This issue's shoptalkers: Marc Elias, chairman of the political law group at Perkins Coie; Robert Lenhard, former chairman of the FEC and member of the election and political law practice group at Covington & Burling; Neill Reiff, a founding member of the D.C.-based firm Sandler, Reiff, Young & Lamb; Michael Toner, former chairman of the FEC and partner at Wiley Rein; and Jason Torchinsky, partner at Holtzman Vogel.
C&E: What has surprised you the most about what has resulted in the wake of Citizens United?
Marc Elias: When the decision came down I think there was a lot of agreement that this was a big deal less because of the holding of Citizens United and more because of the atmospheric effect it would have. 527s were always complicated to explain to people. You had groups that would register with the IRS and could run ads that impacted elections but were not for the purpose of influencing elections. And thanks to Chairman Toner’s regime at the FEC, there were restrictions on what you could do once you solicited the money and what you could tell donors about how the money would be used. It was all just very complicated. What Citizens United did was not necessarily affect any of that, but it affected the psychology around all of it. I suspect the enduring legacy of Citizens United is less the narrow holding that corporations may engage in independent campaign speech, but rather what it meant for all kinds of groups and individuals and organizations. Now they could engage in independent expenditure activity without having to worry about some of the things that the FEC passed by regulation in the early part of the last decade.
Neil Reiff: We all can admit that the whole process of outside groups for the last several years has been the process of subterfuge—running ads that drew to a line, but didn’t cross a line. You could say that, in and of itself, destroys confidence in the system. The other thing is the reporting regime. We all know that the 527 reporting regime at the IRS is just inadequate and awful.
Jason Torchinsky: One of my biggest frustrations with the Citizens United decision is how the general media has represented it. I just had to deal with a corporate client who didn’t understand that his corporation couldn’t make a contribution to a candidate post-Citizens United. What I’m hoping the decision leads to is raising the limits on what people can actually give to candidates and party committees. I think when you cut off their ability to fundraise by artificially limiting the dollars they can raise, you weaken their voice.
Michael Toner: I did think that there would have been a legislative response in Congress after Citizens United. A tremendous effort was obviously made. In fairness, some of the reform groups really mishandled that opportunity, because they did have working margins to get something done had they taken a more narrow approach. Obviously, Citizens United broadened the ability of corporations to finance this independent spending. But if you look at the Super PAC reports, individuals are the ones contributing. You’re not seeing Fortune 100 companies out here. That may change, but right now it’s still the province of much smaller privately held companies and individuals.
Robert Lenhard: I think that’s true. There’s a great deal of reluctance on the part of the widely publicly traded consumer products companies to get into a political space that looks controversial.
Elias: For now. The fact is that when the party committees raised soft money, they got six figure checks from Fortune 100 companies and they were engaged in partisan activity—in some instances it was controversial advertising activity. It may be an acculturation. I’d be surprised if there’s not a greater level of involvement. On the 10th anniversary of the new ownership of Campaigns & Elections when you do that issue that looks back on the last decade, I think that’s what you’ll see. There’s reluctance now, but that tends to work itself out.
Torchinsky: I almost think that we’re going to see some yo-yoing of the Super PACs. When Citizens came out in 2010, it was largely too late in the cycle for Super PACs to organize and impact primaries. Now we’re seeing single candidate oriented Super PACs involved in presidential primaries. I think we’re going to see a lot of single candidate Super PACs in House and Senate races. And I think we’re also going to see the same thing at the state and local government level. I think that’s where the corporate money might come in.
Elias: I totally agree with that and in some respects I think it’s the most important point about Citizens United. For most companies, who the president is matters less day to day than who sits on the city council and the zoning board.
Reiff: I think Citizens United really stole the thunder of a different case, which in the scheme of Super PACs is way more important. The SpeechNow.org case is probably more important than Citizens United. The oral argument in SpeechNow happened the week after Citizens United was decided, and it was fascinating. It was an en banc hearing—nine judges—and they were completely fixated by the Citizens United decision and the absolutist language from Justice Kennedy on independent expenditures.
Torchinsky: The opening question from the chief judge of the 9th Circuit to the lawyer for the Institute for Justice was, “What do you have to add to what the Supreme Court said last week?” That was the question. It was as if the lawyer needed to say, “Nothing your honor” and just sit down and that would have ended the case.
C&E: Is there anything to this concept of hybrid PACs?
Torchinsky: I don’t think it’s a big deal. If you can raise unlimited money and do independent expenditures, why do you care if you can raise and spend money in a couple thousand dollar chunks and then dole out a little bit to candidates? I understand that the folks behind this are making a big deal of it in the press, but I just don’t see that as being something significant for major operative types.
Lenhard: I completely agree with that.
Elias: I actually agree from a slightly different perspective. Jason, you ask why anyone would even want to do this? My point is, why not just let them do it? As the law firm that represented EMILY’s List—they make contributions to candidates and have a Super PAC. So this just doesn’t feel like quite as much of a novel concept as some folks out there are promoting it as. Maybe I’m just missing what’s novel about it.
Torchinsky: I haven’t had a single political consultant come up to me and say, “I read about that and I want to do it.” With Citizens United, on the other hand, I get calls from people who want to form a Super PAC frequently.
Reiff: I think it’s totally irrelevant in the short term, but in the long term I think you will see a handful of significant ones. If I have a short term goal of doing independent expenditures in the presidential election, I don’t need a contribution account. But over time I do think there will be groups with longer term goals that may set up as hybrid PACs.
Torchinsky: There’s one thing that I’ve been wondering about: how about an independent expenditure committee that spends money and instead of saying, “Vote for Marc Elias,” says “Make a contribution to Marc Elias and go to MarkElias.com.” I almost see a really effective route for Super PACs to spend independently to help candidates raise money. I haven’t seen any of them actually do it yet. But if you can spend independently and say, “Vote for Marc Elias,” why can’t I ask people to give money to Marc Elias? There was no footnote in Citizens United that said you were free to do independent expenditures except if you’re asking somebody to give money to a candidate.
Lenhard: There’s a little bit of that out there, but there’s not much. I do think it’s an area where there’s an opportunity for people to have an impact.
C&E: How about this issue of transfers between c(4) groups and Super PACs?
Lenhard: I’ll be happy to speak on that topic since I’ve thought about it a little bit. This is the problem of what to do with entities that share resources and are attempting to allocate these costs. There’s a range of different ways to go about doing this, but it’s an area the FEC has looked at, and in some situations, which are in some ways analogous, has encouraged entities to place the costs in the federal PAC entity. The plus side of that is that it allows a fair amount of transparency about what the spending side of the equation is. The other side of the coin is that the entities that are making these transfers don’t have the same level of disclosure that federal PACs do. You could also try to have the funds flow the other way and put all the expenses in the c(4).
Reiff: And if you did that, no one would even be talking about this.
Torchinsky: I think the reformers are making more of this than there actually is. In their year end reports, Super PACs reported almost $100 million in receipts. I saw a story about this that identified two transfers totaling less than $100,000.
Elias: I’m mindful that my lunch is being paid for by a news outlet, but this is one of these things that I would get calls on from reporters and I just couldn’t understand what they were talking about. If Citizens United stands for anything it’s that nonprofit corporations can directly make independent expenditures. So if you have an undisclosed contribution into an organization that itself can spend the money, why wouldn’t it just spend the money if that’s what it was trying to do? Why would it go through the mechanism of giving it to a Super PAC to spend?
C&E: To the extent that you all think the media is off the mark in focusing on some of these things, where should the focus be?
Toner: I think that as institutional actors adapt to the changing landscape there is greater pressure placed on certain areas of the law, and that’s really important. Two that stand out for me are coordination, and then the question of how you define the primary purpose of c(4)s and c(6)s under the tax code. I think the significance of both of these areas of the law has really grown in the last couple of years. And again, there has been no litigation brought against the FEC’s coordination rules even though there is a really rich history of litigation challenging the FEC’s rules. If there’s a sense that the rules don’t go far enough, then people should put out their own proposals rather than just saying, “Everybody knows that certain alleged activity is coordinated.” I find that to be a real disservice to this debate. I’m actually very comfortable with the FEC’s coordination rules.
Elias: Well, you were one of the primary architects of them. (Laughter)
Toner: Another point I would make is about the IRS. It obviously has important regulatory jurisdiction here that has grown in importance in recent years, and what it chooses to do regarding the activity of c(4)s and c(6)s is going to be really important in the years ahead.
Reiff: I think coordination is going to be a huge fault line here. Super PACs are going to permeate every campaign. It’s not just going to be the presidential election. It’s going to be every House race and every Senate race. When you’re setting up your exploratory committee and doing the checklist of everything you need to run for office, a Super PAC is going to be on there. Campaign manager? Check. Political director? Check. Super PAC? Check. I think there is going to be a lot more focus on the movement of personnel and the role of candidates and the agents of candidates in creating Super PACs. I think we’ll see more publicity on that and a lot of complaints filed on that issue as we go forward.
Toner: It’s why I’ve really been surprised that the groups wanting more restrictions on campaign finance haven’t litigated over the coordination rules.
Reiff: I think we’ll just have to look back in a year and see how many enforcement complaints have been filed on coordination, and then go from there.
Lenhard: There’s plenty of information on the public record about this activity. Everybody has hired their own pollsters and their own media people, and everybody feels as though they are as smart as the next guy. So these entities tend to actually operate independently. There’s another lawyer who isn’t here today who often talks about having been the lawyer for entities that were on the party side—the independent expenditure and the coordinated programs—and watching them get different polling numbers and coming up with slightly different messages and thinking, “This is so silly.” But that’s just the way it played out. People didn’t make any effort to cross those lines. We’re speculating here, but part of it may be that this isn’t an area where there’s a lot of misconduct going on.
Torchinsky: I think the lawyers—probably a lot of the people sitting around this table—have scared a lot of the operatives into following the rules. The consequences of not following the rules, for the candidates in particular, are so great that it’s just not worth it.
Elias: To answer your question, I think the press and the public should focus more on the role of technology in elections. It’s always been the case that you can access public information, but the role of the Internet and social media has sped that up. I remember getting calls from candidates who would pull off the side of the road and say, “I just heard that someone heard something on TV and it was something like…” And you would get this secondhand account of what some ad was. Now, technology has really changed the way campaigns happen. All of that also impacts the law. You have this law that has not really been updated to deal with technology. It still clunks around on these issues. So if there was something that I think was underreported, it’s probably that. Frankly, where I have been critical of the commission has been where it doesn’t acknowledge the democratizing force that technology and the Internet has been.
C&E: On the coordination point, what does a Senate hearing accomplish? Is there really enough steam for that to move forward?
Lenhard: There’s an old Gore Vidal quote that I’ve been repeating: “People who think alike don’t need to conspire.” I think there’s a certain truth to that. If you pull a half dozen political consultants together from either side of the aisle, give them polling data, demographics, the make-up of a district—they will come up with similar strategies.
Elias: I would only say that Senator Schumer chairs the Rules Committee and introduced the DISCLOSE Act last Congress, which passed the House and came close to overcoming a Republican filibuster in the Senate. To the extent that Michael asks about the legislative response, the Rules Committee is the committee of jurisdiction over campaign finance. You would expect that it would have a natural interest in looking at the campaign finance system to see what works.
Toner: I think there’s a growing sense that the situation political parties find themselves in needs to be examined under the law. Virtually any entity in America, other than the national parties and the candidates themselves, can now spend unlimited corporate and individual contributions on election related activities. We’re not in an era where we are going to see unlimited corporate contributions to candidates, but I do think there’s a growing concern about the national parties. They are doing a very good job of trying to make the best of the environment they find themselves in, but I think we have to be fair in looking at how they try to compete with all of these outside groups. It’s very hard.
Elias: The DISCLOSE Act had in it some relief for the parties. That was one of the things that was disappointing for folks like me who thought the DISCLOSE Act could accomplish a bipartisan goal. This is something that I think was overlooked a little bit by my Republican colleagues and friends.
Toner: In fairness, there were a lot of terrible draconian provisions in there.
Elias: Well, there was a provision for parties to have lowest unit rate, which would have decreased the price of advertising for parties. There was a provision for parties to begin to be able to coordinate more with their candidates, which would have been a positive for parties.
Toner: There are two very straightforward solutions when it comes to parties: either unlimited coordinated expenditures with no ifs, ands or buts, or no contribution limits to parties. That’s a very straightforward approach.
Reiff: Well, this is my Sally Struthers moment: don’t forget about the poor state and local parties. If anyone got royally screwed by the Bipartisan Campaign Reform Act it was state party committees. It’s one of my primary areas of practice and it’s obviously been a boon for me because the organizations that are most regulated are state party committees. The reform groups—and I don’t know why—keep pushing the FEC to write even stricter regulations. I can tell you right now that the state parties are having a rough time.
Torchinsky: One other logical outgrowth of Citizens United that may come this year or may come after November is challenging this idea that you can prohibit corporate contributions but still allow unlimited individual contributions. I think the prohibition on corporate contributions directly to candidates is inconsistent with the logic of Citizens United.
C&E: How well has the FEC handled all of this since 2010?
Lenhard: I think it’s clearly a difficult period for the commission. There is a more profound ideological divide among the commissioners today than I think there has historically been when it comes to the appropriate scope of the law. On the other side of the coin, there is a lot of stuff happening there that gets no press. One technical issue that everyone in this room deals with a lot is the question of what constitutes the restricted class of a corporation. We’ve seen four decisions there in the last two years, and there’s another one pending. So that’s just one area where the commission has been helpful and that’s important for practitioners.
Reiff: If you were a practitioner back in the day and you were trying to strategize about your case and how to deal with the FEC, who you were as a party committee mattered. But now, whatever you want to say about the commission, the variable of who you are is much less important than it used to be. As a Democratic attorney, I’m getting a much fairer shake on an issue with the full commission, based on the issue itself and not based on who my client is. I find that refreshing.
Toner: I think that’s a very important comment, because any allegation that the FEC is functioning in a partisan manner … I just don’t see how you can seriously advance such a proposition. In fairness, when you have sweeping judicial rulings like this, it’s always a struggle to try to implement those decisions as an administrative agency. But the idea that this is some partisan undertaking? The record just doesn’t support that. I’m not sure that anyone at this table would be comfortable with an agency that could proceed on a party line vote, yet that’s the premise of virtually every proposal to overhaul the agency. I would be gravely concerned about that.
Torchinsky: The one thing I will say for the current crop of commissioners is that when major issues do come up, at least you know where the commissioners stand. If you submit an advisory opinion or have an enforcement action, you know where the commissioners are going to be. Regardless of whether the complaintant or the respondent is a Republican or a Democrat, these commissioners have been remarkably consistent about the positions that they take. I really admire the commission for that.
Elias: One of the things that Michael had pointed out to me years ago, and that I had never contemplated, is that the FEC is somewhat unique in that the staff does not operate under the direction of the chair.
Toner: Right. It’s not like the Federal Communications Commission where if you head a bureau at the FCC, you work for the chairman. The FEC is a different animal.
Elias: And that impacts a lot of things— not just at the commission decision level, but all the way down the agency.
Torchinksy: At the lower levels you have a lot of staff driven proceedings where the commissioners aren’t involved. The commissioners aren’t driving the day to day activity of the agency.
Lenhard: And to be somewhat more generous to the staff, what they would say is, “We have no idea what those commissioners are thinking because they never agree on anything. We’re just doing the best we can.” The product is that there’s not a singular titular head of the agency with direct command and control over the staff. There are six people who have direct command and control over the staff.
Toner: It also really matters who the general counsel is. It really matters who the staff director is. I’m confident that 99 percent of your readership probably isn’t aware that the FEC has a staff director, and if so, what does that person do? The audit division, for example, reports to the staff director. Similarly, the general counsel side serves a very important role. You’re making recommendations to the agency and you have hundreds of lawyers reporting to you. It’s an important piece of the puzzle.