Secondary menu

Electoral Insight - Election Legislation Enforcement

Electoral Insight – March 2003

Campaign Finance Enforcement in the United States

Campaign Finance Enforcement in the United States

Rhonda J. Vosdingh
Associate General Counsel for Enforcement,
U.S. Federal Election Commission

Lawrence L. Calvert Jr.
Attorney, Enforcement Section,
Office of General Counsel,
U.S. Federal Election Commission

Introduction

There are more than 50 campaign finance enforcement schemes in the United States, or roughly the same as the number of campaign finance laws. U.S. federal law generally governs only the financing of campaigns for election to the offices of President and Vice President of the United States, United States Senator, and United States Representative. Footnote 1 Each U.S. state has its own system of campaign finance law, with a corresponding enforcement scheme. And some of the larger U.S. cities, such as New York and Los Angeles, have enacted their own ordinances regulating the financing of municipal election campaigns and have created local agencies to administer and enforce those ordinances.

At the federal level, responsibility for campaign finance enforcement is again divided. Violations of the campaign finance laws that are aggravated both in intent and amount may be prosecuted as crimes by the U.S. Department of Justice (DOJ). Offenders found guilty of campaign finance crimes may be imprisoned, fined or both. All violations of the campaign finance laws, whether of aggravated or lesser intent and regardless of the amount of money involved, may be settled or prosecuted in civil court by the Federal Election Commission (FEC or "the Commission").

The FEC is the independent agency of the United States Government vested with the exclusive authority to "administer, seek to obtain compliance with, and formulate policy with respect to" the three laws at the centre of the federal scheme of campaign finance regulation. Those laws are:

This article addresses U.S. campaign finance enforcement solely at the federal level. Its main focus is on the civil enforcement process administered by the FEC. That process is the only process applicable to the vast majority of campaign finance cases; it also has some features that are unique or very unusual in American administrative law. Before turning to civil enforcement, however, we look briefly at criminal enforcement.

Criminal enforcement

The Department of Justice has had authority to prosecute criminal violations of the federal campaign finance statutes since the first such statute was enacted in 1907. But before the creation of the Commission in 1974, very few prosecutions were brought. This was largely due to substantive deficiencies that made FECA's predecessor, the Federal Corrupt Practices Act of 1925, extremely easy to evade. However, it was also due to an unwillingness to expend limited prosecutorial resources on what some considered "minor" or "technical" violations. While the violations may have been "minor" compared to other types of crime, failure to prosecute them contributed to widespread flouting of the Federal Corrupt Practices Act.

Thus, in 1974 Congress created the FEC as an agency with power to enforce compliance with the Federal Election Campaign Act and the Presidential public financing statutes in the civil courts.

Violations of U.S. federal campaign finance laws can be crimes only if they are committed with "knowing and wilful" intent. This is a very high standard; it means, in essence, that defendants can be found guilty only if they knew their conduct was unlawful and engaged in it anyway. Moreover, even "knowing and wilful" violations may be prosecuted as crimes only if the amount of money involved exceeds a certain threshold, which in most cases is US$2 000. Additionally, as in any criminal case, the prosecution must prove "knowing and wilful" intent, as well as the acts constituting the crime, beyond a reasonable doubt.

Until recently, criminal violations of the FECA could be directly prosecuted only as misdemeanours. Footnote 5 However, the most aggravated FECA violations generally those where the amount in violation aggregates more than US$25 000 in a calendar year, or US$10 000 for cases involving reimbursed contributions through "straw donors" are now felonies under amendments to FECA contained in the Bipartisan Campaign Reform Act of 2002 (BCRA, popularly known as "McCain-Feingold" or "Shays- Meehan"). Footnote 6 Moreover, the statute of limitations for criminal prosecution of FECA violations has been extended to five years, from the previous three. Footnote 7

The FEC and its enforcement process

Photo: U.S. Federal Election Commission
Ellen L. Weintraub, Chair, U.S. Federal
Election Commission

The Federal Election Commission has six members. They are appointed by the President to serve staggered, six-year terms. No more than three of the commissioners may be of the same political party. Among the Commission's core functions are encouraging voluntary compliance with the federal campaign finance laws, investigating potential violations of those laws, attempting to settle or "conciliate" violations where they are found, and, where cases cannot be settled, prosecuting violations by filing civil lawsuits in U.S. District Court.

The Commission takes its mission of encouraging voluntary compliance very seriously. Its Public Information Division conducts an aggressive program of educational outreach to the regulated community through a monthly newsletter, the publication of "Campaign Guides" and other resources about the law, periodic training conferences, and the Commission's Web site (www.fec.gov). Moreover, the Commission's Reports Analysis Division (RAD) examines the reports of receipts and disbursements that political committees file with the Commission; the most minor technical reporting violations are usually disposed of by a letter from RAD to the reporting committee noting the problem, and the committee's subsequent filing of an amended report. However, voluntary compliance does not always work. Where it does not, the Commission's investigative and law enforcement missions begin.

Matters under review (MURs)

The Commission's enforcement functions are carried out primarily through enforcement cases, called Matters Under Review (MURs). The Act and regulations contain detailed enforcement procedures that require approval by the votes of four of the six commissioners at each stage (to initiate an investigation, approve a subpoena, find probable cause to believe a violation has been committed, settle a matter, or authorize suit). This means that, on occasion, the Commission will take no action in an enforcement matter because it lacks four votes for any particular position. However, the four-vote requirement and the partisan balance of the Commission combine to ensure that every action taken by the Commission has at least some bipartisan support. Congress deliberately designed the system in this manner so that no majority party could use the Commission to persecute its political adversaries in the minority. If the Commission finds itself unable to act due to a lack of four votes for a particular position, it will usually then vote unanimously to dismiss the case on those grounds.

Initiation of a compliance action

MURs may be initiated in two ways. Most are initiated by complaints, which may be filed by any person who believes a violation has occurred. Complaints must be signed and sworn to by the person making the complaint; the Act prohibits the Commission from acting on anonymous complaints. They must also allege violations within the Commission's relatively limited jurisdiction; for example, the Commission has no power to act on an alleged violation of the Voting Rights Act, which is wholly within DOJ's jurisdiction.

MURs can also be initiated by the Commission itself based upon information ascertained in the normal course of carrying out its responsibilities, such as through RAD's regular review of reports or through an audit of a political committee; the receipt of a referral from another government agency; or through the receipt of a sua sponte submission from a respondent (i.e. one in which a respondent reports its own violation).

Rights of respondents

Respondents receive notification of the Commission's actions at various stages in the enforcement process. They also have opportunities at various stages to respond in writing to the allegations raised and to the Commission's actions during its investigation. However, respondents have no opportunity for an oral hearing before the Commission.

Respondents have a right to be represented by counsel, if they choose, at all stages of a matter. Moreover, until the termination of the MUR, the Act requires that the entire investigation remain confidential, unless the respondent files an express waiver. Footnote 8

Case intake and enforcement priority system

If a proper complaint within the Commission's jurisdiction is filed, a file is opened and assigned a MUR number. Copies of the complaint are sent to the respondents and, once responses are received, an initial determination is made as to whether the case appears to be significant enough to warrant use of Commission resources. The Commission calls this triage process the Enforcement Priority System, or EPS. EPS can be viewed as a funnel. If purely voluntary compliance and (in the reporting context) prompt and complete responses to RAD inquiries are at the top of the funnel, EPS further winnows the enforcement agenda so that staff focus only on the most serious and significant cases. Among the factors examined in EPS are the presence of knowing and wilful intent, the impact of alleged violations on elections, the amount of money involved, and whether certain areas of the law require special attention. Cases that appear to warrant use of Commission resources are assigned to staff, as staff becomes available to work on them. Cases that do not warrant use of Commission resources may be closed without investigation, pursuant to the Commission's prosecutorial discretion. Although staff is responsible for the evaluation of a case under the EPS, the evaluation is subject to review by the Commission, and all decisions to close cases must be approved by the Commission.

The "reason to believe" stage

In matters that are activated, the complaint, the respondent's response, and the staff analysis and recommendations are submitted to the Commission for an initial determination as to whether there is reason to believe or no reason to believe a violation has occurred. In internally generated matters, the Commission considers its internal records and the staff analysis and recommendations when making this determination. "Reason to believe" is a relatively low threshold, and the statutory term has been criticized as misleading; at this stage, the Commission is simply deciding whether there is reason to investigate.

If the Commission finds reason to believe, an investigation is initiated. If the Commission does not find reason to believe, the matter is closed. The Commission may also find reason to believe, but exercise prosecutorial discretion to take no further action and close the file.

If the Commission finds reason to believe, the respondent will receive a legal and factual analysis showing the basis for the Commission's finding. At this point, unless the Commission has determined to take no further action and close the file, all respondents including respondents in internally generated matters, who have received no notification of the matter prior to this point have an opportunity to respond.

Investigation and pre-probable-cause conciliation

The Act provides a full range of investigative powers to enable the Commission to secure sufficient information and evidence to resolve the case. The investigation may be conducted through informal contacts or through formal issuance of subpoenas and orders for production of documents, depositions or answers to interrogatories.

The Commission's regulations provide a means to settle matters early if the respondent states in writing a willingness to conciliate a violation prior to a finding of probable cause. Upon receipt of this request, staff will prepare a conciliation agreement for Commission approval if the General Counsel's investigation is complete. In an effort to streamline the process, in certain types of cases, the Commission may send a proposed pre-probable-cause conciliation agreement to a respondent along with the reason-to-believe notice.

Probable cause to believe

Photo: Getty Images
Capitol Building, Washington

If a matter is not resolved in pre-probable-cause conciliation, the General Counsel prepares a brief stating his position on whether the facts of the case and the applicable law indicate probable cause to believe a violation has been committed. Although the Commission has not formally articulated a definition of "probable cause to believe," for most Commissioners, in most cases, it seems to mean "more likely than not" the same standard the Commission would have to meet in court if it ultimately sued a respondent. The General Counsel simultaneously provides the respondent and the Commission with a copy of the brief. The respondent has 15 days after receipt of the brief in which to submit a response brief. The Commission then considers both briefs before voting on probable cause.

In the event the Commission finds probable cause and decides to pursue the matter, it must attempt to conciliate the violation for at least 30 days, but not more than 90 days. If it has unsuccessfully attempted pre-probable-cause conciliation, it must nevertheless try again after a finding of probable cause.

A conciliation agreement usually provides for payment of a civil penalty by the respondent. The Commission may consider various factors in determining the amount of the civil penalty.

The agreement also contains a statement of facts, and, in virtually all cases, an admission of violation and an agreement to cease and desist from further violations of the provision of law at issue. It may also require corrective action, such as the refund or giving up of illegally received contributions; the amendment of a committee's disclosure reports; or the attendance of the committee's treasurer at an FEC training conference.

If the Commission finds that a violation was knowing and wilful, it may seek a civil penalty of up to twice the amount it otherwise could. Footnote 9 The Commission may, of course, settle or civilly prosecute knowing and wilful violations itself. It may also refer such violations to DOJ for criminal prosecution, but not until it has found probable cause to believe. If the Commission refers a matter to DOJ, the Commission may retain jurisdiction over that matter until DOJ has completed its process with regard to the case.

Post-probable-cause action

If the Commission is unable to correct a violation through a conciliation agreement, it may authorize the filing of a civil action for relief in U.S. District Court by an affirmative vote of at least four members. The District Court reviews the facts of the matter de novo.

Two aspects of this procedure are highly unusual compared to most other U.S. administrative law enforcement schemes. First, most other U.S. administrative agencies have the power to directly fine persons who violate the law or to order them to cease and desist from further violations. In the usual scheme, after an investigation, an alleged lawbreaker is administratively prosecuted by agency staff before an independent administrative law judge, who takes testimony and renders an initial decision; the presidential appointees at the head of an agency serve an appellate function. The burden of contesting the agency's final findings and orders is on the respondent, who must usually appeal the final agency action to a U.S. Circuit Court of Appeals. Those courts, in turn, review the agency actions under the more deferential standards applied by appellate courts.

In contrast, there are no administrative law judges at the Commission. With the limited exception of a pilot program for handling routine reporting violations, the Commission has no power to do anything to a respondent, other than to sue. Rather than serving an appellate function, the Commission performs a function somewhat akin to a civil grand jury's. The burden of going forward in court is on the Commission, not the respondent.

The second unusual aspect of this procedure is that the General Counsel's Office, not the Department of Justice, represents the Commission in enforcement litigation (and in defensive litigation, as well). Congress provided for the Commission to conduct most of its own litigation in order to ensure that civil enforcement actions under the Act would be brought independently of political considerations.

In contrast to criminal FECA prosecutions, where the government must prove beyond a reasonable doubt that the defendants knowingly and wilfully violated the law, FEC enforcement suits are subject to the same "preponderance of the evidence" burden of proof as any civil suit in the United States. This burden is considerably lower than "beyond a reasonable doubt." Moreover, the FEC may bring a civil enforcement suit even if the defendant did not have knowing and wilful intent. Violations of FECA's limitations and prohibitions on the sources and amounts of contributions are subject to civil sanction if committed with knowing intent. This means that the defendants intended to do the act that violated the law, whether or not they knew it was illegal. Violators of FECA's requirements for disclosure of political committees' receipts and disbursements are subject to civil sanction under a "strict liability" standard. This means that the FEC need prove only that the violation occurred, and need not prove intent.

Termination of enforcement matters

Compliance matters are terminated in one of three ways. First, they may be terminated if the Commission closes the file after finding no violation or taking no further action. A Commission determination in the context of an enforcement matter involves the exercise of prosecutorial discretion. Therefore, the Commission can decide not to pursue a particular violation due to mitigating circumstances. Factors the Commission may consider in deciding to take no further action include the amount of money involved, the timing of the violation, actions taken to correct the violation, the timing of those actions, and whether the matter involves an ambiguous area of the law or a provision that has not been previously interpreted by the Commission.

Second, a compliance matter is terminated (at least with respect to a particular respondent) when the Commission enters into a conciliation agreement with the respondent. Finally, a compliance matter is terminated after a failure to get four votes for any action necessary to continue the matter.

Between 1996 and mid-2002, about 56 percent of matters activated and assigned to staff were resolved through conciliation agreements; some of these matters settled relatively rapidly, but others settled only after extensive investigations. Roughly 39 percent were closed either after a substantive finding of no violation, an exercise of prosecutorial discretion to take no further action, or a failure to obtain 4 votes. Only about 5 percent of matters activated and assigned to staff were subjected to the entire enforcement process through the authorization of a civil law enforcement suit.

Complainant's challenges to agency handling of complaints

If the Commission does not take final action on a complaint within 120 days after it was filed, the complainant may seek judicial review in the U.S. District Court for the District of Columbia. The complainant will have to show that the Commission's failure to complete action was contrary to law or arbitrary and capricious. In deciding such claims, the court takes into consideration the nature and complexity of the enforcement matter and the action the Commission has taken, as well as other factors such as the Commission's workload and its human and budgetary resources. If the court agrees that the manner in which the Commission is proceeding is not arbitrary and capricious, it may dismiss the suit, or it may require periodic reports from the Commission about any action the Commission is taking.

In defending these cases, the Commission frequently provides the court and complainant/plaintiffs with confidential chronologies of the actions taken in the enforcement matter up to that point. These cases frequently settle with an agreement to provide the court and complainant with periodic updates.

Moreover, in a provision that may be unique in American administrative law, complainants may seek judicial review of a Commission decision not to pursue a matter. If the Commission dismisses a complaint, the complainant may file a petition to review that dismissal. However, the petition must be filed in the U.S. District Court for the District of Columbia, no matter where the complainant is located. The petition must be filed within 60 days after the Commission dismisses the complaint. As with suits for delay, the complainant/plaintiff bears the burden of proving that the Commission's failure to act was arbitrary and capricious or contrary to law.

If the court rules that the Commission acted in an arbitrary and capricious manner, it may order the Commission to take some other action within 30 days. If the Commission does not conform to the court's directive, the court may authorize the complainant to file his or her own suit against the respondent to remedy the alleged violation of the law.

Alternative enforcement processes

Administrative fines program

Photo: Getty Images
Senate of the United States

A larger number of political committees than one might expect either fail altogether to file the required reports disclosing their receipts and disbursements, or fail to file them on time. Many of these violations do not result from malfeasance, but are instead committed by smaller committees staffed by less experienced personnel. The only factual issue in the cases is usually whether the report was or was not filed on time. Nevertheless, prior to 2000 the FEC had no way to deal with these cases other than the procedure-laden process just described.

Amendments to the FECA, first enacted by Congress in 1999 and since renewed, permit the FEC to directly impose civil money penalties, based on published schedules of penalties, for late filing and non-filing of disclosure reports, if the violation occurs between January 1, 2000, and December 31, 2003. Beginning with the July 15, 2000, quarterly reports, the Commission began a new program to assess these penalties.

Under the new program, if the Commission finds reason to believe that a committee failed to file a report at all or on time, it notifies the committee in writing of the factual and legal basis of its finding and the amount of the proposed civil money penalty. The committee has 40 days from the date of the reason-to-believe finding either to pay the civil money penalty or submit to the Commission a written response, with supporting documentation outlining the reasons why it believes the Commission's finding and/or penalty is in error.

If the committee submits a response, the response is forwarded to an impartial reviewing officer someone employed by the FEC who was not involved in the original reason-to-believe finding. After reviewing the Commission's finding and the committee's written response, the reviewing officer forwards a recommendation to the Commission. Respondents have an opportunity to submit a written response to the reviewing officer's recommendation. The Commission then makes a final determination as to whether the committee violated the Act. If the Commission finds a violation occurred, it assesses the civil money penalty.

After a final determination by the Commission, the committee has 30 days to pay the penalty or seek judicial review in a U.S. district court in the area where the committee resided or conducted business. If a respondent fails to pay the civil penalty, the Commission may either sue the respondent directly to collect the penalty or transfer the case to the U.S. Department of the Treasury for collection.

Alternative dispute resolution

In 2000, the Commission initiated an Alternative Dispute Resolution (ADR) pilot project to resolve certain enforcement matters. It recently made the project permanent.

The objectives and goals of the ADR program are to promote compliance, expand the tools available to the Commission for resolving selected complaints, resolve matters more quickly without using the full Commission enforcement mechanism, and reduce costs to both the FEC and respondents.

If the Commission determines that a matter is appropriate for handling as an ADR matter, the respondent or respondent's representative will be contacted by a representative of the ADR office. If the respondent is not willing to participate in ADR, the matter is returned to the General Counsel's Office for handling through the normal enforcement process. If the respondent is willing to engage in the ADR process and agrees to toll any applicable statute of limitations for the time the matter is pending in ADR, the matter proceeds to bilateral negotiations between the respondent or representative and a representative of the ADR office.

If a settlement is reached in negotiation, it will be submitted to the Commission for approval. If not, the ADR process proceeds to mediation.

If an ADR matter proceeds to mediation, the ADR office will forward to the respondent a list of three proposed mediators, all of whom are senior, experienced, neutral professionals from the private sector. The respondent has the opportunity to choose one or reject all three. If the respondent rejects all three, the ADR office will forward a second and final list of three proposed mediators.

The respondent and the ADR representative choose a location for the mediation session, which will generally last one day. During the session, the mediator will meet both jointly and separately with the respondent or respondent's representative, and the ADR representative, as necessary. The mediator treats as confidential all respondent-mediator communications, i.e. the mediator does not reveal anything about the communications to the ADR representative without the respondent's permission. Moreover, no information that respondents provide in a mediation can be used in a later enforcement proceeding.

Any proposed settlement, whether reached through negotiation or mediation, is submitted to the Commission for its approval. All approved settlements become a matter of public record; all are accompanied by a statement that the settlement was negotiated through ADR and that the settlement cannot be used as a precedent for the settlement of other cases. If the Commission fails to approve a settlement arrived at between a respondent and the ADR office, the matter is dismissed.

If the negotiation and mediation processes fail to produce a settlement, the case is returned to the General Counsel's Office for handling through the normal enforcement process. At this point, any applicable statute of limitations begins to run again.

The Bipartisan Campaign Reform Act and the future

The Bipartisan Campaign Reform Act became effective on November 6, 2002, the day after the 2002 national general election. The coming months and years promise great change in the substance of federal campaign finance law enforcement in the United States, as the Commission and the regulated community adjust to the many substantive changes BCRA made to the law. However, other than making it easier for DOJ to prosecute the most aggravated violations as felonies, BCRA left the process by which FECA is enforced virtually untouched. The procedures described in this article will continue in place as the Federal Election Commission pursues its missions of encouraging voluntary compliance and enforcing the law.


Endnotes

Footnote 1 There are some exceptions. Most notably, U.S. federal law prohibits foreign nationals essentially meaning individuals who are neither U.S. citizens nor green card holders, and corporations or other non-natural persons that are organized under non-U.S. law or otherwise under foreign control from making contributions or expenditures in connection with elections for federal, state or local office. A number of specific requirements that are beyond the scope of this article apply to the establishment of a political action committee by a U.S. subsidiary of a foreign corporation, or to direct or indirect contributions from the subsidiary's corporate treasury to state and local candidates.

Footnote 2 2 U.S.C. ss. 431455.

Footnote 3 26 U.S.C. ss. 90319042.

Footnote 4 26 U.S.C. ss. 90019013.

Footnote 5 However, DOJ has had some success using more general statutes to bring felony prosecutions in cases where reimbursed contributions have been made through "straw donors" in attempts to disguise the identity of the true contributor and/or evade FECA's limitations and prohibitions.

Footnote 6 Pub. L. 107-155, 116 Stat. 81 (2002). BCRA introduced a number of important substantive amendments to FECA, including a ban on the receipt or spending of non-federal funds (or so-called "soft money") by national political parties, 2 U.S.C. s. 441i(a); new restrictions on the receipt and spending of such funds by state and local political party committees (which typically conduct activities that affect both federal and non-federal elections), 2 U.S.C. s. 441i(b); and new restrictions on the sources of funding for what BCRA calls "electioneering communications," or broadcast advertisements aired in close proximity to elections that refer to candidates for federal office without using words of express advocacy and are targeted to the constituency from which the candidate is seeking election. 2 U.S.C. ss. 434(f)(3) (definition), 441b(c) (restriction on source of funds). More on BCRA's substantive provisions, the reasons Congress passed them, and the constitutional issues they raise can be found in Richard Briffault, "Soft Money, Issue Advocacy and the U.S. Campaign Finance Law," Electoral Insight, May 2002, pp. 914.

Footnote 7 BCRA's enhanced criminal penalties are codified at 2 U.S.C. ss. 437g(d)(1)(A) and (D). The longer statute of limitations for criminal prosecutions is codified at 2 U.S.C. s. 455(a).

Footnote 8 A judge of the U.S. District Court for the District of Columbia held in 2001 that the Act's confidentiality provision extends beyond closure of the matter and prevents the Commission from making public all but a very limited range of materials relating to a MUR after the MUR is closed, AFL-CIO v. FEC, 177 F. Supp. 2d. 48 (D.D.C. 2001). Prior to the decision, the Commission had always made public most of the investigative files in enforcement matters once they were complete. Pending review of this decision by a U.S. Court of Appeals, the Commission is complying with it with respect to all newly closed enforcement matters.

Footnote 9 Under BCRA, civil penalties for knowing and wilful violations of the prohibition on reimbursed contributions will now be a minimum of three times the amount of the violation and a maximum of 10 times the amount of the violation, 2 U.S.C. s. 437g(a)(6)(C). This represents the first time Congress has provided for mandatory minimum civil penalties for violations of FECA.