Monday, January 06, 2014

Finally a picture emerges of the system by which the Kochs moved and obscured the sources of a bare minimum $407M outside the campaign-finance system in the 2012 election cycle


Efforts to trace the movement of money contributed, raised, and funneled by the Koch Brothers' "network" during the 2012 electoral cycle have so far produced this org chart. No wait, this is a diagram of the London Underground, which is much, much easier to understand.

"It is a very sophisticated and complicated structure. It's designed to make it opaque as to where the money is coming from and where the money is going. No layperson thought this up. It would only be worth it if you were spending the kind of dollars the Koch brothers are, because this was not cheap."
-- Notre Dame Law Prof. Lloyd Hitoshi Mayer, in a Washington
Post report
on the Kochs' campaign money-moving system

by Ken

Nobody, to my knowledge, believes more fervently that campaign cash is speech and therefore constitutionaly protected than does Supreme Court Justice Antonin Scalia. But the last I heard, Justice Nino also seemed pretty emphatic that this alleged constitutional protection doesn't include any right to secrecy -- that disclosure requirements don't by themselves infringe on any constitutional rights. (We'll come back to the "nondisclosure" issue in a bit.)

It's looking as if the Supreme Court, a court that has bent over backwards at every possible step to give American business everything it can ask from the courts, is going to have to make its lopsided view of the Constitution clearer -- and if I'm understanding Justice Nino correctly, people like the Koch Brothers may not be happy with the result.

Of course by then they'll have shoveled who-knows-how-many hudreds of millions of dollars into the electoral process under cover of obfuscation. And I suppose if it happens, they'll just have to pay their high-priced legal and bookeeping talent more big bucks to find their away around the rules as they're then stated. Sort of the way the Kochs' people have taken to creating and uncreating barely-legal entities to serve as go-betweens for what looks awfully like a major money-laundering operation revealed in a a new Washington Post investigative report, an operation designed to: (a) conceal the flow of money, and (b) to conceal the carefully wrought concealment of the concealing operation.

This, it seems to me, is the lesson of the report, "Koch-backed political network, designed to shield donors, raised $400 million in 2012."

Actually, it turns out that $400 million is pretty much a floor estimate for this daredevil money-moving operation, because the Post report is limited to what could be tracked through IRS disclosures so far made by the original donors.
A labyrinth of tax-exempt groups and limited-liability companies helps mask the sources of the money, much of which went to voter mobilization and television ads attacking President Obama and congressional Democrats, according to tax filings and campaign finance reports. . . .

The system involved roughly a dozen limited-liability companies with cryptic, alphabet-soup names such as SLAH LLC and ORRA LLC, and entities that dissolved and reappeared under different monikers. . . .

Tracing the flow of the money is particularly challenging because many of the advocacy groups swapped funds back and forth. The tactic not only provides multiple layers of protection for the original donors but also allows the groups to claim they are spending the money on “social welfare” activities to qualify for 501(c)(4) tax-exempt status.
And the $407 million figure cited in the Post report "is a conservative one, since it does not account for the complete revenue of eight groups that have not yet filed their tax returns for the latter half of 2012."
Post reporter Matea Gold quotes Notre Dame Law School Prof. Lloyd Hitoshi Mayer, "who studies the tax issues of politically active nonprofits," saying "he has never seen a network with a similar design in the tax-exempt world."
“It is a very sophisticated and complicated structure,” said Mayer, who examined some of the groups’ tax filings. “It’s designed to make it opaque as to where the money is coming from and where the money is going. No layperson thought this up. It would only be worth it if you were spending the kind of dollars the Koch brothers are, because this was not cheap.”
"The resources and the breadth of the organization," reporter Matea writes,
make it singular in American politics: an operation conducted outside the campaign finance system, employing an array of groups aimed at stopping what its financiers view as government overreach. Members of the coalition target different constituencies but together have mounted attacks on the new health-care law, federal spending and environmental regulations.

Key players in the Koch-backed network have already begun engaging in the 2014 midterm elections, hiring new staff members to expand operations and strafing House and Senate Democrats with hard-hitting ads over their support for the Affordable Care Act.

Its funders remain largely unknown; the coalition was carefully constructed with extensive legal barriers to shield its donors.
According to the Post report, the Koch-inspired network's known $407 million money-funneling has already far outstripped the mere $325 million gathered up by Karl Rove's Crossroads operations. According to the report, on the left "roughly $400 million" was poured into 2012 elections by unions and "a network of wealthy liberal donors organized by the group Democracy Alliance mustered about $100 million for progressive groups and super PACs in the last election cycle, according to a source familiar with the totals."

The Post report is careful to note that not all the money dumped into the Koch mystery machine comes from the Kochs: "While 'the Koch network' has become a shorthand in political circles, the coalition is financed by a large pool of other conservative donors as well, according to people who participate in the organization." The Post report cites the impact of the Kochs' "seminars," held twice a year since 2003, "with like-minded donors at which they collect pledges for groups that share their commitment to deregulation and free markets."
Jack Schuler, a Chicago health-care entrepreneur, attended one of the Kochs’ donor meetings in Beaver Creek, Colo., several years ago and has contributed about $100,000 a year to their efforts since then.
“They came across as guys who are putting a lot of their own money into it,” Schuler said. “They are pretty soft-spoken, not screamers or screechers. They provide the leadership, the staff -- without the framework, I wouldn’t do it on my own.”

Many donors get involved because they “value the privacy afforded to them by giving to these entities,” said Phil Kerpen, president of American Commitment, a nonprofit free-market advocacy group that is part of the network.

“There are hundreds and hundreds of very successful and patriotic Americans that take part in the seminars,” Kerpen added. “To suggest that anything that goes through any of these entities is Charles and David Koch is very misleading. There are a significant number of donors involved.”
"A significant number of donors," no doubt, but how significant any of their individual contributions may have been is hard, no impossible determine, given the shielding-from-view at the heart of the operation. At the very least, though, the Kochs served as "bundlers," but bundlers who also functioned as high-powered campaign investment advisers -- and also tax counselors.

"Of the $407 million" so far tallied, the report says, "$302 million can be traced to Freedom Partners or TC4 Trust." TCR Trust, we've learned, is "a now-defunct group that "was shuttered in June 2012, according to tax filings," and whose place was taken by Freedom Partners. These organizations appear to be the hub of the operation that maneuvered the elaborate shuffling of funds through that alphabet soup of appearing and disappearing entities which so impresses Professor Mayer of Notre Dame.

Reporter Gold again:
"The same tax preparer -- a Kansas City, Mo.-based partner in the accounting firm BKD -- did the returns for Freedom Partners and TC4 Trust, as well as for nearly half the other groups in the network and for the nonprofit Charles Koch Institute."
We learn too that, as one would expect, the people involved in the 2012 operation have been studying the results, with a view to improving their operation. We're reminded that David Koch himself told Forbes "shortly after Election Day:
“We raised a lot of money and mobilized an awful lot of people, and we lost, plain and simple. We’re going to study what worked, what didn’t work, and improve our efforts in the future. We’re not going to roll over and play dead.”
Which would be only reasonable, the only problem being that their operation, whose outlines only now begin to emerge, is so clearly designed to circumvent scrutiny even as it attempts to overwhelm the electoral system. Which brings us back to the poor bullied right-wing donors' need for protection of their identities. It's protection they need from bullies.
James Davis, a spokesman for Freedom Partners, said the organization funds groups “based on whether or not they advance the common business interests of our members in promoting economic opportunity and free-market principles.”

Davis said the group has been upfront about its spending and made its tax return available online as soon as it was filed in September.

“Our members are free to disclose their affiliation if they wish,” he said. “We leave that decision with them. Unfortunately, recent IRS and other instances of intimidation and harassment of individuals and groups because of their policy beliefs and activities demonstrate why it’s important to keep such information confidential.”
"Such maneuvers," says reporter Gold, "could be sharply restricted under new regulations proposed by the Internal Revenue Service in November. The new rules seek to rein in nonprofit groups that have increasingly engaged in elections while avoiding the donor disclosure required of political committees." Naturally the campaign finaglers are outraged, and have attempted to portray their enemy as a partisan IRS rather than the letter and spirit of laws passed to attempt to put some limits on how the campaign-finance system can be abused.
Naturally the abusers like to portray themselves as the victims. Charles Koch himself, writes reporter Gold, gave "a rare in-person interview with Forbes" (the official mouthpiece of the Koch Brothers, one wonders?) in "late 2012," in which he "defended the need for venues that allow donors to give money without public disclosure, saying such groups provide protection from the kind of attacks his family and company have weathered."
“We get death threats, threats to blow up our facilities, kill our people. We get Anonymous and other groups trying to crash our IT systems,” he said, referring to the computer-hacking collective. “So long as we’re in a society like that, where the president attacks us and we get threats from people in Congress, and this is pushed out and becomes part of the culture -- that we are evil, so we need to be destroyed, or killed -- then why force people to disclose?”
It's my understanding, however, that Justice Scalia heard all those arguments when he opined that there is no constitutional protection against legally required disclosure of contributions. Perhaps I've got it wrong, or perhaps he can be persuaded. But the bullies' argument that they have to protect themselves from bullying may carry less legal weight than the bullies think.

If you're curious about the inner workings of this money-moving machine, the Post report has a fair amount of nuts-and-bolts detail. But don't get too attached to those names. As reporter Gold notes, "The makeup of the coalition was corroborated by people familiar with the structure who said the network is ad hoc and will not necessarily remain constant."

It should gladden everyone to know that Americans for Prosperity, the high-powered attack machine whose largest funder is the Kochs, was at the thick of the 2012 attack operation, and is already at work for 2014.

Labels: ,


Post a Comment

<< Home