Campaign finance law is a “mockery,” a Democratic senator declared today during a hearing on Capitol Hill, while also urging federal officials present to criminally investigate politically-active nonprofits, shell corporations and super PACs.
Sen. Sheldon Whitehouse, D-R.I., chairman of the Senate Judiciary Committee's subcommittee on crime and terrorism, cited several “areas of mischief” regarding politically active nonprofits, known in Internal Revenue Service parlance as 501(c)(4) organizations.
Several such organizations spent into the millions of dollars directly advocating for or against political candidates during the most recent election cycle — activity not seen in U.S. politics prior to the Supreme Court's 2010 Citizens United v. Federal Election Commission decision.
Among Whitehouse's complaints about these nonprofits:
- Discrepancies in reporting to the IRS and to the Federal Election Commission
- Discrepancies between reported and actual political activity
- Characterizing political TV ads as “educational activities” or “legislative activities”
- Characterizing as non-political donations made to other groups that spend it on political advertising
- Disbanding and reforming under other names before the reporting is due for the disbanded organization
Whitehouse suggested the DOJ explore a new legal avenue for prosecuting nonprofits and super PACs active in elections — specifically, fraudulent claims about their political activity in federal filings.
Whitehouse pressed Mythili Raman, the assistant attorney general for DOJ’s criminal division, on what he considered the department’s failure to investigate potential false statements.
“Are you rethinking deferring these matters to the IRS where it is not a tax specific underlying issue and something as simple as making a false statement? Are you satisfied with the state of play right now with the lack of prosecution in this area?” the senator asked.
Raman said the DOJ “could and would” prosecute the laundering of political contributions to super PACs through anonymous shell corporations.
“But not yet?” Whitehouse interrupted.
“Not yet,” Raman said. “Without discussing ongoing investigations, we can assure you that we are incredibly vigilant about the use of these organizations as an end-run around contribution limits.”
Sen. Ted Cruz, R-Texas — the only other committee member present — provided conservative counterweight to the hearing, pointing to the risks of additional campaign finance regulation to free speech rights.
Cruz at one point asked Raman: “In the department of Justice’s opinion, what is the government interest in regulating the independent expenditures of public citizens?”
Raman replied: “What I’m suggesting is that there is a risk, from what we have seen, of bad actors using the anonymity that is given to them when they declare as 501(c)(4)’s to hide the identities of their donation. We need to be able to determine when those donors are acting with bad intent and frankly when a campaign or an election official maybe knowingly allowing that kind of donation to occur, intending to be influenced in some corrupt way. That is our job.”
Whitehouse ended the hearing by urging DOJ officials to be more proactive and show less deference to the IRS on campaign finance enforcement matters.