FEC members clash over family gifts

18 Dec 2009 // Democrats on the Federal Election Commission say that the commission’s GOP members have created a loophole in federal election law that would allow wealthy parents to essentially finance a congressional campaign by one of their children.

Two Republicans, Matthew Petersen and Caroline Hunter, say the FEC has failed to take a consistent position on the issue of gifts from family members to congressional candidates, and they signaled that they are unlikely to enforce existing regulations until the commission promulgates a new standard for such cases. Peterson will serve as the FEC’s chairman next year, it was announced Thursday.

A third Republican commissioner, Don McGhan, has abstained from voting on the case. Under FEC procedures, a majority of the six commissioners must vote to approve any official action, meaning that the commission is deadlocked.

“The commission’s past handling of enforcement matters involving monetary gifts from family members has been inconsistent, to put it charitably,” Petersen and Hunter said last week. “The commission’s contradictory approaches in past matters involving family gifts provide inadequate notice to the regulated community about what is permitted and what is not.”

The GOP statement provoked a sharp response from two of the Democratic commissioners, Eileen Weintraub and Cynthia Bauerly. They pointed out that the Supreme Court had ruled on this issue in 1976, and the FEC has regulations in place that cover it.

“There already is a regulation on the books governing this situation; we do not need to issue a new rule or policy statement to justify proceeding here,” they said.

The partisan dispute inside the FEC could affect Sen. John Ensign (R-Nev.), who is under fire for an affair he had with his former campaign treasurer.

An FEC complaint was filed against Ensign this summer by a watchdog group following the disclosure that Ensign’s parents gave $96,000 to the family of his former mistress, Cindy Hampton. The watchdog group, Citizens for Responsibility and Ethics in Washington, says that gift could be a violation of federal election law and, thus, a potential criminal act. Ensign has denied the money given to Cindy and Doug Hampton was a “severance payment,” saying it was an allowable gift from his family to the Hamptons.

At issue in the internal FEC battle is whether to fine James Feldkamp, a former Oregon GOP congressional candidate, for accepting a $75,000 gift from his mother during the middle of a campaign.

In 2004, Feldkamp was running against Democratic Rep. Peter DeFazio when he received a loan from his mother, Phyllis Feldkamp, of nearly $35,000. The FEC said the donation violated federal contribution limits and made the Feldkamp campaign return most of the money.

But two weeks later, Phyllis Feldkamp wrote a $75,000 personal check to her son from the same bank account as the original loan. James Feldkamp cashed his mother’s check, put the funds in his personal bank account and then donated the money — in his own name — to his campaign. Congressional candidates are allowed to loan their campaigns an unlimited amount of personal money for a House or Senate race.

Feldkamp lost the 2004 race by a large margin, but he challenged DeFazio again in 2006.

In March 2006, the Oregon Democratic Party filed a complaint with the FEC about the 2004 gift, asserting that the candidate’s personal financial disclosure form showed he wasn’t wealthy enough to loan himself $75,000. Oregon Democrats said Feldkamp “must have received money from another source in violation of campaign finance laws.”

The Feldkamp campaign countered that the money was a routine gift from mother to son, part of a pattern of gifts that had existed prior to his run for Congress and thus allowable under federal law. McGhan, then a Republican campaign lawyer and now the FEC commissioner who has recused himself from the case, represented the Feldkamp campaign before the commission.

Following an FEC investigation, the commission’s professional staff found “reason to believe” that Feldkamp had received an improper gift from his mother, a decision initially approved by the six-member FEC in December 2006.

However, in October 2008, Republican commissioners on the FEC reversed the earlier decision, and with McGhan abstaining , the commission deadlocked and was unable to determine that Feldkamp and his mother “knowingly and willfully violated” election laws. The case was then closed in Oct. 2008.

When the file on the Feldkamp case became publicly available in January 2009, both Democratic and GOP commissioners remained divided over what the case meant.

On Dec. 11, Petersen and unexpectedly issued a Statement of Reasons explaining their position in the Feldkamp matter, and pointing out that the FEC fined a candidate in 2003 over his handling of a gift from his family, but then declined to investigate a similar episode the following year.

Fred Wertheimer, president and CEO of Democracy 21, a campaign watchdog group, said the three Republican commissioners on the FEC “are blocking enforcement in every area.”

“It’s a complete rogue agency,” Wertheimer added. “These Republican commissioners have basically shut down enforcement at the agency, and it’s going to potentially affect any complaints that are sitting there, including [those against] Ensign or anyone else.”