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Citizens United rolls, SEC rule drifts

By MICHAEL KIRKLAND, UPI Senior Legal Affairs Writer   |   Feb. 16, 2014 at 3:30 AM   |   Comments

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WASHINGTON, Feb. 14 (UPI) -- A petition that would undo some of the effects of Citizens United vs. FEC has languished without action at the Securities and Exchange Commission for more than two years while the same narrow U.S. Supreme Court majority that produced Citizens United appears ready to loosen campaign finance rules even further.

The 5-4 decision in 2010's Citizens United, of course, crushed McCain-Feingold campaign finance reform under its heel, saying corporations and unions had political free speech rights. Corporations were free to make unlimited "independent" contributions from corporate general funds, in some cases secretly.

The 2002 Bipartisan Campaign Reform Act, better known as McCain-Feingold, prohibited corporations and unions from using their general treasury funds to make independent expenditures for an "electioneering communication" or for speech that expressly advocates the election or defeat of a candidate.

Corporations could still set up a political action committee, but PACs are subject to even more restrictions and disclosures. And PAC money has to come from the pockets of corporate executives, not from the corporate treasury. There were limits in every election cycle.

McCain-Feingold and similar restrictions on corporate spending in two dozen states were swept away by Citizens United.

In the majority opinion, Justice Anthony Kennedy said limiting corporate political contributions was an exercise in thought control.

"When government seeks to use its full power, including the criminal law, to command where a person may get his or her information or what distrusted source he or she may not hear, it uses censorship to control thought. This is unlawful. The First Amendment confirms the freedom to think for ourselves."

In a side issue, eight of the nine justices agreed Congress at least could force corporations to make donations public. So far, Congress has declined to do so.

The high court ruling was quickly followed by one from the U.S. Court of Appeals for the D.C. Circuit in SpeechNow.org vs. FEC, which used Citizens United to declare unconstitutional the limits on contributions from individuals to groups making independent expenditures.

Together, the two rulings unleashed hundreds of millions in new dollars into the U.S. political system.

In response to Citizens United, 10 professors of corporate law joined together to form the "Committee on Disclosure of Corporate Political Spending." In August 2011, the group submitted a "petition for rulemaking" to the Securities and Exchange Commission: "We ask that the commission develop rules to require public companies to disclose to shareholders the use of corporate resources for political activities."

In other words, if executives want to participate in high-stakes politics using corporate funds, they should have to publicly tell stockholders what they're doing. Corporate funds belong to the stockholders, not corporate managers with their own political agendas.

The committee is composed of "10 academics [from Harvard, Columbia, Yale and similar institutions] whose teaching and research focus on corporate and securities law."

"We differ in our views on the extent to which corporate political spending is beneficial for, or detrimental to, shareholder interests," the group told the SEC. "We all share, however, the view that information about corporate spending on politics is important to shareholders -- and that the commission's rules should require this information to be disclosed."

The professors' petition has been "pending" at the SEC since it was filed. Under law the commission is not required to grant or deny the petition, nor is it under any deadline. In fact, the petition could stay "pending" forever.

Any action positive or negative by the SEC could anger one of two powerful groups -- those in Congress and out who condemn Citizens United as massively corrupting the political system, or those in Congress and out who have benefited from the new campaign finance regime and see it as a natural extension of free speech.

Meanwhile, the justices are scheduled to return to the Supreme Court from the break Feb. 24, and should start handing down decisions shortly thereafter.

One of the decisions is expected to come in McCutcheon and the Republican National Committee vs. the FEC. The justices heard argument in the case Oct. 8 at the start of the term.

The case was brought by an Alabama man, Shaun McCutcheon, and the RNC to challenge "aggregate limits" -- the restrictions on the total amount of contributions that can be given directly during a particular two-year election cycle.

The Federal Election Campaign Act sets up separate limits on the amounts individuals may contribute to federal candidates and other political committees, some indexed for inflation.

The RNC and McCutcheon seek to break through those barriers on direct contributions.

The challenge is a genuine appeal to the U.S. Supreme Court, unlike most cases that end up in the high court, which are the product of requests for review. Appeals must be heard, and once the Supreme Court "notes jurisdiction" in a district court case, it is required to hear it.

The RNC and McCutcheon -- who wanted to make larger contributions than the aggregate limits allow -- asked a three-judge U.S. District Court panel in Washington for an injunction against the continued implementation of the aggregate limits, saying they were unconstitutional or weren't justified by a narrowly tailored government interest.

The panel dismissed the challenge, relying on 1976's Buckley vs. Valeo, in which the U.S. Supreme Court ruled limits on political contributions implicate fundamental First Amendment interests, but said such limits may be imposed as long as they are closely drawn to match a sufficiently important governmental interest, such as corruption.

The panel also rejected the cascade effect of Citizens United on aggregate limits.

One of the many friend-of-the-court briefs filed in support of the challengers comes from U.S. Senate Minority Leader Mitch McConnell, R-Ky., who demanded that the aggregate limits be subjected to "strict scrutiny," the highest form of judicial review.

"In short" McConnell's brief argued, "it is no exaggeration to say that political contributions are not only an avenue of symbolic political expression, but are also a concrete and tangible expression of support that enables the political speech at the core of the American political process."

Another friend-of-the-court brief in support of the challengers comes from The Tea Party Leadership Fund, which describes itself as "a non-connected hybrid political action committee dedicated to promoting individual freedom, limited federal government and returning political power to the states and the people."

"Hybrid PACs" were created by another legal challenge to the FEC. A hybrid PAC can act like a regular PAC, making direct contributions to campaigns, but can set up a separate account and use it to act like a super PAC, accepting "unlimited donations from corporations and capable of making independent expenditures, but unable to donate directly to candidates," an analysis on talkingpointsmemo.com explained.

The leadership fund told the Supreme Court it is chafing under the aggregate rule restrictions.

"TPLF registered with the Federal Election Commission on May 9, 2012," its brief said. "Since then, TPLF has received contributions in mostly small-dollar amounts from over 25,000 individuals and has contributed to more than five candidates, and thus is considered a multicandidate committee permitted by law to make contributions of up to $5,000 to each candidate per election. By pooling these contributions, TPLF is able to express its unique political perspective, engage in independent advocacy and contribute to political candidates. But under the aggregate contribution limits at issue in this case, individuals wishing to contribute to TPLF are prohibited from doing so if they have already reached their arbitrary and unconstitutional aggregate limits of contributions made to other committees or candidates ...

"The aggregate contribution limits imposed on individuals not only critically infringe upon their core First Amendment rights, but also inflict a special constitutional injury on the exercise of political speech by all PACs."

What are the restrictions?

"Any two people who wish to pool their resources and exercise their First Amendment rights by participating in the political campaign process must register as a PAC within 10 days of their contributions or expenditures exceeding $1,000, and are subject to the myriad of statutory provisions and FEC regulations. PACs are immediately subject to both base limits on contributions from individuals and aggregate contribution limits that limit PACs' ability to exercise their core First Amendment rights.

"The base contribution limits bar PACs from soliciting or accepting contributions from individuals of more than $5,000 per election," the brief explained. "Moreover, once an individual has met his or her aggregate biennial contribution limit of $74,600 to non-candidate PACs and state and local party committees, that individual is barred from contributing any funds at all to additional PACs, ranging from even $1 to the small, non-corrupting amount of $5,000."

The brief added: "Individuals are further barred from contributing more than $48,600 to all candidate committees. Thus, the total aggregate limit of all political contributions from individuals cannot exceed $123,200. Further, the current legal regime arbitrarily does not index individual contribution limits to PACs to account for inflation, as is the case for an individual's contributions to all other candidate and party committees."

© 2014 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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