AO 2005-11: Use of campaign funds to pay for legal expenses

Representative Randall "Duke" Cunningham may use campaign funds for expenses incurred in connection with a grand jury investigation related to his campaign activities and his duties as a federal officeholder.

Background

Representative Cunningham is the U.S. Representative from the 50th Congressional District of California and is a member of the Permanent Select Committee on Intelligence and the House Appropriations Defense Subcommittee. The U.S. Attorney for the Southern District of California convened a grand jury to investigate Representative Cunningham's conduct in office and his campaign fundraising activities. The investigation appears to be based upon two principal allegations:

• In November 2003, Mitchell Wade, founder and president of federal defense contractor MZM, Inc., purchased a house owned by Representative Cunningham allegedly at a price that was above market value, allegedly in order to support MZM's efforts to secure defense contracts; and
• Mr. Wade allegedly allowed Representative Cunningham to live rent-free on his yacht for 13 months.

Representative Cunningham and his campaign committee intend to use campaign funds to pay for:

• Legal fees and expenses incurred in connection with the grand jury investigation and legal proceedings arising from the investigation; and
• Legal fees and expenses involved in responding to the press regarding the matter.

Legal Analysis

The Act and Commission regulations generally prohibit the conversion of campaign funds to "personal use," which occurs when funds are used for expenses that would exist "irrespective" of the candidate's campaign or duties as a federal officeholder. 11 CFR 113.1(g). Permissible uses of campaign funds include:

• Expenditures in connection with a candidate's campaign for federal office; and
• Ordinary and necessary expenses incurred in connection with a federal officeholder's duties.

The question of whether the payment of legal fees constitutes personal use is dealt with on a case-by-case basis. In previous advisory opinions, the Commission has concluded that legal fees and expenses incurred in legal proceedings involving allegations that relate to a candidate's campaign activities or duties as a federal officeholder pass the "irrespective" test and therefore may be paid with campaign funds. (See AOs 2003-17, 1998-1, 1997-12, 1996-24 and 1995-23).

Based on the representations in the request, the Commission concluded that legal fees and expenses associated with the grand jury investigation would not exist irrespective of Representative Cunningham's campaign activities and federal officeholder duties. Accordingly, the Commission determined that he may use campaign funds to pay for the legal fees and expenses incurred in connection with the investigation and any legal proceedings stemming from the investigation. If at some point the grand jury investigation involves allegations not related to Representative Cunningham's campaign activities or officeholder duties, the use of campaign funds to pay for those legal expenses would constitute impermissible "personal use" of campaign funds.

Similarly, Representative Cunningham may use campaign funds to pay for legal fees and expenses incurred in responding to the press regarding allegations that relate to his campaign activities or officeholder duties because such fees and expenses would not exist irrespective of those activities and duties. (See AOs 1998-1 and 1997-12). However, in keeping with previous advisory opinions, the Commission cautioned that if the grand jury investigation involves allegations that are not related to Representative Cunningham's candidate or officeholder activities, then campaign funds can cover 100% of legal fees and expenses incurred in preparing press releases, press conferences or talking with reporters, and cover 50% of other press-related legal expenses. The campaign must maintain appropriate documentation of any disbursements made for legal fees in connection with the investigation, legal proceedings or press responses, and the committee must disclose these disbursements as "operating expenditures" on its regular reports filed with the FEC.

AO 2005-11; Date issued: September 26, 2005; Length: 5 pages