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Tue, Jun 29

Campaign Legal Center and the Center on Science & Technology Policy at Duke University Ask FEC to address a campaign spending loophole to improve transparency.

Washington – Today, the Campaign Legal Center (CLC) and the Center on Science & Technology Policy (CSTP) at Duke University filed a rulemaking petition with the Federal Election Commission (FEC) asking the agency to close transparency loopholes that have allowed campaigns and PACs to disguise millions of dollars in political spending.

Although campaigns, PACs, and other political groups are required to report payments to vendors over $200, the FEC has created a loophole: if the vendor then subcontracts with a third party, payments to that subcontractor need not be disclosed.

This loophole is not absolute — a vendor cannot lawfully act as a conduit to disguise a campaign’s spending. Although there are recent examples of campaigns violating the law by routing spending through LLCs controlled by senior officials, other campaigns and PACs have stayed within legal lines while nonetheless obscuring the ultimate recipients of their spending.

As a result, transparency suffers and voters, donors, and researchers are denied essential information. The effect of this loophole is that voters are deprived of basic information about how candidates and committees are operating and donors are left in the dark about how their contributions are being spent. It disguises whether campaign funds are being routed to the candidate’s businesses, to the candidate’s family members, or to firms owned by a “scam PAC’s” operators.

Moreover, as CSTP has described, this loophole makes it nearly impossible for academics and researchers to track digital political advertising, because FEC reports routinely only disclose a committee’s digital advertising payments to a consulting firm, without separately itemizing that firm’s “subcontracted” payments to digital advertising platforms on the committee’s behalf.

Increased transparency means less influence for wealthy special interests and less political corruption, allowing for increased opportunities for academics and researchers to follow the money and more ways to identify bad actors.

The petition from CLC and CSTP asks the FEC to adopt rules making clear that all expenditures or disbursements made on behalf of or for the benefit of a campaign, PAC, or other reporting entity must be disclosed in full, regardless of whether they are made via an agent, independent contractor, vendor, or subvendor.

“Voters have a right to know where campaign money is coming from, as well as how it is being spent.” said Brendan Fischer, director of the federal reform program at the Campaign Legal Center “The FEC created this transparency loophole decades ago, and it is about time that they close it.”

“Our recent report estimated that 94% of advertising money in the last month of the 2020 election passed through communication consultancies, making this less of a loophole and more of a black hole in the middle of our election oversight system,” says Scott Babwah Brennen, Senior Policy Associate with CSTP.

Earlier this year, CLC and CSTP hosted a panel discussion featuring FEC Chair Shana Broussard on the regulations that govern federal reporting of political sub-vendor spending. The panelists offered insight on current and potential reforms of political ad regulations and highlighted how those regulations could increase public transparency.

Increasing disclosure around subvendors is an excellent example of an easily achievable transparency increase.