Rules of the Game: Obama’s Nonprofit Carries on Dubious Tradition

Posted March 10, 2013 at 6:30pm

A Democratic rising star who campaigned on a platform of sweeping ethics changes draws fire once in power, after his top campaign donors bankroll a secretive nonprofit promoting his agenda.

Sound familiar? It’s a story that should ring a bell for New York Gov. Andrew M. Cuomo, who’s weathered a storm of bad press since he took office in 2011 over a tax-exempt group known as the Committee to Save New York that’s spent some $17 million touting his policies on TV.

Like Organizing for Action, President Barack Obama’s controversial nonprofit advocacy arm, the Committee to Save New York is organized as a (501)(c)(4) social welfare group, and it has drawn fire from watchdogs complaining about transparency and special interest access. The New York group’s receipts include some $2 million from gambling interests with a stake in Cuomo’s casino policies.

But unlike Obama’s group, the Committee to Save New York is sitting out its hero’s latest round of budget fights. Instead, Cuomo has reportedly turned to the New York Democratic Party to help him raise some $5 million to push his budget priorities.

It’s a turnabout that Susan Lerner, executive director of Common Cause New York, touted as “a model for how things should be handled.”

Cuomo’s story serves as both an example and a cautionary tale for Obama, whose nonprofit arm carries on a long, if dubious, tradition of politically connected nonprofit groups that have heaped trouble on the elected officials who ran them.

These range from the Citizens for the Republic Education and Research Foundation, a nonprofit that grew out of Ronald Reagan’s 1976 presidential campaign that eventually ran afoul of the Federal Election Commission, to Celebrations for Children, a charity that provided a convenient vehicle for House Majority Leader Tom DeLay, R-Texas, to raise big money at the 2004 GOP Convention. DeLay set out to reward the charity’s donors with parties and yacht cruises, but he dropped that plan amid public outcry.

Organizers for Obama’s group attempted to mollify critics last week when they announced that the nonprofit would take no corporate or foreign donations and would report all contributions of $250 or more every quarter. Far from promoting special interest access, the group’s “mission is to put the power back in the hands of the American people,” National Chairman Jim Messina insisted in an email to OFA supporters.

But watchdogs remain unconvinced and have continued calls for the group to close down. Organizing for Action is “a national scandal waiting to happen,” Democracy 21 President Fred Wertheimer said. The group is unprecedented as an official outgrowth of a presidential campaign, he noted. It’s run by former Obama aides and will leverage his campaign’s massive email list and sophisticated organizational apparatus.

Fueling critics are reports that bundlers who pull in $500,000 or more will enjoy quarterly meetings with Obama. During a daily briefing last week, White House Press Secretary Jay Carney protested that “any notion that there’s a set price for a meeting with the president is just wrong.” But Messina said only “we’ll see” last week when asked on CBS’ “This Morning” whether Obama would attend a “founder’s summit” for the group’s donors in Washington, D.C., this week.

At a minimum, Obama’s close links to Organizing for Action bode poorly for his alleged ethics agenda. His embrace of an unrestricted super PAC in the 2012 election has already disillusioned reform advocates. So have his failures to fulfill pledges to address the broken public financing system and the corporate money that flowed to both to the Democratic National Convention and to his inauguration.

Still, Obama had an opportunity this year to urge the IRS to enforce the regulations governing politically active tax-exempt groups, which in 2012 spent hundreds of millions in undisclosed dollars on campaign ads. He also had a chance to overhaul the fractious FEC, or at least install new commissioners.

But now that his nonprofit has emerged as a ripe IRS or FEC target, it’s hard to imagine Obama egging on those agencies to enforce the rules more vigorously. Likewise, Democrats on Capitol Hill could find it awkward to revive disclosure legislation that in the runup to the 2014 elections that could directly affect Obama’s group. (OFA is already launching gun safety ads aimed at specific lawmakers.)

By siphoning money and institutional support away from the Democratic National Committee, OFA may inadvertently fuel calls for further campaign finance deregulation. Some argue for lifting limits on political parties, which are increasingly overshadowed by outside groups and now operate under stricter rules than big-spending super PACs.

At worst, OFA opens a potential loophole in government ethics regulations designed to protect elected officials from influential lobbying interests. The group violates no obvious tax or campaign finance rules, election lawyers say.

Yet the prospect that members of Congress might follow the president’s lead and set up similar pet nonprofits alarms watchdogs. While OFA has agreed to voluntarily report its donors, such groups technically operate outside the disclosure rules, and there’s no guarantee that copycat organizations would follow OFA’s lead and open their books.

“This is a terrible and incredibly dangerous precedent,” Wertheimer said. “Because if the president as a federal officeholder can do this, it’s going to inevitably lead to other federal officeholders doing the same thing.”