MUR 5453: Excessive and prohibited contributions

The Commission has entered into conciliation agreements with several parties regarding the making and receipt of excessive and prohibited contributions and with the Giordano for U.S. Senate Committee for improper reporting. The respondents agreed to pay civil penalties totaling to more than $156,000.

Background

The definition of contribution includes, among other things, any gift, loan or advance. According to the laws in effect at the time of the incidents, individuals could contribute up to $1,000 per election and $25,000 per year.¹ Corporations and national banks were and are prohibited from making contributions or expenditures; this includes any direct or indirect payment and anything other than normal or usual business practices. The law also prohibits contributions in the name of another, e.g., reimbursing someone for a contribution they made.

Excessive contributions

On July 14, 2000, Giordano and his committee obtained a $300,000 loan at Patriot National Bank. The same day, Salvatore Trovato, Philip Giordano’s father-in-law, gave him $300,000, which the campaign used for the collateral on the loan. Although the Act allows candidates to receive “gifts of a personal nature which had been customarily received prior to candidacy,” the Commission’s investigation revealed that Mr. Trovato had never given a gift of this size to any of his children. As a contribution, Mr. Trovato’s gift exceeded the $1,000 per election limit by $298,000, assuming he intended to give both to the primary and general elections.

Additionally, the Commission found reason to believe that the Patriot National Bank violated the Act, since it appeared that the loan was not made in the ordinary course of business, but based on the evidence uncovered during the investigation the Commission decided to take no further action against the bank.

Corporate contributions

In April 2000, Michael Watts, Senior Vice-President of Arthur A. Watson & Co., Inc. suggested to Thomas Willsey, the President of the corporation, that the corporation reimburse employees for making contributions to the Giordano Committee with corporate treasury funds. Mr. Watts, with the consent of Mr. Willsey, asked employees to make contributions to the Giordano committee with the understanding that they would receive payment from the Company to offset the amount of the contribution through an adjustment in compensation. These employees included Greg Bedula, James Nelson and William Wittman, each of whom made $2,000 contributions on behalf of themselves and their wives. Mr. Watts also made such a contribution. The Commission found reason to believe that these contributions made in the name of another were made on a knowing and willful basis. In the ensuing investigation, some respondents claimed that they relied upon a company officer’s statements that outside counsel had approved the reimbursement scheme.

Additionally, on October 14, 2000, the Giordano committee received a direct corporate contribution of $2,500 from En-Tech Corporation. The committee did not refund the prohibited contribution.

Improper disclosure

In 2000, the Giordano Committee treasurer was James S. Paolino, and from 2000 to July 2001, the deputy treasurer was Thomas M. Ariola, Jr. The Commission named Mr. Paolino in his personal capacity for acceptance of excessive contributions. The Commission also found that he understated the committee’s receipts on disclosure reports by over $21,000.

Mr. Ariola was also named in his personal capacity for knowing and willful acceptance of excessive and corporate contributions, of which more than $12,000 was not refunded. He was also found to have underreported the committee’s receipts by over $18,000.

Conciliation agreements

Mr. Trovato agreed to conciliate the matter, but contended that he did not intend, or understand, that anything he was doing was contrary to law. He paid a $99,000 civil penalty in two installments.

Mr. Watts agreed to pay a $15,000 civil penalty. Arthur A. Watson & Co. agreed to pay a $16,000 civil penalty. The Commission took into account Mr. Willsey’s cooperation with the investigation and participation in the conciliation process in arriving to his penalty amount; he agreed to pay $13,000. Without admitting or denying all of the Commission’s allegations, Messrs. Bedula, Nelson and Wittman agreed to pay $1,000 each in civil penalties.

En-Tech Corporation agreed pay a $1,250 civil penalty.

In 2003 Philip Giordano was imprisoned for a 37-year term on charges unrelated to this investigation. As such, the Commission took no further action with respect to him. The Commission also found that the committee should pay all the funds that remain in its accounts as a civil penalty; this amounts to over $900. Mr. Paolino agreed to pay a $5,500 civil penalty. Since Mr. Ariola cooperated with the Commission investigation and facilitated its resolution, he agreed to a $2,500 civil penalty. The penalties paid by Mr. Ariola and Mr. Paolino also reflected their financial conditions.

Dissenting Statement of Reasons

On December 12, 2005, Commissioner Michael Toner issued a dissenting Statement of Reasons regarding the civil penalty issued against Mr. Trovato.

¹ These incidents occurred before the implementation of the Bipartisan Campaign Reform Act of 2002. Today, the limit for individual contributions to candidate committees is $2,100 per election with a $40,000 biennial limit for total individual contributions to candidate committees.