Court upholds ban on corporate political contributions

U.S. Secretary of State Hillary Rodham Clinton and U.S. Navy Vice Adm. Harry B. Harris Jr. pay their respects during a ceremony at the Monument to the Heroic Defenders of Leningrad, in St. Petersburg, June 28, 2012.

NEW YORK (Reuters) - A federal appeals court has ruled that two Hillary Clinton supporters cannot use a controversial U.S. Supreme Court campaign-finance decision to battle accusations they illegally funneled donations to Clinton's campaign coffers.

In a decision on Thursday, the U.S. Court of Appeals for the 4th Circuit found that a district court judge erred when he relied on the Supreme Court's 2010 Citizens United decision to dismiss one count of federal election law violations against William Danielczyk Jr. and Eugene Biagi.

The men formerly were officers with Galen Capital Group LLC and Galen Capital Corporation, two investment banks. They were indicted last year on charges that they used Galen funds to reimburse people more $186,000 in contributions to Clinton's 2006 Senate race and 2008 presidential campaign.

One charge in the indictment alleged that Danielczyk and Biagi had violated the federal election law that makes it illegal for corporations to make direct contributions to political candidates. In May, U.S. District Judge James Cacheris in Alexandria, Virginia, ruled that count unconstitutional.

In his opinion, Judge Cacheris relied on the 2010 Supreme Court decision, Citizens United v. Federal Election Commission, which struck down a ban against corporate "independent expenditures" to elect or defeat of a candidate. "The First Amendment does not allow political speech restrictions based on a speaker's corporate identity," the high court held.

Judge Cacheris found that under Citizens United, it stood to reason that corporations should be able to make direct contributions like human beings since both are entitled to equal political speech rights.

But a three-judge panel for 4th Circuit disagreed. Judge Roger Gregory, who authored the decision, wrote that the logic of Citizens United did not extend to direct contributions.

"Leaping to this conclusion ignores the well-established principle that independent expenditures and direct contributions are subject to different government interests," wrote Judge Gregory.

Jeffrey Lamken, an attorney for Danielczyk, and Lee Goodman, an attorney for Biagi, did not return calls seeking comment.

The case is U.S. v. Danielczyk, U.S. Court of Appeals for the 4th Circuit, No. 11-4667.

(Reporting by Andrew Longstreth; Editing by Lisa Shumaker)