Wisconsin governor scandal shows states as the new front in fight for dark money disclosure

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It’s still an open question whether the allegations brought against Republican Gov. Scott Walker of Wisconsin will end a politician’s career, but they could signal the opening of a new front in the effort to end to campaign finance loopholes that wealthy political donors use to keep their names out the public eye.

While Capitol Hill appears to be gridlocked over transparency legislatures, the same inertia does not seem to be affecting states. A review of Sunlight’s Open States database found at least 18 bills introduced during the most recent legislative session that would introduce new disclosure rules or amend existing regulations regarding independent expenditures, the type of campaign spending that’s skyrocketed in the wake of 2010 Citizens United decision.

Wisconsin state law is what prosecutors have been relying on to help build their case that several “dark money” groups allied with Walker should have disclosed donors, documents released last week reveal.

As prosecutors in the case wrote:

…Wisconsin’s laws prohibit candidate coordination with ‘independent’ organizations, like a 501(c)(4) organization, to channel donations from the campaign to the candidate-controlled organization, thus avoiding both contribution limits and disclosure of the donor identity as required by law. If the ‘independent’ organization then spends that money on ‘issue’ advocacy during an election cycle, the campaign has effectively used private donations in violation of public reporting and other requirements. The result is that the electorate is prevented from knowing that substantial sums–sometimes millions of dollars–have been made available to the candidate campaign by unnamed donors.

Other states have been adding legal tools that would allow them to do what federal law won’t — force politically active nonprofits to reveal their sources of funding.

Some, like AB 800 from California, would clarify the ability of state campaign finance regulators “to perform pre-election audits, examine campaigns’ books before disclosure documents are filed and seek pre-election injunctions,” wrote the Capitol Weekly, a newspaper that covers California politics. Others, like HP 910 in Maine, would require reporting of all transfers of campaign money designed to “be used to make or pay for an independent expenditure,” according to the text of the bill.

Massachusetts’ legislature is on the verge of passing some of the “strictest and most comprehensive state campaign finance laws in the country,” according to the Boston Globe. The proposed laws would require super PACs to disclose the names of funding sources within seven days of each expenditure and within 24 hours if those expenditures are within eight days of a primary or general election, according to the Globe.

Several other states, including Washington, New Jersey and Arizona, are also mulling tighter disclosure rules to limit the anonymity of dark money groups. As prospects for any regulations at the federal level seem murky at best, it appears that the fight against clandestine political donors may be leaving Washington and entering state houses around the country.

States have also been leading the charge in enforcement actions against dark money groups. In 2012, California’s state political watchdog, the Fair Political Practices Commission, filed suit against Americans for Responsible Leadership, a dark money organization responsible for an $11 million money dump in two ballot initiative races. A judge in Sacramento County ruled that voters would suffer “irreparable harm” if they voted without knowing who the true financial backers of the campaigns were, according to ProPublica. Just two days before the election, the state’s Supreme Court upheld that decision. The suit resulted in the disclosure of a list of donors that included investor Charles Schwab, several owners of the Gap clothing line, and L.A. philanthropist and major Democratic contributor Eli Broad, according to the Los Angeles Times.

In March, the Utah state legislature released a report alleging the state’s former Attorney General John Swallow laundered campaign cash through a series of groups unaffiliated at least on paper with his campaign, Bloomberg BusinessWeek reported. Seeking to protect cash advance lenders from a new consumer protection bureau but wary of their ill-repute among the voting public, the goal of the alleged subterfuge, according to the New York Times, was to “[h]ide the payday money behind a string of PACs and nonprofits, making it difficult to trace donations from payday lenders to Mr. Swallow’s campaign.”

The court documents released June 19 show prosecutors in Wisconsin also taking advantage of state law to pry open the books of several outside groups that, Washington Post reported, allegedly funneled nearly $9 million to Walker’s reelection campaign at his direction and those of his top aides. As a federal judge reviewing the case wrote:

…when an ostensibly independent organization becomes a subcommittee by virtue of its coordination with a political candidate or a candidate’s committee, the coordinated expenditures must be disclosed as in-kind contributions on the political committee’s campaign finance reports under Wis. Stat. § 11.06. (Id. at 8-9.) Furthermore, every committee must register and file campaign finance reports under Wis. Stat. §§ 11.05(1) and (6)….

As the Election Day draws closer, more of these groups may find themselves running into new state laws intended to force their donors out of the shadows.

After handing a record $1 million fine to the dark money organizations involved in the 2012 election, California recently passed a new law requiring nonprofits to disclose the names of donors who gave “$1,000 or more to spend on political activity in California,” according to the Sacramento Bee. That law goes into effect on July 1, making any expenditures following that date subject to the new transparency rules.

California is home to six competitive House races this year, according to the nonpartisan Rothenberg Political Report:

In addition, Gov. Jerry Brown is running for reelection and there’s the perennial a raft of ballot initiatives. All of which suggests that California could again be the proving ground for testing how effective the Golden State can be in leading the nation.