Never Mind Super PACs: How Big Business Is Buying the Election
Before the advent of the Roberts Court, Saudi Aramco would have been prohibited from using corporate money to influence an American election. The company’s only option would have been to ask its US-based employees to make small donations to a transparent political action committee.
A 1990 Supreme Court decision, Austin v. Michigan Chamber of Commerce, required trade associations to spin off separate, highly regulated PACs if they sought to influence federal elections. These PACs could only be funded with disclosed contributions from individuals, in amounts limited by the Federal Election Commission. Trade associations were further restricted by the 2002 McCain-Feingold campaign finance reform act, which prevented corporations from airing so-called electioneering communications within sixty days of a general election. This ban encompassed sham issue ads, which attack a candidate without explicitly calling for his or her defeat—those ubiquitous commercials that go something like: “Call Senator John Smith and tell him to stop killing jobs!”
Then, in 2007, just a year after Samuel Alito replaced Sandra Day O’Connor, and only two years into John Roberts’s tenure as chief justice, the Court went to work chipping away at these restrictions. That year, in Federal Election Com- mission v. Wisconsin Right to Life, the Court’s conservative majority struck down the limits on corporate-funded sham issue ads. Three years later, Citizens United vastly expanded the scope of that ruling, striking down any prohibition against corporations airing election ads of any type, at any time.
In his dissent, Justice John Paul Stevens warned that the Court’s logic, which put campaign spending by corporations on an equal footing with spending by individuals, would open the door to foreign influence on American elections. The decision affords “the same protection to multinational corporations controlled by foreigners as to individual Americans,” wrote Stevens.
The retiring justice, in the longest dissent of his career, mocked the majority’s claims that corporations are censored in American society. Had the decision been in place before World War II, he noted, Japanese propaganda broadcasts in the South Pacific would have been accorded First Amendment protections. And although Stevens continued to sound the alarm about foreign influence in speeches, lobbyists immediately recognized the ways that corporations could take advantage of the extraordinary decision.
In 2010, Cleta Mitchell, a prominent Republican election attorney who advises GOP candidates as well as corporations, began delivering a PowerPoint presentation to the officers of major trade associations. In one version called “Political Activity After Citizens United: Understanding the Opportunities and the Risks,” presented at a Washington, DC, conference center for such trade groups as the Consumer Electronics Association, Mitchell pointed out that “many corporations will not risk running ads on their own,” nor will they choose to work with Super PACs, which are subject to disclosure requirements. Such direct corporate involvement, she warned, could lead to “public image problems like those experienced by Target.”
She was referring to an episode that has since become notorious in the world of corporate electioneering, when Target and Best Buy became two of the first large firms to take advantage of Citizens United by donating a combined quarter of a million dollars to Minnesota Forward, the committee set up to support Tom Emmer, a Republican gubernatorial candidate. But Emmer was an outspoken opponent of gay rights, and when filings revealed that Target had funded his campaign, MoveOn.org called for a boycott of the company’s stores. Target CEO Gregg Steinhafel was forced to backpedal, and the entire episode became what James Kahl, a former general counsel to the FEC who now advises trade associations, calls “a cautionary tale.”
In such a system, Mitchell said, “[trade] associations are the big winners”: no filings, no disclosure, no fuss.
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Though much media attention has been heaped on Super PACs—the new political action committees that can take unlimited contributions from nearly any source, such as Mitt Romney’s Restore Our Future—they haven’t caught fire within corporate America owing to their monthly (in some cases, quarterly) disclosure requirements. Most donations to Super PACs are from wealthy individuals, such as casino magnate Sheldon Adelson, making them not so different from the so-called 527 groups that proliferated in the immediate wake of McCain-Feingold. Among the eight largest Super PACs active during the Republican presidential primaries, 86 percent of their funding came from individuals, not corporations.
The real tsunami in corporate spending has come from nonprofits, in particular trade associations, which are classified as 501(c)(6) organizations under the tax code and are virtually fully funded by corporate cash. In 2010, 501(c)(6) trade associations and 501(c)(4) issue-advocacy groups outspent Super PACs $141 million to $65 million, according to the Center for Public Integrity and the Center for Responsive Politics.
After Citizens United, trade associations quickly moved to augment their traditional PAC spending with secret corporate cash. Take the Pharmaceutical Research and Manufacturers of America, the pharmaceutical industry’s trade association. In 2008, PhRMA spent less than $200,000 on federal elections, using only money bundled from transparent individual contributions, mostly from drug company executives. The following election cycle, after Citizens United, PhRMA spent $10.36 million on federal elections, 98 percent of it from undisclosed corporate sources.
Likewise, the shift allowed the National Association of Realtors, already a heavy hitter when it came to PAC spending, to unleash an additional $1.1 million on federal elections from undisclosed real estate companies in 2010.
“What Citizens United has done, it has wholesale changed the landscape,” said Stefan Passantino, a partner at the law and lobbying firm McKenna, Long & Aldridge and a former Newt Gingrich campaign adviser. He was addressing a seminar in Atlanta, Georgia, on corporate political engagement in the 2012 election cycle. He recounted advising one corporate client on how to “engage in an issue where we’re not popular,” in this case to preserve certain tax loopholes. Passantino said businesses have enormous new opportunities for influencing elections without being detected. “We gotta keep our corporate logo out of the bull’s-eye,” he added.
The ability to avoid disclosure is what makes trade associations the perfect vehicle for corporate electioneering. Quirks in IRS rules allow trade associations to hide all of their donor information. The few disclosures mandated for 501(c)(6) organizations, which pertain to yearly budget information and transfers of money to other groups, only become public a full year after an election has occurred. The disclosures for trade associations active this election season won’t be released until the fall of 2013—and even then we won’t know which individual corporations provided funds for the ads blanketing the airwaves.
By an eight-to-one vote, the Supreme Court, in Citizens United, upheld existing disclosure laws. It’s ironic now to note that Justice Anthony Kennedy’s majority opinion spoke of the danger that groups running election-season ads would hide “behind dubious and misleading names,” and that citizens deserved disclosure to “make informed choices in the political marketplace,” since the decision he wrote has ushered in a new era of dubious and misleading campaign entities. Since then, Congress has failed to pass an updated disclosure law to deal with trade associations and other groups exempted from election transparency rules. And a three-to-three deadlock at the FEC has prevented a tighter reinterpretation of the existing rules.
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