Q&A: Householder Corruption Case Puts Spotlight On 'Dark Money'

According to the FBI, Generation Now paid for pro-HB6 mailers like this one. So-called "dark money" groups like Generation Now are not legally required to disclose their donors.
According to the FBI, Generation Now paid for pro-HB6 mailers like this one. So-called "dark money" groups like Generation Now are not legally required to disclose their donors. [FBI]
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Updated: 9:50 a.m., Friday, July 31, 2020

A federal grand jury Thursday indicted Larry Householder, and his statehouse colleagues voted to remove him as Speaker of the Ohio House. At the heart of the corruption case against Householder is a so-called “dark money” group called Generation Now.

The FBI says Generation Now received about $60 million from Company A, widely known to be Akron-based FirstEnergy. Prosecutors say that money won the speakership for Householder and secured passage of a bailout for FirstEnergy’s nuclear plants.

Nonprofits like Generation Now are legal, and they’ve become more prominent in politics in the decade since the Supreme Court’s Citizens United decision in 2010, which allows for unlimited corporate spending in elections.

“Dark money” nonprofits, which existed before Citizens United, are subject to few rules on how they raise and spend money, said Erin Chlopak, the director of campaign finance strategy for the Campaign Legal Center.

“Aside from not being permitted to make contributions to candidates, no, there aren’t a lot of restrictions on how c4s can spend money to influence elections and who they can get that money from,” she said.

In the wake of the Householder charges, Ohio lawmakers have proposed new campaign finance rules. And Gov. Mike DeWine this week said he’d like 501(c)4s to be more transparent about their donors.

“Look, I would favor total transparency,” he said at a COVID-19 news conference Wednesday. “So the contributions that are given would have to be disclosed. What I don’t know, and I’ve asked my team to look at this, is what we can do based upon the U.S. Supreme Court case of Citizens United.”

ideastream’s Nick Castele joined All Things Considered host Tony Ganzer to explain how these groups work.

What are these dark money groups? Why do we call them that?

These are nonprofit companies. In tax code they’re known as 501(c)4s. Technically, they’re known as “social welfare” groups, so in theory they’re dedicated to issues and causes. But of course they’re causes that cross paths with politics. Now the IRS says politics cannot be their primary purpose, but the truth on the ground is that many are quite political.

Here’s Catherine Turcer with Common Cause Ohio. She supports reforms and more transparency and she says one way that Generation Now went astray is by allegedly being focused entirely on politics, entirely on winning an election and getting a nuclear bailout.

“There are lots of c4s that are engaged in lobbying, for example,” Turcer said. “There are c4s that, for example, are promoting some candidates. I think the difference really here is this is all they did.”

Now c4s don’t have to report who is writing them checks, which is why we call them “dark money” groups, we can’t see who’s behind them. And there’s no limit to how much a company or an individual can give them.

It seems like it might be the Wild West for these groups. Is it, or are there any rules that they have to follow?

There are some rules that they’re supposed to follow. One, in theory, is not being primarily focused on politics. They’re also supposed to be independent, that is, not run by the people whose candidacy they’re supporting, and not coordinating with those campaigns.

“We have pretty loosey-goosey coordination rules, but what is very clear is that a nonprofit in Ohio cannot be a puppet of somebody who is an elected official or a candidate for office,” Turcer said.

And you see the FBI in the complaint laying out what they say is the evidence that Generation Now was, in fact, Householder’s puppet, that he was at the meetings, he was deciding how to spend the money and he was talking with candidates about it, too.

Now these groups can’t give money directly to candidates’ campaign committees, but they can run ads supporting or attacking candidates on the air.

Let’s go back to the group in Ohio, Generation Now. What did it spend its money on?

A few examples laid out in the FBI complaint are that money bought broadcast ads and mailers supporting candidates that were on so-called “Team Householder.” Money also went to signature collection firms so that they’d have a conflict of interest and not help collect signatures to repeal HB6, allegedly.

It’s also alleged that the money paid for campaign staff. As well as personal uses, allegedly, such as settling a lawsuit against Householder that was related to an out-of-state mining company that owed some money to a bank. And the FBI also alleges that money paid off expenses related to Householder’s home in Florida and some credit card debt.

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