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USA v. Kanchanalak, et al.



On October 8, 1999, the U.S. Court of Appeals for the District of Columbia Circuit reversed a district court decision to dismiss charges against Pornpimol Kanchanalak and Duangnet Kronenberg for illegally using conduits to disguise donations from foreign nationals and corporations. The Department of Justice originally filed suit against Ms. Kanchanalak and Ms. Kronenberg for willfully causing the Democratic National Committee (DNC) and other committees to file false reports of hard money contributions and soft money donations with the Federal Election Commission (FEC), in violation of 18 U.S.C. §§2(b), 1001.[1] The defendants were allegedly involved in a scheme in which permanent U.S. residents signed checks for both hard and soft money when the actual source of the funds was a foreign corporation, Ban Chang International (USA), Inc.


The U.S. District Court for the District of Columbia dismissed the charges against Ms. Kanchanalak and Ms. Kronenberg. In regard to the hard money counts, the district court concluded that the government had failed to prove that the defendants had directly caused the making of false reports to the FEC. With regard to the soft money counts, the court determined that neither the Federal Election Campaign Act (the Act) nor Commission regulations require political committees to report the sources of soft money donations. The Court of Appeals reversed on each of these matters.

Hard money

The appeals court reinstated the hard money counts against the defendants based on its previous decision in United States v. Hsia,[2] which established that the Act requires political committees to report the true source of the federal funds they receive. 2 U.S.C. §441f. The appellate court ruled that the defendants' scheme of illegally utilizing conduits caused the DNC and other committees to report the conduits rather than the true sources of the contributions on FEC forms. Because the defendants' actions "caused false statements to be made to a government agency," the appeals court summarily reversed the district court's decision on these counts.

Reporting soft money

The court of appeals also reversed the district court's ruling regarding the soft money reporting regulation. The appellate court did not question the lower court's determination that nothing in the Act requires soft money reporting, but pointed to the Commission's regulation at 11 CFR 104.8(e), which requires disclosure about any entity that "donates an aggregate amount in excess of $200 in a calendar year to the committee's nonfederal account(s)." In upholding the FEC's interpretation of its regulation to require the disclosure of the true sources of soft money, the opinion noted the appeals court's long history of deferring to agencies' interpretations of their own regulations, and quoted a Supreme Court opinion which stated '"that the [Federal Election] Commission is precisely the type of agency to which deference should presumptively be afforded.'"[3]

Soft money donations by foreign nationals

In reversing the district court's judgment with regard to the soft money counts, the appeals court found that the FEC had reasonably interpreted the Act to forbid soft money donations by foreign nationals. While the defendants had argued that the prohibition applied only to federal elections, the appellate court ruled that it extends to state and local elections as well. The opinion cited 2 U.S.C.441e, which states that "it shall be unlawful for a foreign national directly or through any other person to make any connection with an election to any political office." While the defendants had focused on the fact that "contribution" is defined to include "any gift...made by any person for the purpose of influencing any election for Federal office" (2 U.S.C.§431(8)(A)(i)), the appeals court emphasized the use of the term "any political office." The appeals court compared §441e to §441b, which differentiates between contributions in connection with elections to federal office and those in connection with election to "any political office." The opinion noted that, "[b]y distinguishing federal offices from 'any political office,' Congress plainly intended to reach certain contributions made to state and local offices." In this regard, the appellate court again relied on the FEC's interpretation of the law, which has consistently been that nonfederal offices are included in the foreign national prohibition.


[1] The court of appeals stated that "hard money" refers to funds that have been deposited by the Committee into a "federal account" and are used to finance federal election campaigns, whereas "soft money" refers to funds that are deposited into a "nonfederal" account and are supposed to be used for, among other things, state and local campaigns.
2] United States v. Hsia, 176 F.3d 517 (D.C. Cir. 1999).

[3] FEC v. Democratic Senatorial Campaign Committee, 454 U.S. 27, 37 (1981).

Source:   FEC RecordJanuary 2000. 192 F. 3d 1037 (D.C. 1999)