FEC v. Friends of Jane Harman

On August 18, 1999, the U.S. District Court for the Central District of California found that Friends of Jane Harman, the principal campaign committee of former Congresswoman Jane Harman, and its treasurer violated the Federal Election Campaign Act (the Act) when they accepted corporate contributions in the form of earmarked contributions collected by a corporate representative and an "advance" from the same corporation.

Background

Hughes Aircraft Company (Hughes), a Los Angeles corporation, sponsored a fundraiser for Ms. Harman at her request during the 1993-1994 election cycle.

Hughes's chairman and CEO approved the fundraiser and directed Hughes's employees to carry out the logistics of the fundraiser. Hughes's executives and employees secured a room at Hughes's corporate headquarters, hired a caterer, issued invitations and collected and transmitted Hughes employees' contribution checks to the Harman campaign.

A solicitation letter, sent to Hughes's employees in tandem with an invitation, requested contributions to Ms. Harman's campaign. The solicitation letter also requested that personal checks be made out to the campaign and that they be forwarded, via interoffice mail, to a Hughes employee in advance of the event.

On October 29, 1993, Representative Harman appeared at the fundraiser held at Hughes's corporate headquarters. Hughes's Director of Public Affairs collected some contributions for the event through interoffice mail prior to the event and collected others from executives at the door. A few days after the fundraiser, a representative of the Harman campaign picked up the checks. Altogether, Hughes collected and forwarded $20,600 to the Harman campaign.

Three months later, the Harman campaign paid $857 to the corporation to cover Hughes's labor costs and the cost of using Hughes's facilities. The campaign paid the food caterer for the event directly.

Earmarked contributions

The Act prohibits corporations from making contributions or expenditures in connection with any federal election. 2 U.S.C. §441b(a). Because Hughes, as a corporation, was prohibited from making a contribution to a federal campaign, it was also prohibited under FEC regulations from acting as a conduit for contributions that are earmarked to candidates or their authorized committees. 11 CFR 110.6(b)(2). Additionally, 2 U.S.C. §441b(a) prohibits candidates or their committees from knowingly accepting "anything of value" from a corporation.

The court found that the collection of contributions by a Hughes employee in her official capacity as Director of Public Relations conferred a benefit on the campaign from the corporation. Therefore, when the Harman campaign received the checks collected, it violated the §441b(a) prohibition against accepting anything of value from a corporation.

Reimbursement of staff labor costs

Section 441a(b)(2) of the Act provides that a "contribution" includes an advance. On the other hand, 11 CFR 114.9(2) (an FEC regulation) permits campaigns to reimburse corporations for the use of corporate facilities within a commercially reasonable time. The FEC maintained that this regulation covers reimbursement for the use of facilities but not reimbursement for the labor costs of corporate employees.

Deferring to the FEC's interpretation of the Act and its regulations, the court concluded that, "because the Harman Campaign did not pay for the use of employee services until after the event occurred," the $731 value of the employees' labor constituted an advance of corporate funds and was, therefore, an impermissible corporate contribution violating 2 U.S.C. §441b(a).

Remedy

While the court found that the committee knowingly violated the Act, the court denied the FEC's request to require the committee to disgorge to the U.S. Treasury an amount equal to the prohibited contributions, to assess a civil penalty against the committee or to enjoin the committee from accepting corporate contributions in violation of 2 U.S.C. Section 441b(a).

The court stated that there was no evidence that the defendants believed, at the time of the fundraiser, that they were not complying with the law. The court also stated that the FEC subsequently clarified its regulations surrounding the use of corporate staff; the regulations now specifically state that the use of corporate staff to "plan, organize or carry out [a] fundraising project" requires payment of the fair market value of the services in advance. 11 CFR 114.2(f)(2)(i)(A). The court did not issue an injunction because the likelihood of future violations of the Act by the campaign or its treasurer was remote since the Harman campaign is no longer in existence and Representative Harman is no longer in office.

Source:   FEC Record — November 1999; October 1999