Election 2010: The Loophole Created by 11 C.F.R. § 104.20(c)(9) and Citizens United and the Ineffectiveness of the Campaign-Finance-Law Framework in Iowa

• Author: Brian P. Flaherty
• Position: J.D. Candidate, The University of Iowa College of Law, 2012
• Pages: 239-274

239

Election 2010: The Loophole Created by

11 C.F.R. § 104.20(c)(9) and Citizens

United and the Ineffectiveness of the

Campaign-Finance-Law Framework in

Iowa

Brian P. Flaherty

ABSTRACT: The loophole in the campaign-finance-law framework created

by the combination of 11 C.F.R. § 104.20(c)(9) and Citizens United v.

FEC allowed nonprofit organizations to use unlimited and anonymous

donations from corporations to fund political communications during the

2010 election campaign. Congress failed to pass legislation to address

Citizens United’s impact, and Iowa’s campaign-disclosure system alone

was insufficient to prevent hundreds of thousands of dollars worth of

independent political spending by nonprofit organizations from changing

the dynamic of the 2010 campaign without providing information to Iowa

voters as to who was funding their speech. This Note examines the

campaign-finance-law framework in existence in Iowa in 2010, the use of

the loophole by two organizations with ties to Iowa, and the ramifications

that the loophole and its origins had on the exercise of corporations’ right to

free speech. The Note discusses options for policymakers to address the

loophole and obstacles the options would face. The Note concludes, with an

eye on the 2012 Iowa Caucuses, with a call to action to address the failings

of the campaign-finance-law framework, including the loophole.

I. INTRODUCTION ...................................................................................... 241

II. BACKGROUND ........................................................................................ 242

 J.D. Candidate, The University of Iowa College of Law, 2012; B.A.s Virgin ia

Polytechnic Institute and State University, 1999, 2001. I would like to thank the many people

who assisted me in the completion of this Note, including Megan Tooker, Pr ofessor Sheldon

Kurtz, the student writers and editorial board members of the Iowa Law Review Volumes 96 and

97, and especially Professor Randall Bezanson for his advice during our many conversations.

Lastly, I would like to thank the many dedicated journalists whose works are cited in this Note,

without whose investigative work into the financing of the 2010 election this Note would not

have been possible.

240 IOWA LAW REVIEW [Vol. 97:239

A. PASSAGE OF THE BIPARTISAN CAMPAIGN REFORM ACT ....................... 242

B. THE FEC MAKES A MINOR RULE WITH MAJOR IMPLICATIONS ............ 243

C. CITIZENS UNITED V. FEC ............................................................... 245

D. THE FEDERAL RESPONSE TO CITIZENS UNITED ................................. 247

E. IOWA’S RESPONSE TO CITIZENS UNITED ........................................... 248

III. SO MUCH MONEY: THE CONDUCT OF THE 2010 ELECTION UNDER

THIS CAMPAIGN-FINANCE-LAW FRAMEWORK ......................................... 251

A. THE 2010 IOWA BALLOT ................................................................. 251

B. THE LOOPHOLE IN THE CAMPAIGN-FINANCE-LAW FRAMEWORK

CREATED THROUGH THE COMBINATION OF 11 C.F.R.

§ 104.20(C)(9) AND CITIZENS UNITED ........................................... 252

1. The U.S. Chamber of Commerce: The Big Business

Advocate .................................................................................. 256

2. American Future Fund: The Iowa-Based Conservative

Messenger ............................................................................... 259

C. THE INABILITY OF THE IOWA DISCLOSURE FRAMEWORK TO PROVIDE

IOWA VOTERS WITH INFORMATION ABOUT WHO WAS FUNDING THE

ORGANIZATIONS SPEAKING TO THEM ................................................ 262

IV. THE LOOPHOLE AND FUTURE POLICY POSSIBILITIES ............................. 265

A. THE OBSTACLES TO CLOSING THE LOOPHOLE ................................... 266

1. Federal Difficulties: Politics and the Litigation Defense ..... 266

2. Iowa Difficulties: Federalism and Geography ...................... 267

B. ENACT LIMITED FEDERAL DISCLOSURE REGULATIONS THAT

FURTHER IMPLEMENT THE REASONING BEHIND THE DECISION IN

CITIZENS UNITED ........................................................................... 269

V. CONCLUSION ......................................................................................... 273

2011] ELECTION 2010 241

I. INTRODUCTION

What a change; what a change had come over that Senate in less

than 200 years! I think we might also, with great sadness, reflect

upon the report by Cineas when he refer red to the Roman Senate

after he had witnessed it—as I say, not as a “gathering of venal

politicians, not a haphazard council of mediocre minds,” but in

reality “an assemblage of kings.” What a Senate that was . . . . It is in

even greater sadness that we noted Jugurtha’s words [as he left

Rome after being expelled by the Senate 173 years after the report

of Cineas]: “Yonder is a city up for sale, and its days are numbered

if it ever finds a buyer.” But that is what is happening in this land of

ours and in this body of ours.1

Senator Robert Byrd, first elected to the U.S. Senate in 1958, opened

his comments on the Bipartisan Campaign Reform Act of 2001 (“BCRA”)

with the characterizations of Cineas and Jugurtha to introduce his

comparison of the costs of U.S. Senate campaigns between when he first ran

in 19582 and the 2000 campaign.3 His speech reminds us, as it reminded the

Senate, that the connections between power and moneyed interests and

their potential for corrupting government are not new problems. It is the

question of how that potential for corruption can be mitigated through the

constitutional regulation of campaign finance that continues to challenge

policymakers and the courts today.

This Note examines the campaign-finance-law framework in effect

during the 2010 election and how the election was conducted within that

framework. The Note will specifically examine a loophole created in the

framework and how organizations took advantage of the loophole to pay for

political communications funded by anonymous contributions. Part II of this

Note describes the aspects of the campaign-finance-law framework relevant

to the loophole and 2010 federal and Iowa legislative efforts on campaign-

finance regulation. Part III continues by examining the 2010 election in

Iowa and how the loophole was used by two organizations to fund political

communications. Part IV discusses the loophole and future policy proposals.

This Note concludes in Part V with a brief look at future implications if the

status quo remains in place.

1. 147 CONG. REC. 3970 (2001) (statement of Senator Byrd). Cineas was a philosopher

and envoy of the Greek general Pyrrhus who visited Rome in 280 B.C. Jugurtha was a Numidian

prince who was ordered to leave Italy by the Roman Senate in 107 B.C. Id. at 3969–70.

2. Massimo Calabresi, Robert Byrd, Longest-Serving Senator, Dies, TIME, June 28, 2010,

http://www.time.com/time/magazine/article/0,9171,2001021,00.html.

3. 147 CONG. REC. 3969–70 (2001) (statement of Senator Byrd).