by Robert Donachie · October 10, 2017
Media Matters chief David Brock has personally watched over and benefited from a scheme to hide donor identities that allowed progressives to funnel untraceable millions to initiatives against conservative and GOP causes around the nation, a complaint filed Tuesday with the Federal Election Commission charges.
Andrew Kerr details in the complaint obtained by The Daily Caller News Foundation how Brock has allegedly overseen a sleight of hand operation to obscure who is donating money to a super PAC in which he has a vested personal interest.
Kerr is a former employee of a major American technology firm. He has spent the last year parsing through and collating data on American Bridge’s nonprofit and political arms.
The complaint centers on a cost-sharing arrangement between American Bridge 21st Century Foundation, a 501(c)(4) nonprofit, and a super PAC sharing its name, American Bridge 21st Century.
Kerr claims that the nonprofit has overpaid the super PAC for work done on behalf of the foundation — an action that the complaint alleges may violate FEC regulations and federal laws governing fraud and contribution reporting requirements. In other words, the complainant is alleging the foundation is apparently transferring donations to the political action committee in the form of compensation for work done through shared employees.
The FEC requires that super PACs, like American Bridge 21st Century, publicly disclose their donors. The foundation, on the other hand, is not beholden to the same rules, which presents a potential loophole for political groups to hide donor identity. If a donor gives to the foundation, which in turn transfers the money to the super PAC, their identity is “hidden” from the public.
Kerr wants the FEC to investigate the cost-sharing arrangement between the American Bridge foundation and the PAC, to see if the employee timesheets at the foundation are straight. He suspects the wages and worker hours do not correspond to the amount of work the foundation billed, because the foundation has never reported a single employee to the IRS.
If American Bridge does not produce the timesheets, it’s impossible to determine whether the foundation is making legitimate reimbursements, or simply funneling money to the PAC, the complaint charges.
The entire operation ties back to Brock, who sits on the board of directors of both American 21st Century and American 21st Century Foundation. He also draws a salary from each, according to Form 990 filings with the IRS.
Brock did not immediately respond to requests for comment from TheDCNF.
Many of the groups in Brock’s network, including Media Matters and the various arms of American Bridge, are situated just over a mile from the White House and the U.S. Capitol, in two floors of an office building in Northwest D.C.
Here’s how the alleged scheme works.
Kerr contends that the foundation and the super PAC’s cost-sharing arrangement resulted in the evasion of the requirements of federal law requiring the disclosure of donor identity to the super PAC.
The complaint says the arrangement created a “system” where contributions marked for the PAC would first go to the foundation and then be transferred to the PAC as “Overhead & Staff Expenses.” Since the foundation is not required to report the identity of donors to the FEC, this arrangement would allow the foundation to hide who is funding the PAC.
The foundation and the PAC entered into the cost-sharing arrangement, known as a “common paymaster agreement,” in March 2011, according to both group’s filings with the IRS. The arrangement allows the PAC and the foundation to identify as one paymaster when cutting paychecks, so, for example, a shared employee can receive one check rather than two.
So, say an employee works for American Bridge and splits time during one pay period roughly 70/30 between the super PAC and the foundation. Instead of getting paid $700 from the super PAC and $300 from the nonprofit arm, the employee receives a single $1,000 check from the super PAC.
The super PAC is then reimbursed from the foundation for the $300 it covered on the nonprofit’s end.
The foundation has paid the super PAC more than $10 million from March 2011 to June 2017, reporting the costs as “shared expenses,” under the common paymaster agreement. Those expenses include shared office space, administrative costs, and, most importantly, shared employees.
The foundation told the IRS in its 2013 filing for tax-exempt status that it shares “some resources, facilities and employees” with the super PAC, but it does not list a single employee on its IRS Form 990, an annual filing required to keep up its tax-exempt status. The foundation has actually never listed an employee on any of its 990 forms.
Although American Bridge’s nonprofit arm paid out roughly $6.9 million in employee compensation from 2011 to 2015, the latest publicly available year of IRS reports, the foundation reported zero employees in that time frame.
Form 990s do not require them to list all employees, only “key employees” and those making over a certain amount of money.
American Bridge did not immediately respond to request for comment from TheDCNF.
The form includes a section — Statement of Functional Expenses — that provides some details into the amount the foundation spent on office space, technical equipment, news subscription lists, and employee compensation.
A 501(c)(4) social welfare organization, like the foundation, is not barred from participating in political activity, so long as it’s a secondary mission, according to IRS law.
The foundation’s total expenditures to the super PAC from July 2013 to December 2015 appear to cross the 50 percent threshold designated by the IRS, according to its Form 990s over from that period. This could call the foundation’s tax-exempt status into question.
The foundation told the IRS in 2013 that it “tracks its expenses, including the use of timesheets for its employees,” to ensure that “political activities do not become a majority of its activities in the course of a fiscal year, and to ensure that all required taxes will be paid under Internal Revenue Code.”
The accounting shows that the nonprofit spent $7.4 million on said “shared expenses.” Roughly 92.5 percent of that sum went toward employee compensation.
Kerr is calling for the FEC to do a thorough review of employee timesheets for every pay period from 2011 to at least 2015. Timesheets would show documentation for what work was done, the exact wages paid and to see if the foundation can even materialize said reports.
This should not be a problem for the foundation since it has told the IRS it keeps documented records.
American Bridge also runs its own “transparency database” for conservative causes, which documents the “flow of money among conservative donors, organizations, and candidates.” An organization committed to such transparency should not be opposed to releasing Kerr’s requested information.
If American Bridge cannot produce these timesheets when, or if the FEC asks for them, it could lose its 501(c)(4) status. Furthermore, if there are no records of work completed for the foundation on behalf of the super PAC, it would call into question whether those millions were simply funneled from the foundation to the super PAC.
Here’s why it matters.
American Bridge 21st Century PAC is a bastion of the Democratic Party and liberal organizations, providing talking points, research and rapid response to progressive candidates nation wide.
It sells itself as “the Democratic epicenter of opposition research and rapid response in presidential and Senate elections.”
The super PAC touts $311,685,223 worth of TV airtime for Bridge-research and video content since 2011, according to a leaked memo from Brock to PAC donors obtained by The Washington Free Beacon. The PAC also reports over 18,000 stories placed based on Bridge research since 2011.
The seals of a number of entities under Brock’s banner appear on the front page of the memo: Media Matters for America, American 21st Century super PAC, Citizens for Ethics and Responsibility, a progressive watchdog group also under the Brock banner, and Shareblue, a liberal news site.
Brock lays out American Bridge’s mission through the 2020 election cycle in the memo. The top initiatives include defeating Trump, “either through impeachment or at the ballot box,” and changing “the balance of power by measurably impacting US Senate, gubernatorial, and state legislative races.”
The mission of American Bridge is to “sustain a nonstop campaign against Trump, his administration, and Republicans who enable him.”
“American Bridge will make running as a Republican candidate in the next four years painful,” the memo reads. “We will not only damage Trump, but also the candidates who enable and support him.”
American Bridge was one of the loudest voices in the room calling for a special prosecutor to investigate the president’s connections to Russia in the spring, and has published a series of “Trump Accountability Reports,” aimed at “accountable, transparent and held in check.”
The political initiatives of American Bridge are clear and well articulated, and its connections to Brock are undeniable. If Kerr’s projections are correct and the foundation amounts to a slush fund for the super PAC, it could call into question a number of entities in Brock’s political network.