The non-partisan Citizens for Responsibility and Ethics in Washington (CREW) filed complaints Thursday with both the Federal Election Commission (FEC) and the Federal Bureau of Investigation (FBI) alleging that Karl Rove and his secretive Crossroads GPS violated election law and may have engaged in a criminal conspiracy to do so.
Under campaign finance law and FEC regulations, 501(c)(4) groups, like Crossroads GPS, can raise unlimited funds from wealthy individuals and corporations without having to disclose their donors. The only time donors to these secretive groups must be disclosed is when donors give more than $200 explicitly “for the purpose of furthering an independent expenditure.”
According to CREW, Rove expressly asked for and received millions of dollars in contributions specifically to fund an independent expenditure effort in support of unsuccessful Republican Ohio Senate nominee Josh Mandel:
Arizona-based Americans for Responsible Leadership, having lost in California courts all the way to the Supreme Court, abandoned its appeal to the U.S. Supreme Court and revealed the true source of its $11 million contribution to a California initiative campaign.
The source of the money was the Koch-backed Americans for Responsible Leadership. It passed the money through another PAC, Center to Protect Patient Rights, based in Arizona. This is a 501(c)(4) non-profit “social welfare organization,” whose principal concern is the welfare of billionaires. Eventually, the money passed to Americans for Job Security. The money has been used to oppose Proposition 30 (education funding) and to promote Proposition 32 (hobbles union political spending).
“The persistence and hard work of the FPPC has won a significant and lasting victory for transparency in the political process,” said Ann Ravel, Chair of the FPPC. “We will continue in this matter and all others to ensure that the people of California know who is funding political activity in this State.”
California’s Political Reform Act requires disclosure to the people of California of the true source of campaign donations. This information is required in most cases before the election, when it matters. The Act requires those who serve as intermediaries, or middlemen, for contributions to disclose their true source to the recipient of the contribution.
Americans for Job Security has ties to many GOP noteworthies, including Rove’s Crossroads GPS.
More coverage of this:
The actual donors behind the $11 million that landed in California’s initiative battles last month remain a mystery, but two more layers became known Monday when the Arizona nonprofit in question revealed two other opaque nonprofits that routed the money its way.
On or before Oct. 15: Alexandria, Va.-based Americans for Job Security gave $11 million to Phoenix-based The Center to Protect Patient Rights.
Oct. 12 and Oct. 15: The Center to Protect Patient Rights served as an “intermediary” and gave $11 million to Phoenix-based Americans for Responsible Leadership.
Oct. 15: Americans for Responsible Leadership gave $11 million to the Small Business Action Committee PAC No on 30/Yes on 32.
California regulators and attorneys said today they are seriously weighing next steps - including criminal charges - against parties involved in the $11 million contribution whose known trail leads through three different out-of-state nonprofits.
A lawyer for Americans for Responsible Leadership, the Arizona-based donor at the center of the controversy, appeared to acknowledge the possibility of future legal action in a letter he filed this morning with the state Fair Political Practices Commission.
Attorney Michael D. Bopp wrote that while new disclosures from Americans for Responsible Leadership and The Center to Protect Patient Rights may relate to state codes banning hidden intermediary contributions, the groups do not admit wrongdoing.
California’s elections watchdog has been fighting for weeks to unmask a secretive group that gave $11 million to defeat Proposition 30, Gov. Jerry Brown’s temporary tax increase to fund schools, and to pass Proposition 32, which would kneecap state labor unions. That battle ended Tuesday morning in something of a stalemate.
Americans for Responsible Leadership, the Arizona nonprofit that made the $11 million donation, had refused demands by California’s Fair Political Practices Commission to name its donors. So the state watchdog sued ARL, and judges agreed that ARL needed to fess up. ARL relented Tuesday, but its response is far from satisfying: ARL’s $11 million originally came from…another shadowy group called Americans for Job Security, which is run out of an office in Alexandria, Virginia. To complicate matters more, Americans for Job Security had funneled the $11 million through a third nonprofit, the Center to Protect Patient Rights, before it finally landed in ARL’s coffers.
Think of it as a daisy chain of secret money. The Fair Political Practices Commission described the scheme as the largest case of “campaign money laundering” in California’s history. Money laundering is a misdemeanor in California, according to FPPC’s chair Ann Ravel. (The state attorney general has the power to take action against ARL.) But the real source of the money, the individuals or corporations that first gave it, remains a mystery. Disclosure, in other words, is not transparency.
Here’s what we know about Americans for Job Security and the Center to Protect Patient Rights. Founded in 1997, AJS is a nonprofit currently run by a little-known Republican operative named Stephen DeMaura. The group runs ads backing GOP candidates and does not disclose its donors. In 2008, staff attorneys at the Federal Election Commission found “reason to believe” that AJS violated the law by not registering as a political committee, but the FEC’s three GOP commissioners blocked any action against the group.
The Center to Protect Patient Rights, as first revealed by the Center for Responsive Politics, is an ATM for conservative nonprofit groups backing Republican candidates at the state and federal levels. The group doled out $44 million in 2010 to the likes of Grover Norquist’s Americans for Tax Reform, the Club for Growth, and Americans for Prosperity. Those recipients all went on to slam Democrats and boost GOPers in the 2010 elections.
Who funds the Center to Protect Patient Rights is a mystery: As a 501(c)(4) nonprofit, the group does not name its donors. CPPR raked in $13.7 million in 2009, according to tax filings, but said in those same filings that it did not spend any money on fundraising in 2009.
CPPR is said to have ties to billionaires Charles and David Koch and their network of conservative donors. Sean Noble, who runs the group, spoke at a 2010 Koch donor conference; Politico has called Noble a “Koch operative” and the Los Angeles Times described him as a “key operative in the Kochs’ political activities.” However, no direct connection between CPPR, the Kochs, or their donor network has been established.
Even as it hailed forcing Americans for Responsible Leadership to reveal the trail of secrecy behind its $11 million donation, California’s Fair Political Practices Commission admitted the victory was bittersweet. “This case also demonstrates the need for reform to make sure true donors are disclosed and can’t hide behind innocuous committee names,” said Ann Ravel, the FPPC’s chair. “The people of California deserve better.”
Karl Rove is upping the ante. According to Politico, the Rove-founded American Crossroads and Crossroads GPS are launching their biggest paid-media push of the election cycle Tuesday, with a $16 million one-week buy on TV and radio in multiple presidential swing states and Senate battlegrounds.
Of that $16 million, the super PAC American Crossroads will devote $11 million to defeating President Barack Obama, with a TV spot titled “Actually Happened” that compares the current 8.1 unemployment rate to a lower rate that the president projected earlier in his term. Viewers will see the ad in Colorado, Florida, Iowa, Nevada, New Hampshire, North Carolina, Ohio and Virginia.
Crossroads GPS, a 501(c)(4) nonprofit, will spend $1 million on radio ads in those same states and an additional $4 million in Montana, North Dakota and Virginia.
We can’t beat their money so we have to beat them with boots on the ground. Have you volunteered?
JP Morgan Chase, Goldman Sachs, BP, Chevron, WalMart, and billionaires Charles and David Koch are launching a multi-million dollar TV ad buy Tuesday blasting President Obama over the national debt.
Actually, I don’t know who’s behind this ad because there’s no way to know. And that’s a big problem.
The front group for the ad is Crossroads GPS, the sister organization to the super PAC American Crossroads run by Republican political operative Karl Rove.
Because Crossroads GPS is a tax-exempt nonprofit group, it can spend unlimited money on politics — and it doesn’t have to reveal where it gets the dough.
By law, all it has to do is spent most of the money on policy “issues,” which is a fig leaf for partisan politics.
Here’s what counts as an issue ad, as opposed to a partisan one. The narrator in the ad Crossroads GPS is launching solemnly intones: “In 2008, Barack Obama said, ‘We can’t mortgage our children’s future on a mountain of debt.’ Now he’s adding $4 billion in debt every day, borrowing from China for his spending. Every second, growing our debt faster than our economy,” he continues. “Tell Obama, stop the spending.”
This is a baldface lie, by the way.
Obama isn’t adding to the debt every day. The debt is growing because of obligations entered into long ago, many under George W. Bush – including two giant tax cuts that went mostly to the very wealthy that were supposed to be temporary and which are still going, courtesy of Republican blackmail over raising the debt limit.
In realty, government spending as a portion of GDP keeps dropping.
As I said, I don’t know who’s financing this big lie but there’s good reason to think it’s some combination of Wall Street, big corporations, and the billionaire Koch brothers.
According to the reliable inside-Washington source “Politico,” the Koch brothers’ network alone will be spending $400 million over the next six months trying to defeat Obama, which is more than Senator John McCain spent on his entire 2008 campaign.
Big corporations and Wall Street are also secretly funneling big bucks into front groups like the U.S. Chamber of Commerce that will use the money to air anti-Obama ads, while keeping secret the identities of these firms.
Looking at the all the anti-Obama super PACs and political fronts like Crossroads GPS, Politico estimates the anti-Obama forces (including the Romney campaign) will outspend Obama and pro-Obama groups by 2 to 1.
How can it be that big corporations and billionaires will be spending unlimited amounts on big lies like this one, without any accountability because no one will know where the money is coming from?
Blame a majority of the Supreme Court in its grotesque 2010 Citizens United vs. Federal Election Commission decision — as well as the IRS for lax enforcement that lets political front groups like Crossroads GPS or the U.S. Chamber of Commerce pretend they’re not political.
But you might also blame something deeper, more sinister.
I’m not a conspiracy theorist (you can’t have served in Washington and seriously believe more than two people can hold on to a big story without it leaking), but I fear that at least since 2010 we’ve been witnessing a quiet, slow-motion coup d’etat whose purpose is to repeal every bit of progressive legislation since the New Deal and entrench the privileged positions of the wealthy and powerful — who haven’t been as wealthy or as powerful since the Gilded Age of the late 19th century.
Its techique is to inundate America with a few big lies, told over and over (the debt is Obama’s fault and it’s out of control; corporations and the very rich are the “job creators” that need tax cuts; government is the enemy, and its regulations are strangling the private sector; unions are bad; and so on), and tell them so often they’re taken as fact.
Then having convinced enough Americans that these lies are true, take over the White House, Congress, and remaining states that haven’t yet succumbed to the regressive right (witness Tuesday’s recall election in Wisconsin).
I desperately hope I’m wrong, but all there’s growing evidence I may be right.
The reason for these staggering numbers — and for the growing imbalance between the parties — is that the vast financial power of the business world has been loosed as a political tool by the federal courts. In pursuit of lower taxes and less regulation, businesses, led by the United States Chamber of Commerce, are determined to remove President Obama from office and return full control of Congress to the Republican Party. Executives and companies are the principal source of the unlimited checks that are fueling the rise of these outside groups.
Many of the executives are giving money to “super PACs,” which have to disclose their names. But because businesses usually don’t want the public to know of their political activity, they prefer to launder their political contributions through the Chamber or through “social welfare organizations,” which can keep the names a secret.
The law that permits these undisclosed contributions also puts explicit limits on these organizations’ activities. Tax-exempt social welfare groups, known by their Internal Revenue Code section number as 501(c)(4)’s, cannot be organized for the “primary” purpose of political activity. So far, the I.R.S. is looking the other way.
But if not political activity, what is the primary purpose of a group like Crossroads GPS, the 501(c)(4) organized by Karl Rove, which plans to spend more than $100 million this year? It has already run at least a dozen ads this year, 11 of which accuse President Obama of breaking promises or committing serious policy errors.“Obama added almost $16,000 in debt for every American,” says the latest, a classic in misleading political hyperbole.
As Jeremy Peters recently reported in The Times, that ad is part of a $25 million campaign that was based on 18 focus groups and field tests conducted by Crossroads, all to determine the most effective attack lines against the president.Is that the action of a tax-exempt social welfare group not primarily active in politics?
The I.R.S. generally makes that kind of assessment by examining a 501(c)(4)’s activity over a calendar year, so a full reckoning of this year’s campaign finance travesty won’t happen before 2013. But some of these groups, including Crossroads, have been operating with the tax agency’s implicit consent since 2010. Even a cursory audit would show how little they deserve to call themselves a “social welfare group” and claim a tax exemption.
Removing the 501(c)(4) exemption would be serious: it would force Crossroads to either retain its tax exemption by converting to a super PAC and disclosing its donors, or pay taxes on its tens of millions in donations. American voters would win either way: they might learn who is behind those millions, and the disclosure and tax requirements would reduce the shadowy money pouring into the campaign
If the I.R.S.had stood up to this farce last year, it would have had a hugely beneficial effect on this year’s campaign.Though it needs more resources and better legal tools, it mostly requires the will to enforce the law.
How Do You Report Suspected Tax Fraud Activity?
If you suspect or know of an individual or company that is not complying with the tax laws, you may report this activity by completing Form 3949-A. You may fill out Form 3949-A online, print it and mail it to:
Internal Revenue Service
Fresno, CA 93888
If you do not wish to use Form 3949-A, you may send a letter to the address above. Please include the following information, if available:
Name and address of the person you are reporting
The taxpayer identification number (social security number for an individual or employer identification number for a business)
- A brief description of the alleged violation, including how you became aware of or obtained the information
The years involved
The estimated dollar amount of any unreported income
Your name, address and daytime telephone number
Although you are not required to identify yourself, it is helpful to do so. Your identity can be kept confidential.
Frequently Asked Questions - 1.13 IRS Procedures: Reporting Fraud
How to Report:
- Abusive Tax Promotions and/or Promoters:
Complete the referral form which documents the information necessary to report an abusive tax avoidance scheme. The form can be mailed or faxed to the IRS address and fax number on the form.
She’s Back! Stephanie Cutter: Get the facts on Karl Rove’s BS
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Stephanie Cutter shares the facts against the latest ad put out by Karl Rove and his Super PAC: Crossroads.
Crossroads Grassroots Policy Strategies, the political ad-buying organization cofounded by Republican strategist Karl Rove in 2010, has officially submitted its first tax forms with the Internal Revenue Service, and as expected, the group is formally requesting that the IRS treat it as a nonprofit operating under section 501(c)(4) of the tax code.
But that’s a tricky proposition for a group that spends the vast majority of its money on ads decrying one political candidate or another.
The hitch is that the tax code says 501(c)(4) groups “must be operated exclusively to promote social welfare” — the promotion of which “does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office.”
Rove depends on Crossroad GPS getting that 501(c)(4) status for one reason. Avowedly political groups, like Crossroads GPS’ sister organization, the American Crossroads Super PAC, have to disclose their donors; 501(c)(4) groups don’t (although that could be changing).
The group insists that most of the ads the organization produces comprise “issue advocacy” rather than political campaign activity. It argues that since less than 50 percent of its budget goes to what it terms “direct” political spending, the group qualifies as being “primarily” a social welfare group.
The big question the IRS will have to address, therefore, is whether the ads that Crossroads GPS and similar groups call “issue advocacy” ads are, in fact, “on behalf or in opposition to any candidate for public office.”
The “GPS” in Crossroads GPS ostensibly stands for grassroots policy strategies, but the Washington Post reported Friday that nearly 90 percent of the money flowing through the Karl Rove-associated group has come from as few as two dozen anonymous donors, two of whom gave at least $10 million each.
The group, known for funding hard-hitting attack ads against congressional Democrats in the 2010 elections, has said that it and its sister group, American Crossroads, intend to spend $300 million in this year’s elections. Most recently, Crossroads GPS spent $1.7 million on television ads attempting to blame President Barack Obama for high gas prices.
Crossroads GPS won’t divulge the names of its donors, citing its self-declared status as a nonprofit organization operating under section 501(c)(4) of the tax code. That section is intended for “social welfare” groups that have a primary mission other than political activity.
The IRS has yet to formally grant Crossroads GPS that status. Several campaign finance reform groups have demanded that Crossroads’ request be denied.
This week, Crossroads GPS announced a $650,000 nationwide television ad campaign called “Deflect.” The 30-second spot falsely blames Obama administration actions for the rise in gasoline prices since 2009.
Crossroads GPS is a tax-exempt 501(c)(4) group, affiliated with the American Crossroads super PAC. Karl Rove has been linked to both groups.
The spot begins by noting gas prices “then and now” — going up from the unusually low prices of January 2009 to the higher prices of today. A narrator asks what has made the difference.
The narrator then claims the reasons for higher gas prices are:
– “President Obama’s administrationrestricted oil production in the Gulf”
–Limited development of American oil shale
– Obama personally lobbied to kill a pipeline bringing oil from Canada.
Unlike candidate ad spots, television stations are under no obligation to run ads by outside groups, especially when the ads are factually wrong. This one is.
This movement is about something much bigger than “occupying” a particular space. Occupations proved to be a shrewd tactic. They are not a cause or an end in themselves. Focusing on holding a piece of public land simply makes the movement a hostage to the decisions of local officials, some of whom will inevitably be hostile to its purposes.
More important, the movement should remind itself of its greatest innovation, its slogan: “We are the 99 percent.” This is an affirmation that it is trying to speak for nearly everybody. Its tactics should live up to this aspiration by building support among the vast number of Americans who will never show up at the encampments. It should also want to help political figures such as Warren, who understood far earlier than most the costs of inequality and of the abuses of financial power. The last thing this movement should want to do is create fodder for the ads and e-mails propagated by Warren’s foes.
The occupations have done their work. Now it’s time to occupy the majority.
Democracy 21 and the Campaign Legal Center sent a letter to tax authorities calling for a prompt investigation of the Republican-leaning Crossroads GPS and American Action Network; the Democratic group Priorities USA; and a centrist group, Americans Elect.
The watchdogs based their request on the terms of the U.S. tax code. The Internal Revenue Service exempts non-profits — called 501(c)(4) organizations — from income taxes because they promote social welfare.
“The idea that these organizations are social welfare groups is nonsense,” Fred Wertheimer, president of Democracy 21, said in a statement. “The overriding purpose of these groups is to participate in and influence elections, which makes them ineligible for tax-exempt status.”
He said the groups seek to be considered 501(c)(4) organizations to keep the donors financing their campaign expenditures secret.
The memo was a sharp reversal for the tax agency, which had invoked a rarely used, 30-year-old ruling to warn the five donors in February that they might owe gift taxes on their donations. Organizations heavily financed by conservative donors like David Koch, or in the case of Crossroads GPS, tied to top Republican strategists like Karl Rove, would have come under such newly enforced rules, were they to be imposed across the board.
Mr. Rove’s group and Priorities USA, a new liberal advocacy group set up by two former Obama administration officials, Bill Burton and Sean Sweeney, are attracting ever larger war chests in support of campaigns and causes because they can offer their donors anonymity, unlike political action committees and 527 organizations.
The I.R.S. audits became public just as such groups were ramping up for the 2012 election cycle, and a group of six senators led by Senator Orrin Hatch, Republican from Utah, wrote to the I.R.S. commissioner Douglas H. Shulman raising concerns that its effort to impose gift taxes on donations to these groups was politically motivated and in violation the First Amendment.
The rise of these independent groups, which can raise unlimited amounts of money from corporations, unions and other wealthy donors and spend it to help their favored candidates, could end up defining the 2012 campaign.
But some of the groups could also pose a threat to established campaigns, which may find it difficult to stop them from wandering off message or committing strategic blunders. One rogue super PAC in Southern California has upended a Republican congressional campaign by producing a cru de video depicting the female Democratic candidate as a stripper giving tax money to gang members.
The Campaign Finance Institute, which tracks money in politics, calculated in a recent study that independent groups spent nearly $300 million in the 2010 elections, more than double the amount spent in 2008. Michael Malbin, the group’s executive director, said the loosened climate is reminiscent of the Watergate era, which led to a series of wide-ranging overhauls.
“If you want to know what the 2012 campaign is going to look like, you have to look back 40 years — to 1972,” Malbin said. “These groups are functioning almost the way party groups used to function.”
The real starting gun of the 2012 presidential race may be sounding Monday, and it’s coming in the form of massive attack ad campaign aimed squarely at President Obama’s economic record.
Crossroads GPS, anonymous-money collecting arm of the Citzens United-inspired political machine founded by Karl Rove and other Republican heavyweights, is going live with a $20 million television ad campaign targeting the president 497 days before voters head to the polls in November 2012.
The ads will start appearing on Monday, and will run on national cable as well as broadcast covering key swing states, including Colorado, Florida, Iowa, Missouri, Montana, Nebraska, North Carolina, New Mexico, Nevada, and Virginia.
The opening round buy is $5 million, enough to keep the ad on the air for two weeks.