Financial Transparency Coalition

This Saturday marks the two-year anniversary of Citizen’s United v. Federal Election Commission, the decision which opened the door in the United States for unlimited corporate spending on elections, a practice that had long been forbidden. Most organizations which engage in political advocacy, including campaigns, are forced to disclose who donated how much money to their group. Disclosure is considered a key defense against corruption – it makes quid pro quo more apparent, allows voters to hold politicians accountable for their associations, and in general keeps the system fairly transparent. Any U.S. voter can go to OpenSecrets.org and see the names of donors to campaigns, political action committees and parties.

The protection that disclosure provides breaks down, however, when anonymous, or shell, corporations enter the picture. In the United States, it is possible to form anonymous corporations. These corporations do not have to disclose the name of the person controlling, and therefore responsible for, their operations to law enforcement or the public. They effectively form an opaque barrier that is almost impossible to penetrate. This creates real potential for corruption, as 2012 Presidential candidate Buddy Roemer has pointed out frequently during his campaign.

This isn’t just a problem in the abstract. In August, a corporation with the innocent-sounding name W Spann LLC donated $1 million to Mitt Romney’s Super PAC, Restore Our Future, and then immediately dissolved. W Spann LLC was incorporated in Delaware, a state which allows corporations to be formed without declared beneficial owners. NBC News eventually uncovered the donation and put enough public pressure on Restore Our Future to disclose the identity of the donor, but the incident highlights the dangerous road we are heading down. Most large corporations are hesitant to directly give money to candidates, for fear of alienating potential customers and suppliers; Coco-Cola wants to be the brand of all Americans, not just of Democrats or Republicans. In an opaque system, they would have no such fear. Anonymous corporations give them the chance to do so.

Satirist Stephen Colbert demonstrated this problem on his show, The Colbert Report. Colbert has made headlines in the United States recently by creating his own Super PAC, Americans for a Better Tomorrow, Tomorrow. On his show, Colbert had his lawyer create an anonymous shell corporation, named “Anonymous Shell Corporation,” to shield his donors from disclosure until 2013. His shell corporation, 501.(c)(4) organization, can solicit and collect donations, and then donate them to Americans for a Better Tomorrow, Tomorrow. By doing so, “Anonymous Shell Corporation” will show up on Americans for a Better Tomorrow, Tomorrow’s FEC disclosure, not the identity of the actual donors.

You can watch Colbert explain this process below. Key quote, Colbert: “How is this any different from money laundering?” Lawyer: “It’s hard to say.”

Eliminating anonymous corporations would not end this problem, but it would go a long way toward solving it. Anonymous corporations pop up across all sorts of issues – they have been used by criminals to launder money, by Iran to avoid sanctions, and even by terrorists to conduct operations. We shouldn’t want to add the subversion of U.S. electoral politics to that list. We ought to pass the Incorporation Transparency and Law Enforcement Assistant Act, a bi-partisan bill currently introduced in the Senate. Politicians like Roemer who are interested in curtailing corruption should advocate for that bill. Here at the Task Force, we focus on how financial opacity creates poverty and human suffering in the developing world, by facilitating illicit capital flight and corruption. The U.S. should learn from the experience of developing countries – there is no good reason to have truly anonymous corporations. They need to be eliminated, today.

Update, 1:01 PM: As I was typing this, The Economist published an editorial calling for the elimination of anonymous corporations. It reads,

But limited liability is a concession—something granted by society because it has a clear purpose. It is unclear why in parts of the world anonymity became part of the deal

I highly recommend reading the whole editorial, and the accompanying news article. They will both run in the next print edition of the magazine.