Speaking Fees

It's Forbes vs. Forbes at the FEC.

The Federal Election Commission has filed suit against Steve Forbes and Forbes Inc. for campaign finance violations during the publisher's 1996 presidential campaign. Forbes wasn't sipping coffee with shadowy foreign businessmen. Instead he wrote a biweekly column in Forbes magazine and had the audacity to discuss current events in that column. For this, the FEC, which claims it is so chronically underfunded that it has to dismiss most of the complaints it receives because it lacks the resources to prosecute them, has filed a complaint in federal court in New York claiming that, by publishing these columns, Forbes (the magazine) made an illegal contribution to Forbes (the candidate).

Interestingly, the FEC recently persuaded hostile appropriators in Congress to fully fund the agency's requested 1999 budget of $36.5 million (up from $31.6 million the previous year). To lead off 1999 with a case that is certain to draw attention to the commission's quixotic litigation strategies shows some nerve.

Did Forbes--or Forbes--violate the law? Federal law prohibits corporate contributions to federal candidates. Contributions may be in the form of money or in-kind services, such as the publication of a campaign advertisement. Corporate "expenditures" made in coordination with a candidate are also considered illegal contributions. Congress understood that this blanket rule could impose unacceptable restrictions on media activities, and so it made an exception to the definition of "expenditure" for news stories, commentaries, or editorials distributed by any broadcasting station, newspaper, magazine, or other periodical.

Fearing that this could in time become a loophole for political parties and candidates (who could establish newspapers or magazines to take advantage of the rule), Congress dictated that the exception would not apply to media outlets "owned or controlled by any political party, political committee, or candidate" unless the item in question represented a bona fide news account which was "part of a general pattern of campaign-related news accounts which give reasonable equal coverage to all opposing candidates."

According to the FEC's complaint, while a candidate for president Forbes disseminated his opinions about issues "on which he was also relying in his presidential campaign" in his "Fact and Comment" column in Forbes magazine. "Those issues included, among others, the flat tax, capital gains taxes, term limits, Bosnia foreign [sic], abortion, and the gold standard," says the complaint. The FEC argues that since Forbes (the candidate) controlled Forbes (the magazine), the cost of running these columns was a corporate political expenditure. Since articles written by Forbes (the columnist) were obviously coordinated with Forbes (the candidate), the FEC found that Forbes made an illegal contribution to Forbes. The commission, using mysterious precision, says the value of this contribution is "at least $94,900."

Forbes's campaign began in September 1995 and ended in March 1996. Counting the columns published in the month or two before he announced his candidacy, he had roughly 15 opportunities in "Fact and Comment" to flack his campaign. Did he?

Forbes indeed wrote about several of the issues the FEC identified in its complaint. He wrote about Bosnia twice. On October 23, he discussed partition of Bosnia and the role of NATO. On January 1 he urged that U.S. troops remain overseas no matter what happened in Bosnia. In neither article did he mention President Clinton, the Clinton administration, or any rival Republicans. Nor did he attempt to raise funds for his campaign.

On October 23, Forbes also mentioned his support of the flat tax in the context of simplifying the tax code, which he advocated as a way to decrease the invasiveness of the Internal Revenue Service. On September 25, about the time Forbes declared his candidacy, he wrote in support of a reduced tax rate on capital gains and of term limits as a way to reform Washington's "inbred political culture." Again, no opponents were criticized, or even named, in these commentaries, and no references were made to any election or to Forbes's candidacy. There was only one reference to the "gold exchange standard"--in a paragraph about inflation, stating that Nixon took the dollar off the standard. One wonders why the FEC bothered including this issue in its complaint.

Since the FEC's theory emphasizes that Forbes controlled Forbes, why limit the analysis to these "Fact and Comment" columns? Under the FEC's logic, any other material published in the magazine during this period should also be fair game. Caspar Weinberger wrote about Bosnia twice (October 9 and December 18, 1995), Thomas Sowell discussed term limits in a September 11 column, and John Rutledge mentioned the gold standard and the flat tax in a November 6 column on the Phillips curve. Once the primaries began, it seems that not a jot was included by Forbes (the magazine or the candidate) on any of the issues the FEC sees as those "on which [Steve Forbes] was also relying in his presidential campaign."

Nor is there support for a claim that these commentaries were somehow timed to give Forbes's campaign a boost. The closest correlation appears to be that his comments about term limits were published in September, about the time he declared his candidacy, and his campaign's first media push (in October) also discussed this issue.

The editorial content of Forbes magazine during the Steve Forbes campaign, in short, reflected longstanding editorial positions in favor of growth, free markets, a sound dollar, and an internationalist foreign policy. To assert, as the FEC must, that these commentaries were a craven attempt to bolster the Forbes campaign through illegal corporate support is ludicrous.

Ludicrous and unconstitutional. Steve Forbes's role as a commentator cannot be shoehorned into federal campaign finance law simply because Forbes is both a journalist and a candidate.

The Supreme Court and a legion of lesser courts have held repeatedly that for speech to be "political enough" to trigger regulation, it must contain "express advocacy" for or against a clearly identified candidate. The "media exemption" rules cited at length in the FEC's complaint simply don't matter unless the commentaries advocated the election or defeat of a candidate. They didn't.

In the debate over campaign finance reform, much ink has been spilled over the last two years about the wisdom of the express advocacy standard. Critics have observed that it allows corporations, unions, and rich people to run "issue ads" that are designed to persuade voters to support or oppose a candidate but avoid federal regulation and reporting requirements by never stating so in clear terms.

In an effort to control such ads, campaign finance reformers in Congress, such as the supporters of the McCain-Feingold bill, would institute additional regulations for advertisements that name a candidate or for issue ads that appear within a certain period immediately preceding an election. Notably, Forbes's commentaries fall outside even this expansive proposal, since he named no candidates.

Steve Forbes isn't the first individual to be confronted with the FEC's mathematics, which equate speaking about issues with campaigning. The FEC used this argument against Joel Hyatt, an unsuccessful 1994 candidate for the U.S. Senate in Ohio who is also the principal of Hyatt Legal Services, a law firm that advertises heavily on television.

The FEC concluded that Hyatt Legal Services television spots were--you guessed it--contributions from the company to Joel Hyatt. As the FEC's Office of General Counsel observed, several of the ads referred to health care and crime, which were "issues raised in the campaign."

Since Hyatt was a plaintiff's attorney, his trolling for claims among viewers with health problems or who had been victims of crime is hardly surprising. Nevertheless, rather than fight government lawyers, Hyatt settled this enforcement action at the administrative level for $11,000.

Apparently the FEC would require Joel Hyatt and Steve Forbes to abandon their private careers before either could run for office. In an era in which reformers complain that our political process needs to focus more on debating issues, FEC enforcers are demanding that these candidates say less about the most salient topics. How this would preserve the integrity of our electoral processes (supposedly the FEC's mission) is hard to understand.

By refusing to settle with the FEC's lawyers, Steve Forbes must now spend the time and money needed to defend himself against this assault on his personal liberties. In the process, he will be striking a blow for free speech.

Allison R. Hayward ([e-mail]) practices election and government ethics law at the Washington, D.C., law firm of Wiley, Rein & Fielding.