Cruz could see a windfall of $545,000 as judges lift cap on donors repaying winners’ debt

WASHINGTON — Along with Sen. Ted Cruz, the Supreme Court on Monday struck down a $250,000 cap on how much candidates can recoup for personal loans with donations received after Election Day.

“This provision weighs down basic political discourse without proper justification,” Chief Justice John Roberts said. written in the review 6-3the three liberal judges dissenting.

Cruz placed a $10,000 personal bet on the case to challenge a restriction he sees as an attack on free speech. But he had much more at stake: $545,000 he lent to his campaign in 2012 that he could now get back.

Before or after an election, supporters cannot donate more than $2,900 to a federal candidate per election cycle. Candidates, however, can inject unlimited amounts of personal funds into their own campaigns. And when they do so in the form of a loan, they are allowed to use the donations to repay themselves in full – up to 20 days after an election.

After that, they were only allowed to collect $250,000, under a 2002 campaign finance law and Federal Election Commission rules designed to minimize the risk of corruption.

Tory judges were unconvinced, finding “little evidence” that post-election payments actually led to corruption.

“The government is advocating for a speech restriction necessary to prevent anticipated harm,” Roberts wrote. “Yet the government is unable to identify a single case of quid pro quo corruption in this context – even though most states do not impose limits on the use of post-election contributions to reimburse candidate loans.”

To gain traction, Cruz loaned his campaign $260,000 the day before his 2018 victory over Beto O’Rourke, who is now challenging Governor Greg Abbott. The campaign did not need money. It was the costliest Senate race in history at that time. Cruz had raised $46 million and still had enough money.

Over the next month, the Cruz campaign account paid off all but $10,000 of the loan. During closing arguments on January 16, his attorney argued that if Cruz couldn’t be bribed for $250,000, an additional $10,000 wouldn’t make a difference.

Although Cruz’s attorneys didn’t mention it to the Supreme Court, the senator had a lot more to gain if the cap was cleared.

In 2012, he loaned out just over $1 million from his campaign account, nearly all of it in the GOP primary and runoff against Lt. Gov. David Dewhurst. When the dust settled, Cruz was a senator – and his campaign still owed him $545,000 that under the existing rules he could never repay.

In 2015, after an FEC audit, he declared the loan a campaign contribution. But the “Senate Loan to Ted Cruz” remains on his annual personal financial disclosure to the Senate, listed as an asset, suggesting he still hopes to cash out. And that, as much as eroding federal campaign finance restrictions, was his goal.

The three dissenting judges called it naïve to dismiss the risk of corruption.

Judge Elena Kagan, joined by the courts of two other liberals, pointed to a 2012 scandal in Ohio involving law firms that received state contracts after helping a newly elected attorney general recover $200. $000 in personal loans; an Alaska governor impeached in 1985 after a lobbyist helped him recover $100,000 and then secured a $9 million state contract; and a similar scandal involving a Kentucky governor and no-tender contracts.

“Political contributions that will line a candidate’s pockets, given after their election, present a particular danger of corruption,” she wrote.

The case pits money as freedom of speech against the government’s interest in curbing corruption.

Cruz and other conservatives bristle at campaign finance restrictions.

Judges weigh Cruz’s claim: post-election donors can’t buy it for $250,000, so $10,000 more won’t matter

Cruz’s attorney asserted that the loan repayment cap deters candidates from lending money to their own campaigns, which in turn diminishes political speech rights guaranteed by the First Amendment.

Roberts embraced the argument, citing comments during a 2001 Senate debate by Kay Bailey Hutchison, a Texas Republican and Cruz’s predecessor: “I’m glad I didn’t face a person who could make a check for $60 million, $10 million or $5 million. , Besides. If so, I wish I could have a level playing field so I could stay in the ball game.

The Department of Justice, defending this law and the FEC regulations to implement it, warned of a great risk of corruption if donors can pour unlimited sums into the pockets of a politician, especially after that they know who won.

Malcolm Stewart, the United States Deputy Solicitor General, conceded there is nothing magical about $250,000. He described the cap as a modest burden that the FEC settled on to balance free speech and anti-corruption goals.

Supreme Court agrees to hear Ted Cruz challenge to $250,000 cap on post-election loan repayments

“The right of candidates for political office to make their case to the American people” is a core First Amendment activity, Roberts wrote in Monday’s ruling, and the limitations require far more justification than the FEC does. has gathered. He noted that most winners — “the only candidates affected by his anti-corruption interest” — almost always have their pre-election loans paid off in full anyway.

Cruz’s attorney, Charles Cooper, insisted during closing arguments that post-election donations cannot be considered a gift to the candidate, no matter what they are used for, whether to repay candidates’ loans or for rent, payroll and a host of other services a modern campaign entails.

He pointed out that Congress and the FEC set no limits on the use of post-election donations to pay these vendors.

“Congress effectively gives a corruption pass to the top 86 donors who max out after an election, but abruptly closes the corruption window on donor number 87,” he argued. for 90 minutes of oral argument.

Kagan was impassive.

“I don’t know why you argue that it’s like a gift,” she said during closing arguments. “One day, I had a loan of $10,000. The next day, I don’t. I’m $10,000 richer. Someone just donated $10,000.

In her dissent, she shot the scenario of a winner who ends up with $500,000 in debt.

“Once elected, he devoted himself assiduously to recovering the money” and to filling the “gaping hole of half a million dollars” in his personal bank account. “He is deeply grateful to those who help him… In the months and years to come, they will receive government benefits – perhaps favorable legislation, perhaps valuable appointments, perhaps lucrative contracts. The politician is happy; donors are happy. The only loser is the public.

Senate Minority Leader Mitch McConnell, R-Ky., called the 2002 law a “constitutional wreck” from the start and immediately challenged the law. But in a 2003 decision that bears his name, he lost in the Supreme Court. He now boasts that the high court has since dismantled the law.

The hardest blow came in 2010, with the Citizens United decision. This opened the door to super PACs and unlimited corporate spend on campaign ads. The 5-4 court sided with a conservative group that the FEC had blocked from promoting a movie accusing Hillary Clinton of corruption.

The loan repayment ceiling was only the last provision in the line of fire.

“The limit chills grassroots political discourse, especially the discourse of unknown challengers who have to spend more to be heard. And the loan repayment limit serves no legitimate government interest,” McConnell said. in a friend of the court file support Cruz.

The Biden administration sought to disqualify Cruz from challenging the cap by pointing out that he only left $10,000 on the table to fight. On this point, judges across the board were unconvinced, noting a long history of plaintiffs deliberately breaking a law in order to challenge it.

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