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The Role Dark Money Plays in Local Races

Last year’s contest for Allegheny County, Pa. executive drew $1 million in funds from secretive groups that skirted disclosure requirements.

The role "dark money" played in Joe Rockey's campaign for chief executive of Allegheny County, Pennsylvania, illustrates how PACs can operate without public knowledge. (Dreamstime/TNS)
For supporters of Joe Rockey, it was a secret way to help boost his campaign and help him capture the most powerful office in Allegheny County.

First, a nonprofit was formed in Delaware, one of the nation's foremost havens for financial privacy.

Then, a political action committee was created 100 miles away, in Alexandria, Va.

Soon, the money began flowing — hundreds of thousands of dollars routed from the nonprofit to the PAC and then to television stations in Pittsburgh — without the public ever knowing who was paying for the advertising campaign.

Within days, the first commercial was blanketing the airwaves, with sharper attacks soon to follow in what became a $1 million ad blitz aimed at tearing down the candidacy of Democrat county executive candidate Sara Innamorato.

The newly formed nonprofit and its closely connected PAC would go on to outspend Innamorato two-to-one on the airwaves in one of the most consequential political battles in the county in years.

To this day, donors to the nonprofit — Save Allegheny County — remain hidden behind obscure corporate filings, complex tax laws and a campaign finance system that shields the names of donors at a time when most Americans consider transparency a fundamental safeguard of elections.

In a plan that experts say was emblematic of a dark-money scheme, the cash that flowed into Allegheny County was routed through two out-of-state entities that had been created for just this purpose, the Pittsburgh Post-Gazette has found.

"Unfortunately, this is a really common example of how wealthy special interests seek to hide the sources of big election spending and rig the political system in their favor," said Elizabeth Shimek, senior legal counsel for the Campaign Legal Center, which advocates for transparency in elections.

When questioned by the Post-Gazette, Rockey, the Republican candidate who narrowly lost the county executive race, said he had no involvement in the operation and no knowledge of who funded it. Innamorato declined to comment.

Election transparency advocates say the lack of information is a troubling example of how disclosure laws can be skirted in Pennsylvania, preventing voters from knowing the powerful supporters behind candidates.

"That should raise red flags," said Brendan Fischer, deputy executive director of the campaign finance watchdog group Documented. "There are wealthy special interests that want to buy influence in secret, and keep their names hidden from public disclosure."

Dark money has been around for years in U.S. politics, but in Pennsylvania — a key battleground in the presidential campaign — it's become a troubling option for donors because the state does not have the kind of laws that would force groups like Save Allegheny County to identify their funders.

In Arizona, the names of top donors are disclosed in campaign ads. In Rhode Island, nonprofits that engage in political races have to identify their funders. In California, outside groups must name their top three contributors.

But in Pennsylvania, donors have been free to conceal their roles in key races ever since a landmark U.S. Supreme Court decision that ushered in the era of unlimited spending by outside groups.

The high court's decision in 2010 known as Citizens United, along with a federal court ruling four years later, reshaped Pennsylvania's campaign finance laws and paved the way for dark money groups to enter the fray.

For Save Allegheny County, the operation struck quickly.

On Aug. 1, 2023, just over three months before the polls closed in Allegheny County, someone anonymously bought the domain name, according to the Internet Corporation for Assigned Names and Numbers.

Three days later, Save Allegheny County Inc. was set up as a nonprofit in Delaware, where corporate officers do not have to be identified in public filings.

The only record that would reveal the nonprofit's directors would be its annual report — and Save Allegheny County never filed one, despite a law requiring it to do so by March 1, according to the Delaware Secretary of State's office.

Once the nonprofit was up and running — and able to collect unlimited, anonymous donations — the final piece of the political operation fell into place just over a month later, on Sept. 7.

A campaign accounting firm headquartered in Alexandria, Va., filed the paperwork to create Save Allegheny County Action, a political action committee that was now ready to jump into Western Pennsylvania's biggest race.

In the weeks that followed, that PAC raised $440,000 — all funneled from Save Allegheny County Inc.

Though the donors are shrouded in secrecy, the Post-Gazette was able to identify the chairman of the non-\profit as Jeff Kendall, director of the Pittsburgh private equity firm Laurel Mountain Partners, because federal laws require outside groups that run campaign television ads to list their directors.

Kendall is also listed as the chairman of the PAC that was set up to take in the money from the Delaware nonprofit.

After springing to life in the final months of the campaign, the nonprofit and PAC went on to spend $985,520 on television, digital and radio ads in the county executive race, according to AdImpact, which tracks political advertising.

On one television ad alone, the nonprofit spent $178,000 to broadcast images of lawlessness and vanishing jobs. Days later, the PAC spent $160,000 on an ad warning that Innamorato would "destroy what we've built."

One of the ads shows bleak images of a person slumped on the sidewalk begging for food, a menacing figure carrying a knife, and crime scene tape strung up while police lights flash blue and red in the background.

The PAC would spend nearly $12,000 more on mail, billboards and print ads supporting Rockey's campaign and attacking Innamorato, state records show.

Kendall declined to say who funded the operation but in a statement cast the groups as "different organizations with different missions."

The PAC, he wrote, "fully complied with the law and disclosed its electoral activities throughout the 2023 election."

Once the political committee and nonprofit started spending, they immediately surpassed Innamorato's campaign, which would spend just $478,000 in ads during the final months of the race. Save Allegheny County surpassed that amount in its first six weeks on the air.

It was almost enough.

In a county where Democrats outnumber Republicans two-to-one, Rockey lost to Innamorato by less than three percentage points, the slimmest margin for that seat in nearly a quarter century.

For transparency advocates, one of the key reasons for listing the names of donors is to help identify any ties that might exist between those who fund campaigns and politicians.

Whether its contractors seeking government work or corporations looking for tax breaks and weaker regulations, disclosing the source of money helps protect against corruption, advocates say.

Though lax rules have allowed dark money groups to flourish in recent years, experts say that Save Allegheny County's methods might have gone too far.

Nonprofits get tax breaks from the government because they're supposed to benefit a public cause. In the case of Save Allegheny County, the group became involved in a political race immediately after it was formed.

"Political activity is not supposed to be a nonprofit's primary purpose," Fischer said. "It could be that (Save Allegheny County) is pushing the legal envelope and expecting that the IRS isn't going to do anything about it — which is a pretty safe bet."

The IRS has received hundreds of complaints about nonprofits engaging in political activity since the Citizens United decision, but has taken few enforcement actions, according to the Center for Responsibility and Ethics in Washington, a campaign and political ethics watchdog group.

Without the fear of sanctions, the tax-exempt organizations have flourished as a tool for political operatives, said Stuart McPhail, CREW's senior litigation counsel.

"What we often see is these consultants go to donors and say, 'Hey, here's how you give anonymously. Don't send the money to the campaign. Send it to this random nonprofit. We'll make sure it gets there.' And then it's sort of laundered through a nonprofit network. Money is shifted around to other nonprofits that are all just pieces of paper," McPhail said.

But relationships like the one between Save Allegheny County Inc. and its PAC have drawn regulators' attention in recent years — including a case in neighboring Ohio involving a political committee that used the same treasurer, Lisker.

In that case, the operation spun up in just three short days. On a Tuesday in March 2018, the Honor and Principles PAC was registered with the Federal Election Commission.

A day later, the nonprofit LZP LLC was incorporated in Ohio. The following day, LZP donated $175,000 to Honor and Principles.

The FEC spent years investigating whether LZP had been created solely as a pass-through to hide the identity of the real donors to the new political committee — and whether Lisker should've known about the scheme. In the end, the commission decided there wasn't enough evidence of wrongdoing.

Lisker did not respond to an interview request or a list of questions sent by the Post-Gazette. During her deposition in the federal investigation, she told the agency she "had no reason to believe that LZP was not the original source of the contributions" and "denied having any knowledge" the nonprofit was formed the day before it made a major donation to the political committee, according to a report by the agency.

McPhail, whose group sparked the investigation with a complaint to the FEC, said the agency should create stricter requirements for key officers who facilitate the flow of dark money.

"She basically said, 'I didn't know what was happening. I was just told to take some money and spend it on that,'" said McPhail. "You see these consultants behind the scenes pulling strings, directing the money around."

In Pennsylvania, the law doesn't give state regulators any more tools to pursue campaign finance violations or uncover secret donors than those available to federal investigators, said Timothy Ford, who leads the political and election law group at the Philadelphia firm Dilworth Paxson.

For nonprofits operating in the gray area between issue advocacy and outright politicking, if they don't specifically involve the candidate they are supporting, they are in the clear, he said.

"As long as they're not calling up Joe Rockey and saying, 'Hey, Joe, what do you want us to say in this ad,'" they're within the bounds of the law, Ford said. "They can say whatever they want. They just can't coordinate with a candidate."

Rockey, in a brief statement in response to a list of questions from the Post-Gazette, noted the ban on coordination and said he "honored that law."

As federal oversight languishes and courts carve out more protections for corporate campaign spending, the battle over transparency has moved to the state level, where several legislatures have tried to force dark money groups to disclose the people who are really behind the money flooding their elections.

Rhode Island led the way in 2012 with a law that requires outside groups like Save Allegheny County Inc. to disclose the names of anyone who gave at least $1,000 to pay for ads in a political race.

In Alaska, voters passed a ballot measure that requires committees like Save Allegheny County Action to disclose the "true source" of their funding, not just the nonprofit that was the conduit for the money.

But special interests have fought back. They've challenged new disclosure laws in state and federal courts, and when those efforts fail, they've simply created new corporate entities to funnel the money through. Rather than donating directly to a nonprofit like Save Allegheny County, they donate to a nonprofit that then donates to another nonprofit, experts said.

That's when Arizonans stepped in.

In 2022, they overwhelmingly passed the Voters' Right to Know Act, which requires any group that spends $50,000 on a statewide campaign or $25,000 on a local race to disclose the original source of the money — and to name the group's top three donors in any ads they run.

"Arizona is really the gold standard," Shimek said. "It doesn't matter how many links there are in the chain, how many layers there are in the onion, it is the responsibility of the spender to trace that back and find out where that money is really coming from."

Absent similar rules here, Pennsylvania voters are left with the worst of both worlds, McPhail said: no limits on campaign contributions and no way to pierce the secrecy that shields the donors behind nonprofits like Save Allegheny County.

"Who is the person who can show up to the candidate and say, 'I'm responsible for your win. I gave a million dollars to your campaign. Do me a favor,'" McPhail said. "The voting public has a right to know who that person is."

©2024 the Pittsburgh Post-Gazette. Distributed by Tribune Content Agency, LLC

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