Corporate executives are often asked by federal candidates to raise money for their campaigns. It's often hard to refuse; in fact, an executive may be delighted to help. But there are many regulatory traps for the unwary. What's the executive to do?
This article will discuss some of an executive's options and generally identify "dos and don'ts" for corporate fundraising through a hypothetical.We do not, however, cover every possible scenario, but instead try to provide general practical guidance. If you have questions about the permissibility of a particular action, please consult counsel.
Before setting forth the hypothetical, some legal background is in order. Under federal campaign finance law and regulations, a corporation is prohibited from using its funds or tangible resources to provide a thing of value (a "contribution" or an "expenditure," depending on the outlay's circumstances) to a federal candidate. (State laws can and do differ regarding if and how a corporation can participate politically, but their general contribution/ expenditure approaches are usually consistent with federal law.)For their part, federal violations can result in substantial civil or criminal penalties, with criminal exposure most likely if the corporation or an executive reimburses others' contributions.On the civil side, corporate liability (which has extended into the several hundreds of thousands of dollars) most often entails what is known as corporate "facilitation" of third party contributions, such as: (1) the corporation's rewarding employees for making a contribution; (2) an executive using his or her corporate title or letterhead for personal political solicitations; (3) an executive's assigning a subordinate to help with the executive's political and fundraising activities during work without advance reimbursement; (4) the corporation's making federal fundraising activities part of an employee's job duties; (5) employees using corporate stationery, envelopes, postage, and other materials to transmit personal contributions to federal campaigns without prompt reimbursement for use of these resources; or (6) the corporation allowing a federal campaign to use non-public corporate facilities for political or fundraising events without advance payment.
With this preface, here is the hypothetical: John Smith is running for the open U.S. Senate seat for Virginia. He calls his friend, Robert Jones, CEO of ABC Corporation (ABC), Arlington, Virginia, at his corporate office and asks him to raise $20,000 for his Senate campaign, John Smith for Senate 2008 ("John Smith"). Jones agrees to raise $20,000 for John Smith for the 2008 primary election (a separate election from the subsequent general election). Mr. Jones is not registered as a federal lobbyist, so there are no impending campaign-side "bundling" disclosure obligations under the recently-enacted Honest Leadership and Open Government Act of 2007.
Option 1: If ABC Has A Connected, Federally Registered PAC
ABC's connected PAC is ABC PAC. Robert Jones is chair of ABC PAC, and Rudy Richardson (ABC's vice president-government affairs) is treasurer.The two form ABC PAC's steering committee. Mr. Jones and Mr. Richardson meet and agree it is in ABC's interest to raise the $20,000 with ABC PAC's assistance. Because the Virginia primary has not yet occurred, ABC PAC can contribute the $5,000 per-election maximum if it hasn't contributed already, and can host an ABC PAC fundraiser for John Smith to raise the additional $15,000. Because this is a PAC event, Messrs. Richardson's and Jones' admins can help plan the event and assist with solicitations to the PAC's restricted class (generally corporate officers, executives, and managers that are not foreign nationals). The PAC's admin works with the Smith campaign to find a mutually acceptable date and location for the event and then drafts a sample solicitation email on the PAC's letterhead for Mr. Jones' approval. Mr. Jones approves the email text, which his admin then transmits to senior ABC executives via the corporate email system on PAC letterhead on Mr. Jones' behalf. The e-mail gives background information about John Smith and states the ABC PAC is holding a lunch reception for Smith on February 20, 2008 (work day) at a local restaurant. The suggested voluntary contribution is $1,000 per person.The solicitation requests participants to bring their checks directly to the event or mail them directly to the campaign using their own (not corporate) envelopes and postage. Mr. Jones and Mr. Richardson follow up the emails with personal meetings and calls with targeted ABC executives. No one is pressured into participating. Fourteen executives, including Richardson, voluntarily agree to donate $1,000 to Smith without any reward from Mr. Jones or ABC. Mr. Jones contributes the per election individual maximum, currently $2,300, and also brings the $5,000 ABC PAC check. The other ABC executives bring their checks and hand them directly to Smith's campaign staff (not to Mr. Jones) at the event. The lunch for the 15 ABC executives, ABC PAC admin Hillary Edwards, John Smith, and a member of his campaign staff costs $1,000 and is paid directly by John Smith. The successful event nets $20,300 for Smith and complies with federal campaign finance laws.
Option 2: Personal Fundraising
Mr. Jones decides to raise the $20,000 on his own. He and his wife each decide to contribute $2,300, and to raise the rest from friends and family. Mr. Jones works directly with the Smith campaign to arrange a time and place for a fundraiser before the primary. He does not use his corporate secretary or any corporate resources for logistical assistance, such as setting up the lunch or creating and transmitting invitations. Mr. Jones uses his cell phone and personal computer instead, and does not list ABC Corporation or his corporate title on any communication. Additionally, he asks prospective attendees to bring a $2,000 personal check to the event or to send it directly to the campaign (by including the campaign's address in his email solicitations) and to identify the breakfast fundraiser on their contribution check's memo line. At the breakfast, the campaign handles all the logistics: it has a staff person collect checks at the door and pay the restaurant with campaign funds for the food and beverages. Mr. Jones, his wife, and eight other adult family members and friends attend and legally raise $20,000 for Smith.
Option 3: Individual Personal Political Activity At The Office
From his corporate office, Mr. Jones decides to invite his friends and business colleagues to a fundraiser for John Smith at his favorite restaurant. He spends a couple of hours at work drafting the invitation and saves it on his office computer. He then reviews his contacts on his office computer and e-mails the invitations to his ABC executive-level colleagues and a dozen outside friends (all U.S. citizens or permanent U.S. residents). Mr. Jones follows up the emails during the next month with calls to eight ABC executives and eight outside friends. All in all, he spends about two hours of his time at the office during this month on those calls. He also spends an hour on the phone, plus some Internet time with the Smith campaign and outside vendors planning the event. He does not use his admin for any of this personal political activity. Mr. Jones personally hosts the fundraising lunch at the restaurant on a workday. Five of his ABC colleagues join him and bring $2,300 personal checks (and do not seek any reimbursement). Mr. Jones brings a personal check for $1,300 for himself, a $2,300 personal check from his spouse, and a $3,000 ABC PAC check. Additionally, Mr. Jones' personal friends, Tom Jefferson and Jim Madison, each bring $1,000 personal checks. Everyone hands their checks directly to Smith's campaign staff upon entering the restaurant's private room or sends their checks directly to the campaign. Additionally, Mr. Jones pays for the $1,000 lunch using his personal credit card and does not seek reimbursement from ABC or any tax deduction. After the event, Jones writes and sends a letter to the Smith campaign noting the in-kind $1,000 contribution for the fundraising lunch's cost on X date. Mr. Jones is credited with raising over $20,000 for Smith, and he and ABC have not violated federal campaign finance law.Mr. Jones only made "occasional, isolated and incidental" use of ABC corporate resources for his personal political activities. Federal Election Commission regulations consider presumptively permissible one hour per week or four hours per month of personal ( i.e. , non-job-related or impelled) political activity at work, with additional regulatory tolerance for personal use of corporate Internet. Additionally, Mr. Jones performed this federal campaign work himself and avoided corporate facilitation problems by not using his assistant or raising ABC's overhead costs by using ABC paper, envelopes and postage.
Option 4: Agent Of The Smith Campaign
While we counsel particular caution with this approach, if Mr. Jones accepts a volunteer part-time leadership position on the campaign ( e.g., co-chair) and is authorized in writing to raise funds for the campaign, he may be permitted as an "agent of the campaign" directly to solicit and collect contribution checks from his friends and associates and forward them to the Smith campaign himself. For example, Mr. Jones could use his personal phone or PDA or one provided by the Smith campaign to contact potential donors and raise $20,000 for Smith.However, Mr. Jones must make sure that he continues to fully perform his duties for ABC to prevent an illegal corporate contribution to John Smith.He also must not undertake this activity as part of his ABC job duties. Finally, Mr. Jones should not use his corporate admin for Smith campaign matters.
Conclusion
As the permutations set forth above demonstrate, federal campaign finance law governing political activity by a corporate executive calls for a corporate political compliance program if a corporation's employees are or plan to be politically active.Such a program should be tailored to fit the corporation's culture and goals, allow for individual political expression, and protect the corporation (and participating executives and employees) from civil or criminal liability.
Published February 1, 2008.
