, financing a trip to Israel last August with Iowa social-conservative leader Bob Vander Plaats, influential Iowa radio host Simon Conway, and Friess, among others.
If Santorum runs for president, Davis says the nonprofit would continue its operations.
Rick Perry’s supportive nonprofit, Americans for Economic Freedom, was seeded with $200,000 in leftover money from the super PAC that backed his 2012 presidential campaign. The group is not technically tied to the former Texas governor, though its CEO is Jeff Miller, a Perry confidant who has been laying the groundwork for Perry’s 2016 run.
It has set a $15 million budget from 2013 to 2015, documents filed with the IRS show.
“If the governor does run, we’re hopeful that AEF will continue talking about the important economic issues facing our country,” says Mark Miner, a former Perry adviser, who is now the group’s spokesman. Miner left the door open to funding TV ads featuring Perry, perhaps in key early states. “It would have to be,” he says, “in accordance with law.”
A nonprofit with ties to Ohio Gov. John Kasich, Balanced Budget Forever, was formed in November and is the least developed of the bunch, though it paid for a recent trip to Arizona.
The Federal Election Commission has proved unable or unwilling to rein in or force disclosure of nonprofit spending. And the IRS has moved slowly to respond to the shift, crippled by allegations of targeting conservative groups. The reality is, it may be years before we know how much was really spent on the 2016 presidential campaign. And we may never know by whom.
Robert Maguire, an investigator who tracks nonprofits’ political activities for the Center for Responsive Politics, offers this sobering calculation: “If a nonprofit organization forms right now, and starts raising tens of millions of dollars, the first piece of paper they will be required to file with the IRS … they will file more than a week after the 2016 elections.”
In fact, such a nonprofit—for Jeb Bush, Mitt Romney, Chris Christie, Hillary Clinton, anyone, really—may already exist. It’s almost impossible to know.