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On March 25, 1997, the U.S. District Court for the District of New Hampshire ordered Anastasios Kalogianis to pay a $37,500 civil penalty to the FEC for making $249,000 in excessive contributions to the Tsongas for President Committee during the 1992 election cycle. Both parties to this suit agreed to the judgment and consent order.
Mr. Kalogianis made six loans to the Tsongas Committee. Although one of the checks was made payable to Nicholas Rizzo, the committee's chief fundraiser, the money was given with the intention that it be used in the Tsongas campaign.
The Federal Election Campaign Act (the Act) states that no person may make
contributions to any federal candidate or his or her authorized candidate
committee which, in the aggregate, exceed $1,000. 2 U.S.C. §441a(a)(1)(A).
A contribution includes anything of value made by any person for the purpose
of influencing a federal election, including loans. 2 U.S.C. §431(8)(A)(i).
Further, Commission regulations state that a loan that exceeds the contribution
limits of the Act is unlawful whether or not it is repaid. 11 CFR 100.7(a)(1)(i)(A).
In addition to the civil penalty, Mr. Kalogianis was permanently enjoined
from making similar violations of the Act.
Source: FEC Record -- May 1997 [PDF].
On January 11, 2006, the Commission asked the U.S. District Court for the Middle District of Florida to find that Constantine Kalogianis, Kalogianis for Congress, Inc.; Patricia Jones, as treasurer of Kalogianis for Congress; Kalogianis and Associates, P.A.; and Liberty Title Agency, Inc. violated the Federal Election Campaign Act’s (the Act) ban on corporate contributions and its reporting requirements. In addition, the FEC asked the court to permanently enjoin them from violating these acts and assess a civil penalty against each defendant.
The Act prohibits making or accepting corporate contributions in connection with a federal election. 2 U.S.C. 441b(a). A contribution is any gift, subscription, loan, advance, or deposit of money or anything of value made by any person for the purpose of influencing any election for federal office. The Act also requires, among other things, that the identity of each person who makes a loan be disclosed along with the identification of any endorser of the loan and the date and amount of the loan. 2 U.S.C. 434(b).
During the 2002 campaign, the Kalogianis Committee accepted six loans totaling over $54,000 from Kalogianis & Associates and Liberty Title Agency, corporations Mr. Kalogianis owns. Additionally, the committee operated from the offices of Kalogianis & Associates without charge for administrative and overhead expenses. The committee reported that it had received personal loans from Constantine Kalogianis, when part of one loan was from Kalogianis & Associates and part of another loan was from Liberty Title Agency. The committee also failed to report the correct dates on which it repaid loans made by Liberty Title Agency.
Source: FEC Record -- March 2006 [PDF].
FEC v. KAZRAN
Click here for case summary, as well as court decisions and related documents.
On June 8, 1992, the U.S. District Court for the Eastern District of Pennsylvania declared that Edward E. Kopko violated 2 U.S.C. §441f by making contributions in the names of others. In its complaint, the FEC had alleged that defendant Kopko had reimbursed twelve of his relatives and friends for their $250 checks to Alexander Haig's 1988 Presidential campaign. The court ordered Mr. Kopko to pay a $1,500 civil penalty and permanently enjoined him from violating §441f. Both the FEC and the defendant agreed to the entry of the order. (Civil Action No. 91-CV-7764.)
Source: FEC Record -- August 1992, p. 11.
On July 2, 1981, citing a lack of appellate jurisdiction, the Supreme Court dismissed an appeal brought by T. Bertram Lance from the U.S. Court of Appeals for the Fifth Circuit, construed Lance's papers as a petition for a writ of certiorari and declined to hear the case. In FEC v. T. Bertram Lance (Civil Action No. 78-1859), the appeals court had affirmed an earlier decision by the U.S. District Court for the Northern District of Georgia, which ordered enforcement of a deposition the FEC had issued to Mr. Lance. Motions by the appellant to stay the appeals court's decision had been denied by the appeals court on February 19, 1981, and by the Supreme Court on March 11, 1981.
The FEC had issued the subpoena to Mr. Lance as part of an investigation into Mr. Lance's 1974 gubernatorial campaign in Georgia, which involved possible violations of 2 U.S.C. §441b (formerly 610 of the Federal Corrupt Practices Act). This provision prohibits national banks from making or candidates from accepting contributions in connection with any election to any political office.1 The Commission's investigation began in September 1977.
District Court Ruling
The district court ordered Mr. Lance to comply with the subpoena. The court reasoned that the subpoena was well within the Commission's "broad and inclusive" statutory authority to investigate violations of the Federal Election Campaign Act (the Act).
Appeals Court: Panel
A panel of the appeals court rejected the arguments made by Mr. Lance for quashing the subpoena and affirmed the district court order enforcing the subpoena. Specifically, Mr. Lance claimed that the FEC was investigating matters outside its jurisdiction. He contended that both the Constitution and the Act barred any FEC investigation of contributions made by national banks to his 1974 campaign. The panel responded to this claim by affirming the FEC's argument that it was "...specifically given authority over this provision." (P.L. 93-433, 88 Stat. 1281 (October 15, 1974).) "Moreover, the Supreme Court held that any party seeking enforcement of 610 (now 441b) after January 1, 1975, must seek redress with the Commission." Cort v. Ash, 422 U.S. 66 (1974).
Mr. Lance further claimed that the subpoena violated the equal protection and ex post facto provisions of the Constitution by attempting to apply §441b to campaign activities that occurred before the enactment of the FECA in 1975. The panel, on the other hand, affirmed the FEC's argument that these provisions presented no impediment to the FEC's investigation: "The prohibition against the making of campaign contributions by national banks has been in effect since 1907. Tillman Act, 34 Stat. 864. The mere recodification of 18 U.S.C. §610 as 2 U.S.C. §441b cannot absolve the respondent...from liability for substantive violations which were not changed by the incorporation of §441b into Title 2."
Appeals Court: En Banc
On January 16, 1981, the appeals court, sitting en banc, issued an opinion that adopted the earlier panel decision, affirmed the district court's subpoena enforcement order and rejected a claim, presented by Mr. Lance in his appeal, that §441b was unconstitutional on its face. The appeals court adopted three of the arguments given by the appeals court panel, but rejected the ex post facto argument, stating that it was not ripe for adjudication. The court concluded that the prohibition on unsound banking practices (extensions of credit to a campaign that are outside the ordinary course of business) did not violate the First Amendment because all the transactions in question involved "no speech elements at all." The bank drafts were transacted privately and were "...not the sort of public expression or support for Lance and his views that would make them even 'symbolic speech.'"
As to Mr. Lance's argument that §441b was unconstitutionally vague, the court noted, "The vagueness doctrine has been developed in the context of, and it is applicable to, penal statutes." The court concluded that the vagueness issue was not ripe for adjudication because the court was "...unwilling to assume that the present investigation of Lance will result in his criminal prosecution."
The court also rejected Mr. Lance's claim that §441b abridged Fifth Amendment rights by imposing greater restrictions on national banks in connection with elections than on other entities. The court held that since "...the Banks' contributions contain no cognizable elements of speech...we think the statute must be upheld if there is a rational relationship between the prohibition...and the purpose that prohibition serves.... Since we have no difficulty in concluding that a prohibition against banks engaging in unsound banking practices is rational, we reject Lance's equal protection claim."
As to the defendant's claim that the statute of limitations barred the investigation, the panel found that there was no statute of limitations applicable to a civil proceeding undertaken to enforce the Act. 2 U.S.C. §437g. The panel upheld the FEC's argument that the statute of limitations applied only to criminal prosecutions. "Even assuming arguendo that the three year statute of limitations was applicable to a future civil action brought by the Commission," the FEC argued, "the Commission has information suggesting that violations have occurred within the three years. Moreover, as noted, the existence of violations outside the statutory period themselves provide reason to investigate to ascertain whether further violations occurred within the three year period."
Finally, the defendant contended that, since the FEC already had information available to it from other government agencies, enforcement of the subpoena should be denied on grounds of undue burden and harassment. The panel rejected this claim, confirming the FEC's argument that "the existence of prior investigations by other agencies touching on similar issues does not preclude an agency from investigating matters within its jurisdiction." FEC v. Texaco, 555 F.2d at 878-79. The appeals court panel determined, however, that the constitutional challenges asserted by Mr. Lance should be heard by the court sitting en banc.
Source: FEC Record -- September 1981, p. 1.
FEC v. Lance, 617 F.2d 365 (5th Cir. 1980), aff'd, 635 F.2d 1132 (5th Cir.) (en banc), appeal dism'd, cert. denied, 453 U.S. 917 (1981).
On September 28, 1994, the U.S. District Court for the Eastern District of Virginia issued an order stipulated by the parties holding Lyndon H. LaRouche, Jr., and his 1988 Presidential campaign committee jointly and severally liable for repayment of $146,464.44 in Presidential primary matching funds-plus accrued interest-to the U.S. Treasury.
Mr. LaRouche received $833,577 in 1988 primary matching funds. The Commission determined that he had to repay $151,260 in funds received in excess of his entitlement and funds spent on nonqualified campaign expenses. The campaign repaid part of that amount in February 1992, leaving $146,464 still outstanding.
The Commission claimed that, in a letter of September 22, 1992, it notified defendants that the repayment was due within 30 days. On October 22, instead of repaying the funds, Mr. LaRouche and his campaign filed suit against the FEC to challenge the repayment amount.1 They did not ask the FEC to stay the repayment until the court decided the case; nor did they deposit the repayment amount in an interest-bearing account. See 11 CFR 9038.5(c).
The FEC asked the court to find that Mr. LaRouche and his 1988 Presidential primary campaign had violated the public funding law by failing to repay the remaining $146,464. The agency further asked the court to order Mr. LaRouche and his campaign to repay that amount-plus interest accruing from October 22, 1992-to the U.S. Treasury.
The order stipulated that a $158,304.84 check (the security), given to the court by Democrats for Economic Recovery-LaRouche in '92,2 be deposited into an interest-bearing account and used for the repayment, if appropriate.
The FEC agreed to refrain from all efforts to collect on the defendants' repayment obligation until after the Commission issued a final repayment determination with respect to the Presidential primary matching funds received by the LaRouche in '92 committee.
If the FEC's final repayment determination concluded that the LaRouche in '92 committee had at least $158,304.84 in excess campaign funds, then the court would release the security-plus interest-to the FEC as repayment of the defendants' repayment obligation. In this event, the FEC and the defendants would voluntarily dismiss all claims and counterclaims associated with this case.
If the FEC's final repayment determination for the LaRouche in '92 committee concluded that the committee did not have at least $158,304.84 in excess campaign funds, then the court would issue the FEC a check for that portion of the security equal to the amount of the committee's excess campaign funds. That amount would represent a partial repayment of the defendants' repayment obligation. The balance of the security (including accrued interest) would be returned to the LaRouche in '92 committee. In this event, the FEC could use any available legal procedures to collect the remaining amount owed by the defendants.
The Commission reserved the right to conclude that the LaRouche in '92 committee's payment to the court was not a qualified campaign expenditure (for the 1992 campaign) and to contest the sufficiency of the security to pay the defendants' obligation. The defendants and the LaRouche in '92 committee reserved the right to contest any Commission finding.
1 The campaign did not contest the entire
repayment amount but only $109,149 of the total. See LaRouche v. FEC (92-1555).
2 Democrats for Economic Recovery-LaRouche in '92 was Lyndon LaRouche's 1992 authorized Presidential campaign committee.
Source: FEC Record -- July 1994, p. 3; and December 1994, p. 2.
On September 17, 1984, the U.S. District Court for the District of Columbia issued an order in FEC v. Citizens for LaRouche (Civil Action No. 83-0373), which granted summary judgment in favor of the FEC and dismissed the defendants' counterclaims.
On February 9, 1983, the FEC filed suit against Lyndon H. LaRouche and the Citizens for LaRouche (CFL), Mr. LaRouche's principal campaign committee for his publicly funded Presidential campaign in 1980. In the suit, the FEC asked the district court to declare that the LaRouche campaign had violated a conciliation agreement entered into by CFL with the FEC. The Commission claimed that the campaign had failed to pay any portion of the $15,000 civil penalty stipulated in the agreement. The conciliation agreement had resulted from an enforcement action in which the FEC had found probable cause to believe that, among other violations, the LaRouche campaign had accepted unlawful contributions in 1979 and 1980.
In its suit, therefore, the FEC had asked the district court:
- To declare that CFL had violated the conciliation agreement;
- To order Mr. LaRouche and the LaRouche campaign to pay the $15,000 civil penalty (with interest);
- To permanently enjoin the LaRouche campaign from further violations of the conciliation agreement;
- To declare that Mr. LaRouche was jointly and severally liable for the civil penalty and that, in failing to pay the penalty, he had violated one of the terms of his certification letter. (He had signed the letter in November 1979 as a prerequisite to being eligible for primary matching funds); and
- To permanently enjoin Mr. LaRouche from further violating the terms of the certification letter.
Mr. LaRouche and the LaRouche campaign admitted that it had failed to pay any portion of the civil penalty. The defendants maintained, however, that the entire written conciliation agreement had been voided by the FEC's alleged breach of both the written agreement and a supplemental oral agreement that allegedly had been reached between the campaign and FEC attorneys. As a result, the defendants claimed, the FEC could not recover the civil penalty.
District Court Ruling
The court noted that, under the election law, a conciliation agreement may only be entered into with the affirmative vote of four Commissioners. See 2 U.S.C. §437g(a)(4)(A)(i). The court found, therefore, that it had to base its consideration of the case exclusively on the terms of the written conciliation agreement approved by the Commission. The Commission had not voted on the terms of the alleged oral agreement; nor had the written conciliation agreement made reference to a supplemental oral agreement.
The court noted that, to file a civil action against parties that violate the terms of a conciliation agreement, "the Commission need only establish that the person has violated, in whole or in part, any requirement of such a conciliation agreement.... " See U.S.C. §437g(a)(5)(D). Since the LaRouche campaign admitted that it had never paid the civil penalty required by the conciliation agreement, the court found that "the FEC is entitled to declaratory relief in this action and receipt of an accelerated payment of $15,000 from defendant CFL."
The court further found that the candidate, Lyndon H. LaRouche, must also be held liable for the unpaid civil penalty. The court cited the letter of agreements that Mr. LaRouche had entered into with the FEC as a condition of matching fund eligibility. Under the agreements, both Mr. LaRouche and his campaign committee were held liable for any civil penalties assessed against his campaign. Finding no merit to the campaign's counterclaim for damages resulting from "fraudulent inducement and fraudulent actions by the FEC," the court dismissed the counterclaim "for failure to state a claim upon which relief can be granted."
Source: FEC Record -- November 1984, p. 6.
FEC v. Citizens for LaRouche, 2 Fed. Elec. Camp. Fin. Guide (CCH) ¶9214, (D.D.C. 1984).
On April 8, 1991, the U.S. District Court for the District of South Carolina, Greenville Division, granted the FEC's motion for default judgment. (Civil Action No. 6:90-2116-9.) The Commission claimed that Mark Lawson knowingly permitted his name to be used to effect a contribution made in the name of another, a violation of 2 U.S.C. §441f. The FEC alleged that, in 1982, Mr. Lawson received a $1,500 bonus from his employer, Robin's Mens Store, in order to make a $1,000 contribution two days later to the House campaign of Robin Tallon, Jr.
The court decreed that Mr. Lawson had violated §441f and ordered him to pay a $5,000 civil penalty within 10 days. The court also permanently enjoined Mr. Lawson from future violations of §441f.
Source: FEC Record -- June 1991, p. 1
On October 26, 1988, the U.S. District Court for the Central District of California entered a consent order in FEC v. Roger Lee (Civil Action No. 88-02640). The FEC filed the suit against Mr. Roger Lee, President and Director of the Bekins Company, alleging that Mr. Lee had violated section 441b(a) of the election law.
In his capacity as Chief Financial Officer of the Bekins Company, Mr. Lee consented to corporate reimbursements for employees who made contributions to Senator John Glenn's 1984 Presidential primary campaign.
In settlement of this litigation, Mr. Lee agreed to pay $5,000 civil penalty for these violations within 30 days of the court's order.
Source: FEC Record -- December 1988, p. 8.
On February 16, 1996, the U.S. Court of Appeals for the District of Columbia Circuit reversed the district court's decision to dismiss the FEC's case against Legi-Tech, Inc. The district court had dismissed the case on October 12, 1994, based on the ruling of the U.S. Court of Appeals for the District of Columbia Circuit in FEC v. NRA Political Victory Fund.
On May 30, 1997, the U.S. District Court for the District of Columbia granted the FEC's motion for summary judgment and imposed a $20,000 civil penalty on Legi-Tech, after it used information obtained from disclosure reports filed with the FEC for commercial purposes in violation of the Federal Election Campaign Act (the Act).
The Act requires political committees to identify each individual whose aggregate contributions exceed $200 in a calendar year by listing their name, mailing address, occupation and employer. 2 U.S.C. §434(b)(3)(A). The FEC must make disclosure reports available for public inspection and copying within 48 hours of receipt. However, "information copied from such reports or statements may not be sold or used by any person for the purpose of soliciting contributions or for commercial purposes." 2 U.S.C. §438(a)(4).
Legi-Tech, through its Campaign Contribution Tracking System (CCTS), devised a plan to provide paying subscribers with information about political contributors and their contributions. Starting with the 1984 election cycle, CCTS copied contributor information directly from disclosure reports filed with the FEC, entered this information into a computer database, added telephone numbers of contributors and sold the information to its customers. In all, the CCTS received $273,869 from at least 42 customers, including the International Brotherhood of Teamsters, Freedom Policy Foundation, National Association of Independent Schools and International Funding Institute, Inc. In addition, Legi-Tech was aware that some of its customers used the information to solicit contributors.
In 1985, the National Republican Congressional Committee (NRCC) filed an administrative complaint against Legi-Tech, alleging the company was using contributor information for commercial purposes. After an investigation of the complaint, the Commission found probable cause to believe that a violation of the Act had occurred and attempted to enter into a conciliation agreement with Legi-Tech. That effort failed, and the Commission filed suit.
District Court Decision
While the court was considering the FEC's suit, the U.S. Court of Appeals for the District of Columbia Circuit issued its decision in FEC v. NRA Political Victory Fund. In that decision, the appeals court ruled that the FEC's structure was unconstitutional because, by having the Clerk of the House and the Secretary of the Senate as nonvoting ex officio members, it violated the separation of powers principle.
Following the NRA decision, the FEC removed the ex officio members from its body and, in this new form, ratified its former actions and authorized its attorneys to continue litigation against Legi-Tech. The district court, however, said that these corrective measures were not enough. The court reasoned that, because enforcement proceedings against Legi-Tech had been initiated by an unconstitutionally structured FEC, the rule set forth in Harper v. Virginia Department of Taxation-that a newly enunciated rule of law must be retroactively applied to pending cases-had to be applied in this case. For this reason, the district court dismissed this case.
Appeals Court Decision
While the appeals court did not object to the district court's application of the Harper rule in this case, it disagreed that dismissal was the only remedy.
In its decision, the appeals court pointed out that: "Even were the Commission to return to square one-assuming the statute of limitations were not a bar-it is virtually inconceivable that its decisions would differ in any way the second time from that which occurred the first time."
Most of the Commissioners who originally voted to find probable cause that Legi-Tech had violated §438(a)(4) and, subsequently, voted to initiate a lawsuit against Legi-Tech, are still on the Commission and would likely vote the same way now as they had before, reasoned the court. The court noted that it can not "examine the internal deliberations of the Commission, at least absent a contention that one or more of the Commissioners were actually biased."
Therefore, instead of dismissal, the appeals court said that "the better course is to take the FEC's post-reconstitution ratification of its prior decisions at face value and treat it as an adequate remedy for the NRA constitutional violation."
District Court Ruling
The court rejected Legi-Tech's arguments, which were based, in part, on the corporation's contention that it was an organ of the press and was therefore entitled to use the contributor information in the way that it did. The court agreed with the Commission when it stated that a publisher's use of the names and addresses from disclosure reports filed with the FEC is permissible so long as that use is incidental to the sale of a larger publication. For example, a newspaper article that includes such information as part of the story is permissible. What is not permissible, the FEC contends, is when the use of contributor information is not incidental to the sale of the publication, but, in fact, the primary focus of the publication. AO 1981-38.
Because the Act does not explicitly state whether commercial activity like the CCTS's is protected, the court gave deference to the FEC's construction of §438(a)(4) as well as to its regulations and advisory opinions relevant to this issue. On that basis, the court rejected all of Legi-Tech's challenges.
- It said that the CCTS could not be characterized as a communication similar to a "newspaper, magazine or book," but was more like a listbroker. The former would fall under the FEC's media exemption to §438(a)(4); a listbroker would not.
- It said that the CCTS failed the "principal purpose" test in that its primary purpose was the dissemination of the contributor information for profit. The court said: "Legi-Tech's sale of information through the CCTS posed the precise threat that troubled Congress: while Congress wanted to promote disclosure of campaign contribution information, it also wanted to protect political committees' intellectual property and 'political discourse from the adverse effect that the disclosure requirement of the Act would otherwise have.'"
- The court found Legi-Tech's argument that the CCTS was exempt because Legi-Tech's parent corporation was a diversified media company "unpersuasive" because the CCTS's primary purpose was commercial.
Legi-Tech also argued unsuccessfully that §438(a)(4) violates the First Amendment in that it prevents "'the dissemination of the truth about political campaigns' and constitutes 'a content based restriction on core political speech.'"
The court, noting that the constitutionality of the statute already had been upheld in FEC v. International Funding Institute, restated that the statute "serves important governmental interests by minimizing the adverse effects of the Act's disclosure requirements." In addition, the statute also protects political committees' intellectual property. The commercial use of such information, as the NRCC contended in its original complaint, diminishes the economic value of contributor lists. The court also found that prohibiting commercial use of contributor information would make it more likely that individuals would continue to support financially the current private campaign financing system for U.S. elections. Legi-Tech's other First Amendment arguments also were rejected by the court.
Source: FEC Record -- December 1994, p. 6; April 1996 [PDF]; and July 1997 [PDF].
FEC v. Legi-Tech, Inc., No. 91-0213 (JHG) (D.D.C. Oct. 12, 1994), (D.D.C. Mar. 1, 1995) (final judgment); 75 F.3d 704 (D.C. Cir. 1996); 967 F. Supp. 523 (D.D.C. 1997).
Failing to resolve a complaint through the informal conciliation process mandated by the law (2 U.S.C. §437g(a)(4)(A)(i)), the FEC filed suit in the U.S. District Court for the Southern District of New York (Civil Action 84-CIV 5552). The Commission petitioned the court to:
- Find that the Liberal Party Federal Campaign Committee (the Liberal Party Committee) violated 2 U.S.C. §441a(a)(1)(A) by making excessive contributions to the 1980 National Unity Campaign for John B. Anderson, Mr. Anderson's principal campaign committee for his 1980 Presidential general election campaign;
- Order the Liberal Party Committee to amend its reports to reflect in-kind contributions of $14,149 to the Anderson campaign;
- Order the Liberal Party Committee to pay a $5,000 civil penalty or an amount equal to 100 percent of any contributions or expenditures resulting from its violations; and
- Enjoin the Liberal Party Committee (or any of its agents or successors) from further violations of the election law.
On November 13, 1984, the court entered a default judgment against the Committee. Under the court order, within 30 days of the court's final judgment, the Liberal Party Federal Campaign Committee had to amend its reports and pay a $5,000 civil penalty to the U.S. Treasury. On June 25, 1985, the district court entered an order finding the Liberal Party Committee in civil contempt of its November 13 order. The court ordered that, if the Liberal Party Committee had not fully complied with the November 13 order by July 1, 1985, it would be required to pay a fine of $500 per day until compliance was completed.
Source: FEC Record -- October 1984, p. 8; and March 1985, p. 3.
FEC v. Liberal Party Federal Campaign Committee, No. 84-Civ. 5552 (S.D.N.Y. June 25, 1985 contempt).
On June 15, 1989, the U.S. District Court for the District of Washington issued a final order and default judgment in FEC v. Life Amendment PAC, Inc. (Civil Action No. C88-860Z). The court declared that the committee and its treasurer, Rick Woodrow, had violated 2 U.S.C. §434(a) by failing to file six reports during 1985, 1986 and 1987. The court ordered Life PAC to pay a civil penalty of $30,000 ($5,000 for each missing report).
The court also found that Mr. Woodrow and Citizens Organized to Replace Kennedy (C.O.R.K.), a political committee of which he was also treasurer, had failed to disclose debts and obligations in three 1986 reports, in violation of 2 U.S.C. §434(b)(8). The court ordered C.O.R.K. and Mr. Woodrow to file the missing Schedules C and D and to pay a $5,000 civil penalty. Permanently enjoining the defendants from future similar violations of the election law, the court also ordered them to pay the FEC's costs in the action.
On January 24, 1990, in another suit, the court granted the FEC's motion for a final order and default judgment against Life PAC (No. C89-1429Z (originally C89-1429WD)). The court found that Life PAC and Mr. Woodrow, as treasurer, had committed several violations of the election law and regulations. Unless otherwise noted, the following violations were found in connection with Life PAC's 1983 and 1984 disclosure reports:
- Failing to maintain adequate records with respect to contributions received from individuals (2 U.S.C. §432(c) (1)-(3));
- Failing to retain the required records for three years (2 U.S.C. §432(d));
- Failing to keep adequate records of 129 disbursements, totaling $72,201 (2 U.S.C. §432(c)(5));
- Failing to maintain the committee's bank records for three years and failing to make those records available for audit, inspection or examination by the Commission (11 CFR 104.14(b));
- Misreporting the total amount of Life PAC's receipts and disbursements (2 U.S.C. §434(b) (2) and (4));
- Failing to properly itemize disbursements for operating expenditures (2 U.S.C. §434(b) (5));
- Failing to properly disclose disbursements made in connection with independent expenditures (2 U.S.C. §434(b)(6));
- Failing to properly and continuously disclose the committee's outstanding debts and obligations (2 U.S.C. §434(b)(8) and 11 CFR 104.11); and
- In the committee's 1987 mid-year report, failing to identify contributors (2 U.S.C. §434(b)(3) (A) and (B)).
For the violations cited above, the court ordered the defendants to pay a $55,000 civil penalty.
The court further declared that the defendants had knowingly and willfully committed the following violations:
- Failing to maintain adequate records with respect to contributions received from individuals in 1985 and 1986 (2 U.S.C. §432(c)(1)-(3));
- Failing to preserve the required records for three years (2 U.S.C. §432(d));
- Failing to keep bank records for 1985 and 1986 for at least three years and failing to make those records available for audit, inspection or examination by the FEC (11 CFR 104.14(b)); and
- Failing to file four monthly reports on time from April through July 1988 (2 U.S.C. §434(a)(4) (B)).
For these knowing and willful violations, the court ordered the defendants to pay a civil penalty of $70,000, to amend and correct their reports and to pay the Commission's court costs. The defendants were permanently enjoined from future similar violations of the law.
Motion for Contempt
On September 11, 1992, the court held defendants in the above cases in civil contempt of court for failing to comply with the court's earlier judgments against them.
Under the contempt orders, defendants in each suit must pay an additional penalty of $100 per month until they comply with the earlier order. The defendants were also ordered to pay the FEC up to a maximum of $1,000 as reimbursement for the agency's costs.
Source: FEC Record -- October 1989, p. 11; April 1990, p. 7; and November 1992, p. 9.
On June 29, 1993, the U.S. District Court for the District of New Hampshire held defendants Elliott S. Maggin for Congress Committee and its treasurer, Andi T. Johnson, in civil contempt of court for failing to pay civil penalties and the FEC's costs and attorneys fees. (Civil Action No. C86-40-L.) The assessments had remained unpaid since they were imposed under an August 1986 court order.
The court further ordered Ms. Johnson to provide the FEC with financial records on her resources and liabilities within 20 days and to appear before the court 30 days after submitting the records. A $10,000 civil penalty and interest on the earlier penalties would be assessed against her if she failed to provide the information.
Under the 1986 judgment, the court found that the defendants had violated the Federal Election Campaign Act by failing to file a 1984 quarterly report. The court ordered each defendant to pay a $5,000 civil penalty and permanently enjoined them from further violations of the Act. Defendants were also ordered to pay $2,569 to cover the FEC's costs and attorneys fees.
Source: FEC Record -- November 1993, p. 3.
FEC v. Maggin, No. C86-40-L (D.N.H. 1986)
On March 30, 2004, the U.S. District Court for the District of Columbia granted partial summary judgment to the FEC in this case, and denied defendant Carolyn Malenick's cross-motion for summary judgment. The court found that Triad Management Services (Triad), which subsequently became Triad Management Services, Inc. (Triad Inc.), was a political committee under the Federal Election Campaign Act (the Act) in 1996, that it failed to register and report with the Commission and that it accepted contributions in excess of the Act's limits.
According to its 1996 promotional materials, Triad was a consulting firm devoted to keeping the Republican majority in Congress. From 1995 to 1996, Carolyn Malenick operated Triad as a sole proprietorship, and she became the president, sole director and owner of Triad Inc. when Triad incorporated in May 1996. Robert Cone was the primary source of funding for Triad and Triad Inc. in 1996, and provided the organization with well over $1,000 in funding.
The Commission began its investigation of Triad/Triad Inc. in response to a series of administrative complaints filed between 1996 and 1998. After failing to reach a conciliation agreement with the defendants, the Commission filed a court complaint on June 21, 2002, alleging that Miss Malenick, Triad and Triad Inc. violated the Act by, among other things, failing to register and file as a political committee and accepting and making excessive and prohibited contributions. 2 U.S.C. § § 433, 434, 441a(a)(1), 441a(f) and 441b.
District Court Decision
Under the Act, a political committee is defined in part as "any committee, club, association, or other group of persons which receives contributions aggregating in excess of $1,000 during a calendar year." 2 U.S.C. § 431(4)(A). A contribution includes any gift, loan or deposit of money, or any thing of value, given for the purpose of influencing a federal election. 2 U.S.C. § 431(8)(A)(i). An organization that is regulated under the Act as a "political committee" must also have as its major purpose the nomination or election of a federal candidate. See FEC v. Massachusetts Citizens for Life, 479 U.S. 238 (1986), and Buckley v. Valeo, 424 U.S. 1, 79 (1976).
The court found that Triad/Triad Inc.'s major purpose was the nomination or election of specific federal candidates in 1996. The court also found that the funds Mr. Cone provided to Triad/Triad Inc. were contributions under the Act and exceeded $1,000. Triad/Triad Inc. thus became a political committee under the Act, but failed to register and file reports as required by the Act. 2 U.S.C. § § 433 and 434. The court additionally found that, while the total amount of contributions Triad/Triad Inc. received from Mr. Cone is uncertain, these contributions certainly exceeded the $5,000 limit on contributions that a political committee may permissibly receive from an individual. 2 U.S.C. § 441a(f). The court granted the Commission a declaratory judgment on these points.1
The FEC also alleged in its court complaint that Triad Inc. accepted prohibited corporate contributions and that Triad/Triad Inc. made excessive contributions to federal candidates through its contributions combined with the contributions of two affiliated committees, the American Free Enterprise PAC and the Citizens Allied for Free Enterprise PAC. 2 U.S.C. §§ 441b and 441a(a). The court, however, found that the record was not sufficient on these two issues to grant summary judgment to the FEC; it did find that American Free Enterprise PAC was affiliated with Triad/Triad Inc., but stated that further information would be needed to determine the amount of excessive contributions.
The court declined to impose penalties by way of summary judgment or to grant injunctive relief without further action first being taken in this case.
1 The court also found two of the FEC's causes of action, presented as an alternative theory if Triad/Triad Inc. was not adjudged to have been a political committee, to be moot based on its other rulings in this case.
On March 21, 1991, the U.S. District Court for the District of Columbia granted the FEC's motion for default judgment against Mann for Congress Committee and its treasurer, Terry L. Mann, for violating the terms of a conciliation agreement. (Civil Action No. 90-2419(LFO).) (Under the terms of the agreement, the committee and Mr. Mann had agreed to refund $17,746 in excess contributions, disclose the refunds on FEC reports and pay a $5,000 civil penalty.)
The court ordered defendants to comply with the agreement's terms within 10 days and pay the FEC an additional $5,000 civil penalty for violating the agreement. The court also permanently enjoined defendants from future violations of the conciliation agreement.
Source: FEC Record -- May 1991, p. 7.
In September 1978, Massachusetts Citizens For Life, Inc. (MCFL), a nonprofit corporation without members, printed 100,000 copies of a special election edition flyer captioned "Everything You Need to Vote Pro-Life." The publication contained the position of state and federal candidates on abortion-related issues. It included at least two exhortations to "vote pro-life" and the statement that "No pro-life candidate can win in November without your vote in September." Photographs of pro-life candidates were also included in the publication. To correct minor errors in the special election edition, MCFL subsequently issued a supplement to the edition.
MCFL distributed copies of the two special election editions to 5,985 MCFL contributors and 50,674 noncontributors. MCFL also sent copies to its local chapters for distribution, mailed out copies on request, and left copies in public areas for general distribution.
In response to a complaint filed with the Commission, the FEC found probable cause to believe that MCFL's expenditures for the publications (amounting to $9,812.76) had violated the Federal Election Campaign Act's (the Act's) ban on corporate spending in connection with federal elections. 2 U.S.C. §441b. After unsuccessfully attempting to conciliate the matter with MCFL, on February 22, 1982, the FEC filed suit against MCFL in the U.S. District Court for the District of Massachusetts. (Civil Action No. 82-609-G.)
District Court Ruling
On June 29, 1984, the U.S. District Court for the District of Massachusetts granted defendant's motion for summary judgment. The court found that, in publishing the special election editions of its newsletter in 1978, MCFL had not made prohibited corporate expenditures in connection with the Massachusetts primary campaigns of federal candidates. The court found that MCFL's expenditures were more properly characterized as independent expenditures and expenditures for news and editorial comments. As such, the court held that the expenditures were explicitly exempted from section 441b's prohibition on corporate spending.
In characterizing MCFL's expenditures for the special election editions as independent expenditures, the court held that the "publication was uninvited by any candidate and uncoordinated with any campaign."1
With regard to its characterization of MCFL's publication of the special election editions as exempt spending for a news story and news editorial,2 the court stated: "In our opinion, the compilation of voting records and questionnaire responses was news, probably not available elsewhere; and the call to vote pro-life in conjunction, incidentally, with a quotation from Thomas Jefferson, was editorial." The court further stated that the special election editions satisfied the statutory requirement that exempt stories may be published in a "periodical publication." The court noted that the special editions were similar in size, format and content to regular issues of MCFL's newsletter. Finally, the court maintained that "the legislative history of the newspaper exemption shows that Congress intended that it be a broad exemption, coextensive with the First Amendment."
Alternatively, the court held that, even if it had misconstrued MCFL's spending as exempt independent and news story/editorial expenditures, the statutory prohibition on corporate expenditures was unconstitutional as applied to MCFL's spending. The court found that applying the prohibition to MCFL's spending abridged the organization's free speech, press and association rights because the expenditures were: "(a) independent of any candidate or party, (b) by a nonprofit-making corporation formed to advance an ideological cause and (c) for the purpose of publishing direct political speech." Under these circumstances, the court concluded, the compelling governmental interest served by banning the special election editions as prohibited corporate expenditures (i.e., the prevention of real or apparent corruption in federal elections) was not justified. Specifically, since the court maintained that MCFL's publication of the special election editions was not coordinated with any candidates, the court followed the Supreme Court's determination in Buckley v. Valeo that their independence "alleviate[d] the danger that expenditures will be given as quid pro quo for improper commitments from the candidate." (See Buckley v. Valeo at 47.) In finding that the expenditures were independent, the court noted that they were too small (i.e., $80 per federal candidate) to have a corrupting influence on federal elections.
With regard to MCFL's role as a nonprofit corporation, the court held that, "by sharing its views on an important public issue" with the public, MCFL's expenditures for the special election editions advanced, rather than deterred, governmental interests by "promoting citizen responsibility."
Similarly, the court held that, if viewed as direct political speech, MCFL's financing of the special election editions "would seem to promote rather than undermine the honest functioning of representative government." Specifically, the court found that the special editions "sought to influence incumbents and candidates solely by means of informed voter reaction to the candidates' positions on an important public issue." Furthermore, the court found that "the corporate identity of the speaker does not deprive speech of what otherwise would be its clear entitlement to protection under the First Amendment. (First National Bank of Boston v. Bellotti, supra at 778-786)"
Appeals Court Ruling
On July 31, 1985, the U.S. Court of Appeals for the First Circuit ruled that MCFL's expenditures, were subject to the election law's prohibition on expenditures by corporations in connection with federal elections. This statutory ruling reversed that of the district court. At the same time, the appeals court affirmed the holding by the district court that, if applied to MCFL's expenditures, the Act's prohibition on corporate expenditures (2 U.S.C. §441b) would violate MCFL's First Amendment rights.
MCFL's Expenditures Fall within the Purview of Section 441b
In overturning the district court's ruling that section 441b(b)(2)'s ban on corporate expenditures did not apply to MCFL's expenditures, the appeals court concluded that section 441b prohibits expenditures in connection with federal elections, in general, as well as contributions specifically made to candidates for federal office.
The appeals court also rejected the district court's holding that, even if section 441b prohibited corporate expenditures in connection with federal elections, MCFL's publication expenditures were exempt from the prohibition because the publication did not expressly advocate the election or defeat of any particular candidate. To the contrary, the appeals court found that the publications did constitute express advocacy: "The MCFL Special Election Edition...explicitly advocated the election of particular candidates in the primary elections and presented photographs of those candidates only...." The appeals court added that it did not have to decide whether such spending was covered by section 441b because MCFL's flyers "would fit within the definition of expenditure, even if an express advocacy requirement were incorporated into the definition."
Finally, contrary to the district court, the appeals court found that the publications did not qualify for the news story exemption: "...the Special Editions may not be considered new stories, commentaries, or editorials because the editions were not distributed through the newsletter's facilities, were not published by the newsletter's staff, did not contain the newsletter masthead and were not limited to the usual MCFL newsletter circulation. " Nor did the expenditures qualify under the exemption as "normal functions of a press entity."
Prohibiting MCFL's Expenditures Is Unconstitutional
Nevertheless, the appeals court affirmed the district court's holding that §441b, as applied to MCFL's expenditures, was unconstitutional. The appeals court said that it did not believe that "the availability of alternative methods of funding speech [e.g., MCFL's establishment of a separate segregated fund] justifies eliminating the simplest method."
Furthermore, the court found that there was no substantial government interest (i.e., to prevent corruption or the appearance of corruption in federal elections) in prohibiting MCFL's expenditures for the publications. "Because MCFL did not contribute directly to a political campaign, MCFL's expenditures did not incur any political debts from legislators." The appeals court concluded that a ruling by the Supreme Court which upheld §44lb's ban on solicitations by another nonprofit corporation, the National Right to Work Committee, did not apply to MCFL's expenditures. "Unlike National Right to Work Committee, [MCFL's spending] involves a corporation's indirect and uncoordinated expenditures in connection with a federal election, not a solicitation for direct contributions to candidates."
The appeals court therefore affirmed the district court's ruling that section 441b was unconstitutional, as applied to MCFL's expenditures: "We therefore uphold that the application of section 441b to indirect, uncoordinated expenditures by a non-profit ideological corporation expressing its views of political candidates violates the organization's First Amendment rights."
Appeal to Supreme Court
On August 28, 1985, the Commission filed an appeal of the first circuit's decision with the Supreme Court. On January 13, 1986, the Court noted probable jurisdiction in this case. Oral argument was heard on October 7, 1986.
Supreme Court Decision
In FEC v. Massachusetts Citizens for Life, Inc. (MCFL) the Supreme Court of the United States decided, by a 5 to 4 vote, that the law's prohibition on corporate expenditures is unconstitutional as applied to independent expenditures made by a narrowly defined type of nonprofit corporation. The Court's December 15, 1986, decision affirmed an appeals court ruling.
Scope of Ruling
Acknowledging that "the class of organizations affected by our holding today will be small," the Court delineated the type of corporation which would be permitted to make independent expenditures under this ruling. "MCFL has three features essential to our holding that it may not constitutionally be bound by §441b's restriction on independent spending." These three criteria are as follows:
- The organization must be formed "for the express purpose of promoting political ideas, and cannot engage in business activities. If political fundraising events are expressly denominated as requests for contributions that will be used for political purposes, including direct expenditures, these events cannot be considered business activities."
- The organization must have "no shareholders or other persons affiliated so as to have a claim on its assets or earnings."
- The organization must not have been established by a business corporation or a labor union, and must adopt a policy "not to accept contributions from such entities."
MCFL in Violation of §441b
The Supreme Court unanimously affirmed the appeals court ruling that, as the FEC had argued, MCFL's expenditures were in violation of §441b. In making this determination, the Court rejected MCFL's arguments to the contrary.
MCFL had contended that, in making its expenditures, it had not provided anything to a candidate. Because of this, its spending was not within the reach of §441b(b)(2), which defines "expenditure" to include anything of value provided to a candidate or political committee. The Court, in holding that 441b's scope is broader than MCFL's interpretation, stated that the legislative history "clearly confirms that §441b was meant to proscribe expenditures in connection with an election."
The Court also rejected MCFL's argument that its publication costs did not constitute prohibited expenditures because the material did not "expressly advocate" the election of candidates. Citing its opinion in Buckley v. Valeo, the Court noted it had previously concluded "that a finding of 'express advocacy' depended upon the use of language such as 'vote for,' 'elect,' 'support,' etc." Buckley, 424 U.S. 44, n. 52 (1976). Applying this test to the MCFL's publication, the court stated: "Just such an exhortation appears in the 'Special Edition.' The publication not only urges voters to vote for 'pro-life' candidates, but also identifies and provides photographs of specific candidates fitting that description. The Edition cannot be regarded as a mere discussion of public issues that by their nature raise the names of certain politicians. Rather, it provides in effect an explicit directive: vote for these (named) candidates. The fact that its message is marginally less direct than 'Vote for Smith' does not change its essential nature."
MCFL had also argued that its publication was a "Special Edition" of its regular newsletter and therefore payments for issuing the material were exempt from the definition of expenditure under the statute's exception for news stories, commentaries and editorials distributed through periodical publications and other news media. 2 U.S.C. §431(9)(B)(i). The Court did not need to rule on whether MCFL's newsletter qualified for the press exemption because it considered the "Special Edition" a campaign flyer rather than an issue of the newsletter. "No characteristic of the Edition associated in any way with the normal MCFL publication." The Court emphasized that it was essential to make a distinction between regular publications and campaign flyers "since we cannot accept the notion that the distribution of such flyers by entities that happen to publish newsletters automatically entitles such organizations to the press exemption."
Section 441b's Infringement on Free Speech
In determining whether §441b was unconstitutional as applied to MCFL's independent expenditures, the Court first examined the provision's effect on political speech protected by the First Amendment.
The FEC had argued that, although §441b prohibited MCFL from making expenditures from its corporate treasury funds, the law provided another avenue for MCFL to exercise political speech: It could establish a separate segregated fund (also called a political action committee or PAC) and make contributions and expenditures using money specifically solicited for the fund. The Court maintained that "even to speak through a segregated fund, MCFL must make very significant efforts," and mentioned in particular the recordkeeping and solicitation requirements the law imposes on such funds. In conclusion, the Court stated: "These additional regulations may create a disincentive for such organizations to engage in political speech.... The fact that the statute's practical effect may be to discourage protected speech is sufficient to characterize §441b as an infringement on First Amendment activities."
Section 441b Unconstitutional as Applied
In ruling that 441b is unconstitutional as applied to MCFL's activities in this case, a decision from which four Justices dissented, the Court first explained that "[w]hen a statutory provision burdens First Amendment rights, it must be justified by a compelling state interest." The Court disagreed with the Commission's arguments that §441b's prohibition on MCFL's expenditures was justified.
The FEC had noted the long legislative history supporting §441b's prohibition on corporate activity and argued that the courts have consistently ruled that those restrictions are justified by the governmental interest in protecting the election process from the effects of the accumulation of wealth. After examining the legislative history and past Supreme Court decisions, the Court concluded that this governmental interest is valid with respect to expenditure restrictions applied primarily to profit-making corporations but not to corporations such as MCFL, "formed to disseminate political ideas." The Court, therefore, found no compelling justification for treating business corporations and MCFL alike "in the regulation of independent spending."
The Court also rejected the FEC's argument that §441b serves to prevent a corporation such as MCFL from spending individuals' money for political purposes that they might not support. The Court pointed out that individuals who contribute to MCFL do so because they support its political aims and expect that the organization will spend the funds "in a manner that best serves the shared political purposes of the organization and the contributor."
In responding to the Commission's argument that a contributor, while supporting the political views of MCFL, may not wish donations to be used to support or oppose particular candidates, the Court said that this problem could be resolved by "simply requiring that contributors be informed that their money may be used for such a purpose."
Finally, the FEC had maintained that, if the §441b prohibition were not applied to expenditures by corporations such as MCFL, then the political process would be in danger of corruption, since business corporations and labor unions could funnel undisclosed treasury funds into a nonprofit organization to be converted to political spending. In rejecting this argument, the Court cited 2 U.S.C. §434(c), which requires groups that are not political committees to report information on their independent expenditures once they exceed $250 in one year. In reporting under this provision, a group must include the identification of persons funding independent expenditures if they contribute an aggregate of over $200 during a year. "These reporting obligations provide precisely the information necessary to monitor MCFL's independent spending activity and its receipt of contributions," the Court stated. Furthermore, the Court pointed out that "should MCFL's independent spending become so extensive that the organization's major purpose may be regarded as campaign activity, the corporation would be classified as a political committee," subject to the restrictions and extensive reporting requirements the law applies to such entities.
In conclusion, the Court ruled that "§441b's restriction of independent spending is unconstitutional as applied to MCFL, for it infringes protected speech without a compelling justification for such infringement." However, the Court did not directly rule on the constitutionality of §441b's restrictions on "commercial enterprises," since that was not at issue in this suit.
Justice William J. Brennan, Jr., who wrote the majority opinion, was joined by Justices Thurgood Marshall, Lewis F. Powell, Jr. and Antonin Scalia and, in part, by Justice Sandra Day O'Connor.
Chief Justice William H. Rehnquist, joined by Justices Byron R. White, Harry A. Blackmun and John Paul Stevens, dissented from "the conclusion that the statutory provisions are unconstitutional as applied to [MCFL]." Chief Justice Rehnquist observed that the differences between business corporations and corporations like MCFL "are 'distinctions in degree' that do not amount to 'differences in kind.'.... As such, they are more properly drawn by the legislature than the judiciary.... Congress expressed its judgment in §441b that the threat posed by corporate political activity warrants a prophylactic measure applicable to all groups that organize in the corporate form. Our previous cases have expressed a reluctance to fine-tune such judgments; I would adhere to that counsel here."
In his judgment, "[t]he three part test gratuitously announced in today's dicta...adds to a well-defined prohibition a vague and barely adumbrated exception certain to result in confusion and costly litigation."
1 The election law and FEC regulations define an
independent expenditure as 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 committee or
agents. 2 U.S.C. §431 (17); 11 CFR 110.16 and 109.1(a).
2 Under the election law and FEC regulations, a news story, commentary, or editorial by any broadcasting station, newspaper, magazine, or other periodical publication is not considered an expenditure, provided the station or publication is not owned or controlled by a political party, committee or candidate. 2 U.S.C. §431(9)(B)(i); 11 CFR 100.8(b)(2).
Source: FEC Record -- August 1984, p. 7; October 1985, p. 7; and February 1987, p. 4.
FEC v. Massachusetts Citizens for Life, Inc., 589 F. Supp. 646 (D. Mass. 1984), aff'd, 769 F.2d 13 (1st Cir. 1985), aff'd, 479 U.S. 238 (1986).
On March 28, 1983, the U.S. District Court for the District of New Jersey entered a default judgment against the defendants in FEC v. Nick Mastorelli Campaign Fund (Civil Action No. 82-0774F). The court decreed that the Mastorelli Campaign and its treasurer had violated provisions of the election law by:
- Failing to file reports required for the 1978 election year on time and by failing to file the semiannual reports required for 1980 and thereafter (2 U.S.C. §434a);
- Accepting contributions in 1978 from four corporations (2 U.S.C. §441b(a));
- Accepting excessive contributions, in the form of a loan, from three individuals (2 U.S.C. §441a(f)); and
- Accepting $21,050 in excessive cash contributions in 1978 (2 U.S.C. § 441a(f)).
The district court also found that certain contributors to the Mastorelli Campaign had violated the election law by:
- Making cash contributions in excess of $100 to the campaign (2 U.S.C. §441g); and
- Making contributions in the name of another (2 U.S.C. §441f).
The court permanently enjoined the defendants from any further violations of the election law. The court also assessed a $5,000 civil penalty against the Mastorelli Campaign and its treasurer as well as against each of the individual defendants named in the suit.
Source: FEC Record -- May 1983, p. 7.
On December 11, 1996, the U.S. District Court in Massachusetts issued a judgment and consent order to which both parties agreed. Under the order, Elkin McCallum must pay a $50,000 civil penalty to the FEC for making excessive contributions to the Tsongas for President Committee.
The FEC filed the lawsuit against Mr. McCallum alleging that he had made $250,000 in loans to Paul Tsongas's campaign in 1991 and 1992. These loans constituted excessive contributions. Specifically, the FEC alleged that Mr. McCallum had made the following contributions:
- He purchased a ticket for $1,000 to a Tsongas Committee fundraiser on April 8, 1991;
- He contributed $100,000 to the Tsongas Committee on August 13, 1991 , and $50,000 on October 21, 1991; and
- He wrote a $100,000 check on February 10, 1992, payable to Mr. Tsongas's chief fundraiser, Nicholas Rizzo, intending it to be a loan to the Tsongas Committee.
The Federal Election Campaign Act (the Act) states that an individual has a $1,000 contribution limit for a candidate or that candidate's authorized committee per election and that the definition of contribution includes loans. 2 U.S.C. §§431(8)(A)(i) and 441a(a)(1)(A). Additionally, FEC regulations make it unlawful for a person to make a loan that exceeds the contribution limits whether or not it is repaId. 11 CFR 100.7(a)(1)(i)(A).
In a settlement agreement, Mr. McCallum did not contest the allegations. In addition to the civil penalty, the court permanently enjoined Mr. McCallum from making excessive contributions.
Source: FEC Record -- February 1997 [PDF].
On March 7, 1979, the U.S. District Court for the District of Columbia granted summary judgment to the Committee for a Constitutional Presidency-McCarthy '76, defendants in a suit filed by the FEC on August 22, 1977.
The FEC alleged that the defendants had improperly classified a series of payments (speaking fees from universities) as "other receipts" rather than as "contributions," and requested a mandatory injunction from the court requiring the defendant to amend its reports accordingly.
The court agreed with both parties that there were no material issues in dispute. The court also agreed with the FEC that the payments in question were, in fact, "contributions" rather than "other receipts." However, while the court concluded that the defendant may have committed a technical error, it declined to enter the requested order for the following reasons:
- The defendant had acted in good faith and had fully reported all payments on appropriate FEC forms.
- In 1976, Congress amended the reporting provisions of 434(b), which now provide that when candidates and committees "show that best efforts have been used to obtain and submit the information required by this subsection, they shall be deemed in compliance with this subsection." Since the events of this case occurred before Congress adopted the amendment, the amendment does not control the case. However, it does provide support for the court's view that a candidate could act in good faith and yet technically violate a provision of the Act; it also corroborates the court's conclusion that sanctions should not be imposed on a public figure who acts in good faith.
- The public interest would not be served by the requested court order.
This public interest in disclosure is already satisfied by the detailed information supplied by the defendant. Furthermore, a court-imposed remedy would not ensure better compliance in the future since a candidate who acted in the same manner today would probably not be considered in violation of the Act due to the "best efforts" amendment.
Source: FEC Record -- June 1979, p. 6.
FEC v. Committee for A Constitutional Presidency-McCarthy '76, 2 Fed. Elec. Camp. Fin. Guide (CCH) ¶9074 (D.D.C. 1979).
On March 22, 1995, the U.S. District Court for the Western District of Michigan, Southern Division, dismissed this case pursuant to a stipulation by the parties.
The FEC originally charged that the Michigan Republican State Committee (MRSC) had knowingly accepted $5,550 in excessive contributions, had deposited $35,655 in impermissible contributions into its federal account, and had exceeded its coordinated party expenditure limit for a Senate candidate by $8,298.
The court issued a consent order on July 18, 1994 , that resolved the excessive and impermissible contribution issues; the MRSC agreed to pay a $12,500 civil penalty and to transfer $35,655 from its federal account to its nonfederal accounts. The violation of the coordinated party expenditure limit, however, remained pending.
Subsequent to the consent order, the MRSC paid the civil penalty and transferred the nonfederal monies as agreed.
With regard to the remaining allegation, MRSC provided the FEC with documentation showing that the Senate candidate reimbursed the committee for the expenditures in question and therefore the committee did not exceed its coordinated party expenditure limit.
Source: FEC Record -- September 1994,
p. 8; and May 1995, p. 4.
FEC v. Michigan Republican State Committee, No. 5:94-CV-27 (W.D. Mich. July 18, 1994); (W.D. Mich. Mar. 22, 1995).
On October 30, 1992, the U.S. District Court for the Northern District of Iowa ordered the Mid-America Conservative PAC and its treasurer to pay a $10,000 civil penalty for failing to file several reports on time. (Civil Action No. C90-2093.) The court also permanently enjoined defendants from late filing of future reports.
The decision was based on a settlement agreement between both parties. Under the settlement procedures, defendants agreed to submit an offer of settlement to the Commission but also agreed to accept the FEC's final determination. The Commissioners unanimously voted to reject the defendants' proposal and to accept an alternative agreement submitted by the FEC's General Counsel. Defendants then objected to the agreement because the Commissioners had not considered the matter in a public session.
In granting the FEC's motion to enforce the settlement agreement, the court pointed out that the Commission had followed its usual procedures in considering and voting on the agreement. The court also noted that defendants could have specified that the agency follow special procedures but did not do so.
Source: FEC Record -- December 1992, p. 7.
On April 23, 1993, the U.S. District Court for the District of Columbia signed a settlement agreed to by both parties. (Civil Action No. 92-2244(SS).) In the joint stipulation, Stefan Miller admitted that he had violated the terms of a conciliation agreement he had entered into with the Commission by failing to pay the $1,300 civil penalty. He further agreed to make monthly installments of $75 until the full amount is paid. If he fails to make a payment, the FEC may require that the entire amount be paid within 10 days.
Mr. Miller later filed a statement in which he maintained that he never agreed to enter into the conciliation agreement, which was signed by his attorney on his behalf. He said, however, that he would honor the terms of the stipulation.
Source: FEC Record -- June 1993, p. 8.
On April 24, 1981, the U.S. District Court for the District of Columbia issued a judgment in favor of the FEC in the suit FEC v. Daniel Minchew (Civil Action No. 81-174). Declaring the defendant had violated the requirements of a conciliation agreement entered into with the FEC in October 1979, the court ordered Mr. Minchew to comply with the conciliation agreement and to pay a $4,000 civil penalty resulting from the agreement. The court also required the defendant to pay the costs of the civil action and to pay interest on civil penalty from the date of the court's order. Mr. Minchew had incurred the penalty for a violation of 2 U.S.C. §432(b): he had failed to provide Senator Talmadge's 1974 reelection committee with detailed accounts of campaign contributions, which he had received on the Senator's behalf, within the required five-day period.
Source: FEC Record -- June 1981, p. 6.
On December 5, 2007, the Commission filed suit in the U.S. District Court for the District of Columbia against Jamie Jacob Morgan for failure to comply with the terms of a conciliation agreement Mr. Morgan entered into with the Commission on April 20, 2007.
Jamie Morgan was a Republican candidate for Congress in 2002 and the de facto treasurer of his campaign committee, Morgan for Congress (the Committee). On April 20, 2007, Mr. Morgan entered into a conciliation agreement with the Commission for knowing and willful violations of the Federal Election Campaign Act (the Act). See the June 2007 Record [PDF].
In the conciliation agreement, Mr. Morgan admitted to filing several disclosure reports with the Commission containing inflated and fictitious receipts, disbursements and other inaccuracies. He reported over $100,000 of fictitious receipts, as well as $190,000 of fictitious disbursements from his campaign. He also intentionally concealed $62,000 of contributions from his father. Mr. Morgan admitted to additional knowing and willful violations of the Act and Commission regulations, including violating reporting requirements (2 U.S.C. §434(b)), accepting excessive contributions (2 U.S.C. §441a(f)), accepting contributions in the name of another (2 U.S.C. §441f), commingling campaign funds with personal funds (2 U.S.C. §432(b)(3)) and falsely terminating the Committee (11 CFR 102.3).
The Commission asserts in the complaint that Mr. Morgan has not paid any portion of the $60,000 civil penalty agreed to in the conciliation agreement. Under the terms of the agreement, Mr. Morgan was to pay the penalty in three installments of $20,000, due 30, 60 and 90 days following the April 20, 2007, effective date of the agreement.
The Commission requests that the court:
- Declare that Mr. Morgan violated the conditions of the conciliation agreement;
- Order Mr. Morgan to pay the $60,000 civil penalty;
- Enjoin Mr. Morgan from violating the provisions of the agreement in the future;
- Require Mr. Morgan to pay interest on the civil penalty until he has fully paid; and
- Award any other relief that the court finds appropriate.
Source: FEC Record -- January 2008 [PDF].
On September 10, 1996, the U.S. District Court for the Eastern District of Pennsylvania issued a consent order that the defendant committee, an authorized committee of a 1994 Congressional candidate in Pennsylvania, violated 2 U.S.C. §434(a)(6)(A) by failing to file a 48-hour notice disclosing the receipt of a $100,000 loan from the candidate. Under the 48-hour notice provision, a candidate committee must file a notice providing information on any contribution of $1,000 or more it receives after the 20th day but more than 48 hours before an election. The committee must file the notice within 48 hours of receiving the contribution.
The court awarded the FEC a $15,000 penalty but, because of the committee's financial circumstances (its lack of assets and $350,000 debt), the court suspended payment of all but $3,000.
Source: FEC Record -- November 1996 [PDF].