Thursday, November 18, 2010


The Sunlight Foundation's REPORTING GROUP is reporting that "Dark Money" groups spent $110,000,000 in 168 races during the 2010 election.

 "Dark Money" is the new term of art for funds spent by independent expenditure groups following the Supreme Court's decision in Citizens United v. Federal Elections Commission and Court of Appeals decision relying on Citizens United, Keating v. Federal Elections Commission. The Keating case is known as the Speech Now case, even though SpeechNow.Org was not a party to the en banc proceedings before the Federal Court of Appeals for the D.C. Circuit.

That case went to the Supreme Court for a Writ of Certiorari. The Supreme Court denied the petition letting the judgment of the Court of Appeals stand.

The yet-to-be-certified victor in Illinois is Republican Mark Kirk. Kirk got the benefit of $4.4 million in dark money directed at his Democratic opponent Alexander Giannoulias.

In the State of Washington incumbent Democratic Senator stood up against an onslaught of Karl Rove' Crossroads GPS independent expenditures of $3.5 million.

The California Senate race between Democratic incumbent Barbara Boxer and Republican challenger Carly Fiorina saw an influx of $5.61 million in dark money. The U.S. Chamber of Commerce, through various dark money groups, spent $4.6 million in the California race, according to REPORTING GROUP.

Consensus says that most of these groups don't have to report. I am not certain where that whacky notion originated, but it is clearly wrong.

The question presented to the Supreme Court in  Speech Now was:

 "[w]hether, under the Free Speech Clause of the First Amendment, the federal government may require an unincorporated association that makes only independent expenditures to register and report as a political committee despite the fact that a more narrowly tailored means of disclosing its independent expenditures exists in 2 U.S.C. § 434(c)."

Respondent's brief in opposition similarly phrased the question as:

"[w]hether the en banc court of appeals correctly held that the reporting, organizational, and administrative requirements of the Federal Election Campaign Act of 1971, 2 U.S.C. 431 et seq., are constitutional as applied to the treasurer of a group whose major purpose is the making of independent expenditures to elect or defeat clearly identified federal candidates."

It looks like the independent expenditure groups assumed they would get relief from the Supreme Court and ran amuck with dark money. There may be consequences.

The Federal Elections Commission did a poor job of rulemaking to clarify what needed to be done for the independent expenditure groups. Clear lines were not drawn to keep independent expenditure groups from running afoul of FECA, the Federal Election Campaign Act. Independent expenditure groups still had adequate notice to report, in one of two forms, who gave all that dark money.

Instead the FEC issued a couple of advisory opinions rather than go into full rulemaking mode. The FEC dropped the ball and dark money has run through Campaign 2010 like raw sewage flowing into the nation's waterways.

FEC Advisory Opinion 2010-09 dealt with a request by the Club for Growth, which asked for opinions on three separate issues. The drafts of their opinions are at line at the FEC web portal. You have to read the footnotes. In answering one of the Club for Growth's questions they hit the nail on the head. 

Footnote One reads "The Commission notes that this advisory opinion implicates issues that will be the subject of forthcoming rulemakings in light of the Citizens United, EMILY's List, and SpeechNow decisions. The results of that rulemaking may require the Commission to update its registration and reporting forms to facilitate public disclosure. In the meantime, the Committee may include a letter with its Form 1 Statement of Organization clarifying that it intends to accept unlimited contributions for the purpose of making independent expenditures. See Attachment A. Electronic filers may include such a letter as a Form 99. 2 currently, the President of the Club serves as Treasurer of Club PAC. Statement of Organization, Club for Growth PAC (Apr. 14,2009), available at: (last visited luI. 16,2010) ."

Footnote One says the FEC will most likely have to engage in full rulemaking. Believe me, they need to get in gear on this rulemaking.

Footnote Ten reads "The court also upheld the Act's "organizational and reporting requirements" as applied to Upon meeting the applicable thresholds, the group would be required to register with the Commission as a political committee and abide by the disclosure and reporting requirements applicable to political committees. SpeechNow, 599 F.3d at 696-98."

But hold on for the wrinkle in Footnote Eleven, which reads "On May 27, 2010, in compliance with the D.C. Circuit's opinion, the United States District Court of the District of Columbia issued an order that the Act's contribution limits (2 U.S.C. 441 a(a)(1 )(C) and 441 a(a)(3)) and implementing regulations could not be constitutionally applied against or those who contribute to it. On June 11,2010, the Commission filed a Motion to Alter or Amend the Judgment to reflect that the organizational, administrative, and reporting provisions of the Act are constitutional as applied to the plaintiffs. The Commission's motion remains pending. These, as well as other documents related to the SpeechNow litigation, are available at The Solicitor General is not petitioning the Supreme Court to review the court's decision, but has requested and received an extension of time to file a Petition for a Writ of Certiorari on the questions addressing registration, disclosure, and reporting." (Emphasis Added).

Footnote Ten says hold on the District Court's Order only spoke to the issues the Court of Appeals said didn't pass Constitutional muster. There's more, the Court of Appeals said the reporting requirements did not violate the Constitution. On March 26th the District Court amended its order and said " there is no constitutional infirmity in the application of the organizational, administrative and reporting requirements set forth in certified questions 4 and 5."

So what did the United States Court of Appeals for the District of Columbia say? Here it is.

SpeechNow, as we have said, intends to comply with the disclosure requirements applicable to those who make independent expenditures but are not organized as political committees. Those disclosure requirements include, for example, reporting much of the same data on contributors that is required of political committees, 2 U.S.C. § 434(c); information about each independent expenditure, such as which candidate the expenditure supports or opposes, id.; reporting within 24 hours expenditures of $1000 or more made in the twenty days before an election, § 434(g)(1); and reporting within 48 hours any expenditures or contracts for expenditures of $10,000 or more made at any other time, § 434(g)(2). 19 Because SpeechNow intends only to make independent expenditures, the additional reporting requirements that the FEC would impose on SpeechNow if it were a political committee are minimal. Indeed, at oral argument, plaintiffs conceded that “the reporting is not really going to impose an additional burden” on SpeechNow. Oral Arg. Tr. at 14 (“Judge Sentelle: So, just calling you a [PAC] and not making you do anything except the reporting is not really going to impose an additional burden on you right? . . . Mr. Simpson: I think that’s true. Yes.”). Nor do the organizational requirements that SpeechNow protests, such as designating a treasurer and retaining records, impose much of an additional burden upon SpeechNow, especially given the relative simplicity with which SpeechNow intends to operate. Neither can SpeechNow claim to be burdened by the requirement to organize as a political committee as soon as it receives $1000, as required by the definition of “political committee,” 2 U.S.C. § 431(4), 431(8), rather than waiting until it expends $1000. Plaintiffs argue that such a requirement forces SpeechNow to comply with the burdens of political committees without knowing if it is going to have enough money to make its independent expenditures. This is a specious interpretation of the facts before us. As the district court found, SpeechNow already has $121,700 in planned contributions from plaintiffs alone, with dozens more individuals claiming to want to donate. SpeechNow can hardly compare itself to “ad hoc groups that want to create themselves on the spur of the moment,” as plaintiffs attempted at oral argument. Oral Arg. Tr. at 17. In addition, plaintiffs concede that in practice the burden is substantially the same to any group whether the FEC imposes reporting requirements at the point of the money’s receipt or at the point of its expenditure. Oral Arg. Tr. at 15-16. A group raising money for political speech will, we presume, always hope to raise enough to make it worthwhile to spend it. Therefore, groups would need to collect and keep the necessary data on contributions even before an expenditure is made; it makes little difference to the burden of compliance when the group must comply as long as it anticipates complying at some point. We cannot hold that the organizational and reporting requirements are unconstitutional. If SpeechNow were not a political committee, it would not have to report contributions made exclusively for administrative expenses. See 2 U.S.C. § 434(c)(2)(C) (requiring only the reporting of contributions “made for the purpose of furthering an independent expenditure”). But the public has an interest in knowing who is speaking about a candidate and who is funding that speech, no matter whether the contributions were made towards administrative expenses or independent expenditures. Further, requiring disclosure of such information deters and helps expose violations of other campaign finance restrictions, such as those barring contributions from foreign corporations or individuals. These are sufficiently important governmental interests to justify requiring SpeechNow to organize and report to the FEC as a political committee.

We therefore answer the last two certified questions in the negative. The FEC may constitutionally require SpeechNow to comply with 2 U.S.C. §§ 432, 433, and 434(a), and it may require SpeechNow to start complying with those requirements as soon as it becomes a political committee under the current definition of § 31(4).


We conclude that the contribution limits set forth in certified questions 1, 2, and 3 cannot be constitutionally applied against SpeechNow and the individual plaintiffs. We further conclude that there is no constitutional infirmity in the application of the organizational, administrative, and reporting requirements set forth in certified questions 4 and 5. We further conclude that because of our decision today, as guided by Citizens United, which intervened since the entry of the district court’s denial of plaintiffs’ petition for injunctive relief, the district court’s order denying injunctive relief is vacated and remanded for further proceedings consistent with our decision.

So ordered.
The matter returned to the United States District Court for the District of Columbia which entered an order enforcing the judgment of the Court of Appeals.

The notion that independent expenditure groups are not or were not subject to the reporting requirements of 2 U.S.C. §§ 432, 433, and 434 is pure fiction. 2 U.S.C. § 434 (c) (2) (c) pertains to individuals making independent expenditures and says the identity of each person making a contribution of $200 or more must be disclosed. 2 U.S.C. § 434 (b) (3) (A) makes a similar disclosure requirement. 2 U.S.C. § 434 (f) (2) (E) require identification of all persons contributing $1,000 or more to segregated accounts used for electioneering. 2 U.S.C. § 434 (f) (2) (E) makes similar requirements for funds which were not segregated.

The U.S. Chamber of Commerce is among groups who infused the dark money into Campaign 2010. The Chamber is a 26 U.S.C. §501 C (6) business league organization. That means it is tax exempt. 26 U.S.C. §527 (f) (3) requires the Chamber to have segregated its membership dues from any political activities. Reporting during Campaign 2010 indicated that was not the case. The Chamber may face penalties, perhaps a revocation of their tax exempt status?

The FEC, the IRS, and the FBI must immediately begin investigations and audits of those who polluted the campaign process with this dark money.  Above all else, the FEC needs to go into full rulemaking mode to prevent anymore toxic dark money from polluting the waters of American politics.

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