By Nick Penniman
August 12, 2020 at 5:00 am ET
Foreign governments like Russia, China, Iran and North Korea have another tool to influence, disrupt and attack our elections unabated and undetected, threatening to undermine the very integrity of our democratic system.
Enabled by a glaring loophole in our campaign laws, shell companies, most commonly in the form of limited liability companies, are free to act as money-laundering machines that pump cash into super PACs. Some of this activity is not just unsavory, it’s illegal. Foreign entities are not allowed to participate in American elections, but by using LLCs, they can do so with near impunity.
How is this possible?
Since the Supreme Court’s 2010 Citizens United decision, corporate super PAC donors have flourished. And while super PACs are required by law to publicly reveal their donors, the names they list can be little more than opaque shell companies — black boxes that allow the people behind them, whether American or not, to remain completely hidden.
My group, Issue One, just took on the task of unmasking some of these shady LLCs by extensively poring over campaign finance data and other obscure public records. It was a grueling project — a feature of the system, not a bug — and one not easily replicated by a time-pressed public or press. In some cases, we simply got lucky finding the right document that gave identities away.
Our new report documents 12 instructive cases that attest to the blind spots in our laws. One of these groups was the aptly named Tomfoolery LLC, a shell company donating to a liberal super PAC in Texas that simply lists its address as a 60-story skyscraper in New York City. Then there’s Race Fans for Trump 2020 LLC, which helped a pro-Trump PAC place ads on NASCAR vehicles. These opaque LLCs with often banal or ridiculous names have proliferated — but more often than not, we have zero idea from where or from whom they get their money to make political contributions.
The shadowy groups we were able to shed light on are just a drop in the bucket. Without systematic changes, we will never know even a fraction of where LLC money going to super PACs comes from.
The implications are shocking: This loophole can easily be exploited by foreign interests wishing to attack or influence our elections — and we know they are eager to meddle in 2020. At least two such foreign donations have already been exposed, with one allegedly illegally donating to a pro-Obama super PAC and another to a pro-Trump group, according to the Justice Department.
How many others have slipped by with ease? What will happen as more and more foreign interests engage in this subterfuge?
Right now, we’re taking super PACs at their word that their mystery money doesn’t illegally stem from foreigners. With a pivotal election fast approaching that is sure to see unprecedented sums poured into it, this is especially worrisome.
But our nation isn’t powerless against such abuse — or at least, it doesn’t have to be. As with most election loopholes, fixing things requires Congress and the Federal Election Commission to act.
On paper, the FEC has expressed rare bipartisan agreement from Democratic and Republican commissioners that using shell companies to mask a donor’s identity is a violation of the law. The problem, though, is that breaking the rules rarely results in a penalty, if the activity is noticed at all. The commission needs to examine and strengthen its existing transparency rules if the law is to be as rigorously enforced as it should be.
Congress, too, has recognized the problem, and there’s even a bipartisan measure to curb such illegal political activity: The Shell Company Abuse Act is a tough, commonsense bill that makes it a felony to set up, or assist in the creation of, a business that conceals giving by foreigners.
Americans have the right to know who is trying to influence their vote. The Supreme Court has affirmed this time and time again, even stating in the Citizens United case that prompt disclosure of expenditures provides “transparency [that] enables the electorate to make informed decisions and give proper weight to different speakers and messages.”
We are duty-bound to hold politicians and special interests accountable. And every one of us should want to curb foreign interference in our elections.
But that is impossible with our current, broken system. It’s time to stop the tomfoolery.
Nick Penniman is the founder and CEO of Issue One.
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