A Project of The Annenberg Public Policy Center

Foreign Money? Really?

Democrats peddle an unproven claim.


Summary

Democrats, from President Barack Obama on down, are trying to turn an evidence-free allegation into a major campaign theme, claiming that foreign corporations are "stealing our democracy" with secret, illegal contributions funneled through the U.S. Chamber of Commerce. It’s a claim with little basis in fact.

  • The Democratic National Committee released a TV ad over the weekend claiming: "It appears they’ve even taken secret foreign money to influence our elections."
  • President Obama said last week that "one of the largest groups paying for these ads regularly takes in money from foreign sources."
  • The liberal group MoveOn.org is claiming, without any qualification, that "[f]oreign corporations are funding some of the $75 million the U.S. Chamber of Commerce is spending to defeat Democrats."

The chamber says it does receive money from foreign sources, but that it amounts to only a small fraction of the chamber’s $200 million budget. The chamber says none of the foreign money is used in its ads, and no evidence has been produced to show otherwise. Federal Election Commission opinions state that organizations taking in foreign money may make political donations legally, so long as they have "a reasonable accounting method" to keep foreign money separate and have enough money from U.S. sources to cover the donations.

Analysis

As we reported last week in an Ask FactCheck item on this subject, the claim that money from foreign corporations is funding Chamber of Commerce attack ads originated with a Democratic-leaning organization headed by John Podesta, former chief of staff for President Bill Clinton. That report noted that the chamber took in foreign dues and then said that the chamber is "likely skirting longstanding campaign finance law" against foreign spending in U.S. elections. The word "likely" made clear the author was engaging in speculation, which the chamber flatly denied. Tita Freeman, the chamber’s vice president of communications and strategy, told us that money the chamber takes in from foreign corporations "is not used for political ads."

Now others have challenged the claim. The New York Times reported:

New York Times, Oct. 8: [T]here is little evidence that what the chamber does in collecting overseas dues is improper or even unusual, according to both liberal and conservative election-law lawyers and campaign finance documents.

In fact, the controversy over the Chamber of Commerce financing may say more about the Washington spin cycle — where an Internet blog posting can be quickly picked up by like-minded groups and become political fodder for the president himself — than it does about the vagaries of campaign finance.

The Times reported, for example, that U.S. subsidiaries of corporations based overseas have set up more than 160 political action committees. The Federal Election Commission states that this is perfectly legal so long as U.S. residents make the decisions and provide all the funds. The Times also noted that groups such as the AFL-CIO and the Sierra Club also have international affiliations. The AFL-CIO has pledged to spend $53 million on the midterm elections, mainly supporting Democrats.

Nevertheless, the Democratic National Committee repeated the foreign-money claim in an ad it released to weekend news shows. It was played on CBS’ "Face the Nation."

[TET ]

Democratic National Committee Ad:
"Stealing Democracy
"

Announcer: Karl Rove, Ed Gillespie: They’re Bush cronies. The U.S. Chamber of Commerce: They’re shills for big business. And they’re stealing our democracy. Spending millions from secret donors to elect Republicans to do their bidding in Congress. It appears they’ve even taken secret foreign money to influence our elections. It’s incredible: Republicans benefiting from secret foreign money. Tell the Bush crowd and the Chamber of Commerce: Stop stealing our democracy.
[/TET]

The ad claims that "it appears" Republicans have taken "secret foreign money" to influence elections. "It’s incredible: Republicans benefiting from secret foreign money."

On "Face the Nation," CBS’ Bob Schieffer noted that the Times had quoted the chamber’s chief lobbyist as saying that the chamber got less than $100,000 from foreign affiliates, and Schieffer challenged White House Senior Adviser David Axelrod:

CBS’ Schieffer, Oct. 10: But this part about foreign money, that appears to be peanuts, Mister Axelrod, I mean, do you have any evidence that it’s anything other than peanuts?

Axelrod: Well, do you have any evidence that it’s not, Bob?

Axelrod said "the core of the problem" is that the chamber won’t identify the sources of money it is using to fund its ads, except to say that it’s not from foreign sources. It’s true that the chamber won’t release donors — there’s no legal requirement for it to do so — and also won’t discuss the specific accounting methods it uses to keep foreign money separate.

As we reported last week, however, any "reasonable accounting method" will do, according to the governing advisory opinion issued by the Federal Election Commission.

The FEC, in AO 1992-16, allowed the wholly owned U.S. subsidiary of a Japanese company to make corporate donations to state and local candidates in Hawaii, provided that the U.S. company could show that it had enough funds from its domestic operations to cover the donations.

FEC, AO 1992-16: The [U.S.] subsidiary must be able to demonstrate through a reasonable accounting method that it has sufficient funds in its account, other than funds given or loaned by its foreign national parent, from which the contribution is made.

The FEC reaffirmed that position as recently as 2006, in another advisory opinion stating that domestic subsidiaries of foreign corporations may donate to state and local elections. That was AO 2006-15, which ruled that two U.S. subsidiaries of a Canadian energy company "may make corporate donations and disbursements in connection with State and local elections to the extent permitted by State and local law," provided that no foreign nationals decide where the money is given and all funds come from U.S. sources.

The amount of foreign money the chamber takes in is actually somewhat more than $100,000 — though the chamber won’t say how much more. The chamber’s vice president of communications, Tita Freeman, told us that the chamber gets about $100,000 per year through American Chambers of Commerce overseas. That’s the $100,000 that the chief lobbyist was referring to in the Times story, another chamber official confirmed with us. In addition, Freeman said the chamber also receives membership dues directly from foreign corporations, though she would not disclose the amount.

We have at least an inkling: ThinkProgress, which is part of the Democratic-leaning Center for American Progress think tank and which made the initial allegations about the chamber’s foreign money, subsequently published a follow-up: At least 84 foreign companies pay at least $885,000 in dues to the chamber, according to ThinkProgress. Still lacking, though, is any proof that the money is being used in the chamber’s ad campaign.

Guilty Until Proven Innocent

Nevertheless, some Democrats are taking the position that the Chamber of Commerce is guilty of using foreign contributions until proven innocent. MoveOn.org is using this claim in a fundraising appeal, both in e-mail messages and on its website:

MoveOn.org website: Foreign corporations are funding some of the $75 million the U.S. Chamber of Commerce is spending to defeat Democrats this election cycle. Ask the Justice Department to investigate.

Update, Oct. 12: In addition, MoveOn.org Political Action attacked Republican Rep. Mark Kirk, who is running for an Illinois Senate seat, with an ad saying that the chamber was helping "Republicans like Mark Kirk" and getting money from corporations in "countries like China, Russia and India, the same companies that threaten American jobs."

[TET ]

MoveOn.org Political Action ad:
"Mark Kirk, Connect the Dots"

Announcer: Mark Kirk voted to reward corporations with tax breaks for shipping jobs overseas. Now the Chamber of Commerce is spending over 75 million dollars to help Republicans like Mark Kirk get elected. And where has the chamber been getting some of their money lately? From foreign corporations in countries like China, Russia and India, the same companies that threaten American jobs. 

It’s time to connect the dots. Exactly who is Mark Kirk working for? Because it sure isn’t Illinois.

2nd Announcer: MoveOn.org Political Action is responsible for the content of this advertisement.

[/TET]

President Obama, in recent campaign appearances, has been a bit more circumspect, but not much. He has hedged his claim with words like "maybe" and "could."

At a campaign rally for Illinois Senate candidate Alexi Giannoulias at Chicago’s Drake Hotel, Obama said:

Obama, Oct. 7: Just this week, we learned that one of the largest groups paying for these ads regularly takes in money from foreign sources.

So the question for the people of Illinois is, are you going to let special interests from Wall Street and Washington and maybe places beyond our shores come to this state and tell us who our senator should be?

He repeated the claim three days later at a DNC rally in Philadelphia’s Fulton Elementary School Park:

Obama, Oct. 10: [S]pecial interest groups … are spending unlimited amounts of money on attack ads — attacking folks like Patrick Murphy, attacking folks like Joe Sestak — just attacking people without ever disclosing who’s behind all these attack ads. You don’t know. It could be the oil industry. It could be the insurance industry. It could even be foreign-owned corporations. You don’t know because they don’t have to disclose.

Now, that’s not just a threat to Democrats — that’s a threat to our democracy.

It’s certainly true that millions are being spent without public disclosure, and that much of the money is coming from corporations taking advantage of a Supreme Court ruling easing restrictions on political spending. But using foreign funds to finance political ads is still a legal violation. Accusing anybody of violating the law is a serious matter requiring serious evidence to back it up. So far Democrats have produced none.

— by Brooks Jackson

Update, Oct. 15: After we posted this article, ThinkProgress published a follow-up to its original piece, this time saying that it had identified at least 84 foreign companies that paid the Chamber at least $885,000 in dues. We have updated the article to reflect this information.

Sources

Lichtblau, Eric, "Topic of Foreign Money in U.S. Races Hits Hustings" New York Times. 8 Oct 2010.

Stone, Peter H. "U.S. Chamber Boosts Election Budget to $75 Million." The Center for Public Integrity.  1 Jul 2010.

Federal Election Commission. "Foreign Nationals." Jul 2003.

Foreign Agents Registration Act. 22 U.S.C. sec. 611.

Federal Election Commission. "Federal Election Campaign Laws." Apr 2008.

Fang, Lee. "Foreign-Funded ‘U.S.’ Chamber Of Commerce Running Partisan Attack Ads." ThinkProgress. 5 Oct 2010.

MoveOn.org. "Investigate foreign corporations funding U.S. Chamber of Commerce political attacks." Petition drive. Oct 2010.

Remarks by the President at Rally for Maryland Governor Martin O’Malley. The White House. 7 Oct 2010.

Remarks by the President and the Vice President at a DNC "Moving America Forward" Rally in Philadelphia, Pennsylvania. The White House. 10 Oct 2010.

Federal Election Commission. Advisory Opinion 1992-16. 26 Jun 1992.

Federal Election Commission. Advisory Opinion 2006-15. 19 May 2006.