‘More money, less disclosure’: N.J.’s new elections law fails a key test

This fall, the longtime New Jersey political boss George Norcross helped a shadowy group called Jersey Freedom split Republican votes to benefit Democrats in some of the most competitive districts in the state.

In ads, the organization promoted Republicans who did not actively campaign and whose petitions were circulated by an unsuccessful GOP candidate with reported ties to South Jersey Democrats allied with Norcross.

In an only-in-New Jersey twist, the maneuver was possible without knowing who funded it until three weeks after the Nov. 7 election thanks to a new campaign finance law ironically called the Elections Transparency Act. It overhauled New Jersey’s campaign finance rules to allow doubling of contributions and gutted state and local pay-to-play ordinances. Democrats seemed to benefit, with more spending by super PACs and other outside political groups than all but one state-level election in history.

A little-noticed amendment in the law allowed outside groups to legally bankroll so-called phantom candidates — whose main purpose is to siphon off votes from “legitimate candidates,” according to a lawsuit — without disclosing their donors’ identities before Election Day. In response, Republicans sued Jersey Freedom before the election and a state court judge froze its spending. That judge heard oral arguments Monday.

The political hijinks echo an alleged “ghost candidate” scheme in Florida, in which the friend of Republican former state senator Frank Artiles ran as a progressive but campaigned little, drawing votes away from Democrats and helping a Republican to win the senate seat. However, Artiles was charged with making excessive campaign contributions; he goes on trial next year.

In New Jersey, the small change to the Elections Transparency Act led to some of the most brazen campaign activities state political veterans have ever seen. That’s a high bar in a state where the senior U.S. senator, Bob Menendez, is facing federal charges for accepting envelopes of cash for favors to the Egyptian government, and the convicted former mayor of Paterson was indicted for defying a court order by running for his position again.

While there was much circumstantial evidence tying Jersey Freedom to South Jersey Democrats, there was no public way to track the source of its funding until three weeks after the election. Then, campaign finance reports showed Jersey Freedom raised $225,000 exclusively through another newly formed super PAC called Brighter Future Forward, which was in turn partially funded by a super PAC named American Representative Majority. The majority of its recent funding came from Norcross himself.

Opponents of the law fear it will further shroud the source of political spending and breed more public distrust in a system still reeling from controversial federal campaign finance rulings.

“There’s already this devastation from Citizens United more than a decade ago that opened up the floodgates to all this dirty money. And now you’re talking about more money, less disclosure. I can’t really think of a worse case scenario,” said Jesse Burns, executive director of the League of Women Voters of New Jersey. “I don’t know that anybody really foresaw this level of dysfunction around the way that our elections are being funded.”

Joe Donohue, who leads the state’s election watchdog agency, said the law in some ways did increase transparency. It retools a previous “dark money” disclosure rule overturned in federal court by more narrowly defining which groups have to disclose spending to influence an election, a change that requires nonprofits to report donations. And for most political committees, it lowers the threshold for small-dollar donations that are required to be reported.

But opponents like the League of Women Voters and state Republicans argue it will ultimately make the process less transparent and more favorable to entrenched interests.

They note how it doubles and even triples campaign contribution limits, greatly reduces the statute of limitations on prosecuting campaign finance violations and all but eliminates New Jersey pay-to-play laws that barred companies that make major donations from getting contracts.

“[The law] has proven to be as much of a colossal disaster as anyone with a brain anticipated,” said Assemblymember Brian Bergen (R-Morris). “The bill was all about stacking the deck for Democratic fundraising efforts over Republicans and nothing more. The one thing ironically missing is transparency.”

South Jersey’s ‘phantom candidate’ playbook

Nowhere were the elections less transparent than South Jersey.

In mid-October Jersey Freedom, which listed its address as a post office box in Queens, New York, sent out mailers attacking Republican legislative candidates in two districts. In one of those districts it promoted “conservative” independents who did not actively campaign.

Their petitions were circulated by a woman with ties to the South Jersey Democratic machine led for decades by the unelected insurance broker Norcross. One of the candidates, Maureen Dukes-Penrose, told NJ Globe she was encouraged to run by retiring state Sen. Fred Madden, which he’s denied. POLITICO tried reaching Dukes-Penrose but was unsuccessful.

The move drew conservative votes away from the Republican candidates, according to Chris Del Borrello, one of the Republicans who unsuccessfully ran for Madden’s Senate seat in District 4. Dukes-Penrose and her Senate running mate received about 3,000 votes — not enough, it turned out, to have made a difference in the election’s outcome.

State Sen. Vince Polistina (R-Atlantic), who was targeted in ads by Jersey Freedom but won reelection, along with the Republican State Committee and Del Borrello, sued Jersey Freedom on Nov. 3, alleging that it failed to follow reporting requirements.

“Despite this blatantly obvious political deception campaign being communicated to voters through mail, TV and digital ads, no information was made publicly available at the time the communications were received that would allow voters to determine who was running by Jersey Freedom, the source of funds being used to pay for these communications, or how much the communications cost,” the complaint said.

The state party has served subpoenas to the group seeking more information on its dealings. Jersey Freedom is seeking to have the lawsuit tossed. Judge Michael Blee said Monday he expects to rule within 30 days.

In October, Polistina sent a letter to the Election Law Enforcement Commission, the agency led by Donohue, asking it to investigate the group. It has not responded.

“It is pretty clear that Jersey Freedom was created specifically to shield contributions and expenditures made in order to interfere with a free and fair election in Legislative Districts 2 and 4,” he wrote. He asked the agency and “whatever law enforcement resources from the state are required” to investigate and prosecute any potential crimes.

Brighter Future Forward and its attorney Bill Tambussi, who also represents Jersey Freedom, did not return calls. Norcross did not respond to messages seeking comment.

Changes to the ‘Elections Transparency Act’

The Elections Transparency Act was passed in March, partly in response to an effort to decrease the influence of super PACs in state and local elections. But the tweak that set disclosure requirements for independent groups flew under the radar as it was rushed through the legislative process.

Republicans and other detractors raised the alarm at the time but its prime sponsor, Senate President Nick Scutari, hailed it as a success.

“The bill that we passed was an excellent bill because we saw more transparency than we ever saw before in terms of fundraising,” Scutari, Democrat of Union County, recently said.

The November election, with all 120 state lawmakers topping ballots, was the first to fully take place under the new campaign finance law. Democratic campaign coffers and candidates appear to have benefited from its increase of contribution limits.

This year’s legislative elections saw record spending by super PACs and other outside political groups. Three quarters of the $23 million those groups spent to influence the elections were spent on Democrats, according to the Election Law Enforcement Commission.

There was no public disclosure of who funded the mysterious political committees until well after the election ended.

Inside the law

The Elections Transparency Act created a new category of political organization called an “independent expenditure committee,” similar to other states’ definitions. Unlike traditional PACs, they are not required to file quarterly campaign finance reports; instead they must file just three reports, 29 days before the election, 11 days before the election and 20 days after the election.

Jersey Freedom did not register with the state’s election watchdog until late October, and in its 11-day, pre-election report did not disclose any fundraising — only debt to a Baltimore-based printer. That meant no one could say with any certainty before Election Day who funded the group and its attack ads against Republicans.

The Norcross-funded American Representative Majority super PAC loans — of $850,000 and $500,000 — and the transfers between the PACs all took place in the election’s closing days, between Oct. 25 and Nov. 1.

In an unattributed statement released last month, Jersey Freedom said it complied with the Elections Transparency Act and pointed out “there are no 48-hour notices required to be filed by independent expenditure committees in the law.” Still, it’s not clear whether the new Democratic organizations fully complied with the Election Transparency Act’s requirements.

The law requires independent expenditure committees to register with the Election Law Enforcement Commission within 10 days of receiving their first donations and setting up bank accounts.

Brighter Future Forward, the newly formed independent expenditure committee that funded Jersey Freedom, received its first $2.5 million in July and August from super PACs tied to United Brotherhood of Carpenters but did not file a registration form with ELEC until mid-October. The lawsuit alleges Jersey Freedom was supposed to file with ELEC before it started spending money, not after, “an obvious violation of the law.”

The law also requires independent expenditure committees to disclose their activities “made, incurred, or authorized by it beginning on the first day of the preceding calendar year and ending on the reporting date.” Jersey Freedom’s statement said it began running cable TV ads on Oct. 28, but no related expenses were disclosed in its 11-day pre-election report, which covered Oct. 7 through Oct. 24.

Polistina was one of just two Republicans to vote in favor of the Elections Transparency Act. He said he would consider tweaking the law yet again but that the bigger problem was in groups not complying with it.

“Everything I’ve seen indicates they did not follow the law in place for the 2023 election,” Polistina said.

The problems went beyond South Jersey

The opaque campaign finance activity wasn’t limited to state elections — or Democrats. Another newly formed independent expenditure committee called Patriots for Progress spent more than $82,000 on the mayoral election in the central New Jersey town of Sayreville. The group backed former longtime Republican Mayor Kennedy O’Brien’s successful comeback bid.

But Patriots for Progress was not required to disclose the source of any of its funding because all of the contributions were under $7,501 — the threshold at which independent expenditure committees have to disclose donors.

Patriots for Progress papered the town of 45,000 with mailers promoting O’Brien. The public is unlikely to ever know who paid for them. What’s more, independent groups are barred from coordinating with candidates. But Patriots for Progress’ first president, John Krenzel — the mayor of neighboring South River — told POLITICO earlier this month that O’Brien himself first called him to ask about setting up the PAC.

Reached by phone, O’Brien said “I had no involvement in [Patriots for Progress]. You’ll have to call them for any more information.”

While critics of the Elections Transparency Act say the concerns they raised have been borne out, the law’s supporters have been largely quiet. Scutari did not respond to questions about the law, and a spokesperson for Gov. Phil Murphy —who quietly signed the bill in April, declined to comment.

Donohue, the acting executive director of the Election Law Enforcement Commission, said that while the law had some positives on transparency, the special exemption for independent expenditure groups is “frustrating.”

“The whole thing was trying to put everybody on an even playing field. We just wanted everybody to follow the same rules,” Donohue said.

Henal Patel, law and policy director for the New Jersey Institute for Social Justice, said the law was the product of behind-the-scenes wrangling between the governor and Legislature and did not benefit the public.

“There’s a lot that happened with this bill and a lot of different elements,” Patel said. “But part of what ends up happening when you have that mess coming together, is the quote, unquote ‘intention’ of transparency didn’t end up becoming a priority.”