Introduction

Welcome to the March edition of the Political Law Playbook. This month’s newsletter comes on the heels of the Supreme Court’s unanimous decision that states cannot disqualify former President Trump from their ballots. This edition’s federal coverage highlights two new Federal Election Commission (“FEC”) rules taking effect, novel and irregular uses of Super PACs, and Senator Menendez’s (D-NJ) continued legal battles related to an alleged bribery scheme. This coverage includes how a Super PAC supporting Robert F. Kennedy Jr.’s bid for the presidency and a businessman’s “bridge funding” agreement exposes a weakness in campaign finance transparency laws. At the state and local levels, recent weeks have produced a flurry of interesting legislative happenings as the public’s appetite for politics builds in anticipation of November. The Hawai`i and Florida state legislatures are looking to expand and contract, respectively, campaign public financing options. Meanwhile, San Francisco and New York City continue efforts, with varying degrees of success, to bring non-US citizens into city politics. We also highlight an attempt in Maine to have the US Supreme Court rule that Super PACs should be regulated.

Federal Elections & Campaign Finance

Supreme Court Rules Former Pres. Trump Can Remain on Colorado Ballot – The US Supreme Court unanimously ruled last week that Colorado cannot disqualify former President Trump from the ballot under the 14th Amendment’s “insurrection ban”. The case arose from a challenge brought by six Colorado voters who sought to disqualify Mr. Trump from the state’s Republican presidential primary based on Section 3 of the 14th Amendment, which forbids those who have taken an oath “to support the Constitution of the United States” from holding office if they have “engaged in insurrection or rebellion against the same, or given aid or comfort to the enemies thereof.” Despite a Colorado trial court initially ruling against the petitioning voters, the Colorado Supreme Court ultimately disqualified Mr. Trump from the state’s ballot on appeal. On expedited petition to the US Supreme Court, the justices – in per curiam decision – overruled the Colorado high court’s decision and held that a state has no unilateral authority to enforce the 14th Amendment in such a manner as to disqualify federal candidates from the ballot. According to the Court’s opinion, the Constitution places responsibility for enforcement of Section 3 against federal officeholders and candidates with Congress, which has yet to construct a methodology for taking such action.

Group Alleges that “Straw Donor” Made Illegal Contribution to Super PAC Affiliated with North Dakota Governor Doug Burgum’s Presidential Campaign – The Campaign Legal Center (CLC), a campaign finance “watchdog” organization, recently filed a complaint with the FEC alleging that a donation made by an LLC to a Super PAC affiliated with North Dakota Governor Doug Burgum’s presidential campaign may constitute an illegal straw donor scheme. The complaint asserts that fifteen days after the entity’s registration as an LLC, it contributed $150,000 to the Super PAC. CLC claims that this, in combination with the lack of publicly available information about the LLC, suggests that the LLC was used solely to funnel a contribution to the Super PAC while concealing the contributors’ identities. If proven to be true, such a scheme would violate federal campaign finance law that requires contributions to be made in the name of the true donor.

Super PAC Backing RFK Jr. Returned Millions to a Donor After Purported “Bridge Funding” Arrangement – A Super PAC supporting Robert F. Kennedy Jr.’s bid for the presidency – the American Values PAC – recently accepted millions of dollars in contributions from private security executive Gavin de Becker before returning nearly all of the funds to the donor – effectively making the contribution akin to a loan. All told, de Becker made $10 million in contributions to the Super PAC before $9.65 million was returned. According to campaign finance transparency advocates, back-and-forth transactions like the ones seen in this scenario help to facilitate de facto loans for a committee, which frees it from having to report the associated debt on FEC disclosures, helps obscure its actual financial activity, and allows it to circumvent traditional campaign finance transparency obligations. De Becker and the PAC’s co-founder rejected any claims of impropriety with the financing arrangement and characterized the contributions as legal “bridge funding” for the committee – a financing arrangement that is quite common in the business arena, but relatively untested in campaign finance circles. It remains to be seen whether similar “bridge funding” financing arrangements will gain popularity for other federal Super PACs, but we will keep a close eye on whether American Values and de Becker are starting a new trend in the committee fund arena.

New FEC Candidate Salary and Tech Modernization Rules Take Effect – Two sets of new Federal Election Commission (“FEC”) regulations took effect March 1 that are designed to help the Commission address recent trends in political campaign activities. The first set of rules adjusts the regulatory criteria for determining a candidate’s eligibility to receive compensation from campaign funds, the maximum amount of compensation a candidate may receive from campaign funds, and the period during which a candidate may receive compensation. The second set of rules seeks to modernize FEC regulations by addressing electronic contributions, such as those made using credit cards, via text message, and internet-based payment processors, facilitating electronic accounting, recordkeeping, and reporting, and eliminating or updating references to obsolete technologies.

Federal Candidates May Request Reimbursement from Nonfederal Sources for Costs of Brochures – In February, the FEC issued an advisory opinion holding that a federal candidate may solicit and receive reimbursement from nonfederal sources for brochure costs. Congresswoman Maxine Waters (D-CA) sought guidance on whether her campaign may use campaign funds to design, publish, and mail brochures featuring the Congresswoman’s endorsements of federal and nonfederal candidates and her positions on ballot measures, and solicit and receive reimbursement from nonfederal sources for the portions of the brochures devoted to each nonfederal candidate and ballot measure. The final advisory opinion adopted by the Commission concludes that a federal candidate may solicit the nonfederal candidates and committees that appear in the proposed brochure and receive reimbursement if the nonfederal sources’ funds comply with the source prohibitions, amount limitations, and reporting requirements under federal law.

Pennsylvania Man Pleads Guilty to Federal Fraud Charges over Phantom Super PAC – The Department of Justice recently announced that a Pennsylvania man pled guilty to filing documents with the FEC that contained false and fictitious information about a Super PAC and evidence of purported credit card fraud. According to court documents, Christopher Richardson created a Super PAC named Americans for Progressive Action USA (AFPA) that used fictitious names for AFPA’s treasurer and designated agent. Richardson then filed a falsified quarterly report with the FEC claiming that AFPA had raised $4.8 million from several fictitious individuals and a report of expenditures that falsely claimed that the Super PAC spent over $1.5 million to make advertisements opposing certain candidates for the US Senate. Mr. Richardson subsequently filed another FEC report that falsely stated that AFPA refunded the non-existent $4.8 million in donations. Richardson also used the alias of one of the fictitious donors to AFPA to obtain a credit card, and made over 200 transactions. Richardson faces a combined maximum penalty of up to 30 years in prison plus financial penalties.

Federal Lobbying & Ethics

Sen. Menendez Charged with Obstruction of Justice on the Heels of Associate’s Guilty Plea – Jose Uribe, a New Jersey businessman accused of providing Senator Robert Menendez’s (D-NJ) wife with a $60,000 Mercedes-Benz in exchange for Mr. Menendez’s efforts to intercede in an insurance fraud investigation in New Jersey, pled guilty to seven counts this month, including conspiracy to commit bribery, honest services wire fraud, obstruction of justice, and tax evasion. Mr. Uribe was one of three businessmen charged in what prosecutors say was a vast, yearslong bribery scheme involving Senator Menendez and his wife. Four days after Uribe’s guilty plea, prosecutors charged Senator Menendez and his wife with obstruction of justice in a new, 18-count indictment. Adding to the corruption charges the couple already faces, prosecutors now allege that Senator Menendez’s former lawyers told prosecutors in meetings last year that Menendez had not been aware until 2022 of mortgage or car payments that the businessmen had made for his wife, and that when he found out about the payments he thought they were loans. Prosecutors assert that Menendez had learned of both the mortgage company payment and the car payments prior to 2022, and that they were not loans, but bribe payments. Senator Menendez, his wife, and the two other businessmen have pled not guilty and are facing trial in May.

Foreign Agents Registration Act

Senate Homeland Security and Governmental Affairs Committee Hearing Implicates FARA Compliance – In February, the Senate Homeland Security and Governmental Affairs Committee’s Permanent Subcommittee on Investigations held a hearing in which it questioned executives from several US-based companies related to their work with Saudi Arabia’s Public Investment Fund (PIF). The Committee has been investigating Saudi investments in the US as a tool of influence in the wake of an announcement last year that the PIF-backed LIV Golf and the PGA Tour were in negotiations to merge. Of the three companies, only one had registered under the Department of Justice’s Foreign Agent Registration Act (FARA) for work on behalf of PIF.

Non-Federal Elections & Campaign Finance

Civil Rights Groups Prevail in Challenging Louisiana’s State Legislative Maps – A federal district court recently held that Louisiana’s state House and Senate district maps violate Section 2 of the Voting Rights Act, which prohibits voting laws or procedures that purposefully discriminate on the basis of race, color, or membership in a language minority group. The Court's opinion condemned the cracking and packing of Black communities within the maps, and has mandated that the state take remedial measures to rectify what it viewed as discriminatory boundaries. “Cracking” refers to splitting groups with similar characteristics across multiple districts while “packing” involves cramming certain groups of voters into as few of districts as possible. The Court has given the state a reasonable period of time to approve new legislative districts, and did not specify when new maps need to take effect.

Ohio Bill Banning Foreign Contributions to Ballot Issue Campaigns Passes State Senate – The Ohio Senate recently passed Senate Bill 215 which, if enacted, would prohibit foreign contributions to state ballot issue campaigns. The bill extends the state’s current law banning foreign contributions to candidates running for office and eliminates the loophole for ballot issue campaigns. The bill, which passed the Republican-led Senate on a 25-7 party-line vote, is now with the Ohio House of Representatives for consideration.

Hawai`i Legislature Considers Comprehensive System of Public Financing for State and Local Elections – In February, the Hawai`i Senate passed Senate Bill 2381 which would establish a comprehensive system of public financing for all candidates seeking election to state and county public offices, to begin with the 2028 general election year. The system would provide grants to qualifying candidates who are able to demonstrate sufficient support from voters, with the funding formula varying by race. Proponents of the bill argue that it would reduce the temptation for political corruption and lead to a new generation of younger elected officials who are not beholden to special interests and corporations. Opponents question whether the utilization of taxpayer dollars for state and local political campaign funding is the best public policy decision in uncertain financial times. The bill is currently being considered by the Hawai`i House Committee on Judiciary and Hawaiian Affairs and the House Committee on Finance.

NYC’s Non-Citizen Voting Law Ruled Unconstitutional on Appeal – A New York state appeals court ruled recently that a New York City law that would have allowed non-citizens to vote in local elections is unconstitutional. The 2022 law, which had not yet gone into effect, sought to let legal permanent residents (“green card” holders) and other people living in New York City with federal work authorization vote in local elections for offices including Mayor and City Council. The Court held that the clause in the state constitution that “every citizen shall be entitled to vote…” refers exclusively to United States citizens. Government efforts to permit legalized non-citizen voting are still relatively rare in the United States, but several large and politically-progressive jurisdictions, including Washington, D.C., have considered recent legislative proposals to implement it. If the New York City law had been upheld, the City could have added 800,000 or more new eligible voters to its municipal voter rolls. 

San Francisco Appoints First Noncitizen to Serve on Elections Commission – Kelly Wong, an immigrant rights advocate, is believed to be the first noncitizen appointed to the San Francisco Elections Commission, a seven-member civilian body that oversees and creates policy for the City’s Department of Elections. Wong’s appointment is the result of a 2020 voter-approved measure that removed the citizenship requirement to serve on San Francisco boards, commissions, and advisory bodies. Wong, however, is not legally allowed to vote in the City.

Michigan Political Fundraisers Charged with Campaign Finance Violations – Michigan Attorney General Dana Nessel recently brought criminal charges against two Republican fundraisers who were allegedly involved in an effort to conceal the names of donors to a campaign to reduce Governor Gretchen Whitmer's emergency powers during the COVID-19 pandemic. It is alleged that the fundraisers helped raise money for the Unlock Michigan ballot proposal committee in 2020 and 2021 by funneling donations through nonprofit organizations that did not have to identify their contributors. If the donors had given directly to the Unlock Michigan petition effort, the committee would have had to report their names. The Attorney General alleges that this scheme was developed to intentionally evade reporting requirements under the Michigan Campaign Finance Act. One of the fundraisers has been charged with three misdemeanor violations of the state's campaign finance law and willfully making or publishing a false statement with the intent to defraud – a felony. The other fundraiser is charged with perjury.

Anti-Super PAC Initiative Headed to Maine Legislature for Consideration – A campaign finance reform effort in Maine has secured enough signatures for a citizen initiative and will now go to the Maine Legislature for consideration, which can either enact the bill as written or send it to a statewide vote in November 2024. The initiative seeks to limit contributions to Super PACs, which generally can receive unlimited contributions from individuals and corporations alike. The proposed bill would limit annual contributions to Super PACs to $5,000 from individuals, PACs, and businesses. Given existing legal precedent in the political speech realm, it is highly likely that such a law – should it be enacted – would face immediate legal challenge and raise serious constitutional questions. 

Georgia House Approves Crackdown on Deepfake AI Videos – The Georgia state House voted this month to crack down on deepfake artificial intelligence (AI) videos ahead of this year’s elections. The legislation, if enacted, would make it a felony to publish a deepfake within 90 days of an election with the intention of misleading or confusing voters about a candidate or their chance of being elected. The bill would allow the Georgia Attorney General to have jurisdiction over the crimes and allow the Georgia State Election Board to publish the findings of investigations. Satire and parody would be exempted from the bill, and campaign advertisements would require disclosures if the content used was generated with AI. The bill is now being considered by the Georgia state Senate.

Lawsuit to Stop Arizona Dark Money Transparency Law Dismissed – For the second time, a lawsuit asking Arizona courts to block the state from enforcing the “Voters’ Right to Know Act” has been rejected by a state judge. In November 2022, more than 70% of Arizonans voted to pass Proposition 211, the Voters’ Right to Know Act, which purports to eliminate “dark money” election spending by requiring that Arizona political committees spending at least $50,000 in statewide or legislative campaigns reveal the identities of individual contributors who give more than $5,000. Individuals who give $2,500 or more to a committee spending at least $25,000 in local elections would also have their names, mailing addresses, and employers disclosed under applicable regulatory frameworks. Two conservative groups challenged the law on the basis that it violates their free speech rights. The Goldwater Institute, which represents the groups in the suit, says it plans to appeal.

Florida Senate Approves Ballot Referendum Asking Voters to Weigh in On Repealing State’s Public Campaign Finance Law – This month, the Florida Senate approved a measure approving a ballot referendum asking voters to weigh in on repealing the Florida Election Campaign Financing Act (FECFA). If passed, Florida voters this year would decide in a referendum whether they want to end the state’s public campaign financing system that has been in effect since 1986. Under FECFA, statewide candidates can receive campaign contribution matches for individual contributions of $250 or less. In exchange, candidates agree to abide by certain campaign expenditure limits. Such contribution matches are also contingent on personal wealth caps and limits on political party giving. An identical House bill has also been introduced.

Arizona House Passes Bill Eliminating No-Excuse Early Mail-In Voting – Arizona House Republicans approved a proposal that, if enacted, would end no-excuse early voting by mail, by far the most popular way to cast a ballot in the state. On a party line vote, the Arizona House of Representatives passed a bill that would force a return to precinct-based voting instead of voting centers and would force most voters to head to the polls on Election Day instead of dropping off or mailing an early ballot. Voting by mail has been popular in Arizona during and immediately following the COVID pandemic, with almost 90% of ballots in 2020 cast by mail and around 75% of voters signed up to receive early ballots in 2022. The bill is currently being considered by the state’s Senate. If passed, Arizona Governor Katie Hobbs (D) is expected to veto it.

Non-Federal Lobbying & Ethics

Florida Senate Fails to Advance Lobbying Transparency Bill – The Florida State Senate failed to advance an omnibus lobbying transparency bill that would have made various changes to ethics regulations for local and state government officials. The law would have prohibited public officers, state agency employees, local government attorneys, and candidates for office from accepting anything of value including a gift, loan, reward, promise of future employment, favor, or service, based on the understanding that their judgment, official action, or vote would be influenced. Additionally, individuals intending to lobby a municipality, county, or special district would have been required to register with the Florida Commission on Ethics. The bill died in the state’s Senate Appropriations Committee earlier this month.

Questions of Political Favoritism Raised Against California Governor in Regard to New Wage Law Beneficial to Large Donor – In September 2023, California Governor Gavin Newsom signed legislation that will increase the minimum wage for more than a half-million fast-food workers in the state to $20 per hour starting next month. The law’s language includes an unusually specific exemption for restaurants with on-site bakeries that sell bread as a menu item. Bloomberg reported that a driving force behind the carve-out had been Greg Flynn, a Bay Area billionaire who has done business with the governor and is a longtime campaign donor. Mr. Flynn’s company owns two dozen Panera franchises in California.  Under the bakery exemption, the establishment must operate a bakery that produces bread for sale on the establishment’s premises. Many chain bakeries such as Panera Bread mix dough at centralized off-site locations and then ship that dough to retail locations for baking and sale. Governor Newsom’s office recently denied that he had met with Flynn about the exemption, and said that Panera does not qualify for the exemption. California state Senate Minority Leader Brian Jones (R) asked state Attorney General Rob Bonta (D) to investigate the allegations of “pay-to-play” politics in the drafting of the bill.

Former Massachusetts State Senator Charged with Violating Ethics Laws – Former Massachusetts State Senator Dean Tran has been indicted by a grand jury and charged with two counts of violating state ethics laws. The Commonwealth’s Attorney General alleges that Mr. Tran used members of his Senate staff to campaign for him in 2018 and 2022 while those staff members were on state time, state payroll, and purportedly working for the Legislature. Massachusetts’ ethics laws prohibit state, county, and municipal public employees from using public resources in connection with political campaigns or other private political activity, including engaging in campaign activity during public work time. The Massachusetts Senate previously sanctioned Tran in 2020 after its Ethics Committee found his office staff had been performing campaign work with public resources during business hours.

New York Appeals Court Hears Arguments Over the Fate of the State’s Ethics Commission – This month, a New York appeals court heard oral arguments over the fate of the state’s Commission on Ethics and Lobbying in Government. The case stems from a lawsuit filed by former New York Governor Andrew Cuomo, who claims the Commission lacked the constitutional authority to prosecute him. Mr. Cuomo, who resigned in 2021, is fighting an attempt by the Commission to force him to forfeit $5 million he received for writing a book about his administration’s efforts during the COVID-19 pandemic. A lower court judge ruled in September 2023 that the Commission’s independence violates the state Constitution’s separation of powers doctrine. The appeals court is expected to issue a ruling in the coming months.

Pay-to-Play

New Legislation Would Block Campaign Money from Michigan’s Power Utilities – A Michigan Representative introduced a pair of bills that together would block state-regulated energy utility companies from making donations to political nonprofits and political action committees. If adopted, the bills would block officials at multiple levels of Michigan’s government from taking money from utility companies, utility board members, employees, and their family members, and from nonprofits that have a utility official or worker sitting on their board. A utility company found to violate the proposed legislation would be subject to a civil fine up to 10 times the size of the contribution. 

Practice Pointers

People tend to pay more attention to, and be more engaged with, political happenings during federal, and in particular, presidential election years. This month’s Practice Pointers note serves as a reminder to corporate and nonprofit compliance teams to communicate frequently and actively with organizational personnel about ensuring their personal campaign contributions and outside political activities comply with applicable federal, state, and local contribution limits, internal organizational compliance policies, and other relevant restrictions. Organizations engaged in lobbying activities, whether that be through outside lobbying counsel or in-house lobbyists, should be aware not only that certain lobbyist and entity contributions may be reportable to governmental oversight bodies, but also that lobbyists may be barred from giving or face restrictive contribution limits in certain jurisdictions. Organizations engaged in procurement lobbying should also closely monitor employee giving to ensure that these contributions do not disqualify the organization from existing government contracts or bar them from pursuing potential procurement opportunities, as many jurisdictions maintain draconian pay-to-play provisions that regulate political giving by prospective public vendors and their staff. The Dentons Political Law Team regularly advises organizations and businesses on establishing and maintaining appropriate policies and procedures to help ensure compliance with the intricacies of federal, state, and local campaign finance, lobbying, and pay-to-play rules, so please do not hesitate to reach out as you strategize how to stay compliant.

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