Las Vegas Sun

November 16, 2018

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Campaign donors little-noted in Nevada

Those are questions asked by Yale Law professor Ian Ayres and his co-author Bruce Ackerman, who argue in their book, "Voting with Dollars" that campaign contributions should be made anonymously.

We have secret voting in part because it reduces the likelihood of buying votes. After all, there'd be no point in trying to buy the vote of someone if you can't be certain how they'll vote.

By the same token, if a politician didn't know who was giving her $50,000, there'd be no more special access for big donors, the authors argue.

The system would work like this: Candidates, political parties and political action committees would establish blind trusts at reputable trust companies. To donate to a campaign, a contributor would mail a check to the trust account. Rules would prohibit the trust from disclosing the size of donations.

As for whether the idea is catching on with the public, "Voting with Dollars" was ranked 996,857 on Amazon's book ranking Wednesday.

- J. Patrick Coolican

A Laguna Beach, Calif., outfit known as Arcadia Living Trust A so badly wants Rep. Jim Gibbons to be the next governor of Nevada that it gave him $10,000. And that's about all there is to know about Arcadia Living Trust A.

That's because Nevada law requires little more than a name - though not the owner's name - and an address from campaign contributors.

Unlike California, Washington and other states, Nevada law provides an easy way for campaign contributors to hide behind a wall of anonymity. Just about anyone can funnel money into Nevada campaigns, with the public left in the dark.

"If I were to own a business, I could file with the secretary of state 20 businesses, and they could be shell corporations, with the only purpose of funneling money to a candidate," said Secretary of State Dean Heller, whose office regulates campaign finances. Moreover, the real owner of the business could name someone else as the officer of the new company and thus remain anonymous.

Who might want to do this? Wealthy contributors who want to protect their privacy. But it could also be hate groups or criminals trying to influence Nevada politics without anyone - save the candidate - knowing.

"It's one of the fundamental principles of democracy, that sunlight is the best disinfectant," said Joe Doherty, a professor at the UCLA School of Law and a main contributor to the Campaign Disclosure Project, which has studied disclosure laws in all 50 states.

It gave Nevada a grade of F.

"If you think something is wrong in government, you've got to get it out in the open," Doherty said. "If you can't control the amount of money, we should at least know where it's coming from."

And the anonymity offered to campaign contributors is just the beginning of the flaws in Nevada's law, say campaign finance experts and good-government advocates in the state.

Candidates should be forced to disclose more about how they spend their money, and disclose it more often, the advocates say. The law also lacks tough enforcement mechanisms.

Some of the anonymity stems from what is known as "bundling." Although contributors can give only $10,000 to a candidate, a 1994 ruling by then-Attorney General Frankie Sue Del Papa argued that the Nevada campaign finance law allows different entities each to give $10,000.

As a result, wealthy individuals and companies form limited liability corporations so they can bundle their contributions and give candidates hundreds of thousands of dollars. These new companies have no public profile and exist only to funnel campaign cash, so they can remain a mystery to the public.

Even without bundling, however, the law doesn't force contributors to provide much information. Donors aren't required to provide their occupation, employer, or the cumulative amount they've given to the campaign.

This allows a corporation's employees, for example, to bundle their contributions without the public knowing it.

By contrast, federal law, which governs congressional and presidential races, requires disclosure of occupation, employer and total contribution.

The anonymity Nevada offers donors is "the worst of all worlds," said Jeremy Bulow, a professor of economics at Stanford who has studied campaign finance.

"It's the opposite of what's good for the public, in the sense that the candidate knows who's giving them the money, but the public does not."

As a result, contributors can curry favor with elected officials without public scrutiny.

Candidates also aren't required to report very often, which is an invitation to hide shady donors by giving the public - and press - little time to try to find the origins of contributions.

Candidates are required to file reports on Jan. 15, and not again until Aug. 8, which is just three days before the close of early voting and a week before the primary. They report again Oct. 31, a week before the general election.

Candidates don't have to say much about how they spend the money, either. Although Nevada law requires candidates to itemize expenditures, candidates don't have to disclose what are known as "sub-vendors."

In other words, a candidate could run up $50,000 in various campaign expenses on a Visa card, and then disclose only that he or she wrote a check to the credit card company for that amount. That shields such practices as paying a relative as a "consultant," or paying for phony services.

The public is also hampered from closely scrutinizing campaign money by the state's online disclosure site, which merely provides scanned copies of the paper disclosure reports, many of which are hand-written. Other states, such as Idaho and Alaska, provide an online database for searching and sorting.

Finally, the secretary of state can't audit a candidate's report without first receiving a written complaint.

To be fair, Nevada voters do have more information now than ever before. Candidates have to disclose all donations of $100 or more. Not long ago, the threshold was $500 or more. Because of this requirement, 90 percent of political money gets reported now, as opposed to 60 percent before, said Heller, a Republican running to replace Gibbons in Congress.

During the 2005 session, the Legislature required candidates to disclose third-party loans and placed more stringent reporting requirements on initiative backers and opponents.

Because most of the flaws in the reporting law help incumbents, though, there's little appetite for reform.

"The political class wants to raise as much money as they can, and they don't want anyone to know where the money came from," Heller said.

During the last session, for instance, a bill would have required businesses making contributions to disclose their ownership. It was killed by an amendment, according to the Nevada Legislative Counsel Bureau.

For now, the grim truth is anyone hoping for broad reform in Nevada should root for a nasty scandal. That's the lesson from other states and the federal government.

Reform usually comes only after some high-profile ignominy, and particularly scandal in the executive branch, said Bob Stern, an expert in campaign finance at the Center for Governmental Studies in Los Angeles.

In Connecticut, for instance, former Gov. John Rowland went to prison last year in a pay-for-play scandal. It led to campaign finance reform.

Tennessee recently passed reform, including more disclosure, after a bribery and corruption scandal involving four lawmakers.

Then there's the mother of all campaign finance scandals, Watergate, which is what led to a wave of campaign finance disclosure laws in the 1970s at both the state and federal level.

As for Arcadia Living Trust A, a search of online databases, phone books and Web sites yielded nothing about it.

The Gibbons campaign directed questions to Paul Morabito, the chairman and chief executive officer of Berry-Hinkley Industries, a large Nevada petroleum concern.

Morabito explained that he's behind the living trust, which for him is a real financial instrument and not a vehicle for giving anonymous contributions to political candidates.

In fact, Morabito favors more disclosure and opposes the practice of setting up companies with no purpose other than to give to candidates.

"I want to be absolutely open about my support for Jim Gibbons, and if the system is set up to make it appear otherwise, then that's wrong. If people are trying to hide their contributions, if they're setting up a company only to give money to a candidate, that's wrong."

Sun librarian Rebecca Clifford contributed to this report.

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