FEC Unveils Website, Debates Super PAC and State Party Restrictions

The Federal Election Commission endured a four hour session on Thursday, October 29. Among the topics discussed were a resolution for the Repledge advisory opinion request, a request from Senate Majority PAC and House Majority PAC seeking to clarify the legal limits of would-be candidates and Super PACs during the testing the waters period, and a heated discussion about Commissioner Lee Goodman’s proposal to provide regulatory relief for state and local parties.

But first, the session opened with the debut of the Commission’s new website. You can check it out here.

Afterwards, the Commission began to address the advisory opinion requests on the agenda. After tabling the Repledge request until noon, the Commission addressed the AO request from Senate Majority PAC and House Majority PAC. Counsel for the requestors, Marc Elias, Jonathan Berkon and Rachel Jacobs, were present at the session. The request seeks to clarify three areas of the law. First, the request asked for clarification regarding “pre-candidacy” activities between individuals contemplating federal candidacy and federal Super PACs. Second, the request asked for clarification of the “testing the waters” (“TTW”) exemption under federal regulations, which allows individuals contemplating candidacy to raise and spend funds without registering and reporting with the FEC as long as they are “for the purpose of determining whether an individual should become a candidate.”  Specifically, the requestors sought clarification about the type of conduct that triggers federal candidacy such that the TTW exemption no longer applies. Third, the requesters asked for clarification about the definition of “agent” under federal regulations and whether federal regulations require that a minimum number of expected attendees attend a Super PAC event such that a candidate can permissibly speak, attend, or be featured as a special guest for the event.  The Commission issued two draft advisory opinions on Wednesday, October 28 that were largely similar in substance except for their responses to the last two questions asked by the requesters.

Commissioner Goodman began the discussion by asking Mr. Elias whether the FEC even has jurisdiction over pre-candidates during the TTW period. He noted that the Commission has some jurisdiction over this period, but only once the individual formally announces his or her candidacy. Commissioner Goodman felt that the statute only applies to candidates and it is outside the Commission’s jurisdiction to regulate activities prior to an individual becoming a candidate for federal office. He felt that the TWW activities created jurisdiction retroactively, which is outside the scope of the FEC’s authority.  Commissioner Ellen Weintraub disagreed with Commissioner Goodman’s concerns. She did not believe that jurisdiction was retroactive. Instead, she noted that she believes the TTW period acts more as a protection and allows an individual to have relative freedom in determining whether to run. Commissioner Weintraub explained that the FEC has jurisdiction to regulate TWW activities because TTW is an exception to the definition of contribution and the FEC’s jurisdiction covers when individuals raise and spend contributions. Mr. Elias expressed concern about the conduct occurring during the TTW period.  He pointed out that  the rules for actions during this time are unclear but that his clients are seeking guidance under the current law and regulations, which cover TTW activities . Among other issues, the advisory opinion request asked if potential candidates could assist with forming a Super PAC and if contributions to that Super PAC counted towards the limits that could be upheld retroactively under the TTW exemption. Chair Ann Ravel also mentioned that the answers to some of Mr. Elias’ questions would be better answered by a rulemaking, and the FEC may not use advisory opinions to create rules. In particular, she was referring to the definition of “agent” under federal regulations, and on which the requesters sought clarification in their request.

Before seeking Mr. Elias’ opinions on the two drafts, Commissioner Caroline Hunter revealed that the Commission would not be voting on the drafts during the session. Mr. Elias asked why this was the case, given that the drafts were nearly identical except for the answers to questions 11 and 12. Vice Chair Matthew Petersen noted that the drafts were only released the preceding day and that the AO request addressed “complex and timely” questions. Further, the Commission wanted an opportunity to ask requesters’ counsel questions prior to voting on the drafts.  Chair Ravel told Mr. Elias that he could expect his request to be further addressed at the next meeting of the Commission on November 10, 2015. Several commissioners indicated that they did not know where their colleagues stood on the issues in the request. Commissioner Weintraub signaled to Mr. Elias that just because the drafts were similar did not mean that there was consensus on the Commission.

After a quick break the Commission reconvened to discuss the Repledge advisory opinion request. The issue had been delayed several times due to issues with the language in Draft C. As Commissioner Goodman put it, the disagreement was not whether the answer to the question was yes, but rather how the Commission came to yes. Despite the consensus, the Commission failed to approve a draft and therefore could not issue a formal advisory opinion.

Next, the FEC addressed an advisory opinion request submitted on behalf of 21st Century Fox. The Commission unanimously approved the draft and issued a formal opinion.

One of the last topics discussed was Commissioner Goodman’s proposal to provide state and local parties regulatory relief. Commissioner Goodman’s proposal argued that legal reform is necessary and could help strengthen state and local political parties. Among his suggestions were allowing parties to access candidate materials for coordinated communications, expanding freedom to engage in volunteer activities, and allowing political parties to register voters and further engage in get-out-the-vote activities. He stressed that this was a bipartisan effort and one that would make small yet meaningful changes that would provide great relief to the local parties. The discussion became contentious when Commissioner Weintraub suggested adding Super PAC limitations to the proposal. The Republican commissioners revealed their frustration with the Democratic commissioners’ desire to make sweeping changes rather than incremental ones. In turn, the Democratic commissioners signaled that they were not willing to support the proposal. Clearly frustrated, Commissioner Goodman requested that the Commission table the proposal until the next meeting. The request was granted.

The Commission next meets on November 10.

Commission Divides Sharply on Scope of Foreign National Ban

The Federal Election Commission met on Thursday, October 1. The agenda included two advisory opinion requests, discussion about whether to ban foreign national contributions to state and local ballot measures, and a notice of proposed rulemaking on reporting multistate independent expenditures and electioneering communications on presidential primary elections.

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At Stake in the FEC Debate Over Leadership PACs: More Criminal Enforcement?

In dueling draft advisory opinions to Representative Maxine Waters, the Federal Election Commission is divided over whether “leadership PACs” are subject to the personal use rules. Both drafts agree that FEC rules would not keep Representative Waters’ campaign, PAC or her personally from giving to a foreign candidate. But Draft A warns the Congresswoman that “the personal use prohibition applies to your leadership PAC,” while Draft B states flatly that the personal use restrictions do not apply to leadership PACs.” The FEC is scheduled to take up the drafts at its September 17 meeting.

What’s at stake in the Waters request is not whether Members of Congress can make “personal use” of their leadership PAC funds. Congressional ethics rules already keep them from doing that. Rather, it’s whether the FEC will expand the scope of federal campaign finance law’s personal use restriction in a way that emboldens criminal prosecution.

Current law presents heavy barriers against enforcing the personal use restrictions against leadership PAC spending, whether civilly or criminally. As recently as 2013, the FEC asked Congress to change the law to extend the personal use ban to leadership PACs, saying that “Congress might not have considered the application of the personal use prohibition to this particular type of political committee.” The FEC’s treatment of the issue in other advisory opinions has been muddled at best. In an advisory opinion issued last year to Representative Paul Ryan over whether his PAC could pay to publicize his book, the FEC deadlocked on the issue, with “three Commissioners holding the position that the Act’s personal use prohibition does not apply to leadership PACs.”

However, the general subject of personal use is a very attractive object of criminal prosecution. The Commission’s debate comes as the Justice Department has seemed more active in core campaign finance cases, with the recent prosecution of a House campaign manager for illegally setting up and running a super PAC, and the indictment of three aides to the presidential campaign of Representative Ron Paul for allegedly disguising payments made to an Iowa state senator for his endorsement.

Thus, the Waters opinion presents a serious policy question for the Commission. The FEC’s decision will have a small effect on what Members actually do, because of the existing Congressional ethics prohibitions. But a change in policy could give prosecutors a significant new tool in public corruption cases that—as all six of the current FEC Commissioners admitted—“Congress might not have considered.”

DC Circuit Spurns GOP Challenge to SEC Pay-to-Play Rule

The United States Court of Appeals for the District of Columbia Circuit today left standing the Securities and Exchange Commission’s “pay-to-play” rule, which bars investment advisers from providing paid services to state and local governments when making certain political contributions to state and local officials.

The court rejected as time-barred a challenge to the rule that was brought by state Republican parties in New York and Tennessee. The court held that the state parties brought their suit in the wrong court and at the wrong time, saying that the Investment Advisers Act required the challenge to be brought at the circuit court level and within 60 days of promulgation. The SEC rule took effect in 2010; the state parties sued in federal district court in 2014.

Informed investment advisers maintain strict procedures to comply with the SEC rule, which affects some federal elections as well as many non-federal elections. Four incumbent governors currently seek the presidency: Chris Christie of New Jersey, Bobby Jindal of Louisiana, John Kasich of Ohio, and Scott Walker of Wisconsin. The court’s ruling leaves in place a barrier to fundraising in direct support of their campaigns.

The opinion in New York Republican State Committee v. SEC is available here.

Why We Should Expect More Criminal Cases Charging Illegal Coordination Between Campaigns and Super PACs: A Former Prosecutor’s Perspective

Note: An earlier post on Perkins Coie’s In the Arena: Law and Politics Update discussed, from a campaign finance lawyer’s perspective, why the prosecution in United States v. Harber signals future jeopardy for operatives in down-ballot races who coordinate with hastily-formed “super PACs.” This post offers a different angle on the same question from Barak Cohen, senior counsel in Perkins Coie’s White Collar & Investigations practice and a former prosecutor in the Public Integrity Section of the U.S. Department of Justice. In his post below, Cohen explains how the considerations that drive public corruption prosecutions point toward this same increased risk.

As Brian Svoboda’s recent post on In the Arena  noted, DOJ’s prosecution of Tyler Harber may signal increased criminal enforcement of the campaign finance laws.  That post aptly concluded that these enforcement efforts will likely focus on smaller campaigns for seats in the House.  As a former prosecutor in DOJ’s Public Integrity Section (the DOJ component that specializes in such cases, and which helped prosecute Harber), I agree, and have some further reasons for why additional prosecutions like Harber’s–the first widely reported criminal case based on illegal coordination between a campaign and a “super PAC”–should be expected. Continue Reading

VA-11 Coordination Case Is a Wake-Up Call for Down-Ballot Races, Operatives

Last Friday’s sentencing of the manager of a failed Congressional race in Virginia’s 11th District suggests that, if there is to be a wave in the criminal prosecution of the campaign finance laws, it may come toward the bottom of the ticket. Smaller campaigns face the same competitive pressures as presidential campaigns and marquee Senate campaigns do. They play by the same rules. And yet these smaller campaigns operate in conditions that make the rules more likely to be disregarded and prosecutions more likely to succeed. In a post-Citizens United world, the VA-11 case is a powerful warning for “down-ballot” candidates, their staff and consultants.

All federal campaigns comply with limits and restrictions that are backed by criminal statutes. They file reports under penalty of false statement. And yet congressional and “down-ballot” campaigns are less likely to have the culture or infrastructure to comply with these laws. They have smaller budgets and less experienced staff. They are less likely to have basic financial controls, best practices, lawyers, or other outside support. Down-ballot campaigns depend more on external sources of accountability, whether from the national congressional campaign committees, their pollsters, or their media consultants.

This makes these smaller campaigns especially vulnerable to lapses in professionalism, and to the extreme results that can follow. This seems to be what happened in VA-11, as an April 2015 article in Campaigns & Elections strongly argued. The campaign manager’s claim at sentencing that he “got caught up in what politics has become” rings a bit hollow. The government alleged that, in the last two months of the race, he set up a super PAC solely to support his candidate, micromanaged it, arranged for it to pay him and his family $138,000, and then lied repeatedly to the Federal Bureau of Investigation when contacted a year later. This is not normal conduct. And yet ill-staffed, ill-supported campaigns are still more prone to it than others.

While smaller campaigns are more vulnerable to professional lapses, they are more vulnerable to prosecution at the same time. This is true also of “rifle-shot” super PACs that form quickly to make independent expenditures in a single race. Because these campaigns and PACs are transient enterprises, especially when the candidate loses, they lack the means to mount a legal defense when the race is over. The campaign is done, the PAC has terminated, the donors are gone, and the operatives must fend for themselves. This makes the operatives involved inviting targets for investigation and prosecution.

The current conversation about campaign finance regulation is almost entirely focused on the presidential campaign. But the Virginia case shows that the real action may be further down the ballot. If there will be more criminal enforcement of the coordination rules, it seems more likely to come in down-ballot races, where the asymmetrical system of limits bestowed by Citizens United is putting even more stress on the competitive and operational pressures with which campaigns already struggle sometimes to contend. We will know in a couple of years whether the Virginia case was an outlier—or the shape of things to come.

FEC’s McCain Decision Opens Still Another Path for Independent Expenditures

An overlooked enforcement decision by the Federal Election Commission involving Senator John McCain’s 2010 campaign may put another type of player onto a campaign field that has become increasingly dominated by super PACs, nonprofits and non-candidate groups—other candidates’ campaigns.

The FEC announced last Friday that it found no reason to believe that McCain’s campaign broke the law by making independent expenditures against Representatives in 2010. You can see the McCain ads here and here. (Full disclosure: the present author drafted the complaint against McCain. This post represents his own views, and not any client’s.)

At issue was a statute—52 U.S.C. 30102(e)—that allows a candidate’s principal campaign committee to “support” only that candidate. (A narrow exception allows the campaign to make contributions of up to $2,000 to other candidates.) The Commission had aggressively enforced this statute before:

What seems to have saved McCain, apart from the FEC’s apparent slowness to enforce—his matter remained open for nearly five years—was Citizens United v. FEC. The Commission relied on that landmark case, which held that independent expenditures presented an insufficient risk of corruption to justify limits on their financing, and said: “It is unlikely that independent spending by authorized committees would be deemed more potentially corrupting than independent expenditures by individuals, political parties, or corporations, each of which has been found to have a constitutional right to make unlimited independent expenditures. Therefore, the Commission dismisses the allegation.”

The McCain decision is an odd case  involving a very odd statute. But it could have a significant effect on future elections. The decision makes clear that candidates face no legal barrier against making independent expenditures to support other candidates, so long as they do not coordinate with those whom they are supporting. This could prove significant especially in national elections, where Senate and House candidates are often eager to ally themselves with presidential candidates, as was the case in the Jenkins and Stupak matters. The decision could prove especially significant for nationally prominent candidates like McCain, who have a broad fundraising base and ample resources to spend.

Perkins Coie Lawyers on Two Panels at FEC Hearing

Today the Federal Election Commission holds a public hearing to consider whether to change its earmarking, joint fundraising, disclosure and affiliation rules in response to the Supreme Court’s decision in McCutcheon v. FEC.

  • Bob Bauer is scheduled to testify this morning at 9:45 EST. His comments, offered in his individual capacity, can be found here.
  • Brian Svoboda is scheduled to testify this afternoon at 2 EST on behalf of the Perkins Coie LLP Political Law Group, whose comments are here.

A full schedule of the witnesses is here. You can watch or listen to the hearing live.

FEC Publishes New Contribution Limits for the 2016 Election Cycle

Today the Federal Election Commission published in the Federal Register the contribution limits that will apply during the 2016 election cycle. The chart below summarizes the new limits, some of which were adjusted for inflation under the Bipartisan Campaign Reform Act of 2002:

TO/FROM:

Presidential
Candidate

Senate Candidate

House Candidate

National Party Committee

State Party Committee

PAC

Individual

$2,700 per election

$2,700 per election

$2,700 per election

$33,400 per calendar year

$10,000 per calendar year

$5,000 per calendar year

Multicandidate PAC

$5,000 per election

$5,000 per election

$5,000 per election

$15,000 per calendar year

$5,000 per calendar year

$5,000 per calendar year

Non-Multicandidate PAC[1]

$2,700 per election

$2,700 per election

$2,700 per election

$33,400 per calendar year

$10,000 per calendar year

$5,000 per calendar year

National Party Committee

$5,000 per election

$46,800 combined[2]

$5,000 per election

Unlimited

Unlimited

$5,000 per calendar year

State Party Committee

$5,000 per election

$5,000 per election

$5,000 per election

Unlimited

Unlimited

$5,000 per calendar year

Non-individual “person” (e.g., Tribes, partnerships)

$2,700 per election

$2,700 per election

$2,700 per election

$33,400 per calendar year

$10,000 per calendar year

$5,000 per calendar year


[1] A candidate’s authorized committee may only contribute $2,000 (not $2,700) per election to another candidate’s authorized committee, and may make unlimited transfers to party committees.

[2] This limit is shared by the national committee (e.g., the DNC or the RNC) and the national Senate campaign committee (e.g., the DSCC or the NRSC).

Reese Speaks at National Press Club on Nonprofit Political Activity

Political Law Group partner Ezra Reese spoke last week at the National Press Club in Washington, DC, in a panel discussion about whether the Internal Revenue Service should adopt clearer rules for nonprofit political activity. Reese has written here before about the Bright Lines Project, an initiative he has led with other nonprofit tax experts to seek better guidance for politically active nonprofits. Entitled, “A Rising Tide Will Lift All Boats: Evangelical and Progressive Perspectives on the Need for Clear Rules for Nonprofits,” the discussion followed a keynote speech by U.S. Senator Sheldon Whitehouse, and brought together speakers from the progressive, evangelical Christian, and campaign finance reform communities. You can watch a video of the discussion here.

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