A recent decision by the U.S. Court of Appeals for the Ninth Circuit rejected a challenge to a federal law banning political spending by foreign nationals in local elections. This law had been upheld by the Supreme Court with respect to federal elections, but this is the first decision applying it to state or local elections. The decision further solidifies the legal foundation for Free Speech For People’s work to limit foreign influence in our elections, including by limiting political spending in state and local elections by corporations that are partly owned by foreign investors.

Background

The Federal Election Campaign Act prohibits a foreign national from contributing or spending in federal, state, or local elections. (“Foreign national” means a foreign government, corporation, political party, or an individual who is not a U.S. citizen or permanent resident.)

A little-reported Supreme Court decision issued just two years after Citizens United upheld this law with respect to federal elections. In Bluman v. FEC, two Canadians in the U.S. on temporary visas challenged the prohibition under the First Amendment—after all, Citizens United had just a year before emphasized that a ban on corporate political spending violated the prohibition against “distinguishing among different speakers, allowing speech by some but not others” and thereby “deprive[d] the public of the right and privilege to determine for itself what speech and speakers are worthy of consideration.” If corporations can spend unlimited money in elections, the plaintiffs argued, they should be allowed to spend a few dollars to “print flyers supporting President Obama’s reelection and to distribute them in Central Park.”

In an opinion by then Judge (now Justice) Brett Kavanaugh, a three-judge federal district court explained:

Political contributions and express-advocacy expenditures are an integral aspect of the process by which Americans elect officials to federal, state, and local government offices. . . . We think it evident that those campaign activities are part of the overall process of democratic self-government. Moreover, it is undisputed that the government may bar foreign citizens from voting and serving as elected officers. It follows that the government may bar foreign citizens. . . . from participating in the campaign process that seeks to influence how voters will cast their ballots in the elections. Those limitations on the activities of foreign citizens. . . . are all “part of the sovereign’s obligation to preserve the basic conception of a political community.”

Obviously, this created some tension with Citizens United, because corporations also can’t vote or serve as elected officers, and today’s transnational corporations do not fit into “the basic conception of a political community.” Evidently recognizing the inconsistency, the Supreme Court decided to duck the issue, affirming the lower court ruling in a brief order without a written opinion.

Campaign Finance Crimes in San Diego

The case of United States v. Singh involved a Mexico City business executive (Jose Susumo Azano Matsura) who maintained a home in San Diego and resided in the United States under a temporary visa. Azano had an interest in real estate developments on the San Diego waterfront, and sought to secure the favor of San Diego mayoral candidates who he believed would support his development plans. Working with Ravneet Singh, a political consultant (who recognized the ban on foreign nationals’ political spending), he used various schemes (including routing money from companies he owned) to funnel money to favored candidates while concealing the source.

Prosecutors tried Azano and Singh for conspiracy to violate the Federal Election Campaign Act’s ban on foreign national political spending and disclosure requirements, and conspiring to falsify campaign records. A jury found them guilty on all charges.

The Ninth Circuit’s Decision

On appeal, Azano and Singh argued that the federal prohibition of foreign national political spending was unconstitutional on two grounds: (1) it exceeds Congress’s jurisdiction to legislate concerning state and local elections, and (2) it violates foreign nationals’ First Amendment speech rights.

The Ninth Circuit rejected both challenges. It explained the background of the foreign nationals political spending prohibition:

As donations and contributions have grown more important to the campaign process, so too has concern over foreign influence in American elections. . . . [Despite early legislation,] suspicions of foreign influence in American elections remained a pervasive concern. Following the 1996 election, the Senate Committee on Governmental Affairs investigated foreign campaign contributions. The Committee Report identified efforts by agents of the People’s Republic of China to “influence U.S. policies and elections through, among other means, financing election campaigns.” The report focused chiefly on federal elections, but also referred to a “seeding program” to develop individuals to run in state and local elections. In response to the Committee Report, Congress enacted the Bipartisan Campaign Reform Act of 2002 (BCRA), which amended FECA and further limited foreign nationals’ ability to participate in elections.

On the first challenge, regarding Congress’s power to regulate foreign spending in local elections, the court held that “Congress was within its power when it acted to protect the country’s political processes after recognizing the susceptibility of the elections process to foreign interference.” On the First Amendment challenge, the court held that it was bound by the Supreme Court’s summary affirmance in Bluman.

Importance of the Decision

This is an important decision because it is the first federal court decision upholding the ban on foreign nationals’ political spending in state or local elections. As the court noted, Congress had reason back in 2002 to be concerned about the possibility of foreign influence in state or local elections. Furthermore, while the 2016 election has renewed concern about the danger of foreign governments influencing our elections, foreign influence is not always a matter of hostile foreign intelligence services. Sometimes it is simply about getting a good deal on waterfront development.

The decision provides additional legal support for Free Speech For People’s work in challenging foreign influence in federal, state, and local elections, and in particular for our efforts to stop political spending by foreign-influenced corporations. As the Azano case illustrates, foreign investors can leverage ownership stakes in corporations to spend money from the corporate treasury in U.S. elections. Under current federal law, that is prohibited if the corporation is registered abroad, but allowed if the corporation is registered in the United States, even if only through a mailstop in Delaware.

Whenever corporations partly owned by foreign investors spend money in candidate elections, whether directly or by contributing to a super PAC, our democratic self-government is threatened. Our work aims to change that, and this decision is an important positive development.