The full story is this:
(1) The Citizens United case dealt with a blanket ban on corporate expenditures. The Court struck down the ban, which is part of 2 USC 441b.
(2) A separate section of the law, 2 USC 441e, prohibits “foreign nationals” from making expenditures or contributions. “Foreign nationals” includes corporations that are not incorporated or headquartered in the United States. This is an extremely broad prohibition that applies to any U.S. election (including state and local elections) and to any activity “in connection with” an election. The Citizens United ruling doesn’t touch this prohibition and specifically notes that it makes no judgment about foreign corporations.
(3) This would allow a U.S. corporation, incorporated and headquartered in the United States, to make expenditures (Obama, remember, referred to “foreign corporations”). But . . .
(4) FEC regulations at 11 CFR 110.20 further delineate the prohibition:
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.
Additionally, the FEC requires that any funds so spent come from U.S.-generated income (in other words, the parent corporation cannot send capital to the U.S. subsidiary and then have the subsidiary spend that in connection with U.S. elections). Therefore . . .
(5) You could have a foreign-owned but U.S.-incorporated-and-headquartered subsidiary, using U.S. funds, controlled solely by U.S. nationals, make expenditures. However, bear in mind that . . .
(6) Such a corporation is already eligible to operate a PAC — which can make unlimited expenditures and also make contributions directly to candidates (under the same restrictions of U.S. funds managed by U.S. nationals) — and to spend unlimited sums from any source. Its executives and managers who are U.S. citizens or lawful permanent residents (i.e., the same people who would have to decide on any corporate spending) are already eligible to spend unlimited sums on U.S. elections.
So claiming that the Citizens United decision will allow “foreign corporations to spend without limits in our elections” is as misleading as saying that “Obama and the Democratic Congress have allowed foreign corporations to spend without limits in our elections.” The corporate ban is not about foreign contributions, and the government never tried to defend it as such. To suggest that this ruling allows foreign expenditures in elections is wholly misleading.
We might say that the president’s statement is not a lie, because it contains a small kernel of truth. But that kernel of truth is what separates lies from demagoguery. The president’s statement was shameless demagoguery.
– Bradley A. Smith is Josiah H. Blackmore II/Shirley M. Nault Designated Professor of Law at Capital University Law School.