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Obama order could make corporate political spending public

An executive order being considered by President Obama would require companies bidding for federal contracts to disclose political spending they may now keep secret.

By Matea Gold and Tom Hamburger | LA Times

A lobbying battle is raging largely behind the scenes over a seemingly obscure executive order that could — if signed by President Obama — make public the political spending that many corporations can now keep secret.

Under the proposed order, all companies bidding for federal contracts would be required to disclose money spent on political campaign efforts, including dollars forwarded through associations like the U.S. Chamber of Commerce and other private groups.

Election spending by such organizations soared to new heights in 2010, thanks in part to the Supreme Court’s ruling in the Citizens United case, which allowed corporations and unions to make direct political expenditures. The majority opinion endorsed disclosure of the new political spending, but many groups have formed as nonprofits, which do not have to reveal their funding sources.

Since then, campaign finance reform advocates and their Democratic allies have sought to unmask the secret contributions fueling the groups, arguing that such spending allows wealthy individuals, corporations and other special interests to have an outsized influence on elections without voters knowing who is behind the effort.  

At stake are tens of millions of dollars in donations provided by corporations to trade associations and other not-for-profit groups that use the money for independent campaign expenditures. In the last election cycle, most of the money spent by the groups benefited GOP candidates. Democrats, worried about that advantage, sought to restrict this kind of undisclosed independent spending. When that effort failed, some prominent party members began forming their own not-for-profit organizations to compete with the GOP.

If Obama issued the draft executive order, he would effectively discourage previously undisclosed donations to groups like the U.S. Chamber of Commerce, which — with some exceptions — have been generally helping Republican candidates. It would also give the president a chance to quiet critics who want him to be more outspoken in demanding disclosure of large contributors.

But business interests are trying to quash the measure.

The chamber is pressing top White House officials, including Chief of Staff William Daley, who worked closely with the group when he was an executive at JPMorgan Chase, to push Obama to drop the executive order.

The chamber also has corralled its allies on Capitol Hill. More than two dozen Republican senators, House Majority Whip Kevin McCarthy (R-Bakersfield) and chairmen of 19 House committees signed letters to the president arguing that the order would inject political favoritism into the contracting process. Two House committees will hold a joint hearing Thursday to push administration officials on the matter.

“The way the order is drafted, it hijacks the very powerful engine of the federal procurement system and it takes it and tries to achieve political and electoral ends,” said Lily Fu Claffee, the chamber’s general counsel, who charged that the measure would “chill the free-speech rights of corporations.”

Backers of the disclosure measure say that it is intended not to reward political donors with federal contracts but to shed light on corporate influence over elections. They argue the business opposition is driven by self-interest.

“Many of the government contractors that would be captured under the executive order probably are the big contributors to the Chamber of Commerce, so as a result, the chamber is pursuing their battle against this with extreme vigilance,” said Craig Holman, lobbyist for the consumer advocacy group Public Citizen, one of 30 organizations that sent Obama a letter last week urging him to sign the order.

Nonprofit 501(c) groups, as the third-party groups are legally known, plowed at least $134 million from secret donors into the last election — $119 million of which was spent by GOP allies, according to an analysis by the nonpartisan Center for Responsive Politics.

The executive order would require any company seeking a federal contract to disclose all of its federal political spending over $5,000 for the previous two years — including contributions to third-party groups.

Some of this information is already available: Government contractors, like all companies, have to disclose contributions to their political action committees, as well as their independent political expenditures. But the proposed order would create one central database — on the website data.gov — listing the political activities of government contractors and their affiliates and officers.

More than 138,000 companies are prime federal contractors and could fall under the measure, according to government data. That includes Fortune 500 companies such as Apple, Southwest Airlines, Coca-Cola and FedEx. It would also affect some unions that have federal contracts to provide services, such as worker training.

As of now, the 2012 campaign is poised to see an even greater influx of undisclosed political spending than the last election, in part because of the Democratic rush to set up the same nonprofit political vehicles that Republicans exploited in 2010. But if Obama signs the executive order, some corporations — wary of being dragged into partisan politics — could shy away from funding efforts on behalf of either side.

There is recent precedent for that: After Target Corp. suffered a consumer backlash last year for supporting an organization that backed a candidate opposed to gay rights, it adopted a new policy restricting how the company’s funds are used for political purposes.

The chamber’s Claffee said the message sent by the executive order will be: “If you want to get a fair shake in the contracting sphere, you should avoid political spending that raises eyebrows” and instead donate to the party in power.

Other critics, such as Steven Law, president of conservative nonprofit groups American Crossroads and Crossroads GPS, maintain that the proposed order could usher in a new era of dirty politics.

“When I was in the executive branch, mixing politics with procurement was called corruption,” Law, who served as deputy secretary of Labor for President George W. Bush, wrote in an email.

The battle puts the chamber at sharp odds once again with the Obama administration, with which it tangled during the 2010 election.

The fate of the executive order, which remains under review at the Office of Management and Budget, is unclear. Daley, the chief of staff hired in part to smooth administration relations with business, called it “just a proposed rule” that the White House was considering.

“We’re going to do things they like, do things they don’t like,” Daley said of the chamber. “We’re not going to do things because they do or don’t like them. That’s just the way it is.”

Advocates are cautiously optimistic.

“I expect President Obama to sign an executive order sometime in the near future,” said Fred Wertheimer, president of Democracy 21. “This is their idea — there’s no reason for them to back away from it.”

But lack of a signature so far, Holman said, “means we have to keep applying the pressure and reassuring the White House that despite the screaming of the Chamber of Commerce, the rest of America wants to have this kind of transparency.”