The Intimidation Game

by Kimberley Strassel

  Van Hollen nonetheless took care to present his bill as an exercise in clean government, claiming it was all about the public’s “right to know.” He stoked worries about what would come of the status quo: Companies, he said, could alter elections by pouring money into “sham organizations” and “dummy corporations.” It would protect the public from “organizations who hide behind nice-sounding names like Americans for Clean Oceans funded by BP.” (The Deepwater Horizon blowout had happened only a week before he introduced his bill.)

  It was far more revelatory (and amusing) to listen to Schumer, who is somewhat infamous in Washington for letting the political cat out of the bag. Schumer didn’t pretend the bill was about educating voters or cutting through political front groups. The legislation, he crowed, was about shutting his political opponents out of the democratic process. The DISCLOSE Act, declared Schumer, would make companies “think twice” before spending any political money. “The deterrent effect,” he pronounced smugly, “should not be underestimated.”

  Republicans didn’t underestimate it, and in the space of a few months were forced to reevaluate their longtime (if unthinking) love affair with disclosure laws. Few if any had envisioned Democrats using transparency as a weapon, and fewer yet had fully contemplated the implications of that for free speech, or for their prospects in the 2010 midterm elections. Senate Republican leader Mitch McConnell—himself one of the party’s early clear-eyed free-speech stalwarts—began briefing his colleagues on the bill’s First Amendment implications, as well as the public on the left’s blatant attempt to censor its opponents for political advantage. DISCLOSE, declared McConnell, wasn’t about clean government; it was “a transparent attempt to rig the fall election.”

  Still, most of the GOP was on record supporting the type of disclosure Van Hollen and Schumer now demanded, and when Republicans en masse revolted against the bill, Democrats had a field day accusing them of hypocrisy. Moreover, the Citizens decision was unpopular, transparency resonated with the public, and Democrats ran both the House and the Senate. The DISCLOSE bill looked inevitable, and Van Hollen and Schumer were in a rush to get it passed over the summer, so that it would start working to Democrats’ advantage in the heat of the fall election season.

  The group that ultimately saved the country from DISCLOSE was, strangely, the National Rifle Association (though that was hardly the NRA’s intent). The gun-rights lobby voiced screeching opposition to DISCLOSE, on the grounds that the bill would require it—along with other 501(c)(4) groups—to disclose its donors. The NRA has always had amazing pull in Washington with both Republicans and moderate Democrats, and its opposition left the bill short of the necessary votes. Had the NRA stayed strong, it likely would have killed the bill outright. Instead, the group’s leadership decided on a more cynical approach, and began working with Democrats to gain a special carve-out to the legislation. The NRA was happy to saddle the country with First Amendment restrictions and turbo-arm the unions in the upcoming election, so long as it got a pass.

  The carve-out, however, ended up being the bill’s undoing. Other outside political groups cried foul, and the exemption was extended to yet more of them. These favored exclusions gave the entire bill a backroom stench. Olson testified in front of the House in May, pointing out that the bill’s problems weren’t limited to disclosure. Democrats had snuck back in many of the same types of speech restrictions that the Court had only just invalidated. It contained, for instance, a bar on government contractors from spending money on political ads in an election, which Olson termed a “thinly veiled and utterly unwarranted attempt to resurrect the unconstitutional regime of speech suppression that Citizens United emphatically struck down.” Between the shady dealings and the constitutional argument, even moderate Republicans—those with long pro-disclosure records—had plenty of cover to join the rest of their party to oppose it.

  The House passed DISCLOSE in late June, with only two Republicans crossing over. Democratic leader Harry Reid nonetheless failed to get a single Republican vote in the Senate, and thus couldn’t move the legislation past a filibuster. Obama predictably blasted the GOP, accusing it of “using every tactic and maneuver they can to prevent the DISCLOSE Act from even coming up for a vote.” Schumer vowed that he’d just keep bringing up the bill “again and again and again until we pass it.” He declared it “vital” to “people’s faith in the functioning of this government.” In truth, the bill was vital in only one regard: to Democrats’ ballot tallies.

  Despite Schumer’s public bravado, Democrats privately admitted they were unlikely to get DISCLOSE. They’d been too obvious in their political maneuvering, and Republicans had come to view the bill in the same way as their opponents: as a matter of political survival. They’d stick with a filibuster. And so as the summer of 2010 wore on, the left began turning its attention to a different part of its new post-Citizens disclosure drive. The IRS.

  Chapter 6

  Call Out the Dogs

  DISCLOSE was primarily aimed at shutting down the business community. But Democrats were also stressed by the flood of Tea Party and conservative organizations signing up as 501(c)(4) social-welfare groups. These groups had sprung to life at a local level, and most, like Kenney’s, were doing their civic work entirely within their own neighborhoods. But their status as social-welfare organizations gave them the right to take part in national elections—the Citizens decision had guaranteed that. Their status also meant they were not required to publicly disclose their donors.

  Social-welfare 501(c)(4) groups have been around forever, and are largely apolitical—Rotary Clubs, the Miss America Foundation, volunteer fire departments, veterans’ organizations. Of those that do take part in politics, many of the biggest work on behalf of Democrats. The AARP, the Sierra Club, the ACLU, the League of Women Voters—they’ve all been claiming tax-free status for years, and using it to elect the left. Democrats loved 501(c)(4)s—right up until conservatives looked to have more of them. And Democrats had never before complained about the rights accorded to them—namely their ability to maintain some level of anonymity in their funding.

  But that all changed as conservatives started to pour into the 501(c)(4) field, and with some big names. Former Bush adviser Karl Rove helped set up a political group called American Crossroads, which had a 501(c)(4) arm. The Koch brothers arranged their own influential group, Americans for Prosperity. Former Minnesota senator Norm Coleman and businessman Fred Malek in 2010 set up another heavyweight 501(c)(4), the American Action Network. And some of the new grassroots conservative organizations, like the Tea Party Patriots, had beefed up, building a national presence. Democrats feared that the combination of all this 501(c)(4) political firepower would swamp their side.

  Even as Democrats were pushing forward with DISCLOSE, they were casting about for other levers of government they might pull to grind to a halt the conservative 501(c)(4) movement. They settled on the IRS. Top officials—folks like Lois Lerner—had already expressed public concern about the growth in 501(c)(4) political groups, and the groups’ involvement in politics. Democrats saw an easily influenced target.

  As is usually the case, the tone was set at the top—from the White House—where Bauer was still serving as general counsel. Obama ultimately crammed in more than twenty-five campaign trips on behalf of Democratic candidates. By August, he was blowing a dog whistle for the IRS at every stop.

  The debut of this new attack came August 9, as President Obama appeared at a Democratic National Committee campaign event in Austin, Texas. Obama spent twenty minutes slamming Republicans—on taxes, education, energy—and then launched into what would become a standard warning in pretty much every speech he’d give up through November. “Right now all around this country there are groups with harmless-sounding names like Americans for Prosperity, who are running millions of dollars of ads against Democratic candidates all across the country. And they don’t have to say who exactly the Americans for Prosperity are. You don’t know
if it’s a foreign-controlled corporation. You don’t know if it’s a big oil company, or a big bank. You don’t know if it’s an insurance company that wants to see some of the provisions in health reform repealed because it’s good for their bottom line, even if it’s not good for the American people.

  “A Supreme Court decision allowed this to happen. And we tried to fix it, just by saying disclose what’s going on, and making sure that foreign companies can’t influence our elections. Seemed pretty straightforward. The other side said no.

  “They don’t want you to know who the Americans for Prosperity are, because they’re thinking about the next election. But we’ve got to think about future generations. We’ve got to make sure that we’re fighting for reform. We’ve got to make sure that we don’t have a corporate takeover of our democracy.”

  This Obama monologue was both absurd and pointed. Absurd, because it monumentally overstated the situation. Democrats have made an obsession of talking about “dark money,” even as they know that it is a bare blip on the election radar. The Federal Election Commission keeps tallies of all spending—every disbursement, by every political actor. Pretty much any organization in this country that spends money expressly calling for the election or a defeat of a candidate must quickly report that spending to the FEC. That rule is the same for everyone—super PACs, 501(c) groups, 527s, political parties. And most of those groups also must disclose their donors. One exception is 501(c) organizations, which are generally allowed to keep their donors anonymous. The left now calls this “dark” money.

  In the 2012 election year, U.S. political actors spent about $7 billion attempting to get their favored candidates elected. It sounds like a lot, but then again, Americans spend roughly $7 billion every year on Halloween. National elections happen only every two years, which means that the U.S population spends twice as much every cycle buying Supergirl costumes and Milk Duds than they do electing the people who will govern their country.

  Of that $7 billion spent in 2012 to form a government, about $320 million of it was “dark money.” Do the math, and 96 percent of the money spent in elections is disclosed. Only 3 to 4 percent (it varies by cycle) is done anonymously, and even then, most of it is hardly anonymous. The media is obsessed with 501(c)(4) groups, and have done a very good job of “outing” a lot of their donors. It isn’t very difficult to guess what types of groups or people are funding the Sierra Club, or the League of Women Voters, or the Chamber of Commerce, or the NRA.

  Democrats were long happy for these organizations to get their dollars from liberal benefactors and not to have to disclose them. That’s why these liberal groups, in part, obtained their 501(c)(4) designations in the first place. Obama’s own community-organizing group, Organizing for America, filed as a 501(c)(4).

  Obama’s comments were absurd, too, because they were misleading. Foreign nationals, foreign governments, foreign political parties, foreign corporations or associations—all are completely banned from giving money in U.S. elections. The Chinese, as Obama and Chris Van Hollen well know, aren’t allowed to directly contribute to Americans for Prosperity. That’s why Obama deliberately and carefully continued to use the phrase “foreign-controlled” entities. It sounds menacing—it was designed to sound menacing. But parse Obama’s words, and what he was talking about was, say, a U.S. dealership for Toyota, or a U.S. citizen who works for Toyota, giving money to campaigns. It is perfectly legal for them to do so, since the courts have held that it is wrong to bar American entities and citizens from participating in the democratic process by virtue of the fact that they are connected to a foreign corporation. “Think about it,” says Olson. “Where does that point end? How many corporations have foreign stockholders? Look at the major book publishers—several are owned by foreign corporations. Or then there’s the New York Times—its largest shareholder is [Mexican investor] Carlos Slim. Should none of these organizations be able to speak during an election?”

  Perhaps the bigger point is that nobody truly believes that the union guy who assembles cars at a Toyota plant in South Carolina, and who donates to a Senate race, is acting as an agent for the Japanese government. The carefully phrased “foreign-controlled” entity line was designed to stoke an imaginary public fear.

  Obama figured most Americans wouldn’t see the absurdity. And in any event, he wasn’t speaking to the public; he was pointing his comments at the IRS. Social-welfare organizations were already at the center of a debate in Washington. Thousands of applications were pouring into the IRS, and the Citizens decision—and the DISCLOSE fight—had set off a discussion among the media and political types and tax lawyers about whether those groups deserved closer scrutiny.

  Democrats and campaign finance organizations had also grown bitter over the Federal Election Commission, which is legally charged with policing election activity, and is the rightful entity to look at the political activity of nonprofits. But the FEC was deliberately set up to be nonpartisan; it contains three Republicans and three Democrats. Since it requires a majority of commissioners to institute a finding against a political actor, many complaints don’t result in penalties or fines. It’s a smart safeguard, given the political motivations behind many FEC complaints. But it didn’t suit the purposes of Democrats, who wanted a crackdown on conservative groups. So part of the Democrats’ new strategy was (as the Washington Post explained in an October 2010 article) “increasing pressure on the IRS to broker such disputes amid gridlock at the Federal Election Commission.”

  The president would weave versions of his “shady” nonprofits line into nearly every election speech going forward—in Connecticut, Pennsylvania, Wisconsin. In a clear sign of coordination, the rest of the Democratic apparatus joined him. Only two days after the president’s speech in Austin, the Democratic Congressional Campaign Committee (which Van Hollen ran) sent out a fund-raising e-mail warning about “Karl Rove–inspired shadow groups.” His administration staff went on national television to warn about “front groups for foreign-controlled companies.”

  Obama devoted weekly radio addresses to the threat of “deceptive attack ads sponsored by special interests using front groups with misleading names. We don’t know who’s behind these ads or who’s paying for them. Even foreign-controlled corporations seeking to influence our democracy are able to spend freely in order to swing an election toward a candidate they prefer.”

  He kept mentioning Americans for Prosperity, a habit that surprised nobody more than AFP president Tim Phillips. “In 2010, we were small, and new to the national stage, and it was shocking to hear the president of the United States go on an extended riff about us,” he says. And it turns out getting singled out by the president isn’t a lot of fun. Phillips remembers that bigger donors in particular voiced concern to him. “In some ways, the attention helped us with those $10 online donors. But the bigger donors, they were like, ‘The president of the United States is attacking you, and he does control a rather large federal bureaucracy. What is that going to mean for me?’ There was a chilling effect.”

  And that was the least of it. AFP started getting bomb threats at the office. It had to put in a security system with swipe keys and stronger doors. There was regular harassment over the telephone and in the mail. Opponents would take AFP’s prepaid donation envelopes and send back bricks, to run up the cost of postage. Sometimes they’d send back far more disgusting things in the envelopes. Hackers associated with the group Anonymous shut down the AFP website. Phillips notes that all this explains why it is so important that donors retain anonymity. “A lot of our donors are in privately held companies. And they are often more vulnerable because they are smaller, and intimidation and harassment, by outside groups or by the government, has the potential to really throw a monkey wrench in their operation.”

  The White House also enlisted the liberal media to help with the cause. The ground had already been broken. In August, the New Yorker’s Jane Mayer authored a hit piece on the Koch brothers, entitled (what else?)
“Covert Operations.” Mayer, hewing closely to Obama talking points, accused the brothers of funding “political front groups” and creating “slippery organizations with generic-sounding names” that have “made it difficult to ascertain the extent of their influence in Washington.” She called this funding the “subsidization of a pro-corporate movement,” which she variously described as “obscure,” “evasive,” and a “front operation.” Mayer managed to write more than ten thousand words on the Kochs, including details that ranged from apartments they’d bought, to the businesses they ran, to donations they’d made, to the amounts they’d spent on lobbying, to a list of all the political organizations they’d funded, to events AFP held (including speeches from the lectern). And she spoke to and included an exhaustive list of people who’d worked for or with the Kochs. She’d go on to write an entire book on them, published in 2015. Which was remarkable, given the supposedly “covert” nature of the Koch operation.

  The Mayer model set, the White House encouraged others in the media to follow suit. In a September 21 Huffington Post article headlined “Obama, Dems Try to Make Shadowy Conservative Groups a Problem for Conservatives,” writer Sam Stein explained that the day before that second presidential address, a “senior administration official urged a small gathering of reporters to start writing on what he deemed ‘the most insidious power grab that we have seen in a very long time.’” The senior official, wrote Stein, specifically pointed out the Mayer piece, telling the assembled journalists that the Kochs were “feeding Tea Party rallies” and “[pushing] information” to “try to reverse the gains we have made here on behalf of everyday people and the country as a whole.” The liberal media needed to expose all this, he said, because “I think a lot of Tea Party people would be shocked to know that the candidates they favored are now being largely propelled by the dollars of the special interests that they revile.” Soon, the press was pumping out stories about “shadowy” conservative groups, claiming many were abusing the IRS and the tax code.