FEC Debates Approving Planned App to Steer Contributions

Daily Report for Executives provides in-depth coverage of unfolding legislative, regulatory, and judicial news from the nation’s capital, the states, and around the world. This daily news service...

By Kenneth P. Doyle

The Federal Election Commission discussed Aug. 17 but didn’t vote on a proposal from a pair of entrepreneurs for a new app that would allow users to round up the change from purchases and contribute that amount to certain Democratic congressional candidates.

The discussion followed a comment from a watchdog group supporting tougher campaign finance rules that suggested FEC approval of the proposal could grant too much power to a private company to steer contributions to favored candidates.

The FEC commissioners meeting in an open session agreed to delay a final vote at the suggestion of FEC Chairman Steven Walther and Commissioner Ellen Weintraub, both of whom hold Democratic seats on the commission. The vote of either Walther or Weintraub would be needed for a four-vote majority to approve the plan presented in an advisory opinion request (AO 2017-06) on behalf of Eli Stein and Jeremy Gottlieb.

Illinois GOP Audit, ETF Advisory Opinion

The six-member FEC currently has one vacancy, meaning all but one of the five commissioners must approve any commission action. The FEC is split evenly 3-3 between Democratic and Republican seats but requires a bipartisan four-vote majority to approve advisory opinions and other agency actions.

In other action on agenda items at the Aug. 17 open commission meeting, the FEC commissioners approved most findings of a staff audit of the Illinois Republican Party, which found thousands of dollars worth of apparent violations of reporting and recordkeeping rules. The commissioners voted to reject two findings related to payments for party committee mailings.

The FEC also approved unanimously an advisory opinion request AO 2017-08 made on behalf of Point Bridge Capital, a financial firm that wants to establish an exchange traded fund (ETF) of company stocks based on companies’ support for a particular political party and its candidates. The plan approved by the FEC would use campaign finance disclosure reports filed with the agency to gauge corporate support for parties and candidates.

Rounding-Up App

The request for an FEC advisory opinion (AO 2017-06) on behalf of Stein and Gottlieb was filed by attorneys Jonathan Berkon and Tyler Hagenbuch of the firm Perkins Coie LLP, which represents Democratic candidates and groups. The request said the creators of the new app want to use it to fund contributions only to Democratic candidates for the U.S. House.

“Due to the current groundswell in voter and donor interest in swinging the U.S. House of Representatives to Democratic control, the Project plans to market the App to Democratic donors and will feature only Democratic candidates on the App,” Berkon’s letter said. “While the Project may decide to expand its user base to supporters of other parties in the future, doing so at this time would threaten the commercial viability of the Project in its startup phase.”

A user of proposed app could, for example, purchase an item at the store for $13.45. The app would round up to $14 and the user could select a candidate or candidates to receive the difference of 55 cents as a campaign contribution.

The FEC released two draft advisory opinions, both of which would approve the request from Stein and Gottlieb, but these were criticized in a comment letter filed by the nonprofit watchdog Campaign Legal Center. The CLC comment letter, written by Adav Noti, an attorney for the nonprofit who previously worked at the FEC, said the commission shouldn’t approve a plan that gives a company so much authority to pick and choose the candidates that its contribution platform would support. This provides something of great benefit to the candidates receiving the contributions, Noti said.

‘Charles and David Pepsi’

Noti’s comment letter asked tongue-in-cheek for FEC approval of a hypothetical donor platform to support Republicans created by “Charles and David Pepsi”—a thinly veiled reference to Koch Industries leaders Charles and David Koch, who have established a network of conservative donors. In Noti’s hypothetical, the Pepsi brothers ask the FEC to approve contribution processing by “Americans for Prospering LLC,” known by the initials AFP.

“AFP will provide no services to the recipient [party and candidate campaign] committees,” Noti’s hypothetical request said, “except to send them as much money as possible while excluding all their competitors.”

Berkon, the attorney for Stein and Gottlied, was asked to respond to Noti’s comment letter during the FEC meeting. He said the FEC has long approved plans for vendors, consultants, attorneys and others to work only for candidates of one of the major political parties without considering it a contribution to the party or its candidates. Such arrangements are made for commercial reasons, Berkon said, because parties and candidates want services from those who work only for one side.

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

To contact the editor responsible for this story: Paul Hendrie at pHendrie@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Try Daily Report for Executives