Category Archives: campaign finance

FEC Deadlocks, Again

Dave Levinthal and C. Ryan Barber at Business Insider report that the Federal Election Commission has deadlocked over a “complaint that Donald Trump’s 2020 White House campaign laundered hundreds of millions of dollars in spending through corporate entities closely tied to the ex-president and his family.” They have obtained a copy of the FEC’s letter to the Campaign Legal Center.

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Breaking and Analysis: Dividing on Ideological Lines and Breaking Little New Ground in FEC v. Cruz, Supreme Court Strikes Down Another Part of McCain-Feingold law

The result and lineup in today’s Supreme Court decision in FEC v. Cruz is no surprise: all the conservatives on the Court signed onto Chief Justice Roberts’ opinion holding that a loan repayment provision of the McCain-Feingold law is unconstitutional; the three liberals joined in a dissent from Justice Kagan stating that the law is constitutional. As troubling as the opinion is for someone who believes reasonable limits on money in politics do not violate the First Amendment, I breathed a sign of relief in reading the opinion because it broke no new ground. I had expected the Court could have used the opinion to make a major change in how to consider these constitutional questions; the Court didn’t, perhaps because of the abortion case and everything else on the Court’s plate now in the rush to finish for the term.

In a nutshell, the Supreme Court held that the law which prevents repaying federal candidate loans over $250,000 with money raised after the election was unconstitutional. The majority held that “This limit on the use of post-election funds increases the risk that candidate loans over $250,000 will not be repaid in full, inhibiting candidates from making such loans in the first place.” This even though the law is aimed at post-election contributions, it impinges on potential expenditures by candidates, and therefore limits their self-expression—especially of challengers who might loan their campaigns money to jump-start their campaigns. The Court held this was a great burden on speech, and was not justified to prevent corruption. In a part of the opinion likely to be quoted, the Court wrote: “We have consistently rejected attempts to restrict campaign speech based on other legislative aims. For example, we have denied attempts to reduce the amount of money in politics, see McCutcheon, 572 U. S., at 191, to level electoral opportunities by equalizing candidate resources, see Bennett, 564 U. S., at 749–750, and to limit the general influence a contributor may have over an elected official, see Citizens United v. Federal Election Comm’n, 558 U. S. 310, 359–360 (2010). However well intentioned such proposals may be, the First Amendment—as this Court has repeatedly emphasized—prohibits such attempts to tamper with the ‘right of citizens to choose who shall govern them.’
McCutcheon.”

It did not matter that the dissent cited incident after incident of apparent slimy campaign dealings happening between those who are elected to office and those seeking favor who help pay off the winning candidate’s existing loans. Finally, despite polling evidence that showed that large majority of the public think that such slimy repayments raise the risk of corruption, the court held that evidence was too weak to support the campaign finance laws. The dissent disagreed on virtually all of these points.

But it is worth pointing out what the opinion did not do: it did not change the standard of review that applies to campaign finance contribution limits, which remains somewhat less strict than the review of expenditure limits; it did not expressly state a new standard for the type of evidence necessary to show corruption or the appearance of corruption; and it did not otherwise mess with the Buckley framework. Given how strongly anti-campaign finance regulation this conservative Court supermajority is, I’m surprised this opinion wasn’t much worse. I don’t expect this opinion will have much influence on the general trajectory of Court review over campaign finance regulations (which is already bad enough).

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Coordinating Publicly to Get Around Campaign Finance Laws–2022 cycle

Shane Goldmacher at N.Y. Times reports on the “Little Red Boxes” appearing on many Democratic primary candidates’ websites to direct their Super PACs’ messaging strategies. The basic principle is not new, but the details are interesting. Republicans this cycle apparently are focused on different end-runs around these campaign finance restrictions.

“Democratic candidates nationwide are using . . . red boxes to pioneer new frontiers in soliciting and directing money from friendly super PACs[,] . . .

[A] New York Times survey of candidate websites found at least 19 Democrats deploying some version of a red box in four of the states holding contested congressional primaries on Tuesday.

The practice is both brazen and breathtakingly simple. To work around the prohibition on directly coordinating with super PACs, candidates are posting their instructions to them inside the red boxes on public pages that super PACs continuously monitor.

The boxes highlight the aspects of candidates’ biographies that they want amplified . . . Then, they add instructions that can be extremely detailed: Steering advertising spending to particular cities or counties, asking for different types of advertising and even slicing who should be targeted by age, gender and ethnicity.

‘Liberals, voters under 50 and women — across only San Antonio, Guadalupe and Atascosa counties,’ reads the targeting guidance from Jessica Cisneros, a Democratic challenger in South Texas.

‘Black voters ages 45+ in Durham and white women ages 45+ in Orange’ was the recent directive from Valerie Foushee, a Democratic House candidate in North Carolina locked in a competitive primary for an open seat.”

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“Primaries spotlight coming battles over state supreme courts”

AP News

“[A]cross the country this year, . . .  state judicial races become increasingly politicized over issues such as partisan gerrymandering, abortion and gun rights. Voters in 32 states this year will cast ballots on state supreme court seats, which have become a magnet for spending by national interest groups.”

As the stakes of the independence of state constitutional interpretation rise, we are certain to see this kind of spending rise too.

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Eighth Circuit panel finds no threat of enforcement of certain provisions of the Minnesota Fair Campaign Practices Act

From the summary of the decision in Minnesota RFL Caucus v. Freeman:

The relevant section of the Minnesota Fair Campaign Practices Act – Minn. Stat. Sec. 211B.02 – prohibits a candidate from falsely stating that a candidate or ballot question has the support or endorsement of a major political party; the statute further provides that county attorneys may prosecute violations of the statute. Plaintiffs contend the statute violates their First Amendment rights, and they sued four Minnesota county attorneys with authority to criminally prosecute violations and asked the district court for a preliminary injunction to prohibit the county attorneys from enforcing the statute pending disposition of the case; the district court denied their motion, and plaintiffs appeal the denial of the preliminary-injunction motion. The district court did not err in denying the motion as the defendants had not enforced the statute and have not threatened to do so and were entitled to Eleventh Amendment immunity.

Plaintiffs brought a challenge alleging a First Amendment violation. But the evidence showed that the county attorneys testified “that they never have initiated civil or criminal proceedings for violations of § 211B.02, that they are ‘not currently investigating’ any such violations, and that they have ‘no personal intention’ to commence proceedings.” That was enough for the Eighth Circuit to conclude that a preliminary injunction was inappropriate. The court holds that Ex parte Young offers an independent barrier to plaintiffs seeking relief, beyond a claim where a plaintiff has standing and a claim is ripe for judicial review: those cases in which an official “has neither enforced nor threatened to enforce the statute challenged as unconstitutional.”

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“Super PAC and its President Plead Guilty to Dark Money Scheme to File False Reports with the FEC”

DOJ Release:

A Super PAC and its president pleaded guilty today to scheming to lie to the Federal Election Commission (FEC) about the true identities of donors.

According to court documents, Joseph Fuentes-Fernandez, 62, of Arlington, Virginia, and the Super PAC for which he served as president and treasurer, Salvemos a Puerto Rico, pleaded guilty today before U.S District Judge Joseph N. Laplante to one count of scheming to falsify and conceal material facts.

According to the admissions made in connection with their pleas, Fuentes was the president and treasurer of Salvemos a Puerto Rico, which was organized to raise funds to support the 2020 election campaign of Public Official-1, then a candidate for office in the executive branch of the government of Puerto Rico. Soon after Salvemos a Puerto Rico was organized, Fuentes and others also formed two shell § 501(c)(4) nonprofit social welfare organizations. These two § 501(c)(4) entities were registered within seven minutes of each other, listed the same mailing address, and shared some of the same officers.

Fuentes and others solicited hundreds of thousands of dollars of donations to the two shell nonprofit entities, which rapidly sent most of those funds on to Salvemos a Puerto Rico. Fuentes and Salvemos a Puerto Rico then reported to the FEC that the nonprofit organizations were the donors of those funds, rather than reporting the true source of the funds. The purpose of routing these donor funds through the nonprofit organizations was exclusively to conceal the true identities of the donors to Salvemos a Puerto Rico. For example, in October 2020, Fuentes sent this text message to a potential donor: “You can use a third party to not disclose the true donor.” By ensuring that many of the true donors to Salvemos a Puerto Rico remained anonymous, Fuentes and Salvemos a Puerto Rico deprived the people of the Commonwealth of Puerto Rico and the FEC of information about the true source of hundreds of thousands of dollars flowing into the Commonwealth of Puerto Rico’s political system.

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Breaking: Supreme Court, with No Noted Dissents, Turns Down Major Petition on Whether Corporations Have a Constitutional Right to Make Contributions Directly to Candidates

Once again, the Supreme Court has turned down the chance to consider the constitutionality of laws limiting direct campaign contributions to candidates. The Court upheld such limits in Beaumont v. FEC but it has been under sustained attack since Citizens United.

Today’s order list, without noted dissent, rejects Lundergan v. US. I explained in this post, A Worrisome Run to Get the Supreme Court to Overturn the Ban on Corporate Campaign Contributions to Candidates, This One from a Leading Supreme Court Litigator Involving the Father of a Former Ky Democratic Secretary of State, why I thought this case had a good chance of being granted.

I’m thrilled that I was wrong.

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Bruce Freed: “CPA’s New ‘Practical Stake’ Report Takes a Hard Look at Corporations, Political Spending and Democracy”

The following is a guest post from Bruce Freed of the Center for Political Accountability:

Today’s crisis of democracy poses fundamental questions for company engagement in the political process. Is a commitment to democratic institutions a priority for companies, or is it superseded by bottom line or political access concerns? What type of political environment enables companies to grow and the country to prosper?  How does the attack on democracy affect companies, and what risks does it pose? How should companies respond?

These are questions with which public companies have seldom grappled. Today, they are at the forefront of national debate. The risks are real and not easily ignored. The Center for Political Accountability took the first comprehensive look at these challenges facing public companies in its new Practical Stake report on corporations, political spending and democracy. Here are the key points:

  • The vibrant capitalism that companies need for growing, competing, and pursuing their interests depends on a healthy democracy.  Companies need the rule of law and a level playing field that come with a strong democracy. They also need predictability and certainty from government.
  • The environment for companies and the risks facing them have changed dramatically over the past decade at the state level, and during the last administration at the federal level. This environment has become hyper-partisan and threatening.  All of this came to a head with the Jan. 6, 2021, attack on the U.S. Capitol.
  • Many companies have publicly affirmed their commitment to our democratic institutions and to the importance these institutions play in creating an environment where companies can fairly compete and thrive. CEOs who’ve spoken out on the threats to our democracy are to be commended.
  • However, political spending by companies totaling millions of dollars too often conflicts with their public commitments. Companies contributed heavily to a partisan political group tied to robocalls one day before Jan. 6, 2021. That same group helped elect state attorneys general who went to court to get the 2020 election results from key states thrown out. At the state level, companies gave millions of dollars to groups supporting the election of officeholders who worked for new laws to restrict or suppress voting.
  • CPA found that between the 2018 and 2022 election cycles, 14 top companies and three leading trade associations donated $39 million to two 527 committees and two congressional super PACs that supported the election of state and federal officeholders who have challenged the 2020 presidential election outcome or supported the attack on voting rights.
  • Companies today are increasingly operating in a political climate filled with threats and intimidation coming from officeholders in Washington and state capitals alike. The report presents 13 case studies. The culmination is the audacious retribution by Florida Gov. Ron DeSantis against the Walt Disney Co. for its speaking out against the recently enacted “Don’t Say Gay” bill. The report warns that such pressures incur a great cost to the long-term interests of companies.
  • How should companies respond? The answer must come from within. Companies must create an internal culture that resists the pressures and reinforces a commitment to ethical and accountable participation in our politics. It is not just a question of abiding by the law, but of acting to protect and strengthen a well-functioning democracy. The CPA-Wharton Zicklin Model Code was developed to guide that effort. It provides a framework for companies to evaluate the goals and risks of their election-related spending, and in doing so, to align it with both core company values and a needed commitment to democratic institutions.

Bruce F. Freed is president and co-founder of the Center for Political Accountability whose mission is to bring transparency and accountability to corporate political spending. Founded in 2003, CPA is reshaping how companies engage in political spending. It engages companies through shareholder resolutions and dialogues and produces the annual CPA-Zicklin Index. As a result of its efforts, political disclosure and accountability is recognized as the norm.

Mr. Freed draws on his long experience in journalism and on Capitol Hill. He co-authored major CPA reports including Collision Course, Conflicted Consequences and Corporate Enablers, the first examinations of conflicted company political spending and the risks it poses to companies. He also co-authored the Practical Stake report.

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“Path Cleared for CLC Lawsuit Over FEC Inaction on Illegal Coordination by Clinton Campaign”

Release:

In a win for transparency, the U.S. Court of Appeals for the District of Columbia Circuit has cleared a path for a lawsuit brought by Campaign Legal Center (CLC) to challenge the failure of the Federal Election Commission (FEC) to take action against a massive coordination scheme between the 2016 presidential campaign of Hillary Clinton and Correct the Record (CTR), a super PAC created by David Brock that was notorious for its efforts to “push back against” Clinton’s critics online.

The D.C. Circuit reversed a 2020 decision by U.S. District Court for the District of Columbia to dismiss the case for lack of standing, ruling that CLC could proceed because it has been deprived of complete and accurate “factual information about the amounts of the contested coordinated, in-kind contributions” the super PAC gave the campaign as a result of the coordination scheme.

“The refusal of the Federal Election Commission to enforce campaign finance laws creates a pathway for secret campaign giving – this its failure to hold the Clinton campaign and this super PAC accountable for $9 million in coordinated spending sets a dangerous precedent that could be replicated by other campaigns,” said Tara Malloy, senior director of appellate litigation & strategy, at CLC. “It is time for the FEC to do its job and hold political campaigns and their donors accountable.”

You can find the opinion at this link.

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“Democratic Dollars Flow Once Again to Likely Lost Causes”

NYT:

Gary Chambers Jr. burst onto the national scene in 2020 with a viral video of him castigating the racism of the East Baton Rouge school district. Now, he has captured the hearts and wallets of young liberals with a video for his improbable Senate campaign that shows him smoking a large joint and calling for the legalization of marijuana.

He has almost no paths to victory over a sitting Republican senator in a red state like Louisiana. But he has raised $1.2 million.

The same most likely goes for the Rev. Jasmine Beach-Ferrara, a gay minister who has raised $1.4 million to oust Representative Madison Cawthorn, the far-right Republican, from his North Carolina seat. And for Marcus Flowers, a cowboy-hat-wearing veteran in Georgia who raised $2.4 million just in the first three months of the year to try to dislodge Marjorie Taylor Greene from a heavily Republican district.

Every election year in recent cycles, celebrity Democratic candidates have emerged — either on the strength of their personalities, the notoriety of their Republican opponents or both — to rake in campaign cash, then lose impossible elections. Some Democrats say such races are draining money from more winnable campaigns, but the candidates insist that even in losing, they are helping the party by pulling voters in for statewide races, bolstering the Democratic brand and broadening the party’s appeal.

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“Campaign finance watchdog cracks down on untraceable super PAC donations”

Politico:

The Federal Election Commission signaled Friday that it will take steps to uncover some types of virtually untraceable donations to super PACs, a potentially significant shift in the enforcement of campaign finance law.

The move came as the FEC released documents resolving a complaint about a pair of 2018 donations to DefendArizona, a super PAC that supported then-Rep. Martha McSally’s (R-Ariz.) Senate bid.

The complaint, originally filed by the nonprofit watchdog group Campaign Legal Center, alleged that a pair of donations to the super PAC were not properly disclosed. The money came in from two limited liability companies, but there was no indication of who was actually behind the money before it went into the LLC.

Straw donations to super PACs run through anonymous LLCs have become increasingly common in recent years, as some wealthy political donors look to shield their contributions from the public by routing them through other entities first. The FEC has been frozen for years on what to do about these donations, effectively blessing them by not policing requirements that would have forced further disclosure.

That all apparently changed Friday. A statement from four of the six commissioners indicated that the agency would now start cracking down on these straw donations, requiring that the LLCs disclose who is actually behind the companies. There are still other avenues for untraceable money to flow into super PACs, but the LLC route has been a major one.

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“Revealed: The $14M mystery behind a new crypto super PAC”

Politico:

The billionaire founder of a global crypto exchange made an anonymous $14 million contribution to a super PAC. Only it wasn’t anonymous. And it wasn’t $14 million.

Protect Our Future — a super PAC that’s spent millions supporting candidates “who take a long term view on policy planning” — disclosed $14 million in contributions from the Nevada-based fintech Prime Trust LLC in its quarterly filing on Friday.

After POLITICO reported that Prime Trust was the source of the funds — as reflected in the super PAC’s filing with the Federal Election Commission — a spokesperson for Prime Trust reached out to say that the money wasn’t actually from the company.

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“Judge denies Abrams bid to seek unlimited contributions”

AP:

Georgia Democratic gubernatorial candidate Stacey Abrams cannot immediately begin raising and spending unlimited campaign contributions under a state law passed last year because she is not yet her party’s nominee, a federal judge ruled Thursday.

Abrams and her One Georgia committee filed a lawsuit last month challenging the constitutionality of the new law, which allows certain top elected officials and party nominees to create “leadership committees” that can raise campaign funds without limits. But they also asked the judge to order the state ethics commission not to take any action against them if they continue to raise money before the primary next month.

“This Court will not rewrite Georgia law to enable One Georgia to stand in the same shoes as a leadership committee that, in Plaintiffs’ view, is operating in violation of the First Amendment,” U.S. District Judge Mark Cohen wrote in his order.

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