A federal government contractor has agreed to pay a civil penalty of $125,000 for making prohibited contributions to super PACs. The penalty is the largest the Federal Election Commission has obtained for violating the ban on federal contractor contributions.

According to settlement documents made public earlier this month, a Florida-based disaster response firm made contributions totaling $525,000 to two super PACs. The firm made a $500,000 contribution to a pro-Trump super PAC, which was refunded in 2021, after the FEC began its investigation. The firm also made a $25,000 contribution to a super PAC that supported the Senate candidacy of former Congressman Patrick Murphy (that entity had terminated with no funds remaining, and so no refund was issued). While corporations are permitted to make contributions to federal super PACs, the FEC’s view is that federal contractors and companies negotiating federal contracts may not. In the settlement agreement, the firm acknowledged that it was a federal contractor at the time the contributions were made, but claimed the contributions were made from an account holding the CEO’s personal funds. The penalty was paid by the firm’s CEO.

The settlement underscores the importance of effective political law and pay-to-play compliance policies for government contractors. Indeed, as a condition of the settlement, the contractor agreed to take steps to ensure that the violations do not recur, including having outside legal counsel vet future contributions.

In addition to prohibitions against federal contractors making contributions to super PACs, many states and localities restrict or prohibit contributions by government contractors and their key personnel or require public reporting of such contributions. Violations can result in the loss of contracts, voiding of bids, and civil or criminal penalties. Government contractors should understand the risks associated with political activity and implement appropriate compliance programs to manage and mitigate the risks.