Need to Close the Door on DISCLOSE Again

The Supreme Court ruled earlier this year (in Citizens United vs. FEC) that company (and employee) voices were being unfairly silenced by the campaign finance rules that were in place. Democrats in Congress didn’t like what they heard so they attempted to make their way around the decision by coming up with the DISCLOSE Act. For those that care, the acronym (who has the job of coming up with these things) stands for Democracy is Strengthened by Casting Light on Spending in Elections.

Fortunately, the effort fell short of the 60 Senate votes needed to proceed. But bad ideas (in this case one of the worst ones to come down the pike in a long time, and that’s saying something in a city filled with questionable policy proposals) don’t simply go away. Indiana Chamber members communicated their displeasure the first time around.

CongressDaily reports the latest:

The DISCLOSE Act will head back to the floor for a vote when the Senate returns next month, according to spokespeople for Senate Majority Leader Harry Reid and Sen. Chuck Schumer, D-N.Y., the bill’s lead sponsor.

The measure would implement strict disclosure laws on campaign ads, require corporate leaders to appear in ads much like candidates and severely restrict foreign-owned companies and those that do business with the government. 

Senate Dems and their reform-advocate allies are targeting Sens. Scott Brown, R-Mass., Olympia Snowe, R-Maine and Susan Collins, R-Maine, all of whom voted against cloture last month. The 3 GOPers said the bill was rushed in an attempt to influence the ’10 midterms on Dems’ behalf.

Now, though, reform advocates believe they have removed that most significant objection all 3 GOPers had. If the measure is passed in late Sept. or early Oct., it would not go into effect until after the midterms.

Senate leaders have told their House counterparts that they will bring the bill up again, and that they may let GOPers block it one more time in order to score political points. But after the bill fails, reform groups and senators who back the DISCLOSE Act will try to convince potential GOP allies to join them in passing the bill so it might be implemented after the midterms.

Still, Snowe, Collins and Brown will face pressure from their leader even after it becomes clear the bill wouldn’t impact the midterms. Senate Minority Leader McConnell has been a vocal opponent of the DISCLOSE Act, labeling it a ploy to benefit Dems. McConnell has been successful in keeping his conference together on most controversial votes, making the bill’s prospects uncertain.

Dems also have to deal with Sens. Dianne Feinstein , D-Calif., and Frank Lautenberg , D-N.J., both of whom are opposed to a carve-out that exempts the NRA from certain disclosure provisions. Holman said there is an understanding that the 2 Dems would vote for cloture, getting Dems over the 60 votes required to move the bill to final passage, but then Lautenberg and Feinstein could vote against the final package. Lautenberg and Feinstein both voted for cloture when the bill first came up on July 27.

Off Target? In the World of Politics, Be Careful Who You Back

Earlier this year, when the U.S. Supreme Court eased the rules on corporate giving to political campaigns, it was deemed a victory for the business community. However, Target recently discovered that this can be quite polarizing. When the company donated to a group supporting a Minnesota gubernatorial candidate for his approach toward economic growth and job creation, it soon received a backlash from employees for his views on social issues. Minnesota Public Radio reports:

The CEO of Minneapolis based Target Corporation is apologizing for a donation the company made to a political group supporting Republican Tom Emmer’s bid for governor.

The contribution to MN Forward prompted a backlash from Democrats and gay rights groups who called for boycotts of the company’s stores. At least one gay rights organization is praising the apology but is waiting to see whether it follows up with its renewed emphasis on supporting gay rights causes.

In a letter to Target employees, CEO Gregg Steinhafel wrote that the purpose of the $150,000 donation to MN Forward was to support economic growth and job creation, but he wrote that the contribution affected many employees in ways he did not anticipate and quote "for that I am deeply sorry."

Target spokeswoman Lena Michaud said the company will also do a strategic review of political donations and plans to lead a discussion on improving gay rights in the workplace.

"Our commitment right now is in letting people know that we’ve heard their feedback and we’re really sorry that we’ve let them down," Michaud said. "We want to continue doing the many things that Target has done as a company to foster our inclusive corporate culture and then look at ways of doing things better in the future."

The company’s tone has changed dramatically since it became public in July that the company contributed to MN Forward. At the time of the donation, Target officials said the company gave to both Democrats and Republicans and the contribution was aimed at fostering a better business climate in Minnesota. But the donation to Minnesota Forward and the group’s subsequent TV ad in support of Tom Emmer ignited a backlash that spread nationwide.

Michaud wouldn’t say if the boycott affected the company’s sales and also wouldn’t say whether Target would stop making political donations to MN Forward or other groups.

That’s what Monica Meyer, executive director of the gay rights group OutFront Minnesota, said she’ll be watching for. Meyer said she’s pleased Target apologized for the contribution, but she wants to make sure the company follows up on its promise to be committed to gay rights.

Here’s Why DISCLOSE is a DISASTER

Two unrelated observations that come together in this case:

  1. Who is in charge of naming legislation that produces such memorable acronyms? The latest is the DISCLOSE Act, short for Democracy Is Strengthened by Casting Light On Spending in Elections
  2. Any time you can get 300 organizations to agree on something, it must be at an extreme — in this case the bad end of the spectrum

DISCLOSE is the 2010 version of card check, attempting to penalize business voices at the expense of unions. Card check dealt with union elections; DISCLOSE seeks to circumvent a Supreme Court decision and attack First Amendment rights by limiting the business voice in political elections.

The 300-plus organizations (chambers, economic development groups, associations and more) represent businesses of all types and size across the country. They combined to send a letter to all members of the U.S. House. A couple of excerpts below, and here is the full letter:

The legislation’s sponsors admit that the bill’s purpose is to deter corporations from participating in the political process. Senator Schumer has said the bill will make corporations “think twice” before attempting to influence election outcomes, and that this “deterrent effect should not be underestimated.”

Its provisions include a blanket prohibition on election-related speech by certain government contractors. Thousands of corporations regularly participate in contracts with the federal government; under Schumer – Van Hollen, many of them are categorically barred from making their political views known. The bill imposes no comparable restrictions on labor unions that receive federal grants, negotiate collective bargaining agreements with the government, or have international affiliates, even though unions and their political action committees are the single largest contributor to political campaigns and claim to have spent nearly $450 million in the 2008 presidential race.

Free Speech for All

Look at most polls and you’ll see voters are in a surly mood and wanting to boot incumbents out of office. So no one should have been surprised that congressional leadership wants to move fast to pass new restrictions on speech by those who might disagree with them.

It’s called the Democracy Is Strengthened by Casting Light on Spending in Elections, or “DISCLOSE Act.”  A long and cute title, but the bill is really designed to put duct tape over the mouths of businesses and trade associations. Labor unions and trial lawyers get a pass in the bill, an important preferential treatment with real election impacts.

For-profit corporations doing federal contract business, taking TARP money, or with as little as 20% overseas ownership would be flatly shut-out of making campaign communications. CEOs of any other corporations who tried to speak up would have to go on camera in any advertisement saying they approved the ad and could face criminal complaints. Independent expenditure ads by businesses and associations would be blocked from being on the air from April through November in Indiana.

For decades, federal campaign finance rules and “reform” packages like McCain-Feingold were crafted with some balance for corporations and labor unions. The DISCLOSE Act abandons this important balance and bipartisanship. There was no attempt at a bipartisan approach here, particularly with the current chair of the House Democrat Campaign Committee (Rep. Van Hollen) and immediate past chair of the Senate campaign committee (Sen. Chuck Schumer) actually authoring the bill.

Businesses and trade associations have First Amendment free speech rights, as reinforced by the U.S. Supreme Court in the landmark Citizens United ruling last year. That pesky First Amendment getting in the way of politicians again.

You can take action in fighting this legislation via the Indiana Prosperity Project.

Supreme Court Rules in Favor of Business Freedom

In a major victory for Hoosier and American business, the United States Supreme Court handed down a much anticipated ruling today in Citizens United v. Federal Election Commission. This ruling removes the ban placed on corporate dollars spent on independent expenditures and will give the job creators and innovators of this country the freedom to talk about issues, candidates and elections.

“The Supreme Court’s ruling frees American business from the yoke of second class citizenship.  It returns the right of American business to talk about workplace issues and hold candidates accountable,” said Gregory Casey, President and CEO of the Business and Industry Political Action Committee (BIPAC), the nation’s oldest business political action committee. The Court’s action is “certain to increase the discussion on economic issues in the 2010 elections, which is a very good outcome.” 

The Court’s 5-4 ruling also involved two much older cases, Austin v. Michigan Chamber of Commerce and McConnell v. Federal Election Commission.  In Citizens United v. FEC, a small non-profit organization, Citizens United wanted to release a documentary that was critical of Hillary Clinton during the 2008 presidential election on cable TV that would have been available through video-on-demand. Several lower court decisions ruled against the organization from airing the documentary.

Contributions made by corporations will be disclosed and essentially treated the same as an individual contribution currently is by the FEC. Transparency and freedom of speech are both important and both won in this ruling.

By the way, the loud moan you are hearing is coming from labor union leaders who fear business leaders talking directly with voters about an agenda centered on job creation, economic development and education reform.

Please feel free to add to the conversation and post your comments or questions.

Supreme Court Case Could Impact Sarbanes-Oxley

Today, the U.S. Supreme Court will hear the Free Enterprise Fund v. Public Company Accounting Oversight Board, a lawsuit that challenges the constitutionality of a large portion of the Sarbanes-Oxley Act of 2002.

A recent e-mail from the Competitive Enterprise Institute notes, "The law, which was rushed through Congress after the Enron and WorldCom scandals, created numerous corporate governance and accounting rules that have been criticized by both Democrats and Republicans as excessively burdensome to smaller companies, detrimental to U.S. competitiveness, and ill-equipped to protect shareholders from fraud. The decision the Court makes could be more consequential to jobs growth than any job summit politicians might have."

NPR explains:

The U.S. Supreme Court hears arguments on Monday testing the constitutionality of the federal anti-fraud law that grew out of the Enron scandal. At issue is the constitutionality of the board Congress created to oversee independent audits of publicly traded companies.

But even more could be at stake.

As Congress debates what measures are needed to avoid a repeat of the financial institution failures of the last year, it is hard to remember that eight years ago, a different kind of scandal shook the foundations of the business world. It involved the collapse of some of the nation’s largest corporations — Enron, WorldCom and Tyco — and how those companies deceived their investors through sham outside audits. Enron’s bankruptcy in 2001 was, at the time, the largest in U.S. history.

"It was the canary in the mine shaft," says Paul Sarbanes, who in 2001 was chairman of the Senate Banking Committee.

"You had a number of major companies engaged in convoluted, often fraudulent, accounting schemes to inflate their earnings, to hide their losses and to drive up their stock prices," he observes.

And the outside audits of these companies, even though conducted by industry standards, were worthless.

The debacles provoked a crisis of confidence in capital markets. After extensive hearings, Democrat Sarbanes, and his Republican counterpart in the House, Michael Oxley, co-authored a bill to ensure that investors would get accurate financial information about publicly traded companies. President Bush signed it into law in 2002.

Instead of allowing the accounting industry to regulate itself, as it had before, the law created the Public Company Accounting Oversight Board, the PCAOB, or as it is uncharitably known, "peekaboo." The board is technically private and is funded by a fee charged to public accounting firms. Its five board members are top accounting specialists appointed by the Securities and Exchange Commission.

But pro-business conservatives have attacked the board as unconstitutional. They contend it is a hybrid institution accountable to no one, that both makes rules to govern public accounting and enforces them.

Sarbanes-Oxley Goes to Court

The Sarbanes-Oxley Act, the legislation enacted following the Enron meltdown, will now be reconsidered by the Supreme Court. The Washington Post reports:

The Supreme Court yesterday agreed to consider a challenge to the Sarbanes-Oxley Act of 2002, the centerpiece of the government’s response to the watershed accounting scandals at Enron and Worldcom.

The case tests the constitutionality of a nonprofit oversight board created to regulate auditors of public companies. Plaintiffs in the case, including a Nevada accounting firm, allege that the oversight board was endowed with unchecked government powers.

If the court agrees, it could force Congress to reopen the debate over one of the most sweeping pieces of business legislation since the 1930s. Supporters say the Sarbanes-Oxley Act has helped protect investors; critics say it has imposed costly burdens on corporations.

The court accepted the case for consideration in the term that begins in October.

Congress enacted Sarbanes-Oxley after big accounting firms such as the now-defunct Arthur Andersen failed to protect shareholders from a wave of accounting manipulations that made corporations look healthier and more profitable than they really were. Until 2002, the accounting profession was largely responsible for making its own rules and overseeing itself.

Hat tip to Reason Magazine’s blog.

And just so you know: If you’re like most business and are still trying to grasp the complexities of this law, you could probably use our book, The Sarbanes Oxley Act: A Practical Guide for Companies, which is authored by attorneys from Ice Miller.