From Justia
Samuel Estreicher and David Moosmann
Posted in: Election Law
With the December 2018 sentencing of Michael Cohen—President Trump’s long-time personal lawyer and “fixer”—has come a renewed interest in the president’s exposure to liability for campaign finance violations. Some commentators have suggested that these violations of the Federal Election Campaign Act (FECA) could form the predicate for a bill of impeachment against the president. It may be too soon, however, to pop the champagne corks, for at least with respect to the $130,000 “hush” payment of adult film star Stormy Daniels, it is far from clear that the president has violated federal election law.
Reading the Justice Department (DOJ)’s sentencing memorandum for Cohen, we learn that while remaining formally employed by “Manhattan-based real estate company” (presumably, The Trump Organization), Cohen advised the Trump campaign and, acting at Trump’s direction, entered into a “confidential settlement agreement” with “Woman-2,” whom we now know to be Daniels. He did so, the government alleges, “with the intent to influence the 2016 presidential election” by preventing Daniels from making embarrassing statements about an alleged affair she had with the candidate. After making the payment, Cohen sought “reimbursement payments” which he received in the form of twelve payments of $35,000 over the course of the next year. The government believes that Cohen violated the law by making a campaign contribution in excess of the $2,700 cap permitted by law (11 C.F.R. § 110.1(b)(1)). However, notwithstanding Cohen’s pleas and sentence, the president’s liability under FECA is not clearly established.
As the debate has taken shape, there are two principal lines of argument for Trump—one focusing on the purpose of the expenditure and the second on the source of the money. As to the first, the argument is essentially that the payment to Daniels was a personal expense and thus did not constitute an expenditure or a contribution at all. Because expenditures and contributions alike must be made “for the purpose of influencing any election for Federal office,” 52 U.S.C. § 30101(8)-(9), monies paid for a different purpose—say, to avoid personal embarrassment or family hardship—would not fall within the ambit of the campaign finance laws. This is ultimately a factual issue, turning on whether Trump’s dominant purpose was to avoid embarrassment or to influence voters, and perhaps a legal issue (discussed below) as to whether actions undertaken with mixed motives—one personal and one to influence the campaign—can be actionable.
As to the second line of argument, which is the subject of our column, we focus on the fact that that the Daniels payment ultimately involved the president’s own money, which makes it doubtful that a campaign contribution or expenditure within the meaning of federal campaign law occurred in this case.
Personal Funds or Corporate Funds?
A threshold question is whether the funds paid to Cohen by the Trump Organization constituted Trump’s personal funds or whether they were corporate funds subject to the statutory prohibition on corporate contributions. The relevant provision, 52 U.S.C. § 30118, states that “[i]t is unlawful for . . . any corporation whatever . . . to make a contribution or expenditure in connection with any [federal] election.” The same prohibition is stated in the regulations at 11 C.F.R. § 114.2(b). Another provision, 11 CF.R. § 114.2(f)(1), prohibits corporations from “facilitating the making of contributions to candidates or political committees, other than to the separate segregated funds of the corporations. . . .” As Trump’s tax counsel has characterized it, The Trump Organization is a body of some 500 entities of which Trump is the “sole or principal owner” and which do business collectively as The Trump Organization (TO). While most of the businesses under the TO umbrella are “sole proprietorships and/or closely-held partnerships,” the organization itself is a limited liability corporation (LLC). If Trump is the sole or primary owner of the LLC, as he appears to be, then the funds of TO could be considered personal funds under the regulations of the Federal Election Commission (FEC), the independent agency tasked with administering the campaign finance law. A candidate’s “personal funds” are defined in 11 C.F.R. § 100.33 (a) to include income derived from “any asset that . . . at the time the individual became a candidate, the candidate had legal right of access to or control over” and with respect to which the candidate had either “legal and rightful title” or “an equitable interest.”
The reason that Trump’s reimbursement of Cohen’s payment to Daniels involved his personal funds is important is because a candidate can make unlimited contributions to and expenditures for his own campaign. This is in keeping with the central purpose of federal campaign finance law, as the US Supreme Court put it in Buckley v. Valeo, “to limit the actuality and appearance of corruption resulting from large individual financial contributions” from third parties to candidates for federal office. Thus, while a third party’s making a contribution to a federal candidate’s campaign is subject to...
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