Three lessons from the McCutcheon argument.

October 9, 2013   •  By David Keating
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Oral argument has a tendency to clarify things. It’s often the only opportunity the litigants and judges have to publicly discuss a case and point out which parts they find particularly important. This is especially true of cases like McCutcheon which, despite overarching themes of free speech and democracy, are grounded in our nation’s complex and technical campaign finance regime.

It makes sense, then, that the justices would turn to hypothetical examples to illustrate their points. But sometimes these hypotheticals can backfire.

The Sam Smith blunder

Consider Justice Breyer, who asked whether one could set up a PAC called Sam Smith PAC (Sam Smith being, presumably, the name of a hypothetical candidate). While it is illegal for a person to give money to a PAC and earmark that contribution to be passed on to a favored candidate, Breyer suggested that naming a PAC after a particular candidate gives contributors a pretty good idea of where their money will end up.

Perhaps, but both Congress and the FEC had the foresight to prevent that eventuality: it is illegal to name a PAC after a candidate. (2 USC § 432(e)(4); 11 CFR 102.14).

Earmarking mistakes

Justices Breyer and Kagan clearly did not understand the laws and regulations that restrict earmarking. These rules aim to prevent evasion of the candidate contribution limits, specifically by preventing a contribution to a PAC from being channeled to a particular favored candidate.

11 CFR 110.6 defines earmarking very broadly. The regulation is lengthy, but begins as follows:

(a) General. All contributions by a person made on behalf of or to a candidate, including contributions which are in any way earmarked or otherwise directed to the candidate through an intermediary or conduit, are contributions from the person to the candidate.

(b) Definitions. (1) For purposes of this section, earmarked means a designation, instruction, or encumbrance, whether direct or indirect, express or implied, oral or written, which results in all or any part of a contribution or expenditure being made to, or expended on behalf of, a clearly identified candidate or a candidate’s authorized committee.

Justice Breyer conceded that current law prohibits any person from controlling more than one PAC (and if someone does, the contribution limits treat all of those PACs as a single entity). This prevents one person from forming dozens of PACs for the purpose of skirting the base limits.

But at argument, Justice Breyer hand-waived this important impediment, noting that it merely requires someone to “be[] careful to have not one person control the 4,000 PACs, which is pretty easy to do.” Even giving him the benefit of the doubt, and assuming the Justice meant “40 PACs,” it’s not at all clear that anyone in the real world would risk a federal enforcement action in order to quietly coordinate 40 PAC contributions, much less 4000, for the benefit of a single candidate. There’s simply no evidence, either before the court or in the public record, supporting that unsubstantiated concern.

Furthermore, using a PAC to evade the contribution limits appears to violate 11 CFR 110.4(b) that states “No person shall make a contribution in the name of another.” That regulation covers PACs as well as individuals.

The Department of Justice has a strong record of prosecutions in high profile cases on giving in the name of another (Cenac in Louisiana and Whittemore in Nevada). Such evasions – working out deals with PACs to give to a candidate – would clearly trigger a violation. It is difficult to see the various hypotheticals ever coming to pass, as the downside for not successfully navigating the minefield is devastating. People go to jail for this. The justices ever-changing hypotheticals seemed to assume a level a bravery that seems foolhardy.

Joint Fundraising Committees

Finally, at yesterday’s argument, both the government and several justices held up joint fundraising committees (JFCs) as a villainous tool allowing contributors to corrupt an entire party’s House and Senate candidates at the same time. These concerns revealed a gross misunderstanding of JFCs and their purpose.

First, the base limits apply to money given to each recipient. If two candidates decide to host a fundraiser together, a $5,200 contribution will be divided evenly between the two candidates at the current federal maximum of $2,600. If a contributor attempted to give $5,500 to the joint fundraiser, the remaining the $300 would be refunded to the donor before the remaining $5,200 is split into two $2,600 donations. JFCs are not a device allowing contributors to magically give more to a candidate than he or she otherwise could.

Second, JFCs bear no resemblance to soft money. Both Justice Elena Kagan and Solicitor General Verrilli attempted to force this analogy, and with good tactical reason: in 2003, the Supreme Court upheld a federal ban on soft money in the case of McConnell v. FEC. If the government can present the unique facts of McCutcheon as a repeat of McConnell, their case would be considerably easier. Unfortunately for the FEC, the comparison is inapt.

Soft money involved a single contributor, writing out one large check, which went to one recipient, and — at least according to some record evidence relied upon by the McConnell Court — wound up in the hands of one candidate. In order for a JFC to be used to pass along a similarly large check to one candidate, a joint fundraising conspiracy of at least dozens of candidates, and several state and national parties would have to engage in an extremely paperwork and manpower-intensive (and illegal) struggle to funnel the money to a favored candidate.

As is often the case in dealing with boogeymen, the truth behind JFCs is far more innocuous. They were created by the FEC to ensure adherence to the base limits when parties and candidates held joint events, while ensuring the burdens of holding these events were properly allocated among all those raising money. For example, if a candidate and a party have a fundraiser in the same park, the joint fundraising regulations require them to set up a JFC to ensure that payment of the overhead and fundraising costs are shared between the candidate and the party. Otherwise, one could subsidize the other.

Joint fundraising committees, despite the protestations of some, are not an end run around contribution limits, nor do they set up a new “super limit” for the wealthy.

David Keating

David Keating