Category Archives: campaign finance

“The Unique Appearance of Corruption in Personal Loan Repayments”

John Martin has posted this draft on SSRN (forthcoming, Cornell Law Review). Here is the abstract:

Under U.S. campaign finance jurisprudence, electoral candidates have the right to self-fund their campaigns without limitation. The majority of self-funded candidates do so by issuing personal loans—i.e., personal money given to their campaign with the expectation of having it paid back. Many such candidates rely on outside contributions to help repay these personal loans, leaving them susceptible to partaking in corrupt quid pro quo exchanges.

To counter this risk, many jurisdictions have implemented personal loan repayment limits (“PLRLs”), which regulate the extent to which candidates can rely on contributions to recover the funds they loaned to their campaigns. Up until recently, PLRLs were seen as straightforward anticorruption measures justified by the government’s interest in reducing the actuality and, importantly for this Article, the appearance of corruption in our democratic institutions.

Nevertheless, in May 2022, the U.S. Supreme Court overturned the federal PLRL governing congressional elections—Section 304 of BCRA—in the case FEC. v. Cruz, finding that the FEC had not demonstrated a unique anticorruption interest. This latest instance of judicial deregulation of campaign finance by the Roberts Court will almost certainly lead to an avalanche of litigation challenging similar laws in state and local jurisdictions.

By conducting a comprehensive survey consisting of 2,428 participants, however, this Article finds that PLRLs are in fact quite defensible in a post-Cruz world. Indeed, survey respondents perceived a significantly greater likelihood of quid pro quo corruption when a candidate receives a contribution to repay personal loans versus to cover campaign expenses. Such a finding provides empirical support for a distinctive appearance of corruption in personal loan repayments, which in turn strengthens the state’s interest in regulating them. This Article thus contributes to the campaign finance literature by offering a vital first quantitative look into exactly how personal loan repayments affect the public’s perception of corruption.

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“Trump’s Post-Election Fund-Raising Comes Under Scrutiny by Justice Dept.”

NYT:

A federal grand jury in Washington is examining the formation of — and spending by — a fund-raising operation created by Donald J. Trump after his loss in the 2020 election as he was soliciting millions of dollars by baselessly asserting that the results had been marred by widespread voting fraud.

According to subpoenas issued by the grand jury, the contents of which were described to The New York Times, the Justice Department is interested in the inner workings of Save America PAC, Mr. Trump’s main fund-raising vehicle after the election. Several similar subpoenas were sent on Wednesday to junior and midlevel aides who worked in the White House and for Mr. Trump’s presidential campaign.

The fact that federal prosecutors are now seeking information about the fund-raising operation is a significant new turn in an already sprawling criminal investigation into the roles that Mr. Trump and some of his allies played in trying to overturn the election, an array of efforts that culminated with the mob attack on the Capitol on Jan. 6, 2021….

Save America has shared only a small portion of its bounty with candidates in contested midterm races. Instead, it has hoarded cash or used it to pay firms and groups devoted to helping Mr. Trump, including his own businesses, or to undermining his enemies.

It has brought in more than $135 million, including more than $30 million transferred from Mr. Trump’s presidential campaign committee in the weeks after the election.

It has spent a little more than $36 million, leaving it with $99 million in the bank at the end of July, the most recent period covered by its monthly filings to the F.E.C. (The Republican National Committee had about one-third as much money in the bank at the end of July — $33.6 million.)

Among the roughly half-dozen current and former Trump aides in the White House and the 2020 presidential campaign who are said to have received subpoenas this week were William B. Harrison, an aide to Mr. Trump in the White House and after his presidency, and William S. Russell, who similarly served in the West Wing and now works for Mr. Trump’s personal office, according to several people familiar with the events.

Julie Radford, who served as chief of staff to Mr. Trump’s daughter, Ivanka, and who was not known to have any role in any of Mr. Trump’s post-election activities, also received a subpoena. Nicholas Luna, another personal aide to Mr. Trump who witnessed some of his behavior in his final weeks in office, received a subpoena as well, as did Sean Dollman, who was chief financial officer of Mr. Trump’s 2020 campaign….

The subpoenas sought information about communications with a range of people, many of them lawyers who were also listed on earlier subpoenas that focused on the fake elector plan. Among the lawyers appearing as subjects of interest on both sets of subpoenas were Jenna Ellis, who was part of Mr. Trump’s initial legal team after the election, and Kenneth Chesebro, a Wisconsin-based lawyer who helped devise the fake elector scheme.

But at least one of the most recent subpoenas included a new name: Bruce Marks, a lawyer in Pennsylvania who had worked on efforts to challenge the results of the election there. In an email, Mr. Marks said, “It is a frightening attack on attorney-client privilege if D.O.J. is targeting my communications.” He said that to his knowledge he had not communicated with any White House employees, though he had been in touch with Rudolph W. Giuliani and Boris Epshteyn, who were acting as lawyers for the Trump campaign and Mr. Trump.

Despite such crossovers, it remained unclear how the examination of Save America PAC intersects with the investigation of the fake electors. The electors strand of the inquiry is being led by a federal prosecutor named Thomas P. Windom. But at least one of the new subpoenas bore the name of a different federal prosecutor in Washington who specializes in fraud cases, suggesting that this avenue of inquiry is devoted primarily to examining the spending and fund-raising at Mr. Trump’s PAC.

The PAC has paid more than $3.1 million to an array of law firms for “legal consulting.” And it has paid salaries to a number of aides to Mr. Trump, including at least four of the new subpoena recipients: Mr. Dollman, Mr. Russell, Mr. Luna and Mr. Harrison. It has also paid the lawyers Christina Bobb and Lindsey Halligan, who have been representing Mr. Trump in the classified documents investigation.

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Democratic, Republican fundraising for election litigation tops $121 million in 18 months, beats entire 2020 presidential election cycle

I’ve chronicled the recent, astonishing increase in spending on election litigation. Sine 2015, election donors may contribute to “election recounts and contests and other legal proceedings,” above and beyond individual candidate campaign contribution limits.

The total from the first 18 months of 2021-2022 cycle are in, and the Federal Election Commission reports more than $121 million in contributions to accounts of national party committees. The breakdown:

DNC: $37,622,647

RNC: $13,413,360

DSCC: $8,732,380

NRSC: $15,000.391

DCCC: $22,155,455

NRCC: $24,880,883

Democratic National Party Totals: $68,510,483

Republican National Party Totals: $53,294,635

(Other: $5551)

Grand Total: $121,810,669

It’s worth noting that in the first 18 months of the 2019-2020 cycle, the parties raised $53 million. And in the entire 24-month cycle (a presidential cycle), they raised nearly $118 million

In 2019-2020, Republican-affiliated groups edged out Democratic-affiliated groups, $64 million to $53 million. Those figures are almost perfectly reversed (for the moment).

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“Federal grand jury probing Trump PAC’s formation, fundraising efforts: Sources”

ABC News:

A federal grand jury investigating the activities leading up the Jan. 6 attack on the U.S. Capitol and the push by former President Donald Trump and his allies to overturn the result of the 2020 election has expanded its probe to include seeking information about Trump’s leadership PAC, Save America, sources with direct knowledge tell ABC News.

The interest in the fundraising arm came to light as part of grand jury subpoenas seeking documents, records and testimony from potential witnesses, the sources said.

The subpoenas, sent to several individuals in recent weeks, are specifically seeking to understand the timeline of Save America’s formation, the organization’s fundraising activities, and how money is both received and spent by the Trump-aligned PAC.

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FEC on 6-0 Vote Rejects Complaint Against Mark Zuckerberg and Others for Campaign Finance Violations Based on Grants to Help Local Administrators Run Elections During Covid

They say no good deed goes unpunished, but this one mercifully was rejected 6-0.

I’ve been very critical of Facebook for how it has handled election-related content. But these grants by Zuckerberg and Chan (his spouse) were extremely helpful in having a smooth election during a pandemic.

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“How a Record Cash Haul Vanished for Senate Republicans”

NYT:

The committee had squeezed donors with hyperaggressive new tactics. And all the money coming in obscured just how much the committee was spending advertising for donors. Then inflation sapped online giving for Republicans nationwide. And the money that had rolled in came at an ethical price.

One fund-raising scheme used by the Senate committee, which has not previously been disclosed, involved sending an estimated millions of text messages that asked provocative questions — “Should Biden resign?” — followed by a request for cash: “Reply YES to donate.” Those who replied “YES” had their donation processed immediately, though the text did not reveal in advance where the money was going.

Privately, some Republicans complained the tactic was exploitative. WinRed, the party’s main donation-processing platform, recently stepped in and took the unusual step of blocking the committee from engaging in the practice, according to four people familiar with the matter.

The texts had been part of a concerted push that successfully juiced fund-raising, though it used methods that experts say will eventually exhaust even the most loyal givers.

One internal N.R.S.C. budget document from earlier this year, obtained by The Times, shows that $23.3 million was poured into investments to find new donors between June 2021 and January 2022. In that time, the contributors the organization found gave $6.1 million — a more than $17 million deficit.

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“The Truly Scary Part of the $1.6 Billion Conservative Donation; It’s not about the legality. It’s about the loop.”

I have written this piece with Dahlia Lithwick for Slate. It begins:

On Monday, the New York Times broke the news that last year conservative mastermind Leonard Leo had obtained control over $1.6 billion through something called the “Marble Freedom Trust” to further his deeply conservative political and legal agenda. While much of the follow up reporting so far has focused on the unusual but apparently legal means by which the donor of the money—an elderly electronics magnate named Barre Seid—structured the transaction to avoid paying at least $400 million in taxes, the longer-term implications for a democracy as we understand it in America are far more dire.

Over the last three decades, Leo brilliantly created an interconnected series of institutions and firms designed to fundamentally reshape the American judiciary and in turn American society. This new infusion of over one billion dollars is going to solidify this effort in a way that will be hard for anyone to counter, in part thanks to new election law rules created by the Leo-shaped judiciary….

Here’s where the bootstrapping comes in. The very same conservative judiciary that Leo helped create has been central to crafting new legal rules which help elect more Republicans to office. Cases like Citizens United and Speech Now have opened the floodgates to fund large outside political groups such as Super PACs. Cases like Americans for Prosperity Foundation v. Bonta are making it easier for that large money to be contributed anonymously or through entities that can mask the identity of those who are pulling the strings, providing an easier path to influence without giving voters valuable information about who is trying to influence them and elected officials.ADVERTISEMENT

Plus, voting rights cases such as Shelby County and Brnovich v. DNC have seriously weakened the protection for minority voters under the Voting Rights Act, providing the path for white Republicans to gain ever more influence. The upcoming Milligan v. Merrill case that the Supreme Court will hear this term threatens to further weaken minority voting power in the redistricting process. Leo’s organizations seed the judiciary with jurists who advance the very theories that undermine core democratic principles from voting rights to financial disclosure rules. As doom loops go, it’s a successful operation in making sure that minorities have fewer and fewer protections while judges arrogate to themselves power to say more and more.

This term, the Supreme Court will hear Moore v. Harper, a case that stands to empower Republican state legislators against Democratic-majority state supreme courts that have been enforcing voting rights protections contained in state constitutions. Not coincidentally, the Leo-backed (and Orwellian-named) “Honest Elections Project” has been involved in efforts to get the Court to embrace a theory in Moore of the “independent state legislature” that would rob state courts of the power to protect voters’ rights. (They’ve tried the same approach in other cases, including one supporting the Republican Party’s attempt to disqualify some 2020 ballots in Pennsylvania.)

These election law rulings are just a means to an end. The end includes rulings like Dobbs on abortion, the loosening of gun laws, the paring back of affirmative action, and reading the religion protections in the First Amendment in ways that will serve not only to put religion into public schools but also to provide a path for anti-LGBTQ discrimination. The new Supreme Court supermajority also has begun hobbling the administrative state and erecting new barriers for the federal government to protect the public through covid vaccines and measures to limit climate change. The end is, and has always has been, to ensure that wildly unpopular ideas and policies can be put into effect by a life-tenured judicial branch that represents a well-funded conservative minority.

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“Inside The Right’s Historic Billion-Dollar Dark Money Transfer”

The Lever/ProPublica:

An elderly, ultra-secretive Chicago businessman has given the largest known donation to a political advocacy group in U.S. history — worth $1.6 billion — and the recipient is one of the prime architects of conservatives’ efforts to reshape the American judicial system, including the Supreme Court.

Through a series of opaque transactions over the past two years, Barre Seid, a 90-year-old manufacturing magnate, gave the massive sum to a nonprofit run by Leonard Leo, who co-chairs the conservative legal group the Federalist Society.

The donation was first reported by The New York Times on Monday. The Lever and ProPublica confirmed the information from documents received independently by the news organizations.

Our reporting sheds additional light on how the two men, one a judicial kingmaker and the other a mysterious but prolific donor to conservative causes, came together to create a political war chest that will likely supercharge efforts to further shift American politics to the right….

The creators of the Marble Freedom Trust shrouded their project in secrecy for more than two years.

The group’s name does not appear in any public database of business, tax or securities records. The Marble Freedom Trust is organized for legal purposes as a trust, rather than as a corporation. That means it did not have to publicly disclose basic details like its name, directors and address.

The trust was formed in Utah. Its address is a house in North Salt Lake owned by Tyler Green, a lawyer who clerked for Supreme Court Justice Clarence Thomas. Green is listed in the trust’s tax return as an administrative trustee. The donation does not appear to violate any laws.

Seid’s $1.6 billion donation is a landmark in the era of deregulated political spending ushered in by the Supreme Court’s 2010 Citizens United decision. That case, along with subsequent changes and weak federal oversight, empowered a tiny group of the super rich in both parties to fund groups that can spend unlimited sums to support candidates and political causes. In the last decade, donations in the millions and sometimes tens of millions of dollars have become common.

Individuals could give unlimited amounts of money to nonprofit groups prior to Citizens United, but the decision allowed those nonprofits to more directly influence elections. A handful of billionaires such as the Koch family and Soros have spent billions to achieve epochal political influence by bankrolling networks of nonprofits.

Even in this money-drenched world, Seid’s $1.6 billion gift exceeds all publicly known one-time donations to a politically oriented group….

illionaires tend to craft intricate estate plans to pass the family business to the next generation, fortified from taxation and protective of their vision. The apparently childless Seid didn’t have that option, but starting in April 2020, he set in motion a plan to make sure his fortune would go toward his favored causes.

That month, the Marble Freedom Trust was created, and Seid subsequently transferred his 100% ownership stake in Tripp Lite to the trust, according to the documents reviewed by The Lever and ProPublica.

In February 2021, Tripp Lite filed its annual reports with the state of Illinois as it had done for decades. But this time, Seid’s typewritten name had been crossed out as an officer of the company. Added as an officer, written in by hand, was Leonard Leo.

A Tripp Lite subsidiary in Nova Scotia, Canada, similarly removed Seid as a director and added Leo as a director in March 2021, according to disclosure filings.

Then, later that same month, Eaton Corporation, a large publicly traded company, acquired Tripp Lite for $1.65 billion.

The transactions appear to have been carefully sequenced to reap massive tax savings. Selling a company that has grown in value after decades of ownership is treated the same way for tax purposes as a person selling a share of stock. If the property has grown in value, capital gains taxes are due when it is sold.Give A Gift Subscription

But Seid transferred Tripp Lite to the Marble Freedom Trust, a nonprofit that is exempt from income tax, before the electronics company was sold. As a result, lawyers say, Seid avoided up to $400 million in state and federal income tax, preserving those funds for Leo’s operation.

“If the person who had owned the stock had sold the stock himself, he would’ve been taxed on the appreciation in the stock,” said Ellen Aprill, a tax law professor at Loyola Marymount University. “Whereas if you give it to the 501(c)(4), there’s no charitable deduction for giving the money, but you avoid the tax on all of that appreciation.”

Political advocacy nonprofits like the Marble Freedom Trust are formally called 501(c)(4) social welfare organizations, after the section of the tax code. Informally, they are known as dark-money groups because donors can remain secret, in contrast to the public disclosures required of gifts to political campaigns or super PACs. While they can spend money directly advocating for or against candidates in political campaigns, such spending cannot be their primary purpose.

In giving to such a dark money group, Seid also avoided another federal levy, the gift tax, thanks to a change signed into law by President Barack Obama in 2015.

There’s a reason why giving money specifically to a trust might have been attractive for an older and ideological donor such as Seid. The founding documents that lay out how the trust will spend money can be harder to change than the governing documents of a corporation, according to Lloyd Hitoshi Mayer, a professor at Notre Dame Law School.

Mayer added that while corporations usually have at least three directors, trusts can have just a single trustee in charge of the organization’s activities.

Leo is the trustee and chairman of the Marble Freedom Trust. In other words, Leo is now in charge of the massive sum of money.

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“Broadening Donor Participation in Local Elections: Results from the Seattle Democracy Voucher Program in 2021”

New report from Jennifer Heerwig and Brian McCabe. Executive Summary:

The Democracy Voucher program in Seattle completed its
third election in 2021. The 2021 cycle featured an open seat
mayoral race, two at-large city council contests, and the race
for city attorney. Six of the eight general elections candidates
funded their campaigns with democracy vouchers.
• More than 48,000 Seattle residents used their democracy
vouchers in 2021. As a percentage of the voting age
population, the participation rate reached a new high
of 7.59%.
• Participation in the program increased across all demographic
groups. Relative to 2017, some of the largest percentage gains
in participation were concentrated among people of color,
younger, and lower income residents.
• Overall, voucher users were similar to voters in the 2021
general elections in terms of age, income and race. We also
note a diversification of the cash donor pool with higher
shares of younger residents and people of color among cash
donors than among active voters and, in some cases, than
among voucher users.

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“Outside Money Floods New York Congressional Races”

NYT:

A rising tide of lightly regulated outside money is pouring into New York State: As of Thursday, with the Aug. 23 primary date looming, outside entities have spent about $9 million in state congressional primaries, according to data maintained by Open Secrets, a government transparency group. In 2018, outside entities spent roughly $2.6 million.

Some of the players are familiar, including real estate and police groups. Others, like the super PAC targeting Ms. Maloney in the 12th District, have yet to identify their donors. The treasurer for that PAC, Brandon Philipczyk, did not respond to requests for comment. Berlin Rosen, a New York consultancy, is also involved.

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“Inbox beware: Federal watchdog approves Google program to let campaigns skip spam filters”

Politico:

The Federal Election Commission, the nation’s chief campaign finance watchdog agency, gave its blessing to a program proposed by Google on Thursday that will effectively allow federal campaigns and other political committees to bypass spam filters and land in the inbox of Gmail users. The commission, in a 4-1 vote, said that Google’s program would not amount to an impermissible contribution to the committees, clearing the way for the search giant to implement the program should it so choose.

The program, as described in a proposal from attorneys from Google, would allow emails from federal campaigns and committees in the program “that meet objective security criteria” and do not otherwise break Gmail’s terms of service to “not be affected by forms of spam detection to which they would otherwise be subject” and automatically land in a user’s inbox. These political senders’ emails would continue to be directly routed to users’ inboxes, unless or until a user opts out from receiving them from a particular committee or campaign.

Google’s proposal said it intends to run the program through January 2023, unless the program “degrades the user experience.”

The FEC has been inundated with thousands of comments about the proposal, which one commissioner called “record breaking,” with virtually all of them urging the agency to not approve the program.

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“Force multipliers: How one donor network is pushing the envelope on California campaign money”

Cal Matters:

Sift through the campaign contributions to Robert Rivas, the Salinas Democrat angling to become the next speaker of the California Assembly, and a name keeps popping up: Govern For California.

The organization’s statewide chapter gave the maximum $9,800 to Rivas in 2021. So did its Marin chapter, Hollywood chapter, Golden Gate chapter, Palo Alto chapter and four others. In the past 14 months, 16 Govern For California chapters have given him a combined $116,000 — nearly a tenth of everything he’s raised this election cycle.

Over the last two years, Rivas’ 2022 reelection committee has been a top recipient of campaign contributions from the Govern For California network, according to a CalMatters analysis of state campaign finance records. During the same period, financial disclosure forms, lobbying reports and Govern For California emails show that his brother, Rick Rivas, has served as both a political advisor to the statewide organization and as a consultant to Robert Rivas’ campaign.

But Assemblymember Rivas is hardly the only beneficiary of Govern For California spending. In the 2022 election cycle so far, the network has donated more than $3 million to more than 110 candidates across California, the vast majority of the money going to 82 running for the state Senate and Assembly.

Govern For California characterizes its 18 chapters as “force multipliers” that amplify the influence of its donors on state politics and government. The 11-year-old organization — the brainchild of 68-year-old Stanford lecturer David Crane, and funded primarily by a group of Bay Area venture capitalists, tech executives and philanthropists — opposes what it regards as excessive sway of labor unions over state policy.

None of the campaign finance experts CalMatters spoke with said they thought Govern For California was doing anything illegal. But Ann Ravel, former head of the Federal Election Commission and California’s campaign finance agency, said its chapter donation operation was “undemocratic,” albeit similar to the model organized labor unions use.

Some experts also questioned whether it’s a way for its small cadre of wealthy donors to evade contribution caps designed to limit anyone from having outsized influence on state politics.

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