Foreign Money in American Politics?

Some say Supreme Court has opened a new path.

January 23, 2010, 10:01 PM

Jan. 24, 2010 — -- Some election lawyers believe that last week's landmark U.S. Supreme Court opinion may have opened a new avenue for foreign money to enter the American political system, and that the justices are inviting a repeat of the 1996 Chinese money scandal that bloodied the Clinton administration.

Thursday's opinion in Citizens United v. Federal Election Commission allows corporations to spend unlimited amounts on political commercialson the grounds that corporations should be treated just like individuals when it comes to First Amendment rights.

The problem, former Federal Election Commission Chairman Scott Thomas told ABC News, is that it's much tougher to determine whether foreign money is behind a political ad when the check is cut by a multi-national corporation.

"There are unfortunately lots of examples where foreign businesses or governments have tried to route money through U.S. subsidiaries and into party coffers," Thomas said. "Now we're permitting businesses to get involved directly in advocacy messaging. There will have to be a lot more scrutiny on the question of whether the money is coming from a foreign source, and whether it can be constrained."

Under current law, foreign nationals cannot donate to political candidates or pay for campaign ads.

Concerns that other countries might try to influence American elections are not merely academic. In the late 1990s the Justice Department and congressional investigators uncovered efforts by foreign donors to infiltrate the American political system through donations to the Democratic Party under Bill Clinton.

Among those implicated was Johnny Chung, a Clinton fund-raiser who told Federal investigators that a large part of the nearly $100,000 he gave the Democrats in the 1996 campaign came from China. According to published reports, Democrats had to return another $1.6 million brought in by another prominent Clinton money man, John Huang, after questions were raised about the source of the funds.

"It would be a very serious matter for the United States if any country were to attempt to funnel funds to one of our political parties for any reason whatsoever,'' President Clinton said at the time.

The FEC tightened its restrictions to make sure foreign individuals could not make contributions.

But what's to stop a foreign government from funneling money through an overseas company that has a U.S. subsidiary?

The FEC has tried to deal with this question in the past when foreign corporations have formed political action committees, or when they have attempted to get involved in state and local campaigns where corporate contributions were already legal.

To guard against foreign meddling, the FEC created rules that said only Americans (or green card holders) could decide where to send political donations. And the FEC rules say the funds have to come from money made in the U.S., and not simply be funneled in from abroad.

"But there is still a lot of gray area surrounding this," Thomas said.

The Supreme Court was aware this issue could surface during this latest case, which began with a suit by the conservative group Citizens United over its wish to broadcast a film called "Hillary: The Movie" in the run-up to the 2008 election. Justice Ruth Bader Ginsburg raised it during oral arguments back in September when she grilled attorney Ted Olson on the notion that a corporation was entitled to the same First Amendment rights as an individual.

"Mr. Olson, are you taking the position that there is no difference in the First Amendment rights of an individual?" she asked. "Would that include today's mega-corporations, where many of the investors may be foreign individuals or entities?"

After being pressed on the question by Justice John Paul Stevens, Olson replied, "I would not rule that out."

Jan Baran, an election lawyer who hailed the court's opinion, noted that Justice Anthony Kennedy explicitly chose not to address the question of foreign contributions in his majority opinion. And he even opened the door to a future Supreme Court case to deal with the issue.

"There's nothing in this opinion that implies how the court would rule if it got this issue before them," Baran said.

But some of the justices have offered clues about their thinking on the issue. Justice Samuel Alito noted during the September arguments that foreign-owned media corporations have the same First Amendment rights that American companies do. Republican campaign lawyer Trevor Potter said Kennedy's opinion also hinted at his desire to see the issue of foreign money debated.

"I think it's a very clear signal that there is some interest in that argument," Potter said. "And maybe, that he believes there shouldn't be restrictions on anybody."

Click Here for the Blotter Homepage.

ABC News Live

ABC News Live

24/7 coverage of breaking news and live events