By John O'Connor, The Herald (Rock Hill, SC), November 27, 2009

27 Nov 2009 // COLUMBIA -- State ethics laws have no rules regulating a state Republican plan to create a legal defense fund for election, ballot and candidate court issues.

That means the public won't know who is donating money to candidates, and there are no limits on how much money can be contributed to the fund.

S.C. Republican Party chairwoman Karen Floyd announced in September the party would begin collecting donations for a legal defense fund, a response, in part, to a libel lawsuit filed on behalf of Spartanburg Rep. Rita Allison. An anonymous mail piece sent to voters in Allison's district alleged Allison had an affair with Gov. Mark Sanford, for whom she worked as an adviser and legislative liaison.

But the GOP legal fund could raise issues under state ethics law, which requires candidates and public officials to disclose contributions, gifts or anything of value.

“There's certainly nothing in the Ethics Act about legal defense funds,” said Cathy Hazelwood, counsel for the State Ethics Commission, which interprets state ethics laws and provides candidates with guidance, by e-mail. “The question to my mind is whether the party is making an in-kind contribution to the candidate by providing money to them. I think the commission would need to weigh on this.”

Such legal funds have raised issues in other states, including New York, where lawmakers have proposed bills imposing contribution limits and requiring full disclosure of donors. Members of Congress are allowed legal defense funds, but the contributions are capped and must be disclosed in quarterly reports.

Floyd recognized the legal gray area but said the S.C. GOP would collect and spend legal donations through its operating account. Under state and federal law, the party must report all donations and expenses from its operating account quarterly. The party also has recruited attorneys to donate their time on legal issues, which Floyd said would be reported as in-kind contribution.

Floyd said the party intended the fund to be a straight-up proposition.

But, she said, it's the job of the state party to support candidates, which includes ensuring voting laws are enforced, making sure all legal votes are counted and backing up a candidate attacked anonymously.

“The party chairman has a responsibility to elect great Republicans,” Floyd said. “If individuals are not seeking office because of the warfare, perhaps a legal trust fund can give a signal: ‘We're there for you.'”

It is unclear how many state-level parties have legal defense funds, but legal funds are common at the federal level, where ethics suits are a political tactic, said Stefan Passantino, an attorney with Washington, D.C.-based law firm McKenna, Long & Aldridge and an expert in ethics lawsuits. Passantino's clients have included former Republican U.S. House speakers Newt Gingrich of Georgia and Dennis Hastert of Illinois.

“Both sides of the aisle were using the ethics process as a weapon with some effectiveness,” Passantino said.

“That is a trend that has become exponentially more prevalent. Many states are passing laws barring pay to play gifts to public officials,” Passantino said, citing high-profile investigations in Illinois, New Jersey and New York.

Former Alaska Gov. Sarah Palin cited mounting ethics claims against her as one reason she stepped down from office this year. Likewise, Sanford has accumulated a yet-to-be-determined amount of legal bills defending himself from ethics charges regarding his travel and campaign spending.

Under state law, Sanford can tap his $1.5 million campaign account for his legal bills, but has not said whether he will.

Many lawsuits have a political basis, Passantino said, making it appropriate for a party to defend its candidates.

But Melanie Sloan, executive director of D.C.-based Citizens for Responsibility and Ethics in Washington, said residents should be wary of politicians creating slush funds for wealthy or corporate donors under the guise of legal need. Sloan said S.C. residents should demand contribution limits and disclosure rules similar to those required of federal candidates.

“The public should want to see if there is a link, if there is one, between donors and favors,” Sloan said of legal donations.

Carol Fowler, chairman of the S.C. Democratic Party, said Democrats have no plans to create a legal defense fund.

“I'm hoping to avoid legal expenses,” Fowler said. “I don't know of abuses."

She said it's not clear why S.C. Republicans are even creating a fund.

State Ethics Commission attorney Hazelwood said that under current state law, any regulation of legal donations likely would require a ruling from the nine-member commission.