The Secret Fundraising Scheme That Will Make Super PACs Look Quaint in 2016

The secret fundraising scheme forming for this contest will make super PACs look quaint.

National Journal
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Shane Goldmacher
Jan. 23, 2015, midnight

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.

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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.

Charles and David Koch's network operates almost entirely in the disclosure shadows. (Bo Rader/Wichita Eagle/MCT via Getty Images and Photo by Jamie McCarthy/Getty Images) Bo Rader/Wichita Eagle/MCT via Getty Images and Photo by Jamie McCarthy/Getty Images

Charles and Dav­id Koch’s net­work op­er­ates al­most en­tirely in the dis­clos­ure shad­ows. (Bo Rader/Wichita Eagle/MCT via Getty Im­ages and Photo by Jam­ie Mc­Carthy/Getty Im­ages)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.

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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.

Rick Santorum (Mark Wilson/Getty Images) National Journal

Rick San­tor­um (Mark Wilson/Getty Im­ages)Rick San­tor­um’s non­profit, Pat­ri­ot Voices, grew al­most dir­ectly out of his failed 2012 pres­id­en­tial cam­paign. He cofoun­ded the group in June 2012 and its ex­ec­ut­ive dir­ect­or, Nad­ine Maenza, joined shortly after serving as na­tion­al fin­ance dir­ect­or of his pres­id­en­tial run. She also works for San­tor­um’s fed­er­al PAC of the same name: Pat­ri­ot Voices PAC.

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.

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