Could Karl Rove's new 527 avoid disclosure requirements?

The law, lawyers, and the court.
April 6 2010 10:38 AM

Hushed Money

Could Karl Rove's new 527 avoid campaign-finance disclosure requirements?

Illustration by Mark Alan Stamaty. Click image to expand.

If you thought things have gotten bad with campaign financing since the Supreme Court turned on the corporate money spigot in the Citizens United case, you ain't seen nothing yet. Opponents of reasonable regulation have a new target: trying to keep the flow of campaign money secret. We may soon be going retro, back to the pre-Watergate era of secret campaign cash.

The Watergate scandal of the 1970s taught us a lot about secret campaign cash. Major corporations gave large sums to the Nixon campaign despite the prohibition on corporate giving to federal candidates. American Airlines was the first corporation to plead guilty to funneling $55,000 in illegal corporate cash, laundered through a Lebanese bank, to the 1972 Nixon re-election effort. Cash also arrived to the campaign in paper bags from millionaires.

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Watergate taught us too that secrecy allowed for all kinds of out-of-sight dirty tricks, such as breaking into offices of rivals, planting spies with opposition campaigns, and attempts at outright bribery of officials. The dairy industry offered $2 million to the Nixon campaign in exchange for the administration's support for higher milk subsidies. These were truly the "bad old days" of campaign financing.

Even after federal disclosure law was strengthened to minimize the chances that politicians could take unreported donations, secret cash persisted through loopholes allowing anonymous independent spending on campaigns. In the 2000 election, a previously unknown group called "Republicans for Clean Air" spent money in the New York presidential primary knocking John McCain's environmental record to support the candidacy of George W. Bush. It turned out that Republicans for Clean Air was none other than Sam and Charles Wyly, two Texas supporters of Bush.

McCain-Feingold closed the disclosure loophole that allowed the Wylys to spend secretly, and the Supreme Court in Citizens United recently affirmed the constitutionality of those disclosure rules as "a less restrictive alternative to more comprehensive regulations of speech." One would think that would end the matter: that the trade-off of Citizens United is unlimited corporate and union spending in federal elections that's at least fully and quickly reported to the public. Journalists and bloggers and advocacy groups can use the information to ferret out corruption, alert voters to who is supporting a candidate or ballot measure, and make sure other campaign-finance laws are being followed. Sunlight is the best disinfectant and all that.

But it turns out that the call for unlimited campaign spending is just the opening act for the campaign finance deregulationists. In Act II, now underway, they argue for anonymity in their independent election spending. (If they succeed, in Act III they'll argue for the right to give unlimited anonymous sums directly to candidates.) Citizens United is now claiming that it is a bona fide media organization entitled to the same exemption from disclosure that applies to news organizations like Slate or the Weekly Standard. Citizens United doesn't want to say who is paying for its campaign-oriented films, such as Hillary: The Movie, its offering in the last presidential primary season, aimed at proving that Hillary Clinton was a "European-style socialist." Citizens United want its donors to be able to hide behind the organization's innocuous-sounding name as it goes on the political attack.

Meanwhile, an anti-regulation PAC, Speechnow.org, is trying a similar tactic. Federal law bars political action committees from taking more than $5,000 from individuals to use in federal campaigns. The U.S. Court of Appeals for the D.C. Circuit recently struck down this $5,000 contribution limit, relying on and extending Citizens United. (Disclosure: I'm defending a similar San Diego contribution limit in the 9th Circuit.) But Speechnow.org lost in its bid to be exempt from the disclosure requirements that apply to PACs, and it is now considering taking the issue to the Supreme Court. Again, the argument is that certain donor information—in Speechnow.org's case, the identity of those paying for the PAC's administrative expenses—shouldn't be public.

With the same goal in mind, some new political groups are starting up, in part to avoid more onerous disclosure requirements imposed on PACs and parties. Karl Rove has launched American Crossroads: It's like the Republican National Committee without the disclosure mandate federal law imposes on the RNC. (I expect this group to set up a 501(c) organization alongside its 527 entity, because 501(c)s  need disclose very little about their donors.) Jim Bopp, one of the nation's leading opponents of campaign finance regulation, is representing another group, the Committee for Truth in Politics, which has reportedly spent an estimated $5 million on advertising against financial services reform but won't reveal its donors and is arguing that the Federal Election Commission can't require it to do so.

Given the Supreme Court's recent endorsement of disclosure as the "less restrictive alternative" to spending limits in Citizens United, one might think the courts won't tolerate these new efforts to block disclosure. Indeed, the disclosure battles might simply be a side skirmish to deflect attention from the larger changes wrought by the Supreme Court's ruling.

 But there's reason to worry that the court could weaken its endorsement of disclosure in Citizens United. Later this month, the justices will hear Doe v. Reed, a case challenging disclosure of the names of people who signed a petition seeking to repeal by referendum a pro-civil-union gay rights measure passed by the Washington state legislature. The Supreme Court has long recognized an exemption from disclosure laws for donors who face legitimate threats of harassment for their campaign contributions. In Brown v. Socialist Workers '74 Campaign Committee, the court allowed such an exemption for contributors to the Socialist Workers Party, following proof of "threatening phone calls and hate mail, the burning of SWP literature, the destruction of SWP members' property, police harassment of a party candidate, and the firing of shots at an SWP office."

In the Doe case, the signers of the measure are trying to extend this shield of anonymity, claiming that a fear of harassment is enough. It turns out that in this case, the fear is totally unsubstantiated. In an amicus brief, a group of political scientists say that they have not found a single reported threat to the signer of a ballot measure petition in any state in the last 100 years. In a similar case involving alleged threats to the campaign for California's anti-gay marriage referendum, Proposition 8, the trial judge found little evidence of actual harassment to support withholding the names of contributors.

But just because the fear is unproven doesn't mean that five Supreme Court justices might not believe in it. As Emily Bazelon explained in January, the Supreme Court blocked the televising of the same-sex marriage trial concerning the constitutionality of Proposition 8 based on similarly unsubstantiated fears that witnesses at the trial could face harassment. Extending the harassment exemption without actual evidence is a way to undermine disclosure laws without saying so. And appealing to conservative justices' sense of being under siege seems like a reasonable strategy to get there these days. It all shows that full campaign finance deregulation is on the march.

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Richard L. Hasen is a professor of law and political science at the UC–Irvine School of Law and is writing a book on campaign finance and political equality. Follow him on Twitter.