Another Court Criminalizes Political Activity -- Will It Be Applied Equally?

The U.S. Court of Appeals for the Eighth Circuit has ruled, in United States v. Benton (8th Cir. May 11, 2018) that three officials from Ron Paul's 2012 presidential campaign committed criminal acts by (1) paying an Iowa State Senator for various services, including his endorsement, through a sub-contract with a video production vendor and (2) reporting the purpose of the expenditure as "audio/visual services."

The State Senator indeed provided "audio/visual services" to the Paul campaign by recording telephone messages and appearing on television for the Paul campaign.  He also traveled for the campaign and encouraged support for the campaign.  But federal prosecutors claimed the main purpose of the payment was the State Senator's "endorsement," which was not reported as the purpose of the payment.

All three of the Republican political operatives were convicted and punished.  One had his house raided and went to prison.    

The ruling has serious implications for the Hillary Clinton campaign and the Democratic National Committee.  News media have reported that the Clinton campaign and DNC funneled money to the Perkins Coie law firm, which in turn sub-contracted with an opposition research firm, Fusion GPS, which in turn sub-contracted with a foreign operative, Christopher Steele, to perform opposition research about Donald Trump.  The foreign operative reached out to Russians with Kremlin connections for information that might harm Donald Trump's candidacy.  The Clinton campaign reported the purpose of its payments to Perkins Coie as "legal services."  One liberal group has filed a complaint with the FEC over the activity. 

RNLA member Prof. Brad Smith noted that this decision could impact Perkins Coie:

“If I'm Perkins Coie, right now I'm a bit nervous about the reporting of payments to Fusion GPS,” said Brad Smith, a former FEC chairman and current chairman of the Institute for Free Speech.

Republicans do not support the criminalization of politics.  But Republicans do respect the rule of law and equal justice.  

Democrat Hypocrisy on Tax Cut Bonuses vs. Campaign Finance Disclosure

Writing in the Washington Examiner, Prof. Brad Smith astutely pointed out the disconnect between House Minority Leader Nancy Pelosi's response to employees receiving $1,000 bonuses as a result of the tax cut bill passed in December and the current campaign finance disclosure thresholds:

. . . The truth is that the U.S. today has more extensive disclosure than ever before. Contrary to popular myth, even “super PACs” are required by law to publicly disclose all donors giving more than $200. Traditional PACs, political parties, and candidates must do the same. In many states, the disclosure thresholds are much lower — as little as $10. 

Which takes me back to “crumbs.” If Nancy Pelosi thinks that $1,000 is “crumbs,” why does she support a law that requires every American who contributes more than $200 (and as little as $10 in some states) to a candidate, political party, or PAC, to be reported to the government, with their names, addresses, and employment information published for the world to see? . . . 

. . . A $200 contribution represents about one one-hundredth of 1 percent of what the average winning House candidate spent in 2016. No one in Congress is being corrupted by $200 contributions. Nor do undecided voters learn anything from seeing the personal information of thousands of small donors, whom they almost certainly have never heard of. 

These disclosure thresholds were low when enacted, and haven’t been adjusted, not even for inflation, since 1979. Studies have shown that compulsory disclosure of campaign contributions discourages small donor political participation. . . . The threshold at which contributor information must be publicly disclosed should be substantially higher than it currently is. That would simplify the reporting system, make harassment of small donors less likely, and encourage small donor participation. That would be one campaign finance reform both Left and Right could get behind. And it wouldn’t be “crumbs.”

Democrats and liberals are quick to dismiss when Americans get to keep more of their hard-earned money (and of course, $1,000 is a substantial amount to most people, even if not to multi-millionaire Pelosi).  Yet despite lamenting the lack of small donor participation in the political system, they champion outdated disclosure requirements that discourage small donors and require disclosure of small contributions of which a candidate takes no notice.  And as Prof. Smith describes, in this era of political violence and intimidation, the disclosure requirements open up everyday Americans to bullying and threats of violence for expressing their political beliefs through their contributions.

California’s Campaign-Advertisement Disclosure Laws Become Toughest in the Country

Last week, Governor Jerry Brown signed the California DISCLOSE ACT, AB 249, which by some standards makes California’s campaign-advertisement disclosure laws the toughest in the country.

This new law requires the three largest contributors (of $50,000 or more) to be listed on ballot measure ads and independent expenditures.

On video and TV, the disclosures must be displayed against a solid black background in a clear font that is not all-caps, fill the bottom third of the screen and stay up for a full five seconds during a 30 second ad. Each of the three major funders’ names must appear on a separate line. Disclosures on radio ads would need to be made with the same speed as the rest of the ad. Committees must keep track of donations on a daily basis to make this calculation. If the top contributors change, committees have five business days to make a new ad and update it. Top funders would have to be identified in TV, radio, online and print ads about ballot measures on the ad itself.

This law applies to print, online, TV, and radio ads as well as mass mailers and robocalls. It requires radio ads and robocalls to name the two largest funders.

It also requires that if the funds were earmarked, the “true” source of the funds be disclosed. However, California Fair Political Practices Commission chair Jodi Remke raised a red flag about the fine print tucked inside the bill – particularly how, for example, labor union earmarks are disclosed. Granted, the FPPC chair thought the bill might need to require additional disclosure requirements. But the new earmarking rules benefit labor unions – likely to the detriment of Republicans:

Critics of the bill, including Republican Assemblyman Matthew Harper, R-Costa Mesa, who voted against it, complain that it stacks the deck for Democrats by making an exception for membership dues, helping the labor unions that fund Democrats’ campaigns. 

If a member’s dues are used to pay for a campaign, the organization — not the individual dues-payer — would appear as the contributor as long as the total amount is below $500. Mullin and others argue the change eases the paperwork burden for membership organizations while making it easier for the public to follow the money. But Republicans have cast the provision as union-friendly politics as usual. 

“What this does is it creates a massive, dark-money loophole that unions can drive through,” Harper said. “It’s what Democrats do over and over again.”

Although Republicans may be currently outnumbered in the California legislature, that has not stopped the RNLA from working to set-up a robust lawyer organization in the state. On October 21, RNLA’s California Chapter is hosting National Republican Congressional Committee General Counsel Chris Winkelman at a MCLE event during the California Republican Party Convention in Anaheim. Mr. Winkelman will be discussing the lawyer's role protecting the integrity of elections. He will also highlight important Congressional races in 2018 and discuss how lawyers can help next November. We will also be introducing our statewide leadership and new California Regional Chairs. Register for the event here.

California’s RNLA Chapter is growing and recruiting lawyers around the state to help in 2018 races. If you haven’t already joined RNLA, now is the time!

By Audrey Perry Martin, RNLA California State Chapter Chair and Of Counsel to Bell, McAndrews & Hiltachk, LLP.

Former SEC Commissioners Reject Political-Disclosure Rulemaking

The Federalist Society’s Jeff Dinwoodie recently hosted three former Securities and Exchange Commission commissioners to discuss past and future issues at the powerful financial agency. Troy Paredes, Annette Nazareth, and Paul Atkins graded the commission on various issues ranging from Dodd-Frank to esoteric oversight boards.  

While the commissioners disagreed on many issues they spoke unanimously on one major issue where securities law and election law overlap: political-spending disclosure. No one spoke in favor of pressuring the Commission into a rulemaking requiring disclosure of public-company political spending.

The issue has bedeviled the Commission for years. Shortly after the Supreme Court decided Citizens United v. FEC, the Senate considered a bill requiring this disclosure but it failed to garner requisite support. More recently Senators Charles Schumer, Elizabeth Warren, Robert Menendez, and Jeff Merkeley threatened to scuttle Commissioner nominees Lisa Fairfax and Hester Pierce because they refused to declare ex ante they would support a political-spending rulemaking.

Senator Schumer responded to this heresy with trademark vapidity: “If one feels that undisclosed special interest money cascading into our politics is one of the worst problems American faces, then this approach is very logical.” Apparently fighting ISIS, trillions in debt, and stagnant job growth take a backseat to learning whether corporation X supported its trade association. SEC chairwoman Mary Jo White disagrees with Schumer’s priority assessment and has thus far deflected attempts by politicos and agitprops to force her hand.

Paul Atkins has long opposed this potential rulemaking, laying out his rationale in a 2013 law review article, MATERIALITY: A BEDROCK PRINCIPLE PROTECTING LEGITIMATE SHAREHOLDER INTERESTS AGAINST DISGUISED POLITICAL AGENDAS. In it, he articulated three reasons why this disclosure is deleterious: (i.) materiality is lacking, (ii.) cost/benefit analysis is off balance, and (iii.) it is antithetical to the Commission's mission and a low priority compared to 2008 crisis-related issues.

Atkins revived his reasoning at the panel. The SEC’s mission is to maintain fair, orderly, and efficient markets, facilitate capital formation, and to protect investors by ensuring that market participants have accurate material information about SEC-registered securities. Whether corporations support 501(c)(4)s or (c)(6)s that advocate certain policies or support certain candidates is immaterial to that mission. In fact, the groups pushing companies to reveal their political spending do not represent average investors but entities that usually take positions adversarial to corporate objectives. Thus they have incentives to force business perspectives from the political marketplace. These include state and union pension funds (unions coincidentally aren’t affected). 

In fact, more than 75% of the corporate public policy spending proposals in 2012 were proposed by a coalition of special-interest investors coordinated by the Center for Political Accountability, Walden Asset Management, and the American Federation of State, County and Municipal Employees. These groups ‘name and shame’ resisting corporations to bring unwanted publicity so they retreat from important policy battles.

Paredes agreed that the Commission should carefully analyze the cost/benefit to disclosure requirements not directly related to the touchstone “materiality” requirement. So did Democrat Commissioner Annette Nazareth who praised Chairwoman White for not bowing to outside pressure and suggested the SEC was ill-suited for this responsibility with all the other issues facing the Commission.

In his paper discussing this issue, Atkins wrote, “Efforts to force mandatory disclosure of corporate spending on political and other advocacy activities should be viewed as primarily political rather than economic and, as such, would not serve to help shareholders evaluate corporate performance or promote shareholder value.” Commissioners nominated on both sides of the aisle realize the political nature of these disclosure efforts and deserve praise for saying so.

By Paul Jossey