FEC Drops Crossroads GPS Enforcement Cases

By Kenneth P. Doyle

Jan. 5 — The Federal Election Commission dismissed two newly revealed enforcement cases that alleged the conservative nonprofit Crossroads GPS, linked to Republican political adviser Karl Rove, broke campaign finance laws by failing to report spending on campaign ads and collecting undisclosed money earmarked for campaign advertising.

The FEC actions were revealed Jan. 5 by the liberal watchdog group, Citizens for Responsibility and Ethics in Washington (CREW), which filed complaints in the cases in 2012. Details, including how the six FEC commissioners voted on the cases, have not yet been revealed, though it appeared the commissioners deadlocked along party lines on one or both cases, leading to their dismissal without any penalty.

The cases were the latest in a series of enforcement matters in which the FEC effectively has given a green light to activities—by super political action committees and other campaign spending groups—that critics claimed are illegal. The commissioners deadlocked in other recently revealed cases involving such issues as whether groups allied with a candidate can use candidate-produced video in their ads and the extent to which a candidate can help raise money for allied groups before declaring candidacy.

Only one of the recent cases—involving a super PAC paying to air virtually an entire campaign ad originally produced for and aired by a candidate's campaign—has led to an FEC fine (See previous story, 12/14/15).

Some Questions Still Open

Questions such as the extent of disclosure required for certain corporate contributions to a super PAC apparently remain unresolved, as the FEC has not yet released the results of enforcement matters on these issues.

The FEC also has deadlocked on, or voted to dismiss, numerous cases involving charges that candidates illegally coordinated their activities with nominally independent super PACs and other groups. Some other coordination cases are believed to be pending.

In addition, some cases dismissed by the FEC, including one involving an earlier enforcement case against Crossroads GPS, have been challenged in court. These court challenges also remain pending (See previous story, 12/15/15).

Crossroads GPS is organized as a nonprofit organization under Section 501(c)(4) of the tax code and has claimed to be exempt from campaign finance reporting requirements applicable to FEC-regulated political action committees. Crossroads GPS says it is an issue-based, educational organization linked to an FEC-registered super PAC called American Crossroads.

A spokesman for Crossroads GPS, Ian Prior, told Bloomberg BNA in an e-mail that the organization was always confident allegations in the newly disclosed FEC matters would be dismissed.

“As we said in our responsive filings to the FEC, these allegations were completely frivolous,” Prior said. “From the beginning we had the utmost confidence that they would be dismissed, and obviously that was the case.”

Ad Spending Not Reported

CREW filed the complaint in one case—designated Matter Under Review (MUR) 6612—in July of 2012. It alleged that Crossroads GPS illegally failed to report its spending on TV ads it ran against three Democratic U.S. Senate candidates.

CREW argued the ads were campaign messages and could not be considered issue ads aimed at influencing policy because the candidates targeted held no public office at the time.

Crossroads GPS ran the ads against Democratic Senate candidates Heidi Heitkamp of North Dakota, Bob Kerrey of Nebraska and Tim Kaine of Virginia, none of whom were in office in 2012. Heitkamp and Kaine both were elected to the Senate, while Kerrey lost the election.

CREW said campaign finance law required spending for the ads to be reported as independent campaign expenditures advocating the election or defeat of a candidate, but Crossroads sought to avoid such reporting to maintain its tax-exempt status as a 501(c)(4) “social welfare” organization. Under Internal Revenue Service rules, such an organization cannot make campaigning its primary activity.

Millions Raised for Ohio Senate Race

The other case (MUR 6696), filed in November 2012, involved a CREW complaint against Crossroads GPS and Rove himself regarding an alleged appeal to raise $6 million specifically to fund independent expenditures in the 2012 Ohio U.S. Senate race. Incumbent Democrat Sherrod Brown won the election.

CREW cited Rove's reported comments at an August 2012 fundraising event that an anonymous donor gave Crossroads GPS $3 million specifically for the Ohio Senate race and told Rove it was a “matching challenge” dependent on the group raising another $3 million for the race. Crossroads GPS ended up spending $6.36 million on independent expenditures in the Ohio race, but did not disclose any donors in nine reports the group filed with the FEC.

CREW said disclosure was required for the money raised explicitly for campaign ads in Ohio. Additionally, the liberal watchdog said, Crossroads GPS also broke the law by soliciting donations to be spent on the Virginia, Nevada and Montana Senate races, but failed to disclose the donors.

CREW spokesman Jordan Libowitz told Bloomberg BNA in a phone interview that the organization was disappointed the FEC did not rule in its favor on the enforcement complaints. He added that CREW would wait for the FEC to release more documents before “deciding on our next course of action.”

To contact the reporter on this story: Kenneth P. Doyle in Washington at kdoyle@bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com