The Intercept’s Jon Schwarz on the Investigation That Led to the Third-Largest Financial Penalty the FEC Ever Issued

By Jeremy Scahill
 
Jeremy Scahill: Earlier this month, the Federal Election Commission issued a historic fine and cited The Intercept’s 2016 investigative series called “Foreign Influence.” That series was written by Jon Schwarz and Lee Fang, and through dogged reporting, they managed to expose a major violation of campaign finance law’s strict prohibition against foreign money being used in U.S. federal elections. Their reporting was so critical that the FEC, which rarely catches these sorts of violations, actually punished both the Chinese-owned company which donated the money, and the Super PAC which received it, fining them a combined total of $940,000. Before Citizens United in 2010, corporations couldn’t spend money to directly advocate for federal candidates. After Citizens United and related court decisions, corporations that were formed in the U.S.—even ones that are completely owned and controlled by foreigners—could send money to super PACs in unlimited amounts. Enter Jeb Bush in 2016. That’s right, Jeb. 

Jeb Bush: I think the next president needs to be a lot quieter but send a signal that we’re prepared to act in the national security interests of this country, to get back in the business of creating a more peaceful world. Please clap. 

Jeremy Scahill: Jeb’s sad campaign was backed by a super PAC called “Right to Rise USA.”  They received over a million dollars in donations from a California corporation called American Pacific International Capital, or APIC. That company, APIC, was controlled completely by two Chinese citizens living in Singapore. So remember, it’s illegal for foreign nationals to contribute money in connection to U.S. elections. But APIC and Jeb Bush’s “Right to Rise USA,” tried to get away with using the loophole created by Citizens United. Because APIC was incorporated in California, it was technically not foreign. And the financial contribution would have been fine if they had not egregiously violated one part of the law still on the books. That part of the law limits this sort of foreign influence. When foreign-owned corporations make political donations, only U.S. citizens are supposed to make the decision. My colleagues at The Intercept, along with reporter Elaine Yu in Hong Kong, got Gordon Tang, the Chinese national at the head of APIC, to admit that he helped make the decision to donate to Jeb Bush. And that was very illegal. Here is The Intercept’s Jon Schwarz to walk us through this bizarre tale. 

Jon Schwarz: So, in 2010, the Supreme Court famously decides in Citizens United, that U.S. campaign finance law was wrong. Before Citizens United, you could only contribute money for U.S. political campaigns in limited amounts. It had to come from individual citizens. After Citizens United, corporations, unions could put unlimited amounts of money. It could go to super PACs for instance, and as long as they were theoretically not coordinating with individual candidates, they could take this unlimited amount of money and then spend it however they wanted, promoting anything. Very soon after the Citizens United decision in 2010 was Obama’s State of the Union Address, and in it, he said —

Barack Obama: With all due deference to separation of powers, last week the Supreme Court reversed a century of law that I believe will open the floodgates for special interests, including foreign corporations, to spend without limit in our elections. 

Jon Schwarz: What is the significance of that? If you look at the law, what is says is this: Foreign nationals are forbidden from putting money into U.S. elections. A foreign national is a foreign individual, it is a foreign government, and it is a foreign corporation. What happens if there is a U.S. corporation that is a wholly owned subsidiary of a foreign corporation? Well, according to U.S. law, that corporation counts as a U.S. national, meaning that a completely foreign-owned corporation could now, post-Citizens United, put as much money as they wanted into U.S. politics. 

Barack Obama: I don’t think American elections should be bankrolled by America’s most powerful interests; or worse, by foreign entities. They should be decided by the American people. And I’d urge Democrats and Republicans to pass a bill that helps correct some of these problems. 

Jon Schwarz: So six years later, Ellen Weintraub, then on the Federal Election Commission, now the chairman of the FEC, wrote an op-ed for the New York Times about this issue about: Are foreign-owned corporations going to able to spend without limit in U.S. elections? 

Jon Schwarz: Lee Fang and I thought this is an interesting question. We decided to look into it, see what corporations were giving money to U.S. super PACs, and find out whether there was foreign ownership of any of them. And within 10 minutes of trying to find this out, we saw something that looked tremendously suspicious, which was a corporation called American Pacific International Capital located in San Francisco. 

Just a little bit of Googling found information that suggested this was in fact 100 percent foreign owned and it had given $1.3 million to the “Right to Rise USA” super PAC, which was supporting Jeb Bush’s 2016 presidential candidacy. 

Jeb Bush: We’re 17 months from the time for choosing. The stakes for America’s future are about as great as they come. Our prosperity and our security are in the balance. So is opportunity in this nation where every life matters and everyone has the right to rise. 

Jon Schwarz: What we found out after speaking to Charlie Spies, who was the treasurer of “Right to Rise USA” and one of the most prominent campaign finance lawyers in the United States, was that Spies had actually written a memo explaining step-by-step how you could put foreign money into U.S. elections and have it be legal. We also spoke to Gordon Tang, who was the Chinese businessman behind APIC. 

[Audio: Gordon Tang, speaking in Cantonese, tells reporter Elaine Yu why the company gave over $1 million to Right to Rise USA, the main Super PAC supporting Jeb Bush.]

Jon Schwarz And to our great shock, he essentially unknowingly confessed to having broken U.S. campaign finance law. There are still some remaining weak prohibitions that you should be able to abide by that really can’t be easily enforced that will only create problems for you if reporters call you and you accidentally confess.

Jon Schwarz: If Gordon Tang had just kept his mouth shut, if he hadn’t told us, oh yes, you know, I said this seems like a good idea to me, then they would have been fine. They would have been able to, as Obama said, spend without limit in U.S. elections and there really should not have been any legal consequences. They just got sloppy. What’s crucial here is this fact: there’s sort of the law as written and the law as possible to be enforced. The law as written says: Yes, foreign-owned corporations can participate now in U.S. elections, but foreign nationals can’t participate in the decision making in terms of putting the money into the U.S. electoral process. 

Now, we were expecting that when this article came out, it would make huge news. You know, foreign interference in U.S. elections. It’s proven now. Obama called it, here it is. Essentially, nothing happened. No one paid any attention. It was the summer of 2016. It was around the time of the U.S. Democratic and Republican conventions. What we thought was an enormous story went nowhere. 

Now what happened then was: The Campaign Legal Center, which is sort of an election law watchdog in Washington, picked up our article, used the information in it to say, hey, this seems like a clear violation of very significant U.S. campaign finance law. They filed a complaint with the FEC. And then, no one heard anything for two and a half years. The FEC generally does not enforce U.S. campaign finance law. The Republican Party pretty much as policy now believes that campaign finance law is illegitimate and they simply at the FEC block it from being enforced. So we thought nothing was going to happen. And then, to our surprise, something did. 

Rachel Maddow: You don’t hear news like this all that often. You hardly ever hear about it on this scale. But a super PAC from the 2016 campaign, a super PAC that supported Jeb Bush for president, has just been hit by federal officials with a huge fine for accepting donations from foreigners. 

Jon Schwarz: It became public that the FEC was issuing the third largest fine in its history, the largest fine since Citizens United, almost $1 million. Both APIC, the foreign-owned corporation, and “Right to Rise,” the Jeb Bush super PAC, had to pay fines. Now, what it suggests is not just the fact that this was going on, that this happened for sure in 2016. But that with people who are more careful, it is probably going on in ways that can’t be detected. 

The reality is, foreign countries, foreign corporations, foreign individuals have very, very good reasons to try to influence U.S. politics. If I were a foreigner, I would try to influence U.S. politics. Of course, you have to. We’re the most powerful country on earth. You would be a fool not to try to do this. And as I say, people who are more sophisticated about it should be able to pull this off without detection. 

So, what does this mean right now? What it means is that post-Citizens United this absolutely can happen. It means that we don’t know what is happening. I would also encourage people to think about the fact that there is foreign influence on U.S. politics in all kinds of ways that was already legal before Citizens United. There’s tons of money that flows into think tanks in Washington. There’s tons of money that flows into lobbying organizations in Washington in ways that are perfectly legal but involve foreign influence on U.S. politics.

I hope that other reporters will look at this and realize that this was just out there in the open for anybody to find. Like, this information is probably there for other corporations, we just don’t know it yet. And this is actually something that anybody could do. Like, anybody can go look through the campaign finance filings. They’re on the FEC’s website. They’re at the Center for Responsive Politics. If you are interested in this issue, even if you’re not a journalist, go comb through this and send it to reporters. I guarantee you that they’ll be interested to hear about anything you find. 

Jon Schwarz: That was my colleague at The Intercept, Jon Schwarz. You can check out that series at theintercept.com. It was called “Foreign Influence.” Jon spoke to our assistant producer, Elise Swain.