SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: PART 16 --------------------------------------------------------------------x : STRATEGIC ADVANTAGE INTERNATIONAL : and

DANIEL ODESCALCHI, : : Petitioners, : : - against : : COMMISSION TO INVESTIGATE PUBLIC : CORRUPTION, : : Respondent. : --------------------------------------------------------------------x

Index No. 161554/2013 Honorable Alice Schlesinger

MEMORANDUM OF LAW IN OPPOSITION TO THE MOTION TO QUASH AND IN SUPPORT OF THE CROSS-MOTION TO COMPEL

ERIC T. SCHNEIDERMAN Attorney General of the State of New York DAVID E. NACHMAN Senior Enforcement Counsel LESLIE B. DUBECK Special Assistant 120 Broadway, 25th Floor New York, New York 10271 (212) 416-8390 (212) 416-6001 (facsimile) David.Nachman@ag.ny.gov

JANOS MARTON DEREK J. ETTINGER Special Counsel at the Commission to Investigate Public Corruption 90 Church Street, 15th Floor New York, NY 10007 of Counsel

TABLE OF CONTENTS TABLE OF CONTENTS................................................................................................................. i TABLE OF AUTHORITIES .......................................................................................................... ii PRELIMINARY STATEMENT .....................................................................................................1 STATEMENT OF FACTS ..............................................................................................................3 A. B. The Establishment of the Commission ................................................................... 3 The Rise of Election Dark Money and the 501(c)(4) Vehicle ......................... 5 1. 2. C. D. ARGUMENT I. Dark Money After Citizens United ..............................................................5 Legal Constraints on the Use of Dark Money By 501(c)(4) Organizations ...............................................................................................7

CSP: Dark Money in New York ............................................................................. 8 The Commissions Subpoenas .............................................................................. 12 ..........................................................................................................................14

THE COMMISSIONS INVESTIGATION OF CSP IS CONSISTENT WITH ITS STATUTORY MANDATE AND PUBLIC POLICY ...............................................14 A. The Subpoenas Seek Information Consistent with the Commissions Broad Mandate to Investigate the Effectiveness and Weaknesses of Existing Campaign-Finance and Lobbying Regulations. ..................................... 14 The Commissions Work Is Not Yet Completed .................................................. 16

B. II.

PETITIONERS PROCEDURAL ARGUMENTS ARE WITHOUT MERIT .................18 A. B. The Commission Has Complied With All Necessary Procedures and Rules ....... 18 The Subpoenas Are Neither Overbroad Nor Unduly Burdensome ...................... 19

III.

THE SUBPOENAS DO NOT IMPERMISSIBLY BURDEN FIRST AMENDMENT RIGHTS ..................................................................................................21 A. B. C. The Subpoenas Serve Important State Interests.................................................... 21 Petitioners Have Not Demonstrated Significant First Amendment Burdens........ 25 CSPs Donors Do Not Face a Realistic Threat of Reprisals or Harassment ......... 27 ..........................................................................................................................30

CONCLUSION

TABLE OF AUTHORITIES Cases Page(s)

Anheuser-Busch, Inc. v. Abrams, 71 N.Y.2d 327 (1988) ........................................................................................................14, 15 Bailey v. Me. Commn on Govt Ethics & Election Practices, 900 F. Supp. 2d 75 (D. Me. 2012) ...........................................................................................27 Brown v. Socialist Workers 74 Campaign Comm., 459 U.S. 87 (1982) ...................................................................................................................28 Buckley v. Valeo, 424 US 1 (1976) ...........................................................................................................21, 23, 24 Carl Andrews & Assoc. Inc. v. Office of the Inspector General, 85 A.D.3d 633 (1st Dept 2011) ..............................................................................................14 Carlise v. Bennett, 268 N.Y. 212 (1935) ................................................................................................................15 Citizens United v. Federal Election Commission, 558 U.S. 310 (2010) ......................................................................................................... passim Ctr. for Individual Freedom v Madigan, 697 F. 3d 464 (7th Cir. 2012) .............................................................................................21, 22 Doe v. Reed, __ U.S. __, 130 S. Ct. 2811 (2010) ..............................................................6, 21, 22, 25, 26, 28 Eastland v. United States Servicemens Fund, 421 U.S. 491 (1975) ...........................................................................................................23, 24 Human Life of Wash. Inc. v. Brumsickle, 624 F.3d 990 (9th Cir. 2010), cert. denied __ U.S. __, 131 S. Ct. 1477 (2011) ......................22 Matter of Am. Dental Co-op., Inc. v. Attorney General of the State of N.Y., 127 A.D.2d 274 (1st Dept 1987) ............................................................................................19 Matter of De Brizzi, 303 N.Y. 206 (1951) ................................................................................................................19 Matter of Edge Ho Holding Corp., 256 N.Y. 374 (1931) ................................................................................................................14 Matter of Hogan v. Cuomo, 67 A.D.3d 1144 (3d Dept 2009) .......................................................................................15, 30 ii

Matter of the Joint Legislative Comm. (Teachers Union), 285 N.Y. 1 (1941) ....................................................................................................................24 Matter of La Belle Creole Intl v. Attorney General, 10 N.Y.2d 192 (1961) ........................................................................................................14, 15 Matter of Minuteman Research, Inc. v. Lefkowitz, 69 Misc.2d 330 (Sup. Ct. N.Y. Co. 1972) ...............................................................................19 Matter of the New York Republican State Committee v. New York State Commission on Government Integrity, 138 Misc. 2d 790 (Sup. Ct. N.Y. County 1988) ........................................................................15 Matter of Nicholson v. State Commn on Judicial Conduct, 50 N.Y.2d 597 (1980) ..............................................................................................................26 McConnell v. Federal Election Commn, 540 U.S. 93 (2003) .............................................................................................................21, 25 N.Y. State Commn on Govt Integrity v. Congel, 156 A.D.2d 274 (1st Dept 1989) ............................................................................3, 17, 18, 20 NAACP v. Alabama, 357 U.S. 449 (1958) .................................................................................................................28 Nixon v. Shrink Mo. Govt Pac, 528 U.S. 377 (2000) .................................................................................................................25 Ognibene v. Parkes, 671 F.3d 174 (2d Cir. 2011), cert. denied __ U.S. __, 133 S. Ct. 28 (2012) ...........................25 Perry v. Schwarzenegger, 591 F.3d 1147 (9th Cir. 2009) ...........................................................................................23, 24 ProtectMarriage.com v. Bowen, 830 F. Supp. 2d 914 (E.D. Cal. 2011)......................................................................................28 SpeechNow.org v. FEC, 599 F.3d 686 (D.C. Cir.), cert denied __ U.S. __, 131 S. Ct. 553 (2010) ...............................22 United States v. Miss. Valley Generating Co., 364 U.S. 520 (1961) .................................................................................................................25 United States Constitution First Amendment ................................................................................................................... passim

iii

Federal Statutes 26 U.S.C. 501(c) ................................................................................................................................4, 16 501(c)(4) ....................................................................................................................... passim 501(c)(6) .................................................................................................................................7 527...........................................................................................................................................7 State Statutes Civil Rights Law 73 ....................................................................................................................19 Election Law 14-126. ..............................................................................................................8, 17 Executive Law 6...........................................................................................................................1, 2, 4, 14, 18 68(3) ......................................................................................................................................14 63(8) ....................................................................................................................1,2, 4, 18, 19 63(12) ....................................................................................................................................14 New Yorks Public Integrity Reform Act of 2011.........................................................................11 Federal Regulations 26 C.F.R. 1.501(c)(4)-1(a)(2)(ii)......................................................................................................7 Proposed Federal Regulations 78 Fed. Reg. 71535 ....................................................................................................................8 State Regulations and Executive Orders 9 N.Y.C.R.R. 8.106.............................................................................................................................. passim Executive Order No. 106 (July 2, 2013) ................................................................................ passim Miscellaneous Authorities Azi Paybarah, Addabbo Hit With PAC Mailer Excerpting City & State, Cap. N.Y., Aug. 22, 2012, http://www.capitalnewyork.com/article/politics/2012/08/6481091/addabbo-hit-pacmailer-excerpting-city-and-state ................................................................................................9 Board of Elections Website, http://www.elections.ny.gov:8080/plsql_browser/EXPENSESB_county ...............................11 California Attorney Generals Office Announces Record Settlement in $11 Million Arizona Contribution Case, Cal. Fair Political Practices Commn, FPPC, Oct. 24, 2013, http://www.fppc.ca.gov/ press_release.php?pr_id=783 ...................................................7 iv

Center for Responsive Politics, Outside Spending by Disclosure, Excluding Party Committees, http://www.opensecrets.org/outsidespending/disclosure.php ...............................6 commonsenseprinciples.com .....................................................................................................9, 12 Glenn Coin and Paul Riede, Candidates, parties pour almost $2 million into 49th District NY Senate race, The Post-Standard: Syracuse.com, Oct. 28, 2010, http://www.syracuse.com/news/index.ssf/2010/10/candidates_parties _pour_almost.html .....................................................................................................................9 Jessica Alaimo, Fact Check: Ted OBrien Betrayed New York Women, Rochester Democrat & Chron., Sept. 26, 2012, http://blogs.democratandchronicle.com/voteup/2012/09/26/fact-check-ted-obrienbetrayed-new-york-women/ .......................................................................................................9 Jimmy Vielkind, Drumroll: Common Sense Principles Lists Its Donor, Capitol Confidential, Feb. 6, 2013, http://blog.timesunion.com/capitol/archives/160954/senate-gop-is-paying-super-pacdirector/ ....................................................................................................................................11 Jimmy Vielkind, Senate GOP is paying Super PAC founder, Capitol Confidential, Oct. 22, 2012, http://blog.timesunion.com/capitol/archives/160954/senate-gop-is-payingsuper-pac-director/ ...................................................................................................................12 John D. Feerick, Reflections on Chairing the New York State Commission on Government Integrity, 18 Fordham Urb. L.J. 157 (1990) .........................................................3 Jude Seymour, Common Sense Author is a Mystery, Watertown Daily Times, Aug. 18, 2010, http://www.watertowndailytimes.com/article/20100818/BLOGS09/ 100819832/-1//BLOGS09 ....................................................................................................9, 12 Memorandum of Governor Cuomo, reprinted in Bill Jacket for ch. 79 (1992), at 30-31................3 Old Dominion Res. Group, http://www.dominionresearch.com/index.php/site/about/about_kevin_wright .......................11 Phil Reisman, Mystery Surrounds Anti-Latimer Mailers, Politics on the Hudson, Oct. 15, 2012, http://www.lohud.com/article/20121016/NEWS02/310160102/ReismanMystery-surrounds-anti-Latimer-mailers. ..................................................................................9 Preliminary Report of the Commission dated December 2, 2013 .......................................5, 11, 13 Proposed Internal Revenue Code Regulation Related Political Activities, 78 Fed. Reg. 71535 (proposed Nov. 26, 2013), available at http://www.irs.gov/irb/201352_IRB/ar18.html ......................................................................................................................8

Lee Aitken, The Atlantic, Dec. 16, 2013, Theres No Way To Follow The Money, http://www.theatlantic.com/politics/archive/2013/12/theres-no-way-to-follow-themoney/282394/ ..........................................................................................................................6 Thomas B. Edsall, Dark Money Politics, N.Y. Times Blogs, June 12, 2013, http://opinionator.blogs.nytimes.com/2013/06/12/dark-money-politics/ ..............................5, 6 Thomas Kaplan, Attack Ads, by Outside Groups With Murky Ties, Shape 3 New York Senate Races, N.Y. Times, Oct. 16, 2012, http://www.nytimes.com/2012/10/17/nyregion/3-new-york-senate-races-flooded-bymoney-from-outside-groups.html ..............................................................................................9

vi

PRELIMINARY STATEMENT In response to a public crisis of confidence in government, Governor Andrew M. Cuomo formed the Commission to Investigate Public Corruption (Commission) in July 2013, with Attorney General Eric T. Schneiderman designating Commission members as his deputies, to conduct a broad investigation into the laws and public agencies that regulate and oversee government ethics, conflicts of interest and campaign finance. Like similar commissions formed by prior governors or attorneys general, the Commission is an investigatory body tasked with achieving a comprehensive understanding of the problems facing New Yorks current government-ethics regime. Although the Commission cannot itself enact laws or promulgate state policy, its investigations are intended to lead to recommendations for proposed legislative and administrative reforms. The Commissions authority derives from two distinct and complementary statutes: (1) Executive Law 6, through which the Legislature authorized the Governor to examine and investigate the management and affairs of state agencies, and (2) Executive Law 63(8), through which the Legislature separately authorized the Attorney General, with the approval of or at the direction of the Governor, to investigate matters concerning the public peace, public safety and public justice. Each statute expressly authorizes the issuance of subpoenas for documents and witnesses. As just one part of its broad inquiry into government ethics, the Commission is evaluating the role played in New Yorks electoral system by dark money -- funds from undisclosed donors used to pay for and influence elections and campaigns. Dark money deprives voters and election officials of essential information about the sources of election-related spending. The absence of that information prevents voters from fully evaluating candidates, contributes to corruption and the appearance of corruption, and makes it difficult for election

officials to detect and respond to violations of campaign finance laws. The Commission has pursued its investigation into dark money in order to determine whether existing laws are adequate to address these harms, or whether instead reforms are needed to ensure that New York voters can make informed decisions about the candidates and issues that have attracted rapidly growing amounts of anonymous spending to this State. To help it understand the scope of the dark money phenomenon, the Commission exercised its express subpoena powers under Executive Law 6 and 63(8) to request information concerning an out-of-state entity, Common Sense Principles (CSP), that spent millions of dollars to affect the outcomes of the 2010 and 2012 legislative races in New York. The Commissions investigation led it to believe that a leading New York political consultancy and its principal (petitioners here) were likely coordinating the in-state activities of CSP, and issued subpoenas calling upon petitioners to disclose communications that would reveal who was paying for and directing those activities. In an effort to keep this information secret, petitioners have moved to quash the Commissions subpoenas. Each of the arguments advanced in support of petitioners motion, however, is without merit. The nature of CSPs involvement in funding election-related activities falls squarely within the Commissions authority to investigate weaknesses in New Yorks existing campaign-finance and lobbying laws. Petitioners procedural and overbreadth objections are plainly belied by the Commissions enabling order and the Commissions willingness to narrow the subpoenas scope to address any legitimate burden concerns. And petitioners assertions of harms to their First Amendment interests are squarely foreclosed by recent precedents, including from the U.S. Supreme Court, holding that disclosures about the sources of

election-related spending serve compelling state interests. Petitioners motion should be denied, and the subpoenas enforced. STATEMENT OF FACTS A. The Establishment of the Commission Corruption and the appearance of corruption are not new to New York State. For years, reformers have tried with minimal success to scrub New York politics of the collusive relationships and outright frauds that violate the public trust and alienate the citizenry from their government. Twenty-six years ago, then-Governor Mario Cuomo created the Commission on Government Integrity. See N.Y. State Commn on Govt Integrity v. Congel, 156 A.D.2d 274 (1st Dept 1989); John D. Feerick, Reflections on Chairing the New York State Commission on Government Integrity, 18 Fordham Urb. L.J. 157, 158-59 (1990). Also known as the Feerick Commission -- for its chair, John D. Feerick, then the dean of Fordham Law School -- the commission investigated all aspects of New York political life, including the States porous campaign finance laws. Congel, 156 A.D.2d at 275-76. That commission exposed numerous shortcomings in New Yorks existing laws and proposed a series of thoughtful reforms, Feerick, supra, at 160-61, but many of the relevant laws were left unchanged or modified only slightly, and the problematic practices that marked political life in New York were not expunged. See Memorandum of Governor Cuomo, reprinted in Bill Jacket for ch. 79 (1992), at 30-31. This past spring, these problems notoriously re-emerged when a large number of indictments were handed down against several New York legislators. As the public has demanded those guilty of crimes be held to account, so too has it called for an examination of the laws and political culture that led to such pervasive corruption and the appearance of corruption.

It is in this environment, and with the unfinished work of the Feerick Commission as a backdrop, that the current Commission was created. On July 2, 2013, Governor Andrew M. Cuomo signed Executive Order 106 creating the Commission to Investigate Public Corruption and empowering the Commission to conduct inquiries under Executive Law 6 and 63(8).1 Executive Order (Cuomo) No. 106, 9 N.Y.C.R.R. 8.106 (2013) (Executive Order). Ex. A.2 Both sections expressly empower the Commission to require the production of any books, records, documents or papers relevant to [its] inquiry. Executive Law 6 & 63(8). The scope of the Commissions inquiry is broad; it includes, in pertinent part, the power to investigate: compliance with and the effectiveness of campaign finance laws, existing laws, regulations and procedures relating to the regulation of lobbying, including but not limited to examining compliance by organizations and other persons engaged in lobbying and other attempts to influence policies or elections, including tax-exempt organizations under Section 501(c) of the Internal Revenue Code . . . , weaknesses in existing laws, regulations and procedures relating to addressing public corruption, conflicts of interest, and ethics in State Government, and whether the Board [of Elections] is fulfilling its obligation under the Election Law to . . . oversee election campaign practices and campaign financing practices.

Executive Order II(a) & (c). The Commission also is charged with the responsibility to make recommendations to reform any weaknesses uncovered in existing State laws. Id. II(c). To fulfill its mandates, the Commission thus far has issued over 200 subpoenas and requests for information, received and reviewed millions of pages of documents, and conducted

Executive Law 6 -- sometimes referred to as the Moreland Act -- allows the Governor to convene a commission to inquire into matters concerning the executive branch of government. Section 63(8) empowers the Governor to direct the Attorney General to inquire in matters concerning the public peace, public safety and public justice and to appoint, as needed, deputies to carry out the inquiry. 2 References to Ex. __ refer to the exhibits attached to the accompanying affirmation of Janos Marton, subscribed February 6, 2014 (Marton Aff.).
1

dozens of interviews and depositions. The Commission has heard testimony from federal and state prosecutors, good government groups, public officials, and members of the public. It has worked closely with numerous state agencies, local, state, and federal prosecutors, and with law enforcement entities. Throughout this process, the Commission has acted even-handedly: it has investigated both Republicans and Democrats alike, and it has issued subpoenas to entities related to both major parties. Marton Aff. 4. On December 2, 2013, the Commission issued a preliminary report of its investigative findings along with its initial recommendations (Preliminary Report). Ex. B. As the Preliminary Report explicitly noted, the Commissions investigatory work is active, and ongoing. Ex. B at 6; see also id. at 1, 98. The Commission is continuing to examine weaknesses in the enforcement of existing State laws and is in the process of developing more detailed legislative proposals based on additional information from its investigations. B. The Rise of Election Dark Money and the 501(c)(4) Vehicle 1. Dark Money After Citizens United

One of the biggest challenges to effective campaign regulation is the prevalence of dark money, election-related spending that goes undisclosed under federal and state reporting regimes. In the wake of the Supreme Courts decision in Citizens United v. Federal Election Commission, 558 U.S. 310 (2010), an increasingly popular way to deploy dark money has been to channel it through nonprofit entities putatively dedicated to social welfare and organized to qualify for special tax treatment under 501(c)(4) of the Internal Revenue Code, which does not require public disclosure of the donors to the entity. See Thomas B. Edsall, Dark Money Politics, N.Y. Times Blogs, June 12, 2013, http://opinionator.blogs.nytimes.com/2013/06/12/dark-money-

politics/ ([E]yes glaze over trying to follow [the] money trail between organizations with names like . . . Americans for Job Security, American Future Fund and American Commitment. . . .). By hiding information about the sources of election-related spending, dark money organizations undermine core democratic values. They interfere with the ability of citizens to know who is seeking to influence their voting behavior, and they prevent citizens from holding political actors democratically accountable for their actions. See Doe v. Reed, __ U.S. __, 130 S. Ct. 2811, 2819 (2010) (highlighting the importance of transparency and accountability in the electoral process). As one good government advocate has noted, [n]othing is more corrosive to our democratic system of government than politicians indebted to and perhaps doing the bidding of donors while watchdog journalists or, more importantly, the voting public are left with no way to discover these secret relationships.3 In the last decade, the use of dark money has risen dramatically across the country. The percentage of outside election spending by organizations that do not disclose their donors has increased from 1% in 2006 to over 40% in 2012, and the total amount of undisclosed spending has increased from just over $5 million in 2006 to more than $310 million in 2012.4 In light of Citizens United, which struck down limits on independent expenditures to promote the election or defeat of political candidates, this is not a surprising trend. Filing as a 501(c)(4) has allowed dark money organizations to attract and spend unlimited funds while, at the same time, shielding the identity of those who are ultimately providing these monies. In a hearing on donor disclosure, David Early, Counsel to the Brennan Center, noted that, while a 501(c)(4) must disclose the

New York State Office of the Attorney General 501(c)(4) Donor Disclosure Hearing 65-66 (New York, NY, Jan. 15, 2013) [hereinafter NYC Hearings] (testimony of Melanie Sloane, executive director of Citizens for Responsibility and Ethics) (Ex. F). 4 Ctr. for Responsive Politics, Outside Spending by Disclosure, Excluding Party Committees, http://www.opensecrets.org/outsidespending/disclosure.php. In the aptly titled, Theres No Way To Follow The Money, The Atlantic, Dec. 16, 2013, Lee Aitken notes that more than a year after the 2012 elections, regulators and the media still cannot discern the true source of funding for vast amounts of election spending. http://www.theatlantic.com/politics/archive/2013/12/theres-no-way-to-follow-the-money/282394/.
3

amount it spends on political ads, it can easily avoid disclosing its underlying donors, leaving the public in the dark about who is paying for advertisements designed to sway their votes . . . . The bottom line here is that big spenders are aware of the 501(c)(4) loophole and exploit it ruthlessly.5 2. Legal Constraints on the Use of Dark Money By 501(c)(4) Organizations

By obscuring the sources of election-related spending, dark money organizations also prevent the effective enforcement of election laws and regulations that indisputably apply to their activities. Although Citizens United substantially limited the governments ability to impose campaign spending limits, it did not affect two important constraints on the activities of 501(c)(4) organizations: first, the requirement that they carry out a social welfare mission as defined by the Internal Revenue Service; and second, that they avoid coordination with political campaign committees in violation of state law.6 Federal law provides that 501(c)(4) organizations must operate exclusively for the promotion of social welfare. 26 U.S.C. 501(c)(4). I.R.S. regulations state that the promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office. 26 C.F.R. 1.501(c)(4)-1(a)(2)(ii) (emphasis added).7 To further clarify this prohibition on political participation, the IRS has commenced a proposed rulemaking proceeding to amend current regulations so that no candidate-related political activity would qualify as the promotion of

NYC Hearings 40 (David Early, Counsel to the Brennan Center) (Ex. F). Inasmuch as the rise of dark money is a relatively new phenomenon, state enforcement proceedings relating to its misuse have been rare. In a sign this trend may be changing, the California Attorney Generals office recently secured a $1 million fine against the Center to Protect Patient Rights and Americans for Responsible Leadership, two Arizona-based nonprofits that had used intermediary 501(c)(4) and 501(c)(6) groups in multiple states to obfuscate the source of more than $29 million in California campaign spending. See Cal. Fair Political Practices Commn, FPPC Announces Record Settlement in $11 Million Arizona Contribution Case, Oct. 24, 2013, http://www.fppc.ca.gov/press_release.php?pr_id=783. 7 Organizations engaging in purely political activity can file under 26 U.S.C. 527, which requires the public disclosure of donors.
6 5

social welfare. See Guidance for Tax-Exempt Social Welfare Organizations on CandidateRelated Political Activities, 78 Fed. Reg. 71535 (proposed Nov. 26, 2013), available at http://www.irs.gov/irb/2013-52_IRB/ar18.html. Thus, a 501(c)(4) organization that primarily participates in campaigns for or against political candidates violates existing federal law. Apart from these federal requirements, a 501(c)(4) organization is also subject to the separate requirements of each States election laws. In New York, for example, a candidate or campaign committee that coordinates with a 501(c)(4) organization to make election-related expenditures in order to evade contribution limits may be guilty of a crime under 14-126 of the Election Law. That section provides: [a]ny person who . . . act[s] on behalf of a candidate or political committee, knowingly and willfully [to] solicit, organize or coordinate the formation of activities of one or more unauthorized committees, make[s] expenditures in connection with the nomination for election or election of any candidate, or solicit[s] any person to make any such expenditures, for the purpose of evading the contribution limitations . . . [is] guilty of a class E felony. N.Y. Elec. Law 14-126. C. CSP: Dark Money in New York CSP engaged in intense electioneering in New York in connection with both the 2010 and 2012 New York State legislative races, spending more during those elections than any other dark money entity. Marton Aff. 7. It has been the subject of intense scrutiny by journalists, good government groups, and government agencies. Notwithstanding this attention, there is little publicly available information about CSP or the sources of its funding.. Public records disclose that CSP is a Virginia not-for-profit corporation that claims an exemption from federal taxation pursuant to 501(c)(4). Its federal tax filings identify it as a social welfare organization founded in 2010 to further the common good and general welfare of the citizens of the United States of America by advocating smaller government and responsible 8

tax and budget policies by engag[ing] in issue advocacy direct mail to individuals about budget policies in close proximity to an election. Ex. C at 15. Public records show that in 2010, CSP raised $2.62 million from unknown sources and spent $2.54 million, Ex. C at 1, primarily to run attack ads against several Democratic New York State Senators.8 In 2011, a non-election year, CSP raised no funds and spent only $34,735. Ex. D at 1. In the 2012 election year, CSP raised $785,929 from unknown sources and spent $865,413. Ex. E at 2. Its website, commonsenseprinciples.com (CSP.com or the Website), was, and still is, dedicated almost exclusively to attacking New York State Senators Joseph Addabbo, Ted OBrien, and George Latimer, each of whom were Democrats running in competitive races in 2012. The Website includes examples of attack mailers that were sent to voters in each of the candidates districts before the 2012 election. Ex. I. The attack mailers drew significant attention from journalists, but efforts to unearth their ultimate source proved futile.9 In 2013, the three targeted State Senators, along with good government advocates and other legislators, testified at a series of hearings held by the New York State Attorney General concerning proposed regulations on political spending by nonprofit organizations. The State

See Glenn Coin and Paul Riede, Candidates, parties pour almost $2 million into 49th District NY Senate race, The Post-Standard: Syracuse.com, Oct. 28, 2010, http://www.syracuse.com/news/index.ssf/2010/10/ candidates_parties_pour_almost.html; Jude Seymour, Common Sense Author is a Mystery, Watertown Daily Times, Aug. 18, 2010, http://www.watertowndailytimes.com/article/20100818/BLOGS09/100819832/-1//BLOGS09. As one target of CSPs 2010 ads, State Senator Timothy Kennedy, stated at a hearing on the subject, [w]e know were public figures and these attacks can come from anywhere at any time, and we know that theyll sometimes be personal and unfair, but we ask only that the rules allow us to know where these attacks are coming from so that we can rightfully respond. New York State Office of the Attorney General Public Hearing: 501(c)(4) Donor Disclosure Regulations 16 (Buffalo, N.Y., Feb. 20, 2013) [hereinafter Buffalo Hearings] (Ex.H). 9 See Jessica Alaimo, Fact Check: Ted OBrien Betrayed New York Women, Rochester Democrat & Chron., Sept. 26, 2012, http://blogs.democratandchronicle.com/voteup/2012/09/26/fact-check-ted-obrien-betrayednew-york-women/; Thomas Kaplan, Attack Ads, by Outside Groups With Murky Ties, Shape 3 New York Senate Races, N.Y. Times, Oct. 16, 2012, http://www.nytimes.com/2012/10/17/nyregion/3-new-york-senate-races-floodedby-money-from-outside-groups.html; Azi Paybarah, Addabbo Hit With PAC Mailer Excerpting City & State, Cap. N.Y., Aug. 22, 2012, http://www.capitalnewyork.com/article/politics/2012/08/6481091/addabbo-hit-pacmailer-excerpting-city-and-state; Phil Reisman, Mystery Surrounds Anti-Latimer Mailers, Politics on the Hudson, Oct. 15, 2012, http://www.lohud.com/article/20121016/NEWS02/310160102/Reisman-Mystery-surrounds-antiLatimer-mailers.
8

Senators described CSPs effect on the 2012 election in some detail. State Senator OBrien explained that shortly before the election, voters in his district were bombarded with mailers from outside groups who made some very ugly and very misleading accusations about [him] . . . intimating that [he] condoned sexual harassment of women. Buffalo Hearings at 24 (Ex. H). He acknowledged that [i]n politics attacks are part of the business; what disturbed him was not knowing who was behind the attacks and thus not being able to effectively refute them. Id. at 25. State Senator OBrien said he wrote several complaints to CSP and, in an effort to find out what it was, even sent a relative to its address. These efforts were not fruitful: no one responded to or even acknowledged his complaints, and there was no entity operating as CSP at the address provided. Senator OBrien ultimately concluded that [t]here was no indication of who Common Sense or Common Sense Principles was or any way to hold anyone accountable for the refuted mailers. Id. at 27. State Senator Latimer, who was accused by CSP of using campaign funds for personal dinners and other indiscretions, Ex. I, testified that despite his efforts to determine who CSP was, he could find no evidence of anything they did that was other than political . . . no nonpolitical advocacy of any sort for social welfare was evident. If it is evident, then its as invisible to us as are the people behind Common Sense. New York State Office of the Attorney General Public Hearing on Proposed New Charity Disclosure Regulations 16-17 (Albany, N.Y., Jan. 29, 2013) [hereinafter Albany Hearings] (Ex. G). State Senator Addabbo described CSPs practices this way: We all know the trick, the flyer sent shortly before elections listed bullet point after bullet point of false ethical charges against me. And then at the end of the long list urged voters to call my office regarding a bill that didnt even exist. The kinds of ads run against me were neither social welfare nor issue advocacy . . . . I see no evidence that groups like Common Sense Principles do anything else but engage in thinly veiled electioneering. 10

Albany Hearings at 57-59 (Ex. G). In January 2013, CSP filed a Semi Annual Report with the Joint Commission on Public Ethics (JCOPE) (Ex. E). In its Report, CSP took the position that it was a lobbying entity, not a campaign vehicle. As required by New Yorks Public Integrity Reform Act of 2011, CSP included a Source of Funding Disclosure which revealed only one donor -- the Center for Common Sense, LLC (CFCS), a Florida-based limited liability company. CFCS listed no address other than that of an accountant who serves multiple clients out of the same office. The LLC was voluntarily dissolved on May 24, 2013. Ex. J. The Albany Times-Union described CSPs disclosure as a performance satire of the states election laws.10 To this day, the principals of CFCS and the sources of its funding remain unknown. As the Commission noted in its Preliminary Report, [t]his daisy chain of out-of-state corporations and ghost companies appear to exist for one reason: to hide the source of money used to fund negative advertising and influence our local elections. Ex. B at 40. Despite this lack of transparency, evidence has emerged suggesting that CSP may be coordinating with political entities in New York State. CSPs 2010 and 2011 tax filing list Kevin Wright, a Virginia political strategist, as one of its two directors. Ex.C at 7; Ex D at 7. New York State Board of Elections campaign filings show that Wright was paid over $40,000 for research by the New York State Senate Republican Campaign Committee (SRCC) from 2007 to 2008.11 Moreover, during the 2012 election cycle, an organization founded by Wright (Old Dominion Research Group)12 was paid more than $45,000 in consulting and other fees by two State Senators and a Senate Housekeeping account. Wright and the SRCC have denied any

Jimmy Vielkind, Drumroll: Common Sense Principles Lists Its Donor, Capitol Confidential, Feb. 6, 2013, http://blog.timesunion.com/capitol/archives/177691/drumroll-common-sense-principles-lists-its-donor/. 11 Board of Elections Website, http://www.elections.ny.gov:8080/plsql_browser/EXPENSESB_county. 12 Old Dominion Res. Group, http://www.dominionresearch.com/index.php/site/about/about_kevin_wright.
10

11

improper connection or coordination between CSP and New York political entities,13 but there is no way to verify these denials without determining who controls and directs CSPs activities. In light of the concerns expressed by good government groups and legislators in the 2013 public hearings, and the relevance of those concerns to the Commissions mandate, the Commission attempted to learn more about CSPs role in the 2012 election cycle. Nearly all inquiries into the individuals and entities associated with CSP led to out-of-state locations, jurisdictions in which the Commission can serve subpoenas only with considerable difficulty and expense. The Commission did, however, identify at least one entity readily subject to process: Prompt Mailers, a Staten Island-based direct mail company that sent CSPs 2012 attack mailers. In response to a subpoena served upon it, a representative of Prompt Mailers told the Commission that CSPs attack ads had been ordered by a Florida based company called Media Printing Corp. He was unable to provide any information about CSP and referred to it as a ghost company. Marton Aff. 13. D. The Commissions Subpoenas With few other options, the Commission directed its attention to CSPs website. It learned that CSP.com is registered to a private company, petitioner Strategic Advantage International (SAI). In addition to its work for CSP, SAI administers other domains, including nassautaxrevolt.com and a website for the Somali Peoples Party. In addition, SAI received payments from eleven New York political campaign committees from 2006 through 2013. Although he has previously denied any connection to the Website,14 the email account administering CSP.com belongs to petitioner Daniel Odescalchi, the principal of SAI.15 Given

Jimmy Vielkind, Senate GOP is paying Super PAC founder, Capitol Confidential, Oct. 22, 2012, http://blog.timesunion.com/capitol/archives/160954/senate-gop-is-paying-super-pac-director/. 14 Jude Seymour, Common Sense Author is a Mystery, Watertown Daily Times, Aug. 18, 2010, http://www.watertowndailytimes.com/article/20100818/BLOGS09/100819832/-1//BLOGS09.
13

12

their nexus to CSP and CSPs New York activities, the Commission subpoenaed the petitioners, seeking, inter alia, communications that would identify who paid for and directed their work. Obtaining this information would assist the Commission in determining not only whether existing election and lobbying laws had been followed, and the efficacy of those laws, but also, crucially, whether further disclosures should be mandated to ensure transparency in the funding and operation of dark money groups. On November 8, 2013, with the unanimous approval of the Commission Co-Chairs, the Commission served subpoenas on Daniel Odescalchi, SAI, and CSP.com. In discussions with petitioners counsel, the Commission agreed to extend the subpoenas return date to November 27, 2013. Petitioners counsel informed the Commission that her clients did not intend to produce any documents and would instead file a motion to quash the subpoenas. In the course of that discussion, counsel explained that she considered the subpoenas to be too broad and to impose overly burdensome demands on her client. The Commission expressed a willingness to address these concerns and, to avoid litigation, the parties again agreed to extend the return date while they attempted to resolve their dispute. Marton Aff. 16 - 17. The parties had several subsequent conversations, but were unable to come to an agreement. Marton Aff. 18. On December 16, 2013, the Commission sent counsel a follow-up email reiterating its willingness to narrow the scope of the subpoena. Ex. M. In particular, the Commission emphasized its view that compliance with the subpoena would have to include documents demonstrating petitioners interactions with Common Sense Principles and related persons and entities, but not communications regarding political strategy pertaining to specific candidates or particular political messages. Ex. M. Though petitioners counsel acknowledged

The Commissions Preliminary Report, released on December 2, 2013, discusses CSP without naming Mr. Odescalchis involvement or describing the subpoenas issued to him.
15

13

the Commissions position, counsel indicated that petitioners would nevertheless file a motion to quash because the Commission sought documents relating to those with whom Mr. Odescalchi and SAI conducted business. Ex. N. The next day, petitioners filed the pending petition to quash the subpoenas and for a protective order. On February 6, 2014, the Commission filed its crossmotion to compel compliance with the subpoenas. ARGUMENT I. THE COMMISSIONS INVESTIGATION OF CSP IS CONSISTENT WITH ITS STATUTORY MANDATE AND PUBLIC POLICY A. The Subpoenas Seek Information Consistent with the Commissions Broad Mandate to Investigate the Effectiveness and Weaknesses of Existing Campaign-Finance and Lobbying Regulations.

The Commission has a broad mandate to investigate public corruption, and it is empowered to require the production of any books, records, documents or papers relevant or material to [its] inquiry. Executive Law 68(3) (emphasis added); see also id. 6; Carl Andrews & Assoc. Inc. v. Office of the Inspector General, 85 A.D.3d 633 (1st Dept 2011). The Commission therefore is entitled to the same deferential, relevant or material standard that applies to executive subpoenas issued by the Attorney General in other contexts. See, e.g., Matter of La Belle Creole Intl v. Attorney General, 10 N.Y.2d 192, 196 (1961) (authority under Executive Law 63(12)); Anheuser-Busch, Inc. v. Abrams, 71 N.Y.2d 327 (1988) (authority under the Martin Act). A motion to quash an executive subpoena will be granted only where the futility of the process to uncover anything legitimate is inevitable or obvious or where the information sought is utterly irrelevant to any proper inquiry. Anheuser-Busch, Inc., 71 N.Y.2d at 331-32 (quoting Matter of Edge Ho Holding Corp., 256 N.Y. 374, 382 (1931) and Matter of La Belle Creole Intl, 10 N.Y.2d at 196). In assessing whether the Commissions subpoena seeks information relevant to a proper inquiry, the Commission is entitled to a 14

presumption that it is acting in good faith. Matter of Hogan v. Cuomo, 67 A.D.3d 1144, 1146 (3d Dept 2009) (citing Anheuser-Bush, Inc., 71 N.Y.2d at 332; Matter of La Belle Creole Intl, 10 N.Y.2d at 196; Carlise v. Bennett, 268 N.Y. 212, 217-18 (1935)). Contrary to petitioners assertions, the Commissions authority is not limited to investigating wrongdoing or violations of existing laws. (Memorandum of Law in Support of Petition to Quash Subpoenas and for a Protective Order (Mem. Law) at 12). No specific complaint of wrongdoing is required to trigger the Commissions reasonable investigation, Matter of the New York Republican State Committee v. New York State Commission on Government Integrity, 138 Misc. 2d 790, 796 (Sup. Ct. N.Y. County 1988), because the aim of the Commission is not to sanction individual violations of the law, but rather to understand how the legal and regulatory regime governing corruption, conflicts of interest, lobbying, and campaign finance currently works -- and how it may be improved. Here, the core information sought by the subpoenas -- communications reflecting who pays for and directs CSPs New York campaign activities -- relates directly to several of the Commissions objectives as set forth in the Executive Order. First, the Commissions mandate includes determining the effectiveness of campaign finance laws, as well as assessing the Board of Elections oversight of campaign financing practices. See Executive Order II(a)-(b). As one of the largest spenders in the 2010 and 2012 New York State elections, the largest dark money spender, and one with at least indirect ties to political party campaign operatives, CSPs conduct raises serious questions about whether existing provisions of New York law effectively prevent coordination between outside anonymous donors and in-State campaign committees to evade campaign-finance restrictions. In addition, the difficulty in determining who funds and directs CSPs activities speaks directly to

15

the ability of the Board of Elections to effectively oversee such organizations activities and ensure compliance with New York laws. Second, the Commission is charged with assessing the regulation of lobbying, including . . . attempts to influence policies or elections by tax-exempt organizations under Section 501(c) of the Internal Revenue Code. Executive Order II(b). CSP is a 501(c)(4) organization that has filed as a lobbying entity in New York State. Ex. E. The information sought is thus directly relevant to assessing the adequacy of current lobbying regulations and whether CSP, and other entities like it, are able to improperly influence New York elections on behalf of anonymous principals or donors. Third, the information sought is directly relevant to the Commissions charge to determine weaknesses in existing laws, regulations and procedures relating to addressing public corruption. Executive Order II(c). The Commission cannot make specific recommendations to address the weaknesses in State disclosure laws unless it fully understands how dark money groups such as CSP have been able to avoid disclosures that are crucial to enabl[ing] the electorate to make informed decisions and give proper weight to different speakers and messages. Citizens United v. FEC, 558 U.S. 310, 371 (2010). The Commissions subpoenas plainly fall within the scope of its subpoena authority. B. The Commissions Work Is Not Yet Completed

Petitioners do not seriously dispute the Commissions broad authority to investigate campaign-finance and lobbying activities. But they contend that the Commission has already achieved this goal with the publication of its Preliminary Report, and thus assert that the Commissions only remaining objective is to out or embarrass private citizens who have

16

aligned themselves with conservative causes or sought to discuss the issue positions of Democratic officeholders in New York State. (Mem. Law at 12, 14). The basic premise of this argument is flawed. The Commission did not fulfill its mandate by publishing a Preliminary Report, which by its very terms was just that -- preliminary. See Ex. B at 1, 6 and 98. In the case of the CSP investigation, there are still many unanswered questions - more, perhaps, than when the investigation began. The Commission still has not discovered who controls CSP and how it manages to move dark money through the system in a way undetectable by the government, by advocacy groups, or by the media. Answers to these questions will advance the Commissions work in at least two important respects. First, a clearer understanding of CSPs byzantine activities will help the Commission make specific legislative recommendations to the Legislature beyond the very general ones outlined in its Preliminary Report. As discussed above, the Commissions investigation may reveal methods by which CSP was able to circumvent IRS regulations, 14-126 of New York State Election Law, or other campaign finance provisions. A basic understanding of how groups like CSP actually operate in New York will inform the Commissions specific recommendations to the Legislature. Second, the Commissions continuing investigation into CSPs operations may reveal enforcement inadequacies at the Board of Elections, and further inform the Commissions work in recommending reforms to the conduct of that agency. Petitioners contention that these objectives have been mooted by virtue of the Preliminary Report is precisely the argument that was considered and rejected by the First Department in New York State Commission on Government Integrity v. Congel, 156 A.D.2d 274 (1st Dept 1989). In Congel, corporate contributors sought to quash subpoenas issued by the Feerick Commission. As petitioners argue here, the Congel petitioners argued that because the

17

Feerick

Commission

had

already

issued

preliminary

report

containing

policy

recommendations, the information sought was no longer needed. Supreme Court granted the motion to quash, but the First Department reversed. Rejecting the argument that the Feerick Commissions work was finished because it had already issued its preliminary report, the First Department held that it was not for the court to determine whether the subpoenaed materials [were] necessary, id. at 279, and stated that the materials the subpoenas sought were generally relevant to the Commissions inquiry. Id. at 280. As in Congel, this Commission has not finished its work, and the subpoenaed material remains relevant to its ongoing investigation. II. PETITIONERS PROCEDURAL ARGUMENTS ARE WITHOUT MERIT A. The Commission Has Complied With All Necessary Procedures and Rules

Petitioners threshold procedural objection -- that the Commission may not exercise its subpoena authority until it has publicly disseminated procedures and rules governing the Commissions work (Mem. Law at 11-12) -- has no basis in law. The subpoenas were issued under the authority of 6 and 63(8) of the Executive Law, neither of which requires that the Commission adopt particular procedures as a prerequisite to exercising subpoena authority pursuant to those sections. Likewise, the Executive Order does not condition the Commissions subpoena authority on first adopting certain procedures and rules. Rather, the Order authorizes the Co-Chairpersons of the Commission to adopt, by unanimous vote, such procedures and rules as they believe necessary to govern the exercise of [the Commissions] powers and authority. Executive Order V. Read in context of the entire Executive Order, this is a grant of authority to the CoChairpersons and not a limitation on the Commissions statutorily defined subpoena authority. Moreover, even if the Executive Order had purported to require such procedures and rules

18

(which it did not), the Governor may not by executive order limit the Attorney Generals subpoena authority under 63(8). See Matter of De Brizzi, 303 N.Y. 206, 213 (1951) (executive order requesting inquiry by the Attorney General under 63(8) could not deprive Attorney General of discretion required by that section). Although the Commission was not obligated to adopt rules governing the exercise of its powers, provisions regulating its conduct already exist to protect the interests of any witness required to provide testimony or information to the Commission. Executive Law 63(8) makes it a misdemeanor to disclose to any person other than the governor or the attorney-general the name of any witness examined or any information obtained upon such inquiry. The Commissions inquiry also is subject to 73 of the Civil Rights Law, which creates a Code of fair procedure for investigating agencies, and controls the disclosure of information obtained by a Commission subpoena. In addition to these statutory protections, the Executive Order requires that each subpoena be unanimously approved by all of the Co-Chairpersons. The subpoenas issued to SAI and Odescalchi were so approved and issued consistent with all applicable requirements. B. The Subpoenas Are Neither Overbroad Nor Unduly Burdensome

Petitioners further contend that the subpoenas are overbroad and burdensome, and that [t]he time and resources that would be required to comply with the Subpoenas are incalculable. (Mem. Law at 17). But [a] subpoena is not rendered invalid merely because it requires production of a substantial number of documents. Matter of Am. Dental Co-op., Inc. v. Attorney General of the State of N.Y., 127 A.D.2d 274, 282 (1st Dept 1987). Relevancy, and not quantity, is the test of the validity of a subpoena. Id. (quoting Matter of Minuteman Research, Inc. v. Lefkowitz, 69 Misc.2d 330, 331 (Sup. Ct. N.Y. Co. 1972)).

19

The premises of petitioners argument are in any event mistaken: the Commission does not seek, and has not demanded, all of the petitioners documents, communications, and media materials unrelated to their dealings with CSP. (Mem. Law at 14-15). Construing the subpoenas consistently with the Commissions obvious intent, the subpoenas are tailored to require production only of records pertaining to petitioners relationship with CSP and related entities. The purpose of the subpoenas broad language was simply to capture the relevant documents and materials regardless of the corporate form that CSP used to conduct business with the petitioners -- a necessary recourse in light of CSPs well-documented use of shell organizations and passthrough entities. The Commission has made the scope of the subpoenas clear in discussions with petitioners over compliance with the subpoenas. In an email to petitioners counsel, the Commission clarified that it is uninterested in communications regarding political strategy pertaining to specific candidates or particular political messages. Ex. M. Petitioners, through their counsel, were indisputably aware of the Commissions willingness to work with them to clarify and narrow the subpoenas scope, but nonetheless proceeded with their motion to quash. The Commission remains willing to accept as compliance with the subpoena the production of documents, communications and media materials relating specifically to CSP and CSP-related persons and entities, and has no objection to the Court declaring that such production will constitute compliance with the subpoena. See Congel, 156 A.D.2d at 278 (narrowing Commissions subpoenas to address concerns of overbreadth). Petitioners do not and cannot argue that, as limited in this fashion, the subpoenas would be overbroad or unduly burdensome.

20

III.

THE SUBPOENAS DO NOT IMPERMISSIBLY BURDEN FIRST AMENDMENT RIGHTS Petitioners final argument is that the subpoenas impermissibly intrude on their and their

clients First Amendment rights by requiring disclosures that assertedly interfere with their free political expression and association. This argument lacks merit. Unlike limits on corporate independent expenditures, disclosure requirements inherently pose less of a burden on First Amendment rights because they impose no ceiling on campaignrelated activities and accordingly do not prevent anyone from speaking. Citizens United, 558 U.S. at 366 (internal quotation marks and citations omitted). For these reasons, in Citizens United, the Supreme Court held that disclosure requirements are not subject to the same strict scrutiny standard that applies to campaign limits, but rather to a more relaxed exacting scrutiny test requiring only a substantial relation between the disclosure requirement and a sufficiently important governmental interest. 558 U.S. at 366-67 (citing Buckley v. Valeo, 424 US 1, 64 (1976); McConnell v. Federal Election Commn, 540 U.S. 93, 231-232 (2003)); see Ctr. for Individual Freedom v Madigan, 697 F. 3d 464, 477 (7th Cir. 2012). Although the Court in Citizens United struck down limits on corporate independent expenditures, it upheld mandatory disclosure requirements under federal law. The Commissions subpoenas here likewise satisfy First Amendment scrutiny. A. The Subpoenas Serve Important State Interests 1. Electoral Integrity: Transparency and Accountability

In upholding the challenged federal disclosure requirement in Citizens United, the Supreme Court noted that disclosure permits citizens . . . to react to speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages. Id. at 371. Six months later, in Doe v Reed, 21

the Court again emphasized that disclosure promotes transparency and accountability in the electoral process to an extent other measures cannot. 130 S. Ct. at 2820 (2010); see also id. at 2837 (Scalia, J., concurring in the judgment) (Requiring people to stand up in public for their political acts requires civic courage, without which democracy is doomed). These interests are intimately related to the importance of provid[ing] the electorate with information about the sources of election-related spending. Citizens United, 558 U.S. at 367 (quoting Buckley, 424 U.S. at 66). The importance of transparency and accountability in the electoral process has been affirmed as well by federal appellate courts that have upheld various disclosure requirements over the past several years. See, e.g., Ctr. for Individual Freedom v. Madigan, 697 F. 3d 464, 490-93, 498-99 (7th Cir. 2012) ([C]ampaign finance data can help busy voters sift through the information and make informed political judgments . . . [s]uch transparency helps the public hold political speakers accountable for making false, manipulative, or otherwise unseemly ads that they might otherwise run with impunity.); SpeechNow.org v. FEC, 599 F.3d 686, 698 (D.C. Cir.) ([T]he public has an interest in knowing who is speaking about a candidate and who is funding that speech, no matter whether . . . contributions were made towards administrative expenses or independent expenditures.), cert denied __ U.S. __, 131 S. Ct. 553 (2010); Human Life of Wash. Inc. v. Brumsickle, 624 F.3d 990, 1008 (9th Cir. 2010) ([D]isclosure requirements thus advance the important and well-recognized governmental interest of providing the voting public with the information with which to assess the various messages vying for their attention.), cert. denied __ U.S. __, 131 S. Ct. 1477 (2011). Here, the Commission seeks information about an anonymous, out-of-state entity that indisputably spent millions of dollars on attack ads in a blatant effort to influence New York

22

elections. This information is crucial to fulfill the Commissions core responsibility to determine whether existing laws and regulatory efforts require sufficient disclosures to fully inform the electorate. Without understanding the relationships that are being hidden from the public under the current disclosure regime, the Commission cannot determine whether and what additional disclosures will provide appropriate information to the public. The same concerns about transparency and accountability that were sufficient to uphold disclosure requirements in Citizens United, Buckley, and a host of federal appellate decisions thus more than adequately support the Commissions efforts here to study the weaknesses of existing disclosure rules. Against the substantial bulk of Supreme Court and appellate court precedent recognizing the importance and validity of disclosure requirements, petitioners rely on the Ninth Circuits decision in Perry v. Schwarzenegger, 591 F.3d 1147, 1165 (9th Cir. 2009). Perry, however, is readily distinguishable. First, the interests at stake in Perry were significantly weaker than they are here. In Perry, private individuals requested the disclosure of internal campaign communications in an effort to demonstrate voter intent in an initiative measure. See id. at 1152. The court held that plaintiffs had not met their burden in demonstrating a sufficient need for the discovery because, among other things, there were other ways to get the needed information. See id. at 1165. Here, in contrast, the subpoenas in question were issued under the authority of the Governor and the Attorney General, seeking information in service of the long recognized government interests of transparency and accountability in elections, and in direct pursuit of the investigatory objectives for which the Commissions members were appointed. See, e.g., Eastland v. United States Servicemens Fund, 421 U.S. 491 (1975) ([T]he power to investigate is inherent in the power to make laws . . . . The issuance of a subpoena pursuant to an authorized

23

investigation is similarly an indispensable ingredient of lawmaking. . . .); Matter of the Joint Legislative Comm. (Teachers Union), 285 N.Y. 1, 8 (1941) ([P]ower of inquiry, with process to enforce it, is an essential auxiliary to the legislative function.). Moreover, unlike in Perry, the subpoenas at issue here seek information that is not available by any other practical means: CSP has filed no disclosures with the Board of Elections, and its disclosure to JCOPE led the Commission only to an equally obscure shell organization which has since been dissolved. Thus, the Commission has no practical way apart from these subpoenas to determine how dark money organizations such as CSP obtain or spend funds. Second, the holding in Perry was not to protect donor identities across the board, as petitioners would like the Court to do here. Rather, the court emphasize[d] that [its] holding [wa]s limited to private, internal campaign communications concerning the formulation of campaign strategy and messages. 591 F.3d at 1165 n.12 (emphasis in original). Here, the Commission already has made clear that the communications it seeks do not include those, or those portions, regarding political strategy pertaining to specific candidates or particular political messages. Given that the holding in Perry shielded only communications concerning internal strategy and messages, that decision in no way supports petitioners blanket challenge to the Commissions subpoenas. 2. The Appearance of Corruption

Dark money also fosters the appearance that large contributors are hiding their identities because they are engaged in illicit or improper behavior. The disclosures sought by the Commissions subpoenas will help the Commission determine both whether this appearance reflects reality, and whether additional disclosures (or other reforms) can dispel the appearance of corruption.

24

The importance of this interest cannot be gainsaid. The Supreme Court has explained that without the authority to regulate the appearance of undue influence, the cynical assumption that large donors call the tune could jeopardize the willingness of voters to take part in democratic governance. McConnell, 540 U.S. at 144 (citing Nixon v. Shrink Mo. Govt Pac, 528 U.S. 377, 390 (2000)). See Buckley, 424 U.S. at 67 (explaining the States interest in avoiding the appearance of corruption). Indeed, [d]emocracy works only if the people have faith in those who govern, and that faith is bound to be shattered when high officials and their appointees engage in activities which arouse suspicions of malfeasance and corruption. Shrink Mo., 528 U.S. at 390 (quoting United States v. Miss. Valley Generating Co., 364 U.S. 520, 562 (1961)); see also Ognibene v. Parkes, 671 F.3d 174, 183 (2d Cir. 2011), cert. denied __ U.S. __, 133 S. Ct. 28 (2012) (explaining that [i]t is not necessary to produce evidence of actual corruption to demonstrate the sufficiently important interest in preventing the appearance of corruption). Whether or not CSP is actually engaged in corrupt activities, the Commission has a strong government interest in obtaining the information necessary to determine how best to dispel any appearance of corruption caused by CSPs and similar organizations political connections. B. Petitioners Have Not Demonstrated Significant First Amendment Burdens

To withstand exacting scrutiny, the strength of the governmental interest must reflect the seriousness of the actual burden on First Amendment rights. Doe v. Reed, 130 S. Ct. at 2818 (internal quotation marks and citation omitted). Here, Petitioners have failed to articulate any substantial burden on their First Amendment rights at all. Petitioners argue that, if forced to comply with the subpoenas, they would feel constrained, going forward, in order to protect themselves and their clients from possible reprisals, to limit what they say to the clients, how they say it, and how frequently they

25

communicate with them. (Mem. Law at 20). But the New York Court of Appeals has held that merely asserting the possibility of a chilling effect on First Amendment rights is not enough to avoid compelled disclosure of information relevant to [a] legitimate subject of inquiry. Matter of Nicholson v. State Commn on Judicial Conduct, 50 N.Y.2d 597, 609 (1980). That is especially true where, as here, petitioners claim of possible reprisals lacks any credible support in the record. (See discussion at 27 - 30 below.) Petitioners also claim that compliance with the subpoenas would lead future clients to cease doing business with them. (Odescalchi Aff. 11, 13-14). The only evidence put forward for this assertion is Odescalchis conclusory, self-serving affidavit. On its own, this cannot establish a sufficient burden on petitioners First Amendment rights. See Reed, 130 S. Ct. at 2821 (finding insufficient evidence of potential retaliation where plaintiffs provided us scant evidence or argument beyond the burdens they assert disclosure would impose. . . .). Petitioners further argue that compliance with the subpoenas would infringe on the First Amendment rights of donors to clients and former clients of Petitioners. (Mem. Law at 20). This argument is wrong as a matter of both law and fact. On the law, it incorrectly assumes that campaign donors have a constitutionally protected interest in anonymity as such, when the weight of precedent discussed above lends no support for that position. It is factually incorrect, as well, in construing the subpoenas as a request for CSPs donor list. In fact, the subpoenas are not directed to CSP and do not seek the production of any donor list; instead, they are directed to a private, for-profit entity and its principal, and merely call for communications to show who is paying for and directing the for-profit entitys work related to CSP. Indeed, CSP already has publicly disclosed the identity of its sole donor; according to its JCOPE disclosure form, Ex. E, that donor is the (now dissolved) Center for Common Sense, LLC (CFCS), which was not a

26

charity, an advocacy organization, or even a 501(c)(4) non-profit, but rather a private, forprofit, limited liability company registered in Florida. The Commission seeks to learn who controlled and directed CFCS -- and by extension CSP. Petitioners arguments concerning anonymity ring especially hollow because their business model relies on promoting, not shielding, the names of their clients. Petitioners website (www.saipr.com) extensively and specifically advertises both their political work and the names of their clients, and a review of Board of Elections data reveals the names of at least ten campaigns in New York State since 2010 that have paid petitioners for their services. There is thus no genuine reason to think that petitioners commercial well-being depends on preserving its clients anonymity. See Bailey v. Me. Commn on Govt Ethics & Election Practices, 900 F. Supp. 2d 75, 85 (D. Me. 2012) (Plaintiffs prior political work undercut need for anonymity to prevent threats, harassment and reprisals). C. CSPs Donors Do Not Face a Realistic Threat of Reprisals or Harassment

Petitioners final argument, advanced on behalf of their clients and their clients donors, is that [s]pecial consideration is warranted [because] it is probable that the disclosure of contributor names would subject these contributors to threats, harassment, or reprisals from Government officials. (Mem. Law at 21). The argument is entirely without merit. As an initial matter, it bears noting that the Commission has not subpoenaed a list of CSPs (or any other entitys) contributor names; its subpoenas are aimed, rather, at the communications of a for-profit consultant and its principal which will reveal who pays for and directs the activities they carry out in the name of CSP in New York.

27

As a matter of law, moreover, to assert a First Amendment defense against otherwise valid disclosure requirements, the party resisting disclosure must show a reasonable probability that the compelled disclosure [of personal information] will subject them to threats, harassment, or reprisals from either Government officials or private parties. Reed, 130 S. Ct. at 2820 (internal citation and quotation marks omitted). Petitioners have come nowhere near to making such a showing. Those who have prevailed under this test have typically been members of underrepresented minority groups that have demonstrated a severe and concrete history of threats and harassment. In NAACP v. Alabama, 357 U.S. 449 (1958), for example, the Court found that the States interest in obtaining NAACP membership lists did not justify disclosure of those lists because on past occasions revelation of the identity of its rank-and-file members has exposed these members to economic reprisal, loss of employment, threat of physical coercion, and other manifestations of public hostility. Id. at 462-63.16 Similarly, in Brown v. Socialist Workers 74 Campaign Comm., 459 U.S. 87 (1982), the Court held that certain campaign disclosure requirements could not constitutionally be applied to the Socialist Workers Party (SWP) because of substantial evidence of past and present hostility from private persons and Government officials. Id. at 102. By contrast, supporters of a recent ballot initiative opposing gay marriage who had extensive documentation of harassment during a campaign season were nevertheless denied anonymity because, unlike the civil-rights activists and socialists in NAACP and Brown, they did not belong to a minor party, had not suffered mistreatment over extended periods of time, and had not been subjected to countless acts of government harassment and retribution. ProtectMarriage.com v. Bowen, 830 F. Supp. 2d 914, 929-32 (E.D. Cal. 2011).

Notably, the plaintiffs in NAACP complied satisfactorily with the Alabama Attorney Generals production order, other than the disputed membership lists, id. at 464-65, in contrast to petitioners, who moved to quash the Commissions subpoenas without producing any documents.
16

28

Here, petitioners can present no concrete, substantial evidence of a reasonable probability of threats, harassment or reprisals remotely comparable to what led the Court to protect the identity of NAACP members in the Alabama of the 1950s or of Socialist Workers Party members in the early 1980s. Indeed, they present even less evidence of harassment or mistreatment than was presented by the opponents of a gay marriage initiative in ProtectMarriage.com, where the court nevertheless required disclosure. Petitioners rest their claim not on a showing that backers of CFCS are members of any harassed or vulnerable minority, but rather on the basis merely that they spend cash supporting a conservative political organization that aims to defeat targeted members of one of the States two leading political parties. Petitioners cite no evidence that past disclosures about their clients, or about organizations similar to their clients, have had any negative repercussions whatsoever. And they cite no evidence that contributors to conservative political causes in New York (many of whom are well known) have suffered or will suffer retaliation or violence due to their political beliefs or expression. There is simply no basis to equate petitioners unknown contributors to the persecuted and politically disadvantaged minorities of earlier eras, or to find they face any realistic threat of governmental reprisals or intimidation. Petitioners sole argument is speculation that their conservative contributors will face future harassment due to Democratic influence in Albany and the Commissions alleged bias favoring Democrats. But their asserted bases for this claim are either erroneous or unpersuasive. First, petitioners assert that the risk of reprisal is acute because the Governor is a Democrat and Democrats control both the State Senate and the State Assembly. (Mem. Law at 21-22). This is not correct. While the Democrats control the State Assembly, it is the Republicans who control the State Senate, in partnership with a group of four breakaway

29

Democrats called the Independent Democratic Conference (IDC) under the leadership of Senator Dean Skelos (Republican) and Senator Jeffrey Klein (IDC). Second, petitioners claim that the Commission has granted favorable treatment to the New York State Senate Democratic Campaign Committee (SDCC) over its Republican counterpart. (Mem. Law at 22). This claim, too, is inaccurate. On September 20, 2013, the Commission served the SRCC housekeeping account with a subpoena requesting financial and other documents. Several days later, the Commission served the SDCC housekeeping account with a nearly identical subpoena. The Commission has served additional subpoenas on the New York State housekeeping accounts of the Republican Assembly Campaign Committee, Democratic Assembly Campaign Committee, Republican State Committee, Democratic State Committee, Working Families Party, Independence Party, and Conservative Party, all of whom have complied with the Commissions subpoenas. Marton Aff. 4.There is no credible evidence of bias on the part of the Commission, and petitioners concerns about unfair treatment have no basis. See Hogan, 67 A.D.3d at 1146 (noting that New York State Attorney General benefits from a presumption that he is acting in good faith) (internal citations omitted). CONCLUSION The Commissions subpoenas lie squarely within the investigative authority of the Commission, serve important government interests, and comply with all relevant procedural requirements. Petitioners have shown no credible threat to their First Amendment rights from the enforcement of these lawful subpoenas. Petitioners Motion to Quash should be denied and the Commissions Cross-Motion to Compel should be granted.

30