'Shadow Parties' Share Leaders and Republican Roots

Veterans of the Bush administration and other former Republican elected officials are now leading the tax-exempt organizations that are skirting campaign finance rules

(Bloomberg) — The outside groups spending record amounts to help elect Republicans this year are required to work independently of the campaigns. The ties that bind them to the party ensure that there isn't too much distance. Many of the leaders are veterans of President George W. Bush's administration, former Republican elected officials, past chairmen of the Republican National Committee, or ex-aides to Republican lawmakers, records show. And the groups themselves share a political agenda, including opposition to the health- care overhaul and tax increases.

They also share personnel and even office space. While these tax-exempt organizations operate separately from the political campaigns, they're driving the Republican fundraising machine because they can do what the party can't: take in unlimited amounts of funds from anonymous donors. "It's almost as if these are shadow parties," said Bill Allison, editorial director for the Sunlight Foundation, a Washington-based watchdog group. "They've found a way to supplement what their colleagues are doing at the Republican National Committee and the congressional committees without having to play by the same rules."

That freedom stems from their incorporation under 501(c)4 of the tax code, which allows the organizations to spend money on campaign ads without saying who's paying for them. These and other Republican-leaning outside groups have spent about $73 million since Sept. 1, four times as much as Democratic- supporting groups and a record for midterm elections, Federal Election Commission records show.

'You Don't Know'

President Barack Obama has led a Democratic Party attack on the groups, demanding that they reveal their funders. "It could be the oil industry," Obama said at an Oct. 10 campaign rally. "It could be the insurance industry. It could even be foreign-owned corporations. You don't know because they don't have to disclose."

Carl Forti, political director for American Crossroads, one of two groups advised by former Bush political strategist Karl Rove, said the Democrats are guilty of hypocrisy, saying they relied on outside groups when they took back Congress in 2006 and the White House in 2008. Forti said the leaders of the various Republican-supporting organizations meet regularly and that they find no shortage of potential contributors. "Donors are energized because of the opportunity that exists right now," he said. "Voters are angry. They want change. The change they voted for two years ago isn't enough."

Interlocking Groups

Forti may illustrate the interconnectedness of the Republican-leaning organizations better than anyone else: He has links to a number of the groups. He handles publicity for the 60 Plus Association, which supports privatizing Social Security. His ex-boss sits on the board of American Action Network, which is headed by former Republican Senator Norm Coleman of Minnesota.

Michael Dubke, who co-founded the consulting firm Black Rock Group with Forti, once led Americans for Job Security, which opposes the increase in Bush-era tax rates scheduled for Jan. 1, and started a media firm that places political ads for the organizations. The two entities that Rove helped establish — American Crossroads, which discloses its donors, and Crossroads GPS, which doesn't — share a chief executive, Steven Law, a deputy labor secretary under Bush. Both count on Rove and former Bush White House aide Ed Gillespie for fundraising. American Crossroads' chairman is Mike Duncan, who, like Gillespie, headed the Republican National Committee under Bush.

Leasing Space

The Rove-backed groups lease space from Coleman's American Action Network, based in Washington. American Action Network board members include former U.S. Senator Mel Martinez, a Florida Republican and now a JPMorgan Chase & Co. executive committee member; and former U.S. Representative Tom Reynolds of New York, who led the National Republican Congressional Committee when Forti was communications director.

Also on the board is Maria Cino, now a lobbyist for Pfizer Inc. Cino was president of the 2008 Republican National Convention. The convention chairwoman, Jo Ann Davidson, is a American Crossroads director. Law left the Bush administration to become general counsel of the U.S. Chamber of Commerce, which has pledged to spend $75 million on the elections, mostly to support Republicans. Law, chamber political director Bill Miller and senior vice president Rolf Lundberg all worked for Republican lawmakers.

Coordinating Strategy

Besides American Crossroads and Crossroads GPS, Forti works for the Alexandria, Virginia-based 60 Plus Association, whose chairman is former Republican congressional aide James Martin. The Crossroads strategists meet in their offices with representatives of other groups, including the American Action Network and the Chamber, said Jonathan Collegio, a spokesman.

The organizations are "making sure that our ad buys don't step on an ad buy of another group," he said. Forti's consulting firm partner Dubke is the founder of Crossroads Media LLC of Alexandria, which has handled advertising for American Crossroads, Crossroads GPS, American Action Network and Americans for Job Security, FEC records show. The group has received at least $15 million since Sept. 1, though much of the money goes to the television stations running the ads.

"This is the Holy Grail mechanism for untracked independent expenditures," said Lisa Gilbert, a lobbyist for the U.S. Public Interest Research Group, which supports stronger campaign-finance disclosure laws. "Karl Rove figured out a neat trick, and his friends are eager to emulate it."

    Before it's here, it's on the Bloomberg Terminal.