Christmas comes early for campaign watchdogs—or late, depending on your perspective. Thanks to a lag in IRS reporting rules, the tax returns of independent groups that spent hundreds of millions of dollars in the 2012 election are just now coming due. Considered together with a recent campaign-finance investigation in California, these filings hint at an orgy of self-dealing and “dark money” shenanigans unprecedented in American politics. The first presidential election since the Supreme Court’s 2010 Citizens United decision spawned what Bloomberg Businessweek called “a Cayman Islands-style web of nonprofit front groups and shell companies.” These not only shielded donors’ identities but also obscured the huge profits of political operatives who moved nimbly between the candidates, the super PACs, and the vendors that get their business. The so-called “independent expenditure” groups have been “transforming the business of running a political campaign and changing the pecking order of the most coveted jobs,” Businessweek noted. “With a super-PAC, the opportunity to make money is soaring while the job is getting easier to do.” Is it any wonder then that many of the biggest players from past elections jumped to the other side of the game in 2012? Or that they imported two money-making techniques perfected in campaign work: shell corporations that put fees and commissions beyond the reach of federal disclosure rules, and “integrated businesses,” set up by staff and advisers to do nuts-and-bolts electioneering?
The just-settled California case offers an example of both gambits, along with a textbook case of the new dark-money shuffle. The state’s Fair Political Practices Commission traced $29 million raised to run ads about state ballot measures through a daisy chain of 501(c)4 tax-exempt groups, which are not required to identify donors—hence the “dark money.” The lynchpin for this maneuver was the Center to Protect Patients Rights (CPPR), run by a former Capitol Hill staffer named Sean Noble. Operating out of a post-office box in Arizona, CPPR’s sole function is to accept grants, then turn around and make grants for a network of conservative nonprofits.
In the California case, $29 million from in-state donors who wanted to remain anonymous was steered to the Virginia-based Americans for Job Security, which passed $24.5 million to CPPR. Noble then made two grants: $18 million to Americans for Responsible Leadership (ARL), which passed on $11 million to the Small Business Action Committee (SBAC) in California; and $7 million to American Future Fund, which gave $4 million to the California Future Fund.