December 19, 2014

Dead End Disclosure in the Laboratories of Democracy

By Matt Corley and David Crockett

Michigan

A growing trend in campaign spending this election was the use of federally-registered super PACs to dump money into state-level elections. In some cases, these super PACs simply transferred large sums to state-based affiliates that subsequently spent the money, such as the Liberty Principles PAC, which raised nearly $1.8 million from a single donor that was later transferred to a state account. In other instances, federal super PACs directly paid for ads aimed at local candidates, as was the case with the Concrete and Portland Cement Action Network profiled by CREW earlier this week.

Like their nationally-minded counterparts, state-focused super PACs can raise unlimited sums and are required to disclose their donors to the Federal Election Commission (FEC). That transparency is easily subverted, however, when contributions are routed through nonprofits that can keep their donors secret. A perfect example is the Hardworking Americans Committee, which spent more than $920,000 in 2014, mostly on negative TV ads attacking Democrats in Michigan. More than half of the group’s budget can be traced to dark money groups.

Hardworking Political Consultants

The Hardworking Americans Committee first arrived on the scene during the final weeks of the 2012 election, running more than $1 million in negative ads against Sen. Debbie Stabenow (D-MI). The group was established by Stu Sandler, a political consultant who was once the executive director of the Michigan Republican Party. Since the Hardworking Americans Committee delayed making its expenditures until very close to the election, the super PACs donors were a secret until a month after Election Day when final FEC reports for the cycle were due. Just four individuals, it turned out, funded the attacks against Sen. Stabenow, including casino mogul Sheldon Adelson, who contributed $1 million.

In 2014, the super PAC no longer relied on individual contributors.  Instead, a combination of PACs, nonprofits, and other political organizations – 10 entities in all – filled its coffers.  Several of the organizations have ties to the Sterling Corporation, a “Republican communications company” in Michigan. For instance, Michigan Citizens for Fiscal Responsibility (MCFR), a tax-exempt social welfare group organized under section 501(c)(4) of the tax code that gave $155,000 to the Hardworking Americans Committee, is run by the firm. Another nonprofit that contributed $40,000 to the super PAC, the Michigan Jobs and Labor Foundation, is also staffed by Sterling employees. Three other contributors, the Senate Majority 2014 PAC, the West Michigan Preservation Fund, and the Moving Michigan Forward Fund II, all share a Lansing, Michigan address with the Sterling Corporation.

The Republican State Leadership Committee (RSLC), a national organization that focuses on electing Republicans on the state level, was the top contributor to the Hardworking Americans Committee, giving $415,000 in late October. Most of the money that the RSLC gave to the Hardworking Americans Committee may have originated with the Sterling Corporation-affiliated groups. MCFR, the Michigan Jobs and Labor Foundation, and the Senate Majority 2014 PAC gave a combined $325,000 to the RSLC at roughly the same time the RSLC made its contributions to the Hardworking Americans Committee. Since MCFR and the Michigan Jobs and Labor Foundation are nonprofits that do not have disclose their donors, the ultimate source of most of the money is unknown. Funneling hundreds of thousands of dollars from nonprofits to a super PAC, by way of the RSLC, could be the “Triple Lindy” of dead end disclosure.

Super PACS and Nonprofits Working Side by Side

Mr. Sandler, who founded the Hardworking Americans Committee, is the chairman of two nonprofits whose primary activities have been sending money to other organizations that engage in political and policy fights. Americans Who Advocate Responsible Efforts (AWARE), based in Washington, DC, and Involve America, based in Michigan, were both founded in 2011. Between 2011 and 2013, AWARE gave away $1.57 million to organizations including New Models, Citizens for a Working America, and the Michigan Chamber of Commerce. One of the biggest recipients was Involve America. In 2012 alone, Involve America gave away $3.06 million to other organizations, including the YG Network, Hoosiers for Economic Growth, and the Michigan Republican Party. Both AWARE and Involve America also directed money to MCFR. In fact, in 2011, MCFR was completely funded by a $50,000 grant from AWARE. In 2012, 96 percent of MCFR’s budget came from an Involve America grant.

One state Senate race in Michigan this year was an epicenter of activity for this dark money network. According to the Center for Public Integrity’s state ad wars tracker for Michigan, the Hardworking Americans Committee spent nearly $100,000 on negative ads against state Rep. Stacy Erwin Oakes (D-95) in Michigan’s 32nd Senate district. A national organization well-known for spending secret money on politics, Americans for Job Security, also ran more than $203,000 in ads against Rep. Oakes. In 2012, Americans for Job Security, received $1.4 million from Mr. Sandler’s Involve America and $425,000 from MCFR. Finally, one of the groups that funded the Hardworking American Committee, the Michigan Jobs and Labor Foundation, also ran ads supporting Rep. Oakes’ opponent, though only a small amount. The Michigan Jobs and Labor Foundation may have planned to run more, but the group came under fire in early October for the language used in several ads, resulting in a complaint filed with the Michigan Bureau of Elections by state Rep. Oakes’ campaign.

Mr. Sandler likely guided even more dark money into Michigan’s elections this year.  On his consulting firm’s website, Mr. Sandler says that in 2014 he “worked with the Hardworking Americans Committee SuperPAC and the Faith & Freedom Coalition of Michigan advising the committees in independent expenditures and issue advocacy spending in 34 State Senate and State House races around Michigan.” The Faith & Freedom Coalition of Michigan is a 501(c)(4) social welfare nonprofit, so the funders behind any spending by the group on “independent expenditures and issue advocacy” are secret. If the pattern established by other groups connected to Mr. Sandler holds, the answer may likely be found on the 2014 tax returns for AWARE, Involve America, or MCFR.

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