It Could Soon Be Easier For The Media To Expose Dark Money Donations By Government Contractors

In the years since the Supreme Court's 2010 Citizens United decision, political spending has skyrocketed, much of it in secret. The ruling has kept the media and public from knowing where this “dark money” comes from and what conflicts of interest exist. However, if President Obama decides to issue an executive order requiring contractors to disclose their political donations, as he is reportedly considering doing, journalists will soon be able to expose the hidden relationships between contractors and elected officials.

Citizens United opened the financial floodgates to dark money groups - organizations that raise unlimited money from donors to pay for political advertising and campaign organizing but are not obligated to disclose where the money came from. The decision has allowed corporations and wealthy individuals to have enormous influence over elections because it allows them to get around the legal direct donation limits to candidates and parties, creating what many view as a corrupting influence.

As a recent New York Times editorial noted, President Obama is considering issuing an executive order that would force federal contractors to disclose donations to dark money groups. The editorial, which advocated for an order “requiring federal contractors to disclose their donations to political candidates,” also noted that House Republicans are currently crafting legislation to further decrease transparency in political spending. Because of entrenched Republican opposition to campaign finance reform, the proposed executive order requiring disclosure on the part of federal contractors may be the only forthcoming measure to address the crisis of money in politics.

[Center for Responsive Politics, accessed 7/14/15]

Some of the larger implications of the Citizens United decision and the ability of federal contractors to skirt federal law have been the subject of investigative reporting by national media, who have looked into the origins of dark money groups. But federal contractors' political spending has received little coverage, mostly because so little reliable information is available, given the secretive nature of the donation process. That is slowly changing, thanks to a renewed push by media outlets and advocacy groups for executive action to force contractors to disclose donations. Their efforts could soon produce results and give media the power to report on how contractors try to gain influence by supporting candidates through dark money groups.

Citizens United gave federal contractors a huge incentive to contribute to these third-party groups as a way to curry favor with politicians who award lucrative government contracts. Washington hands out hundreds of billions of dollars annually in federal contracts and grants, and a vast majority go to large corporations. According to the Brennan Center, “Since 2000, the top 10 federal contractors have made $1.5 trillion from the government.” In some states, these federal contractors are an outsized influence on the local economy.

Though the law says 23 percent of federal contracts must go to small businesses, large defense contractors like Lockheed Martin and Raytheon have found ways to qualify as small businesses in certain circumstances. Nine of the top 10 contract winners so far this year have been defense contractors whose political action committees (PACs) were among the largest contributors to federal candidates in the first quarter of 2015:

Requiring contractors to disclose donations would not only affect companies that survive off of federal contracts, like many defense firms, it would also shed light on companies for whom contracts are only part of a larger business model, such as the billionaire Koch brothers-controlled Koch Industries, which has a history of winning federal contracts.

The potential conflict of interest inherent in allowing contractors to donate to politicians who decide which companies get government contracts was acknowledged as far back as 1940. As The Brennan Center for Justice's Ciara Torres-Spelliscy reported, the 1940 Hatch Act made it illegal for contractors to donate “directly or indirectly to make any contribution of money or other things of value, or to promise expressly or impliedly to make any such contribution to any political party, committee, or candidate for public office or to any person for any political purpose or use.” However, courts have decided that a contractor may set up its own super PAC as a separate entity to get around the Hatch Act. As the Brennen Center explained in a report on one of the legal challenges to the law:

In 2013, Public Citizen launched a complaint against Chevron for giving $2.5 million to a super PAC called the Congressional Leadership Fund (CLF). This expenditure was the largest one from a for-profit publicly traded company in the 2012 election cycle.

This should have be a slam dunk of a case since Chevron is a government contractor covered by the Hatch Act. But the FEC did not see it that way. As Mother Jones reported, “The FEC bought the company's argument, which is that Chevron Corporation (the organization that donated to CLF) and Chevron U.S.A. (the organization with government contracts) are entirely different entities.” It did not matter that Chevron U.S.A. is 100 percent owned by Chevron Corp. Now it is open season for government contractors to spend in federal elections since all they have to do is spend through a different subsidiary. The Hatch Act is now barely worth the paper it's written on if this is how the FEC is going to “enforce” it.

And while super PACs are transparent, listing publicly where they got their funds, the donors to super PACs can be dark money conduits like 501(c)(4)s or 501(c)(6)s. Consequently, federal contractors could be hiding among the donors of $600 million in dark money that has been spent in the past four years.

While an executive order would not eliminate contractors' ability to donate to dark money groups, as the Brennen Center points out, it would give journalists and citizens a clearer view into which organizations are supporting which candidates, and could go a long way toward deterring corrupt pay-to-play practices:

Such disclosure [of federal contractor's donations] would not bring all dark money to light, but it would expose a type of dark money that should be especially troubling: campaign contributions that could have been given to influence a contract awarded by the government.