USA v. HSIA

Background

On May 18, 1999, the U.S. Court of Appeals for the District of Columbia Circuit reversed a district court decision to dismiss five counts of a six-count criminal indictment charging Maria Hsia, a Democratic fundraiser, with collecting and disguising impermissible contributions in the 1995-96 election cycle.

The five counts of the indictment that were reinstated accuse Ms. Hsia of causing the Clinton/Gore '96 Primary Committee, the Democratic National Committee and The Friends of Patrick J. Kennedy '96 to make false statements in their reports filed with the FEC. The appellate court also denied Ms. Hsia's cross-appeal of the remaining count in the indictment, which accuses her of conspiracy to defraud the FEC and the Immigration and Naturalization Service.

The court remanded the case to the U.S. District Court for the District of Columbia for further proceedings.

The Department of Justice (DOJ), which filed this suit, alleged that Ms. Hsia and the International Buddhist Progress Society (IBPS), an incorporated, tax-exempt religious organization in California, funneled money through straw donors to various campaigns. The indictment alleged that Ms. Hsia and IBPS asked nuns, monks and others with ties to IBPS to make contributions to Democratic campaigns, and later reimbursed them with IBPS funds. Ms. Hsia was also accused of using straw donors to funnel money from two clients of her Los Angeles immigration consultant business to Democratic campaigns.

The Federal Election Campaign Act (the Act) prohibits corporations from making contributions in connection with any federal election. 2 U.S.C. §441b(a). The Act also prohibits any person from making a contribution in the name of another. 2 U.S.C. §441f. Additionally, the U.S. tax code bars certain organizations, such as IBPS, from participating in any political campaigns. 26 U.S.C. §501(c)(3). Finally, under 18 U.S.C. §§2 and 1001, it is unlawful to willfully cause an offense by another person against the United States.

Appeals court decision

The appeals court first addressed the willful nature of Ms. Hsia's alleged conduct. The district court had concluded that Ms. Hsia's actions were not willful because the DOJ failed to show that she knew her conduct was unlawful. The appellate court, however, stated that the government need not prove that Ms. Hsia knew that her conduct was unlawful; only that she knew that the information provided to the political committees regarding the sources of contributions was false and that she intentionally caused false statements to be made by another.

The appeals court also rejected the district court's finding that the causal link between Ms. Hsia's conduct and the false statements in the political committees' reports was too "attenuated." In fact, the appeals court concluded the conduit scheme together with the names on the checks caused false statements to be made by the political committees. The appellate court pointed to several cases where the courts previously upheld applying the "false statement prohibition" to conduit contribution schemes. In those cases, defendants used straw donors to conceal their own contributions. Here, Ms. Hsia did not funnel her own money to straw donors: instead, the money belonged to immigration clients or to IBPS. Hsia, however, arranged for the conduits to do their part. The distinction of whose money was used is irrelevant to this situation, the appeals court found. FEC regulations state that a contribution made by check should be reported as a contribution by the last person signing it. 11 CFR 104.8(c). "The simple interposition of conduits to sign the checks is certainly enough to 'cause' a committee to make false statements in its report," the appeals court wrote in its decision.

The appeals court also rejected the lower court's finding that the contributor information filed with the Commission by the three committees was "literally true." The district court had reasoned that, because the indictment did not allege that the committees' treasurers had any wrongful knowledge about the true contributors, the statements in their reports had to be considered in compliance with the Act, and therefore not false.

This reasoning assumes that the safe harbor provision protecting treasurers of political committees who use "best efforts" to report all required information, 11 CFR 104.7, modifies the substantive reporting requirements of the Act. However, the court added, "it would make no sense for Congress to allow treasurers to rely on the provision of information by others while at the same time giving others a virtual carte blanche to provide inaccurate information."

Source:   FEC Record — July 1999; USA v. Hsia, 176 F.3d 517 (D.C. Cir. 1999).