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Surge in LLC Contributions Brings More Mystery About True Donors

Trump’s limited liability companies (or LLCs) donations have spurred many queries from the Federal Election Commission.

Donald Trump’s inaugural committee did well by almost any standard: Doubling the previous record for cash raised to fund festivities around a new president’s swearing-in, it took in contributions from every major sector of the economy, and from donors who had steered clear of his campaign prior to the election.

The committee also received about $10.6 million — or about 10 percent of its total raised — from roughly 60 limited liability companies, or LLCs — structures often set up by small businesses that provide favorable tax treatment while also protecting their owners’ assets.

But some exist mainly to mask people’s identities.

Names of many of the inaugural LLC donors are straightforward, like Altria Client Services LLC, which clearly is affiliated with the tobacco company. Others read like a can of alphabet soup just exploded: HFNWA LLC, which gave $1 million; BV-2 LLC, $350,000; HGI DB Fund LLC, $250,000; HGIM LLC Corporate, same amount; or HJK LLC, $100,000, to name a few.

OpenSecrets Blog and other news outlets tracked down the people behind some of these using state corporate records searches and similar sources. (Franklin Haney, Gordon Sondland, Chad Guidry and his brother Shane, and H.J. Kalikow were behind that batch of five.) But the individuals who control a handful of the others on the list — like BH Group, LLC, which contributed $1 million — haven’t been nailed down.

By comparison, President Barack Obama’s 2013 inaugural committee received funds from just six LLCs, none of which had mysterious backers; they gave a total of $496,750.

And inaugural committees aren’t the only recipients of surging LLC contributions — their donations to presidential campaigns and super PACs in 2016 also spiked: About 840 of them gave roughly $21 million in the last cycle — almost double the $12 million by 109 LLCs in 2012, the first presidential race after the Supreme Court’s Citizens United decision.

Who Is That Man Behind the Curtain?

Exactly what LLCs can and can’t do in the political realm depends on how they file tax returns: as corporations, or not. If not, their revenues, losses and so on are included on the personal returns of the individual or partners who own the LLC.

Corporate LLCs and LLPs (limited liability partnerships) can’t donate directly to candidates; the noncorporate kind can, as long as they report the names of the individuals responsible for the donations. The contributions count toward an individual’s giving limits ($2,700 per candidate per election, but there’s no limit on gifts to super PACs.)

But many limited liability donations are reported with no names included. “LLC donations have created this whole new realm of transparency problems,” said Brendan Fischer, federal program director at the Campaign Legal Center. “They require minimal transparency and they are easy to set up, making them an appealing vehicle for a donor that doesn’t want his name attached.”

A donation could also cross the legal line by allowing foreign or corporate funds to flow into an election.

“A foreign national or a foreign individual or an agent could easily set up an LLC in Delaware, make a contribution and if the true source is not disclosed, the public would have no way of knowing,” Fischer noted.

LLCs gave about $828,000 to presidential campaign committees in 2016 — a modest sum given that the cost of the presidential election was an estimated $2.4 billion, and 26 candidates raised $1.5 billion, but way up from the $7,500 that these organizations gave to White House campaigns in the 2012 cycle. Gov. John Kasich (R-Ohio) led the pack with $160,000, followed by Democratic nominee Hillary Clinton with $112,000 and Gov. Chris Christie (R-N.J.) with $110,000. Trump came in at No. 7 with $49,000. (In our analysis, we only included donations from entities with “LLC” or “LLP” in their names, which means we have certainly undercounted.)

But it is Trump’s LLC donations that have spurred the most queries from the Federal Election Commission, even though his haul from such companies was modest compared with that of other candidates. The agency wants to know whether around 140 LLC donations of $91,000 (about $52,000 of which went into Trump’s campaign committee) were legal. (This figure is larger than our count of Trump’s LLCs because it includes groups that are LLCs but don’t have those letters in their names.) In many cases, Trump didn’t report the partners’ names, as the rules require.

One letter from the FEC highlighted a company with a headline-strewn past: Clean Energy Capital, LLC, which gave $1,000 to Trump’s Make America Great Again joint fundraising committee in early October. Two years earlier, it was a different agency, the SEC, that was interested in this Tuscon-based private equity fund and its CEO, Scott Brittenham, accusing them of misallocating funds. Brittenham and the fund settled the federal charges, paying roughly $2.2 million. The campaign reattributed the donation, $800 of which had been allocated to Trump’s campaign from the JFC, to Brittenham.

The campaign has fixed some of the other LLC donations flagged by the FEC, too. At least six were refunded because the campaign could not determine if they were legal or not. In some other cases, the campaign amended its FEC report to include partnership attributions. At least one query from the agency, concerning nine LLCs, is still awaiting a response, which is due by May 12.

“Our Committee has safeguards in place to ensure that all contributions are made by eligible contributors only,” wrote campaign treasurer Timothy Jost in September and November letters to the FEC.

LLC donors to Trump and his JFCs disclosed in response to FEC queries

Most of the LLC donor action was with outside spending groups. Former Gov. Jeb Bush (R-Fla.) led the presidential pack with $6 million in such contributions to his super PAC, Right to Rise. He was followed by a fellow Florida Republican, Sen. Marco Rubio, with $5.5 million from LLC donors to Conservative Solutions, the super PAC dedicated to electing him; and Kasich, who saw $2.2 million in LLC donations to his super PAC, New Day for America.

Trump moved up, coming in at No. 4 with his groups getting $1.6 million from LLCs.

With some of these organizations, it takes quite a bit of digging to uncover the name of the human responsible for the contribution. For instance, MMWP12, LLC gave $500,000 to pro-Kasich super PAC New Day Independent Media Committee. The Center for Public Integrity reported the entity was incorporated in Montana the day before it made the big gift, and is linked to another LLC, K2M, that lists a former Kasich staff member, Paul Johannsen, as one of its officers. Another example: The New York Times identified the true source of the $250,000 from V3 231, LLC to pro-Cruz Stand for Principal PAC: Ben Nash, the CEO of PCS Wireless. And the AP uncovered the original donor behind a half-million-dollar donation from IGX LLC in Delaware (in which three such names are registered) to Rubio’s super PAC to be self-described investor Andrew Duncan of Brooklyn, NY.

Nobody was able to top the $11 million that Restore Our Future and other groups backing then-GOP nominee Mitt Romney scooped up from LLCs in 2012 — and which also triggered hunts for the real donors.

Overall, the number of LLCs actively contributing at the federal level and the amount they gave to super PACs (including non-presidential ones) shot up in 2016, with around 850 of them doling out almost $32.2 million. That’s compared to the approximately 290 LLCs giving $8 million in 2014 for the mid-year elections, and 310 LLCs donating $22 million in 2012.

Eight super PACs, with all but one supporting Republicans, received at least $1 million from LLCs last election. After the pro-Bush Right to Rise ($6 million) and pro-Rubio Conservative Solutions PAC ($5.5 million), the Congressional Leadership Fund, which is the super PAC offshoot of the National Republican Congressional Committee and works to elect GOP House candidates, was the third runner up, harvesting $2 million from these organizations.

Trump himself is no stranger to doing business via LLCs. The Wall Street Journal estimated almost half the income listed on his financial disclosure reports (at least $304 million) came from assets held in 96 LLCs, and he owns more than 500 in all. These entities are frequently used in the real estate industry, with each project being set up as its own LLC, protecting the LLC owner from liability for debts and bringing advantageous tax treatment. Jared Kushner, Trump’s son-in-law and another real estate maven, included 204 LLCs on his personal financial disclosure.

Official Inaction

LLC contributions were a hot topic at the beginning of 2016, with advocacy groups filing multiple complaints with the FEC saying the corporate names were hiding the true sources of the funds. One target: Children of Israel LLC, which donated $150,000 to a super PAC supporting GOP White House contender Mike Huckabee, $400,000 to a pro-Cruz outside group and $334,000 to the Republican National Committee.

The Campaign Legal Center filed a complaint against Children of Israel, alleging it was an illegal straw donor, and others against DE First Holdings, which gave $1 million to a liberal super PAC, Coalition for Progress, the day after it was incorporated, and Décor Services LLC, which gave $250,000 to a pro-Christie super PAC 16 days after it was formed. Another, IGX LLC, faced the same scrutiny after donating $500,000 to a pro-Rubio super PAC. The Associated Press reported the owner, Andrew Duncan, admitted to using the LLC to donate because “he was worried about reprisals.” The complaints are currently still pending, and the Campaign Legal Center has not heard back from the FEC.

(The Intercept reported after the complaint was filed that big donor Saul Fox was the man behind Children of Israel by analyzing an amended RNC filing.)

Separately, last month a federal court in Washington, D.C., rejected the FEC’s attempt to throw out a lawsuit by the Campaign Legal Center and Democracy 21 against the agency in connection with LLC contributions in the 2012 campaign cycle. The advocacy groups sued to force the FEC to investigate five cases involving LLC contributions to super PACs supporting Romney, Obama, and a group of Republicans; the agency had dropped the cases after failing to get the requisite four commissioners to vote to move forward.

“I think this huge increase you’re seeing from one presidential election cycle to another is largely due to the deadlocks on the FEC,” said Brett Kappel, partner at Akerman LLP, “because contributors learn that if they use an LLC it’s unlikely there will be any issues with the FEC, which has to have a four vote majority to do anything.”

In addition, says another close observer, the increase may foretell the next chapter in the post-Citizens United development of campaign finance strategy.

“When super PACs first started out contributors generally consisted of individuals, so this phase two maturation is where we see more businesses like LLCs that are closely held and controlled by individuals,” said Caleb Burns, a partner at Wiley Rien. “I think this is the middle of a trend, where ultimately we will have other businesses in the not so distant future, including public companies becoming bigger players as super PAC donors.”

Researcher Alex Baumgart contributed to this post.

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