June 17, 2016

Dark Money Groups Targeted By Complaints Ran Last Minute Attack Ads in AG Races

By Matt Corley

Earlier this week, Citizens for Responsibility and Ethics in Washington (CREW) filed IRS complaints against 10 politically active non-profit groups that sought to influence elections across the country in 2014. Many of the groups violated their tax-exempt status by impermissibly making politics their primary activity while others significantly underreported their political activity. CREW also filed complaints with the Department of Justice against six of the organizations that appear to have made false statements to the IRS about their political activity.

Despite the fact that they spent hundreds of thousands of dollars on television ads targeting candidates in the weeks before an election, several of the organizations did not report any political activity to either election authorities or the IRS. Take the American Dream Initiative (ADI), for instance.

In May 2014, just days before the runoff election in Texas’ Republican primary for attorney general, the Virginia-based section 501(c)(4) organization broadcast ads in seven Texas cities criticizing one of the two candidates, then-Texas Senator Ken Paxton, who eventually won the election. ADI spent approximately $532,000 to air the ads, but never filed any reports with the Texas Ethics Commission. The group’s founder, campaign finance lawyer Dan Backer, claimed he didn’t have to because it was an “issue ad” that didn’t explicitly advocate for now-Attorney General Paxton’s defeat.

When it came time to file ADI’s annual tax return with the IRS, Backer asserted the group did not engage in any “direct or indirect political campaign activities on behalf of or in opposition to candidates for public office.” But as CREW noted in its complaint against ADI, the IRS considers several key factors when it determines whether particular communications constitute political campaign intervention, and ADI’s ads do appear to constitute political activity. They were broadcast immediately before an election, identified someone who was a candidate, and expressed disapproval of him. They were neither part of an ongoing series of communications on an issue nor related to any non-electoral event such as a vote on legislation. Instead, the only reasonable interpretation is that the ads were aimed at swaying voters in the runoff election.

The Rule of Law Project (ROLP), a Virginia-based non-profit that spent nearly $200,000 on ads in Wisconsin’s 2014 attorney general election, also did not file any reports with the Badger State’s campaign finance authority. The ads, which ran during the week before the November 4, 2014 election, clearly identified the two contenders as candidates while praising the Republican nominee and attacking the Democratic nominee. Yet, just like ADI, ROLP told the IRS on its tax return that it did not try to influence any elections in 2014.

It may not be a coincidence that these two groups used the same tactic of running last minute attack ads while refusing to comply with basic disclosures of political spending. As CREW has previously noted, the two groups share financial ties. Between July 1, 2013 and June 30, 2014, the Judicial Crisis Network, a non-profit known for spending millions in opposition to Supreme Court nominee Merrick Garland, contributed $250,000 to ADI and $100,000 to ROLP. Another group with ties to the Judicial Crisis Network also gave money to both groups in 2014. The Wellspring Committee, known in as a “pioneer” in moving money between politically active non-profits, contributed $350,000 to ADI and $30,000 to ROLP.

A third group that received funds from both the Judicial Crisis Network and the Wellspring Committee also paid for last minute ads in a 2014 attorney general election. Unlike ADI and ROLP, however, the Arizona Public Integrity Alliance (AZPIA) provided a modicum of disclosure. AZPIA spent hundreds of thousands of dollars on ads attacking then-Attorney General Tom Horne’s ethics in 2014, including one that called on him to resign. For an ad that the group ran close to the August 26, 2014 primary, AZPIA actually filed an independent expenditure report with the Arizona Secretary of State’s office disclosing spending $138,287. Even though the group said it believed the ad was an issue ad and not express advocacy, it filed the report “in an abundance of caution and in the interest of transparency.” AZPIA does not appear to have counted the ad as political spending on its 2014 tax return, though the group did admit to spending $11,015 on politics.

Still, the little bit AZPIA did disclose is a vast improvement over ADI and ROLP. While AZPIA made a nod toward respecting the public’s interest in transparency, the other two groups brazenly ignore disclosure requirements. In fact, ADI went so far as to refuse to even reveal its significant donors to the IRS, as section 501(c)(4) organizations are required to do (the IRS is barred from disclosing this information to the public). The American Dream apparently does not include knowing anything about who spends money to influence political campaigns just before Americans cast their votes. 

What’s Duncan Hunter Drinking?

Rep. Duncan Hunter (R-CA) has come under fire for charging thousands of dollars in personal expenses to his campaign, leading to FEC and Ethics complaints from CREW. Beyond the expenses he has admitted to being inappropriate—video games, oral surgery, a garage door opener—we’ve also found issues with what his campaign classifies as “Food & Beverages.” Read More ›

Florida Medicaid Initiative Tied to Rep. Corrine Brown Funded by Sham Nonprofit

Former Jacksonville, FL City Council candidate Mincy Pollock was recently pulled into the scandal surrounding Rep. Corrine Brown (D-FL) and sham nonprofit One Door for Education. Pollock was visited by federal agents following allegations from his former business partner concerning checks that Pollock wrote from their business last year in a dizzying sequence of suspicious money movement—including two to One Door. A CREW investigation reveals that Pollock may have used One Door to indirectly fund a state ballot initiative expanding Medicaid, raising new questions about how One Door operated and why the One Door money was used to support the initiative. Read More ›

Are Montana Politicians Really “Incorruptible”?

In the Federalist Papers, James Madison noted that “if angels were to govern men, neither external nor internal controls on government would be necessary.” Of course, he recognized we were not to be governed by “angels,” but by “men,” and so laws were necessary to “oblige [the government] to control itself.” According to U.S. District Judge Charles Lovell, however, Madison needn’t have concerned himself: we could have just been ruled by “Montana politicians,” who the Judge found were “relatively incorruptible.” Read More ›

Despite Initial Hesitance, Americans for Prosperity Ups Lobbying Presence on Capitol Hill

Americans for Prosperity (AFP), a Koch network-connected section 501(c)(4) nonprofit group, is well-known for its grassroots organizing and campaign-style political activity. In 2014, however, AFP tepidly made plans to try out a more traditional, insider influence tool: lobbying Congress. Read More ›

Infamous for Keeping Clients Secret, Berman Admits to Advising Monsanto on GMOs

In June 2014, Richard Berman, the infamous president of corporate public relations firm Berman and Company, pitched a room full of energy company executives on his team’s work in fighting an anti-fracking initiative in Colorado. Noting that critics often want to know the names of the donors behind his campaigns, Berman said he runs all his work “through nonprofit organizations that are insulated from having to disclose donors,” allowing “total anonymity” for his clients. Read More ›

Groups Tied to Nonprofit Leading SCOTUS Blockade Regularly Target AG Candidates

The Judicial Crisis Network (JCN) is making news these days as the main conservative group seeking to block President Obama’s ability to seat a replacement on the Supreme Court for late Justice Antonin Scalia. The nonprofit group, which does not disclose its donors, is spending millions on ads attacking nominee Merrick Garland and pressuring Republican senators to hold the line against even holding a hearing on his nomination. Read More ›

© 2015 Citizens for Responsibility and Ethics in Washington, all rights reserved.
• 455 Massachusetts Avenue NW • Sixth Floor • Washington, DC 20001 • 202-408-5565 •

Citizens for Responsibility and Ethics in Washington®, and the
“CREW | Citizens for Responsibility and Ethics in Washington” wordmark are registered trademarks.