Dark money nonprofits spent hundreds of millions in the 2012 elections, but reported only a fraction of that thanks to an "issue advocacy" loophole that requires only limited disclosure for ads that don't explicitly urge viewers to vote for or against a candidate. Federal and state elections officials have rarely probed whether a group's so-called "issue ads" are really intended to influence elections — but in Wisconsin, a politically-active nonprofit exposed its issue ad charade on its own.

Group Gave Contradictory Messages to Elections Board and Funders

The American Federation for Children, a 501(c)(4) nonprofit organization that supports school privatization through "vouchers" and other programs, told Wisconsin's elections board it spent only $345,000 on state legislative races in 2012. Like many nonprofit groups active in the 2012 elections, the actual total spent around the elections was much higher, but it was never disclosed publicly because AFC claimed the spending was about "issues" rather than supporting or opposing a particular candidate.

AFC sang a different tune for funders.

In a document titled "2012 Election Impact Report" obtained by Dan Bice of the Milwaukee Journal-Sentinel, AFC boasted that it spent $2.4 million in Wisconsin helping elect nine pro-privatization legislators to office. The disparity between what was reported and actually spent is likely attributable to the "issue advocacy" loophole. And most importantly, voters never knew who actually provided the funding for the ads.

“This episode exposes what a hoax this ‘issue ad’ charade really is,” said Mike McCabe, director of the Wisconsin Democracy Campaign, which filed a complaint with Wisconsin's Government Accountability Board about the undisclosed spending.

“They told their funders one thing and state election authorities a totally different story about what all this spending was for,” McCabe said.

Will Elections Board Investigate "Issue Ad" Scam?

Under Wisconsin law, which tracks federal election rules, reporting and disclosure requirements are only triggered when an ad explicitly calls for the defeat or election of a candidate, or when it is "susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate." Many organizations in Wisconsin and nationally have skirted disclosure requirements by running "issue ads" that don't fall under this rubric, and claiming with a wink-and-a-nod that their ads are not intended to influence elections — and the state elections board has not questioned these often dubious assertions.

Nationally, as the Center for Media and Democracy and U.S. PIRG Education Fund documented in the report Elections Confidential, dark money nonprofits that do not disclose their donors reported spending around $300 million on the 2012 elections, but the actual total was certainly much higher because of the "issue ad" loophole; there has been limited scrutiny of this secret spending by federal authorities.

But AFC might come under closer scrutiny from Wisconsin's elections board since it admitted that all of its spending, including its "issue ads," was intended to influence Wisconsin elections.

It appears AFC is planning to put up a fight. The group is represented by election lawyer Jim Bopp, an activist attorney who has worked for years to strike down clean election laws and who was the chief architect behind the controversial 2010 Citizens United case. Bopp also represented Wisconsin Supreme Court Justice Michael Gableman in 2008 when he was facing ethics charges before the state Judicial Commission over deceptive ads run against his opponent, which Bopp framed as an issue of "free speech."

"The American Federation of Children Got Exactly What They Wanted"

AFC has long been promoting school privatization in Wisconsin, and this year stands to make significant gains: Governor Scott Walker has added a variety of non-fiscal items to the budget, including an expansion of the voucher program that sends taxpayer dollars to private schools, and provides taxpayer-funded vouchers for all students with disabilities, and creates a state commission to authorize charter schools over the objections of local school districts. The proposals track American Legislative Exchange Council (ALEC) model legislation.

As part of the $2.4 million spent electing Wisconsin legislators, AFC's "2012 Election Impact Report" shows the group spent more than $325,000 to help elect freshman Republican Rick Gudex to the state Senate, who won by less than 600 votes. But the group told the elections board it spent only $145,000 on the Gudex race.

AFC got what it paid for: Sen. Gudex is one of three state Senators who have pledged to vote against any budget bill that does not expand the state's "voucher" program that uses taxpayer dollars to send kids to private schools.

"The American Federation of Children got exactly what they wanted," McCabe said. "They want legislators who will go to the mat and make expanding the voucher program the bottom line."

The group was organized and is funded by the billionaire DeVos family — heirs to the Amway fortune — and its chief lobbyist is disgraced former Wisconsin Assembly Speaker Scott Jensen, who was convicted of three felonies for misuse of his office for political purposes and banned from the state Capitol for five years (though the charges were later reversed and dropped as part of a plea agreement).*

In the 2012 gubernatorial recall race, American Federation for Children was one of Governor Scott Walker's top PAC supporters, reporting $1.1 million in expenditures on his behalf. They also reported spending $1.3 million helping GOP Senators facing recall in 2011. It is not known whether additional spending was not disclosed.

* Correction May 9: The article originally stated, erroneously, that Scott Jensen's three felony charges and statehouse ban were "reduced" on appeal, but those charges were dropped as part of a plea agreement, after an eight-year long legal battle, where Jensen pleaded no contest to a misdemeanor ethics charge. We regret the error.