FEC Fines Groups $350K for Disguising Super PAC Contribution

By Kenneth P. Doyle

The American Conservative Union and two other groups have agreed to collectively pay a $350,000 fine to the Federal Election Commission for disguising money funneled to a super political action committee.

The super PAC, called Now or Never PAC, reported receiving a $1.71 million contribution from ACU in October 2012. The contribution actually came from an obscure corporation called Government Integrity LLC, but this wasn’t reported, according to a settlement with the FEC. Now or Never PAC and Government Integrity are the other groups involved in the settlement.

The super PAC spent more than $7.7 million to help Republican Senate candidates in 2012. Most of its money went for ads opposing Democrats, including Sens. Sherrod Brown (Ohio), Tammy Duckworth (Ill.), Heidi Heitkamp (N.D.), and Jon Tester (Mont.).

The watchdog group Citizens for Responsibility and Ethics in Washington released Nov. 20 the conciliation agreement settling the case.

The FEC fine is one of the largest since the 2010 Supreme Court decision in Citizens United v. FEC, which led to the creation of super PACs.

The case also appears to be the first FEC enforcement matter involving an illegally disguised contribution to a super PAC. Such “conduit” or “straw donor” cases involving contributions to candidates or traditional PACs have been pursued in the past frequently by the FEC. Some of these past cases have been criminally prosecuted by the Justice Department.

Super PACs Must Report Contributors

Super PACs can collect unlimited contributions, including corporate money, but they are required by law to report their contributors to the FEC, just like candidates and traditional PACs. The FEC settlement said the ACU and the other groups involved violated the legal prohibition against campaign contributions “in the name of another.”

“This is one of the clearest cases we’ve seen of laundering money through a dark money nonprofit to conceal the source of a political contribution,” CREW Executive Director Noah Bookbinder said in a statement. “Given the egregious facts, even the often dysfunctional FEC had no choice but to act.”

The FEC hasn’t yet publicly released documents in the case and declined to comment on it.

An attorney representing the ACU, Charles Spies of the firm Clark Hill, emailed a statement from the group saying its settlement with the FEC “relates to decisions made five years ago by ACU’s previous chairman and previous executive director, both of whom no longer have any affiliation with the organization.”

The statement said the ACU’s current leadership discovered and self-reported the issue shortly after taking office and worked with the FEC to “address the actions of former ACU staff and leadership, and because of that cooperation was able to settle this matter with no admission of liability.”

The FEC settlement didn’t find the ACU “knowingly and willfully” violated campaign finance law.

The settlement said there was reason to believe Now or Never PAC and Government Integrity committed knowing and willful violations. In addition, the settlement named James C. Thomas III, a Kansas City, Mo., attorney who was the super PAC’s treasurer and served as an attorney for Government Integrity at the time it contributed to the super PAC.

According to the settlement, Thomas contended he didn’t have independent authority to make decisions for the super PAC or the LLC. Reached by Bloomberg Government, he said in a brief phone interview that his only role was representing others and that he would pass along a request for comment to the groups involved.

Contribution Passed Along Minus $90,000

The settlement made public by CREW said the ACU received $1.8 million from Government Integrity and immediately contributed $1.71 million to Now or Never PAC, while keeping $90,000. In emails cited in the settlement, staffers at the ACU said they waited until receiving money from Government Integrity before contributing to the super PAC.

An ACU staffer told a colleague that their nonprofit group was keeping $90,000 in the transaction, receiving a response that said: “Well done!!!”

Election law attorney Brett Kappel, who wasn’t involved in the case, told Bloomberg Government in an email that the result was an important precedent.

“This is the first [Matter Under Review] in which the FEC obtained a fine from an LLC for participating in an illegal conduit contribution scheme,” said Kappel, of the firm Akerman LLP.

Kappel noted, however, that the FEC’s settlement, while imposing a fine, didn’t disclose the original source of the Government Integrity LLC contribution.

CREW spokesman Jordan Libowitz told Bloomberg Government that CREW still doesn’t know the original source of the contribution, calling it “somewhat of a mystery.”

More information might be revealed when the FEC releases more documents in the case, which is expected in the coming weeks.

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

To contact the editor responsible for this story: Paul Hendrie at phendrie@bgov.com

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