FEC decision may allow more foreign money in U.S. votes, critics say

NEW YORK (Reuters) - The Federal Election Commission has declined to investigate the funding of a campaign to defeat a Los Angeles County ballot initiative by an international conglomerate, raising fears among campaign finance reform advocates that foreign funds may flood into U.S. elections.

The 2012 ballot initiative required adult film stars to wear condoms while filming movies.

After the initiative passed, a California HIV-AIDS advocacy group filed a complaint charging that $327,000 in donations made by two pornography distributors tied to Manwin International SARL, a global pornography and advertising firm, violated the Federal Election Campaign Act, which prohibits foreign nationals from donating to U.S. campaigns.

The FEC’s three Democratic commissioners, including Chairwoman Ann Ravel, voted to investigate the source of the funds and assess whether or not to fine the California committee that opposed the ballot measure for accepting the funds, according to documents released on Thursday.

But the FEC’s three Republican commissioners voted not to pursue an investigation, agreeing with the FEC’s Office of the General Counsel that the ban on foreign donations does not apply to local ballot initiatives.

A deadlock at the FEC, a common occurrence, means that no probe will ensue.

Democratic Commissioner Ellen Weintraub told Reuters the decision could open the door to more foreign money in U.S. votes.

“Imagine, for example, a foreign billionaire who was dissatisfied with U.S. immigration policy and decided to try to change it more to his own liking, one statewide ballot measure at a time,” Weintraub said.

Republican members of the commission were not immediately available for comment.

Manwin International was founded by Fabian Thylmann, a German-born software engineer who became famous for consolidating massive amounts of pornography online and turning a profit, even on free “tube” sites.

In October 2013 Thylmann sold his stake in the company, then the world’s largest adult entertainment operator. It subsequently changed its name to MindGeek.

Craig Holman of Public Citizen, a reform group, said the FEC deadlock on banning foreign money in U.S. elections raises concerns that foreign influence in American candidate and ballot measure campaigns could rise.

“The ‘dark money’ phenomenon that has flooded elections since the 2010 Citizens United decision has made it easy for foreign interests to secretly launder money into candidate elections,” he said.

“The unwillingness of the FEC to enforce the law in ballot measure campaigns, even when the influence of foreign money is in the open, makes our elections open season for foreign intervention.”

(Corrects third paragraph to show that the 2012 ballot initiative had passed)

Editing by Alan Crosby