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Citizens United v. FEC – The Good, the Bad and the Ugly

In my first post about the Supreme Court’s decision in Citizens United v. FEC, I gave my readers the facts of the case and then I summarized the Court’s opinion. See: http://wendygdphillips.wordpress.com/2010/01/26/citizens-united-v-fec-%E2%80%93-american-jurisprudence-at-its-best-or-partisanship/

In this post, close scrutiny is given to parts of the Court’s opinion which I consider to be good, bad and ugly.

The Good

In Citizens United, the Supreme Court left intact the disclaimer and disclosure provisions of section 311 of the Bipartisan Campaign Reform Act (BCRA). Under 311, televised electioneering communications funded by anyone other than a candidate must include a disclaimer that “___ is responsible for the content of this advertising.”  That statement must be made in a clearly spoken manner and displayed on the screen in a clearly readable manner for at least 4 seconds.  It must state that the communication is not authorized by the candidate or candidate’s committee.  It must also display the name and address (or website address) of the person or group that funded the advertisement.

Under BCRA section 201, any person who spends more than $10,000 on electioneering communications within a calendar year must file a disclosure statement with the FEC.  That statement must identify the person making the expenditure, the amount of the expenditure, the election to which the communication was directed, and the names of certain contributors.

Citizens United challenged the disclaimer and disclosure provisions of the BCRA as unconstitutional.  Citizens United also argued that by forcing the corporation to devote 4 seconds of each advertisement to a spoken disclaimer, the statute is decreasing both the quantity and effectiveness of the corporation’s speech.

The Supreme Court rejected both arguments.   The Court held that disclosure is a less restrictive alternative to more comprehensive regulations of speech.  The Court also noted that the disclaimers required by section 311 provide the electorate with information to insure that the voters are fully informed about who is speaking about the candidate.  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 different messages.

The Bad

The Citizens United Court left intact limits on direct contributions to politicians.  The Court recognized that large contributions could be given to secure a political quid pro quo and there is a sufficiently important governmental interest in preventing corruption and the appearance of corruption, so it upheld limits on direct contributions.  However, the Court did not extend this reasoning to expenditures for ads and other speech.  “Independent expenditures, including those made by corporations do not give rise to corruption or the appearance of corruption,” the Court stated.  Am I missing something here?  So there is corruption when a politician does a political favor for a corporation that made a contribution to his campaign, but there is no corruption when a politician does a political favor for a corporation that spent millions on an ad campaign which endorsed that politician?  Go figure!

The Ugly

During arguments for Citizens United, Justices Ruth Bader Ginsburg and John Paul Stevens asked whether foreign interests would be able to funnel money into American elections through their U.S. subsidiaries if the court struck down 441b.  One of the attorneys for Citizens United replied, “I would not rule that out.”

In its Opinion, the Court side-stepped the issue and refused to make a ruling on whether foreign corporations would be able to influence our political process by funding election ads.  Instead, the Court stated that there is no need to answer the question, and referred to the fact that 2 U.S.C 441(e) bans contributions and expenditures by foreign nationals. This may be true, but the operative word in 441e is “nationals”. How can this Court say that the question of whether foreign organizations can influence our Nation’s political process is best answered by 441e when 441e applies only to foreign nationals or individuals, and not corporations?  This creates a loophole for foreign corporations.  It will be interesting to see what foreign corporations will do to capitalize on this blunder by the Court.

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29 Responses

  1. [...] Citizens United V. FEC – The Good, The Bad And The Ugly « Wendy During arguments for Citizens United, Justices Ruth Bader Ginsburg and John Paul Stevens asked whether foreign interests would be able to funnel money into American elections throu… [...]

  2. Really nice post here, it left a smile on my face. I am starting to wonder if our court is stained with a big hot steaming ROBERTS.

  3. Haven’t foreign corporations been explicitly defined as being included in “foreign nationals” already?

  4. Oh, for crying out loud, incorporating entities is the job of the secretary of state of the 50 states. China can incorporate in any of those states – as a “domestic” corporation, merely by having a registered agent in the state.

    Thanks to the 5 Opus Dei right wing idiots on the Court, the Chinese could spend a billion dollars for every member of the House and Senate to vote their way.

  5. I don’t know why citizens united would be concerned about the disclaimer provision. Have the requirement that drug advertisements site potential side effects slowed down the consumption of prescription drugs? The power of commercials to influence drug use remains. This reality is what concerns me about the influence of corporate spending on elections and issues.

  6. Thank you Wendy. I do have a question, though. My understanding was that 441e also defines “nationals” specifically to include foreign corporations. Wouldn’t this imply that the loophole you fear isn’t as ugly as we might otherwise think?

  7. I’m really surprised by all the concern from the Left about ‘foreign corporations’ influencing our politics. If they were to do so, they would do so overwhelmingly in favor of economic policies that would further cripple the US by pushing us further and further toward the European model of ‘Social Democracy’ (20% unemployment, stifling of innovation, and overweening regulation) — and isn’t that what the Left in this country is all about?

  8. Did I miss something? As I understood it, the corporation was trated to the provisions of free speach accorded to human citizens. All the rest of the decision was an interpetation of how a corporate entity/person could spend money in election campaigns. The Suprime Court of the United States (SCOUTS) has created de facto citizens out of incorporated businesses. THAT is the UGLY!

    Let me see…. The corporate image is a created \”person\” via state and federal laws, not a citizen by either birth or naturalization. This creation was a means to control corporate entities with a body of law intended for citizens. The SCOTUS decision makes the corporate image a legal citizen with the constitutional rights of free speech acorded human citizens. A much earlier SCOTUS decision said that real humans born in the US were not citizens, but were actually property. Both SCOTUS decisions were the handiwork of \”strict interpetationalist\” judges. When the letter of the law trumps the spirit of the law, there is no law. When the letter of the law is used to support an agenda, it is activist law. Judicial impeachment is legal, and within the letter of the law. I wonder …..

  9. [...] "Citizens United v. FEC – The Good, the Bad and the Ugly#," is from Wendy Phillips' Blog (1/27/10). [...]

  10. nice summary of the main components of the ruling. Not happy with the outcome….guess Bush gets the last laugh on this one.

  11. It’s a little more nuanced than that. “So there is corruption when a politician does a political favor for a corporation that made a contribution to his campaign, but there is no corruption when a politician does a political favor for a corporation that spent millions on an ad campaign which endorsed that politician? Go figure!”
    If the politician directed the corporation to spend the money in a specific way to benefit the politician, and it was understood that following that direction would result in preferential treatment, then that is corruption. Such direction creates a situation where the ad campaign is equivalent to a direct “gift” of money for preferential treatment.
    Using your thinking, could a news organization spend more time reporting on a particular candidate? What if that news organization was owned by NewsCorp? What if it was owned by GE? Would media companies be allowed different rights as to how they use their resources with regards to expressing/advocating their positions, political or otherwise, compared to non-media companies? Since MSNBC represents a part of GE that is smaller than the banking and industrial side of GE, should it be viewed and classified as a media company, or since it is owned by a non-news organization, should it be classified otherwise.
    What if Citizens United had just purchased a small media company, or even better, just a part of the media company? Then would thier advocacy through that entity be viewed by you as protected free speech?
    One thing I think that is interesting from the decision is that the free speech of the corporate entity derives from the free speech of the individuals that make up the corporation. But what does this mean in practice with the ban on foriegn influences? If one share of a company is owned by a non-US citizen, then is the free speech right of the corporate entity diminished in any way? If not, what if a significant number of shares is owned by foriegners? There must be some point before total foriegn ownership at which the corporate entity no longer can effectively claim to derive it’s right to free speech. What is this point?

    Nice blog. I will be monitoring it. I wish you had more information your About profile. Anyway, thanks

  12. Ooops, I just discovered your link. Sorry for saying I wish there was more in the “About” part of your blog!

  13. You write like SCOTUS is advocating bribes and such which is not the case. If people are sheep and will believe whatever is put in front of them, is that the fault of the corporation? Or would it not be the fault of the person who is too lazy to do the research?

    You want to control what people hear and from whom, it is not right.

    How about you liberals realize that the American people are not sheep and we can think for ourselves, as shown in Mass.

  14. What I dont understand is, we have a president who received almost a BILLION $$ in funding from unknown Local, overseas corp and private sources, and he has the Guts to tell us that NOW with this ruling the SCOTUS open the flood gates, is he for real????

  15. 2 U.S.C. Section 441e paragraph (b)

    (b) “Foreign national” defined
    As used in this section, the term “foreign national” means—
    (1) a foreign principal, as such term is defined by section 611 (b) of title 22, except that the term “foreign national” shall not include any individual who is a citizen of the United States; or
    (2) an individual who is not a citizen of the United States or a national of the United States (as defined in section 1101 (a)(22) of title 8) and who is not lawfully admitted for permanent residence, as defined by section 1101 (a)(20) of title 8.

    From section 1 above — following to the referenced section 611(b) of title 22:
    (b) The term “foreign principal” includes—
    (1) a government of a foreign country and a foreign political party;
    (2) a person outside of the United States, unless it is established that such person is an individual and a citizen of and domiciled within the United States, or that such person is not an individual and is organized under or created by the laws of the United States or of any State or other place subject to the jurisdiction of the United States and has its principal place of business within the United States; and

    (3) a partnership, association, corporation, organization, or other combination of persons organized under the laws of or having its principal place of business in a foreign country.

    2 U.S.C. Section 441e does include foreign corporations as specified in paragraph (3) above.

    • While the legal definitions that David Johns lists explain who is a “foreign national” or a “foreign corporation” the definitions do not include a U.S. corporation that is a wholly owned subsidiary of a foreign ceorporation, or even of a foreign government.

      A U.S. Corporation (incorporated in any of the 50 states under state law) would qualify under the provision (22 USC 611(b)(2)) “unless it is established that … such person is not an individual and is organized under or created by the laws of the United States or of any State or other place subject to the jurisdiction of the United States and has its principal place of business within the United States”.

      By the way, a corporation incorporated in State X is referred to as a “foreign corporation” when it sets up to do business in State Y in which it is not incorporated (where X and Y are states in the United States). Call your local Secretary of State and ask about that!

      So much for the argument that foreigners are excluded from spending whatever they want on any compaign for or against any candidate.

      • Joe – I don’t think you’ve thought this through. While it is possible for a US-based subsidiary of a foreign company to run issue ads supporting or attacking a candidate, they cannot do so with foreign funds. This is very specifically mentioned in 2 USC. Thus, your fear that a foreign company would open up a US Subsidiary just to pour money into an effort to influence US elections just isn’t practical – the veil would be pierced so easily that the likely outcome is jail time for the perpetrators and a huge black eye for the candidate they supported.

        Of course, legitimate US corporations making money in the US but organized as a subsidiary of a foreign company could indeed run ads with their US earnings subject to disclosure rules and funding restrictions based on earnings. I just don’t get why anyone would think that this opens a gaping, *new* hole through which foreign nationals can pour money.

        If you are just anti-corporation and want them muzzled, say so. But, clearly, George Soros has already proven that there are far easier ways for foreign entities to attempt to influence US elections.

        Indeed, after reading through this issue over the last few days in this and other forums, I’ve concluded that the SCOTUS ruling did *nothing* to give foreign entities any new tools to influence elections. The people who are attacking the SC just seem to be the same people who hate corporations and business interests in general. The whole “foreign influence” thing appears to be just a smokescreen.

  16. This has NOTHING to do with black and white. I’m willing to bet if Obama was white, you would examine this ruling differently. Obama is a fraud. The ruling was protecting our 1st amendment. If you don’t like freedom of Speech, then work on Corporate law.

    You can’t rewrite the Constitution just because it’s convenient for you. This ruling has nothing to do with Corporate or foreign money. This has to do with freedom of speech. How do you think Obama got elected? It was mostly foreign money.

  17. David Johnson – this is what I was looking for. It appears that there really is not a loophole that permits foreign corporations to spend $$ on political advertising. So, we may not like the “good and the bad” but the “ugly” just isn’t really there – the law forbidding it really hasn’t been touched.

    Also, to answer bobdevo’s question (statement, really) a foreign company cannot just “incorporate in each state” and then go and spend all the money they want. From what I was reading earlier, there are also restrictions that require any expenditures to come from income earned in the US as well as a raft of other requirements (e.g. attribution, etc.) that make the strategy you are outlining quite unlikely.

    As to whether this “opens up the floodgates” – you’ll want to keep in mind what we’re talking about here. Do you really suppose that McDonald’s or Boeing, etc. would ever take out a television ad saying “Vote for John Smith for Congress in November”? Think about it; if Smith loses anyway, they’ve just needlessly made a powerful enemy. Corporations simply don’t work that way. Not only that, large corporations are so diverse, I can’t imagine the board ever agreeing to have money spent on one party’s candidate – it would piss off half of the shareowners and may well piss off half of the board.

    And, no, I don’t believe for a minute that all the little guys are Democrats and all the big guys are cigar-chomping Republicans. That may work in cartoons but it doesn’t work that way in life.

    • so if say Toyota who owns Toyota USA, who makes a bunch of money in the US could in fact then air adds right? Of course a corporation might also create subsidiary with a different name, pay them for services rendered , and that entity then runs the adds under its own name. and considering how well the corporations have been managed of late, and how well informed shareholders are, I can see them not knowing any thing about how the money. after all, if a bank can pay almost all of what it earned as bonuses, why would stop if from doing advertising?

      • dw – I think that you are rightly worried about money influencing elections and I respect that. But it is sort of like the drug war – you are crying out for further erosion of basic rights in what I see as an obviously doomed effort. Right now, powerful interests lobby congress, shuttle money their way via PACS, and expect a quid pro quo. If you don’t think some of these interests are foreign, you may want to Google “George Soros” or “Clinton Campaign Contributions China” or “George Bush Campaign Contributions Oil”.

        Do you *really* think that striking down a formality such as the prohibition of direct corporate sponsorship “opens up a floodgate”?

        Look, either you believe that free speech is a right or you don’t. If you don’t – if you believe that the left/right wing (take your pick) can be trusted to appropriately monitor and filter the opinions that we’re permitted to hear – then, by all means keep throwing out straw men and pretending you are acting for the good of the country.

        Personally, I think people are wise enough to make up their own minds about what is in their own best interest. In particular, the *last* thing I am worried about is Toyota USA running political ads supporting Joe Schmoe for Congress. It isn’t likely to happen and would be a waste of money even if it did. What I *am* worried about is a government that grows so massive and that insinuates itself into so many spheres of life that powerful interests have no choice but to struggle for influence over the law. The bigger the pile, the more flies you get…

  18. If Obama and the democrats are so full of piss and vinegar about foreign corporations which I fully agree influencing our elections and our operating government then why dont the democrats simply revise 441 to include foreign corporations as equivalent to foreign nationals.

    After all the democrats in the house and senate could pass it, the republicans wouldnt dare defend representation of foreign corporations and we know Obama will sign it…if infact Obama cant simply change 441 out of executive order.

    • well he can’t change change the law. so it would be up to Congress to do so. and the likelihood of that is nill

  19. Why not just drop corporate spending for any political electioneering. IMO corporations are not people and have no place in the political field. This is one of the reasons that we are seeing so much corruption in DC. Yes, it is corruption no matter how these so-called leaders spin it. As for foreign influence, Obama should keep his mouth shut. It has already been proven that his 2008 campaign received money from foreign interests. Due to multi-national corporations the FEC should repeal all corporate donation laws and enact one the bans it completely. Problem solved. No need to waste more time and money with research, committees, discussions.

  20. Alright, just read this blog, I have been doing research, and this blog has helped. Cheers.

  21. [...] Citizens United v. FEC – The Good, the Bad and the Ugly In my first post about the Supreme Court’s decision in Citizens United v. FEC, I gave my readers the facts of the [...] [...]

  22. nice work. thanks

  23. Nice summary. Nonetheless, I still find most of the findings to be “ugly”.
    In 2012 we may all be welcoming our new president paid for by a generous contribution from Sony Corp.

  24. lynnrockets – It’s really that easy? Just skim a bit of profit off the top, buy a couple of ads and you’ll have the president you want? And here I thought that people could actually evaluate a message, consider the source, and make a rational decision. Silly me.

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