FEC v. Friends of Schaefer; Schaefer v. FEC
These suits arose from an FEC enforcement proceeding against Friends of Schaefer and J. Michael Schaefer, as treasurer. Mr. Schaefer was a 1986 Senatorial candidate in Maryland. The agency filed suit against the respondents on May 15, 1991.
Penalty claims against Schaefer
On April 19, 1991 (after the FEC had notified him of its intention to file suit), Mr. Schaefer filed an adversary proceeding against the FEC in the U.S. Bankruptcy Court for the Southern District of California, where he had filed for bankruptcy. In Schaefer v. FEC (No. 91-9024), he argued that the FEC had failed to file a proof of claim with the court and therefore could not make a claim against him with respect to the payment of any civil penalty that might result from the agency's enforcement efforts.
The FEC asked the court to dismiss Mr. Schaefer's adversary proceeding or, alternatively, to refer the matter to the federal district court, which was the proper forum to litigate campaign finance issues. On July 2, 1991, the bankruptcy court denied the FEC's motion to dismiss and also denied the alternative motion, stating that it should be brought before the district court. The FEC then asked the U.S. District Court for the Southern District of California to take jurisdiction over this issue. (FEC v. Friends of Schaefer, No. 91-0650, was then pending in that court.)
The district court consolidated the two cases. On November 25, 1991, the court held that, because a civil penalty is a nondischargeable debt, the FEC could enforce a civil penalty against Mr. Schaefer, regardless of the agency's failure to file a claim in bankruptcy court. (Judgment was entered April 3, 1992.)
On May 16, 1991, claiming that the Bankruptcy Code barred the FEC from filing suit against him, Mr. Schaefer moved that the bankruptcy court hold FEC Chairman John Warren McGarry in contempt of court and incarcerate him until the FEC's district court case was dismissed. The FEC opposed the motion, arguing that the provision cited by Mr. Schaefer did not apply to a government agency enforcing its regulatory power. The bankruptcy court agreed with the FEC and, on October 28, 1991, ordered Mr. Schaefer to pay the FEC $750 in sanctions for filing a frivolous motion.
On April 7, 1992, the district court entered a final judgment in FEC v. Friends of Schaefer and ordered defendant Schaefer to pay a $3,000 civil penalty.
The court found that Mr. Schaefer and his committee had violated the Federal Election Campaign Act by:
- Failing to file a Statement of Candidacy and Statement of Organization on time;
- Accepting an excessive contribution (Mr. Schaefer received a $30,000 loan from an individual, deposited the money in his personal account and then loaned the money to his committee);
- Failing to continuously report the loan until it was extinguished;
- Knowingly accepting a $28,000 loan from a corporation (Mr. Schaefer obtained a $28,000 margin loan drawn on his account with Charles Schwab & Co. and then loaned the funds to his committee); and
- Failing to file three reports on time (they were filed between two months and over one year late).
Based upon Mr. Schaefer's continuing refusal to remedy several of the violations, the court enjoined him from committing similar violations for one year, unless the FEC demonstrates that an extension is necessary.
Source: FEC Record — June 1992