Opinion ID: 2608924
Heading Depth: 3
Heading Rank: 2

Heading: caucus' first amendment arguments lack merit.

Text: Caucus argues that because it is a political organization, raising money to further its political purposes, the application of Alaska's Blue Sky laws to its fundraising efforts violates the First Amendment. [5] There are two aspects to Caucus' argument: 1) that its political purpose excuses any fraudulent practices, and 2) that the registration/disclosure requirements imposed by Alaska's Blue Sky law on even non-fraudulent political fundraising by way of loans unduly burdens Caucus' political activities. The first aspect of Caucus' argument is meritless. A state has a compelling interest in protecting the public from fraudulent practices, even where the purpose underlying those fraudulent practices is protected by the First Amendment. Minnesota case, 422 N.W.2d at 273; see also Cantwell v. Connecticut, 310 U.S. 296, 306, 60 S.Ct. 900, 904, 84 L.Ed. 1213 (1940). Cf. Pratt, 718 P.2d at 969 (protecting the general public from deceit and fraud in securities transactions is a compelling interest). A political purpose is not a license to commit fraud. We also reject the second aspect of Caucus' argument. Under the terms of the Division's cease and desist order, Caucus could still engage in political fundraising through borrowing, without using fraudulent means, by either registering its securities or by obtaining an exemption under AS 45.55.140(a)(11) (exempting securities issued by a person organized and operated not for private profit but exclusively for religious, educational, benevolent, charitable, fraternal, social, athletic, or reformatory purposes... .) To obtain an exemption, Caucus would need to comply with 3 AAC 08.910(1). This regulation requires the filing of a notice with the Division at least 15 days before an offering. The notice must contain an IRS ruling or determination of tax exempt status or other documentation the administrator may require including, but not limited to, proposed offering circular, certified financial statement, bylaws and articles of incorporation, plan of financing, plan of operation, use of proceeds, background of officers and directors (or principals if unincorporated). 3 AAC 08.910(1). A $25 filing fee is also required. 3 AAC 08.910(6). In Buckley v. Valeo, 424 U.S. 1, 60-84 & n. 76, 96 S.Ct. 612, 654-66 & n. 76, 46 L.Ed.2d 659 (1976) (per curiam), the Court noted that compelled disclosure, in itself, can seriously infringe on privacy of association and belief guaranteed by the First Amendment. Id. at 64, 96 S.Ct. at 656. See also NAACP v. Alabama ex rel. Patterson, 357 U.S. 449, 460-66, 78 S.Ct. 1163, 1170-74, 2 L.Ed.2d 1488 (1958). Such disclosure requirements, if significant enough to burden First Amendment activity as a practical matter, must be justified by a compelling interest and there must be a substantial relation between the governmental interest and the information required to be disclosed. Buckley, 424 U.S. at 64-65, 96 S.Ct. at 656-57; NAACP, 357 U.S. at 460-62, 78 S.Ct. at 1170-72. Such scrutiny is invoked where the disclosure requirements would entail divulging the names of contributors. Buckley, 424 U.S. at 65-66, 96 S.Ct. at 656-57; NAACP, 357 U.S. at 463-65, 78 S.Ct. at 1172-73. In Riley v. National Fed'n of the Blind of North Carolina, 487 U.S. 781, 108 S.Ct. 2667, 2676-80, 101 L.Ed.2d 669 (1988), the Supreme Court held that a North Carolina statute requiring charitable solicitors to disclose to contributors what percentage of their contributions actually went toward charitable activities violated the First Amendment. Solicitation of money for charitable purposes is protected speech invoking strict scrutiny, where, as here, the component parts of a single speech are inextricably intertwined... . Id. 108 S.Ct. at 2677. In performing strict scrutiny analysis, [6] the Court accepted the validity of North Carolina's asserted fraud-deterrence purpose, but held that forcing disclosure of what percentage of solicited funds were spent on a particular purpose was insufficiently tailored to pass constitutional muster. Id. 108 S.Ct. at 2678-79. The Court noted, however, that: [I]n contrast to the prophylactic, imprecise, and unduly burdensome rule the State has adopted to reduce its alleged donor misperception, more benign and narrowly tailored options are available. For example, as a general rule, the State may itself publish the detailed financial disclosure forms it requires professional fundraisers to file. This procedure would communicate the desired information to the public without burdening a speaker with unwanted speech during the course of a solicitation. Alternatively, the State may vigorously enforce its anti-fraud laws to prohibit professional fundraisers from obtaining money on false pretenses or by making false statements. These more narrowly tailored rules are in keeping with the First Amendment directive that government not dictate the content of speech absent compelling necessity, and then, only by means precisely tailored. Id. 108 S.Ct. at 2679. [7] The fact that under this cease and desist order, Caucus will have to register future borrowing from supporters, even assuming a lack of deceit, does not impermissibly impinge on its First Amendment activities. Nothing in 3 AAC 08.920(6) requires the divulgence of who its contributors are; all that is required is the divulgence of who the borrowers are and proof of how the debts are to be repaid. Compare NAACP, 357 U.S. at 463-64, 78 S.Ct. at 1172-73; Cantwell v. Connecticut, 310 U.S. 296, 306, 60 S.Ct. 900, 904, 84 L.Ed. 1213 (1940) ([w]ithout doubt a State may protect its citizens from fraudulent solicitation by requiring a stranger in the community, before permitting him publicly to solicit funds for any purpose, to establish his identity and his authority to act for the cause which he purports to represent.) (footnote omitted). The disclosure required to obtain an exemption passes constitutional muster under Riley. The deterrence of fraud is a compelling state interest. Pratt, 718 P.2d at 969. Moreover, the disclosure provisions of 3 AAC 08.910(1) are the same as those approved of as sufficiently narrowly tailored by the Court in Riley. Riley, 108 S.Ct. at 2679 (implying that the state may require fundraisers to disclose detailed financial information before entering the forum and the state may vigorously enforce its anti-fraud laws). See also Cantwell, 310 U.S. at 306, 60 S.Ct. at 904. The information required to be disclosed to obtain an exemption under 3 AAC 08.920(6) does not include the names of who potential contributors/lenders are, only who the borrowers are and how they intend to and will be able to pay back sums borrowed. This information is of obvious relevance to the goal of preventing fraud. AFFIRMED. [8]