FEC closes first "millionaire" cases
On July 26, 2005, the Commission announced civil penalties totaling more than $50,000 in the first two enforcement cases to arise from the so-called “Millionaires' Amendment.” Enacted as part of the Bipartisan Campaign Reform Act of 2002 (BCRA), the Millionaires' provision increases the individual contribution limits and—in some cases—the coordinated party expenditure limits for qualified candidates whose opponent’s personal spending on the campaign exceeds certain threshold amounts.
Background
Under the Millionaires’ rules, a candidate registering to run for a House seat must disclose on his/her Statement of Candidacy (FEC Form 2) the amount by which he/she expects to exceed the applicable $350,000 personal spending threshold. 2 U.S.C. §441a-1(b)(1)(B); 11 CFR 400.20. (Note that the thresholds for Senate races are different.) Then, within 24 hours after exceeding the threshold through a personal expenditure, the candidate (or his/her campaign committee) must notify the Commission, each opposing candidate and the national party committee of each candidate in the election by filing FEC Form 10. The opposing candidates then use that information to calculate the “opposition personal funds amount” (OPFA), which compares the overall funding of the campaigns to determine whether they qualify for increased limits.
Under the Millionaires’ rules, an expenditure of personal funds includes not only direct candidate expenditures in connection with the campaign, but also campaign loans secured by the candidate’s personal funds. In addition to including loan amounts in a potential Form 10 filing, under the Federal Election Campaign Act’s reporting requirements, political committees must report all loans on Schedule C and file a Schedule C-1 with the first report due after a new loan is obtained by either the committee or the candidate to demonstrate that the loan was obtained in accordance with normal lending practices.
MUR 5623
On July 18, 2005, the Commission entered into a conciliation agreement with the Mike Crotts for Congress Committee, Inc. and Vicki Gibbs, in her official capacity as committee treasurer (Respondents). According to the agreement, Mike D. Crotts filed a Statement of Candidacy (FEC Form 2) on July 8, 2003, but failed to complete the declaration of intent to expend personal funds. Upon receiving a letter from the FEC’s Reports Analysis Division (RAD) notifying him of the omission, Mr. Crotts filed an amended form declaring his intent to spend no personal funds above the threshold. In March 2004, however, the Mike Crotts for Congress Committee, Inc. received a bank loan of $400,000 drawn on Mr. Crotts’ personal home equity line of credit. Although the loan amount exceeded the $350,000 personal spending threshold, the required FEC Form 10 was filed only after further correspondence from RAD—47 days late. In addition, the campaign committee did not subsequently file the required Schedule C1 disclosing the details of the loan.
The conciliation agreement requires the Respondents to pay a civil penalty of $40,000 and to cease and desist from future violations of the Millionaires’ provisions and other regulations implicated in this case.
MUR 5488
On July 12, 2005, the Commission entered into a conciliation agreement with Brad Smith for Congress, James Bailey in his official capacity as treasurer and Bradley Smith (Respondents). According to the agreement, Bradley Smith’s opponent, Gene DeRossett, expended $451,000 in personal funds and subsequently filed the required Form 10. In calculating the OPFA, the Respondents used the correct formula as outlined in 11 CFR 400.10(a)(3)(ii), but they mistakenly included only net loans from the candidate to determine Mr. Smith’s own personal expenditures, rather than the gross amount of those loans. By using the lesser amount in the calculation, the Respondents erroneously believed they were eligible for increased contribution limits and, in fact, accepted $40,500 in contributions above the normal limits.
The agreement requires the Respondents to pay a civil penalty of $14,000 and to cease and desist from violating 2 U.S.C. §441a(f). In addition, Respondents will refund to contributors or seek reattribution for all contributions they received that exceeded the normal limits.
Additional information
For additional information on these cases, please visit the Commission’s Public Records Office or consult the Enforcement Query System on the FEC’s website and enter case number 5623 or 5488.