FEC Ruling Leaves Ad Uncertainty

Posted April 6, 2012 at 5:12pm

A court ruling rejecting Federal Election Commission disclosure requirements as too lax has left political players unsure how much they need to report about the financing of issue ads, making the agency a battleground in the dispute over secret money in 2012.

The March 30 ruling by U.S. District Court Judge Amy Berman Jackson orders the FEC to rewrite disclosure rules drafted after enactment of the 2002 McCain-Feingold campaign finance law that the court deemed inadequate.

Few expect the six-member agency to comply promptly with the order. Divided evenly between Republicans and Democrats, the FEC is notorious for partisan deadlocks. It hasn’t yet mustered a quorum to weigh new regulations arising from the Supreme Court’s 2010 ruling in Citizens United v. FEC, though it did say it would no longer enforce restrictions that kept labor unions and corporations from making political expenditures.

“They’re very tardy in doing this, frankly,” said Indiana election lawyer James Bopp Jr., who petitioned the FEC to write new regulations within weeks of the Citizens United ruling. “There are several regulations that depend exclusively on the sections of the law that the U.S. Supreme Court struck down, and the only responsible course for the FEC would have been to repeal those regulations.”

The March 30 ruling muddies the waters further. At issue is whether trade associations or tax-exempt advocacy groups must report the donors behind the issue ads known as electioneering communications. Such ads picture or name a candidate on the eve of an election but stop short of urging for a vote for or against the individual. Nonprofits spent some $133 million on the ads in 2010 without disclosing donors.

The McCain-Feingold law, officially the Bipartisan Campaign Reform Act, included broad disclosure rules for the ads. But FEC regulations written in the wake of its passage only require identifying contributions specifically earmarked for such ads. Rep. Chris Van Hollen (D-Md.) challenged the rules in court, arguing they were too narrow and left loopholes.

Jackson agreed, concluding that “Congress spoke plainly” and “did not delegate authority to the FEC to narrow the disclosure requirement through agency rulemaking.” Van Hollen and his allies say the decision is only part of what may evolve into a multifront war over agency rules.

“This is a very clear instruction from the court,” Van Hollen said in an interview. “The opinion was crystal clear, and pointed the FEC in the direction demanded by the law. So I think the FEC is going to be playing with fire if they try and thumb their noses at the court.”

Van Hollen is mulling a second lawsuit that would target a separate set of FEC disclosure rules governing independent campaign ads by super PACs and other outside groups, which he said contain a similar loophole. “We are in the process of looking at our options” and will decide whether to proceed ‘‘very soon,’’ Van Hollen said.

Two conservative groups that intervened in the case, the Center for Individual Freedom and the Hispanic Leadership Fund, have requested a stay of Jackson’s decision and announced plans to appeal.

Lawyers for both groups have argued that the disclosure rules are a reasonable interpretation of the McCain-Feingold law, and that the Supreme Court’s Citizens United ruling, which deregulated corporate and union campaign spending, validates those regulations. The agency has 60 days to decide whether to appeal. No FEC commissioner responded to a request for comment.

The uncertainty has left interest groups unsure whether to follow FEC regulations as written or disclose more information about donors, in the spirit of Jackson’s decision. Some groups may wager that the FEC and the Justice Department, which also has jurisdiction over campaign finance, won’t prosecute violators without clear-cut federal standards.

Jason Torchinsky, an election lawyer representing the Hispanic Leadership Fund, said the mere fact the court invalidated the FEC disclosure rules will have a chilling effect and lead groups to pull issue ads. “It’s going to have the effect of stifling speech,” he said.

“To the degree that individuals view the election laws as murky, counterintuitive or the product of an Alice in Wonderland-like experience, the effect of this decision may serve to reinforce that view,” said a recent client memo circulated by Covington & Burling.

Paul Ryan, FEC program director and associate legal counsel at the nonpartisan Campaign Legal Center, said the agency should promptly update its rules instead of perpetuating confusion.

“Unfortunately, it’s highly unlikely that this dysfunctional commission will heed the court’s order anytime soon,” he said.

Frustration with the agency is mounting on and off Capitol Hill. Both reform advocates and House Democrats have called on President Barack Obama to replace several FEC commissioners whose terms have expired. Said Fred Wertheimer, president of the watchdog group Democracy 21: “We are finally reaching the breaking point with the Federal Election Commission.”