How a super PAC helping Beto O'Rourke by bashing Ted Cruz can hide who's funding it

By Ashley Balcerzak, Center for Public Integrity
© 2018 The Texas Tribune

Want to influence Tuesday’s midterm election but keep your identity secret from voters?

No problem. Here’s how you do it:

Step 1. Pick a super PAC name, treasurer and bank account.

Step 2. File a short form with the Federal Election Commission.

Step 3. Wait until Oct. 18 to begin spending your money. That way, you won’t have to report your donors until an entire month after Election Day.

This isn’t just theory — it’s happening now. And Democrats are leading the way despite decrying political efforts funded by “dark money” — political cash that can’t be traced to its ultimate source.

A Center for Public Integrity analysis of federal campaign records indicates that three super PACs that have formed since Oct. 18 have reported spending a combined $1.3 million across three hotly contested U.S. Senate races and one U.S. House race. Super PACs may raise and spend unlimited amounts of money to advocate for or against political candidates.

As of Thursday night, these three groups are among 43 political action committees that have formed since Oct. 18. These groups must by law disclose their donors.

But this election cycle, the final pre-Election Day deadline for PACs and super PACs to reveal their donors came and went on Oct. 26 — a deadline covering financial activity from Oct. 1 to Oct. 17. Any group that formed after Oct. 17 isn’t subject to this deadline and must first report the identities of their contributors, and the amounts they contributed, on Dec. 6, per federal regulations.

Most notable among these just-formed groups is Texas Forever, a super PAC bashing Sen. Ted Cruz, R-Texas. To date, Texas Forever has spent more than $1.29 million on anti-Cruz TV ads just in the past two weeks.

Who gave that money to Texas Forever is a mystery, and will remain so until Dec. 6. Cruz is battling Democratic Rep. Beto O’Rourke in a race that a University of Texas at Tyler poll Wednesday indicates is very close and the Cook Political Report has declared a “toss-up”.

“BBQ. Football. … There’s a lot in Texas you shouldn’t mess with. Your health care is one of them. But Ted Cruz did,” the ad’s voiceover says.

The treasurer of the Texas Forever super PAC is Democratic Texas political consultant Christopher Lippincott, who from 2006 to 2011 served as the director of media relations for the Texas Department of Transportation.

Lippincott acknowledged an interview request from the Center for Public Integrity, but did not respond to several follow-up attempts. In a recent interview with the Dallas Morning News, he declined to reveal the group’s donors but nevertheless called Cruz out for benefitting from conservative political groups’ secretive money: “Ted Cruz is a phony politician propped up by millions of out-of-state dark dollars who has spent the past six years doing favors for his special interest donors."

Said Cruz campaign spokeswoman Catherine Frazier to the Center for Public Integrity: “That’s an awfully hypocritical charge given that Beto O’Rourke is being propped up by this very super PAC and has taken money for his campaign bundled by multiple PACs.”

Although little is known about Texas Forever, it hired a media buying firm, Waterfront Strategies, that has ties to the national Democratic machinery.

O’Rourke has routinely boasted of not accepting corporate PAC or special interest money.

But as Texas Forever is a super PAC, and therefore not controlled by the O’Rourke campaign, it can raise and spend unlimited amounts of money as it sees fit — to benefit O’Rourke or any other political candidate. O’Rourke has also financially benefited from the effort of J Street PAC, a “pro-Israel, pro-peace” political committee that’s served as a “conduit” and directed individuals’ contributions to O’Rourke’s campaign, as the Associated Press has reported.

"We're not interested in the help of any super PACs or special interest groups and don't want their involvement in this race, which is why our grassroots campaign has accepted exactly zero dollars from PACs in this election," Chris Evans, the O’Rourke campaign communications director, told the Center for Public Integrity.

But Democrats of late have not hesitated to use untraceable money as part of their efforts.

A prime example, from late last year, is the super PAC Highway 31.

Highway 31 spent millions in Alabama’s special U.S. Senate race without disclosing its donors — which turned out to be Democrat-aligned super PACs Senate Majority PAC and Priorities USA Action, as well as the League of Conservation Voters — until after the election.

In Montana this month, a super PAC named Forward Montana has spent about $9,500 on mailers and printouts supporting Democratic Sen. Jon Tester and Democrat Kathleen Williams, a water conservation expert running for Montana’s U.S. House seat. Forward Montana reported receiving no donations as of Oct. 17, according to Federal Election Commission records.

Forward Montana’s website says University of Montana students founded the group in 2004, with its “first fights … focusing on recycling, renewable energy, sexual assault and tenant rights.” It boasts being the largest youth civic engagement organization in Montana with staff in Billings, Bozeman and Missoula.

Forward Montana registered a super PAC arm on Oct. 19 this year. On Thursday, the super PAC filed paperwork with the FEC changing itself into a traditional PAC, which is subject to fundraising limits but may donate money directly to candidates.

>> READ: Understanding political committees 101

Forward Montana members did not return the Center for Public Integrity’s requests for comment.

David Keating, president of the Institute for Free Speech, which advocates against campaign finance regulations, said it’s “ironic” that liberals are engaging in such activity.

“If [Democrats] think disclosure is such a good idea, then why aren’t they doing it?” Keating mused.

Federal statutes governing campaign finance disclosure were written in the 1970s and need updating to address the loophole allowing some super PACs and other political committees to hide their donors until after Election Day, said Brett Kappel, a partner at Akerman LLP.

Republican groups are also using this donor disclosure loophole to keep their funders secret for now.

Take Scottsdale, Arizona-based super PAC Restore Our Healthcare Inc. It formed on Halloween, the same day it reported spending almost $11,300 on a radio ad supporting Republican Rep. Martha McSally, who is running for Arizona’s U.S. Senate seat.

Restore Our Healthcare Inc.’s treasurer is Randy Pullen, the former chairman of the Arizona Republican Party and former treasurer of the Republican National Committee.

The amount of PAC and super PAC money flowing through this legal loophole is significantly more than in previous election cycles.

At least 28 pop-up PACs formed in the final days of the 2016 presidential election. Together, they spent $220,000 in money whose donors weren’t disclosed until after the election, according to a Center for Responsive Politics analysis.

The largest-spending pop-up PAC that cycle, Truth PAC, dropped $92,000 on anti-Donald Trump ads. One ad overlaid Russian nesting dolls on the faces of Trump and Russian President Vladimir Putin. At least 27 pop-up PACs materialized in the final days of the 2014 election, spending relatively little.

PACs and super PACs that formed earlier in the year, but waited until late October to actually spend money in elections, also are allowed to hide their donors until after Tuesday’s midterm election.

Alexandria-based super PAC American Potential Fund, created Oct. 3, waited until after Oct. 17 to spend $186,000 on digital ads opposing incumbent Sen. Bill Nelson, D-Fla., in his U.S. Senate race against Republican Gov. Rick Scott.

Throughout the 2017-2018 election cycle, political groups, especially on the Democratic side, have been creatively filing their registration and campaign finance disclosure paperwork with federal regulators, allowing them to temporarily delay revealing who funds them.

In all, 63 committees this cycle together spent more than $22 million on politicking before revealing who was bankrolling their activities, according to a ProPublica and Politico analysis of Federal Election Commission filings from the beginning of 2017 through Oct. 17, 2018. This is in addition to the PACs and super PACs that have formed since Oct. 17.

Not all PACs and super PACs that pop up days before Election Day are doing so with the intention of hiding their donors until after the 2018 midterms are complete.

At least six such groups told the Center for Public Integrity that they don’t plan on spending money until the 2020 election — or that they were unaware they could keep their donors a secret until December.

Kelly Werder, a hospitality law professor and administrator at Florida Gulf Coast University, formed a new political action committee, called 5050 by 2020 Committee, on Oct. 23.

“We’re just some pretty frustrated women in a post-[Brett] Kavanaugh world, and that’s pretty much it,” Werder said.

Werder shared her “very exciting donor list including me, friends from college, and my mom!” with the Center for Public Integrity. She collected about $500, as well as spending almost $300 herself on a post office box, web hosting and graphics.

The group is mostly boosting social media posts and hopes to start a podcast on female politicians. It has endorsed female candidates from both parties.

Matthew Resh, the treasurer of a new Houston-based super PAC called Center for Real News, said he hasn’t received any money yet.

And Ryan Alsayegh of the Philadelphia-based PAC Second Generation, which formed on Oct. 24, said it has no donors and doesn’t plan to fundraise until 2019. The group wants to encourage immigrant communities to be politically engaged.

But, by law, if someone wants to form a super PAC and spend unlimited amounts of "dark money" between now and Election Day 2018, it has four days left to do so.

© 2018 The Texas Tribune