The state of California, often the pacesetter for governmental reform, struck a small blow for democracy and openness last week when it forced two dark-money groups to admit they had illegally laundered $15 million from secret businessmen to influence voters on two ballot issues, one that would raise their taxes and the other that would trim the political clout of California unions.
Caught red-handed, the nonprofits capitulated and signed a settlement that fines them $1 million and requires the recipients of the laundered $15 million to turn it over to California. The groups said they realized too late that they were violating California law.
The two groups, the Center to Protect Patient Rights and Americans for Responsible Leadership (we saw their work in Arkansas elections in 2012 and 2014), are part of a shadowy network of political nonprofits and political action committees that have assumed a huge role in national and state politics, especially after the U.S. Supreme Court gave them the green light in the Citizens United decision three years ago. Rich people, corporations, unions or other groups move massive sums into political campaigns, mainly for attack ads, but keep their identities secret.
"This case highlights the nationwide scourge of dark-money nonprofit networks hiding the identities of their contributors," said the chairwoman of the ethics commission that enforces California's campaign-finance laws.
But don't believe that California is really setting the nation on course to transparency and diluting the power of great money in government. In a matter of perhaps days, the Supreme Court will strike another blow for plutocracy in the latest of a line of cases reaching back to 1976, when it ruled that money was a form of expression protected by the First Amendment and that the more you had of it the greater should be your voice in the councils of government. The court will hold, in the same fashion as in Citizens United, that a corporation, a union or a person of vast wealth may spend any aggregate sum it or he chooses to shape the outcome of races in each election.
What California did was shine a light on a system that washes huge sums through interlocking groups for political attack ads and other media efforts without the donors ever being known, at least by the voters. About 150 wealthy Californians, including billionaire investor Charles Schwab, put up $29 million to defeat the California tax on the rich and to pass the antilabor act, but they didn't want it known they were behind it. So the money went to Americans for Job Security, a Virginia-based conservative nonprofit that is not required to disclose its donors. Arkansans may remember the blizzard of TV and newspaper ads from the group in 2010 that attacked Arkansas Senate candidate Bill Halter for being on the board of a company that it said outsourced U.S. jobs to India. They pictured men and women in the flowing garb of India with Hindi script, which the ads translated into words thanking Halter for shipping American jobs to them. The charge was false and Halter's opponent, Blanche Lincoln, softly disavowed the ads. Later, she became the target.
Near the election, Americans for Job Security figured out that California law required disclosure of some of its contributors, so it transferred $24.6 million to the Center to Protect Patient Rights, a right-wing group set up in 2009 and headed by an associate of the billionaire Koch brothers to attack Obamacare, which was working its way through Congress. The Center to Protect Patient Rights then rolled the money into two other conservative groups, Americans for Responsible Leadership and the American Future Fund, which were then to funnel the money into the California campaigns.
(Arkansas and other states with critical votes in Congress saw the fruits of the two groups' work in the massive ad campaign against the health insurance law making its way through Congress in the winter and spring of 2010. The ads dramatically changed public attitudes about universal health coverage. The insurance industry first laundered $102.4 million through the U.S. Chamber of Commerce for media attacks on the legislation in Arkansas and other states in 2010 to try to kill the bill's requirement that insurers refund money to people if they spent less than 80 percent of premiums on medical care. The insurance industry supported the act after it became law. After it became law, the Center to Protect Patient Rights, which operates out of a postoffice box in Arizona, became one of the big conduits for dark money against Obamacare. A secretive group called Freedom Partners channeled $115 million through the Center to Protect Patient Rights to attack Obamacare as a government takeover of healthcare.)
So the California ethics commission caught up with the money-laundering scheme before the election and the state Supreme Court ordered Americans for Responsible Leadership to disclose the names of people who put up all the money. The group set out to appeal to the U.S. Supreme Court to get protection from disclosure under the Citizens United decision, but that alarmed national groups that were counting on the Supreme Court to expand protections for big political donors in the case that was argued this month. The facts of the California case might disturb the justices' deliberations. So the groups settled instead.
It is too bad the Supreme Court will not be confronted with those facts. The state's unmasking of the national money-laundering scheme proves the fallacy of the Supreme Court's fateful decision in Buckley v. Valeo that the unfettered use of personal and corporate wealth to shape the affairs of government is good for democracy because the titans of commerce and finance can be trusted to be open about their labors.