From Open Secrets:
Fort Lauderdale private equity manager Brian Neff says he doesn’t like how the government treats small businesses. To make his point, last June, Neff made a $10,000 political contribution through his latest limited liability corporation, Sintavia, rather than under his own name.
“I felt that my speech would be better heard through my company as opposed to Brian Neff, private citizen, on this particular issue,” he wrote toOpenSecrets Blog in an email.
Neff is probably right that making a contribution as Sintavia — a new 3D-printing company whose investment process “began in earnest” last April, according to Neff, and seeded with $10 million from Neff Capital Management, according to a press release — raises its public profile. However, his contribution raises red flags for watchdogs taking stock of the increasingly common transfers from LLCs to super PACs. To campaign finance expert Larry Noble at the Campaign Legal Center, the gift looks like a prohibited donation.
When Neff chose to use his company’s name to make a contribution to the single-candidate super PAC Reform Washington, he made “a contribution in the name of another,” Noble said. The super PAC will back Lt. Gov. Carlos Lopez-Cantera’s bid to fill the seat of Sen. Marco Rubio, whose GOP presidential bid ended earlier this month.
Usually, these contributions make use of straw donors — individuals who contribute using someone else’s money, at the behest of the person providing the cash. It’s also “often called money laundering,” Noble recently wrote in a blog post, and is “one of the more serious violations of the [Federal Elections Commission] law, as it undermines the very concept of disclosure.”
Usually, these contributions make use of straw donors … [which is] also “often called money laundering
The same principle applies with contributions like Neff’s, only the straw donors are corporations. As the Washington Post reported last Friday, millions of dollars are going into super PACs through hard-to-track LLCs this cycle. Neff’s contribution shows how a strategy once employed most often at the presidential level has now filtered through to down-ticket races too. “When it works on the presidential level, [the tactics] make their way to the House and Senate,” Noble said.
Because the six-member Federal Election Commission — three Democrats, three Republicans –has deadlocked on whether to even investigate contributions like this, straw-donor giving through LLCs has essentially been blessed by the FEC, even if it may be illegal, Noble said.
That’s likely why this strategy for further clouding donor disclosure is moving beyond the presidential playing field. In 2011, the Campaign Legal Center and Democracy21 filed complaints with the FEC and implored the Department of Justice to look into the “apparent use of three Limited Liability Companies to hide the real source of three $1 million donations to a super PAC,” Noble wrote in the same post. A few weeks ago, the FEC deadlocked 3-3 on whether to investigate the violation. The commission needs four votes to even consider moving forward with a probe. Case closed.
Now, the “use of LLCs to make contributions is going to be pretty widespread,” Noble told OpenSecrets Blog in an interview.
When OpenSecrets Blog reached out to Neff about his contribution, he seemed unaware of whether he was violating any laws. “There is no difference to me whether I donate directly or through Sintavia. Sintavia was chosen in this case for editorial reasons,” he wrote in an email.
Use of LLCs to make contributions is going to be pretty widespread
Unlike some other other straw-donor LLCs, Sintavia appears to be a legitimatemanufacturing company that, according to Neff, now turns a profit – it did not at the time of his giving – and employs six people.
But these defenses miss the point about straw donations and LLCs, according to Noble: Whose money is being donated, the individual’s or the corporation’s?
In Neff’s case, Noble finds two reasons to believe it was his money. One: Sintavia doesn’t pay corporate taxes, Neff wrote to OpenSecrets Blog, which is common for LLCs. Instead, Neff claims Sintavia’s income on his and his wife’s “personal tax return as a disregarded entity,” he wrote. That means “the money was his money,” Noble said.
The second reason: Neff is the sole investor in the LLC, as confirmed by Sintavia President Doug Hedges.
So: Whose $10,000 was it that went to the super PAC supporting Carlos Lopez-Cantera’s Senate bid?
It was Neff’s money, according to his email.
“Just because he thinks it makes more editorial sense, it doesn’t mean he gets to hide who is giving the contribution,” Noble said.