As Dark Money Floods U.S. Elections, Regulators Turn a Blind Eye
With apologies to the cast of Cabaret, dark money makes the political world go round.
Confusing rules and a regulatory void in campaign finance have unleashed a tsunami of cash from anonymous donors that is expected to have unprecedented influence over the midterm elections in November.
Try Newsweek for only $1.25 per week
As a result of the U.S. Supreme Court’s Citizens United v. Federal Election Commission judgment in 2010, individuals—and big corporations—received a carte blanche to make unlimited anonymous financial donations to “nondisclosing” organizations, increasingly nonprofit groups whose primary mission is defined as “social welfare.”
There are some guidelines: Such groups, categorized as 501(c)(4), can devote no more than half of their funds to political spending if they want to retain their nondisclosing tax-exempt status. The trouble is, who is holding them to account? Since the Internal Revenue Service got hammered for oversight activities that were at best overzealous, at worst partisan, many of these groups can essentially do whatever they want, unchallenged.
While the partisan battle rages over whether such anonymous and unlimited political spending should even be allowed, a more immediate concern is the unwillingness, or inability, of regulators to get involved and enforce the existing rules—for dark money and for campaign spending in general.
On November 4, candidates will do battle over all 435 seats in the House of Representatives, plus 36 of the Senate’s 100 seats. Dark money as a proportion of total money spent on U.S. election campaigns is reaching an all-time high, according to data obtained by Newsweek from the Sunlight Foundation, a Washington-based nonpartisan group that is an advocate for transparent government.
Up about 50 percent from the last election season, in 2012, cash spent by dark money groups hit $85.4 million as of late September, making 2014 a record year at this point in the cycle for unknown donors. Considering that the bulk of the funds are not spent until the final weeks before Election Day, the Center for Responsive Politics estimates that dark money expenditures could reach “upwards of $730 million, or, if the rate seen in the last midterm holds, edge close to $1 billion.”
While dark money equates to just under 10 percent of total political expenditures by House and Senate candidate committees so far this season—which, as of mid-September, hovered at just above $850 million—funds coming from hidden donors for radio, television and other ads ahead of the midterm elections could play a decisive role in races this year, with Republicans poised to take back the Senate. (For every $1 of dark money spent on a House race, $3 has been spent on a Senate race.)
Sunlight’s data guru, Jacob Fenton, told Newsweek that spending by congressional candidates this year has been “flat” compared with 2012, while spending by dark money groups on House and Senate races has “nearly doubled.”
This year, the greatest amount of dark money, more than $50 million, has been spent on boosting Republicans and defeating Democrats. Outside of the realm of dark money, it’s the reverse: The majority of funds—more than $100 million—have been spent on defeating Republicans, with pro-Democrat TV ads dominating top Senate races in the first two weeks of September.
“The sheer numbers on display have caused this year to be christened the dark money election,” says Lisa Gilbert, a director at Public Citizen, a nonprofit think tank in Washington that lobbies for government transparency and financial reform. “Our goal is to get new rules in place before 2016, so that by the time we get to the next presidential election, we have a lot more transparency and disclosure in the system.”
Groups on both sides are using dark money. On the liberal end are such groups as Patriot Majority USA and League of Conservation Voters, while conservative causes are supported by the likes of Americans for Prosperity and Crossroads GPS.
Americans for Prosperity, run by the billionaire industrialist Koch brothers, and Crossroads GPS, founded by Karl Rove, have become flashpoints in the debate, as some detractors accuse nondisclosing groups of filing for nonprofit status solely to invoke the right to hide their donors. By contrast, Super PACs, which also take unlimited donations, thanks to the Citizens United decision, must report their donors’ identities.
HANDS OFF
A key point often overlooked in Citizens United was that even as the Supreme Court upheld the rights of all—even corporations—to engage in “political speech” in the interest of safeguarding an “uninhibited marketplace of ideas,” the court made it clear that the honest and timely disclosure of the identity of speakers was critical for “the electorate to make informed decisions and give proper weight to different speakers and messages.”
But when it comes to policing campaign-spending rules, government agencies have stepped up and just as quickly struck out.

