Bid to Unmask Dark Money Donor Lands in DC Circuit

WASHINGTON (CN) — The D.C. Circuit heard arguments Friday in a lengthy legal battle entangling Washington federal courts over the issue of so-called dark money campaign contributions.

For the second time, a three-judge panel in Washington took up a case in which the Supreme Court last year allowed a lower court decision forcing Crossroads Grassroots Policy Strategies to disclose donors to take effect.

The conservative political action committee contributed at least $17 million to multiple U.S. Senate races during the 2012 election cycle.

The original complaint filed in 2012 by Citizens for Responsibility and Ethics in Washington, or CREW, claimed Crossroads GPS sidestepped campaign finance laws by not disclosing the name of an anonymous donor who contributed millions at a fundraising event to then-Ohio State Treasurer Josh Mandel’s campaign for the U.S. Senate.

The event was headed off by Republican political operative Karl Rove, who informed the audience of the anonymous $3 million pledge that set off another $1.3 million in matching donations.

After the Federal Election Commission denied CREW’s administrative complaint, the watchdog group sued the commission in 2016, arguing it had ignored Congress’ mandate with the regulation that allowed Crossroads GPS to maintain donor secrecy. The PAC intervened in the case and filed simultaneous appeals to the D.C. Circuit and U.S. Supreme Court.

Like the Supreme Court, the appellate court denied the emergency motion for a stay of the district court’s order, finding that Crossroads GPS had “not satisfied the stringent requirements for a stay pending appeal.”

In court on Friday, the PAC looked to Chief U.S. Circuit Judge Merrick Garland and U.S. Circuit Judges Stephen Williams and Sri Srinivasan to reinstate the ousted FEC rule.

Wiley Rein attorney Thomas Kirby, representing Crossroads GPS, argued U.S. District Judge Beryl Howell had wrongly struck down the FEC regulation that allowed political groups to not disclose their donors unless the donors met certain conditions.

The regulation sharply narrows the obligation to disclose to “significant donations to support independent expenditures specifically intended to influence the outcome of a federal election.”

Leaning on Supreme Court precedent laid out in the 1976 case Buckley v. Valeo, Kirby said only contributions made with a “clear and objective tie” to advocacy require disclosure.

He further argued that CREW was long past the six-year statute of limitations to challenge the FEC rule when it brought the case against the commission in 2016.

But Chief Judge Garland took issue with Kirby’s claims, saying the lawyer’s interpretation differed from the definition found in Buckley.

Echoing the concern from across the bench, Judge Williams said Kirby’s definition was “very narrow.”

The Supreme Court ruling in Buckley reaches beyond the definition outlined in the FEC regulation to include not only donations intended to influence any federal office, but also funds “earmarked for political purposes.”

But Kirby held his ground, stating that Buckley demands a “very precise and very narrow and very direct linkage” between independent expenditures and a campaign objective.

CREW attorney Stuart McPhail offered a much broader definition, saying that contributions of $200 or more include expenditures not gifted to a specific candidate or campaign objective. This encompasses, he said, politically driven activities such as voter registration.

Williams later responded to arguments from McPhail, saying that while there is “fungibility with money,” the necessity for disclosure seemed “pretty direct” based on the facts laid out by CREW.

Over the years, CREW has garnered Democratic support in the case, including from three U.S. senators who filed an amicus brief back in April.

Richard Blumenthal, D-Conn., Sheldon Whitehouse, D-R.I. and Jon Tester, D-Mont., wrote the embroiled FEC regulation violated the purpose of the Federal Election Campaign Act — passed by Congress in 1971 — allowing secrecy to mold an “unhealthy political environment.”

“[The FEC regulation] flatly fails to meet real-world tests of today’s political campaigns,” the senators wrote.

Brushing away the semantics underpinning the arguments from Crossroads GPS, McPhail said any money tied to a political cause warrants an investigation by the FEC.

“That money has to be reported whenever a disclosure is triggered,” McPhail said.

The three-judge panel will issue a decision on the case heard Friday in the coming months.

The oral arguments came less than two weeks after the FEC announced on Sept 1. that it had begun working without a quorum of four commissioners, after Vice Chairman Matthew Petersen stepped down on Aug. 31.

“While the Federal Election Campaign Act of 1971, as amended…requires an affirmative vote by four Commissioners to make decisions in many areas, including regulations, advisory opinions, audit matters and enforcement, the Commission remains open for business. Staff continues to further the agency’s vital mission of administering the nation’s campaign finance laws,” the FEC said in a press release.

President Donald Trump is responsible for selecting an appointee to replace Petersen, to be approved by Congress. But the White House has given no indication of plans to appoint new commissioners to what is meant to be a six-member board.

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