Ambiguities in campaign finance rules allow big money to work in the dark

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Wednesday, November 09, 2011 at 11:42 am

On July 19th, 2011, Mitt Romney attended a dinner party for potential donors put on by the super Political Action Committee (PAC), Restore Our Future. Under the Federal Election Commission’s (FEC) coordination guidelines, Romney’s presence at the fundraiser didn’t cross any boundaries, as long as he didn’t explicitly ask for money at the event.

But if the dinner party had been in June 2011, Romney would have been stretching the legal bounds of allowed coordination between a candidate and a super PAC. The FEC issued an advisory opinion on the question in July. The timing of Romney’s meeting highlights just how quickly the already ambiguous guidelines on coordination, which regulate the relationship between candidates and super PACs, are changing, and how they stretch the boundaries of campaign finance limits.

On the other side of the organization spectrum, 501(c) nonprofits are accepting unlimited, anonymous donations and funneling them into super PACs, providing complete secrecy to donors. But these nonprofits, too, are buttressed by weak regulation, say critics. Meanwhile, their funding increases as a result of the infamous Citizens United Supreme Court decision.

Candidates can only solicit money from nonprofits if the organization’s “main purpose” is not political activity, according to FEC regulations. If a 501(c) organization exceeds the minimum amount of political activity, it becomes a Qualified Nonprofit Corporation, and can then make political independent expenditures. But as reported by Roll Call last week, a more precise definition than “main purpose” has “never been clearly spelled out.”

The Internal Revenue Service says 501(c) nonprofits can only participate in “insubstantial” amounts of political activity, which Washington insiders have taken to mean social aid work must be 51 percent of the group’s purpose. But that is understood more as a rule of thumb.

This distinction has come under increased scrutiny as nonprofits both receive and give donations in the political realm — including to super PACs.

In 2010, the nonprofit advised by Karl Rove, Crossroads GPS  spent tens of millions of dollars on advertisements for Senate races around the country in 2010. The actions of the nonprofit, which is affiliated with the American Crossroads super PAC, prompted Sen. Dick Durbin and the nonprofit groups Democracy 21 and the Campaign Legal Center to request an IRS review of Crossroads 501(c) status and a clarification of the rules governing nonprofits’ political action. 

Coordination confusion

Federal laws guiding super PAC coordination are equally narrow, say critics; super PACs may be independent groups in name, but the reality tells another story, according to critics, allowing for a large amount of activity outside the legal definition of coordination.

“The critical point is that the [coordination] laws are pretty modest,” said Paul S. Ryan, FEC Program Director and Associate Legal Counsel at the Campaign Legal Center. Candidates and super PACs “can’t coordinate on a specific detail, but it’s false that they can’t interact.”

As far as the FEC is concerned, coordination is defined as: “made in cooperation, consultation or concert with, or at the request or suggestion of, a candidate, a candidate’s authorized committee, or their agents, or a political party committee or its agents.”

The rules allow “a lot of interaction that’s not independent,” said Ryan. “It’s an overstatement and misstatement to say that they [super PACs] have to be independent.”

The rules have created enough head-spinning that comedian Stephen Colbert devoted his show Monday to spoofing them.

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A super PAC can support a specific candidate so long as their coordination is within the limits of the three coordination “prongs,” as the FEC calls them.

The first and most widely known is the restriction on coordinated spending. Super PACs are called independent expenditure groups because the decisions about how they spend their money can’t be made with the input of a candidate, though the money can be spent in support of a candidate or an issue that is important to the candidate.

The second is a limitations on public communications that can be made in support of candidates. If the communication is for electioneering purposes, advocates the defeat or victory of a candidate, has the input of a candidate or is disseminated 120 days or fewer before the election, it is considered coordinated.

The third coordination guideline covers solicitation. The candidate is not allowed to solicit or direct any money for super PACs, said Ryan with the Campaign Legal Center but “that restriction is quite modest.”

How does this affect the system?

Coordination limits have been pushed by candidates and super PACs in a number of ways. Even with these limitations, super PACs unlimited donation allowances bring in significantly more funding than traditional PACs, which can only take donations of up to $5,000 in support of candidates. Restore Our Future was created to support Romney, and has so far raised more than $12 million this year. By contrast, Romney’s traditional PAC, Free & Strong America, raised only a little over $3 million in the same time period.

All the same, several groups have submitted advisory opinion requests pertaining to “coordination” to the FEC, and some of the most significant changes in campaign finance have come from these groups.

A ruling in July 2011 allowed candidates to attend super PAC fundraisers; the idea of hybrid PACs that have a bank account both for independent and coordinated expenditures originated with an advisory opinion request to the FEC, and U.S. Sen. Mike Lee (R-Utah) submitted an advisory opinion request last month asking whether a leadership PAC could also open an independent expenditure bank account.

But “the cutting edge of how much interaction on the spending of money can you get away with,” said Ryan, is being pushed by the super PAC American Crossroads. Its request seeks permission for American Crossroads to run advertisements that “feature incumbent members of Congress who might face uncertain re-election prospects,” and asks whether this could hurt its status as an independent expenditure committee.

Weakness of the FEC

The Federal Election Commission, the body charged with enforcing campaign finance laws, is first and foremost hampered by an ideological divide. Five of its six commissioners are on expired terms, and three Republican commissioners “think all campaign finance laws unconstitutional.”

This leads to lax regulation of what is already an “unlimited, unregulated shadow campaign,” says Ryan. “Million-dollar contributions to the Super PACs pose just as big a threat of corruption as would million-dollar contributions directly to candidates.”

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