The FEC and the Case of the LLC

March 10, 2016
posted by Bob Bauer

The Federal Election Commission’s job is hard, harder than many will admit, but the agency somehow manages to make it even harder. So now, five years after the fact, the FEC has decided not to investigate a donor’s alleged use of an LLC to mask a $1 million contribution to a Super PAC.  The word of the non-decision got out before any member of the FEC could explain it or any of the case materials were released.

So naturally the agency looks somewhat silly.  Some might and do ask: how could it be that the alleged establishment of an LLC to mask the true source of a large contribution isn’t even subject to an investigation?  And why would it take almost five years for that inconclusive result to be reached?  Maybe the case files once released, along with the explanations of the different Commissioners, will provide some answer to those questions.

The case did take an unusual turn in 2011 when the individual donor came forward, claimed that a lawyer had advised him that he could do this, and asked that the Super PAC amend its reports to disclose him as the true donor.  In other words: on the date that the complaint was filed and before the FEC began its review, the harm of the particular case was being redressed.  And presumably complicating matters was the donor’s contention that he acted on legal advice.

That did not mean, however, that the FEC could not have done something constructive with this episode – – like dismissing this peculiar case for lack of 5 votes to proceed, but clarifying the law or its position, based on the law, that donors cannot form LLCs or other entities to hide the true source of their contributions.  Instead news reports suggest that it dithered and then could not act, when the disclosure principle at stake here seems fairly clear.  The law provides an ample basis upon which to find –and should there have been any doubt, for the FEC to verify–that a contributor may not set up and then make a contribution through an LLC or other organization for the purpose of concealing her identity.

The Campaign Legal Center filed the original complaint and supplemented it with a letter to the Department Of Justice, calling also for a criminal investigation. CLC somewhat overdid things and that probably didn’t help.  It argued the indisputable disclosure point but also suggested that the contributor in forming and funding the LLC to make the contribution had established a “political committee” subject to full registration and reporting requirements.  Overkill, one might say.

There are difficult issues facing the FEC in addressing the issues raised by Super PACs.  The one presented in this case doesn’t rank very high on the scale of difficulty, and yet, so far, the FEC has managed to look as bad as possible in dealing with it.

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