[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
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
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
----------
U.S. GOVERNMENT PRINTING OFFICE
55-410 PDF WASHINGTON : 2010
For sale by the Superintendent of Documents, U.S. Government Printing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
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Washington, DC 20402-0001
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:]
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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:]
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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:]
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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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