| October 26, 1999 Hon. Scott E. Thomas Re: Comments on Draft Advisory Opinion 1999-28 Dear Chairman Thomas: On behalf of the Organization for International Investment (or "OFII"), this letter respectfully comments on FEC Advisory Opinion Request 1999-28 (September 15, 1999) from Bacardi-Martini USA, Inc. ("BMUSA"), and urges adoption by the Commission of the Draft Opinion proposed by the Office of General Counsel. OFII is a Washington, D.C.-based association representing 61 United States companies (including some of the nation's largest firms) that are subsidiaries of companies based abroad. At the outset, OFII wishes to highlight the important contribution that these U.S. companies make to the U.S. economy:
As substantial businesses within the U.S. economy, U.S. subsidiaries, both on their own and through OFII, frequently express their views on regulatory or legislative issues. In addition, the U.S. executives and employees of these companies have much to contribute to the political debate, especially on issues of international trade, tax and corporate law. The First Amendment protects the speech and associational rights of all United States citizens, whether they be employed by domestic or foreign companies. The Supreme Court stated in Buckley v. Valeo, 424 U.S. 1, 14 (1976), that "[d]iscussion of public issues and debate on the qualifications of candidates are integral to the operation of the system of government established by our Constitution." The Court stated further that such discussions and debates, especially those surrounding controversial issues, are "undeniably enhanced by group association." Id. at 15. Therefore, declared the Court, "[t]he First Amendment affords the broadest protection to such political expression in order 'to assure [the] unfettered interchange of ideas for the bringing about of political and social changes desired by the people.'" Id. at 14. The Buckley Court went on to address the nexus between speech and associational rights and political contributions. The Court noted that "expensive modes of communication [have become] indispensable instruments of effective political speech," and that such modes require "the expenditure of money." Id. at 19. Consequently, contribution limitations "represent substantial rather than merely theoretical restraints on the quantity and diversity of political speech." Id. Moreover, the Court found contribution restrictions to infringe upon a "contributor's freedom of political association" by limiting that person's ability to both affiliate with a particular candidate and to pool his or her resources with "like-minded persons . . . in furtherance of common political goals." Id. at 24, 22. Thus, concluded the Court, "governmental actions which may have the effect of curtailing the freedom to associate is subject to the closest scrutiny." Id. at 25. The Commission has consistently honored the First Amendment rights of American citizens who work for international companies. For example, the Commission has ruled that "[i]t is not unlawful . . . for a United States citizen who is employed outside the United States, as an executive of a foreign national corporation subsidiary, to make contributions to the separate segregated fund of the United States parent corporation." FEC Advisory Opinion 1982-34, Fed. Election Camp. Fin. Guide (CCH) 5678 (1982) (citing FEC Advisory Opinion 1979-59, Fed. Election Camp. Fin. Guide (CCH) 5440 (1979)). Similarly, the Commission has upheld the right of a domestic parent corporation to solicit contributions from the eligible members of the restricted class of its international franchisees. FEC Advisory Opinion 1992-7, Fed. Election Camp. Fin. Guide (CCH) 6051 (1992). The Commission has approved numerous Advisory Opinions allowing U.S. corporations that are subsidiaries of companies based abroad to establish separate segregated funds ("SSFs"), provided that no foreign national is solicited for the fund or involved in the fund's decision-making process. See FEC Advisory Opinion 1995-15, Fed. Election Camp. Fin. Guide (CCH) 6152 (1995); FEC Advisory Opinion 1990-8, Fed. Election Camp. Fin. Guide (CCH) 5986 (1990); see also FEC Advisory Opinion 1989-29, Fed. Election Camp. Fin. Guide (CCH) 5976 (1989); FEC Advisory Opinion 1980-100, Fed. Election Camp. Fin. Guide (CCH) 5548 (1980); FEC Advisory Opinion 1978-21, Fed. Election Camp. Fin. Guide (CCH) 5327 (1978). Additionally, the Commission has a regulation specifying restrictions on participation by foreign nationals in SSFs. See 11 C.F.R. 110.4(a)(2). The logic of Commission precedent suggests that the Commission should permit U.S. corporations and their SSFs to solicit contributions from, and communicate with, U.S. citizens in the restricted classes of other domestic subsidiaries (including corporations, partnerships, limited liability companies) as well as of the parent corporation. Commission rules state that "[a]ll committees (including a separate segregated fund . . . ) established, financed, maintained or controlled by the same corporation, . . . including any parent, . . . are affiliated." 11 C.F.R. 100.5(g)(2). Thus, a subsidiary may normally solicit from and communicate with other affiliated entities. See 11 C.F.R. 100.5(g)(3)(i) & 110.3(a)(2)(i). Furthermore, the Commission has stated that an SSF of a subsidiary corporation "may solicit the shareholders and their families of the parent corporation." FEC Advisory Opinion 1982-18, Fed. Election Camp. Fin. Guide (CCH) 5664 (1982). Finally, as noted above, U.S. subsidiaries are already subject to Commission rules devised to prohibit foreign nationals from making political contributions. 11 C.F.R. 110.4. Thus, as the draft Advisory Opinion notes, the committees of a parent corporation and each of its subsidiaries are affiliated with each other per se. 11 C.F.R. 100.5(g)(3)(i) and 110.3(a)(2)(1); also citing FEC Advisory Opinion 1990-10, Fed. Election Camp. Fin. Guide (CCH) 5995 (1990). Therefore, OFII specifically concurs with the conclusion that "BMUSA is affiliated with all of BL's subsidiaries." This is a result that also applies to many OFII members that are similarly affiliated with other U.S. companies through a common parent corporation. This outcome advances the "anti-proliferation" purposes of the Act, and provides helpful clarification of the status of SSFs established by such U.S. subsidiaries. In conclusion, so long as foreign
nationals are not being solicited or communicated with, no principled
rationale exists for denying American citizens employed by companies affiliated
with a U.S. company the right to participate fully in the American political
process, including by contributing to, or being solicited by, affiliated
SSFs. Respectfully submitted, Trevor Potter
|