Senate Committee Examines Enforcement of Campaign Finance Laws

Sen. Whitehouse Urges Robust Enforcement by the Justice Department, IRS

Tuesday, April 9, 2013 Washington, DC – In the wake of the 2012 election cycle, which saw an unprecedented level of campaign spending by super PACs and tax-exempt political organizations that do not disclose their donors, the Senate Judiciary Subcommittee on Crime and Terrorism today held a hearing on “Current Issues in Campaign Finance Law Enforcement.”  The hearing focused on the challenges facing the Department of Justice (DOJ) and the Internal Revenue Service (IRS) in enforcing criminal campaign finance laws relating to independent groups.
Subcommittee Chairman Sheldon Whitehouse presided over the hearing, which examined the enforcement of campaign finance laws prohibiting: coordination between outside groups and candidates; the use of shell companies to hide donor identities; and political contributions from foreign nationals.  The hearing also focused on whether 501(c)(4) tax exempt groups engaged in politics are being held accountable for deceptive information in their tax filings.
In his opening statement, Senator Whitehouse discussed the abuse of the 501(c)(4) designation, which gives non-profit status to entities that are “operated exclusively to promote social welfare.”
Whitehouse said that “[t]his promotion of social welfare is specifically forbidden to include ‘direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office.’  That seems clear enough, but after the Supreme Court opened the floodgates to big money in elections in its disgraceful Citizens United decision, big donors like to use these non-profit entities to launder campaign spending and hide their identities.”
The Subcommittee heard testimony from two panels today.  Testifying on the first panel were Mythili Raman, Acting Assistant Attorney General for the Criminal Division of the Department of Justice; and Patricia Haynes, Deputy Chief of Criminal Investigation for the Internal Revenue Service.  Testifying on the second panel were Lawrence M. Noble, President of Americans for Campaign Reform; Gregory L. Colvin, Principal of Adler & Colvin; and Bradley A. Smith, Chairman of the Center for Competitive Politics.
In questioning the witnesses from DOJ and IRS, Whitehouse asked why they have not prosecuted 501(c)(4) groups that have seemingly made false statements about their political activities or donors that have used shell companies to donate to Super PACs to hide the donor’s identity.
Whitehouse said, “I would urge that the Department and the Service get together and rethink whether in these two specific areas, which I think bear little resemblance to traditional tax violations and are in fact very plain-vanilla criminal cases, whether or not that deference to the IRS is actually serving the public interest at this point, or whether the Department could not proceed to… put together a criminal case showing a fairly straightforward false statement or a fairly [straightforward] shell corporation disclosure violation.”
The full testimony of each witness is available online here.
Senator Whitehouse, who has emerged as a leading voice for campaign finance reform, will use the information compiled in this hearing in his ongoing efforts to improve fairness and transparency in our system of elections.  Last year he was the lead sponsor of the DISCLOSE Act, which would have shined a light on secret spending by 501(c)(4) organizations and other groups.  The Department of Justice today expressed that inadequate disclosure requirements hamper their investigation of campaign finance violations.  Whitehouse has said he will reintroduce the bill in this Congress.

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