Never Mind Super PACs: How Big Business Is Buying the Election
For its part, the pharmaceutical industry’s trade association, PhRMA, boasts many French and British firms with US subsidiaries as members. In 2010, after passage of the Affordable Care Act, PhRMA transferred millions of dollars to PACs to curry favor on both sides of the aisle: $4.5 million went to the American Action Network, a Republican group set up to run ads against Democrats (one famously claimed that convicted rapists would receive Viagra “paid for by the new health bill”), while $3.4 million went to a Democratic-aligned Super PAC called Citizens for Strength and Security.
PhRMA’s electioneering came at a time when the industry needed to cultivate political capital with both parties. The industry sought to reward the Democrats for expanding prescription-drug subsidies for seniors as well as protecting drug companies from generic competitors—both part of Obama’s healthcare reform package. On the other hand, PhRMA was counting on Republicans to block government studies that would pit drugs against each other in order to create cost-conscious treatment protocols that would eliminate waste—but put drug sales at risk.
Some progressive organizations, such as community credit unions, have benefited from the new latitude granted by Citizens United. The Credit Union National Association, for example, has lobbied obsessively over one bill, the Small Business Lending Enhancement Act, that would lift the amount credit unions can lend to businesses from 12.25 to 27.5 percent of their assets. The higher rate, credit unions claim, would make them competitive with commercial banks.
Still, it was the group’s direct electioneering that seems to have produced results. CUNA mobilized its members to send 600,000 partisan mailings during the midterm elections, carrying explicit messages like “Support Rob Woodall for Congress.” Trey Hawkins, CUNA’s vice president for political affairs, said that credit unions went in big for Suzanne Bonamici, the Democrat running to fill the Oregon Congressional seat left vacant by David Wu earlier this year. Bonamici won, and her first official act as a member of Congress was to co-sponsor the small business lending legislation. (Check out CUNA's PowerPoint for members, "The Election 2012 and Your Credit Union.")
But the spending by such groups (in CUNA’s case, slightly over $1 million during the 2010 midterms) is eclipsed by major corporate trade groups like the US Chamber of Commerce, which spent a reported $75 million on electioneering in 2010—a sum larger than any of the Super PACs’ in that election cycle. At least $32.8 million of that spending would have been illegal before the Roberts Court deregulated the system.
The US Chamber of Commerce, like many large trade associations, is international in scope. As I reported in 2010, foreign businesses—many of which have little in the way of US operations, such as the Bahrain Financial Harbour Holding Company—contributed at least $885,000 to the Chamber’s 501(c)(6), the entity that pays for partisan attack ads. The Chamber acknowledged the foreign funds but claimed that the money was segregated from its domestic corporate dues. The American Petroleum Institute and the American Chemistry Council may also segregate their foreign funds from their domestic money—but no one knows for sure, because they aren’t required to say.
“The segregating of money within a trade association, that’s a plausible defense. But as an outsider, I have no idea if they’re mixing their foreign money with their domestic money,” said Ciara Torres-Spelliscy, a legal expert who formerly covered campaign finance for the Brennan Center for Justice.
Current FEC rules allow a foreign-owned corporation to spend in an American election as long as its subsidiary is registered in the United States, the money used for electioneering is generated from US-based operations, and the election spending decisions are made by American citizens or green-card holders.
But under current law, there’s no way to audit foreign corporate spending when it occurs through trade associations. “Precisely because there is no disclosure by these groups, there is no way to monitor what they’re doing,” said Trevor Potter, a former FEC chairman.
Labor unions, like trade associations, are organized under Section 501 of the Internal Revenue Code. But unions are forced to disclose all of their political spending; the LM forms that unions have to file with the Department of Labor list all of their spending in detail, making them uniquely transparent.
By contrast, information about trade associations’ campaign activities only gets out if corporations choose to disclose it—or do so by accident. Some companies, such as the drugmaker Merck, have adopted governance policies that require disclosure of contributions to trade associations. Then there are companies like Aetna, the health insurance giant, which accidentally revealed on a regulatory filing that it had given $4 million to the Chamber in 2011—far more than the $100,000 in Chamber dues it reported in 2010.
In the main, the public and the press are shut out of the process. Only corporations, their army of lobbyists and the politicians they influence fully understand what’s going on behind the legal walls set up around a 501(c)(6).
“Prior to Citizens United, all federal election money could be traced back to an individual who expended it or contributed to a political committee,” said Karl Sandstrom, a former FEC commissioner now with the law firm Perkins Cole. “Once you enable artificial entities to contribute, money is no longer traceable back to identifiable individuals.”
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Defending their new privilege of secret corporate electioneering, trade associations have bitterly opposed any attempts, post–Citizens United, at reform.
Last year, when President Obama publicly considered issuing an executive order that would force companies receiving government contracts to disclose their political spending—including spending done via trade associations—the Chamber reacted harshly. “We will fight it through all available means,” one Chamber lobbyist told the New York Times in April 2011. “To quote what they say every day on Libya, all options are on the table.”
More than 120 trade associations came together last year to reinforce the Chamber’s message, signing a letter endorsing legislation that would block President Obama from enacting such an executive order. And in July, when Senator Sheldon Whitehouse (D-R.I.) put forward the DISCLOSE Act, which would have required the trade associations to reveal their spending, dozens of trade groups joined together to denounce the bill before a Republican-led filibuster prevented it from coming up for debate. A letter from the groups blasting the bill, which placed no restrictions on trade associations but simply required disclosure, described it as a “purely partisan effort to silence one, and only one, group of speakers—the business community.”
Among the signers of both letters: Saudi Aramco’s trade association, the American Petroleum Institute.
For more check out our infographic, Secret Election Money Unleashed.