Today, the Campaign Legal Center, joined by Democracy 21, filed an amici brief in New York Republican State Committee v. Securities and Exchange Commission (SEC) urging the U.S. District Court for the District of Columbia to deny a preliminary injunction and dismiss the latest challenge to pay-to-play laws. 

The state Republican parties of New York and Tennessee are challenging an SEC rule barring investment firms from managing state assets for two years after a firm or its associates make more than de minimis contributions to officeholders or candidates who have or would have power to award investment contracts.  

The rule was implemented after SEC and state investigations uncovered extensive evidence of fraud in the award of state investment contracts.  One such scheme involved former New York State Comptroller Alan Hevesi, who was ultimately convicted of steering $250 million in pension funds to an investment firm in exchange for gifts and more than $500,000 in contributions.

“SEC and state investigators have prosecuted a long and sad laundry list of quid pro quo corruption in the awarding of state investment contracts to major donors,” said Tara Malloy, Campaign Legal Center Senior Counsel.  “Despite the claims of the state parties that the SEC cannot provide extensive evidence of quid pro quo arrangements between government officials and investment advisers, the record cites prosecutions in Connecticut, New Mexico, Illinois, Ohio, and Florida, as well as New York.  Pay-to-play laws are a vital bulwark helping to maintain the public’s faith in its government and its elected officials.  The courts have long recognized the vital public interest served by such laws.”

To read the brief, click here. 

In a letter sent today to the IRS, Democracy 21 and the Campaign Legal Center summarized comments they had submitted regarding the ongoing IRS rulemaking proceeding to consider new regulations to govern eligibility for section 501(c)(4) tax status.

The letter stated:

On May 7, 2014, the American Bar Association Section on Taxation submitted comments to you and other officials of the IRS and Treasury Department regarding a proposed regulation set forth in the Notice of Proposed Rulemaking issued last November, “Guidance for Tax-Exempt Social Welfare Organizations on Candidate-Related Political Activities” 78 Fed. Reg. 71535 (Nov. 29, 2013).

Given this submission, Democracy 21 and the Campaign Legal Center are writing to summarize the two sets of comments our organizations previously submitted to the IRS in the same rulemaking.  In one set of comments submitted on February 27, 2014, Democracy 21 and the Campaign Legal Center, on behalf of ourselves and Representative Chris Van Hollen, addressed issues relating to the amount of campaign activity that social welfare groups are legally permitted to conduct under the Internal Revenue Code and under court interpretations of the Code.  In a second set of comments submitted on the same day, we addressed the definition of “candidate-related political activity.”

The IRS is expected to issue a new notice of proposed rulemaking in early 2015 that will set forth a revised proposed rule.  It is essential for the IRS to adopt a final rule in a timely manner in order to prevent further abuse of the tax laws in the 2016 election cycle by groups that claim to be social welfare organizations in order to hide the donors financing their campaign activities.

To view the full letter, click here.

Judge’s Error-Riddled Ruling Also Ordered Prosecutors to Destroy Evidence
 
Today, the Campaign Legal Center, joined by Democracy 21, filed an amici brief urging the U.S. Court of Appeals for the Seventh Circuit to reverse a district court order that halted an investigation into allegations of illegal coordination between the campaign of Wisconsin Gov. Scott Walker and ostensibly “independent outside groups.” The preliminary injunction issued by U.S. District Court Judge Rudolph Randa in O’Keefe v. Chisholm additionally ordered prosecutors to destroy evidence gathered in the case tying the Governor and his campaign to outside groups, including Wisconsin Club for Growth. The brief filed by the Campaign Legal Center and Democracy 21 focuses entirely on the flawed First Amendment argument utilized by the Judge to enjoin the investigation.
 
“Judge Randa’s ruling completely disregarded longstanding Supreme Court precedent and instead invented a new theory that the First Amendment forbids regulation of any coordinated spending beyond express advocacy. We hope the Seventh Circuit will see fit to rectify this misguided order expeditiously,” said Tara Malloy, Campaign Legal Center Senior Counsel. “By narrowing the definition of coordination so drastically, Judge Randa’s ruling, if left standing, would allow and in fact encourage circumvention of the contribution limits on a massive scale, giving rise to exactly the type of quid pro quo corruption that the limits are intended to prevent.”
 
The Legal Center’s brief highlights that the Supreme Court formulated the express advocacy test only to modify the regulation of independent spending, not the regulation of contributions or coordinated spending. The brief also points out that Judge Randa’s holding is in direct conflict with the Supreme Court’s decision in McConnell v. FEC, which upheld a federal statute authorizing the regulation of coordinated spending that is not express advocacy—namely, “electioneering communications.”
 
The Legal Center and Democracy 21 were aided in the filing of the amici brief by Paul Smith of Jenner and Block. To read the brief filed by the Campaign Legal Center and Democracy 21, click here.
 

Today the Federal Communications Commission (FCC) launched a rulemaking to expand online political file requirements to cable satellite and radio.  The action came in response to a petition filed last week by the Campaign Legal Center, the Sunlight Foundation, and Common Cause.  The FCC notice requests public comment on the organizations’ petition to extend cable and satellite providers the requirement to post their public files online that now cover broadcasters.  In recent years, the amount of political advertising on these other outlets has jumped significantly and is expected to grow even more.

“The Commission in many cases sits on rulemaking petitions for years, so we are very pleased to see them move so quickly on our petition,” said Meredith McGehee, Policy Director of the Campaign Legal Center.  “Hundreds of millions of dollars are spent on political ads every election cycle seeking to influence cable and satellite viewers and radio listeners, and the stations already ready maintain these files.  Making them available online is not a hardship, especially in light of the economic windfall the stations gain from airing the ads.  We have been pushing for years for greater disclosure and were gratified when the Commission moved forward this past July to require all broadcast licensees to put their public file on the FCC website.  Broadcasters’ claims that such requirements were burdensome were not accompanied by proof since these days TV stations conduct all of their transactions on computers.  This should be a no-brainer."

“We are hopeful that this extension to other forms of television will not be a heavy lift, so the FCC can then turn to getting the uploaded information into a user-friendly database to replace the clumsy PDFs the stations now use.”

To view the petition for rulemaking filed by the Campaign Legal Center, the Sunlight Foundation, and Common Cause, click here. 

Today, the U.S. Court of Appeals for the Fifth Circuit denied the effort by the organization True the Vote (“TTV”) to intervene in the Texas voter photo ID case.  True the Vote sought to intervene to defend the discriminatory law.  The trial court had denied intervention last year and True the Vote appealed the denial to the Fifth Circuit. The Campaign Legal Center serves as counsel to the lead plaintiffs challenging the law in the district court and had filed an opposition in the Fifth Circuit to stay the voter ID lawsuit.

“We are relieved the court denied True the Vote’s belated attempt to join the State of Texas in defending a law serving no purpose other than to suppress the ability of black and Latino registered voters to cast their ballots,” said J. Gerald Hebert, Executive Director of The Campaign Legal Center.  “True the Vote fell far short of establishing the right to intervene in the case and we are pleased the court of appeals correctly denied the organization’s effort to participate.”

On December 11, 2013, TTV was denied intervention as a defendant in the consolidated lawsuits (Veasey v. Perry, No. 2:13-cv-193) challenging Texas’s new voter identification law.  The district court found that TTV did not have a particularized interest that the litigation threatens to impair or impede, and that TTV’s generalized interests in the issues will be adequately represented by the State of Texas. That decision was affirmed today by the court of appeals.

The complaint filed by the Campaign Legal Center in the case claims that the voter photo ID law (SB 14) violates the 1st, 14th, 15th and 24th Amendments to the Constitution, as well as Section 2 of Voting Rights Act.  Trial is scheduled to begin September 2 in Corpus Christi.  Several challenges (including one brought by the United States) have been brought against the Texas law, which is the one of the most restrictive laws in the nation.  The cases have been consolidated in the Southern District of Texas in Corpus Christi. 

The Campaign Legal Center attorneys are part of the legal team that includes Chad Dunn and K. Scott Brazil (Brazil & Dunn), Neil G. Baron, David Richards (Richards, Rodriguez & Skeith), Armand Derfner (Derfner, Altman & Wilborn), Luis Roberto Vera, Jr. (LULAC).

To read today's Fifth Circuit opinion, click here.

To read the Campaign Legal Center’s opposition to TTV’s motion, click here.

Late yesterday, reform groups asked the U.S. District Court for the District of Columbia to declare unlawful the dismissal of a complaint against the secretive political spending group Crossroads Grassroots Political Strategies (GPS) by the Federal Election Commission (FEC). The motion for summary judgment stems from the FEC’s failure to investigate Crossroads GPS for not registering as a political committee. The FEC Office of General Counsel had strongly recommended that the agency investigate in the face of evidence against the group but the Commission deadlocked along party lines leading to the dismissal of the complaint.

 
The lawsuit, Public Citizen v. FEC, was brought by the parties to the 2010 complaint: Public Citizen; Craig Holman, campaign finance expert for Public Citizen; ProtectOurElections.org; and Kevin Zeese, an attorney for ProtectOurElections.org. The Campaign Legal Center and Public Citizen are handling the legal work on the case as co-counsel for the parties.

The groups contend that Crossroads GPS – an organization created by Republican strategists Karl Rove and Ed Gillespie to influence the 2010 midterm elections – fits the legal definition of a political committee: any group that receives or spends more than $1,000 during a calendar year to influence elections and whose major purpose is federal campaign activity. Political committees must disclose information about their donors and expenditures. The FEC’s refusal to investigate Crossroads GPS for failing to register as a political committee has allowed the organization to continue to keep its donors secret for the last three election cycles.

“Courts are the only recourse when three Commissioners ignore the laws passed by Congress, ignore the FEC’s own longstanding policies and ignore the call for an investigation by their own General Counsel,” said Paul S. Ryan, Campaign Legal Center Senior Counsel. “As a result of that FEC deadlock the seemingly clear cut violations of the law by Crossroads GPS have continued unabated and other ‘dark money’ groups have been emboldened to follow suit resulting in a massive spike in undisclosed political spending in our elections. We hope that the court sees fit to grant this motion and ensure that every member of the Commission fulfils the duties of their office and enforces the laws passed by Congress.”

“We hope the court will be able to see what the three Commissioners who blocked the FEC from proceeding claimed they could not: Crossroads GPS was formed to pour money into our elections, and that is exactly what it did in the 2010 elections,” said Robert Weissman, president of Public Citizen. “The Commissioners’ failure to perceive that reality is a classic case of failing to see that the emperor has no clothes.”

In 2007, the FEC published a detailed policy laying out how the agency determines an organization’s major purpose. The policy provides that the FEC will consider public and non-public statements by the organization and the proportion of spending on “federal election activity,” which includes spending on express advocacy (messages calling for a vote for or against a candidate) as well as electioneering communications and other materials that discuss the merits of a candidate immediately before an election.

Evidence indicates that Crossroads GPS operates as a political committee. Between June and December 2010, Crossroads GPS spent $20.8 million on federal campaign activity – more than half of what Crossroads GPS reported spending the entire year, the FEC’s general counsel determined.

And Crossroads GPS’ co-founder, the Republican strategist Karl Rove, boasted on FOX News that Crossroads GPS was an avenue for donors who had maxed out to GOP political committees. In October 2010, the group announced a $4.2 million ad buy targeting eight heavily contested U.S. Senate races. Three-quarters of the ad buy was paid for with money from undisclosed donors.

“Disclosure of who is paying for political ads is an important part of campaign finance law and an essential consideration for voters,” said Zeese of ProtectOurElections.org. “Disclosure of who is paying for political ads is an important part of campaign finance law and an essential consideration for voters. The FEC however - because of obstruction by three partisan commissioners - has allowed such expenditures to be done in secret thereby undermining the law and our democracy. Our case gives the court the opportunity to correct that injustice.”

Political committees are required by law to disclose the identities of their donors.  In an attempt to avoid disclosing its donors, Crossroads GPS has applied for status as a 501(c)(4) nonprofit social welfare group.

To read the motion for summary judgment filed yesterday with the court, click here.
 
To read the original FEC complaint, click here.
 
To read the statement by the Democratic Commissioners of the FEC, click here.
 
To read the FEC General Counsel’s recommendation, click here.
 

Today the Campaign Legal Center strongly warned against the growing threat of Dark Money to our democracy and provided testimony to the Senate Rules Committee that the DISCLOSE ACT would provide the disclosure called for by the U.S. Supreme Court in a number of recent campaign finance rulings.  In a statement submitted into the record of today’s hearing “The DISCLOSE Act (S.2516) and the Need for Expanded Disclosure of Funds Raised and Spent to Influence Federal Elections” Legal Center President Trevor Potter and Executive Director J. Gerald Hebert condemned the Federal Election Commission’s (FEC) “blatant override of Congressional intent” in the rules issued by the Commission to implement the disclosure requirements of the Bipartisan Campaign Reform Act of 2002.

Potter and Hebert explained that the FEC precipitated the current crises, undermining Congressional efforts to increase disclosure of the funders of outside spending:

The DISCLOSE Act is of particular urgency due to the mushrooming of outside spending in elections combined with the Federal Election Commission’s (FEC) ongoing efforts to narrow the coverage of the disclosure rules. The FEC’s disclosure regulations—which are clearly contrary to the legislative intent of Congress—and the Commission’s failure to enforce the law as intended have largely created this problem. The good news is that this is a problem that can be fixed legislatively, and in fact was addressed by Congress when it passed the Bipartisan Campaign Reform Act (BCRA) in 2002. The “electioneering communications” disclosure provision of BCRA, which the Supreme Court upheld and is still on the books, says that any “person,” including corporations and labor unions, that spends more than $10,000 on TV and radio ads mentioning candidates in close proximity to elections must file a report with the FEC disclosing the names and addresses of all contributors who contributed $1,000 or more to the person making the ad buy.     

The statement urges the Rules Committee to expeditiously send the DISCLOSE Act to the full Senate and to vigorously oppose efforts to weaken the legislation in order to bring disclosure regulations in line with current law and in keeping with U.S. Supreme Court rulings calling for complete disclosure of political spending in order to safeguard the integrity of the nation’s elections. 

To read the full statement, click here.