Supreme Court, Meet Reality

U.S. Supreme Court
The U.S. Supreme Court in Washington, D.C. Photo by Mark Thomas

Recently, it was reported that in an interview at Harvard Law School, Supreme Court Justice Anthony Kennedy commented that campaign finance disclosure is “not working the way it should.” Justice Kennedy’s statement provides an important insight into why the Supreme Court’s recent campaign finance decisions are undermining our democracy. These decisions have been based on how five Justices think the campaign finance laws should be working, which is far from the reality of how they are working. Watching the 2016 elections unfold, it is hard not to wonder whether any of these Justices will rethink their assumptions about money in politics or whether our democracy will continue to suffer from a constitutional jurisprudence based on wishful thinking.

Since 2007, the Roberts Court has glibly reversed all or part of several previous decisions that had upheld legislative efforts to limit the corrupting impact of large aggregations of wealth on our democracy. For example, this Court has rejected its previous view that buying access and undue influence with large contributions constitutes a form of corruption. The Court has also held that limits and prohibitions on independent political activity only apply to messages that contain express advocacy and then declared that corporations have a constitutional right to make independent expenditures.

What all of these cases have in common is that they are based on the way the Court thinks campaigns should work and ignore the real world.

The latest example is what is happening in the aftermath of the Court striking down the aggregate limits on the total amount an individual can contribute in a two-year election cycle. These limits were enacted to prevent a wealthy individual from evading the base limits by giving to multiple committees. For the 2013–14 election cycle, the aggregate limits permitted an individual to contribute a total of $123,200 to all candidates, political parties and other committees making contributions during the two-year election cycle. While the Court had found aggregate limits constitutional in 1976 in Buckley v. Valeo, in 2014 the Roberts Court declared aggregate limits unconstitutional in McCutcheon v. FEC.

Campaign Legal Center filed an amicus brief in the McCutcheon case on behalf of itself and seven other groups arguing that without aggregate limits a candidate could join with the national and state party committees in a joint fundraising committee that would “be able to receive single checks of astronomical amounts from individual donors.” Once the participating committees received their portion of the money raised, they “could each transfer their allocated amount back to a single federal party committee, such as the DNC or RNC.” That money “could ultimately be used to benefit the candidate who had participated in the joint fundraising effort.”

In the 5-4 decision that followed, Chief Justice Roberts rejected as “far too speculative” the possibility that someone might “contribute massive amounts of money” using multiple entities to evade the base contribution limits. The Court found it unlikely that a donor with the “desire to support one candidate” would write “a $500,000 check to a joint fundraising committee composed of a candidate, a national party committee, and most of the state party committees,” and that those state party committees would then “divide up the money so that each one receives the maximum contribution permissible under the base limits, but then each transfers its allocated portion to the same single committee.” According to the Court, “this circumvention scenario could not succeed without assuming that nearly 50 separate party committees would engage in a transparent violation of the earmarking rules (and that they would not be caught if they did).”

Well, Supreme Court, meet the 2016 election.

While it may come as a surprise to five Supreme Court justices, it has been reported that Hillary for America, the Democratic National Committee, 32 Democratic state party committees and the Puerto Rico Democratic party committee have established the Hillary Victory Fund, which is a joint fundraising committee that effectively allows a donor to write one check combining the base contribution limits of all 35 participating committees. In early December, Clinton attended her first event for the Hillary Victory Fund, which raised more than $5 million.

Although this is a few states short of the “nearly 50” state party committees the Supreme Court thought would never join together, keep in mind that the Hillary Victory Fund was formed before the first primary votes have been cast and while Clinton still faces serious competition for her party’s nomination. There is plenty of time for other state party committees to join in.

It has also been reported that Clinton’s campaign asked contributors to give up to $366,100 to the Hillary Victory Fund in 2015. Now that we have crossed over to 2016, they will undoubtedly be asked to give the same or even more, if more party committees are added to the Hillary Victory Fund. That means that a wealthy contributor will be able to give more than $700,000 (and a couple will be able to contribute close to $1.5 million) to the Hillary Victory Fund over the two-year election cycle. And these numbers may be somewhat conservative, as they only count one $33,400 annual limit for the national party committee. Thanks to changes in the law Congress jammed into the 2014 Cromnibus bill, an individual can now give an additional $600,000 over the election cycle to separate national party committee accounts set up to support the convention, legal proceedings and the party headquarters building.

Further making a mockery of the Supreme Court’s understanding of our campaign finance system, state party committees are already transferring contributions received through their participation in the Hillary Victory Fund to the Democratic National Committee, where the money can be used to support Clinton’s campaign. For example, according to the Alaska Dispatch News, the Alaska Democratic Party’s campaign finance reports filed with the Federal Election Commission (FEC) show that on November 2, 2015, the Alaska Democratic Party received $43,500 from the Hillary Victory Fund and then turned around and transferred the same amount to the DNC the same day. The reports of the Democratic state party committees in Georgia and Idaho also show the exact same receipts from the Hillary Victory Fund and transfers to the DNC. And all three state party committees identify the money they received through the Hillary Victory Fund as coming from many of the same out-of-state contributors. For example, hedge fund manager S. Donald Sussman, Hyatt hotel heir J.B. Pritzker, his wife, Mary Pritzker and Fred Eychaner are all reported as contributing $10,000 each to the Alaska, Georgia and Idaho Democratic state parties.

Contrary to what the Court assured us, the earmarking rules are not preventing these types of transfers. The FEC does not recognize earmarking unless the contributors have made a “designation, instruction, or encumbrance, whether direct or indirect, express or implied, oral or written, which results in all or any part of a contribution or expenditure being made to, or expended on behalf of, a clearly identified candidate.” Or to put it another way, according to the FEC, unless contributors like Sussman, the Pritzkers and Eychaner included a “designation, instruction, or encumbrance,” with their contribution, they did not make their contributions with the “desire to support one candidate,” as the Supreme Court put it.

Whether the Supreme Court believes it or not, as far as the contributors are concerned, there is little question their money will be used to help elect Hillary Clinton. After all, the money going to the states is from contributions made to a joint fundraising committee called the Hillary Victory Fund. Wealthy contributors looking for a payback when their candidate is elected care little about what account their money is being deposited into, as long as the candidate does the asking and it will help her campaign. At the same time, a candidate is likely to pay more attention to a contributor who gives $700,000 to a joint victory fund than to a contributor who gives the maximum allowed—$5,400 per election cycle—directly to the campaign. In the real world, the person who can only afford to give $25, $50 or $200 to the campaign is not only not in the same ballpark, he or she is not even playing the same sport.

Make no mistake, this is not a Hillary Clinton problem and she will not be the only one using joint fundraising committees this way. She is playing by the rules, as rewritten by five Supreme Court Justices. The only reason the Republicans have not yet started playing the same game is that they are still trying to narrow their field of candidates to a small crowd. Regardless of how much the Supreme Court wants to ignore reality, history tells us that this is only the beginning. Expect the use of joint fundraising committees to keep growing in presidential, Senate and House elections.

In fact, joint fundraising committees have been part of our elections for years. But, before the Court struck down the limit in 2014, what an individual could give to such a committee was capped by the aggregate limits. So, while useful, joint fundraising committees could only serve as conduits for one person making a contribution of about $123,000. (This, by the way, is still a staggering amount of money to all but the wealthiest Americans.) However, it took no great insight to figure out what would happen without the limits. What has never been speculative or improbable is that wealthy donors seeking elected leaders who will be compliant with their wishes look for ways to get around the base contribution limits and candidates and political parties work hard to find ways to accept their money.

The fact that what five Justices of the Court declared speculative and improbable in McCutcheon is happening in the very first election following the decision means that those Justices are either incredibly naïve about politics or decided to reject reality in an effort to protect the power of the wealthy. Either way, they are basing decisions dealing with core democratic values on how they think contributors and candidates should be acting, not on what is actually happening. This can only weaken our democracy which, whether Justice Roberts and his four brethren like it or not, must succeed or fail in the real world.

Larry is the former general counsel of the FEC and an expert and adviser on campaign finance and ethics.