Money in politics: legal experts contemplate the four years since Citizens United ruling

02/28/14 Janelle Irwin
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Tags: Citizens United, money in politics, Campaign contributions, dark money, super PAC, 501(c)4


Palelists look at the implications of money in politics four years after the controversial Citizens United V. FEC Supreme Court ruling.

photo by Janelle Irwin

It’s been four years since the Supreme Court’s ruling on Citizens United allowed corporations and wealthy individuals to contribute unlimited money to political campaigns. During a symposium at Stetson University College of Law Friday, panels of law professors and other professionals took a look at how the political climate has changed since the landmark decision.

Citizens United led to the creation of Super PACs – political action committees that collect funds from wealthy donors and spend the money on things like political ads. Ciara Torres-Spelliscy is a Stetson law professor.

“Before Citizens United, if a CEO of a corporation wanted to spend in politics, he had that right, he just had to use his own money. But what Citizens United opens up is the opportunity for that CEO to reach into an entirely different pocket to pull out a different checkbook, to pull out the corporate checkbook – the one that has the corporate logo on it, the one where the bill does not go to his house.”

According to Jonathan Salant, a reporter for Bloomberg, that’s a lot of money.

“Non-profits continue to spend millions on campaigns without disclosing their donors and efforts to require such groups to identify their backers have been backed by Republicans who benefit more than Democrats by such outside spending. In 2012, Republican-leaning non-profits spent almost $270 million. Democratic-leaning groups spent less than $60 [million].”

Salant talks about groups not disclosing donors. That’s called dark money and it’s made possible by non-profit groups classified by the IRS as 501(c)4. Super PACs fall under the purview of the Federal Elections Commission and they have to provide transparency about where their money comes from. 501(c)4s are regulated by the IRS and don’t have that same burden. Stetson’s Torres-Spelliscy cites statistics from the website showing that 42% of campaign spending came from so-called dark money in 2010.

“If 2010 was a dark election, 2012 was an even darker election. Now the percentages got better, it’s only 31% of money was dark, but that’s because the denominator grew so substantially. So, in the aggregate, the dark money more than doubled between 2010 and 2012.”

The far-reaching implications of Citizens United are most often criticized by left-leaning groups. But supporters are quick to point out the law also benefits groups that tend to support Democrats. But Torres-Spelliscy points out there is a reason groups like labor unions aren’t talked about.

“This is the form that unions have to fill out itemizing their political expenditures. They report this to the Department of Labor and have been doing this for decades, but I can’t show you a form from the Securities and Exchange Commission because no such form exists.”

The idea behind the ruling was that it was unconstitutional to prohibit corporations from spending money on political ideals. But it creates another problem with publicly traded corporations. John Coates IV is a professor of law and economics at Harvard.

“Corporations are owned and run for the benefit of their shareholders not their managers under corporate law principals, but as a practical matter, without disclosure or without better tools for shareholders to control managers, in fact it’s the managers who run the corporations for their own interests.”

That means when a corporation opens up its checkbook to a Super PAC or a dark money group, the shareholders don’t necessarily get a say even though it’s their money being spent. But efforts to require disclosure have failed in Washington and only some states require corporations to give shareholders a heads up when company funds are being spent on campaigns or lobbying. In Iowa, a board of directors has to approve political spending. Maryland requires the expenditures be reported to shareholders. The same goes for New York, but only if those contributions are more than $1,000.

“The theory basically goes like this: you can’t control it. If you try to regulate money in politics it’ll just figure out some other way to get where it wants to go. It’s like water, it’ll just get there.”

Coates says the lack of action by Congress to reform campaign finance laws makes a good argument for giving up, but the theory among naysayers isn’t true.

“That in those states with regulation of political activity, the laws are systematically better for shareholders where companies have to disclose more information about their politics.”

And of course there’s the question of when is a contribution just a contribution and when is it quid pro quo? That’s a line Stetson white collar crime research professor Ellen Podgor says has been blurred. She uses a made-up congressional candidate – Good Eve – as an example.

“She tells a group of students and parents of students that she supports legislation to subsidize student loans, but she needs money to get elected.”

So those parents and students donate money to her campaign. When Good Eve gets elected, she delivers on her promise. Podgor asks, is that legal? Most would agree it is. But what about another fictitious mayoral candidate? In Podgor’s example, Evil Eve tells a contractor that if he donates to her campaign, she’ll make sure he lands a contract with the city.

“The contractor donates the money, Evil Eve gets elected and the first thing she does is she gives that contract to the contractor. Did Evil Eve commit a crime? Are these two individuals really any different?”

They are different and Evil Eve is likely breaking the law. But she could easily defend her actions. Meanwhile Good Eve could also be accused of giving campaign kickbacks. Regardless, Harvard’s Coates thinks the Citizens United ruling and all its implications will come back to bite some benefactors eventually.

“If we keep the system in place what will eventually happen is another Watergate, there will be a scandal. Some of the current incumbents who are benefiting from the system will go to jail and they will do so surprised.”

Citizens United is a conservative 501(c)4 non-profit that challenged the Federal Election Commission for the right to air and advertise an anti-Hillary Clinton video. The group won in a 5-4 Supreme Court ruling. According to Mother Jones, Citizens United plans to challenge proposed changes to IRS rules that would clarify what constitutes political activity.

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