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On May 15, 1986, the U.S. District Court for the Eastern District of North Carolina issued a consent order agreed to by the Federal Election Commission and three defendants: the National Congressional Club (NCC), a multicandidate political committee; NCC's treasurer, R.E. Carter Wrenn; and Jefferson Marketing, Inc. (JMI), a North Carolina corporation that provides media services to political committees. Plaintiff and defendants agreed that:
- Since NCC and JMI had operated as a single entity,1 NCC and its treasurer, R.E. Carter Wrenn, had violated section 434 of the election law by failing to report JMI's financial activity; and
- Within 30 days of the court's order, defendants would pay a $10,000 civil penalty to the U.S. Treasury for these violations.
Furthermore, defendants no longer contested the FEC's allegation that JMI had violated section 441b of the election law by charging less than the fair market value for services JMI had provided to federal candidates.
In the order, defendants also agreed to establish themselves as separate entities, despite their contention that they had already done so in 1983. In this regard, the following changes would be made:
- Thomas Ellis and R.E. Carter Wrenn would resign as directors of the Educational Support Foundation, Inc., JMI's sole shareholder;
- JMI would liquidate its outstanding debt to NCC within 12 months of the date of the consent order;
- Employees who began working for NCC after the date of the consent order, and who were later employed by JMI, would not be credited with benefits and seniority accrued during their employment by NCC; and
- As long as he remained an NCC officer, R.E. Carter Wrenn would not act as JMI's director, officer or employee.
After NCC and JMI have made these changes, they will be considered separate entities. However, the FEC reserved the right to file suits and claims against JMI if JMI fails to charge the fair market value for services the organization provides to federal political committees and candidates.
Within 90 days of the consent order, NCC agreed to amend its FEC reports to disclose JMI's financial activity with regard to federal elections during the period from December 1978 to the present.
The suit grew out of an administrative complaint filed by Congressman Charles Rose. In that case, the Commission found probable cause to believe respondents had violated the law; yet, it failed to resolve the matter through conciliation. Thus, on February 7, 1985, the agency filed suit.
1 Evidence noted in the consent order for defendants' operation as a single entity included: JMI's financial dependence on NCC, NCC's control over JMI's voting stock and Mr. Wrenn's involvement in JMI's decision-making process.
Source: FEC Record -- July 1986, p. 7.
On May 27, 1998, the U.S. District Court for the District of Columbia entered an order submitted by the parties requiring the National Medical Political Action Committee (NMPAC) and its treasurer to pay a $10,000 civil penalty to the FEC for failing to file 14 disclosure reports in a timely manner during 1992, 1993 and 1994. In a stipulation, both parties had agreed to the facts and to the final order and judgment.
NMPAC had filed all the reports that were due during 1992 and 1993 on May 12, 1994. NMPAC also failed to file on time six other reports due in 1994 and 1995. These tardy filings violated 2 U.S.C. §434(a)(4)(i), (ii), (iii) and (iv).
In addition to finding that NMPAC had violated the Act, the court permanently enjoined the PAC from failing to file reports within the time limits set out by Commission regulations.
Source: FEC Record -- July 1998 [PDF].
On June 12, 1995, the U.S. District Court for the District of Columbia found that, as stipulated by both parties in a Stipulation to Final Judgment, the National Republican Senatorial Committee (NRSC) violated 2 U.S.C. §§441a(h) and 434(b) by directing the redesignation of contributions it received and by failing to properly report this activity.
The FEC was precluded from collecting civil penalties in this case because in a February 24, 1995, decision, the court ruled that the 5-year statute of limitations had expired.
This case had been dismissed in November 1993, but was reopened in 1994, as explained below.
Dismissal and Reopening of Case
The court had dismissed the suit on November 24, 1993, based on an October 1993 appellate court holding that the FEC's composition was unconstitutional and that the agency therefore lacked authority to bring an enforcement action. FEC v. NRA Political Victory Fund (NRA). In that case, the appeals court held that the presence of two Congressionally-appointed ex officio members on the Commission violated the Constitution's separation of powers.
On December 2, 1993, the Commission moved for reconsideration of the dismissal based on FEC actions immediately following the NRA ruling: The agency reconstituted itself as a six-member body entirely composed of Commissioners appointed by the President; ratified its earlier findings in enforcement cases; and authorized ongoing litigation, including FEC v. NRSC.
Due to the FEC's remedial actions, the district court reversed its earlier decision that NRA was a basis for dismissal, and the case was reopened on February 8, 1994.
Statute of Limitations
In a second stage of the case, on February 24, 1995, the court ruled that the FEC was precluded from recovering monetary penalties in the action because the 5-year statute of limitations expired before the suit was filed. (The statute of limitations, however, does not apply to injunctive and declaratory relief.)
The statute of limitations at 28 U.S.C. §2462 1 applies in all instances except those involving other statutes in which Congress specifically included another time limitation. The court ruled that the Federal Election Campaign Act does not contain such an alternative statute of limitations. Accordingly, the court applied the 5-year limit to this case.2
In applying §2462, the court determined that the statute of limitations started running from the date of the alleged violations—the period between November 1985 and November 1986. Since the time between the dates of the violations and the date the FEC filed this case with the court exceeded the 5-year statute of limitations, the FEC could not pursue the imposition of civil penalties.
The case then proceeded to a final stage.
Stipulation to Final Judgment
In its original suit, the FEC had alleged that during the 1986 election cycle the NRSC, having exhausted its contribution and coordinated party expenditure limits on behalf of Republican Senate candidate Jim Santini, contacted its contributors and asked them to redesignate a portion of their NRSC contributions to Mr. Santini. The NRSC then forwarded these newly earmarked contributions to the Santini committee.
Under 11 CFR 110.6(d)(2), the full amount of a contribution earmarked by a contributor at the direction of an intermediary counts against both that contributor's and that intermediary's contribution limit for the recipient. In the matter at hand, this rule caused the NRSC to exceed its contribution limit for Mr. Santini by $183,500—$104,200 of which was the total value of the earmarked contributions and $79,300 of which was the cost of securing the redesignations (an in-kind contribution).
In the Stipulation to Final Judgment, the NRSC admitted to engaging in the alleged conduct, but stated that it offered this admission only to bring this case to a close. In addition, the NRSC agreed to accept, in all future matters, the FEC's position that this conduct constitutes violations of 2 U.S.C. §§441a(h) and 434(b), and 11 CFR 110.6(d)(2). Furthermore, the NRSC agreed that through December 31, 1998, it would report all contributions that it asks contributors to redesignate to candidates as contributions from both itself and the contributor.
1 That provision reads: “Except as otherwise
provided by Act of Congress, an action, suit or proceeding for the enforcement
of any civil fine, penalty, or forfeiture, pecuniary or otherwise, shall not
be entertained unless commenced within five years from the date when the claim
2 This conclusion is inconsistent with the U.S. District Court for the Central District of California's denial of defendant's motion to dismiss in FEC v. Williams. In that case, Larry Williams argued that because the 5-year statute of limitations in §2462 had expired, the court should dismiss the case. The court rejected this motion without issuing an opinion. FEC v. Williams, No. CV 93-6231 ER.
Source: FEC Record -- January 1994, p. 12; April 1994, p. 7; April 1995, p. 4; and August 1995, p. 4.
FEC v. National Republican Senatorial Committee, No. 93-1612 (TFH) (D.D.C. June 24, 1994); (D.D.C. Feb. 24, 1995)(opinion); (D.D.C. June 12, 1995).
FEC v. NATIONAL RIGHT TO WORK COMMITTEE (77-7125);
NATIONAL RIGHT TO WORK COMMITTEE v. FEC (78-0315)
On December 13, 1982, the Supreme Court issued a unanimous decision reversing a decision by the U.S. Court of Appeals for the District of Columbia Circuit in FEC v. National Right to Work Committee (NRWC) (U.S. Supreme Court No. 81-1506). In its opinion, the Court held that some 267,000 individuals solicited by NRWC for contributions to its separate segregated fund during 1976 did not qualify as solicitable “members”1 of NRWC under 2 U.S.C. §441b(b)(4)(C). (NRWC is a nonprofit corporation without capital stock, which advocates voluntary unionism.)
In November 1977, the FEC filed suit against NRWC (FEC v. NRWC, Civil Action No. 77-7125) claiming that, since both NRWC's bylaws and the articles of incorporation it had filed with Virginia stated that NRWC had no members, NRWC had violated section 441b(b)(4)(C) of the Act by soliciting funds to its separate segregated fund from persons other than members. (Under this provision, corporations without capital stock may pay the costs of soliciting contributions from their members to their separate segregated funds.) NRWC contended, on the other hand, that its solicitations were permissible since those persons solicited were “members” of NRWC, within the meaning of the Act and FEC regulations.
After receiving notice of the FEC's intent to file a civil action, NRWC filed suit in October 1977 (NRWC v. FEC, Civil Action No. 78-0315), seeking injunctive and declaratory relief and challenging the constitutionality of sections 441b(b)(4)(A) and (C) of the Act, which, together, prohibit nonstock corporations from soliciting persons other than their “members.” Among its constitutional claims, NRWC asserted that section 441b(b)(4)(C) was unconstitutionally vague and infringed on the First Amendment rights of free speech and association of those persons solicited by NRWC.
In February 1978, the cases were consolidated for argument before the U.S. District Court for the District of Columbia.
District Court Ruling
Referring to NRWC's articles of incorporation and bylaws, the district court found that NRWC was organized without members. The court held that NRWC had violated Section 441b(b)(4)(C) by soliciting contributions to its separate segregated fund from persons who were not members of NRWC. The court found that the legislative history of the Section 441b membership exception required a limited definition of “members.” The court defined “members” as those “...persons who have interests and rights in an organization similar to those of a shareholder in a corporation and a union member in a labor organization. To read the exception more broadly would be to upset the symmetry of the statutory scheme.” (501 F. Supp. 422, 432 (D.D.C. 1980)) The court noted that no class of persons solicited by NRWC had been given any such participation rights in NRWC.
Appeals Court Ruling
On September 4, 1981, reversing the district court's ruling, the appeals court held that the term “member” set forth at Section 441b(b)(4)(C) “...necessarily includes those individuals solicited by NRWC.... “ The appeals court concluded that the district court's definition of “member” was “...so narrow that it infringes on associational rights.” The court noted that two identifiable public interests served by the Act (i.e., to eliminate the appearance or actuality of corruption in federal elections and to prevent coercive contributions) were not “...served by restricting the solicitation activities of a nonstock corporation organized solely for political purposes.” The court found that, “as to the first interest, we believe that solicitation [alone] will neither corrupt officials nor distort elections.” As to the second interest, the court found that “...the individuals from whom NRWC solicits contributions, unlike employees of a corporation or members of a labor union, clearly are not subject to coercion.” In the court's opinion, “the NRWC operation...ensures that NRWC accurately identifies and solicits only those individuals who share a similar political philosophy and who have evidenced a willingness to promote that philosophy through support of the Committee.”
On October 19, 1981, the Commission filed a petition with the appeals court for a rehearing of the case and a suggestion for an en banc rehearing. On November 13, 1981, the U.S. Court of Appeals for the District of Columbia Circuit, sitting en banc, denied the FEC's suggestion for a rehearing of National Right to Work Committee, Inc. (NRWC) v. FEC (Civil Action No. 80-1487). On December 15, the Commission voted to petition the Supreme Court for a writ of certiorari.
Supreme Court's Ruling
In rejecting the appeals court's reasoning, the Supreme Court held that the “persons solicited by NRWC were insufficiently attached to the corporation to qualify as members under Section 441b(b)(4)(C) of the Act.” In this regard, the Court noted that the legislative history of Section 441b(b)(4)(C) indicated that “ ‘members' of nonstock corporations were to be defined, at least in part, by analogy to stockholders of business corporations and members of labor unions. The analogy to stockholders and union members suggests that some relatively enduring and independently significant financial or organizational attachment is required to be a ‘member' under 441b(b)(4)(C).” The Court found that those individuals solicited by NRWC through “random mass mailings” failed to meet this membership requirement: “Among other things, NRWC's solicitation letters did not mention membership, its articles of incorporation disclaim the existence of members, and members play no part in the operations or administration of the corporation.” Consequently, the Court found that the respondent's arguments would “virtually excise from the statute the restriction of solicitation to ‘members'.... ” and would “open the door to all but unlimited corporate solicitation.”
The Court found that the Act's restrictions on solicitations by nonstock corporations did not raise “any insurmountable constitutional difficulties.” The First Amendment “associational rights asserted by respondent...are overborne by the interests Congress has sought to protect in enacting Section 441b.” In this regard, “the statute reflects a legislative judgment that the special characteristics of the corporate structure require particularly careful regulation.” Moreover, the Court noted that “the governmental interest in preventing both actual corruption and the appearance of corruption of elected representatives has long been recognized [by the Court], First National Bank of Boston v. Bellotti, 435 U.S. at 787, n.26, and there is no reason why it may not in this case be accomplished by treating unions, corporations, and similar organizations differently from individuals. California Medical Association v. FEC, 435 U.S. 182, 201 (1981).”
As to the defendants' claim that Section 441b(b)(4)(C) was unconstitutionally vague, the Court maintained that “there may be more than one way under the statute to go about determining who are ‘members' of a nonprofit corporation, and the statute may leave room for uncertainty at the periphery of its exception for solicitation of ‘members.' However, on this record we are satisfied that NRWC's activities extended in large part, if not in toto, to people who would not be members under any reasonable interpretation of the statute. See Broadrick v. Oklahoma, 413 U.S. 601 (1973).”
Remand to Appeals Court
The Court then remanded the case to the appeals court to consider, among other things, “the...imposition of a $10,000 civil penalty” on NRWC for unlawful solicitations to its separate segregated fund. On September 2, 1983, the appeals court found that the district court had erred in finding NRWC's violation to be “knowing and willful.” The appeals court therefore concluded that the $10,000 civil penalty imposed by the district court was unwarranted.
Remand to District Court
After the case had been remanded to the district court, the court accepted a consent order on October 4, 1984, which provides that:
- NRWC, ERCC and any of their agents will not solicit contributions to ERCC from persons other than NRWC's members. See 2 U.S.C. §441b(b)(4).
- Within thirty days of the date of the consent order, NRWC and ERCC will mail refunds totaling $67,401.62 to those individuals unlawfully solicited on June 21 and September 9-15, 1976. (The court will grant extensions for reasonable delays.)
- Each refund will be accompanied by a letter informing the contributor that the courts have determined that the solicitation constituted a violation of the law's prohibition on corporate contributions which was not knowing and willful. 2 U.S.C. §441b.
- The refund checks will expressly, and in bold print, require deposit within 30 days from the date drawn.
- NRWC and ERCC will report to the FEC on the status of the refund checks indicating whether they were undeliverable, cleared through the bank or remained outstanding.
- Within 30 days of the consent order, NRWC and ERCC will pay a $5,000 civil penalty (without interest) to the U.S. Treasury.
- Within 30 days of the consent order, NRWC and ERCC will pay FEC court costs from the district court proceeding amounting to $4,483.64 (without interest).
- Within an agreed upon time, NRWC and ERCC will donate to the Salvation Army: any contribution refunds that were undeliverable; all checks which remain outstanding; and $15,000 in lieu of the interest accrued from April 24, 1980, on refundable contributions, NRWC's civil penalty and the FEC's court costs. Once NRWC and ERCC have satisfied these conditions, the parties will file a joint motion to:
- Have the Aetna Casualty and Surety Company released from any and all obligations under the Supersedes Bond filed with the district court in these actions; and
- Have all NRWC and ERCC contributor information which was filed under seal with the district court returned to NRWC and ERCC. In addition, the FEC will return to NRWC and ERCC all contributor information that the defendants presented to the FEC under seal, together with all copies, lists, summaries or digests made from them.
1 As defined by 11 CFR 114.1(e), “‘Members' mean all persons who are currently satisfying the requirements for membership.... A person is not considered a member...if the only requirement for membership is a contribution to a separate segregated fund.”
Source: FEC Record -- November 1981, p. 3; January 1982, p. 7; February 1983, p. 3; November 1983, p. 6; and January 1985, p. 7.
FEC v. National Right to Work Committee, 501 F. Supp. 422 (D.D.C. 1980), rev'd, 665 F.2d 371 (1981), rev'd, 459 U.S. 197 (1982), on remand, 716 F.2d 1401 (1983).
On February 15, 1996, the U.S. District Court for the District of Columbia ruled that the FEC was barred from suing for a civil penalty in this case because the 5-year statute of limitations had expired. 28 U.S.C. §2462. Additionally, the court ruled that injunctive relief was not warranted because the defendant had not violated the law again for more than 10 years.
The National Right to Work Committee (NRWC) is a nonprofit corporation that defends workers' rights to refuse to join or support a labor union. In 1984, the NRWC spent $100,000 to hire private detectives to infiltrate the AFL-CIO, the National Education Association (NEA) and the Mondale for President Committee for the purpose of gathering evidence that the unions were using their general treasury monies to provide support to Walter Mondale's Presidential effort. (The use of labor union money in connection with a federal election is prohibited by 2 U.S.C. §441b.) The NRWC used the information gathered by its hired detectives to file administrative complaints with the FEC.
In October 1984, the NEA filed an administrative complaint with the FEC that accused the NRWC of violating the same federal election laws that the NRWC had accused the NEA of violating. The NEA complaint contended that the NRWC's payment of $100,000 represented illegal contributions and expenditures because the payments funded the services of detectives who, in the course of conducting their clandestine information gathering, rendered services to the Mondale campaign.
On May 23, 1989, the Commission found “probable cause” that the NRWC had violated §441b. On March 13, 1990, the FEC filed this lawsuit.
Statute of Limitations
In general, federal government agencies must initiate proceedings to assess civil penalties, fines and forfeitures within 5 years from “the date when the claim first accrued.” 28 U.S.C. §2462. In FEC v. National Republican Senate Committee, the court ruled that this statute of limitations applied to the FEC and that the statute of limitations began to run when the alleged offense was committed. The FEC conceded that the NRWC's hired detectives ceased their undercover operations by September 1984. The court noted that the Commission did not file this lawsuit until March of 1990. The court concluded that the 5-year statute of limitations ran out on this case and the FEC was therefore barred from pursuing a civil penalty in this matter.
Furthermore, the court ruled that because the FEC failed to put forth any compelling evidence that the NRWC had violated the law since 1984, it was both unnecessary and unwarranted to issue injunctive relief.
Source: FEC Record -- April 1996 [PDF].
FEC v. National Right to Work Committee, No. 90-0571 (D.D.C. Feb. 15, 1996).
In September 1980, the U.S. District Court for the District of Columbia ruled that Section 9012(f) was unconstitutional as applied to Americans for Change, Americans for an Effective Presidency and FCM, three multicandidate political committees (not affiliated with any parent organization). This provision of the Presidential Election Campaign Fund Act prohibits unauthorized committees (i.e., those not authorized by a candidate) from making expenditures exceeding $1,000 to further the election of a publicly funded Presidential nominee in the general election. The committees had planned to make expenditures in excess of $1,000 to support the Republican Presidential nominee's general election campaign.
On January 19, 1982, the Supreme Court voted 4 to 4 to affirm the D.C. district court's September decision, with Justice Sandra O'Connor not participating. However, since the high Court's vote on the suit had been equally divided, its affirmance had no precedential value. Subsequently, the FEC issued advisory opinions to NCPAC and FCM in which the FEC stated that Section 9012(f) may be enforced.1
In an effort to obtain a final ruling by the high Court on Section 9012(f)'s constitutionality, the FEC filed a new suit with the U.S. District Court for the Eastern District of Pennsylvania on June 14, 1983. (FEC v. NCPAC and FCM; Civil Action No. 83-2823.) This suit was consolidated with another suit, Democratic National Committee (DNC) v. NCPAC (Civil Action 83-2329), which had been filed on May 1, 1983. The FEC intervened in that suit as defendants and argued that the DNC lacked statutory and constitutional standing to bring that action. In the consolidated suits, plaintiffs asked that a three-judge panel of the court be convened to declare that:
- Expenditures (in excess of $1,000) that NCPAC and FCM each intended to make on behalf of the publicly funded Republican Presidential nominee in 1984 would be prohibited by, and in violation of, 26 U.S.C. §9012(f)(1); and
- Section 9012(f)(1), as applied to the defendant committees, was constitutional.
District Court's Ruling
On December 12, 1983, the Pennsylvania district court first ruled that the Democrats had standing to bring suit. The court then held that Section 9012(f) was unconstitutional on its face because it violated First Amendment rights of free speech and association. The court based its finding on the Buckley v. Valeo opinion. That opinion, the court said, allows “restrictions on true campaign speech only to prevent corruption or its appearance.” The court concluded that “plaintiffs have produced virtually no evidence of actual corruption and little admissible evidence of the appearance of corruption.” The court held the view that “modest expenditures by political committees...[such as the defendant committee] have almost no potential to corrupt or to create the appearance of corruption.... ”
On December 16, 1983, the FEC filed an appeal of this decision with the Supreme Court.
Supreme Court's Ruling
On March 18, 1985, the Supreme Court handed down a ruling in FEC v. National Conservative Political Action Committee (NCPAC) (CA No. 83-1032), which affirmed the Pennsylvania district court's decision that 26 U.S.C. §9012(f) was unconstitutional on its face because the provision violated First Amendment rights of free speech and association. However, the Court reversed the district court's holding that the Democratic Party and the Democratic National Committee (the Democrats) had standing to file a suit regarding Section 9012(f)'s constitutionality and instructed the lower court to dismiss the Democrats' suit.
The Democrats Lack Standing to Bring Suit
In reversing the lower court's ruling that the Democrats had standing to bring suit, the Supreme Court noted that, while the Fund Act authorized the Democratic National Committee to bring “appropriate” suit,2 such private suits “to construe or enforce the Act are inappropriate interference” with the FEC's “responsibilities for administering and enforcing the Fund Act.”
Section 9012(f) Violates the First Amendment
The Court noted initially that “the expenditures at issue are squarely prohibited by §9012(f).” Nevertheless, since the committees' allegedly independent expenditures on behalf of President Reagan's campaign “produc[ed] speech at the core of the First Amendment and implicat[ed] the freedom of association, they [were] entitled to full protection under that Amendment.” The Court stated that in a Presidential election, “allowing the presentation of [political] views while forbidding the expenditure of more than $1,000 to present them is much like allowing a speaker in a public hall to express his views while denying him the use of an amplifying system.”
The Court therefore concluded that “Section 9012(f)'s limitation on independent expenditures by political committees is constitutionally infirm, absent any indication that such expenditures have a tendency to corrupt or to give the appearance of corruption. But even assuming that Congress could fairly conclude that large-scale political action committees have a sufficient tendency to corrupt, §9012(f) is a fatally overbroad response to that evil. It is not limited to multimillion dollar war chests, but applies equally to informal discussion groups that solicit neighborhood contributions to publicize views about a particular Presidential candidate.”
Finally, the Court held that “section 9012(f) cannot be upheld as a prophylactic measure deemed necessary by Congress. The groups and associations in question here, designed expressly to participate in political debate, are quite different from the traditional organizations organized for economic gain [e.g., corporations and labor organizations] that may properly be prohibited from making contributions to political candidates.”
1 For a summary of AO's 1983-10
and 1983-11, see the
July 1983 Record, p. 2.
2 Under Section 9011(b)(1) of the Fund Act, the national committee of a political party, the FEC and individuals eligible to vote for President may file appropriate actions which seek to implement or construe provisions of the Fund Act.
Source: FEC Record -- January 1984, p. 8; and May 1985, p. 6.
FEC v. National Conservative Political Action Committee; Democratic Party of U.S. v. National Conservative Political Action Committee; 578 F. Supp. 797 (E.D. Pa. 1983) (three-judge court) aff'd in part, rev'd in part, 470 U.S. 480 (1985).
On May 16, 1986, the U.S. District Court for the Southern District of New York granted the FEC's motion for summary judgment in FEC v. National Conservative Political Action Committee (NCPAC). (Civil Action No. 84 Civ. 0866 (GLG).) The court ruled that expenditures made by NCPAC in its campaign to defeat Senator Moynihan's 1982 reelection effort constituted excessive in-kind contributions to Bruce Caputo. The court found that NCPAC had further violated the election law by failing to properly report these expenditures as “in-kind” contributions. Accordingly, on June 13, 1986, the court imposed a $15,000 civil penalty on NCPAC and ordered the PAC to file amended reports with the FEC within 30 days of the court's order.
During the 1981-82 election cycle, as part of its strategy to defeat Senator Moynihan, NCPAC established a political action committee, “New Yorkers Fed Up with Moynihan.” NCPAC also hired Arthur J. Finkelstein Associates, a polling and political consulting firm, to develop a media strategy to advocate Senator Moynihan's defeat, conduct and analyze polls, and select election issues on which Senator Moynihan was most vulnerable. From April 1981 until August 1982, NCPAC spent $73,755 on its anti-Moynihan campaign. During this time, the Finkelstein firm also worked for Bruce Caputo's campaign.
In March 1981, Mr. Caputo announced that he would seek the Republican Party's nomination for Mr. Moynihan's Senate seat, and he retained Mr. Finkelstein as a paid political consultant. By March 1982, when Mr. Caputo withdrew from the Senate race, his campaign committee had paid Mr. Finkelstein's firm $28,000 to assist in all aspects of Mr. Caputo's Senatorial primary campaign.
In January 1982, the FEC received a complaint from the New York State Democratic Committee alleging that independent expenditures reported by NCPAC for its anti-Moynihan campaign were actually in-kind contributions to the Caputo campaign. In September 1983, the FEC found probable cause to believe that NCPAC's expenditures were, in fact, contributions. NCPAC had therefore exceeded the election law's contribution limits and had violated the disclosure requirements. After failing to reach a conciliation agreement with the respondent, the FEC filed suit against NCPAC on February 6, 1984.
NCPAC did not deny that, on its face, the election law limits the amount of such contributions. NCPAC claimed, however, that, in making the expenditures, it had relied in good faith on an FEC advisory opinion issued to the PAC in March 1980.
The Court's Ruling
The district court concluded that NCPAC could not rely on the FEC's advisory opinion because “the distinctions between the facts as they actually unfolded and the facts addressed in the FEC's advisory opinion are patent.” The court found that Moynihan and Caputo were “for all practical purposes, opponents” during the primary season. The court also noted that the Finkelstein firm's role in both “the NCPAC and Caputo efforts was far more significant than that of a vendor of advertising services or a polling company. Finkelstein was NCPAC's key strategist. He formulated and directed the execution of NCPAC's plan to defeat Senator Moynihan.... Simultaneously, he served as the chief architect of Bruce Caputo's campaign.” The court concluded that NCPAC's coordination with the Caputo campaign “far exceeded the ‘communication' sanctioned by the FEC” in its advisory opinion. Under these circumstances, the court concluded that “NCPAC's anti-Moynihan expenditures must be deemed contributions to the Caputo campaign” rather than independent expenditures.
On July 17, 1986, the defendants filed an appeal with the U.S. Court of Appeals, 2nd Circuit. (Civil Action No. 86-6139) Both parties filed a Stipulation for Withdrawal of Appeal on August 27, 1986. The defendants were ordered to pay the FEC's taxation of costs and on February 3, 1987, the district court issued an Acknowledgment of Satisfaction of Judgment, thereby closing the matter.
Source: FEC Record -- July 1986, p. 6; and April 1980, p. 4.
FEC v. National Conservative Political Action Committee, 647 F. Supp. 987 (S.D.N.Y. 1986).
On April 29, 1987, the U.S. District Court for the District of Columbia granted plaintiff's motions for summary judgment and dismissal of defendants' counterclaim in FEC v. National Conservative Political Action Committee (Civil Action No. 85-2898). The court found that the defendants had violated the law by failing to include a statement in their solicitation material clearly identifying the person who paid for the communication.
During the 1984 election cycle, NCPAC mounted a $10 million independent expenditure campaign advocating the reelection of President Reagan. As part of this project, NCPAC mailed out materials urging the reelection of the President and soliciting contributions to finance its expenditures for this effort. The solicitation material did not identify who paid for it. Under the Act and Commission regulations, any communication which expressly advocates the election or defeat of a clearly identified candidate or which solicits contributions must clearly display a disclaimer identifying the person(s) who paid for the communication. 2 U.S.C. §441d(a)(3).
On April 23, 1985, after attempting to resolve this enforcement matter through informal methods of conciliation, the Commission filed suit against the defendants in the U.S. District Court for the District of Columbia. In its complaint, the FEC sought the following:
- A judgment declaring that the defendants violated the law by failing to include a proper disclaimer in their solicitation material;
- An order permanently enjoining the defendants from repeating the violation;
- An assessment of a civil penalty; and
- An award of attorney's fees and costs incurred by the FEC.
In their counterclaim, the defendants sought review of the FEC's decision to bring this action pursuant to the Administrative Procedure Act (APA), 5 U.S.C. §701 et seq. The defendants claimed that the FEC decision was “final agency action” within the meaning of section 704 of the APA and, therefore, reviewable. Furthermore, the defendants claimed that the FEC decision was “arbitrary, capricious, and an abuse of discretion under the APA” because the Commission had declined to initiate a civil enforcement action in another similar case. Finally, in denying the alleged violation of the Act, the defendants argued that the use of the NCPAC postal frank and other references throughout the material made it quite clear who paid for the communication. In their view, therefore, a specific disclaimer was not necessary.
In ruling that the defendants had violated 2 U.S.C. §441d(a)(3), the court said that “the Act and regulations do not provide for disclaimers by inference and the court is consequently of the view that these repeated references to NCPAC which appear within the materials do not satisfy section 441d's disclaimer requirement.”
The court also dismissed the defendants' counterclaim. Citing an earlier Supreme Court case, the court held that the initiation of enforcement proceedings does not constitute “final agency action” and is, therefore, not subject to judicial review under the APA. Regarding the defendants' allegation that the FEC exercised selective prosecution against NCPAC, the court ruled that one isolated instance of nonenforcement was not evidence that NCPAC was being singled out for prosecution and that even if it were, defendants produced no evidence demonstrating that this action resulted from an improper motive.
Finally, the court assessed a civil penalty of $3,000 against the defendants. On June 27, 1987, the defendants filed a motion to stay the decision.
Source: FEC Record -- July 1987, p. 5.
FEC v. National Conservative Political Action Committee, No. 85-2898 (D.D.C. April 29, 1987) (unpublished opinion).
On July 20, 1978, the U.S. District Court of the District of Columbia granted the Commission's motion for summary judgment in this case. The FEC had filed suit against the National Education Association (NEA), its separate segregated fund (NEA-PAC) and eighteen of its state affiliates seeking to enjoin them from collecting political contributions by means of a “reverse checkoff” procedure. Under this procedure, a political contribution is automatically deducted from a member's salary along with his/her dues payment. The contribution is subsequently refundable upon written request by the member.
In addition to granting summary judgment, the court issued the following orders:
- Defendants are permanently enjoined from using the reverse check-off procedure to collect political contributions to NEA-PAC.
- Defendants, in consultation with the Commission, must prepare a plan by which its members will be informed of the suit and the decision of the court. In addition, the plan must provide a method by which the members are afforded an opportunity to obtain, at no expense to them and with minimal effort, a refund of any monies deducted from the paychecks through the reverse check-off. The plan must be presented to the court by August 25, 1978.
- Defendants' counterclaim against the Commission was dismissed.
On November 2, 1978, the U.S. District Court for the District of Columbia ordered the NEA to obtain written affirmation from participants in the reverse check-off programs of their intent to make a political contribution to its separate segregated fund, NEA-PAC. The court set April 1, 1979, as the deadline for obtaining each member's written consent to the contributions they had made through the reverse check-off procedure. NEA was further required to return funds to individuals who do not submit the affirmation.
Source: FEC Record -- September 1978, p. 4; and January 1979, p. 3.
FEC v. National Education Association, 457 F. Supp. 1102 (D.D.C. 1978).
On June 23, 1986, the U.S. District Court for the Eastern Division of Virginia, Alexandria Division, approved a consent order between the Commission and defendants, the New Republican Victory Fund (the Fund), a nonconnected political committee, and the Fund's treasurer, Charles R. Black, Jr. The consent order provides that defendants violated section 434(a)(4)(A) of the election law during the 1984 election cycle by:
- Failing to file the Fund's October quarterly, year-end and post-general election reports; and
- Filing its July quarterly report approximately 64 days late.
Within 30 days of filing the consent order, the defendants agreed to:
- File these reports; and
- Pay a $2,350 civil penalty to the U.S. Treasurer.
The consent order concluded a suit filed by the FEC on April 18, 1986.
Source: FEC Record -- August 1986, p. 7.
On April 17, 1990, the U.S. District Court for the Southern District of New York issued a final consent order and judgment declaring that the New York State Conservative Party State Committee/1984 Victory Fund made excessive contributions in connection with a 1982 direct mail project for Florence M. Sullivan, a Republican candidate in the 1982 Senatorial primary election in New York. (Civil Action No. 87-3309). The order included a $15,000 civil penalty.
The consent order stated that the defendants first made a $4,980 in-kind contribution to the Sullivan for Senate Committee by paying for the printing of direct mail literature. Subsequently, the defendants allowed the Sullivan Committee to use the Victory Fund's nonprofit postal permit, saving the Sullivan committee $24,852.15 on postage (i.e., the difference between the usual bulk rate for the Sullivan letters and the postage actually paid using the nonprofit permit). These in-kind contributions exceeded the $5,000 per candidate, per election limit for multicandidate committees, set forth at 2 U.S.C. §441a(a)(2)(A).
In addition, the order stated that the Victory Fund failed to report the in-kind contribution of the postage costs, in violation of 2 U.S.C. §434(b).
The consent order required the Victory Fund to amend its reports and pay a $15,000 civil penalty.1 Finally, the defendants were permanently enjoined from future similar violations.
1 Payment of the civil penalty in this consent order will also satisfy two prior outstanding default judgments in FEC v. 1984 Victory Fund (Civil Action Nos. 86-3891 and 85-8384). See the March 1987, June 1986 and December 1985 issues of the Record for more information on those suits.
Source: FEC Record -- June 1990, p. 7.
On May 11, 1989, the U.S. District Court for the District of Columbia issued a memorandum opinion granting the defendant's motion for summary judgment in FEC v. National Organization for Women (NOW). The court found that the election law's prohibitions against corporate political expenditures did not apply to a series of direct mailings sent as part of a NOW membership drive because the materials did not contain express advocacy.
The agency filed suit against NOW, a nonprofit corporation, in August 1987 after failing to reach a conciliation agreement with the organization in a compliance matter generated by a 1984 complaint from the National Conservative Political Action Committee.
The FEC charged that three direct mailings sent by NOW during the 1984 election cycle contained communications connected with several U.S. Senate elections. The letters mentioned several Senators who were running for reelection in 1984, including Jesse Helms and Strom Thurmond. Although NOW had established a separate segregated fund for political activities, the expenditures for the mailings were made with money from its general treasury. The FEC charged that these expenditures constituted violations of 2 U.S.C. §441b, which prohibits all corporations from making expenditures in connection with federal elections.
District Court Decision
In finding that now's financing of the preparation and distribution of the letters in question with money from its corporate treasury did not constitute a violation of the election law, the court primarily addressed the issue of express advocacy.
Citing the Supreme Court's 1986 ruling in FEC v. Massachusetts Citizens for Life, Inc. (MCFL), the court reasoned that section 441b's prohibition against expenditures made “in connection with” federal elections did not broaden the general definition of “expenditure” given in section 431(9)(a)(i) of the Act, i.e., disbursements, gifts and other types of payments made “for the purpose of influencing” federal elections. The court determined that section 441b's prohibition against expenditures made “in connection with” federal elections could only be interpreted as prohibiting expenditures made “for the purpose of influencing” federal elections. Further citing MCFL and other Supreme Court decisions, the district court concluded that this interpretation of the definition of "expenditure” required that the communication expressly advocate the election or defeat of a candidate. Express advocacy, in the court's view, had to include “an explicit and unambiguous reference” to a candidate, as well as a clear exhortation to vote for or against that candidate. Using this interpretation of express advocacy—based on MCFL, the appeals court ruling in FEC v. Furgatch, and other decisions—the court found that now's letters did not contain any language that expressly advocated the election or defeat of any candidate.
The court found that the central purpose of each of the mailings was apparently to expand the organization's membership, not to tell recipients how to vote. While the letters named some Senators who were candidates, they also mentioned some who were not running for reelection in 1984. Moreover, Senators were named mainly in the context of their opposition to causes embraced by now. The letters called for a variety of actions by the recipients in support of the organization and its causes. Such actions included, for example, communicating support for the equal rights amendment to the recipients' own Senators, and making contributions to now. The letters “fail[ed] to expressly tell the reader to go to the polls and vote against particular candidates.” Since the letters were “suggestive of several plausible meanings...now's letters fail the express advocacy test proposed by the ninth circuit in Furgatch.”
The district court added that, since the actual distribution of the letters was conducted by an outside direct mail contractor that did not inform now of where the mailings would be sent, NOW “clearly lacked the intent to influence” any particular senatorial election.
The court decided that the now mailings constituted discussion of political issues, protected by the first amendment, rather than an attempt to influence the election or defeat of any candidates because the letters did not contain express advocacy.
The FEC appealed the decision. In October 1991, however, following the supreme court's denial of the Commission's petition for a writ of certiorari in Faucher v. FEC, the commission filed a motion to dismiss the appeal. The U.S. Court of Appeals for the District of Columbia Circuit granted the motion on October 11, 1991.
Source: FEC Record -- July 1989, p. 7; and November 1991, p. 1.
FEC v. NOW, 713 F. Supp. 428 (D.D.C. 1989), appeal dismissed (D.C. Cir. Oct. 11, 1991).
On April 27, 1983, the U.S. District Court for the District of Columbia issued a consent decree resolving claims brought by the FEC against the National Rifle Association of America (NRA), an incorporated association; the Institute for Legislative Action (ILA), NRA's lobbying organization; and the NRA Political Victory Fund (PVF), NRA's separate segregated fund (Civil Action No. 81-1218).
The FEC filed suit against the defendants in May 1981, claiming that they had violated 2 U.S.C. §441b(a), which prohibits corporations from making contributions in connection with federal elections. Specifically, the FEC alleged that:
- NRA and ILA had made corporate expenditures in connection with the 1978 and 1980 Congressional elections and the 1980 Presidential elections;
- NRA and ILA had made corporate contributions to PVF in the form of advanced payments of expenditures on behalf of PVF, for which they were later reimbursed by PVF; and
- PVF had received corporate contributions by accepting (and subsequently reimbursing) the advanced payments of expenditures by NRA and ILA.
On January 6, 1983, the court dismissed, without prejudice, a portion of the FEC's claims, namely, allegations related to NRA's purchase of certain goods and services for PVF that had resulted in a violation of 2 U.S.C. §441b(a). The court found that it did not have subject matter jurisdiction over these specific factual allegations because the FEC had not undertaken conciliation with respect to them.
By the terms of the court's April 27 consent decree, the defendants agreed that:
- They will no longer engage in those activities alleged in the FEC's complaint which were not dismissed as part of the court's January 6, 1983, order.
- They will no longer spend corporate funds in connection with any federal election or otherwise engage in political activities prohibited by 2 U.S.C. §441b(a).
- They will limit partisan communications to NRA's restricted class of personnel (as specified by 2 U.S.C. §431(8)(B)(vi)).
- They will limit corporate expenditures in connection with federal elections to those exempt activities explicitly permitted by the Act and FEC regulations.
Source: FEC Record -- June 1983, p. 11.
FEC v. National Rifle Association, 553 F. Supp. 1331 (D.D.C. 1983).
On June 29, 2001, the U.S. Court of Appeals for the District of Columbia Circuit ruled that the National Rifle Association (the NRA) and its lobbying organization, the NRA American Institute for Legal Action (ILA), violated the Federal Election Campaign Act's (the Act) ban on corporate contributions and expenditures during the 1978 and 1982 election cycles. 2 U.S.C. §441b(a). While the district court had ruled that the NRA also violated the ban in 1980, the appellate court determined that during 1980 the NRA qualified for a constitutionally-mandated exemption from the ban. As a result, the appeals court remanded the case to the lower court in order to have civil penalties calculated based on the 1978 and 1982 violations alone.
During the 1978, 1980 and 1982 election cycles, the NRA paid $37,833 of the Political Victory Fund's expenses for federal election activity, including payments for newspaper advertisements, direct mailings and other materials that supported or opposed individual candidates. The Political Victory Fund then distributed some of these materials to NRA members, firearms dealers and other related organizations. The Political Victory Fund later reimbursed the NRA for these expenses and reported the disbursements as independent expenditures on its FEC disclosure reports.
In 1985, the Commission filed a civil suit against the NRA, the ILA and the Political Victory Fund, claiming that they had violated the Act's prohibition on corporate contributions and expenditures.
In response, the NRA argued that its payments on behalf of the Political Victory Fund were for that committee's administrative expenses and, thus, permissible under the Act. The NRA also challenged the constitutionality of the Act as applied to its activities, arguing that the organization should qualify for the so-called MCFL exemption that allows certain nonprofit political corporations to make independent expenditures.
This exemption is based on the Supreme Court's decision in FEC v. Massachusetts Citizens for Life (MCFL), 479 U.S. 238 (1986). In that case, the Court held that the Act's general prohibition of corporate-financed independent expenditures could not constitutionally be applied to nonprofit ideological corporations that possess three specified features that preclude them from presenting the kinds of dangers at which the prohibition is directed.1 See also Austin v. Michigan Chamber of Commerce, 494 U.S. 652 (1990).
District Court Decision
The district court rejected the NRA's argument that its payments to the Political Victory Fund were merely for administrative expenses. The court also concluded that the NRA, unlike MCFL, did not qualify for the constitutionally-mandated exemption from the Act's prohibition of corporate independent expenditures. The NRA, the court stated, had not been formed for the express purpose of promoting political ideas and pursued a variety of activities, many of which were not political. The court also stated that the NRA had no policy of refusing contributions from business corporations. The court fined the NRA and ILA $25,000 for making prohibited contributions and expenditures, and it imposed a separate $25,000 civil penalty against the Political Victory Fund for receiving prohibited corporate contributions.
Appeals Court Decision
On appeal, the NRA again argued that its payments on behalf of the Political Victory Fund were permissible payments of administrative expenses. In addition, the NRA argued that its:
- In-kind contributions of corporate materials and facilities were allowable under Commission regulations that permit persons to use corporate facilities for election-related activity, so long as they reimburse the corporation within a commercially reasonable time for the market value of the production of the materials (11 CFR 114.9 (c)); and
- Payments to NRA employees working for Political Victory Fund on the campaigns of federal candidates were permissible because those payments did not meet the statutory definition of “contribution” at 2 U.S.C. §431(8)(A).
The appeals court, however, deferred to the Commission's interpretation of the definition of administrative expenses at 11 CFR 114.1(b), which allows corporations to cover only the overhead and start-up costs of their political action committees. The court also deferred to the Commission's interpretation of 11 CFR 114.9(c), which allows only stockholders and employees acting as volunteers to use corporate facilities to produce materials in connection with a federal election. Finally, relying on FEC Advisory Opinion 1984-24, the court held that the NRA's payments to its employees who were working for the Political Victory Fund on candidates' campaigns were prohibited corporate contributions under the definition of “contribution” at section 441b(b)(2), which addresses corporate activity. The FEC's advisory opinions, the court stated, are entitled to deference. They “not only reflect the Commission's considered judgment made pursuant to congressionally delegated lawmaking power, but [they] also have binding legal effect.”
In its appeal, the NRA also renewed its claim that, under the MCFL decision, it was exempt from the ban on corporate contributions. The NRA argued that it was “not formed to amass capital, and its resources reflect not the ‘economically motivated decisions of investors and customers, but rather its popularity in the political marketplace.'”
The Commission argued that, unlike MCFL, the NRA does not have a narrow political focus but instead performs a wide variety of nonpolitical services for its members. The Commission also argued that the NRA's extensive business activities and its acceptance of corporate contributions distinguished it from the kinds of corporations exempted by the Supreme Court in MCFL.
The appellate court stated that “the Commission must demonstrate that the NRA's political activities threaten to distort the electoral process through the use of resources that, as MCFL put it, reflect the organization's ‘success in the economic marketplace' rather than the ‘power of its ideas.'” The court concluded that the Commission had “failed to demonstrate that the NRA resembles a business firm more closely than a voluntary political association.”
The court found, however, that the $7,000 and $39,786 in corporate contributions that the NRA received in 1978 and 1982, respectively, were substantial enough to risk turning it into a “potential conduit for the corporate funding of political activity” during these years. Thus, the court found no constitutional barrier to applying the Act's prohibitions to the NRA for those two years. In 1980, however, the NRA received only $1,000 in corporate contributions, an amount which, in the court's view, did not demonstrate that the organization was acting as a conduit for corporate contributions. Therefore, the court held that the NRA was not in violation of the Act for contributions and expenditures it made to the Political Victory Fund during that year.
The appeals court ordered that the case be remanded to the district court to recalculate penalties against the NRA, the ILA and the Political Victory Fund based solely on the 1978 and 1982 violations.
On August 23, 2001, the Court of Appeals for the District of Columbia Circuit denied the Commission's petitions to have this case reheard by a panel of the court and heard en banc. The Commission had asked the court to revisit a portion of its June 29, 2001, ruling. The court had held that in 1980 the National Rifle Association (NRA) qualified for a limited exemption to the Federal Election Campaign Act's ban on corporate contributions and expenditures.
Although the court denied the FEC's petitions, it did—at the Commission's request—clarify that the NRA's 1980 exemption applied only to corporate independent expenditures and not to corporate contributions to candidates.
- The organization is a nonprofit ideological corporation formed “for the express purpose of promoting political ideas, and cannot engage in business activities.”
- It has “no shareholders or other persons affiliated so as to have a claim to its assets or earnings.”
- It has not been established by a corporation or labor union and has a policy “not to accept contributions from such entities.”254 F.3d 173.
On December 6, 1994, the Supreme Court ruled that the FEC lacked standing to independently bring a case under Title 2 of the U.S. Code before the Supreme Court. In future cases, the FEC must seek authorization from the U.S. Solicitor General if it wishes to represent itself in Title 2 cases. (Civil Action No. 93-1151.)
This decision brought to an end the FEC's legal efforts to enforce a finding that the NRA contributed corporate monies to its separate segregated fund, the NRA Political Victory Fund. (Corporations are prohibited sources of contributions under 2 U.S.C. §441b(a).) In November 1991, the U.S. District Court for the District of Columbia had ruled in favor of the FEC and had imposed a $40,000 penalty on the defendants. On appeal, the U.S. Court of Appeals for the District of Columbia reversed the district court's ruling on the grounds that the FEC's two nonvoting, ex officio members, the Secretary of the Senate and the Clerk of the House, sat on the Commission in violation of the Constitution's separation of powers.
District Court Ruling
In a November 15, 1991, order, modified on December 11, the U.S. District Court for the District of Columbia found that a $415,745 payment made by the National Rifle Association—Institute For Legislative Action (ILA) to NRA's separate segregated fund was a corporate contribution in violation of 2 U.S.C. §441b(a). (The ILA is a component of NRA, a nonprofit corporation.) (Civil Action No. 90-3090.) The court ordered defendants ILA, the NRA Political Victory Fund (the separate segregated fund) and the Fund's treasurer to pay a $40,000 civil penalty. The court also ordered defendants to comply with 11 CFR 114.5(b)(3) in future transactions. Under that regulation, a corporation may reimburse its separate segregated fund (SSF) for expenses that the corporation could lawfully have paid as an administrative or solicitation expense, but the reimbursement must be made no later than 30 days after the SSF's payment.
Application of Section 114.5(b)(3)
The payment at issue originated from transactions that took place in March and July 1988, when ILA paid for two solicitation mailings. The Fund reimbursed ILA $415,745, the full cost of the mailings, on August 1. ILA returned that amount to the Fund on October 20—81 days after the August payment. Because this reimbursement was made after the 30-day period specified in section 114.5(b)(3), the court found that the October 20 payment was not a permissible reimbursement of solicitation expenses, as defendants had argued, but was instead an illegal corporate contribution to the Fund. The court observed that the October 20 payment was not used to pay for the solicitation material purchased in March and July. By defendants' own account, the money was returned to the Fund to bolster its budget for campaign activities related to the 1988 elections.
Application of MCFL
The court also rejected defendants' argument that the October 20 payment was permissible under the Supreme Court's decision in FEC v. Massachusetts Citizens for Life, Inc. (MCFL), 479 U.S. 238 (1986). MCFL permitted a nonprofit corporation to make independent expenditures if, among other conditions, the corporation had a policy of not accepting donations from business corporations and labor unions. The district court found MCFL inapplicable here because the ILA does receive corporate donations.
Constitutional Status of FEC
Defendants also argued that the FEC lacked authority to bring suit because the FEC is a constitutionally flawed agency. They first claimed that the appointment of Commission members impermissibly restricts the appointment power granted the President under Article II because, under the Federal Election Campaign Act, the President is prevented from appointing more than three Commissioners from the same political party. Defendants further claimed that, because the President cannot control or remove Commissioners, the execution of the law does not rest with the President, an infringement of the sole executive power vested in the President under Article II. The court, however, ruled that the defendants did not have standing to raise these claims: “[D]efendants have raised an issue that bears on the rights of a third party, namely the President, and not on their own legal interests.”
Defendants also argued that the statute's designation of the Clerk of the House and the Secretary of the Senate as nonvoting Commission members violated the separation of powers. Finding no showing that the nonvoting members participated in any decisions involving the present case, the court said that there was “no need to concern itself” with this argument.
FEC Requests Change in Civil Penalty
In its original order of November 15, the court had imposed a civil penalty in the amount of the FEC's total costs in investigating and prosecuting the violation, the amount to be calculated by the FEC.
On December 2, the FEC filed a motion asking the court to amend the civil penalty so that it reflected the amount necessary to deter similar violations rather than the costs of the agency's enforcement efforts, which the FEC viewed as unrelated to the violation at issue. The FEC also noted that such a penalty would be time consuming and burdensome to calculate.
In an amended opinion issued on December 10, the court ordered defendants to pay a $40,000 penalty. In imposing that amount, the court considered the defendants' bad faith, the injury to the public, the defendants' ability to pay and the need to vindicate the FEC's authority. The court concluded: “Because of the deliberate nature of defendants' actions, the Court must impose a substantial penalty in order to deter them from repeating this violation.” The court added that defendants could have accomplished their objective legitimately if they had used proper fiscal planning.
Appeals Court Ruling
On October 22, 1994, the U.S. Court of Appeals for the District of Columbia ruled that the composition of the Federal Election Commission “violates the Constitution's separation of powers.”
Under the Federal Election Campaign Act (FECA), the President appoints the Commission's six voting members, and Congress designates two non-voting ex officio members. The court found that “Congress exceeded its legislative authority when it placed its agents, the Secretary of the Senate and the Clerk of the House of Representatives, on the independent Commission as non-voting ex officio members.”
The court rejected the Commission's contention that the ex officio members play an “informational or advisory role.” The court noted that “advice...implies influence, and Congress must limit the exercise of its influence...to its legislative role.” The court added that the “mere presence” of the Congressional representatives “has the potential to influence the other Commissioners.” Citing legislative history, the court concluded that Congress intended the ex officio members to “serve its interests while serving as commissioners.” Ultimately, the court said, “the mere presence of agents of Congress on an entity with executive powers offends the Constitution.”
Based on a severability clause in the FECA, the court concluded that “the unconstitutional ex officio membership provision can be severed from the rest of ” the statute, permitting a reconstituted Commission to continue to operate. The court added that Congress was not, in this instance, required to amend the statute.
The court rejected two other Constitutional challenges raised in the case; one regarding the Commission's bipartisan composition and the other, its status as an independent agency. The NRA had argued that:
- The “FECA's requirement that ‘[n]o more than 3 members of the Commission...may be affiliated with the same political party,' 2 U.S.C. §437c(a)(1) (1988), impermissibly limits the President's nomination power under the Appointments clause;” and
- The FEC's independence denies the President “sufficient control over the Commission's civil enforcement authority, a core executive function.”
The court found the first of these challenges to be nonjusticiable because it is the Senatorial confirmation process, and not the statute itself, that arguably restrains the President. Indeed, the court noted that “without the statute the President could have appointed exactly the same members” to the Commission.
The court also upheld the FEC's status as an independent agency, citing a number of court cases that specifically sanction such entities.
The appeals court ruling reversed a district court decision that the NRA had violated 2 U.S.C. §441b(a) by contributing corporate funds to its separate segregated fund, the NRA Political Victory Fund. Having ruled on the Constitutional issue, the appeals court did not consider the merits of the case.
Following the appeals court's decision, the Commission took several steps to ensure the uninterrupted enforcement of the federal election law. The agency:
- Reconstituted itself as a six-member body, comprising only those commissioners appointed by the President;
- Ratified, in its reconstituted form, the regulations, forms, advisory opinions, audits, compliance matters and litigation issued and/or initiated by the former Commission; and
- Filed a petition for a writ of certiorari with the Supreme Court.
Supreme Court Decision
In December 1994, the Supreme Court ruled that the FEC lacked standing to independently bring Title 2 cases before the Court. As a result of the ruling, the FEC will have to seek authorization from the U.S. Solicitor General if it wishes to represent itself in Title 2 cases.
The FEC's petition to the Supreme Court was filed within the 90-day filing period mandated by law, but it was filed without the authorization of the Solicitor General. The Court contrasted the language at 2 U.S.C. §437d(a)(6) with that of 26 U.S.C. §§9010(d) and 9040(d) to reach the conclusion that the FEC lacked standing to bring this case. The Title 2 statute empowers the FEC “to . . . appeal any civil action . . . to enforce the provisions of the” Federal Election Campaign Act. It fails, however, to explicitly provide the FEC with the authority to file a writ of certiorari or otherwise conduct litigation before the Supreme Court. By contrast, the Court stated, the Title 26 statute does specifically provide the FEC with the authority “to petition the Supreme Court for certiorari to review” judgments in actions to enforce the Presidential election fund laws. The Court interpreted the discrepancy in the language of these two statutes to indicate congressional intent to restrict the FEC's independent litigating authority at the Supreme Court level to those matters involving the Presidential election laws.
The Court rejected the Commission's argument that, in the past, it had represented itself before the High Court. The Court pointed out that none of those cases had challenged the FEC's standing to petition the Court for a writ of certiorari.
Although the Solicitor General authorized the FEC's petition, this action came months after the 90-day filing period had closed—“too late in the day to be effective.”
The FEC's petition for a writ of certiorari, therefore, was dismissed for want of jurisdiction. The action left standing the ruling of the court of appeals.
Source: FEC Record -- January 1992, page 7; December 1993, p. 2; and February 1995, p. 1.
FEC v. NRA Political Victory Fund, 778 F. Supp. 62 (D.D.C. 1991), No. 90-3090 (D.D.C. Dec. 10, 1991), rev'd, 6 F.3d 821 (D.C. Cir. 1993), cert. dismissed for want of jurisdiction, 115 S. Ct. 537 (Dec. 6, 1994).
On April 27 and 28, 1997, the U.S. District Court for the District of Utah, Central Division, approved the parties' settlement that required Utahns for Ethical Government (UEG) to pay a $9,000 civil penalty to the FEC for violations of the Federal Election Campaign Act (the Act) and to amend their termination report so that all of their expenditures would be reported as in-kind contributions to Orton for Congress. UEG also had to either refund $1,800 in impermissible corporate contributions or remit that same amount to the U.S. Treasury.
The violations resulted from UEG's involvement in the 1990 general election campaign for the 3rd Congressional District seat in Utah. UEG, a single-candidate political committee registered with the FEC, supported William Orton over his opponent, Karl Snow.
The settlement states that UEG accepted corporate contributions and contributions in the name of another, in violation of the Act. 2 U.S.C. §§441b(a) and 441f. The committee reported receipts of in-kind contributions of $1,000 from Sherman Fugal and of $800 from Jayson Fugal. In fact, these contributions were actually from Fugal & Fugal, Inc., a corporation, d/b/a Peggy Fugal Advertising.
The settlement also states that, although UEG included disclaimers on its advertisements that opposed Mr. Orton's opponent, the disclaimers failed to include a statement indicating whether the ads had been authorized by a candidate or candidate committee. Additionally, UEG failed to file a statement of organization with the Commission within 10 days of becoming a political committee, as required by 2 U.S.C. §433(a).
The settlement includes no judicial determination as to whether expenditures of $11,452, made by UEG to pay for ads opposing Mr. Orton's opponent, were in fact excessive contributions to Mr. Orton. The Commission, in its administrative proceedings, had found probable cause that UEG's expenditure had been coordinated with the Orton campaign, based on the fact that a former Orton campaign volunteer had participated in some UEG activities. Under the law, any expenditure made in cooperation with or at the suggestion of a candidate or his campaign is considered a contribution. 2 U.S.C. §441a(a)(7)(B)(i). In prior enforcement matters, the Commission had interpreted this provision to cover situations where the spender's activity was based on knowledge of official campaign strategy, the source of which was the candidate or the campaign. The defendants disagreed with the finding, arguing that the Commission had no direct evidence of the alleged violation.
The claims against all the defendants, including Mr. Orton and his campaign committee, will be dismissed with prejudice once UEG pays the fine and amends its reports.
Source: FEC Record -- June 1997 [PDF].