Federal Election Commission Main Page
December 19, 1989
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
ADVISORY OPINION 1989-29
Edean S. Hayashida, Chairman
GEM Political Action Committee
GEM of Hawaii, Inc.
1199 Dillingham Boulevard
Honolulu, Hawaii 96817
Dear Mrs. Hayashida:
This responds to your letter dated August 9, 1989, as
supplemented by letters dated November 7 and November 27, 1989,
requesting an advisory opinion on behalf of GEM of Hawaii, Inc. ("GEM"
or "the company") concerning the application of the Federal Election
Campaign Act of 1971, as amended ("the Act"), and Commission
regulations to the political activities of GEM and GEM Political
Action Committee ("GEM PAC" or "the committee").
You state that GEM is incorporated in the state of Hawaii and its
principal place of business is in that state. It is a wholly-owned
subsidiary of a Japanese corporation. The company has three
directors, two of whom are Japanese nationals. The president and
chief executive officer, who is also a director, is an American.
According to a letter from GEM's vice president and treasurer, the
company derives its revenues from merchandise sales and other related
ventures in Hawaii.
You state that GEM has a political action committee "which is
comprised of employees who are U.S. citizens and residents of the
State of Hawaii." You explain that the administrators and managers of
GEM PAC and the other employees comprising GEM PAC are U.S. citizens
and residents of the State of Hawaii. Neither the Japanese directors
nor any other foreign national participates in decision-making as to
where contributions should be directed or in the administration of the
committee in any way. You further state that GEM is the source of the
funds for the committee for administration and solicitation expenses
and for contributions made by the committee to candidates or political
party committees. The committee proposes to make contributions in
Federal, state, and local elections.
You ask whether contributions by GEM are lawful and whether GEM
PAC is "the proper vehicle" for the making of such contributions. You
also ask the Commission to state how GEM may otherwise make
contributions if the responses to the first two questions are in the
negative.1/
The Act and Commission regulations prohibit contributions and
expenditures by corporations in connection with an election for
Federal office. 2 U.S.C. Sc441b(a); 11 CFR 114.2. Therefore, GEM
itself is prohibited from making contributions to candidates for
Federal office or to committees supporting Federal candidates. From
the information presented by you, it appears that GEM is the only
source of funds for contributions made by g/EM PAC and proposes to
essentially make corporate contributions through the committee to
Federal candidates or political committees. Because corporate
contributions are prohibited in Federal elections whether made
directly or indirectly, GEM PAC may not make contributions or
expenditures to influence a Federal election campaign. Cf. Advisory
Opinions 1989-20 (prohibiting contributions to non-Federal candidates
by a domestic subsidiary from the funds of its foreign parent) and
1980-7 (permitting a state-chartered corporation to make contributions
in non-Federal elections provided that it is not merely an
instrumentality of its Federally chartered parent).
Because you have indicated that GEM and GEM PAC also propose to
make contributions in state and local elections your request raises an
issue as to the application of 2 U.S.C. Sc441e. That provision
prohibits foreign nationals from making contributions directly or
through any other person, in connection with an election to any
political office. In addition, it is unlawful for any person to
solicit, accept, or receive any such contribution from a foreign
national. 2 U.S.C. Sc441e(a); 11 CFR 110.4(a)(1) and (2). As defined
in the Act, the term "person" includes a corporation or a committee.
2 U.S.C. Sc431(11). Unlike most of the other provisions of the
Act, Sc441e applies to any election for any political office, includin
state and local offices as well as Federal offices. According to 2
U.S.C. Sc441e(b)(1), the term "foreign national" includes a "foreign
principal" as defined specifically by 22 U.S.C. Sc611(b). Section
611(b) defines a "foreign principal" as including:
(1) a government of a foreign country and a
foreign political party:
(2) a person outside of the United States, unless
it is established that such person is an
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1/ In your letter of August 9, you refer to contributions
made in the past by GEM "through a political action
committee," and your question appeared to pertain only to the
legality of those past contributions. The Commission may
not issue an advisory opinion as to the lawfulness of past
activity, but may only address a specific transaction or
activity that the requestor "plans to undertake or is
presently undertaking and intends to undertake in the
future." 11 CFR 112.1(b). This opinion, therefore, will
address only prospective transactions or activities of GEM or
GEM PAC.
individual and a citizen of and domiciled within
the United States, or that such person is not an
individual and is organized under or created by
the laws of the United States or of any State or
other place subject to the jurisdiction of the
United States and has its principal place of
business within the United States; and
(3) a partnership, association, corporation,
organization, or other combination of persons
organized under the laws of or having its
principal place of business in a foreign country.
Under 22 U.S.C. Sc611(b), a corporation organized under the laws o
any state within the United States whose principal place of business
is within the United States is not a foreign principal and,
accordingly, would not be a foreign national under 2 U.S.C. Sc441e.
Hawaiian statutory sections pertaining to "Election Campaign
Contributions and Expenditures" permit corporate contributions up to
$2,000 per election for state and local candidates. HRS ScSc11-191(18
and 11-204(a).2/ As a discrete entity incorporated under the laws of
Hawaii with its principal place of business in that state, GEM falls
outside the definition of foreign national.
Section 441e, however, also prohibits contributions by a foreign
national through any other person. GEM has stated that its revenues
are derived from the operations of its stores in Hawaii. This
situation is distinguishable, therefore, from the situation presented
in Advisory Opinion 1989-20 where the Commission prohibited
contributions by a real estate development company that was
predominantly funded by a foreign national parent, and whose projects
were not yet generating income; the Commission concluded that
contributions were being made, in effect, by the parent through the
domestic subsidiary. See Advisory Opinion 1985-3. Additionally, in
order to comply with Sc441e, GEM must ensure that neither the foreign
national parent, nor any other foreign nationals, including directors,
officers, or other personnel of your company, participate in any
decisions by GEM to contribute to GEM PAC or to other committees or
campaigns for state or local office. Advisory Opinions 1985-3 and
1982-10. The Commission concludes, therefore, that, subject to the
conditions set out, GEM itself may contribute to state and local
campaign committees and to GEM PAC to the extent permitted by state
and local laws.
In its present operation, GEM PAC is not a separate segregated
fund of GEM, but merely a vehicle through which GEM proposes to
contribute to candidates. You have also asserted that GEM PAC is
comprised of and administered solely by non-foreign nationals. Based
on the conditions permitting GEM to make a contribution and on the
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2/ The Commission notes, however, that Hawaiian election
provisions cannot allow a corporation to engage in activity
that is barred by 2 U.S.C. Sc441e.
administration of the committee, the Commission concludes that GEM PAC
may contribute to state and local candidates to the extent permitted
by state and local law. Advisory Opinions 1983-31, 1983-19, 1982-34,
1981-36, 1980-111, 1980-100, and 1978-21.
GEM, as a discrete, non-foreign national entity, may establish a
separate segregated fund pursuant to 2 U.S.C. Sc441b(b)(2)(C) and 11
CFR 114.5 and may solicit voluntary contributions for the fund from
GEM's executive and administrative personnel and stockholders, and
their families, provided that no solicitee or contributor to the fund
is a foreign national. Advisory Opinions 1983-19, 1980-111, 1980-100
and 1978-21. See also Advisory Opinion 1977-53. The fund, in turn,
may make lawful contributions to Federal candidates, to political
committees, and to the extent permitted by state and local law, to
non-Federal candidates. The decisions and administration of the
separate segregated fund are subject to the same restrictions set
forth above with respect to contributions by GEM and GEM PAC in state
and local elections.
This response constitutes an advisory opinion concerning
application of the Act or regulations prescribed by the Commission to
the specific transaction or activity set forth in your request. See 2
U.S.C. Sc437f.
Sincerely,
Danny L. McDonald
Chairman for the
Federal Election Commission
Enclosures (AOs 1989-20, 1985-3, 1983-31, 1983-19, 1982-34,
1982-10, 1981-36, 1980-111, 1980-100, 1980-7,
1978-21, and 1977-53)
P.S. Chairman McDonald and Commissioner Thomas voted against approval
of this opinion and will file a dissenting opinion at a later date.