By: Kenneth P. Vogel
October 5, 2010 02:39 PM EDT
A massive $4.2 million ad buy announced Tuesday by American Crossroads and Crossroads GPS erases any doubts that the groups, conceived by veteran GOP operatives Karl Rove and Ed Gillespie, have the cash to be major players in next month’s election.
And with nearly 75 percent of the buy paid for by undisclosed donors, the expenditure highlights a trend that has shaped the midterm campaigns and could have far-reaching consequences in American politics: the shift to anonymous political activity.
The combined media buy targets hotly contested Senate races in eight states — Colorado, Florida, Illinois, Kentucky, Missouri, Nevada, Pennsylvania and Washington — where either the Democratic incumbent is viewed as vulnerable or there is an open seat considered attainable for Republicans.
The buy brings the total ad spending of Crossroads groups, which were formed this year to counter what had been a major advantage for Democrats in political infrastructure outside the official party groups, to about $18 million. And with a month to go until the critical midterm elections, the groups appear to have the cash in the bank to continue spending heavily right through Election Day.
Their emergence places them at the leading edge of a significant shift in American campaign finance.
“What we see this election cycle are large pots of money getting bigger as organizations offer to accept the money and use an entity that will allow the donor not to own up to their political activity,” said Gerry Hebert, president of the Campaign Legal Center, a nonprofit that pushes to limit the role of money in politics.
Hebert’s group, along with another nonprofit, Democracy21, asked the Internal Revenue Service on Tuesday to investigate whether Crossroads Grassroots Policy Strategies (Crossroads GPS, for short) is abusing its tax-exempt status to influence elections while “allow[ing] its donors to evade the public disclosure requirements.”
The letter is part of a growing drumbeat by advocates for stricter campaign finance rules — echoed by Democrats, who have struggled to match the spending by GOP-allied outside groups — to compel the IRS and the Federal Election Commission to tamp down the explosion of political spending, primarily by Republican-allied outside groups, including Crossroads GPS, that are registered under Section 501(c)(4) of the tax code.
That section allows so-called social welfare nonprofit organizations to keep their donors’ identities secret but requires the groups to limit their campaign-related activity to less than half of their total spending.
Last week, Sen. Max Baucus (D-Mont.) sent a letter to the IRS suggesting that Crossroads GPS and two other GOP-leaning 501(c)(4) groups with links to GPS — American Action Network and Americans for Job Security — might be violating the requirements of their tax-exempt status.
Jonathan Collegio, a spokesman for the Crossroads groups, dismissed the Campaign Legal Center complaint as politically motivated and, at the same time, took a shot at longtime campaign finance activist Fred Wertheimer, whose Democracy 21 nonprofit group co-signed the center’s letter.
“This is a baseless complaint, filed by a partisan group that fundraises off of the baseless complaints they file,” Collegio said. “Crossroads GPS carefully and cautiously follows all laws governing 501(c)(4) organizations. Meanwhile, liberal groups spent more than $400 million in undisclosed campaign money in 2008 alone, with nary a peep of protest from liberal lobbyist Fred Wertheimer.”
Liberals have also recently raised questions about other right-leaning groups that don’t disclose their donors, with the White House-allied Think Progress blog on Tuesday morningaccusing the U.S. Chamber of Commerce, which is registered under Section 501(c)(6) of the tax code, of skirting campaign finance laws by using foreign money to bankroll campaign attack ads.
The blog asserted that foreign corporations have paid the Chamber at least $300,000 in annual dues to its general fund, which it uses to pay for political ads — a charge the Chamber denied.
Of the $4.2 million in ads announced Tuesday by the two Crossroads groups, $3,125,000, or nearly 75 percent, was placed by Crossroads GPS, while the remaining $1,120,000 was placed by American Crossroads, which was founded earlier and, because it is registered under Section 527 of the tax code, reports its donors to the Federal Election Commission on a monthly basis.
American Crossroads was incorporated in March at the urging of Rove and Gillespie to offset what had been a major advantage for Democrats in political infrastructure outside the official party groups. The group predicted it would raise a whopping $52 million to boost Republicans, partly by taking advantage of both rising energy among wealthy donors and a January Supreme Court decision that gave added flexibility for corporate-funded ads. And it also benefited from big donors’ dissatisfaction with the leadership of the Republican National Committee, which has seen a drop in maximum donations.
At the time of its formation, its allies highlighted its disclosure requirements as a strength.
“We decided to be forward leaning on disclosure because that’s going to be one of the hot-button issues over the next several months, so we just decided to take it off the table,” someone involved in the groups told POLITICO. “In some ways, it makes us a very safe place to play, because questions about transparency and disclosure are settled on the front end,” added the person, who did not want to be identified discussing internal deliberations.
But the group initially struggled to raise money, and its leaders in May spun off Crossroads GPS, acknowledging that the privacy it provided donors would help it raise big money.
“I wouldn’t want to discount the value of confidentiality to some donors,” the groups’ president, Steven Law, told POLITICO. But, he added, “the genesis of it from our perspective was that there are a number of things that are priorities for us that seemed to fit more into a 501(c)(4) than a 527, such as doing very legislatively focused issue advocacy activity, which we will be undertaking in the next few months.”
After the formation of the 501(c)(4) group, fundraising — buoyed by anonymous donations —took off. Collegio said the groups had raised a combined $32.5 million through late September.
It’s difficult to decipher the fundraising division between the two groups, though, because Crossroads GPS doesn’t regularly report summary fundraising and spending numbers — and won’t be required to do so until months after Election Day and possibly as late as November 2011.
Records on file with the FEC to date reflect more activity by American Crossroads, the 527 group, which, through Sunday, had spent $6.6 million on ads. The records show $4.9 million spent by Crossroads GPS.
That doesn’t include all the groups’ spending before Tuesday’s announcement — which the FEC pegged at $14 million — because prior to September, Crossroads GPS would not have been required to report ads that attacked Democratic candidates or boosted their GOP rivals based on issue positions but didn’t urge a vote for or against a candidate. That’s because of a regulation that requires reporting of so-called issue ads only when they fall within 30 days of a primary election or 60 days of a general election.
An example of such an issue ad — which Crossroads defenders quite likely would contend does not count as political activity under the tax code — would be the one the group announced Tuesday attacking Colorado Democratic Sen. Michael Bennet, who’s in a tough race against Republican Ken Buck.
The ad — which neither mentions Buck’s name nor expressly urges a vote against Bennet — blasts Bennet for “gambl[ing] with our teachers’ retirements.” It charges that as Denver school superintendent, Bennet pushed the school board into a risky and ultimately unsuccessful deal with Wall Street bankers. “Now, Bennet has accepted contributions from the same Wall Street bankers who cost our schools. Michael Bennet should work for us — not Wall Street,” it says.
Though similar issue ads have long been aired by 501(c)(4) groups to send viewers a none-too-subtle signal about how to vote without expressly advocating for or against a candidate, this year marks the first election cycle in which 501(c)(4)’s have also ventured so brazenly into more explicit express advocacy.
Operatives and donors alike say the new aggressiveness, particularly on the right, is due largely to the signal sent by the Supreme Court’s ruling in January in Citizens United v. Federal Election Commission.
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