October 18, 2012

Cash from Wisconsin rocked Pennsylvania governor’s race

Pennsylvania Gov. Tom Corbett. Image from state website

At a campaign stop near Philadelphia early in his 2010 bid for governor, Republican Tom Corbett announced, “We’ve got to raise money,” calling this his campaign’s “No. 1” priority. That same July day, a $1.5 million contribution arrived — from Wisconsin.

Officially, the donation was from the Wisconsin affiliate of a national political organization called the Republican Governors Association (RGA). But the $1.5 million could not travel directly from the RGA to Corbett. Pennsylvania law bans candidates from accepting corporate money, and the RGA accepts millions of dollars from some of the nation’s largest businesses.

In a single day, the $1.5 million gift traveled from the D.C.-based parent organization to the RGA Wisconsin PAC, then to the RGA Pennsylvania PAC and finally to Corbett’s campaign account.

By the time the donation reached Corbett, it was impossible to identify the original source of the cash or whether the donation was permissible under state law.

Barry Kauffman, executive director of Common Cause Pennsylvania, called this well-traveled donation a prime example of “an elaborate money-laundering scheme” used by the RGA with success in a number of races for governor in 2010. He added that it is legal.

The RGA’s funding played a central role in Corbett’s victory. By Election Day he had received a total of $6 million from the RGA — 21 percent of his total fundraising, making the RGA his campaign’s top donor, according to the National Institute on Money in State Politics.

Corbett’s campaign office did not return calls for comment for this story.

Corbett’s boosters crushed the competition from the D.C.-based Democratic Governors Association (DGA), which used similar maneuvers to raise $1.9 million for Corbett’s opponent, Dan Onorato.

RGA a major player

The RGA emerged as a major player in the 2010 election, and not just in Pennsylvania.

“We can’t wait until 2012 to start taking our country back,” said Haley Barbour, then governor of Mississippi and chairman of the RGA, in a promotional video released 12 weeks before the landmark 2010 election.

In that election, 37 governors’ seats were up for grabs. Republicans won 23 races to the Democrats’ 13, including the Pennsylvania race that landed Corbett in the Pennsylvania governor’s mansion. Republicans knocked Democrats from 10 seats, and clinched 29 governorships nationwide.

During this election, the RGA raised $87 million, more than the previous three years combined, a Center for Public Integrity review of data from the Center for Responsive Politics reveals.

“It’s hard not to look at the numbers coming out of the RGA and not marvel/quake at the
Mississippi governor’s fundraising capacity,” wrote The Washington Post’s Chris Cilizza on the eve of the 2010 vote.

The spending has continued this election season. The organization has kept money flowing by circuitous routes into several states, including North Carolina, Indiana and Wisconsin. Gubernatorial races are being fought in 11 states, eight of which currently have Democratic governors.

Through September, the RGA has spent $40 million of its $43 million haul — nearly doubling the amount raised by the DGA.

Life would be simpler for the RGA if it could make contributions to gubernatorial candidates directly from its D.C. bank account. But it receives tens of millions of dollars in contributions from corporations — and corporate contributions to candidates are banned in 21 states, including Pennsylvania.

The RGA maintains that its activity in 2010 was legal, thanks to its use of state-level PACs.

“The RGA worked with both Pennsylvania and Wisconsin campaign finance authorities in 2010 to ensure we were complying with the law,” wrote RGA spokesman Mike Schrimpf in an email, responding to questions posed by the Center.

Playing a shell game

In Pennsylvania, corporations cannot give to candidates, but individuals can make
unlimited contributions to both PACs and candidates.

The RGA Pennsylvania PAC, which retained the same D.C. address of its parent organization and listed the same treasurer, filed reports with the state itemizing contributions from individuals and not corporations.

Six-and seven-figure donations came to the state PAC from some of the RGA’s most loyal contributors, but only 3 percent of the PAC’s total fundraising came from inside the state. They included $1 million from hedge fund managers Paul Singer of New York, Steven Cohen of Connecticut and Ken Griffin and wife Anne from Chicago. Texas home builder Bob Perry gave $500,000.

Those donations alone comprise more than half of the $6 million that went from the RGA to Corbett.

The DGA Pennsylvania PAC also took contributions from a smaller stable of mostly out-of-state donors, including Texas trial lawyer and Democratic mega-donor Steven Mostyn, who gave $400,000. Mostyn did not return numerous calls for comment.

Though these large gifts are permissible under Pennsylvania law, the RGA and DGA confirm that its donors give to a general fund, not to any specific state. The D.C.-based organizations then make the call on whose money is counted toward which race.

The result is a listing of donors to Corbett and Onorato who were not aware their donations were attributed to a specific campaign.

“It is legal,” said Ron Ruman, spokesman for the Pennsylvania Department of State, “as long as the contribution that went to Pennsylvania was from an individual.”

Still, the practice calls into question the accuracy of the governors associations’ disclosure reports.

Billionaire hedge fund manager Singer, for example, has spent years, and millions of dollars, advocating for the right of same-sex couples to marry. He has a gay son who married in Massachusetts, and The New York Times reports he gave $425,000 to back New York’s gay marriage bill.

Corbett ran as a staunch opponent of gay marriage in the state and has maintained that stance in office.

A spokesman for Singer declined to comment.

A weird hole in the structure?

Like the national political parties, the RGA is a nonprofit political organization, regulated and tax-exempt under Internal Revenue Code Section 527. But because the RGA is focused on state, not federal, elections, it is largely unregulated by the Federal Election Commission.

“The governors associations are everywhere,” writes Ciara Torres-Spelliscy, a legal expert at Stetson Law School, but “are regulated almost nowhere.”

The organization has spurred investigations and lawsuits in several states since it emerged as a force in state elections.

It’s “subterfuge,” said former FEC official Bob Biersack, now a senior fellow with the Center for Responsive Politics. “They’ve figured out this weird hole in the legal structure.”

The RGA has maneuvered skillfully, winning in court when states have challenged its practices. In the past four years, Schrimpf said, the organization has “in no state had a final judgment issued requiring us to pay a fine.”

In making its $1.5 million contribution to Corbett, the RGA used multiple accounts to effectively cloak the original source of the money, thanks to a loophole in Wisconsin disclosure laws.

Wisconsin only requires the PAC, which lists the RGA’s D.C. address, to report donations from Wisconsin residents. The vast majority of the RGA Wisconsin PAC’s money, however, came from out of state.

In the months ahead of the 2010 primary vote, the RGA Wisconsin PAC reported spending at least $5 million, including the $1.5 million gift that ended up with Corbett. The PAC listed its in-state donors, whose contributions amounted to barely more than $31,000.

“It’s very difficult to get to the bottom of where their money came from,” said Nathan Judnic at the Wisconsin Government Accountability Board.

When the money arrived in Corbett’s campaign account, no one, including the Pennsylvania Secretary of State, could decipher the source.

The RGA attached a letter to its campaign filings with Pennsylvania in September 2010. While the origin of the $1.5 million Wisconsin donation was not detailed, the RGA assured the state that it was composed of individual, not corporate, donations.

“In the interest of complete transparency,” wrote RGA Counsel Michael Adams, the organization enclosed its full list of individual donors between January and June of that year. The list contained more than $1.5 million in contributions, but did not say explicitly which of those donations made up the $1.5 million that went to Corbett.

A friend in need

The mysterious July gift of $1.5 million from the RGA Wisconsin PAC came to Corbett just in time. The candidate had suffered a month of bad press after criticizing the state’s jobless for relying on unemployment benefits.

The money helped launch the Corbett campaign’s first ads and a bus tour, which shifted the focus away from the gaffe. By the end of August, his lead in the polls was again more than 10 points, and he was on the road to victory.

In the three weeks before the vote, the RGA would send about $3.6 million more to Corbett to help seal a victory.

Pennsylvania is not the only state where the RGA directed its funds.

The RGA was “the Laundromat and the repository for a lot of the money that was spent all over the country in 2010, there’s no question about it,” said Jay Heck, executive director of the good government group Common Cause in Wisconsin.

In Iowa, the RGA gave about $1.2 million directly to Terry Branstad, according to data from CRP. As in Pennsylvania, Branstad could not receive corporate money, but could take unlimited sums from individuals. As it did in Pennsylvania, the RGA fed it through its RGA Iowa PAC, and listed individuals as donors to the PAC.

Also as in Pennsylvania, the RGA Iowa PAC received donations from the RGA’s PAC in Wisconsin totaling $340,000.

In Texas, the RGA gave $3 million directly to Gov. Rick Perry, according to the CRP data. The donation was routed through its PAC in Michigan, apparently in an attempt to comply with a state law banning corporate donations.

On Perry’s campaign filings, the donation appears as a contribution from the RGA Michigan PAC — because PACs can give candidates unlimited funds to candidates in Texas, as long as the money isn’t corporate.

The seed money for the RGA Michigan PAC came again from wealthy individuals, including prolific political donor Texas homebuilder Bob Perry (no relation to Rick). The homebuilding magnate gave the RGA $4 million earlier in 2010.

The RGA also gave contributions in the millions directly to Republican parties in states where corporate contributions to parties are banned. Through its PACs in Michigan and Pennsylvania, it sent $5.3 million to Michigan’s Republican Party and $2.3 million to bolster the Pennsylvania Republican Party’s efforts.

By contrast, the RGA uses a more direct method in states where corporate contributions to candidates are unlimited.

The organization sent roughly $2.5 million directly to Oregon Republican Chris Dudley, according to both data from CRP and state campaign finance reports. Dudley, who lost a close race for governor, reported the donations as coming from the RGA’s “Corporate Unlimited Account” — no pass-through and no state-affiliated PACs were necessary for the corporate cash infusion.

A repeat performance?

Republican candidates are leaning heavily on the RGA again as 11 more governors’ races head to the November finish line. The organization continues its maneuvers through state and federal election law, and is on pace to break Barbour’s prodigious 2010 fundraising record.

It continues to tap the deep pockets of hundreds of donors who have pledged at least $25,000 annually as members of the RGA’s Executive Roundtable — led by venture capitalist Fred Malek, who worked in the White House under Presidents Nixon and Ford and served as campaign manager for President George H.W. Bush in 1992.

Hundreds of these executives met with Barbour, Malek, American Crossroads strategist Karl Rove and presidential candidate Mitt Romney in August for an Aspen fundraising and strategy session, according to Politico. Republican gubernatorial candidates Rick Hill of Montana and Rob McKenna of Washington were also present, as was Wisconsin Gov. Scott Walker.

The RGA is devoting millions to four possible pickups as Democrats leave open governorships in North Carolina, Washington, Montana, and New Hampshire. The RGA has dedicated millions to challenge Democratic incumbents in four additional states, including Missouri and West Virginia.

Governor Scott Walker in a Dec. 23, 2011 portrait. Lukas Keapproth/Wisconsin Center for Investigative Journalism

The RGA also dropped about $8 million to protect Gov. Walker from being recalled, and has shored up incumbents in Utah, Puerto Rico and Indiana. Walker is a member of the group’s executive committee.

In the Hoosier State the RGA used its RGA Right Direction super PAC to sidestep the state’s corporate ban and give $1 million to candidate Mike Pence while obscuring the original donors.

The RGA has also used the super PAC, registered to make independent expenditures on federal races, to sponsor ads attacking Democratic candidates for governor in West Virginia and Montana. Donors and spending on these ads were not reported to the states in question after they ran. They were finally reported, however, in mid-October filings with the FEC.

Whether the RGA and the DGA are intentionally evading state laws is difficult to say because of the structure of the organizations.

“Their structure provides plausible deniability to underlying donors,” said Stetson’s Torres-Spelliscy. Donors can “pretend” they’re only giving to the associations and not influence policy in a particular state, “but only that donor and the staff at the governors association knows if this money is given without strings attached.”

John Dunbar contributed to this report.

One thought on “Cash from Wisconsin rocked Pennsylvania governor’s race

  1. GREAT investigation and article. Thank you!

    Have any Wisconsin legislators tried to close the Wisconsin disclosure loophole mentioned in this article? If so, what happened?

    I would love to see a comprehensive report showing voters the details of Wisconsin campaign finance reform efforts of the last 10 or 20 years, so we can all see exactly what our Governors and State Legislators have been doing about the blatant election corruption that nearly everyone acknowledges now.

    We need to know the names and deeds of Legislators and Governors who are champions of reform (if there are any), as well as those leading efforts to block reform.

    We also need a clear and simple table listing Legislators’ and Governors’ voting records on reform over the past 10-20 years. Has anyone compiled a career-long scorecard for Legislators currently serving?

    Have any Legislators “promised the Moon” and done nothing?

    Is there a pattern of particular campaign contributions being linked with particular votes or actions regarding campaign reform?

    What are the official party platforms on campaign finance reform … for Republicans, Democrats, Libertarians, Greens, etc.? What do their websites say?

    What do prominent non-Party political organizations say about reform? (…. Governor’s Association, Counties Association, League of Municipalities, etc.) What do local and county governments say or do?

    Do any individual Legislator websites have interesting comments about campaign reform?

    Are there any functioning democracies anywhere in the world where private money is kept out of the election process, or nearly so? How do they do it? How did they get there? Could their rules work here? (… assuming we could convince the U.S. Supreme Court.)

    It would also be very helpful to know which non-governmental, non-party Wisconsin groups are promoting campaign finance reform. Have they made any difference? Do they work well together, or not? (If not, why? Can this be fixed? Is anyone trying?) Which are the most powerful or effective? How big are they? Are any of the groups bogus, a waste of money, or counter-productive? Who supports them? Where does their money come from? What obstacles do they face?

    I’d also love to know the same things about private NGO’s working AGAINST campaign finance reform. For example, are labor unions just as bad as the Chamber of Commerce on this score? (I’ve heard they are, but is it true?)

    I assume the news media in Wisconsin play a big role in whether reform efforts are successful. Are there any trends or patterns in how the news media cover this issue? For example, do companies that own TV stations suppress news coverage of reform efforts and lobby legislators against reform … because the massive growth in spending on TV campaign ads is so profitable? (Who’s getting rich from those ads?) Do similar profits affect radio or print media coverage?

    Have there been concerted, coordinated efforts from within the journalism community and/or the media industry to boost media coverage of campaign reform efforts? (This website certainly helps!) Have the efforts had any impact? Are journalists or other workers in the news media industry ever fired, penalized or stifled for promoting coverage of reform efforts? Are reader comment letters or opinion columns on reform ever stifled or blocked?

    Are there any important Wisconsin news sources owned by private interests known to use other means to block reform? (ie: lobbying, donations, membership in anti-reform organizations, etc.)

    What role have Wisconsin’s courts played? What are the track records of individual judges? Is there a pattern of judicial votes by political party affiliation? When campaign reform cases come before the courts, who are the groups involved in the cases, how much money did they spend on their legal involvement, and what was their position? (… pro or con reform?)

    I know that answering all these questions would require a massive amount of work, but you’d be doing our state a great service.

    Essentially, I’m requesting a concise, highly focused “MAP” to guide citizens and voters who want to take action and fix this corrupt system. We all need a quick, reliable guide to “Who’s Who.”

    Ordinary citizens can’t afford to waste their limited time, money and votes on hopeless, misdirected, ineffective, or counterproductive campaign reform efforts. Currently, too many Wisconsinites just surrender to the depressing corruption. They stop voting and try not to think about it … because this issue is so big and complicated that they don’t know where to start. They don’t realize how much power they have, especially if they worked together to fix this.

    If credible reports already exist for some or all of these issues, please tell us where we can access them! (If dishonest, inaccurate, or questionable reports are being distributed, it would be good to know about them, too.)

    If existing reports are scattered, inaccessible, huge, too complicated for laymen, and/or mixed with lots of unrelated data, it would be wonderful if you could pull all their relevant results together in one place, and add easy summary factsheets, charts and tables.

    Thank you again for your all your work, and for this excellent website!

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