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Rural Law Firm Shields $262 Million in Secret Donations

About 50 miles west of Washington, in a newly developed zone between the roadside farm stands and the shops that line the Victorian Main Street of tiny Warrenton, Virginia, sits a brick office building that’s emerged as a nexus of Republican secret money and power.

The building houses the law firm of Holtzman Vogel Josefiak PLLC, a boutique outfit that specializes in advising organizations that want to participate in the electoral process without disclosing who’s paying their bills.

The firm is tied to non-party groups, including super- political action committees, that spent more than $250 million in an effort to influence the 2012 election. That’s more than a quarter of the total by independent organizations, according to an estimate by the Center for Responsive Politics, a nonpartisan Washington-based group that tracks political spending.

Lawyers at Holtzman Vogel have signed off on corporate filings, legal briefs and Internal Revenue Service documents for some of the prominent players, including American Crossroads, and the stealthiest ones, such as the Center to Protect Patient Rights, which California election officials accused last month of being part of a “campaign money laundering” scheme.

“They push the envelope and take aggressive positions in court and on advice,” said David Vance, a spokesman for the Washington-based Campaign Legal Center which advocates for transparency in elections and has squared off with Holtzman Vogel in court.  The firm is “involved in the assault on disclosure and every other campaign finance law left on the books.”

Rules Changing

Jason Torchinsky, a Holtzman Vogel partner who defended several nonprofits against California’s effort to force disclosure by the firm’s clients, disputes that characterization.

“The rules keep changing, which is part of the reason that people need law firms to figure out how to speak,” he said. “The rules are in a constant state of flux.”

Torchinsky said the firm only does what the clients want and he and his partners don’t try to be activists when it comes to campaign finance.

“Do I believe strongly in the First Amendment? Yes. But we do not push the envelope,” said Torchinsky, who worked in the Justice Department under President George W. Bush and was counsel to the 2004 re-election campaign. “Do we have clients who once in a while want to step out and do something more activist? Yes.”

Brisk Business

Business has been especially brisk in recent years after a series of court decisions overturned campaign finance laws and left the rules defining political activity and disclosure up to interpretation by the Federal Election Commission and the lawyers. Although a full accounting of their payments isn’t public, clients who do report to the FEC, including the Republican National Committee and Florida Senator Marco Rubio’s campaign, spent $1.7 million for the firm’s services in the 2011-2012 election cycle.

Managing Partner Jill Holtzman Vogel, now a Virginia state senator, was chief counsel to the Republican National Committee in 2004. Her husband, Alex Vogel, is a partner in the firm and also a prominent Washington lobbyist who was counsel to former Senate Majority Leader Bill Frist, a Tennessee Republican. The firm also includes Tom Josefiak, a former FEC chairman, as a named partner.

From their office in a city with a population of 9,735, they are advising and defending a shadow Republican power structure that includes such prominent players as Karl Rove, a former adviser to President George W. Bush, who wield influence that rival that of the Republican National Committee.

Lucrative Operation

The work has been lucrative. Jill Holtzman Vogel and Alex Vogel own millions of dollars’ worth of real estate in Washington and Virginia’s Fauquier County, in which Warrenton is situated. The couple, who have five children, paid $2.4 million in 2006 for their Upperville home, which sits on 50 acres and boasts a pool and tennis court, according to real estate records. They also own a two-bedroom penthouse condominium at the Ritz-Carlton in Washington and an office building in Warrenton.

“They are one of a couple of law firms that have an active campaign-finance litigations practice,” said Tara Malloy, an attorney at the Campaign Legal Center who has gone up against Holtzman Vogel lawyers. “They show up at the FEC and ask for advisory opinions. Then they go to the courts.”

American Crossroads, the super-PAC tied to Rove, lists Holtzman Vogel’s Warrenton address as its own on some IRS filings. Its nonprofit sister group, Crossroads Grassroots Policy Strategies, lists Torchinsky as the administrator of its website.

Crossroads Spending

The Crossroads groups spent at least $175.8 million on election ads in 2012, according to the Center for Responsive Politics. Crossroads leaders have said the group spent as much as $300 million, much of it not subject to FEC disclosure.

Crossroads spokesman Jonathan Collegio said the group chose the firm because Tom Josefiak is a former FEC chairman and “one of the leading conservative legal minds in campaign law.” Josefiak also has been chief counsel at the Republican National Committee.

The Warrenton law firm also advises the American Future Fund, a nonprofit “social welfare” group that raised and spent at least $25.6 million to help elect Republicans in 2012. Jill Holtzman Vogel defended the group against an effort by Citizens for Responsibility and Ethics, a Washington-based group that advocates for disclosure, to declare it a political committee and force it to make public its donors.

Koch Group

Americans for Prosperity, the political nonprofit founded and partially funded by billionaires Charles and David Koch, fought off similar complaints with the help of Torchinsky. AFP spent $38.5 million on advertising in support of Republican candidates in 2012, according to the Center for Responsive Politics. The group also deployed a ground operation that sought to register Republican voters and get out the vote on Election Day.

Nonprofits such as Crossroads GPS, the American Future Fund and Americans for Prosperity spent unprecedented amounts of money trying to influence the 2012 election while hiding the source of their funds. They were able to do so because of a new legal landscape created in part by Holtzman Vogel’s lawyers, who argued in state and federal regulatory filings and in the courts that such groups have a constitutional right to participate in elections without revealing the names of the donors who finance their political messages.

“As a law firm we do what our clients need to be done,” Torchinsky said. He declined to speak about individual clients.

Byzantine Network

Still, some Holtzman Vogel clients created byzantine layers of non-profits to protect the identity of their donors from the public eye even with legal challenges.

One such group is Americans for Responsible Leadership, an Arizona-based nonprofit that was incorporated in July 2011 by Holtzman Vogel attorney Cathleen West, according to state filings. Americans for Responsible Leadership contributed $11 million to the California-based Small Business Action Committee PAC to help defeat a ballot measure that would raise the sales tax and pass another that would make it harder for unions to raise money.

California regulators sued Americans for Responsible Leadership, seeking the names of its donors. Holtzman Vogel unsuccessfully fought the disclosure. When Americans for Responsible Leadership revealed its contributors’ identities the day before the election, it showed money moving through a string of nonprofit entities tied to Holtzman Vogel in what the California Fair Political Practices Commission called “campaign money laundering.”

Ann Ravel, chairwoman of the commission, said she has opened a formal investigation into the contributions.

California Case

Americans for Responsible Leadership received the $11 million from Phoenix-based Center to Protect Patient Rights, another group that lists West of Holtzman Vogel as its incorporator in IRS documents. The Center to Protect Patient Rights is led by Sean Noble, a former Republican aide on Capitol Hill whose consulting firm, DC-London Inc., was also incorporated by West.

Both groups sent almost identical letters stating that their donations were “intermediary contributions.” California law requires people or groups making contributions on behalf of others to disclose the identity of the original donor. The source of the California money, after it passed through three nonprofits, was a fourth group called Americans for Job Security, which doesn’t reveal its contributors either.

Noble and Americans for Responsible Leadership President Kirk Adams didn’t respond to requests for comment.

Running money through a chain of nonprofit organizations, known as 501c4s for the section of the IRS code where they are defined, may help the groups hide their donors because they are relying on interpretations of elections and tax law that require that less than half their money goes to political activity and the rest be of benefit to the public.

“When c4s report payments to other c4s, that at least facially is arguably a social-welfare expenditure,” said Marcus Owens, a partner at the law firm Caplin & Drysdale and former head of the IRS exempt organizations section. “That would contribute towards justifying tax exempt status.”

To contact the reporter on this story: Alison Fitzgerald in Washington at afitzgeraldk@bloomberg.net

To contact the editor responsible for this story: Jeanne Cummings at jcummings21@bloomberg.net

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