Undisclosed And Untold: Most Lawmakers Have Ties To Accounts That Can Raise Money In Secret

Some Lawmakers Serve On The Boards Of Nonprofit Organizations That Are Accepting Undisclosed ‘Political’ Contributions. Others Are Raising Money For Them. A Look Inside The Growing Trend Of Secret Fundraising Accounts In Lansing.

 

By CRAIG MAUGER
Michigan Campaign Finance Network


LANSING (July 22, 2019) — At the end of 2016, then-state Sen. Mike Nofs was at the center of a push to overhaul Michigan’s energy laws.

The Battle Creek Republican was chairman of the Senate Energy and Technology Committee. He helped develop the compromise proposal that passed the Legislature in December 2016. The state’s two dominant electric utilities supported the plan.

At some point in 2017, according to federal tax records, a nonprofit organization connected to one of those dominant electric utilities gave $20,000 in “grants or other assistance” to another nonprofit called Empower Michigan. According to state business filings, Nofs was the president of Empower Michigan, which he says he used to benefit students, veterans and other causes in his Senate district. Nofs said no special considerations were given as part of the energy overhaul, which he noted got bipartisan support.

“Whatever the rules are, you follow them,” Nofs said. “If people want the rules changed, then they should get the rules changed.”

Under the current rules, state officeholders’ quiet use of accounts, like Empower Michigan, that can accept unlimited amounts of money from secret donors has become commonplace in Lansing. An analysis by the Michigan Campaign Finance Network (MCFN) found links between a majority of the 148 lawmakers serving last year and accounts or organizations that could raise money from sources known to the lawmaker but unknown to the public.

For some of the accounts, the available public documents made it impossible to know whether the accounts were active, how much money they were raising or what elected officeholders were using them for. So while many lawmakers argued that they used the funds for charitable causes, there was no way to verify that.

The connections MCFN found included the following:

— Lawmakers, their spouses or their main legislative staffers serving on the boards of nonprofit organizations that received contributions that corporate donors themselves described as “political”;

— Lawmakers holding fundraisers in Lansing where contributions were directed to go to nonprofit accounts;

— Corporations or interest groups reporting giving contributions to accounts that the donors listed at the home addresses of state lawmakers or their legislative staffers;

— And accounts operating under lawmakers’ names to accept corporate contributions.

MCFN also determined some of the connections through discussions with sources. However, many lawmakers didn't respond to questions about potential connections to these types of accounts, and some wouldn’t even confirm connections that were clearly visible. Multiple lawmakers said while these types of fundraising accounts may be popular, they generally aren’t discussed by their colleagues.

Like others, former Sen. Mike Green, a Republican from Mayville who left office because of term limits at the end of 2018, declined to guess how many lawmakers used a nonprofit to raise money.

“It’s not something we talked about,” Green said.

Green’s former chief of staff was listed as an authorized agent for a nonprofit organization called the Farm Coalition, according to state business filings. It formed in 2011, the same year Green became a state senator. Green said he used the organization to do things for his community but never raised much money to support its efforts


How We Followed The Money

MCFN examined hundreds of voluntary disclosures made by corporations about their political giving, tax documents, state business filings, previously published articles and fundraising invitations to arrive at the conclusion that most state lawmakers serving in 2018 were connected to an account that could raise money from secret donors. MCFN also spoke with about 20 sources for this report and used ProPublica's searchable nonprofit explorer.

In 2016, a joint project by MCFN and MLive found that at least a third of lawmakers serving at that time had connections to these types of accounts. MCFN built on that story for this new report, which marks the first time it’s been found that a majority of the Legislature had ties to this type of under-the-radar fundraising.

What’s happening in Michigan doesn’t appear to be happening to the same extent in other states. MCFN examined voluntary disclosures on corporate political giving made by three large, national companies: AT&T; CVS Health; and Reynolds American Inc. All three reported making more contributions in 2018 to organizations in Michigan that didn’t feature a candidate’s name or a political party’s name and fell outside of campaign finance disclosure laws than they did in other states.

Unlike Michigan, some states allow for corporate contributions directly to lawmakers’ campaigns so the need for a side account that can accept corporate money may be less pressing. Some states, including Ohio, and the U.S. House put limitations on officeholders’ ability to solicit things of values that could lead to improper influence with exemptions for campaign contributions.

CVS Health reported giving corporate dollars to 36 “political” accounts with no obvious connections to specific politicians in Michigan in 2018. CVS Health reported contributions to no more than seven mystery accounts in any other state.

A spreadsheet of organizations with connections to 75 Michigan lawmakers serving in 2018 is below. The spreadsheet includes information on the connections MCFN found and on some of the money we tracked.

 

 

However, there are many other organizations receiving political money that MCFN couldn’t currently tie to specific lawmakers. Twenty of those organizations are listed below.

 

 

While many of voluntarily disclosed contributions to these types of accounts are less than $2,000, MCFN was also able to track a number of large contributions from interest groups to key officeholders’ nonprofits or administrative accounts. Some of them are listed in the spreadsheet below.
 
— In 2016, the Michigan Responsibility Council, a trade association working with medical marijuana entrepreneurs, gave $30,000 in “grants or other assistance” to a nonprofit called Kowall for Michigan, according to a tax filing. At the time, Sen. Mike Kowall, a Republican from White Lake, was the Senate floor leader. Also, in 2016, the Legislature approved a wide-ranging proposal setting up a new licensing program for medical marijuana businesses. Kowall didn’t respond to multiple requests for comment on what the nonprofit used the money for.
 

 

— At some point between July 2016 and June 2017, the Michigan Health & Hospital Association, which lobbies on behalf of hospitals, gave $10,000 to West Michigan Conservatives for Growth, an account tied to former Rep. Rob VerHeulen, a Republican from Walker. In 2016, VerHeulen was campaigning to be the House Republican leader for the next term, and the Health & Hospital Association was supporting his bid, he said.

— On Oct. 2, 2018, a super PAC for the interest group Business Leaders for Michigan gave $25,000 each to two nonprofits: the Peninsula Fund; and Michigan! My Michigan! Peninsula Fund formed in 2017. Its president is a legislative staffer who’s worked for Rep. Lee Chatfield, a Republican from Levering. Chatfield became speaker of the House at the start of  2019.

 

Michigan! My Michigan! formed in August 2018. In disclosures by other groups who’ve given the organization money, the nonprofit has been listed at two different addresses. One of the addresses is that of Lansing consulting firm that works with the Senate Republicans and the other is of an accounting firm based in Jackson. The only lawmaker who’s publicly disclosed paying that Jackson accounting firm to do campaign finance work since 2016 was Sen. Mike Shirkey, a Republican from Clarklake. Shirkey became Senate majority leader in 2019. Spokespeople for both Chatfield and Shirkey didn’t respond to requests for comment.


The Accounts. The Connections. The Law

Traditionally, members of the public believe that they can determine their elected officials’ political donors by examining campaign finance disclosures that are filed with the Secretary of State. However, in Michigan, that belief has some growing flaws.

In Michigan, campaign finance disclosure requirements generally cover money that’s given to lawmakers to help their campaigns or to openly impact an election. More lawmakers appear to be using nonprofit organizations or administrative accounts to raise money for activities that fall outside of the narrow scope of Michigan’s campaign finance law.

These types of accounts can fund community projects, like backpack drives, or they can reimburse lawmakers for expenses directly related to their official positions, like a trip to a conference or gas purchases for traveling the state to attend events. However, because many accounts don’t file any public paperwork on their spending, it’s impossible to know what Michigan lawmakers are actually using them for.

Some lawmakers have ties to nonprofit social welfare organizations. They are known as 501(c)(4)s because that’s the section of the Internal Revenue Code they fall under. They are meant to be used to promote social welfare. Donors to these groups don’t have to be disclosed, and generally, these groups only have to file detailed reports on how much they spent or raised if they raised more than $50,000 in a year.

Other lawmakers are using administrative accounts to raise money. They are known as 527s because they fall under Section 527 of the Internal Revenue Code. Generally, they only have to regularly report their donors if they raise more than $50,000 a year.

Various lawmakers have told the same story about their accounts: Lobbyists in Lansing or their own colleagues in the Legislature encouraged them to set up the accounts because there were donors who wanted to give to their accounts anonymously.

Former Rep. Henry Yanez, a Democrat from Sterling Heights who had a nonprofit called Great Place Michigan, said the donors tended to be groups that wanted to build or maintain relationships with state officeholders.

“These people are so willing to give me this money and I have this need back home,” Yanez said, “so I took it.”

Yanez said he used Great Place Michigan to buy backpacks for students in his district, among other things.

Former Gov. Rick Snyder has maintained some of the most active nonprofit organizations among state officeholders in recent years and has used them for a variety of tasks, including paying a staff member and helping with his administration’s response to the Flint water tragedy.

One of his nonprofits Making Government Accountable reported raising $1.2 million in 2017, according to a tax filing. The group won’t have to file its report for 2018 until later this year.

In 2017, the nonprofit reported giving $218,000 to other nonprofits, spending $172,000 on professional fundraising, spending $59,164 on travel and spending $83,772 on “conferences, conventions and meetings,” its tax filing says.

While Making Government Accountable has maintained a larger profile, MCFN was only able to determine many of the accounts lawmakers have been using to raise money through corporations’ voluntary reports on their self-described “political” contributions. Corporations like telecommunications giant AT&T and the tobacco company Reynolds American Inc. regularly disclose the political contributions they make at the state level. Their disclosures feature just the name of the nonprofits and the amounts given.

Having the names of the nonprofits allowed MCFN to do further research through state incorporation documents to determine who was actually behind the organizations. However, some of those documents were lacking. Under Michigan law, most nonprofit organizations are supposed to have three board members and file extremely brief annual reports although some nonprofits with connections to the Legislature haven’t publicly disclosed three board members and haven't filed reports for years.

For instance, in 2017, Verizon voluntarily reported giving $500 to a nonprofit called Conservative Michigan Fund. According to a 2018 filing, the fund’s president, secretary and treasurer were all the same person. That person has been listed online as a legislative staffer for Rep. Michele Hoitenga, a Republican from Manton and chairwoman of the House Communications and Technology Committee. Hoitenga didn’t respond to a request for comment.

Another nonprofit called The Future Leader's Fund formed in 2015. Its incorporator was a legislative staffer for Sen. Ken Horn, a Republican from Frankenmuth. But the organization doesn't appear to have filed annual reports with the state since 2015, according to the state's database. Horn's office didn't respond to a request for comment.

 

‘I Feel An Obligation’

The tobacco company Reynolds American Inc. reported giving a total of $24,950 to 17 accounts in Michigan in 2018. Of those 17, only five included a lawmaker’s name in the name of the account.

One of the others was a 501(c)(4) social welfare organization called the Step Forward Committee. It incorporated in 2017. It received $3,000 from Reynolds American Inc. in 2018, according to the company's disclosure. According to a filing with the state of Michigan, the organization’s mission is “to help provide greater understanding among area residents and businesses in a broad range of issues.”

The nonprofit was based in Ann Arbor and its treasurer was the same person listed as the treasurer for the campaign of Rep. Ronnie Peterson, a Democrat from the Ann Arbor area.

Asked about the organization, Peterson confirmed his connection to it, adding that he had nothing to hide. Peterson said he uses the nonprofit to benefit the arts community in his district and to help grieving families in need of financial assistance for funeral arrangements, among other things.

Lawmakers are frequently asked to make charitable donations, Peterson said. The Step Forward Committee allows him to be generous in support of community causes, he said.

“People allowed me to have this responsibility,” Peterson added. “I feel an obligation to give back to them.”

Nofs made similar statements. Nofs, who left the Legislature because of term limits at the end of 2018, said he’s used the nonprofit Empower Michigan to put on an event for veterans and to send students to summer camp.

“As an elected senator, especially if they’re coming from their area, how do you tell them no?” Nofs asked.

 

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