Foreign Money In U.S. Elections

VULNERABLE AND COMPROMISED: FOREIGN MONEY INFLUENCING U.S. ELECTIONS

Despite laws banning foreign money in American elections [1], loopholes in our campaign finance system have left our electoral process vulnerable to spending by foreign governments, corporations and foreign nationals. Foreign entities can and have spent unchecked and undisclosed money to influence U.S. elections. One of the largest vulnerabilities was created by the Supreme Court’s 2010 Citizens United decision [2], which gave corporations the same rights as people to spend unlimited amounts of money on elections.

RUSSIAN INFLUENCE IN 2016

News that a Russian company bought political ads on social media in the 2016 election is a striking reminder that our elections are vulnerable to influence through foreign money and we are unprepared to prevent it.  In addition to avoiding disclosure through digital ads there are loopholes that foreign governments exploit to spend tens of millions of dollars or more.

Foreign governments can mask their spending, making it difficult, and sometimes impossible to follow the money to its source.

FOREIGN MONEY SPENT IN U.S. ELECTIONS

There are several ways foreign money can make its way into U.S. elections. Some examples include passing it through corporations or advocacy groups or through the creation of shell corporations.

CORPORATIONS

U.S. Subsidiaries:
Thanks to Citizens United, corporations can spend unlimited amounts of money on elections. Current FEC rules allow foreign-owned corporations to spend in elections as long as a subsidiary is registered in the U.S. and the election spending is made by American citizens using U.S. profits. [1]

  • WE KNOW IT HAPPENS: In 2016, American Pacific International Capital, a company owned by Chinese nationals, used this loophole to donate $1.3 million to Right to Rise, a Super PAC supporting Jeb Bush’s presidential campaign. [1]
  • WE KNOW IT HAPPENS: Restore Our Future, a pro-Romney Super PAC, received a million dollars from OdyssesyRe, a ‘wholly-owned subsidiary’ of a Canadian company. [2]

Investments in American companies:
Another pathway for foreign money through a U.S. corporation is its investors.  Most publicly traded corporations have a substantial portion of foreign shareholders.  An estimated 25 percent of all US stock are foreign-owned – a number that has ballooned from just 5 percent 30 years ago. [3] Because corporations aren’t required to report dark money spending it’s difficult to know which companies influenced by foreign investors are spending in U.S. elections.

  • WE KNOW IT HAPPENS: In 2012, just two years after Citizens United, over $325,000 was spent by two companies with ties to Manwin Licensing International, then one of the largest adult webpage sites in the world based in Switzerland, to oppose a LA ballot measure to require actors in the pornography industry to practice safe sex. [4]
TRADE ASSOCIATIONS

Trade associations represent corporate interests, including foreign corporations or interests, and can accept foreign money. They have power far beyond typical campaign committees such as candidates or traditional PACs or even Super PACs, which are required to disclose their donors. The loophole can allow foreign corporations to spend unlimited and undisclosed money in U.S. elections because there are no disclosure laws that allow for assured transparency. [1]

  • WE KNOW IT HAPPENS: American Petroleum Institute (API), an oil industry trade association that represents hundreds of multinational oil and gas companies, has contributed millions in U.S. elections and lobbying. [2] One of API’s top donors and leaders by means of its U.S. subsidiary is Aramco, the government-owned Saudi oil giant. It’s top executive during the 2010 midterm elections was none other than Tofiq Al-Gabsani, then a registered lobbyist for the Saudi government and chief executive with Aramco’s U.S. subsidiary. [9]
  • WE KNOW IT HAPPENS: American Chemical Association, a chemical trade association, lists SABIC, the Saudi government-owned chemical company, as well as Solvay SA, a Belgian chemical concern and the Japanese-owned Daikin Industries as dues-paying members.  With millions of dollars at its disposal, AAC has spent corporate cash on federal campaign ads to elect industry allies.
  • WE KNOW IT HAPPENS: The Chamber of Commerce, which consistently spends heavily in elections, including over $5.7 million in the 2016 elections [3], has received nearly over $800,000 from a Bahrain company.
SHELL COMPANIES AND 501c4s

Shell Companies:
A foreign entity can anonymously create a shell LLC that serves no purpose other than to make political contributions. The new ‘shell corporation’ can spend unlimited money on elections.  Although this is an illegal use of an LLC, it can donate directly to a 501c4, which does not publicly report its donors, hiding the illegal contributions. [4] In 2016, there was a surge in donations from shell corporations, which have the sole purpose of hiding donors’ identities. [5]

  • WE KNOW IT HAPPENS: In March 2016 wealthy Mexican businessman Jose Susumo Aazano Matsura was convicted of conspiracy to make U.S. campaign donations by a foreign national.  He donated over $500,000 to U.S. candidates in 2012 including the mayoral campaign of Republican District Attorney Bonnie Dumanis and California Democratic Rep. Bob Filner. For much of the spending he used a U.S. shell company before placing money in a Super PAC. Since current laws only require Super PACs to reveal the name of a company, Azano was able to hide his identity. [6]
  • WE KNOW IT HAPPENS: According to recent reports, employees of the pro-Trump group, Great America PAC were caught on tape saying it could help a Chinese national funnel millions of dollars to a Super PAC supporting Trump through a consulting firm and 501(c)4s. [7]
  • WE KNOW IT HAPPENS: Last year, an offshore company, Bridge Capital LLC, was caught trying to funnel money through LLCs to help support a casino ballot initiative in Massachusetts. The $3.2 million campaign, launched by Eugene McCain, Jr., was almost entirely by the Saipan-based investment company whose principals had previously launched slot proposals around the globe. [8]
KNOWN UNKNOWNS: THE TIP OF THE ICEBERG

Loose reporting requirements, lax enforcements and anonymous political spending mean that tracking – and preventing – foreign spending in U.S. elections is next to impossible.  The examples in this report likely represent only the tip of the iceberg.  Foreign governments like Russia and China have unfettered access to spend unlimited amounts of money, anonymously, to influence American elections and our democracy.

THE SOLUTIONS:
KEEP FOREIGN MONEY OUT; REQUIRE DISCLOSURE

KEEP FOREIGN MONEY OUT OF U.S. ELECTIONS

In March 2017, Congressman Jamie Raskin (MD-08) introduced the ‘Get Foreign Money Out of U.S. Elections Act.’ The bill, which has been co-sponsored by over 30 members of Congress, would close a campaign finance loophole that allows foreign-owned, foreign-controlled and foreign-influenced corporations to pass unlimited and undisclosed money into U.S. elections. [9]

STRONGER DISCLOSURE LAWS

Strong disclosure laws would prevent foreign governments from the ability to hide their donations in 501(c)4 dark money groups and could shine light on foreign owned companies that are spending in U.S. elections. They would also help prevent the illegal use of LLC shell corporations as a means to funnel money into elections.

PUBLIC OPINION:
AN ISSUE THAT CONCERNS AMERICANS ACROSS THE SPECTRUM

The threat of foreign money influencing U.S. elections is an issue of top concern of voters. Research conducted by End Citizens United over the last 18 months demonstrates that voters worry about foreign money and want their leaders to act to prevent it from corrupting our electoral system.

  • 89% of voters expressed concern that foreigners are able to donate money in secret
  • 79% of voters believe foreigners influence American elections “very often to somewhat often”
  • When discussing the need for campaign finance reform, the ability to spend foreign money in our elections was the top-testing reason by Republicans to overturn Citizens United
  • Support for undisclosed money, which can lead to foreign money in elections, gave Independents and Republicans doubts about a candidate more than any other issue overall
  • In Montana and Wisconsin, foreign money in politics was the highest and second-highest reason for supporting a candidate

By a margin of 61-30%, Americans support an independent investigation into Russia’s involvement in the 2016 presidential election