WaPo investigates the ‘Kochtopus’ dark money network; Arizona’s political media ignores the political corruption in its own backyard


Posted by AzBlueMeanie:

Both The Arizona Republic and the Arizona Daily Star rely heavily on the Washington Post for reporting and syndicated columnists. But the editors are highly selective in the reports they choose to publish. For example, neither Arizona newspaper thought it newsworthy to publish the big investigative report by Matea Gold in the Washington Post on Monday about the evil bastard Koch brothers. Hmmm, is Arizona's GOP-friendly media still protecting Sean Noble and the "Kochtopus" dark money laundering organization Center to Protect Patient Rights? Koch-backed political coalition, designed to shield donors, raised $400 million in 2012:

The political network spearheaded by conservative billionaires Charles and David Koch has expanded into a far-reaching operation of unrivaled complexity, built around a maze of groups that cloaks its donors, according to an analysis of new tax returns and other documents.

The filings show that the network of politically active nonprofit groups backed by the Kochs and fellow donors in the 2012 elections financially outpaced other independent groups on the right and, on its own, matched the long-established national coalition of labor unions that serves as one of the biggest sources of support for Democrats.

The resources and the breadth of the organization make it singular in American politics: an operation conducted outside the campaign finance system, employing an array of groups aimed at stopping what its financiers view as government overreach. Members of the coalition target different constituencies but together have mounted attacks on the new health-care law, federal spending and environmental regulations.

Key players in the Koch-backed network have already begun engaging in the 2014 midterm elections, hiring new staff members to expand operations and strafing House and Senate Democrats with hard-hitting ads over their support for the Affordable Care Act.

Its funders remain largely unknown; the coalition was carefully constructed with extensive legal barriers to shield its donors.

But they have substantial firepower. Together, the 17 conservative groups that made up the network raised at least $407 million during the 2012 campaign, according to the analysis of tax returns by The Washington Post and the Center for Responsive Politics, a nonpartisan group that tracks money in politics.

A labyrinth of tax-exempt groups and limited-liability companies helps mask the sources of the money, much of which went to voter mobilization and television ads attacking President Obama and congressional Democrats, according to tax filings and campaign finance reports.

The coalition’s revenue surpassed that of the Crossroads organizations, a super PAC and non­profit group co-founded by GOP strategist Karl Rove that together brought in $325 million in the last cycle.

* * *

The system involved roughly a dozen limited-liability companies with cryptic, alphabet-soup names such as SLAH LLC and ORRA LLC, and entities that dissolved and reappeared under different monikers.

Lloyd Hitoshi Mayer, a University of Notre Dame Law School professor who studies the tax issues of politically active nonprofits, said he has never seen a network with a similar design in the tax-exempt world.

“It is a very sophisticated and complicated structure,” said Mayer, who examined some of the groups’ tax filings. “It’s designed to make it opaque as to where the money is coming from and where the money is going. No layperson thought this up. It would only be worth it if you were spending the kind of dollars the Koch brothers are, because this was not cheap.”

Tracing the flow of the money is particularly challenging because many of the advocacy groups swapped funds back and forth. The tactic not only provides multiple layers of protection for the original donors but also allows the groups to claim they are spending the money on “social welfare” activities to qualify for 501(c)(4) tax-exempt status.

Such maneuvers could be sharply restricted under new regulations proposed by the Internal Revenue Service in November. The new rules seek to rein in nonprofit groups that have increasingly engaged in elections while avoiding the donor disclosure required of political committees.

The donors

It is unclear how much of the network’s funds came directly from the Kochs, who head Koch Industries, one of the largest privately held companies in the country. The brothers, who fund a host of libertarian think tanks and advocacy groups, are heralded on the right and pilloried on the left for their largess.

While “the Koch network” has become a shorthand in political circles, the coalition is financed by a large pool of other conservative donors as well, according to people who participate in the organization.

Through a corporate spokesman, the Kochs declined to comment on what support they give.

* * *

Since 2003, the Kochs have hosted twice-yearly seminars with like-minded donors at which they collect pledges for groups that share their commitment to deregulation and free markets.

* * *

Many donors get involved because they “value the privacy afforded to them by giving to these entities,” said Phil Kerpen, president of American Commitment, a nonprofit free-market advocacy group that is part of the network.

* * *

The money

Much of the money that flowed through the network in the last election cycle originated with two nonprofit groups that served as de facto banks, feeding money to groups downstream, according to an analysis by Center for Responsive Politics researcher Robert Ma­guire, who investigates politically active nonprofits.

The biggest was the Freedom Partners Chamber of Commerce, an Arlington County-based group set up in November 2011 that now functions as the major funding arm of the network, according to people familiar with the operation. The organization, whose board includes current and former Koch Industries officials, brought in nearly $256 million in its first year, “significantly more revenue than was expected,” according to its tax filing.

Nearly $150 million was in the form of dues paid by more than 200 members of the organization, which is structured as a business league. An additional $105.8 million came from something called “SA Fund.”

* * *

According to people familiar with the network, Freedom Partners took the place of a now-
defunct group based in Alexandria called TC4 Trust, which raised more than $66 million in three years before it was shuttered in June 2012, according to tax filings.

The same tax preparer — a Kansas City, Mo.-based partner in the accounting firm BKD — did the returns for Freedom Partners and TC4 Trust, as well as for nearly half the other groups in the network and for the nonprofit Charles Koch Institute.

In all, the feeder funds and the groups they financed raised an estimated $407 million in the last election cycle. That figure is a conservative one, since it does not account for the complete revenue of eight groups that have not yet filed their tax returns for the latter half of 2012.

Of the $407 million, $302 million can be traced to Freedom Partners or TC4 Trust.

The sources of the rest of the money remain a mystery, but many donors in the network write checks to the individual groups, according to people familiar with the system. Some of the organizations also have additional funding streams outside the network.

The structure

Freedom Partners and TC4 Trust moved a large share of their funds through an intermediary group, the Phoenix-based Center to Protect Patient Rights, which served as a major cash turnstile for groups on the right during the past two election cycles. It is run by political operative Sean Noble, who served as a Koch consultant in 2012.

Rather than finance CPPR directly, Freedom Partners and TC4 Trust transferred $129 million to limited-liability companies with changing names that are registered in Delaware, a state that requires corporations to disclose little about their operations: Eleventh Edition (which was renamed Corner Table and then Cactus Wren) and American Commitment (which was SDN, then became Meridian Edition).

Their relationship to CPPR was unknown until May, when the Arizona group acknowledged in amended tax filings that the LLCs were its affiliates.

Such LLCs are known as “disregarded entities,” which means that, for IRS purposes, they do not exist. Their revenue is reported on the balance sheets of their parent organizations.

Tax experts said disregarded entities are typically used by nonprofits to, for example, hold a piece of real estate to shield an organization from liability.

But they also can be used to make it harder to trace the movement of funds between groups. In its final tax return, TC4 reported doling out nearly $28 million to 10 organizations with names such as POFN LLC, PRDIST LLC and TRGN LLC. Those are the affiliates of the groups Public Notice, Americans for Prosperity and Generation Opportunity, in that order.

The Post and the Center for Responsive Politics identified the groups that make up the Koch-backed network through an analysis of tax filings, which revealed their shared DNA. Most have affiliated LLCs and received a substantial share of their revenue from the feeder funds.

The makeup of the coalition was corroborated by people familiar with the structure who said the network is ad hoc and will not necessarily remain constant.

A key player is Americans for Prosperity, the Virginia-based advocacy organization that finances activities across the country and ran an early and relentless television ad assault against Obama during the 2012 campaign. More than $44 million of the $140 million the organization raised in that election cycle came from Koch-linked feeder funds.

Other groups in the network included the American Future Fund, a Des Moines-based nonprofit that poured more than $25 million into ads against Obama and congressional Democrats in 2012; Concerned Women for America, a conservative Christian women’s activist group that ran a get-out-the-vote effort aimed at young women; the Libre Initiative Trust, a Texas-based group aimed at Latinos; Generation Opportunity, which seeks to engage millennials; and Themis Trust, which houses the data used by the allied groups.

The network also distributed funds to other independent political players. In the last election, Freedom Partners and CPPR doled out millions of dollars to a wide assortment of groups on the right, including the U.S. Chamber of Commerce ($3 million), the NRA ($6.6 million), the National Federation of Independent Business ($2.5 million) and Heritage Action for America ($500,000).

* * *

[O]fficials are focused on creating a more effective operation aimed at bolstering the conservative movement for the long term. Freedom Partners, which now has nearly 50 employees, is expected to bring many functions in-house and expand beyond grantmaking, according to people familiar with the plans. Groups such as CPPR are expected to play a smaller role going forward.

Others are already engaged in the 2014 fight. Americans for Prosperity is in the midst of a $20-million-plus ad blitz attacking congressional Democrats for their support of the health-care law, while the Libre Initiative has targeted Latinos with similar messages.

Accompanying graphic to the story Inside the network:

Inside the $400-million political network backed by the Kochs

In an analysis of 2011 and 2012 tax filings, The Washington Post and the Center for Responsive Politics found that a coalition of nonprofit groups backed by a donor network organized by the billionaire industrialists Charles and David Koch raised more than $400 million in the last election cycle. Much of the money was distributed to a maze of limited-liability companies affiliated with the nonprofits, which used some of their resources to turn out conservative voters and run ads against President Obama and congressional Democrats.


Source: Robert Maguire with the Center for Responsive Politics.Matea Gold and Cristina Rivero/The Washington Post. Published on January 5, 2014, 6:34 p.m.

Additional reporting The players in the Koch-backed $400 million political donor network:

The Washington Post and the Center for Responsive Politics identified a coalition of allied conservative groups active in the 2012 elections that together raised at least $407 million, backed by a donor network organized by the industrialists Charles and David Koch. Most of the funds originated with two groups, the Freedom Partners Chamber of Commerce and TC4 Trust, both of which routed some of the money through a Phoenix-based nonprofit group called the Center to Protect Patient Rights (CPPR).

The makeup of the coalition may change going forward, but in 2012 the network consisted of:

Americans for Prosperity , the Virginia-based nonprofit that finances grass-roots activities across the country and ran an early and relentless television ad assault against President Obama during the 2012 campaign. More than $44 million of the $140 million the organization raised in the last cycle came from the Koch-linked feeder funds.

The 60 Plus Association , which casts itself as a conservative alternative to AARP. The group reported spending $4.6 million on ads against Obama and House Democrats in 2012.

American Commitment , a new group that reported spending nearly $1.9 million on spots attacking Obama and congressional Democrats in 2012 and that runs online petitions against the federal health-care law and in support of the Keystone XL pipeline.

The American Energy Alliance , the 501(c)(4) arm of the Institute for Energy Research. The advocacy group, whose president is a former Koch Industries lobbyist, ran a 17-state bus tour in 2012 highlighting the benefits of domestic energy production. The organization got $2 million from Freedom Partners and CPPR in 2012 but has seen increased levels of support from other donors in recent years, according to a person familiar with its operations.

The American Future Fund , a Des Moines-based nonprofit that poured more than $25 million into ads against Obama and congressional Democrats in 2012. Nearly $63 million of its $68 million war chest in 2012 came from network feeder funds.

The Center for Shared Services , an organization in Alexandria that serves as a human resources hub for the network.

Concerned Veterans for America , which in 2012 held events spotlighting the unemployment rate among veterans and the difficulties members of the military face in casting ballots. The group was funded almost entirely by TC4 in 2012.

Concerned Women for America , a conservative Christian women’s activist group that received more than $8 million from Freedom Partners. The organization ran a social-media campaign and get-out-the-vote effort aimed at young women in 2012.

Evangchr4 Trust, a pastor outreach effort that gave nearly $1.2 million to CitizenLink, an advocacy arm of the conservative Christian group Focus on the Family. CitizenLink spent more than $2.5 million on ads on behalf of GOP presidential nominee Mitt Romney and other Republicans in 2012.

Generation Opportunity , a nonprofit aimed at millennials that ran a national get-out-the-vote effort in 2012 emphasizing the unemployment rate among youths.

The Libre Initiative Trust , a Mission, Tex.-based group aimed at promoting “the principles and values of economic freedom” to Latinos. It started in 2011.

Public Engagement Group Trust, a low-profile nonprofit based in Arlington County that says its mission is to raise public awareness of issues such as government spending and free markets. It received nearly $3.5 million from Freedom Partners and TC4.

Public Notice , a policy nonprofit that highlights the impacts of government spending. Its executive director, Gretchen Hamel, was listed as a program leader for TC4 on the group’s first tax filing.

Themis Trust, which houses the data used by the groups in the network.

You should contact your local media, newspaper and television reporters, and demand to know why they are not reporting on the political corruption going on this state. All of the good reporting on the "Kochtopus" has been done by reporters who are not in the Arizona media.

UPDATE: Via OpenSecrets:

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AZ BlueMeanie
The Blue Meanie is an Arizona citizen who wishes, for professional reasons, to remain anonymous when blogging about politics. Armed with a deep knowledge of the law, politics and public policy, as well as pen filled with all the colors stolen from Pepperland, the Blue Meanie’s mission is to pursue and prosecute the hypocrites, liars, and fools of politics and the media – which, in practical terms, is nearly all of them. Don’t even try to unmask him or he’ll seal you in a music-proof bubble and rendition you to Pepperland for a good face-stomping. Read blog posts by the infamous and prolific AZ Blue Meanie here.