Secret Political Cash Moves Through Nonprofit Daisy Chain
By: Alison Fitzgerald and Jonathan D. Salant
October 14, 2012
Sean Noble, a former congressional aide, had an account ready when the U.S. Supreme Court ruled in 2010 that corporations could join wealthy donors and spend freely in federal elections. In less than a year, he had $62 million at his disposal.
He then unleashed it into that year’s midterm elections, and, to this day, no one knows where Noble’s obscure Phoenix- based nonprofit group called the Center to Protect Patient Rights got its money.
What is known is where much of it went. According to the group’s annual IRS disclosure, more than half of the cash was parceled out to four groups — the American Future Fund, 60 Plus Association, Americans for Job Security, and Americans for Tax Reform – that in turn spent $30 million to help elect Republicans. For 60 Plus, an Arlington, Virginia-based group that favors privatizing Social Security and has received funding from billionaires David and Charles Koch, the $9 million from Noble’s nonprofit accounted for more than half of its 2010 revenue of $16 million, IRS records show.
Noble’s political activity sheds light on a Cayman Islands- style web of nonprofit front groups and shell companies that are increasingly being used to protect the identities of donors who want to get involved in politics in big ways without leaving a trace. These groups represent the super-secret money flowing through federal elections in the aftermath of the Supreme Court’s decision in Citizens United v. Federal Election Commission and other court rulings.
“It’s a campaign finance haven,” said Bill Allison, editorial director at the Sunlight Foundation, a Washington- based group that advocates for government transparency. “There’s money shuffling around between nonprofits, going from one organization that then is giving it to another.”
Noble’s personal finances also appeared to improve substantially, as he went from being a Capitol Hill senior aide to the owner of three homes — including an 8-bedroom, Utah property — and a Washington, D.C, rowhouse that combined are valued at more than a million dollars.
Noble didn’t respond to phone calls, e-mails or a direct message via Twitter seeking comment. A visit to his Capitol Hill house went unanswered.
It will likely take another year to know what the Center to Protect Patient Rights is doing, if anything, in this year’s race between President Barack Obama and Republican challenger Mitt Romney because of a delay in IRS filings. However, its pattern of moving money through nonprofits is being employed by other groups.
The Center for Individual Freedom is a nonprofit that spent $1.3 million on 2,572 television ads during the last two weeks of September against Democratic House candidates in seven states. The group, which doesn’t disclose its donors, received $2.8 million from Crossroads Grassroots Policy Strategies in 2010, another political nonprofit that does not disclose its donors.
Even groups that claim to disclose contributors can hide the source of some of their money. Priorities USA Action, a super- political action committee that supports Obama’s re-election bid, has received in-kind donations from its sister nonprofit, Priorities USA, which doesn’t say where its money comes from.
Another super-PAC, FreedomWorks for America, which is aligned with the anti-tax Tea Party movement, has spent $6.9 million on ads supporting mostly Republican candidates. The group’s major donor is FreedomWorks, an associated nonprofit led by Republican former House Majority Leader Dick Armey that doesn’t disclose where it gets its money.
“There are a group of people, donors, whose highest priority is secrecy — being able to spend money in the election without it being disclosed,” said Trevor Potter, a former FEC chairman who is president of the Campaign Legal Center, a Washington-based group that favors greater disclosure. “They will go to great lengths to do this.”
David Keating, president of the Center for Competitive Politics, an Alexandria, Virginia-based group that opposes limits on campaign giving, disagreed. “It’s not an unusual occurrence for nonprofits to donate to other nonprofits,” he said. “It has to be on the public part of the tax returns. It’s not secret. I don’t see that as a way to hide donors.”
Noble’s stewardship of the Center to Protect Patient Rights also carried rich rewards. In 2008, he was earning $87,000 a year as chief of staff to Representative John Shadegg, an Arizona Republican.
Last year, Noble spent $665,000 on a Capitol Hill rowhouse. In December he bought a 5,700-square-foot, eight-bedroom house in Hurricane, Utah, according to public property records. He and his wife, who have five children, also own two houses in Phoenix, according to Maricopa County, Arizona, property records.
His journey to the nonprofit world began in 2008 when, after serving as Shadegg’s chief of staff for 10 years, he left his job and set up his own political consulting firm, Noble Associates Inc. In 2009, he signed on as executive director to the Center to Protect Patient Rights. He took no salary in that role. Instead, Noble Associates Inc. was paid $530,000 over two years, and he hired himself to lobby for the group.
The CPPR is registered with the Internal Revenue Service as a nonprofit “social welfare” group, a tax category that permits some political activity so long as the majority of its work is dedicated to advancing the public good through education or awareness about issues.
That organizational structure has proliferated since the Citizens United ruling, and it carries an added advantage: the names of donors can be kept secret.
The Center to Protect Patient Rights served largely as a way station for piles of cash that Noble forwarded to other nonprofit groups that ran political ads, mounted direct mail campaigns and conducted robo-calls in an unprecedented effort to help Republicans win seats in Congress.
The CPPR took in $13.7 million in contributions in 2009, even as its tax returns say it engaged in no fundraising. The following year, after the Supreme Court’s ruling, contributions almost quintupled to $61.8 million.
In the two years for which records are available, 2009 and 2010, Noble and the CPPR, whose address is a post-office box 10 miles from Noble’s Arizona home, funneled $55.4 million to other nonprofit political organizations, including some of the biggest-spending independent groups of the 2010 election.
In addition to 60 Plus, the CPPR gave $11.7 million to the American Future Fund, accounting for more than half of its $23.3 million in revenue. The American Future Fund, based in Des Moines, Iowa, opposes the new health-care law that expands coverage to millions of uninsured Americans.
“This is one illustration of how the Supreme Court got it wrong in Citizens United by declaring that corporations are just like humans,” said Paul Ryan, a lawyer with the Campaign Legal Center. “Corporations aren’t human and they can be used as pass-throughs, particularly to obscure the true source of funds being used to influence elections, therefore denying voters the information they need to make informed decisions on Election Day.”
While there are no public records that show where the CPPR gets its funding, Noble has ties to the Koch brothers, who control Wichita-based Koch Industries Inc., and to their political nonprofit, Americans for Prosperity.
Noble spoke in 2010 at a Koch-sponsored gathering of wealthy donors where they discussed how to help Republicans win the White House and more seats in Congress. He shared a podium with Tim Phillips, president of Americans for Prosperity, and the CPPR gave AFP $1.9 million in 2010. Phillips did not respond to a phone call and e-mail requesting an interview. An AFP spokesman said Noble is not on the group’s payroll.
The center and an organization called Patients United Now, which was created by the Americans for Prosperity Foundation that David Koch is chairman of, worked together to sponsor an event to oppose Obama’s health-care overhaul in The Woodlands, Texas, according to a flier from the event.
Groups such as the CPPR may be shuffling money between nonprofits in order to say they donated their money to another organization that was doing good works, several campaign finance specialists said.
“What you can do is create this daisy chain where every group is passing around the same million as the other groups,” Allison of the Sunlight Foundation said. “This way it looks like they’re fulfilling this social welfare obligation.”
The practice is akin to “wholesale money laundering,” said David Vance, a spokesman at the Campaign Legal Center.
It’s unclear if the Noble’s center is still in business. It has no website and a call to the number listed on its tax filings was answered by a woman who said it’s now her personal telephone number.
The center’s mail is being forward to Starlet Eiting, a financial management professional with addresses in Texas and Glendale, Arizona. Eiting refused to discuss the center in a telephone interview. “I can’t give you any information,” she said and hung up. Eiting is being paid by DCI Group, a Washington-based political communications firm, according to the Center for Responsive Politics.
This year, Noble, whose consulting firm is now called DC- London Inc., has been a consultant to several congressional candidates, including Representative Jeff Flake, an Arizona Republican who is running for the Senate.
Flake paid DC-London Inc. $49,000 last year for management and field operations, according to the Center for Responsive Politics and Federal Election Commission records.
Noble’s firm — and Flake — are benefiting from his position at CPPR. Through the center, Noble in 2010 sent $690,000 to the nonprofit arm of the Club for Growth, a Washington-based group that supports less government spending and lower taxes, accounting for 12 percent of the club’s entire budget, IRS records show.
The Club for Growth on Oct. 2 announced it would spend $500,000 on TV ads in Arizona to support Flake’s Senate campaign. Barney Keller, a club spokesman, said the group’s campaign spending comes from its political action committee, not the group’s nonprofit arm. The nonprofit, however, gave money to the PAC, according to the Center for Responsive Politics. Keller declined to say whether his organization was still receiving money from the CPPR.
“It really highlights how interconnected and tightly knit this world is,” said Sheila Krumholz, executive director of the Center for Responsive Politics. “A few players keep showing up again and again.”