By: Fred Wertheimer

The Supreme Court is scheduled next week to decide whether to review two lower federal court decisions in which the constitutionality of key campaign contribution limits are being challenged.

At its conference on Friday, February 15, 2013, the Court is expected to act on a petition for certiorari in a case that involves a challenge to the constitutionality of the ban on corporate contributions to federal candidates.

The Court is also expected to act on an appeal in a case that involves a challenge to the constitutionality of the limit on total contributions that an individual can make to all federal candidates, party committees and PACs in a two-year election cycle.

The Supreme Court has upheld both of these key contribution limits in past decisions. Opponents are now asking the Supreme Court to declare unconstitutional, for the first time, limits on contributions to federal candidates.

If the Court decides to hear one or both of these cases, the stakes involved would be enormous.

If the corporate contribution ban is declared unconstitutional a corporation would be free to give, and a federal officeholder free to solicit, a single check to a national party of $1,194,000 million for a two-year election cycle.[1] The national party could then spend all of this money to benefit the officeholder who solicited the million dollar-plus contribution.

The same would be true if the limit on the total amount an individual can give to all candidates, parties and PACs is declared unconstitutional. A federal officeholder would be free to solicit, and an individual free to give, a single check to a national party of $1,194,000 for a two-year election cycle. Again, the national party could spend all of that money to support the officeholder who solicited the donation.

Either or both of these results would open the door to widespread buying and selling of influence in Washington. Striking down either of these contribution limits would be a grave setback in the efforts to prevent corruption of government decisions and federal officeholders and to prevent the appearance of such corruption.

While the Supreme Court created enormous problems for our democracy with its disastrous Citizens United decision in January 2010, the Court also has twice upheld the constitutionality of important campaign finance laws since that decision.

In June 2010, the Supreme Court in Republican National Committee v. FEC reaffirmed the constitutionality of the ban on soft money contributions to political parties. In June 2011, the Supreme Court in Green Party v. Lenge left standing a Court of Appeals decision upholding the constitutionality of the Connecticut public financing law.

The Democracy 21 pro bono legal team, led by former U.S. Solicitor General Seth Waxman and the WilmerHale law firm, filed briefs on behalf of parties in both of these cases in support of the campaign finance laws that were upheld.

The Supreme Court’s decision on whether to accept for consideration one or both of the cases pending before the Court is expected to be announced shortly after the February 15 conference. If the Court decides to hear one or both of the cases, the Democracy 21 legal team will file amicus briefs to support the constitutionality of the campaign finance laws being challenged.

United States v. Danielczyk

The Danielczyk case involves a criminal prosecution brought against two individuals who were charged with using corporate funds to make contributions to a federal candidate, in violation of the longstanding federal ban on contributions by corporations in federal elections. The defendants are arguing that the corporate contribution ban is no longer constitutionally valid in light of the 2010 decision in the Citizens United case.

In Citizens United, the Supreme Court struck down the ban on independent corporate expenditures but did not address the ban on direct corporate contributions to federal candidates.

In the Danielczyk case, the defendants argue that the Court’s reasoning in striking down the expenditure ban applies to the contribution ban as well. They also argue that Citizens United effectively overruled a 2003 decision by the Supreme Court in FEC v. Beaumont in which the Court directly upheld the ban on corporate contributions as applied to a non-profit corporation.

Based on its reading of Citizens United, a federal district court in Virginia struck down the corporate contribution ban. The district court ruling, however, was reversed by the Fourth Circuit Court of Appeals in a decision issued in June, 2012.

The Fourth Circuit opinion said it was bound by the Supreme Court’s earlier ruling in Beaumont upholding the ban on corporate contributions. The Circuit Court rejected the defendants’ argument that Beaumont applied only to non-profit corporations and therefore cannot be read as precedent for upholding the contribution ban as applied to for-profit corporations.

The Fourth Circuit found instead that Beaumont was based on “extensive discussion of Congress’ legitimate interests in regulating direct contributions made by all corporations.”

The Court of Appeals also distinguished the Supreme Court’s ruling in Citizens United. It noted that a different standard of review applies to restrictions on contributions than to restrictions on expenditures. The Court also concluded that Citizens United preserved the anti-corruption and anti-circumvention interests in the campaign finance laws. The Court reasoned that while those interests were not served by the ban on corporate expenditures at issue in Citizens United, they are served by the ban on corporate contributions.

In their petition for certiorari to the Supreme Court, the defendants urge the Court to reconsider Beaumont, arguing that Citizens United “swept away Beaumont’s logical underpinnings and scrapped most of the government interests that case described.” In particular, they argue that a total ban on corporate contributions is overbroad, and that any legitimate governmental interest in deterring corruption can be served by a limit on contributions to federal candidates by corporations, just as the same interest is served by a limit on contributions by individuals.

The defendants argue that “it cannot be that allowing the wealthiest American to donate $2,500 creates no intolerable risk of corruption, but allowing the most impecunious corporation to donate a penny would. Nor can Congress single out corporations for unfavorable treatment just because they are corporations: The First Amendment protects corporations’ political activity no less than that of individuals.”

In opposing the petition for certiorari, the Solicitor General argues that “Citizens United does not cast doubt on Beaumont.” The Solicitor General says:

Congress has good justification for treating corporate and individual contributions differently. One special risk posed by corporate-treasury contributions—that is not posed by individual contributions—is the ease with which corporations can proliferate. New corporations can be formed merely by filing some papers . . . A single corporation can spawn multiple new corporations, each of which could then make its own campaign contributions. Contrary to petitioner’s suggestion, the government could not easily devise and enforce rules for attributing one corporation’s contributions to another.

The Solicitor General elaborated on the potential for circumvention of contribution limits on individuals if corporations are permitted to make contributions, even if the corporate contributions themselves are subject to limits:

Without [the ban on corporate contributions], an individual who wanted to exceed the individual contribution limits could quickly create a new corporation to serve as his conduit, or a hundred new corporations, each of them able to contribute to the same candidate in the same election cycle. The corporations may all have different names, and the complexities of corporate structure may mask their relationship to each other and to the conduit contributor.

The Solictor General accordingly urged the Court not to review the decision by the Fourth Circuit Court of Appeals to uphold the ban on corporate contributions.

McCutcheon v. Federal Election Commission

The McCutcheon case involves a challenge to the limit on the total contributions by an individual to all federal candidates, political parties and PACs. Under current law, an individual is limited to an overall total of $123,200 in contributions to all candidates, parties and PACs during a two-year election cycle. Within that limit and time frame, no more than $74,600 can be given to all party committees and PACs and no more than $48,600 can be given to all federal candidates.

These aggregate limits were challenged by plaintiff Shaun McCutcheon and by the Republican National Committee, who contended that the limits serve no valid anti-corruption purposes and therefore violate their First Amendment rights. (The case does not involve a challenge to the limit of $2,600 per election on the amount an individual can now give to a candidate).

In September, 2012, a three-judge district court in Washington, DC rejected the constitutional challenge to the aggregate limits. The court noted that the aggregate limits are necessary to prevent individuals from contributing very large sums of money each cycle, and therefore necessary to prevent massive circumvention of the underlying individual contribution limit.

Eliminating the aggregate limits would mean that an individual could give, and a President or a member of Congress could solicit, a single contribution of more than $1 million to a joint fundraising committee comprised of the officeholder’s campaign committee, the three national party committees of the officeholder’s party, and the party’s 50 state party committees.

The joint fundraising committee would be required to divvy the contributions among all the committees taking part in the joint fundraising effort to ensure that no committee receives more than it is allowed to receive under the contribution limits that apply to the various committees.

But because party committees may make unlimited internal transfers among themselves, the million dollar-plus contribution that was distributed to the separate committees could then come back to a single national party committee’s coffers. This would be easy to do through electronic transfers. That committee, in turn, could spend all of the money to make coordinated and independent expenditures in support of the candidate who raised the million dollar-plus contribution.

As the lower court stated, the candidate “will know precisely where to lay the wreath of gratitude” for the $1 million donation spent on his behalf.

McCutcheon and the RNC have appealed the lower court’s ruling directly to the Supreme Court. In urging the Supreme Court to dismiss the appeal and affirm the three-judge district court panel’s ruling, the Solicitor General argues that the aggregate contribution limit was reviewed and upheld by the Supreme Court in its 1976 decision in Buckley v. Valeo.

In Buckley, the Court said that the aggregate limit “is no more than a corollary of the basic individual contribution limitation” that the Court had “found to be constitutionally valid.” The Solicitor General stresses the anti-circumvention role played by the aggregate limits, noting that “multiple contributions create that risk than an individual contributor can circumvent the base limits by channeling his money in such a way that a particular target is likely to receive much more than the base limits would allow (e.g., by contributing to political committees likely to contribute to a particular candidate).”

Indeed, quoting the district court decision, the Solicitor General points out that “if the aggregate limits did not exist, ‘an individual might contribute $3.5 million to one party and its affiliated committees in a single election cycle,’ yet remain in compliance with all of FECA’s base contribution limits.” For example, this would result, if an individual gave $5,000 (recently increased to $5,200) per election cycle to each of a party’s House and Senate candidates, plus $30,800 (recently increased to $32,400 per year) to each of a party’s three federal party committees each year, and $10,000 to each of a party’s fifty state committees a year—contributions that would all be lawful if there was no aggregate limit in place.

As the Solicitor General notes:

Congress could reasonably conclude than an individual who made contributions of that magnitude to a party’s overall electoral efforts might acquire actual or perceived ‘improper influence’ over the party’s elected officials, even if no single contribution was likely to have that effect.

Conclusion

The ban on corporate contributions was enacted in 1907 and has been in effect for more than a century. The ban was upheld by the Supreme Court in 2003 by a 7 to 2 vote in the Beaumont case. The aggregate individual contribution limit was enacted in 1974 and was upheld by the Supreme Court in 1976 in a per curium decision in the Buckley case.

When the Supreme Court struck down the federal ban on corporate expenditures in the Citizens United decision in 2010, it based its decision on the grounds that the expenditure was made “independent” from the candidate. The Court did not address the ban on corporate contributions made directly to candidates.

The Supreme Court has consistently upheld limits on contributions to federal candidates.

It would be a disaster for our democracy and political system if the Court was to now reverse its past decisions and strike down the contribution limitations involved. Such a radical step would invariably result in ongoing and widespread government corruption and would fundamentally undermine public trust in federal officeholders and government decisions.



[1]
Through the use of a joint fundraising committee involving national and state party committees, the single contribution would include $32,400 per year to each of the three national party committees, or $97,200 per year combined, and $10,000 per year to each of the 50 state parties, or $500,000 per year combined, for an overall total of $597,200 per year and an overall total of $1,194,000 for a two-year election cycle. Since parties committees can make unlimited internal transfers to other party committees, the joint fundraising committee could first distribute all of the money to each of the separate party committees involved and then have it all come back to the national party committee in one electronic transaction.