August 10, 2016

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Indiana, Latest News

MEMORANDUM: IN GOP Still in Disarray Over Pence’s Campaign Cash

MEMORANDUM: IN GOP Still in Disarray Over Pence’s Campaign Cash

Legal Update: Dos and Don’ts for Donors & Fundraisers

To: Interested Parties

From: Democratic Governors Association

Date: 8/10/16

 

Weeks after Eric Holcomb became Mike Pence’s handpicked successor, the Indiana GOP remains in disarray over its inability to access Pence’s campaign funds.

Yesterday, Hoosiers were exposed to the GOP’s latest end-around, money-grabbing scheme that appears to violate basic campaign finance regulations. Howey Politics Indiana reported:

“The Holcomb/Crouch campaign is expecting to recover about $5 million of the reelection funds from Gov. Mike Pence,” An informed and reliable campaign source tells HPI, ‘It’s safe to say that somewhere in the ball park of $5 million will come via direct transfers, in-kind or other legally permissible ways. No one really knows the full amount at this point.’”

However, this plan appears to be the latest in a long line of legally questionable moves made by Indiana Republicans.  

When first informed that federal law restricted Pence from transferring his $7.5 million campaign account to Eric Holcomb, the initial response from Indiana Republicans was denial. 

Niki Kelly from the Journal Gazette reported:

“Jim Bopp, a GOP attorney and campaign finance expert, initially told The Journal Gazette that state law has no prohibitions on Pence giving his campaign dollars to other state races, and federal law doesn’t apply.” 

However, Bopp quickly reversed himself:

“After reviewing several Federal Election Commission advisory opinions he clarified.  ‘I still think generally what I said was true but obviously there are complications that I’ll be working through. I’ll do my best to figure it out,’ Bopp said.”

Indiana Republicans then appeared to accept reality. On July 29, Pence’s campaign transferred $1,248,492.04 to Holcomb’s campaign, an “oddly precise” amount that news reports noted “could be related to the additional federal rules complicating the contributions.”

But now, it appears the Republican’s latest “plan” would violate the law if implemented:

1.  Federal law provides that “only donations from permissible sources that comply with the Act’s contribution limits may be used to make [] disbursements … to [] non-Federal candidates.” FEC Adv. Op. 2007-26 (Schock).

Pence appears to have transferred his federally permissible funds to Holcomb’s campaign, after the “oddly precise” initial transfer of $1,248,492.04.  

 2.  The article suggests that the Pence campaign may try to make “in-kind” contributions to get around the restrictions. But in-kind contributions, like monetary contributions, are “subject to the source prohibitions and amount limitations of the Act.”  FEC Adv. Op. 2006-4 (Tancredo). 

If the Pence campaign purchases a good or service with funds that are not federally permissible, and provides that to Holcomb’s campaign, that violates federal law.

 3.  The article suggests that there are “legally permissible ways,” other than direct transfers, to move $5 million from Pence’s campaign to Holcomb’s. An unnamed source in an earlier article argued that in the case of individuals who had contributed over the federal limit, funds in excess of the $2,700 limit “could be returned to the donor, who could then donate it back to the Holcomb campaign.”

 a.   But the FEC addressed that possibility in 2007 and rejected it. In response to Congressman Schock’s request to refund the money to donors, the FEC wrote that “[t]he funds identified to be refunded may not also form the basis to fund another disbursement under the proposals outlined in questions 1, 2, and 3 [which involved proposed contributions to state/local party committees and candidates.”  See FEC Adv. Op. 2007-26.  

In other words, refunds cannot be provided to donors with the understanding that those funds will, in turn, be provided to the Holcomb campaign.

b.   Violating this rule is not only a problem for the Pence campaign; it is also a liability for donors. Federal law provides that, “[n]o person shall make a contribution in the name of another person or knowingly permit his name to be used to effect such a contribution.” 52 U.S.C. § 30122.  

If the Pence campaign provides a refund to the donor with the understanding that those funds will be contributed to the Holcomb campaign, the donor has knowingly permitted his name to effectuate a transfer from the Pence campaign to the Holcomb campaign.

4.  Federal law also prohibits federal candidates from “financing” an entity that raises or spends non-federal funds. See 11 C.F.R. § 300.60(d). A candidate “finances” another entity when his campaign “provide[s] funds in a significant amount” to that entity. See FEC Adv. Op. 2006-4. In that advisory opinion, the FEC determined that the federal candidate would be “financing” another entity when the candidate’s campaign donated $50,000 to the entity and that $50,000 comprised 25% of the entity’s overall receipts. 

So if the funds provided by Pence’s campaign comprise 25% or more of the Holcomb campaign’s funds, then the Pence campaign would be “financing” the Holcomb campaign. And the Holcomb campaign would then be limited to raising federal funds ($2,700 per election).  

5.  When the Pence campaign refunds money to donors, it must do so on a pro rata basis. I.C. 3-9-1-12(f)(1)(E) provides that campaign funds may be distributed back to “[c]ontributors to the committee, on a pro rata basis” upon dissolution. Because the Pence campaign had already spent a chunk of the money it had raised, it means that Pence may not refund 100 percent of the funds that the RGA contributed to his campaign.

6.  Governor Pence (and his agents) may not solicit donors to contribute more than $2,700 to Holcomb’s campaign. The McCain-Feingold law allows federal candidates to solicit funds for nonfederal campaigns only up to the federal limit and only from federally permissible sources. See FEC Adv. Op. 2005-2 (“Pursuant to 2 U.S.C. 441i(e)(1)(B) and 11 CFR 300.62, Senator Corzine and his agents may raise up to $2,100 per election5 from an individual donor for a candidate for State or local office.”).