Of What Use is "Major Purpose" Absent Corruption? -- Part Two

Published on March 3, 2008 06:46 AM
by Steve Hoersting

File Under: Enforcement, Faulty Assumptions, Political Committees & 527s

Of What Use is "Major Purpose" Absent Corruption?: The Pernicious Nature of the "Political Committee" Process--and What the Courts Can Do About It.

-- The following is the second in a two-part post -- 

The burden in being a “political committee.”  The Supreme Court made plain in MCFL that “even to speak through a segregated fund,” would require “very significant efforts” and while “not an absolute restriction on speech, it is a substantial one” that “may create a disincentive for such organizations to engage in political speech.” MCFL at 252-54. The MCFL Court explained in detail the burdens and obligations associated with being a political committee, and readers interested in those burdens should see the Court’s opinion at pages 253 to 255. 

The Court noted that the 

[d]etailed record-keeping and disclosure obligations, along with the duty to appoint a treasurer and custodian of the records, impose administrative costs that many small entities may be unable to bear.  Furthermore, such duties require a far more complex and formalized organization than many small groups could manage. 

***

Faced with the need to assume a more sophisticated organizational form, to adopt specific accounting procedures, [and] to file periodic detailed reports … it would not be surprising if at least some groups decided that the contemplated activity was simply not worth it.

MCFL at 254-55.

In addition to cataloguing burdens, the Court also explained that every government interest in forcing MCFL to register was met by more narrowly-tailored disclosure and disclaimer provisions in FECA available to “persons other than political committees.”  (This argument is explained, and updated to accommodate BCRA, in footnote 9 of the SpeechNow.org Advisory Opinion request).

If a billionaire acting alone can spend unlimited sums advocating the defeat of a candidate and disclose only when he speaks, without laying bare his personal finances, why can’t a group of citizens do the same?  Those concerned about independent organizations disclosing only when the organization makes a communication, however, may have some questions:

What if the organization begins coordinating its communications with candidates, political parties or other committees, thus compromising its independence?  This violation would be captured by the same complaint process in place for coordination between campaign committees and other political committees.

What if the organization begins making contributions, thereby opening itself to a potentially corrupting tie to officeholders?  Those contributions would be reported by the recipient committees, and would force the previously independent organization to become a political committee or administer one.

What if an organization began taking corporate funds or became a conduit for other corporate actors?  This question was addressed in MCFL where the government argued that the failure to register would “open the door to massive undisclosed spending by similar entities, and to their use as conduits for undisclosed spending by business corporations and unions.”  MCFL at _.  The Court saw “no such danger”:

[A]n independent expenditure for as little as $250 by MCFL will trigger the disclosure provisions of § 434(c).  As a result, MCFL will be required to identify all contributors who annually provide in the aggregate $200 in funds intended to influence elections, will have to specify all recipients of independent spending amounting to more than $200, and will be bound to identify all persons making contributions over $200 who request that the money be used for independent expenditures.  These reporting obligations provide precisely the information necessary to monitor MCFL’s independent spending activity and its receipt of contributions.  The state interest in disclosure therefore can be met in a manner less restrictive than imposing the full panoply of regulations that accompany status as a political committee under the Act.

MCFL at 262.

Compelling organizations to political committee status can be legitimate only to further legitimate interests.  The Act itself, however, provides more narrowly tailored means of furthering those interests short of registration.  The Commission’s 2004 rulemaking on political committee status, therefore, is unconstitutional as-applied to certain independent organizations.  Independent, unincorporated, and individually-funded organizations that don’t contribute and don’t coordinate needn’t register as political committees and subject themselves to contribution limits, either to further the interest in preventing quid pro quo corruption or its appearance or to stem corruption from the “corrosive … effects of … wealth that are accumulated with the help of the corporate form.”  See Austin, supra.  (That contribution limits are inapplicable to independent, unincorporated, and individually-funded organizations is predicated on a concurring (and controlling) opinion of Justice Blackmun in FEC v. California Medical Assn., 453 U.S. 182 (1981)).

Recall that the informational interests recognized in Buckley are to “provide the electorate with information … to aid the voters in evaluating those who seek federal office”; to “deter actual corruption and [its] appearance … by exposing large contributions and expenditures to the light of publicity,” and to “gather[] the data necessary to detect violations of the contribution limitations.”  Buckley at 66-68.  The first two interests are furthered by FECA’s disclosure and disclaimer provisions for non-political committees.  The third is inapposite as independent, unincorporated, individually-funded speech organizations cannot constitutionally be held to contribution limits.

Unfortunately, the MCFL Court did not have the opportunity to fully consider what threats might be posed or interests might require an unincorporated organization to register, even if the organization’s major purpose is campaign activity.  The Court’s statement -- “should MCFL’s independent spending become so extensive that the organization’s major purpose may be regarded as campaign activity, the corporation would be classified as a political committee” – is dicta.  But the Court did provide insight as to how it would rule where it finds the absence of potential corruption:

It is not the case … that MCFL merely poses less of a threat of the danger that has prompted regulation.  Rather, it does not pose such a threat at all. … Given this fact, the rationale for restricting core political speech in this case is simply the desire for a bright-line rule [of political committee registration].  …. While the burden on MCFL’s speech is not insurmountable, we cannot permit it to be imposed without a constitutionally adequate justification.

MCFL at 263.

The pernicious effects of prosecuting “major purpose.”  But the burden is not solely on those small or ideological organizations, like MCFL, that might register grudgingly or unnecessarily.  As stated by Bob Bauer himself, when addressing the rulemaking when issued: “The major purpose test as explained and applied by the agency is one of the constructions that will most concern the regulated community—or even more, unregistered organizations operating outside the sphere of regulation but in the belief that they are doing so legally.”  Bob Bauer (2/1/07)

“[U]nregistered organizations operating … in the belief they are doing so legally”….  This describes ALP.  ALP Counsel Karen Getman issued a Memorandum last Feb. 21^st stating that, “[a]lthough ALP is not a political committee under BCRA [sic], and will not be subject to BCRA’s funding restrictions, it will have reporting requirements with the FEC as well as the IRS.  [E]very time the ALP spends $10,000 or more on an electioneering communication, it will file within 24 hours a report with the FEC that lists its donors of $1,000 or more.”

But even if they understood and foresaw the arguments awaiting them, Getman and ALP were sitting ducks for opposing counsel.  Under the 2004 rulemaking, “[i]f the modest level of contributions or expenditures are found to have been made or received,” explains Bauer, “the agency may embark on what it terms ‘an extensive examination of the organization,’” to determine its major purpose.  That examination “is complex and, in practical deployment, open-ended: it reserves to the regulators considerable authority to render judgments as they see fit on any set of facts they may encounter.”  Bob Bauer (2/1/07).  The mere allegation of political committee status to an unregistered organization freezes the organization in its tracks, and robs it of the ability to exercise its rights of association and issue discussion.  “All unregistered organizations of whatever kind that are seen to influence elections—or that are suspected of this activity—will undergo extensive examination.”  Id.

The process is open-ended.  The Commission claims a need to “examine statements by the organization that characterizes its activities and purpose,” as well as “fundraising appeals” and to “evaluate the organization’s spending on Federal campaign activity, as well as any other spending by the organization.”  Rulemaking at 5601.  The Rulemaking notes that had the Commission “simply adopted a rule in 2004 that listed the factors considered in determining an organization’s major purpose, the rule would still have to be enforced through investigations of the specific statements, solicitations, and other conduct by particular organizations,” and the listing “would not likely be exhaustive in any event.”  Rulemaking at 5602.  The Commission's test for major purpose probes the organization's intent and its effect.

The Supreme Court, however, “in Buckley had already rejected an intent-and-effect test for distinguishing between discussions of issues and candidates," and "explained that analyzing the question in terms of ‘intent and effect’ would afford ‘no security for free discussion.’”  WRTL II at 2665.  The Court’s reasoning is instructive and the Commission should now realize that if determining issue discussion from electoral advocacy must turn on objective factors then it is a disservice to speakers to mire the major purpose test -- ultimately for the same communications -- in subjective criteria:

[A]n intent-based test would chill core political speech by opening the door to a trial on every ad …, on the theory the speaker actually intended to affect an election, no matter how compelling the indications that the ad concerned a pending legislative or policy issue.  No reasonable speaker would choose to run an ad … if its only defense to a criminal prosecution would be its motives were pure.  An intent-based standard “blankets with uncertainty whatever may be said,” and “offers no security for free discussion.” 

WRTL II at 2665-66.  The Court, in WRTL II, stated that a “proper standard … must be objective, focusing on the substance of the communication rather than amorphous considerations of intent and effect.”  WRTL II at 2666-67.  Any inquiry into whether a communication is a source-prohibited electioneering communication or genuine issue advocacy “must entail minimal if any discovery, to allow parties to resolve disputes quickly without chilling speech through the threat of burdensome litigation.  And it must eschew “the open-ended rough-and-tumble of factors, which, “invites complex argument in a trial court [or election commission] and a virtually inevitable appeal.”  Id.

The pursuit of major purpose at the FEC does not end the open-ended rough-and-tumble of factors.  It shifts them from the determination of the ad’s nature to a determination of the nature of the organization.  This is a process the Court would have to look askance upon if made to understand it.  Why carve clean lines between electoral and issue advocacy, and take steps to streamline the process for determining constitutionally protected only to muddle the process in a search for major purpose?

The courts should, once and for all, save worthy speakers from this regulatory ordeal.  Creating a bright-line standard for “major purpose” is unlikely.  Even a test that would require a 51% showing of electoral output—expenditures; express advocacy—to subject an organization to political committee status would still suffer from the lack of a government interest when applied to certain independent organizations.  To save worthy speakers this ordeal, the courts should hold political committee status unconstitutional as-applied to any organization that neither contributes nor coordinates, that uses individuals’ funds for any communication, and does not engage in express advocacy via the corporate (or union) form, no matter the major purpose of the organization.  (This protection already exists for certain ideological corporations whose major purpose isn't campaign activity.  See MCFL.  And running unprotected electioneering communications with corporate or union treasury funds is a separate violation, irrelevant to political committee status).

Conclusion.  Asked by Prof. Rick Hasen to reconcile his interest in the SpeechNow.org litigation with his attack against the ALP, Bauer explained that he didn’t make the rules governing the 2008 election cycle, he is only following them.  As a matter of policy no one has been more critical of the political committee construct than Bauer; he understands what is at stake, which is evident from his presentation of the arguments in the matter of SpeechNow.org:

[T]he crowd at SpeechNow has filed suit [and has] argued that if the speech is truly independent, the individuals joining together to finance it cannot be forced into political committee status; or that if they must register as a committee, their contributions cannot be limited.  Their claim is constitutional.  [U]ntil a court has spoken, [however,] the law is the law.

Bob Bauer (2/26/08).  Campaign finance enthusiasts have focused too much on the contribution-limits side of the SpeechNow.org matter and have ignored the argument on the early side of Bauer’s semi-colon.  This is understandable.  Casual commentators, busy elsewhere, can easily recall a concurring opinion in Cal Med, but perhaps have not taken time to consider the burdens associated with being a political committee, or grasped the pernicious effects in prosecuting major purpose or the intricacies in political-committee investigations themselves.  But political committee status is the constitutional question on which the courts must engage.  Without precedent of this kind, independent speakers lay unprotected from the full panoply of regulation spared MCFL.  Issue advocates remain open to regulatory hijacking by skilled compliance lawyers like those that held up the American Leadership Project and forestalled the ALP’s exercise of rights guaranteed under WRTL II.

This is why SpeechNow.org president David Keating has always called SpeechNow.org an “independent speech group,” and never a “political committee.”  To underscore the importance of that appellation, we’ll give Bauer the last word:

527s are either an affront to the enforcement of the campaign finance laws, or the organizations created for and best suited to the free discussion of campaign issues and of the candidate’s positions on those issues.  Whether they are more the one than the other is often made out to be obvious.  But it is not obvious, which is why, particularly as the 527 arguments turn to speech and away from coordination, the campaign finance law is facing a severe test, not too long before the Supreme Court supplies the final grade.

Bob Bauer (10/13/06)

P.S.  Realize that for organizations that are controlled by or comprised of candidates, or that coordinate with or contribute to other political committees, major purpose is largely the question whether the entire organization must become a political committee or merely administer a political committee (i.e. establish a separate segregated fund).  Ask yourself: Of what use is the major-purpose test for unincorporated organizations that do not contribute or coordinate, are not controlled by or comprised of candidates (or officeholders), and do not avail themselves of corporate or union treasury funds in the pursuit of politics?  And if still you see a use there in major purpose, concede that your use is not in preventing corruption or its appearance as today’s courts understand the term.