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PACs linked to foreign companies legally donate millions to U.S. campaigns

By Dan Eggen
Washington Post Staff Writer
Sunday, October 17, 2010; 7:44 PM

As Democrats and Republicans spar over whether foreign money is polluting the midterm elections, a simple point is often overlooked: Hundreds of foreign corporations already play an integral and perfectly legal role in American politics through their U.S. subsidiaries.

Political action committees connected to foreign-based corporations have donated nearly $60 million to candidates and parties over the past decade, including $12 million since the start of 2009, federal contribution records show. Top donors in this election cycle include PACs tied to British drugmakers GlaxoSmithKline and AstraZeneca, which together account for about $1 million; Belgium's Anheuser-Busch InBev, at nearly $650,000; and Credit Suisse Securities, at over $350,000.

The donations must come from U.S. citizens or residents, and they make up a small fraction of overall political giving. Nonetheless, the role of foreign companies and their U.S. subsidiaries has become particularly sensitive in this year's midterm campaigns, which have featured widespread voter dismay over the economy and eruptions of anti-foreign rhetoric from both parties.

Democrats have made a campaign issue over speculation that the U.S. Chamber of Commerce is using foreign dues to help pay for a $75 million pro-Republican ad campaign, a charge the organization denies. White House adviser David Axelrod, appearing on CNN's "State of the Union" on Sunday, attempted to shift the thrust of the criticism to the more general issue of undisclosed donors.

But neither Democrats nor Republicans have drawn attention to PACs linked to global companies, a source of campaign funds that benefits both parties.

U.S. subsidiaries of foreign companies generally favored Republicans during the George W. Bush administration but have shifted the tilt of PAC contributions to Democrats since Barack Obama took office, according to a Washington Post analysis.

Foreign firms' lobbying

Overseas companies have a vigorous lobbying presence in Washington, and many of them played a prominent role in derailing Democratic campaign finance legislation that would have limited their U.S. political activities. The bill, blocked by Senate Republicans, would have classified more multinationals as foreign entities and, in early drafts, could have prevented them from having PACs.

More than a dozen foreign-connected companies, including subsidiaries of Germany's BASF Corp. and Switzerland's UBS Americas, registered to lobby against the legislation, records show.

The legislation came in reaction to a Supreme Court decision that eased restrictions of corporate political spending and raised the possibility that foreign companies might claim similar rights. That issue lies at the heart of unsubstantiated allegations that the Chamber of Commerce may be commingling foreign dues with political funds. The business group denies the charges, saying they are part of a White House-led "smear campaign."

Democrats have ratcheted up their attacks on Republican candidates and business groups for supporting policies that they say encourage multinational companies to move jobs overseas. Republicans and their allies have responded with campaign ads alleging that the Democratic-backed stimulus bill had the effect of creating jobs in China and other countries, a claim disputed by the Obama administration.

Despite the bluster, contribution records make clear that both parties benefit from contributions from U.S. companies with roots in other countries.

One of the leading contributors to federal candidates among U.S. subsidiaries is BAE Systems, the Arlington County-based arm of the British defense and aerospace company. Records show BAE's PAC has given nearly $600,000 to candidates in this cycle, with 55 percent going to Democrats. Top recipients include Sen. Kirsten Gillibrand (D-N.Y.), whose state includes many BAE employees, and Sen. Richard Burr (R-N.C.), a member of the intelligence, armed services and veteran affairs committees.

"The PAC supports candidates who demonstrate a commitment to the defense and security of our country, as well as science, technology, education and math," said Clark Dumont, BAE's vice president of communications.

Officials with other subsidiaries declined to comment or offered general defenses of their U.S. political and lobbying activities.

Steve Goldberg, a U.S. vice president for BASF, said the company's PAC "assesses candidates on the basis of their positions on key issues, relationship to BASF sites and standing on committees or congressional leadership positions of relevance to our business."

"The PAC is bipartisan and regularly supports candidates of both parties," Goldberg added.

Major global health-care companies are well represented at the top of the contributions list, including Novartis Corp. of Switzerland, Bayer Corp. of Germany and several British companies. Defense and energy companies such as Rolls-Royce, Siemens and EADS, the maker of Airbus jets, also rank high.

Rules governing PACs

The rules governing U.S. subsidiaries of overseas corporations are relatively clear. No foreign nationals can contribute to company PACs, nor can they be involved in deciding how the money gets allocated. Employees of U.S. subsidiaries are as free as any other citizens to participate in politics, including contributing to their employer's political committee.

Foreign-based companies employ more than 5 million Americans in a range of areas such as health care, defense and finance, including tens of thousands of Chrysler employees who now work for Italian automaker Fiat, according to federal data.

"Millions of Americans work for foreign-owned corporations, and I don't think anyone thinks they should have less rights than anyone else," said Stefan Passantino, a GOP campaign finance lawyer at McKenna Long & Aldridge.

But some unions and campaign finance watchdogs have long complained that the system does not do enough to guard against allowing foreign interests, including corporations with U.S. employees, to wield inordinate influence in Washington. They say an American employee in charge of a foreign-connected PAC will be well aware of the parent company's political and economic views - and will act accordingly.

"The bottom line is that those individuals are likely to be much more interested in the health of the global economy than in the guy who just lost his job in Zanesville, Ohio," said David Donnelly, director of Campaign Money Watch, which favors a public financing system for elections.

When Democrats unsuccessfully pushed this year for the Disclose Act, which would have required more disclosure of political donors and tightened restrictions on the political activities of foreign-based corporations, those companies were particularly alarmed by proposed language they said would outlaw their U.S.-run PACs. Their complaint led to early changes in the bill brokered by Rep. Chris Van Hollen (D-Md.) and Sen. Charles E. Schumer (D-N.Y.).

But the Organization for International Investment, a lobbying group representing U.S. subsidiaries of foreign corporations, remained opposed to the gist of the legislation, according to those involved in the debate. The bill was twice filibustered by Republicans in the Senate.

Nancy McLernon, president and chief executive of the U.S. subsidiaries group, said portions of the bill would have unfairly penalized U.S.-based companies with overseas parents. She also decried the growing political rhetoric aimed at foreign companies, including those with U.S. operations.

"It's very disappointing that in 2010, some politicians are still trying to do this us-versus-them that no longer exists," McLernon said. "We will be heading down the wrong path if we continue to put flags on these companies. Other countries are turning away from that."

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