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           DEFINING THE FUTURE OF CAMPAIGN FINANCE IN AN AGE OF SUPREME
                                  COURT ACTIVISM

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                                    HEARING

                                   before the

                               COMMITTEE ON HOUSE
                                 ADMINISTRATION
                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED ELEVENTH CONGRESS

                                 SECOND SESSION

                                   ----------

                    Held in Washington, DC, February 3, 2010

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      DEFINING THE FUTURE OF CAMPAIGN FINANCE IN AN AGE OF SUPREME COURT
                                    ACTIVISM

      DEFINING THE FUTURE OF CAMPAIGN FINANCE IN AN AGE OF SUPREME COURT
                                    ACTIVISM

    =======================================================================

                                    HEARING

                                   before the

                               COMMITTEE ON HOUSE
                                 ADMINISTRATION
                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED ELEVENTH CONGRESS

                                 SECOND SESSION

                                   __________

                    Held in Washington, DC, February 3, 2010

                                   __________

          Printed for the use of the Committee on House Administration

                           Available on the Internet:
       http://www.gpoaccess.gov/congress/house/administration/index.html

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                       COMMITTEE ON HOUSE ADMINISTRATION

                    ROBERT A. BRADY, Pennsylvania, Chairman
    ZOE LOFGREN, California,             DANIEL E. LUNGREN, California,
      Vice-Chairwoman                      Ranking Minority Member
    MICHAEL E. CAPUANO, Massachusetts    KEVIN McCARTHY, California
    CHARLES A. GONZALEZ, Texas           GREGG HARPER, Mississippi
    SUSAN A. DAVIS, California
    ARTUR DAVIS, Alabama
                          Jamie Fleet, Staff Director
                   Victor Arnold-Bik, Minority Staff Director

      DEFINING THE FUTURE OF CAMPAIGN FINANCE IN AN AGE OF SUPREME COURT
                                    ACTIVISM

                                  ----------

                          WEDNESDAY, FEBRUARY 3, 2010

                              House of Representatives,
                             Committee on House Administration,
                                                        Washington, DC.
        The committee met, pursuant to call, at 1:53 p.m., in Room
    1310, Longworth House Office Building, Hon. Robert A. Brady
    [chairman of the committee] presiding.
        Present: Representatives Brady, Lofgren, Davis of
    California, Davis of Alabama, Lungren, McCarthy, and Harper.
        Staff Present: Jamie Fleet, Staff Director; Tom Hicks,
    Senior Elections Counsel; Janelle Hu, Elections Counsel;
    Jennifer Daehn, Elections Counsel; Matt Pinkus, Professional
    Staff/Parliamentarian; Kyle Anderson, Press Director; Joe
    Wallace, Legislative Clerk; Daniel Favarulo, Legislative
    Assistant, Elections; Darrell O'Connor, Professional Staff;
    Shervan Sebastian, Staff Assistant; Peter Schalestock, Minority
    Counsel; Karin Moore, Minority Legislative Counsel; Salley
    Collins, Minority Press Secretary; and Mary Sue Englund,
    Minority Professional Staff. fb deg.
        The Chairman. Good afternoon, everybody. The Committee on
    House Administration hearing on Defining the Future of Campaign
    Finance in an Age of Supreme Court Activism will come to order.
        In his State of the Union speech in 1905, Republican
    President Teddy Roosevelt said, ``All contributions by
    corporations to any political committee for any political
    purpose should be forbidden by law.'' On January 21, 2010, in a
    single sweeping opinion, the conservative majority of the
    Supreme Court threw out nearly 100 years of laws and destroyed
    decades of commonsense legislation and regulations designed to
    adhere to that basic principle.
        Imagine Wall Street bankers creating political campaigns to
    target Members as we debated the TARP plan. Does anyone think
    that giving the Gordon Gekkos of the world access to corporate
    funds to wage political campaigns will make our democracy any
    stronger? I doubt it. Imagine foreign investors waging
    political campaigns during the negotiation of American trade
    policy.
        I am hopeful that we will be able to reach across party
    lines to ensure that, at a minimum, corporations, particularly
    those that are foreign controlled, cannot exert undue influence
    on American elections. Strengthening disclosure requirements,
    protecting the interests of shareholders, and safeguarding
    against foreign influence are three areas where we can start.
        Many Members of Congress have already acted, including Mr.
    Capuano, a member of our committee, who introduced the
    Shareholder Protection Act. Mr. Capuano's bill requires
    corporate CEOs to disclose to their investors or shareholders
    how corporate treasury funds are being spent to influence
    elections.
        In his State of the Union Address last week, President
    Obama said that the Supreme Court decision will open the
    floodgates for special interests, including foreign
    corporations, to spend without limits in our elections. At
    least one jurist seems to believe that this is simply not true.
    I say today to Justice Alito, prove it; prove that Citizens
    United will not lead to an election system that is, in the
    words of the President, ``bankrolled by America's most powerful
    interests, or worse, by foreign entities''.
        Today we begin the process. This is the committee of
    jurisdiction over Federal elections. So, make no mistake, any
    law or legislation that defines Federal elections in the wake
    of Citizens United will be considered by this committee. This
    is our responsibility, and we intend to meet it. To this end,
    this committee will conduct hearings that will allow for a full
    airing of all viewpoints.
        We understand that in the intersection of free speech and
    fragile election law, opinions diverge and passions flair. This
    hearing will therefore not be constrained by a 5-minute rule.
    Members will be given an opportunity to fully air out their
    concerns, but the committee will not, in its relaxation of the
    rules, let it get so relaxed. We respect all opinions, but we
    are also aware that at the end of the day our constituents
    expect us to act.
        I would now like to recognize my friend from California,
    Mr. Lungren, for an opening statement.
        Mr. Lungren. Thank you very much, Mr. Chairman.
        We have worked on a bipartisan basis through this Congress.
    I knew there would be a point in time when we might reach more
    contentious issues, and I think that point has been reached.
        The Chairman. But we are going to do it with a smile on our
    face.
        Mr. Lungren. We shall. We shall.
        I might just start out by saying the first amendment is an
    inconvenient truth. The Constitution is a series of
    inconvenient truths. They have within them various principles
    articulated that establish the relationship of individuals to
    the Federal Government, and sometimes they do not allow us to
    do things we might feel we want to do. But the test of time has
    reached a conclusion that, by and large, we were served well
    with it.
        This hearing comes amidst a flurry of bills introduced in
    response to the Supreme Court's recent decision in Citizens
    United v. Federal Election Commission. We still await a
    promised legislative proposal from the chairman of the
    committee charged with electing Democrats to the House and the
    former chairman of the Senate counterpart. In the meantime, let
    us consider some of the fundamental issues at stake.
        The first amendment states very simply, ``Congress shall
    make no law abridging the freedom of speech.'' Let me say that
    again. ``Congress shall make no law abridging the freedom of
    speech.''
        Mr. Chairman, we know that historically the most sacred
    kind of speech for the Founders was political speech; and even
    though the Supreme Court for decades, in my opinion, has spent
    a lot more time dealing with questions of nude dancing and
    other kinds of issues that probably never were contemplated by
    our Founding Fathers, the essential part is, as Justice Kennedy
    said in his majority opinion, ``The essence of the protected
    speech in the first amendment is political speech,'' and that
    ought to be our focus.
        Our government was not organized to quash dissent, minority
    views, or respected interests of various kinds, but, rather, to
    make those interests compete against one another in the court
    of public opinion. And frankly, it was not just to compete but
    to compete robustly, to have the clash of ideas presented as
    the way that we would best come to conclusions as to how we
    would order ourselves under the Constitution, not say there
    will be disfavored speech or disfavored individuals or
    disfavored groups.
        To attempt to root out free speech and to ration the
    arguments and voices of persons and entities within this
    country by controlling the timing, the manner, the character,
    and mechanisms of political speech defies our tradition rather
    than defines it, defies our Constitution, defies our system of
    ordered liberty, and I would argue it defies common sense. It
    is, in my judgment, judicial activism to read words into the
    Constitution that do not exist or to ignore words that are
    there. Taking the words of the Constitution at face value is
    not judicial activism, it is giving effect to the words or the
    work of our Founders.
        It is this long-held and long-revered truth that the Court,
    in my judgment, affirmed in the decision in Citizens United.
    Far from being the undoing of our system of free and fair
    elections--dangerous hyperbole that I have heard from a number
    of this decision's critics--this decision was the affirmation
    of one of the first principles of our democracy, that as
    Madison wrote during the height of the debate surrounding the
    Alien and Sedition Acts, the ``right of freely examining public
    characters and measures and of communication is the only
    effectual guardian of every other right.''
        What I find most troubling in the midst of this debate is
    the penchant or an apparent indifference by some to speech
    rationing and speech restrictions. As far back as 1976, the
    Supreme Court has worried that limits on political spending
    allow the government to restrict the speech of some elements of
    our society in order to enhance the relative choice of others.
    Mr. Chairman, I believe the government should never be in the
    position of deciding what voices are worthy of being heard.
        I hear many say, well, the answer to all of our problems is
    more restrictions under campaign finance reform. I happen to
    remember as a student in college that there was somebody called
    Clean Gene. His name was Gene McCarthy. He rallied the young
    people of America in an effort to deal with the question of an
    unpopular war.
        President Lyndon Johnson was President of the United
    States. Most people expected that he would basically sail to
    victory in the next election, but Gene McCarthy began the
    ``children's crusade'' against him. Interestingly enough,
    Eugene McCarthy was backed by five multimillionaires to provide
    the essence of his ability to speak. Stewart Mott gave him a
    huge amount of money. Today, Mr. Mott would go to prison for
    giving that amount of money to any individual. And yet it was
    Eugene McCarthy who brought down Lyndon Johnson.
        I remember studying at the library at the University of
    Notre Dame when all of a sudden I heard students running,
    running through the floors yelling at the top of their lungs.
    And what they were running about is that President Johnson had
    just announced he was not going to stand for reelection.
        Now, Eugene McCarthy was not the nominee. His position was
    later taken essentially by Robert Kennedy; and, unfortunately,
    we had the tragedy of the assassination of Robert Kennedy in
    southern California. But the fact of the matter is the
    unseating of a President, who was leading us at that time in an
    unpopular war, was effectuated by a lone voice in the United
    States Senate who was allowed to multiply his impact because he
    was assisted by funding from a number of individuals.
        Now, some people interpret that history differently than I
    do, but I have always been struck by the irony of that. Eugene
    McCarthy could not become the candidate he was in 1968 today
    because he wouldn't have that voice.
        During the oral arguments in this case that we are talking
    about here today, the Deputy Solicitor General went so far as
    to suggest that laws passed by Congress would allow the
    government to ban books. I happen to think that is essentially
    when the Supreme Court began to realize what they had in front
    of them. When the Deputy Solicitor General said, yes, if you
    had this book put out by a corporation, 500 pages, and at the
    end it said vote for or against someone, would the government
    be able to ban that book? And the answer was yes. Have we gone
    so far that we believe that banning books are allowed under the
    first amendment?
        As Justice Kennedy powerfully wrote, ``When government
    seeks to use its full power, including the criminal law, to
    command where a person may get his or her information or what
    distrusted source he or she may not hear, it uses censorship to
    control thought.''
        Mr. Chairman, many say they want to stop corruption and the
    appearance of corruption. I, too, support these worthy goals.
    But quashing political speech is not the way to accomplish
    that. That is, frankly, in the opposite direction of where the
    Constitution directs us. The most effective way is to have more
    information, more openness, more transparency, and more
    accountability in the way we do the people's business here in
    the U.S. Congress.
        ``Congress shall make no law abridging the freedom of
    speech.'' Mr. Chairman, I hope that, whatever we do, we will
    not abridge that freedom. Let's not be tempted with abridging
    that freedom. Let's make no law abridging, constricting, or
    shrinking political speech and the societal spaces in which it
    thrives. Let us instead support, strengthen, and encourage
    speech, that very same freedom we are using here today in these
    important deliberations.
        And so, Mr. Chairman, I would say I look forward to hearing
    from our panel of witnesses. I think you have given us an array
    of distinguished witnesses, and I think we are going to engage
    in some healthy debate under the concept of free political
    speech.
        Thank you, Mr. Chairman.
        The Chairman. Thank you.
        Ms. Lofgren.
        Ms. Lofgren. Thank you, Mr. Chairman.
        I think you are right. We don't see this eye to eye. I will
    say that, in reading the majority opinion in the Citizens
    United case, I was really shocked by the lack of judicial
    restraint and the departure from stare decisis, really just
    defining that, since we don't agree, would ditch the precedent.
    It is really not something you usually see in reading Supreme
    Court decisions, and it is really a case of very strident
    activism, I think.
        I am concerned about the impact on free elections. I was
    interested that a former Justice, Sandra Day O'Connor, who
    recently, I just think yesterday, indicated that she is
    concerned that corporate money will influence not only the
    outcome of legislative and executive races throughout the
    country but has expressed concern that the rush of corporate
    money will be problematic--and this is a quote--``for
    maintaining an independent judiciary''. And certainly that is
    of concern.
        I would note that the first amendment really is first
    because it is probably the most important, and yet we do
    sometimes regulate speech. For example, we prohibit Federal
    employees from doing certain political activities because of
    the concern that the mixing of Federal employment and the
    political spectrum might taint both services. We prohibit
    illegal aliens from contributing to political campaigns; and no
    one has said, well, what about their free speech rights if they
    are here? The remedy to the free speech of illegal aliens would
    be the speech of legal residents or U.S. citizens. So it is
    simply not correct to say that we never regulate in the area of
    speech.
        I think it is important to note that when the Founders
    formed this great union, the idea of corporate speech was
    really quite foreign to what they were thinking of when they
    wrote the Constitution.
        But, having said all of that, I recognize that we have a
    Court decision. I may agree with Justice Stevens' dissent a lot
    more than I do with the majority opinion, but that really is
    not what is before us. We have the Court's decision. There is
    no appeal from the Court's decision. And so I read the decision
    looking at what can be done, given the new legal realities that
    we face?
        It seems to me that the Court really did invite certain
    things. They embrace disclosure as a remedy to whatever
    problems might be attendant to the majority decision, and so I
    think we need to take a look at our disclosure laws and make
    sure that they are really up to date.
        The Court spoke with great favor on the Internet and the
    ability to instantly let everyone know who was saying what, and
    I think that bears examination.
        There was more than one reference to the role of corporate
    democracy and what remedy shareholders might have if they were
    concerned about the speech of a corporation. And, actually,
    let's be honest, corporations are people only as a fiction. It
    is really the shareholders who own it, and yet the shareholders
    don't have a say in what is happening. So I think we need to
    think through how do we provide mechanisms for shareholders to
    be fairly dealt with? And I am hoping that the witnesses will
    accommodate that.
        Corporations are entirely creatures of law, and so I think
    we need to think through what of the various elements that we
    grant to corporations are important relative to this new
    freedom that they have in political advertising. I mean, it is
    worth noting that if you added up all that was spent on
    congressional elections in the last cycle--and this is
    information that I got off the FEC--the average amount for
    winning a House seat in the 2008 cycle was $1.4 million. During
    that same cycle, ExxonMobil had $80 billion in profits that
    same cycle. So if ExxonMobil used just 1 percent of their
    profits on political activity, it would be more than all the
    435 winning congressional candidates spent to win their races.
    I mean, the scale of what one corporation could do versus what
    every candidate could do is pretty stunning.
        So I think we need to take a look at those tax issues,
    corporate law issues. And I also hope that we can take a look
    at a bill that our colleague, John Larson, has introduced that
    would allow an opting out of this whole situation, where, on a
    voluntary basis, you could have public funding of campaigns.
    That is not going to be the only answer to this situation, but
    I think it is time to throw that whole concept into the mix of
    this discussion, and I hope some of the witnesses can discuss
    that as well.
        I want to thank you, Mr. Chairman, for holding this
    hearing. I think it is extremely important that we pay
    attention to what the Court has wrought and that we avail
    ourselves of the invitation the Court had in its decision to
    remedy whatever holes have been created from the new law.
        With that, I yield back.
        The Chairman. I thank the lady.
        Mr. McCarthy.
        Mr. McCarthy. Thank you, Mr. Chairman.
        I am actually very eager to hear from the witnesses today.
    As you know, the room is actually packed, and it is nice to
    see.
        One thing I would say, in listening to the opening
    statements, as my colleague from California also brought up,
    public financing, I hope we care as much about the taxpayer who
    would be that shareholder as we conveyed from the other side of
    how much input the shareholder would have from corporations.
        In reading what the Supreme Court wrote, it talked more
    also than just corporations. It talked about free speech. But
    it also talked about the idea I hope comes out within here that
    we are able to hear about, what about those members of unions
    that don't have the say? A shareholder can even sell the stock.
    A union individual would have to quit their job if they didn't
    like the way the money was spent. So I hope we get a very fair
    treatment to all taxpayers and to all citizens out there and we
    keep the First Amendment in the process as we go through and we
    actually find common sense.
        When you go out and listen to Americans today and they see
    what transpires in back rooms that has been happening with
    different bills through here, they are frustrated. I like the
    idea of what the Supreme Court said about transparency. I like
    the idea that everybody can see what is happening on the table,
    that the American public, I always trust them, as long as they
    have the opportunity to see what is all being done and let them
    make the judgment at the end of the day.
        So I yield back, Mr. Chairman.
        The Chairman. I thank the gentleman.
        Mr. Capuano.
        Mr. Capuano. Thank you, Mr. Chairman.
        Mr. Chairman, generally, I don't do comments in the
    beginning, but I feel today it is important that we do.
        Though I respect some of the comments that were made, I
    thought I was listening to Justice Douglas about freedom of
    speech. And I just wish that if that is the only thing you will
    agree with him on, that is wonderful, but I would hope that you
    would agree with Justice Douglas in everything else he ever
    wrote as well, a fine, wonderful Justice.
        At the same time, we have always had some limitation on
    freedom of speech, and I would suggest that what we are doing
    now--what I am doing now--is trying to search for a way that is
    a reasonable, thoughtful, legal, constitutional way to do that.
    And I understand fully well that that is what we do here. We
    try to find ways to do what we are trying to accomplish without
    breaching the Constitution. And if the Court has said that--in
    a 5-4 decision, if I remember correctly--so be it. So I think,
    for me, I am searching for other ways to give the American
    people what I think they really want, which is an unfettered
    opportunity to make their own decisions on a level playing
    field.
        And I would argue that this is only one aspect of it. I
    think we need to talk about other things. I like some of the
    transparencies. I would love to get rid of the 527s, and I
    invite anybody to work with me to do that. If we can't get rid
    of them because, again, they might be free speech things, for
    me, I have no problem with an ad going up saying, Mike Capuano
    is Terrible, brought to you by the Exxon Corporation--let my
    voters know who is bringing it--as opposed to, Mike Capuano is
    Terrible, brought to you by Americans for a Better World,
    funded by the Exxon Corporation.
        I think those are the things we need to talk about, and
    those are things we need to work on. And I look forward to
    doing so over the next couple of months with people who are
    serious about this.
        I will tell you that this campaign finance bill that we
    passed a couple of years ago, I was never thrilled with a lot
    of these things. We talked a good game. But one of the worst
    things we did was increase the amount of money that individuals
    can give. I don't know, maybe I am the only person here who has
    a hard time finding many people who can donate $2,400 at a
    clip. And that is only part of the game because it is really
    $4,800, we all know that, and if they have a spouse, it is
    really $9,600. Now, I have some constituents who can do that,
    and some do, but I hate asking people for $10,000. And I would
    argue that we should be looking at ways to get rid of that as
    well.
        I know that that is a little bit beyond today's scheme, but
    really what I think today is talking about is trying to find a
    way to get the election system back in the hands of the average
    voter so they can make a thoughtful, level-playing-field
    decision, not just on me but on all of us and on issues.
        So I am going to try my best to avoid--which is going to be
    hard to do, of course--to avoid some of the high-flying
    commentary about freedom of speech and everything else. And I
    actually agree with Mr. McCarthy's comment about unions. I am
    looking for ways to get union members to have a say in that
    manner. I think that is a fair commentary, and I would love to
    work with you or anybody else to try to do so.
        I am not trying to stop people from being involved.
    Corporations were always involved. The question is, to what
    degree? And the same thing with unions or anybody else. What I
    would love to do is get everybody out of it, go to public
    financing and let that decide it, let the taxpayers who have to
    rely on us pay for it. I know that is probably beyond the scope
    of what we can do, but that is the best way to get rid of
    everybody, get out of this business, and let the voters have an
    equal say on everything.
        Nonetheless, I actually look forward, and I hope that we
    can get beyond some of the political rhetoric of all of us--we
    all engage in it, me, too--to get to a point where we can
    actually maybe try to work on trying to find some ways to make
    this work.
        And, again, I understand if somebody thinks, forget it,
    just total free speech, everybody can do whatever they want
    with as much money as they want. I respect that opinion. I
    don't agree with it, but I respect it. I think it is reasonable
    one, a thoughtful one, but just say it. If that is what you
    want, a free for all, anybody with the money can put as much
    money as they want on the table, fine, but then don't pretend
    that somehow you want to level the playing field. It is not a
    level playing field.
        That is what I am looking for, is reasonable, thoughtful
    ways to do it in reaction to a Supreme Court decision, which I
    disagree with, but it is not the first Court decision I have
    disagreed with and it won't be the last, regardless of how the
    Court is made up. And to try to find ways to do so legally,
    thoughtfully, with transparency, that hopefully we can all find
    a way to work together. I don't know that we can; and, if we
    can't, I will be happy to do my best to then defeat those
    people who don't agree with me. But that is what the system is
    all about.
        I hope that none of us have to hang a sign underneath our
    nameplates, Brought to You by Exxon. I won't be hanging that
    particular nameplate, because I don't think they would probably
    be donating a whole lot to me, but I do expect that maybe I
    will be brought to you in spite of Exxon.
        With that, Mr. Chairman, I yield back.
        The Chairman. I would like to thank the gentleman and clear
    the record: Mr. Capuano is not a terrible guy.
        Mr. Harper.
        Mr. Harper. Thank you, Mr. Chairman.
        So far, the discussion of Citizens United has been filled
    with much rhetoric about catastrophe. There have been dire
    warnings about foreigners taking over our elections and
    corporations flooding our airways with political
    advertisements. What there has been relatively little
    discussion of or adherence to are actual facts. That is what I
    hope we will hear from our witnesses today and what I would
    like to talk about for a few minutes.
        First, let's dispense with the oft-used talking points that
    Citizens United changed a century of American law. The law that
    is a century old bars corporations and unions from contributing
    to candidates out of their general funds. That law still exists
    in full force today, and Citizens United did nothing to change
    that or disturb that.
        Next, let's suspend with the talking points that the
    Citizens United decision will allow foreign corporations to
    spend without limit in our elections and that American
    elections will be bankrolled by America's most powerful
    interests or, worse, by foreign entities. Existing statutes and
    regulations, undisturbed by Citizens United, address this.
        As we sit here today, it is illegal for any foreign
    national to directly or indirectly make contributions or
    expenditures in any American election or to direct the
    decisions of any corporation or union's election-related
    activities.
        We have also heard talk about banning entities that employ
    lobbyists from making political expenditures. That seems to be
    saying that if you exercise your first amendment right to
    petition the government for a redress of grievances, then you
    must sacrifice your first amendment right to speak on political
    issues.
        We have heard that some corporations are so close to the
    government or look so much like the government that they should
    be treated like they are the government and not allowed to
    speak. Do not mistake the breathtaking scope of this claim. The
    examples cited include Wal-Mart and health insurers. And, of
    course, we have heard that the way to solve all of these
    problems is to use taxpayer funds to pay for congressional
    campaigns.
        All of these points lead in one direction, toward the
    government deciding who can speak, who can't speak, and how
    much they can speak. That is exactly the position our Founders
    rejected when crafting the first amendment, and it is exactly
    the position the Supreme Court rejected in Citizens United.
        Another claim that we hear often these days is that
    Citizens United was an exercise in judicial activism. Ignoring
    words in the Constitution is judicial activism. Reading words
    into the Constitution that aren't there is judicial activism.
    It is not judicial activism to decide that a law banning speech
    is invalid in the face of constitutional language that
    ``Congress shall make no law restricting the freedom of
    speech.''
        It is obvious that many individuals, especially on the
    Democratic side, disagree with the Supreme Court's decision,
    but to resort to misleading and overblown rhetoric does force
    us to wonder how much of the response is based on a policy
    disagreement and how much is based on a desire to manipulate
    the rules to benefit their own candidates. For example, they do
    not seem concerned about the ability of labor unions to spend
    freely to support or oppose candidates or show any interest in
    subjecting unions to the same kind of restrictions they would
    place on corporations.
        As we move toward considering legislation, I encourage this
    committee to take great care that its work is not designed to
    benefit either political party over the other.
        Thank you, and I reserve the balance of my time, Mr.
    Chairman.
        The Chairman. I thank the gentleman.
        Mrs. Davis.
        Mrs. Davis of California. Thank you, Mr. Chairman. I really
    came to hear the panel. I appreciate you all being here. I
    didn't realize my colleagues were reading speeches today. There
    are a few things I just wanted to mention then, since it looks
    like I am going to have to go lead my own subcommittee a little
    before 3 o'clock.
        I think the basic questions really are, where are the
    voters in this? I think what we always want to do is encourage
    involvement and not turn people away nor create apathy. So I
    think that is an issue that we want to think about as we do
    this and how we continue to engage them.
        The other issues, of course, are around disclaimers, which
    people have mentioned. What is the most efficient way that one
    can have a disclaimer? Because I think asking people to go to
    another Web site is probably not realistic. People are not
    going to do that. How much can you get into a disclaimer that
    is fair, that really represents what is happening? Do we need
    CEOs to be there saying, I approve this ad, and then you have a
    candidate perhaps, in some cases, doing the same.
        That leads to the other question of coordination. The
    courts threw out, as I understand it, any definitions in terms
    of coordination. Does that mean that elected officials can call
    up a CEO and say, hey, why don't you guys go get an ad out for
    me? I would like that. What is happening then? Where is that
    line going to be drawn? I think that is a very important one.
        The other thing that has been mentioned in terms of unions,
    and I think that we need to look at the history in terms of the
    ways that some organizations, some unions have handled this,
    because they have created a wall of separation in some cases.
    Someone who chooses not to avail themselves of the benefits of
    the union and yet is paying for that representation can pay a
    minimal amount and their dollars do not go to PAC money.
        So we already have that. There are places that do that. I
    think that is worthy to take a look at and understand how that
    could happen. And, obviously, it will happen in terms of
    shareholders if we can come up with something that actually is
    meaningful and works.
        So I appreciate the time, and I certainly appreciate the
    panel being here. Thank you.
        The Chairman. Thank you.
        As I said earlier, I wanted everybody to get a chance to
    speak, and I didn't want anybody's voice not being heard,
    including all of yours. I thank you for being here.
        We would like to introduce the panel.
        Mr. Robert Lenhard. Mr. Lenhard is currently of counsel of
    Covington and Burling D.C. offices and a member of the firm's
    Election and Political Law Practice Group. Prior to his work
    with the Covington and Burling law firm, he served as Chairman
    of the Federal Election Commission in 2007 and Vice Chairman in
    2006. He also previously served as Associate General Counsel
    for the American Federation of State, County, and Municipal
    Employees.
        Judith A. Browne-Dianis. Ms. Browne-Dianis is currently the
    Co-Director of Advancement Project, a legal action group
    committed to racial justice and fighting for fair elections.
    Prior to her work with the Advancement Project, Ms. Browne-
    Dianis worked with the NAACP Legal Defense and Education Fund,
    practicing law in the area of voting rights.
        Mary Wilson. Ms. Wilson is the President of the League of
    Women Voters. Ms. Wilson has been with the League of Women
    Voters for nearly 20 years in leadership positions at the
    national, State and local level. Prior to her work with the
    League, Ms. Wilson was counsel with the United States
    Department of Energy and the United States Equal Employment
    Opportunity Commission.
        Ms. Torres-Spelliscy is currently counsel with the Brennan
    Center for Justice Democracy Program. Ms. Torres-Spelliscy has
    worked to defend campaign finance and public funding laws in
    courts across the country. Prior to her work with the Brennan
    Center for Justice, Ms. Torres-Spelliscy was a staff member to
    Senator Durbin's office and worked at the law firm of Arnold &
    Porter.
        Allison Hayward. Ms. Hayward is an Assistant Professor of
    Law at George Mason University School of Law where she teaches
    constitutional law, election law, ethics, and civil procedure.
    Prior to teaching at George Mason University, Ms. Hayward was
    counsel to former FEC Commissioner Bradley Smith; an associate
    at Wiley, Rein & Fielding in Washington, D.C.; and of counsel
    at Bell, McAndrews & Hiltachk in Sacramento, California--you
    California guys jumped in on that one.
        Steve Simpson. Steve Simpson is a senior attorney with the
    Institute for Justice, a public interest law firm dedicated to
    issues of civil liberties. Before coming to the institution, he
    spent 5 years as a litigator with the national law firm Sherman
    and Sterling.
        I thank all of you for being here today and for testifying.
        As I said, we were lax on the 5-minute rule up here. I will
    be lax on the 5-minute rule down there. But if you get a little
    too far out, you will see me squirming a little bit, and then I
    will ask you to sum up. And then there will be time for
    questions, so you will be able to get--anything you couldn't
    get in in your statement, I am sure you will be able to answer
    a question and be able to filter that in, too.

     STATEMENTS OF ROBERT LENHARD, OF COUNSEL, COVINGTON & BURLING
    LLP; JUDITH A. BROWNE-DIANIS, CO-DIRECTOR, ADVANCEMENT PROJECT;
       MARY G. WILSON, PRESIDENT, LEAGUE OF WOMEN VOTERS; CIARA
    TORRES-SPELLISCY, COUNSEL, BRENNAN CENTER FOR JUSTICE; ALLISON
     HAYWARD, ASSISTANT PROFESSOR OF LAW, GEORGE MASON UNIVERSITY
        SCHOOL OF LAW; AND STEVEN M. SIMPSON, SENIOR ATTORNEY,
                         INSTITUTE FOR JUSTICE

        The Chairman. Mr. Lenhard.

                      STATEMENT OF ROBERT LENHARD

        Mr. Lenhard. Thank you.
        Chairman Brady, Ranking Member Lungren, distinguished
    members of the committee, I want to thank you for the
    opportunity to come and testify today.
        As the chairman noted, I have practiced in the area of
    campaign finance law for close to 20 years, both providing
    advice and counsel to individuals, unions, corporations, and
    trade associations to try to comply with the law, as well as
    serving as a regulator at the FEC trying to faithfully
    interpret and enforce the laws that Congress has passed.
        This has left me with a number of impressions of the
    Supreme Court's decision in Citizens United and the
    implications of it; and while I have submitted a somewhat more
    lengthy written testimony, there are four points that I wanted
    to raise briefly at the beginning.
        The first is that I think the popular perception that this
    was a dramatic change in the law is correct. For as long as I
    have been alive, it has been illegal for corporations to make
    either contributions or expenditures to influence Federal
    elections. The Supreme Court's decision in Citizens United
    changed that. The Court made clear that the first amendment
    protects the right of corporations to make expenditures
    expressly advocating the election or defeat of candidates so
    long as they do so independently of the candidates. The
    consequence of this is that there will be more corporate
    spending in elections, and we can all guess or debate how big
    we think that increase is going to be.
        I like to look at the problem a little differently. I would
    like to look at it just very briefly from the perspective of
    candidates, particularly candidates in very closely fought
    races. Because I think the decision, combined with existing
    law, makes those candidates particularly vulnerable now, and
    the reason for that is this:
        The Supreme Court has made clear that corporations can
    spend unlimited sums advocating the election or defeat of
    candidates, and yet the laws that regulate the collection of
    those funds, the sources of those funds vary dramatically
    between corporations and candidates. Corporations can raise
    those funds through commercial transactions and can spend as
    much as they have. Candidates are constrained by the
    contribution limits. They can raise no more than $2,400 from
    individuals, $5,000 for most PACs. And, consequently, my sense
    is that outside organizations that want to influence close
    elections can have a great effect by coming in and making very
    large ad buys very late in the race that are very negative,
    because my sense is that those kinds of ads can shave several
    percentage points of support off a candidate, and in a close
    election they can be decisive.
        The problem for a candidate is that if you face that kind
    of a situation, you are vulnerable in a number of ways. First
    off, you don't know the money is coming. Your opponent, you can
    look at their campaign fund-raising reports and see how much
    they have raised, how much you have, and make some rational
    budgetary decisions. Money coming from outside groups is
    unexpected. It is like an ambush.
        The second is the amount of money you can raise is limited
    by the statute, and most of the people whom you can pick up the
    phone and call and ask for money, you have already asked and
    they have already given. So as you get to the very last days of
    a campaign, that money is very, very hard to raise.
        And the other thing the law does is, because the
    prohibition on coordination is still in place and because
    coordination includes ads spent at the request or suggestion of
    a candidate, you really can't call up outside groups or even,
    as the law currently stands, political parties and ask them for
    help. Because, if you do, the spending that follows is an
    illegal coordinated expenditure or in-kind contribution, which
    would be illegal, even in a post-Citizens United world.
        That is true even for the political parties. Political
    parties by statute have a very low amount of money which they
    can spend in coordination with the campaign. Under the
    Constitution, they can spend unlimited sums independently. But
    in terms of your reaching out and calling for help, there are
    very, very few places where you can make that call.
        There is a possibility to change that. It will be possible
    for Congress to repeal the limits on how much a party can spend
    in coordination with a campaign, and it would provide
    vulnerable candidates with someplace they can call and seek an
    influx of money to help balance or counterbalance money coming
    from outside, especially in the context of Citizens United.
        This has, I think, a number of advantages. One is that the
    money is hard money. It remains under the restrictions of
    McCain-Feingold prohibiting the use of soft money because all
    that national party committee money is hard money, and the
    McCain-Feingold prohibitions remain in place.
        Second, because that money can be spent in coordination
    with a candidate, the candidate retains some control over the
    message. And one of the problems with outside spending is
    candidates do lose control of the themes that are driving
    voters in their elections.
        And, lastly--and it is a personal view--I think that it
    helps strengthen the parties, makes the parties more relevant,
    which I personally think would be a good thing. Other people
    may disagree, but I think it does make the parties more central
    and would provide candidates who are vulnerable--and I think
    candidates on both sides of the aisle are vulnerable to these
    outside spending ads--some way to try and help counterbalance
    that effect.
        The next thing I would like to talk about very briefly is
    disclosure. Congress has created really three different
    disclosure regimes that cover ads in this area. The first is
    the disclosure regime that exists within the Federal Election
    Commission. Entities that qualify as political committees face
    a relatively rigorous set of disclosure rules. They have to
    disclose all their receipts and disbursements, and they have to
    itemize where that money came from or where it went to if it
    exceeded very low limits--$200 from money coming in, $250 for
    money coming out.
        For organizations that do not qualify as political
    committees--political committees would include PACs as well as
    candidate committees--for organizations that don't meet those
    definitions, there are really two different points at which
    they have to file reports with the FEC. The first is if they
    make independent expenditures, expressly advocating the
    election or defeat of candidates. The second is if they make
    electioneering communications, which was a term Congress
    created in McCain-Feingold (BCRA), which essentially covers ads
    that feature candidates and that run very close to an
    election--30 days with the primary, 60 days with the general--
    and target in the district in which the Member of the House or
    the Senate is running.
        And there are more abbreviated disclosure forms that
    organizations that run those kinds of ads have to fill out
    essentially saying how much they spent, and in certain
    circumstances where that money came from.
        The third disclosure regime you have created covers 527
    organizations. These are entities that operate under Section
    527 of the Tax Code which covers entities trying to elect or
    defeat candidates. Congress requires the IRS administer a
    requirement that those kind of entities disclose where the
    money came from and what they spent it on to the degree that it
    reaches slightly higher thresholds--$500 for money coming in,
    $800 for money coming out.
        There are a number of exceptions to who has to file those
    reports with the IRS. And the IRS reports are all on the
    Internet. You can go right now and log in and call them up.
        The first is there are certain kinds of entities that are
    already reporting somewhere else, and they are exempt from the
    IRS rule. So, for example, if you are reporting to the FEC, you
    don't have to also report to the IRS. If you are only involved
    in State elections and you report to the State, you don't have
    to report to the IRS. But Congress' goal there was to try and
    capture the 527 entities a number of years ago when they were
    quite controversial.
        There is an exception there which allows organizations not
    to disclose donors if they are willing to pay the tax, and the
    tax is steep. It is the highest corporate rate, which I think
    runs about 35 percent now. But there have been a couple of
    groups over time that would rather pay the tax than disclose
    the source of their contributions.
        But as you think about this area of the law, there are
    really three different areas where you have created existing
    disclosure regimes.
        And the last thing I want to touch on very briefly is
    coordination, which remains a valid statutory provision. The
    Court has not struck down the statute. It is illegal to
    coordinate with campaigns.
        There is a great deal of back and forth about what the
    nuanced interpretations of that law is. The FEC has come up
    with regulations a couple of times. The courts have struck them
    down a couple of times. The FEC is in ongoing rulemaking right
    now as we speak trying to come to grips with that. But there
    is, I think, some amorphousness as to what that law exactly
    means today; and the question of what is coordination and what
    disclosure exists really, I think, are going to be the two
    areas of law post-Citizens United that are the most debated.
        Thank you very much.
        [The statement of Mr. Lenhard follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you.
        Ms. Browne-Dianis.

                  STATEMENT OF JUDITH A. BROWNE-DIANIS

        Ms. Browne-Dianis. Thank you, Chairman Brady and members of
    the committee.
        My name is Judith Browne-Dianis and I am Co-Director of
    Advancement Project, a civil rights organization that supports
    organized communities in their struggles to achieve universal
    opportunity in a just democracy.
        Almost since our inception Advancement Project has been
    involved in the important voting rights issues of our day,
    including issues related to the administration of elections,
    and the elimination of barriers to voting through our voter
    protection program. We have been advocating for the automatic
    restoration of voting rights of persons with felony
    convictions. We have represented communities of color in
    redistricting. And, lastly, we have initiated a campaign for a
    constitutional amendment for a right to vote.
        In addition to the written testimony I submitted, I would
    like to note a few things.
        First, I wanted to note the irony of having this discussion
    today about a case opening the door to the unbridled corporate
    influence on elections on the anniversary of the ratification
    of the 15th amendment, which happened on February 3, 1870,
    prohibiting the denial of the vote on the basis of race, color,
    or servitude.
        The Supreme Court's decision in Citizens United clearly
    ushers in a new and unprecedented era of direct corporate
    wealth influence in our elections. This means that lower- and
    middle-income Americans, who compromise the clear and
    overwhelming majority of the country, will have much less of an
    opportunity to gain access to and interact with their political
    representatives or to help shape the debate in ways that serve
    the interests of the majority of Americans.
        But the wealth disparity in campaign finance is not just an
    issue of class. It is also an issue of race. Unfortunately, we
    still live in a country where race and wealth are intertwined
    such that people of color have accumulated less wealth; and,
    under this new regime, this corporate takeover of our
    democracy, the voices of people of color will be drowned out in
    the efforts to influence the outcomes of our elections.
        Given the historical and lingering racial disparities in
    wealth distribution and transfer caused by government and
    private actions over hundreds of years, coupled with the low
    representation of people of color in the management sphere of
    our Nation's largest corporations and the overwhelmingly white
    demographic of major campaign contributors, it is easy to see
    why any campaign finance regime that allows and relies heavily
    upon private financial contributors, especially major
    corporations, would structurally exclude people of color from
    any significant degree of effective political influence.
        To alleviate the racially discriminatory burdens of money
    and wealth in the campaign finance system, Congress must act
    boldly to strengthen public financing in all Federal and State
    elections, including passing the Fair Elections Now Act,
    establishing direct expenditure and electioneering limits on
    all Federal contracts, and requiring States that receive
    Federal election funds to amend their laws to require explicit
    shareholder and member approval for electioneering
    expenditures.
        What is also disconcerting about the Citizens United
    decision is the Supreme Court's willingness to sell our
    democracy off to the highest corporate bidder in the name of
    free speech and participation while in other instances
    eviscerating protections for citizens--real, live people--to
    have their voices heard by voting. The Court applied the most
    restrictive standard of review in its consideration of whether
    the campaign finance statute issued in Citizens United ran
    afoul of the first amendment, but it is not so exacting when it
    comes to looking at barriers to voting.
        Specifically, in Citizens United, the Supreme Court
    determined that political speech of corporations was subject to
    strict scrutiny under the first amendment, requiring a
    compelling State interest to infringe upon that right. Yet when
    considering Indiana's law requiring voter identification in the
    Crawford case, the Court departed from past precedent and used
    a less stringent standard of review where there was a clear
    burden on the opportunity to vote. It is outrageous that voting
    is not entitled to review under the most stringent protections
    that now apply to corporate influence in the outcomes of
    elections.
        As Justice Stevens rightly noted in his dissent, ``While
    American democracy isn't perfect, few outside the majority of
    this Court would have thought its flaws included a dearth of
    corporate money in politics.''
        To ensure vigorous protection of individual voting rights,
    Advancement Project urges Congress to enact House Joint
    Resolution 28 to amend the Constitution to enshrine an express
    right to vote. We do not have a right to vote in this country,
    along with 11 other democracies and Iran and Libya. Without a
    Federal guarantee of the right to vote, the judiciary will
    continue to regard voting rights as something to be balanced
    while still claiming them as fundamental, and States will
    continue to use their vast control over this basic citizenship
    right in a patchwork quilt of arbitrary rules with vast
    consequences for close elections.
        Finally, Congress should realize that voting is the last
    frontier of our democracy. No matter how much money
    corporations may choose to spend to influence elections in the
    political debate in the wake of Citizens United, the one thing
    they will never be able to do--at least I hope--is to cast a
    ballot on Election Day. It is therefore incumbent upon Congress
    to ensure that all American citizens, especially traditionally
    disadvantaged and disenfranchised citizens of color, do not
    encounter needless roadblocks to registration and voting. To
    that end, Advancement Project urges Congress to enact the
    Protection Against Wrongful Voter Purges Act, which amends the
    NVRA and HAVA in a number of ways to strengthen protections
    against the wrongful removal of registered voters from the
    roles and the wrongful denial or delaying of voter registration
    applications.
        Advancement Project also recommends that Congress enact the
    Provisional Ballot Fairness in Counting Act of 2009, H.R. 3552,
    which would eliminate the wrong precinct rules that relates to
    counting provisional ballots in fair elections. In particular,
    it would require that provisional ballots cast by a voter
    registered anywhere in the State be counted for President and
    Senate elections and ballots cast in correct congressional
    districts be counted for U.S. representatives.
        These two bills would provide immediate fixes to many of
    the perennial voter registration and list maintenance issues
    that have prevented eligible voters from becoming registered to
    vote and have their ballots counted since the 2000 elections.
        In the longer term, Congress should work to improve voter
    registration by enacting legislation that will require
    automatic registration of all eligible voters and permit
    Election Day registration to those who are not already
    registered.
        We clearly believe that in light of Citizens United we must
    strengthen our democracy by ensuring that individuals who are
    actually eligible to cast a ballot have an opportunity to do
    that. This is the only way to balance out the power
    corporations have been given. The one great equalizer, in our
    democracy is going into the election booth to cast that ballot.
    This must be a protected right in order to secure our
    democracy.
        Thank you very much.
        [The statement of Ms. Browne-Dianis follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you.
        Ms. Wilson.

                      STATEMENT OF MARY G. WILSON

        Ms. Wilson. Thank you.
        Mr. Chairman, members of the committee, I am Mary Wilson,
    President of the League of Women Voters of the United States. I
    am very pleased to be here this afternoon to talk to you about
    the League's support for legislation that would protect our
    electoral system in the wake of Citizens United v. FEC.
        There is one simple message that I hope the committee
    members will take away from the hearing this afternoon; and
    that is: because the 2010 elections are fast approaching, it is
    imperative for Congress to act swiftly to pass legislation and
    send to the President for signature legislation that governs
    corporate and union spending. That legislation must take effect
    immediately. Waiting until after the 2010 elections is simply
    not a viable option.
        The League of Women Voters of the United States has for the
    last 90 years been working to educate voters, register voters,
    and make sure that citizens have an opportunity to participate
    in our electoral process. I can tell you without a doubt that
    voters want election results that reflect their honestly held
    opinions, not results that derive from big money in elections.
    The voters depend on you, their elected representatives in
    Congress, to protect that open, honest government and a healthy
    democracy.
        The Court's decision in Citizens United upends basic
    campaign finance law that Congress has carefully crafted over
    many years. This fundamental change--with perhaps more coming
    as the Court considers other cases--requires a strong response
    from Congress and the President. Now, I must say we do not
    expect that legislation that would be adopted this year can
    address every possible issue, but some basic voter protection
    can and must be enacted this year.
        There are numerous protections that could be enacted, and
    in my lengthy written statement there are a number of issues
    that I raise, but I want to talk today about enhanced
    disclosure. It is the most basic step toward protecting the
    role of the voter in making decisions in elections.
        The Citizens United decision appears to make it possible
    for corporations, and perhaps unions, to secretly use funds
    that they receive from another corporation to intervene in an
    election. This is not acceptable. Voters need information about
    the sources of funding for those charges and countercharges
    that always come during election campaigns. This is basic. It
    is one of the few ways by which a voter can test the accuracy
    of campaign statements. And I must say, indeed, the Court in
    Citizens United supported such requirements, as they said, ``so
    that the people will be able to evaluate the arguments to which
    they are being subjected.'' We couldn't agree more with that
    statement.
        The League of Women Voters supports strong disclosure
    requirements for both those who receive election funds and
    those who provide such funds. For example, if corporation A
    receives significant funds from corporation B and subsequently
    makes an election expenditure, then corporation A should
    disclose both its own expenditure and the contribution from
    corporation B, and corporation B should disclose its
    contributions to corporation A.
        We believe that corporations should have the responsibility
    for providing disclosure to the public, through disclaimers and
    on the Internet, directly to their stockholders or members, as
    the case may be, and to the Federal Election Commission and the
    Securities and Exchange Commission.
        Disclaimers on public communications should be required for
    every corporation that provides funds above a certain amount
    either directly or indirectly to an election expenditure. The
    Supreme Court clearly approved of disclaimers in Citizens
    United and in fact remarked that, ``With the advent of the
    Internet, prompt disclosure of expenditures can provide
    shareholders and citizens with the information needed to hold
    corporations and elected officials accountable for their
    positions and supporters.''
        After providing enhanced disclosure, the next most
    important step for Congress is to do no further harm. A
    decision as far-reaching in its implications as Citizens United
    will, I am sure, provoke a number of proposals that we, the
    League of Women Voters, believe could make our election system
    and our government processes worse.
        Some, I am sure, will call for increasing or doing away
    with contribution limits to candidates and PACs. There will
    likely be calls to allow corporations and unions once again to
    make huge contributions to political parties, effectively
    repealing the soft money ban in BCRA. There may even be those
    who call for unlimited corporate and union contributions to
    candidates.
        On behalf of the League of Women Voters, I strongly urge
    you not to do any of these things. Each of these steps would
    increase corruption or the appearance of corruption. We need
    fair elections, not greater involvement of big money in
    elections and government.
        In conclusion, the League of Women Voters believes that the
    Court's majority decision in Citizens United was fundamentally
    wrong and a tragic mistake, but this is the decision of the
    Court. Congress needs to respond now, recognizing its own
    authority and responsibility to uphold the Constitution and
    protect the voters. Fair and clean elections, determined by the
    votes of American citizens, should be at the center of our
    democracy.
        Thank you.
        [The statement of Ms. Wilson follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you.
        Ms. Torres-Spelliscy.

                  STATEMENT OF CIARA TORRES-SPELLISCY

        Ms. Torres-Spelliscy. Good afternoon. Thank you for having
    me here today.
        I request that my report, ``Corporate Campaign Spending:
    Giving Shareholders A Voice,'' be entered into the record.
        The Chairman. Without objection, so ordered.
        Ms. Torres-Spelliscy. Thank you.
        [The information follows:]
        Ms. Torres-Spelliscy. We at the Brennan Center encourage
    Congress to respond to Citizens United in a holistic way. In
    the near future, corporate managers may be using shareholder
    money to play in politics. While other witnesses today may
    argue that nothing has changed because corporate money was
    already in politics, I would respond that while you may have
    been wading in special interest money up to your waist at this
    point, in the future you may be up to your eyeballs or over
    your head.
        Congress should act to ensure that voters and citizens
    remain the central actors in our elections. We suggest a range
    of reforms, including public financing, universal voter
    registration, and empowering shareholders. Today I am going to
    focus on shareholder empowerment.
        Citizens United permits corporate treasury funds to be
    spent on express advocacy for the first time in 63 years. The
    crux of the issue is this: When a corporate manager spends
    ``corporate money'' on politics, this includes other people's
    money. There are two basic problems under the current law: a
    lack of consent and a lack of transparency. This is an
    important issue, because one out of every two American
    households is invested in a publicly traded company.
        So when I say that shareholders are not sufficiently
    protected, I am not talking about elites. I am talking about
    average Americans who rely on their investments for their
    current income and for their future retirements.
        When we were studying this issue at the Brennan Center, we
    had a chance to ask some big structural questions. One of the
    questions we asked was, if an investor wanted to know the total
    amount of political expenditures by a given corporation, would
    she be able to find that? And the answer in many cases is no.
    Second, if an investor happened to discover a particularly
    boneheaded, ill-advised political expenditure, what recourse
    would that shareholder have? And the answer to that is there is
    very little legal recourse for a dissenting shareholder.
        In asking these big structural questions, we discovered
    that there are some very problematic gaps between the corporate
    law and the campaign finance law that leaves shareholders
    unprotected, and this problem has increased tenfold with
    Citizens United.
        The first problem is a lack of consent, and the big picture
    is this: Under current law, including the new developments in
    Citizens United, corporations can spend vast amounts of
    corporate treasury funds on politics, and they can do so
    without notifying their shareholders either before or after the
    fact, and they can do it without getting shareholder consent or
    authorization.
        Then there is the related problem of a lack of
    transparency. It is extraordinarily difficult for shareholders
    to learn the total universe of political corporate spending.
    The short answer to why this is is that neither the Securities
    and Exchange Commission nor the Federal Election Commission
    require full disclosure directly to shareholders. So this led
    us to think about shareholder protections that Congress could
    enact.
        We conclude that legislation should have the following
    three prongs: Corporate managers should get shareholder
    authorization of all future political spending; two, companies
    should provide periodic notice of political spending to
    shareholders; and any unauthorized corporate political spending
    should trigger liability. We base this policy proposal in part
    on the British, who have had these protections for their
    shareholders since the year 2000.
        These reforms make sense from the point of view of the
    integrity of our capital markets. If a particular company is
    trying to game the system through political spending, then I
    think that the market and investors should know that. And these
    reforms also make good sense from the point of view of our
    democratic norms because we want consenting individuals at the
    center of our politics.
        I thank you for the opportunity to present today.
        [The statement of Ms. Torres-Spelliscy follows:]

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        The Chairman. Thank you.
        Ms. Hayward.

                      STATEMENT OF ALLISON HAYWARD

        Ms. Hayward. Thank you, Mr. Chairman, Ranking Member
    Lungren, and the committee for providing me the opportunity to
    talk to you today.
        I have provided longer comments for the record, but what I
    want to do today is highlight a couple of things.
        Two points predominantly. First, that, in my view anyway,
    the Citizens United opinion is a sound opinion and one that
    falls within the progression of precedent that the Court has
    enunciated when it has been dealing with independent
    expenditures. Secondly, my skepticism that the consequences
    from Citizens United are going to be as dramatic as maybe some
    of the colleagues that I have on this panel would believe.
        First of all, Citizens United fits within the Court's
    jurisprudence when you look particularly at what the Court has
    enunciated with regard to independent expenditures.
        When the Court was faced initially with the question of how
    to interpret the expenditure ban, it was in a test case teed up
    by a labor organization after the 1947 amendments to the Taft-
    Hartley Act, which, by the way, were added at the 11th hour in
    conference committee--not that any of you would be familiar
    with how that works--and without a lot of debate. Labor unions
    were fairly well convinced that it was going to be
    unconstitutional, and so were very comfortable with bringing a
    test case.
        The Court in U.S. v. CIO, which came down in 1948, wasn't
    very helpful in providing constitutional guidance, because what
    they did is they looked at the law and said, whatever this law
    is intended to cover, it couldn't possibly cover your
    newsletter because that would be unconstitutional. So, no case.
        A series of lower court cases, also test cases teed up by
    unions, did not go well for the Department of Justice either.
    In fact, the Department of Justice, through the late '40s and
    early '50s, adopted a policy of non-enforcement out of fear
    that enforcement of the Taft-Hartley amendment would be
    unconstitutional. And you don't have to take my word for that.
    There is testimony provided by the Assistant Attorney General
    at the time in 1955 to a Senate committee where he says
    essentially that. He is very open about it.
        And the Court looks again at the law in the Autoworkers
    decision from 1956, I believe. And there Justice Frankfurter
    writing for the Court says, well, we are going to look at this
    again. It was a case involving some TV spots. The Autoworkers
    had a weekly television program, and some of these programs
    included advocacy for and against particular lawmakers,
    incumbents. And so a few episodes of this larger series were
    the subject of the prosecution, and the Court there said this
    is the kind of expenditure that the amendment was designed to
    address, but because the court below dismissed that question,
    we have to remand it back to the district court. On remand,
    they had a trial, and the jury acquitted the union of making an
    expenditure.
        So, as you can see, as the cases start to develop on the
    expenditure ban, especially with regard to labor organizations
    that were bringing these challenges--I think it is interesting
    to note that corporations weren't testing the law to the same
    degree of vigor and enthusiasm that unions were--you don't get
    a very clear enunciation of the constitutionality of an
    expenditure ban. You get a ``sort-of-there-but-not-there'' kind
    of cloud. And that cloud persists until I think Austin v.
    Chamber of Commerce.
        In the interim, you have other questions involving
    independent expenditures, however, where the court is very
    clear that expenditure prohibitions are not constitutional. You
    have the independent expenditure cap in Buckley v. Valeo. You
    have the independent expenditure cap in the publicly funded
    presidential general election, which is the NCPAC decision.
        And you have Justice Brennan--no conservative he--looking
    at the independent expenditure ban in MCFL and saying, okay--
    and this will sound familiar--whatever Congress meant to
    regulate, it wasn't this. And so the legacy in MCFL is an
    exception to the expenditure ban when you have political
    nonprofits that are not using corporate money and there is no
    sense that there are shareholders whose money might be used
    against their will.
        Then you have the Austin case, which Citizens United
    expressly overrules. The Austin case looked at, using strict
    scrutiny, the Michigan law that prohibited a Chamber of
    Commerce from doing the same thing that MCFL wanted to do. You
    can kind of see where the Austin lawyers thought this might be
    the next step. And, applying strict scrutiny, the court held
    that in fact that was constitutional, but using reasoning that
    was controversial at the time and I think has been
    controversial for a lot of scholars since then.
        So when people look at Citizens United as a departure from
    doctrine, I am not so sure. The doctrine was never very well
    enunciated. It has been under a constitutional cloud. I think
    it is instructive that in the immediate aftermath of the
    passage of Taft-Hartley prosecutors were reluctant to prosecute
    on it because they didn't want that bad precedent blowing up a
    tool that they were concerned might be helpful at least as a
    deterrent.
        I want to talk quickly about consequences in the wake of
    Citizens United. I don't know what the consequences will be. I
    am not sure anyone else does either. Corporations do spend
    money in the context of politics now. They are just issue
    advocacy not express advocacy. Now they can say directly what
    they couldn't before.
        Will that mean there is more spending or different scripts
    but the same spenders? I don't know. But I just want to suggest
    that it is not a foregone conclusion that there will be a rush
    for additional money but simply that the people who are already
    spending might spend slightly differently.
        Moreover, I would like to note that States that allow
    corporate expenditures in their campaigns have not seen fit to
    alter their corporate law or other aspects of their State laws
    that regulate those corporations in any sort of novel or
    dramatic ways and seem to be fairly comfortable with
    corporations and unions as participants in political dialogues.
        Briefly--I think this has been mentioned, but I will say it
    from the panel--the foreign national ban remains the law. That
    is to say that foreign nationals cannot make contributions or
    expenditures in any elections--Federal, State or local.
    Congress has exercised its authority in matters of foreign
    affairs and foreign policy to provide for a broad ban in the
    law. That has been interpreted by the FEC to include foreign
    national individuals and their ability to make decisions in
    fund raising. It might be that it is a comfort to some for that
    interpretation to be codified. I don't suggest that as my
    suggestion, but if there is a felt need to clarify or reiterate
    that ban, that would be one way to go.
        On shareholder democracy, just real quickly. Shareholder
    democracy isn't very democratic if you have worked with
    corporations. For one, not all corporations are alike. I don't
    think anyone here is worried about the closely held corporation
    where you have five shareholders who also happen to be the same
    people who are officers and the same people who are directors.
    The corporate roster in any State is filled with those. These
    are people who are incorporating so that they can have a
    fictitious business name to do business so that they can sign
    leases in the name of a fictitious person, not in the personal
    name of the individual business person. Let's set those aside
    because I don't think those are what people are worried about.
        When you have large corporations in a shareholder
    democracy, you have a couple of qualities in voting that I just
    want to alert you to; and the recommendation I would have is
    that you should find a corporate scholar to help you along the
    road if you feel like this is the place you want to go.
        In corporate voting, you can buy votes. It is perfectly
    legal. You can enforce a contract to buy and sell your
    shareholder vote. You can engage--or hedge funds can engage,
    not you personally or me personally--in what is called empty
    voting, where you borrow the voting rights for somebody else.
    So you can vote in a way that is insincere to the corporation's
    interests because you have another investment interest over
    here. It is controversial, but it is an aspect of corporate
    governance today that you should know about. So you will want
    to tread carefully when you start looking at the shareholder
    feedback loop.
        Another question that came up in my mind, just listening to
    my fellow panelists, was, suppose the shareholder is themselves
    a corporation or a labor organization. Do you have to have a
    second-tier approval process, and how attenuated does that
    chain need to be before you feel confident that there is
    consent? It may be something that you can't satisfy.
        So, in closing, Congress has latitude in many areas of
    regulation that may relate to this. I just want to point out
    that Congress has latitude in setting the rules for who can
    contract with the Federal Government. So instead of looking at
    this as a regulation of political activity, you might look at
    it as a regulation of government contracting. Congress, of
    course, has great latitude in how it structures its ethics
    rules. You might look at tax incentives as another way to go.
        And then, finally, I would like to endorse my fellow
    panelist Bob Lenhard's proposal about raising or eliminating
    the coordinated expenditure restrictions that apply to
    political parties. I think that would be a very healthy thing
    to do.
        Thank you.
        [The statement of Ms. Hayward follows:]

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        The Chairman. Thank you.
        Mr. Simpson.

                     STATEMENT OF STEVEN M. SIMPSON

        Mr. Simpson. Mr. Chairman, Ranking Member Lungren, and
    members of the committee, thank you very much for inviting me
    to testify here today.
        The Supreme Court's decision in Citizens United is one of
    the most important first amendment decisions in a generation.
    It arose because the campaign finance laws prevented a
    corporation from disseminating a film and even threatened to
    regulate the publishing and dissemination of books. As the
    Court stated in the decision, ``If the first amendment has any
    force, it prohibits Congress from fining or jailing citizens or
    associations of citizens for simply engaging in political
    speech.''
        Critics have lodged a number of wild claims about the
    decision, but in assessing its impact we should follow the
    Court's own wise counsel and not let rhetoric obscure reality.
    Toward that end, I would like to address some of the more
    prominent myths that have been offered about the Citizens
    United decision.
        First is the idea that under Citizens United corporations
    will be able to buy elections. Now, a corporation can no more
    buy an election with political advertising than they can buy
    market share with commercial advertising. If they could, we
    would all be driving American cars and drinking new Coke,
    Michael Huffington would have been voted Senator a long time
    ago, Ross Perot would have been voted President, John Corzine
    would not have lost in New Jersey. The list goes on and on.
        While it is certainly true that money is necessary to win a
    campaign, that simply does not translate into victory for the
    biggest spender. Indeed, as Professor Hayward made clear, 26
    States allow corporations to make independent expenditures in
    elections. They have not become hotbeds of corruption, nor have
    corporations been able to buy their elections.
        But the claim that anyone can buy an election, whether a
    corporation or anyone else spending money on advertising in an
    election, is not only false, it contradicts the very idea of
    our constitutional republic. As the Court said in Citizens
    United, ``The first amendment confirms the freedom to think for
    ourselves.'' In short, corporate spending does not buy
    elections anymore than anyone else's spending does. It buys
    speech that seeks to persuade. For those who don't agree with
    that speech, the Court provided the answer in Citizens United,
    ``It is our law and our tradition that more speech, not less,
    is the governing rule.''
        The second myth I would like to address is that
    corporations, unlike people, have no free speech rights. Now,
    it is true certainly that corporations are not people, but they
    are made up of people just like any other association that
    exists today. Indeed, concerns about corporate speech obscure
    the fact that campaign finance laws in essence treat all groups
    basically the same way.
        A case in point is a case called SpeechNow v. FEC, a case
    that I am now litigating along with the Center for Competitive
    Politics in the D.C. circuit. SpeechNow is an unincorporated
    association. It is a group of individuals who wish to get
    together, exercise their right of association, and spend their
    money advocating the election or defeat of candidates.
        The campaign finance laws treat this group, this
    unincorporated association, essentially exactly the same as a
    corporation. To speak, they must become a political committee,
    and they must comply with the same onerous burdens that the
    Supreme Court just struck down as they apply to corporations.
    Neither the FEC nor campaign finance reform groups have said
    that SpeechNow.org should be relieved of these burdens because
    it is not a corporation. And critics have responded that the
    laws that were struck down in Citizens United don't actually
    prevent anyone from speaking, they merely regulate the funding
    of that speech.
        But this ignores the very real burdens of political
    committee status that the Supreme Court highlighted, excuse me,
    in the Citizens United decision. For instance, in a recent
    study conducted by Dr. Jeffrey Milyo of the University of
    Missouri on behalf of my organization, the Institute for
    Justice, 255 individuals were asked to comply with the
    regulations that apply to ballot issue committees in the
    States. On average they managed to correctly complete just 41
    percent of the tasks that they were asked to complete. After
    the exercise many expressed frustration, saying things like
    this was worse than the IRS and a person needs a lawyer to do
    this correctly.
        It is no exaggeration to say that the campaign finance laws
    often rival the Tax Code in their complexity. Indeed, during
    the oral argument in the Speech. Now in this case I had the
    surreal experience of debating with several judges on the D.C.
    Circuit as to whether the tax laws are more or less burdensome
    than the campaign finance laws. Now, reasonable minds can
    disagree on that question, but it ought not be debatable that
    if Americans come to regard speaking out about political
    elections, as they do filing their income tax returns, far
    fewer of them would bother to try to speak out at all.
        In conclusion, in today's world money and organization are
    not merely important to political speech, they are absolutely
    indispensable to it. As Chief Justice Roberts said in his
    concurring opinion in the Citizens United decision, the first
    amendment protects more than just the individual on a soap box
    and the lonely pamphleteer. The first amendment's protections
    apply whether the speaker is an individual or a group, whether
    he uses a quill pen, a printing press, or the Internet. That
    the Supreme Court understands this is not cause for concern, it
    ought to be cause for celebration.
        Thank you.
        [The statement of Mr. Simpson follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you and thank all of you. We will now
    open up for questions, and I would like to start and just ask
    all of you the same exact question if you would just respond
    briefly.
        I am not an expert on constitutional law, but I am a union
    member and a union official for the last 45 years. I know the
    difference between individuals who join unions and individuals
    who purchase stocks. Unions are membership organizations, union
    leadership democratically elected and held accountable to its
    members in regularly scheduled elections. Unions are nonprofit
    organizations bringing together individuals, individual
    interests for the purpose of increasing bargaining power and
    effectively petitioning government. Corporations have
    shareholders. Neither boards nor their executive management
    teams are democratically elected. They are constituated to
    accumulate wealth in the form of a shareholder value rather
    than represent the board interest of the shareholders and
    petition their government.
        Does this distinction between the unions and their
    corporation merit different treatments for unions and
    corporations in America, election law and the election law in
    the wake of citizen alliance? In other words, should unions and
    corporations be treated differently?
        Start with you, sir.
        Mr. Lenhard. I guess the----
        The Chairman. Because they are lumped in in this decision
    and I would like to know.
        Mr. Lenhard. The easy answer is I don't know. Having been
    both a member of a union and a shareholder, I found the
    democratic experience in the union far preferable to that of
    being a shareholder. I think that there are a number of
    procedural protections that union members have, both in terms
    of the--and I actually practiced in this area of law for a
    while early in my career. The courts and in some cases
    legislatures have given people who are covered by collective
    bargaining agreements the right to dissent and to reduce the
    amount of money they pay the union by the proportion of the
    union's expenditures that are attributable to political
    activity, and it is not just campaign contributions, a lot of
    political activity. And people do actively use that right and
    they do pay reduced sums. And they--so there is, I think, a
    reasonably robust process whereby people who want to both get
    information about the money that is spent on political
    activities and the ability to get a portion of that back.
        The same is far from true in the corporate setting, where
    shareholders have a very limited set of rights to vote for the
    board, approve auditors, and particular transactions.
        My sense is that the--and the other factor in this--is the
    enormous disparity in wealth available to unions and available
    to corporations make them very, very different entities. Unions
    are viewed as more politically powerful because the members are
    very active and volunteer their time. But the size of resources
    the unions have is really tiny in comparison to that of
    corporations.
        The Chairman. Thank you. Ms. Dianis.
        Ms. Dianis. I am going with his answer. I have nothing to
    add to that. I think that the point of the activity and
    involvement of union members versus shareholders does bring a
    significant distinction and that they should be treated
    differently because of that. Again, the point about the
    activity of union members and their political activity brings
    it also different from the shareholder who gets a piece of mail
    every once in a while and asking basically for their proxy
    instead of their real involvement.
        The Chairman. Ms. Wilson.
        Ms. Wilson. I certainly think that you, Mr. Chairman,
    summed up the differences between unions and corporations in
    terms of their governance, and I think that is a very key point
    in the discussion. But I also would like to look at it from the
    voters' perspective, and from the voters' perspective I believe
    that the disclosure and disclaimer requirements, whether or not
    it is a union-paid advertisement or a corporation-paid
    advertisement, may indeed look very similar.
        Thank you.
        The Chairman. Ms. Spelliscy.
        Ms. Torres-Spelliscy. To be honest, the Brennan Center has
    not looked at the union question, but we love a good
    hypothetical. And if the committee is interested in that
    particular question, I would be happy to get my cracker jack
    lawyers on that question.
        [The information follows:]
        The Chairman. That is why I asked the question because I am
    interested in it, and I appreciate your help.
        Ms. Hayward.
        Ms. Hayward. I have not written anything formally on this
    but I have thought about it a lot in my research of the history
    of the law, because it does seem to me that the reason labor
    unions and corporations are treated identically in the law has
    much more to do with the political context and a little tit-
    for-tat game going on between Democrats in the White House and
    Republicans in--at least after the 1946 election controlled
    both Houses of Congress with fairly great majorities. And they
    are different in such different ways that I don't think that
    you can say that one deserves less regulation than the other.
    They deserve different tailored regulations to address the fact
    that labor unions are membership organizations with a great
    deal of job basis power over their members where publicly held
    corporations have this very dispersed and dissolute
    relationship with hundreds of thousands of people that any
    individual shareholder may or may not care about very much,
    especially if he owns the shares sort of indirectly through a
    fund.
        I think maybe you could make an analogy between a local
    labor organization and a small closely held corporation and the
    kinds of tensions you would have there, but even there I think
    the differences are much greater than the similarities. That is
    in fact an area of legislation that would take a lot of hard
    original thinking to think about the differences in governance
    and oversight and the relationship between the decision makers
    and the rank and file of the shareholders. And it would be a
    great thing to do because it hasn't been done, and I think that
    is just more evidence that the law that we have is not closely
    tailored.
        The Chairman. Mr. Simpson.
        Mr. Simpson. As long as association with either a union or
    a corporation is voluntary then for political speech purposes
    they should be treated identically. Now that has not always
    been the case. Under many State laws members of unions and even
    nonmembers in certain occupations have to pay dues to the union
    and the Supreme Court has dealt with that by effectively
    requiring the unions to allow them to opt out of paying for
    political speech. I think that is appropriate.
        One thing though that is lost in this debate about
    corporations is that shareholders buy their stock voluntarily.
    Indeed, with publicly traded corporations it is probably easier
    to disassociate yourself from a corporation than it is for any
    other entity ever devised by the mind of man. You can go on the
    Internet, you can sell your stock in 5 minutes. That is not
    true of any government I am aware of, it is not true of unions,
    and the idea that shareholders who buy shares of stock really
    want to manage the corporation and make decisions about what
    the corporation spends its money on is counterintuitive, it is
    counterfactual. That is why they are shareholders, because they
    don't want to run the corporation.
        The Chairman. Thank you. It is the selling of the stocks
    that is--it is not the troubling part as to who is buying them.
    But just for the record, every union, any expenditure, whether
    it comes from the general treasury, from a political action
    fund gets voted on by the members.
        Mr. Simpson. I am sorry.
        The Chairman. Every union, every union that has an
    expenditure, whether it may be from the general treasury or
    from their political action fund, gets voted by the members or
    ratified by the members, everyone, not by proxy. You have to be
    there. They can vote yes or they can vote no. So they are going
    to vote on that.
        But I appreciate that and I appreciate your answers and
    thank you for your testimony today.
        Mr. Lungren.
        Mr. Lungren. I would just like to offer a hypothetical to
    all of you. Let's say on election day at 5:00, polls are going
    to close at 8:00, an organization has robo calls going to the
    households of a single party in which they indicate that the
    results are in in the East and the Midwest and the candidate of
    the other party has succeeded and it will make no difference
    whatsoever in the vote turnout in California. This goes only to
    the party that they are suggesting is losing the presidential
    election, it goes on at 5:00; that is, with 3 hours left in the
    voting. Is that kind of a communication the kind of
    communication that should be controlled, required disclosure,
    or does it depend on the organization?
        Mr. Lenhard.
        Mr. Lenhard. I guess that ultimately is a question for you
    to decide. Currently under the statute I think it would be. I
    think that you would have to provide some sort of disclaimer.
    There is a bit of a struggle at the FEC over whether certain
    kinds of media, of communication, robo calls being one, polling
    being another, would require a disclaimer, but I think that the
    state of the law now is that it would.
        Mr. Lungren. The interesting thing that happened is, that
    happened in my election. In fact, I was the recipient of one of
    those calls and we were told that because they did not
    specifically advocate it was merely a news report, that it did
    not--was not required to be reported. And I guess what I am
    just trying to point out is that it is very difficult to kind
    of control the language because they didn't advocate one way or
    the other. Now obviously it was a suppression call. It was only
    to people registered in my party to try to suppress the vote in
    our elections, and we had no recourse. It is kind of
    interesting how those things can kind of go on and, you know,
    technically it is true, they didn't say vote for someone, but I
    think we know what the purpose was. The difficulty is for the
    government then to come in and to try and figure out what the
    motivation was and then punish you or say, no, we are not going
    to punish you, I think is giving government a tremendous amount
    of power that I don't want them to have, even though it was
    against me and the candidates that I supported.
        At least three of the panelists here today have advocated
    taxpayer financing of congressional campaigns. Ms. Torres-
    Spelliscy, you did specifically and your organization does.
    What do you say about taxpayers who disagree? For instance, we
    have the scenario now where you have--where usually--it used to
    be that major candidates for the presidency opted for the
    public financing, but we have had a guy named Lyndon LaRouche
    who goes around with public financing even from--I think at one
    point in time from a prison cell for President. I didn't want
    to see money used for that purpose. Of course that was the
    voluntary system. But as I understand those who are advocating
    this, you are not talking about a voluntary system that is only
    based on taxpayers' contributions, you are talking about from
    general revenues.
        Wouldn't the taxpayer be put in the same position as the
    stockholder that you have talked about but even in a more
    difficult situation in that you really wouldn't have any more
    recourse because the Federal Government was making this money
    available with candidates with whom you may have a very, very
    strong disagreement?
        Ms. Torres-Spelliscy. Well, as you said, it really depends
    on how you structure FENA. The way that the presidential public
    financing system has always worked is it is paid for by a
    taxpayer checkoff.
        Mr. Lungren. Right. Do you assume that there is sufficient
    support for that, for public financing for all congressional
    campaigns, all elections, that that would be sufficient
    funding?
        Ms. Torres-Spelliscy. It could be if you had a good public
    education campaign and people realized the difference between a
    privately funded candidate and a clean elections candidate.
        Mr. Lungren. Do all of you agree that at least one of the
    decisions or the fundamental premises of Buckley v. Valeo is
    that money is speech, at least as defined as someone's ability
    to express themselves, to use it on behalf of themselves if
    they run for office or to use it on behalf of expressing a
    political position? Does anybody disagree with that being a
    fundamental part of Buckley v. Valeo?
        Mr. Lenhard. I guess if I could--I mean, I think I would
    frame it somewhat differently. I think money is a means by
    which one projects one's speech, amplifies one's speech beyond
    the sound of your voice.
        Mr. Lungren. Let me put it this way, isn't one of the
    conclusions of that interpretation of the Constitution that,
    for instance, Steve Forbes was unable to contribute whatever
    amount of money he wanted to to Jack Kemp when Jack Kemp ran
    for President in 1988, and short of that, then Steve Forbes
    became a candidate. Maybe it is a rhetorical question, but I
    will ask it anyway: Why was the country better served by having
    Steve Forbes who, while he supported the same positions Jack
    Kemp did, was certainly not as good a presidential candidate,
    why is the country better off that the person who is clearly
    not a viable presidential candidate is able to spend his money,
    as long as he is the candidate, but somehow we corrupt the
    system if he gave the money to a Jack Kemp, who has the same
    ideas but would have been a much better candidate but didn't
    have the resources? That is a question I have tried to figure
    out in my own mind. Maybe I am biased on it because I happened
    to be part of Jack's campaign and I thought it was a terrible
    tragedy that he wasn't able to sustain it. But sometimes I just
    wonder whether we are looking for answers to the question of
    corruption in the wrong places. I just--I find it hard to
    believe that we are better off with Jack Kemp not being able to
    compete in that campaign because frankly we couldn't raise the
    money for it and Steve Forbes, a genuinely nice man who had the
    same views, could use his own money but was not nearly as good
    a candidate. Those are the kinds of real life consequences that
    would bother me when we theoretically think about how we are
    going to sort of set the system up so that we make sure the
    corruption is not here. And yet we still have the first
    amendment which we have always said allows you to use your
    money to express your point of view.
        A rhetorical question, but it is one that I grapple with
    all the time in looking at these issues. I respect all of your
    opinions here, I may disagree with some of them, but these are
    thorny issues that are important issues because it really does
    go to the question of how do we have earnest and active and
    robust debate and maybe disclosure?
        And lastly, I would just say I would hope that others would
    think about the idea of allowing more cooperation and
    coordination from the parties to the candidates, because
    frankly I think that is one of the answers to these other
    issues that are out there. I would rather be held responsible
    for my views in my campaign. I would rather my party be held
    responsible. And if we could work together, then the people
    know what my message is and what my party's message is. If we
    coordinate it, that is so much the better.
        Anyway, thank you for your suggestions there. Thank you,
    Mr. Chairman.
        The Chairman. I thank the gentleman.
        Ms. Lofgren.
        Ms. Lofgren. Well, thank you, Mr. Chairman. And Mr.
    Lungren, you and I don't agree on everything but I think the
    idea that parties are so constrained is really something we
    ought to talk further about, because I am not sure that is good
    for the American system at all. And I am not exactly sure how
    to deal with it, but I think it deserves some future discussion
    and I think maybe we can do something together on that.
        Ms. Torres, I particularly found your testimony helpful
    because I have been thinking, clearly we have got some work to
    do, I think, on the disclosure end and several of the witnesses
    mentioned that, and I think we need to think through what that
    is exactly. I mean the Court mentioned the immediacy of
    technology. And you can--if you make a contribution, there is
    not a reason in the world you can't have the fact of that
    contribution on your Web site within the hour. I mean it is
    easy to do. And so since it is easy to do, maybe there ought to
    be a requirement to do that.
        But I am looking at your testimony. On page 4 you say since
    shareholder money is at stake, shareholders deserve more say
    about whether that money is spent on political contributions
    and expenditures, and note that there is a process in Britain
    to do that. But Britain doesn't have a first amendment and I am
    looking at the Court's opinion, Justice Kennedy, on page 55 of
    the Supreme Court draft. At the end of that paragraph he says,
    the first amendment protects political speech and disclosure
    permits citizens and shareholders to react to the speech of
    corporate entities and shareholders--of corporate entities in a
    proper way. And from that I think he refers to the first
    sentence in that same paragraph about corporate democracy being
    the proper way. And that makes me think about really that the
    Court is envisioning a reaction rather than a prospective
    approval, although they don't say so directly. And it also
    makes me think that we should examine corporate democracy,
    because if they are saying that is where shareholder remedies
    are if they are agreed then we ought to look at what can a
    shareholder do retroactively, and the answer in most cases is
    nothing.
        And so I am wondering in your opinion if we enhance
    disclosure, so for example, I am Good Smelling Soap Corporation
    and I decide that I am going to spend, you know, 3 percent of
    my profit this year campaigning against Mr. Capuano because I
    think that he is dirty and I am a soap guy, right? I am just
    making this up as I go along. My shareholders are aggrieved,
    but what can they do about it? Nothing. If I engage in activity
    that triggers disclosure, should then shareholders have
    additional rights under corporate democracy to hold officers
    and directors accountable in some way for profitability or for
    failure to disclose or for other things? Would that be a burden
    on the First Amendment in your judgment?
        Ms. Torres-Spelliscy. I do not think that giving
    shareholders the ability to consent to political expenditures
    is implicated by the First Amendment. I think this is a
    question of using other people's money in a way in which they
    have had no say. And so I think it is good corporate governance
    and it is good for our democracy to change the securities laws
    to give shareholders more meaningful rights.
        What I find so interesting about Kennedy's opinion is that
    he seems to believe that shareholders already have these
    rights.
        Ms. Lofgren. That is right.
        Ms. Torres-Spelliscy. And I think that is an invitation, an
    opening for Congress, that he is not against shareholders
    exercising control over management's spending in politics.
        Ms. Lofgren. Let me ask you this, the business judgment
    doctrine really protects officers, and you reference that in
    your testimony, from any kind of breach obligation, but those
    business judgments tend to--they relate to running a business,
    whereas political speech generally has been held to be in a
    different sphere. Should we directly repeal or modify the
    business judgment doctrine when it comes to speech that
    triggers disclosure? And again, would that, do you think, be an
    improper burden on exercise of First Amendment rights by the
    corporation?
        Ms. Torres-Spelliscy. Yeah--I mean, business judgment is
    usually--it is something that State courts use to be
    deferential to how corporate managers manage the day-to-day
    workings of a business. So I actually haven't wrapped my head
    around how Congress could change the business judgment rule,
    which tends to be exercised by State court judges.
        Ms. Lofgren. That goes to my next question, if I may,
    because we do generally have the ability to regulate
    corporations under the Commerce Clause. We regulate to the
    Securities and Exchange Commission. So clearly it seems to me
    we would have the ability to create certain Federal
    requirements, at least for those companies that are regulated
    by the Securities and Exchange Commission.
        Ms. Hayward has mentioned several times closely held
    corporations, and the Court itself criticized the regulatory
    scheme as not making distinctions between different corporate
    entities, and I think there is some truth to some of that. For
    example, if the corporation is just me, obviously I should not
    have to go ask myself permission.
        On the other hand, I represent Silicon Valley and there are
    plenty of people who are working for a corporation that hasn't
    gone public yet, but their entire future net worth is in stock
    options or stock that they can't sell because it is not
    publicly traded. In fact, they may be at a greater disadvantage
    than a publicly traded corporation for somebody who engages in
    speech and puts everything they worked for at jeopardy.
        And so I am wondering in terms of litigation, the Cort v.
    Ash case that you reference, again it is not a Federal issue,
    but it could become a Federal issue, whether there is a need to
    provide in cases where activity triggers disclosure some remedy
    for shareholders if shares are damaged in some way or the
    trademark is diluted. I am not sure what all the details would
    be--and that would give--I am thinking aloud, but that would
    give protection to shareholders even when there has not been an
    IPO, and arguably whether you are even more at risk because you
    can't sell your stock. And yet for the corporation that has one
    shareholder, you obviously would never sue yourself, so it
    wouldn't invite those kinds of abuses. Do you think that would
    run afoul of the First Amendment?
        Ms. Torres-Spelliscy. I do not. And Cort v. Ash is a very
    interesting case because this is when the corporate ban was in
    effect and a corporation arguably violated the ban, a
    shareholder tried to sue under FECA and the Court said no,
    there is not a private right of action under FECA. Even though
    the corporation is violating FECA, you as a shareholder don't
    have a right to enforce that. And so part of what you might
    look at is where do you create those private rights of action.
        Ms. Lofgren. And only when the--I am just thinking when you
    engage activity that triggers a new disclosure activity, then
    you might have a different set of rules to protect
    shareholders. I will just ask one more question because I know
    others want to speak.
        On Sub S corporations and some others, I am looking at will
    you spend--when we give benefits to corporations, tax benefits,
    and again this is a question do you think this would be an
    unfair burden on First Amendment exercise. If a certain
    percentage of your revenue or your value is expended in
    activity that must--that triggers disclosure, would that that
    be--we might then question is this really a corporation that
    deserves the benefit of the corporate code or is it really just
    a shell to get tax benefits for political speech and whether at
    some level you say okay, we are going to trigger, you are no
    longer really legitimately a corporation. You are really just
    trying to get the taxpayers to subsidize your political
    activity and we are not going to give you those corporate tax
    benefits anymore. Do you think that would be an unfair burden
    on the First Amendment?
        Ms. Torres-Spelliscy. I think the difficulty, and one of
    the proposals I have seen floating around, is basically you
    would say in, say, the State of Delaware, if you conduct
    independent expenditures then you cannot get a Delaware
    corporate charter. I think that probably goes too far and you--
    --
        Ms. Lofgren. I think so, too.
        Ms. Torres-Spelliscy. Yes, because Citizens United is
    Citizens United, it says that corporations have free speech
    rights and so I don't think you could take that away----
        Ms. Lofgren. What I am asking you is not do they have free
    speech rights, they do, the Court already told us that. The
    question is do they have tax benefit rights? And at what point
    does that--we are giving corporations tax benefits for a public
    purpose, which is to engage in economic activity and that
    creates wealth for the Nation and the like. We are not really
    giving those tax benefits to run political campaigns. Where is
    that line drawn and does that run afoul of the First Amendment?
        Torres-Spelliscy. Under IRC, I think it is 162(e),
    contributions and other political expenditures are already not
    tax deductible for corporations. So the Tax Code does speak to
    some of those issues.
        Ms. Lofgren. But the independent expenditures, we are in a
    whole new world.
        Ms. Torres-Spelliscy. Yes.
        Ms. Lofgren. Mr. Chairman, thank you for your indulgence in
    letting me ask these questions.
        The Chairman. Thank you. We are going to have votes at 4
    o'clock. They are the last votes of the day. I would like to
    try to get this done and adjourn rather than bring everybody
    back here again. I mean, I will come back if you will come
    back, but sometimes my colleagues don't always join us. So if
    they would be a little short I would appreciate you getting to
    the pertinent questions.
        Mr. McCarthy.
        Mr. McCarthy. Before I begin, Mr. Chairman, I want to thank
    you in the style in which you are holding this hearing. The
    freedom that you allowed the speakers to go longer is very
    productive for all of us, even on the questioning. I understand
    we are going to have quite a few hearings on this as we go
    forward. And I appreciate the style in which you are holding
    it.
        If we are going to be studying this, let's analyze what the
    case actually said and, Ms. Hayward, you said the Court came
    down and it didn't change the status of the corporation under
    the First Amendment but it allowed a corporation and a union to
    change from an issue ad to a direct ad. So maybe you could
    explain a little of that so we are all on the same page.
        Ms. Hayward. Okay, the way I see it, what Citizens United
    did was say explicitly what the Court had been sort of hinting
    around in a series of cases, Austin being the notable
    exception, that it was focusing more on the independent
    expenditure quality of activity than the identity of the
    speaker. And so independent expenditures received full First
    Amendment protection, which means they get strict scrutiny and
    States have to have a compelling state interest and use the
    least restrictive means to restrict independent expenditures.
    The wholesale corporate expenditure ban doesn't fly under that
    test. I think that is a reasonable continuation from prior
    cases.
        Mr. McCarthy. If I could be quick. So an issue ad from a
    direct ad, would I be wrong in saying it is changing three
    words at the end of the ad to calling somebody to either voting
    for or opposing?
        Ms. Hayward. Quite possibly.
        Mr. McCarthy. And there would be the timing, either 60-day
    or up to the election. Is that why you come to the conclusion,
    Mr. Simpson, that there won't be that much more money different
    in this campaign spent by corporations? Because they can
    already spend it, it is the timing of when you spend it or a
    union in that matter?
        Mr. Simpson. That is a large part of the reason, yes. The
    other part is that we can look to States like California and
    other States and it is not as though corporate speech has
    overtaken their elections. Before we decide that the sky is
    falling from this, we might want to actually look at the States
    that allow corporate independent expenditures and these other
    things. And I think if we do we will see that corporations have
    not spent jillions of dollars in those States.
        Mr. McCarthy. I come from California and they allow it in
    the State house. President Obama was a representative in
    Illinois and they allowed it. Chris Van Hollen from Maryland,
    they allowed it as well. So we have seen this play.
        I want to go back to Mr. Lenhard. With this Court case, can
    a corporation give money to a Member of Congress. Has that
    changed at all?
        Mr. Lenhard. No, it has not.
        Mr. McCarthy. You said, I think it was in the questioning
    with Mr. Lungren--no, no, with Chairman Brady--that between a
    union and a corporation you were concerned because the
    corporations were so much larger in scope playing politically?
        Mr. Lenhard. No, I think what I was trying to say is that
    it was possible to distinguish them because the potential pool
    of resources was so much larger.
        Mr. McCarthy. Do you know off the top of your head who has
    the largest political PAC in the country, who is the most
    active?
        Mr. Lenhard. Yeah, the largest political PAC--I am not
    sure. Certainly the labor--the largest--labor union PACs are
    among the largest PACs in the country.
        Mr. McCarthy. Does their money go 50/50 both parties?
        Mr. Lenhard. No, I think that they give more money to
    Democrats than Republicans. I am not sure if you looked at
    overall, the accumulation of all PAC spending. My guess is that
    if you looked at all PAC spending it probably went to whichever
    party was in the majority.
        Mr. McCarthy. I just checked OpenSecrets, and you are
    right. Operating Engineers are the largest, which is a union,
    they do 80 percent. The second is a corporation, AT&T, they do
    50/50. And the third largest is International Brotherhood, a
    union, and they do 99 percent. The next is a corporation,
    Honeywell, and they do 61 percent to Democrats.
        It made me think again on the questioning of Ms. Lofgren to
    Ms. Torres here, when you are asking that last question there
    that somehow corporations get some type of tax benefit so you
    would have to look at it. Could you not make that same
    argument, when we were talking here about health care and the
    way unions' health care was treated, if that bill that got the
    deal in the Senate would be to pass, would the unions not have
    a special tax incentive for their union members in health care
    and would that not give them a greater advantage because they
    wouldn't be taxed on it so they would have more money to play
    politically; could you make that argument?
        Ms. Torres-Spelliscy. You could make all sorts of
    arguments. I am not a tax attorney, and so----
        Mr. McCarthy. Well, she was asking you tax questions.
        Ms. Torres-Spelliscy. Yes, I probably should have said that
    to her as well. So I just can't comment on the tax consequences
    of these things.
        Mr. McCarthy. Last question. You did the study, Ms. Torres,
    on the concern that you said for the shareholders. And you
    weren't talking about the big wealthy shareholders, you were
    talking about so many of us who invest each month in our
    401(k)s and others, and you thought there had to be a change.
    If that change would take place that we had to approve, would
    that be an opt-in or an opt-out?
        Ms. Torres-Spelliscy. What we are proposing is an up or
    down vote. So the company would propose a political budget, we
    are going to spend a million dollars and then a line on the
    proxy that goes to the shareholder would say do you want
    corporation X to spend a million dollars in the coming year,
    yes or no. So if you want to look at that as an opt-in, then--
    --
        Mr. McCarthy. Since the Court case dealt with corporations
    and unions, would you not ask the same question of the union so
    that union member that is middle class that is getting money
    taken out but has to opt out for it, would it not be the same
    question to them as well; if you were crafting a legislation
    would you not want that?
        Ms. Torres-Spelliscy. As I said earlier, we haven't really
    looked at the union question.
        Mr. McCarthy. But would it be fair and in the same plane so
    if we did craft legislation and a corporation was asked that to
    a shareholder, wouldn't that same American that is a union
    worker have the same because they will probably be shareholders
    too? So you would probably agree with the statement that we
    should do the same for both?
        Ms. Torres-Spelliscy. I will decline to agree with you at
    this point.
        Mr. McCarthy. So we should treat them differently? They are
    different people?
        Ms. Torres-Spelliscy. I honestly would rather do some
    thoughtful study and then give written testimony to the
    committee.
        [The information follows:]
        Mr. McCarthy. Their money must be different. Okay, I yield.
        The Chairman. Mr. Capuano.
        Mr. Capuano. Thank you, Mr. Chairman. Mr. Chairman, I will
    be brief because I know we have to go vote. I got to tell you,
    after listening to most of this discussion I really wish I had
    paid more attention to corporate law. All I remember from
    corporate law is you are supposed to borrow somebody else's
    money, make a profit and keep both. That is all I remember from
    corporate law.
        Mr. Lungren. Law school?
        Mr. Capuano. No, it was run by Jesuits as a matter of fact.
        Mr. Chairman, I don't approach it through the
    technicalities of everything and that is why I don't really
    have any questions. I am looking forward to working with people
    on this panel.
        The question I have for everybody, and it is how I come to
    the issue, is what is it that I want? What is the goal that I
    want? I am not looking to thread a needle with a constitutional
    issue, I am not looking to parse this out. What I really want,
    I really want upfront, straightforward elections. I want
    everybody out of the elections except the voters and the
    candidates. If I could, I would have no money at all for
    anybody. I mean maybe a few dollars for some literature so
    people can get educated, and that is it. A level playing field.
        Everybody says you need millions of dollars to run for
    Congress. Why? The only reason you need it is because the other
    guy has it. If the other guy doesn't have it, you don't need
    it. Elections should be decided by regular people, getting rid
    of all the extraneous material.
        Now I know that that is a dream and I know I can't get
    there. My goal is to try to find ways with the stupid laws and
    stupid legal decisions we have. How do I get through all of
    that to get as close to that ideal that I want--I know that
    others don't share it--as possible. And that is all I want to
    do.
        So I am asking the panel, not necessarily today, we don't
    have time today, and I am asking members of this committee to
    try to come up with what is it that you want? I am not looking
    for Democrats to win or Republicans to win. I know that you
    don't believe me, and that is fine. I am not. I am looking for
    voters to make honest, open, unfettered decisions. Not based on
    who has more money, not based on who is part of the political
    machine.
        The last thing I would want is to bring the Democratic
    Party into my elections. Keep them out. I want the Republican
    Party in, please, get me a candidate. I want voters to decide
    on the basis of the people on the ballot. I do agree with not
    cluttering up the ballot. I totally agree I don't want public
    money going to fringe candidates. There is no question, but I
    think there are ways we can avoid that.
        The truth is I don't really want public money. I just see
    it as the only alternative we have left available, as the best
    of a bunch of bad alternatives. What I want is voters to have
    the equal opportunity to hear the ideas of different
    candidates, from school committee to president, on a level
    playing field and make thoughtful decisions on that, which
    requires some involvement by voters. I wouldn't mind requiring
    them to come to debates. I don't know how you quite do that.
    Another court case, I am sure. But for me that is the goal and
    everything else is extraneous. And what we are doing today, I
    would argue, I am trying to find ways to get there.
        And I would ask the panelists, again not today, I know we
    have to go vote, but you will be hearing from me in the next
    month or so. I would ask you to look at it with that goal in
    mind, how do I get there? How do I get as much of this nonsense
    out, not just corporate money. Corporate money happens to be
    the debate today. But I have no problem getting it all out so
    that we can have honest debates and honest elections and let
    the chips fall where they may. I am satisfied with that. That
    is all I want.
        Mr. Lungren, I will tell you that what happened to you was
    wrong, and I would not have any problem at all making it
    illegal, clearly and unequivocally, but it is not the only
    dirty trick I have ever heard of. And it doesn't make it right.
    It is actually pretty easy compared to some of the stuff I
    know. But it doesn't make it right and it doesn't make it good
    for the voters. They should be able to come and vote as they
    please each and every election. So if there are ways to do
    that, I want to work with anybody who wants to do it, and
    without the partisanship as best I can, without the ideological
    answers. I want voters to decide. If they want to go to the
    hard right, I can say they are wrong, but it is okay with me,
    it is okay with me.
        We just lost an election in Massachusetts. It is okay with
    me. We had a huge turnout for a January election. I was on the
    other side, we lost. But you know what, voters came out and
    voted it was okay with me. It was actually a pretty straight up
    election. That is what it should be about, and that is what I
    am here for. I am not here for money or no money or anything
    else.
        And with that, Mr. Chairman, I apologize, but that is what
    I am asking. I am not asking a question today, I am asking you
    to think about it and help us through this, help me through
    this. Thank you.
        The Chairman. Thank you, we have 3\1/2\ half minutes for a
    vote. Mr. Harper.
        Mr. Harper. I will be quick so Mr. Davis will have a
    moment, too.
        Public financing of elections I think is not a good idea
    and a good road for us to go. But I would ask, if I could ask
    Mr. Lenhard, do you believe that the individual contribution
    limits should be done away with?
        Mr. Lenhard. No. No, I think that there is certainly the
    potential, and in some cases actual corruption when people can
    give very, very, very large amounts of money to politicians. I
    think that that has underlain the restrictions and the law and
    the court's decisions for a long time. I don't think--there are
    politicians who are above that and it doesn't matter who gives
    them money and who doesn't. But I think sometimes it does and
    at minimum the appearance of giving someone $100,000 or
    $600,000 would be corrupting or appear so.
        Mr. Harper. In light of what Ranking Member Lungren said
    about Jack Kemp and Steve Forbes and that race, there is
    somebody who can use all their individual money. Shouldn't this
    be about full disclosure so we know exactly where the money is
    coming from and who this is. Does anybody on the panel support
    doing away with the individual limits on campaign contributions
    with full disclosure? I would just be curious.
        Mr. Simpson. I actually agree with Congressman Lungren to
    the extent that he laments the fact that people cannot finance
    candidates that they wish. I think that the answer to the
    problems on this committee is dealing with in the sense of
    corporations or other groups being able to outspend
    politicians. The answer is allow politicians to compete on the
    same basis. So I would do away with or raise them so that
    politicians can actually compete with all of the voices.
        The Chairman. Two minutes to the next vote, 2 minutes.
        Mr. Davis of Alabama. Thank you, Mr. Chairman. Thank you,
    Mr. Harper, for your courtesy in being brief. Obviously given
    the time constraints, I really only have time to make an
    observation to the two members of the panel who were supportive
    of the United decision. It seems a lot of the arguments frankly
    that you made, Mr. Simpson, were probably the very same
    arguments that were made prior to Buckley v. Valeo. Before
    Buckley v. Valeo it was not at all taken for granted that
    contributions could be capped. A number of the points you made
    about the first amendment were made by the people who argued
    for striking down the caps on contributions during Buckley v.
    Valeo. But if memory serves me correctly the Court's logic was
    that in the context of speech if there was a compelling enough
    public interest in reining in speech, that the Court could
    impose caps and could impose limits.
        So I would just end with this observation. Right now if a
    Member of Congress sits down with a corporation, there is a
    difference of opinion on issue, the most a corporation can
    implicitly say to you is I won't write you a check or I will
    write a check to your opponent and they will limit it to the
    tune of whatever the limits are in their PAC, $5,000 per cycle.
    Candidly that is not much of a threat in the modern context of
    campaigns. It would seem that after this decision the worst
    that a corporation can say to a Member ratchets up
    considerably: If you don't vote with me I will put a million
    dollars into defeating you in the next election. I can't
    imagine a greater threat to independent decision making by this
    body than corporations implicitly or explicitly being able to
    say if you don't follow my line, I will single-handedly put
    enough resources into that contest to defeat you.
        The Chairman. Zero time, sir.
        Mr. Davis of Alabama. All right.
        The Chairman. I don't want to cut you off, but I don't want
    you to miss the vote either. Thank you all. We really
    appreciate you being here and it was very, very enlightening.
    Thank you for your testimony. I am sure we will be hearing more
    from you; you will be hearing more from us.
        I ask unanimous consent that the following statements be
    part of the hearing record, statements by the Campaign Legal
    Center, statements by the People for the American Way,
    statements by SEIU, statements by U.S. PIRG, statements by the
    President of UAW and the President of the Communications
    Workers of America, and an article published by the Brookings
    Institution. I ask the record be left open for 5 days to accept
    testimony from others.
        [The statement of the Campaign Legal Center follows:]

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        [The statement of People for the American Way follows:]

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        [The statement of SEIU follows:]

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        [The statement of U.S. PIRG follows:]

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        [The statement of UAW and Communications Workers of America
    follows:]

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        [The statement of the Brookings Institution follows:]

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        The Chairman. This hearing is now adjourned, and again I
    thank our panel.
        [Whereupon, at 4:05 p.m., the committee was adjourned.]

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