There has been a 300 percent increase in “dark money” campaign spending over the last six years. An investigation into a former Utah official provides an excellent — and frightening — example of how that system can be abused.
John Swallow, a former attorney general in the state, allegedly hid money in a maze of "social welfare" nonprofit groups and PACs, Nicholas Confessore reports at The New York Times. Those groups ultimately contributed to his campaign.
Public records, affidavits and a special legislative report released last week look at how Utah’s political nonprofits work. Swallow, a former state attorney general, appears to have taken hundreds of thousands of dollars from the payday lending industry through various nonprofit organizations. He allegedly employed a strategy of using those nonprofits to collect contributions that were then passed to political action committees, so that anyone looking up the contributors would see the name of the nonprofit and not the actual donor.
One of the shadow money groups was Utah’s Prosperity Foundation, which advertised itself as a PAC for Mark Shurtleff, the sitting Utah attorney general. But documents indicate that it was also intended as a way for Swallow to get money from industries under increased scrutiny from regulators, and whose interests Swallow advocated, like payday loan companies and telemarketing firms.
Prosperity Foundation contributed $262,000 to Swallow’s campaign between December 2011 and August 2012; about $30,000 contributions came from four out-of-state payday loan companies. One campaign staffer wrote in an email to Swallow, “More money in [Prosperity Foundation] is more money for you down the road,” Confessore reports.
Another nonprofit that was set up, the Proper Role of Government Education Association, collected $452,000 for his campaign, mainly from the payday industry. That group provided It’s Now or Never, a Nevada-based super PAC, with more than $150,000 in funds via other nonprofits, masking the money's source. It's Now or Never then ran radio and TV ads aimed at Swallow’s Democratic opponent, Sean D. Reyes — including one about Reyes’ “unethical campaign finance practices.”
There has been an enormous rise in the number and power of “social welfare” groups over the past four election cycles; according to the Center For Responsive Politics, in 2006, such groups spend $5.2 million on elections, increasing to more than $300 million by 2012. Dubbed 501(c)(4)s, for the section of the tax code that governs them, they don’t have to disclose their donors, making them enticing outlets for all of that spending. The IRS is now drafting new rules to curb spending by the groups.
“What the Swallow case raises is the possibility that political money is never really traceable,” said David Donnelly, executive director of the Public Campaign Action Fund, a group that pushes for stricter campaign finance laws, told Confessore. But both parties are guilty of using 501(c)(4)s to funnel money, said Walter Bugden, a lawyer for Jason Powers, who was a campaign strategist for Swallow. Members of both parties also oppose the IRS' attempts at reforms. (Politicians rarely like to curb political spending.)
Swallow resigned in November 2013 after less than a year in office.