Most common mistake made by corporate PACs: Giving in the name of another

In a rare moment, two commissioners on the Federal Election Commission (FEC) agreed on the answer to a question posed during a recent seminar about corporate political activity. The question: What common mistake by corporations is most likely to result in FEC sanctions? The answer: Giving in the name of another.

Federal law and the laws of many states, including Ohio, specifically prohibit a person from making political contributions in the name of another. Yet many corporations still reimburse employees for political contributions, provide bonuses for political activity, or otherwise communicate that an employee’s salary is intended to be sufficient enough to permit the employee to be politically active. FEC Chairman Matt Peterson and Commissioner Ellen Weintraub both noted that this type of activity was surprisingly prevalent and was being committed by corporate officers who simply did not understand that it is illegal.

To be clear, state and federal law prohibit funneling campaign contributions through another person or entity. The offense is compounded when corporations are involved because corporate funds cannot be used for political support, either directly or indirectly.

Penalties can be significant. At the FEC, penalties can range from 300 to 1,000 percent of the amount of the illegal contribution. Criminal penalties can include significant felony convictions and the possibility of serious prison time. Ohio law provides for a monetary penalty of up to $10,000, potential forfeiture of office if a candidate was the perpetrator, and possible criminal sanctions.

Corporations that value political involvement by their employees should carefully examine the applicable laws and implement strict policies that protect an employee’s First Amendment rights to be politically active without crossing the line into activity that might constitute making a contribution in the name of another. Such corporations should also strongly consider setting up a political action committee, which can achieve the same corporate goal of being politically active and, if operated correctly, can do so in a legal manner.  

This article was reprinted from the Fall 2016 Compliance Connections Newsletter. Download the complete issue here.