Cutting corners in a federal campaign is criminal

The political world was shocked to hear that at the end of May, Donald Trump’s political campaign had a measly $1.3 million of cash on hand. Of course $1.3 million is more than most of us have ever had in our lifetimes. But for a presidential campaign, which could have a $1 billion price tag, $1.3 million is alarmingly low amount of gas in the tank with a country as large as the U.S. and five months to go until election day.

The problem for Mr. Trump is he doesn’t seem to have much of a fundraising infrastructure. He may have miscalculated thinking if Bernie Sanders can raise over $200 million, so can I. This underestimated the brains and time that Sanders campaign put into small donor fundraising. Also the Sanders campaign had lots of volunteerswilling to help out. If a report in the Associated Press (AP) is correct, Mr. Trump is having a hard time even hiring people to work for his campaign.

{mosads}As a result of cash crunch, Donald Trump just forgave his personal loan to his campaign to the tune of $50 million.  He likely thought that he would get this money back from the campaign by raising money from other donors. And he did have nearly $17 million in contributions from others. But the donations were not flowing in fast enough to keep the campaign liquid or to pay his loan back.

Trump is not the first candidate to use a loan to jump start a presidential run.  For example when he was running for the presidency in 2004 Democratic Senator John Kerry mortgaged his house to finance a $6 million loan to his campaign. In 2008 Republican Senator John McCain took out $4 million in bank loans to keep his campaign afloat. Loaning a campaign money is one way to show that the candidate has some skin in the game.

By forgiving his loan, Mr. Trump converts the loan into a contribution, which means he won’t get that money back from other contributors. On this narrow point, his opponent Hillary Clinton may feel some sympathy for him as her first run for president cost her $13.2 million personally.  This money had started as a loan to her campaign, but it had to be converted into a contribution when the campaign ran out of money. Clinton’s first campaign in 2008 ended in debt which took 4 years to pay back

And for all of Trump’s recent mockery of Mitt Romney, both Trump and Romney look like they will end up spending a similar amount for running for president as Mitt Romney gave his campaign $44 million.

If Trump wants to avoid paying more out of his pocket for his presidential run, then his campaign will need to do some fundraising.  Under the FEC rules, he can raise $2,700 per person for the primary and $2,700 per person for the general election. As I explained at a recent forum at the FEC, citing my new book Corporate Citizen, under federal election law, Mr. Trump can’t raise any money directly from corporations, unions, or foreigners.

His opponent Hillary Clinton has $42 million cash on hand. So his best case scenario is he needs to find 7,500 Americans and convince them all to max out their donations to him just to pull even with Secretary Clinton. And many top GOP donors are sitting on their hands instead of reaching for their check books.

Being this deep in the fundraising hole may raise the temptation of cutting corners like trying to raise money in bigger chunks than is allowed under the law or from prohibited sources (like corporations or foreigners). And indeed the Scottish press are reporting that Mr. Trump solicited campaign funds from Scottish MPs which he is illegal.  But this would be a grave mistake to go down this road because  that type of behavior triggers criminal liability.

While the perennially deadlocked Federal Election Commission (FEC) may not enforce much election law, the DOJ will.  Federal campaign finance law became more strict in 2002, including creating  “a five-year felony offense for FECA [Federal Election Campaign Act] violations aggregating $25,000 or more during a calendar year.”

And campaigns cannot paper over where they got the money by lying to the FEC because of the prohibition on making false statements to federal agencies under 18 U.S.C. § 1001.  Again while the FEC might not enforce this, the DOJ will. “False statements” in campaign finance is like the tax evasion for mobsters: if the feds can’t get a criminal on anything else, they get them on the paper work.

For example, false statements were part of the prosecution against once mega lobbyist Paul Magliocchetti, the founder and president of PMA Group Inc.  Mr. Magliocchetti got 27 months in prison for illegal campaign contributions and false statements to the FEC.

So this is not the time to cut corners for a cash strapped campaign. With each new campaign filing, there will be scrutiny of where the money came from and where it’s going. And some of that scrutiny will be from those who enforce federal criminal law.

Ciara Torres-Spelliscy is an associate professor of law at Stetson University College of Law, a Brennan Center fellow and the author of Corporate Citizen? An Argument for the Separation of Corporation and State.

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