EP. 25 — THE FUNNEL

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Weston Wamp: I'm Weston Wamp, and this is Swamp Stories, presented by Issue One.

Advertisement #1: We know Jon Ossoff hid cash from Chinese communists and terrorist sympathizers, but Ossoff’s lies can’t hide his radical agenda — threatening to defund the police.

Advertisement #2: Now Perdue’s blocking help for small businesses and stopping stimulus checks for Georgians. David Perdue - he’s never been for you.

Weston Wamp: Those were just two of the ads that made Georgia’s two month runoff for the U.S. Senate a $500 million advertising bonanza. Nothing like it has been seen in American political history.

Research by OpenSecrets.org shows that $326 million of that came from outside groups — super PACs and 501c4s — and they were almost exclusively running negative ads.

So where does all the money come from? Well, billionaire Stephen Schwarzman, the CEO of Blackstone Group, gave $15 million for the runoff alone to the Senate Leadership Fund, which is the super PAC affiliated with then Senate Majority Leader Mitch McConnell and the same one that made that attack ad against Jon Ossoff that you just heard. Billionaire Hedge Fund Manager Ken Griffin gave $10 million. Billionaires Patrick Ryan and Tim Mellon gave $5 million a piece. 

And Majority Forward, the PAC that’s affiliated with then Senate Minority Leader Chuck Schumer and the one that’s responsible for that “Perdue has never been for you” rhyme, well they had plenty of their own billionaire donors like the founder of Netflix, Reed Hastings, who gave a million dollars.

The point is not to single out these wealthy businesspeople. The point is that we know who they are and which races they were wanting to influence because they played by the rules. Now we could debate whether this much money should be allowed to be given by a single donor, but each of these contributions was given directly to a super PAC, which by law is required to disclose the identities of its major donors.

The problem is that, increasingly, we don’t know the identities of donors giving to super PACs, while these groups are spending more than ever. Let me explain.

This is Episode 25 — The Funnel

Anna Massoglia: You have 501(c)(4)s dark money groups that just give to closely aligned groups that then spend. In many cases, these groups may even share staff, share resources, even share office space with these closely tied super PACs that they're giving money to, and it's basically just adding an extra step because the donor is giving to the dark money group that is then giving to the super PAC that is then spending, rather than the donor giving directly to the super PAC, the donor's identity is not disclosed.

Weston Wamp: As Anna Massoglia of OpenSecrets.org explains, the once rare practice of funneling dark money became a go-to strategy at the highest levels of government, on both sides of the aisle.

In the 2020 cycle, both the Senate majority leader and the Senate minority leader had affiliated super PACs, as well as 501(c)(4)s. In both cases, tens of millions of dollars were transferred from the 501(c)(4) straight to the affiliated super PAC. This is no small problem.

In the jargon of campaign law, the “primary purpose” of a 501(c)(4) nonprofit is not to be electioneering. It’s deep in these weeds that dark money thrives. Section 501 of IRS code really isn’t all that interesting to most people. And because no one is enforcing that part of the code, there’s a good chance you don’t know who paid for the attack ad you just watched on TV.

Danielle Caputo: The problem has come in that (c)(4)s especially, which are also kind of colloquially known as dark money groups, there's really no enforcement to make sure that their primary purpose is actually that social welfare aspect, as opposed to that lobbying aspect, or even trying to get candidates elected or to oppose them.

Weston Wamp: Danielle Caputo is Issue One’s Legislative Affairs and Programs Counsel.

Danielle Caputo: They are able to give just ridiculous amounts of money without ever knowing who's giving them, and then they give them to super PACs who disclose it's the (c)(4), but we don't know beyond that who actually gave that money.

Weston Wamp: And, as Caputo points out, the brazenness with which these 501(c)(4) organizations or similar opaque LLCs are being used to hide donors, without any consequences, begs an important question.

Danielle Caputo: Effectively you will know if an individual has donated to a super PAC, but what incentive is there for a wealthy individual who can give unlimited sums of money to a super PAC to do so directly in their own name when they could just as easily go and set up an LLC or have a (c)(4) that they don't even ... In some states, if you're setting up an LLC, you don't even have to give your name. So you would just have literally no record, no ability to know who is giving that money. There's really no incentive for anyone to know. So yeah, the super PACs are going to say this LLC, and this 501(c)(4) gave, but we don't actually know who those who's the person behind that veil.

Weston Wamp: Former Republican Congressman Denver Riggleman, echoes Caputo’s concern that it's easier than ever for a donor to effectively hide their identity.

Rep. Riggleman: You have all these individuals starting 501(c)(4)s to suck money in, but it does allow anonymity on a level that makes people very comfortable in a bad way that they can funnel those monies anywhere they need to go. 

Weston Wamp: I reached out to Riggleman for a different perspective. He’s made quite a name for himself calling ‘em like he sees ‘em in his first few months out of office. Riggleman isn’t your average politician in the first place. Right wing activists ran him out of office for officiating a same-sex wedding. Now he’s a private citizen running his whiskey distillery with his wife. And he sees a dark money industry that has an incentive to protect itself.

Rep. Riggleman: There's another dark side to this, as you know, is that you can easily leave Congress and go get a job with one of these super PACs or help a 501(c)(4). So are you going to cut your own umbilical that's feeding you all of this, not only during Congress or maybe after Congress. And big donors, you're going to isolate or make those big donors transparent that are actually putting monies through a 501(c)(4) that might somehow cost you some kind of job afterwards?

I think they're thinking about all of that and that's the issue with politics right now is it is a business. The business portion of this, I think, has trumped the service side of this. And I was screaming about this from the beginning, but I do believe that's where we're at right now is that business and money are just overwhelming the process right now.

Weston Wamp: Ultimately, the craze of outside spending that fueled a half a billion dollars spent in November and December in Georgia, is symptomatic of something much bigger according to Riggleman.

Rep. Riggleman: I think when you're looking at groups like what Trump is putting up right now, these huge left leaning groups, these huge PACs or huge 501(c)(4)s, I think now I think everybody believes this is some kind of tribal war between good and evil and sadly it's going away from policy to emotion. 

This is follow the money. And as long as the money is this large and people are making livings like this, I don't think money's going to go out of politics. Not this kind of money. I think it's just going to continue to increase.

Weston Wamp: So assume Riggleman is right, and the sums of money in campaigns isn’t going anywhere but up. How do we combat the latest tactics that keep voters in the dark about who’s funding the avalanche of negative ads that roll around every two years?

Danielle Caputo: Really, the best way to fight dark money is through transparency.

Weston Wamp: Caputo explained to me that there are five things Congress could do to make dark money less dark. First, it could require all groups, including (c)(4)s and other dark money groups, to disclose all the large contributions they receive.

Danielle Caputo: Large contributions being like $10,000, $50,000. Basically just the highest-level, not the average individual who is donating this money.

Weston Wamp: Second, disclose the biggest donors. 

Danielle Caputo: The top donors could be disclosed in the ad so that people know who is funding this advertisement beyond just the dark money group name.

Weston Wamp: Third, Congress should pass the Honest Ads Act, which would update online political advertising to be in line with television and radio requirements.

Danielle Caputo: With online advertising, one thing that’s really prevalent is that you would never know that an ad is out there unless it was being targeted at you. And so this would prevent that kind of invisibility shield by making it so that anyone could do a search and see what ads are out there.

Weston Wamp: Fourth, and more coming in future episodes about this, the Federal Election Commission, aka the FEC, needs to be strengthened.

Danielle Caputo: Right now, there’s no effective cop on the beat, even to ensure that the current laws that are in place are being effectively enforced. So by strengthening the FEC and making it a more effective agency, we would have better enforcement of the current laws and also new laws as they get passed.

Weston Wamp: Finally, Congress can try to strike a balance between privacy concerns and the public’s right to know who’s trying to influence them and their political decisions.

Danielle Caputo: Dark money groups could be required to create segregated funds — basically donors could choose to donate to the segregated fund that would be making the political or campaign expenses, and their names would be disclosed, or they could contribute to a general fund that would not engage in any campaign activities, and then that way they could choose to remain anonymous. 

Weston Wamp: On the next episode of Swamp Stories, we’re sitting down with a former Republican lawmaker who spoke truth to power as a member of Congress. And whose perspective on the 2020 election you won’t want to miss.

Weston Wamp: Thanks for listening to Swamp Stories, presented by Issue One, the country's leading political reform organization that unites Republicans, Democrats, and Independents to fix our broken political system. Please subscribe to the podcast and share it with your friends. Even better, rate and review it on iTunes to help us reach more listeners. You can find out more at swampstories.org. I'm your host Weston Wamp. A special thank you to executive producer, Ethan Rome, senior producer Evan Ottenfeld, producer Sydney Richards, and editor Parker from ParkerPodcasting.com. Swamp Stories was recorded in Tennessee, edited in Texas and can be found wherever you listen to podcasts.

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