Secret Court Ruling Could Undermine Wisconsin Campaign Finance Law

A secret court ruling in the "John Doe" probe into campaign finance violations during Wisconsin's 2011 and 2012 recall elections could have implications well beyond the investigation -- if news reports from anonymous sources are accurate.

Earlier this month, the Wall Street Journal editorial board reported that Wisconsin Judge Gregory Peterson had quashed subpoenas issued to Wisconsin Club for Growth and Citizens for a Strong America in the closed-door John Doe criminal investigation (which operates like a grand jury except in front of a judge), on grounds that it was not illegal for these supposedly independent groups to coordinate with a campaign -- since their ads did not expressly tell viewers to "vote for" or "vote against" a candidate. Wisconsin Club for Growth spent at least $9.1 million on these "issue ads" supporting Walker and legislative Republicans during the 2011 and 2012 recall elections, and in turn shuffled millions more to Citizens for a Strong America, which funnelled the money to other groups that spent on election "issue ads."

The editorial board wrote on July 10:

Wisconsin's campaign finance statutes ban coordination between independent groups and candidates for a "political purpose." But a political purpose "requires express advocacy," the judge wrote, and express advocacy means directly advocating the election or defeat of a candidate. "There is no evidence of express advocacy" and therefore "the subpoenas fail to show probable cause that a crime was committed," Judge Peterson wrote. Even "the State is not claiming that any of the independent organizations expressly advocated" for the election of Mr. Walker or his opponent, he added. Instead they did "issue advocacy," which focuses on specific political issues.

The implication of this secret ruling, if it is upheld, is that a candidate for Wisconsin office can now operate hand-in-glove with a nonprofit like Wisconsin Club for Growth -- which can accept unlimited donations and is under no obligation to disclose those donations -- as long as Wisconsin Club for Growth's ads omit words like "vote for" or "vote against." This would have the effect of undermining the state campaign finance laws that limit how much an individual can donate to a candidate and require disclosure, election law experts say.

"In that situation, the contribution limits become meaningless," says Paul S. Ryan, Senior Counsel with the Campaign Legal Center.

Death to Disclosure and Contribution Limits?

Under Wisconsin law, an individual donor can give no more than $10,000 to a gubernatorial candidate, $1,000 to a candidate for state Senate, and $500 to a person running for Assembly. Every donation must be reported to Wisconsin's elections board and publicly disclosed.

If there is little distance between the issue ad group and a candidate, however, a million-dollar, secret donation to a group like Wisconsin Club for Growth would be effectively the same as a donation to the candidate, undermining the candidate contribution limits, and raising the same concerns about corruption and undue influence as a million-dollar check directly to a candidate.

Because a donation to a candidate-aligned issue ad group would not be publicly disclosed, the public would be unable to track whether the donation resulted in favorable treatment. In recent months, legislators have been caught doing apparent favors for top contributors -- Rep. Joel Kleefisch pushed a bill written by GOP donor Michael Eisenga to cut his child support payments, and Sen. Sheila Harsdorf wrote a bill to pay $217,000 in taxpayer funds to a company whose CEO had given thousands to her campaign -- but the press would have a hard time tracking that favorable treatment if big donations are kept secret.

"Why would anyone bother with the [candidate] contribution limits if you can give a million dollars to the 'issue ad' group working with them?" Jay Heck of Common Cause Wisconsin told CMD.

Although a series of U.S. Supreme Court decisions have dismantled many campaign finance regulations, candidate contribution limits and disclosure requirements have consistently been upheld as an important means for curbing political corruption. Some groups active in the 2012 elections on the federal level were closely connected to candidates (like the Mitt Rommey-aligned Restore Our Future and Barack Obama-aligned Priorities USA), but by law the organizations were not allowed to coordinate with the campaigns on strategy. Judge Peterson's ruling, if it is upheld -- and assuming available reports are accurate -- would significantly weaken what remains of Wisconsin's clean election laws.

Is the Wall Street Journal Ed Board Giving Us the Whole Story?

On the federal level, "issue ads" mentioning a candidate run 60 days before a general election and 30 days before a primary are deemed to have a political purpose and must be reported, but Wisconsin law does not have a similar bright line. However, Wisconsin courts have found that if a group is coordinating on issue ads with a candidate, their spending -- regardless of whether it includes express advocacy -- can be considered a contribution, which under Wisconsin law encompasses both cash donations and the giving of anything of value.

If those "contributions" exceeded donation limits and were not reported to the state elections board, the group running coordinated issue ads would be violating election law.

"Once there is actual coordination, the question is whether the coordinated expenditure is a 'thing of value' within the meaning of the definition of 'contribution'" under Wisconsin law, says Charles G. Curtis Jr, an attorney at Arnold & Porter who helped defend the McCain-Feingold campaign finance law. "And a well-timed 'issue' ad, emphasizing themes of importance to a given candidate or political party, can obviously be a 'thing of value,'" he told CMD.

In 1999, the Wisconsin Court of Appeals in Wisconsin Coalition for Voter Participation v. State Election Board held that, as is the case under federal law, Wisconsin law can count issue ad "expenditures that are 'coordinated' with, or made 'in cooperation with or with the consent of a candidate'... as campaign contributions." As a result of that decision, the elections board pursued an investigation into illegal coordination between a campaign led by Mark Block and an "independent" group that sent issue ad postcards. That probe resulted in a settlement where Block was fined and barred from politics for three years. (Block would go on to lead the Wisconsin chapter of the David Koch-founded Americans for Prosperity, and headed Herman Cain's 2012 presidential run).

Because Judge Peterson's order on the subpoenas has not been made public, it is not clear how he distinguished the Wisconsin Coalition for Voter Participation case, or to what extent he greenlighted coordination between "issue ad" groups and campaigns. All that is known is what the Wall Street Journal editorial board has selectively decided to report -- and if the Journal's account is accurate, Wisconsin elections could get dirty.

But there is reason to be cautious about what has been reported.

Media Hostile to Campaign Finance Regulation Sets Terms of John Doe Debate

Thanks to the John Doe investigation's strict secrecy rules, details have been hard to come by, and the targets of the investigation have managed to set the terms of the debate through a series of strategic leaks to friendly media sources, such as Wisconsin Club for Growth director Eric O'Keefe's disclosures to the Wall Street Journal editorial board.

Another major source of information about the John Doe probe has been the Franklin Center for Government & Public Integrity's Wisconsin Reporter, which has cited unnamed sources to break news and criticize the investigation in its 20-part-and-counting series called "Wisconsin's Secret War." As CMD has documented, Franklin Center was launched by O'Keefe, and its Director of Special Projects, John Connors, is president of Citizens for a Strong America, another group subpoenaed in the John Doe.

"The public has to be very wary of taking for granted what is being reported by the Wall Street Journal and Wisconsin Reporter," says Mike McCabe of the nonpartisan Wisconsin Democracy Campaign, which tracks election spending in Wisconsin. "O'Keefe and others have decided that is who they want reporting on John Doe, they've decided what to leak, and how they want it framed, and what they want the public to believe what the investigation is about."

If the Wall Street Journal editorial board's piece on Judge Peterson's subpoena ruling is correct, Wisconsinites have a lot to worry about. Candidate contribution limits and disclosure laws may have been eviscerated, and favoritism and political corruption could grow in the shadows. But there is plenty of reason to suspect that we are not getting the whole story.