FEC Fines Settle Case Involving Former Congresswoman

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By Kenneth P. Doyle

June 20 — The Federal Election Commission has settled a long-pending enforcement case alleging that a Turkish-American nonprofit group illegally financed litigation on behalf of former Rep. Jean Schmidt (R-Ohio).

The nonprofit group, the Turkish Coalition of America (TCA), agreed to pay a $25,000 fine to the FEC, while Schmidt's campaign committee agreed to pay $2,500, file a new disclosure report and shut down.

The settlements resolve charges centering on TCA's payments of more $650,000 to lawyers representing Schmidt in a legal feud with a rival candidate, Democrat David Krikorian. The payments constituted illegal contributions to Schmidt's campaign, according to a conciliation agreement with the FEC signed by a lawyer for the Schmidt campaign and a separate agreement with the FEC signed by a TCA lawyer.

The settlements said TCA and the Schmidt campaign contended they did not knowingly do anything wrong.

Ethics Committee Acted in 2012

Schmidt was defeated in a primary bid for re-election in 2012 by Brad Wenstrup, a Republican who currently holds the seat. She had been dogged before leaving Congress by ethics complaints mostly centered on her legal feud with Krikorian over Turkish-Armenian issues.

The House Ethics Committee announced in 2012 that it had resolved an inquiry involving Schmidt and the payment of her legal costs, concluding she received an impermissible gift of about $500,000 in the form of payments of legal fees by the TCA (154 DER, 8/10/11).

The Ethics Committee was following up on an investigation by the independent watchdog Office of Congressional Ethics. After the OCE probe, the committee concluded that no sanction against Schmidt was appropriate because she did not know she was receiving an illegal gift in the form of payments to her lawyers. However, the committee said that Schmidt was required to “disclose and repay the gift” represented by the cost of legal service she received.

Schmidt left Congress—and the jurisdiction of the House Ethics Committee—apparently without ever making this repayment.

FEC Working Through Enforcement Backlog

The FEC enforcement case—designated Matter Under Review (MUR) 6494—traced back to the 2008 congressional campaign and was one of the oldest unresolved FEC enforcement cases.

The FEC has been working its way through a backlog of old enforcement matters in recent months, closing cases and releasing case files in a number of significant, long-pending matters. These include, among others, complaints about disclosure of contributions to a super PAC supporting Mitt Romney's 2012 presidential campaign; allegations involving Newt Gingrich's 2012 presidential campaign; allegations of coerced campaign contributions from employees of Murray Energy Corp.; and a complaint that a Nevada architecture firm made illegal contributions to the 2010 re-election campaign of Sen. Harry Reid (D-Nev.).

Deadlocked, party-line votes by the six commissioners—three Democratic appointees and three Republicans—led to dismissal of many of the cases. A few cases, like the one involving Schmidt and the TCA, have yielded settlements and fines.

Documents in the Schmidt case were provided to BNA by an attorney involved in the matter. The full case file has not yet been released by the FEC.

The case involved payments by the Turkish-American group to lawyers representing the former congresswoman in litigation alleging Schmidt was defamed by Krikorian, who ran in the 2008, 2010 and 2012 elections in their Cincinnati-area congressional district. Krikorian accused Schmidt of taking “blood money to deny the genocide of Christian Armenians by Muslim Turks.”

According to the FEC settlements, the TCA payments to lawyers representing Schmidt were illegal, unreported campaign contributions.

The settlements indicated that Schmidt's campaign and the TCA did not believe the payments violated campaign finance laws at the time they were made and that they agreed to settle with the FEC simply to resolve the matter.

`Nuisance Settlement.'

A lawyer for Schmidt's campaign, Donald C. Brey of the law firm Taft Stettinius & Hollister, told Bloomberg BNA in a phone interview that no enforcement action was pursued against individuals involved in the matter and that the campaign committee agreed to settle so that it could shut down.

“We never agreed there was wrongdoing,” Brey said. He said Schmidt “never did anything wrong” and added that the $2,500 fine paid to the FEC was a “nuisance settlement.”

The FEC's conciliation agreement with Schmidt's campaign said, however, that “[i]n ordinary circumstances, the Commission would seek a substantially higher civil penalty based on the violations outlined as well as the mitigating circumstances. However, the Commission is taking into account that the [Schmidt] Committee plans to terminate, has very little cash, and has a limited ability to raise any additional funds.”

The Schmidt campaign's latest disclosure report filed with the FEC in April showed it had $1,306 in cash on hand.

The TCA's conciliation agreement with the FEC was signed by attorney Scott Thomas, formerly a Democratic FEC commissioner, now with the law firm Blank Rome LLP. Thomas e-mailed Bloomberg BNA a statement on behalf of David Saltzman, counsel to TCA.

TCA `Pleased' to Resolve Matter

“We are pleased that this matter was resolved in a manner that explains the mitigating circumstances and the ambiguous state of the law,” the statement said. “Rather than litigate this matter, the Turkish Coalition of America agreed to settle on favorable terms and thereby keep its focus on its programs that help foster understanding and cooperation across the globe.”

The conciliation agreement said the arrangement to pay Schmidt's legal bills arose out of discussion between the nonprofit group's officers, Schmidt and the chief of staff of her congressional office, Barry Bennett. Bennett is now a senior adviser to Republican presidential candidate Donald Trump.

An arm of the TCA, the Turkish American Legal Fund (TALDF), ultimately represented Schmidt in four legal proceedings, including a case before the Ohio Elections Commission and the defamation suit against Krikorian. Payments to the nonprofit's lawyers in the matters totaled $651,154, the settlement said.

According to the conciliation agreement, the TCA suggested a statute of limitations barred FEC action on some of the allegations and said the value of legal services subject to the settlement was about $250,000. The TCA also contended that it “had a good faith misunderstanding, based in part of communications with Rep. Schmidt's staff, that provision of TALDF legal services was permissible” under ethics rules and campaign finance laws.

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