Fighting to Rein in Dark Money

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Every news cycle seems to bring another revelation of the corrupting influence of dark money on American politics.

In just the past few weeks, reporters and watchdog groups have exposed a network of state-level advocacy groups posing as think-tanks, revealed new details about a little-known organization called DonorsTrust that promises its wealthy donors it will keep contributing to conservative causes after they die, and discovered ALEC’s plans to bounce back after public scrutiny of the organization spooked a number of its corporate sponsors.

Sheila Krumholz, the Executive Director of the Center for Responsive Politics, has long fought on the frontlines in the battle for more transparency in our political system. Moyers & Company caught up with her this week to get up to speed with the latest developments in that fight. This is a lightly edited transcript of our discussion.

Joshua Holland: Do we have a better sense now of how much was spent by outside dark money groups in 2012, the first presidential election cycle after Citizens United?

Sheila Krumholz: The Center for Responsive Politics has tallied around $300 million dollars of previously unreported political spending. So what we can say with confidence is that hundreds of millions of dollars is flowing into the political process, but not being disclosed. Information that’s critical to an accurate interpretation of the political messages people hear is being withheld from the voters.

Our mission here is to kind of supplement the official record of political spending by teasing out of the IRS nonprofit filings additional information that will enhance our understanding of the true amount spent and the true sources of political cash in the United States.

Holland: We hear so much about the Koch brothers. Do we know how much of that money is linked to them?

Krumholz: In our reporting, we’ve found that at least one in four dark money dollars in the last cycle was connected to the Koch brothers.

That’s not to say that there was not money being spent, often secretively, and perhaps deceptively, by liberal organizations. There was, but in the last cycle, it couldn’t hold a candle to the amount of money raised and spent by conservatives, and mostly Koch-affiliated organizations.

So far this year, we’ve seen a turnabout of events. Most of the money has been linked to liberal organizations. I think that certainly has a lot to do with the nature of the races so far this year — the special elections – and the states in which they were carried out, Massachusetts and New Jersey being two of them.

There is really a kind of no-holds-barred approach by both sides and that we’ll see more use of these outside vehicles — these purportedly independent outside vehicles — on both sides of the aisle, particularly given the blessing of the White House during the 2012 election cycle.

Holland: Let me go back to this finding that there’s more liberal than conservative money being spent so far in this admittedly young election cycle. Is it accurate to look at this and see it as a sort of nuclear arms race, where one side starts and then the other side feels compelled to match their arsenal?

Krumholz: Certainly that was the message that was put forth when the White House weighed in on their change of heart about outside groups advocating for Democratic candidates last cycle. The analogy they used was you can’t bring a knife to a gunfight.

There were ardent Democrats who were deeply disappointed in the turnabout and called it a very cynical move on the part of the Obama campaign apparatus and the Democratic supporters’ operatives supporting that move.

So, there are those who viewed it as a real surrender of principle and there are others who viewed it as a very pragmatic kind of realpolitik move that took into account the nature of how things have evolved post-Citizens United.

Whatever view you take, there’s no question that that move by the Administration will have spurred additional spending, and likely in the tens if not hundreds of millions of dollars by liberal organizations and donors.

Holland: We’re now entering our second midterm election cycle in the post-Citizens United era. How does it compare with 2010?

Krumholz: You just cannot gin up the kind of passion around midterm elections among voters, and the same is true of donors — the big money is often centered on the race for the White House.

So what you’ll see very often among hard money donors during this midterm is that it’s more policy-oriented and less about the bigger, broader vision and the leadership of the party.

Holland: According to your group’s website, OpenSecrets, more dark money has been spent this cycle supporting candidates rather than opposing them, and that’s a major departure from this point in both the 2010 and 2012 cycles. Do you have any theories that might explain that departure?

Krumholz: It’s interesting, but I think it’s too early to tell. Maybe it has to do more with this being a congressionally-focused election. Maybe it has to do with the nature of the specific organizations that have ponied up the bulk of the money, some of them including new entrants into the outside spending spree. Perhaps it has to do with a kind of moderate approach by liberal organizations that decided on their own behalf to enter into the fray, but to restrain themselves from the worst of the mudslinging.

And when the action is in a primary, you might see a more moderate approach.

Holland: The Obama administration has proposed new rules governing these so-called social welfare organizations, 501(c )4’s, that get involved in electioneering. Can you tell us how significant that move really is? Is it something that has a chance to shift the game significantly?

Krumholz: It can’t help but have the potential to shift the game significantly. At a minimum, their stated goal is to achieve clearer guidelines about political activity by nonprofits. That is plainly necessary.

So they will be looking to define and curtail political spending by 501(c)4 social welfare or educational organizations that have been using their tax exempt status to protect the anonymity of their donors and to protect their financial activities in ways that would not be allowed under the rules set forth by the Federal Election Commission.

I think there’s no question that there is a bruising fight ahead for the agency, another bruising fight, following on the heels of the IRS scandal earlier this year. And they’ve said they expect an extensive public comment period and probably a prolific number of comments.

I’m sure they rightly anticipate that this will be very contentious, and that’s in no small part because historically lawmakers have been so quick to label any investigations of such political activity as a partisan witch-hunt.

Holland:This week the Securities and Exchange Commission backed off a proposal to require that corporations disclose political spending to their shareholders. How significant was that, and what does it say about efforts to rein in campaign spending through shareholder accountability measures?

Krumholz: Well, it’s hard to read the tea leaves. On the one hand, it’s very disturbing. There have been historic levels of public participation, public comments around this rule-making process, and it’s very distressing to have it drop off of the menu of topics the commission will address without explanation.

On the other hand, it is plausible that it is just being postponed until the SEC can address topics which Congress has set before them to address. Whether or not this really is a harbinger of things to come remains to be seen. But I have no doubt that 700,000 commenters aren’t going to let them off the hook so easily without a fight. So I’d say it’s a delay, and it’s a disappointment, but it’s by no means over.

Holland: Last month, California settled with a network of dark money groups, also linked to the Koch brothers. They had funneled a lot of money raised outside the state to oppose a tax hike on high earners and support an anti-union measure in California. And officials imposed a record setting $16 million dollars in fines. Can you tell us a little bit about that case?

Krumholz: Sure. This is emblematic of the kind of churning among networks of outside nonprofit organizations — nonprofits with deep ties between and among these allied organizations. And this is the first time that one of these networks of outside spending groups has been successfully confronted by enforcement officials. So I think the meaning of this is that it shows that they can be exposed.

It’s also important to note that it took a lot of diligent auditing and careful documentation — and real chutzpah and determination on the part of the California Fair Political Practices Commission. I don’t think that it was fait accompli simply because there were laws on the books. But the strong transparency laws already on the books were a critical first factor.

And I think it also shows how complex these networks really are. We’ve been documenting that in our research, but it’s really complicated to explain this the public, and if it can’t be explained simply, all too often the public kind of moves on. I think this was dramatic enough that it really broke through to the public consciousness. It’s really good for the public to be aware, and this was a mother lode of evidence about how these networks work.

I think it was also important to show that certain donors, donors like Eli Broad, were plainly using the anonymity to have their cake and eat it too in the PR battle. [Editor’s note: Broad is a wealthy philanthropist who has publicly called for higher taxes on the wealthy but was bankrolling opposition to California’s Prop 30, which raised taxes on high earners.]

Once again, this shows that it’s important not just to understand the message, but to know the messenger, because that information changes how we understand the information we’re being sold. Are we being served the facts or are we being sold a bill of goods?

This case shows how far they’ll go to hide their involvement, so they can say one thing publicly, but then fund organizations who work counter to those stated positions. And the same thing goes for the donor to the California effort who was revealed to have ties to Wal-Mart. It’s one thing to see a local small business PAC pushing anti-union measures. It’s another thing entirely for a Bentonville, Arkansas, donor with ties to Wal-Mart to fund that effort.

Holland: Looking ahead, can you tell us about McCutcheon versus the FEC? Some are calling this case Citizens United 2.0. What are the outlines of this case?

Krumholz: Well, if the Court overturns the aggregate contribution limits, it will throw the campaign finance system and practitioners another curve ball. I think there’s little doubt it will change the landscape of our campaign finance system. It will change how political committees and donors operate within the system.

Our view is that it will further weaken an already weakened system by adding another layer of complexity. I think there’s no question that it would change the way the game is played going forward. And that complexity is important because, again, it matters to have an engaged public, and if the public can’t understand a system made even yet more complex, the risk is that they will tune it out, and if they tune it out, there are others who are tuned in and will further their own narrow interests. And the question is whether that’ll be at the expense of the public interest.

What I hope people have on their radar screens is that a strong democracy has to count on their engaged, informed participation.

This is not going to be quickly and easily solved. In fact, it’s never going to be solved as long as we are using the basic structure of this system to fund politics. So we all have to be in it for a long haul. The most recent changes have made many people enormously angry, if not feeling hopeless about their ability to fix the problem of money’s undue influence.

And I would just say to them, you know, you’re looking at this wrong. This is how it works. You pay attention, get involved, and make it your responsibility to be informed and engaged. Then you can then be an effective member of a growing coalition to create momentum for real change.

And part of that, as a most basic step, is not allowing the money trail to be erased.

Joshua Holland was a senior digital producer for and now writes for The Nation. He’s the author of The Fifteen Biggest Lies About the Economy (and Everything Else the Right Doesn’t Want You to Know about Taxes, Jobs and Corporate America) (Wiley: 2010), and host of Politics and Reality Radio. Follow him on Twitter: @JoshuaHol.
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