Experts believe a foreign contributions case is ripe for a high-court ruling. | Jay Wescott/POLITICO | JAY WESTCOTT/POLITICO Lawsuit revives fears of foreign cash

Raising the specter of “foreign money” boosting your opponent’s campaign has become a bipartisan tactic in the past two election cycles.

In 2008, conservatives alleged that Barack Obama’s presidential campaign was fueled in part by illegal cash from Iran and other hostile lands. Two years later, Obama and his allies ominously suggested that secret streams of foreign cash – this time from corporations – were boosting Republicans.


Neither side was able to offer much compelling evidence to support their arguments, and both endured accusations of stoking jingoistic sentiment for partisan advantage. So now an unlikely team of foreigners with no apparent ties to Washington’s political class is trying to do the unthinkable – make foreign campaign contributions legal.

Their lawsuit against the Federal Election Commission, which seeks to overturn a long-standing ban on foreign nationals contributing to campaigns, airing ads and making other expenditures, will be heard Thursday by a special panel of federal district court judges created specifically to fast-track campaign finance challenges straight to the Supreme Court. Since election law experts believe such a case is ripe for a high court ruling, it could reignite another round of innuendos and accusations for the third consecutive election cycle.

But the lawsuit also has created a dilemma for Washington partisans who in recent years have clashed repeatedly over a series of campaign finance legal fights that have gone a long way towards relaxing rules governing the political playing field.

While conservatives have worked hard to loosen restrictions on political giving and spending, they also have supported tough immigration restrictions. And, while liberals are more likely to support expansions of citizenship benefits, they have opposed efforts to weaken campaign finance regulations, which they contend could allow big moneyed conservative interests – including foreign governments and companies – to pour money into campaigns.

“This cuts across the ideological or partisan divide, which I think is probably why people don’t have talking points at the ready,” said Allison Hayward, an official with the Center for Competitive Politics, a leading opponent of campaign regulations that – like many of the main combatants in the campaign finance battles – is sitting out the case, at least for now.

But the lawsuit has nonetheless generated some of the same rhetoric that partisans used to whip up their respective bases in 2008 and 2010.

The FEC’s lawyers, for instance, predicted in a filing defending the contribution ban, that its reversal “could open the door to millions — or even billions — of dollars of campaign advocacy by foreign corporations,” as well as “attack ads against American candidates” financed by “an individual paid by a foreign government to conduct espionage on the United States and harm American interests.”

And the White House-allied ThinkProgress blog ominously suggested that liberal bogeymen such as Koch Industries and the U.S. Chamber of Commerce may be secretly funding the suit to further deregulate campaign rules and pave the way for foreign corporations to try to buy U.S. elections.

Those claims are “ludicrous,” said Yaakov Roth, one of the two young lawyers at the elite firm of Jones Day trying the case on a pro-bono basis. Roth – a Canadian who graduated from Harvard Law School and clerked for conservative Supreme Court Justice Antonin Scalia, first became interested in the foreign contribution ban when he learned it barred him from making political donations. He contends it stems partly “from hostility and suspicion about the views of aliens. And that’s directly contrary to what the First Amendment is about.”

Roth and Warren Postman – an American who graduated from Harvard Law with Roth and clerked at the same time for then-Justice David Souter, a liberal – brought the lawsuit on behalf of two young foreigners living, working and paying taxes in New York City as legally admitted temporary residents – Benjamin Bluman, a Canadian lawyer who went to law school with Roth and Postman, and Asenath Steiman, a doctor who is a dual Canadian-Israeli citizen doing her medical residency in New York.

According to their lawsuit, Bluman supports same-sex marriage, net neutrality and environmental protection, and would like to contribute $100 a piece to the campaigns of Democrats he believes will advance those positions, including Obama and Rep. Jay Inslee (D-Wash.). And Steiman is a free-market conservative and opponent of Obama’s healthcare overhaul who wants to contribute $100 each to Sen. Tom Coburn (R-Okla.), the National Republican Senatorial Committee, the Club for Growth and “her preferred candidate for the Republican (presidential) nomination.”

Permanent residents who hold green cards are allowed to contribute to campaigns and make expenditures supporting them. But Bluman and Steiman are temporary residents, and contend in their suit that the foreign contribution ban’s threat of civil or criminal penalties is keeping them “from expressing their political views in any of (those) ways” and represents an “arbitrary and irrational” violation of their First Amendment rights.

The FEC is concocting “nightmare scenarios” to demonstrate potential harms from the case, Roth told POLITICO. He predicted that the actual impact if his side wins would be felt by only a relatively small group of individuals – not corporations – who “if you look at the congressional record, were probably never intended to be covered,” who are ideologically diverse and unlikely to sway the balance of power one way or the other if they’re allowed to contribute.

“The notion that this group is going to take over the political discourse is preposterous,” he said. “They’re largely here on the types of work visas that you don’t need if you’re already a billionaire.”

Washington’s close-knit campaign finance community is closely watching the case for signs the Supreme Court will accept it, and, if it does, whether it will vies the case as raising a narrow issue affecting only the small class Roth cites, or use the suit as a vehicle to address larger legal questions about foreign election spending.

“There is at least a potential danger of changing the rules of the game here,” said Fred Wertheimer, a leading advocate for stricter political money rules, who has stayed on the sidelines in Roth’s case, Bluman vs. FEC.

Wertheimer’s non-profit group Democracy 21 has warned that foreign interests could use their control over American corporations to influence election spending as a result of the Supreme Court’s controversial 2010 decision in a case called Citizens United vs. FEC, which started as a narrow dispute but was used by the majority to strike down decades of law barring corporations from spending money to support or oppose candidates.

In its 5-4 ruling, the court specifically left unresolved the issue of foreign spending, asserting “We need not reach the question whether the Government has a compelling interest in preventing foreign individuals or associations from influencing our Nation’s political process.”

It is a case, Wertheimer said, that “could put in play the whole question of the restrictions on foreign money being used in campaigns in this country, but I would expect that opening the door to increased money from foreign interests of any kind would cause a great deal of concern in the country.”

Efforts to bar foreign campaign contributions date from the mid-1960s, when then-Sen. William Fulbright (D-Ark.) sponsored a bill barring any “agent of a foreign principal” from making or soliciting contributions. The bill stemmed from hearings held by Fulbright’s Foreign Relations Committee to investigate reports that representatives of the Philippine sugar industry and other foreigners with interests in congressional policymaking were steering cash through their American agents to members of Congress.

In 1974, Congress amended the Federal Election Campaign Act to bar direct contributions from foreign nationals after then-President Richard Nixon was alleged to have accepted campaign cash from Canada, Uruguay and Greece, including a $25,000 contribution made by a Greek industrialist whose firm had recently received a $4.7 million contract to supply fuel for the U.S. Sixth Fleet in Piraeus, Greece.

The foreign national ban was strengthened further in the 2002 campaign finance overhaul known as McCain-Feingold in response to reports that foreign businessmen and government agents used huge so-called soft money donations to both national parties to curry favor from, or gain access to, top officials.

More than 20 people eventually were convicted of funneling foreign funds, mostly from Asian countries, into U.S. elections, including Johnny Chung, a Taiwan-born businessman with ties to Chinese military intelligence, who donated hundreds of thousands of dollars to the Democratic Party (all of which was eventually returned) and, arguably as a result, scored dozens of visits to the Clinton White House.

“The scandals of the past suggest what could recur without limit if the statute were declared unconstitutional as to all foreign nationals who temporarily work and reside in the United States, as plaintiffs request,” argue the FEC’s lawyers. Congress has rightly concluded, they contend, that “prohibiting foreigners living abroad or only temporarily residing here from financial participation in American elections was necessary to protect the national security of the United States.”

But Democrats and advocates for stricter campaign rules argue that the Supreme Court set back this cause in its Citizens United decision, which seemed to allow U.S. subsidiaries of foreign corporations to pay for campaign ads.

In his State of the Union address, only days after the ruling, Obama chastised the Supreme Court justices, some of whom were in attendance, predicting it would “open the floodgates for special interests – including foreign corporations – to spend without limit in our elections. I don’t think American elections should be bankrolled by America’s most powerful interests, or worse, by foreign entities.”

But after Obama’s political guru David Axelrod was asked in a television interview to provide evidence for a Democratic claim that the U.S. Chamber of Commerce was using foreign money to bankroll campaign attack ads, his response was widely panned.

“Do you have any evidence it’s not, Bob?” Axelrod asked CBS’s Bob Schieffer, who responded “Is that the best you can do?”

In fact, Obama’s campaign and countless others have accepted contributions from foreign nationals and then refunded them when they were discovered to be from foreigners. Obama’s campaign continued to process such refunds well into his administration, sending back cash to donors with foreign addresses as well as foreign nationals living in the United States, such as the president’s Kenyan aunt, Zeituni Onyango, who had lived illegally in the U.S. for years and faced deportation proceedings before being granted asylum last year.

Yet, in a report suggesting that Obama’s campaign may be accepting millions in illegal foreign contributions, the conservative Newsmax got a little carried away with the foreign money meme, highlighting FEC data showing 520 contributions to Obama listing “IR” in the state field. That, Newsmax pointed out, is “often an abbreviation for Iran.”

The claim was later removed and replaced with a “clarification” in which an FEC spokesman explained that “IR” generally is an abbreviation for “information requested,” not Iran.