FEC v. AFL-CIO

On November 13, 1980, the U.S. Supreme Court denied the Commission's petition for a writ of certiorari in the suit, FEC v. American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) (Supreme Court Docket No. 80-368). The Commission sought review of a judgment of the U.S. Court of Appeals for the District of Columbia Circuit, which had reversed an earlier decision by the U.S. District Court for the District of Columbia, imposing a $10,000 civil penalty against the AFL-CIO.

In filing the suit against the AFL-CIO on December 16, 1977, the Commission had sought to enjoin the organization from transferring funds from its COPE Education Fund (which contained general treasury funds) to COPE-PCC, its separate segregated fund (which contained only voluntary political contributions from individuals). The Commission had argued that the transfers violated provisions of the Act prohibiting labor organizations from using their general treasury funds to make contributions or expenditures in connection with federal elections. Between 1970 and 1977, COPE-PCC had transferred funds to the COPE Education Fund several times because COPE-PCC's funds were idle between elections. On demand of COPE-PCC, the funds were subsequently transferred from the COPE Education Fund back to COPE-PCC for its use. The COPE-PCC transfers were designated as loans to the COPE Education Fund but were interest free. Complete records were kept, and the transactions were reported to the Office of Federal Elections of the General Accounting Office (GAO) and later to the FEC.

In 1977, after the FEC had succeeded to the GAO's authority, it notified the AFL-CIO that section 441b of the Act permits transfers of funds from COPE-PCC to the COPE Education Fund but not transfers from the COPE Education Fund back to COPE-PCC. In an FEC enforcement action brought against the AFL-CIO, the AFL-CIO attempted to negotiate with the FEC a transfer of $321,000 from the Education Fund to COPE-PCC for the purpose of clearing the balance between the two funds. No agreement was reached and the FEC brought a civil action against the AFL-CIO in the district court. On June 16, 1978, the district court granted the Commission's motion for summary judgment in the case. It ruled that past transfers from the COPE Education Fund to COPE-PCC were illegal, enjoined the AFL-CIO from making any such transfers in the future (except for a single transfer of the $321,000 previously transferred) and assessed a $10,000 civil penalty against the AFL-CIO. The AFL-CIO appealed the assessment of the civil penalty.

The appeals court, on April 1, 1980, reversed the imposition of the $10,000 civil penalty. The appeals court found that the lower court had imposed the statutory penalty for a "knowing and willful" violation of the election law, although the facts in this case did not support a finding that the defendant's violation were "knowing and willful." (See 2 U.S.C. §437g(a)(5)(B).) The court held that the AFL-CIO's belief in the legitimacy of the transfers had been reasonable; during the GAO audit no comment had been made about the routinely reported transfers, and neither the Act nor any court decision had addressed the immediate issue. (The appeals court rejected the FEC's argument that Pipefitters Local No. 562 v. United States, 407 U.S. 385 (1972) provided specific notice that interfund transfers were prohibited by the Act.)

On November 10, 1980, the Supreme Court refused a request by the FEC for a writ of certiorari to review the appeals court ruling on the imposition of the civil penalty.

Source:   FEC Record— January 1981. FEC v. AFL-CIO, 628 F.2d 97 (D.C. Cir.), cert. denied, 449 U.S. 982 (1980).