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Ian Lind • Online daily from Kaaawa, Hawaii

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When can related companies exceed the campaign contribution limit?

November 5th, 2012 · 1 Comment

Here’s a question I stumbled into while working on yesterday’s post regarding Cal Lee’s campaign for OHA At-Large seat.

When are related businesses or organizations that contribute to a campaign considered so closely related that their contributions must be aggregated for purposes of applying contribution limits?

Prior to 2005, the campaign spending law at Section 11-204 provided both a general and several specific answers to that question.

A quick search didn’t turn up a clean copy of the pre-2005 statute, but here’s the language taken from the original version of HB1747 (2005), which retained the existing language.

(h) All payments made by a person or political party whose contributions or expenditure activity is financed, maintained, or controlled by any corporation, labor organization, association, political party, or any other person or committee, including any parent, subsidiary, branch, division, department, or local unit of the corporation, labor organization, association, political party, political committees established and maintained by a national political party, or any other person, or by any group of those persons shall be considered to be made by a single person or political party.

[(g)] (i) A contribution made by two or more corporations shall be treated as one person when such corporations:

(1) Share the majority of members of their boards of directors;

(2) Share two or more corporate officers;

(3) Are owned or controlled by the same majority shareholder or shareholders; or

(4) Are in a parent-subsidiary relationship.

[(h)] (j) An individual and any general partnership in which the individual is a partner, or an individual and any corporation in which the individual owns a controlling interest, shall be treated as one person.

So the general provision says that if a contributor is “financed, maintained, or controlled” by any other person or entity, all their payments “shall be considered to be made by a single person.”

That’s a pretty broad and sweeping provision.

It was then followed by certain specifics, providing that corporations sharing a majority of directors, or two or more officers, controlling shareholder, or in a parent-subsidiary relationship, are also considered as one person when applying the contribution limit.

What does it mean? Two or more businesses that share officers, directors, or controlling shareholders can’t get around contribution limits by making multiple contributions in the names of the related companies. Instead, the different entities are only allowed to give a total of the maximum allowed. No doubling up by passing the money through affiliates.

But when the bill came out of conference as HB1747, CD1, the detailed items in Section 11-204 had been deleted, leaving only the general language in place.

In a quick search, I didn’t turn up anything in the legislative history to indicate whether the amended provision finally adopted was meant to allow the commission to interpret the law in a stricter fashion, and hold that two corporations might be considered as one even if they did not meet any of those specific requirements, or, on the other hand, was it meant to say that corporations sharing officers, directors, and controlling shareholders are now free to double up by contibuting to the same candidates in excess of what would otherwise by the applicable limit?

The question arose because of the dual contributions made by Innovations Development Group and Honua Group in certain cases. The companies are clearly related, and share key personnel, but whether their aggregated contributions would be subject to the contribution limit is an open question in light of the ambiguity introduced by those 2005 amendments.

To be clear here, I’m not saying there’s any issue with their contributions, but they did call my attention to the 2005 amendments and their meaning.

I think most of the amendments were pasted from a separate bill that was part of the commission’s attempt at recodification of the overall statute. If so, there may be some clues to intent buried somewhere in either the commission’s recommendation or the other bill’s history, but I haven’t had time to go there yet.

If anyone else has thoughts on this or specific recollections of the deliberations on this measure, please share!

Tags: Campaigns · Legislature · Politics

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