A Win For Transparency in Corporate Spending on Elections


The Supreme Court, in its landmark 2010 Citizens United decision, unleashed unlimited special interest corporate spending in our elections but assured us that any threat of corruption stemming from this spending would be eliminated by robust campaign finance disclosure.

The Court wrote: “The First Amendment protects political speech [i.e., spending]; 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.” Eight of the Court’s nine Justices signed the portion of the decision upholding the challenged disclosure law.  But the promised disclosure never materialized.

Last week, a federal district court pulled the curtain back on the reality the Citizens United Court left us with when it issued a decision in Van Hollen v. Federal Election Commission (FEC), striking down an FEC regulation that gutted the disclosure law upheld in Citizens United—years before Citizens United was decided.

Yes, back in 2007, the FEC—whose job it is to implement and enforce campaign finance laws enacted by Congress—did the opposite when it blew a huge hole in the disclosure statute upheld in Citizens United. Because of this 2007 regulation, it was entirely predictable that the disclosure law upheld in Citizens United would be easily evaded and wholly ineffective at “enabl[ing] the electorate to make informed decisions” in the voting booth.

The statute requires any group spending in excess of $10,000 on TV or radio ads referring to a federal candidate within 30 days of a primary election or 60 days of a general election (i.e., “electioneering communication”) to disclose the “names and addresses of all contributors who contributed an aggregate amount of $1,000 or more” to the spender.

In a 2007 rulemaking, the FEC obliterated this donor disclosure requirement by adopting a regulation stating that corporations and labor unions meeting the $10,000 spending threshold only need to disclose their donors of $1,000 or more if the “donation . . . was made for the purpose of furthering electioneering communications.”

In other words, the FEC added a “donor’s purpose” requirement where none existed in the statute, a standard met only when a donor “specifically designated” the contribution for electioneering communication. If a donor simply refrains from designating their money for election ads and, instead, states no purpose at all, the statutorily-required donor disclosure requirement is evaded.

Three Republican members of the six-member FEC (Petersen, Hunter, McGahn) made matters even worse when they stated they would only enforce the electioneering communication donor disclosure requirement where the “donations are made for the purpose of furthering the electioneering communication that is the subject of the [disclosure] report.” Because it takes a vote of at least four Commissioners to enforce the law, the FEC’s enforcement of disclosure laws is being held hostage by these three Commissioners.

The FEC-created loophole allowed special interest groups like the U.S. Chamber of Commerce and the innocuous-sounding American Action Network to spend more than $50 million combined on electioneering communication in 2010 without disclosing their donors. Such groups were just getting warmed up in 2010—testing the waters to see how much the feckless FEC would let them get away with.

The number of similar groups, set up to launder corporate money into U.S. elections with the FEC’s blessing, has multiplied since 2010. Such groups will likely spend hundreds of millions of dollars in the 2012 elections—with voters left in the dark about the source of the funds.

Last year, Representative Chris Van Hollen (D-MD) had enough of the FEC’s gutting the disclosure laws and sued the FEC challenging the 2007 regulation. Last week, District Judge Amy Berman Jackson struck down the regulation, which permitted some groups to hide their donors, finding that it contradicted "the Congressional goal of increasing transparency and disclosure in electioneering communications" and that “such a rule could result in the wholesale evasion of disclosure requirements if contributors were encouraged to simply transfer money but keep their thoughts to themselves.”

Judge Jackon's decision marks another victory in the ongoing battle for transparency of money in politics, but it’s not the end of the battle. An appeal is likely.  The FEC will undoubtedly drag its feet in repealing its invalidated regulation—with no fix likely before this year’s elections. Hundreds of millions of special interest dollars will likely be spent to influence this year’s elections and voters won’t know where those dollars came from.

This opinion piece originally appeared on the Open Society Blog on April 9, 2012.