FEC to Congress: Expand ban on personal use of political committee funds

The Federal Election Commission (FEC) renewed its charge to Congress Thursday to extend a ban prohibiting personal use of campaign funds to all political committees.

The ban would stop individuals from using political action committee (PAC) funds "to fulfill any commitment, obligation, or expense that would exist irrespective of the candidate's election campaign or duties as a holder of Federal office," the FEC states in the legislative recommendations it approved this week.

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The restriction currently only applies to candidates and candidate committees. The loophole allows those who use funds from non-candidate committees for "their own personal use, including theft or embezzlement" to do so with impunity.

Commission legislative recommendations from 2009 and 2011 also point to the lack of restrictions in this area as an issue, but Congress has not taken the bait. In the meantime, activities like Sarah Palin's bus tour, which many labeled a vacation, have been paid for through political committee funds.

"The Commission has seen a substantial number of instances where individuals with access to the funds received by political committees have used such funds to make unauthorized disbursements to pay for their own personal expenses," the Commission's legislative recommendation states.

"However, no corresponding provision covers individuals who convert contributions received by party committees, separate segregated funds, leadership PACs, and other political committees to their own personal use, including through theft or embezzlement. While other provisions of [campaign finance law] are sometimes available to address these types of unauthorized disbursements, sometimes they are not."

The Justice Department also has seen a “dramatic rise in the number of cases” of stolen money intended for use in “electing a candidate or candidate supported by the political committee,” the department summarized in the 2007 report, Federal Prosecution of Election Offenses, cited by the Commission.

Congress’ inaction on the commission’s recommendation is not unusual. The legislative body normally ignores the advice of the commission, Bob Biersack of the money-in-politics watchdog Open Secrets told The Hill.

The expansion of Leadership PACs over the past few years could also offer a disincentive to move forward on this FEC proposal.  A Leadership PAC is an unauthorized committee of a candidate or federal officeholder that is “directly or indirectly established, financed, maintained or controlled by” the candidate or officeholder, the commission site states.

“[It] is true that Leadership PACs have proliferated in recent years to the point where its unusual for a member not to have one and that may make members reluctant to add more regulation to something they're directly involved with,” Biersack said.

The addition of super-PACs to the game could further exacerbate the worrisome issue, watchdogs said. Super-PACs could change the game “because they’re bring more money into the process without many restrictions,” Biersack explained.

Super-PACs – that is, independent expenditure only political action committees – are empowered to accept unlimited donations and make unlimited expenditures in support of, or opposition to, a political candidate, provided the money is spent independent of the knowledge and control of candidates and campaigns.

Democracy 21 president Fred Wertheimer pointed to candidate-specific super-PACs that could technically end election participation after the primary, as one example of the danger of the loophole.

“So when you get the candidate-specific super-PACs, like the ones we have for the presidential candidates, once the primaries are over they are free to do whatever they want with that money. As long as they convert it to personal use [and] pay taxes on it,” Wertheimer said.

It is hard to decipher exactly how frequently this misuse of funds intended for campaign purposes occurs, according to Wertheimer.

For instance, if a retired member gave their Leadership PAC money to a non-profit that they are “associated with,” the transfer is legal and not taxed. Meanwhile, the foundation could be paying the family members or retired member and that would be difficult to track, Wertheimer explained.

The retired member could also potentially convert the money from their Leadership PAC to personal funds, pay taxes on it and pocket the rest, Wertheimer said. That is considered legal under current campaign finance law.

“What we do know is that it’s dangerous to not have the campaign finance laws clarified to prevent the use of campaign money for personal use. That’s not what campaign contributions are about,” Wertheimer said.

“I think it’s important to close this loophole, but it’s been important to close this loophole for some time,” he said.

The commission also recommended forcing certain Senate candidates and their committees to submit their disclosure filings electronically in their 2012 report.  Electronic filing would help speed up disclosure and the integration of Senate records into the Commission searchable database.

Senate candidates and committees would be required to comply “if they have, or have reason to expect to have aggregate contributions or expenditures in excess of the threshold amount to be determined by the Commission,” the commissioners wrote.


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