Letters from the Public - 1 of 2 — San Jose City Council, March 22, 2022

P.O. Box 5374San Jose, CA 95150www.lwvsjsc.orgNovember 15, 2021 To: Mayor Liccardo, Vice Mayor Jones, and Councilmembers Jimenez, Peralez, Cohen, Carrasco,Davis, Esparza, Arenas, Foley, and Mahan cc: San Jose City Clerk
Subject: Options for Campaign Finance RegulationsRelated to Public Financing, Foreign Influencein Elections, and Other Limits on Corporations and Other EntitiesItem: 3.6,November 16 Council Agenda Dear Mayor Liccardo and City Councilmembers:

The League of Women Voters of San Jose/Santa Clara urges you to support the recommendations inthe memo authored by Councilmembers Cohen, Jimenez, and Foley. We thank the City Attorney for acomprehensive review of options for local campaign finance reform.

We firmly believe that elections, and our political system overall, should prioritize ordinary voters, notbig money or special interests. Representative democracy is damaged when there are secret donors,Super PACs, and an emphasis on raising large amounts of campaign cash. Our campaign financesystem should maximize people’s participation in the political process, promote transparency aboutthe sources of money, combat corruption, and level the playing field so the competition is moreequitable.

Foreign Influence in Elections
We support the definition of foreign-influenced corporations as stated in the Cohen, Jimenez,and Foley memorandumto help close a loophole whichcould allow citizens of other countries toinfluence elections by investing in US companies. We advocate for the lower threshold as an effectiveway to reduce the impact of large contributions to independent PACs and to accomplish the goal ofpolitical equality for all citizens. The Supreme Court ruling in Citizens United v. F.E.C. allowedcorporations to spend freely in politics equating corporations to citizens with First Amendment rights.Seattle adopted an ordinance in reaction to a $1.5 million contribution by Amazon to a local PAC foruse in Seattle Council elections in 2019. While we do not presume to offer legal advice, we note thezero standard alluded to by Justice Brett Kavanaugh while a judge on the DC Court of Appeals. Hewrote in Bluman v. F.E.C., “Foreign citizens do not have a constitutional right to participate in, and thusmay be excluded from, activities of democratic self-government…” Public Financing Program
The League supports public financing of elections in which candidates must abide by reasonablespending limits and enhanced enforcement of campaign finance laws. TheWeThe People Act (HR 1)was strongly supported by the League. If passed, it would have established public financing poweredby small donations of $200 or less with a 6:1 match. Council should move expeditiously to bringforward a public campaign financing program. We look forward to reviewing the ordinance in depthand advocate in advance for extensive public outreach and for the new program to be fully funded.

The City of St. Petersburg, FL made history on October 6, 2017 by becoming the first municipality afterthe Citizens United decision to abolish Super PACs and limit foreign corporate spending in local

elections. The League of Women Voters of the St. Petersburg Area worked with a coalition for twoyears to encourage the City Council to pass the ordinance. Its president Dr. Julie Kessel stated,“Webelieve that big money in politics is a root cause of a compromised democracy, every bit as corrosiveas gerrymandering, governmental abuse of power and voter suppression. When money is asimportant to a candidate or an elected official as a citizen’s vote, the sovereign power of the people toelect officials to represent their interests has been corrupted.” We request that you vote YES to approve the recommendations in the Cohen, Jimenez andFoley memo, and continue to research options to limit the influence of money in politics.

Regards,
Carol M. Watts
Carol WattsPresident, League of Women Voters of San Jose/Santa [email protected] Dawson, Director,[email protected] Alexander, Director, [email protected]

2 I. General and legal background
Under well-established federal law, recently upheld by the U.S. Supreme Court, it is illegal for a foreign government, business, or individual to spend any amount of money at all to influence federal, state, or local elections.2 This existing provision does not turn on whether the foreign national comes from a country that is friend or foe, nor the amount of money involved. Rather, as then-Judge (now Justice) Brett Kavanaugh wrote in the seminal decision upholding this law:

It is fundamental to the definition of our national political community that foreign citizens do not have a constitutional right to participate in, and thus may be excluded from, activities of democratic self-government. It follows, therefore, that the United States has a compelling interest for purposes of First Amendment analysis in limiting the participation of foreign citizens in activities of American democratic self-government, and in thereby preventing foreign influence over the U.S. political process.3

Federal law, however, leaves a gap that has been opened even further since the U.S.

Supreme Court’s 2010 Citizens United decision invalidated laws that banned corporate political spending.4 While the existing federal statute prohibits a foreign- registered corporation from spending money on federal, state, or local elections, federal law does not address the issue of political spending by U.S. corporations that are partially owned by foreign investors. That is the topic here.

The Citizens United decision three times described the corporations to which its decision applied as “associations of citizens.”5 On the topic of corporations partly owned by foreign investors, the Supreme Court simply noted “[w]e need not reach the question” because the law before it applied to all corporations.6 As a result, federal law currently does not prevent a corporation that is partly owned by foreign investors from making contributions to super PACs, independent expenditures, expenditures on ballot measure campaigns, or even (in states where it is otherwise legal) contributing directly to candidates.

2 52 U.S.C. § 30121.
3 Bluman v. Federal Election Comm’n, 800 F. Supp. 2d 281, 288 (D.D.C. 2011), aff’d, 132 S. Ct. 1087 (2012); see also United States v. Singh, 979 F.3d 697, 710-11 (9th Cir. 2020), cert. denied sub nom. Matsura v. United States, No. 20-1167, 2021 WL 2044557 (May 24, 2021).
4 Citizens United v. Federal Election Comm’n, 558 U.S. 310 (2010). 5 Citizens United, 558 U.S. at 349, 354, 356. Many scholars have criticized the Court’s understanding of the corporate entity as an association. See, e.g., Jonathan Macey & Leo E. Strine, Jr., Citizens United as Bad Corporate Law, 2019 Wis. L.

Rev. 451 (2019). However misguided, this account reflects the reasoning that the Court has adopted in extending constitutional rights to corporations. 6 Id. at 362.
3 Since 2010, neither Congress nor the beleaguered Federal Election Commission have done anything. However, as Professor Laurence Tribe of Harvard Law School and Federal Election Commissioner Ellen Weintraub have written, a city such as San Jose does not need to wait for federal action to protect its state and local elections from foreign influence. The goal of this bill is to plug the loophole allowing corporations partly or wholly owned by foreign interests to influence elections.

This threat is real. For example, Uber has shown an increasing appetite for political spending in a variety of contexts. In California, the company spent some $58 million on Proposition 22, which successfully overturned worker protections for Uber drivers.7 The company is currently preparing to spend millions on a similar ballot measure in Massachusetts. Although Uber started in California, the Saudi government made an enormous (and critical) early investment, and even now owns several percent of the company’s stock, long after the company has gone public.8 Fellow Proposition 22 major spenders, such as DoorDash and Lyft, are also substantially owned by foreign investors from countries including the United Kingdom, Japan, Malaysia, China, and elsewhere.

Similarly, in October 2016, Airbnb responded to the New York Legislature’s growing interest in regulating the homestay industry by arming a super PAC with $10 million to influence New York’s legislative races.9 Airbnb received crucial early funding from, and was at that time partly owned by, Moscow-based (and Kremlin-

7 Ryan Menezes et al., “Billions have been spent on California’s ballot measure battles. But this year is unlike any other,” L.A. Times, Nov. 13, 2020, https://lat.ms/3gRct8d; Glenn Blain, “Uber spent more than $1.2M on efforts to influence lawmakers in first half of 2017,” N.Y. Daily News, Aug. 13, 2017, http://bit.ly/39HJLRf; Karen Weise, “This is How Uber Takes Over a City,” Bloomberg, June 23, 2015, http://bloom.bg/1Ln2MaN.
8 Eric Newcomer, “The Inside Story of How Uber Got Into Business with the Saudi Arabian Government,” Nov. 3, 2018, https://bloom.bg/2SWWDgv. As of this writing, the Public Investment Fund of Saudi Arabia owns 3.9% of Uber stock. See Uber, https://www.cnbc.com/quotes/UBER?tab=ownership (last visited Mar. 8, 2021). 9 Kenneth Lovett, Airbnb to spend $10M on Super PAC to fund pre-Election day ads, N.Y. Daily News, Oct. 11, 2016, http://nydn.us/2EF5Lgi. 4 linked) DST Global.10 Investment by foreign sovereign wealth funds, like Saudi Arabia’s, is expected to increase exponentially as oil-rich Middle Eastern states seek to diversify their investment portfolios.11

In the New York Times, Federal Election Commissioner Ellen Weintraub explained the problem, and pointed to a solution: “Throughout Citizens United, the court described corporations as ‘associations of citizens,” she wrote. “States can require entities accepting political contributions from corporations in state and local races to make sure that those corporations are indeed associations of American citizens— and enforce the ban on foreign political spending against those that are not.”12

As Weintraub noted, even partial foreign ownership of corporations calls into question whether Citizens United, which three times described corporations as “associations of citizens” and which expressly reserved questions related to foreign shareholders,13 would apply. Indeed, after deciding Citizens United, the Supreme Court in Bluman v. Federal Election Commission specifically upheld the federal ban on foreign nationals spending their own money in U.S. elections.14 In light of the Court’s post-Citizens United decision in Bluman, a restriction on political spending by corporations with foreign ownership at levels potentially capable of influencing

10 See Jon Swaine & Luke Harding, Russia funded Facebook and Twitter investments through Kushner investor, The Guardian, Nov. 5, 2017, https://bit.ly/3ppmIF5; Dan Primack, Yuri Milner adds $1.7 billion to his VC war chest, FORTUNE, Aug. 3, 2015, https://bit.ly/3jnhNkb (DST Global is Moscow based); Scott Austin, Airbnb: From Y Combinator to $112M Funding in Three Years, The Wall Street Journal, July 25, 2011, https://on.wsj.com/2STNYvj. Reportedly, $40 million of the $112 million that Airbnb raised in its 2011 funding round came from DST Global. See Alexia Tsotsis, Airbnb Bags $112 Million In Series B From Andreessen, DST And General Catalyst, TechCrunch, July 24, 2011, http://tcrn.ch/2EF6IF2.
11 According to one report, Saudi Arabia’s Public Investment Fund is expected to deploy $170 billion in investments over the next few years. Sarah Algethami, What’s Next for Saudi Arabia’s Sovereign Wealth Fund, Bloomberg BusinessWeek, Oct. 21, 2018, https://bloom.bg/2sQNJGF.
12 Ellen Weintraub, Taking on Citizens United, N.Y. Times, Mar. 30, 2016, http://nyti.ms/1SwK4gK.
13 Citizens United, 558 U.S. at 349, 354, 356, 362.
14 Bluman v. Federal Election Comm’n, 800 F. Supp. 2d 281, 288 (D.D.C. 2011), aff’d, 132 S. Ct. 1087 (2012). In 2019, the U.S. Court of Appeals for the Ninth Circuit upheld federal statute’s foreign national political spending ban as applied to local elections. Singh, 924 F.3d at 1042.
5 corporate governance can be upheld based on Bluman and as an exception to Citizens United.15
II. Foreign influence and ownership thresholds
How much foreign investment renders a corporation’s political spending problematic for protection of democratic self-government? Arguably, any foreign ownership in companies that spend money to influence our elections is a threat to democratic self-government. In the most commonly accepted understanding, corporate shareholders are “the firm’s residual claimants.”16 As explained Put by the California Court of Appeal, “it is the shareholders who own a corporation, which is managed by the directors. In an economic sense, when a corporation is solvent, it is the shareholders who are the residual claimants of the corporation’s assets . . . .”17

In practice, shareholders rarely have the opportunity to actually assert these residual claims. Yet there is a sense in which investors and corporate managers alike understand that the corporation’s assets “belong to” the shareholders.

15 A similar analysis would also apply to First Nat. Bank of Boston v. Bellotti, 435 U.S. 765 (1978), which addressed limits on corporations spending in ballot question elections.
16 Henry Hansmann & Reiner Kraakman, The End of History for Corporate Law, 89 Geo. L.J. 439, 449 (2001); see also Stephen M. Bainbridge, Director Primacy: The Means and Ends of Corporate Governance, 97 Nw. U.L. Rev. 547, 565 (2003) (“[M]ost theories of the firm agree, shareholders own the residual claim on the corporation’s assets and earnings.”); Frank H. Easterbrook & Daniel R. Fischel, THE ECONOMIC STRUCTURE OF CORPORATE LAW 36-39 (1991) (arguing that shareholders are entitled to whatever assets remain after the company has met its obligations, and thus are the ultimate “residual claimant[s]” on a company’s assets). While different theories are sometimes offered in academic literature, this is the standard economic model of shareholders of a firm, and it has been widely adopted in judicial decisions. See, e.g., RTP LLC v. ORIX Real Est. Cap., Inc., 827 F.3d 689, 692 (7th Cir. 2016) (“Stockholders and owners of other equity interests have residual claims in a business; they get whatever is left after everyone else is paid.”); In re Franchise Servs. of N. Am., Inc., 891 F.3d 198, 208 n.7 (5th Cir. 2018), as revised (June 14, 2018) (“Shareholders are the residual claimants of the estate,” and are entitled to whatever remains after satisfying creditors); In re Cent. Ill. Energy Coop., 561 B.R. 699, 708 (Bankr. C.D. Ill. 2016) (noting that directors have fiduciary duty to shareholders rather than creditors precisely because “shareholders hav[e] the residual claim to the corporation’s equity value”).
17 Berg & Berg Enter., LLC v. Boyle, 100 Cal. Rptr. 3d 875, 892, 178 Cal. App. 4th 1020, 1039 (Cal. App. 2009); accord In re Bear Stearns Litig., 23 Misc. 3d 447, 474, 2008 WL 5220514 (N.Y. Sup. 2008) (shareholders are “residual beneficiaries of any increase in the company’s value” when it is solvent) (cleaned up). 6 That means that corporate political spending is drawn from shareholders’ money.

As Justice Stevens noted in the Citizens United decision, “When corporations use general treasury funds to praise or attack a particular candidate for office, it is the shareholders, as the residual claimants, who are effectively footing the bill.”18 This point has often been raised from the perspective of shareholders who may not want corporate managers spending “their” money on various political causes.19 But here, we confront the mirror issue: corporate managers may spend money to influence U.S. elections out of funds that partly “belong to” foreign investors.

On this understanding, any amount of foreign investment in a corporation means that management’s political expenditures come from a pool of partly foreign money.

Seen that way, a corporation spending money in U.S. elections no longer qualifies as an “association of citizens” if any of the money in its coffers “belongs to” foreign investors—in other words, when it has any foreign shareholders at all.20 Indeed, polling indicates that 73% of Americans—including majorities of both Democrats and Republicans—would support banning corporate political spending by corporations with any foreign ownership.21

But we need not reach that far. At ownership thresholds well above zero, an investor may exert influence—explicit or implicit—over corporate decision-making.

Even if a company was founded in the United States and keeps its main offices here, companies are responsive to their shareholders, and significant foreign ownership affects corporate decision-making. As the former CEO of U.S.-based ExxonMobil Corp. stated, “I’m not a U.S. company and I don’t make decisions based on what’s good for the U.S.”22 There is no evidence that political spending is magically exempt from this general rule.

To someone not deeply versed in corporate governance, it may seem that the right threshold for the point at which a foreign investor (or any investor) can exert influence is just over 50%. That is, after all, the threshold for winning a race

18 Citizens United v. Federal Election Comm’n, 558 U.S. 310, 475 (2010) (Stevens, J., dissenting).
19 See, e.g., Lucian A. Bebchuk & Robert J. Jackson, Jr., Corporate Political Speech:

Who Decides?, 124 Harv. L. Rev. 83, 85 (2010).
20 By analogy, in the class-action context, some courts hold that a class cannot be certified if even a single member cannot bring the claim. See Denney v. Deutsche Bank AG, 443 F.3d 253, 264 (2d Cir. 2006) (“no class may be certified that contains members lacking Article III standing”).
21 Ctr. for Am. Progress Action Fund, NEW POLL: Bipartisan Support for Banning Corporate Spending in Elections by Foreign-Influenced U.S. Companies, https://bit.ly/3CrcWFV.
22 Michael Sozan, Ctr. for Am. Progress, Ending Foreign-Influenced Corporate Spending in U.S. Elections (Nov. 21, 2019), at 19, https://ampr.gs/2QIiNQT. 7 between two candidates, or controlling a two-party legislature. But corporations are not legislatures. A better analogy might be a chamber with many millions of uncoordinated potential voters, most of whom rarely vote and who may be, for one reason or another, effectively prevented from voting. In that type of environment, a disciplined owner (or ownership bloc) of 1% can be tremendously influential.

As explained in more detail in written testimony submitted by Professor John Coates of Harvard Law School in support of similar legislation elsewhere, and in a recent report by the Center for American Progress,23 the thresholds in this bill—1% of stock owned by a single foreign investor, or 5% owned by multiple foreign investors—reflect levels of ownership that are widely agreed (including by entities such as the Business Roundtable) to be high enough to influence corporate governance. Corporate governance law gives substantial formal power to minority shareholders at these levels, and this spills out into even greater unofficial influence. For this reason, since the passage of Seattle’s 2020 law, newer bills— currently pending in states such as New York, Massachusetts, and Minnesota, and in the U.S. Congress—generally follow the Seattle model.

Federal securities law provides powerful tools of corporate influence to investors at these levels. Seattle’s 1% threshold was grounded in a rule of the U.S. Securities and Exchange Commission regarding eligibility of shareholders to submit proposals for a shareholder vote—a threshold that the SEC ultimately concluded was, if anything, too high.24 For a large multinational corporation, an investor that owns 1% of shares might well be the largest single stockholder; it would generally land

23 See Michael Sozan, Ctr. for American Progress, Ending Foreign-Influenced Corporate Spending in U.S. Elections (Nov. 21, 2019), https://ampr.gs/2QIiNQT. 24 Until November 4, 2020, owning one percent of a company’s shares allows an owner to submit shareholder proposals, which creates substantial leverage. See Procedural Requirements and Resubmission Thresholds Under Exchange Act Rule 14a-8, 85 Fed. Reg. 70,240, 70,241 (Nov. 4, 2020). The SEC proposed to eliminate this threshold, and rely solely on absolute-dollar ownership thresholds that correspond to far less than 1% of stock value, because it is fairly uncommon for even a major, active institutional investor to own 1% of the stock of a publicly-traded company. See SEC, Procedural Requirements and Resubmission Thresholds under Exchange Act Rule 14a-8, 84 Fed. Reg. 66,458 (Dec. 4, 2019) (proposed rule). In other words, recent advances in corporate governance law suggest that the 1% threshold may, if anything, be higher than appropriate to capture investor influence. That said, 1% remains appropriate for this purpose. 8 among the top ten. Conversely, as the SEC has acknowledged, many of the investors most active in influencing corporate governance own well below 1% of equity.25

Of course, this does not mean that every investor who owns 1% of shares will always influence corporate governance, but rather that the business community generally recognizes that this level of ownership presents that opportunity, and—for a foreign investor in the context of corporate political spending—that risk.

In other cases, no single foreign investor holds 1% or more of corporate equity, but multiple foreign investors own a substantial aggregate stake. To pick one example, at the moment of this writing (it may change later, of course, due to market trades), Amazon does not have any 1% foreign investors, but at least 8.3% of its equity (and possibly much more) is owned by foreign investors.26 While presumably foreign investors as a class are not all perfectly aligned on all issues, they can be assumed to share certain common interests and positions that may, in some cases, differ from those of U.S. shareholders—certainly when it comes to matters of San Jose public policy. As the Center for American Progress has noted:

Foreign interests can easily diverge from U.S. interests, for example, in the areas of tax, trade, investment, and labor law. Corporate directors and managers view themselves as accountable to their shareholders, including foreign shareholders. As the former CEO of U.S.-based Exxon Mobil Corp. starkly stated, “I’m not a U.S. company and I don’t make decisions based on what’s good for the U.S.”27

Neither corporate law nor empirical research provide a bright-line threshold at which this type of aggregate foreign interest begins to affect corporate decision- making, but anecdotally it appears that CEOs do take note of this aggregate foreign

25 See id. at 66,646 & n.58 (noting that “[t]he vast majority of investors that submit shareholder proposals do not meet a 1 percent ownership threshold,” including major institutional investors such as California and New York public employee pension funds).
26 See Amazon.com, CNBC, https://cnb.cx/2JShvAt (visited Oct. 20, 2021) (ownership tab). As of the date of writing, at least one foreign investor (Norges Bank) holds

0.9% but no foreign investor is known to hold 1.0% or more. Aggregate ownership data, however, shows 7.4% in Europe (including Russia) and 0.9% in Asia. In fact, the total aggregate foreign ownership could be much higher, as the summary data show only 57.4% of shares owned in North America. CNBC obtains its geographic ownership concentration data from Thomson Reuters, which in turn obtains it from Refinitiv, a provider of financial markets data that has access to some non-public sources.
27 Michael Sozan, Ctr. for Am. Progress, Ending Foreign-Influenced Corporate Spending in U.S. Elections (Nov. 21, 2019), at 19, https://ampr.gs/2QIiNQT. 9 ownership and that at a certain point it affects their decision-making. The Seattle model legislation selects a 5% aggregate foreign ownership threshold. Under federal securities law, 5% is the threshold that Congress has already chosen as the level at which a single investor or group of investors working together can have an influence so significant that the law requires disclosure not only of the stake, but also the residence and citizenship of the investors, the source of the funds, and even in some cases information about the investors’ associates.28 In this case, while it may not be appropriate to treat unrelated foreign investors as a single bloc for all purposes, it is appropriate to do so in the context of analyzing how corporate management conceive decision-making regarding political spending in U.S. elections.

Obviously, some companies do not have substantial foreign ownership. Even of those that do, many probably do not spend corporate money on San Jose elections.

Such companies either would not be covered at all (if they did not meet the threshold) or would not experience any practical impact (if they do not spend corporate money for political purposes).

The point here is not that FICs do not have connections to San Jose, nor that foreign investment in local companies should be discouraged, nor that the foreign owners of these companies are necessarily known to be exerting influence over the companies’ decisions about corporate political spending, nor that they would do so nefariously to undermine democratic elections. Rather, the point is simply that Citizens United accorded corporations the right to spend money in our elections on the theory that corporations are “associations of citizens.” But for companies of this type, that theory does not apply. Enough shares are owned or controlled by a foreign owner that the corporation’s spending is at least, in part, drawn from money that “belongs to” that foreign entity—and furthermore, the entity could exert influence over how the corporation spends money from the corporate treasury to influence candidate elections.

Finally, to reiterate, the bill does not limit in any way how employees, executives, or shareholders of these companies may spend their own money—just how the foreign- influenced business entities’ potentially vast corporate treasuries may be deployed to influence San Jose electoral democracy.

III. Frequently asked questions
Does this bill affect individual immigrants?
No. The bill regulates corporate political spending by business entities.

28 15 U.S.C. §§ 78m(d)(1)-(3).
10 What types of companies are covered?
The bill uses the term “corporation” for convenience, but defines it broadly to include a for-profit corporation, company, limited liability company, limited partnership, business trust, business association, or other similar for-profit business entity.

Has the policy been endorsed by leading scholars and experts? The model legislation has been endorsed by Professor Laurence Tribe of Harvard Law School and Professor Adam Winkler of the University of California Law School, experts in constitutional law; Professor John C. Coates IV of Harvard Law School (also a former General Counsel and Director of the Division of Corporate Finance at the U.S. Securities Exchange Commission) and Professor Brian Quinn of Boston College School of Law, experts in corporate law and governance; and Federal Election Commissioner Ellen Weintraub, expert in election law.29

Does the bill have bipartisan support?
A 2019 national poll of 2,633 voters showed that 73%—including majorities of both Democrats and Republicans—would support banning corporate political spending by corporations with any foreign ownership.30 Even after polled individuals were deliberately exposed to partisan framing and opposition messages, voters continued to support the policy 58-24 overall; Trump voters supported it 52-30 and Clinton voters supported it 68-20.

Does the bill prevent corruption?
The Supreme Court currently recognizes two distinct public interests in regulating the amounts and sources of money in politics: (1) preventing corruption or the appearance of corruption, and (2) protecting democratic self-government against foreign influence. This bill focuses on the latter.

As Judge Kavanaugh explained in Bluman, the public “has a compelling interest for purposes of First Amendment analysis in limiting the participation of foreign citizens in activities of American democratic self-government, and in thereby

29 See Letter from Prof. Laurence H. Tribe to Mass. Legis. Joint Comm. on Election Laws, Sept. 15, 2021, https://bit.ly/3E0CkTs; Letter from Fed. Election Comm’r Ellen L. Weintraub to Mass. Legis. Joint Comm. on Election Laws, Sept. 17, 2021, https://bit.ly/3EenbhN; Letter from Prof. John C. Coates IV to Seattle City Council, Jan. 3, 2020, https://bit.ly/3jjvfFP. Professors Winkler and Quinn have authorized us to convey their endorsement for the policy but have not reviewed specific bill language in this jurisdiction.
30 Ctr. for Am. Progress Action Fund, NEW POLL: Bipartisan Support for Banning Corporate Spending in Elections by Foreign-Influenced U.S. Companies, https://bit.ly/3CrcWFV.
11 preventing foreign influence over the U.S. political process.”31 The U.S. Court of Appeals for the Ninth Circuit has confirmed that this interest applies to state elections as well.32

Is the bill “narrowly tailored” to protecting democratic self-government? Yes. The public interest in protecting democratic self-government from foreign influence is particularly strong, and supports a wide range of restrictions ranging from investment in communications facilities to municipal public employment.33 In the specific context of political spending, the facts of the Bluman decision are worth noting. The lead plaintiff wanted to contribute to three candidates (subject to dollar limits that in theory minimize the risk of corruption) and “to print flyers . . . and to distribute them in Central Park.”34 All these were banned by the federal statute, and the court upheld the ban on all of them.

In other words, in a context where the risk of corruption was essentially nil, the court found that the interest in protecting democratic self-government from foreign influence is so strong that a law that prohibits printing flyers and posting them in a park is narrowly tailored to that interest. Given that, a ban on corporate political spending—with the potential for far greater influence on elections than one individual printing flyers—by corporations with substantial foreign ownership, at levels known from corporate governance literature to bring the potential for investor influence, is also narrowly tailored to the same interest.

Does this bill go further than the federal statute at issue in Bluman? Yes; that is the point. The federal statute prevents foreign entities from spending money directly in federal, state, or local elections.35 The proposed bill applies to companies where those same foreign entities own substantial investments.

Has any court decided how much foreign ownership of a corporation renders a corporation “foreign” for purposes of First Amendment analysis? No. That issue was not before the Supreme Court in Citizens United, and the Court expressly decided not to decide that question.36 The majority opinion did make a passing reference to corporations “funded predominately by foreign shareholders” as

31 Bluman v. Fed. Election Comm’n, 800 F. Supp. 2d 281, 288 (D.D.C. 2011), aff’d, 565 U.S. 1104 (2012).
32 United States v. Singh, 924 F.3d 1030, 1042 (9th Cir. 2019). 33 See Bluman, 800 F. Supp. 2d at 287 (collecting Supreme Court cases upholding limits on noncitizen employment in a wide variety of local positions); 47 U.S.C. § 310(b) (banning issuance of broadcast or common carrier license to companies under minority foreign ownership).
34 Id. at 285.
35 52 U.S.C. § 30121, formerly codified as 2 U.S.C. § 441e. 36 See Citizens United, 558 U.S. at 362.
12 the type of issue that the decision was not addressing. This is what lawyers call “dictum”—something mentioned in a judicial opinion that is not part of its holding.

Similarly, in Bluman, Judge Kavanaugh wrote that “[b]ecause this case concerns individuals, we have no occasion to analyze the circumstances under which a corporation may be considered a foreign corporation for purposes of First Amendment analysis.”37 For purposes of poltical spending, the question of how much foreign ownership is “too much” has not yet been decided by any court.

The analysis in the main part of the above memorandum shows how arguably any foreign ownership renders the entire pool of corporate funds foreign. However, the bill focuses more narrowly on corporations where foreign holdings exceed thresholds, established from empirical corporate governance research, where investors can exert influence on executives’ decisions.

Notably, the Seattle Clean Campaigns Act (the model upon which this bill is based) has been in effect since February 2020, including the vigorously contested 2021 citywide election featuring an expensive mayoral race, yet none of the many multinational corporations in Seattle have been impelled to challenge it.

Do corporations know who their shareholders are?
Managers of privately-held corporations may know the identity of all shareholders at all times. Managers of publicly-traded corporations do not know moment to moment, but can obtain a complete list of shareholders and number of shares owned for any particular “record date,” They do this on a regular basis for routine corporate purposes, such as the corporate annual meeting. For more detail, see the letter from Professor John C. Coates IV of Harvard Law School, a former General Counsel and Director of the Division of Corporate Finance at the U.S. Securities Exchange Commission.38

37 Bluman, 800 F. Supp. 2d at 292 n.4.
38 Letter from Prof. John C. Coates IV to Seattle City Council, Jan. 3, 2020, https://bit.ly/3jjvfFP.
13 How many companies would be covered by the bill?
Foreign investment in U.S. companies has increased dramatically in recent years:
“from about 5% of all U.S. corporate equity (public and private) in 1982 to more than 20% in 2015.”39 By 2019, that figure had increased to 40%.40

However, foreign ownership is not evenly distributed. Analysis by the Center for American Progress found that the thresholds in this bill would cover 98% of the companies listed on the S&P 500 index, but only 28% of the firms listed on the Russell Microcap Index—among the smallest companies that are publicly traded.41

It is much more difficult to obtain data regarding ownership of privately-held companies. Intuition suggests that the vast majority of small local businesses have zero foreign ownership.

Does the bill violate the rights of U.S. investors?
No. Obviously, individual U.S. investors may spend unlimited amounts of their own money on elections.

The question might be framed as whether the bill restricts the ability of U.S. investors to spend their money through the vehicle of a corporation in which they share ownership with foreign investors. At the outset, the assumption embedded in this framework is somewhat unrealistic; few if any U.S. investors buy stock in a for- profit business entity with the expectation that, the corporation will engage in regulated political campaign spending.42 But even if so, any right to invest in a corporation with that expectation is limited by valid restrictions imposed on the other co-owners of the corporation, namely, foreign investors. Any impact on U.S. investors who have chosen to invest jointly with foreign investors is incidental to the primary purpose of preventing foreign influence.

39 John C. Coates IV, Ronald A. Fein, Kevin Crenny, & L. Vivian Dong, Quantifying foreign institutional block ownership at publicly traded U.S. corporations, Harvard Law School John M. Olin Center Discussion Paper No. 888 (Dec. 20, 2016), Free Speech For People Issue Report No. 2016-01,
https://papers.ssrn.com/sol3/papers.cfm?abstract id=2857957 . 40 See Steve Rosenthal and Theo Burke, Who’s Left to Tax? US Taxation of Corporations and Their Shareholders, Urban-Brookings Tax Policy Ctr., paper presented at NYU School of Law (Oct. 27, 2020), https://bit.ly/3uLjVqE. 41 Michael Sozan, Ctr. for Am. Progress, Ending Foreign-Influenced Corporate Spending in U.S. Elections (Nov. 21, 2019), at 42-45, https://ampr.gs/2QIiNQT. 42 See Jonathan Macey & Leo E. Strine, Jr., Citizens United as Bad Corporate Law, 2019 Wis. L. Rev. 451, 451 (2019) (noting that for many American investors, corporate political spending “has no rational connection to their reason for investing”).
14 By analogy, in upholding a State Department order to shut down a foreign mission even though it had U.S. citizen and permanent resident employees, the U.S. Court of Appeals for the D.C. Circuit noted: “[The order] does not prevent [plaintiffs] from advocating the Palestinian cause, nor from expressing any thought or making any statement that they could have made before its issuance. The order prohibits [them] only from speaking in the capacity of a foreign mission of the PLO.”43

Similarly, the U.S. investors can spend their money directly on political campaigns, or they can invest in a different corporation that is not foreign-influenced and which may spend treasury funds on political campaigns. If corporate political spending can be described as partly the speech of U.S. investors, then the bill prohibits them only from speaking in the capacity of investors in a foreign-influenced corporation.

Finally, the question could be framed as involving freedom of association for those U.S. investors who “associate” with foreign investors in a corporation. But a recent U.S. Supreme Court decision, written by Justice Kavanaugh, held that U.S. citizens cannot “export” or extend their own constitutional rights to foreign entities. In Agency for International Development v. Alliance for Open Society Int’l, Inc., the Court considered a statute that imposed speech-related conditions on funding. After first holding that the conditions violated the First Amendment rights of U.S. funding recipients, the Court then rejected a constitutional challenge on behalf of the foreign entities with which those U.S. entities associated. The Court explained that U.S. entities “cannot export their own First Amendment rights” to the foreign entities with which they associate.44 The Court’s reasoning leads to the same result when U.S. entities associate with foreign nationals in the corporate form: the mere fact that U.S. citizens have the independent right to contribute and make expenditures does not mean that those rights will flow to any association they form.

What if a U.S. investor holds a majority or controlling share? The danger of foreign participation remains. As corporate law expert Professor John Coates of Harvard Law School and his co-authors note:

A stylized and largely uncontested fact is that institutional shareholders—the most likely to be blockholders of U.S. public companies—are increasingly influential in the governance of those companies. Various changes in markets and regulation have increased the ability of such institutions to encourage, pressure or force boards to adopt policies and positions that twenty years ago would have been beyond their reach. Board members are spending increased amounts of time responding to and directly “engaging” with blockholders. While in

43 Palestine Information Office v. Shultz, 853 F.2d 932, 939 (D.C. Cir. 1988) (emphasis in original).
44 140 S. Ct. 2082, 2088 (2020).
15 the past legal regimes tested “control” of foreign nationals at higher levels of ownership—majority voting power, or 25% blocks for example—those regimes may no longer catch the new forms of institutional influence.45

As it happens, federal communications law has been addressing a very similar issue for nearly 90 years. Since 1934, section 310 of the federal Communications Act has prohibited issuance of broadcast or common carrier licenses to companies with one- fifth foreign ownership.46 Obviously, that raises a similar issue: a company with one-fifth foreign ownership has four-fifths U.S. ownership. Yet, as Congress determined, the risks were too great even with a four-fifths U.S. owner.

It makes little sense to say that a corporation with 75% U.S. ownership is too foreign-influenced to own a small local terrestrial radio station with limited reach, but not too foreign-influenced to spend tens of millions of dollars on statewide elections. Put another way, a U.S. investor that owns a very large percentage of a company but has foreign co-investors may be better suited choosing a different investment vehicle for buying radio stations or for spending money in elections.

We are only aware of one constitutional challenge to Section 310 in its nearly 90- year-history—the challenge concerned a slightly different point, but the court upheld the provision.47 The same logic would apply to this bill.

What if the corporation takes proactive steps to ensure that foreign investors have no influence on corporate decision-making regarding political spending?
The issue is generally not that foreign investors are directly participating in corporate decision-making regarding political spending. In major corporations, most investors do not participate in day-to-day operational decisions.

Rather, the issue is that corporate executives are fully aware of their major investors, act with a fiduciary duty towards those investors, and tend to avoid taking action that they anticipate will displease those major investors. Among other

45 Coates et al., supra note 39, at 5,
https://papers.ssrn.com/sol3/papers.cfm?abstract id=2857957 . 46 See 47 U.S.C. § 310(b).
47 See Moving Phones P’ship LP v. FCC, 998 F.2d 1051, 1056 (D.C. Cir. 1993) (applying rational basis review because “[t]he opportunity to own a broadcast or common carrier radio station is hardly a prerequisite to existence in a community”).

Other courts have upheld related provisions of the same act that are even more restrictive than section 310. See, e.g., Campos v. FCC, 650 F.2d 890, 891 (7th Cir. 1981) (upholding against constitutional challenge a Communications Act provision barring even permanent residents from holding radio operator licenses). 16 considerations, major investors have multiple options for influencing corporate governance writ large: they can submit shareholder proxy resolutions; they can attempt to replace directors on the board, and demand a change in management; in publicly traded corporations, they can dump their shares, decreasing the value of executives’ stock options; etc. Investors do not need to literally be in the conference room debating specific political expenditures to exert an influence, any more than voters need to be in the conference room during legislative debates to exert an influence on elected officials.

A similar question has repeatedly arisen in the context of the Communications Act, where partly-foreign-owned entities have sought broadcast or common carrier licenses, claiming that they had developed contractual or other internal measures to insulate decision-making from foreign partners or investors. Courts have consistently rejected such challenges.48

Does the bill apply to non-profits?
The bill indirectly applies to non-profits that receive contributions from business entities. To prevent circumvention, the bill provides that any “person” (entity) that receives a contribution from a business entity can only spend those funds on political spending if the business entity also provided a certification that it is not foreign-influenced. In other words, if the business entity donor provides a certification that it is not foreign-influenced, then the recipient may spend the money on political spending to the extent otherwise permitted by law; if the business entity donor does not provide such a certification, then the recipient may only use the donation for other (non-political) spending. This makes it harder for foreign-influenced business entities to “launder” political spending through non- profits or other intermediaries.

The bill does not apply to a non-profit that receives a contribution directly from a foreign national; that situation is already substantially addressed by federal law.49 The gap that the bill aims to plug pertains to foreign investors in U.S. corporations; there is no directly analogous gap in the law for non-profits.

Does the bill apply to labor unions?
No. The noncitizen, non-permanent resident workers who may be members of U.S. labor unions are qualitatively different from the foreign entities that invest in U.S. corporations. Almost without exception, immigrant workers in U.S. labor unions are

48 See Cellwave Tel. Servs. LP v. FCC., 30 F.3d 1533, 1535 (D.C. Cir. 1994) (rejecting argument that FCC should have granted license to partly-foreign-owned partnership because “the alien partners had insulated themselves by contract from any management role in the partnerships”); Moving Phones P’ship L.P. v. FCC, 998 F.2d 1051, 1055-57 (D.C. Cir. 1993) (same).
49 See 52 U.S.C. § 30121(a)(2).
17 physically located in the United States, where they enjoy most rights under the U.S.

Constitution; activities related to democratic self-government (including political spending) are the exception. By contrast, with rare exceptions, foreign investors in U.S. corporations are physically located abroad.50 Under the Supreme Court’s 2020 decision in Agency for International Development v. Alliance for Open Society, foreign entities located abroad have no rights whatsoever under the U.S.

Constitution.51 This weaker constitutional status of foreign entities located abroad makes the law more constitutionally defensible when limited to foreign-influenced business entities.

50 A major source of foreign national investors who actually reside in the United States is the EB-5 Immigrant Investors Visa Program. Under this program, approximately 10,000 visas per year are issued to foreign investors who invest at least $500,000 in American businesses. Notably, an EB-5 visa grants “conditional permanent residence.” Since 52 U.S.C. § 3012(b)(2) defines a “foreign national” as someone “who is not lawfully admitted for permanent residence, an EB-5 investor might not be considered a “foreign national” under 52 U.S.C. § 30121. 51 Agency for Int’l Dev. v. Alliance for Open Society Int’l, Inc., 140 S. Ct. 2082, 2086– 87 (2020).

california legislatureÑ2021Ð22 regular session
ASSEMBLY BILL No. 1819
Introduced by Assembly Member Lee
(Coauthor: Assembly Member Kalra)
(Coauthor: Senator Wieckowski)
February 7, 2022
An act to amend Section 85320 of, and to add Section 82007.5 to, the Government Code, relating to the Political Reform Act of 1974. legislative counselÕs digest
AB 1819, as introduced, Lee. Political Reform Act of 1974:
contributions and expenditures by foreign-inﬂuenced business entities.

The Political Reform Act of 1974 prohibits a foreign government or foreign principal from making any contribution, expenditure, or independent expenditure in connection with the qualiﬁcation or support of, or opposition to, a state or local ballot measure or an election for a state or local ofﬁce. The act prohibits a person or committee from soliciting or accepting a contribution from a foreign government or foreign principal for the same purposes. The act makes a violation of these prohibitions a misdemeanor.

This bill would expand these prohibitions to include contributions, expenditures, or independent expenditures made by a foreign-inﬂuenced business entity, as deﬁned, in connection with an election or ballot measure. The bill would require a business entity that makes a contribution, expenditure, or independent expenditure to ﬁle with the ﬁling ofﬁcer and the applicable candidate or committee a statement of certiﬁcation, signed by the entity’s chief executive ofﬁcer under penalty of perjury, avowing that the entity was not a foreign-inﬂuenced business entity on the date the contribution, expenditure, or independent

99 expenditure was made. The bill would prohibit a person who receives funds from a business entity from using those funds for purposes of a contribution, expenditure, or independent expenditure in connection with a ballot measure or election unless the person receives a copy of the statement of certiﬁcation from the business entity.

By creating a new crime and expanding the scope of an existing crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state.

Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a speciﬁed reason.

The Political Reform Act of 1974, an initiative measure, provides that the Legislature may amend the act to further the act’s purposes upon a
2⁄3 vote of each house of the Legislature and compliance with speciﬁed procedural requirements.

This bill would declare that it furthers the purposes of the act.

V ote: 2Ú3. Appropriation: no. Fiscal committee: yes.

State-mandated local program: yes.

The people of the State of California do enact as follows:
1 SECTION 1. (a) This act shall be known, and may be cited, 2 as the “Stop Foreign Inﬂuence in California Elections Act.” 3 (b) The Legislature ﬁnds and declares all of the following:
4 (1) The State of California welcomes immigrants, visitors, and 5 investors from around the world. However, its elections should be 6 decided by the people of California and not by foreign investors 7 or the business entities over which they exert inﬂuence. 8 (2) The United States Securities and Exchange Commission, 9 major capital investors, corporate managers, and corporate 10 governance experts broadly agree that ownership or control of one 11 percent or more of shares can confer substantial inﬂuence on 12 corporate decisionmaking. For similar reasons, ownership or 13 control of ﬁve percent of shares by multiple foreign investors can 14 affect corporate decisionmaking.
15 (3) Corporations with partial foreign ownership have been 16 spending money to inﬂuence state and local elections in California 17 and around the country.
99 — 2 — AB 1819

1 (4) Investors are the ultimate beneﬁciaries of corporate interests. 2 According to the California Court of Appeal, “it is the shareholders 3 who own a corporation, which is managed by the directors” and 4 “when a corporation is solvent, it is the shareholders who are the 5 residual claimants of the corporation’s assets.” Berg & Berg Enter., 6 LLC v. Boyle (2009) 178 Cal.App.4th 1020, 1039. Where part of 7 the shareholders’ equity is attributable to foreign investors, 8 spending corporate treasury funds on California elections means 9 spending the equity of foreign entities on California elections. 10 (5) Corporations and similar entities have a ﬁduciary 11 responsibility to their shareholders, including investors around the 12 world, and generally prioritize the interests of such shareholders, 13 which may diverge substantially from the interests of the people 14 of California and the United States.
15 (6) The United State government has concluded that Russia, 16 China, Iran, and other foreign actors are engaged in ongoing 17 campaigns to undermine democratic institutions, as set forth in the 18 joint statement “Combating Foreign Inﬂuence in US Elections,” 19 issued by the Ofﬁce of the Director of National Intelligence, United 20 States Department of Justice, Federal Bureau of Investigation 21 (FBI), and Department of Homeland Security on October 19, 2018. 22 (7) The FBI has concluded that foreign inﬂuence activities 23 include “criminal efforts to suppress voting and provide illegal 24 campaign ﬁnancing,” as set forth in FBI Director Christopher 25 Wray’s press brieﬁng on election security on August 2, 2018. 26 (8) Aside from active measures by hostile intelligence services, 27 the explicit or implicit inﬂuence of major foreign investors subjects 28 corporate decisionmaking to foreign inﬂuence as executives 29 consider interests of foreign investors. Domestic corporate political 30 spending by such corporations threatens democratic
31 self-government.
32 (9) The United States Congress and the United States Supreme 33 Court have recognized the need to protect American elections from 34 foreign inﬂuence through the ban on contributions and expenditures 35 by foreign nationals imposed by 52 U.S.C. Sec. 30121 and upheld 36 by the Supreme Court in Bluman v. Federal Election Commission 37 (D.D.C. 2011) 800 F.Supp.2d 281, aff’d. (2012) 565 U.S. 1104. 38 (10) Current law does not adequately protect against foreign 39 interference through corporate political spending by United States 40 corporations with signiﬁcant foreign ownership, as explained by 99 AB 1819 — 3 —

1 Federal Election Commissioner Ellen Weintraub in their May 22, 2 2019, written testimony to the United States House of 3 Representatives Committee on Oversight and Reform’s
4 Subcommittee on National Security.
5 (11) Political spending by foreign-inﬂuenced corporations can 6 weaken, interfere with, or disrupt California’s democratic 7 self-government and the trust that the electorate has in its elected 8 representatives.
9 (12) To protect the integrity of California’s democratic 10 self-government, it is necessary to prevent foreign-inﬂuenced 11 business entities from inﬂuencing California elections through 12 political spending.
13 SEC. 2. Section 82007.5 is added to the Government Code, to 14 read:
15 82007.5. “Chief executive ofﬁcer” means the highest-ranking 16 ofﬁcer or decisionmaking individual with authority over a business 17 entity’s affairs.
18 SEC. 3. Section 85320 of the Government Code is amended 19 to read:
20 85320. (a) A foreign government or foreign principal shall A 21 foreign government, foreign principal, or foreign-inﬂuenced 22 business entity shall not make, directly or through any other person, 23 a contribution, including a contribution to a committee, 24 expenditure, or independent expenditure in connection with the 25 qualiﬁcation or support of, or opposition to, any state or local ballot 26 measure or in connection with the election of a candidate to state 27 or local ofﬁce.
28 (b) (1) Within 7 days after making a contribution, expenditure, 29 or independent expenditure, a business entity shall ﬁle with the 30 ﬁling ofﬁcer and the candidate or committee to which or for which 31 the contribution or expenditure is made a statement of certiﬁcation, 32 signed by the chief executive ofﬁcer of the business entity under 33 penalty of perjury, avowing that, after due inquiry, the business 34 entity was not a foreign-inﬂuenced business entity on the date the 35 contribution or expenditure was made.
36 (2) (A) For purposes of the statement of certiﬁcation, a business 37 entity shall ascertain beneﬁcial ownership in a manner consistent 38 with the requirements of the Corporations Code or, if the business 39 entity is registered on a national securities exchange, as set forth 99 — 4 — AB 1819

1 in Sections 240.13d-3 and 240.13d-5 of Title 17 of the Code of 2 Federal Regulations.
3 (B) Upon request of the recipient, a business entity shall also 4 provide a copy of the statement of certiﬁcation to any other 5 candidate or committee to which the business entity provides a 6 contribution.
7 (b)
8 (c) (1) A person or a committee shall not solicit or accept a 9 contribution from a foreign go vernment or foreign principal 10 government, foreign principal, or foreign-inﬂuenced business 11 entity in connection with the qualiﬁcation or support of, or 12 opposition to, any state or local ballot measure or in connection 13 with the election of a candidate to state or local ofﬁce. 14 (2) For purposes of paragraph (1), a person or committee may 15 rely in good faith on a statement of certiﬁcation pursuant to 16 subdivision (e).
17 (d) (1) A person who receives a contribution or donation from 18 a business entity shall not use that contribution or donation, 19 directly or indirectly, to make a contribution, expenditure, or 20 independent expenditure in connection with a ballot measure or 21 election, or to contribute, donate, transfer, or convey funds to 22 another person for purposes of making a contribution, expenditure, 23 or independent expenditure in connection with a ballot measure 24 or election, unless the person also receives from the business entity 25 a copy of the statement of certiﬁcation described in subdivision 26 (b) and complies with the other requirements of this title. 27 (2) A person who uses a contribution or donation from a 28 business entity for the purposes described in paragraph (1) shall 29 separately designate, record, and account for the funds and ensure 30 that disbursements for the purposes described in paragraph (1) 31 are made only from funds that comply with the requirements of 32 this section.
33 (e) For purposes of subdivisions (c) and (d), a person soliciting 34 or receiving a contribution may rely in good faith on a statement 35 of certiﬁcation that meets the requirements of this section. 36 (c)
37 (f) For the purposes of this section, a “foreign the following 38 terms have the following meanings:
39 (1) “Foreign principal” includes all of the following:
40 (1)
99 AB 1819 — 5 —

1 (A) A foreign political party.
2 (2)
3 (B) A person outside the United States, unless either of the 4 following is established:
5 (A)
6 (i) The person is an individual and a citizen of the United States. 7 (B)
8 (ii) The person is not an individual and is organized under or 9 created by the laws of the United States or of any state or other 10 place subject to the jurisdiction of the United States and has its 11 principal place of business within the United States. 12 (3)
13 (C) A partnership, association, corporation, organization, or 14 other combination of persons organized under the laws of of, or 15 having its principal place of business in in, a foreign country. 16 (4)
17 (D) A domestic subsidiary of a foreign corporation if the 18 decision to contribute or expend funds is made by an ofﬁcer, 19 director, or management employee of the foreign corporation who 20 is neither a citizen of the United States nor a lawfully admitted 21 permanent resident of the United States.
22 (E) A business entity in which a foreign principal, as deﬁned 23 in subparagraph (A), (B), or (C), or a foreign government holds, 24 owns, controls, or otherwise has directly or indirectly acquired 25 beneﬁcial ownership of equity or voting shares in an amount that 26 is equal to or greater than 50 percent of the total equity or 27 outstanding voting shares.
28 (2) “Foreign-inﬂuenced business entity” means a business entity 29 in which any of the following occur:
30 (A) A single foreign principal holds, owns, controls, or otherwise 31 has direct or indirect beneﬁcial ownership of one percent or more 32 of the total equity, outstanding voting shares, membership units, 33 or other applicable ownership interests of the entity. 34 (B) Two or more foreign principals, in aggregate, hold, own, 35 control, or otherwise have direct or indirect beneﬁcial ownership 36 of equity or voting shares in an amount that is equal to or greater 37 than 5 percent of the total equity, outstanding voting shares, 38 membership units, or other applicable ownership interests of the 39 entity.
99 — 6 — AB 1819

1 (C) One or more foreign principals participate in any way, 2 directly or indirectly, in the business entity’s decisionmaking 3 process with respect to contributions or expenditures of funds in 4 connection with a ballot measure or election.
5 (d)
6 (g) (1) This section shall does not prohibit a contribution, 7 expenditure, or independent expenditure made by a lawfully 8 admitted permanent resident.
9 (2) This section does not prohibit a business entity from 10 sponsoring a sponsored committee, as deﬁned in Section 82048.7, 11 nor does it require a statement of certiﬁcation from the sponsor 12 solely due to the activities described in Section 82048.7. 13 (e)
14 (h) Any person who violates this section shall be guilty of a 15 misdemeanor and shall be ﬁned an amount equal to the amount 16 contributed or expended.
17 SEC. 4. No reimbursement is required by this act pursuant to 18 Section 6 of Article XIIIB of the California Constitution because 19 the only costs that may be incurred by a local agency or school 20 district will be incurred because this act creates a new crime or 21 infraction, eliminates a crime or infraction, or changes the penalty 22 for a crime or infraction, within the meaning of Section 17556 of 23 the Government Code, or changes the deﬁnition of a crime within 24 the meaning of Section 6 of Article XIII B of the California 25 Constitution.
26 SEC. 5. The Legislature ﬁnds and declares that this bill furthers 27 the purposes of the Political Reform Act of 1974 within the 28 meaning of subdivision (a) of Section 81012 of the Government 29 Code.

O
99 AB 1819 — 7 —

1 March 21, 2022

Honorable Mayor, Vice Mayor, and City Council
City of San Jose
200 E. Santa Clara St.

San Jose, CA 95113

Re: Support for Councilmembers’ memorandum regarding campaign finance reform ordinance

Dear Mayor Liccardo, Vice Mayor Jones, and Members of the City Council:

I write in support of Councilmembers’ memorandum directing staff to return to Council with a draft ordinance requiring that corporations certify that they are not foreign-influenced before making independent expenditures or contributing to campaigns and independent expenditure committees. If enacted, this people-powered ordinance would help stop political spending by foreign entities, including foreign investors who own appreciable levels of stock in U.S. corporations, thereby protecting the city’s right to self-government. In recent weeks, this policy has taken on additional importance since Russia’s invasion of Ukraine, given that Russian investors—including sanctioned Russian oligarchs—own appreciable amounts of American corporations.1 Quite simply, the City should update its laws to prevent foreign entities from influencing elections and ballot measures, which should be the purview solely of the city’s voters.

I am a senior fellow at the Center for American Progress (CAP). Based in Washington, D.C., CAP is an independent, nonpartisan policy institute dedicated to improving the lives of all Americans through bold, progressive policies. My democracy reform work at CAP has involved research in the area of preventing political spending by foreign-influenced U.S. corporations. I have submitted written and oral testimony on this policy in several state legislatures and have worked closely with lawmakers at the federal, state, and local levels to draft legislation to enact this structural reform. My publications include a report and fact sheet analyzing this policy, with the report republished in the Harvard Law School Forum on Corporate Governance.2 These publications may be useful as you consider the recommended ordinance.

1 One high-profile example of a sanctioned Russian oligarch indirectly owning an appreciable portion of a politically-connected American company is discussed in my 2019 report, “Ending Foreign -Influenced Corporate Spending in U.S. Elections.” Michael Sozan, “Ending Foreign-Influenced Corporate Spending in U.S. Elections” (Washington: Center for American Progress, 2019), available at https://www.americanprogress.org/issues/democracy/reports/2019/11/21/477466/ending -foreign- influenced-corporate-spending-u-s-elections/ (discussing Oleg Deripaska and Braidy Atlas, Inc.) 2 Ibid; Michael Sozan, “Fact Sheet: Ending Foreign-Influenced Corporate Spending in U.S. Elections” (Washington: Center for American Progress, 2019), available at https://www.americanprogress.org/issues/democracy/reports/2019/11/21/477468/ending -foreign- influenced-corporate-spending-u-s-elections-2/; Michael Sozan, “Ending Foreign-Influenced Corporate

2 Summary

After reviewing the Councilmembers’ memorandum, I conclude that the recommended ordinance would provide an important tool to protect San Jose’s elections and ballot initiatives from foreign influence and reduce the outsize role that corporate money can play in the results of elections and ballot initiatives. The common-sense recommended ordinance would strengthen the right of San Jose’s residents to determine the political and economic future of their city and help ensure that lawmakers are accountable to voters instead of foreign- influenced corporations. This recommended ordinance is particularly important given that foreign investors now own approximately 40 percent of U.S. corporate equity, compared to just 4 percent in 1986, a stunning increase.3

The recommended ordinance would follow Seattle, Washington, which passed similar legislation in 2020 to protect its elections after a deluge of corporate political spending by at least one foreign-influenced U.S. corporation, Amazon.4 Moreover, the New York State Senate recently passed similar legislation in a bipartisan vote, and that bill is now pending in the state Assembly.5 Several similar bills have been filed at the federal level by leading members of Congress, including Sen. Elizabeth Warren (D-MA) and Rep. Jamie Raskin (D-MD).6

California certainly is no stranger to prodigious political spending by foreign-influenced U.S. corporations. As I discussed in an op-ed published in The Mercury News in 2020, multiple foreign-influenced companies, including Uber, Lyft, and DoorDash teamed up to spend over $200 million to get their desired result on Proposition 22, which invalidated a state law and allowed companies to classify their gig workers as contractors instead of employees.7 This

Spending in U.S. Elections” (Cambridge, MA: Harvard Law School Forum on Corporate Governance, 2019), available at https://corpgov.law harvard.edu/2019/12/06/ending-foreign-influenced-corporate- spending-in-u-s-elections/.
3 Steven Rosenthal and Theo Burke, “Who’s Left to Tax? US Taxation of Corporations and Their Shareholders” (Washington: Urban-Brookings Tax Policy Center, 2020), p. 2, available at https://www.law nyu.edu/sites/default/files/Who%E2%80%99s%20Left%20to%20Tax%3F%20US%20T axation%20of%20Corporations%20and%20Their%20Shareholders- %20Rosenthal%20and%20Burke.pdf.
4 Annie Palmer, “Blow to Amazon as Seattle passes new political spending restrictions,” CNBC, January 13, 2020, available at https://www.cnbc.com/2020/01/13/blow-to-amazon-as-seattle-passes-new-political- spending-restrictions.html.
5 Democracy Preservation Act, S.1126B, 2021-2022 legislative session (passed by N.Y. State Senate on January 10, 2022), available at https://www.nysenate.gov/legislation/bills/2021/s1126. 6 Anti-Corruption and Public Integrity Act, S. 5070, Section 721, 116th Cong., 2nd sess. (December 19, 2020), available at https://www.congress.gov/bill/116th-congress/senate- bill/5070/text?q=%7B%22search%22%3A%5B%22warren%22%5D%7D&r=2&s=2 ; Get Foreign Money Out of U.S. Elections Act, H.R.6283, 117th Cong., 1st sess. (December 14, 2021), available at https://www.congress.gov/bill/117th-congress/house-
bill/6283?q=%7B%22search%22%3A%5B%22raskin+get+foreign+money+out%22%2C%22raskin%22 %2C%22get%22%2C%22foreign%22%2C%22money%22%2C%22out%22%5D%7D&s=1&r=1 . 7 Michael Sozan, “Opinion: Stop political spending by foreign-influenced U.S. firms,” The Mercury News, December 15, 2020, available at https://www mercurynews.com/2020/12/15/opinion-stop- political-spending-by-foreign-influenced-u-s-firms/. As I wrote there, one of the corporations that spearheaded the ballot initiative—Uber—is partially owned and controlled by the government of Saudi

3 means that major foreign investors played a role—at least indirectly—in determining the fate of California policy.

Analysis

In the U.S. Supreme Court’s misguided decision in Citizens United, the conservative majority gave American corporations the ability to spend money in elections based on the premise that corporations are “associations of citizens.”8 However, many of the largest American-based corporations are owned appreciably by foreign entities. This creates a loophole in the Supreme Court’s ruling, as recognized in a dissenting opinion by Justice Stevens: foreign entities can invest in U.S. corporations, which then spend large amounts of money from their corporate treasuries to influence the results of elections and ballot initiatives.9 This dangerous loophole allows foreign entities to circumvent the longstanding federal prohibition against their participating directly or indirectly in U.S. elections.10

The recommended ordinance proposes a cogent method to close this anti-democratic loophole by using bright-line thresholds to determine when a corporation has appreciable foreign ownership. The ordinance would amend the municipal code to define foreign- influenced corporations as any corporation—as defined by the California Political Reform Act—in which at least one of the following conditions is true:

• 1 percent or more of the total ownership interests of the corporation are held by a single foreign entity, or
• 5 percent or more of the total ownership interests of the corporation are held by two or more foreign entities in aggregate, or
• The corporation is owned by a foreign entity that directly or indirectly participates in decisions on the corporation’s political activities in the United States.

I note that the recommended ordinance reasonably does not appear to limit foreign- influenced corporations from contributing money from their political action committees (where, by law, funds are derived from U.S. employees); nor does it limit either contributions from executives or employees in their personal capacities or a corporation’s lobbying activities. Instead, the ordinance aims to limit spending directly from corporations’ treasuries—spending that can be done via secret, dark money routes. It is also important that the recommended ordinance not apply to non-profit corporations nor should it have any impact on individual immigrants.

Arabia. Another corporation—Lyft—has seen appreciable ownership and control by a Chinese conglomerate and a Japanese conglomerate.
8 Citizens United v. Federal Election Commission, 588 U.S. 310 (2010), available at https://www.fec.gov/resources/legal-resources/litigation/cu sc08 opinion.pdf . 9 Ibid. (dissent by Justice Stevens).
10 The Federal Election Campaign Act (FECA), 52 U.S.C. § 30121(a), as amended by the Bipartisan Campaign Reform Act of 2002 (BCRA), Public Law 155, 116 Stat. 81, § 303 (2002), available at https://www.law.cornell.edu/uscode/text/52/30121.

4 Substantial Support for Foreign Ownership Thresholds

The foreign ownership thresholds used in this recommended ordinance are solidly grounded in corporate governance and related law, even though at first glance, they may appear to be relatively low. Moreover, the framework in the recommended ordinance is constitutional under federal jurisprudence,11 as discussed at length by Harvard Law School professor Laurence Tribe in his letter filed in these proceedings.

Corporate managers, governance experts, and regulators recognize that a shareholder who owns at least 1 percent of corporate stock can influence corporate decision-making, including decisions about political spending.12 Relatively few individual shareholders ever own as much as 1 percent of a major publicly traded corporation; and if they do, their stock likely is worth hundreds of millions of dollars, if not more.13 These rare shareholders can almost always get the immediate attention of corporate executives and often have power over a corporation’s strategic direction.

As discussed at length and cited in my 2019 report:

• The 1 percent ownership threshold is anchored in regulations of the U.S. Securities and Exchange Commission (SEC) governing thresholds for shareholder proposals. • Former Republican Chairman of the U.S. House Committee on Financial Services Jeb Hensarling (R-TX) recognized—in the area of proxy contests—that shareholders who own 1 percent of corporate stock are important players who have the very real opportunity to influence corporate decision-making.
• The Business Roundtable, an association representing corporate CEOs, also acknowledged this dynamic. In fact, the Business Roundtable, suggested a sliding scale for considering shareholder proposals that would fall far below the 1 percent threshold for the largest U.S. corporations—to a 0.15 percent share of ownership.

The higher 5 percent aggregate foreign-ownership threshold also has strong merit. A significant number of smaller shareholders who band together may share a commonality— such as foreign domicile—which can influence corporate managers’ decisions in the manner described above. Additionally, where several shareholders each own slightly less than 1

11The U.S. Supreme Court affirmed (without opinion) a decision authored by then-Judge Brett Kavanaugh, which recognized that the First Amendment allows the government to prohibit contributions from foreign entities, a ruling found to be consistent with Citizens United. Bluman and Steiman v.

Federal Election Commission, memorandum opinion, U.S. District Court for the District of Columbia, No. 10-1766 (August 8, 2011), available at
https://www.bloomberglaw.com/public/desktop/document/Bluman v Federal Election Commission Ci vil No 101766 BMK RMURMC 2?1565223708 ; aff’d, 132 S. Ct. 1087 (2012) (Mem.), available at https://www.supremecourt.gov/orders/courtorders/010912zor.pdf. 12 See Sozan, “Ending Foreign-Influenced Corporate Spending in U.S. Elections,” pp. 32–34. 13 According to internal research conducted by CAP in 2021, the average 1 percent shareholder of an S&P 500 corporation owns stock worth $864 million, while the median 1 percent shareholder of an S&P 500 corporation owns stock worth $335 million.

5 percent of a corporation but together own at least 5 percent of the corporation, the law cannot ignore the possibility that these smaller shareholders could join forces to do what a single 1 percent shareholder could do alone. Moreover, the Business Roundtable supported the right of a group of shareholders to submit a proposal for consideration if those shareholders owned only 3 percent of a corporation’s shares.14

As Ellen Weintraub, longtime commissioner on the Federal Election Commission, has written, the United States is not working its way down from a 100 percent foreign-ownership standard; it is working its way up from the zero foreign-influence standard that a strict legal interpretation of federal law suggests.15 When an American-based corporation is not an “association of citizens,” any amount of foreign investment in a corporation should preclude management’s political expenditures, a point argued compellingly by experts at the nonpartisan organization Free Speech For People.16

Practical Effect of Foreign Ownership Thresholds

In my 2019 report, I analyzed data on foreign ownership of 111 U.S.-based publicly traded corporations in the S&P 500 stock index. The results include the following:

• When applying the 1 percent single foreign shareholder threshold, 74 percent of the corporations studied exceeded the threshold.
• When applying the 5 percent aggregate foreign shareholder threshold, 98 percent of the corporations studied exceeded the threshold.

These 111 corporations voluntarily disclosed the very large sum of $443 million spent in federal and state elections from their corporate treasuries in the years 2015, 2016, and 2017.

Among smaller publicly traded corporations, 28 percent of the corporations that were randomly sampled exceeded the 5 percent aggregate foreign-ownership threshold. From this analysis, it appears that smaller publicly traded corporations may be less likely to have as much aggregate foreign ownership as their larger counterparts and therefore would likely be less affected by the recommended ordinance’s ownership thresholds.

14 See Ning Chiu, “Business Roundtable Urges Improvements to Rule 14a-8 and Related Processes,” Davis Polk, November 16, 2016, available at https://www.davispolk.com/insights/client-update/business- roundtable-urges-improvements-rule-14a-8-and-related-processes; Business Roundtable, “Re: File Number 4-725” (Washington: 2018), p. 5, available at https://s3.amazonaws.com/brt.org/2018.11.09- BRT.SECProxyRoundtableCommentLetter.pdf.
15 Ellen L. Weintraub, “Taking On Citizens United,” The New York Times, March 30, 2016, available at https://www.nytimes.com/2016/03/30/opinion/taking-n-citizens-united html. 16 See Ron Fein, “RE: Political spending by foreign-influenced corporations S.454 (Comerford), S.482 (Montigny), H.839 (Uyterhoeven); Limits on contributions to super PACs S.455 (Comerford), H.772 (Day), H.840 (Uyterhoeven),” Free Speech For People, September 17, 2021, p. 8, available at https://freespeechforpeople.org/wp-content/uploads/2021/09/rfein-written-testimony-election-laws- 20210917-combined.pdf.

6 Process for Corporations to Determine Foreign Ownership

Corporations can and do regularly ascertain foreign-ownership thresholds. Opponents’ arguments that this process is impractical are not well founded.

According to testimony from former SEC counsel and Harvard Law School professor John Coates, the vast majority of corporations are owned by a single shareholder or a small, discernible group of shareholders, so it would be relatively simple to measure levels of appreciable foreign ownership.17 Large publicly-traded corporations already collect this type of stockholder information for their annual shareholder meetings and sometimes more frequently to allow votes regarding off-cycle events.18 Professor Coates’ testimony explains how corporations can reasonably conduct the requisite inquiry to determine their levels of foreign ownership. Finally, multiple publicly available finance-related websites supply detailed information on corporations’ largest shareholders, as well as approximate data regarding aggregate foreign ownership.19 If corporations do not know who their owners are, then it only strengthens the case that those corporations should not be allowed to spend to influence elections or ballot measures.

Conclusion

At a time of rising foreign interference in U.S. elections, San Jose should be commended for helping to lead the way in legislative efforts across the nation to take proactive, commonsense steps to stop political spending by foreign-influenced American corporations. The recommended ordinance does not appear to be aimed at disincentivizing foreign investment in U.S. but rather setting guardrails on when foreign-influenced companies can spend political dollars to influence elections and ballot measures. The recommended ordinance would be a big step forward in reassuring the people of San Jose that their democratic right to self- government is protected.

I urge favorable consideration of the recommended ordinance. Please let me know if I can be of further assistance.

Sincerely,
Michael L. Sozan
Senior Fellow

17 John C. Coates IV, Statement submitted to Massachusetts House of Representatives regarding an act to limit spending by foreign-influenced corporations, Harvard Law School, May 14, 2019, pp. 9 -10, available at https://freespeechforpeople.org/wp-content/uploads/2019/05/2019-Coates-MA-FIC- 20190514-PDF-final.pdf.
18 Ibid.
19 For example, see CNBC’s finance website. Using Chevron as an example, a user can ascertain important foreign ownership data from the “Ownership” page. Ownership data for Chevron, CNBC, available at https://www.cnbc.com/quotes/CVX?tab=ownership (last visited March 2022).

Mayor and City Council
City of San Jose

via e-mail only to
City Clerk Toni Taber
[email protected]

March 21, 2022

Mayor Liccardo, Vice Mayor Jones, and Councilmembers:

I write to you today in my individual capacity as a Commissioner on the U.S. Federal Election Commission in support of the proposal to draft an ordinance that would prohibit spending by foreign-influenced corporations in San Jose’s elections. And I write to thank you for taking the lead on such an important topic.

If San Jose enacts such an ordinance, it will be the largest jurisdiction in the nation to do so.

Helping ensure that San Jose’s municipal elections belong to San Jose’s voters would be commendable leadership on its own. But it would also set an exceptionally well-timed example for the California Assembly, which is considering similar protections to help ensure that your state’s elections belong to California’s voters.

The recommendation put forward by Councilmembers Cohen, Arenas, Jimenez, and Foley would, if enacted, strike a bold blow. But it would nonetheless fit comfortably within existing federal statutory law and Supreme Court precedent. It is fully in keeping with Citizens United’s prescription for greater transparency in political spending; as the Supreme Court wrote, “[D]isclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.”
The councilmembers’ recommendation regarding foreign-influenced corporations is consistent with an approach I laid out in an op-ed for The New York Times (attached) that described a new way to read the Citizens United decision together with the foreign-national political-spending ban.

In a nutshell, I noted that since the Citizens United majority protected the First Amendment rights of corporations as “associations of citizens,” and held that a corporation’s right to C O M M I S S I O N E R E L L E N L . W E I N T R A U B

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participate in elections flows from the collected rights of its individual shareholders to participate, it follows that the limits on the rights of a corporation’s shareholders must also flow to the corporation.

And one of the most important campaign-finance limits we have is that foreign nationals are absolutely barred from spending directly or indirectly in U.S. elections at any political level – federal, state, county, or city. It thus defies logic to allow groups of foreign nationals, or foreign nationals in combination with American citizens, to fund political spending through corporations. One cannot have a right collectively that one does not have individually.

Accordingly, the ordinance recommended by Councilmembers Cohen, Arenas, Jimenez, and Foley seeks to ensure that only those corporations owned and influenced by people who have the right to participate in San Jose’s elections are doing so.

The risks addressed by this measure are not theoretical. The largest aggregate penalty in a single matter in the post-Citizens United era stemmed from $1.3 million in illegal foreign donations to a super PAC routed through APIC, a California subsidiary of a foreign corporation. Had APIC’s corporate officers been required to sign the statements of certification required by the ordinance recommended to you, the illegal behavior may well have been deterred.

Please do not hesitate to get in touch with me if I may be of any further assistance. I am available at [email protected] and (202) 694-1035.

Sincerely,

Ellen L. Weintraub
Commissioner, Federal Election Commission

Attachment: “Taking On Citizens United” (March 30, 2016), NY TIMES, http://nyti.ms/230BOgq http://nyti.ms/1qhmpKB
The Opinion Pages | OP-ED CONTRIBUTOR
By ELLEN L. WEINTRAUB MARCH 30, 2016
SOMETHING is very wrong with the way we fund our elections. This has become especially clear since Citizens United, the 2010 Supreme Court decision that struck down campaign spending limits on corporations, ruling they were intrusions on free speech.

The majority opinion in Citizens United v. Federal Election Commission was clear: The First Amendment rights of corporations may not be abridged simply because they are corporations. But while corporations may be deemed to have some of the legal rights of people, the court has never held that corporations have any of the political rights of citizens.

This key distinction, read in harmony with existing law, provides ways to blunt the impact of the decision that gave corporations the right to spend unlimited sums of money on federal elections.

The effect of that decision has been pronounced: The Washington Post reported this month that through the end of January, 680 corporations had given nearly $68 million to “super PACs” in this election cycle — 12 percent of the $549 million raised by such groups. This figure does not include the untold amounts of “dark money” contributions to other groups that are not disclosed by the donor or the recipient.

Taking On Citizens United - The New York Times http://www.nytime s.com/2016/03/30/opinion/taking-n-citizens-united.ht... 1 of 4 4/4/2016 5:25 PM

Throughout Citizens United, the court described corporations as “associations of citizens”: “If the First Amendment has any force,” Justice Anthony M. Kennedy wrote, “it prohibits Congress from fining or jailing citizens, or associations of citizens, for simply engaging in political speech.” In other words, when it comes to political speech, which the court equated with political contributions and expenditures, the rights that citizens hold are not lost when they gather in corporate form.

Foreign nationals are another matter. They are forbidden by law from directly or indirectly making political contributions or financing certain election-related advertising known as independent expenditures and electioneering communications.

Government contractors are also barred from making contributions.

Thus, when the court spoke of “associations of citizens” that have the right to participate in American elections, it can only have meant associations of American citizens who are allowed to contribute.

But many American corporations have shareholders who are foreigners or government contractors. These corporations are not associations of citizens who are allowed to contribute. They are an inseparable mix of citizens and noncitizens, or of citizens and federal contractors.

Since the court held that a corporation’s right to participate in elections flows from the collected rights of its individual shareholders to participate, it follows that limits on those individuals’ rights must also flow to the corporation.

You cannot have a right collectively that you do not have individually. Individual foreigners are barred from spending to sway elections; it defies logic to allow groups of foreigners, or foreigners in combination with American citizens, to fund political spending through corporations. If that were true, foreigners could easily evade the restriction by simply setting up shell corporations through which to funnel their contributions.

Arguably, then, for a corporation to make political contributions or expenditures legally, it may not have any shareholders who are foreigners or federal contractors. Corporations with easily identifiable shareholders could meet this Taking On Citizens United - The New York Times http://www.nytime s.com/2016/03/30/opinion/taking-n-citizens-united.ht... 2 of 4 4/4/2016 5:25 PM
standard, but most publicly traded corporations probably could not.

This may sound like an extreme result, but it underscores how urgently policy makers need to examine these issues with an eye toward drawing acceptable lines.

Perhaps we could require corporations that spend in federal elections to verify that the share of their foreign ownership is less than 20 percent, or some other threshold.

The Federal Communications Commission, for example, bars companies that are more than 20 percent owned by foreign nationals from owning a broadcast license.

At the moment, without a clarifying rule, the only standard that follows the law is a zero-tolerance standard.

If one thing is clear this election season, it is that many voters feel that their voices are not being heard. We should make sure that the voices of citizens are not being drowned out by corporate money. American billionaires already have an outsize influence on our elections. Let’s not cede yet more power to foreign elites.

To that end, at the next public meeting of the Federal Election Commission, I will move to direct the commission’s lawyers to provide us with options on how best to instruct corporate political spenders of their obligations under both Citizens United and statutory law. The American people deserve assurances from American corporations that they are not using the money of foreign shareholders to influence our elections.

Regardless of whether the perpetually deadlocked F.E.C. takes action, lawyers may wish to think twice before signing off on corporate political giving or spending that they cannot guarantee comes entirely from legal sources.

States can also take action, since Citizens United and federal law barring foreign money apply with equal force at the state level. States can require entities accepting political contributions from corporations in state and local races to make sure that those corporations are indeed associations of American citizens — and enforce the ban on foreign political spending against those that are not.

Polls show that overwhelming majorities of Americans reject the conclusions of Citizens United and want to see it overturned. But in the meantime, federal and state policy makers and authorities can at least ensure that corporations are not being Taking On Citizens United - The New York Times http://www.nytime s.com/2016/03/30/opinion/taking-n-citizens-united.ht... 3 of 4 4/4/2016 5:25 PM
used as a front to allow foreign money to seep into our elections.

Ellen L. Weintraub is a member of the Federal Election Commission.

Follow The New York Times Opinion section on Facebook and Twitter, and sign up for the Opinion Today newsletter.

A version of this op-ed appears in print on March 30, 2016, on page A21 of the New York edition with the headline: Taking On Citizens United.
© 2016 The New York Times Company
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San Jose City CouncilMarch 22, 2022

San Jose City Council
March 22, 2022