In the weeks before last November’s election, television viewers in South Carolina were treated to an animated caricature of Rep. John Spratt high-kicking in a chorus line with President Obama and then-House Speaker Nancy Pelosi.

“It’s the worst economy in decades,” the ad intoned, “and the folks in Washington are living it up, spending our tax dollars like there’s no tomorrow.”

That ad and a second one mocking Spratt appeared at least 723 times between Sept. 25 and Election Day and were paid for by a group called the Commission on Hope, Growth and Opportunity, according to ad trackers at Campaign Media Analysis Group, a unit of WPP. Spratt, a 14-term Democrat, saw an early lead vanish and lost the election.

Commission on Hope and four other Republican-leaning groups spent at least $4.05 million attacking candidates in the run-up to November voting, according to Campaign Media estimates and TV station records obtained by Bloomberg News.

None of that spending can be found searching the public database of the Federal Election Commission, and FEC spokeswoman Mary Brandenberger said the commission has no record of it.

Federal law requires FEC disclosure of money spent on ads mentioning or depicting a candidate in the 60 days before a general election. The five groups whose spending wasn’t reported either declined to comment, were unreachable, or said they deemed the spending not reportable under the law.

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The five are among the outside, or non-party, organizations that have played a growing role in federal elections.

They include trade groups, unions and nonprofits started by political operatives that raise and spend money for ads.

The $305 million they reported spending in the 2010 elections was more than four times the amount such entities paid out in the midterm elections in 2006, according to the Washington-based Center for Responsive Politics, a research group that tracks FEC filings.

OFF THE RADAR

Growing more sharply is a subset that keeps secret the identities of donors who bankroll the ads. These outside organizations told the FEC they spent $137 million in the 2010 cycle — 25 times the 2006 level.

Commission on Hope represents an even more secretive type that has taken itself off the radar of federal regulators — by reporting neither spending nor donors to the FEC.

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Non-party groups, including the secretive ones, are already planning to raise more money in the 2012 elections. They received a boost from the Supreme Court’s decision in the Citizens United case last year, which for the first time allowed corporations and unions to spend unlimited amounts on ads advocating the election or defeat of a candidate.

The organizations face little scrutiny from the FEC, where split votes between Republican and Democratic commissioners have stymied enforcement in cases for almost three years.

As a result, voters may find themselves choosing the next president knowing less about those trying to shape their views of the candidates than they have since secret money helped finance the Watergate burglary and re-elect President Richard Nixon in 1972.

Watergate led to his resignation and ushered in the law that created the FEC. Investigators found more than $20 million had been given behind the scenes to Nixon’s campaign.

In the 2010 election, donors tested how secret spending through outside groups works, and used it on a small scale, according to Linda Fowler, a government professor at Dartmouth College. “There will be more next time,” she said.

“The amounts of corporate money involved in Watergate will look quaint by the standards of secret corporate funding that will take place in 2012,” said Donald Simon, a director of Democracy 21 and former general counsel of Common Cause, both pro-disclosure organizations.

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A NEW TACTIC – NONPROFITS

Obama is considering an executive order that could undercut these predictions and reduce secrecy. It would mandate disclosure of political contributions over $5,000 a year by any company vying for a federal contract, according to a draft reviewed by Bloomberg News. The U.S. Chamber of Commerce, which collects secret money for political ads, has vowed to fight it.

Expenditure and broadcasting records collected by Bloomberg provide a glimpse of secretive groups’ strategy, their willingness to co-operate with one another on tactics and their spending on close races in the final days of the 2010 campaign. The records also show how the identities of those who funded false advertising were shielded in some cases by tax laws.

In the Citizens United decision, the high court expressed confidence that interested voters could easily discern the identities of those paying for campaign ads.

The Supreme Court didn’t reckon with political operatives who quickly turned toward tax-exempt nonprofits to avoid disclosure requirements.

Examples of how this money worked in 2010 were found largely on the Republican side. The restocking of the outside-money war chests for the presidential election has already begun.

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American Crossroads and Crossroads Grassroots Policy Strategies — created by Karl Rove and Ed Gillespie, former aides to President George W. Bush — have set a $120 million goal for 2012.

They gathered $71 million in 2010, according to spokesman Jonathan Collegio. Crossroads GPS keeps its donor list secret.

“Democrats, having watched what happened last time, are … not going to roll over,” said David Axelrod, former senior adviser at the White House, who recently left to help plan president Obama’s re-election campaign. He predicted “a lot” of new groups appearing on his side of the political divide.

Democratic activists have already formed at least three designed to raise money without disclosing donors. “Our goal is to keep pace with Karl Rove” and other Republican-leaning groups, “but we don’t think we’ll necessarily be able to match them dollar for dollar,” said Bill Burton, a former White House deputy press secretary and co-founder of Priorities USA, one of the new organizations.

Outside groups were responsible for only about 8 percent of total spending in the 2010 elections, which handed the Republicans a majority in the House.

Still, the spending surprised Democrats in the days prior to the election and helped the Republicans offset the money-raising advantage many Democrats had.

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And the effectiveness of the outside money was magnified by coordination efforts by the Republican-leaning groups. Leaders of about 15 met regularly to discuss where to concentrate their firepower, said Collegio, the Crossroads spokesman.

“What happened exceeded our expectations, in terms of the activity on the other side,” Axelrod said. “Hundreds of millions of dollars came into the campaigns, much of it from unnamed sources. And they were meaningful dollars. Where you really felt it was in the House races. They came in late with a large amount of money and ended up making a big difference.”

Commission on Hope paid at least $2.10 million for ads against Spratt and 10 other Democrats in seven states in the 60 days prior to voting, according to estimates by Campaign Media. Ten of the 11 Democrats lost.

Formed in March 2010, Commission on Hope lists only one person on its website — William B. Canfield, a former Republican Senate aide who is the group’s general counsel. Its address is a downtown Washington law office where he has a desk. Canfield declined to comment.

Eleven other groups with secret donors bought ads taking on one or more of the 11 Democrats that Commission on Hope targeted, spending $5.87 million, according to CRP data and Campaign Media estimates. One, the U.S. Chamber of Commerce, spent $1.13 million in five of the 10 races, according to CRP.

INTEREST GROUPS GAIN POWER

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In the Illinois race for Obama’s old Senate seat, combined candidate and party spending was $19.8 million for Republican Mark Kirk and $18.3 million for Democrat Alexi Giannoulias, according to CRP. Non-party players came up with $7.1 million favoring Kirk and $2.2 million for Giannoulias — expanding the money advantage for the Republican, who won.

The largest expenditure on behalf of Giannoulias was $692,128 from a political action committee funded mostly by labor unions, including $500,000 from the Service Employees International Union.

More than half of the outside surge benefiting Kirk came from the U.S. Chamber and Rove’s Crossroads GPS. Five months after the election, the names of the unreported donors remain a mystery to the public.

“If you find out, let me know,” said Colin Van Osten, campaign manager for Ann Kuster, who lost her bid for a New Hampshire congressional seat by a single percentage point after an ad assault from American Action Network and 10 other non-party groups, CRP data show.

In Manchester, N.H., Portland, Maine, and Boston, Campaign Media data show the group spent at least $388,522 for television ads opposing two-term N.H. incumbent Democrat Carol Shea-Porter before her defeat.

“What has happened in American politics with the advent of campaign finance (changes) is the parties have taken a back seat to the interest groups,” said Tom Davis, who chaired the National Republican Congressional Committee from 1999 to 2002. “So the people who are running these other things have as much to say as the party operatives. They’ve got spending, and they’re less accountable.”

This report was written by Bloomberg News reporters John Crewdson, Alison Fitzgerald, Jonathan Salant and Charles R. Babcock.

 


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