BILL ANALYSIS Ó
AB 2250
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Date of Hearing: March 30, 2016
ASSEMBLY COMMITTEE ON ELECTIONS AND REDISTRICTING
Shirley Weber, Chair
AB 2250
(Ridley-Thomas) - As Introduced February 18, 2016
SUBJECT: Political Reform Act of 1974: contribution
limitations. Urgency.
SUMMARY: Prohibits, under state law, contributions,
expenditures, and independent expenditures from foreign
governments and foreign principals in connection with candidate
elections. Specifically, this bill:
1)Prohibits a foreign government or foreign principal, as
defined, from making, directly or through any other person, a
contribution, expenditure, or independent expenditure in
connection with any election.
2)Prohibits a person or a committee from soliciting or accepting
a contribution from a foreign government or a foreign
principal, as defined, in connection with an election.
3)Makes corresponding and technical changes.
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4)Contains an urgency clause, allowing this bill to take effect
immediately upon enactment.
EXISTING STATE LAW:
1)Creates the Fair Political Practices Commission (FPPC), and
makes it responsible for the impartial, effective
administration and implementation of the Political Reform Act
(PRA).
2)Prohibits a foreign government or foreign principal from
making, directly or through any other person, a contribution,
expenditure, or independent expenditure in connection with the
qualification or support of, or opposition to, a state or
local ballot measure. Prohibits a person or a committee from
soliciting or accepting a contribution from a foreign
government or a foreign principal in connection with the
qualification or support of, or opposition to, any state or
local ballot measure.
a) Defines "foreign principal," for the purposes of these
restrictions, to include the following:
i) A foreign political party;
ii) A person outside the United States (US), unless
either of the following is established:
(1) The person is an individual and a citizen of
the US; or,
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(2) The person is not an individual, and is
organized under or created by the laws of the US or of
any state or other place subject to the jurisdiction
of the US and has its principal place of business
within the US;
iii) A partnership, association, corporation,
organization, or other combination of persons organized
under the laws of or having its principal place of
business in a foreign country; or,
iv) A domestic subsidiary of a foreign corporation if
the decision to contribute or expend funds is made by an
officer, director, or management employee of the foreign
corporation who is neither a citizen of the US nor a
lawfully admitted permanent resident of the US.
b) Provides that these restrictions do not prohibit a
contribution, expenditure, or independent expenditure made
by a lawfully admitted permanent resident.
c) Provides that a person who violates these provisions is
guilty of a misdemeanor and shall be fined an amount equal
to the amount contributed or expended.
3)Permits the FPPC to impose administrative penalties of up to
$5,000 per violation of the PRA.
EXISTING FEDERAL LAW:
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1)Prohibits a foreign national, directly or indirectly, from
doing either of the following in connection with a federal,
state, or local election:
a) Making a contribution or donation of money or other
thing of value, or an express or implied promise to make a
contribution or donation; or,
b) Making an expenditure, independent expenditure, or
disbursement for an electioneering communication.
2)Prohibits a person from soliciting, accepting, or receiving a
contribution or donation made by a foreign national in
connection with a federal, state, or local election.
3)Defines "foreign national," for the purposes of the
prohibitions described above, as either of the following:
a) A government of a foreign country; a foreign political
party; or a partnership, association, corporation,
organization, or other combination of persons organized
under the laws of or having its principal place of business
in a foreign country; or,
b) An individual who is not a citizen or a national of the
US and who is not lawfully admitted for permanent residence
in the US.
4)Establishes the Federal Election Commission (FEC), and makes
it responsible for the administration and enforcement of the
Federal Election Campaign Act (FECA), including the
restrictions on contributions and expenditures by foreign
nationals described above.
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FISCAL EFFECT: Unknown. State-mandated local program; contains
a crimes and infractions disclaimer.
COMMENTS:
1)Purpose of the Bill: According to the author:
Since 1966, federal law has prohibited foreign
nationals from making contributions in connection with
political campaigns in the [US]. The purpose of this
law is to protect the process of democratic
self-governance for Americans.
Because federal election law does not explicitly
provide for ballot measure elections, it is unclear
whether this law applies to contributions made in
connection with state or local ballot measure
campaigns. In fact, the [FEC], which interprets and
enforces the federal law, deadlocked on that question
in a case last year involving contributions made in
connection with a ballot measure in Los Angeles.
Due to the lack of clarity about whether the federal
ban on contributions by foreign nationals applies to
ballot measure elections, in 1997, California enacted
Government Code Section 85320 (Section 85320) through
the passage of SB 109 (Kopp), Chapter 67, Statutes of
1997. Section 85320 prohibits foreign governments and
foreign principals from making contributions,
expenditures, and independent expenditures in
connection with a state or local initiative, recall,
or referendum measure. Section 85320 additionally
prohibits any person or committee from soliciting or
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accepting a contribution from a foreign government or
principal in connection with a ballot measure
campaign. Because Section 85320 was in place, the
[FPPC] was able to bring an enforcement action
concerning the foreign contributions made in
connection with the ballot measure in Los Angeles.
The FPPC ultimately imposed a fine of $61,500 in that
case for violations of Section 85320 and other
provisions of the [PRA]-the first case in which the
FPPC brought an enforcement action for a violation of
Section 85320.
While it is unclear whether federal law governs
contributions made by foreign nationals in connection
with ballot measure elections, it clearly prohibits
foreign nationals from making contributions in
connection with candidate elections in California.
The FEC, however, which is responsible for enforcing
that law, has a significant backlog and frequently
deadlocks on enforcement matters. Furthermore, it is
important for the FPPC to have concurrent jurisdiction
over the issue of foreign contributions in elections
in order to best protect the integrity of California
elections.
2)Foreign Campaign Spending, Federal Law, and Previous
Legislation: As detailed above, federal law prohibits foreign
nationals from making contributions in connection with
federal, state, and local elections. According to information
from the FEC, "[t]he ban on political contributions and
expenditures by foreign nationals was first enacted in 1966 as
part of the amendments to the Foreign Agents Registration Act
(FARA), an 'internal security' statute. The goal of the FARA
was to minimize foreign intervention in US elections by
establishing a series of limitations on foreign nationals.
These included registration requirements for the agents of
foreign principals and a general prohibition on political
contributions by foreign nationals. In 1974, the prohibition
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was incorporated into [FECA], giving the [FEC] jurisdiction
over its enforcement and interpretation."
Until 2002, the restriction on contributions by foreign
nationals specifically applied to contributions made "in
connection with an election to any political office." Because
that language was limited to elections for office, it was the
position of the FEC that contributions from foreign nationals
relating exclusively to ballot measures were not restricted by
federal law. (In 2002, the restriction on foreign
contributions was amended to make it applicable to any
contribution made "in connection with a Federal, State, or
local election," though it is unclear whether that change was
intended to cover ballot measure elections.)
In 1997, the Legislature approved and Governor Wilson signed SB
109 (Kopp), Chapter 67, Statutes of 1997, to prohibit foreign
governments or foreign principals from making contributions,
expenditures, or independent expenditures in connection with
state or local ballot measures. The legislative history
suggests that SB 109 did not seek to regulate foreign
contributions made in connection with elections for office
because such contributions were already restricted by federal
law. Instead, SB 109 was limited to foreign spending in
connection with ballot measure elections, thereby restricting
foreign spending that was not covered by federal law.
Aside from the fact that state law is limited to foreign
spending made in connection with ballot measures, state and
federal law differ in one other important respect. While
federal law restricts contributions and expenditures by
foreign nationals, state law does not restrict contributions
or expenditures by a foreign national who is an individual and
who is legally present in the US. The initial version of SB
109 (and an unsuccessful bill from the prior legislative
session) would have restricted contributions by foreign
nationals who were legally present in the US, but that
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restriction was amended out of the bill to address opposition.
3)Recent Enforcement Action Related to Foreign Contributions:
As noted above by the author of this bill, the FPPC recently
brought an enforcement action for the first time in a case
involving foreign contributions made in connection with a
ballot measure. That enforcement action was initiated after
the FEC considered an enforcement action of its own, and
declined to take action in that case.
Measure B was a Los Angeles County initiative dealing with adult
film production that appeared on the ballot at the November
2012 statewide general election. In October 2012, one of the
proponents of Measure B filed a complaint with the FEC
alleging that the committee opposing Measure B had received
contributions made by a foreign national, and further alleging
that those contributions violated FECA. In August 2014, the
Associate General Counsel of the FEC recommended dismissing
the complaint due in part to a "lack of clear legal guidance"
on whether federal law restricts contributions made by foreign
nationals in connection with ballot measures. The FEC was
equally divided on whether to dismiss the complaint, and in
March 2015, it ultimately closed the file on the complaint
without taking further action.
In July 2015, after the FEC's action to close its file, the FPPC
received a sworn complaint in connection with the same matter.
Last December, the FPPC reached a stipulated settlement in
that case. As detailed in that settlement, Manwin USA, a
Delaware-based subsidiary of Manwin International, a
Luxembourg-based corporation, made contributions totaling more
than $268,000 to the committee opposing Measure B. In
addition, Froytal, a Cyprus-based subsidiary of Manwin
International, made a contribution of $75,000 to the committee
opposing Measure B, although that contribution subsequently
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was returned by the committee. Even though Manwin USA was
incorporated under Delaware-law, its contributions violated
California law because it was a subsidiary of a foreign
corporation and the decision to contribute funds was made by
an officer of the foreign corporation who was neither a US
citizen nor a lawfully admitted permanent resident of the US.
The FPPC fined Manwin USA a total of $20,000 for the unlawful
contributions that it made, fined Froytal $5,000 for the
unlawful contribution that it made, and fined the committee
opposing Measure B and its treasurer a total of $20,000 for
accepting unlawful contributions made by foreign principals.
The FPPC also imposed an additional $16,500 in fines for
violations of reporting and disclosure laws that occurred in
connection with the unlawful foreign contributions.
4)Political Reform Act of 1974: California voters passed an
initiative, Proposition 9, in 1974 that created the FPPC and
codified significant restrictions and prohibitions on
candidates, officeholders and lobbyists. That initiative is
commonly known as the PRA. Amendments to the PRA that are not
submitted to the voters, such as those contained in this bill,
must further the purposes of the initiative and require a
two-thirds vote of both houses of the Legislature.
REGISTERED SUPPORT / OPPOSITION:
Support
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Fair Political Practices Commission
Opposition
None on file.
Analysis Prepared by:Ethan Jones / E. & R. / (916) 319-2094