While Governor Doug Ducey, the ice cream man hired by Koch Industries to run their Southwest subsidiary formerly known as the state of Arizona, is attending the Koch brothers annual bacchanal for Plutocrats in Palm Springs, the “Kochtopus” dark money organization that bought him the governorship has now filed its tax report.
Tax filings by the “Kochtopus” organization American Encore confirm what was widely suspected during the 2014 gubernatorial race: that Doug Ducey’s longtime ally and “Kochtopus” bag man Sean Noble was at the center of the multimillion-dollar dark money campaign that helped elect him governor. The Arizona Capitol Times (subscription required) reports, Nearly all pro-Ducey dark money in 2014 tied to ally Noble:
According to the Form 990 that American Encore filed with the IRS for the year of 2014, nearly every dollar of the $3.5 million of dark money that was spent on Ducey’s behalf in the race can be traced back to Noble, who serves as the group’s president. Groups that received money from Noble’s organization also spent heavily in campaigns for secretary of state, Corporation Commission and myriad legislative races.
American Encore provided grants to four other nonprofits that targeted former GoDaddy executive Christine Jones and former Mesa Mayor Scott Smith, Ducey’s chief competition in the Republican primary. In addition, American Encore itself spent nearly $1.5 million supporting Ducey in his general election matchup against Democrat Fred DuVal.
The greatest beneficiary of American Encore’s largesse was the Virginia-based 60 Plus Association, which received a grant of more than $1.8 million. The 60 Plus Association spent nearly $1.4 million in the governor’s race, running about 466,000 in ads against Smith and $339,000 against Jones in the primary, along with about $578,000 against DuVal in the general election. In addition, the group spent more than $300,000 on an ad campaign against Democratic secretary of state nominee Terry Goddard in the general election, which he lost to Republican Michele Reagan.
Legacy Foundation Action Fund, an Iowa-based nonprofit that received $880,000 from American Encore in 2014, spent $275,000 on ads against Smith, while the Arizona Free Enterprise Club received $450,000 from Noble’s group and spent $150,000 against the former Mesa mayor. Veterans for a Strong America, a South Dakota group, spent about $178,000 against Jones while receiving a $275,000 from American Encore.
Each of the four groups received more from American Encore than they spent in Arizona elections, and Noble appears to have been the source for all of the combined $2 million they spent helping Ducey get to the Ninth Floor, most of which was spent helping him secure the Republican nomination for governor. Furthermore, American Encore gave $20,000 to a Washington, D.C., group called Concerned Women for America. That group shares an address with the Concerned Women Legislative Action Committee, which spent about $18,000 in dark money for Ducey in 2014.
All told, the $3.5 million that can be tied to American Encore, either through its grant recipients or its own spending, is close to the total amount of dark money spent on Ducey’s behalf in 2014, based on a post-election analysis of 2014 dark money spending by the Arizona Capitol Times. Noble didn’t dispute that American Encore was the source that money.
The only anonymously funded group that spent for Ducey in 2014 but is not tied to Noble through American Encore’s tax filing is the Washington, D.C.-based Environmental Defense Action Fund, which spent $130,000 in ads during the general election.
American Encore and the 2014 grant recipients are 501(c)(4) nonprofit organizations. Under federal tax laws, such social welfare organizations cannot have the primary purpose of electioneering and must devote the majority of their resources to non-election issues.
The section of American Encore’s IRS filing that detailed its grants to other organizations included a note saying the group “carefully evaluates the missions and activities of recipient organizations” before providing grants “to ensure that funds are used only for tax exempt education and social welfare purposes of recognized 501(c)(4) organizations.” The note also stated that American Encore’s grants are accompanied by transmittal letters indicating how the money may be used.
However, the filing noted that American Encore “does not currently have procedures for monitoring the use of grant funds in the United States once grants are made.”
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At least one of the four groups clearly used American Encore for its pro-Ducey spending. Legacy Foundation Action Fund reported $980,000 of income for 2014, just $100,000 more than the amount of the grant it received from American Encore that year, while spending about $275,000 in the governor’s race. The other groups’ Form 990s from 2014 were not available online.
Legacy Foundation Action Fund claimed its spending against Smith was “issue advocacy” unrelated to the election. But the Citizens Clean Elections Commission determined that the ads in fact qualified as campaign spending and fined the group $96,000 for failing to register as a political committee and disclose its spending. The group is now appealing that fine.
Veterans for a Strong America also claimed its anti-Jones ads were issue advocacy. The Secretary of State’s Office concluded that the group engaged in express campaign advocacy and therefore also failed to comply with campaign finance laws. Reagan referred the case to the Attorney General’s Office in July.
In addition to the dark money spending, Ducey received plenty of help in 2014 from groups that weren’t anonymously funded. Most notably, a political action committee created by the Republican Governors Association spent about $5 million against DuVal in the general election.
In addition, Ducey ran a well-funded campaign of his own. He raised a total of nearly $8 million for his campaign, including about $3.5 of his own money that he contributed to his campaign.
A new tax filing from Sean Noble’s “American Encore” washing machine shows that he did, indeed, run the dark money portion of Doug Ducey’s Arizona gubernatorial campaign, funneling money to various groups which – combined with AE’s own ads – resulted in more than $3.3M in anonymized spending. The groups that received grants from AE also spent heavily on the Corporation Commission race, supporting Justin Pierce for Secretary of State and on the solar/net metering issue.
Through all of these transactions, Noble’s personal companies netted more than $1.8M, and American Encore retained nearly $3.5M going into the quiet 2015 year (ready to spend this year).
The sources of the $5.4M contributed to American Encore in 2013-14 are entirely secret, leading to the use of the term “dark money.” Arizona’s Politics has previously offered its definition of dark money and scored organizations on its #50ShadesOfDarkMoney spectrum. AE is a solid dark 50 on the scale.
American Encore is a 501(c)(4) social welfare organization. Its required IRS filing for 2014 was made this past November and just became publicly available this month. (That is part of the problem with the patchwork of disclosure laws – untimely disclosures which organizations can take advantage of.)
AE started 2014 off with $8.5M in the bank, and brought in $3.2M during the year. Of the $7.9M spent during the year, most – $5.1M was either directly spent in Arizona or went to groups that have been focused on Arizona races. Here is the breakdown.
Arizona Governor’s Race
Sean Noble has worked with now-Governor Doug Ducey for the past several years. While he was the main money man for the nationally-prominent Koch brothers’ political operation, he also was the dark money conduit for then-Treasurer Ducey’s organization opposing the renewal of a 1% sales tax to help fund education. The Noble operation anonymized $925,000 for that Ducey campaign.
During the 2014 gubernatorial campaign, it was widely assumed that Noble was not joining the Ducey campaign so that he could operate the anonymized independent expenditures. Arizona’s Politics and others detailed the links between Noble and some of the committees which popped up. This tax filing confirms those connections.
First up was a mysterious group out of Iowa which began an odd $173,000 attack on then-Mesa Mayor Scott Smith; he was widely seen as a top candidate for the GOP nomination. Legacy Foundation Action Fund. At the time, Arizona’s Politics sketched out the data points that might connect LFAF to Noble.
The 990 shows that American Encore did, in fact, give LFAF $880,000 in 2014 (and $25,000 in 2013). In addition to the $173,000 for the TV ad, LFAF is apparently using some of the rest of the money for legal expenses being incurred in their ongoing battle with the Arizona Clean Elections Commission, which is now pending in the Court of Appeals.*
The following month, another new (to Arizona) organization popped up with another unusual attack. Veterans For a Strong America (“VSA”) started up an ad campaign hammering Christine Jones – another top candidate for the GOP gubernatorial nomination. Jones was lambasted for saying positive things about Hillary Clinton and later for misleading voters about her military service. Arizona’s Politics asked VSA to explain who was funding its involvement (they declined), and pointed out the past connections to Noble.
We now know that, in fact, American Encore gave a total of $275,000 to VSA in 2014. As VSA filed no 2014 reports with the Arizona Secretary of State, the FEC (it had filed its 2012 anti-Obama spending), or the IRS (its status has been revoked), we cannot tell what happened to the rest of AE’s money.
American Encore gave $450,000 to the well-known Arizona Free Enterprise Club (“AZ FEC”) during 2014. The AZ FEC also ran a $150,000 TV ad hammering Smith two weeks before the primary. However, because AZ FEC poured a total of $1.7M into statewide and legislative races in 2014, and because it, too, does not disclosed sources of money, it is not (yet) provable as to whether the AE grant was for the Governor’s race or for the Corporation Commission race (see below).
AE’s longtime close collaborator – the 60 Plus Association – also received the most money from AE. In 2014, the grant(s) was/were $1,845,000; the year before, $529,000 was transferred. 60 Plus spent more than $1.6M on Arizona elections that year, and was also involved in the 2013 Corporation Commission battle between APS and solar companies (solar/net metering). $1,332,000 was spent on the Governor’s race – mostly ($752,000) before the GOP primary in August.
After the primary battle was over and Ducey came out on top, Noble’s American Encore felt it could take a lead in the general election campaign. AE spent $1,437,670. Most of it was “pro-Ducey,” as 60 Plus took the negative route, spending $578,000 hammering Democratic nominee Fred DuVal.
The blog post has more about the Corporation Commission race s well.
Arizona is a wholly owned subsidiary of the “Kochtopus” thanks to the longstanding GOP culture of corruption in Arizona. The only sure way to end this culture of corruption is to vote Republicans out of office.