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Ethics Commission Takes First Step on Dark Money Disclosure

The Texas Ethics Commission took a small step Thursday toward doing what the Legislature was unable to do last session — figure out a way to get the politically active nonprofit groups that have become increasingly active in recent years to disclose the identity of their donors.

Michael Quinn Sullivan of Empower Texans and Texans for Fiscal Responsibility.

The Texas Ethics Commission took a small step Thursday toward doing what the Legislature was unable to do last session — figure out a way to get the politically active nonprofit groups that have become increasingly active in recent years to disclose the identity of their donors.

Many argue that the ability of these groups to grant anonymity to their donors while spending money independently to influence elections is precisely why they have become popular. Independent direct expenditures on campaigns became common after the U.S. Supreme Court’s 2010 decision in Citizens United v. FEC.

Instead of writing a new law, lobbyist Steve Bresnen proposed a rule that presumes contributions made to a group spending money on campaigns are campaign contributions.

According to Bresnen, that puts the burden of proof on the group to show the contribution wasn’t intended for political purposes.  “It cannot be that this system depends on them to voluntarily disclose,” Bresnen said. “Otherwise, we have a system of secret money.”

Groups across the ideological spectrum in Texas have adopted the practice of using nonprofits to spend directly on campaigns. One of those groups, Empower Texans, makes independent expenditures through a 501(c)(4), Texans for Fiscal Responsibility.

Joe Nixon, an attorney for Empower Texans, called it “shameful” that the Ethics Commission would consider the rule. He said Bresnen was attempting to get at nonprofit groups’ donor lists “in order to shut it down.”

He compared the action to the recent IRS controversy in which extra attention was given to checking the nonprofit status of certain political groups and also to attempts in Alabama to harass the NAACP in the 1950s.

The state does not have a compelling interest to regulate here, said Nixon, who added that it was “ironic” that a state agency that enforces election laws is not itself following the law.

Lawmakers passed legislation last session on the topic, only to have Gov. Rick Perry veto the bill.

Thursday’s action by the Ethics Commission was to publish the proposed rule. After publication, the public would have at least 30 days to comment, with action required within six months.

The vote to publish was 6-2 with the chairman and vice chairman voting no. Bresnen that the other commissioners were interested in seeing the process move forward but that it “would be fair to say they’re not wedded to my particular formulation.”

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On Wednesday, the Ethics Commission approved subpoenas for witnesses and documents in advance of an April 3 formal hearing on complaints filed against Empower Texans and Michael Quinn Sullivan, the group’s president and CEO.

The complaints allege that Empower Texans illegally solicited money for its PAC and that Sullivan acted as an unregistered lobbyist.

Formal hearings are extremely rare before the Ethics Commission, and Joe Nixon, Empower Texans' attorney, told commissioners that they lacked an adopted set of rules on which to conduct their hearing.

He also said that holding a combined hearing on the two complaints did not give him enough of an opportunity to mount an effective defense of his clients. “We’ve had a two-year process getting here,” Nixon told The Texas Tribune on Thursday. “What is the rush?”

On Wednesday, Nixon vigorously challenged Ethics Commission Chairman Jim Clancy on his authority to set the parameters of the formal hearing. Clancy responded that existing law on administrative practices gave him the latitude to hold a hearing. He said the decision to hear both complaints in a single hearing was based on duplicative testimony during the preliminary hearings.

Nixon disagreed with Clancy's legal argument, asserting that the commission should have adopted a specific set of rules beforehand on how to conduct a formal hearing and that the best way forward was for the commission to go through a rulemaking process before continuing with the complaints.

Clancy also made a distinction between an administrative hearing before his agency and a district court review that Empower Texans could ask for after the conclusion of the ethics commission review.

Nixon seized on Clancy’s statement as suggesting the chairman was predisposed against his client. And on Thursday, he complained about the ethics commission “wanting to take money out of my client’s pocket without having a set of rules. That is a lack of due process.”

Among those receiving subpoenas to testify were Sullivan as well as those who filed the complaints — lobbyist Steve Bresnen, state Rep. Jim Keffer and former state Rep. Vicki Truitt. A separate set of subpoenas would seek testimony from five Empower Texans staff members.

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