Dr. Riki Ott presents the graphic timeline that led to the Citizens United and (probably even worse) Speech Now decisions that gave victories to corporations over We the People.
What Led to Citizens United?
Setting the Scene: Corporations push for Constitutional Rights
Santa Clara County v. Southern Pacific Railroad, 118 U.S. 394 (1886)
The first Supreme Court case allegedly holding that corporations were protected as persons under the Fourteenth Amendment equal protection clause was based on false reporting. A well-connected railroad lawyer falsely wrote that the Court had made such a decision, in headnotes summarizing the decision. In fact, the Court had not made any constitutional decision, and had expressly told the litigants that they did not want to hear any constitutional arguments.
The decision was based on fences running along the railroad tracks which had incorrectly been included in the assessment of the railroad’s property. Therefore the tax assessment was incorrect. The decision had nothing to do with equal protection for corporations under the 14th Amendment, yet it was cited in later cases for that proposition.
Congress reacts with legislation.
Teddy Roosevelt called for legislation forbidding all contributions by corporations “to any political committee or for any political purpose.” He thought that directors should not be able to use stockholder money for political purposes. He was responding to the huge increase in corporate spending in political campaigns in the late 19th and early 20th Century.
The Tillman Act passed by Congress completely banned corporate contributions “in connection with” any federal election.
Congressional distaste for corporate spending on political campaigns continued. An amendment to the Tillman Act extended the prohibition on contributions to include “anything of value” and made acceptance of a corporate contribution as well as the giving of it a crime. A leading Senator characterized “the apparent hold on political parties which business interests and certain organizations obtain by reason of liberal campaign contributions” as “one of the great political evils of the time.”
Burroughs v. United States, 290 U.S. 534 (1934)
The Court upheld the amended statute stating that “the power of Congress to protect the election of the President and Vice President from corruption being clear, the choice of means to that end presents a question primarily addressed to the judgment of Congress.”
The Taft-Hartley Act of 1947 required corporations and unions to use segregated funds (PACs) for expenditures in connection with federal elections. 2 USC 441b.
Federal Election Commission Act (FECA) passed, establishing the Federal Election Commission (FEC). See Wikipedia’s summary.
Buckley v.Valeo, 424 U.S. 1(1976) upheld the creation of the FEC, and public funding of presidential elections.
The Court also drew a line between limits on contributions to political campaigns (permitted) and limits on expenditures by candidates (not permitted.) Contributions could be limited to eliminate the improper influence on candidates when they depend on large contributors. It leads to the appearance of legislating in their favor. Contributions are limited to safeguard the integrity of elections. Limits on expenditures curtail the ability to speak. All meaningful political conversation requires spending money. Therefore money equals speech.
Buckley concerned contributions and expenditures of individuals – none of the parties challenged the limits on corporations or unions. It concerned wealthy candidates who wanted to spend their own money on campaigns.
Austin v. Michigan Chamber of Commerce, 494 U.S. 652 (1990)
Political speech may be banned based on the speaker’s corporate identity. The Supreme Court decided that the State of Michigan could require corporations to use PACs funded by individual contributions when engaging in express electoral advocacy.
The Court said even “independent expenditures” – i.e., money spent without coordinating with a candidate or campaign – could be prohibited because corporations get advantages under state corporate law which allow them to amass huge amounts of money and the resources of the corporation’s treasury are not an indication of popular support for the corporation’s ideas. “The availability of these resources may make a corporation a formidable political presence even though the power of the corporation may be no reflection of the power of its ideas.” Michigan law is aimed at more than quid-pro-quo corruption. “Corporate wealth can unfairly influence elections when it is deployed in the form of independent expenditures just as it does in direct contributions which are also illegal under Michigan law – but not appealed here.”
“We hold that the State has articulated a sufficiently compelling rationale to support its restriction on independent expenditures by corporations.” And using PACs is a solution that is “narrowly tailored to achieve its goal.” Austin was later used as the model for the Bi Partisan Campaign Reform Act (BCRA) of 2002.
Report of Senate Investigation into campaign practices during the 1996 federal elections was published. Report concluded that loop holes had led to “a meltdown of the campaign finance system” and discussed potential reforms. “Soft money” – money that was not regulated by Federal law – was being used to give money to State parties for grass roots organizing,, recruitment and advertising. (“Hard money” is money given to a candidate or a campaign.) Soft money could include money given to a political party as long as it was not used for a candidate or a campaign, but for “party building.” Money could be spent to educate voters about issues, as long as the ads didn’t tell voters which candidates to vote for.
2002 Election Law Before Citizens United v. FEC (This is what we lost.)
Bipartisan Campaign Reform Act (BCRA) 2002
(McCain Feingold Act)
Senators Russ Feingold and John McCain negotiated for years and held numerous hearings establishing a record of more than 100,000 pages to create BCRA. They used a Supreme Court case as a template: Austin v. Michigan Chamber of Commerce, 494 U.S. (1990) which held that it was constitutional for the state of Michigan to require corporations to use segregated funds contributed by shareholders, officers and employees (PACs) for express candidate advocacy. BCRA was upheld in 2003 by the Supreme Court in McConnell v. Federal Election Commission 540 U.S. 93 (2003)
2 USC 441b (Paraphrased and condensed)
Corportions and Unions cannot give directly to candidates or political campaigns.
a)It is unlawful for a corporation or a labor union to give any money from its treasury – or thing of value – to a candidate in a federal election, or to a political convention or caucus. If a corporation coordinates with a candidate or a campaign, it is unlawful because it is giving a thing of value. (Therefore, corporations and unions must use PACs.) So-called “independent expenditures” are corporate political expenditures not given directly to a candidate or campaign and not coordinated with them.
It is unlawful for any candidate in a federal election to accept or receive any money – or thing of value – from a corporation or a labor union.
The people in corporations and unions can speak politically through PACs, which are separate legal entities.
b)Corporations and unions are authorized to organize and to solicit money for a “segregated fund” (PAC) to be used for political purposes.
Corporations can ask their shareholders, executive and administrative personnel (people who are paid on a salary basis – not hourly basis) and their families, to contribute money for the fund, but cannot ask people outside the corporation or union to donate. It is unlawful to use any threats, or for employees who choose not to contribute to suffer any job discrimination. Any employees being solicited must to told the political purpose of the fund, and they must be informed that they have the right to refuse to contribute.
Corporations and Unions – but not PACs – are prohibited from spending any money – even money that is “independent” and not coordinated with a candidate or campaign – on the eve of an election.
c) Rules relating to electioneering communications on the eve of an election:
Corporations and labor unions cannot use money from their treasuries to make “electioneering communications.” Electioneering communications mean any “broadcast, cable or satellite communication which refers to a clearly identified candidate for Federal Office” and is made within 30 days of a primary election or within 60 days of a general election.
Non-profit 501 (c)( 4) corporations, like Citizens United, can sometimes be exempt from these BCRA rules.
501(c)(4) corporations are exempt from these rules but only if they do not receive any funds from corporations or labor unions. 501(c)(4) corporations can, however, use their own “segregated fund” (PAC) money for electioneering communications. Citizens United lost the exemption because it accepted donations from corporations. It did, however, have its own well-funded PAC and could easily have funded the movie on Hillary Clinton if it had wanted to!
Internal Revenue Code, 26 USC 501(c)(4)
501(c)(4) corporations are tax exempt, but unlike 501(c)(3) corporations, donations to them are not tax deductible. They are operated for social welfare purposes and must use all of their net earnings for charitable, educational or recreational purposes. They may participate in political campaigns and lobby for legislation as long as that is not their main purpose. They are not required to disclose their donors publically.
McConnell v. FEC, 540 U.S. 93 (2003) (Senator McConnell sued the FEC arguing BCRA was unconstitutional)
The Court upheld BCRA, in a majority decision written by Justices O’Connor and Stevens, joined by Justices Breyer, Souter and Ginsburg. Therefore, there could be no for-profit corporate funding of election eve broadcasts that mention candidates and convey unmistakable election messages.
The Court found that more than simple quid-pro-quo corruption was at stake. BCRA was passed to curb undue influence on an office holder’s judgment. Large contributions lead to access and influence. Justice Kennedy, Rehnquist, Scalia and Thomas dissented. Kennedy wanted to limit it to only quid-pro-quo corruption.
FEC v. Wisconsin Right to Life Inc, 551 U.S. 449 (2007)
Chief Justice Roberts narrowed the definition of electioneering communication to ones that are “susceptible to no reasonable interpretation except as an appeal for a vote for or against a candidate.”
Citizens United v. FEC, 588 US 50 (2010)
On January 21, 2010 the US Supreme Court, in Citizens United v. FEC, overturned longstanding precedent limiting corporate expenditures in our elections. The Court gutted the 2002 Bipartisan Campaign Reform Act (BCRA), also known as McCain Feingold for its Senate Sponsors. The majority opinion stated that under the First Amendment, the government cannot discriminate against a speaker based on the speaker’s identity as a corporation. BCRA had produced an elegant solution to the question of who can speak for a corporation. The shareholders, corporate officers, and staff choosing to contribute to a political action committee, could form a PAC to speak for the corporation. The PAC system was made obsolete by Citizens United because corporations can now spend their own money without setting up a PAC. The decision also stated that “independent expenditures, including those made by corporations, do not give rise to the appearance of corruption.” “Independent expenditures” mean money spent on Ads and other projects but not coordinated with the candidate or the candidate’s campaign.
All the realities of political fund raising, the arguments about undue influence and access, and the appearance of corruption were made obsolete by Citizens United. Only money for votes is corruption, and if money is not given directly to a candidate or the candidate’s campaign, there is no quid pro quo corruption as a matter of law, according to Citizens United. The decision is based on the idea that money is speech, and therefore the First Amendment is violated if money is curtailed in elections. Buckley v. Valeo decided in 1976 first equated money and speech in a case involving limits on campaign expenditures by wealthy candidates who wanted to spend their own money on their campaigns. The Court stated that limits on expenditures curtailed the ability to speak. All meaningful political conversation requires spending money. Therefore money equals speech. If money equals speech, then Big Money controls our elections and our democracy.
The Court overruled Austin and McConnell despite the fact that the Court had decided McConnell a mere six years earlier and upheld BCRA! Although the ban on corporations giving money directly to candidates and campaigns still remains, PACs are obsolete because they place unconstitutional limits on corporate speech. Corporations have a first amendment right to make uncoordinated expenditures any time they want to.
2010 Aftermath of Citizens United: the Birth of Super PACs
SpeechNow.org v. FEC, 599 F.3d 686 (D.C. Circuit, 2010)
Relying on the Citizens United case, the DC Circuit Court of Appeals decided March 26, 2010 in SpeechNow.org v. FEC that if the government could not limit independent corporate expenditures based on the anti-corruption rationale, then it could not limit contributions to political committees such as SpeechNow.org that want to fund independent expenditures. Super PACs were born. The case was not appealed to the Supreme Court. The only restraint on political spending by either corporations or wealthy individuals is that the money must be spent on ads or projects that are not coordinated with the candidate or the candidate’s campaign.
For more details on this case, read on.
David Keating is executive director of the Club for Growth. Its mission is to promote “economic freedom” by promoting a flat income tax (the same percentage on all income levels) and elimination of the income tax on corporations, dividends and capital gains.
He crafted SpeechNow.org, an unincorporated, section 527 organization designed to challenge the Federal Election Campaign Act (FECA) and the Bipartisan Campaign Reform Act (BCRA) on First Amendment grounds. This was before Citizens United was decided.
Under federal election law a “Political Committee” is any committee, club, association or other group of persons that receives contributions or makes expenditures of more than $1,000 in a year for political purposes. 2 U.S.C. 431(4) Political Committees can only accept up to $5,000 per calendar year from any individual. 2 U.S.C.441a(a)(1)(C). Individuals are also limited to contributing $69,900 every two years to all political committees. 2 U.S.C. 441a(a)(3). (The limit stated in the law is $57,500, but that amount is indexed and was $69,900 at the time of the case.) The law put limits on wealthy people getting together to pool resources and fund independent expenditures.
David Keating deliberately crafted SpeechNow.org to avoid problems and arguments that had arisen in other cases. People investing were told exactly the kind of right-wing, Republican, anti-tax advertisements the organization would fund, therefore there could be no arguments that the “shareholders’ interests” were being violated, arguments that had been made in other attacks on BCRA and FECA. SpeechNow.org’s bylaws did not permit it to take any contributions from corporations, unions, or federal contractors, and it could not coordinate with any candidate or campaign.
The plaintiffs included people who wanted to give more than $5,000 to Speech Now.org.
SpeechNow.org asked the Federal Election Commission for an opinion on whether its members could give more than $5,000 but the FEC lacked a quorum and could not give an opinion. The General Counsel gave a draft opinion that they could violate federal law if contributors gave more than $5,000 a year.
On the basis of the draft opinion, SpeechNow.org filed a complaint in Federal District Court. It argued that the federal government had no legitimate interest in regulating contributions to groups that will make independent expenditures.
The District Court certified the constitutional questions to the District of Columbia Circuit and before the case was heard, Citizens United was decided. The DC Circuit Court said Citizens United resolved the appeal and gave David Keating the opinion he wanted. As applied to SpeechNow.org, the contribution limits violate the first amendment. 599 F.3d 686 (D.C.Circuit, 2010)
The Court concluded that if the government could not limit independent corporate expenditures based on the anti-corruption rationale, (Citizens United held that “independent expenditures, including those made by corporations, do not give rise to corruption or the appearance of corruption.”) then it could not limit contributions to entities such as SpeechNow.org that want to fund such expenditures. The DC Circuit Court held that limits on contributions to political committees for independent expenditures violate the first amendment.
All the realities of political fund raising, the arguments about undue influence and access, and the appearance of corruption, were made obsolete by Citizens United. Only money for votes is corruption, and if money is not given directly to a candidate or the candidate’s campaign, there is no quid pro quo corruption, as a matter of law, according to Citizens United.
The D.C. Appeals Court did, however, uphold the rules on disclosure and the reporting requirements in the interest of providing the electorate with information. Therefore SpeechNow.org must register with the FEC as a political committee, make quarterly or monthly reports, and must keep records including the name and address of any person who makes a donation over $50. It must also keep records on the date, amount and recipient of its expenditures.
The FEC did not appeal the decision to the Supreme Court, so wealthy individuals can now give unlimited amounts to political committees designed to promote their interests.
These Super PACs have become legal at a time when “The richest 1 percent of households earned as much each year as the bottom 60% put together; they possessed as much wealth as the bottom 90%; and with each passing year, a greater share of the nation’s treasure was flowing through their hands and into their pockets.” (The Atlantic, Can the Middle Class be Saved, pages 60-61 by Don Peck, September, 2011) See, also the same statistics in Rebuild the American Dream by Deepening our Democracy.
Both Republicans and Democrats have established Super PACs that offer both disclosure and non-disclosure of donor’s identity by using 527 organizations which must disclose donors, and 501(c)(4) organizations which are not required to disclose donors. For example:
Republicans – Founded by Karl Rove
American Crossroads – 527 organization
Crossroads GPS – 501(c)(4) corporation
Democrats – Founded by former Obama advisors, Bill Burton and Sean Sweeney
Priorities USA Action – 527 organization
Priorities USA – 501(c)(4) corporation