Republican Groups Use Hidden Money to Overcome Democrats' Cash

Republicans are getting help filling their coffers from outside groups that don't disclose their donors

(Bloomberg) — Republican-leaning groups that don't disclose their donors are raising and spending millions of dollars on the U.S. congressional elections, helping make up for the party's fundraising deficit.

Five organizations alone reported spending more than $5 million since Aug. 1 on so-called electioneering communications, compared with less than $200,000 for Democratic-leaning groups, Federal Election Commission data show. Millions of dollars in other spending to influence the Nov. 2 elections doesn't have to be reported because the ads don't mention specific candidates.

There is "much more money flowing," said Craig Holman of Public Citizen in Washington, who lobbies for stricter campaign finance laws. "We've gone from full disclosure to full non-disclosure in a short period of years."

Republicans need the outside help. The three major Democratic Party committees yesterday reported a combined cash advantage of $20 million over their Republican counterparts heading into September.

The U.S. Chamber of Commerce, the top business lobby, plans to spend $75 million on the elections and is leading the advertising spree for Republicans. Another group, Crossroads GPS, and its sister organization, American Crossroads, expect to spend $52 million. Karl Rove, former President George W. Bush's chief political strategist, advises and raises money for that pair, which have brought in $32 million so far.

Targeting Senate Races

The groups are mainly targeting Senate races, reports to the FEC show. Because the chamber is a trade group and the others, such as Crossroads GPS, are organized as nonprofit issue groups, they don't have to report donors. They can also take unlimited contributions from corporations, unions and individuals.

"We can see for ourselves how destructive to our democracy this can become," President Barack Obama said in his Sept. 18 weekly address, the second in a month to take on the issue. "We see it in the flood of deceptive attack ads sponsored by special interests using front groups." Obama is pushing a proposal, so far blocked by Republicans, to make such groups disclose their donors. The organizations reported their spending because their ads mentioned candidates within a certain window before an election, and the $5 million figure excludes spending that was clearly intended only for primaries. The group also includes former Republican Senator Norm Coleman's American Action Network and Americans for Prosperity, whose sister foundation is headed by David Koch, executive vice president of Koch Industries Inc.

'Wasteful' Spending

The Americans for Prosperity Foundation is separately spending $5.5 million on ads that criticize the government's $814 billion stimulus program and "wasteful government spending." While the ads don't mention candidates and therefore don't have to be reported, they are running in districts of vulnerable House Democrats.

Americans for Prosperity is one of the groups Obama has criticized by name. "It's pure opportunism on behalf of the left," said Phil Kerpen, vice president for policy at the Arlington, Virginia-based group. "They are mischaracterizing our issue ad campaign."

Strategists Meet

Steven Law, the head of American Crossroads, often meets with Republican strategists running the outside groups including former Republican National Committee Chairman Ed Gillespie, said Jonathan Collegio, a spokesman for Law's group. American Crossroads yesterday reported raising $2.6 million in August, helped by $1 million donations from two Texas businessmen, Trevor Rees-Jones and Robert Rowling, and $400,000 from American Financial Group Inc. of Cincinnati. Millions more flowed unreported into Crossroads GPS.

Crossroads GPS devoted more than $1 million to ads targeting Democratic Senate candidates Harry Reid in Nevada, Michael Bennet in Colorado, Robin Carnahan in Missouri and Jack Conway in Kentucky. Also, it has announced spending more than $3 million on other ads that didn't require reporting, including a $1 million campaign against Boxer in California.

"It's time we tried to counter all the activity of the labor unions" and other pro-Democrat groups, Gillespie said in an interview. "This year, we've done a pretty good job." While these campaign finance vehicles were legal before the Supreme Court in January freed companies to spend unlimited amounts from their treasuries to support candidates, they are getting more attention.

"There is no longer any legal reticence," said Trevor Potter, a former FEC chairman who runs the political activities law practice at Caplin & Drysdale in Washington.

Behind the Scenes

Still, companies are more likely to donate behind the scenes after the backlash suffered by Minneapolis-based Target Corp. Customers and shareholders objected after the retailer donated $150,000 to a group backing a pro-business gubernatorial candidate who opposes gay marriage. "A lot of companies feel more comfortable giving to trade associations," said Larry Noble, a former FEC general counsel and lawyer with Skadden, Arps, Slate, Meagher & Flom LLP in Washington. "They don't disclose."

The Chamber of Commerce, whose members include drug-maker Pfizer Inc. and 3M Co., spent more than $850,000 to oppose California Democratic Senator Barbara Boxer and $1 million on ads against Florida Governor Charlie Crist, an independent Senate candidate vying with a Republican and a Democrat.

Chamber President Tom Donohue announced even before the high court decision that the group would carry out "the largest, most aggressive voter education and issue advocacy effort" in its history, spokesman J.P. Fielder said.

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