May 14, 2018: This story has been updated.
The impact of the decision — which could have implications for how precisely political committees such as President Donald Trump’s re-election campaign and the Democratic National Committee have to detail their spending — will rest on how the FEC chooses to apply it, several campaign finance experts said.
“This could help the FEC be more aggressive about requiring specific and actual reporting of the use of campaign funds and limiting the use of subvendors,” said Larry Noble, general counsel of the Campaign Legal Center and a former FEC general counsel. “However, the FEC could also look at this and say it’s a unique situation involving a clear scheme to hide the use of the funds.”
FEC Chairwoman Caroline Hunter, a Republican, could not immediately be reached for comment on the impact of the decision.
The decision Friday involved three staffers from the 2012 presidential campaign of Ron Paul, R-Texas. The Paul staff members — Jesse Benton, John Tate and Demetrios Kesari — were convicted in 2016 of charges connected to $73,000 in payments to an Iowa state senator who, in exchange for the money, switched his Republican presidential primary endorsement from former Rep. Michele Bachmann, R-Minn., to Paul shortly before the Iowa caucuses.
The three men made the payments to the state senator, Kent Sorenson, via a third-party video production company. The court said the video production company payment was really a ruse designed to hide the fact that the campaign money was destined for Sorenson, who last year began serving prison time stemming from his bribe acceptance.
Lawyers for Benton, Tate and Kesari argued that the law, and FEC precedents, don’t prohibit a campaign paying a vendor who then pays a subcontractor, even if campaign finance reports only show the name of the original vendor. Prosecutors said it was illegal to hide the purpose of the payments, which were described as “audio/visual expenses,” when they were really made in exchange for Sorenson’s endorsement, and the circuit court’s opinion said that was a factor.
A three-judge panel of the 8th U.S. Circuit Court of Appeals in St. Louis upheld the district court, saying there was “ample evidentiary support” to do so.
Brett Kappel, a political law specialist at the law firm Akerman, said the decision was striking because it affirms prosecutors’ ability to use the statute prohibiting falsification of records in campaign finance cases, and that law carries longer sentences.
He called it “a powerful new tool for their toolbox. The Justice Department may also be more inclined to pursue these type of FEC prosecutions if the longer sentences will have a deterrent effect.”
Political committees — including campaigns — are required to itemize disbursements and publicly disclose vendors and the purpose of expenses. Previous FEC opinions have said campaigns don’t have to list subvendors. But government and political watchdogs, including the nonpartisan Campaign Legal Center, have said that should change.