Today, Free Speech For People released two on Super PACs and Foreign Money in U.S. Corporations. 

I. Quantifying Foreign Institutional Block Ownership at Publicly Traded 
U.S. Corporations

By: John C. Coates IV,  Ronald A. Fein, Kevin Crenny, and L. Vivian Dong

Since the Supreme Court’s 2010 Citizens United decision invalidated restrictions on corporate political spending, considerable public and policymaker interest has developed in the potential for U.S. elections to be influenced by foreign interests through U.S. corporations. On the one hand, existing federal law (the Federal Election Campaign Act) already prohibits political spending in federal, state, or local elections by corporations that are incorporated outside the U.S., or which have their principal place of business abroad. On the other hand, current law still allows substantial avenues for foreign influence over corporate political spending by U.S.-incorporated and -based corporations.

Lawmakers in Congress and members of the Federal Election Commission have expressed interest in addressing this phenomenon. As of yet, federal reform proposals have failed to advance. A more likely near-term prospect for new policy measures is at the state and local level. Local governments (notably in St. Petersburg, Florida) are now contemplating measures to address this concern.

This paper focuses on ownership of significant blocks of stock as a potential mechanism for foreign influence over corporate political spending. We found that roughly one in eleven (9%) companies in the S&P 500 has one or more foreign institutions each owning five percent or more blocks of stock, nine have foreign institutions with ten percent or more blocks, five have a foreign institution with more than fifteen percent, and three have foreign institutions with more than 20% blocks. Three firms have multiple foreign institutional blockholders. This is the first recent empirical analysis of the level of foreign institutional blockholder ownership of publicly traded corporations.

“Six years ago, the Supreme Court’s Citizens United decision opened the door to corporations spending money to influence our elections, and the dissent warned that corporate political spending could become a pathway for foreign influence. The Federal Election Commission, and the local government in St. Petersburg, Florida, have been exploring potential rules to address the risk of foreign investors leveraging their ownership stakes in U.S. corporations to advance their interests through corporate political spending. This study shows that about 1 in 11 companies on the S&P 500 have one or more foreign or foreign-controlled investors that own enough stock to be required to report their ownership stakes to the federal government.

— John C. Coates

II. The SpeechNow Case and the Real World of Campaign Finance

By: Stephen R. Weissman

In the U.S. Court of Appeals for the D.C. Circuit’s SpeechNow decision, which created super PACs, the court theorized that contributions to so-called “independent expenditure committees” could not possibly result in corruption. In the real political world, however, as this study shows, top donors to super PACs and other independent spenders are not only contributing to these groups. They are simultaneously giving directly to the very candidates who benefit from their contributions to independent spending. The typical two-track donor supports multiple candidates in this fashion. Thus, while independent spending groups are legally restrained from coordinating with their beneficiaries, donors to such groups are legally permitted to financially coordinate with these same candidates within certain contribution limits. When donors amplify their legally limited direct contributions to candidates with unlimited indirect support via independent spending groups, an “anti-corruption interest in limiting contributions to an independent expenditure group” certainly arises. These unlimited contributions intensify the dangers of quid pro quo corruption and its appearance that contribution limits were established to prevent.

“This research undermines the judicial theory that large contributions to super PACs cannot create even the appearance of corruption. The data show that the vast majority of big super PAC donors also make large direct contributions to the same candidates that they subsidize indirectly via super PACs. Since the donors are financially entwined with their favored candidates, their additional support through super PACs intensifies the danger of corruption.

— Stephen R. Weissman