Corporate political spending can stay secret in Wisconsin

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Wisconsin lawmakers are insisting that they didn’t intend to allow corporate political donations to remain secret under the recent overhaul of the state’s campaign finance laws.

But secrecy, in fact, is now the distinguishing characteristic of Wisconsin elections.

Sweeping campaign-finance changes signed into law by Gov. Scott Walker in December allowed corporations, for the first time, to donate up to $12,000 directly to “segregated funds” created by political parties and legislative leaders. (See Wis. Stat. §11.1104(6), Wis. Stat. §11.1112). Previously, corporations were barred from donating to political parties and legislative committees.

Even so, the statute’s reporting requirements in Wis Stat. § 11.0304 were not updated to deal with disclosure of donations to — and spending by — those newly created “segregated funds,” creating an apparent loophole allowing parties to keep their corporate contributions secret.

“That was clearly not our intent,” claimed Assembly Speaker Robin Vos, who previously insisted that an overhaul of the state’s campaign finance limits was necessary to bring “clarity” to the law.

Two state agencies reached disputing conclusions about how to interpret the new provisions. The Government Accountability Board found that disclosure was not required. The Legislative Reference Bureau, in turn, held that corporate contributions to a party’s “segregated fund” would have to be reported like any other donation.

The apparent loophole made headlines in Wisconsin and elicited a pledge from Vos to work on a legislative remedy.

Yet the feigned concern about transparency ignores how — thanks to the Legislature’s campaign finance changes — most corporate spending in Wisconsin can remain entirely secret, even if corporate “segregated fund” contributions are publicly disclosed.

That’s because Wisconsin’s radical new campaign-finance overhaul allows corporations to spend unlimited amounts on elections, in full coordination with candidates or political parties, and with zero public disclosure.

Under the new laws, any electoral ads that stop short of expressly telling viewers how to vote — using so-called issues ads — are left entirely unregulated. As a result, there is nothing stopping candidates and parties from establishing shadow “issue ad” committees that accept unlimited corporate donations, with the full knowledge of the candidate, but absolutely zero disclosures to the public.

A corporation’s $12,000 donation to a political party’s “segregated fund” is a mere drop in the bucket compared with the unlimited secret corporate money that can now flow to the shadow committees that are now legal under the law.

Previously, Wisconsin law provided that, if a candidate controls an outside group’s spending, the group’s electoral ads count as an in-kind campaign contribution, regardless of whether the ads expressly call for the election or defeat of a candidate.

This precedent — reflected in the 1999 Wisconsin Court of Appeals decision in Coalition for Voter Participation and a 2002 Elections Board opinion affirmed by the Government Accountability Board in 2008 — was consistent with the longstanding constitutional distinction between campaign contributions and independent expenditures.

In cases such as Buckley v. Valeo and Citizens United, the U.S. Supreme Court upheld limits on contributions directly to candidates, but struck down limits on independent groups like PACs. The idea was that direct candidate donations could corrupt, but independent spending was less helpful to a candidate and therefore posed less risk of corruption.

Yet if a candidate is actually controlling an outside group, its fundraising and spending is no longer “independent,” and its expenditures must be treated as an in-kind contribution to the campaign, since it would have substantial value to the candidate.

Otherwise, politicians could easily circumvent the contribution limits and disclosure requirements that apply to their own campaigns. As Judge Frank Easterbrook noted last year in O’Keefe v. Chisholm: “If campaigns tell potential contributors to divert money to nominally independent groups that have agreed to do the campaigns’ bidding, these contribution limits become porous, and the requirement that politicians’ campaign committees disclose the donors and amounts becomes useless.”

Wisconsin’s new campaign finance laws throw out that distinction for ads that attack or praise a candidate but don’t expressly tell viewers how to vote.

This means that a candidate can form a PAC or nonprofit, ask corporations to contribute million-dollar checks to it, and entirely control how the money is spent. As long as the money goes to ads that omit words like “vote for” or “vote against,” those corporate contributions can remain entirely secret.

This is not a far-fetched hypothetical notion. In fact, this is close to what Walker’s campaign did during the 2012 recall elections, which led both Republican and Democratic prosecutors to launch the John Doe campaign finance probe.

Last July, the Wisconsin Supreme Court shut down the John Doe, despite years of precedent indicating this conduct violated the law. Yet evidence uncovered during the John Doe probe provides a snapshot into the sort of secret corporate fundraising and spending that is now legal in Wisconsin.

According to documents obtained by prosecutors, Walker offered CEOs a way to bypass the state’s bans on corporate donations by giving to his campaign’s affiliated nonprofit Wisconsin Club for Growth, which he told donors “can accept corporate contributions and it is not reported.”

Devon Energy CEO Larry Nichols, for example, wrote a $50,000 check from the oil and gas company’s corporate account to the Club.

The donation was never publicly reported, and Devon Energy shareholders never knew or approved of their money being used to support Wisconsin Republicans.

What’s more, the CEO of the Florida-based mining company Gogebic Taconite — which sought to build an open-pit iron ore mine in Northern Wisconsin — secretly gave more than $700,000 to the Club.

After winning election, Walker made Gogebic Taconite’s mine his top legislative priority. Yet the public and press had no knowledge of the company CEO’s $700,000 in donations as the controversial mining bill was being debated; the secret spending was more than 22 times the amount of disclosed contributions to candidates.

There is no reason to think that Walker or any other candidate — from either party — will operate any differently in future elections, especially after this sort of conduct has been explicitly endorsed by the legislature.

Even if Vos follows through on his promise to bring transparency to $12,000 corporate checks given to political parties’ segregated funds, this amounts to a drop in the bucket. Corporations that want to give more — or who want to do it secretly — can still do so, and almost certainly will.