Fundraising

Deadlocked FEC allows donors to hide behind shell companies

Political donors hiding their super-PAC contributions behind shell companies have effectively been given the green light to continue the practice after the Federal Election Commission couldn’t agree whether to open an investigation into so-called straw donations.

During the 2012 election cycle, three shell companies were set up to transfer $1 million apiece into the super-PAC supporting Mitt Romney, known as Restore Our Future.  

{mosads}The identities of the donors behind two of the groups — F8 and Eli Publishing — were obscured behind a mysterious office suite in Utah

The identity of the funder of the third shell group is known is because the donor voluntarily revealed himself to the news media. Edward Conard, a former partner of Romney’s at Bain Capital, put $1 million into W Spann LLC, which then directed the cash into Romney’s super-PAC.

Campaign finance law stipulates that donors cannot make political contributions in another person’s name. This law has tended to be breached by employers who privately instruct their employees to donate to political campaigns, with the assurance that they will later be reimbursed. 

But in the era following the Supreme Court’s 2010 Citizens United decision, which paved the way for corporations and unions to make unlimited political expenditures, the practices of disclosure have become even cloudier, and mysterious LLC groups have proliferated.

The non-profit advocacy group Campaign Legal Center filed a complaint to the FEC in 2011 about the shell groups funding the Romney super-PAC. 

But it took nearly five years — until Friday last week — for the FEC, which is deadlocked between three Democrats and three Republicans, to inform the Campaign Legal Center through a mailed letter that it would not be opening an investigation.  

Tweeting a picture of the letter on Monday, the Campaign Legal Center’s deputy executive director Paul S. Ryan, wrote, “Just when I thought the dysfunctional FEC couldn’t get any worse.”

Four votes are required to open an FEC investigation, and while the FEC’s split decision on straw donor giving creates no legal precedent, it has the practical effect of allowing it to continue. The Washington Post first reported the news on Monday. 

“The FEC has reached a new low in its unwillingness to enforce federal law and has opened the floodgates for secret funding of U.S. elections,” Ryan told The Hill in a telephone interview on Monday. 

Ryan said the Campaign Legal Center is considering suing the FEC “for failure to enforce the law.”

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