Over the last few years, the courts have loosened campaign finance laws and the agency charged with enforcing them is frequently gridlocked. However, one campaign finance violation that can still get you in big trouble is reimbursing contributions, particularly when the reimbursing is done by a corporation.
In settling a recent enforcement matter involving the Fiesta Bowl, the Federal Election Commission (FEC) obtained fines of nearly $100,000 from the corporation and the CEO and restitution by the CEO of over $60,000. A parallel criminal case resulted in guilty pleas that landed the former CEO in jail for eight months, community service for one executive, and two years of probation for another (who would have also faced a $15,000 penalty from the FEC, but she was able to demonstrate an inability to pay).
The case is not really new – the settlements occurred in 2012 and 2013 – and the FEC has yet to release the documents on its website, but the organization that filed the complaint with the FEC made them available to the public. The documents show a scheme that the FEC says included:
- Soliciting employees for contributions with a promise of reimbursement;
- Writing bonus checks from a manual checkbook to reduce the chance of detection;
- Grossing up the bonuses to cover taxes;
- Asking employee spouses to make the contributions to minimize detection;
- Giving bonuses to employees who did not make contributions to hide the reimbursements; and
- Creating fake reasons for the bonuses.
The case serves as a good reminder that companies or individuals should never reimburse another person for making a campaign contribution. Although many companies make PAC solicitations around the same time that employees receive bonuses and salary increases– since employees tend to be high on the company and feeling well off — it is important not to tie the bonus to the request for a PAC contribution. To help minimize risk, we suggest:
- Soliciting PAC contributions after the bonuses are awarded and salaries increased;
- Making sure PAC contributions are not factored into compensation decisions;
- Keeping communications about the PAC separate from communications about compensation and bonuses;
- Having valid, performance-based reasons for bonuses that are entirely unrelated to PAC contributions; and
- Using formal processes and payroll for the bonus.