A major misstep by a conservative nonprofit has led to a dramatic turn of events in the Golden State. In what was first a case of a mysterious Arizona group laundering political money for two key ballot initiatives in California, the scandal may quickly evolve into a criminal investigation that could rock the foundations of Capitol Hill by unmasking the most prominent dark money slush fund in the country.
It’s all up to Kamala Harris, California’s attorney general, who was elected two years ago on a platform of getting tough on white-collar crime. Her office told reporters today that she is laying out the options for either a criminal or civil investigation into this major secret money group.
First, some background:
• On October 15, a mysterious nonprofit in Arizona called Americans for Responsible Leadership cut a stunning $11 million donation to a committee in California dedicated to defeating Prop 30 (a ballot initiative to raise taxes to fund the budget) and passing Prop 32 (an anti-union effort to ban payroll deductions), but didn’t disclose where that money came from. The move violated a brand new rule in California mandating that even 501(c) nonprofits disclose the source of their donations.
• Three days later, on October 18, Common Cause, a government watchdog, filed a complaint with the California Fair Political Practices Commission asking for an inquiry. The commission, a state campaign finance regulator that puts the Federal Election Commission to shame with its aggressive pursuit of the public interest, took up the case and on October 25, advised Americans for Responsible Leadership that it had 25 hours to comply with a request for information about the source of that $11 million check.
• Americans for Responsible Leadership hired Holtzman Vogel, a DC-area law firm retained for years by Karl Rove and other Republican leaders, to try to quash the FPPC’s requests, claiming at one point to a local judge that the Supreme Court’s Citizens United decision protected the group from having to disclose its donors. As the Sacramento judge accurately observed, the Citizens United decision did no such thing.
• In a surprise last week, an appellate judge, without comment, agreed with the Arizona group in preventing the FPPC from action. This forced a late minute appeal that led to an emergency decision by the California Supreme Court, which ruled 7-0 on Sunday to force disclosure.
And that brings us to the revelation this morning that Americans for Responsible Leadership received the $11 million from Americans for Job Security, a trade association based in Virginia. Americans for Job Security, founded by two Republican operatives who now handle media-buys for Karl Rove’s American Crossroads Super PAC, is just another coin-operated front group. In the past, corporations have given it large sums in exchange for negative advertising in campaigns and lobbying efforts.
In the letter to regulators, Americans for Responsible Leadership conceded that Americans for Job Security in turn received the $11 million from yet another nonprofit, this one called Center to Protect Patients’ Rights.
The FPPC’s chair, Ann Ravel, says the trail of dummy nonprofits is a clear sign that the Arizona nonprofit behind the $11 million donation was engaged in “campaign money laundering.” It’s obvious to anyone that Americans for Responsible Leadership is still playing shell games. The two nonprofits it disclosed do not give any real information about the individuals or corporations that provided the money for the $11 million check.
Here’s why this now gets very interesting.
As I reported exclusively in May, the Center to Protect Patients’ Rights—the group that is, at this point, the closest thing know about the origin of the $11 million in California—is the hub for billionaire donors to funnel cash to attack ad campaigns across the country. Sean Noble, the president of the group, is a key deputy to the Koch brothers’ political machine. He helps run weekly meetings with other Republican Super PACs to coordinate spending. As head of the Center to Protect Patients’ Rights, he doles out checks to various nonprofits that in turn use that money to pummel Democrats with negative advertising.
Noble’s strategy centers on brand marketing. To appeal to Catholic voters, his group will cut a check to a right-wing religious nonprofit, like the Susan B. Anthony List, to run ads accusing Democrats of supporting abortion. To make an appeal to elderly voters, the Center finances a nonprofit called the 60 Plus Association to run ads accusing Democrats of cutting Medicare. The list goes on, from organizations dedicated to scare tactics against Muslim Americans to Tea Party groups, Noble has channeled billionaire cash to a stunning array of different fronts that then air nasty negative ads during elections. The public only sees the brand at the end of the commercial, but never the true source of the money. Quirks in nonprofit law allow even the most modest forms of disclosure—the transfers from one group to the next—to be kept secret until over a year after the election. That’s why we learned about the transfers during the midterm elections only this year.
Noble’s group completely altered the shape of Congress. During the 2010 election cycle, Noble’ group funneled some $55 million, which in conjunction with the US Chamber of Commerce’s $75 million, lifted House Republicans into the majority, radically shifting the balance of power in Washington, DC. This year, it’s pretty clear that shadow money groups active in federal elections across the country are again depending on this pool of untraceable money.
The right-wing billionaire clique, rumored to be the same group of tycoons who attend the posh Koch strategy conferences, is obessed with secrecy. They were quick to kick me out of one of their confabs earlier this year, and have used every legal instrument available to prevent their names from being revealed. Accordingly, Center for Protecting Patients’ Rights pushes the limits of campaign finance law, but rarely violates it.
Even in California, a nonprofit can avoid disclosure laws by claiming to only support issue advocacy.
That’s where the operatives messed up. The $11 million they financed in California went to an explicit campaign committee, voiding any argument that the donation was in pursuit of an “issue” rather than a political campaign. There’s no grey area here; the money was part of a campaign donation, and its true donors, meaning the people behind the Center to Protect Patients’ Rights, must be disclosed.
Kamala Harris seems determined to pursue a criminal investigation. But will she?
The growing scandal resembles another eleventh-hour Koch campaign effort. In 1996, a resurgent Clinton administration came close to helping Democrats retake the House of Representatives. In the closing days of the 1996 election, a nonprofit group called Triad Management helped two other nonprofits air $3 million in television ads in twenty-six House races and three Senate races. The money saved Speaker Newt Gingrich’s majority.
A subsequent investigation found that more than half of the Triad money came from an organization funded by David and Charles Koch, and that the money was spent disproportionately in areas where Koch Industries owned refineries and pipelines. The investigation also found that Koch Industries provided direct corporate money for the ads, an apparent violation of campaign finance law at the time.
At the time of the Senate investigation, Koch Industries had been building up its lobbying muscle to combat charges relating to over 300 oil spills caused by the corporation in the mid nineties.
Just as The Wall Street Journal reported on many Triad-related documents, Koch received help from its allies in DC. In October of 1997, Senator Fred Thompson (R-TN)—then, the chair of the Senate Government Affairs Committee—moved to cancel hearings into the investigation.
Today, the dynamics are different, but the core issue is the same. A Koch-group was caught violating the law, and there’s a chance to uncover the truth about one of the biggest secret money efforts in American history. It’s likely that Koch and these billionaires will do anything it takes to prevent this current scandal from growing.
Attorney General Harris will decide whether or not to pursue an investigation into the $11 million donation. The result of the effort may reveal who really purchased Congress for the last two years, and the next two.