California's election board successfully compelled a "dark money" group that spent $11 million on ballot initiatives in that state to reveal the source of their funding -- but the donors are other dark money groups tied to the Koch brothers and Karl Rove's political machine. Those groups also don't disclose the source of their funds. California managed to peel back one layer of the dark money onion, but discovered little information about who is really bankrolling the operation -- they only found more of the dark money onion.

California's Election Board Demands Transparency, Gets Smoke and Mirrors

The subject of the election board's action, Americans for Responsible Leadership (ARL), is an Arizona-based nonprofit organized under section 501(c)(4) of the tax code. ARL had made an $11 million donation to the Small Business Action Committee PAC (SBAC) in October, one of the largest single donations in the state this election cycle. The SBAC is opposing Proposition 30 (which would raise taxes) and Proposition 32 (which would prohibit labor unions from raising money for political activities through employees' voluntary payroll deductions). Common Cause-California filed a complaint with California's elections board, the California Fair Political Practices Commission, alleging that ARL failed to comply with the state's disclosure laws.

Under California law, nonprofit groups must disclose all donors who give for the purpose of funding political ads or activities. Some groups have avoided disclosure by claiming that all donations were raised for general purposes.

But the Commission wasn't buying ARL's claim that it had raised $11 million from donors who were not aware the money would be used to fund ads in the fight over these ballot issues, and asked the group to name its funders. When ARL refused, the Commission filed suit [3] and won, and on Sunday the California Supreme Court rejected ARL's appeal and ordered the group to reveal its donors.

On Monday, ARL revealed that it had indeed received $11 million in contributions for the purpose of funding the ballot initiative activities. But the source of that contribution was another dark money nonprofit, Americans for Job Security (AJS). And to complicate things further, Americans for Job Security filtered its contribution through a third dark money group, the Center to Protect Patient Rights (CPPR). According to the Commission's press release [4], "Under California law, the failure to disclose this initially was campaign money laundering."

Both AJS and CPPR are intimately familiar with this kind of "campaign money laundering." In 2010, CPPR gave $4.8 million to AJS, which it spent on ads attacking Democrats. In 2012, AJS gave $11 million to CPPR, which it gave to ARL.

Americans for Job Security, a "Trade Group" that Seems to Exist Only to Influence Elections

As the Center for Media and Democracy has reported [5], Americans for Job Security is officially registered as a 501(c)(6) nonprofit "trade association," like the drug industry trade group PhRMA, but AJS does not appear to advance the interests of any particular industry or trade. The group claims that as a 501(c)(6) "trade association," it raises funds not through donations earmarked for political ads, but from voluntary "membership dues," which the group's leaders decide on their own how to disburse -- allowing it to hide its donors by claiming none of the donations were made for the purpose of funding its election-related activities. But throughout its existence AJS has done little else besides influencing elections. In 2008 the Federal Elections Commission found "reason to believe" [6] the group had violated election law by not registering as a political committee -- which would have required more disclosure -- but the FEC's Republican commissioners blocked any action against the group.

AJS lists its mailing address at a UPS drop box in Alexandria VA, but the group operates out of the same office building in Washington DC [7] as Karl Rove's American Crossroads SuperPAC, the related Crossroads Media, as well as consultancies like the Black Rock Group and Target Point Consulting. AJS has reported spending $15.6 million [8] on ads this election cycle (most of them attacking President Obama), but as CMD has reported [9], the total is likely higher. Some of its ad buys appear to be coordinating with Rove's Super PAC, American Crossroads -- in Pennsylvania [10], for instance, AJS spent $1.2 million on ads in Philadelphia at the same time American Crossroads spent the same amount on ads across the rest of the state. AJS has also paid the related Crossroads Media [11] to produce and place its ads, and for an unknown reason has disbursed nearly $1 million [12] directly to Crossroads GPS.

Koch-Connected CPPR Gave to AJS in 2010

Though AJS does not disclose its donors, two funding sources have been identified from disclosures filed by contributing organizations. And one of them is the Center to Protect Patient's Rights (CPPR).

As first discovered by Open Secrets [13], CPPR gave AJS $4.8 million in 2010, according to its most recent IRS filings. CPPR's misleading name gives the impression it is concerned about healthcare but it actually appears to operate as a conduit for funding right-wing electoral operations. As a nonprofit, CPPR is not required to report its funders, but it must disclose its grant recipients -- and through those disclosures, it was revealed that CPPR gave $55 million in 2010 to a variety of nonprofit groups that in turn spent at least $46 million [14] attacking Democrats in the 2010 elections.

As a 501(c)(4) nonprofit CPPR itself does not disclose its donors. But it does have ties to the billionaire Koch brothers.

CPPR's President Sean Noble has been described as a "Koch operative" [15] affiliated with a number of Koch-connected political operations, and who in the runup to the 2010 elections met regularly with GOP strategists and Karl Rove's Crossroads groups to plot and coordinate that year's Republican electoral landslide. Noble has since been hired [16] by Americans for Limited Government, another nonprofit organization which happens to be AJS's other known funder. Its IRS filings [17] show it gave $250,000 to AJS in 2010.

Other individuals associated with the group also have Koch ties [14]. Consultant Cheryl Hillen has raised at least $2.6 million for the organization and was formerly director of fundraising for David Koch's Citizens for a Sound Economy (which later split into Koch's Tea Party group Americans for Prosperity and Freedomworks, which is led by Dick Armey). One of CPPR's original directors, Heather Higgins, is chairwoman of the Independent Women's Forum, a climate change denialist group that has received Koch money and was previously run by a Koch lobbyist.

Shell Game Highlights Need for Reform

This week, with Americans for Responsible Leadership forced to disclose its funding to California's elections board, it is apparent that the flow of some of the money has now been reversed. Where in 2010 donors gave secretly to the Center to Protect Patient's Rights, which in turn gave secretly to Americans for Job Security, in 2012 donors apparently have given secretly to Americans for Job Security, which gave secretly to the Center to Protect Patient's Rights. CPPR then gave $11 million to Americans for Responsible Leadership, which in turn made an $11 million donation to the Small Business Action Committee PAC.

According to Ann Ravel, Chair of the California Fair Political Practices Commission, the case "demonstrates the need for reform to make sure true donors are disclosed and can't hide behind innocuous committee names."