Bloomberg News

Company Campaign Giving Should Be Limited, U.S. Tells Court

October 19, 2011

(Updates with prosecutors’ argument in fourth paragraph.)

Oct. 19 (Bloomberg) -- A judge’s ruling that a century-old ban on direct corporate donations to federal candidates was unconstitutional is “wholly illogical” and should be thrown out to prevent public corruption, U.S. prosecutors said.

The Justice Department today asked the U.S. Court of Appeals in Richmond, Virginia, to reinstate criminal charges against two fundraisers for political campaigns of Hillary Clinton, who is now secretary of state.

U.S. District Judge James Cacheris in Alexandria, Virginia, dismissed some of the charges after ruling that the Supreme Court’s Citizens United decision in 2010, which gave corporations the same rights as individuals to spend money independently to support candidates, also meant they can make campaign donations directly to candidates as long as they comply with general legal limits.

“Individual corporate officers are subject to those valid contribution limits, but they could easily evade those limits if given the opportunity to funnel contributions through a corporation,” prosecutors argued in today’s filing.

Individuals this year can give $2,500 to a candidate for each election.

Prosecutors argue corporations are free to “have a voice in elections” by contributing money to federal candidates through PACs.

Presidential Campaign

The fundraisers, William P. Danielczyk Jr., chairman of McLean, Virginia-based Galen Capital Group LLC, and Eugene R. Biagi, its secretary and treasurer, were indicted for improperly reimbursing $186,600 to donors in Clinton’s 2008 presidential campaign. Cacheris threw out the charge that they illegally funneled money from Galen Capital to the campaign.

Danielczyk and Biagi were charged in the indictment with conspiracy, obstruction of justice and causing false statements to be made. The indictment also covers Clinton’s 2006 Senate race.

Jeffrey Lamken, the lead lawyer for the defendants on the appeal, didn’t immediately return an e-mail seeking comment on the government’s filing. The defendants are scheduled to file their response next month.

The criminal case has been put on hold while the appeals court decides the campaign finance issue. The Richmond court has yet to schedule arguments in the matter.

Bans on direct corporate donations to candidates go back to the Tillman Act of 1905. The 2002 campaign finance law prohibited contributions known as “soft money” from corporate and union treasuries to the political parties.

The case is U.S. v. Danielczyk, 11-4667, U.S. Court of Appeals for the Fourth Circuit (Richmond).

--Editors: Michael Hytha, Glenn Holdcraft

To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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