US judge rules against corporate contribution ban

[May 28, 2011]  ALEXANDRIA, Va. (AP) -- A U.S. judge has ruled that the campaign finance law banning corporations from making contributions to federal candidates is unconstitutional, saying that a recent Supreme Court decision gives companies the same right to donate as individual citizens enjoy.

In a ruling issued late Thursday, U.S. District Judge James Cacheris tossed out part of an indictment against two people charged with illegally reimbursing donors to Hillary Clinton's 2006 Senate and 2008 presidential campaigns.

Cacheris says that under the Supreme Court's landmark Citizens United decision last year, corporations have the right to give to federal candidates.

The ruling from the federal judge in Virginia is the first of its kind. The Citizens United case had applied only to corporate spending on campaign activities by independent groups, such as ads run by third parties to favor one side, not to direct contributions to the candidates themselves.

Cacheris noted in his ruling that only one other court has addressed the issue in the wake of Citizens United ruling. A federal judge in Minnesota ruled the other way, allowing a state ban on corporate contributions to stand.

"(F)or better or worse, Citizens United held that there is no distinction between an individual and a corporation with respect to political speech," Cacheris wrote in his 52-page opinion. "Thus, if an individual can make direct contributions within (the law's) limits, a corporation cannot be banned from doing the same thing."

In court papers, federal prosecutors defending the law said overturning the ban on corporate contributions would ignore a century of legal precedent.

"Defendants would have the court throw out a century of jurisprudence upholding the ban on corporate political contributions, by equating expenditures -- which the Court struck down in Citizens United -- with contributions. This is, however, equating apples and oranges," prosecutor Mark Lytle wrote in his argument to keep the indictment intact.

In the count that was tossed out, defendants William P. Danielczyk Jr. and Eugene R. Biagi were charged with helping funnel corporate funds to the presidential campaign of Clinton, now the U.S. secretary of state. Specifically, they were charged with using money from the corporation they controlled, Galen Capital Group, to reimburse individuals who made contributions in their own names.

Peter Carr, a spokesman for the U.S. attorney in Alexandria, which is prosecuting the case along with the Justice Department's Public Integrity Section, said Friday that the office is reviewing the ruling. Prosecutors have the option to appeal the ruling to the 4th U.S. Circuit Court of Appeals in Richmond.

Defense lawyers, though, said the implications of the Citizens United case are clear.

"Corporate political speech can now be regulated, only to the same extent as the speech of individuals or other speakers," Biagi's lawyer, public defender Todd Richman, wrote in court papers. "That is because Citizens United establishes that there can be no distinction between corporate and other speakers in the regulation of political speech."

Fred Wertheimer, president of Democracy 21, a Washington-based group that supports campaign finance reform, said Friday that Cacheris overstepped his bounds and ignored Supreme Court rulings issued before Citizens United that explicitly upheld the ban on corporate contributions. If the Supreme Court had wanted to overturn the ban, it could have done so directly in Citizens United.

"This decision ought to be appealed, and it ought to be overturned," Wertheimer said.

University of Virginia law professor Daniel Ortiz said the ruling "pushes the outer limits of the Citizens United logic." He said he does not expect it to stand.

The Citizens United case makes a distinction, Ortiz said, between independent expenditures by corporations that are not coordinating with a federal candidate's campaign, and direct campaign contributions.

As a practical matter, Ortiz said that even if Cacheris' ruling stands, its practical effect may be negligible because corporations would be subject to the same contribution limits imposed on individuals -- $2,500 per candidate per election. Cacheris himself makes a similar point in his ruling, saying in a footnote that "this finding hardly gives corporations a blank check."

On the other hand, individuals can form an unlimited number of corporations, which could create a significant loophole in the law if unchecked.

Under existing law, corporations that want to contribute directly to federal candidates must form a political action committee -- 1,683 corporate PACs existed at the start of the year, according to the most recent count from the Federal Election Commission. PACs are allowed to contribute to a candidate at twice the amount of an individual -- $5,000 per election instead of $2,500 -- but those PACS must use segregated funds and face strict limitations on how much they can raise and from whom.

In the pending case, Danielczyk, 49, and Biagi, 76, who live in the Washington suburb of Oakton, Va., allegedly reimbursed $30,200 to eight contributors to Clinton's 2006 New York Senate campaign, and reimbursed $156,400 to 35 contributors to her 2008 presidential campaign.

Cacheris, an appointee of President Ronald Reagan who is also the brother of prominent defense lawyer Plato Cacheris, allowed most of the indictment against Danielczyk and Biagi to stand. If the government does not appeal Cacheris' ruling on the constitutionality of corporate contributions, the case is scheduled to go to trial in July.

[Associated Press; By MATTHEW BARAKAT]

Matthew Barakat can be reached at http://twitter.com/mattbarakat.

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