FEC Dark Money Fine Shows Limits of Disclosure (Again)

by Robert Maguire

Sean Noble ran the Center to Protect Patient Rights, which was the hub of the Koch network of groups for several years. (LinkedIn)

This week, the Federal Election Commission did the unthinkable. The agency most frequently characterized by its constant, crippling deadlock levied a substantial fine against three large politically active nonprofit groups.

The decision also required the groups to amend past FEC filings to disclose who provided their funding. But because the source was, itself, another nondisclosing group, the public has learned very little.

The fine -- first made public by Citizens for Responsibility and Ethics in Washington (CREW), which originally brought the complaint in 2014 -- totaled $233,000 split among three groups: Americans for Job Security, American Future Fund, and the 60 Plus Association.

The penalty now ranks among the top 25 highest total fines ever brought by the FEC, and the largest ever brought for activity in a post-Citizens United election, according to this list of cases maintained by the FEC.

The violations at the heart of the enforcement action stretch all the way back to the 2010 midterms and the Tea Party wave that flipped the House into GOP control. The complaint centers on a group called the Center to Protect Patient Rights (CPPR), a 501(c)(4) social welfare organization, now called American Encore, which at the time was the hub of the Koch donor network.

CPPR didn't report any political spending to the FEC in 2010, but it did send $25.5 million to the three other groups, who together reported spending tens of millions of dollars supporting Republican House candidates.

Normally, AJS and the other organizations wouldn't have to report that CPPR was the source of funds for the ads; disclosure would only be required if the grants were "earmarked" for specific expenditures in specific races. Such earmarking is rare, which is why 501(c) groups almost never disclose their donors -- and, hence, are referred to as "dark money" groups.

The FEC found, however, that the operative running CPPR, Sean Noble, was engaged in the selection of which races should be targeted, and his firm, Noble Associates, was sub-contracted to "produce and develop" some of the ads. Noble's substantial involvement in content selection for the ads and race targeting was sufficient grounds for the FEC to find that the contributions should have been disclosed as if they were earmarked.

The involvement of Noble Associates also highlights the close ties between Noble's firms and the groups he runs, an intertwining that in the past has led to allegations that he has profited handsomely from the political activities of his nonprofits.

The CREW complaint itself only materialized in 2014 because Noble described the set-up in detail for the National Review. By then, Noble's propensity to chat about his activities and get his groups into very public disputes with regulators had already led the Kochs to cut him loose.

While the three recipient groups will have to pay fines -- $50,000 for 60 Plus Association, $140,000 for American Future Fund, and $43,000 for Americans for Job Security -- they are getting what amounts to a pass on their disclosure. The conditions of their conciliation state that they must amend their FEC filings to identify CPPR as a donor in 2010, but that has long been public. When OpenSecrets Blog first discovered CPPR in 2012, we reported its contributions to these and other groups.

The FEC's donor reporting enforcement in this instance amounts to little more than a nondisclosure disclosure, because while the groups that ran the ads must reveal CPPR as their donor, CPPR doesn't have to reveal the sources of its own funds. The individuals or organizations that kept it in business as a major distributor of cash in the Koch network are still not known beyond what OpenSecrets Blog has been able to ferret out.

While Noble's ties to the Koch network at the time are clear, it is impossible to specify to what extent the Kochs themselves funded the group or who else in their orbit may have provided the money.

The lack of information becomes all the more stark when one considers that the FEC's decision has no bearing on the 2012 election, by which point CPPR was part of a network that raised more than $400 million and was responsible for at least 1 in 4 dark money dollars spent.

CPPR and its grantees aren't the first to manage to keep their donors secret despite forced disclosure, and they won't be the last. The dark money churn -- basically, the transfer of assets among connected groups to provide multiple layers of anonymity -- is what keeps a lot of these groups in business. The FEC's action this week, while important, proves the strategy works.