Massive secret spending by GOP groups, thanks to SCOTUS

Outside Republican groups spent $54 million more than outside Democrat groups during the campaign. Was that all the difference?

Four GOP groups alone -- Rove's Crossroads groups, the American Chamber of Commerce, and American Action Network -- spent $83 million on attack ads against Democrats. And thanks to Dubya's Supreme Court, they didn't have to disclose who donated how much to them.

Spending blitz by outside groups helped secure big GOP wins

Hedge fund moguls helped bankroll groups' attack ads, sources tell NBC News
By Michael Isikoff and Rich Gardella
November 3, 2010 | NBC News

A tightly coordinated effort by outside Republican groups, spearheaded by Karl Rove and fueled by tens of millions of dollars in contributions from Wall Street hedge fund moguls and other wealthy donors, helped secure big GOP midterm victories Tuesday, according to campaign spending figures and Republican fundraising insiders.

Leading the GOP spending pack was a pair of groups — American Crossroads and its affiliate, Crossroads GPS — both of which were co-founded by two former aides in the George W. Bush White House: Rove, and Ed Gillespie.

Together, the groups — which are not formally part of the Republican Party — spent more than $38 million on attack ads and campaign mailings against Democrats, according to figures compiled by the Sunlight Foundation, a nonpartisan group that tracks campaign spending in congressional races.

A substantial portion of Crossroads GPS' money came from a small circle of extremely wealthy Wall Street hedge fund and private equity moguls, according to GOP fundraising sources who spoke with NBC News on condition of anonymity. These donors have been bitterly opposed to a proposal by congressional Democrats — and endorsed by the Obama administration — to increase the tax rates on compensation that hedge funds pay their partners, the sources said.

A scorecard compiled by NBC News shows the ad barrage appeared to mostly pay off: Republican candidates won nine of the 12 Senate races and 14 of 22 House races where American Crossroads and Crossroads GPS spent money.

That had the groups' leaders gloating Wednesday about what they described as their pivotal role in the election results.

'A decisive blow for freedom'

"Thank you, America!" read the banner headline on a blog posting by Steve Law, president of American Crossroads, on the group's website. The posting proclaimed that the organizations' team had "struck a decisive blow for freedom" with the election results. "Together we not only retired House Speaker Nancy Pelosi, we also achieved the largest House seat switch since 1938!" Law wrote.

While it is hard to calculate exactly how much of an impact the Crossroads groups had in an election that was tilting Republican for a variety of reasons, their efforts helped fuel an substantial overall spending advantage by outside GOP groups. Overall, outside Republican groups outspent outside Democratic groups, $245 million to $191 million — a $54 million edge.

The Crossroads affiliates and similar groups were formed after a controversial Supreme Court ruling in January that permitted outside political groups to collect unlimited contributions from corporations, labor unions and other wealthy donors and use them directly on campaign ads. In addition, groups that were organized as nonprofit "advocacy" organizations (such as Crossroads GPS) did not have to disclose the identity of their donors.

As a result, the airwaves this campaign season were flooded with millions of dollars in attack ads, paid for by secret donors. Out of nearly $300 million spent on congressional campaigns ads by both parties, 42 percent were funded by undisclosed donors, according to a study by the Center for Responsive Politics.

Just behind the Crossroads groups in outside spending on the GOP-side were the Chamber of Commerce ($31 million) and the American Action Network ($14 million), according to Sunlight Foundation figures. Neither disclosed the identity of its donors.

While outside Democratic groups belatedly tried to mimic the GOP efforts, they fell short. America's Families First Action Fund, a group founded by a number of former Democratic strategists that operated much like American Crossroads, wasn't organized until last summer and spent just $5.5 million — $1 million of which came from a non-disclosing nonprofit affiliate, according to the Sunlight Foundation. The big outside spenders on the Democratic side were labor unions such as AFSME ($10.7 million) and the SEIU ($10 million.)

Groups coordinated spending, insiders say

In addition to the spending advantage, outside GOP groups like the Crossroads groups, Americans for Prosperity and Club for Growth coordinated their efforts, divvying up which groups would spend in which races at which times. The groups' leaders would meet and talk regularly in sessions often led by Rove or one of his associates, according to the two GOP fundraising sources familiar with how the organizations worked.

The coordination could be seen in spending patterns in key Senate races.

In Illinois, for example, GOP winner Mark Kirk benefited from $5.5 million in attack ads from the Crossroads groups targeting his Democratic opponent, Alexi Giannoulias.

In Wisconsin, meanwhile, the Crossroads groups didn't spend any money, but the Chamber of Commerce spent $748,000 on attack ads that helped defeat Democratic Sen. Russ Feingold. (Feingold, ironically, was co-author of the McCain-Feingold campaign finance law whose restrictions on advertisements by outside groups was overturned by the Supreme Court ruling earlier this year, paving the way for the creation of groups such as American Crossroads.)

The long term impact of the spending by the outside groups during this election will be to lay the groundwork for an even bigger effort during the presidential campaign two years from now. That will substantially diminish the role of the two political parties, according to campaign finance experts.

Other than running primaries, "who needs (political parties)?" asked Brett Kappel, a Washington lawyer who specializes in campaign finance laws. Contributions to the parties remain "heavily regulated," under strict limits and must be publicly disclosed, he noted.

"After this election," Kappel said, "all of that can be outsourced to unregulated entities that don't have to disclose their donors."