Super PACs are Also Personal Piggybanks

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Nov 19, 2012 No Comments ›› blackexaminer

          My mother used to warn me that while Black folk were sleeping the people downtown were thinking of ways to take our money.  She was being politically correct about who the people downtown were but you can guess who she was talking about.  Ma should not have limited those being schemed upon to just Blacks, though, because the guys downtown are equal opportunity crooks. The people behind the creation of the newfangled Super PAC for financing election campaigns are precisely who my dear mother warned me about.

          Several Black politicians in Washington, D.C., and neighboring Prince George’s County, Maryland, have been accused and/or convicted of violating election campaign finance laws.  Kwame Brown, a former District of Columbia councilman is awaiting sentencing on a plea to a misdemeanor campaign finance charge involving failure to report the raising and spending of more than $270,000 in his 2008 re-election campaign for an at-large council seat.  He is also accused using $239,000 of campaign funds to pay a now-defunct consulting firm owned by his brother.  He strangely pled guilty despite the fact that questions about what happened to the money and whether there was any wrongdoing at all still remain unanswered.  It is speculated that he took the plea to avoid any chance of going to jail.  There is no speculation, though, that the motivation of the powers that be was to run him out of office.  Mission was accomplished in that regard because the plea deal required him to resign from the council.  D.C. Councilman Michael Brown lost his reelection bid in November, 2012, to a white candidate who ran as an Independent – the first Independent ever elected to the council.  Brown’s personal finances, but more importantly, his election eve claim that his campaign manager stole $113,000 from his campaign account was portrayed as poor management which apparently contributed to dooming his bid for re-election.  It is also critically important to note that his departure shifts the balance of power in the City Council from all Black to majority white for the first time since the District was granted home rule. [A topic for another day].  Finally, Maryland State Delegate Tiffany Alston pled guilty last summer to stealing $3,000 from her campaign fund to cover part of her wedding expenses.   

          Unfortunately, Kwame, Mike and Tiffany’s transgressions occurred before the U.S. Supreme Court’s Citizens United decision in 2010, which completely altered the American election campaign finance landscape. The Court held that corporations are people endowed with a constitutional right to free speech. The decision gave them the green light to spend unlimited amounts of money on political ads and a host of other campaign tools designed to elect or defeat an individual candidate or proposition.  While it is still illegal for corporations to give money directly to federal candidates, contributions can be made in unlimited amounts to a so-called “Super PAC”.  So, in one fell swoop the boys downtown created a mechanism that will fundamentally and profoundly influence future elections with astronomical infusions of cash.

          The kicker is that Super PACs were also cleverly designed with a “workaround” to make some serious cash that can be used for personal expenses.   

          Political Action Committees (PAC) have been around since the 1940’s, but as mentioned Super PACs are relatively new beasts that were invented after the 2010 Community United decision.  Officially known as an “independent expenditure-only committee”, Super PACs are 501(c)(4) nonprofit corporations “organized to lobby for legislation and participation in political campaigns and elections [provided] promotion of social welfare is its primary activity.”  The Federal Election Commission (FEC) which is charged with enforcing campaign finance only requires Super PACs to only reveal the names of donors who gave for the express purpose of funding ads.  Otherwise, their identity remains anonymous.  And even if they were dumb enough to designate that their donation was to be spent solely on ads, their names are still never disclosed publicly.  This type of contribution from anonymous donors has been criticized as “dark money” because the sources are cloaked in secrecy.  Finally, unlike a traditional PAC, Super PACs don’t have contribution limits on the dollar amount that can be taken in or paid out.

          According to the FEC, Super PACs raised $661.5 million as of November 12, 2012 and spent $631.5 million leaving $30 million unspent.  This figure does not accurately reflect the amount of money spent on this year’s federal elections, however, because PAC administrators have up to 30 days to file reports.  The more accurate figure of the money spent is widely believed to be north of a billion dollars.  During the course of the election campaign and after it ends –win or lose — Super PAC funds can be used for anything, including  personal expenditures for the candidate, its administrators and anyone else fortunate enough to sidle up to the money trough.  The funds can be used to buy a yacht, a villa on the Rivera or deposited into personal bank accounts.  It is taxable as income unless the recipient takes advantage of an accounting trick by “passing” the funds through a 501(c)(3) charitable  nonprofit corporation with instructions on how and to whom the money should be dispersed.  The instructions satisfy the FEC reporting requirements but do not become part of the public record.  By passing the funds through as opposed to transferring it to the 501 (c)(3) nonprofit, the money is not considered taxable income that must be reported to the Internal Revenue Service (IRS).  Indeed, it simply sends the IRS a postcard tax return that reports zero income.  Since the identity of the recipient is never publicly disclosed there is no incentive to pay taxes on it.  Talk about free money!

           So, if Super PACs had been around when the hapless Black politicians were doing their thing, legal indirect payments could have been made to their brother’s out-of-business consulting firm, all donations could have been reported without fear of having to account for how the money was spent, lavish weddings could have been financed, campaign managers could have been handsomely compensated or they could have just kept it for themselves.

          Anyone who believes that Republican Party gonifs like Karl Rove, for example, who started American Crossroads Super PAC purely out of some altruistic dedication to public service or quest for power without the expectation that a tidy sum of the millions of dollars raised wasn’t also going south has driven way pass the exit to reality.  That goes for Democratic PACs as well, albeit to a far lesser extent.

           It can be seen from all this that in one fell swoop the boys downtown created a mechanism that will fundamentally and profoundly indfluence future elections in America with astronomical infusions of cash, and in the process earn a ton of under the table, tax-free scatch for themselves.  My mother warned  me about them.

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