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Complaint for Injunctive and Declaratory Relief

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Complaint for Injunctive and Declaratory Relief Case 1:16-cv-00259-BAH Document 1 Filed 02/16/16 Page 1 of 28 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA CITIZENS FOR RESPONSIBILITY AND ) ETHICS IN WASHINGTON ) 455 Massachusetts Ave., N.W., Sixth Floor ) Washington, D.C. 20001, ) ) NICHOLAS MEZLAK ) 5707 Forest Ave. ) Civil Action No. Parma, OH 44129, ) ) Plaintiffs, ) ) v. ) ) FEDERAL ELECTION COMISSION ) 999 E Street, N.W. ) Washington, D.C. 20463, ) ) Defendant. ) ) COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF 1. This is an action for injunctive and declaratory relief under the Federal Election Campaign Act of 1971 (“FECA” or “the Act”), 52 U.S.C. § 30109(a)(8)(C), and the Administrative Procedure Act, 5 U.S.C. § 706, challenging as arbitrary, capricious, an abuse of discretion, and contrary to law the dismissal by the Federal Election Commission (“FEC” or “Commission”) of an administrative complaint by Citizens for Responsibility and Ethics in Washington (“CREW”) and Nicholas Mezlak (collectively, “Plaintiffs”) against Crossroads Grassroots Policy Strategies (“Crossroads GPS”), Steven Law, Karl Rove, Haley Barbour, and Caleb Crosby for their failure to comply with the FECA’s disclosure requirements for those making independent expenditures. This action further challenges a regulation promulgated by the FEC, 11 C.F.R. § 109.10(e)(1)(vi), as the regulation is arbitrary, capricious, and contrary to 1 Case 1:16-cv-00259-BAH Document 1 Filed 02/16/16 Page 2 of 28 law in violation of 52 U.S.C. § 30109(a)(8)(C) and 5 U.S.C. § 706(2) because it is inconsistent with a provision of the FECA, 52 U.S.C. § 30104(c). 2. In 2012, Crossroads GPS received a contribution in excess of $3 million that was given for the explicit purpose of aiding the group’s support for the election of Josh Mandel in the United States Senate race in Ohio, according to Crossroads GPS and Karl Rove, a long-time political operative who helped found the group and raised the funds from the donor. It is undisputed that Crossroads GPS ran extensive independent expenditure television advertisements in Ohio for that very purpose. Indeed, Crossroads GPS admits that broadcasting independent expenditures was its primary activity in Ohio. Under the law, spending on ads like these must be disclosed to the FEC and, importantly, contributors who paid for them also must be disclosed. Nonetheless, despite admitting that this multi-million dollar contribution was made for the explicit purpose of electing a federal candidate and was used to fund independent expenditures for that same purpose, Crossroads GPS never disclosed the identity of the contributor because, it argues, the contributor did not specifically intend to further a particular independent expenditure in the exact form that Crossroads GPS eventually ran it in the state. 3. Nor did Crossroads GPS disclose any other contributor who paid for those ads. Specifically, Crossroads GPS failed to disclose the identities of donors who, it admits, provided an additional $1.3 million in “matching” contributions also intended to further Crossroads GPS’s activities in Ohio. Again, these activities consisted primarily of the creation and dissemination of independent expenditures. 4. Crossroads GPS also failed to disclose the identities of the other contributors who funded its activities in 2012 Senate races in Ohio, Virginia, Nevada, and Montana; contributors who Crossroads GPS brought to a fundraiser, provided materials for donating to the group, 2 Case 1:16-cv-00259-BAH Document 1 Filed 02/16/16 Page 3 of 28 showed “example” independent expenditure advertisements (nearly all of which were Crossroads GPS’s), and then solicited money, saying their contributions were needed to pay for the rising cost of broadcasting such ads. Crossroads GPS subsequently ran independent expenditures advertisements in those states echoing the claims and arguments made in the example ads shown at the fundraiser. Despite all this, Crossroads GPS failed to disclose these donors to the FEC. 5. The FECA, however, does not countenance such evasion. Voters have a vital interest in knowing the identities of those who pay for independent expenditures in support or opposition to federal candidates, an interest that is not lessened merely because the contributor may not be aware of the exact form of the final independent expenditure. That interest, moreover, is manifested in the FECA. The Act imposed and continues to impose on Crossroads GPS the obligation to disclose the contributors behind its independent expenditures. The FEC’s refusal to enforce that obligation was arbitrary, capricious, an abuse of discretion, and contrary to law, and warrants reversal by this Court. JURISDICTION AND VENUE 6. This Court has both subject matter jurisdiction over this action and personal jurisdiction over the parties pursuant to 52 U.S.C. § 30109(a)(8)(A) and 5 U.S.C. § 702. This Court also has jurisdiction over this action pursuant to 28 U.S.C. §§ 1331, 2201(a), and 2202. Venue lies in this district under 52 U.S.C. § 30109(a)(8)(A) and 28 U.S.C. § 1391(e). PARTIES 7. Plaintiff CREW is a non-profit, non-partisan corporation organized under Section 501(c)(3) of the Internal Revenue Code. 8. CREW is committed to protecting the rights of citizens to be informed about the activities of government officials, ensuring the integrity of government officials, protecting our 3 Case 1:16-cv-00259-BAH Document 1 Filed 02/16/16 Page 4 of 28 political system against corruption, and reducing the influence of money in politics. CREW works to advance reforms in the areas of campaign finance, lobbying, ethics, and transparency. Further, CREW seeks to ensure that campaign finance laws are properly interpreted, enforced, and implemented. 9. To advance its mission, CREW uses a combination of research, litigation, advocacy, and public education to disseminate information to the public about public officials and their actions, and the outside influences that have been brought to bear on those actions. A core part of this work is examining and exposing the special interests that have influenced our elections and elected officials and using that information to educate voters regarding the integrity of public officials, candidates for public office, the electoral process and our system of government. 10. Toward this end, CREW monitors the activities of those who run for federal office as well as those groups financially supporting candidates for office or advocating for or against their election. CREW regularly reviews campaign finance reports that groups, candidates, and political parties file with the FEC disclosing their expenditures and, in some cases, their contributors. Using the information in those reports, CREW, through its website, press releases, reports, and other methods of distribution, publicizes the role of these individuals and entities in the electoral process and the extent to which they have violated federal campaign finance laws. 11. CREW also files complaints with the FEC when it discovers violations of the FECA. Publicizing violations of the FECA and filing complaints with the FEC serve CREW’s mission of keeping the public, and voters in particular, informed about individuals and entities that violate campaign finance laws and deterring future violations of campaign finance laws. 4 Case 1:16-cv-00259-BAH Document 1 Filed 02/16/16 Page 5 of 28 12. CREW is hindered in carrying out its core programmatic activities when those individuals and entities that attempt to influence elections and elected officials are able to keep their identities hidden. Likewise, the FEC’s refusal to properly administer the campaign finance laws, particularly the FECA’s reporting requirements, hinders CREW in its programmatic activity, as compliance with those reporting requirements often provides CREW with the only source of information about those individuals and groups funding the political process. As a result of the FEC’s refusal to enforce the FECA’s disclosure provisions, organizations like Crossroads GPS have been able to pour vast amounts of “dark” or anonymous money into the political system without revealing the source of that money. This deprives CREW of information critical to advancing its ongoing mission of educating the public to ensure the public continues to have a vital voice in our political process and government decisions. 13. A part of CREW’s work in carrying out its central mission focuses on so-called “pay-to-play” schemes. Toward that end, CREW looks for correlations between donations to the campaign of a member of Congress or candidate and that member’s subsequent congressional activities, including advocating for policies and legislation that serve the interests of the member’s donors. Information that an individual or entity made a large-dollar contribution may be very revealing about the influences that donor has brought to bear on the member post- election. Without information about the individuals and entities funding the political activities of organizations like Crossroads GPS, CREW is stymied in fulfilling its central mission. 14. As an example, in May 2013, CREW issued a report, Rise of the Machines, detailing the growing political influence of high-frequency traders in Washington. CREW’s analysis was based in large part on the lobbying and campaign contribution records of 48 companies specializing in high frequency trading. That data revealed that between the 2008 and 5 Case 1:16-cv-00259-BAH Document 1 Filed 02/16/16 Page 6 of 28 2012 election cycles, the campaign contributions of these firms increased by 673 percent, from $2.1 million during the 2008 election cycle to $16.1 million during the 2012 cycle. CREW was able to obtain this information because of the disclosure requirements to which the organizations receiving those contributions—federal candidates, party committees, PACs, and super PACs— are subject under the FECA.
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