Ensign Takes Unusual Step in Registering Defense Fund

Posted August 3, 2010 at 3:50pm

Sen. John Ensign registered his legal expense fund as a 527 political organization Monday, according to documents filed with the IRS.

The Nevada Republican received Senate approval in May to establish a legal expense fund to pay attorney fees stemming from Senate Ethics Committee and Justice Department investigations into his alleged attempts to cover up his extramarital affair.

Campaign finance experts called the decision unusual and possibly unprecedented, noting that Members of Congress do not typically register legal expense accounts in such a dual fashion.

“I guess he somehow considers the use of these legal fees, these contributions, to be political, and while they’re related to political charges, typically those defense funds are not set up as 527s,” said Ken Gross, a campaign finance attorney at Skadden, Arps, Slate, Meagher and Flom.

The tax-exempt organizations, named for a section of the tax code, can raise unlimited funds for issue advocacy and political activities.

Neither Ensign’s office nor Doug Templeton, who is listed as the expense fund’s trustee on Senate documents and the IRS forms, returned requests for comment Tuesday.

According to IRS documents available in a public database, Templeton described the 527’s purpose in nearly identical language to Ensign’s earlier request to the Senate to establish a legal fund.

“The sole purpose of the Trust is to receive funds and to pay all expenses reasonably related to the legal representations of the Grantor in connection with legal inquiries, including by the Select Committee on Ethics of the United States Senate and the United States Department of Justice, involving allegations of violations of Standing Rules and Standards of the Senate and Federal Statutes, relating to or arising by virtue of the Grantor’s service in or to the United States Senate,” Templeton wrote on the IRS form.

Senators are allowed to establish legal defense funds with the approval of the Ethics Committee to pay for civil or criminal proceedings relating to their official duties.

Contributions to such funds are capped at $10,000 per year for an individual and do not count against contribution limits for campaigns, but lobbyists are prohibited from donating.

Although 527 organizations do not face similar limits, Brett Kappel, a lawyer at Arent Fox, said the legal fund’s restrictions still apply.

“The contribution limits are determined by the Senate rules and not by the law governing 527 organizations,” Kappel said. “The trust would still be bound by the dollar limits established by the Senate rules and by whatever additional restrictions were built into the trust itself.”

But the legal fund would have to file electronic reports with the IRS to detail its income, unlike the Senate, which maintains paper records.

The FBI and the Ethics Committee are separately investigating Ensign’s alleged efforts to cover up an affair with a campaign aide, Cynthia Hampton. She is married to Doug Hampton, who was Ensign’s top personal office aide at the time of the affair. The Hamptons no longer work for Ensign.

Citizens for Responsibility and Ethics in Washington, a watchdog group, and others have accused Ensign of using his office to steer clients to Doug Hampton’s lobbying business in exchange for his silence about the affair.

Hampton told the New York Times last fall that Ensign had taken specific steps to assist his lobbying clients and helped circumvent the lobbying ban that applied to Hampton as the Senator’s former employee.

The Justice Department has begun issuing subpoenas in the Ensign case, including requests for documents from the National Republican Senatorial Committee, where the Senator served as chairman for the 2008 campaign cycle.

The Senate approved a resolution late last week allowing Ensign’s aides to testify before a grand jury investigating the case.