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Anonymous Donors Are Flooding the 2016 US Election With 'Dark Money'

'Dark money' groups have emerged as a powerful and secretive political fundraising tool for many campaigns, changing the landscape of America's 2016 election.

by Olivia Becker
Oct 17 2015, 1:35pm

Photo via EPA

Republican presidential candidate Bobby Jindal raised $579,000 in the third quarter of 2015, according to Federal Election Commission (FEC) filings released Friday. That probably wouldn't cover the costs of television ads in one swing state, let alone fund an entire campaign until the next debate. But Jindal will likely be able to stay in the race thanks to an additional $9 million from pro-Jindal groups whose donors' identities are kept secret.

Jindal's super PAC, Believe Again, raised nearly $3.7 million last quarter. But the majority of Jindal's war chest is coming from a secretive nonprofit called America Next, which raised $4 million in the first quarter of 2015, according to the Washington Examiner.

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America Next is one of a growing number of "dark money" groups that qualify as 501(c)4 nonprofits, which have emerged as a powerful political fundraising tool for many campaigns. Unlike super PACs — the conduit of choice for billionaire donors in the 2012 presidential election — groups like America Next do not have to register with the FEC as super PACs do, nor are they required to disclose their donors. But they can give unlimited money for political lobbying. These groups allow candidates who've raised little from individual donors to stay in the race by relying almost entirely on groups funded by a select few anonymous donors.

"This is the 'Bring your Own Billionaire' election," says Melissa Yeager, a writer with the Sunlight Foundation, which tracks campaign funding and money in government. "This is what it takes to compete in this election cycle."

America Next raised $2.4 million in its first year after being quietly created in Virginia in 2013, according to its tax filing documents. The group maintains that its purpose has nothing to do with elections and is instead a conservative free-market research organization. "We are not one of those groups that merely pretend to be focused on policy, but are actually focused on campaigns," its website says.

But America Next's website also features pictures and videos of Jindal at campaign events. As of its filing Friday, it had spent $340,000 on pro-Jindal television advertisements.

These dark money organizations, which are registered with the IRS as "social welfare" groups, are legally allowed to do direct political lobbying as long as it is not their primary purpose. But it is not clear what purpose many of the organizations serve beyond working on behalf of a candidate's interests. 

It's not just campaigns that are benefiting from these groups. For mega-donors, the benefit of using nonprofits as a conduit to a campaign is twofold: One, they allow a donor to remain anonymous. Two, there is a long delay between the donation and when the donation needs to be reported, explains Yeager. 

"By the time people start learning where the money came from, the election is over," she says. 

If a billionaire donor wanted to give millions of dollars to support a candidate, he or she could donate to a 501(c)4, which in turn would donate to the super PAC supporting the candidate. The super PAC is required to report its donors to the FEC, but the donation would be reported as coming from the nonprofit, masking the identity of the original donor.

"The problem is that a lot of these groups do political work and their purpose is clearly to influence elections, but they claim that's not what they're all about," says Larry Noble, senior counsel at the Campaign Legal Center, which monitors violations of campaign finance regulations. "So for that reason they don't register as political committees, they don't register their political donors, and the FEC has not done anything about them."

Nonprofits are not new, but the extent to which they're used to further circumvent the dwindling restrictions on money in elections has grown recently. The murky nonprofits played a large role during the 2014 midterm elections, according to the Center for Responsive Politics (CRP), by funding waves of political advertisements late into the election.

Even though the 2016 election is more than a year away, the role of dark money is already dwarfing past cycles. Outside spending on campaigns is up by more than a third compared to this point during the 2014 midterm elections, reported the CRP. Dark money nonprofits like Jindal's have so far spent more than $4.6 million on the 2016 election, up from just over $300,000 at this point in the 2012 presidential election.

Details about the money these nonprofits control are difficult to come by. Since they're not regulated by the FEC, information on how much money they have or where it is being spent does not emerge until they file with the IRS, which is often not until long after the election is over. Even then, the names of their donors remains anonymous. This means that "voters won't have a chance to see who is behind these groups and where they sent their money until well after they've cast their votes," Yaeger says.

The only way to get a sense of these nonprofits' activity during the election season is if they directly pay for political ads, which they can do a small amount since they are required to disclose that money to the FEC. But most nonprofits get around this regulation by donating to super PACS, which can then run the ads for them. Or they spread out donations to a wider swath of issues or candidates over time so they cannot be accused of carrying out activities on the behalf of a political campaign.

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Most candidates are now supported by both super PACs and nonprofits that work in tandem, Noble says. Marco Rubio's campaign is relying almost entirely on his allied nonprofit, Conservative Solutions Project, to run his ads across the country. Outside groups have raised $6 million for Mike Huckabee, while his actual campaign raised only $2 million in the most recent quarter.

Groups like the Campaign Legal Center have filed complaints with the FEC and the IRS over some of these nonprofits and other groups but have little to show for it. Noble says this is because the FEC is hampered by gridlock and unable or unwilling to enact much change. This could mean that for future elections, most of the actual campaigning is probably not going to be done by campaigns. 

Follow Olivia Becker on Twitter: @obecker928

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