Colbert Super PAC: A More Accurate Yesterday, Today

Trevor Potter and Stephen Colbert's Super PAC
Image courtesy of Comedy Central

When The FEC denied Stephen Colbert’s request to significantly expand the press exemption for his Super PAC, Americans for a Better Tomorrow, Tomorrow, the comedian touted the routine creation of his Super PAC as an odds-defying victory and unfortunately much of the media coverage followed his lead.  Yesterday, Splitsider took a closer look at what actually occurred in a Q&A with Legal Center FEC Program director Paul S. Ryan.       

The following Q&A and introduction by Stephen Hoban ran on on August 23, 2011 under the title: “Talking to the Campaign Legal Center About the Ins and Outs of Colbert's Super PAC”

We may not be at the punch line yet, but the setup keeps getting better and better. Colbert's Super PAC, now known as "Americans for a Better Tomorrow, Tomorrow", is now fully formed and interfering with becoming involved in the 2012 presidential campaign. And it is finally attracting the attention of the journalists and political insiders who had dismissed Colbert's bad political humor in June. Why are they taking him seriously now? I'm sure there are a whole slew of reasons, but one of them is: now he has money.

David Carr's column in yesterday's New York Times was the latest to look at the serious side of Colbert's Super PAC. It builds up to a chilling quote from an unnamed Colbert Report staffer: “Not even the actual news reporters want to cover campaign finance. We decided that we would just see how far we could go. And it turns out that, like everyone else raising money in politics, we can pretty much do what we want.”

Is that true? Can they really do whatever they want? This is where it gets tough to figure out exactly what is going on, and what's allowed. I think I stand with most Americans, many folks with law degrees, and Colbert himself, when I say: I have no idea. Campaign finance law is just too damn complicated.

One group that has a pretty good sense of what is going on is the Campaign Legal Center, which follows campaign finance issues. The Center, you may already know, is the organization that lobbied the Federal Election Commission to turn down Colbert Super PAC's press exemption request at the same time the organization's own founder, Trevor Potter, argued (as Colbert's lawyer) in favor of it. That's a good indication they're doing something right.

I asked Paul Ryan, Associate Legal Counsel at the Center, to shed some light on what exactly Colbert Super PAC was (legally, not humorously) trying to do, and what about its case with the FEC was groundbreaking. I won't lie, his answers left me more confused than before, but it's that cramming-for-midterms kind of confused that you know has to be good for you. Ryan helpfully took the time to explain the nuances of the electoral landscape in the post-Citizens United world. His answers show how easy it is for outside groups to influence today's elections without anyone even knowing it was happening.

The intricacy of what's behind the scenes here leaves you with the impression that Colbert's legal team must be as brilliant as his comic one. The legalese and bureaucratese of campaign finance law are complicated and heavy. We need a Colbert to spell out the issue in simple terms: "unlimited corporate funds which can be used to influence our elections."

The Supreme Court's Citizens United decision came after the most recent presidential election. What's different now? Will we be seeing things in the next election we haven't seen before?

In the 2012 presidential election race, we'll likely see record-breaking fund raising and spending by candidates, parties and, as a direct result of the Citizens United decision, by a new type of political committee known as a Super PAC, which is the type of committee that Mr. Colbert recently set up.

Unlike candidates and political parties, which are subject to contribution limits and are prohibited from accepting contributions from corporations and labor unions, Super PACs are not subject to contribution limits and are permitted to accept corporate and labor union contributions. The only constraint on Super PACs is that they are not allowed to contribute money directly to candidates and they are not allowed to coordinate their spending with candidates. Instead, Super PACs will be making "independent expenditures" with the hundreds of millions of dollars they raise in this election cycle. Similarly, we will likely see hundreds of millions of dollars raised and spent by organizations claiming federal tax exemption: political advocacy groups like the NRA and the Sierra Club, labor unions, and trade associations like the U.S. Chamber of Commerce. Like Super PACs, these groups are not subject to any contribution restrictions. However, tax law prevents them from doing candidate advocacy as their primary activity-so they will combine candidate advocacy with so-called issue advocacy.

At the same time that we will see more money than ever before in an election, we will also have less disclosure of the sources of that money than we have had in decades. Corporations that are now allowed to make candidate advocacy expenditures because of the Citizens United decision, will launder their money through groups like the U.S. Chamber of Commerce to avoid disclosure of their political spending that might alienate their customer base, shareholders and employees. And because of a loophole in our federal disclosure laws created by the Federal Election Commission (FEC) in 2007, groups like the Chamber will only be required to disclose the source of the funds it uses to buy political ads if the donor specifically designated their contribution to be used for political ads. If the donor simply refrains from designating their contribution for political ads, then the donor will remain undisclosed to the public.

So the Chamber will know where the money came from. The candidates supported by the Chamber will most certainly be told which influence-seeking special interest corporation funded the Chamber's ads. But voters will be in the dark.

The Center filed a comment asking that Colbert's press exemption request be denied. What did you see as the danger of his request?

Unfortunately, most of the press coverage of Mr. Colbert's advisory opinion request missed the mark. His request was repeatedly characterized as "seeking permission to set up a Super PAC," but his ability to set up a Super PAC was never in question. Anyone, including Mr. Colbert, is free to set up a Super PAC and Super PACs can accept unlimited contributions from individuals, corporations, unions and other groups.

The real issue raised by Mr. Colbert's advisory opinion request was whether his new Super PAC would be required to disclose as "in-kind" contributions the money spent by Comedy Central's parent company, Viacom, to create political ads for the Super PAC, to pay staff to do the Super PAC's disclosure paperwork, etc.

This is where the so-called "press exemption" comes in. When a media company is performing legitimate press functions, the money it spends on those activities is exempt from the federal law definitions of "contribution" and "expenditure" and, therefore, exempt from disclosure requirements that generally apply to political contributions and expenditures.

The Campaign Legal Center did not recommend that "Colbert's press exemption request be denied" across the board. On the contrary, we commented that much of Mr. Colbert's proposed activities do fall within the press exemption. For example, if Mr. Colbert were to talk about his Super PAC during the course of The Colbert Report, any expenses incurred by Viacom to produce and disseminate that portion of the show should be covered by the press exemption — meaning that Colbert Super PAC would not be required to report the expenses as an in-kind contribution received from Viacom.

However, Mr. Colbert asked the FEC to dramatically expand the scope of press exemption to cover activities that have never been, and should not be, considered legitimate press functions. It is this dramatic expansion of the press exemption that the Campaign Legal Center objected to — and the FEC agreed with us.

For example, Mr. Colbert asked the FEC to declare that Viacom could produce TV ads expressly advocating a candidate's election or defeat and give them to Colbert Super PAC for distribution on other TV networks without Colbert Super PAC having to disclose its receipt of an in-kind contribution from Viacom — under the auspices that this is somehow Viacom engaging in a legitimate press function. Mr. Colbert also asked the FEC to declare that Viacom's payment of Colbert Super PAC's administrative expenses (e.g., staff time to produce disclosure reports, set up and maintain a Colbert Super PAC web site, etc.) also fell within the press exemption.

An opinion by the Commission advising Mr. Colbert that it is within Viacom's press exemption (and therefore not a reportable contribution) for Viacom to pay the expenses of Colbert Super PAC's production and distribution of independent expenditure ads on other shows and networks, and Colbert Super PAC's administrative expenses, would eviscerate the "legitimate press function" prong of the press exemption and would undermine federal law contribution disclosure requirements. Indeed, if the "legitimate press function" test can be stretched so far, there is little, if anything, it would not cover.

Although we recognize that Mr. Colbert submitted his advisory opinion request in the spirit of political comedy, an opinion by the FEC permitting all that Mr. Colbert requested would have had a sweeping and damaging impact on disclosure laws and the public's right to know about campaign finance activities. Many television show hosts who are serious politicians have political committees that could reap great financial benefit from an advisory opinion that expands the scope of the press exemption to cover the production and distribution costs of independent expenditure ads made for their federal PACs and the payment of such PACs' administrative expenses.

We are happy that the FEC agreed with the Campaign Legal Center's view on this matter and rejected Mr. Colbert's request that the press exemption be expanded.

Is the media exemption or press exemption pretty rare? Do groups only seek media exemptions when challenged? Does the FEC ever make that sort of challenge?

The press exemption is definitely not rare. On the contrary, we all see it in action nearly every day. News outlets' coverage of campaigns and endorsements of candidates all fall within the press exemption, so the news outlets do not have to worry about filing paperwork with the FEC. And it is not necessary to "seek" the press exemption. A media outlet does not need permission or authorization of any sort from the FEC. So long as a media outlet is truly engaging in a traditional, legitimate press function, it simply goes about its business confident that it is exempt from federal campaign finance laws.

Where media outlets do approach the FEC is when they want to expand the boundaries of the types of activities that had previously been covered by the press exemption. Mr. Colbert has an excellent lawyer (CLC President Trevor Potter, who works in private practice and who recused himself from our consideration of the matter), who wisely counseled Mr. Colbert that some of the things Mr. Colbert intended to do would have pushed or crossed the boundaries of the press exemption, so they sought the FEC's formal opinion.

How will this affect other media figures who fundraise (you've termed them 'politician-commentators'), like the PACs run by Fox news personalities — Rove and Palin and Huckabee? Is there anything they can't do now that they might have gotten away with before?

The FEC has maintained the status quo. If Mr. Colbert had gotten the opinion he asked for, which he didn't, then PACs run by Fox news personalities would not have had to disclose if and when News Corps paid the PACs' administrative expenses and made their political ads for airing on other networks. This would have been a troubling development. Voters have a right to know who is spending money to influence their voting.

The FEC placed restrictions on where Colbert could display advertisements. It says if Viacom produces advertisements for Colbert Report, then the PAC cannot distribute them elsewhere without Viacom having to declare its in-kind contribution — the media exemption will no longer apply. Does this tie the PAC's hands? How significant is this and how broadly could it be applied? Does it apply to other expenditures besides ads?

No, this does not "tie the PAC's hands." Instead, it treats Colbert Super PAC like every other federal PAC. Federal PACs have to disclose their donors of cash and in-kind contributions. There's no reason Colbert Super PAC should be treated differently than any other PAC. If I give a contribution to a federal PAC, the PAC discloses my identity to the FEC. If Viacom gives things of value to a federal PAC that are unrelated to Viacom's legitimate press function (e.g., political ads for airing on other networks, PAC administrative expenses), then the PAC should likewise have to disclose Viacom's identity.

Additionally, Colbert Super PAC is an independent, free-standing legal entity. Its existence is in no way dependent upon or tied to Viacom. Colbert Super PAC is soliciting and receiving contributions from the general public and will likely be successful at raising a lot of money. If Viacom decides it doesn't want to create free ads for Colbert Super PAC to air on other networks because it's expenses will be reported by the Colbert Super PAC as in-kind contributions, then so be it. Colbert Super PAC can use the money from other willing contributors who will likewise be disclosed. Indeed, Colbert Super PAC is currently disclosing its donors on a crawl across the bottom of the screen during episodes of The Colbert Report — disclosure not required by law and well in excess of what the law requires. So Colbert Super PAC apparently has plenty of supporters beyond Viacom and no aversion to disclosing these supporters' identities.

If Colbert PAC produces the commercials, not Viacom, can they be shown anywhere?

Yes, Colbert Super PAC, and any other Super PAC, is free to receive unlimited contributions from Viacom, any other corporation, or any individual — and to do whatever it wants with the money, including producing commercials and airing them through any media outlet. Again, this Colbert Super PAC matter entailed no restrictions whatsoever. Colbert Super PAC is free to raise as much money as it can from any source, including Viacom's unlimited in-kind contributions, and do whatever it wants with that money. Its ability to do so was never in question. Instead, the question was whether Colbert Super PAC has to disclose where it's getting its money and in-kind financial support.

Could it be argued that a network's exempted in-kind contribution subsidizes a PAC's other expenses? Do all contributions go into one pot, or can a PAC draw clear lines around what pays for what?

A PAC puts all contributions into a single account and discloses all of the contributions it receives. But if Viacom's payment of an expense falls within the press exemption, then it is exempt from the very definitions of "contribution" and "expenditure," so it never gets disclosed. The advisory opinion proceeding was all about what falls within the press exemption (i.e., expenses related to a legitimate press function) and what does not.

The FEC also said the ads could not be shown on the Committee's web site. How strictly do they mean that? Can Colbert PAC upload that ad to their YouTube channel or Facebook page? Can it be shown on the Colbert Nation web site? Would this restriction affect any of the other politician-commentator PACs (like Palin's or Rove's)?

Again, this isn't about what Colbert Super PAC can and cannot do — it's about what Colbert Super PAC must disclose and what it need not disclose. If a federal PAC is using/disseminating a political ad that was produced by someone else (e.g., Viacom), it must disclose its receipt of an in-kind contribution. The Colbert Nation web site is the property of Viacom, not Colbert Super PAC, so it would not constitute trigger any disclosure requirements for the PAC.

I know the campaign season is just beginning, but do you think Colbert's actions will ultimately help effect some reform in campaign finance?

Only time will tell!