Nonprofit Groups Exchange Legal Blows in Disclosure Battle

January 17, 2013; Source: Wall Street Journal

Here is one of the reasons that some industry advocates fought the Dodd-Frank Wall Street Reform and Consumer Protection Act: via the law’s Cardin-Lugar Amendment, it requires disclosure of payments to foreign governments by gas, mining and oil companies. Now, two nonprofit groups representing industry interests—the American Petroleum Institute (API) trade association and the U.S. Chamber of Commerce—have filed a lawsuit arguing that the Securities and Exchange Commission (SEC), in the paraphrasing of the Wall Street Journal, “went beyond its authority when adopting the rule, ignor[ed] companies’ suggestions for limiting its costs, and…violate[d] the First Amendment as well as Congressional intent.”

That’s more or less throwing the whole kitchen sink at the provision, no? Meanwhile, another nonprofit, Oxfam America, which originally brought a lawsuit to help ensure that the SEC would implement this Dodd-Frank rule, argues that the SEC policy enables people to track where gas, mining and oil money is going in these often-volatile markets. As for the First Amendment point, Oxfam argues, “There is simply no constitutional right to keep payments to foreign governments secret.”

It remains to be seen what will happen in the courts, but so far it appears that Congress is siding with Oxfam. Sen. Ben Cardin (D-Md.), Sen. Carl Levin (D-Mich.) and former Sen. Richard Lugar (R-Ind.) filed a brief in the case stating that congressional intent was to mandate exactly the type of disclosure that API and the Chamber are fighting against. The senators wrote, “In making no provision for exemptions, the SEC acted consistent with the statutory language and purpose. On its face, the statute makes no provision for exemptions.”

The senators go on to question the overarching rationale for the industry groups’ legal challenge: “There is nothing in the Cardin-Lugar Amendment that requires anything other than garden variety disclosure of factual, financial information by SEC issuers to the public.”

Last week, the U.S. State Department also stood behind the provision, stating, “Corruption and mismanagement of these resources can impede economic growth, reduce opportunities for U.S. trade and investment, divert critically-needed funding from social services and other government activities, and contribute to instability and conflict.” From our vantage point, these industries have seemingly responded to Dodd-Frank with something of an Okay, but where’s our loophole? approach. To their chagrin, it just may be that, in this case, there is no loophole. –Mike Keefe-Feldman