Romney: an "Investment" for the 1%?

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"People can invest what they want," billionaire industrialist David Koch recently told Politico.

Koch wasn't discussing the stock market or oil futures. He was talking money in politics: wealthy donors "investing" in elected officials, apparently with the expectation of getting a return. In total, donors like the Kochs, along with Sheldon Adelson, Harold Simmons, and "outside" groups have pledged to raise a total of $1 billion this election to elect Republicans, particularly President Barack Obama's opponent Mitt Romney.

With support from these deep-pocketed outside donors and organizations, Romney could be the first candidate in modern history to outraise and outspend the incumbent president. Much of that money will be spent funding a flood of ads in the next few weeks in an effort to reverse Romney's poll numbers.

"What I need you to do is to raise millions of dollars."

In the recently-leaked video of Romney speaking at a closed-door, $50,000-per-person fundraising event in Boca Raton, Florida last May, he described in clear terms the way deep-pocketed donors could help his candidacy:

"Frankly, what I need you to do is to raise millions of dollars."

How individuals could "raise millions" is not immediately clear. The Romney campaign itself can only accept direct contributions of $5,000 (though it can fundraise jointly with the Republican Party, which is how it can hold a $50,000 fundraiser -- the invitation explains that $5,000 goes to the candidate, $30,800 to the Republican National Committee, and the remainder to party committees). Donors could potentially "bundle" contributions by tapping their personal and professional networks to raise funds for the campaign, and if they do, their identities would remain secret, since Romney is the first presidential candidate in twelve years to hide the identities of his bundlers.

Almost all of the over $193 million raised by the Romney campaign itself has come from big donors, much of it from the financial sector. The top five companies whose employees and corporate PACs have donated to Romney's campaign (which is distinct from his Super PAC) are all banks: Goldman Sachs, JP Morgan Chase, Morgan Stanley, Bank of America, and the Credit Suisse Group. These industries were top donors to Obama in the 2008 campaign but have switched to the Romney camp.

Additionally, political donations from the private equity industry has soared in 2012 and largely gone to benefit Romney. The Boca Raton fundraiser, for example, was held at the home of controversial private equity manager Marc Leder, who made his fortune at Sun Capital Partners, a firm like Romney's Bain Capital. Sun Capital is known for taking over companies and raiding employees' pension funds while leaving workers without jobs or the retirement they had invested in -- about which more information can be found here.

At Leder's fundraiser for Romney, the candidate also decried the millions being raised by the Obama campaign, which so far has outraised Romney's campaign $432 million to $279 million.

But Romney failed to mention that support from nominally independent Super PACs and dark money groups gives him a significant financial edge over President Obama.

The way that donors at that Boca Raton fundraiser could more directly meet Romney's request for "millions of dollars" is to give to his Super PAC, Restore Our Future, which can raise and spend without limits but technically cannot coordinate with the campaign. If the giving habits of the event's host is any indication, this path seems likely. Leder has given $225,000 to Restore Our Future but just $2,500 to Romney's campaign. Leder is not alone. Top donors to Restore Our Future overlap significantly with donors to Romney's official campaign account, although they are giving exponentially more to the Super PAC, which can accept unlimited funds in the wake of the Supreme Court's Citizens United decision and its progeny.

Though Super PACs are prohibited under federal law from coordinating with candidates, "non-coordination" is a very fine line. Both the campaign and Restore Our Future use the same consultants and media placement firms, for example, and the Super PAC was formed and is led by veterans of Romney's 2008 presidential run -- it was founded by Carl Forti, who was Romney's campaign strategist, its current treasurer is Charles Spies, who was Romney's campaign lawyer, and its chief fundraiser is Steve Roche, who had raised funds for Romney's 2008 campaign and early in the 2012 campaign. Romney has also appeared at Restore Our Future fundraisers and characterized donations to the Super PAC as contributions to his campaign.

Romney's Restore Our Future has raised $96 million so far, and will likely surpass the $100 million goal it set earlier this year. (In contrast, the Priorities USA Super PAC, which is backing Obama, has raised only $31 million.)

Coupled with support from other Super PACs like Rove's American Crossroads and dark money groups like David Koch's Americans for Prosperity, Romney and his allies are expected to significantly outspend Obama and his backers.

"Independent" Spending Vital to Romney's Chances

Super PACs -- made possible by the U.S. Supreme Court decision in Citizens United v. FEC and the related DC Circuit decision Speechnow v. FEC -- can accept unlimited, multi-million dollar contributions and spend unlimited amounts on independent ads supporting candidates. "Dark money" nonprofits, enabled both by Citizens United and the 2007 case Wisconsin Right to Life, are doing the same but keeping their donors secret, and sometimes even using this cloak of secrecy as a selling point. Though big money has long been influential in elections, Citizens United opened the floodgates in an unprecedented way.

"Independent expenditures, including those made by corporations, do not give rise to corruption or the appearance of corruption," Justice Anthony Kennedy wrote in the now-infamous 2010 decision Citizens United v FEC, which paved the way for Super PACs and opened the doors for dark money nonprofits to run ads calling for the election or defeat of federal candidates. "The absence of prearrangement and coordination ... alleviates the danger that expenditures will be given as a quid pro quo for improper commitments from the candidate."

That reasoning was questionable then and appears even more flawed now.

Romney's presidential chances will depend on support from "independent" Super PACs and dark money groups running ads to support his campaign. That spending would have been all but impossible pre-Citizens United.

Top donors to Romney's Restore Our Future have a lot to gain under a Romney presidency. Its biggest donor is Sheldon Adelson, who along with his wife Miriam has given $10 million. Adelson would profit handsomely through his China-based casinos if Romney were to aggressively crack down on China's currency manipulation. (Adelson initially backed Newt Gingrich and the Super PAC supporting him in the Republican primaries.)

Another top donor, John W. Childs, has given $1 million to Restore Our Future and would benefit from Romney's tax treatment for private equity managers. Also giving $1 million is The Renco Group, a holding company owned by Ira Rennert that has lobbied hard for Congress' backing in a dispute it has had with Peru over environmental damage caused by the company's subsidiary. Other big donors include $1 million from notorious hedge fund manager John Paulson, who packaged "made to fail" investments for Goldman Sachs, and $7 million from Texas homebuilder and perennial Republican donor Bob Perry.

Harold Simmons has given $11 million to American Crossroads, another Super PAC supporting Romney (and whose political director Carl Forti founded Restore Our Future) that has spent $15.9 million on anti-Obama ads so far this election. Simmons stands to make a lot of money if a Romney administration changes the rules on nuclear waste storage and his company wins the contract.

With Romney's current poll numbers the flood of ads in coming weeks from Restore Our Future and American Crossroads may be key to keeping his presidential hopes alive. And if he wins Romney could reasonably be indebted to those funding the ads.

So for the million-dollar donors to these Super PACs, it is a small investment for a potentially big return -- which could certainly give the appearance of a quid pro quo between donations and policy decisions.

Romney's Biggest Support from "Dark Money"

Because most donors to Super PACs must be disclosed, the public can at least track whether contributions result in political payback or give the appearance of quid pro quo corruption. But most of the money behind Romney is flowing through dark money nonprofit groups that do not disclose their funders, making it all but impossible to assess whether a donor's "investment" pays off through favorable policy.

Rove's Crossroads GPS has reportedly spent $41.7 million influencing the presidential elections and David Koch's Americans for Prosperity has spent $27 million on the race. As of mid-August, just these two groups have spent far more than all Super PACs combined.

Other dark money groups like the American Future Fund are also getting active in the presidential campaign, recently airing two ads that focus on the vice-presidential side of the ticket (and describing Vice-President Joe Biden as a "drunk uncle").

Though Romney's Super PAC Restore Our Future does disclose its donors, some of its money remains secret. It has received one million each from F8 LLC and Eli Publishing, shell corporations that appear to do little else besides provide donors a way to anonymously funnel money to political organizations. Former Bain executive Edward Conard tried using the same scheme last year, hiding his $1 million contribution by forming a sham corporation called W. Spann LLC, but revealed his identity after critics filed a complaint with the FEC.

Although the American public may remain in the dark about the sources of these funds, there is nothing keeping donors from making their identities clear to the politicians benefitting from their largesse -- and they likely have the same expectations for a return as any other investor.