Executives from major American corporations are calling for greater transparency in election spending, alleging the shadowy, secretly-funded groups that spent hundreds of millions on the 2010 elections are distorting the democratic process. Groups like Karl Rove's Crossroads GPS [3], they say, will spend an increasing amount in future elections and political scandal will follow. Meanwhile, Wisconsin leaders promote even greater election secrecy.

A record $560 million was spent on the 2010 midterm elections, and around 50 percent of it was kept secret. "The use of hidden money in elections undermines First Amendment guarantees and is contrary to the basic values of our democracy," states a report [4] (pdf) issued Monday by the Center for Economic Development (CED) and signed by thirty two business executives and university professors, including representatives from corporations like Citigroup [5] and Prudential Financial.

"The system we have now takes good men and women who are elected and corrupts them," said [6] Edward Kangas, former chairman and CEO of Deloitte Touche Tohmatsu in a press conference announcing the report.

Supreme Court and Business Group Supports Transparency

The U.S. Supreme Court's Citizens United [7] decision, while greatly maligned for lifting bans on corporate election spending under the guise that the U.S. Constitution protects corporate "speech," actually expressed strong support for disclosure. The majority opinion stated:

the First Amendment protects political speech, and disclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.

The signatories to the CED report support this view, writing "disclosure and transparency are essential to the proper functioning of our democracy and economic system." Shareholders, the true owners of any publicly-traded corporation, have been left in the dark about whether CEOs are using their investment dollars for political activities. The report states shareholders "need to know how the funds in which they have a financial interest are being spent if they are to make informed political and economic decisions." The anonymity marking the current electoral landscape was made possible by a series of Federal Elections Commission [8] rules and advisory opinions that dismantled election disclosure laws. Much of the secret spending comes from groups organized as "social welfare" nonprofits under the 501(c) section of the tax code.

"Since many of these organizations have generic sounding names," the report states, "such as Americans for Prosperity [9], American Action Network [10], and American Future Fund [11], citizens cannot be expected to know the interests behind their efforts without effective donor disclosure."

IRS Asked to Investigate 501(c) Groups

An unrelated petition to the IRS this week asked [12] the tax agency to investigate the nonprofit status of the American Action Network, which spent around $16 million in the 2010 elections, as well as Rove's Crossroads GPS and the Obama-affiliated Priorities USA.

"The idea that these organizations are social welfare groups is nonsense," said Fred Wertheimer, president of Democracy 21 [13], which sent the IRS letter along with the Campaign Legal Center. "The overriding purpose of these groups is to participate in and influence elections, which makes them ineligible for tax exempt status."

In 2010, Republican-affiliated organizations dominated the secret-spending field, but Democrat groups have been jumping into the fray. Former White House aides Bill Burton and Sean Sweeney launched Priorities USA in spring, with Burton telling the Los Angeles Times "while we agree that fundamental campaign finance reforms are needed, Karl Rove and the Koch brothers [14] cannot live by one set of rules as our values and our candidates are overrun with their hundreds of millions of dollars."

Democracy 21 and the Campaign Legal Center asked the IRS last year to investigate Crossroads GPS, but no major action has been taken.

Wisconsin GOP Efforts to Maintain Secrecy

Election boards in states like Wisconsin have tried to rein in this unlimited secret spending by tightening state disclosure rules. However, Wisconsin's rules were promptly challenged in court [15] by the Koch-funded Americans for Prosperity, and in the past month, the state GOP used a parliamentary trick [16] to block the disclosure rule and protect secret corporate spending.

On Thursday, Wisconsin Sen. Glenn Grothman [17] (R-West Bend) announced [18] a plan to further limit election transparency, ending the long-standing requirement that those donating directly to a candidate's political campaigns disclose their employers.