The new glut of money in U.S. politics stems from a landmark 2010 decision by the U.S. Supreme Court known as Citizens United, which created new opportunities for almost unlimited anonymous corporate spending on political causes. Credit: DonkeyHotey/cc by 2.0

By Carey L. Biron
WASHINGTON, Nov 27 2013 (IPS)

The U.S. government has proposed strengthening an obscure tax-status designation that supporters say could significantly impact upon the massive amounts of anonymous money that have come to define U.S. politics over the past two campaign cycles.

Two federal agencies, the Treasury and the Internal Revenue Service (IRS), on Tuesday issued initial guidance that could tighten regulations on the extent to which certain tax-exempt groups can engage in political activities. While such designations are highly coveted, critics have increasingly complained that the rules governing these groups’ activities are overly vague and often unenforced, lending themselves to abuse.“The notion that spending obviously intended to influence elections somehow advances ‘social welfare’ is absurd." -- Brendan Fischer

Following on Tuesday’s announcement, such critics have almost universally lauded the proposals as a strong first step, but warned that significant work remains. Others worry that the new moves would infringe on a constitutionally guaranteed right to free speech.

“This is definitely an encouraging sign from a federal agency that’s been almost completely absent in terms of regulating these groups. But the devil will be in the details,” Paul S. Ryan, a senior counsel at the Campaign Legal Centre, which works on campaign finance issues and has sued the IRS over the issue, told IPS.

“Remember, though, what is at issue here is disclosure for voters. This rulemaking isn’t necessarily about getting involved in elections, but rather about disclosing donors.”

The new glut of money in U.S. politics stems from a landmark 2010 decision by the U.S. Supreme Court known as Citizens United, which created new opportunities for almost unlimited anonymous corporate spending on political causes. The decision remains bitterly disputed by many across the country, with more than a dozen states having formally called for it to be overturned.

According to official estimates, some 300 million dollars was funnelled into the 2012 presidential election from anonymous donors through tax-exempt organisations (others have pointed out that this figure is relatively small compared to the seven billion dollars that was spent cumulatively in the 2012 election).

Activists today refer to such secret funding as “dark money”, some 85 percent of which is estimated to have gone to conservative groups in 2012.

The vehicle of choice for many of these donors has been a type of organisation known by its tax-code designation as a 501(c)(4). Also known as “social welfare” organisations – given that this is supposed to be their primary focus – these groups have the enticing position of having some wiggle room in how politically involved they can be, while also being able to keep their contributors largely private.

On the contrary, the IRS allows other such groups to engage wholly in the political process, but these are required to disclose their donors’ identity.

“The proposed rules are a positive step towards reining in political groups charading as ‘social welfare’ nonprofits while devoting almost all of their resources towards influencing elections,” Brendan Fischer, general counsel for the Centre for Media and Democracy, a watchdog group, told IPS.

“The notion that spending obviously intended to influence elections somehow advances ‘social welfare’ is absurd, so hopefully the proposed rules will provide some clarity to the law and shine light on the dark money. The proposed rules still have to go through the rulemaking process, but hopefully the final rules will resolve some of the ambiguity in the tax code that led to such abuses.”

Bright lines

The new move comes just months after heated, politicised accusations that the IRS had been disproportionately scrutinising the applications of conservative groups seeking tax-exempt status. While subsequent disclosures suggested that the agency had been targeting both obviously conservative and obviously liberal groups in an effort at efficiency, the broader debate highlighted new public confusion over why any of these clearly political groups were under consideration as “social welfare” organisations in the first place.

In fact, U.S. law largely prohibits such groups from engaging in any political activities, but implementation of this statute has always come down to the IRS’s interpretation.

“This is part of ongoing efforts within the IRS that are improving our work in the tax-exempt area,” IRS Acting Commissioner Danny Werfel said Tuesday. “Once final, this proposed guidance will continue moving us forward and provide clarity for this important segment of exempt organisations.”

In particular, the IRS is proposing to redefine exactly what is meant by a key part of these designations – the term “candidate-related political activity”. Stating that it foresees “significant public interest” in the issue, the Treasury is now eliciting public comment through late February.

“For decades the IRS has used a ‘primary activity’ test to determine how much political activity is too much, but it has never really provided any clarification on this activity,” the Campaign Legal Centre’s Ryan says.

“So the dark money groups have said that up to 49.9 percent of their activities can be political, while we’ve been saying that an appropriate level would be far lower, around 10 or 15 percent. The strength of this new rulemaking will be where the IRS draws that line.”

Others are warning that the issue shouldn’t be up to IRS interpretation, and are pushing the courts to clarify the intent of current law once and for all.

“While we welcome this action, we need a definitive and bright line ruling from the court,” Chris Van Hollen, a member of Congress who sued the IRS on this issue over the summer, said Tuesday.

“The public has a right to know who is spending millions to influence the outcome of our elections and we must put an end to this flow of secret money. That is why I filed my lawsuit against the IRS in August.”

Even if the rule change does result in a significantly strengthened regulation regarding 501(c)(4)s, many are now urging additional official scrutiny on other tax-exempt organisations. Action from the IRS could well push anonymous donors out of the 501(c)(4)s and into, instead, groups such as trade associations, which are bound by different and looser regulations.

The CampaignLegalCenter, for instance, is urging officials to look into these groups as well, and think about tightening restrictions on their political activities.

“Ultimately, this is a necessary but incomplete measure,” the Centre for Media and Democracy’s Fisher says.

“Billionaires and their lawyers will continue looking for new ways to buy elections in secret. What we really need is a constitutional amendment to reverse Citizens United and get money out of politics.”

Oil giant Chevron's corporate offices in Houston Texas are housed in the old Enron buildings at 1400 Smith St. Credit: Jonathan McIntosh/cc by 2.0

By Carey L. Biron
WASHINGTON, May 29 2013 (IPS)

At an annual shareholder meeting held Wednesday, upper-level management for the oil conglomerate Chevron faced renewed questioning over its record-setting political contributions during last year’s national election.

At the meeting, a shareholder resolution on the issue focused on Chevron’s alleged refusal to explain how the company’s political spending has benefited shareholders, particularly given the excoriating criticism the contribution has garnered, and called for a cessation of the practice.

The resolution failed to pass, however, receiving just four percent of shareholder backing.

Of particular interest has been a lump payment of 2.5 million dollars spent by a Chevron subsidiary. Given that Chevron receives government contracts, the contribution’s timing (in the last weeks of the election) and its beneficiary (a group focused on electing Republicans to the House of Representatives) have raised concerns that the payment could have violated U.S. law.

Chevron is wrapping up “its most expensive year of political spending to date,” Green Century Capital Management, which filed the resolution, stated Tuesday, just ahead of the shareholder meeting. The advisory firm is now formally urging the company to “refrain entirely from political spending, arguing that doing so would protect against risks to shareholder value”.

Chevron, the second-largest oil company in the United States, reportedly spent a total of 3.9 million dollars during the 2012 campaign. Yet it was the 2.5-million-dollar payment to a group called the Congressional Leadership Fund that has become the focus of much interest, in part because it is the largest single corporate political contribution to date.

In 2010, the U.S. Supreme Court handed down a controversial ruling that lifted restrictions on most corporate election-related spending. The decision made the 2012 presidential election the most expensive to date.

It has also sparked a significant public backlash: according to a September poll, more than four-fifths of U.S. respondents would support limiting election spending. Further, at least 14 states have now passed resolutions urging a constitutional amendment to overturn the judicial decision, known as Citizens United.

Against this backdrop, Chevron has been widely pilloried for having racked up the largest-yet corporate political contribution since the Citizens United decision was handed down.

“This issue is important for our members because Chevron has not been willing or able to demonstrate value to shareholders of its political expenditures,” Leslie Samuelrich, a senior vice-president with Green Century, told IPS.

“Given high negative press coverage that Chevron’s contribution garnered for the company, we feel that it’s important that Chevron explain why it made this contribution, as well as a long list of growing political contributions over the years. They weren’t able to do so, so we went forward with the resolution.”

Following Wednesday’s vote, Samuelrich lauded the results, telling the media the process represented “a turning of the tide”.

Risky business

The Citizens United decision appears to have led to an immediate response from Chevron. The company has reported spending a little more than a million dollars on political contributions in 2008 and a little less than that amount in 2010, when the Supreme Court ruled.

Two years later, those figures have almost quadrupled. In addition, watchdog groups have noted that around 90 percent of corporate spending in the 2012 election went to Republicans.

“This appears to be very risky business to us,” Samuelrich says, noting that Green Century has filed similar resolutions this year with the oil company ExxonMobil, Bank of America and 3M, a manufacturing conglomerate.

“We spoke with Chevron earlier this year, but that dialogue resulted in no change whatsoever – they didn’t offer any analysis about why they made the initial contribution, nor any evaluation of the impact of their highly publicised political spending.”

Further, the company continues to be dogged by allegations that the Congressional Leadership Fund contribution could have been illegal in the first place, given Chevron’s contracts with the government.

“Under a legislative prohibition known as ‘pay to play’, government contractors can’t make these types of contributions,” Kelly Ngo, a legislative assistant at Public Citizen, a consumer watch group, told IPS. “The law is pretty clear on this.”

In March, Public Citizen and several environment groups filed a joint complaint on the issue with the Federal Election Commission, though the commission has yet to respond. The company, meanwhile, has pointed out that the payment was made through a subsidiary that doesn’t hold a government contract.

In documentation sent to IPS, Chevron’s board unanimously recommended that shareholders vote against the resolution to halt political spending.

“Chevron exercises its fundamental right and responsibility to participate in the political process … [and] advocates positions on proposed policies that will affect the Company’s ability to realize strong financial returns while meeting the world’s growing demand for energy,” the Chevron board states.

“[The] Board is confident that the Company’s political activities are aligned with its stockholders’ long-term interests.”

Ecuador legacy

Two additional resolutions floated by Chevron shareholders on Wednesday dealt with longstanding litigation against the company’s predecessor, Texaco, for having wilfully dumped oil wastes in a remote part of Ecuador from the 1960s until the 1990s. (Extensive documentation on the case can be found here, while Chevron’s responses can be found here.)

While the Ecuadorian courts have repeatedly assessed the company for 19 billion dollars in liability, Chevron has taken an aggressive line in refusing the penalty, saying a multi-million-dollar remediation has already taken place. In an unusual step, in December the company even subpoenaed some of its own shareholders, alleging that they were colluding with the Ecuadorians.

Shareholders floated a related resolution, impugning the Chevron management for the ongoing Ecuador situation, at last year’s meeting.

Although that move was rejected, it did win the backing of around 40 percent of shareholders – slightly more than was ultimately received during Wednesday’s vote, indicating continued shareholder interest to resolve the issue.

Meanwhile, the Ecuadorian plaintiffs, who allege health problems and ruined lands, are now suing Chevron in other countries in which the company operates. Following on an order earlier this month, Chevron CEO John Watson will now have to testify in a fraud-related counter-suit filed by the company against the Ecuadorians.

This year, activists have increasingly targeted Watson himself, singling him out for having originally overseen the acquisition of Texaco.

“My parents both died from cancer due to Chevron’s contamination,” Servio Curipoma, from San Carlos in Ecuador’s northeast, told Chevron shareholders and management Wednesday.

“I am still fighting for justice so that no one else will have to suffer the pain they did, and the loss I have. Chevron has lied to its shareholders, to the world, to me. I’m here on behalf of all of us to say that CEO Watson should be fired.”

A rally by Move to Amend Ohio, the state chapter of the national coalition seeking to amend the U.S. Constitution to abolish corporate constitutional rights. Credit: Progress Ohio/cc by 2.0

By Matthew Charles Cardinale
ATLANTA, Georgia, Jan 28 2013 (IPS)

There is a growing national movement to establish a 28th amendment to the constitution of the United States to address the issue of unlimited corporate spending in elections, although the groups working on the issue diverge on what exactly the amendment should say.

One national coalition called Move to Amend (MTA) is led by David Cobb. A Green Party candidate for president in 2006, Cobb has been touring the country calling for a constitutional amendment to “clearly establish that money is not speech, a corporation is not a person, all corporations are subject to regulation, all campaign contributions will be disclosed, and (that) allows for no loopholes,” according to the MTA website.

But passing a constitutional amendment is a daunting task, requiring the support of two-thirds of the U.S. House and Senate, followed by ratification by three-fourths of the 50 state legislatures.

Cobb believes that it will take about 10 years to build a grassroots movement to successfully lobby for the enactment of the amendment, but that it can be accomplished eventually.

“It’s a lot of work, but so was the Civil Rights Movement, so was women’s suffrage,” Cobb told IPS.

“A small group of ruling elites has hijacked every one of the institutions in this country – the media and both political parties. There’s a corporatised culture and we have to change the power structure. The only way we see is to build a mass, multiracial movement,” he said.

“Move to Amend is a coalition coming together specifically to work together for (abolishing) corporate personhood. We’ve got 258,000 people who are participating with us specifically on this project. There’s lots of work going on now, and it’s coalescing.”

The effort to amend the U.S. constitution has in part been a reaction to the controversial ruling of the Supreme Court in Citizens United v. Federal Election Commission in 2010, which found that the first amendment to the U.S. constitution, on freedom of speech, prohibits the government from restricting independent political expenditures by corporations and unions.

In the ruling, corporations were essentially viewed as having the same rights as people, thus coining the term corporate personhood.

Activists held rallies across the U.S. earlier this month to protest the third anniversary of the Citizens United ruling. 

Data from the 2012 national elections have begun to reveal an unprecedented amount of spending in the elections, about six billion dollars, much of which is untraceable due to a new phenomenon called SuperPACs, political action committees that have literally no limit to how much they can spend, as well as shadow corporations, which are created for the sole purpose of funneling money into elections.

One of the main organising strategies by MTA and other groups to support an eventual constitutional amendment is to get local councils and commissions at the city and county levels to adopt resolutions in support of such an amendment.

According to the MTA website, there are at least 183 municipal government resolutions, 19 local ordinances, and three state-level resolutions in Hawaii, Montana, and Vermont that have passed to ban corporate personhood.

In addition, there are 79 local resolutions and 10 state resolutions that have also passed, but that MTA considers partial resolutions because they do not completely address the issue of corporate constitutional rights.

Most recently, on Jan. 22, the city council in Conway, Arkansas, passed a resolution with unanimous support.

MTA is itself a coalition of hundreds of organisations, and MTA has dozens of affiliates in cities throughout the U.S.

Other organisations that are working on this issue nationally include United for the People, which is also a coalition and which also has affiliates; in addition to Free Speech for the People, People for the American Way, and Public Citizen.

There has been some disagreement, though, among members of congress and various advocacy groups as to what the exact language of the constitutional amendment should be.

At least six different members of congress introduced legislation in 2011 to amend the constitution to in one way or another address the issue of unlimited corporate spending in U.S. elections.

Meanwhile, different organisations are supporting different versions of the bill. For example, Free Speech for the People is supporting the Edwards proposal and the McGovern proposal. People for the American Way is supporting the Udall proposal. And Public Citizen is supporting the Deutch proposal, which is the counterpart in the House to the Sanders proposal in the Senate.

Move to Amend presents on its website what it believes to be the strongest version of the proposed amendment, adding, “It is our belief that we need to operate on the assumption that once an Amendment comes out of Congress we won’t get another shot. So we MUST get it right!”

“I work on many issues. When you get to the bottom of just about every issue, you come up against the wall of the unholy alliance of money, corporate interest, and politicians,” Stacey Hopkins, lead organiser for United for the People Georgia and council organiser for MoveOn Atlanta, told IPS.

“I was active in doing voter registration, and we saw where dark money groups were backing voter suppression efforts around the country,” Hopkins said.

“We’ve also seen groups backing efforts to repeal Section Five of the Voting Rights Act, and as an African American, this is something that I take very personally,” Hopkins said.

Civil society actors and the some corporate groups here are reacting with excitement to indications that the U.S. Securities and Exchange Commission (SEC), which regulates the country’s stock exchanges, is likely to take up discussion over new rules that would mandate the public disclosure of all political spending by U.S.-listed public corporations.

With the issue now on the SEC’s agenda, a formal announcement is slated for April, with a period of public input to follow. On Tuesday, a broad coalition of academics and activists urged the commission to move swiftly.

The move comes in the aftermath of a contentious U.S. Supreme Court decision that opened the possibility for nearly unlimited anonymous corporate spending on political causes. Many warn that the decision led to the most expensive election cycle in history, concluding in November after political spending amounted to some six billion dollars nationwide, much of it untraceable.

“We’ve seen a 400 percent increase since 2008 in political spending by outside organisations,” Rob McCord, treasurer for the state of Pennsylvania, said Tuesday in a conference call to discuss the new SEC moves.

“The creepy thing is that more than 60 percent of this money was from super PACs” – political action committees allowed to spend unlimited amounts of money – “funded by just over 100 individuals.”

The Supreme Court, in a 2010 decision known as Citizens United, ruled that corporations’ right to engage in political spending – seen as an extension of free speech – cannot be limited. Yet the justices were also adamant in their support for transparency of that spending.

While the case enraged activists and scholars, particularly on the political left, the recent election saw such an avalanche of spending – particularly noticeable in certain state-level campaigns – that many across the country are today feeling that something significant has changed.

“I hear from my constituents – people are really outraged with the effect that big money is having in politics, and the impact that this is making on how we govern and run elections,” John Sarbanes, a member of the U.S. House of Representatives, told journalists Tuesday.

“There’s an absolute chorus out there among ordinary Americans who are fed up that their government and campaigns have been taken over by special interests, and they expect the Congress to do something.”

According to a survey taken in October, at the height of the recent presidential election, an overwhelming majority of U.S. citizens – 77 percent – said they would favour a requirement requiring public disclosure of all corporate spending on political activities; 45 percent were “strongly in favour” of such a measure.

Investor demand

While several pieces of legislation have been introduced in Congress that would require such disclosure, Sarbanes notes that there is much that can be done at the regulatory level, as well.

The SEC’s actions may have been motivated by a growing backlash by corporate investors. Since Citizens United, many shareholders have become increasingly worried about being cut off from any details about their company’s political spending – specifics on amounts given, to whom or, of particular importance, the strategies behind such policies.

“Political spending disclosure is necessary for the smooth functioning of markets, and fits comfortably within the securities laws and the SEC’s framework,” Alya Z. Kayal, director of policy and programmes at the U.S. Forum for Sustainable and Responsible Investment, a Washington association, told IPS.

“It is an important tool that helps shareholders, investors, management and directors deal with significant risks that can threaten companies and shareholder value.”

The forum has highlighted disclosure as a central priority for its work this year. As highlighted in a trends report released in November, Kayal notes, the forum’s research “found that a leading concern for shareholders, especially since the Citizens United decision, is corporate political spending and lobbying; investors filed more than 100 resolutions annually in 2011 and 2012 seeking better review and disclosure by portfolio company management of these activities.”

A petition to the SEC requesting rules on this issue was filed in 2011 by a bipartisan committee of law professors. Since that time, the SEC has received some 323,000 public comments in support of the petition – the most significant public response the commission has ever experienced, garnering around 150,000 more comments than the next largest response.

“If you look at the responses to the petition, investors have been clamouring for this information for some time,” Robert Jackson, a professor at the Columbia Law School and one of the lead filers of the petition to the SEC, said Tuesday. “Shareholder proposals for spending on politics have become the most requested type at large public companies in the U.S.”

Unchecked authority

While the SEC’s next moves are not yet certain, supporters say that several signs suggest that it is very likely that the body will indeed take up the rulemaking discussion on corporate political spending. In anticipation of such actions, several major actors have begun to build resistance.

The U.S. Chamber of Commerce, the country’s largest business lobby group, has already stated its opposition to any new disclosure rule. According to Public Citizen, a consumer advocacy group, the Chamber was the single largest outside spender during the 2010 election, and distributed another 36 million dollars during the 2012 campaigns, while refusing to name donors.

In a Jan. 4 letter to the SEC obtained by IPS, the Chamber and two dozen other industry groups warned against the petition’s overly broad scope, the SEC’s own lack of expertise in regulating political activity, and the potential violation of corporations’ freedom of speech.

The letter also suggests that “there is no evidence whatever that shareholders generally are clamoring for this information” and that, anyway, a rulemaking initiative “cannot be justified on the theory that political activity harms shareholder value – the evidence plainly shows that corporate political activity enhances shareholder value.”

Yet Adam Kanzer, with Domini Social Investments, counters that there is “Lots of strong institutional support for this rule … (from those) looking to invest in companies with superior products, not with superior access to politicians.”

He continues, “Currently, CEOs across the country have unchecked authority to spend other people’s money on political campaigns. Companies repeatedly say their political spending is in our best interests, but we’d like to assess that for ourselves.”