The Federal Election Commission has unveiled one of the most significant enforcement actions in its history, citing a 2016 investigative series by The Intercept.
The series, “Foreign Influence,” detailed how Right to Rise USA, a Super PAC supporting the 2016 presidential candidacy of Jeb Bush, received $1.3 million in campaign donations from American Pacific International Capital, a California corporation controlled by two Chinese citizens.
The FEC fined APIC $550,000 and Right to Rise USA $390,000. The total of $940,000 is the third-largest financial penalty the FEC has ever issued.
It is illegal for foreign nationals to contribute money in connection with U.S. elections. However, APIC and Right to Rise USA attempted to use an odd loophole created by the Supreme Court’s 2010 Citizens United decision to funnel overseas cash into American politics.
The details of the enforcement action were released today in a letter to the Campaign Legal Center, a campaign finance watchdog that filed a complaint based on The Intercept’s investigation.
“This case was so egregious that, once it was revealed, even the dysfunctional FEC was forced to act,” said Robert Weissman, president of consumer rights group Public Citizen, in a statement to The Intercept.
The letter revealing the fine includes conciliation agreements that lay out the facts of the case, which correspond to The Intercept’s original reporting.
Barack Obama warned during his 2010 State of the Union address that the Citizens United ruling would “open the floodgates for special interests, including foreign corporations, to spend without limit in our elections.” APIC was attempting to do exactly this.
Before Citizens United, only individual American citizens could contribute limited amounts of money to support U.S. political activities. Post-Citizens United and related decisions, American companies can donate directly from their corporate treasuries to Super PACs in unlimited amounts.
However, any company incorporated in the U.S. counts as an “American” corporation under current law — even if it is wholly owned by foreigners.
This was the case with APIC, a U.S. affiliate of the SingHaiyi Group, a Singapore-based real estate conglomerate. According to SingHaiyi’s 2014 public filings, APIC is owned by SingHaiyi founders Gordon Tang and Huaidan Chen, a married couple who are citizens of China and legal residents of Singapore. Neil Bush, the brother of both Jeb and George W. Bush, sits on APIC’s board.
The concept of the donations was first vetted by Charlie Spies, a powerful GOP lawyer and the treasurer of Right to Rise USA. Spies produced a memo in February 2015 green-lighting the contributions under the same reasoning used by Obama. “A domestic subsidiary corporation,” Spies wrote in reference to APIC, “may now directly contribute to a Super PAC in connection with a federal election.” Following its receipt of the memo, APIC made two donations, the first for $1 million and another for $300,000.
“Obama was right,” says Brendan Fischer of the Campaign Legal Center. Prior to Citizens United, “APIC would have been prohibited from making contributions altogether.”
What tripped up APIC and Right to Rise USA was a failure to follow the remaining weak restrictions on foreign participation in U.S. elections. According to the FEC, only American citizens may participate in the decision-making process regarding donations from a foreign-owned corporation such as APIC — leaving out foreign individuals such as Tang and Chen.
However, The Intercept’s investigation revealed that the donations to Right to Rise USA were made under Tang’s direction. In an interview with The Intercept two years ago, Tang told us that his brother-in-law, Wilson Chen, had asked him to “donate, so I did, I don’t really mind.” Wilson Chen, for his part, told us that the donation had been approved by APIC’s board, which included Tang and Huaidan Chen.
In the course of its investigation, the FEC confirmed that Tang had engaged in “communications regarding the potential APIC contributions to Right to Rise.” The agency also obtained emails from early 2015 that show that Neil Bush had contacted his fellow APIC board members about providing financial support for his brother’s presidential campaign.
In one email, Bush wrote that Tang had “expressed interest in donating legally through APIC to my brother Jeb’s political action committee.” Huaidan Chen replied to the email with a message to Wilson Chen, noting, “Wilson, Gordon wants you to follow up this matter. Pls check with [APIC’s in-house counsel] and contact him by phone.”
The opaque nature of most large corporate campaign donations, often funneled through nondisclosing “dark money” nonprofits or limited liability corporations, has concealed the true extent of corporate money in U.S. elections. The APIC donation is a notable exception, as some watchdogs have pointed out, because the firm gave to a Super PAC, which must disclose its contributors — and because its executives admitted on tape that foreign nationals were involved in the process.
Public Citizen’s Weissman noted that the FEC is known for its “lackluster enforcement,” making its punishment of APIC and Right to Rise USA particularly noteworthy. But, he said, “given the huge amount of money sloshing around among corporations and dark-money organizations in the wake of Citizens United, there’s every reason to suspect violations like those in the APIC case are relatively common.”
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