Federal Election Commission Main Page
FEDERAL ELECTION COMMISSION
Washington, DC 20463
September 26, 2005
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
ADVISORY OPINION 2005-11
Mr. Kenneth Batson
Treasurer
Friends of Duke Cunningham
P.O. Box 697
San Marcos, CA 92079
Dear Mr. Batson:
We are responding to your advisory opinion request on
behalf of Friends of Duke Cunningham, Representative Randall
"Duke" Cunningham's principal campaign committee (the
"Committee"), concerning the application of the Federal
Election Campaign Act of 1971, as amended (the "Act"), and
Commission regulations to the use of campaign funds to pay
legal fees and expenses incurred by Representative
Cunningham in connection with a grand jury investigation.
The Commission concludes that the Committee may use campaign
funds to pay for the legal fees and expenses incurred in
connection with the grand jury investigation and legal
proceedings that may arise from this investigation because
the investigation concerns allegations that are related to
Representative Cunningham's campaign activities or his
duties as a Federal officeholder and the legal fees and
expenses would not exist irrespective of Representative
Cunningham's campaign or duties as a Federal officeholder.
The Committee may also use campaign funds to pay for the
legal fees and expenses incurred in responding to the press
regarding the grand jury investigation and legal proceedings
that may arise from this investigation.
Background
The facts of this request are presented in your letter
received on August 3, 2005, and the attachments thereto, as
supplemented on August 10, 2005, and on Representative
Cunningham's official website.1
Representative Cunningham is the U.S. Representative
from the 50th Congressional District of California and is a
member of the Permanent Select Committee on Intelligence and
the House Appropriations Defense Subcommittee.
Your request states that the United States Attorney for
the Southern District of California recently convened a
grand jury "purporting to investigate matters related to
Representative Cunningham's conduct in office and campaign
fundraising." The grand jury subpoenaed testimony from
Representative Cunningham's Congressional staff, as well as
records from the files of his Congressional office. The
grand jury also subpoenaed records pertaining to
contributions to Representative Cunningham's campaign
accounts and the Committee's fundraising activities.
Although the details of the grand jury's investigation are
not public at this time, the media reports you submitted
indicate that the investigation appears to be based on two
principal allegations: (1) in November 2003, Mitchell Wade,
founder and president of MZM, Inc. ("MZM"), a Federal
defense contractor, purchased a house owned by
Representative Cunningham allegedly at a price above market
value, allegedly in order to support MZM's efforts to secure
defense contracts with the U.S. Department of Defense; and
(2) Mr. Wade allegedly allowed Representative Cunningham to
live rent-free on Mr. Wade's yacht for 13 months.
Questions Presented
1. May the Committee use campaign funds to pay legal fees
and expenses incurred by Representative Cunningham in
connection with the grand jury investigation and legal
proceedings that may arise from this investigation?
2. May the Committee use campaign funds to pay legal fees
and expenses incurred by Representative Cunningham in
responding to the press regarding the grand jury
investigation and legal proceedings that may arise from this
investigation?
Legal Analysis and Conclusions
Question 1. May the Committee use campaign funds to pay
legal fees and expenses incurred by Representative
Cunningham in connection with the grand jury investigation
and legal proceedings that may arise from this
investigation?
Yes, the Committee may use campaign funds to pay for
the legal fees and expenses incurred in connection with the
grand jury investigation and legal proceedings that may
arise from this investigation because the investigation
concerns allegations that are related to Representative
Cunningham's campaign activities or his duties as a Federal
officeholder, or both, and the legal fees and expenses would
not exist irrespective of Representative Cunningham's
campaign or duties as a Federal officeholder.
The Act identifies six categories of permissible uses
of contributions accepted by a Federal candidate. They are:
(1) otherwise authorized expenditures in connection with the
candidate's campaign for Federal office; (2) ordinary and
necessary expenses incurred in connection with the duties of
the individual as a holder of Federal office; (3)
contributions to organizations described in 26 U.S.C.
170(c); (4) transfers, without limitation, to national,
State or local political party committees; (5) donations to
State and local candidates subject to the provisions of
State law; and (6) any other lawful purpose not prohibited
by 2 U.S.C. 439a(b). See 2 U.S.C. 439a(a); see also 11 CFR
113.2(a) through (c).
Contributions accepted by a candidate may not, however,
be converted to "personal use" by any person. 2 U.S.C.
439a(b)(1); 11 CFR 113.2. Commission regulations define
"personal use" as "any use of funds in a campaign account of
a present or former candidate to fulfill a commitment,
obligation or expense of any person that would exist
irrespective of the candidate's campaign or duties as a
Federal officeholder." 11 CFR 113.1(g); see also 2 U.S.C.
439a(b)(2).
The Act and Commission regulations list a number of
expense categories that would constitute per se personal
use, such as household food items or supplies, clothing,
tuition payments, home mortgage, rent, and utility payments.
See 2 U.S.C. 439a(b)(2); 11 CFR 113.1(g)(1)(i). This list
does not include legal fees and expenses. The Commission
considers on a case-by-case basis whether specific, unlisted
uses constitute "personal use." See 11 CFR 113.1(g)(1)(ii).
Further, Commission regulations specifically provide a non-
exhaustive list of uses, including "legal expenses," that
are subject to a case-by-case examination. 11 CFR
113.1(g)(1)(ii). Accordingly, the Commission analyzes the
payment of legal fees and expenses on a case-by-case basis
under 11 CFR 113.1(g)(1)(ii)(A).
The Commission has previously concluded that any legal
fees and expenses incurred in legal proceedings involving
allegations concerning the candidate's campaign activities
or duties as a Federal officeholder would not exist
irrespective of the candidate's campaign or duties as a
Federal officeholder and therefore may be paid for with
campaign funds. See Advisory Opinions 2003-17, 1998-1, 1997-
12, 1996-24, and 1995-23.
Here, you represent that Representative Cunningham will
incur legal fees and expenses associated with a grand jury
investigation involving allegations relating to
Representative Cunningham's campaign activities or duties as
a Federal officeholder, or both. According to the media
reports you submitted, the grand jury investigation appears
to focus on allegations that Representative Cunningham
obtained benefits (i.e., the sale of his house at an above-
market price and a rent-free stay on a yacht) from Mr. Wade
because of his status as a U.S. Representative and his
position on the Permanent Select Committee on Intelligence
and the House Appropriations Defense Subcommittee. Thus,
based on the representations made in your request and the
submitted news articles, the Commission concludes that the
legal fees and expenses associated with the grand jury
investigation would not exist irrespective of Representative
Cunningham's campaign or duties as Federal officeholder.
Accordingly, the Committee may use campaign funds to pay for
legal fees and expenses incurred in connection with the
grand jury investigation and legal proceedings that may
arise from this investigation.
Because the details of the grand jury investigation are
not public at this time, however, it is possible that
portions of the investigation could involve allegations not
related to Representative Cunningham's campaign activities
or his duties as a Federal officeholder. The use of
campaign funds to pay for Representative Cunningham's
representation in legal proceedings regarding any
allegations that are not related to his campaign activity or
duties as a Federal officeholder would constitute an
impermissible personal use. See Advisory Opinion 2003-17;
see also Advisory Opinion 1993-15 (determining that counts
within an indictment could be severed, depending upon
whether the counts were related to campaign activity).
Question 2. May the Committee use campaign funds to pay
legal fees and expenses incurred by Representative
Cunningham in responding to the press regarding the grand
jury investigation and legal proceedings that may arise from
this investigation?
Yes, the Committee may use campaign funds to pay for
the legal fees and expenses incurred in responding to the
press regarding the grand jury investigation and legal
proceedings that may arise from this investigation.
In the past, the Commission has determined that legal
fees and expenses incurred to respond to the press regarding
allegations that concern the candidate's campaign activities
or duties as a Federal officeholder would not exist
irrespective of the candidate's campaign or duties as a
Federal officeholder and therefore may be paid for with
campaign funds. See Advisory Opinions 1998-1, 1997-12.
Accordingly, Representative Cunningham may use campaign
funds to pay for the legal fees and expenses incurred in
responding to the press regarding the grand jury
investigation and legal proceedings that may arise from this
investigation.
The Commission notes that in the event that the grand
jury investigation involves allegations that are not related
to Representative Cunningham's campaign activities or his
duties as a Federal officeholder, the Committee may also be
permitted to use campaign funds to pay for certain legal
fees and expenses incurred in responding to press inquiries
and stories involving the grand jury and legal proceedings
arising from it. See Advisory Opinions 1998-1 and 1997-12.
In these Advisory Opinions, the Commission concluded that
for allegations that do not concern campaign or officeholder
activity, campaign funds may be used to pay for 100% of any
legal fees and expenses related to dealing with the press
such as preparing a press release, appearing at a press
conference, or meeting or talking with reporters. Campaign
funds may also be used to pay for 50% of any other legal
fees and expenses incurred in researching and preparing
substantive responses to the press regarding allegations
that do not concern campaign or officeholder activity.
In accordance with 11 CFR 102.9(b) and 104.11(b), the
Committee must maintain appropriate documentation of any
disbursements made to pay legal fees and expenses incurred
in connection with the grand jury investigation and legal
proceedings that may arise from this investigation,
including legal fees and expenses incurred in responding to
the press. See Advisory Opinion 2003-17. In addition, the
Committee must report all funds disbursed for such legal
fees expenses as operating expenditures, with the purpose
noted. 11 CFR 104.3(b)(2) and (b)(4)(i); Advisory Opinions
2003-17, 1998-1, 1997-12, and 1996-24.
The Commission expresses no opinion regarding the
application of state law and Federal tax or other law, or
the rules of the House of Representatives to the proposed
activities, because those questions are not within the
Commission's jurisdiction.
This response constitutes an advisory opinion
concerning the application of the Act and Commission
regulations to the specific transaction or activity set
forth in your request. See 2 U.S.C. 437f. The Commission
emphasizes that, if there is a change in any
of the facts or assumptions presented, and such facts or
assumptions are material to a
conclusion presented in this advisory opinion, then the
requestor may not rely on that conclusion as support for its
proposed activity.
Sincerely,
(signed)
Scott E. Thomas
Chairman
Enclosures (Advisory Opinions 2003-17, 1998-1, 1997-12, 1996-
24, 1995-23, and
1993-15)
_______________________________
1 http://cunningham.house.gov/