Concluding from the last message...
3. Finally on the purpose test, it seems that a good example of its
inadequacy lies in the FEC's recent ruling on candidate endorsements. The
Commission held that an endorsement ad is a coordinated public communication
that, if distributed within 120 days of an election before the endorsing
candidate's voting constituency, is a "contribution" by the candidate paying
for the ad to the candidate appearing in it to communicate the endorsement.
Of course, a contribution is a payment "for the purpose of influencing an
election"--though it is clear that in the overwhelming number of endorsement
ads the candidate paying for the ad does not have the "purpose" of
supporting any election other than his or her own. Does that mean from the
FEC's point of view, that the payment is not a "contribution"? The FEC here
has concluded that purpose is not controlling, but that what instead matters
is that one candidate has benefited in fact from expenditures by another.
Purpose here does not matter-only effect,.
I do not agree with this interpretation, but it is an example of the
difficulty of addressing the application of the campaign finance of the
campaign finance laws through a "purpose" prism. The effects of an
expenditure might matter, even where those effects occur in contradiction to
actual purpose. The same would be true of someone who gave large amounts of
money to a nonfederal account for the purpose of defeating the federal
candidate at the top of the ticket, when the effect of the donation, through
its use for ticketwide activities, would be to assist other, nonfederal
candidates as well.
-----Original Message-----
From: Marty Lederman
To: Bauer, Bob-WDC; Rick Hasen; election-law
Sent: 1/31/2004 12:45 PM
Subject: Re: Some thoughts on the GC's Draft Opinion in the ABC 527
Proceeding
Thanks, as ever, to Bob for so thoughtfully and carefully engaging me on
these arguments.
I'm not quite at the point of concluding that the FEC should adopt a
simple "purpose" test for all occasions. Indeed, as to union and
corporate contributions, the statutory standard isn't "purpose," as
such, but rather, whether the payment was made "in connection with" a
federal election. But I am suggesting the following:
1. At least as to individuals' contributions to political committees,
the statutory cap is -- for better or worse, wisely or not -- triggered
by the donor's "purpose," rather than by the recipient's use. (Unless
the payment is "of compensation for the personal services of another
person which are rendered to a political committee without charge," in
which case the $5000 cap applies if the payment was made "for any
purpose.")
2. If the donor has an express federal electoral objective in making
the donation, the statutory question should be quite straightforward,
and there should be no need to turn to the FEC's "objective" test based
on the recipient's conduct. This is what even Justice Thomas, in
McConnell, recognized. Thus, I think that in Bob's hypo -- "As the
donor writes out the check for $4 million, he states: 'I am doing this,
because if we raise public awareness of the threat to reproductive
rights presented by this Administration and its policies, we can beat
Bush in November.'" -- the contribution cap is quite obviously
triggered, and exceeded, regardless of the ultimate use that is made of
the donation. (As I've written many times, there is a very serious
constitutional question in applying the $5000 cap in such a case; but
the statutory question is, IMHO, a no-brainer.) What's the argument to
the contrary? Bob writes that "The law of course does not take account
of purpose or motive: it focuses on how the monies are spent." This is
simply, and unequivocally, mistaken, at least if one understands FECA
(rather than the FEC regs) to be "the law." Even the GC concedes that,
if the money is solicited for the express purpose of affecting federal
elections, the ensuing donations are subject to the contribution limits
-- because they are presumed to have been made for the purposes for
which they were solicited. (See draft AO at 21-22, 28-29.) I think
that this same conclusion should be even more straightforward in the
case where the donor has such an express objective, given that the
statute is, after all, written in terms of the donor's "purpose."
3. The fact that (as Bob correctly notes) the recipient committee might
have mixed motives -- wanting, e.g., to use the $$ to affect state
elections as well -- should make no difference from a statutory
perspective. Indeed, even if the donor has mixed state and federal
objectives -- which I agree will often be the case, and is neither
"disengenuous," nor "worse" -- I think the Supreme Court was almost
certainly correct in concluding that "a literal reading of FECA's
definition of 'contribution' would have required such activities to be
funded with hard money." 124 S.Ct. at 648-49. This is especially true
with respect to union and corporate treasury donations, for which the
trigger is not "purpose" but only that the donation be made "in
connection with" a federal election. This is where I have the most
trouble with Bob's (and the GC's) argument. I share what I presume are
Bob's views that labor unions, in particular, should not be prohibited
from using treasury funds to affect federal elections, and that the
Court should not have upheld the segregated-fund requirement as applied
to unions (at least, not without some sort of facially plausible
explanation as to why it is constitutional as applied to unions). But
the Court did uphold 441b as applied to unions, and the fact of the
matter is that (with the exception of the 1994-2002 soft money
interregnum) unions have been living with that prohibition since 1947.
And, if we presume (however regretably) that 441b is good law, I find it
difficult to understand how union treasury donations to the 527s in
question are not "in connection with" federal elections. Does anyone
believe that they are not in connection with such elections? To be
sure, such donations might be "in connection with" other things, as well
(e.g., legislative debates, state elections); but I suspect no one could
argue with a straight face that they are not "in connection with"
federal elections. I regret this conclusion, and I'd gladly urge the
Court to invalidate 441b as applied to unions; but until it does so, I'm
afraid I don't see a strong statutory argument in support of treasury
donations to the 527s in question here -- unless, of course, it could be
argued that Congress has in effect ratified the FEC's allocation scheme
for unions and corporations by declining to amend that scheme in BCRA
(which I concede is a potentially powerful argument, see pp. 3-6 of
http://www.moresoftmoneyhardlaw.com/outside/act_fec_.pdf
<http://www.moresoftmoneyhardlaw.com/outside/act_fec_.pdf> ; but one I
have not fully considered).
4. I am sympathetic to the point in Bob's final paragraph, namely, that
a "purpose" test is not a very good or efficient touchstone if the
legislative objective is to prevent corruption of federal officials.
Such officials presumably do not really care what a donor's purpose was;
they care how valuable the donation was to their election prospects, and
therefore they care about how such a donation was used, and the extent
to which its value was or was not diluted by being used in a
"multi-purpose" way that was not directly related to the candidate's
election. Indeed, I think that title I of BCRA itself, by abandoning a
"purpose" test in favor of a recipient-based test, actually reflects
this understanding, and is, for this reason, a much more tailored
statute than FECA in this respect. (That's one of the principal themes
of Rick's amicus brief in McConnell.) But this is an argument for
amending FECA to eliminate the "purpose" test; not for ignoring the
statutory language.
5. I agree that in many cases of individuals' donations to political
committees, determining "purpose" will be an elusive, if not futile,
task for the FEC. In such cases, therefore, perhaps it remains
reasonable, and permissible, for the FEC to retain a recipient-use-based
"objective" test. (This was essentially the holding of Orloski.)
However, just as I think (with the GC) that such a test should not be
used in the case where the solicitation is expressly
federal-election-related, I also think that it should not be used where
the donor has such an express "purpose," nor where the donations are
made from union or corporate treasury funds (because, as explained
above, it is difficult to see -- absent a congressional ratification
argument -- how such donations are not made "in connection with" federal
elections). The use of an allocation scheme for "mixed motive" cases is
a harder question, because, as the Court noted, a "literal" reading of
FECA would not permit allocation in such cases.
6. But even if I am wrong, and Bob is right, as to any or all of these
points, I still think it is incumbant upon the FEC to deal with the
statutory language, and to justify its allocation rules in terms of the
statute's contribution limits -- especially seeing as how the Court just
a few weeks ago so harshly and repeatedly rebuked the Commission for
having instituted such an allocation scheme in the first place. What
seems unacceptable to me is an opinion (such as the draft opinion) or a
regulation that appears to have all important questions turn on whether
a particular committee's communication constitutes an "expenditure"
under FECA -- a determination that is, quite simply, inapposite in a
case where the statutory question is whether the donor has violated
441a(a)(1)(C) or 441b(a) by making a donation "for the purpose" of
influencing, or "in connection with," a federal election.
7. Finally, even if the FEC were to retain its old allocation system,
and retain its (in my mind, unjustifibale) focus on whether a political
committee's communications constitute "expendiutures," I presume Bob
would agree with me that the draft AO does not adequately justify its
new bright-line rule that a communication promoting, attacking,
supporting or opposing a federal candidate must be financed entirely
with "Federal funds," or even that such a communication is necessarily
an "expenditure."
----- Original Message -----
From: "Bauer, Bob-WDC" < <mailto:RBauer@perkinscoie.com>
RBauer@perkinscoie.com>
To: "'Marty Lederman '" < <mailto:marty.lederman@comcast.net>
marty.lederman@comcast.net>
Sent: Saturday, January 31, 2004 10:50 AM
Subject: RE: Some thoughts on the GC's Draft Opinion in the ABC 527
Proceeding
Marty is frustrated with the lack of focus on stated or apparent
election-influencing "purpose" in the General Counsel's draft on the
ABC
request. But the problem on this point does not follow from the
Counsel's
analysis, so much as it does from the impossibility of achieving
satisfactory, not to mention constitutional, results with words like
"purpose". I fear in fact that "purpose" presents some of the same
diffficulties we see in the application of terms like "circumvention".
Consider a donor who provides a huge some of money to a 501(c)(3)
organization that is dedicated to public education in the area of
reproductive rights. As the donor writes out the check for $4
million, he
states: "I am doing this, because if we raise public awareness of the
threat
to reproductive rights presented by this Administration and its
policies, we
can beat Bush in November." And the CEO of the happy charity replies:
"I am
with you: Bush is the biggest threat we have ever faced to the rights
of
women, and we have to get rid of him." The law of course does not
take
account of purpose or motive: it focuses on how the monies are spent.
One answer would be: but the committee before the Commission in ABC
is, so
it claims, a political committee, and so the effect of the application
of
the test is not whether a 501(c) would somehow wander into FECA
territory,
but simply whether we accept a purpose other than a federal election
related
purpose in determining the use of monies other than hard money. This,
however, is a dodge. For purpose is regulable in the latter case,
there is
no reason why it would not be just as regulable in the former. In
fact,
from a statutory perspective, we could imagine that if an officeholder
had
solicited the $4 million for the reproductive rights program,
believing it
to have the same effects as imagined by the donor, the fears of
"corruption"
would be more acute than in the case presented by ABC, where the draft
assumes that the activities in question were not coordinated with
officeholders.
The "objective" test that the Commission has followed for the most
part,
respects the difficulties of sorting out how to evaluate and weight
"purpose". it limits the Commission's chase after the
unknowable--what did
the donor really intend with the donation?--and it avoids
oversimplifying
politics. A donor might well have principally, even exclusively, the
purpose of supporting a federal reeelection, but the committee
receiving the
monies might find the nonfederal element of its program important: it
may
well believe that ticketwide activities, entailing coattail effects,
will
enhance the possibility of an election producing legislative
majorities for
the President's congressional supporters, In l980, Bill Brock was
lionized
for a vigorous hard and soft money program that sought to integrate
federal
and state efforts to generate a Republican victory in elections
across-the-board. And he was successful (though the R's did not
succeed in
winning the House, only the Senate.) In this day and age, any
pronounced
interest in a political nonfederal program, as part of an integrated
effort,
is viewed as disingenuous, and worse.
Moreover, by focusing on who accepts the money and how it is spent,
the law
stays closer to its constitutionally approved knitting. The object of
this
exercise is not to regulate the activities of all those who may wish
to
influence elections with the use of monies, but to do so with focus on
those
activities presenting the most serious danger of corruption of federal
elected officials. The "purpose" test in the application discussed by
Marty
pulls the analysis away from this direction. In fact, the purpose
test as
Marty discusses it would be far better justified if the campaign laws
were
sustained as an effort to secure political equality, by equalizing
influence
without regard to resources.
-----Original Message-----
From: Marty Lederman
To: Rick Hasen; election-law
Sent: 1/30/2004 11:17 AM
Subject: Some thoughts on the GC's Draft Opinion in the ABC 527
Proceeding
The draft opinion does not attempt to answer two of the three most
important questions in the current 527 debate:
(i) what makes an organization a "political committee"
(ABC implicitly conceded that it is such a committee, by noting that
it
has federal and nonfederal "accounts" pursuant to 11 CF.R. 106.6 --
which I think makes sense only if it is a "political committee"); and
(ii) whether FECA's $5000 limit on contributions to
political committees is constitutional as applied to a nonparty
committee that does not make contributions to, or coordinated
expenditures with, federal candidates or parties.
The opinion is, instead, concerned almost exclusively with the
legality
of political committees' own conduct - in particular, with how a
committee may use so-called "non-Federal funds." With respect to that
question, the draft opinion will, I predict, be deemed inadequate or
unsatisfying by many observers on all sides of this debate. As I
understand it based on a very quick read, the draft's analysis
proceeds
in the following steps:
1. The draft presumes the validity of 11 C.F.R. 102.5(a)(1)(i),
which provides that all "expenditures" by a political committee "in
connection with any Federal election" must be "Federally funded,"
i.e.,
not paid for by union and corporate treasury funds, or by individual
contributions over $5000. (See page 5.)
2. In determining whether a particular committee activity is an
"expenditure," the draft assumes that, in accord with 2 U.S.C.
431(9)(A)(i), any "purchase, payment, distribution, loan, advance,
deposit, or gift of money or anything of value, made . . . for the
purpose of influencing any election for Federal office" constitutes an
"expenditure."
3. The draft then takes a page out of BCRA in crafting a new
bright-line rule for committees' communications that mention federal
candidates. The draft assumes that communications "promoting,
supporting, attacking or opposing" federal candidates --
communications
that are, for entirely separate purposes, deemed "federal election
activity" pursuant to title I of BCRA, see 2 U.S.C. 431(20)(A)(iii) --
are necessarily "for the purpose of influencing a federal election,"
and
therefore constitute "expenditures" by the committee (page 12). The
"promote, support, attack or oppose" standard, the draft reasons, is
"appropriate as the benchmark for determining whether communications
made by political committees must be paid for with Federal funds"
(page
3).
4. With respect to voter registration and GOTV activities that do not
expressly promote, attack, support or oppose federal candidates, the
draft opinion simply assumes the continued application of the
allocation
rules specified in 11 C.F.R. 106.6.
There are at least a couple of major problems with this analysis.
A. Most fundamntally, the draft opinion makes virtually no attempt to
tie any of its analysis to the language of FECA itself. A person
unschooled in the lacunae of the past quarter-century of FEC
regulation
would, upon reading this, assume that FECA imposes specific
restrictions
on political committees' "expenditures," as such. But FECA does not
impose any such expenditure limitations. Instead, it prohibits two
sorts of contributions to political committees (and, in one case, the
receipt by such committees of the prohibited contributions).
First, corporations and unions may not use their treasury funds to
give
any payment, or anything of value, to a political committee "in
connection with" any federal election, convention or caucus (and
political committees may not receive such payments). 2 U.S.C.
441b(a).
Second, no person may make contributions to nonparty political
committees "in any calendar year which, in the aggregate, exceed
$5,000." 2 U.S.C. 441a(a)(1)(C). For purposes of this restriction,
"contribution" is defined as "any gift, subscription, loan, advance,
or
deposit of money or anything of value made by any person for the
purpose
of influencing any election for Federal office; or the payment by any
person of compensation for the personal services of another person
which
are rendered to a political committee without charge for any purpose."
2 U.S.C. 431(8)(A).
The FEC has, over the years, declined to apply these two restriction
limitations with regard to a contributor's actual intent or purpose in
making the donation. Instead, it has simply presumed that funds
contributed in excess of these two statutory limitations are not, in
fact, "in connection with" federal elections (in the case of corporate
and union treasury funds) or "for the purpose of influencing" federal
elections (in the case of individual donations above $5000) -- a
presumption that apparently is based on the fiction that such
so-called
"non-Federal" funds are contributed to political committees only in
order to influence, and only "in connection with," state and local
elections. Thus, according to the FEC, if the recipient of such an
contribution spends it in a way that is intended to influence both
state
and federal elections, the portion of the expenditure that was paid by
"non-Federal" funds is presumed to have been applied "only" to
influence
(and in connection with) the state-election "portion" of the
expenditure. For example, a GOTV campaign that does not mention
federal
candidates can be paid for in part using corporate and union treasury
funds, on the assumption that those funds are being used - and were
intended by the contributor to be used - only to influence state and
local, but not federal, elections.
The draft opinion continues in this vein. Indeed, the draft even
opines
that a committee's expenditure is in part "non-Federal," and may be
paid
for with "non-Federal" funds, where the Committee itself has the
express
purpose of electing or defeating particular federal candidates (page
7).
Perhaps, however, the FEC might want to reconsider whether it should
abide by the allocation scheme and by its
"objective"-use/recipient-expenditure-based test for determining
whether
FECA contribution limits are exceeded, in light of the Supreme Court's
rebuke of such practices in McConnell. The McConnell majority noted
(in
the context of expenditures by party committees) that ; see also id.
at 660 n.44 ("the FEC regulations permitted more than Congress, in
enacting FECA, had ever intended"); id. at 660 FEC's allocation regime
"subverted" the FECA scheme that was approved in Buckley). Justice
Thomas, dissenting, similarly reasoned that if donations are in fact
made for the purpose of influencing federal elections, then the
"alleged
soft-money donation is in actuality a regular 'contribution' as
already
defined and regulated by FECA." Id. at 732. I think it is fair to
say
that virtually no one believes that corporations and unions give
treasury funds to political committees solely "in connection with"
nonfederal elections, or that individuals give more than $5000 to such
committees solely for the purpose of influencing nonfederal elections.
And, if that is correct, then it should mean that all such donations
are
"Federal," and FECA-restricted.
On the other hand, perhaps it could be argued that, even if the FEC
should never have embraced such a "nonfederal purpose" fiction back in
the 1970s, by overturning the FEC's allocation scheme in certain
respects, but by leaving it untouched in other respects - including
with
regard to contributions to nonparty committees - the Congress in
enacting BCRA in effect ratified the FEC's longstanding construction
of
FECA, and approved the permissibility of the FEC's basic
allocation/recipient-use-test scheme. (On the other, other hand, that
FEC scheme was, as applied to nonparty committees, anything but clear
under FEC law even before BCRA - see, e.g., the SG's brief for the FEC
in Akins and the FEC's proposed regulatory amendments in March 2001,
66
Fed. Reg. 13681; therefore, it would be difficult to identify
precisely
what BCRA could be said to have ratified.)
In any event, the draft opinion does not join this debate; instead, it
is predicated on the FEC's longstanding fiction about contributors'
"nonfederal" intent, on the existing allocation scheme, and on the
assumption that the FEC should look to the manner in which the funds
are
spent, rather than at the objective for which they were contributed.
Indeed, the draft goes so far as to refuse to answer questions
concerning whether certain donations to political committees are
lawful
when the donator's stated purpose is to influence federal elections
(see
pages 22, 7 n.6.) - even though it is precisely such donations, and
not
committees' expenditures, that FECA directly regulates! The draft
defends this refusal on the ground that requests pertaining to the
activities of "third parties" do not qualify as advisory opinion
requests. This is, I think, a cheat. The entire statutory basis of
the
draft opinion is FECA's restrictions on contributions to political
committees. To be sure, the FEC regulations address the committees'
expenditures, but only as an administratively manageable way of
enforcing the statutory restrictions on contributions by corporations,
unions, and individuals. Moreover, at least as to corporate and union
donations, the draft could easily have opined as to whether the
committees' receipt of such donations is unlawful. See 2 U.S.C.
441b(a)
(separately prohibiting committees' receipt of corporate and union
treasury funds donated "in connection with" federal elections).
B. Even assuming that the FEC should continue to regulate FECA's
contribution limitations based upon the purposes of the subsequent
expenditures by the recipient political committees, the draft provides
very little explanation for its new bright-line rule that a
communication promoting, attacking, supporting or opposing a federal
candidate can be financed entirely with "Federal funds." The draft
simply reasons that such communications are "for the purpose of
influencing a federal election," and thus are "expenditures" within
the
meaning of 2 U.S.C. 431(9). (See page 12.) But there are at least a
couple of problems with this theory.
First, for better or worse, rightly or wrongly, "expenditure" under
431(9) and similar FECA provisions has been construed to include only
"magic words" express advocacy, a narrower category than BCRA's
"federal
election activity' definition. BCRA did not amend the definition of
"expenditure." To the contrary - that more recent statute established
new categories of communications, including "electioneering
communications" and "federal election activity," precisely because it
wanted to reach communications that were not regulated as
"expenditures"
under FECA. Thus, insofar as committees' use of "non-Federal" funds
is
(or should be) governed by what constitutes an "expenditure" under
FECA,
the draft opinion appears to construe that statutory term more broadly
than might be warranted.
On the other hand, why should the permissibility of a committee's use
of
"non-Federal" funds be governed by whether the committee's activity is
an "expenditure" under FECA? The statutory tests are whether the
funds
were donated to the committee "in connection with" a federal election
(for union and corporate treasury funds), and whether the funds were
given to the committee "for the purpose of influencing any election
for
Federal office" (for individual donations above the $5000 cap). In
light of those statutory criteria, perhaps it does make sense to
presume
that funds contributed for communications that attack, support, oppose
or promote a federal candidate are subject to FECA limits -- not
because
such communications are necessarily "expenditures," and not because of
BCRA, but instead simply because such communications presumptively
are,
at least in part, "in connection with," and "for the purpose of
influencing," federal elections. If so, then perhaps the draft
opinion
has reached the right result, but for the wrong reasons. (This
conclusion would not, of course, resolve how such funds should be
treated where the communication in question is intended to affect both
state and local elections, or are, e.g., "in connection with" both
federal elections and federal legislative debates.)
C. Finally, the draft does not question or reexamine the adequacy of
the existing FEC regulation (11 C.F.R. 106.6) concerning political
committees' expenditures for GOTV and voter registration. Nor, more
broadly, does the draft address the broader questions of regulatory
amendment that the FEC raised in March 2001, see 66 Fed. Reg. 13681,
but
that the Commission has yet to answer. (In fairness to the GC, this
is
probably not the proper procedural context for such reevaluation of
the
existing regulatory structure - although the GC does use the draft
opinion to adopt a brand-new bright-line rule regarding communications
that attack, support, oppose or promote a federal candidate.)