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Arizona cited as a ‘special place’ for dark-money operations

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WASHINGTON _ Dark money in campaigns has become an issue nationwide but in the words of one expert, Arizona “really is a special place for dark money.”

The state, because of its laws or its culture, has become ground zero for a growing number of politically active tax-exempt organizations, said Robert Maguire, the political nonprofits investigator at the Center for Responsive Politics.

“Many of the most questionable organizations in existence have some tie to Arizona,” Maguire said.

He ought to know. Since 2012, Maguire and his center colleagues have compiled about 18,000 records that they pieced together from IRS Forms 990 – the tax returns that tax-exempt and nonprofit organizations have to file with the government every year.

They matched those records with political campaign spending reported to the Federal Election Commission. The result is a data set Maguire says neither the IRS nor the FEC has – and those are the agencies he argues should be overseeing nonprofits’ political activities.

The FEC has strict reporting rules for candidates, political action committees and other campaign organizations. Those rules require regular, detailed, public reporting of who donated to a campaign, when and in what amounts, and where the money was spent.

While IRS rules allow a certain type of nonprofit “social welfare” organization to spend up to half of its income on politics, the reporting requirements are not nearly as strenuous as the FEC’s. Political expenditures by those 501(c)(4) groups have to be reported annually on 990s; the groups do not have to report sources of those funds.

Maguire’s group, which tracks money and its influence in U.S. politics, reported that at least $169.2 million was spent in the just-ended midterm elections for congressional campaign ads sponsored by groups that do not have to disclose their donors.

In Arizona, varying disclosure laws governing outside spending make it next to impossible to put an exact price tag on the amount of dark money that was in play during this year’s elections.

Filings with the secretary of state‘s office showed that $27.3 million was spent on independent expenditures – political spending not tied directly to a campaign – but not all of that was dark money. One estimate by bloggers at Arizona’s Politics said total dark spending in the state this year may have approached $15 million.

While he is not sure why so many dark-money trails lead to Arizona, Maguire thinks it may have something to do with the people who have been holding the purse strings.

He and other center researchers were the first to discover the Center to Protect Patient Rights back in 2012. A nonprofit initially financed with donations from Charles and David Koch, the group now goes by the name American Encore and is run by Arizona political operative Sean Noble.

“That was an amazing day when I opened up that (tax) filing,” Maguire said. “I remember that first one, it was $41 million, and we had never found anything like that.”

The amount “seems quaint now,” Maguire said, “because their next filing had like $150 million.”

But Noble defends his organization, which according to its website will “defend freedom, promote free markets, work to expand economic opportunity and make the case for the American ideals of liberty and democracy, both at home and abroad.”

“Well, I think this is larger than one person,” Noble said, in response to Maquire. “I mean, I happen to be involved in organizations that exercise their First Amendment rights, and there have been people and organizations from every state that engage in that.”

Noble suggested that Maguire’s organization “in fact … is a dark-money organization. So it’s a little bit ironic for him to be critical when he is a part of a dark-money organization.” He claimed that the Center for Responsive Politics does not disclose all of its contributors.

Maguire said “that’s rich,” noting that his center is a 501(c)(3), which “doesn’t engage in any electioneering activities, period, nor do we fund organizations that engage in electioneering activity without disclosing their donors, as Mr. Noble’s organization has done for years.”

He pointed to the center’s list of all its contributors, both individuals and foundations, and said it makes its financial statements and tax forms publicly available. In addition to providing that information, he said, the center has “strict limits on which organizations we will not accept money from, namely corporations, unions and political committees.”

“We are a data organization,” Maguire said. “We download and process hundreds of thousands of records filed with the FEC, the IRS, Congress and elsewhere every month and provide that data in digestible form to the public regardless of the party, ideology or affiliation of the organization whose data is being displayed.”

The center’s database allows its investigators to follow the money trail that leads through an increasingly intricate web of organizations whose expenditures “rise and fall drastically from election to off-year,” Maguire said.

One such group is American Future Fund, another organization Maguire says is closely linked to Noble.

“It’s a mailbox in Des Moines, Iowa,” Maguire said. “It’s an organization that has no employees, has the highest (revenue) rises and falls … from election year to off-year of almost any other organization.”