On September 6, 2020, news broke that U.S. Postmaster General Louis DeJoy’s former company allegedly reimbursed its employees with corporate funds for donations that he asked them to make to federal and state political campaigns. If true, such “conduit” or “straw donor” contributions likely would have violated federal election law. The allegations against DeJoy arise in the midst of a contentious presidential election, where the Postal Service has received outsized scrutiny given the role it will play processing the record number of ballots that are expected to be cast by mail due to the ongoing COVID-19 pandemic. As we race toward another hotly contested presidential election this November, the allegations against DeJoy serve as a timely reminder to know and comply with campaign finance law. If your company is engaged politically and encourages employees to attend fundraisers and give to campaigns, it is especially important that your compensation program does not run afoul of campaign finance law or you may invite unwanted attention by Congress, the Federal Election Commission (“FEC”), the Department of Justice and state authorities.
Campaign finance laws vary substantially from state to state, but federal election law clearly limits the amount that can be given to certain candidates and campaigns and prohibits corporations from donating to individual candidate campaigns.1 The law also prohibits making campaign contributions in the name of another,2 as well as soliciting others to make campaign contributions on their own behalf and then reimbursing the donors for those contributions.3 Violations of these and other campaign finance laws are subject to civil enforcement by the FEC4 and, if the violation is willful and meets the dollar threshold for the particular offense at issue, could even result in a criminal prosecution.5
On Sunday, September 6, 2020, The Washington Post reported that Postmaster General DeJoy allegedly pressured employees at his former North Carolina-based company, New Breed Logistics, to make campaign contributions, and he then caused the company to make inflated bonus payments to those employees to cover the cost of their contributions.6 According to the Post’s report, between 2003 and 2014, New Breed employees — many of whom did not make campaign contributions before or after this period — gave over $1 million to Republican candidates.7 In the immediate aftermath of the news story, the U.S. House Committee on Oversight and Reform launched an investigation,8 which was followed the next day by another investigation being opened by the North Carolina attorney general.9
Campaign finance laws have been on the books for decades and federal and state authorities renew their efforts to prosecute wrongdoers each election year. The allegations against DeJoy echo several high-profile campaign finance cases where the defendants made illegal contributions through conduits in the past. For example, in May 2014, conservative author Dinesh D’Souza pleaded guilty to violating campaign finance laws by soliciting contributions to a candidate for the U.S. Senate from several associates and their spouses on the promise that he would reimburse them for the contributions.10 In March 2014, Washington, D.C. businessman Jeffrey Thompson admitted to causing over $3 million to be spent in illegal campaign donations, in violation of federal and D.C. campaign finance laws, including illegal conduit reimbursements that he processed through salaries, bonuses, advances, and consulting fees at his accounting firm.11 And in one famous case from 1974, former New York Yankees owner George Steinbrenner admitted to making illegal contributions to President Nixon’s re-election campaign and to channeling funds from his shipbuilding company to various political candidates by disguising the funds as bonuses to his employees.12
What This Means for You
It is perfectly natural to want to engage politically and to believe that one candidate may benefit you or your company over another. It is also perfectly legal to give money to a campaign in your individual capacity, provided you stay within the legal limits to do so. However, if your company’s employees feel pressured to give money or support candidates and they believe that their compensation may be tied to such decisions, then a company’s politics could have legal and even criminal implications. A number of precautions should be taken but, chief among them, employees must know that any donations they make are entirely voluntary and are in no way tied to compensation decisions or advancement within the company.
With less than 60 days until Election Day — in what promises to be another deeply divided and impassioned election season — companies should ensure their policies and procedures adequately address political contributions so they are in line with federal and state election law. Companies should also take time to ensure their compliance policies and programs are designed to prevent violations of campaign finance law. If you have a question or discover an issue, it is especially important to seek competent counsel who can advise you and your company to steer clear of any violation of federal or state election law.