Helpful Tips for Campaign Financing: Keeping Your Name Out of the News Alerts by Courtney Gabriele [1] and Hon. Alfonso Charles

Helpful Tips for Campaign Financing: Keeping Your Name Out of the News Alerts

Every day you are called upon to decipher, interpret and apply complex laws to the facts before you. You listen to arguments, read briefs, and possibly conduct independent research; but some of the most complex and ambiguous laws apply not to the cases before you, but to the way you get elected to the bench. The reality of Texas campaign finance law is that it is often so broad and convoluted it leaves well-meaning officeholders and candidates open to criticism, public scrutiny, and civil and criminal penalties.


An organization by the name of the Texas Ethics Advisory Board (TEAB) has provided a perfect example of how judges making good faith efforts to comply with campaign finance laws can come under fire. In recent months, TEAB has issued press releases containing allegations that local and state judges are not accurately reporting their campaign contributions and expenditures. The allegations range from improper use of campaign funds to failing to properly list the employer of a contributor. The TEAB is a General-Purpose Political Committee (GPAC) formed in April 2009 by Jim Jenkins of Spring, Texas, but many of the complaints the organization files with the Texas Ethics Commission (TEC) are by one of their members, William Elmer of Huntsville, TX. On The Texas Independent’s political website, Elmer was quoted as boasting, “‘I dare say, if you look at the TEC website, 40 percent of those rulings resulted from [TEAB] complaints.’“[2]


All judges understand that public scrutiny comes with the job and are prepared to handle attacks by media, opponents, and groups such as TEAB. However, in case you need a refresher, the following is intended to highlight some common mistakes judges make with campaign financing, as well as provide helpful tips for keeping your name out of the daily news alerts.


I.    Contribution Limits in General


            One of the keys to meeting campaign reporting requirements is being aware of the applicable contribution limitations. Under Section 253.155(b) of the Texas Election Code, a judicial candidate or officeholder may not knowingly accept political contributions from an individual (this does not apply to general-purpose committees) that in the aggregate exceeds the following limits:

A.  statewide judicial office: $5,000

B.  any other judicial office:

1.   $1,000 if population of judicial district is less than 250,000;

2.   $2,500 if population of judicial district is from 250,000 to 1,000,000;

3.   $5,000 if population of judicial district is more than 1,000,000.[3]

Under Section 253.157, a judicial candidate or officeholder may not accept a political contribution in excess of $50 from a person if:

A. the person is a law firm, a member of a law firm, or a general-purpose committee established or controlled by a law firm; and

B. the contribution when aggregated with all political contributions accepted by the candidate or officeholder from the law firm, other members of the law firm, or a general-purpose committee established or controlled by the law firm in connection with the election would exceed six times the applicable contribution limit under Section 253.155.[4]


Exception: The above restrictions do not apply to an individual who is related to the candidate or officeholder within the second degree by consanguinity.[5] However, contributions from in-laws do not fall under the exception and are subject to limits of §253.155(b).[6]


Be Careful: Contributions made by an individual’s spouse or child count as a contribution made by that individual.[7] Also ensure that you are aggregating contributions made by members of a firm correctly. A law firm is a “person” for purposes of the Judicial Campaign Fairness Act.[8] Thus, if a check is made on behalf of a firm, it cannot exceed the limits of Section 253.155(b). However, if contributions are made on behalf of individual members who are affiliated with the same firm, you can receive up to six times the limit of Section 253.155(b). For example, if you are a state district judge with a population over one million, you may not accept more than $50 from a member of a law firm if the contribution would cause the total accepted from members of that law firm to exceed $30,000 (six times the permissible amount under §253.155).[9] The common way that this occurs is where you receive the maximum contribution from six attorneys in the firm. Once you have reached the maximum amount allowed to that law firm, you cannot receive any addition contributions that can be attributed to the firm. See TEC’s Guidelines for Contributions From Law Firms. This also applies to a general purpose committee of a law firm.


Helpful Tip: If you realize that you have inadvertently accepted political contributions from individual members of a firm, or from the firm itself, that exceed the permissible amount, Section 253.155(e) allows you to return the excess amount by the last day of the reporting period or the fifth day after the contribution is received.

 

II.  Limits on Contributions Made to Other Candidates, Officeholders, and Political Committees


The Election Code also places limits on the political contributions that can be made to other candidates, officeholders, and political committees. Under Section 253.1611(a), a judicial candidate or officeholder or a specific-purpose political committee supporting or opposing a candidate may not contribute more than $100 in aggregate of his or her own political contributions to other judicial candidates or officeholders in one calendar year.[10] This $100 limit is per candidate. Also see Additional Limits on Judicial Candidate and Officeholder Political Contributions.

Note: None of the above prohibitions apply to personal funds. If you are making a political contribution using your personal funds, your contribution would be subject to the same restrictions of Section 253.155(b), supra.


III. Campaign Expenditure Limits


Furthermore, to avoid campaign reporting mistakes, candidates and officeholders must know the applicable limits on campaign expenditures set by The Judicial Campaign Fairness Act. Under §251.001(10) of the Election Code, a “political expenditure” includes both campaign and officeholder expenditures. TEC Rule § 22.33 provides that: (1) an officeholder expenditure is attributed to the next election in which the officeholder is a candidate that occurs after the expenditure is made; and (2) a campaign expenditure is attributed to the election for which the expenditure is made.[11] With this in mind, the voluntary limits on political expenditures are as follows[12]:

A.  $2 million for a candidate for a statewide judicial office;

B.  $500,000 for a candidate for chief justice or justice of a court of appeals if the population of the judicial district is more than 1 million;

C.  $350,000 for a candidate for chief justice or justice of a court of appeals if the population of the judicial district is 1 million or less;

D.  $350,000 for a candidate for a district court, a statutory county court, or a statutory probate court if the population of the judicial district is more than 1 million;

E.   $200,000 for a candidate for a district court, a statutory county court, or a statutory probate court if the population of the judicial district is 250,000 to 1 million;

F.   $100,000 for a candidate for a district court, a statutory county court, or a statutory probate court if the population of the judicial district is less than 250,000.


IV. Failure to Timely File Reports


A study of sworn complaints filed with TEC in 2008 listed the most common alleged violations and among them were violations of the requirements for the general content of reports, semiannual reporting, and opposed candidates reports.[13]


A.  Personal Financial Disclosure Statement. Not later than the 40th day after the date of the regular filing deadline for an application for a place on the ballot in the general primary election, an individual who is a partisan or independent candidate for an office as an elected officer shall file the financial statement required by this subchapter.[14] See also Filing Dates for Particular Circumstances.


            Helpful Tip: SB 1269 was passed last session that eliminated the necessity for the judges to report reimbursements for meals, lodging and transportation for judicial conferences on their Personal Financial Statements, which was originally required by the Texas Ethics Commission Advisory Opinion 484 issued in 2009.


B.  Semiannual Reports. Every officeholder or candidate must file semiannual reports of contributions and expenditures by January 15 and July 15 of each year.[15]


C.  Pre-Election Reports for Opposed Candidates. The filing authority must receive a report of contributions and expenditures by a candidate who is opposed by the 30th day prior to the election, and a second report on the 8th day prior to the election. See Expenditure Dates to be Included in Each Report. To be opposed, the candidate must have an opponent whose name is on the ballot. If opponent is a write-in candidate, the candidate is not considered opposed for the purpose of these reports.


Helpful Tip: For candidates and officeholders filing reports with the Texas Ethics Commission, exact filing due dates for the 2012 election can be viewed here: 2012 Filing Schedule. For candidates and officeholders filing reports with the county clerk or elections administrator, exact filing due dates for the 2012 election can be viewed here: 2012 County Filing Schedule.


Be careful: There are many ifs, ands, and buts relating to the filing of reports. If you are in a unique situation, make sure you do some research and determine whether you are required to file any additional reports. There are special requirements relating to runoff elections, candidates who do not intend to receive or spend more than $500 (modified reporting), officeholder reporting, opposed candidates who receive more than $1,000 within the 9 days prior to the election (special pre-election report), and ending candidacy requirements.[16]


Also Be Careful: The total amounts must be specific to that reporting period. You cannot have any “running totals” that span across numerous reporting periods.[17]


V.        Failure to Properly Report Contributions


A.  Properly Disclosing Contributor


1.   Corporations. In response to the Supreme Court opinion in Citizens United, Section 253.094 no longer prohibits political expenditures by corporations and labor organizations.[18] However, it does still prohibit political contributions. A contribution is a direct or indirect transfer of money, goods, services, or any other thing of value and includes an agreement made or other obligation incurred, whether legally enforceable or not, to make a transfer.[19] For example, it is a violation to hold a campaign fundraising event at a department store if that department store is incorporated. The use of their facilities would be an “in-kind” political contribution by a corporation in violation of Section 253.094.[20]


Exception: Receiving a political contribution from a professional corporation is permissible.[21]


2.   Employment. In the past, the TEC has found it permissible to report a contributor as self-employed, instead of reporting the name of the company or business that the contributor owns, if you can tell from the name of the business that it is owned by the contributor.[22] For example, if you receive a contribution from Sam Walton, you would not report that he is self-employed, but that he is owner-CEO or President of Wal-Mart. If you receive a contribution from John Doe who is a self-employed relator, then you could use self-employed.[23]


Helpful Tip: When in doubt, use the company or business name. For instances, in the example above regarding the realtor, it would be preferable if you used John Doe Reality instead of self-employed. For solo practicing attorneys, use the Law Office of John Doe instead of self-employed.


B.  “In-Kind” Contributions


Some in-kind contributions must be reported on campaign finance reports. See Example of In-Kind Contributions that Must Be Reported. On the other hand, not all in-kind contributions need to be reported. For example, if an individual performs personal services for which they are not compensated, you are not required to disclose the service as a political contribution.[24] However, personal services are an in-kind contribution and are still subject to the contribution limits of Section 253.155(b). For example, a campaign volunteer is making a contribution in the form personal services.[25] You are not required to report the volunteer’s personal services as a contribution in your finance reports, although you may if you want to. However, his or her services do count towards the individual limits of Section 253.155(b). This opens the door for questions such as how do you estimate the worth of each volunteer’s time and how do you keep track of hours? These are questions that cannot be readily answered. The more clear cut example that I was given by a staff attorney at TEC was that of a singer playing at a candidate’s fundraiser. If Kelly Clarkston agrees to play a concert for you and receives no compensation, then it would be an “in-kind” contribution for which you do not have to report. However, she would still be violating Section 253.155(b) because her time is conceivably worth much more than the individual contribution limits set forth in that section. In-kind contributions also count toward the expenditure limits of Section 253.168.


VI.       Failure to Properly Report Expenditures


A.  Description of Expenditure. A political expenditure for goods or services must describe the categories of goods or services received in exchange for the expenditure.[26]

1.   “A critical factor in determining whether the respondent sufficiently described the purposes of a political expenditure is the respondent’s level of involvement with the expenditure. For instance, if the respondent directed a political consultant’s activity by telling the consultant how to spend funds, the respondent would have been required to disclose the ultimate recipient as the payee and describe the purpose of the expenditure in more detail than ‘campaign services/expenses.’ On the other hand, if the respondent gave money to the consultant knowing that the consultant would pay other service providers but did not exercise discretion over the details of how the consultant made the payments, the respondent would comply with the law by reporting the payment to the consultant, and describing the purpose of the expenditure as being for ‘consulting or campaign services’ would be sufficient.”[27]


Helpful Tip: Review your recent filings to ensure that your descriptions are complete and accurate. If you feel that a description needs more detail, you can correct the report using form COR-C/OH. If you make the correct within 14 days of discovering the error and the error was in good faith, there will be no penalty.


Examples: TEC’s list of acceptable expenditure descriptions. This list is for illustrative purposes only and is not an exhaustive or an exclusive list.


B.  Description of to Whom Expenditure was Made. Same as with political contributions, spell out the full name. Even if you believe it is a recognized organization, spell it out! For example, reporting a political expenditure to “WCNAA” is insufficient because it is not the full name of the political committee and WCNAA is not a recognized acronym.[28] However, reporting a political expenditure to or “PVL-New Era” is sufficient because that is the full name of the political committee.[29]

 

VII.     Converting Political Funds for Personal Use


            TEC’s study of 2008 sworn complaints also listed improper reimbursement of personal funds as one of the most common allegations.[30]


  1. A.     Restrictions on Personal Use of Contributions.

Election Code § 253.035(a) prohibits a person who accepts a political contribution from converting the contribution to personal use; section 253.035(b) prohibits a specific-purpose committee that accepts a political contribution from converting the contribution to the personal use of a candidate, officeholder, or former candidate or officeholder. These prohibitions include the personal use of an asset purchased with the contribution and the personal use of any interest earned on the contribution.[31] 

 

“Personal use” means a use that primarily furthers individual or family purposes not connected with the performance of duties or activities as a candidate or holder of a public office.[32]


            For example, a candidate or officeholder could not use a political contribution to purchase a car solely for his private use or the use of his family members. Nor may a candidate or officeholder knowingly make a payment from a political contribution to purchase real property or to pay for the rental or purchase of real property from a person related within the second degree of consanguinity or from a business in which the candidate or officeholder (or a relative within the second degree) has more than a 10 percent interest or serves as an officer or board member.[33]


The TEC has issued advisory opinions addressing specific situations concerning the personal use of political contributions. A list these advisory opinions as of January 23, 2012, may be found on the TEC website. This link provides a brief description of some of the permissible and impermissible uses of political contributions addressed in the Commission’s Advisory Opinions


If you are in doubt, do not assume that the use if permissible; call the Ethics Commission Legal Division at 512-463-5800.


  1. B.     Restrictions on Reimbursement of Personal Funds.

Election Code § 253.0351(a) provides that a “candidate or officeholder who makes political expenditures from the candidate's or officeholder's personal funds may report the amount expended as a loan and may reimburse those personal funds from political contributions in the amount of the reported loan.” If the expenditures are not reported as a loan under Section 253.0351(a), then a candidate or officeholder who makes political expenditures from the candidate’s or officeholder’s personal funds may reimburse those personal funds from political contributions only if the expenditures were fully reported under Section 253.035(h). 


            Section 253.0351(c), which was added on July 19, 2011, effective September 28, 2011, provides that a “candidate or officeholder who deposits personal funds in an account in which political contributions are held shall report the amount of personal funds deposited as a loan and may reimburse the amount deposited as a loan from political contributions or unexpended personal funds deposited in the account. The reimbursement may not exceed the amount reported as a loan. Personal funds deposited in an account in which political contributions are held are subject to Section 253.035 and must be included in the reports of the total amount of political contributions maintained required by Sections 254.031(a)(8) and 254.0611(a).”

 

The TEC has adopted rules in Section 20.63 concerning reporting the use and reimbursement of personal funds[34] and in Section 22.19 concerning general restrictions on reimbursement of personal funds.[35] 

 

A recent Ethics Commission publication provides an explanation of these restrictions and reporting requirements when reporting expenses from personal funds.[36]

 

VIII.    Conclusion


If you found this article to be useful, be on the lookout for the next issue of In Chambers. It will feature an article addressing recent statutory and TEC rule changes relating to campaign financing.




[1] Courtney Gabriele received a B.S. in Political Science from Lamar University (2006) and J.D. from the University of Houston Law Center (2009). Honorable F. Alfonso Charles is presiding judge of the 124th District Court in Gregg County, Texas.

[2] Brendel, Patrick, Ethics allegations against Straus ‘absolutely’ meant to impact Texas House speaker’s race, The American Independent, Jan. 6, 2011,  http://www.americanindependent.com/164327/ethics-allegations-against-straus-absolutely-meant-to-impact-texas-house-speakers-race.

[3] Tex. Elec. Code Ann. § 253.155(b).

[4] § 253.157(a)(1)-(2).

[5] § 253.159.

[6] In the Matter of Melissa Goodwin, SC-3100385, Before the Texas Ethics Commission, Order and Agreed Resolution, 1-3 (2011); See also In the Matter of Debra Lehrmann, SC-311004125, Before the Texas Ethics Commission, Order and Agreed Resolution, 1-2 (2011).

[7] EAO No. 274 (1995). §253.158.

[8] EAO No. 342 (1996).

[9] EAO No. 274 (1995). §253.157.

[10] Tex. Ethics Comm’n, Campaign Finance Guide for Judicial candidates and Officeholders 16-17 (Rev. March 19, 2012); § 253.1611(a).

[11] Tex. Ethics Comm’n Rule § 22.33.

[12] § 253.168. See also Tex. Ethics Comm’n, Campaign Finance Guide for Judicial candidates and Officeholders 17-18 (Rev. March 19, 2012).

[13] Texas Ethics Commission, Most Common Sworn Complaint Violations, available at http://www.ethics.state.tx.us/whatsnew/Most_Common_Sworn_Complaint_Violations.pdf.

[14] Tex. Gov’t Code Ann. § 572.027(a).

[15] Supra, note 10, at 29.

[16] Id.

[17] In the Matter of Ruben George “R.G.” Bowers, Jr. SC-3110493, Before the Texas Ethics Commission, Order and Agreed Resolution, (2011); Tex. Elec. Code Ann. § 254.031(a)(6).

[18] I will address the legislative and TEC response to Citizens United in more detail in the next issue of In Chambers.

[19] § 251.001(2).

[20] Tex. Ethics Comm’n Rule §20.1(8). See In the Matter of Barbara E. “Barbie” Scharf-Zeldes SC-31007235, Before the Texas Ethics Commission, Order and Agreed Resolution (2012).

[21] Supra note 10, at 14.

[22] Telephone interview by Hon. Alfonso Charles with Tim Sorrells, Attorney, Texas Ethics Commission (Feb. 24, 2012)

[23] Id.

[24] § 254.033.

[25] Supra note 10, at 8.

[26] Tex. Ethics Comm’n Rule § 20.61(a)

[27] In the Matter of Barbara E. “Barbie” Scharf-Zeldes, at 4.

[28].In the Matter of Yvonne Davis, SC-2912294, Before the Texas Ethics Commission, Order and Agreed Resolution (2011).

[29] Id.

[30] Supra, note 10.

[31] Id. § 253.035(c).

[32]  Id. § 253.035(d).

[33] Tex. Elec. Code Ann § 253.038(a) and (a-1). Compare Texas Ethics Comm. v. Goodman, 2010 WL 323544 (Tex. App.—Fort Worth Jan. 28, 2010, no pet.).  

[34] http://www.ethics.state.tx.us/legal/ch20pI.html#20.63.

[35] http://www.ethics.state.tx.us/legal/ch22.html#%C2%A7%2022.19.

[36] http://www.ethics.state.tx.us/whatsnew/tips_personal_funds.html.