Ever since the 1972 Federal Election Campaign Act passed, public disclosure of the money used to influence elections has been a cardinal rule of U.S. politics.

 

Voters’ right to know who is behind the money spent trying to sway them was firmly established by the Supreme Court’s 1976 decision in Buckley v. Valeo, which upheld the constitutionality of campaign finance disclosure laws.

 

But now, secret money has returned to U.S. politics and is flooding the 2010 congressional races.

 

The main vehicles being used to hide donors are 501(c)(4) tax-exempt organizations, which do not have to disclose their donors. These groups are expected to spend tens of millions of dollars on the 2010 congressional races.

 

Many news outlets have reported this year about the dire financial condition of the Republican National Committee, but this turns out to be an illusionary problem.

 

Two “shadow RNC” groups, American Crossroads GPS and American Action Network, are prime examples of full-scale political operations run inside the structure of tax-exempt 501(c)(4) groups. They were both set up this year by leading GOP political operatives to elect Republicans in the midterm races. As 501(c)(4)’s, their activities are financed by contributors kept secret from the public.

 

These two groups, along with a third “shadow RNC” group, American Crossroads, a 527 political organization, have announced plans to spend at least $75 million in the 2010 congressional races. While American Crossroads, as a 527, has to disclose its donors, most campaign expenditures by these groups are expected to be made by the two 501(c)(4)’s and financed with undisclosed contributions.

 

Trade associations also are being used to conceal donors financing campaign spending. The U.S. Chamber of Commerce, for example, is set to spend $75 million in the 2010 congressional races, funded by undisclosed contributors.

 

The Shadow RNC

 

The three shadow groups were formed by some of the top Republican political operatives — and are based in the same building.

 

Both American Crossroads and American Crossroads GPS were established by Karl Rove, former President George W. Bush’s chief political adviser, and Ed Gillespie, a former RNC chairman.

 

The head of American Crossroads, Mike Duncan, is another former RNC chairman. He has said the two groups plan to spend nearly $50 million in 11 Senate races this year.

 

The third group, American Action Network, was formed by several other Republican leaders, including former Sen. Norm Coleman. The GOP fundraiser Fred Malek is a key player in the group, which announced plans to spend $25 million to support Republican congressional candidates this year.

 

The Center for Public Integrity recently reported that another 501(c)(4) shadow RNC group was being formed by Scott Reed, a Republican operative, who says “he’s raised about half of the $25 million he’s hoping to spend to influence a few Senate and 20 House contests.” Reed did not disclose the group’s name.

 

Rove and Gillespie first established American Crossroads as a 527 but then set up American Crossroads GPS as an affiliated 501(c)(4) — that does not disclose its donors and can therefore serve as a haven to hide big donors.

 

According to POLITICO, Steven Law, president of both groups, made clear that secrecy for donors was a key reason for establishing the 501(c)(4), saying, “I wouldn’t want to discount the value of confidentiality to some donors.”

 

As of Aug. 23, American Crossroads and American Crossroads GPS had raised a combined $17.6 million as of Aug. 23, with $6.5 million reported by the 527 group, and almost twice as much, or $11.1 million, reported by the 501(c)(4), according to the BNA Money and Politics Report.

 

Since the formation of the 501(c)(4), most contributions raised by the two groups have gone to the (c)(4) — where donors’ identities are kept secret.

 

World’s Billionaires Unite

 

The first contributions for the Rove/Gillespie operation were raised for American Crossroads, their 527, and had to be disclosed. Examining these contributions can offer some idea of the kind of donors for American Crossroads GPS, which does not disclose contributors.

 

The original donor of choice for American Crossroads was a billionaire. The original contribution of choice was $1 million.

 

According to POLITICO, Salon and the Center for Public Integrity, the initial donors to American Crossroads included:

 

• Billionaire Bradley Wayne Hughes, chairman of Public Storage Inc. — $1.55 million;

 

• Billionaire Trevor Rees-Jones, president of Dallas-based Chief Oil and Gas — $1 million;

 

• Billionaire Harold Simmons’s company, Southwest Louisiana Land LLC — $1 million;

 

• Dixie Rice Agricultural Corp., in which billionaire Harold Simmons is a major investor — $1 million

 

• Billionaire Robert Rowling’s company TRT Holdings — $1 million;

 

• Billionaire Jerry Perenchio’s Living Trust — $1 million.

 

The DISCLOSE Act

 

The explosion of secret money in the 2010 races was triggered by the Supreme Court’s 5-4 decision in Citizens United v. Federal Election Commission, which struck down the long-standing ban on corporations making campaign expenditures to influence federal elections.

 

More than 75 percent of voters, including 70 percent of Republicans and 73 percent of independents, according to a recent Survey USA poll, view such corporate election spending as an attempt to bribe politicians rather than as free speech.

 

The Citizens United decision opened the door for 501(c)(4) advocacy groups and 501(c)(6) trade associations to make unlimited campaign expenditures funded by undisclosed contributions.

 

The DISCLOSE Act, which passed the House in June, was devised to cure the secrecy problem and provide disclosure of the contributors and the amounts they give.

 

But the act was one vote short of getting to the Senate floor in July, when no Republican senator voted to allow the legislation to be considered. The bill is expected to come up for a vote again this month.

 

While a new law cannot be passed in time to shed light on the secret funding of this year’s races, passing the DISCLOSE Act in this Congress would restore to future federal elections the basic principle that voters have a right to know who is behind the money being spent to influence their votes.

 

Fred Wertheimer is founder and president of Democracy 21, a nonpartisan organization that promotes government integrity, transparency and accountability.

 

CORRECTION: In an earlier version of this story, the year of passage of the Federal Election Campaign Act was stated incorrectly. It was passed in 1972, not 1973.

 

The story also misstated the connection between two leading Republican political strategists – Karl Rove, former President George W. Bush’s chief political adviser, and Ed Gillespie, a former RNC chairman – and three new shadow Republic National Committee groups. The two men played central roles in the creation of these three groups, but did not establish them.