Sunlight Foundation Reporting Group

Ruling may free corporate influencers from contortions

The Supreme Court's Citizens United vs. FEC ruling undoes years of restrictions on the ability of corporations and labor unions to use their treasuries to attempt to sway elections.

But a more accurate interpretation might be that it allows them to be more up-front about it.

From the first days after President George W. Bush signed the Bipartisan Campaign Reform Act of 2002, better known as McCain-Feingold, huge sums of unregulated money have flowed from multi-billion dollar businesses, powerful labor unions and wealthy individuals with the intent of advancing their agendas and swaying political opinion, often in hidden or convoluted ways. The act barred labor and business from donating "soft money" directly to political parties, but big donors found different means of influencing elections through Section 527 groups--named for the section of the tax code that sets up political organizations--and 501(c)4 tax-exempt organizations.

For a case study in more under-the-table influencing, consider the Koch family, which controls one of the largest, and privately-held, oil companies in the world. Koch Industries reported spending $20 million lobbying Congress in 2008--more than all but seven organizations, according to the Center for Responsive Politics.

That sum pales, though, in comparison to the multiple channels through which the corporation and its owners, brothers Charles and David Koch, spread political opinions--through media, education and ostensibly "grassroots" political movements. While the company's K Street spending is easily determined, the public is often unaware of Koch Industries' extracurricular influencing. 

Koch money established one of the premier libertarian think tanks, the Cato Institute; helps fund the Mercatus Center, based at George Mason University, which has sponsored hundreds of trips for members of Congress and their staffs; endowed journalism by conservative writers via the Phillips Foundation; and funded advocacy groups that have recently organized opposition to the health care reforms proposed by Democrats in Congress in favor of free market solutions.

How much the family and its company have given to various causes is not known; most of the groups they use to influence public policy--501(c)3 and 501(c)4 organizations--do not have to disclose the names of their donors. But the Kochs' ideological promotion goes well beyond what is normally thought of as political activity.

The Charles G. Koch Charitable Foundation is helping shape academic programs at some top schools by providing endowments for conservative professors; at Pepperdine University's School of Public Policy, the money has been used to write a group of students $400 checks to study libertarian works such as The Socialist Roots of Nazism; The Road to Serfdom, The Rhetoric and Reality of Distribution; Can Capitalism Survive?; and Ayn Rand's Capitalism, the Unknown Ideal. 

In 2007, the Charles G. Koch Charitable Foundation awarded grants to 23 colleges totaling $1.7 million, plus the Association of Private Enterprise Education, which encourages the study of market-based thought. The 501(c)(3) nonprofit held $190 million in assets that year, tax records show.

At the Clemson University School of Economics, which received $52,000, the funding is overseen by faculty members and used to award fellowships. "They're free market people and we're free market people, more or less," said Raymond Sauer, department chair. "But there's no strings attached to the money."

Koch family members founded the advocacy groups Citizens for a Sound Economy--now FreedomWorks, led by former House leader Dick Armey--and Americans for Prosperity. The groups, which derive much of their funding from oil profits, have been active in harnessing "grassroots" demonstrations among conservatives nationwide, and have worked to derail Democrats' efforts at environmental regulation.

In the early 2000s, Citizens for a Sound Economy built its membership roster--enabling it to present itself as a community-driven voice of the people, not a corporate mouthpiece--by selling insurance. Along with the coverage, purchasers unknowingly became members of the group.

"Before I showed you this form today, did you even realize that you signed a form that was an application for membership in Citizens for a Sound Economy?" a  lawyer asked one woman during a 2004 deposition, the Washington Post reported.

"I don't know what Citizens for a Sound Economy is," she responded.

Such think tanks and nonprofits--as well as business associations such as the Chamber of Commerce--can be used as a pass-through for corporate money. CSE's anti-cigarette tax initiative, the Washington Post found, was secretly bankrolled by the tobacco company then known as Philip Morris Companies Inc.

That sleight of hand enabled Philip Morris to avoid compromising its image, while lending credibility to the advocacy. Will companies in the wake of Citizens United be more willing to publicly take stands on controversial issuessuch as running ads with the sponsorship prominently disclosedor, afraid of alienating half their customer base, stick to their old tricks?