Created By: Student1 on 12/15/1999 at 01:34 PM
Category: Campaign Finance Rulings
LOUISIANA BOARD OF ETHICS
acting as the
SUPERVISORY COMMITTEE ON CAMPAIGN FINANCE DISCLOSURE
DATE: August 19, 1999 OPINION NO.: 99-360
RE: In the matter of Governor Murphy J. “Mike” Foster, Jr.
The Louisiana Board of Ethics, pursuant to the provisions of Section 1511.4 of the Campaign Finance Disclosure Act (CFDA) conducted an investigation into the manner in which Governor Murphy J. “Mike” Foster and his campaign committee handled certain transactions in connection with his 1995 election campaign. After the conclusion of the investigation, and with the complete cooperation of Governor Foster, the Board now makes the following:
I. During 1994, Senator Murphy J. “Mike” Foster declared his candidacy for Governor in the October 21, 1995 election. Foster organized a campaign committee for the 1995 election called Murphy J. “Mike” Foster, Jr. Campaign Committee, Inc. Foster was the chairman for the committee. His accountant and president of one of his private businesses, Bayou Sale Contractors, Inc. (Bayou Sale), was the treasurer.
FINDINGS OF FACT
2. Prior to the October 21, 1995 election, Foster’s primary source of campaign funding consisted of his personal loans to the campaign committee. By July 7, 1995, the campaign had received 31 loans in the total amount of $2,185,000 from Foster’s personal account, which were handled and documented by the accountant.
3. As Foster’s accountant handled all of Foster’s accounts for his personal and business activities, including the affairs of Bayou Sale, the accountant was delegated the duty as treasurer to assemble, prepare and file all forms for Foster’s execution to comply with the reporting requirements of the CFDA. The accountant would from time-to-time discuss with Foster various matters about which he had questions in regard to the reporting requirements of the CFDA.
4. In 1995, Foster met with all other potential gubernatorial candidates, including David Duke, to discuss views relative to the campaign. When meeting with Duke, he was informed by Duke that Duke did not intend to seek the governorship. At that meeting, Duke offered to sell Foster the use of his computerized list of conservative voters. It was agreed by Duke and Foster that Foster would pay Duke $100,000 for the one-time use of the list during the 1995 campaign and that if Foster was elected, he would pay Duke an additional $50,000 for the right to use the list in 1999 should Foster seek reelection. Duke advised Foster that he had arranged for the transfer of the computerized list to be made through Impact Mail & Printing, Inc. (Impact Mail), a firm in Metairie, Louisiana. Impact Mail provides bulk mailing services and brokers mailing lists. Duke was neither an owner of nor an employee of Impact Mail.
5. Because he planned to purchase the list with his personal funds, on July 7, 1995, Foster requested that a business office employee of Bayou Sale transfer funds to Foster’s personal account. That employee wrote a $100,000 check from Bayou Sale payable to Mike Foster. The payment was treated by the employee as an advance from Bayou Sale to Foster. At the time of this event, Foster’s accountant (and campaign treasurer) was on vacation.
6. On July 10, 1995, Foster deposited the $100,000 check to his personal account. He then caused the bank account to be debited for $103,000 to pay for a cashier’s check made payable to Charles Billodeau, a long-time employee of Bayou Sale and the company’s expert in computers and computer software.
7. On July 10, 1995, Billodeau then took the $103,000 cashier’s check to the bank where Billodeau maintained his personal account, deposited the cashier’s check to his account and, from that account, purchased a $102,000 cashier’s check from the bank made payable to Impact Mail. Foster believes that the check to Impact Mail was for $102,000 to provide a commission to Impact Mail.
8. That same day, Billodeau personally delivered the $102,000 cashier’s check to Impact Mail and was issued a receipt to “Billodeau Computers” for “mailing services conservative list, 1 time use only, 50% discount for 2nd use.” Billodeau obtained from Impact Mail three computer disks which Billodeau determined contained approximately 80,000 names and addresses. At the direction of Foster, Billodeau retained the three disks and the receipt at his home.
9. As was agreed between Duke and Impact Mail, Impact Mail issued to Duke a check for $97,000, payable to “Duke Report,” and the balance of $5,000 was retained by Impact Mail.
10. When the accountant returned from vacation, the $100,000 Bayou Sale check was reviewed.
Believing the check represented an advance by Bayou Sale to Foster, on July 19, 1995, the accountant wrote out a check from Foster’s savings account payable to Bayou Sale to reimburse the $100,000 advance.
11. Other than Billodeau, Foster told no one, including his accountant or campaign consultant, about the transaction. The $103,000 expenditure was not disclosed on his campaign finance disclosure report covering the period ending July 13, 1995, nor was it reported on any subsequent campaign finance reports.
12. In January 1997, Duke contacted Foster requesting the second payment of $50,000 for Governor Foster’s right to use the computer software containing the mailing list in the 1999 gubernatorial campaign.
13. On January 10, 1997, Governor Foster wrote a personal check for $52,000 to Charles Billodeau. The memo line on the check stated “advance for computer work.”
14. Billodeau took the check to his bank and had a $50,000 cashier’s check issued to Impact Mail. Billodeau personally delivered the cashier’s check to Duke.
15. Duke took the $50,000 check to Impact Mail, which in turn gave Duke an Impact Mail check for $49,000 payable to “Duke Report.”
16. By that time period, the personal accounts of Foster had been placed into the Bayou Sale computer bank to aid in the formulation of all reports and the $52,000 was noted by the accountant when he was preparing the Governor’s 1997 personal financial disclosure report. When Governor Foster was queried about the purpose of the $52,000 check, Foster told his accountant that it was the same transaction as was the 1995 payment of $103,000. The accountant then realized that the 1995 transaction had been overlooked and not reported.
17. Foster and the accountant then decided to report the $52,000 transaction on the Governor’s 1997 personal financial disclosure report due to be filed in January 1998. This $52,000 transaction was reported as a “purchase of computer software” in the category amount of $50,000 to $99,000 on his personal financial report. The item was described as “computer software” at the suggestion of the accountant because he felt that the term “computer software” included both programs as well as data contained within the disks.
18. If called to testify, Governor Foster would testify that: 1) as both Senator and Governor he has always been a strong supporter of campaign finance disclosure laws and was instrumental in the passage of legislation designed to insure Internet access to certain campaign finance disclosure reports including those filed by the Governor; 2) he never willfully nor knowingly violated any provision of the Campaign Finance Disclosure Act and that he did not intentionally fail to report in July of 1995 or in January of 1997 the expenditures to which reference is made above as he assumed the accountant would pick up the same under the well-established internal practices and procedures developed to comply with all reporting laws, and, to the contrary, it was always his intention to carefully and faithfully comport with all of the operational provisions of law concerning campaign finance disclosure; 3) he, in an abundance of caution, had historically over-reported on both his personal financial and campaign finance reports in comparison with other candidates for governor and, in addition, required auditing of the campaign reports by an outside auditor, all of which demonstrates good faith and his due diligence in such matters; 4) after it was brought to his attention by the accountant that the transaction might require reporting on the campaign finance reports, he had a conversation with a staff attorney for the Ethics Board sometime during early 1998 in which he asked the staff attorney if he should report the expenditure of personal funds for computer software, if the computer software was, in fact, not used in connection with a campaign, and was told by the staff attorney that such an expenditure would not have to be reported; 5) following their purchase, the computer disks containing the list were retained by Billodeau and never used in the
1995 campaign; and 6) he is mindful of arguments that might successfully be made that portions of the transactions in question have prescribed and are otherwise time-barred, but that he has chosen to waive these issues of limitation of actions in order to clear the air and to achieve a complete and final resolution of this matter.
19. The staff attorney to whom Governor Foster recalls making the inquiry concerning the need to report “computer software purchased with personal funds and not used during the campaign” does not remember the conversation. However, she informed Foster that she would have answered his inquiry as he recalls, if he had described the matter as he recalls describing it. She would have interpreted the term “computer software” to mean a computer program or programs of general utility, and not as data which has utility for campaign purposes alone.
If she had known that the “computer software” was data such as a list of conservative voters with utility for campaign purposes alone, she would have responded that the item purchased would have to be reported on the campaign finance report even if purchased with personal funds and even if not actually used in a campaign.
II.The Governor takes the position that:
THE POSITION OF THE GOVERNOR
1) Since he never used or consumed the information contained in the computer disks, the statutes requiring disclosure do not require the disclosure of any item purchased with the personal funds of the candidate which is not used or consumed in the campaign.
2) Since the Board has not heretofore rendered an opinion declaring that the kind of transaction herein considered involved the purchase of an item with personal funds and not “used or consumed” in the campaign is a campaign expenditure under R.S. 18:1483(9)(b)(i), there cannot now be any finding that he has “knowingly or willfully” violated the CFDA;
3) During the conversation between the Governor and the Board’s staff attorney relative to the reporting requirements, the Governor correctly described the purchase of the computer’s list of names as “software”;
4) The staff attorney’s initial opinion that he did not have any duty by law to report the expenditure under the CFDA, because he did not use the software during the campaign, is the correct interpretation of the law;
5) His inquiry to the Board’s staff attorney satisfied the due diligence requirement of CFDA R.S. 18:1505.4(B) and the jurisprudence interpreting the same; and,
6) Governor Foster asserts that there is a bona fide dispute on the interpretation of the disclosure laws of this state and as to the nature and extent of the claimed violations and penalties, nevertheless, he desires to accomplish a final resolution of this matter in order to avoid litigation and, accordingly, enters into this consent opinion.
III. Candidates and their principal campaign committees are required to file periodic campaign finance disclosure reports. R.S. 18:1483, et seq. These reports are required to include the name and address of any person who was the recipient of an “expenditure” from the campaign during the reporting period. R.S. 18:1491.7B(13) & 1495.5B(12).
“Expenditure” is defined at R.S. 18:1483(9) as:
a purchase, payment, advance, deposit, or gift, of money or anything of value made for the purpose of supporting, opposing, or otherwise influencing the nomination or election of a person to public office, . . . , whether made before or after the election.
In order to insure that there is a proper “audit trail” of all campaign expenditures, R.S. 18:1491.4D provides that “no expenditure shall be made by any committee chairman, committee campaign treasurer, deputy treasurer, or any other person on behalf of the committee, except by check drawn on [a campaign depository] . . .” The statute also requires that each check be made payable to a specific person, indicate the objects or services for which the check is drawn, and be maintained as part of the committee’s required records. Failure to disclose or failure to disclose accurately any information required to be reported by the CFDA constitutes a violation of the CFDA. R.S. 18:1505.1.
The Governor and candidates for Governor of the State of Louisiana are required to file personal financial disclosure statements identifying business interests, property, income, and transactions for the previous year. Under R.S. 42:1124B(1)(f), the Governor is required to file periodic reports which contain:
f) A brief description, amount, and date of any purchase, sale, exchange, donation, gift or other acquisition or disposition, in excess of one thousand dollars, of any real property, and of any stocks, bonds, commodities futures, or other forms of securities, including but not limited to, any option to acquire and/or dispose of any stocks, bonds, commodities futures, other forms of securities, negotiable instruments, movable or immovable property, or any other interest.
IV. This is the first occasion the Board has been called on to determine whether payments made by a candidate with his personal funds for campaign specific items, such as a computerized list of names, constitute reportable expenditures pursuant to the CFDA, regardless of whether the computerized list is ever used by the candidate or the candidate’s committee.
The Board is of the opinion that Governor Foster violated the disclosure requirements contained in the Campaign Finance Disclosure Act in 1995 when he failed to report the expenditure of $103,000 for the purchase of computer disks containing a list of conservative voters. This expenditure was made for the purpose of influencing Governor Foster’s election and therefore should have been reported on the campaign finance disclosure report due by July 13, 1995.
It is further the opinion of the Board that Governor Foster violated the CFDA when he failed to report the additional $52,000 expenditure in 1997 for the continued right to use the computer list even though it was reported on his personal financial report for 1997. Because the payment was made for information specifically related to a campaign, it should have been reported on the annual campaign finance disclosure report.
A stated purpose of the CFDA is to ensure a knowledgeable electorate through disclosure. It is therefore essential that all contributions received and expenditures made with a view toward influencing an election be reported at a time when that information can be effectively considered by the electorate.
The CFDA standards do not require a finding that the candidate acted intentionally, purposefully or without good faith before a penalty can be assessed, nor do they require any showing the candidate knew his acts constituted a violation. R.S. 18:1505.4(B) provides that:
Any candidate, the treasurer or chairman of any political committee, or any other person required to file reports under this Chapter who knowingly and willfully fails to disclose, or knowingly and willfully fails to accurately disclose, any information required by this Chapter to be disclosed in the reports filed herein, shall be assessed a civil penalty. . . . (Emphasis added.)
The legislature has defined the term “knowing and willful” in the context of the civil penalties provided in the CFDA to mean “conduct which could have been avoided through the exercise of due diligence.” R.S. 18:1505.4(B). This definition does not, unlike the use of such terms in the criminal law, imply any voluntary, intentional violation of a known legal duty. The Board accepts the Governor’s assurances that he never intended to violate the CFDA. A good faith belief, subjectively held but objectively erroneous, does not provide a defense to the CFDA. As pointed out by the jurisprudence, it is not necessary for the Board to find that the candidate acted with the active desire to violate the CFDA before a penalty can be assessed. The proper inquiry in this civil context is whether or not the conduct could have been avoided through the exercise of due diligence.
The provisions of R.S. 18:1491.4 clearly require that campaign expenditures be made “by check drawn on a [designated campaign depository] account or accounts.” Paragraph D expressly provides that expenditures must be made by a check made payable to a specific person which indicates the object or services for which the check is drawn. Payment for campaign specific items must come from a check from the campaign committee. The Board is of the opinion that notwithstanding the fact that the purchase of the computer list was made with the personal funds of
the candidate and never actively used in the campaign, it has been reported that Foster purchased the “exclusive” right to use the list of names and addresses purchased from Duke. Pretermitting the determination of whether or not Foster’s “exclusive” access to the list may have constituted a “use” of the list, the Board is nevertheless of the opinion that — given the totality of the circumstances — the purchase of the list was designed to influence Foster’s election. The transaction was made for the purpose of influencing the election for Governor and therefore should have been paid by a campaign check.
The Board also accepts the Governor’s assurances that he sought the opinion of a staff attorney of the Board as to whether “software purchased with personal funds but unused” was a reportable transaction, and recalls being advised that such a transaction, as described, was not a reportable transaction. The Board also acknowledges that the description of the computer list of names as “computer software” may be technically correct. However, the Board finds that the description of the transaction as the purchase of computer software was insufficient under the circumstances to satisfy the due diligence requirements of the CFDA.
Although Governor Foster did report the $52,000 transaction on his personal financial disclosure report, the Board is of the opinion that the personal financial reporting requirements of R.S. 42:1124 do not apply to this transaction, nor does that statute apply to the $103,000 transaction. Because both transactions were campaign finance expenditures, each should have been reported on campaign finance disclosure reports.
The Board recognizes the considerations that an argument may be made that the failure to report the 1995 expenditure may be barred by the limitation of actions provided in R.S. 18:1511.11 had Foster not elected to waive that potential defense and that the 1997 expenditure was reported on Foster’s personal financial disclosure form. Given all the circumstances of this matter, the Board is of the opinion that a $10,000 penalty for each of the two campaign expenditure reporting violations is appropriate.
V. For the foregoing reasons:
IT IS ORDERED that the Board finds as a matter of fact and a conclusion of law that Governor Murphy J. “Mike” Foster, Jr. and the Murphy J. “Mike” Foster, Jr. Campaign Committee, Inc. violated R.S. 18:1505.1 on two occasions as described above by failing to accurately and timely report campaign expenditures and by failing to follow the procedures required by R.S. 18:1491.4D in making payments for campaign expenditures.
IT IS FURTHER ORDERED that a civil penalty of $20,000 be and is hereby imposed upon Governor Murphy J. “Mike” Foster, Jr. and the Murphy J. “Mike” Foster, Jr. Campaign Committee, Inc., payable to the State Treasurer.
BY ORDER OF THE BOARD this 19th day of August , 1999.
s/Robert L. Roland s/Robert P. Bareikis
Robert L. Roland, Chairman Dr. Robert P. Bareikis
s/Carole Cotton Winn s/Revius O. Ortique, Jr.
Rev. Carole Cotton Winn Justice Revius O. Ortique, Jr.
s/Ronald L. Sawyer s/Harry J. Blumenthal, Jr.
Ronald L. Sawyer Harry J. Blumenthal, Jr., Vice Chairman
s/E. L. Guidry, Jr. Absent and did not participate
Judge E. L. Guidry, Jr. Edwin O. Ware
s/Virgil Orr Absent and did not participate
Dr. Virgil Orr T. O. Perry, Jr.
I, the undersigned (a) stipulate to the facts found by the Board; (b) waive the procedural requirements contained in R.S. 18:1511.11 et seq.; (c) admit the conduct as described above violated the described provisions of the Campaign Finance Disclosure Act; (d) consent to the publication of this opinion; and (e) agree not to seek judicial review of the findings and actions taken in this opinion.
s/Murphy J. “Mike” Foster, Jr. Aug. 19, 1999
Murphy J. “Mike” Foster, Jr., Governor Date
Individually and as Chairman of the
Murphy J. “Mike” Foster, Jr. Campaign Committee, Inc.
CONCURRING OPINION OF HARRY BLUMENTHAL
I concur in the majority’s determination that violations of the Campaign Finance Disclosure Act occurred and in the Board’s imposition of a substantial civil fine.
However, it is my opinion that the Board did not go far enough and should have required the filing of amended reports, disclosing the challenged transactions as only “expenditures”, thus foreclosing any subsequent effort to characterize the transactions as“loans”. To do otherwise could result in a windfall in which the governor repays to himself from campaign contributions, as a “loan”, the full amount of the payments made indirectly to Mr. Duke.
I believe we would better discharge our responsibilities by precluding even the possibility that the campaign report could be amended at a future time to reflect a “loan”that clearly never occurred.
s/Harry J. Blumenthal, Jr.
Concurring Opinion of Judge E. L. Guidry, Jr.
I disagree with the Concurrence filed by the Vice Chairman suggesting that this Board has failed to impose a sufficiently severe sanction in resolving this case. To the contrary, in my view, we have a novel question resolved against the candidate [now Governor] for which he accepts responsibility for failing to anticipate the correct result – and even waives a potentially valid plea of prescription. Rather than criticizing the decision of the Board for acting with undue leniency, I believe that the dissent should question whether the result has been unduly harsh. Because the Governor and this Board are firmly committed to a strict interpretation and application of our ethics laws, I believe the correct result has been reached. As opposed to criticism of this decision as reflected by the Concurrence, I feel that this Board, with the Governor’s concurrence has fulfilled its responsibility to enforce the Ethics Laws in a very stringent and unyielding fashion.
I’m not at all confident that the Board’s position would have been upheld had this matter been contested. However, public confidence in the Board’s capacity and willingness to strictly enforce the ethics laws should be enhanced by this Resolution, not diminished as suggested by the Vice Chairman’s Concurrence. For these reasons, I respectfully concur.
s/ E. L. Guidry, Jr.
Judge E. L. Guidry, Jr.