- Associated Press - Sunday, May 15, 2016

INDIANAPOLIS (AP) - Republican Gov. Mike Pence and Democratic challenger John Gregg could be headed toward one of the most expensive races in Indiana history, as big-money donations flow to both in ways that, while legal, skirt state limits on how much corporations or labor unions may contribute.

The campaigns have taken in more than $12.7 million combined as of Monday since the beginning of last year. An Associated Press analysis of fundraising reports shows more than $4.5 million of that has come from contributors using entities like limited liability companies or political action committees to give as much they wish while obscuring the origin of the money.

Pence and Gregg are stockpiling funds for what is shaping up as a fierce rematch of the 2012 election, when Pence narrowly defeated the former Indiana House speaker. Their total fundraising is about $18 million since then, and by November could rival the record $33 million spent on the 2004 Indiana governor’s race by Republican challenger Mitch Daniels and Democratic Gov. Joe Kernan.

Both campaigns tout high percentages of Indiana contributors in fundraising announcements, but much of the big money has come from out-of-state sources sidestepping the $5,000 annual cap set by a 1986 state law for donations from corporations or unions.

Pence’s campaign has received nearly $1.6 million from the Washington-based RGA Right Direction PAC, funded by the Republican Governors Association. Gregg’s campaign has reported its top donations were of $200,000 or slightly more each from six labor union PACs based outside the state and the Democratic Governors Association.

“If you look at where the money is coming from, it’s obviously from those entities that have limits,” said Julia Vaughn, policy director for Common Cause Indiana, which advocates for government transparency. “This particular loophole makes it quite easy for corporations to give whatever they please and make limits in the statute basically meaningless.”

Pence and Gregg are following the path of many Indiana candidates who have raised large amounts from LLCs and PACs over the past several elections. Indiana is among 13 states that don’t limit the campaign contributions from such groups or individuals, according to the National Conference of State Legislatures.

Formation of an LLC is a common way to incorporate an Indiana business, but such companies are required to provide only the name of a representative - not the owner - on documents filed with the secretary of state’s office.

“LLCs are allowable under Indiana law,” said Marty Obst, executive director of Pence’s campaign staff. “We certainly make it a point to follow Indiana law.”

Federal Election Commission records show RGA Right Direction’s top donor is the Republican Governors Association, which, like the Democratic Governors Association, can accept unlimited money from corporations otherwise bound by Indiana’s state limit.

At least $700,000 to Pence’s campaign has come from LLCs - some of them incorporated at the same addresses as companies already giving the legal limit.

For example, Chagrin Executive Offices LLC gave $95,000 to Pence in November and shares an address with the Ohio headquarters of coal giant Murray Energy Corp. Murray CEO Robert Murray is also the registered agent for Chagrin, according to the Ohio secretary of state’s office.

Pence has been a vocal opponent of regulations sought by the Obama administration to reduce greenhouse gas emissions, saying Indiana utilities rely on coal-burning power plants.

“Chagrin Executive Offices LLC donated to Gov. Pence in order to exercise its First Amendment rights under the U.S. Constitution,” Murray Energy spokesman Gary Broadbent said on behalf of Chagrin in an email. “This donation was completely within the rule of law.”

Gregg’s campaign has collected much less in contributions from LLCs, but has been fueled by about $2.4 million from various labor union PACs from outside the state. That makes up nearly 40 percent of the more than $5.8 million Gregg has taken in since the start of 2015.

The campaign defended the outside money as being affiliated with Indiana workers.

“Some of that money is technically Indiana money but it’s recirculating through the national organizations,” Gregg campaign spokesman Jeff Harris said.

The Midwest Region Laborers’ Political League, a labor PAC based in Illinois, has given Gregg $200,000 so far.

“It’s a means of working people from Indiana putting money together,” said Sean Stott, the organization’s director of government affairs. “They’re pooling their nickels and dimes together to give financial support to a candidate that is more in line with what working people in Indiana think.”

Disclosure advocates say any influence is difficult to reveal under the current law.

“If you have a contribution limit and allow people to set up multiple organizations, you’re just providing an easy way around limits,” said Larry Noble, a former general counsel to the Federal Elections Commission who is currently with the Campaign Legal Center.

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Follow Aric Chokey on Twitter at https://twitter.com/aric_chokey

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