Federal Politics

Published — October 5, 2012 Updated — May 19, 2014 at 12:19 pm ET

Canadian-owned firm’s mega-donation to super PAC raises ‘legal red flags’

Pro-Romney group received $1 million from foreign-owned company

Introduction

Republican presidential candidate Mitt Romney writes on a white board as he talks about Medicare during a news conference in Greer, S.C. (Evan Vucci/AP)

A million-dollar donation by a foreign-owned corporation to a Republican super PAC has raised legal concerns and opened up the controversial Citizens United Supreme Court decision to new criticism.

Restore Our Future, the super PAC supporting Republican Mitt Romney’s run for president, received a $1 million donation in mid-August from reinsurance company OdysseyRe of Connecticut, a “wholly-owned subsidiary” of Canadian insurance and investment management giant Fairfax Financial Holdings Limited.

Fairfax Financial’s founder is Indian-born V. Prem Watsa. Watsa serves as CEO and chairman and owns or controls 45 percent of the company’s shares. He is also the chairman of the board of OdysseyRe, the American subsidiary.

The law says that any foreign national is prohibited from “directly or indirectly” contributing money to influence U.S. elections. That means no campaign donations, no donations to super PACs and no funding of political advertisements.

But campaign finance law is not as clear for U.S. subsidiaries of foreign companies as it is for individuals.

Most of the regulations on political spending by subsidiaries of foreign companies were written before corporations were legally allowed to fund political advertisements or donate to super PACs. And Republican members of the Federal Election Commission have thwarted the implementation of new rules regarding the practice.

Sen. Sheldon Whitehouse, D-R.I., is among those concerned about foreign-controlled corporations “exploiting loopholes in existing law” to influence U.S. elections. He calls the practice a “direct threat to our democracy.”

“You can bet that wholly owned subsidiaries of foreign commercial entities have an agenda when they spend millions to sway the outcome of an election,” Whitehouse told the Center for Public Integrity in a statement. “And you can bet that agenda is not promoting the interests of middle-class American voters.”

OdysseyRe’s donation “raises some legal red flags,” says Paul S. Ryan, an attorney at the Campaign Legal Center.

The law lays out clear rules for political action committees associated with U.S. subsidiaries of foreign companies, Ryan says, but it is hazier on spending allowed in the wake of Citizens United.

“I would be very wary if I was a corporation based in the U.S., owned wholly by foreign nationals, of contributing to a federal political committee or making independent expenditures,” he said.

He faults the FEC for failing to “provide clarity and guidance in this controversial and important area of the law.”

Ellen Weintraub, the Democrat who currently serves as the FEC’s vice chair, agrees with Ryan that the commission’s leadership in this area has been lacking.

“We should make some decisions about what we think the appropriate role of these organizations is in this brave new world of corporate money in politics,” she said.

“By not addressing [these issues] in a rulemaking, we’re leaving uncertainty out there,” Weintraub continued. “And when there’s uncertainty, there’s always a risk that folks may try to use that uncertainty to their own advantage.”

Officials with OdysseyRe and Fairfax Financial maintain that no U.S. laws were broken.

Paul Rivett, Fairfax Financial’s vice president of operations, said that OdysseyRe’s Canadian parent company had “no role” in the decision to donate to Restore Our Future. Peter Lovell, general counsel of OdysseyRe, likewise said the firm’s contribution was executed by a subcommittee of the company’s board of directors comprised only of U.S. nationals.

“Neither our Canadian parent nor any other foreign nationals were part of the decision-making process to contribute to the super PAC,” Lovell said.

Watsa has been called the Canadian Warren Buffett and his companies have flourished.

On its website, Fairfax boasts that it is “results oriented” and “not political.” It reported more than $33 billion in assets and nearly $7.5 billion in revenue last year, despite a “record level of catastrophe claims.” OdysseyRe reported assets of $10.6 billion at the end of 2011.

Watsa and his company cashed in on the collapse of the U.S. housing market by investing in complex financial instruments known as derivatives, according news accounts.

Since the beginning of 2008, Fairfax Financial has spent $320,000 on lobbying in Washington, D.C., and its issues include how derivatives are regulated under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

The company is the subject of an IRS whistleblower’s complaint, according to the New York Times, alleging that it received an unwarranted tax break of $400 million between 2003 and 2006, a claim Fairfax disputes.

The $1 million donation will likely be used for attack ads against President Barack Obama. And with less than five weeks until Election Day, $1 million is no insignificant amount. It’s enough to buy at least a week or two’s worth of ads in critical media markets. It also represents one-seventh of the money Restore Our Future collected in August.

Watsa told industry analysts in a conference call just before the election that the “the decision to make the contribution was made entirely by OdysseyRe.”

“OdysseyRe chose to make that contribution because it is one of the only remaining reinsurers in the U.S. and it is paying US taxes,” he said, according to a transcript. “The fact that competitors have moved offshore and pay lower taxes is a competitive disadvantage to OdysseyRe, and OdysseyRe believes Gov. Romney is the best choice to rectify this inequality.”

Two of OdysseyRe’s board members are deep-pocketed Republican donors.

In May, board vice chairman Andrew Barnard donated $75,800 to the Romney Victory Fund, a joint fundraising committee, and Brandon Sweitzer has donated more than $80,000 to federal candidates and political groups since 2002, federal records show, including $5,000 to Romney’s current campaign.

All of Sweitzer’s money has gone to Republicans, with the exception of $2,000 given to the PAC of the U.S. Chamber of Commerce, where Sweitzer also serves as a senior fellow.

Since the Citizens United decision, concerns have been raised about foreign influence on U.S. elections — a specter that in the past has plagued both Democrats and Republicans.

Scandal tainted the 1996 re-election of President Bill Clinton after Democratic Party fundraisers accepted millions of dollars from China, Korea and other foreign sources. And ahead of the 1994 election, then-chairman of the Republican National Committee Haley Barbour secured a $2 million loan from a Hong Kong businessman for a Republican group linked to the RNC.

In October of 2010, 15 Democratic senators, including Whitehouse, urged the FEC to “protect our elections from foreign influence.” Weintraub and her two fellow Democratic commissioners pushed a proposal that outlined a variety of options to keep foreign money out, but it was not adopted by the commission.

The Democratic commissioners proposed that U.S. subsidiaries owned or controlled by foreign nationals should, at a minimum, establish a political action committee or “separate segregated fund,” with money kept in a bank account separate from the general corporate treasury. Furthermore, foreigners should be prohibited from making decisions about spending that money on political ads.

A more restrictive proposal the three commissioners floated would have banned domestic subsidiaries of foreign corporations from funding political ads if more than 20 percent of the corporation’s shares were owned by foreign nationals, or if a third of the corporation’s board of directors were foreign nationals.

All of these ideas were met with unified opposition by the three Republican commissioners on the FEC, resulting, twice, in deadlocked 3-3 votes in 2011.

None of the GOP commissioners could immediately be reached for comment, but Weintraub says she hopes the regulatory body takes the initiative to grapple with these issues.

“We shouldn’t just ignore it and let people make their own calls,” she said.

Andrea Fuller and John Dunbar contributed to this report.

Update (Nov. 5, 6:35 p.m.): This story was updated to include comment from Prem Watsa, chairman and CEO of Fairfax Financial Holdings.

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Mark Sullivan
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Mark Sullivan

Trump needs to conduct these activities because the entire MSM media, excluding Fox, is campaigning against him 24/7/365.

Didn’t Monica’s boyfriend’s wife and various criminal enterprises outspend Trump by almost 2-1?

CapitalistRoader
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CapitalistRoader

Why wouldn’t he get an early start on fund raising? Hillary outspent him two-to-one in 2016. The Dem’s are the party of big money. The President knows this and is attempting to get a jump on it. Of course the Dem candidate will outspend him in 2020 so it’s only rational that he starts fund raising now.

George Young
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George Young

Oh brother. We just 8 years of the Campaigner – in – Chief. Where was this journalistic rectal thermometer then. Just another article about 2000 words too long that merely takes another slap at Trump for something he far from initiated.

j stevenson
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j stevenson

The big difference between Trump and all the rest is his refusing to accept funds from lobbyists, so they don’t have the White House access they are used to. These are the donors who buy the presidency and are as pixxed off that he won the election as are the media and the Dems. Lobbyists have never been shut out of the WH and Trump has told them he is not for sale.

jan v
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jan v

all the lobbyists are running all our government agencies and all the career civil servants who know how to run the country have been fired. YOU think this is a good thing ? what a crock…

thomas alessi
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thomas alessi

I am for Trump

Martin Shellabarger
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J. Stevenson, what are you drinking? Trump has more lobbyists in his administration than probably any other president. Trump is totally “for sale”, and the corporations know it. Grow a brain!

Anonymous
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Anonymous

Trump needs to be impeached and tossed in prison. Then have the key thrown away so he will never be free. Then he can see how it feels not to have freedom.

Mark Sullivan
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Mark Sullivan

Thank you for the usual insightful leftist low IQ Snowflake response.

barney
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hes not imprisoning them hes sending them back to their country chill tf out

SOUTH JERSEY
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SOUTH JERSEY

WHY DONT YOU HAVE FREEDOM?

Tom Larkin
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Tom Larkin

First, something positive. I was happy to learn of empirical information in article. BUT, the article was so slanted against President Trump as to be deemed fake news (“Perhaps Trump just lied.” (Two different issues)). The article mentions that President Trump raised over $67 million, but ended 2018 with $19 million. President Trump spent over $40 million 2016 and 2017. President Trump conducted 57 political rallies. The article notes the hats and T-shirts sold, but NEVER MENTIONS THE INCREASE IN THE NUMBER OF REPUBLICAN SENATORS during a mid-term election that lost the House and the number of political rallies in… Read more »

Ted Sirois
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Ted Sirois

At least Trump is getting donations from willing donors. Fresh from his first election, Obama used billions of our children’s tax dollars to save thousands of union jobs in the car industry and bailed out the banks and many Wall Street businesses. This secured his source of reelection funds for his reelection four years later.

South Jersey
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South Jersey

TRUMP 2020; IS AN AMAZINGLY SMART MAN! VERY ORIGINAL & CREATIVE. I AM HAPPY TO HAVE HIS AS POTUS.

SOUTH JERSEY
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SOUTH JERSEY

THIS ARTICLE WAS OBVIOUSLY WRITTEN BY, A TRUMP-HATE-GROUP. THAT FEELS; IT IS NOT NORMAL TO BE SUCCESSFUL WITH YOUR OWN BRAND NAME. WHEN, IF FACT, IT IS NORMAL! >>>>> THIS IS >>> FAKE NEWS!!! <<<< ie: A PACK-OF-LIES; SPUN INTO; DEFAMATION OF CHARACTER. FOR A SINISTER-AGENDA OF; FASCIST DEMOCRATIC SOCIALIST, COUP D'ETAT

David
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David

Are you on some kind of drugs? Writing in caps makes me think that you are grumpy old fart or a uneducated hillbilly.