Obama vs. Simmons: FEC Deadlock

The Federal Election Commission took nearly five years to consider campaign finance charges against a nonprofit group that spent millions of dollars on ads in 2008 seeking to link President Obama to the “terrorist” Weather Underground and its founder William Ayres.

Ultimately, the FEC could not decide whether the group, American Issues Project, violated the law by failing to register and report as a political committee.

FEC staff lawyers said in a report that AIP appeared to have broken the law, and they recommended the agency pursue an enforcement case.  Yet Republican and Democratic commissioners deadlocked along party lines in a vote on staff recommendations, meaning the case was dismissed without a definitive legal ruling, according to FEC documents.

AIP funder Harold Simmons, a major Republican donor, was let off the hook by the only clear ruling in the case. The FEC commissioners voted to find Simmons did not violate PAC contribution limits because such limits are no longer valid, due to court decisions in the intervening years since the 2008 election.

However, the FEC deadlock on the main issue in the case—when a political group becomes a PAC—leaves unanswered a key legal question that has lingered and grown through the 2012 campaign and up to the present day.

With the FEC unable to rule on which organizations must follow campaign finance rules, including disclosure of their funding sources, the IRS has been asked more and more to determine which new organizations conducting political activities are eligible for tax-exempt status under Section 501(c)(4)—the part of the tax code governing “social welfare” organizations.

Such organizations have an advantage over FEC-registered PACs because, under the tax law, they can keep their funding sources secret. The groups operate as nonprofit corporations and are becoming increasingly active in campaigns following the 2010 Supreme Court ruling in Citizens United v. FEC, which said corporations can make unlimited independent expenditures to influence campaigns.

The FEC has three Republican commissioners—Caroline Hunter, Donald McGahn, and Matthew Petersen. There are two FEC Democrats—Steven Walther and Ellen Weintraub—with one Democratic seat vacant. The votes of at least four commissioners on the six-member panel are required for any final ruling. Consensus has been lacking at the FEC in recent years, however, with the commissioners splitting along party and ideological lines on many key issues.

That is what happened in the case of the American Issues Project. The group faded from public view after Obama was elected president in 2008, but it made headlines in the summer months of that year by spending $3 million on ads linking Obama to Ayres and the Weather Underground, the 1960s radical group that was described as a `terrorist organization.”  The ads asked if voters “know enough” about Obama to elect him.

Obama’s campaign said the ads distorted the facts to smear Obama and help defeat him in the presidential race. The campaign called loudly in 2008 for the Justice Department to investigate AIP’s alleged criminal violations of campaign finance laws in sponsoring the messages without registering as a PAC.

The group claimed that it was operating legally, though it took a lower profile after the public flap with the Obama campaign.

All of AIP’s money for the anti-Obama ads came from Simmons, who has continued to fund similar organizations up through the last election. The Dallas businessman and his wife provided nearly $27 million to Republican-leaning organizations in the 2012 campaign, according to FEC reports compiled by the nonprofit Center for Responsive Politics.

A staff report from the FEC general counsel’s office concluded that AIP should have registered as a PAC and followed stricter reporting requirements. The counsel’s report suggested that the agency pursue an enforcement case and perhaps seek a fine in the case.

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