Allison R. Hayward: Ban on small-business political bucks is unconstitutional

In the reargument of Citizens United v. Federal Election Commission, several Supreme Court justices made note of the contested history of the corporate and labor expenditure ban. In part they drew from my work in this area, which shows that the cited history on which modern campaign finance restrictions generally rest is misleading in important ways.

Counsel for the intervenors, Seth Waxman, contended at that argument that there was little question that bench and bar always understood the expenditure ban (and the preceding ban on corporate expenditure) was constitutional.

My research contradicts Waxman’s point. In addition to material already available in this context, I recently reviewed the archives of an interesting — but long-forgotten — series of prosecutions of corporations for making political contributions.
In those materials, I found clear indication that notwithstanding political enthusiasm for the prosecution, both U.S. attorneys involved had doubts about the constitutionality of their position.

First, some context. In 1948, a group of automobile dealers in Michigan were indicted under federal law for making illegal corporate contributions to a state political committee in 1946. Heavy governmental regulation of the market made political influence an enormously important goal for the automobile industry. The government set not just the price of all cars, but dictated to whom they should be sold. The subsequent growth of a black market eroded state sales tax receipts.

During a state tax investigation, the reform-minded Republican Michigan attorney general, Eugene Black, uncovered evidence of political contributions (most less than $1,000) out of dealers’ corporate accounts. For various political and personal reasons, the state investigation stalled.

Black, undeterred, took the case to the Truman Department of Justice. Attorney General Tom Clark assigned his top aides, Alex Campbell and Peyton Ford, to oversee a federal investigation under the day-to-day supervision of two Michigan U.S. attorneys, Thomas L. Thornton and Joseph Deebs. Even after extensive FBI investigative work, trials in early November 1948 (a week after President Truman’s upset victory) of two indicted auto dealers ended in acquittal.

The attorneys at Justice wanted to push on, but the Michigan prosecutors did not. It was at this point, in January 1949, that Thornton and Deebs observed:

“It is noted that Section 251 [the corporate contribution ban] makes no distinction between a large or small corporation. It prohibits corporate contributions generally. ... The legislative history of the Federal Corrupt Practices Act shows that the principal basis for limiting the use of money by corporations in connection with federal elections was removing disproportionate influences exerted by means of large aggregations of money.”

Thornton and Deebs thus recommended ceasing the investigation. Campbell and Clark were not persuaded, by the way, and continued to pursue a handful of Republican auto dealers through 1950.

To be sure, the Thornton/Deebs memorandum does not address the corporate contribution ban in the familiar “strict scrutiny” terms we now apply to restrictions on speech. It couldn’t, because that constitutional doctrine did not exist in 1949.
In the terms of our day, however, the memorandum is arguing that the contribution ban, read literally, is overbroad. Justice Antonin Scalia said essentially the same thing in the reargument.

The Supreme Court is not bound by the legal analysis of the U.S. attorney for the state of Michigan in 1949. But, if the argument is that doubts about the propriety of the contribution or expenditure ban are merely the creation of modern day agitpropagandists, that point is clearly wrong. Prohibiting corporations and unions categorically from political spending has always been controversial, for good reason, as the court’s reargument in Citizens United illustrated yet again.

Allison R. Hayward is assistant professor of law at George Mason University School of Law, and is a board member of the Office of Congressional Ethics and the Center for Competitive Politics.