Brief Filed in Van Hollen Lawsuit Challenging FEC Regulation That Eviscerated the Contribution Disclosure Requirements for Electioneering Ads
Representative Chris Van Hollen (D-MD) filed a brief last Friday with the federal district court in Washington, DC in a lawsuit he filed in April against the Federal Election Commission.
The Van Hollen lawsuit challenges as contrary to law an FEC regulation that has eviscerated the existing contribution disclosure requirements for groups that run “electioneering communications” ads in federal elections.
The brief filed on Friday sets forth the legal grounds for holding that the FEC regulation at issue is contrary to law and for the court to require the FEC to issue new contribution disclosure regulations.
“The improper FEC disclosure regulation being challenged by Representative Van Hollen is the reason why more than $70 million in secret contributions were spent on ‘electioneering communications’ in the 2010 congressional races,” said Fred Wertheimer president of Democracy 21 and a lawyer in the case.
“Absent the new FEC regulations sought by the Van Hollen lawsuit, or a new disclosure law, we face dramatic increases in the amount of secret contributions that will be spent on ‘electioneering communications’ in the 2012 federal elections and beyond,” Wertheimer said.
Representative Van Hollen is represented in the lawsuit by Democracy 21’s pro bono legal team, led in this case by the law firm of WilmerHale and senior partner Roger Witten and including lawyers from Democracy 21 and Campaign Legal Center.
The FEC is scheduled to file an opposition brief this summer, after which Representative Van Hollen will file a reply brief. The district court may then set the case for oral argument in the fall.
Electioneering Communications
The Bipartisan Campaign Reform Act (BCRA) defines an “electioneering communication” to mean any broadcast communication which refers to a candidate for federal office and is made within 60 days before a general election or 30 days before a primary election. BCRA has disclosure provisions that apply specifically to “electioneering communications.”
[There is a separate FEC contribution disclosure regulation that applies to “independent expenditures” (communications requiring “express advocacy”). That regulation is also being challenged as contrary to law by Representative Van Hollen in a petition filed with the FEC. Unlike the direct court challenge to the “electioneering communications” regulation, Representative Van Hollen first had to petition the FEC to issue a new regulation on contribution disclosure for “independent expenditures” before being able to file a lawsuit challenging the regulation.]
BCRA requires any person, that funds “electioneering communications” to disclose the name of any contributor of $1,000 or more to the person and the amount given. This includes “electioneering communications” paid for by corporations, including tax-exempt 501(c)(4) advocacy groups and tax-exempt 501(c)(6) business associations, and labor unions.
BRCA also provides an alternative approach for donor disclosure: the person can set up a separate bank account to use to pay for its “electioneering communications” and disclose all donors of $1,000 or more to the separate account, and the amounts given.
“What BCRA does not provide is a third way for contributors to be disclosed that was invented by the FEC and set forth in the FEC’s contribution disclosure regulation issued in 2007,” according to Wertheimer. "The FEC regulation permits corporations and labor unions paying for ‘electioneering communications’ to disclose only those donors who gave money ‘for the purpose of furthering’ electioneering communications," Wertheimer said.
“This ‘third’ approach by the FEC has no basis in law and is being used by the groups making ‘electioneering communications’ to massively circumvent the contribution disclosure requirements in BCRA,” Wertheimer said.
“The circumvention results from the fact that spenders take the position that the donations they receive were not specifically designated to pay for ‘electioneering communications’ and therefore do not have to be disclosed under the existing FEC regulation," Wertheimer stated.
The brief states:
The challenged regulation frustrates the intent of Congress by inviting corporations and labor organizations to evade—almost completely—BCRA’s reporting requirements for ‘electioneering communications.’
The Van Hollen lawsuit challenges this FEC regulation as arbitrary, capricious and contrary to law under the Administrative Procedures Act.
According to the brief:
BCRA requires all persons, including corporations and labor organizations, that pay for “electioneering communications” to disclose “all contributors of $1,000 or more.” The challenged FEC rule, by contrast, provides that corporations and labor organizations need identify only some (or even none) of those contributors—those who have announced a “purpose of furthering electioneering communications.” Thus, contrary to the plain language and purpose of BCRA, the challenged FEC regulation permits corporations and labor organizations to pay for “electioneering communications” without disclosing the sources of such funding.
The brief further states:
As a practical matter, by requiring disclosure only of donors who give with a certain announced “purpose,” the regulation does not require disclosure of any contributors, let alone “all,” because a corporation or labor organization will rarely have, and can readily avoid having, evidence of the contributor’s intent to further “electioneering communications,” especially where both parties prefer not to disclose the names and addresses of “all contributors.” The record furthermore confirms that under this regulation almost no contributors are being disclosed. See supra 14-15. A regulation that requires less than the statute requires is contrary to law. See Shays I, 414 F.3d at 82 (citing 2 U.S.C. 438(e)).
The Van Hollen brief states that the FEC regulation adopted in 2007 has eviscerated the contribution disclosure provisions in BCRA and has allowed a huge amount of contributions to be spent secretly in the 2010 congressional races. The brief points out that the amount of secret contributions is expected to greatly increase in the 2012 election.
According to the brief:
In the 2004 and 2006 election cycles after BCRA’s enactment and prior to the Supreme Court’s decision in WRTL, the public received almost full disclosure of the donors to groups making “electioneering communications.” In the 2008 election cycle—after WRTL and the promulgation of the challenged regulation—disclosure fell considerably In the 2010 cycle, it dropped even further. In 2010, persons making “electioneering communications” disclosed the sources of less than 10 percent of their $79.9 million in “electioneering communication” spending. Answer 30. The ten “persons” that reported spending the most on “electioneering communications” (all of them claiming tax-exempt status under 501(c) or 527) disclosed the sources of a mere five percent of the money they spent. Id. 30. Of these ten “persons,” only three disclosed any information about their funders. Id. The public record reflects little or no disclosure of the numerous contributors to non-profit corporations that made substantial “electioneering communications” in the 2010 congressional races. Id. 31.
The brief also notes:
Looking ahead, the U.S. Chamber of Commerce, a section 501(c)(6) corporation, which expended over $30 million on “electioneering communications” in 2010 and disclosed none of its contributors, stated that it will continue to make “electioneering communications” and that it will continue not to disclose any of its contributors. See Answer 32. Crossroads GPS, a 501(c)(4) corporation which expended $1.1 million on “electioneering communications” in 2010 and disclosed none of its contributors, announced that it and its affiliated 527 political organization, American Crossroads, intend to raise a combined total of $120 million for the 2012 election, almost twice as much as the two organizations raised for the 2010 mid-term cycle. Moreover, new high profile groups are forming to exploit the perceived advantage in raising funds for “electioneering communications” from hidden sources. The newly-formed Priorities USA has declared its intention to raise funds from hidden donors, citing a need to keep pace with organizations such as Crossroads GPS. As The New York Times reported, “the group’s entr©e into the early 2012 contest all but ensures that the presidential race will be awash in cash from undisclosed corporate and labor sources with huge stakes in Washington policy making.”
The Van Hollen brief states that the FEC regulation is contrary to the plain language of BCRA, which requires that “all” contributions be disclosed by persons making electioneering communications. The brief says:
The term “all” is hardly ambiguous. “All” means all. “All” means the whole number, or every member of a set or group. It does not mean “some” or “part.” Webster’s Third New Int’l Dict. 54 (2002) (defining “all” as “that is the whole amount or quantity of”); accord Concise Oxford English Dict. 34 (11th ed. 2004) (defining “all” as “the whole quantity or extent of”); see, e.g.,Public Citizen v. FTC, 869 F.2d 1541, 1553 (D.C. Cir. 1989) (invalidating, at Chevron Step One, an agency regulation that created an exception to a statute requiring a warning label on advertising for “any smokeless tobacco product” (quoting 15 U.S.C. 4402(a)(2)). Because 434(f)(2)(F) requires disclosure of “all contributors” to a separate bank account or (at its option) to the organization as a whole, every person who fits the definition of “contributor” (and donates $1,000 or more during the relevant period) must be identified.
The brief shows that the FEC regulation is contrary to the purpose of BCRA and the intent of Congress to provide for the public the sources and amounts of money given to fund “electioneering communications”:
Here, Congress sought to shine light on whose money was behind “electioneering communications.” See supra 3-4. It recognized that persons who finance “electioneering communications” often stand to benefit economically from the election or defeat of a candidate or acceptance or rejection of a bill, and that voters are in a better position to evaluate such communications when the identity of the financier has not been cloaked. See supra 4, n.2. So did the Supreme Court. See Citizens United, 130 S. Ct. at 915 (“[T]he public has an interest in knowing who is speaking about a candidate shortly before an election.”). The FEC’s regulation plunges the financing of “electioneering communications” back into darkness: after promulgation of 11 C.F.R. 104.20(c)(9), virtually all disclosure ceased. See supra 14-15. To maintain that Congress delegated authority to the FEC to bring about this result would be absurd indeed. See Shays I, 414 F.3d at 106; Shays III, 528 F.3d at 925.
In response to an argument that the FEC regulation is justified by alleviating the disclosure “burden” on corporations, the brief states:
Because “burden” is not among the “factors deemed relevant by the Act,” Shays I, 414 F.3d at 97 (internal quotation marks and citation omitted), the FEC’s regulation based on those factors exceeds its statutory authority and constitutes an impermissible construction of the statute.
In fact, Congress expressly and preemptively addressed the “burden” issue in two ways. First, it provided for the segregated account option. 2 U.S.C. 434(f)(2)(E). Second, it exempted contributors who contributed an aggregate amount of less than $1,000 from the disclosure requirement. See id. 434(f)(2)(E), (F). Thus, Congress addressed the “burden” issue in statutory language that is clear, and left the agency no implied authority to create additional exceptions. See Shays I, 414 F.3d at 114 (“By promulgating a rigid regime, Congress signals that the strict letter of its law applies in all circumstances ….”).
Contrary to law, the FEC has engaged in “impermissible second-guessing of Congress’s calculations,” id., by making its own determinations about how to achieve the “policy” objectives “underlying the disclosure provisions of BCRA.” 72 Fed. Reg. at 72911. The FEC did not have this authority. See Shays I, 414 F.3d at 114 (no authority to create exceptions based on agency’s conclusion “that the acknowledged benefits are exceeded by the costs” (quoting Public Citizen v. FTC, 869 F.2d 1541, 1557 (D.C. Cir. 1989))).
The brief concludes:
The Nation is about to enter its sixth election cycle—and its third presidential election—since BCRA was enacted, and the need for regulations that carry out BCRA’s disclosure provisions is more acute than ever. See supra 14-16. The absence of proper disclosure harms both Plaintiff and the public. See Shays I, 340 F. Supp. 2d 39, 52 (D.D.C. 2004) (“The existence of loopholes and unfaithful regulations constitutes a daily injury to both [plaintiffs’] interests and the clearly articulated intent of Congress.”), aff’d 414 F.3d 76 (D.C. Cir. 2005); id. at 54 (“The public interest is best served by enforcing Congress’s intended campaign finance system expeditiously in order to assuage the harms produced by the Commission.”).
Accordingly, we urge this Court to vacate the challenged regulation; direct the FEC to “instigate proceedings” and promulgate revised regulations in accordance with this Court’s order with “reasonable expediency,” id. at 52; and retain jurisdiction to ensure that the FEC timely implements the Court’s order.
