A political network associated with conservative billionaires Charles and David Koch has grown into a far-reaching, complex operation built around a maze of groups designed to protect its two hundred donors from disclosure, the Washington Post reports.
According to an analysis of recently filed tax returns and campaign finance reports by the Center for Responsive Politics and the Post, a coalition of seventeen politically active nonprofit groups backed by the Koch brothers' donor network received at least $407 million during the 2012 elections — a conservative estimate that does not account for the revenue of eight groups that have yet to file their tax returns for the latter half of 2012. The documents also show that the funds were distributed through a labyrinth of limited-liability companies that dissolved and reappeared under different names — a system designed to minimize disclosure by donors, whose contributions funded voter mobilization efforts and television ads critical of President Obama and congressional Democrats. The groups also swapped funds back and forth, which not only provided multiple layers of protection for the donors but also allowed the groups in question to claim they were spending the money on "social welfare" activities and thus qualify for 501(c)(4) tax-exempt status, the Post reports. Such maneuvers could be restricted under new regulations proposed by the Internal Revenue Service in November.
"It is a very sophisticated and complicated structure," said Lloyd Hitoshi Mayer, a University of Notre Dame Law School professor who examined the tax filings of some of the groups. "It's designed to make it opaque as to where the money is coming from and where the money is going....It would only be worth it if you were spending the kind of dollars the Koch brothers are, because this was not cheap." In a 2012 interview with Forbes, Charles Koch defended the need for venues that allow donors to give money without public disclosure, saying such groups provide protection from the kind of attacks his family and company have weathered.
According to the Post, two nonprofit groups within the coalition — the Freedom Partners Chamber of Commerce, whose board includes current and former Koch Industries officials and brought in nearly $256 million in 2012, and TC4 Trust, which raised more than $66 million in three years before it was shuttered in June 2012 — served as de facto banks, feeding money to groups downstream. Both organizations moved a large share of their funds via LLCs through an intermediary group, the Phoenix-based Center to Protect Patient Rights, which supported a wide array of conservative groups during the last two election cycles, including Americans for Prosperity, another member of the coalition, which received $44 million of the $140 million it raised during the 2012 campaign from Koch-linked feeder funds. Other groups in the coalition include American Commitment, the American Future Fund, Concerned Women for America, the Libre Initiative Trust, and Generation Opportunity.
It is unclear how much of the network's funds came directly from the Kochs or Koch Industries. "Koch's involvement in political and public policy activities is at the core of fundamental liberties protected by the First Amendment to the United States Constitution," Koch Industries spokesman Robert Tappan told the Post in an e-mailed statement. "This type of activity is undertaken by individual donors and organizations on all ends of the political spectrum — on the left, the middle, and the right. In many situations, the law does not compel disclosure of donors to various causes and organizations."
American Commitment president Phil Kerpen told the Post that many donors get involved in the network because they "value the privacy afforded to them by giving to these entities." Added Kerpen: "There are hundreds and hundreds of very successful and patriotic Americans that take part in the seminars....To suggest that anything that goes through any of these entities is Charles and David Koch is very misleading. There are a significant number of donors involved."