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Dark Money, Politics, And The Ways People Hide Big Political Donations


Earlier this month, two business partners of Rudy Giuliani were arrested on their way out of the country. They're accused of violating federal campaign finance laws. Part of their scheme allegedly involved funneling more than $300,000 from a shell company to a superPAC supporting President Trump.

We've been talking with some experts in election law, and many of them are surprised not at the size of the donation or the attempt to cover up the source of the funds - those things are actually pretty common. They're surprised that Lev Parnas and Igor Fruman didn't cover their tracks better because there are options for people who want to completely obscure big political donations.

And here to talk about that is Robert Maguire of Citizens for Responsibility and Ethics in Washington. Welcome.

ROBERT MAGUIRE: Thanks for having me.

SHAPIRO: Our colleague Jeff Brady talked to Lev Parnas before the arrest. Here's how he explained the donations.


LEV PARNAS: This is actually the first couple of times that I really started doing some bigger donations because I wanted to get notoriety for my energy company. And I thought it might be a great way to, you know, play with the big boys, as you call it.

SHAPIRO: Now that so-called energy company appears to have just been a shell company created weeks before the big donations. But if you imagine that Parnas came to you and said, here's what I want to do, and I want to hide the money, what would you have advised him?

MAGUIRE: Well, you know, America First Action, for example, the superPAC they gave to, has a 501(c)(4) social welfare arm that doesn't have to disclose its donors. It's run by essentially the same people out of the same address. It is nominally a social welfare organization that's supposed to do things that benefit the community. But these function, essentially, as stealth political groups that have the benefit of not disclosing their donors. So the easiest way for them to have avoided the situation they now find themselves in is just to have given to that arm of the group.

SHAPIRO: There's obviously a difference in transparency between the superPAC on the one hand and the (c)(4) on the other hand. Is there also a difference in how those groups can spend that money?

MAGUIRE: There is - sort of on paper, there are rules for these groups and how much political activity they can engage in. But the reality is that in practice, these groups can act essentially as stealth political committees. They can spend millions of dollars to buy tens of thousands of ads for months and months and months out before an election and not report that spending to the Federal Election Commission unless it's 30 days before a primary or 60 days before a general.

But there's also - they can give grants to other politically active 501(c)(4)s and count that as social welfare activity, and that creates this churn where you see sort of daisy chains of groups that give grants to each other to offset their political spending. So there's sort of a wealth of options for these groups to make sure that they are maximizing the amount of money they're spending on politics without disclosing any donors.

SHAPIRO: So if I'm trying to donate half a million dollars to a campaign in order to buy some influence and curry favor with a candidate, but I don't want the public to know, is there any way that the candidate can find out - 'cause I want them to know that I'm a big supporter of theirs, right?

MAGUIRE: That is actually the key of dark money. So we're not talking about no one knowing who is behind the group. We're saying the public doesn't know, but the candidates know who's funding these groups.

SHAPIRO: Given that there are these more secretive options available, why do you think Lev Parnas and Igor Fruman allegedly gave in a way that was so easy for them to get caught?

MAGUIRE: Well, I think if you listen to the clip, it kind of gives some indication of, they weren't sophisticated political donors. They realized the reality - that is, if you are a major donor, you are buying access to powerful people.

SHAPIRO: And indeed, there were photos of them with very powerful people, ranging from the governor of Florida to the president himself.

MAGUIRE: Precisely. What they didn't know so much is how to cover their tracks. And it's unfortunate that there are much more sophisticated political donors that know exactly how to do that and make sure that the public doesn't know who is funding these groups and who is being repaid once these people are in office. But it seems that in this case, we had two people who had just sort of dove in headfirst and ran into the reality that there are ways to do this where you don't get in a situation where they are now.

SHAPIRO: Robert Maguire of Citizens for Responsibility and Ethics in Washington, thanks for explaining this.

MAGUIRE: Absolutely. Thanks for having me.

(SOUNDBITE OF MELLOTRON VARIATIONS' "143 I LOVE YOU") Transcript provided by NPR, Copyright NPR.