FEC v. Toledano (01-56762)
On April 17, 2000, the FEC filed suit asking the U.S. District Court for the Central District of California to find that James Toledano, former Chair of the Orange County Democratic Central Committee (Orange County Party), violated 2 U.S.C. §432(b) by failing to forward two $5,000 contributions to the treasurer of the Orange County Party within 10 days after receiving them.
On May 3, 2001, the U.S. District Court for the Central District of California granted the Commission's request for summary judgment, ruling that James Toledano violated 2 U.S.C. §432(b)(2). On September 27, 2001, James Toledano appealed this case to the U.S. Court of Appeals for the Ninth Circuit.
On November 7, 2002, the U.S. Court of Appeals for the Ninth Circuit affirmed the decision of the U.S. District Court for the Central District of California granting the Commission summary judgment in this case and imposing a $7,500 fine against James Toledano. The appeals court also ordered Mr. Toledano to pay the Commission's attorney's fees on this appeal as a sanction for his "bad-faith conduct and abuse of the judicial process."
The contributions in question were made by Debra and Paul LaPrade in early 1996. At the time, Ms. LaPrade's brother, James M. Prince, was a candidate for the Democratic nomination for Congress in California's 46th congressional district.
The LaPrades, who had already given the maximum to the Prince campaign, contributed to the Orange County Party. Upon receipt of the funds, Mr. Toledano opened a new bank account in the name of the party, with only his own signature required for withdrawals, and deposited the LaPrades' $10,000 check into the account. He then spent the money to finance a slate mailer that advertised the California Democratic Party's endorsement of Mr. Prince.
Unaware of the contributions and expenditures, the Orange County Party's treasurer was unable to fulfill the Orange County Party's registration and reporting obligations under the federal election law. The treasurer learned of the LaPrades' contributions and the existence of the new bank account only one day before the primary.
The Commission learned of Mr. Toledano's actions through a letter sent by the Orange County Party itself, and a complaint filed by another individual. After finding probable cause to believe that Mr. Toledano had violated §432(b), the Commission attempted, but failed, to reach a conciliation agreement with him. Unable to resolve the matter, the Commission voted to authorize this suit.
Appeals court decision
The appeals court found that Mr. Toledano violated 2 U.S.C. §432(b), which requires persons who receive contributions in excess of $50 to forward these contributions to the committee's treasurer within ten days after receiving them. In 1996 Mr. Toledano, who was then the chairman of the Orange County Democratic Party (the Party), received a $10,000 contribution check made out to the Party, which he used to print and mail pamphlets supporting a Congressional candidate. Mr. Toledano did not forward the contribution to the committee treasurer within ten days or even inform him of it.
On appeal, Mr. Toledano argued, among other things, that his actions did not violate 2 U.S.C. §432(b) given that he "had de facto authority to act as treasurer" because he was convinced that the real treasurer was "incompetent and failed to discharge his duties responsibly." The court found that Mr. Toledano was not a designated agent of the treasurer and could not exercise the treasurer's authority under the statute or Commission regulations. The court further concluded that "to recognize unauthorized 'de facto agents' of the treasurer and thus open up multiple points of entry and exit through which campaign funds may flow is to create predictable confusion and unravel the whole statutory scheme." The court concluded that by failing to forward the contribution to the Party's treasurer, Mr. Toledano prevented the contribution, which turned out to be excessive, from being scrutinized by the Party's treasurer for its legality.
The court affirmed all aspects of the district court's order granting the Commission summary judgment and imposing a $7,500 fine. The court also referred the case to the Appellate Commissioner for a determination of the Commission's attorney's fees and related expenses in defending this case on appeal.