The Governors' Three-PAC Monte

Article excerpt

How do millions in untraceable dollars wind up in the pockets of Republican candidates from Florida to Michigan? Inside the group that skirts election rules by "wiping the fingerprints off the money." By Andy Kroll

MICHIGAN'S 2010 elections had just concluded, and Rich Robinson, the state's leading campaign finance reform advocate, was conducting his usual postmortem. As he tallied the big money behind the conservative groundswell that swept Republican Rick Snyder into the governor's mansion and placed the state Legislature solidly under GOP control, one particular political action committee caught his eye.

Created in December 2009 and shut down shortly after the election, RGA Michigan 2010 had come out of nowhere to spend nearly $8.4 million-54 percent more than any other PAC had poured into any election in Michigan history. Ninetysix percent of the group's donors lived outside the state, and its top three funders included Texas homebuilder Bob Perry, Koch Industries' David Koch, and New York City hedge fund CEO Paul Singer. On the other side of the ledger, RGA Michigan 2010 had given $5.2 million to the Michigan Republican Party- no surprise therebut, mysteriously, it had also funneled $3 million into the campaign coffers of Texas Gov. Rick Perry.

Robinson, the executive director of the Michigan Campaign Finance Network, began to connect the dots. He remembered the phone calls from reporters in Maine and Florida asking if Robinson knew why money from the Michigan Chamber of Commerce had ended up with PACS in their states. The state's Chamber, which usually spent more than $1 million on TV ads during Michigan elections, officially didn't spend a dime on ads in 2010, according to Robinson. But it had given an unprecedented $5.37 million to a national organization that, Robinson now realized, was at the root of the anomalous spending he'd uncovered: the Washington, DCbased Republican Governors Association.

During the midterms, while many campaign finance observers were fixated on the proliferation of super-PACS and shadow-spending groups, the RGA spent $132 million- more than the five biggest conservative super-PACS and 501(c) groups combined. It was instrumental in electing a slate of GOP governors- Wisconsin's Scott Walker, Ohio's John Kasich, Georgia's Nathan Deal, and Iowa's Terry Branstad, among others-who hastened to crack down on public-sector unions and roll back environmental regulations. These electoral successes were fueled in part by the creative campaign finance strategy that Robinson began to piece together.

Since 2008, he explains, the RGA has used a network of at least 15 state-level PACS to shuffle campaign cash around the country. Doing so serves a couple of purposes. First, it enables the RGA to scrub the identity of a donor to avoid image issues. For instance, Rick Perry taking $3 million from a Texas oil baron might be controversial, but if that baron gives $3 million to the national RGA, which then diverts the money to RGA Michigan PAC and then to Perry? Harmless.

The RGA 's cash shuffle also allows itand its corporate allies- to skirt campaign finance laws. For instance, in Michigan, corporations can't donate directly to candidates or political parties. But the state's Chamber of Commerce donated millions to the national RGA, which then directed some of the money to its PACS in Florida and Maine, where no such corporatemoney bans exist. Why would a Michigan group want its money flowing to races in other states? Chamber CEO Rich Studley told Maine Public Radio that its members supported funding "pro-business" candidates outside Michigan.

Robinson has a different theory. During the 2010 election cycle, the Michigan Chamber donated more than $5 million to the RGA. In turn, the RGA'S Michigan PAC directed $5.2 million-contributions that largely came from individuals outside the state-to the Michigan Republican Party. Robinson believes that, through this roundabout process, the Chamber's corporate money was swapped out with individual contributions, allowing it to be deployed in Michigan in a more potent form. …