United States v. William Danielczyk, Jr. ( 2012 )


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  •                        PUBLISHED
    UNITED STATES COURT OF APPEALS
    FOR THE FOURTH CIRCUIT
    UNITED STATES OF AMERICA,             
    Plaintiff-Appellant,
    v.
    WILLIAM P. DANIELCZYK, JR., a/k/a
    Bill Danielczyk; EUGENE R. BIAGI,
    a/k/a Gene Biagi,
    Defendants-Appellees.
          No. 11-4667
    CAMPAIGN LEGAL CENTER;
    DEMOCRACY 21,
    Amici Supporting Appellant,
    REPUBLICAN NATIONAL COMMITTEE;
    CENTER FOR COMPETITIVE POLITICS;
    JEFFREY D. MILYO, PH.D.; DAVID
    M. PRIMO, PH.D.,
    Amici Supporting Appellees.
    
    Appeal from the United States District Court
    for the Eastern District of Virginia, at Alexandria.
    James C. Cacheris, Senior District Judge.
    (1:11-cr-00085-JCC-1; 1:11-cr-00085-JCC-2)
    Argued: May 18, 2012
    Decided: June 28, 2012
    2                UNITED STATES v. DANIELCZYK
    Before TRAXLER, Chief Judge, and GREGORY and
    DIAZ, Circuit Judges.
    Reversed by published opinion. Judge Gregory wrote the
    opinion, in which Chief Judge Traxler and Judge Diaz joined.
    COUNSEL
    ARGUED: Michael R. Dreeben, UNITED STATES
    DEPARTMENT OF JUSTICE, Washington, D.C., for Appel-
    lant. Jeffrey A. Lamken, MOLOLAMKEN, LLP, Washing-
    ton, D.C.; Lee Elton Goodman, LECLAIR RYAN, PC,
    Washington, D.C., for Appellees. ON BRIEF: Neil H. Mac-
    Bride, United States Attorney, Mark D. Lytle, Assistant
    United States Attorney, OFFICE OF THE UNITED STATES
    ATTORNEY, Alexandria, Virginia; Lanny A. Breuer, Assis-
    tant Attorney General, Criminal Division, Richard C. Pilger,
    Director, Election Crimes Branch, Eric L. Gibson, Trial Attor-
    ney, Criminal Division, William M. Jay, Assistant to the
    Solicitor General, UNITED STATES DEPARTMENT OF
    JUSTICE, Washington, D.C., for Appellant. Todd M. Rich-
    man, Assistant Federal Public Defender, OFFICE OF THE
    FEDERAL PUBLIC DEFENDER, Alexandria, Virginia,
    Chris Ashby, LECLAIR RYAN, PC, Washington, D.C.,
    Joseph M. Rainsbury, LECLAIR RYAN, PC, Roanoke, Vir-
    ginia, for Appellee Eugene R. Biagi; Michael G. Pattillo, Jr.,
    Lucas M. Walker, MOLOLAMKEN, LLP, Washington, D.C.,
    for Appellee William P. Danielczyk, Jr. Donald J. Simon,
    SONOSKY, CHAMBERS, SACHSE, ENDRESON &
    PERRY, LLP, Washington, D.C.; Fred Wertheimer,
    DEMOCRACY 21, Washington, D.C.; J. Gerald Hebert, Tara
    Malloy, Paul S. Ryan, THE CAMPAIGN LEGAL CENTER,
    Washington, D.C., for Amici Supporting Appellant. John R.
    Phillippe, Jr., Gary Lawkowski, REPUBLICAN NATIONAL
    UNITED STATES v. DANIELCZYK                        3
    COMMITTEE, Washington, D.C., for Republican National
    Committee, Amicus Supporting Appellees. Allen Dickerson,
    CENTER FOR COMPETITIVE POLITICS, Alexandria, Vir-
    ginia, for Center for Competitive Politics, Amicus Supporting
    Appellees. Terence P. Ross, Jessica M. Thompson, CRO-
    WELL & MORING LLP, Washington, D.C., for Jeffrey D.
    Milyo, Ph.D., and David M. Primo, Ph.D., Amici Supporting
    Appellees.
    OPINION
    GREGORY, Circuit Judge:
    The Government appeals the district court’s grant of Wil-
    liam P. Danielczyk, Jr. and Eugene R. Biagi’s (the "Appel-
    lees") motion to dismiss count four and paragraph 10(b) of the
    indictment, alleging that they conspired to and did facilitate
    direct contributions to Hillary Clinton’s 2008 presidential
    campaign in violation of 2 U.S.C. § 441b(a) of the Federal
    Election Campaign Act of 1971 ("FECA"), and 
    18 U.S.C. § 2.1
    The district court reasoned that in light of Citizens United v.
    Federal Election Commission, 
    130 S. Ct. 876
     (2010),
    § 441b(a) is unconstitutional as applied to the Appellees. We
    disagree for the following reasons and thus reverse the district
    court’s grant of the motion to dismiss count four and para-
    graph 10(b) of the indictment.
    I.
    Danielczyk and Biagi were officers of Galen Capital
    Group, LLC, and Galen Capital Corporation (together,
    "Galen"). At the time of the charged conduct, Danielczyk was
    Galen’s chairman, while Biagi was Galen’s secretary. In
    1
    The indictment also alleges that Danielczyk co-hosted a fundraiser for
    Clinton’s 2006 Senate campaign. These allegations support counts that are
    not at issue in this appeal.
    4                UNITED STATES v. DANIELCZYK
    March of 2007, Danielczyk co-hosted a fundraiser for Clin-
    ton’s campaign and had individuals, including Biagi, give
    donations to the campaign with the promise that they would
    be reimbursed by Galen. Danielczyk and Biagi concealed
    Galen’s reimbursements by writing "consulting fees" on the
    reimbursement checks’ memorandum lines, by issuing the
    checks for amounts larger than the actual contributions, and
    by creating false back-dated letters to the individual donors
    that characterized the reimbursement payments as "consulting
    fees." In total, Danielczyk and Biagi reimbursed the donors
    for $156,400 in contributions made to Clinton’s 2008 cam-
    paign, and the campaign in turn reported the contributions to
    the Federal Election Commission.
    Danielczyk and Biagi were indicted on seven counts for
    this contribution scheme. Count four and paragraph 10(b)
    respectively charged the Appellees with knowingly and will-
    fully causing contributions of corporate money to a candidate
    for federal office, aggregating $25,000 or more, in violation
    of § 441b(a) and 2 U.S.C. § 437g(d)(1)(A)(i), and conspiring
    to do so. On April 6, 2011, Danielczyk and Biagi moved to
    dismiss count four, contending that § 441b(a) is unconstitu-
    tional as applied to them in light of Citizens United.
    Prior to the Supreme Court’s decision in Citizens United,
    § 441b(a) made it unlawful for corporations to make both
    direct contributions to political candidates and independent
    expenditures on speech that expressly advocates for or against
    the election or defeat of a candidate. However, the FECA per-
    mitted individuals to make independent expenditures and
    direct contributions within limits. See, e.g., 2 U.S.C.
    § 441a(a). The act also allowed corporations wanting to make
    either type of expenditure to form political action committees
    ("PACs"), which were entities separate from the corporations
    subject to regulatory requirements. See 2 U.S.C.
    § 441b(b)(2)(C); 
    11 C.F.R. §§ 114.1
    (a)(2)(iii), (b), and
    114.5(d). Citizens United struck down § 441b(a)’s prohibition
    against corporate independent expenditures, reasoning in part
    UNITED STATES v. DANIELCZYK                   5
    that the ban was not supported by the interest in preventing
    quid pro quo corruption, 
    130 S. Ct. at 908-09
    , and further that
    "the First Amendment does not allow political speech restric-
    tions based on a speaker’s corporate identity," 
    id. at 903
    . Citi-
    zens United left untouched § 441b(a)’s ban on direct
    corporate contributions.
    Relying on Citizens United, the district court held that
    § 441b(a)’s ban on direct corporate contributions as applied to
    Galen is unconstitutional because it impermissibly treats cor-
    porations and individuals unequally for purposes of political
    speech. The district court rejected the Government’s conten-
    tion that the differential treatment of corporations in the con-
    text of direct contributions fulfills legitimate governmental
    interests, such as the prevention of quid pro quo corruption.
    It concluded that the interest in preventing quid pro quo cor-
    ruption could be fulfilled by requiring corporations to comply
    with the act’s contribution limits for individual donors.
    Five days after it granted the motion to dismiss, the district
    court sua sponte ordered the parties to file briefs on whether,
    in light of Agostini v. Felton, 
    521 U.S. 203
     (1997), and Fed-
    eral Election Commission v. Beaumont, 
    539 U.S. 146
     (2003),
    the court should reconsider its decision. In Beaumont, the
    Supreme Court rejected an as-applied challenge to § 441b(a)’s
    ban on direct corporate contributions. 
    539 U.S. at 163
    . The
    Government argued that Beaumont directly controlled the
    case and must be applied even if Citizens United may have
    eroded Beaumont’s reasoning. This is because the Agostini
    principle requires lower courts to apply Supreme Court prece-
    dent that directly controls the case before it despite subse-
    quent Supreme Court case law that may have affected the
    precedent by implication. 
    521 U.S. at 237
    .
    After considering the briefs, the district court denied recon-
    sideration of its dismissal. It reasoned that Beaumont did not
    directly control the case because it addressed an as-applied
    challenge of § 441b(a)’s ban on direct corporate contributions
    6                UNITED STATES v. DANIELCZYK
    against a nonprofit corporation and not, as in this case, a for-
    profit corporation like Galen. The district court further
    affirmed the rationale in its earlier ruling that § 441b(a) vio-
    lated Citizens United by treating corporations and individuals
    unequally. Accordingly, it concluded that count four and para-
    graph 10(b) remained dismissed. The Government timely
    appealed.
    II.
    For the following reasons, we hold that § 441b(a) is not
    unconstitutional as applied to the Appellees. Beaumont clearly
    supports the constitutionality of § 441b(a) and Citizens
    United, a case that addresses corporate independent expendi-
    tures, does not undermine Beaumont’s reasoning on this point.
    The district court erred when it granted the Appellees’ motion
    to dismiss.
    A.
    The Agostini principle provides that in circumstances when
    Supreme Court precedent has "direct application in a case, yet
    appears to rest on reasons rejected in some other line of deci-
    sions, [courts] should follow the line of cases which directly
    controls, leaving to [the Supreme] Court the prerogative of
    overturning its own decisions." Agostini v. Felton, 
    521 U.S. 203
    , 237 (1997) (quoting Rodriguez de Quijas v. Shear-
    son/Am. Express, Inc., 
    490 U.S. 477
    , 484 (1989)). Thus, lower
    courts should not conclude that the Supreme Court’s "more
    recent cases have, by implication, overruled [its] earlier prece-
    dent." 
    Id.
    In Beaumont, the Supreme Court addressed a First Amend-
    ment challenge to § 441b(a) as it applied to nonprofit advo-
    cacy corporations. Federal Election Commission v.
    Beaumont, 
    539 U.S. 146
    , 156 (2003). In that case, North Car-
    olina Right to Life, Inc. ("NCRL"), a nonprofit corporation
    organized to provide counseling to pregnant women and to
    UNITED STATES v. DANIELCZYK                   7
    promote alternatives to abortion, brought an as-applied chal-
    lenge to § 441b(a)’s ban on direct corporate contributions and
    independent expenditures. Id. at 150. A panel of this Circuit
    found the ban on both independent expenditures and direct
    contributions unconstitutional as applied to NCRL. Beaumont
    v. FEC, 
    278 F.3d 261
    , 279 (4th Cir. 2002), rev’d by Beau-
    mont, 
    539 U.S. 146
    .
    With respect to direct contributions, the panel reasoned that
    the ban was unjustified in light of Federal Election Commis-
    sion v. Massachusetts Citizens for Life, Inc. ("MCFL"), 
    479 U.S. 238
    , 259 (1986), a decision in which the Supreme Court
    held that § 441b(a)’s ban on independent expenditures was
    unconstitutional as applied to a nonprofit corporation that, in
    many respects, was similar to NCRL. Id. at 275. As a result,
    the panel extended MCFL’s holding that solely addressed
    § 441b(a)’s ban on independent expenditures to the context of
    the provision’s ban on direct contributions, concluding that
    "[i]n neither case is there the threat of quid pro quo, monetary
    influence, or distortion corruption that the prohibitions seek to
    prevent." Id. After this Circuit denied a rehearing en banc, the
    Federal Election Commission petitioned the Supreme Court
    for certiorari only on the issue of whether the ban on direct
    contributions was constitutional. Beaumont, 
    539 U.S. at 151
    .
    In a 7-2 decision, the Supreme Court reversed this Circuit’s
    opinion. 
    539 U.S. at 163
    . In doing so, the Supreme Court
    thoroughly explained its longstanding jurisprudence uphold-
    ing Congress’s "original, core prohibition on direct corporate
    contributions" and warned that this jurisprudence "would dis-
    courage any broadside attack on corporate campaign finance
    regulation of corporate contributions." 
    Id. at 153, 156
    . It
    remarked that it had previously held that § 441b(a) had "broad
    applicability" to both corporations and labor unions regardless
    of their financial disposition and rejected NCRL’s various
    arguments to limit this applicability, including that the ban
    did not adequately consider the variations between corpora-
    tions with respect to affluence and diversity of corporate
    8                UNITED STATES v. DANIELCZYK
    form. Id. at 157. It then recognized four government interests
    that supported the ban on direct corporate contributions: anti-
    corruption, anti-distortion, dissenting-shareholder, and anti-
    circumvention (preventing the evasion of valid individual
    contribution limits). Id. at 153-55. The Supreme Court
    rejected NCRL’s position that these government interests are
    implicated only by for-profit corporations, reasoning that non-
    profits, just like for-profits, benefit from state-created advan-
    tages, can amass political war chests, and are susceptible to
    corruption and misuse as conduits for circumventing individ-
    ual contribution limits. Id. at 160. Thus, in addressing
    § 441b(a)’s applicability to a nonprofit advocacy corporation,
    the Court based its conclusion on a century of law that has
    supported bans on direct contributions against for-profit cor-
    porations. Id. at 157. Overall, Beaumont makes clear that
    § 441b(a)’s ban on direct corporate contributions is constitu-
    tional as applied to all corporations.
    B.
    The Appellees contend that Beaumont does not govern our
    inquiry here because its holding was limited to nonprofit cor-
    porations. For the reasons expressed above, we do not read
    Beaumont so narrowly. Beaumont stands for the proposition
    that a nonprofit corporation does not differ from a for-profit
    corporation for purposes of § 441b(a) because all corporations
    implicate the asserted government interests, and § 441b(a) is
    closely drawn to further those interests. However, even if we
    did agree with the Appellees, we cannot ignore Beaumont’s
    extensive discussion of Congress’s legitimate interests in reg-
    ulating direct contributions made by all corporations. As the
    Supreme Court has stated, "When an opinion issues for the
    Court, it is not only the result but also those portions of the
    opinion necessary to that result by which we are bound." Sem-
    inole Tribe v. Florida, 
    517 U.S. 44
    , 67 (1996). Nor should we
    forget that NCRL recognized the uphill battle it faced in chal-
    lenging the general ban on direct contributions and thus did
    not request complete upheaval of the law, but only that non-
    UNITED STATES v. DANIELCZYK                   9
    profits, like it, be exempt. Beaumont, 
    539 U.S. at 156
    . Thus,
    at the very least, Beaumont’s discussion of the ban as it
    applies to all corporations informs our inquiry here.
    C.
    The Appellees would have this Court hold that Citizens
    United repudiated Beaumont’s entire reasoning; this we can-
    not do. Citizens United held that in the context of independent
    expenditures, the Government could not suppress political
    speech on the basis of the speaker’s corporate identity. In
    reaching its decision, the Court did not discuss Beaumont and
    explicitly declined to address the constitutionality of the ban
    on direct contributions. Citizens United v. Federal Election
    Commission, 
    130 S. Ct. 876
    , 909 (2010). Nor did the opinion
    indicate that its "corporations-are-equal-to-people" logic nec-
    essarily applies in the context of direct contributions. 
    Id. at 903
    . Leaping to this conclusion ignores the well-established
    principle that independent expenditures and direct contribu-
    tions are subject to different standards of scrutiny and sup-
    ported by different government interests. See Preston v.
    Leake, 
    660 F.3d 726
    , 735 (4th Cir. 2011) (concluding that Cit-
    izen United did not overrule "Buckley [v. Valeo, 
    424 U.S. 1
    (1976)], Nixon v. [Shrink Mo. Gov’t PAC, 
    528 U.S. 373
    (2000)], Beaumont, or other cases applying ‘closely drawn’
    scrutiny to contribution restrictions").
    Independent expenditure limitations are "substantial rather
    than merely theoretical restraints on the quantity and diversity
    of political speech." Buckley, 
    424 U.S. at 19
    . "By contrast . . .
    a limitation upon the amount that any one person or group
    may contribute to a candidate or political committee entails
    only a marginal restriction upon the contributor’s ability to
    engage in free communication," 
    id. at 20-21
    , and thus "lie[s]
    closer to the edges than to the core of political expression,"
    Beaumont, 
    539 U.S. at 161
    . The "markedly greater burden"
    on basic freedoms imposed by independent expenditure limi-
    tations requires that these limitations survive "exact scrutiny
    10                   UNITED STATES v. DANIELCZYK
    applicable to limitations on core First Amendment rights of
    political expression." Buckley, 
    424 U.S. at 44
    .
    Direct contribution limitations, on the other hand, require
    the "lesser demand of being closely drawn to match a suffi-
    ciently important interest." Beaumont, 
    539 U.S. at 162
     (inter-
    nal quotation marks omitted).2 The reason for this difference
    in scrutiny is clear: independent expenditures, by definition,
    are direct means by which political speech enters into the
    marketplace, see Citizens United, 
    130 S. Ct. at 898
    ; direct
    contributions, conversely, do not necessarily fund political
    speech but must be transformed into speech by an individual
    other than the contributor, see Beaumont, 539 U.S at 161-62.
    To minimize the constitutional differences between regula-
    tions that govern independent expenditures and regulations
    that ban direct contributions by applying Citizens United to
    this case would repeat the same error this Circuit committed
    in Beaumont. See Beaumont, 
    539 U.S. at 151
     (rejecting this
    Circuit’s conclusion that "the rationale utilized by the Court
    in [MCFL] to declare prohibitions on independent expendi-
    tures unconstitutional as applied to MCFL-type corporations
    is equally applicable in the context of direct contributions."
    (internal quotation marks omitted)).
    As recently recognized by the Second and Ninth Circuits,
    Citizens United preserved two of the four important govern-
    ment interests recognized in Beaumont: anti-corruption and
    anti-circumvention.3 Ognibene v. Parkes, 
    671 F.3d 174
    , 195
    2
    The Appellees contest this standard of review only for the purpose of
    preserving the right to challenge it upon any later review by the Supreme
    Court. Appellee Br. 18. We note that this challenge has been rejected pre-
    viously by the Supreme Court. See Beaumont, 
    539 U.S. at 161
    .
    3
    The Citizens United court did reject the anti-distortion rationale as it
    was used to support the ban on independent expenditures when it over-
    turned Austin v. Mich. State Chamber of Commerce, 
    494 U.S. 652
     (1990).
    
    130 S. Ct. at 913
    . The Court also disapproved of the dissenting-
    shareholder interest as justification for the ban on independent expendi-
    tures. 
    Id. at 911
    .
    UNITED STATES v. DANIELCZYK                  11
    n.21 (2d Cir. 2011) (declining to hold that Beaumont was
    overruled by Citizens United, and determining that Citizens
    United preserved the anti-corruption and anti-circumvention
    interests); Thalheimer v. City of San Diego, 
    645 F.3d 1109
    ,
    1125 (9th Cir. 2011) (holding that Citizens United did not dis-
    approve of the anti-circumvention interest); Green Party of
    Conn. v. Garfield, 
    616 F.3d 189
    , 199 (2d Cir. 2010)
    ("Beaumont . . . remain[s] good law. Indeed, in the recent Cit-
    izens United case, the Court . . . explicitly declined to recon-
    sider its precedent involving campaign contributions by
    corporations to candidates for elected office.").
    Prevention of actual and perceived corruption and the threat
    of circumvention are firmly established government interests
    that support regulations on campaign financing. See Beau-
    mont, 
    539 U.S. at 154
    ; Nixon, 528 U.S. at 390 ("Even without
    the authority of Buckley, there would be no serious question
    about the legitimacy of the interest[ ] [of preventing corrup-
    tion and the appearance of it] [ ], which, after all, underlie[s]
    bribery and anti-gratuity statutes."); Buckley, 
    424 U.S. at 27
    ("Of almost equal concern as the danger of actual quid pro
    quo arrangements [through contributions] is the impact of the
    appearance of corruption stemming from public awareness of
    the opportunities for abuse."). While clarifying that the anti-
    corruption interest is limited to actual quid pro quo corruption
    or the appearance of it, as opposed to the appearance of influ-
    ence or access, Citizens United did not deny that anti-
    corruption was a sufficiently important governmental interest,
    which is all that is required for closely drawn scrutiny. 
    130 S. Ct. 909
    -10. Instead, it held that the interest did not justify a
    ban on corporate independent expenditures under strict-
    scrutiny review. 
    Id. at 911
    .
    With respect to the anti-circumvention interest, the Beau-
    mont court explained that without limitations on corporate
    contributions, individuals "could exceed the bounds imposed
    on their own contributions by diverting money through the
    corporation." 
    539 U.S. at 155
    . Thus the interest in preventing
    such evasion is grounded in the "experience" of "candidates,
    12                   UNITED STATES v. DANIELCZYK
    donors, and parties [that] test the limits of the current law, and
    it shows beyond serious doubt how contribution limits would
    be eroded if inducement to circumvent them were enhanced."
    
    Id.
     (internal quotation marks and citations omitted).4 Citizens
    United did not undercut Beaumont’s endorsement of this
    interest. Indeed, the majority opinion did not even discuss this
    interest when it struck down the independent expenditure ban,
    and thus prior Supreme Court precedent affirming this interest
    remains the law this Court must follow. See e.g., FEC v. Colo.
    Republican Fed. Campaign Comm., 
    533 U.S. 451
    , 456
    (2001); Cal. Med. Ass’n v. FEC, 
    453 U.S. 182
    , 197-98 (1981).
    III.
    For the foregoing reasons, we hold that the district court
    erred in granting the Appellees’ motion to dismiss count four
    and paragraph 10(b) of the indictment.5 The district court’s
    grant of the motion to dismiss with respect to count four and
    paragraph 10(b) is reversed.
    REVERSED
    4
    The Appellees point to McConnell v. Federal Election Commission,
    
    540 U.S. 93
     (2003), a case decided after Beaumont, to support their chal-
    lenge to the anti-circumvention interest. In McConnell, the Supreme Court
    found unconstitutional § 318 of the Bipartisan Campaign Reform Act of
    2002, which prohibited minors from making direct contributions to candi-
    dates, and contributions or donations to political parties. 2 U.S.C. § 441K.
    Id. at 232. In doing so, the Court rejected the Government’s argument that
    the provision protected against use of minors as conduits to circumvent
    individual-contribution limitations because there was "scant evidence" to
    support this form of evasion. Id. McConnell did not address Beaumont’s
    endorsement of the anti-circumvention interest in the context of a corpo-
    rate contribution ban, which remains good law. And unlike McConnell,
    the result in Beaumont is supported by the separate interest in preventing
    quid pro quo corruption.
    5
    Consequently, we do not address the parties’ arguments regarding
    whether § 441b(a) is closely drawn to support the government interests
    asserted. We find that Beaumont forecloses this inquiry. See, e.g., 
    539 U.S. at 160, n.7
     (rejecting NCRL’s suggestion that an earmark rule would
    be a better-tailored approach than the ban on direct contributions to fulfill
    the anti-circumvention interest).