Checks: Political Money & Democracy

Reforming Democracy in the Age of Trump

On November 10, Miles Rapoport sat down with Bob Herbert's Op-Ed.TV to discuss what led to Donald Trump's victory, what it means for voting rights and money in politics, and how democracy reformers should respond. Rapoport is a long-time democracy advocate who served as secretary of state in Connecticut, and president of both Demos and Common Cause, as well as a member of The American Prospect's board. His most recent feature, "From a Contentious Election to a Stronger Democracy" appeared in the Prospect's Fall 2016 issue. 

More Corporations Embrace Disclosure, Despite Conservative Opposition

Republican Senate Majority Leader Mitch McConnell is in a standoff with Democrats as he refuses to remove a rider to a short-term funding bill that would prohibit the Securities and Exchange Commission from strengthening political disclosure requirements for corporations.

Stopping measures that would shine some light on corporations’ secret political spending is a top priority for McConnell, along with his powerful allies at one of the leading sources of dark money: the U.S. Chamber of Commerce. Chamber officials argue that requiring more disclosure is a just an underhanded ploy to keep corporations from exercising free speech.

Yet an increasing number of American companies don’t see it that way. With greater scrutiny on corporate money in politics, businesses are adopting internal policies that specifically disclosure their political activities and some are even voluntarily curbing their campaign spending, according to a new report on corporate transparency from the Center for Political Accountability and the Zicklin Center for Business Ethics Research at the University of Pennsylvania’s Wharton School.

“We find that companies now recognize that political spending is a risk and that they need to have disclosure policies in place,” says Bruce Freed, president and founder of the Center for Political Accountability (CPA). He says that after Citizens United corporations face greater pressure from trade associations, political nonprofits, and super PACs who want their money and find that putting transparency policies in place can provide a buffer against such requests.

For the first time, the annual CPA-Zicklin Index of Corporate Political Disclosure and Accountability compares the policies of all Standard & Poor’s 500 companies, including some of the biggest political spenders in the country, over consecutive years. The analysis examines corporate policies regarding political spending; board of directors’ oversight of political spending; disclosure of trade association dues and contributions to 501(c)(4)s; and other metrics.

The CPA-Zicklin Index finds that a growing number of companies have addressed the rise of dark money by developing or strengthening policies that require some level of disclosure of payments to trade associations like the U.S. Chamber of Commerce, the Business Roundtable, and the American Chemistry Council as well as social-welfare 501(c)(4)s. These groups have been driving forces behind the increase in undisclosed political campaign contributions.

Nearly half of all S&P 500 companies disclosed some type of payment to trade associations or specifically directed these groups not to use their money on election spending. Nearly one third disclosed some type of information about contributions to social-welfare groups, noted that they prohibited contributions to these types of groups, or had directed these types of groups not to use contributions on election-related activities. The report noted that 53 companies instituted some type of limitation on payments made to social-welfare groups and trade associations, up from 40 in 2015.

“Companies have a responsibility to know how their money is being used and have a say in how it’ll be spent,” Freed says. “Even if they don’t disclose payments but do disclose memberships, that means that questions can be asked. Shareholders know; journalists know; the public knows.”

The chamber, along with other trade groups, has pushed back against the CPA-Zicklin Index. Last year, The Huffington Post published an email message sent to the Carlton Group, a Washington, D.C., corporate interest group, by Lisa Rickard, president of the chamber’s Institute of Legal Reform, calling the Index “part of an orchestrated campaign to ultimately limit the business community’s ability to engage in political and policy debates.”

Many of the companies leading the way on transparency are also members of the U.S. Chamber of Commerce, despite the organization’s stark opposition to any type of corporate disclosure—mandatory or voluntary. Of the 94 companies in the top tier of the index, 36 are verified members of the chamber, according to a tally provided to the Prospect by the CPA. Those member-companies include industry behemoths like Pfizer, Monsanto, Morgan Stanley, Wells Fargo, Dow Chemical, Aetna, and Altria.

“That’s the thing we find very ironic,” Freed says. “The chamber’s opposition has had no effect on companies decisions on disclosure and has had no impact on continued pace of disclosure. We’ve seen no companies back down.”

The chamber is the largest source of dark money in the 2016 election so far, according to the Center for Responsive Politics, having already spent more than $22 million this election cycle to protect the Republican Party’s majority in the Senate. The trade group’s spending, funded by undisclosed donors, has fueled record-levels of dark-money contributions across the country. Meanwhile, political nonprofits have already spent nearly $50 million in federal elections, and that figure is expected to skyrocket in the weeks leading up to Election Day.

Still, disclosure advocates argue that the voluntary corporate transparency policies do not negate the need for uniform and universal disclosure regulations, as the proposed SEC rule would require.

“This trend of increasing voluntary disclosure is a sign that this is becoming a norm and that is happening because investors want this disclosure,” says Lisa Gilbert, director of Public Citizen’s Congress Watch division. “The SEC should take their cue from those investors.” 

 

This Is What Happens When a State Has No Contribution Limits

Rex Sinquefield, left, shakes hands with Lieutenant Governor Peter Kinder in 2011. (Photo: Flickr, Fired Up! Missouri)
 

The RNC platform released this week broadly calls for rolling back federal campaign-finance laws—going so far as to advocate for the right of donors to contribute unlimited amounts of money. “Limits on political speech serve only to protect the powerful and insulate incumbent officeholders. We support repeal of federal restrictions on political parties in McCain-Feingold, raising or repealing contribution limits,” the party’s platform states.

Curious what that may look like? Well, look no further than Missouri, one of the few states that places absolutely no limits on campaign contributions. Combine limitless political giving with a pivotal governor’s race, and you’ve got a recipe for a Wild West-style campaign season.

Missouri’s gubernatorial primary elections are just a few weeks away, and there are four candidates still vying for the GOP nomination. The St. Louis Post-Dispatch reports that three of those four candidates have received more than $1 million from a single individual or family. It’s no wonder why the battle for the job is so heated: A Republican governor would be incredibly powerful. The legislature is currently controlled by Republicans, and with Democrats unlikely to pick up many seats this November, the GOP would have complete control of the state.

Missouri business owner and mega-donor David Humphreys and his sister Sarah Atkins each gave $500,000 to Missouri Lieutenant Governor Peter Kinder, the GOP gubernatorial frontrunner. Humphreys is a major opponent of organized labor and wants Missouri to pass right-to-work legislation that was vetoed by Democratic Governor Jay Nixon. In addition to his contribution to Kinder, who supports right-to-work laws, Humphreys and his family have given nearly $3 million to a PAC to target pro-union Republicans.

Catherine Hanaway, a former Missouri speaker of the House, has received at least $3 million from St. Louis investor Rex Sinquefield, the state’s most powerful funder of conservative politics, or PACs that he funds. Over a two-month period last year, Sinquefield contributed $10,000 a week to Hanaway’s campaign. For many years, Sinquefield has funded the state’s conservative politicians, organizations, and causes to the tune of $40 million and is a staunch supporter of repealing all Missouri taxes.

Another GOP candidate’s campaign, former Navy SEAL Eric Greitens, got a last minute donation this week of nearly $2 million. The contribution came from SEALs for Truth, a Washington-based group set up last month: So far Greitens is the only candidate to receive any money from the organization.

What about the fourth GOP candidate, you ask? That would be former CEO John Brunner. While he hasn’t received millions from any single outside donor, Brunner himself has given or loaned at least $4.75 million of his own money to his campaign. It’s not his first rodeo—in 2012, he self-funded his unsuccessful $8 million bid for a U.S. Senate seat.

Missouri offers just a small taste of what Republicans Party leaders hope could happen nationwide. They see unlimited political contributions as an affirmation of free speech and a boon for political competition.

However, as the Missouri case illustrates, what ends up happening is that all the millionaires and billionaires who are willing to spend small fortunes propping up the campaigns of their preferred candidates are drowning out the political voices of everyday citizens. Instead they work to advance policies, like repealing income and corporate taxes or making it harder for their workers to unionize, that disproportionately benefit the wealthy. 

The FEC Just Slapped Koch Brothers Groups with a Big Fine

In a sign that, surely, the end times are near, the partisan-deadlocked Federal Election Commission actually agreed to enforce campaign-finance laws—six years after the fact.  

Three groups funded by Charles and David Koch’s expansive political network agreed to pay $233,000 in fines to the FEC for illegally hiding the identities of donors to their 2010 political ad campaigns, according to a Citizens for Responsibility and Ethics in Washington (CREW) press release. The watchdog group filed a FEC complaint against several groups in 2014.

The complaint centered on the 60 Plus Association, the American Future Fund, and Americans for Job Security. These social-welfare nonprofits spent millions of dollars that they received from the Center to Protect Patient Rights (CPPR), which at the time was the Koch brothers’ main political vehicle, without disclosing the source of the money.

That would have been fine if the organizations had used the money for general expenses, as they originally claimed in FEC filings. Social-welfare groups, however, are required to disclose the source of donations if the money is earmarked for specific political activities.

The groups probably would have stayed way below the federal radar, like so many other dark-money groups. But Sean Noble, a political operative for CPPR who helped dole out the Kochs’ money, blabbed to National Review in 2014 that he was closely involved in producing and targeting the ads.

At that point, CREW filed a complaint with the FEC. The agency opened an investigation and eventually found that Noble’s consulting firm helped produce and place the ads for the groups.

“These rules provide some of the only windows into the funding of dark money groups, but the FEC almost never penalizes groups that break them,” CREW Executive Director Noah Bookbinder said in a statement. “It is hard to overstate how significant this is.”

While $233,000 may seem like a small amount of money for groups flush with Koch cash (and it is), it’s a huge sum for the FEC. In the first five months of 2016, the FEC has only levied $273,000 in total civil penalties—an average of $15,000 per violation. But this enforcement action is a drop in the bucket of dark-money spending.

Unfortunately, even when the FEC does take action it can come long after the violation actually occurs: The move comes six years after the ads actually ran, and the agency likely wouldn’t have levied any penalties if one political operative hadn’t bragged to the press. Campaign-finance reformers contend that the FEC must act with greater speed and strength in order to deter political puppetmasters like the Koch brothers from playing politics in the shadows.

But reformers have to take their wins where they can get them, and when the FEC actually agrees to take action—against the Kochs, no less—that is a big win.

“This is the largest fine the FEC has collected from groups active in post–Citizens United elections,” Bookbinder said. “This case sends an important signal that groups that brazenly disregard the law will be held accountable. We hope this is a sign of things to come and the FEC will continue to hit dark money groups with major penalties for violating the law.”

Report: Most Pharma Donations Go to Drug-Affordability Opponents

Alarmed by a new Centers for Medicare and Medicaid Services (CMS) pilot program that aims to bring down the cost of drugs to patients, lawmakers on both sides of the aisle have lined up against it, citing concerns ranging from rationing of care to reduction in rural patients’ access to affordable providers. But a Public Citizen report released Monday shows that many of the members of Congress who opposed the pilot are also bankrolled by the pharmaceutical and health-products industry—major opponents of the proposal.

The “Pharma’s Orders” study by the nonprofit watchdog group examines the contributions received by the 310 members of Congress (240 Republicans and 70 Democrats) who signed two letters, as well as by the 124 members who did not sign either. (One letter opposed the CMS Medicare Part B demonstration project; a second expressed “concerns” about it.) Signers received 82 percent more in contributions during 2016 than those who didn’t sign.

“The contrast here is pretty stark and shows a case where influence is pretty clear,” says Rick Claypool, a Public Citizen research director and the author of the report.

The signers received a combined total of more than $7 million from the pharmaceutical and health-products industry, with an average of $23,344 per individual. Those who didn’t sign either letter got nearly $1.6 million from the industry in total, with an average of $12,789.

It’s not only the signers who are top recipients of pharmaceutical money. Many lawmakers who have otherwise come out publicly against the measure have also been targeted by the industry.

Senator Ron Wyden, an Oregon Democrat, has criticized the proposal for potentially driving seniors in rural areas toward hospital treatment, which is more costly. So far this year, Wyden has received $365,441 from the pharmaceutical and health industry. Senator Chuck Grassley, an Iowa Republican who called it “an ill-conceived experiment” that amounted to human research, received $130,100. Senator Tom Carper, a Delaware Democrat who questioned why it was so large and expansive, received $226,310. And Senator Orrin Hatch, a Utah Republican and one of the plan’s fiercest opponents, received a massive $693,377 from the industry.

The vast majority of the industry’s contributions have gone to Republicans, but Claypool believes this case reflects the current make-up of Congress, which is 56 percent Republican. Historically, the pharmaceutical and health-products industry has tended to steer most of its congressional contributions to members of the party that effectively controls Congress.

The pilot program proposed by CMS Deputy Administrator Dr. Patrick Conway would test how changing the drug-reimbursement system affects doctors’ prescribing behavior. Critics charge that the existing system incentivizes doctors to prescribe more expensive drugs.

Currently, Medicare reimburses physicians the average sale price plus 6 percent for each drug that they prescribe. The proposed measure would lower this percentage to 2.5 percent, and replace the average sales price with a flat payment of $16.80 per drug per day. 

“In a way, we’re trying to reduce monetary influence in this process just as we’re trying to reduce it in the political process,” says Claypool.

Following the volley of criticism from members of Congress, Conway told the Senate Finance Committee that CMS intends to go forward with plan, albeit with modifications.

Court Deals Blow to Advocates Fighting Voter Registration Obstacles

Voting rights advocates trying to rein in the head of the beleaguered federal Election Assistance Commission are getting no favors from the courts. Last week, a D.C. Circuit Court judge declined to issue a preliminary injunction blocking what critics say are voter-registration barriers that violate federal law.

Back in January, Brian Newby, the commission’s executive director, unilaterally approved requests from Georgia, Alabama, and Kansas to  require voters to provide proof of citizenship when they use a federal mail-in voter registration form.

Soon after, the League of Women Voters sued Newby and the commission in an attempt to block those actions, arguing that Newby violated federal law by approving changes to the form without a full commission vote.

Now the judge has refused to temporarily block the states’ new requirements while the case proceeds, potentially making it more difficult for people in those states to register to vote in upcoming elections.

“While we are disappointed in [the] decision, we will appeal to protect the critical rights of voters in these three states, especially during this election year,” Chris Carson, the League of Women Voters president, said in a statement.

The League believes that not only are Newby’s actions contrary to the commission’s own protocols, which require that all members of the commission vote on such matters, but they are also a clear departure from previous commission rulings and Supreme Court decisions.

In 2014, the commission rejected similar requests from Arizona and Kansas to require people to submit proof of citizenship with the federal mail-in form.

Moreover, the Supreme Court ruled in 2013 that Arizona’s proof-of-citizenship requirement for federal mail-in registrations was preempted by federal law. “The Federal Form provides a backstop,” wrote Justice Antonin Scalia in the majority opinion. “No matter what procedural hurdles a State’s own form imposes, the Federal Form guarantees that a simple means of registering to vote in federal elections will be available no matter what procedural hurdles a State’s own form imposes.”

The League and other voting rights advocates who have joined the suit argue that Newby is both abusing his power by acting unilaterally and is granting states an unprecedented path to further suppress voter access by circumventing federal law.

“If Mr. Newby’s decision were to be found OK, that would make it so any state could require documentary proof to register to vote,” Lloyd Leonard, the League’s senior director of advocacy, told the Prospect in April. “This is really the battle over how much restriction there should be [in the federal form].” 

Reformers Sound Alarm: McDonnell Ruling Invites Corruption

Good-government advocates voiced alarm Monday that the Supreme Court’s unanimous ruling to overturn former Virginia Governor Bob McDonnell’s 11-count corruption conviction will pave the way for the wealthy and powerful to more brazenly wield influence in government.

“By saying that politicians can receive gifts in exchange for political favors, the Supreme Court has enshrined bribery into our politics and further empowered moneyed interests over ordinary citizens,” Zephyr Teachout, a corruption expert and Democratic congressional candidate in New York, declared in a statement.

The Court concluded Monday that the prosecutor had too broadly defined what constitutes bribery of a public official. McDonnell, a Republican, had been convicted of accepting gifts and loans worth more than $175,000, including a Rolex watch, designer clothes, lavish vacations, and use of a Ferrari sports car, from a businessman who had sought the governor’s help in promoting a dietary supplement.

In the Court’s unanimous opinion, Chief Justice John Roberts rejected the state prosecutor’s definition of bribery as overbroad, arguing that simply meeting with someone in exchange for a personal gift or campaign contribution is not an “official act” and therefore doesn’t constitute federal bribery. 

"There is no doubt that this case is distasteful; it may be worse than that,” Roberts wrote in the opinion. “But our concern is not with tawdry tales of Ferraris, Rolexes, and ball gowns. It is instead with the broader legal implications of the Government’s boundless interpretation of the federal bribery statute. A more limited interpretation of the term ‘official act’ leaves ample room for prosecuting corruption, while comporting with the text of the statute and the precedent of this Court."

Roberts warned that the lower court’s interpretation of what constitutes corruption is problematic. 

"Conscientious public officials arrange meetings for constituents, contact other officials on their behalf, and include them in events all the time,” the Roberts opinion stated. “The basic compact underlying representative government assumes that public officials will hear from their constituents and act appropriately on their concerns—whether it is the union official worried about a plant closing or the homeowners who wonder why it took five days to restore power to their neighborhood after a storm.”

The danger of defining corruption too broadly, Roberts added, is that “officials might wonder whether they could respond to even the most commonplace requests for assistance, and citizens with legitimate concerns might shrink from participating in democratic discourse."

The court vacated the convictions, which had been handed down by the United States Court of Appeals Fourth District, meaning a new trial may now be held to determine whether McDonnell’s actions constitute as an “official act” under the parameters defined in Monday’s ruling.

Though reform advocates decried the ruling, some election law experts said it struck the right balance. Richard Hasen, an election law professor at the University of California, Irvine, called the ruling “sensible and courageous” on his blog.

“It is not enough that conduct is odious—the rules governing political action need to be clear enough so that politicians know the line between politics as usual and crossing the line,” Hasen wrote. “Prosecutors seek to make a name for themselves by going after corrupt politicians. But vague and broad laws criminalizing ordinary politics raise due process problems, selective prosecutions, and unfair treatment.”

But watchdogs argue that this was a clear-cut case of corruption, and that the ruling will only make it harder to hold corrupt politicians accountable to federal bribery laws.

“There was a corrupt bargain at work here, and the Supreme Court has disarmed the ability of the American people to police similar corruption in the future,” Fred Wertheimer, president of reform group Democracy 21, said in a statement. “This ruling opens the door to a ‘pay to play’ culture in government, so long as the gift-receiving official does not make a government decision or take an official government action. In essence, the Supreme Court has said it is perfectly legal for an officeholder to sell certain types of actions taken by the officeholder in return for large amounts of money going into the officeholder’s pocket.”

Reformers also say it underscores the urgent need for stricter state campaign-finance laws.

“This entire case could have been avoided if Virginia had taken the necessary and vital steps to prohibit the receipt of huge gifts from people who have business before the government,” said Tara Malloy, deputy executive director for the Campaign Legal Center, which filed an amicus brief in support of upholding McDonnell’s conviction.Given today’s ruling, states must make it a priority to protect and preserve the integrity of our democracy by passing strong gift laws and campaign-finance laws, both of which are designed to prevent bribery schemes from hatching in the first place.”

Yet, even as reformers voiced concern about the precedent created by such a narrow reading of corruption, they acknowledged that it could have been far worse. The court rejected McDonnell’s argument that the First Amendment constitutionally protects gifts and payments to public officials offered in exchange for policy influence.

“We think the case strongly shows that argument is incorrect,” says Brent Ferguson, counsel at the Brennan Center for Justice. “[The ruling] certainly was not as broad as some thought it would be.” 

Report: Dark Money Surges in State and Local Elections

Undisclosed political spending is both more pronounced and more influential at the state and local level than it is in federal elections, concludes a new report by the Brennan Center for Justice at New York University’s School of Law.

Also on the rise in state elections is what the report calls “gray money”—money that moves from one outside spending group to another, and can’t be immediately traced. Many political committees that are technically required to disclose their donors simply report receipts from other PACs or outside groups, the report found, obscuring the original funding source.

“Too often, even transparency is not fully transparent,” report co-author and Brennan Center senior counsel Chisun Lee told the Prospect.

The biggest source of undisclosed “dark” money is politically active tax-exempt groups, which operate outside the disclosure rules, and whose expenditures have exploded since the Supreme Court’s 2010 Citizens United ruling to lift all limits on independent political spending. The report focused on six states—Alaska, Arizona, California, Colorado, Maine, and Massachusetts—where fully transparent outside spending plummeted from 76 percent in 2006 to merely 29 percent in 2014.

One of the biggest jumps was in Arizona, where undisclosed spending spiked from $600,325 in 2010 to $10.3 million in 2014. The report cites numerous examples of big-spending outside groups that wielded disproportionate influence on local decision-making involving such matters as electricity rates, rent control, and environmental regulations. In Arizona, for example, a state initiative to subsidize energy efficiency through solar panels was weakened after the state’s largest utility poured $3.2 million into ads whose funding source was undisclosed.

“For a relative pittance—less than $100,000—corporations and others can use dark money to shape the outcome of a low-level race in which they have a direct stake,” wrote Lee and Brennan Center deputy director Lawrence Norden in a New York Times op-ed unveiling the report.

The report underscores the overwhelming influence that unrestricted and often undisclosed outside spending wields in elections, despite speculation that big money may not matter so much given the millions that many high-dollar super PACs spent fruitlessly on losing primary hopefuls in this presidential race.

The Brennan Center report, titled “Secret Spending in the States,” points to one bright spot amid the rise in undisclosed political spending: the success of state disclosure laws, most notably in California. State efforts to improve political disclosure have rung alarm bells among conservatives, who argue that such efforts are designed to chill speech and will subject donors to harassment and intimidation. But Lee argues that disclosure laws in California and elsewhere strike a proper balance.

“It is possible to require transparency across the board,” says Lee, “but have reasonable accommodations for speakers who can show they have a genuine reason to be fearful.”

Have New York’s Leaders Doomed Major Ethics Reform?

In the wee hours of Saturday, June 18, the New York legislature and Governor Andrew Cuomo passed a reform deal that strengthens the ban on coordination between super PACs and campaigns, and strips pensions from public officials who are convicted of felonies related to their office.

But instead of cheering, government reform advocates are livid. They say that the deal—done behind closed doors and without public review—is a tone-deaf response to mounting public outrage over a string of major corruption scandals in New York, including the conviction of two of the state’s former top leaders on federal corruption charges. The deal lacks any substantive measures aimed at rooting out corruption, reformers say, and could even doom future efforts to pass more robust ethics reforms.

“It’s a deflection,” says Susan Lerner, executive director of Common Cause New York. “They’re setting rules for everybody else but themselves. This is something that the legislature and governor want to point to, to confuse voters and say, ‘We’ve done something.’”

She adds that Cuomo “is basically washing his hands of ethics reform.”

The two most pressing measures that reformers wanted passed were missing from the package, including limits on the amount of outside income that legislators may earn, and closure of the so-called LLC loophole, which allows donors to secretly skirt contribution limits by routing undisclosed donations through limited liability corporations.

To the state’s reform advocates, closing the LLC loophole has become a Sisyphean task. Cuomo, along with both the state’s centrist Independent Democrats and the Republicans, rely heavily on LLC contributions from the real estate industry in their campaign fundraising. The loophole has become an unsavory feature of New York power politics and many state politicians are averse to closing it.

Critics now say that Cuomo’s pledge for the past six months to push LLC reform in this year’s legislative session was just lip service, especially after he failed to push for an ethics deal in the recent budget negotiations.

Indeed, Cuomo essentially admitted as much in an interview with The New York Times after the reform deal passed. “There has to be a dose of reality in the assessment,” he said. “It is tantamount to political suicide for the Republican Party in this state because they believe it ends corporate money, and only union money would come into the system, which would help the Democrats.” He added that the only way to close the loophole now is for New Yorkers to vote for a state constitutional convention in the upcoming 2017 referendum.

Many saw that as an admission that he doesn’t intend to help Democrats win control of the Senate from Republicans, who have repeatedly blocked LLC reform efforts and worked closely with Cuomo on several issues. “For him to say it never had a chance shows that while he may support [LLC reform], he’s not willing to put political muscle behind that,” says Dick Dadey, executive director of the New York reform group Citizens Union.

Reform advocates say the key now is for the public to keep up the pressure on leaders to pass genuine anti-corruption measures. 

“This is the sixth incremental step that a governor and New York legislature has taken in the past 11 years to strengthen the ethics of our public officials,” says Dadey. “With each incremental step, it becomes less likely that the big picture items are going to be achieved, because the appetite for visiting ethics reform gets smaller and smaller with each successive smaller victory.”

Reform groups will now try to make the 2016 elections a referendum on corruption in Albany. “Voters do have remedies,” Lerner says. “The reason why they felt they had to do something was public pressure. We’re far from powerless.” 

Foreign Contributions Risk Unites Liberals, Conservatives

Campaign-finance deregulation has elevated the risk that foreign money will make its way into American elections, and this danger is emerging as a rare point of bipartisan agreement between liberals and conservatives.

The threat of foreign campaign contributions and how to stop it was the topic of a bipartisan forum at the Federal Election Commission to address how to ensure that foreign donors do not use corporations, “dark” money nonprofits, and shadowy limited liability corporations (LLCs) to funnel foreign money into American elections. The panel was convened by Democratic FEC commissioner Ellen Weintraub, and featured lawyers, campaign-finance experts, and watchdogs from both sides of the aisle.

Foreign money has long been banned in American elections on the grounds that this protects the country from political subversion of the national interest. But the growing deregulation of campaign-finance laws, combined with dwindling enforcement, has diminished accountability, watchdogs warn. Reform advocates voiced concern Thursday that this has made it all too easy for foreign money to find its way in.

The specter of that growing foreign influence is emerging as an area of common ground among liberals and conservatives, who are usually sharply divided on the issue of campaign financing. Panelists on both sides of the aisle at Thursday’s event brought up a slew of concerns, starting with the growing role of outside money in elections.

Outside money accounts for about 20 percent of all political money so far in the 2016 election, said Sheila Krumholz, executive director of the Center for Responsive Politics. And undisclosed, “dark” political spending could reach as much as $600 million this election cycle, she predicted. Moreover, weak disclosure laws have made it increasingly difficult to uncover the existence of foreign money in elections, Krumholz said.

But the risk that such money will run through corporate coffers is high, panelists said. For one, as companies have become increasingly globalized, they may no longer have singular domestic interests—something the Supreme Court did not address when it ruled in Citizens United that corporations are essentially people.

“Corporations are different than they used to be,” Norm Ornstein, a political scholar at the American Enterprise Institute, said at the forum. “Now we have corporate inversions; we have a vast expansion of foreign countries and entities buying U.S. companies and starting U.S. subsidiaries.”

While an individual American may have many different interests, Ornstein said, it’s broadly assumed that such a citizen will be loyal to the national interest. The same is not true for many corporations, he argued. “We’re going to have very serious scandals and questions over what is or isn’t in the national interest,” Ornstein said.

It’s no secret that companies see political contributions to U.S. elections as an investment—and foreign entities are no different. “People everywhere know that political investment is a tremendous investment,” said John Pudner, executive director of the conservative campaign-finance reform group Take Back Our Republic and a former political consultant.

The fact that foreign donations are illegal can have little impact in the highly lucrative political consulting industry, Pudner said. “There’s the temptation here, and there are the people willing to carry it out,” he said. The temptation of big commissions from large ad buys might make unscrupulous political consultants willing to turn a blind eye, said Pudner.

So how can foreign money be kept out?

Weintraub has proposed an FEC rulemaking that would require corporations making political contributions to verify that they are not using foreign money. The FCC already has a similar requirement in place for companies that want to obtain a federal broadcast license.

“Regardless of whether the perpetually deadlocked FEC takes action, lawyers may wish to think twice before signing off on corporate political giving or spending that they cannot guarantee comes entirely from legal sources,” Weintraub wrote in The New York Times back in March.

Pudner has also successfully lobbied more than 40 House conservatives to back a bill that would require federal candidates’ online contribution forms to disclose a three-digit credit card security code as well as a valid U.S. billing address, which he argues would close an easy loophole that allows foreign nationals to contribute to campaigns.

Panelists also cited robust disclosure of all political expenditures as a critical measure to ensure that foreign money stays out of American elections. However, disclosure legislation has in recent years fallen prey to partisan gridlock in Congress, amid Republican concern that disclosure mandates will lead to political targeting.

Meanwhile, it remains to be seen whether substantive action on foreign money can transcend partisan gridlock at the FEC.

“You don't lose money betting against action” at the FEC, Weintraub told Bloomberg BNA in an interview

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