Today in Van Hollen v. FEC, the Court of Appeals for the D.C. Circuit once again upheld an FEC rule that severely limits federal disclosure requirements connected to “electioneering communications.” The appellate panel overturned a district court decision holding the rule “arbitrary, capricious, and contrary to law” for improperly narrowing the scope of the McCain-Feingold law’s disclosure requirements and allowing nonprofit 501(c)(4) advocacy groups, 501(c)(6) business associations, and others to spend millions on “electioneering communications” without disclosing their donors.

“Today’s decision is deeply disappointing,” said Tara Malloy, Campaign Legal Center Deputy Executive Director, “and all but guarantees that there will be no disclosure of the donors funding the vast sums already being spent on political advertising by 501(c)(4) and other groups in the 2016 election cycle. Once again, the Court of Appeals has effectively sanctioned the wholesale evasion of federal disclosure laws. Neither Supreme Court precedent nor the underlying statute provided any justification for the FEC to adopt a rule narrowing disclosure.”

The Van Hollen case is a long-running challenge to a 2007 FEC regulation providing that only donors that specifically earmark their contributions for election ads are subject to disclosure. The district court first ruled in favor of Rep. Van Hollen in 2012, holding that the FEC regulation was contrary to the clear language of the federal campaign finance statue it purported to implement. The D.C. Circuit Court of Appeals also overturned the first lower court decision, disagreeing that the federal statute was unambiguous and holding that the district court should have instead analyzed whether the rule was a reasonable interpretation of the statute under a more deferential mode of judicial review. The case was remanded back to the district court, which found that the rule promulgated by the FEC was “arbitrary, capricious, and contrary to law” and an “unreasonable interpretation” of the McCain-Feingold law.

The Campaign Legal Center is part of the legal team representing Rep. Van Hollen in this case, which is led by Catherine Carroll of WilmerHale. The legal team also includes lawyers from WilmerHale, Democracy 21 and Public Citizen. 

To read the opinion, click here.

To read the brief filed by Rep. Van Hollen’s legal team, click here.

Today, the Campaign Legal Center, with Democracy 21, filed a complaint with the Federal Election Commission (FEC) urging the FEC to investigate apparent violations of campaign finance laws by Senator Ted Cruz and the 2012 Cruz for Senate Campaign relating to loans he obtained from Goldman Sachs and Citibank for use in his 2012 Senate campaign. According to the complaint, Senator Cruz failed to report the loans to the FEC, as required by law, and may have used a portion of his wife’s assets to secure the loan resulting in the campaign accepting excessive contributions.

The complaint asks the FEC to formally investigate the apparent violations and seek appropriate sanctions.

According to published reports, Senator Cruz used loans from Citibank and Goldman Sachs to help finance his 2012 election to the U.S. Senate, but his campaign committee failed to include the loans on the reports his campaign filed with the FEC. While it has been reported that Senator Cruz claimed that he and his wife had liquidated their “entire net worth, liquid net worth, and put it into the campaign,” it instead appears that he used both personal and joint assets to secure loans from the two banks, a fact he failed to disclose.   

A review of Senator Cruz’s Senate Financial Disclosure Reports for 2011 and 2012 also raise the question of whether he used his wife’s share of their joint assets as security for the loans, which would likely result in the campaign accepting an illegal contribution. 

“The failure to report these loans is a clear cut violation of the law and kept voters in the dark about the money behind the Cruz campaign,” said Paul S. Ryan, Deputy Executive Director of the Campaign Legal Center, which took the lead in drafting the FEC complaint. “If he also used his wife’s assets to obtain these unreported loans, he caused his committee to accept illegal excessive contributions from his wife.” 
 

To read the FEC complaint, click here. 

On Monday, January 11, the U.S. House of Representatives passed by voice vote H.R. 1069, the Presidential Library Donation Reform Act, to reveal the identities of donors to presidential libraries, prompted by reports raising concerns about sitting Presidents fundraising for such institutions.  H.R. 1069 was introduced by Rep. John Duncan (R-TN).  A companion bill, S. 558, introduced by Sen. Thomas Carper (D-DE), has been reported out of the Homeland Security and Governmental Affairs Committee and is awaiting final action on the Senate floor.

Currently, donations to presidential libraries are not required by law to be disclosed.  There are no limits on the amount someone may contribute nor are there any limits on who may contribute.  Foreign individuals and even foreign governments may make a donation.  There are also no limits on sitting Presidents’ ability to solicit donors for their libraries.  President Obama has set a goal of raising $1 billion for his library. 

Concerns related to presidential libraries have arisen during the last three administrations.  A donation to the Clinton presidential library created the appearance of a link between the contribution and a presidential pardon for Marc Rich, an international financier who was indicted on federal charges for tax evasion and illegal oil deals with Iran.  President George H.W. Bush’s pardon of Edwin Cox, Jr., convicted of bank fraud, raised similar issues when Cox’s father made a generous contribution to President Bush’s library in College Station, Texas.  In 2008, longtime George W. Bush fundraisers were secretly videotaped by the London Times offering a foreign dignitary access to the White House in exchange for a $250,000 contribution to the Bush library.   

H.R. 1069 requires quarterly disclosure to the National Archives and Records Administration of every contributor who gives a presidential library a contribution (whether monetary or in-kind) of $200 or more.  It also requires the U.S. Archivist to publish the information on a website within 30 days after each quarterly filing.  The bill also prescribes criminal penalties for filing false information or for omitting information.

“It is troubling that sitting Presidents and their fundraisers are raising private funds for their presidential libraries,” said Meredith McGehee, Campaign Legal Center Policy Director.  “It is a situation ripe for conflicts and for creating the appearance of influence-peddling.  While it might be preferable for Presidents to put their presidential library fundraising efforts on hold until they leave office, passage of H.R 1069 would be an important step in bringing needed transparency to a process that has remained opaque.”

“We urge Senate Majority Leader Mitch McConnell (R-KY) to schedule H.R. 1069 or its Senate counterpart, S. 558, to the floor for final action expeditiously,” McGehee said.

To read H.R. 1069, click here. 

The Campaign Legal Center yesterday joined in a lawsuit alleging widespread corruption in the awarding of contracts by the Houston Independent School District (HISD).  The Legal Center joins the legal team representing a Houston construction contractor who was locked out of the school district’s construction contracts after refusing to participate in the Board of Trustees’ widespread “pay-to-play” scheme.

This case brings into the daylight the pervasive and egregious corruption within HISD. Trustee and former HISD Board President Larry Marshall was an elected public official who, along with others at HISD, regularly abused his position of trust by placing his own interests above those of the students and employees of the school district. As a member of the Board of Education, he was charged with a duty of loyalty in overseeing the expenditures of local tax dollars, bond money and federal funds for the benefit of the students and employees of the Houston Independent School District. But since at least 1999, the lawsuit alleges, Mr. Marshall used his position of influence to extract bribes from companies seeking to do business and contract with the district in exchange for preferable treatment and contracts. Persons or companies who dared to interfere with HISD's pay-to-play system were terminated, forced to resign or no longer awarded contracts at HISD. CLC’s client, Gil Ramirez Group, was just one such victim of this pervasive public corruption scheme. 

            “As the suit alleges, Board President Marshall apparently required contractors to pay  monthly bribes only nominally hidden behind consultancy ’fees’ to Marshall’s associate for services never performed,” said Campaign Legal Center Executive Director J. Gerald Hebert.  “These actions deserve public scrutiny and their day in court. “The public has a right to know how their public officials have abdicated their duties of loyalty and corrupted their public positions. This lawsuit, by bringing HISD’s longstanding pay-to-play corruption into the light, will be a major step towards eliminating corruption throughout HISD and rebuilding the public trust in that governmental institution.” 

            To read the Campaign Legal Center’s response to Defendant’s second motion for summary judgment, filed yesterday, click here.

The deal struck late last night on the Omnibus funding measure removed some troubling campaign finance riders that would have rolled back longstanding reforms. The current bill however includes two riders that will cement in place the ‘dark money’ status quo for the 2016 election cycle.

The first rider blocks the Securities and Exchange Commission from acting on a proposed rule to require corporations to tell shareholders how corporate money is being spent on elections-- disclosure the Citizens United decision assumed shareholders would have. Current SEC Chair Mary Jo White has refused to slot the proposed rule for action, despite receiving more than a million signatures calling for action on the proposed rule, so this rider takes the pressure off her to do anything.

The IRS rider blocks the agency from clarifying rules governing the acceptable limits of political activities of social welfare organizations. There is virtually universal agreement that the current rules are confusing and unclear, and have resulted in abuses both by dark money groups and by IRS agents in the exemption approval process. However, the IRS effort to update these rules has been bogged down in bureaucracy and plagued by partisan opposition. Now, Congress has mandated that these same inadequate rules remain untouched for another year-- the agency is not even allowed to continue working on drafting better ones.

An effect of this rider is that the door to secret foreign dollars in U.S. elections remains wide open through secret contributions to these ostensibly "nonpolitical" groups that run campaign ads without any disclosure of their donors.

On the positive side, the omnibus deal is also notable for what was not included in terms of riders pushed by some Members on campaign finance issues-- no provision to remove the coordinated spending limits for parties, no ban on an Executive Order regarding disclosure of campaign finance activities by government contractors and no provision to effectively close down the remaining structure of the presidential public financing system. All of these were apparently considered during the deliberations on the Omnibus.

It is unfortunate and a sad commentary on the grip of deep-pocketed special interests on our elections that both of the remaining riders target the kinds of disclosure that the majority of Americans strongly support and that the Supreme Court has consistently upheld and has said is important to the functioning of our democracy. These riders encourage dark money groups to seek to gain even more leverage in our political discourse and our elections.

Today, the Campaign Legal Center again urged the House Ethics Committee and the Office of Congressional Ethics (OCE) to establish a Task Force to review and recommend changes to clarify House rules concerning recusal and conflicts of interest by Members.  In a letter to Ethics Committee Chair Charles Dent (R-PA) and Ranking Member Linda Sanchez (D-CA) and OCE Co-Chairs David Skaggs and Judy Biggert, CLC offered new accounts that raise questions of potential Member conflicts on a large scale in the fields of biomedicine and healthcare.

“The current rules are weak and lack transparency which presents problems with actual conflicts of interest as well as with the public’s faith in its elected representatives in Washington,” said Meredith McGehee, Campaign Legal Center Policy Director.  “Neither Members nor the general public are well served by the current weak rules concerning recusal and conflicts of interest. Under the current system, Members are dogged by the shadow of potential conflicts in their actions and the general public too often assumes the worst about Congress because there is no transparency in the current system.”

The letter urges the Ethics Committee and OCE to establish a joint Task Force to review the current practices and guidance, and then publicly recommend changes in House rules and procedures to clarify when Members should recuse themselves from not only voting but also other legislative activities in order to protect against conflicts of interest.  The process, the letter emphasized, should also include a public notification as part of the process to ensure public confidence that Members are not using their official position to further personal interests.

Currently House rules require that every Member “shall vote on each question put, unless he has a direct personal or pecuniary interest in the event of such question.”  It appears that most most Members go no further in order to determine whether to recuse themselves from voting or taking action on a matter directly affecting their financial interests.  However, the House Ethics Manual (Manual) differentiates between voting and other legislative “advocacy” actions such as “sponsoring legislation, advocating or participating in an action by a House committee, or contacting an executive branch agency.”  The Manual also states that prior to undertaking such non-vote advocacy implicating financial interests, a Member should clear it with the Ethics Committee.  Under current guidelines, there is no way for the public to determine whether Members seek clearance from the Ethics Committee.

To read the letter, click here.