Federal Election Commission dismisses complaint against rapper

Introduction

A divided Federal Election Commission has dismissed a complaint against rapper Pras Michel, a co-founder of the Fugees who funded a pro-Barack Obama super PAC in 2012.

A complaint filed last year by two campaign finance reform advocacy groups alleged that Michel had violated federal law by giving money to super PAC Black Men Vote through his company — known as SPM Holdings LLC — without disclosing that he was the source of the funds.

The super PAC spent $1.3 million during the 2012 election supporting Obama’s re-election. Since then, limited liability companies have increasingly been used to bankroll a range of liberal and conservative super PACs.

The FEC’s recent move, announced last week along with decisions in three other years-old cases involving super PAC donations from limited liability companies, shows how divided its six commissioners are on whether certain corporate vehicles are skirting political disclosure requirements.

The FEC’s three Democratic-appointed commissioners argued that Michel should be sanctioned for using his limited liability company to inject $875,000 into Black Men Vote during the fall of 2012 without identifying himself as the true source of the money.

But the commission’s three Republicans disagreed, as did the FEC’s office of general counsel.

The FEC’s Republican commissioners acknowledged that, “under certain circumstances,” LLC contributions to super PACs may violate the federal prohibition on giving money in the name of another donor.

But, they concluded, this case was not one of them.

Part of the reason why not? The FEC’s office of general counsel concluded that SPM Holdings LLC was “an active business entity” and “not merely a ministerial conduit or vehicle for transferring Michel’s contributions.”

Neil Reiff — a campaign finance lawyer retained by Michel, who had also donated $350,000 to Black Men Vote in the fall of 2012 in his own name — told the FEC that the rapper had used SPM Holdings LLC to make additional contributions because of “cash flow” reasons and “business convenience.”

In a letter to the FEC, Reiff called the complaint against Michel, which was brought by the Campaign Legal Center and Democracy 21, “baseless.” Reiff further argued that Michel was being used “as a pawn to conduct a public relations campaign” regarding the reform groups’ discontent with existing campaign finance laws.

Under what circumstances might a majority of the FEC’s six commissioners agree to a corporate LLC has been misused to violate campaign finance law?

It’s not exactly clear.

“The speech rights recognized in Citizens United would be hollow if closely held corporations and corporate LLCs were presumed to be straw donors — thus, triggering investigations and potential punishment — each time they made contributions,” wrote Republican commissioners Lee Goodman, Caroline Hunter and Matthew Petersen. “Because closely held corporations and corporate LLCs are constitutionally entitled to make contributions to super PACs, such contributions shall be presumed lawful unless specific evidence demonstrates otherwise.”

In the three other recently dismissed cases involving LLC donations to super PACs, the Republican commissioners voted against punishing the companies despite the fact that the office of general counsel urged the commission to find these contributors in violation of the law.

As in the case involving Michel, the Democratic-appointed commissioners supported sanctioning the donors in these three cases.

“Congress certainly did not intend for donors to be able to conceal their identities by routing their personal contributions through corporate entities,” wrote Commissioners Ann Ravel, Steven Walther and Ellen Weintraub. “The current law clearly prohibits contributors from using the names of LLCs to shield their identity from disclosure to the public.”

For decades, donors have been prohibited from making political contributions in the name of another person in order to evade contribution limits. Super PACs, which were created following the U.S. Supreme Court’s Citizens United v. FEC decision in 2010, are allowed to accept unlimited contributions from individuals, corporations and labor unions.

The fact that Michel was behind SPM Holdings LLC was first reported by the Center for Public Integrity last year.