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FEC Ruling Affirms Foreign Money Allowed in Ballot Initiatives

A recent ruling by the FEC reaffirms a loophole allowing foreign donations into state and local ballot initiatives.

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The ancient Greek democracy, though wildly different from any of the modern variations, had the same weaknesses. Athens and its Greek allies could defeat the Persian superpower on the battlefield, but by lining the pockets of politicians and religious advisors with gold and silver, the Persians managed to pacify the Greeks.

The United States currently has no military peer, but foreign money is slowly seeping into American elections and the FEC just re-affirmed the legality of this trend in a new ruling.

In short, this ruling, first reported by Axios, rejected the claim that Sandfire Resources America and its controlling company Sandfire Resources NL, an Australian owned firm, violated federal election laws in donating to two organizations that opposed a mining-related referendum in Montana in 2018. This is despite having “no sources of revenue in the United States.” No one, including the FEC, disputes the alleged actions: Sandfire Resources undeniably gave foreign money to oppose the ballot initiative.

Instead, the FEC’s reasoning hinges entirely on the precise definition of elections.

As defined in the (FECA), an election is “a general, special, primary, or runoff election” and “a convention or caucus of a political party which has authority to nominate a candidate.” The FEC also has additional language defining elections as “the process by which individuals . . . seek nomination for election, or election, to Federal office.”

The Persians weren’t necessarily funding Athenian ballot initiatives (they preferred to buy off politicians directly), but FECA still leaves the door wide open for direct foreign influence on voters’ decisions. Even the Supreme Court has upheld the interpretation that FECA “regulates only candidate elections, not referenda.”

Most attempts by foreigners to influence policy inside the United States are regulated under the Foreign Agents Registration Act, or FARA. Most individuals and organizations in foreign countries, and those Americans representing them, must register under FARA in order to conduct their affairs legally.

Perhaps Sandfire believes it is following the law as its efforts, according to FECA, do not involve US elections. But FARA may pose another possibility. That law states, in sum:

FARA requires an agent of a foreign principal to register when engaging in political activities or those designed to influence the U.S. government or public regarding domestic or foreign policy; taking part in perception management efforts or acting as a public relations counsel, publicity agent, or information service employee; performing fundraising or disbursement of funds; or lobbying Congress or the Executive Branch.

Election involvement is not a necessary condition for registering under FARA.

Sandfire Resources is not registered under FARA.

Other foreign entities and their US agents that have engaged in ballot influence have registered under FARA, such as HQ Energy Services, the US subsidiary of the Canadian firm Hydro-Quebec.

According to Open Secrets, HQ Energy Services filed in the run up to a November 2021 referendum in Maine and paid over $2.5 million to achieve their desired electoral outcomes. Among the activities HQ Energy Services named in their FARA filing include “voter outreach relating to the foreign principal’s interest in the New England Clean Energy Connect transmission line project.”

The FECA loophole matters. More than sixty ballot initiatives will be voted on in next year’s midterm elections, deciding issues ranging from collective bargaining to abortion access.

Seven states currently have laws on the books preventing foreign donations toward state ballot initiatives, but Maine governor Janet Mills recently vetoed a ban on the practice in her state in the run up to the referendum on the New England energy corridor mentioned above.

A state-by-state approach might not be the only avenue open, as Senator Kirsten Gillibrand (D-NY) recently offered legislation to amend FECA to include ballot initiatives and referenda under its authority. Senator Marco Rubio (R-FL) promised to introduce his own legislation to address the same issue.

In addition to closing the FECA loophole, Washington lawmakers should consider reforming FARA requirements, and there have been several proposals such as closing the exemption for registered lobbyists, while also pushing the Justice Department to more strictly enforce existing FARA regulations.

The United States has not become the 21st century iteration of Persian-controlled Athens, but unless the Congress takes up the charge, the only avenue to curb foreign influence over your local ballot initiatives may be through the state legislatures.