MUR 5390: Chartered corporation pays record $3.8M civil penalty

The Commission has entered into a conciliation agreement with Federal Home Loan Mortgage Corporation (Freddie Mac), a federally chartered corporation, concerning its use of corporate resources to host campaign fundraising events and to collect and forward political contributions to federal candidates. The $3.8 million civil penalty Freddie Mac has agreed to pay for these violations of the Federal Election Campaign Act (the Act) is the highest civil penalty in FEC history.

Background

The Act prohibits corporations from making contributions or expenditures from their general treasury funds in connection with any election of a federal candidate. 2 U.S.C. 441b(a). A corporation may send a communication that solicits contributions for a particular candidate or committee only to its restricted class. A corporation and its agents may not facilitate an individual’s contribution to a candidate or act as a conduit for individual contributions. 2 U.S.C. 441b(b)(2)(A), 11 CFR 114.2(f)(1) and 114.3. Examples of this would include:

• Officials or employees ordering staff to plan, organize or carry out a fundraising project as part of their work responsibilities using corporate resources; or
• Providing materials for the purpose of transmitting or delivering contributions, such as stamps, envelopes addressed to a candidate or committee other than the corporation or labor organization’s separate segregated fund.

Corporations organized by the authority of any law of Congress—like Freddie Mac—are also prohibited from raising or spending funds to influence state or local elections.

Campaign fundraising events

From 1999 to 2002, Robert Mitchell Delk, senior vice president of Freddie Mac’s Government Relations department, retained Epiphany Productions, Inc., to plan and organize campaign fundraisers for federal candidates. Freddie Mac retained Progressive Strategies LLC in 2001 and The Leger Company in 2002 to assist Clarke Camper, the head of the Congressional Relations group within Government Relations, with these fundraisers. From October 2000 through May 2003, Mr. Delk hosted 70 campaign fundraisers and raised about $1.7 million for federal candidates. Additionally, Leland Brendsel, Freddie Mac’s chairman and CEO, hosted a campaign fundraising lunch in 2001 for a former member of Freddie Mac’s board of directors, who was also a federal candidate.

Freddie Mac contends that it paid monthly retainers to compensate the firms for services unrelated to fundraising events, such as providing political and legislative advice, organizing non-fundraising events honoring current and former officials, advising Mr. Delk and Mr. Camper in their personal capacities on fundraising and advising Freddie Mac regarding fundraising for the building fund accounts of national political parties.¹

Solicitation and collection of contributions

Mr. Delk was responsible for advising Freddie Mac executives of congressional candidates to whom they should consider making campaign contributions. Mr. Delk and Mr. Camper contacted executives and solicited contributions, including specific amounts and whether the executives, their spouses or both should write checks. Mr. Delk or Mr. Camper either personally picked up the checks or requested that the executive send the contribution to the Government Relations office. Mr. Brendsel’s secretary handled approximately $55,000 in contributions to federal committees from 2000 to 2004.

RGA contribution

In 2002, the chairman of the Republican Governors Association (RGA), who was also a consultant hired by Freddie Mac, approached Mr. Delk and asked Freddie Mac to make a $250,000 donation to the RGA for the Republican National Committee’s Eisenhower Building Fund. The chairman also suggested that Freddie Mac divide the donation into two parts. The first check, in the amount of $100,000, was payable to the Republican Governors Association Eisenhower Building Fund.

Freddie Mac sent the second check after the passage of BCRA, but before its effective date. The check was payable to the RGA allegedly with a letter asking that the contribution be used for building fund purposes. However, RGA deposited the check in its operating account. This constituted an impermissible corporate contribution. Freddie Mac asked for a refund eight months later.

Conciliation agreement

Freddie Mac agrees to pay a civil penalty of $3.8 million for its violations of the Act. It also agrees to cease and desist from engaging in activities that violate 2 U.S.C. 441b(a). The Commission has determined to take no further action with respect to the former corporate executives and Epiphany Productions.

¹ Some of the violations occurred before the passage of the Bipartisan Campaign Reform Act of 2002 (BCRA). Since its enactment, corporations have been banned from making any donations to national party committees.