“Dark money” group won’t have to disclose donors

One of the most prominent spenders of dark money in the 2014 election won’t have to disclose its donors, thanks to a federal judge’s determination that a key campaign finance statute is unconstitutional.

Peoria city attorney Steve Kemp informed the Arizona Attorney General’s Office that he would not pursue a complaint against the Arizona Free Enterprise Club. The Secretary of State’s Office last year found reasonable cause that the group’s spending in the 2014 election should have required it to register as a political committee.

However, U.S. District Court Judge James Teilborg ruled in November that the statutory definition of “political committee” was unconstitutionally vague and overbroad. The Legislature redefined the term during the 2015 session and the Attorney General’s Office has dropped the state’s appeal in the case.

Because of that ruling, Kemp, who took over the case after then-Attorney General Tom Horne declared a conflict of interest last year, said he couldn’t proceed with the case.

“The reasonable cause finding of the (secretary of state) is based on a statute that has been struck down as unconstitutional and therefore is no longer in effect,” Kemp wrote to the attorney general and secretary of state’s offices in July. “Consequently, it must be concluded that in light of the decision of the United States District Court … AFEC cannot be defined as a political committee. Therefore, there exists no legal basis to require reporting.”

Had the group been forced to register as a political committee, it would have also then had to disclose its contributors. As a federally registered nonprofit organization, it does not have to disclose its contributors, even if it spends in elections, but also cannot have the primary purpose of electioneering.

Scot Mussi, executive director of the Arizona Free Enterprise Club, called the complaint “frivolous” and without evidence, and said he was pleased by Kemp’s decision.

“The whole determination was based on a belief that just because we were exercising our First Amendment rights and engaging in political activity that they decided they wanted to do an investigation against us,” Mussi said. “There was no evidence of wrongdoing to begin with. There should have never, ever been a referral by the secretary of state.”

The Arizona Free Enterprise Club was one of several groups at the heart of a debate over dark money – anonymous spending by independent expenditures in elections – and the role it played in the 2014 race for two seats on the Arizona Corporation Commission. Many believed that the Arizona Free Enterprise Club was a pass-through for money from Arizona Public Service.

The group spent more than $450,000 supporting two APS-backed candidates for Corporation Commission, Tom Forese and Doug Little, both of whom won their elections. It also spent about $635,000 to help Justin Pierce, a candidate for secretary of state in the Republican primary whose father, Gary Pierce, was a member of the Corporation Commission.

In addition, the group spent $150,000 against Scott Smith in the Republican gubernatorial primary, and spent on numerous legislative races. The Arizona Free Enterprise Club spent more than $1.7 million during the 2014 election cycle.

APS has repeatedly refused to say whether it funded the election activities of the Arizona Free Enterprise Club or other groups that spent on behalf of Forese and Little.

The case that led Teilborg to strike down the definition of “political committee” came from Fountain Hills after a town official attempted to force Dina Galassini to register a political committee because of a protest she had planned against a bond measure on the 2010 ballot.

Because the bulk of Arizona’s campaign finance enforcement laws relied on that definition, it affected myriad other election enforcement cases. The Attorney General’s Office and Secretary of State’s Office dismissed dozens of other election-related complaints, arguing that they couldn’t proceed with enforcement actions because of the ruling.

Kemp said he couldn’t speculate on whether he would have forced the Arizona Free Enterprise Club to register as a political committee if Teilborg hadn’t struck down the key statute.

“I have to deal with the statute as it was. And as it was, the statute was ruled unconstitutional. So that dictated the outcome,” he said.

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