The Federal Election Commission was deadlocked, and no one was surprised. Democrats had wanted to crack down; Republicans didn’t. No matter that it could have been among the most important campaign finance decisions in years. No matter that the agency’s general counsel had recommended action. Divided equally and hopelessly by ideology, the six commissioners were at a stalemate.
It was all perfectly ordinary for this dysfunctional agency. All except for footnote 111.
The case involved complaints against Crossroads GPS, a nonprofit affiliated with Karl Rove that burst onto the national political scene in 2010 and had since spent tens of millions of dollars on campaign advertisements. For the FEC, the question was whether all of that political spending meant that Crossroads was not, in fact, a nonprofit — and thus entitled to keep secret its list of donors and details of its activities. The outcome had the potential to impact what politically minded nonprofits everywhere — from the Koch Brothers’ vast network to Organizing for Action, the outgrowth of President Obama’s campaign — could and couldn’t do.
The FEC’s general counsel, a nonpartisan office inside the agency, had concluded that Crossroads should have registered as a political committee, not as a nonprofit. But with the Republicans on the commission still unconvinced, all that was left in the case was the pro forma publishing of partisan statements and the general counsel’s findings, a report that would be parsed by political attorneys and strategists around the country looking to know just how far their clients could stretch the legal limits of election law without earning an FEC rebuke.
Then came the controversial footnote.
In a move that infuriated Democrats and stopped some election lawyers cold, the Republicans on the commission dropped a bureaucratic bombshell. They revealed in a footnote that the official report of the FEC’s legal team, known formally as the First General Counsel’s Report, was not the “first” report at all. There had been a previous report-a “first First General Counsel’s Report,” the GOP commissioners called it — and it had come almost a year and a half earlier.
In the name of transparency and because it “informed our decision,” the Republicans said they were publishing that document. Except that each of the 76 pages they attached was blank, the contents replaced by the general counsel’s office with one word:
What’s in this report? Why have Republicans pushed to publish it? How did it get redacted over the objections of presidentially appointed commissioners?
The Republicans aren’t talking. And neither is the FEC’s staff. But election lawyers around the country can appreciate the redacted document’s potential impact, should it ever be revealed: A roadmap for campaigns and their nonprofit supporters to evade FEC enforcement.
The magnitude of this case is hard to overstate. Crossroads collected $255 million from 2010 to 2012, and used it to helped fund and shape the messages of campaigns across the country. So, not surprisingly, the redaction has sparked intrigue outside and fighting inside the elections agency.
While the FEC’s stated policy is to put “all First General Counsel’s reports on the public record,” this one somehow was and remains fully blacked out. “I have been paying pretty close attention to the FEC for more than a decade,” said Paul S. Ryan, senior counsel to the Campaign Legal Center, “and I cannot recall another instance in which I’ve seen a completely redacted document attached to a statement of reason, let alone such a lengthy document.”
Larry Noble, who spent 13 years as the FEC’s general counsel and now advocates for campaign finance reform, said the blackout was unusual. “It shows the dysfunction of the agency that they get into this battle and release a document that is redacted,” he said. He called the Republicans’ decision to attach the redacted report “a bit of a stunt.”
For its part, the FEC isn’t talking, either about what’s in the redacted report or how it got blacked out.
According to Noble, the counsel’s office during his tenure had the power to redact documents, even over the objections of commissioners. Only a majority vote of the commissioners can overrule that decision.
Indeed, people involved in the Crossroads deliberations, who spoke on condition of anonymity due to its sensitivity and a separate-but-related lawsuit that’s pending, said the Office of General Counsel had redacted its initial report against the wishes of the GOP commissioners. Republicans have yet to find that fourth vote needed to overrule the agency’s lawyers.
Behind closed doors, commissioners are set to discuss the document on Tuesday.
With the commissioners keeping silent, FEC-watchers are floating competing theories for why Republicans would try so hard to get the report published. Maybe the commissioners wanted to show that even the FEC’s legal team was torn over the reasoning in this weighty case. Maybe the initial counsel’s report was weaker, more poorly argued, or relied on more circumstantial evidence — all of which would bolster the GOP’s decision to dismiss.
Whatever the motivation, the document matters.. The FEC’s deadlock doesn’t set legal precedent but it means that, de facto, everything Crossroads was accused of doing would continue to be allowed by the current commission. Thus, if the redacted document was actually more sweeping in its scope and condemnations of Crossroads than the general counsel’s final report, it could, counterintuitively, broaden the kinds of activities that political professionals consider safe from prosecution.
“It’s certainly not anything you can rely on in a court of law,” said Dan Backer, a prominent Republican election lawyer. But he said the stalemate suggests “if my clients engage in this activity, in exactly the same manner, they are likely to avoid repercussions for doing so,” as long as the makeup of the commission remains the same.
Interestingly, the Washington law firm that employs the former FEC general counsel who authored the agency’s published Crossroads report described how campaigns and nonprofits use such deadlocks to plan and justify their activities.
“It will not be a path for the faint of heart, for a 3-3 deadlock on an enforcement matter is weak precedent for those who later face an investigation on somewhat different facts,” Covington & Burling told clients in a report published in February. “But we can expect to find that the published statements of these three commissioners will resurface as an appendix to defense pleadings arguing that due process precludes the agency from enforcing rules that, for at least a period in time, lacked the support of a majority of the commission.” The report was coauthored by former FEC General Counsel Tony Herman.
The law in the political nonprofit area is notoriously vague. For Crossroads, or any other nonprofit, the legal question facing the FEC is whether its “major purpose” is to affect federal elections. If so, then it must register as a political committee. The problem is, there’s no detailed definition of what constitutes “major purpose,” though it’s been widely interpreted to mean whether a group spends more than half its money on campaigns.
In the released general counsel’s report, FEC investigators studied Crossroads’ 2010 spending and said 53 percent went toward federal campaign activity — enough, the FEC legal team argued, to make the group a political committee. (Crossroads GPS disputed this analysis and noted it created a separate super PAC, American Crossroads, for political work.) The Republican commissioners did their own calculation, using a different timeframe, and determined that Crossroads GPS spent only 25 percent of its money on campaigns between mid-2010 and the end of 2011.
The mysterious redacted report could give campaign lawyers a better understanding of how the current FEC counsel’s office is interpreting these vagaries of “major purpose,” lawyers say.
For its part, the FEC isn’t talking, either about what’s in the redacted report or how it got blacked out. “We are not authorized to comment,” FEC spokeswoman Judith Ingram wrote in an email, “and there is no information on the public record to which we could point you to answer your question.”
FROM DEADLOCK TO DARKNESS
The original complaints against Crossroads were filed in fall of 2010. The FEC’s lawyers prepared their report and submitted it to the commissioners on June 22, 2011. The timing was awkward. Only a week earlier, the FEC had named Herman its new general counsel. That meant that, in the biggest case snaking its way through the agency, Herman would be inheriting and defending a predecessor’s work.
When Herman formally began at the commission, the commissioners were only days from an executive session set to consider Crossroads. That closed-door hearing would mark a turning point. “The discussion during that meeting apparently caused OGC to reconsider its legal theories,” wrote the Republican commissioners in their statement about the case, attached to the final general counsel report.
At the meeting, Herman asked to withdraw his office’s report, and the commissioners agreed, according to the Republicans’ statement and to people familiar with the process. Craig Holman, a campaign finance reformer with Public Citizen, who is among those who filed the original complaint against Crossroads, presumes the lawyers “pulled it back themselves and came up with a stronger argument.”
Herman won’t say. “It would not be appropriate for me to discuss this matter,” he told National Journal in an email. Crossroads attorney Thomas Josefiak, a former FEC commissioner, also declined to comment.
The withdrawal of the report in September 2011 ensured that the case would drag on past the 2012 presidential election. That year, Crossroads would raise $179 million and spend nearly $75 million on political campaigning, according to its tax returns, posted online by ProPublica.
The FEC’s second and final counsel’s report was delivered to commissioners in November 2012, shortly after the election. The commission took 13 months before it formally deadlocked. The Office of General Counsel published its report in January 2014.
Donald McGahn, a former Republican FEC commissioner who has seen the “first First” report, thinks he knows what happened. “It seems that the Democrats can make things public as they see fit, and the Republicans cannot,” said McGahn, who served on the commission from 2008 through September 2013.
While he would not discuss the contents of the redacted report, McGahn accused the FEC’s Office of General Counsel of treating commissioners differently based upon their ideology. He contrasted a blacked-out memo he had tried to attach to a statement in 2013 to a case in 2009 in which Democratic commissioners had successfully attached a similar memorandum. “Bottom line, there is a double standard,” McGahn said.
Ellen Weintraub, a current Democratic FEC commissioner who feuded with McGahn throughout his tenure, defends the FEC staff. “I categorically deny that our staff plays favorites in any way,” she said. “Sometimes when people disagree with recommendations, they take it personally,” she said of her former colleague. “It’s certainly not personal, and it’s not political.” Weintraub also declined to discuss specifically the Crossroads case or the redacted report.
Besides a vote of the commissioners, there remains one way the missing document could go still public: as a result of a federal lawsuit filed by consumer groups against the FEC, arguing the commission failed to enforce the law in the Crossroads case. Those groups could demand that the FEC turn over its lawyers’ first report — but they would do so at their peril, knowing it is a document that the Republicans they are battling want public.
“We haven’t made any decisions whatsoever along those lines,” said Ryan, who is involved in the lawsuit.
However the episode is resolved, or left unresolved, it is just the latest example of the agency’s paralysis. A Center for Public Integrity study last year reported that 41 percent of the commission’s votes in the first half of 2013 lacked the support of four commissioners; that was up from only 7 percent in 2007. The general counsel post — one of the agency’s most important staff positions — has been vacant since Herman departed. Morale is low and frustration is high.
“They have six bosses, and three of them never agree with the other three,” Weintraub said. “That makes their job very difficult.”
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