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  mpaign Financ and
Camp         nce
   lic  closure Board
Publ Disc     e     rd

Date: Ju 10, 2011

To:    B         ers
       Board Membe

From: Gary Goldsm
      G                      ve
                mith, Executiv Director                           one: 651-29
                                                            Telepho         96-1721

Re:    T          e          n         ory
       The possible revocation of Adviso Opinion 257

Authorit and pract tice
         ta        S                                  es           d's
Minnesot Statutes Section 10A.02, subd. 12(a), provide the Board authority to issue
                   P          b)          division des cribes the ef
advisory opinions. Paragraph (b of the subd                                     opinion:
                                                                   ffect of the o

       "A written adv
        A                       on         y            s           n            n
                    visory opinio issued by the board is binding on the board in a
        ubsequent board procee
       su           b           eding concerning the pe              g          d
                                                       erson making or covered by
       th request and is a defense in a judicial proceed
        he         a                                                volves the su
                                                        ding that inv           ubject
       matter of the opinion and is brought against the p
       m                                    a                                    ed
                                                        person makiing or covere by
       th request unless:

       (1 the board has amended or revoke the opinio before the initiation o the
        1)                                  ed          on          e          of
       board or judic proceeding, has notified the pers making or covered by
                    cial                               rson
       th request of its action, and has allo
        he         o             a                      t
                                            owed at least 30 days for the person to do
       anything that might be neecessary to comply with the amende or revoke
                                             c                      ed         ed

       (2 the reques has omitte or missta
        2)         st         ed        ated materiall facts; or

       (3 the person making or covered by the request has not acte in good f
        3)          n                                            ed        faith
        n           n           n."
       in reliance on the opinion

An advisory opinion is binding on on the Bo
                                 nly                                 er
                                             oard. Even the requeste is not required to follo ow
the advic With respect to the Board, the opinion is bin
        ce.                      B                      nding only in a proceedin concernin
                                                                                  ng          ng
        on                       y          st.         on           he
the perso making or covered by the reques The perso making th request m be differmay          rent
than the person cove             r
                     ered by the request beca                        are
                                             ause adviso ry opinions a often req  quested by legal
counsel on behalf of an entity or a treasurer. The phrase "person co
        o                                    .           e                       he
                                                                     overed by th request" d  does
not imply that the opinion has bro
        y                                   cation than to the immed
                                 oader applic            o                                    est.
                                                                     diate parties to the reque

       h           n
Although the Section 10A.02 pro
                              ovision quote above cle
                                          ed          early contem               evocation of
                                                                    mplates the re          f
                                                      ation, it is sile regarding the
advisory opinions and provides a process for the revoca               ent        g
circumsta           r          B          o
        ances under which the Board may or should rev voke an opin    nion.

Formal re            f
        evocation of advisory op            ot        but
                                pinions is no common, b should p             undertaken more
                                                                 probably be u
                     ce,        an                    ocation, staf keeps pub
frequently. In practic rather tha process a formal revo           ff                     ons
                                                                            blished opinio
up-to-date by annotating opinions that are no longer effective. The most common reason an
advisory opinion becomes ineffective is that a statute is amended. For example, advisory
opinions 198, 218, 238, and 245 all relate to gifts of plaques. The statute prohibiting most gifts
of plaques was amended to permit those gifts. As a result, staff prepended an annotation to
these opinions indicating that they had been rendered obsolete by the statutory change. On the
other hand, when the U.S. District Court modified the definition of independent expenditures
rendering several advisory opinions invalid, the Board formally revoked them.

In another series of opinions, the Board began to go beyond the statutory language in its
       opinions considering what would trigger the requirement that an association register a
       political fund. The statute limits the triggers to making donations or approved
       expenditures or making independent expenditures. In particular, Advisory Opinion 398
       went beyond the statutory requirements and is not a valid statement of the law. This
       opinion and a series similar to it could, and probably should, be formally revoked.
       However, the Board remedied its error when it was actually required to apply the law in
       an investigation. In The Matter of the Complaint of Novack Regarding Minnesota
       Majority, the Board completed a thorough and reasoned examination of the law and
       reached a conclusion different than its opinion in Advisory Opinion 398 and others. As a
       result, staff prepended Advisory Opinion 398 and similar advisory opinions with a short
       memo indicating that these opinions were superseded by the Board's examination of the
       question in Novack.

Early in its examination of the statutory gift prohibition, the Board issued two advisory opinions
reaching opposite results, with the second opinion making no reference to the first. The facts
were that a public official wanted to solicit lobbyist principals for donations to a nonprofit charity.
In September, 1994, in Advisory Opinion 161, the Board recognized the difference between a
gift to an official and a gift to a charity which would not personally benefit the official. In
Advisory Opinion 214, issued less than a year later, the Board reached the opposite result and
said that a gift to a charity solicited by an official was a gift to the official. It is instructive to read
Advisory Opinion 214, as an example of an opinion that is not well-reasoned. Each question is
posed and answered with no explanation of the reasoning supporting the result. Additionally,
Advisory Opinion 214 does not explain its apparent conflict with Advisory Opinion 161. Finally,
in Advisory Opinion 234, issued about six months after 214, the Board recognized and resolved
the conflict concluding that the charitable contribution was not a gift to the official who requested
it. While Advisory Opinion 214 could be revoked, it was not - possibly because Advisory
Opinion 234 made it clear that 214 was not authoritative. For an example of an opinion that
does not meet the test of being well-reasoned, a concept discussed further below, I attach a
copy of Advisory Opinion 214.

In determining whether to revoke an advisory opinion, it is instructive to examine the approach
used by the United States Supreme Court when considering overruling its own precedent. The
Court, in Citizens United, overruled a long line of precedent that held that laws prohibiting
corporate contributions to candidates were constitutional. In doing so, the Court stated:

        "Our precedent is to be respected unless the most convincing of reasons
        demonstrates that adherence to it puts us on a course that is sure error.
        Beyond workability, the relevant factors in deciding whether to adhere to the
        principle of stare decisis include the antiquity of the precedent, the reliance
        interests at stake, and of course whether the decision was well reasoned."
        (Internal quotations and citations omitted.)

Board advisory opinions carry far less weight than do Supreme Court opinions. In fact, by
statute, the Board is prohibited from imposing the conclusions of advisory opinions on anyone,
even the requester, unless those conclusions have been adopted as administrative rules. The
effect of an advisory opinion is only that it may be used as a defense by the requester if the
Board begins an enforcement action related to the same subject.

Nevertheless, the Board recognizes that advisory opinions are a record of the Board's statutory
interpretation and are sometimes relied on by other parties than the requester. For these
reasons, it is important that the Board continuously review opinions that may be of particular
interest, even if they are no longer relevant to the original requester. Advisory Opinion 257 is
such an opinion.

Although not required, a review of the Supreme Court's factors, outlined above, may be
instructive in determining whether an advisory opinion should be officially revoked.

In introducing the list of factors, the Supreme Court prefaces its discussion, quoted above, with
the words "beyond workability". Therefore, it may be productive to review whether Advisory
Opinion 257 produces a workable interpretation of Chapter 10A.

Advisory Opinion 257 addresses the requirements of Chapter 10A that relate to disclosure by
unregistered associations when they donate to registered ballot question political committees or
funds. Specifically, Minnesota Statutes section 10A.12, subd. 5, requires an association
transferring dues and membership fees to its political fund to disclose the sources of the money
being transferred when the money from a single individual exceeds $100. Additionally, Section
10A.27, subd. 13, requires all unregistered associations to provide specified disclosure when
they contribute more than $100 to a political committee or fund.

As the result of Advisory Opinion 257, the disclosure requirements described in the previous
paragraph are ignored for corporations contributing or transferring money to ballot question
political committees or funds. For associations that are not corporations and that do not have
as their major purpose promoting the passage or defeat of ballot questions, an extremely
abbreviated form of disclosure is required. For federal, local, and non-Minnesota political
committees, the disclosure requirements are applied as fully as they would be to an entity
registered with the Board.

Questions arise as to whether the resulting application of Chapter 10A is workable because it
does not result in the same disclosure requirement for similarly situated associations. This was
made clear in 2007 when the Board investigated contributions to Minnesotans for Better Roads
and Transit ("MBRT"), a registered political committee. In that matter, a report filed by MBRT
disclosed both corporate contributions and contributions from non-corporate associations. Staff
review found that nine contributions from non-corporate entities were given without any
disclosure statement. The Board applied the conclusions of Advisory Opinion 257 and found
that the nine contributions were prohibited because the donor associations did not include the
underlying source disclosure required by Section 10A.27, subd. 13.

The MBRT treasurer pointed out that the Board's interpretation resulted in a scheme that was ".
. . especially confusing. There are two different standards. Individual contributors and
corporations are not required to disclose information regarding their contributions. Unregistered
non-corporate associations are". In fact, the Board's decision actually resulted in a three-tiered
system, with the level of disclosure based on both the unregistered association's legal structure
and whether or not the association was organized for a political purpose.

What the MBRT matter makes clear is that small legal distinctions may make one contribution
legal and another illegal even though they appear to be similar in all respects. The following
groups of contributions received by MBRT are examples that illustrate the problem. None of the
listed contributions included a statement of underlying source disclosure. In each case, the first
contribution was prohibited because it was received from a non-corporate entity. Each of the
other contributions in the category was from a corporation and, thus, was permitted without
disclosure based on the reasoning of Advisory Opinion 257.

       Financial Services Companies
       Boulay, Heutmaker, Zibell & Co, PLLP (prohibited)
       Ameriprise Financial Services, Inc.

       Law Firms
       Kalina, Wills, Gisvold, & Clark, PLLP (prohibited)
       Leonard Street And Deinard

       Golden Transportation LLP (prohibited)
       Golden Ring Trucking, Inc.
       Lawrence Transportation Company

The unworkable result is perhaps best summed up in the response of Golden Transportation to
the Board's investigation:

       A partner responded on behalf of Golden Transportation on April 24, 2007. The partner
       stated that: “My spouse …and I are 50/50 owners of Golden Ring Trucking, Inc. (a
       Corporation) and Golden Transportation, LLP (a Limited Liability Partnership). When the
       contribution to the Minnesotans for Better Roads and Transit Committee was made we
       wrote a Golden Transportation, LLP check because it made no difference and we saw
       no difference - $500.00 is $500.00. …Then we received a letter and a refund from the
       Committee. We wrote a $500.00 check from Golden Ring Trucking, Inc. to replace the
       first check.”

Any system of disclosure will require some attention to detail and an understanding of
disclosure principles. However, a system that relies so heavily on the legal form under which an
association chooses to do business adds an additional and potentially unworkable level of
complexity that does not appear to be required or supported by the language of Chapter 10A.

When the legislature clarified disclosure for unregistered associations making donations to
independent expenditure political committees or funds, it distinguished donors not based on
their legal form, but on the source of money used to make the donation. Such a distinction is
more straightforward and is more readily tailored to provide disclosure that is relevant to the
State's interest in providing information about the sources of money used to influence ballot
question voting decisions.

Reliance on Advisory Opinion 257 as precedent
The Board has not adopted any of the principles of Advisory Opinion 257 into administrative
rules; a step that would be required to give them precedential value.

Additionally, the Board has repeatedly recommended that the legislature clarify what disclosure
should be required of corporations making contributions to ballot question political committees
or funds. The Board made broad requests for clarification in the its 2002, 2003, and 2005
legislative recommendations. The Board revived the issue again in the 2011 session, this time
proposing specific recommendations.

The Board's recommendations, which would specifically require disclosure of underlying
sources when unregistered associations make ballot question transfers or contributions, were
heard in four legislative committee sessions between April 26 and May 4, 2011. No interested
party appeared at any hearing to argue that it was relying on the conclusions of Advisory
Opinion 257, which would effectively be revoked by the proposed legislation, or that the
proposed disclosure was unacceptable.

Ballot questions in Minnesota have historically been infrequent, resulting in little reason to
consider the effect of an old advisory opinion on the subject. Advisory Opinion 257, itself, was
issued in 1997 and related to a particular question to be on the ballot in 1998; a year that saw
three constitutional amendment questions on the ballot (environmental trust fund, hunting and
fishing rights, and abolition of State Treasurer office). It was not until 2006 that another
constitutional amendment question appeared on the ballot. That question, related to roads and
transit, gave rise to the Board action described above. One question was on the ballot in 2008.
The next time that questions will be on the ballot will be in 2012. It would seem, thus, that any
claim that Advisory Opinion 257 has been widely and regularly relied upon is misplaced. After
the election cycle in which it was issued, it existed for only two additional ballot questions. Even
during this time, the Board was questioning its applications and repeatedly asked the legislature
for clarification. Those requests to the legislature became even more emphatic in the Board's
2011 recommendations.

Ballot question fundraising is now beginning for at least one question, and it is likely that there
will be additional questions on the 2012 ballot. Although some interest groups would clearly
prefer Advisory Opinion 257 to be the Board's official statement on the application of Chapter
10A disclosure provisions, it is difficult to see how they can credibly argue that they have
already relied on its conclusions to their detriment.

Was Advisory Opinion 257 well reasoned?
In Citizens United, the Court recognized that the principle of stare decisis, the preference for
allowing precedent to stand, "is a principle of policy and not a mechanical formula of adherence
to the latest decision". (Citation omitted). In other words, the mere fact that a decision has been
in existence for a long time is not sufficient to preserve its effect if it was not well-founded when
it was issued.

In 1997, without explaining its line of reasoning, the Board concluded that two disclosure
provisions of Chapter 10A, namely sections 10A.27, subd. 13, and 10A.12, subd. 5, simply
would not be applied to corporations. (Citations are to current statute numbers. In 1997
Section 10A.27, subd. 13, was codified into a different section.) Only if this decision is well-
reasoned, with support in the law and a clearly articulable basis, should it be allowed to stand.

Advisory Opinion 257 says:

       "We believe that the specific grant of authority to make contributions to
       promote or defeat ballot questions provided in Chapter 211B is irreconcilable
       with, and therefore supersedes, the Chapter 10A restrictions otherwise

        imposed on contributions from unregistered associations.           Thus, a
        corporation may make a contribution directly to a ballot question committee
        free of any restriction found in Chapter 10A.

        The Board first adopted this position in 1980 when it issued advisory opinion
        #73. In that opinion, the Board said: “A corporation may spend money to
        promote or defeat ballot questions either by registering its own political fund
        or by contributing to an already registered political fund ”."

A reading of Advisory Opinion 73, however, calls into question the 1997 Board's reliance on it
for the proposition that Chapter 10A disclosure provisions had no application to corporations.

Advisory Opinion 73 was very limited in scope and did not address the underlying disclosure
required when a corporation made a transfer to its ballot question political fund or made a
contribution to a ballot question political committee. The entire relevant part of the opinion
reads as follows:

        "The Board finds that a corporation may spend money to promote or defeat
        ballot questions either by registering its own political fund or by contributing to
        an already registered political fund which will itemize that contribution if it is in
        excess of $100."

Advisory Opinion 73 stands only for the proposition that ballot question expenditures must be
made through a registered political committee or fund. Advisory Opinion 73, unlike Advisory
Opinion 257, did not attempt to address the requirements for disclosure when an unregistered
association contributes to a political committee or transfers money to its political fund.

The 1997 Board correctly relied on Advisory Opinion 73 to support its continuing position
regarding registration requirements. However, its citation to the earlier opinion in support of its
decision to invalidate the Chapter 10A requirements for underlying disclosure seems misplaced.

If Advisory Opinion 73 does not provide sound reasoning for Advisory Opinion 257's
conclusions about disclosure then that reasoning, if it exists, must be found in the opinion itself.

Initially, it is helpful to return to the key finding of Advisory Opinion 257:

        "We believe that the specific grant of authority to make contributions to promote or
        defeat ballot questions provided in Chapter 211B is irreconcilable with, and therefore
        supersedes, the Chapter 10A restrictions otherwise imposed on contributions from
        unregistered associations. Thus, a corporation may make a contribution directly to a
        ballot question committee free of any restriction found in Chapter 10A."

This statement of opinion is conclusory rather than reasoned, providing no insight into the basis
for the perceived conflict between Chapter 10A and Chapter 211B. Also noteworthy is the fact
that at the same time that it finds an unreconcilable conflict between Chapter 211B and the
Chapter 10A disclosure requirements for corporations, the 1997 Board finds no conflict between
Chapter 211B and the Chapter 10A requirement that corporations must make ballot question
expenditures through registered political committees or funds.
It is also instructive to recognize that the provisions for unregistered associations to make
contributions to a registered political committee or fund under §10A.27, subd. 13, are available
to corporations as well as other unregistered associations. Under Chapter 10A, corporations

have always had a mechanism to donate or transfer money to registered political committees or
funds. Yet in spite of the existence of same mechanism for corporations and non-corporations
to make contributions under Section 10A.27, subd. 13, the 1997 Board concluded that the
provision would apply only to non-corporations.

The question of whether Sections 10A.27, subd. 13, and 10A.12, subd. 5, may be interpreted in
a way that will make them constitutional is a separate question. It was not addressed in
Advisory Opinion 257 and is not relevant to consideration of the continuing authority of that
advisory opinion. The question in Advisory Opinion 257, and in the present analysis, is whether
10A.27, subd. 13, and 10A.12, subd. 5, are applicable at all to corporations making donations or
transfers to ballot question political committees or funds. The analysis described in this
memorandum addresses the question of whether the 1997 Board's conclusion that these
provisions have no application to corporations is well reasoned. If it is not, the Board should
revoke the opinion and proceed with analysis of Chapter 10A to determine what, if any
disclosure may be constitutionally required.

Rules of statutory construction
Another means of analyzing the decision of an administrative agency when it interprets a statute
is to consider the extent to which it has applied the rules of statutory construction. These rules,
consisting of both statutes and principles established in case law, form some of the core
guidelines for reasoned determination of questions of statutory interpretation.

The first and overriding canon of construction is a statutory requirement:

       The object of all interpretation and construction of laws is to ascertain and effectuate the
       intention of the legislature. Every law shall be construed, if possible, to give effect to all
       its provisions.

       When the words of a law in their application to an existing situation are clear and free
       from all ambiguity, the letter of the law shall not be disregarded under the pretext of
       pursuing the spirit.

This canon makes several things clear. First, legislative intent controls. Second, if the statutory
language is clear, the legislative intent is implemented by applying the statute as written and no
interpretation should be undertaken. Finally, all provisions of the statutes should be given effect
if possible.

Minnesota Statutes Section 10A.27, subd. 13, reads, as follows:

       Subd. 13. Unregistered association limit; statement; penalty. (a) The treasurer of a
       political committee, political fund, principal campaign committee, or party unit must not
       accept a contribution of more than $100 from an association not registered under this
       chapter unless the contribution is accompanied by a written statement that meets the
       disclosure and reporting period requirements imposed by section 10A.20. This statement
       must be certified as true and correct by an officer of the contributing association. The
       committee, fund, or party unit that accepts the contribution must include a copy of the
       statement with the report that discloses the contribution to the board. This subdivision
       does not apply when a national political party contributes money to its affiliate in this

       (b) An unregistered association may provide the written statement required by this
       subdivision to no more than three committees, funds, or party units in a calendar year.
       Each statement must cover at least the 30 days immediately preceding and including the
       date on which the contribution was made. An unregistered association or an officer of it
       is subject to a civil penalty imposed by the board of up to $1,000, if the association or its

               (1) fails to provide a written statement as required by this subdivision; or

               (2) fails to register after giving the written statement required by this subdivision
               to more than three committees, funds, or party units in a calendar year.

The only part of the requirement of this statute that may be unclear is the phrase "that meets the
disclosure and reporting period requirements imposed by section 10A.20". It is clear is that the
treasurer of a recipient may not accept a contribution of more than $100 from an unregistered
association without a disclosure statement provided by the unregistered association (subject to
Board clarification as to the content of that statement).

It is also clear that unregistered association's failure to provide this disclosure statement
constitutes a separate violation.

Minnesota Statutes Section 10A.12, subd. 5, reads as follows:

       Subd. 5. Dues or membership fees. An association may, if not prohibited
       by other law, deposit in its political fund money derived from dues or
       membership fees. Under section 10A.20, the treasurer of the fund must
       disclose the name of any member whose dues, membership fees, and
       contributions deposited in the political fund together exceed $100 in a year.

Though the requirement for disclosure statements in both statutes is unambiguous, the 1997
Board did not apply these laws because it found them to be in irreconcilable conflict with
Minnesota Statutes Section 211B.15, which exempts corporate ballot question expenditures and
contributions from the general prohibition on corporate political activity.

Reading the opinion does not help explain why requiring an unregistered corporation to comply
with Section 10A.27, subd. 13, or Section 10A.12, subd. 5, would be inconsistent with the
concept that the corporation may, in fact, make ballot question expenditures. Unregistered
associations taking other legal forms make the same ballot question contributions and
expenditures and provide the Section 10A.27, subd. 13, or 10A.12, subd. 5, disclosure without
any unreconciled conflict. The lack of explanation of this fundamental element of the opinion's
analysis makes it difficult to consider the opinion to be well reasoned.

Additionally, taking the position that the underlying disclosure provisions of Chapter 10A may be
ignored violates the requirement that if possible, all provisions of statute are to be given effect.
Finally, Chapter 10A went into effect in 1974 and was significantly amended two years later
after the U.S. Supreme Court case of Buckley v Valeo. That case established the basic
principles that still control when considering campaign finance disclosure provisions in the
context of the First Amendment right to freedom of speech.

During the Buckley era, Minnesota, like many jurisdictions, enacted a comprehensive system of
disclosure of money related to the political process. While the Board does not have specific

legislative history on which to rely, it appears that the legislature intended a disclosure system
that was as comprehensive as the Constitution permitted.

When legislative intent cannot be ascertained by the language of the statute being interpreted,
Minnesota Statutes section 645.17 provides further guidance:

       In ascertaining the intention of the legislature the courts may be guided by the following

               (1) the legislature does not intend a result that is absurd, impossible of execution,
               or unreasonable;

               (2) the legislature intends the entire statute to be effective and certain;

               (3) the legislature does not intend to violate the Constitution of the United States
               or of this state;

               (4) when a court of last resort has construed the language of a law, the
               legislature in subsequent laws on the same subject matter intends the same
               construction to be placed upon such language; and

               (5) the legislature intends to favor the public interest as against any private

In deciding that sections 10A.27, subd. 13, and 10A.12, subd. 5, should have no application to
corporations in the ballot question setting, the 1997 Board did not discuss the reasons it
believed it was not required to interpret Chapter 10A in a way that would make all of its
provisions effective. Additionally, when construing a chapter that is devoted to regulation and
public disclosure, it would be preferable for a well-reasoned opinion to explain why failing to
require statutory disclosure favors the public interest or why the interest in non-disclosure
outweighs the public interest in disclosure.

An advisory opinion issued without a well-reasoned basis for its conclusions should not be
allowed to stand merely because it has been in existence for a long period of time.

In determining whether an opinion is well reasoned, the Board should look first to the opinion
itself and to its explanation and rationale for its conclusions. The Board should also look at any
precedent or history that led to the issuance of the opinion under review. In the immediate
matter, review of the opinion and of the history of the matter does not provide insight into the
1997 Board's rationale or reveal a sound legal foundation by which, today, the opinion can be
given continuing support.

An opinion under review may also be reviewed on the basis of its effectiveness in implementing
legislative intent as expressed by the words of the statutes and the principals the legislature has
given the courts for use when interpreting statutes. Under this review, Advisory Opinion 257
seems to fare no better.

A final consideration on review of a prior advisory opinion, though not specifically stated in the
cases or statutes, is whether the reviewing Board can, itself, provide a well-reasoned basis for
the original opinion even if one is not obvious in the opinion itself.

If the present Board finds that Advisory Opinion 257 is not a well-reasoned implementation of
the legislature's intent in enacting Chapter 10A, it should revoke the opinion to avoid misplaced

Next steps
If the Board revokes Advisory Opinion 257, it should begin a process to review the scope and
applicability of sections 10A.12, subd. 5, 10A.27, subd. 13, and 10A.20, subd. 3, to contributions
or transfers to ballot question political committees or funds.

The Board will also be required to ensure that the Chapter 10A disclosure provisions are
interpreted so as to avoid constitutional infirmities.

The Board may wish to undertake this review in the context of developing a statement of
guidance on which regulated parties may rely, but ultimately the Board should consider
engaging in an administrative rulemaking process to provide certainty to the regulated

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