The Statement and Account Clause and Citizens United: Part I

JURIST Guest Columnist Joseph Marren, President and Chief Executive Officer of KStone Partners LLC, says that the Statement and Account Clause must be strictly adhered to if voters are to make truly informed choices...
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On January 21, 2010, in Citizens United v. Federal Election Commission (FEC), the Supreme Court resolved a First Amendment challenge to the Bipartisan Campaign Reform Act of 2002 (BCRA). In a 5-4 decision, the Court "rejected the argument that political speech of corporations or other associations should be treated differently under the First Amendment simply because such associations are not 'natural persons.'" Laws, such as the BCRA, that burden political speech are "subject to strict scrutiny," which requires the government to prove that the restriction "furthers a compelling interest and is narrowly tailored to achieve that interest." The Court in Citizens United, finding that the provisions of the BCRA that limited corporations and unions did not pass strict scrutiny, held that political speech is "indispensable to decision-making in a democracy, and this is no less true because the speech comes from a corporation rather than an individual." Furthermore, the Court found that "[s]peech is an essential mechanism of democracy, for it is the means to hold officials accountable to the people ... [P]olitical speech must prevail against laws that would suppress it whether by design or inadvertence."

Two years before that landmark decision, Citizens United released a documentary about presidential candidate Hillary Clinton and produced television ads for video-on-demand of the film scheduled to be available within 30 days of the election. The non-profit corporation was concerned about possible civil and criminal penalties for violating Section 441b of the BCRA, which prohibits corporations and unions from making independent expenditures for speech that is an "electioneering communication" (defined as "any broadcast, cable, or satellite communication" that "refers to a clearly identified candidate for Federal office") or for speech that expressly advocates the election or defeat of a candidate. Citizens United sought declaratory and injunctive relief, arguing that Section 441b was unconstitutional as applied to its documentary. The US District Court for the District of Columbia denied Citizens United a preliminary injunction and granted the FEC summary judgment.

The Supreme Court overruled the district court, stating that Section 441b's prohibition on independent expenditures by corporations is thus a ban on speech. As a "'restriction on the amount of money a person or group can spend on political communication during a campaign,' that statute 'necessarily reduces the quantity of expression by restricting the number of issues discussed, the depth of their exploration, and the size of the audience reached.'" Were the Court to uphold these restrictions, the government could repress speech by silencing certain voices at any of the various points in the speech process.

The Court noted that "[i]n a republic where the people are sovereign, the ability of the citizenry to make informed choices among candidates for office is essential." The right of citizens to inquire, to hear, to speak and to use information to reach consensus is a precondition to enlightened self-government and a necessary means to protect it. The First Amendment "'"has its fullest and most urgent application" to speech uttered during a campaign for political office.'" Furthermore,"[d]iscussion of public issues and debate on the qualifications of candidates are integral to the operation of the system of government established by our Constitution."

The Court further ruled:

Under the Constitution it is "We The People" who are sovereign. The people have the final say. The legislators are their spokesmen. The people determine through their votes the destiny of the nation. It is therefore important — vitally important — that all channels of communication be open to them during every election, that no point of view be restrained or barred and that the people have access to the views of every group in the community.
Finally, the Court maintained that the worth of speech "does not depend upon the identity of its source, whether corporation, association, union or individual."

The Statement and Account Clause of the Constitution requires that "a regular Statement and Account of the receipts and expenditures of all public Money shall be published from time to time." The government's constitutional authority to suppress financial information related to national security matters is not being questioned. Also, Congress's authority to determine the amount of detail associated with its financial results is not being questioned. What is being asserted is that the government is falsely reporting total receipts, total expenditures and the resulting deficit calculated by subtracting the second figure from the first. These three figures are not subject to the plenary power of Congress. An accounting of "all public Money" is required, yet the government continues to use the cash basis of accounting which it knows is substantially misleading, to prepare the statement and account. It does not accrue for the $70 trillion of entitlement obligations for which Congress has enacted permanent appropriations and/or mandatory authoring legislation. Finally, it does not consolidate in its financial statements material controlled entities including the Federal Reserve System, Fannie Mae and Freddie Mac — each a multi-trillion dollar enterprise.

Justice William Douglas in his dissent in United States v. Richardson, the only case addressing the Clause to reach the Supreme Court, had numerous comments that illuminate its meaning:

The mandate runs to the Congress and to the agencies it creates to make a regular Statement and Account ... The beneficiary-as is abundantly clear from the constitutional history-is the public." "The Framers of the Constitution deemed financial information essential if the electorate was to exercise any control over its representatives and meet their new responsibilities as citizens of the Republic ... From the history of the clause it is apparent that the Framers inserted it in the Constitution to give the public knowledge of the way public funds are expended ... The sovereign in this Nation is the People, not the bureaucracy. The statement of accounts of public expenditures goes to the heart of the problem of sovereignty. If taxpayers may not ask that rudimentary question, their sovereignty becomes an empty symbol and a secret bureaucracy is allowed to run our affairs.
In Richardson, Chief Justice Warren Burger stated:
[I]t is clear that Congress has the plenary power to exact any reporting and accounting it considers appropriate in the public interest[.] James Madison's comment in Federalist No. 10 stands in sharp contrast to this dictum. No man is allowed to be a judge in his own cause, because his interest would certainly bias his judgment and not improbably, corrupt his integrity. With equal, nay with greater reason, a body of men are unfit to be both judges and parties at the same time.
Judge Max Rosenn, the circuit judge in Richardson stated:
The debates at the Constitutional Convention in 1787 and the state ratifying conventions reveal that....the citizenry should receive some form of accounting from the Government....Article II, section 3 requires the President "from time to time to give Congress Information on the State of the Union," and presumably the Framers could have utilized the same informal procedure with regard to the accounting if they had so wished. Instead, they chose to have the statement "published," indicating that they wanted it to be more permanent and widely-circulated than the President's message. The connotation must be that the statement was for the benefit and education of the public as well as coordinate branches of government.
The publication recognized by the government as the official statement and account is the combined statement of receipts, outlays and balances. This publication is not widely known or used by the public (including the media), not central to any discussion of the nation's finances, and is not viewed as a major publication by any recent Congress or administration. The several laws enacted by Congress that have led to the publication of a false and misleading statement and account must be viewed in essentially the same manner as the FEC rules in Citizens United.

It should be clear to all that the statement and account is "political speech" that is equal to or greater in importance than the president's required State of the Union address. Furthermore, this financial reporting cannot possibly withstand strict scrutiny. As Justice Anthony Kennedy stated in the Citizens United decision, "[t]he Constitution ... confers upon voters, not Congress, the power to choose the Members of the House of Representatives, Art. I, § 2, and it is a dangerous business for Congress to use election laws to influence the voters' choices." The fact that Congress is using the laws governing the publication of the statement and account to influence voters' choices does not make it any less dangerous. The First Amendment is premised on a mistrust of governmental power and provides that "Congress shall make no law ... abridging the freedom of speech." The laws that Congress has put in place that have led to current federal financial reporting violate the people's freedom of speech.

The judiciary has sometimes indicated that public access is a matter for executive and legislative discretion. The Court averred in Houchins v. KQED, Inc. that "[t]he Constitution itself is neither a Freedom of Information Act nor an Official Secrets Act." The two reasons typically given to deny an affirmative right to information are that the judiciary lacks easily ascertainable standards for specifying the content of any access guarantee and that alternative methods are available for the public to access the information. However, as I have previously stated, the Court has already determined the relevant standard. With respect to the second reason, the concept that a citizen or voter can piece together consolidated financial information from the data that is published today is laughable as sophisticated financial executives who pore over the data for years can only get a sense for what these figures would actually be. Furthermore, in addressing the argument denying an affirmative right to financial information the Court must confront the Supremacy Clause and the Statement and Account Clause.

Unless the rule of law is restored the lack of proper financial reporting ensures that our electorate remains uninformed and that the nation will go off the proverbial "financial cliff" with the concomitant severe economic disruption and civil unrest. Furthermore, the Court will continue to decide cases erroneously based on false economic data. The only solution is for Congress to fulfill its Constitutional obligation and inform the electorate of the true state of the nation's finances and let voters make informed decisions regarding the leaders that they want to make the difficult decisions required to lead the country back to financial stability.

Joseph Marren is the President and Chief Executive Officer of KStone Partners, an SEC-registered investment advisor that specializes in managing funds of hedge funds. Previously he was Head of Business Development in the mergers and acquisitions departments at several firms including Sagent Advisors, Citigroup, Credit-Suisse and DLJ. He is the author of two books on mergers and acquisitions, taught at New York University Stern School of Business and is a graduate of Fordham University School of Law.

Suggested citation: Joseph Marren, The Statement and Account Clause and Citizens United, JURIST - Sidebar, Jan. 9, 2013, http://jurist.org/sidebar/2013/01/joseph-marren-citizens-part1.php


This article was prepared for publication by Stephen Krug, an associate editor for JURIST's professional commentary service. Please direct any questions or comments to him at professionalcommentary@jurist.org

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