A unanimous federal appeals court in Washington, DC has upheld a long-standing ban on federal campaign contributions by government contractors.
The case, Wagner et al. v. Federal Election Commission, was brought by three individuals who, at the time, held personal services or consulting contracts with federal agencies. Under 52 U.S.C. § 30119(a)(1), none of the three were permitted to contribute to candidates for federal office, and all three sought to make contributions in connection with the 2012 elections.
The plaintiffs challenged the statute, which was first enacted in 1940, on both First Amendment and equal protection grounds. They maintained that the prohibition is not narrowly tailored to prevent corruption, noting that federal candidates and officeholders have no direct connection to the awarding of federal contracts, which are usually handled by agency personnel. The plaintiffs also argued that they were denied equal protection because federal employees (as opposed to contractors) may generally make political contributions, as can individual employees of corporate contractors. Moreover, they explained, contractors that are corporations may establish political action committees to do the same.
An en banc panel of all 11 judges of the US Court of Appeals for the District of Columbia joined in the July 7 decision, written by Chief Judge Merrick Garland, rejecting the plaintiffs’ claims. The court, noting that individuals and firms continue to test the limits of campaign finance restrictions and citing a series of controversies, concluded that “[t]his experience readily confirms that the government’s fear of the consequences of removing the current ban is not unwarranted.” The court also pointed to the growing number of states with so-called “pay-to-play” laws in support of the fact that “the federal statute is no outlier.”
“Taken together,” Judge Garland wrote, “the record offers every reason to believe that, if the dam barring contributions were broken, more money in exchange for contracts would flow through the same channels already on display.”
The decision was hailed by campaign finance reform advocates, who were cheered by the court’s focus on the potential harms of pay-to-play practices. “This is a major victory for democracy,” said Tara Malloy of the Campaign Legal Center, “and we are pleased to see no dissent on the court in upholding this critical bulwark against corruption and the appearance of corruption in the awarding of government contracts.”
The plaintiffs, on the other hand, may see in the decision an opportunity to seek Supreme Court review. In two landmark decisions in recent years – Citizens United and McCutcheon – the high court has applied a tough standard to other long-standing campaign finance provisions designed to combat corruption, voiding a ban on corporate expenditures as well as an aggregate limit on individual contributions. If the plaintiffs in Wagner appeal, and if the Supreme Court takes the case, it could give the Court a chance to chip away further at political giving restrictions in the law.
In the meantime, it has been suggested that the Wagner decision may prompt President Barack Obama to address contractor contributions through executive action. During his first term in office, the White House prepared a draft executive order that would have required prospective federal contractors to disclose certain political contributions and expenditures made during the preceding two years.
Prior to the 2012 elections, the President declined to issue the proposed executive order, but a coalition of advocacy groups and others launched a campaign earlier this year and wrote to President Obama in February urging the Administration to do so. One of those advocacy groups, Public Citizen, analyzed public data on federal contracts and concluded that at least 70 of the Fortune 100 companies would be covered by the provisions of the proposed executive order.
The draft order includes a disclosure requirement only, and would not impose any restrictions on contributions or expenditures. However, advocates argue that it would shine light on certain corporate contributions not otherwise disclosed. Chief among these are donations to social welfare organizations created under section 501(c)(4) of the tax code which may, under the law, engage in a limited amount of political activity without disclosing their donors. The proponents of the executive order are also concerned about corporate support for so-called super PACs, which are committees organized to make independent expenditures on behalf of or in opposition to candidates (and which do report their donors).
Finally, with respect to these 501(c)(4) groups and super PACs, note that the Wagner court was not forced to address whether the ban on contributions from government contractors extends to such entities, or whether it would be constitutional to do so. The plaintiffs sought only to give to federal candidates and party committees, and the court was therefore not required to address the question of other political contributions and expenditures.
Most super PACs refuse to accept contributions from government contractors, and the DC Circuit’s decision should bolster that stance. However, some particularly ideological groups accepted contractor contributions in 2012, arguing that a ban would be unconstitutional. The practices of 501(c)(4) groups are less clear, because donations to them are not publicly reported.