Campaign Legal Center President Trevor Potter submitted a statement on the DISCLOSE Act of 2012 (S. 2219) at the request of the Senate Rules Committee. Because Potter was unavailable to testify due to a prior out-of-town commitment, the statement will be entered into the record at the Rules Committee hearing on the bill to be held on March 29, 2012.
The statement emphasizes the Legal Center’s support for the legislation and urges the Committee to quickly move the bill on to the full Senate without weakening amendments. Potter stressed that “S. 2219 is appropriately targeted, narrowly tailored, clearly constitutional and desperately needed.”
The statement points to the broad support for disclosure traditionally from both parties in Congress and even overwhelmingly from the U.S. Supreme Court in the controversial 5-4 decision in Citizens United. “With the Supreme Court having struck down corporate speech restrictions, it is now up to Congress to supply the full disclosure the Court hailed,” Potter wrote.
The full statement follows below.
March 28, 2012
The Hon. Charles Schumer
Chair, Senate Rules Committee
Russell 305
Washington, DC 20510
Dear Chairman Schumer:
The Campaign Legal Center strongly supports S. 2219, the DISCLOSE Act of 2012, and urges the Committee to report it out expeditiously without any weakening changes. S. 2219 is appropriately targeted, narrowly tailored, clearly constitutional and desperately needed.
In the 2010 elections, corporations, unions and other outside groups spent some $300 million or more to influence the midterm elections. Those expenditures included more than $135 million in secret contributions by donors whose identities were hidden from the American people. Campaign finance expert Professor Anthony Corrado, of Colby College, estimates that 90% of the sources of funding of the ten largest independent players in the 2010 midterm election was undisclosed.
In the 2012 elections, there is now even greater secret, undisclosed spending with both the Presidency and control of Congress in play. Left unchecked, secret money spent in political campaigns will result in sharply increased power for those givers, and greater sway in the halls of Congress, skewing the political process even further.
It is well established that laws requiring disclosure of the sources of election-related expenditures are constitutional. In a series of cases, the Supreme Court has repeatedly upheld robust disclosure requirements when it comes to campaign-related spending, and has explicitly and repeatedly recognized the value of ensuring that voters have the information they need to assess a speaker and that speaker's message. Even as the Court overthrew decades of practice and jurisprudence in the Citizens United v. Federal Election Commissiondecision, it overwhelmingly endorsed disclosure of funds spent on election activity as the antidote to corruption.
In that case, the Supreme Court had only a narrow 5-4 majority to strike down the restrictions on independent political expenditures by corporations, but it had an 8-1 majority, spanning the philosophical wings of the Court, in favor of disclosure over the Internet and by other means to the public and shareholders of the details of corporate funding of such political expenditures.
With the Supreme Court having struck down corporate speech restrictions, it is now up to Congress to supply the full disclosure the Court hailed. The Campaign Legal Center is urging Congress to muster the same broad philosophical support for such disclosure, since both political parties have long favored at least that much regulation.
S. 2219, a modified version of the legislation that was introduced last year, approaches this task by ensuring that the disclosure required is specifically targeted at campaign-related activities. It does not require groups to disclose their membership lists, but does address the “Russian nesting doll” problem that current laws are not reaching – either due to lax enforcement or to partisan disagreement about what transactions are covered by current statutes. S. 2219 appropriately addresses this and other problems that have arisen in the current disclosure regime in a targeted way.
The Gap in Current Law
The Supreme Court’s decision in Citizens United and the subsequent decision by the U.S. Court of Appeals for the District of Columbia in SpeechNow.org v. FEChighlighted gaps in current disclosure laws. These gaps have been exacerbated by the actions of the Federal Election Commission (FEC).
Under current federal law, political action committees (PACs) are entities with the major purpose of influencing elections that raise or spend more than $1,000 in connection with a federal election. The same disclosure laws that cover other PACs -- disclosure to the FEC of donors who contribute more than $200 – currently cover the independent expenditure-only political action committees, now known as Super PACs. PACs are also required to disclose disbursements exceeding $200 to any individual or vendor.
This disclosure regime for PACs has worked fairly well over the past thirty years, providing the public the opportunity to obtain accurate information about the funding and spending of PACs in federal elections.
Now, however, the disclosure requirements for campaign-related contributions are being evaded because the current laws and regulations did not anticipate these new rulings. As a result, Super PACs are receiving contributions from corporate entities whose funders remain anonymous, thereby undermining the purpose and effectiveness of the disclosure. For example, a disclosure report for a Super PAC may indicate it received funding from the corporation “Americans Who Love America, Inc.,” but not reveal the funding behind that organization.
Also, entities are being established that are undertaking significant election-related activities, but that do not qualify as Super PACs under current law and practices. These “shadow PACs” are usually organized as 501(c)(4) “social welfare” organizations that claim their primary purpose is lobbying or 501(c)(6) trade associations. Contributions to these tax-exempt organizations do not have to be disclosed under current tax law. However, there are a number of these “shadow PACs” that are undertaking significant election-related activities and playing a large part in the 2012 campaigns. In essence, this new scheme is allowing corporations and individuals to evade disclosure of their electoral spending by laundering money through third-party organizations not covered by current disclosure laws.
Moreover, the FEC has played a critical and damaging role in undermining a disclosure regime that accurately reflects the activities that are being undertaken to influence the outcome of federal elections. The FEC weakened a disclosure requirement of the Bipartisan Campaign Reform Act of 2002 (BCRA) by requiring groups spending money on “electioneering communication” to disclose only those donors that specifically designate their contributions to the organization for the funding of such ads. The FEC rules thus create a roadmap for evasion of the law.
The DISCLOSE Act of 2012 would require any “covered organization” – a corporation, labor union, 501(c) organization (other than a (c)(3)), Super PAC and section 527 organization – that spends $10,000 or more on a “campaign-related disbursement” to file a disclosure report with the FEC within 24 hours of the spending, and to file a new report each time an additional $10,000 or more is spent. The FEC must post the report on its website within 24 hours after receiving it.
Under S. 2219, if a covered organization does not wish to fall under the disclosure requirements, it may set up a segregated bank account dedicated to campaign-related disbursements that only contains funds donated directly to the account and then disclose only those donors. If, however, the campaign-related disbursement is paid for out of its general treasury fund, it has to disclose the source of all donations of $10,000 or more. A donor can request for his donation to not be used for campaign-related disbursements and thus, not be included in the segregated fund. The bill does not cover certain internal transfers between affiliated organizations, unless made for the purpose of funding a campaign-related disbursement.
S. 2219 also includes improved “Stand By Your Ad” requirements for Super PACs and other outside spending groups and ensures a more timely disclosure schedule for outside spending groups.
Completing the Process Begun by the Court
In Justice Kennedy’s majority opinion in Citizens United v. Federal Election Commission, he made two things very clear: First, it is generally constitutional to require disclosure of the sources of funding for spending in federal elections, whether or not that spending “expressly advocates” the election or defeat of a federal candidate. Second, he and seven other Justices were clear that they thought such disclosure was entirely appropriate and useful in a democracy.
Justice Kennedy stated that disclosure of the sources of funding of political advertising “provide[s] the electorate with information” and “insure[s] that the voters are fully informed about the person or group who is speaking. He also cited the holding in First National Bank of Boston v. Bellotti that, “Identification of the source of the advertising may be required as a means of disclosure, so that the people will be able to evaluate the arguments to which they are being subjected.”
Justice Kennedy also rejected the argument that disclosure requirements should be limited to “express advocacy.” Justice Kennedy’s Opinion flatly declared: “We reject this contention.” He noted that the Supreme Court had, in a variety of contexts, upheld disclosure requirements that covered constitutionally protected acts, such as lobbying. “For these reasons,” Justice Kennedy stated, “we reject Citizens United’s contention that the disclosure requirements must be limited to speech that is the functional equivalent of express advocacy.”
As to the value of disclosure of political spending, Justice Kennedy was equally clear. He wrote:
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 corporations 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.
Justice Kennedy concluded:
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.
Thus, Justice Kennedy binds together the two elements of his opinion—independent corporate speech in elections is a First Amendment right, and the funding sources of such speech must be fully disclosed in order to make this constitutional right function in our political system. This section of Justice Kennedy’s Opinion was the only one joined by the four Citizens United dissenters, meaning that the fundamental importance of disclosure was recognized by eight of the nine Justices. Full disclosure is one of the few concepts in this contentious area of law to receive such a broad endorsement from the Supreme Court.
This background is important to your consideration of S. 2219, the DISCLOSE Act 2012, not only because it makes it clear that the disclosure provisions of the bill are constitutional, but also because they complete the process begun by the Court.
Unrestricted corporate speech in elections without disclosure of the sources of such speech is indeed contrary to the Court’s theory in Citizens United, which paired corporate First Amendment speech rights with the virtues of disclosure of the sources of such speech—disclosure to shareholders and to the general public. (The Citizens United case referred only to corporate speech and disclosure, because only a corporation was challenging the restrictions in the law. However, the DISCLOSE Act recognizes that First Amendment rights found in Citizens United are considered by the FEC to apply to unions as well, and therefore includes unions in the Act’s provisions.)
It is notable that just months after the Citizens United decision, Justice Antonin Scalia once again took the opportunity to stress the importance of disclosure in the political arena. In the case Doe v. Reed, concerning the disclosure of petitions signers for a ballot measure, Justice Scalia rejected arguments about potential threats of harassment of signers by opponents of the petition. In that case, he wrote:
Requiring people to stand up in public for their political acts fosters civic courage, without which democracy is doomed. For my part, I do not look forward to a society which, thanks to the Supreme Court, campaign anonymously and even exercises the direct democracy of initiative and referendum hidden from public scrutiny and protected from the accountability of criticism. This does not resemble the Home of the Brave.
Summary
For more than three decades following the Watergate scandal, both Republicans and Democrats agreed that disclosure of money spent in politics was essential to protecting the integrity of U.S. elections and government decision-making. That disclosure consensus has now broken down in spite of strong statements and clear holdings by the U.S. Supreme Court. The partisan schism over disclosure is most revealed at the FEC where regulations have eviscerated existing contribution disclosure requirements, leaving gaping loopholes in federal disclosure laws.
It is unfortunate that there are those who attempt to cast this debate as a partisan one between Republicans and Democrats. It should not be. Many Republicans have long argued for the exact conclusion that Justice Kennedy arrived at: less restriction on political speech in return for “full disclosure.”
S. 2219 fulfills an important need by requiring disclosure of individuals and entities spending money in U.S. elections. A strong majority of the U.S. Supreme Court has stated that such disclosure is not only constitutional, but is the expected and indeed necessary counter-balance to the new corporate right to expend unlimited funds in U.S. elections.
The Campaign Legal Center urges Congress to require such complete disclosure as quickly as possible. As Justice Kennedy’s majority opinion said on this point:
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.
Sincerely,
Trevor Potter
President, Campaign Legal Center
