IVN News

Post-Citizens United, Is Foreign Money Pouring into Our Elections?

Federal law states that foreign governments, corporations, and individuals cannot spend money on elections in the United States. Yet following the Citizens United decision in 2010, some – including President Obama himself – have worried that foreign money could have an easier time influencing American politics.

An investigation by The Intercept released earlier this month shows that such foreign influence took place during the 2016 Republican primary race, and, moreover, explores whether that influence was legal.

The case involves $1.3 million given in total to a super PAC supporting Jeb Bush, Right to Rise USA. The money came from APIC, a San Francisco-based “diversified international investment holding company” that The Intercept notes has been described as “controlled,” “owned,” and even “100 percent owned” by Gordon Tang and Huaidan Chen – two Chinese citizens with permanent residence in Singapore. The company had close ties to Jeb Bush: his brother, Neil Bush, sits on APIC’s board.

The super PAC was advised that it could accept such donations by Charlie Spies, who supported Mitt Romney’s campaigns in 2008 and 2012 and who served as legal counsel to Right to Rise USA.

In a February 2015 memo, Spies stated that a U.S. subsidiary could donate to a super PAC if it satisfied several important conditions. First, foreign nationals could have only minimal involvement in the decision-making process, such as establishing a separate account for a donation or setting a budget. Second, the subsidiary must be able to pay for the donation out of its own net earnings and not be subsidized by the foreign parent company.

As The Intercept notes, the first criterion appears to have been satisfied: the domestic firm had enough money on hand to finance the contribution (though it points out that corporate money is fungible and that the contribution ultimately made the Chinese couple $1.3 million poorer). However, it also notes that one owner of the company, Tang, may have been overly involved in the decision-making process: referring to a request by Huaidan Chen’s brother Wilson Chen, Tang stated, “Wilson said to donate, so I did.”

Spies’s legal advice rested primarily on a 2006 FEC advisory opinion. Yet that opinion pertained to corporate PACs – which have limits on how much they can receive from individuals and how much they can give to various parties and candidates, and not to super PACS – which can raise and spend unlimited amounts of money so long as they do not coordinate with a campaign.

Nevertheless, the opinion continues to be cited as a legal basis to allow U.S. subsidiaries of foreign companies to participate in federal, state, and local elections, and recent examples indicate that such involvement has occurred at all levels.

In 2012, for example, a Connecticut-based subsidiary of a Canadian insurance and investment corporation gave $1 million to the pro-Romney super PAC Restore Our Future, and a New Jersey-based subsidiary of a Chinese-owned business donated $120,000 directly to Terry McAuliffe’s campaign – not to a pro-McAuliffe super PAC – during his successful 2013 gubernatorial bid in Virginia (a hefty contribution allowed under state law).

Also, in 2012, subsidiaries of a Luxembourg-based company spent more than $300,000 to challenge a Los Angeles ballot measure regulating the pornography industry. In 2016, the committee that received and spent the funds paid a fine of $61,500.

In that last case, however, the fine was paid not to the FEC but to California’s Fair Political Practices Committee (FPPC). In March 2015, the FEC’s six commissioners split 3-3 on a vote over whether to pursue the case, thus preventing its involvement. (The three Republican commissioners argued that ballot measures are not “elections” and therefore that the foreign spending did not violate federal law.)

Now, two FEC commissioners are speaking out about the need to address the legal questions surrounding foreign money and the political activities of domestic subsidiaries controlled by overseas companies.

In March, Ellen Weintraub wrote that since many companies have non-American shareholders, it might be desirable to impose a ceiling on the level of foreign ownership (such as 20 percent) in determining which companies can participate in U.S. elections.

And earlier this month, FEC member Ann Ravel proposed that the commission “formally rescind” the 2006 advisory opinion and move to ban domestic subsidiaries of foreign companies from spending money directly or indirectly on all elections. Citing the APIC case and the demonstrated threat posed by sham or “ghost corporations,” Ravel wrote that the post-Citizens United campaign finance system is “vulnerable to influence from foreign nationals and foreign corporations through Domestic subsidiaries and affiliates in ways unimaginable a decade ago.”

Given the partisan gridlock that plagues the FEC, it is unlikely that this issue will be resolved by regulators in the executive branch any time in the near future. The responsibility to address it thus falls on the shoulders of citizens and their representatives to decide what statutory changes, if any, they want to see at the local, state, and federal levels.