Dark money rises: federal and state attempts to rein in undisclosed campaign-related spending.

• Author: Eagan, Kristy
• Position: P.801-829

Introduction I. Background: Free Speech Rights and Compelled Disclosure A. Free Speech Rights 1. The Origins of and Justifications for Free Speech Rights 2. Common Challenges to Laws Regulating Election-Related Speech B. Compelling Disclosure 1. The Interests in Compelling Disclosure 2. The Interests in Avoiding Disclosure C. The Evolution of the Federal Election Campaign Act: From Buckley to Citizens United. II. The Current State of the Federal Disclosure Requirements A. The Current Federal Disclosure Requirements B. The Inadequacies of the Federal Requirements 1. Various Ways of Avoiding Disclosure Under the FECA 2. The Effect of Splits on Disclosure a. Defining Express Advocacy b. Defining an Electioneering Communication c. Determining When an Organization Qualifies as a PAC d. The Ensuing Effects on Disclosure III. State Attempts to Go Beyond the Federal Requirements A. Determining What the Supreme Court Said 1. The Major Purpose Test 2. Express Advocacy and Its Functional Equivalent B. Determining What Exactly Is Exacting Scrutiny 1. Expanding the Definition of Electioneering Communications 2. PAC-Style Disclosure Requirements IV. Where Do We Go From Here: Plugging Holes and Increasing Disclosure A. Congress's Role B. The FEC's Role C. The Courts' Role 1. The Heightened Specificity Standard Should Not Apply to Disclosure Laws 2. Courts Should Be Deferential to State Attempts to Discover the Extent of Outside Influence in their Local Elections Conclusion Introduction

Perhaps the most infamous of attack advertisements, titled "Peace, Little Girl," depicted a little girl in a field plucking petals from a daisy as she counted up from one to nine. (1) At the end of her count, a man's voice began counting down from ten. (2) Upon reaching zero, an atomic bomb exploded. (3) As the mushroom cloud appeared on the television screen, the voice of then-President Johnson stated: "These are the stakes--to make a world in which all of God's children can live, or go into the dark. We must either love each other, or we must die." (4) The ad was intended to attack statements that Barry Goldwater, the Republican presidential candidate, had made regarding nuclear warfare. (5) Although the ad aired only once, it is credited with ushering in a new era of American politics. (6) However, attack ads are nothing new--neither are anonymous ones.

In 1800, President John Adams faced reelection against Thomas Jefferson. (7) The Alien and Sedition Act prevented anyone from openly criticizing the President, so Jefferson sought other ways to get his message out. (8) Jefferson anonymously distributed campaign propaganda (9) and financially supported James Callender while encouraging him to publish a series of essays in the Richmond Examiner that attacked Adams, referring to him as a "hideous hermaphroditical character which has neither the force or firmness of a man, nor the gentleness and sensibility of a woman." (10) Adams fought back, calling Jefferson "a mean-spirited, low-lived fellow, the son of a half-breed Indian squaw, sired by a Virginia mulatto father." (11)

Today, negative campaign advertisements dominate the airwaves during election cycles. (12) Just as Americans have come to expect to see more holiday-themed advertisements in November and December, (13) they too have come to expect a flood of negative campaign ads in the months preceding elections. (14) In 2012, Americans witnessed the most expensive election campaign in history, topping off at approximately seven billion dollars. (15) Modern attack ads, produced by strategy teams including behavioral scientists, (16) are noticeably less overt, although no less persuasive, than they were in the nineteenth century. (17) Rather than employ traditional name calling, modern attack ads use subliminal messaging (18) and sympathetic personal stories to paint negative pictures of political candidates. (19)

In 2012, an advertisement produced by Priorities USA Action used the personal story of Joe Soptic. (20) In the ad, Soptic described how he lost his job and health insurance plan when Governor Romney decided to close the plant where Soptic worked. (21) Soptic's wife later became ill but did not tell him until he brought her to the hospital and they discovered that it was too late to save her. "I don't know how long she was sick and I think maybe she didn't say anything because she knew that we couldn't afford the insurance," Soptic lamented. (22) The ad ended with Soptic stating: "I do not think Mitt Romney realizes what he's done to anyone, and furthermore I do not think [that he] is concerned." (23) The ad was widely criticized as tying Governor Romney to cancer. (24) Nevertheless, Priorities USA Action defended the ad, calling it "wildly successful." (25) President Obama responded in a news conference, stating: "I don't think that Governor Romney is somehow responsible for the death of the woman that was portrayed in that ad. But keep in mind this is an ad that I didn't approve." (26)

Priorities USA Action is a Super PAC, (27) which means that it does not contribute to or coordinate with federal candidates and can receive unlimited contributions from individuals, corporations, and labor unions. (28) Given that Super PACs are subject to extensive disclosure requirements under the Federal Election Campaign Act ("FECA"), one would think that it would be easy to determine who funds Priorities USA Action's ads, but that is not always the case. Some of the information disclosed on Priorities USA Action's itemized receipts clearly identifies the source of contributions, but some information does not. (29) For example, in 2011, Priorities USA Action received $215,234.42 in contributions from Priorities USA, a 501(c)(4) non-profit organization that is not required to disclose the source of its contributions when it contributes that money to a Super PAC. (30)

To date, the identities of the contributors of nearly 30% of money spent in 2012 by outside organizations on campaign-related activity subject to disclosure remain undisclosed. (31) That figure was higher in 2010, at 44%. (32) These statistics stand in stark contrast to prior election years, where undisclosed spending averaged less than 5% and never exceeded 13.3%. (33) As undisclosed or "dark" money makes up a greater portion of overall spending, the influence of anonymous donors increases, and, accordingly, the public interest in knowing the sources of contributions becomes more imperative. (34)

Some commentators point to the recent rise in undisclosed spending as evidence that the interest in avoiding disclosure is both strong and prevalent. (35) They also point to statistics showing that when disclosure requirements change, campaign spending shifts to those activities that are subject to less or no disclosure. (36) They argue that individuals and groups that are determined to remain anonymous will choose to redirect their spending, even where the alternatives are more costly, rather than subject themselves to disclosure. (37)

For over a century, Congress has recognized the need for campaign finance reform. Congress first addressed this need in 1907 when it passed a law banning corporations and national banks from making contributions in connection with political elections. (38) Over the course of the next forty years, Congress passed additional legislation that, among other things, barred unions and corporations from making independent expenditures, established contribution and spending limits, and required disclosure of certain contributions and expenditures. (39) In 1971, these laws were consolidated into the "FECA. (40) Congress has amended the FECA several times since its enactment, twice passing sweeping legislation that promised increased disclosure. (41)

The actions and inactions of the executive and judicial branches of the federal government, however, have undermined Congress's intentions and contributed to the recent rise in dark money. The decisions of the Supreme Court' and the rules promulgated by the Federal Election Commission ("FEC") have inadvertently created easily exploitable loopholes in the FECA's disclosure provisions. (42) The FEC Commissioners are divided evenly over the proper scope of the agency's authority and the permissible interpretation of several provisions of the FECA and corresponding regulations. (43) These splits have prevented the agency from promulgating any substantive rules since Citizens United v. FEC (44) and from taking action against any conduct that falls beyond the scope of the FECA, as three Commissioners have narrowly interpreted it. This narrow reading essentially creates a bright-line...