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Super-PACs and Elections: Separating Myth from Reality, Contributed by Jason A. Levine, Vinson & Elkins LLP

Monday, February 27, 2012

So far, 2012 is on track to be remembered as the Year of the “Super-PAC”. President Obama and his Republican challengers each are supported by at least one Super-PAC, and the groups are proliferating among U.S. Senators and Congressmen.1 More importantly, for as many dollars as Super-PACs have spent in this election cycle, it seems that commentators have used an equivalent number of words to denounce them. By most published accounts, the Super-PAC is an abomination created by the Supreme Court’s Citizens United2 decision and set loose to terrorize our democracy. In urging Democrats to form Super-PACs supporting President Obama’s re-election, his campaign even analogized them to nuclear weapons, noting that to refrain from participation would be tantamount to “unilateral disarmament.”3 Free to raise and spend unlimited sums of money on certain types of political advertising, the narrative goes, Super-PACs threaten to place elections up for sale through anonymous corporate donors.4 Given this melodramatic backdrop, it may come as a surprise that, in fact, Super-PACs have legal underpinnings dating back more than 35 years and are subject to strict public reporting and disclosure requirements. Conceptually, they are neither brand-new nor especially secretive. Although the impact of Super-PACs on elections surely merits debate, the hysteria accompanying them is rooted in three perennial myths—not reality. This article seeks to debunk these myths and help facilitate a more accurate assessment of Super-PACs and their implications for future elections.

Super-PACs Differ from Traditional PACs

Before addressing the myths surrounding Super-PACs, a brief description of political action committees (“PACs”) is in order. As discussed in this article, several recent court decisions established that the First Amendment of the U.S. Constitution protects the right of individuals, corporations, and unions to spend their resources on independent political speech—not coordinated with candidates or political parties—advocating the election or defeat of specifically identified candidates for office. In response to these decisions, the Federal Election Commission (“FEC”) issued several Advisory Opinions and amended its regulations to expressly permit the establishment and operation of political committees that only make independent expenditures—so-called Super-PACs. Accordingly, a Super-PAC is a PAC that makes no contributions to candidates or political party committees (such as the RNC and the DNC), or to other PACs that contribute to candidates or political party committees. Further, there is no dollar limit on the amount of money a Super-PAC can raise or spend on its independent expenditures. Traditional PACs, in contrast, are limited to raising $5,000 per donor per year, but they in turn may make contributions directly to candidates, political party committees, and other PACs. Super-PACs may not.

Myth #1: Citizens United Was a Radical Decision That Created Super-PACs

Many pundits and politicians deem it obligatory to condemn Citizens United whenever discussing Super-PACs, but in fact the origins of Super-PACs pre-date Citizens United by over 35 years.5 In 1976, the Supreme Court decided the case of Buckley v. Valeo, which upheld the First Amendment right of individuals to make unlimited “independent expenditures” supporting the election or defeat of candidates for federal office.6 In contrast, the Court left in place limits on contributions to political candidates and campaigns, on the rationale that they amounted to only a “marginal restriction upon the contributor’s ability to engage in free communication”—in part because independent expenditures were not restricted.7 This dichotomy was the fundamental basis for the infamous “Swift Boat” ad campaign against Democratic presidential candidate John Kerry in 2004, which was a series of independent expenditures paid for by individuals calling themselves Swift Boat Veterans for Truth. Conversely, the same legal doctrine permitted George Soros to spend $24 million through independent expenditures supporting Senator Kerry’s candidacy.8 Super-PACs are in a similar vein: they register with the FEC as “independent expenditure-only” political committees that do not make contributions to candidates or political party committees. The change flowing from Citizens United is that it upheld the First Amendment right of corporations and unions—not only corporations, as commonly reported—to make unlimited independent expenditures from treasury funds, just as Buckley had previously held for individuals.9 Although this obviously affects the sources of funds potentially available for independent expenditures—and has itself been the subject of intense debate—there was no legal prohibition or limitation on independent expenditures by individuals before Citizens United.10 All that Citizens United changed was the ability of corporations and unions to participate directly in independent expenditures on the same general basis as individuals.11 Further, Citizens United did not address existing limitations on corporate contributions to traditional PACs, which Super-PACs generally assume are applicable to them. These restrictions include a statutory ban on contributions to traditional PACs by foreign nationals and foreign corporations, government contractors, national banks, and corporations organized by authority of a law passed by Congress.12 Although the constitutionality of these restrictions is presently being litigated, the Supreme Court did not opine about them in Citizens United, but let them stand. Taken together, once upheld (as is likely), the restrictions will continue to substantially narrow the universe of corporations—but not unions—that may form or contribute to Super-PACs.13Citizens United also did not address, but let stand, the century-old prohibition on direct contributions to candidates by corporations.14 This bulwark of campaign finance regulation therefore continues to fundamentally limit corporate involvement in politics.

Myth #2: Super-PACs Are Super Secretive and Have Anonymous Donors

Super-PACs are also often condemned for being secretive, with Citizens United blamed for permitting them to operate anonymously.15 On the contrary, the finances of Super-PACs are relatively transparent. Like other political committees, Super-PACs are legally required to report the identity of any donor who gives in excess of $200 in a year, including the donor’s name, mailing address, occupation, and employer.16 Super-PACs also must disclose how they spend their money, including the identity of any persons who are paid over $200 in a year and the purpose of the payment.17 The FEC has gone so far as to issue regulations specifying examples of “inadequate” purpose disclosures that are too vague, with the consequence of civil penalties if not corrected publicly.18 As for their organizational structures, when a Super-PAC registers with the FEC it must identify its Treasurer and Custodian of Records, provide mailing and email addresses, and list a website address (if one exists).19 All of this information is publicly available on the FEC’s website (www.fec.gov), and is updated periodically. These same requirements apply to all political committees: Super-PACs are not the beneficiaries of more lenient standards. Although federal law does not require a Super-PAC to disclose the identity of other officers or by-laws—if it has them—this is also the case for traditional PACs. Of course, if Super-PACs choose to incorporate, their chosen state law of incorporation may impose additional public disclosure requirements as well. In short, Super-PACs are no less transparent than traditional PACs and other political committees, and the charge that they are unduly “secretive” is misguided.

Myth #3: Super-PACs Are Controlled by the Candidates They Support

Super-PACs are often described in the same breath as the candidate they support, and this has led some commentators to describe them as if candidates control them.20 Quite to the contrary, as noted above, Super-PACs may make only independent expenditures. In other words, they must operate independently from the candidates they support. This is not a “technicality,” but a fundamental requirement that can lead to substantial federal penalties (if not dissolution) if violated.21 Spending that is found to be “coordinated” with—let alone controlled by—a candidate, a campaign committee, or a political party committee, may be deemed an illegal in-kind contribution with potentially criminal consequences for the parties involved. For this reason, Super-PAC staff generally have internal structures and rules in place to prevent non-public information from moving between the organization and a candidate, campaign committee, or political party committee in a way that might influence the activities of the Super-PAC. The FEC also imposes requirements to minimize the threat of improper coordination. For example, Super-PAC employees or consultants who previously worked for a candidate's campaign or political party committee within the past 120 days cannot use information gained in those positions to prepare Super-PAC communications.22 Likewise, the FEC recognizes the use of “firewalls” to ensure that vendors who work for candidates or political party committees do not become conduits of information that should not be shared with a Super-PAC.23 The same is true for any other social welfare organizations or traditional PACs that may work with a candidate or political party committee simultaneously with a Super-PAC. It is true that candidates for office are permitted to attend, speak at, or be featured guests of Super-PACs’ fundraising events, but there are strict limits on this participation. The candidates may only solicit contributions that are within the legal limit for traditional PACs ($5,000), and from permissible sources (individuals and other traditional federal PACs). In general, candidates are reticent about appearing at Super-PAC fundraising events, and rightly so, because such appearances could lead to communications that call into question the “independence”—and thus the legality—of later expenditures by the group.

Conclusion: Super-PACs Are Not So “Super” After All

Stripped of their mythical attributes, Super-PACs are less threatening and radical than demagogues would have the public believe. A logical outgrowth of First Amendment doctrines set forth over 35 years ago, Super-PACs give equal sway to corporations and unions, and they are subject to a strict public disclosure regime. Super-PACs undoubtedly are poised to have a significant impact on federal elections, and a post-election assessment of their activity in 2012 will be informative. Viewed in their totality, however, they appear to pose no more mortal a threat to our democracy than does uninformed and sensational political commentary—which demagogues put forth in abundance, and which the First Amendment also protects. Jason A. Levine is a Partner in the Washington, D.C. office of Vinson & Elkins LLP. Since 1995, Mr. Levine has specialized in complex business litigation, including the defense of class actions and cases involving securities, business torts, contracts, fraud, and government enforcement. Mr. Levine also practices political law, representing candidates and political party committees in litigation involving elections and campaign finance regulation. He is a 1994 graduate of Harvard Law School and was a judicial clerk to now-Chief Judge Randall Rader on the U.S. Court of Appeals for the Federal Circuit. Contact: jlevine@velaw.com. © 2012 Vinson & Elkins LLP

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