Cruz’s campaign loan trial heads to Supreme Court

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Locked in an expensive Republican primary for the US senator against a wealthy and better-known opponent, Ted Cruz loaned more than $ 1 million to his campaign in 2012.

The money helped him defeat Lieutenant Governor David Dewhurst in a runoff that essentially secured Cruz a Senate seat. But it came at a personal financial cost: Cruz was never able to recover $ 545,000 from that loan, according to a report by the Federal Election Commission.

A 2002 law prohibits successful federal candidates from using more than $ 250,000 raised after an election to repay loans they made to their own campaigns before election day. Congress passed it to help prevent the emergence of quid pro quo corruption. The idea behind the limit is that money raised after an election no longer helps a candidate win a position. Instead, the funds go into the pocket of the chosen one.

Cruz recovered a good part of this 2012 loan with the money received before election day. But when Cruz’s campaign determined that the loans couldn’t be fully repaid due to regulations, it began to explore ways to challenge the law, according to a May 2020 deposition from Cabell Hobbs, treasurer of Ted Cruz Victory. Committee.

Next month, the trial of his campaign against the FEC will reach the Supreme Court. Cruz’s campaign lawyers should argue that the limit is unconstitutional, arbitrarily limits political discourse, and deters candidates from lending money to their campaigns.

“Federal government restrictions on a candidate’s ability to lend his own money to his own campaign violate the First Amendment,” a spokesperson for Cruz told the Texas Tribune in an email. “Senator Cruz seeks to assert his First Amendment rights and the rights of anyone who seeks federal office. “

We don’t know if Cruz will ever get his money back, even if he wins his case. In 2015, after his campaign was audited by the FEC, Cruz’s campaign converted existing unpaid loans into a contribution, as required by law. But he still lists loans as an asset in his latest Senate financial statement, which could be a sign he hopes to eventually get the money back. Cruz’s office did not answer questions about his loan plans.

The current Supreme Court case is in fact a separate loan. A day before being re-elected in 2018, Cruz loaned $ 260,000 to his campaign – intentionally laying the groundwork for a lawsuit to overturn the rule and raise money to recover the $ 10,000 that goes over the $ 250,000 cap. .

“The money they contribute literally goes to Ted Cruz’s bank account,” said Seth Nesin, the former senior FEC lawyer on the case who left the agency in August after 13 years. “That’s what really makes it seem, at least to me and other people, pretty sketchy.”

Cruz’s legal fight is a new front in a long-standing Conservative effort to eliminate federal campaign finance rules they say violate free speech. If the Supreme Court upholds lower court rulings in Cruz’s favor, the case would deal another blow to Chief Justice John Roberts’ federal campaign finance laws.

In Citizens United v. Federal Election Commission of 2010, the Supreme Court effectively allowed unions and businesses to spend as much as they wanted on independent political broadcasts in candidate elections. Campaign spending by outside groups more than doubled in the wake of the ruling, according to a 2015 analysis from the Brennan Center for Justice. In McCutcheon v. The 2014 Federal Election Commission, the Supreme Court ruled that the government cannot cap the total amount of donations to federal candidates every two years.

But this case goes further, according to some detractors of Cruz’s trial, because the money collected after the elections would replenish the personal funds of the politicians – not their campaigns.

If the Supreme Court overturned the limit, Tara Malloy, senior director of litigation and appeals strategy at the Campaign Legal Center, said the effect would be bad but “fairly small.”

“It makes good sense that when an election is over, a contributor no longer gives money to fund the election speech. At most, they are trying to side with the candidate, ”said Malloy, whose group filed an amicus curiae brief supporting the FEC in the Supreme Court case. “This money that is raised will directly enrich the candidate in a way that almost no other campaign contribution will.”

In a motion tabled in July, the FEC highlighted a recent study of U.S. Congressional campaigns from 1983 to 2018 by two finance professors at universities in France and Switzerland. The study found that almost half of all political campaigns rely on debt in one form or another. According to the study, indebted mandate holders are more likely to shift their votes in favor of PACs that contribute to the post-election campaign.

But conservatives have long argued in court that campaign contributions amounted to political speech, which should not be limited.

In an amicus curiae brief filed in August, the nonprofit Institute for Free Speech argued that the limit hinders political discourse by dissuading candidates from lending money to their campaigns.

“Contributions to a political campaign promote more spending by that campaign, which translates into more political speech,” wrote Donald A. Daugherty for the Institute for Free Speech.

FEC lawyers also argue that removing the limit would allow candidates to engage more in “debt stacking,” a loophole where donors avoid contribution limits by donating money to previous campaigns with existing debts.

“If there was no loan repayment limit now, a contributor who had never given Senator Cruz could donate $ 16,000 today: the maximum of $ 5,000 to his primary campaigns and general 2012… campaigns. And Senator Cruz would be able to grant another loan to his 2024 campaign to keep the cycle going, ”the FEC wrote.

But Judge Neomi Rao – appointed by former President Donald Trump to the DC Circuit Court of Appeals – wrote in June that because the government had failed to sufficiently prove how the law prevents corruption, the limit “goes against the First Amendment ”.

The lawyers representing Ted Cruz for the Senate have until December 15 to file their brief in the case. Oral arguments are January 19. If the limit is considered unconstitutional, future candidates could theoretically repay loans of infinite amounts with post-election contributions.

Nesin fears that the “court very hostile to campaign finance laws” will lift the limit.

“I think the Supreme Court is very unlikely to find the FEC on the merits of the case,” Nesin said. “Just because of who sits on the Supreme Court, the FEC doesn’t win anything. “

This article originally appeared in The Texas Tribune, a non-partisan, member-backed newsroom educating and engaging Texans about state politics and politics.


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