EspressoPundit

     Ruminations of an over-caffeinated political junkie
 

 

  

 

 

Here's a summary of what we know about Modscam,

1.  Mainstream Arizona raised Corporate donations.

2.  They spent the money in an effort to elect Moderate Republicans who were running against Conservative Republicans, however, they claimed they were simply advocating on behalf of certain issues--not specific candidates.

3.  Superior Court Judge Edward Burke ruled that the money was used to advocate on behalf of candidates. not on behalf of issues.

Therefore, while not using magic words such as “vote for” or “elect,” the unmistakable message of the mailer is that the two legislators should be re-elected which makes the mailer “express advocacy.”
 

4.  While I'm not a lawyer, it appears that, it is illegal to spend corporate contributions to expressly advocate on behalf of candidates

5. The person through whom the violation is effected is guilty of a class six felony.      ARS 16-919 D

6.  In 1994 Grant Woods prosecuted Arizona Automobile Association Director Marvin Cronberg for illegally spending corporate contributions to advocate on behalf a candidate.  He spent one corporate contribution on one candidate.  The contribution was around $1,000.Mr. Cronberg  pled guilty to one violation and was fined $10,000 and sentenced to one year probation. 

7.  The Mainstream's case does not appear to be  a single violation.  Hundreds of thousands of dollars were raised from multiple corporations and were spent on behalf of nearly a dozen candidates. 

Obviously, the people behind Mainstream are innocent until proven guilty.

 

 

Here's the original entry on Modscam.

ModScam?

BY NOW YOU ARE UP to speed on the train wreck that was Mainstream Arizona.  If not, click here.  The disaster centers over whether "Mainstream" Arizona advocated on behalf of candidates in the recent Primary Election. 

 

Here's the Republic's pre-election take on it.  "Quietly but effectively, a new group called Mainstream Arizona is building a big war chest, which it is using to help moderate Republicans win their legislative primaries in the ongoing battle for the soul of the Arizona GOP."   Arizona Republic Aug. 15, 2004

 

First stop laughing about the "Quietly but effectively" part.  It reminds me of the old bumper sticker "The Moral Majority is Neither."

  

Being unencumbered by law degree, I would argue that  "help moderate Republicans win their legislative primaries" is advocacy.  The Clean Elections folks saw it the same way and provided matching funds to the candidates who were opposing the "moderate Republicans" Most of the Conservatives won.

 

But the Mainstream folks continue to insist that they did not advocate on behalf of candidates--they were advocating ISSUES. 

 

Mainstream is planning to sue...yada yada yada and is planning to provide an expert witness to say the Mainstream pieces weren't advocacy.   

 

Are 527s Advocacy Groups?

 

 Let's go back to the August 15th Republic article.  "Mainstream Arizona is a 527 non-profit, which means it can't directly advocate for candidates but can use advertising to educate voters about the stances of politicians."

 

 But wait a second.  Is that right?  527s are Political Organizations 

 

According to the IRS, the term ''political organization'' means a party, committee, association, fund, or other organization (whether or not incorporated) organized and operated primarily for the purpose of directly or indirectly accepting contributions or making expenditures, or             both, for an exempt function.    IRS Code Section 527 e (1)

 

An exempt function is "attempting to influence the selection, nomination, election, or appointment of any individual" in other words CANDIDATE ADVOCACY. 

 

And a Political organization's income is TAXABLE at 35% unless it is spent on an exempt function. 

 

So it looks to me that the Mainstream legal brain trust--which has been so effective thus far--is insisting that the income they received was not spent on advocacy...and is therefore subject to income tax--to the tune of just over $100,000.

 

WHY THE HECK WOULD THEY DO THAT?

 

Maybe it's because Mainstream Arizona is in part funded with corporate contributions. 

 

There seems to be some confusion about campaign disclosure as it relates to 527s.  Indeed, 527 contributions are reported to the IRS and NOT reported to the FEC.  And it's true that most information sent to the IRS is confidential--but not 527 contributions.

 

A list of some of Mainstream Arizona's contributors is provided here

 

Several of them appear to be corporate i.e. Bashas'.  And most of them are above normal campaign limits. 

 

We know that I'm not a lawyer, but I think corporate contributions are perfectly legal in AZ if the campaign is not advocating on behalf of candidates.  But spending corporate money advocating for a candidate is illegal in Arizona. 

A.

It is unlawful for a corporation or a limited liability company to make any contribution of money or anything of value for the purpose of influencing an election, 16-919.

 

If that's true, I can see how the mainstream folks are really uptight about the CCEC finding that Mainstream was indeed advocating on behalf of candidates. 

 

Triggering Matching funds might be the least of their problems. 

 

And what about the tax consequences of maintaining the argument that they haven't advocated on behalf of any candidates?  My layman's reading of the 527 rules would indicated that these contributions are taxable. 

 

Surely no one from Mainstream Arizona is going to argue in Arizona Court that they ARE NOT spending money advocating for candidates and then sign a federal tax return indicating that they ARE advocating on behalf of candidates. 

 

That would be bad. 

 

This is open source blogging.  So I am interested in your opinion, suggestions and corrections.

 

Have I missed some key points?  Or is this about to really explode.

 

 

Rumor has it that the AG is already looking at this. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


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