Foreign Campaign Money Subject of FEC Forum

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By Kenneth P. Doyle

June 21 — Foreign campaign money has been banned from U.S. elections for decades, based on the reasoning that foreigners with no necessary interest in what is best for America should not be calling the shots for American democracy.

But a rise in campaign spending by loosely regulated outside groups is raising new concerns at the Federal Election Commission and elsewhere that foreigners may be finding increased opportunities to influence American politics.

Under current rules, corporations spending money on campaigns—including so-called Section 501(c) nonprofit corporations that have become increasingly influential—don't have to disclose the source of their money. Whether foreign money actually has found channels into U.S. politics remains a largely unanswered question, according to FEC officials. But, some say that's the point: we should know for sure that foreigners can't influence campaigns.

Ensuring that corporations are not being used to funnel foreign money into U.S. elections will be the focus of a panel at an FEC forum set for June 23. FEC Democrats, including Commissioner Ellen Weintraub, the forum's main sponsor, clearly hope the discussion will generate support for new requirements to guard against foreign campaign money. The outcome remains far from certain, however.

Weintraub told Bloomberg BNA in a phone interview that she hoped the forum would help inform the FEC about “what we need to do going forward because no one wants foreign money in our elections.” She noted that the FEC's Republican chairman, Matthew Petersen, expressed support for holding the forum and informing the commission about the issue, though he has not said whether he would support new regulations (See previous story, 04/15/16).

FEC, Congress Hamstrung on Disclosure

Weintraub added that the forum was “an important first step” to determine if new rules to control foreign campaign money may be needed. She acknowledged, however, that deep divisions among the commissioners have hampered action on a range of issues in the past.

“You don't lose money betting against action” at the FEC, she said.

The forum is expected to address questions including how to define “foreign money” and how campaign money currently is being tracked, and to assess the role of foreign nationals and corporations in campaign financing. Panelists addressing these issues will include academics, researchers and advocates—virtually all of whom have taken positions favoring stronger campaign finance disclosure regulations.

The panelists are expected to include Norman Ornstein of the nonprofit American Enterprise Institute and others from Washington think tanks and watchdog groups, as well as leading law professors working on election law issues.

While the discussion is set to focus narrowly on foreign money, it could lead quickly into broader campaign finance disclosure issues that have hamstrung the FEC and Congress since 2010. In that year, the Supreme Court rolled back decades of restrictions on corporate political spending in Citizens United v. FEC and opened avenues for increased campaign money from outside groups, including super political action committees and nonprofit organizations that don't disclose their donors.

For years, Democrats in Congress and on the FEC called for new rules to counter what they see as the negative consequences of the Citizens United decision. Republicans, however, have resisted any new rules, and partisan gridlock has persisted.

How to Keep Out Foreign Money?

Years of debate on the effects of the Supreme Court decision have narrowed the focus of disclosure supporters to several important issues, including the one that the new FEC forum is set to address. While Citizens United opened the door to unlimited corporate political spending, it did not say how to keep foreign funds—which remain illegal—from flowing through corporations into U.S. elections.

Weintraub recently proposed an FEC rulemaking that would deal with the issue. Instead of requiring full disclosure of all funding sources by campaign spending groups, she proposed a new process for sponsors of campaign messages simply to certify that they are not using foreign money.

A similar certification proposal also was introduced recently as legislation (H.R. 5515) in Congress sponsored by Reps. Derek Kilmer (D-Wash.) and Richard Hanna (R-N.Y.) (See previous story, 06/17/16).

The measure—the Election Protection and Integrity Certification Act—would require groups that are tax-exempt under Section 501(c) of the tax code to check a box on their annual returns filed with the Internal Revenue Service declaring that they did not use foreign donations for campaign activities. In addition, the measure also would require these organizations to certify in campaign spending reports filed with the FEC that no foreign funds were used for independent campaign expenditures or other campaign-related spending. Finally, the bill would require a Government Accountability Office study to examine corporate campaign activities to see if foreign funds are being used.

The sponsors of the bill, Kilmer, a second-term Democrat, and Hanna, a third-term Republican, both are considered moderates in their parties. Their bill was referred to the House Ways and Means Committee, but it was unclear if it would see any action in the current Congress.

Pudner: Building Conservative Support ‘Tough.'

One clue that the measure could have trouble gaining broader bipartisan support was that Hanna, the Republican cosponsor, is on his way out of Congress after his current term. After disagreeing with conservatives on some issues, he announced he is not running for reelection and will leave Congress after this year.

John Pudner, who has worked in campaigns as a Republican political consultant and is now trying to generate Republican support for new campaign finance legislation, acknowledged in a phone interview with Bloomberg BNA the difficulty of building enthusiasm for any new disclosure rules. Pudner is set to appear on a panel at the June 23 FEC forum to discuss what is currently known about the effect of foreign money on campaigns.

Suspicion of disclosure rules is “our toughest obstacle as conservatives that we need to overcome,” Pudner said. He added that many Republicans are reluctant to sign on to new rules because of what he called “legitimate concerns” that rules could be abused, such as when the IRS was accused in recent years of targeting politically active nonprofit groups for additional scrutiny.

Pudner worked to elect Rep. Dave Brat (R-Va.) in a 2014 primary campaign that shocked the country by ousting former House Majority Leader Eric Cantor from his seat in Congress. Cantor, a prolific fundraiser for the national Republican Party, was portrayed by Brat's campaign as out of touch with the needs of ordinary voters.

Pudner now heads Take Back Our Republic, a nonprofit group that endorsed the Kilmer-Hanna bill to control foreign campaign money, as well as another House bill (H.R. 4177), introduced by Rep. Paul Gosar (R-Ariz.), intended to block foreign campaign contributions from being funneled into U.S. campaigns through unverified credit-card contributions.

While conservatives have been reluctant to embrace disclosure, Pudner emphasized that, if no disclosure is required regarding sources of campaign funds, there is a real threat of foreign money influencing U.S. campaigns—a result he said would be unacceptable.

‘Badge of Honor.'

Pudner acknowledged that, in addition to ideological concerns about disclosure rules, there are practical political pressures on candidates concerned that groups opposed to disclosure could spend money to unseat them. In addition, he said, most candidates are advised by consultants and others who are reluctant to disturb the current campaign finance system, which can be richly rewarding to political professionals.

Asked how lawmakers could overcome such pressures, Pudner said they could “wear it as a badge of honor” that they are seeking to change an apparently intractable system.

Another panelist set to appear at the FEC forum is Ciara Torres-Spelliscy of Florida's Stetson University College of Law. Torres-Spelliscy is the author of a newly published book, titled Corporate Citizen?, which focuses on Supreme Court rulings on corporations—especially in election law cases.

She told Bloomberg BNA in a phone interview that the court's decisions—especially recent rulings under Chief Justice John Roberts—have expanded corporations' constitutional rights and created problems for the campaign system. These include the potential influence of foreign money, Torres-Spelliscy said, as well as the fact that publicly traded corporations get involved in influencing campaigns by spending money from shareholders who may not support the company's political agenda.

She noted that even Justice Anthony Kennedy, who wrote the 5-4 majority opinion in Citizens United recently expressed doubts about the adequacy of campaign finance disclosure.

Acknowledging that her analysis was academic, rather than political, Torres-Spelliscy indicated she did not know what it would take for action on possible new regulations.

“It may take a new, incoming Congress” following the elections in November, she said.

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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