A Campaign Finance Law Conundrum
Seth D. Uram has been a federal prosecutor for seventeen years and in 2006 prosecuted the first individual convicted under FECA’s enhanced anti-conduit provision. Mr. Uram, with permission, borrowed extensively from materials created by the Department of Justice’s Public Integrity Section in writing this article.
The conundrum. It’s Monday morning, you are contemplating your twentieth consecutive 70-hour work week as a first-year associate, and you receive the following e-mail from the founding partner of your firm:
“To all attorneys, paralegals, and support staff:
A former senior partner of the firm is running for the United States Senate. I have agreed to be her campaign finance chairperson. I expect everyone in the firm wants to contribute $2,300 to this candidate. If anyone cannot afford $2,300, the firm will reimburse them by issuing a $2,300 bonus check (net after payroll tax deductions) at the end of the quarter.”
What do you do? What can you do without violating federal campaign finance law? Before making a decision, you decide a brief review of campaign finance law is in order.
Campaign finance law overview. A political contribution is a gift of anything of value that is given to influence a federal election. The Federal Election Campaign Act of 1971 (FECA), which regulates the financing of federal elections, limits individual contributions to a federal candidate to $2,300 during the current election cycle.
Federal campaign finance laws are designed to minimize the corrupting influence of money in politics and on elections. They do this by limiting the size of contributions, by prohibiting contributions from entities that have historically attempted to exert potentially corrupting influence on federal elections, and by imposing strict disclosure requirements on politicians, their campaigns, and their political parties.
The list of entities prohibited from making contributions is long and reflects entities that have a history of abusing funds to improperly influence elections or a general concern that contributions from entities are inappropriate, or both. The prohibited entities include corporations, labor unions, national banks, government contractors, and foreign nationals. In 2002, FECA was substantially amended by the Bipartisan Campaign Reform Act, which eliminated loopholes relating to “soft money” and “issue ads” and enhanced the criminal penalties for FECA crimes.
Campaign finance crimes. All criminal violations of federal campaign finance laws require proof beyond a reasonable doubt that the violator acted knowingly and willfully in violation of the laws, which means that the violator knew what the law required or prohibited but acted contrary to the law. This level of criminal intent is also sometimes described as the intentional violation of a known legal duty. Most significant federal campaign finance crimes are now felonies with potentially lengthy periods of imprisonment and substantial fines.
The contribution prohibition an associate is most likely to encounter concerns contributions through conduits, which is one of FECA’s most frequently violated prohibitions. Pursuant to 2 U.S.C. § 441f, it is unlawful for any person to make a contribution in the name of another or for any person to permit his or her name to be used to make such a contribution. The anti-conduit section also prohibits any person, most importantly the candidate himself or herself or his or her campaign representatives, from knowingly accepting a contribution made by one person in the name of another.
Conduit contributions typically occur in two settings. The first is the fundraising event, where a supporter of a candidate recruits friends, family, and business associates to attend the $2,000-a-plate “rubber chicken” dinner that is typically followed by a speech from the candidate and photographs with the candidate. Each conduit usually buys the event ticket with his or her own check or credit card, and then the political supporter immediately reimburses each conduit. The supporter sometimes lays the groundwork for a defense to a criminal charge by calling the reimbursement a loan for which he or she has no actual intention of seeking repayment.
The second common conduit setting occurs in a business office. Law firms are fertile ground for this conduct because lawyers are often the most politically active members of the business community. Associates may very well find themselves in the above situation being asked to contribute to a campaign. As many law firms are incorporated, reimbursement of employee contributions from the firm’s general operating account or payroll account violates the prohibition against corporate contributions.
Because conduit schemes attribute contributions to the wrong individuals, the financial disclosure reports each candidate must file (usually quarterly) with the Federal Election Commission will be false. This means participants in the scheme and campaign officials who know about the scheme can be charged with causing a materially false statement to be made to a federal agency in violation of 18 U.S.C. § 1001. Moreover, conduit crimes sometimes result in federal charges against violators that allege conspiracy to defraud the United States.
The right answer. Despite the pressures inherent in the founding partner’s e-mail, a prudent associate will decline the opportunity to be reimbursed by the law firm for making a contribution to the Senate campaign of the former partner. If the founding partner uses law firm funds to reimburse law firm personnel for contributions, the founding partner would subject himself, the law firm, and the candidate’s campaign committee to criminal liability for violating FECA’s anti-conduit provision. And, each individual in the law firm who agreed to be reimbursed will potentially subject himself or herself to criminal liability because almost all federal campaign committees require contributors to sign a statement attesting that the funds they are contributing are their own funds and do not come from a third party. As a result, even if an associate or a paralegal at the law firm did not know about FECA’s anti-conduit provision before making the contribution, their signatures on the anti-conduit statement supply the knowledge necessary to commit a criminal violation.