In a message to leaders of the Oregon House of Representatives, the State Council of the Oregon Progressive Party reiterated its absolute opposition to SB 270A, which remains in the House Rules Committee.  The bill would allow any candidate or political committee to avoid reporting any of its campaign contributions received during an entire month, upon payment of a single fine of only $5,000. It would destroy Oregon's campaign finance reporting system, allowing big money contributors to avoid disclosing their identities . . . ever.     Read more ...

I testified against this bill on March 28, 2011 (attached).  Its proponent, Kevin Neely, claims it is needed so that a very large fine cannot be assessed against a Treasurer who accidentally fails to report a single very large contribution, say $1 million.

Why SB 270A is Not Needed

First, Mr.  Neely's scenario is not realistic.  It includes the assumption that the treasurer does not know about the transaction until many days or weeks after it occurs, because somehow someone other than the treasurer received it and the treasurer did not know about it.  One wonders where the money went, in that scenario.  The treasurer should be cognizant of money deposited in the campaign's bank account.  In the current system the reporting requirement does not trigger, until the treasurer or the committee's bank account actually receives the money.  The 2011 Oregon Campaign Finance Manual (p. 28) states:

Contributions collected by an entity other than a committee, including connected organizations such as unions, associations or online contribution services, are considered received by the committee once the contributions are in the physical custody of the committee or are deposited in the committee’s campaign account, whichever is sooner.  Each contribution must be transferred to the committee within seven business days of its collection by the other entity.

If the contribution is in the physical custody of the committee or deposited in the committee's campaign account, it is reasonable that the treasurer would be responsible for reporting the contribution within the applicable deadline (30 days or 7 days after the date of receiving the contribution).

Second, Mr. Neely's scenario is already handled well by the current system.  The fine for non-reporting or late reporting of a transaction is 1/2 of 1% of the amount of the transaction for each day it is late, capped at 10% of the transaction.  See 2010 Oregon Campaign Finance Manual, p. 69.  This system provides a graduated penalty, so that mere mistakes that are quickly corrected do not incur large fines.  But it does sometimes provide for fines that exceed $5,000, because it is very important to obtain compliance with the reporting requirements for very large contributions.  And, of course, the current system does not have a limit on the fines that can be assessed upon a committee due to its failures to comply with the reporting requirements for an entire month (or any other period).

Third, the fines used to be much higher, as a percentage of the amount of the violation.  Prior to the 2010 cycle:

The penalty for a late transaction is 1/2% of the amount of the late transaction multiplied by the number of business days the transaction is ?led late, if the transaction is ?led no later than 30 calendar days after it was due. Beginning on the 31st calendar day after the transaction was due the penalty increases to 1% of the amount of the late transaction multiplied by the number of business days the transaction is ?led late. * * *

The maximum penalty for any late transaction is the amount of the transaction, not to exceed $10,000.

2008 Campaign Finance Manual, p. 74.  That means that the maximum penalty was 100% of any transaction of $10,000 or below and $10,000 on any violation in excess of $10,000.

Why SB 270A is Not a Rational Solution to the Alleged Problem

If the problem is the inadvertent failure to report a large contribution, the solution would be at most a cap on the fine for failing to report a single transaction, not an aggregate limit on the fines against any committee to cover all of its unreported transactions for an entire calendar month.  Thus, even if Mr. Neely's scenario were realistic, it does not warrant SB 270A.  Further, the cap on the fine for any single transaction already exists -- 1/2 of 1% per day up to 10% of the amount of the transaction.

While an absolute cap per transaction would be a far better solution than the absolute cap per month included in SB 270A, the existing percentage cap is a superior penalty.  An absolute cap per transaction of $10,000 would still allow unscrupulous treasurers to avoid reporting very large transactions that voters should know about.  For example, say a ballot measure campaign received a $1 million contribution from a person or entity of great notoriety in Oregon, such as George Soros or Loren Parks or a U.S. subsidiary of one of the large corporations owned by the People's Liberation Army of China.  A campaign might consider it worthwhile to pay the SB 270A $5,000 penalty to avoid disclosing the transaction.  Note that under SB 270A the fine could never exceed $5,000, even if the identity of all contributors during any given month are never disclosed.  Again, the 10% penalty is a far better approach that any absolute dollar cap, particularly as the size of contributions is growing ever larger so that any absolute cap becomes ever less material to big money campaigns.

Note: Federal law does not regulate campaign contributions in state or local races by U.S. subsidiaries of foreign corporations.  Chinese government-owned corporations have made contributions to U.S. political campaigns.  See Special Report of the Select Committee on Intelligence of the United States Senate, January 6, 1999 TO December 15, 2000 (August 3, 2011), Senate Report 107-51.

Rational Solution for the Alleged Problem

First, nothing prevents the innocent treasurer from suing the person who caused the fine to be levied in order to recover from that person the amount of the fine paid by the treasurer.  Second, if the Neely scenario does happen, the solution is to impose the fine on the person who caused the violation, not on the innocent treasurer. 

The law currently imposes liability for fines upon the treasurer and the candidate (for a candidate committee), without regard to their personal knowledge or behavior.  With few exceptions (use of campaign funds to pay the candidate for his or her professional services), fines can be paid from the campaign fund.  ORS 260.407(2)(b)(B).  The imposition of liability on the treasurer and candidate is a means to ensure that the fines are paid, and campaign money is the source most likely to be available.  Imposition of liability upon someone else is more likely to result in unpaid fines.

In any event, adding a new section to ORS Chapter 260 would directly solve the problem alleged by Mr. Neely.  Current law, ORS 260.037(3), provides:

The candidate, in addition to the treasurer, is personally responsible for the performance of the duties referred to in subsection (2) of this section.  Any default or violation by the treasurer shall be conclusively considered a default or violation by the candidate.  Any default or violation by the person designated by the candidate or treasurer under ORS 260.039, 260.042 or 260.057 is conclusively considered a default or violation by the candidate or treasurer.

An appropriate response to the problem alleged by Mr. Neely would be adding this section to ORS Chapter 260:

All penalties for violations of the requirements for reporting contributions and expenditures under this chapter shall be the responsibility of the person or entity causing the violation to occur.  For violations by a committee, the treasurer and the candidate shall be responsible, unless it is shown that the violation could not reasonably have been avoided by the treasurer or by the candidate.

We urge rejection of the $5,000 monthly cap provision of SB 270A.

Daniel Meek
503-293-9021 voice
dan@progparty.org