Watchdog groups are demanding that state and federal officials investigate a $1 million donation from a mysterious firm to an independent political group backing Mitt Romney’s campaign in order to determine whether it violates federal campaign laws.
In a letter to Delaware Attorney General Beau Biden, the Public Campaign Action Fund claims that the giant contribution to Super PAC “Restore Our Future” from the firm W Spann LLC is out of bounds. As first reported by NBC’s Michale Isikoff, records show the firm was incorporated in the state in March and then dissolved in July with little apparent activity besides its donation and virtually no publicly available information on its owners.
“If Attorney General Biden doesn’t act soon, Delaware is likely to turn into the Cayman Islands of political fundraising,” David Donnelly, the group’s national campaigns director, wrote. “This is just another avenue for wealthy donors and maybe even foreign interests to influence who wins and loses American elections.”
Democracy 21, a nonprofit that seeks to limit the influence of money on elections, issued a similar call to federal officials.
“The apparent effort to keep secret the actual donor or donors of the $1 million may well be a violation of the campaign finance laws and this matter should be investigated by the Federal Election Commission and the Justice Department,” president Fred Wertheimer said in a statement.
Even in the freewheeling post-Citizens United era of campaign finance law in which corporations are allowed to spend unlimited cash on political ads, the $1 million donation from W Spann LLC’s mysterious short-lived firm is likely a legal bridge too far, experts say.
“If they put money into the corporation specifically for the purpose of making a political donation that would constitute, in my view, illegally making a donation to avoid disclosure,” Paul S. Ryan, FEC program director for the Campaign Legal Center, told TPM. “It’s difficult to fathom a legitimate explanation for creating a corporation, using it to contribution $1 million to a Super PAC, then dissolving it almost immediately.”
Under current campaign finance laws, “no person shall make a contribution in the name of another person or knowingly permit his name to be used to effect such a contribution,” meaning that political donors cannot launder their contributions through a phony surrogate in order to hide their true identity. The provision has been used to prevent employers from reimbursing their employees for donations to their favored candidate, for example. Creating a shell company to obscure donations is new territory, however, since corporations could not directly donate to campaigns until the last election cycle, meaning there would have been no motive to do so.
“This is the first I’ve heard of it,” Richard Hasen, law professor at UC-Irvine and expert on campaign finance regulations, told TPM. “This seems unusually brazen, but of course if it works then it will become more commonplace.”
Experts and watchdog groups say the W Spann case highlights broader disclosure problems in the post-Citizens United era. One issue is whether corporations could be used as a vehicle for anonymous donations from foreign nationals. While only Americans can legally contribute, the FEC’s three Republican commissioners have blocked efforts to craft rules defining exactly how this applies to corporations, who may be partially owned by foreign entities or may be an American subsidiary of a foreign company. Politico’s Ben Smith noted on Thursday that the issue is particularly relevant to “Restore Our Future” because, unlike anonymous-money nonprofits like Karl Rove’s “Crossroads GPS,” Super PACs only report their contributions to the FEC and not to the more aggressive IRS.
“There are some clear aspects of the law regarding foreign nationals, but we have virtually no information about this straw corporation and whether it’s foreign-owned, or whether it’s American-owned, or whether it’s owned by a foreign national or by multiple owners,” Ryan said. “Which makes it worthwhile for the FEC and Department of Justice to look into this.”
Benjy Sarlin is a reporter for Talking Points Memo and co-writes the campaign blog, TPM2012. He previously reported for The Daily Beast/Newsweek as their Washington Correspondent and covered local politics for the New York Sun.