December 4, 2010

New Super PACs spent $83.7 million on election

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By T.W. Farnam | Washington Post

The newly created independent political groups known as super PACs, which raised and spent millions of dollars on last month’s elections, drew much of their funding from private-equity partners and others in the financial industry, according to new financial disclosure reports.

The 72 super PACs, all formed this year, together spent $83.7 million on the election. The figures provide the best indication yet of the impact of recent Supreme Court decisions that opened the door for wealthy individuals and corporations to give unlimited contributions.

The financial disclosure reports also underscore the extent to which the flow of corporate money will be tied to political goals. Private-equity partners and hedge fund managers, for example, have a substantial stake in several issues before Congress, primarily the taxes they pay on their earnings.  

“Super PACs provide a means for the super wealthy to have even more influence and an even greater voice in the political process,” said Meredith McGehee, a lobbyist for the Campaign Legal Center, which advocates for tighter regulation of money in politics.

American Crossroads, a conservative super PAC that outspent its peers, pulled in six- and seven-figure donations from the financial industry. That included $500,000 from Anne Dias-Griffin, founder of the Aragon Global Management hedge fund, and her husband, Kenneth Griffin, founder of the Citadel Investment Group hedge fund.

Crossroads, which was founded with the support of Bush administration adviser Karl Rove, raised $70 million, much of it used to support 10 Republican Senate candidates and 30 Republican House candidates.

John Childs, founder of Boston-based J.W. Childs Associates, gave $650,000 to the Club for Growth, an anti-tax group. Dalea Partners, a private-equity firm based in Oklahoma City, gave $250,000 to the First Amendment Alliance, which spent money opposing five Democratic Senate candidates, including incumbents Harry M. Reid (Nev.) and Michael Bennet (Colo.).

Most of the donations from the financial industry went to interest groups attacking Democrats, the disclosure reports show.

That follows support from some Democrats for a measure that would increase tax rates on income executives receive as “carried interest.” The proposals would raise the tax above its current 15 percent rate. Other income for those in the highest bracket is taxed at a 35 percent rate.

Several measures that would change the tax rate for carried interest have passed the House in recent years but have stalled in the Senate each time. Democrats have proposed raising the tax as a source of revenue to pay for other programs; that is now unlikely given the Republican takeover of the House after the November elections.

Private-equity partners and hedge fund managers argue that carried interest should be taxed at the same rate as investment income because there is risk involved.

Under federal law, donations to candidates and the political parties cannot exceed certain limits. But recent court decisions have removed limits for contributions to interest groups operating independently of candidates.

The Supreme Court’s ruling this year in Citizens United v. Federal Election Commission found that corporations, unions and nonprofit groups could spend unlimited money on advertising directly attacking or supporting candidates. In a separate decision, a federal court in the District removed limits on contributions to those groups.

To take advantage of the loosened regulations, political activists created super PACs, which are allowed to accept any kind of contribution as long as they disclose their donors and do not coordinate with candidates.

Super PACs represent only one portion of the spending spurred by the court’s decision. Nonprofit groups that are not required to disclose their donors also spent heavily on the election.

Hedge funds and private-equity partners have previously tended to favor Democratic candidates with their contributions. For example, George Soros, founder of the Soros Fund Management hedge fund, has in the past donated large amounts to Democratic interest groups.

The new figures show that this year, other financial industry executives have supported liberal groups. The group Accountability 2010, which spent money attacking Republican House candidate Steve Pearce in New Mexico, drew contributions from half a dozen financial industry executives. They included $45,000 from George Denny, co-founder of the private-equity firm Halpern, Denny & Co., according to the reports, which were filed with the FEC on Thursday night.

Staff writer Dan Eggen contributed to this report.

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