MUR759401321 1 FEDERAL ELECTION COMMISSION 2 3 FIRST GENERAL COUNSEL’S REPORT 4 5 MUR: 7594 6 DATE COMPLAINT FILED: April 11, 2019 7 DATE OF NOTIFICATION: April 18 and 22, 2019 8 LAST RESPONSE RECEIVED: October 16, 2019 9 DATE ACTIVATED: September 11, 2019 10 11 EARLIEST EXPIRATION OF SOL: March 6, 2022 12 ELECTION CYCLE: 2018 13 14 COMPLAINANT: Alexander Austin 15 16 RESPONDENTS: Enbridge, Inc. 17 Enbridge (U.S.) Inc. 18 Enbridge (U.S.) Inc. Political Action Committee 19 and K. Ritu Talwar, as Treasurer 20 Enbridge Energy Company, Inc. 21 52 Federal Committee Respondents and Treasurer 22 and 252 State Committee Respondents 23 identified on Appendix A 24 25 RELEVANT STATUTES AND 52 U.S.C. § 30121 26 REGULATIONS: 11 C.F.R. § 110.20 27 28 INTERNAL REPORTS CHECKED: Disclosure Reports 29 30 FEDERAL AGENCIES CHECKED: None 31 32 33 I. INTRODUCTION 34 The Complaint alleges that Enbridge Inc., a Canadian company, violated the Federal 35 Election Campaign Act of 1971, as amended (the “Act”), in connection with contributions to 36 political committees during the 2018 election cycle.1 The contributions at issue in the Complaint 1 Compl. at 1 (Apr. 11, 2019). MUR759401322 MUR 7594 (Enbridge, Inc., et al.) First General Counsel’s Report Page 2 of 12 1 were made by Enbridge (U.S.) Inc. Political Action Committee (“Enbridge PAC”), a separate 2 segregated fund (“SSF”) of Enbridge Inc.’s U.S. subsidiary, Enbridge (U.S.) Inc.2 3 Enbridge Inc., Enbridge (U.S.) Inc., and Enbridge PAC (collectively, “Enbridge 4 Respondents”)3 assert that the Complaint is baseless because the contributions were made by 5 Enbridge PAC, not Enbridge Inc.4 The Enbridge Respondents further assert that the PAC 6 complied with Commission precedent permitting a U.S. subsidiary of a foreign company to form 7 a SSF and contribute to federal, state, and local candidates so long as the foreign parent company 8 does not finance the political activities and no foreign national participates in the operation or 9 administration of the SSF or in any decision made by the SSF with respect to contributions or 10 expenditures.5 Since the available information is insufficient to establish that Enbridge Inc. 11 contributed to any political committees or that any foreign national participated in the decision- 12 making of Enbridge PAC, we recommend that the Commission dismiss the allegation that 13 Enbridge Inc., Enbridge (U.S.) Inc., Enbridge (U.S.) Inc. Political Action Committee and K. Ritu 14 Talwar in her official capacity as treasurer, and Enbridge Energy Company, Inc. violated 15 52 U.S.C. § 30121(a)(1). 16 The Federal and State Committee Respondents assert that they relied upon the fact that 17 Enbridge PAC was registered with the Commission when accepting the contributions, they had 18 no information suggesting that the contributions were from a foreign national, and Enbridge PAC 2 Id. at 6. 3 The Enbridge Respondents assert that Enbridge Energy Company, Inc. is not directly involved in the matter and should not be considered a respondent, but do not provide any additional information about Enbridge Energy Company, Inc.’s position within the Enbridge corporate structure. Enbridge Resp. at 1 n.1 (June 11, 2019). 4 Enbridge Resp. at 1. 5 Id. at 7. MUR759401323 MUR 7594 (Enbridge, Inc., et al.) First General Counsel’s Report Page 3 of 12 1 complied with Commission precedent permitting a U.S. subsidiary of a foreign company to form 2 a SSF. Since there is no information available to suggest that the Federal and State Committees 3 had a basis to conclude that Enbridge PAC was a foreign national or that foreign nationals were 4 involved in Enbridge PAC’s decisions to make contributions, we recommend that the 5 Commission find no reason to believe that the Federal and State Committee Respondents 6 violated 52 U.S.C. § 30121(a)(2). 7 II. FACTUAL BACKGROUND 8 Enbridge Inc. is a publicly traded Canadian corporation in the oil and gas industry and is 9 headquartered in Calgary, Canada.6 Enbridge Inc. acknowledges that it is a foreign national 10 under 52 U.S.C. § 30121(b) and a foreign principal under 22 U.S.C. § 611(b).7 Enbridge (U.S.) 11 Inc., an indirect wholly-owned subsidiary of Enbridge Inc., is a Delaware corporation with its 12 principal place of business in Houston, Texas.8 It has approximately 3,500 employees in the 13 United States and assets across 41 states.9 14 On February 27, 2017, Enbridge Inc. and Spectra Energy Corporation (“Spectra Energy”) 15 merged, and Spectra Energy became a wholly-owned subsidiary of Enbridge Inc.10 Following 16 the merger, Enbridge (U.S.) Inc. became the direct parent company to Spectra Energy and all of 6 Compl. at 5; Enbridge Resp. at 2. 7 Enbridge Resp. at 2. 8 Compl. at 5; Enbridge Resp. at 2. Enbridge (U.S.) Inc. is a direct, wholly owned subsidiary of Enbridge US Holdings Inc., which is a Canadian corporation that is a direct, wholly-owned subsidiary of Enbridge Inc. Id. 9 Id. 10 Id. Spectra Energy was formed in 2006 in connection with its spin-off from Duke Energy Corporation, and was publically traded on the New York stock exchange. Id. MUR759401324 MUR 7594 (Enbridge, Inc., et al.) First General Counsel’s Report Page 4 of 12 1 its subsidiaries and assets.11 At the time of this merger, Spectra Energy sponsored a SSF known 2 as the Spectra Energy Corp Political Action Committee (“Spectra Energy PAC”).12 Following 3 the merger, Spectra Energy PAC changed its name to Enbridge (U.S.) Inc. Political Action 4 Committee (“Enbridge PAC”) and identified Enbridge (U.S.) Inc. as its connected organization.13 5 Enbridge PAC adopted Articles of Association on March 14, 2017.14 The Articles 6 provide that the members of Enbridge PAC include all Enbridge (U.S.) Inc. shareholders, 7 employees, and families who are eligible and do contribute to Enbridge PAC “provided such 8 individuals are United States citizens or permanent United States residents.”15 9 Enbridge PAC contributed over $500,000 to federal and state political committees during 10 the 2017-2018 election cycle.16 As of October 31, 2019, Enbridge PAC had contributed over 11 $95,000 to federal and state political committees during the 2019-2020 election cycle.17 12 III. LEGAL ANALYSIS 13 The Act and Commission regulations prohibit any “foreign national” from directly or 14 indirectly making a contribution or donation of money or other thing of value, or an expenditure, 11 Id. 12 Id.; see also Spectra Energy Corp Political Action Committee, Amended Statement of Organization (filed Sept. 9, 2014). 13 Enbridge Resp. at 2; Enbridge (U.S.) Inc. Political Action Committee, Amended Statement of Organization (filed Mar. 6, 2017). 14 Enbridge Resp. at 3. The Enbridge Respondents assert that the Articles of Association are, in substance, nearly identical to those adopted previously by Spectra Energy PAC. Id. 15 Id. at 3, Ex. B. 16 See Enbridge (U.S.) Inc. Political Action Committee, 2017-2018 financial Summary, available at https://www.fec.gov/data/committee/C00429662/?tab=summary&cycle=2018. $22,000 of the contributions were made prior to the merger of Enbridge Inc. and Spectra Energy. 17 See Enbridge (U.S.) Inc. Political Action Committee, 2019-2020 financial Summary, available at https://www.fec.gov/data/committee/C00429662/?tab=spending&cycle=2020. MUR759401325 MUR 7594 (Enbridge, Inc., et al.) First General Counsel’s Report Page 5 of 12 1 independent expenditure, or disbursement, in connection with a federal, state, or local election.18 2 The Act’s definition of “foreign national” includes an individual who is not a citizen or national 3 of the United States and who is not lawfully admitted for permanent residence, as well as a 4 “foreign principal” as defined at 22 U.S.C. § 611(b), which, in turn, includes a “partnership, 5 association, corporation, organization, or other combination of persons organized under the laws 6 of or having its principal place of business in a foreign country.”19 Commission regulations 7 implementing the Act’s foreign national prohibition provide that “[a] foreign national shall not 8 direct, dictate, control, or directly or indirectly participate in the decision-making process of any 9 person, such as a corporation … with regard to such person’s Federal or non-Federal election- 10 related activities, such as decisions concerning the making of contributions[.]”20 11 A. There is insufficient information to conclude that a foreign national was 12 involved in Enbridge PAC’s decision-making process or that Enbridge Inc. 13 made a political contribution. 14 The Commission has held that a domestic subsidiary of a foreign national corporation is 15 permitted to make contributions, when corporate contributions are otherwise permitted, if (1) the 16 contributions derive entirely from funds generated by the subsidiary’s U.S. operations; and (2) if 17 no foreign nationals are involved in the decision to make the contribution.21 Similarly, a 18 52 U.S.C. § 30121(a)(1); 11 C.F.R. § 110.20(b)-(c). Courts have consistently upheld the provisions of the Act prohibiting foreign national contributions on the ground that the government has a clear, compelling interest in limiting the influence of foreigners over the activities and processes that are integral to democratic self-government, which include making political contributions and express-advocacy expenditures. See Bluman v. FEC, 800 F. Supp. 2d 281, 238-89 (D.D.C. 2011), aff'd 132 S. Ct. 1087 (2012); United States v. Singh, 924 F.3d 1030, 1040-44 (9th Cir.