Updated: This article has been updated to correctly reflect the nature of donations made by Club for Growth to its affiliated super PAC. The donations referred to are in-kind services, not monetary contributions.

Two super PACs focused on a handful of races and advised by the same lawyer-lobbyist have kept most of their donors’ names secret by drawing nearly all of their funds from tax-exempt groups that don’t have to say where their money comes from.

One of the super PACs, Las Vegas-based It’s Now or Never, has spent more than $155,000 supporting or opposing candidates so far this year, according to the Federal Election Commission. Of that total, $140,000 went to influence Utah’s state-level attorney general race; the other $15,000 was split between supporting Sen. Orrin Hatch (R-Utah) in his primary, which he won, and Nevada State Sen. Barbara Cegavske in her unsuccessful bid to be the GOP nominee for a House seat.

The group has raised $171,900. And $160,900 of it has come from the same place: the It’s Now Or Never 501(c)(4) nonprofit group, a tax-exempt social welfare organization registered to the same address as its sister super PAC. The groups share leadership, a name and a location, but the key difference is that the nonprofit does not have to disclose its donors, meaning that the original source of the super PAC’s funds may never be known.

When the Supreme Court decided Citizens United v. FEC in January 2010 — which, in combination with other legal developments, led to the formation of super PACs — the opinion’s author, Justice Anthony Kennedy, emphasized the importance of disclosure even as the court was opening the doors to new kinds of spending. That point was reiterated in a recent interview by Justice Antonin Scalia, who sided with the majority in the case.

But when a committee that is supposed to disclose its donors, such as It’s Now or Never, is funded by a committee that doesn’t, such as its 501(c)(4) affiliate, disclosure is effectively blocked.

OpenSecrets Blog in July. That committee purchased negative advertisements in the recent Pennsylvania GOP Senate primary, and was also bankrolled by a sister nondisclosing nonprofit called Restore the Dream, which was run out of the same P.O. Box as the super PAC. The setup is the same one used by Fight for the Dream — a super PAC whose similar shadow money network was uncovered byin July. That committee purchased negative advertisements in the recent Pennsylvania GOP Senate primary, and was also bankrolled by a sister nondisclosing nonprofit called Restore the Dream, which was run out of the same P.O. Box as the super PAC.

Both the Fight for the Dream and It’s Now or Never shadow money networks share ties with an attorney who is also a lobbyist for Oklahoma-based Devon Energy, Anthony Ferate.

Investigations by OpenSecrets Blog have revealed that Ferate was responsible for arranging Fight for the Dream’s anonymous hidden financial structure, and that he serves as legal counsel for Fight For The Dream and the It’s Now or Never super PAC. Ferate is also on the board of It’s Now Or Never super PAC. Ferate told OpenSecrets Blog that he was approached separately by the organizers of It’s Now Or Never and Fight For The Dream to set up their super PACs, and that his work consulting political committees has nothing to do with his position as an energy lobbyist. “I wear a number of hats in a number of situations, each one is entirely separate from the other,” he said. Under IRS rules nonprofits are permitted to engage in political activity — including donating to super PACs — as long as their primary purpose is the promotion of the social welfare. But an outbreak of explicitly political 501(c)(4)s, including liberal group Patriot Majority and Karl Rove’s Crossroads GPS, has led the IRS to say it is reviewing its regulation of them; so far, however, no specific action has been announced. When asked why the super PAC’s donations were funneled through a nonprofit, It’s Now or Never’s executive director Jason Smith said that the group’s actions were legal. “That’s well within our rights to set it up that way,” he said. It’s true that other super PACs have drawn contributions from related nonprofits. Pro-Obama super PAC Priorities USA Action took $215,000 from the group’s nonprofit arm to cover operating expenses in 2011. Conservative nonprofit Club for Growth has reported $66,000 in contributions to its super PAC, but in the form of in-kind services–meaning that no money changed hands. The League of Conservation Voters has also provided in-kind donations to its super PAC, LCV Victory Fund. But it is rare for a super PAC to receive all or almost all of its funding from a linked nondisclosing group. The Cooperative of American Physicians, a California based trade group dedicated to protecting doctors from malpractice suits, has given contributions valued at over $2.5 million to its super PAC — all of the super PAC’s funding. However, it is a membership group, and it intervened in only one election, supporting then-candidate Janice Hahn‘s (D-Calif.) successful 2011 House run. According to Paul Ryan, senior counsel to the nonpartisan Campaign Legal Center, the actions of It’s Now or Never and Fight For the Dream could in fact be illegal.



“If the (c)(4) is only serving the purpose of being a conduit for funds to the super PAC, then the (c)(4) is breaking federal tax law,” he said in an interview with OpenSecrets Blog. According to Ryan, the use of such groups as “straw donors” to keep contributors anonymous runs afoul of federal law and requirements that nonprofits not have electoral politics as their primary purpose. Aside from the legality of the groups, Ryan argued that such behavior points to bigger issues in American campaign finance. “The fact that it is possible for the identity of donors to be obscured from voters…is a big problem,” he said. “The Supreme Court in Citizens United unleashed a flood of special interest money in politics, but promised voters that there would be disclosure…In 2012, we have the flood of money, but we don’t have the disclosure.” Smith, a state-level lobbyist for the Texas Public Employees Association and the national deputy political director for Texas Gov. Rick Perry when he ran for the 2012 Republican presidential nomination, declined to comment on whether the It’s Now Or Never 501(c)(4) group had spent money on anything other than contributions to the super PAC. He also did not comment on what social welfare activities the group engaged in. Aside from their financial structures, both of the super PACs organized by Ferate are currently violating FEC reporting standards.

Both groups failed to file their July quarterly reports electronically as required of super PACs, instead sending them in by mail. Although Ferate attached a letter to It’s Now Or Never’s filing blaming “electronic password difficulties” for the paper report, the FEC sent both groups letters on July 25 threatening enforcement actions unless the committees reached compliance with the Commission’s standards. As of publication, neither group had refiled its reports. (Any reader wishing to look up the committees on the Center For Responsive Politics‘ database will leave disappointed; because there is no electronic record of the groups’ finances last quarter, our site cannot fully track their activities.) It’s Now Or Never is also being sued for defamation by one of the subjects of its negative ads. The group ran spots attacking Utah Attorney General candidate Sean Reyes for an alleged campaign finance violation, though Reyes had been cleared of wrongdoing, and for an alleged road rage incident from 1993. Reyes, who lost the election, is also suing his opponent John Swallow, who, according to the lawsuit, had close ties to It’s Now or Never. Photo: Flickr user Shyb



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