U.S. Federal Election Commission Deadlocks on Greater ’12 Donor Disclosure

The U.S. Federal Election Commission failed to approve a proposal that could lead to greater disclosure of donors to independent groups poised to spend millions on attack ads in the 2012 presidential race.

The FEC deadlocked today in Washington along party lines, as it did when it failed to move ahead with a similar proposal in January. Some campaign finance experts who are alarmed by the rise of secret donations worry that this inaction might expand the flow of unregulated money.

“I’ve never seen an FEC this bad before,” said Craig Holman, who lobbies on campaign finance issues for Public Citizen. “They’re just giving the green light to everyone saying, ‘We’re not going to enforce the laws; you can do whatever you want.’”

Frustration with the FEC stems largely from its structure. The six-member commission is evenly divided along partisan lines, which means nothing can get done unless one member is willing to cross party lines and go along with a change. Since 2008, the commission has seen an increase in party-line voting, according to a Bloomberg News study.

Partisan activists in recent years have exploited that built-in bias against aggressive campaign finance oversight by pushing the limits of the law. Those efforts are expected to culminate in 2012 with both the Democrats and Republicans soliciting millions of dollars in anonymous political donations to pay for negative advertising and direct mail.

Citizens United

Democrats on the FEC pressed to make increased disclosure a part of the commission’s rewrite of election rules in light of the U.S. Supreme Court’s Citizens United decision, which paved the way for corporations and labor unions to spend freely on political campaigns.

“The commission should be seeking public comment on whether it remains appropriate for our reporting regulation to treat corporations and labor unions differently in terms of what is reported,” Bauerly said in a statement after today’s vote. “The question is not whether the FEC will comply with the court’s decision, but how it should do so.”

The FEC rejected a similar proposal in January along party lines, with the Republicans saying the commission should just rewrite the rules regarding corporations and labor unions that conflict with the court decision. An alternative Republican draft, which also failed, didn’t discuss disclosure.

Donors Names

Adding proposals on disclosure “is no more responsible today than it was in January,” said the three Republican commissioners, Caroline Hunter, Donald McGahn II and Matthew Petersen, in a statement following the vote.

The commissioners also noted that Congress already considered and rejected legislation that would shed light on donors’ names. Senate Republicans killed the bill last year.

The FEC did agree to seek comment on Maryland Democratic Representative Chris Van Hollen’s request that the FEC require the U.S. Chamber of Commerce and other outside groups that run campaign-related ads to disclose who is paying for them.

Groups that didn’t disclose their donors spent at least $137 million in the 2010 elections, 25 times more than in 2006, FEC reports show.

Rove Groups

Two groups created with the help of Republican strategist Karl Rove, Crossroads Grassroots Policy Strategies, which doesn’t disclose contributors, and American Crossroads, which does, announced plans to raise $120 million for the 2012 campaign after raising $71 million in 2010. Former Obama White House Spokesman Bill Burton and other Democrats have countered the Rove-led effort by establishing three new nonprofit groups that won’t identify donors. They also created companion groups that will disclose donors.

Campaign finance watchdogs cite a 2007 FEC decision for the growth of nonprofit groups that keep their donors secret.

In that ruling, the commissioners said organizations needed to disclose only those contributions earmarked for political spending.

Three years later, the FEC, along party lines, rejected its counsel’s request to investigate whether Freedom’s Watch, created by former aides to President George W. Bush to run ads against Democrats, should have identified its donors.

At the time, the three Republicans said disclosure was required only if the donations were given for a specific ad, a standard that would rarely, if ever, apply to a contribution.

Proposed Settlements

Since the current Republican commissioners joined the FEC in July 2008, the commission on 18 occasions has rejected counsel calls for investigations or rejected proposed settlements already agreed to.

To the activist community, an FEC tie vote is viewed as clearance to proceed since the commission is unlikely to muster the votes for enforcement action later.

Beyond today’s discussion about disclosure, another significant decision on track to come before the commissioners is the role elected officials can play in assisting the outside groups in fundraising.

Republican National Committee member James Bopp Jr., who argued Citizens United before the Supreme Court, helped form the Republican Super PAC to take in unlimited donations. He now wants Republican lawmakers to seek contributions for the PAC, which can far exceed the limited donations that lawmakers’ can accept for their own campaigns.

“The reformers have criticized this but they criticize all political spending,” Bopp said. “The law is clear that this is legal.”

Two Democratic super PACs have asked the FEC for a ruling on the matter.

Stronger Restrictions

Trevor Potter, a former FEC chairman and now head of the Campaign Legal Center, a Washington-based advocacy group that supports stronger campaign finance restrictions, said Bopp’s plan violates the 2002 law that banned federal candidates from seeking unlimited donations.

Obama could break the deadlock by replacing the three Democratic and two Republican commissioners whose terms have expired with more aggressive regulators. Even if Senate Republicans blocked the nominees, Obama could put them on the commission during a congressional recess, remaking the FEC in time for 2012. He has yet to act.

The president “never wanted to spend any political capital,” said Melanie Sloan, executive director of the watchdog group Citizens for Responsibility and Ethics in Washington. “I don’t understand it, considering how the campaign finance world is getting crazier and crazier every day.”

Eric Schultz, a White House spokesman, said, “The president intends to nominate well-qualified candidates, and we will continue to support strong enforcement of our campaign finance laws.”

To contact the reporter on this story: Jonathan D. Salant in Washington at jsalant@bloomberg.net.

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net.