District court dismisses Commission’s complaint in FEC v. Rivera

In an order dated September 24, 2018, the U. S. District Court for the Southern District of Florida granted former Congressman David Rivera’s motion to dismiss the Commission’s complaint. The Commission‘s complaint alleged that Rivera violated the ban on contributions in the name of another by engaging in a scheme to secretly provide nearly $70,000 in in-kind contributions to a federal candidate and requested declaratory relief and civil penalties.

Background

David Rivera was a one-term Republican Congressman from Florida’s 25th congressional district. In 2012, Rivera lost his bid for re-election in the redrawn 26th congressional district to Democratic candidate Joe Garcia.

The FEC alleged that, during the 2012 primary campaign, Rivera carried out a scheme to provide funds to one of Garcia’s opponents for the Democratic nomination, Justin Sternad. In particular, the FEC alleged that in April 2012, Rivera met with Ana Sol Alliegro to discuss providing financial support to Sternad’s campaign and directed her to approach Sternad with the offer to help fund his campaign. Alliegro then spoke with Sternad and he accepted the offer. As part of the scheme, Sternad received nearly $70,000 in in-kind contributions in the form of campaign services. At Rivera’s direction, Alliegro instructed the campaign to falsely report these contributions on its disclosure reports as loans from Sternad’s personal funds.

Sternad and Alliegro were criminally prosecuted for their roles in the scheme and both pled guilty to the charges.

The Commission initiated enforcement proceedings against Rivera after reviewing information in the normal course of carrying out its supervisory responsibilities. Unable to secure an acceptable conciliation agreement, the Commission filed suit against Rivera in July 2017.

Analysis

Section 30122 of the Federal Election Campaign Act provides that “[n]o person shall make a contribution in the name of another person.” In 1976, the Commission promulgated 11 CFR 110.4(b), which addressed those who make contributions and falsely attribute another person as the source of the contribution. The regulation also addressed “straw donor” schemes where a person provides funds to a conduit who then contributes those funds to a candidate or committee without disclosing the true source of the contribution. Thus, the regulation addressed “primary actors” or those who directly participate in making, receiving or handling the contributions.

In 1989, the Commission added section 110.4(b)(1)(iii) which applies Section 30122’s ban on contributions in the name of another to “secondary actors” or those who “[k]nowingly help or assist” any person in contributing in the name of another. The Commission has explained that a person has knowingly helped or assisted a person to contribute in the name of another when he or she has “initiate[d] or instigate[d] or ha[d] some significant participation in a plan or scheme to make a contribution in the name of another.”

On April 6, 2018, the United States District Court for the District of Utah enjoined the FEC from enforcing 11 CFR 110.4(b)(1)(iii) and ordered that portion of the regulation stricken from the Code of Federal Regulations in its decision in FEC v. Jeremy Johnson and John Swallow. The Utah court found that the FEC had exceeded its statutory authority when adopting 11 CFR 110.4(b)(1)(iii) because it concluded that Congress did not intend to create secondary liability for “helping and assisting” in making a contribution in the name of another.

In May 2018, the Commission filed a Notice of Supplemental Authority that apprised the court of the Swallow decision and stated that the FEC’s complaint against Rivera had alleged both primary and secondary liability. The court determined that the FEC had only alleged secondary liability regarding Rivera and noted the FEC’s complaint against Rivera did not allege that he secretly made donations without Sternad’s knowledge, used a false name, or himself instructed Sternad to falsify his disclosures. The court granted Rivera’s motion to dismiss the complaint and directed the clerk to close the case.

Resources:

• FEC v. Rivera litigation page