Archive for the ‘Money & Democracy Update’ Category

Earlier this month, The Guardian published an investigation into the network of politicians, donors, and groups that raised tens of millions of dollars to defend Wisconsin Governor Scott Walker and several Wisconsin state senators who faced recall elections in 2011 and 2012. They also looked at conservative Wisconsin Supreme Court Justice David Prosser, Jr., who was up for re-election in 2011.

american_corporate_flagIt is estimated that an astounding $137 million was spent on the recall races, with millions more spent on the Supreme Court race. The Guardian exposé, based on over 1500 pages of leaked emails and other documents, gives us a bird’s eye view into the dirty business of raising boatloads of cash from corporate special interests and the very rich.

This trove of leaked documents is particularly important because Wisconsin law does not require the disclosure of monies spent on “issue advocacy” ads that praise or criticize a candidate without explicitly calling on voters to vote for or against the candidate. Many groups, including the U.S. Chamber of Commerce, ran “issue advocacy” ads in these races, and therefore their names do not appear in publicly available databases of elections spending in Wisconsin. The leaked documents offer the public a chance to peak behind the legal curtain that shields deep-pocketed special interest groups from having to disclose their electioneering activities.

ChamberWatch wanted to learn more about the role played by the Chamber in financing the deluge of ads that dominated the airwaves in the months leading up to these elections. So we reviewed the 1500 pages of leaked documents that The Guardian made available online.

We found that the U.S. Chamber of Commerce as well as the Wisconsin state chamber, Wisconsin Manufacturers & Commerce, played major roles as outside spenders in these races, particularly in the Supreme Court race.

Tellingly, when Walker’s chief fundraising consultant laid out an initial blueprint for funding his recall election, she listed the Chamber’s Institute for Legal Reform as a major potential donor along with the Koch brothers, Sheldon Adelson, major corporations, and CEOs of major corporations, among others.

The primary evidence that the Chamber spent money on behalf of Walker comes from an email sent by Chamber head of communications Tom Collamore to one of Walker’s campaign consultants. The email includes a Wall Street Journal article about a $2 million ad buy by the Wisconsin state chamber promoting Walker. (The total spent by the state chamber on the recall elections was at least $4.7 million). The consultant then forwards the email, writing “Tom is a good friend…we have had many conversations about Scott…they know the significance of this race and that is why they are so supportive…and will continue to be so.”

Unfortunately, none of the leaked documents indicate exactly how much money the Chamber spent on the governor’s race. However, we know that a PAC associated with the Republican Governors Association was one of the largest outside spenders in the governor’s race. We also know that the Chamber gave $1.25 million in 2012 to the RGA, making it the sixth largest donor to the group. Of course, we don’t know how much if any of this money was spent in Wisconsin.

The evidence of Chamber elections spending is even more clear cut with respect to the Supreme Court election. One of Walker’s top advisors writes that he assumes the Chamber is in for a minimum of $1.1 million for the Supreme Court race. A subsequent email from the same advisor mentions a Chamber ad buy of $1.5 million for the Supreme Court race. Judging by estimates of total spending it is a safe bet that the Chamber was one of the largest if not the largest spender on the Supreme Court race.

The leaked documents also reveal that at the same time the U.S. Chamber and Wisconsin state chamber were showering Walker and Prosser with money, the state chamber was also providing corporations including Altria, Walmart, Kimberly-Clark, Xcel Energy and AT&T access to Walker as well as lobbying him on unemployment insurance and workers compensation.

And therein lies the reason why the Chamber and the large corporations it represents were “so supportive” of Walker and Prosser and why they spent so much money bolstering their reelection campaigns. Walker and his conservative allies in the state legislature were receptive to lobbying by Big Business pushing an anti-worker agenda. They had just passed a major bill eviscerating worker rights and protections. And Prosser could be counted on to protect this legislation from any legal challenges. Without Walker, without a conservative majority in the state legislature, or without Prosser, not only would it have been possible to undo the damage done by this legislation, but Big Business would no longer have the opportunity to get additional items on its anti-worker wish list enacted into law and upheld by the courts.

The leaked Wisconsin documents paint a picture of a political system almost entirely reliant on—and beholden to—big money corporate donors. And the U.S. Chamber and its affiliates stand at the nexus of this unholy alliance between Big Business and the political class. Perhaps it’s time to admit the obvious: our democracy is now a corporatocracy.

IRS Commissioner John Koskinen’s appearance in front of the House Judiciary Committee on Wednesday was a missed opportunity to advance an important discussion about nonprofit governance. Members of the committee from both parties chose to create a political spectacle rather than talk about real solutions for problems with the definition of political activity for tax-exempt organizations.

Republicans proceeded as though the hearing was a genuine impeachment hearing, while denying Commissioner Koskinen any kind of due process –including the rights to have counsel present and to call and cross-examine witnesses.

John Koskinen

IRS Commissioner John Koskinen, courtesy of Brookings Institution/Flickr

On the other side of the aisle, many Democrats chose to question the Commissioner about Donald Trump’s unreleased tax returns and the Donald J. Trump Foundation’s alleged self-dealing. Some Democrats did defend the Commissioner and labeled the proceeding a “sham” and a “farce.”  Even though Koskinen made it evident early in the hearing that he could not comment on particular taxpayer situations, a number of Democrats asked again and again about thinly veiled hypotheticals relating to Trump’s tax situation.

It is understandable that Democrats would not ask Koskinen questions related to the impeachment attempt by the House Freedom Caucus, given that the impeachment is doomed to fail and is merely designed to make headlines. Democrats could have used the opportunity to show the American public that they are serious about creating clearer rules for tax-exempt organizations rather than respond to a political attack with a political attack of their own.

In fact, members of both parties could have used this as a chance to confront the dysfunction and disunity that has plagued Congress. Instead of asking the Commissioner questions he has already answered and accusing the Commissioner of nefarious acts of which the Treasury Department’s independent Inspector General and the Department of Justice have cleared him, members should have asked substantive questions on topics that can move the government forward.

For example, members of the committee could have used the opportunity to ask Koskinen about the negative effects that the current vague rules have on nonprofits – especially 501(c)(3) organizations. They could have asked about the effects of the Congressional prohibition on the IRS’s ability to engage in rulemaking activities for 501(c)(4)s. Or, they could have asked about how to improve the current tax regime for non-profit organizations moving forward.

Without clearer rules to define political activity, risk averse 501(c)(3)s will be forced to refrain from civic activities that should be permissible because they do not want to jeopardize their tax-exempt status. In addition, bad rules cloud the waters when it comes to responding to an attack on an organization’s core mission. When someone close to a political candidate compares refugees to skittles, how can a refugee-focused 501(c)(3) respond without violating the (c)(3) ban on political activity? There are nonpartisan ways to respond, but because the rules are so unclear, most would choose to remain silent rather than take any risk they could accidentally stray over the line.

The time has come to stop using the IRS to further partisan political goals and instead acknowledge the important nonpartisan role it plays in governing tax-exempt organizations and the critical responsibility it has in maintaining American democracy.

Last week, the Consumer Financial Protection Bureau (CFPB) fined Wells Fargo $185 million for the astounding abuse of opening more than two million unauthorized deposit and credit card accounts.

Now, Senate Majority Leader Mitch McConnell (R-Ky.) is employing a rarely used procedure to force a rushed vote on a bill to defang the CFPB.

Ok, now here’s a quiz. Can you guess which member of Congress with his wife holds more Wells Fargo stock than any other, at least according to the most recently available financial disclosure forms?

You guessed right! Mitch McConnell.

Let’s walk this through in more detail.

On Friday, the CFPB announced $185 million in fines and penalties against Wells Fargo for the jaw-dropping, illegal practice of opening deposit and credit card accounts for consumers who did not request them and did not know they existed. Not just a few such accounts — 2 million of them. According to Wells Fargo, more than 5,000 employees were involved in setting up the sham accounts.

One hundred million of that total penalty was imposed by the CFPB; $35 million goes to the Office of the Comptroller of the Currency, and $50 million to Los Angeles. The $100 million fine is the largest ever imposed by the CFPB.

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Enter Mitch McConnell.

This week, he announced plans to rush to the Senate floor S. 3318, “A bill to amend the Consumer Financial Protection Act of 2010 to subject the Bureau of Consumer Financial Protection to the regular appropriations process, and for other purposes,” introduced by Georgia Republican Senator David Perdue.

You might be curious to read the bill.

Too bad.

It was just introduced on Monday, and the text does not yet appear oncongress.gov, the website where proposed bills are posted.

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But the title tells you what you need to know. When the CFPB was created, Congress gave it budget autonomy — it is funded by transfers from the Federal Reserve system, and its budget is set at 12 percent of Federal Reserve operating expenses. The CFPB creators built in this feature because they knew that otherwise the Big Banks could destroy the consumer bureau by stripping its funding. This isn’t unique among banking regulators — the Fed, the OCC, the FDIC and others all share this autonomy, as it has long been recognized that our cops on the financial beat should not be subject to appropriations while policing Wall Street. Since then, the Big Banks have lobbied hard to subject the CFPB to congressional appropriations, almost explicitly for the purpose of slashing its funding and stopping it from doing its job.

S. 3318 is not following the traditional pathway to the floor of the Senate. It has not yet been debated and voted on in committee. Instead, using a special procedure, Majority Leader McConnell is taking it straight the Senate floor.

Which raises the question: Senator, what’s the rush?

Well, it just may be that Mitch McConnell brings a special passion to the issue, in the wake of the CFPB penalty on Wells Fargo.

In his 2015 financial disclosure form, McConnell reports between $1,000,001 and $5,000,000 in deferred compensation for his wife, Elaine Chao, from Wells Fargo. Chao, the former Secretary of Labor, serves on Wells Fargo’s board of directors.

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The bank paid her a not inconsiderable $291,027 in 2015 for her board service.

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Quite something, right?

We cannot assume that McConnell is acting just to punish the CFPB for imposing a modest fine on Wells Fargo for its systematic misdeeds.

It’s entirely possible — arguably more likely — that McConnell is acting to please his Wall Street paymasters, more than out of pique in response to the CFPB penalizing a megabank to which he’s unusually close.

It’s true that that can pass as a kind of ethics defense in Washington, D.C. (see theongoing case of Rep. Roger Williams, R-Texas, also an auto dealer, who is defending himself against charges of wrongdoing related to the introduction of an amendment to benefit auto dealers on the grounds that he was not trying to benefit himself but was instead doing a favor for a lobbyist for the National Automobile Dealers Association). But it doesn’t wash among Americans uncontaminated by Washington corruption.

It’s clear that Americans want transparency when it comes to how companies spend in politics.

Courtesy Flickr/Almond Butterscotch.

Courtesy Flickr/Almond Butterscotch.

The next administration and the U.S. Securities and Exchange Commission (SEC) must address secret corporate political spending because it poses a great threat to democracy and investor confidence, says a new report by Public Citizen. The report, highlighting the historic campaign for an SEC rule requiring publicly held corporations to disclose their political spending, comes in advance of a Sept. 20 event on the state of corporate disclosure and as Public Citizen and its partners in the Corporate Reform Coalition (CRC) review and plan ahead for a new administration and new SEC priorities.

The Sept. 20 event is organized by Public Citizen, the AFL-CIO, Americans for Financial Reform, Ceres the Financial Accountability & Corporate Transparency (FACT) Coalition, the International Corporate Accountability Roundtable (ICAR), Patriotic Millionaires and SIF: The Forum for Sustainable and Responsible Investment, and hosted by the Center for American Progress. It will explore the SEC’s recent “Disclosure Effectiveness” review, which is evaluating corporate disclosure requirements, and the role of environmental, social and governance disclosures in promoting a sustainable economy.

The report details how a five-year campaign has driven 1.2 million comments to the SEC in support of a disclosure rule – the most in the agency’s history. The campaign also has garnered more than 500 stories in local and national press, and brought together powerful champions on Capitol Hill who are working to ensure that an SEC rulemaking on disclosure is not obstructed by congressional Republicans’ insertion of a harmful policy rider into the appropriations process that would stop the SEC from finalizing the rule. In addition, another 20,000 comments supporting political spending disclosure have come into the agency as comments to its “Disclosure Effectiveness” review process and to the agency’s Regulation S-K concept release, which solicited comments on proposed changes to corporate financial statement requirements.

The campaign began in response to the disastrous 2010 U.S. Supreme Court decision in Citizens United v. FEC, which opened the floodgates for corporations to spend unlimited and undisclosed amounts to influence American politics. In 2011, a bipartisan committee of leading corporate and securities law professors filed the first petition requesting a rulemaking at the SEC requiring all public companies to disclose their political expenditures. In response, the agency began a rulemaking, then halted it.

In this election cycle, secret outside spending is the highest it has ever been, clocking in at a whopping $660 million. Americans know that corporate influences lurk behind most campaign ads. Polls show they remain frustrated by the lack of transparency around corporate political spending.

Disclosure is material to investors as they consider the risk of their investment and important to the American voters who want to know who is bankrolling their elections. The SEC needs to take a stand and move forward with this rulemaking.

While the speeches of the Democratic and Republican conventions have been dominating traditional news and social media, behind all the pageantry a slew of special interests are pulling the strings.

Photo courtesy of IIP Photo Archive/Flickr under Attribution-NonCommercial 2.0 Generic license.

Photo courtesy of IIP Photo Archive/Flickr under Attribution-NonCommercial 2.0 Generic license.

The conventions are yet another moment to highlight what is becoming an increasingly more talked- about campaign issue: special interests’ influence in politics. This year’s conventions are expected to continue to shatter spending records. The Democratic National Convention is projected to cost $65 million and the Republican National Convention is expected to cost even more, with a price tag coming in around $71 million.

Since Congress repealed public financing of conventions in 2014, with the exception of $50 million provided by Congress for each convention’s security expenses, the rest of the money will come from special interests including corporations, unions, and lobbyists looking to gain favor with the politicians attending the conventions.

This special interest money enters the equation through “host committees,” which aren’t considered political entities and therefore do not need to disclose where their unlimited contributions come from. These undisclosed special interest dollars fund events and parties surrounding the conventions.

The presence of undisclosed special interest dollars at the conventions is problematic because it makes it impossible for the public to know whether the voices they hear at the conventions really represent the candidates or whether they represent the interests of those funding the events.

The public is becoming increasingly frustrated with a system that is rigged in favor of the super wealthy and special interests, and the conventions are another moment to draw attention to the corporate money flooding into the American political process. Polls show that two-thirds of Americans are dissatisfied with the outsized influence of corporations in America and 88% of Democratic and Republican primary voters think that the U.S. Securities and Exchange Commission should require public corporations to disclose their political spending.

Facing increased frustration, some may wonder how they can participate in changing the system. One unexpected way is through their retirement investments. Americans who invest their retirement savings with major mutual fund companies are ultimately empowering major corporations who meddle in politics.

Let’s break down how this happens.

When you contribute money to your retirement account with Vanguard, for example, Vanguard then takes your money and invests it in major corporations on the stock market. Those major corporations then turn around and spend money influencing elections and policy implementation. This spending is not required to be disclosed to the general public or the corporations’ shareholders.

Shareholders at major corporations have been asking the corporations to disclose their political spending for years. Unfortunately, those shareholder proposals rarely receive majority support because the biggest mutual fund companies, like Vanguard, can own 5 percent or more of these corporations and they tend to vote against increased transparency.

Five percent may not sound like a lot, but in actuality it translates to significant voting power in corporate elections where the fates of shareholder proposals on transparency are decided. Here’s where the average American saving for retirement comes in. Americans who invest their retirement savings with major mutual fund companies like Vanguard or BlackRock should tell the companies to support political spending disclosure at the corporations where their retirement dollars are invested.

The conventions are another instance where undisclosed political contributions are running rampant and Americans don’t know whose voices they are really hearing. Until the U.S. Securities and Exchange Commission issues a rule requiring all public companies to disclose political spending, mutual fund companies can and should represent the 401Ks and other investment accounts entrusted to them, and play a pivotal role in supporting disclosure. In turn, Americans who trust major mutual fund companies with their retirement savings should tell the companies to support disclosure whenever it comes up. Transparency is good for investors and good for our democracy.

Rachel Curley is the Democracy Associate at Public Citizen’s Congress Watch. Follow more of her work at Corporate Reform Coalition

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