Ruling Hints at Scrutiny of Lobbyist ‘Bundling’

Posted September 9, 2005 at 6:16pm

A little-noticed aspect of a recent decision by the Federal Election Commission could have far-reaching implications for how fundraising is conducted in Washington, as the agency eliminated some wiggle room in outside lobbyists’ abilities to “bundle” contributions from corporate executives and pass them on to lawmakers.

Lobbyists can still engage in such activities, however, so long as they act in their personal capacities.

Bundling is a common fundraising tool whereby one individual collects checks from colleagues and friends and then passes those aggregated checks to a particular candidate. Lobbyists in particular use it as a method to get credit for contributions they collect for presidential and Congressional campaigns.

In August, the FEC fined Westar Energy $20,000 for making illegal campaign contributions to a number of federal candidates, including House Majority Leader Tom DeLay (R-Texas). Two of the Texas firm’s former executives were also fined. In a rare move, the FEC also fined the company’s outside lobbyist, Richard Bornemann, $5,000 for organizing and personally delivering the contributions.

It is this last punitive measure that has some wondering whether the FEC has become less tolerant of a practice that the agency itself acknowledges as “an everyday activity for Washington lobbyists.”

In their “statement of reasons,” the five FEC commissioners who voted to fine Westar tried to make clear that they were not, in fact, outlawing a practice “heretofore universally considered to be legal,” but instead clarifying what exactly lobbyists can and cannot not do when raising funds for federal candidates in their capacity as corporate agents.

At issue is the so-called facilitation rule. Under long-standing campaign finance law, corporations cannot give directly to federal candidates or serve as conduits for contributions earmarked for federal candidates. What is now crystal clear, according to campaign finance lawyers, is that lobbyists cannot coordinate and direct contributions from company executives to federal candidates when they are acting in their capacities as the companies’ employees.

Brett Kappel, a lobbyist and campaign finance attorney with the firm Vorys, Sater, Seymour and Pease said the FEC’s decision in Westar could change how the game is played. “From a legal standpoint it’s interesting to practitioners because of the commission’s expansive interpretation of the anti-facilitation rules,” Kappel said.

And because violations of anti-facilitation rules can be criminally prosecuted, “This could have a significant legal impact on how money is raised in Washington,” Kappel added.

But former FEC chairman and current campaign lawyer Trevor Potter said the Westar decision didn’t break new ground as much as it clarified exactly where outside lobbyists stand in their ability to bundle contributions. Potter said it has been long clear that corporate executives cannot use company resources to facilitate federal campaign contributions.

That means that corporate executives cannot use out-of-pocket company resources or company time (which the FEC defines as more than four hours per month) to coordinate or make donations to federal candidates.

Potter explained that it followed logically that a company’s lobbyist could not organize and direct campaign contributions to federal candidates in his or her official capacity as a hired agent for the corporation, using company time and/or company resources.

“Corporations cannot pay people to engage in federal political activity,” Potter said.

What’s left, Potter and other campaign lawyers agreed, was the ability of lobbyists to act in their personal capacities or as agents for federal candidate’s campaigns. In both instances, the result would be the same. Lobbyists can still bundle contributions from corporate executives, they just can’t use more than four hours of company time per month or company money to do so. In other words, they have to be acting in their capacities as independent citizens, a constitutionally protected sphere.

According to the “statement of reasons” signed by five of six FEC commissioners, “It is indeed true that a lobbyist’s delivery of a contribution check from a corporate client’s [political action committee] is legally permissible.” Furthermore, the FEC reiterated that corporations may pay the PAC’s overhead expenses, including postage and express shipment fees to deliver and manage the contributions checks.

What would be illegal, under the 1974 Federal Election Campaign Act, is for the corporations to donate to federal candidates directly. The company’s executives can ask other higher-ups in the corporation (the so-called “restricted class,” which includes executive employees, administrative personnel and stockholders) to make contributions to candidates, using a minimal amount of company time and provided the contributions are not “coerced.” And the company can pay the operating expenses of the PACs it sets up to facilitate those contributions.

But under the FEC’s anti-facilitation rules, the corporation itself and its executive agents acting in their official capacities — which now includes hired outside lobbyists acting in their official capacities — may not collect and forward contributions to federal candidates.

“Thus, lobbyists who advise corporate clients or employers to urge executives to make contributions to federal candidates should simply remind those involved that the contributors should mail or otherwise transmit check to the campaign directly — not through a representative of the corporation,” the five commissioners explained. “This is a simple rule, surely not beyond the comprehension of anyone whose profession is to guide corporate clients through the labyrinthine ways of Washington.”

By law, corporations cannot give to candidates from their treasuries. Under longstanding FEC guidelines, however, executives can use a “de minimis” amount of company time and resources to solicit money from its restricted class and collect the funds in a PAC and pay the PAC’s overhead expenses, all the while not running afoul of FEC regulations prohibiting corporate collection and transmittal of contributions.

In their explanation, the commissioners wrote that the facts of the Westar case made clear that Bornemann was not “volunteering to assist in fundraising on behalf of a campaign or political party. Instead, the lobbyist involved was advising the corporation regarding its employees’ political contributions (including impermissible facilitation thereof) and delivering those contributions for, and as a compensated representative of, the corporation.”

“A lobbyist volunteering in his individual capacity on behalf of a campaign may collect and forward (‘bundle’) contributions on behalf of the recipient campaign, party or political committee,” the FEC’s decision continues. “In such instances, the lobbyist-volunteer may personally solicit contributions, including from employees of clients.”

The five commissioners cautioned, however, that such “volunteer” activity may not be conducted on the “corporate dime” (as they determined was the case with Westar), nor under direction of corporate managers, nor using corporate out-of-pocket resources.

Not everyone on the commission agreed that Westar and Bornemann violated the agency’s regulations, however. Republican Commissioner Michael Toner didn’t vote with the 5-1 majority, writing in his dissent that it was “unclear whether Westar’s actions or the actions of any of the other respondents here constituted corporate facilitation.”

In Toner’s estimation, all those involved were acting within their “safe harbour” of exempted individual activity.

According to the company’s own admissions, Bornemann requested the checks; the company’s vice president of governmental affairs, Doug Lawrence, notified the designated Westar executives of their requested amounts; and Lawrence’s assistant shipped the received checks to Bornemann, who personally delivered them to federal candidates.

Even so, Toner wrote, “it was unclear based on the factual record at hand what amount of corporate resources, if any, were used in taking these steps,” and he could not find that Westar’s actions or those of their employees constituted “corporate facilitation,” under the FEC’s rules.

The use of company resources, Toner wrote, “was limited to the use of the company’s computers to send e-mails requesting checks and to approximately $40 worth of Federal Express charges,” all activities he believes the FEC’s own regulations allow.