Tonight, President Obama will address the “founders summit” of Organizing for Action, the political advocacy group created to promote his second term agenda. The moment will complete an important reversal in the president’s stance on campaign finance: an unmistakable embrace of politically active nonprofits known as “social welfare” organizations—or 501(c)4s, per the IRS—entities that Obama once decried as a threat to American democracy for accepting unlimited and often undisclosed donations.
OFA drew howls of protest from reform groups when it was formed in January out of the remaining infrastructure of Obama’s reelection campaign. Bob Edgar, the president of Common Cause, told the New York Times last month that the setup “just smells,” and Common Cause, Democracy 21 and other organizations called on the president to shut it down.
Following this storm of criticism, OFA President (and former Obama campaign manager) Jim Messina announced several measures last week intended to improve the group’s transparency and curb the influence of special interests. OFA will not accept contributions from lobbyists, corporations or foreign donors. It will also disclose on a quarterly basis the names of donors who contribute more than $250, as well as the amount that they contribute.
OFA did not respond to written questions from CJR. But both the organization and the White House have described the current arrangement as a means of facilitating grassroots advocacy on behalf of popular Obama agenda items, such as immigration reform and gun control, without opening the door to undue influence. “There’s going to be no opportunity to lobby the president through this organization,” Ben LaBolt, an advisor to OFA and former Obama campaign spokesman, told CNN.
However, the reassurances from the Obama and OFA teams paper over important loopholes that undermine their recent pledges to shun special interest contributions. Good government groups say a number of common tactics for funneling political donations could allow lobbyists and corporations to circumvent OFA’s latest guidelines and direct major dollars to the group.
Reporters at the local and national levels should keep close watch for the strategies outlined below, both in scrutinizing OFA’s activities and in uncovering the identities and agendas of donors from within their own communities. The tactics are also applied to avoid disclosure under the more restrictive rules guiding traditional donations to candidates, and should be on the radar of all reporters covering money in politics.
Here are four techniques that special interests can still use to steer unlimited sums into the president’s new operation without leaving a fingerprint:
1) Use Unregistered Lobbyists
OFA’s new policy prohibits federal lobbyists—who are required to register with the US Senate—from contributing to the organization. But under the complex rules that govern lobbying, some people who engage in lobbying activities manage to avoid registration. At Obama’s second inaugural celebration, for example, the Sunlight Foundation found that in spite of an official ban on lobbyists there were several deregistered lobbyists in attendance who were still lobbying part-time, directing other lobbyists, or providing “government relations strategy” advice.
These unregistered lobbyists can further boost their influence by acting as “bundlers”—elite fundraisers who solicit contributions from relatives, friends and business associates and deliver the entire package of funds in a bundle. The Center for Public Integrity reported last week that a number of top bundlers in Obama’s reelection campaign (whose infrastructure was used to form OFA) had significant ties to the lobbying industry. In 2011, The New York Times found that the directors of the lobby shops at Pfizer and Comcast Corporation, respectively, were not registered as lobbyists themselves and had each bundled $500,000 for President Obama’s reelection bid.
OFA has not indicated that it will disclose who its bundlers are—501(c)4s are not required to do so—leaving the public without any way of knowing who is performing this crucial fundraising role.
2) ‘Laundered’ Contributions
One of the primary concerns of good government groups is that donations could be channeled (or “laundered”) through an intermediary by a lobbyist or special interest group seeking to contribute to OFA. For example, an unscrupulous lobbyist could tell a client—or a member of his or her own firm who is not registered to lobby—to make a major contribution to OFA, which would then be written off as a business expense or reimbursed through a salary increase or bonus.
“This is ripe for Jack Abramoff style lobbyists to find other ways to channel the money,” said Edgar, the president of Common Cause.
Contributions channeled through straw donors have sparked scandals in the past, such as the criminal prosecution surrounding the Buddhist monks who were listed as Clinton-Gore donors in their 1996 reelection campaign. But these scandals came to light in large part because of the detailed disclosures required by the Federal Election Commission, which offered a clear record of the donations in question. In the case of OFA, the quality and even the fact of disclosure is entirely voluntary, as is the prohibition on accepting corporate and lobbyist cash.
“There’s no legal enforcement mechanism,” said Lisa Rosenberg of the Sunlight Foundation. “Except for the public outcry if they took money that they said they wouldn’t take, there’s no ramifications” for OFA if it receives contributions funneled from special interest groups.
3) In-kind Contributions
OFA has said that it will not take money from corporations or lobbyists, but major companies have already provided the group with valuable in-kind contributions. In-kind contributions can include hosting or sponsoring events, or otherwise offering facilities, goods or services free of charge.
The January conference in which OFA was unveiled to donors, reported Politico’s Kenneth Vogel, was sponsored by a trade association called Business Forward. Business Forward is funded by influential corporations including Walmart, Microsoft and PG&E, each of which sent representatives to participate in the event.
OFA has not indicated that it will disclose in-kind contributions, and it is not known if they have received such contributions for today’s “founders summit.”
4) Delayed Disclosure
OFA president Messina has pledged that the group will disclose its donors, and the amount of their contributions, on a quarterly basis. But that may be too long a delay to shed light a contribution’s influence before the donor has already gotten what he or she wanted. A federal agency may change a rule or award a contract, or a bill may move through Congress, sufficiently quickly that the outcome is decided before the relevant donations have been disclosed.
Rosenberg of the Sunlight Foundation called on OFA to adopt “real time reporting” of its contributions and expenditures. “For me there’s no good reason to delay disclosure at all,” she said.
As OFA kicks into gear, reporters across the country should keep their eyes open to see whether its financial practices are living up to the grassroots rhetoric that it has employed to describe its founding summit tonight.
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