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John Doe prosecutors: Judge's decision is death knell for campaign finance laws

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If it’s allowed to stand, a federal judge’s ruling Tuesday that allows political campaigns to coordinate their work with so-called issue advocacy groups could deliver a major blow to campaign finance regulations, according to prosecutors, election watchdog groups and a former chairman of the Government Accountability Board.

U.S. District Judge Rudolph Randa’s preliminary injunction in a civil lawsuit brought by Eric O’Keefe and the Wisconsin Club for Growth was immediately appealed by prosecutors who have been investigating possible coordination between conservative groups and political campaigns including Gov. Scott Walker’s 2012 recall campaign. Late Wednesday afternoon, the 7th Circuit Appeals Court stayed Randa’s order.

In a statement Wednesday, the Milwaukee County prosecutors involved in the case said Randa’s legal argument could drastically alter how outside groups spend money on elections and coordinate with campaigns.

“If sustained, this ruling is the death of campaign finance law as we know it in the state of Wisconsin and across the nation,” said Samuel Leib, the lawyer representing the prosecutors in the lawsuit. “It will now be possible for a political candidate to personally conduct a campaign — soup to nuts — without disclosing a single campaign contribution.”

Wisconsin Democracy Campaign executive director Mike McCabe said if the ruling were to be upheld by the U.S. Supreme Court, it would have repercussions similar to the Citizens United and McCutcheon Supreme Court decisions. Those rulings allowed unlimited independent expenditures by corporations and unions and lifted aggregate spending limits on federal candidates.

“If it does stand up to appeal, it’s just another nail driven into the coffin of democracy,” McCabe said. “If these groups can spend as much money as they want and they can directly coordinate with candidates and they can keep their money cloaked in secrecy, they will be in a commanding position to determine who can run competitively for office.”

Retired Judge David Deininger, who was GAB chairman in 2012 when, according to Randa, the state elections agency helped launch the John Doe investigation, called Randa’s ruling “surprising and very dismaying.”

He said state law has held for decades that any coordination between a candidate and an outside group is subject to campaign disclosure laws. The U.S. Supreme Court in previous campaign finance cases has distinguished between coordinated and independent expenditures, and upheld disclosure laws.

Under the ruling, he said, a gubernatorial candidate could bring together a group of donors, have them write checks to an issue advocacy group and coordinate where and when the group runs ads, all while assuring the donors their names will never be disclosed.

“Nobody would ever know who was funding that campaign and how much it was funding,” Deininger said. “This ruling eviscerates the independence rule and the disclosure rule.”

Rick Esenberg, a Milwaukee lawyer who represents conservative causes, said Randa’s decision changes some long-standing doctrine related to campaign finance law. But he disagreed the ruling would alter how elections are funded.

“I don’t know as a practical matter you’d see money being allocated differently,” Esenberg said. “The incentives to do issue advocacy are already there. That’s what people do.”

Political action committees that expressly advocate for or against a candidate can donate to a candidate’s campaign and run independent ads. But those donations are subject to campaign finance limits and the ads can’t be coordinated with the campaign unless they’re disclosed as an in-kind contribution.

Issue advocacy groups that don’t expressly advocate for or against a candidate — but may still run ideological ads aimed at influencing voters — don’t have to disclose their donors or say how much they spend.

Randa’s decision makes clear that such groups also can coordinate their activities with candidates and campaigns without having to disclose that fact or be subject to campaign contribution limits.

“The plaintiffs have found a way to circumvent campaign finance laws, and that circumvention should not and cannot be condemned or restricted,” Randa wrote. “Instead, it should be recognized as promoting political speech, an activity that is ingrained in our culture.”

Randa also wrote that it’s “undisputed that O’Keefe and the Club (for Growth) engage in issue advocacy, not express advocacy or its functional equivalent.” For that reason they are not subject to Wisconsin’s campaign finance laws.

Randa’s decision doesn’t prohibit the state from requiring issue advocacy groups to disclose their spending, Esenberg said. It also doesn’t settle the question of what constitutes issue advocacy versus express advocacy.

The state does not regulate issue advocacy groups, though they are subject to Internal Revenue Service rules as 501(c)4 organizations.

In 2010, the GAB issued rules that would have required such groups to report their financing if the ads ran 30 days before a primary or 60 days before an election. The GAB also would have had discretion to classify whether political advocacy was campaign-related or issue-related.

But the Wisconsin Club for Growth and liberal advocacy group One Wisconsin Now sued, causing the GAB to back off the rules.

Senate Majority Leader Scott Fitzgerald, R-Juneau, this past session tried to fast-track a bill that would have enshrined in law that issue advocacy is not subject to campaign finance disclosure. But it didn’t draw enough Republican support to pass.

The GAB has been involved in the secretive John Doe investigation since Milwaukee County District Attorney John Chisholm opened it in August 2012, a detail that hadn’t been disclosed before Randa noted it in his decision. The six-member board voted unanimously in June 2013 to advance the case to prosecutors in five counties, which was previously disclosed in court filings.

GAB spokesman Reid Magney declined to comment on the ruling Wednesday.


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