• Nonprofit spends big on politics despite IRS limitation

    Philip Andrews / Roll Call Photos/Newscom

    Bruce Rastetter, CEO of Hawkeye Renewables, reportedly provided some of the seed money for the American Future Fund.

    By Michael Beckel, The Center for Public Integrity

    Last fall, a cadre of wealthy business executives and conservative groups tried to sell California voters on new campaign finance reforms.

    Couched in lofty rhetoric about the importance of cutting off money from special interests to politicians and other regulations favored by reformers, their proposal sought to ban the practice of using payroll deductions for political expenditures — a popular method of union fundraising.

    Once alerted to the true nature of Proposition 32, the unions and political left rose up against it.

    An innocuously named nonprofit, the Iowa-based American Future Fund, proved to be one of the biggest backers of the initiative, sinking more than $4 million into the ballot measure that voters ultimately rejected.

    As a “social welfare” organization, the American Future Fund is not required to publicly disclose its donors. But to maintain its tax-exempt status under Sec. 501(c)(4) of the U.S. tax code, influencing elections cannot be its primary purpose.

    The American Future Fund’s investment in California was part of a nationwide, political advertising spree in 2012 that exceeded $29 million, according to a Center for Public Integrity analysis of state and federal records.

    That amount included more than $19 million on efforts designed to oust President Barack Obama, as well as millions more to oppose Democratic candidates for Congress and even two state attorneys general. Now the group is funding ads opposing Obama’s nomination of former Republican Sen. Chuck Hagel of Nebraska for defense secretary.

    Since the U.S. Supreme Court’s controversial Citizens United decision in 2010, nonprofits such as the American Future Fund have played a more prominent role in electoral contests — all while giving their supporters the ability to keep their identities hidden. During the 2010 midterm elections, politically active nonprofits outspent super PACs, which exist to fund political advertisements, by a 3-to-2 margin.

    The American Future Fund ranked third among “social welfare” nonprofits in spending in the 2012 federal election, according to the Center for Responsive Politics, trailing only the Karl Rove-affiliated Crossroads GPS and Americans for Prosperity, which is backed by conservative billionaire brothers Charles and David Koch.

    There are also Democratic-aligned nonprofits, but their spending was well below that of their conservative counterparts. The top left-leaning nonprofit was the League of Conservation Voters, which reported spending about $11 million in the 2012 election opposing or supporting candidates.

    The American Future Fund’s spending “raises some serious questions” and “evades any form of meaningful disclosure,” said Adam Rappaport, senior counsel with watchdog group Citizens for Responsibility and Ethics in Washington (CREW).

    Numerous officials with the American Future Fund did not respond to requests for comment for this story.

    Advocating for ‘free-market ideas’
    The American Future Fund’s mission is to “educate and advocate for conservative and free-market ideas,” according to its annual filing with the Internal Revenue Service.

    Despite asserting that it isn’t primarily focused on elections, the nonprofit’s DNA is decidedly political.

    Conservative political operative Nick Ryan, a longtime adviser to former GOP Rep. Jim Nussle of Iowa, founded it in 2007. Over the years, the group has paid Ryan’s firm, Concordia Enterprises, hundreds of thousands of dollars annually for consulting services.

    In 2010, the New York Times reported that Iowa businessman Bruce Rastetter provided an unspecified amount of “seed money” for the organization. Ryan once represented four of Rastetter’s companies as a lobbyist, including Hawkeye Energy Holdings, one of the country’s largest ethanol producers.

    The nonprofit’s first president was Nicole Schlinger, the former finance director of Iowa’s Republican Party. Its current president is veteran Republican state Sen. Sandra Greiner, who served for 14 years as the Iowa chairwoman of the pro-business American Legislative Exchange Council.

    Ryan and Greiner did not respond to requests for comment.

    In 2008, when the American Future Fund was seeking — and ultimately garnered — tax-exempt status from the IRS, it pledged to abstain from electoral politics, saying it would spend 70 percent of its time doing work to “educate the public on policy issues” and 30 percent engaging in efforts to “influence legislation through grassroots advocacy.”

    When asked on its application if the group had any plans to spend money to “influence the selection, nomination, election or appointment” of anyone seeking public office, it answered “no.” It also vowed to stay out of the presidential race.

    When the IRS subsequently inquired why the group’s advertisements “appear to be more partisan than nonpartisan,” the group’s attorney, Karen Blackistone, wrote that the efforts were “strictly issued-based and nonpartisan.”

    The group takes a position on issues and encourages the public to contact their representative, she wrote in a 2008 response to the IRS.

    “AFF’s advertisements have never commented on a candidate’s character, qualifications or fitness for office,” she stated.

    Big money tied to post office box
    The American Future Fund has raised more than $60 million, with spikes in contributions coming in election years.

    Much of that money has come from another conservative “social welfare” nonprofit that doesn’t disclose its donors by name — the Arizona-based Center to Protect Patient Rights.

    The nonprofit has no website and lists its address as a post office box in Phoenix. It was launched in 2009 by Republican operative Sean Noble, who has extensive ties to the vast political network underwritten by the Koch brothers.

    Noble, a former chief of staff for former Rep. John Shadegg, R-Ariz., did not respond to requests for comment for this story.

    For three years running, Noble’s organization has reported making substantial grants to the American Future Fund for “general support,” according to IRS filings. The nonprofit contributed more than $14 million to the American Future Fund between 2009 and 2011, or 51 percent of funds the group raised over the three-year period.

    The Center to Protect Patient Rights has also given millions of dollars to a network of conservative groups, including the Koch-backed nonprofit Americans for Prosperity, as was first reported by the Center for Responsive Politics.

    In addition to Noble, there is another Koch connection.

    In 2008, Trent Sebits, the former manager of public and government affairs for the Kochs’ Wichita-based refining giant, Koch Industries, registered with the state of Kansas to lobby on behalf of the American Future Fund and Americans for Prosperity. Sebits did not respond to a request for comment.

    The American Justice Partnership, another “social welfare” nonprofit, gave $50,000 to the American Future Fund in 2011 and $2.4 million in 2010, according to IRS filings. The group supports free enterprise and is often at odds with trial lawyers.

    Dan Pero, its president, said in an emailed statement that the organization supported the American Future Fund to help “promote free enterprise and improve the fairness and predictability of the legal environment.”

    Like super PACs, “social welfare” nonprofits are allowed to accept unlimited donations from individuals, corporations, unions and other organizations. The only funders whose names they are required to publicly disclose are those that make contributions earmarked for political purposes.

    That’s as it should be, according to attorney Dan Backer, who is not affiliated the American Future Fund but does work with other conservative groups.

    “A nonprofit makes its decisions by a board or other management structure, which is distinct from its donors,” Backer said.

    Increasingly political
    In 2010, the American Future Fund became far more politically active, reporting $8.6 million in political expenditures as well as millions more for “media services,” “telecommunications” and “mail service/production.” It told the Federal Election Commission that it spent $9.1 million on political advertisements.

    Marcus Owens, former chief of the IRS’s nonprofits division, said it is “difficult to conjure up a situation where a particular expenditure would be reportable to the FEC but would not constitute political campaign intervention under tax law.”

    Nevertheless, Owens said the organization could make a “straight-faced argument” that its orientation had simply changed over time to become more overtly political.

    Of the $25 million that the American Future Fund reported spending to the FEC last year, more than 90 percent fueled ads that urged voters to support or reject candidates.

    The group also sought the FEC’s advice on whether mentioning the White House or “the administration” in negative ads ahead of Election Day would be seen as referring to a “clearly identified candidate for federal office.”

    Such a designation would have required the group to disclose information about its donors. (The commission deadlocked, 3-3, in a vote along party lines.)

    In addition to the presidential race, the American Future Fund spent money in 20 congressional elections in 2012, including California’s 26th Congressional District, where it spent $500,000 attacking Democrat Julia Brownley, who, as a state legislator, had authored legislation to bolster disclosure for political advertisements.

    She won anyway, but told the Center for Public Integrity that she is “deeply concerned” about the activities of non-disclosing groups in the wake of Citizens United and hopes to “take immediate action” to strengthen federal disclosure laws.

    The American Future Fund also spent more than $542,000 to aid West Virginia Republican Patrick Morrisey in his successful quest to win the race for attorney general, records indicate, and more than $620,000 in a failed effort to sink Missouri Attorney General Chris Koster, a Democrat.

    Complaints about the American Future Fund’s political activities have followed it since its creation.

    In 2008, the Democratic Party in Minnesota contended that the group needed to register as a political committee after paying for ads that praised then-U.S. Sen. Norm Coleman, R-Minn. The FEC disagreed.

    Two years later, in October 2010, consumer group Public Citizen and two other organizations alleged that the American Future Fund’s “huge expenditures” to aid candidates in the midterm election should have triggered requirements that the group register as a political committee and disclose its donors. That complaint is still being considered by the FEC, which often takes years to fully resolve such matters.

    CREW, the watchdog organization, filed a complaint against the American Future Fund with the IRS in February 2011 that challenged whether its primary purpose was something other than influencing elections. The group has dismissed the complaint as “baseless” and contends that CREW “only targets government officials and organizations who have a differing or conservative point of view.”

    Proposition 32

    California’s campaign finance rules require major donors to groups that pay for political advertisements to be named in actual ads.

    Thus, when a political committee called the California Future Fund for Free Markets aired ads praising Proposition 32, each advertisement included the disclaimer “with major funding by the American Future Fund.”

    One ad criticized lawmakers for making “deals cut in shadows and back rooms” as dramatic music played in the background. Yet the donors to the American Future Fund itself largely remain in the shadows.

    The Center for Public Integrity is a nonprofit independent investigative news outlet.  To read more of its stories on this topic go to  http://www.publicintegrity.org/politics/consider-source 

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  • How outside money was poured into governors' races

    By Paul Abowd and Andrea Fuller, The Center for Public Integrity

    Despite outraising its Democratic counterpart by a 2-to-1 margin, the Republican Governors Association won only four of 11 races in the 2012 election, a far cry from the success it enjoyed two years ago.

    The Washington D.C.-based political organization raised almost $100 million, according to recently released Internal Revenue Service data. The group targeted six states it considered winnable, losing five of them. Democrats won seven of the 11 contests, but the GOP managed to pick up one seat in North Carolina, long held by Democrats.

    The top donors to the so-called “527” organization, which can accept unlimited contributions from billionaires, corporations and unions, are familiar Republican Party patrons — No. 1 is Bob Perry, a Texas homebuilder and perennial RGA supporter, who gave $3.25 million. That’s a little more than half of what he gave in 2010.

    Billionaire casino magnate Sheldon Adelson is No. 2, with $3 million in donations between him and his wife. According to the latest Federal Election Commission reports, Adelson is the top donor to super PACs in 2012, doling out more than $93 million along with his family.

    Conservative billionaire David Koch — who has not made any contributions to super PACs — was the organization’s third-highest donor, writing two checks totaling $2 million. Koch is co-owner of the second-largest privately held company in America, Koch Industries, an energy conglomerate.

    Seven of the RGA’s top 10 donors are corporate executives who gave at least $1 million. Two of them, Paul Singer and Kenneth Griffin, are hedge fund managers.

    Six of the Democratic Governors Association's top donors were unions. The American Federation of State County and Municipal Employees topped the DGA donors list, giving about $1.3 million. The Service Employees International Union gave about $1.1 million, while the American Federation of Teachers gave at least $772,000.

    Top corporate donors to the DGA included pharmaceutical giants Pfizer, which gave almost $700,000, and AstraZeneca, which contributed nearly $600,000. The companies also gave comparable sums to the RGA. The DGA also got corporate support from health insurer United Healthcare Services Inc., and AT&T.

    The DGA raised nearly $50 million, the organization's "strongest fundraising year ever," according to spokeswoman Kate Hansen. 

    'Enormous impact on state elections'
    The DGA and RGA have devised national strategies for collecting unlimited funds from unions, corporations, and wealthy individuals, and funneling the money into state races. Both have used networks of state-based PACs to maneuver around various state limits on campaign giving.

    “They’ve had an enormous impact on state elections across the nation,” said Ciara Torres-Spelliscy, an election law expert at Stetson Law School. “In many states they were consistently a top spender.”

    The circuitous methods used by both organizations to inject corporate and union cash into state races and mask the identity of its donors have raised legal questions, prompted lawsuits, and tested the capacity of state election boards to enforce limits on outside spending.

    Both organizations have told the Center for Public Integrity that they fully comply with campaign finance laws, and that they report their donors and spending to the IRS.

    The RGA set up a federal super PAC called RGA Right Direction, and fed it with $9.8 million in contributions. The super PAC — another type of organization that can accept unlimited donations from individuals and corporations — then made a large contribution to Indiana Republican candidate Mike Pence, and bought ads in tight state races in Montana, Washington, New Hampshire, and West Virginia.

    Super PACs are normally used to spend money on federal campaigns. By passing the funds through the super PAC, which reported its sole donor as the RGA, the association effectively shielded the identities of the donors who paid for ads in the state races.

    In North Carolina, the RGA spent millions of dollars, directly from corporate treasuries to win in a state long led by Democratic governors. The unlimited contributions from dozens of corporations across the country went toward ads supporting Republican candidate Pat McCrory, who won convincingly over Democratic Lt. Gov. Walter Dalton.

    The DGA, too, used a network of state-affiliated PACs, to fund ad campaigns in battleground states like Montana and North Carolina. It was the primary funder of a PAC called North Carolina Citizens for Progress, which purchased ads attacking McCrory.

    While America’s wealthiest corporate executives tend to prefer the RGA, and unions give almost exclusively to the DGA, some donors played both sides this election.

    Agricultural giant Monsanto, credit card company Visa and health insurance company Humana were large donors to both the RGA and DGA — each giving about $100,000 to both groups.

    Despite the Republicans' win-loss record, RGA spokesman Michael Schrimpf called 2012 "a successful year by any standard" with Republicans now in control of governorships in 30 states. Most of those gains, however, came in 2010. The North Carolina win and the failed effort to recall Scott Walker, Wisconsin's Republican governor, in June, were high points for the GOP this year.

    In addition, in five states targeted by the RGA where it lost, the Democrats held advantages unrelated to fundraising. 

    Missouri and West Virginia featured Democratic incumbents. Three other states — Montana, Washington and New Hampshire — had open seats where a Democrat had previously been in power.

    The two organizations will put their fundraising powers to the test again in 2013, when Virginia and New Jersey choose their next governors.

    Michael Beckel contributed to this report.

    The Center for Public Integrity is a non-profit independent investigative news outlet.  For more of its stories go to publicintegrity.org

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  • Report on lavish Vegas trip spurs ouster of three top federal employees

    The head of the General Services Administration, Martha Johnson, has resigned after it was discovered that she spent taxpayer money on Las Vegas attractions. NBC's Lisa Myers reports.

    By msnbc.com staff

    The head of the U.S. agency that provides products and services to support the federal government resigned Monday, after the agency’s inspector general reported excessive spending at a training conference in Las Vegas that included line items such as "mind reader," and "clown," according to a story first reported by The Washington Post.


    GSA administrator Martha Johnson tendered her letter of resignation to the White House Monday and two of her deputies were forced out — Public Buildings Service chief Robert A. Peck and Johnson's top adviser, Stephen Leeds, White House officials told the Post. Four GSA employees who organized the four-day conference have been placed on administrative leave pending further action.

    The report released Monday by the inspector general details the outlays at a GSA training conference for 300 employees held at a luxury hotel near Las Vegas in October 2010 that cost more than $835,000.

    The costs included $147,000 in airfare and rooms at the hotel for six planning trips by a team of organizers. They also paid $3,200 for a mind reader and $75,000 on a training exercise to build a bicycle and $6,300 on commemorative coin sets.

    In her resignation letter, Johnson said that the agency had made a "significant mis-step," in which "taxpayer dollars were squandered." She said she had launched an internal review, taken disciplinary action and instituted tough new controls to prevent similar problems in the future.

    She resigned, "so that the agency can move forward at this time with a fresh leadership team," according to her letter.

    Johnson was unanimously confirmed by the U.S. Senate as head of the GSA on Feb. 5, 2010.

    The GSA manages contracts for government needs such as transportation, office space and communications. It is also tasked with developing cost-minimizing policies for the federal government.

    White House Chief of Staff Jack Lew said in a statement that President Obama learned of the inspector general’s findings prior to his recent trip to South Korea, "and he was outraged by the excessive spending, question questionable dealings with contractors, and disregard for taxpayer dollars."

    "He called for all those responsible to be held fully accountable given that these actions were irresponsible and entirely inconsistent with the expectations that he has set as president," the statement said.

    The Repulican chairman of the House Oversight and Government Reform Committee responded to the news with a statement linking the spending scandal to administration policies.

    "After President Obama lectured the private sector about not wasting funds on Las Vegas conventions, it's hypocritical that such a large agency with critical management responsibilities across government would hold this luxurious conference at the height of the recession and even spend thousands on custom made coins touting the stimulus," said a statement from Rep. Darrell Issa, R-Calif. 

    "Employees congratulating themselves and promoting one of the most politically controversial initiatives of this Administration with taxpayer funds is indicative of the waste that exists in a bloated federal government."

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  • For Gen Y, moving back with their parents is a LOL

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    Among young adults, 61 percent said they have friends or family members who have moved back in with their parents because of economic conditions

    By Eve Tahmincioglu

    You would think young adults stuck living at home with their parents would be sending texts of despair to friends about their lot in life.

    Think again. Most Gen Yers think it's gr8.

    Three out of ten adults, ages 25 to 34, are living with their folks and of those 78 percent said they’re happy with it, according to a Pew Research survey released Thursday and titled “The Boomerang Generation: Feeling OK about Living with Mom and Dad.”

    Even more surprising is that 77 percent of those still under their parent’s roof have high hopes for their economic futures.

    The Pew survey is based on telephone interviews with about 2,000 young adults around the country in December.

    It’s becoming like an episode of “All in the Family” out there.

    “The share of Americans living in multi-generational family households is the highest it has been since the 1950s, having increased significantly in the past five years,” according to additional Pew research that looked at U.S. Census data, and the 24 to 35 crowd are among the most likely to be living in such arrangements.

    One reason Gen Yers might be happy with the new family order is because so many of them are doing it, the researchers surmised.

    • Among young adults, 61 percent said they have friends or family members who have moved back in with their parents over the past few years because of economic conditions.
    • And 29 percent of parents of adult children report that a child of theirs has moved back in with them in the past few years because of the economy.

    Indeed, the unemployment rate for this group, which on the decline, is still 8.7 percent, above the national average in February of 8.3 percent, according to the Bureau of Labor Statistics.

    “Adults in their late 20s and early 30s have fared somewhat better in the labor market, but they have felt the sting of tough economic times in other areas of their lives,” the report stated. “Many have had to settle for jobs they didn’t really want just to make ends meet. Fully a third have gone back to school, and an equal share (34 percent) have postponed either marriage, parenthood or both.”

    The economic turbulence, Pew reported, “appears to be giving rise to a protracted set of economic ties between parents and their adult children.”

    Having the kids return home isn’t all bad for the parents either, especially when it comes to finances.

    • 48 percent of young adults report that they have paid rent to their parents.
    • And 89 percent said they helped with household expenses.

    This might be why many young adults reported not feeling footloose and fancy free, even though they’re not burdened by paying their own way. “Nearly eight-in-ten of these 25- to 34-year-olds say they don’t currently have enough money to lead the kind of life they want,” Pew results found, “compared with 55 percent of their same-aged peers who aren’t living with their parents.”

    Are you over 20 and still living at home with your parents? Let us know on Facebook.

  • Report: Earmarks fund projects near lawmakers' properties

    By msnbc.com staff

    Members of Congress have pushed more than $300 million in earmarks and other provisions to projects near their own properties, the Washington Post reported on Tuesday.

    Thirty-three members of Congress channeled the public funds into projects next to or within two miles of properties they own, according to the newspaper's investigation.

    The Post said this is legal under ethics rules penned by lawmakers themselves.

    The investigation into the holdings of all 535 members also revealed that 16 had steered federal funds to firms, colleges and programs where family members worked or sat on boards, the newspaper reported.

    In one case, an Alabama senator directed more than $100 million in federal earmarks to upgrade an area near his office building in Tuscaloosa, according to the Post. Another representative reportedly earmarked $486,000 to build a bike lane to a bridge near a property she owned. (Click here for full results of the Washington Post investigation)