Karl Rove: Too Clever For His Own Good With Crossroads GPS Secrecy?

How 'Too Clever' Secretive Political Fundraising Groups May Fail

WASHINGTON -- Measures that secretive political groups keep coming up with to avoid disclosing donors may eventually backfire, Rep. Chris Van Hollen (D-Md.) said Wednesday.

"These organizations are doing all sorts of gymnastics to try to prevent voters from knowing the sources of their funding," Van Hollen said at a conference on "Shadow Money" hosted by the Center for Responsive Politics. "I think they're already becoming too clever for their own good."

Van Hollen succeeded in closing one of the most consequential campaign finance loopholes affecting the 2012 race last month, when an appellate court turned down a request to delay a district court ruling in his favor.

As a result, even secretive nonprofit groups organized under sections 501(c)(4) or 501(c)(6) of the tax code now must disclose major donors if they buy certain kinds of broadcast ads. These ads, known as "electioneering communications," mention a federal candidate's name during a prescribed period before an election, but don't explicitly call for a candidate's election or defeat.

Such ads were a favorite of secretive groups in 2010, because as long as, say, a negative ad about a candidate didn't explicitly call for his or her defeat, the groups could claim that they were "issue ads" -- and not actually political.

In its tax forms, for instance, Karl Rove's Crossroads GPS group claimed that all of its spending on issue ads qualified it as a non-disclosing "social welfare group." An organization mostly political in nature would have to disclose donors.

The immediate effect of the ruling in the Van Hollen case was that secretive groups like Crossroads GPS and the U.S. Chamber of Commerce stopped buying electioneering communications. And they found another way around the disclosure rules.

Chamber of Commerce President Tom Donohue told reporters that his group would still spend at least $50 million dollars in 2012 elections and would continue to hide its donors. How? By abandoning the pretense of issue ads and instead specifically supporting or opposing candidates. Such "express advocacy ads" still qualify for the disclosure loophole.

But the consequences could ultimately be dire, Van Hollen said Monday. Rove's group, for instance, could now find it vastly more difficult to make the case to the IRS that it is a non-political organization.

Another group, the conservative American Future Fund, has asked the Federal Election Commission whether it could keep donors secret as long as it uses "White House" or "administration" in ads instead of "Obama."

"They are trying to figure their way through this thicket that they themselves have created [by] hijacking the form of a charitable organization for political purposes," Van Hollen said.

And to the extent that groups choose to run express advocacy ads rather than the slightly vaguer issue ads, "some groups will risk alienating their members," Van Hollen said.

"I think there are some members of the Chamber of Commerce who may become a little more uncomfortable when the chamber can no longer argue that the ads are aimed at issues that they care about," but are instead explicitly election-related, Van Hollen said.

"It removes the thin veil of deniability."

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