Learning to follow the money in the 2014 midterm elections, part I

What is political corruption? The U.S. attorney’s manual defines political corruption as undertaking an action with “a generalized expectation of currying favor.”

So, what to make of campaign contributions? Is it about currying favor?

Of course, said Sunlight Foundation editorial director Bill Allison.

“People are always trying to curry favor when they give money,” said Allison, a veteran investigative reporter.

A couple dozen journalists gathered in Washington, D.C. for the first of a two-day training session Friday (hosted by Sunlight, the Center for Responsive Politics and the Center for Public Integrity) designed to ready them for following the huge sums of money expected to be spent in the 2014 midterm elections.

So, how do you track whom donors are giving money to and what that favor is supposed to get them?

First, you’ll want to start with the politicians.

The Center for Responsive Politics, a non-partisan campaign finance watchdog, collects data from the Federal Election Commission and posts it online in a multitude of searchable databases and tables.

Sarah Bryner, a staffer at CRP, demo’d the site’s capabilities.

On one page, reporters can see politicians’ top-giving industries.

On another, reporters can see the companies and other organizations whose employees have contributed the most money.

Journalists can view data on both political action committees (which are limited in the amounts of money from donors) and Super PACs (which are not).

Folks can even download the data in bulk for analysis.

So, what’s next in campaign finance?

Robert Kelner, an attorney who leads Covington & Burling’s nationally-known election law group, explained the evolution of campaign finance law, from the predominance of 527s and 501(c)(6) trade associations in the early 2000s to 501(c)(4) “social welfare” tax-exempt nonprofits that don’t have to disclose their donors so long as they spend no more than 50 percent of their funds on vaguely-defined “electioneering” activities.

Kelner believes so-called “taxable vehicles,” such as corporations or limited liability companies are likely the next big thing.

Unlike 501(c)(4)s, which are subject to IRS and state attorneys general regulations–and therefore scrutiny–taxable vehicles exist under less-regulated state corporation laws. In particular, these entities won’t have to deal with the IRS’s exempt organizations division that stands accused of targeting conservative groups. Furthermore, information on principals of these organizations can be even more opaque than with nonprofits, depending on the state. There are no limits on amounts individuals may give to these organizations.

Kelner notes that the activities of these vehicles would still fall under the same rules regarding reporting of funds spent on election-related activities, such as independent expenditures.

Kelner says these vehicles, like Super PACS and 501(c)(4)s, don’t generally donate directly to campaigns but are instead conducting many of the activities traditionally associated with political parties–conducting voter research, undertaking data analysis and building ground games.

“Candidates are bit players in this system,” Kelner said.

But for the time being, it’s still the politically-active nonprofits that are leading the way in dark money.

The first thing to know about them is that giving is highly concentrated.

Robert Maguire, a dark money investigator with the Center for Responsive Politics, noted that just 215 entities have made up 68 percent of the funds raised by Super PACs.

The next thing to know is that these organizations are engaging in massive, purposeful obfuscation of the sources and recipients of their money.

The place to figure out who some of these organizations’ donors are are their 990s. These forms, which nonprofits must file annually with the IRS, are available on GuideStar. In particular, schedule I on 990s will list grants the organization gave to other organizations.

Another important section of form 990s is schedule R. This section lists a nonprofits “disregarded entities,” a legal designation to describe an entity that is wholly controlled by the nonprofit. A politically-active nonprofit will sometimes give grants to the disregarded entities of another nonprofit so as to mask the flow of money between the two nonprofits.

On their website, the Center for Responsive Politics visualized this nonprofit dark money flow over time. The Center has an entire section devoted to politically-active nonprofits, where reporters can view, among other things, spending by nonprofits and identified donors to nonprofits. The Center even has a searchable database of information drawn from nonprofits (politically-active and otherwise).

Speaking of searchable databases, Luke Rosiak, an investigative reporter at the Washington Examiner, demo’d CitizenAudit. The service, created by Rosiak, enables full text searches within nonprofits’ form 990s. Why is that useful in tracking dark money?

Well, remember schedule I–the section of a 990 that lists all the grants that nonprofit gave to other organizations? Because CitizenAudit allows you to search text within the 990s filed by all nonprofits, a search for one politically-active nonprofit’s name will pull up all instances where that nonprofit appears in other nonprofits’ schedules I. That is, you’ll get a list of all the nonprofits that have made grants to the politically-active nonprofit you’re interested in.

Voila! Mystery solved. Democracy saved.

Of course, while digging through documents and data to ferret out the story is the first step, reporters must always focus on telling a compelling story.

Dave Levinthal, a senior reporter at the Center for Public Integrity, explained why local reporters should care about money in their coverage area’s politics.

“At its root, money is a tool. It’s a tool for transactions. It’s a tool to buy something,” said Levinthal.

By figuring out who’s giving the money, journalists can explain to their readers what it is those donors are looking to buy.

That’s what happened on day one of the training. Check back at inewsource tomorrow for a post on day two.

shadow-ornament

We'll let you know when big things happen.

About Joe Yerardi:

Joe Yerardi
Joe Yerardi is a freelance data journalist for inewsource, where he worked between 2013 and 2016 as an investigative reporter and data specialist. To contact him with questions, tips or corrections, email joe.yerardi@gmail.com.