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Campaign Finance Disclosure Decision Means Rove, Others Could Suddenly Have To Disclose Donors

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WASHINGTON -- One of the most consequential campaign finance loopholes affecting the 2012 race -- the one allowing big-money donors to secretly funnel millions into campaign ads -- is now closed, after an appellate court ruling on Monday.

In April, a district court judge struck down a Federal Election Commission regulation that allowed donors to certain nonprofit groups -- including those created by Karl Rove and the Koch brothers -- to evade normal disclosure requirements.

And on Monday, a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit turned down a request to stay that ruling on a 2 to 1 vote.

“This case represents the first major breakthrough in the effort to restore for the public the disclosure of contributors who are secretly providing massive amounts to influence federal elections," said Democracy 21 President Fred Wertheimer, one of the lawyers who filed the original lawsuit that led to the April decision, in a statement.

The office of House Administration Committee ranking Democrat Robert A. Brady issued a statement Tuesday saying, "As of today, any entity creating electioneering communications will have to disclose the identity of their top donors."

"As far as we see, the groups now have an obligation, pursuant to the district court ruling, to disclose all their donors of over $1,000," said Tara Malloy, a lawyer with the Campaign Legal Center, a group that aims to reduce the influence of money in politics.

But whether the non-disclosing groups will suddenly change their behavior -- or gamble that they can continue to skirt disclosure requirements -- remains unclear. "That is the million-dollar question," Malloy said. "Or more like the $100 million question."

Campaign law expert Rick Hasen blogged that he expects the "stay request to now end up before the Supreme Court, where the outcome may be different."

The FEC's commissioners, who in normal circumstances would issue new regulations that enforce the law as interpreted by the court, are deadlocked 3-3 on virtually every important matter that comes before them.

The April ruling already prompted one group, the conservative American Future Fund, to ask for an advisory opinion on whether they could continue to keep their donors secret as long as they used "White House" or "administration" in their ads rather than "Obama."

The plaintiff in the case, Rep. Chris Van Hollen (D-Md.) argued that the Federal Election Commission had created the loophole by willfully misinterpreting disclosure requirements in the Bipartisan Campaign Reform Act of 2002, also known as McCain-Feingold.

That law called for disclosure of donors to groups buying broadcast ads that refer to a federal candidates in a prescribed period before an election.

But in 2007, the FEC added a regulation that allowed groups to keep their donors secret as long as those donors didn't commission a specific ad.

That loophole, combined with the Supreme Court's 2010 Citizens United decision, led the percentage of undisclosed independent campaign spending to jump from 1 percent in 2006 to 43.8 percent in 2010, according to the Center for Responsive Politics.

Secret money has been a huge factor in the 2012 cycle already, and promises to be a defining element of the general election. GOP political guru Karl Rove said he intends for his non-disclosing group Crossroads GPS, along with its disclosing sister group, to spend $300 million to elect Republicans.

The FEC opted not to appeal the district court ruling, but two outside groups with legal standing requested the stay.

In the appellate court ruling, the two judges in the majority were scathing in their denial, saying the intervening parties had failed to make a strong showing that they would win their appeal on the merits or that they would be irreparably injured absent a stay.

Noting the requirement for non-disclosure established in the Citizens United Supreme Court decision -- a decision that, even while throwing out decades of campaign finance restrictions, sustained disclosure requirements -- the court wrote: "Intervenors provided no evidence that their contributors 'would face threats, harassment, or reprisals if their names were disclosed,'… and thus they fail to demonstrate how the disclosure requirements 'prevent [them] from speaking.'"

The court also noted that: "In any event, they are free to create a separate 'electioneering communications' bank account funded by U.S. citizens or permanent residents if they wish to protect the anonymity of those who contribute for a purpose other than funding 'electioneering communications'.”

By contrast, they wrote: "To the extent Van Hollen would be hampered, in the absence of full disclosure, in effectively responding to groups sponsoring 'electioneering communications' mentioning him by name, a stay would cause him substantial harm."

The appellate court noted that the Supreme Court, even in Citizens United, acknowledges "that the public interest is best served by access to more, not less, information."

A spokesman for the Center for Individual Freedom, one of the intervening groups, could not immediately be reached for comment.

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