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Appeals Court Rejects Bid to Demand Full Campaign Finance Disclosure

Updated 5:36 p.m.

In a blow to advocates of campaign finance disclosure, a federal appeals court today threw out a lower court’s finding that the Federal Election Commission’s public reporting rules are at odds with campaign finance law.

The ruling by the U.S. Appeals Court for the District of Columbia Circuit was a reversal of fortune for Rep. Chris Van Hollen (D-Md.), who had declared victory in March when a federal district court upheld his challenge to the FEC disclosure rules.

The appeals court’s action shuffles the disclosure rules for the second time in this election cycle for outside groups spending tens of millions of dollars on ads targeting candidates, much of it without reporting their donors. At issue is whether political players who run electioneering communications – ads that picture or name candidates on the eve of an election – must publicly report their backers.

The lower court had agreed with Van Hollen that groups mounting such ads must say who paid for them, in accordance with the 2002 soft money ban known as the Bipartisan Campaign Reform Act. The FEC rules essentially require public reporting only for donors who earmark their contributions for those ads, a regulation Van Hollen said was too narrow and contrary to the 2002 law.

Two conservative groups that intervened in the case – the Hispanic Leadership Fund and the Center for Individual Freedom – challenged that ruling to the full appeals court, which today sided with them.

The Center for Individual Freedom has received $2.75 million from the conservative nonprofit group Crossroads GPS, according to the Center for Responsive Politics. Founded by GOP operatives Karl Rove and Ed Gillespie, Crossroads GPS has spent $104.7 million on ads targeting candidates in this election cycle, according to an analysis by the nonprofit Sunlight Foundation.

Non-disclosing groups such as Crossroads GPS had largely stopped running electioneering communications ads in the wake of the district court ruling, switching instead to explicit campaign ads that, because of a quirk in the law, face less stringent disclosure rules.

Now, it’s anyone’s guess what outside groups will do. Trade associations such as the U.S. Chamber of Commerce and Democratic-friendly environmental and women’s groups have also spent heavily on candidate-focused ads without disclosing their donors. While today’s ruling essentially puts the less stringent FEC rules back into effect, political players may opt to play it safe by avoiding ads that require full disclosure.

While Van Hollen failed to convince the appeals court that the FEC rules clearly contradict the law, he still has an opening to argue that the FEC regulations are “arbitrary and capricious,” a standard established by a Supreme Court case known as Chevron USA v. Natural Resources Defense Council Inc.

The appeals court has now ordered the district court to require the FEC to “promptly” take one of two actions: either rewrite its disclosure regulations or come before the court to defend them. An FEC spokeswoman said only that “the commission is reviewing the decision.”

“The court is affirming our view that the statute is not as clear as Congressman Van Hollen said it was,” said Jason Torchinsky, a partner with Holtzman Vogel Josefiak who is representing the Hispanic Leadership Fund.

Van Hollen called the appeals court ruling a “blow to transparency.” He said he and other disclosure advocates will continue to examine their options, and he expressed hope that the FEC will issue a new disclosure rule in line with the law.

“The Court of Appeals’ decision today will keep the American people, for some time being, in the dark about who is attempting to influence their vote with secret money,” Van Hollen said in a statement.

“It’s a disappointment,” said Paul Ryan, senior counsel with the Campaign Legal Center, which sided with Van Hollen in the challenge. “The Campaign Legal Center has found fault with this FEC regulation from day one.”

But in practical terms, Ryan added, the appeals court ruling may not dramatically affect disclosure in the weeks that remain before Election Day.

“The bottom line here is that outside spenders have shown a willingness to bend over backwards to hide their supporters from the American voters,” he said. “And there is no reason to think they won’t continue doing the same thing.”

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