Legal Center Weekly Report: January 18, 2013
 
Supreme Court Again Comes Down On Side of Donor Disclosure, Denies Cert in Real Truth About Abortion / FEC & DOJ Complaints Filed Over “Straw Companies” that Funneled $12 million to FreedomWorks Super PAC / IRS Urged to Investigate American Tradition Partnership and Its Suspect Application for 501(c)(4) Status / Crossroads GPS Application to IRS Bears No Resemblance to Shadow Party Committee that Spent $70 Million Anonymously on Ads / Stephen Colbert’s Ham Rove Memorial Fund Makes Generous Contribution to Campaign Legal Center / Legal Center Counsel Testifies in Support of Disclosure Measure / Conservative Groups Join Reform Coalition Calling for President to Fix the FEC and for Congress to Preserve the Office of Congressional Ethics / Legal Center’s Paul S. Ryan Addresses Senate Presidents’ Forum / SEC Moves to Require That Corporations Disclose All Political Spending / Legal Center Urges Reps. Shuler & Emerson to Resign or Recuse Themselves Due to Conflicts of Interest/ Legal Center Names Megan McAllen First Rapoport Legal Fellow / Senior Counsel Joins Panel at Indiana Common Cause Meeting

Supreme Court Again Comes Down On Side of Donor Disclosure, Denies Cert in Real Truth About Abortion

On January 7, the U.S. Supreme Court declined to grant certiorari in The Real Truth About Abortion v. FEC and left standing a lower court ruling upholding FEC rules governing donor disclosure.  The suit specifically challenged the “subpart (b)” definition of “expressly advocating” (11 C.F.R. § 100.22(b)), as well as the FEC’s methodology for determining when a group has campaign activity as its “major purpose.” Both are key measures to ensure effective determinations of federal “political committee” status, and by extension, to implement the comprehensive disclosure requirements applicable to such political committees.

“The Supreme Court has once again come down in favor of transparency, recognizing the vital importance of the public’s right to know who is paying for the political advertising geared toward swaying elections,” Legal Center Senior Counsel Tara Malloy stated.  “Even in the highly controversial Citizens United case, the Supreme Court by an 8-1 vote was clear that disclosure of political spending is critically important to our democratic process.  The Real Truth case was part of an extensive nationwide litigation campaign seeking to undermine state and federal disclosure laws, but those attempts have repeatedly been beaten back in the courts.”

The Supreme Court’s order denying certiorari marks the end of the long-running proceedings which began as The Real Truth About Obama (RTAO) v. FEC in 2008.  The group originally challenged a number of FEC rules, which were all upheld in the district court and court of appeals.  Much of the case was later mooted by subsequent judicial decisions, most notably Citizens United.  The Legal Center, along with Democracy 21, has filed several amici briefs in the case dating back to 2008.  To read those briefs and other documents related to the case, click here.  

FEC & DOJ Complaints Filed Over “Straw Companies” that Funneled $12 million to FreedomWorks Super PAC

On December 20, the Campaign Legal Center, joined by Democracy 21, asked the Federal Election Commission (FEC) and Department of Justice (DOJ) to investigate possible violations of campaign finance law by two companies that appear to have been created for the purpose of funneling $12 million to the Super PAC FreedomWorks for America, while hiding from the public the source of the funds.  On January 3, the agencies were sent additional information to supplement and expand the calls for investigations after The Washington Post reported that Illinois millionaire Richard J. Stephenson was the source of the huge contributions and that FreedomWorks itself, led by executive vice president Adam Brandon, orchestrated the scheme for Stephenson reportedly to evade federal campaign finance disclosure laws. 

“The latest report, if true, confirms our suspicion that the two companies were created to illegally hide the donor of $12 million given to FreedomWorks in the final weeks leading up to the election,” said Paul S. Ryan, Campaign Legal Center Senior Counsel. “Further, the report implies that FreedomWorks played a role and knowingly received the contributions from Mr. Stephenson illegally made in the name of the two straw donor companies. Assuming the media reports can be verified by DOJ and the FEC, the agencies must act quickly to enforce the law and deter future illegal use of straw donors to evade disclosure laws. The integrity of our elections depends on it.”

The two companies named in the original complaint, Specialty Group Inc. and Kingston Pike Development LLC, were both created by William S. Rose of Knoxville, Tennessee in late September 2012, and over the six weeks leading up to Election Day funneled more than $12 million to FreedomWorks.

To read the letter to the Department of Justice, click here and here.

To read the letter to the FEC, click here and here.

IRS Urged to Investigate American Tradition Partnership and Its Suspect Application for 501(c)(4) Status

On January 16, the Campaign Legal Center joined Democracy 21 in urging the Internal Revenue Service (IRS) to investigate whether American Tradition Partnership (formerly Western Tradition Partnership) submitted false information to the agency in order to obtain its 501(c)(4) tax-exempt status.  Copies of the organization’s application materials published by ProPublica and Frontline indicate that the group made numerous false claims while seeking expedited review of its application for exempt status.

In its original application, then Western Tradition Partnership told the IRS that it would not participate or intervene in elections, which it subsequently did.  Further the group sought and received expedited review and approval of its application for 501(c)(4) status by claiming that an individual had pledged $300,000 to the group only if it were granted exempt status by a certain date.  In interviews after the IRS documents were published, the supposed donor (Jacob Jabs) reportedly told the media that he never pledged funds to the group and had never even spoken to representatives of the organization until after being identified in stories as the individual who had pledged funds, when he called the group to complain.

“The IRS needs to investigate the matter thoroughly and if it can verify the media reports, the agency must revoke the group’s exempt status and the Department of Justice should prosecute the violations to the full extent of the law,” said J. Gerald Hebert, Legal Center Executive Director. “If these allegations prove true and American Tradition Partnership is not prosecuted, then there would be little to prevent other one-cycle political committees from posing as social welfare organizations in order to launder money for wealthy secret interests seeking to sway our elections.”

To read the full letter sent to the IRS, click here.

Crossroads GPS Application to IRS Bears No Resemblance to Shadow Party Committee that Spent $70 Million Anonymously on Ads

On January 2, The Campaign Legal Center joined Democracy 21 citing new evidence in urging the Internal Revenue Service (IRS) to deny Karl Rove’s Crossroads GPS tax-exempt status as a section 501(c)(4) social welfare organization. The letter points to the recent public dissemination by the news organization ProPublica of Crossroads GPS’s application to the IRS seeking privileged 501(c)(4) tax exempt status as a “social welfare” organization able to keep its donors secret. The application describes an organization bearing little resemblance to the Crossroads GPS whose recent Federal Election Commission (FEC) filings revealed $70 million in independent expenditures and electioneering communications to elect Republican candidates or defeat Democratic candidates for federal office in the 2012 elections.

“The application filed with the IRS by Crossroads GPS is laughable in the face of the growing body of evidence against the pretense that Crossroads GPS is a ‘social welfare’ organization,” said J. Gerald Hebert, Legal Center Executive Director. “The tax code is being abused to allow the very rich to spend tens of millions of dollars anonymously in an attempt to buy election results, and by extension to purchase still more influence in Washington.”

To read the full letter to the IRS, click here.

Stephen Colbert’s Ham Rove Memorial Fund Makes Generous Contribution to Campaign Legal Center

On December 13, Stephen Colbert announced on The Colbert Report that the Ham Rove Memorial Fund had made a grant of more than $135,000 to the Campaign Legal Center. The only condition of the grant requires that the Legal Center name its conference room The Ham Rove Memorial Conference Room. A dedication ceremony is in the works and the grant will be applied to the Legal Center’s general fund.

“We vow to do our best to ensure that groups like Americans for a Better Tomorrow, Tomorrow and Colbert Super PAC SHH will not be able to get away with their anonymous shell game shenanigans in future election cycles,” said Legal Center President Trevor Potter.

The Ham Rove Memorial Fund was created by Mr. Colbert with money he raised though his Colbert Super PAC. The Colbert Report was awarded with a prestigious Peabody Award for the segments of the show related to the Super PAC and the nation’s completely dysfunctional campaign finance system in the wake of the Supreme Court’s controversial Citizens United decision and a series of failures by regulatory agencies, including the Federal Election Commission and the Internal Revenue Service (IRS).  Legal Center President Trevor Potter served as Colbert’s campaign finance attorney through his private practice.

To watch Mr. Colbert’s announcement of the grant on The Colbert Report, click here.

To view a number of the segments that earned the Colbert Report a Peabody Award, click here.

Legal Center Counsel Testifies in Support of Disclosure Measure

On January 15, Legal Center Senior Counsel Tara Malloy presented testimony at a public hearing in New York City to support New York Attorney General Schneiderman’s proposed rules on nonprofit disclosure.  The regulations would require nonprofits registered with the Attorney General’s Charities Bureau to disclose information in connection to their spending in New York state and local elections, including the sources of their funding.

Ms. Malloy’s testimony focused on the constitutionality of proposed regulations, noting that the Supreme Court had consistently upheld measures requiring political transparency and had specifically rejected many of the arguments that opponents of disclosure offer in support of their position.  The Legal Center intends to submit more detailed written comments on the proposed regulations at the end of February.

Conservative Groups Join Reform Coalition Calling for President to Fix the FEC and for Congress to Preserve the Office of Congressional Ethics

On December 12, the Legal Center was joined by Judicial Watch and the National Legal and Policy Center and eight reform groups in calling upon House Speaker John Boehner (R-OH) and Minority Leader Nancy Pelosi (D-CA) to reauthorize and appoint new board members to the Office of Congressional Ethics (OCE), and urging President Obama to appoint new commissioners to the Federal Election Commission (FEC) who are willing to enforce the laws passed by Congress.

Representatives of the watchdog groups addressed the media at a Capitol Hill press conference in which the President and Congress were reminded that congressional ethics rules and the nation’s campaign finance laws are at dire risk if new appointments are not made to both the OCE and the FEC.  The terms of four of the six board members of the OCE expired at the end of December. The terms of five of the six FEC commissioners had long been expired, and the sixth commissioner’s term is up in April. 

On January 16, Speaker Boehner and Minority Leader Pelosi reappointed the full OCE board allowing the office to continue functioning seamlessly. Earlier this month FEC Commissioner Cynthia Bauerly submitted her resignation effective February 1, which is expected to force the President to nominate at least one new commissioner.   

To read the letter to House Leaders, click here.

To read the letter to President Obama, click here.

To read the comments delivered at the press conference by Legal Center Policy Director Meredith, McGehee, click here.

Legal Center’s Paul S. Ryan Addresses Senate Presidents’ Forum

On January 12, CLC Senior Counsel Paul S. Ryan gave a presentation to the Senate Presidents’ Forum in Palm Beach, FL entitled “Citizens United—Money, Politics and Transparency: Legal Remedies for State Legislatures.”  The Senate Presidents’ Forum is a non-partisan, non-profit 501(c)(3) educational organization serving the information and networking needs of the presiding officers of the 50 state senates in the United States.  Meeting three times a year at various locations throughout the United States and overseas, the Senate Presidents’ Forum provides an opportunity for state senate leaders to meet with their peers to discuss solutions to common challenges faced by all the states, to exchange ideas on issues and public policy, and to benefit from one another's experiences to design effective legislation.

SEC Moves to Require Corporations Disclose All Political Spending

On January 8, the Legal Center along with the Corporate Reform Coalition applauded the Securities and Exchange Commission’s (SEC) proposal to seek disclosure of all corporate political spending in response to a historic demonstration of investor demand for such a rule-making.

In one of the last actions of departing SEC Chair Mary Schapiro’s term, the agency announced that it will consider a proposed rule to require that public companies provide disclosure to shareholders regarding the use of corporate resources for political activities. A petition requesting this rulemaking was filed in 2011 by a bipartisan committee of leading law professors.

By putting this rule on its agenda, the SEC has responded in part to the Supreme Court’s ruling in Citizens United v. Federal Election Commission. In Citizens United, Justice Anthony Kennedy emphasized the importance of disclosure and accountability for corporate political spending, writing that disclosure requirements “provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters.”

Legal Center Urges Reps. Shuler & Emerson to Resign or Recuse Themselves Due to Conflicts of Interest

On December 21, the Campaign Legal Center urged Rep. Heath Shuler (D-NC) and Rep. Jo Ann Emerson (R-MO) to resign from Congress or at the very least recuse themselves from all official matters related to the issues of energy or the environment and broader matters like the “fiscal cliff” due to conflicts of interest created by the jobs they will start when they leave office.

In January, Rep. Shuler will join Duke Energy as its vice president of federal affairs and Rep. Emerson will become President and CEO of the National Rural Electric Cooperative Association (NRECA). Both organizations have high-profile lobbying operations in Washington and spend millions of dollars annually lobbying Congress.

“Representative Shuler and Representative Emerson face issues that will impact their future employers,” said Meredith McGehee, Campaign Legal Center Policy Director. “Out of respect for the institution and their constituents, Representative Shuler and Representative Emerson should resign immediately. Members leaving public service to cash in through the revolving door should not be in the business of serving two masters while still holding office.”

To read the letter to Representative Emerson, click here.

To read the letter to Representative Shuler, click here.

Legal Center Names Megan McAllen First Rapoport Legal Fellow

On January 9, the Board of Directors of the Campaign Legal Center approved the selection of Megan McAllen as the Legal Center’s first recipient of the Rapoport Legal Fellowship.  This fellowship was made possible by a generous grant from the Bernard and Audre Rapoport Foundation. 

“The generosity of the Rapoport Foundation will allow us to keep a very talented young lawyer on board here at the Legal Center as we litigate a growing number of campaign finance and election law cases around the nation,” said Legal Center Executive Director J. Gerald Hebert.  “For the last year we have been lucky enough to have had Megan working with us thanks to a grant from the University of Virginia Law School, and we are thrilled to be able to retain her through this new legal fellowship.”

Ms. McAllen litigates numerous campaign finance and election law issues before state and federal courts, and is also active in a range of voting rights and election protection efforts.  With J. Gerald Hebert, she co-authored “Redistricting in the Post-2010 Cycle: Lessons Learned?” ,which appeared in the Winter 2012 issue of Human Rights Magazine (published by the American Bar Association’s Section of Individual Rights & Responsibilities).

Senior Counsel Joins Panel at Indiana Common Cause Meeting

On December 14, CLC Senior Counsel Paul S. Ryan participated in a panel discussion hosted by Indiana Common Cause, in Indianapolis, entitled “In the Shadows: Campaign Finance Regulation and Disclosure After Citizens United.”  Ryan was joined by FEC Commissioner Cynthia Bauerly and Common Cause Staff Counsel Stephen Spaulding.  The three panelists reviewed the impact of the Supreme Court’s 2010 decision in Citizens United on the 2012 elections and discussed campaign finance reforms that would improve disclosure in coming elections.

 

 
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