Election 2016: One campaign contribution could spell disaster for companies

With the start of the 2016 election right around the corner, it is important to remember one area of law that is easily forgotten: campaign finance. Part of why people forget about campaign finance laws is because knowing when you have violated a campaign finance law is not always intuitive. Everyone knows that you cannot give a politician money in return for a government contract, but there are other areas of campaign finance laws that are not as intuitive.

Consider Dinesh D’Souza, who pled guilty to campaign finance violations back in May 2014 and received his sentence in federal court. When D’Souza pled guilty, he was facing a potential two-year prison sentence for his violations, but miraculously came out with a $30,000 fine and five years of probation. What did D’Souza plead guilty to? He convinced two individuals to donate $10,000 apiece to a friend of his from his college years at Dartmouth University who was running for the United States Senate with the understanding that D’Souza would pay them back. This is an example of a typical “straw-donor” relationship, where Person A has maxed out the amount of money he can legally give to Candidate A, so he gives money to Person B to donate to Candidate A. This effectively helps Person A bypass federal contribution limits.

Jeffrey E. Thompson is another example of an individual who was investigated for, and later pled guilty to, campaign finance violations. Thompson pled guilty to helping divert $2 million in illegal campaign contributions to a number of candidates, including Hillary Clinton during her presidential campaign and Vincent C. Gray during his campaign for Mayor of Washington D.C.

Both of these men were prosecuted under federal campaign finance laws, which help form, along with other election-related statutes, the newly-created Title 52 of the United States Code. For example, 52 U.S.C. § 30116 limits the amount of money contributors may give to candidates, political committees, and political parties. To ensure compliance with Section 30116, Section 30122 prohibits contributors from engaging “straw donors” to help skirt the limits of Title 52.

It is not difficult to violate these laws unknowingly. Another provision of Title 52 –Section 30116¬– prohibits corporations from donating to political candidates. But what if you own a company and you believe that it is important for your employees to be politically active? What if you increase your employees’ salaries by $500, paid for by the company, and recommend that they donate the extra cash to a candidate you support? Have you violated Section 30116? Is it possible that a prosecutor may look at that scenario and decide that there is enough evidence to prosecute you for using corporate funds to donate directly to campaigns for political office?

What can be almost as bad as a prison sentence is the negative stigma that accompanies individuals investigated for campaign finance violations for what people perceive as attempts to “buy” politicians. While not a crime that one intuitively thinks is immoral or wrong, such as murder or theft, the public reaction to these cases is pretty tremendous. In Thompson’s case, his businesses faltered the more his name appeared in the papers. Tom Delay, even after two separate appellate courts stated his innocence, is still associated with corruption as a result of an indictment and trial that painted him as a mastermind behind an effort to avoid campaign finance laws. So, although people recognize campaign finance laws as another example of over-criminalization, the backlash of public perception still exists. Any connection to a violation, even if proven false down the road, may spell disaster not only in terms of prison time and fines but also in terms of reputation for the individual or business accused of violating the laws.

All businesses, big and small, should understand how to comply with campaign finance laws. Even if a business or its employees are not contributing to candidates or creating political action committees, campaign finance laws are extremely broad and may encompass activity that one might never consider.

 

Federal Government