HOW MUCH TRANSPARENCY IS TOO MUCH?

An important dialogue is taking place around the issue of disclosure by certain non-profit organizations that support or oppose candidates for federal office.  While the issues may seem technical, they impact on how our electoral process works and how we participate in it.

The American Bar Association (ABA) is considering a resolution that would require Section 501(c)(4) organizations that spend money supporting or opposing a candidate for federal office to disclose the names of their contributors.  A 501(c)(4) is a tax exempt advocacy organization such as the League of Women Voters, the National Rifle Association and IndependentVoting.org.  The last-named is my client.

Under present law, such organizations are allowed to spend funds from their general treasury to support or oppose candidates, so long as those expenditures do not constitute a significant portion of their budget.  The ABA resolution recommends that an organization which does so be required to disclose the identity of anyone who has contributed $200 or more to it.  The proposal is similar to H.R. 4010 (pending legislation in Congress regarding these issues), which mandates that a 501(c)(4) that uses funds from its general treasury to support or oppose a candidate for federal office must disclose the identity of all persons who gave more than $10,000 to the organization from the beginning of the calendar year prior to the date of the disclosure in question.  The ABA threshold for disclosure is significantly lower. 

I am wary of the presumption in the press and in the heat of the current presidential campaign that 501(c)(4) organizations exist only for purpose of evading campaign finance regulations.  The proposed disclosure and reporting requirements would impose a significant burden on such an organization should it choose to participate in the federal election process. 

Now, should a 501(c)(4) allow itself to become a conduit for wealthy people seeking to use it as a “pass through” for money spent to elect candidates, then this activity and the source of its funding should be disclosed.  It might happen, however, that in the course of a campaign, a candidate for Congress makes a statement on an issue related to the 501(c)(4)’s mission that prompts the organization to speak out against the candidate, even though the organization had not planned to do so, and had not and did not contemplate participating in the electoral arena. 

Under the ABA’s proposal, such expenditure would trigger disclosure of the identity of all contributors of $200 or more, including those who did not intend and had no knowledge that their money would be used for such expenditure.  This might discourage persons form contributing to the organization at all.  Consider a person living in a small, conservative, rural community who is strongly pro-choice.  Such a person might not contribute to a pro-choice 501(c)(4) for fear that her support would be disclosed and make her a target of hostility in the community where she lives and works. 

In First Amendment legal parlance, this is called "a chilling effect."  A person is less likely to exercise her right to free speech and free association for fear that doing so would cause her harm. 

Isn’t it enough to require that the organization making the expenditure disclose its identity?  That might cause a past contributor who did not agree with the expenditure to not give again.  But it would not discourage contributions for fear of possible disclosure and retaliation against the contributor. 

Sometimes, too much transparency can be a bad thing.

WILL THE EDWARDS PROSECUTION UNRAVEL CAMPAIGN FINANCE REGULATION?

John Edwards has been indicted for receiving large gifts from friends that he used to cover up his affair and love child with Rielle Hunter during his presidential campaign. According to federal prosecutors, these were campaign contributions and expenditures and should have been reported as such. In addition the amounts given to Edwards exceeded the $2,500 contribution limit.

The theory of the prosecution appears to be that the gifts and expenditures were meant to benefit the campaign by avoiding disclosure of what would surely have damaged Edward’s status as presidential contender.

As a candidate in a presidential primary, Edwards received $12,882,877.42 in federal primary matching funds. These funds are available to a candidate to be used for “qualified campaign expenses.” It follows under the prosecutions’ theory that Edwards could have used federal money to conceal his sexual peccadilloes.

OK, so I am running for president and the recipient of primary matching funds. My teenage daughter gets pregnant, and I am concerned it might damage my campaign, so I arrange for an abortion, with her consent of course. Can I use matching funds for this? Or, I am accused by a masseuse of making a pass at her during a massage. She threatens to go public if I don’t give her $250,000. Can I use matching funds for this? What if a young woman threatens to expose a titillating tweet I sent her? Under the theory of the Edwards prosecution, the answer would have to be yes.

Should the government compile a list that states which such expenditures are allowed and which are not? If they don’t, and surely Edwards will contend, they have not, how is a candidate to know what is legal and illegal. And if the funds are so used and reported, how much information must be given about their purpose? Would not a filing that disclosed the purpose defeat the purpose of spending the money in the first place? What is a candidate to do?

Tune in to the John Edwards trial to find out.

The Limits of Disclosure

Earlier this year Manhattan Surrogate Nora Anderson was acquitted by a jury on charges of false filing in conjunction with her successful campaign to be elected to preside over estate matters. Her prosecution came about because a colleague allegedly gave her a large sum of money which she transferred to her campaign. The charge was that this was a scheme to evade the campaign contribution limits and disclosure laws.

Because of some complicated procedural issues, the only charge that went to trial was “false filing.” The disclosure statements filed with the Board of Elections indicated that the contribution to the campaign came from Judge Anderson not from her colleague. A candidate is allowed to contribute an unlimited amount to their own campaign. Judge Anderson had very skillful attorneys at trial who argued, among other things, that the false filing charge made no sense. If Judge Anderson had reported the contribution to her campaign as coming from her colleague, it would have been literally untrue as the funds came from her account via a check she wrote.

Since the trial, the Manhattan District attorney’s office has asked the New York legislature to enact a law that would require every candidate for public office to disclose all gifts from any source that they received in the past year. If your mother gave you $10,000 to help pay your daughter’s college tuition, that would have to be disclosed. The theory is that if the government can see all the gifts you got and compare them to moneys received by your campaign, they might be able to detect an illegal contribution.

This is a dubious proposition at best. First, Judge Anderson’s contribution and its ultimate source was discovered without such a statute. Second, why should the government require citizens to disclose activity that is perfectly legal (like getting a $10,000 gift from your mother) in the hope of finding some illegality? It is an invasion of privacy and an imposition on those seeking to run for office.

It makes me think of the Mann Act, a federal statute that makes it a felony to “transport” a person across state lines to engage in “prostitution, or in any sexual activity for which any person can be charged with a criminal offense….” Under the logic of the Manhattan District attorney, the government would be justified in requiring every person who crosses state lines with another person to report that to the government just in case it turns out that the purpose of the trip was to engage in prostitution.

Something is wrong when the people charged with enforcing the law think this way.