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A federal appeals court Thursday refused to strike down major provisions of the Federal Election Campaign Act, rejecting a challenge brought by a Pennsylvania businessman who is under indictment for allegedly making illegal contributions to several candidates including Republican presidential nominee Robert Dole. The appeal by Renato P. Mariani was unusual because it was automatically referred to a 10-judge en banc appeals panel of the 3rd U.S. Circuit Court of Appeals — a procedure Congress dictated when drafting the law. And the appellate court was forced to make its legal conclusions on a clean slate, with only factual findings from the lower court and the legal arguments of the parties to guide the way. That aspect of the procedure, too, was fashioned by Congress for any constitutional attack on FECA. Mariani is accused of violating the law by concocting a scheme in which employees of his corporation made contributions to campaigns and were later reimbursed. To challenge the constitutionality of the law, he hired one of the country’s leading First Amendment lawyers — Floyd Abrams of Cahill Gordon & Reindel in New York — to join his existing defense team of Thomas Colas Carroll and Mark Cedrone of Philadelphia’s Carroll & Cedrone. Abrams, who was joined on the brief by his associate, Susan Buckley, argued that FECA violated Mariani’s free speech rights by prohibiting corporate contributions to be made directly to federal candidates while saying nothing about so-called “soft money” which corporations can give in unlimited amounts to national and congressional political party organizations. The recent “avalanche” of soft money, he said, has rendered FECA “underinclusive” since its limits on direct contributions are now incapable of advancing the intended purpose of the law. Abrams also argued that because the Supreme Court’s only cases in the area recognize that corporate speech is protected and have validated limits on campaign contributions, but not banning them outright, FECA’s total ban on direct corporate contributions violated the First Amendment. But the court found disagreed, saying it rejected Abrams’ argument that there is no meaningful distinction between hard and soft money. “Congress might well have concluded that direct contributions from corporate treasuries were more important to regulate than expenditures or contributions made through committees, because hard money can be used by a candidate in more and different ways than soft money,” Chief U.S. Circuit Judge Edward R. Becker wrote for a unanimous court. In the end, Becker found that the challenge was asking for a political, and not a legal, solution. “We cannot exchange our robes for togas,” he wrote. “Any reform in this area must be sought from Congress.” The only judge to recuse herself from the case was U.S. Circuit Judge Marjorie O. Rendell, whose husband, former Philadelphia Mayor Edward Rendell, is currently the chairman of the Democratic National Committee. Becker found that some of the lower court’s findings “went beyond what was proper both as a matter of evidence and by crossing the line into forming legal conclusions.” Nonetheless, Becker found that Chief U.S. District Judge Thomas I. Vanaskie of the Middle District of Pennsylvania “compiled an impressive factual showing that soft money plays an increasingly large role in federal elections.” Contributions made to or expenditures made on behalf of candidates for federal elective office are referred to as “hard money,” Becker noted. Under Section 441b(a) of FECA, corporations are not permitted to make contributions of hard money to campaigns for federal office. Corporations can, however, make contributions to political parties in unlimited amounts. Such contributions, which are referred to as “soft money,” can be used to fund “issue advocacy.” Becker found that “issue advocacy” includes advertisements or other campaign materials that advocate positions supported by a candidate, often comparing those positions with those of an opponent, without directly advocating the election of the candidate. “Donors of soft money are able to avoid the FECA contribution limits and disclosure requirements applicable to hard money and direct advocacy,” he wrote. The amount of soft money contributed in each election cycle “has grown tremendously in the last two decades,” Becker noted, from about $19 million in 1980 to more than $260 million in 1996. Donations of soft money by the 544 largest public and private companies more than tripled between 1992 and 1996, he said. PROTECTED SPEECH? Under the U.S. Supreme Court’s 1976 decision in Buckley v. Valeo, Becker said, it is clear that spending for political campaigns is protected speech that implicates both the right to free expression and the right of free association. The high court, Becker said, has also stated that there is “no support” for the proposition that speech that otherwise would be within the protection of the First Amendment loses that protection simply because its source is a corporation. Becker found that under the Buckley court’s standard of scrutiny, a contribution limit involving “significant interference” with associational rights could survive if the government demonstrated that contribution regulation was “closely drawn” to match a “sufficiently important interest.” In considering Mariani’s challenge, he said, “While we treat campaign contributions from the corporate treasury as speech and subject the ban on them in Section 441b(a) to exacting scrutiny, we do so against a background principle that limits on contributions — though not necessarily bans on contributions — can withstand this scrutiny if they are closely drawn to match a sufficiently important interest.” In a more recent case, Becker said, the justices upheld a Michigan ban on the use of corporate funds in state political races, clearly implying that a flat ban can be constitutional. Turning to Mariani’s “underinclusiveness” argument — which focused on the proliferation of soft money and the resultant watering down of the effects of FECA’s ban on hard money — Becker found that the law cannot be called “fatally underinclusive.” The underinclusiveness analysis employed for First Amendment questions, he said, requires that the rule chosen must “fit” the asserted goals, and must also “strike an appropriate balance between achieving those goals and protecting constitutional rights.” A rule fails the test, he said, “only if it cannot fairly be said to advance any genuinely substantial governmental interest,” because it provides only “ineffective or remote” support for the asserted goals. Over the years, Becker said, the Supreme Court has crafted an underinclusiveness analysis for First Amendment cases that “requires neither a perfect nor even the best available fit between means and ends.” Applying the test to FECA, Becker said the law survives the challenge. “The important theoretical differences between hard and soft money, which include that a candidate cannot directly control how to spend soft money, are intended to avoid the corrupting influence of large contributors supporting a particular candidate,” Becker wrote. “The practical distinctions between hard and soft money may have diminished in the past decade with the rise of issue advocacy, but not to such an extent that we can say that there is no benefit from distinguishing between the two. If hard and soft money were equivalent, it would be hard to imagine why Mariani would have gone to the lengths he allegedly went to in order to give hard money instead of soft.” Becker noted that no party to the case had argued that there is no compelling overnment interest in banning contributions from corporations. “Indeed, Mariani’s argument that the rise of soft money fatally undermines the purpose of Section 441b(a) seems to depend on the assumption that limiting corporate contributions — if done effectively — would be constitutionally valid,” he wrote.

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