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As the election season progresses, the opportunities for companies to get in trouble increase. Candidates ask for help raising funds, employees have more questions about becoming involved in campaigns, use of the corporate jet for political purposes gets tricky, and so-called issue ads start receiving more scrutiny. Moreover, several critical regulations have been revised recently. In the issue-ad area, for example, the definitions of “electioneering communications” and “coordinated communications” were changed within the past year. The need to stay within the rules is more important than ever. The U.S. Department of Justice Web site is chock-full of press releases touting public-corruption prosecutions completed or under way. In some instances, the goodie given to the public official was campaign support (whether for a re-election committee, a leadership political action committee, or a party committee). In April, the Justice Department announced a new initiative to target campaign-finance violations. This came after a January announcement that the FBI had dedicated 200 more agents to public-corruption work. Meanwhile, even the notoriously timid Federal Election Commission has bared its fangs. In April, Freddie Mac was persuaded to pay a $3.8 million civil penalty for purportedly using corporate resources to subsidize several fund-raising events for federal candidates. The total improperly spent by the bank was less than one-twentieth of the penalty, so it is apparent that the FEC was focusing not on the amount of corporate resources spent but on the financial impact of the violation — the amount raised for the candidates using those resources. This turns relatively small technical violations into potentially major headaches for a corporation. Here are some other potential trouble spots. Helping candidates raise funds. The Freddie Mac case points out the necessity of identifying all costs that go into setting up a widely attended fund-raising event and ensuring that the corporation does not pay for any of them. The top in-house lobbyist for Freddie Mac claimed that he was personally paying the bulk of the costs for the event. But the FEC seemed to assume the corporation was contributing, at least indirectly. Although a public relations firm was retained to perform companywide government relations services, the FEC apparently believed that most of the firm’s fees went toward the fund-raising efforts at issue. If nothing else, this points to the need to carefully document precisely who is paying for what, so that an FEC investigation can be handled easily or avoided altogether. Also, the ban on corporate political contributions at the federal level contains a broad definition of “contribution” that includes gifts, loans, and advances of anything of value. This means that some estimate of “fair market value” for fund-raising services must be made, and a permissible source (e.g., the PAC, an executive, or the candidate) must be found to pay such costs. The FEC uses the arcane phrase “facilitating the making of contributions” to spell out what is prohibited in this area. For services such as providing a list of customers or vendors, arranging catering services, and directing company employees to help with invitations or organizing an event, the estimated costs have to be paid in advance of the activity. For other costs, such as the use of a reception room, company cars, or production services for invitations, after-the-fact reimbursement is allowed. A few calls to businesses that provide these services can yield a good-faith estimate of fair market value. There are some important exceptions to the harsh federal rules. If a solicitation is going to management employees only (“executive and administrative” personnel, in FEC jargon), the corporation may pay for solicitations and related event costs. Contributions may not be collected by corporate representatives, though. Have donors mail checks to the campaign or have a campaign representative present at the event to collect them. There are also ways to set up legally permissible plant visits, in which all company employees can meet with a candidate. Such visits cannot, however, entail fund-raising, and an equal opportunity has to be offered to other candidates who request it. Political activity by employees. If an executive wants to volunteer for a candidate’s campaign, the time spent can escape treatment as a corporate in-kind contribution if the executive has full discretion in setting his work schedule. For employees expected to work during set hours, the time spent volunteering during the work period has to be made up within a reasonable time. As for an employee’s use of office space, phones, computers, and other facilities of the employer for political purposes, the rules have long exempted “occasional” use for “individual volunteer activity.” “Occasional” means an amount of usage that doesn’t interfere with the employee’s regular work. Any increase in overhead — for instance, long-distance calls or supplies — has to be reimbursed to the corporation promptly. The FEC has created a “safe harbor” for usage that does not exceed one hour per week or four hours per month. The occasional-use rule applies only to individual volunteer activity. Use of corporate facilities by someone directed by a supervisor does not qualify. If an executive wants to use a personal residence for a federal candidate’s event, the value of using the home is not an in-kind contribution. Food, beverage, and invitation expenses adding up to $1,000 per election are exempt as well. If the executive has a spouse, this total could be $2,000. These outlays would not count against their $2,100-per-election contribution limit for the candidate. Use of the corporate jet. FEC regulation revisions in late 2003 have changed some practices in this area. For someone traveling on behalf of a candidate and using a corporate airplane, advance payment is no longer required, but the payment must be made within seven days of the start of the trip. Depending on whether travel is between cities with regularly scheduled first-class or coach service, the amount reimbursed must be either first-class or coach fare or charter rate. The new regulations specify all sorts of detailed record keeping that supposedly is the responsibility of the campaign, but the corporation has to provide much of the information (e.g., names of noncampaign travelers as well as the tail number, size, and make of the plane used). Of course, if all the travelers in question can be categorized as noncampaign travelers, the federal campaign-finance rules do not apply. But when House or Senate members or staff are involved, the congressional gift-and-travel rules pertain. The respective ethics committees have relatively clear guidance on their Web sites regarding the basic options. Issue ads. After years of drift, in which corporations were able to steer clear of election law restrictions by avoiding use of magic words like “vote for” or “defeat” in public communications, Congress in 2002 clamped down with the electioneering-communications restriction: Corporate funds may not be expended for radio and TV ads that clearly identify a candidate, run within 30 days of a primary or 60 days of a general election, and reach at least 50,000 people in the relevant electorate. The quandary for a corporation that wants to contribute resources to a grass-roots lobbying campaign is how to do it effectively in the face of the electioneering-communication ban. There are, however, viable options. First, there are ways to craft effective messages that do not refer to a particular candidate. A TV ad strongly and emotionally stressing the importance of getting “the Senate” to oppose S. 666, saying, “You might be surprised to find out which senators support this bad bill,” and then urging viewers to “call the Senate right now,” accompanied by the Senate telephone number, can be very effective. Such wording results in calls being routed to the caller’s own senator and, presumably, a dialogue about the senator’s position. Second, some of the most effective grass-roots lobbying efforts these days use the Internet, direct mail, phone banks, or newspaper ads. None of these means are covered by the federal electioneering-communication rule. Such corporate-paid messages still must steer clear of “express advocacy” and “coordinated communication” definitions, but this path is available to those with even moderately creative political advisers. State and local restrictions. Just when you think you’ve got a handle on the federal rules and all the relevant changes, you may need to learn state or local requirements. Many states have restrictions similar to those just described. More often than not, however, the degree of clarity found at the federal level is lacking. On the other hand, at the state and local levels there are more restraints on lobbyist contributions, restrictions on making donations during legislative sessions, and limits or prohibitions on “pay to play” contributions by those seeking government contracts. As at the federal level, state laws are in a constant state of flux. The last thing an in-house lawyer needs is a messy campaign-finance investigation, particularly one involving people with badges. Even picayune transgressions can drag on for years and generate bad press. Conducting a compliance review, developing internal controls, and training people to behave are critical. Don’t be the one who gets asked, “Why did you let this happen?”
Scott E. Thomas is of counsel in the Washington, D.C., office of Dickstein Shapiro. He served as an FEC commissioner from 1986 to 2006. This article originally appeared in Corporate Counsel , an ALM publication.

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