Common Cause Massachusetts 2017 Testimony on Political Spending by Foreign-Influenced Corporations

September 27, 2017

Written by Pam Wilmot

Written by Devon Nir

Testimony in Support of S.394, H. 2081, H. 2904
Political Spending by Foreign-Influenced Corporations
Pam Wilmot, Executive Director, Common Cause Massachusetts

Joint Committee on Election Laws
September 27, 2017

The news is full of reports of Russian interference with the 2016 presidential election. While details are still emerging, we know that a Russian company bought ads on Facebook and undertook other actions to influence the outcome in favor of the President. Under current law, foreign governments and citizens are forbidden from directly spending money in federal and state elections. Yet a loophole allows foreign money to enter our politics through political spending by corporations. S.394, H. 2081, and H. 2904 all help to close this loophole for our Massachusetts state elections. 

The Supreme Court’s 2010 Citizens United decision is largely to blame for the foreign-owned corporate loophole. Prior to that unfortunate decision, business corporations were not allowed to directly or indirectly influence elections. Since Citizens United, for-profit corporations, even those under foreign control or influence, can spend unlimited money in politics. Yet incorporation is easily achieved and effectively allows a foreign individual or group to legally make political expenditures. This makes no sense, and to protect our Republic we must close this loophole.

S.394, H. 2081, and H. 2904 would do just that. They prohibit a corporation from making electioneering communications and independent expenditures in Massachusetts elections (we cannot make rules for expenditures regarding federal candidates) if a single foreign shareholder owns more than 5% of a company’s shares or if over 20% of the total ownership is in foreign hands. Why five percent? It is the threshold at which a single shareholder must be disclosed to the Securities and Exchange Commission and is considered a significant influencer in the corporation’s decision-making. The legislation would help ensure that the financing of our state elections is protected from foreign corporate influence.

Moreover, the bills would also take a bite out of Citizens United. About one in ten S&P 500 corporations have a foreign shareholder owning over 5% of shares and therefore are in a position to influence the corporation’s political spending. The numbers may be even higher for companies that are not publicly traded. For example, Uber, which has spent millions on local-level elections to fight safety regulations, has been over 5% owned by the Saudi Arabian government.

We believe the prohibitions in the bill are constitutional. In 2012, after Citizens United, the Supreme Court upheld the ban on foreign nationals spending in elections in Bluman v. FEC. We think the case is clearly applicable to the proposals in these bills because if foreign nationals do not have a right to spend directly on elections, they also lack a right to do so indirectly in the corporate form. The Supreme Court upheld the notion that state, local, and the federal government can properly exclude foreign citizens from activities that are part of the democratic self-government of the United States. That is precisely what these bills will do.

Our country’s Founders were rightly worried about foreign influence in elections, fearing that Europe would try to corrupt and undermine the new Republic’s independence. Here, at the Birthplace of the American Revolution, we should act now to protect our own state’s democracy. Please give these bills a favorable report.

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