Money in Politics This Week

Every Friday, the Brennan Center will be compiling the latest news concerning the corrosive nature of money in New York State politics—and the ongoing need for public financing and robust campaign finance reform. We’ll also be linking to dispatches from around the country highlighting the national scope of this crisis. This week’s links were contributed by Syed Zaidi.

For more stories on an ongoing basis, follow the Twitter hashtag #moNeYpolitics and #fairelex.

CAMPAIGN FINANCE REFORM AND ETHICS NEWS

NEW YORK

Gambling Industry Donates Millions to New York Politicians

As Governor Andrew Cuomo and the New York State Legislature discuss the process of amending the State Constitution to allow up to seven new full-scale, privately owned casinos in New York, the gambling industry is funneling millions of dollars into lobbying efforts and campaign war chests. Indian tribes, racetrack casinos and other gambling interests have spent nearly $50 million since 2005—over $40 million on lobbying and roughly $7.1 million on campaign contributions—according to a new report by Common Cause. Nearly $4 million of this has gone to New York Senate and Assembly races. “Gambling interests are betting big and spending millions in advance of a potential billion-dollar pay out. New York’s sky-high contribution limits, LLC loophole, and unlimited contributions to soft money accounts means the deck is stacked against the average voter” Susan Lerner, executive director at Common Cause, stated. “We need campaign finance reform to assure the public that the state’s future won’t be decided in a high stakes game where the dealer always wins,” she added.

Congressmen Warn Schneiderman Not to Investigate Outside Groups

Earlier this year, New York State Attorney General pledged that he would investigate non-profit “social welfare” organizations that have been channeling millions of dollars into political campaigns for potentially violating their tax-exempt status, which dictates that they cannot have political campaigning as their primary purpose.  Representative Dave Camp (R-MI) and Senator Orrin Hatch (R-UT) released a letter warning Schneiderman that his attempt to obtain tax information from 501(c)(4) groups could violate federal privacy laws. “We emphasize strongly that willful unauthorized disclosure of returns or return information is a federal crime subject to fines and/or imprisonment,” the letter alleged. The Attorney General’s Office defended its request for the tax records, arguing that New York has the right to examine fraud and state tax evasion, and further asserting that the Attorney General is aware of the proper procedures for proceeding with the inquiry.

2011 Ethics Legislation Riddled With Loopholes and Complications

An op-ed in the New York Times from early September attributed ethical mishaps in Albany to the part-time nature of the legislative position. “Because these ‘citizen lawmakers’ work only a few days a week, they also are permitted to have lucrative day jobs — including anything from broad consulting or legal work to key roles at companies or organizations that may benefit directly from the legislative activity in Albany.” The author credits Governor Cuomo for signing important reform legislation back in June that requires legislators to disclose their outside income and creates an independent monitor to help investigate breaches. However as Kelly Williams, corporate general counsel at the Brennan Center, explains in a letter to the editor the ethics law does not go far enough. “Lawmakers must disclose only their new clients, or new business with existing clients after July 2012 — and only those clients for whom the lawmaker personally and directly performed state business, like negotiating a contract with a state agency in an amount greater than $50,000 or obtaining a grant greater than $25,000 through legislative initiative.” These complicated procedures and loopholes necessitate that more must be done to ensure ethical behavior on the part of our lawmakers. 

NATIONAL

AP-NCC Poll Shows Robust Support for Campaign Finance Reform

Over the course of this year national surveys by Gallup and the FreedomForum have illustrated that Americans support campaign finance reform by broad margins. Now, a recent poll by the Associated Press and the National Constitution Center has yielded similar results. More than 80 percent of Americans back limits on the amount of money that can be donated to groups vying to influence the outcome of elections. Furthermore 71 percent of Americans still retain a robust view of free speech, responding that people have the right to say as the please, even if their positions are deeply offensive to others. In contrast to the Supreme Court decision in Citizens United, Americans regard free speech as distinct from unlimited campaign contributions.

Romney and Obama Should Open Their Fundraisers to the Public

Leaked videos from an exclusive fundraiser for Mitt Romney, at the home of private equity firm executive Marc Leder, have gone viral. The videos demonstrate the special access and influence that moneyed special interests enjoy over the Presidential candidates. The dramatically blunt recordings illustrate the dichotomous nature of the race; an image of the candidates on the campaign trail with tediously prepared remarks to woo voters, and another in the company of elites that paid outlandish sums for direct answers from the real candidate. Of course such secrecy and duplicity is not limited to the Romney campaign—the Obama campaign’s strict entrance protocols at fundraisers this year are a response to the “guns or religion” comment that surfaced online in the 2008 race. A Washington-Post op-ed is calling on both candidates to open their fundraisers to the media so that the American public can also hear from the real candidate. “Let the media hang out. You’ll be better protected and the public will be better informed. If donors are offended and decide to stay away, the republic will just have to live with less money in its political system.”

Appeals Court Overturns District Court Ruling on “Social Welfare” Organizations

This summer, the D.C. District Court ruled that non-profits spending money on “electioneering communications” had to disclose their donors. Electioneering communications, also referred to as express advocacy, is one of two means at the disposal of outside groups, whereby they can run ads that mention a candidate without calling for his election or defeat. By contrast “independent expenditures” are ads that explicitly take a position on the candidate’s election. This week the D.C Circuit Court of Appeals overturned the District Court’s ruling. Back in 2007 the Federal Election Commission stated that non-profits engaged in electioneering communications only had to reveal donors that contributed to the direct financing of political ads. The District Court in Van Hollen v. FEC held that the FEC’s interpretation of McCain-Feingold was incorrect and that the law mandated the disclosure of all donors to non-profits engaged in "electioneering communications." However the case has now been sent back to both the District Court and the FEC, where the commissioners must either come up with a new regulation or decide to defend the old one in District Court. Furthermore, the Appeals Court has stated that the district court must find an FEC regulation to be "arbitrary and capricious" in order to overturn it.

Representative Sarbanes Holds Roundtable on Grassroots Democracy Act

Representative John Sarbanes (D-MD) is introducing the Grassroots Democracy Act (H.R. 6426) today in an effort to combat the influence of concentrated money on the political process. The Congressman hosted a roundtable discussion on his proposal yesterday with several reform organizations. “Super PACs and other shadowy groups have become a dominant force in political campaigns and most Americans do not believe Congress can operate independently of these special interests,” Representative Sarbanes stated. “It’s time to create a new paradigm that empowers grassroots donors and makes candidates dependent upon the people for support.” The legislation would match contributions of $100 or less by a 5-to-1 ratio, and create a $50 tax credit for campaign donations as well as a People’s Fund to fight back against outside Super PACs and non-profits. Candidates that forgo all contributions above $100 would receive a 10-to-1 match with public dollars. The bill has 31 co-sponsors at this stage. Adam Skaggs, senior counsel at the Brennan Center, commended Representative Sarbanes “for developing the Grassroots Democracy Act and for his continuing leadership in addressing the corrupting role of money in politics.”  

Money in Politics This Week

Every Friday, the Brennan Center will be compiling the latest news concerning the corrosive nature of money in New York State politics—and the ongoing need for public financing and robust campaign finance reform. We’ll also be linking to dispatches from around the country highlighting the national scope of this crisis. This week’s links were contributed by Syed Zaidi.

For more stories on an ongoing basis, follow the Twitter hashtag #moNeYpolitics and #fairelex.

CAMPAIGN FINANCE REFORM AND ETHICS NEWS

NEW YORK

Corporations Use Limited Liability Companies to Skirt Campaign Contribution Limits

Limited Liability Companies associated with luxury real estate mogul Leonard Litwin have channeled more than $900,000 into races for the New York State Senate this election cycle, largely to Republicans seeking to hold on to majority control. These LLCs have also contributed nearly $100,000 to at least 18 candidates for the State Assembly. Although the state caps political donations to $150,000 for individuals and $5,000 for corporations, an LLC is treated like an individual, allowing these entities to donate up to $150,000 annually. Furthermore, the process of forming an LLC is simple; any person or business can create an LLC by mailing a short form to the Department of State with a $200 fee. Companies can fashion numerous LLC’s in order to funnel donations above the legal limit for a single corporation. According to Adam Skaggs, senior counsel at the Brennan Center, “It’s a loophole that absolutely should be a high priority if you want to apply meaningful limits on how much you want to donate to candidates.” Employing LLCs to circumvent the law can also disguise the source of contributions since LLCs are only required to provide the name of a “registered agent”—an attorney or a firm that processes corporate registrations—rather than the actual parent company.

Super PACs Gear Up in Long Island Swing District

Super PACs are becoming increasingly involved in political contests in New York. Prosperity First is a new Super PAC in eastern Long Island that is backed by $500,000 from Robert Mercer, CEO of the hedge fund Renaissance Technologies. It has already run $294,000 worth of ads supporting Republican businessman Randy Altschuler in his bid for Congress against current incumbent Democrat Tim Bishop of the 1^st Congressional District. Renaissance Technologies spent $1.05 million in 2011 and 2012 lobbying against the Dodd-Frank bill and proposals to increase the capital gains tax on Capitol Hill. The 2010 election contest between Altschuler and Bishop was extremely close with 600 votes out of 200,000 throwing the race to Bishop. Consequently Super PACs could have a significant impact on House races such as this. Similarly the Democrat-leaning House Majority Super PAC has been active in other districts in New York targeting Republican Representatives Chris Gibson, Michael Grimm, Nan Hayworth and Ann Marie Buerkle. House Majority PAC has raised $1 million for New York Congressional races thus far, and plans to spend $6 million in the state by Election Day.  

NATIONAL

Federal Courts Weigh in on Independent Contributions and Disclosure

Federal courts have recently issued rulings for two campaign finance related cases. In a 2-1 ruling the Seventh U.S. Circuit Court of Appeals rejected challenges to disclosure laws in Illinois. Illinois mandates disclosure of campaign expenditures by campaigns, Super PACs and non-profits alike, without any exemptions for groups that claim their “major purpose” is not to influence elections. Judges David Hamilton and Ilana Rovner stated that comprehensive disclosure was “especially valuable after Citizens United,” noting that spending by outside groups in the 2012 federal elections had already reached $ 300 million. “Amidst the cacophony of political voices--super PACs, corporations, unions, advocacy groups, and individuals, not to mention the parties and candidates themselves—campaign finance data can help busy voters sift through the information and make informed political judgments." Meanwhile the Eighth U.S. Circuit Court of Appeals, sitting en banc, upheld Minnesota’s ban on direct corporate contributions to state political campaigns citing “significant distinctions” between unrestrained corporate “independent expenditures”—which the Supreme Court has validated—and direct “contributions” to campaigns, which justify greater restrictions. However the ruling struck down a section of the Minnesota law, which required corporations or associations with independent expenditures of $100 or more in a given year, to create and register a “political fund” and file regular reports with the state. The court expressed concern over requiring ongoing reporting from groups that only spend small amounts of money in politics, but suggested that the state may accomplish disclosure by requiring reporting only when money is actually spent.

Obama and Romney Report Heavy August Fundraising

The major party presidential campaigns have released their August fundraising numbers. Obama and the Democratic National Committee garnered $114 million in contributions in August, leading Mitt Romney and the RNC’s haul by $3 million. The Obama campaign touted that it had 317,000 first-time donors in August, contributing an average of $58. Overall, 98 percent of donations to Obama were for $250 or less while 94 percent of contributions to Romney were from such small donors according to the campaigns, although the numbers are difficult to verify independently. The Obama campaign made much of outraising its Republican counterpart for the first time in three months, but these figures are hardly an advantage for Obama considering the significant buffer Super PACs and non-profits can offer to Romney. At least 80 percent of the money spent on TV, radio and Internet ads overtly supporting Romney came from outside groups, compared to only 20 percent for Obama.

Sheldon Adelson is Investing $100 Million in Romney for a $2 Billion Return

Reform New York has frequently noted that large donors often expect returns in terms of policy for their contributions. Casino mogul and Republican donor Sheldon Adelson, who has stated that he will spent $100 million to help elect Governor Romney, is likely to receive a 2,200 percent return on his political investment under Romney’s tax plan. Romney’s tax plan would maintain low rates on stock dividends and capital gains, slash taxes for high income earners, and exempt corporate profits made overseas, in sum reducing Adelson’s tax liability by $2 billion—that is billion with a “B”! Adelson and his wife Miriam have already donated $10 million to Romney’s Restore Our Future Super PAC, and $35 million to non-disclosing “social welfare” organizations such as Crossroads GPS and the Young Guns Network. A comprehensive list of Mr. and Mrs. Adelson’s donations to Super PACs, campaign committees, and non-profits is available at Public Campaign Action Fund. Investigations into Obama’s major supporters reveal similar financial interests. Former Department of Energy official Steve Spinner, who reportedly pressured the Energy Department to approve a $535 million dollar loan to energy firm Solyndra, has bundled $2.27 million for Obama since 2011. Meanwhile, investment funds owned by George Kaiser, who helped Obama raise $250,000 back in 2008, could stand to gain $341 million in tax breaks due to Solyndra’s bankruptcy.

Congressional Campaigns Marred by Corruption

Republicans and Democrats alike are utilizing a slew of corruption scandals involving Congressional candidates to launch partisan attacks. The National Republican Congressional Committee has introduced an initiative entitled “Ten Most Corrupt Democrats” to highlight one Democratic candidate per week facing corruption charges leading up to the election. The Democratic Congressional Campaign Committee has already targeted three Republican Congressional Representatives with corruption allegations on their record. Partisan bickering aside, the problem is quite serious. A report by Citizens for Ethics and Responsibility in Washington, has singled out ten lawmakers in D.C. for particularly egregious ethical and legal violations. Illegal campaign fundraising, misusing campaign funds for personal expenses, employing official resources for campaign activities, bribery, accepting improper gifts and loans, and conflicts of interest are on the spectrum of improper activities that these lawmakers may have engaged in.

Koch Industries Garnered Government Subsidies and Tax Breaks

In an op-ed in the Wall Street Journal, Charles G. Koch, Chairman and CEO of Koch Industries, Inc., argued that the “growing partnership between business and government,” or corporate cronyism, is a destructive force that distorts markets, directs resources to inefficient sectors, drives up energy prices, and grants an unfair advantage to some companies over others. Campaign contributions are one avenue that businesses frequently utilize to access such favors from the government. Koch Industries is in fact guilty of these very practices, donating generous sums to political campaigns, Super PACs, and shadowy non-profits, as well as lobbying lawmakers, to procure lucrative benefits. Koch Industries spent $5.3 million on lobbying federal officials just in 2012. Americans for Prosperity, heavily bankrolled by David and Charles Koch has spent an estimated $18.2 million, more than any group with the exception of Crossroads GPS, to help Republicans this election cycle. The policy implications of these donations are evident. In Kansas, the legislature exempted the Keystone XL Pipeline from property taxes, a $50 million cost to taxpayers. The pipeline would carry petroleum from tar sand mines owned by Koch Industries in Canada to refineries owned by the Koch Industries in Texas. Koch Industries has also received nearly $85 million in federal government contracts from the Department of Defense, as well as subsidies for oil and ethanol production.

Money in Politics This Week

Every Friday, the Brennan Center will be compiling the latest news concerning the corrosive nature of money in New York State politics—and the ongoing need for public financing and robust campaign finance reform. We’ll also be linking to dispatches from around the country highlighting the national scope of this crisis. This week’s links were contributed by Syed Zaidi.

For more stories on an ongoing basis, follow the Twitter hashtag #moNeYpolitics and #fairelex.

CAMPAIGN FINANCE REFORM AND ETHICS NEWS

NEW YORK

New York State Board of Elections Late to Approve Disclosure Regulations

The New York State Board of Elections has failed to approve final regulations regarding Super PAC disclosure. The draft regulations, which were due January 1, 2012, were not completed until this spring. Once they are approved, the regulations will entail a 30-day waiting period before enforcement to allow Super PACs sufficient time to prepare. Realistically this date will be well past the state primary elections and too close to the general elections in November—hindering voters from accessing important information. Although disclosure by Super PACs is already required under current law, the regulations were designed to ensure more specific disclosure on Super PAC fundraising, donations and ad expenditures.

Citizens Protest Outside Amedore Fundraiser

A variety of good government groups held a protest this Thursday outside a fundraiser for George Amedore, a Republican Assemblyman now running for a Senate seat in the 46^th district. The cost of entry tickets was $250, with a lavish $1,000 opening reception. The protestors gathered near the Mohawk Golf Club in Schenectady to criticize Amedore’s disproportionate take from out-of-district special interests. Sean Collins, of Citizen Action, stated that 24 contributors that donated over $5,000 each to the campaign accounted for “over 50 percent of the cash he’s raised, totaling $152,247.” A pamphlet distributed to the media further indicated that 17 of these 24 contributions, totaling 37 percent of Amedore’s campaign funds from this year, hailed from real estate, developers, and construction corporations, firms and organizations.

NATIONAL

Democratic Party Platform Endorses Campaign Finance Reform

Unlike the Republican Party Platform, which praises Citizens United and opposes the DISCLOSE Act, the newly unveiled 2012Democratic Party Platform declares support for campaign finance reform—but with less vigor and detail that one would wish. The Platform applauds President Obama for establishing unprecedented ethics rules during his administration—banning gifts from lobbyists and preventing former executive branch officials from lobbying the administration via executive order. It also commends the Democratic National Committee for declining contributions from corporations and federal lobbyists. Without mentioning specific reforms to curb unrestrained campaign donations, the Platform advocates for “campaign finance reform, by constitutional amendment if necessary.” It also upholds disclosure; “We support requiring groups trying to influence elections to reveal their donors so the public will know who’s funding the political ads it sees.” Unfortunately, the Democratic Party Platform is too quick to praise and insufficiently detailed. A New York Times editorial lauds the Democratic Party for taking “a stand against the rising influence of money in politics,” but asserts that campaign finance reform “has been relegated to a document that few will ever read” as “no convention speaker on Tuesday made it a priority.”

Exclusive Events for Donors at DNC

At the Democratic National Convention, donors are receiving exclusive access to events with Michelle Obama, Bill Clinton and Joe Biden. Convention organizers have divided the donors into different strata, each with its corresponding set of events, based on their level of contribution to the Obama campaign. All donors to the Obama Victory Fund are entitled to attend an exclusive campaign briefing with campaign manager Jim Messina, a “toast to the South” with President Bill Clinton, and a rally at the NASCAR Hall of Fame with Vice President Joe Biden. A National Finance Committee breakfast with Michelle Obama, however, is reserved for bigger donors that qualify for “NAB” and “Presidential Partners” status—those that donated the maximum $75,800 to the Obama Victory Fund.

Super PACs and Lobbyists Active at DNC After-Parties

Super PACs made their presence known at  the Republican convention in Tampa, and they [are not far behind in Charlotte. Donors that gave $100,000 to Super PACs backing Obama and Congressional Democrats received fifty tickets to a party featuring Hollywood celebrity Jessica Alba, rapper Pitbull, and the pop band Scissor Sisters. These donors are also entitled to six tickets for the Political Leaders Brunch, where they will have the opportunity to interact with Senators Harry Reid, Dick Durbin, and Chuck Schumer, as well as Representatives Nancy Pelosi, Steny Hoyer and Steve Israel. Along with these courtesy events to thank donors, there are a number of closed-door fundraising dinners, such as the Super-O-Rama for Priorities USA Action, House Majority PAC and Senate Majority PAC.  A comprehensive set of after-party events by corporate lobbyists and Super PACs are mapped out by the Sunlight Foundation and the Huffington Post.

West Virginia Supreme Court Issues Decision

This Tuesday, the West Virginia Supreme Court heard oral arguments regarding a case involving public financing for state judicial elections. Republican Supreme Court candidate, Allen Loughry, is the only candidate participating in a public matching program designed to reduce the influence of money on the bench. Loughry sued the State Election Commission for refusing to disperse public "rescue" funds to his campaign—provided in the event that his privately financed opponents outspend him. Adam Skaggs—senior counsel at the Brennan Center and one of Loughry’s attorneys—argued that judicial elections are different than legislative or executive elections in that the branch should be impartial, not responsive to particular constituencies or interest groups. The Court delivered its decision on Friday. Although the Court appropriately recognized that the public funding program’s goals of “protecting the impartiality and integrity of the judiciary and strengthening public confidence” in the institution are compelling state interests, it unfortunately did not find the use of rescue funds to be narrowly tailored, and struck down those provisions.

Super PACs Spend Millions Against Obama, Romney

Swing-state voters should prepare for another onslaught of political attack ads. Federal candidates and outside groups will be unleashing an estimated $3 billion in advertising expenditures over the next nine weeks, making the 2012 election the most expensive in American history. Particularly concerning is the undue influence of outside Super PACs and non-profits in producing these ads. These organizations have pumped $26 million into ads opposing Mitt Romney. That figure is dwarfed by the amount that outside groups have spent against Obama—$68 million. Specific numbers on the outside groups as well as a sampling of their ads are available via an interactive tool on the Los Angeles Times website.