This article was originally published in Venable's Political Law Briefing Blog.
As we get closer and closer to the elections, candidates will be working harder and harder to raise money. One tried and true method is the fundraiser: an individual agrees to put together an event where his or her closest friends will make substantial contributions to the candidate, attend a breakfast, lunch, cocktails, or dinner, meet the candidate, and, if they contribute enough, get a picture with the candidate. While this may seem simple and straightforward, companies often get into trouble when they use their corporate resources to help put on fundraisers.
The largest fine in FEC history ($3.8 million) came as a result of corporate facilitation back in 2006. Others have followed. The FEC just unveiled an enforcement case involving a Nevada architectural firm that paid a substantial fine for using corporate resources to hold a fundraiser. The settlement provides a good example of how not to fundraise for federal candidates.
|What the respondent did||How it could have been done|
|Company president had his secretary organize the event while on the clock for the company.||1.) Company president could have planned the event himself or pre-paid the company for the secretary’s time and treated that as an in-kind contribution to the campaign.|
|Company had its marketing and graphics specialist design the invitation while on the clock and with company resources.||1.) Company president could have pre-paid the design costs and treated that as an in-kind contribution to the campaign.|
|Company paid to send out the invitations.||1.) Company president could have pre-paid the postage costs and treated that as an in-kind contribution to the campaign or sent the invitations via email so there was no cost.|
|Company sent invitations to suppliers and vendors.||1.) Company president could have sent invitations to his personal contact list (which may have included some of the same people).|
|Company collected contributions and sent them to the campaign.||1.) Company president could have collected contributions without using any corporate resources, sent them to the campaign, and been disclosed as a bundler.|
|Company paid for catering for the event and was reimbursed by the campaign.||1.) The company could have received payment from the campaign ahead of time.|
|Note: Options 1 and 2 in each box above generally could be used interchangeably. Option 3 would need to be used throughout. Options 4 and 5 in the last box could be used with Options 1 and 2 throughout.|
As you can see, there were several permissible options for conducting this event. Some would have resulted in an event that was very similar to the event actually held; others would have been a little different, but still very successful. In addition to the facilitation charges, there were also issues with the company reimbursing contributions, the company coercing contributions (the head of the company allegedly said: “contribute or you won’t have any work this year”), and contributions by government contractors.
Interestingly, the campaign (of a long-time Senator) was actively involved in the preparations for the event, which goes to show you that you cannot rely on the campaign for advice regarding the company’s compliance obligations.
And how did all of this come to the FEC’s attention? As with most types of corporate political activity, there were lots of eyes on what the company was doing. In this case, the company fired an employee (for reasons unrelated to the fundraiser), and he filed a complaint with the FEC. Companies can avoid a similar fate by understanding the rules of the road for hosting political fundraisers and planning accordingly.