How Elon Musk, Larry Page and Mark Zuckerberg Use Scam Nonprofits to Hide Dark Money
Politicians are increasingly using nonprofits capable of accepting unlimited dark money funds to advance their agendas and oligarchs use those non-profits to bribe those politicians.
Since Watergate, it’s been illegal for anyone to secretly donate millions to a federal candidate’s election campaign. Congress decided at the time that capping contributions was a price worth paying to deter corruption. For the same reason, campaign finance law requires candidates to publicly disclose donations above a certain amount. Sunlight, as the Supreme Court likes to say, is the best disinfectant.
But such rules — designed to prevent would-be officeholders from being “bought” by wealthy donors — don’t apply to a burgeoning new mode of self-promotion that politicians are embracing once they actually take office.
Like so-called “buddy PACs” – unlimited spending groups that support a single candidate during campaign season – the new must-have accessory for successful politicians is the officeholder-controlled nonprofit. These entities, launched after the campaigning is over, can raise unlimited amounts in secret donations to spend on promoting officeholders and their agendas. And they are gaining popularity among elected officials at every level of government.
The time has come to enact common-sense regulations to stop these nonprofits from corrupting our politics.
Among the most prominent examples: America First Policies, a 501(c)(4) social welfare nonprofit that President Trump’s top advisors founded a week after his inauguration. Earlier this year, CNBC reported the group has conducted polling worth as much as seven figures — work that typically fuels political ad campaigns. Among other promotions of Trump administration positions, the nonprofit produced a TV ad last fall that featured flattering footage of the president and called on viewers to “stand with President Trump to cut taxes, now.” The donors to America First Policies remain secret.
In a recent report, we at the Brennan Center for Justice found that at least two presidents, seven governors, and several prominent mayors – from both major parties – have established nonprofits that allow them to raise unlimited, anonymous funds for political spending after election day.
Since 2010, these elected officials — including Republicans like embattled Missouri Governor Eric Greitens and progressives like campaign finance warrior Bernie Sanders — have altogether raised as much as $150 million for nonprofits that they are able to control and use to promote their respective agendas.
Allowing elected officials to take unlimited cash from usually secret donors through these nonprofits opens the door to conflicted loyalties and corruption. Occasional exposés reveal some of these donors have specific business interests before the elected officials whose nonprofits they support – and likely see their donation as a means to win government decisions that will benefit them.
In New York State, for example, gambling companies donated $2 million to a nonprofit affiliated with Governor Andrew Cuomo just before the he declared his support for increasing gambling in his 2012 State of the State address. And in Los Angeles, a pipe manufacturing executive made it clear that his million-dollar pledge to the mayor’s nonprofit was meant to gain influence in a city that forbids campaign contributions by companies seeking government business. He told the Los Angeles Times, “We want to influence the government leaders to make the right decisions so that we can be more competitive.”
Some of these nonprofits have taken steps at self-regulation. President Obama’s Organizing for Action wrote the playbook on turning these types of nonprofits into publicity juggernauts. In the spirit of being “open and transparent,” OFA decided early on to voluntarily disclose its donors. But hoping that officeholder-controlled nonprofits will voluntarily disclose funders is hardly a plan to ensure ethical governance.
Americans deserve to have confidence that decisions about who builds bridges or treats drinking water are based on the most qualified, competitive bid – not who gives the most to an elected official’s nonprofit. For this reason, we recommend a straightforward set of laws to bring transparency to these nonprofits and limit the influence of those with specific business interests before government, and we’re urging legislators across the country to adopt it.
First, we should identify those nonprofits that pose a major risk of corruption – determining whether an elected official or close associates control the group and, if so, whether the group spends substantial amounts on promoting the official. Then, for the small set of entities this test would identify, we propose two key safeguards that are well-established components of anti-corruption law. One is public disclosure of who is giving money, and how much, to an officeholder-controlled nonprofit. The second is contribution limits for donors who have concrete business interests that the politician has the power to affect.
Some jurisdictions have already started following this model. In New York City, similar legislation kicked in this year following a federal investigation into Mayor Bill de Blasio’s nonprofit and allegations of ethical transgressions. And in early 2017, the Missouri legislature considered a measure to require certain nonprofit groups to report donations, though the effort fell short.
To be sure, nonprofits associated with elected officials may do work that serves the public. They may use the officeholder’s high profile to attract private funding for education, economic development, antipoverty work, and more. The beauty of a legal solution that focuses on control by the elected official and spending to promote that official is that these public benefits can go on, uninterrupted.
But with officeholders’ increasing reliance on private donors even outside of campaign season, requiring transparency and limiting donations by those seeking government business are crucial starting points for protecting government integrity. To ignore this growing problem of money in our politics, where a handful of ultrarich donors from Silicon Valley already wield grossly outsized influence, would ignore an unacceptable threat to representative democracy.
Thanks to the slashing, theatrical tactics of Michael Avenatti, we spent much of last week learning how corporate America bribes public officials. It was revealed that AT&T and Novartis paid Trump lawyer Michael Cohen for “insights” into the Trump administration. Cohen’s take from a variety of companies ran into the seven figures.
Our government is for sale, but don’t blame Donald Trump. His clumsy cast of cartoon Mafiosi have merely taken the finesse out of the game, placing the oily guts of the machine out in the daylight.
Pay for play politics is not new. It is not a product of Citizens United or McDonnell. Bribery is deeply engrained in our values and protected in law. Some states, like Texas, have no enforceable bribery laws. Federal statutes create such a high standard, with so many exceptions, that even the rare, successful prosecution is usually overturned on appeal.
Spiro Agnew spent his career shaking down government contractors for cash. He continued the practice during his time as Nixon’s Vice President. When the payments were revealed he was forced to resign, but his only penalty was to pay back-taxes on a small portion of the income. Money for that payment came from Frank Sinatra.
The only way to go to jail for bribery is to be sloppy, unpopular, or of course – black. Louisiana Congressman, William Jefferson, carries the distinction of serving the longest sentence in our history for bribery. His conviction carried an enhancement for criming while black, resulting in a whopping 13-year sentence. Jefferson served five years before almost all of the charges against him were overturned. Coincidently, the two longest sentences ever handed down for bribery just happen to have been laid on black elected officials, Jefferson and Philadelphia’s Chaka Fattah. Strange.
Former Texas Governor and current Energy Secretary, Rick Perry has spent his entire adult life in poorly paid public service. Naturally, he’s a millionaire. Perry plays a starring role in one of our country’s most remarkable bribery incidents, and no, it’s not the one that earned him an indictment.
Back in the 90’s, Texas homebuilding tycoon, Bob Perry (no relation), was concerned about the growth of municipal housing codes and his losses from lawsuits over shoddy construction. So he bought a new state agency that would pre-empt municipal codes and block homeowner lawsuits. He even got his lawyer appointed to the agency board in 2003. The effort is estimated to have cost him around $10 million which he spread liberally around both parties in the legislature and the Governor’s office. Under public protest, the agency was disbanded a few years later, but there were no investigations or prosecutions.
Sweet old Bob Dole was the king of the dole. Like Perry, public service made Dole a millionaire. He was owned by the tobacco industry, but they lent him out for other projects. His ’88 campaign earned a then-record fine for its blatant irregularities. A scandal over payments by the Gulf Oil Company back in the 70’s was one his strangest scams in a career filled with, let’s just say, odd and irregular payments.
Your Congressman does not represent you. If your Congressman imagines that she represents you, she will quickly cease to be your Congressman. This is as true of the finest people we send to Washington as it is of the worst. The noblest, most principled, and most effective of our representatives are the ones who ride a knife edge, finding small ways around the legislative margins to protect your interests while pacifying the people who underwrite the system and fund their campaigns.
The impact of institutionalized bribery is perhaps most apparent in the details of the Affordable Care Act. Why didn’t the ACA include a public option? Why isn’t the program universal? Why is Medicare blocked by law from using its remarkable negotiating leverage to drive down prices for prescription drugs? Lots of well-intentioned elected officials went to Washington in 2008 and discovered the stark limits of their power. Corporations and wealthy individuals spent just enough money on bribes to divert just enough public political will to protect their most vital interests at a critical moment.
Of course, buying political outcomes is more complicated than it sounds. Your legislature is a marketplace with many competing buyers. Voters complicate this picture. Money spent on bribes is leverage against public will. The deeper and more focused the public interest, the more it costs to move unpopular policies into law. An organized and engaged public can easily drive the price of corruption too high even for billionaires. Nothing in our system is as powerful as motivated voters. Don’t worry, the wealthy have ways to keep voters disorganized and confused.
Money spent to buy political outcomes isn’t just spent on bribes. Elected officials receiving the money need air cover. Cash flows into disinformation campaigns that blunt public will. The racist website, Brietbart is a project of the Mercer family. But for the Mercers, you never would have heard of Steve Bannon. If you’ve heard of Ben Shapiro or the fake news site Daily Wire, you can thank the freaky Texas billionaires, the Wilks Brothers.
Daily Signal is underwritten by the Heritage Foundation, which is a project of several billionaires including the Scaifes and the Kochs. Tucker Carlson’s Daily Caller was backed by born-again millionaire Foster Friess. Founders of The Federalist have managed to keep their funding sources secret. The “grassroots” conservative media site, RedState, is a project of the Salem Media Group, a Christian media behemoth that trades on NASDAQ. And of course, the mother of all fake news projects, Fox News, was built by Nixon aide Roger Ailes and funded by Rupert Murdoch.
Beyond just news, the Koch brothers have bought an entire complex of phony think tanks. They’ve also bought university programs and professors. They practically own George Mason University outright. If information is power, disinformation is Kryptonite.
Why do hacks like Ben Shapiro and Tomi Lahren appear all over your drunk uncle’s Facebook feed while few people have heard of David Brin, Doug Mataconis or Doug Muder? If your writing on politics and economics is insightful, you might build a modest following. If your writing helps wealthy people cover their bribery, you’ve stumbled onto a golden business model.
Some have fought this monster. Sally Yates built a career battling corrupt public officials and it nearly cost her a job at the Justice Department. Long before anyone could imagine a Trump administration, Congressman and civil rights hero John Lewis tried to scuttle Yates’ 2009 appointment as a federal prosecutor. Yates had ruined the career of a corrupt Atlanta mayor friendly to Lewis. The pay-for-play monster has no concern for no party labels.
Obama Administration officials launched a serious campaign against corruption. Their efforts contributed to prosecutions against Sheldon Silver and Seth Williams. As a result, Yates and Preet Bharara have been fired. Others will likely follow. The Silver prosecution is already unraveling. The Obama Era effort to constrain bribery is deader than Donald Trump’s soul.
In theory, voters could put a stop to pay for play politics anytime we want. Citizens United does nothing to stop state or federal government from adopting aggressive disclosure laws for political donations. We could pass real, enforceable bribery laws. We could strip the tax deduction for dark money political donations. We could implement financial disclosure rules for elected and appointed officials.
We haven’t stopped this monster because the public doesn’t care. Money-driven politics is so engrained our political culture that it doesn’t inspire much concern. Bribery is an American tradition, one we will almost certainly pass on to the next generation.
A decade in the making, the controversial Trans-Pacific Partnership (TPP) is reaching its climax and as Congress hotly debates the biggest trade deal in a generation, its backers have turned on the cash spigot in the hopes of getting it passed.
“We’re very much in the endgame,” US trade representative Michael Froman told reporters over the weekend at a meeting of the 21-member Asia-Pacific Economic Cooperation forum on the resort island of Boracay. His comments came days after TPP passed another crucial vote in the Senate.
That vote, to give Barack Obama the authority to speed the bill through Congress, comes as the president’s own supporters, senior economists and a host of activists have lobbied against a pact they argue will favor big business but harm US jobs, fail to secure better conditions for workers overseas and undermine free speech online.
Those critics are unlikely to be silenced by an analysis of the sudden flood of money it took to push the pact over its latest hurdle.
Fast-tracking the TPP, meaning its passage through Congress without having its contents available for debate or amendments, was only possible after lots of corporate money exchanged hands with senators. The US Senate passed Trade Promotion Authority (TPA) – the fast-tracking bill – by a 65-33 margin on 14 May. Last Thursday, the Senate voted 62-38 to bring the debate on TPA to a close.
Those impressive majorities follow months of behind-the-scenes wheeling and dealing by the world’s most well-heeled multinational corporations with just a handful of holdouts.
Using data from the Federal Election Commission, this chart shows all donations that corporate members of the US Business Coalition for TPP made to US Senate campaigns between January and March 2015, when fast-tracking the TPP was being debated in the Senate:
- Out of the total $1,148,971 given, an average of $17,676.48 was donated to each of the 65 “yea” votes.
- The average Republican member received $19,673.28 from corporate TPP supporters.
- The average Democrat received $9,689.23 from those same donors.
The amounts given rise dramatically when looking at how much each senator running for re-election received.
Two days before the fast-track vote, Obama was a few votes shy of having the filibuster-proof majority he needed. Ron Wyden and seven other Senate Democrats announced they were on the fence on 12 May, distinguishing themselves from the Senate’s 54 Republicans and handful of Democrats as the votes to sway.
- In just 24 hours, Wyden and five of those Democratic holdouts – Michael Bennet of Colorado, Dianne Feinstein of California, Claire McCaskill of Missouri, Patty Murray of Washington, and Bill Nelson of Florida – caved and voted for fast-track.
- Bennet, Murray, and Wyden – all running for re-election in 2016 – received $105,900 between the three of them. Bennet, who comes from the more purple state of Colorado, got $53,700 in corporate campaign donations between January and March 2015, according to Channing’s research.
- Almost 100% of the Republicans in the US Senate voted for fast-track – the only two non-votes on TPA were a Republican from Louisiana and a Republican from Alaska.
- Senator Rob Portman of Ohio, who is the former US trade representative, has been one of the loudest proponents of the TPP. (In a comment to the Guardian Portman’s office said: “Senator Portman is not a vocal proponent of TPP - he has said it’s still being negotiated and if and when an agreement is reached he will review it carefully.”) He received $119,700 from 14 different corporations between January and March, most of which comes from donations from Goldman Sachs ($70,600), Pfizer ($15,700), and Procter & Gamble ($12,900). Portman is expected to run against former Ohio governor Ted Strickland in 2016 in one of the most politically competitive states in the country.
- Seven Republicans who voted “yea” to fast-track and are also running for re-election next year cleaned up between January and March. Senator Johnny Isakson of Georgia received $102,500 in corporate contributions. Senator Roy Blunt of Missouri, best known for proposing a Monsanto-written bill in 2013 that became known as the Monsanto Protection Act, received $77,900 – $13,500 of which came from Monsanto.
- Arizona senator and former presidential candidate John McCain received $51,700 in the first quarter of 2015. Senator Richard Burr of North Carolina received $60,000 in corporate donations. Eighty-one-year-old senator Chuck Grassley of Iowa, who is running for his seventh Senate term, received $35,000. Senator Tim Scott of South Carolina, who will be running for his first full six-year term in 2016, received $67,500 from pro-TPP corporations.
“It’s a rare thing for members of Congress to go against the money these days,” said Mansur Gidfar, spokesman for the anti-corruption group Represent.Us. “They know exactly which special interests they need to keep happy if they want to fund their reelection campaigns or secure a future job as a lobbyist.
“How can we expect politicians who routinely receive campaign money, lucrative job offers, and lavish gifts from special interests to make impartial decisions that directly affect those same special interests?” Gidfar said. “As long as this kind of transparently corrupt behavior remains legal, we won’t have a government that truly represents the people.”
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