|
|
 |
|
| Best Practices: Politics |
Give Wisely
Jill Duman
01/01/2008
|
With the national elections only
months away, affluent voters of all political stripes are being hounded
mercilessly for donations. Campaigns, causes and committees all desperately want
cash, and they make it quite easy for high-net-worth individuals to make
sizeable contributions—maybe too easy.
 Campaign finance experts say there has never been a more
critical time to exercise caution when making political donations. The laws
governing where, when and how much donors can contribute are very specific, and
promise various penalties should violations occur. "My advice to contributors
is, don’t assume the federal government isn’t going to come knocking," warns
Michael Toner, the former chair of the Federal Elections Commission (FEC) and a
current partner in the Washington, D.C., law firm Bryan Cave.
Individual election code violators have attracted the attention
of the FEC and, in criminal prosecution cases, the Justice Department. Most of
the violators who have made headlines recently were rapped for what FEC
spokesman Bob Biersack describes as "conscious efforts to either avoid areas in
the law or manipulate the law." For example, Norman Hsu, the fundraiser facing
fraud and campaign finance violation charges, is believed to have raised well
over $1 million for Hillary Clinton’s presidential campaign. Much of the money
came in the form of bundled checks, the origins of which became suspect when the
fraud charges against Hsu became public. Another high-profile case involves a
Michigan trial lawyer, Geoffrey Fieger, who was indicted on federal charges that
he funneled $127,000 in contributions to the 2004 presidential campaign of John
Edwards. Meanwhile, Tab Turner, an Arkansas trial lawyer, paid a $50,000 FEC
civil penalty for making contributions in the names of others and using
corporate facilities in support of raising money for a federal candidate.
TOP VIEW
With elections only months away, the political fundraising
machinery is working overtime to raise needed funds—specifically from
high-net-worth donors. Unfortunately, the campaign finance regulations that
govern political contributions are labyrinthine and largely a mystery to the general public. Experts warn that before individuals write
checks to their candidate or cause of choice, they should be sure the donations
follow federal guidelines. The pen-alties for ignoring these laws are
stiff. |
The McCain-Feingold Act, formally known as the Bipartisan Campaign Reform Act
of 2002, profoundly enhanced criminal and civil penalties for election law
violations. Toner says, "The FEC has really had its hand strengthened in pursuing wrongdoing." Prior to
McCain-Feingold, in the vast majority of cases in which a donor was found to
have broken the law, it often would be a misdemeanor or the donor would plead
out. With criminal penalties, Toner says, "you’re looking at hard time and a
felony conviction, and that ups the ante."
Dubious Donations
McCain-Feingold’s stricter penalties—combined with bans on
so-called soft money, new limits on hard money, and targeted campaigning by IRS
tax-exempt 527 organizations—have led to record FEC enforcement. (Named for the
section in the tax code that defines them, 527 groups raise money for political
activities other than express advocacy of the election or defeat of a federal
candidate; they have not been subject to FEC oversight.)
In 2006 the FEC collected $6.2 million in fines—more than twice
as much as it ever collected in any of its previous 30 years. Early reports for
2007 indicate that the commission collected $2.5 million during the first six
months of the year. The largest fines levied by the commission in the past two
years have been against corporations and committees. In 2006, the FEC imposed a
record $3.8 million fine on the federally chartered home mortgage company
Freddie Mac, along with a total of $630,000 on the MoveOn.org Voter Fund,
Swiftboat Veterans and POWs for Truth, and the League of Conservation
Voters—all 527 groups. In 2007, the FEC received a $750,000 settlement in a case
against the 527 group Progress for America Voter Fund and another $775,000
penalty from the America Coming Together PAC.
Historically, the FEC has not focused on individual donors, as
evidenced by the fact that there have been no actions against contributors to
the 527 groups making headlines in recent years. But that could change as
Congress and the FEC continue to interpret and massage election law. New
regulations in 2008 require federal campaigns to disclose the names of lobbyists
who gather together or bundle donations of more than $15,000 in a semiannual
period. Additional disclosure requirements for large-scale donors could come, Toner says. "If history is any guide, the enactment of one set of finance
restrictions often leads to additional ones in other areas." He adds that the
FEC has indicated that it may begin taking a harder look at the role significant
donors play in contributions that later result in agency enforcement. "That
would be a sea change," he says.
|
|
|
|
|
|
|
