TERRY GROSS, host:

This is FRESH AIR. I'm Terry Gross.

If you think you're seeing more campaign ads than you'd expect for a midterm election, you're probably right. This year is expected to set a new record in media spending for an election cycle, and that can be attributed in part to the recent Supreme Court Citizens United decision, which extended the right of free speech to corporations.

The decision allows corporations and unions to spend unlimited amounts on ads and other campaign activities that can urge voters to directly oppose or support individual candidates. And organizations with certain IRS designations can accept unlimited donations without publicly disclosing who their donors are, which means when we see an ad, we may not know who is behind it.

We have three guests today talking about this new world of campaign finance and how it's helped create what some describe as a shadow GOP.

Our first guest, Peter Stone, has spent the past two decades covering lobbying and campaign finance. He wrote for National Journal for nearly 18 years and now leads the money and politics team for the Center for Public Integrity, a nonprofit organization devoted to investigative journalism.

Peter Stone, welcome to FRESH AIR.

Mr. PETER STONE (Center for Public Integrity): Thank you.

GROSS: Let's start with an explanation of how the Citizens United Supreme Court decision changed the rules of campaign finance.

Mr. STONE: Basically, the Citizens United decision overturned a couple decades of campaign finance laws and essentially gave the green light to corporations, unions and individuals to spend unlimited sums on political ads - political ads and other political activities that also can directly endorse or oppose an individual candidate.

GROSS: And they could do it anonymous. They could give the money anonymously.

Mr. STONE: They can give it to organizations that don't that aren't required to disclose their donors. And it appears this year that that is where the lion's share of the money is going, to a variety of nonprofits that don't have to disclose publicly who the donors are.

GROSS: Why do some campaign finance donors want anonymity?

Mr. STONE: I think this year the reason is there are three or four different reasons that are connected. One is that the decision itself initially was highly unpopular. Roughly 80 percent of the public in early polls said that they oppose the decision or dislike the decision. That included a high percentage of Republicans, as well, from what I've seen.

Secondly, the rules of the road here are untested. This decision came down in January, and campaign finance lawyers and election lawyers immediately started going through the fine print and trying to analyze how it would be implemented. And it took them months, really, to figure out a lot of the details of it.

And I think corporations were wary because of the unpopularity of the decision. They were also wary because of the possibility that liberal groups, unions and others might target them in some fashion or retaliate if corporations ran ads directly in their own name.

So by and large, we've seen anonymous groups groups with anonymous donations pull in an awful lot of money and set much higher budgets for themselves this year than they have in the past.

GROSS: And you've been trying to sort all that out and see who's getting the money, who's giving the money.

Mr. STONE: Correct.

GROSS: There are some new groups that have formed in the wake of the Citizens United decision. Let's look at some of those groups.

Karl Rove, who was President Bush's political advisor and also was considered the architect of his successful presidential campaigns, so Karl Rove and former Republican National Committee chair Ed Gillespie teamed up earlier this year and launched a couple of groups or helped launch a couple of groups.

One of them is called American Crossroads, the other Crossroads GPS. Tell us what these groups are.

Mr. STONE: Well, essentially, they're two arms of the same organization. The first one is a so-called 527, which can accept unlimited donations, can spend all of its money on political activities but is required to disclose its donors, large donors, every month. And they've been doing so.

The other arm is called a 501(c)(4), which doesn't have to disclose its donors at all, won't have to report anything to the IRS until early next year and has a second requirement or another requirement that it can only spend just under half of its money on political activities. The majority of its funds have to be spent on lobbying, grassroots, legislative issue activities. That's the other restriction that goes with a 501(c)(4).

GROSS: So this group, these two groups are getting a lot of money. How is the money being used in the midterm election campaigns?

Mr. STONE: Thus far, they've spent roughly 16, $18 million, as have been reported in a few publications this week, on advertising. Most of it has been spent by the 501(c)(4) arm, which again doesn't have to disclose its donors, and it's primarily gone into six, eight, 10 Senate contests in such states as Nevada, where they're trying to knock off Harry Reid; Colorado, where they're trying to knock off Senator Bennet; and a number of other battleground states such as Washington, Missouri, Pennsylvania, Ohio.

And these have been issue ads, so-called issue ads, which tell the listener, tell the viewer that so-and-so, such as Harry Reid, is not very good on health care issues, and please call or write Washington about your concerns.

That's the line that some of these 501(c)(4)s have to hew to to make sure that they're sticking with the rules, which require a little over half their spending to go for so-called legislative or lobbying issues.

GROSS: Wait, wait. So let me stop you. So if you have a campaign - if you have an ad that says write Washington, let them know Harry Reid isn't doing a good job, that's not considered a campaign ad, that's considered lobbying or grassroots efforts?

Mr. STONE: Well, that's their interpretation, basically, and some campaign finance lawyers agree with that. I talked to a former head of the tax exempt division at the IRS, Marcus Owens, who pointed out there's a lot of ambiguity there and that some of these ads are in some ways very close to being political ads.

And they all but you know, they criticize sharply a candidate on a particular issue, and I think that issue is going to be you know, is still to be resolved, and it's going to take some time.

The IRS in the past has issued different - slightly different interpretations on this. So the rules on this are a little murky. And there's wiggle room on this for a group that wants to push the envelope, so to speak, on an issue like that.

GROSS: If the IRS decides that this is out of bounds, it will be too late for this election.

Mr. STONE: Almost definitely too late for this election. I mean, there has been a challenge, as you know, filed just this week by Democracy 21, a long-time campaign finance watchdog group run by Fred Wertheimer that basically makes that point, that in their eyes, many of these eyes that Crossroads GPS has been running are more political ads than they are issue ads, more political ads than legislative ads.

And that's part of why Wertheimer and another Wertheimer's group and another organization decided to ask the IRS to look into the tax-exempt status of this group.

GROSS: So why would major donors, individuals, corporations, give money to groups that Karl Rove and Ed Gillespie are behind, as opposed to giving money to the Republican National Committee?

Mr. STONE: I think there's been a very, very well-documented case this year, and going back to last year, in many stories in the major media about the problems at the RNC, that the national committee has been plagued basically with management problems, fundraising problems, excessive spending for over a year under chairman Michael Steele.

And donors and fundraisers, big names in the Republican circles, started getting very upset about this at least early this year, if not late last year, and looking around for options.

I think some were hoping that Steele might be replaced. I think that was a hope that vanished early this year. And others decided why not build kind of an outside organization? Why not build more outside groups, which can do many of the same things that the Republican National Committee has done historically?

This was a lot of what was behind Rove and Gillespie's idea to try to launch American Crossroads and Crossroads GPS and encourage other groups, as well. They thought that it would be better to put more money into outside groups, where they had a lot of veterans from different campaigns who could help organize issue ads, other ads and get-out-the-vote efforts.

GROSS: So something else that's very interesting about this Karl Rove and Ed Gillespie group, and they're not officially the head of the group. They're not officially founders of the group. But everybody reporting on these two groups say that they are the people who launched, they are the people behind it. Am I right in saying that?

Mr. STONE: They're definitely the people who helped launch the group, and I think that's there's no doubt about it. They inspired a great deal of it. They did some of the initial fundraising, as I've reported.

Both went down to Texas together early this year to woo some major Texas donors. Those names have largely become public so far. They gave the early money, and they've given subsequent money to the 527 arm, American Crossroads.

And there are three or four Texas billionaires who have, either on their own or through their companies or a combination, contributed a total of $2 million each.

Probably the most prominent of them is Harold Simmons(ph), a Texas billionaire who's been a long-time backer of conservative causes, helped fund the somewhat notorious Swiftboat Veterans for Truth back in 2004. And Simmons, through two little-known companies that he has a good-size stake in, has put in roughly $2 million.

GROSS: Well, you know, I just find it very interesting that this is supposed to be the year of, like, the Tea Party, the insurgent candidates, a big change in the Republican Party, and you have these two groups, American Crossroads and Crossroads GPS, with Bush-era powers behind it in terms of Rove and Gillespie and also in terms of some of the funders, including the funder who also helped fund the Swiftboat campaign against John Kerry.

So what does that say to you about who's got the power now within the Republican Party?

Mr. STONE: It says basically that it's split. It's bifurcated. You have many old establishment figures, long-time GOP operatives, who have helped organize groups like American Crossroads and others and helped do a lot of the fundraising for them.

And they've recruited many, many veterans from the RNC, from the National Republican Congressional Committee, from the National Republican Senatorial Committee, to work for these groups. And they've done a really incredible job of building what some have called a shadow GOP.

They meet regularly. There must be about 10 or 12 of these organizations. They started meeting regularly back in April. As I reported in National Journal early this year, they did a luncheon at Karl Rove's house on April 21st, where folks such as Steven Law, the president of American Crossroads, Fred Mallek, long-time GOP fundraiser who founded the American Action Network, Bill Miller, the political director of the U.S. Chamber of Commerce, all attended. And the agenda was, in good part, about the need for more cooperation, coordination this year, which was perfectly legal, and they have continued to do that.

GROSS: If you're just joining us, my guest is Peter Stone of the Center for Public Integrity. It's a nonprofit investigative journalistic organization. He leads the money and politics team.

We're going to take a short break, and then we'll talk more about new changes in campaign finance. This is FRESH AIR.

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GROSS: We're talking about the new world of campaign finance. My guest is Peter Stone of the Center for Public Integrity. It's a nonprofit investigative journalistic organization. He leads the money and politics team.

The Chamber of Commerce is officially supposed to be a bipartisan group, yet you include it in this, quote, shadow GOP. Where does the Chamber of Commerce fit in, into this, quote, shadow GOP?

Mr. STONE: The chamber gives a lion's share of its money, 80, 85, 90 percent, depending upon the year, and runs ads in support of Republican candidates. And they have been increasingly critical of the Obama administration. They spent tens of millions of dollars trying to defeat health care reform, financial services reform and opposed other initiatives from the administration and the Democratic Congress.

And they have become more strident, more critical as they year has gone on. And they have said on the record that the composition of the Congress needs to change. And there's no secret that they're talking about Republicans need to gain power.

Bill Miller, the political director of the chamber, said this to me. Tom Donohue, the long-time head of the chamber, said this at a private meeting earlier this year in Southern California, where there was a retreat.

And at that point, Donahue mentioned that he wanted to increase spending this year to 75 million, setting a much higher target than they'd originally set of 50 million, all in the effort to change the composition of the Congress.

GROSS: And you write that you think that it's the energy, health insurance and financial services industries within the chamber that are the forces behind this new drive.

Mr. STONE: I think they're a big part of it. Miller cited I asked Miller about what was fueling corporate anger, which he alluded to in a couple of interviews that we did. And he cited four issues. He cited financial services reform, health care reform and potential threats to corporations.

He mentioned cap and trade legislation, and he mentioned the possibility of card check legislation. He talked about four big issues that chamber members are upset about.

This doesn't mean that they're necessarily the ones who have put in all the money, but I think it provides kind of a roadmap, if you will, to where a good bit of the support is coming from, that those are some of the sectors that they've targeted for fundraising.

We don't know where the chamber's money is coming from. They also don't have to disclose who their donors are. It has been reported last week that NewsCorp, whose CEO is Rupert Murdock, gave a million dollars. That's the only large donation that we're aware of publicly. The chamber has not denied it, but I think sources have confirmed that that is in fact what happened.

GROSS: The IRS and the FEC, the Federal Election Committee, are supposed to be regulating how this money is spent on campaign ads. What are each of their jobs? What is the IRS overseeing? What is the FEC overseeing?

Mr. STONE: Well, the IRS is principally overseeing many of these organizations, which have mushroomed this year, the so-called 501(c)(4)s, the ones that don't have to report their donors publicly. They also oversee 501(c)(6)s, which also don't have to report their donors publicly, and some other so-called 501(c)s, which have different rules. But it's primarily the (c)(4)s and the (6)s which have been spending the bulk of the money on advertising.

And what they have to look at there again is with this issue of the (c)(4), which American Crossroads has, you know, Crossroads GPS, their 501(c)(4) arm, the American Action Network has a 501(c)(4) arm, and some of the others I mentioned.

The rule there is they have to spend over half their money on legislative lobbying activity. And that's where the rubber meets the road, so to speak. That's where they - the controversies are and we're going to see challenges like the one that Democracy 21 has filed recently, trying to figure out whether, indeed, these ads, which are proliferating, that go to the heart of a candidate, stand on certain issues, Harry Reid on health care, Harry Reid on stimulus, whether they indeed are issue, legislative lobbying ads or whether they're more political ads.

And if they don't have the right balance, if they don't prove sufficiently that over half of the money is going to the legislative front, then the IRS could crack down on them. But that's not going to happen. That's not going to happen imminently.

Again, these are challenges that have just been filed, calling for investigations. So that's the critical issue there that the IRS is looking at.

The FEC had to write some rules for groups and organization in the wake of the Supreme Court decision, has to provide guidance for them. And historically, they have also overseen political action committees, campaign spending, both individual campaigns and congressional campaigns, and they have a range of issues they look at.

They have to be one of the groups that has to make sure that there is no coordination between these outside groups and any of the campaigns or individual campaigns or committees, national committees. That's a lot of their role.

GROSS: Now, the FEC is comprised of three Republicans and three Democrats. They're political appointees. Is the FEC a politicized group?

Mr. STONE: The FEC has long been a deadlocked group. I mean, it's been a major problem at the FEC historically is that big decisions take a long time to come down, investigations take a long time, usually, to happen. People are fined for campaign violations often well after the campaign well, almost always after the campaign is concluded, sometimes well after the campaign is concluded.

And they deadlock. They deadlock on major issues over the years. And so it's one that has been widely criticized by campaign finance reformers and watchdogs for being an agency that is hobbled by its, you know, its basic structure.

GROSS: Peter Stone, thank you so much for talking with us.

Mr. STONE: It's been a pleasure, thank you.

GROSS: Peter Stone leads the money and politics team for the Center for Public Integrity, a nonprofit organization devoted to investigative journalism. You can find links to his articles on our website, freshair.npr.org.

We'll have more about the changing world of campaign finance in the second half of the show. I'm Terry Gross, and this is FRESH AIR.

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GROSS: This is FRESH AIR. I'm Terry Gross.

We're devoting today's show to the new world of campaign finance that has been created as a result of the Citizens United decision. The decision gave corporations the right to donate unlimited amounts for political ads and other campaign activities that can urge voters to directly oppose or support individual candidates. Organizations that qualify for certain tax status under the IRS are allowed to accept that unlimited funding without disclosing where it's coming from.

Earlier, we heard about two new organizations that Karl Rove helped launch this year, taking advantage of the Citizens United decision.

Here to follow up on how this changing world of campaign finance is affecting politics is Ken Vogel. He reports on money, politics and influence for Politico, a news organization that focuses on national politics.

Ken Vogel, welcome to FRESH AIR. Since Karl Rove helped launch a couple of very important fundraising groups, American Crossroads and Crossroads GPS, how is that changing Karl Rove's place in the GOP? I mean, I thought that he'd kind of left that aspect of politics and was, you know, now serving as a commentator on Fox News. But he's reasserted himself as an active force within party politics and party fundraising. So where does Karl Rove fit in now in the Republican Party?

Mr. KEN VOGEL (Journalist, Politico): Well, if we were to think of these groups as sort of a shadow RNC or a shadow party infrastructure, Karl Rove would be the chairman of this shadow infrastructure. There's no doubt that he is very much involved. Even as he and Ed Gillespie, to some extent, protest to the contrary in really shaping the strategy of these new groups, coordinating between these new groups, and raising money for these new groups. And if Republicans are successful in the 2010 midterms, if they recapture the House of Representatives, certainly if they recapture the Senate, a lot of credit will go to Karl Rove and some of these groups that he helped form and helped orchestrate.

GROSS: So is Karl Rove's importance now as a fundraiser, as political strategist, as somebody who's setting the actual political agenda, the actual issues that are the foundation of the party? Which of those roles is he active in?

Mr. VOGEL: All the above. There's no underestimating his importance here. What's interesting is that both he and Ed Gillespie, a fellow former Bush-era RNC political operative, have downplayed their roles publicly. And it's a little curious to those of us who follow this stuff on a regular basis, who know just how important he is and wonder why he's doing this. A number of theories sort of have been put forth as to explain his sort of reluctance to be associated with this shadow political party effort, one of which is that he just is loyal to the folks who are actually running it, who in some instances, actually owe their careers to him, all of whom have close ties to him. And he wants to see them get credit for it.

A more cynical possibility that has been raised is that he realizes that he could potentially be a political liability for Republicans and for some of the Republicans who are being supported by the groups that he is helping raise money for and set strategy for because he really is associated, in the public mind, polls show, with the Bush administration and some of the - certainly, towards the end of the Bush administration - some of the more unpopular aspects of it. And we have already seen in some races in which American Crossroads and Crossroads GPS have been active.

The Democrats who are on the receiving end of some of these attack ads have aired ads invoking Karl Rove and suggesting that a vote for the Republican who's being supported by the Rove-linked groups would be tantamount to a vote to return to the sort of Bush years. And that seems to be - at least the Democrats who have used this strategy believe that it is an effective strategy. And so that could be an explanation for why Rove has sought to stay in the background, even as he is so popularly associated with some of these efforts.

GROSS: When you say that Karl Rove is distancing himself from the two groups that he helped launch, you report that a spokesperson for American Crossroads has been going around trying to correct journalists who say that Rove is the head of the group or that Rove launched the group. And the spokesperson has been saying that while both Rove and Gillespie encouraged the formations of the groups, neither is on the board, is compensated, consulted or is on any of the incorporating documents. Have you been corrected for something you've said?

Mr. VOGEL: We've been corrected. I've talked to a number of other reporters here in Washington or who cover the national political beat who've been on the receiving end of some of these calls and emails, some of which have been quite heated, where they've demanded corrections. Sometimes they've demanded changes to cut lines under photos, or have urged us or other media outlets to take down pictures of Rove and Gillespie from stories posted online about American Crossroads or Crossroads GPS, suggesting that even just having their pictures up there creates a misleading impression that these folks are running or created - created these groups.

Interestingly, Sheila Krumholz - the director of the Center for Responsive Politics, a very well-regarded campaign finance watchdog, non-partisan campaign finance watchdog here in Washington, D.C. - told me she actually received a letter from an American Crossroads lawyer demanding that they make just a very slight change to a story that indicated that Rove and/or Gillespie started American Crossroads.

They changed it slightly because, as she told me, it's largely a distinction without a difference. Their readers know and are savvy enough to know that, in fact, if these guys helped create it and are raising money for it, then their fingerprints are all over it and they're likely guiding the direction of these groups. And I don't think that that - I think that that is safe to say, that they are, in fact, guiding the direction of these groups.

GROSS: I guess the fundamental question is: Why do these groups need to exist? In other words, why isn't the money going - instead of to a shadow RNC, why isn't the money going directly to the RNC?

Mr. VOGEL: Well, a lot of that certainly has to do with the dissatisfaction over the RNC and over Michael Steele's tenure there. It's interesting to note that the chairman who Michael Steele replaced is a guy by the name of Mike Duncan, who had very close ties to the Bush-era Republican machine, very close ties to Karl Rove and Ed Gillespie. And when he left the RNC, so, too, did a lot of the big donors who have come with him to American Crossroads and some of these other groups.

GROSS: My guest is Ken Vogel of Politico.

We'll talk more after a break. This is FRESH AIR.

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GROSS: My guest is journalist Ken Vogel of Politico. We've been talking about how the Supreme Court's decision - the Citizens United decision -is changing the world of campaign finance and politics.

Since you cover money, politics and influence for Politico, I wonder what you've been seeing about any political divisions between the Tea Party and the GOP. I mean, the Tea Party candidates are largely running as Republicans, but in the primaries, they weren't necessarily the Republican establishment's picks. So now that the primaries are over, have Republican powerbrokers and Republican money started to back the Tea Party candidates, who in the primaries, displaced the Republican picks?

Mr. VOGEL: In most cases, yes. But, you know, we hear this cliche a lot about the battle for the soul of the Republican Party. And I think we're still seeing that and I think we will see that after the 2010 election, no matter the result, where these Tea Party activists - many of whom are new to politics - really reject, on its face, the Republican establishment and the way that the Republican establishment has done business. And so we saw that certainly, very acutely, in the primary challenges in which Tea Party-backed candidates took on more established Republican candidates who were the picks of the Republican Party, either in those states or nationally, in some cases, won and upset - sort of upset the Republican's general election plans.

We see that, obviously, in Delaware, where Christine O'Donnell defeated long-time Republican Congressman, Former governor of Delaware, Mike Castle. We certainly saw that in Alaska, where a failed state legislative candidate by the name of Joe Miller, who was backed by the former governor and Tea Party darling there, Sarah Palin, ended up defeating a sitting United States senator, Lisa Murkowski, in that primary. And we saw that in Nevada, where Sharron Angle, a long-time state legislator and perennial candidate, defeated at least one and possibly two candidates who the Republican Party would've preferred to see running for Senate against Harry Reid, the Senate Majority Leader.

And the Tea Party activists who played a big role in these victories say, you know what? We don't care if we - if the primary ended with us supporting and nominating a candidate who is deemed to be less electable by the establishment headed into a general election, we don't even care if those candidates lose. For us, this is about pulling the Republican Party further to the right. Of course, this is music to the ears of Democrats who say yeah, we'd love for the Tea Party candidates to send less electable candidates into the general election. And it really chaffs a bit at the Republican establishment, who it's all about winning the election, winning the general election for them, and they're willing to make philosophical compromises in order to get the best candidate for the specific race.

What we're seeing with the Tea Party activists, who are promising to carry over this philosophy past the mid-term elections, is they're not willing to make those philosophical compromises. They'd rather have ideological purity, even if it means losing out on the potential to win a majority in either chamber of the United States Congress.

GROSS: Do you think that the creation of several new fundraising groups in the wake of Citizens United on the Republican side have managed collectively to bring in more money than the Republican Party otherwise would have gotten?

Mr. VOGEL: I think so. It's a combination of these new groups and donors feeling freer to give as a result of several recent Supreme Court decisions, as well as just the fact that the energy is on the right. You know, donors aren't going to shell out a lot of money if they think that their side is going to get creamed. We saw that a little bit in the 2008 presidential election. We certainly saw that in 2006, when all the electoral factors were sort of pointing Democrats way. It's just harder. If you talk to fundraisers, it's harder to raise money when all the pundits and all the polls are pointing to a less-than-successful result on election night.

Clearly, that's not the case this time on the right. All the polls and electoral factors would seem to suggest the Republicans are in for huge and potentially historic gains next month, and so it's simply easier to raise money. The fact that there are more established operatives who donors trust with their money, raising money, into newer groups, some which promise anonymity and without the risk - or at least without the perception of the risk that federal regulator will clamp down on these groups after the fact and give these donors a hard time, all those factors have combined to create really a surge that some operatives who I talk to say is unprecedented in big money donations from the right.

GROSS: President Obama opposed the Citizens United decision and opposed the idea that individuals and corporations should be allowed to give unlimited amounts, and then, in some instances, be allowed to give those amounts without even disclosing who they are. So given his opposition to the Citizens United decision, how has that affected fundraising on the Democratic side?

Mr. VOGEL: Well, President Obama's stance on these issues - campaign finance, generally - even predating the Citizens United decision, has had a chilling effect on Democratic big-money efforts outside of the political parties. And it goes back to his presidential campaign - or really before, frankly, where he really discouraged big donors from giving to these groups. And, in fact, he and John McCain during the 2008 presidential campaign almost called something of a truce, where they urged both of - because both folks, both then-Senators McCain and Obama, had sort of staked-out stances as campaign finance reformers and advocates for reducing the role of money in politics and special interests in politics, and they discouraged the big donors on their respective sides from giving to these types of groups. And we didn't see a whole lot of that type of activity on either side during 2008 presidential campaign.

Of course, it really didn't matter on Obama - from Obama's perspective, because he raised an unprecedented, record-shattering $750 million for his campaign, so he didn't need a whole lot of help. But now Democrats do need help, and a lot of big donors say that President Obama's stance on these issues, on discouraging these large donations, has continued to discourage them.

And frankly, Obama hasn't done a whole lot to sort of warm them up. Not only has he continued to cry foul over the effect of this Citizens United decision in ways with rhetoric that really decries the influence of big money in politics across the board, but his administration has done little to award or even in sort of a wink and a nod type of way, large donors who contribute to these outside efforts in ways that we had seen in past administrations where, you know, the Bush administration, the Bush RNC would hold fundraisers at their houses or give them little perks that would sort of show that, hey, we recognize that even though we're not supposed to be coordinating with these outside groups, that you helped us and out party out through these large donations.

We dont see that from Obama and we do hear large donors saying that they dont feel inclined to give big donations to these groups that would help President Obama and the Democratic Party because of President Obama's stances on these issues.

GROSS: Well, Ken Vogel, thank you so much for talking with us.

Mr. VOGEL: It was my pleasure.

GROSS: Ken Vogel reports on money, politics and influence for Politico.

Coming up, Lee Fang talks about the story he broke this week, about how the Chamber of Commerce may be using money from foreign corporations to fund political ads in the U.S.

This is FRESH AIR.

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GROSS: My guest Lee Fang broke a big campaign finance story this week. He reports that the U.S. Chamber of Commerce, which has been funding many political attack ads against Democrats, is trying to increase the amount of money it raises from foreign corporations. According to Fang, the money from those foreign corporations goes into the Chamber's general account, the same account that funds the Chamber's political ads. The Chamber says no foreign money is being used to fund political activities.

Fang's report led to an editorial yesterday in The New York Times, calling on the government to make sure that the tax code and American control of American elections is not being violated. Fang writes for Think Progress, the blog of the Center for American Progress.

Lee Fang, welcome to FRESH AIR. Now, you write that the largest attack campaign against Democrats is being waged by the Chamber of Commerce. Why is the Chamber of Commerce taking such an active role?

Mr. LEE FANG (Researcher, The Progress Report and ThinkProgress.org): Well, Chamber of Commerce has fought bitterly against some of the largest progressive agenda items in the last two years. They were the largest interest group to run attack ads against health reform, many of which were funded by health insurance companies secretly.

They were the largest group to lobby against financial reform. Theyve attacked clean energy reform, helping to kill the bill in the Senate. Theyve fought for free trade deals that some Democrats have opposed. Theyve fought against the Disclose Act, which Democrats purposed to deal with the campaign finance landscape after the Citizens United Supreme Court case.

And finally, after the BP oil spill, the Chamber has really fought against efforts to change the oil liability law, which would force BP to pay for the cleanup. And I should note that BP is an active member of the Chamber.

GROSS: You said that the Chamber of Commerce helped kill the Disclose Act. What is the Disclose Act?

Mr. FANG: The Disclose Act is a fix - a partial fix - for the Citizens United decision. It basically puts new stronger protections against foreign money in American elections. It also says groups that accept federal contracts and government bailouts can't be running ads in American elections. It also says, most importantly, that groups that run these big advertising campaigns or small advertising campaigns, have to disclose their funders.

GROSS: Is it killed or is it just stalled?

Mr. FANG: It's stalled. Using their allies in the Senate, the Republican Party, the Chamber of Commerce lobbied aggressively to basically stall any effort to move the bill out of the Senate.

GROSS: So most of the money that the Chamber gets is from corporations, right?

Mr. FANG: We believe so. Of course, the Chamber of Commerce does not disclose its donors. They do not disclose who is paying for the lobbying they do. They dont disclose who is running the ads when they put ads on television and radio, so we dont fully know. They say they represent all businesses, but there have been a lot of reporting from my own blog and elsewhere that it's mostly large international corporations and large conglomerates that are funding the Chamber.

GROSS: Let's get to the story that you broke this week. What did you find out about foreign contributions to the Chamber of Commerce that you think are going to fund political ads?

Mr. FANG: Well, heres what we know: on Tuesday, I broke the story. The Chamber of Commerce is very large and they set up a large network of affiliates in countries all over the world. And what we found were several fundraising documents that the Chamber has been using in places like Bahrain, India and they're sending these fundraising applications out recruiting foreign corporations, foreign businesses.

The documents say foreign companies are welcomed and they ask that these foreign businesses send money to the same campaign account, the 501(c)(6), that the Chamber is using to run attack ads. And they're telling these foreign businesses that they can have a voice in American public policy debates.

GROSS: Is that legal?

Mr. FANG: Well, it's illegal for foreign companies and foreign nationals to spend money in American elections. However, because the Chamber doesnt disclose and theyve killed every effort to force disclosure on these campaign ads, we dont know the extent of this. We dont know exactly how these funds are used. But its important to note that all these funds are comingled once they go inside this one big Chamber of Commerce campaign account. They say they have internal controls, but theyve produced no documentation, no proof, but they have admitted that they are accepting this foreign money in their campaign account that they're using against Democrats.

GROSS: Do you think that the Chamber of Commerce accepting foreign money is something that's new?

Mr. FANG: I dont know. The Chamber of Commerce recently began many of these foreign fundraising efforts. Actually, this month and last month they commissioned former Ambassador Frank Lavin to go around to foreign affiliates of the Chamber of Commerce in places like China to talk about the importance of a midterm election. I know theyve been ramping up their fundraising efforts in the UAE, in Bahrain and several other Middle Eastern countries. We do know that the Chamber of Commerce is funded by government-owned corporations like the Bahrain Petroleum Company and the State Bank of India and these stakes are very high.

GROSS: And what would their interest be in attack ads during American elections?

Mr. FANG: There are a lot of stakes. For one thing, the Chamber of Commerce lobbies very hard working often openly with foreign countries to help push free trade deals. Right now the Korea free trade deal is on the table. Democrats earlier this year tried to pass efforts to repeal special tax breaks for companies that ship jobs overseas. The Chamber of Commerce helped Republicans in the Senate kill that bill; that's one of their largest priorities.

It's possible foreign companies are spending and giving money to the Chamber for that purpose, but again, we dont know.

GROSS: What did you learn about the Chamber of Commerce's approach to raising money in foreign countries?

Mr. FANG: Well, they're very aggressive. For example, they have an office inside their H Street building. It's across the street from the White House called the U.S.-India Business Council. It sounds like a separate entity but its not. It's actually just a part of their main organization, organized under that same 501(c)(6) tax identity. And they send out these applications to India, they set up offices to recruit foreign businesses and they promise all kinds of different services, like advocating certain public policy decisions. For example, the India Business Council says that they will fight to improve the state of manufacturing in India if Indian companies sign up.

GROSS: What does the law say about foreign funding of American political ads?

Mr. FANG: The law is very clear that foreign nationals and foreign corporations are not allowed to spend in expenditures in American political campaigns, no political advertising, nothing.

GROSS: So if youre right in your story, the Chamber of Commerce would be breaking the law.

Mr. FANG: Yes. But again, they dont disclose who is paying for these ads; although, the bank account - the campaign account, I should say, that's receiving these foreign funds is comingled with American businesses. It's all combined and then used on the $75 million massive campaign or attack campaign, I should say.

GROSS: If, as you reported, money from foreign sources is going into the Chamber of Commerce and the Chamber of Commerce is using some of that money for political ads, what are the dangers of that?

Mr. FANG: We dont know. This is an unforeseen era in American politics. If you have foreign government-backed businesses picking who wins and who loses elections here in America, its - I dont know if there is a great precedent for that. But its a scary future if China or another country or Saudi Arabia has a priority and they can elect candidates to achieve that priority in our government. So, you know, we dont know the extent to what the Chamber is doing but, you know, it opens the door to a lot of possibilities.

GROSS: Lee Fang, thank you so much for talking with us.

Mr. FANG: Thanks for having me.

GROSS: Lee Fang writes for ThinkProgess, the blog of the Center for American Progress. The Chamber of Commerce denies that it is using any foreign money to fund political activities in the U.S.

Senator Al Franken has called on the Federal Election Commission to investigate allegations - these allegations.

You can find links to articles by all three of today's guests on our website, freshair.npr.org, where you can also download podcasts of our show.

(Soundbite of music)

GROSS: I'm Terry Gross.

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