Dan Morain

Lame watchdog lets big campaign donors hide


The secretive Panamanian law firm that enabled rich people to hide their assets has nothing on the U.S. Federal Elections Commission, the defanged watchdog that is responsible for ensuring that big campaign donors are publicly identified.

Based on a recent decision – a nondecision, really – the commission effectively sanctioned the practice by which wealthy donors veil themselves behind thin corporate shells, often limited liability companies, and funnel huge sums into federal campaigns.

The case involved four donors who dumped $16 million into the 2012 campaign. Because the commission failed to reach a consensus, which happens on virtually all cases of significance, neither the donors nor their advisers will pay a dime in fines.

They include Tennessee attorney William Rose. In September 2012, Rose created Specialty Group Inc. By November, Specialty and another Rose corporation had donated more than $12 million to the conservative advocacy group FreedomWorks for America, which in turn funded campaigns to elect conservatives.

The true donor evidently was Richard J. Stephenson, the founder of Cancer Treatment Centers of America, and a FreedomWorks board member, though one couldn’t tell that from a press statement Rose put out in 2012.

“The business of Specialty Group is my family secret, a secret that will be kept – as allowed by applicable law – for at least another 50 years,” Rose told reporters at the time.

Another is Edward Conard, a longtime friend of 2012 Republican presidential nominee Mitt Romney, who wanted to donate $1 million to the pro-Romney Restore Our Future super PAC.

In March 2011, his lawyer created an entity called W Spann LLC. In April 2011, W Spann LLC gave the super PAC $1 million. The following month, poof, W Spann LLC was dissolved.

“If it was legally permissible to do so, (Conard) wanted to make the donation in a manner that did not cause his identity to be widely publicized, particularly on the internet,” one of his lawyers later wrote. “He was concerned that disclosure on the internet of a large donation by him could jeopardize the safety and security of his family.”

A third is Steven J. Lund, founder of a Utah company called Nu-Skin. Operating through Eli Publishing L.C. and F8 LLC, Lund made separate $1 million donations to Restore Our Future, later saying in a Fox News interview that there were accounting benefits to giving under the company name, rather than his own.

A fourth, rapper Pras Michel, contributed $250,000 in his own name to Black Men Vote, a political organization backing Barack Obama’s 2012 re-election. SPM Holdings LLC, controlled by Michel, gave another $875,000. His attorney said Michel never intentionally hid that he was giving the money.

The Campaign Legal Center and Democracy 21, Washington-based organizations that aspire to compel compliance with the federal election law, filed complaints with the Federal Election Commission, contending the donors failed to comply with the law’s fundamental tenet – that donors disclose their true identities.

“We used have to have consensus that disclosure was a bedrock principle,” said Lawrence Noble, general counsel for the Campaign Legal Center.

Four years later, with the 2016 presidential campaign raging, the Federal Election Commission rendered its 3-3 nondecision.

The three Republican appointees concluded that the question of whether limited liability companies and closely held corporations – basically, shells – is one of “first impression” and that rules “may be confusing.” For that reason, the Republican appointees concluded, the complaints “should be dismissed in an exercise of prosecutorial discretion.”

The three Democratic appointees, including former California Fair Political Practices Commission chair Ann Ravel, answered that the law is clear, and basic to the Federal Election Campaign Act of 1971.

“The act prohibits a person from making a contribution in the name of another person, knowingly permitting his or her name to be used to effect such a contribution, or knowingly accepting such a contribution,” the Democratic appointees said.

A 3-3 deadlock means after four years, nothing was resolved.

Last month, Sen. Tom Udall, D-N.M., introduced a bill, S. 1890, to reconstitute the Federal Election Commission so it could resolve issues that come before it. Nonprofit organizations that advocate disclosure embrace the bill. But so far, only one senator has signed on as a co-sponsor.

The nonpartisan Center for Responsive Politics has found limited liability companies have given no less than $48.7 million to federal campaigns since 2012, including $18 million so far in the 2016 campaign.

The question of who funds campaigns has become more pressing in each election since 2010, when the U.S. Supreme Court issued its decision in Citizens United v. Federal Election Commission, which opened the way for unlimited corporate donations to federal campaigns. The ruling says disclosure would ensure that the electorate will remain informed about who was trying to influence the outcome of elections.

Whether out of naivete or ignorance, or maybe willful blindness, the justices failed to take into account that the watchdog is lame, and that politicians who control the House and Senate have no incentive to offend the rich people who fuel their campaigns.