POLITICO Broke the Story, But Here’s the Breakdown on What Really Went Down With the Clinton-DNC Fundraising ApparatusWednesday, July 27, 2016
There has a been a lot of news lately surrounding the hack and release of thousands of DNC emails. Of the many stories, one surrounds the Clinton campaign’s joint fundraising committee (“JFC”) with the DNC and several Democratic state parties. Known as the Hillary Victory Fund, a few of those leaked emails suggest that the DNC was trying to hide the details of the JFC. Contrary to what they were implying, the state parties were only keeping a very tiny portion of the contributed funds.
If this seems a little confusing, it’s because JFCs are one of the more esoteric areas of campaign finance law. So, first a little background: Essentially, JFCs allow multiple political committees to join together to more efficiently raise funds from donors. Those committees can then have a single event or a single solicitation asking for a larger than normal contribution that is later distributed among the JFC’s members. That way, a donor does not need to write a bunch of checks to a bunch of committees. Instead, the donor can write one large check. Before a JFC is created, an allocation formula is created that each of the individual committees agree to, which describes how the funds will be distributed. For example: The first $1,000 will go to a campaign, the next $5,000 will go to a national party, and all the remaining funds will go equally to however many named state parties. A great deal of flexibility is allowed in setting this formula as long as it does not allow an individual to break a contribution limit to one of the individual committees.
As for the Hillary Victory Fund, it seems per those leaked emails that the DNC worked in overdrive to avoid public scrutiny over its allocation formula and how the funds were being handled. The Clinton campaign and the DNC persisted that the JFC was being used to help support 40 state parties, but in reality, that seems to be a little suspect. A recent analysis shows that, in actuality, only a fraction of a percent of the JFC’s funds were being kept by those state parties. Instead, filings with the FEC suggest that the money being distributed to the state parties were being sent right back to the DNC, which was doing all it could to help the Clinton campaign. Since the Hillary Victory Fund was created in September, state parties received approximately $7.7 million from the JFC, but within a few days of receiving those funds, $6.9 million was transferred by those state parties to the DNC.
This may seem a little odd, but state parties and national parties can transfer funds between each other without limitation at any time. So, it is not illegal for the state parties to receive funds from the JFC and then send them to the DNC. What is problematic is that the allocation formula, which donors must be shown, was seemingly just a pretext. What is worse is that what the Clinton campaign and the DNC were saying publicly about their JFC’s activities did not line up with how the funds were ultimately being treated. The DNC was claiming that the JFC was going to be used to help state parties, and presumably the allocation formula suggested as much, but in actuality all the funds eventually ended up in the coffers of the DNC. Though not illegal, it is certainly very embarrassing. The DNC and the Clinton campaign knew as much, and several emails released as part of the recent leak show DNC officials in a panic over this scrutiny.
In addition, these emails suggest that even more egregious and possibly illegal activity may have been occurring between the DNC and the Clinton campaign. Beyond normal interactions between a primary candidate and the national party, it appears the DNC had already become an arm of the Clinton campaign. That being true, it is possible that the DNC was already making coordinating expenditures on behalf of the Clinton campaign, which have so far gone unreported. Unlike the JFC issue, that would be a violation of FEC regulations. Future email leaks from the hack might show more on this subject, and thus be even more damaging.
Two lessons: First, although a JFC’s allocation formula does not have to be released to the public at large, a curious press will discover how JFC funds are treated. So, it is a good idea to have statements about the JFC jive with FEC filings. Second, you can never spend too much money on cybersecurity.
This blog post was written by Troy McCurry, an attorney with The Gober Group. Troy specializes in helping clients navigate the complex world of political law and government ethics regulations.