How undisclosed money works its way in

OpenSecrets, Morning Call report on “financial gymnastics” in PA Senate primary

PENNSYLVANIA — The US Senate primary here may be over, but the work of understanding how the contest was played—and shedding light on who paid to play—goes on, thanks to enterprise reporting by the Center for Responsive Politics’s OpenSecrets Blog and additional reporting by The (Allentown) Morning Call.

The April 24 contest itself wasn’t close, with Republican nominee Tom Smith self-financing more than $4.5 million in the primary alone on the way to garnering nearly 300,000 votes, or about a 40 percent share. GOP primary challenger Steven Welch, who had the backing of Gov. Tom Corbett and much of the establishment, came in third with about half as many votes and a fraction of Smith’s spending.

Just days before the primary, nearly $175,000 in anti-Smith advertising hit the airwaves here—ads that were funded through a network of groups whose donors are unknown, according to a detailed report last week by OpenSecrets Blog, a website of the Center for Responsive Politics (one of the follow-the-money resources CJR wrote about here).

The report by Dan Glaun provides a perfect, explainable encapsulation of how undisclosed money works its way into campaigns. Or, as Glaun put it, the “financial gymnastics [that] appear designed to avoid revealing the donors behind [anti-Smith] advertisements while adhering to the letter of campaign finance law.”

Here’s a quick summary: The super PAC Freedom Fund for America’s Future spent about $175,000 on television ads attacking Smith for his Democratic background. Nearly all of that money came from another super PAC, Fight for the Dream, which, according to OpenSecrets (and, despite disclosure rules) had disclosed little except its UPS Store box number in Allentown, PA—a box rented by Wayne Woodman, a former finance chairman for Welch and chairman of the Lehigh County Republican Party, according to OpenSecrets’s report.

There’s more: according to a July 14th Federal Election Commission filing, all of Fight for the Dream’s funding, in turn, came from yet a third group called Restore the Dream—a 501(c)4 “social welfare” nonprofit that doesn’t have to disclose its donors but happens to share the same address as Fight for the Dream.

Super PACs, of course, must disclose their donors, but quarterly disclosure schedules mean the public may not know who donors are—or, in this case, that they can’t know who donors are—until after votes are cast. (Left-leaning ThinkProgress pointed out, the day before the GOP Senate primary here, that this was the case for the money behind Freedom Fund for America’s Future and its Pennsylvania ad buys).

Some more specifics, as described by OpenSecrets’s Glaun:

Woodman, after resigning from his position in Welch’s campaign, set up the super PAC Fight for the Dream and the nonprofit Restore the Dream in April with the help of … his legal counsel. Restore the Dream made transfers to Fight for the Dream totaling $174,800 on April 11, 19 and 20. One day after each transaction, Fight for the Dream gave the money to Freedom Fund for America’s Future, which used those funds to make nearly all of its $175,000 in ad buys against Welch’s opponent Smith on April 19 and 20.

The bottom line?

The transactions between the two super PACs and the non-disclosing nonprofit provide a stark example of how disclosure requirements are sometimes rendered meaningless. By law, super PACs must reveal their donors to the public via their reports to the FEC. But when the donor is ultimately another group or an LLC that is under no legal mandate to say where its money is coming from, voters actually learn very little.

After OpenSecrets published its report, The Morning Call advanced the story, explaining for its Allentown regional audience how, in effect, “no one will know who paid for the Smith attack ad[s],” but that the funds were “arranged locally.” Reporters Colby Itkowitz and Scott Kraus interviewed Woodman and described how his 501(c)4, Restore the Dream, must—in order to maintain its non-disclosing status—do more than fund attack ads. Wrote Itkowitz and Kraus:

So far, Restore the Dream’s only activity has been giving money to a political action committee, but as long as it does more education and advocacy in the same fiscal year — as Woodman says it plans to do — the arrangement is lawful.

PoliticsPA blog, too, reported last week on this “unknown funding” (citing OpenSecrets).

In the end, the Welch-supporting arrangement was the equivalent of a hidden-ball trick, with the score of the game about 35-10 in the fourth quarter. Now that the season’s over, and with the Welch team not making the playoffs, there’s perhaps less interest in following the story. (And, indeed, there is a lot going on in Pennsylvania these days—some of it even having to do with football.)

But Fight for the Dream and Restore the Dream plan to stick around. Indeed, Woodman told OpenSecrets that Fight for the Dream’s “efforts did not end with Welch’s defeat, and the group will continue to raise and spend money on political campaigns.” Pennsylvania media outlets should keep these groups (and others like them) on their radar. Voters deserve to know how campaign finance disclosure requirements can be made meaningless, leaving them—along with lots of money—in the dark.

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Ken Knelly served as metro editor at The Times-Tribune in Scranton and as senior editor for government and business at The State in Columbia, S.C. He owns Clearberries, a communications consulting and training firm, and works for a Christian college in Northeastern Pennsylvania.