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Ruling May Open Finance Law Loophole

Lawmakers may soon be called in to patch up a hole in federal campaign finance laws after an obscure ruling on conduit contributions by a federal judge in California earlier this week.

U.S. District Court Judge S. James Otero on Monday threw out a case against Pierce O’Donnell, who was charged with making illegal campaign contributions to the presidential campaign of former Sen. John Edwards (D-N.C.). Some campaign finance experts believe the ruling is a precedent that will hamper the government’s ability to prosecute certain campaign finance violations in the future.

In documents, prosecutors alleged O’Donnell and an unindicted co-conspirator “solicited individuals, including employees of O’Donnell’s law firm, to contribute a total of over $10,000 in one year to EFP,’ an authorized political committee supporting the election of a candidate for the president of the United States.—

O’Donnell was charged with three counts, including violating a statute that says “no person shall make a campaign contribution in the name of another person or knowingly permit his name to be used to effect such a contribution.— O’Donnell was also accused of “knowingly and willfully— instructing another individual to make false statements, a charge he still faces.

While Otero did not throw out the charges alleging false statements, he did toss out charges involving the alleged conduit gifts, a decision that reverberated throughout the campaign finance community Tuesday.

Popular blogger Rick Hasen, a law professor at Loyola University in Los Angeles, wrote that “if this stands, Congress should act to amend the statute to make clear that conduit contributions are always illegal.—

“This adds uncertainty and will require prosecutors to be more creative in how they would charge people,— Hasen said in an interview.

Campaign finance lawyer Brett Kappel said on Tuesday that Otero’s decision “blows a humongous hole in the statue.—

“Unless it gets overturned or fixed,— Kappel said, “it’s the biggest loophole in the history of the statute.—

But George Terwilliger, O’Donnell’s lawyer, appeared to downplay the broad significance of the ruling, suggesting that prosecutors simply gambled and lost by opting to charge O’Donnell with a serious crime.

“The U.S. attorney’s office just overreached by trying to make his conduct a felony. If he had been charged with exceeding campaign contribution limits by the same $10,000 charged in the indictment, it would have been a misdemeanor offense,— Terwilliger said.

“This U.S. attorney’s office relied on what was just conventional wisdom in prior judicial opinions, not rulings on the issue presented in this case,— he added. “Making conduit contributions in excess of individual contribution limits is illegal, but conduit contributions are not banned generally.—

Prosecutors may decide to appeal Otero’s decision.

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