Tag Archives: Federal Elections Commission

How the Corporate Transparency Act Can Shine Light on Dark Money in U.S. Elections

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Last year, in an effort to prevent the abuse of anonymous companies by malign actors, the U.S. Congress passed the Corporate Transparency Act (CTA). The CTA requires certain legal entities, like corporations and limited liability companies (LLCs), to provide information about their beneficial owners—that is, the people who actually own or control the entity—in order to make it more difficult to operate anonymous shell companies for criminal purposes. Pursuant to the CTA, beneficial ownership information must be submitted to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) and maintained in a centralized database.

Much of the fight for beneficial ownership transparency was spearheaded by anticorruption advocates, who emphasized the ways in which foreign kleptocrats and other corrupt officials use anonymous companies to hide their stolen wealth. But the CTA’s beneficial ownership transparency measures will be helpful in fighting another kind of corruption, one closer to home: the corrupting influence that so-called dark money—spending by undisclosed donors to influence election outcomes—has on the integrity of U.S. elections and American political sovereignty.

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Hiding in Plain Sight: How the Federal Elections Commission Can Use Existing Disclosures To Detect Campaign Finance Fraud

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Last August, U.S. Congressman Duncan Hunter was indicted for misuse of campaign funds for personal benefit. The Justice Department alleges that Hunter conspired with his wife, whom he appointed campaign manager, to steal from his campaign to support their lavish lifestyle: the campaign spent $15,000 on airline tickets and hotel rooms for Hunter’s children and relatives, a $14,000 Thanksgiving trip to Italy, and for other expenses like $700 for seven adult and five children’s tickets to see “How the Grinch Stole Christmas.”

Though Representative Hunter’s conduct is only now being investigated, the allegations of improper spending go back to 2009, and many of the expenses now under scrutiny were detailed in his campaign’s filings with the Federal Election Commission (FEC). FEC filings are public records, readily available and searchable (via simple keyword searches on the FEC’s webpage) to anyone interested in looking. For example, Representative Hunter is a “vaping” enthusiast (even smoking his e-cigarette in Congress). Using the FEC’s webpage and a simple search for the words “cigar,” “smoke,” and “tobacco,” I found that Representative Hunter’s  2015-16 campaign expenditures include hundreds of dollars of spending at a cigar lounge, smoke shop, and tobacco company in his home district. Similar search results through the FEC website show all sorts of eyebrow-raising transactions.

So why weren’t the problems detected earlier? The problem, in cases like this, is not that the FEC doesn’t have enough information to identify suspicious activity—it’s that it has too much information. The FEC has massive amounts of data, making the detection of fraud a needle-in-the-haystack problem. The FEC relies largely on complaints and referrals to guide its enforcement process, with the result that enforcement remains anemic.  In 2017, for example, the FEC levied administrative fines in 215 matters totaling under $2 million, despite having data on 23.4 million line-item disbursements and 34.5 million individual contributions, not even counting electioneering communication transactions and the massive data on political action committees (PACs).

Waiting for referrals, or screening data by hand, is not an effective way for the FEC’s roughly 300 employees to detect corruption or fraud in campaign finance. There are no silver-bullet solutions; fraud detection is a fundamentally difficult, especially when fraudsters take steps to cover their tracks. But there are some steps the FEC can take to better monitor fraudulent expenditures to identify suspicious cases early on:

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