How Corporations Secretly Move Millions to Fund Political Ads

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Raw Story

How Corporations Secretly Move Millions to Fund Political Ads

A Raw Story Exclusive

by
Brad Jacobson

The Supreme Court's seismic January ruling that corporations are free to spend unlimited amounts of their profits to advertise for or against candidates may have been the latest shakeup of campaign finance - but gaping holes already allow corporations to spend enormous sums without leaving a paper trail.(Image: Scribe Culture)

The Supreme Court's seismic January ruling that corporations are
free to spend unlimited amounts of their profits to advertise for or
against candidates may have been the latest shakeup of campaign finance
- but gaping holes already allow corporations to spend enormous sums
without leaving a paper trail, a Raw Story investigation has found.

Campaign
finance experts confirmed that though disclosure rules remained intact
in the new Supreme Court decision, there are effective methods to
circumvent them.

Ciara Torres-Spelliscy, an attorney and campaign
finance expert at New York University's Brennan Center for Justice,
said corporations already effectively end-run campaign finance law by
shuffling money through trade associations.

"One of their favorites right now is spending through trade associations," Torres-Spelliscy said.

Trade
associations are considered tax-exempt non-profit organizations under
US law. While they must report contributions received from other
corporations to the Internal Revenue Service, the document itself
remains confidential and is not made available to the public.

"Money
coming through the trade association doesn't get disclosed,"
Torres-Spelliscy explained. "You can't tell if it came from particular
corporations."

For example, she said, "The disclaimer form is
likely to just say, ‘This is brought to you by the Chamber of
Commerce,' with no extra ability to see behind that."

The Chamber of Commerce is the world's largest trade association representing 300,000 businesses and organizations.

A
fellow non-profit that works on campaign finance, the Center for
Political Accountability, calls trade associations "the Swiss bank
accounts of American politics."

"What was the lesson from Watergate?" Torres-Spelliscy quipped. "Follow the money?"

Health insurers, pharmaceutical companies embrace loophole

Trade
associations such as America's Health Insurance Plans (AHIP) and
Pharmaceutical Research and Manufacturers of America (PhRMA) have had
an enormous impact on the health insurance reform bills pending in
Congress. In fact, AHIP was recently found to have solicited
$10 million to $20 million from leading health insurance companies --
UnitedHealth, Wellpoint, Aetna, Cigna and Humana among them -- and
funneled it secretly to the US Chamber of Commerce to underwrite
anti-reform attack ads.

Asked about the story, the Chamber's top
lobbyist told the reporter, "No comment. We never disclose funding or
what we're going to do." The Chamber of Commerce did not respond to a
Raw Story request for comment.

Raw Story's 2008 award-nominated investigative series The Permanent Republican Majority
noted that, "Despite its seemingly bipartisan name, the Chamber of
Commerce has operated as a pro-Republican powerhouse since the
fervently anti-regulation Thomas J. Donahue became president in 1997."
Raw's Larisa Alexandrovna and Muriel Kane uncovered, for instance, that
the Chamber, under Donahue's leadership, had an indirect role in the
defeat and political prosecution of Governor Don Siegelman and in
targeting sitting judges in contested state elections.

President
of the Center for Political Accountability Bruce Freed told Raw Story
that trade associations also use other trade associations in this
manner as "blinds for ads" to "launder their money."

"It's a way for the industry to avoid responsibility for those ads," Freed remarked.

Karl
Sandstrom, the Center's lead counsel, noted that it isn't only the
public that remains in the dark over the "Swiss bank" loophole. He said
that when the Center surveyed boards of directors of companies, the
majority of them just assumed their businesses contributions supporting
political ads were being disclosed.

"It's just almost a working assumption," Sandstrom said.

Most of the boards of directors, he said, were "shocked to learn there is no disclosure."

While
these types of contributions prior to the new Court ruling could only
be used for "issue ads" -- political advertisements that do not
expressly advocate for or against a particular candidate -- many such
ads were often accused of blurring this line and having nearly the same
impact as express advocacy ads.

Christian Hillard, spokesman for
the Federal Election Commission (FEC), confirmed Tuesday that the FEC
has "no authority over issue ads."

Corporate funding of issue ads through trade associations has "no filing requirements with us," he told Raw Story.

New ruling's impact on the trade association loophole

Now
that corporations, including trade associations, are free to spend
funds on political ads - which cannot be coordinated with a candidate
or political party but which expressly advocate the election or defeat
of a candidate - the line between funding issue ads and express
advocacy ads has been largely erased.

Campaign finance experts expressed grave concern in conversations with Raw Story.

Paul
S. Ryan, an attorney and expert in federal election law at the Campaign
Legal Center in Washington, D.C., asserted that Congress did not
contemplate this new Court ruling when it wrote the laws for disclosure
related to independent expenditures or electioneering communications,
because at the time such corporate spending was prohibited. Ryan said
that it's imperative that the FEC addresses disclosure requirements
pertaining to this decision.

"Take hypothetically a group like
the Chamber of Commerce," he explained. "The Chamber collects money
from lots of other corporations. So the question becomes: What kind of
disclosure are we really going to get when the FEC gets around to
promulgating rules to implement this Supreme Court decision?"

"Yes,
the Chamber needs to file paperwork with the FEC saying we ran an ad
saying Vote for Candidate Smith," he continued. "But does the Chamber
need to tell the FEC where it got its money to pay for that ad? And
when the FEC adopts its rules to implement this new Supreme Court
decision, the FEC will likely say, ‘Chamber of Commerce, you only need
to tell us where you got your money if that money was given to you
specifically designated to run election ads.'"

Ryan and other campaign finance experts told Raw Story this is a simple dodge.

"It's
child's play to get around that type of disclosure," Ryan said, adding,
"It's unclear whether the Court was being naive or disingenuous" when
it touted disclosure provisions during its decision.

He explained
that, for example, all the Chamber of Commerce has to do is tell other
corporations, "Give us money and we'll make sure it advances your
business interests."

"So as long as the donors don't say to the
Chamber, ‘We're giving you this money to run political ads,' as long as
they refrain from saying that, then their identity can continue to be
shrouded or hidden from the public."

The Center for
Accountability's Sandstrom agreed, saying this type of disclosure "is
easily avoided" and adding, "As long as you don't designate it, you
won't be disclosed."

The Chamber of Commerce, in fact, argued against any disclosure in the Citizens United case.

"Their
first brief filed in Citizens United is on the disclosure issue,"
Sandstrom said. "They argued that they would raise substantially more
money the more they could keep it anonymous."

FEC spokesman
Hillard said that the FEC was still examining the impact of the Supreme
Court's decision and would not comment on anything pertaining directly
to that ruling, including disclosure provisions.

Brad Jacobson is a contributing investigative reporter for Raw Story.

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