FEC chairman Matthew Peterson (center) and members Ellen Weintraub, Cynthia Bauerly, Caroline Hunter and Steven Walther (clockwise, from top left) (Not pictured: Donald McGahn) (Pics via FEC)

Campaign finance reform groups are telling a sobering story. During the 2004 and 2006 elections, nonprofit groups reported who donated nearly every penny spent on independent advertisements mentioning candidates (called electioneering communications) to the Federal Election Commission. In 2008, they were able to account for less than two-thirds of the dollars behind the ads. In the current primary season, just one-third of the dollars spent on such ads can be tracked back to their donors.

This precipitous decline in disclosure comes in the wake of the Supreme Court’s decision in Citizens United v. the Federal Election Commission. The January 2010 ruling allowed corporations or labor unions to spend unlimited sums of money to advocate on behalf of candidates; previously, only individuals or groups of individuals could do so. Many well-meaning citizens and politicians blame the rise in opacity on the ruling.

But the falloff in disclosure started long before the Court’s decision. And blame for the current drop-off in disclosure falls not at the feet of the Supreme Court, but at the feet of the FEC, an agency so mired in gridlock that it is part unable and part unwilling to enforce its own guiding statutes.

“It’s essential to put the national spotlight on the FEC,” notes Fred Wertheimer, president of Democracy 21, an organization that advocates for campaign finance reform in Congress and in the courts. “I do not think that most citizens know that, for all practical purposes, we do not have a campaign finance enforcement agency. We have a set of laws on the books, but we have an agency that basically refuses to enforce them, or misinterprets the laws in ways that cripples their impact.”

Congress is trying (and, thus far, failing) to strengthen campaign finance and disclosure laws, with legislation like the DISCLOSE Act. But reformers argue that legislation is not the only way to shore up donor disclosure. The FEC currently lacks the willpower, but not the prerogative, to enforce disclosure laws that exist on the books, and three of its six current commissioners are serving past the end of their designated terms. The Obama Administration, advocates note, could appoint new, committed commissioners to take their seats, but thus far it has shied away from the political fight with Republican leadership that would be required to make it happen.

A commission divided

As a body, the FEC has never been mistaken for a paragon of nonpartisan professionalism, or even mere efficiency — and a portion of that has to do with the way it was set up. Designed so that no political party is allowed to claim the allegiance of more than three of its six serving commissioners, any action taken by the commission necessarily requires at least one commissioner to cross the political aisle.

“[Those who designed the FEC] either knew they were intentionally creating a dysfunctional agency or they were not familiar with decision-making processes and how it might work out,” says Paul Ryan, associate legal counsel at the Campaign Legal Center. “The agency was designed to deadlock,” he adds, and “if you look at it from perspective of members of Congress creating an agency tasked with policing them, we too might choose to create a less-than-functional agency.”

For much of its history the commission rarely became deadlocked, especially when it came to decisions regarding enforcement proceedings against political groups believed to have broken campaign finance laws.

A recent report from Public Citizen, a nonprofit consumer advocacy organization, argues the real troubled started in mid-2008, when Congress confirmed three new Republican commissioners — Caroline Hunter, Donald McGahn and Matthew Petersen — to the regulatory body. The proportion of enforcement actions stalled in the FEC at that point jumped from less than 2 percent per year to 16 percent in 2009. In 2010, “all I can think of are deadlocked votes,” says the report’s author, Public Citizen legislative representative Craig Holman.

While commissioners had always displayed flashes of partisan politics, the new GOP members went a step beyond, displaying an ideological mistrust of any effort to enforce regulations that might deter the political speech of political groups supporting either party — regulations that they, as commissioners, were tasked with the duty of enforcing.

“These three individuals on the commission have made it very clear that they are ideologically opposed to campaign finance laws and prepared to take extreme steps to make sure that they have minimal impact and make sure that they are not enforced,” Wertheimer says.

Commissioner Donald McGahn, in particular, is often cited as the ringleader of the current GOP voting bloc and the architect of its disciplined commitment to block all critical enforcement matters. McGahn served as a campaign finance and ethics lawyer for former House Majority Leader Tom DeLay, whose violations of campaign finance laws made his name synonymous with Beltway corruption. McGahn also rigidly opposes the idea of campaign finance regulation itself. He “views enforcement of the law as an infringement of rights,” argues Ryan, “and has often expressed a fair degree of hostility to the very purpose of the commission itself.”

True to their sentiments, the GOP commissioners rebuffed the FEC’s own staff lawyers’ recommendations to investigate different groups believed to have skirted the body’s regulations four times in 2008. And on a 3-3 party-line vote, the GOP commissioners even refused to accept a punitive fine that the FEC counsel had previously negotiated with a U.S. Chamber of Commerce-funded group for improprieties committed in a previous election cycle.

Donor disclosure begone

The final nail in the coffin of donor disclosure, however, came earlier this year when the FEC declined, in a party-line vote, to pursue an investigation into the now-defunct organization, Freedom’s Watch, effectively absolving the group for failing to report any donors for the vast majority of its electioneering communications in 2008.

Both the DCCC, which originally filed the complaint, and the FEC’s own staff, which recommended an investigation, had cited a New York Times article that quoted anonymous Republican operatives and reported that the group’s approximately $30 million for ad spending “came almost entirely from casino mogul Sheldon Adelson, who has ‘insisted on parceling out his money project-by-project.’” In their justification for not taking action, however, the Republican commissioners ridiculed the Times’ use of anonymous sources and, more importantly, substantially reinterpreted and narrowed the FEC regulations outlining the conditions in which donor disclosure must take place.

While current regulations dictate that all donations of more than $1,000 made “for the purpose of furthering electioneering communications” must be disclosed to the FEC, the GOP commissioners argued that since the $126,000 ad in question could, in theory, have been funded by other donors besides Adelson, the group was under no obligation to report their primary backer’s involvement in the ad. In other words, the GOP commissioners now argued that unless a specific donor contribution could be demonstrably linked to the creation of a specific ad — a practice no political donors engage in — nonprofit groups that cut political ads were under no requirement to disclose their donor rolls.

“[The GOP commissioners] locked down on the interpretation that there must be some sort of written or oral designation by the contributor that the money is going to a specific ad at a specific time in a specific place, and nobody does that,” explains Holman. “As a result they’ve shut down all disclosure.”

The impact of the FEC’s decision, meanwhile, has extended far beyond the individual enforcement case at hand. Rather, it has contributed to what Wertheimer describes as a “Wild West situation where there’s nothing to worry about as far as complying with campaign finance laws.” 501(c) organizations — the group of choice for influencing political races in the current election cycle — now feel little fear of reprisal when they list “.00” on their electioneering communication reports under the area for donor contributions, and the ever increasing number of groups abstaining from the practice of disclosure attests to their sense of impunity.

No appetite for reform

Fixing the FEC by reforming its basic, gridlocked structure would require new legislation that’s simply out of the question at this point, reform advocates argue. But naming new appointees to replace the three commissioners — including McGahn — whose terms have long since expired is doable. But even though McGahn, along with Democratic commissioners Ellen Weintraub and Steven Walther, are all serving in a lame-duck capacity, the Obama administration has made hardly any effort to replace them.

The reason for Obama’s inaction, advocates speculate, is that custom dictates that the president ask the majority and minority leaders of the Senate to submit names for the FEC commissioner positions and nominate them accordingly. But Minority Leader Sen. Mitch McConnell, R-Ky., who has vociferously opposed the DISCLOSE Act in the Senate, is hardly motivated to disrupt the body’s current gridlock and even more unlikely to recommend a commissioner whose beliefs would stray from his own, rigid distaste for campaign finance regulation.

“Where the commission has broken down is with the appointment process to the FEC,” notes Holman. “Even though legally the process is that the president appoints commissioners with the confirmation and advice of Senate, it’s really always been the other way around … and McConnell started realizing some time ago that he could wreck havoc through the appointment process.”

The administration, in other words, is free to nominate a Republican or an independent appointee to replace McGahn tomorrow. But doing so would be sure to ruffle some feathers.

“[Obama] could nominate new commissioners and send them up to the Senate,” notes Wertheimer, “and if McConnell used his influence to filibuster or block the appointments, then he could consider recess appointments. To date it’s simply been not important enough in their minds to take on McConnell.”

Indeed, the only action the administration has attempted since taking office was in 2009 when it appointed Democratic union lawyer John Sullivan to replace one of the Democratic commissioners, a move that Sens. John McCain, R-Ariz., and Russ Feingold, D-Wis., announced they would block till the president agreed to submit nominations to replace all three lame duck commissioners at once.

McCain and Feingold, who co-sponsored the Bipartisan Campaign Reform Act in 2002 and have been frustrated with the FEC’s refusal to adequately enforce the bill’s statutes, released a statement at the time that urged the president to “nominate new commissioners with a demonstrated commitment to the existence and enforcement of the campaign finance laws,” but since then the administration has been mum. (Probed about the ongoing delay in nominating new FEC commissioners, a White House spokesman could only say “the president is committed to filling these positions with the most qualified persons.”)

Reform advocates, while eager to get the commissioners replaced, nonetheless sided with the two senators, in part because Obama’s pick hardly represented the kind of integrity and commitment to campaign finance laws for which they were hoping. “My concern with Sullivan’s nomination is that he has made a career out of fighting FEC regulations for labor unions,” Ryan says. “It didn’t represent one iota of change.”

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