Archive for the ‘Money & Democracy Update’ Category

Despite an unusual presidential race, the 2016 election proved to continue the trend since the Supreme Court’s 2010 Citizens United decision of dramatically increased campaign spending. Particularly, spending from outside organizations like super PACs and “dark money” nonprofit organizations like 501(c)(4) social welfare organizations and trade associations hit an all- time high. Citizens United and subsequent decisions ended the long-standing $5,000 limit on donations to PACs that make independent expenditures, thus earning them the new name of “super PACs.” These court decisions also allow electioneering nonprofit organizations to receive unlimited donations, and since nonprofits need not disclose their donors, they provide new avenues for corporations to funnel secret money into our elections and skirt the responsibility to their investors and the public for how they choose to spend in politics.

Even though president-elect Trump disdained normal fundraising strategies and received unprecedented free media coverage, it would be incorrect to say that corporate influence and outside spending did not have a big presence in the 2016 cycle. Each of the major presidential candidates established their own super PACs so that once donors maxed out to the candidate campaigns, they could continue making unlimited donations in support of the campaigns to their super PACs. Spending by these outside groups reached record levels and heavily contributed to the most expensive election in American history. What is even more worrisome is the fact that almost half of this unprecedented spending by super PACs came from just 50 families – the very wealthiest of America’s elite class.

Key points about outside spending in 2016

This was the most expensive election in history.  Early estimates identify that a whopping $6.9 billion was spent in the 2016 federal election cycle, making it the most expensive in history. Despite Donald Trump’s erratic fundraising strategy, big donors didn’t shy away from this election.

Outside spending hit a new record. Super PACs and 501(c) organizations not formally affiliated with any candidates hit new records of spending with a total of $1.4 billion in the 2016 cycle– up from $1 billion in 2012 and $338 million in 2008. “Dark money” groups, which are a subset of outside spenders comprised of political nonprofits that do not disclose their donors, spent just over $204 million in 2016. While “dark money” is a problem that should alarm every citizen, just as problematic is the level of coordination between candidates and super PACs. This coordination allows candidates to sidestep the $2,700 per election contribution limit. As soon as a wealthy donor maxes out to the campaign, he or she can simply turn to the candidate’s super PAC where no limits apply. Nearly half of all super PACs spend all their resources in support of one single candidate – the candidate responsible for setting up the super PAC.

Conservative groups continued to dominate outside spending. Conservative groups comprised 55% of the total outside spending in the 2016 election cycle compared to liberal groups’ 39%.

Outside spending groups spent heavily down ballot– with a lot of success. Outside spenders focused $595 million on Senate and House races. Three- fourths of this spending was targeted at races where Republicans were trying to hang onto their majority. The Pennsylvania Senate race was the most expensive race coming in at a total cost of more than $170 million, over $124 million of which came from outside spending. Outside groups outspent the candidates in many of these races, and in the end Republicans succeeded in maintaining their majority in both chambers.

Corporate influence flooded ballot initiative fights. Corporations spent over $335 million to protect their interests in ballot initiative campaigns in the states. Corporate interests won 62% of the fights where they focused their resources and outspent their opposition by an average of 33-to-1.

Corporations funneled untraceable funds through the Chamber of Commerce. In the 2016 election, the Chamber of Commerce spent the second-largest amount among groups not required to disclose their donors, second only to the NRA Institute for Legislative Action. Despite the Chamber’s claims to represent all businesses, in actuality the source of the majority its political spending comes from Big Business and very deep-pocketed corporate interests. This suggests that the over $29 million the Chamber spent on elections in 2016 was not focused on looking out for the average American business.

The 2016 election continued the trend of secret corporate influence taking advantage of lose regulations and unlimited spending capabilities to protect Big Business interests. It is more important than ever that Congress and the incoming administration not hamper the SEC from requiring publicly-traded companies to disclose their political spending. The inappropriate budget rider forbidding the SEC from finalizing this rulemaking should be removed in order to hold companies accountable to their shareholders and to the American people. Additionally, before leaving, the Obama administration should issue an executive order requiring all government contractors to disclose their political spending.

This week, the Corporate Reform Coalition released a video interview with Vanguard Group’s founder, John C. “Jack” Bogle, about his vision in 1975 to set up a different kind of mutual fund company and how he thinks companies should best serve their shareholders.

Watch Vanguard’s founder Jack Bogle talk about a shareholders right to information like a company’s political spending.

Bogle, who founded Vanguard over 40 years ago based on a novel principle at the time- that a mutual fund company should be owned by the shareholders of its funds and not just by management- remains committed to that vision today. He fosters that commitment by speaking out on broader investor issues, for example, corporate political spending disclosure.

Bogle has submitted public comment to the U.S. Securities and Exchange Commission (SEC) on the securities law professor’s petition calling for the SEC to put forth a rulemaking that would require publicly- held companies to disclose how they spend money in politics. When asked why he commented on the petition Bogle replied, “It’s the shareholder’s right to know what we are all doing,” referring to corporate activities.

bogle-shareholder-right2-twitterBogle’s remarks come at a significant time. Investor advocates are reaching a tipping point in their push for the SEC to issue a rule requiring companies to disclose how they spend money in politics.

As of October 21, outside spending in the 2016 election alone has totaled over $1 billion, much of which is coming from dark money groups that do not have to disclose their donors. This makes it impossible to track secret corporate influence. American know that more dark money in our politics is not good for the health of our democracy, but when faced with adversaries such as giant corporations it’s hard to see an easy way to make change.

One way to combat secret corporate influence is to bring it into the light, which this disclosure rulemaking would do. Unfortunately, the SEC has been dragging its feet on the rulemaking and Congressional Republicans have helped the stagnation by inserting an inappropriate policy rider into the federal budget forbidding the SEC from finalizing (though not from working on) the rule.

For the last decade, investors have been filing shareholder resolutions at individual companies and seeing promising responses from many who are interested in increasing their transparency. Without a uniform rulemaking, though, others are allowed to continue to keep shareholders and the public in the dark about how they spend in politics. Even those who do disclose may not do it the same way as other corporations, making it hard for investors to actually use the information to make corporate comparisons.

How do mutual funds fit into this picture? The major ones, like Vanguard and BlackRock, have incredible power in corporate elections; power accumulated from the millions of retirement savings accounts they manage. With the volume of shares they control, the major mutual funds can and should support shareholder resolutions calling for political spending disclosure. Instead, Vanguard, specifically, either votes against or abstains from voting for these resolutions at the companies where its clients’ savings are invested. The weight of the major mutual fund vote means that many times resolutions fail to get majority support without it.

All shareholders, whether the traditional kind or those who own shares through their mutual fund investments, “are entitled to the information they want, they’re owners,” says Bogle in the interview. Therefore, if shareholders are calling for information about how companies spend money in politics so that they can weigh the reputational risk of this activity, companies should listen and increase their transparency.

The gravity Jack Bogle continues to hold within the investment community is immense, and we should heed his words about shareholder rights. The SEC should make strides on the political spending disclosure rule and Congress should not stand in its way. Until the rule is finalized, though, mutual funds should not hamper the efforts of shareholders calling for disclosure at individual companies.

Bogle seems optimistic that the tide is turning in shareholders’ favor. “When shareholders aren’t served first the world will change,” he says. “And it is changing.”

Originally published on the Corporate Reform Coalition’s website.

By Eren Orellana, Congress Watch legal intern and Susan Harley, Congress Watch Deputy Director

Recently, consumer advocate and Public Citizen founder, Ralph Nader hosted Breaking Through Power, a four-day conference highlighting the different ways Americans can work together to organize change in a political system that has been overrun by wealthy corporate special interests. A longtime advocate for consumer rights, starting in the automobile industry, Nader dedicated the last day of the conference to speaking about the underutilization of the civil law system.

logo225Special topics included “The Need to Educate the Public on The Importance of Tort Law” and “Why Lawsuits are Good for America.” In a panel discussion titled “Plaintiffs for Justice” victims shared their stories and their road to advocacy. Laura Christian, an auto safety advocate, urged the need to create a system that regulates and provides notice of recalls to buyers and existing owners of used cars. Todd Anderson, a victims advocate, shared the personal story of his son’s death. Anderson’s son was killed in a car accident due to an automobile malfunction that he was not notified of in time to correct. Susan Vento, a mesothelioma advocate, spoke about the need to ban asbestos and the legal rights victims of mesothelioma have against corporate negligence. Overall, the panelists pushed the point that greater advocacy is needed to improve consumer protections and positively increase the utilization of the court system.

In the much-anticipated session “Litigating for Justice,” renowned trial lawyer, Thomas Girardi spoke about how corporations attempt to shame lawyers and how he has succeeded in trying his cases and breaking the stigma associated with personal injury suits. In 1970 Girardi became the first attorney to win a one million dollar award for a medical malpractice case. However, Girardi is best known for the part he played in the Pacific Gas & Electric case of the Hinkley groundwater contamination. In that case, residents of Hinkley brought a class-action suit against PG&E for claims of contamination of the town’s water supply due to a leak from PG&E’s gas compressing station. The leak apparently began as early as the 1950’s and the residents did not receive notice until 1987. The residents blamed incidents of cancer and other diseases on the contaminated water and in 1996 PG&E settled the suit and agreed to pay the town’s residents $333 million. This case was the inspiration for the film Erin Brockovich.

More recently, Girardi was on the team of lawyers who tried Bryan Stow’s case. Bryan Stow was the man brutally beaten after a baseball game at Dodger Stadium. Girardi reasoned that the Dodgers and the stadium’s personnel were partially to blame for the incident due to a lack of organized and effective security personnel, which was not suited to handle such large crowds. Girardi described his pride in the fact that after winning the verdict of Stow’s case, Dodger Stadium heightened security and started regulating the consumption of alcohol during games.

In addition to the important monetary compensation lawyers, like Girardi, earn for their clients in these cases, there is the societal benefit of trying these cases. Win or lose, civil law cases bring to light many of the ways corporations fail to protect consumers, sometimes even at the cost of death. These cases expose corporate lawbreakers and force them to better protect their customers. Utilizing the justice system to compensate victims has proven to be one of the best mechanisms to hold corporations accountable. Conferences like Breaking Through Power are doing a great service to society by bringing this very powerful tool to light. Even better, videos from the conference are available so you too can learn how to join the Breaking Through Power movement.

– Eren Orellana

 

Last week, Ralph Nader headlined a panel at the 2016 Freedom of Information Summit focused on dissecting the challenges facing the open government movement, but also celebrating the victories. At the top of the list of successes is the Freedom of Information Act (or FOIA,) which gives the public the right to access government records subject to nine limited exemptions. Recently having celebrated the 50th anniversary of FOIA’s passage, the panel on which Nader spoke was aptly entitled “FOIA at 50.”

Nader and the other panelists spoke about critical consumer protections that were achieved as a direct result of the public’s right-to-know as granted by FOIA. The panelists also addressed areas where the law continues to fall short, even after the open government community’s recent victory in securing passage of bipartisan FOIA reforms that were signed into law by President Barack Obama right before the law hit its 50 year mark.

It was especially moving to hear the other panelists speak so eloquently about the steadfast commitment that Public Citizen has to protecting FOIA. Notably, for most of the organization’s 45 year history, our litigation group has been a national leader in upholding the public’s right-to-know. Getting access to government records had uncovered threats to public health, safety, and the nation’s financial security. This law is an invaluable tool for holding the government accountable and ensuring it is acting in the public’s best interest.

Nader said it best during the panel: FOIA is the ultimate tool of democracy.

And Public Citizen will be there for the next 45 years protecting our right-to-know.

-Susan Harley

 

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.

© Copyright . All Rights Reserved.