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FEC v. DEAR FOR CONGRESS (03CV2897)

On June 7, 2004, the parties solely, for the purpose of settling this case, stipulated that the court could enter a consent judgment, with the defendants neither admitting nor denying the findings included in the judgment. In the consent judgment, the U.S. District Court for the Eastern District of New York provided declaratory, injunctive, and monetary relief in favor of the Commission. The court decreed that one or more of the defendants violated the Federal Election Campaign Act's:

The court ordered Dear for Congress, Dear 2000 and Friends of Noah Dear to pay to the Commission all funds remaining in their accounts as of the date that the parties entered into the stipulated agreement, and the court ordered Abraham Roth, as treasurer, to pay a $45,000 civil penalty to the FEC. In addition, the court enjoined the defendants from committing further such violations of the Act.

Background

This complaint arose from FEC administrative Matters Under Review (MURs) 4935 and 5057. The Federal Election Campaign Act (the Act) limits the aggregate amount that a person may contribute to a federal candidate, and it prohibits any person from making a contribution in the name of another person and any person from knowingly accepting such a contribution. 2 U.S.C. §§441a(f) and 441f. The Act also bars corporations and unions from making contributions from treasury funds to influence a federal election and any person from knowingly receiving such a contribution. 2 U.S.C. §441b(a). Committees and their treasurers are also required to file timely and accurate campaign finance disclosure reports. 2 U.S.C. §§434(b)(4)(F), 434(b)(8) and 434(a)(6)(A). On May 1, 2003, the Commission found probable cause to believe that the defendants had violated these provisions of the Act, and it filed this suit after failing to reach a conciliation agreement with the defendants. 2 U.S.C. §§437g(a)(4)(A) and (a)(6)(A).

Court Complaint

On June 5, 2003, the Commission filed a complaint in the U.S. District Court for the Eastern District of New York against Dear for Congress, Inc., Dear 2000, Inc., Friends of Noach Dear '93 and these committees' treasurer Abraham Roth. The complaint alleged, among other things, that:

The Commission asked the court for a civil penalty, declaratory and injunctive relief and for the maximum civil penalty for each violation.

Mr. Dear was an unsuccessful House candidate in the 1998 New York primary, and Dear for Congress was his campaign committee. During the campaign, Dear for Congress and Mr. Roth accepted several sets of sequentially numbered money orders, purportedly from some 47 individuals, totaling approximately $40,000. However, the Commission alleged that Dear for Congress campaign staff executed at least some of these money orders. Several money orders were signed in the same handwriting, and many of the individuals whose names appear on the money orders deny making contributions to the committee or contributions via money order. Moreover, the Commission alleged that in accepting these contributions, Mr. Roth failed to comply with the statutory requirement to examine the legality of each of these facially irregular contributions. 2 U.S.C. §432(b)(1).

The Commission also alleged that during the 1998 election cycle, Dear for Congress and Mr. Roth accepted approximately $564,000 in excessive contributions and did not refund or redesignate the contributions within the 60-day period set by Commission regulations. 11 CFR 103.3(b)(3). Dear for Congress and Mr. Roth also accepted impermissible campaign contributions from several corporations, totaling about $12,000. Moreover, the committee and Mr. Roth had still not refunded approximately $200,000 in excessive contributions, and the complaint described a number of reporting violations by Dear for Congress and Mr. Roth, including falsely reporting refunds of impermissible contributions.

The complaint further alleged that Mr. Dear's nonfederal campaign committee made an excessive contribution to one of his federal campaign committees. In addition to running for the House in 1998, Mr. Dear also campaigned for a New York City council seat. Friends of Dear was his campaign committee for that election, and Mr. Roth served as treasurer. In December 1999, Mr. Dear established Dear 2000 to serve as his principal campaign committee for his campaign to win a House seat in the 2000 primary. Mr. Roth again served as treasurer. During 1999 Friends of Dear purchased an opinion poll for $40,000 and contributed the results to Dear 2000. The Commission alleged that once Mr. Dear became a candidate for federal office, the donation of the opinion poll resulted in an excessive in-kind contribution from Friends of Dear, which could only contribute $1,000 per election to Dear 2000. The Commission alleged that Mr. Roth knowingly accepted this excessive contribution on behalf of Dear 2000 and also failed to report the contribution on the committee's first financial disclosure report, due January 1, 2000.

Relief

The Commission asked the court to:


Source:
  FEC Record -- August 2003 [PDF]; August 2004 [PDF].

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FEC v. DEMOCRATIC PARTY OF NEW MEXICO (02-0372)

On April 29, 2005, the U.S. District Court for the District of New Mexico issued an Order and Judgment finding that the Democratic Party of New Mexico (DPNM) and Judy Baker, as its treasurer, violated the Federal Election Campaign Act (the Act) by:

The court also found that the Serna Committee knowingly accepted direct and in-kind contributions from DPNM in excess of the combined limit in connection with the May 13, 1997, special election. 2 U.S.C. §441a(f).

The court permanently enjoined DPNM and Ms. Baker from using funds from a nonfederal account1 to make disbursements for communications that urge the public to vote in special elections in which only federal candidates are on the ballot and from violating the limits and reporting requirements for coordinated expenditures. The Serna Committee is permanently enjoined from knowingly accepting any excessive contributions in connection with a special federal election. 2 U.S.C. §441a(f). DPNM and Ms. Baker (in her official capacity as treasurer) must pay a $60,000 civil penalty and must transfer $86,900 from the DPNM’s federal account to its nonfederal account.

FOOTNOTES:

1 This portion of the Court's Order and Judgment does not apply to DPNM’s use of Levin funds. See 11 CFR 300.32(b)(2).


Source:
  FEC Record -- June 2005 [PDF] July 2002 [PDF].

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FEC v. DEMOCRATIC SENATORIAL CAMPAIGN COMMITTEE (95-2881)

On January 16, 1997, the U.S. District Court for the Northern District of Georgia, Atlanta Division, ruled that the Democratic Senatorial Campaign Committee (DSCC) violated the Federal Election Campaign Act (the Act) when it contributed $17,500 to a Senatorial candidate's runoff election after having already contributed the same amount during the primary and general elections.

The second contribution violated the Act at §441a(h), which sets a $17,500 limit for national committees-such as the DSCC and the National Republican Senatorial Committee (NRSC)-when giving to a candidate for the U.S. Senate.

On July 7, 1997, the court ordered the DSCC to pay a $175 penalty for violating the Act during the 1992 Senatorial race. The sum amounts to 1 percent of the DSCC's violation of $17,500.

Background

The excessive contribution was made during the unusual circumstances surrounding the 1992 Senatorial campaign in Georgia. A state law, which has since been changed, required that the winner of the Senate seat receive a majority of the vote.

Former Senator Wyche Fowler Jr., a Democrat, had a plurality in the general election in 1992, receiving 49 percent of the ballots cast. Republican Senator Paul Coverdell, who challenged Mr. Fowler in the race, came in second with 48 percent of the vote. Because no candidate received a majority of votes, a runoff election was held between the two men. Mr. Coverdell won that race with 51 percent of the vote.

During the primary and general elections, the DSCC contributed $17,500 to Mr. Fowler's campaign, and then contributed another $17,500 to his runoff election.

District Court Finds for FEC

The court ruled in the FEC's favor. The court held that the language and legislative history of the Act, coupled with accepted principles of statutory construction, support the view that §441a(h) precluded the DSCC from making a second contribution of $17,500.

The court pointed out that, unlike individuals and other committees, national committees have a higher contribution limit under §441a(h) and greater discretion in allocating the sum during the length of a campaign. For example, individuals have a $1,000 contribution limit per election (primary, general and runoff), per candidate. Multicandidate PACs have a $5,000 contribution limit per election, per candidate. The court held that national committees, such as the DSCC, may allocate part or all of their $17,500 contribution limit to a Senatorial candidate at any stage of the election campaign.

The DSCC had argued that the FEC had erroneously interpreted the $17,500 limit with respect to post-general election runoffs and that Congress had intended the statute to be part of an effort to expand the role of national committees. However, the court said that the language of §441a(h) was unambiguous and that, even if it were not, the FEC's interpretation of it would be entitled to deference. In AO 1978-25, the court pointed out, the Commission had confirmed that §441a(h) did indeed establish a single contribution limit without regard to whether there were primary, general or runoff elections.

The DSCC had also argued unsuccessfully that the unusual nature of the Georgia majority-winner rule was not taken into account when Congress adopted the statute, and that, had its members known of such a scenario, it would have drafted the law differently. The court said that such speculation would not cause the court to disregard the language of the law.

The court rejected the DSCC's claim that its First and Fifth Amendment rights of freedom of association and equal protection were violated. The DSCC said the law denied them the freedom to associate with Mr. Fowler's campaign because "no committee would ever reserve funds for the uncertain prospect of a runoff." It also pointed out that other types of committees and individuals were able to contribute to Mr. Fowler's runoff election.

The court said that, while a difficult allocation issue confronted the DSCC, the law does not infringe on its right to associate with whomever it wishes. The DSCC lawfully made more than $200,000 in coordinated expenditures under 2 U.S.C. §441a(d)1 in support of Mr. Fowler's runoff campaign. Further, the DSCC does not have to be treated the same as other types of committees in respect to contribution limits. "Party committees, individuals, and other organizations and corporations are not similarly situated entities for election regulation purposes," the court said.

Pursuant to a prior agreement of the parties, the court ordered briefing on the appropriate sanctions for DSCC's violation of §441a(h).

Penalty

In determining an appropriate penalty, the court considered these four factors:

The court found that the DSCC did act in good faith because it had believed that it was acting lawfully when it made the second $17,500 contribution. The court also determined that the second contribution did no harm to the public. While the FEC had argued that "any violation of the [Act's] limits undermines a public perception of integrity of the election process," the court disagreed with such a blanket assertion. It also found that the FEC did not require vindication in this case and noted that the DSCC's ability to pay did not justify assessing it with a large penalty, which is what the FEC had requested.

In its deliberations, the court also considered the penalty negotiated with the NRSC in a conciliation agreement for a violation of a different provision of the Act-2 U.S.C. §441d-in connection with the same election. That penalty amounted to 1 percent of the approximately $500,000 violation, or $5,000.

FOOTNOTES:

1 Under 2 U.S.C. §441a(d), the national party is entitled to make limited expenditures for the general election in cooperation with the candidate (in addition to the contributions it is otherwise entitled to make).


Source:
  FEC Record -- March 1997 [PDF]; and August 1997 [PDF].

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FEC v. DRAMESI FOR CONGRESS

On July 25, 1986, the U.S. District Court for the District of New Jersey granted the FEC's motion for summary judgment in FEC v. Dramesi for Congress Committee (Civil Action No. 85-4039). The court found that the John A. Dramesi for Congress Committee's treasurer, Russell E. Paul, had violated 2 U.S.C. §441a(f) by knowingly accepting an excessive contribution from the New Jersey Republican State Committee (the State Committee) and ordered Mr. Paul to pay a $5,000 civil penalty to the U.S. Treasurer.1 The court had previously entered a $5,000 default judgment against the Dramesi Committee for accepting the excessive contribution.

In 1990, the U.S. District Court for the District of New Jersey granted a motion by the FEC to hold the committee and Mr. Paul, as treasurer, in contempt of court for failing to pay the penalties imposed in 1986 (FEC v. Dramesi for Congress Committee, No. 85-4039(MHC) (D.N.J. Sept. 5, 1990) (unpublished opinion)).

Background

In 1982, when the State Committee made a $5,000 contribution to the Dramesi Committee, the State Committee had not achieved multicandidate status because it had not yet satisfied the six-month registration requirement.2 Consequently, the State Committee was only eligible to make a contribution of up to $1,000 per election to each Republican Congressional candidate in New Jersey, and the Dramesi Committee could legally receive only $1,000 for the primary election.

On learning of the State Committee's excessive contributions to Republican House candidates, the FEC initiated enforcement proceedings against the State Committee. When the Commission failed to reach a settlement with the Dramesi Committee, the agency filed a suit against the Committee and its treasurer in which it asked the court to: (1) assess a $5,000 civil penalty against the Committee for accepting the State Committee's excessive contribution and (2) order the Dramesi Committee to refund the excessive portion ($4,000) to the State Committee.

The Court's Ruling

The court observed that, under the FEC regulations, the treasurer of a political committee has to "'make his or her best efforts to determine the legality of a contribution.'"3 The court therefore found that "Mr. Paul...had a duty to determine [the contribution's] propriety. Instead, he merely assumed from the source of the contribution that it was legal."

Nor did the court find any merit to defendant's contention that he had no way of knowing the contribution was illegal. The court noted that the defendant could have consulted the Index of Multicandidate Political Committees, an "exhaustive list of such eligible [multicandidate] committees, compiled by the FEC, [which] was readily available to the defendants."

The court therefore found that "Mr. Paul, as Treasurer of the Dramesi Committee, acted intentionally in accepting the $5,000 contribution in question, and was fully aware of the facts rendering his conduct unlawful." Accordingly, the court ruled that defendant "knowingly accepted" the State Committee's excessive contribution, in violation of 2 U.S.C. §441a(f).

FEC's Contempt Motion

Although finding the Dramesi committee in contempt, the court did not take any action against it since the committee is defunct. The court, however, rejected Mr. Paul's argument that he should not be held personally liable for payment of the penalty imposed against him. The court stated that, in its previous decision in this case, "we determined that Russell E. Paul's liability was distinct from the liability of the Committee." The court went on to state that, because "political committees have a tendency to dissolve after an unsuccessful campaign," Congress chose to hold an individual-the committee treasurer-responsible for compliance with the Federal Election Campaign Act. See 2 U.S.C. §432(a) and (c). It therefore follows that "an individual will also stand responsible for his indiscretions as a treasurer."

The court, in addition to holding Mr. Paul in contempt, ordered him to pay the $5,000 penalty within 30 days. The court imposed a $50 per day assessment if payment was not complete within 30 days. On January 2, 1991, the court issued stipulation and order in which Mr. Paul agreed to pay a total of $5,317 to the FEC. That amount represented the original $5,000 penalty, $91 in interest charges and $226 in FEC costs. The Commission agreed to waive the contempt penalties of $50 a day (which had been accumulating since the original contempt order in 1990) provided that Mr. Paul pay the $5,317 by March 1, 1991.

FOOTNOTES:

1 On June 16, 1986, the U.S. District Court for the District of Columbia found that another New Jersey House incumbent campaigning for reelection in 1982 had not knowingly accepted an excessive contribution from the New Jersey Republican State Committee. See FEC v. Re-Elect Hollenbeck to Congress Committee.
2 Multicandidate committees may contribute up to $5,000 per election to a candidate's authorized committee(s) or any other political committee. To achieve multicandidate status, a committee must have more than 50 contributors, have been registered for at least six months and, with the exception of state party committee, have made contributions to five or more candidates for federal office. 2 U.S.C. Section 441a(a)(4); 11 CFR 100.5(e)(3).
3 See 11 CFR 103.3(b)(1).


Source:
  FEC Record -- September 1986, p. 6; November 1990, p. 9; and March 1991, p. 10.
FEC v. Dramesi for Congress Committee, 640 F. Supp. 985 (D.N.J. 1986).

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FEC v. FRIENDS OF LANE EVANS (04CV4003)

On June 27, 2005, the U.S. District Court for the Central District of Illinois signed a consent judgment reflecting an agreement in this case between the Commission and Friends of Lane Evans, the 17th District Victory Fund and the Rock Island Democratic Central Committee. Under the consent agreement, the defendants neither admit nor deny violating the Federal Election Campaign Act (the Act), but agree to pay civil penalties. Friends of Lane Evans will pay a $185,000 civil penalty for violations by the Evans campaign and the 17th District Victory Fund, while the Rock Island Democratic Central Committee has agreed to a $30,000 civil penalty for its role in the violations.

Court Decision

The consent judgment signed by the court decrees that the defendants committed violations of the Act as presented in the Commission’s January 30, 2004, court complaint.  According to that complaint, during the 1998 and 2000 elections, Congressman Lane Evans’ campaign committee established a purportedly independent committee, the 17th District Victory Fund (the Victory Fund), that was in fact nothing more than an alter ego of the Congressman’s campaign committee.

For the 1998 and 2000 elections, a candidate’s principal campaign committee could accept up to $1,000 per election from an individual, and the committees of a national party could accept up to $20,000 per year in the aggregate from an individual. Any other political committee could accept $5,000 per year from an individual. 2 U.S.C. §441a(a)(1). Additionally, under the Act an expenditure made by any person in “cooperation, consultation or concert, with, or at the request or suggestion of, a candidate, his authorized political committees, or their agents” is considered a contribution to the candidate. 2 U.S.C. §441a(a)(7)(B)(i).  Corporations and unions are barred from making contributions or expenditures in connection with any federal election. 2 U.S.C. §441b(a).

During the period in question, the Victory Fund raised and spent more than $500,000. Congressman Evans and his staff raised a majority of the money contributed to the Victory Fund, including more than $200,000 in prohibited contributions from labor union treasury funds.

The Victory Fund then spent the majority of its funds on voter identification and get-out-the-vote activities promoting Congressman Evans. The Commission found that at least $330,000 of these campaign-focused activities were so closely coordinated with the campaign that they represented contributions from the Victory Fund to Congressman Evans. The contributions exceeded the Act’s limits and included funds from sources prohibited by the Act.

In addition, in 1998 the Rock Island Democratic Central Committee (the Rock Island Committee) spent approximately $18,000 on a radio ad, two direct mail pieces and a newspaper ad that expressly advocated the Congressman’s re-election and were coordinated with the Evans Committee. These coordinated expenditures exceeded the applicable $1,000 contribution limit and the communications did not include the required disclaimer stating whether they were authorized by Congressman Evans or the Evans Committee. 2 U.S.C. §441d(a).

The Rock Island Committee failed to register as a political committee and did not report its financial activity, even though it received several hundred thousand dollars during the 1998 and 2000 cycles after becoming a political committee. See 2 U.S.C. §433. Also, while it did not establish separate federal and nonfederal accounts, it accepted contributions outside the Act’s limits and prohibitions.

In addition to the civil penalties assessed, the agreement requires the Victory Fund to pay the Commission all funds remaining in its accounts on the date that the parties executed the Stipulation for Entry of Consent Judgment. The court also enjoined the defendants from committing similar violations of the Act in the future.


Source:
  FEC Record -- August 2005 [PDF]; March 2004 [PDF].

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FEC v. FRIENDS FOR FASI

On January 12, 2000, the Commission filed a complaint alleging that Mr. Fasi, a former Mayor of Honolulu and gubernatorial candidate in Hawaii, and his campaign committee, Friends for Fasi, had accepted prohibited contributions in the form of reduced rent for space that was owned, managed and/or controlled by foreign nationals. The Federal Election Campaign Act (the Act) prohibits foreign nationals from making "any contribution of money or other things of value . . . in connection with an election to any political office." 2 U.S.C. §441e(a). The Commission asked the court to declare that Fasi had violated the Act, enjoin them from accepting further contributions prohibited by 2 U.S.C. §441e and assess appropriate civil penalties.

Subsequently, Fasi filed a motion to dismiss the Commission's complaint, arguing three major points:

The court rejected Fasi's argument that §441e only applies to federal elections. Although the court found the language of the statute to be ambiguous in this regard, it concluded that the Commission's interpretation of §441e-as expressed in its own regulations and advisory opinions-was consistent and reasonable. The court said that the Commission has express authorization to "elucidate statutory policy in administering FECA" unless the court finds the Commission's interpretations "demonstrably irrational or clearly contrary to the plain meaning" of the Act. United States v. Kanchanalak, 192 F.3d at 1049; Nevitt v. United States, 828 F.2d at 1406-07.

The court granted in part and denied in part Fasi's motion to dismiss based on Fasi's second argument, that the Commission had filed its suit after the statute of limitations had expired. The court agreed that any claims based on alleged violations that occurred before January 12, 1995, were barred by the statute. The court also found, however, that the reduced rent constituted a "continuing violation" and that each month that Fasi was allowed to rent space at a reduced rate marked a new and separate contribution. The court reached this decision both because the Act makes each contribution a separate violation of 441e and because, in the absence of a long-term rental agreement or a fixed rental rate, the court concluded that Fasi had rented on a month-to-month basis. Thus, the court ruled that the Commission could only file claims based on alleged violations occurring between January 13, 1995, and November 1996, after which Fasi allegedly stopped receiving prohibited contributions.

On January 19, 2001, the court signed a consent judgment, in which it:


Source:
  FEC Record -- August 2000 [PDF]; and June 2001 [PDF].

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FEC v. FRIENDS OF ISAIAH FLETCHER

On April 24, 1989, the U.S. District Court for the District of Maryland ruled that Friends of Isaiah Fletcher and Mr. Fletcher, as treasurer, violated section 434(a)(2)(A) of the election law by failing to file an October 1986 quarterly report. (Civil Action No. PN 88-2323.) The committee was Mr. Fletcher's principal campaign committee for his 1986 Congressional bid.

The court ordered defendants to pay a civil penalty of $5,000 and to pay the Commission's costs in the action. The court also permanently enjoined the defendants from similar future violations of the Act.

In March 1990, after the Fletcher campaign had failed to make any payments on the judgment, the FEC petitioned the court to (1) hold defendants in contempt for their failure to pay the assessments and (2) order defendants to pay the interest that had accrued on the penalty.

The court denied the motion but ordered defendants to begin paying the assessments in monthly installments of $300 each beginning June 15, 1990. The court also ordered Mr. Fletcher to file a statement profiling his financial situation.

After the defendants failed to comply with these orders, the court granted an FEC petition to hold them in contempt on February 5, 1991. The court ordered Mr. Fletcher and the committee to pay:

The case was closed on August 6, 1992, when the FEC notified the court that the committee and its treasurer, Mr. Fletcher, had paid the court-ordered penalty to the satisfaction of the agency.


Source:
  FEC Record -- June 1989, p. 8; July 1990, p. 4; April 1991, p. 6; and October 1992, p. 12.

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FEC v. FORBES

On February 19, 1999, the U.S. District Court for the Southern District of New York dismissed this lawsuit after both parties asked for the action. The court order was preceded by the Commission's 4-2 vote to withdraw the lawsuit against 1996 Presidential candidate Malcolm S. "Steve" Forbes, Jr.

The FEC had asked the court in September 1998 to find that bi-weekly columns authored by the candidate in Forbes Magazine resulted in violations of the Federal Election Campaign Act by Mr. Forbes, the magazine, his 1996 committee and the corporation he controls.

Background

In November 1995, while running for the Republican nomination, Mr. Forbes took a leave of absence from Forbes, Inc., but continued to write the weekly column "Fact and Comment" for the company's flagship publication, Forbes Magazine. In addition, Mr. Forbes continued to be listed as editor-in-chief on the magazine's masthead, and he controlled the length, content and format of the articles. Excerpts of these columns also appeared in another Forbes publication, The Hills-Bedminster Press. The columns discussed some of the same themes Mr. Forbes pressed during his presidential campaign, including the flat tax, term limits, abortion and foreign intervention in Bosnia , and have been valued at $94,900.

The Commission contended that Mr. Forbes's columns were not bona fide news accounts and were not part of a general pattern of campaign-related news accounts that gave reasonably equal coverage to all opposing candidates. Furthermore, the Commission argued that Forbes, Inc., published the columns in consultation with Mr. Forbes while he was a candidate, thereby turning the corporation's expenditure for the columns-$94,900-into a contribution to the Forbes campaign.

In addition, the Forbes committee failed to report the value of the columns in any of its reports filed with the Commission. 2 U.S.C. §434(b)(2)(A).

The FEC asked the court to find that Forbes, Inc., made prohibited in-kind corporate contributions to the Forbes committee and that Mr. Forbes, in his capacity as CEO, violated the Act by consenting to the contributions. The FEC also asked the court to find that Mr. Forbes, the Forbes committee and the committee treasurer violated that Act when they knowingly accepted the prohibited in-kind contributions. The FEC asked the court to enjoin the defendants from violating the Act further and to assess a civil penalty against them.


Source:
  FEC Record -- November 1998 [PDF]; and April 1999 [PDF].

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FEC v. FRANKLIN

On September 27, 1989, the U.S. Court of Appeals for the Fourth Circuit granted the FEC's motion for summary affirmance in FEC v. William Franklin (No. 89-1512). The appeals court remanded the case to the district court (Civil Action No. 89-324-N).

Background

In October 1988 Mr. Robb, the Democratic nominee for the U.S. Senate in Virginia, filed a complaint with the Commission alleging that Mr. Franklin's unknown employer had violated the election law by failing to report payments made to Mr. Franklin to investigate rumors linking the candidate with persons allegedly implicated in drug use or drug trafficking. Mr. Franklin was a private investigator and an attorney working in Virginia. Conducted during the height of the 1988 campaign, Mr. Franklin's investigation was the subject of several news stories.

The Robb campaign also alleged that the contribution limits may have been violated by Mr. Franklin's client.

After finding "reason to believe" that the law had been violated, the Commission sent Mr. Franklin a questionnaire about the nature and purpose of his investigation and asking on whose behalf it was conducted. Mr. Franklin answered some of the questions, but he refused to identify the person who had hired him, invoking attorney-client privilege. The FEC subsequently obtained a court order requiring Mr. Franklin to respond fully to the questions.

Along with ordering Mr. Franklin to identify his employer, the court ordered the FEC not to disclose the identity of that person until a formal enforcement action commenced, or the individual waived confidentiality, or until disclosure was mandated by the election law.

District Court Decision

Mr. Franklin challenged the FEC's actions on four grounds:

The court rejected all of these arguments.

In ruling on the FEC's jurisdiction, the court concluded that the Commission had fulfilled its statutory requirements in acting on the complaint to the extent that it was possible. The election law requires that the Commission notify respondents of complaints filed against them; the Commission must also give such persons the opportunity to respond to the allegations. 2 U.S.C. §437g(a)(1). Although the Commission did not know the name of the respondent, the court found that the Commission had "met the requirements of the law" by communicating with the unknown respondent through Mr. Franklin.

The court also rejected Mr. Franklin's argument that the Robb complaint was inadequate on the grounds that it did not identify the respondent or allege "a clear and concise recitation of the facts which describe a violation," as required under 11 CFR 111.4(d)(3). "While the complaint did not identify the respondent by name," the court said, "the complaint clearly identified the employer of Franklin as the respondent." The court further said that the regulations did not require "a complete factual and legal account of a violation." Filing a complaint is only the first step in the enforcement process, the court emphasized.

With regard to Mr. Franklin's charge that the Commission's "reason to believe" finding was contrary to law, the court observed that "agency actions are not generally ripe for judicial review" unless they constitute "final agency actions." In most cases, a "reason to believe" finding is a preliminary action in the enforcement process, leading to a formal investigation. It is not a final action. Furthermore, the court noted, "reason to believe" findings have not previously been reviewed by courts unless the alleged violation was novel or unless the press exemption to the reporting requirements was at issue. The Robb complaint involved neither novel issues nor the press exemption. Adding that Mr. Franklin had not demonstrated that an FEC investigation would injure himself or his client, the court rejected Mr. Franklin's argument that the Commission's finding was "contrary to law."

The court also found that Mr. Franklin had not established that the attorney-client privilege applied to his case. Although he was a practicing attorney, Mr. Franklin was questioned by the FEC about his activity as a private investigator. " Franklin has not demonstrated that the client retained him in his capacity as an attorney or that [he] provided legal advice to the client relating to Franklin 's investigation," the court saId.

For these reasons, the court ordered Mr. Franklin to provide written answers to the FEC's questions within 75 days. Furthermore, the court ordered that "upon pain of contempt, no member or employee of the FEC, or any other person, disclose to any person who is not a member or employee of the FEC with a need to know" the identity of Franklin 's client in the Robb investigation. This protective order would apply unless and until a formal enforcement action was begun, or Franklin 's client waived confidentiality restrictions, or disclosure was otherwise required by the law.

Mr. Franklin appealed the decision.

Appeals Court Decision

On September 27, 1989, the U.S. Court of Appeals for the Fourth Circuit granted the FEC's motion for summary affirmance. The appeals court remanded the case to the district court, which on September 29 ordered Mr. Franklin to provide the Commission with "full and complete answers to the extent of his knowledge to each and every question propounded to him" by the agency. The court ordered the defendant to provide the answers within 5 days.

On the direction of the appeals court, the district court also vacated a protective order that it had imposed in July.


Source:  
 FEC Record -- September 1989, p. 8; and March 1990, p. 13.
FEC v. Franklin, 718 F. Supp. 1272, aff'd in part, (E.D. Va.), 902 F.2d 3 (4th Cir. 1989).

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FEC v. FREE THE EAGLE;
FEC v. RUFFPAC

On June 5, 1995, the U.S. District Court for the District of Columbia issued consent judgments in these two cases. In both cases the FEC sought enforcement of conciliation agreements (Matter Under Review (MUR) 2191) entered into by Free the Eagle and by RUFFPAC and Tammy J. Lyles. Ms. Lyles was the managing director of Free the Eagle and the treasurer of RUFFPAC.

In the stipulations for consent judgments, both defendants and Ms. Lyles admitted to being in breach of the conciliation agreement. Free the Eagle owed the Commission $5,000, and RUFFPAC and Ms. Lyles owed the Commission $8,000, both with interest accrued since November 15, 1994. Defendants and Ms. Lyles agreed to the following:

Additionally, a $5,000 civil penalty was assessed against each defendant under 2 U.S.C. §437g(a)(6)(A) for breach of the conciliation agreement. The FEC agreed to waive both civil penalties provided that all parties complied with the court's consent judgment order and that all payments were timely.


Source:
  FEC Record -- August 1995, p. 5.
FEC v. Free the Eagle, No. 95-0297 (D.D.C. June 5, 1995). FEC v. RUFFPAC, No. 95-0296 (D.D.C. June 5, 1995).

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FEC v. FREEDOM'S HERITAGE FORUM, ET AL.

On March 28, 2002, the U.S. District Court for the Western District of Kentucky at Louisville granted the Commission's motions for:

The court denied the Commission's request for summary judgment that former congressional candidate Timothy Hardy knowingly received a prohibited corporate contribution because certain of the facts were contested by the parties.

On August 14, 2003, the U.S. District Court for the District of Kentucky at Louisville issued an agreed order regarding Timothy Hardy's involvement in this case.

Background

The Forum is a political committee that promotes pro-life and other social issues. In response to an administrative complaint alleging that the Forum made coordinated expenditures on behalf of Mr. Hardy's 1994 Congressional campaign, the Commission found that the Forum violated the Act's contribution limits, reporting and disclosure requirements and disclaimer provisions. 2 U.S.C. §§441a(a)(1)(A), 434(b), and (c) and 441d(a)(3). The Commission also found that Mr. Hardy accepted excessive contributions. 2 U.S.C. §441a(f). After failing to reach a conciliation agreement with the defendants, the Commission filed a court complaint.

Coordination

The Commission alleged that the Forum's expenditures supporting Mr. Hardy, totaling $23,515.81, were not independent expenditures but coordinated expenditures that resulted in excessive contributions to his campaign committee. 2 U.S.C. §441a(a)(1)(A).

Disclaimers and Express Advocacy

The Commission alleged that the Forum distributed seven flyers expressly advocating the election or defeat of a federal candidate and failed to include the required disclaimers. 2 U.S.C. §441d(a). In its September 29 decision, the court reviewed four flyers and found that one contained express advocacy and, thus, required a disclaimer. On April 28, 2000, the court ruled on three additional flyers, finding that two contained express advocacy.

1st District Court Decision

The FEC had alleged that the expenditures supporting Mr. Hardy, totaling $23,515.81, were not independent expenditures but coordinated expenditures, which resulted in excessive contributions to his campaign committee. 2 U.S.C. §441a(a)(1)(A). The Act defines independent expenditure as an expenditure that expressly advocates the election or defeat of a clearly identified candidate and that is not made in concert with, or at the request or suggestion of, the candidate or the campaign. 2 U.S.C. §431(17).

FEC regulations elaborate on this definition. They add the following presumption: "An expenditure will be presumed to be so made [in cooperation with the campaign] when it is based on information about the candidate's plans, projects, or needs provided to the expending person by the candidate, or by the candidate's agents, with a view toward having an expenditure made." 11 CFR 109.1(b)(4)(i)(A).

The Commission alleged two instances of coordination. The first was a meeting between Dr. Simon and the representatives of Mr. Hardy's campaign prior to Mr. Hardy's entering the primary. The second took place at a political event during which Mr. Hardy was present while Forum members planned strategies "on how to get Tim Hardy elected." Following the event, the Forum made four separate direct mailings of campaign literature that supported the election of Mr. Hardy.

The court rejected the Forum's assertion that actual coordination of a specific disbursement must be shown in order to consider it a "coordinated expenditure." The court said, "This assertion finds no support in the statute, the regulations, or the case law." Further, the court stated, "...we do not find any requirement that coordinated expenditures must contain 'express advocacy' in order for them to fall within the purview of the statute." Nevertheless, the court found that "the FEC has not sufficiently plead enough facts that allege that the expenditures made by the Forum were coordinated with the Hardy campaign."

Regarding the first meeting, the court said that the FEC had not alleged that "Hardy actually informed Dr. Simon of his plans, projects, or needs with a view toward having an expenditure made." As to the direct mailings of campaign literature, the court held that there were no allegations made that the mailings were at the request or suggestion of Mr. Hardy. The court stated that, "Hardy's mere presence at the meeting, even if his presence was accompanied by the giving of a campaign speech, [was] insufficient to make these expenditures coordinated." Following its conclusion that there was no coordination, the court dismissed the charges that the Forum had failed to report its expenditures as contributions.

Disclaimer and Express Advocacy

The Forum argued that its four mailings did not contain "express advocacy" and therefore did not constitute contributions to the Hardy campaign. The court disagreed. It said, "There is no requirement that a contribution as defined in 2 U.S.C. §441a must result in or from 'express advocacy.'" The Forum further argued that it was not required to include disclaimers on the four mailings because none of the mailings included "express advocacy." (Under 2 U.S.C. §441d(a), communications containing express advocacy must include certain disclaimers.) The court stated that, "although a communication does not have to contain 'magic words' ['vote for,' 'elect,' 'support,' 'cast you ballot for,' 'Smith for Congress,' 'vote against,' 'reject'] to constitute express advocacy, it will ordinarily contain some sort of functional equivalent of an exhortation, directive, or imperative for it to expressly advocate the election or defeat of a candidate."

The court agreed that all four of the Forum's mailings clearly portrayed Mr. Hardy's opponent in an unfavorable light and Mr. Hardy in a favorable light. Nevertheless, the court found that only one of the Forum's four mailings contained express advocacy. That mailing included a sample ballot identifying candidates the Forum supported, including Mr. Hardy, which stated, "Please take this sample ballot to the polls and vote on Tuesday." It explicitly urged the reader to vote for the "profamily" candidates identified, and it showed a vote for Mr. Hardy. The court held, therefore, that the flyer contained "the functional equivalent of an exhortation to vote for Hardy."

With regard to another mailing that contained a request for volunteers and contributions, the court concluded that it sought "to persuade the reader to get involved in soliciting votes for Hardy and to contribute time and money to the Forum," but it did not contain "...an express exhortation to the reader to elect Hardy, or to defeat [his opponent]." FEC v. Freedom's Heritage Forum.

2nd District Court Decision

On April 28, 2000, the U.S. District Court for the Western District of Kentucky granted in part and denied in part the Freedom's Heritage Forum's motion to dismiss certain portions of the FEC's complaint against it. The court's decision relates to the Forum's motion to dismiss Count VII of the Commission's Second Amended Complaint.

In Count VII, the FEC had alleged that seven flyers the Forum had distributed in connection with the 1994 elections- including the four on which the court had already ruled-contained express advocacy, but lacked the disclaimers required by 2 U.S.C. §441d(a).

Having already ruled on four of the flyers, the court concluded that two of the three remaining flyers contained express advocacy and should have had disclaimers.

The first of them was a "Congressional Candidate Report" that compared one candidate's positions on certain issues to those of his opponents. It contained in a highlighted box: "IMPORTANT! Registered Democrats and Republicans can vote for [the named candidate] who actively opposes the liberal Clinton agenda. Vote November 8, 1994, 6 a.m. to 6 p.m. " The court found that this statement was an exhortation to vote for the named candidate and therefore was express advocacy. The second express advocacy flyer was a sample ballot that readers were to take to the polls on election day. It "explicitly urge[d] the reader to vote for the 'pro-family' candidates identified." The other flyer was an invitation that included the statement: "We have the Pro-Abortionists right where we want them, divided and fighting each other. Now [the named candidate] can win with only 40% of the vote!" Because the flyer lacked Lacking an explicit exhortation to vote, the court concluded that the statement was merely a "comment on the status of the election," not express advocacy.

3rd District Court Decision

New Coordination Regulations

The Commission asked the court to dismiss with prejudice several counts of its complaint because the FEC has promulgated new coordination regulations. Under the new regulations, the defendants' activities, as described in these counts, are not violations. The Commission also asked the court to dismiss the defendants' counterclaims, which asked the court to declare one of the old regulations unconstitutional and to enjoin the Commission from enforcing the old regulation against the defendants. The court found that the defendants were not in danger of a second lawsuit based on these counts because the regulation had been repealed, and that the defendants' counterclaims were moot for the same reason. The court granted the Commission's motions on these points.

Disclaimers

Under the Act, whenever a person makes an independent expenditure, the communication must disclose both the name of the person who paid for the communication and the fact that the communication was not authorized by any candidate or candidate's committee. 2 U.S.C. §441d(a). Since the court had previously found that three of the Forum's flyers contained express advocacy, and none of them stated whether they were authorized by a candidate, the court granted the Commission summary judgment on its claims that the Forum violated 2 U.S.C. §441d(a).1 The court imposed a $3,000 penalty-$1,000 for each violation.

Acceptance of Corporate Contributions

The Commission also requested summary judgment on its claim that Mr. Hardy knowingly accepted corporate contributions in violation of 2 U.S.C. §441b(a). During Mr. Hardy's campaign, a member of his staff received permission from Toby Tours, Inc., to send campaign mailings using its bulk mail permit. By using the permit, the campaign saved $4,077.26 in postage, which, according to the Commission, resulted in an prohibited contribution from Toby Tours, Inc.

The court determined that the campaign staff member had knowingly accepted the illegal contribution; however, it also found the Commission had not shown that the staff member acted on Mr. Hardy's behalf. The court denied the Commission's request for summary judgment because a question of material fact remained as to whether the staff member was acting as Mr. Hardy's agent, and a legal question remained about whether Mr. Hardy could be personally charged with the violation. This issue remains to be resolved by the court.

Selective Enforcement of the Act

In their counterclaims, the defendants alleged that the Commission's "unwarranted, selective, and lengthy proceedings" deprived them of their freedom of speech and associational rights under the First and Fourteenth amendments. The court granted the Commission's motion to dismiss this claim, agreeing that the claim was moot because the administrative proceedings in question had concluded.

The defendants also claimed that the Commission violated their rights to equal protection under the Fourteenth Amendment by selectively enforcing the Act against them because of their politically-conservative views. Under the Sixth Circuit's three-part test for evaluating a selective enforcement claim, the enforcement situation in question must:

  1. Single out for prosecution a person belonging to an identifiable group (such as a group exercising constitutional rights) even though the enforcement official has in similar situations decided not to prosecute individuals not belonging to that group;
  2. Be initiated with a discriminatory purpose; and
  3. Have a discriminatory effect on the group to which the defendant belongs.

The defendants alleged, among other things, that the Commission did not prosecute any other group involved in the election, including a gay or lesbian organization that published an express advocacy communication for Mr. Hardy's opponent and did not include a disclaimer. The defendants also generally claimed that the Commission does not prosecute "liberal politicians and elected officials," and specifically pointed out that the Commission did not prosecute Toby Tours, Inc.

The court granted the Commission's motion to dismiss this counterclaim, finding that the defendants had not provided sufficient supporting facts. For example, the court found that even if the gay or lesbian organization had violated the Act, the situation was not similar to the defendants' because they could not show that the Commission knew about the violation or that a complaint was filed. Similarly, the Commission's failure to prosecute Toby Tours, Inc., did not meet the test's criteria because the corporation was not part of an identifiable group. Finally, the court found that the defendants' general claims of FEC bias were not specific enough to withstand scrutiny under the selective enforcement test.

Defendants' Motions

On April 10, 2002, the Forum and its treasurer filed a motion to alter or vacate the court's order and a motion to allow the filing of counter claims.

4th District Court Decision

Under the agreement, issued by the U.S. District Court for the District of Kentucky at Louisville, Mr. Hardy, a Congressional candidate in the 1994 elections:

The Commission agreed that all of its remaining claims against Mr. Hardy are resolved by this agreement.

FOOTNOTES:

1 The defendants had argued that the FEC was enjoined from enforcing the regulation defining express advocacy "against any ... party in the United States of America." However, the Fourth Circuit court of appeals vacated this injunction, finding that the district court "abused its discretion by issuing a nationwide injunction ..." Virginia Society for Human Life, Inc. v. FEC, 263 F.3d 379, 393 (4th Cir. 2001).


Source:
  FEC Record -- December 1999 [PDF]; and June 2000 [PDF]; August 2002 [PDF]; and October 2003 [PDF].

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FEC v. FUND FOR A CONSERVATIVE MAJORITY

On September 23, 1997, parties to this suit agreed to a final order and judgment by the U.S. District Court for the Eastern District of Virginia, Alexandria Division. Under that order, the defendants, Fund for a Conservative Majority (FCM) and its treasurer, Robert C. Heckman, agreed to pay a civil penalty of $2,500 for having violated the Federal Election Campaign Act (the Act).

Mr. Heckman failed to file the FCM's 1994 year-end report on time, a violation of 2 U.S.C. §434(a)(4)(A)(i). This section of the Act requires political committees other than authorized candidate committees to file quarterly reports during a year in which a general election is held. The report for the final quarter that ends on December 31 must be completed and returned to the FEC no later than January 31 of the following year.

The FCM's 1994 year-end report should have been submitted to the FEC by January 31, 1995. Mr. Heckman hand delivered a copy of the FCM's year-end report on September 7, 1995 -nearly nine months late. He also delivered another copy of the report to staff of the Commission's Office of General Counsel on June 27, 1996 -close to a year and a half after it was due.

Neither Mr. Heckman nor the FCM contested the Commission's allegations in this case. In addition to the civil penalty, the defendants were permanently enjoined from making similar violations of the Act.

Contempt Judgment

On April 28, 2000, the U.S. District Court for the Eastern District of Virginia granted the FEC's motion to hold Robert Heckman and Fund for a Conservative Majority (FCM) in contempt of court for failing to pay a court-imposed civil penalty and for failing to file disclosure reports, as the court had ordered.

The court ordered Mr. Heckman and FCM to pay the outstanding civil penalty plus interest (amounting to $5,540); to pay a $5,000 contempt fine; and to file all outstanding disclosure reports. If Mr. Heckman and FCM fail to comply with the court's orders within 10 days, the court will impose additional contempt fines of $100 per day until they do so.


Source:   FEC Record -- November 1997 [PDF]; and June 2000 [PDF].

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FEC v. FURGATCH;
FEC v. DOMINELLI

On November 20, 1984, the U.S. District Court for the Southern District of California dismissed FEC v. Furgatch (Civil Action No. 83-0596-GT[M]) on the ground that the case failed to state a justiciable claim. Based on its ruling in the Furgatch suit, on November 30, 1984, the court also dismissed a "virtually identical case," FEC v. Dominelli (Civil Action No. 83-0595-GT[M]).

More than two years later, however, the district court was reversed by the court of appeals, which ruled that the defendants had violated the election law and which remanded the cases to the district court.

On remand, the district court assessed a $25,000 civil penalty against Mr. Furgatch and permanently enjoined him from future similar violations of the election law (Civil Action No. 86-6047). Mr. Furgatch appealed the penalty and the injunction.

On March 8, 1989, the appeals court upheld the lower court's imposition of the civil penalty. However, the court vacated the permanent injunction against Mr. Furgatch and remanded it to the district court with instructions to limit its duration.

Background

In filing suit against Mr. Furgatch on March 25, 1983, the FEC claimed that he had violated the election law by failing to report independent expenditures of approximately $25,008. 2 U.S.C. §434(c). Mr. Furgatch incurred the expenditures for two political ads he placed in The New York Times and The Boston Globe, respectively, which the Commission alleged expressly advocated the defeat of President Carter in his 1980 reelection bid. The FEC also claimed Mr. Furgatch had violated section 441d of the law by failing to include an adequate disclaimer notice on the ad he placed in The Boston Globe.

In filing suit against Mr. Dominelli on the same day, the FEC had asked the court to find that he had failed to report independent expenditures amounting to $8,471. The FEC alleged that Mr. Dominelli had incurred the expenditures for an ad in a November 1980 issue of The Chicago Tribune, which expressly advocated President Carter's defeat.

District Court Ruling on the Furgatch Suit

In ruling on whether the political ads sponsored by Mr. Furgatch expressly advocated President Carter's defeat, and therefore constituted independent expenditures, the district court applied the standard contained in the Supreme Court's Buckley v. Valeo opinion.1 In Buckley v. Valeo, the Court had defined express advocacy as "communications containing express words of advocacy of election or defeat, such as 'vote for,' 'elect,' 'cast your ballot for,' 'Smith for Congress,' 'vote against,' 'defeat,' 'reject.'" Buckley v. Valeo, 424 U.S. 1, 44 (1976). The district court cited earlier district and appeals court decisions which emphasized that "neither the purpose nor the effect of a political advertisement is determinative of the issue of whether the ad expressly advocates the election or defeat of a clearly identified candidate." See FEC v. CLITRIM, 616 F.2d 45, 53 (2d Cir. 1980); FEC v. AFSCME, 471 F. Supp. 315, 316 (D.D.C. 1979). Applying this express advocacy standard to Mr. Furgatch's ads, the court found that the pivotal question was "whether the phrase 'Don't let him do it' [was] the equivalent of the expression 'vote against Carter.'" (The remainder of the language in the ad was beyond the election law's scope, the court concluded, because it contained only an implied message not to vote for President Carter.) Interpreting the word "it" in the phrase, the court concluded that the ad exhorted the reader not to let President Carter "hide his own record" or "degrade the electoral process and lessen the prestige of the office." The court then concluded that the phrase "Don't let him do it" did not constitute express advocacy. The court found that "the range of actions expressly recommended by the ad obviously did not include voting the President out of office." Consequently, the ad did not ask the reader to vote against the President.

Finally, the court noted that, since it had decided the case on grounds of statutory construction, it was not "necessary or desirable to [address] the defendants' constitutional challenges to sections 434(c) and 441d" of the election law.

On January 24, 1985, the FEC filed an appeal of the district court's decision with the U.S. Court of Appeals for the Ninth Circuit.

Appeals Court Ruling

On January 9, 1987, the U.S. Court of Appeals for the Ninth Circuit reversed the district court's decision in the case and confirmed the FEC's claim that Mr. Furgatch should be held liable for violations of the election law resulting from: his failure to report spending for the ads as independent expenditures and his failure to state in one of the ads that the communication was not authorized by a candidate or a candidate's committee.

Since FEC v. Dominelli presented "facts virtually identical" to those addressed in the Furgatch suit, the appeals court also reversed the district court's ruling in that case. (FEC v. Dominelli; Civil Action No. 85-5525)

In reversing the district court's ruling in the case, the appeals court rejected the "strictly limited" definition of express advocacy relied upon by the district court. (See discussion above.) Instead, the appeals court found that "context is relevant to a determination of express advocacy." The court therefore concluded that "[political] speech need not include any of the words listed in Buckley to be express advocacy under the Act, but must, when read as a whole, and with limited reference to external events, be susceptible of no other reasonable interpretation but as an exhortation to vote for or against a specific candidate." The appeals court stated that this standard for determining when political speech constitutes express advocacy would "preserve the efficacy of the Act without treading upon the freedom of political expression."

Elaborating on this standard, the appeals court held that a political communication constituted express advocacy if:

Conversely, the appeals court held that "speech cannot be express advocacy of the election or defeat of a clearly identified candidate when reasonable minds could differ as to whether it encourages a vote for or against a candidate or encourages the reader to take some other kind of action." In applying its express advocacy standard to Mr. Furgatch's ads, the appeals court held that it had "no doubt that the ads ask the public to vote against Carter." In reversing the district court's conclusion, the appeals court held that the "pivotal question is not what the reader should prevent Jimmy Carter from doing, but what the reader should do to prevent it [i.e., his reelection]." The appeals court noted that, although "we are presented with an express call to action" in the ad, we are not told "what action is appropriate." However, the court concluded, in the context of the message, "reasonable minds could not dispute that Furgatch's advertisement is urging readers to vote against Jimmy Carter." Moreover, the court held that its conclusion was "reinforced by consideration of the timing of the ad... timing the appearance of the advertisement less than a week before the election left no doubt of the action proposed."

Finally, the court held that Mr. Furgatch's ads were not the kind of "issue-oriented speech" excepted from the election law: "The ads directly attack a candidate, not because of any stand on the issues of the election, but for his personal qualities and alleged improprieties in the handling of his campaign. It is the type of advertising that the Act was enacted to cover."

The court did not explicitly discuss Mr. Furgatch's constitutional challenge to sections 434(c) and 441d of the election law, but noted that in deciding the case on grounds of statutory construction, it had "implicitly" dealt with the free speech issues raised in his suit.

On October 5, 1987, the U.S. Supreme Court denied a petition by Mr. Furgatch for a writ of certiorari in the suit.

District Court Judgment on Remand

On April 26, 1988, the district court entered a judgment requiring Mr. Furgatch to pay a $25,000 civil penalty and to comply with the FECA's reporting requirements within 30 days. The court also permanently enjoined the defendant from future similar violations of the election law. Mr. Furgatch appealed the judgment in the Ninth Circuit.

Mr. Furgatch petitioned the appeals court to find that the district court had abused its discretion in assessing a $25,000 penalty. He also asked the appeals court to find that the lower court's permanent injunction was not authorized by the election law, was impermissibly vague and was not imposed in compliance with Rule 65(d) of the Federal Rules of Civil Procedure.

Appeals Court Decision

In finding that the district court had not abused its discretion in imposing the civil penalty, the appeals court observed that the Federal Election Campaign Act (the Act) permits a court to assess a civil penalty "which does not exceed the greater of $5,000 or an amount equal to any contribution or expenditure involved" in the violation. 2 U.S.C. §437g(a)(6)(B). Since the total expenditures Mr. Furgatch had made for the ads amounted to $25,008, the district court had assessed a $25,000 penalty.

With regard to the permanent injunction, Mr. Furgatch had claimed that the Act permitted a court to issue an injunction only when a person "is about to commit" a violation of the law. The FEC claimed that the relevant statute, 2 U.S.C. §437g(a)(6)(B), gave a court the authority to issue an injunction on the basis of either a past or a threatened future violation. Admitting that the language of the statute did not clearly indicate whether Congress intended to limit injunctive relief to cases of imminent violations of the Act, the court cited legislative history to conclude that the FEC was correct in its interpretation of section 437g.

Nevertheless, the court said, the district court could not issue an injunction pursuant to section 437g(a)(6)(B) unless there was a likelihood of future violations. The court found that although the record supported a finding that Mr. Furgatch was likely to violate the election law again, it did not justify a permanent injunction-that is, an injunction lasting the duration of his life.

In remanding the injunction to the lower court, the appeals court instructed it to limit the injunction to a "reasonable duration." The appeals court also required the district court to state, in compliance with Rule 65(d), the reasons for the injunction and the specific actions restrained by it.

On remand, the district court cited Mr. Furgatch's past violations of the election law as demonstrating that he was likely to violate the law again. As an additional reason for the injunction, the court pointed out that his conduct since the enforcement action was opened (in 1980) had shown "an absence of good faith efforts by Furgatch to cure his violations."

In accordance with the appeals court's ruling, the district court specified that the injunction prohibited Mr. Furgatch from committing further violations of sections 434(c) and 441d of the Act. Finally, the court limited the duration of the injunction to eight years.

Default Judgment Against Dominelli

Since Mr. Dominelli never responded to the FEC's complaint on remand, the agency asked the district court to issue a default judgment against him.

In response to the FEC's request, on March 14, 1988, the district court issued a judgment in which it decreed that:

FOOTNOTES:

1 An independent expenditure is an expenditure for a communication expressly advocating the election or defeat of a clearly identified candidate that is not made with the cooperation or prior consent of, or in consultation with, or at the request or suggestion of, any candidate or his/her authorized committees or agents. 11 CFR 100.16 and 109.1(a).


Source:
  FEC Record -- January 1985, p. 6; March 1987, p. 5; June 1987, p. 6; December 1987, p. 7; May 1988, p. 8; May 1989, p. 7; June 1989, p. 7; and February 1990, p. 7.
FEC v. Dominelli, No. 83-0595-GT(M) (S.D. Cal. 1984) (unpublished opinion), rev'd, 810 F.2d 205 (9th Cir. 1987). FEC v. Furgatch, No. 83-0956-GT(M) (S.D. Cal. 1984), (unpublished opinion), rev'd, 807 F.2d 857 (9th Cir.), cert. denied, 484 U.S. 850 (1987), on remand (S.D. Cal. April 26, 1988) (unpublished order), aff'd in part, vacated and remanded in part, 869 F.2d 1256 (9th Cir. 1989).

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FEC v. DAVE GENTRY FOR CONGRESS COMMITTEE

On September 28, 1999, the U.S. District Court for the Middle District of Florida, Orlando Division, found in a default judgment that the Dave Gentry for Congress Committee (the Committee) and its treasurer violated the Federal Election Campaign Act (the Act) when they failed to comply with the Act's reporting requirements. Mr. Gentry was defeated in the 1996 general election for Florida's 5th congressional district.

The Committee and its treasurer violated 2 U.S.C. §§434(a)(2)(A)(i), (ii) and (iii) and 434(a)(2)(B)(ii) by failing to file five reports of receipts and disbursements until after the deadlines established by the Act. Specifically, they failed to file the reports listed below in a timely manner.

The court ordered the Committee and its treasurer to pay a civil penalty of $25,000 to the FEC within fifteen days of the final order and default judgment.

Source:   FEC Record -- November 1999 [PDF].

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FEC v. GOPAC

On February 28, 1996, the U.S. District Court for the District of Columbia ruled in GOPAC's favor and dismissed this case. The FEC had asked the court to find that, under the Federal Election Campaign Act, GOPAC first qualified as a political committee in 1989 and as such was required to file and register with the FEC since then. GOPAC argued that it did not qualify as a political committee under the Act until 1991, at which time it did register with the FEC.

The court ruled that an organization's status as a political committee under the Act is properly determined by applying the "major purpose" test to narrow the statutory definition, which states that a political committee is any group that receives at least $1,000 in contributions or makes at least $1,000 in expenditures to support federal candidates. According to the court, the major purpose test serves as a bright line that separates groups that are political committees from those that are not; under the major purpose test, a group is a political committee if its major purpose is to elect a particular candidate or candidates for federal office.

FEC Administrative Activity

Following an investigation into an administrative complaint filed by the Democratic Congressional Campaign Committee in September 1990, the FEC found probable cause to believe that in 1989 GOPAC qualified as a political committee under the Act, and that, until 1991, GOPAC failed to abide by the Act's registration and disclosure requirements for political committees. This probable cause finding was based on a GOPAC solicitation that urged contributors to help "break the Democrats' stronghold on power" in the U.S. House of Representatives.

The FEC was unable to reach a conciliation agreement with GOPAC and filed this lawsuit on April 14, 1994. The FEC asked the court to impose civil penalties on GOPAC and to require GOPAC to file 1989 and 1990 disclosure reports.

Factual Background

In 1989, GOPAC's stated mission was: "to create and disseminate the doctrine which defines a caring, humanitarian, reform Republican Party in such a way as to elect candidates, capture the U.S. House of Representatives and become a governing majority at every level of government."

The court said that although this mission statement had as its ultimate objective the election of Republican candidates to the U.S. House of Representatives, GOPAC's direct support in 1989 and 1990 was for state and local candidates and not for any federal candidates.

GOPAC did develop and distribute materials espousing a set of ideas for Republican candidates, including federal candidates. GOPAC also targeted cash contributions to local and state candidates in areas where it hoped this support might indirectly influence the election of other candidates, including federal candidates, on the Republican ticket.

GOPAC also provided assistance to Congressman Newt Gingrich in 1989 and 1990, but the court said there was no material evidence that Congressman Gingrich used these funds for his 1992 reelection campaign as opposed to his work as GOPAC Chairman.

Legal Analysis

The Act defines a political committee as any group that receives at least $1,000 in contributions or makes at least $1,000 in expenditures for the purpose of influencing a federal election. 2 U.S.C. §431(4)(A).

In Buckley v. Valeo, the Supreme Court, citing First Amendment concerns, ruled that the definition of political committee "need only encompass organizations that are under the control of a candidate or the major purpose of which is the nomination or election of a candidate."

The FEC contended that the Buckley decision did not require a group to provide direct support to a specific federal candidate in order for the group to be considered a political committee under the major purpose test. Instead, the FEC argued that Buckley's definition of "political committee" encompassed groups organized to engage in partisan electoral politics or electoral activity. Accordingly, the FEC argued that if GOPAC's sole purpose was to advocate the election of Republicans as a class of candidates, then the purpose of its activities was by definition campaign related. and if its expenditures or contributions for these campaign-related activities exceeded $1,000, it qualified as a political committee under the Act.

The court disagreed because it found the term "partisan electoral politics" to be vague and therefore to chill the First Amendment rights of issue advocacy groups. The court quoted the Buckley decision: " . . . the distinction between discussion of issues and candidates and advocacy of election or defeat of candidates may often dissolve in practical application."

The court reasoned that a bright-line test was therefore required, so that contributors and committee treasurers could easily conform their conduct with the law and so that the FEC could easily identify violations and take quick and decisive action. The court concluded that the appropriate bright line was provided by limiting the definition of political committee to groups whose major purpose was the election of a particular federal candidate or candidates. The court said that this test drew two relatively clear lines: it distinguished between federal and nonfederal candidates; and it distinguished between groups that support particular federal candidates and those that lend general party support.

The court noted that the FEC conceded that there was no evidence of direct GOPAC support to federal candidates in 1989 and 1990. GOPAC's support appeared to have been limited to state and local candidates, to general nationwide dissemination of ideological materials and to Congressman Gingrich in his role as GOPAC chairman and not as a federal candidate. The court therefore ruled in GOPAC's favor and dismissed the FEC's complaint.


Source:  
 FEC Record -- April 1996 [PDF].
FEC v. GOPAC, 917 F. Supp. 851 (D.D.C. 1996).

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FEC v. HALEY CONGRESSIONAL COMMITTEE

On February 24, 1987, the U.S. District Court for the Western District of Washington at Tacoma granted the defendants' motion for summary judgment in FEC v. Ted Haley Congressional Committee (Civil Action No. 85-1185). The district court dismissed the suit with prejudice, finding no violation of federal election law regarding contribution limitations (2 U.S.C. §441a(a)(1)(A) and 441a(f)). The court concluded, alternatively, that if there was a violation, no civil penalty would be assessed.

On July 22, 1988, the U.S. Court of Appeals for the Ninth Circuit issued a decision which reversed the district court ruling. Though finding that the defendants had, in fact, violated the contribution limitations, the appeals court upheld the lower court's refusal to assess a civil penalty.

On November 22, 1988, the court issued an amended judgment responding to the remand order.

Background

The Ted Haley Congressional Committee was the principal campaign committee for Mr. Haley's bid for a House seat in Washington 's 1982 Congressional primaries. After the election, Mr. Haley obtained a $50,000 personal loan from a local bank to retire debts outstanding from his campaign. To secure the loan, Mr. Haley obtained guarantees from several friends, that is, the six other defendants in the suit. (Four of the defendants provided guarantees of $10,000 each; two provided guarantees of $5,000 each.) The loan and the guarantees were reported by Mr. Haley's campaign in its 1983 mid-year report. By the end of 1983, Mr. Haley had fully repaid the loan.

Under the election law and FEC regulations, an endorsement or guarantee of a loan, like a regular loan, counts as a contribution from the endorser or guarantor to the extent of his/her portion of the outstanding balance of the loan. 11 CFR 100.7(a)(1)(i)(C). Consequently, each guarantor for Mr. Haley's campaign loan exceeded his/her $1,000 limit for Mr. Haley's primary campaign. On October 30, 1984, the Commission therefore found reason to believe that:

On July 30, 1985, after attempting to resolve this enforcement matter through informal methods of conciliation, the Commission filed a suit against defendants in the U.S. District Court for the Western District of Washington.

District Court Ruling

The court found that "post-election loan guarantees, such as those made here, are presumptively for the purpose of influencing an election under the statute and regulations. This presumption, however, is not conclusive, but rebuttable. It simply allows the FEC to shift the burden of proof to defendants after a minimal showing."

The court held that the defendants had successfully rebutted this presumption by showing that the "facts [of the case] are not in issue, and that those facts lead to the legal conclusion that the guarantees in issue were not for the purpose of influencing any election." Thus the guarantees should not have been viewed as contributions (i.e., funds received to influence a federal election). As evidence that the loan guarantees were not made to influence a federal election, the court cited "the timing of the solicitation [of loan guarantees after the election], the nature of the relationships between Haley and the guarantors, their intent in making and accepting the guarantees and the facts and circumstances of Haley's [re]payment.... " of the loan.

The court also found "no justifiable ground" for assessing a civil penalty against defendants, even if it were to conclude the defendant had violated the election law. On April 23, 1987, the FEC filed an appeal with the U.S. Court of Appeals, 9th Circuit (Civil Action No. 87-3867).

Appeals Court Ruling

In reviewing the case on appeal, the appeals court held that, since Congress had not precisely addressed the issue of whether donations made to a campaign committee after the election constituted contributions for the purpose of influencing a federal election, the court could "not simply impose its own construction on the statute...." Rather, the court had to decide whether the FEC had based its interpretation of the statute on a "permissible construction.... "

The court found that the FEC's interpretation of the relevant statutory provisions through its regulations and advisory opinions was a "permissible" interpretation of the election law. For example, when the FEC promulgated a regulation in 1976 stating that post-election contributions were subject to limits, Congress did not disapprove it. In the court's view, "Congress' acquiescence [was] made more concrete in view of several advisory opinions the FEC has issued on the subject."

The appeals court therefore held that "the district court erred when it substituted its interpretation of the statute and regulations rather than giving deference to the FEC's interpretation of its enabling statute and its own promulgated regulations and advisory opinions...The appellees [the Haley Congressional Committee] cannot choose to ignore that interpretation of the regulatory scheme and urge this court to substitute its own construction for that of the FEC."

The appeals court found that the district court had not abused its discretion in finding that a civil penalty for the defendants' violations of the election law was "unwarranted." Consequently, the appeals court decided not to "disturb that finding and conclusion."

Finally, the appeals court vacated the district court's award of attorneys' fees to the defendants. Since the defendants were no longer the "prevailing party" in the case, the appeals court held that all parties to the suit had to bear their own litigation costs.

District Court Ruling on Remand

In its amended judgment, the district court:


Source:
  FEC Record -- May 1987, p. 6; September 1988, p. 7; and January 1989, p. 9.
FEC v. Ted Haley Congressional Committee, 654 F. Supp. 1120 (W.D. Wash. 1987), rev'd, 852 F.2d 1111 (9th Cir. 1988).

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FEC v. HALL-TYNER ELECTION CAMPAIGN

On September 22, 1981, the U.S. District Court for the Southern District of New York issued an order in FEC v. Hall-Tyner Election Campaign Committee (the Committee) granting the defendant's motion for summary judgment in the suit (Civil Action No. 78-3508). The Committee was the principal campaign committee for the 1976 Presidential and Vice Presidential nominees of the Communist Party, U.S.A. The district court ruled that the recordkeeping and disclosure requirements of the Act, as applied to the Committee, would abridge First Amendment rights to the Committee's supporters.

FEC's Claim

The FEC's suit arose from the Committee's failure to disclose on its reports the names and addresses of 424 contributors who had each made contributions of $100 or more. Instead, the Committee listed the contributors as "anonymous" (in violation of 2 U.S.C. §434(b)(2)). Moreover, the Committee's treasurer failed to keep records of contributions exceeding $50 from individuals who had elected to remain anonymous (in violation of 2 U.S.C. §432(c)). After attempting to resolve this matter through informal methods of conciliation, the Commission filed suit with the district court on August 1, 1978.

District Court Ruling

In ruling that the Committee did not have to comply with the Act's disclosure requirements, the district court noted that the Supreme Court had not created a blanket exemption for minor parties from the Act's disclosure requirements in its Buckley v. Valeo decision. The Supreme Court did conclude, however, that minor parties might not have to comply with the disclosure provisions when they had a chilling effect on contributors' rights of free association. Buckley v. Valeo, 424 U.S. at 72-74.

In order to exempt contributors from the disclosure requirements, the Court said that a minor party would have to demonstrate a "reasonable probability" that compelled disclosure of the names of contributors would "subject them to threats, harassment, or reprisals from either Government officials or private parties." Id. at 74. Under these circumstances, disclosure could "...instill sufficient fear in potential supporters of the organization to deter them from engaging in protected associational activity." Id. at 71. On examining the evidence presented by the Committee, the district court found that "the record plainly reflects an extensive history of governmental harassment and public hostility directed at the Party and its members and supporters." The district court concluded that "the substantial infringement of First Amendment rights demonstrated in the record cannot be justified by the governmental interests furthered by applying the FECA disclosure requirements to the defendants." Moreover, the court noted that "the governmental interest served in disclosing the source and amount of contributions is less substantial" in the case of a minor party. The district court cited the Supreme Court's holding in Buckley that "the undue influence of large contributions on officeholders" is reduced in the case of minor parties since their candidates are less likely to win an election. Id. at 70.

Similarly, the district court found that the Act's recordkeeping requirements also infringed on the contributors' free association rights, even though information recorded would not be publicly disclosed. The court cited an ongoing governmental investigation as evidence that records of contributors' names would subject them to undue harassment. The district court cited 12 affidavits submitted by anonymous individuals providing evidence of harassment. The district court found that the main governmental interest served by the recordkeeping requirements (i.e., effective monitoring and enforcement of the contribution limits) did not justify infringement of the contributors' First Amendment rights.

Appeals Court Ruling

On May 6, 1982, the U.S. Court of Appeals for the Second Circuit issued an opinion in FEC v. Hall-Tyner Election Campaign Committee (Civil Action No. 81-6229). The appeals court upheld an earlier ruling by the U.S. District Court for the Southern District of New York that the recordkeeping and disclosure requirements of the Act, as applied to the Hall-Tyner Campaign Committee (the Committee), would abridge First Amendment rights of the Committee's supporters.

In affirming the district court's decision, the appeals court found that the Committee had met the standard set forth in Buckley v. Valeo for exempting minor parties from the Act's disclosure requirements; i.e., the Committee had demonstrated a "reasonable probability" that disclosure of the names of its contributors would subject them to governmental or private harassment. Buckley v. Valeo, 424 U.S. at 72-74. Moreover, the appeals court cited the Court's holding in Buckley that the governmental interest served in disclosing the source and amount of contributions (i.e., "the undue influence of large contributions on officeholders") is less substantial in the case of a minor party with little chance of winning an election. Id. at 70. The appeals court concluded, therefore, that the governmental interest served in obtaining information on the Committee's contributors did not justify the chilling effect that disclosure would have on their First Amendment rights of free association.


Source:
  FEC Record -- November 1981, p. 5; and July 1982, p. 7.
FEC v. Hall-Tyner Election Campaign Committee, 524 F. Supp. 955 (S.D.N.Y. 1981), aff'd, 678 F.2d 416 (2d Cir. 1982), cert. denied, 459 U.S. 1145 (1983).

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FEC v. FRIENDS OF JANE HARMAN

On August 18, 1999, the U.S. District Court for the Central District of California found that Friends of Jane Harman, the principal campaign committee of former Congresswoman Jane Harman, and its treasurer violated the Federal Election Campaign Act (the Act) when they accepted corporate contributions in the form of earmarked contributions collected by a corporate representative and an "advance" from the same corporation.

Background

Hughes Aircraft Company (Hughes), a Los Angeles corporation, sponsored a fundraiser for Ms. Harman at her request during the 1993-1994 election cycle.

Hughes's chairman and CEO approved the fundraiser and directed Hughes's employees to carry out the logistics of the fundraiser. Hughes's executives and employees secured a room at Hughes's corporate headquarters, hired a caterer, issued invitations and collected and transmitted Hughes employees' contribution checks to the Harman campaign.

A solicitation letter, sent to Hughes's employees in tandem with an invitation, requested contributions to Ms. Harman's campaign. The solicitation letter also requested that personal checks be made out to the campaign and that they be forwarded, via interoffice mail, to a Hughes employee in advance of the event.

On October 29, 1993, Representative Harman appeared at the fundraiser held at Hughes's corporate headquarters. Hughes's Director of Public Affairs collected some contributions for the event through interoffice mail prior to the event and collected others from executives at the door. A few days after the fundraiser, a representative of the Harman campaign picked up the checks. Altogether, Hughes collected and forwarded $20,600 to the Harman campaign.

Three months later, the Harman campaign paid $857 to the corporation to cover Hughes's labor costs and the cost of using Hughes's facilities. The campaign paid the food caterer for the event directly.

Earmarked Contributions

The Act prohibits corporations from making contributions or expenditures in connection with any federal election. 2 U.S.C. §441b(a). Because Hughes, as a corporation, was prohibited from making a contribution to a federal campaign, it was also prohibited under FEC regulations from acting as a conduit for contributions that are earmarked to candidates or their authorized committees. 11 CFR 110.6(b)(2). Additionally, 2 U.S.C. §441b(a) prohibits candidates or their committees from knowingly accepting "anything of value" from a corporation.

The court found that the collection of contributions by a Hughes employee in her official capacity as Director of Public Relations conferred a benefit on the campaign from the corporation. Therefore, when the Harman campaign received the checks collected, it violated the §441b(a) prohibition against accepting anything of value from a corporation.

Reimbursement of Staff Labor Costs

Section 441a(b)(2) of the Act provides that a "contribution" includes an advance. On the other hand, 11 CFR 114.9(2) (an FEC regulation) permits campaigns to reimburse corporations for the use of corporate facilities within a commercially reasonable time. The FEC maintained that this regulation covers reimbursement for the use of facilities but not reimbursement for the labor costs of corporate employees.

Deferring to the FEC's interpretation of the Act and its regulations, the court concluded that, "because the Harman Campaign did not pay for the use of employee services until after the event occurred," the $731 value of the employees' labor constituted an advance of corporate funds and was, therefore, an impermissible corporate contribution violating 2 U.S.C. §441b(a).

Remedy

While the court found that the committee knowingly violated the Act, the court denied the FEC's request to require the committee to disgorge to the U.S. Treasury an amount equal to the prohibited contributions, to assess a civil penalty against the committee or to enjoin the committee from accepting corporate contributions in violation of 2 U.S.C. Section 441b(a).

The court stated that there was no evidence that the defendants believed, at the time of the fundraiser, that they were not complying with the law. The court also stated that the FEC subsequently clarified its regulations surrounding the use of corporate staff; the regulations now specifically state that the use of corporate staff to "plan, organize or carry out [a] fundraising project" requires payment of the fair market value of the services in advance. 11 CFR 114.2(f)(2)(i)(A). The court did not issue an injunction because the likelihood of future violations of the Act by the campaign or its treasurer was remote since the Harman campaign is no longer in existence and Representative Harman is no longer in office.


Source:
  FEC Record -- October 1999 [PDF]; and November 1999 [PDF].

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FEC v. RE-ELECT HOLLENBECK TO CONGRESS

On June 16, 1986, the U.S. District Court for the District of Columbia denied the Commission's motion for summary judgment and entered a judgment for the defendants in FEC v. Re-Elect Hollenbeck to Congress Committee (Civil Action No. 85-2239). The court held that the Re-Elect Hollenbeck to Congress Committee (the Hollenbeck Committee), Representative Hollenbeck's principal campaign committee for his 1982 reelection effort, and the Hollenbeck Committee's treasurer, David I. Korsh, had not knowingly violated the election law by accepting an excessive contribution from the New Jersey Republican State Committee.1

Background

In 1982, when the New Jersey Republican State Committee (the State Committee) made a $5,000 contribution to the Hollenbeck Committee, the State Committee had not achieved multicandidate committee status2 because it had not yet satisfied the six-month registration requirement. Consequently, the State Committee was only eligible to make a contribution of up to $1,000 per election to each candidate, and the Hollenbeck Committee could legally receive only $1,000 for the primary election.

On learning of the State Committee's excessive contributions, the FEC initiated enforcement proceedings against the State Committee, the campaign committee of each New Jersey Republican incumbent and their respective treasurers. When the Commission failed to reach a settlement with the Hollenbeck Committee, the agency filed a suit against the Committee in which it asked the district court to: (1) assess a $5,000 civil penalty against the defendants for violating 441a(f) of the Act in accepting the State Committee's excessive contribution and (2) order the Hollenbeck Committee and its treasurer to refund the excessive portion of the contribution (i.e., $4,000) to the State Committee.

Acknowledging receipt of the $5,000 contribution, the Hollenbeck Committee denied "knowingly accepting" an illegal contribution. The Committee argued that it had "erroneously assumed that the State Committee had qualified for the status of a multicandidate political committee."

The Court's Ruling

The court noted that, under FEC regulations, a campaign committee's"treasurer shall make his or her best efforts to determine the legality of any contribution"3 made to the campaign. The court observed that this regulation was "not unduly burdensome. It does not place an affirmative obligation upon the treasurers to verify the legality of every contribution. Rather, it requires verification of contributions that 'appear to be illegal,' including those exceeding $1,000 that do not appear to come from a multicandidate committee."

In ruling that the Hollenbeck Committee should not be held liable for the State Committee's excessive contribution, the court held that the State Committee's contribution to the Hollenbeck Committee "would appear to be legal to any reasonable treasurer.... "

FOOTNOTES:

1 On July 25, 1986 , the U.S. District court for the District of New Jersey found that another New Jersey House incumbent campaigning for reelection in 1982 had knowingly accepted an excessive contribution from the New Jersey Republican State Committee. See FEC v. Dramesi for Congress Committee.
2 Multicandidate committees may contribute up to $5,000 per election to a candidate's authorized committee(s) or any other political committee. To achieve multicandidate status, a committee must have more than 50 contributors, have been registered for at least six months and, with the exception of state party committees, have made contributions to five or more candidates for federal office. 2 U.S.C. §441a(a)(4); 11 CFR 100.5(e)(3).
3 See 11 CFR 103.3(b)(1).


Source:
  FEC Record -- August 1986, p. 7.

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FEC v. INTERNATIONAL FUNDING INSTITUTE

On July 10, 1992, the U.S. Court of Appeals for the District of Columbia Circuit, sitting en banc, upheld the constitutionality of 2 U.S.C. §438(a)(4). (Civil Action No. 91-5013.) That provision of the Federal Election Campaign Act (the Act) prohibits anyone from using, for solicitation or commercial purposes, the information on individual contributors listed in political committee reports filed with the FEC. On November 30, 1992, the U.S. Supreme Court denied a petition for review of the case.

On March 1, 1993, the U.S. District Court for the District of Columbia ordered defendants to pay an $18,000 civil penalty for knowing and willful violations of the sale or use restriction.

Background

According to the findings of fact in this case, International Funding Institute (IFI), through Robert E. Dolan, its sole stockholder and director, subscribed to an on-line data base service provided by Legi-Tech, Inc. (an amicus curiae in this action). The data base contained information on individual contributors compiled from FEC reports. IFI developed the contributor data into a mailing list, which it marketed through a broker. The broker, in turn, rented the list to about five customers, including American Citizens for Political Action, Inc. (ACPA), a political committee. (Mr. Dolan is also chairman and treasurer of ACPA.) ACPA used the list for several mailings, each soliciting about 5,000 individuals.

In an internal enforcement matter, the FEC found probable cause to believe that IFI, ACPA and Mr. Dolan, as ACPA treasurer, knowingly and willfully violated section 438(a)(4). Unable to reach a conciliation agreement with respondents, the agency filed suit against them in the U.S. District Court for the District of Columbia. (Civil Action No. 90-1623.)

Defendants asked the district court to dismiss the case, arguing that §438(a)(4) violated the First Amendment of the Constitution, both on its face and as applied to their conduct. The FEC moved to certify the constitutional question to the court of appeals. The district court granted the FEC's motion.

Court of Appeals Opinion

Level of Scrutiny

The court first examined what level of scrutiny it should apply to determine whether the use restriction of §438(a)(4) was constitutional. Noting some apparent conflicts in levels of scrutiny applied by the Supreme Court in similar cases, the court "assumed"-but did not decide-that §438(a)(4) was subject to intermediate scrutiny.

Quoting Seattle Times Co. v. Rhinehart, 467 U.S. 20, 32 (1984), the court explained the Supreme Court's criteria for intermediate scrutiny: it "require[s] only that the restriction further 'an important or substantial governmental interest unrelated to the suppression of expression' and [that it] be 'no greater than is necessary or essential to the protection of the particular governmental interest involved.'"

Governmental Interest

The FEC argued, inter alia, that §438(a)(4) was narrowly tailored to further an important governmental interest, that of protecting the value of a political committee's contributor list. The FEC further argued that this protection, in turn, preserves political discourse.

The court agreed: "Without the use restriction of §438(a)(4), innumerable entrepreneurs would, like the defendants here, be able freely to appropriate to themselves part of the value of the contributor lists compiled by reporting political committees. As a result, such committees would have less incentive to compile the lists in the first place. In other words, if the return on their investment in solicitation would be reduced by others using the resulting lists, political committees would not find it worthwhile to solicit as much as they now do; they would raise less money, spend less money, and correspondingly underwrite less political discourse....[T]he use restriction protects political discourse from the adverse effect that the disclosure requirement of the Act would otherwise have."

(The FEC also argued, based on legislative history, that §438(a)(4) furthers the governmental interest in protecting contributors from unwanted solicitations, but the court did not find it necessary to reach that argument.)

Defendants claimed that a political committee has no property rights in its contributor list because a list of names and addresses is not sufficiently original to warrant copyright protection. The court, however, observed that "Congress may recognize an intellectual property interest, narrower than copyright, that is not subject to the constitutional requirement of originality."

The court rejected defendants' alternative argument that §438(a)(4) is inconsistent with the First Amendment because it creates "a property interest in the political sympathies of another." Instead, the court said, the use provision "narrowly protects the value of the list itself in a particular use; it does not prevent one from soliciting a person who is on a committee's contributor list, so long as one does not obtain that person's name (directly or indirectly) from a list filed with the FEC."

Conclusion

The court held that, under an intermediate level of scrutiny, section 438(a)(4) is constitutional as applied to the defendants' conduct because it "advances an important governmental interest" (preserving the value of a political committee's contributor list) and "is no broader than is necessary to that task."

The court rejected defendants' second claim, that §438(a)(4) was unconstitutional on its face. Quoting Members of the City Council of Los Angeles v. Taxpayers for Vincent, 466 U.S. 789, 798 (1984), the court said that a facial challenge can succeed "only if the statute may 'never be applied in a valid manner' or is 'written so broadly that [it] may inhibit the constitutionally protected speech of third parties.'" The defendants, the court said, failed to make such an argument.

The court remanded the case to the district court for proceedings consistent with its holding.

Defendants agreed to the district court's March 1993 order, which imposed the $18,000 penalty and also permanently enjoined defendants from future violations of the sale and use restriction.


Source:
  FEC Record -- September 1992, page 11; January 1993, page 2; and May 1993, p. 2.

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FEC v. AMERICANS FOR JESSE JACKSON

On May 19, 1987, the United States District Court for the District of Maryland issued a consent order in FEC v. Americans for Jesse Jackson (Civil Action No. Y-86-3766). Americans for Jesse Jackson was a 1984 political committee that was not authorized by Presidential primary candidate Jesse Jackson. In the consent order, the parties agreed that Americans for Jesse Jackson violated the Act in several ways:

The defendant agreed to pay a civil penalty of $500 and to file all outstanding reports with the Committee within 30 days.


Source:
  FEC Record -- August 1987, p. 9.

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