Federal court ruling could create stricter FEC enforcement

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In the wake of the Citizens United case, the common narrative that has transpired among public interest reformers and media outlets, is one that suggests that the FEC’s ability to enforce campaign finance law has been “systematically gutted” over the past decade.  Yet in a recent article titled “No More Easy Outs at the FEC,” former FEC Chairman David Mason posits quite the reverse.  Events that do not quite make it to the level of the Supreme Court, or that otherwise prove insufficiently flashy enough to attract the sort of media attention that Citizens United did, nevertheless have important implications for the direction of campaign finance.  In particular, Mason refers to a court ruling that he believes will engender a heightened sense of scrutiny and stricter FEC enforcement measures and notes, “..it may not be enough to comply with the law—you need to document your compliance decisions and procedures.”  Though relatively minor in its solitary impact, this one example sheds light on an overall national political trend that appears to get lost in the complexity of our system.   Trends such as the rising costs of campaigns and an increased need for professional campaign services have implications that pale in comparison to Citizens United.

Of course, procedural improvements implemented at the FEC are made with the intent to increase accountability within the “regulated community” (PACs, candidates, parties).  Stronger accountability is a nonpartisan issue that few would argue has any negative direct effects.  Yet what tends to get overlooked are the indirect effects, including the pricetag of these procedural changes and where the financial burden of it may fall.

The rising costs of running a campaign, whether as a function of strengthened regulations or the reality of increasingly expensive media markets, has been primarily shouldered by political candidates.  Over the past century, campaigns have moved away from a party-centered model toward a primarily candidate-centered one.  Faced with dwindling party support, candidates had to look elsewhere for the financial support necessary to pay for services such as voter identification, registration, and distribution of campaign literature. Services that have historically been functions of the party machine are now being outsourced to political professionals. (See this article by Jill Lepore for a more extensive background of the professionalization of politics and how it became a business.)

This candidate-centered trend has created the perception that the more money a campaign raises, the more legitimate and credible its candidate is regarded by the media and the public.  The way in which this phenomenon developed can be likened to an arms race.  Candidates stock their war chests with campaign dollars, primarily as a defensive strategy.  Yet understanding the potential for those funds to be used offensively, opponent parties and challengers respond by developing war chests of their own.  In this environment, it is therefore easy to see how a candidate’s legitimacy is a function of how much money they are able to raise.  Money determines the extent to which an incumbent candidate can defend itself from potential challengers, or a potential challenger can run a professional offensive campaign a seated incumbent.

If Mr. Mason is correct, then along with the campaign managers and field directors, compliance services will soon be added to the budget as an indispensable component of the campaign.   Interestingly, what is perhaps become more valuable than precluding incidental FEC fines for minor reporting violations, are the ways in which the competitive political environment may enhance the political role that compliance plays.  Stricter enforcement measures increase the potential for minor compliance errors to become political problems.  And what candidate wouldn’t love to link their opponent to a “campaign finance scandal?”  Compliance specialists are in a position to save the campaign untold amounts in political capital by mitigating potential infractions before they occur (and appear permanently on the public record).

Beyond the professional implications are the unanswered concerns:  should the ability to fundraise be such a vital prerequisite of our elected officials?  Undoubtedly a certain number of otherwise highly qualified individuals that are simply not magnets for money are filtered out in the current system.  What do goliath-sized incumbent war chests, which function to raise de facto “entry fees,” do to the competitive landscape in American politics?  From a compliance standpoint alone, challengers are at a significant disadvantage as they are much more likely to incur administrative fines, while having the least amount resources at their disposal.  Of all administrative fines that were exacted to candidate committees by the FEC in the election year 2010, 94% of them were to challengers and only 6% were to incumbents.  Lastly, what prospects are there for a legislative solution when all members of congress have, by definition, been beneficiaries of the status quo?

Super PACs Crash the Conventions

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Brett Smiley – the founder and president here at CFO Compliance – hopped on a flight to North Carolina last week in order to serve as a delegate at the Democratic National Convention. This meant I had nobody in the office to badger with my pesky questions about campaign finances. Left to my own devices, I spent a lot of time reading news articles about Super PACs, while, incidentally, reruns of the television show, Friday Night Lights, were on in the background.

Actively consuming one form of media and passively consuming another at the same time forced my mind to merge them together in one collective blob of information. I started seeing real-life politics in a fictional program about sports. Let me explain.

Buddy Garrity is the fictional president of the fictional Dillon High School’s booster club. In the small town of Dillon – where the locals place nothing in the world above their love for high school football – Buddy has dedicated his adult life to convincing upper class, small-town Texans to write him large checks so that the football program can afford to buy things like JumboTrons and fancy uniforms.

Buddy and his booster pals are separate from the high school itself. They aren’t coaches, employees, or teachers. They are simply passionate supporters who raise funds and act in what they feel is the organization’s best interest.

Do you see where this is going?

Buddy Garrity, in his small sphere, is a Super PAC.

Super PACs are “non-profit” organizations that raise money to support certain political candidates. In this election year – the first since the Citizens United decision to allow unlimited, anonymous donations into independent political action committees – wealthy men and women are dedicating their time and talents to running these organizations. They are convincing other wealthy men and women to write large checks so that the group can afford things like prime-time political advertising.

These organizations are separate from the official campaigns they support. They have their own bank accounts, and their messages are uninfluenced by the particular candidate’s communication team. They are simply passionate supporters who raise funds and act in what they feel is the organization’s best interest. Because of this separation – because they are their own entities – the Supreme Court ruled that Super PACs do not need to adhere to FEC campaign contribution regulations.

However, that separation tends to blur in both cases. Buddy Garrity would tip-toe around the borderline by showing up to closed practices and making speeches at organized team events. Over the last few weeks, Super PACs have followed in his footsteps by making appearances at the conventions in Tampa and Charlotte.

Despite rules that prohibit official campaigns from planning and coordinating with their independent support groups, the conventions featured a lot of intermingling between elected officials and their Super PAC supporters.

According to this New York Times article, representatives from Restore Our Future, Americans for Prosperity and American Crossroads had “all but merged into a unified conservative machine.” They hosted parties that featured elected officials as guest speakers, had dinner with Senators, and stayed in the same hotel as the Romney campaign.

This probably shouldn’t matter. Wealthy people have always had more access to glamorous privileges than the average Joes. Miley Cyrus met the Queen of England; why should we surprised that these billionaires – who, it must be noted, are brilliant and successful human beings – are rubbing shoulders with politicians at the National Convention?

But it clearly does matter. It seems to be a cause of concern for many American people, and it’s the lack of regulation that seems to be disconcerting. FEC regulations and donor contribution limits exist in order to, yes, prevent an unfair fundraising advantage for either candidate, but they also exist to ensure that every individual vote – the ones from the broke 21 year-old college student all the way to the billionaire casino magnate – are counted equally. Elected officials are voted into office and represent the people with decision-making power. Everyone else is a tally mark on Election Day.

Super PACs weren’t breaking any rules in Charlotte or Tampa; they were simply showing how easily groups can get around them. The billionaire leaders of political action groups certainly aren’t bad people. Neither are the real-life, small-town equivalents of Buddy Garrity. But they’re powerful. And if a six or nine-figure check is enough to buy a meeting with a presidential candidate at a convention, average voters may fear that the people sign those checks will be given the power to voice their opinions at closed-door meetings about public policy issues that affect the entire nation.

In Dillon, Buddy was able to leverage his power to convince the head coach of a high school football team who to start at quarterback.

In an election year in the United States of America, Super PACs have already shown they have the money. Without regulation, voters seem to fear the leverage that money could create.

 

 

 

New Apps Explain Super PAC Spending

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As they do every four years, presidential candidates are beginning to appear much more frequently during our favorite TV shows’ commercial breaks.

With the November election mere months away, the likes of adorable Subaru commercials and creative Google spots have been overrun by political attack ads funded by Super PAC groups such as American Crossroads or Priorities USA.  While it’s no secret that prime-time advertising space on network channels is extraordinarily expensive, average Americans do not know very much about the groups who sign the checks to put these attack ads on the air.

In an effort to make Super PAC information more transparent and inform the general public, Sunlight Foundation – an educational organization committed to increasing transparency in US government – and Glassy Media – a new business founded by two grad students from Harvard and MIT – recently released mobile applications called Ad Hawk and Super PAC Apps, respectively.  Using the same audio recognition technology as apps such as Shazam, these apps can listen to a political advertisement and – within seconds – give users a comprehensive bio of the group that paid for it.  Both Ad Hawk and Super PAC App include a detailed summary of the group’s mission statement and business plan, how much money the group has raised and spent to date, and how much cash on hand the group has in the bank.  They also show how much money the PAC is spending on negative ads versus positive ads and which political candidate the group supports or opposes.

Political attack ads – from both sides of the aisle – have often had a tendency to border on the line of truth.  Few would go so far as to say the ads are littered with flat-out lies, but many would agree it’d be fair to say they typically look at large issues through a very tiny window.  And in today’s Digital Age, with information spreading so rapidly on so many different channels, it’s very difficult for average voters to find the truth.  Super PAC Apps has a solution to that problem.  After listening to an ad, the application gives viewers a list of information, statistics, or claims the advertisement made with links to reputable sources that either back up or disprove the content in the commercial.  This – in my opinion – will be the most important and most helpful feature of the new app.

Obviously, these new apps won’t stop the contributions from flowing into the PACs, and they certainly won’t stop the attack ads from going on the air.  They could, however, provide average voters with information they may not have obtained otherwise, and an informed general public is never a bad thing.  So far this election year, over $300 million have been contributed to various Super PACs across the country. Thanks to the Citizens United decision, these multimillion dollar contributions remain anonymous, prompting the media to coin the phrase “dark money.”  This isn’t to say Super PACs are “bad,” but the regulations at which they are permitted to operate have loopholes that have been found and exploited at the expense of the average voter.  Since the FEC has continued to show their unwillingness to update their disclosure regulations, technological innovation has stepped in to fill in the cracks.

These two apps, if they’re used by enough people, will accomplish their goals of increasing transparency between the government and the American people.

The donors may still be anonymous, the money still dark, and the ads still factually shaky.  But now, armed with our iPhones, at least we’ll know a little more about the groups who paid for them.

 

 

 

Obama for America goes mobile

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Even in election years marked by multimillion dollar donations to a new brand of political action committees–better known as Super PACs – President Obama continuously shows that he understands the value of small-money donors. The Obama campaign took grassroots fundraising to a historical level in 2008, raising 45% of their overall funds in small contributions. Now, four years later, grassroots fundraising has been given a new weapon. They’re going mobile.

Three months after the FEC unanimously approved a rule allowing text message contributions, Obama’s team is days away from wrapping up agreements with Verizon, Spring and T-Mobile to begin fundraising via text by the end of this week.

How will it work?

Text to donate campaigns have typically been used in large-scale charity movements. They made their first big splash during the aftermath of the earthquake that tragically devastated Haiti. In just two weeks, Americans contributed $30 million through text message donations.

In order to comply with FEC regulations and protect the interests of the mobile carriers, the approval of text message contributions came with strict rules and conditions.

  • Donations will be capped at $10 per text, $50 per month, and $200 per cycle.
  • The FEC has stated that campaigns are “solely responsible” for ensuring their donations comply with all FEC laws, including laws that prohibit donations from corporations and minors.
  • Wireless service providers may decide to accept donations for certain political committees and not others.
  • Contributions will be assessed a fee. Carriers and other payment processors will likely receive between 30 and 50 percent of the total contribution.

This is how text message fundraising will work. 1) Campaigns will distribute a phone number to a mobile payment processor for their supporters to text in order to donate. 2) Donors text that number, attest that they are legally permitted to contribute, and pledge their contributions. 3) The mobile payment processor and wireless carrier take their respective fees from the contributions. 4) The rest is given to the campaign by the wireless carrier. 5) The donation is added to the donor’s bill at the end of the month. 6) The donor pays the wireless carrier.

How large of an impact will it have?

Donors already have the incredibly easy-to-use option of contributing with credit cards online, so why is text messaging going to matter so much?

Well, simply put, because it’s easier. Almost 80 percent of Americans send or receive at least one text per day. Young college students – a group the Obama campaign has connected with on an unprecedented level – never leave home without a phone in their pockets. To many people, texting a five-digit number doesn’t feel like spending money, so the hope is that they’ll just hit send and not think twice about it.

Imagine being one of the tens of thousands of people who will be at the Democratic National Convention when President Obama accepts his presidential nomination. You’re in the moment, listening to the President of the United States of America deliver an inspired speech to his supporters. Cameras are flashing, flags are waving, and iPhones are recording. People are standing, clapping, screaming, and whistling as Obama thanks his crowd, promises change, and says God Bless America. He exits the stage, and as he’s walking off, a JumboTron flashes a message: Text GIVE to 62262.

Still caught in the moment, close to 70,000 people – the estimated attendance in Denver four years ago – around you pull out their phones and press the buttons to donate ten dollars.

It’d be hard not to do the same, and that’s why it’s going to be important.

Super PACs overshadow armies of small donors

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According to FEC data, over 2.5 million people have made political contributions to the presidential campaign of their choice of $200 or less. That sounds like a large number. That is a large number.

It just doesn’t mean as much as it used to.

Four years ago, President Obama’s campaign made history with their innovative techniques of encouraging small-dollar donors’ involvement. 45 percent of his funds came from individuals who contributed $200 or less. In this election year so far, that percentage has drastically shrunk.

Through June, the 2.5 million people who have made small donations to either presidential campaign represent only 18 percent of the two parties’ total funds. According to Politico, during this election, the top .07 percent of donors is more valuable than the bottom 86 percent. In an election where virtually all we hear from either candidate is the necessity to strengthen our middle class, the fundraising statistics are awfully top-heavy.

Of course, like most things, there are varying opinions on the matter. Some voters think money is money. If both sides are using these Super PACs, there is still a level playing field. Campaign finance directors have no choice but to fall on this side of the argument. In the last election, Obama urged wealthy Democrats not to spend money on third party groups supporting his campaign. Four years later, that message has been forced to change.

But a large amount of voters disagree. They don’t think it’s fair that the fundraising for a general election is being virtually dominated by the super wealthy.

It’s very possible that President Obama won four years ago because he convinced the small-dollar donors – the Average Joe’s, the middle class, the “regular” people – that he would represent their best interest. He developed a relationship with the people, and they showed their appreciation by contributing financially. Yes, the checks were small – five, ten, fifty dollars – but giving money seemed to provide his supporters with an invaluable sense of involvement with the campaign. That connection between candidates and voters may suffer if Super PACs continue financially overshadowing armies of small donors.

The small donor revolution that President Obama’s campaign pioneered four years ago seems to be coming to a sudden halt. Was this inevitable? Will it impact the upcoming election?

Those questions could be answered in the next few months.

 

Yes, Moneyed Interests Gained an Advantage After Citizens United, But Why Else is it Important?

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Considerable attention has been given to groups that gained a direct advantage as a result of the Citizens United case.  Significantly less has been devoted to understanding how the case affected other political institutions and what the implications may be.  Political parties are the wheels of democracy; they mobilize voters,  structure vote choices, recruit candidates, and function as a means of turning political preferences into policy.  In this article in Campaigns and Elections, Neil Reiff discusses how parties have been negatively impacted by recent campaign finance regulation (specifically since the McCain-Feingold Act in 2002) and why the outcome of the Citizens United case further exacerbates the problem.

Procedure and Participation: How the Rules Affect the Game

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A study analyzes how specific rules, in this case New York City’s “matching funds” program, affects the demographic and socioeconomic diversity of what groups choose to participate and contribute to campaigns.

The Supreme Court’s decision in the Citizens United case was largely predicated on theoretical concerns about free speech and First Amendment rights.  One of the key criticisms of the ruling was its failure to account for how the rules affect other important components of the electoral process, such as voter participation. New York City’s public financing matching program, in which contributions up to $150 are matched 6-1, is one example of how regulatory policy can have a positive effect on desirable outcomes; in this case, by increasing participation and expanding the diversity of the voter base.

A recent study conducted by the Campaign Finance Center and New York University compared the state’s campaign finance system to the city’s system in order to see which appeared better suited to encourage (rather than suppress) participation among all demographic and socioeconomic groups.  It determined that by encouraging small dollar donations, the city’s matching program provided candidates a greater incentive to reach out to a greater variety of voters, which had a positive impact on participation rates of diverse groups.

The report’s co-authors conclude: “the city’s public financing system appears to have achieved one of its key goals — strengthening the connections between public officials and their constituents.”  The apparent success of the program has led to discussion of extending the policy to statewide elections in New York.

To be sure, reconciling the abstract nature of First Amendment concerns, with the realistic effect of how rules impact the behavior of both candidates and voters, is no easy task. However, it is perhaps our role as practitioners that lead us to conclude that the methods of one over the other seem more appealing and  beneficial to promoting a free and fair democratic electoral process.

Article Link: Study: Public Financing Contributes to Greater Diversity of Participation in NYC Elections

 

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The Interaction of Personality and Procedure in Citizens United Decision

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One New Yorker piece by Jeffrey Toobin that we found particularly interesting discusses the role that Chief Justice John Roberts played in “orchestrating” the Citizens United decision.  In “Money Unlimited,” Toobin provides a comprehensive background of the events leading up to the now infamous decision that struck down the ban on corporate spending in elections. He examines the personality and individual motivations of the Justices, and explains how these crucial yet often neglected factors fundamentally shaped the landmark Citizens United ruling. Specifically, Toobin focuses on the impact that Chief Justice Roberts had on the ultimate outcome, and went so far as to state, “as American politics assumes its new form in the post-Citizens United era, the credit or the blame goes mostly to him.”

How did the Chief Justice accomplish such a feat? According to Toobin, John Roberts orchestrated the decision by manipulating the scope of the case, in other words, what legal question was being presented to the Court.  If Justice Roberts had maintained the narrow scope, then the decision would have been specific to the one case and would have had minimal impact beyond it. Instead, he shifted away from the specific facts of this one case and began focusing on more general and theoretical ones including the relationship between money, free speech, and First Amendment rights.  He also notes that Roberts also made use of tactical strategic choices. In assigning Justice Kennedy, both a noted First Amendment champion as well as the swing vote on the Court, the primary author of the Majority’s Opinion meant there would be no ambiguity in the final ruling.

As Toobin notes, “these rhetorical fights were a long way from the gritty business of raising and spending campaign money.”  Indeed, it is difficult to overlook the practical effect of the ruling now two and a half years later.  Speech may not be stifled, yet it is also certain that not all voices are being heard.

 

Article Link: Money Unlimited: How Chief Justice Roberts orchestrated the Citizens United Decision

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