In The Know

Can Permissible Contributions be Illegal?

dmason — Wed, 01 Sep 2010 12:42:02 +0000

The disclosure yesterday that the House of Representatives’ Office of Congressional Ethics (OCE) recommended investigations of three Members of Congress for fundraising activity associated with financial reform legislation adds new urgency to the question of when apparently legal campaign contributions can become suspicious or even illegal.

Lobbyists and legislators involved in the OCE inquiry have expressed surprise to find themselves under scrutiny for campaign contributions that are clearly permitted by campaign finance laws. Campaign contribution limits are supposed to be set low enough to prevent corruption. But even a permissible contribution – one within the limits and source restrictions of campaign finance laws – can be illegal if the contribution is tied to a particular legislative act. Recently arguably common circumstances merely suggesting such a link have become enough to invite official scrutiny.

The Justice Department has long pursued legislation-for-contribution schemes under the rubric of “honest services fraud.” More recently the House of Representatives’ Office of Congressional Ethics (OCE) has scrutinized links between fundraising and legislation well short of a classic quid-pro-quo. It now appears that merely circumstantial events suggesting the “appearance” of a connection between fundraising and legislation may be sufficient to trigger an investigation.

In May the OCE referred some of its findings involving the appropriations lobbying firm PMA to the Justice Department. Our friends at Wiley Rein have a detailed discussion of the background to the referral. Some of the notable elements include:

PAC contribution request forms tying contributions to particular or even general legislative support;
PAC budget spreadsheets listing items supported by legislators;
E-mails justifying contributions by reference to general or specific legislative support, or even opportunities to discuss legislation in the future.

In July the OCE opened an inquiry into fundraising events by eight Members of Congress coincident with House action on financial institutions reform legislation. At the end of August OCE terminated its inquiry as to five of the lawmakers, but recommended further investigation of three others. What is striking about this later inquiry is that it appears to be based not on specific documentary evidence, but on circumstances and appearances. Moreover, the OCE seems to believe that the mere appearance of special treatment or access is sufficient to justify a full-fledged ethics investigation.

Documents associated with the investigation suggest that the timing of a fundraising event in association with legislative action is sufficient to raise questions. One finding suggested that soliciting or accepting contributions “in a manner which gave the appearance of special treatment or access” (emphasis added) was inappropriate. Once such an appearance was triggered, the inquiry went far further. The investigation included subpoenas to fundraising firms and lobbyists for “all files, correspondence, e-mails, receipts, notes and any other documents” related to fundraising events and all contacts over the course of more than a year between the subpoenaed lobbyists and Members being investigated.

The problem for PAC managers, fundraisers, lobbyists, and others potentially affected by such inquiries is that the triggering behavior appears to run from the plainly off-limits (such as tying a particular contribution to a particular vote or earmark) to the apparently routine (such as building personal contacts with members). While it may be that virtually no fundraising activity is exempt from scrutiny, there are some clear no-no’s:

Avoid discussing fundraising and legislation in the same e-mail, memo, or meeting;
Exclude discussions of fundraising from lobbying plans and reports;
Eliminate references to legislative support – especially as to particular actions or items – in PAC request forms and budget documents.

Beyond specific “don’ts” the enhanced scrutiny by the OCE is a reminder of an aphorism sometimes referred to as the “Washington Post test:” think about how that memo or e-mail would look on the front page of a major newspaper. What would it suggest to an ethics investigator? No one ever wants that sort of scrutiny, but if you’d be uncomfortable explaining a document to a reporter or an investigator, that’s a signal to think about what you’re writing, or what you’re doing.

David M. Mason, J.D.,
Senior Vice President, Compliance Services

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Can teens click away their internet identities to advertisers without parental concent?

cburke — Tue, 31 Aug 2010 13:01:58 +0000

Have you wondered how an opt-in or opt-out contract works on the Internet when the person consenting is not an adult?

Most contract law requires a person to be of legal age, typically 18, to enter into a legally enforceable agreement. Minors can enter into a contract but it is voidable until they are 18 years of age.

One should consider parental consent a good first step for a child to give away their rights, in this case their internet identity to advertisers to mine, market and advertise.

This will be brought before a judge in a class action lawsuit filed in California against Facebook for the use of the “like” button.

California law requires parental consent in order to obtain a minor’s consent for using their name or likeness for an advertisement.

Facebook doesn’t do that according to the lawsuit, which you can read more about here.

Lawsuits like this one could result in anyone under 18 having to get their parents’ permission to sign up for Facebook for which a system like Integrity is very effective in ensuring that the parent is indeed in control of their child’s digital identity.

Michael Bolcerek
Senior Vice President of Business Development for Integrity

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What is a PAC Solicitation?

dmason — Mon, 30 Aug 2010 08:29:06 +0000

Corporations and trade associations may solicit funds for their PACs only from a restricted class of employees or members.

So just what is a “solicitation”? (I’ll address “restricted class” in a subsequent post.)

Federal Election Commission (FEC) rules and court decisions construing what constitutes a solicitation for the PAC are surprisingly broad. An e-mail or letter asking employees or members to write a check or sign up for payroll deduction is clearly a solicitation. But many other activities such as routine government relations or grassroots web sites or newsletters and conference or meeting invitations can easily include inadvertent PAC solicitations.

Among the examples the FEC has concluded are solicitations are:

• A simple announcement of the time, location, and featured guest for a PAC fundraiser (AO 1976-27);
• Disclosure of the fact that the PAC may accept unsolicited contributions;
• Mentioning a PAC fundraiser in a convention mailing (AO 1976-27);
• Setting up a PAC Booth at a convention (unless contributions from non-restricted class members are declined)(AO 1976-96 and TK);
• Praising employees who have contributed to the PAC (AO 1979-13).

The FEC recently summed up its PAC solicitation rule by saying that communications that “encourage” or “facilitate” contributions to a PAC are solicitations.

In a somewhat surprising development a U.S. District Court recently concluded the “encourage or facilitate” test may not go far enough. The court ordered the FEC to explain why it did not also prohibit communications merely “informing” persons of fundraising activity as solicitations. (Utility Workers v. FEC, DDC 2010)

These rules can be particularly problematic for trade associations due to the “prior approval” requirement for soliciting employees of member corporations. Many announcements that association managers might consider routine (and even necessary) communications with members (such as publicly thanking members who contributed to the PAC) can run afoul of the very broad solicitation standard.

Aristotle’s professional services professionals can assist PACs in navigating the solicitation rules in their fundraising campaigns, web sites, newsletters, and other communications, helping craft effective and fully compliant PAC campaigns. Please contact Jeff Ashe (803-524-2198), Katie Anderson (202-758-9218) or Dave Mason (202-543-8345, x 242) on the professional services team for a review of your PAC communications and advice about making your PAC more effective while keeping it compliant.

David M. Mason, J.D.,
Senior Vice President, Compliance Services

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PAC reporting tools to manage your data with ease

cburke — Fri, 27 Aug 2010 13:53:51 +0000

Aristotle 360 has an effective system tool called the PAC Management Reports. To get there, navigate to “PAC Management Reports” under the Reporting tab and you will see five new reports that can help you quickly assess your PAC data.

The Payroll Variance Report allows you to compare your member’s contributions to the PAC from a specified date range. This has been very useful for clients who like to check on the monthly progress of the PAC contributions. The PDF output file is clean and crisp, which comes in handy for those unexpected presentations. Each report can be exported into PDF or CSV(Comma Separated Value) files for easy output.

Another useful report is the PAC Summary Report. It gives you both an analysis and a breakdown of money being contributed to your PAC as well as money that you are spending and disbursing to candidate committees.

These reports are great features that simplify your data management. We encourage all PAC Software clients to check them out. Feel free to contact us with any questions!

Shawn Rahmani
Senior Project Manager, PAC Software

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It’s All in the Details – Helpful Hint #1 from Your Aristotle Support Staff

agreenfield — Thu, 26 Aug 2010 14:17:01 +0000

How many times has someone told you a story and at the end of it, having not understood any of it, your first thought was, “Hmm, a little more details would have been nice”?

Yes, it has happened to most of us, even those of us on the story-telling side. Those of you nodding your head, either flush with guilt or experiencing a sudden sense of déjà vu, you know exactly what I’m talking about. Those of you not nodding your head, probably because you’ve somehow been able to avoid a situation like that, consider yourselves lucky.

Well, this type of situation happens here in Support, too. One of the best ways to help us be prepared when we contact you, as well as even help expedite a solution, is to be as detailed as possible when you are contacting us. If we receive an email with a question but no mention of the campaign or PAC you are with, or even the software you are working with, it’s hard sometimes for us to quickly and effectively determine a forward moving direction towards a solution.

So when you send an email to us here in Support, please include those important details, such as your name and contact information, which campaign or PAC you’re with, the software you’re using, and a brief explanation of the issue you are having.

We are always there for your questions and concerns, and the more we know right from the top, the quicker we can get to the bottom of a successful solution.

Adam Greenfield
Technical Support Representative

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Peanuts and Cracker Jacks to Captain Morgan and Coke

cburke — Tue, 24 Aug 2010 16:07:25 +0000

Major League Baseball was never immune to commercial appeal, but the all-American game is now venturing into uncharted territory that could tarnish the brand of baseball if it continues in this direction.

I recently received an e-mail from Major League Baseball (MLB) promoting Captain Morgan Rum. It invites me to “Follow the Captain” as he throws out the first pitch and join them on Facebook.

This concerns me as I have never been properly age verified to receive the adult-oriented promotion, and secondly, it relies on Facebook to ensure that kids do not access additional content.

In the first instance, the actual advertisement prior to verification of age is a bit concerning if I was brand manager for Major League Baseball. Promotion of alcohol to minors should be a very restricted advertisement activity, and simply requiring that someone enter an age greater than 21 seems to be a very feeble approach to controlling this marketing.

Secondly, the ad relies on Facebook to restrict viewing. But the social network often fails to verify individual age and identity. I have friends with dogs who have Facebook profiles, or their 7-year kids are listed as 18, so I am certain there is no check to accurately verify identity and the corresponding date of birth.

Therefore this is truly ineffective and improperly-named age verification, as there is no verification even performed. I would hope for more from our national pastime.

Michael Bolcerek
Senior Vice President of Business Development

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Baseball History Through a New Media Lens

cburke — Fri, 20 Aug 2010 14:08:10 +0000

I trust you’ve heard about the sad passing of famed New York Giant Bobby Thomson. If not, you can read some good coverage here. His famous home run, the “Shot Heard ‘Round the World” helped the Giants win the National League pennant over the Brooklyn Dodgers in 1951.

As I read through Wednesday’s sports pages and watched the various television interviews, I wanted to see the event myself. So I turned to YouTube, and enjoyed the footage below:

Now this seems fairly normal these days. But it’s still amazing how our interactions and media consumption habits have advanced in just a decade or so.

Anecdotally, I have friends who read their news via Twitter, prefer to message with Facebook instead of email, etc. And they aren’t alone.

Seventy-five percent of online news readers said they received their news through email or a post on a social networking site, according to the Pew Internet & American Life project.

And the trend isn’t likely to change in the near future, as “digital natives” are expected to make social networking a lifelong habit.

Colin Burke
Marketing Manager

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One PAC’s $900,000 Oops!

dmason — Wed, 11 Aug 2010 09:40:56 +0000

Some recent news stories and editorials give the impression that the Federal Election Commission (FEC) has virtually gone out of business.

An early August enforcement announcement from the FEC provides a striking reminder that a lax approach to FEC compliance can lead to very high costs.

The American Resort Development Association’s Resort Owner’s Coalition PAC (ARDA-ROC PAC) paid $300,000 in penalties and disgorged over $600,000 on account of a series of violations of FEC rules between 2003 and 2008. The PAC’s violations included misstatements of financial activity, receipts of impermissible contributions, and improper solicitations.

One remarkable aspect of this case, given the high penalty, is that nearly all of the contributions were small – almost all under $200 – and there was evidently no malicious scheme involved. The PAC simply made some small mistakes, over, and over, and over again until they snowballed out of control.

The impermissible contributions occurred because the PAC lacked a system to review the thousands of small contributions to sort out those from corporations or overseas. The improper solicitations arose because the PAC failed to include one or more of three disclaimer statements the FEC requires for a combined dues/PAC solicitation.

These are mistakes any busy PAC administrator could make, and they underline the value of professional filing and compliance assistance. For ARDA-ROC PAC the consequence of failing to have professional PAC administration and regular review of PAC activities was extraordinarily large: Call Aristotle for a review of your PAC operations and compliance to avoid letting small mistakes become six-figure headaches.

David M. Mason, J.D.,
Senior Vice President, Compliance Services

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Digital Politics

jtowns — Tue, 01 Jun 2010 11:36:16 +0000

Our CEO, John Aristotle Phillips, will be a guest on the Digital Politics internet radio show and podcast this afternoon discussing fundraising, voter targeting, and GOTV efforts. Go here to listen live at 12pm PST/4pm EST: http://wsradio.com/. You can also hear the podcast here.

John will be joined on the show by Stephen Hershkowitz, partner of the law firm Sandler, Reiff and Young and former assistant general counsel at the Federal Elections Commission; and Peter Pasi (Executive Vice President) and Ben Olson (eCampaign Director) from emotive.

________

Update

The podcast is now live – check it out! http://wsradio.com/internet-talk-radio.cfm/shows/Digital-Politics-Radio.html

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Independent Expenditure Reporting Using Form 5

brandi.travis — Tue, 06 Apr 2010 13:02:41 +0000

Most committees are probably well versed on the standard filing forms Form 3 or 3X. There is, however, a different form for committees to disclose independent expenditures. Form 5 isn’t used often, but knowing how to fill it out correctly can save you a lot of time.

Form 5 is used to disclose the quarterly reports of independent expenditures (IE), or to file a 24- or 48- hour notice of an IE. A 48-hour notice is required anytime a committee spends $10,000 or more on a specific election during a calendar year. If the date of the IE is within 20 days of a specific election then the committee must file a 24-hour notice once the committee spends $1,000 or more.

Form 5 starts out pretty standard. The form is split in two parts. Schedule 5-A asks you to itemize receipts that were expressly given to the committee for the purpose of running an IE. This is not an itemization of all your committee’s receipts, simply those that were donated just for independent expenditures. Schedule 5-E is the itemization of all the disbursement to vendors for the purpose of running an independent expenditure.

The difference with Form 5 is at the bottom of each transaction. For each vendor transaction on Schedule 5-E, you will have to list the name of the federal candidate supported or opposed by the expenditure, and check whether the disbursement was intended to support or oppose the candidate. Another part that must be filled out for each transaction is the office being sought by the candidate and what cycle (Primary, General or other) the disbursement occurred in.

The reason that filling out the Office Sought and Cycle Period fields is so important is that Form 5 calculates aggregation differently than almost all other FEC forms. Most FEC forms fill out an aggregation field with the amount paid to a specific vendor during a cycle. Form 5 calculates the aggregation field by the election in which the independent expenditure occurred. That means that all of the transactions that make up any independent expenditures for say the Ohio Senate Primary 2010 should be added together, and have a different aggregation total than the Ohio Senate General 2010. That is why Form 5 has the aggregation field called “Calendar Year-To-Date per Election for Office Sought”. It is important to know that currently the software provided by the FEC, FECFile, does not correctly calculate these fields. The FEC is aware of this problem, and suggests that until a patch is released, committees file a memo entry with any report stating the correct aggregation totals. Recently, Aristotle launched their own version of Form 5 through our 360 software that does calculate the aggregation fields correctly and is fully compliant with FEC standards.

If anyone has any questions about Form 5 or other independent expenditure questions feel free to give me a call anytime at 202-543-8345 ext. 229.

John Mannion
Outsourcing Manager

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