Mar 30, 2022 - Politics & Policy

Congress gets new spending loophole

Illustration of Benjamin Franklin giving a knowing wink.

Illustration: Aïda Amer/Axios

Federal regulators last week allowed a legal loophole that could effectively let former members of Congress spend leftover campaign money on personal expenses.

Why it matters: Campaign finance reform advocates say that opens the door to former public servants to live large off of money intended for political contests. Scores are already retired, and more members are heading for the door this fall ahead of potential Democratic losses and GOP challenges.

The details: It's illegal for current or former members of Congress to spend campaign money on personal expenses.

A Federal Election Commission complaint filed by the nonprofit Campaign Legal Center in 2019 alleged former Rep. Ileana Ros-Lehtinen (R-Fla.) violated that prohibition.

  • After retiring from Congress in 2017, she transferred her remaining campaign funds to a leadership PAC — a common vehicle for current and former officeholders to put their unused donations to work on behalf of allied candidates.
  • Ros-Lehtinen's leadership PAC proceeded to spend those funds on — among other expenses — high-priced meals, lodging and even Disney World tickets.
  • The former congresswoman told the FEC all of those expenses covered legitimate political activities related to her support for other candidates and were not for personal use.

The FEC's general counsel nonetheless recommended the panel find "reason to believe" a violation occurred, saying "the available information raises a reasonable inference" campaign funds were used for personal expenses.

  • Ros-Lehtinen, now a lobbyist at the firm Akin Gump, did not respond to multiple requests for comment.
  • An attorney who represented her on matters related to the leadership PAC spending also did not respond to inquiries from Axios.

The FEC declined to pursue the case last week, deadlocking in a 3-3 vote on that reason-to-believe determination.

Commission rules require four votes to proceed with enforcement matters.

  • The deadlock effectively killed FEC enforcement efforts — and signaled a divided commission won't enforce the personal spending ban for money that's transferred from a campaign to a leadership PAC.
  • The commission's three Republicans took a narrow reading of the law: the money was no longer bound by personal-use restrictions because it was no longer in a campaign committee's bank account, they ruled.
  • Its three Democrats argued for a more expansive interpretation: money raised by a campaign is still bound by personal-use restrictions, even if it's transferred to a different committee, they said.

The big picture: Whether or not Ros-Lehtinen's spending constituted personal use, the FEC's failure to move forward with an investigation effectively cements a standard that, good government groups warn, opens a huge campaign finance loophole.

  • "Republican FEC commissioners have now declared that members of Congress can take their campaign money with them when they leave office, as long as they launder it through a so-called leadership PAC," Adav Noti, Campaign Legal's vice president and legal director, told Axios.
  • "The commissioners’ position is completely contrary to law, and it could open the door to elected officials pocketing tens of millions of dollars."

The other side: The Republican commissioners acknowledge that loophole exists but say it's up to Congress to close it.

  • "Congress has not amended the relevant statute," which says personal use rules apply specifically to campaign committees, Commissioner Sean Cooksey wrote in a statement last year, as the commission debated the Ros-Lehtinen case.
  • Cooksey knocked the FEC's general counsel and Democratic commissioners for "ignoring or recasting past precedents in order to bring novel enforcement theories and retroactively expand the breadth of prohibited conduct."

Between the lines: Leadership PACs were created in the 1970s as a vehicle for members of Congress to help fund colleagues' campaigns — and build their own political network and clout within their caucuses.

  • Members have long exploited them to spend leadership PAC funds on pricey meals and entertainment, club memberships and high-end travel and lodging.
  • When former President Trump set up a new political vehicle after his 2020 election defeat, he opted for a leadership PAC.
  • Dubbed "Save America PAC," it's raised over $100 million since he left office. But it's spent more at Trump properties than it's donated to candidates Trump has endorsed, the New York Times reported last month.
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