Who's afraid of the F.E.C.?

WHO'S AFRAID OF THE F.E.C.?

In 1982, Mississippi's second district hosted one of the closest congressional races in the country. The Democratic candidate and odds-on favorite to win was Robert Clark, a state representative who had been the first black since Reconstruction to win a Mississippi Democratic congressional primary. His Republican opponent was Webb Franklin, a white circuit court judge and former Democrat. When Franklin scored an upset and won by 2,914 votes, many were taken by surprise. And when the Federal Election Commission (FEC) announced three years later that Franklin's campaign committee had broken campaign laws by accepting more than $60,000 in illegal contributions, many who had been surprised felt they had found the secret to Franklin's narrow triumph.

The illegal funds came in a last-minute avalanche. During the period starting five days before the election and ending two weeks after, the Franklin campaign obtained the money through a series of bank overdrafts from the Bank of Greenwood, a branch of the First National Bank of Jackson. Because the bank had not formally extended overdraft protection to the campaign account, the FEC considered the overdrafts to be campaign contributions--which banks are prohibited from making under the Federal Election Campaign Act of 1971. In addition, the FEC cited three men, one of whom was William B. Crump III, now Franklin's chief congressional aide, for endorsing a $30,000 loan to cover Franklin's overdrafts. Under the law, endorsing a bank loan is considered a campaign contribution. All three already had contributed to the legal limit, so the endorsement amounted to an excess contribution of $10,000 from each.

The money clearly had a critical effect on the election. At a time when campaign bank books are usually looking anemic, Franklin had money for a last-minute media assault and, according to forms filed with the FEC, for election day transportation, a key element for turning out black voters, especially in rural areas, where they often have no way to get to polling places. (A large percentage of the voters in the second district are black.) There were also a number of donations to black churches made the day after the election; candidates frequently pledge contributions to black churches so the preacher will lend support or at least hold his peace. According to Fred Slabach, executive director of the Mississippi Democratic party and a volunteer on the Clark campaign, the money was decisive. "If we had had an extra $30,000 in 1982 there is no doubt in my mind that it would have made a difference,' he says. "During the last three or four weeks, Robert Clark was scratching for money.'

But running afoul of the FEC proved to be a painless affair for Franklin. His campaign committee was penalized $7,500 and the Bank of Greenwood $2,000. "Franklin basically got off with a slap on the wrist,' says Slabach. "If $30,000 in illegal contributions will get me elected, why not just take the risk and pay the $7,500 later? What's the deterrent?'

Pay the man the $5

If anything, the FEC proved fiercer in its handling of the Franklin case than it has in most others. A look at more than 300 cases on file reveals an organization that is somewhat less than intimidating.

After a 1978 campaign in Alabama, the Walter Flowers for U.S. Senate Committee paid a $1,500 penalty for receiving almost $140,000 in illegal contributions. Most of that money came in the form of overdrafts, but $35,000 of it was a loan from Flowers's brother. (Loans from anyone, including blood relatives, are considered contributions, according to the Federal Campaign Act.) Calculated on the entire sum, the fine is equivalent to a loan at about 1 percent. You'd have a hard time getting that rate at your local bank.

A whopping $200 penalty--less than a round-trip fare from Washington to Kennebunkport --was assessed to the George Bush for President Committee for violations that included failure to report as campaign funds bank accounts in 37 states during the 1980 presidential campaign and for accepting $20,195 in illegal contributions during that campaign.

A $500 penalty was paid by the Republican National Committee for receiving $33,933.23 in corporate contributions, which are prohibited, and for spending more than the allowed limit of $10,000 on the campaign of a candidate for Congress in Michigan.

A $4,000 penalty was paid by Senator Edward Kennedy's presidential campaign committee for receiving excess contributions totaling $75,092 during the 1980 campaign and for failing to report a $400 contribution from a labor union and a $1,500 loan from an Arizona bank.

A $4,000 penalty was paid by the 1980 Reagan for President (RFP) Committee for receiving $194,056 in excess contributions from the Citizens for the Republic (CFTR), Reagan's PAC. (CFTR was hit for a stiff $1,000.) In a separate case, RFP was fined $9,500 for accepting $187,349.94 in illegal contributions. So in sum, RFP had the use of $381,405.94 for the low, low price of $13,500. Equally damaging to the Reagan effort was that the first penalty wasn't assessed until three years after the election and the second not until four years after.

In a rather byzantine case, William F. Buckley and some associates were investigated after setting up a PAC to support the 1980 Senate bid of Buckley's brother, James, and Rep. Stewart McKinney's reelection in Connecticut. It seems that before the PAC, the Committee to Aid Connecticut, had any money, William Buckley had National Review put up almost $20,000 for advertising for the candidates, with the idea that the PAC would repay the money when it received some contributions. According to FEC files, William Buckley, his sister Priscilla, and Raymond Learsy then each gave $5,000 to the PAC. The FEC ruled that the National Review money was not a loan but an illegal corporate contribution and that the $5,000 contributions were personal campaign contributions (which are limited to $1,000), rather than independent expenditures (which are unlimited) because the contributors gave money to the committee knowing that it was going to defray advertising costs for those specific campaigns. National Review, the Buckleys, and Learsy did not have to pay any fines, though the Committee to Aid Connecticut got a $2,500 civil penalty.

No penalties were levied against the Cliff Dickman for Congress Committee, which received an illegal contribution of $23,825 in the form of a bank loan endorsed by three of Dickman's supporters. Although the FEC found the three and the committee in violation of the statutes, it decided "to take no further action and close the file.' In lieu of a penalty, each party received a letter of admonition.

Virtue unrewarded

Taking no further action seems to be what the FEC does best. Clayton Roberts of the National Right to Work Committee, a lobbying organization opposed to union dues being used for contributions to political campaigns, says, "We've been involved in several cases, complaints that we have filed with the FEC against both Mondale and various labor unions, including the NEA and the AFL-CIO, where the FEC has found in our favor in every count. They have said, "You are right, the Mondale campaign is guilty, the AFL-CIO is guilty,' and that's the end of it--no penalties whatsoever.' Michael Malbin, a political scientist at the American Enterprise Institute, agrees that the FEC is hardly a tiger among regulatory agencies. "I think it's an FEC pattern to look at little things and spend a long time doing it, and when they penalize, to make it look like candidates should just go out and do it again.'

Congressmen elected in 1984 spent $18 million more than they raised before voters went to the polls. Given this upward spiral, it seems likely such campaign improprieties will increase. Indeed, the candidate who won't break the rules to match his rival's spending risks becoming a case of virtue unrewarded. Because there is no limit on how much a candidate can loan his own campaign, the rich already have a distinct advantage in running for office. Less wealthy candidates have difficulty persuading banks to lend them the necessary cash, so naturally they are tempted to accept illegal contributions. Then there's the matter of interest rates: Why pay 15 percent or more when your illegal contributions offer the best rate on the market?

The FEC's low-cost capital is not a terribly well-kept secret. David Ifshin, a lawyer who specializes in campaign finance and served as general counsel to the Mondale campaign, has observed as much. "My clients increasingly ask me when they call up, "Am I talking about a $100 civil penalty if I do this and get caught?' My advice is, "Look, there's a willful and knowing aspect to this. If you go out and violate the law, knowing in advance you're violating the law, you have the potential to have it referred to the Justice Department for criminal prosecution.' But it's also true that there have been no referrals for criminal prosecution and most people who are professional in the area know that.'

Actually, Ifshin exaggerates. In the 11 years the FEC has been in operation, it has referred one case to the criminal division of the Justice Department. In that instance, supporters of former Pennsylvania Governor Milton Shapp, in an attempt to cover their tracks, attributed their own excess contributions to Shapp's presidential campaign to a group of other people. The convictions were overturned on technicalities, so no one ever has gone to jail for campaign contribution abuses. The highest penalty ever levied by the FEC was one recently given the Mondale committee for its much-publicized use of delegate committees to circumvent spending limits. The committee agreed to pay an $18,500 penalty and refund $350,000 to the Treasury Department. The great majority of penalties don't come close to this figure; they are generally in the $250 to $1,000 range.

Lean but not hungry

Why isn't the FEC tougher on violators? A major reason is that the FEC does not have the legal power to levy fines. Instead, it recommends penalties and then enters negotiations with the offending party to arrive at a mutually agreeable sum. The guidelines the commission uses to decide on fines are supposed to hinge on the question of intent: If it decides a violation was done without willful and knowing intent, then it may recommend a figure anywhere from $5,000 to the full amount of the illegal contribution. If the FEC does find intent, the penalty can range from $10,000 to twice the total of the illegal contributions. But that rarely occurs; finding intent is too complicated a legal matter, so the actual range of penalties is usually the one set for the unknowing violators.

Arbitration makes a farce of the whole affair. Predictably, if the commission comes in with a request for a $7,000 penalty, the offender will offer a host of excuses and say he thinks $250 is a fair sum. Both parties know that the only recourse the FEC has if no agreement is met is to file suit in federal court--something it's loath to do because of the high cost of litigation. So the violator is in the driver's seat, and he's likely to end up with a penalty roughly equivalent to writing one hundred times on the blackboard, "I will not break the law.'

The rationale behind the FEC's enforcement policy is that it lacks the manpower to strike fear into candidates' hearts. Fred Eiland, an FEC spokesman, explains: "We've got a small staff, we've never been a big organization, and we've just got to measure how we're going to spend our resources.' Like the IRS, the FEC is an agency where beefing up the staff might actually help lower the federal deficit, since greater enforcement would result in more revenue from fines. Unfortunately, the FEC doesn't seem particularly interested in becoming more aggressive. As Eiland sees it, the system is designed so that public disclosure --not civil penalties--is the primary deterrent against campaign finance abuse. This, Eiland says, puts much of the responsibility on journalists for publicizing the infractions. "Then if people don't approve of what the incumbents or candidates have been doing, there are always the polls at the next election. And if they reelect them, then all you can say is, "Well, the people did it.''

It's true that journalists aren't always aggressive in pursuing FEC stories. But it's also true that the FEC moves so slowly in investigating and negotiating that judgments are rarely made until after the election, when it's too late to make a difference. Indeed, in the Franklin case, the 1982 violations were not punished until three years later--after the reelection campaign in which Clark once again lost to Franklin in a close race. "On both counts the FEC failed in 1982,' says Fred Slabach. "It didn't deter anybody from doing anything, and it didn't even disclose [the violations] to the public in time for it to do any good in 1984. If the purpose of the FEC is to deter this stuff through public disclosure, they ought to get their asses in gear and do it in time for the next reelection cycle.'

Pardon my audit

Though the officials at the FEC are not winning prizes for temerity, ultimate responsibility for the weakness of the commission lies with Congress. What teeth the FEC had when it was established in 1975 were removed in 1979 when Congress took away the FEC's power to conduct random audits of congressional campaigns. Under the audit program, 10 percent of the members of the House and Senate were to be examined. This was not terribly popular in Congress. "You would have thought somebody had planted a nuclear device on Capitol Hill, from the reaction up there,' says Jan Baran, a Republican election-law expert. "Everyone was scared.' The commission's first audit had the bad luck to find improprieties in the campaign finances of James J. Delaney, chairman of the powerful House Rules Committee. Complaining that the FEC officials who audited his books "didn't know one thing about the law,' Delaney questioned the wisdom of congressmen appropriating money for the sake of investigating themselves. Delaney's violations turned out to be minor, and his case was closed without a fine. But not long afterward, Congress stripped the FEC of the right to conduct the audits. To spare themselves the tedium of explaining the complexities of this issue to their constituents the House administration committee made the decision by voice vote.

Since then, Congress has continued to neuter the agency through budget cuts. At about $12 million a year, the FEC weighs in with one of the lightest budgets of any regulatory agency. Since 1980 its staff has been cut by 13 percent, even as the total number of PACs and campaigns it oversees has doubled. Under Gramm-Rudman its budget is likely to shrink by nearly $1 million next year.

Congress also enjoys considerable sway in choosing the FEC's six commissioners--three Democrats and three Republicans--since the president nominates the commissioners from a list provided by senators of the party whose seat is open. Zealots obviously will not go to the head of the class. Finally, the secretary of the Senate and the clerk of the House are ex officio members of the commission and keep an eye on matters that may affect Congress. As a result, the FEC is particularly timid about confronting incumbents. And since Democrats and Republicans are both guilty of violating FEC rules, neither party is interested in turning FEC timidity into a campaign issue.

Plenty of regulatory agencies are and have been heavily influenced by the industries they oversee. That's bound to occur even with a reform-minded government, because the people who make up the industry are capable of organizing on their own behalf. But there may be no other agency or commission that is so perfectly dependent on the group it regulates--the Congress--as the FEC. Until voters demand more vigorous enforcement, an FEC fine will continue to provoke little more anxiety than a traffic ticket.