[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
  ADDITIONAL DISCUSSION OF H.R. 5175, THE DISCLOSE ACT, DEMOCRACY IS 
         STRENGTHENED BY CASTING LIGHT ON SPENDING IN ELECTIONS

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

                                HEARING

                               before the

                           COMMITTEE ON HOUSE
                             ADMINISTRATION
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

             Held in Washington, DC, Tuesday, May 11, 2010

                               __________

      Printed for the use of the Committee on House Administration


                       Available on the Internet:
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                   COMMITTEE ON HOUSE ADMINISTRATION

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


  ADDITIONAL DISCUSSION OF H.R. 5175, THE DISCLOSE ACT, DEMOCRACY IS 
         STRENGTHENED BY CASTING LIGHT ON SPENDING IN ELECTIONS

                              ----------                              


                         TUESDAY, MAY 11, 2010

                          House of Representatives,
                         Committee on House Administration,
                                                    Washington, DC.
    The committee met, pursuant to call, at 5:00 p.m., in room 
1310, Longworth House Office Building, Hon. Robert A. Brady 
(chairman of the committee) presiding.
    Present: Representatives Brady, Lofgren, Capuano, Lungren, 
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; Greg Abbott, Professional Staff; Shervan 
Sebastian, Staff Assistant; Peter Schalestock, Minority 
Counsel; Karin Moore, Minority Legislative Counsel; Salley 
Collins, and Minority Press Secretary.
    The Chairman. I would like to call the hearing on House 
Administration to order. And good afternoon to members of the 
committee, witnesses and guests. And thank you for being here 
today.
    This hearing is our third on the impact of the Citizens 
United decision and the potential legislative response. As I 
said last week, the DISCLOSE Act is a bipartisan and fair 
solution to the Supreme Court overturning decades of campaign 
finance precedent. The bill does not play political favors. It 
applies to corporations, labor unions, trade associations and 
nonprofit advocacy organizations. The DISCLOSE Act provides 
prompt and honest disclosure of political spending seeking to 
influence our elections.
    As we have heard from our witnesses last week, additional 
disclosure laws are needed. The DISCLOSE Act allows voters to 
follow the money. The bill would require all covered 
organizations to report to the FEC within 24 hours of their 
campaign-related activity and their transfers of money to other 
groups that are then available for campaign-related activity. 
Disclosing these transfers of moneys will ensure that special 
interest money cannot hide behind sham organizations and shell 
corporations.
    The DISCLOSE Act also prevents foreign-controlled 
corporations and government contractors from influencing our 
elections. This is not complicated. We do not let foreign 
citizens vote in our elections; we should not let them have any 
financial interest in them either.
    Critics of the DISCLOSE Act claim that it will chill First 
Amendment rights, but the Supreme Court in the Citizens United 
decision by an 8 to 1 majority rejected their argument that 
disclosure requirements chill the exercise of free speech. The 
court noted that disclosure requirements did not prevent anyone 
from speaking and recognized that disclosure laws enable the 
voter to make informed decisions and give proper weight to 
different speakers and different messages.
    The bottom line of this legislation is simple: Voters 
deserve to know who is financing elections. I hope that we can 
get to that simple goal. And I thank our panel for being here 
today and look forward to your testimony.
    Now I would like to recognize the ranking member, Mr. 
Lungren, for any opening statement.
    Mr. Lungren. Thank you very much, Mr. Chairman, for having 
this, the second hearing on proposed legislation following the 
Citizens United decision.
    As I understand it, it is the mind of the chairman of the 
Democratic majority to mark up this bill on Thursday afternoon. 
I might just say, the dispatch with which we are dealing with 
this is in obvious distinction to how the Court has treated 
this and how the FEC treated this.
    The organization Citizens United had to wait for several 
years before they got a decision, during which time they were 
unable to exercise what the Court said was their constitutional 
right protected under the First Amendment dealing with free 
speech and the essence of free speech being political speech.
    With all due respect, Mr. Chairman, it sounds like the 
gentleman doth protest too much in explaining how this bill is 
a bipartisan bill. I suppose 2 out of 176 or 178 Republicans 
makes it bipartisan.
    It would have been more bipartisan had the majority 
leadership--not speaking of you, Mr. Chairman, but others--had 
at least considered it appropriate to share the bill with us 
before it appeared in its final form announced to the press.
    It is difficult to understand bipartisanship when the press 
gets a quicker look at it than those of us on the bipartisan 
side of the aisle. But I understand these things.
    Saying something is disclosure doesn't make it disclosure. 
We have to be very careful how we deal with this law because it 
does deal with the First Amendment right of protected free 
speech, political speech.
    Mr. Chairman, I thought we had a productive hearing last 
week, and I am looking forward to hearing from the witnesses 
here today. Thank you all for being here.
    Mr. Chairman, the hearing last week was revealing. It 
revealed that at least one of the majority's witnesses did not 
believe that the Federal Election Commission could implement 
regulations before the bill becomes effective; thus leaving 
those who wish to speak out about politics without clear 
guidance on what they can say or how they can do it and 
suggesting that it would nullify their ability to so act for 
this election cycle. Perhaps that is the purpose of the bill.
    It revealed how another majority witness who said he had 
participated in the writing of the bill could not, at least in 
my judgement, clearly answer my question about the provisions 
on coordination and how they may differ from current 
regulations because of the use of the word ``or,'' which, as a 
former English major, always suggested to me it meant 
alternatively as opposed to requiring both elements. And we 
have the question of content and conduct being both included as 
the measure of coordination superseded by language, which at 
least suggests to me it can be solely content. That is 
troublesome, at least as far as I am concerned, because it may 
stray too far in terms of defining what coordination is or is 
not.
    It also revealed that some Members on your side of the 
aisle thought the bill could stand some improvement. And for 
that, I offer my thanks. And hopefully we can improve that 
which is before us.
    Mr. Chairman, I look forward to hearing from our witnesses 
today. And I hope that if this committee does report the bill 
to the House, it will be one that has been carefully considered 
and subject to amendment. We may ultimately not agree on the 
policy that should be in place, but I think we do agree that 
the bills we pass should be clear and coherent in achieving 
their ends and free of unintended consequences.
    And since a bill contains potential criminal penalties, we 
have an obligation to ensure that it is not vague. We have an 
obligation, particularly when the criminal penalties are 
attached to an attempt by us to constitutionally restrict what 
otherwise would be considered free political speech, that we be 
very careful about how we do that.
    The Court most recently in a case involving the question of 
honest services statute, at least in the oral argument, 
expressed concern about passing statutes which are so vague as 
to give not unlimited but undue discretionary authority to 
prosecutors to pick out those they wish to take action against. 
And I think, therefore, we should be cautioned as to ensure 
that when we write this bill, it does so in a way that not only 
will pass the constitutional muster, as articulated in the 
Citizens United case, but also not chill free speech.
    Thank you very much, Mr. Chairman.
    I look forward to today's testimony. And I thank you for 
having this hearing.
    The Chairman. Thank you.
    Anyone else?
    Gentlelady Lofgren.
    Ms. Lofgren. Mr. Chairman, I do want to hear the witnesses. 
I won't go on in any kind of considerable length. I think this 
is the third hearing we have had, the second hearing on the 
bill and the third hearing on the subject. And I think that 
there has been substantial--and I would like to submit for the 
record by unanimous consent a list of the communications 
between the majority and minority on this item. I am sure that 
Mr. Lungren speaks in good faith, but I think it is just 
inaccurate.
    Mr. Lungren. Will the gentlelady yield?
    Ms. Lofgren. Yes, I would.
    Mr. Lungren. Does that include the two letters I sent to 
the authors of the bill asking for cooperation for which we 
received no response for several months?
    Ms. Lofgren. Yes, it does. And it also includes a whole 
variety of noted letters. And I think that if we read it, we 
will see that this has been far from a secret proceeding.
    The Chairman. Without objection.
    [The information follows:]

                           [COMMITTEE INSERT]

    Ms. Lofgren. And with that, Mr. Chairman, I would look 
forward to hearing from the witnesses and having time for 
questions.
    The Chairman. Mr. Harper?
    Mr. Harper. No, thank you, Mr. Chairman.
    The Chairman. Thank you.
    I would now like to introduce our witnesses.

   STATEMENTS OF THE HONORABLE TREVOR POTTER, PRESIDENT AND 
    GENERAL COUNSEL, CAMPAIGN LEGAL CENTER; JOHN C. COATES, 
 PROFESSOR OF LAW AND ECONOMICS, HARVARD LAW SCHOOL; ELIZABETH 
  LYNCH, ATTORNEY, CHINA LAW & POLICY; THE HONORABLE MICHAEL 
    TONER, PARTNER, BRYAN CAVE, LLP; AND WILLIAM MCGINLEY, 
                  ATTORNEY, PATTON BOGGS, LLP

    The Chairman. The Honorable Trevor Potter. Mr. Potter 
currently serves as president and general counsel for Campaign 
Legal Center. Mr. Potter previously served as general counsel 
to John McCain in the 2008 presidential campaign and is a 
former commissioner and chairman of the Federal Election 
Commission.
    John F. Coates is a professor of law and economics as well 
as the research director for the Program of the Legal 
Profession at Harvard Law School. Before coming to Harvard, he 
taught on the adjunct faculties of New York University of Law 
and Boston University School of Law.
    Elizabeth Lynch is an attorney who focuses on legal 
development and reform in China and is founder of the China Law 
& Policy. Prior to working with China Law & Policy, Ms. Lynch 
was a research fellow at New York University Law School, U.S. 
Asian Law Institute, as well as a practicing attorney in New 
York, working on commercial litigation, including antitrust and 
securities actions.
    The Honorable Michael Toner. Mr. Toner is partner at Bryan 
Cave, LLP, where he heads up their election law and government 
ethics practice. Prior to joining the firm, Mr. Toner was 
former commissioner and chairman of the Federal Election 
Commission.
    William McGinley is of counsel in the Washington, D.C., 
office of Patton Boggs, where he advises a wide range of 
clients on political and campaign finance law issues. Before 
joining Patton Boggs, Mr. McGinley served as general counsel 
and deputy counsel to the National Republican Senate Campaign 
Committee.
    I thank the witnesses. And there is a button in front of 
you, and if you would just push that and speak into the 
microphone. We do have a 5-minute rule, and we do allow on this 
issue, on this bill being as important as it is, to go over it. 
We don't want to go over it too far because you get a chance to 
reiterate anything you say in your statement that you can't get 
in, you can put in for the record. You will be able to 
incorporate it, I am sure you all can, when you answer that or 
any question that we give you, you can incorporate any part of 
your statement into that answer.
    We do have votes coming up around 6:30. I will do this as 
best as possible to get everything in. And hopefully we can get 
it in by then. If not, we all have to come back here about 
7:30, 8:00 o'clock. And if you care to do that, I will join you 
doing that. But I would rather see if we can get this done.
    Mr. Potter, you are on.

            STATEMENT OF THE HONORABLE TREVOR POTTER

    Mr. Potter. Thank you, Mr. Chairman and Mr. Lungren.
    I appreciate the honor of appearing before you today to 
discuss the DISCLOSE Act.
    I would like to say at the outset that I am appearing today 
on my own behalf and not on behalf of any other entity or 
client of my law firm.
    In Justice Kennedy's majority----
    The Chairman. In legalese, that means you are not getting 
paid?
    Mr. Potter. It does.
    The Chairman. Thank you. I didn't mean to interrupt you. 
Thank you.
    Mr. Potter. In Justice Kennedy's majority opinion in 
Citizens United, he was very clear about the importance of 
disclosure. He stated, ``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.''
    Justice Kennedy further stated, ``the First Amendment 
protects political speech; and disclosure permits citizens and 
shareholders to react to the speech of corporate entities in a 
proper way. This transparency enables the electorate to make 
informed decisions and give proper weight to different speakers 
and messages.''
    Finally, Justice Kennedy stated, ``the public has an 
interest in knowing who is speaking about a candidate just 
before an election.''
    Thus Justice Kennedy in his Citizens United opinion bound 
together the two elements of the decision: Independent 
corporate speech in elections is a First Amendment right, and 
the funding sources of such speech must be fully disclosed in 
order to make this constitutional right function in our 
political system.
    This section of Justice Kennedy's opinion was the only one 
joined by the four Citizens United dissenters, meaning that the 
fundamental importance of disclosure was recognized by eight of 
the nine Justices.
    This background is important to your consideration of the 
DISCLOSE Act not only because it makes it clear that the 
disclosure provisions of the bill are constitutional, but 
because they complete the process begun by the Supreme Court in 
the Citizens United decision by requiring the sort of 
disclosure that Justice Kennedy and the other Justices found so 
essential to our Democratic system.
    I am fully aware that there are many who term this debate a 
partisan one between Republicans and Democrats. And as a 
Republican, I regret that is so. I know the DISCLOSE Act has 
only two distinguished Republican Members of the House as 
cosponsors, and I hope there will be more Republican support 
because this should not be a partisan issue.
    Many Republicans have long argued for the exact conclusion 
that Justice Kennedy arrived at: Less restriction on political 
speech in return for full disclosure.
    This is not to say that the DISCLOSE Act is a perfect act 
of legislative draftsmanship. Few pieces of legislation are, 
especially before they have seen the light of public comment 
and the committee process. Thus I hope the members of the 
committee from both sides will work together to improve the 
bill.
    In particular, I have concerns that the provisions on 
foreign national involvement in the U.S. political process can 
and should be clarified and improved.
    Let me begin by saying that I think there is a bipartisan 
unanimity that we do not want foreign governments, foreign 
government officials or foreign government controlled entities 
from Venezuela, China, or elsewhere, spending money in U.S. 
elections, either directly or through the U.S. companies they 
control. This is a serious threat the bill must address.
    However, the bill goes further in a manner that I think 
makes it vulnerable to potential constitutional challenge for 
being both over-inclusive and under-inclusive. For instance, it 
declares some U.S. companies to be foreign nationals if they 
have a single non-U.S. Individual or company owning 20 percent 
of its shares, even if that individual has no control over the 
corporation's affairs.
    More broadly, the current draft raises the question of why 
some U.S. companies like, say, Anheuser-Busch or Chrysler are 
treated differently in terms of their ability to have U.S. PACs 
or participate in local political activity than other U.S. 
companies with whom they directly compete, like, say, Sam Adams 
and Ford.
    I believe the better answer is to clearly prohibit the 
involvement in U.S. elections of any companies with foreign 
government ownership, either directly or through foreign 
government controlled corporations. This definition can be 
written to prevent the dangers we all seek to guard against 
without sweeping in purely commercial entities.
    The analogy would be to the Foreign Agents Registration 
Act, which makes exactly this sort of distinction.
    The DISCLOSE Act's provisions requiring personal 
certification by the CEO under threat of perjury could police 
this ban on foreign government involvement. I am sure there are 
other areas of the proposed legislation which would also 
benefit from bipartisan discussion and amendments and hope that 
will occur.
    However, the bill fulfills an important need by requiring 
disclosure of who is spending money in U.S. elections. As I 
have noted, an 8-1 majority of the U.S. Supreme Court has 
stated that such disclosure is not only constitutional but is 
the expected and indeed necessary counterbalance to the new 
corporate and union right to expend unlimited funds in U.S. 
elections.
    I urge Congress to require such complete disclosure in time 
for the 2010 elections. Thank you.
    [The statement of Mr. Potter follows:]

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    The Chairman. I thank the gentleman.
    Mr. Coates.

                  STATEMENT OF JOHN C. COATES

    Mr. Coates. Thank you, Mr. Chairman, Ranking Member Lungren 
and members of the committee.
    I am also delighted to be able to be here today to comment 
on this bill. By way of background, I am a corporate law 
scholar and a former corporate lawyer. I was a partner at 
Wachtell Lipton before going to Harvard. I am not a 
constitutional law scholar, and I am not going to address 
constitutional issues either about Citizens United or the bill.
    But I can say with some certainty that the Citizens United 
case did shock in some sense the owners of U.S. corporations. 
It was a radical change in their expectations of how their 
money would be used going forward. Corporations have been out 
of the election world in a direct sense for so long that very 
few companies that are active today needed to have special 
provisions in place. They were created after the Taft-Hartley 
Act. They were created after the Tillman Act, certainly. The 
owners of those companies never imagined that this change in 
law would be coming down.
    And as a result, the decision creates, from a purely 
corporate governance perspective, a massive new risk for the 
shareholders of those companies, and specifically that will be 
that managers of those companies will be using other people's 
money, shareholders' money, to pursue their own personal and 
political agendas using corporate bank accounts in the election 
process. And they are going to be able to do this in secret 
without any disclosure to shareholders or any ability on the 
part of shareholders to learn about, to analyze, to respond to 
the potential diversion by corporate managers.
    The DISCLOSE Act in its entirety is a measured and 
responsible response, I think, to this risk. By requiring 
disclosure, the bill would follow a long tradition of the 
Federal Government mandating disclosure by public companies, 
which supplements private enforcement by shareholders of their 
rights under State law. It would enable shareholders to track 
and monitor election expenditures and, if they want to, to get 
involved in pressuring managers to do what they want rather 
than what managers want. And it would discourage a certain kind 
of activity, which is to say essentially stealing shareholders 
money for the pursuit of a manager's own personal interest.
    I think this, frankly, is what some sponsors and backers of 
this bill may have been referring to in recent media reports 
that were quoted last week as suggesting that it would chill 
some activities. It is not that it would chill speech; it would 
chill theft and use of the stolen property for speech that the 
backers of the corporation themselves would not themselves 
back.
    By requiring personal endorsements from CEOs, the bill 
would also follow a tradition. Here a tradition laid down by 
Chris Cox, former Member of this esteemed organization, and 
George Bush, whose reaction to Enron, appropriately, was to 
start requiring CEOs to personally certify financial 
statements.
    That part of the bill is going to make sure that top 
managers can't simply pretend to not know what is going on down 
in the ranks of their organizations. They won't be able to do 
what Captain Renault did in Casablanca and pretend to be 
shocked at the gambling that was going on in the casino in that 
movie. Instead, they are going to have what Justice Scalia 
calls the civic courage to step up and participate in a 
democracy, which I think is something that he personally is in 
favor of.
    And finally, by covering conduits, the bill would make the 
disclosure requirements effective. They will deal with a sort 
of double problem with the use of other organizations by large 
companies to funnel money into the election cycle. The double 
problem is that, first, shareholders have managers take their 
money and not ask them or tell them about how they are using 
it. Then they turn it over carte blanche to other 
organizations, which ensures another layer of secrecy and 
clouds over their behavior. And again, there is good evidence 
to suggest that managers of companies themselves are surprised 
at how their money is used in the election world.
    And then, finally, the bill will plug the loophole for 
foreign ownership created by the Supreme Court in Citizens 
United. Anybody familiar with the Boston area will know that 
there is a giant Citgo sign near Fenway. Very few people know 
that Citgo is, in fact, backed by Venezuela and effectively 
controlled by Hugo Chavez. And after Citizens United, Citgo can 
directly funnel Hugo's personal, political ambitions into our 
electoral world.
    I don't think that is a good thing. I think that obviously 
runs afoul of longstanding bipartisan decisions to not have 
foreigners in our electoral process.
    Just to wrap up. Thank you for the opportunity to comment 
on the bill. And I hope that you will pass it as soon as 
reasonably practical.
    [The statement of Mr. Coates follows:]

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    The Chairman. I thank the gentleman.
    Ms. Lynch.

                  STATEMENT OF ELIZABETH LYNCH

    Ms. Lynch. Good afternoon, Chairman Brady, Ranking Member 
Lungren and distinguished members of the committee. My name is 
Elizabeth Lynch, and I am an attorney and editor at China Law & 
Policy. I want to thank you all for letting me testify today.
    I am grateful for this committee's work on the DISCLOSE 
Act, legislation necessary to deal with the practical problems 
arising from the Supreme Court's recent decision in Citizens 
United v. FEC.
    Of particular concern is the potential influence of foreign 
money and, given the structure of some multinational 
corporations, direct pressure from foreign governments in U.S. 
elections.
    First, how does Citizens United change our understanding of 
the corporate form? In Citizens United, the Court latches on to 
the legal shorthand of person and citizen that the common law 
periodically uses to describe corporations and takes these 
words literally. In doing so, it elevates corporations to equal 
status with individual citizens in the sphere of political 
speech.
    According to the Court, there should be no difference 
between the two. When analyzing a corporation's right to 
political speech, courts are no longer permitted to take into 
consideration elements that make corporations inherently 
different from an individual citizen. These include limited 
liability, perpetual life, and preferential tax treatment. In 
other words, courts can no longer pull aside the corporate 
curtain and look at what is really going on behind the scenes 
that causes a corporation to be different from a real person.
    So how does this new logic help foreign corporations and 
governments in potentially influencing our elections? In 
today's world, most foreign companies with a global presence 
often establish a U.S. subsidiary. These U.S. subsidiaries are 
incorporated under State law and, for purposes of the law, are 
considered citizens in the State in which they are 
incorporated.
    Unfortunately, now, with Citizens United, we are no longer 
permitted to look behind that corporate curtain of a U.S. 
corporation to see its possible relationship to a foreign 
corporation.
    But make no mistake, these U.S. subsidiaries are heavily 
influenced, if not outright controlled, by their foreign parent 
corporations. The parent usually owns a majority, if not all, 
of the shares of the subsidiary, and capital is often infused 
into the subsidiary from the parent.
    But the picture after Citizens United becomes increasingly 
more perilous when some of these foreign corporations have 
direct ties to their governments. For example, in socialist and 
post-socialist countries, such as China, Russia, and Vietnam, 
many corporations are still government run. The same holds true 
for oil-rich nations, like Venezuela and Saudi Arabia, where 
the oil industry is largely nationalized.
    Each of these countries has U.S. subsidiaries for many of 
their government-run corporations. Citgo, for example, is owned 
by the National Oil Company of Venezuela. With the Citizens 
United loophole, the Venezuelan government has the potential to 
flood money into our electoral process through its relationship 
with Citgo.
    But unlike corporations, foreign governments are motivated 
by more than just corporate profits. Global influence, power, 
and advantage are also a major part of their calculation. Even 
if involvement in U.S. elections might harm profits of the 
state-controlled foreign corporation, if that involvement is 
ultimately beneficial to the foreign government for other 
reasons, it will seek to take advantage of the loophole. And in 
today's world, where China has $2.4 trillion in foreign 
currency reserves and the United Arab Emirates' Sovereign 
Wealth Fund houses $450 billion in assets, these foreign 
governments now have the money to do so.
    And that is why Section 102 of the DISCLOSE Act is 
necessary. In a post-Citizens United world, the current version 
of the Federal Election Campaign Act is glaringly ill-equipped.
    First, the act's current prohibition only applies to 
political action committees and says nothing about direct 
expenditures by U.S. subsidiaries of foreign corporations, 
expenditures Citizens United now permits corporations to make 
through election night.
    Second, the act's current prohibition that the foreign 
parent cannot give money to the formation of the U.S. 
subsidiary's PAC is ineffective in today's complex corporate 
world. Corporations are no longer that transparent. Under 
today's corporate law, there is simply no way to prevent 
infusion of cash from one company to another. All the 
subsidiary has to do is issue stock that is purchased by the 
foreign parent and use those funds to ultimately do the foreign 
parent corporation's bidding in our elections.
    But Section 102 of the DISCLOSE Act would effectively 
eliminate these current loopholes. By expanding the definition 
of foreign national to include U.S. Subsidiaries where 20 
percent of the voting shares are owned by a foreign entity or 
where a majority of the board are foreign nationals or where 
the U.S. operations are, in fact, directed by a foreign entity, 
the DISCLOSE Act can protect our elections from undue foreign 
influence and restore the ability of the U.S. people to hold 
accountable their government.
    Thank you. And I look forward to your questions.
    [The statement of Ms. Lynch follows:]

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    The Chairman. Thank you.
    Mr. Toner.

            STATEMENT OF THE HONORABLE MICHAEL TONER

    Mr. Toner. Thank you, Chairman Brady, Ranking Member 
Lungren, and members of the committee for the opportunity to 
testify today regarding the DISCLOSE Act.
    I am appearing today in my personal capacity and not on 
behalf of any particular client.
    At the outset, I would like to emphasize that I am very 
troubled by the process by which Congress has considered the 
DISCLOSE Act to date. The legislation purports to respond to 
the Citizens United ruling but contains a large number of 
provisions that have nothing to do with the ruling and are in 
no way necessitated by the Supreme Court decision.
    The legislation was crafted behind closed doors with, as 
far as I can determine, little or no consultation with the 
Republican congressional leadership, neither in the House of 
Representatives or the Senate.
    In addition, the DISCLOSE Act seeks to make major changes 
to the Federal Election Campaign Act only months before a 
national election, with an effective date of 30 days after 
enactment, regardless of whether the Federal Election 
Commission has issued any regulations to effectuate the 
legislation.
    Moreover, the DISCLOSE Act fails to define numerous key 
statutory terms, which creates some potential for widespread 
confusion among regulated entities about what their legal 
obligations are under the law, all of which could take place as 
soon as this fall in the final weeks before the midterm 
election.
    Needless to say, the presence of any of these phenomena 
would seriously jeopardize the enactment of sound legislation. 
The presence of all three of them here makes it nearly 
impossible, in my view, for Congress to act in a responsible 
way.
    I will not attempt to identify all of my objections to the 
DISCLOSE Act, which are outlined in greater detail in my 
written comments, but I would like to highlight two of the 
biggest problems I see in the proposed legislation.
    First, the DISCLOSE Act would severely restrict the 
political activities of a large number of American 
corporations, including many longstanding companies run by 
American citizens, if foreign nationals are associated with the 
companies in certain ways. The practical effect of these 
provisions would be to prohibit many American companies from 
making any contributions or expenditures in connection with 
U.S. elections, from making any independent expenditures or 
election year communications, or even from operating a 
political action committee, which after all is funded by 
contributions from American citizens, is fully disclosed to the 
Federal Election Commission, and allows the company's employees 
to be involved in American politics.
    The biggest targets of the legislation are American 
subsidiaries of foreign parent corporations, including 
companies that employ tens of thousands of Americans and have 
operations across this country. Targets of legislation 
potentially include Anheuser-Busch, Food Lion, Michelin North 
America, the Miller Brewing Company, Nestle U.S.A., Panasonic 
Corporation, and the John Hancock Life Insurance Company, just 
to name a few of the legislative targets.
    I understand that advocating for additional foreign 
national restrictions in American elections makes for good 
politics, particularly in an election year. But to potentially 
sweep up hundreds of established U.S. companies that are run by 
Americans and restrict them from being involved in American 
elections, in my view, is very misguided.
    It is also unnecessary, given that the Citizens United 
ruling did not affect FECA's existing regulations on foreign 
national contributions and expenditures, which, after all, were 
strengthened just 8 years ago in the Bipartisan Campaign Reform 
Act of 2002, and given that no one has argued that there has 
been inappropriate foreign national involvement in American 
elections in recent years.
    Second, a number of key statutory terms are not defined in 
the DISCLOSE Act, which makes the legislation unduly vague in a 
wide variety of areas. I will just touch on one key area, and 
that deals with political party coordinated expenditures. The 
DISCLOSE Act provides that payments by political parties for 
communications made on behalf of their candidates would be 
subject to FECA's party-coordinated expenditure limits but only 
if, ``the communication is controlled by or made at the 
direction of the candidate.'' However, the legislation does not 
define or specify what types of candidate conduct or 
communications constitute direction or control within the 
meaning of the statute.
    And that is a very important element. I think if Congress 
is going to amend the party committee coordinated expenditure 
limits, that there be key definitions as to what these 
statutory terms entail. My written comments go into a few 
scenarios that I think could easily arise and whether or not 
the legislation would restrict the activities or not.
    But more broadly, given that political parties cannot 
corrupt their own candidates, political parties should be 
permitted to make unlimited coordinated expenditures without 
any qualifications or conditions whatsoever. It is important to 
note that, under current law, political party coordinated 
expenditures must be made out of hard dollar funds which are 
raised subject to the contribution limits and source 
prohibitions of FECA. Permitting unlimited coordinated party 
expenditures would allow the political parties to more 
efficiently target their hard dollar funds in the most 
important races across the country and also would be fully 
consistent with the Bipartisan Campaign Reform Act's emphasis 
on hard dollar fundraising and making those types of funds more 
important in Federal elections.
    If Congress decides to amend FECA's political party 
coordinated expenditure provisions, in my view, it should lift 
the limits on party coordinated expenditures altogether without 
any statutory conditions.
    Thank you so much, Mr. Chairman, for the opportunity to be 
with you, and I look forward to the questions.
    [The statement of Mr. Toner follows:]

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    The Chairman. Thank you.
    Mr. McGinley.

                 STATEMENT OF WILLIAM MCGINLEY

    Mr. McGinley. Chairman Brady, Ranking Member Lungren, 
members of the committee, thank you for the opportunity to 
testify today regarding the DISCLOSE ACT. I am testifying today 
in my personal capacity and not on behalf of any client or any 
other individual or organization.
    The Chairman. Another freebie.
    Mr. McGinley. My testimony reflects my personal views on 
the DISCLOSE Act as a citizen and a political law practitioner.
    I have serious concerns about this legislation because it 
appears designed to chill political speech and discriminate 
between different types of speakers. The fact that the Federal 
Government contractor and expanded foreign national bans apply 
only to corporations and not to similarly situated labor unions 
is particularly troubling. The only apparent reason for this 
disparate treatment is an attempt to elevate the labor union 
speech and possibly protect incumbents.
    My testimony today will focus on two topics: First, the 
potential consequences resulting from some of the vague terms 
contained in the DISCLOSE Act; and second, the chilling effects 
some of the disclosure requirements will have on political 
speech.
    The DISCLOSE Act contains many vague terms that will impose 
onerous requirements on political speakers. This will result in 
many of them inadvertently violating the law. First, the 
foreign national certification requirement under 102(c) appears 
to apply to every for-profit and nonprofit corporation. This 
means that not only will large publicly traded corporations be 
required to file the certification, but also every Federal 
campaign, PAC, and political party committee that is 
incorporated as a nonprofit corporation. In fact, it appears 
that the certification will need to be filed by incorporated 
State candidate committees and PACs and party committees as 
well, because the certification requires it for donations.
    Second, the broad reach of the new definitions of 
independent expenditure under Section 201(a) and covered 
coordinated communication under Section 324(b) now appear to 
regulate Internet communications, including the liberal and 
conservative blogosphere. These provisions apply to 
``communications,'' an undefined term in the act. Current 
Federal law limits the application of these rules by using the 
definition of public communication that specifically excludes 
Internet communications, unless the Internet communication is 
an advertisement placed on another person's Web site for a fee.
    Moreover, the media exemption contained in the DISCLOSE Act 
coordination rules under Section 324(b)(4) does not include Web 
sites or Internet communications in the same manner as current 
law. Therefore, this legislation does not exclude bloggers or 
Internet communications and places them at risk. If this bill 
passes, the Internet's status as a free speech zone is in 
danger.
    Third, Section 324(a) provides that the republication in 
whole or part of any candidate or campaign materials 
constitutes coordination and results in a contribution to that 
candidate, regardless if there is any actual coordination 
between the two groups. This is a radical departure from the 
current coordination framework, which requires that actual 
coordination be present.
    Section 324(a) as currently drafted does not contain 
similar safeguards. This means that if an outside group uses a 
portion of a campaign ad or a brochure to criticize a 
candidate, it may result in a prohibited contribution to that 
candidate.
    In addition, the DISCLOSE Act's burdensome reporting 
requirements will have a chilling effect on independent 
political speech. First, Section 102(c) requires every 
corporation to certify under penalty of perjury that it is not 
subject to the expanded foreign national ban prior to engaging 
in political speech. This requirement will cause delay when a 
political speaker conducts the due diligence necessary to make 
such a certification. This severely burdens speech because 
effective advocacy requires a speaker to be nimble in response 
to the political messages of others.
    Second, the legislation requires a covered organization to 
file a public report, including posting the report on the 
organization's Web site if it transfers money to another person 
that is deemed to be made for campaign activity. These types of 
transfers are made before an advertisement is publicly 
released. This prespeech disclosure forces a speaker to confer 
a competitive advantage on its opponents by revealing its 
private political strategies. It also dilutes the effectiveness 
of the advocacy.
    Finally, I am concerned that the legislation may become 
effective 30 days after enactment during the upcoming 2010 
elections; 30 days is not enough time for the FEC to clarify 
the application of the DISCLOSE Act through the proper 
rulemaking procedures.
    Equally troubling is the protracted process for judicial 
review of this legislation, which appears designed to push any 
potential judicial relief until after the 2010 elections.
    I respectfully request that the committee not adopt the 
DISCLOSE Act and fashion a reasonable disclosure regime for 
independent speech that respects the freedoms of association 
and speech under the First Amendment.
    I am happy to answer any questions you may have.
    [The statement of Mr. McGinley follows:]

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    The Chairman. Thank you.
    We will open up for questions. And I have a question for 
Mr. Potter. Is it constitutional to require disclosures of the 
donors to private groups that engage in political speech? And 
is it necessary?
    Mr. Potter. Mr. Chairman, I think, as my citations to 
Justice Kennedy in the 8-1 section of that opinion indicate, it 
is.
    What Justice Kennedy and the Court were saying is that it 
is important for people to know who is speaking and where the 
funding is coming from. And that would be true whether we are 
talking about a corporation or a trade association or a union 
or a 501(c)(4).
    Under current law, there is a range of disclosure that is 
already required, and that would apply to (c)(4)s as well. So I 
don't see a constitutional problem with the provisions of the 
act.
    The Chairman. So what this bill does is say, who is saying 
something, and who is paying for something? That is really--
    Mr. Potter. That is my understanding.
    The Chairman. Thank you.
    Mr. Lungren.
    Mr. Lungren. Thank you very much.
    And this is more of a general question, but it is one that 
I have difficulty finely defining in my own mind.
    I am for disclosure, appropriate disclosure. At the same 
time, we had an experience in California recently where we had 
a controversial proposition on the ballot called Proposition 8. 
It had to do with the definition of marriage. During the course 
of a court case that took place thereafter--it still is not 
resolved--there was a demand made, enforced by the court, that 
contributors to the Proposition be revealed.
    Subsequent to that, some of my constituents and some just 
outside my constituency received retaliatory action because 
they had contributed as little as $1,000 on behalf of the 
Proposition, one individual being fired from his job or forced 
to resign from his job, even though it had nothing to do with 
the job that he had; another business being the subject of 
boycott and threat.
    And I just say that as a factual matter. I know these facts 
to be true.
    Do we say that that is the price of debate in a vigorous 
society, a vigorous political society, and therefore, even 
though disclosure may allow for those things to occur, if one 
wishes to express himself or herself politically by way of 
donation, that that person should expect that repercussions, 
including that kind of retaliation, should take place because 
we believe it is of a higher value for disclosure so that the 
public may know who seeks to influence decisions before the 
public?
    Mr. Potter.
    Mr. Potter. I think there are two answers there.
    One is that, as you are undoubtedly aware, there is a 
similar case right now in the Supreme Court, and there were 
oral arguments on it about a month ago out of the State of 
Washington with parallel questions.
    I recall the accounts of that oral argument, and I am going 
to paraphrase Justice Scalia saying something along the lines 
of, people who engage in political public discourse shouldn't 
be shrinking violets.
    But that is a flip answer, because the second part is that 
the Court said, going all the way back to a Socialist Workers 
Party case, that if you can show that there is going to be 
actual harm from disclosure, that you are going to be injured 
in a direct way, then you can be exempt from disclosure. And in 
fact, I believe it is still the case that the Socialist Workers 
Party has an exemption at the FEC from filing its donor 
disclosure forms because of that.
    So on an as-applied basis, I think you can say, if there is 
proof that there is going to be violence or actual harm to 
somebody because of a disclosure statute, that they can apply 
for and be exempt. But that doesn't, in my view, mean that you 
shouldn't have the disclosure requirements for everybody else.
    Mr. Lungren. Let me ask this question. I brought this up 
last week, and at least one of you talked about Venezuela 
having influence over our elections and so forth by way of this 
and maybe China.
    We have laws on the book which say that foreign nationals 
cannot take acts to influence elections. I don't believe that 
Citizens United changes that, and the person making the 
decision for a corporation must be an American citizen rather 
than a foreign national. I don't believe that changes this at 
all.
    But I do understand the concern people have with respect 
to, at some level, some threshold that you would have foreign 
influence because a corporation is somehow identified with 
foreign interest as opposed to other interests.
    My question is this: As we try and articulate that 
proposition in the law, ought we be concerned about whether or 
not we give license to other countries to utilize that same 
argument against American companies who may operate in their 
territory?
    For instance, if an American company were operating in 
Venezuela and the Venezuelan government were to say or the 
president of Venezuela were to say, we are going to put before 
our legislature a law which will nationalize American companies 
in this area of our economy, would we--should we be concerned 
about the inability of the American company to be able to 
respond to that by saying, even though it is a political 
decision, we believe this is unfair to our company and our 
employees in your country and therefore be subject to the law 
that they may adopt saying that criticizing prospective 
government decisions, that is bills before the legislature, or 
criticizing the candidate, the president is up for election 
when he makes this statement, is an illegal act and would 
subject the American company to criminal penalties, including 
imprisonment?
    And this is not a flip question. This is a question that I 
really am somewhat concerned about. We have a legitimate 
concern here, but ought we not to be very careful how we write 
this so we don't give that kind of precedent for other 
countries to be able to use it against us? Obviously, they have 
their criminal justice schematic, but their definition of 
political participation may not seem to them entirely different 
than what we are attempting to restrict here, which is 
political free speech, otherwise thought. Would any of you 
respond to that?
    Mr. Coates. Let me take a quick stab at it.
    So my first response is I am a little confused, both--you 
make this point, and it was made earlier by some of the other 
panelists last week, that the existing law already prohibits 
foreign persons. So, but at the same time, I hear you, the same 
people, claiming that if we simply add the provision that is in 
this bill it will have terrible consequences. So either we have 
the law already in place and it works or we don't need to 
change it----
    Mr. Lungren. If you would answer my question, please, 
because I only have a period of time. If you don't want to 
answer the question, I will ask somebody else to answer that 
question.
    Mr. Coates. Honestly, that is a sincere response to your 
statement earlier that we already prohibit the thing that we 
are concerned about.
    Now, in response to the point about foreigners, if we have 
public financing, as is true in Europe, of campaigns, this 
whole concern goes away.
    Ms. Lynch. I would just like to respond.
    I really appreciate that you are thinking about the 
international effects of domestic legislation, because I do 
think a lot of times Congress doesn't look to that. And as 
somebody who works abroad and interacts with a lot of people in 
China and places like China, it is something that comes up, 
like what are the precautions if you are a foreign person 
abroad or a foreign business.
    But I think in the case of the DISCLOSE Act, I do think it 
is less of a problem. I do think that Section 102 just returns 
what we had before Citizens United; it just returns it back to 
the status quo.
    I think when Citizens United was decided, I think somebody 
on the panel said that a lot of corporations were surprised by 
its decision. And I think that would equally hold true of 
foreign governments. I don't think foreign governments ever 
thought they would have the ability to put money in our 
elections.
    And I also think there are other avenues open to foreign 
governments and foreign corporations in the United States that 
they effectively use, such as lobbying and also comment periods 
before rulemaking.
    And what is really interesting to note in the case of China 
is that it has actually become much more responsive to U.S. 
interests--not U.S. interests, but it has allowed for U.S. 
corporations, U.S. Chamber of Commerce to actually give 
comments to recent laws that it has adopted, such as the anti-
monopoly law and the amendments to their labor contract law. 
And all of that happened before Citizens United.
    So I actually think, while it is important to always be 
thinking about potential implications abroad of our own 
domestic legislation, I think Section 102 wouldn't have 
necessarily that retribution.
    Mr. Lungren. I just recall the argument of the government 
in the first oral argument before the Supreme Court was that 
the government has the right to even ban a book if published by 
a corporation that criticized someone within the 90-day period 
who happened to be up for election. And that bothers me a great 
deal because that goes far beyond the idea that you are 
directly contributing to a candidate. That takes expression to 
the furthest extent, and one thing we have always been a little 
concerned about is that.
    And frankly, I was surprised that the government took that 
position, but that was the position of the Federal Government. 
And I certainly wouldn't want that to be the position of a 
foreign government, saying, well, that is the position that you 
folks have taken in the United States.
    Thank you very much, Mr. Chairman.
    The Chairman. I thank the gentleman.
    Ms. Lofgren.
    Ms. Lofgren. Thank you, Mr. Chairman.
    Before I ask my questions, I wanted to note that I see 
former Representative Pete McCloskey here in the audience, 
someone who was a tremendous hero and whom we all admire.
    And, Pete, it is just great to have you here in the 
committee room.
    Mr. Coates, I am glad that we have got a corporate lawyer, 
not just constitutional lawyers here, because there are some 
questions I have had, and maybe you can help answer them for 
me.
    When I read the decision, I will say I didn't agree with 
the decision, but it is the law. So now we have to see what is 
there and see what is possible consistent with the law. I 
accept that.
    But here is what I am interested in probing. The decision 
says the First Amendment does not allow the power to prevent 
corporate speech, to paraphrase; there is, furthermore, little 
evidence of abuse that cannot be corrected by shareholders 
through the procedures of corporate democracy. When I read 
that, I thought, I don't know about that. I mean, corporate 
democracy isn't that vibrant really.
    And towards the end of the decision, it talks again about 
shareholders. And I will read just part of it. It says, 
shareholder objections raised through the procedures of 
corporate democracy can be more effective today because modern 
technology makes disclosures rapid and informative, which 
really I think asks us--it is reaching out and enticing us to 
establish a vigorous disclosure procedure--and again, with the 
advent of the Internet, prompt disclosure expenditures can 
provide shareholders and citizens with the information needed 
to hold corporations and elected officials accountable for 
their positions and supporters. Shareholders can determine 
whether their corporation's political speech advances the 
corporation's interests in making profits and citizens can see 
whether elected officials are in the pocket of so-called 
moneyed interests. The First Amendment protects political 
speech. The disclosure permits citizens and shareholders to 
react to the speech of corporate entities in a proper way. And 
I have been wondering what ``a proper way'' might be. And it 
goes on to say that transparency enables the electorate and the 
like.
    Now, I have been thinking about when shareholders, when you 
buy a piece of stock, your basic interest is in your return. It 
is in getting dividends and having the price increase in value 
so you can sell it. It is not so the officers and the directors 
can use your money or what would have been your dividend to 
play politics with your money.
     And right now, I don't see any way to protect--I mean, put 
the free speech issues just to one side for a minute. How can 
shareholders be protected? I mean, if the value of the share is 
diminished because of the expenditure decisions made by the 
officers and directors to say ``sell the stock'' is not the 
remedy because the stock value has been diminished. And also, 
if you are in a closely-held corporation, you are especially 
vulnerable because you can't sell the stock, even if that were 
a proper remedy, which I think it is not.
    It seems to me that the business judgment rule really 
protects and insulates the officers and directors from 
accountability. And I have been exploring, is there some way 
that we could give shareholders some kind of remedy at law when 
there are expenditures for political reasons, which is 
protected, but the end result is the shareholder eats it 
financially; shouldn't they have some kind of remedy? How would 
you craft that?
    Mr. Coates. Thank you for your question.
    Yes, I agree that the Supreme Court--I agree with the 
implication of your question that the Supreme Court was a 
little over-optimistic about the ability of shareholders under 
current law to take action.
    And the most basic point is that, without the disclosure 
requirements of the kind that are in this bill, they won't even 
know what is being done with their money.
    Ms. Lofgren. Well, if I may, the disclosure requirements 
benefit the electorate, and then they can make a decision.
    I remember--and I am sure Dan remembers as well--in 
California, a number of years ago, there was an initiative to 
regulate smoking in public places. And as soon as the public 
found out that it was funded by the tobacco companies, it just 
crashed in the polls. I mean, it went down.
    So the disclosure benefits the electorate, but the 
disclosure doesn't actually solve the problem for the 
shareholder, does it?
    Mr. Coates. It does not completely solve the problem, but 
it is a minimum. It is a necessary thing. I think one thing, at 
least in principle, that shareholders could do if they were 
dissatisfied with what they learned their money was being used 
to do is to sponsor bylaw amendments that would then further 
control the use of political money by the companies in which 
they invest.
    And in fact, a significant number of companies have 
voluntarily adopted mandatory self-imposed disclosure 
requirements and reporting requirements. And I think, for that 
reason, that is another reason that this bill is in line with 
what in fact shareholders would want.
    I think it is also reasonable to explore alternative means 
to give shareholders more of a role in this area, and I think 
there are other bills that are out there that are worth 
exploring and working on to see if we could get that done, too.
    Ms. Lofgren. If I could just do one quick follow up. On 
that point, I don't think it belongs in this bill. I think that 
these disclosure provisions are essential, and it needs to move 
promptly. But on a separate track, I have been thinking, 
shouldn't the shareholder--I mean, we really tightened up 
derivative--I mean, shareholder lawsuits. And, actually, I was 
one of the Democrats that voted to override President Clinton's 
veto on that, and I am glad I did, and I think it was the right 
vote to this day.
    But there are circumstances where, I mean, other than 
having the ability to go after the corporation that took your 
dividend and spent it on their pet project, what remedy do you 
have?
    Mr. Coates. The United Kingdom currently requires prior 
shareholder authorization for political activity. I am not 
necessarily saying that we could take it from their system and 
put it in ours exactly in the way that they do it, but that is 
at least worth exploring.
    I will also point out that, to the extent people are 
concerned about parity between unions and corporations, union 
members all have basically a right to opt out, not as a vote, 
not as a collective, but individually on whether they want 
their money used for political purposes. And so if you wanted 
to be strictly parallel, you would give every shareholder of 
every corporation the right to veto their personal pro rata 
share of proposed political expenditures, and that would be 
substantially more than the United Kingdom has done. But I 
think those are things that are at least worth putting in the 
mix.
    Ms. Lofgren. If I may, and perhaps I can follow up with you 
subsequent to this, because I think certainly we have tried to 
be evenhanded so that the rules will follow for everyone. But 
the union members don't have their entire life savings at 
stake; the shareholders do. And to say that your pro rata share 
can be walled off doesn't really do you any good if the stock 
takes a dive because your CEO, as a wild-eyed lefty, goes off 
on some tangent and the right wing organizes a boycott, and the 
stock takes a dive; how does that help you?
    Mr. Coates. I would love to follow up and work with you on 
alternatives to add to what is in the bill, but I just want to 
reemphasize, without disclosure, none of the rest of it works.
    Ms. Lofgren. Thank you.
    I yield back, Mr. Chairman.
    The Chairman. I thank the gentlelady.
    Mr. Harper.
    Mr. Harper. Thank you, Mr. Chairman.
    Mr. Potter, if I could, earlier you made a statement in 
your opening remarks that this should not be a partisan issue. 
Does the fact that this is the committee of jurisdiction on 
this bill, that none of the Republican members of this 
committee were consulted, does that not make it partisan?
    Mr. Potter. I don't know who was consulted in the process, 
Mr. Harper.
    I do know that I was continually hearing through the spring 
that one of the reasons that the bill had not yet been drafted 
and introduced as people had talked about doing shortly after 
the decision is that they were looking for Republican partners 
and not finding many.
    Since this is the committee of jurisdiction, what I am 
hopeful at this stage is that in the markup process, there can 
be a coming together, because, as Mr. Lungren said, I think 
both sides have favored disclosure as the essence here, and 
what I am hopeful is that people can coalesce around the 
details of it.
    Mr. Harper. Senator McCain made some remarks on this, that 
he thought that this legislation, the DISCLOSE Act, would favor 
unions. Do you agree or disagree with that statement?
    Mr. Potter. Well, as I said, I am not here speaking on 
behalf of any client, including the good Senator.
    Mr. Harper. I understand.
    Mr. Potter. I think, having looked at it, and I read the 
testimony from last week that said it would favor unions, it 
seemed to me that the disclosure provisions were evenhanded. 
They would apply to both corporations and unions.
    And I can certainly remember past campaigns where unions 
paid for advertising that ran under catchy names that didn't 
say anything about unions, ``Americans for a Better Country'' 
or something. So I think the fact that it would have to 
disclose the names of the unions that are sponsoring it, and 
that it was specifically sponsored by unions, would be an 
important disclosure provision and probably news to viewers who 
are used to just seeing the catchy name on it.
    Mr. Harper. Is it your understanding that if corporations 
received TARP funds, that they are restricted under this bill?
    Mr. Potter. I believe that is the case, unless they paid 
them back.
    Mr. Harper. But their unions are not restricted. So I am 
trying to figure out how that----
    Mr. Potter. I suppose if they received TARP funds, but I 
don't think any of them did.
    There are going to be provisions of the bill--the other 
discussion has been Federal contractors--where there are going 
to be more corporations affected than there are unions, because 
there are going to be more corporations that are Federal 
contractors than they are unions, but I don't know that that 
makes the bill discriminatory against corporations.
    We have to start with the fact that Citizens United is a 
case about corporate spending. There was no union in that case. 
I think lawyers assume that unions have the same First 
Amendment rights as corporations do, but the whole Supreme 
Court decision is about corporate spending, corporate 
disclosure, corporate shareholders because that was the case 
before them.
    Mr. Harper. Thank you, Mr. Potter.
    Mr. Toner, do you agree or disagree with Senator McCain's 
statement that unions are treated--that this may favor unions a 
great deal?
    Mr. Toner. I don't think it is a bad deal for the unions. 
That would be my short summation.
    And if I may, Congressman, two quick points I would make. A 
couple of the panelists have emphasized that Citizens United 
was a shock. I think, in many ways, Citizens United was a 
resettling of precedent in terms of the First Amendment values 
the Court has emphasized.
    And I say that because Citizens United overruled Michigan 
v. Austin Chamber of Commerce that in many ways was an outlier 
because the Supreme Court has emphasized that when you are 
talking about independent speech, there is no anticorruption 
rationale for restricting it. And so, starting with individuals 
in Buckley v. Valeo, that is unlimited; starting with political 
action committees in NCPAC, that was held could not be 
restricted. Nonprofit corporations, in Massachusetts Citizens 
for Life could not be restricted. Political parties could not 
be restricted. Really the only entities in America left were 
for-profit corporations. And so, in that respect, I think 
Citizens United was a reordering of the decision.
    And beyond that, of course, as you know, a large number of 
jurisdictions in this country for decades have allowed 
corporate contributions and expenditures before Citizens 
United. And I think it is fair to say that some of the best 
governed States in the Nation operate in those types of 
regimes, such as, for example, Virginia. And we have not seen 
the parade of horribles displayed there that we are hearing a 
little bit this afternoon.
    So, for all of these reasons, I really think in many ways, 
particularly in the foreign national area, this is a statute 
searching for problems that don't exist. And I will emphasize 
one thing: Current law does not prohibit American companies 
that are owned 80 percent by Americans from being involved in 
U.S. elections. This bill would. I don't think that is 
appropriate. Maybe other people think it is, but I think that 
is really a misguided policy choice.
    Mr. Harper. Mr. McGinley, you were talking earlier and you 
mentioned about this taking effect within 30 days after passage 
without any regs being written. To your knowledge, has the FEC 
implemented or given any regulations on the Citizens United 
case, which was decided back on January 21 of this year?
    Mr. McGinley. No. I believe the only thing that they did 
was put out a policy statement that said that the regulations 
affected by the decision would no longer be enforced.
    Mr. Harper. Can you think of any reason, other than to 
impact the November 2010 election, of why would you have this 
take place without the regs being in effect?
    Mr. McGinley. I think that would be the sole reason, 
because a number of the things that are happening in this bill. 
The unions are left untouched by the government contractor and 
the foreign national ban, despite the fact that a union may be 
an international union with international members receiving 
dues from an international source, or a union representing the 
employees of a Federal Government contractor or a union 
representing Federal Government employees that may be similarly 
situated. And so those types of labor unions are left 
untouched, left free to engage in the speech.
    And I also might add, under the disclosure regime, it is my 
understanding that there have been some studies where the 
average dues that unions receive from a member is below the 
thresholds for the reporting. What we are seeing is a carefully 
crafted disclosure threshold amount that requires the 
disclosure of donors to make sure that union members are not 
disclosed, and I think that that is very troubling.
    Mr. Harper. Thank you, Mr. McGinley.
    Thank you, Mr. Chairman. I yield back.
    The Chairman. Thank you.
    Mr. Capuano.
    Mr. Capuano. Thank you, Mr. Chairman.
    As far as participation of the process, I mean, if there 
are amendments to be offered this week or whenever we are going 
to do the markup, I am more than happy to look at every 
amendment offered by any member of this committee and make a 
judgment on that, and maybe even co-author.
    I have some of the same concerns, I said at the last 
hearing, on the definition of what a foreign corporation is. 
And if there are thoughtful amendments that are offered, I 
might even co-author them.
    I am not going to do it with the intent of killing the bill 
because I think the concept is right, but around the details, I 
am more than open to some of these things. I think some of 
these concerns are generally okay.
    First of all, Mr. Potter, I want to thank you very much. I 
am not sure, but I may be the only person up here who had an 
opponent from the Socialist Workers Party, and I didn't know 
why they didn't file anything. Now I do. I just figured they 
didn't raise any money. Maybe they raised a lot, and I didn't 
know it.
    Is there anybody on the panel that thinks that, regardless 
of the definition of a foreign corporation, that a United 
States citizen that works for a foreign-owned corporation could 
not make a contribution? Is there anybody here that thinks that 
this proposal would prohibit a U.S. citizen who works for CITGO 
or ADIA or anybody else from making a contribution?
    Go ahead, Mr. Toner.
    Mr. Toner. It would, yes. It would restrict a U.S. citizen 
from contributing to the company's PAC; yes, sir.
    Mr. Capuano. No, no, to an actual political campaign or to 
a specific ballot question or anything else.
    Mr. Toner. You mean, setting aside the ability to 
contribute to the company's PAC, which is a vital part of being 
involved in American politics?
    Mr. Capuano. Actually, you know what, I would ask you, and 
that is fine, if you think so, I would like you to show me that 
specific language because that is a fair concern. I don't read 
it that it does, but if you do, I am happy to look at that.
    But do you see anything in here that would prohibit them 
from contributing to my campaign?
    Mr. Toner. Setting aside the inability to contribute to the 
company's PAC, I agree with you. But I do think the PAC is an 
important issue.
    Mr. Capuano. I don't disagree, and I would be happy to 
consider that. But the average employee of a foreign 
corporation, regardless of whether it is a wholly-owned 
subsidiary of the government or not of a foreign company, could 
contribute; we all agree with that. So, therefore, they have 
the right to participate in their own elections.
    Does anybody here think that--and again, CITGO, I am not 
sure they are a corporate organization. But I am positive ADIA 
is a corporation sponsorship. ADIA is the largest owned, 
largest sovereign wealth fund in the world, wholly owned by the 
government of the United Arab Emirates. Does anybody here think 
really they should have a right to participate in my election? 
Do you really think that? And if you do, it is okay; I just 
want to know it.
    Mr. Toner. I don't mean to be so disagreeable. Two points: 
I think it is illegal under current law, and I am not familiar 
with CITGO making contributions or expenditures----
    Mr. Capuano. I didn't ask whether it was legal. I asked 
whether you think they should be able to do so.
    Mr. Toner. Well, I do think it is relevant to assess 
whether it is lawful under current law, and I think it is 
unlawful.
    Mr. Capuano. No, because we are the ones who write these 
laws, so that is what I am trying to assess. I am trying to 
assess--my question, every time I write a law, is what do I 
want the law to be; not what the law is. I want to know, what 
kind of a world do I want to live in, not just in this; every 
time I participate in writing legislation, what is my goal? And 
I would argue that my goal would be to keep foreign entities 
out of my elections, but I am just curious if anybody here 
thinks that a corporation that is a wholly-owned subsidy of a 
foreign government should participate in the American electoral 
process. It is a philosophical question, not a legal one.
    Mr. Toner. Well, this law, this proposed law goes far 
beyond that goal, Congressman, and would sweep up U.S. 
Companies and U.S.----
    Mr. Capuano. Mr. Toner, I guess if you don't answer the 
question, that is okay. You are entitled to not answer the 
question. The other people aren't answering it, and that is 
okay. But it is a very simple question: How is it that you 
don't understand that question?
    Mr. Toner. If you want to make it illegal for American 
companies that are owned 80 percent by Americans, that is fine; 
that is your legislative choice. That is what this would do.
    Mr. Capuano. Mr. Toner, I can talk slower if you want me 
to. Do you think that a foreign corporation that is a wholly-
owned subsidiary of a foreign government should participate in 
the elections of American politicians? Very simple question.
    Mr. Toner. I appreciate the cadence of your question. The 
answer is, no, but that is not necessary by this bill.
    Mr. Capuano. Thank you. I appreciate that, because I don't 
either.
    And once you decide that some corporation should not 
participate in the American electoral process, then the next 
question is, where is the line? We are no longer at the 
question of whether corporations should or shouldn't; the 
question is, which lines? I think those are fair questions.
    Twenty percent may be too low, a couple of members of the 
board maybe. Those are fair points, and I would be open to 
anybody making a reasonable suggestion to decide maybe the 
standards are a little too low; maybe they should be different. 
That is a fair point.
    But the concept of saying foreign governments, foreign 
corporations should not participate in the American electoral 
process I think is fair.
    As far as American corporations participating in other 
countries, they can and will do that whether we do anything or 
not. And that is the risk they run, and most companies, 
especially in China. I don't think that China--actually, you 
cannot do business in China unless the person who runs that 
corporation is a Chinese citizen. It is kind of simple. So they 
kind of already raised the standard. You can't do business in 
China as an American citizen on your own, under a corporate 
format anyway.
    Am I wrong about that, Ms. Lynch?
    Ms. Lynch. You can't do business legally in China, yes.
    Mr. Capuano. Legally. Of course, we only want to talk about 
what is legal under the law.
    So I guess I also want to talk about the shareholder issues 
that Ms. Lofgren was talking about. Just out of curiosity, on 
the general concept, if any corporation, the most American 
corporation of all American corporations--whoever makes the 
American flags--I hope they are made in this country. I don't 
know. But the most American corporation, if that corporation 
has a dollar sitting around that they don't need to run the 
corporation, they don't need to buy any more machines, they 
don't want to hire anybody; whose dollar is that? I would argue 
that it would be the shareholders? Anybody disagree with that? 
Do you think it belongs to the CEO of the corporation? Okay. I 
guess that is unanimous for the silence.
    I would think that it is the shareholders' money. And that 
being the case, I would then argue that any of these dollars 
should be subject--again, I am going back to Ms. Lofgren's 
suggestion and Mr. Coates' comment or suggestion with the 
comment, that when it comes time for corporations to spend 
money that they do not need to run the corporation, it should 
be the decisions of the shareholders to do so. And if they do--
and I make no bones about it, I start from the premise that I 
don't like this decision, but okay, as Ms. Lofgren said, it is 
the law. I am really kind of over it. I was over it pretty 
quickly. On the level of how angry I get about this decision, 
it is really not that high. There are a whole lot more 
decisions that the Court has made that I didn't like. We can 
start with Bush v. Gore, but that is a different issue.
    But all that being said, Mr. Coates, and for others, I 
would ask you to look at the Shareholder Protection Act that 
has been proposed that would allow shareholders to be the 
decision makers as far as how much money a corporation is--that 
is not for today's discussion though.
    I guess on the final point that I want to make, on 
retaliation, because I think retaliation is a fair point to 
make, and it is a real fact of life; I have seen retaliation in 
political circumstances all my life. And I don't like them. As 
a matter of fact, when I was mayor of my community, one of the 
things I did, I banned lawn signs, which is, by the way, 
unconstitutional, but we did it anyway. And we lost in court, 
which I knew we would.
    But then I put political pressure on those who put yard 
signs up. The rule was, if you come into my city and you want 
to put up yard signs, you buy my political opposition. And for 
10 years, we had no yard signs. Neighbors got along. Everything 
was fine. That was my definition of terms.
    So retaliation, I think, is a very real consideration. 
However, the question to me then comes, retaliation doesn't 
just come on these issues. Is not retaliation potentially 
possible in straight-up political elections like, for instance, 
district attorneys, judges, attorneys general? Even Members of 
Congress might feel some compunction about maybe not being so 
friendly to someone who opposed them. So is retaliation in this 
circumstance, does anybody see it here as any different, any 
more nefarious, or any more possible than it is in any other 
political situation? If you do, do you think that those 
contributions to judges running for office or DAs or attorneys 
general, should they be secret as well?
    Mr. Coates. Could I say, I think it is less--when I give 
money to my local Congressman--Barney Frank, for example; I 
live in Newton--that is instantly disclosed on the Web. It 
shows up so fast, and people track it, and then they analyze 
all the professors at Harvard and all professors generally. And 
they publish reports about it, and we get retaliated against. 
So you're telling me that I get retaliated against, that is not 
so bad; but if Exxon gets retaliated against, that is terrible.
    Mr. Capuano. Who would dare retaliate against a professor 
in my district?
    With that, I--I actually have no time left, so I give back 
what I don't have.
    The Chairman. Well, I think this is an important bill, so I 
will let the blinkers go right by.
    Mr. Lungren. I am just surprised that a Harvard professor 
would get retaliated against for contributing to Barney Frank 
in Massachusetts. I guess I don't understand Massachusetts.
    As I understand the general proposition, the Supreme Court 
has basically said that you can restrict types of political 
participation, and we can put limits on expenditures to 
candidates, for instance, even though the use of money is free 
speech because of the corruptive influence or an attempt to try 
and eliminate or at least ameliorate the potential corruption; 
I mean, that is sort of a gross statement.
    Presumably that is the same basis for which this bill does 
not allow those who are Federal contractors to participate as 
others might participate. If that is the case, what is the 
essential difference between a corporation that has a 
government contract and a grantee of the Federal Government, 
which is not so impaired under this bill, or we talk about 
unions, a public employee union is not similarly restricted? 
Mr. Toner or Mr. McGinley or anybody else, can you tell me why 
there is an essential difference in those categories?
    And if there is not an essential difference, does that not 
give rise to a potential constitutional challenge where the 
Court has already told us, you cannot distinguish between 
corporations or different types of associations, free speech 
rights, and in this case, it would seem to me that if you 
differentiate between unions and corporations, one having a 
contract and the other having a relationship with the Federal 
Government representing Federal employees who get their direct 
pay from the Federal Government, how is that distinguishable? 
Or do you think that might give rise to a constitutional 
challenge in the courts?
    Mr. McGinley. I will take the first crack at this one.
    I think that it does give rise to a constitutional 
challenge in the courts for the very reasons that the Court 
laid out in Citizens United. The Court said that the Federal 
Government does not have the authority to distinguish between 
different speakers who choose to speak in the political 
process.
    If you have a corporation with a contract with the Federal 
Government and you have a labor union that represents Federal 
Government employees, a public service union, there really 
should be no difference between the treatment of the two under 
the law. What this does is decide that the employer cannot 
speak about issues that may be of concern to the employer.
    Mr. Lungren. Because of the potential corruptive influence.
    Mr. McGinley. Because of the potential of corruption, which 
is the only compelling governmental interest that can satisfy 
the need to limit the speech, as opposed to the union, which 
represents the employees of the Federal Government and engages 
in collective bargaining. Why there should be a difference 
between those two types of situations I cannot explain.
    However, I can say that the Court was very clear about the 
fact that we need to have more speech from more speakers, and 
that the Federal Government contract prohibition that is 
currently in the DISCLOSE Act is going to prevent these 
companies from speaking out. Not only on express advocacy, 
which would be the advertisements that advocate the election or 
defeat of a candidate, but it may also prohibit them from 
speaking out with Electioneering communications, which now, 
under the bill, are not only from 60 days back from the general 
election and 30 days back from the primary; they begin from 120 
days back from the general election. So if there is a bet the 
business piece of legislation that is moving through Congress 
that could endanger this company's business, they don't have 
the authority, not to advocate the election or defeat; they 
can't even discuss the business and ask the general public to 
contact those Representatives because that may be a prohibited 
communication under this bill.
    Mr. Lungren. And what type of media can they use?
    Mr. McGinley. They wouldn't be able to use the television 
or radio under the Electioneering communication ban. But also 
under this bill, you have expanded the definition of an 
independent expenditure, which is something that applies year-
round. Not only does it include express advocacy, which are 
those advertisements that advocate the election or defeat, but 
you have taken the functional equivalent of express advocacy, 
which is the electioneering communication standard that the 
Supreme Court set forth in Wisconsin Right to Life. Those are 
issue ads. That is the court case where the Court laid down 
that the First Amendment allows speakers to convey information. 
It may not be that they are not advocating the election or 
defeat, but the only authority that the Federal Government has 
to regulate those ads is if the advertisement is susceptible of 
no reasonable interpretation other than an appeal to vote for 
or against a candidate, an objective standard.
    In fact, in Citizens United, the FEC's attempt to 
promulgate a regulation that had two parts and 11 factors was 
specifically singled out by the Supreme Court as analogous to a 
prior restraint, because it was too confusing and nobody 
understood it. Now we have a definition of independent 
expenditure in this bill where it talks about the functional 
equivalent and offers a definition that really borrows largely 
from what the Supreme Court has already criticized as analogous 
to a prior restraint.
    Mr. Lungren. So we have actually moved further towards the 
prior restraint----
    Mr. McGinley. That is correct.
    Mr. Lungren [continuing]. Definition that the Court at 
least pointed to in the Citizens v. United case.
    Mr. McGinley. That is correct.
    The Chairman. If your answers aren't quicker, you are going 
to come back here instead of going to dinner.
    Mr. Toner. That is a powerful incentive to me, Mr. 
Chairman. I am hungry.
    Mr. Lungren. Mr. Chairman, there are a whole lot of other 
questions----
    The Chairman. I can well imagine.
    Mr. Lungren [continuing]. But I understand that we have 
time limits here.
    So, Mr. Chairman, I would like to introduce three items for 
the record; number one, the testimony from the Center for 
Competitive Politics.
    The Chairman. Without objection.
    [The information follows:]

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    Mr. Lungren. Secondly, a law review article written by Mr. 
Bob Bauer stating that disclosure requirements like ``Stand By 
Your Ad'' really serve the purpose of regulating speech, and 
third, a study from procon.org that lists the average union 
dues for major unions across the Nation.
    [The information follows:]

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    The Chairman. I will just ask unanimous consent that all 
articles, and various other documents be committed into the 
record.
    Mr. Lungren. And may I ask one more question?
    And that is, in the new disclosure requirements--not 
disclosure requirements, the new requirements for 
identification at the time of an ad, because in some cases now 
they double the number of people to be mentioned and the 
association has to be mentioned twice, at least my staff has 
tested it, and they utilize the names and associations of the 
people who appeared in the panel last week. And they found that 
for a 30-second ad, it could take up to an average of 13 to 14 
seconds. Does anybody believe that that is something that does 
in fact interfere with the right of free speech when at least 
half of the message has got to be a repetition of who it was 
that sponsored it and the name of the group? Or is that just 
one of the breaks of the game; if you are going to do a 30-
second ad, half of it is going to be taken up with the 
statement?
    Mr. Potter. Mr. Lungren, I venture into that territory and 
say that, obviously, at some point, it becomes impractical. 
There is a standard the FEC currently uses that says, if the 
disclaimer takes up so much of the ad you can't get your 
message out--and I am thinking of text messaging, for 
instance--or it is impractical--I am thinking of sky writing--
you don't apply it that way. So I think there is a reasonable 
way to deal with a very short ad.
    Mr. Lungren. And I was just thinking from what Ms. Lofgren 
said in quoting Justice Kennedy's statement about the use of 
new technology and so forth, you could require that there be 
some sort of message that is even shorter, but directs people 
to the Web site that contains that information that is 
necessary. I mean, there are ways of making sure that they have 
that available that would not take up the time of the ad 
itself, and yet not try and get around the identification.
    I understand what we are trying to do; I want to know who 
it is. But at the same time, you either are going to get the 
situation where they take up too much time, or you are going to 
hire that guy who speaks faster than anybody else and so nobody 
actually understands it, and yet it might fulfill what the law 
is. It is just one of the practical things I think we should be 
concerned about.
    Mr. Potter. It is a balancing issue because you and I both 
know that we are most likely to hear it on the ad, and we are 
less likely to write it down and go to the Web site and figure 
out who sponsored it. So we would like it on the ad, but you 
have to find a way to make it practical, I agree.
    The Chairman. Thank you.
    Before I recognize Ms. Lofgren, I would like to say a few 
words.
    I am either at a disadvantage--but in my view, I am at an 
advantage because I am not an attorney amongst all the other 
attorneys that are here.
    But Mr. Toner, you said something about labor, that they 
got a good deal. I can't figure out how. I can't figure out how 
labor got a good deal. In order to get a contribution from a 
candidate from labor, it has to be in writing. If you are a 
corporation, you don't have to get anything in writing. In 
order to get a contribution out of labor, members vote on it. 
If I have stock in AT&T, I don't vote on it. If members of a 
union want to get a request--if there is a request for a 
political contribution, it has to be a request made in writing, 
a member has to know about it. Members of the unions know about 
it, and members vote on it or ratify it. Nobody who is a member 
or a dividend owner or anybody in the corporation gets the 
chance to see that.
    I could have, I said it before, is it still Deer Park? I 
don't know what we are doing here. I could have stock in Deer 
Park, and Deer Park can support my opponent. And the money I am 
buying stock with, that money goes against my opponent. That 
can't happen in labor. So I don't think labor is getting a good 
deal. I think labor has been covered under this bill forever in 
time, and they do have full disclosure on every piece. So I 
just wanted to make that comment.
    I would like to now recognize Ms. Lofgren.
    Ms. Lofgren. Thank you, Mr. Chairman.
    I would like to ask unanimous consent to put a little 
compilation of information from, actually, Bob Bauer's position 
in favor of disclosure--because clearly he does favor 
disclosure--in the record, just to be clear on that.
    [The information follows:]

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    Ms. Lofgren. I would like to get back to, you have already 
covered the union obligations that are found, not just in 
disclosure but in the Labor Management Reporting Act and the 
Civil Service Reform Act. I mean, there are a whole set of 
burdens on labor when it comes to political speech. But I would 
like to go back to the corporate world, once again, to further 
explore--let's give this example: Let's say this bill or 
something quite like it passes, becomes the law, and when 
covered advocacy happens through corporate money, there has to 
be disclosure of that fact. And let's say in that case, the 
corporation takes position A, and the people who don't support 
A get annoyed, and they organize a boycott, and they harm the 
brand of the corporation, and sales decline, and the stock 
value declines. And as a shareholder, I am not only getting my 
dividend, but my life savings just took a dive.
    As I see it right now, the officers and directors are 
pretty much protected from liability by the business judgment 
doctrine. And I am just thinking, what remedy does a 
shareholder have in such a case? Selling it doesn't make them 
whole because they already took a bath because of what the 
directors did. And I am wondering, can you envision, Mr. 
Coates, a remedy where, if the directors were reckless, that 
the shareholder might be able to sue for damages and get past 
the business judgment rule? How else do you hold the officers 
and directors accountable in such a scenario?
    Mr. Coates. I don't think that a litigation remedy is 
likely to be a good idea. It also would not likely work very 
well for reasons that I am happy to talk about at great length.
    But let me just say one remedy that might work instead is, 
with disclosure, if enough shareholders don't like option A 
that the company has been pursuing, they can legally, under the 
laws of all the States currently, propose a bylaw which would, 
in the future, prevent the company from engaging in that 
activity.
    Now, there is a problem--or two problems, one practical and 
one legal. The legal one is that the SEC, for reasons known 
only to itself, has frequently prevented those sorts of 
proposed by-laws from being put into the company's proxy 
statement and, as a practical matter, forced shareholders to 
have to pay for and print and distribute their own proxy 
statement, which then makes it practically impossible for them 
to get this enacted. So part of a separate potential bill would 
be to encourage or require the SEC to revisit some of those 
decisions.
    But even if it is completely legal, I think you are 
absolutely right to focus on the fact that, for many companies, 
it still will not be a practical option for the 25 million 
shareholders of Proctor & Gamble to get together, even if 12.5 
million of them dislike what management is doing, and adopt 
something. And so that then leads to the kind of thing that I 
was talking about earlier, which is a federally mandated vote 
before political expenditures----
    Ms. Lofgren. But what do you do if it is pre-IPO? Many of 
my constituents are working 18 hours a day, and they are doing 
stock options in the hopes that someday they are going to be 
worth a lot. As a matter of fact, they are more victim to 
something like this than a publicly traded entity. There is no 
market for this stock; you can't sell it. There are no 
shareholder meetings. They are just out of luck. What remedy 
for them, what is going to deter the directors and the officers 
from having fun with other people's money--always a 
temptation--if there is no possibility of ever being held to 
account?
    Mr. Coates. I think the point you are making is a good 
reason that Citizens United perhaps should be reconsidered from 
time to time by the Court, but I don't see a practical remedy 
for many shareholders in that situation.
    Ms. Lofgren. Mr. Chairman, the bells have rung, and you had 
announced previously that we would adjourn as soon as they did. 
So I will yield back, even though it is on yellow, and I have 
a----
    Mr. Lungren. Could I ask the gentlelady a question, though, 
before she yields back?
    The only theory I had not heard about the problem with 
Proctor & Gamble last week was what was just suggested. I am 
going to investigate that and see if it was some statement of 
political activity that was made by the chairman of the Board.
    The Chairman. I thank the members, and I thank the panel of 
witnesses. I appreciate your participation. This hearing is now 
adjourned.
    [The information follows:]

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    [Whereupon, at 6:35 p.m., the committee was adjourned.]