AO 2011-03: National party committees may fund litigation expenses using recount funds

Several requesting national party committees may use recount funds to pay costs associated with a lawsuit, filed under Texas law, which seeks disgorgement of contributions and donations that were allegedly the proceeds of a Ponzi scheme.

Background

The Democratic Senatorial Campaign Committee (DSCC), the National Republican Congressional Committee (NRCC), the Republican National Committee (RNC), the Democratic Congressional Campaign Committee (DCCC) and the National Republican Senatorial Committee (NRSC) (collectively the national party committees) were sued in the U.S. District Court for the Northern District of Texas by Mr. Ralph Janvey, who was appointed receiver over the property, assets and records of Allen Stanford. Mr. Stanford, together with others, is alleged to have run a Ponzi scheme. Mr. Janvey claims that proceeds from this scheme were donated and contributed to the national party comnessee, mittees, and he seeks disgorgement of those donations and contributions along with payment of interest and attorney’s fees.

Prior to the enactment of the Bipartisan Campaign Reform Act of 2002 (BCRA), national party committees were allowed to accept funds outside of the limits and prohibitions of the Federal Election Campaign Act (the Act) into their nonfederal accounts. Mr. Janvey’s litigation principally concerns whether nonfederal, also called “soft money,” donations to the national party committees made prior to the BCRA’s effective date constitute fraudulent transfers under applicable state law. Nearly all of Mr. Stanford’s donations to the national party committees were “soft money” contributions made to the parties’ nonfederal accounts prior to the enactment of BCRA. Thus, for the most part, Mr. Janvey seeks disgorgement of funds that the national party committees have been prohibited from raising and spending since 2002. 11 CFR 300.12(a) and (c).

The national party committees have moved to dismiss the Janvey litigation and wish to draw on their respective recount funds to finance expenses associated with that litigation. A recount fund is a separate fund maintained by a national party committee that may be used to pay expenses incurred in connection with recounts and election contests of federal elections. See AO 2009-04.

Analysis

Under the circumstances presented in this request, the Commission concluded that the national party committees may use their recount funds to defray expenses for defending against the Janvey litigation.

AO 2011-03: Date issued: April 7, 2011; Length: 4 pages.