Pro-Ernst dark money group may get sued over undisclosed finances

UPDATE: Campaign Legal Center filed suit against Iowa Values on February 12. Original post follows.

A group formed to support U.S. Senator Joni Ernst’s re-election may face a lawsuit over its ongoing failure to disclose its fundraising and spending.

Iowa Values, created as a 501(c)4 political nonprofit, has not registered with the Federal Election Commission. The FEC has yet to act on a complaint filed more than a year ago, seeking to bring the group into compliance with campaign finance law.

The Campaign Legal Center, a nonprofit organization supporting public access to the political process, has asked a U.S. District Court in Washington, DC to find that the FEC failed to comply with a court order to address the Iowa Values matter. If the court does so, federal law allows the center “to sue Iowa Values directly” to force disclosure of its financial activity. That option is on the table, an attorney for the center told Bleeding Heartland on February 8.

GROUP SOUGHT TO BUILD A “WINNING COALITION” FOR ERNST

Brian Slodysko reported for the Associated Press in December 2019 on emails and a strategy memo showing that Iowa Values, founded by Ernst’s political aides, “worked closely” with the senator’s campaign to promote her re-election. The memo described efforts to “isolate the ‘firewall’ slice of the electorate” for Ernst and target messages to those voters. It outlined plans for a “ground game” and paid advertising to mobilize key supporters.

Tax-exempt 501(c)4 organizations are not required to disclose their donors and for that reason are commonly known as “dark money” groups. They “may engage in political campaign activities if those activities are not the organization’s primary activity,” under Internal Revenue Service rules. However, the Federal Election Campaign Act requires groups to register as political committees and file regular disclosures if they raise and spend more than $1,000 in a calendar year and demonstrate through their actions that their “major purpose” is to influence a federal election.

The Campaign Legal Center filed an administrative complaint with the FEC in December 2019. Citing documents obtained by Slodysko as well as Facebook and Google political ad archives showing thousands of dollars in spending to promote Ernst, the center argued that Iowa Values met the definition of a “political committee” subject to FEC reporting requirements.

For example, a June 2019 news release from Iowa Values hailed a “digital ad blitz” and door-to-door campaigning, “just the beginning of an election-long effort” to highlight Ernst’s work. The strategy document spoke of communicating with certain voters needed as part of the senator’s “winning coalition.”

After more than six months passed with no FEC action, Campaign Legal Center filed suit in June 2020. By that time, information released by Google and Facebook showed Iowa Values had spent tens of thousands of dollars on digital advertising. The plaintiffs’ court filing noted, “there is little evidence of Iowa Values making any public communications in 2019 other than those aimed at supporting Senator Ernst’s reelection.”

Taken together, Iowa Values’s paid public communications demonstrate its major purpose of reelecting Senator Ernst. These targeted digital advertisements—particularly through their focus on Senator Ernst’s character as a “leader,” unconnected from any meaningful discussion of legislative issues—are susceptible of no reasonable interpretation other than as electoral advocacy for Joni Ernst.16 The ads’ electoral purpose is even more apparent when considered along with Iowa Values’s contemporaneous strategy memo describing the organization’s plans to “communicate directly with specific segments of the electorate that will be determinant in winning or losing in 2020.”17

While that lawsuit was pending, Iowa Values put far more money behind the Ernst re-election project.

GROUP GAVE $1.45 MILLION TO SUPER-PAC BACKING ERNST

In July 2020, Ernst supporters set up a new super-PAC called Iowa Values Action, registered at the same Clive address as Iowa Values. The super-PAC’s sole focus was Iowa’s U.S. Senate race; it spent $2.2 million to benefit Ernst, mostly on negative advertising about her Democratic challenger, Theresa Greenfield.

FEC filings by Iowa Values Action show $1,451,000–about 65 percent of all contributions to the super-PAC–came from Iowa Values, another sign that the 501(c)4 group’s primary focus was influencing a federal election.

The FEC never responded to the Campaign Legal Center’s lawsuit, and District Court Judge Royce Lamberth, a Ronald Reagan appointee, ruled in favor of the plaintiffs in October 2020. His default judgment order required the FEC to act within 90 days on the administrative complaint against Iowa Values.

That deadline came and went on January 12, 2021.

JUDGE CONFIRMS PLAINTIFFS HAD STANDING TO SUE

Despite regaining a quorum in early December, the FEC took no steps to require Iowa Values to register as a political committee. Asked about the inaction, an FEC spokesperson told Bleeding Heartland on February 8 that the agency does not comment on litigation.

Perhaps the commission was banking on the lawsuit being derailed by some other means. Two days after the District Court issued its order in October, the U.S. Department of Justice took the unusual step of intervening in the case to assert the plaintiffs did not have standing. The Campaign Legal Center’s senior director of trial litigation, Adav Noti, called the Justice Department’s move “shady and completely improper.” He explained to Iowa Starting Line’s Elizabeth Meyer,

“For DOJ — which by law has no role in this case — to insert itself after a judgement has been issued, and to only do that after the judgement appears to be causing some political harm to the President’s ally, it looks terrible, and it’s exactly why the Department of Justice has no role in these cases,” Noti told Starting Line. “They really should not have gotten involved. They have no place in the matter, and by inserting themselves they’ve made it look like the Department of Justice is taking a political position rather than a legal one.”

Judge Lamberth ruled on February 5 that “well-established law” gives the center standing to sue. The organization has demonstrated it suffered an “informational injury,” due to Iowa Values’ failure to disclose its contributions, expenditures, and debts.

“A REAL HARM TO THE DEMOCRATIC PROCESS”

The Campaign Legal Center filed a new motion in District Court on January 27. Plaintiffs noted that the FEC had not “provided any evidence” that it acted on the Iowa Values complaint and did not respond to inquiries about its intentions. They asked the court to “find that the FEC has failed to conform to this Court’s Default Judgment Order,” and that the agency’s failure means the center “is entitled to sue Iowa Values directly ‘to remedy the violation involved in the original complaint.’”

Erin Chlopak, director of the center’s campaign finance strategy, told Bleeding Heartland in a February 8 telephone interview that the organization hadn’t made any final decision on how to proceed. But she said a lawsuit against Iowa Values “is certainly within the range of options on the table,” if the District Court finds the FEC didn’t conform to its order.

Chlopak noted that the Federal Election Campaign Act foresaw this kind of situation, and therefore allows someone who filed an administrative complaint to sue if “the FEC didn’t do its job.” She added that “our preference” would be for the agency to enforce federal campaign finance laws. That said, “we may be prepared to step in” if the FEC won’t act.

The most important issue underlying this legal dispute is “transparency of election spending,” Chlopak added. Federal law stipulates that if a group’s “primary purpose” is to be involved in election campaigns, the group must register as a PAC and disclose its fundraising and spending. “The whole reason for that is the public needs that information to make informed decisions when they go to vote.”

In this case, a group’s announced purpose was to help a senator in a highly competitive race get re-elected, Chlopak noted. Going into the election, voters weren’t able to learn who was funding the Iowa Values effort. “That’s a real harm to the democratic process.”

Bleeding Heartland will update this post as needed with legal developments.


FILES

Administrative complaint the Campaign Legal Center filed with the Federal Election Commission on December 19, 2019

Lawsuit the Campaign Legal Center filed in U.S. District Court on June 30, 2020

District Court’s October 14, 2020 default judgment order requiring the FEC to act on the administrative complaint within 90 days

Campaign Legal Center’s July 27, 2021 motion seeking an order that the FEC has failed to conform to the default judgment order

District Court’s February 5, 2021 order finding that the Campaign Legal Center has standing to bring this case

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