FEC Delays Action on Foreign-Money Proposal

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By Kenneth P. Doyle

Aug. 16 — The Federal Election Commission has delayed until next month consideration of a proposal to clamp down on a potential channel for foreign influence in U.S. campaigns.

The proposal would rescind a 2006 FEC advisory opinion (AO 2006-15) that allowed a U.S. subsidiary of a foreign company to establish a corporate political action committee.

The proposal was initiated by Democratic FEC Commissioner Ann Ravel amidst heightened concerns about possible foreign influence in the current presidential campaign (See previous story, 08/16/16).

An update on campaign finance issues written by attorney Robert Lenhard, a former Democratic FEC commissioner, said the issue of foreign influence was unlikely to be resolved soon by the FEC “but will remain a hot button topic in campaign finance, and should be on everyone’s radar screen if Congress takes up the issue of campaign finance reform in the next Congress.” Lenhard's commentary was posted on the website of his law firm Covington & Burling.

FEC Republicans Resist New Rules

In addition to allowing traditional corporate PACs for domestic subsidiaries of foreign companies, the 2006 FEC ruling has been cited to allow U.S. subsidiaries to contribute to super PACs, which arose after the 2010 Supreme Court ruling in Citizens United v. FEC allowed unlimited, direct corporate spending to influence campaigns. Some super PACs active in the current election cycle have received large contributions from U.S. subsidiaries of companies based outside the U.S.

The 2006 FEC ruling is seen by Ravel and other critics as a key loophole, allowing the owners of foreign parent companies to influence U.S. campaigns—and perhaps funnel money directly from foreign sources into campaigns.

FEC Republican commissioners have disagreed, however, arguing that current rules protect the rights of American employees of foreign-owned companies to participate in campaigns in the same way as employees of U.S.-owned companies. Republicans have suggested that the supposed threat of foreign money is overblown and meant to provide cover for Democrats to impose a broader regulatory agenda.

The delay in considering the Ravel proposal was announced before a brief FEC open meeting Aug. 16, during which the commissioners unanimously approved an advisory opinion for a new online campaign contribution platform. The ruling (AO 2016-08) granted a request by a company called eBundler.com LLC to set up an online platform for campaign fundraisers to collect and track contributions from others in a process known as bundling.

Progress on Enforcement Cases

Most of the meeting was spent by the FEC commissioners discussing their recent progress in clearing a backlog of pending enforcement cases. The FEC has closed a number of long-pending enforcement matters in recent months, though many of these resulted in deadlocked votes and dismissals without a penalty.

The six FEC commissioners, three recommended by Democrats and three Republicans, have been deeply divided along party lines regarding key legal and enforcement matters.

A memo prepared by FEC Vice Chairman Steven Walther and presented at the Aug. 16 meeting said the number of pending cases on the FEC's enforcement docket dropped from 72 to 44 over the last year, a 61 percent decline. Walther, an independent who holds a Democratic seat, said he has been working with the FEC's Republican chairman, Matthew Petersen, to reduce the backlog of pending FEC cases.

Petersen echoed Walther's comments, saying, “we've been able to work together to slash substantially the number of pending cases.”

Walther offered a motion to set a deadline for commission action on remaining cases, but this was defeated by a 3-3 vote, with the Democratic commissioners in favor and Republicans opposed. Similar, earlier proposals also had been turned back by opposition from the three FEC Republicans.

Despite the defeat of Walther's motion, Petersen said he would continue pressing to resolve enforcement cases efficiently and would, if necessary, convene additional executive sessions to consider pending cases.

Rulemaking Petitions

The agenda for the Aug. 16 FEC meeting also included several regulatory items that have been discussed previously by the FEC but remain unresolved. These include proposals for new rules regarding political party contributions and for “technological modernization” of FEC regulations.

Further discussion of the regulatory proposals was put off until the next FEC open meeting, set for Sept. 16.

Prior to its latest meeting, the FEC released rulemaking petitions asking for revision of political party regulations.

One petition from attorneys at the Perkins Coie law firm asked the FEC to write new rules to implement legislation passed by Congress in 2015 increasing limits for contributions to certain accounts of the political parties. The legislation, an amendment to major appropriations bill, created special party accounts to pay for conventions, party headquarters and legal and recount costs. The FEC has indicated it would write new rules setting requirements for these special party accounts but has not yet completed action nor even published a proposed rule.

The FEC also released a rulemaking petition from Ken Martin, chairman of the Minnesota Democratic Farmer-Labor Party, asking the FEC to loosen current campaign finance rules for state and local party committees.

Previous calls to ease political party rules have been supported by Republican FEC commissioners. FEC Democrats, however, have indicated reluctance and suggested they would not support easing rules for parties unless tougher restrictions are imposed on campaign spending by non-party organizations—a condition that FEC Republicans oppose (See previous story, 06/16/16).

To contact the reporter on this story: Kenneth P. Doyle in Washington at kdoyle@bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com

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