Saturday, January 30, 2010

Inviting Foreign Influence

I get dizzy easily, so to avoid going in circles, I'll comment only on one remark made in response to the latest posting on Citizens United v. Federal Elections Commission. It is the facet most energizing congressional Democrats. However, if D.B. is correct, they are wasting their time on what is a moot point, the ruling having left untouched the ban on foreign influence in U.S. elections. He cites the following passage from The New York Times:

President Obama called for new legislation to prohibit foreign companies from taking advantage of the ruling to spend money to influence American elections. But he is too late; Congress passed the Foreign Agents Registration Act in 1996, which prohibits independent political commercials by foreign nationals or foreign companies."

As (Jerry) Seinfeld periodically dead-panned in his sitcom of the same name: I don't think so. Or, rather, it turns on the definition of "foreign nationals" and "foreign companies." Fred Werteimer of Democracy 21 explains

Section 441e prohibits contributions or expenditures by any "foreign national" - which is defined to include any corporation "organized under the laws of or having its principal place of business in a foreign corporation."

Thus, a corporation organized in Germany, or with its headquarters in China, remains subject to a ban on spending in U.S. elections.

But there are domestic corporations - those organized under state law in the United States - which are and can be controlled by foreign interests.

Those kinds of corporations - domestic corporations owned by or controlled by foreign governments, foreign corporations or foreign individuals - are not in any way prevented by section 441e from spending corporate treasury funds to influence U.S. elections.

Prior to the Citizens United decision, these corporations were prevented from spending their funds on expenditures to influence federal campaigns by the general prohibition on corporate campaign spending. But now that that prohibition has been struck down, these foreign-controlled domestic companies are free to spend their treasury funds directly to influence U.S. elections.

Thus, there is no statutory prohibition against foreign-controlled domestic corporations from making expenditures to influence federal elections, following the Citizens United decision.

The Federal Election Commission has a regulation in this area, but it is inadequate and does not provide effective protection for the public against foreign involvement in federal elections.

The FEC regulation prohibits any foreign national from directing, controlling or directly or indirectly participating in "the decision-making process" of any person, including a domestic corporation, with regard to that person's "election-related activities," including any decisions about making expenditures.

The regulation does not prevent foreign owners from making their views known to their American domestic subsidiaries about the governmental and political interests of the controlling foreign entity; it just prevents them from directly or indirectly participating in the formal "decision-making process."

Those who manage the domestic subsidiaries, furthermore, can be expected to know the governmental and political interests and needs of their foreign owners, and to be responsive to the needs of their owners, even absent any participation by the foreign owners in the formal "decision-making" process regarding expenditures in federal elections.

In other words, the existing FEC regulation is an inadequate and ineffective safeguard, by itself, to prevent foreign nationals from exerting influence on U.S. elections through the use of election-related expenditures made by domestic corporations which they own or control.

Thus, following the Supreme Court's invalidation of the ban on corporate expenditures, section 441e does not address at all the problem of expenditures made by domestic subsidiaries of foreign companies or domestic corporations controlled by foreign nationals, and there is no statutory prohibition on foreign nationals being directly involved in expenditure decisions made by foreign owned domestic corporations.

The only restriction here is an ineffective FEC regulation administered by an agency that is widely recognized as an abject failure in carrying out its responsibilities to enforce the nation's campaign finance laws.

The Center for Public Integrity observes

CITGO Petroleum Company — once the American-born Cities Services Company, but purchased in 1990 by the Venezuelan government-owned PetrĂ³leos de Venezuela S.A. The Citizens United ruling could conceivably allow Venezuelan President Hugo Chavez, who has sharply criticized both of the past two U.S. presidents, to spend government funds to defeat an American political candidate, just by having CITGO buy TV ads bashing his target.

And it’s not just Chavez. The Saudi government owns Houston’s Saudi Refining Company and half of Motiva Enterprises. Lenovo, which bought IBM’s PC assets in 2004, is partially owned by the Chinese government’s Chinese Academy of Sciences. And Singapore’s APL Limited operates several U.S. port operations. A weakening of the limit on corporate giving could mean China, Saudi Arabia, Singapore, and any other country that owns companies that operate in the U.S. could also have significant sway in American electioneering.


Some legal observers fear the ruling would open up the floodgates for any corporation operating in the United States, no matter who owns them. J. Gerald Hebert, executive director and director of litigation at the non-partisan Campaign Legal Center, told the Center for Public Integrity that the existing prohibition on foreign involvement does not refer to foreign controlled domestic corporations. “With the corporate campaign expenditure ban now being declared unconstitutional, domestic corporations controlled by foreign governments or other foreign entities are free to spend money to elect or defeat federal candidates,” he believes.

Politico speculates that wealthy foreigners "might start corporations in the U.S. solely or primarily to funnel money in to spend on U.S. elections." How about that for irony- free speech in the form of independent political commercials off-limits to a class of individuals (foreigners), but open to the corporations they form.

If legislation, such as that contemplated by Senator Chuck Schumer (D.-NY) and Rep. Chris Van Hollen of Maryland to curb the influence of foreign nationals and foreign companies in U.S. elections, is unnecessary, someone better alert the corporate sector. According to The National Journal through Think Progress, "The Organization for International Investment a trade group representing foreign banks, oil companies, and other foreign corporations operating in the United States, 'lashed out' at Van Hollen’s proposals." Apparently, the organization was not comforted by the article in The New York Times.

Hopefully, efforts by Democrats to close any loopholes opened by the court's ruling will be joined by those Republicans who are more interested in national security than in protecting the interests of multinational corporations. Both of them.

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