Court proceedings using front companies to mask political donations
On Friday, a federal appeals court panel heard arguments about the use of shell companies to conceal donations in a case that could affect super PAC disclosure in the 2020 election.
Utah businessman Steven Lund is helping the Federal Election Commission defend the dismissal of allegations that Lund and other wealthy donors used front companies to illegally hide their donations from action committees great politicians.
Lund, Chairman and CEO of Nu Skin Companieswas among several donors accused of breaking campaign finance laws by funneling millions of dollars to super PACs who supported Mitt Romney and Barack Obama in the 2012 presidential race. Shady companies were listed as donors in reports filed with the FEC, prompting watchdog groups to complain that the real donors were hidden.
Obscure corporate donors continue to be listed in reports filed by super PACS active in the current election, including groups supporting President Donald Trump.
Earlier this year, two Ukrainian Americans, Igor Fruman and Lev Parnas, were arrested and charged by federal prosecutors with illegally funneling $325,000 in 2018 to pro-Trump super PAC America First Action through a company called Global Energy Partners LLC. The Justice Department’s criminal case followed an FEC complaint filed by the nonprofit watchdog Campaign Legal Center, which also protested hidden super PAC donors Romney and Obama in 2012. .
A decision is expected in the coming weeks from the three-judge panel of the United States Court of Appeals for the DC Circuit that heard arguments on Friday. The panel includes judges Merrick Garland, David Tatel and Harry Edwards.
During the row, the judges repeatedly questioned FEC attorney Haven Ward about the commission’s discretion to dismiss enforcement complaints due to the impasse in the commissioners’ votes. Edwards criticized a 2018 ruling by a separate DC Circuit panel that said courts could not review the commission’s “prosecuting discretion” to drop cases. The FEC dropped the complaint about Lund in a deadlocked vote in 2016 despite a staff recommendation to pursue enforcement action.
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This “cannot be true,” Edwards said, because it is inconsistent with previous rulings that FEC enforcement decisions are reviewable and must be based on a strong legal rationale. “You have to give reasons and we can look into them.”
Lund and the two companies used to make political contributions, Eli Publishing LC and F8 LLC, intervened in the lawsuit “to defend the dismissal of the claims against them and to ensure that they would not be ensnared in the litigation proceedings. ‘execution of the FEC, with the associated cost and damage to their reputation’, according to a brief filed by attorney George Terwilliger and others with McGuireWoods LLP. Lund’s brief urged the appeals court to affirm a federal district court decision upholding the FEC’s “rational exercise of prosecutorial discretion” to drop the case.
A FEC attorney general’s report said there was ‘ample evidence’ Lund gave $2 million to the pro-Romney Restore Our Future super PAC through the two companies he controlled, though he was never officially listed as a donor in FEC reports.
The same would have happened with the 2012 contributions to another Republican super PAC, Freedom Works for America, by Richard Stephenson, founder of the health care company Cancer Treatment Centers of America. A FEC attorney general’s report found “reason to believe” that Stephenson gave Freedom Works $12 million through companies called Specialty Group Inc. and Kingston Pike Development LLC, but FEC commissioners became deadlocked over the opportunity to investigate the matter.
Another FEC complaint cited a $1 million contribution to Romney’s super PAC funneled through a company set up by Edward Conard, a former Romney business partner.
Meanwhile, rapper Prakazrel “Pras” Michel used a business he owned to funnel $875,000 to a pro-Obama super PAC, Black Men Vote.
Conard and Michel later acknowledged that they had made the contributions. Their contributions are no longer in issue in the case before the DC Circuit.
Michel was indicted last year in a criminal case prosecuted by the Justice Department alleging that the money for his contribution to Obama’s super PAC actually came from Low Taek Jho, a wealthy Malaysian businessman, raping the law against foreign campaign contributions. Michel has pleaded not guilty and is awaiting trial in federal court in Washington.
The case is Campaign Legal Center v. FEC, DC Cir., No. 18-5239.
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