District attorney's wife drove case against Wis. Gov. Walker, insider says

CHICAGO - The future of the Wisconsin’s governor’s race could hang on a federal appeals court in Chicago hearing a potentially explosive case today.

Depending on how the three-judge panel of the U.S. Court of Appeals for the Seventh Circuit decides, the ruling will have major impact on the scope of political speech, the role of voter’s donations in politics, and the fate of Wisconsin Gov. Scott Walker, a 2016 Republican presidential hopeful.

The governor’s race is virtually tied, according to recent polls, and the court’s ruling may move undecided voters. The investigation, critics say, has paralyzed conservative advocacy in Wisconsin, giving an advantage to unions when Gov. Walker is locked in a tight re-election race against Democrat Mary Burke.

Gov. Walker, a Republican, is at the center of a sweeping and secretive four-year criminal investigation by Milwaukee District Attorney John Chisholm, a Democrat, and other prosecutors, that is now focused on alleged "illegal coordination" of campaign funding by the governor and 29 independent nonprofits -- virtually the entire conservative movement in Wisconsin.

Those conservatives say that the long-running criminal investigation has unconstitutionally prevented them and their allies from participating in politics and tilted the political field to favor Democrats, whose campaign practices are almost identical to the Republicans' but largely ignored by the prosecutors. The probe, conservatives say, has forced them to pay hundreds of thousands of dollars in legal bills and harassed some of them with pre-dawn raids on their suburban homes that seized cell phones and computers of all family members, including a child’s iPad. Prosecutors imposed “gag orders” to prevent the investigation’s targets from publicly complaining.

Wisconsin Republicans, and some Democrats in Washington, contend that the Democratic district attorney is distorting campaign finance laws to criminalize ordinary politics.

The district attorney and some campaign-finance experts say that Wisconsin has long had some of the nation’s toughest campaign-finance laws and those laws bar outside groups from working together with a candidate’s campaign.

A federal judge in Milwaukee recently halted the district attorney’s investigation, finding that the conduct of Gov. Walker’s political allies is actually legal. U.S. District Court Judge Rudolph Randa found that the investigation is contrary to both Wisconsin law and the U.S. Constitution’s First Amendment.

The prosecutors' appeal of judge Randa's ruling will be heard today. This marathon legal battle may well end up at the U.S. Supreme Court.

The case began in 2009 when then-Milwaukee County Executive Walker's staff uncovered that $11,242.24 had apparently been embezzled from a county charity. Walker’s staff asked the district attorney for a criminal investigation.

While the thief was ultimately convicted, District Attorney Chisholm took the opportunity to focus his investigation mainly on Walker’s personal staff.

Walker’s team would not learn of the secret investigation for more than a year, when Walker was first campaigning for governor in 2010. Walker's then-chief of staff, the late Tom Nardelli, learned that Chisholm’s staff had won a court order in May 2010 to start a secretive "John Doe" probe into the "origin" of the allegedly embezzled $11,242.24.

A "John Doe" is a legal proceeding under Wisconsin law that allows prosecutors, with a judge’s approval, to require complete secrecy from any one involved. This “gag order” provision, almost unique in American law, effectively disables targets or witnesses from publicly defending themselves or responding to damaging leaks.

Nardelli wrote a letter to Chisholm in 2010, evincing suspicion of the investigation. The "origin" of the missing money was already known - the question was where had it gone — and the case seemed like small potatoes for a John Doe proceeding. "Again, John, why is this a secret John Doe?" wrote Nardelli. Noting that Walker's office had requested an ordinary investigation of the apparent theft, he added: "Why are you going this route? What is the motive?"

Nardelli's implication was that Chisholm's people were improperly digging for dirt on Walker or his staff in an election year. Chisholm denied this.

Meanwhile, Walker became a national figure in 2011, when his “Budget Repair” bill cut state spending and sharply curbed public employee unions — perhaps the biggest reversal of public union power in U.S. history. Conservatives were delighted and liberals alarmed.

Now a longtime Chisholm subordinate reveals for the first time in this article that the district attorney may have had personal motivations for his investigation. Chisholm told him and others that Chisholm’s wife, Colleen, a teacher’s union shop steward at a school in St. Francis, which is near Milwaukee, had been repeatedly moved to tears by Walker's anti-union policies in 2011, according to the former staff prosecutor in Chisholm’s office. Chisholm said in the presence of the former prosecutor that his wife "frequently cried when discussing the topic of the union disbanding and the effect it would have on the people involved ... She took it personally."

Citing fear of retaliation, the former prosecutor declined to be identified and has not previously talked to reporters.

Chisholm added, according to that prosecutor, that "he felt that it was his personal duty to stop Walker from treating people like this."

Chisholm was referring to Gov. Walker's proposal - passed by the legislature in March 2011 - to require public employee unions to contribute to their retirement and health-care plans for the first time and to limit unions’ ability to bargain for non-wage benefits.

Chisholm said his wife had joined teachers union demonstrations against Walker, said the former prosecutor. The 2011 political storm over public unions was unlike any previously seen in Wisconsin. Protestors crowded the State Capitol grounds and roared in the Rotunda. Picketers appeared outside of Walker’s private home. There were threats of boycotts and even death to Walker’s supporters. Two members of the Wisconsin Supreme Court almost came to blows. Political ad spending set new records. Wisconsin was bitterly divided.

Still, Chisholm's private displays of partisan animus stunned the former prosecutor. "I admired him [Chisholm] greatly up until this whole thing started," the former prosecutor said. "But once this whole matter came up, it was surprising how almost hyper-partisan he became ... It was amazing ... to see this complete change."

The culture in the Milwaukee district attorney’s office was stoutly Democratic, the former prosecutor said, and become more so during Gov. Walker’s battle with the unions. Chisholm "had almost like an anti-Walker cabal of people in his office who were just fanatical about union activities and unionizing. And a lot of them went up and protested. They hung those blue fists on their office walls [to show solidarity with union protestors] ... At the same time, if you had some opposing viewpoints that you wished to express, it was absolutely not allowed."

Asked to respond to the former prosecutor's allegations, Samuel Leib, Chisholm's private lawyer, said that they amount to a "baseless character assault" that "is inaccurate in a number of critical ways." He provided no specifics. He added that "John Chisholm’s integrity is beyond reproach" and sent a 2012 article signed by a Republican retired judge and six others expressing confidence in Chisholm's impartiality and honesty.

As the governor’s showdown with public unions wound down, Chisholm’s probe grew. Prosecutors successfully petitioned the "John Doe judge," Barbara Kluka, some 18 times to enlarge the investigation's scope, as Chisholm's assistants kept citing new leads for potential offenses ranging from bid-rigging to sexual misconduct.

This first John Doe investigation of Walker led to convictions of six people for what federal judge later called "a variety of minor offenses" that did not implicate Walker. A second investigation, focusing on campaign finance, began in August 2012.

One of the biggest champions of Walker’s legislation curbing public unions was 59-year-old Eric O'Keefe. He said Walker’s budget laws are "the most important state reform in this country because it revives local control of local government, undoing half a century of centralization."

So O'Keefe threw himself into the battle as chief strategist and fundraiser for the Wisconsin Club for Growth, a nonprofit advocacy group. The Club raised $12 million in 2011 and $8 million in 2012, spending about half of those sums on "issue ads" supporting the budget bill and giving the rest to allied groups, some of which O'Keefe says aired their own issue ads.

Chisholm’s raids on Walker's office - one of them on the eve of the November 2010 election in which he won the governorship - and other investigative moves put into the hands of the Democratic district attorney thousands of pages of sensitive communications between Walker, his staff, Republican leaders, activists and contributors. Some of those documents soon appeared in the press.

After the anti-union legislation became law, unions pushed for recall elections to unseat several state senators in 2011 and 2012, and ultimately to oust Walker himself. He ended up being the first governor in U.S. history to win a recall election, on June 5, 2012.

Two months later, Chisholm's assistant district attorneys drew on the trove of confidential information collected in the first John Doe investigation of Walker to launch a second, larger one, this time into suspected campaign-finance violations before and during Walker's 2012 recall campaign.

They obtained sweeping subpoenas for records from at least eight phone companies and records from every major private email provider including Google and Yahoo, ultimately amassing hundreds of thousands of pages on the activities of every major conservative group in Wisconsin and many around the country, as well as of Walker and his team. They seized documents from people’s offices and homes.

Armed officers raided the homes of Walker’s supporters across the state, using bright floodlights to illuminate the targets' homes. Deputies executed the search warrants, seizing business papers, computer equipment, phones, and other devices, while their targets were restrained under police supervision and were denied the ability to contact their lawyers.

At other times, the prosecutors jailed at least two witnesses "who did not possess the information they sought" and "blanketed conservative activists nationwide with [more than 100] invasive subpoenas," according to court filings.

In the process, Chisholm began targeting the governor’s outside supporters, including O'Keefe and the Club. They counterattacked with a federal civil rights lawsuit in February 2014, claiming that Chisholm’s probe was pretext for an "open-ended fishing expedition into Walker's office" and "a political vendetta."

O’Keefe filed suit against the wishes of Gov. Walker’s camp, which feared negative publicity during the governor’s campaign, according to a source with knowledge of the exchange.

While O'Keefe stresses that he is an "issues guy," not loyal to any political party, he does not deny that his ads were helpful to Walker and other GOP candidates.

The effect of Chisholm’s aggressive tactics, including the gag orders, say the Club and O'Keefe in court papers, has "virtually silenced one half of policy debate in Wisconsin" by paralyzing their targets' fundraising and political speech.

This, say the plaintiffs, has been the prosecutors' goal from the start, and explains their "harassment" of and threats to imprison conservative activists for "illegal coordination."

The plaintiffs add that "[l]iberal groups involved in the Wisconsin recall campaigns conducted precisely the same activities that [the prosecutors] have identified as justifying an investigation into conservative groups, but there is no John Doe investigation into these groups."

The prosecutors point out that the investigators are not all Democrats and have been assisted by a unanimous vote of the state's nonpartisan, six-member Government Accountability Board.

The prosecutors also point out that two Republican district attorneys opened related John Doe proceedings to help Chisholm enlarge his investigation's territorial scope and that of Francis Schmitz, a politically independent former federal terrorism prosecutor who was made Special Prosecutor and titular head of the investigation in August 2013, largely to counter conservative cries that it was a partisan vendetta.

Rivkin and other critics say that the Republican district attorneys have done little more than show professional courtesy to Chisholm; that he brought in Schmitz "to provide a veneer of impartiality," with no legal expertise in campaign-finance law; and that Chisholm still effectively runs the show.

Prosecutors ran into trouble in November when the longtime “John Doe” judge supervising the investigation suddenly recused herself, citing an undisclosed conflict of interest. Judge Kluka had approved every petition, subpoena, and search warrant the prosecutors sought over the past few years.

Kluka was replaced by retired Wisconsin Court of Appeals Judge Gregory Peterson, who in January quashed a number of subpoenas for failing to show "probable cause that [the targets] committed any violations of the campaign finance laws.”

Prosecutors have appealed Judge Peterson’s ruling to Wisconsin's appellate courts, which have not yet ruled. If Peterson’s decision stands, the judge said, it would effectively end the five-year investigation.

Moving on a parallel track in federal courts, O'Keefe and the Wisconsin Club for Growth launched their so-far successful federal civil rights suit against District Attorney Chisholm, his assistants Bruce Landgraf and David Robles, and Special Prosecutor Francis Schmitz. Their court papers accuse Chisholm and the others of using a frivolous and unconstitutional theory of "illegal coordination" to target and "silence political speech [they do] not like."

Chisholm and his colleagues lost that case in May, when Judge Randa issued his surprisingly strong opinion, rejecting the prosecutors’ legal theory that conservative activists had illegally coordinated with Walker's 2012 campaign as "simply wrong."

Even if the Club and other groups did collaborate closely with Gov. Walker in raising and spending money, Judge Randa found, they had a legal right to do so under both Wisconsin law and the U.S. Constitution.

The prosecutors had argued that coordinated issue ads are tantamount to a campaign contribution and thus subject to the laws limiting contributions and requiring disclosure of donors, even if they stop short of urging a vote for a candidate.

But, Judge Randa held, coordinated ads can constitutionally be regulated only if they contain "express advocacy" or its "functional equivalent." That's campaign-finance-law jargon for a clear appeal to vote for or against a specific candidate.

Flashing outrage at the investigators' pre-dawn raids by armed officers who carried off files and computers, cellphones, and more from the homes of conservative activists, Randa wrote that "attempts to purify the public square lead to ... the Guillotine and the Gulag."

In handing down his decision to temporarily halt the investigation, Judge Randa ruled that the prosecutors have no "reasonable expectation of obtaining a valid conviction."

Chisholm and his allies appealed to the federal Seventh Circuit in Chicago. The plaintiffs' high-powered, hard-charging Washington lawyer, David Rivkin and his team have squared off against the prosecutors'​ lawyers in their briefs and will do so in the oral argument today.

The prosecutors have argued in court papers that Randa's view of the law would allow candidates to exercise "direct control over millions of dollars of undisclosed corporate and individual contributions without limitation [and to urge allied nonprofit groups] to run overwhelming and negative advertising, while the candidate remains above the fray."

"At no time was such conduct illegal," attorney Rivkin responds in court papers. "And, if it were, perhaps the majority of politicians in Wisconsin and across the nation would be at risk of prosecution and conviction."

Indeed, Rivkin notes, in February 2012, "President Barack Obama's official campaign committee threw its support behind Priorities USA Action, a 'super PAC' supporting Democratic candidates ... [T]op campaign staff and even some cabinet members [would] appear at super PAC events, and they helped Priorities USA Action raise millions that it spent in support of Democratic candidates."

The outcome of the prosecutors' appeal is uncertain because the law in this area is still somewhat unsettled.

The vague rules of some states barring "illegal coordination" between candidates and independent groups are in tension with the U.S. Supreme Court's repeated emphasis that donors forfeit free-speech protections only if their ads are essentially campaign contributions, such as running television spots specifically endorsing a candidate or allowing the candidate to dictate content and timing.

The prosecutors vigorously defend their theory of illegal coordination, but do not deny the plaintiffs' assertion that "after years of investigation, [the prosecutors] have been unable to identify a single advertisement by the Club so much as referencing Governor Walker when he was a candidate."

And that fact alone may spell defeat for the prosecutors if the U.S. Supreme Court hears the case. Five of the justices have repeatedly found restrictions on issue ads offensive to free speech rights.

Champions of tough campaign finance restrictions are worried that a U.S. Supreme Court decision affirming Judge Randa would "eviscerate contribution limits and disclosure, leaving governments vulnerable to quid pro quo corruption," in the words of a friend-of-the-court brief filed with the Seventh Circuit by the liberal Brennan Center for Justice.

Bob Bauer, one of the nation's leading election law experts, counters that however valid the reformers' concerns may be, the Wisconsin investigation raises important constitutional and policy issues. "There are serious problems with the effort to prohibit or limit issue ad coordination," Bauer said. "I'm very wary of using the criminal law to enforce them."

Punishing coordination, Bauer said, would "drive apart natural allies who should be free to collaborate on common political goals.” As an example, he suggested that Planned Parenthood and the 2016 Democratic presidential nominee might want to pair their fundraising and ads for maximum effect, if it would help defeat an anti-abortion Republican candidate in 2016.

Since Bauer served as President Obama's White House Counsel, he cannot be discounted as a conservative partisan.

Urging donors to make large, anonymous, unregulated contributions to allied nonprofits that fund ads helpful to Republicans, as Gov. Walker has done, is too often presented by the press as scandalous, according to O’Keefe and other supporters of the governor.

When some secret court filings were unsealed on June 19, almost all major news outlets trumpeted the prosecutors' theory that Walker was at the center of a "criminal scheme" to channel big contributions through conservative groups to help him win his 2012 recall vote. They also headlined subsequently unsealed documents revealing that Gov. Walker had personally solicited wealthy donors, such as Donald Trump and Sheldon Adelson, to give large sums to the Club for television ads that would also benefit his own campaign.

The New York Times ran a front-page article highlighting prosecutors' claims of "an elaborate effort to illegally coordinate fundraising and spending between [Walker's] campaign and conservative groups." Buried in paragraphs 10 and 11 was the fact that both a federal judge and a state judge had ruled that the investigation should be shut down as legally groundless.

Amid the debate over whether it is Gov. Walker and conservative activists like O'Keefe - or Chisholm and his fellow prosecutors - who are corrupting Wisconsin politics, one issue emerges: Campaign finance laws designed by reformers to stop the corruption of American politics can take a toll on the freedom of speech. The question that the federal courts will decide is whether the benefits are worth the costs.

Editor's note: A previous version of this article misidentified the school at which Colleen Chisholm worked.