FEC’s renewed focus leads to quick settlements, bigger fines

The Federal Election Commission (FEC) has started to collect on its reestablished enforcement credentials, earning its third-biggest payment ever this past quarter.

The FEC has turned its full attention on 527 groups — so-called for their IRS status — and collected a $750,000 settlement this week from the Progress for America Voter Fund, a pro-Republican group that helped President Bush’s reelection bid in 2004. Altogether, the FEC reported this week $1.1 million in civil-penalty earnings for the first quarter.

{mosads}FEC watchers agree that the commission has become more aggressive, but some say it still has far to go.

Following years of criticism that it had more bark than bite, “there is no question that the FEC has dedicated more time and resources to enforcement actions,” said Joshua Zive, an election law attorney at Bracewell & Giuliani.

“It is a continuation of a fairly startling trend,” said Michael Toner, a former FEC chairman who is now partner at Bryan Cave LLP.

The agency began to signal its intent last year by collecting fines against some of the best-known 527s, like MoveOn.org’s Voter Fund and Swift Boat Veterans and POWs for Truth. Still, the FEC’s renewed enforcement efforts have left campaign finance watchdogs unimpressed.

“There has not been much consistency … on how these groups are being fined and why,” said Paul Ryan, associate legal counsel for the Campaign Legal Center (CLC). “Going through the FEC papers, there is no bright line rule but rather a mosaic of varying facts and circumstances that triggers political committee status for these groups.”

Echoing a 2004 decision, the commission refused again in 2006 to set specific rules for 527s. But in response to a lawsuit brought by the CLC and others, the FEC said it would take each case as it comes.

Calling the fines “a slap on the wrist” and “not adequately large enough,” Ryan said that this week’s settlement should have been greater, given that it involved “record-breaking campaign finance violations” in 2004.

But others point out that the FEC is broadening its focus beyond 527s to corporations, resulting in several speedy and large settlements in recent years.

As some see it, corporations may prefer the settlement option to expensive and lengthy litigation.

Large corporations and organizations “increasingly see reaching quick settlements as a smart business choice,” said Robert Kelner, head of the election and political law practice at Covington & Burling.

Kenneth Gross, a partner at Skadden Arps Slate Meagher & Flom, agreed on that point and noted that FEC cases “involving the use of corporate facilities and bundling in connection with fundraising was virtually unheard of until a few years ago.”

Under criticism for years over its poor enforcement, and faced with uncertainty over the Bipartisan Campaign Finance Reform Act (BCRA), the FEC may have found the right approach.

“When these political motivations are combined with campaign finance laws that are still relatively new as a result of BCRA, you have the right formula for big fines — an uncertain legal environment plus an administrative need to demonstrate effectiveness,” said Zive.

This week’s penalties indicate the FEC in 2007 will exceed last year’s total of $6.2 million, which in turn was more than double any previous year’s collection.

Eyeing the FEC’s enforcement push, some 527s have changed their tax status to “501c(4),” another nonprofit affiliation, to avoid disclosing their donor list and running the risk of FEC enforcement.

But Ryan points out another consequence: The groups that change their tax status will have to cut down on their electioneering outlays.

“If the same groups are engaging in the same political activities as they were in 2004, I would say by 2008 that they are going to not only have a campaign finance law problem, but a tax law problem too,” said Ryan.