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Wang: DISCLOSE Act Causes Less Disclosure

The wisdom of the ages tells us the road to hell is paved with good intentions. And so it is with the so-called DISCLOSE Act. Ever since the Supreme Court issued its Citizens United ruling in 2010, self-styled reformers have tried repeatedly to push the bill through Congress, including in the most recent session. The overly broad proposal has sucked all of the oxygen out of the air for any realistic legislation to address concrete, statutory issues resulting directly from Citizens United.

Take, for example, the recent controversy over certain contributions to the Restore Our Future and FreedomWorks for America super PACs. Last September, a Knoxville, Tenn., attorney formed two companies, Specialty Group and Kingston Pike. One week later, the companies began giving several million dollars to FreedomWorks for America. By Election Day, the two entities had sent $12 million to the super PAC — more than half of its total contributions last year. When asked about the companies’ line of business, the attorney, William Rose Jr., said cryptically that it was a “family secret.”

The FreedomWorks contributions have been the largest mystery super PAC transactions, but they were not the first. In 2011, three companies by the names of W Spann, F8 and Eli Publishing each gave $1 million to the pro-Romney Restore Our Future super PAC. W Spann was formed in March, gave its contribution in April and dissolved in July.

The provenance of each company has generally been revealed under media scrutiny. Edward Conard, a former director of Bain Capital, immediately stepped forward as the principal behind W Spann. Circumstantial evidence points to Stephen Lund, founder of the Nu Skin cosmetics company, as being behind F8 and Eli Publishing. Anonymous sources have stated that the FreedomWorks mystery contributions came from Richard Stephenson, founder of the Cancer Treatment Centers of America and a FreedomWorks director.

The Campaign Legal Center and Democracy 21 have filed complaints with the Federal Election Commission and Department of Justice, alleging that these transactions violate a federal statute prohibiting political contributions made in the name of another person. Codified at 2 U.S.C. 441f, this provision primarily addresses instances where Peter, who has given the maximum $5,000 contribution to Mary’s campaign for office, uses Paul as a straw donor and gives $5,000 more in Paul’s name to Mary. To borrow an analogy from the presidential debates, applying 441f to super PACs is like using horses and bayonets to fight drones.

Congress simply did not envision super PACs when it wrote 441f, and the transactions here technically do not violate the statute’s literal language. The contributions came from and were made in the names of the entities at issue, and they were booked and reported as such. If these transactions violated 441f, then all corporate contributions to super PACs could be illegal, since all corporations derive their funds from other sources. This would essentially overturn Citizens United, as well as a subsequent federal court ruling known as SpeechNow, which permitted unlimited corporate contributions to super PACs.

The FEC and DOJ cannot simply override Congress by rewriting 441f on their own, and overturn two court rulings in the process. Rather, to the extent mystery super PAC contributions are a problem, Congress must address the issue. Which brings us back to the DISCLOSE Act. While the bill addresses mystery super PAC contributions, it does so in a roundabout way. Rather than simply amend the statute to prohibit shell corporation contributions, DISCLOSE would require the shell corporations to file reports with the FEC.

DISCLOSE also introduces a whole slew of ancillary provisions having absolutely nothing to do with the recent court decisions. One requires groups that are not PACs to report all of their sources of income if they engage in political speech. Disclaimers for political ads, which already are the butt of pop culture jokes, also would become even wordier and more meaningless. Last month, Sens. Ron Wyden, D-Ore., and Lisa Murkowski, R-Alaska, sketched out what was intended as a more palatable alternative to DISCLOSE. However, their legislative framework suffers from many of the same fatal flaws.

Congress can address the problem of undisclosed super PAC contributions by adding a simple provision in the Federal Election Campaign Act, such as: “No person shall make a contribution to an entity formed for the sole or primary purpose of making contributions, and which entity is not subject to the reporting requirements of this Act.”

“Christmas tree” legislation like the DISCLOSE Act and Wyden-Murkowski have proven to be a monumental distraction and detour on the road to actual disclosure. As this article went live, millions of Americans are discarding their Christmas trees. Congress should follow their lead.

Eric Wang is a political law attorney and former counsel to a commissioner at the Federal Election Commission.

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