Disavowed PACs Thrive as FEC Unable to Stop Them

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By Kenneth P. Doyle

Sept. 6 — Political action committees that might mislead the public in their contribution solicitations, or even those that exist mainly as scams to enrich the PACs' creators, appear to have proliferated this election season.

Some are capitalizing on support for populist presidential candidates Donald Trump and Bernie Sanders.

Trump's campaign has filed letters with the Federal Election Commission disavowing more than a half-dozen PACs it said are using the Republican nominee's “name, image, likeness or slogans in connection with soliciting contributions.” Such solicitations are likely to cause confusion and lead contributors to believe they are giving money to Trump's campaign when they aren't, said the letters to the FEC.

Meanwhile, a super PAC that collected large contributions supposedly to support Sanders was fined recently by the FEC for failing to file a disclosure report. However, the $7,150 fine assessed against the PAC, called Americans Socially United, did not mention the PAC's fundraising activities.

Whether the FEC can or would do anything to fight these PACs' questionable fundraising practices remains in doubt because of limits on the commission's legal authority and disagreements among the commissioners about how aggressively to enforce the law.

Curb on PAC's Use of Names Struck Down

In addition to the agency's own problems, the courts also have struck a blow against the FEC in one area where there had been broad agreement among the commissioners. A recent ruling by the U.S. Court of Appeals for the District of Columbia struck down as unconstitutional restrictions against a PAC using a candidate's name in promoting itself.

Before the ruling, the FEC fought against the legal challenge to its rules restricting PACs from using candidate names, saying rules are needed in this area to prevent public confusion and possible fraud. It remains unclear whether the August ruling in the case brought by a super PAC supporting Republican presidential candidate and former Arkansan Gov. Mike Huckabee will be appealed further.

The pro-Huckabee super PAC, called Pursuing America's Greatness, said it wanted to set up websites and social media platforms using Huckabee's name. After Huckabee dropped out of the presidential race, the super PAC said it wanted to promote itself by using the names other candidates that it supported.

Sept. 16 Deadline for Appeal

The FEC faces a Sept. 16 deadline to decide whether to appeal the ruling of a three-judge appellate panel of the D.C. Circuit. The commission could file an appeal to the full D.C. Circuit, sitting en banc.

The agency has declined to comment on the possibility of an appeal.

The D.C. Circuit panel ruling, handed down Aug. 2, rejected FEC arguments that rules regarding PAC names should be upheld as a disclosure requirement, rather than a restriction on speech. The rules “banned more speech than that covered by [the Federal Election Campaign Act’s] provisions requiring disclosure,” said the panel's 18-page opinion written by U.S. Circuit Judge Thomas Griffith and joined by Judges Brett Kavanaugh and Raymond Randolph (See previous story, 08/03/16).

The FEC commissioners—evenly divided among three recommended by Democrats and three Republicans—must vote on whether to appeal the ruling, and it's not clear whether the required four-vote majority could be mustered for the appeal. If not, the Justice Department could seek to have the case reviewed by the Supreme Court, though it's not clear if that would happen.

A DOJ spokeswoman said the department had no comment on the case.

Appeals to Trump, Sanders Supporters

If the latest D.C. Circuit ruling stands, it would make it even more difficult and unlikely for the FEC to act on claims that PACs are using candidates' names, images and slogans—possibly, to prey on unwitting contributors. Meanwhile, candidates like Trump and Sanders have tried to curb unauthorized PACs through warning letters sent to the PACs themselves and notices sent to the FEC and placed on the public record.

Among the PACs called out by Trump were high-profile super PACs like Great America PAC and the Committee to Restore America's Greatness, as well as PACs appropriating the candidate's name, such as High Tower of Trump, Nevada Veterans for Trump and Students for Trump.

The Trump campaign's concerns about PACs making appeals to the candidate's supporters has continued throughout the campaign. Most recently, Trump's campaign filed a notice with the FEC Aug. 29 disavowing a PAC called American Horizons PAC, which purported to offer donors a chance to have dinner with Trump.

James Bond Scammed?

The Sanders campaign, meanwhile, has not filed letters with the FEC but reportedly has sent cease-and-desist letters directly to the super PAC Americans Socially United, which was accused of scamming Sanders supporters out of tens of thousands of dollars.

The most prominent of the PAC's donors, according to a report by the nonprofit Center for Public Integrity, was the actor Daniel Craig, who played James Bond in several recent films. Craig gave the PAC nearly $50,000, the center reported.

The PAC is one of the few to draw the attention of the FEC—but not for scamming donors like Craig. The agency announced Sept. 2 that it was assessing an administrative fine against American Socially United for failing to file a year-end disclosure report for 2015, which was due last January. The PAC also failed to file disclosure reports in April and July, according to the FEC website, but the FEC hasn't yet taken any enforcement action regarding these filings.

According to the Center of Public Integrity report, the super PAC was created by Cary Lee Peterson, who described himself as a lobbyist and “campaign guru” but has been accused by federal prosecutors of securities fraud.

Threat to ‘Political Engagement.'

In addition to Americans Socially United, Peterson also is listed as the treasurer of more than a half-dozen other FEC-registered PACs with names like Congressional Committee on Law Enforcement and Public Safety, Every Vote Counts Restoring America Super PAC and Independent National Alliance Committee.

An attorney for the Sanders campaign, Brad Deutsch of the law firm Garvey Schubert Barer, told Bloomberg BNA in a phone interview that PAC activities like those carried out by Peterson were damaging not just to the contributors whose money is taken but to the larger political process.

Making campaign contributions, especially the type of small-dollar contributions collected by Sanders campaign for the Democratic presidential nomination, “is at the core of political engagement,” Deutsch said. Motivating contributors enough to give $20 “is a big deal,” Deutsch added. If those people later realize their money has been stolen by someone pretending to support a candidate, they are likely to become “even more cynical than they were before” and further alienated from the political process.

Due to court rulings like the recent D.C. Circuit decision on use of candidates' names, the FEC may be hamstrung in addressing the problem using campaign finance laws, said Deutsch, who is a former staff attorney for the agency. However, some PACs might be addressed through criminal fraud investigations by the Justice Department, he said, suggesting that DOJ consider setting up a task force to address the issue.

To contact the reporter on this story: Kenneth P. Doyle in Washington at kdoyle@bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com

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