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S. HRG. 113–301 

CURRENT ISSUES IN CAMPAIGN FINANCE LAW 

ENFORCEMENT 

HEARING 

BEFORE THE

SUBCOMMITTEE ON CRIME AND TERRORISM 

OF THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

APRIL 9, 2013 

Serial No. J–113–12 

Printed for the use of the Committee on the Judiciary 

( 
(II) 

COMMITTEE ON THE JUDICIARY 

PATRICK J. LEAHY, Vermont, Chairman 

DIANNE FEINSTEIN, California 

CHUCK SCHUMER, New York 

DICK DURBIN, Illinois 

SHELDON WHITEHOUSE, Rhode Island 

AMY KLOBUCHAR, Minnesota 

AL FRANKEN, Minnesota 

CHRISTOPHER A. COONS, Delaware 

RICHARD BLUMENTHAL, Connecticut 

MAZIE HIRONO, Hawaii 

CHUCK GRASSLEY, Iowa, Ranking Member 

ORRIN G. HATCH, Utah 

JEFF SESSIONS, Alabama 

LINDSEY GRAHAM, South Carolina 

JOHN CORNYN, Texas 

MICHAEL S. LEE, Utah 

TED CRUZ, Texas 

JEFF FLAKE, Arizona 

BRUCE A. COHEN, Chief Counsel and Staff Director 

DAVID YOUNG, Republican Chief of Staff 

SUBCOMMITTEE ON CRIME AND TERRORISM

SHELDON WHITEHOUSE, Rhode Island, Chairman 

DIANNE FEINSTEIN, California 

CHUCK SCHUMER, New York 

DICK DURBIN, Illinois 

AMY KLOBUCHAR, Minnesota 

LINDSEY GRAHAM, South Carolina 

TED CRUZ, Texas 

JEFF SESSIONS, Alabama 

MICHAEL S. LEE, Utah 

STEPHEN LILLY, Democratic Chief Counsel 

SERGIO SARKANY, Republican Chief Counsel 
(III) 

C O N T E N T S 

STATEMENTS OF COMMITTEE MEMBERS 

Page 

Whitehouse, Hon. Sheldon, a U.S. Senator from the State of Rhode Island ...... 1 

Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont, prepared 

statement .............................................................................................................. 34 

Cornyn, Hon. John, a U.S. Senator from the State of Texas, prepared statement ...................................................................................................................... 36 

WITNESSES 

Witness List ............................................................................................................. 33 

Raman, Mythili, Acting Assistant Attorney General, Criminal Division, U.S. 

Department of Justice, Washington, DC ............................................................ 4 

prepared statement .......................................................................................... 37 

Haynes, Patricia, Deputy Chief, Criminal Investigation, Internal Revenue 

Service, Washington, DC ..................................................................................... 6 

prepared statement .......................................................................................... 42 

Noble, Larence M., President and Chief Executive Officer, Americans for 

Campaign Reform, Washington, DC ................................................................... 17 

prepared statement .......................................................................................... 48 

Colvin, Gregory L., Principal, Adler & Colvin, San Francisco, California .......... 19 

prepared statement .......................................................................................... 55 

Smith, Bradley A., Chairman, Center for Competitive Politics, Josiah H. 

Blackmore II/Shirley M. Nault, Professor of Law, Capital University Law 

School, Columbus, Ohio ....................................................................................... 21 

prepared statement .......................................................................................... 68 

QUESTIONS 

Questions submitted by Senator Amy Klobuchar for Mythili Raman, Patricia 

Haynes, Lawrence M. Noble, Gregory L. Colvin, and Bradley A. Smith ........ 88 

Questions submitted by Senator Charles Schumer for Mythili Raman and 

Patricia Haynes .................................................................................................... 89 

ANSWERS 

Responses of Mythili Raman to questions submitted by Senators Schumer 

and Klobuchar ...................................................................................................... 91 

Responses of Patricia Haynes to questions submitted by Senators Schumer 

and Klobuchar ...................................................................................................... 96 

Responses of Lawrence M. Noble to questions submitted by Senator 

Klobuchar .............................................................................................................. 97 

Responses of Gregory L. Colvin to questions submitted by Senator Klobuchar . 101 

Responses of Bradley A. Smith to questions submitted by Senator Klobuchar . 105 

MISCELLANEOUS SUBMISSIONS FOR THE RECORD 

March 22, 2012, lettter to IRS ................................................................................ 117 

American Civil Liberties Union (ACLU), Laura W. Murphy, Director, Washington Legislative Office, Washington, DC, April 9, 2013, letter ..................... 121 

Democracy 21, Fred Wertheimer, President, Washington, DC, statement ......... 126 
Page

IV 

ADDITIONAL SUBMISSIONS FOR THE RECORD 

Submissions for the record not printed due to voluminous nature, previously 

printed by an agency of the Federal Government, or other criteria determined by the Committee, list .............................................................................. 130 

Petition for rulemaking on campaign activities by section 501(c)(4) ...................

http://www.democracy21.org/uploads/ 

D21landlCLClPetitionltolIRSl7l27l2011.pdf ........................... 130 

Democracy 21 report: leading presidential-candidate super PACs http:// 

www.democracy21.org/uploads/Democracyl21lSuperlPAClReportl1l4l2012.pdf ..................................... 130 

‘‘The FEC: The Failure to Enforce Commission’’ by Fred Wertheimer 

and Don Simon http://www.acslaw.org/sites/default/files/ 

WertheimerlandlSimon—The Failure to Enforce Commission.pdf ....... 130 
(1) 

CURRENT ISSUES IN CAMPAIGN FINANCE 

LAW ENFORCEMENT 

TUESDAY, APRIL 9, 2013 

U.S. SENATE, 

SUBCOMMITTEE ON CRIME AND TERRORISM, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC 

The Subcommittee met, pursuant to notice, at 10:02 a.m., in 

Room SD–226, Dirksen Senate Office Building, Hon. Sheldon 

Whitehouse, Chairman of the Subcommittee, presiding. 

Present: Senators Whitehouse, Feinstein, Schumer, Durbin, 

Klobuchar, Graham, Cruz, Sessions, and Lee. 

OPENING STATEMENT OF HON. SHELDON WHITEHOUSE, A U.S. 

SENATOR FROM THE STATE OF RHODE ISLAND 

Chairman WHITEHOUSE. Good morning. The hearing will come to 

order. I appreciate the witnesses being here, and the order of proceeding will be that any Senators who are present before the testimony will be invited to make any opening statement that they care 

to make. We will take the testimony from these witnesses and then 

have a question-and-answer session, and I think we will start with 

seven-minute rounds. It does not appear, given everything that is 

going on in the Senate today, that we are going to have a great 

number of Senators here, so I think we can go with seven-minute 

rounds. And we will switch then to the other panel and continue 

the same way, and we have to be done at noon. So I appreciate the 

witnesses who are here, and I will lead with my opening statement. 

In a country of laws, when the laws are made a mockery, it is 

a serious matter. This hearing will explore the mockery our campaign finance laws have become, with particular emphasis on what 

appears to be flagrantly false statements made with impunity in official documents. 

We note Section 1001 of the U.S. Criminal Code, which makes 

it a criminal offense to make ‘‘any materially false, fictitious, or 

fraudulent statement or representation’’ in official business with 

the government, and Section 7206 of the Internal Revenue Code, 

which makes it a crime to willfully make a false material statement on a tax document filed under penalty of perjury. 

The false statements we look at relate, among other things, to 

Section 501(c)(4) of the Tax Code, which gives nonprofit status to 

entities that are ‘‘operated exclusively to promote social welfare.’’ 

This promotion of social welfare is specifically forbidden to include 

direct or indirect participation or intervention in political cam-
2 

paigns on behalf of or in opposition to any candidate for public office. It seems clear enough. 

But after the Supreme Court opened the floodgates to big money 

in elections in its disgraceful Citizens United decision, big donors 

like to use these nonprofit entities to launder campaign spending 

and hide their identities. As the head of one such nonprofit admitted, for big donors ‘‘the anonymity was appealing.’’ 

So the tax filings then begin to get creative. There are several 

areas of mischief: discrepancies in reporting to the IRS and to the 

FEC; discrepancies between reported and actual political activity; 

characterizing political TV ads as ‘‘educational activities’’ or ‘‘legislative activities’’; characterizing as ‘‘nonpolitical’’ donations made to 

other groups that then spend it on political advertising; and disbanding and reforming under other names before the reporting is 

due for the disbanded organization. 

The responsible federal agencies, primarily the IRS and DOJ, appear somewhat complicit in the mockery that is made of these tax 

laws. The DOJ maintains a policy of deference to the IRS and does 

not investigate or prosecute false statements in campaign finance 

tax reporting without a case having been brought to it by the IRS. 

As we will hear from some of the witnesses, this creates problems. 

DOJ maintains this policy despite 18 U.S.C. 1001, the well-known 

law against false statements that spans all federal agencies in addition to the false statements law specific to tax filings. 

The IRS on its part is an organization as to which, according to 

press reports quoting its own previous Director of Nonprofit Organizations, and I quote here, ‘‘Chasing political nonprofits isn’t the 

organization’s primary function, nor one for which it is staffed.’’ 

Thus, from a systems point of view, we have DOJ deferring for enforcement to an effectively toothless organization, with the predictable result that zero cases appear to have been brought. Indeed, as 

far as I know, not one person has been put before an investigative 

grand jury. 

To make matters worse, the IRS has taken one of the clearer 

statutes passed by Congress and through its regulations has so 

defanged and confused the law as to make it virtually unenforceable by the agency. The IRS did this by saying that ‘‘exclusively’’— 

the word in the statute—meant ‘‘primarily’’ by then accepting that 

‘‘primarily’’ meant 51 percent, and further by pursuing a policy of 

conspicuous nonenforcement even of that watered-down standard. 

If the IRS has affirmatively wished to defeat this law and permit 

rampant false statements to go unpunished, it could hardly have 

done a better job. As a Notre Dame law professor who specializes 

in this area has said, ‘‘the IRS seems to blink if you push them.’’ 

And yet DOJ defers to the IRS. 

The result is that statements that are plainly false by any common lay definition of the term ‘‘go unpunished.’’ A clear congressional statute goes unenforced. An industry that launders immense 

amounts of anonymous money into our elections grows like a weed. 

And in politics, only the big donors and the candidates and their 

intermediaries know who is beholden to whom and for how much. 

As Senator McCain and I pointed out in a brief to the Supreme 

Court recently, this latter condition is a prescription for corruption. 

As even the Supreme Court pointed out in Citizens United, it is 
3 

disclosure of donors’ identities that allows ‘‘citizens to hold corporations and elected officials accountable for their positions and supporters’’ so that citizens can ‘‘see whether elected officials are in 

the pocket of so-called monied interests.’’ 

And, of course, under this regime, nothing prevents foreign interests from influencing American elections if there is no investigation 

and no enforcement of whose money is really hiding behind the 

nondisclosure provisions that gives Section 501(c)(4) its appeal to 

big donors. 

The relevant federal IRS form includes Question 15, which asks, 

under penalty of perjury, ‘‘Has the organization spent or does it 

plan to spend any money attempting to influence the selection, 

nomination, election, or appointment of any person to any Federal, 

State, or local public office or to an office in any political organization? ’’ In one investigation, ProPublica found 32 organizations that 

answered no to this question and then went out and spent money 

on political races. And that was out of 72 IRS filings they reviewed. 

Nearly half appear to be false. Some organizations had ads running 

on the day they mailed their filings in. Some had run them before. 

Many spent millions on political ads. 

Looked at the other way, in the ProPublica investigation they 

found 104 organizations that told State or federal elections officials 

they had spent money on candidates’ specific political ads, what the 

FEC called ‘‘electioneering communications.’’ Thirty-two of those 

104 had told the IRS they had spent no money to influence elections. 

Even when information is provided, it may be false. One organization said it would spend 50 percent of its effort on a Web site 

and 30 percent on conferences. Investigations showed its Web site 

consistent of one photograph and one paragraph, and no sign of 

any conferences. The same group declared it would take contributions from individuals only and then took $2 million from PhRMA, 

the pharmaceutical lobby. 

Another declared to the IRS that it spent $5 million on political 

activities, but told the FEC it has spent $19 million on political 

ads. Another pledged its political spending would be limited in 

amount and will not constitute the organizations primary purpose, 

and then went out and spent $70 million on ads and robo-calls in 

one election season. 

And some never even apply. They just start spending and file a 

tax return after the fact, potentially as their last act before they 

disband so they are gone before the mail brings their filing to the 

IRS. 

One never filed at all, even after the fact. No enforcement action 

has been taken as far as I know. 

As Melanie Sloan, executive director of CREW, has said, ‘‘You 

can go into business and violate the law and then go out of business. And what is ever going to happen about that? There is no 

consequence.’’ 

Let me close on this issue by reading from an article describing 

the reaction of a State election official: ‘‘When ProPublica read the 

group’s description of its activities on its IRS application to Ann 

Ravel, the chairwoman of the California Fair Elections Commis-
4 

sion, she laughed. ‘Wow,’ she said, upon hearing that the group 

said it would not try to influence elections. ‘That is simply false.’ ’’ 

So this hearing is directed to the mechanisms and machinations 

by which such false statements are allowed to go unpunished. During this hearing we will also examine enforcement issues pertaining to coordination between candidates and outside groups 

where the FEC has so weakened the limitations as to make socalled independent expenditures functionally equivalent to campaign contributions, also the use of shell corporations to hide donor 

identities, and the risk of foreign money influencing our elections 

that comes with secret fundraising and spending by 501(c)(4)s and 

other groups. 

I look forward to hearing from the witnesses on these and other 

issues. I see that Senator Cruz has joined us, and I invite him to 

make any opening statement he cares to make at this time. 

Senator CRUZ. I am happy at this point just to hear from the witnesses. 

Chairman WHITEHOUSE. Very good. Let me introduce both witnesses. 

Mythili Raman is Acting Assistant Attorney General for the 

Criminal Division of the Department of Justice. In this role, Ms. 

Raman oversees nearly 600 attorneys who prosecute federal criminal cases across the country. Previously, Ms. Raman was the Principal Deputy Assistant Attorney General for the Criminal Division. 

Ms. Raman has been with the Department since 1996 and previously served as an Assistant United States Attorney in the U.S. 

Attorney’s Office for the District of Maryland. 

Patricia J. Haynes is the IRS Deputy Chief of Criminal Investigation. In this role, Ms. Haynes directs worldwide programs for 

investigating potential criminal violations of the Internal Revenue 

Code and related financial crimes. Previously, Ms. Haynes was the 

Executive Director of Investigative and Enforcement Operations, 

and before that Director of Field Operations for the Southeast 

Area. She began her career as a special agent in Virginia in 1983. 

If I could ask the two witnesses to stand and be sworn, we will 

begin the hearing. Do you affirm that the testimony you are about 

to give before the Committee will be the truth, the whole truth, 

and nothing but the truth, so help you God? 

Ms. RAMAN. I do. 

Ms. HAYNES. I do. 

Chairman WHITEHOUSE. Thank you very much. 

Ms. Raman, welcome. We will begin with you. Thank you very 

much for being here on the part of the Department of Justice. 

STATEMENT OF MYTHILI RAMAN, ACTING ASSISTANT ATTORNEY GENERAL, CRIMINAL DIVISION, U.S. DEPARTMENT OF 

JUSTICE, WASHINGTON, DC 

Ms. RAMAN. Chairman Whitehouse and distinguished Members 

of the Subcommittee, thank you for—— 

Chairman WHITEHOUSE. Is your microphone on? 

Ms. RAMAN. Let me start again. 

Chairman WHITEHOUSE. Before you start again, let me just make 

clear that for those who have prepared testimony, your entire testimony will be included in the record. We do call on our witnesses 
5 

to restrict their presentations in terms of time here, but the full 

statement becomes a part of the record of the proceeding. 

Again, Ms. Raman, thank you. 

Ms. RAMAN. Thank you very much. Thank you, Chairman 

Whitehouse and distinguished Members of the Subcommittee. 

Thank you for inviting me here today to share the views of the Department of Justice on challenges to the criminal enforcement of 

our campaign finance laws posed by the growing activity of super 

PACs and certain 501(c) organizations. I am honored to represent 

the Department at this hearing and to have the opportunity to 

oversee the important work of the Criminal Division. 

Protecting the integrity of our elections is one of the Department’s most important tasks, and enforcement of our campaign finance laws is a top priority. There is no question that private contributions to political campaigns are a fundamental part of the 

electoral process and that, under the Constitution, the ability to 

make political contributions is a protected component of our citizens’ political speech. At the same time, Congress and the federal 

courts have long recognized the importance of transparency and 

fairness in campaign finance to avoid any individual or entity exercising undue influence over our elections or over our elected officials. 

The Justice Department is fully committed to investigating and 

prosecuting those who willfully violate the disclosure requirements 

and the contribution limits established by our campaign finance 

laws. Indeed, since 2010, we have successfully prosecuted more 

than a dozen cases involving campaign finance violations. 

In the time since the Supreme Court’s decision in Citizens United 

v. FEC, however, the manner in which individuals and entities 

raise and spend money in our elections has changed dramatically 

and continues to change. The two most important developments affecting our ability to enforce the campaign finance laws are the rise 

of super PACs and the growing political activity of certain types of 

organizations created under 501(c) of the Internal Revenue Code, 

such as 501(c)(4) social welfare groups. 

We face certain investigative and prosecutorial challenges as a 

result of this new landscape. With regard to super PACs, the primary challenge we face is establishing illegal coordination between 

a super PAC and a campaign. As described more fully in my written testimony, as a result of certain FEC advisory opinions, regulations, and matters under review, we believe it will be exceedingly 

difficult for prosecutors to prove beyond a reasonable doubt whether and when super PACs and campaigns willfully engage in illegal 

coordination. 

With regard to designated classes of 501(c) organizations, we are 

hampered by the fact that, unlike PACs, super PACs, and other political organizations, these 501(c)s are not required to publicly disclose their donors to the FEC even though those donors’ contributions may be used as expenditures to seek to influence federal elections. Instead, 501(c) organization donors are disclosed only to the 

IRS as part of their tax returns, which can be filed a year or more 

after an election and are subject to the traditional restrictions on 

public disclosure imposed by our tax laws. 
6 

Thus, for example, a donor seeking to bribe a corrupt official 

could potentially use a 501(c) organization to hide his identity, and 

we would be unlikely to ever receive the warning signals we would 

need to investigate further. 

Vigorous enforcement of our campaign finance laws is essential 

to preserving both the integrity of our elections and the public’s 

confidence in these elections. The Justice Department’s prosecutors 

and federal law enforcement agents work tirelessly to uncover, investigate, and prosecute campaign finance offenses. But the recent 

changes in our campaign finance laws have made it easier for individuals and entities to buy influence over elections and conceal 

their conduct. And our ability to successfully combat these threats 

is hindered by the current law regarding what constitutes coordination between super PACs and candidates and by the loss of transparency arising from the use of designated 501(c) organizations in 

connection with elections. 

Despite these challenges, we are committed to vigorously rooting 

out corruption and ensuring the fairness of our elections through 

the robust enforcement of our campaign finance laws. 

Thank you for the opportunity to appear before you, and I am 

pleased to answer any questions you may have. 

[The prepared statement of Ms. Raman appears as a submission 

for the record.] 

Chairman WHITEHOUSE. Thank you very much. 

Ms. Haynes, welcome, and thank you for being here. 

STATEMENT OF PATRICIA HAYNES, DEPUTY CHIEF, CRIMINAL 

INVESTIGATION, INTERNAL REVENUE SERVICE, WASHINGTON, DC 

Ms. HAYNES. Thank you, Chairman Whitehouse and Members of 

the Subcommittee. My name is Patricia Haynes, and I am the Deputy Chief of IRS Criminal Investigation. Thank you for the opportunity to testify at this hearing on the criminal enforcement of our 

campaign finance laws. 

My purpose here today is not to discuss the campaign finance 

laws themselves or how violations of those laws are prosecuted, 

which is not my area of expertise. Rather, I am here to explain how 

IRS Criminal Investigation helps to enforce the tax laws of the 

United States and specifically Internal Revenue Code Section 7206. 

The mission of Criminal Investigation is to foster compliance in 

our tax system and compliance with the tax laws by investigating 

potential criminal violations of the Internal Revenue Code and related financial crimes. Criminal Investigation consists of approximately 2,400 special agents worldwide who investigate violations of 

the Tax Code as well as statutes related to money laundering and 

the Bank Secrecy Act. Criminal Investigation works closely with 

the Department of Justice and the United States Attorneys’ Offices 

around the country to bring criminal offenders to justice. The work 

being done by our special agents is a critical component of the IRS’ 

overall effort to encourage voluntary tax compliance. 

Criminal tax enforcement is a crucial component of the IRS’s 

overall effort to encourage voluntary compliance. Under IRS Code 

Section 7206, it is a felony to make false or fraudulent statements 

to the IRS or to file false or fraudulent returns or other documents 
7 

with the IRS. The most common prosecutions under this code section involve the underreporting of income or the fraudulent inflation of deductions on federal tax returns. But violations of 7206 

may also be charged in cases involving other types of false statements made to the IRS on an array of IRS forms, applications, and 

schedules. 

The government must prove four key elements in order for a return or statement to be deemed in violation of Section 7206: that 

the defendant making the statement declared it to be true; that the 

statement was materially false; that the defendant signed the 

statement willfully and with the knowledge that it was false; and 

that the statement was accompanied by a written declaration that 

it was made under the penalty of perjury. 

Let me turn now to an explanation of how Criminal Investigation 

investigates potential tax law violations. In general, Criminal Investigation conducts two types of investigations. The first type, 

known as an administrative investigation, is worked outside of the 

grand jury process. An administrative investigation can be initiated 

when Criminal Investigation receives or develops information indicating possible violations of laws related to tax, money laundering, 

or bank secrecy. If a special agent determines that the information 

supports the potential for criminal prosecution, the special agent 

will launch an investigation to gather evidence, with the special 

agent involved using the broad spectrum of techniques available to 

him or her. 

The second type of investigation arises when Criminal Investigation submits a request to the Justice Department to initiate a 

grand jury investigation either before, during, or after an administrative investigation. This type of investigation is initiated when 

the use of a grand jury would be more efficient or would strengthen 

the potential for prosecution. 

At the conclusion of an administrative or grand jury investigation, IRS criminal tax counsel evaluates the evidence gathered and 

provides advice on whether to recommend prosecution by the Department of Justice. 

Criminal Investigation also works with other law enforcement 

agencies that investigate campaign finance-related offenses. In the 

past, such cases have involved allegations of public corruption, improper use of campaign contributions, and the concealment of conduit or straw contributions. 

Mr. Chairman, that concludes my testimony. Thank you again 

for the opportunity to appear before the Subcommittee and describe 

the role that IRS Criminal Investigation plays in helping enforce 

tax laws and campaign finance laws. I would be happy to answer 

any questions. 

[The prepared statement of Ms. Haynes appears as a submission 

for the record.] 

Chairman WHITEHOUSE. Thank you very much. 

Let me begin first by thanking Ms. Raman and highlighting the 

point that she makes in her testimony that the current state of affairs impedes investigation into political corruption. That is a point 

that the Supreme Court has simply failed to address, both in Citizens United and in cases that followed. And it is a point that Senator McCain and I made in our brief to the U.S. Supreme Court, 
8 

and it is an area where I think they need to provide some attention. 

But what I would like to focus on in my questions are some very 

specific acts that appear to be happening fairly frequently and that 

appear to be happening with impunity. The first is a violation of 

the false statements laws and specifically in response to this question on the IRS form: Has the organization spent or does it plan 

to spend any money attempting to influence the selection, nomination, election, or appointment of any person to any federal, State, 

or local public office? So that is one sort of fact pattern that I think 

is quite clear and relatively simple. We have numerous instances 

where the answer to that question was a plain no, and then very 

significant political activity was then accomplished by the entity 

that said that it would not do that. So that is one. 

The second is the—I will just describe it. A super PAC has no 

ability to shield the identity of its donors. In fact, disclosure is part 

of the reason that there is a super PAC. And yet we often see— 

here we go—individuals or corporations, some anonymous entity, 

making a donation to what appears to be a completely shell corporation designed just for the purpose of laundering money into a 

super PAC and violating the law that would require disclosure of 

the true identity, which would seem to be a pretty clear 441(f) violation, making a contribution in the name of another. And I am 

wondering why it is that the Justice Department does not appear 

to bring any of those cases, and I think the immediate answer to 

that question—you can correct me if I am wrong—but I think the 

immediate answer to that question is that it is because you defer 

to the IRS to bring those cases to the Department, because they 

come out of the tax world, and I do not know why particularly the 

false statements—let me focus on that because that comes off the 

IRS report. 

I can see why the Department of Justice would want to defer to 

the IRS on criminal prosecutions involving complex tax matters. 

Making a false statement is something the Department prosecutes 

all the time. It does not take particular tax expertise to recognize 

a false statement when you see one or to prosecute one when you 

see one. What are the inhibiting factors that prevent DOJ from 

going forward? Are you rethinking deferring so much to the IRS in 

these matters where it is not a tax-specific underlying issue and is 

something as simple as making a false statement? And are you satisfied with the state of play right now with the lack of prosecution 

in this area? 

Ms. RAMAN. Thank you, Senator Whitehouse, for asking those 

questions. I should start by saying 18 U.S.C. 1001 is a bread-andbutter statute that we use in our corruption cases and our fraud 

cases. It is an important statute. It is one of the best ways for us 

to get to the heart of cases involving people who are trying to defraud the United States or lie to an agency of the United States. 

So we fully embrace and understand the importance of robust enforcement of 1001 in appropriate circumstances. 

Chairman WHITEHOUSE. But I am correct that no 1001 cases 

have been brought about Question 15 and the answers to it that 

appear to be false? 
9 

Ms. RAMAN. And you have highlighted, I think, some of the problems that we have encountered, particularly in the last several 

years, regarding how to get to the bottom of some of the activities 

in the flow of money that goes through 501(c)(4)s and super PACs. 

One of your charts described a scenario in which an anonymous 

donor provides money to a shell company and then contributes to 

a super PAC. That is, in fact, something we could and would prosecute under 441(f). 

Chairman WHITEHOUSE. But have not. 

Ms. RAMAN. Not yet. Without discussing ongoing investigations, 

we can assure you that we are incredibly vigilant about the use of 

these organizations as an end run around contribution limits. 

Chairman WHITEHOUSE. Well, I fully respect the constraints, 

particularly if a grand jury will succeed, that you cannot discuss 

ongoing investigations and you cannot discuss matters that are before a grand jury. But I believe it is perfectly legitimate to say 

whether a category of offense is being prosecuted or not anywhere 

in the Department and whether or not the Department has grand 

jury investigations addressing a category of offense underway without going into the details of who or where. And as I understand it, 

there is no activity at this point within the Department of Justice 

either on false statements made in response to Question 15 or 

under 441(f) for the shell identity laundering into a super PAC. 

Ms. RAMAN. Well, I actually cannot comment on any ongoing 

grand jury matters, but setting that aside, I do want to assure you, 

Senator Whitehouse, that—— 

Chairman WHITEHOUSE. Can I infer from that that there actually 

is a grand jury matter that might be going on? Or can you not even 

say that? 

Ms. RAMAN. I would not want to tell you that. 

Chairman WHITEHOUSE. OK. So as far as I can know, there is 

zero activity. 

Ms. RAMAN. And I do want to assure you, Senator Whitehouse, 

that our Public Integrity Section within the Criminal Division and 

the 94 U.S. Attorneys’ Offices are focused on these kinds of activities. 

441(f) is a statute that our Public Integrity Section has used repeatedly over the last several years. We used it prior to Citizens 

United, 441(f), in the context of conduit contributions where essentially people were using shell donors or straw donors to funnel 

money to candidates. Post-Citizens United, those people do not 

need to use those kinds of conduit schemes anymore. They simply 

donate directly to a super PAC because there are no limits on independent expenditures. So—— 

Chairman WHITEHOUSE. Unless they want to hide their identity, 

and then they do the shell corporation thing. And if that is a 441(f) 

case, I would think that that is something that could be brought. 

There is nothing that would legally inhibit bringing a 441(f) prosecution in a fact pattern in which a donor creates a shell corporation exclusively for the purpose of hiding their identity and then 

has the shell corporation, which they control and which is for the 

exclusive purpose of hiding their identity, make their contribution 

in its name to a super PAC. Correct? 

Ms. RAMAN. I absolutely agree. 
10 

Chairman WHITEHOUSE. Okay. Senator Cruz. 

Senator CRUZ. Thank you, Mr. Chairman. I want to thank both 

of the witnesses for joining us this morning. 

In my view, whenever Congress acts in the area of political 

speech, the touchstone for everything we do should be the First 

Amendment to the Constitution. And I think that the public should 

be particularly skeptical when you have elected politicians of either 

party enacting rules limiting the ability of public citizens to criticize the behavior of their elected officials. 

In my view, the First Amendment was created precisely to ensure that the citizens could speak without the men and women who 

sit in this body restricting what they say. And I think there are few 

areas that are more dangerous to have the government engaged in 

prior restraint or punishment after the fact for private citizens who 

would choose to speak out on politics. 

Indeed, of all the areas of speech—we have long lines of cases extending free speech protections to all sorts of questionable activities, including things like nude dancing—and that is a well-established line of cases from the Supreme Court. But of every possible 

area of speech, I think there is none more central to the core purposes of the First Amendment than political speech, than the ability of every American to speak up and express his or her views on 

the direction of this country. 

And I would point out that in saying this, I am not unfamiliar 

with the downsides. In Texas, I just came through a campaign 

where I was on the receiving end of $35 million in attack ads and 

was outspent 3:1. And let me say those who chose to put resources 

into launching attacks against me had a First Amendment right to 

do so, and God bless them for speaking out and being involved in 

politics. And I think we should all be concerned about those who 

are elected to office and immediately want to prevent anyone from 

speaking and being engaged in the political process or saying something they do not like. 

Now, Ms. Raman, I would like to ask you a few questions about 

your testimony. The first thing I would like to ask is: In the Department of Justice’s opinion, what is the government interest in 

regulating the independent expenditures of private citizens? 

Ms. RAMAN. Well, we obviously understand—— 

Chairman WHITEHOUSE. I think your microphone need to come 

on. 

Ms. RAMAN. I am sorry. We understand fully the holdings of the 

Supreme Court in this area, and we are not suggesting regulation 

of independent expenditures. Our challenge as corruption prosecutors is something altogether different. Our challenge as corruption 

prosecutors is to be able to understand when those independent expenditures really are not independent, where there is the kind of 

illegal coordination such that the expenditures become contributions and become an end run around the contribution limits that 

have long been recognized by both Congress and courts around the 

country. And that is our concern. We want to be able to have the 

tools that we have always had to be able to follow the trail of 

money, to be able to follow the paper trail, to be able to determine 

whether there are bad actors who are illegally trying to influence 

our elected officials by providing donations to the PACs that are il-
11 

legally coordinating with the campaign. And that is our challenge 

now. It is simply a different challenge post-Citizens United. 

Senator CRUZ. Ms. Raman, I want to make sure I understand 

your answer. If I understood you correctly, you said that the government interest was in investigating and/or prosecuting expenditures that were not independent, that were coordinated directly 

with a candidate or a campaign. Is it fair, then, to infer that the 

answer to the question I asked about does the Justice Department—is there a government interest in regulating independent 

expenditures, in other words, those expenditures that are not coordinated, is it fair to infer that your statement is there is not a 

government interest? Or is there a government interest? I do not 

want to put words in your mouth, so I would like to know what 

the Department’s view is. 

Ms. RAMAN. Well, I am not going to speak holistically for every 

circumstance in which there may be some law or regulation passed 

that may be viewed as affecting independent expenditures. But I 

am here to tell you that our primary purpose is to ensure that our 

campaign contribution limits are robustly enforced, and we are 

hampered from doing that now given that we simply do not have 

the tools that we used to have to determine whether or not super 

PACs are illegally coordinating with campaigns. 

Senator CRUZ. But today the Justice Department is not articulating any government interest in regulating independent expenditures of private citizens. Is that correct? 

Ms. RAMAN. Today I am here to tell you that our interest is twofold: One, we want clear and common-sense understanding of what 

coordination is so that we can do our job as robustly as we have 

been able to; and, number two, we need transparency in the way 

our campaign finance system works, so that if a donor is, in fact, 

using an organization like a 501(c)(4) to hide his identity, that we 

somehow be able to get that information. 

Senator CRUZ. Let me focus on the second part of your answer 

there. You said that the Department has an interest in transparency. Does the Department have a view on whether the First 

Amendment protects a right to anonymous speech? 

Ms. RAMAN. Again, I cannot get into every hypothetical in which 

we might have some interest in talking about anonymous speech. 

And I am certainly not here to suggest that our goal is to impede 

a lawful ability of individuals to speak on behalf of—— 

Senator CRUZ. Ms. Raman, I am asking what I think should be 

a fairly straightforward question. The Department is testifying 

today in support of legislation forcing disclosure of political speech, 

and my question is: Does the Department believe the First Amendment protects a right to anonymous speech? That is a question that 

goes right to the heart of your testimony. 

Ms. RAMAN. I think, Senator Cruz, more important than what 

the Justice Department thinks, Citizens United, the Supreme Court 

upheld a disclosure regime and found it fully consistent with the 

First Amendment. And we believe that the kind of disclosure regime that the Supreme Court upheld in Citizens United is critical 

to our ability to continue to understand—— 
12 

Senator CRUZ. Does the Department think it would be permissible under the Constitution for the Federal Government to require 

the NAACP to disclose a list of all of its members? 

Ms. RAMAN. I am certainly not here to suggest that that is what 

we are asking for. 

Senator CRUZ. I mean, as you know, the Supreme Court held 

that cannot be required. 

Ms. RAMAN. And, Senator Cruz, I am certainly not here to suggest otherwise. What I am suggesting is that there is a risk that 

we have seen of bad actors using the anonymity that is given to 

them when they donate to 501(c)(4)s to hide the true purpose of 

their donation. And we need to be vigilant about that. We need to 

be able to determine when those donors are acting with bad intent 

and, frankly, when a campaign or an elected official may be knowingly allowing that kind of donation to occur intending to be influenced in some corrupt way. That is our job. We need to ensure that 

we are robustly and vigorously enforcing Title 2, the campaign finance laws, but also that we vigorously enforce our corruption 

laws. And it is not—it has certainly been the case that we have 

had several cases in which campaign contributions are, in fact, part 

of the quid pro quo that goes to the heart of a bribery case. 

Senator CRUZ. Okay. Thank you very much. I appreciate your 

being here this morning. 

Ms. RAMAN. Thank you. 

Chairman WHITEHOUSE. Well, first, let me thank my friend Senator Cruz for bringing new dancing into what was a very dry and 

technical hearing. 

[Laughter.] 

Chairman WHITEHOUSE. That is going to raise the profile of this 

hearing quite a lot. 

I wanted to just follow up. There is nothing in the First Amendment that would protect threatening or corrupt speech, even if it 

is anonymous. 

Ms. RAMAN. That is right. 

Chairman WHITEHOUSE. And there is nothing in the First 

Amendment that protects false statements and the prosecution of 

false statements when provided under penalty of perjury. 

Ms. RAMAN. Of course not. 

Chairman WHITEHOUSE. And there is nothing in the First 

Amendment that protects anybody’s right to violate disclosure laws 

through a shell corporation. 

Ms. RAMAN. No. 

Chairman WHITEHOUSE. And that so far has been the focus. Let 

me ask Ms. Haynes a question. This is an issue where there is obviously often partisan disagreement, but we have some interesting 

partisan agreement among the witnesses who will follow, which is 

that, as professional as your organization is, you are not well suited to doing this particular work. Mr. Noble says it does not appear 

there is any effort to target donors to super PACs who use front 

organizations; there appears to be little effort being given to making sure politically active groups claiming 501(c)(4) status are complying with the law; it appears that the agency rarely challenges 

a group’s 501(c)(4) designation based on political activity; and ultimately it does not appear that the law is being enforced. 
13 

Mr. Smith says that this is a mission for which the IRS lacks 

knowledge and expertise and which is tangential to its core responsibilities, the Service has long been particularly prickly about being 

dragged into political wars, and the agency, ‘‘is not equipped or 

structured to do the job it was asked to do.’’ 

Let me ask both of you: Does it make sense to have the IRS right 

now get from the Department of Justice the deference that it does 

with respect to those two narrow particular kinds of cases—the 

false statement case under Question 15, or the 441(f) case in which 

you have a clear shell corporation manufactured for the purpose of 

violating a disclosure law? I do not believe—I asked Ms. Raman 

this question—that the Department of Justice has ever made a 

case or is even investigating any case in either of those areas. I do 

not know if the IRS is either. If you are not, is that a signal that 

maybe DOJ’s policy of deference to the IRS in this particular set 

of areas, which are not tax-law specific, have nothing to do with 

understanding the Tax Code, and are all about false statement and 

shell corporation behavior, which is, as Ms. Raman pointed out, frequent in many areas of criminal behavior, whether that should be 

rethought and whether you are confident that the IRS is doing a 

good enough job on its own and making adequate referrals? 

Ms. HAYNES. Well, Senator, I can say that the IRS Criminal Investigation has been involved in violations of campaign finance 

laws using the statutes that we have. In fact, one of the cases that 

we were involved in was mentioned in Ms. Raman’s written testimony out of New Jersey. 

Chairman WHITEHOUSE. A straw donor case. 

Ms. HAYNES. Pardon me? 

Chairman WHITEHOUSE. A straw donor case. 

Ms. HAYNES. Yes. Yes, it was. 

Chairman WHITEHOUSE. But not one of these shell corporation to 

super PAC cases. There has never been one of those done. 

Ms. HAYNES. I do not have any information that I can share on 

any case like that. 

Chairman WHITEHOUSE. Nor a false statement in answer to the 

no on Question 15 and then subsequent immense political activity. 

Ms. HAYNES. I do not have any information I can share on a 

501(c)(4)-related false statement case, you are correct. But IRS is 

still engaged in these types of investigations. 

In the course of a criminal investigation, the special agents gather all the facts and circumstances and make a recommendation 

based on what they feel has the strongest likelihood of prosecution, 

whether that is a 7206 charge or a 7212(a) charge, as was in the 

prior case that I mentioned. That recommendation is reviewed by 

our criminal tax counsel and then ultimately when it is referred to 

the Department of Justice, the discretion lies with the prosecutor 

on what violations to charge. 

So IRS is involved in these types of cases. It is just that we have 

not had one that I can speak of with that particular charge. 

Chairman WHITEHOUSE. Well, I guess under the circumstance of 

the testimony that we have from the subsequent panel on what we 

have today, I would urge that the Department and the Service get 

together and rethink whether in these two specific areas, which I 

think bear little resemblance to traditional tax violations and are, 
14 

in fact, very, as I think you used the words, ‘‘plain vanilla’’ criminal 

cases, whether or not that deference to the IRS is actually serving 

the public interest at this point, or whether the Department could 

not proceed to investigate, empanel grand juries, bring people before them, generate evidence, and put together a criminal case 

showing a fairly straightforward false statement or a fairly 

straightforward shell corporation disclosure violation. And I do not 

need you to answer that right now because I know that question 

is going to be answered, if it is answered at all, by people above 

you in both organizations. But I would ask you to take that away 

from this hearing. 

Ms. HAYNES. Sure, Senator. 

Chairman WHITEHOUSE. I had another round. Senator Cruz, you 

are welcome to another round. 

Senator CRUZ. Thank you, Mr. Chairman. 

Ms. Haynes, does the IRS have any position on whether additional campaign finance legislation should be passed by Congress? 

Ms. HAYNES. Senator, I do not have an official position on that 

matter. I leave those decisions up to our criminal tax counsel or 

our tax counsel in the Department of Treasury to establish those 

types of regulations or improvements. 

Senator CRUZ. Thank you. 

Ms. Raman, I would like to go back to the conversation we were 

having a few minutes ago and understand, as best I can, the Department’s position with regard to the constitutional protections on 

independent expenditures by private citizens. 

As I understood our discussion, the principal basis you were 

pointing to additional disclosure requirements on private political 

activity is that that transparency would aid in discovering if there 

is corruption or bribery. Am I understanding you correctly? 

Ms. RAMAN. Corruption and bribery, and if there are other violations of our campaign contribution limits. 

Senator CRUZ. Now, you would certainly agree that there are 

limits—and I would think significant limits—to the theory that additional government information would be helpful for discovering 

crime, that that is a theory that has the potential to require government disclosure of virtually everything. And I am sure you 

would agree there are limits to that theory. 

Ms. RAMAN. Of course, and we obviously just want a reasonable 

disclosure regime that balances the need for people to speak freely 

and have their voices heard in the political arena while still assuring us that we are able to combat both corruption and the appearance of corruption. 

Senator CRUZ. Now, when I asked about a constitutional right to 

anonymous speech, you made reference to Supreme Court decisions. Does the Department of Justice maintain that the Supreme 

Court has been wrong in concluding that there is a First Amendment right to anonymous speech? 

Ms. RAMAN. It is not the government’s position to second-guess 

the Supreme Court. I am here, however, to clearly describe what 

some of our challenges are in light of Citizens United. Obviously, 

the government took a particular position before the Supreme 

Court in Citizens United, but now we have a law, and we intend 

to follow it. 
15 

That having been said, there are real challenges. There are real 

challenges to our ability to enforce the campaign contribution laws, 

and there are real challenges to our ability to determine when and 

whether there is the type of corruption that is rooted in campaign 

contributions in exchange for official acts. 

Senator CRUZ. Well, and I think everyone on both sides of the 

aisle would agree that preventing corruption and preventing bribery is an important governmental interest and deserves serious 

focus. You mentioned, though, in your prepared testimony that you 

were concerned also not just about corruption and bribery but what 

you characterized as ‘‘undue influence.’’ And I guess I have a little 

bit of difficulty understanding what ‘‘undue influence’’ means, because if it is not corruption or bribery, which is a very different 

thing, it strikes me that the citizens are due all the influence they 

can get in a democratic process. 

So I am curious what you mean by ‘‘undue influence,’’ if it is any 

different from corruption or bribery. 

Ms. RAMAN. I do not think I intend to suggest that it is something different from illegal acts such as corruption or bribery or extortion by officials. What it does—what it is that—I am focusing, 

however, on the fact that undue influence often translates into 

those kinds of activities. I think it is axiomatic that contributions 

lead to influence, and the larger the contribution, the larger the influence. And we have seen in certain of our corruption cases that 

public officials succumb to that influence and agree to take official 

acts in exchange for campaign contributions. And we just want to 

be vigilant about ensuring that we can get to the heart of those 

kinds of cases when and if we encounter them. 

Senator CRUZ. Well, but the Supreme Court has certainly recognized a distinction between contributions and independent expenditures, and there are a great many organizations on the left and on 

the right that devote real resources to try to convince their fellow 

citizens that they are right on particular issues of public importance. 

I assume it is not, for example, the Department of Justice’s position that a group like the Sierra Club exercises undue influence. 

Am I right in that? 

Ms. RAMAN. And, again, Senator Cruz, I want to be absolutely 

clear. My concern is not about any one particular group or about 

undue influence in and of itself. What I am concerned about is 

that, given the rise of super PACs, our ability to understand when 

there is the type of coordination that causes an expenditure to become a contribution and that contribution is over the contribution 

limits that have long been established by Congress, that we want 

to be able to get to that, get to the bottom of that. 

Senator CRUZ. So is it right, then, that to get to the bottom of 

it the Department would like to know every political contribution 

made to every private group? Again, I do not want to put words 

in your mouth, so I am trying to understand what your testimony 

is. 

Ms. RAMAN. There are two things that would aid us as prosecutors: greater transparency in general, and we are happy to work 

with Congress or your staffs to talk further about the particulars; 

number two, a more common-sense understanding and definition 
16 

about what constitutes coordination. And those two things would 

assist us as prosecutors in being able to continue to do the jobs 

that we have always done in terms of rooting out corruption. 

Senator CRUZ. You know, we have seen in recent news reports 

instances of bribery and corruption of public officials receiving 

bribes. I think one, it was alleged, received a bribe in a box of 

Cheerios. Another public official recently was alleged to have kept 

a bribe in his freezer. So corruption is a real problem. But I think 

it is qualitatively different from regulating the efforts of private 

citizens to speak out in the political process. And I will make clear 

at least my views. I asked about the Sierra Club, and I can happily 

say, no, I do not think they exercise undue influence. I do not think 

Planned Parenthood exercises undue influence. I do not think the 

unions exercise undue influence. I do not think the NRA exercises 

undue influence. I think every one of them has a constitutional 

right to speak out in a democracy. I think their members care passionately about the values they are espousing, and that is the way 

our system is supposed to work. And I think we should be very cautious about the Federal Government restricting the ability of private citizens to express their views on the direction of our country. 

Thank you. 

Chairman WHITEHOUSE. If I might add, because I think Senator 

Cruz makes a very good point, and I would want the record of the 

hearing to reflect that I think we have agreement amongst everyone that it is never the government’s position or proper role to determine based on the amount of influence that a political group or 

interest or individual has that they have too much. That is a role, 

I think, for the voters to determine. And in that regard, I think it 

is important that the record of the hearing reflect that it is not just 

corruption and bribery that are of concern in this area, but as the 

Supreme Court has clearly established, making sure that citizens 

are informed is an important public goal, as the Supreme Court 

said, to hold corporations and elected officials accountable for their 

positions and supporters so citizens can see whether elected officials are ‘‘in the pocket of so-called monied interests.’’ And to the 

extent that there are laws that provide that disclosure, I think the 

government then does have an interest, if it not to be made a 

mockery, in enforcing the laws that we have created for that disclosure. And clearly there are appropriate limits on that, but I think 

that disclosure is an important element in this discussion. 

And, with that, I will release these two witnesses. Let me thank 

you both for the work you do on behalf of the people of the United 

States. I spent four years as a United States Attorney and had 

great pride and satisfaction in working with people at the Department of Justice and Main Justice and with the IRS criminal investigative agents. You do great work, and I am glad you came here 

today, and I thank you. 

Ms. RAMAN. Thank you. 

Ms. HAYNES. Thank you. 

Chairman WHITEHOUSE. We will take about a two- or threeminute break while the room gets reset for the second panel of witnesses and come back into session in just a moment. 

[Pause.] 
17 

Chairman WHITEHOUSE. If the witnesses are present, can I ask 

them to take their seats and we can proceed with the remainder 

of the hearing? 

Well, we are awaiting the arrival of Mr. Colvin, who I understand has been seen and must be nearby, so we will have him here 

in a moment. Indeed, here comes somebody with a determined approach to the chair. There we go. Thank you very much. 

Let me introduce the witnesses and then have them sworn and 

then ask you each to make your statements. 

First, on our left, on the witnesses’ right, is Lawrence M. Noble. 

He is the president and CEO of Americans for Campaign Reform, 

which is a nonpartisan organization supporting public funding for 

federal election. He is also an adjunct professor at the George 

Washington University Law School, where he teaches campaign finance law. Previously, Mr. Noble served for 13 years as the general 

counsel for the Federal Election Commission. 

Our second witness, front and center, is Gregory L. Colvin. He 

is chairman of the board of Adler & Colvin, a San Francisco law 

firm that specializes in representing nonprofit organizations and 

their donors. Mr. Colvin has written widely on the political activities of tax-exempt organizations. From 1991 to 2009, he served as 

co-chair of the Subcommittee on Political and Lobbying Organizations and Activities of the Exempt Organizations Committee of the 

ABA Tax Section. 

And furthest to my right is Bradley A. Smith, a professor of law 

at Capital University Law School in Columbus, Ohio, and founder 

and chairman of the Center for Competitive Politics. Mr. Smith 

served as a Commissioner on the Federal Election Commission 

from 2000 to 2005, including service as its Chairman in 2004. 

I welcome all the witnesses and ask if you would please stand 

and be sworn. Do you affirm that the testimony you are about to 

give before the Committee will be the truth, the whole truth, and 

nothing but the truth, so help you God? 

Mr. NOBLE. I do. 

Mr. COLVIN. I do. 

Mr. SMITH. I do. 

Chairman WHITEHOUSE. Thank you very much, and please be 

seated. 

Mr. Noble, we begin with you. Thank you very much for being 

here. 

STATEMENT OF LAWRENCE M. NOBLE, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, AMERICANS FOR CAMPAIGN REFORM, 

WASHINGTON, DC 

Mr. NOBLE. Thank you. Chairman Whitehouse, Senator Cruz, I 

want to thank you for inviting me to testify at this Committee on 

this very important issue of the enforcement of the campaign finance laws. 

It is estimated that over $6 billion, well over $6 billion, was 

spent on the last elections, with so-called independent groups—that 

is the super PACs, the 501(c)(4) organizations, and the others— 

spending somewhere around $1 billion, or at least that was what 

was reported. We also know that a tremendous amount of the 

money was not reported. 
18 

So we have a situation here now where our elections are being 

funded by these independent groups, which is constitutional, but 

there are also laws surrounding how those groups should operate, 

and those are not being followed. 

Many point to the Supreme Court’s decision in Citizens United 

and other decisions as saying it has hampered the ability of the Department of Justice, the Federal Election Commission, and the IRS 

to enforce the laws. And that is true. In some ways it has. The Supreme Court has recognized the constitutional right to make independent expenditures by individuals and corporations. 

But that overstates the case, because those who say that often 

say that, well, there is no point in trying to do anything, there is 

no point trying to do any reform because the power of corporations, 

unions, wealthy individuals cannot be effective under what the Supreme Court has said. 

But the reality is that the FEC—the Federal Election Commission—the IRS, and the Department of Justice are not enforcing the 

laws on the books. And if they would enforce the laws on the books, 

a number of the issues that we have would go away or at least 

would be more manageable. 

First of all, super PACs are required to report their donors, as 

has been discussed. They are political action committees. It seems 

logical that if they are required to report their donors, they should 

actually report the person who really gives to them. And, therefore, 

you should have a law, it would seem, that would prevent somebody from giving through a straw donor to a super PAC to hide 

their identity. That is logic. And, fortunately, there is such a law, 

and that is 2 U.S.C. Section 441(f), which allows the government 

to prosecute the giver, the intermediary organization, and the 

super PAC if they knowingly give money. Through that intermediary organization, the super PAC knows about it for the purpose of hiding the identity of the donor. That is illegal right now. 

That is not being prosecuted. 

Even beyond super PACs, 501(c)(4) organizations do not have to 

report their donors. That is absolutely true. But if they make independent expenditures, they do have to report. And they have to report anybody who gives over $200 for the purpose of furthering an 

independent expenditure. That would sound like if I gave to a 

501(c)(4) organization and said, ‘‘Here is money to make independent expenditures,’’ my name would be reported. It is not happening. Why? Because FEC Commissioners have determined or 

some have determined that unless you give for a specific ad, you 

do not have to be disclosed. It is very difficult to prove anybody has 

given for a specific ad. 

Beyond that, any organization, whether it is a 501(c)(4) or a 

501(c)(3), any organization or any group of persons that makes expenditures over $1,000 and has as its major purpose political activity, federal election activity, has to report as a political committee, 

report all of its donors. That is the current law. 

Given the statements made by many of the 501(c)(4) organizations, given what we know about their funding, it is hard to see 

how there is at least not an investigation as into why some of these 

are not political committees. But the Federal Election Commission 

has basically given up on trying to define what is a political com-
19 

mittee because of a dispute on the Commission or enforcing any 

group to report as a political committee if it decides not to. 

As to the coordination issue, this is an area where reality and 

the law have separated. Under the law, these expenditures are allowed because they are independent. The Supreme Court said very 

explicitly, the constitutional right for an independent expenditure 

comes from the fact that, because it is independent, it could hurt 

the candidate as well as help the candidate, and there is virtually 

no chance of a quid pro quo or any potential corruption because of 

that separation. 

Put that statement up against what we saw in the last election, 

where candidates have their own super PACs, raise funds for their 

own super PACs, call them their super PACs. Their staff, their 

former staff go to work on those super PACs, and it is not surprising that neither the candidates, the public, or anybody else 

seems to think that these are truly independent organizations. So 

they are not independent organizations. 

Why is this happening? Because the FEC, the Federal Election 

Commission, is not enforcing the law on the books; the Department 

of Justice is not independently enforcing the law on the books; and 

as was discussed in the previous panel, the IRS is not taking a serious look at what these 501(c)(4) organizations are doing. 

Thank you. 

[The prepared statement of Mr. Noble appears as a submission 

for the record.] 

Chairman WHITEHOUSE. Thank you very much, Mr. Noble. 

Mr. Colvin, welcome. Please proceed. You need to turn on your 

microphone, sir. 

STATEMENT OF GREGORY L. COLVIN, PRINCIPAL, ADLER & 

COLVIN, SAN FRANCISCO, CALIFORNIA 

Mr. COLVIN. Good morning, Senators. I appreciate the chance to 

come before you and address the question why we have seen so little enforcement—civil or criminal—of the federal tax laws that 

apply to political activities of 501(c)(4) organizations. 

My law firm represents a broad range of nonprofits and their donors. For 35 years, I have formed tax-exempt organizations, including (c)(4)s, and advised them on their political activities. 

Why is the IRS in the business of enforcing political rules? You 

see, every person, every entity, in the country has a federal tax life. 

It must pay tax on its income unless it is exempt by statute. The 

only entity allowed to have a primary political purpose is a 527 organization; it has a partial tax exemption and must disclose its donors over $200. All other tax-exempts must have a primary purpose 

that does not include politics. Therefore, the IRS cannot avoid the 

law enforcement duty to, one, qualitatively define political activity 

and, two, quantitatively determine what is too much to keep your 

exemption. 

The annual Form 990 has a question under penalty of perjury: 

‘‘Did the organization engage in direct or indirect political campaign activities on behalf of or in opposition to candidates for public office? ’’ If you answer yes, you must report the amount spent, 

the number of volunteer hours, and describe what you did. 
20 

There is, though, a fundamental problem affecting enforcement 

on 501(c)(4) nonprofits. The tax rules are vague, unpredictable, and 

unevenly applied. Only the most flagrant violations could be knowing, willful, or deliberate and subject to criminal prosecution. 

What is political intervention? The IRS interpretation must be 

gleaned from a few old cases and rulings, internal training materials, and a few bursts of guidance from the last decade. The IRS 

insists on using an open-ended ‘‘facts and circumstances’’ approach 

rather than drawing bright lines. Political intervention under tax 

law is more than express advocacy under election law, we are told, 

but what is it? Reasonable minds could differ, and they do. 

How much political intervention is too much for a tax-exempt 

(c)(4)? Its primary operations must promote social welfare—‘‘the 

common good’’ of the community. The IRS, therefore, deduces that 

non-qualifying activities must be ‘‘less than primary.’’ 

While the Service has never pinned this down to an annual level 

of expenditures, it has tacitly accepted 49 percent as a defensible 

figure. Yet because of the IRS ‘‘facts and circumstances’’ approach, 

we can never be sure. So,the speech of some (c)(4) groups is chilled. 

They avoid the risk and stay far below the 49 percent level, while 

their adversaries may go right up to the edge. 

Two things I want to say about the focus of this hearing on 

(c)(4)s: First of all, there are well over 100,000 registered with the 

IRS. They include well-known organizations such as Rotary, 

Kiwanis, and the Disabled American Veterans, as well as Sierra 

Club and the NRA. Most are highly reputable and do very little or 

no political activity. They do not present a law enforcement problem. 

Second, enforcing these tax laws is not limited to the (c)(4) class. 

The vagueness of these rules affects (c)(3) charities, (c)(5) unions, 

and (c)(6) trade associations that have the same primary purpose 

rule. 

Here is the most difficult political tax law enforcement problem: 

What is the difference between a political campaign ad and an 

issue ad that names a candidate, says something good or bad about 

them, and tells the viewer to contact the candidate about the issue? 

BCRA in 2002 required disclosure to the FEC of spending on 

‘‘electioneering communications,’’ defined basically as paid advertising that names a candidate and is broadcast within 30 or 60 

days before an election. The IRS went in a different direction. It 

issued Revenue Ruling 2004–6, listing a series of six bad factors 

and five good factors by which to judge ‘‘advocacy communications.’’ 

Then three years later, it issued Ruling 2007–41, with a seven-factor test on issue advocacy. The two multifactor tests are not the 

same. Neither of them applies directly to the key question in this 

hearing: What political speech by a (c)(4) would count against its 

exemption? 

So how can a lawyer advise his or her client, how can a prosecutor evaluate a case, in which a (c)(4) denies it will engage in 

candidate politics on its federal tax form, and on the same day in 

March it broadcasts a TV ad praising a Senator who is up for reelection in November? 

Under the seven-factor IRS test, three factors look bad: It names 

a candidate, expresses approval, and is not connected to an event 
21 

such as a vote on legislation. But three factors look good: The election is still eight months away, the ad makes no reference to the 

election or voting, and it mentions no ‘‘wedge’’ issues separating the 

candidates. What if the ad is targeted to a battleground State? Targeting is a factor in one ruling but not the other. 

With this kind of vague, uncertain, multifactor approach, the 

(c)(4) can find a reputable lawyer to advise that the ad is not political intervention under the IRS tests. Therefore, an officer of the 

(c)(4) entity can sign a tax return believing that it is true and correct. 

I want to conclude by suggesting that the IRS itself can solve 

both the qualitative and quantitative problems. 

The IRS and Treasury could establish a regulatory project to define bright lines for political intervention. I chair a drafting committee of the Bright Lines Project, sponsored by Public Citizen, 

which is attempting to do exactly that. 

Finally, the IRS could reconsider its position on the ‘‘less than 

primary’’ ceiling for (c)(4)s, (5)s, and (6)s. It could establish a percentage, at 10 percent, as an insubstantial level of political activity. 

These reforms would go a long way toward restoring public confidence in the tax-exempt universe. 

Thank you. 

[The prepared statement of Mr. Colvin appears as a submission 

for the record.] 

Chairman WHITEHOUSE. Thank you, Mr. Colvin. 

And now we—I do not know if it is appropriate to call you ‘‘Commissioner Smith’’ still? Does the title stick with you after you are 

gone. ‘‘Mr. Smith,’’ in any event. We will go that way. Mr. Smith, 

welcome. 

STATEMENT OF BRADLEY A. SMITH, CHAIRMAN, CENTER FOR 

COMPETITIVE POLITICS, JOSIAH H. BLACKMORE II/SHIRLEY 

M. NAULT PROFESSOR OF LAW, CAPITAL UNIVERSITY LAW 

SCHOOL, COLUMBUS, OHIO 

Mr. SMITH. Thank you, Chairman Whitehouse and Senator Cruz. 

Thank you for inviting me to testify today. 

I want to actually be the one who challenges some of the assumptions that have underlaid this hearing. For example, it was said at 

the beginning that there are massive amounts of money flooding 

into the system because of Citizens United. It is true, for example, 

that spending in 2012 was up about 37, 35 percent from 2008. But 

between 2008 and 2004, spending rose by about 30 percent. Spending has gone up in every Presidential election in my lifetime, usually by a substantial amount. And to suggest that this is the consequence of one decision I think is incorrect. 

In fact, when we look at the numbers, it appears that at an absolute maximum, about five percent of the spending came from corporations, for-profit corporations, and we get there only by suggesting that everything nonprofits spent, (c)(4)s spent, was from 

corporations. And we know that that is not true. We know that 

much of that came from unions, and much of it came from other 

individuals and so on. 

Second, I do not agree that there is a huge crisis of enforcement 

here. For example, we talk about the disclosure aspect. That has 
22 

gotten a lot of attention today. In fact, it appears that about five 

percent of political spending in the last election went ‘‘undisclosed.’’ 

Okay? Now, $380 million sounds like a lot; five percent does not 

sound like maybe it is such a dominant problem in American politics. And even that overstates it. Much of that spending was, in 

fact, done directly by groups that are well known to the public. If 

we are trying to inform the public, I think most people know what 

the agenda of the Chamber of Commerce is, or most people know 

what the agenda of most of the types of groups that were giving 

happen to be. 

We have talked some about shell corporations. You know, people 

go over these super PAC contribution lists and in great detail. That 

is what CREW exists to do and so do some of these other groups. 

And to my knowledge—I may have missed one or two, but to my 

knowledge there have been two recorded episodes of ‘‘shell corporations.’’ In both cases, it was revealed within a matter of hours, if 

not days at the most, who was the spender behind those shell corporations. And as has been pointed out, that activity is probably already illegal, although the people did not seem to recognize it because so many people have been going around suggesting that, in 

fact, you could use shell corporations in this way. 

Next I want to address the issue of shifting enforcement to other 

agencies than the FEC, which has been the big creature here in the 

room. It kind of surprised me to hear all this talk about should the 

IRS be enforcing campaign finance laws and so on. Much of what 

is talked about and complained about with the FEC is not a bug. 

It truly is a feature. People complain all the time: ‘‘Well, the FEC 

is prone to gridlock. It is 3–3.’’ Actually, it does not deadlock very 

much 3–3. When it does, that usually decides the issue. But beyond 

that, it is designed that way intentionally so that one party cannot 

take over the political system and ram things through on a 3–2 

vote of Commissioners. That is precisely what Congress said we 

were not going to have, and I do not think there is any Member 

of this chamber who would be willing to stand on the floor and say, 

‘‘I am willing to give the opposition party the ability to decide who 

speaks when on politics without input from my party.’’ I do not 

think any Member of this chamber would do that. 

We need to recognize as well, for example, on coordination, the 

rules are complex and it is hard to prove coordination. But that is 

as well a design, because coordination investigations are extremely 

sensitive. I can guarantee—well, I cannot guarantee, but I am pretty sure—that at some point in the next 30 days, you know, all the 

Senators here are likely to meet with somebody who is from a 

super PAC, an interest group, a union, a trade association, right? 

At this point, if it is a coordination investigation, we should then 

be able to investigate that meeting. Who knows what they talked 

about? Maybe if that trade association or union did any election expenditures, maybe it was coordinated. And this is what we find 

with these coordinated hearings. They are extremely intrusive into 

political strategy, into political tactics, and into the ongoing goals 

and efforts that folks made. 

So I want to conclude by suggesting that we need to be very careful about trying to get aggressive enforcement out of Justice. We 

have seen that in the past. We have seen that at the IRS in the 
23 

past. The IRS for many years, under pretty much every President 

up through Richard Nixon, of both parties, was used for political 

purposes. And for that reason it has sought hard to stay out of politics, and now Congress is trying to drag it back in as a campaign 

enforcement mechanism because it is unhappy with the fact that 

the FEC is set up to guarantee a bipartisan regime. 

I am going to suggest here that if you really want to shatter confidence in government, if you really want to build this trust, if you 

want to create the appearance of corruption, then what you ought 

to do is use a straight party-line political vote, either in this Congress or at the administrative agencies that have party-line majorities, and use that vote to attack the other side politically with no 

bipartisan support. I can think of nothing more that would shatter 

public confidence in government and the impartiality of the government agencies, including Justice and the IRS, than taking that approach. 

Thank you very much. 

[The prepared statement of Mr. Smith appears as a submission 

for the record.] 

Chairman WHITEHOUSE. Would that apply to the Supreme Court 

and the 5–4 decision with the Republican judges all holding with 

no support from the minority? 

Mr. SMITH. I am not sure how that actually relates to the question, but I guess I would say that, no, I do not think that holds 

there at all. I do not think the judges are sitting in partisan roles, 

and they are not running for election, and they are not worried 

about who is going to be the next Speaker. 

Chairman WHITEHOUSE. Well, they are not running for election, 

anyway. 

Mr. Noble, I wanted to ask you, I am one who believes that the 

FEC is logjammed. I am one who believes it is deliberately 

logjammed by outside forces that have come to bear on the Commission itself to stop actions that interfere with practices that are 

useful in the political world but may actually be unlawful if the 

FEC would act. And in that regard, we spend, I do not know, close 

to $70 million on this Commission. Would it be useful to and will 

you recommend establishing a private right of action for a candidate or campaign that believes it has had the law violated 

against it, cannot get an answer from the FEC, and now has the 

right to go to the traditional constitutional locus for adjudication in 

the American system of government, which is a jury, and have that 

heard? And perhaps if there was that alternative, then the satisfaction of blockading the FEC would dissipate, and it would become 

more of an active and responsive body again. 

Mr. NOBLE. I think a private right of action is important. There 

is one right now in the FEC. There are cases certain complainants 

can bring if the FEC does not act. Now, there are a lot of hoops 

you have to go through, but—— 

Chairman WHITEHOUSE. It is very rarely done, is it? 

Mr. NOBLE. It is very rarely done, and there are constitutional 

reasons, including standing concerns about whether people can actually sue another party. 

While I think it is an important factor, I would hate to rely on 

it too much because that is only available to major players, the peo-
24 

ple who can afford lawyers. The party committees can. It is not 

available to the average citizen who cannot afford to sue the agency. 

And I agree with Commissioner Smith on something which is 

very important, that I think the Department of Justice needs to do 

much more, but I do agree that a locus should be at the FEC. I 

think the problem is the FEC is not enforcing the law, and it is 

deteriorated tremendously since Commissioner Smith was there. 

And there have been always been differences on the Commission, 

but right now what you see are true ideological differences, where 

you have three Commissioners who just do not believe much of the 

law. 

And I appreciate Commissioner Smith saying that these are not 

bugs, these are features. I do think it is a bug that, as of the end 

of this April, all six seats on the Commission will have expired, and 

no appointments have been made to the Commission. I do think 

that is a bug. I think it is a bug that since 2010, when Citizens 

United came out, the FEC has been trying—actually, it has given 

up—to come up with regulations to explain how Citizens United affects the law. It has been unable to do that. 

It is kind of like saying when I had a sports car that ran half 

the time that that was actually a feature stopping me from using 

gas. No, it was a bug, and it is not acceptable. 

The FEC is broken. It does not work, and something has to be 

done about that. And I agree with Commissioner Smith you have 

to be concerned about the political ramifications. But I think that 

if you had an effective FEC, a lot of these issues would go away. 

Obviously, there would always be issues that exist, but I do think 

a private action is part of it, but you have to address the FEC. 

Chairman WHITEHOUSE. Mr. Colvin, in your testimony you addressed the Vision Service Plan case and the insubstantiality 

standard. Could you elaborate a little bit further on the insubstantial standard as it came through Vision Service and how that conforms or does not conform with the political activity standard, and 

whether that should conform? I think you reached the conclusion 

that it should conform. Could you explain your argument there and 

describe Vision Service Plan a little bit more? 

Mr. COLVIN. Certainly. The Vision Service Plan did not involve 

political activity. It involved a health insurance plan that had, in 

the IRS’ view, too much private benefit to certain members of the 

plan. The test that it used to determine what was too much was 

an insubstantial test. ‘‘Insubstantial’’ does not have a precise—— 

Chairman WHITEHOUSE. ‘‘Insubstantial,’’ in quotes. 

Mr. COLVIN. That is right. 

Chairman WHITEHOUSE. Yes. 

Mr. COLVIN. It does not have a precise percentage to it, but there 

have been cases in other areas of tax law affecting both political 

and lobbying activity that have said somewhere around five or 10 

percent would be considered insubstantial. 

The legal precedent for this is that when the IRS interprets 

words like ‘‘exclusively’’ and ‘‘primarily,’’ it means all but insubstantial. 

So the presence of one activity or one purpose, if it is substantial, 

destroys the tax exemption. However, the IRS has not taken that 
25 

stance clearly in the case of political activity and, instead, in Revenue Ruling 81–95, provided that a 501(c)(4) organization can engage in political activity, so long as it is less than primary. And in 

the absence of any percentage, many have interpreted that to be 

49 percent. 

So, really, the IRS, for that matter, if it were to pursue a case 

of political activity under 501(c)(4), (c)(5), or (c)(6), and the Department of Justice got hold of that case, could very well determine 

that the same standard ought to apply as in the Vision Service 

Plan, private benefit, insubstantial, 5–10 percent, and no more. 

Chairman WHITEHOUSE. And they are both articulating the statutory requirement of 501(c)(4) that these entities be operated exclusively to promote social welfare. So in the case of Vision Service 

Plan, they said it was not exclusively to promote social welfare because there was a more than insubstantial amount of private benefit being taken out of the organization, and your hypothesis is that 

you could take that same standard that you used for private benefit and apply it to the political side, the political benefit, and apply 

the insubstantial standard. 

Mr. COLVIN. Absolutely. That is correct. And Miriam Galston is 

here, who has written an article arguing exactly that point, and I 

agree with it. 

Chairman WHITEHOUSE. Great. 

Let me ask Mr. Smith a question. I think we have agreement so 

far in this hearing that with respect to the First Amendment, 

which clearly is a significant consideration in all of this discussion, 

that—two things. One, false statements under oath do not enjoy 

First Amendment protection. And, second, where there is a constitutional requirement, not a requirement in the Constitution but 

one that meets constitutional muster, by law that fraudulent use 

of a shell corporation to defeat that law is also not protected by the 

First Amendment. 

Would you agree with both of those hypotheses? 

Mr. SMITH. Certainly I would agree with the first. The second I’m 

not quite sure what you are talking about. If you are saying is it 

illegal to make a contribution in the name of another, you know, 

yes, I think that can withstand—— 

Chairman WHITEHOUSE. And despite the fact that making a contribution is political speech that is protected by the First Amendment, making it in the name of another is not protected by the 

First Amendment and can be prosecuted properly? 

Mr. SMITH. I think the Court would uphold that. But it is important for us to recognize that generally, as I have heard the discussion about disclosure in this case, people kind of say, well, the 

Court has endorsed disclosure in Citizens United. It did, but remember, the Court has not endorsed anything called ‘‘disclosure.’’ 

It has, in fact, placed huge limits on disclosure. Even in Buckley 

v. Valeo, it struck down more of the Federal Election Campaign 

Act’s disclosure regime than it upheld. And there is a long line of 

cases suggesting that you have to be very sensitive in that area. 

So you have raised what, again, I think is a very minor problem. 

We do not really see many examples of it. People are combing these 

things—— 

Chairman WHITEHOUSE. But you do not have—— 
26 

Mr. SMITH. I think it is fine—— 

Chairman WHITEHOUSE [CONTINUING]. Any dispute that a contribution in the name of another that is fraudulently done, not innocently—— 

Mr. SMITH. Well, you know, if you put the circumstance that you 

have, which is that it is in the name of another and it is fraudulently done—and those are the questions that will often come up 

in investigations. 

Chairman WHITEHOUSE. Yes, and ditto, false statements under 

oath enjoy no First Amendment protection. 

Mr. SMITH. Well, I do not think they do. I tell you, under the Stolen Valor case, maybe even there they might have some. But I 

think the ‘‘under oath’’ would probably take that away. 

Chairman WHITEHOUSE. Yes, it would seem that way. It would 

be a novel theory if it were not. 

Senator Cruz. 

Senator CRUZ. Thank you, Mr. Chairman, and I would like to 

thank all three witnesses for being here today. 

Commissioner Smith, I would like to ask several questions. As 

we sit here today, Organizing for America, which is President 

Obama’s 501(c)(4)—indeed, their Web site is barackobama.com. 

They are currently today running online ads criticizing me. 

Now, Commissioner Smith, would you agree that that is their 

First Amendment right to do so that should be entirely protected 

under the Bill of Rights? 

Mr. SMITH. I think it is a terrible thing to run ads criticizing you, 

Senator Cruz. 

[Laughter.] 

Mr. SMITH. But I probably would agree that it is protected by the 

First Amendment. 

Senator CRUZ. And that standard should obviously apply across 

the board, regardless of the partisan affiliation of the speaker or 

the person being praised or criticized. 

Mr. SMITH. I would apply that to criticism of Chairman 

Whitehouse as well, yes. 

Senator CRUZ. Very good. 

One of the things, Commissioner Smith, you talked about was 

the structure of the Federal Election Commission, in particular 

that you have got three Democrat Commissioners, three Republican Commissioners, and the role that plays as a check on partisan 

excesses. And you mentioned that there has been a long history 

when campaign activities have been located purely in the executive 

branch, located in, say, the IRS. There has been a long history of 

abuse, and abuse on both sides of the aisle. There were allegations 

of abuse under President Nixon. There were allegations of abuse 

under President Johnson. 

Can you share your views on the importance of the structural 

check of the FEC’s organization to limit either party abusing the 

executive branch to punish their political enemies? 

Mr. SMITH. Well, I think obviously it is very, very important, you 

know, and the history, I have outlined some of it in my prepared 

remarks. We see cases like the very first prosecution brought under 

the Federal Election Campaign Act was brought against a group of 

people, ordinary citizens, basically, kind of upper-middle class folks 
27 

who had a little bit of money to pool, some professors and so on, 

who ran an ad in the New York Times criticizing Richard Nixon 

and calling for him to be impeached. This was before Watergate. 

And the Nixon folks said, well, if somebody is convinced we ought 

to be impeached, maybe they will be convinced not to vote for me, 

we ought to be able to go after these folks. 

And so I really know that it is very important—you know, long 

history under both parties, that that is why Congress set up a bipartisan agency—not bipartisan like many agencies, 3–2 majority 

or something, but a true 3–3. 

The Commission has historically deadlocked, as people say, gone 

3–3 on about one to four percent of its votes. In recent years, that 

has spiked up to about 10 percent of its votes. One thing I’d point 

out is that typically resolves the issue, and it is important to note 

that that spike may be precisely due to the fact that over the last 

couple years we have seen, I think, strong attempts by partisans 

to use disclosure in the campaign finance rules in that way. 

You know, Media Matters, a very liberal group, has, for example, 

said that its goal is to attack corporations that might make political contributions of any kind, which would include contributions to 

a trade association that makes political expenditures. And then use 

its allies to then attack that same corporation for the damage done 

to its reputation, which is created by Media Matters itself. 

Candace Nichols, an opponent of Proposition 8 out in California, 

made the comment afterwards that they were blacklisting and boycotting a number of folks, and she said, ‘‘Years ago’’—they used the 

campaign finance regulations disclosure to get that. She said, 

‘‘Years ago, we would have never been able to get a blacklist out 

that fast and quickly.’’ Apparently this is considered progress since 

the McCarthy era. We are now much more efficient at creating 

blacklists. 

There is a group called Accountable America that sent letters to 

thousands of conservative donors threatening to dig through their 

lives if they continued to do that. As the New York Times reported, 

it was ‘‘hoping to create a chilling effect that will dry up contribution.’’ 

There are groups such as Huffington Post and eight maps that 

put maps to donors’ homes right on the Web. What is the purpose 

of that? 

I am straying a bit from your question, but what I am saying is 

when you are in this kind of environment, it is really important 

that you have some degree of bipartisan support before acting. 

Senator CRUZ. Well, and I think the examples you gave about the 

potential for partisan retribution are particularly chilling. And they 

are most dangerous, it seems to me, for those who would have the 

temerity to criticize those in power; that a system that requires full 

disclosure of any citizen’s activity in the political sphere enables 

those in power to very directly exact punishment for any who dare 

criticize them. 

Mr. SMITH. Well, the purpose of disclosure laws, as I have always 

seen them, is to inform citizens about their government, but not to 

inform the government about their citizens. 

Now, those are often two sides of the same coin, so it is hard to 

tease them apart. But I do think when we look at, you know, orga-
28 

nizations that are not working with candidates, for example, that 

we need to start thinking about being careful about what it is that 

we are doing. When we are talking about direct contributions to 

candidates or parties, that is historically where we have allowed 

more disclosure, and that is where the Supreme Court upheld it in 

Buckley. Remember, in Buckley, the Supreme Court struck down 

most of the disclosure regime that otherwise existed. It was a very 

broad disclosure regime that would have taken in almost anybody 

who spoke about politics at all, whether they were giving to a candidate or not. And the Court struck most of that down. 

Senator CRUZ. And I guess the threat of retribution for political 

speech, as you just described, is not hypothetical. We have seen it 

for donors who supported Proposition 8 in California and lost their 

job because they engaged in political speech. 

I guess we recently saw with respect to another constitutional 

right in New York a number of gun owners being publicly identified in the newspaper and potentially subject to retribution for exercising their Second Amendment right to keep and bear arms. 

Would you agree that part of the reason the First Amendment 

protects the right to anonymous speech is precisely to prevent retribution for citizens engaging in speech? And, indeed, that was 

much of the reason why perhaps the most famous example of anonymous political speech in history was the Federalist Papers, published under the pseudonym Publius. 

Mr. SMITH. Right. Well, as the Supreme Court said in the 

NAACP case that you mentioned earlier, Senator, ‘‘It is hardly a 

novel perception that compelled disclosure of affiliation with groups 

engaged in advocacy may constitute . . . effective . . . restraint on 

freedom of association . . . .’’ I think it is very definitely something—I have said sometimes imagine if the government said we 

are going to make sure that terrorists are not infiltrating our government or foreigners are not infiltrating our government, we are 

going to require you to report your political activity to the government, and they are going to keep it in a big data base, and it will 

be made available to creditors, mortgage lenders, potential employers, your nosy neighbor, Halliburton, whoever wants it, right? Most 

people I know get very, very upset. And then I point out to them 

that that is exactly what the Federal Election Campaign Act does, 

and we are talking about doing more of it. 

And I want to emphasize that we already have broader disclosure in America now than we have had any time in our Nation’s 

history. We are in the greatest disclosure age of our history. And 

I think when we look, we do not see that it is really achieving its 

goals, and I wonder if the real solution is to say we have got to 

have more and crack down more if it is really to change the idea 

and try to create different incentives for people to participate. 

Senator CRUZ. Thank you very much, Commissioner, and thank 

you to all of you. 

Chairman WHITEHOUSE. Let me ask one additional question, and 

that is, your opinion—let me start with you, Mr. Noble. You have 

made the observation that there is conspicuous non-enforcement of 

a variety of laws in situations in which the enforcement of the law 

actually would be reasonably straightforward. A false statement 

case is not a complicated thing to make, and the 441(f) shell cor-
29 

poration, you know, use of shell corporations to violate the law occurs in all sorts of areas of the law. So why the non-enforcement? 

And let me add an asterisk to that. I know that DOJ will say, 

‘‘Well, why the non-enforcement is because we have not been referred cases by the IRS.’’ But that really begs the question, because 

the Attorney General and the Secretary of the Treasury and the 

Commissioner of the Internal Revenue Service all work for the 

same person, and the Attorney General could perfectly well say to 

his colleague, ‘‘Look, these are laws that I am supposed to enforce. 

We prosecute false statements all across the board. Why aren’t you 

referring these to us? What is going on with your regulations that 

makes this difficult? ’’ And you might then see some of the progress 

that Mr. Colvin has suggested toward the IRS redoing the regulations, to the extent that that is described as the problem. 

So that is really, I think—when that is the answer to the question, that is really just another way of asking the question. So I 

wanted to make sure that you looked at it that way. Why the nonenforcement? And if the reason is because the IRS does not make 

referrals and has adopted confusing and different regulations, why 

are they satisfied with that as the status quo? 

Mr. COLVIN. I think there are several reasons, and I have to say 

up front, I have tremendous respect for the staff of federal agencies, of the IRS and the Department of Justice. I think they try 

very hard to do what the right thing is. 

I think there is a certain amount of fear. There is a fear of getting involved in politics. There is a fear of being accused of being 

partisan when you are not being partisan, when you are calling it 

as you see it, but people are going to say, ‘‘You did that just for 

partisan reasons.’’ 

I think as you move up the chain, I think then you get into a 

power issue. Frankly, the current system helps those in power. The 

current system, the lack of enforcement, favors those who are writing the laws right now, who are enforcing the laws right now. It 

favors this administration to keep a system by which they won in 

place. They do not want, frankly, any more disclosure. They are not 

calling—this is a great disappointment, but this administration 

right now is not calling to redo the FEC, not calling for much 

stricter enforcement of these laws, not calling for a crackdown on 

OFA, Organizing for America. They are not doing that either. Why? 

Because I think the problem we face is that we are fundamentally 

dealing about a power issue here and about the right of voters. 

There is a very critical First Amendment issue, no doubt about 

that. It is paramount in this area, and everything we do in this 

area involves the First Amendment. But there is also an issue 

about democracy, about our right to know what the government is 

doing, about our right to know where Members of Congress or Senators are getting their funding, who they may be beholden to. And 

these are the issues the Supreme Court has upheld. These are the 

things the Supreme Court has said the government has a compelling interest in. And when it says ‘‘the government,’’ it means the 

people have a compelling interest in knowing who are funding the 

campaigns. 

And when the Supreme Court says these expenditures have to be 

independent or that 501(c)(4) organizations that do not get involved 
30 

in political activity do not have to disclose, there are caveats that 

go along with that. That means that they are not involved in political activity. And we are not talking about every issue. We are not 

talking about arguing about gun control. There are very specific— 

the Court is limited to very specific types of ads: express advocacy 

ads, electioneering communication ads, or things that are done in 

coordination with a candidate. These are very, very specific issues, 

very specific areas where the public has a right to know; the public 

has the right to have the law enforced as it is; and, yes, the public 

has a right to be protected. 

But just to quote the First Amendment and say that that bar is 

doing anything, I think, is really to present the public with a false 

option. You can have the strongest First Amendment and a very 

strong representative democracy that actually is responsible to the 

people, and the people understand and make the decisions about 

what they feel about where the contributions are going or who is 

supporting whom. 

So I think it is fear, and I think it is politics and power. 

Chairman WHITEHOUSE. Senator Cruz. 

[No response.] 

Chairman WHITEHOUSE. All right. Let me thank the witnesses 

for coming. I really appreciate the effort that went into the testimony. I think that each one of you provided very thoughtful and 

extensive testimony. Mr. Smith, I thought some of the historical examples that you brought out were particularly instructive and 

helpful. And I am delighted that you all shared your time with us. 

I know you are very busy people. 

Senator Leahy has a statement for the record, our Chairman, 

that, without objection, I will add to the record of these proceedings. 

[The prepared statement of Chairman Leahy appears as a submission for the record.] 

Chairman WHITEHOUSE. And I want to thank Senator Cruz for 

attending. He brings a very valuable and well-honed perspective. 

But I do think that there has emerged an area of agreement that 

really translates across all of the participants in this hearing, and 

that is that a traditional prosecutable false statement under oath 

is not protected by the First Amendment, and that the use of shell 

corporations fraudulently to violate the law is not protected by the 

First Amendment. And yet those specific things within the much 

larger context of campaign finance reform, those specific things 

seem to be happening a lot, and that neither the Department of 

Justice nor the Internal Revenue Service could identify a single 

case they had ever made either in the circumstance of a false statement made to the famous Question 15 or in the case of a shell corporation used to obscure the origin, unlawfully, of a contribution to 

a super PAC that would otherwise have to be disclosed. Those seem 

like very straightforward cases. 

And it appears—I will now venture into my own personal opinion 

at this point. It appears to me that the deference of the Department of Justice to the tax authorities with respect to those specific 

matters is not merited. They are not the kind of case that a prosecutor looks at and says, ‘‘Oh, my gosh, I better bring the tax guys 

in on this one. This is a complicated question of tax law.’’ No. A 
31 

false statement is a false statement, and if you take people into a 

grand jury, you can pretty well find out very quickly what the intent was and prove the materiality and move on. 

So it appears to me that if there is at least one flaw in what we 

are doing right now, it is, with respect to those matters, the willingness of the Department of Justice to allow itself to be constrained by this policy of deference, which is its own policy, to the 

Internal Revenue Service, which I think all of the witnesses—many 

of the witnesses, at least—agree is not particularly well suited, is 

not particularly well staffed, and is not particularly well disposed 

toward this sort of a matter. 

So I will close the hearing with my personal commentary and 

look forward to continuing to work on this issue with all of the witnesses and all of the Members of the Subcommittee. Again, my 

gratitude to Senator Cruz for his helpful participation in this hearing. 

Thank you, and we are—the record will be open for one week for 

any additional matter anybody wants to add to the hearing, and 

with that, we are adjourned. 

[Whereupon, at 11:43 a.m., the Subcommittee was adjourned.] 

[Questions and answers and submissions for the record follow.] 

[Additional material is being retained in the Committee Files; 

see Contents.] 

(33) 

A P P E N D I X 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD
34 

PREPARED STATEMENT OF CHAIRMAN PATRICK LEAHY
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36 

PREPARED STATEMENT OF SENATOR JOHN CORNYN
37 

PREPARED STATEMENT OF MYTHILI RAMAN, ASSISTANT ATTORNEY GENERAL, U.S. 

DEPARTMENT OF JUSTICE
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42 

PREPARED STATEMENT OF PATRICIA HAYNES, DEPUTY CHIEF, INTERNAL REVENUE

SERVICE, CRIMINAL INVESTIGATION
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PREPARED STATEMENT OF LAWRENCE M. NOBLE, PRESIDENT AND CEO, AMERICANS

FOR CAMPAIGN REFORM
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PREPARED STATEMENT OF GREGORY L. COLVIN, PRINCIPAL, ADLER & COLVIN, SAN

FRANCISCO, CALIFORNIA
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SUPPLEMENTAL PREPARED STATEMENT OF GREGORY L. COLVIN, ADLER & COLVIN, 

SAN FRANCISCO, CALIFORNIA
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68 

PREPARED STATEMENT OF BRADLEY A. SMITH, CHAIRMAN, CENTER FOR COMPETITIVE

POLITICS, JOSIAH H. BLACKMORE II/SHIRLEY M. NAULT, PROFESSOR OF LAW, CAPITAL UNIVERSITY LAW SCHOOL, COLUMBUS, OHIO
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88 

QUESTIONS SUBMITTED BY SENATOR AMY KLOBUCHAR FOR MYTHILI RAMAN, PATRICIA

HAYNES, LAWRENCE M. NOBLE, GREGORY L. COLVIN, AND BRADLEY A. SMITH
89 

QUESTIONS SUBMITTED BY SENATOR CHARLES SCHUMER FOR MYTHILI RAMAN AND

PATRICIA HAYNES
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RESPONSES OF MYTHILI RAMAN TO QUESTIONS SUBMITTED BY SENATORS SCHUMER

AND KLOBUCHAR
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RESPONSES OF LAWRENCE M. NOBLE TO QUESTIONS SUBMITTED BY SENATOR

KLOBUCHAR
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RESPONSES OF GREGORY L. COLVIN TO QUESTIONS SUBMITTED BY SENATOR

KLOBUCHAR
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105 

RESPONSES OF BRADLEY A. SMITH TO QUESTIONS SUBMITTED BY SENATOR

KLOBUCHAR
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117 

MISCELLANEOUS SUBMISSIONS FOR THE RECORD
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130 

ADDITIONAL SUBMISSIONS FOR THE RECORD

Submissions for the record not printed due to voluminous nature, 

previously printed by an agency of the Federal Government, or 

other criteria determined by the Committee, list 

Petition for rulemaking on campaign activities by section 

501(c)(4) 

http://www.democracy21.org/uploads/ 

D21landlCLClPetitionltolIRSl7l27l2011.pdf 

Democracy 21 report: leading presidential-candidate super 

PACs http://www.democracy21.org/uploads/Democracyl21lSuperlPAClReportl1l4l2012.pdf 

‘‘The FEC: The Failure to Enforce Commission’’ by Fred 

Wertheimer and Don Simon http://www.acslaw.org/sites/ 

default/files/WertheimerlandlSimon—The Failure to 

Enforce Commission.pdf 

Æ