Article: Loophole Allows Saudi Arabian Businesses to Spend Freely in Our Election

Cross-posted from The Nation

Some Republican bloggers have circulated what seems to be a complete dud of a story about foreigners donating discretely to the Obama campaign using credit cards. Yesterday, Josh Israel demolished what was left of the pseudo-scandal. There's actually a more significant loophole that should give anyone pause.

Foreign corporations can in fact influence American democracy in pernicious ways. For instance, how can Saudi Arabia and other oil-rich countries keep us dependent on fossil fuels? Well, thanks in part to the Citizens United decision, a new loophole allows foreign corporations to spend unlimited, undisclosed amounts on American elections.

Saudi-funded groups have run ads against Senator Claire McCaskill, a Democrat in Missouri, as well as in support of Tommy Thompson, a Republican in Wisconsin. But in both cases, they've been able to conceal the spending behind a wall of secrecy, and under the banner of groups with "American" in the name.

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Super PACs have to disclose their donors, so for a foreign corporation to spend big without ever revealing itself, a more practical vehicle to influence an election is something called a trade association, which can now operate as a PAC but without revealing a cent of its funding.

A typical trade association consists of many businesses that pay an annual fee depending on its size. Companies can also pitch in extra funds to their respective trade association at any time, as health insurance companies secretly did with an $86 million transfer to the US Chamber of Commerce in 2009 for ads against health reform. As the company's representative, a trade association engages in everything from lobbying to promotional campaigns to efforts to develop common industry standards.

The largest trade associations have been around for nearly a century, and in the last few decades, many have taken an international scope. For instance, the American Petroleum Institute, which began in 1919 as a trade group for domestic oil companies, is now led in part by a Saudi government lobbyist and has offices in Singapore, Beijing and Dubai. ExxonMobil and Chevron are reportedly among the highest dues-paying members of API, but so is Aramco, the state-owned Saudi oil company. (The American Petroleum Institute, as Bloomberg has reported, now transfers money to attack ad groups like the 60 Plus Association.)

Here's the rub. Citizens United allows trade associations, for the first time, to dip into their general treasuries -- made up in many cases of both foreign and domestic money from businesses -- and spend unlimited amounts on American elections. Before the Supreme Court began taking an axe to campaign finance, if a trade association wanted to spend on a federal election, it had to spin off a regulated and disclosed political action committee. Though foreigners can't manage a PAC, they are more than welcome to manage major trade associations like the American Petroleum Institute.

Here's how it plays out this year.

Chemical companies do not want Tammy Baldwin, the Democratic Senate candidate in Wisconsin, to win. In addition to voting to move our energy system towards a clean economy and away from petrochemicals, she's a strong advocate for regulating carcinogens in household products, like cosmetics. But instead of beating her with an ordinary PAC or a campaign contribution to her opponent, the trade association for the chemical industry has chosen to take advantage of the Citizens United loophole to use undisclosed general treasury funds against Baldwin.

The American Chemistry Council made one of the biggest media buys in the Senate race in August by purchasing $648,600 worth of ads supporting Baldwin's opponent, former Republican Governor Tommy Thompson. Here's the ad:

The American Chemistry Council used its 501(c)(6) fund rather than its PAC, so it does not have to disclose where it got that money. The council has also used its 501(c)(6) to air ads in support of Senator Joe Manchin (D-WV) and other pro-chemical industry politicians of both parties.

Where does the Chemistry Council's general treasury, otherwise known as its 501(c)(6), receive its funds? Well, according to its website, the largest foreign chemical companies in the world -- Saudi Arabia's state-owned SABIC, the Chinese-owned Sinopec corporation and Japan's Mitsubishi Chemical Corporation -- are dues-paying members, alongside American giants like DuPont and Dow Chemical.

The American Petroleum Institute also used its foreign-funded 501(c)(6) to air its own ads against senators like McCaskill.

In some rare cases, subsidiaries of foreign-owned corporations have decided to skip the trade association route and spend disclosed dollars on US elections. Recently, OdysseyRe, a subsidiary of a Canadian financial services company, gave $1 million to the pro-Romney Super PAC. As I reported earlier this year, 7-Eleven Corporation, which is owned by a Japanese holding company, gave to a Super PAC supporting Senator Dick Lugar (R-IN) during his primary.

When the next Congress is gaveled in this January, a good number of lawmakers will owe their seats to groups financed in part by foreign-owned corporations. In the case of the American Chemistry Council and American Petroleum Institute, two Saudi-funded pro-oil lobbies active in the election, that could have wide ranging ramifications for our energy security.

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