Colorado GOP donors fly below the radar with maze of 527 committees
Monday, April 23, 2012 at 10:27 am
In Colorado, organizing, infrastructure and fundraising within the Democratic Party and progressive organizations are the stuff of legend. The story of how liberal mega-millionaires and single-minded cooperation on the left turned this formerly solid red state to purple and blue have been told and retold for years. The story of coordination among conservatives groups, however, and the way millions of dollars each election cycle slosh to candidates and causes on the right has received relatively scant attention.
Part of the reason, perhaps, is that, within the increasingly complex system of U.S. campaign finance, Democrats and Republicans here tend to use different channels to make political donations. Democrats give through so-called Super PACs, which make their records public on a sometimes delayed but regular schedule. Republicans, however, lean toward a maze of difficult-to-track 527 committees. The 527s give the money to other committees, which often pass the money on to yet more committees, which eventually buy campaign ads. What’s more, the people on the right who give the most cash also often use multiple versions of their names on public records, making the money they give even more difficult to tally.
Add to that rules adopted by the Secretary of State’s office in March that could allow many of these 527 committees to avoid most reporting requirements and you have the makings of an interesting election season. Where in the past 527s were difficult to track, in the future it may simply be impossible to follow the money.
Colorado is perhaps a microcosm or a laboratory for the ways and means of money in politics. We have it all: Deep pocketed, highly motivated donors, a partisan, outspoken secretary of state, and left-leaning watchdog groups who pay special attention to Secretary of State Scott Gessler and campaign finance rules.
While PACs–which Colorado Democrats typically fund–can advocate for candidates, and 527s–which Republicans fund–cannot, that difference becomes less and less important as 527s push the envelope and courts rule in their favor. The rules governing what 527 committees cannot say have come to be known as The Magic Words, which include “vote for,” “elect,” and “vote against”. Anything less explicit than that is generally acceptable.
Right now, two Republican committees–Colorado Leadership Fund and Senate Majority Fund–together are sitting on more than $1.1 million–money no betting person expects to still be there after November’s election. These committees were sued by Ethics Watch in 2008 for stepping over the “magic words” line, but the Colorado Supreme Court ruled for the committees, setting the stage for more election seasons of big spending.
Last month Ethics Watch and Colorado Common Cause filed suit against the Secretary of State’s office to stop the SOS’s new, less stringent 527 reporting requirements from taking effect. While waiting for a court date, the rules have gone into effect.
Luis Toro, director of Ethics Watch, argues that Gessler does not have the authority to make rules that Toro says contradict existing state statutes. Ethics Watch has won similar suits against Gessler in the past. Gessler’s new rules, if they stand, would mean that 527s will not have to report contributions and expenditures if they do not expressly advocate for a candidate.
“Secretary Gessler appears not to have gotten the message that both the court and the legislature have already sent: his job is to enforce the laws on the books, not rewrite them to his liking in an election year,” said Toro. “We are confident that the result in this case will be no different from what has happened before. Unfortunately, the State of Colorado will spend a great deal of public money attempting to defend the indefensible.”
“Coloradans fought for the right to know who is spending money to influence their votes,” said Elena Nunez, executive director of Colorado Common Cause. “As we approach an election expected to have record spending, Secretary Gessler’s rules rewrite will leave Coloradans in the dark.”
Gessler was blunt in his response to the suit: “This challenge comes as no surprise. Groups opposing common sense rules have stacked the deck in their favor,” Gessler said. “Yet again, the office has been sued by the same secretive, unaccountable, taxpayer-subsidized groups.
“We should be encouraging civic engagement by clarifying the rules and creating a level playing field for everyone,” Gessler added.
Even the rules that up until March required 527 committees to file reports often leave voters in the dark as money moves around so deftly as to be almost impossible to follow.
A moving target
Because people often write checks to one 527 committee, which then turns around and writes checks to other committees, it is difficult to track exactly how much is raised and spent. Throw into this mix the fact that some committees come into existence one month, receive a large check from another committee, buy a load of ad time or produce and mail thousands of post cards and then disband a week later, and 527 money becomes even harder to track.
In fact, Colorado Democratic Party spokesman Matt Inzeo said the Party doesn’t even try to track Republican 527s. “We just can’t devote the resources to tracking that money,” Inzeo said. “New committees can appear out of nowhere. You just never know what group will emerge to buy ads and mailers in the month before an election. We know they are out there and they are well funded and well organized, but they are a moving target.”
The Western Skies Economic Growth Committee, for instance, was opened in October 2008 and shut down barely a month later. It got all of its money in one contribution from Western Skies Coalition. Not surprisingly it also spent all the money at once, with Strategic Media Services, to create and place advertising. Western Skies Coalition is a Virginia non profit supporting energy concerns.
Innocuous names like Western Skies Economic Growth Committee are common in the world of 527s. Who doesn’t like Western Skies? Or Economic Growth? You can’t tell from the name whether the committee is liberal or conservative.
“That’s no accident,” said Inzeo.
Every political ad purchased has to say who paid for it, but if the committee only existed for a month and got all of its money from another committee, the name on the ad becomes meaningless. “There is no transparency and that leads to greater and greater levels of distrust from the public,” Inzeo said. He noted that if the Democratic Party–or the Republican Party–buys an ad, you know who is behind the ad, but that if the ad is purchased by a committee that existed only long enough to buy the ad, then voters really have no idea who bought the ad.
“From the point of view of Democrats, we are really not in a good place in the post Citizens United world of unlimited corporate contributions to 527s,” he said.
Citizens United was the Supreme Court case that ruled that for the purposes of donating money to 527s, corporations have the same rights as individuals–which is to give as much money as they want to give.
Ken Gordon, former state senate majority leader and now the driving force behind CleanSlateNow.org, says no one is in a good place after Citizens United.
“The way we finance campaigns is destroying democracy. It takes the power that should belong to people and gives it to wealthy interests. The problem is not just one party or the other. Both sides are trying to use money to get more power than they would get based on the merit of their ideas,” Gordon said.
CleanSlateNow.org is dedicated to supporting candidates who refuse to take any special interest money. Gordon says that ultimately it is up to voters to decide that they won’t support candidates who take special interest money. Under current campaign finance laws, though, even if a candidate refuses special interest or corporate money, there is nothing to stop a special interest from forming a 527 committee for the express purpose of supporting that candidate, who will have nothing to say about the way the money is spent.
Rick Palacio, chairman of the Colorado Democratic Party, says it really doesn’t matter if Republicans raise and spend as much or more than Democrats.
“At a certain point, money has diminishing returns if you have candidates that are of out of touch, extreme, and have serious flaws.
“Nationally you see this with candidates like Mitt Romney and locally with the tea party extremists,” Palacio said.
An individual, or a corporation, or another 527 committee can give unlimited funds to a 527 committee, and there is a long list of Colorado Republicans who have written five- and six-figure checks to 527s. The committees cannot coordinate with a candidate and cannot advocate directly for a candidate’s election, but as court case after court case has shown, it is a very fine line–a line some say is crossed every election.
One person who has litigated the issue is Luis Toro, of Colorado Ethics Watch. He has filed suit against two Colorado 527s, alleging that they had crossed the line into direct campaigning for candidates. The courts ruled for the committees.
“Much of the controversy over election spending in Colorado has focused on so-called “527″ groups, which refer to political groups that do not meet the definition of a PAC (or “political committee” under Colorado law), because they don’t expressly advocate for or against candidates. The key difference has been that contributions to PACs are limited while contributions to 527s are not,” Toro wrote in a recent Denver Post column.
When a wealthy individual writes a large check to a 527, and then that committee writes a check to another committee which purchases the actual advertising, three things potentially happen, according to campaign finance experts who did not want to be quoted for this article.
1) The money becomes harder to track in a timely manner by reporters, by candidates who are being targeted with negative ads and by attorneys representing campaign finance watchdog groups or representing competing interests.
2) Wealthy, well-known, public-image conscious individuals or companies have some deniability in that they did not give their money to the committee that bought the negative or misleading ads.
3) It might look to the world that more money is being raised and spent than actually is, which can make it easier to raise even more money. For instance, if committee A raises $1 million during a reporting period and gives all the money to committee B, advocates and fundraisers can say that the two committees, which both support similar things, raised $2 million between them, which can make other donors more likely to jump on the bandwagon and spend their own money.
“In most other lines of work, moving money from committee to committee and finally using a brand new committee no one has heard of to buy the ads would be called money laundering,” Inzeo said.
Emphasizing that he thinks Democrats game the system as much as Republicans, Gordon said he thinks Republicans have been especially artful in setting up dozens of committees that routinely transfer funds to each other.
“It is wrong because voters can’t tell who is purchasing political influence. Both sides use whatever means they can to get more influence,” he said.
Jon Caldara, director of the Independence Institute, agrees the system is broken, but he says getting money out of politics is probably impossible. He says campaign finance laws, which limit how much anyone can give to any candidate has driven the money underground.
“Our campaign finance laws have separated candidates from their campaigns,” he said.
With more and more of the money going to PACs and 527s, he said, “You have other people working for or against a candidate, but the candidate has no control over it.”
Caldara said the answer is to get rid of the limits on how much people can give directly to candidates. “Let the money go straight to the campaigns. Let the candidates run their own campaigns.”
Richard Westfall, a partner at the law firm Hale Westfall and general counsel to the Colorado Republican Party, agreed with Caldara.
“Whether you think these committees are good or bad, they arose out of campaign finance reform laws,” Westfall said. “If you go back twenty years, the messaging was done by the candidates and the parties. Campaign reform, designed to get money out of politics, has instead moved the money to independent expenditure groups,” he said.
Westfall emphasized that he was not speaking in his official capacity with the Republican Party, but instead as a private attorney who is a Republican.
He said all of the 527s and PACs are run by groups who have a special interest. Some are pro-environment, some support traditional energy interests, some support abortion rights while other are against abortion rights, etc.
In the old days, he said, candidates could choose whether to take money from a special interest. Today, the special interests can spend their money without a candidate’s knowledge or approval. Both he and Caldara noted that sometimes committees which intend to support a certain candidate actually harm that person’s campaign by misrepresenting their positions, or making them seem more extreme than they actually are, for instance.
Westfall said the people who pushed campaign finance reform were “all on the left.” He said they were well-intended, but that the results have been disastrous.
“Can anyone argue that campaign finance reform has kept money out of politics?” he asked.
Indeed, the amount of money spent locally, across the state and nationally goes up every election, sometimes almost exponentially.
Colorado Leadership Fund–and its offspring
The Colorado Leadership Fund, which describes its purpose as to “elect Republican candidates” has raised more than $782,000 since December 2010, according to reports filed with the Secretary of State’s office. Contributions came from insurance companies, energy companies, pharmaceutical interests and General Motors among others.
Among big recent donors are Edward McVaney ($100,000); Phillip Morris ($115,000); The Apartment Association of Metro Denver ($103,000); PHRMA ($120,500) and Farmers Insurance ($168,000).
This 527 committee often gives its money to other committees, including the now defunct Colorado Leadership Fund Political Committee and Coloradans for Change among others.
When it was active, the Colorado Leadership Fund Political Committee gave substantial amounts of money to Colorado Citizens for Accountable Government.
Asked why Colorado Leadership Fund would give so much of its money to other committees instead of spending it directly on its own ad buys, registered agent Timothy Gilmore answered succinctly: “I cannot tell you that.”
The Colorado Leadership Fund’s most recent filing says “NA” for cash on hand, but lifetime expenditures are about $622,000 less than lifetime income, so it stands to reason the committee has at least $600,000 in the bank. A spokesperson for the Secretary of State’s office confirmed that committees do not have to include cash on hand in their reports and that simply subtracting expenditures from contributions should tell you how much money the committee has on hand.
Asked what the committee’s plan for this election cycle were, Gilmore answered, “I cannot tell you that.”
Mario Nicolais, a well-known campaign finance attorney at the Hackstaff Law firm, said he represents a number of Republican committees, but he wouldn’t talk about them, except to say, “I am sure that lots of outside interest groups on both sides will be very involved in this election.”
Colorado Citizens for Accountable Government
CCAG seems to be the big daddy of GOP committees in Colorado, and is the recipient of large donations not just from individuals but also from other committees. In 2010, it spent about $1.7 million in Colorado–some of that money going to producing and placing negative ads attacking Democrats.
In October and November of 2010, CCAG received a total of $350,000 from American Justice Partnership. Also in October 2010, it received $300,000 from Colorado Leadership Fund and $145,000 from Senate Majority Fund. It received smaller donations that month from Greg Stevinson and Encana Oil and Gas.
The national Republican State Leadership Committee gave CCAG $515,000 in 2010. Interestingly, Colorado House Speaker Frank McNulty recently skipped two days of legislative business in order to hobnob with this same Republican State Leadership Committee.
He made the point then that Republicans need to work extra hard to keep up with Democratic fundraising.
A recent article in a Denver daily once again recounted how Democrats have become formidable in Colorado, and said they have out-raised Republicans by 150 to 1.
Specifically the article said Democrat Super PACs outraised Republican Super PACs $4.24 million to $28,644 over the last election cycle (presumably December 2008 to December 2010), which might technically have been true, but it failed to take into account the fact that Republicans put their money into 527s instead of PACs.
“I can guarantee you, Democrats are not sitting on $150 million right now,” Inzeo said, joking about the purported 150-1 fundraising ratio.
Where did CCAG’s money go in 2010? It went to television and direct mail. In October, 2010 alone, CCAG dished out nearly $323,000 to Targeted Creative Communications of Alexandria, VA for direct mail campaigns. Almost $465,000 went to Rock Chalk Media of Grand Junction for the production and placement of advertising, all according to reports on file with the Secretary of State’s office.
Targeted Creative Communications brags on its website about its success electing Republican candidates. A flashing screen asks the question: What drives votes? Among several answers that rotate through is “Fear.”
527s are known for fearmongering. They aren’t supposed to overtly support any candidate, but nothing stops them from trashing candidates they oppose, and the advertising and marketing firms that work with 527s market that very skill.
CCAG gave $19,500 to Coloradans for Change. Coloradans for Change, like a number of these groups, has as its registered agent Mario Nicolais, of the Hackstaff Law Firm, where SOS Gessler used to work.
CCAG is still raising and spending money, but its heyday (so far anyway) was during the 2010 election cycle when it raised and spent more than a half million dollars. Of course, there is no saying it won’t reach that level again this election season.
With most of CCAG’s money coming from other committees, the question that has to be asked is, “who’s funding those committees?”
In the case of American Justice Partnership, there is no easy answer. As a non-profit 501c4, AJP does not have to disclose its donors. Interestingly, one of the top features on the AJP website is a “follow the money” button where it invites people to see what causes liberals are bankrolling.
Are Republican donors getting their money’s worth? The Republican Party did not return a call seeking comment and no one directly associated with a 527 would discuss it. Inzeo said “I’m not sure anyone putting money into Ken Buck’s (failed) campaign (for U.S. Senate) is feeling very good about it, but they can have a big effect on down ticket races. It was just a few hundred votes that put the State House in Republican control, so you can’t say the money didn’t have an effect.”
The money men
Alex Cranberg, chairman of energy company Aspect Holdings, has given at least $900,000 to GOP causes in Colorado in recent years. Big recipients have been The Trailhead Group, Coloradans for Change, Colorado Republican Committee and Senate Majority Fund. He also gives to individual candidates. The SOS database shows $280,000 as the total given by Alex Cranberg, with the rest of the money given by Alex M. Cranberg and A.M. Cranberg. Cranberg answered a few questions submitted in writing.
That email exchange is here:
1) Why do you give so much, and do you think it has made a difference?
Cranberg: I express myself in part through election advocacy because it is my responsibility as a citizen. My goal is to advance effective ways to produce prosperity and freedom for the largest number of people possible.
2) Are campaign finance rules fair? Do they make elections more fair, or do they need to be changed?
Cranberg: Campaign finance rules often restrict legitimate expression. Why should any person NOT be allowed such voice as his/her determination, creativity, access and resources allow?
Whose opinion, no matter how many times expressed, should we be afraid of? Which citizens do we need to “protect” from hearing which opinions? Is it unfair for celebrities to replace money with fame to amplify their voice? Going down the road of trying to make each person’s voice have equal influence is to go down a road toward tyranny.
3) Some people say we should eliminate all big donations to committees and get the money out of politics. Others say we should eliminate limits on what someone can give to a candidate as long as it is disclosed. Right now, a person can only give a small amount to a candidate but can give unlimited amounts to a 527, which some say removes the campaign from the candidate and has driven donations essentially underground. How should the system work?
Cranberg: I don’t know. I’m in favor of freedom of expression. I understand the benefits of disclosure, but I also believe that people should be able to support causes they believe in without exposing themselves to politically motivated retribution.
Thomas Paine wrote and distributed Common Sense which became the largest selling media property to date in American history. He did it anonymously. This tradition should be respected also.
4) A lot of times a person will give money to one 527 which then gives to another. The second committee might give to a third committee that actually just opened, which then buys the ads and closes shop. Is this an abuse of the system or does it serve a legitimate purpose?
Cranberg: See above.
Cranberg’s wife, Susan Morrice, has also given more than $25,000 to GOP causes in Colorado over the years, much of it in smaller amounts to individual candidates.
Edward McVaney in 2010 and 2011 gave at least $124,775 to GOP causes in the state, including $100,000 to Colorado Leadership Fund. He also gave $20,000 to school board candidates and donated to the campaigns of Attorney General John Suthers and Secretary of State Scott Gessler. McVaney was the founder of JD Edwards, now owned by Oracle. He has donated millions to the University of Nebraska as well.
Over the years, McVaney and various family members have given around $900,000 to conservative causes in Colorado. Among those contributions: $250,000 to Coloradans for School Choice in 1998; $100,000 to Vote No; It’s Your Dough in 2005; $100,000 to Coloradans for Marriage in 2006.
Somewhat common to big donors, McVaney and his wife use several variations of their names when making contributions.
Dan Ritchie has given at least $128,000 in disclosed contributions to political causes in Colorado since 2010. A large share of that has gone to school board candidates. He has given about $1000 each to the Colorado Democratic Party and to the campaign of John Hickenlooper. He gave $30,000 to the Business Opportunity Fund and $25,000 to the Trailhead Group, both of which have supported conservative causes in Colorado. Variations on his name are even more numerous than with other donors.
Ritchie, former chancellor and chairman of the board at the University of Denver, has given the university millions over the years. As a businessman, he was involved in numerous industries, from banking to Hollywood.
The Coors family and family of businesses have given millions to conservative political causes over the years. Former U.S. Senate candidate Pete Coors has given at least $179,000 to GOP causes in Colorado since 2010, according to the Secretary of State’s database. Of that, $175,000 went to the Trailhead Group. Pete’s brother Joe is currently running for the U.S. House against incumbent Democrat Ed Perlmutter. Joe Coors has not been as obviously generous, but he did give $1000 to Personhood Colorado in 2010. He just gave more than $200,000 to his own campaign to defeat Perlmutter.
Pete Coors was one of the founders of Trailhead, along with former governor Bill Owens and former oilman and current CU Chancellor Bruce Benson. Coors is listed on Wikipedia as the sixth wealthiest politician in the U.S., with a net worth of $750 million.
Greg Stevinson donated at least $100,000 to conservative causes in Colorado in 2010. His largesse was divided among CCAG, Coloradans for Responsible Reforms, Business Opportunity Fund and Senate Majority Fund.
Anheuser Busch has given hundreds of thousands of dollars to Colorado political causes over the years, including plenty of money to both up and down ticket Democrats. The company has spent its big money on Republicans, though, giving $41,000 to the Colorado Leadership Fund in 2009-11.
Big Democratic donors that we tracked tended to use only the most commonly known form of their names.
Committees come, committees go
While it is easy enough to look back at which committees raised and spent the most money in a prior election, it is impossible to predict which committees will have the money in 2012′s election.
In addition to the big players from past years, there are a number of other committees that are active today and may or may not be big players this year.
Coloradans for a Better Future has raised and spent about $90,000 over the years, but currently had no money in the bank as of its last report.
Another to keep an eye on is the Committee for the American Dream.
Coloradans for Change is still raising and spending money, but its heyday was during the 2008 election cycle when it raised and spent more than a half million dollars.
One thing is imminently clear, with an election just a few months away, one or more of these committees will see an infusion of cash. If that isn’t true, it will only be because old committees are abandoned and new ones formed–the better to fly below the radar.
One committee to watch is The Senate Majority Fund, a 527 committee set up to support Republicans running for the Colorado Senate, which is sitting on a war chest of more than $500,000 in advance of this year’s election. One of its bigger recent expenses was just over $10,000 to Gessler’s old firm the Hackstaff Law Group.
The Senate Majority Fund was sued unsuccessfully by Ethics Watch. Again, from Luis Toro’s recent Post column:
In 2008, two 527s, the Senate Majority Fund and the Colorado Leadership Fund, ran ads supporting Republican candidates. Each of the ads named a candidate and the office he or she sought, extolled their virtues, directed voters to candidate websites, and in some cases even mentioned endorsements. These 527s were breaking new ground by running ads that were like PAC ads in all respects except one: they never used “magic words” like “vote for” or “elect.” Ethics Watch filed suit arguing that the 527s were illegally operating as PACs. The judge ruled that under Colorado’s Amendment 27, an ad doesn’t expressly advocate for candidates unless it uses “magic words,” thus the 527s were not PACs. Last month the Colorado Supreme Court affirmed that ruling.
Katie Kennedy, registered agent for the Senate Majority Fund, said she is not the person who makes decisions about how to spend the fund’s money. She described herself as being the compliance officer. She said she would have someone call the Colorado Independent, but no one did.
Gordon says waiting for campaign finance laws to change is a fool’s game. “Campaign finance laws were written by people whose hearts weren’t in controlling money in politics. The laws were written by people inside the system. Congress is against transparency and disclosure, and even if Congress passes a law that would help, the Supreme Court will overturn it,” he said.
“It is a terrible thing we are doing,” Gordon said.
It is impossible to post links directly to a contributor’s report in the Secretary of State’s database. This link will allow you to type in a name and get a report.
(Image of cash in hand: Wikimedia Commons: Psychonaught)