The Seattle City Council will soon consider a bold new campaign finance reform ordinance. We are proud to partner with Fix Democracy First in this campaign, and we thank Seattle City Councilmember Lorena González for her leadership in sponsoring this legislation.
The proposed ordinance will accomplish three major goals:
- Prohibits political spending by foreign-influenced corporations (corporations owned in significant part by foreign investors)
- Limits contributions to “independent expenditure” political committees, thereby ending super PACs in city elections
- Expands Seattle’s existing disclosure rules to require commercial advertisers to report information about political advertisements outside of the narrow context of an election campaign
This ordinance builds on Free Speech For People’s work developing similar legislation in St. Petersburg, Florida (along with partners American Promise-Tampa Bay, League of Women Voters of the St. Petersburg Area, and the Leif Nissen Foundation), which passed in November 2017, as well as proposed legislation in Massachusetts.
I. The ordinance
Political Spending by Foreign-Influenced Corporations
- The 2016 election showed that foreign interference in our elections is a serious problem.
- The recent news that at least one Russian company bought political ads on Facebook shows one way that foreign interests can use corporations to influence elections. But Facebook and Twitter aren’t the only way that foreign interests can use American companies to influence U.S. elections.
- Under current law, it’s illegal for a foreign government or individual to spend money to influence state elections. The Supreme Court has upheld this law.
- But there’s a loophole in the current law: if a corporation is registered in the United States, but it has significant foreign ownership, it can still spend money, or launder the money through a “super PAC,” to spend it in state and local elections.
- This bill would help plug that loophole by making it illegal for a company that is owned 5% by foreign owners, or 1% by a single foreign owner, from spending money directly or giving it to a super PAC to spend in state or local elections.
- This bill will help to limit the influence of political spending from companies owned or influenced by foreign investors.
Limits on Contributions to Super PACs
- Under Seattle law, there is a limit of $500 per year on how much a person can contribute to a political campaign for a candidate for city office, but there is a huge loophole: there are no limits at all on contributions to “independent expenditure” committees, also known as “super PACs,” that spend on a candidate’s behalf.
- This ordinance would limit any person’s contributions to a super PAC to $5,000 per year. We need limits on contributions to super PACs to help prevent corruption and the appearance of corruption.
- Contrary to a common misconception, the Supreme Court’s Citizens United decision does not prevent states from limiting contributions to super PACs.
II. Letters of Support
Read testimony in support of our proposed ordinance.
- Letter from Councilmember Lorena González, Seattle City Council
- Letter from Professor Laurence Tribe, Harvard Law School
- Letter from Professor Albert Alschuler, University of Chicago Law School
- Letter from Ellen Weintraub, Chair, Federal Election Commission
- Letter from Ron Fein, Legal Director, Free Speech For People (with attached testimony of Professor John C. Coates IV, Harvard Law School, on similar Massachusetts bill)
- Letter from Stephen R. Weissman, Ph.D., Associate Director for Policy at the Campaign Finance Institute (2002-09)
- Albert Alschuler, Laurence Tribe, Norm Eisen, & Richard Painter, “Why limits on contributions to super PACS should survive Citizens United” (law review article)
Quantifying Foreign Institutional Block Ownership at Publicly Traded U.S. Corporations by John C. Coates, Ron 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. [/expand]
The SpeechNow Case and the Real World of Campaign Finance by Stephen R. Weissman Ph.D.
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.
The SpeechNow Case and the Real World of Campaign Finance: Undermining Federal Limits on Contributions to Political Parties Pt. II by Stephen R. Weissman Ph.D.
This report explores the top 100 individual and 50 organizational donors to independent groups in the 2012 and 2014 elections. It focuses on those who gave to one or more of the six official national party committees and also contributed to unofficial party-linked Super PACs active in the same election(s).
There are federal limits on how much a donor can give to an official party committee per year, but following the SpeechNow ruling, there are no set limits on contributions to party-linked super PACs. For example, in 2014, the maximum a donor could give to a party committee per year was $32,400; assuming a donor who gave to all three committees of one party, that’s $97,200 to party committees. Under federal law, $97,201 would be illegal—too high a risk of quid pro quo corruption—but that same donor can give millions to party-linked super PACs. In essence, donors can multiply their legal direct party contributions by giving to party-linked super PACs at levels far beyond what Congress has determined is necessary (and the Supreme Court has so far upheld) to protect against corruption. This pattern of giving completely undermines the limits on contributions to parties.
he large donors surveyed in this study made very substantial contributions to their preferred party committees. The size of these contributions, while within legal limits, assured that these donors would be noticed by party fundraisers, many of whom were themselves candidates and elected officials. When these donors simultaneously embellished their financing by massively subsidizing independent Super PACs linked to the same parties in the same elections, they intensified the danger of corruption and its appearance.
By ignoring such political realities, the SpeechNow decision has helped undermine federal contribution limits, the primary means of federal regulation of campaign financing.
IV. In the News
- Boston Globe, Prof. Laurence Tribe & Ron Fein “How Massachusetts can fight foreign influence in our elections” (9/26/2017)
- Boston Globe, Prof. Laurence Tribe & Scott Greytak “Get Foreign Political Money Out of US Elections” (7/22/2016)
- The American Prospect, “Plotting the End of Super PACs” (7/21/2016)