(RealClearWire) — The Swiss billionaire Hansjörg Wyss has a profound interest in American politics. Over the years, he has pumped $475 million he has earned manufacturing medical devices into left-wing advocacy groups — $72 million in 2021 alone, according to a new report from the conservative watchdog group, Americans for Public Trust.
According to a biography of Wyss written by a sister, Wyss’ goal is not to bend laws to his business’s advantage but to “[re]interpret the American Constitution in the light of progressive politics.”
Although foreigners are prohibited from donating money directly to political causes, Wyss has donated lavishly to progressive political organizations. The New York Times reported in 2021 that these include the “Center for American Progress and Priorities USA, as well as organizations that ran voter registration and mobilization campaigns to increase Democratic turnout, built media outlets accused of slanting the news to favor Democrats, and sought to block Mr. Trump’s nominees, prove he colluded with Russia and push for his impeachment.” Since 2016, some $245 million of his spending on American politics has gone to Arabella Advisors, which controls a vast network of progressive nonprofits which, among other activities, has financed hundreds of smaller groups that campaign for specific issues and candidates. Arabella, which raised $1.6 billion in 2021, was dubbed by The Atlantic “The Massive Progressive Dark-Money Group You’ve Never Heard Of.”
Critics argue that Wyss’ largesse illuminates a gaping loophole in political finance that essentially allows wealthy foreigners to launder their contributions — one that has been exploited far more robustly by Democrats than Republicans. That may help explain why the issue became more prominent on Aug. 14, when House Republicans announced an investigation “into whether entities that qualify as tax-exempt under Section 501 of the U.S. Code are abiding by the statutory and regulatory prohibitions against … foreign sources of funding … being funneled through such organizations to influence America’s elections.” As part of that probe, the House Ways and Means Committee produced an open letter detailing the problem and requesting information from the public. A significant portion of the letter discussed the political donations of a single foreigner — Hansjörg Wyss.
Marneé Banks, a spokesperson for the two organizations most responsible for Wyss’ political giving, told RCI that “The Wyss Foundation and Berger Action Fund prohibit their grants from being used to support or oppose political candidates or parties or to fund get-out-the-vote or voter registration activities.” She said, “Both organizations comply with the rules and laws governing their activities, and they support increasing transparency in our campaign finance system.”
Almost every expert interviewed agrees that the House investigation will prove challenging. The opaque nature of 501(c)4 independent political expenditure groups makes it impossible to tell whose donations are spent on what.
“There’s no way for us right now to even check up on, let alone stop, wealthy foreign interests, say from China or Russia, from cutting a check to an American foundation that disappears into its coffers and winds up in the hands of a political nonprofit,” says Hayden Ludwig, Director of Policy Research at the Restoration of America, a right-leaning nonprofit that investigates the undisclosed donations to nonprofits commonly disparaged as “dark money.” “And if it’s 501I4 [the IRS tax designation for organizations that can engage in activity supporting political candidates and electoral issues] that money can absolutely be used for independent expenditures, running political ads, hammering Republicans and electing Democrats.”
Arabella, along with its subsidiary organizations, declined to comment for this article.
Taking foreign donations has long been illegal, but it emerged as a major concern in 1996 when figures tied to Chinese intelligence illegally funneled hundreds of thousands to the Democratic National Committee. One of the major figures in the scandal, a Chinese businessman named Ng Lap Seng, told ABC News in 1997, “My philosophy is that I should not break the law but I wouldn’t mind bending it.”
The political landscape shifted profoundly in 2010 with the Supreme Court landmark decision in Citizens United vs. FEC. By holding that campaign finance laws violated the right to free speech, the court broadly prevented the government from restricting independent political spending by corporations and other associations.
Although foreigners have never been allowed to make direct contributions to campaigns, Citizens United essentially allowed Wyss and other foreign billionaires to give unlimited amounts of money to political action committees and other organizations that did not coordinate their advocacy with specific candidates.
In the 13 years since the Citizens United decision, which Democrats have long derided, a large number of 501(c)4 independent expenditure groups have sprung up to take advantage of the new rules. None has been as successful as Arabella Advisors.
Arabella was founded by Eric Kessler, a former Clinton White House appointee, as well as a member of the Clinton Global Initiative, which was plagued by fundraising controversies. Under Kessler, Arabella achieved great success in wrangling wealthy liberal donors and thereby making many organizations on the left dependent on its largesse: The Arabella network spent $1.2 billion in 2020. “Altogether this is absolutely one of the largest fundraising machines I have ever come across,” Robert Maguire of the left-leaning watchdog Citizens for Responsibility and Ethics in Washington told Politico in 2021. “I am really struggling to think of any other group, especially recently, that could rival it.”
The structure of Arabella Advisors is complicated and opaque by design. Arabella is comprised of a handful of smaller but still large and influential funds — New Venture Fund, Sixteen Thirty Fund, North Fund, Hopewell Fund, and Windward Fund. Those groups then create several “pop-up” groups with generic names such as “Floridians for a Fair Shake” and “Arizonans For Responsible Government” to campaign for specific issues and candidates.
“They’re little more than websites designed to look like fully independent, grassroots advocacy groups; yet they can be unplugged the minute a campaign wraps up,” according to a recent report on Arabella’s operations by Ludwig. “These pop-up groups don’t file IRS disclosures, nor do they reveal their staff, boards, or budget. They often solicit donations from unsuspecting liberals, some of whom might be bothered to realize they’re in fact supporting the biggest ‘dark money’ monster in politics and not a grassroots group.”
The Arabella network has created some 500 of these groups since 2006, and even political journalists are often fooled into thinking these are grassroots groups instead of entities controlled by well-funded D.C. activists. (Some of these pop-up groups have even run political ads that deceptively try to look like local news outlets.) Many of those pop-up groups are also 501(c)(3) organizations, which unlike 501(c)(4) groups, are tax deductible and supposed to be nonpartisan.
However, “nonpartisan” groups funded by Arabella often skirt the law and are created to accomplish narrow partisan goals. For instance, the Arabella network gave $25 million to the Center for Tech and Civic Life (CTCL), a nonprofit that endured heavy criticism for its role in the 2020 election. While CTCL’s mission was to improve election infrastructure by working with local government election offices, it was run by election analytics experts affiliated with Democrats and progressive causes. The hundreds of millions in grants CTCL distributed in the 2020 election were allocated by coordinating with Democratic politicians and heavily skewed toward increasing turnout in Democratic counties and cities located in swing states.
With Arabella, donors’ money is extremely fungible. Because it is routed through two or three organizations before it gets spent, it is difficult to determine how donations from foreigners such as Wyss are disbursed.
And given Arabella’s massive political spending, there’s no question the organization exerts political influence and is cozy with the Biden administration. This year, it was revealed that Arabella’s Eric Kessler was the only non-government employee on an email chain where Secretary of Agriculture Tom Vilsack and other USDA employees were discussing policies about how to “transform” the U.S. food system and go after the meat industry for high prices, raising questions about whether the group is directly shaping the Biden administration’s agenda.
With Arabella and their foreign megadonors working this closely with the White House, “I don’t see Democrats remotely concerned about the influence of foreign money, even though they spent years hammering Trump about being a supposed Russian asset,” says Ludwig.
This lack of concern also created a marked contrast with how similar organizations on the right are operating. While it is very difficult to track the flow of such money, the top nonprofit groups accepting it on the right that are comparable to Arabella, One Nation, and American Action Network have institutional bans on accepting foreign money.
And those groups are quite happy to emphasize this as a point of political contrast with Arabella. “Unlike the left, who rely on massive foreign gifts to bankroll their toxic agenda that’s costing American families more daily, we do not accept foreign contributions,” says American Action Network Communications Director Courtney Parella. Americans for Public Trust executive director Caitlin Sutherland adds that “This is mostly an issue on the left, with all the hypocrisy involved, because they’re the ones decrying dark money, they say they want to ban dark money, want to get money out of politics, but have no actual ban on accepting money from foreign nationals.”
And despite the broad freedom Citizens United created for political spending, serious questions about the legality of these arrangements remain. Two years ago, Americans for Public Trust filed a complaint with the FEC regarding Wyss and Arabella. “Foreign nationals cannot give to Super PACs, but we’d see a pattern where the foreign national gives to a nonprofit, that nonprofit turns around and gets the money to a Super PAC. We’ve been calling this the foreign influence loophole,” says Sutherland. “So we filed an FEC complaint that basically argued just that, that the money flow needs to be investigated by the FEC.”
By law, the FEC board can have no more than three appointees from a particular political party, and the Americans for Public Trust’s FEC complaint was eventually dismissed last year on a 3-3 deadlock between commissioners. The attorney representing Wyss in the FEC matter was Marc Elias, the Democratic party super lawyer who specializes in contesting elections — Elias also served as the DNC’s cut-out to pay for the debunked Steele Dossier, which alleged that former President Trump and many of his aides were financially compromised by Russian interests.
However, while the FEC’s general counsel report on the matter concluded “there is also not currently enough information in the record to conclude that Wyss made indirect political contributions … that would be used for electoral purposes,” the report validated a number of concerns raised by Americans for Public Trust. Specifically, it concluded that the Sixteen Thirty Fund, a key part of Arabella Advisors’ network and funnel for Wyss’ money, had spent the lion’s share of its budget on electoral politics. The organization spent $400 million in 2020, which included a whopping $128 million to America Votes, a progressive organization that declares its mission is to “WIN ELECTIONS in key states” on its website.
“Based on this record, including STF’s [Sixteen Thirty Fund’s] admitted spending, its grants to politically active grant recipients, and its payments … it appears that there is reason to believe that by 2020 STF had the major purpose of influencing a federal election,” notes the report. The FEC’s general counsel report went on to conclude that Sixteen Thirty, and a subsidiary organization, The Hub Project, had likely violated the law by not registering as political committees.
Had they been forced to register as Super PACs, that would have forced significantly more transparency requirements on both organizations. Registering as a Super PAC would have also made it clear the fund could not accept foreign donations, something which the FEC has previously cracked down on. In 2019, the FEC fined a Jeb Bush Super PAC $940,000 for taking in donations from a Chinese corporation. However, since the FEC took no enforcement action, the conclusions of the FEC’s general counsel were not binding. The Sixteen Thirty Fund is still not registered as a political committee.
Sixteen Thirty Fund did not respond to a request for comment, but it appears neither Sixteen Thirty nor Arabella is done dealing with the FEC. On August 15, Americans for Public Trust filed an all-new complaint with the Internal Revenue Service alleging Arabella’s relationship with Sixteen Thirty and its other subsidiaries is illegal. In order to receive nonprofit status, Sixteen Thirty and the four other funds in the Arabella network initially claimed Arabella would only be providing the groups with temporary administrative support. Seventeen years later, the groups have paid Arabella hundreds of millions in management fees and remain under its yoke.
Ultimately, any hope for addressing foreign money in elections may lie with Congress because the FEC’s role is merely interpreting the existing laws governing dark money, which are unclear. House Republicans recently introduced the “The American Confidence in Elections (ACE) Act,” which would make it illegal for foreigners to funnel money from nonprofits to Super PACs and other vehicles for electoral spending.
Though Democrats once thought of concerns about foreign election interference and dark money as signature issues, Axios notes that Republicans are “trying to flip the script and draw attention to foreign donations to Democrat-aligned and progressive nonprofit organizations” with the introduction of the ACE Act. Additionally, Sen. Marco Rubio reintroduced the Protecting Ballot Measures from Foreign Influence Act, which would make it illegal for a foreign national to contribute money, directly or indirectly, to State or local initiatives and referendums.
Plastic no-no bans
And setting aside the complicated world of dark money, Democrats have faced accusations of willfully enabling fraudulent fundraising for the last 15 years. Both of former President Obama’s 2008 and 2012 campaigns were heavily criticized for refusing to use basic credit card verification systems for online donations that are designed to, among other things, filter out donations from foreign sources. This resulted in a raft of obviously fraudulent donations.
ActBlue, the largest online fundraising platform for Democrats, which raised a whopping $5 billion in 2020, still does not require donors to supply the three-digit Card Verification Value (CVV) number on the back of credit cards. Requiring a CVV is now standard industry practice for online transactions, specifically to prevent fraud and illegal foreign transactions. (ActBlue’s GOP counterpart in online fundraising, WinRed, does require CVV numbers to donate.)
To that end, Rubio has also introduced legislation to require a CVV for online donations. When Rubio submitted it as an amendment to the Democrats’ climate and tax bill last year, it didn’t even receive a vote. Rubio has subsequently called for an FEC investigation into ActBlue after reports emerged earlier this year that ActBlue is a conduit for fraudulent donations made with stolen credit card numbers. ActBlue also did not respond to inquiries about why it chooses not to require CVV numbers for fraud prevention.
Ron Fein of the clean elections watchdog Free Speech for People warns against making foreign dark money a partisan issue. Fein notes Republicans are not perfect on this issue — Free Speech for People filed an FEC complaint against President Trump’s inaugural committee for taking a $500,000 contribution from Venezuelan-owned oil company CITGO.
More important, curbing foreign influence in elections is an issue that large majorities in both parties support. “Survey after survey, and every opportunity to actually vote directly, like a ballot initiative shows that large majorities of Americans of both political parties will say time and time again, that they don’t want foreign money entering US elections,” says Fein. He also notes that state and local Democrats have embraced limiting foreign donations.
At the national level, Rubio has attracted some support from Democrats — Virginia senator Mark Warner is co-sponsoring his Protecting Ballot Measures from Foreign Influence Act, and it has attracted some support from moderate Democrats in the House — but Rubio is plainly frustrated with the fact that stopping foreign money in American elections has become a largely Republican issue in Congress.
“Democrats talk a big game about protecting our elections from foreign interference, but it is all talk,” Rubio tells RealClearInvestigations. “Cracking down on credit card fraud and foreign political donations used to be a bipartisan idea, but apparently fundraising comes first for the Democrat Party.”
This article was originally published by RealClearInvestigations and made available via RealClearWire.
Mark Hemingway
Mark Hemingway reports on the key institutions shaping public life, from lobbying groups to federal agencies to elections, for RealClearInvestigations. His writing has appeared in USA Today, Wall Street Journal, MTV.com, and The Weekly Standard.
