The RGA's $114M shell game

LANSING -- The 2010 election cycle was widely noted for spending by interest groups acting independently of candidate committees. The Center for Responsive Politics reports that committees other than candidate committees spent $483 million in federal campaigns, with non-party groups accounting for more than $298 million of that total.

Not widely noted is the fact that a single 527 organization, the Republican Governors Association, spent more than any of the major non-party spenders in federal campaigns through its network of state political action committees. The U.S. Chamber of Commerce, American Action Network, American Crossroads, Crossroads GPS and the Service Employees International Union spent a combined total of $113.4 million in the 2010 cycle. The RGA spent $113.7 million - just in calendar year 2010. It spent $131.8 million over the two year election cycle.

The RGA’s overall clout was largely unrecognized because of its unique structure. The central organization is a 527 committee that reports its financial activity to the Internal Revenue Service in non-searchable reports that are displayed in portable document format (pdf). Its aggregated funds were redistributed through a system of state political action committees in Michigan, Ohio, Illinois, Wisconsin, Minnesota, Iowa, Maine, Vermont, Pennsylvania, Arizona, New Mexico, Florida, Georgia, South Carolina, Virginia, and, likely, other states.

The RGA’s activity in Michigan illustrates its general method of operation. The RGA’s Michigan state PAC and the 527 committee’s candidate-focused “issue” advertisements in the Michigan gubernatorial campaign created an $8.7 million footprint.

The list of major Michigan contributors to the RGA 527 committee reveals no real surprises. The Michigan Chamber of Commerce was the top Michigan contributor at $5,372,500. Seven members of the DeVos family gave a combined total of $1,485,000. Various corporate entities and practiced individual political donors brought the total to $9.7 million from Michigan contributors. If Richard DeVos, Sr. is counted as a Floridian, the total given by Michigan donors is $8.6 million.

The contributions to the RGA Michigan PAC make very little sense for a state political committee. Ninety-eight percent of the $8,423,078 in contributions is attributable to persons who do not reside in Michigan. The top reported contributor was Texan Robert Perry at $1,000,000. Second on the list was David Koch of New York, reported to have given $988,604.44. Most contributions to RGA Michigan PAC have $604.44 as their last five digits. There were no corporate contributions reported.

Spending by the RGA Michigan PAC was a mixture of logical and illogical action for a Michigan state committee. The RGA Michigan PAC gave $5,200,000 to the Michigan Republican Party. It also reported giving $3,000,000 to the campaign of Texas Gov. Rick Perry.

Beyond the $5.2 million in contributions to the Michigan Republican Party, the RGA’s notable mark in Michigan came in the form of $3.5 million worth of candidate-focused “issue” ads in the gubernatorial general election. The RGA began its anti-Virg Bernero / pro-Rick Snyder advertising on September 9th and continued through October 17th. Candidate Rick Snyder did not begin his own broadcast television advertising for the general election until October 11th and his television spending for the general election totaled $1.95 million, barely more than half of what the RGA 527 spent on his behalf.

Overall, the RGA 527 committee disclosed $26.4 million worth of advertising through Target Enterprises in its reports to the IRS. The Michigan Campaign Finance Network (MCFN) compiled its records of $3.5 million spent by Target Enterprises in Michigan from the public files of Michigan television broadcasters and cable systems. Target, which had been Snyder’s ad agency during the primary campaign but was not for the general campaign, appeared to recycle B-roll of Snyder in his home from the primary for the RGA’s general election ads. Such coordination is not prohibited in Michigan state campaigns, but in-kind contributions, such as post-production B-roll, are supposed to be reported.

Coincidentally, or otherwise, the Michigan Chamber of Commerce disappeared as a major advertiser in Michigan state campaigns in 2010. From 2000 through 2008, the Michigan Chamber spent more than $1 million for issue ads each election cycle and sponsored more than $10 million worth of candidate-focused ads overall. While there was no reporting of that activity in the state’s campaign finance reporting system, MCFN was able to compile records of the spending from the public files of state broadcasters and cable systems. There were no records of Michigan Chamber television ads in Michigan in 2010.

The RGA money shuffle helped big contributions from the Michigan Chamber land in unlikely new places. Reporters from Maine and Florida contacted MCFN to inquire why the Michigan Chamber would make large contributions to the RGA Maine PAC and RGA Florida PAC. The Michigan Chamber gave $225,000 to the RGA 527 on July 22, 2010 and the RGA Maine PAC reported the same contribution on the same date with no mention of the RGA central organization. The Michigan Chamber gave $1,600,000 to the RGA 527 on September 1, 2010 and the RGA Florida PAC reported the same contribution on the same date, again, with no acknowledgment of the role of the central organization.

Rich Studley, president and CEO of the Michigan Chamber of Commerce, told Maine Public Radio, “The direction we've been given by our members is to be very actively involved and to provide business leadership in the area of both legislative and political action. Mostly that means in our state, but sometimes it means directly or indirectly becoming involved and being helpful in other states where we see pro-taxpayer, pro-jobs, or pro-business candidates that deserve support.”

Evidently the members and undisclosed donors to the Michigan Chamber saw a need for their support in states where corporations are free to make contributions directly to candidates. Michigan is not one of those states.

The $5.4 million given by the Michigan Chamber to the RGA is more than 120 percent of the Chamber’s average annual operating budget as a business association. Net of its “issue advocacy,” the Chamber’s average for annual expenditures over the last six years is $4.45 million. Despite the fact that its major financial activity in 2010 was that of political fund aggregator, the Michigan Chamber did not revert from a 501(c)(6) business association to a 527 committee, because the contributions spanned two of the Chamber’s July-to-June tax years. The Chamber gave the RGA $2,547,500 in 2009-2010, and $2,825,000 in 2010-2011. If the Chamber did revert to a 527 committee, it would be required to disclose all its contributors. As a 501(c)(6) organization, it does not have to disclose its contributors, and its members’ dues are tax deductible.

“The machinations of the Republican Governors Association and the Michigan Chamber of Commerce demonstrate a remarkable inventiveness for obfuscation of political accountability,” said Rich Robinson of the Michigan Campaign Finance Network. “If that level of creativity was applied to job creation, the unemployment rate in Michigan would be less than four percent.”

"Gov. Haley Barbour's Biloxi shuffle should be studied in every state where the RGA played in 2010," Robinson added.

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