NPR News Investigations
3:08 am
Tue November 5, 2013

From Social Welfare Groups, A River Of Political Influence

Originally published on Thu November 7, 2013 9:38 am

Part one of the two-part "Secret Persuasion" investigation, reported with the Center for Responsive Politics.

Bruce Pregler walks down the slope from his cabin, eases into the Au Sable River and casts his line; fishing takes his thoughts away from his downstate law practice.

He stands in the flowing water, holding his fishing rod, and gazes at the river around him. "You can't look at it from the bridge or a lodge," he says of the Au Sable, one of Michigan's prime spots for trout fishing. "You need to float it, walk it, wade it, fish it, enjoy it. And my wife and I thought so highly of it, we had our daughter baptized right here at this spot."

But the Au Sable represents more than just Michigan fly-fishing at its best. As Pregler knows, it's also a setting that reveals powerful and secretive new influence in American political campaigns.

Three years ago the river was caught in an environmental battle, and a local conservation group called the Anglers of the Au Sable sued Michigan's environmental agency. Pregler, president of the Anglers, watched as the case became subsumed in a state supreme court election financed in large part by nationally funded advocacy groups. Money came from unions, corporations and tax-exempt social welfare organizations.

Social welfare groups — known as 501(c)(4)s, after their designation in tax law — are becoming a vehicle of choice for big donors to hide large donations in politics. Unlike donors to political committees, those who give to social welfare groups can give unlimited amounts while remaining private and bypassing public disclosure laws.

NPR and the Center for Responsive Politics investigated the world of these secretive social welfare groups, using tax records to track money not otherwise reported and found that millions of dollars is traded between groups. CRP data show that their federal political spending increased more than 80-fold between the 2004 and 2012 election cycles. It's an abrupt swing in campaign financing.

We also found that significant sums of money are moved around within networks of social welfare groups, as some organizations finance others. Overall, transfers among the groups have exceeded $386 million since 2008.

Conservative groups are better financed and more numerous than liberal groups — at least so far. For example, CRP data show that in the 2012 presidential, Senate and House campaigns, conservative groups constitute five of the six 501(c)(4)s that spent more than $10 million in explicitly political advertising.

But none of this affected the Au Sable until the 2010 elections.

The Appointment Of Alton Davis

Back in 2005, an energy company wanted to pump treated — but still polluted — water into the Au Sable watershed. When the state approved the plan, Pregler says the Anglers "looked at this and said, 'Why are you transferring contaminated water from one watershed to a clean, pure water?' " And they sued.

The case wound up at the Michigan State Supreme Court, where, as Pregler says, it took some real twists. The first twist: One justice abruptly resigned, and Democratic Gov. Jennifer Granholm appointed a new one. Incoming Justice Alton Davis tipped the court's balance from conservative to liberal, and he sympathized with the Anglers' arguments.

But even as Davis was taking his seat, he had to run in an election to stay there. The race became a magnet for out-of-state ideological money.

That November, Davis lost. In 2011, with Davis off the bench, the court reconsidered his decision and reversed it, ruling against the Anglers.

Davis had run for judgeships before, usually unopposed, and hardly ever having to raise serious money. This time was different. "I was well behind the curve," he said in an interview on his pontoon boat at Lake Margarethe, near the Au Sable. Outside money was pouring in, mostly against him.

Right off, an attack ad started running on radio stations in Detroit and Grand Rapids, Michigan's two dominant media markets. It said the resignation of Davis' predecessor and his appointment were a "sleazy deal" that was "designed to pack Alton Davis on to the Supreme Court."

The ad came from a social welfare group called the American Justice Partnership.

Davis didn't pay much attention. He had a campaign to run — "such as it was," he says ruefully — and he was on the road, driving himself from one campaign event to the next. "I just plugged the iPod in," he recalls. "I didn't want to hear all that stuff."

And now, three years later, he says of the 2010 supreme court election, "When I look back at the whole deal, I think it was a disgusting exercise."

After the election, the new court's conservative majority took charge.

A New Way Of Doing Politics

Was this something the American Justice Partnership had in mind when it ran the attack ads against Davis?

It wasn't on the group's radar, says Dan Pero, president of AJP. "My brother didn't like that decision either, actually, because he fishes the Au Sable," Pero says, referring to the reversal of Davis' decision. But Pero then adds: "The law's the law. So change the law. And don't ask the court to do it for you."

AJP's slogan is "Tipping the scales for legal reform." In practice over the years, that has meant targeting liberal judges for defeat.

Pero says AJP's donors are mainly corporations and businesspeople.

"Business, frankly, got tired of getting slapped around on these activist courts and decided to support candidates that they thought were more rule of law and they started contributing to those endeavors." he says.

And not just in Michigan, where Pero lives and works. "People who support us don't give for a specific state. You really can't target your contributions that way anyway. You believe in our goals and where we want to play." In 2010, Pero's list of states to play in included Ohio, Georgia, Oklahoma, Wisconsin, Alabama and Michigan.

"We were involved in all of those areas," he says.

But what is the "we" in the American Justice Partnership? As a social welfare group, it doesn't have to say who gives it money.

When other social welfare groups donate money to one another, however, the donor groups must disclose that information to the IRS. So CRP and NPR used those IRS records to map out the finances of AJP and more than 100 other social welfare organizations.

We traced nearly $2.5 million going to AJP in 2010 alone, coming from largely invisible groups seeking to influence political issues around the nation. Among them: the Wellspring Committee, based in the Washington, D.C., suburbs.

Asked about Wellspring, AJP's Pero says he doesn't remember them. "I mean, it's been three years," he says. "If they support us, thank God. God bless them if they supported us, because it means they support our agenda."

Pero is describing a new way of doing politics.

Donors give to groups like Wellspring because they believe in an ideology. Wellspring gives to groups like the American Justice Partnership because its ads can sway voters. Candidates like Alton Davis win or lose at the hands of funders who might not even know who they are.

It's all invisible to voters. And it happens far away from places like the Au Sable River.

This story was reported by NPR's Peter Overby, together with Viveca Novak and Robert Maguire from the Center for Responsive Politics. Read part two here.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

STEVE INSKEEP, HOST:

On this election morning, let's hear about some of the forces that shape and influence elections before most voters ever even think about them. NPR's Power, Money and Influence correspondent Peter Overby is with us next. He spent the last few months tracking an explosive growth in anonymous political spending. He's been investigating secretive national groups that give money to other nonprofit groups, which in turn spend their money on state and local elections, influencing the sort of races that many of us barely follow. This national money can affect real-life issues in your local community, like the place where Peter was taken fly-fishing in Michigan. And he's here to tell us about it. Hi, Peter Overby.

PETER OVERBY, BYLINE: Hi, Steve.

INSKEEP: So how did we start with campaign finance and end up fly-fishing?

OVERBY: Well, first of all, we're not talking about the cash that goes to candidates and party committees. This is about tax-exempt social welfare organizations.

INSKEEP: You have told us about these in the past - 501(c)(4) is the legal designation. They can spend money on ads, though, right?

OVERBY: That's right. Social welfare groups have been around for a century - your local Rotary Club or volunteer fire department. They're designed to work for the good of the public. Now some groups have formed just to get involved in politics. Their donors have no contribution limits. It's a way to keep the contributions private as the money goes into the political system.

INSKEEP: Private but legal.

OVERBY: Yes. It is all legal. In eight years spending by social welfare groups in federal elections has roughly gone up 80-fold. It's the most dramatic change I've seen in 19 years of covering campaign finance.

INSKEEP: You're saying that for every $1 that was spent in the past, $80 is spent this way now.

OVERBY: That's right. Right now most of it is on the right. If you looked at disclosed spending in 2012, the groups that spend a million dollars or more - there were 20 of them on the right, there were seven on the left. But now the left seems to be catching on.

INSKEEP: So this is money that people feel they can keep private but you've been making an effort to learn what you can about who is spending and where the money is going.

OVERBY: That's right. I've been working with the Center for Responsive Politics. It's a nonprofit research organization that tracks political money. They built a new database that has identified $386 million in money transferred among tax-exempt groups, mostly the social welfare organizations.

INSKEEP: And you managed to trace this money to fly-fishing somehow?

OVERBY: Yes. To the Au Sable River in Michigan. It's one of the state's favorite trout fishing spots.

BRUCE PREGLER: Sit down. Just shove your foot in there.

OVERBY: First come the waiters. All of this is new to me. A lesson in casting the line.

PREGLER: Like you're answering a phone. You pick it up. Hello? It's for you. Boom, boom, just like that.

OVERBY: The Au Sable River is in central Michigan.

(SOUNDBITE OF BIRDS CHIRPING)

OVERBY: I'm with Bruce Pregler.

PREGLER: You got to get out in the water.

OVERBY: On weekdays, he's a lawyer in the Detroit suburbs.

PREGLER: You can't look at it from a bridge or a lodge. You need to float it, walk it, wait it, fish it, enjoy it. My wife and I thought so highly of it that we had our daughter baptized right here at this spot.

OVERBY: Nearby, a spot where deer like to linger.

PREGLER: My daughter has named that island Fawn Island.

OVERBY: But there's more than fly-fishing going on, on the Au Sable. Pregler is president of a local conservation group, the Anglers of the Au Sable. Back in 2005, an energy company wanted to pump treated by still polluted water into the river's watershed. The state agency said OK. The anglers sued the agency.

PREGLER: And as anglers, we looked at this and said, well, why are you transferring contaminated water from one watershed to a clean, pure water?

OVERBY: The case wound up at the Michigan State Supreme Court.

PREGLER: That's where this case takes some real twists.

OVERBY: The first twist: one justice abruptly resigned and a new one was appointed. Incoming Justice Alton Davis tipped the court's balance from conservative to liberal and he sympathized with the anglers' arguments. But even as Davis was taking his seat, he had to run in an election to stay there. The race was a magnet for out of state money. David ultimately lost. With him gone, the court reconsidered his decision and reversed it, ruling against the fly-fishers. I went to visit Davis at his home on a lake near the Au Sable.

ALTON DAVIS: Lake Margarethe is a very social lake.

OVERBY: We went down to his pontoon boat.

DAVIS: Have a seat. Get comfortable.

OVERBY: Davis had run for judgeships before - usually unopposed and hardly ever having to raise serious money. This time was different.

DAVIS: I was well behind the curve.

OVERBY: Outside money was pouring in, mostly against him. Right off, Davis was hit with an attack ad on the radio.

(SOUNDBITE OF AD)

UNIDENTIFIED MAN #1: The sleazy deal was designed to pack Alton Davis onto the court...

OVERBY: An ad from a social welfare group called the American Justice Partnership. Davis didn't pay much attention. He had a campaign to run. And he was on the road, driving himself from one campaign event to the next.

DAVIS: So I just plugged the iPod in. I didn't want to hear all that stuff.

OVERBY: What did you think of it when you kind of looked around and saw what you had gotten into?

DAVIS: When I look back at the whole deal, I thought it was a disgusting exercise.

OVERBY: After the election came Davis's ruling in favor of the Anglers of the Au Sable, and then the reversal as the new court's conservative majority took charge.

DAN PERO: My brother didn't like that decision either, actually, 'cause he fishes the Au Sable.

OVERBY: That's Dan Pero, president of the American Justice Partnership.

PERO: But the law is the law. So change the law and don't ask the court to do it for you.

OVERBY: Pero's group produced that ad attacking Davis.

(SOUNDBITE OF AD)

UNIDENTIFIED MAN #1: Paid for by the American Justice Partnership.

OVERBY: The American Justice Partnership is a social welfare organization. Its slogan is: tipping the scales for legal reform, which boils down to targeting liberal judges for defeat. That case about the Au Sable River wasn't anywhere on its radar. Pero says AJP's donors, mainly corporations and businesspeople, have higher aims.

PERO: Business, frankly, got tired of getting slapped around on these activist courts and decided to support candidates that had a philosophy that they felt was more rule of law, and they started contributing to those endeavors.

OVERBY: And not just in Michigan, where Pero lives and works.

PERO: People who support us don't give for a specific state. You really can't target your contributions that way anyway. You believe in our goals and where we want to play.

OVERBY: Ohio, Georgia, Oklahoma were on Pero's list - Wisconsin, Alabama, Michigan.

PERO: So, you know, we were involved in all of those areas.

OVERBY: But just what does Pero mean by we? The American Justice Partnership doesn't have to say who gives it money but other social welfare groups have to tell the IRS what they give to AJP. So that's where we looked, the IRS records. The Center for Responsive Politics and NPR used IRS records to map out the finances of more than 100 social welfare organizations. We traced nearly $2.5 million going to AJP in 2010 alone; money coming from largely invisible groups seeking to influence political issues around the nation, groups like the Wellspring Committee, based in the Washington suburbs. When I was asking about Wellspring - are you aware of them? Had you heard of them before?

PERO: I don't even remember who they are, and it's been three years. If they support us, thank God. God bless them if they supported us, 'cause it means they're supporting our agenda.

(LAUGHTER)

OVERBY: What Pero is describing is a new way of doing politics; donors give to groups like Wellspring because they believe in an ideology. Wellspring gives to groups like AJP because their ads can sway voters. Candidates like Alton Davis win or lose at the hands of funders who might not even know who they are. It's all invisible to voters and it happens far away from places like the Au Sable River. Peter Overby, NPR News.

(SOUNDBITE OF MUSIC)

INSKEEP: And let's keep following the money tomorrow when Peter takes a closer look at how social welfare groups funnel millions into campaigns. You're listening to MORNING EDITION from NPR News. Transcript provided by NPR, Copyright NPR.

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