This election season saw campaign finance and political law issues raised to a new level of public prominence. This comes as no surprise, as President Obama foreshadowed the role of campaign finance in elections when he criticized the Supreme Court's decision in Citizens United during his State of the Union address. And, when Congress failed to pass the broad new disclosure and expenditure rules included in the DISCLOSE Act, the stage was set for accusations that the Supreme Court had opened the door for new ways for money to influence elections.
During the midterm election season there has been no shortage of accusations that have the potential to lead to new legislation, regulations and investigations during the next Congress. Indeed, a twelve-term incumbent facing a tough election challenge has called for the impeachment of the Chief Judge.
In the aftermath of the elections it is obvious that campaign finance and political law issues are not about to go away any time soon. In fact, the President identified "transparency" as an area where he plans to work with the new leadership in the House during his post-election press conference, and the language of transparency has long been used to describe all varieties of new contribution and expenditure restrictions, disclosure obligations for advocacy groups and lobbyists, and restrictions on the political activities of companies and individuals.
Investigations of Corporate Political Activism
With the new composition of Congress, it will be exceedingly difficult for any comprehensive campaign finance legislation to attract both a majority in the House and the 60 votes necessary for passage in the Senate. However, it is likely that the heated campaign finance rhetoric in this election cycle will lead to series of hearings, investigations and studies designed to identify what type of corporate political activism occurred during the recent elections. Politically active companies should be prepared to explain and justify their activism to legislators, the media and the FEC. While it is legal for companies to participate in independent expenditures it is not legal to coordinate activities with campaigns or political parties nor is it permissible to fund the activity with funds from foreign entities or citizens.
Continued Criticism of Foreign-owned Companies
Starting with the President's State of the Union address, there has been a growing drumbeat of criticism aimed at U.S. subsidiaries of foreign companies that become involved in politics. During the midterm campaigns these criticisms reached a crescendo with virtually all of the leaders of the Democratic Party, including the President, making claims that foreign companies were exerting undue influence in U.S. elections, claims which were vigorously denied by the accused entities such as the US Chamber of Commerce. In this context, it is reasonable to expect that Congress will engage in a new round of bashing of foreign companies, and the President and Democratic leadership in the Senate may try to resurrect the DISCLOSE Act elements that limited the political activism opportunities for foreign-owned companies.
Gearing Up for 2012
All of the campaign finance machinations in Congress will take place as both parties ramp up their fundraising efforts for 2012. Given the tone of the campaign finance discussion over the past year, politically active individuals, groups and companies should gird themselves for frequent inquiries from politicians and the media about their contributions. With the chances of legislative reform of campaign finance laws being relatively low, it increases the likelihood that politicians will resort to even more heated accusations of corruption and undue influence. In this environment companies and individuals should consult counsel prior to making campaign-related expenditures.