Bundling Campaign Contributions Is Legal, but Carries Risks | A Question of Ethics
Q. I read about a recent court case where a lobbyist was sent to jail for arranging for a large group of people to make contributions to the campaign of Sen. Harry Reid, D-Nev. I had always thought that it was okay for someone to help organize a big group of campaign donors. Isn’t this known as “bundling,” and isn’t it legal?
A. Yes and yes. Bundling is a common practice and is, in fact, legal. But, the case you’re describing involved not merely bundling, but a more nefarious practice.
First, let’s talk about bundling. As you know, a bundler is someone who gathers campaign contributions from people within a particular organization or community and presents them to a campaign. Campaigns value bundlers for their connections and ability to drive large amounts of revenue. Broadly speaking, with some limitations, bundling is legal.
One of the reasons bundling can be important is because the law limits the amount of money an individual can contribute to a particular campaign. The idea is to prevent individuals from having undue influence over a candidate. In light of the limits, sometimes a supporter tries to help a candidate by encouraging other individuals to contribute to the candidate’s campaign. In 2007, Congress enacted legislation recognizing the practice of bundling, but requiring lobbyists who bundle contributions to make public filings disclosing the contributions they bundled.
None of this is at issue in the recent case you describe, in which a federal appeals court in Nevada upheld convictions of a Nevada man who did something much different than mere bundling. The case involved F. Harvey Whittemore, whom the court described as a “prominent attorney, developer, and lobbyist who has long been active in Nevada politics and political fundraising.” In 2007, Whittemore promised to raise $150,000 in contributions for Reid’s 2010 re-election, and told the campaign he would do so by a specific campaign finance filing deadline. Shortly before the deadline, the campaign still had not received any of the money Whittemore promised, and twice contacted him about it.
So far, so good.
Just days before the deadline, however, Whittemore gave $145,000 to 17 relatives and people he employed. Those who were single received $5,000, married couples received $10,000. Each individual recipient then contributed $4,600 to Reid’s campaign — the maximum amount permitted by law. Whittemore assembled the contributions and sent them all to Reid’s campaign, just beating the deadline.
Recipients of the money from Whittemore testified that he encouraged them to contribute to Reid’s campaign or, in some cases, actually told them the money he gave was intended to cover a contribution to the campaign.
This is not mere bundling. Rather, a jury in Nevada federal court concluded it is illegal circumvention of the limits on campaign contributions. Specifically, the court convicted Whittemore of violating the limits on his own campaign contributions as well as a statute that forbids making a contribution in the name of another.
The recent news about the case concerned the federal appeals court’s rejection of Whittemore’s appeal. While Whittemore’s attorneys made several arguments on appeal, a key one was that the money he gave to friends and employees was an “unconditional gift.” In short, the argument went, the transfers were gifts with no strings attached. As such, because the money became the recipients’ own money, and because Whittemore did not condition the gifts on any subsequent campaign contributions, he had not violated the campaign finance restrictions, even if he suggested that recipients consider making contributions.
The appeals court rejected the argument. It concluded that the key issue “is the source of the funds, regardless of the status of the funds under state property law at the time of the donation.” The jury had determined that Whittemore knew the named contributors were not in fact the “true source” of the contributions. Whittemore’s transfers of money to the recipients, the court said, amounted to “contributions” under federal law.
Whittemore was sentenced to two years in jail. Legitimate bundlers of campaign contributions need not worry about facing a similar fate. But, bundlers better make sure the money they are bundling is not really their own.
C. Simon Davidson is an attorney with the law firm McGuireWoods. Submit questions to email@example.com. Questions do not create an attorney-client relationship. Readers should not treat his column as legal advice.
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