Supreme Court weighs lifting ban on corporate funding of candidates

The Supreme Court’s conservative bloc sounded poised Wednesday to strike down on free-speech grounds a 102-year-old ban against corporations spending large amounts of money to elect or defeat congressional and presidential candidates.

If the justices were to issue such a ruling in the next few months, it could reshape American politics, beginning with the congressional campaign in 2010. Big companies and industries -- and possibly unions as well -- could fund campaign ads to support or defeat members of Congress.

For example, the health insurance industry would have a much greater ability to target for defeat lawmakers who supported a so-called public option for medical insurance. Banks and investment firms could oppose representatives who favored stricter regulation of the financial industry.

And far more money could flow into elections. Last year, the political parties spent about $1.5 billion on campaigns, while corporations earned more than $600 billion in profits.

Since 1907, federal law has prohibited corporations from giving money to candidates. And since 1947, corporations and unions have been barred from spending money on their own to urge voters to elect or defeat federal candidates.

Of course, corporate executives, as individuals, can contribute money to a corporate political action committee, or PAC, but these amounts are modest compared with the funds available to corporate treasuries.

At least 24 states (California not among them) have similar bans on corporate spending in state races.

All of those spending limits have come under growing legal attack from conservatives and libertarians who say that the government should not be allowed to set limits on campaign spending and electioneering, even when corporate or union money is in play.

Three justices -- Antonin Scalia, Anthony M. Kennedy and Clarence Thomas -- have already said that they would vote to overrule past decisions that upheld federal and state restrictions on corporate election spending.

Chief Justice John G. Roberts Jr. and Justice Samuel A. Alito Jr. also have said they favor free speech over the campaign funding limits. But they have not yet said whether they would go along and give corporations a free-speech right to spend on campaign ads.

That was the issue before the court Wednesday. It was a rare reargument in the seemingly narrow case of a small nonprofit group called Citizens United.

The organization had produced an anti-Clinton video called “Hillary: The Movie,” which was designed to undercut her 2008 campaign for the presidency. However, it got tied up in a legal battle with the Federal Election Commission.

Because Citizens United is incorporated and received a small amount of corporate money, the group and its movie came under FEC regulation. Any amount of corporate money can trigger regulatory action under the election laws.

In March, the justices debated whether the law should apply to a nonprofit group that produced a campaign-related video. But rather than decide that narrow question, the justices said in June that they would focus instead on whether to say that all corporations, like individuals, had a right to spend freely to elect or defeat candidates.

Washington lawyer Theodore B. Olson, solicitor general under President George W. Bush, pressed the justices to rule broadly.

“Corporations are persons entitled to protection under the 1st Amendment,” said Olson, who represented Citizens United.

It was the first argument for Justice Sonia Sotomayor, and she wasted no time in challenging Olson. She noted that in March, Olson had said his client would be a winner with a narrow ruling saying that a small nonprofit group cannot be regulated by the FEC.

“Mr. Olson, are you giving up on your earlier arguments that there are ways to avoid the constitutional question to resolve this case?” she asked.

Olson said that he would be glad to win narrowly, but he continued to press for a broader ruling.

“Wouldn’t we be doing some more harm than good by a broad ruling in a case that doesn’t involve business corporations?” Sotomayor asked later.

It was also the first argument for Solicitor General Elena Kagan, President Obama’s top courtroom lawyer. She strongly defended the corporate spending restrictions in the face of steadily skeptical questions from the court’s conservatives.

When Scalia said the court should be suspicious of Congress because lawmakers were inclined to protect themselves, Kagan said he had it exactly backward. Freeing corporations and unions to support candidates would help the incumbents, not hurt them.

“They want winners,” she said. “Corporate and union money [would] go overwhelmingly to incumbents,” she said.

Roberts tangled with Kagan through much of her argument. “We don’t put our 1st Amendment rights in the hands of FEC bureaucrats,” he said.

Sens. John McCain (R-Ariz.) and Russell D. Feingold (D-Wis.), cosponsors of the 2002 campaign funding law, were in the courtroom and listened intently to the 90-minute argument. The ruling could strike down part of the McCain-Feingold Act that restricted corporate and union-funded election ads in the months before an election.

Seth Waxman, a former Clinton administration lawyer, represented McCain and Feingold in the argument. It would be “truly extraordinary” for the justices to reject 100 years of election law, Waxman said, particularly in a case that could be resolved through a narrow ruling.

The court will meet behind closed doors later this week to vote on the case. A decision could come within a few months.

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david.savage@latimes.com