Federal Election Commission Main Page
June 18, 1990
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
ADVISORY OPINION 1990-8
R. Todd Johnson
Jones, Day, Reavis & Pogue
1450 G Street, N.W.
Washington, D.C. 20005-2088
Dear Mr. Johnson:
This responds to your letter dated April 30, 1990, requesting an
advisory opinion on behalf of The CIT Group Holdings, Inc. ("CIT")
concerning the application of the Federal Election Campaign Act of
1971, as amended ("the Act"), and Commission regulations to the
establishment and operation of a political action committee by a
corporation that is majority-owned by a foreign bank.
You state that CIT is a Delaware corporation and has its principal
place of business in New York. Directly or through its subsidiaries,
it provides financial services, including business financing and
leasing, consumer financing, factoring, and commercial financing.
From May, 1984, until December 29, 1989, CIT was a direct
wholly-owned subsidiary of Manufacturers Hanover Corporation, a
Delaware corporation ("Manufacturers"). You state that, in 1989, CIT
and its subsidiaries had net income of $126,156,000 and total net
assets of $10,145,350,000 from their operations. On December 29,
1989, Dai-Ichi Kangyo Bank Ltd. ("DKB"), a Japanese bank, purchased 60
per cent of the issued and outstanding stock of CIT from
Manufacturers. Manufacturers continues to own 40 per cent of CIT's
stock.
The Board of Directors of CIT is composed of six members appointed
by DKB, two members appointed by Manufacturers, and two members
appointed by CIT. Five of the six members appointed by DKB are
Japanese nationals. The remaining five Board members are all citizens
of the United States.
Prior to January, 1990, eligible personnel of CIT were solicited
for contributions to Manufacturer's separate segregated fund, the
Manufacturers Hanover Association for Responsible Government Fund.
CIT is considering the establishment of its own separate segregated
fund ("CITPAC") which would solicit the eligible employees of CIT and
its direct and indirect subsidiaries and make contributions to Federal
and state candidates.1/ You state that members of the Board of
Directors of CIT who are foreign nationals under the definition of 2
U.S.C. Sc441e "will abstain from voting on matters concerning CITPAC,
its activities and the selection of individuals to operate and
exercise decision-making authority with respect to the political
contributions and political expenditures of CITPAC." You state that
CITPAC would be "directed and controlled" by executive officers of
CIT, all of whom are United States citizens, and that "[t]hese would
be the only individuals with decision-making authority for CITPAC."
Finally, you state that CITPAC would solicit only personnel who are
U.S. citizens or are lawfully admitted for permanent residence.
You ask whether the establishment and operation of CITPAC under
the circumstances presented would violate
2 U.S.C. Sc441e.
The Act and Commission regulations prohibit foreign nationals from
making a contribution directly or through any other person, or making
an expenditure, in connection with an election to any political
office. In addition, it is unlawful to solicit, accept or receive a
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).
The term "foreign national" includes a "foreign principal" as
defined by 22 U.S.C. Sc611(b). 2 U.S.C. Sc441e(b)(1); 11 CFR
110.4(a)(4). 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 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
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1/ Because you have not asked whether CITPAC would be an
affiliated committee of Manufacturer's separate segregated
fund, and because the issue of affiliated committee status is
not implicated or necessarily raised by your Sc441e question,
the Commission does not address the affiliation issue in this
opinion. See generally 2 U.S.C. Sc441a(a)(5) and 11 CFR
100.5(g). See also 11 CFR 112.1(a)-(c).
(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 of
any state within the United States, with a principal place of business
within the United States, is not a foreign principal and, accordingly,
would not be a foreign national under 2 U.S.C. Sc441e. As a discrete
corporate entity organized under the laws of Delaware and with New
York as its principal place of business, CIT is not a foreign
principal and, therefore, may establish and operate a separate
segregated fund subject to certain conditions set out in your request.
In addressing situations involving the political committees of
domestic subsidiaries, the Commission has consistently sought to
ensure that foreign nationals do not make contributions in connection
with an election through the direction or control of a PAC. See
Advisory Opinions 1989-29, 1983-31, 1983-19, 1982-34, 1981-36,
1980-111, 1980-100, and 1978-21. The Commission subsequently
promulgated regulations affirming this conclusion at 11 CFR
110.4(a)(3).
A foreign national shall not direct,
dictate, control, or directly or indirectly
participate in the decision-making process of
any person, such as a corporation, labor
organization, or political committee, with
regard to such person's Federal or nonfederal
election-related activities, such as decisions
concerning the making of contributions or
expenditures in connection with elections for
any local, State, or Federal office or
decisions concerning the administration of a
political committee.
The Commission notes the reference in your proposal to the
decision-making process for CITPAC. The Commission conditions its
approval of your proposal not just on the basis that the members of
CIT's Board who are foreign nationals will abstain from voting on
matters concerning CITPAC and its activities, but also on the basis
that they will abstain from voting on the selection of individuals to
operate the PAC and exercise decision-making authority with respect to
PAC contributions and expenditures. These conditions are necessary to
ensure the exclusion of foreign nationals from direct or indirect
participation in the decision-making process related to the
administration and conduct of the committee.2/ The Commission also
conditions its approval upon your representation that individuals who
are foreign nationals will not be solicited for contributions to
CITPAC.3/ Advisory Opinions 1989-29, 1983-19, 1980-111, 1980-100, and
1978-21. See 2 U.S.C. Sc441e(b)(2).
This response constitutes an advisory opinion concerning the
application of the Act or regulations prescribed by the Commission to
the specific transactions or activities set forth in your request.
See 2 U.S.C. Sc437f.
Sincerely,
(signed)
Lee Ann Elliott
Chairman for the
Federal Election Commission
Enclosures (AOs 1989-29, 1983-31, 1983-19, 1982-34, 1981-36,
1980-111, 1980-100, and 1978-21)
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2/ This exclusion pertains not just to the CIT Board members,
but to any other foreign nationals, including shareholders
and officers. See Advisory Opinions 1980-100 and 1978-21.
3/ Of course, any solicitations for contributions must
conform with all other applicable provisions of the Act and
Commission regulations.