rnc argues for coporate donations to fed candidates

8/3/2019 RNC Argues For Coporate Donations To Fed Candidates

1/45

No. 11-4667

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

________________________

UNITED STATES OF AMERICAAppellant

v.

WILLIAM P. DANIELCZYK, JR. and EUGENE R. BIAGIDefendants-Appellees

________________________

ON APPEAL FROM THE UNITED STATES DISTRICT COURTFOR THE EASTERN DISTRICT OF VIRGINIA AT ALEXANDRIA

(The Honorable James C. Cacheris, District Judge)________________________

BRIEF OFAMICUS CURIAE FOR THE

REPUBLICAN NATIONAL COMMITTEE IN

SUPPORT OF THE DEFENDANTS-APPELLEES

AND URGING AFFIRMANCE________________________

John R. Phillippe, Jr.Attorney of Record

Chief Counsel

Gary LawkowskiRepublican National Committee310 First Street, S.E.

Washington, D.C. 20003Phone: (202) 863-8638

Counsel forAmicus Curiae


2/45

i

CORPORATE DISCLOSURE STATEMENT

The Republican National Committee is an unincorporated entity; it is not a

publicly held corporation, nor is it a similarly situated entity which issues public

shares. The Republican National Committee does not have a parent company, nor

does any publicly held corporation have any form of ownership over it. The

Republican National Committee is not aware of any publicly held entity that has a

direct financial interest in this case.

/s/ John R. Phillippe, Jr.

John R. Phillippe, Jr.Republican National Committee

310 First Street, S.E.Washington, D.C. 20003

Phone: (202) 863-8638

January 10, 2012


3/45

ii

TABLE OF CONTENTS

Page

CORPORATE DISCLOSURE STATEMENT ......................................................... i

TABLE OF AUTHORITIES ................................................................................... iii

STATEMENT OF INTEREST .................................................................................. 1

SUMMARY OF THE ARGUMENT ........................................................................ 2

I. The District Court was Correct to Hold thatBeaumontMay Be Distinguishedfrom the Case at Hand ............................................................................................ 4

II. Citizens Unitedand Other Recent Decisions have EvisceratedBeaumontsHistorical Prologue ................................................................................................. 7

A. Contribution Limits Must be Closely Drawn to a Sufficiently ImportantGovernmental Interest ......................................................................................... 7

B. Citizens Unitedhas UndercutBeaumonts Historical Prologue ................... 8

III. The Complete Ban on Corporate Contributions is Not Closely Drawn to aLegitimate Anti-Circumvention Interest...............................................................13

A. The Government Fails to Show that Anti-Circumvention is a SufficientGovernmental Interest .......................................................................................14

B. The Ban on Corporate Contributions is Over-Inclusive .............................22

C. The Corporate Contribution Ban Artificially Disadvantages Political Partyand Candidate Committees ................................................................................27

CONCLUSION ........................................................................................................31


4/45

iii

TABLE OF AUTHORITIES

Cases

Agostini v. Felton, 521 U.S. 203 (1997) .................................................................... 5

Arizona Free Enterprise Club's Freedom Club PAC v. Bennett, 131 S.Ct. 2806

(2011) ...................................................................................................................... 7

Austin v. Michigan Chamber of Commerce, 494 U.S. 652 (1990) ............................ 9

Buckley v. Valeo, 424 U.S. 1 (1976) ................................................................ passim

Citizens United v. FEC, 130 S.Ct. 876 (2010) ................................................. passim

Davis v. FEC,554 U.S. 724 (2008) ........................................................................... 8

FEC v. Beaumont, 539 U.S. 146 (2003) .......................................................... passim

FEC v. Colorado Republican Fed. Campaign Comm., 533 U.S. 431 (2001) ........13

FEC v. Natl Conservative Political Action Comm., 470 U.S. 480 (1985) .........9, 10

FEC v. National Right to Work Comm., 459 U.S. 197 (1982) ......................... 11, 13

First National Bank of Boston v. Bellotti, 435 U.S. 765 (1978) ..............................13


5/45

iv

Green Party of Connecticut v. Garfield, 616 F.3d 189 (2d Cir. 2010)...................... 9

McConnell v. FEC, 540 U.S. 93 (2003) ..................................................................... 7

Monitor Patriot Co. v. Roy, 401 U.S. 265 (1971). .................................................... 2

Ognibene v. Parkes, -- F.3d. -- , 2011 WL 6382451 (2d Cir. 2011) ...................9, 10

Preston v. Leake, 660 F.3d 726 (4th Cir. 2011)......................................................... 7

Randall v. Sorrell, 548 U.S. 230 (2006) ..............................................................8, 30

Rodriguez de Quijas v. Shearson/American Express, Inc. , 490 U.S. 477 (1989) ..... 5

SpeechNow.org v. Federal Election Commission, 599 F.3d 686 (D.C. Cir. 2010) 10,

17, 27

United States v. Danielczyk, 791 F.Supp.2d 513 (E.D.Va. 2011) .................. 2, 5, 12

Wisconsin Right to Life v. Barland, No. 10-C-0669 (7th Cir. 2011) ......................... 9

Statutes

2 U.S.C. 431 ............................................................................................................ 1


6/45

v

2 U.S.C. 441b ................................................................................................ passim

2 U.S.C. 431(11) ...................................................................................................12

2 U.S.C. 441a(a) ....................................................................................................12

26 U.S.C. 1361(b)(1).............................................................................................25

26 U.S.C. 503(b) ..................................................................................................... 6

26 U.S.C. 1361-1376 ..........................................................................................25

Other Authorities

Bennett Roth,A Family Comes to Rep. Youngs Defense, Roll Call, May 3, 2011,

http://www.rollcall.com/issues/56_115/don-young-legal-defense-fund-chouest-

205267-1.html .......................................................................................................21

Bradley A. Smith, Campaign Finance Reform: Searching for Corruption in all the

Wrong Places, 2003 Cato Sup. Ct. Rev. 187 (2003) ............................................18

Brief Amici Curiae for Campaign Legal Center and Democracy 21 in Support ofAppellant and Urging Reversal, United States v. Danielczyk, No. 11-4667 (4th

Cir. 2011) ..........................................................................................................6, 20


7/45

vi

Brief for the United States, United States v. Danielczyk, No. 11-4667 (4th Cir.

2011) .................................................................................................... 6, 19, 20, 22

Dan Eggen,Are Iowa Caucuses Harbinger of the Super PAC Era?, TheWashington Post, Jan. 3, 2012, http://www.washingtonpost.com/politics/are-

iowa-caucuses-harbinger-of-the-super-pac-

era/2012/01/02/gIQA8zW7YP_story.html ...........................................................30

David Leventhal & Kenneth P. Vogal, Super PACs Go Stealth Through First

Contests, Politico, Dec. 30, 2011,

http://www.politico.com/news/stories/1211/70957.html .....................................30

David Primo,It's Time To Bring Some Sanity To Campaign Finance Laws, Forbes,

Dec. 15, 2011, http://www.forbes.com/sites/realspin/2011/12/13/its-time-to-

bring-some-sanity-to-campaign-finance-laws/ .....................................................21

Donor Demographics: Election Cycle 2008, Center for Responsive Politics (2009),

http://www.opensecrets.org/bigpicture/donordemographics.php?cycle=2008&filter=A ......................................................................................................................18

Entrance Polls: Iowa Republicans, CNN, Jan. 3, 2012,

http://www.cnn.com/election/2012/primaries/epolls/ia .......................................23

Fear Factor: Lobbying and Campaign Finance Reforms in the Nations Capital,

The Metropolitan Corporate Counsel (2006),

http://www.metrocorpcounsel.com/pdf/2006/May/57.pdf ...................................18

FEC, Conciliation Agreement: LifeCare Holdings, Inc.; LifeCare Management

Services, LLC, MUR 5398 (June 8, 2005) ...........................................................16


8/45

vii

FEC, Contribution Limits 2011-2012,

http://www.fec.gov/pages/brochures/contriblimits.shtml ....................................16

H. Comm. On Ethics, 112th Cong.,In the Matter of Allegations Relating toRepresentative Don Young (Comm. Rep. 2011) ..................................................21

Historical Elections: The Money Behind the Elections, Center for Responsive

Politics, http://www.opensecrets.org/bigpicture/index.php ..................................28

Indictment, United States v. Danielczyk, 788 F.Supp. 2d 472 (E.D.Va. 2011) (No.

1:11cr85 (JCC)) ...................................................................................................... 2

Kenneth P. Vogal & Alex Isenstadt, Super PACs Giving Party Committees a Run

for Their Money, Politico, Oct. 28, 2011

http://www.politico.com/news/stories/1011/67046.html .....................................29

Kenneth P. Vogel,Rick Perry Boosted By Mysterious Corporate Cash, PoliticoDec. 30, 2011, http://www.politico.com/news/stories/1211/70972.html ............20

Kyle Dropp,Early Exit Polls: Top Issues this Election, The Washington Post, Nov.

2, 2010, http://voices.washingtonpost.com/behind-the-

numbers/2010/11/early_exit_polls_top_issues_th.html .......................................23

M. Keightley, Congressional Research Service Report for Congress,BusinessOrganizational Choices: Taxation and Responses to Legislative Changes (2009)

...............................................................................................................................24


9/45

viii

Maggie Haberman,Mysterious Mitt Romney Donor Comes Forward, Politico,

Aug. 26, 2011, http://www.politico.com/news/stories/0811/60776.html ...........20

Nicholas Confessore, Outside Groups Eclipsing G.O.P. as Hub of Campaigns,N.Y. Times, Oct 29, 2011 at A1,

http://www.nytimes.com/2011/10/30/us/politics/outside-groups-eclipsing-gop-

as-hub-of-campaigns-next-year.html?_r=1&pagewanted=all ..............................29

Outside Spending, Center for Responsive Politics,

http://www.opensecrets.org/outsidespending/index.php ......................................28

Paul Blumenthal, Super PACs and Secret Money: The Unregulated Shadow

Campaign, The Huffington Post, Sept. 9, 2011,

http://www.huffingtonpost.com/2011/09/26/super-pacs-secret-money-campaign-

finance_n_977699.html ................................................................................. 27, 30

Paul Blumenthal, Super PACs Dominate Iowa Caucus, Helping Mitt Romney Run

Ahead, The Huffington Post, Dec. 31, 2011,http://www.huffingtonpost.com/2011/12/31/super-pacs-iowa-caucus-mitt-

romney_n_1176741.html?view=print&comm_ref=false .....................................29

R. Sam Garrett, Congressional Research Service Report for Congress, The State of

Campaign Finance Policy: Recent Developments and Issues for Congress (2010)

...............................................................................................................................28

Republican National Committee, Complaint Against Obama for America, Oct. 6,

2008,

http://i.cdn.turner.com/cnn/2008/images/10/06/Complaint_against_Obama_for_

America.pdf ..........................................................................................................21


10/45

ix

Supplemental Brief for Chamber of Commerce of the United States of America as

Amicus Curiae, Citizens United v. FEC, 130 S.Ct. 876 (2010) (No. 08-205) .....24

The Federalist No. 51 (James Madison) ..................................................................22

The Rules of the Republican Party, Rule No. 1: Organization of the Republican

National Committee (2010) .................................................................................... 1

Tom Hamburger & Melanie Mason, Super PACs Are Showing Their Power, The

L.A Times, Jan. 1, 2012, http://articles.latimes.com/2012/jan/01/nation/la-na-

money-election-20120101 ....................................................................................31

Regulations

11 C.F.R. 100.10 ...................................................................................................12

11 C.F.R. 103.3(b) ......................................................................................... 14, 15

11 C.F.R. 104.3(b)(3)(vii)(A), (C) ......................................................................17

11 C.F.R. 104.4(a),(b), (c) ..................................................................................17

11 C.F.R. 104.18 ...................................................................................................15

11 C.F.R. 109.10(b) ..............................................................................................17


11/45

x

11 C.F.R. 110.1 ........................................................................................... 6, 12, 25

64 Fed. Reg. 37397-01 (1999) .................................................................................26

Legal Expense Fund Regulations 3.2 in H. Comm. On Ethics, 112th Cong.,In

the Matter of Allegations Relating to Representative Don Young, Appendix Cat 3

(Comm. Rep. 2011) ..............................................................................................25

Legal Expense Fund Regulations 3.3 inId...........................................................26


12/45

1

STATEMENT OF INTEREST

Amicus curiae the Republican National Committee (RNC) is an

unincorporated entity that is responsible for the general management of the

Republican Party. The Rules of the Republican Party, Rule No. 1: Organization of

the Republican National Committee at 1 (2010). The RNC has members and

actively participates in federal, state, and local campaigns and elections in all fifty

states; is regulated as a national political party committee under the Federal

Election and Campaign Act, 2 U.S.C. 431; and is subject to the limitations and

regulations contained therein, including 2 U.S.C. 441b(a)s prohibition on

contributions by corporations. While submitting a brief in support of donors to a

Democratic presidential campaign falls out the scope of normal RNC activities,

441(b)saffront to such donors constitutional rights carries major implications for

all federal candidates and party committees. By virtue of its status as an entity

subject to the limits and prohibitions in question and its close connection with

candidates for federal office who are subject to the law in question, the RNC has

demonstrated its interest in the law at issue in this case.

All parties have consented to the filing of this brief. This brief was not

composed in whole or in part by counsel for any party to this case. Funding for this

brief derives solely from the RNC; no money was contributed by a party, their

counsel, or any other person, to fund its preparation and/or submission.


13/45

2

SUMMARY OF THE ARGUMENT

In Citizens United v. Federal Election Commission, 130 S.Ct. 876, 904

(2010), the Supreme Court stated [i]f the First Amendment has any force, it

prohibits Congress from fining or jailing citizens, or associations of citizens, for

simply engaging in political speech. Yet, that is precisely what is happening in

this case. The Defendants-Appellees face imprisonment under Count 4 of the

indictment simply for seeking to engage in political speech through the corporate

form. Indictment at 15, United States v. Danielczyk, 788 F.Supp. 2d 472 (E.D.Va.

2011) (No. 1:11cr85 (JCC)). Such criminalization of political expression strikes at

the heart of our nations history of open political discourse and rich tradition of

recognizing that the First Amendment has its fullest and most urgent application

precisely to the conduct of campaigns for political office.Monitor Patriot Co. v.

Roy, 401 U.S. 265, 272 (1971). In vindicating the right to political expression, the

District Court in United States v. Danielczyk, 791 F.Supp.2d 513 (E.D.Va. 2011)

was correct to distinguishDanielczykfrom Federal Election Commission v.

Beaumont, 539 U.S. 146 (2003), providing a narrow avenue for associations of

individuals in the corporate form to exercise their First Amendment rights.

Contributions from for-profit entities may be rationally distinguished from

those from non-profits. Under current Federal Election Commission (FEC)

regulations, contributions by permitted non-natural persons are attributed to


14/45

3

individuals and count against individual contribution limits based on the division

of profits within the entity. For-profit corporations have discernible owners and

profit distributions which may be relied upon to attribute contributions to

individuals and prevent the use of corporations as conduits to circumvent

recognized contribution limits. Non-profit corporations, by definition, do not have

owners or profits to distribute, rendering attribution more difficult. While the

resulting state of affairs may appear illogical, it is far more rational and

constitutionally sound than the current regulatory regime. In the absence of further

action by the Supreme Court, this distinction serves to reconcile the opposing

pronouncements of the Court inBeaumontand Citizens United.

In its historical prologue,Beaumontidentified three prongs historically

justifying distinctions between corporations and individuals: first, that corporate

contributions pose a threat ofquid pro quo corruption through the use of large

amounts of wealth accumulated in the corporate form and amassed into political

war chests; second, to prevent corporations from making contributions to

candidates and causes with which its shareholders may disagree; and third, to

prevent the use of the corporate form as a conduit to circumvent recognized

contribution limits. Citizens Unitedclearly rejects the political war chest and

shareholder protection arguments, and along with other recent decisions, calls into

question the sufficiency of anti-circumvention.


15/45

4

Although anti-circumvention was not addressed directly in Citizens United,

the surrounding facts make it difficult to see how 441bs total ban on corporate

donations is closely drawn to anti-circumvention and anti-circumvention alone.

The government fails to show that circumvention is a sufficient threat to the

political system and fails to account for the role political actors play in protecting

against violations of campaign finance regulation. Even assuming anti-

circumvention is a sufficiently important governmental interest, the complete ban

both is over-inclusive to this aim and artificially disadvantages political party and

candidate committees. It is over-inclusive because it bans all corporate donations

without regard to the ability of corporate donors to attribute their donations to

individuals. It artificially disadvantages political party and candidate committees

by forcing them to rely on aggregating small-dollar donations from individuals

while allowing other political actors, such as independent-expenditure-only

political action committees, to receive unlimited corporate donations.

ARGUMENT

I. The District Court was Correct to Hold thatBeaumont May BeDistinguished from the Case at Hand

The Supreme Court has observed that [a]dvocacy of the election or defeat of

candidates for federal office is no less entitled to protection under the First

Amendment than the discussion of political policy generally or advocacy of the

passage or defeat of legislation.Buckley v. Valeo, 424 U.S. 1, 48 (1976). [I]t is


16/45

5

inherent in the nature of the political process that voters must be free to obtain

information from diverse sources in order to determine how to cast their votes,

and therefore speech from corporations has value and adds to the political

marketplace of ideas. Citizens United, 130 S.Ct. at 899. Section 441b categorically

denies corporations the cherished ability to make even a symbolic expression of

support in the form of a campaign contribution.Buckley, 424 U.S. at 21.

The District Court was correct to conclude that the holding inBeaumontwas

limited by its own terms to the narrow question of whether or not there is a

constitutionally mandated exception to 441b for non-profit corporations.

Danielczyk, 791 F.Supp.2d at 516. InBeaumont, the Court was clear about what it

held, stating [w]e holdthat applying the prohibition [on corporate campaign

donations] to non-profit advocacy corporations is consistent with the First

Amendment.Beaumont, 539 U.S. at 149 (emphasis added). While the Court of

Appeals should follow the case which directly controls where one is present, the

Court of Appeals is free to distinguish where there is no such case which directly

controls.Agostini v. Felton, 521 U.S. 203, 237 (1997) (quotingRodriguez de

Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 484 (1989)). This is

particularly true where such a distinction is rational and supported by recent

Supreme Court precedent. In the case at hand, in the absence of clarification from

the Court, an appropriate distinction was drawn by the District Court that is more


17/45

6

consistent with recent Supreme Court jurisprudence while accounting for the

Courts specific holding inBeaumont.

Contrary to the governments assertion that non-profit corporations do not

differ in any material way from for-profit corporations, there are a number of

differences which support the district courts holding. See, Brief for the United

States at 19-20, United States v. Danielczyk, No. 11-4667 (4th Cir. 2011). Most

obviously, as the brief in amicus curiae in support of the Government concedes, by

definition, non-profit entities have no owners and no profits to allocate or adjust

amongst shareholders. 26 U.S.C. 503(b); Brief Amici Curiae for Campaign Legal

Center and Democracy 21 in Support of Appellant and Urging Reversal at 30 n.12,

United States v. Danielczyk, No. 11-4667 (4th Cir. 2011). For-profit corporations

do. Under current campaign finance regulation, certain non-natural persons

(partnerships and limited liability corporations that elect to be taxed as

partnerships) are permitted to make political contributions. 11 C.F.R. 110.1. In

order to prevent circumvention, contributions made by partnerships are attributed

according to each partners share of the organizations profits, or if not all partners

wish to donate, on another basis provided the profits of the contributing partner(s)

and only the contributing partner(s) are adjusted accordingly. 11 C.F.R. 110.1(e).

For-profit corporations have owners and a division of profits which may serve as a

baseline for the attribution of corporate contributions to individuals, preventing


18/45

7

individuals from using corporations as conduits to circumvent individual

contribution limits. While it may seem counterintuitive to provide disparate

treatment to non-profit and for-profit corporations, there is a rational, defensible

distinction between the two which seeks to maximize speech.1

II. Citizens Unitedand Other Recent Decisions have EvisceratedBeaumonts Historical Prologue

A.Contribution Limits Must be Closely Drawn to a SufficientlyImportant Governmental Interest

In order to be valid, a limit on political contributions must be closely drawn

to a sufficiently important governmental interest.Arizona Free Enterprise Club's

Freedom Club PAC v. Bennett, 131 S.Ct. 2806, 2817 (2011); McConnell v. FEC,

540 U.S. 93, 231-232 (2003); Preston v. Leake,660 F.3d 726, 735 (4th Cir. 2011).2

1 The RNC contends thatBeaumontshould be overruled in light ofCitizensUnited, and that the distinction between non-profit and for-profit corporations doesnot justify harsher resrictions on the former, but restricting the free speech rights ofthe latter is consitutionally infirm regardless of the treatment of the former.2 In the absense of further Supreme Court clarification, this Court of Appeals hasindicated that the closely-drawn standard remains viable, and in recognition of that

judgment, the closely-drawn standard has been applied here. Preston, 660 F.3d at735. The closely-drawn standard derives from the contribution/expendituredistinction inBuckley, and along with that distinction, should be overturned.

Buckley, 424U.S. at 25. There is no rational reason to conclude that donationsaggregated to support communications by independent-expenditure-onlycommittees, restrictions on which are subject to strict scrutiny, are more expressivethan donations pooled to support speech by a candidate or political committee,restrictions on which are subject to only heightened scrutiny. To the extent thatthere are compelling reasons justifying differing treatments of contributions toindependent-expenditure-only committees and candidate/party committees, the


19/45

8

The Court has recognized that under the closely-drawn standard, there is still a

floor below which legislators cannot go in regulating contributions. InRandall v.

Sorrell, 548 U.S. 230, 248 (2006), the Court struck down Vermonts contribution

limits as impermissibly low, concluding that [a]t some point the constitutional

risks to the democratic electoral process [of contribution limits that are too low]

becomes too great. See also,Davis v. FEC,554 U.S. 724, 737 (2008) (we have

held that limits that are too low cannot stand). InRandall, the Court provided

some guidance for lower courts evaluating contribution limits, stating that courts,

including appellate courts, must review the record independently and carefully

with an eye toward assessing the statutes tailoring, that is, toward assessing the

proportionality of the restrictions.Randall, 548 U.S. at 249. In determining

whether a contribution ban is closely drawn, the court must look to see if the

statute is proportional to its objectives.

B.Citizens Unitedhas Undercut Beaumonts Historical PrologueThe Court inBeaumontidentified three objectives of 441bs ban on

corporate contributions: corruption or the appearance thereof through the

accumulation of political war chests, protecting shareholders from having

corporate funds disbursed to candidates they may not support, and preventing the

circumvention of valid contribution limits.

proper place to make that determination is as part of strict scrutiny analysis, not inselecting the standard of review.


20/45

9

Following the Courts rejection of distortion in the political marketplace in

Citizens United, preventing quid pro quo corruption or the appearance thereof is

the only governmental interest sufficient to justify restrictions on political speech.

Citizens United, 130 S.Ct. at 909 (overruling Austin v. Michigan Chamber of

Commerce, 494 U.S. 652 (1990));FEC v. Natl Conservative Political Action

Comm., 470 U.S. 480, 496-497 (1985);Buckley, 424 U.S. at 25-29. In Ognibene v.

Parkes, -- F.3d. -- , 2011 WL 6382451 at *8 (2d Cir. 2011), the Court of Appeals

for the Second Circuit appears to have disregarded this holding, identifying

improper or undue influence as a distinct and sufficient form of political

corruption. To the extent that improper and undue influence differs from quid pro

quo corruption or the appearance thereof, Judge Livingston correctly observes in

her concurrence that recent decisions by the Supreme Court and this Court clearly

foreclose this . . . determination. Ognibene, at *18 (Livingston, J, concurring in

part and concurring in the judgment). In Green Party of Connecticut v. Garfield,

616 F.3d 189 (2d Cir. 2010), the Court of Appeals for the Second Circuit held that

influence and access, without more, are not sinister in nature, but are part of

representative government. Ognibene, at *19 (Livingston, J, concurring in part

and concurring in the judgment) (quoting Green Party of Connecticut, 616 F3d at

207). In Wisconsin Right to Life v. Barland, No. 10-C-0669 at *25 (7th Cir. 2011),

the Seventh Circuit concluded . . . preventing actual or apparent quid pro quo


21/45

10

corruption is the only interest the Supreme Court has recognized as sufficient to

justify campaign-finance restrictions (emphasis in the original), and in

SpeechNow.org v. Federal Election Commission, 599 F.3d 686, 692 (D.C. Cir.

2010) the court determined that [t]he Supreme Court has recognized only one

interest sufficiently important to outweigh the First Amendment interests

implicated by contributions for political speech: preventing corruption or the

appearance of corruption. The courts ruling in Ognibene is out of sync with the

Supreme Court, the other Courts of Appeals, and its own jurisprudence; the only

legitimate purpose of contribution limits or bans is to prevent quid pro quo

corruption or the appearance thereof.

To the extentBeaumontidentified an inherent corruption in corporate

donations, it did so through constitutionally impermissible warnings regarding the

dangers of aggregated wealth in the corporate form. When the Court in Beaumont

spoke ofquid pro quo corruption, it did so in the context of the public interest in

restrict[ing] the influence of political war chests funneled through the corporate

form to preven[t] corruption or the appearance of corruption.Beaumont, 539

U.S. at 154 (quotingFEC v. Natl Conservative Political Action Comm.,470 U.S.

480, 496-497, 500-501 (1985)). This argument traced its lineage to concerns that

substantial aggregations of wealth amassed by the special advantages which go

with the corporate form of organization should not be converted into political war


22/45

11

chests which could be used to incur political debts from legislators.Beaumont,

539 U.S. at 154 (quoting FEC v.Natl Right to Work Comm., 459 U.S. 197, 207

(1982)).

Citizens Uniteddoes not expressly evaluate the merits of these assertions,

noting that contribution limits were not squarely before the Court; however, the

language the Court uses in describing this language reveals deep skepticism.

Citizens United, 130 S.Ct. at 909. According to the Court, the Government cannot

restrict political speech based on the speakers corporate identity.Bellotti could not

have been clearer . . . . Citizens United, 130 S.Ct. at 902. As the Court in Citizens

Unitedobserves, theNational Right to Work Committee Courtin formulating the

idea that political war chests pose a danger of corruption was [s]eizing on an aside

inBellottis footnote, an aside that is supported only by a law review student

comment, which misinterpretedBuckley. Citizens United, 130 S.Ct. at 909.

Accordingly, [r]eferences to massive corporate treasuries should not mask the real

operation of this law, in this case as in Citizens United, to ban political speech.

Citizens United, 130 S.Ct. at 907. Aggregations of wealth or political war chests

are not quid pro quo corruption, and they cannot justify restrictions on political

speech.

This proposition is reinforced by the presence of contribution limits.

Contribution limits break the hypothesized link between substantial aggregations
https://web2.westlaw.com/find/default.wl?returnto=BusinessNameReturnTo&docname=CIK(LE00223525)&rp=%2ffind%2fdefault.wl&sv=Split&rs=WLW11.10&db=BC-COMPANYSRBD&findtype=l&fn=_top&mt=Westlaw&vr=2.0&pbc=1E218C2E&lvbp=Thttps://web2.westlaw.com/find/default.wl?returnto=BusinessNameReturnTo&docname=CIK(LE00223525)&rp=%2ffind%2fdefault.wl&sv=Split&rs=WLW11.10&db=BC-COMPANYSRBD&findtype=l&fn=_top&mt=Westlaw&vr=2.0&pbc=1E218C2E&lvbp=Thttps://web2.westlaw.com/find/default.wl?returnto=BusinessNameReturnTo&docname=CIK(LE00223525)&rp=%2ffind%2fdefault.wl&sv=Split&rs=WLW11.10&db=BC-COMPANYSRBD&findtype=l&fn=_top&mt=Westlaw&vr=2.0&pbc=1E218C2E&lvbp=Thttps://web2.westlaw.com/find/default.wl?returnto=BusinessNameReturnTo&docname=CIK(LE00223525)&rp=%2ffind%2fdefault.wl&sv=Split&rs=WLW11.10&db=BC-COMPANYSRBD&findtype=l&fn=_top&mt=Westlaw&vr=2.0&pbc=1E218C2E&lvbp=T


23/45

12

of wealth and the accumulation of political war chests on the one hand, and

supposedly indebted lawmakers on the other. Contribution limits reflect a

legislative judgment regarding a floor below which the legislature has concluded

contributions will not pose an appreciable risk ofquid pro quo corruption or the

appearance thereof. See,Buckley, 424 U.S. at 29-30. Contribution limits apply to

all persons not otherwise prohibited from making political contributions. 2

U.S.C. 441a(a); 11 C.F.R. 110.1(a). Person is defined to include any

corporation or labor organization. 2 U.S.C. 431(11); 11 C.F.R. 100.10. If able

to make direct contributions, corporations would immediately be subject to the

same contribution limits as individualscontribution limits that Congress has

determined pose no significant risk ofquid pro quo corruption. Once it is

recognized that the only permissible purpose of contribution limits is to prevent

actual quid pro quo corruption or the appearance thereof, it follows that the District

Court is correct in acceding to Congresss legislative judgment that contributions at

or below the proscribed limits do not pose any risk of such corruption. U.S. v.

Danielczyk, 791 F.Supp.2d 513, 515 (E.D.Va 2011). Resort to the potential for

corruption posed by political war chests is foreclosed by the Court in Citizens

United.

The shareholder protection rationale posited inBeaumontis also now

foreclosed by Citizens United. TheBeaumontCourt asserted that . . . the ban has


24/45

13

always done further duty in protecting the individuals who have paid money into a

corporation or union for purposes other than the support of candidates from having

that money used to support political candidates to whom they may be opposed.

Beaumont, 539 U.S. at 154 (quotingFEC v.Natl Right to Work Comm., 459 U.S.

197, 208 (1982)). According to the Court in Citizens United, this rationale would

allow the Government to ban the political speech even of media corporations, a

power that the First Amendment does not allow. Citizens United, 130 S.Ct. at

911. Rather, the proper remedy for shareholder protection concerns is through the

procedures of corporate democracy. Citizens United, 131 S.Ct. at 911 (quoting

First Natl Bank of Boston v. Bellotti, 435 U.S. 765, 794 (1978)). Given that the

political war chest argument and the shareholder protection argument are

foreclosed by Citizens United, anti-circumvention is all that remains ofBeaumonts

historical prologue.

III. The Complete Ban on Corporate Contributions is Not CloselyDrawn to a Legitimate Anti-Circumvention Interest

In addition to quid pro quo corruption,Beaumontrelied in part on a more

circuitous form of corruptionthat restricting contributions by various

organizations hedges against their use as conduits for circumvention of [valid]

contribution limits.Beaumont, 539 U.S. at 155 (quoting FEC v. Colorado

Republican Fed. Campaign Comm., 533 U.S. 431, 456 and n. 18 (2001)). In

advancing its argument under this theory, the government fails to provide
https://web2.westlaw.com/find/default.wl?returnto=BusinessNameReturnTo&docname=CIK(LE00223525)&rp=%2ffind%2fdefault.wl&sv=Split&rs=WLW11.10&db=BC-COMPANYSRBD&findtype=l&fn=_top&mt=Westlaw&vr=2.0&pbc=1E218C2E&lvbp=Thttps://web2.westlaw.com/find/default.wl?returnto=BusinessNameReturnTo&docname=CIK(LE00223525)&rp=%2ffind%2fdefault.wl&sv=Split&rs=WLW11.10&db=BC-COMPANYSRBD&findtype=l&fn=_top&mt=Westlaw&vr=2.0&pbc=1E218C2E&lvbp=Thttps://web2.westlaw.com/find/default.wl?returnto=BusinessNameReturnTo&docname=CIK(LE00223525)&rp=%2ffind%2fdefault.wl&sv=Split&rs=WLW11.10&db=BC-COMPANYSRBD&findtype=l&fn=_top&mt=Westlaw&vr=2.0&pbc=1E218C2E&lvbp=Thttps://web2.westlaw.com/find/default.wl?returnto=BusinessNameReturnTo&docname=CIK(LE00223525)&rp=%2ffind%2fdefault.wl&sv=Split&rs=WLW11.10&db=BC-COMPANYSRBD&findtype=l&fn=_top&mt=Westlaw&vr=2.0&pbc=1E218C2E&lvbp=T


25/45

14

empirical support for the proposition that circumvention is a sufficient

governmental interest to support a ban on political speech. Even assuming

arguendo that anti-circumvention in and of itself is a sufficiently important

interest, 441bs total ban on all corporate contributions is not closely drawn to

that interest because it is over-inclusive and because it places political party and

candidate committees at an artificial disadvantage.

A.The Government Fails to Show that Anti-Circumvention is aSufficient Governmental Interest

The governments assertion that anti-circumvention is a sufficient

governmental interest is largely hypothetical. As such, it ignores the role

individuals and other political actors play in the regulation of the political process.

Political actors have strong legal and reputational incentives to abide by the law.

Once a contribution arrives at the intended political committee, the Treasurer of

that committee has a legal duty to ensure that the committee complies with the

individual contribution limits and that the contributions are not from a prohibited

source. 11 C.F.R. 103.3(b). If there is any question about the legality of a

contribution, the Treasurer must use their best efforts to verify its legality,

including making at least one written request for evidence that it is a legal

contribution, such as a written or oral statement by the contributor explaining why

it is a legal contribution. 11 C.F.R. 103.3(b)(1). If for whatever reason the

contributions legality cannot be verified, the committee has a legal obligation to


26/45

15

return the contribution to the prospective donor within thirty days. 11 C.F.R.

103.3(b)(1). If a contribution that appears legal is later determined to be illegal, it

must be returned. 11 C.F.R. 103.3(b)(2). The Treasurer of a political committee

must submit a signed verification along with the committees disclosure reports

stating, under threat of perjury, that they have examined the reports of legal

contributions and that these reports are true to the best of their knowledge. 11

C.F.R. 104.18. Even if an individual wants to make an illegal contribution,

regulations governing political committees make such an action difficult.

These are not just empty provisions. Violating these provisions can result in

enforcement action by the FEC or criminal prosecution by the Department of

Justice. In 2008, the last presidential election year, the FEC reported closing

seventy-one cases and assessing $2,385,043 in civil fines, for an average fine of

approximately $33,592 per case closed. FEC, OGC Enforcement Statistics for

Fiscal Years 2003-2008 2 (2009), http://www.fec.gov/em/enfpro/enforcestatsfy03-

08.pdf. Even in cases where individuals and organizations seek to do the right

thing, large fines may follow. In 2005, the FEC entered into a conciliation

agreement with a corporation and its wholly owned subsidiary that self-reported

(as happened in the present case) a violation of the ban on corporate contributions.

The FEC assessed a $50,000 fine that reflects a reduction from the penalty the

Commission would have sought if the violations had not been voluntarily


27/45

16

disclosed. FEC, Conciliation Agreement: LifeCare Holdings, Inc.; LifeCare

Management Services, LLC14, MUR 5398 (June 8, 2005).

Political candidates and committees often spend years building up

reputations in the community. An investigation into impropriety, let alone an

adverse ruling, can hurt that reputation and in the most extreme cases, even cost

candidates elections. Even in the most unfavorable hypotheticala bad actor

intentionally trying to circumvent contribution limitsthere is still an important

check on the system: political committees have a legal obligation to ensure

compliance with campaign finance laws, and they have very strong practical and

reputational incentives to meet that obligation given that political success is a

direct function of public esteem.

Setting aside these legal and reputational concerns, the convoluted

circumvention schemes envisioned by the government do not make sense in the

current regulatory environment. The current contribution limit is $2,500 per

candidate. FEC, Contribution Limits 2011-2012,

http://www.fec.gov/pages/brochures/contriblimits.shtml. Based on this

contribution limit, a wealthy donor wishing to spend, for example, $100,000, in

support of a particular candidate would need to establish at least forty separate

subsidiaries, enlist the cooperation of at least the candidate and the campaign

treasurer, and successfully hide their hand in corporate filings and FEC disclosures


28/45

17

to circumvent the contribution limit. Alternatively, there is no limit to what an

individual or corporation can contribute or spend on independent expenditures.

See, SpeechNow.org v. FEC, 599 F.3d 686 (D.C. Cir. 2010). A wealthy donor

wishing to spend $100,000 to support a candidate could make a $2,500

contribution and spend $97,500 on independent expenditures supporting that

candidate without establishing a single subsidiary and without breaking a single

law.

In addition, a candidate has to know where the money is coming from in

order for it there to be any quid pro quo corruption or the appearance thereof. The

entire purpose of a circumvention scheme would be to obfuscate the source of the

money. Independent expenditures are openly disclosed. See, 11 C.F.R.

104.3(b)(3)(vii)(A), (C); 104.4(a),(b), (c); 109.10(b). Any quid pro quo

arrangement would be illegal under either circumstance. Assuming, as the

Government does, that there is in fact a pool of bad actors, the Government is

seeking, without any empirical evidence, to restrict the free speech rights of

millions of Americans to prevent those bad actors from laundering illegal

campaign contributions through a circumvention scheme that today is so

needlessly convoluted it would make Rube Goldberg smile.

The intentional bad actor is a worst-case scenario. For the overwhelming

majority of political contributors, a symbolic expression of support is not worth


29/45

18

risking prison. From 2003-2008, the FEC closed six-hundred cases arising from

complaints and referrals, out of which 158 involved substantive issues concerning

limitations on contributions and expenditures. FEC, OGC Enforcement Statistics

for Fiscal Years 2003-2008 2 (2009),

http://www.fec.gov/em/enfpro/enforcestatsfy03-08.pdf. In the 2007-2008 election

cycle alone, there were over 1,300,000 reported donors to federal elections.Donor

Demographics: Election Cycle 2008, Center for Responsive Politics (2009),

http://www.opensecrets.org/bigpicture/donordemographics.php?cycle=2008&filter

=A. The overwhelming majority of political donors are law-abiding citizens

seeking to exercise their First Amendment rights by supporting candidates, parties

and political action committees. As one former Chairman of the Federal Election

Commission observed, the fact of the matter is there is little evidence of regular,

intentional violations of campaign finance law; rather [m]ost violations of

campaign finance law are inadvertent. Fear Factor: Lobbying and Campaign

Finance Reforms in the Nations Capital, The Metropolitan Corporate Counsel at

57 (2006), http://www.metrocorpcounsel.com/pdf/2006/May/57.pdf . The result is

that the truest grassroots activity . . . is caught up in a Byzantine web of

regulations. Bradley A. Smith, Campaign Finance Reform: Searching for

Corruption in all the Wrong Places, 2003 Cato Sup. Ct. Rev. 187, 201 (2003).

Simplifying the regulatory regime by removing the irrational distinction between


30/45

19

corporations, LLCs, and partnerships is likely to reduce actual illegal behavior and

reduce the compliance burden on political committees by reducing the risk of

accidentally making an illicit contribution. The governments fears of widespread

circumvention are without empirical support.

As a corollary to concerns that individuals will use corporations as conduits

to circumvent valid contribution limits, the Government asserts that even with full

disclosure of corporate actions it will be difficult if not impossible for regulatory

agencies to assimilate the large volume of information necessary to ensure proper

attribution of corporate contributions. Brief for the United States at 44 (Even with

disclosure of corporate contributions, multiple corporations with unrelated names

would not appear related, and getting beneath the surface to probe ownership or

control would be extraordinarily resource-intensive and in many instances virtually

impossible). Aside from the speculative nature of this claim, such tasks are not

left to government regulators alone. Regulators are joined by the media and other

interested political actors, particularly rival campaigns and political parties, who

have strong incentives to investigate campaign finance disclosures for any

impropriety as part of their routine research efforts.

This is not a hypothetical scenario. Even in the post-Citizens United

environment, outside groups have efficiently performed the enormous and

impractical task ofpeaking behind the curtain to deduce whether a single


31/45

20

contributor controlled particular entities or used them as conduits for making

personal contributions. Brief for the United States at 49. It was a media entity that

first identified a large contribution to a super PAC supporting Mitt Romneys

presidential campaign made by a corporation that formed and dissolved within four

months, and it was independent advocacy groups (including those which have filed

a brief in amicus curiae in this case), which filed complaints with the FEC and

Department of Justice forcing its previously secret patron to come forward. See,

BriefAmici Curiae for Campaign Legal Center and Democracy 21 in Support of

Appellant and Urging Reversal at 23-24, United States v. Danielczyk, No. 11-4667

(4th Cir. 2011); Maggie Haberman,Mysterious Mitt Romney Donor Comes

Forward, Politico, Aug. 26, 2011,

http://www.politico.com/news/stories/0811/60776.html. It was a media story that

led the owners of a corporation which made a large donation to a super PAC

supporting Rick Perrys presidential campaign to come forward. Kenneth P. Vogel,

Rick Perry Boosted By Mysterious Corporate Cash, Politico Dec. 30, 2011,

http://www.politico.com/news/stories/1211/70972.html. And it was a media story

reporting contributions by multiple LLCs owned by the same family that

contributed to an investigation of Representative Don Young by the House Ethics

Committee.3 H. Comm. On Ethics, 112th Cong.,In the Matter of Allegations

3 The Committee ultimately dismissed the allegations against Representative


32/45

21

Relating to Representative Don Young 4-5 (Comm. Rep. 2011). See also, Bennett

Roth,A Family Comes to Rep. Youngs Defense, Roll Call, May 3, 2011,

http://www.rollcall.com/issues/56_115/don-young-legal-defense-fund-chouest-

205267-1.html.

Political parties also have a role to play in policing corporate contributions,

both in making sure that their own conduct is above board and immune from

attack, and in monitoring the conduct of their competitors. RNC researchers

carefully review every FEC report from organizations such as the Democratic

National Committee and Obama for America and will report improprieties to the

FEC or other relevant agencies. See, e.g., Republican National Committee,

Complaint Against Obama for America, Oct. 6, 2008,

http://i.cdn.turner.com/cnn/2008/images/10/06/Complaint_against_Obama_for_A

merica.pdf. This is not a practice unique to the RNC; In the real world, these

violators would be exposed to lawsuits, fines and attacks from political

opponents. David Primo,It's Time To Bring Some Sanity To Campaign Finance

Laws, Forbes, Dec. 15, 2011,http://www.forbes.com/sites/realspin/2011/12/13/its-

time-to-bring-some-sanity-to-campaign-finance-laws/. In the heated battleground

state of Florida, for example, one election commission official indicated that 98%

Young, concluding that he neither violated the letter of the regulations nor clearlyviolated the spirit thereof. H. Comm. On Ethics, 112th Cong.,In the Matter of

Allegations Relating to Representative Don Young 11 (Comm. Rep. 2011).


33/45

22

of campaign-finance-related complaints are politically motivated.Id. Just as with

government, so it is with the political process: Ambition must be made to

counteract ambition. The Federalist No. 51 (James Madison). To the extent that

attempts at circumventing campaign finance regulations occur, political actors such

as the RNC and its Democratic counterparts are likely to act in their own self-

interest to investigate and report suspicious disclosures of their political opponents.

B.The Ban on Corporate Contributions is Over-InclusiveBy prohibiting contributions from all entities classified as corporations,

regardless of size or internal structure, 441b limits the political speech rights of

organizations whose contributions could be easily attributed to individuals.

Attribution limits opportunities for circumvention, removing the raison dtre for

the ban. As such, the ban is over-broad, and thus not closely drawn to the

governmental interest of preventing quid pro quo corruption or the circumvention

of preexisting contribution limits.

The Government has defended 441b on the grounds that corporations are

primarily economic actors and will seek to circumvent the contribution limits to

obtain economic rent from lawmakers. According to the Government,

corporations pursue economic interests through entry into the political arena and

[t]he corporate form is particularly suited to pursue such economically motivated

behavior to seek official favors. Brief for the United States at 41.Yet as the


34/45

23

Court in Citizens Unitedobserved, [a]ll speakers, including individuals and the

media, use money amassed from the economic marketplace to fund their speech.

Citizens United, 130 S.Ct. at 905. Furthermore, corporations are far from the only

ones whose political behavior may be influenced by economic factors. In both

2008 and 2010, over 60% of voters indicated that the economy was the most

important issue for the country. Kyle Dropp,Early Exit Polls: Top Issues this

Election, The Washington Post, Nov. 2, 2010,

http://voices.washingtonpost.com/behind-the-

numbers/2010/11/early_exit_polls_top_issues_th.html. Economic concerns have

continued to predominate voters concerns into 2012, with network entrance polls

at the Iowa Caucuses indicating that the economy was again the most important

issue.Entrance Polls: Iowa Republicans, CNN, Jan. 3, 2012,

http://www.cnn.com/election/2012/primaries/epolls/ia. Especially during a down

economy, individuals are highly motivated by economic factors in their political

behavior.

There is no indication, nor is their reason to expect, that a corporation is any

more rent-seeking it its political forays than an unincorporated sole proprietorship,

partnership, or limited liability corporation, all of which are primarily viewed as

economic actors, or than individuals, all of which are permitted to make political

contributions. Most corporations are not large entities waiting to flood the political


35/45

24

system with contributions to curry influence. Most corporations are small

businesses. As the Court noted in Citizens United, more than 75% ofcorporations

whose income is taxed under federal law have less than $1 million in receipts per

year, while 96% of the 3 million businesses that belong to the U.S. Chamber of

Commerce have fewer than 100 employees. Citizens United, 130 S.Ct. at 907

(citing M. Keightley, Congressional Research Service Report for Congress,

Business Organizational Choices: Taxation and Responses to Legislative Changes

10 (2009) & Supplemental Brief for Chamber of Commerce of the United States of

America asAmicus Curiae at 1, 3, Citizens United v. FEC, 130 S.Ct. 876 (2010)

(No. 08-205), respectively) (internal citations omitted). While the concept of

corporate contributions evokes images of organizations like Exxon or Halliburton,

with large numbers of shareholders and large corporate treasuries, the reality is that

most corporations in the United States are small businesses more akin to a

neighborhood store. Yet 441b does not distinguish between these different types

of entities; under 441b, a corporation is a corporation. As such, it is over-

inclusive.

The over-breadth of 441b is further illustrated in the distinctions that it

does make. Under FEC regulations, a single type of business organization, an LLC,

is treated as a partnership, therefore able to make political contributions, or a

corporation, therefore unable to make contributions, based solely on which


36/45

25

provision of the tax code it elects to be taxed under. 11 C.F.R. 110.1(g). The

First Amendment rights of a limited liability corporation hinge solely on a business

decision that may be undertaken for a myriad of reasons, few if any of which have

any discernible relationship to the political process let alone the potential to cause

quid pro quo corruption.

Subchapter S corporations are small businesses4 which may, like LLCs, elect

to be taxed under different provisions of the tax code. 26 U.S.C. 1361-1376.

Unlike LLCs, this choice has no impact on the corporations First Amendment

rights; subchapter S corporations are categorically prohibited from making direct

contributions. This prohibition bears no relation to attribution. Under the rules

established by the House Committee on Ethics, members of Congress are able to

receive limited donations to Legal Expense Funds from subchapter S corporations.

Legal Expense Fund Regulations 3.2 in H. Comm. On Ethics, 112th Cong.,In

the Matter of Allegations Relating to Representative Don Young, Appendix Cat 3

(Comm. Rep. 2011). Under Regulation 3.3 of the Legal Expense Fund regulations,

contributions by subchapter S corporations are attributed in exactly the same

manner as those by partnerships and LLCs.Legal Expense Fund Regulations 3.3

4 Defined in the Internal Revenue Code as a corporation having one class of stockwith 100 or fewer shareholders, all of whom are individuals, certain trusts, orcertain tax-exempt organizations, and none of whom are nonresident aliens. 26U.S.C. 1361(b)(1). Since all shareholders must be individuals, the circumventionschemes hypothesized by the government are impossible with subchapter Scorporations.


37/45

26

inId. When the FEC undertook rulemaking with respect to LLCs, it recognized

that there are general similarities between LLCs and subchapter S corporations, but

elected to exclude subchapter S corporations from rulemaking permitting LLCs to

make political contributions [b]ecause subchapter S corporations are considered

corporations under the laws of all fifty States. 64 Fed. Reg. 37397-01 (1999). In

spite of their structural similarities to LLCs, in spite of their ability to elect to be

taxed as unincorporated businesses for federal tax purposes, and in spite of the

clearly demonstrated feasibility of attribution, all subchapter S corporations are

categorically prohibited from making political contributions based solely on their

corporate status.

This Kafka-esque mix of regulatory formalism and functionalism is over-

broad. By permitting one category of speakerpartnerships and LLCs that elect to

be taxed as partnershipsto make political donations while prohibiting another,

similarly situated speakersubchapter S corporations that are taxed like

unincorporated entities(in addition to LLCs that are taxed as corporations)

Congress is impermissibly outlawing speech that has no corrupting potential.

Accordingly, 441b is not closely drawn to a sufficiently important governmental

interest.


38/45

27

C.The Corporate Contribution Ban Artificially DisadvantagesPolitical Party and Candidate Committees

The Court in Citizens Unitedhas made it clear that corporations may enter

the political arena directly through independent expenditures, and/or unlimited

contributions to independent-expenditure-only committees. At the same time,

corporations are currently prohibited from making limited campaign contributions

to political parties and candidate committees. This state of play creates a disparate

environment for corporate contributions which actively and artificially

disadvantages political parties and campaign committees.

Following Citizens Unitedand its progeny, corporations are able to make

unlimited direct contributions to independent political organizations. The result,

according to the Executive Director of the Center for Responsive Politics, is that

[money is] shifting away from the parties, the candidates, and PACs, and shifting

to these unregulated groups and becoming much and much more secret. Paul

Blumenthal, Super PACs and Secret Money: The Unregulated Shadow Campaign,

The Huffington Post, Sept. 9, 2011,

http://www.huffingtonpost.com/2011/09/26/super-pacs-secret-money-campaign-

finance_n_977699.html. As the Congressional Research Service observed,

[f]ollowing Citizens Unitedand SpeechNow, it is . . . possible that tax-exempt

organizations, corporations, or unions will rival or overshadow parties financial

prowess in the long-term. R. Sam Garrett, Congressional Research Service Report


39/45

28

for Congress, The State of Campaign Finance Policy: Recent Developments and

Issues for Congress 12 (2010).

Outside spending accounted for approximately 5.7% of total spending in the

2008 election cycle.Historical Elections: The Money Behind the Elections, Center

for Responsive Politics, http://www.opensecrets.org/bigpicture/index.php; Outside

Spending, Center for Responsive Politics,

http://www.opensecrets.org/outsidespending/index.php. This ballooned to

$304,679,091, or nearly 8.4% of all election-related spending in the 2010 election

cycle.Id. These numbers are significantly higher in races where outside groups

choose to focus their efforts, with super PAC spending alone reaching over 40% of

total spending in the 2008 Colorado Senate race. R. Sam Garrett, Congressional

Research Service Report for Congress, Super PACs in Federal Elections:

Overview and Issues for Congress 10-20 (Dec. 2, 2011). All signs indicate that

outside spending will continue to increase in the 2012 election cycle. In the 2010

election cycle, seventy-nine independent-expenditure-only super PACs organized

and spent approximately $90.4 million.Idat 13. By December 2011,

approximately 250 super PACs had already registered with the FEC for the 2012

election cycle.Id. at 26. By the end of 2011, super PACs have combined to spend

$11 million in the Republican primaries, at least $5.8 million of that in Iowa

alone. Paul Blumenthal, Super PACs Dominate Iowa Caucus, Helping Mitt


40/45

29

Romney Run Ahead, The Huffington Post, Dec. 31, 2011,

http://www.huffingtonpost.com/2011/12/31/super-pacs-iowa-caucus-mitt-

romney_n_1176741.html?view=print&comm_ref=false. Super PACs associated

with two conservative groups alone are already planning to raise hundreds of

millions of dollars, an amount that will rival what the formal Republican

committees will spend. Nicholas Confessore, Outside Groups Eclipsing G.O.P. as

Hub of Campaigns, N.Y. Times, Oct 29, 2011 at A1,

http://www.nytimes.com/2011/10/30/us/politics/outside-groups-eclipsing-gop-as-

hub-of-campaigns-next-year.html?_r=1&pagewanted=all.

The result is that traditional political parties and candidate committees are in

danger of having their voices drowned out. According to Representative Tom

Cole, who helped run the Republican National Committee and the National

Republican Congressional Committee, [t]heres no question that with the way we

structure these super PACs, it will enormously diminish the role the committees

play. Kenneth P. Vogal & Alex Isenstadt, Super PACs Giving Party Committees a

Run for Their Money, Politico, Oct. 28, 2011

http://www.politico.com/news/stories/1011/67046.html. This diminution does not

result from a failure of political parties and campaigns to attract donors, but rather

reflects an artificial allocation derived from what theHuffington Posthas

characterized as a two-tiered campaign finance system, with political parties and


41/45

30

candidate committees subject to strict regulation of contribution amount and

sources, while outside groups are free to act unencumbered. Paul Blumenthal,

Super PACs and Secret Money: The Unregulated Shadow Campaign, The

Huffington Post, Sept. 9, 2011, http://www.huffingtonpost.com/2011/09/26/super-

pacs-secret-money-campaign-finance_n_977699.html. As one top advisor to a

super PAC supporting Newt Gingrichs presidential campaign observed, [i]ts

ridiculous that we have the ability to raise unlimited money and direct the message

of the campaigns when the candidates themselves dont have this . . . [but] this is

the situation thats been given to us. David Leventhal & Kenneth P. Vogal, Super

PACs Go Stealth Through First Contests, Politico, Dec. 30, 2011,

http://www.politico.com/news/stories/1211/70957.html.

InRandall, the Supreme Court held that contribution limits that are too low

harm the electoral process by preventing candidates from mounting effective

campaigns.Randall, 548 U.S. at 249. In early primary states such as Iowa, [s]uper

PACs have outspent Republican candidates by more than 2 to 1. Dan Eggen,Are

Iowa Caucuses Harbinger of the Super PAC Era?, The Washington Post, Jan. 3,

2012, http://www.washingtonpost.com/politics/are-iowa-caucuses-harbinger-of-

the-super-pac-era/2012/01/02/gIQA8zW7YP_story.html. Early indications are that

outside spending in Iowa and New Hampshire for the 2012 Republican presidential

nomination process is swamping the efforts of the candidates themselves. Tom


42/45

31

Hamburger & Melanie Mason, Super PACs Are Showing Their Power, The L.A

Times, Jan. 1, 2012, http://articles.latimes.com/2012/jan/01/nation/la-na-money-

election-20120101. The solution is not to restrict or prohibit outside groups, which

would be unconstitutional under Citizens United. At the policy level, more speech

serves the public interest by ensuring more perspectives are heard. At the legal

level, Citizens Unitedand its progeny have made it readily apparent that such

restrictions are antithetical to the First Amendment. The solution is to recognize

that 441b criminalizes speech and artificially disadvantages regulated political

entities, and loosen the ties that force political parties and candidate committees to

grapple in the marketplace of ideas with one hand firmly tied behind their backs.

The distinction between for-profit and non-profit corporations adopted by the

District Court may appear arbitrary, but until the Supreme Court has had the

opportunity to reevaluate 441b in light ofCitizens United, it is the most rational

path in an otherwise Byzantine, irrational, and capricious jungle of regulation.

CONCLUSION

The District Courts ruling should be affirmed.


43/45

32

Respectfully Submitted,


John R. Phillippe, Jr.Attorney of Record

Chief Counsel

Gary LawkowskiRepublican National Committee310 First Street, S.E.Washington, D.C. 20003Phone: (202) 863-8638

Counsel forAmicus Curiae

January 10, 2012


44/45

CERTIFICATE OF COMPLIANCE WITH FED. R. APP. P. 32(a)

This brief complies with the limitations set forth in Fed. R. App. P.

32(a)(7)(B) because it contains 6,910 words, excluding the portions exempted

under F. R. App. P. 32(a)(7)(B)(iii).

This brief has been prepared in Microsoft Office Word 2007 using the

proportionally spaced typeface Times New Roman in 14 point, in conformity

with Rule 32(a)(5)(A).


John R. Phillippe, Jr.Republican National Committee

310 First Street, S.E.Washington, D.C. 20003

Phone: (202) 863-8638

January 10, 2012


45/45

CERTIFICATE OF SERVICE

I certify that on January 10, 2012, I electronically served a copy of the

forgoing document on all parties or their counsel through the CM/ECF system. All

parties and their counsel are CM/ECF users.

I also caused eight true and correct printed copies to be filed with the Clerk

of the Court by FedEx delivery directed to the following address:

Patricia S. ConnorClerk

U.S. Court of Appeals for the Fourth Circuit1100 East Main Street, Suite 501Richmond, Virginia 23219-3517


John R. Phillippe, Jr.

Republican National Committee310 First Street, S.E.

Washington, D.C. 20003Phone: (202) 863-8638

January 10, 2012

rnc argues for coporate donations to fed candidates

Documents