Dark money used to evade donor disclosure laws in Michigan
Lansing — A dark money group that spent more than $2 million to help promote Gov. Gretchen Whitmer in the 2018 election cycle exploited a legal loophole to avoid disclosing any donors to the state or federal governments — and it is not alone.
Progressive Advocacy Trust is one of at least five local Democratic Party slush funds that have operated in the shadows since at least 2002, according to a joint investigation by The Detroit News and Michigan Campaign Finance Network. The groups can accept unlimited corporate or union contributions but have evaded all disclosure requirements.
While a similar local Republican outfit spent in the 2010 and 2014 general election, primary spending last fall by Progressive Advocacy Trust and the Phillip A. Hart Democratic Club triggered outrage from progressive activists and cries of hypocrisy as the Democratic party publicly pushes for transparency and campaign finance reform.
"We've long held that we are the party of the people, and I think that puts us, at least in words, directly against the use of these kind of dark money accounts," said former gubernatorial candidate Abdul El-Sayed, who lost to Whitmer in the Democratic primary. "We need to move beyond that, and I think these accounts should be shut down."
Progressive Advocacy Trust was created in 2011 as an administrative account of the Ingham County Democratic Party, a relationship its spokesman and former treasurer have cited when claiming exemptions to campaign finance laws. But the local party has distanced itself from the account, which is run by an outside board of managers that a spokesman has repeatedly refused to identify.
The Michigan Republican Party and Michigan Democratic Party have both used their own dark money administrative accounts to influence elections without disclosing donors. They do so through so-called issue advertising that is exempt from state disclosure laws as long as it does not directly advocate for the election or defeat of a candidate.
But since 2002, local Democratic accounts have spent on candidates in contested primaries, drawing the ire of liberal activists sensitive to party favoritism in the wake of the contentious 2016 presidential primary between U.S. Sen. Bernie Sanders and nominee Hillary Clinton.
Progressive Advocacy Trust was the second largest contributor to organizations that ran ads featuring Whitmer before her primary and general election wins, but it did not directly contribute to her campaign, which raised more than $13 million. Other pro-Whitmer Democratic groups spent at least $13.7 million through the general election, which was one of the most expensive in Michigan history.
The Michigan Democratic Party’s official platform calls for extending campaign finance reporting requirements to political parties, foundations and “other groups used to evade donor disclosure requirements.”
A lack of donor disclosure "keeps the public in the dark about who is influencing Michigan politics," Executive Director Noah Bookbinder said last month as his Citizens for Responsibility and Ethics in Washington group filed an Internal Revenue Service complaint against Progressive Advocacy Trust. Public reporting can "inform voters about who is trying to influence them and to deter corruption," CREW said in the complaint.
It’s not clear if the Michigan Democratic Party could shut down local dark money accounts, but it also utilizes an administrative account that is not subject to disclosure rules for running issue-ad campaigns.
Michigan GOP and Michigan Democratic Party administrative accounts received a total of $2.3 million in traceable donations during the 2018 election cycle, a figure that is only known because of filings by groups that gave to them.
How it works
In an undated letter obtained by The News, former Progressive Advocacy Trust Treasurer Nancy Bohnet, a longtime Whitmer ally who now works for the governor, made clear to would-be contributors that they could remain anonymous.
Progressive Advocacy Trust is “an account authorized by the Ingham County Democratic Party” that is not required “to report the amounts or sources of contributions from individuals or other entities,” she wrote.
The group claims it is exempt from taxes under Section 527 of the Internal Revenue Code, which requires most groups to disclose donor and spending — but not local political parties.
But that federal exemption is “based on the assumption they are going to be regulated by state law and filing reports of their contributions and expenditures with a state entity,” said Austin Graham, a campaign finance expert with the Campaign Legal Center.
In Michigan, however, the Department of State does not require political parties to disclose donors or spending by administrative accounts, which are supposed to be used for purposes “totally unrelated to the party’s political activity,” according to a campaign finance manual maintained by the state.
The accounts are not addressed in state law but have been exempt from disclosure requirements under interpretive statements issued by the office of Secretary of State Richard Austin in 1981 and 1982, provided the spending is "entirely independent of supporting the election of candidates and opposing or supporting the enactment of ballot questions."
The only known donors to Progressive Advocacy Trust are groups that reported their own contributions. They include a Michigan Pipes Association political action committee that gave $250,000 to the group in February 2018 and Pfizer, the pharmaceutical company, which self-reported a $10,000 contribution during the 2011-12 election cycle.
Citizens for Responsibility and Ethics in Washington in 2015 filed a similar complaint against a GOP group that ran ads to benefit former Attorney General Bill Schuette in 2010 and 2014. The group closed the following year, long before the Midland Republican squared off with Whitmer in the general election.
GOP operative Richard McLellan had claimed Michigan Advocacy Trust was an administrative account of the 23rd Michigan State Senate Republican District Political Party Committee of Ingham County. The inspiration? Democratic groups that had done the same, McLellan said at the time.
A Whitmer connection
Although Progressive Advocacy Trust did not directly contribute to Whitmer's campaign, it gave $300,000 in anonymous money to a separate organization called Build a Better Michigan. This group ran primary-season ads featuring Whitmer and was recently forced to pay a $37,500 fine for violating issue advocacy rules and coordinating with the Whitmer campaign.
Progressive Advocacy Trust also gave $1.875 million to A Stronger Michigan, which ran ads promoting Whitmer and attacking Schuette in the general election.
But the Progressive Advocacy Trust remains shrouded in mystery. Spokesman Mark Fisk repeatedly refused to identify the board of managers that runs the fund. He confirmed that Bohnet served as volunteer treasurer but said she left the group in 2016.
Fisk was not able to explain why a September contribution report from A Stronger Michigan listed an address for Progressive Advocacy Trust that does not exist but is on the same Lansing street as Bohnet's home. The group’s address is actually P.O. Box 322 in East Lansing, Fisk said.
Bohnet, who now works for Whitmer as an assistant in the official gubernatorial residence in Lansing, hung up on a Detroit News reporter and did not return subsequent voicemails seeking comment about her role with Progressive Advocacy Trust.
She previously worked for Whitmer in the Legislature and for Move Michigan Forward, a 501(c)4 nonprofit linked to Whitmer that did not disclose donors and dissolved in early 2015. Bohnet was also the designated record keeper for the Whitmer Leadership Fund political action committee.
Whitmer spokesman Zack Pohl said Bohnet is now a part-time assistant at the governor's residence with an annual salary of $45,000. He declined to discuss Progressive Advocacy Trust but said Whitmer "continues to support stronger campaign finance laws and looks forward to working with the Legislature to bring more transparency to state elections.”
Progressive Advocacy Trust “is and always has been fully compliant with all IRS and campaign finance laws,” said Fisk, who noted it is “no different from other similar entities created for years by county parties and state parties, both Republican and Democrat alike.”
Fisk worked for then-U.S. Rep. David Bonoir in 2002 when a St. Clair County Democratic Party fund spent dark money to boost the Democratic congressman in the gubernatorial primary against eventual winner Jennifer Granholm and former Gov. James Blanchard. A Kalamazoo County fund spent for then-Gov. Granholm in 2006, and a Genesee County fund spent in the 2010 gubernatorial primary to help the victor, Lansing Mayor Virg Bernero.
Last fall, the Philip A. Hart Democratic Club in Macomb County gave $250,000 in anonymous money to a group that ran pro-Whitmer primary ads. The club also spent money to support Macomb County Clerk Fred Miller in his winning primary campaign over then-state Sen. Steve Bieda of Warren, who criticized it at the time as "a secret slush fund that masquerades as a Democratic club."
Meanwhile, the Michigan Republican Party’s main administrative account gave $175,000 in October to a super political action committee called Hardworking Americans. Hardworking Americans then gave the money to another super PAC called Michigan Prosperity that sent out $85,000 in mail against Whitmer and gave $82,000 to another super PAC called Michigan People for Progress, according to the Michigan Campaign Finance Network.
'Tipping scales for one candidate'
While Progressive Advocacy Trust claims to be a local administrative account, it’s current relationship with the Ingham County Democratic Party is unclear.
Ingham party members in August adopted a resolution distancing the local party from the Progressive Advocacy Trust four days after Whitmer defeated El-Sayed and Ann Arbor businessman Shri Thanedar in the Democratic primary.
The Ingham County Democratic Party was neutral in the race, but the administrative account contributed to a group that ran pro-Whitmer television ads. This angered local progressive activists, who had no say over the spending and pushed the resolution to remove the party name designation from Progressive Advocacy Trust.
“We were Abdul supporters and really (were upset) about all the stuff that was going on with that,” Ingham County Democrat Kelli Collison said. “We were really upset that there was what looked like the county party tipping the scales for one candidate over another during the primary.”
Ingham County Democratic Party Chairman Chris Swope did not respond to multiple emails or voicemails and refused to discuss the account when questioned by a Detroit News reporter at a party event.
“I won’t be returning your calls on that,” Swope said. “I have nothing to say.”
Asked about the resolution, if the account is still affiliated with Ingham Democrats and other issues, Swope refused to acknowledge the questions.
The resolution was amended on the floor before adoption, and other party officials say only Swope would have the final copy, which he has been unwilling to share with The News. It’s not clear if the Ingham County Democratic Party removed its name from the fund, or if it has the authority to do so.
Former Ingham County Democratic Party Vice Chair Walt Sorg said local officers were not even aware the Progressive Advocacy Trust existed until it became active in the 2018 election cycle and sparked controversy.
“I know it’s been a headache for (Swope),” Sorg said. “He got stuck in the cross-hairs and was blindsided by the whole thing.”
Former Ingham County Democratic Party Secretary Thomas Morgan, now a county commissioner, confirmed he signed paperwork to create the Progressive Advocacy Trust in 2011 but said he was not aware of the significance at the time.
"I was just handed a stack of papers and signed it,” Morgan said. “I should probably have read what I signed, but I have no knowledge or understanding or concept of what this group does.”
Asked about the dark money spending last fall, Secretary of State Jocelyn Benson, a Democrat, said she wants to revisit interpretive statements issued by the Department of State in 1981 and 1982 that exempted political party administrative accounts from state disclosure rules.
Like her Republican predecessor, former Secretary of State Ruth Johnson, Benson said she also thinks groups that pay for so-called issue ads near an election should also be required to file campaign finance reports. The GOP-led Legislature wrote an issue ad exemption into state law in 2013.
"Other states have figured this out," Benson said during a Feb. 22 taping of "Off The Record" on WKAR-TV. "The federal government has more disclosure requirements than we do, so we can at least move closer to that, is my goal. My principle is everything should be disclosed."
While El-Sayed and other progressive left Democrats are calling on the party to shut down the accounts, former state party Chairman Mark Brewer said it would be unfair to unilaterally disarm unless Republicans are required to do the same.
“If the law is the law, both parties should follow it,” Brewer told the Michigan Campaign Finance Network.
New Michigan Democratic Party Chairwoman Lavora Barnes, elected to the post in early February, did not directly address the controversy in a statement provided to The News but said she supports “comprehensive campaign finance reform.”
Asked if she could shut down local accounts, Barnes said the party "rigorously adheres" to state and federal campaign finance laws. “Local organizations are responsible for their compliance, but the state party regularly stresses strict adherence to all applicable campaign finance law," she said.
Likewise, the Michigan Republican Party "complies with all applicable state and federal laws," spokesman Tony Zammit said. The party "maintains several safeguards to ensure that its administrative funds are not used for candidate support or opposition" and "respects the First Amendment rights of its contributors," he said.
Fisk, co-founder of the Byrum and Fisk Advocacy Communications firm in East Lansing, also serves as spokesman for the pro-Whitmer Build a Better Michigan, the group to which Progressive Advocacy Trust donated and was fined $37,500 for violating campaign finance laws.
The groups are “are completely separate entities that are not connected,” he said. But Fisk declined multiple requests for additional information about Progressive Advocacy Trust.
“As a matter of policy," he said, "we don’t discuss strategy or other private internal information or divulge information regarding the board."