- The role of dark money in nonprofits is going to have its day in the Supreme Court.
- The plaintiff, and many of the filers of 22 amicus briefs, are connected to the influential ultrawealthy Koch family.
- The ruling could have far-reaching consequences for money and politics.
- Visit Business Insider's homepage for more stories.
Billionaire Charles Koch hails from one of the most influential (and wealthy) families in family. Behind Koch Industries, a conglomerate that produces everything from toilet paper to crude oil, the Kochs are known for reshaping American politics by putting millions behind conservative causes like lowering taxes and undercutting climate science — and for contributing to likeminded several think tanks and nonprofits.
Now one of these Koch-affiliated groups is headed to the Supreme Court, which said on January 8 that it would hear its lawsuit against the state of California's requirement that nonprofits disclose the names and addresses of people who have donated more than $5,000.
Based on how the court rules, the case could have sweeping ramifications for donor transparency and campaign finance. It comes on the heels of the Citizens United decision, which allowed nonprofits and other groups to pour limitless money into elections.
In his 2010 State of the Union address, President Barack Obama criticized the Citizens United ruling in front of members of the Supreme Court, saying it had "reversed a century of law that I believe will open the floodgates for special interests — including foreign corporations — to spend without limit in our elections."
During the remarks, Justice Samuel Alito seemed to shake his head and mouth "not true," according to CNN.
Since then, so-called dark money has poured into elections; the past federal election saw at least $100 million routed through nonprofits, according to the Brennan Center for Justice, a left-leaning think tank dedicated to legal issues named for former Supreme Court Justice William J. Brennan.
Daniel Weiner, deputy director of the Brennan Center's Election Reform program, told Insider that the groups involved in this particular case see ending disclosure laws as "the unfinished business of the Citizens United decision."
In fact, Citizens United cosigned a brief filed by the Free Speech Coalition in the current Supreme Court case.
The case features many amicus briefs from groups supported by the Koch family
The case features a petition from a charitable nonprofit, the Americans for Prosperity Foundation (AFPF), and amicus briefs from 22 other groups. AFPF and 15 of the amicus brief filers have received more than $35.3 million from Koch family foundations and two donor-advised funds known to be used by the Koch family since 2015, according to an analysis of IRS tax records by the Center for Media and Democracy. (AFPF is connected to the Charles Koch-backed Americans for Prosperity, or AFP.)
The groups' day in court stems from a legal battle over one small aspect of California law, which currently requires that nonprofits disclose the names and addresses of people who have donated more than $5,000. AFPF has been fighting that requirement in court, citing free speech and threats to donors.
Bruce R. Hopkins, who practices nonprofit law and teaches it at the University of Kansas School of Law, told Insider that he wasn't surprised the Supreme Court took the case.
"This particular Supreme Court is very strong on free speech rights," Hopkins said, something he called one of Chief Justice John Roberts' favorite areas.
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One entity that filed an amicus brief, the prominent libertarian think tank Cato Institute, was founded as the Charles Koch Foundation in 1974 until the name was changed in 1976. The Cato Institute has received $10.3 million from Koch foundations and affiliated donor-advised funds since 2015, according to the CMD. David Koch, who passed away in 2019, served on its board for nearly 30 years; Charles Koch is still a director emeritus, per its 2019 annual report.
When asked about Koch groups donating to some of the groups involved in the case, Hopkins said that he suspects they "had a lot to do with these amicus briefs being filed, and there's nothing wrong with that." He added that it wouldn't be the first time that this kind of thing has happened.
"I'm quite confident that there has been a lot of work behind the scenes by the foundation to get these briefs filed. And the court understands that, I mean, obviously they know this," he said.
When reached for comment, AFP directed Insider to AFPF communications, and AFPF directed Insider to CEO Emily Seidel's public statement. AFPF declined to provide a statement on fellow Koch groups' affiliations with petitioners.
An argument before the court is that anonymity is core to protecting donors — at the cost of transparency
The AFPF wrote in its petition that donors are kept anonymous for their safety's sake, citing doxxing, death threats, a bomb threat, and a cyberattack.
The brief filers also argue that donors fear the economic consequences of their contributions becoming public, including the Proposition 8 Legal Defense Fund, which seeks to ban same-sex marriage through the amendment of the same name.
"Employers of Prop 8 supporters have been targeted, resulting in some of them having to resign, take a leave of absence, or otherwise lose professional opportunities," the brief states.
Death threats are "unacceptable," but should not be conflated with backlash towards businesses, Weiner said.
"To talk about boycotts in the same breath as death threats to me represents a fundamental misunderstanding of what the First Amendment is all about," Weiner told Insider. "The right to freedom of speech and expression does not include the right to be free from criticism. It often seems like these groups try to intentionally blur the distinction here … Criticism is as American as apple pie."
Doing away with disclosure laws as the next step after the Citizens United decision
Many of these Koch-affiliated groups, according to Weiner, view invalidating disclosure laws entirely as "the unfinished business of the Citizens United decision."
The Citizens United decision held that corporations and other outside groups could spend limitless amounts of money on elections. It allowed nonprofits who don't disclose their donors to funnel "dark money" to super PACs, which do not have spending and contribution caps.
Read more: Charles Koch doubles down on saying he 'screwed up' with partisanship, but he's still supporting a Republican in the Georgia runoffs
As Obama warned, the Citizens United ruling opened the floodgates to dark money. The Brennan Center reports that over $1 billion in dark money has been spent since 2008, and the past federal election included at least $100 million of contributions routed through nonprofits, dwarfing previous data dating back to 2006. And those figures are only the tip of the iceberg, since they only account for the giving reported to the FEC. The Center for Responsive Politics says it is closer to $750 million.
Wealthy donors are behind much of this giving. Most of the $2.9 billion spent by super PACs in federal elections from 2010 to 2018 came from high-net-worth individuals. In the 2018 election cycle, the top donors accounted for nearly 78% of all super PAC spending.
The consequences of a potential Supreme Court ruling in favor of the Koch groups
The ramifications of a ruling in favor of AFPF would be limited if the court's ruling is only focused on whether the Attorney General is justified in ordering Americans for Prosperity to disclose their donors to the government. But if the analysis isn't narrowly tailored, it could have far reaching consequences.
"If they issue some sort of broad, very ideological decision like Citizens United that fundamentally questions the value of transparency rules relative to the supposed infringement on First Amendment-protected rights, then you could potentially knock out one of the last standing pillars of the campaign finance system," warns Weiner.
Hopkins said that he may end up eating his words, but he does believe that AFPF will win the case whenever it ends up being heard.
"If I was forced to bet, I would say that the Supreme Court will rule in favor of the charities and will rule that the wrong standard was applied, and that the free speech rights of the charities had been — and the donors, for that matter — have been violated," he said.
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