June 8, 2016
Albany, NY

Remarks as Prepared: Governor Cuomo Advances Nation's Strongest Protections to Combat Citizens United

TOP Remarks as Prepared: Governor Cuomo Advances...
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Governor Andrew M. Cuomo today announced he is taking first-in-the-nation action to curb the power of independent expenditure campaigns unleashed by the 2010 Supreme Court case Citizens United vs. Federal Election Commission. The Governor’s Counsel, Alphonso David, issued an opinion to enforcement entities offering guidance on existing state law and whether coordination exists between independent expenditure campaigns and the candidates they support. The opinion clarifies permissible conduct under state law and works to preserve the integrity of the electoral process in New York.

The Governor is also advancing legislation which would limit the “quid pro quo” danger posed by colossal corporate donations and ensure that independent expenditure groups remain autonomous from the entities they support. The legislation also would strengthen disclosure requirements and mandate that groups report the identity of anyone exerting control over them, as well as any former staffers or immediate family members of a candidate. The Governor made the announcement in a speech at Fordham Law School.


Introduction: The Worst Decision

This presidential political year is unlike any I have seen before and I am not alone. Most analysts have been focusing on how bizarre the campaigns have been. I don’t think the campaigns or even the candidates are the real story. They are not the stimulus of our political environment; they are the response. An angry, disenfranchised, frightened citizenry is driving the unprecedented extremes and intensity.

A presidential election is a litmus test on how people view the state of the nation. Are you better off today than you were four years ago — is the country headed in the right direction? That is always the implicit question. This year the overwhelming response is no.

The country is skeptical about their economic future, frightened by terrorism and frustrated by gridlocked government. Our government was promised to be the solution but has become part of the problem.

As if all this was not enough, people also believe their political power – their ability to change and influence their government is being diminished. Today they fear electoral impotence: their vote and their voice is eclipsed by the rich and the powerful, who somehow, amidst governmental paralysis, still manage to have their interests served.

The combination of the economic anxiety, government failure, and political disenfranchisement is a toxic brew.

What’s worse, the people are not wrong. The middle class has been economically stagnant and income inequality has exploded. The cost of tuition, taxes, and living expenses has far outpaced the increase in wages. Government has failed on many levels. Gridlock, once the exception, is now the rule. Compromise, once regarded as the statesman’s art, is now viewed by the political extremes as an ideological capitulation. Competence, performance and professionalism in government executives is replaced by cheap political rhetoric and press releases. Campaigns have become dominated by money. Not only must a candidate be rich to be viable, but now there is a price of admission to be in the audience. Unless you make a significant contribution your voice is no more than a whisper.

While there are many factors at play, one single event has caused much of the harm. The Supreme Court’s case of Citizens United did more to damage political participation than any Supreme Court decision in history. Indeed, the Citizens United decision ranks with the Court’s worst. It will go down in history as one of the most regressive decisions, joining the Dred Scott decision which ruled that even if a slave lived in a non-slave state for seven years that the individual was still a slave; Korematsu v. United States, which upheld the interment of U.S. citizens of Japanese ancestry during World War II; and Lochner v. NY, striking down health and safety protections in the work place. This trilogy of cases is the quintessential example of the Court at its worst – tilting the scales of justice in favor of the powerful over the powerless.

In its noblest moments, the Supreme Court has been the champion of equality and democracy. Establishing the principle of one man, one vote in Reynolds v. Sims; outlawing the racist poll tax in Harper v. Virginia Board of Elections; affirming the constitutionality of the Voting Rights Act in South Carolina v. Katzenbach; and outlawing state bans on marriage for same sex couples in Obergefell v. Hodges in 2015.

Quite unlike these decisions, Citizens United devalues an individual’s right to participate in the political system.

What the Court Said

The case Citizens United vs. the Federal Elections Committee started life as an unremarkable dispute. A conservative group called Citizens United produced a film called Hillary: The Movie, which they wanted to show on Pay TV. The FEC regulated the work as an advertisement instead of a film. The producers objected. The Court could have issued a narrow decision. They could have said, “Okay, it’s a movie.” Or they could have said the work was protected by the freedom of the press provision. But the court wanted to use the moment to set new policy. By a 5-4 margin, the Court issued a sweeping decree that prohibits the government from restricting people and corporations from making unlimited independent political expenditures on behalf of candidates. In doing so, the Court effectively undid a century’s worth of state and federal campaign finance regulation.

Free Speech Misunderstood

In his opinion, Justice Kennedy focused on Freedom of Speech. Since 1976, with Buckley v. Valeo, the Court accepted that contributing money to a political campaign was part of a person’s First Amendment right to free expression. In that decision, the Court rejected efforts to limit how much campaigns could spend. But the Court did accept that there could be limits on the amount that individuals can donate. Moreover, the Court allowed the part of the law that set a different limit that an individual could donate, and what a corporation could donate.

In Citizens United the court reasoned that government has no right to inhibit “free speech.’’ “By suppressing the speech of corporations, both for-profit and nonprofit,’’ the Court ruled, “the Government was preventing their voices and viewpoints from reaching the public and advising voters on which persons or entities are hostile to their interests.” The Court went on to reason that a corporation is by law treated as an individual and hence has a right to free speech. The Court further found that economics are a function of the marketplace and that an individual and a corporation has the constitutional right to use their resources as they see fit. In short, money talks. And big money talks louder.

Perhaps the most bizarre and incongruous aspect of the decision is that the limits that the Court permitted in Buckley v. Valeo remained in effect. Today, a person can’t give more than $5,400 to a candidate for president for the primary and general election. But you can give $54 million to a committee that supports the candidate.

Two years ago, in McCutcheon v. FEC, the Supreme Court doubled down on its reasoning in Citizens United, and struck down one of the few remaining restrictions on the ability of the very wealthy to spend in federal elections. In a dissent in that case, Justice Breyer wrote, allowing the wealthy few to dominate political spending “breaks the constitutionally necessary ‘chain of communication’ between the people and their representatives.”

The Court misses among other things that the times had changed. Our founding fathers were adamant to protect free speech and free press out of fear of government restriction and government domination. Free from King George the Third, the founding fathers wanted to assure small “d” democracy. Censorship was a real threat that their new constitution would oppose.

Today the enemy of free speech in a political context is not government repression or government domination. Today the enemy of free speech is private sector domination, and a system where the value of an individual’s right to free speech is entirely a function of the individual’s wealth.

We live in a political system where mass communication is very expensive. The status of the people who can fund campaigns is already enhanced. The current danger to free speech is that if there are no limits to contributions, an average individual’s right to free speech is meaningless. When the time comes to decide who wins political office, what policies will be considered, and what laws will be enacted, paid speech is all that will matter. Citizens United actually decimates the right to free speech by allowing it to be eclipsed by paid speech.

We don’t need to speculate about the impact of Citizens United – it is clear.

The Impact of Citizens United

It has been an enormous negative.

Citizens United birthed an industry of shadow political corporations. Spending by outside groups — those who operate independently of political candidates — has exploded in the wake of the 2010 decision.

In 2010, approximately 80 Super PACs were registered. By 2012, more than 800 Super PACs were registered with the FEC. Before 2010 independent expenditures accounted for $90 million in spending. Independent expenditures spent approximately $800 million in the 2012 elections.

In the three election cycles since 2010, Super PACs have spent more than a billion dollars. Nearly 60 percent of those donations — more than $600 million — were made by just 195 people and their spouses. In this election cycle, close to half the money raised by super PACs through the end of February came from just 50 mega-donors and their relatives.

Take for example Sheldon Adelson. Four years ago, he reportedly gave $98 million to support political candidates. Adelson’s largesse single-handedly kept Newt Gingrich in the 2012 Republican primary. And last month, Adelson said he will reach into his deep pockets once again to support Donald Trump’s campaign.

This affects more than the presidency. Today it seems like almost every Congressional and Senate candidate has the support of a Super Pac. In 2014, independent expenditures in U.S. Senate elections were 2,079 percent higher than in 2008, the election before Citizens United. In 2008, total independent expenditures amounted to $17 million; in 2014, independent expenditures totaled $387 million. All in all, the top 100 donors spent about as much as all 4.75 million small donors combined.
In 2014, the first cycle since New York law increased reporting requirements for Independent Expenditure Committees, a record $60 million was spent on state senate races.

Of that, IEC spending accounted for about $15 million. And almost all of that—about $12 million was spent in five key senate races. By comparison, only about $2 million was raised by individual contributions in these five races.

The most expensive race was for the 40th Senate District. Spending in the most expensive race, for the 40th Senate District, totaled $7.5 million, more than what was spent in 91 percent of U.S. House races that year. More than half of that was from IECs.

$6.8 million was spent in the race for the 46th Senate District, $2.8 million from IECs. $4.1 million was spent in SD 60, nearly half – $1.9 million – from IECs.

One IEC raised $4.25 million from twelve people and spent most of it in three senate races—SDs 3, 40 and 41 with a smattering of spending in other races. Another raised and spent about $2.5 million on five races—SD 3, 7, 40, 41 and 46.

The abuses and exploitation of Citizens United are not the province of one political party. Citizens United ignited the equivalent of a campaign nuclear arms race. Both sides needed to engage to be competitive. Both republican and democratic campaigns – both corporations and unions – have maximized the loopholes of Citizens United.


Independence is a Myth

In its decision, the Supreme Court relied heavily on the concept that these groups would be “independent.’’ As Justice Kennedy wrote, “We now conclude that independent expenditures, including those made by corporations, do not give rise to corruption or the appearance of corruption.” It was either naïve or Machiavellian – but the concept of independence of these entities was at best a fig leaf.

It is unclear whether Kennedy himself believes what he wrote about expenditures not giving rise to the appearance of corruption. Just six months before Citizens United, Justice Kennedy wrote the opinion in Caperton v. Massey, in which he held that a $3 million contribution to an independent group supporting the election of a West Virginia Supreme Court justice required that the justice recuse himself from a case involving the independent spender who supported his candidacy, lest there be the appearance of impropriety. Six months later, he was saying, in effect, don’t be fooled by appearances.

Kennedy also relied on a system of aggressive disclosure and transparency regulations. However, he should have known in 2010 that instant disclosure laws did not exist for the supposedly independent corporate and union spending that Citizens United allowed. Plus he should have known that corporations and unions can spend undisclosed “dark money” on elections through nonprofit corporations, which are not subject to campaign finance disclosure. And what has been the upshot?

43 percent of the $35.6 million of independent spending in the 2014 Kentucky Senate race came from undisclosed sources. 31 percent of all independent spending in Colorado’s 2014 Senate race came from non-disclosing groups. Dark money accounted for one-quarter of independent spending in the 2014 Alaska, Georgia and North Carolina Senate campaigns.

Citizens United effectively neutered state and local campaign finance laws. New York City’s public financing system can be easily circumvented by establishing shell independent expenditure committees or advocacy organizations that have unlimited contribution levels and now dominate the elections. New York State’s campaign finance laws are likewise circumvented by Citizens United. You can either follow the state limits or you can establish your own independent expenditure committee. The existing state finance laws have loopholes no doubt – such as the LLC loophole – but Citizens United bypasses the entire body of law. With Citizens United the dam burst and big, dark money flooded the political system. Reform must start by addressing this perversion.

So what do we do? Well Citizens United must be reversed as soon as possible but we must also act now to stop the damage. We cannot allow this critical presidential election to be manipulated and scandalized. And hopefully a new president and a new court does just that.

Thankfully, the Court did create an opportunity for states to greatly limit the corrosive impact of their decision. States retain the right to promulgate regulations and pass laws that would limit the “quid pro quo” danger posed by large corporate donations. The challenge to the states is to seize this opening.

One of the fundamental flaws in the Citizens United decision is the fiction that the independent entities would be truly independent. Not true. They may not always explicitly coordinate efforts, but the collusion, overlap of interested parties and corporations is pervasive. To this point, Congress and the states have done a terrible job policing this coordination.

Indeed the coordination of these entities is open and notorious. Politicians will speak openly of their efforts establishing independent expenditure committees – a clear legal violation. The public and the press don’t even bat an eyelash.

In New York, we want to change that dramatically. Today I am issuing a Governor’s Counsel’s Opinion that will articulate the toughest, most aggressive stance in the country against the fraud of “independent” structures and backdoor coordination.

Our approach is simple: follow the law – even Citizens United. The Court provides protection for entities that in effect satisfy a two-pronged test. That is that they are independent structures and do not coordinate with existing candidates or political committees.

We can determine evidentiary criteria to test the Court’s standard. Today I’m issuing a Governor’s Counsel’s Opinion that will provide state regulators and law enforcement guidance in making that determination.

Among the factors to be considered should be:

  • A candidate’s personal interaction with the entity including whether a candidate attends the entity’s functions or participates in conversations with members of the entity. Candidate attendance at fundraising functions evidences coordination. A candidate’s participation in policy or strategic discussions likewise evidences coordination.

 

  • Personnel employed by the entity and their relationship, if any, to a candidate bears examination. Former employees or staff members suggest coordination. And obviously participation by family members of a candidate evidences a lack of independence.

 

  • The vendors and contractors of the entity must be reviewed for connections to the candidate. If the entity and the candidate knowingly employ the same consultants such as media, polling, or mailing experts, these relationships evidence coordination.

 

  • Sharing of office space and sharing of nonpublic information evidences a lack of independence.

 

  • If the entity is disseminating material provided by the candidate or very similar to material disseminated by the candidate it can evidence coordination.

 

  • Overlapping donor bases may also evidence a lack of independence. We would recommend a strict scrutiny test be applied with major or dominant donors to the IE who are also donors to the candidate’s political committee. So if a donor is a major contributor to the candidate’s committee, and to other political committees supporting the candidate then that donor is then a major donor to a purported independent entity and strict scrutiny should be applied. In these cases there is a likelihood that an IE was created to circumvent the legal limits of the candidate’s political committee.

 

  • Likewise if there is significant overlapping donor bases strict scrutiny should be applied as the likelihood of dozens of people coincidentally contributing to both entities on an independent basis is very low.

 

I urge New York State’s regulators and law enforcement to honor the aggressive stance laid out in the Governor’s Counsel’s Opinion. It enforces the law of Citizens United and accepts and fulfills the role the Supreme Court left to the states. The FEC has been complacent and it is appropriate that the states – Brandeis’ “laboratories of democracy” – lead the way and no state is better situated than the great state of New York.

I urge New York State’s regulators and law enforcement to honor the aggressive stance laid out in the Governor’s Counsel’s Opinion. It enforces the law of Citizens United and accepts and fulfills the role the Supreme Court left to the states. It’s not just that Citizens Union imagined that Independent Expenditure groups would be truly independent. New York law also requires it. This opinion also aims to fulfill the promise that currently exists in New York law. The FEC has been complacent and it is appropriate that the states – Brandeis “laboratories of democracy” – lead the way and no state is better situated than the great state of New York.

But we could go even further. Besides issuing a Counsel’s Opinion, I have been discussing the issue with the legislative leaders and will also propose legislation incorporating these standards. If the New York State legislature wants to redeem their reputation for ethical standards what better opportunity than leading the nation in stopping the abuses of Citizens United. Legislation could make even more progress.

The current disclosure requirements for independent spending groups are so weak that we can’t even tell who is running these groups or where their money comes from. We should require independent spenders to disclose the identity of their owners, directors, executives, or anyone else exerting control.

This agenda is in addition to the ethics reform I proposed in January and have advocated since. After the conviction of Sheldon Silver and Dean Skelos, the public demands dramatic reform. I proposed limiting outside income for legislators, pension forfeiture for convicted officials, raising legislator’s compensation to fulltime employment, and public financing of campaigns. I believe we must stop political consultants to sitting elected officials from achieving special access for clients by mandating that they register as lobbyists.

I have also proposed closing the LLC loophole so that these limited liability companies are subject to the same campaign limits as traditional corporations. I have introduced eight different bills to close this loophole – one for each elected office in the state. I’ve called on the legislature to pass all of them, or as many as they’d like. But at a minimum, they should pass the one impacting anyone running for the office of the Governor. I will go first – if the legislature passes it I will sign it into law today.

The legislature has a choice – lead on reform or perpetuate the status quo.

Before the legislature departs next week I urge them in the strongest possible terms to pass real ethics reform that sends a clear message: in New York democracy rules and, the voice of the people matters.

They should rise to the occasion. We know they can do it. Indeed the New York State legislature has recently led the nation on marriage equality, gun safety, a $15 minimum wage, and paid family leave. They can and must lead here also, and have New York State lead the way

Now is the Time to Act

In less than six months, we will elect America’s 45th president. The issues we face are daunting, and the mood of the electorate is volatile. We must begin to take steps to reduce the alienation that the voters feel. We must restore their sense that casting a vote is an act that is meaningful, and not a cynical charade that disguises the real power behind the scenes. And we cannot have an election in November that further divides and alienates. We must be united as a country to move forward. We all remember the damage of the 2000 election and the hanging chads of Florida. The Supreme Court decided the Presidency. A bitter taste was left in the mouth of the electorate. There can be no recriminations after this election.

Many years ago, Supreme Court Justice Louis Brandeis said, “We must make our choice. We may have democracy, or we may have wealth concentrated in the hands of a few, but we can't have both.”Now is the time to choose. New Yorkers know what it is to fight for democracy. We have fought at Saratoga and Gettysburg and Normandy. We have fought at Seneca Falls and Selma and Stonewall. New York State can lead once again. We must. Thank you.