Lawyer: Super PAC givers face ‘firestorm’ of fines

Jonathan Oosting
Detroit News Lansing Bureau

Lansing – An “avalanche of campaign finance fines” could be looming for corporations and labor groups over political spending in Michigan, according to warnings from a Republican attorney urging legislators to update state law.

Bob LaBrant last month asked Michigan Secretary of State Ruth Johnson’s office to clarify state rules governing super political action committee contributions in the wake of a landmark U.S. Supreme Court ruling in 2012 that opened the doors for unlimited but independent political spending as a form of free speech.

Michigan hasn’t updated its campaign finance laws to reflect the decision, and LaBrant argues a little-known state Bureau of Elections action in 2014 could lay the groundwork for a “firestorm” of complaints and fines that would cut across business, labor, conservative and liberal donors.

While he requested a declaratory ruling from the Secretary of State, LaBrant is warning members of the Republican-led Legislature they may not like the outcome and urging them to clarify state law before the final decision.

Critics contend the legislation LaBrant has been pushing in Lansing would go far beyond the Supreme Court ruling, which allowed unlimited outside spending so long as it is done independently of any political candidate.

A plan approved by the Senate Elections Committee in May would define super PACs in state law as independent expenditure-only committees, “but it does so in a way that is troubling,” said Craig Mauger of the Michigan Campaign Finance Network.

“It allows super PACs to work so closely with a candidate committee that it would essentially render the contribution limits we have for candidates meaningless,” Mauger said.

Senate Majority Leader Arlan Meekhof, R-West Olive, supports the super PAC legislation and could put it up for a vote as soon as this fall. The full Senate approved a similar bill in 2015 but it did not see a vote in the House.

“The Supreme Court has ruled … that everybody has free speech, and that includes the amount of money they want to invest,” Meekhof told The Detroit News. “I think it serves the citizens well, and if we have the votes to do that, we will move it forward.”

LaBrant’s request and warning to legislators is based on a 2014 enforcement action by the Bureau of Elections, which held that state law requires any person – including a corporation – who donates at least $500 in a calendar year to register as its own separate super PAC committee.

The bureau was responding to a complaint filed against the nonprofit Michigan Community Education Fund and Detroit Forward, a super PAC set up in 2013 to support Wayne County Sheriff Benny Napoleon’s campaign for Detroit mayor.

The bureau concluded the nonprofit, which gave $149,000 to the super PAC, was primarily established to “shield the name of contributors to Detroit Forward from public disclosure.”

The Michigan Community Education Fund was a tax-exempt social welfare organization and not required to disclose donors by the federal Internal Revenue Service. But it should have filed campaign finance reports with the state and would have racked up $4,300 in late fees for not doing so, according to the bureau.

Detroit Forward ended up signing a conciliation agreement with the state requiring it to file a statement that “reflects the true sources of the $149,000 in contributions in question.” It paid a civil fine of $9,500, according to Secretary of State spokesman Fred Woodhams.

The bureau has not levied any fines of that type since that decision, Woodhams said. But LaBrant’s request for a declaratory ruling asks the state to clarify whether the 2014 enforcement action means any nonprofit corporation, for-profit corporation or labor union that gives more than $500 to a super PAC must also register as a super PAC itself.

If that’s the case, LaBrant contends a whole host of companies and labor groups could face fines for contributions they’ve made to super PACs because of what he calls a “gotcha requirement buried in the campaign finance law” that the bureau did not publicize.

Twenty-one companies, including Meijer and Quicken Loans, contributed to a Business Leaders for Michigan super PAC when it was established in 2010, he noted. Twelve union groups, including locals from Saginaw to Monroe, gave to a new pipe trades super PAC in 2014.

“This is an equal opportunity issue,” said LaBrant, who recently retired as general counsel for the Sterling Corporation and formed his own LaBrant Strategies LLC. “Labor is as affected as business, and the liberal groups are as impacted as conservative groups.”

Secretary of State Johnson’s office is set to release a draft response to LaBrant’s request for a declaratory ruling or interpretive statement by Sept. 7, Woodhams said. After that, the state will open the matter up to public comment before issuing a final response, likely by late September.

LaBrant is urging legislators to end “this fiasco” before that final decision by amending state campaign finance law to clearly exclude super PAC donors from the definition of a committee.

The Senate legislation, awaiting possible action on the floor, would do that and more. LaBrant has testified in support of the legislation but conceded it goes beyond the U.S. Supreme Court’s Citizens United ruling.

“I think you can codify Citizens United with probably a two-section bill or a three-section bill, not a 30-page bill,” he said, referencing the 41-page bill that advanced out of committee in May.

The Secretary of State’s Office is officially “neutral” on the bill, meaning it is not supporting or opposing its passage.

Mauger, a campaign finance watchdog, has called the legislation “Citizens United on steroids.”

It would allow a politician to solicit unlimited funds for a super PAC that could independently advocate for their election. The proposal would also allow a candidate committee and super PAC to share attorneys, vendors or consultants, provided those vendors don’t communicate messages between them.

Those provisions would weaken rules against coordination between candidate campaigns and super PACs, according to Mauger, who said the legislation would have a much larger impact than the declaratory ruling LaBrant is seeking.

“All of a sudden this question of independent spending is not really independent,” he said.