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Soft Money

How "Soft Money" Is Used to Violate the Federal Election Campaign Act (FECA)

Campaign finance is governed by complex rules and regulations designed to ensure transparency, fairness, and integrity in the electoral process. 

The Federal Election Campaign Act (FECA) heavily enforces these regulations, outlining the framework within which political campaigns and contributions must operate. 

Soft Money to Violate the Federal Election Campaign Act

However, despite these stringent guidelines, violations continue to arise, often involving the misuse of "soft money." While so-called "soft money" donations are largely unregulated, they can still be used in violation of FECA.

Federal campaign finance laws tightly regulate fundraising for political candidates and their action committees, including marketing activities. 

Any type of activity that falls under the umbrella of campaign finance fraud can be prosecuted. The political candidate and organizers found violating campaign finance laws can face severe civil penalties and even criminal prosecution.

Notably, numerous federal laws prohibit a wide range of practices in campaign finance. Anyone running for a political office must understand and follow these laws.

Also, it's a federal crime to knowingly prepare and submit a false campaign finance report to the Federal Election Commission.  Your first reaction may be bewilderment if you've been charged with federal campaign finance violations. This is because the United States campaign laws are so complex that many campaigns can violate them without even realizing it. Let's discuss this further below.

What is the Federal Election Campaign Act (FECA)? 

The Federal Election Campaign Act (FECA), enacted in 1971, marked a significant turning point in regulating campaign financing in the United States. This legislation was born out of a growing recognition of the need for greater transparency and accountability in the electoral process.

Initially, FECA primarily focused on requiring comprehensive campaign contributions and disclosure of expenditures. However, following the Watergate scandal in 1974, the Act underwent substantial amendments, introducing stringent limitations on contributions and expenditures and establishing the Federal Election Commission to enforce these rules. 

FECA prohibits corporations, labor organizations, and foreign nationals from making contributions or expenditures concerning federal elections, among other provisions. 

It mandates strict limits on hard money donations to a specific candidate or committee, ensuring no single donor wields undue influence over the electoral process. Furthermore, FECA demands comprehensive disclosure of financial activities by campaigns and political committees, fostering a culture of accountability.

The FEC is tasked with monitoring campaign finance violations and implementing corrective actions. However, the advent of soft money has posed significant challenges to the FEC's oversight capabilities, highlighting gaps in the legislation that sophisticated political financiers have exploited.

What are the Campaign Finance Laws?

The FECA statutes were incorporated into Title 52 of the U.S. Code, which contains other laws relating to voting and elections.  Campaign finance is covered in Subtitle III, which has 46 distinct regulations, such as the following:

  • 52 U.S.C. 30101 – Definitions,
  • 52 U.S.C. 30102 – Organization of political committees,
  • 52 U.S.C. 30103 – Registration of political committees,
  • 52 U.S.C. 30109 – Enforcement. 

These laws define who may and may not organize a political committee, the rules under which they must function, and the enforcement proceedings under the FECA, which can be civil or criminal for knowing and willful violations.

Notably, FECA allows for the formation of PACs and Super PACs, in addition to candidate and party committees.  Each type of committee works slightly differently, but section 30102 explicitly states that all must have a treasurer who records all contributions and disbursements. 

Violations of these statutes could include several offenses, such as failing to record contributions or expenses properly, maintaining too much petty cash, and mentioning a particular candidate in a Super PAC ad. 

Criminal violations can result in sentences of one to five years in federal prison, and the defendant may also face steep fines. In civil FECA cases, the violator may face large fines and restitution and be barred from engaging in any campaign activity. 

What is the Difference Between "Soft Money" and "Hard Money?"

The difference between "soft money" and "hard money” primarily relates to where the money is given and how it is designated for use. Hard money refers to funds given directly to a candidate or campaign committee, strictly regulated by federal law regarding source and amount. 

In contrast, soft money refers to funds raised by political parties that are meant for "general party use" and not directly for supporting or opposing specific political candidates.

What are the Common Violations of Misusing "Soft Money?"

After the passage of FECA, soft money grew significantly after the 1970s as parties sought ways to fund their activities without the stringent restrictions placed on campaign contributions. 

This growth highlighted the loopholes in campaign finance laws, indirectly allowing substantial money to influence elections. Today, millions of dollars in "soft money" flow freely into political party coffers from high-value individuals and political action committees (PACs).

Federal Campaign Finance Laws

The political parties can spend this money as they see fit if it boosts voter turnout and does not support or oppose specific candidates. However, these lines often get blurred under a vague definition of boosting the vote.

Soft money profoundly undermines the intentions of FECA, so lawmakers passed the Bipartisan Campaign Reform Act (BCRA) of 2002 to ban the use of soft money. 

However, several Supreme Court decisions have since struck this law's key provisions, rendering it toothless. Thus, despite the stringent regulations of FECA, the misuse of soft money remains a prevalent issue and often crosses the line into legal violations. Here are some common ways soft money may be used to violate campaign finance laws:

Circumventing Contribution Limits

Entities may attempt to exert influence over the electoral process by funneling funds through channels not regulated by FECA, undermining the integrity of campaign finance laws.

Financing Issue Advocacy and Electioneering Communications

Soft money is often employed to fund issue advocacy and electioneering communications, bypassing restrictions on using hard money. This strategy can result in an influx of unregulated funds influencing federal elections, contravening FECA's principles.

Coordinating Activities Between Political Parties and Candidates

Another area of concern involves coordination between political parties and candidates, which could lead to the improper use of soft money in support of specific campaigns. Such actions blur the distinction between permissible and impermissible contributions, posing significant legal risks.

What are the Legal Consequences for Violating FECA with Soft Money?

Violations of FECA involving soft money can lead to serious legal consequences, including hefty fines, civil penalties, and, in some cases, criminal prosecution. The FEC's enforcement actions can range from audits and administrative fines to referrals to the Department of Justice for criminal investigation. 

Given all that's at stake if you or your organization are accused of FECA violations, it's essential to engage a federal criminal defense attorney with specific experience with the nuances of campaign finance laws. For more information, contact our federal criminal defense attorneys at Eisner Gorin LLP, which has offices in Los Angeles, California.

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