Could Karl Rove's new 527 avoid disclosure requirements?

The law, lawyers, and the court.
April 6 2010 10:38 AM

Hushed Money

Could Karl Rove's new 527 avoid campaign-finance disclosure requirements?

Illustration by Mark Alan Stamaty. Click image to expand.

If you thought things have gotten bad with campaign financing since the Supreme Court turned on the corporate money spigot in the Citizens United case, you ain't seen nothing yet. Opponents of reasonable regulation have a new target: trying to keep the flow of campaign money secret. We may soon be going retro, back to the pre-Watergate era of secret campaign cash.

The Watergate scandal of the 1970s taught us a lot about secret campaign cash. Major corporations gave large sums to the Nixon campaign despite the prohibition on corporate giving to federal candidates. American Airlines was the first corporation to plead guilty to funneling $55,000 in illegal corporate cash, laundered through a Lebanese bank, to the 1972 Nixon re-election effort. Cash also arrived to the campaign in paper bags from millionaires.

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Watergate taught us too that secrecy allowed for all kinds of out-of-sight dirty tricks, such as breaking into offices of rivals, planting spies with opposition campaigns, and attempts at outright bribery of officials. The dairy industry offered $2 million to the Nixon campaign in exchange for the administration's support for higher milk subsidies. These were truly the "bad old days" of campaign financing.

Even after federal disclosure law was strengthened to minimize the chances that politicians could take unreported donations, secret cash persisted through loopholes allowing anonymous independent spending on campaigns. In the 2000 election, a previously unknown group called "Republicans for Clean Air" spent money in the New York presidential primary knocking John McCain's environmental record to support the candidacy of George W. Bush. It turned out that Republicans for Clean Air was none other than Sam and Charles Wyly, two Texas supporters of Bush.

McCain-Feingold closed the disclosure loophole that allowed the Wylys to spend secretly, and the Supreme Court in Citizens United recently affirmed the constitutionality of those disclosure rules as "a less restrictive alternative to more comprehensive regulations of speech." One would think that would end the matter: that the trade-off of Citizens United is unlimited corporate and union spending in federal elections that's at least fully and quickly reported to the public. Journalists and bloggers and advocacy groups can use the information to ferret out corruption, alert voters to who is supporting a candidate or ballot measure, and make sure other campaign-finance laws are being followed. Sunlight is the best disinfectant and all that.

But it turns out that the call for unlimited campaign spending is just the opening act for the campaign finance deregulationists. In Act II, now underway, they argue for anonymity in their independent election spending. (If they succeed, in Act III they'll argue for the right to give unlimited anonymous sums directly to candidates.) Citizens United is now claiming that it is a bona fide media organization entitled to the same exemption from disclosure that applies to news organizations like Slate or the Weekly Standard. Citizens United doesn't want to say who is paying for its campaign-oriented films, such as Hillary: The Movie, its offering in the last presidential primary season, aimed at proving that Hillary Clinton was a "European-style socialist." Citizens United want its donors to be able to hide behind the organization's innocuous-sounding name as it goes on the political attack.

Meanwhile, an anti-regulation PAC, Speechnow.org, is trying a similar tactic. Federal law bars political action committees from taking more than $5,000 from individuals to use in federal campaigns. The U.S. Court of Appeals for the D.C. Circuit recently struck down this $5,000 contribution limit, relying on and extending Citizens United. (Disclosure: I'm defending a similar San Diego contribution limit in the 9th Circuit.) But Speechnow.org lost in its bid to be exempt from the disclosure requirements that apply to PACs, and it is now considering taking the issue to the Supreme Court. Again, the argument is that certain donor information—in Speechnow.org's case, the identity of those paying for the PAC's administrative expenses—shouldn't be public.

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