The Corner

Re: Obama and Citizens United

A couple of e-mailers have asked why Citizens United wouldn’t effectively allow a foreign corporation with a U.S. subsidiary to make independent expenditures in support of a political candidate. And the White House is apparently pushing back against criticism of Obama’s remarks by arguing that the Court’s decision creates just such a “loophole.”

From a plain reading of the statute that remains in place, though, this is little more than a tempest in a teapot. 2 U.S.C. section 441e prohibits foreign principals, including corporations organized under foreign law, from either “directly” or “indirectly” involving themselves in the U.S. electoral process, either through direct contributions to candidates or “independent expenditures” in support of candidates. While the Citizens United ruling said that the ban on corporate independent expenditures was a violation of the First Amendment, it did nothing to touch this prohibition on foreign participation. If a foreign corporation sought to circumvent the direct ban by indirectly, through the use of a U.S. subsidiary, doing what the statute prohibited directly, the statute would consider that an illegal act.  

As Brad Smith points out, the FEC regulations expressly prohibit such acts, stipulating 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, there is no loophole in play — FEC regulations already contemplate the problem and deal with it. It is only where a U.S. subsidiary makes a decision without any input whatsoever from its foreign parent that such an act might be protected.

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