Update: On May 14, 2019, the D.C. Circuit denied CREW’s petition for rehearing of the case en banc.  While the denial of rehearing en banc has no precedential value itself, it leaves in place the panel ruling that severely restricts judicial review of FEC deadlocks on an enforcement matter where commissioners seeking to block enforcement claim “prosecutorial discretion.” As FEC Commissioner Weintraub explained in April, a recent application of D.C. Circuit panel’s decision “vividly shows a few magic words sprinkled onto the end of a statement by less than a majority of commissioners, suggesting what they could have done – but didn’t – in a case, can paper over even thoroughly debunked legal reasoning and protect even the most outrageous dismissals from any review whatsoever. The power the D.C. Circuit panel granted to these magic words eviscerates the right that Congress gave the American public to review this agency’s decisions.” Judge Pillard of the D.C. Circuit dissented from the denial of rehearing en banc, stating that the panel decision “empowers any partisan bloc of the Commission to cut off investigation and stymie review of even the most serious violations of federal campaign finance law.” Read the denial here.

On November 23, 2015, CREW filed a lawsuit against the Federal Election Commission (FEC) for failing to investigate now-defunct and notorious dark money group, the Commission of Hope, Growth and Opportunity (CHGO). Documents released by the FEC show inexcusable delays to investigate CHGO and a stubborn refusal by the three Republican commissioners to acknowledge that the group was a political committee required to disclose it donors.

Some background: CHGO was created in early 2010 by longtime political operative Scott Reed and Michael Mihalke, president of media relations and production company Meridian Strategies, LLC. Although they exercised control over CHGO, their association with the group was kept hidden from the public as they were never named as officers, employees, or board members. According to its internal documents, CHGO’s express goal was “[t]o make an impact using express advocacy” in targeted congressional races. Its “[s]imple mission” was to “win Senate seats,” though it later switched its focus to House races. The group intended to take advantage of the recent Citizens United v. FEC decision to “[p]rovide corporations and individuals with an opportunity to participate directly in [the] election or defeat of candidates” while making sure that its “donor name[s] [were] never made available to the public.”

However, Citizens United contemplated that politically active organizations would be required to disclose the named of their donors so that voters would know who was financially backing (or attacking) candidates. To avoid the possibility that its donors would be made public while still achieving its goal of spending heavily on politics, CHGO engaged in deeply troubling conduct over the next several years: it lied about its mission, plan, and activities, broke the law, then tried to disappear to avoid being held accountable.

After receiving a $4 million contribution that would provide more than 83% of the funds CHGO raised over its lifetime, CHGO sent the money it raised — a total of about $4.5 million — to its sole direct vendor, Mihalke’s Meridian Strategies. Meridian then used CHGO’s money to produce and air electoral communications relating to at least fifteen congressional elections, contrary to CHGO attorney William Canfield’s assertion to the IRS that CHGO would not attempt to influence federal elections.

CHGO failed to file disclosure reports for any of these independent expenditures and electioneering communications, and it failed to register as a political committee and report its spending and expenditures.

CREW filed a complaint in May 2011 with the FEC alleging CHGO failed to file the one time reports, and in April 2012 amended the complaint to allege that CHGO failed to register as a political committee or reporting its political advertising spending to the IRS or FEC.

After a prolonged investigation, the Office of General Counsel (OGC) calculated that 85% of CHGO’s spending was on political ads, including 61% on express advocacy ads alone. Nevertheless, on October 1, 2015, the FEC split three-to-three on all of the OGC’s recommendations.

On the same day that CREW filed this lawsuit, it also filed a complaint with the District Attorney’s office for the District of Columbia requesting that it investigate whether officials, consultants, and vendors associated with CHGO lied to the IRS and the FEC and obstructed an FEC investigation.

On February 22, 2017, a judge granted the FEC’s motion for summary judgment and denied CREW’s motion for the same. Even though the judge agreed that the FEC “had strong grounds to prosecute [CHGO] under the [FECA],” it did not want to rule on whether the three commissioners opposed to taking action had permissibly interpreted the laws that they said barred FEC enforcement of law against CHGO. Instead, it found that the mere existence of uncertainty in the law created “litigation risk” for FEC enforcement, and that risk provided a “rational basis” for the FEC to exercise “prosecutorial discretion.” This was sufficient to cause the dismissal not to be “contrary to law” within the meaning of FECA. CREW appealed the decision in March of 2017.

 

Lawsuit Documents