Examining The SuperPAC With Colbert's Trevor Potter

Republican and Democratic SuperPACs, empowered by the Supreme Court's Citizens United decision, can collect unlimited contributions from individuals, corporations and unions. Potter became a celebrity when he signed on as Stephen Colbert's lawyer and advised the satirical TV host on how to create his own SuperPAC.

TERRY GROSS, HOST:

This is FRESH AIR. I'm Terry Gross. SuperPACs have led to what was described in the New York Times yesterday as a new breed of super-donor. About two dozen individuals, couples or corporations have given a million dollars or more this year to Republican superPACs that have poured that money directly into this year's presidential campaign.

SuperPACs, both Republican and Democratic, are empowered by the Supreme Court's Citizens United decision and other rulings to collect unlimited contributions from individuals, corporations and unions. We're going to talk about this new post-Citizens United world of campaign financing.

Our first guest is Trevor Potter, who has become something of a celebrity since he became Stephen Colbert's lawyer and advised Colbert on how to create his own superPAC. Potter is the founding president of the Campaign Legal Center and helped defend the 2002 McCain-Feingold law, which enacted campaign finance restrictions.

From 1991 to '95, he served on the Federal Election Commission. He served as general counsel to John McCain's presidential campaigns in 2000 and 2008. Potter has not only been advising Stephen Colbert on his PAC, Potter helped Colbert set up an organization known as a 501(c)(4). Officially designated as social welfare organizations, 501(c)(4)s have spent tens of millions on advertising in political campaigns, and they are not required to disclose their donors. Here's Stephen Colbert and Trevor Potter on "The Colbert Report," setting up a 501(c)(4).

(SOUNDBITE OF TV SHOW, "THE COLBERT REPORT")

STEPHEN COLBERT: So how do I gets me one, Trevor?

TREVOR POTTER: Well, lawyers often form Delaware corporations, which we call shell corporations, that just sit there until they're needed.

COLBERT: So like some anonymous shell corporation?

POTTER: Right, and I happen to have one here in my briefcase.

COLBERT: Let's see it. OK, what's it called?

POTTER: It's called Anonymous Shell Corporation.

(SOUNDBITE OF LAUGHTER)

COLBERT: OK, brrmm, brrmmm, Anonymous Shell Corporation filed in Delaware. OK, I got this. So now I have a (c)(4)?

POTTER: Right, now we need to turn it into your shell corporation, your anonymous one, and we do that by having normally a board of directors meeting.

COLBERT: And who's on the board of directors?

POTTER: Well, just you. We can just have you do this.

COLBERT: Sounds like a nice group of people.

(SOUNDBITE OF LAUGHTER)

COLBERT: All right, let's do it. Call to order. Let's do this thing.

POTTER: All right. So this says that you are the sole director of the corporation.

COLBERT: I am.

POTTER: And that you are now electing yourself president, secretary and treasurer.

COLBERT: Sounds like a great board.

POTTER: And you are authorizing the corporation to file the papers with the IRS in May 2013.

COLBERT: So I could get money for my (c)(4), use that for political purposes, and nobody knows anything about it till six months after the election?

POTTER: That's right, and even then they won't know who your donors are.

COLBERT: That's my kind of campaign finance restriction. OK, OK, so now I've signed it. I have a (c)(4)?

POTTER: You have a (c)(4). It's up and going.

COLBERT: Can I take this (c)(4) money and then donate it to my superPAC?

POTTER: You can.

(SOUNDBITE OF LAUGHTER)

COLBERT: But wait, wait, superPACs are transparent.

POTTER: Right, and...

COLBERT: And the (c)(4) is secret. So I can take secret donations of my (c)(4) and give it to my supposedly transparent superPAC...

POTTER: And it'll say given by your (c)(4).

COLBERT: What is the difference between that and money laundering?

(SOUNDBITE OF LAUGHTER)

POTTER: It's hard to say.

(SOUNDBITE OF LAUGHTER)

COLBERT: Well, Trevor, thank you so much for setting me up.

GROSS: That's my guest, Trevor Potter, with Stephen Colbert on "The Colbert Report." Trevor Potter, welcome to FRESH AIR.

POTTER: Thanks, Terry, good to be with you.

GROSS: So what can Stephen Colbert now use his 501(c)(4) to do?

POTTER: Well, it can engage in direct political activity. It can urge the election or defeat of candidates. It could lobby Congress, any number of public efforts related to public policy, essentially.

GROSS: So the 501(c)(4) is officially supposed to be a social welfare organization?

POTTER: Yes, that's the oddity here, of course, is that I've started by saying it could engage in political activity and run radio and television ads, which is not what we think of (c)(4)s doing. But through a combination of lassitude by the IRS and general confusion, (c)(4)s are now being used to engage in political activities. That wasn't the idea. They were set up by Congress to do public policy work, which was usually thought of as lobbying or arguing for one side or another of an issue in public.

But they've become very popular because they do not disclose their donors, and they can engage in some amount of political work. There's a dispute in the - amongst tax lawyers as to how much work they can engage in, but many lawyers would say up to just under half of their spending can be for directly political activities, including urging the election or defeat of federal candidates, and they can do all that with money that is not disclosed to the public.

GROSS: So you were an advisor to John McCain's campaign in 2000 and 2008. You served on the Federal Elections Commission. What can candidates do now when raising money that they weren't allowed to do before, that they weren't allowed to do under McCain-Feingold?

POTTER: We're really in a different world. Part of it involves candidates raising money, but most of it involves these new so-called superPACs. Throughout the - almost all of my career, until this year, what candidates could do was raise a small amount of money from each individual donor, it used to be $1,000, and then under McCain-Feingold it became $2,000 and was inflation-adjusted, so it's 2,500. But that's still a very small amount of money that an individual can give to a candidate.

So throughout the campaigns I've been involved with, candidates would have fundraisers and accept contributions of maybe as little as 250 or $500 from donors. They would hope to have someone max out, as they call it, at the full $2,500 this year, and then if their spouse gave, you could double that to now 5,000.

And that's the sort of money that candidates have been looking for. It has led, over the last couple cycles, to what we call bundlers, which means people who have a lot of wealthy friends they can ask money for, so that you go to a fundraiser, and your host gives you the 5,000, themselves and their spouse, but then they've asked their friends, their neighbors, their business associates, people in the same line of work to come to the fundraiser.

And in the McCain experience, where you may recall he was running really a low-funded campaign for a long period of time, they'd be thrilled if they could raise $25,000 at a fundraiser. $50,000 was a very successful fundraiser. Well, you jump from that sort of world to the world of the superPACs, where individuals can and do give $100,000, $500,000, some have given more than a million.

Famously, one of Newt Gingrich's supporters has given, I believe, 10 million between himself and his spouse to these supposedly outside groups that then spend money to elect the candidates. So we've changed the game from what really are small donors, either over the Internet or a couple hundred dollars, to a world where one person or a handful of people can bankroll a presidential candidate.

GROSS: So the people who you're referring to, the husband and wife who gave to the Newt Gingrich campaign, that's Sheldon Adelson and his wife, they apparently saved the Newt Gingrich campaign because Gingrich wouldn't have had the money to carry on; a similar thing with Rick Santorum and one of his major funders, Foster Friess. Would they have been able to do that in previous years? I mean, would there be a way that they could have just given as individuals to the campaigns, as opposed to giving through a PAC?

POTTER: No, there really isn't. What they could have done in previous years is taken their own personal money and spent it, in the case of Gingrich in South Carolina, in the case of the Romney backers, they could have spent it in Iowa, but they would have had to do so by putting their own names on an ad.

So it would have said, you know, I'm Adelson and I approved this ad and it's paid for by me. And no donor, no matter how wealthy, has ever really done that in the 30 years since Watergate, when these laws were put into effect. What changed this...

GROSS: Why not? Why not?

POTTER: That's a good question. I think because people first of all are much more comfortable giving to an organized political entity, which is what these political committee superPACs are. What you would have had to have done, before this year, is decide that you wanted to support a particular candidate. You would have had to go out and find somebody who knew how to do political ads, where to spend them, what the most effective approach was.

You'd create your budget. You then would have hired the professionals, done the ads and then put your name on them. So you essentially would become a political player yourself. And I think the wealthy individuals who are giving, in most cases that just doesn't occur to them to do something like that. They say what entity can I give to.

GROSS: So the Supreme Court decision Citizens United opened the door for the creation of superPACs, and superPACs can get as much money as any individual corporation wants to give, but they have to reveal who they are. So...

POTTER: Right. To be fair on this - to the court, at least - what they said is corporations have the same right as individuals to make independent political expenditures. Then along came a lower court, the D.C. Circuit, which said if you have a right, a constitutional right to make independent expenditures on your own, you have a constitutional right to do so through a political committee.

And so superPACs didn't come directly from Citizens United, but they came from a lower court effectively sort of guessing that the Supreme Court meant to include the sort of groups we are now seeing, where they take unlimited contributions from a number of people and then engage in this unlimited spending.

GROSS: My guest is Trevor Potter, the founding president of the Campaign Legal Center. We'll talk more after a break. This is FRESH AIR.

(SOUNDBITE OF MUSIC)

GROSS: My guest is Trevor Potter, a former federal election commissioner who supports campaign finance restrictions. He helped Stephen Colbert set up his superPAC.

So watching this campaign, what are some of the loopholes you've seen playing out in ads, in funding - you know, some of the things that weren't in - that you think the Supreme Court didn't necessarily count on but people have found loopholes and ways around so that they can do it anyways?

POTTER: I think there are two things that we are seeing play out here that are clearly contrary to what the Supreme Court was thinking, maybe three. So the first is that the court assumes, as a matter of law, that this spending is going to be independent of the candidates. In their original case, the Buckley v. Valeo case, they talk about independent spending being spending that is wholly independent of candidates and campaigns.

And because it's wholly independent, the court says it can't corrupt the candidate, you're not buying anything, there's no agreement with the candidate. The candidate might not even like the spending, and therefore since it's wholly independent, and there's no danger of corruption, it cannot be constitutionally limited. That's the theory.

Well, the practice is we are seeing these committees are actually pretty closely tied to candidates. They are not anyone's definition of wholly independent. They are created and run by friends of the candidates, family members of the candidates, former employees of the candidates, longtime fundraisers of the candidates, business partners of the campaign manager.

There is a whole web of ties here. The effect of that is that when donors give to these committees, they feel they are safely giving to a group that has the candidate's best interests in mind and knows what the candidate wants. This is amplified by the fact that candidates refer to them as my superPAC, which a number of candidates do, or the superPAC run by my good friends.

Under an advisory opinion from the Federal Election Commission last year, it is permissible for these candidates to attend meetings of donors, potential supporters for these PACs, and endorse the PAC. They can't solicit an unlimited amount of money, but they can go in and say you're doing great work, this is really important to my campaign. If the message is these are my people, I want you to support this group, then someone can, in fact, go out and write a check for a million dollars. They just can't be directly solicited by the candidate.

So we've ended up in a world that I think the Supreme Court did not understand or expect in Citizens United, where these supposedly wholly independent groups are closely linked to the candidates, where the people running the groups say, well, I decide what to do because I watch the candidate on television and do what he suggests, which is what one of the Gingrich people said.

So there's a close tie in the fundraising, in the personnel, in the goals of these groups, with individual candidates. And that's simply, I think, functionally very different from what the court thought was going to happen.

GROSS: So theoretically the head of the superPAC and the candidate are not supposed to coordinate, but given all the ties that you've just pointed out, one has to assume that there's some amount of knowledge of what the other is doing.

And I want to play another clip from "The Colbert Report" that kind of - that I think kind of, you know, really illustrates really well the kind of loopholes to help you get around the no-coordination rule. And this is a scene from "The Colbert Report" after Colbert has decided to run for president of South Carolina. So he has to give up his superPAC, the superPAC that you helped him create.

So he hands it over to Jon Stewart, in spite of the fact that they're business partners, and it's legal, in spite of the fact that they're business partners. And in this scene, Colbert and Stewart are asking for your advice, since you are at this point not only Colbert's lawyer, but you've become Stewart's lawyer too, since he now heads the superPAC. And that's legal.

POTTER: Right, something they point out they think is also a little odd that is legal.

GROSS: Right, OK, so here we go. Jon Stewart speaks first.

(SOUNDBITE OF TV SHOW, "THE COLBERT REPORT")

JON STEWART: Now that I have the superPAC, can I run ads supporting Stephen Colbert, who I believe in very deeply, perhaps attacking his potential opponents, who I don't believe in at all?

POTTER: Yes, you can, as long as you do not coordinate.

(SOUNDBITE OF LAUGHTER)

COLBERT: Well, that's interesting.

(SOUNDBITE OF LAUGHTER)

STEWART: Red flag.

COLBERT: What?

STEWART: I am busy.

COLBERT: Of course. You have a show.

STEWART: Can I legally hire Stephen's current superPAC staff to produce these ads that will be in no way coordinated with Stephen?

POTTER: Yes.

STEWART: Whew...!

POTTER: As long as they have no knowledge of Stephen's plans.

COLBERT: Well, that's easy. I don't know what the hell I'm doing.

(SOUNDBITE OF LAUGHTER)

COLBERT: OK, Jon, I guess you'd better leave for fear that we would coordinate with each other. I cannot let you know my plans.

STEWART: I don't want to know.

COLBERT: From now on, Jon, from now on, I will just have to talk about my plans on my television show and just take the risk that you might watch it.

GROSS: OK, so that was a scene from "The Colbert Report" with Jon Stewart and Stephen Colbert. That's an interesting point there, that, you know, you're not supposed to coordinate, but the PAC, the people who are running the PAC at the very least know what you're saying from your speeches. I mean, they know what your priorities are. They know what you want.

POTTER: Well, and in this election cycle, whether it's life imitating art or the other way around, but you had a situation in South Carolina where Newt Gingrich went out and said I can't coordinate with my superPAC, but I can speak to them publicly, and I am speaking to them right now, and I am asking them to take down certain ads or to at least correct the text of them.

So you have this example in real life of a candidate not communicating while communicating with a superPAC. I think what that Colbert episode points out, as you sort of walk through it, is that the rules that the Federal Election Commission has established for what constitutes coordination are just ridiculously narrow. In fact, two federal courts have told the Federal Election Commission that they are inadequate and ordered them to come up with new rules, but they haven't done so.

So for the moment the rules simply cover a candidate requesting or advising a PAC on the content of the message or where it is broadcast, as opposed to any of the other things that they might do, such as help with fundraising, share staff over time, something like that.

GROSS: Now, do you think that the Supreme Court anticipated any of the loopholes that we're seeing or even anticipated the existence of superPACs or anticipated that 501(c)(4)s and (c)(6)s would be used as ways of funneling opaque money into the theoretically transparent superPAC?

POTTER: Well, we actually know the answer to that, which is no, they didn't anticipate it. The reason we know it is that Justice Kennedy wrote in his majority opinion in Citizens United that today for the first time corporations will be able to give unlimited - spend unlimited amounts for independent expenditures and also that will be fully disclosed, so that shareholders will know where their money is going, and citizens will know who is spending on the ads they're seeing.

And then he goes on for several pages to talk about how important it is to have that sort of disclosure, how people need to know where the money is coming from so that it isn't just some unknown group giving, but they have a sense of what the interests are being the spending.

So he obviously thought that all of this spending was going to be disclosed. That's a little bit of a mystery because even in 2010, when that decision came down, there had been a fair amount of stories about spending by 501(c)(4)s and (c)(6)s and how that money wasn't disclosed. But they also hadn't had any real experience here.

They appear not to have been aware of the details of some of the FEC's regulations and enforcement actions, where the commission has not enforced the existing spending laws. And this is a case - that's an element of the case. It was not briefed to the Supreme Court.

You may recall that one of the things about Citizens United is that it was really on a rush schedule. It was a special case with its own day of oral argument, and there a lot of aspects that were not considered when the court was saying do corporations have a right as people, as persons, to make this independent expenditures. So the court assumed and stated that there would be full disclosure, when, in fact, that's not how the system is working. And I think that has to be a big surprise to Justice Kennedy who wrote that.

GROSS: Trevor Potter will be back in the second half of the show.

I'm Terry Gross and this is FRESH AIR.

(SOUNDBITE OF MUSIC)

GROSS: This is FRESH AIR. I'm Terry Gross, back with Trevor Potter, who you may know as Stephen Colbert's lawyer who helped Colbert set up his superPAC. Potter is an advocate of campaign finance restrictions - the kind of restrictions that were removed by the Supreme Court decision Citizens United, and subsequent lower court rulings that allowed corporations, unions and individuals to contribute unlimited amounts of money to committees that have become known as superPACs. Potter is the founding president of the Campaign Legal Center.

So let's talk about where the FEC, the Federal Election Commission, comes in. You used to serve on the commission. Part of its job is to hold candidates and PACs accountable. How good of a job has it been doing?

POTTER: Well, it's had its critics for years. One of the reasons I joined the commission is that as a lawyer in private practice I was frustrated by the commission. I thought it wasn't being very effective or very efficient. And I thought, well, this is an opportunity to improve the way the agency operates.

However, the criticism the commission is really changed in recent years - because people used to say the commission was ineffective or disorganized. Now the complaint is the commission is again, and again, and again deadlocked and unable to act at all.

There are three - effectively - Republicans, three Democrats on the commission. It takes four votes to do anything. And the three Republicans currently on the commission do not appear to believe that the commission should be a regulator of spending in elections. They are largely deregulatory in philosophy. They opposed or have criticized McCain-Feingold, the law that they're supposedly enforcing. And what we're seeing is a split on the commission between those commissioners who want to enforce the law and those who say it would be wrong to do so or that it would crimp speech.

The result of that is the commission is essentially now missing in action. It is not a watchdog because it's sitting there tied up, unable to move by this 3-3 deadlock in a whole range of important cases.

GROSS: So, if the FEC isn't serving as a watchdog is anybody else, or is any other group?

POTTER: No. I think that's our current problem. The commission should be doing that. That's the role that Congress has assigned it - and it is not. By the way, five of the six commissioners have - are serving expired terms. They shouldn't be there. But the president has to nominate successors and Congress has to confirm them. And that hasn't happened.

GROSS: You - the president hasn't even nominated people? Or that Congress just hasn't confirmed them?

POTTER: He nominated one person who then withdrew. They are no nominees now for any of the five seats that are supposed to be vacant. And therefore, Congress hasn't done anything because there's no one to do anything with.

The White House says privately that they haven't done anything because the Republicans' leadership on the Hill has not cooperated in helping them nominate names, identify Republicans who could serve. But either way, we have a deadlock on the commission, a deadlock in the nomination process between the White House and Congress, and a commission that is unable to function.

At the same time, the IRS, which could be dealing with these C4s and the disclosure issues we've been talking about - the political spending - has visibly done nothing. There is no sign that it is involved. In fact, they backed off recently when some of their agents - professional career people - were asking questions about C4s and their tax status and contributions to them, a number of Republican members of Congress objected and the IRS commissioner announced that it was all a mistake, they would no longer ask those questions of the C4s. So the IRS seems to be out of action, afraid, I think, of political controversy. That leaves the Justice Department.

There two problems with that. One is, of course, it's part of the Obama administration, so that anything it does runs the risk of being seen as political and anti-Republican. And the other problem is that its jurisdiction is only if there is an actual criminal act. The FEC is supposed to enforce the laws, unless the violation is so bad that it is what the legal standard is knowing and willful - that you knew you were breaking the law and you did it anyway. And in that case, the Justice Department has jurisdiction. So that's a much higher standard for them to get involved.

GROSS: So, let's get to like the bottom line of all this. Obviously, you think this kind of unlimited and often opaque campaign spending that is in a lot of ways actually kind of coordinated with the candidates, is not a good thing for the electoral process. That's your point of view, otherwise you wouldn't be opposed to this kind of unlimited spending. So make the case for us. What's the problem? I mean, why do you think that individuals and corporations shouldn't be allowed to give as many millions as they want?

POTTER: Well, first...

GROSS: Anonymously or by name.

POTTER: Right. I mean first my initial objection as a lawyer is that I don't think what we're seeing now is what the law provides. I don't think it's what the Supreme Court was doing in the Buckley case and the Citizens United case. They didn't expect this coordination and this lack of disclosure. It's not what Congress provided for in McCain-Feingold in the parts that are still good law and should be enforced. So I think as what sometimes gets called an officer of the court, a person who is supposed to, as a lawyer, focus on public policy, I have a problem with the fact that what we're seeing now is not what the law says we should be seeing.

Beyond that, when we look to the future and I think the only way we're going to get out of this mess is to have Congress again write a new law after this election cycle. The question of should you have unlimited, undisclosed spending in a democracy is the question on the table, because that's what we're heading to unless we change.

I don't think that is healthy. It seems to me that you do have a real problem here of corruption. It becomes effectively bribery if you can give an unlimited amount to a candidate for office, who then acts on your legislative agenda - either to vote for legislation you want or to sink legislation you don't want. If that is secret, so that that money is given and the donor or the spender knows it and the beneficiary knows it but public doesn't, I think you will see more mistrust of the political system.

We run a risk here of citizens feeling that their vote doesn't count because the members of Congress are going to do what the major donors tell them to do. We run a risk that people will think their small contribution doesn't count because candidates are going to get millions of dollars from people who can give that kind of money, not the average small donor. That, to me, is not how a democratic system works.

GROSS: Trevor Potter, thank you so much for talking with us.

POTTER: Thanks very much.

GROSS: Trevor Potter is the founding president of the Campaign Legal Center and is Stephen Colbert's lawyer, advising Colbert on his superPAC.

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