FEC penalties plummet even as campaign spending hits record high

Introduction

As outside spending to influence elections soared in 2010, the federal agency charged with enforcing election laws handed out some of the smallest penalties in its three-decade history.

The Federal Election Commission levied less than $1 million in fines this year to election scofflaws, a far cry from the $6.7 million in civil penalties in 2006.

Experts said the low output resulted from internal politics that deadlocked the six-member regulatory body and from a landmark Supreme Court ruling that gutted campaign finance laws and opened the spigot for massive corporate and union spending in the 2010 election.

“Court decisions have changed the rules of the game,” said Paul Ryan, an attorney at the Campaign Legal Center, a nonpartisan group that generally favors stricter enforcement of campaign finance laws. “There is now a smaller universe of illegal activities.”

A current commissioner, Republican appointee Donald McGahn, attributes the decline to the FEC paying more attention to compliance and prevention.

“In the past, the commission used to be like the police officer at the bar, waiting for a drunk driver to get in the car and drive away, then arrest them for drunk driving. I’d rather be the cop at the door taking the keys. You don’t have to let people gets themselves in big trouble before fixing the problem,” McGahn told the Center for Public Integrity.

The FEC slapped penalties on 108 cases in 2006, 252 in 2007, 104 in 2008, 248 in 2009, and 34 in 2010.

Some cases that might have drawn penalties in the past were resolved instead through dispute resolution, a form of mediation. That applied to 51 cases in 2006, 67 in 2007, 36 in 2008, 52 in 2009, and 39 in 2010.

A November report released by the FEC shows penalties for the 2010 fiscal year amount to only $860,000.

That is a sharp decline from 2006 fines totaling $6.71 million, which was more than double the amount of penalties in any other year in the agency’s history. “Our performance this year sends a strong message that while we will do our best to encourage voluntary compliance, we will also seek significant civil penalties when we uncover serious violations of federal election laws,” then-Chairman Michael Toner said at the time.

More than half of the 2006 fines came from a single penalty, $3.8 million paid by Federal Home Loan Mortgage Corporation (Freddie Mac), for using corporate funds and company resources to illegally contribute to political committees. Freddie Mac’s actions would have been illegal even under the U.S. Supreme Court ruling in January that opened the floodgates of corporate contributions to finance political ads.

“I would think the generalized confusion in the state of the law since January also impacted the enforcement process,” said former commissioner Scott Thomas, a Democratic appointee, referring to the Citizens United v. FEC ruling. Spending in the 2010 elections is estimated to have reached as high as $4 billion, a record amount even as FEC enforcement declined.

Thomas added, “There may also be a decrease in the number of complaints being filed simply because the FEC has gotten some press about just dropping cases that the staff has presented to the commission with civil penalties in hand. ”

Commission deadlocked in some cases

Another former commissioner attributed the decline to the court rulings as well as political splits among the FEC’s six commissioners. The FEC is evenly split between Democrats and Republicans.

“There were several who settled rather than going to court because of the costs of litigation. More recently there have been deadlocks on the commission and inability to agree on the proper level of fines,” said ex-commissioner Karl Sandstrom, also a Democratic appointee. “A good thing to look at is how many matters were actually pursued. I think most practitioners working in the area would say there’s been a big drop off.”

The Citizens United ruling said corporate funding of political ads in elections could not be limited under the First Amendment. The decision struck down a provision of the McCain-Feingold Act prohibiting unions and corporations from broadcasting political ads.

Addressing a complaint against Freedom Watch, Inc., the FEC set a new legal precedent by not requiring reporting of single donor sources. The complaint accused the political action committee of violating FEC disclosure laws when it aired a political ad but failed to identify donors. The FEC case was dismissed in August when the commission deadlocked, once again, on a 3-3 vote.

A statement released by the three Republican commissioners said that only funds donated for the explicit purpose of funding an ad must be disclosed.

The political split among the six FEC commissioners leads to frequent deadlocks because it takes four votes to conclude that the law was broken.

“We have complained about the increase in deadlocked votes at the FEC. There are some Republican commissioners with less of an appetite for enforcing the law than anyone in the agency’s history. With deadlocked votes, nothing happens,” Ryan said.