A Project of The Annenberg Public Policy Center

The Chamber and Foreign Contributions


Q: Is illegal foreign money being filtered through the U.S. Chamber of Commerce to fund ads attacking Democrats?

A: The chamber says dues money paid by overseas companies "is not used for political ads," but won’t discuss how it segregates those funds. Democratic and liberal groups want an investigation of "likely" or "possible" legal violations.

FULL QUESTION

What’s the truth behind the assertion that the Chamber of Commerce is funding ads attacking Democratic candidates with money solicited from foreign interests — China, oil emirate, Russian banks, etc. Currently MoveOn.org is working this story.

FULL ANSWER

U.S. Chamber of Commerce President Tom Donohue has declared that his group will spend $75 million in connection with the upcoming midterm election. But the chamber won’t say specifically where that money is coming from, which gives corporations a conduit for funding attack ads anonymously.

Despite a recent Supreme Court decision that eases restraints on the use of corporate money in U.S. elections, it is still illegal for a foreign national to make a contribution to a candidate in a federal, state or local election. And the term "foreign national" includes foreign corporations. A "foreign national" is a foreign government, political party, corporation, association or partnership, or a person with foreign citizenship who does not have a green card (permission from the U.S. government to reside here permanently).

The ban is quite broad. The law not only forbids foreign nationals from making contributions, but also prohibits them from spending money in connection with an election, either directly or indirectly. It’s also illegal for anyone to receive such a contribution, to solicit one or to help a foreign national violate the prohibition.

The general ban dates back to 1966 amendments to the Foreign Agents’ Registration Act, according to the Federal Election Commission; the intent was to prevent other countries from influencing U.S. elections. It was incorporated into the Federal Election Campaign Act in 1974 amendments. The last time much attention was paid to the subject was when allegations surfaced that foreign contributions played a role in the 1996 presidential campaign.

The Allegation

The charge that the Chamber of Commerce might be using foreign money to help fund political ads arose in an Oct. 5 report by the left-leaning ThinkProgress, a project of the Center for American Progress Action Fund, headed by John Podesta, former White House chief of staff under President Bill Clinton. The allegation has been picked up by the liberal group MoveOn.org Political Action, which calls it "potentially a very serious crime." MoveOn is running a "petition drive" urging an investigation by the Justice Department.

And President Barack Obama himself has echoed the allegation. At a political rally in Maryland on Oct. 7, he 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 corporations. So groups that receive foreign money are spending huge sums to influence American elections, and they won’t tell you where the money for their ads comes from.

The ThinkProgress report said that the chamber, through affiliated entities such as the U.S.-Bahrain Business Council, as well as through direct membership, takes in dues from foreign-owned, and in some cases state-owned, corporations that amount to hundreds of thousands of dollars or more. Dues are paid into the chamber’s general account, the report says, and the chamber can use them for any purpose. ThinkProgress concluded that the chamber was "likely skirting" the law:

ThinkProgress, Oct. 5: A ThinkProgress investigation has found that the Chamber funds its political attack campaign out of its general account, which solicits foreign funding. And while the Chamber will likely assert it has internal controls, foreign money is fungible, permitting the Chamber to run its unprecedented attack campaign. According to legal experts consulted by ThinkProgress, the Chamber is likely skirting longstanding campaign finance law that bans the involvement of foreign corporations in American elections.

The Response

The chamber does indeed say it has internal controls to prevent any foreign money being used in illegal ways. Tita Freeman, the chamber’s vice president for communications, told us that money the chamber takes in from foreign corporations "is not used for political ads." However, she declined to describe how the funds are segregated. "I won’t go into the specific accounting," she said. "We are careful to comply with the applicable law."

The Chamber of Commerce is a 501(c)(6) organization under tax law, which means it doesn’t have to disclose its donors.

Minnesota Democratic Sen. Al Franken wrote to the FEC on the same day that the ThinkProgress report was published, asking the agency to investigate "recent reports" of foreign money being used. Franken’s letter conceded, however, that mere commingling of foreign and U.S. funds might not be illegal under FEC regulations:

Sen. Franken, Oct. 5: Under prior Commission guidance, this commingling is not per se illegal. However, a company must be able to demonstrate through a "reasonable accounting method" that its foreign funds were not in fact used in connection with election contributions or expenditures.

Franken referred to a 1992 advisory opinion issued by the FEC (AO 1992-16), allowing 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. firm could show that it had enough funds from its domestic operations to cover the gifts.

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.

We consulted Trevor Potter, a former FEC commissioner and counsel to John McCain’s 2008 presidential campaign. "The question for the FEC," said Potter, "is what has the chamber done to ensure the foreign money is not used, and is that sufficient?"

— by Viveca Novak

Sources

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.

Campaign Finance Special Report. The Washington Post. Various dates 1997-1999.

Duffy, Michael and Michael Weisskopf. "Manna from Hong Kong." Time. 12 May 1997.

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.

Letter from Sen. Al Franken to The Hon. Matthew S. Peterson, Chairman, Federal Election Commission. 5 Oct 2010.

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