Art Pope and the Corporate Takeover of Democracy

Ask a casual political observer to name the nation's biggest Republican operatives, and a few would come readily to mind. Most could you tell you about Karl Rove, the legendary Bush adviser and GOP strategist who this year aims to spend $52 million by November to help elect conservative candidates.

Some might even know Charles and David Koch, the Kansas-based oil billionaires who have poured over a hundred million dollars since 1980 into conservative causes and spent millions more on political candidates and lobbyists.

Fewer still could tell you about James "Art" Pope, but that could change after this year. While lacking big-time name recognition, the North Carolina retail magnate and former state legislator has quietly built a smaller but formidable Koch-like political apparatus that's rapidly growing beyond his home state -- where a local paper dubbed him the "Knight of the Right" -- onto the national stage.

But a centerpiece of Pope's strategy for flexing his political muscle this election year has included funneling money to ostensibly non-partisan "social welfare" nonprofits, which then use these resources to run political attack ads -- a practice critics say violates federal tax laws and a former Internal Revenue Service investigator recently called "a farce."

A National Political Player

Art Pope may not be a household name, but two of his leading operations have made a splash on the conservative political scene: Americans for Prosperity and its sister group, the Americans for Prosperity Foundation.

Pope is one of four national directors of Americans for Prosperity, shepherding the group through a period of rapid growth, especially after AfP took a lead role in organizing the national April 2009 Tax Day Tea Party protests.

Pope has also been a critical benefactor of the Americans for Prosperity Foundation, through his position as chair of the board of the John William Pope Foundation.

A Facing South analysis of the Pope Foundation's tax filings shows it has given over $1.3 million to the Americans for Prosperity Foundation since 2004, making Pope the group's  second largest institutional backer in the country.

Pope's investment in this leading voice for the right has grown dramatically in recent years: In 2008, the Pope Foundation gave $300,000 to the AfP Foundation; by 2009, the amount had skyrocketed to $500,000.

But other than information that can be gleaned from such reports filed by grant-making foundations, the donors to Americans for Prosperity and the AfP Foundation are shrouded in mystery. That's because both groups are designated by the IRS as nonprofit, non-partisan "social welfare" organizations, though of different kinds, which aren't required to reveal their backers -- making them attractive places for Pope and other political operatives to inject money without a trace.

AfP proper is a so-called 501(c)(4) organization, named after the section of IRS tax code regulating its activity. 501(c)(4) groups can engage in some forms of political advocacy, although the IRS states
that "the promotion of social welfare does not include direct or
indirect participation or intervention in political campaigns on behalf
of or in opposition to any candidate for public office."

"The rule of thumb," the New York Times notes, "is that more than 50 percent of a 501(c)(4)'s activities cannot be political."

As for the AfP Foundation, it's a 501(c)(3) group and subject to rules that are more strict: In exchange for being able to accept tax-deductible donations, the IRS demands that (c)(3)'s refrain from "activities which constitute participation or intervention in a
political campaign on behalf of or in opposition to a candidate." This includes "the publication or distribution of written or printed statements or the making of oral statements on behalf of or in opposition to such a candidate."

Complicating matters further, 501(c)(3) groups like the AfP Foundation can raise money under the stricter rules, but then turn around and share a portion of their resources with a 501(c)(4) affiliate -- but the IRS rules prohibiting nonprofits' partisan political intervention remain.

"November is Coming"

Despite these barriers, both Americans for Prosperity and the AfP Foundation have boldly entered the political stage in this year's hotly-contested elections -- pushing, and some say violating, the limits on nonprofit involvement in politics.

Americans for Prosperity has made no secret of its interest in the 2010 elections: In spring of this year, they launched November Is Coming, a website and roadshow designed to "send a clear message to our elected officials" that "if they support big government programs or other freedom-killing policies," AfP members will "remember in November."

AfP has also been deeply involved in the Tea Party cause, which has been unabashed in its support for Republicans in opposition to Obama and the Democrats. As Jane Mayer documented in a widely-circulated piece in The New Yorker in August, AfP hosted a website offering supporters "Tea Party Talking Points." The North Carolina AfP branch launched a "Tea Party Finder" Web site, advertised as "a hub for all the Tea Parties in North Carolina."

As the 2010 elections have heated up, the money the Koch brothers and Pope have injected into AfP and the AfP Foundation has been increasingly channeled to political purposes. In mid-August, AfP announced a $4.1 million ad campaign targeting over two dozen tight Congressional districts in 11 states. Democrats hold all but one of the seats in question, including 17 incumbents seeking re-election. Overall, AfP plans to raise $45 million for political ads this election cycle.

What do the ads say? Those sponsored by Americans for Prosperity -- the 501(c)(4) side of the operation -- target Democrats by name, like this attack on Colorado's Rep. Betsy Markey:

"Betsy voted for Cap-and-Trade, the new energy taxes that would cost Colorado thousands of jobs, and Markey betrayed us by voting for a government health care plan that cuts $500 billion from Medicare," the ad states. "Tell Betsy Markey: 'It's time to start working for Colorado again.'"

An ad targeting Rep. Danny Heck in Washington -- part of an $180,000 campaign launched by AfP the day after Heck won his primary -- says the name of the Democratic incumbent six times.

A growing chorus of legal experts and election advocates say using non-partisan 501(c)(4) organizations for such apparently partisan purposes likely violates the law.

In a letter to the IRS this week, the Campaign Legal Center and Democracy 21 called for officials to
investigate Crossroads GPS, a (c)(4) group similar to AfP founded by Republican strategist Karl Rove, arguing:

In our view, Crossroads GPS is a classic example of a 501(c)(4) organization that is impermissibly using its tax status to spend tens of millions of dollars in the 2010 congressional races while hiding the donors funding these expenditures from the American people.

What about the Americans for Prosperity Foundation? Ads coming from AfP's 501(c)(3) side are understandably more careful: They don't mention candidates, instead vaguely calling on voters to oppose "pork projects" and "wasteful spending."

But the ads coming from AfP and the AfP Foundation target the exact same Congressional districts. In Kansas and Michigan, the AfP and AfP Foundation ads also appeared within one week of each other.

That coordination led the Democratic Congressional Campaign Committee to call for an IRS investigation into what it calls "illegal election ads" that violate the AfP Foundation's 501(c)(3) tax-exempt status and "are being used to mislead voters."

Politics Back Home: Civitas Action

In Pope's home state of North Carolina, the conservative donor is raising many of the same questions through his backing of a similar 501(c)(4) operation, Civitas Action.

Civitas Action was launched in 2008 as the political advocacy arm of the Raleigh, N.C.-based John W. Pope Civitas Institute, a 501(c)(3) conservative think tank named after Art Pope's father and which depends largely on Art Pope's support.

A Facing South analysis finds that the Pope Foundation has given nearly $6 million to the Civitas Institute since 2005 -- accounting for about 99 percent of the group's foundation support between 2005 and 2009.

This week, Civitas Action made its first foray into election-year politics, spending $5,750 targeting North Carolina's two leading Democrats in the legislature: Democratic House Speaker Joe Hackney and Senate leader Marc Basnight.

Francis De Luca, president of the parent Civitas Institute -- and former state director of the North Carolina branch of Americans for Prosperity -- said the mailings targeting Hackney and Basnight were just an opening salvo. "I would plan on us doing other mailers," De Luca told the AP.

Civitas Action has Pope to thank for their new presence on the electoral stage: The group's Sept. 27 filing with the State Board of Elections [pdf] reports Civitas Action has raised $264,889 for "electioneering communications" in 2010. Of that, $190,000 came directly from Variety Wholesalers, the retail company Art Pope owns.

The balance of Civitas Action's reported income came from Americans for Prosperity, where Pope is a director and whose sister group AfP Foundation is crucially backed by Pope funds.

Change on the Horizon?

The emergence of groups like Americans for Prosperity, Civitas Action and Rove's American Crossroads on this year's election scene -- bolstered by the recent Citizens United court decision which opened up channels for corporate spending -- is raising questions about the role of nonprofits in politics, but will it lead to change?

Few are holding their breath. The IRS doesn't have the capacity to monitor them, and because there's little revenue collection involved there's not much incentive to aggressively pursue suspected violators. As Marcus Owens, who used to head the IRS division responsible for investigating such violations, told the New York Times:

These groups are popping up like mushrooms after a rain right now, and many of them will be out of business by late November. Technically, they would have until January 2012 at the earliest to file anything with the I.R.S. It's a farce.

But increased public scrutiny alone may be having impact: With secrecy being one of the chief appeals of funneling money through nonprofits, the Colorado Independent reports that the prospect of IRS investigations may be starting to spook potential donors:

One of Washington's best connected Republicans e-mailed the Washington Independent: "We are telling all of our clients, do not give a cent unless you accept the possibility that one day your contribution will be well be public... I do not think you will see many blue chip companies, this is more for the wealthy."

In the meantime, Art Pope has deep pockets and a government to change. After all, November is coming.