Consider the Source from The Center for Public Integrity

Majority of Supreme Court members millionaires

2013-06-14T14:14:04-04:00

At least five and perhaps as many as eight of the nine members of the U.S. Supreme Court are millionaires according to recently released financial disclosures, and only two hold any consumer debt.

Assets on the forms are reported in a range making it impossible to say precisely how much each justice is worth, but suffice to say, none of them are hurting financially.

Ruth Bader Ginsburg boasts the highest potential net worth at $18.1 million with Stephen Breyer a close second at $17.1 million. Both were appointed by former President Bill Clinton.

However, Ginsburg’s actual net worth may be as low as $4.4 million and Breyer’s as low as $5 million. Federal officials are also exempt from disclosing the value of their homes, making an accurate calculation even more difficult.

After collecting nearly $2 million in book advances, Justice Sonia Sotomayor's assets rose to between $1.7 and $10.3 million, ranking her No. 3 in terms of highest potential net worth. Sotomayor is an appointee of President Barack Obama.

Chief Justice John Roberts, an appointee of former President George W. Bush, possesses one of the court’s most complex financial portfolios. His net worth is valued between $2.8 million and $6.6 million, ranking him No. 4.

As for the rest:

Antonin Scalia, appointed by former President Ronald Reagan, reported a net worth between $1.9 and $4.2 million, ranking him No. 5.

Obama appointee Elena Kagan's assets total between $815,000 and $2.1 million, according to the Center’s analysis, putting her at No. 6.

Clarence Thomas, an appointee of President George H.W. Bush reported between $1.8 million and $715,000, ranking him seventh.

Samuel Alito has not yet filed his 2012 report and sought an extension, but in 2011 the George W. Bush appointee reported between $380,000 and $1.1 million in wealth putting him at No. 8 for maximum potential wealth.

Anthony Kennedy, appointed by Reagan, reported assets of between $330,000 and $700,000, placing him at No. 9.

Salaries plus perks

Justices make good money, though with their backgrounds they could easily earn much more in the private sector. Roberts, as chief justice, earns $223,500 per year, while the eight associate justices make $213,900.

But there are perks. Judges rake in tens of thousands of dollars from speaking fees, professorships and book deals.

Most of Ginsburg’s assets are held in mutual funds and retirement accounts. In 2012, Ginsburg earned nearly $26,000 for taking part in two separate university-sponsored events, including a two-week Wake Forest School of Law summer seminar held in Venice, Italy, and in Vienna, Austria.

The bulk of Breyer’s holdings are in mutual funds, retirement accounts and bonds. But one of Breyer’s two largest reported assets is a $1 million to $5 million stake in Pearson, the publishing company that owns the Penguin Group and The Financial Times. The justice collected between $15,000 and $50,000 last year in dividends thanks to his stock holdings in that company.

Breyer enjoyed a windfall last summer when he sold his stock in Amgen, Inc., the pharmaceutical company that was party in a case that came before the Supreme Court in its most recent term. In late September, just a month after he realized between $15,000 and $50,000 in gains by selling his Amgen holdings, the court docket noted that Breyer was no longer recused from proceedings related to the case.

Investing in China

Also notable is Breyer’s holdings in Tai Shan Fund which invests in tech companies in China, Hong Kong and Taiwan and is part of a Boston-based capital management firm led by investor Thomas Clafflin, according to a Bloomberg report.

Roberts has invested heavily in technology and telecommunications companies — some of which have had business before the high court. He also owns a mix of bonds, retirement accounts, mutual funds and shared ownership of a cottage in County Limerick, Ireland.

The top justice owns up to a total of $750,000 in shares of Time Warner, Microsoft and Texas Instruments and up to $200,000 in T-Mobile and Sirius XM Radio stock, according to his report.

Roberts recused himself from a patent dispute involving Microsoft, which the software giant lost in a unanimous 8-0 decision in 2011.

As the Center for Public Integrity reported last week, Justice Sonia Sotomayor’s disclosure is notable for the nearly $2 million she received in book advances and promotion for her memoir, My Beloved World, published by Knopf Doubleday.

One of Sotomayor’s most valuable assets is her former New York City residence, now a rental property valued between $1 million and $5 million, though she carries a mortgage on the property. Unlike most of her colleagues on the bench, Sotomayor reported a handful of liabilities in her disclosure, including between $250,000 and $500,000 for the rental. Her debts for four credit cards were each less than $15,000.

Scalia reported a debt of less than $15,000 for a loan on a life insurance policy.

Scalia also reported receiving between $5,000 and $15,000 in rent for a property he owns in Charlottesville, Va. His report also shows that he has investments in gold-related securities totaling between $80,000 and $215,000.

Scalia reported earning $26,500 in 2012 for teaching at five different universities, including John Marshall Law School and the University of Southern California. Scalia also reported receiving nearly $64,000 in book royalties. Last year, the justice co-authored Reading Law: The Interpretation of Legal Texts with legal scholar Bryan Gardner.

Well-traveled justices

Scalia traveled frequently in 2012. In the “Reimbursement” section of his financial disclosure, he reports 28 trips to various schools and organizations to deliver speeches and lectures.

In most cases, the justice was provided or reimbursed for transportation, food and lodging. (Federal officials are not required to report how much they were reimbursed, either in exact amounts or in dollar ranges.) In September and October, Scalia gave speeches and lectures at five events hosted by the Federalist Society, a conservative nonprofit that advocates reform of the legal system.

Scalia reported giving a speech at an Aug. 25 event hosted by “Friends of Abe,” a low-profile conservative group organized by actor Gary Sinise and whose members reportedly include singer Pat Boone and actor Jon Voight.

Scalia also reported receiving one gift in 2012. According to his disclosure report, the justice accepted a $1,000 shotgun from the National Wild Turkey Federation.

The bulk of Kagan’s assets were invested in mutual funds and retirement accounts, including some from the University of Chicago, where she was a law professor in the 1990s.

Thomas reported investments in gold- and silver-related securities valued at somewhere between $60,000 and $200,000, according to his report.

Though Kennedy was the high court’s least wealthy justice for the third consecutive year, his report indicates that 2012 was a year of jet setting for the moderate judge. Between January and November of last year, Kennedy traveled to Las Vegas, Palm Springs, Aspen, Maui, London and Paris for various speaking and teaching arrangements.

D.C.-based groups bombarded state high court races with ads

2013-06-15T02:16:28-04:00

Correction (June 14, 2012, 8:21 p.m.): An earlier version of this story reported that Carrie Severino, chief counsel to the Judicial Crisis Network, had said that the organization's strategy was to end judicial appointments and switch to judicial elections. Severino says she did not make this statement and that the JCN’s “objective is to promote judicial selection methods — be they elective or appointive — that are accountable to the people they serve. [N]either I nor JCN has ever engaged in a strategy to end judicial appointments, nor have we promoted state judicial elections as a one-size-fits-all approach. On the contrary, we have applauded efforts to establish a federal style of judicial appointments in some states.”

Sam Ervin IV must have been feeling pretty good about his chances of winning a seat on the North Carolina Supreme Court last fall.

He had name recognition — his grandfather was the legendary senator who led the Watergate investigation — and a poll released less than a week before Election Day showed him leading his opponent, incumbent Justice Paul Newby by 6 points, 38-32.

But on the Friday before the election, "Justice for All NC" — an independent political committee whose funding came mostly from out of state — dropped a TV ad depicting a scowling Ervin and asking: "Sam Ervin. Can we trust him to be a fair judge?"

Ervin lost the race by 4 points, 52 percent to 48 percent.

“As far as I know,” says Ervin, “there had never been an attack ad in a North Carolina judicial race.”

North Carolina’s supreme court election was arguably decided by groups like Justice for All — secretive nonprofits, unaffiliated with a candidate, whose money came from out of state.

Independent groups accounted for at least $2.59 million in spending to influence North Carolinians’ supreme court vote with more than half the total ultimately coming from groups outside the state, according to a Center for Public Integrity analysis.

And North Carolina is not alone.

The Center for Public Integrity examined 10 high-profile state supreme court elections in 2012 and 2013 where outside spending was a factor. At least a third of the $11.7 million spent by independent groups — collected from campaign finance reports, tax records and documents filed with the Federal Communications Commission — originated outside the election states, mostly from Washington, D.C.-based organizations.

Tracking all outside spending is nearly impossible thanks to lax state disclosure rules, as well as a loophole in the federal tax code that allows politically active nonprofits to run attacks ads without disclosing who funds them.

Out-of-state influence likely helped decide races in North Carolina, Iowa and Mississippi.

The influence of nonprofits and super PACs has changed the nature of state supreme court races, formerly shielded, at least in part, from the influence of money and partisan politics. Now, in many states, justices are involved in bare-knuckle partisan brawls similar to those that characterize non-judicial elections.

In the 10 state races analyzed by the Center, national political groups were active directly or indirectly in seven. Seventy-five percent of the outside money could be traced to the long-running battle between trial lawyers and business interests.

Trial lawyers helped carry the day in Florida, Louisiana and Oklahoma, while the U.S. Chamber of Commerce says it was successful in North Carolina, Michigan, Ohio and Mississippi.

***

In North Carolina, supreme court campaigns are mostly funded by taxpayers to spare candidates from having to raise significant money and appear beholden to individuals, companies or interest groups that may face them in court. The outside money in last fall’s race overwhelmed the public finance system, rendering it largely irrelevant.

Justice for All NC, which spent $1.7 million to influence the race, got 68 percent of its money, or $1.2 million, from the Washington, D.C.-based Republican State Leadership Committee. The group in 2010 spearheaded a Republican effort to elect GOP state legislators, who would determine the boundaries of congressional districts following the U.S. Census.

The U.S. Chamber of Commerce’s Institute for Legal Reform gave $3.5 million to the RSLC in 2012, making it the largest single donor to the national Republican group last year. The Institute, a major foil of trial lawyers, lobbies for legislation that would mandate lower damage awards in civil trials.

The anti-Ervin ad was just one part of what appeared to be a coordinated effort between a network of groups with ties to the D.C. area to defeat Ervin and keep Newby on the bench. Officials from RSLC did not return calls seeking comment.

The D.C. money arrived early and stayed late.

In August, the Washington, D.C.-based nonprofit Judicial Crisis Network gave $75,000 to pay for radio ads supporting Newby. The group doesn’t disclose its donors.

Starting in October, another group, the N.C. Judicial Coalition, which received $1.5 million from Justice for All NC, blanketed the state with TV ads featuring a banjo player crooning about Newby’s tough stance on crime.

The North Carolina arm of Americans for Prosperity, the northern Virginia-based group tied to billionaire industrialists Charles and David Koch, spent $225,000 on mailers in late October calling on Newby to “keep standing up for taxpayers.”

The icing on the cake was the attack ad against Ervin just days before the election.

Ervin too had help from outside groups, though they spent only $71,500 on his behalf.

The ultimate provenance of much of this money is a mystery to the public. Those in the know aren’t talking and the disclosure rules in state campaign finance laws and federal tax codes mean they are not required to.

“The average voter doesn’t need to trace every dollar to figure out whether to vote for a candidate,” says Judicial Crisis Network’s chief counsel, Carrie Severino.

***

In Michigan, the Judicial Crisis Network spent more than $1 million on a last-minute attack ad against Democratic supreme court candidate Bridget Mary McCormack. The ad featured the mother of a slain soldier chastising McCormack for “volunteer[ing] to help free a terrorist.”

McCormack wound up receiving the most votes in her race.

Because of Michigan’s lax disclosure rules, the group did not have to report any of its spending to state election officials. Instead, a watchdog group, Michigan Campaign Finance Network, collected filings from local TV stations to calculate the group’s spending.

Teri Johnson, the mother who appeared in the ad, says she was never told who paid for them.

“I don’t know anything about the finances behind it,” she says.

McCormack says her campaign did not know who was behind the Judicial Crisis Network attack, or why she had been targeted among a field of other liberal candidates.

As a “social welfare” nonprofit, the group is not required to report its donors.

Regulatory filings show that the group has several ties to well-connected conservative political operatives.

It shares office space in Washington, D.C., with Grover Norquist’s anti-tax group, Americans for Tax Reform.

Gary Marx, the Judicial Crisis Network’s former executive director, is executive director of the Faith and Freedom Coalition, evangelical powerbroker Ralph Reed’s advocacy organization.

Treasurer Neil Corkery holds the same title for the National Organization of Marriage, the largest anti-gay marriage group in the country. The group spent at least $148,000 in Iowa’s state supreme court race last year.

Tax filings show that the Wellspring Committee, a social welfare organization run by Neil Corkery’s wife Ann, gave the Judicial Crisis Network $350,000 in 2010 and another $170,000 in 2011, making it by far the largest donor to the group. Judicial Crisis Network’s total revenue in fiscal 2010, which ended on June 30, 2011, was $382,453. Wellspring also doesn’t name its donors.

Neither Marx nor the Corkerys returned calls seeking comment.

***

In Iowa, 57 percent of the money spent in a retention election for Justice David Wiggins came from groups backed primarily by out-of-state donors.

Conservative groups, including Colorado-based Focus on the Family, the D.C.-based National Organization for Marriage and the Pennsylvania-based Patriot Voices run by former presidential candidate Rick Santorum, spent $225,000 trying to toss Wiggins from the bench. None of these groups disclose their donors.

In 2010, conservatives successfully unseated three of Wiggins’ former colleagues after the high court voted unanimously in favor of gay marriage.

Wiggins won, thanks in large part to $115,000 spent by another non-disclosing nonprofit, the gay-rights group Human Rights Campaign. Spokesman Fred Sainz says his group was determined to counter the conservative money being spent trying to unseat Wiggins.

“Our goal was to ensure that the campaign in Iowa had the resources that it needed to campaign effectively,” says Sainz, who said the HRC is funded largely by small-dollar donors.

***

The fallout from the 2010 Iowa election spread to Florida last year, where conservatives unhappy with a high court ruling to invalidate a ballot initiative challenging the Affordable Care Act took steps to oust three justices. Two tea party groups, including Americans for Prosperity, spent small amounts in a campaign against the judges, and the Republican Party of Florida urged its members not to retain the justices.

The initiative was opposed by a coalition of trial lawyers, unions and others who spent more than $3.2 million through a group called Defend Justice from Politics. The total was tops among outside groups that spent money on state supreme court elections last year. Former President Bill Clinton even recorded a robocall for the group.

America Votes, a D.C.-based, union-backed group, contributed $300,000 to Defend Justice, making it the single biggest donor. Nine Florida law firms each gave $100,000 or more.

“The one thing we learned from Iowa was that they were ill-prepared and non-funded and we were not going to allow that to happen in Florida,” says Neal Roth, a Miami attorney and former head of the state’s trial lawyer association. Voters retained the three justices — R. Fred Lewis, Barbara Pariente and Peggy Quince.

The spending on the other side was a fraction of that raised in support of the judges. One group, Tallahassee-based Restore Justice, only raised $75,000. An official for Americans for Prosperity estimates they spent less than $100,000.

Slade O’Brien, the Florida director of Americans for Prosperity, says he was looking to deter “judicial activism and legislating from the bench.” Despite the loss — the justices were retained with about two-thirds of the vote — O’Brien claims his group enjoyed a strong return on a modest investment.

“Now there’s a level of scrutiny, they can’t just toil away in anonymity,” O’Brien says.

Roth said the money raised by his group showed that out-of-state groups will find a stiff challenge in the Sunshine State.

“Don’t come to Florida again, because it isn’t going to work,” he says.

Trial lawyers also prevailed in Oklahoma, where their spending helped retain four justices, and in Louisiana, where the Republican candidate they supported won the seat.

***

In Mississippi, out-of-state organizations helped tilt the field toward the winning candidate.

Improve Mississippi, funded heavily by a state physicians’ political action committee, state business groups and the D.C.-based American Tort Reform Association, reported spending more than $350,000 in support of Josiah Coleman against Flip Phillips in a race that is technically non-partisan.

Coleman’s other backer, the northern Virginia-based Law Enforcement Alliance of America, did not disclose its donors or spending.

Coleman won with 58 percent of the vote, even though Phillips’ campaign raised more money than Coleman’s.

The LEAA spent at least $188,000, according to records filed by Memphis television stations with the Federal Communications Commission. The ads portrayed Phillips as a greedy trial attorney. The total does not reflect amounts spent in smaller markets.

One Memphis station, Fox Broadcasting-affiliate WHBQ, refused to provide information about how much LEAA spent for ad time it bought in the two weeks leading up to the election.

Founded in 1991 with support from the National Rifle Association, which has long been a partial financial backer, the LEAA frequently pays for attack ads against state-level candidates.

Several observers in Mississippi, including former supreme court justices, believe that the U.S. Chamber of Commerce is supplying the money behind the LEAA’s attack ads.

Mississippi had a reputation as one of the most plaintiff-friendly jurisdictions in the country when in 2000 the U.S. Chamber spent $1 million trying to influence the state supreme court elections.

The out-of-state influence bothered many in the state, including then-Chief Justice Lenore Prather, whom the Chamber supported, according to published accounts during that election.

She asked the Chamber to stop running its ads, a request that was ignored. State officials later sued the Chamber over its refusal to disclose who paid for the ads. A federal judge ordered the disclosure, but the ruling was overturned on appeal.

In 2002, the Chamber issued what The Wall Street Journal dubbed a “call to arms” to Mississippi voters and referred to the state as a lawsuit “Mecca.” But unlike two years prior, no ads identified as being paid for by the chamber ran on state TV. Instead, the state was blanketed by ads paid for by the Law Enforcement Alliance of America.

The LEAA also ran attacks ads in 2008 against then-state Supreme Court Justice Oliver Diaz, whom the U.S. Chamber had targeted in 2000.

Diaz says he believes Chamber money was behind the push polls, mailers and radio and TV ads that the LEAA sponsored.

“The ads that the U.S. Chamber ran against me in 2000 were extremely similar [to the ones] that the LEAA ran against me in 2008,” says Diaz, who also notes that the attacks in both races were launched right before the election.

The LEAA was also active in Texas that year, running attack ads against the Democratic attorney general candidate. A state court there has ordered the LEAA to reveal the donors who funded those ads, a ruling that’s currently being appealed to the Texas Supreme Court.

No one from the Chamber or the LEAA responded to requests for comment.

In Montana, a mysterious outside group called the Montana Growth Network helped sway the course of that judicial race as well.

***

Earlier this year in Wisconsin, pro-business groups spent nearly $700,000 in the state supreme court race, helping incumbent Justice Patience Roggensack cruise to victory over challenger Ed Fallone.

State supreme court races were expensive affairs in recent years in Wisconsin, but this year’s contest was more subdued as liberal groups didn’t spend much to back Fallone.

The state arm of Club for Growth, an anti-tax group, spent at least $287,000 on TV ads supporting Roggensack’s bid, according to FCC records. The group is not required to disclose its donors.

The National Association of Realtors, based in Chicago, spent at least $206,000 supporting Roggensack via the organization’s state chapter.

After the 2010 Citizens United U.S. Supreme Court decision, the Realtors association began charging its members a $1 fee to pay for ads and other political efforts in an initiative it called “My Realtor Party,” according to Bill Malkasian, president of political strategic planning.

***

State supreme court candidates backed by deep-pocketed outside spending groups weren’t always successful.

Partnership for Ohio’s Future, an affiliate of the Ohio Chamber of Commerce, spent more than $1.1 million in a losing effort to help Republican Justice Robert Cupp win re-election.

The organization didn’t disclose its donors, but in past years the U.S. Chamber has been a major contributor, according to the watchdog group Ohio Public Action.

Tax records show the local chamber gave the group $500,000 in 2012, and tobacco giant Reynolds American Inc. reported giving $100,000 to the group last year.

***

Back in North Carolina, Newby was the final brick in the red wall Republican outside groups began building in 2010, when they took control of both chambers of the state legislature for the first time in more than 100 years.Sympathetic justices on the court would lock in new voting districts approved by the majority, and boost the chances that laws passed by the Republican lawmakers, and signed by the new Republican governor, would stand up to any challenges.

Democrats and other groups, including the state’s NAACP chapter, have sued to undo the Republican-led redistricting effort, and tried unsuccessfully to block Newby from voting on the matter.

Republican Gov. Pat. McCrory this year named Raleigh retail magnate Art Pope as the state’s budget director.

Pope is a board member of the Koch-backed Americans for Prosperity. A nonprofit political group he founded and helps fund, Civitas Action Inc., used a $75,000 donation from the Judicial Crisis Network to buy radio ads to keep Newby on the bench.

One of Pope’s top priorities: doing away with the state’s public financing of judicial races.

Paul Abowd contributed to this report.

Secret court judge attended expenses-paid terrorism seminar

United States — 2013-06-07T15:14:02-04:00

U.S. District Judge Roger Vinson, who signed an order requiring Verizon to give the National Security Agency telephone records for tens of millions of American customers, attended an expense-paid judicial seminar sponsored by a libertarian think tank that featured lectures from a vocal proponent of executive branch powers.

Vinson, whose term on the secret Foreign Intelligence Surveillance Court began in 2006 and expired last month, was the only member of the special court to attend the August 2008 conference sponsored by the Foundation for Research on Economics & the Environment, according to disclosure records filed by the federal judge.

The Center for Public Integrity collected the disclosure records as part of an investigative report that revealed how large corporations and conservative foundations routinely sponsor ideologically driven educational conferences for state and federal judges.

It’s unclear which lectures Vinson attended during the “Terrorism, Civil Liberty, & National Security” seminar. FREE’s website only provides a general agenda for the program and no lecture transcripts.

But Eric Posner, a University of Chicago law professor who delivered two lectures, argued in a 2007 book he co-wrote — Terror in the Balance: Security, Liberty, and the Courts — that “the executive branch, not Congress or the judicial branch, should make the tradeoff between security and liberty.”

The book also asserts that while “no one doubts that injustices occur during emergencies, the type of judicial scrutiny that would be needed to prevent the injustices that have occurred during American history would cause more harm than good by interfering with justified executive actions.”

The seminar, conducted in Montana, also included separate lectures entitled “Terrorism & the U.S. Constitution,” “Decision-Making in Counter Terrorism Dilemmas” and “The Triumph & Pitfalls of the Security State.”

Update, 3:11 p.m.: From 2005 to 2009, FREE received a total of $430,000 in general operating support from the Claude R. Lambe Charitable Foundation, of which billionaire businessman Charles Koch is a director. The M.J. Murdock Charitable Trust, however, is listed as the sole funder for the national security conference that Vinson attended.

John Baden, FREE’s chairman, says that while his recollection of the seminar is hazy, it included experts from “both sides” of the national security debate.

One such conference speaker was University of Utah law professor Amos Guiora, who describes himself as a proponent of judicial review and checks on executive power.

He notes that his views regarding the balance of civil liberties and national security are very different from those held by Posner.

“Eric and I totally disagree,” he says, noting that he and Posner were the conference’s primary lecturers.

Vinson, a senior-status judge, also attended a 2009 economics seminar hosted by Northwestern University and sponsored by the conservative Charles G. Koch Charitable Foundation, the American Petroleum Institute and the U.S. Chamber of Commerce, among others.

He and Posner did not immediately respond to requests for comment.

Sheldon Snook, a spokesman for the Foreign Intelligence Surveillance Court, had no comment about the seminar but did release a statement from Presiding Judge Reggie Walton responding to criticism of the surveillance court that has recently surfaced in news reports.

“The perception that the court is a rubber stamp is absolutely false,” Walton’s statement reads. “There is a rigorous review process of applications submitted by the executive branch, spearheaded initially by five judicial branch lawyers who are national security experts, and then by the judges, to ensure that the court’s authorizations comport with what the applicable statutes authorize.”

In April, Vinson approved the government agency’s “top secret” request ordering Verizon on an “ongoing daily basis” to give the NSA telephone records for all its customers’ phone calls “between the United States and abroad,” as well as those made within the United States.

Vinson, who made headlines two years ago when he invalidated President Obama’s health care law, signed the order authorizing telephone surveillance as a member of the Foreign Intelligence Surveillance Court, a special eleven-member court established in the Foreign Intelligence Surveillance Act of 1978 to review applications for warrants related to national security investigations. The court is composed of federal district judges who are appointed by the Chief Justice of the United States and who serve staggered seven-year terms.

News reports of the highly classified court order, first reported by The Guardian newspaper Wednesday, sparked outrage among many Americans, especially civil libertarians. Legislators and White House officials downplayed the growing controversy, claiming that the monitoring of phone calls is “nothing new” and defending the agency’s efforts as an effective way to gather intelligence on terrorists.

Civil rights group's FCC positions reflect industry funding, critics say

2013-06-06T10:36:34-04:00

When the chairman of the Federal Communications Commission pitched a plan to allow more media mergers earlier this year, he received support from a curious source: the Minority Media and Telecommunications Council, once an ardent critic of industry consolidation.

Julius Genachowski wanted backing for a proposed loosening of a rule that bars the same company from owning a newspaper and a radio or television broadcast station in a top media market.

MMTC and its executive director, David Honig, have historically opposed relaxing ownership restrictions, saying they protect minority interests. Yet last week, the group released a key study arguing the opposite position.

So why the change of heart?

Critics say MMTC’s position may have something to do with its extensive industry funding. This includes more than $440,000 in luncheon sponsorships since 2010 from broadcast giants who favor the rule change.

In an 18-page response to questions for this article, Honig says the support does not influence the group’s positions.

“The most valuable asset that a nonprofit organization has is its integrity, and to imply that donations and fees influence our positions on issues is to suggest that we lack integrity, something we do not take lightly,” he wrote.

MMTC, which acts as a pro bono law firm on FCC issues for civil rights groups like the National Association for the Advancement of Colored People, was vital if Genachowski was to get his plan approved.

Two previous attempts to change the rule were slapped down by the courts, in part because of concern that greater media consolidation would reduce the number of minority media owners.

MMTC offered to commission the study in February, after voicing its support for Genachowski’s proposal.

Once a shoestring operation dependent almost solely on the volunteer efforts of Honig, MMTC has evolved in recent years into a potent organization that exercises much influence on the commission through its ability to shape the positions of large civil rights organizations on relatively obscure FCC issues.

The media ownership rules passed in the 1970s stemmed in part from the FCC’s failure to take action against TV stations in the South that blacked out coverage of the civil rights movement. They were also inspired by the perceived failures of large media outlets to report on grievances of inner cities that led to the race riots of the late 1960s.

It was believed that restrictions on ownership would lead to greater competition, more locally focused programming and more opportunities for minority ownership.

Consolidation has long been favored by many large broadcasters and newspaper companies, which seek savings by combining advertising and newsroom operations.

After years of defending the rules, Honig, wrote in a blog post in December that the cross-ownership ban should be relaxed, citing concern in minority communities about the decline of newspapers.

What he didn't disclose was the hundreds of thousands of dollars his group had received from CBS Corp., radio giant Clear Channel Communications Inc., Rupert Murdoch's News Corp. and the National Association of Broadcasters, an industry lobby group. All four have previously gone to court in an effort to end the ban. News Corp., which Los Angeles Times and a rule-change would clear the way for such a deal.

Clear Channel and News Corp. did not respond to questions for this article. Spokesmen for the NAB and CBS say their organization’s donations weren’t intended to change MMTC’s positions on cross-ownership or other matters.

Honig said the Center’s calculation of sponsorship totals — which were taken from MMTC materials — were “inaccurate.” He said the group may bump up the level of sponsorship of donors “for good will purposes.”

He did not provide alternate figures.

MMTC took in just under $2 million in 2011. Of that, $1.7 million was derived from sponsorships, donations and fees from companies, lobbyists, lawyers and religious broadcasters with interests before the FCC, according to an IRS filing.

“It is important to look at David’s source of funding to determine who David really represents,” says Mark Lloyd, a former associate general counsel and chief diversity officer at the FCC from 2009 until last year. “I think that would tell you a great deal.”

The MMTC ownership study, released last week, concluded the impact of greater consolidation in media ownership on women and minority ownership can’t be a “material justification for tightening or retaining the rules.”

Critics argue that other studies have shown that more media concentration harms small broadcasters, and that most women- and minority-owned broadcasting companies control just a few stations each.

Net neutrality position raises eyebrows

MMTC has also received support from telecommunications and cable firms and its position on broadband regulation and other issues has dovetailed with theirs.

“He’s making arguments that are no different than those made by the big companies and yet they’re presented as those of the civil rights community,” says Craig Aaron, the executive director of Free Press, a group that opposes media consolidation. “Those are his views, but it’s curious how often they’re in line with the filings of Comcast and AT&T.”

Honig says MMTC aims to promote equal opportunity in broadcasting, telecommunications and broadband and that its positions are often in conflict with those of its donors. He pointed to a letter accompanying the ownership study which noted there was "an indication that an especially extensive" cross-media merger could hurt minority ownership in smaller markets."

MMTC’s position on “network neutrality” early in President Barack Obama’s first term angered consumer groups and many technology companies that wanted the government to force Internet service providers to treat all traffic equally.

Proponents of an open Web were concerned that without strong network neutrality rules, broadband providers would be free to offer preferential treatment to deep-pocketed media outlets.

Honig sided with the Internet service providers, arguing that new rules would hurt the ability of cable and telecommunications companies to expand broadband in poor, minority neighborhoods.

"We think that closing the digital divide should be the top priority and that net neutrality should be second," he told the Los Angeles Times.

From 2009 through 2011 MMTC received at least $725,000 in contributions and sponsorships from network neutrality foes including Verizon, Time Warner, and the National Cable and Telecommunications Association, according to MMTC tax filings and sponsorship lists.

MMTC’s relationship with Verizon demonstrates the group’s various methods of obtaining industry revenue. In 2009, at the height of the net neutrality debate, Verizon made a direct $40,000 contribution to MMTC. From 2010 to 2013, MMTC documents list Verizon as funding at least $160,000 in MMTC conference sponsorships.

Additionally, MMTC worked with Verizon on a $189 million sale of wireless spectrum licenses to minority-owned Grain Management this year — a deal announced in conjunction with a larger $1.9 billion license sale to AT&T. A spokesman for Verizon says money paid to MMTC wasn’t intended to influence its policies but to support its mission of promoting inclusion in the industry.

Some saw Honig playing a key role in organizing traditional civil rights groups like the National Urban League and the League of United Latin American Citizens (LULAC) to sign on to anti-network neutrality filings with the FCC.

Honig is “the nerve center for much of the action we've seen on the part of the civil rights groups,” blogged James Rucker, then the executive director of ColorOfChange.org, a technology-oriented civil rights group that supported network neutrality.

“In my opinion, Honig is leading many of the respected civil rights groups he is advising off of the digital cliff,” he added.

Rucker isn’t alone in the view that Honig uses his credibility with civil rights organizations and expertise in communications law to influence them to take positions on complex issues that primarily benefit industry players.

Honig “undermines trust in his organization’s legacy” when he urges groups to join his advocacy campaign and they later find out the issues aren’t quite what they expected, says Cheryl Leanza, co-chairwoman of the Leadership Conference on Civil Rights’ media and telecommunications task force.

“He does a disservice to his past work when other organizations take his advice and they don’t know the consequences or implications of that advice.”

Leanza says her views are her own, not those of the LCCR.

Civil rights activist

Honig began his civil rights activism in the 1960s as a high school student, when he became a youth leader of the Southern Christian Leadership Conference in Rochester, New York.

He earned a law degree from Georgetown in 1983, and after the FCC under President Ronald Reagan suspended key minority broadcast ownership rules, he co-founded MMTC on a shoestring budget.

He mixed MMTC’s advocacy with litigation on behalf of civil rights groups. In the 1990s he led a high profile but unsuccessful legal battle representing the N.A.A.C.P. in its effort to prevent Rupert Murdoch’s News Corp., the parent of Fox Broadcasting Co. and the owner of a New York City television station, from gaining a waiver from the cross-ownership rule to buy the New York Post—the same rule Honig now favors eliminating.

In 1991, on behalf of LULAC, the N.A.A.C.P. and other civil rights groups, his legal work helped spur an FCC investigation and long-running legal fight with the country’s largest Christian television network, Trinity Broadcasting Network (TBN).

Known for its broadcasts of televangelists like Jimmy Swaggart and network founders Paul and Jan Crouch, Honig accused TBN of setting up a sham minority corporation to win additional FCC broadcast licenses.

Honig helped spur the FCC to restore equal employment rules to the cable and broadcast industry in 2002 and pass a 2007 rule preventing advertisers from instructing their agencies not to place spots on radio stations with large black and Hispanic audiences.

By the late 1990s, Honig had also found a way to successfully fund MMTC. In 1998, MMTC began collecting fees from broadcasters in return for helping them sell stations to minority buyers — earning $450,000 that year alone by helping Clear Channel sell a Boston station for $5 million, according to a report in the trade newspaper Broadcasting & Cable. The story noted that Honig was able to begin paying himself a $41,125 salary.

The report also said that rival brokers were complaining that one MMTC client, CBS Corp., did not typically use brokers and had retained Honig “only to curry favor with the diversity-minded FCC.”

In 2002, the group added an annual “Access to Capital” fundraising luncheon, which helped net it $22,806. Honig’s compensation had risen to $161,000, according to tax filings.

By 2006, the luncheon had become so successful at attracting industry interest it had been expanded to two days and was addressed by three of the FCC’s five sitting commissioners — MMTC raised $291,334.

Station donations

Additionally, the non-profit MMTC began accepting donated broadcast properties.

In 2008, Mega Communications, a Spanish radio network owned by New York art collector Adam Lindemann, donated a Tampa Bay area AM station to MMTC. Honig says the station was used to train women and minorities. MMTC sold the station for $1.15 million last year to Christian broadcaster Salem Communications.

In 2010, Trinity Broadcasting Network donated 147 low-power television stations to MMTC. That year MMTC awarded TBN, along with Clear Channel, its “Extraordinary Service Award,” an annual prize given for those “who have far exceeded the call of duty in the service of the civil rights cause,” according to MMTC’s website.

The FCC soon reclaimed the licenses of many of the TBN stations, but in 2011 MMTC sold 78 of the stations for $390,000 to a Tennessee company run by broadcast entrepreneur Henry Luken, whose holdings include The Nashville Network and the male-oriented Tuff TV.

TBN declined to comment on the donation. Honig says MMTC did not solicit the donation from TBN, and that Luken has pledged to enact a training program for women and minorities as part of the deal.

By the time of the sale of the former TBN stations, MMTC had grown substantially. In 2011, the last year for which tax forms are available, it reported almost $2.8 million in net assets.

Honig’s salary had also increased to $212,072. His addresses included a waterfront home on Maryland’s Eastern Shore assessed at $856,700, according to Maryland property records.

Today its website lists eight lawyers, two researchers and a communications director. Its brokerage team includes three others, two of whom are former Clear Channel staffers. MMTC ranked as the seventh-largest broadcast broker in the U.S. in 2011, and has worked on deals valued at $1.8 billion over the past 15 years. Honig, 63, says he plans to semi-retire next year.

Comcast and AT&T

Among the group’s most generous donors is cable giant Comcast, which, according to MMTC documents has spent at least $375,000 on fundraising luncheons and conferences in Washington hosted by MMTC between 2009 and this year.

In addition to taking Comcast's side on Net Neutrality, Honig publicly hailed its 2011 buyout of NBC Universal.

Honig publicly hailed Comcast’s 2011 buyout of NBC Universal saying the $16.7 billion merger was “a win for all Americans, especially minority and low-income consumers who have largely been left out of the digital equation.” The deal required Comcast to expand broadband to low-income Americans and create 10 new television channels in partnership with minorities.

NBC Universal contributed $150,000 to MMTC in 2010, and retained MMTC’s brokerage arm to help it sell a Los Angeles TV station as required under terms of the deal.

“We supported MMTC's work for years prior to the NBC Universal transaction,” said Sena Fitzmaurice, a spokeswoman for Comcast, in an email response to questions about the relationship. “We support a wide variety of organizations and they don't always support all of our policy positions just as we don't always support all of their policy positions.”

MMTC also supported a failed attempt by AT&T to buy T-Mobile in 2011 for $39 billion, the group’s first endorsement of a media and telecom merger in its 25-year history. The combination would benefit minority broadband consumers by allowing AT&T to expand service to more than 97 percent of consumers, Honig wrote in a brief to the FCC.

Groups such as the National Hispanic Media Center and the Center for Media Justice disagreed, arguing that T-Mobile was the low-cost carrier and that its elimination would not only harm consumers but disproportionately affect minority customers.

In 2010 and 2011, AT&T and T-Mobile provided $240,000 in sponsorships to MMTC fundraising events, according to MMTC documents. A number of other civil rights groups such as the NAACP and Gay and Lesbian Alliance Against Defamation also backed the proposed merger and also received AT&T funding.

At the time the chairman of MMTC’s board, former FCC Commissioner Henry Rivera, worked at law firm Wiley Rein, which represented T-Mobile in the merger. Julia Johnson, then MMTC’s treasurer and its current board president, runs a public relations firm whose clients have included AT&T, according to the Tampa Bay Times.

Ari Fitzgerald, a communications lawyer at Hogan Lovells and secretary of the board at MMTC, has done FCC work for T-Mobile both before and after the failed merger proposal.

AT&T relayed questions about the relationship to Honig, who defends MMTC’s stance in the merger, citing AT&T’s record of hiring minority staff and suppliers. Johnson, Fitzgerald and Rivera recused themselves from voting on MMTC’s position on the merger, he said.

“MMTC’s officers and directors are highly skilled, experienced individuals, and they all serve pro bono,” said Honig, adding: “No MMTC officer or director would tolerate attempts at ‘purse-string advocacy.’”

Growing Entity

Long-time public interest lawyer and MMTC board member Andrew Schwartzman says a turning point for the group came when it entered telecom advocacy. He says Honig is “well-motivated” but on some telecom issues “misguided rather than improperly influenced.”

Schwartzman’s own organization, the Media Access Project, closed its doors last year due to a lack of funds. He does not see MMTC’s positions as being “dictated by specific corporate contributions.”

“I don’t see these as a sudden transactional relationship but something longstanding,” he added, in reference to the donations.

Alex Nogales, the director of the National Hispanic Media Coalition, is less forgiving.

"We're disappointed in David," said Nogales. "He's gotten a bit too chummy with the industry and he's tried to drag us into those machinations and I don't appreciate it."

He says he resigned his spot as a member of MMTC’s board because of concerns about its growing corporate ties.

Whether the MMTC’s cross-media ownership study will lead to a relaxation of media ownership rules is a matter that will be decided under its next chairman.

Either way, the MMTC is looking to remain a key player at the FCC under the new regime.

President Obama’s pick for the spot, Tom Wheeler, a former cable and wireless industry lobbyist, was endorsed by the group just hours after news of his selection was leaked to the media.

John Dunbar contributed to this report.

Tobacco giant funded conservative nonprofits

Reynolds American Inc. — 2013-05-31T10:18:28-04:00

Tobacco giant Reynolds American Inc. last year helped fund several of the nation’s most politically active — and secretive — nonprofit organizations, according to a company document reviewed by the Center for Public Integrity.

Reynolds American’s contributions include $175,000 to Americans for Tax Reform, a nonprofit led by anti-tax activist Grover Norquist, and $50,000 to Americans for Prosperity, a free-market advocacy outfit heavily backed by billionaire brothers Charles and David Koch.

The tobacco company’s donations are just a fraction of the nearly $50 million that those two groups reported spending on political advocacy ads during the 2012 election cycle, almost exclusively on negative advertising. Federal records show that Americans for Prosperity alone sponsored more than $33 million in attack ads that directly targeted President Barack Obama.

But the money, which Reynolds American says it disclosed in a corporate governance document at the behest of an unnamed shareholder, provides rare insight into how some of the most powerful politically active 501(c)(4) “social welfare” nonprofits are bankrolled.

Reynolds American is the parent company of R.J. Reynolds Tobacco, which makes Camel and Winston brand cigarettes.

“The shareholder specifically requested that we disclose information about 501(c)(4)s, and in the interests of greater transparency, we agreed,” Reynolds American spokeswoman Jane Seccombe said.

Large corporations — tobacco companies or otherwise — almost never release information about their giving to such groups, and it’s most unusual for the groups themselves to voluntarily disclose who donates to them.

These groups, which obtain their nonprofit status because they say their “primary purpose” is not political activity, are generally under no legal obligation to detail their funding sources. Super PACs and other recognized political committees, by contrast, must report the names of their contributors who give more than $200 and the amounts they give.

Yet during the 2012 election cycle, various social welfare nonprofit organizations, emboldened by the U.S. Supreme Court’s Citizens United v. Federal Election Commission decision in January 2010, spent more than $250 million to promote or attack federal political candidates, according to the nonpartisan Center for Responsive Politics. The source of most of that money remains a mystery.

Reynolds American’s other contributions last year to 501(c)(4) groups include $100,000 to the Partnership for Ohio’s Future, an organization run by the Ohio Chamber of Commerce that spent several million dollars in a failed 2012 ballot initiative campaign to uphold a law limiting public workers’ collective bargaining rights. It also gave $12,500 to the National Taxpayers Union, a 501(c)(4) group that backed Republican candidates last year with modest expenditures.

Ohio Chamber of Commerce Executive Vice President Linda Woggon told the Center for Public Integrity she wasn’t aware that Reynolds American planned to disclose its donation to Partnership for Ohio’s Future.

But Woggon said she did not have a problem with officials there doing so, adding that “the decision is up to the company.”

Americans for Prosperity, which in 2011 reported to the IRS it received more than $25.4 million in contributions and grants, “leaves it up to our supporters” to decide whether to reveal their donations,” spokesman Levi Russell said.

“It’s their right, and we respect it,” he said.

Officials at Americans for Tax Reform, which in 2011 reported to the IRS that it received nearly $4 million in contributions and grants, did not reply to several requests for comment.

Within the tobacco industry, Reynolds American competitor Lorillard, which manufactures Newport brand cigarettes, has no nonprofit donation disclosure policy in place.

Ronald Whitford, the company’s associate general counsel, said Lorillard “could look at possibly enhancing disclosure in the future.”

Altria, the world’s largest tobacco company, does make contributions to politically active nonprofit organizations, spokesman Bill Phelps said — but he would not name any beneficiaries.

Altria’s corporate policy only requires it disclose its contributions to 501(c)(4) nonprofits in narrow circumstances, none of which applied to its 2012 donations, Phelps said.

For example, Altria, which makes Marlboros, the top-selling cigarettes, would publicly disclose a contribution if a nonprofit used at least $50,000 specifically for “political activities” as defined by the Internal Revenue Service — but only if the nonprofit informed Altria of this fact.

The IRS considers political activity to be the “participation in, or intervention in, any political campaign on behalf of (or in opposition to) any candidate for public office.”

Therefore, by its own rules, Altria would not disclose contributions that a 501(c)(4) used to fund so-called “issue advertisements” that are sometimes barely distinguishable from ads that directly advocate for or against a politician.

Politically active nonprofit groups such as Americans for Prosperity and Crossroads GPS, which was co-founded by GOP strategist Karl Rove, together spent millions of dollars on these kinds of communications last year.

Reynolds American’s written corporate policy on nonprofit donation disclosure is similar to that of Altria. But the policy “represents the minimum disclosure threshold,” said Seccombe, the company spokeswoman.

Reynolds American specifically acknowledged its donation to Americans for Tax Reform “because of expected stakeholder interest, not because the contributions were intended to be used or were in fact used for ‘political activity’ as that term is meant for purposes of the Internal Revenue Code,” Seccombe added.

She declined to speculate on which 501(c)(4) organizations Reynolds American will donate to this year. But officials will release information on its 2013 donations early next year, she said.

The company’s actions, although limited and hardly in real time, “set a precedent” and are “to be commended,” said Bruce Freed, president of the Center for Political Accountability, which tracks and advocates for political transparency by corporations.

“We just haven’t seen this with other companies related to their giving to (c)(4)’s,” Freed said.

Small donors fueled Michele Bachmann's campaign

2013-05-30T10:28:21-04:00

What do the woman who founded the Congressional Tea Party Caucus, the co-chairmen of the Congressional Progressive Caucus and the U.S. Senate’s lone self-described “democratic socialist” have in common?

They all rank among the top beneficiaries of small-dollar political donors, according to a Center for Public Integrity analysis of federal records.

It’s firm evidence that neither Democrats nor Republicans in Congress have a monopoly on small-dollar givers, who often serve as barometers for a candidate’s grassroots support.

And the correlation between politicians with fervent beliefs and small-dollar givers lies at the heart of an ongoing debate about the role and significance of modest contributions from the masses in a political age often dominated by sizable contributions from a wealthy few.

Do passionate defenders of ideological views attract small-dollar donors? Do small-dollar givers push politicians to the partisan extremes? And are small-dollar donors ideologically dissimilar from the average voter or their large-dollar counterparts?

During the 2012 election cycle, Tea Party Caucus founder Rep. Michele Bachmann, R-Minn., collected both more cash and a larger portion of her congressional campaign war chest from small-dollar contributions than any other incumbent politician at the federal level, according to the Center for Public Integrity’s analysis.

Donations of $200 or less, the threshold at which the Federal Election Commission requires itemization in campaign finance reports, amounted to more than $9.5 million — or 62 percent of the $15 million Bachmann raised for her 2012 re-election efforts.

This morning, Bachmann — who was facing multiple campaign finance investigations and a tough re-election bid — announced that she would not seek a fifth term in Congress.

Meanwhile, Sen. Bernie Sanders of Vermont, a left-leaning independent who caucuses with Senate Democrats, collected nearly $3.7 million — or 59 percent of his total $6.3 million — from such small-dollar giving. That was enough to rank the self-described socialist as second among incumbents, in terms of percentage of receipts from modest donors.

Attribute this success to the senator’s “career standing up to the most powerful special interests in the country and vigorously representing the needs of the elderly, the children, the sick and low-income Americans,” said Ben Eisenberg, the finance director of Sanders’ campaign.

“People in Vermont and across the country appreciate Bernie’s efforts,” Eisenberg added.

Former Rep. Allen West, R-Fla., another darling of tea party activists, ranked third. Ahead of his narrow defeat by Democrat Patrick Murphy in November, West collected $9.3 million in contributions of $200 or less — nearly half of the $19 million he raised.

Representatives for Bachmann and West did not respond to requests for comment.

Tapping the grassroots

Among non-incumbents who raised at least six figures, Republican congressional challengers John Dennis of California, Anna Little of New Jersey, Samuel “Joe the Plumber” Wurzelbacher of Ohio, Karen Harrington of Florida and Chris Fields of Minnesota placed as the top five beneficiaries — percentage-wise — of small-dollar support, according to the Center for Public Integrity’s analysis.

Each reported raising at least half of their funds as coming from contributions of $200 or less.

Money from grassroots supporters doesn’t always translate into electoral success. Incumbency still remains a most powerful force.

Dennis, for instance, raised 84 percent of his campaign cash from low-dollar gifts and received just 15 percent of the vote in his longshot bid to unseat Democratic House Minority Leader Nancy Pelosi, D-Calif.

All the while, Democratic lawmakers, including Sen. Sherrod Brown of Ohio and Reps. Carolyn McCarthy of New York, Raul Grijalva of Arizona and Keith Ellison of Minnesota, also ranked highly among incumbents who raised a lofty portion of their campaign war chest from small-dollar contributions.

And Florida Democrat Alan Grayson pulled in $2.5 million from small-dollar gifts — more than any other House candidate — ahead of his victory last November. That sum accounted for roughly 47 percent of the $5.4 million he raised overall in the race.

Grijalva and Ellison are the co-chairmen of the Progressive Caucus.

In a telephone interview, Grijalva told the Center that “grassroots” donors help “shift the balance of power.”

“The lady that sends me 10 bucks out of her Social Security check for six months is at the table when I’m making a decision as much as a captain of industry is sitting at the table trying to affect the decision,” he said. “It equalizes things.”

Peggy May, McCarthy’s campaign treasurer, noted that the New York congresswoman “wants to foster an environment in which everyone can get involved and make a difference, no matter how small.”

McCarthy, whose husband was killed in a 1993 mass shooting on the Long Island Railroad, “is a singular figure in Congress when it comes to fighting to reduce gun violence,” May said. “She fights for this issue even when it's not in the headlines and her supporters recognize that.”

Overall, the median portion of campaign funds raised by an incumbent House member during the 2012 election cycle from small-dollar gifts was about 4 percent, and the median portion raised by an incumbent senator was about 11 percent.

Celebrity breeds small-donor success

Recently, Washington Post policy wonk blogger Ezra Klein argued that “small money is polarizing.”

“Small money will turn on you if you dare cut a deal with the other side,” Klein wrote. “Small money attacks the bipartisanship that, for better and worse, is required for the system to function.”

Michael Malbin, executive director of the nonpartisan Campaign Finance Institute, and Norm Ornstein, a scholar at the American Enterprise Institute, disagree.

When you raise political money, Ornstein told the Center for Public Integrity, you “naturally” attract support first from partisans. But you can change the system to expand the donor base “beyond those who are the most intense.”

Added Malbin: “Small-donor fundraising presumes that you will be known by a large enough number of people to get a decent response.”

Politicians typically achieve small-donor fundraising success because they have “gotten some celebrity either because they are leaders or because of statements they’ve made,” Malbin continued.

Both Malbin and Ornstein contend that small-dollar donors are a counterweight against corruption.

Ornstein says that under the current system, where most politicians chase large-dollar contributions, the potential for corruption is two-fold: Lawmakers can “shakedown” donors, and donors can make “explicit threats” to members of Congress.

Small-dollar donors, Ornstein said, “just don’t provide those kinds of problems.”

Pro-Rand Paul super PAC's name may violate law

2013-06-18T16:44:51-04:00

Supporters of Republican Sen. Rand Paul, R-Ky., have launched “Rand PAC 2016.” But because the super PAC uses the potential presidential candidate’s first name, this action may violate federal law.

Three Hillary Clinton-themed super PACs established earlier this year could also find themselves in the same situation. Since, however, the former secretary of state is not officially a candidate for president or any other federal office, they are on safe ground — for now anyway.

Paul, on the other hand, has raised more than $600,000 for his 2016 re-election to the U.S. Senate, including $457,000 during the first quarter of 2013, according to Federal Election Commission filings.

Federal law, in most cases, only permits political committees authorized by a candidate to use that candidate’s name — which super PACs, by definition, are not.

The regulations, though, are unclear about whether the use of a partial name would trigger a change.

This would be “a good area for the FEC to clarify its own rules,” Paul S. Ryan, an attorney at the nonpartisan Campaign Legal Center, told the Center for Public Integrity.

An FEC spokesman directed questions to the agency’s chairman and vice chairman, who could not immediately be reached for comment.

The FEC typically sends a letter to a super PAC if it uses a candidate’s name. For example, during the 2012 GOP presidential primaries, the super PAC “Americans for Rick Perry” ran afoul of the rule and changed its name to “Restoring Prosperity Fund.”

Brandon Edwards — the 27-year-old, self-described libertarian from California who is the chairman of the newly created Rand PAC 2016 — said that if his group were asked to change its name by the FEC, “that would be no problem.”

Edwards said his group does not want to be seen as “leaching off" Paul's name.

“That’s definitely not the goal of this,” he added. “The goal is to become active with the community, find other like-minded people and help spread the message of liberty.”

Another pro-Paul group may face a similar predicament. It christened itself the "Stand with Rand PAC" when it registered in March as a hybrid super PAC.

A hybrid super PAC can operate one bank account fueled by limited contributions to dole out money to candidates — plus a second account funded by unlimited donations that are used to produce political advertisements.

Bill Willenbrock, Stand with Rand PAC's treasurer, said his group had not been asked to change its name by the FEC, adding that he was "not aware that Ayn Rand was running for office," making reference to the deceased author, a libertarian icon.

The super PAC’s website features a photo of the Kentucky senator above the assertion that it exists to “support candidates like Rand Paul who stand up for the Constitution and, more specifically, the Bill of Rights.”

In a previous interview with the Center for Public Integrity, Willenbrock said his group planned to support Paul as well as "other candidates who stand for liberty," such as Sens. Ted Cruz, R-Texas, and Mike Lee, R-Utah.

In January, several notable Clinton supporters formed a super PAC called “Ready for Hillary PAC,” as the Center for Public Integrity previously reported.

The super PAC has not yet been required to report any fundraising to the FEC, but Democratic heavyweights such as strategist James Carville and former Michigan Gov. Jennifer Granholm have already made pitches for the group.

“We are aware of this federal regulation,” said Jim Lamb, Ready for Hillary's general counsel. "If Hillary decides to run and becomes a candidate, we will continue to be in compliance with this regulation."

Clinton supporters have also created an Iowa-based group called "Hillary Clinton Super PAC" and a California-based super PAC called "Hillary FTW," an acronym standing for "for the win."

Further confusing the issue, political committees designed to specifically oppose a candidate are granted an exemption from the rules governing names.

Case in point: the “Stop Hillary PAC” registered with the FEC last week as a hybrid super PAC. Similarly, the “Retire Pryor” super PAC has spent about $10,000 opposing the re-election of incumbent Sen. Mark Pryor, D-Ark, who will face voters in 2014.

The only other exception to the naming restriction is for groups that seek to “draft” a candidate to run for office. These groups must also “clearly indicate” that they are “a draft committee,” according to federal law.

Like super PACs, draft committees need not abide by the strict contribution limits faced by candidate’s own committees.

Lax state rules provide cover for sponsors of attack ads

2013-05-16T16:20:38-04:00

While much criticism has been lobbed at the federal system for failing to adequately identify who is spending money to influence campaigns, 35 states have independent spending disclosure laws that are less stringent than federal election law.

In fact, in 30 states it’s impossible to total how much money outside groups are spending on campaigns, information that is mostly available when it comes to federal contests.

That’s according to a new 50-state analysis by the National Institute on Money in State Politics, which graded the states on disclosure requirements for super PACs, nonprofits and other outside spending groups.

Fifteen states — Alaska, California, Colorado, Connecticut, Illinois, Maryland, Massachusetts, North Carolina, Ohio, Oklahoma, Oregon, Rhode Island, Texas, Washington and Wisconsin — received an “A” grade, meaning the states’ laws were at least as robust as federal independent spending requirements.

New Jersey and Virginia, states where residents will be casting votes for governor and state legislature this year, were among 26 states that received a failing grade.

The others were Alabama, Arizona, Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Dakota, Pennsylvania, South Carolina, Tennessee and Wyoming.

States were graded on a 100-point scale, based on how much information is provided to the public about non-candidate organizations that buy ads, often negative and misleading, just before an election. Six states — Alabama, Indiana, New Mexico, New York, North Dakota and South Carolina — didn’t garner a single point in the survey.

Independent super PACs and nonprofits intent on influencing campaigns proliferated in the wake of the 2010 U.S. Supreme Court’s Citizens United v. Federal Election Commission ruling, adding about $1 billion in spending in federal races in the 2012 election cycle.

At the state level, lavish spending by outside groups often faces weaker disclosure rules than federal contests and receives far less media attention.

The result is a mishmash of rules, with some states scrambling to pass legislation in the wake of the high court decision while others show little interest in enacting any changes.

In South Carolina, for example, outside groups paid for ads attacking several state and local politicians in 2012 but were not required to report the spending.

Two federal court decisions have left the state without “any rules” related to outside groups’ spending, according to Cathy L. Hazelwood, deputy director of the state Ethics Commission.

State Sen. Wes Hayes, a Republican from Rock Hill, estimates that an anonymous group called Conservative GOP PAC, which despite its name has no apparent affiliation with the state’s Republican party, spent at least $100,000 on campaign fliers in an unsuccessful effort to unseat him.

He concedes that’s just a guess.

“I’ll never know the amount, just like I’ll never know who spent it,” Hayes says. Efforts to contact Conservative GOP PAC were unsuccessful, as the group has no office, no phone number, no website, did not file incorporation records with the state and no individuals have claimed membership in the organization.

Non-candidate, independent spending on elections can be broken into two general categories: “independent expenditures” and “electioneering.” With independent expenditures, potential voters are asked to back or oppose a candidate. With electioneering, a candidate is named, but there’s no explicit request for support or opposition.

In 25 of 50 states, electioneering advertisements are not required to be reported, according to the analysis by the National Institute.

The term “electioneering communications” came to be with the passage of the Bipartisan Campaign Reform Act of 2002. The federal law requires such expenditures be reported, but it applies only to television and radio ads that air shortly before an election.

In a few states, however, the definition of electioneering communications is broader than at the federal level, and may include non-broadcast expenditures like direct mail and print advertising. Independent expenditures refer to all expenditures used to support or oppose a candidate, including non-advertising costs like polling and yard signs.

Points were withheld in the survey based on the level of disclosure and whether disclosure forms differentiate between independent spending and other types of campaign expenditures.

While North Dakota scored a zero, the state passed legislation this year that will beef up disclosure requirements for outside groups once the law goes into effect August 1.

The National Institute’s rankings focus solely on spending and not on donors to the groups that are doing the spending. Increasingly, “social welfare” nonprofits — currently at the center of a scandal involving the IRS — and trade associations are being used to hide donors’ identities in both federal and state races.

In New Mexico, outside political action groups spent heavily on races for the state Legislature, races that typically attract fewer than 20,000 voters. Once sleepy contests have become bruising battles fought through statewide television ads, said state Sen. Peter Wirth, a Democrat from Santa Fe.

He’s pushed a bill requiring greater disclosure by outside groups through the Senate three times (twice with unanimous approval) only to see it die in the state House after frenetic lobbying by “very powerful special interests” from both parties, he says.

“It’s bipartisan support in the open, and then behind the scenes it’s full-on bipartisan opposition,” Wirth says.

But several states have enacted disclosure requirements that go beyond federal requirements.

In Maryland, corporations are required to alert shareholders about a company’s independent political spending;
A “stand by your ad” provision in a 2010 Massachusetts law requires that in corporate-funded ads, the CEO appear in the spot;
Alaska, California and North Carolina require independent expenditure groups to list their top donors in political ads.

The National Institute’s rankings also factor whether states require independent spending groups to disclose which candidate they are targeting.

Two states, Florida and Delaware, require that spending be made public but not the targets or the purpose of the spending. The result: It’s virtually impossible to track how much was spent by outside groups trying to hurt or help a particular candidate.

Thirty-six states will elect governors in 2014. Edwin Bender, executive director of the National Institute on Money in State Politics, said he hopes states with poor grades will strengthen their reporting requirements.

“The majority of states will elect their governors and other major statewide offices in 2014,” he said. “We think the public should know how much money is spent on these races, and by whom.”

John Dunbar contributed to this report.

For more information about money in state politics, visit www.followthemoney.org.

Judicial candidate blames mystery nonprofit's attacks for defeat

2013-05-16T16:20:38-04:00

When Ed Sheehy looked at his mail one day last fall, he was startled to see his face staring back at him, posed alongside the notorious “Christmas Day Killer.” Sheehy, as a public defender, had represented the man a year earlier. Now Sheehy was running for a seat on the Montana Supreme Court and someone was using the double-murder to accuse him of being soft on crime.

“I was furious,” the 60-year-old Sheehy, who was born in Butte, Mont., and now resides in Missoula, told the Center for Public Integrity. “It was misrepresenting what I did and what I do as a lawyer.”

So who was behind the attack?

The mailer showed only that it was paid for by the “Montana Growth Network,” a “social welfare” nonprofit, registered under Section 501(c)(4) of the U.S. tax code. Montana election records revealed next to nothing about the organization, which, because of its tax status, is not required to disclose its donors. The nonprofit’s website says its goal is to make Montana “more business friendly.”

Despite finishing on top in the summer’s primary election, Sheehy lost in November.

Mystery mailers

He blames the mailers and similarly themed radio ads paid for by the group for his defeat, and he is angry that it was not required to report the full extent of its spending — much less the names of those who bankrolled it.

Montana, in fact, is one of 35 states where disclosure laws for independent groups like the Montana Growth Network are less stringent than what federal election law requires, according to a new analysis by the National Institute on Money in State Politics.

Sheehy, the nephew of a former Montana Supreme Court justice, first faced off against attorney Elizabeth Best and Laurie McKinnon, a district judge, in a three-way, nonpartisan primary in June. The top two vote-getters advanced to the general election in November.

Ahead of the primary, the Montana Growth Network endorsed McKinnon and touted her in a mass mailing as “fair,” “honest,” “constitutional” and “the only nonpartisan choice for Supreme Court.”

The group’s mailers also focused on Sheehy’s work defending a murderer and criticized Best for pursuing a lawsuit to “seize control of the state’s atmosphere … to stop global warming.”

Sheehy, who finished first with 34.3 percent of the vote, spent $32,000 during the primary, and McKinnon, who finished second with 33.6 percent of the vote, spent about $30,000, records show. Best came in at third with 32.1 percent.

Best raised more than the other two candidates combined — $128,000, which included roughly $20,000 of her own money. She was the only candidate to advertise on television.

The Montana Growth Network spent roughly $42,000 during the primary election — more than either Sheehy or McKinnon’s own campaigns.

Outsider spends big

Best told the Center for Public Integrity that she was “stunned” by the result.

“Hearing from the candidates doesn’t matter anymore,” she said, adding that what matters is who has well-financed outside supporters to “cast candidates as something they aren’t and to tip the scales.”

McKinnon, Best said, was “running as a partisan with unlimited backing.”

The amount spent by the Montana Growth Network in the primary was required by state law to be disclosed because the mailings urged voters to support or oppose a candidate — a line the nonprofit says it didn’t cross with its subsequent activities, whose costs it did not disclose.

Ahead of the November election, one direct mail piece from the Montana Growth Network argued that under Sheehy, justice would be “beholden to a political party,” based on Sheehy’s past financial support of Democratic candidates.

Additionally, both mail and radio advertisements said that Sheehy had an “activist agenda” for his defense of Tyler Michael Miller, the so-called “Christmas Day Killer” who murdered his girlfriend and her 15-year-old daughter “in cold blood” in 2010.

While defending Miller, Sheehy had unsuccessfully sought for Montana’s death penalty process to be ruled unconstitutional because a single judge, not a jury, is allowed to assess whether “mitigating factors” exist that might rule out a death sentence.

Sheehy says he was simply “doing his job.” Miller is currently serving two life sentences after ultimately pleading guilty.

Ads tread fine line

Instead of urging people to vote against Sheehy or support McKinnon, the ads advised voters to “contact Ed Sheehy and tell him that you want an impartial Supreme Court” and to sign an online petition.

How much was spent on these advertisements is not public.

Montana media outlets reported on the anti-Sheehy radio ads, and Sheehy called on McKinnon to denounce them, which she did.

“Negative advertising has no place in a nonpartisan race,” McKinnon said in a press release at the time. “I ask for your vote based on who I am, not on negative portrayals of my opponent.”

On Election Day, McKinnon bested Sheehy by 12 percentage points.

She had also been endorsed by the Montana Chamber of Commerce and spent about $35,000 on the general election campaign. Sheehy, who had been endorsed by the Montana AFL-CIO and state’s teachers’ union, spent roughly $44,000.

Being painted as an “activist” by the Montana Growth Network, Sheehy said, was insurmountable.

“In judicial elections, that does you in,” he said.

University of Montana political science professor Jim Lopach said he was surprised by the election results.

Name didn't help

“It’s amazing that Sheehy didn’t win with name recognition he had," Lopach said, adding that McKinnon came across as the "more conservative" candidate.

One fact that is known about the Montana Growth Network is the name of its founder and treasurer — Republican state Sen. Jason Priest, who donated the legal maximum of $620 to McKinnon’s campaign.

McKinnon declined to be interviewed for this story. Priest told the Center for Public Integrity that Best and Sheehy “disqualified themselves” during the race.

“The voters made their own decision based on the information they had,” Priest said. “We told voters that you’re better off with a nonpartisan court.”

Priest said the Montana Growth Network didn’t report the spending to the state because it was “issue advocacy,” which is not required to be disclosed.

In the months since the election, the Montana Growth Network has continued to produce issue advertisements, including mailers that encouraged Montana lawmakers to reject the expansion of Medicaid coverage called for under the health care reform law signed by President Barack Obama.

Jim Murry, the Montana Political Practices Commissioner until he resigned earlier this year, told the Center for Public Integrity that “voters should be angry and upset” about the lack of transparency at the state level regarding political ads.

In the wake of the U.S. Supreme Court’s Citizens United v. Federal Election Commission decision in 2010, which lifted a ban on corporate spending on political ads that call for the election or defeat of federal candidates, many lawmakers have attempted to update regulations at the state level.

During its most recent legislative session, a bipartisan group of Montana lawmakers pushed for new campaign finance rules that would have required disclosure of “electioneering communications” — defined as ads run within 90 days of an election that show or mention candidates without explicitly advocating for their election or defeat.

The Montana state Senate passed the bill in March on a 29-21 vote, but it died in committee in the Montana House of Representatives. A motion in April to bring it to the House floor without committee approval received majority support but fell six votes short of the three-fifths required.

Secret spending in judicial elections concerns Adam Skaggs, senior counsel at the New York-based Brennan Center for Justice, which advocates for fair and impartial courts.

“There are real concerns that judges will be partial to the individuals or the interest groups that are responsible for putting them on the bench,” he said. “The power of the judiciary depends on its reputation.”

For more information about money in state politics, visit the National Institute on Money in State Politics online at www.followthemoney.org.

IRS nonprofit division overloaded, understaffed

2013-05-30T15:30:50-04:00

Amid withering accusations the Internal Revenue Service targeted tea party and other conservative groups with enhanced scrutiny, the agency faces another problem: it’s drowning in paperwork.

The IRS’ Exempt Organizations Division, which finds itself at the scandal’s epicenter, processed significantly more tax exemption applications in fiscal year 2012 by so-called 501(c)(4) “social welfare” organizations — 2,774 — than it has since at least the late 1990s, according to an analysis of IRS records by the Center for Public Integrity.

Compare that to 1,777 applications in 2011 and 1,741 in 2010, federal records show. Not since 2002, when officials processed 2,402 applications, have so many been received.

Meanwhile, Exempt Organizations Division staffing slid from 910 employees during fiscal year 2009 to 876 during fiscal year 2012, agency personnel documents indicate.

In 2010, IRS officials projected exempt division staffing at 942 employees. But IRS officials cut the number to 900 after the agency began slashing its budget in response to fiscal woes affecting most corners of the federal government.

The agency said this weekend that a heavy workload prompted bureaucrats to “centralize” the “influx of advocacy applications” and, in the name of efficiency, scrutinize groups that contained more common phrases such as “tea party” in them.

“That was wrong, that was absolutely incorrect, insensitive and inappropriate — that’s not how we go about selecting cases for further review,” Lois Lerner, IRS exempt organizations director, said Friday. “We don’t select for review because they have a particular name.”

Lerner, who denied the targeting was politically motivated, added that about 75 groups with words such as “tea party” or “patriot” received extra scrutiny but none had its tax-exempt status revoked.

The IRS could not be reached for comment Monday.

(Also read: IRS employees back Obama, Democrats)

For Washington, D.C.,-based attorney Dan Backer, who represents two tea party-affiliated organizations, blaming such actions on staffing cuts and increased workload is a “lame excuse” that the IRS should stop using.

“They could have hired new employees, they could have reallocated employees, they could have done a lot of things, the not doing of which doesn't suddenly make it OK for them to engage in viewpoint discrimination,” said Backer, who said he is considering suing the IRS. “At worst, their staffing woes maybe justifies a growing backlog, not discriminating against those whose viewpoints they disagree with.”

IRS records show that applications of the most common nonprofit organizations — 501(c)(3) educational nonprofits, private foundations, charities and the like — have dropped this decade after reaching a high of more than 85,000 in fiscal 2007. Generally, this type of nonprofit entity must remain apolitical.

As for 501(c)(4) nonprofit organizations, such as the tea party groups in question, they may engage in politics so long as it isn’t their primary purpose.

During the 2012 election cycle, however, numerous 501(c)(4) organizations — most of them conservative, a few left-leaning and all endowed with new spending powers thanks to the Supreme Court’s 2010 Citizens United v. Federal Election Commission decision — together spent tens of millions of dollars overtly advocating for or against political candidates.

And unlike super PACs, which may also raise and spend unlimited amounts of money, they’re not required to reveal their donors

Democrats primarily cried foul, accusing groups such as the Karl Rove-backed Crossroads GPS and Koch brothers-supported Americans for Prosperity of violating their tax-exempt status.

But the IRS has taken no definitive action against these or other nonprofit groups, and several campaign finance reform advocates have opined that this latest incident will further stymie their effort to convince the IRS to crack down on nonprofit groups they consider overridingly political.

As for tea party-named nonprofit groups, for all the attention now on them, they generally played bit roles during the 2012 election.

Of the more than 40 organizations that identified themselves as tea party-related in IRS documents, just one — the National Tea Party Group of California — reported assets of more than $100,000 in its most recent publicly available financial filing.

For now, Republicans and Democrats in Congress have called on the Obama administration to investigate the matter, and Obama himself described the IRS’ conduct as “outrageous.”

The Treasury Inspector General for Tax Administration is expected to release a full report on the matter later this week, and officials in the House and Senate are promising hearings.

Karen Gries, an appointee to the IRS Advisory Committee on Tax Exempt and Government Entities, says she expects her committee will discuss the matter when it meets later this year.

In the meantime, Gries praised the overall performance of Lerner, the exempt organizations director, while expressing concern about her department’s ability to do its job.

“They are asked to do more with less resources,” said Gries, a principal at with accounting firm CliftonLarsonAllen LLP. “The EO group operates very lean.”