On Jan. 21, the U.S. Supreme Court found in Citizens United v. Federal Election Commission that corporations could make unlimited independent expenditures advocating the election or defeat of a federal candidate. This decision overruled two prior Supreme Court opinions and a law that dates back more than 60 years. It remains illegal for corporations to make direct or coordinated contributions to or on behalf of federal candidates or political party committees.
Aside from the implications of unlimited corporate spending in the political process, a spectacular sideshow has erupted regarding political activities by foreign corporations and their domestic subsidiaries. The sideshow was fueled by President Barack Obama's claim during his State of the Union address that foreign corporations can "spend without limit in our elections." Justice Samuel Alito, sitting in front of the president, mouthed on national television that such a claim was "not true." President Obama or Justice Alito: Who is right? Let's take a look at the law.
The Federal Election Campaign Act provides that foreign nationals shall not directly or indirectly make contributions, donations, expenditures, independent expenditures, or disbursements for electioneering communications. This prohibition, subject to criminal and civil penalties, covers individuals and corporations financing any federal, state, or local election.
During oral argument, Justices Ruth Bader Ginsburg and John Paul Stevens asked whether foreign interests would be able to funnel money into U.S. elections through their domestic subsidiaries if the court struck down the prohibition on corporate spending, as it did. One of the attorneys for Citizens United equivocated in his response by not ruling it out. Such equivocation during oral argument, in an exchange between the justices and counsel, has no legal effect. The opinion itself is all that carries weight, and the opinion does not upset the longstanding prohibition on foreign money in U.S. elections. In fact, perhaps because of that exchange during oral arguments, the court specifically stated it was not addressing the ban on foreign contributions, recognizing that contributions and expenditures by foreign individuals and associations are banned in a distinct section of the law.
While I disagree with the court's decision because unlimited corporate spending is politically harmful to the system, there is nothing in the Citizens United case that provides a legal channel for foreign corporations or individuals to spend money in U.S. elections.
Specifically, the White House's concern seems to focus on contributions and other political activities by corporations that are foreign-owned U.S. subsidiaries. This type of ownership arises in every industry in the United States, from the largest banks, energy companies, pharmaceutical companies, defense contractors, and even alcoholic beverage manufacturers. These domestic subsidiaries have contributed to federal candidates through political action committees (PACs) for decades and have made direct corporate contributions and expenditures in the 28 states that allow corporate funding of elections. However, as a matter of federal law, it has been illegal for any of these entities to funnel foreign corporate funds through domestic entities or to have foreign officers, directors, or employees direct foreign or domestic funds with regards to federal, state, or local elections. Such conduct, if willful, would constitute a felony and potentially carry a lengthy term of incarceration. The Citizens United case did not upset that law. It is possible for a new case to be brought asking for the court to rule on these restrictions. However, that is not the Citizens United case.
So, in short, Alito mouthing the words "not true" in response to Obama's claim of the court having opened the door to foreign money, while questionable as a matter of protocol, is legally correct. Just because the court ruled to allow more corporate spending in elections does not mean that foreign-owned corporations will start breaking the law and finding devious ways around the prohibitions.
If foreign-owned entities were so inclined, they could have been doing so with unlimited contributions in state elections, in states like Virginia, Oregon, Nebraska, Missouri, and Utah. Foreign corporations that own domestic subsidiaries with PACs could have been diverting PAC contributions at the foreign parent's direction. There is no evidence of this conduct currently. Why would they start violating the law now?