The Supreme Court Case That Let Clinton Hijack Party Fundraising

Former Democratic party leader Donna Brazile called the Hillary Clinton campaign’s takeover of party fundraising a “cancer.” Writing in Politico Thursday, Brazile said it “broke my heart” to discover that her predecessor as party chair had given the Clinton campaign power over the Democratic National Committee’s “finances, strategy, and all the money raised” during her primary battle with Vermont Independent Sen. Bernie Sanders.

Brazile inherited the DNC chair position from Florida congresswoman Debbie Wasserman Schultz, who handed the Clinton campaign keys to the party fundraising apparatus through a joint fundraising group called the Hillary Victory Fund: an agreement between the Clinton campaign, the DNC and 32 state parties to raise campaign funds together. The power of that agreement, which effectively allowed Clinton to avoid campaign limits by funneling donations through state parties, was a direct result of a split 2014 Supreme Court decision in which the court’s Chief Justice John Roberts called worries about such arrangments “hypothetical” and “divorced from reality.”

But campaign finance experts say the scenario, far from being hypothetical, may be the new political reality.

“This situation shows that if anyone is divorced from reality, it was the chief justice in assuming they wouldn’t take advantage of this,” Stephen Spaulding, chief of strategy and external affairs for Common Cause, a non-partisan government watchdog group, told International Business Times.

The case in question is McCutcheon v. FEC, a suit brought by Shaun McCutcheon, a Republican activist from Alabama. The Supreme Court ruled in his favor, striking down a federal limit on the total amount individuals could give to parties, candidates and committees each election cycle, which at the time was $123,300.

While there are still limits on how much money a donor can give to single candidates and committees, the court said that a cap on the total amount of money a donor could give per election cycle was an unconstitutional violation of donor free speech rights, continuing a string of decisions following Citizens United in 2010 that have dismantled campaign finance rules on First Amendment grounds.

As a result, joint fundraising agreements between candidates, state parties and committees, became more powerful. For example, while an individual can only give $2,700 per election to a specific candidate, $10,000 to a state party, or $33,900 to a national party committee like the DNC, joint committees can pool those limits together to solicit larger donations. The more groups that come together through joint fundraising agreements, the larger the checks written to the joint organization can be. In the case of the joint fundraising agreement the DNC had with the Clinton campaign and state parties, donors could write a $350,000 check to the joint committee, which then directed the money wherever it wanted.

“The loophole is that political parties can shuttle the money around in an unlimited way,” Spaulding said. “Even though a donor could only give $10,000 to each state party committee, that could be rerouted to the national party to spend however they wanted.”

It usually went to Clinton’s campaign. The Hillary Victory Fund raised $60 million by May 2016, but only 1 percent went to state campaigns, according to a Politico report last summer. That percentage shrunk as the campaign went on, according to Brazile. By August, just half a percent of the $82 million the victory fund raised went back to the state parties, according to Brazile. Those state parties were essentially a money laundering operation for the Clinton campaign, Politico wrote.

The joint fundraising agreement was announced when it was signed in 2015, but the terms had not been disclosed until Brazile described them on Thursday. Because the party’s finances were in dire need of a cash infusion after the Obama years, the Clinton campaign actually issued the DNC an allowance to run day-to-day operations, Brazile said.

All this happened while the presidential primary was still underway and the party was, at least publicly, taking a neutral position in the contest. Like Clinton, the Sanders campaign also had a joint fundraising agreement with the DNC, but it appears the Vermont senator’s didn’t find much value in it, instead soliciting small donations online. President Donald Trump’s campaign announced a joint fundraising committee with the Republican National Committee in May of last year that allowed donors to give up to $449,400.

While individuals can donate unlimited amounts of money to super PACS, which aren’t allowed to coordinate with campaigns, a large check to a joint fundraising committee can put cash straight into a candidate’s campaign coffers.

“McCutcheon increased the abilities of campaigns to go after large donors,” Rick Hasen, an election law expert and professor at the University of California, Irvine School of Law, told IBT.

A network comprised of committees and candidates banding together to pool their limits in order to solicit large checks was a scenario imagined by a lower court that ruled on McCutcheon before the Supreme Court took up the case. But in its ruling, the high court rejected the district court’s analysis, overruling its decision and noting it was unlikely all the states in such a network would work to elect a single candidate. Roberts argued in his decision that election law banned the use of an “intermediary or conduit” to funnel money to a candidate. But as Politico reported last May, money was transferred from the victory fund to the state accounts, only to have the same amounts transferred back to the victory fund the next day.

Those transfers were made possible by an exception in contribution limit rules that allows state and national parties to transfer money between each other without being subject to limits, Adav Noti, an attorney who argued the case on the side of the FEC, told IBT.

“It’s a combination of that exception and the McCutcheon decision which has enabled this,” said Noti, who is now the senior director for trial litigation and strategy at the Campaign Legal Center. “One of the things that Congress should consider is whether that exception for intra-party transfers still makes sense in the post-McCutcheon era.”

But while it may seem obvious to some the victory fund was gaming campaign finance rules, the FEC, the government body tasked with enforcing election law, has taken a hands-off approach in recent years, leading one recently retired commissioner to say the agency is broken. Ian Vandewalker, senior counsel at the Brennan Center for Justice, told IBT the FEC has mostly abandoned its duties.

“Even if there was an email saying ‘we are hereby earmarking these funds illegally,’ I’m not sure the FEC would do anything,” Vandewalker said.

In October, the Democrats registered a new joint fundraising committee that included the DNC and all 50 states, as well as the District of Columbia. Donors will be able to give the Democratic Grassroots Victory Fund $540,000 per cycle.