Oklahoma: CLC Refutes Anti-Disclosure Group Misinformation Pushed on State Officials Urging Unnecessary Repeals of Laws

In Oklahoma this week the Campaign Legal Center stepped in to refute gross mischaracterizations of campaign finance law being leveraged by an anti-disclosure group in urging the repeal of a number of existing state political committee disclosure laws in the wake of recent court decisions.

On October 29, the Legal Center sent a letter to the Oklahoma Ethics Commission refuting a number of baseless interpretations of current law by the Institute for Justice (IFJ) in its contacts with the state claiming that several of its current laws were no longer valid in the wake of the U.S. Supreme Court’s Citizens Uniteddecision and a federal appeals court decision in SpeechNow.  The IFJ incorrectly claimed that Oklahoma laws requiring political committees to register with the state and file detailed disclosure reports would leave state defenseless in the face of inevitable lawsuits.  Of the numerous claims made by the IFJ, the only valid one concerned the state’s contribution limit for political organizations that only make independent expenditures.

The full letter text of the letter from the Legal Center to the Oklahoma Ethics Commission follows below.

November 29, 2010

Oklahoma Ethics Commission

2300 N Lincoln Blvd.

Room B-5

Oklahoma City, OK 73105-4812

Dear Commissioners,

It has come to our attention that Oklahoma Ethics Commission staff received a letter, dated October 18, 2010, from the Institute for Justice (hereinafter “Institute Letter”), purporting to explain recent federal court decisions and urging the Commission to “eliminate not only financing restrictions, but also burdensome PAC requirements” existing in Oklahoma law.  See Institute Letter at 3.  The “financing restriction” referred to is Oklahoma’s $5,000 calendar year limit on contributions to political committees (a.k.a. “PACs”).  See Okla. Stat. tit. 74, § 257:10-1-2(a)(1).  The allegedly “burdensome PAC requirements” referred to by the Institute are registration and disclosure requirements.  See, e.g., Okla. Stat. tit. 74, §§ 257:1-1-2, 257:10-1-11(a), 257:10-1-12(l), and 257:10-1-14.

Although the Institute accurately represents the state of federal law with respect to limits on contributions to political organizations that only make independent expenditures (hereinafter “IE-only groups”),[1] the Institute grossly mischaracterizes the current state of the law with respect to disclosure.  We are writing, therefore, to urge the Commission to disregard the Institute’s advice regarding Oklahoma’s disclosure requirements and to stand firm in its enforcement of existing disclosure laws.

The Institute cites two court decisions as the bases for its assertions that Oklahoma should repeal both its contribution limit applicable to IE-only groups and its requirements that such groups register and file disclosure reports as PACs—Citizens United v. Federal Election Commission, 130 S. Ct. 876 (2010), andSpeechNow v. Federal Election Commission, 599 F.3d 686 (D.C. Cir. 2010).

Citizens United

With respect to Citizens United, we stress two points.  First, the Court did not even consider the constitutionality of, much less invalidate, PAC registration and disclosure laws.  Second, to the extent the Court did opine on campaign finance disclosure, eight of the Court’s nine justices broadly extolled its virtues.

In Citizens United, the Supreme Court struck down as violative of the First Amendment the federal law banning corporations from making independent expenditures and electioneering communications using treasury funds, but the Court upheld federal law electioneering communication disclosure requirements in a section of the opinion joined by eight of the Court’s nine justices.

Importantly, the Court had no reason or opportunity to strike down any federal law PAC provisions because the plaintiff Citizens United did not challenge any federal laws applicable to PACs.  Citizens United had no reason to challenge federal law PAC requirements because the plaintiff corporation Citizens United is not a PAC under federal law.[2]  Like Oklahoma law, which only requires PAC registration by a group with the “primary purpose” of supporting or opposing state candidates or ballot measures, federal law only requires a group of persons to register as a PAC if that group has the major purpose of influencing federal elections.[3]  Citizens United, a 501(c)(4) tax exempt corporation, is prohibited by federal tax law from intervening in candidate elections as its primary activity.  As such, Citizens United had no standing to challenge federal law PAC requirements.

To be certain, the Court in Citizens United did discuss federal law PAC requirements, but did so in the context of rejecting a defense argument by the federal government, not in the context of considering a (nonexistent) legal challenge to federal PAC laws.  In defending the ban on corporate political expenditures, the government argued that the ban was constitutional because a corporation could voluntarily set up a PAC if it wanted to make political expenditures.  The Court explained: “Section 441b is a ban on corporate speech notwithstanding the fact that a PAC created by a corporation can still speak.  A PAC is a separate association from the corporation.  So the PAC exemption from § 441b’s expenditure ban, § 441b(b)(2), does not allow corporations to speak.” Citizens United, 130 S. Ct. at 897 (internal citation omitted) (citing See McConnell,540 U.S. 93, 330-333 (2003) (opinion of Kennedy, J.)).

Under no reasonable reading of the Citizens United decision can the Court be said to have struck down federal law disclosure requirements applicable to PACs.  The Institute’s claim to the contrary is nonsense.

The Court in Citizens United did consider, and upheld against constitutional challenge by an 8-to-1 majority, the federal law requirement that certain broadcast ads clearly identifying a federal candidate in close proximity to an election be disclosed (i.e., “electioneering communication” disclosure).  In addition to specifically upholding the challenged disclosure law, the Court praised generally the increased effectiveness of campaign finance disclosure in the Internet age.  The Court explained:

Shareholder objections raised through the procedures of corporate democracy can be more effective today because modern technology makes disclosures rapid and informative.  A campaign finance system that pairs corporate independent expenditures with effective disclosure has not existed before today.  It must be noted, furthermore, that many of Congress’ findings in passing BCRA were premised on a system without adequate disclosure.  With the advent of the Internet, prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters.  . . .  The First Amendment protects political speech; 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.

Citizens United, 130 S. Ct. at 916 (internal citations omitted).

The Supreme Court made clear in Citizens United that effective campaign finance disclosure is vital to democracy and the maintenance of a well-informed electorate.  We urge you to disregard the Institute’s mischaracterization of theCitizens United decision and to continue enforcing Oklahoma’s disclosure laws.

SpeechNow 

With respect to SpeechNow, a case decided two months after Citizens United, we stress two points.  First, the D.C. Circuit did apply the reasoning of Citizens Unitedand concluded that, because independent expenditures do not give rise to corruption, contributions to IE-only groups do not give rise to corruption and cannot constitutionally be limited.  Second, the D.C. Circuit explicitly considered and rejected the Institute’s challenge, on behalf of its client SpeechNow, to federal law PAC registration and disclosure laws—a challenge virtually identical to the argument the Institute now makes to this Commission in urging the repeal of Oklahoma PAC disclosure laws.

Steve Simpson argued the SpeechNow case before the D.C. Circuit, signed the Institute’s letter to you, and cited the SpeechNow decision in his letter to you.  Given these facts, it is nothing less than outrageous that his letter failed to mention that the D.C. Circuit, sitting en banc, flatly rejected his assertion that “the rule that emerges from Citizens United is that narrow disclosure provisions are constitutional for groups that make independent expenditures, but PAC requirements are not.”  Institute Letter at 4.

As the D.C. Circuit explained in SpeechNow:

On November 19, 2007, SpeechNow filed with the FEC a request for an advisory opinion, asking whether it must register as a political committee and if donations to SpeechNow qualify as “contributions” limited by [federal law].  At the time, the FEC did not have enough commissioners to issue an opinion, but it did issue a draft advisory opinion stating that SpeechNow would be a political committee and contributions to it would be subject to the political committee contribution limits.  Believing that subjecting SpeechNow to all the restrictions imposed on political committees would be unconstitutional, SpeechNow . . . filed a complaint in the district court requesting declaratory relief against the FEC . . . .

SpeechNow, 599 F.3d at 690.

The D.C. Circuit further explained:

[I]f the FEC regulates SpeechNow as a political committee, SpeechNow would be required to, among other things: appoint a treasurer; maintain a separately designated bank account; keep records for three years that include the name and address of any person who makes a contribution in excess of $50; keep records for three years that include the date, amount, and purpose of any disbursement and the name and address of the recipient; register with the FEC within ten days of becoming a political committee; file with the FEC quarterly or monthly reports during the calendar year of a general election detailing cash on hand, total contributions, the identification of each person who contributes an annual aggregate amount of more than $200, independent expenditures, donations to other political committees, any other disbursements, and any outstanding debts or obligations; file a pre-election report and a post-election report detailing the same; file semiannual or monthly reports with the same information during years without a general election; and file a written statement in order to terminate the committee.

SpeechNow, 599 F.3d at 691-92 (internal citations omitted).

The D.C. Circuit first considered and agreed with SpeechNow’s claim that, as an IE-only group, it could not constitutionally be subject to contribution limits.  The court explained: “Given [the] analysis from Citizens United, we must conclude that the government has no anti-corruption interest in limiting contributions to an independent expenditure group such as SpeechNow.”  SpeechNow, 599 F.3d at 695.

The court then moved on to SpeechNow’s claim that the federal PAC registration and disclosure requirements outlined above—similar to those in Oklahoma—are unconstitutional as applied to IE-only groups.  The court summarized SpeechNow’s position, remarkably similar to the Institute’s position before this Commission, and then rejected it.

Plaintiffs do not disagree that the government may constitutionally impose reporting requirements, and SpeechNow intends to comply with the disclosure requirements that would apply even if it were not a political committee.  See 2 U.S.C. § 434(c) (reporting requirements for individuals or groups that are not political committees that make independent expenditures); § 441d (disclaimer requirements for independent expenditures and electioneering communications).  Instead, plaintiffs argue that the additional burden that would be imposed on SpeechNow if it were required to comply with the organizational and reporting requirements applicable to political committees is too much for the First Amendment to bear.  We disagree

SpeechNow, 599 F.3d at 697 (emphasis added) 

We cannot hold that the organizational and reporting requirements are unconstitutional.  If SpeechNow were not a political committee, it would not have to report contributions made exclusively for administrative expenses.  But the public has an interest in knowing who is speaking about a candidate and who is funding that speech, no matter whether the contributions were made towards administrative expenses or independent expenditures.  Further, requiring disclosure of such information deters and helps expose violations of other campaign finance restrictions, such as those barring contributions from foreign corporations or individuals.  These are sufficiently important governmental interests to justify requiring SpeechNow to organize and report to the FEC as a political committee.

SpeechNow, 599 F.3d at 698 (internal citation omitted). 

Conclusion

The Supreme Court’s decision in Citizens United, and the D.C. Circuit’s decision two months later in SpeechNow, are consistent with the Supreme Court’s approach in recent years to questions involving elections and the First Amendment—skepticism with respect to campaign finance restrictions and wholehearted embrace of disclosure.

Again, the majority in Citizens United wrote: “The First Amendment protects political speech; 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.”  Citizens United, 130 S. Ct. at 916.  And take, for example, the following passage from the concurring opinion of Justice Scalia in another recent 8-1 election disclosure decision, Doe v. Reed, 130 S. Ct. 2811 (2010).  In Doe, the Court rejected a challenge to a Washington state law that discloses to the public identifying information of individuals who sign referenda petitions.  Justice Scalia scathingly denounced anonymous political activity, writing:

Requiring people to stand up in public for their political acts fosters civic courage, without which democracy is doomed.  For my part, I do not look forward to a society which, thanks to the Supreme Court, campaigns anonymously and even exercises the direct democracy of initiative and referendum hidden from public scrutiny and protected from the accountability of criticism.  This does not resemble the Home of the Brave.

Doe, 130 S. Ct. at 2836-37 (Scalia, J. concurring) (internal citations omitted).

So, with respect to Oklahoma’s limit on contributions to IE-only groups, though the D.C. Circuit decision in SpeechNow is not binding on Oklahoma and the Tenth Circuit, it is difficult imagining the Tenth Circuit ruling differently on this issue given the Citizens United Court’s declaration that independent expenditures do not give rise to corruption.  For this reason, we recommend the state concede that its contribution limit may not constitutionally be applied to IE-only groups.

However, contrary to the Institute’s statements, the Supreme Court in Citizens United did not strike down any PAC requirements and the D.C. Circuit inSpeechNow explicitly upheld PAC requirements as applied to IE-only groups.[4]  We therefore urge the Commission to disregard the Institute’s advice regarding Oklahoma’s disclosure requirements and to stand firm in its enforcement of existing disclosure laws.

Sincerely,

/s/ J. Gerald Hebert

J. Gerald Hebert

Executive Director & Director of Litigation

The Campaign Legal Center

Paul S. Ryan

FEC Program Director & Associate Legal Counsel

The Campaign Legal Center

Tara Malloy

Associate Legal Counsel

The Campaign Legal Center