Hired hands grab chance to skirt '527' disclosure law

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Complying with a new federal law, Political Animals registered with the Internal Revenue Service by the August 1 deadline.

Like other so-called “527” groups, so named after a section of the IRS code, Political Animals could operate politically related campaigns without disclosing its identity, contributions or expenditures.

Congress targeted such groups in July campaign finance legislation because special interests used the 527 tax status to run political ads with complete anonymity. The law was intended to shed light on who was behind these groups and where the funding came from.

But the law isn’t producing exactly the kind of disclosure the sponsoring lawmakers, such as Senator John McCain, R-Ariz., intended. And until provisions of Section 527 are clarified – by Congress, the IRS, or the courts – it will remain unclear whether some of these tactics skirt the law or simply flout it.

A Public i examination of the first filings with the IRS, including that of Political Animals, has found several ways that 527 groups have circumvented the intent of the disclosure law by providing incorrect or misleading information on the required IRS form or by using the services of a “political treasurer.”

Kinde Durkee is a California political treasurer who is listed as the custodian of record, treasurer or contact person for Political Animals and 104 other groups – all of them Democratic, many of them minority group- or candidate-based, some of them single-issue groups. She manages such organizations as Coalition for a Democratic Majority, the California Lexington Group and Hispanic Unity USA, the organization involved in a Playboy Mansion fund-raising flap. Democratic Party officials publicly threatened Representative Loretta Sanchez, D-Calif., with retribution if she held her fund-raiser at the mansion during the Democratic National Convention. She later moved it and collected $500,000 for Hispanic Unity USA.

“My job is to manage the books and financial records, keep on top of state, local and federal regulations for groups and register my clients at all appropriate levels,” Durkee told the Center. Durkee has a staff of five.

Durkee has been in the accounting business since 1972 and can rattle off the causes championed by these innocuous sounding organizations (for instance, Political Animals is an animal rights group). The IRS requires that 527 groups list all their officers and directors, but Durkee is the sole contact reported for almost all 105 groups she filed for with the IRS; the buck stops with her. Durkee told the Center she isn’t required to give any further information.

David Gould, also a political treasurer in California, who manages more than 250 political committees around the country with 12 full-time employees, told the Center that if the intent of the law was disclosure, Congress missed the mark.

“Some of the groups I represent don’t want their information public, and so I won’t disclose the goals or the people behind the groups, and I don’t have to,” Gould said. “Just because I know who is behind a group doesn’t mean that anyone else will ever know.” Gould and associates of his company manage such groups as the Black Leadership PAC, New Political Agenda, Californians in Action and the Coalition for Kids.

“It really depends on the nature of the PAC, whether or not I can give any further information. The only requirement is that there is a treasurer. I’m the treasurer for hundreds of committees but it isn’t public as to who is involved with the group,” Gould said.

Such groups as Organizing Public Awareness Coalition or Los Angeles List or Safe and Healthy Communities disclose themselves to the IRS, but the information reported doesn’t shed much light on their activities, agenda or directors.

Scope of law possibly tightened

The law was designed to track the leaders and activities of secretive organizations that are trying to influence elections, but it has been criticized for requiring filings from thousands of state candidate, party and interest groups that already disclose at the state level.

Two separate bills were presented in the House in September to address this criticism. On September 22, Representative David Vitter, R-La., proposed H.R. 5265, which would create an exception for state candidate and party committees that already file at the state level and whose filings are public. Three days later, Representative Lloyd Doggett, D-Texas, a sponsor of 527 legislation over the summer, proposed similar exceptions via his H.R. 5277, which would also amend reporting rules and penalties for compliance failure.

“I understand the point of the law,” Durkee said. “This law was passed because something happened — there was a problem and they need to corral all the information. I don’t see how they can tailor the law to go after certain committees and not others, so of course they are going to catch a few organizations they aren’t interested in looking at. In my field there is a lot of duplicative paper work, I’m just used to it.”

Clarification by the IRS

It is uncertain whether Congress will pass one of these clarification laws to do away with some duplicative 527 reporting. An IRS official who spoke to the Center under the condition that the official not be identified, said that the law does not define “contact” or “custodian of records,” nor does it require that the contact person have direct affiliation with an organization. The law also does not limit the number of groups that a person may represent.

The next Congress would have to revisit the issue to specify the role of the political treasurer, but for now, these groups and their political treasurers appear to be in the clear. “If my clients don’t want anyone to know they are involved in a committee, it is simple to get around the rules. We just make up a name, like Committee for a Better America, file the 527 papers and we’re in business. The way the law was constructed was pretty haphazard and doesn’t force any more disclosure,” Gould said.

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