Sunlight as the Best Disinfectant: SCOTUS Sheds Light on “Dark Money”

Photograph of Cash, Daniel I. Weiner, Why You Should Care About Dark Money in Politics, BRENNAN CENTER FOR JUSTICE, (May 1, 2014) https://www.brennancenter.org/blog/why-you-should-care-about-dark-money-politics.

By: Julianne Zilahy

Research and Writing Editor, American Journal of Trial Advocacy

“Publicity is justly commended as a remedy for social and industrial diseases. Sunlight is said to be the best of disinfectants; electric light the most efficient policeman.”[1]

On September 18, 2018, the Supreme Court of the United States vacated a stay[2] placed on the holding of Citizens for Responsibility and Ethics in Washington v. Federal Election Commission.[3] In doing so, the Supreme Court enforced a ruling requiring political active 501(c)(4) organizations to disclose the identities of many financial donors that contribute money for advertising for or against candidates for federal office.[4] Previously, non-profit organizations like the Americans for Prosperity and the National Rifle Association could receive money from donors to fund political advertisements but “hide” the identities of the donors from the Federal Election Commission.[5] Over time, such donations to politically active non-profits have come to be labeled as “Dark Money,” likely due to their origins remaining in the dark.[6] However, with the Supreme Court’s order on September 18th, the “Dark Money” in America’s electoral process will, at least for now,[7] be forced into the light.

Dark Money 

The label “Dark Money” obviously has a negative connotation. Why is “Dark Money” considered a problem? Critics contend that the lack of transparency of electoral financing prevents voters from evaluating the credibility and weight of the messages presented.[8] Voters may “better judge the policy alternatives before them” if the sources and motivations for their promotion are available.[9] Others argue that anonymity prevents donors from the “accountability of criticism” in the electoral process.[10]  In Justice Scalia’s opinion, “[r]equiring people to stand up in public for their political acts fosters civic courage, without which democracy is doomed.”[11] In this view, a nation using “Dark Money,” “does not resemble the Home of the Brave.”[12]

Hiding the identities of donors also creates the risk of foreign entities influencing United States elections.[13] 501(c)(4) and 501(c)(6) organizations are required to keep any foreign money donated from being spent on American elections, but before the Supreme Court’s order vacating the stay on Citizens for Responsibility and Ethics in Washington, organizations were not required to disclose whether such money was donated or how it was kept segregated from American donations.[14] Without required disclosure, the public has no way of knowing whether foreign money is being used to influence American elections. Especially in the wake of the 2016 Presidential election where donors linked to the Russian government spent considerable money on American political advertising,[15] the fear of foreign influence on American elections is a well-grounded one.

Legislators have attempted to address the problem of “Dark Money” before.[16] The Honest Ads Act was introduced in 2017 by Senators Mark Warner, Amy Klobuchar, and the late Senator John McCain.[17] The Honest Ads Act “seeks to combat the problem of hidden foreign disinformation campaigns by implementing a disclosure system for paid, online political advertising.”[18] The Act aims to serve this goal by implementing a disclosure system for paid online political advertising that would require political internet ads to maintain the same transparency requirements of television and radio advertisements.[19] The bill is still awaiting a vote at committee level in both houses of Congress.[20]

Advocates for keeping “Dark Money” in the dark argue that disclosure requirements implicate First Amendment issues.[21] Undeniably, “Dark Money” that advocates for or against the election of federal election candidates (whether through TV commercials or paper handouts) is protected political free speech.[22] “Dark Money” advocates worry requiring donor identification may have a chilling effect speech by deterring some from donating who otherwise would.[23] Others worry still that disclosure may even create a risk of harassment or retaliation upon identified donors,[24] or that disclosure will cause voters to have less information going into elections.[25]  However, the Supreme Court has noted that even in the face of such fears disclosure requirements “appear to be the least restrictive means of curbing the evils of campaign ignorance and corruption that Congress [has] found to exist.”[26]

Why “Dark Money” been legal until now: Citizens for Responsibility and Ethics in Washington v. Federal Election Commission

It appears “Dark Money” has persisted in America’s federal elections because of the FEC’s misinterpretation and misapplication of two small provisions in 52 U.S.C. § 30101. Though small, the failure to implement these provisions has kept a large number of donors financing American elections masked.[27]

The case leading to the Supreme Court’s order first faced the United States District Court for the District of Columbia.[28] The Plaintiffs, Citizens for Responsibility and Ethics in Washington (CREW) and Nicholas Mezlak, brought the action under the Federal Election Campaign Act of 1971 (FECA) and the Administrative Procedure Act.[29] The Plaintiffs alleged that the Federal Election Commission (FEC) failed to implement FECA’s statutory disclosure requirements of 52 U.S.C. 30104(c) for not-political [sic] committees (such as 501(c)(4) organizations)  and an improper dismissal of the Plaintiffs’ administrative complaint against Crossroads GPS for failing to comply with FECA disclosure requirements.[30]

FECA was enacted in 1972 and continues to stand as a regulation on federal political campaign financing “by imposing limitations on contributions and requiring disclosure of persons contributing money for expenditures to influence federal elections.”[31] In the 1979 Amendment of FECA, Congress directed the FEC to implement, among others, the statutory disclosure obligations under FECA (52 U.S.C. § 30104(c)).[32] The FECA statute requires not-political committees to disclose “the identification of each person who made a contribution in excess of $200 to the person filing such statement which was made for the purpose of furthering an independent expenditure.[33] This meant that a not-political committee must provide the identity of donors that give in excess of $200, and the date and the amount donated when the contributions were meant to influence federal elections. The FECA statute also requires not-political committees to identify donors giving over $200 for the purpose of “expressly advocating the election or defeat of a clearly identified candidate.”[34]

On April 1, 1980, the FEC regulation (11 C.F.R. §  109.10(e)(1)(vi)) that was supposed to have incorporated the FECA disclosure requirements went into effect.[35] Not until August 3, 2018, 37 years later, did a court rule that the FEC regulation failed to accurately implement the FECA disclosure requirements.[36] The ‘incorrect’ FEC regulation (11 C.F.R. §  109.10(e)(1)(vi)) stated that not-political committees must provide “[t]he identification of each person who made a contribution in excess of $200 to the person filing such report, which contribution was made for the purpose of furthering the reported independent expenditure.”[37] The FEC had replaced the FECA language of “an independent expenditure” with “the reported independent expenditure.”[38] Donors covered in subsection (c)(2)(C) are those that contribute to not-political committees’ political television commercials, documentaries, brochures or that expressly ask for support or disapproval of a particular candidate for a federal office.[39] The FEC’s replacement language narrows the intended disclosure by only requiring donor identification when the money is contributed to support a specific independent expenditure being reported – thereby requiring “a direct link or specific intent by the donor to spend the contribution in the precise manner reported.”[40]

The FEC rule also read the disclosure requirements of subsection (c)(1) out of the statute.[41] FECA requires not-political committees to “report identification information about donors of over $200 in a calendar year, with the dates and amounts of each contribution, ‘for all contributions’ . . . .”[42] The Court noted that excluding this disclosure requirement is significant because the donations qualifying under (c)(1) can be used by not-political committees to directly support candidates or super PACs.[43] Super PACS must disclose contributors,[44] but such contributors as 501(c)(4) non-profit organizations that have been able to avoid the disclosure requirements of subsection (c)(1) act as “pass-throughs” for the true donors.[45] The FEC’s failure to implement subsection (c)(1) of the FECA statute has allowed non-profit organizations to become a financial routing strategy that masks the identities of donors.[46]

Conclusion

 The Supreme Court’s order on Citizens for Responsibility and Ethics in Washington v. Federal Election Commission is likely not the Court’s final say on the phenomenon of “Dark Money.” The case is on appeal – making the current transparency of “Dark Money” potentially only temporary. Regardless of the pros and cons of donor disclosure, it will be interesting to see whether or not votes will be influenced when those financing America’s elections are forced into the sunlight.


[1] Buckley v. Valeo, 424 U.S. 1, 67 (1976) (quoting  L. Brandeis, Other People’s Money 62 (National Home Library Foundation ed., 1933)).

[2] Crossroads Grassroots Policy Strategies v. Citizens for Responsibility and Ethics in Washington, No. 18A274, 2018 WL 441781 (U.S. 2018).

[3] 316 F. Supp. 3d 349 (D.D.C. 2018).

[4] Crossroads, 2018 WL 441781, at *1; see Citizens for Responsibility and Ethics in Washington v. Federal Election Commission, No. 18-5261, 2018 WL 44178 at *422-23 (D.C. Cir. 2018).

[5] Peter Overby, Supreme Court Orders Disclosure For Dark Money, As New Report Unveils Some Donors, NPR (Sept. 18, 2018, 5:01 PM), https://www.npr.org/2018/09/18/648722358/supreme-court-orders-disclosure-for-dark-money-as-new-report-unveils-some-donors.

[6] Political Nonprofits (Dark Money), Center for Responsive Politics, https://www.opensecrets.org/outsidespending/nonprof_summ.php (last visited Oct. 3, 2018).

[7] This case is on appeal.

[8] Citizens for Responsibility and Ethics in Washington v. Federal Election Commission, 316 F. Supp. 3d 349, 355 (D.D.C. 2018).

[9] Daniel I. Weiner, Why You Should Care About Dark Money in Politics, Brennan Center for Justice, (May 1, 2014) https://www.brennancenter.org/blog/why-you-should-care-about-dark-money-politics.

[10] John Doe No. 1 v. Reed, 561 U.S. 186, 228 (2010) (Scalia, J., concurring).

[11] Id.

[12] Id.

[13] Citizens for Responsibility, 316 F. Supp. 3d at 356 (citing Bluman v. FEC, 800 F. Supp. 2d 281, 283, 288 (D.D.C. 2011)); see Bluman, 800 F. Supp. at 288 (“It is fundamental to the definition of our national political community that foreign citizens do not have a constitutional right to participate in, and thus may be excluded from, activities of democratic self-government. It follows, therefore, that the United States has a compelling interest for purposes of First Amendment analysis in limiting the participation of foreign citizens in activities of American democratic self-government, and in thereby preventing foreign influence over the U.S. political process.”).

[14] Jon Schwartz et al., Cracks in the Dam: Three Paths Citizens United Created for Foreign Money to Pour Into U.S. Elections, The Intercept (Aug. 3, 2016, 12:12 PM) https://theintercept.com/2016/08/03/citizens-united-foreign-money-us-elections/.

[15] S. 1989 And H.R. 4077: The Honest Ads Act, Issue One https://www.issueone.org/wp-content/uploads/2017/11/Honest-Ads.pdf (last visited Oct. 3, 2018).

[16] Id.

[17] Id.

[18] Id.

[19] S. 1989: Honest Ads Act, GovTrack (Oct. 25, 2017), https://www.govtrack.us/congress/bills/115/s1989/summary.

[20] Id.

[21] Campaign Finance Disclosure: The Devil is in the Details, Center For Competitive Politics https://www.ifs.org/wp-content/uploads/2013/12/2014-07-15_Policy-Primer_Disclosure.pdf (last visited Oct. 3, 2018).

[22] Citizens for Responsibility, 316 F. Supp. 3d at 369 (citing Citizens United v. FEC, 558 U.S. 310, 360 (2010)) (“By definition, an independent expenditure is political speech presented to the electorate that is not coordinated with a candidate.”); Citizens United, 558 U.S. at 329 (“[Political] speech . . . is central to the meaning and purpose of the First Amendment.”).

[23] Citizens for Responsibility, 316 F. Supp. 3d at 371 (citing Buckley v. Valeo, 424 U.S. 1, 68 (1976)).

[24] Id.

[25] Dave Levinthal et al., Supreme Court Lets Stand a Decision Requiring ‘Dark Money’ Disclosure, The Atlantic (Sept. 18, 2018) https://www.theatlantic.com/politics/archive/2018/09/supreme-court-lets-stand-a-decision-requiring-dark-money-disclosure/570670/.

[26] Citizens for Responsibility, 316 F. Supp. 3d at 371 (citing Buckley, 424 U.S. at 68).

[27] Dave Levinthal et al., Supreme Court Lets Stand a Decision Requiring ‘Dark Money’ Disclosure, The Atlantic (Sept. 18, 2018) https://www.theatlantic.com/politics/archive/2018/09/supreme-court-lets-stand-a-decision-requiring-dark-money-disclosure/570670/.

[28] Citizens for Responsibility and Ethics in Washington v. Federal Election Commission, 316 F. Supp. 3d 349, 355 (D.D.C. 2018).

[29] Citizens for Responsibility, 316 F. Supp. 3d at 356.

[30] Id.

[31] Id. at 367-68.

[32] Id. at 377.

[33] Citizens for Responsibility, 316 F. Supp. at 377 (quoting 52 U.S.C. § 30104(c)(2)(C)).

[34] Citizens for Responsibility, 316 F. Supp. at 377; 52 U.S.C. § 30101(17); see Citizens United v. FEC, 558 U.S. 310, 360 (2010) (“By definition, an independent expenditure is political speech presented to the electorate that is not coordinated with a candidate.”).

[35] Citizens for Responsibility, 316 F. Supp. at 380.

[36] Citizens for Responsibility, 316 F. Supp. at 422-23 (“11 C.F.R. § 109.10(e)(1)(vi)[] has permitted reporting not-political committees to evade the statutory disclosure requirements in significant ways.”).

[37] Id. at 379 (quoting 11 C.F.R. § 109.10(e)(1)(vi)) (emphasis added).

[38] Id. at 379.

[39] Id. at 380.

[40] Id. at 394.

[41] Citizens for Responsibility, 316 F. Supp. at 380.

[42] Citizens for Responsibility, 316 F. Supp. at 379-80 (quoting 52 U.S.C. § 30104(c)(1)) (citations omitted).

[43] Citizens for Responsibility, 316 F. Supp. at 380.

[44] Id. at 380 (citing 52 U.S.C. § 30104(b)(3)).

[45] Id.

[46] Id.

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