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(incomplete)Q: What laws were broken by Richard Morgan and his North Carolina Republican Mainstreet Committee (NCRMC), in their coordinated campaign to reelect him and his legislative allies in 2004? A: The NCRMC was created as a federal "527" committee, also sometimes called a "527 political group." The press routinely reports that 527s are prohibited from coordinating their activities with any candidate or campaign, e.g., http://www.mooregop.org/ad_campaign_defends_morgans_cooperation_highlighted.html But it turns out to be more complicated than that. The actual wording of the provision in the federal statue defining such committees prohibits coordination with candidates for federal office, but contains no such prohibition of coordination with candidates for State and local office: http://www.law.cornell.edu/uscode/html/uscode26/usc_sec_26_00000527----000-.html (see 527(e)(5)(D) "Participation of Federal candidate or office holder") I am not a lawyer, but my conclusion is that Morgan & the NCRMC apparently did not, by their coordination, violate this federal law. (I presume that the federal law's intent was to let such matters be covered by State law.) But I examined Chapter 163, Article 22A of the NC General Statutes, and found several provisions which Morgan & the NCRMC apparently did violate. Note, however, that Article 22A (G.S. 163-278.5 through 168-278.40I) was significantly revised in the second half of 2004, and again in 2005. Both of those revisions were after the NCRMC concluded its advertising for Morgan et al. These are the bills which revised Article 22A in the second half of 2004 and in 2005: http://www.ncleg.net/Sessions/2003/Bills/House/HTML/H737v7.html http://www.ncleg.net/Sessions/2005/Bills/House/HTML/H1128v6.html I've been unable to find a complete on-line copy of Chapter 163 exactly as it read in early 2004, but here are links to the current version and the 2001 version, respectively: 2006: http://www.ncleg.net/EnactedLegislation/Statutes/HTML/ByChapter/Chapter_163.html (or here) 2001: http://web.archive.org/web/20011024235119/http://www.ncga.state.nc.us/statutes/statutes_in_html/chp1630.html (or here) (press ctrl-F and search for "Article 22A.") All the language in the current version about "electioneering communication" was added in late 2004, as was some of the language about "independent expenditures." Also, the 2004 revisions repealed G.S. 163-278.12A & G.S. 163-278.8(c), both of which you can read in the 2001 version of Chapter 168. But the language limiting contributions from federal political committees is unchanged, as is the language defining "political committees," and the language prohibiting corporate contributions to political committees. Here are some relevant sections, and how each one pertains to Morgan and the NCRMC. These are all provisions which were in effect in early 2004, when the Morgan/NCRMC violations took place: | G.S. 163-278.6(6), 163-278.6(9), & 163-278.6(9a) (definitions) | G.S. 163-278.6(14) G.S. 163-278.7(b) G.S. 163-278.7A G.S. 163-278.12A G.S. 163-278.13(a) G.S. 163-278.13(b) G.S. 163-278.14A G.S. 163-278.15 G.S. 163-278.19 G.S. 163-278.22 | G.S. 163-278.23 G.S. 163-278.27 G.S. 163-278.34 G.S. 163-278.35 G.S. 163-278.6(6) The terms "contribute" or "contribution" mean any advance, conveyance, deposit, distribution, transfer of funds, loan, payment, gift, pledge or subscription of money or anything of value whatsoever, to a candidate to support or oppose the nomination or election of one or more clearly identified candidates, [or] to a political committee... These terms include, without limitation, such contributions as labor or personal services, postage, publication of campaign literature or materials, [or] in-kind transfers... The term "contribution" does not include an "independent expenditure." G.S. 163-278.6(9) The terms "expend" or "expenditure" mean any purchase, advance, conveyance, deposit, distribution, transfer of funds, loan, payment, gift, pledge or subscription of money or anything of value whatsoever, whether or not made in an election year, and any contract, agreement, promise or other obligation, whether or not legally enforceable, to make an expenditure, to support or oppose the nomination, election, or passage of one or more clearly identified candidates, or ballot measure. Supporting or opposing the election of clearly identified candidates includes supporting or opposing the candidates of a clearly identified political party. The term "expenditure" also includes any payment or other transfer made by a candidate, political committee, or referendum committee. The special definition of "expenditure" in G.S. 163-278.12A applies only in that section. G.S. 163-278.6(9a) The term "independently expend" or "independent expenditure" means an expenditure to support or oppose the nomination or election of one or more clearly identified candidates that is made without consultation or coordination with a candidate or agent of a candidate whose nomination or election the expenditure supports or whose opponent's nomination or election the expenditure opposes. Supporting or opposing the election of clearly identified candidates includes supporting or opposing the candidates of a clearly identified political party. ... **** NOTE: One possible defense that could be offered by Morgan is that the NCRMC's activities were "independent expenditures." According to (9a), to qualify as an "independent expenditure" the NCRMC's activities must have been "without consultation or coordination" with Morgan and his campaign team. But that doesn't pass the laugh test. Since Morgan provably coordinated with the NCRMC, and told the press what the NCRMC was going to do before they did it, and publicly identified its plans as being his own, its expenditures were certainly not "independent expenditures" under NC law. See also G.S. 163-278.13(a), and (since the NCRMC was a federal committee) 11 CFR 109.21 (the federal definition of "coordination") G.S. 163-278.6(14) The term "political committee" means a combination of two or more individuals, such as any person, committee, association, organization, or other entity that makes, or accepts anything of value to make, contributions or expenditures and has one or more of the following characteristics: a. Is controlled by a candidate; b. Is a political party or executive committee of a political party or is controlled by a political party or executive committee of a political party; c. Is created by a corporation, business entity, insurance company, labor union, or professional association pursuant to G.S. 163-278.19(b); or d. Has as a major purpose to support or oppose the nomination or election of one or more clearly identified candidates. Supporting or opposing the election of clearly identified candidates includes supporting or opposing the candidates of a clearly identified political party. An entity is rebuttably presumed to have as a major purpose to support or oppose the nomination or election of one or more clearly identified candidates if it contributes or expends or both contributes and expends during an election cycle more than three thousand dollars ($3,000). |*** NOTE #1: It appears that the NCRMC was a "political committee" under NC law by virtue of both (a) and (d). (a) applies because the NCRMC was controlled by Morgan, McComas & Brubaker, all of whom were candidates at the time (Morgan was pulling the strings, but two of its three officers were McComas & Brubaker). (d) also applies since its purpose was (in Morgan's own words) to "support" his legislative allies and "protect" him. | However, I'm informed that the enforcibility of (d) is | in question due to a current court case. Also, the | term "expenditure" does not have its common dictionary | definition. It has the much narrower definition in | G.S. 163-278.6(9), which refers by implication | to G.S. 163-278.14A. **** NOTE #2: The legal presumption is that the purpose was to support or oppose the nomination or election of the candidates. The burden of proof is on Morgan et al to show otherwise. | However, I'm informed that this provision has been voided | by court decision. **** NOTE #3: In addition, it was reported in the press (Raleigh News & Observer, May 23, 2004) that, "Morgan has received an opinion from the state Board of Elections that his committee is not for political purposes." | It turns out, however, that the opinion letter from the | SBOE was not addressed to Rep. Morgan, but rather to Mr. | Rodger Knight. I have obtained the a copy of the letter | which Mr. Knight wrote to the SBOE to elicit that reply. | Mr. Knight's letter failed to mention that the NCRMC was | controlled by candidates Morgan Brubaker & McComas | (in fact, it failed to mention that the NCRMC had any | connection to any candidate), and it mischaracterized | the NCRMC's purpose, to try to get the SBOE opinion that | they wanted: that the NCRMC was not a "political committee" | under NC law. Even so, they didn't get quite the | opinion they wanted: the SBOE opinion contained two | significant caveats: | 1) "this advisory opinion assumes that all contributions | received and expenditures made will only be for the | production of... 'issue advocacy' ads. If this assumption | is incorrect, this advisory opinion will not be valid." | 2) "it should be noted that the Fourth Circuit decision | is presently under review by the United States Supreme Court. | ... If the ruling should be overturned, this advisory opinion | would be nullified." | It is my understanding that the Fourth Circuit decision is | still up in the air, but, because of the 12/10/2003 McConnell | decision, which upheld the use of contextual factors to | classify commmunication, the Fourth Circuit decision is | likely to be reversed. G.S. 163-278.14A. Evidence that communications are "to support or oppose the nomination or election of one or more clearly identified candidates." (a) Either of the following shall be means, but not necessarily the exclusive or conclusive means, of proving that an individual or other entity acted "to support or oppose the nomination or election of one or more clearly identified candidates": ... (2) Evidence of financial sponsorship of communications whose essential nature expresses electoral advocacy to the general public and goes beyond a mere discussion of public issues in that they direct voters to take some action to nominate, elect, or defeat a candidate in an election. If the course of action is unclear, contextual factors such as the language of the communication as a whole, the timing of the communication in relation to events of the day, the distribution of the communication to a significant number of registered voters for that candidate's election, and the cost of the communication may be considered in determining whether the action urged could only be interpreted by a reasonable person as advocating the nomination, election, or defeat of that candidate in that election. **** NOTE: I have only partial quotes from the NCRMC ads, such as this one: "It is because of strong leaders like Speaker Morgan [that] Republicans were able to shape a legislative agenda that focused on finding real solutions to real | problems." That doesn't use the examples of "magic words" | listed in the statute to advocate Morgan's reelection, but | it is obviously a statement which supports a candidate rather | than advocating any issues. Moreover, the law says that if the "course of action" which is being encouraged by the ad is unclear, the "contextual factors" should be considered. In this case, the contextual context makes it perfectly clear what the purpose was, and Morgan's own words to the Winston-Salem Journal, stating the purpose as "a Morgan protection plan," confirmed it, conclusively: the purpose was "to support or oppose the nomination or election of one or more clearly identified candidates." | However, I'm informed that the enforcibility of the | "contextual factors" clause is in question, due to a current | court case, though, because of the 12/10/2003 McConnell | decision, which upheld the use of contextual factors to | classify commmunication (per BCRA), when the dust settles | the "contextual factors" clause is likely to be upheld. | But even if it is not, the opening sentence of 163-278.14A(a) | clearly states that the enumerated tests in that section are | not an exclusive list of the ways for proving the purpose | of the committee and its ads. I contend that another conclusive | way of proving the purpose would be a public admission by the | candidate -- such as the boast that Morgan made to the | Winston-Salem Journal. G.S. 163-278.7(b) Each appointed treasurer shall file with the Board at the time required by G.S. 163-278.9(a)(1) a statement of organization that includes: ... (2) The names, addresses, and relationships of affiliated or connected candidates, political committees, referendum committees, political parties, or similar organizations; ... (c) Any change in information previously submitted in a statement of organization shall be reported to the Board within a 10-day period following the change. **** NOTE: Morgan's campaign treasurer did not include the NCRMC as an "affiliated or connected committee" in his statement of organization for the Richard Morgan Campaign Committee. Neither did Brubaker's. Neither did McComas's. That's another violation, by each of them. Morgan and Brubaker were also required by law to report their connections with another political committee, called "Citizens for Honesty & Integrity" (which never paid a $2226 debt), but neither did so. G.S. 163-278.7A. Gifts from federal political committees. It shall be permissible for a federal political committee, as defined by the Federal Election Campaign Act and regulations adopted pursuant thereto, to make contributions to a North Carolina candidate or political committee registered under this Article with the State Board of Elections or a county board of elections, provided that the contributing committee does all the following: (1) Is registered with the State Board of Elections consistent with the provisions of this Article. (2) Complies with reporting requirements specified by the State Board of Elections. Those requirements shall not be more stringent than those required of North Carolina political committees registered under this Article, unless the federal political committee makes any contribution to a North Carolina candidate or political committee in any election in excess of four thousand dollars ($4,000) for that election. "Election" shall be as defined in G.S. 163-278.13(d). (3) Makes its contributions within the limits specified in this Article. ... **** NOTE #1: "Contributions" from federal committees such as the NCRMC are subject to NC's legal limits. This section makes it clear that being organized as a federal committee doesn't exempt them from the limits which apply to other political committees. **** NOTE #2: The NCRMC did not register as required with the SBOE, and did not comply with the SBOE reporting requirements. In fact, they filed no reports at all with the SBOE. 163-278.12A. Disclosure of spending for material that names candidates. (a) General Duty to Report. Any individual, person, political committee, or other entity that makes an expenditure for printed material or advertisements broadcast or distributed to anyone other than members of the entity shall report those expenditures in accordance with subsection (b) of this section if the printed material or advertisement names a candidate or names an individual whose prospective or potential candidacy is the principal purpose of a political committee. The disclosure requirements of this section do not apply to the following: (1) Material that is solely informational and is not intended to advocate the election or defeat of a candidate or prospective candidate; or (2) The owner of a newspaper, magazine, radio outlet, or television outlet, if that owner is not a candidate, political committee, or the parent entity of a political committee under G.S. 163-278.19. (b) Procedures for Reporting; Exceptions. Any political committee or other entity otherwise required by this Article to file reports with a board of elections shall include an expenditure described in subsection (a) of this section on those reports. Any entity not otherwise required by this Article to file reports shall report expenditures described in subsection (a) of this section to the State Board of Elections within 10 days after the aggregate expenditure has reached the lowest threshold amount set for candidates and political party committees in G.S. 163-278.10A. After the initial report, each entity shall report subsequent expenditures described in subsection (a) of this section according to the schedule set out in G.S. 163-278.9(a) or Part 2 of this Article, whichever is appropriate. (c) Definition. For the purpose of this section, notwithstanding G.S. 163-278.6(9), the term "expenditure" means any purchase, advance, conveyance, deposit, distribution, transfer of funds, loans, payment, gift, pledge, or subscription of money or anything of value whatsoever, whether or not made in an election year, and any contract, agreement, promise, or other obligation, whether or not legally enforceable. An individual or entity is deemed to have made an expenditure for printed material or advertisements if that individual or entity has agreed to compensate another individual or entity for purchasing such printed material or advertisements. (d) No Criminal Liability. No duty imposed by this section alone, and by no other law, shall be relied upon or otherwise interpreted to create criminal liability for any person. (1997- 515, s. 11(a).) | Note: 163-278.12A was repealed by Session Laws 2004-125, s. 4, | effective July 20, 2004. (But that was after the 2004 primary | campaign in which the NCRMC was active.) G.S. 163-278.13. Limitation on contributions. (a) No individual, political committee, or other entity shall contribute to any candidate or other political committee any money or make any other contribution in any election in excess of four thousand dollars ($4,000) for that election. **** NOTE: As a political committee under NC law, the NCRMC was prohibited by (a) from MAKING any contribution valued at more than $4000. But it spent $237,366 on behalf of a handful of legislative candidates. I contend that those expenditures were "contributions" under G.S. 163-278.6(6) ("such contributions as... publication of campaign literature"), and most of them were therefore illegal. G.S. 163-278.13. Limitation on contributions. (b) No candidate or political committee shall accept or solicit any contribution from any individual, other political committee, or other entity of any money or any other contribution in any election in excess of four thousand dollars ($4,000) for that election. **** NOTE: The NCRMC was prohibited by (b) from RECEIVING any contribution valued at more than $4000. But it received contributions of $100,000, $25,000, $15,000, $15,000, $12,000, $10,000, $10,000, $5000, $5000, $5000, and $4178: http://www.mooregop.org/CPI_527-North_Carolina_Republican_Main_Street_Committee-totcon-2004.xls G.S. 163-278.15. No acceptance of contributions made by corporations, foreign and domestic. No candidate, political committee, political party, or treasurer shall accept any contribution made by any corporation, foreign or domestic, regardless of whether such corporation does business in the State of North Carolina. This section does not apply with regard to entities permitted to make contributions by G.S. 163-278.19(f). **** NOTE: Nearly all of the contributions to the NCRMC were from corporations. Since the NCRMC was a "political committee" under NC law, accepting those contributions was illegal. (None of the corporations which contributed to the NCRMC were entities permitted to make contributions by G.S. 163-278.19(f).) G.S. 163-278.19. Violations by corporations, business entities, labor unions, professional associations and insurance companies. (a) Except as provided in subsections (b), (d), (e), (f), and (g) of this section it shall be unlawful for any corporation, business entity, labor union, professional association or insurance company directly or indirectly: (1) To make any contribution to a candidate or political committee (except a loan of money by a national or State bank or federal or State savings and loan association made in accordance with the applicable banking or savings and loan association laws and regulations and in the ordinary course of business) or to make any expenditure to support or oppose the nomination or election of a clearly identified candidate; ... (c) A violation of this section is a Class 2 misdemeanor. In addition, the acceptance of any contribution, expenditure, payment, reimbursement, indemnification, or anything of value under subsection (a) shall be a Class 2 misdemeanor. (g) If a political committee has as its only purpose accepting contributions and making expenditures to influence elections, and that political committee incorporates as a nonprofit corporation to shield its participants from liability created outside this Chapter, that political committee is not considered to be a corporation for purposes of this section. Incorporation of a political committee does not relieve any individual, person, or other entity of any liability, duty, or obligation created pursuant to any provision of this Chapter. To obtain the benefits of this subsection, an incorporating political committee must state exactly the following language as the only purpose for which the corporation can be organized: "to accept contributions and make expenditures to influence elections as a political committee pursuant to G.S. 163-278.6(14) only." No political committee shall do business as a political committee after incorporation unless it has been certified by the State Board of Elections as being in compliance with this subsection. **** NOTE: Both the NCRMC and the corporate contributors are guilty of Class 2 misdemeanors. G.S. 163-278.22. Duties of State Board. It shall be the duty and power of the State Board: ... (4) To make statements and other information filed with it available to the public at a charge not to exceed actual cost of copying. (5) To preserve reports and statements filed under this Article. Such reports and statements, after a period of two years following the election year, may be transferred to the Department of Cultural Resources, Office of Archives and History, and shall be preserved for a period of 10 years. ... (7) To make investigations to the extent the Board deems necessary with respect to statements filed under the provisions of this Article and with respect to alleged failures to file any statement required under the provisions of this Article, and, upon complaint under oath by any registered voter, with respect to alleged violations of any part of this Article. (8) After investigation, to report apparent violations by candidates, political committees, referendum committees, individuals or persons to the proper district attorney as provided in G.S. 163-278.27. **** NOTE: By filing complaint under oath to the SBOE, any registered voter can trigger a duty by the SBOE to investigate violations of Article 22A. G.S. 163-278.27. Criminal penalties; duty to report and prosecute. (a) Any individual, candidate, political committee, referendum committee, treasurer, person or media who intentionally violates the applicable provisions of G.S. 163-278.7, 163-278.8, 163-278.9, 163-278.10, 163-278.11, 163-278.12, 163-278.13, 163-278.13B, 163-278.14, 163-278.16, 163-278.17, 163-278.18, 163-278.19, 163-278.20, 163-278.39, 163-278.40A, 163-278.40B, 163-278.40C, 163-278.40D or 163-278.40E is guilty of a Class 2 misdemeanor. The statute of limitations shall run from the day the last report is due to be filed with the appropriate board of elections for the election cycle for which the violation occurred. (b) Whenever the Board has knowledge of or has reason to believe there has been a violation of any section of this Article, it shall report that fact, together with accompanying details, to the following prosecuting authorities: (1) In the case of a candidate for nomination or election to the State Senate or State House of Representatives: report to the district attorney of the prosecutorial district in which the candidate for nomination or election resides; ... **** NOTE: The SBOE is required by law to refer such violations to the DA, for prosecution. G.S. 163-278.23. Duties of Executive Secretary-Director of Board. The Executive Secretary-Director of the Board shall inspect or cause to be inspected each statement filed with the Board under this Article within 30 days after the date it is filed. The Executive Secretary-Director shall advise, or cause to be advised, no more than 30 days and at least five days before each report is due, each candidate or treasurer whose organizational report has been filed, of the specific date each report is due. He shall immediately notify any individual, candidate, treasurer, political committee, referendum committee, media, or other entity that may be required to file a statement under this Article if: (1) It appears that the individual, candidate, treasurer, political committee, referendum committee, media, or other entity has failed to file a statement as required by law or that a statement filed does not conform to this Article; or (2) A written complaint is filed under oath with the Board by any registered voter of this State alleging that a statement filed with the Board does not conform to this Article or to the truth or that an individual, candidate, treasurer, political committee, referendum committee, media, or other entity has failed to file a statement required by this Article. The entity that is the subject of the complaint will be given an opportunity to respond to the complaint before any action is taken requiring compliance. The Executive Secretary-Director of the Board of Elections shall issue written opinions to candidates, the communications media, political committees, referendum committees, or other entities upon request, regarding filing procedures and compliance with this Article. Any such opinion so issued shall specifically refer to this paragraph. If the candidate, communications media, political committees, referendum committees, or other entities rely on and comply with the opinion of the Executive Secretary- Director of the Board of Elections, then prosecution or civil action on account of the procedure followed pursuant thereto and prosecution for failure to comply with the statute inconsistent with the written ruling of the Executive Secretary-Director of the Board of Elections issued to the candidate or committee involved shall be barred. Nothing in this paragraph shall be construed to prohibit or delay the regular and timely filing of reports. The Executive Secretary-Director shall file all opinions issued pursuant to this section with the Codifier of Rules to be published unedited in the North Carolina Register and the North Carolina Administrative Code. |*** NOTE: The reason that the NCRMC sought an opinion from | the SBOE was to trigger the shield from prosecution in | this section: "If the [candidate or committee] rely on and | comply with the opinion of the Executive Secretary-Director | of the Board of Elections, then prosecution or civil action | on account of the procedure followed pursuant thereto and | prosecution for failure to comply with the statute inconsistent | with the written ruling of the Executive Secretary-Director of | the Board of Elections issued to the candidate or committee | involved shall be barred." However, since the information | which the NCRMC provided to the SBOE to elicit that opinion was | misleading and incomplete, the opinion rendered presumably | would not shield the NCRMC from prosecution. The most obvious | and blatant omission was the NCRMC's failure to disclose that | the committe was, per G.S. 163-278.6(14)(a), controlled by | a candidate. | (Note: 163-278.23 was modified by Session Law 2005-430, s. 8, | in 2005. But that was after the 2004 primary campaign in which | the NCRMC was active.) G.S. 163-278.34. Civil penalties. ... (b) Civil Penalties for Illegal Contributions. - If an individual, person, political committee, referendum committee, candidate, or other entity intentionally makes or accepts a contribution in violation of this Article, then that entity shall pay to the State Board of Elections, in an amount to be determined by that Board, a civil penalty and the costs of investigation, assessment, and collection. The civil penalty shall not exceed three times the amount of the unlawful contribution or expenditure involved in the violation. The State Board of Elections may, in addition to the civil penalty, order that the amount unlawfully received be paid to the State Board by check, and any money so received by the State Board shall be deposited in the Civil Penalty and Forfeiture Fund of North Carolina. **** NOTE: Treble damages, plus reimbursement to the State, plus costs of the investigation! For the NCRMC, since nearly all the contributions it received were illegal corporate contributions, that could come to as much as $900,000 plus costs of the investigation. G.S. 163-278.35. Preservation of records. All reports, records and accounts required by this Article to be made, kept, filed, or maintained by any individual, media, candidate or treasurer shall be preserved and retained by the individual, media, candidate or treasurer for at least two years counting from the date of the election to which such reports, records and accounts refer. **** NOTE: Morgan and the NCRMC will be permitted to destroy their records from the 2004 primary election two years after that primary, on July 20, 2006.
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