Amended  IN  Assembly  May 02, 2022

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Assembly Bill
No. 1819

Introduced by Assembly Member Lee
(Coauthor: Assembly Member Kalra)
(Coauthor: Senator Wieckowski)

February 07, 2022

An act to amend Section 85320 of, and to add Section 82007.5 to, the Government Code, relating to the Political Reform Act of 1974.


LEGISLATIVE COUNSEL'S DIGEST


AB 1819, as amended, Lee. Political Reform Act of 1974: contributions and expenditures by foreign-influenced business entities.
The Political Reform Act of 1974 prohibits a foreign government or foreign principal from making any contribution, expenditure, or independent expenditure in connection with the qualification or support of, or opposition to, a state or local ballot measure or an election for a state or local office. The act prohibits a person or committee from soliciting or accepting a contribution from a foreign government or foreign principal for the same purposes. The act makes a violation of these prohibitions a misdemeanor.
This bill would expand these prohibitions to include contributions, expenditures, or independent expenditures made by a foreign-influenced business entity, as defined, in connection with an election or ballot measure. The bill would require a business entity that makes a contribution, expenditure, or independent expenditure to file with the filing officer and the applicable candidate or committee a statement of certification, signed by the entity’s chief executive officer under penalty of perjury, avowing that the entity was not a foreign-influenced business entity on the date the contribution, expenditure, or independent expenditure was made. The bill would prohibit a person who receives funds from a business entity from using those funds for purposes of a contribution, expenditure, or independent expenditure in connection with a ballot measure or election unless the person receives a copy of the statement of certification from the business entity.
By creating a new crime and expanding the scope of an existing crime, the bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
The Political Reform Act of 1974, an initiative measure, provides that the Legislature may amend the act to further the act’s purposes upon a 2/3 vote of each house of the Legislature and compliance with specified procedural requirements.
This bill would declare that it furthers the purposes of the act.
Vote: 2/3   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

The people of the State of California do enact as follows:


SECTION 1.

 (a) This act shall be known, and may be cited, as the “Stop Foreign Influence in California Elections Act.”
(b) The Legislature finds and declares all of the following:
(1) The State of California welcomes immigrants, visitors, and investors from around the world. However, its elections should be decided by the people of California and not by foreign investors or the business entities over which they exert influence.
(2) The United States Securities and Exchange Commission, major capital investors, corporate managers, and corporate governance experts broadly agree that ownership or control of one percent or more of shares can confer substantial influence on corporate decisionmaking. For similar reasons, ownership or control of five percent of shares by multiple foreign investors can affect corporate decisionmaking.
(3) Corporations with partial foreign ownership have been spending money to influence state and local elections in California and around the country.
(4) Investors are the ultimate beneficiaries of corporate interests. According to the California Court of Appeal, “it is the shareholders who own a corporation, which is managed by the directors” and “when a corporation is solvent, it is the shareholders who are the residual claimants of the corporation’s assets.” Berg & Berg Enter., LLC v. Boyle (2009) 178 Cal.App.4th 1020, 1039. Where part of the shareholders’ equity is attributable to foreign investors, spending corporate treasury funds on California elections means spending the equity of foreign entities on California elections.
(5) Corporations and similar entities have a fiduciary responsibility to their shareholders, including investors around the world, and generally prioritize the interests of such shareholders, which may diverge substantially from the interests of the people of California and the United States.
(6) The United State States government has concluded that Russia, China, Iran, and other foreign actors are engaged in ongoing campaigns to undermine democratic institutions, as set forth in the joint statement “Combating Foreign Influence in US Elections,” issued by the Office of the Director of National Intelligence, United States Department of Justice, Federal Bureau of Investigation (FBI), and Department of Homeland Security on October 19, 2018.
(7) The FBI has concluded that foreign influence activities include “criminal efforts to suppress voting and provide illegal campaign financing,” as set forth in FBI Director Christopher Wray’s press briefing on election security on August 2, 2018.
(8) Aside from active measures by hostile intelligence services, the explicit or implicit influence of major foreign investors subjects corporate decisionmaking to foreign influence as executives consider interests of foreign investors. Domestic corporate political spending by such corporations threatens democratic self-government.
(9) The United States Congress and the United States Supreme Court have recognized the need to protect American elections from foreign influence through the ban on contributions and expenditures by foreign nationals imposed by 52 U.S.C. Sec. 30121 and upheld by the Supreme Court in Bluman v. Federal Election Commission (D.D.C. 2011) 800 F.Supp.2d 281, aff’d. (2012) 565 U.S. 1104.
(10) Current law does not adequately protect against foreign interference through corporate political spending by United States corporations with significant foreign ownership, as explained by Federal Election Commissioner Ellen Weintraub in their May 22, 2019, written testimony to the United States House of Representatives Committee on Oversight and Reform’s Subcommittee on National Security.
(11) Political spending by foreign-influenced corporations can weaken, interfere with, or disrupt California’s democratic self-government and the trust that the electorate has in its elected representatives.
(12) To protect the integrity of California’s democratic self-government, it is necessary to prevent foreign-influenced business entities from influencing California elections through political spending.

SEC. 2.

 Section 82007.5 is added to the Government Code, to read:

82007.5.
 “Chief executive officer” means the highest-ranking officer or decisionmaking individual with authority over a business entity’s affairs.

SEC. 3.

 Section 85320 of the Government Code is amended to read:

85320.
 (a) A foreign government, foreign principal, or foreign-influenced business entity shall not make, directly or through any other person, a contribution, including a contribution to a committee, expenditure, or independent expenditure in connection with the qualification or support of, or opposition to, any state or local ballot measure or in connection with the election of a candidate to state or local office.
(b) (1) Within 7 seven days after making a contribution, expenditure, or independent expenditure, a business entity shall file with the filing officer and the candidate or committee to which or for which the contribution or expenditure is made a statement of certification, signed by the chief executive officer of the business entity under penalty of perjury, avowing that, after due inquiry, the business entity was not a foreign-influenced business entity on the date the contribution or expenditure was made.
(2) (A) For purposes of the statement of certification, a business entity shall ascertain beneficial ownership in a manner consistent with the requirements of the Corporations Code or, if the business entity is registered on a national securities exchange, as set forth in Sections 240.13d-3 and 240.13d-5 of Title 17 of the Code of Federal Regulations.
(B) Upon request of the recipient, a business entity shall also provide a copy of the statement of certification to any other candidate or committee to which the business entity provides a contribution.
(c) (1) A person or a committee shall not solicit or accept a contribution from a foreign government, foreign principal, or foreign-influenced business entity in connection with the qualification or support of, or opposition to, any state or local ballot measure or in connection with the election of a candidate to state or local office.
(2) For purposes of paragraph (1), a person or committee may rely in good faith on a statement of certification pursuant to subdivision (e).
(d) (1) A person who receives a contribution or donation from a business entity shall not use that contribution or donation, directly or indirectly, to make a contribution, expenditure, or independent expenditure in connection with a ballot measure or election, or to contribute, donate, transfer, or convey funds to another person for purposes of making a contribution, expenditure, or independent expenditure in connection with a ballot measure or election, unless the person also receives from the business entity a copy of the statement of certification described in subdivision (b) and complies with the other requirements of this title.
(2) A person who uses a contribution or donation from a business entity for the purposes described in paragraph (1) shall separately designate, record, and account for the funds and ensure that disbursements for the purposes described in paragraph (1) are made only from funds that comply with the requirements of this section.
(e) For purposes of subdivisions (c) and (d), a person soliciting or receiving a contribution may rely in good faith on a statement of certification that meets the requirements of this section.
(f) For the purposes of this section, the following terms have the following meanings:
(1) “Foreign principal” includes all of the following:
(A) A foreign political party.
(B) A person outside the United States, unless either of the following is established:
(i) The person is an individual and a citizen of the United States.
(ii) The person is not an individual and is organized under or created by the laws of the United States or of any state or other place subject to the jurisdiction of the United States and has its principal place of business within the United States.
(C) A partnership, association, corporation, organization, or other combination of persons organized under the laws of, or having its principal place of business in, a foreign country.
(D) A domestic subsidiary of a foreign corporation if the decision to contribute or expend funds is made by an officer, director, or management employee of the foreign corporation who is neither a citizen of the United States nor a lawfully admitted permanent resident of the United States.
(E) A business entity in which a foreign principal, as defined in subparagraph (A), (B), or (C), or a foreign government holds, owns, controls, or otherwise has directly or indirectly acquired beneficial ownership of equity or voting shares in an amount that is equal to or greater than 50 percent of the total equity or outstanding voting shares.
(2) “Foreign-influenced business entity” means a business entity in which any of the following occur:
(A) A single foreign principal holds, owns, controls, or otherwise has direct or indirect beneficial ownership of one percent or more of the total equity, outstanding voting shares, membership units, or other applicable ownership interests of the entity.
(B) Two or more foreign principals, in aggregate, hold, own, control, or otherwise have direct or indirect beneficial ownership of equity or voting shares in an amount that is equal to or greater than 5 percent of the total equity, outstanding voting shares, membership units, or other applicable ownership interests of the entity.
(C) One or more foreign principals participate in any way, directly or indirectly, in the business entity’s decisionmaking process with respect to contributions or expenditures of funds in connection with a ballot measure or election.
(g) (1) This section does not prohibit a contribution, expenditure, or independent expenditure made by a lawfully admitted permanent resident.
(2) This section does not prohibit a business entity from sponsoring a sponsored committee, as defined in Section 82048.7, nor does it require a statement of certification from the sponsor solely due to the activities described in Section 82048.7.
(h) Any person who violates this section shall be guilty of a misdemeanor and shall be fined an amount equal to the amount contributed or expended.

SEC. 4.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.

SEC. 5.

 The Legislature finds and declares that this bill furthers the purposes of the Political Reform Act of 1974 within the meaning of subdivision (a) of Section 81012 of the Government Code.