Politics & Policy

Hiding the Identities of Mega-Donors


It's a “daisy chain where every group is passing around the same million”

Photograph by C Squared Studios/Getty Images

It's a “daisy chain where every group is passing around the same million”

Republican consultant Sean Noble was ready when the U.S. Supreme Court ruled corporations could spend freely in federal elections. Less than a year after the 2010 Citizens United decision, he had $62 million at his disposal, which he poured into that year’s midterm elections on behalf of GOP candidates and causes. To this day, no one knows where Noble’s opaquely named nonprofit group, the Center to Protect Patient Rights, got that money.

What is known is where it went. According to the group’s annual IRS disclosure, more than half the cash was parceled out to four other conservative nonprofits—the American Future Fund, the 60 Plus Association, Americans for Job Security, and Americans for Tax Reform—that in turn spent $30 million to help elect Republican congressional candidates. The $9 million Noble’s nonprofit gave to 60 Plus, which advocates for privatizing Social Security (singer Pat Boone is the group’s frontman), accounted for more than half of its 2010 revenue of $16 million, IRS records show.

Noble’s operation is part of a web of nonprofits and shell companies that political operatives use to protect the identities of donors who want to influence elections without leaving a trace. Instead of spending the money they receive from corporations and wealthy contributors, organizations such as Noble’s parcel it out to other groups, which then spend it on television ads and other advocacy on behalf of candidates.

Funneling money through multiple middlemen makes it more difficult to track the cash back to the original source. “What you can do is create this daisy chain where every group is passing around the same million,” says Bill Allison, editorial director of the Sunlight Foundation, a group that favors more government transparency. David Vance, a spokesman for the Campaign Legal Center, which pushes for stronger disclosure rules, is more blunt. The practice of moving cash from group to group is akin to “wholesale money laundering,” he says. (Noble didn’t respond to multiple attempts to contact him. The Center to Protect Patient Rights has no website and a call to the number listed on its tax filings was answered by a woman who says it’s now her personal telephone number.)

Lenient federal campaign disclosure rules and lax enforcement help these groups keep their donors’ identities secret. The Center to Protect Patient Rights was able to register with the IRS as a nonprofit “social welfare organization,” which allowed it to legally conceal where the millions of dollars it raised during the 2010 election came from. Such groups are supposed to limit their political activity and spend most of their time and money helping to advance the public good through education or awareness about issues. Ill-equipped to police the multitude of nonprofits in the U.S., the IRS largely takes these groups at their word. Scores of groups—including huge operations such as Karl Rove’s Crossroads GPS and the pro-Obama Priorities USA—declare themselves social welfare organizations and keep their donors behind a veil.

Groups that hide their donors have spent $170 million on the 2012 elections, more than double the $80 million they spent in 2008, according to the Center for Responsive Politics. And even those that claim to disclose contributors can hide the source of some of their money. Priorities USA Action, a super PAC that supports Obama, has received financial help from its secretive sister nonprofit, Priorities USA.

Another super PAC, FreedomWorks for America, which is aligned with the Tea Party movement, has spent $6.9 million on ads supporting Republican candidates. The group’s major donor is FreedomWorks, a related nonprofit led by former GOP House Majority Leader Dick Armey, which doesn’t disclose where it gets its money.

The 2010 tax filings of the Center to Protect Patient Rights give a partial picture of how the informal network of political nonprofits spreads money around. The CPPR took in $13.7 million in 2009, even as its tax returns said it engaged in no fundraising. The following year, after the Supreme Court’s ruling, contributions almost quintupled to $61.8 million. In the two years for which IRS records are available, 2009 and 2010, the CPPR, whose address is a post office box 10 miles from a house Noble owns in Phoenix, shifted $55.4 million to other nonprofit political organizations—including some of the biggest-spending independent groups of the 2010 election.

Though there aren’t public records revealing where the CPPR got its money, Noble has connections to Americans for Prosperity, the conservative political nonprofit tied to billionaire businessmen Charles and David Koch. In 2010 Noble spoke at a Koch-sponsored gathering of wealthy donors where they discussed how to help Republicans win the White House and more seats in Congress. He shared a podium with Tim Phillips, president of Americans for Prosperity, and the CPPR gave the group $1.9 million in 2010. An Americans for Prosperity spokesman says Noble isn’t on the group’s payroll.

This year, Noble, whose consulting firm is called DC London, has advised several congressional candidates, including Representative Jeff Flake, an Arizona Republican running for the Senate. Flake paid DC London $49,000 last year for management and field operations, according to the Center for Responsive Politics and Federal Election Commission records. Through the Center to Protect Patient Rights, Noble in 2010 sent $690,000 to the nonprofit arm of the Club for Growth, a group that supports less government spending and lower taxes, accounting for 12 percent of the club’s total budget, IRS records show.

The Club for Growth announced on Oct. 2 that it would spend $500,000 on TV ads in Arizona to support Flake’s Senate campaign. Barney Keller, a spokesman, says the Club for Growth’s campaign spending comes from its political action committee, not its nonprofit arm. Keller declined to say whether his organization is still receiving money from the CPPR. “It really highlights how interconnected and tightly knit this world is,” says Sheila Krumholz, executive director of the Center for Responsive Politics. “A few players keep showing up again and again.”

It will be many months before there is a full accounting of how these groups spent their money in this year’s election. They won’t have to file with the IRS until well into 2013 or 2014, another way the government helps the influence industry operate in secret until long after Election Day.

The bottom line: Lax IRS rules allow political groups to declare themselves “social welfare organizations,” which lets them conceal the names of big donors.

Fitzgerald is a reporter for Bloomberg News.
Salant is a reporter for Bloomberg News in Washington.

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