Legal Rubble: Money and Politics in the Age of Citizens United
On October 9, 2015, CLC President and General Counsel Trevor Potter addressed Harvard Law School students and faculty as part of a lecture and discussion series on election law. Below are his prepared remarks. Click here to watch a recording of the lecture and subsequent discussion.
The narrative of the 2016 election cycle so far has been dominated by two themes—voter anger with the status quo, and money. Voter anger is beyond the scope of this talk, except as it relates to citizens’ views about the corrupting effects of money in elections and governance, which I will get to shortly.
Money, as covered by the press, is about which candidate or super PAC has the most money, which billionaire is sponsoring which player—sorry, candidate— how the candidate super PACs are spending early money, how to guess the origins of the “dark money” being spent through candidate non-profits that do not disclose their donors, who has run out of money and is leaving the race, and who can convince those former candidates’ major donors to switch allegiances and support their candidate’s super PACs and non-profits! The “horse race” is currently the money race. Campaign finance has become such a prevalent issue that (as you may have heard) there’s even a Harvard Law professor running for President whose campaign is focused solely on this issue!
This new money world is described accurately by the press as the “post-Citizens United world” and less accurately as the “result” of Citizens United. But Citizens United is a good place to start in discussing the current Supreme Court’s 5-4 majority in favor of campaign finance deregulation, and its effects.
As you know, there was a 5-4 decision the other way in McConnell vs FEC, upholding the McCain-Feingold/Shays-Meehan or Bipartisan Campaign Reform Act— “BCRA” in Washington parlance (rhymes with “bicker”)—though the philosophical arguments run much deeper than mere “bickering.”
The McConnell 5-4 majority disappeared with the retirement of Justice Sandra Day O’Connor and her replacement by Justice Samuel Alito. This is the first time in US history that no former elected officials serve on the court. An institution populated for more than 200 years by former governors, congressman, senators and even presidents now has nine robed former judges or academics, none of whom has ever served in a legislative branch or raised a campaign contribution. This may be good news for Harvard and Yale law schools, but perhaps not for our democracy, as I will discuss.
With the angry 4 dissenters in McConnell now a 5 member majority, their ideological goal of deregulating money in politics and undoing the post-Watergate campaign finance system quickly became clear. In the first campaign finance case the court faced—Wisconsin Right to Life—the new majority undid part of the BCRA’s ban on the use of corporate money for electioneering communication. In that case Chief Justice Roberts made his agenda clear—speaking of the provision he was striking down, he declared “enough is enough.”
I have given entire speeches about the court’s next campaign finance case – Citizens United in 2010—and the flaws in the procedural consideration and holdings of that decision. I will not subject you to all of that today because my focus is not Citizens United per se, but the failure of our executive and legislative branches to function appropriately in response to it.
To get there though, I need to describe what I see as the four basic failures of the Citizens United decision—failures of understanding and imagination. These result in the collision of abstract legal theory with reality. This is a collision that a Court more familiar with political practices, administrative process, and the difficulties of legislating might have predicted and avoided.
First, disclosure: Writing in the only section of the Citizen United opinion approved by 8 of the 9 Justices (Justice Thomas did not join) Justice Kennedy said:
“A campaign finance system that pairs corporate independent expenditures with effective disclosure has not existed before today.”
“With the advent of the Internet, prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters. Shareholders can determine whether their corporation's political speech advances the corporation's interest in making profits, and citizens can see whether elected officials are "`in the pocket' of so-called moneyed interests.”
“The First Amendment protects political speech; and disclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.”
The second failure: independence. The Supreme Court’s theory since Buckley v. Valeo has been that expenditures that are “wholly” and “completely” independent of candidates and parties cannot corrupt those candidates or parties. The court theorized in Buckley that the independent speech might not be welcome because it might contain the wrong message or otherwise be unhelpful to the candidate.
In Citizens United, the Court extended this protection of independent speech to corporations, with Justice Kennedy saying: “By definition, an independent expenditure is political speech presented to the electorate that is not coordinated with a candidate.”
The third failure: corruption and the appearance of corruption. In Citizens United, Justice Kennedy changed the Court’s definition of corruption—first enunciated in Buckley v. Valeo in 1976—to “actual quid pro quo corruption,” or cash for legislation.
This reverses the standard used by the majority in McConnell, when it said that selling meetings with members of Congress was both actual corruption and promoted the appearance of corruption. Justice Kennedy in Citizens United rejects both aspects of that conclusion, holding instead that selling influence and access is not corrupt because it is not quid pro quo corruption. He then challenges the appearance standard as well, concluding that “The appearance of influence or access, furthermore, will not cause the electorate to lose faith in our democracy.”
The fourth failure is an assumption that the law will be faithfully and fully administered. The majority assumes that the administrative apparatus of the federal government will ensure that the legal theories on which the Court’s rulings rely—that disclosure of money in politics will occur as required by law, that independent speech will in fact be independent—are the reality of elections. This assumption relies on administrative agencies doing their jobs vigorously and effectively, and on Congress stepping in to correct any shortfalls. As we will see, this is theory—but not reality.
Let me briefly summarize what has happened when the Court’s theories on disclosure, independence, the appearance of corruption and administration have met reality.
Justice Kennedy reassured us that “A campaign finance system that pairs corporate independent expenditures with effective disclosure has not existed before today.” This was true, but the reality is that such a system did not exist after that day either.
In fact, the system which is now in place post-Citizens, in terms of disclosure and transparency, looks nothing like what Justice Kennedy described. Corporations are not required to disclose their political spending to shareholders. A proposal before the SEC since 2011, initiated by Harvard Professor John Coates and others, which would require disclosure by publicly held corporations, shows no signs of being adopted or even considered by that agency.
Contributions to super PACs are being made through anonymous shell corporations, so that the identity of the true donors is obscured from the public. Meanwhile, hundreds of millions of dollars are being spent in federal elections by what are called dark-money groups—largely tax exempt 501 (c)(4) and (c)(6) organizations that do not disclose their donors to the public.
The FEC could find that these dark money groups are “political committees,” but it has deadlocked 3-3 every time it has had an opportunity to do so. It could also require the disclosure of the funders behind shell corporations, but so far has failed to do so.
The IRS could find that the major purpose of these political (c)(4)s and (c)(6)s is political activity and therefore subject them to tax and reclassify them as 527 political organizations that have to disclose their donors—but the IRS has not moved on this issue, and shows no sign of doing so.
Unfortunately, this across-the-board failure of legal theory to coincide with reality isn’t limited to mandating disclosure; it extends to another ostensibly crucial element assumed by Citizens United: the independence of so-called “independent expenditures.”
Recall Justice Kennedy’s words in Citizens: “By definition, an independent expenditure is political speech presented to the electorate that is not coordinated with a candidate.” This requires to effective regulation and enforcement to ensure that independent efforts are actually independent and not coordinated with candidates and political parties.
Yet again, the theory which was the basis for downplaying the consequences of Citizens United has met the reality of campaign practices, the traditional difficulty of enforcing standards of independence, and FEC inaction.
Consider the situation of “CARLY for America.” No, I don’t mean Carly Fiorina’s presidential campaign—that would be “Carly for President.” “CARLY for America” is her Super PAC. You are excused for not being clear on the difference! Listen to how the National Journal recently described CARLY for America’s activities:
“At a typical Fiorina campaign stop, a CARLY For America staffer was stationed at a table outside of the event space to sign up attendees for the super PAC’s email list. Another staffer handed out CARLY For America stickers to attendees as they arrived. When Fiorina and her staff entered the event, they were usually met by a room covered in red ‘CARLY’ signs and tables covered in pro-Fiorina literature, all produced by CARLY For America.”
“All produced by CARLY for America”—the totally independent, non-coordinating super PAC running her campaign events.
This sort of interweaving of candidates and Super PACs (and dark money nonprofits) is now occurring in almost every major federal campaign. Super PACs are established by candidates before they announce their candidacy, staffed by supporters selected by the candidate and campaign—often former senior aides or close friends of the candidate—and broadcast ads are filmed in coordination with the candidate but run by the Super PACs. Needless to say—and most importantly for purposes of the constitutional standard of preventing corruption and the appearance of corruption—the FEC has allowed candidates to solicit some contributions to these super PACs, coordinate fundraising events with them, and thank donors for contributing to the super PACs.
As a result, donors achieve just what they seek from contributions to these Super PACs: access and gratitude. Only they are giving $1 million and $10 million contributions to the candidate’s super PAC or nonprofit, rather than $2,700 contributions to the candidate’s official campaign committee, so they are obtaining a whole lot more access and gratitude.
This leads us to the appearance of corruption. The Court’s present majority has stated that having large donors buy access or influence is not “corrupt;” instead it is inherent in our democratic system that some will obtain more influence than others. Only quid pro quo corruption—the sale of specific official action for money—is corruption. Thus, Justice Kennedy stated in Citizens United: “independent expenditures do not lead to, or create the appearance of, quid pro quo corruption”. As for that sale of access and influence—not to worry. Justice Kennedy assures us that: “The appearance of influence or access, furthermore, will not cause the electorate to lose faith in our democracy.”
So, how is that judicial theory holding up in reality? While public opinion polls aren’t always germane to legal questions, this is a special case: after all, the Court seems to be relying on its reading of public opinion in deciding what can be regulated as “corruption.” So, was that reading correct?
Not even close. A Bloomberg poll conducted just last month (September) found the following:
80% of Republicans and 83% of Democrats think The Court was wrong to allow unlimited corporate and labor spending in elections. Where else do you find anything like that level of bipartisan agreement in today’s politically polarized world? By contrast, when the same poll asked about the Supreme Court’s decisions in the health care and marriage cases, the split was what one might have expected—a 49 % and 54% approval, respectively, divided largely along partisan lines. Those numbers put the 80% disapproval of Citizens United in context.
The same survey found an incredible 87% of Americans—again over 80% of respondents of both political parties, agreeing with the statement “campaign finance should be reformed so that a rich person does not have more influence than a person without money”. This finding is not only at odds with Citizens United, but also fundamentally with Supreme Court campaign finance jurisprudence since Buckley, which has rejected “equality” as a rationale for campaign finance regulation.
Another result from the same poll is shocking to me: more than half of all Americans (59%) agree that “The political system is broken [and] we just need to start over”. Start over? That would certainly require some changes in con law classes at Harvard Law!
The fourth failure of theory in Citizens United was the assumption that the federal administrative system would play its required role in enforcing the Court’s mandate for disclosure and independence.
It is arguably at least in part the failure of the administrative system—and the Congressional deadlock which prevents Congress from addressing this administrative failure—that has resulted in the chasm between the theories of Citizens United and today’s reality. I have already referred to the failure of the IRS to address the problem of political groups masquerading as tax exempt nonprofits in order to hide their donors, and the SEC’s failure to require the disclosure of political activity to shareholders that the Supreme Court stated would occur.
But the FEC’s epic failure to fulfill its role requires a little more explanation. The FEC was created by Congress in the post-Watergate reforms as an independent regulatory agency. It has six commissioners, “not more than three from any one party”, and by statute requires four votes to take any action—to open an investigation, issue subpoenas, make findings of fact, sue in court to enforce its judgments, or issue advisory opinions and regulations. This four-vote requirement reflected Congress’s concern that no one party be able to seize control of the FEC and use it as a partisan political tool.
The agency has long struggled with issues of “regulatory capture” because it regulates the activity of the two major political parties, all members of Congress, and the President, and those are the very players who determine who to appoint to the Commission. The FEC was blamed for the advent of “soft money” in the 1980s and 1990s, for instance, because it could not bring itself to say “no” to party committees. Nonetheless, for most of its existence, the FEC was seen as a fair and reasonably effective enforcement agency, and commissioners worked hard behind the scenes to reach compromises and avoid any 3-3 deadlocks.
Today, all of that has changed.
When I served on the Commission, though my colleagues and I sometimes disagreed about how to enforce the law, we did all agree on one thing: that the FEC’s job was to enforce the campaign finance laws passed by Congress and faithfully implement those laws in its regulations.
It was the job of the courts to determine if the laws were unconstitutional, and Congress’s job to amend the statute. There were Commissioners who disagreed with parts of the law, but they recognized that changing the law was not one of their powers, and so left the call on whether to amend or invalidate the laws to Congress and the courts. I can recall a fellow Republican Commissioner once saying about a vote to take enforcement action against a political committee for a violation of law “I’ll vote for this, but I hope we lose in court, because I think the law is wrong.”
That’s not to say partisan issues never arose, but rather, when they did arise, it was most often in the context of ensuring our enforcement was evenhanded across the political spectrum. In my time on the FEC, I remember Commissioners of one party saying to those of another “I’ll vote for this action against one of ours, but you better vote the same way when one of yours is before us in the same situation.”
There were almost never 3-3 ties amongst the six commissioners, even though we were three Republicans and three Democrats. For example, an enforcement action by the Commission during the first President Bush’s term to investigate the incumbent President’s 1988 campaign for allegations of coordinating with the makers of the infamous Willie Horton advertisement was initiated with bipartisan support.
Now, compare this with today. FEC Chair Ann Ravel has publicly termed the Commission “worse than dysfunctional” and has said there is “little chance” that there will be any “meaningful enforcement” of campaign finance laws by the FEC in the 2016 cycle. The FEC repeatedly deadlocks 3-3 on even the most straightforward enforcement cases, and on all major issues before the Commission in advisory opinions or rulemakings.
In the five years following Citizens United, 29 coordination complaints have been brought before the Commission. Not a single one has been investigated. Similarly, the FEC is completely deadlocked on the issue of determining whether an organization qualifies a political committee subject to federal disclosure laws.
It took nearly five years after the Citizens United decision for the FEC to muster four votes even to issue the most basic notice of proposed regulations to bring the FEC’s regulations into accord with the Court’s opinion. This was because the Democrats wanted to include proposals to strengthen the FEC’s disclosure regulations, which the Court had just upheld 8-1, and the Republicans refused to allow the subject to even be discussed.
Just how bad has it gotten? Well, earlier this year, in response to a proposal by Ellen Weintraub—one of the FEC’s Democratic commissioners—to expedite enforcement actions so complaints wouldn’t continue spending years in “legal limbo,” Republican Commissioner Lee Goodman objected, saying that there are many more complaints pending before the FEC against Republicans than Democrats, so this lack of parity justified Republicans in slow-walking the entire enforcement process.
This failure by the FEC to even vote on cases has other consequences: the statute provides the right to request court review of the agency’s dismissal of cases—but if a case is never voted on, then this right can never be exercised and independent court review of FEC inaction cannot occur.
So, where do we go next?
Clearly, the post-Citizens United world theorized by the Court was very, very different from the reality we have. Some of this is the result of lower court action following Citizens United, such as the DC Circuit’s decision in the SpeechNow case, which effectively created super PACs by citing the “independent spending cannot corrupt” rationale of Citizens United. But much of what has happened since Citizens United is the result of the Supreme Court’s failures to understand how regulatory issues and campaign practices would lead to a different reality than the one they theorized.
Justice Kennedy’s had the following to say when testifying before Congress on the Court’s budget:
“We routinely decide cases involving federal statutes, and we say, ‘Well, if this is wrong, the Congress will fix it.’ But then we hear that Congress can’t pass the bill one way or the other, that there’s gridlock. And some people say, ‘Well that should affect the way we interpret the statutes.’ That seems to me a wrong proposition. We have to assume that we have three fully functioning branches of the government that are committed to proceed in good faith and with goodwill toward one another to resolve the problems of this republic.”
In a vacuum, Justice Kennedy is probably right: it makes sense for judges interpreting statutes to assume that regulators and legislators will continue to execute the basic functions of their job.
But we aren’t in a vacuum—this isn’t a theoretical exercise in “what if.” There is overwhelming evidence pointing to a pattern of near-complete failure on the part of the FEC, IRS, SEC, and other executive branch agencies to deal with campaign finance problems and violations. This is matched by complete partisan gridlock in Congress, which means Congress cannot step in and correct these regulatory failures.
During the battle over McCain-Feingold’s soft money ban, Senator Susan Collins of Maine lamented that loopholes and lax enforcement “have virtually destroyed our campaign finance laws, leaving us with little more than a pile of legal rubble.”
“Legal rubble.” It’s certainly an evocative term, and, it would seem, an accurate one too. The legal structures intended to protect the role of average Americans in our Democratic system and prevent corruption and the appearance of corruption are being washed away in a tide of money from those with special interests to protect and advance.
Unfortunately, 2015 is not 2002. 13 years ago, Republicans and Democrats joined together to pass a bipartisan law meant to take the rubble Senator Collins saw and rebuild it into a meaningful system of regulation. The Supreme Court upheld that reform at the time. Today there is no chance this Congress will act, and a substantial likelihood the Court would not uphold such legislation if it did.
It makes me worry about what that 59% of Americans who say we should “start over” are going to have in mind if it gets worse.