Campaign Spending: Why Companies Are Holding Fire

"Our phones are ringing off the hook," says one Washington lawyer

The Supreme Court's decision in Citizens United v. Federal Election Commission provoked condemnation as a decisive breach of the ramparts protecting U.S. politics from the influence of corporations and big labor. The hoopla, it's turning out, may have been hasty.

The ruling, issued Jan. 21 and denounced a week later by President Barack Obama in his State of the Union address, established that companies and unions may make unlimited expenditures advocating the election or defeat of federal candidates right up to Election Day. So far, though, it has not resulted in corporations rushing to set aside fresh money for campaign attack ads. To the contrary, the decision has provoked a backlash among Democrats in Congress. They are drafting disclosure legislation that could make it trickier for businesses to influence elections.

The only obvious winners in the immediate wake of Citizens United are well-connected Washington lawyers. "Our phones are ringing off the hook," says William J. McGinley, a partner with Patton Boggs, a corporate law-and-lobbying firm. "Pretty much every player in this town is trying to figure out what the decision means for them."

From a sunny office across 15th Street from the Treasury Dept. and White House, Kenneth A. Gross, a partner with the firm Skadden, Arps, Slate, Meagher & Flom, is also logging long, well-compensated hours. He's counseling wary Fortune 500 clients on how—or whether—to respond to the ruling in connection with this fall's midterm elections. "They're interested, curious, and want to know how to take advantage of it," says Gross, a former top in-house attorney at the FEC. But not a single major company, he continues, "has made a palpable move to take advantage of it. This is complicated for corporations—more complicated than all the hype would lead you to believe."

Let's sort it out. Comparing campaign ad spending to political speech protected by the First Amendment, the court majority ruled that companies and interest groups may spend as much as they like of their own money on political advocacy. As jurisprudence, this is a big deal. The justices overruled two prior Supreme Court opinions and struck down part of the bipartisan McCain-Feingold election law enacted in 2002.

Citizens United, however, may not live up to its initial billing as a political game-changer, predicts Nathaniel Persily, a professor of law and political science at Columbia Law School. It's the fourth in a series of decisions by the Roberts court that have narrowed or struck down campaign finance regulations. In 2007 the justices held that corporate and union ads enjoyed First Amendment protection as long as they didn't explicitly endorse or oppose candidates. "So before Citizens United, a company or a union could pay for ads that said, 'Tell Senator Smith to stop ruining America,' " Persily explains. "After Citizens United, they can add the magic words: 'and by the way, don't vote for Senator Smith.' That's not much of a practical difference."

Tiptoeing Around Candidates

With or without the Supreme Court's blessing, most big companies don't like to be identified as going after particular politicians, says Christopher DeLacy, a partner with Holland & Knight. "To jump directly into a political campaign is a risky move, especially if you pick the wrong candidate." (It remains illegal, by the way, for companies and unions to make direct or coordinated contributions to federal candidates or political parties.)

None of this is meant to minimize the extent to which special-interest money permeates American politics. In 2008, the Service Employees International Union, all on its own, laid out more than $70 million to help elect Obama and other Democrats, outspending even the U.S. Chamber of Commerce. This year, the chamber, the nation's best-funded business lobby, says it plans to spend $50 million on political advertising—and the White House isn't even up for grabs.

Under existing law, companies can express themselves anonymously via contributions to the political war chests of nonprofit groups such as the chamber. "The vast majority of corporate money will move through trade associations and independent organizations," says Michael E. Toner, a former Republican chairman of the FEC.

Citizens United will allow the chamber and the SEIU to be more direct in pushing their messages. Regardless of whether companies or unions chip in new money as a result of Citizens United, election ads likely will begin to surface in late summer. The business and finance lobbies are expected to try to chip away at the Democratic majorities in the Senate and House. Democrats such as Representatives Dina Titus of Nevada and Alan Grayson of Florida, both from highly contested districts, are thought to be vulnerable. "A lot of special interests are not happy," says Grayson, a sharp critic of Wall Street. "God only knows what they'll spend."

William C. Miller Jr., the chamber's senior vice-president for political affairs, says it anticipates focus-testing candidate-specific ads. "But talking about the issues and trying to inform voters are maybe more powerful," he says. "Dictating a vote may be too much."

Democrats' Response

In the arm wrestling that sometimes characterizes the relationship between Congress and the Supreme Court, companies' ability to act incognito under the auspices of industry groups could disappear. Democrats are preparing legislation in response to Citizens United that would require unions and business groups to identify who pays for ads designed to sway voter opinion. Charles E. Schumer of New York, a co-sponsor, says he already has broad Democratic backing in the Senate. He may not have far to look for Republican support: Four GOP senators—Susan Collins and Olympia Snowe of Maine, Richard Lugar of Indiana, and John McCain of Arizona—have criticized Citizens United.

The Chamber of Commerce's general counsel, Steven Law, says the Supreme Court's assertion of corporate speech rights would be turned on its head by the bill Schumer is drafting with Maryland Representative Chris Van Hollen. "Citizens United is being used as a pretext to pursue much broader regulations of the private sector in the political arena," Law argues.

There are other ways to capitalize on the ruling, says Greg Casey, president of the Business Industry Political Action Committee, another Washington group. Under Citizens United, companies should now feel free to recommend that their own employees vote for particular lawmakers, he asserts. "It is fair to assume that [employers] see this as an opportunity for public education, particularly about issues," Casey says. In late January, BIPAC held a conference call to discuss the ruling with representatives of member companies.

One of the participants, Devon Energy (DVN), will move cautiously, says William F. Whitsitt, senior vice-president of the Oklahoma City-based oil and natural gas producer. "A lot of us," he says, "are trying to understand what the implications of the ruling might be for big labor and for corporations like ours."

The bottom line Companies likely will be wary about exploiting the recent Supreme Court ruling on corporate-financed election ads.

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