Group That Backed Tom Cotton In '14 Got A Big Boost From Club For Growth

by Robert Maguire

Mitch McConnell may have been grateful to many for his party's gains in the 2014 midterms -- victories that saw him sworn in as the new majority leader of a GOP-controlled Senate. But somewhere near the top of his "thank you" list should have been those who were running a handful of shadowy groups in North Carolina, Kentucky and Arkansas that spent millions of dollars to help Republicans in tight races without disclosing who was funding them.

In Arkansas, one of those groups was a little-known 501(c)(4) social welfare organization called the Government Integrity Fund (GIF), which invested heavily to bolster now-Sen. Tom Cotton's bid to unseat incumbent Democrat Mark Pryor. New tax documents obtained by OpenSecrets Blog show that GIF was partly bankrolled by one of the most influential conservative organizations in the country, the Club for Growth.

In late 2014, Club for Growth poured $1.1 million -- or about 15 percent of its spending for the year -- into GIF. Both groups aired TV ads and otherwise went all in to support Cotton's ultimately successful campaign, a pivotal race in the GOP's march to retake control of the Senate.

Unnatural transfers in the Natural State

Social welfare groups like the Club for Growth - which don't have to disclose their funders to the public - are supposed to limit politicking to less than half of their overall spending. However, lax oversight from the IRS and the FEC coupled with a lack of clarity in the rules has allowed these groups to spend hundreds of millions of dollars trying to influence elections, with few questions asked.

The Club for Growth grant setup suggests that GIF -- which is run by a state lobbyist but has no paid employees and lists a Columbus, Ohio, P.O. box as its only address -- was a pass-through for money that the larger group wanted to spend on the election. It's a system frequently used by politically active nonprofits to make their spending look more like it has a social welfare purpose.

The (c)(4) arm of the Club for Growth, an aggressively conservative group that has spent money opposing moderate Republicans as well as Democrats, told the FEC it spent $1.4 million on politics in 2012, not much compared with the more than $16 million spent by its super PAC. In 2016, though, the group appears to have upped the use of its (c)(4), reporting $3.5 million in spending through the year's first quarter, while its super PAC has laid out another $12.4 million. (The organization has spent $10 million opposing Donald Trump's bid for the GOP nomination.)

GIF itself has left almost no paper trail for most of its activities in 2014 -- yet. After numerous unsuccessful attempts by OpenSecrets Blog to reach the group, an attorney representing GIF finally responded and said it planned to submit its annual Form 990 tax return by the end of next week. That would make it more than seven months late. Until that filing is received, it's impossible to say whether GIF exceeded the less-than-50-percent cap on political spending.

The filing containing Club for Growth's grant to GIF covers the period from July 2014 to June 2015. In the lead up to that July, though, GIF had already begun its spending spree. In the roughly one month between April 22 and May 14, 2014, GIF transferred more than $1 million to its super PAC -- the Government Integrity Fund Action Network -- which in turn spent all of the money on pro-Cotton ads. In other words, the super PAC's only donor in 2014 was its own (c)(4), and all of its spending was directed at boosting just one candidate, Tom Cotton.

None of that earlier money appears to have come from Club for Growth, and the source is still unknown.

The super PAC hired the political media firm Target Enterprises to make pro-Cotton ads in April and May, according to FEC filings reviewed by the OpenSecrets Blog. Just a few months later, in July, that same firm began making ad buys on behalf of GIF's (c)(4) arm at GIF president Tom Norris's request, according to Federal Communications Commission filings.

The FCC filings -- submitted by the stations where the ads were run -- are the only available documents that make it possible to track GIF's second wave of electioneering over the summer, as none of the (c)(4)'s direct political spending was ever reported to the FEC. And that second installment came with a $1.1 million price tag, according to Politico -- in other words, precisely the size of the Club for Growth grant. Club for Growth had been one of the earliest backers of Cotton's campaign, and its own super PAC was spending heavily against Cotton's opponent, Mark Pryor.

GIF's total expenditures of nearly $2.2 million in the Arkansas Senate race were surprising, given that the  organization had only raised $25,000 in the preceding year, 2013.

Nodes in a larger network

Neither GIF nor its media vendor, Target Enterprises, are strangers to tangled political networks. In 2012, Target was one of the firms being paid to support Laura Lingle's failed Senate campaign in Hawaii; Target, which counts former Republican Governors Association executive director Nick Ayers as a partner, was one of several companies run by former RGA officials to receive generous payments from GIF and other groups in its network.

Three other groups active in Arkansas in 2014, when GIF's super PAC was spending heavily, also were paying Target Enterprises: Club for Growth Action, Senate Conservatives Action, and Arkansas Horizon. One of Arkansas Horizon's donors was another nonprofit called Citizens for a Working America -- similarly, a nonprofit with Ohio political ties and strong funding links to GIF, including the 2012 funding network that was boosting Lingle. Citizens for a Working America's super PAC also paid GIF more than $34,000 for direct mail in 2014. Arkansas Horizon, like GIF's super PAC, and perhaps GIF itself, spent all of its money in 2014 supporting Tom Cotton.

Larger Trend

GIF's attempts to influence the makeup of Congress didn't happen in a vacuum; it was one of several groups operating around the country to help GOP candidates unseat incumbent Democrats. In North Carolina, for example - one of the most contentious Senate races of the cycle - a 501(c)(4) called Carolina Rising sprang up and spent $4.7 million on ads supporting Thom Tillis (R-N.C.) who would go on to defeat Democrat Kay Hagan. Carolina Rising's pro-Tillis spending made up nearly 100 percent of the group's activities -- despite the fact that nonprofits are not supposed to be political organizations - and nearly all of that money came from another massive (c)(4), Crossroads GPS, which was itself spending millions in the state supporting Tillis.

States with hard-fought Senate races in 2014 saw thousands of ads from single-candidate nonprofits, Koch-network organizations and liberal dark money groups with ties to the Democratic establishment. Many, if not most, of those ads weren't ever reported to the FEC and none of the groups' donors were made public, except when news outlets like OpenSecrets Blog and others have been able to ferret them out.

The 2016 Senate races have been awash in spending by groups like GIF, indicating it's likely the pattern will repeat.