The Intimidation Game

by Kimberley Strassel

  Media outlets like ProPublica were soon using the records to publish stories like one in 2012 that ran under the headline “Revealed: The Dark Money Group Attacking Sen. Sherrod Brown.” Brown is a Democratic senator from Ohio, who was running for reelection in 2012 and who had his public record highlighted in TV ads by a 501(c)(4) organization called the Government Integrity Fund. ProPublica used the FCC records to track down the man listed as the nonprofit’s chairman and treasurer, who happened to be a Republican, who happened to run a lobbying firm, which happened to employ among its staff a man who happened to have worked a year earlier for Brown’s Republican opponent, Josh Mandel. ProPublica cast this noninformation as a giant conspiracy, without ever explaining why there was anything nefarious about a group of Republicans running ads against a Democrat. By 2014, the Sunlight Foundation was bragging that the information had allowed it to begin to “unmask the donors behind political ad buys.”

  The groups were so tickled by their progress in identifying more donors that by the end of 2014 the Sunlight Foundation (Soros money), Common Cause (Soros money), and the Campaign Legal Center (Soros money) wanted the FCC to expand its rule. McDowell, the Republican commissioner, had worried in 2012 that the broadcast disclosure rule was unequally applied. The liberal groups were happy to fix that. They wanted the FCC to expand the disclosure requirement on ad buys to cable and satellite. Advocates argued that the FCC needed to get this in place before the 2016 election. And congressional Democrats did an IRS redux, applying pressure on the agency. California representatives Anna Eshoo and Henry Waxman, along with Florida senator Bill Nelson, wrote a letter explaining that it was “imperative” that the FCC sweep everybody under new disclosure rules. By the end of 2014, the commission had formally proposed just such an expansion.

  These victories were but the prelude. No one on the left had forgotten MAP’s original demand, and all through 2012 and 2013, Democrats kept pushing the FCC to do what Congress wouldn’t: require the full disclosure of all the financial contributors to political ads. In an early 2013 Senate Commerce Committee hearing, Florida’s Nelson, joined by West Virginia Democrat Jay Rockefeller, demanded the FCC, extralegally, impose the requirements of the DISCLOSE Act. Nelson tied the issue back (yet again) to Citizens United, and told the FCC commissioners, “You have the statutory power. You don’t have to do what we failed to do four years ago, to pass the disclosure act.” Then–FEC chairman Julius Genachowski seemed enthusiastic about the idea, calling it a “First Amendment–friendly, powerful tool.”

  Republicans grew alarmed, and thirteen of them led by Senate minority leader Mitch McConnell in April wrote a letter to the FCC putting it on notice that they were watching. The DISCLOSE Act had been among the “most politically charged, partisan issues in recent Congresses,” they said, because it raised “grave constitutional concerns for speech protected by the First Amendment.” Any action in this direction by the FCC would “seriously undermine” its “integrity.” Texas senator Ted Cruz was worried enough to put an indefinite hold in the fall of 2013 on Obama’s nomination of Democrat Tom Wheeler as chairman of the FCC.

  Wheeler, a wealthy venture capitalist and lobbyist, had raised hundreds of thousands of dollars for the Obama election, and was clearly an Obama loyalist. Cruz in confirmation hearings demanded to know whether the nominee thought the FCC had the authority to unilaterally impose such a disclosure regime. The Democrat ducked the question, claiming he didn’t know enough about the issue. Mr. Cruz informed Mr. Wheeler that he wouldn’t be getting a vote until he educated himself. Cruz only lifted his hold after a meeting with Wheeler, after which the senator announced he’d been given assurances that the soon-to-be chairman had no intention of making the political disclosure issue a “priority.”

  Wheeler has held to that agreement. In the summer of 2015, he argued the FCC had plenty else on its to-do list, and wouldn’t be pursuing the left’s disclosure wish list anytime soon. That position earned him the wrath of liberals like Marty Kaplan, a left-wing professor who wrote a scathing column in the Huffington Post that same month. The 2016 election would bring more anonymous ads, he wrote, and the pity was that “we’ll get good and mad at the dog crap soiling democracy’s lawn, but we won’t even know whom to shame.”

  The shaming would be easier, wrote Kaplan, if Wheeler would just understand that “we don’t have to wait for the president to send a disclosure bill to Congress that won’t go anywhere; we don’t have to wait for Congress to bite the hand that feeds it. The FCC can do that rulemaking on its own, and after a 120-day public comment period, if you conceal who’s paying for those ads, you’ll get nailed.” Kaplan complained that as “important” as Wheeler’s other priorities were, only his taking up the disclosure mantle would “rescue” democracy.

  If Kaplan had substituted the word “Democrats” for “democracy,” the piece would have had a whiff of honesty. It was nonetheless revealing. The pressure on the FCC to join the targeting brigade will continue.

  Government intimidation wasn’t confined to the IRS, the FEC, and the White House.

  * * *

  Democrats wanted corporations out of politics. The White House had tried doing it to a discrete group—government contractors. A scant few months after that failed, the left debuted a bigger, better fallback plan. They’d get the whole corporate world in one big swoop. And luckily for them, they had yet another agency, one with control over public companies: the Securities and Exchange Commission.

  The SEC on August 3, 2011, received a petition from an odd if purposefully named organization: the Committee on Disclosure of Corporate Political Spending. It was in reality a collection of ten liberal academics, many of them high-profile scholars who frequently parlayed their putative research into calls for more and bigger rules on the financial sector.

  They were back, in force. Their petition asked that the SEC “develop rules to require public companies to disclose to shareholders the use of corporate resources for political activities.” This was a reprise of the Larry Tribe idea.

  The broader argument for the rule was cast in all sorts of fancy scholar-speak. The petitioners insisted that the law gave the SEC the authority to require such a rule. They cited a new trend in shareholder proposals that demanded that companies divulge their political spending. They referenced the Citizens United decision, claiming that the Supreme Court had backed just this type of disclosure.

  Their Citizens United meditation was actually the most revealing part; it was yet more proof that what drove the petition was the left’s new focus on outing companies, teeing them up for reprisal. The scholar-speak was designed to cloak what was a naked partisan play.

  Citizens United focused the left’s attention on nonprofits. But it was equally frantic about the new free-speech rights of corporations, which now had greater freedom to run their own issue ads. It was also worried that companies would give more money to nonprofits that would also engage in the political system. The DISCLOSE Act had been its initial attempt to immediately shut down the freedoms Citizens United had restored to companies. When that failed, the left crafted a sweeping multipronged campaign to embarrass companies out of civic participation.

  Liberal groups had been going from company to company, trying to pressure them into disclosing their political giving, but that plan wasn’t yielding quick results. The petition was an attempt to get at the same end by a faster, bigger, all-encompassing means—namely by getting the SEC to impose the same requirement from above.

  The idea initially went nowhere. Obama’s SEC was busy, now that his Democratic Congress had passed the gigantic Dodd-Frank financial straitjacket. But the left wasn’t about to let go; it kept pressing and pressing. In December 2012, the patience paid off. The Office of Management and Budget released its list of potential regulatory actions. It included that the SEC’s Division of Corporate Finance was deciding whether to recommend to the SEC a rule requiring companies to disclose political giving.

  We don’t know pr
ecisely what SEC chairwoman Mary Schapiro thought about this plan. The left’s problem was her professional staff. Turns out the agency still contained a few serious career lawyers—attorneys who held the quaint view that the Securities and Exchange Commission’s job was to regulate trading, not political speech.

  According to documents obtained by Congress, one of these was Eric Spitler, counselor to Schapiro and the director of SEC’s Office of Legislative and Intergovernmental Affairs. Only a few months after the scholars filed their petition, Spitler used one of their arguments against them, in an e-mail to Schapiro. Plenty of groups were indeed filing shareholder proposals about disclosure with companies, he wrote. And thanks to existing SEC rules and regulations, those proposals were getting a fair hearing and vote. “I think a key point for us to make is that the mechanisms already exist, and as their letter points out, people are using them.”

  In January 2012, Spitler sent another e-mail, this one flatly highlighting the left’s motivations: “Ironically, it is that fact that Congress cannot act in this area because the votes are not there that is causing them to put more pressure on the agency so they can show something can be done.” Another staffer was far more blunt: “This is an issue for Congress to address.” Staff noted that acting outside of Congress could cause a troubling situation. The SEC can only regulate public companies. An SEC disclosure rule would force public firms to release all sorts of information that their private counterparts didn’t have to. Practically speaking, only Congress could require uniform disclosure.

  It was more unfair than even that. The SEC could only look at companies. It could not require disclosure from unions, which also spend directly on elections and give money (anonymously) to nonprofits. Which is precisely why the left was asking the SEC, rather than Congress, to regulate.

  The staff also had the temerity to point out that even were the SEC to obnoxiously ignore Congress, another agency still had a first and better claim. In December 2012, employees in the office of Meredith Cross, the director of the SEC’s Division of Corporation Finance, prepared a memo that made this point: “FEC is the primary federal regulator of political activity disclosure,” it lectured. “Formulating a SEC disclosure rule that is not duplicative of other federal and state law requirements and does not raise First Amendment issues may be challenging.”

  In April 2012, Schapiro infuriated Obama’s liberal base by voting with Republican commissioners to move ahead with an SEC agenda that did not include a disclosure rule. The timing had the left seeing red. It was an election year, and they’d been counting on getting a corporate-disclosure win. At the very least, they had wanted the promise that the rule was coming. They had hoped the mere possibility of it would cause companies to think twice about spending that election year.

  E-mails and letters poured into the SEC. Groups demanded meetings and explanations. One SEC e-mail recounted a May meet-up between Schapiro, members of outside pro-disclosure groups, and a former Democratic congresswoman. When Schapiro asked, “Why not the FEC instead of us?” the congresswoman responded, “Because the FEC is even more broken than you.” A congressional Republican memo on the exchange pointed to this as glaring evidence that even supporters didn’t believe this was a legitimate SEC job. They were just looking for any means to an end.

  Congressional Democrats—as they had done with the IRS and the FCC—jumped in to push a rule. Barney Frank—the other half of “Dodd-Frank”—was in the summer of 2012 still the ranking member on the House Financial Services Committee. In July, his deputy chief counsel e-mailed the SEC Office of Legislative and Intergovernmental Affairs to make a request. It read, “We have gotten a question from leadership about SEC authority to require disclosure on corporate charitiable [sic] contributions. There is particular interest in what the authority is for disclosure of 501(c)(4) contributions (political contributions).”

  The request was remarkable. The summer of 2012 was also the height of the IRS targeting of conservative nonprofits. Frank’s office was essentially asking if the SEC would zero in on corporate money to those same nonprofits. And it made clear that the demand was coming from the top, from the Democratic “leadership”—likely Nancy Pelosi’s office.

  The e-mail was forwarded to numerous higher-ups at the SEC, with the following (somewhat snarky) note: “I suspect the answer to the actual question is relatively easy,” it read, “but I’m including all of you on the email so you’ll be aware that House Democratic Leadership is interested.” One SEC lawyer almost immediately answered: “There is no specific authority.” The attorney explained that for the SEC to move ahead, it would have to think of some way to argue that the provision fell under some broader existing disclosure rule.

  Schapiro and her two fellow Democratic commissioners ultimately sat in at least eleven meetings with liberal groups demanding disclosure. Many of these meetings were with Public Citizen, the same organization that had been busy filing requests with the IRS to target 501(c)(4) groups. And Public Citizen openly explained that it wanted the SEC rule for the same reason—to expose “electioneering front groups.”

  Another three meetings were with an organization formed in direct response to Citizens United, called the Coalition for Accountability in Public Spending. It was founded in 2010 by then–New York City public advocate Bill de Blasio (who is today New York City’s liberal mayor). The organization admitted that its main goal was to force companies to disclose all their political spending. The meetings also featured all the other usual suspects: Common Cause, People for the American Way, etcetera.

  The staff remained resolute. When in September 2012 the agency started working on its next-year agenda, Cross’s office was asked for its opinion on disclosure. It brusquely stated, “The Division would not recommend adding it to the agenda at this time unless requested by the Commission.”

  Which is precisely what the commission, or at least one commissioner—Luis Aguilar—proceeded to do. The Democrat began a campaign to get the disclosure rule included, sending formal requests to both Schapiro and the agency’s other liberal, Elisse Walter. By the end of September, Schapiro had been made to see the liberal light. Congress did not obtain any documents explaining why she chose to ignore all the wisdom of her staff, but a little more than a week after Aguilar’s demand, the general counsel sent around a draft agenda for the upcoming year that included the disclosure rule.

  The staff, at the wish of political masters, now switched gears. It feverishly attempted to cook up some good excuses for why the SEC needed to act as speech police. The Division of Corporation Finance in January 2013 produced a draft argument in favor of the rules. It even creatively came up with a way to make Barney Frank and the Democratic “leadership” happy. It read, “A substantial amount of corporate spending on politics is conducted through intermediaries not required to disclose the sources of their contributions.…There are cases, such as corporate contributions to intermediaries that spend a large fraction of their funds on politics, for which inclusion within the scope of the Commission’s rules seems warranted.” The SEC, at Democratic leadership’s request, was advocating a backdoor way of blowing up nonprofit anonymity. This is an example of how Congress makes agencies do its bidding.

  In the end, the blowing up happened on the other side. The SEC had terrible timing with its proposal. Not long after it indicated that it intended to proceed, the IRS targeting scandal was exposed and put new focus on other agencies that were pursuing nonprofits. The scholarly community also rained down scathing criticism on the disclosure idea, pointing out just how far the SEC had to stretch to find a legal rationale for inserting itself in the debate. The corporate world uncharacteristically pulled together to beat up on the idea. House Republicans called hearings, warning new SEC chairman Mary Jo White that she risked derailing her tenure at the agency with an uproar over a highly partisan rule, an issue that would overshadow and stymie the rest of her agenda.

  White, a straitlaced former federal prosecutor, decided that she
had no interest in wallowing in a partisan mudhole. In October 2013, she disparaged the whole idea, saying that the disclosure rules pushed by activists “seem more directed at exerting societal pressure on companies to change behavior, rather than to disclose financial information that primarily informs investment decisions.” A little more than a month later, the SEC circulated its list of upcoming priorities. Disclosure was gone.

  Democrats haven’t given up. In August 2015, forty-four Democratic senators signed a letter to White demanding that she get on their disclosure train. It was threatening. “We ask that you make this a top priority for the SEC in the near term, and inform us of the basis for your decision should you not plan to include it on the commission’s agenda for the upcoming year,” it read. The “upcoming year” part is important. It includes a presidential election.

  * * *

  Government intimidation wasn’t confined to the IRS. The service was simply the agency that most fully succumbed to a pressure campaign the left waged across the vast sweep of the Obama apparatus. As soon as the DISCLOSE Act failed in Congress, liberal activists and Democratic politicians instituted a broad and coordinated campaign to get the IRS, the SEC, the FEC, and the FCC to hassle conservative nonprofits. Americans were outraged over the IRS, but they didn’t know the half of it.

  The left got more than it hoped for when the IRS outright muzzled nonprofits. The left’s campaigns at the FCC and SEC, and via the White House executive order, had all been aimed at one thing: disclosure. The activists wanted lists of names. Because they were already fine-tuning a new method of cowing conservative players out of politics.