FEC Republican Commissioners Pave Way for More Foreign Corporate Influence in U.S. Campaigns

Free Speech for People:

The Federal Election Commission divided 3-3 on Free Speech For People’s 2017 complaint against the oil company Citgo, its Venezuelan state-owned parent company, and President Trump’s 2017 inaugural committee. The FEC’s general counsel agreed with Free Speech For People that the companies and the inaugural committee violated a federal ban on donations to inaugural committees by foreign entities. However, the FEC divided along party lines and the case was closed. …

The First General Counsel’s Report noted that all evidence suggested that Citgo’s leadership was selected by PDVSA, and in at least one case, by the president of Venezuela himself:

CITGO’s Response does not … rebut the Complaint’s allegation that CITGO’s Board of Directors at the time of the donation consisted entirely of foreign nationals. According to publicly available information, much of which comes from CITGO itself, CITGO’s Board of Directors at the time of the $500,000 donation consisted of … nationals of Venezuela…. Additionally, at least some of the CITGO board members at the time of the donation apparently held concurrent positions within PDVSA, the foreign parent that the Venezuelan government owns. … Although CITGO Holding, Inc., and the CITGO Board of Directors were purportedly responsible for appointing CITGO’s board members and executive officers, respectively, the Venezuelan government apparently had considerable influence over key personnel decisions at CITGO. For example, Venezuela’s President on November 22, 2017, reportedly named Asdrúbal Chávez, a cousin of former President Hugo Chávez, as the new president of CITGO in an event broadcast on state television.

The professional staff also noted that, since 1978, the FEC had long interpreted foreign-national ban language nearly identical to that in the inaugural committee regulation as prohibiting foreign national participation in the decision-making process. 

Since the unrefuted facts indicates that the entire board of CEO consisted of Venezuelan appointees and Citgo management was closely intertwined with the Venezuelan government, the staff concluded:

These circumstances, coupled with the considerable control that the Venezuelan government apparently had in CITGO operations and in the absence of any explanation by Respondents, raise a sufficient inference that foreign nationals on CITGO’s board and in its holding companies may have indirectly made the donation to the Inaugural Committee, which the regulation prohibits. Accordingly, we recommend that the Commission find reason to believe that Petroléos de Venezuela, S.A, CITGO Petroleum Corporation, and CITGO Holding, Inc., violated 11 C.F.R. § 110.20(j) by making a foreign national donation….

Commissioners Broussard, Walther, and Weintraub voted in favor of finding reason to believe that Citgo and PDVSA had made an illegal foreign donation, as the FEC’s nonpolitical career staff had recommended. Commissioners Cooksey, Dickerson, and Trainor voted against. The 3-3 deadlock prevented the action from moving forward. (The decision was not lightly received; after the action was blocked, two commissioners dissented from closing the file.) 

Commissioners Cooksey, Dickerson, and Trainor provided a written statement explaining their vote against enforcement. These commissioners argued that the FEC’s professional career staff misunderstood the law. Rather, they argued that, as long as PDVSA didn’t provide or reimburse the funds used for the donation, then the donation came from Citgo, a legally distinct entity. Furthermore, they opined that even if the Venezuelan PDVSA-appointed directors of Citgo participated in Citgo’s decision to make the donation, it would not constitute a foreign national “indirectly” making a donation within the meaning of the FEC regulation. 

While the other three commissioners disagreed with this analysis, the Commission can only enforce by majority vote, so a 3-3 split vote means that enforcement is blocked.

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