Today, the Campaign Legal Center sent a letter to Securities and Exchange Commission (SEC) Chair Mary Jo White urging the Commission to act affirmatively on the pending petition to require public companies to disclose to shareholders the use of corporate resources for political activities. 

Petition 4-637, “to Require Public Companies to Disclose to Shareholders the use of Corporate Resources for Political Activities” was submitted in 2011 and has received a record-breaking 1.2 million supportive comments.  To date, the SEC has not responded to the petition.  The letter urges the SEC, which is charged with protecting shareholders, to take up the petition and move expeditiously to require publicly held companies to disclose their political spending to their shareholders. 

The letter notes that Justice Anthony Kennedy’s opinion in Citizens United v. FEC relied on the ability of shareholders to use the “procedures of corporate democracy” to ensure that their “corporation’s political speech advances the corporation’s interest in making profits.”  With 2016 political campaigns already well underway, the letter stresses that it is “imperative for the SEC to respond meaningfully to the new political landscape created by a series of revolutionary court decisions that have radically changed the way shareholder interests are affected by political and electioneering activities.”

“Corporations are required to reveal to all significant information of interest to shareholders, from operating results to management compensation, and where a company is placing its political bets certainly falls into that category,” said Meredith McGehee, Campaign Legal Center Policy Director.  “Corporate political activity is on the rise, whether through trade associations or ‘dark money’ groups, and shareholders deserve to know what kind of returns these investments are bringing in.”

To read the letter, click here.

Today in Williams-Yulee v. Florida Bar, the United States Supreme Court upheld a Florida law barring the personal solicitation of contributions by judicial candidates. 

The Campaign Legal Center joined other groups concerned about impartial justice to file an amici brief in the case in December, arguing that personal solicitations by candidates undermine public faith in the judicial process and that the state has a duty to safeguard judicial integrity through a reasonable and targeted response like Florida’s ban on those solicitations.

“This is a momentous victory for public faith in the integrity of our judicial system. Today’s decision confirms that Florida’s personal solicitation ban, like similar restrictions adopted in 30 of the 39 states that elect judges, protects the appearance and actuality of an impartial judiciary,” said Megan P. McAllen, Campaign Legal Center Associate Counsel.  “At the same time, it is disappointing that what the Court rightly finds untenable in the judicial context — responsiveness to campaign donors — it would tolerate for legislative and executive candidates. Public faith that the judiciary will provide equal justice under the law is vital, but so too is the public’s faith that lawmakers are serving the public interest rather than those of their most generous donors.”

Under the law, Florida judicial candidates must create a committee to solicit contributions on their behalf.  The brief argues that personal solicitations by judicial candidates create the perception that judges may favor their contributors in court.  

The brief filed by the groups concerned about impartial justice emphasized that under Florida’s rule, judicial candidates are in no way inhibited from communicating about their fitness for office or speaking on issues of public concern. The rule thus protects a vital interest in judicial impartiality but imposes only a minor restriction on the conduct of judicial candidates. 

The groups joining in the brief in support of the solicitation ban included the Campaign Legal Center, Justice at Stake, the Brennan Center for Justice, Common Cause, the Center for Media and Democracy, Lambda Legal Defense and Education Fund and Demos.  The Campaign Legal Center gratefully acknowledges the work of the attorneys of Kaye Scholer LLP.

To read the Supreme Court’s opinion, click here.

To read the brief, click here.

Today, the Campaign Legal Center released a short film focusing on three lifelong voters disenfranchised by Texas’ voter photo ID law (SB 14), the most restrictive and burdensome voter ID law in the nation.  The ten-minute film produced by Firelight Media traces the efforts of the Campaign Legal Center’s Voter ID Project to assist registered voters to overcome the many hurdles erected by the new law in order to obtain the photo IDs required by SB 14.  

Today in Veasey v. Abbott, oral arguments will be heard in a challenge to that law, in the U.S. Court of Appeals for the Fifth Circuit in New Orleans.  Attorneys at the Campaign Legal Center serve as co-counsel for plaintiffs Congressman Marc Veasey, LULAC, and a group of Texas voters. 

Following a two-week trial last fall, U.S. District Court Judge Nelva Gonzales Ramos enjoined SB 14, finding that it was as an unconstitutional burden on the right to vote as well as an unconstitutional poll tax, had “an impermissible discriminatory effect against Hispanics and African-Americans, and was imposed with an unconstitutional discriminatory purpose.”  The state defendants immediately appealed Judge Ramos’ decision. In mid-October, the Fifth Circuit Court of Appeals stayed that decision solely to avoid confusion in the November 2014 elections, and the U.S. Supreme Court subsequently refused to vacate the Fifth Circuit’s stay.  

The film released today traces the plight of three Texans who were victims of the Texas voter photo ID law and the massive effort required of many voters to exercise their right to vote under the new law.

“These longtime voters were had their voting rights violated because of SB 14 which the District Court found to be unconstitutional and in violation of the Voting Rights Act,” said J. Gerald Hebert, Executive Director of The Campaign Legal Center.  “The plight of these victims, who suffered a violation of their voting rights through no fault of their own, mirrors the evidence that prompted Judge Ramos to strike down Texas’ intentionally discriminatory, modern-day poll tax.”

The first challenge (Veasey v. Perry) to the Texas photo ID law was filed by the Campaign Legal Center and others in the summer of 2013 claiming that SB 14 violates the 1st, 14th, 15th and 24th Amendments to the Constitution, as well as Section 2 of the Voting Rights Act.  Several additional challenges were then brought against the Texas law (including one by the United States).  All of the cases were consolidated in the Southern District of Texas in Corpus Christi.

In addition to overseeing the Voter ID Project, the Campaign Legal Center is part of the legal team representing the Veasey-LULAC plaintiffs that includes Chad Dunn and K. Scott Brazil (Brazil & Dunn), Neil G. Baron, David Richards (Richards, Rodriguez & Skeith), Armand Derfner (Derfner & Altman), and Luis Roberto Vera, Jr. (LULAC).

To read the Legal Center’s Fifth Circuit brief, click here.

To read the District Court decision striking down the Voter ID law, click here.

Today, the Campaign Legal Center, with Democracy 21, will urge the Federal Election Commission (FEC) and Department of Justice (DOJ) to investigate possible violations of campaign finance laws by rap artist Pras Michel, his company SPM Holdings LLC, the Super PAC Black Men Vote and its Treasurer, William Kirk Jr. relating to “straw donor” contributions totaling $875,000 made by Pras Michel to Black Men Vote in the name of SPM Holdings LLC.

The complaint to the FEC and letter to DOJ ask the agencies to formally investigate the activities of Mr. Michel and SPM Holdings LLC for apparent violations of the ban on making contributions “in the name of another” and of Mr. Kirk and Black Men Vote for knowingly accepting “straw donor” contributions and misreporting the source of the funds to the FEC.  According to a story from the Center for Public Integrity, Pras Michel admitted that SPM Holdings LLC is “just a holding company to do my everyday business through.” 

Mr. Michel made contributions to Black Men Vote in his own name, but the money he gave through SPM Holdings LLC made up more than two-thirds of the total budget of the Super PAC.  The complaint outlines reason to believe that Mr. Michel knowingly made “contributions in the name of another” and that those contributions were accepted by the Super PAC and its treasurer Mr. Kirk who knew the true identity of the donors in violation of the law.

“This seems a clear cut violation of the straw donor prohibition, complete with a confession, and the FEC needs to act to uphold the law in order to prevent wholesale evasion of disclosure laws,” said Paul S. Ryan, FEC Program Director at the Campaign Legal Center, which took the lead in drafting the FEC complaint and letter to the Justice Department.  “Increasingly LLCs and other business entities are being utilized by political donors to launder money and hide their true identities.  If the practice is not stopped by the FEC or the Justice Department, it will serve as a green light to lawbreakers seeking to buy influence with politicians while keeping the public in the dark.”

To read the FEC complaint, click here. 

To read the letter to the Department of Justice, click here.

In a letter sent today to the Internal Revenue Service, Democracy 21, the Campaign Legal Center and Public Citizen called on IRS Commissioner John Koskinen to clarify his remarks that Congress created a framework that allows 501(c)(4) groups to spend up to 49 percent of their expenditures on campaign activities.

According to a report in Tax Notes and Tax Analysis, Koskinen said on March 24, 2015:The framework Congress has is you get to pick where you want to be. If you spend at this point less than 49 percent of your money on politics, you can be a (c)(4).

The report stated that Koskinen “described 501(c)(4)s as being able to “spend a significant amount on politics,” and repeated, “This is the framework Congress has set up.”

According to the letter to Koskinen from the reform groups:

Contrary to your statements, however, this is not the framework Congress set up. Congress did not authorize section 501(c)(4) groups to spend 49 percent of their money, or even “significant” amounts, on political activities.

In fact, Congress did just the opposite in the statute it enacted. Congress provided that a social welfare organization must be operated “exclusively” for the promotion of social welfare.  As the IRS has long recognized, the “promotion of social welfare” does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office.”  Treas. Reg. § 1.501(c)(4)-1(a)(2)(ii).

The letter continued:        

The courts have interpreted the section 501(c)(4) standard that requires an organization to be “operated exclusively” for social welfare purposes the same way they have interpreted a parallel provision of section 501(c)(3) that requires an organization that is tax exempt under that provision to be “organized and operated exclusively” for charitable, education or similar purposes. 

Thus, any substantial non-exempt purpose is sufficient to disqualify an organization from exempt status under section 501(c)(4).  Many court decisions reflect this view. 

According to the letter:

However, the IRS, by regulation, replaced the statutory command that section 501(c)(4) organizations exclusively pursue social welfare goals with the very different requirement that they do so only primarily.  Treas. Reg. §1.501(c)(4)-1(a)(2)(i).  This regulation cannot be squared with the plain language of the governing statute. Nor can it be squared with court decisions interpreting the statute to allow, at most, insubstantial non-social welfare activity.  Far from reflecting the “framework” that Congress has established, the IRS regulation is in derogation of Congress’ mandate.

In the decades since the adoption of this regulation, the IRS has compounded the problem by failing to define “primarily.” Aggressive practitioners have argued that anything up to 49 percent would be permissible under the regulation, and this view has not been challenged by the IRS as it should have been.

Thus, your position that a social welfare organization can spend up to 49 percent of its expenditures on campaign activity and still be “exclusively” engaged in social welfare activity is contrary to the statute and to a long line of court decisions construing the relevant provisions of the Internal Revenue Code.

The letter stated:

Since 2010, the “49 percent” approach has resulted in the growing improper use of section 501(c)(4) organizations to hide the identity of donors whose money is used for campaign activities to influence federal elections.  In fact, section 501(c)(4) organizations have been the vehicle of choice for those who want to channel dark money into federal elections.

Unless the “49 percent” approach is eliminated, and IRS regulation and practice is conformed to the IRC statutory standard forbidding any spending for non-exempt purposes above a de minimis or insubstantial amount, section 501(c)(4) organizations will continue to spend hundreds of millions of dollars in secret contributions on campaign activities in contravention of the IRC.

The letter concluded:

Absent such a decision by the IRS, any other changes in IRS regulations governing section 501(c)(4) organizations will be ineffective in preventing such organizations from abusing the tax laws to improperly launder secret money into our elections.

In light of your recent comments, furthermore, we call on you to clarify that Congress did not create the “49 percent” approach and that there is no basis in law for that approach given the statutory provisions of the IRC and court decisions interpreting the provisions.

To read the full letter, click here.

The indictment of Sen. Bob Menendez (D-NJ) by the Public Integrity Section of the Justice Department is an encouraging sign as the details of the case and the conduct of the Senator have raised troubling questions for far too long.  The Public Integrity Section has been in a defensive crouch since misconduct by its prosecutors led to the overturning of the 2008 conviction of Sen. Ted Stevens (R-AK) for a series of well-documented misdeeds by the late Senator.  It is high time the Public Integrity Section step up and take a more active role in safeguarding our democracy and the public’s faith in its government officials.  To restore its tarnished image, the Public Integrity Section must send a clear message to the American people that no one is above the law no matter how high an office they hold.  The kind of cronyism reflected in the Menendez case -- you scratch my back, I'll scratch yours -- confirms what most Americans believe about Washington.  The question now is whether the prosecution can prove if Sen. Menendez has crossed the line into criminal activity. 

Today, on April Fools’ Eve, the Campaign Legal Center, joined by Democracy 21, filed complaints with the Federal Election Commission (FEC) against Jeb Bush, Martin O’Malley, Rick Santorum and Scott Walker claiming reason to believe they are violating federal campaign finance laws.

“These 2016 presidential contenders must take the American people for fools—flying repeatedly to Iowa and New Hampshire to meet with party leaders and voters, hiring campaign staff, and raising millions of dollars from deep-pocketed mega donors, all the while denying that they are even ‘testing the waters’ of a presidential campaign,” said Paul S. Ryan, Campaign Legal Center Senior Counsel.  “But federal campaign finance law is no joke and the candidate contribution limits kick in as soon as a person begins raising and spending money to determine whether they’re going to run for office. Bush, O’Malley, Santorum and Walker appear to be violating federal law.”

The four complaints filed today document in detail the political activities of each of these presidential aspirants: traveling extensively to early primary/caucus states, battleground states and fundraising hotspots; building campaign infrastructures; fundraising to pay for these activities and to bankroll a formal presidential campaign. These activities constitute “testing the waters” under federal law and must be paid for with funds raised under the federal candidate contribution limits and restrictions (no more than $2,700 per individual donor, no corporate/union funds). Bush, O’Malley, Santorum and Walker are all raising funds above the $2,700 candidate limit, providing reason to believe they are violating federal law.

The complaints further allege that Bush, Santorum and Walker have actually crossed the threshold to become “candidates” as defined in federal law, by referring to themselves publicly as candidates and/or by amassing campaign funds that will be spent after they formally declare their candidacies. Consequently, they are currently violating candidate registration and reporting requirements, contribution limits and restrictions, as well as federal “soft money” prohibitions.

“Publicly denying that they are candidates does not exempt these presidential hopefuls from federal election laws passed by Congress to keep the White House off the auction block,” said Paul S. Ryan, Campaign Legal Center Senior Counsel.  “Jeb Bush is reportedly aiming to raise more than $50 million for his super PAC. Wisconsin Governor Scott Walker has opened an office in Iowa and is raising millions for a political group he created in January. Rick Santorum’s own aide is referring to him as a ‘candidate.’ These individuals are ‘candidates’ under the law.”

The four individuals named in complaints today are not alone in the 2016 field in violating federal campaign finance laws. There are a number of additional White House hopefuls who appear to be in violation of the same campaign finance laws and more complaints will be forthcoming.  So far only Ted Cruz has officially announced his candidacy.  Hillary Clinton, Ben Carson, Lindsey Graham and Jim Webb have acknowledged that they are officially “testing the waters” and appear to be complying with federal law requirements; in the event they chose to run for president, we will examine their first campaign disclosure report to verify compliance with federal law “testing the waters” requirements.

To read the complaint against Jeb Bush, click here.

To read the complaint against Martin O’Malley, click here.

To read the complaint against Rick Santorum, click here.

To read the complaint against Scott Walker, click here.