Saturday, August 7, 2010

Money Laundering Needed for Corporate Political Spending

Now that the U.S. Supreme Court has opened the door for corporations to buy elections, there is a need for a new form of money laundering — so that money can fund political advertising campaigns without anyone being able to trace it back to its source.

Discount chain Target has learned this the hard way. After word got out that it had funded high-profile television advertisements endorsing a culture-war candidate for Minnesota governor, the resulting consumer backlash and investor fears of the effects of a boycott put a damper on the company’s stock value.

Target, which has tried to position itself as a more humane alternative to Walmart, may be more vulnerable than most companies to this kind of disclosure, but other corporate political contributors will not want to take that chance if they can avoid it. U.S.-based and foreign corporations reduce their risk of boycotts and other consequences if their contributions can’t be traced. Meanwhile, foreign governments and organized crime groups wanting to funnel money into political campaigns can now use the corporate loophole to do so as long as they cover their tracks well enough.

Don’t be surprised if most of the political advertising this fall is paid for by fly-by-night organizations with no web site and no office of their own, as apparently is the case with the political fund that Target was supporting. Most of these organizations may shut down and disappear as soon as they have paid their bills following the election, only to be replaced by equally faceless political advertising funds for the next election.

On the corporate side, look for creative and often fraudulent accounting maneuvers to bury the political spending in budgets for advertising and community outreach, so the spending won’t show up in the corporation’s financial statements.

The risk, though, is that the story gets out and the money is traced back to its sources. No one can spend tens of millions of dollars anywhere without leaving tracks, and the corporate contributors, whether they are criminals or real businesses, may not be as anonymous as they want to be.

I keep mentioning the criminal element because there is no way to draw a clear line between criminal organizations and legitimate businesses. A business corporation can operate for years before the world discovers that it is primarily a front for fraud and other criminal activities, as we saw with Enron and Worldcom. And a criminal organization can set up its own business corporations in a matter of days, when that is needed to move money around. In practice, the recent Supreme Court decision allows unlimited criminal funds from anywhere in the world to be spent on behalf of candidates, and even the candidates will not be able to find out how much money is involved or where it is coming from.

Eventually, of course, this loophole that allows anyone with money to buy a U.S. election has to be closed. In the meantime, we can expect the political discourse in the upcoming elections to take a decidedly commercial and criminal turn.