New court filings confirm that Wisconsin's John Doe campaign finance investigation hinges on how state election law treats "issue ad" groups coordinating with political campaigns, shedding new light on a Republican effort to quietly change the law in advance of Governor Scott Walker's reelection campaign.

SB 654 [3], quietly introduced earlier this month by Senate Majority Leader Scott Fitzgerald, who is reportedly [4] under investigation in the John Doe probe, would reverse judicial precedent and declare that "issue ads" cannot be considered a candidate contribution. Those changes, if enacted, would conform Wisconsin statutes to Wisconsin Club for Growth's arguments in the John Doe case, and legalize the conduct under investigation in time for statewide elections later this year.

Prosecutors: "Issue ads" Become Contribution if Coordinated With Candidate

Prosecutors in the John Doe -- which operates like a grand jury, but in front of a judge -- have been investigating coordination during the 2011 and 2012 recall elections between candidate campaigns (including Scott Walker's campaign) and independent groups like Wisconsin Club for Growth (WCFG) and Citizens for a Strong America. Those groups ran "issue ads," thinly-veiled election communications that stop short of expressly calling for the election or defeat of a candidate.

As the Center for Media and Democracy exclusively reported in January [5], even though Wisconsin's campaign finance statutes do not specifically mention "issue ads," Wisconsin courts have held that issue ads can be considered a candidate contribution, if run in coordination with a campaign. A group running coordinated issue ads would be violating election law if these "contributions" exceeded donation limits and were not reported to the state elections board.

New filings verify that this is the theory prosecutors are pursuing in the John Doe.

"The fact that a third party runs 'issue ads' vs. 'express advocacy ads' is not a defense to illegal 'coordination' between a candidate's authorized committee and third party organizations," lawyers for John Doe prosecutor Francis Schmitz and members of the Milwaukee County District Attorney's Office wrote in a brief filed in federal court March 13.

"By operation of law, any person coordinating with or acting at the request or suggestion of a candidate or his committee is deemed...subject to all campaign finance contribution prohibitions, limitations and disclosure requirements applicable to the candidate's (campaign) committee," they wrote.

WCFG, which is challenging the probe in both state and federal courts, argues that the statutes' lack of detail on issue ads bars the investigation.

A "John Doe" probe operates under strict secrecy orders, but court filings made public as part of those challenges have shed new light on the inquiry.

A redacted but still viewable section of another court document, a federal court filing from Special Prosecutor Dean Nickel, shows that the judge overseeing the John Doe probe is sympathetic to WCFG's view. In early January, Judge Gregory Peterson quashed subpoenas issued to WCFG, Citizens for a Strong America, and the Walker campaign on grounds that the statutes do not explicitly address coordination between campaigns and issue ad groups. However, two weeks later, Judge Peterson stayed his own order, writing that the state's theory "is an arguable interpretation of the statutes" and asking that an appellate court resolve the dispute.

The filings provide further evidence that the John Doe probe -- and the challenges to it -- hinges on how Wisconsin campaign finance statutes are interpreted.

Republicans are seeking to amend those same statutes in a bill pending before the Wisconsin Senate. That bill, SB 654, was introduced in the final weeks of the legislative session, with the John Doe investigation actively underway, and with major state elections taking place later this year.

GOP Bill Would Change Law at Issue in John Doe

SB 654 [3], introduced on March 3, would change the definition of "political purpose" under Wisconsin law to reverse judicial precedent and declare that "issue ads" cannot be considered a candidate contribution. Those changes, if enacted, would conform Wisconsin statutes to Wisconsin Club for Growth's arguments in the John Doe case.

In the 1999 Wisconsin Coalition for Voter Participation v. State Election Board [6] decision, the Wisconsin Court of Appeals held that, as is the case under federal law, Wisconsin law counts issue ad "expenditures that are 'coordinated' with, or made 'in cooperation with or with the consent of a candidate'... as campaign contributions." Prosecutors are relying on this case in the John Doe investigation.

Key to the court's decision in Wisconsin Coalition for Voter Participation was the broad definition of "political purpose" under Wisconsin law. Contributions under Wisconsin law are defined as anything of value given for a "political purpose." Because the definition of "political purpose" included all acts made "for the purpose of influencing the election," the Court held that this definition could encompass issue ads, and that issue ads coordinated with a candidate can be a contribution.

SB 654, though, would add a new provision to Wisconsin statutes excluding issue ads from the definition of "political purpose."

If issue ads cannot ever be made for a "political purpose," they cannot be considered a contribution, thereby reversing Wisconsin Coalition for Voter Participation and permitting issue ad groups to coordinate with candidates.

"It is really an extraordinary step to exclude issue ads from coordination rules," Paul S. Ryan, Senior Counsel with the Campaign Legal Center, told CMD.

The bill's sponsor and Elections Committee chair, Sen. Mary Lazich, insisted that the bill merely "codifies" existing law. The bill's other sponsor, Senate Majority Leader Scott Fitzgerald, is reportedly [4] under investigation in the John Doe probe.

Introduced late on a Monday and quickly scheduled for a hearing on Wednesday, the press and public were given zero time to assess SB 654. Attention focused exclusively on the bill's impact on issue ad disclosure; none of the individuals testifying in the March 5 hearing, and none of the articles written about the legislation so far, noted the bill's impact on the definition of candidate contributions or discussed how it would overturn Court of Appeals precedent.

However, the press did notice that the rushed manner in which Republicans have tried to enact the legislation didn't pass the smell test.

"What's most offensive is [the bill's] late unveiling and speedy hearings that are designed to dodge public scrutiny," noted a Wisconsin State Journal editorial.

Law Would Take Effect for Scott Walker's Reelection Campaign

If enacted, the legislation would not necessarily stop the John Doe probe. It would, however, legalize the conduct under investigation in the John Doe for state elections later this year -- including Scott Walker's hotly-contested reelection campaign.

This means that the Walker campaign could work hand-in-glove with an "issue ad" group like Wisconsin Club for Growth, which can accept secret, unlimited donations.

"The proposed policy change is a horrible one," the Campaign Legal Center's Ryan told CMD. "It would pose a serious threat of corruption in Wisconsin politics, and open the door wide to unlimited and undisclosed political expenditures."

As CMD has previously pointed out [5], allowing coordinated issue ads could undermine campaign finance and disclosure laws, since a multi-million-dollar donation to Wisconsin Club for Growth would have almost the same value as a donation directly to Walker -- with the same opportunity for corruption, and the same problems with the press and the public not knowing about the true source of the donations. Because a donation to a candidate-aligned issue ad group would not be publicly disclosed, the public would be unable to track whether the donation resulted in favorable treatment.

"The proposition that only express advocacy is subject to [laws barring] coordination is very dangerous," Ryan said.

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This article has been updated.