Secret Donor Challenge Brings Court Scrutiny of Karl Rove Group

• Federal judicial panel to hear appeal of dark money case
• McConnell, Democrats split on mandating donor disclosure

A federal judicial panel will consider whether nonprofit groups can keep their donors secret in a case that could have widespread implications for the 2020 election, which is on pace to be flooded with outside campaign spending.

The case centers on Crossroads GPS, a Republican group linked to former George W. Bush political adviser Karl Rove. The group spent more than $100 million for campaign ads supporting Republican candidates from 2010 through 2014. It has never revealed any of its donors.

Lawmakers and others involved in political campaigns are weighing in on both sides of the transparency issue being considered Friday by the U.S. Court of Appeals for the District of Columbia Circuit.

“Meaningful and thoroughgoing political spending disclosure must actually be required, or American democracy will continue sliding into a bog of anonymity-fueled corruption,” Democratic Sens. Sheldon Whitehouse (R.I.), Jon Tester (Mont.), and Richard Blumenthal (Conn.), said in their brief filed with the court.

Senate Majority Leader Mitch McConnell (R-Ky.), also filed a brief arguing that anonymous spending to influence elections should be allowed in order to protect donors from harassment. Other friend-of-the-court briefs discrediting disclosure were filed by the U.S. Chamber of Commerce, the nation’s biggest business lobby, and an array of conservative groups.

Secrecy Protects Donors From Public Wrath, McConnell Tells Court

(Photo by Patrick T. Fallon/Bloomberg via Getty Images)

Karl Rove

Republican groups long have dominated spending in this category of undisclosed donations, known to critics as “dark money,” but Democratic allies caught up to and surpassed the GOP in the 2018 midterm elections.

Democrats Get `Dark Money’ Edge Even as Party Pushes Disclosure

Campaign spending by similar groups has continued to increase over the last decade. Groups that kept all or some donors secret spent nearly $540 million in the 2018 midterms — about half of all spending by outside groups not formally linked to candidates, according to reports filed with the FEC.

“Some of the biggest financiers pulling the strings of U.S. elections will remain hidden if the 2020 election cycle continues on the same path,” a report by the nonprofit Center for Responsive Politics concluded.

Garland’s Panel

A three-judge panel led by Merrick Garland, the D.C. Circuit’s chief judge, is set to hear arguments in the case, which could establish stricter requirements for disclosure of campaign money. Garland was appointed by President Bill Clinton; his nomination to the Supreme Court by President Barack Obama was blocked by Senate Republicans. The panel’s other judges include Sri Srinivasan, appointed by Obama, and Stephen Williams, appointed by President Ronald Reagan.

The court will consider a key Federal Election Commission rule — struck down last year by a federal district court – used for decades by nonprofit groups to shield donors who’ve provided a total of more than $1 billion to influence elections. The rule said donors didn’t have to be disclosed unless they earmark money for a specific campaign ad. After the district court ruling last year, the commission said it would begin requiring disclosure of each donor who gives intending to fund any campaign ads or other election activities.

Donors almost never earmark money for a specific campaign ad and thus were shielded from disclosure by the FEC’s old rule, Judge Beryl Howell of the U.S. District Court in Washington wrote in a 113-page decision. A bid by Crossroads to immediately block the lower court ruling by was denied last year by the Supreme Court.So far the ruling has had little effect, as many campaign spending groups have continued to keep donors secret.

Norman Lear-Founded Group Opens Books on Donors to 2018 Efforts

Maintaining Options

Crossroads has been inactive in campaigns since 2014, but says it wants to maintain the option for future campaign spending. Attorneys for the group from the firms Holtzman Vogel Josefiak Torchinsky and Wiley Rein are defending in court the FEC rule that allowed donors to be kept secret. Crossroads stepped in after the commission divided along party lines on whether to appeal the district court ruling. Democratic commissioners agreed with the lower court that more disclosure was needed, while Republicans wanted to defend a hands-off approach.

Congress required detailed disclosure of contributors to candidates and other regulated political committees but intended “a separate, more limited regime” for disclosure by outside groups making independent campaign expenditures, said a final, pre-argument brief filed by the Crossroads attorneys.

Citizens for Responsibility and Ethics in Washington, the watchdog that brought the court challenge to the FEC disclosure rule and will argue the case before the D.C. Circuit Friday, acknowledged that the old rule stood since 1979 without challenge until now. CREW’s final brief said the effect of disclosure gaps was muted until the “explosion” of outside campaign spending over the last decade. Spending shot up after the Supreme Court’s 2010 ruling in Citizens United v. FEC allowed unlimited corporate and union spending to influence elections.

The case is CREW v. FEC, D.C. Cir., No. 18-5261.

To contact the reporter on this story: Kenneth P. Doyle in Washington at kdoyle@bgov.com

To contact the editors responsible for this story: Bennett Roth at broth@bgov.com; Adam Schank at aschank@bgov.com