A First Step in the Fight Against Scam PACs

Posted by on May 14, 2020 6:00 am
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“We always talk about this is a bipartisan issue or that is a bipartisan issue,” Representative Katie Porter told me with a chuckle this week. “I’ll just tell you getting ripped off is probably the most universally un-fun thing that happens to Americans.”

There are scams all over the place, but few are as brazen and unregulated as the phenomenon of “scam PACs,” political-action committees that effectively defraud donors by claiming they’ll spend money on one thing and then using the money for another—typically, lining the pockets of the people who run the PACs.

As I’ve written before, scam PACs invert the usual logic of campaign-finance laws: Rather than the concern being that donors will exert improper influence over politicians, it’s the donors themselves who are being taken for a ride. Scam PACs confound normal expectations about the law, too. While the behavior involved would often get you in trouble with regulators or police in other sectors, like charity, it falls through a loophole in campaign-finance law. But Porter, a Democrat, and Representative Dan Crenshaw, a Republican, hope to change that. The surprisingly simple bill from an unlikely pair of legislators proposes giving the Federal Election Commission the power to regulate scam PACs.

[David A. Graham: Political fundraising has a big, nasty secret]

“This isn’t about what your beliefs are,” Porter said. “This is about making sure that when seniors send a couple bucks, or a family decides to send $10 to help support our democracy, that that’s really going to that purpose.”

The bill is shorter than nearly any other legislation in Congress, even post-office-naming bills. It would strike one word (fraudulently) from existing law, and replace a reference to political parties with one to political committees. For somewhat arcane legal reasons, the vagueness of the clause targeting those who “fraudulently misrepresent” themselves has blocked the FEC from cracking down on scam PACs. The commission asked Congress to grant it authority to go after the grifts in 2018, but few campaign-finance bills are enacted these days, because of Republican opposition to most measures; the FEC is hamstrung by its very structure.

That makes the co-sponsors on this bill all the more intriguing: Porter, who has become one of the most prominent progressive freshmen in the House, and Crenshaw, who has become of the most prominent conservative freshmen. It’s hard to imagine many other issues they’d agree on.

But there are both general and specific reasons for the pairing. Scam PACs know no partisan boundaries, targeting all sorts of causes. They tend to dupe not plugged-in big-dollar donors but smaller and less savvy givers, and have often seemed to prey on the elderly. Assuming there’s a limit on how much money people are willing to give, every dollar that goes to a scam PAC is not going to a legitimate candidate, which means politicians of both parties have an interest in cracking down on abuses. Last year, for example, Politico reported on the Trump reelection campaign’s struggle to compete against fraudulent groups claiming to be backing the president—effectively using Trump’s name to profit without helping his reelection.

Porter and Crenshaw have individual reasons to back this bill, too. Porter, who studied and worked on consumer protection before running for office, was shocked to learn about political operatives engaging in behavior that would be illegal in any other sphere. She sought out Crenshaw not only because of his high profile but also because many scam PACs claim to be furthering veterans’ causes, and Crenshaw is a decorated former Navy SEAL who has taken an interest in veterans’ issues.

[Read: Where is Ben Carson’s money going?]

Porter estimates that the bill would cover millions of dollars’ worth of donations per cycle, though a specific dollar estimate is hard to arrive at, because scam PACs don’t declare themselves as such. Nonetheless, some campaign-finance advocates described this bill as a positive, but limited, move.

“It’s a first step towards addressing the rapidly growing problem of scam PACs,” Adav Noti, the senior director of trial litigation at the Campaign Legal Center, told me. “That’s a problem that federal law is not currently equipped to handle, and there are a number of ways the law needs to be strengthened.”

Noti said the bill wouldn’t do much to fight one major form of scam PAC. Imagine two unscrupulous PACs. One claims to be raising money for an imaginary group, but rather than spending the money on the group—which, after all, doesn’t exist—it redirects donations to the people who set up the PAC. (A common example of this is paying lavish sums to direct-mail or telemarketing companies that are owned by the principals of the PAC or their associates.) A second claims to be raising money for a real group, but redirects all of its donations to the people who set up the PAC.

Under any commonsense interpretation, both of these are scams, since they are raising money under a pretense and spending it on something else. But if this bill becomes law, it would allow the FEC to crack down on the first but not the second.

“It gets the outright fraudsters as opposed to the more nuanced fraudsters,” says Ann Ravel, a former chair of the FEC and current Democratic candidate for the California state Senate. “I think the problem honestly is people giving money for purposes that money is never used for. It’s broader than the issue [the bill is] addressing.”

Ravel suggested to me that really tackling scam PACs might require both stricter disclosure rules about how money is spent and new limits on overhead expenses. Nonprofit organizations with excessive overhead, for example, face poor ratings from watchdog groups, and can have their tax exemptions withdrawn by the IRS.

[Read: Katie Porter is tired too]

Porter defended the limited scope of the bill.

“We want to be careful and thoughtful here about recognizing that democratic expression is an important thing, and that there are lots of people out there engaged in politics,” she said. “The goal here is not to overstep but to solve this first problem first and then to go back and have conversations with both Republicans and Democrats and independents on the FEC and see if something else is necessary.”

Noti and Ravel are right: Something else is already necessary. Some of the most egregious and lucrative scam PACs, such as the Conservative Majority Fund, which ProPublica and Politico exposed last year, seem likely to escape the FEC’s reach under the new bill, and until they’re reined in, lots of Americans are going to be duped in the name of democracy.

But the reality is that passing more aggressive reforms to target scam PACs will be harder. What Ravel calls the “outright fraudsters” are already personae non grata; the “more nuanced fraudsters” are sometimes also campaign consultants and vendors to the same members of Congress who would have to take up legislation. More sweeping reform might crash on the same partisan shoals other efforts have, too. So in the meantime, the Porter-Crenshaw bill is a good step.

“Americans are free to support different causes,” Porter said. “But I want to make sure that that’s what they’re doing, rather than they’re having their their money essentially stolen.”

It’s hard to disagree with that—unless, of course, you’re raking in money from a dubious PAC.

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