Editor's note, Jan. 29, 2014, 5:15 p.m.: This story has been updated to reflect new data provided by Exelon Corp. Company officials now say the discloses originally reviewed by the Center for Public Integrity contained inaccurate information, which caused about $13 million in payments to trade associations to be double-counted. As a result, the overall amount of corporate contributions to politically active nonprofits identified by the Center’s research dropped from $185 million to $173 million. See here for more.
The U.S. Supreme Court’s Citizens United v. Federal Election Commission ruling in 2010 did not, as some warned, unleash a flood of corporate money directly into elections.
But since then, scores of blue-chip U.S. companies quietly bankrolled politically active nonprofits to the tune of at least $173 million in roughly a single year, according to a new Center for Public Integrity investigation.
Ranking among the biggest donors are energy giant Exelon Corp., health insurer WellPoint Inc. and technology titan Microsoft Corp.
The millions of dollars in corporate expenditures highlighted by the Center for Public Integrity’s research flowed to more than 1,000 politically active nonprofits, from major trade associations such as the U.S. Chamber of Commerce to pro-business alliances such as the Fix the Debt Coalition.
Many such trade associations and so-called “social welfare” groups have released a tsunami of political ads since the Citizens United decision.
These funds have been dubbed “dark money” because nonprofits organized under sections 501(c)(4) and 501(c)(6) of the U.S. tax code need not publicly disclose the sources of their funding — unlike candidates, political parties and super PACs.
The Center for Public Integrity illuminated the flow of money by combing through voluntary disclosures filed by the 300 largest public companies in the United States, as ranked by Fortune magazine, most of which covered calendar year 2012.
Shadowy spending has targeted elections at all levels, from the White House to Congress to state party committees. The extent of financial involvement from major corporations has been unclear, as there has been only a scant paper trail to examine.
According to the Center for Public Integrity’s seven-month analysis, roughly 83 percent of the $173 million in self-reported funds flowed to trade associations, including major political players like the Chamber, America's Health Insurance Plans and the American Petroleum Institute.
Meanwhile, about 14 percent went to social welfare nonprofits such as the Democratic-aligned Third Way think tank and the Republican Main Street Partnership.
And about 3 percent was doled out to other entities such as the Congressional Black Caucus Foundation, the National Conference of State Legislators, the Heritage Foundation and the American Legislative Exchange Council.
The analysis found that roughly one-third of the Fortune 300 companies voluntarily disclosed dues payments, grants or contributions to trade associations and other politically engaged nonprofits. Dozens of other large firms, meanwhile, reported affiliations with such groups without getting into the financial details.
Some of the nation’s largest companies — including Wal-Mart Stores Inc., ExxonMobil Corp. and AT&T Inc. — do not voluntarily disclose their political spending.
But what voluntary transparency does exist heartens disclosure supporters.
“Companies increasingly see disclosure as good governance,” said Bruce Freed, the president of the Center for Political Accountability, which advocates for greater corporate self-reporting and each year grades major U.S. companies on their policies and practices.
“There is a premium on transparency,” Freed continued. “Openness on this is in their self-interest.”
Chamber backers revealed
The U.S. Chamber of Commerce, a vocal opponent of more robust corporate disclosure, was the most frequently identified beneficiary of this money, according to the Center for Public Integrity’s research.
The Chamber received funds from at least 62 of the nation’s largest 300 companies, totaling nearly $11 million, according to the voluntary disclosures. The Chamber does not itself reveal its members or their financial contributions, although it does name the business executives who sit on its senior management committee and board of directors.
In 2012, the Chamber reported spending more than $32 million on political advertisements to the Federal Election Commission, most of which urged viewers to vote against congressional Democrats.
Such overt political engagement has continued this election cycle.
In recent months, the Chamber has released a flurry of ads praising Republicans in Congress, ranging from Senate Minority Leader Mitch McConnell of Kentucky to Rep. Mike Simpson of Idaho, a veteran lawmaker who has been targeted for defeat by conservative groups such as the Club for Growth, which accuses him of being a “liberal Republican.”
The Chamber is also Washington’s king of the influence game, having spent more than $100 million in 2012 lobbying on issues ranging from financial regulations to healthcare to immigration reform.
In recent years, it has also worked hard to defeat the DISCLOSE Act — legislation advanced by Democrats to require politically active nonprofits to reveal additional information about their funders.
With many activists, lawmakers and regulators clamoring for increased scrutiny of political spending by social welfare nonprofits, trade associations like the Chamber could play even larger roles in terms of dark money spending in the 2014 and 2016 elections.
The $11 million in disclosed contributions are a mere sliver of the Chamber’s $188 million in total 2012 receipts.
The top self-reporting donors to the Chamber in 2012 are: Dow Chemical Co. ($2.9 million), Chevron Corp. ($1 million), Merck & Co., Inc. ($907,500), American Electric Power Co., Inc. ($525,000) and 3M Co. ($515,500).
Yet companies likely gave much more than was able to be counted. Several companies reported only what portion of their dues payments were used for lobbying and political activities, not their total contributions.
Many also provided information only if the spending exceeded a minimum threshold, such as “at least $50,000.” Since the disclosures are voluntary, there is no reporting standard, federal or otherwise, by which they must abide.
Furthermore, 12 companies — including Best Buy Co. Inc., Delta Air Lines Inc. and Google Inc. — did not even disclose a range, just that they’re affiliated with the Chamber.
In all, the Center for Public Integrity identified more than two dozen politically active nonprofits that received at least $1 million from corporate donors.
Another was the Chamber’s Institute for Legal Reform, which touts itself as a “highly aggressive” force to improve “the lawsuit climate in America and around the globe.” It received $1.6 million from five companies, according to the Center for Public Integrity’s research.
Those donors were Prudential Financial Inc. ($800,000), insurer Chubb Corp. (at least $375,000), MetLife Inc. (at least $250,000), the Hartford Financial Services Group Inc. (at least $75,000) and Deere & Co. (at least $50,000).
Chamber spokeswoman Blair Latoff Holmes said “labor unions, shareholder activists and anti-business policymakers have long sought to drive the voice of the business community out of the political process.”
She continued: “Activists want additional disclosure of political spending so they can target the companies for harassment and boycotts."
Exelon corporate coffers tapped
Editor's note, Jan. 29, 2014, 5:15 p.m.: This story has been updated to reflect new data provided by Exelon Corp. Company officials now say the discloses originally reviewed by the Center for Public Integrity contained inaccurate information, which caused about $13 million in payments to trade associations to be double-counted. See here for more.
Many of the Chamber’s own members do support enhanced nonprofit contribution disclosure practices — despite the Chamber’s opposition.
One of those companies is Exelon Corp., the nation’s largest nuclear power plant operator, which contributed $250,000 to the U.S. Chamber of Commerce in 2012, according to a company document.
Exelon reported doling out $13.6 million in 2012 to roughly two dozen nonprofits organized under Sec. 501(c)(6), which governs trade associations, and under Sec. 501(c)(4), so-called social welfare organizations.
The amount is the second-largest amount voluntarily disclosed among any of the Fortune 300 companies reviewed.
Exelon’s total revenue that year exceeded $23 billion, according to its annual report.
“Exelon intends to be a leader in corporate governance, social responsibility and corporate citizenship, and disclosure of political spending enhances our reputation for good governance and transparency,” said company spokesman Paul Adams.
In fact, the Chicago-based energy giant was one of just three Fortune 300 companies that reported giving trade associations and other politically active nonprofits more than $10 million.
The other two: health insurer WellPoint Inc., which reported giving $19.2 million to 15 trade associations in 2012, and Microsoft Corp., which doled out $12.5 million to more than three dozen groups between July 1, 2011, and June 30, 2012 — its 2012 fiscal year.
Exelon’s largest reported contribution was the $7.2 million that it gave to support the Nuclear Energy Institute, the nuclear power industry’s main trade association and an active force on Capitol Hill, where it has advocated for the construction of new power plants and against new energy taxes.
This sum represented about 14 percent of the Institute’s overall receipts in 2012, according to tax records.
The company also disclosed sizable payments to two other trade groups, $3.4 million to the Edison Electric Institute and about $578,000 to the American Gas Association.
Adams said Exelon’s financial support of trade associations that “share our broad interests” gives the company “a seat at the table on trade group political activity,” adding that “we do not necessarily support every policy position taken by those organizations.”
He further noted that the Nuclear Energy Institute dues are “based on the size of a member’s nuclear assets.”
Exelon also disclosed multiple contributions to social welfare organizations, the largest of which was $290,000 given to the American Energy Alliance — a 501(c)(4) nonprofit with ties to the conservative billionaire brothers Charles and David Koch and led by former Koch Industries lobbyist Thomas Pyle.
Ahead of the 2012 presidential election, the American Energy Alliance organized a 17-state bus tour and spent more than $1 million on television ads in Virginia and Ohio urging viewers to "stand with coal" and "vote no on Obama's failing energy policy," as the Center for Public Integrity previously reported.
While Exelon’s primary energy investment is in nuclear energy, it also has owned and operated coal-fired power plants. Adams said Exelon contributed to the American Energy Alliance because it shared the company’s view that the wind production tax credit “should be allowed to expire.”
The company also made more modest contributions in 2012 to social welfare groups such as the American Action Network, whose chairman is former Sen. Norm Coleman, R-Minn., and the Hispanic Leadership Alliance, which was co-founded by George P. Bush, the son of former Florida Gov. Jeb Bush who’s currently running for Texas land commissioner.
Adams said that Exelon’s investors “generally expect us to be engaged in political processes that affect our business” because the company is “highly regulated” and “significantly affected” by state and federal policies.
What’s the value of transparency?
In recent years, companies across diverse industries have instituted more robust disclosure requirements when it comes to payments to trade associations and contributions to other politically active organizations. Some even tout the marks they have received from the Center for Political Accountability.
“Transparency is always a priority for us,” Pacific Gas & Electric Co. spokeswoman Katie Key said.
Microsoft spokesman Dan Bross echoed that sentiment, noting that his company discloses this information “because public trust in corporations depends in large part on the basic aspects of business character: integrity, values and transparency.”
“We believe it’s good business practice,” Bross added. “Being transparent about our involvement in these groups provides shareholders and customers insights about how our policy work aligns with our business goals.”
And Randy Belote, vice president for strategic communications at defense contractor Northrop Grumman Corp., asserted that the company’s voluntary disclosure policy “aligns with our commitment to transparency and corporate responsibility.”
Yet while the Center for Political Accountability has documented an increasing number of companies adopting enhanced disclosure policies during the past decade, many corporations have fought back against shareholder resolutions urging more transparency.
For instance, a group of shareholders of ExxonMobil, the second-largest company in the United States, failed last year in their attempt to get the company to disclose its spending on “direct and indirect lobbying” — a phrase frequently used by shareholder activists to address payments to trade associations and membership groups in addition to what must already be reported to Congress and state-level regulators.
ExxonMobil’s board of directors argued that “detailed disclosures concerning internal deliberations on public policy issues could be competitively harmful and would be of questionable utility to shareholders.”
Similarly, the board of directors of Verizon Communications Inc. argued in 2013 that a disclosure proposal “would provide little or no value to shareholders while imposing significant administrative burdens on the company.”
Moreover, three of the largest industry trade groups in the country — the U.S. Chamber of Commerce, the Business Roundtable and the National Association of Manufacturers — penned a letter last fall to business leaders urging them to reject new disclosure proposals.
“Corporations do NOT support increased political and lobbying ‘disclosure,’” read the letter, which was first reported by the Center for Public Integrity.
Such practices, the letter said, are part of a “long-term effort by political activists to limit the ability of companies to make their voices heard in the public policy arena.”
The letter was signed by U.S. Chamber of Commerce President and CEO Tom Donohue, Business Roundtable President John Engler and National Association of Manufacturers President and CEO Jay Timmons.
Additionally, the Center for Competitive Politics, which favors campaign finance deregulation, last year launched a website called ProxyFacts.org.
It says it provides “the truth about corporate political spending issues” and argues that the ultimate goal of robust disclosure rules is “to remove corporations from the policy playing field altogether.”
Why the secrecy?
Businesses have an incentive to keep their political donations secret — despite the opining by Supreme Court Justice Anthony Kennedy in the Citizens United majority opinion that prompt disclosure of corporate expenditures could be a reality “with the advent of the Internet.”
“Corporations worry about alienating their customers,” said Rick Hasen, an election law professor at the University of California, Irvine. “When customers can associate a store or company with a particular political position, they may be less likely to shop there if they disagree with that position.”
For instance, the Fix the Debt Coalition calls for dramatic reforms to Social Security, Medicare, Medicaid and the U.S. tax code — positions that might be objectionable to some segments of the population.
The social welfare nonprofit was founded in 2012 by former Republican Sen. Alan Simpson of Wyoming and North Carolina Democrat Erskine Bowles, who served in the Clinton administration. Scores of business executives serve on its “CEO steering committee,” “CEO Council” and “Business Leaders Council.”
During its initial year, the Fix the Debt Coalition raised more than $11 million, and its donors include rail company CSX Corp. and technology firm EMC Corp., which each gave the nonprofit $1 million in 2012, according to information on the companies’ websites.
JPMorgan Chase & Co. and Norfolk Southern Corp. are also donors, giving $500,000 and $400,000, respectively, in 2012.
So is Allstate Corp., although the insurer did not disclose the actual amount of its contribution.
During the first nine months of 2013, the Fix the Debt Coalition reported spending $620,000 on federal lobbying to fix “U.S. long-term debt and deficits.”
Maya MacGuineas, president of the Fix the Debt Coalition, said that while the “bulk” of the group’s funding comes from businesses, donors get “zilch” in return.
Donors are “not getting anything directly out of this,” she said. “We don’t ask them for input.”
Getting the nation’s debt on a downward path, MacGuineas added, is “really patriotic” and “a public interest issue.”
Additionally, General Electric Co. and Qualcomm Inc. each reported giving $1 million in 2012 to the Committee for a Responsible Federal Budget, the Fix the Debt Coalition’s parent organization. Organized as a 501(c)(3) nonprofit, it raised nearly $15 million that year.
Another corporation-funded nonprofit whose donors may face backlash from consumers is the American Coalition for Clean Coal Electricity, an industry-backed trade group that promotes the use of coal. It’s particularly unpopular among environmentalists.
It raised $43 million in 2012, according to an annual tax filing.
Voluntary corporate disclosures show that several energy and transportation companies in the Fortune 300 are among its funders, including Norfolk Southern ($835,000), American Electric Power ($503,000), CSX ($242,000), Union Pacific Corp. ($242,000), and Southern Co. (at least $50,000).
Support flows to think tanks, advocacy groups
Meanwhile, Third Way — a centrist think tank based in Washington, D.C., that counts a dozen Democratic members of Congress among its advisers — was also routinely mentioned in corporate filings.
According to the Center for Public Integrity’s research, at least 10 of the largest 300 public companies collectively gave Third Way more than $270,000 in 2012. They ranged from Hewlett-Packard Co. to Pacific Gas & Electric to Johnson & Johnson.
Two other companies — Minnesota-based Target Corp. and Tennessee-based International Paper Co. — also both disclosed financial assistance to Third Way but declined to put dollar amounts on their support.
The social welfare nonprofit, which tax records show raised $9.3 million in 2012, has recently been caught in a heated debate after two of its officers urged Democrats to avoid “economic populism” in a Wall Street Journal op-ed.
The piece led Sen. Elizabeth Warren, D-Mass., to fire off a letter to the largest banks in the country asking them to reveal their contributions to think tanks like Third Way, whose board of trustees includes many investment bankers.
Third Way spokesman Sean Gibbons has dismissed accusations that the nonprofit’s work was influenced by its funders. “No one — not our donors, our political allies or our friends — tells us what to think, write or say,” he told the New York Times in December.
The Congressional Black Caucus Political Education and Leadership Institute was another Democratic-leaning nonprofit that accepted corporate cash, according to the Center for Public Integrity’s research.
The social welfare nonprofit received $25,000 in 2012 from Entergy Corp., $20,000 from Pacific Gas & Electric, $10,000 from Intel Corp. and an unknown amount from Google.
Another was the BlueGreen Alliance Foundation, a nonprofit organized as a charity under Sec. 501(c)(3). It received $25,000 from energy company Phillips 66.
On the Republican side, seven companies in the analysis disclosed financial ties to the Republican Main Street Partnership, a pro-business group led by former GOP Rep. Steve LaTourette of Ohio.
The Partnership has collected more than $100,000 from Fortune 300 companies, including at least $15,000 from Hewlett-Packard, $15,000 from Intel and $25,000 from Pfizer Inc. during the 2011-2012 election cycle. The contributions from Hewlett-Packard and Intel both came in 2012.
The nonprofit, which tax records show raised $1.3 million in 2012, has actively promoted moderate Republican candidates since its formation in the early 1990s amid the “Republican revolution” led by Newt Gingrich.
Last week, Yahoo News reported that the group would drop the word “Republican” from its name and welcome moderate Democrats to join its ranks in 2014.
The American Legislative Exchange Council, a controversial think tank that allows state lawmakers, most of them Republicans, to work with businesses to craft legislation, was another conservative-leaning beneficiary identified in corporate filings.
California-based eBay Inc. paid ALEC $12,000 in 2012, while Google contributed an unspecified sum.
Furthermore, some beneficiaries listed were not nonprofits, but limited liability companies, another legal structure that has been recently gaining in popularity in some political corners.
Target and Best Buy, for instance, both disclosed financial support — of unidentified amounts — to the Alliance of Wisconsin Retailers LLC in 2012, which backs priorities favorable to the companies.
State documents show two men — Matt Phillips and Scott Stenger — are currently authorized to lobby on the Alliance’s behalf in Wisconsin, and the LLC’s legislative priorities have included advocating for a measure that requires online retailers to pay sales taxes.
‘Meant to be overwhelming’
Some corporate-funded nonprofits influence government even at local levels.
Case in point: Restoring Ohio Inc.
In 2012, this social welfare nonprofit that describes itself as supporting “free enterprise, limited government, economic growth and traditional values” launched an advertising campaign to oust Jonathan Binkley, a Republican committeeman representing Ohio’s 11th Senate District, in Toledo, on the state party’s 66-member central committee.
Such an election is typically decided by the most passionate of the party’s primary voters, not the general public.
Binkley supported the incumbent party chairman, Kevin DeWine, which put him at odds with Republican Gov. John Kasich, who wanted someone else in the job.
The little-known Restoring Ohio, which has a mailing address in a suburb of Columbus, Ohio, lists its directors as longtime Kasich associates, including Don Thibaut, a lobbyist who served as a top aide to Kasich for nearly 20 years.
When contacted by the Center for Public Integrity, Eric Lycan, the group’s legal counsel, declined to answer questions about the nonprofit’s contributors citing a desire to “protect the privacy of its donors.”
When Restoring Ohio applied for tax-exempt status, it told the Internal Revenue Service that it intended to solicit funds from both individuals and businesses, including “businesses in industries that are heavily impacted by government regulations.”
It appears to have been successful. Corporate records show health insurer Aetna Inc., for one, contributed $25,000 to the group.
Media reports at the time of Binkley’s race called Restoring Ohio’s television ad blitz “unprecedented.”
An employee at WTVG, the local ABC affiliate, told the Center for Public Integrity that Restoring Ohio spent more than $11,000 on ads.
“It was meant to be overwhelming,” said Binkley, who ultimately was defeated, despite backing from the Ohio Republican Party.
He added that he isn’t happy about the Citizens United ruling or the burst of activity from a group whose “name itself is a propaganda gimmick.”
The high court’s decision, Binkley said, allowed “a gorilla into what should be a monkey fight.”
Julie Patel, Erin Quinn, Ben Wieder and Adam Wollner contributed to this report.
Correction, Jan. 17, 2:34 p.m.: This story has been updated to reflect the fact that none of the $32 million the U.S. Chamber of Commerce reported spending to the Federal Election Commission on advertisements urged people to vote against President Barack Obama. However, during the 2012 election cycle, the Chamber also spent millions of dollars on advertisements that were critical of Obama’s policies, including his landmark health care reform law, but none of these ads explicitly urged viewers to vote against the president.