LITTLE ROCK, Ark. — Arkansas voters passed Issue 3, commonly known as the Ethics Amendment, in 2014. It was touted as banning direct contributions from corporations to political candidates. While it may have attempted to do that, political action committees, or PACs, seem to be offering a path for those payments to still end up in candidate campaign coffers.
Issue 3: A Bill of Goods Where Voters Got Sold?
Campaign season is a time for speeches, stumping and soliciting financial help to secure a seat for most candidates. And in 2014, Arkansas voters headed to the polls and passed Issue 3, commonly known as the Ethics Amendment.
“We passed one of the strongest reform measures in the country,” said State Rep. Warwick Sabin, one of the biggest proponents of ethics reform and those changes Issue 3 had to offer.
“We banned corporate and union contributions to political campaigns,” he said. “There’s a two-year cooling off period between when a lawmaker can serve and then become a lobbyist. And we greatly restricted the gifts lobbyists can give to lawmakers in hopes of possibly influencing their decisions inside legislative chambers.”
Fast forward to 2016’s campaign cycle, though, and corporate contributions are still finding their way into candidate coffers.
“What it did was prohibit candidates from accepting contributions directly from a corporation or other type of business entity,” said Graham Sloan, executive director of the Arkansas Ethics Commission. “Issue 3 didn’t keep corporate money out of the political process or money from business entities out of the political process.”
Issue 3 restricted the types of contributors candidates could accept campaign contributions from. Corporations aren’t on the list, but political action committees (PACs) are among the five types of acceptable contributors. PACs can accept money from corporations and businesses. Plus, corporations can even create PACs of their own. Those corporations can then donate money to their PACs, often named for the corporation or business interest that creates them, and donate directly to candidates.
“In Arkansas, there’s no restriction against a corporation having a PAC,” Sloan said. “If you were a corporation or a business entity, and you wanted to stay in the game, then, if you can’t contribute directly to a candidate, you’re going to have to find another method. Some of them have decided to do that through PACs.”
“Some people might say Arkansas voters were sold a bill of goods on this, because of corporate contributions can still be made to candidates. Do you agree with that? Did lawmakers over promise and under deliver on what the law could do?” we asked Sabin.
“I absolutely do not agree. We banned direct corporate and union contributions to political campaigns. Politics is the art of the possible. So, one thing you learn very quickly is that it’s impossible to get everything you want. You take little nibbles at it. Now, we’ve found another problem that needs addressed, and we’ll need to address that. Unfortunately, it’s just how the process works.”
What’s more, Arkansas law doesn’t restrict a person, group or company to creating just one PAC.
“In fact, there’s been a pretty significant increase in the number of PACs over the past couple of years,” Sloan said. “The trend has been a steady increase, so I wasn’t surprised. Where we saw groups have one PAC in the past, they now have four or five.”
Sloan has seen an explosion in PACs. There’s been nearly a 70 percent increase when comparing PAC filings in the fourth quarter of 2015 to those in the fourth quarter of 2013.
“We get calls almost on a daily basis from people interested in setting up PACs, and we’ve seen where some groups that had one or two have five PACs now. “
A PAC for Me and Two for You
Now, talking about campaign contributions and political action committees might make one think the whole process is pretty complicated.
But, in fact, the process to creating a PAC in Arkansas is relatively simple. There’s no filing fee. You simply print out the form from the Secretary of State’s website, fill in the blanks, have it notarized and submit it to the Secretary of State’s elections division office.
There’s no need to disclose the interests your PAC aims to support, if you don’t want. And you can have as few as one registered agent or officer to manage the PAC.
To show how easy it is, Working 4 You printed off the forms, filled them out and had them notarized. We didn’t create just one PAC. We created four. We were now registered with the state and could accept checks and financial donations from any number of contributors. Then, we would have been able to funnel those funds to candidates we wanted to support. In as little as five minutes, we had the makings to become part of the clone PAC clan.
Clone PACs are essentially carbon copies of one another. They often have the same officers, addresses and even names, typically with numbers added on to the end to differentiate them legally as registered committees. That’s what KARK did when we registered. We created the Working 4 You PAC, Working 4 You 2, Working 4 You 3 and Working 4 You 4.
Some entities anticipated a proliferation in PACs prior to Issue 3’s passage. Arkansas Farm Bureau in a policy document you can see here anticipated PAC loopholes and foresaw that the ethics amendment wouldn’t actually decrease corporate contributions, just redirect them.
“When you all were speaking in favor of Issue 3 did you anticipate that?” we asked Sabin.
“We predicted people would try to find ways around the new ethics reforms. Water tries to find its way around any kind of obstacle — it’s the same with money in politics.”
Looking at some of those clone PACs, Working 4 You found multiple instances where businesses and lobbying groups give the maximum contribution to each version of the cloned PACs.
“When those organizations are controlled by the same person or entity, that means that they’re basically getting around the limits we’ve put in place,” said Sabin.
Where There’s a Will (And Clone PACs), There’s A Way
So, how does the whole thing play out?
Take a look at DBH PACs, for instance. Registered lobbyist Bruce Hawkins created 7 virtually identical PACs, and financial disclosures with the Arkansas Secretary of State office show that at least five of the seven PACs have received contributions from two or more identical contributors.
Online documents show where the Conway County Legal Beverage organization gave to multiple DBH PACs and also where Hog Wild Wine and Spirits, along with Rockport Refreshments, both gave to multiple DBH PACs as well.
At least four of DBH’s PACs have then turned around and given major contributions to State Senator David Burnett, who is seeking re-election to his seat this year. According to both DBH’s financial disclosures and those filed by Burnett, he’s received nearly $9,000 between the PACs in monetary and non-monetary contributions, just for the primary election.
According to Sloan, the campaign contribution limit is now $2,700 per candidate per election.
One of the biggest contributors to the DBH PACs thus far has been Southland Park Gaming & Racing. It has given at least $30,000 to DBH PACS, maxxing out the $5,000 limit per PAC. Southland operates the greyhound races in West Memphis, which sits in the backyard of Burnett’s senate district.
Burnett has, in the past, taken up legislation that was suggested to benefit Southland, including one in 2014.
We’ve reached out to Burnett regarding the donations, and he has not returned a request for comment at this point.
Working 4 You also reached out to Bruce Hawkins, the registered agent for the DBH PACS, he said in a written statement:
In conversations with our clients, some already had political action committees that they used in other states that could easily become approved in the state of Arkansas. But we also have a number of clients who do not have PACs nor the desire to go through the paperwork and reporting requirements for approved Arkansas political action committees. DBH has had PACs for a number of years, and when we looked at what our clients have contributed in the past, eight was the number of PACs that seemed to be necessary for us to allow them to maintain those contribution levels and stay within all of the legal and reporting requirements.
In an effort to be as transparent as possible, we have named our PACs so that it would be very easy for you or any member of the general public to see exactly who contributes to our PACs and who our PACs contribute to.
I guess this is a very long way of saying, we have opened the number of PACs that we have because that is what is required under the current law in the state of Arkansas for us to be as responsive as possible to our clients.
Clone PACs Next on Ethics Reform Radar
“Does that smell funny to you?” Working 4 You asked Sabin.
“Well, it certainly does smell funny to see PACS be carbon copies of one another,” Sabin said. “It’s basically just a form of money laundering, so what we need to see happen is limit that as much as possible.”
According to Sloan, there’s nothing specifically barring groups or corporations from giving to carbon copy PACs, but he cautioned that they could be treading dangerously close to violating campaign contribution limits.
“I think that would be a problem if someone set up multiple PACs to evade or circumvent the limit,” Sloan said. “But that would have to be determined on a case-by-case basis. We don’t have any hard and fast rules on that at the moment, because we haven’t had to live under the law with the changes at this point.”
Sloan did note that other states have what many call “related entity” laws on the books, and while efforts have been made in Arkansas in the past – including an effort by Sabin to take a stab at related entities, nothing has ever made it onto the books.
“If you had for instance, two PACs that were created and controlled by the same group – then the contributions would be deemed to have been made toward the $2,700 aggregate across both PACs,” he said. “That’s one thing that may need to be addressed. There was legislation that would have created related entity restrictions, and it didn’t pass. That might be something that needs to get revisited in the future.”
There’s no denying the Ethics Amendment attempted to stop corporate contributions from playing a role in state elections.
“Just because somebody has found a way around the law – doesn’t mean the law is flawed,” Sabin said. “We have laws that get broken all the time. That doesn’t mean there’s a problem with the law. The problem is with those breaking it.”
But now that the state is seeing the flow of money work its way around the protections that have been put in place, Sabin said he plans to fight for more reforms.
“This is a huge deal, and eventually if this happens too often, people are going to completely lose faith in our government.” he said. “The tough part is that the system is already rigged in a lot of ways. It’s tough to convince lawmakers to get behind ethics reform, sometimes, because you have lobbyists who don’t want to see these reforms get enacted, and they already have influence over some elected officials and then those people become impediments to getting reforms passed.”
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