Has the Court Freed Foreign Corporations to Participate in U.S. Elections?

Critics of the January 21 Supreme Court decision in Citizens United v. FEC, striking down McCain-Feingold’s ban on broadcast ads mentioning a candidate within 60 days of an election, and upholding the rights of corporations and unions to make political expenditures, are trotting out their horror stories with increasing shrillness. Here’s the biggest horror story of them all:  the Citizens United  decision will allow foreign corporations – from China!  From North Korea! – to pour millions into our elections.

Democratic Senatorial Campaign Committee Chairman Bob Menendez said so this morning on ABC, and the President himself has made the claim,  “even foreign corporations may now get into the act.” 

Really?  No, not really. 

Senator Menedez said that Citizens United allows foreign corporations to spend in American elections because “a corporation is a corporation is a corporation.”  Nonsense. What the Supreme Court said is that you cannot prevent a corporation from speaking simply because it is a corporation.  Therefore, the justices struck down part of 2 United States Code Section 441b.  But a separate section of the law, 2 USC 441e, prohibits “foreign nationals” from contributing.  This section of the law wasn’t even at issue, let alone overruled.  Foreign nationals are prohibited from contributing because they are foreign nationals, not because they are corporations.  “A foreign national” is defined to include any “partnership, association, corporation, organization, or other combination of persons organized under the laws of, or having its principal place of business in, a foreign country.”

Now, this does leave open the possibility of a foreign owned company incorporating and locating in the United States, and then spending money here on politics.  But the definition of foreign national also includes non-resident aliens. And the FEC’s regulations (11 CFR 110.20(i)) provide that:

A foreign national shall not direct, dictate, control, or directly or indirectly participate in the decision making process of any person, such as a corporation, labor organization, political committee, or political organization with regard to such person’s Federal or non-Federal election-related activities, such as decisions concerning the making of contributions, donations, expenditures, or disbursements in connection with elections for any Federal, State, or local office or decisions concerning the administration of a political committee.

In other words, no foreign national can play any role in decision about political spending and activities.   

So what is left?  Well, conceivably a group of foreigners could form a corporation in the U.S., headquarter it here, and then hire some permanent legal resident aliens (“green card” holders) to make decisions about spending its money.  That doesn’t seem to likely to be a successful strategy (and remember, wealthy aliens who live in the U.S. as lawful permanent residents are already able to make personal expenditures, and even direct contributions to candidates), but suppose it is – suppose a few corporations slip through the cracks?*

If this were really a worry, it could be addressed legislatively simply by broadening the definition of foreign national to include corporations with majority (or even some minority percentage of) foreign ownership.  Such a law might also be challenged on Equal Protection or Due Process grounds (aliens located in the United States do have certain rights) but if such a challenge were successful – a big if – it would be that case, not Citizens United, that opens the door to foreign money, and that case has yet to be filed, let alone decided.

So, does Citizens United open the door to foreign contributions?  No, not really.

When you hear the hysteria, take it with a grain of salt.  And remember, the government’s position was that under McCain-Feingold and the U.S. Constitution, the government could ban distribution of political books over Kindle, political movies distributed by video on demand, and the publication of books by Regnery and their sale by Barnes and Noble.  Really?  Really. 

Surely the Court got this one right.

*This is the unlikely, worst case scenario I was referring to in this little piece, which I found very disappointing for the author’s failure to catch my major point, that contributions by foreign corporations are already prohibited by other sections of the law.

Many other links to coverage of Citizens United v. FEC, can be found at the Center for Competitive Politics, www.campaignfreedom.org.

Bradley Smith served as Commissioner and Chairman of the Federal Election Commission from 2000 to 2005, and is now Chairman of the Center for Competitive Politics and Blackmore/Nault Designated Professor of Law at Capital University Law School