Thursday, May 21, 2009, 2:17 PM

3-3 Votes On The FEC: Why So Frequent? What Do They Mean?

The Federal Election Commission has become the place where complaints go to die. In 2006 and 2007, FEC fines were skyrocketing, with several prominent 527 groups paying six-figure penalties and Freddie Mac paying a whopping $3.8 million for deploying corporate resources in support of fundraising activity. In the last year or so, most of the high-profile announcements have been dismissals. Even the investigations are few and far between, with the six-member panel repeatedly voting 3 to 3 on whether to authorize the staff to look into complaints.

What is going on and what does it mean?

Historically, the media and watchdog groups have cited 3-3 votes as evidence of Commission dysfunction. FEC statistics are a bit misleading on this point, but until recently such splits were quite uncommon. And while one could not discount partisanship as an influence in some of these cases, often the votes reflected genuine differences in ideology or disputes about whether the Commission was handling comparable cases in a consistent fashion. It should also be noted that while 3-3 votes have been justly criticized as creating uncertainty for the political community, such votes actually do resolve the immediate question before the Commission. Any time there are fewer than four votes to investigate, settle, or file suit, an enforcement action is terminated and the matter is dismissed.

On the other hand, Commissioners have sometimes made too much about the infrequency of 3-3 votes. Sure, most cases enjoy majority, if not unanimous support. But in a number of high-profile cases, the only way to lure a fourth vote to support going forward has been to allow the swing voter to establish the price tag on the case. In other words, the Commission will find a violation, but the penalty is so dramatically reduced that the pain is hardly felt.

So is anything different now? Yes and no. The current crop of 3-3 votes, while split along party lines, certainly cannot be characterized as protecting party members and loyalists. The three Democrats are repeatedly voting to proceed in these cases, while the three Republicans are voting to shut each matter down. In the current Commission, votes are cast regardless of whose ox is being gored.

But certain things are quite different now. Many of the stalemates depart from recent precedent in a wide range of important issues, such as regulation of political activity by 501(c) and 527 organizations, rules for candidates' testing the waters, coercion of campaign contributions, and liability for false reports stemming from embezzlement. In fact, statements issued recently by the Republican Commissioners give little deference to the FEC's determinations in prior enforcement matters and in many instances reflect a profound unease with using the Commission's investigative powers. There's also been a much sharper tone in statements released by both the Democratic and Republican sides that reveal a growing sense of frustration.

After a while, this kind of dynamic becomes self-sustaining. But roles can change, especially on a six-member body that can only function if there is compromise, or at least common ground. With three Commissioners currently "holding over" on expired terms, the President will probably make new appointments this year, and a new dynamic is likely to emerge. It would not surprise us to see a "new" Commission find agreement on a range of issues that are vexing the current body.


The Carlyle Group, a major private equity firm, agreed last week to pay $20 million and broadly reform its practices, ending an investigation of alleged "pay-to-play" practices and undisclosed conflicts of interest regarding New York’s public pension fund.

As part of the settlement, the Carlyle Group agreed to adopt a "Public Pension Fund Reform Code of Conduct," which is a model proposed by the New York Attorney General for interactions between investment firms and public pension funds. The Code limits campaign contributions to $300 from the investment firm, its principals and employees, and their families to candidates involved in pension fund oversight. Gifts to such officials are also prohibited, unless they are of only nominal value. The Code also prohibits the use of placement agents, lobbyists, or other intermediaries to interact with public pension funds to obtain investments.

The settlement may increase pressure on the Securities and Exchange Commission, which recently announced that it is considering rules to restrict campaign contributions by investment firms. The SEC proposal could come as soon as July.


Kentucky: Violating campaign finance laws can be a risky proposition for individuals and their employers. The Kentucky Attorney General's office recently released investigative records to the Courier-Journal of Louisville regarding a Kentucky man who pled guilty in early 2008 to engaging in a straw donor scheme. Philip Dufour, an employee of road-building company, Elmo Greer & Sons, gave cash reimbursements to his daughter, her friend, and six other individuals for contributions he requested they make to Democratic and Republican candidates for Governor. In addition to Mr. Dufour's felony plea, his employer had to pay the $250,000 cost of the AG's investigation.

Illinois: The recent proposals from the Illinois Reform Commission (see May 8 Political GPS) are making their way through the General Assembly. While some of the commission's proposals – such as limits on the time legislators can serve in leadership roles – are likely to fall by the wayside, consensus seems to be building to enact ethics and campaign finance reform this session. High on the list for reformers are proposed campaign contribution limits similar to those in federal races. In addition, a Joint Committee on Reform established by Senate President John Cullerton and House Speaker Mike Madigan is expected to propose reforms to augment the Reform Commission proposals. But time is running short, with this session scheduled to adjourn at the end of the month.

Tennessee: The Tennessee Ethics Commission has voted against penalizing lobbyists found to have violated the state's registration and reporting laws during random audits conducted in 2008. In conjunction with the vote, the commission released an internal memorandum from its General Counsel that argued against an "aggressive approach to regulation." The violations at issue included failure to register in a timely fashion and failure to accurately report lobbying compensation. While there was an adequate legal basis to seek a civil penalty, the GC felt that such actions would make "influential people mad" and ultimately lead to a weaker law.

By the Womble Carlyle Political Law Team

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