New York Times on secret corporate political donations to 501(c)(4)'s.
Groups Shield Political Gifts of Businesses
By MIKE McINTIRE and NICHOLAS CONFESSORE
American Electric Power, one of the countrys 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, a Republican-leaning nonprofit organization that has spent millions of dollars attacking lawmakers who voted for President Obamas health care bill even as Aetnas 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 Courts Citizens United decision opened the door for corporate spending on elections, relatively little money has flowed from company treasuries into super PACs, 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. ...
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, 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, 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 GPSs 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 and the Center for Public Integrity, 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 Medias Campaign Media Analysis Group, 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 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. ...
Donations from corporations and unions alike must be disclosed if they go to expressly political groups like super PACs. ...
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, 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 chambers Institute for Legal Reform, which lobbies for limits on liability suits.
Some contributions are disclosed by accident. Aetnas 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 companys 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 companys 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 Powers $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 funds 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 AEPs 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. Thats their right under the law.
http://www.nytimes.com/2012/07/08/us/politics/groups-shield-political-gifts-of-businesses.html
It is important to rigorously exclude corporate participation in elections and re-establish the principle that state-created entities like corporations do not have free speech and are subservient in all respects to government. All political activity of corporations must be banned and strictly enforced. The US simply cannot be considered a democratic government based upon popular sovereignty until the people re-establish their sovereignty.
Beyond a constitutional amendment re-establishing that corporations do not enjoy any constitutional rights, I think a constitutional amendment taking powers of incorporation away from state governments and putting the power of incorporation solely in the federal government's hands would help quite a bit in this endeavor. This would make it much easier to enforce strict prohibitions against corporate participation in the political sphere. Penalties can include charter revocation and dissolution of the corporation. State governments are simply ill-equipped and cannot be trusted in any event to properly regulate the entities they create through their incorporation power. Narrowing the scope and reach of state governments has become essential.