By Chris Cermak Feb 9, 2010, 2:28 GMT
Washington - President Barack Obama unleashed a media firestorm over proper manners last month when he slammed a US Supreme Court ruling that 'opens the floodgates' for companies - and possibly foreign governments - to influence US elections.
Obama raised the issue in his State of the Union speech before a joint session of Congress, with the top court's nine justices sitting just in front of him. Justice Samuel Alito, breaking the court's own tradition of stoicism, could be seen shaking his head and mumbling 'not true.'
The rare exchange between the two branches of government raised a serious question now brewing in Congress: could a foreign company, even a state-owned one, spend money to influence US elections?
Could Venezuelan President Hugo Chavez, for example, run advertisements through CITGO, a US oil firm bought in 1990 by state- owned Petroleos de Venezuela, backing a sympathetic US candidate?
The Obama administration fears that could now be legal, and fellow Democratic lawmakers are rushing to find a way to close the legal loophole before mid-term congressional elections in November.
'Subsidiaries of foreign corporations from across the globe have launched a lobbying campaign in Washington to protect their newfound power to influence American elections,' White House legal adviser Norm Eisen wrote last week in a blog posting.
The spat goes back to a January 21 Supreme Court decision, which found that free-speech protections in the US Constitution extend to companies and labour unions.
Companies are still barred from making donations directly to candidates. However, the ruling clears the way for firms to spend unlimited money on advertising to specifically endorse or oppose candidates for office.
The court's 5-4 ruling swept aside more than five decades of restrictions on corporate political advertising and unleashed a furious debate over free speech, the rights of businesses and the nature of US democracy.
Justice John Paul Stevens, writing on behalf of the four-justice minority, said the ruling 'would appear to afford the same protection to multinational corporations controlled by foreigners as to individual Americans.'
But the law here is 'murky,' as are any solutions that Congress might consider, according to Steven Spaulding of the watchdog group Common Cause. The opening could unleash a wave of fresh lawsuits and soon land back at the Supreme Court's doorstep, Spaulding said.
Some argue the fears are wildly exaggerated. Laws that ban foreign corporations or citizens from spending money on US elections remain in place. The Federal Election Commission has rules barring foreigners from making corporate decisions on election spending.
'Foreign participation in our elections is a crime, whether done directly or indirectly,' Steve Hoersting of the Centre for Competitive Politics, testified before Congress last week. 'Even the giving or receiving of foreign advice is a crime.'
But there is a loophole: the US subsidiary of a foreign company, if run by US citizens and using money generated within the United States, is free to spend as much as it wants on elections.
Such firms already spend fortunes influencing US policy decisions, even before the court's ruling. All companies were free to run issue- based ads: Germany's Siemens AG and Bayer Corp used US subsidiaries to lobby on health-care reform.
What's wrong with that? Often US subsidiaries are essentially US businesses, with as much of a stake in policy as a domestic company. Stripping them of that influence would impact US citizens - who are employees or shareholders - with as much of a right to vote as anyone else, said Hoersting.
Yet there is a danger that election spending could still be run by a parent company in a foreign land, if not directly then with 'a wink and a nod,' said Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington.
Sloan points to Venezuelan-owned CITGO as an example. Even if its executives are American, the US subsidiary could make campaign expenditures 'that are more in line with that foreign government's views.'
Sloan said she expects Congress to find a solution: if there is one thing lawmakers from both political parties could agree on, it would be preventing foreign influence in US elections.
Yet the solutions are unclear. In an age of multinational corporations, the line is blurred between a foreign-controlled company and US-based firms with operations abroad.
Congress is considering barring corporations with as little as 5- per-cent foreign shareholdings from spending money on US elections. Yet that could impact many US firms that have foreign investors, and may therefore run afoul of the US Constitution.
Another option is boosting disclosure requirements, which would at least make clear to voters which company paid for the television advertisement. But none of the answers are straightforward.
'There needs to be a lot of congressional fact finding,' Spaulding said. 'Any solution that Congress works on is going to potentially complicate matters.'
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