Higher Corporate Spending on Election Ads Could Be All but Invisible

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ProPublica

Higher Corporate Spending on Election Ads Could Be All but Invisible

by
Chisun Lee

The Supreme Court recently freed
corporations to spend more money on aggressive election ads. But if
businesses take advantage of this new freedom, the public probably
won't know it, because it's easy for them to legally hide their
political spending.

Under current disclosure laws for federal
elections, it's virtually impossible for the public to track how much a
business spends, what it's spending on, or who ultimately benefits.
Experts say the transparency problem extends to state and local races
as well.

"There is no good way to gauge" how much any given
company spends on elections, said Karl Sandstrom, a former vice
chairman of the Federal Election Commission and counsel to the Center
for Political Accountability. "There's no central collection of the
information, no monitoring."

Companies invest in politics to win
favorable regulations or block those "that could choke off their
business model," said Robert Kelner, chairman of Covington &
Burling's Washington, D.C., political law group. But they'd rather hide
these political activities, he said, because they fear backlash from
customers or shareholders.

For instance, a company may want to
help Democratic politicians who support health care reforms that would
benefit the company, but it worries about offending "Republican
shareholders who may care more about their personal ideology than about
their three shares of stock in the company," said Kelner, who says he
represents many politically active Fortune 500 companies. "The same
would be true on the other side of the political spectrum."

Businesses must reveal their identities on public reports to the Federal Election Commission if they buy advertising on their
own. But one popular and perfectly legal conduit for companies wanting
to influence politics under the radar is to give money to nonprofit
trade groups such as the U.S. Chamber of Commerce.

The Chamber and its national affiliates spent $144.5 million 
last year on advertising, lobbying and grass-roots activism -- more
than either the Republican or Democratic party spent, according to a
Center for Responsive Politics analysis of public records -- while
legally concealing [5] the names of its funders. The Los Angeles Times reported this week that the Chamber is building a grass-roots political operation that has signed up about 6 million non-Chamber members.

Some of the positions the Chamber has successfully advanced on behalf of its donors include a nationwide campaign to unseat state judges  who were considered tough on corporate defendants and opposition to a federal bill that would have criminalized defective auto manufacturing.

Now
the Jan. 21 Supreme Court ruling that increases the potential political
clout of businesses is drawing fresh attention to the problem of
tracking them.

That decision (PDF), Citizens United v. Federal Election Commission, allows
corporations to run television ads that don't merely speak to an issue
but say outright whether a candidate should be elected, and allows them
to do so any time they want to, using their general funds. The ruling
also gives nonprofit groups like the Chamber these new freedoms,
because they are technically structured as corporations.

Before,
corporations had to rely on employee and shareholder contributions to a
separate political account to finance the most explicit commercials
and, in the months before an election, any issue ads that mentioned a
candidate. Although the decision addressed federal election rules, its
constitutional rationale also dismantles similar restrictions in 24 states.

Soon
after the ruling, two Democrats -- Rep. Chris Van Hollen of Maryland
and Sen. Charles E. Schumer of New York -- announced they were writing
a bill to make it easier to tell which companies are backing which ads
in federal elections. An outline (PDF) of that bill, which is expected to be introduced this week,
proposes forcing nonprofit groups to identify those who fund their
political commercials.

At present, nonprofit groups don't have
to disclose the sources of their advertising money, unless the donors
specified that their contributions were intended for political ads.

"Unless
you're sort of dumb enough to designate your contribution to the
Chamber," said Meredith McGehee, policy director of the Campaign Legal
Center, "no one will ever know who's the source of those funds."

Politically
active nonprofits exist across the ideological and policy spectrum and
include unions as well as trade groups. Their funders include both
corporations and individuals, some of them very wealthy. But campaign
finance experts say groups that advocate specifically for business tend
to have the greatest resources, simply because corporations have the
most money to give.

The lack of tracking mechanisms sometimes
leaves company officials themselves in the dark about their
organization's political activities, said Adam Kanzer, managing
director and general counsel of Domini Social Investments, which files
shareholder resolutions to push corporations to adopt self-monitoring
and disclosure practices.

"In a lot of our conversations with
companies, they say, 'We don't know exactly how our money is getting
spent. It's hard to get those answers,'" Kanzer said. One major drug
manufacturer, he said, signed on for voluntary disclosure after
learning that its funds had supported a state judicial campaign that
many voters -- who could be customers or shareholders -- viewed as
racist.

The public price of spotty disclosure is not being able
to gauge the real effects of corporation-backed politics, McGehee said.
She questioned one argument, often made by defenders of the Citizens
United decision, that the 26 states that have long allowed unlimited
corporate advertising in their elections haven't suffered more
political corruption than the rest of the nation.

"How would you
know? Most of those states have next to no disclosure," McGehee said.
Corporations "could be buying outcomes left and right, but because of
no disclosure, we don't know." A 2007 examination by the National
Institute on Money in State Politics found that, while 39 states
required some degree of disclosure by political advertisers, the laws
in most were riddled with loopholes. Only five states required enough detail to link sponsors with specific ads, the report said.

Rep.
Van Hollen said the disclosure requirements he and Schumer are drafting
would uncover the corporate political money flowing through nonprofit
channels.

"If corporations spend money in these campaigns, we
cannot allow them to hide behind sham organizations and dummy
corporations that mislead voters," he said in a written comment to
ProPublica. "Voters have a right to know who is delivering and paying
for the message."

The requirements would apply to unions and
liberal nonprofits as well as trade groups, according to the early
outline of the bill. The proposal mentions additional transparency
requirements -- such as mandating corporate disclosures to shareholders
and "stand by your ad" appearances by CEOs of companies that finance
commercials directly -- and seeks outright bans on political
advertising by government contractors, bailout recipients and companies
significantly controlled by foreigners.

A strong disclosure law
would be "hugely effective" in revealing who is paying for political
speech, said Trevor Potter, a former FEC chairman and head lawyer for
John McCain's presidential campaigns, who is now general counsel at
Campaign Legal Center.

But precisely for that reason, Potter
said, politics may get in the way of any serious reform. He expects
trade groups on the right, unions on the left and other cause groups
across the board to fight hard against such legislation.

Already the political battle is taking shape.

Asked
to comment on the push for more disclosure, the Chamber's chief legal
officer and general counsel, Steven Law, instead attacked the political
motives of the proponents. "Unions overwhelmingly support those who are
pushing this legislation," he said in an e-mail. "This isn't about
reform, it's about politicians trying to secure advantages for
themselves before an election."

That reaction drew fire from one of the nation's most politically active unions,
the Service Employees International Union, which also declined to
comment on the new disclosure proposals. "The coming flood of corporate
and foreign money into our elections through the U.S. Chamber of
Commerce is a threat to democracy, plain and simple," said Anna Burger,
SEIU's secretary-treasurer, in an e-mail. She called on legislators to
"drag the Chamber's practices into the light of day."

The Chamber revealed more about its view of disclosure in an amicus brief (PDF) it filed in the Citizens United case on behalf of the 3 million
business members it says it has. It supported the plaintiff, a
nonprofit corporation called Citizens United, which wanted the Supreme
Court not only to lift corporate advertising bans but also to strike
down the existing disclosure requirements.

The Chamber argued
that those requirements inhibited corporations from speaking out. If
the public discovered that corporations were "taking controversial
positions," it might punish them, the brief said. As an example, it
pointed to a 2005 boycott of ExxonMobil products after the public
learned the company was lobbying Congress to open the Arctic National
Wildlife Refuge to drilling.

That argument failed to persuade the high court, which by an 8-1 majority decided to leave the current disclosure laws intact.

Transparency
is important, wrote Justice Anthony Kennedy for the majority, because
it helps voters "give proper weight to different speakers and
messages," and because it allows citizens to "see whether elected
officials are 'in the pocket' of so-called moneyed interests."

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