Pilfered Funds & The FCC’s Online Political Public File Rule: The Law Of Unintended Consequences

In recent months, a number of media buyers have had funds stolen from their bank accounts. Even after repeatedly opening and closing accounts to stop the theft, tens of thousands of dollars have been diverted to accounts across the country and across the world. Unfortunately, it would appear that the thieves are obtaining the media buyers’ account information from none other than the U.S. government through the FCC’s on-line political files. While we understand that the FCC may soon address this problem, there are steps that broadcasters and media buyers can take to minimize these risks.

First, here’s how the evil-doers are apparently accessing the bank accounts. As nearly every broadcaster knows, last year the FCC concluded its long running effort to have television stations place their local public file on the internet. As a part of the new rules, broadcasters affiliated with the top four national television broadcast networks in the top 50 DMAs are required to upload their political files to an FCC-maintained website. All other TV broadcasters must begin to upload new political files on July 1, 2014.

FCC rules require the following materials to be placed in the political public inspection file, and therefore on the Commission’s website:
 

1.     Requests for broadcast time made by or on behalf of a candidate for public office,

2.     An appropriate notation showing the disposition made by the licensee of the requests and,

3.     The charges made, if any, if the request is granted.

To show the disposition of the request, the file must among other things, include a schedule of the time purchased, the rates charged, and the classes of time purchased.

In the past, many broadcasters complied with these requirements by simply putting copies of the ad buy order and the payment check in their local public file. This minimized the time required for compliance and, in a pre-internet world, presented few risks.

When the new rule was under consideration, many broadcasters feared that they would have to spend precious time and resources inputting information into new electronic forms and performing other new tasks. The Commission assured these broadcasters that they would only have to post online the same materials they had previously maintained in the hard-copy local public file. To facilitate the process, the Commission website allows materials to be uploaded in PDF format without any filter or FCC review.
 

And with that, 20th century practices ran head-long into 21st century technology. Predictably, many broadcasters have taken the Commission at its word, and are uploading exact copies of the bank checks used for payment without any redaction. Thus, bank account numbers, routing numbers, and signatures are freely available online to the unscrupulous.
 

To be clear, the FCC has never taken the position that this type of sensitive financial information must or should be placed in the political file to comply with the Commission’s rule. We understand that the FCC will soon be posting an FAQ on its website highlighting this point. And we hope that the Commission disseminates this information widely among the broadcast community.

As a result of these recent events, we anticipate that broadcasters may see new provisions in their order placements and their agreements with media time buyers prohibiting them from posting buyers’ checks to the public file. Even without a specific request or contractual provision, broadcasters should refrain from including bank information in the political file as a general liability mitigation strategy. While it may require the expenditure of some time, a better practice is for broadcasters to provide a short summary of the information necessary to comply with the Commission’s political file rules.

While the online political file requirements do not apply to radio stations – at least not yet – these events are nonetheless instructive. Since members of the public are entitled to have copies of materials in a radio station’s file, it is good policy for the station to follow the same practice of providing a short summary of the required information and purging the file of copies of the checks used to pay for political advertising.

If you have any questions, please contact Gregg Skall and Jim Kahl of Womble Carlyle’s Broadcast and Political Law Teams.

For further information on political broadcasting requirements, you can download the Womble Carlyle political broadcasting manual at: http://www.wcsr.com/resources/pdfs/politicalbroadcastmanual.pdf

Think Globally, Contribute Legally

In today’s globalized world, U.S. subsidiaries of foreign corporations play a significant role in the U.S. economy. And it is common for foreign nationals to have lead roles in both U.S. corporations and the domestic subsidiaries of foreign entities. Companies whose business success requires engagement with federal, state and local lawmakers must understand the restrictions on political activity that apply to foreign national persons and entities. Missteps in this arena can lead to civil and criminal sanctions and damage to your organization’s reputation.

Federal law prohibits foreign national individuals and corporations from making political contributions to federal, state and local candidates and other political committees, including PACs. With regard to individuals, only U.S. citizens and lawful permanent residents (i.e., “green card holders”) can contribute to candidates and political committees. However, U.S. subsidiaries of foreign corporations can make state and local political contributions, where permitted by state law, provided that the contributions are not financed by the foreign parent and foreign nationals do not participate in decision making regarding the contributions. These U.S. subsidiaries can also establish and support a federally-registered PAC so long as the foreign parent does not finance PAC administration and safeguards are put in place to ensure that foreign nationals do not direct or manage the PAC’s activities.

Since indirect as well as direct contributions by foreign nationals are illegal, any contributions made by foreign nationals through intermediaries – by way of reimbursements, bonuses, or otherwise – will violate federal law. Also, third parties who knowingly solicit or accept foreign national contributions or provide “substantial assistance” in making or accepting foreign national contributions may face civil and criminal sanctions.

Opportunities do, however, exist for foreign nationals to engage in political activities that promote corporate objectives. In addition, to the avenues for corporate support by domestic subsidiaries noted above, the Federal Election Commission has recognized many ways that foreign national individuals can participate legally in the political process. For example, in a series of advisory rulings foreign nationals have been permitted on a voluntary basis to attend political fundraisers and speeches, distribute campaign literature, canvass voters, work on telephone banks, solicit contributions, and even serve as campaign staff members.

The FEC’s regulations in this area are complicated and the advisory rulings are fact specific. As a result, foreign corporations, their U.S. subsidiaries, and foreign national individuals are well advised to seek counsel prior to engaging in any U.S. political activity.

If you have any questions, please contact Jim Kahl or any of the other members of the Womble Carlyle Political Law team.