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