Posted June 22, 2007 by Frances R. Hill

Thoughts on the Backroom of the Permanent Campaign: Exploring a Reform Agenda

Once again US politics takes on the ambience of Casablanca while, alas, failing to produce a Bogart for our times.  If one cannot have clarity on a perennial issue, some charm would be refreshing.  But, neither clarity nor charm are hallmarks of our politics.  Neither, apparently, is any sense of history, even very recent history.

The New York Times has reported that there is gambling in the back room of the permanent presidential campaign. The New York Times story is, of course, a serious report about an important issue.  But, it is news only in the sense that this time it’s John Edwards with his complex structure of tax exempt entities and election campaign vehicles.

Since at least the 1988 primary, presidential candidates have been availing themselves of the disclosure shield, deductibility of contributions, freedom from limitations on sources and amounts of money, and the benefits of complexity itself by moving money among related entities.

•           In 1988 Jack Kemp and several Democratic contenders discovered the utility of exempt entities.

•           Newt Gingrigh made the use of charities headline news and found himself slapped on the wrist by his colleagues for lacking discretion.

•           Jeb Bush relied on the New Florida Foundation to see him through the years between his failed run for governor of Florida and his successful campaign four years later.

•           Congressman Mollohan is being investigated for funding several charities with government appropriations and allegedly directing some of the money into his campaign funds through contributions from highly paid staff of the charities, all of whom once worked on the Congressman’s Congressional and political staffs.

•           Tom DeLay was a worthy successor to Newt Gingrich in his abuse of charities.

•           Jack Abramoff treated exempt entities as important components of his effort to exploit his own clients and fund gracious living by public officials.

Despite this shabby history, each new report is greeted with the same ahistoric incredulity.  Is there really gambling in the back room?  In Casablanca, the response was to round up the usual suspects.  In American politics, there is no response at all.  Each new report has been greeted with uncertainty over whether the cards and the tall stack of chips are properly interpreted as evidence of gambling.

The deafening silence on the underlying issue–the abuse of exempt entities as campaign finance intermediaries–is all the more remarkable in light of the ferment surrounding the exempt sector and the exposure of the consequences of inattentive boards for such exempt entities as The Smithsonian Institution, the Getty Museum, the Nature Conservancy, and American University.  This is certainly not an exhaustive, or even particularly inclusive list, but it shows that the problems in the exempt sector are not limited to marginal institutions.  The problems are at the heart of the exempt sector. 

While these scandals were about the use of exempt entities for personal greed, these scandals are at bottom about the failure of boards of directors to do their duty to put the interest of the organization’s exempt mission and the interests of its beneficiaries first.  The same can surely be said of the boards of entities that allow a candidate to fund a campaign with exempt funds or of boards that allow a manager, who is often the organization’s founder, to curry favor with the powerful by moving money at their behest.

Inattentive boards are no more acceptable in organizations that are abusing their exempt status for political purposes than they are in organizations that are abusing their exempt status to gratify the personal greed and sense of entitlement of managers interested only in money.  Exemption from federal income taxation is not consistent with the accumulation of either personal power or personal wealth. 

The deafening silence on the role of exempt entities in election campaigns is doubly remarkable in light of the ferment surrounding elections since 2000.  The legacy of this debacle has been almost surreal.  In a country that has sat silently while the government launched an unprecedented assault on civil liberties, where the Justice Department devoted itself to denying minority voting rights through unfounded charges of fraud, where the Election Assistance Commission altered a report that had concluded that voter fraud was minimal, and where no one will ever know which candidate in fact was elected President in 2000, the major First Amendment issue has been the right of big donors to abuse exempt entities and the right of rouge exempt entities to traffic in their exemption in the interest of keeping campaign contributions secret from the voters but not, of course, from the candidates.

In this debate, most reformers and reform organizations have become not watchdogs but the functional equivalents of an inattentive board.  The role of section 501(c)(3) public charities, of section 501(c)(4) social welfare organizations, of section 501(c)(5) labor unions, and of section 501(c)(6) trade associations as financing intermediaries for candidates and parties has been willfully ignored.  While reformers have overcome their initial reluctance to address issues related to the section 527 organizations that are still not treated as political committees under federal election law, few are willing to examine the activities of the section 501(c) organizations.  Few have been willing to look squarely at the role of exempt entities in the Abramoff follies, preferring instead to treat Abramoff as either a bad apple or as the worst apple in a suspect barrel of lobbyists.

The result of the silence of the reformers is that the Edwards report is greeted with concern but even the usual suspects are not rounded up.  Edwards is not innovative, he is mainstream.  The headlines will blow over and his electoral fortunes will be unaffected by the passing static.  Other stories will appear about other candidates, whether for president or Congress or governor or state legislature or mayor.

There are plenty of technical issues to discuss.  What is lacking is a reform constituency for discussing them.  Continued silence is no more acceptable in this case than it was at the Smithsonian or the Nature Conservancy.  Our own exempt status as an advocacy organization is consistent with speaking truth (as we see it) to power and about power.  Other organizations will see the truth differently.  This is the kind of discussion that is long overdue.  Let it begin with a discussion of the law as it now is in all its partialness and indeterminacy.  In this area, there is no agreement on what the law is or what the law should be.

The New York Times may have uncovered violation of tax law, it may have raised questions about whether the exempt entities should be treated as political committees within the meaning of federal election law, or, it may have written a story about lawful choice of entity strategies by a presidential candidate.  The reform community should end its self-imposed silence and get about the important business of finally discussing these issues.

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Trevor Potter took no part in the consideration or review of this blog posting.