Should voters know more about where undisclosed political money comes from?

The Ohio Statehouse in Columbus.
The Ohio Statehouse in Columbus.

A $60 million bribery scandal at the Statehouse has put a spotlight on how nonprofit groups that don’t have to disclose where they get their money could corrupt politics.

In July U.S. Attorney David DeVillers alleged that Republican Larry Householder and four associates took more than $60 million filtered through these groups to put Householder in power and then pass and defend House Bill 6, a controversial energy bailout law.

These nonprofit groups have been part of Ohio’s political landscape for years and are becoming more common in state and local contests, experts say.

Defenders of the groups say the organizations represent a small percent of overall political spending and they promote free speech.

When Mike DeWine ran for governor in 2018, a nonprofit group called Securing Ohio’s Future Action Fund used $2.1 million from Securing Ohio’s Future Inc. and $2.75 million from the Republican Governors Association to help turn out voters for DeWine.

The governor declined to comment through his spokesman.

And when his daughter, Republican Alice DeWine, ran and lost in the 2020 GOP primary race for her father’s old job as Greene County prosecutor, Protecting Ohio Inc. sent $349,000 to Protecting Ohio Action Fund, which advocated for her campaign. The donors to Protecting Ohio Inc. are not publicly disclosed. Alice DeWine has previously said the money was an independent expenditure that she didn’t know about and was surprised to see the campaign mailer they sent out.

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These groups often pay for the kinds of political activity that also is done by campaigns themselves or their political parties, which have to report who gives them money. The groups pay for mass mailings, TV, radio and digital advertising, and other ways of supporting a candidate or issue.

Behind-the-scenes funders found that they can have a big impact on state and local elections for relatively little money, said Catie Kelley, senior director of policy for the Campaign Legal Center.

“The harm is that people have a right to know who is trying to influence candidates and ultimately lawmakers about what bills are getting passed, what bills never see the light of day and how our government is being run,” Kelley said.

Catherine Turcer of Common Cause Ohio said: “We’ve seen an incredible increase in dark money. But we’re talking about a 10-year problem rather than something that’s come to pass in just the last few years.”

In 2010, the U.S. Supreme Court ruled in the Citizens United case that corporations, unions, associations and nonprofits could give unlimited money to political causes. If there is no coordination between a candidate’s campaign and the outside group and no conversion of the money for personal use, it’s legal.

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The Citizens United case was a victory for free speech, according to the Institute for Free Speech, a Washington D.C.-based group.

Fears of corruption are misplaced and most political spending is done by candidates, parties and political action committees, according to Bradley A. Smith, the institute’s founder and chairman and a former Federal Elections Commission commissioner.

Since the Citizens United ruling, the nonprofit groups that don’t have to disclose their donors have usually accounted for about 3% to 5% of total campaign spending, Smith said in a September column.

“Though their role in elections remains a minor one, nonprofits bring valuable perspectives and information to voters,” Smith said in a September column. “Instead of demonizing dark money, we should welcome more speakers and more speech in campaigns.”

Federal investigators used subpoenas and other tools to shed light on how Ohio-based utility companies funneled more than $60-million to Generation Now, a 501(c)4 organization, which then transferred the cash to a web of related entities and accounts.

Federal prosecutors use this graphic to show the flow of money in the House Bill 6 public corruption case. Companies used dark money groups to funnel more than $60 million in bribes to Republican Larry Householder and his associates, federal prosecutors allege.
Federal prosecutors use this graphic to show the flow of money in the House Bill 6 public corruption case. Companies used dark money groups to funnel more than $60 million in bribes to Republican Larry Householder and his associates, federal prosecutors allege.

Credit: Contributed

Credit: Contributed

“The millions paid into the entity are akin to bags of cash — unlike campaign or PAC contributions, they were not regulated, not reported, not subject to public scrutiny — and the (Householder) Enterprise freely spent the bribe payments to further the Enterprise’s political interests and to enrich themselves,” according to an 80-page affidavit written by FBI Special Agent Blane Wetzel.

The affidavit did not name the energy companies but descriptions identify them as Akron-based FirstEnergy Corp., FirstEnergy Service Co., and FirstEnergy Solutions, which is now known as Energy Harbor.

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The Householder case involves multiple groups that don’t have to disclose their funding sources. The FBI named Generation Now Inc. but used pseudonyms for others — Energy Pass-Through, Coalition, Dark Money Group 1. Descriptions of the others identify them as Partners for Progress Inc., Coalition for Growth & Opportunity Inc. and Hardworking Ohioans Inc., respectively.

The treasurer for two of those groups, attorney Eric Lycan, did not respond to messages seeking comment.

A 501(c)4 organization is a tax-exempt, social welfare organization whose donors do not have to be publicly disclosed. A majority of 501(c)4 organizations expenditures must be for social welfare purposes while the remainder can be spent on politics.

Ian Vandewalker, senior counsel for the democracy program at The Brennan Center, said the IRS rarely enforces that rule so it has little impact.

The money web can be difficult to decipher. Sophisticated participants send the money through multiple organizations to make it difficult to follow, Kelley said.

For example, a 501(c)4 funded by Columbus-based American Electric Power donated $900,000 to Generation Now and a second group, the Coalition for Growth & Opportunity, over three years. A representative for the two groups Generation Now and the Coalition for Growth & Opportunity didn’t respond to requests for comment.

It also gave $525,000 in 2018 to State Solutions Inc., which gave money to an entity called the American Comeback Committee, which gave money to Securing Ohio’s Action Fund, the outside group that helped drive voter turnout for Mike DeWine. State Solutions Inc. in 2018 paid a Columbus-based Republican fundraiser $307,500 to raise $5 million, according to its IRS990 form.

Vandewalker and Kelley both said that layering money through multiple groups is intended to make it confusing and less transparent.

“I’ve played this game of trying to follow the IRS 990s and the secretary of state registrations and it’s very frustrating,” Vandewalker said.

Disclosure and transparency laws at the state and federal level should be bolstered, Vandewalker and Kelley said, to guard against this type of money being used as bribes and to give the public more information so they can be informed voters.

“The Householder case is getting national attention. I think it will help increase support for disclosure,” Vandewalker said. He added, “It’s a bit of a double edge sword because the allegations are so egregious that the political status quo will say that it was bribery and bribery is already illegal, so we don’t have to do anything here.”

Kelley said: “The court has said you can’t stop the spending. So the solution is to give voters information about where the money is coming from.”

While 80% of Americans support increased transparency in political spending, Kelley said: “It is the political elite that are more resistant to providing that. The lawmakers, parties and people running these outside groups don’t want increased transparency.”

Turcer argued that Ohio lawmakers should recognize the House Bill 6 scandal as an opportunity to improve disclosure laws and broaden the rules against coordination between candidates and outside groups.

“It should be really clear to lawmakers that operating in the dark is not good for them as well as the rest of the state,” she said.

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