The One-Person Funded Super PAC: How Wealthy Donors Can Skirt Campaign Finance Restrictions

10/22/2010 08:46 am ET | Updated May 25, 2011

With many outside political groups able to raise and spend unlimited amounts of money in the wake of the Supreme Court's Citizen United decision, a new type of independent expenditure has popped up: ones bankrolled completely by just one donor. These funds allow wealthy contributors to dump large amounts of money into whichever races they choose -- often with very little transparency -- essentially rendering the old rules limiting individual political contributions a joke.

Take the Concerned Citizens for a Working America. The Virginia-based political action committee (PAC) has thrown $250,000 into South Carolina's fifth congressional district on behalf of the Republican candidate. But who are these "concerned citizens"? It turns out that the sole citizen is a Virginia nonprofit called New Models, which is not required to disclose its donors.

There's also Taxpayers Against Earmarks (TAE), a new nonprofit "dedicated to educating and engaging American taxpayers about wasteful government spending and the misguided practice of earmarks." While its mission is educational, it has an affiliated political arm -- what's known as a "super PAC" for its ability to raise and spend any amount it wants -- called the Ending Spending Fund, which just put nearly $600,000 into the Nevada Senate race against Majority Leader Harry Reid (D). The "taxpayers" against earmarks is actually just one man named Joe Ricketts, founder of Ameritrade and owner of the Chicago Cubs, who is also the sole financier of the Ending Spending Fund.

Individuals are allowed to donate only $2,400 per election to a federal candidate or the candidate's campaign committee, according to federal law. People can donate to $5,000 to a traditional political action committee, which essentially funnels contributions to individual candidates, and $30,400 to a national party committee each year.

But the Supreme Court's landmark ruling in Citizens United cleared the way for a federal court's decision in Speechnow.org v. FEC, which opened the floodgates for unlimited election spending by certain outside groups, as long as they do not coordinate their activities with any political candidates or party committees.

In the past, independent expenditures needed to collect contributions from a large number of individuals, who were bound by federal contribution limits, in order to be influential. Even currently, the vast majority still do. But what's also now possible is that an individual can start one of these groups, be the sole funder and therefore direct in which race -- or races -- he or she wants to intervene. Essentially, for the very wealthy, the old rules no longer exist.

"[T]he courts have long justified the deregulation of independent spending based upon the fact the spending is independent and thus, in some respects, less valuable to candidates," said Tara Malloy, associate legal counsel at the non-partisan Campaign Legal Center. "And I think there's some truth to that. I think both candidates would probably prefer to just get the million dollars in hand and would be indebted to that extent."

"However, because of federal contribution limits, a candidate can only accept $2,400 from a person, and I think we argue at the same time, it would be very naive to think that a supporter spent $2 million of his own money, that that's not going to be noticed or appreciated by the candidate as well," she added. "Probably not as much as getting the $2 million, but we think it obviously raises problems of corruption when, you know, a single person is sending that huge amount of money, [who] would usually be acknowledged or sometimes even encouraged by the candidate."

The only reason the public knows Ricketts is the sole donor of TAE is because he voluntarily disclosed his identity, a move he's not required to do by law -- and one unfortunately not pursued by most nonprofits. The group also has an extensive interactive website, another step not taken by many of the tax-exempt groups that have sprung up this election season.

In an interview on Thursday, TAE and Ending Spending Fund President Brian Baker stressed that the group was going to be around for the long haul -- until earmarks are gone and the country goes through "long-term budget reform and appropriation-process reform." In an earlier e-mail to The Huffington Post, Baker said that TAE is not currently soliciting other donations, although it may do so in the future.

Baker is, however, soliciting donations for the Ending Spending Fund and promises to publicly list all contributions and expenditures. "Joe [Ricketts] believes in transparency, and a big part of the earmark issue is the fact that there's no transparency, so Joe is a strong believer in transparency in this," he said.

In addition to the ads against Reid, Baker said that the Fund plans to buy ads in favor of Democratic Rep. Walt Minnick (Idaho) and against Democratic Reps. Chet Edwards (Texas) and John Spratt (S.C.). He said the the ads are not meant to be attack jobs but intended to "inject the issue of earmarks" into high-profile races.

But not all groups are as forthcoming with their donor information. The Concerned Taxpayers of America (CTA), which represents exactly two taxpayers and has been targeting Rep. Peter DeFazio (D-Ore.) and a few races in Maryland, has largely stayed in the shadows. CTA's website has some generic language about how the group was "formed to engage citizens from every walk of life and political affiliation and urge them to hold our nation's elected leaders accountable for the country's fiscal well-being," but it doesn't have CTA's ads.

In an interview with The Huffington Post, DeFazio had particularly tough words for one of the donors, Robert Mercer -- who is from New York and has also donated to his Republican opponent -- saying that it was all about personal gain rather than what's best for the state. "I mean, it's really clear now, this is about one billionaire on Wall Street trying to take me out of Congress," he said. "It's not about my state, it's not about Oregon, it's about Wall Street, and you know, we can speculate as to why it might be. It might be because I think he should pay the same percent of his income in taxes that Americans [do], and we see that Wall Street's very offended by that concept."

DeFazio believes that groups like CTA should have to list the name of their top donors in their political ads, so the public knows who is really behind them. Under the failed DISCLOSE Act, that would have been required of 527s, corporations, labor unions and trade associations. Current law, however, requires no such disclosure.