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Va. judge rules against U.S. ban on direct corporate contributions to candidates

By Robert Barnes,May 27, 2011

A federal judge in Virginia has ruled that the U.S. law banning direct corporate contributions to candidates is unconstitutional, the first such ruling since the Supreme Court’s 2010 decision giving corporations and unions a bigger role in campaign spending.

U.S. District Judge James Cacheris made the ruling Thursday in a case involving federal charges against two men alleged to have made illegal donations to the Senate and presidential campaigns of now-Secretary of State Hillary Rodham Clinton.

Cacheris dismissed one of the counts against the men, saying the Supreme Court’s decision in Citizens United v. Federal Election Commission removed the legal underpinnings for the federal ban against direct contributions to a candidate.

“For better or worse, Citizens United held that there is no distinction between an individual and a corporation with respect to political speech,” the Alexandria judge wrote. “Thus, if an individual can make direct contributions . . . a corporation cannot be banned from doing the same thing.”

The ban on direct corporate contributions is under legal attack across the country, but Cacheris’s decision stands in contrast to other judges who have considered the issue.

For instance, a three-judge panel of the U.S. Court of Appeals for the 8th Circuit recently upheld a Minnesota law banning direct contributions. The judges said that Citizens United did not address a 2003 Supreme Court decision that upheld a ban on direct corporate contributions.

Circuit Chief Judge William Jay Riley said he thought the court’s reasoning in Citizens United left the ban “on shaky ground,” but said it was not up to lower courts to overturn Supreme Court precedents.

But that is what lawyers for William Danielczyk and Eugene Biagi asked Cacheris to do.

The government charged Danielczyk, chairman of Galen Capital Group, and Biagi, a Galen executive, with illegally reimbursing people for nearly $200,000 in contributions to Clinton for her 2006 Senate and 2008 presidential race. There is no allegation that Clinton knew of the alleged plan.

Cacheris agreed with the men’s lawyers that the count of the indictment that charged them with directing contributions of corporate money to the presidential campaign should be dismissed.

Said Chris Ashby, who represents Biagi: “When you read Citizens United, it compels this result.”

The government disagreed. It said the court’s controversial 5 to 4 decision held only that the prohibition against independent expenditures for or against candidates violated the First Amendment’s protection of political speech. The decision did not address the ban on direct contributions to candidates.

“Defendants now attempt to escape liability by stretching Citizens United to reach facts that were not before the court,” wrote Assistant U.S. Attorney Mark D. Lytle. “While creative, defendants’ motion ignores clear judicial precedent stretching over 100 years.”

Campaign finance law experts noted curious aspects of the ruling by Cacheris, a Ronald Reagan appointee who assumed senior status in 1998.

Ashby’s motion on behalf of the defendants contained an extensive discussion of why the court’s 2003 decision banning direct contributions — Federal Election Commission v. Beaumont — was effectively overruled by Citizens United. But neither the government nor Cacheris addressed the case.

Additionally, the judge’s decision mentioned the district court’s ruling in the Minnesota case, but not the 8th Circuit’s review.