Federal Election Commission member Ann Ravel on Tuesday proposed a ban on political contributions by domestic subsidiaries of foreign corporations.
Ravel’s proposal cites The Intercept series last week reporting that American Pacific International Capital, a California corporation owned by two Chinese nationals, donated $1.3 million to Right to Rise USA, the main Super PAC supporting Jeb Bush’s presidential run.
Ravel wrote that as a result of Citizens United and subsequent Supreme Court decisions, “our campaign finance system is vulnerable to influence from foreign nationals and foreign corporations through Domestic subsidiaries and affiliates in ways unimaginable a decade ago.”
The 2010 Citizens United decision struck down the prohibition on corporations spending their own money on “independent expenditures,” thereby opening the possibility that foreign money could flow into elections that way.
Ravel, noting The Intercept’s stories, wrote that this was no longer “a hypothetical concern.”
APIC board member Wilson Chen told The Intercept that APIC made the contributions following advice from its own lawyer and a 2015 memo prepared by Charlie Spies, treasurer and general counsel of Right to Rise USA and arguably the most important Republican campaign finance lawyer.
The Spies memo explains that, while foreigners are strictly prohibited from making political contributions, the FEC “has repeatedly made clear that even if a corporation is a wholly owned subsidiary of a foreign corporation … as long as the subsidiary is both organized under the laws of a U.S. state and has its principal place of business within the U.S., the subsidiary is not a foreign national.” In the case of APIC, the fact that it is incorporated in California makes it American for legal purposes.
Spies’s reasoning largely rests on what is known as “AO 2006-15” — an FEC advisory opinion from 2006. That opinion stated that two U.S. corporations that were 100 percent owned by a Canadian corporation called TransCanada could make political contributions as long as the subsidiaries did not use money generated outside the U.S. or allow foreign nationals to play any role in the decision making process.
Whether APIC, in the end, followed those guidelines is an open question. The Campaign Legal Center, a watchdog organization focused on money in politics, has filed a complaint asking the FEC to open an investigation into APIC’s donations. “Current FEC rules allowing foreign-owned U.S. subsidiaries to spend in our elections, as long as citizens control the contributions, are clearly inadequate to prevent foreign influence,” Larry Noble, the Campaign Legal Center’s general counsel, wrote in a statement accompanying the complaint. “Yet the evidence shows that even those lax rules were violated here.”
Wilson Chen told The Intercept that he “proposed to make a donation to the Republican Party and then let the board of directors approve it before sending the donation.” APIC’s board includes Chen himself and Neil Bush, both U.S. citizens, but also APIC owners Gordon Tang and Huaidan Chen, who are not.
In Ravel’s proposal, she writes that “given significant developments in law and practice” since the FEC’s advisory opinion was issued ten years ago, the FEC should “formally rescind Advisory Opinion 2006-15 (TransCanada) and the parts of other advisory opinions that purported to permit Domestic subsidiaries of foreign corporations to make contributions or donations, either directly or through separate segregated funds, in connection with federal, state, and local elections.”
Rescinding the advisory opinion would not eliminate the loophole that makes foreign owned U.S. corporations legally American. And since FEC enforcement is so notably lax these days, due to a persistent 3-3 deadlock, it’s not entirely clear how dramatic an effect it would have.
The proposal is set to be on the FEC’s agenda for its meeting on Tuesday, Aug. 16.