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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 didredX How it could have been doneGreenCheck

Company president had his secretary organize the event while on the clock for the company.

The FEC says it is impossible for subordinates to “volunteer” their time, since they are not free to say no. The use of support staff being paid by the company to assist a campaign is defined in the FEC regulations as facilitation.

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.

OR

2.)   Company president could have had the campaign plan and organize the event.

OR

3.)   Company president could have designed the event for just company executives and had the secretary organize it.

Company had its marketing and graphics specialist design the invitation while on the clock and with company resources.

Again, having a subordinate perform these services results in corporate facilitation, not a volunteer effort.

1.)   Company president could have pre-paid the design costs and treated that as an in-kind contribution to the campaign.

OR

2.)   Campaign could have designed a simple invitation.

OR

3.)   If this were a company-executives only event, company could have designed the invitation.

Company paid to send out the invitations.

Corporate payment of postage or use of its overnight delivery services is a prohibited in-kind corporate contribution to the campaign.

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.

OR

2.)   Campaign could have mailed out the invitations.

OR

3.)   Company could have invited its executives only and covered any invitations costs.

Company sent invitations to suppliers and vendors.

FEC treats company lists of vendors and suppliers as something of value, which may not be provided to the campaign without reimbursement.

1.)   Company president could have sent invitations to his personal contact list (which may have included some of the same people).

OR

2.)   Campaign could have purchased the lists from the company.

OR

3.)   Company could have limited the event to executives only.

Company collected contributions and sent them to the campaign.

Using company resources to collect contributions is always prohibited. Even if conducting events with the “restricted class” only (i.e., executives of the company), company employees may not collect the checks.

1.)   Company president could have collected contributions without using any corporate resources, sent them to the campaign, and been disclosed as a bundler.

OR

2.)   Contributions could have been sent directly to the campaign, which would have maintained the RSVP lists and follow-up with contributors (preferred over method 1).

OR

3.)   Campaign could have collected contributions at the event, if the event were limited to executives only.

Company paid for catering for the event and was reimbursed by the campaign.

Even though this seems like a reasonable approach that would avoid a corporate contribution, the FEC requires prepayment of any out-of-pocket expenses incurred by the company.

1.)   The company could have received payment from the campaign ahead of time.

OR

2.)   The campaign could have paid for the catering directly without any involvement of the company.

OR

3.)   The company could have paid for the food if the event were limited to executives.

OR

4.)   A company executive could have paid for the catering and treated it as an in-kind contribution to the campaign.

OR

5.)   A company executive could have held the event at his or her home and paid for up to $1,000 in expenses without it being considered a contribution ($2,000 if the spouse were involved).

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.