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.