Tax filings by the conservative nonprofit organization American Encore confirm what was widely suspected during the 2014 gubernatorial race: that Doug Ducey’s longtime ally Sean Noble was at the center of the multimillion-dollar dark money campaign that helped get him elected.
According to the Form 990 that American Encore filed with the IRS for the year of 2014, nearly every dollar of the $3.5 million of dark money that was spent on Ducey’s behalf in the race can be traced back to Noble, who serves as the group’s president. Groups that received money from Noble’s organization also spent heavily in campaigns for secretary of state, Corporation Commission and myriad legislative races.
American Encore provided grants to four other nonprofits that targeted former GoDaddy executive Christine Jones and former Mesa Mayor Scott Smith, Ducey’s chief competition in the Republican primary. In addition, American Encore itself spent nearly $1.5 million supporting Ducey in his general election matchup against Democrat Fred DuVal.
The greatest beneficiary of American Encore’s largesse was the Virginia-based 60 Plus Association, which received a grant of more than $1.8 million. The 60 Plus Association spent nearly $1.4 million in the governor’s race, running about 466,000 in ads against Smith and $339,000 against Jones in the primary, along with about $578,000 against DuVal in the general election. In addition, the group spent more than $300,000 on an ad campaign against Democratic secretary of state nominee Terry Goddard in the general election, which he lost to Republican Michele Reagan.
Legacy Foundation Action Fund, an Iowa-based nonprofit that received $880,000 from American Encore in 2014, spent $275,000 on ads against Smith, while the Arizona Free Enterprise Club received $450,000 from Noble’s group and spent $150,000 against the former Mesa mayor. Veterans for a Strong America, a South Dakota group, spent about $178,000 against Jones while receiving a $275,000 from American Encore.
Each of the four groups received more from American Encore than they spent in Arizona elections, and Noble appears to have been the source for all of the combined $2 million they spent helping Ducey get to the Ninth Floor, most of which was spent helping him secure the Republican nomination for governor. Furthermore, American Encore gave $20,000 to a Washington, D.C., group called Concerned Women for America. That group shares an address with the Concerned Women Legislative Action Committee, which spent about $18,000 in dark money for Ducey in 2014.
All told, the $3.5 million that can be tied to American Encore, either through its grant recipients or its own spending, is close to the total amount of dark money spent on Ducey’s behalf in 2014, based on a post-election analysis of 2014 dark money spending by the Arizona Capitol Times. Noble didn’t dispute that American Encore was the source that money.
“People have a first amendment right to participate in the political process and engage in political discourse. And this has nothing to do with me. It has to do with the public policy issues in Arizona and across the country,” said Noble, a vocal advocate for anonymous political speech.
The only anonymously funded group that spent for Ducey in 2014 but is not tied to Noble through American Encore’s tax filing is the Washington, D.C.-based Environmental Defense Action Fund, which spent $130,000 in ads during the general election.
American Encore and the 2014 grant recipients are 501(c)(4) nonprofit organizations. Under federal tax laws, such social welfare organizations cannot have the primary purpose of electioneering and must devote the majority of their resources to non-election issues.
The section of American Encore’s IRS filing that detailed its grants to other organizations included a note saying the group “carefully evaluates the missions and activities of recipient organizations” before providing grants “to ensure that funds are used only for tax exempt education and social welfare purposes of recognized 501(c)(4) organizations.” The note also stated that American Encore’s grants are accompanied by transmittal letters indicating how the money may be used.
However, the filing noted that American Encore “does not currently have procedures for monitoring the use of grant funds in the United States once grants are made.”
Noble said the grant recipients complied with the terms set in the transmittal letters, which he said authorized the money to be used for “general operating” expenses.
“They’re social welfare, tax-exempt organizations. They have as much right as anybody to do issue advocacy or issue lobbying or express advocacy under the IRS threshold,” he said.
At least one of the four groups clearly used American Encore for its pro-Ducey spending. Legacy Foundation Action Fund reported $980,000 of income for 2014, just $100,000 more than the amount of the grant it received from American Encore that year, while spending about $275,000 in the governor’s race. The other groups’ Form 990s from 2014 were not available online.
Legacy Foundation Action Fund claimed its spending against Smith was “issue advocacy” unrelated to the election. But the Citizens Clean Elections Commission determined that the ads in fact qualified as campaign spending and fined the group $96,000 for failing to register as a political committee and disclose its spending. The group is now appealing that fine.
Veterans for a Strong America also claimed its anti-Jones ads were issue advocacy. The Secretary of State’s Office concluded that the group engaged in express campaign advocacy and therefore also failed to comply with campaign finance laws. Reagan referred the case to the Attorney General’s Office in July.
In addition to the dark money spending, Ducey received plenty of help in 2014 from groups that weren’t anonymously funded. Most notably, a political action committee created by the Republican Governors Association spent about $5 million against DuVal in the general election.
In addition, Ducey ran a well-funded campaign of his own. He raised a total of nearly $8 million for his campaign, including about $3.5 of his own money that he contributed to his campaign.
A group called the Open and Honest Coalition is now pushing a proposed amendment to the Arizona Constitution that would require disclosure of all contributions of more than $10,000. The anti-dark money push is largely driven by the unprecedented amount of anonymous spending in Arizona during the 2014 election cycle.