On Thursday, the FEC will return to the question of foreign nationals’ involvement in United States elections. This is an important question that deserves appropriate attention from our government.  Be it the role of Chinese government-linked funds in the 1996 presidential campaign or the Russian government-linked cyber intrusion in the 2016 presidential race, Congress and the regulatory agencies responsible for ensuring free and fair elections should periodically review the legal protections in place, assess if they are adequate, and improve them if they are not.

So why does the FEC appear headed to yet another deadlock and battling press narratives on this important issue?  In part it’s because there is a fundamental disagreement among the commissioners about how serious the problem is.  In addition, this appears to be another instance where longstanding animosity between the commissioners makes building consensus difficult.  Thursday will also be a test of Chair Steve Walther and Vice Chair Caroline Hunter’s ability to manage the agency through this difficult, but important issue.  After reviewing the competing proposals and the last two hearings, I think consensus is possible, even if difficult.  But first, it’s important to recall what is in dispute.

Existing Law

Federal law currently prohibits foreign nationals from making contributions or expenditures to influence federal, state or local elections.  It bars contributions and expenditures, whether they are made “directly” or “indirectly.”  It explicitly bans contributions to political parties, independent expenditures, electioneering communications, donations as well as contributions, and the giving of a “thing of value.”  52 U.S.C. 30121(a).  It also bars U.S. citizens from facilitating a violation by soliciting, accepting or receiving contributions or donations from foreign nationals.  The FEC’s regulations make clear that foreign nationals cannot participate in a U.S. citizen’s decision-making process about election-related activities, or in PAC decision-making.  11 CFR 110.20(i).

Who is a foreign national?  The statute excludes U.S. citizens and individuals who are lawful permanent resident aliens (“green card” holders) from the ban.  But what about corporations?   When are they “foreign nationals”?  For years, a majority of the FEC commissioners found a corporation could participate in otherwise permissible election-related activity, such as operating a federal PAC or giving to candidates in states that allow corporate contributions, if three things were true: the company was incorporated in the United States; all election-related decisions were made by U.S. citizens; and the funds used were generated from U.S. operations.  The effect of this rule has been that a U.S. subsidiary of a foreign corporation is not a “foreign national” if it complies with these requirements.

The Split

Commissioners Steven Walther and Ellen Weintraub, as well as former Commissioner Ann Ravel, have long argued that the Supreme Court’s decision in Citizens United v. FEC requires a fundamental re-thinking of this construct.  They argue that existing protections are inadequate after the Supreme Court gave corporations the right to make unlimited independent expenditures, and a weakening of the disclosure rules led to a proliferation of “dark money” groups, whose donors are masked from the public.  In this world, they argue, a foreign power or corporation could influence our elections without our knowing it.  While they can cite few specific violations, they view the risk to be sufficiently great to justify acting before disaster strikes, rather than after.

Room for Reform?

Chair Walther and Commissioner Weintraub suggest the FEC change the definition of when a corporation is a foreign national by focusing on ownership and/or control of the entity, rather than the current rule’s focus on decisionmaking about political spending.  They are flexible as to where the new lines should be drawn: Is 5% ownership sufficient for an entity to become a “foreign national” or is 51% or 100% better?  Should it matter if the foreign owner is a government entity or private sector one?  Should the presence of one or more foreign nationals on the board of directors be determinative?

For the Republicans, all of these suggestions are an overreach, unsupported by statute or experience.  While they have been willing to offer suggestions on expanded protections, they have been unwilling to abandon a test that focuses on the country of incorporation, U.S. citizens’ exclusive control of decisionmaking, and a domestic source of the funds used for political spending.

A second area of disagreement is over process.  Commissioner Weintraub has urged a wide open rulemaking, with all ideas presented, commented on by the public, and debated among the commissioners.  The Republicans offer an interpretive policy and a voluntary “safe harbor” for compliance, but no rulemaking.

Is Consensus Possible?

While forging consensus at the FEC has been difficult over the past decade, the following components present some opportunity.

  • A narrow rule rather than a broad-based discussion in rulemaking. The commissioners have now discussed and debated this question for over 5 years.  Success is more likely if a majority of commissioners can agree on a rough outline of what they can live with and allow public comment on that proposal.  We have seen the results of a multi-year debate on whether Citizens United is a threat or a blessing, and it provides little help in understanding or enforcing the law.
  • Clarify the commission’s understanding of the existing regulations. Commissioner Weintraub highlighted at the most recent hearing that the Republican proposal was helpful in describing the breadth of the existing regulations.  Cement that into a formal agency interpretation.  Whether it takes the form of policy or regulation, the more clarity on where the commission stands on these issues, the better.
  • Certifications of compliance. The Republican commissioners suggest insulating recipient committees from enforcement if they require donors to certify compliance with the foreign national ban.  Expanding that to require those reporting independent expenditures or electioneering communications to acknowledge they have complied with the foreign national ban may go a long way to alleviating the other commissioners’ concerns that non-disclosing groups might be a hidden source of foreign influence.  As with the Republicans’ existing suggestion, this would only be an attestation of compliance with existing law, rather than a change to that law.

It does not have to be perfect to be better.  A step in the right direction can be an improvement, even if it does not get you all the way to where you want to go.

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Photo of Robert Lenhard Robert Lenhard

Robert Lenhard is a member of the firm’s Election & Political Law practice group and advises corporations, trade associations, not-for-profit organizations, and high-net-worth individuals on compliance with federal and state campaign finance, lobbying, and government ethics laws.

Mr. Lenhard routinely assists clients in…

Robert Lenhard is a member of the firm’s Election & Political Law practice group and advises corporations, trade associations, not-for-profit organizations, and high-net-worth individuals on compliance with federal and state campaign finance, lobbying, and government ethics laws.

Mr. Lenhard routinely assists clients in establishing and operating federal and state PACs, compliance programs associated with campaign finance and pay-to-play laws; advises advocacy groups and their donors; conducts compliance trainings and audits of federal and state lobbying and political programs; and counsels clients on compliance with congressional gift and travel rules.

Prior to joining the firm in 2008, Mr. Lenhard served as Chairman of the Federal Election Commission (FEC) in 2007 and Vice Chairman of the agency in 2006, during which time the agency handled over 10 major rulemakings, had among its most productive years in enforcement and audit, and adopted several reforms to the enforcement process.  Mr. Lenhard has also led the Presidential Transition Team that reviewed the FEC for the incoming Obama administration in 2008-2009.