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Supreme Court Delivers a Blow to Secret Campaign Spending

The Supreme Court has flashed a warning signal against attempts to evade campaign finance disclosure laws, argues Brennan Center Fellow Ciara Torres-Spelliscy.

The Supreme Court may be closed for in-person oral argu­ments due to Covid-19, but make no mistake: it is still making decisions and shap­ing the law. However, with the pandemic domin­at­ing news stor­ies, the media has over­looked recent devel­op­ments in campaign finance cases, such as the Court’s refusal last month to hear a case called Doe v. Federal Elec­tion Commis­sion, thus leav­ing in place a pro-disclos­ure ruling from a lower court. This move by the Court marks a posit­ive step toward more trans­par­ency in elec­tions and against the use of straw donors.

Polit­ical spend­ing in the United States has been subject to vari­ous disclos­ure require­ments since the enact­ment of the Publi­city Act of 1910. But it wasn’t until the 1970s that one federal agency had sole over­sight of report­ing campaign finance in a clear way to the public. That happened during post-Water­gate reforms with the creation of the Federal Elec­tion Commis­sion, which promotes trans­par­ent campaign spend­ing as one of its core missions.

Over the years, litig­ants have hurled differ­ent consti­tu­tional argu­ments against disclos­ure require­ments for polit­ical spend­ing. However, ever since its 1976 ruling in Buckley v. Valeo, the Supreme Court has consist­ently held that trans­par­ent polit­ical spend­ing served three distinct govern­mental interests: inform­ing voters, fight­ing corrup­tion, and prevent­ing people from circum­vent­ing the law. In other words, the Court has recog­nized that elec­tions require that voters know who is trying to influ­ence them. The justices have also found that that trans­par­ency require­ments lessen the risks of corrupt beha­vior and that publicly report­ing polit­ical expendit­ures ensures that polit­ical spend­ers comply with contri­bu­tion limits.

The Supreme Court reaf­firmed that disclos­ure require­ments are consti­tu­tional in Citizens United v. FEC in 2010 and McCutcheon v. FEC in 2014.

Despite the string of wins for trans­par­ency at the Supreme Court, this has not stopped polit­ical spend­ers from trying to hide their iden­tit­ies. The Doe case was another example of this secret­ive beha­vior. In essence, it was about “a mystery donor’s attempt to main­tain secrecy around a $1.7 million dona­tion to a super PAC whose spend­ing was meant to influ­ence the 2012 elec­tion,” as described by the Campaign Legal Center. Or as FEC Chair Ellen Wein­traub explained in a tweet, “Key play­ers in a straw-donor scheme involving @ACU­Con­ser­vat­ive [Amer­ican Conser­vat­ive Union] had sued @FEC to keep their names forever secret.” In plain English, a straw donor claims in offi­cial docu­ments to be the source of a contri­bu­tion when actu­ally they are passing on money from some other source, who stays hidden.

The super PAC at issue was the Now or Never PAC, which had the goal of “elect­ing men and women to Congress who have demon­strated a desire to imme­di­ately work to Balance the Federal Budget.” The case star­ted when the account­ab­il­ity watch­dog organ­iz­a­tion Citizens for Respons­ib­il­ity and Ethics in Wash­ing­ton (CREW) filed a complaint with the FEC seek­ing inform­a­tion on the source of $1.7 million in dona­tions to the Now or Never PAC during the 2012 elec­tion season. Now or Never repor­ted the $1.7 million as donated by the Amer­ican Conser­vat­ive Union (ACU), the organ­iz­a­tion that runs CPAC (a huge gath­er­ing of conser­vat­ives) every year. But CREW suspec­ted that the ACU was merely a conduit for money it had gathered from other, secret donors — or, in other words, that ACU acted as a straw donor. In total, Now or Never PAC spent $7.7 million during the 2012 elec­tion season.

Under federal campaign finance law, no one is allowed to give money in a federal elec­tion through a straw donor. As the FEC explains, “Reim­burs­ing someone for a contri­bu­tion or other­wise contrib­ut­ing in the name of another person can result in substan­tial civil penal­ties and jail time.” 

For example, before being pardoned by Pres­id­ent Trump, author and film­maker Dinesh D’Souza received a felony convic­tion after he pled guilty to using straw donors because he had others give money to a candid­ate for Senate with the prom­ise that he would pay them back. This allowed him to give more than was allow­able to the Senate candid­ate. Thus, the alleg­a­tion that straw donors were involved in fund­ing the Now or Never Super PAC raised a seri­ous legal issue.

In a 2017 settle­ment, the FEC fined the ACU $350,000 for its role in moving the dona­tions to Now or Never PAC. However, other parties, includ­ing the original donors, refused to be named and instead sued the FEC in Doe v. FEC. They argued that the FEC’s disclos­ure of their names is “an arbit­rary and capri­cious decision, and an abuse of discre­tion because such action viol­ates the First Amend­ment.”

In the federal district court in Wash­ing­ton, Judge Amy Berman Jack­son ruled that the disclos­ure does not in fact viol­ate the First Amend­ment. The John Does appealed to the D.C. Circuit, which in a 2–1 decision also ruled against the John Does, agree­ing with the district court that “Citizens United v. FEC . . . fore­closes their argu­ment.” Finally, the Supreme Court denied yet another appeal, ending the case and the attempt to hide the true iden­tit­ies of the donors.

After the Supreme Court declined to consider the case, the district court’s subsequent response released the FEC to at long last state the truth. In turn, FEC Commis­sioner Wein­traub released an unre­dac­ted docu­ment, which said:

“Here’s what we know happened. Incent­ive Discre­tion­ary Trust (‘IDT’), a trust created and owned by unknown parties, through its trustee, Charles Harris, estab­lished the iron­ic­ally named Govern­ment Integ­rity LLC (‘GI’) in Septem­ber 2012, and was its sole owner. On or about Oct. 31, 2012, IDT trans­ferred $2.5 million to GI. GI, through its lawyer, James Thomas, imme­di­ately trans­ferred $1.8 million to ACU (a 501(c)(4) tax-exempt organ­iz­a­tion). ACU imme­di­ately turned around and sent $1.71 million to Now or Never PAC, whose treas­urer was none other than GI’s lawyer, James Thomas.”

Now, iron­ic­ally indeed, the public knows that the money that went through ACU came through a trust. Where that money in the trust came from is still a bit of a mystery. But at least the public gets a glimpse of a link in the daisy chain of undis­closed polit­ical money. And perhaps this case and the $350,000 fine will warn elec­tion spend­ers in 2020 against using straw donors to evade campaign finance disclos­ure laws.

The views expressed are the author’s own and not neces­sar­ily those of the Bren­nan Center.