Insights

Oreos and Campaign Debt

Thursday, May 26, 2016

This blog post was written by Steve Hoersting of The Gober Group, a noted author and litigator in the field of election law and campaign finance.

You’ve no doubt heard the quip made by presumptive Republican presidential nominee Donald Trump at a recent fundraiser, where he said, “I’m not eating Oreos anymore. Neither is Chris. You’re not eating Oreos[, are you, Chris]?”

The crowd of over 1,000 attendees might have thought Mr. Trump was needling New Jersey Governor Chris Christie for backsliding on a commitment to reduce his weight, but ABC News reports that the remark had nothing to do with the Governor’s diet. Rather, it was a reference to Trump’s distaste for the decision of cookie baker Nabisco to relocate jobs overseas.

But no talk of Oreos, diets, or outsourcing can explain the reason Trump placed himself behind a podium in New Jersey on the evening of May 20th. The reason was to raise the money needed to retire debts Chris Christie for President, Inc. incurred during Christie’s bid for President of the United States.

The fundraiser was reportedly a success—raising more than $200,000, or roughly four-fifths of the committee’s net debts outstanding.

But retiring campaign debt rarely happens this quickly, or so easily.

In the real world, unpaid debts trigger a rush to collect something—anything—for the creditors to a failing business or to a person headed towards bankruptcy. Collections agents call debtors’ phones or knock at doors, often seeking pennies on the dollar.

But the Federal Election Commission is not the real world. And where campaign debt is concerned, the FEC gets the real-world constructs completely backwards. First, the FEC presumes that investors, i.e. contributors, will throw good money after bad. Second, it presumes that no service provider to a campaign actually wants payment.

This can make the negotiation and settlement of campaign debts difficult—and FEC regulations counterintuitive.

To be fair, the FEC’s presumptions flow from law: Corporations cannot contribute a penny to a federal candidate’s campaign—not even after the Supreme Court’s opinion in Citizens United. So, from the viewpoint of the FEC, rendering services that ultimately go unpaid, to a federal campaign that unexpectedly goes bust, is a “loophole” that must be closed. Otherwise, goes theory, ad makers and television stations would happily write-off hundreds of thousands of dollars in services rendered in hopes of currying favor with a candidate.

There are scenarios where these presumptions make sense. But we at The Gober Group see regulatory nonsense daily—and can’t help having noticed that the campaigns least likely to repay debts are tied to the candidates least likely to win office and, therefore, least likely to grant official favors to anyone.

So how does the FEC frustrate debt negotiations and settlement, and what can you do to aid your committee should it face campaign debt?

Well, generally speaking, you should “keep your [contributors] close and your [creditors] closer.”

Explain to your previous contributors the predicament of your indebtedness and ask them to contribute where they can. Just know that contributions to pay down debt are still subject to dollar limits and source prohibitions.

Ask any employees the campaign committee owes unpaid salary expenses to consider listing that time as “volunteer time.” Legally speaking, there are circumstances where this will not result in a contribution to the campaign committee.

Realize that if you reach a point where the committee does not have the money to pay vendors for past performance, you will need the vendors, that is, your creditors (very often incorporated entities), to contact the FEC in writing to explain how their method of writing-down your campaign debt will be virtually the same process by which they write-down business debt, thus making the write-downs “commercially reasonable.” If you do not get this aid from your vendors, any write downs they make by way of a shorter, more logical process, become corporate contributions in the eyes of the FEC, which are strictly prohibited.

Such assistance from the vendors will need to take place within the context of a “debt-settlement plan,” filed by your committee with the FEC and ultimately approved by the FEC before your committee may terminate.

Finally, keep enough staff around to continue filing disclosure reports. Until your committee is terminated, you must keep the public apprised of the committee’s ongoing receipts and disbursements.

Dealing with debt, like staying off Oreos, is never easy. But your committee can handle campaign debts relatively painlessly by calling The Gober Group—whose professionals have learned, from repeated experience with the FEC, to take the lesson of real-world logic . . . and throw it out the window.