C. CAMPAIGN FINANCE STATUTES

Background

Campaign finance statutes are concerned with the manner in which campaign funds are raised and spent. Federal laws in this area have largely been confined to prohibiting certain types of financial transactions.

The first of these laws (the Tillman Act), was enacted in 1907, at the prompting of President Theodore Roosevelt. It prohibited corporations from making certain types of contributions to federal candidates. The list of prohibited financial activities was enlarged in 1925 through the Corrupt Practices Act. Emergency legislation enacted during World War II prohibited union participation in federal campaigns, a ban that was made permanent in the Taft-Hartley Act after the War. In 1948 government contractors were added to the list of prohibited sources of campaign funds, and between 1948 and 1972 the federal courts attempted to define the constitutional and statutory parameters of these laws. See e.g. United States v. C.I.O., 335 U.S. 106 (1948); United States v. Auto Workers, 352 U.S. 567 (1957); and Pipefitters v. United States, 407 U.S. 385 (1972).

In 1972, the original Federal Election Campaign Act (Public Law 92-225) attempted to redraft the campaign finance statutes so as to codify the substantial body of caselaw that had been developed during the period since 1948. The 1974 Amendments to the Federal Election Campaign Act (Public Law 93-443) added a new series of quantitative limitations on political contributions and expenditures. These limitations were subjected to rigorous constitutional scrutiny by the Supreme Court in Buckley v. Valeo, 424 U.S. 1 (1976), a leading First Amendment case which overturned most of the "expenditure" limitations as unconstitutional infringements on First Amendment rights but left the limits on "contributions" intact.

The defects in the law found in Buckley were corrected through the 1976 Amendments to the Federal Election Campaign Act (Public Law 94-283), which also transferred nine criminal laws dealing with campaign finance from the Criminal Code (former 18 U.S.C. 608 and 610-617) to the FECA (present 2 U.S.C. 441a-441i). In the process, non-willful violations of these laws were made subject to the new administrative enforcement machinery entrusted to the newly created Federal Election Commission, with the Justice Department's role in this area being confined to financing offenses that are aggravated in both intent and in amount. See 2 U.S.C. 437g(a) and 437g(d); AFL-CIO v. FEC, 628 F.2d 97 (D.C. Cir. 1980); United States v. Tonry, 433 F.Supp. 620 (D. La. 1977).

The number and complexity of federal laws dealing with the raising and spending of campaign funds have increased by geometric proportions as the Federal Election Commission has found its place in the law enforcement community, and as the major constitutional issues which permeate this field have been resolved. In keeping with the complexities that these laws present, the most recent amendment to the FECA (Public Law 96-187) reaffirms the principle that technical, unintentional or unaggravated violations of them should be disposed

of through means other than the criminal justice system. Accordingly, the role of the Justice Department in this area is to prosecute as crimes only those violations of the Act that are committed with aggravated intent and which involve large amounts of money.

2 U.S.C. 441a. Limitations on contributions and expenditures

Under the FECA, the concept of "contribution" is functionally different from the concept of "expenditure." This distinction has constitutional significance in that "contributions" may be subjected to much more stringent quantitative regulation than may "expenditures." See Buckley v. Valeo, 424 U.S. 1 (1976). A "contribution" is a gift or loan by one person or entity to another person or entity to enable the recipient to engage in political speech or activity. See 2 U.S.C. §431(8). With "contributions," the recipient determines and controls the use to which the corpus of the gift is put. An "expenditure," on the other hand, is a disbursement made by the owner of property directly on political speech or activity. 2 U.S.C. §431(9). With "expenditures," it is the person making the disbursement, not the candidate benefited or affected thereby, who controls and determines the use to which the corpus is put. An ostensible "expenditure" can be transformed into a more heavily regulated "contribution" when the candidate being benefited exerts control over the corpus involved. Section 441a contains two separate sets of contribution limits. Contributions from "persons" (including individuals, associations and committees) may not exceed (a) $1,000 to a candidate per election, (b) $20,000 to a national party committee per year, or (c) $5,000 to any other political committee per year (Section 441a(a)(1)). Contributions from “multi-candidate political committees” (i.e. those registered 6 months with the FEC, that have received contributions from over 50 persons, and that support at least 5 candidates) may not exceed (a) $5,000 to a candidate per election, (b) $15,000 to a national party committee per year or (c) $5,000 to any other political committee per year(Section 441a(a)(2)). In addition, individuals are also subject to an overall annual aggregate contribution limitation of $25,000 (Section 441a(a)(3)).

The above contribution limits do not apply to transfers of funds between national, state, and local party committees. The limits also do not apply to transfers between affiliated political committees (i.e. those controlled by the same person, corporation or union); however, all affiliated committees share a single contribution limit with respect to contributions they make to candidates and other committees (Section 441a(a)(5)). A separate provision permits the Republican and the Democratic Senatorial Campaign Committees, as well as the national party committees, to contribute up to a combined maximum of $17,500 to any candidate for the Senate during the year in which he or she is standing for election (Section 441a(h)).

Under the Buckley case, "expenditures" by candidates can be quantitatively limited only if the candidate involved elects to participate in a public-funding program. Selection 441a(b) imposes limits on expenditures by presidential candidates who have chosen to receive federal funds for their primary or general

election campaigns. However, the FECA does not impose limits on individual expenditures made by citizens, nor does the Act limit expenditures by congressional or senatorial campaigns that are not eligible for participation in a federal payment program, since under Buckley such transactions represent speech that is protected by the First Amendment. See generally Buckley v. Valeo, supra. Violations of this statute must have been committed in a "knowing and willful" manner in order to be criminally prosecutable under 2 U.S.C. 437g(d). Accordingly, most of the cases prosecuted under this statute involve grossly excessive transactions that are affected either surreptitiously (e. g. through cash or conduits), or in the furtherance of some felonious, "evil" objective (e.g. a bribe). 2 U.S.C. 441b. Contributions or expenditures by national banks, corporations, or labor organizations

Section 441b prohibits a national bank or federally chartered corporation from making a contribution or expenditure in connection with any election to federal, state or local office. It also prohibits any corporation whatever or any labor organization from making a contribution or expenditure in connection with any federal election. Finally, Section 441b makes it unlawful for any officer of a national bank, corporation, or labor organization to consent to a prohibited contribution or expenditure; and for any candidate, political committee, or other person knowingly to accept such a contribution. Section 441b does not apply to or restrict the personal political activity of corporate or union officers, if that activity is financed exclusively from personal sources.

The core of this complex statute is its ban on the use of corporate treasury funds, and monies required as a condition for membership in labor organizations, to engage in "active electioneering” in federal campaigns. United States v. Auto Workers, 352 U.S. 567 (1957); United States v. Pipefitters, 434 F.2d 1116 (8th Cir. 1970), rev'd on other grounds, 407 U.S. 385 (1972). It does not apply to the use of such funds to finance communications on any subject between labor unions and their membership, or between corporations and their stockholders. United States v. Auto Workers, supra. Nor does it apply to nonpartisan expenditures, or to the costs of publishing statements of editorial opinion in legitimate corporate or union-owned newspapers. United States v. C.I.O., 335 U.S. 106 (1948). The 1972 FECA involved a major attempt to codify these principles into positive statutory law, an endeavor that was a continuing theme in the 1974 FECA and 1976 FECA.

In 1972, the Supreme Court held that this statute's predecessor, 18 U.S.C. 610, did not forbid corporations or unions from using their treasury money to establish and operate affiliated political action committees (PACs), provided the PACs involved confined their activity exclusively to raising voluntary contributions from union members, corporate employees, and members of their respective families. United States v. Pipefitters, 407 U.S. 385 (1972). Subsequent FECA amendments have added a complex regulatory scheme to this relatively simple principle. Today, the timing, nature, and scope of corporation and union PAC activity are regulated in substantial detail both by the statute

itself (2 U.S.C. 441b(b)(2)(C)) and through the regulations promulgated by the FEC under it (11 C.F.R. 114.1 et seq.).

In view of the fact that criminal violations of the FECA must have been committed with "willful" intent (2 U.S.C. 437g(d)), the Department of Justice's involvement in the enforcement of this type of matter is generally confined to instances where the corporate or union funds are taken directly out of the corporate or union treasury, and laundered on their way to politicians; or where violations of this statute are part of a larger pattern of serious criminal activity. The purposes served by this statute are to protect the integrity of the federal election system against potential corruption resulting from the influx of vast aggregates of corporate and union wealth, and to protect the interests of minority union members and corporate stockholders. United States v. Auto Workers, supra; Cort v. Ash, 422 U.S. 66 (1975); Pipefitters v. United States, 407 U.S. 385 (1972). In keeping with the first objective, the Supreme Court has distinguished this statute from an unconstitutional Massachusetts law that prohibited corporate contributions and expenditures to influence issue-oriented ballot referenda, where the corporation's objective was not to elect a candidate to office. First National Bank of Boston v. Bellotti, 435 U.S. 765 (1978). Accordingly, although Section 441b reaches contributions and expenditures by national banks to local election contests, it does not apply to funds expended solely in connection with referenda or ballot propositions.

The constitutionality of Section 441b has been a frequently litigated issue. Today it is well established that the federal prohibition on corporate and union political activity conforms to First Amendment considerations. FEC v. National Right To Work Committee, 459 U.S. 197 (1982); Athens Lumber Co. v. FEC, 718 F.2d 383 (11th Cir. 1983); United States v. Boyle, 482 F.2d 755 (D.C. Cir. 1973). Moreover, the fact that in practical application this statute may treat corporations and unions somewhat differently has been held not to offend the Equal Protection Clause, International Association of Machinists v. FEC, 678 F.2d 1092 (D.C. Cir. 1982), aff'd, 103 S.Ct. 335 (1983).

2 U.S.C. 441c. Contributions by government contractors

This statute prohibits any person who has, or is negotiating for, a contract to furnish material, equipment, or supplies to the United States Government, from making or promising to make a political contribution. It has been construed by the Department of Justice and by the Federal Election Commission to reach only donations that are made or promised for the purpose of influencing the nomination or election of candidates for federal office. See e.g. 11 C.F.R. 115.2. The statute applies to all types of businesses: sole proprietorships, partnerships, as well as corporations. It reaches gifts that are made from the "business" or "partnership" assets of such firms. However, with respect to unincorporated businesses the Federal Election Commission has ruled that this statute does not prohibit donations that are made from the "personal" assets of the firm's constituent owners. 11 C.F.R. 115.4. Officers and stockholders of incorporated Government contractors are not covered by Section 441c, since

the government contract is with the corporate entity and not its constituent officers.

Section 441c applies only to business entities that have or are negotiating for a contractual relationship with an agency of the United States. Thus, the statute does not reach those who have contracts with nonfederal agencies to perform work under a federal program or grant. Nor does this statute reach businessmen or professionals who provide services to third-party beneficiaries under federal programs that necessitate the signing of agreements with the Federal Government, such as physicians performing services for patients under the Medicare program.

The same statutory exemptions that apply to Section 441b also apply to Section 441c. Thus, Government contractors may make certain types of nonpartisan expenditures, may establish and administer PACs, and may communicate with their stockholders concerning political subjects.

As with Section 441b, the role of the Justice Department in enforcing this statute is confined to instances of "willful" defiance of the statutory dictates. See 2 U.S.C. 437g(d)). Other less aggravated violations are handled administratively by the FEC.

2 U.S.C. 441d. Publication and distribution of statements and solicitations

Section 441d requires that any political communication which is made in writing or through a broadcasting station, which (1) expressly advocates the election or defeat of a clearly identified candidate for federal office, or (2) solicits contributions, state who paid for and authorized the communication. If such a communication is not authorized by any candidate, the communication must specifically state that it is not so authorized.

Section 441d was enacted in 1974 to replace former 18 U.S.C. § 612. However, this new "attribution" statute is not as broad as the one it replaced. Section 441d does not prohibit all anonymous campaign materials (as did former 18 U.S.C. 612), but only anonymous literature or advertisements which solicit contributions or which expressly advocate the election or defeat of a clearly identified candidate for federal office.

2 U.S.C. 441e. Contributions by foreign nationals

This statute prohibits any foreign national from making, directly or through any other person, any contribution in connection with any federal, state, or local election. It also prohibits any person from knowingly soliciting or accepting such a contribution.

The term "foreign national" is defined to include any person who is a foreign principal within the meaning of the Foreign Agents Registration Act (22 U.S.C. 611), as well as anyone who is neither a citizen of the United States nor an individual lawfully admitted for permanent residence.