Predictably, after Attorney General Merrick Garland named Jack Smith as special counsel to run two investigations involving former President Donald Trump, the twice-impeached ex-president and his defenders sought to cast Smith as a partisan operator rather than an impartial investigator. One of the chief lines of attack has been to claim that Smith, a war crimes prosecutor who formerly led the Justice Department’s Public Integrity Section, was “a key person” in the IRS’s so-called targeting of conservative nonprofit groups in the wake of the Supreme Court’s Citizens United ruling.
This particular attempt to tarnish Smith is exceedingly weak tea. Not only has the “targeting” scandal itself been overblown, but the actions by Smith that Trump’s allies are now pointing to basically amounted to asking questions about campaign finance and tax law at a time when political activity by nonprofits was significantly increasing. If anything, the examples that have piled up since 2010 of nonprofits being used to skirt campaign finance rules show that the concerns Smith raised about the potential misuse of nonprofits were well-founded.
On the day Smith’s appointment as special counsel was announced, the Twitter account of House Judiciary Committee Republicans declared that he “has been a Swamp Creature forever” while encouraging followers to read about him in a December 2014 report about the IRS controversy released by the then-GOP led House Oversight and Government Reform Committee. The same report, as well as an earlier one issued by the committee, served as much of the basis for stories in numerous conservative news outlets casting Smith as somehow suspect.
What did Smith actually do that his present-day critics apparently find so concerning? He read a newspaper article and followed up with discussions with lawyers and experts within the federal government about whether it raised legal issues that were viable for the Justice Department to pursue.
That’s pretty much it.
Concern about “misuse” of nonprofits
On September 21, 2010, the New York Times published a front page story about how nonprofit groups organized under section 501(c)(4) of the tax code had become major players in the midterm elections “in part because of the anonymity they afford donors.” The article noted that the chances the groups would “draw much legal scrutiny for their campaign activities seem slim” as they fell into “something of a regulatory netherworld.”
According to both House Oversight reports, on the same day the article was published in print, Smith, who was then-leading the Justice Department’s Public Integrity Division, flagged a New York Times story on the same subject in an email to his senior leadership, asking if it was possible to pursue prosecutions over the “misuse” of nonprofits to circumvent campaign finance law:
Check out [the] article on front page of ny times [sic] regarding misuse of non-profits for indirectly funding campaigns. This seems egregious to me – could we ever charge a [18 U.S.C. §] 371 conspiracy to violate laws of the USA for misuse of such non profits to get around existing campaign finance laws + limits? I know 501s are legal but if they are knowingly using them beyond what they are allowed to use them for (and we could prove that factually)? IRS Commissioner sarah ingram [sic] oversees these groups. Let’s discuss tomorrow but maybe we should try to set up a meeting this week.
Following their own meetings to discuss a “Possible 501/Campaign Finance Investigation,” Smith’s team reached out to the IRS to set up a meeting to discuss the “evolving legal landscape” of campaign finance law post-Citizens United. The meeting took place on October 8, 2010.
According to an IRS readout of the meeting, the lawyers from Smith’s Public Integrity Section “expressed concern that certain section 501(c) organizations are actually political committees ‘posing’ as if they are not subject to FEC law, and therefore may be subject to criminal liability.” After the DOJ attorneys raised “several possible theories to bring criminal charges under FEC law,” the IRS employees, including then-director of the Exempt Organizations Division Lois Lerner, explained several “obstacles” related to tax law in terms of pursuing the theories.
Beyond having a “dialogue” with the FBI about politically-active nonprofits in the period after the meeting, Smith does not appear to have pursued the issue much further. In fact, Smith told the Oversight Committee that the Public Integrity Section “did not open any investigations as a result of those discussions and that we certainly, as you know, have not brought any cases as a result of that.”
Smith’s exploratory conversations in 2010, however, are now being cited to claim that he is “a partisan Democrat who has targeted conservatives in the past,” as the pro-Trump website American Greatness put it,” or that he wanted to prosecute “innocent Americans,” as Rep. Jim Jordan (R-OH), the top Republican on the House Judiciary Committee, has claimed. Sens. Chuck Grassley (R-IA) and Ron Johnson (R-WI) even sent a letter to Attorney General Garland requesting that he answer, among other things, whether Smith’s “reported involvement in the Justice Department’s engagement with the IRS in the wake of Citizens United to apply increased pressure against conservative nonprofits” was a factor in his choice to appoint him.
These characterizations appear to assume that any effort to examine whether tax-exempt organizations are complying with campaign finance law is either inherently illegitimate or an attempt to target conservatives for their political and ideological views. But there is no indication in any of the records cited in the House Oversight Committee reports – nor in a similar Republican staff-written section of the Senate Finance Committee’s investigation into the IRS controversy – that Smith’s inquiry was interested in, let alone motivated by, the ideological positions of any nonprofit groups.
More importantly, in the years following Smith’s discussions on the subject, civil and criminal enforcement authorities have revealed numerous instances of nonprofits being misused in efforts that violated campaign finance and tax law, validating the concerns he raised in 2010.
Evidence of “misuse” of nonprofits
In September 2010, two days after Smith sent his email, the New York Times published another front page article about nonprofit political activity that was also highlighted by the House Oversight Committee. The story focused on a section 501(c)(6) organization called Americans for Job Security that was spending millions to influence the midterm elections and had previously been described by the Alaska Public Offices Commission as having “no purpose other than to cover various money trails all over the country.”
Nearly 9 years later, and more than 7 years after CREW filed a complaint with the Federal Election Commission against Americans for Job Security over its 2010 political spending, the nonprofit signed a conciliation agreement with the FEC finding that it had failed to register and report as a political committee. As a result of the decision, which was nudged forward by multiple CREW lawsuits, Americans for Job Security belatedly reported its contributions and expenditures from 2010 to 2012, revealing funding from prominent individuals, major corporations, and at least one government contractor prohibited from contributing to political committees.
In 2019, the FEC also found reason to believe that another nonprofit organization that spent millions influencing federal elections, Freedom Vote Inc., had failed to register and report as a political committee. Though the agency ultimately deadlocked on finding probable cause that the nonprofit violated the law due to a dispute over the statute of limitations, the FEC’s investigation of Freedom Vote revealed that from 2014 to its termination in 2019, more than 71% of the group’s spending was dedicated to federal campaign activity. As part of the FEC’s investigation of Freedom Vote, the nonprofit also disclosed that it had been audited and fined by the IRS.
In early 2013, around the same time that the IRS’s mismanaged approach to scrutinizing certain applications for tax-exempt status first became public, the tax agency rejected the application of a nonprofit called Arkansans for Common Sense that had spent hundreds of thousands aiding now-former Sen. Blanche Lincoln (D-AR) as she fought off a primary challenge. According to the letter the IRS sent when it rejected the group’s appeal, Arkansans for Common Sense was “not primarily operated for the promotion of social welfare” because its “primary activities” were “the participation in a political campaign on behalf of or in opposition to a candidate for public office.”
Another CREW FEC complaint resulted in the American Conservative Union, a section 501(c)(4) organization, paying a $350,000 fine in 2017 after it served as a conduit for a $1.71 million contribution to a super PAC. The case established a precedent that the prohibition against contributions in the name of another can apply to super PAC contributions routed through nonprofits.
In May 2022, a super PAC and its president pleaded guilty to filing false reports with the FEC over what the Justice Department characterized as a “dark money scheme” that involved routing contributions through two section 501(c)(4) organizations in order to keep the identities of the real donors secret. The evidence in the case included a text message to a potential donor to the super PAC that said, “You can use a third party to not disclose the true donor.”
Given the staggering amount of secretly-sourced political spending that has flowed through nonprofits since the Supreme Court opened the floodgates with its Citizens United decision, the handful of groups that have earned official rebukes are likely just the tip of the iceberg when it comes to the “misuse” of nonprofits to get around campaign finance laws. Smith’s raising of this issue in 2010 was sensible. Trump defenders’ efforts to use it to kick up dust now that he has been named as a special counsel overseeing investigations into the former president are not.