[Vision2020] Groups Shield Political Gifts of Businesses

[Art Deco]

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July 7, 2012
Groups Shield Political Gifts of Businesses By MIKE
McINTIRE<http://topics.nytimes.com/top/reference/timestopics/people/m/mike_mcintire/index.html>and
NICHOLAS
CONFESSORE<http://topics.nytimes.com/top/reference/timestopics/people/c/nicholas_confessore/index.html>

American Electric Power, one of the country’s largest utilities, gave $1
million last November to the Founding Fund, a new tax-exempt group that
intends to raise most of its money from corporations and push for limited
government.

The giant insurer Aetna directed more than $3 million last year to the American
Action Network <http://americanactionnetwork.org/>, a Republican-leaning
nonprofit organization that has spent millions of dollars attacking
lawmakers who voted for President Obama’s health care bill — even as
Aetna’s president publicly voiced support for the legislation.

Other corporations, including Prudential Financial, Dow Chemical and the
drugmaker Merck, have poured millions of dollars more into the U.S. Chamber
of Commerce, a tax-exempt trade group that has pledged to spend at least
$50 million on political advertising this election cycle.

Two years after the Supreme Court’s Citizens United decision opened the
door for corporate spending on elections, relatively little money has
flowed from company treasuries into “super
PACs<http://topics.nytimes.com/top/reference/timestopics/subjects/c/campaign_finance/index.html?inline=nyt-classifier>,”
which can accept unlimited contributions but must also disclose donors.
Instead, there is growing evidence that large corporations are trying to
influence campaigns by donating money to tax-exempt organizations that can
spend millions of dollars without being subject to the disclosure
requirements that apply to candidates, parties and PACs.

The secrecy shrouding these groups makes a full accounting of corporate
influence on the electoral process impossible. But glimpses of their donors
emerged in a New York Times review of corporate governance reports, tax
returns of nonprofit organizations and regulatory filings by insurers and
labor unions.

The review found that corporate donations — many of them previously
unreported — went to groups large and small, dedicated to shaping public
policy on the state and national levels. From a redistricting fight in
Minnesota to the sprawling battleground of the 2012 presidential and
Congressional elections, corporations are opening their wallets and
altering the political world.

Some of the biggest recipients of corporate money are organized under
Section 501(c)(4) of the tax code, the federal designation for “social
welfare” groups dedicated to advancing broad community interests. Because
they are not technically political organizations, they do not have to
register with or disclose their donors to the Federal Election Commission,
potentially shielding corporate contributors from shareholders or others
unhappy with their political positions.

“Companies want to be able to quietly push for their political agendas
without being held accountable for it by their customers,” said Melanie
Sloan, executive director of Citizens for Responsibility and Ethics in
Washington <http://www.citizensforethics.org/>, which has filed complaints
against issue groups. “I think the 501(c)(4)’s are likely to outweigh super
PAC spending, because so many donors want to remain anonymous.”

Because social welfare groups are prohibited from devoting themselves
primarily to political activity, many spend the bulk of their money on
issue advertisements that purport to be educational, not political, in
nature. In May, for example, Crossroads Grassroots Policy
Strategies<http://www.crossroadsgps.org/>,
a group co-founded by the Republican strategist Karl Rove, began a $25
million advertising campaign, carefully shaped with focus groups of
undecided voters, that attacks Mr. Obama for increasing the federal deficit
and urges him to cut spending.

The Internal Revenue Service has no clear test for determining what
constitutes excessive political activity by a social welfare group. And
tax-exempt groups are permitted to begin raising and spending money even
before the I.R.S. formally recognizes them. Two years after helping
Republicans win control of the House with millions of dollars in issue
advertising, Crossroads GPS’s application for tax-exempt status is still
pending.

During the 2010 midterm elections, tax-exempt groups outspent super PACs by
a 3-to-2 margin, according to a recent study by the Center for Responsive
Politics <http://www.opensecrets.org/> and the Center for Public
Integrity<http://www.iwatchnews.org/>,
with most of that money devoted to attacking Democrats or defending
Republicans. And such groups have accounted for two-thirds of the political
advertising bought by the biggest outside spenders so far in the 2012
election cycle, according to Kantar Media’s Campaign Media Analysis
Group<http://kantarmediana.com/cmag>,
with close to $100 million in issue ads.

The growing role of issue groups has prompted a rash of complaints and
lawsuits from watchdog organizations accusing groups like the American
Action Network, Crossroads and the pro-Obama Priorities
USA<http://www.prioritiesusa.org/>of operating as sham charities whose
primary purpose is not the promotion
of social welfare, but winning elections. Efforts in Congress to force more
disclosure for politically active nonprofit organizations have been
repeatedly stymied by Republicans, who have described the push as an
assault on free speech.

“These groups are being used as a conduit to hide from voters the identity
of people and corporations who are bankrolling these television ads, which
are designed to influence the outcome of elections,” said Representative
Chris Van Hollen, Democrat of Maryland.

But Jonathan Collegio, a spokesman for Crossroads, said, “Individuals and
organizations have a First Amendment right to promote their beliefs through
advertising, be that advertising against the Iraq war, against climate
change<http://topics.nytimes.com/top/news/science/topics/globalwarming/index.html?inline=nyt-classifier>or,
in the case of Crossroads, advocating for free markets and limited
government.”

Labor unions — themselves among the beneficiaries of Citizens United — have
also donated millions of dollars to national super PACs and state-level
nonprofit groups involved in battles over government spending, collective
bargaining and health care.

Donations from corporations and unions alike must be disclosed if they go
to expressly political groups like super PACs.

In April, for example, the air traffic controllers’ union contributed $1
million to a pro-Obama super PAC. But other contributions are harder to
trace. Last year, the American Federation of State, County and Municipal
Employees gave $100,000 to Advancing Wisconsin, a tax-exempt group that
supported labor’s fight with Republicans in that state; the donation was
reported nowhere in Wisconsin, but it emerged in an annual financial report
that unions must file with the federal Department of Labor.

Among the largest beneficiaries of corporate donations in recent years have
been trade organizations like the U.S. Chamber of Commerce, which largely
backs Republican candidates. As a nonprofit “business league” under the tax
code, the chamber does not have to disclose its supporters, who helped
finance its $33 million in political ads in the 2010 midterm elections.

But voluntary disclosures by corporations — usually at the prodding of
shareholder advocacy groups — shed some light on the use of trade groups
for lobbying or as pass-throughs for political spending. A search of
voluntary disclosures, some collected by the Center for Political
Accountability <http://www.politicalaccountability.net/>, which advocates
for transparency in corporate political spending, found more than $6
million in chamber donations by 10 companies last year.

Two of the largest came from Prudential Financial and Dow Chemical, which
each gave $1.6 million, while Chevron, MetLife and Merck each gave at least
$500,000. Some of the donations were directed to the chamber’s Institute
for Legal Reform, which lobbies for limits on liability suits.

Some contributions are disclosed by accident. Aetna’s check to the American
Action Network, along with a $4.5 million contribution last year to the
chamber, was mistakenly included in a filing with insurance regulators. The
disclosure was first reported by SNL Financial, a trade publication. Even
where companies pledge voluntary disclosure of political contributions,
they often make an exception for donations to tax-exempt groups.

In 2007, Aetna signed an agreement with the Mercy Investment Program, a
shareholders group, to disclose trade associations to which it made large
contributions. On regulatory filings, the company initially described its
$3 million contribution to the Chamber of Commerce as a lobbying expense,
but the company now says it was intended to finance “educational
activities.”

An Aetna spokesman would not say whether the chamber donation would appear
on the company’s 2011 voluntary disclosure. Sister Valerie Heinonen, the
director of shareholder advocacy for Mercy Investment Services, said that a
failure to do so would violate the company’s pledge.

Beyond the contributions to large, established nonprofits like the chamber
and American Action Network, corporate money is also quietly shaping the
political discourse through more obscure groups, none of which are required
to disclose their donors.

In Minnesota last year, Express Scripts, a major drug benefit manager, gave
$10,000 to a Republican-linked group, Minnesotans for a Fair Redistricting,
involved in a partisan fight over redrawing legislative boundaries. Express
Scripts made the donation, previously unreported, because the “electoral
maps in Minnesota were in doubt and we supported efforts to bring certainty
to Minnesota voters,” said Brian Henry, a spokesman for the company, which
is based in St. Louis. He added that the firm has a facility in
Bloomington, Minn.

The reasons behind American Electric Power’s $1 million contribution to the
little-known Founding Fund are less clear. The company characterized it as
“lobbying” in a corporate governance disclosure last year, but the fund
says it does no lobbying. The fund, whose address is a mail drop in
Alexandria, Va., would not make any of its directors available for an
interview.

The fund’s treasurer, Frank Sadler, is a lobbyist who previously worked for
Koch Industries advising nonprofit groups that support free market causes,
although he said the Kochs, major Republican donors, were not involved in
the group. In its public filings, the fund said it expected to raise about
$10 million this election cycle, primarily from corporations, and use it to
promote free markets and “the narrowing of the scope and reach of the
federal government.”

A spokesman for American Electric Power, Pat D. Hemlepp, said the company
supports organizations “with positions on issues that align with AEP’s
positions” and strives to be transparent on political giving. “We also
respect the positions of others, including some of the organizations that
receive funding from AEP, to not publicly disclose funding or activities.
That’s their right under the law.”


-- 
Art Deco (Wayne A. Fox)
art.deco.studios at gmail.com
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