Expanding Citizens United

By Lyle Denniston
on May 28, 2011 at 7:06 pm

Ruling that the Supreme Court has wiped out constitutional distinctions between individuals and corporations when each wants to give money directly  to candidates for President and Congress, a federal judge in Virgtinia has struck down a law dating back to 1907 that flatly barred corporations from all such giving.  The Supreme Court led the way toward that result, the judge declared, with its controversial ruling a year ago in January in Citizens United v. Federal Election Commission. 

If the new ruling were to withstand appeals, likely to be pursued at some point, it probably would not release the massive flow of corporate dollars that the Citizens United decision did, because the judge specified that corporations, like individuals , would have to stay within the donation ceilings set by Congress.  By contrast, Citizens United allowed corporations to spend whatever they wished, so long as they did it independently of any candidate or political party.  Even so, the new ruling could be a boon to candidates — especially GOP candidates — because corporate donors tend generally to favor Republicans.

In one sense, the new decision, issued on Thursday by U.S. District Judge James C. Cacheris of Alexandria, Va., may well have been inevitable.   The Supreme Court has steadily been breaking down the once sharp division that it had laid out in 1976, in the case of Buckley v. Valeo, between limits on campaign spending and limits on campaign contributions.  It has been steadfastly skeptical of spending curbs, no more so than in Citizens United for corporations, and its former tolerance for contributions limits has been eroding a bit at a time.

Critics of campaign finance restrictions, increasingly aggressive in their attacks, have moved to take advantage of the shifting views within the Supreme Court, and are having considerable success.  Their crowning achievement so far, of course, was Citizens United.

But that ruling dealt only with the spending side of the modern campaign finance ledger.  The Court explicitly said it had not been asked to reconsider its prior constitutional rulings in favor of contribution limits — including the 1907 decision that banned corporate contributions directly to federal candidates.

The last time the Court had confronted a constitutional challenge to that ban was in a 2003 ruling, FEC v. Beaumont. In that ruling, the Court remarked: “Any attack on the federal prohibition of direct corporate political contributions goes against the current of a century of congressional efforts to curb corporations’ potentially deleterious influence on federal elections, which we have canvassed a number of times before.”

The vote in that case was 7-2.  But that can be misleading, when one ponders whether Beaumont would be decided the same way if it were before the current Court.  Four of the seven Justices in the majority have since left the bench.  Justices Stephen G. Breyer and Ruth Bader Ginsburg are the only remaining members who had joined fully in that decision.

The seventh who voted for the outcome,  Justice Anthony M. Kennedy, sent a signal that he might well support a ruling to strike down the flat ban, if the occasion to consider it arose in the future.  Justice Clarence Thomas, joined by Justice Antonin Scalia, said in dissent that the ban could not survive the most rigorous constitutional test (“strict scrutiny”).

And then, last year, Justice Kennedy would become the author of Citizens United, an opinion that was joined in most of its key parts by Chief Justice John G. Roberts, Jr., and Justices Samuel A. Alito, Jr., Scalia and Thomas.

It is no surprise that lawyers for two business executives accused criminally of secretly channeling corporate funds to federal candidates would try to take advantage of the perceived changing constitutional climate, to challenge the charges.  They did so in the case of U.S. v. Danielczyk, et al. (District Court docket 11CR85).

It is perhaps significant that Judge Cacheris, in last Thursday’s ruling, did not even mention Beaumont.   Advocacy groups that favor the ban on corporate donations directly to federal candidates, reacting to the judge’s decision, suggested that he had attempted something that lower court judges may not do — overruling Beaumont, a Supreme Court decision.

There is no way for anyone outside Judge Cacheris’s chambers to know why he left out Beaumont.  But he had been steered clear of it by the challengers to the corporation donation ban.  They had argued, bluntly, that “Beaumont simply could not come out the same way today….Beaumont invoked precisely the rationale and reasoning…that the Court rejected in Citizens United.”

The Court, that brief went on, had used in Beaumont the same reasoning against corporate giving when it decided the 1990 case, Austin v. Michigan Chamber of Commerce.  But, it added, the Austin decision was explicitly overruled in the Citizens United decision.  “When Austin fell, Beaumont did as well,” the challengers contended.

The brief did add that federal judges at Cacheris’s level typically “must refrain from ruling that one Supreme Court decision has overruled another by implication.”  But, it contended, there is more here than an inclination, since Beaumont is no longer good law.

The Justice Department, in defending the constitutionality of the ban on corporate giving, did not mention the Beaumont precedent.   In a way, that may have given the judge a kind of implicit permission to look beyond that ruling, and focus only on Citizens United.

That is exactly what the Alexandria judge did.  He noted that Citizens United had reiterated, from earlier decisions, that the First Amendment free-speech clause “does not allow political speech restrictions based on a speaker’s corporate identity,” so “corporations cannot be banned from makng the same independent expenditures as individuals.”

The  logic of that, Cacheris wrote, “is inescapable here.  If human beings can make direct campaign conributions within [the federal law’s] limits without risking quid pro quo corruption of its appearance, and if, in Citizens United‘s interpretation…corporations and human beings are entitled to equal political speech rights, then corporations must also be able to contribute within [those] limits.”

The Supreme Court’s past concern over “preventing quid pro quo corruption,” the judge added, “does not justify flatly banning corporations from making direct donations while permitting individuals to make such donations within [the law’s] limits.”

While reciting the usual admonition that courts should not decide constitutional issues “except where absolutely necessary,” Cacheris said that, “for better or worse, Citizens United held that there is no distinction between an individual and a corporation with respect to political speech. Thus, if an individual can make direct contributions within [the law’s] limits, a corporation cannot be banned from doing the same thing.”  (The federal law limits individual contributions to candidates to $2,500 per candidate per election, $30,800 to a national party committee in a year, $10,000 to state and local party committees combined in a year, and $5,000 to other party committees in a year.)

The judge thus struck down the ban.   Although his ruling came in the context of a criminal enforcement of the ban, not a civil case, there was no indication that Judge Cacheris would have ruled any other way in a civil enforcement proceeding.

Ironically, perhaps, his new decision — like Citizens United — involved campaign finance activity that surrounded Hillary Rodham Clinton, now the U.S. Secretary of State.

In Citizens United, that politically active organization won from the Supreme Court the right to spend whatever it chose to promote an attack video aimed at Clinton’s presidential campaign in 2008. 

The case before Judge Cacheris involved two businessmen who had been prosecuted by the Justice Department for an alleged scheme to have employees make donations to Clinton’s campaigns, and then reimbursed them — for the purposes, according to prosecutors, of concealing that the money was actually a direct contribution from the corporation, not from the employees.  The indictment said that the reimbursement was passed off as staff bonuses.

Under the alleged scheme, the indictment charged, William P. Danielczyk, Jr., board chairman of a “merchant banking firm” named Galen Capital Group  that formerly had its headquarters in McLean, Va., and Eugene R. Biagi, a member of the company’s executive committee, arranged to create a system of so-called “straw donors.”

A group of 35 employees allegedly were urged to give a total of $30,400 — in individual amounts within the federal law’s contribution ceilings — to Clinton’s 2006 campaign for the Senate from New York, and were urged to give a total of $156,400 to Clinton’s 2008 campaign for the presidency.   False reports about the scheme were filed at the Federal Election Commission, according to the indictment.

The money, prosecutors asserted, was Galen Capital’s money, and it was illegal to channel that money to the two campaigtns through a sham scheme.

Cacheris’s ruling last Thursday came on a series of pleas by Danielczyk and Biagi to dismiss or narrow down the counts in the case — seven counts against Danielczyk, and five against Biagi.  The only count that Cacheris dismissed was Count 4, charging illegal corporate donations directly to Clinton’s campaign.   The other six charges presumably will be tried.  The joint trial of both executives is scheduled to begin in Alexandria on July 6.