Lev Parnas, a former associate of Rudy Giuliani, was sentenced to 20 months in prison in 2022 after he helped funnel money from foreigners into a U.S. election. But when a Quebec-owned utility company spent $22 million on a ballot initiative in Maine, it was legal — a contradiction that has unsettled campaign finance experts and led to a series of lawsuits challenging who can and can’t spend in U.S. elections.
At its root is a deceptively tricky question: What exactly is foreign money?
In an increasingly global world, corporations and foreign governments are making the case that partial foreign ownership should be OK regarding election spending. And courts, reluctant to accidentally hamstring free speech rights guaranteed by the Citizens United decision, are so far siding with corporations and foreign governments for this “hands-off” approach.
Advocates for tighter laws around foreign money say the lawsuits amount to a corporate power grab.
“They’re trying to overturn the will of the voters,” said Kaitlin LaCasse, who was the campaign manager for Protect Maine Elections, the Maine ballot initiative drive. “They’ve made it very clear what they want.”
Lawsuits in Maine and Minnesota address two interlocking issues. First is the fact that, since a 2021 decision by the Federal Election Commission, it has been legal for foreign entities to spend money on U.S. ballot initiatives. Maine and Minnesota addressed this fact by passing a new referendum and law, respectively, barring the practice. Second is the broader, difficult-to-answer question of what exactly qualifies as a foreign-owned company.
The battle in Maine started with a fight over a proposed hydropower transmission line that would have run from Canada through the woods in the north of the state. Several companies with foreign ownership, including Canadian utility Hydro-Québec, took advantage of the new loophole created by the FEC and poured millions into opposing a ballot measure to ban the new transmission line; all in all, spenders on both sides put in roughly $100 million.
Voters in Maine eventually sided against Hydro-Québec and others, knocking down the proposed energy corridor, which proponents argued would have made major strides toward providing more green energy to the Northeast United States. Maine voters then pushed back against their spending by passing a ballot initiative in 2023 banning companies that had at least 5% ownership by foreign governments from spending in state elections.
The initiative passed with the biggest victory margin of any ballot measure in state history. However, both media outlets and companies sued to stop it from being enacted.
The Maine ballot measure would “treat [the companies’] political speech as criminal conduct, the violation of which constitutes a felony and carries with it the prospect of incarceration,” the complaint said. “In so doing, the Initiative strikes at the heart of the protections afforded to free expression and political speech guaranteed by the United States Constitution and the Maine Constitution.” Lawyers representing the plaintiffs did not respond to interview requests.
In Minnesota, lawmakers passed a broader ban on foreign money in ballot measures that extends to types of foreign ownership beyond what Maine considered. The Minnesota Chamber of Commerce filed a lawsuit in response, arguing the ban would have the consequence of chilling free speech. The bureaucratic load would be too big, the Minnesota Chamber of Commerce argued, because a business would have to assess its stockholders “every time it makes an independent expenditure” to ensure they don’t exceed the threshold for foreign ownership.
Judges have sided with business interests in the early stages of both cases by issuing injunctions to temporarily block the new laws from going into effect. In Maine, U.S. District Judge Nancy Torresen drew a line over the new law’s requirement that companies that are more than 5% owned by an entity that is majority-owned or controlled by a foreign government.
“The 5% threshold would deprive the United States citizen shareholders — potentially as much as 95% of an entity’s shareholders — of their First Amendment right to engage in campaign spending,” Torresen wrote in a March decision. “Simply put, it would be overinclusive.”
The lawsuits in Maine and Minnesota reflect how difficult it has been for policymakers to root foreign money out of elections. Proponents of the foreign money bans — which have been overwhelmingly popular with voters — say it’s imperative to tighten up on foreign money that’s being spent to sway U.S. politics.
“So many states have regular referendums that are more or less open to foreign money,” said Tara Malloy, a litigator at the nonprofit Campaign Legal Center, which is representing defendants in Maine. “It’s where the rubber hits the road in terms of foreign influence on U.S. elections.”
Though the possibility of Russia or China committing election interference has been a cause for concern during the last two presidential elections, the reality is there are still a number of ways, illegal and legal, that foreigners can make an impact.
It is illegal for a foreign national to donate to a U.S. political campaign, for example, but legal to donate to so-called “dark money” groups that do not disclose their donors and spend hundreds of millions of dollars each election cycle. And dark money groups regularly pass money to campaigns, making it difficult to track where foreign donations wind up.
Even the FEC has said it has limited resources to investigate potential foreign donors to candidates; a 2021 Office of Inspector General report found the agency’s current practices pose “a national security risk” and provide “insufficient oversight of possible illegal foreign donations,” a report later published by the OIG said.
“Identifying and regulating unlawful foreign campaign expenses,” OIG said, “continues to pose a significant challenge.”
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Maggie Severns is a reporter at NOTUS.