Advisory opinion 2006-22: free legal services result in contribution

An incorporated law firm may not give free legal services to a federal candidate's principal campaign committee when the firm is paying its personnel to provide such services. In order to avoid receiving a prohibited corporate contribution, the committee must pay the usual and normal charge for those services in a timely manner.

Background

David G. Wallace was a candidate for the U.S. House of Representatives in the 22nd congressional district of Texas. On March 7, 2006, Representative Tom DeLay won the Republican primary for that seat. On April 3, 2006, Representative DeLay announced his intention to retire from the House and move to Virginia. In June 2006, after receiving a letter from Representative DeLay asserting his ineligibility to remain on the ballot, the Texas Republican Party declared his ineligibility. When a nominee is no longer eligible for the ballot, Texas law allows the congressional district's Republican Party executive committee to select a replacement candidate for the general election ballot.

In late April, in anticipation of Representative DeLay's ineligibility, Mr. Wallace filed a Statement of Candidacy and Wallace for Congress (the Wallace Committee), his principal campaign committee, filed a Statement of Organization with the Commission. On June 8, 2006, the Texas Democratic Party filed a lawsuit in state court, contesting the declaration of Mr. DeLay's ineligibility on constitutional grounds. The case was removed to federal court and the U.S. District Court for the Western District of Texas ruled that Mr. DeLay's declaration of ineligibility was invalid. The Court prohibited the Republican Party of Texas from certifying to the Texas Secretary of State any candidate other than Representative DeLay for the November 7 general election ballot.

On July 11, 2006, the Wallace Committee entered into a legal representation agreement with Jenkens & Gilchrist (the Firm) for the purpose of submitting an amicus brief to the Fifth Circuit Court of Appeals supporting reversal of the District Court's decision. The agreement provided that, unless the Commission issued an advisory opinion to the contrary, the Firm would provide its services free of charge to the Wallace Committee. The Firm employees who prepared the brief were compensated as usual by the Firm. The brief was filed on July 21, 2006. At that time, the Firm requested an advisory opinion regarding whether the Firm's preparation, free of charge, of the amicus brief on behalf of the Wallace Committee was permissible under the Federal Election Campaign Act (the Act).

On August 3, 2006, the Court of Appeals affirmed the District Court's decision. On August 9, Mr. Wallace announced that he would run as a write-in candidate. On August 21, Mr. Wallace announced that he no longer intended to pursue a write-in candidacy for House seat.

Analysis

Although no district selection process was scheduled, Mr. Wallace was a Federal candidate at the time the Firm provided the services to the Wallace Committee. See 11 CFR 100.3. The Wallace Committee's July Quarterly report showed that his campaign had raised $200,000 and spent $45,000, including $20,000 for a radio buy, before the Wallace Committee entered into the agreement with the Firm. Moreover, the Wallace Committee's website made clear that Mr. Wallace considered himself a candidate for election to the House in 2006. The Wallace Committee served as Mr. Wallace's principal campaign committee and thus fit within the definition of a "political committee." See 11 CFR 100.5(d).

The Act prohibits corporate contributions or expenditures in federal elections. The Act's definition of "contribution" includes "payment by any person of compensation for the personal services of another person which are rendered to a political committee without charge for any purpose." See 2 U.S.C. 431(8)(A)(ii) (emphasis added); see also 2 U.S.C. 441b(b)(2). Commission regulations at 11 CFR 100.54, with certain exceptions not applicable in this situation, also define "contribution" in essentially the same way as 2 U.S.C. 431(8)(A)(ii).(1) Accordingly, the Firm's payment of compensation to employees for legal services provided free of charge to the Wallace Committee would be an impermissible corporate contribution unless the Wallace Committee paid the usual and normal charge for such services in a timely manner.(2)

AO 2006-22; Date Issued: September 18, 2006; length: 5 pages

1) The Act exempts from the definition of "contribution" legal and accounting services provided at no charge solely for purposes of compliance with the Act. 2 U.S.C. 431(8)(B)(viii)(II). Additionally, uncompensated individual volunteer activity is also exempted from the definition of "contribution." 2 U.S.C. 431(8)(B)(i). The services provided to the Wallace Committee did not fall within either exemption.

2) The Commission distinguished its decision in AO 2006-22 from an earlier decision in AO 1980-4 (Carter/Mondale Presidential Committee), because AO 1980-4 applied a previous version of the applicable regulation that did not cover compensated services rendered without charge to a political committee "for any purpose."