Super PACs And Secret Money: The Unregulated Shadow Campaign

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This article is part of a collaboration with MSNBC's The Dylan Ratigan Show for the series "Mad As Hell: Get Money Out ," airing Monday and Tuesday at 4 p.m. EST.

WASHINGTON -- In the span of a week in September, two independent political committees announced unheard-of fundraising plans for the coming campaign season. The Karl Rove-linked American Crossroads, along with its sister nonprofit, Crossroads GPS, announced a plan to raise and spend $240 million in 2012 . Make Us Great Again, a group solely dedicated to electing Texas Gov. Rick Perry the 45th President of the United States, revealed a plan to spend $55 million in the Republican primary alone . Both of these multimillion dollar plans would break all reported records for spending by an independent political committee, and offer a sign of how campaign finance rules have been upended.

The federal system of campaign finance is in the midst of a sea change following the Supreme Court's decision in Citizens United v. Federal Election Commission (FEC), which undid a host of regulations covering the use of corporate and union money by independent groups in elections. Those independent groups are forming a shadow campaign apparatus fueled by unlimited and often undisclosed contributions, without the same accountability required of political parties or candidates' own political action committees.

American Crossroads and Make Us Great Again represent one of the two new kinds of groups playing in the shadow campaign: super PACs, independent political committees filed with the FEC that can accept unlimited funds from corporations, unions and individuals.

In their debut election cycle in 2010, super PACs, like American Crossroads, spent a combined $65.3 million, according to the Center for Responsive Politics . This was part of a huge surge in spending by non-party groups, whose spending hit $304 million in 2010, a record for any election cycle -- presidential or midterm.

If the fundraising goals of American Crossroads and Make Us Great Again are any indication, the 2012 elections will shatter this record.

Super PACs weren't solely responsible for the surge in outside spending in 2010. Nonprofit groups organized under section 501(c)(4) of the tax code were also finally allowed to spend money on express advocacy -- calling for the election or defeat of a candidate -- thanks to the Citizens United ruling. Unlike super PACs, these nonprofits, including Crossroads GPS, are not required to disclose the source of their funds.

While overall outside spending surged, undisclosed spending by nonprofits, or "dark money," exploded. According to the Center for Responsive Politics , the source of only 51 percent of non-party outside spending was disclosed to the public in 2010.

"In the case of the tax-exempt groups, citizens have absolutely no idea what's going on here," Democracy 21 President Fred Wertheimer, a long-time campaign finance watchdog, explained to HuffPost. "They have no way of knowing how groups are trying to influence their votes."

The explosion of unlimited money and secret money is expected to continue unabated in 2012. It is already taking different forms and creating new headaches for those concerned about the increasing role of money in politics. The new campaign finance system is now a two-tiered one: candidates and parties governed by tight regulations and shadow groups that operate with little to no rules.

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Justice Anthony Kennedy wrote the majority opinion in the Citizens United ruling, offering the main argument underlying the decision. "Independent expenditures, including those made by corporations, do not give rise to corruption or the appearance of corruption," he wrote.

That statement led to an immediate trickle-down effect on a lower court case, SpeechNow.org v. FEC. Months after the Citizens United ruling, the U.S. Court of Appeals for the District of Columbia Circuit ruled that SpeechNow.org, a nonprofit, could accept not only the unlimited individual contributions that it had requested, but also unlimited contributions from corporations and unions. The end result, after the FEC approved the ruling, was the creation of super PACs.

SpeechNow.org was founded by David Keating, the executive director of the Club for Growth, a free-market conservative group that has long played a role as an independent spender in elections.

"I really believe in the First Amendment and I wanted to start a PAC that supported candidates who supported the First Amendment," Keating told HuffPost. "Part of the inspiration I got for this is that it's perfectly okay for someone who's rich to speak out all they want, and there have been cases where rich individuals have run their own independent expenditures. If it's John Doe funding the independent expenditure, it says, 'Paid for by John Doe.' If it's okay for one person to spend $1 million, I thought, 'Why can't a few of us get together to pool our money.' It turned out that was illegal."

The changes to the existing structure of the campaign finance system happened almost instantaneously following the SpeechNow.org ruling. Before the 2010 midterms even happened, just five months after ruling, there were 65 super PACs registered with the FEC. Now, more than a year later these groups are emerging with the sole intent of backing presidential candidates, and they are raising huge sums to do so.

Make Us Great Again is one of 11 super PACs backing a specific candidate in the Republican presidential primary. Another super PAC, Priorities USA Action, supports President Barack Obama 's reelection bid. These groups are routinely run by former staffers or close associates of the candidates they're supporting and have been targeted by campaign finance watchdogs who consider them a means to subvert the campaign finance system's limits on contributions to candidates.

"The reason why supporters of a particular candidate start a super PAC is pretty obvious," said Bill Allison, editorial director of the Sunlight Foundation, a pro-transparency nonprofit that tracks outside spending in elections . "You can raise tons of money without campaign finance limitation and then support or attack in the same way as traditional committees."

Paul S. Ryan, a lawyer with the campaign finance watchdog Campaign Legal Center, concurred. "As long as contribution limits have been in existence, specifically since the 1970s, candidates have felt inconvenienced by them and would like to run without them," he said. "It's easier to raise money in $1 million chunks than in $2,500 chunks."

Super PACs are technically not allowed to coordinate with campaigns or parties, but candidates can get involved in the fundraising. The FEC ruled in July that candidates can appear at a fundraiser for a super PAC, with just one restriction: They personally cannot solicit money in excess of the federally-mandated candidate contribution limit of $2,500 per election or $5,000 per election cycle.

"It's fully permissible for the candidates to go to a fundraising event for these super PACs and have a super PAC spokesperson ask the crowd for money before introducing the candidate, who then speaks about the campaign strategy," said Ryan.

According to iWatch News , former Massachusetts Gov. Mitt Romney appeared at a fundraiser for the super PAC supporting his presidential bid, Restore Our Future, to address the crowd, but left promptly before organizers asked the audience for donations.

Romneys appearance at the Restore Our Future fundraiser was made possible by the super PAC's three co-founders, who all worked on Romneys 2008 presidential campaign. The other candidate-centric super PACs could get their favored candidate to their fundraisers thanks to similar relationships between those running the super PACs and the candidates.

Like Restore Our Future, other candidates' super PACs are helmed by former staffers. Make Us Great Again, a pro-Rick Perry super PAC is led by Mike Toomey, Perry's former chief of staff and longtime friend; both Veterans for Rick Perry and Jobs for Vets were started by Dan Shelley, a former Perry legislative director; Rep. Michele Bachmann's former top media aide, Ed Brookover, is the co-chairman of Citizens for a Working America; the pro-Ron Paul Revolution PAC was started with the help of two former aides to the congressman; and Our Destiny, the pro-Jon Huntsman group, was started by Thomas Muir, a vice president at Hunstman Corp., Huntsman's father's company, and listed in filings for two charities run by Huntsman's parents. The Obama-supporting Priorities USA is run by Bill Burton, a former White House aide and Obama campaign adviser.

In the past month candidate super PACs and the candidates' campaigns have been drifting even closer. On Aug. 30, Fred Davis, the ad man for Huntsman's campaign, jumped ship and immediately joined Our Destiny PAC. On Aug. 24, iWatch reported that Romney's top campaign fundraiser was leaving the campaign to raise money for Restore Our Future.

"The idea that this is some independent disconnected operation is a farce," said Wertheimer. The candidate super PACs are "undermining and in the process of eviscerating the contribution limits that exist for candidates in order to protect against corruption."

Priorities USA Action's Burton disputed suggestions that his group was not independent. "Priorities USA and Priorities USA Action are independent committees and we are operating well within prescribed guidelines," he told HuffPost.

Candidate super PACs are even popping up on the congressional level. On Sept. 21, Utah political consultant Kelly Casady announced the formation of the Strong Utah PAC, a super PAC backing the reelection of Sen. Orrin Hatch (R-Utah) . The super PAC aims to counter the weight of the conservative nonprofit FreedomWorks, which has targeted Hatch for defeat as a "Republican in name only" (RINO).

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The decrease in campaign finance disclosure comes comes after Kennedy's Citizens United opinion provided one of the strongest affirmations of transparency and disclosure issued by the Court. Kennedy wrote, "With the advent of the Internet, prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions." The new spending that Kennedys opinion would allow he believed, would be transparent and, thus, limit public concerns that could arise about the corporate or union spending.

That hasn't panned out. In 2010 the number of non-disclosing groups, including nonprofits, jumped dramatically. Spending hidden from the public went from $79.8 million in 2008 to $137.5 in 2010, according to the Center for Responsive Politics . Nonprofits accounted for $90 million of that total in 2010.

"[The Supreme Court isn't] supposed to be designing our campaign finance system," Trevor Potter, the president and general counsel of the Campaign Legal Center and a former FEC Chairman and counsel to the 2008 presidential campaign of Sen. John McCain (R-Ariz.), explained to HuffPost. The result has been "the opposite of what the Supreme Court predicted would happen."

Nonprofit spending increased as the groups were freed to spend money on express advocacy advertisements. While more than half the money spent by non-disclosing groups went to so-called electioneering communications, issue ads that had previously been allowed, almost the entire growth in spending by non-disclosing groups came from the newly-allowed express advocacy, which grew from $6.9 million in 2008 to $62 million in 2010.

Super PACs have even gotten in on the secret money act. While Super PACs are required to disclose their donors, they can accept contributions from nonprofits that do not disclose their donors and from corporations, some of which either do not identify their owners or dissolve upon making a large donation. This has already caused controversy for the Romney-backing Restore Our Future, which received three $1 million contributions from corporations that appear to do no business, one of which dissolved a few months after making the donation .

"The money has shifted to the fringes and it's become less and less transparent," said Center for Responsive Politics Executive Director Sheila Krumholz. "It's shifting away from the parties, the candidates, the PACs, and shifting to these unregulated groups and becoming much and much more secret."

The decrease in disclosure was aided by a 2007 ruling by the FEC that gutted a provision of the McCain-Feingold campaign finance reform law requiring the disclosure of donors to groups spending money on election ads, whether they be issue ads or express advocacy.

"We had 100 percent disclosure for nonprofit spending on electioneering communications in 2004," explained Craig Holman, the lobbyist for the watchdog group Public Citizen. "The FEC changed the disclosure rule in 2007 to only require disclosure for contributors who earmark their donations for [express advocacy and issue] spending, which no one does. Now, everyone has figured out that they don't have to disclose at all."

Rep. Chris Van Hollen (D-Md.) filed suit in April against the FEC for failing to enforce this disclosure provision properly.

During the 2010 elections one of the non-disclosing groups cited in Van Hollen's lawsuit, Americans for Job Security (AJS), supported North Carolina Republican candidate Renee Ellmers with $350,000 in attack ads against her opponent. Ellmers won the race and went to Washington as part of the giant Tea Party class joining the 112th Congress. But that outside spending would come back to haunt Ellmers.

A previous HuffPost article documented how Ellmers attached her support to a bill that would have blocked a new rule regulating swipe fees for debit cards. This seemed obvious -- the conservative blog RedState was for the bill, as was the Republican caucus. And Bank of America, a major supporter of the legislation, is one of the dominant businesses in North Carolina.

But AJS was running ads in Republican districts against the bill and in support of the swipe fee rule at the behest of a client. Ellmers had her name taken off of the bill as the bill's path slowed in the Senate. Her office chalked up the bill sponsorship to a staff error.

Reformers worries about influence exerted on the legislative process by outside groups are not limited to this one case.

Public Citizen's Holman told HuffPost a story highlighting that concern: "I talked to a Capitol Hill staffer and he told me, 'How do I say no to a corporate lobbyist with deep pockets knowing that the corporate client can spend unlimited money to unseat my boss?'" Whether these fears are well-founded remains to be seen.

By empowering corporations to donate to groups that can sway elections, Potter said, the court has empowered organizations that have very different incentives than actual human beings. "Corporations do not behave in the same way people do. They think about the best way to get an advantage over their competitor, either through the government or the marketplace. The whole country is going to see a situation where corporate interests are going to be electing members of Congress for that purpose."