RICHMOND, Va. - A federal appeals court ruled Thursday that a judge was wrong when he declared a century-old ban on corporate campaign contributions in federal elections unconstitutional.
U.S. District Judge James Cacheris ruled last year that the ban violates corporations' free-speech rights. In his first-of-its kind ruling, Cacheris said it was not logical for an individual to be able to donate up to $2,500 while a corporation "cannot donate a cent."
Cacheris based his decision on the U.S. Supreme Court's landmark 2010 Citizens United decision, which struck down a prohibition against corporate spending on campaign activities by independent groups, such as ads by third parties to favor one side. However, the Citizens United ruling left untouched the ban on direct contributions to candidates, the appeals court noted.
The lower court viewed independent expenditures and direct contributions the same, saying both are political speech, but the appeals court said they must be regulated differently.
"The reason for this difference in scrutiny is clear: independent expenditures, by definition, are direct means by which political speech enters into the marketplace," Judge Roger Gregory wrote. "Direct contributions, conversely, do not necessarily fund political speech but must be transformed into speech by an individual other than the contributor."
The Justice Department cited the government's interest in preventing corruption in defending the contribution limit, and the appeals court agreed.
"Prevention of actual and perceived corruption and the threat of circumvention are firmly established government interests that support regulations on campaign financing," Gregory wrote.
The issue arose when William P. Danielczyk Jr. and Eugene R. Biagi, who both live in the Washington suburb of Oakton, Va., were charged with illegally funneling contributions to Hillary Clinton's Senate and presidential campaigns. The defendants, officers with a corporation called Galen Capital Group, allegedly persuaded dozens of individuals to contribute to Clinton's campaigns and reimbursed them with company money. According to prosecutors, they tried to cover their tracks by writing "consulting fees" on the memo line of reimbursement checks and by issuing the checks for amounts larger than the contributions.
Cacheris dismissed one count of the indictment related to contributions to Clinton's 2008 presidential bid, but the ruling by the appeals court reinstates it.
Neither Jeffrey A. Lamken, attorney for Danielczyk, nor Lee E. Goodman, attorney for Biagi, immediately returned phone messages.
The Justice Department said it was pleased with the ruling.
Judges William Traxler and Judge Albert Diaz joined in the panel's decision.
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