FEC Closes First Millionaire Cases

WASHINGTON -- The Federal Election Commission (FEC) announced today that it has completed action on two enforcement matters related to 2004 Congressional campaigns.  These are the first two cases to arise from the so-called “millionaire’s amendment” passed as part of the Bipartisan Campaign Reform Act of 2002 (BCRA).  This provision increases, under certain circumstances, contribution limits from individuals to opponents of a candidate who commits large amounts of personal funds to a federal campaign.  In House races, for example, if one candidate loans or contributes more than $350,000 of personal funds to the campaign, his or her opponents may be eligible for higher contribution limits from individuals depending on their own use of personal funds and overall fundraising patterns.  Limits on spending by parties on behalf of these opponents may also be affected.

In MUR 5623, the Commission found that Mike Crotts for Congress, Vicki Gibbs as treasurer of the committee, and candidate Mike Crotts failed to notify the FEC and his opponents when, on March 31, 2004, Crotts loaned his campaign $400,000.  Crotts was a candidate in the Republican primary in Georgia’s 8th district. The law requires candidates for the House of Representatives to notify the FEC and opponents within 24 hours of making personal funds expenditures that exceed the $350,000 threshold for possible increases in contribution limits for opponents.  Crotts for Congress filed its first notification on May 18, 2004, more than five weeks after the loan was received.

The law also requires that candidates declare in their initial statement of candidacy filed with the FEC that they intend to spend personal funds in their campaign.  Mr. Crotts failed to provide this notification initially, and eventually filed it only after he was questioned by the Commission about this omission. 

The conciliation agreement signed by the FEC and the respondents calls for a civil penalty of $40,000.

In MUR 5488, the FEC has entered into a conciliation agreement with Brad Smith for Congress, James Bailey as treasurer, and Bradley Smith, who was a candidate in the Republican primary in Michigan’s 7th district.  The Commission found that the Smith for Congress committee accepted $40,500 in excessive contributions from individuals because the committee incorrectly calculated its eligibility for increased limits under the millionaire’s amendment. 

While Oscar Gene Derossett, one of Smith’s opponents, spent more than $350,000 of his own funds, Smith had also used personal funds in his campaign, and generally it is the difference between one candidates spending and his opponents that determines eligibility.  Some personal funds were repaid to Smith after Derossett disclosed the loan that exceeded the $350,000 threshold.  Under FEC rules, however, these refunds may not be considered in calculating the difference in personal funds between candidates. 

Smith and his committee have agreed to refund or seek reattribution for the excessive contributions, and to pay a $14,000 civil penalty.