FEC fines Koch groups for illegal dark money

Charles Koch sitting on stage speaking with hands raised.
Koch network-funded groups were fined by the FEC for illegally hiding the source of their funding. Above, Charles Koch. (Photo credit: Kevin Moloney/Fortune Brainstorm TECH via Flickr)

The Federal Election Commission (FEC) announced today that it will fine three dark money groups a total of $233,000 for concealing the sources of funds spent on political ads in 2010.

Three groups — the American Future Fund, 60 Plus Association and Americans for Job Security — received money from the Center to Protect Patient Rights (CPPR), now American Encore. CPPR is linked to the Koch brothers — it was founded by Sean Noble, who was, at the time, central to the Kochs’ dark money efforts. As head of CPPR, he “handed out almost $137 million in 2012 alone — all of it so-called dark money from unnamed donors.” The American Future Fund spent millions during the Republican presidential primary this year to oppose Donald Trump and John Kasich. In 2013, CPPR admitted to failing to properly disclose money spent on a California ballot proposition that year.

The FEC found that CPPR’s money was intended to be spent on independent expenditures (like TV ads), and therefore should have been disclosed to them. 501(c)(4)s like these groups are allowed to spend money on political advertising as long as it isn’t their “primary activity,” which is widely interpreted to mean that they must spend less than 50 percent of their funds on political ads. (Though some 501(c)(4)s spend more anyway and, so far, get away with it.) But if a donor explicitly gives them money for the purpose of spending it on elections, they must disclose that to the FEC.

Citizens for Responsibility and Ethics in Washington (CREW), who brought the complaint to the FEC, explained:

The groups claimed the money was for general expenses and not specific ads, so they were not required to disclose their donors. However, Sean Noble, who was the central figure in distributing Koch money in 2010 and 2012, told the National Review in 2014 that he was deeply involved with producing the ads and selecting their targets—meaning the groups were required to disclose the source of the funds. The FEC’s investigation found that Noble’s consulting firm even helped produce and place the ads for the groups.

While CREW described the fines as “massive,” the amount is tiny compared to the amount these groups doled out on elections. The American Future Fund spent a total of $7,448,096 in 2014, the most recent year for which records are available; its $140,000 fine represents just 1.8 percent of the group’s total spending in 2014. The 60 Plus Association spent $10,031,215 in 2013 (and $18,279,532 in 2012); its $50,000 fine represents less than half of 1 percent of its 2013 spending. Americans for Job Security, which spent more than $15 million in the 2012 cycle, is the only group whose records show that the fine could significantly hurt it: In 2013 the group spent $1,571,753, with only $930,784 in revenue.

CREW is right to note that the $233,000 total is large in the context of other FEC fines — “the FEC gave out $273,000 in conciliation agreement civil penalties for an average penalty of $15,000.” But that’s nothing compared to the kinds of funds these groups have. Fines this small can easily be seen as the cost of doing business for a well-funded group that wants to spend on elections — and obscure the source of such spending — until years after voters have had their say.