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Secretary of State Benson: Close dark money ‘loophole’

Jonathan Oosting
The Detroit News
Secretary of State Jocelyn Benson said she wants Michigan lawmakers to end a dark money “loophole” that both major political parties have used to funnel anonymous corporate and union contributions into election influence campaigns.

Lansing — Secretary of State Jocelyn Benson is urging Michigan lawmakers to end a dark money “loophole” that both major political parties have used to funnel anonymous corporate and union contributions into election influence campaigns.

If lawmakers do not act, the Detroit Democrat will explore administrative actions to crack down on abuse, she told The Detroit News in an exclusive interview.

“I think it's time to fix a broken system, because it's not getting any better,” Benson said. “And it’s causing citizens to lose faith and trust in their elected officials to work on their behalf, as opposed to on the behalf of special interests.”

A mysterious group that spent more than $2 million supporting Gov. Gretchen Whitmer during the 2018 election cycle is among a series of local Democratic slush funds that have evaded state and federal donor disclosure laws since at least 2002, according to a Detroit News joint investigation with the Michigan Campaign Finance Network published Thursday.

The Michigan Republican Party and the Michigan Democratic Party have both used similar state-level “administrative accounts” to influence elections through so-called issue advocacy that is not subject to state disclosure laws.

Michigan began exempting administrative accounts in the early 1980s. It was done to allow "political parties to purchase paper clips and fans and other administrative things and not report that,” Benson said. “But now that loophole has been exploited.”

The administrative accounts also avoid federal disclosure requirements for similar groups operated under Section 527 of the Internal Revenue Service Code, which exempts political parties.

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.

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 disclosures by groups that gave to them.

Dow Chemical Co., for instance, voluntarily disclosed a $1 million contribution to the Michigan Republican Party’s administrative account in 2017. A Michigan Pipe Trades Association political action committee reported giving $250,000 to the pro-Whitmer Progressive Advocacy Trust in 2018.

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, which Benson recently fined $37,500 for violating issue advocacy rules and coordinating with the Whitmer campaign.

Republicans blasted the settlement as a slap on the wrist for fellow Democrats. But Benson said the Bureau of Elections had not even recommended a fine because of the lack of clarity in the law, calling it an “imperfect outcome.”

What can be done?

The political party accounts can avoid disclosure under Michigan law by running ads that feature politicians but do not directly urge viewers to support or oppose their election.

Michigan’s GOP-led Legislature wrote the exemption for so-called issue advocacy into state law in 2013 after then-Secretary of State Ruth Johnson, a Republican, proposed an administrative rule that would have required sponsors to disclose their donors for any political ads run 30 days before a primary or 60 days before a general election.

Six years later, Benson is asking the Legislature to revisit that decision and align Michigan with 30 other states and the federal government that define political ads run near an election as a form of express advocacy that requires disclosure.

“I can’t emphasize enough that until we fix that, we really can’t capture all of the political communication that needs to be disclosed to achieve our goal of ensuring that that voters and all of us have access to information about who's funding communications that are intended to influence our votes and our legislators,” she said.

Tighter issue advocacy rules would allow the state to force disclosure from 527 organizations and administrative accounts that spend to influence elections without using “magic words” of express advocacy.

But asking the GOP-led Legislature to reverse itself on issue advocacy disclosure may not be realistic given the speed by which Republicans acted to overturn Johnson’s rule in 2013. Republican lawmakers then acted amid fears that Johnson's rules could force private groups like the Michigan Chamber of Commerce to disclose member lists if it ran ads referring to candidates for public office.

As a candidate in 2010, former Gov. Rick Snyder blasted political issue ads as “an enormous campaign finance loophole.” But three years later, the Ann Arbor Republican signed a law codifying the exemption for ads that don’t directly urge election or defeat of a candidate, citing protections for “freedoms of speech and association.”

Reviving disclosure issue

Johnson now serves in the Senate and chairs the Election Committee. The Holly Republican is hoping to revive the debate over political issue ad donor disclosure.

Ruth Johnson

“It’s doesn’t matter really which side of the aisle it is, it still disenfranchises voters,” Johnson said. “I don’t want it to be a partisan issue. I want it to be an issue about the voters. They have a right to know who is putting money in the ads.”

Johnson has criticized the fine Benson levied in the Build a Better Michigan case, suggesting it was too small to discourage similar behavior in the future. But she agrees with her successor on the push to disclose issue ad donors.

"I just always have been an advocate for campaign finance transparency and real full disclosure," said Johnson, noting she brings personal experience to the debate in the Legislature. 

But absent legislative action to overturn the law, Benson said she wants to “explore” what she can do administratively to address political party administrative accounts and “close those loopholes and do so in a way that sticks.”

The gaps in donor disclosure requirements date back to 1981 and 1982 when the Michigan Department of State under Democrat Richard Austin issued interpretive statements making a distinction between political party spending that “is entirely independent of supporting the election of candidates and opposing or supporting the enactment of ballot questions."

Asked if she could simply revisit those findings given more expansive political activity funded through administrative accounts, Benson said she is looking into ways to “use all the administrative opportunities” at her disposal to “push for greater transparency.”

But she also noted that Johnson was rebuffed six years ago when she used the rule-making process to try to require disclosure by issue ad groups.

“We want to avoid that,” Benson said, “and I think you avoid that by trying to work with the Legislature to begin with.”

The first-term secretary of state outlined her priorities Wednesday in the House Elections Committee, planned to meet with individual legislators Thursday and is expected to announce additional Secretary of State initiatives next week.

Benson will also take her “transparency agenda” on the road with a series of town hall meetings across the state, beginning Sunday at the Southfield Public Library with local state Sen. Jeremy Moss and Rep. Kyra Bolden, both Democrats.