The dark money game.
There was recently a program on HBO the contents of which merit summarizing because they are very relevant to our cause at werunthehouse.org. In case you are not already familiar, our mission is to reduce the corruptive influence of money in American politics.
If you’ve heard the term
dark money but would like to know exactly what it means, this summary will give
you a specific example to clarify what that term is used for. This is a
must read for anyone who is concerned about how special interests have taken
over American politics and how voters no longer hold any sway over their
representatives as a result.
This prose will explain the details of an FBI investigation that began in 2019 and recently resulted in the incarceration of the Speaker of the House of the Ohio state legislature. In the process of the investigation the FBI uncovered a conspiracy in which one of the largest energy companies in the United States, called First Energy, used $60 million to bribe the members of the Ohio state legislature in order to successfully pass a bill that has provided a $1 billion bail out for First Energy. Despite the fact that the Speaker of the House was incarcerated for being bribed to pass the bill, the bill has not been fully repealed.
This is how the story goes…
The 2010 Citizens United supreme court ruling has allowed fringe groups to bundle billions into secret slush funds to frustrate popular rule. The Citizens United ruling states that corporations have the right to spend unlimited amounts of money in American politics. They can do this as long as they don’t give the money directly to the candidate. Instead they have to set up so-called independent organizations called super PACs.
More than 60% of voters in Ohio believe that abortion should be legal in most cases. Ohio’s lawmakers recently passed one of the most restrictive antiabortion laws in the nation.
Thanks to a rigging of the political map Republicans, who all oppose abortion, control 68% of the seats in the chamber, which is way more than their share of the popular vote.
Ohio was a purple state trending slightly Republican, but things changed drastically after the citizens United ruling.
In 90% of US congressional elections, the candidate who spends the most money wins. Corporations realized they could take over state legislatures because they were really cheap races. 2010 was the year to do it because that was the year when congressional districts are re-drawn by whoever was in power. The practice of re-drawing these districts with boundaries that favor a particular party is called gerrymandering.
Once districts are gerrymandered, politicians have no incentive to appeal to a broader, public interest. They win by catering to extremes and inflaming anger over hot button cultural issues.
A couple of decades ago there was an informal term in Ohio, called the caveman caucus. It was a smallish group of lawmakers, who were very conservative. They wanted things like concealed carry without permits, and a complete ban on abortion. After Citizens United that group was not a smaller subset of the Republican caucus. It became the majority. Corporations would fund these people by saying we will fund your hot button issues if you look the other way on economic regulation. To understand what was going on you had to follow the money.
When Citizens United was passed, the justices said that these PACs would be transparent and that would be a check on bribery in politics. But what happened was that a ton of this money was being spent by nonprofit corporations that can hide their spending. These are called 501(c)(4)s. This is known as dark money. This is money from anonymous donors, and it is actually impossible to trace a lot of the money at this point. That’s intentional because frequently the donors have corrupt intentions.
In 2019, the authorities were investigating the suicide of Neil Clark.
Neil Clark kept a diary of his work as a lobbyist in the Ohio legislature. Some time in 2018, Neil Clark disclosed in his diaries that he was meeting with two men, Brian and Rob who would always drink good wines, and would always pay for dinner in cash. He said they seemed like junior mafia.
The FBI started investigating Neil Clark and an FBI undercover agent caught Clark on tape talking about c4s which is what he called the nonprofit organizations that can take undisclosed dollars and spend them on campaigns or issues. Clark was caught on tape explaining to clients that he would ask the client to invest the c4s of the governor and of the speaker. This was concerning to the FBI, because the law dictated that there was not supposed to be coordination between a politician and the nonprofit corp. So now the FBI had identified the money that was being misused. They just didn’t have the motive yet.
Then House Bill 6 (HB6) was introduced in the Ohio legislature, which was also commonly called the Ohio Clean Air Bill. It provided a subsidy to failing nuclear plants run by a company called First Energy. First Energy is a large energy company that has operations stretching from Ohio to New Jersey. House Bill 6 was basically a $1 billion subsidy born on the back of energy rate payers. The bill, according to FBI agents, didn't mention a specific company, but all of the criteria made it look like it was designed to benefit First Energy. First Energy is one of America’s biggest polluters and was sued for dumping 20,000,000,000 gallons of arsenic infested coal waste into groundwater and reservoirs. Its nuclear plants paid huge fines for covering up safety violations and its balance sheet was so bad that it declared bankruptcy a year before HB6 was introduced in the Ohio state legislature. Unfortunately HB6 would eliminate a renewable program to subsidize the wind industry.
Larry Householder became Ohio state legislature’s speaker of the house. HB6 was Larry Householder’s signature bill. No one knew why he was taking so much interest in the bill.
HB6 was very unpopular. Corporations didn’t like it because their energy bills would go up, and the environmentalists didn’t like it. Television ads started being run to provide cover for conservatives that voted for it. Positive ads were run for people that were voting for it and negative ads were being run for members of the Ohio Congress that were maybe. As it turns out all of these television ads were funded through Larry Householder's c4 which was funded by FirstEnergy.
The FBI received a call from a member of the Ohio House of Representatives called Dave Greenspan, who did not want to vote for the bill and was getting pressured to do so. Neil Clark called Greenspan and told Greenspan that he had to vote for the bill. Neil Clark told Greenspan that nobody cares about his philosophical inclinations so Greenspan called the FBI. Then Larry Householder was caught on tape, saying “ Do you think we should go ahead and make some kind of a movement on Greenspan just to sit there and say if you’re gonna fuck with me I’m gonna fuck with your kids.”
Greenspan later told the FBI that he was told to delete text messages and then, if he agreed to do that, all would be forgiven.
That gave the FBI enough ammunition to subpoena records and start an investigation and quickly build from there. The FBI knew that there was an effort to delete evidence, so they were now racing against time to collect the evidence before it would get deleted.
HB6 moved through the legislature really quickly. It was introduced at the beginning of April and the governor signed it the day it hit his desk in July 2019. After it passed, the FBI were still in the early stages of investigations. They wanted to know if it was a corrupt deal.
The FBI had heard about the speaker's 501(c) (4) and they needed to find out the name of it and connect it to him. They received information that Householder had put a half a million dollars into the House District 43 election. J Todd Smith, a candidate running in that election, was not an initial member of team Householder, but he became one in the general election.
The Democrat, running against Todd Smith was called Dan Foley. Dan was pulled over after he had one beer and he passed the alcohol test but the footage from the police car was found and used in ads by a dark money organization. The ads lied about the fact that he failed a sobriety test and called him a corrupt politician. The ad was paid by a corporation called Hard-Working Ohioans. The FBI subpoenaed the bank records of that corporation and found that it had received something in the neighborhood of $1.4 million million dollars and that the majority of that money came from an entity called Generation Now, which was also a 501(c)(4) entity. They now needed to connect that organization to Larry Householder.
Then Neil Clark was caught on tape saying that Generation Now was the speaker’s c4. There were forty other clues in the bank records of money going out to various entities. So then they subpoenaed those entities and it took thirty days to get those records back and then they subpoenaed forty more entities and so on.
What was discovered was that Speaker Larry Householder was able to build a majority in the House thanks to First Energy’s money that was siphoned through this labyrinth of PACs. For example Generation Now sent money to PACs called the Coalition for Growth and Opportunity, to Hardworking Ohioans and to others. From there it would go to benefit Household’s chosen candidates by running negative ads against their opponents. The trail was quite long and confusing and it was intended to be that way in order to make that money hard to track.
Hard-working Ohioans were able to put out negative ads at the last minute for several key districts that were very important in the general election.
Householder was putting hundreds of thousands of dollars into these races, which was a huge amount of money for these races. That money directly translated into power for Householder.
Neil Clark was Householder’s henchman. He said that he learned early on that the House Speaker rules the roost. He dictates who gets rewarded and who gets punished and the Speaker usually gets what they want.
Householder’s game plan was this. He would use dark money to get anti-abortion members elected. In exchange, they would vote for HB6. And as a reward for their loyalty, he gave them a reward in the shape of a bill, which was the human rights protection act. This act was a ban on abortion. It was one of the most draconian antiabortion laws because it bans abortions after six weeks. It was coined as “The Heartbeat Bill.”
As soon as the abortion bill was passed, Householder moved to try to get HB6 passed in record time.
At this point the FBI knew about Generation Now. They knew about the millions and millions of dollars that were going into that account while the HB6 legislation was pending. But a 501(c)(4) allows any person involved to obscure the fact that they were involved. Luckily, the FBI agents were having dinner with the person that was collecting the money, Neil Clark. Neil was caught on tape telling the FBI agents who were pretending to be potential donors that a noticeable donation was 15 to 20 to 25 thousand dollars. He said he was the speaker’s appointed guy to collect the money. The FBI agent said our $15,000 is going to be like feeding a TicTac to a whale. And then Clark said you can’t compete with some of the corporations that have billions of dollars and the agent prompted Clark to give the name of this huge donor.. Clarke said the donor was First Energy and the agent asked “what they do?” Clarke said, “it’s a nuclear power plant.” So the FBI now had that conversation on tape. But that was still just circumstantial evidence.
The next thing that happened was that oil interests and other advocacy groups got together and decided to launch a referendum to oppose HB6
In his diary Neil Clark said that his team ran a poll which concluded that if the referendum did go on the ballot they would lose, so the conclusion was that they would have to ensure that the referendum never made it onto the ballot.
The person that ran the referendum was someone who had worked with Householder in the past. His name was Tyler Fehrman. Tyler managed candidates for Householder in the primary. Matt Borges who is the former chairman of the Ohio Republican Party was working closely with Householder but had also been Tyler‘s mentor since he was a young rookie. Matt reached out to Tyler shortly after he began the repeal effort and asked him to get a coffee.
Borges told Tyler that he wanted him to feed him information from the inside of the campaign. Borges told Fehrman that if Fehrman could provide him with numbers of how many signatures were being collected, the locations of his signature gatherers and other details that Borges would be a hero to Householder. Borges also said that if Fehrman did that, Fehrman would be taken care of. He said he would pay Fehrman’s legal bill so that he could fight for the custody of his daughter. Borges told Fehrman “pick a salary, pick a car, whatever you want, we will take care of you.”
The next day Borges called the FBI. The FBI asked him whether he’d be willing to wear a wire and to accept Borges’ proposition and to play along. Borges was desperate to impress Householder so he went for it.
Borges had hired private investigators to follow Fehrman so the FBI was following Borges and Fehrman and the private investigators.
After the deal was struck Borges met with Fehrman and said that he would give him 15,000 upfront and 10,000 when it was all over. Then he asked Tyler how many signatures they had so far.
The repeal effort paid money for a modest TV campaign and support for HP6 dropped to 20%. That same poll showed 88% of Ohioans were opposed of foreign countries like China investing in Ohio’s energy grid. Householder and Neil would write the TV scripts for the next few months.
One of the scripts went like this. They took our manufacturing jobs, and now they’re coming for our Energy jobs. The Chinese government is quietly invading our American electric grid. Paid for by Generation Now Inc.
Another script went as follows. The special interest groups that are opposing house bill six can’t convince Ohioans to sign the petition. They’ve resorted to bringing in shady, out-of-state political operatives to work for them. If they approach you asking for your personal information, tell them no. Decline to sign.
Speaker Householder’s team were hiring private investigators to follow around petitioners that were collecting signatures for the referendum. They would have people show up and shout down the petitioners. They would show up with a fake petition that they would try to pass off the legitimate one. They even contacted the petitioners and offered to pay them $2500 and a plane ticket home to just stop working. Householder and Clarke tried to pay all of the signature collection companies they could find, to get them to not work on the repeal effort. You can pay people not to talk. That is legal. What you cannot do is quid pro quo. Getting someone to pass a bill for a bag full of cash.
Around the time that Neil Clark and Larry Householder were trying to thwart the referendum, Neil Clark was caught on tape saying that he had spent $20 million in the last eight weeks. The undercover agent asked how much money they had to play with and Neil said - “it’s unlimited.”
The repeal team had to collect north of 200,000 signatures. It was exhausting work. They would start at eight in the morning and finish at 11 PM.
They were finally able to connect Householder to First Energy. Turns out that First Energy had been looking for a sugar daddy for a while. In turn Householder was looking for a company that wanted something in return and they found that with First Energy. It was a match made in heaven.
First Energy needed a $1.3 billion bail out to avoid bankruptcy. After the bail out a certain executive was going to sell off the nuclear plant and personally make $100 million. First Energy had drafted HB6 before Householder was even elected speaker. The money was sent from First Energy to Generation Now. That provided a guaranteed stream of revenue leading up to the general election. Everything was funded by First Energy. $60 million of First Energy’s money was spent on personal investigators, TV campaigns, on hiring petitioners, etc.
Householder used some of the money personally. He made repairs to a home that he owned in Florida and paid off credit cards. But the vast majority of it was spent to help him gain power by gaining the speakership.
The referendum effort didn’t achieve the 200,000 signatures they needed.
The covert work was done so the FBI then arrested the speaker of the house Larry Householder, and the former chair of the Ohio Republican Party, Matt Borges.
After he was arrested, Householder was reelected that fall because Ohio’s districts were drawn so narrowly that moderate voters never had a chance to make their voices heard. In that election Republicans actually gained three seats in the house.
This caused Ohioans to call for a referendum saying that they needed to have legitimate contests in fairly drawn districts. The referendum passed overwhelmingly and it created an amendment to the constitution of the state. The members of the Ohio state legislature ignored the results of the referendum. Time and time again the Supreme Court had to tell them they could not use the maps they had drawn. The legislators would then send the same maps back to the Supreme Court of Ohio. The chief justice sided with the three Democrats regarding the unconstitutional maps, and there were threats to impeach her.
They did this all the way up to the election, and finally the federal government stepped in and said Ohio had to have an election, so they were forced to have the election with the unfair maps. Ohio is still using those unfair maps today.
With Team Householder unaccountable at the ballot box due to the unfair maps, the citizens of the state looked to federal prosecutors for justice.
Shortly, after the charges were announced, two individuals contacted the FBI through their attorneys and said they were coming in to talk. These insiders brought a lot of the circumstantial evidence to life.
The FBI had a huge amount of evidence against Neil Clark in wire taps and so on and they brought him in for a 4.5 hour meeting. They offered to let him cooperate but told him he would have to begin by pleading guilty. Neil Clark said that would never happen. Neil then explained to the FBI that because Citizens United c4s are entities that are created by the IRS, what they were doing was perfectly legal. Neil really did believe in his innocence. He said it over and over in wire taps. His theory was that you can give unlimited amounts of dark money for political purposes as long as you don’t give it directly to a candidate but instead you give it to a supposedly independent group like Generation Now.
Larry Householder was sentenced to 20 years and Matt Borges was sentenced to 6 years. The case against Neil Clark was dismissed after he was found dead. The head of the public utility commission and two executives from First Energy were then indicted.
The district attorney of Ohio was asked whether any of this could’ve happened without c4s. He said it would have been impossible. He said he spent a lot of his career going after the Sinaloa cartel and they went to great lengths to launder $200,000. Using c4s is a low risk high-yield endeavor according to this prosecutor. It’s really rare that you see any kind of prosecution having to do with dark money because for the most part, nobody knows where it is and how much there is. In the case of the Householder investigation the FBI got lucky because they stumbled on to it accidentally when they heard things said on wire taps in a separate investigation.
Even if you believe in freedom of speech and anonymous donations, that doesn’t justify what Citizens United does, which is to create a secret lobbying, tax-free mechanism for unions and corporations.
A number of Supreme Court decisions have made it increasingly difficult to detect and prosecute corrupt politicians, by narrowing the definition of bribery, to an exchange of favors for a bag of cash. Larry Householder, and First Energy had to be extraordinarily reckless and unlucky to get caught. The line between criminal behavior and business as usual is paperthin. Through campaign donations and sympathetic courts, powerful interest groups have effectively legalized bribery, by calling it free-speech, but it’s a peculiar kind of free speech that’s expensive, influential and anonymous. It’s a recipe for disaster when elected officials deal with very very wealthy business interests.
During the 2024 campaign season $4.5 billion flowed into super PACs and c4s. These are supposed to be independent expenditures, but they were not independent. In exchange for rallies and TV advertising the donors wanted something in return. LinkedIn cofounder read Hoffman gave $7 million to Kamala Harris while demanding that she fire FTC chair Lena Khan.
Elon Musk's super PAC spent $250 million to elect Donald Trump and Trump offered him a position in government. Between his job, federal contracts, stock rises and changes in government regulation, Musk’s Enterprises stood to pocket well over $100 billion. How exactly are these campaign deals not quid pro quo? After Citizens United, what exactly is the difference between a campaign contribution and a bribe?
Unfortunately there’s no political will on either side with either Republicans or Democrats to change it because both parties benefit anonymously from dark money.
Neil was wearing a governor DeWine T-shirt when he was found dead. He claims that Governor DeWine agreed to accept a $5 million contribution from First Energy. Neil made various statements to the effect that Governor DeWine accepted bribes from FirstEnergy. Governor DeWine is still governor of Ohio.
Neil Clark wrote a memoir. It was published after he died. In it he said, “from the first day I walked into the state house. It was already a corrupt pay to play state and over the last forty years, I saw no saints. Members always put power, self-interest and greed before the interest of Ohioans.”
There you have it. If we can find a way to reverse Citizens United, I hope you agree that it’s something that should happen.
Catch you next time!
Cecilia Mackie, MPhys (Hons), CFA
