AMY BERMAN JACKSON, United States District Judge.
This opinion arises out of former Senator Larry Craig's efforts to withdraw the guilty plea he entered in Minnesota state court in 2007, after he was arrested for disorderly conduct in the Minneapolis-St. Paul International Airport. On June 11, 2012, the Federal Election Commission ("FEC" or "the Commission") brought suit against defendants Craig, the Craig for U.S. Senate campaign committee ("Craig Committee"), and Kaye L. O'Riordan, the
The Court will grant the FEC's motion, although it will not award all of the relief the FEC seeks. The Court finds that defendants violated the FECA when they converted campaign funds to pay for legal expenses related to Senator Craig's efforts to withdraw his guilty plea, which was a personal matter that was not connected to the Senator's duties as an officeholder. Furthermore, the Court finds that the circumstances of this case merit the imposition of both a penalty and an order of disgorgement, as well as the declaratory relief the FEC seeks. But the Court finds that the amount that was unlawfully converted totals $197,535, not $216,984, and that a penalty of $45,000 against Senator Craig is appropriate in this case. The Court will therefore order Senator Craig to pay a total of $242,535 to the U.S. Department of the Treasury, which is comprised of the amount he was unjustly enriched plus the additional penalty. The Court will not order any relief against the now defunct Craig Committee, nor will it issue an injunction in this case.
The following facts are not in dispute.
On June 11, 2007, Senator Craig was arrested in the Minneapolis-St. Paul International
On September 1, 2007, after the arrest and conviction became the subject of national media attention, Senator Craig announced his intention to resign from the Senate effective September 30, 2007. Compl. ¶ 15; Answer ¶ 15. Meanwhile, the U.S. Senate Select Committee on Ethics ("Senate Ethics Committee") launched an inquiry into the Senator's arrest, guilty plea, and subsequent conduct. Compl. ¶ 16; Answer ¶ 16. Senator Craig then decided not to resign so that he could "continue [his] effort to clear [his] name in the Senate Ethics Committee," and he retired at the end of his term in January 2009 instead. Compl. ¶ 17; Answer ¶ 17.
On July 25, 2008, the Senate Ethics Committee authorized Senator Craig to establish a legal expense trust fund "to pay for expenses incurred in connection with" the Minnesota litigation, although it warned Senator Craig that its "approval of the Fund and of the trust agreement [did] not indicate approval of [his] continuation of the proceedings in" Minnesota. Ex. 9 to Defs.' Opp. to Pl.'s Mot. for Summ. J. ("Defs.' Opp.") [Dkt. # 19-11] at 1. The Committee also warned that it would "consider any further use of [Senator Craig's] campaign funds for legal expenses without the Committee's approval to be conduct demonstrating [his] continuing disregard of ethics requirements." Id. at 2.
Between July 9, 2007 and October 5, 2008, the Craig Committee disbursed more than $480,000 of campaign funds for legal fees and other expenses. Compl. ¶ 18; Answer ¶ 18. The Craig Committee paid at least $139,952 to the law firm of Sutherland, Asbill & Brennan LLP for its legal services to Senator Craig in connection with his efforts to withdraw his guilty plea, and approximately $77,032 to the law firm of Kelly & Jacobson for similar services, for a total of $216,984. Compl. ¶¶ 19-20; Answer ¶¶ 19-20.
On February 13, 2008, the Senate Ethics Committee issued a "Public Letter of Admonition" to Senator Craig, which stated that some portion of the Craig Committee's expenditures "may not be deemed to have been incurred in connection with [Senator Craig's] official duties, either by the Committee or by the Federal Election Commission." Ex. 7 to Defs.' Opp. [Dkt. # 19-9] at 2. Then, on November 10, 2008, the FEC received an administrative complaint alleging that Senator Craig had violated the FECA by spending more than $213,000 in campaign funds to pay legal fees and expenses incurred in connection with his attempts to withdraw his guilty plea. Compl. ¶ 24; Answer ¶ 24. The FEC investigated the complaint and attempts to resolve the matter short of litigation were unsuccessful. Compl. ¶¶ 25-30; Answer ¶¶ 25-30.
The FEC filed this lawsuit on June 11, 2012, claiming that defendants violated 52 U.S.C. § 30114(b)
Following the Court's ruling on the motion to dismiss, on April 11, 2013, defendants filed an answer that admitted nearly all of the factual allegations in the complaint. See Answer ¶¶ 12-31. Then, on September 30, 2013, the FEC moved for summary judgment. FEC's Mot. for Summ. J. [Dkt. # 16] ("FEC Mot."). The FEC sought the following relief in addition to the entry of judgment in its favor: an order disgorging from Senator Craig the $216,984 disbursed to Sutherland, Asbill & Brennan LLP and Kelly & Jacobson; a $70,000 civil penalty against Senator Craig; a $70,000 civil penalty against the Craig Committee; a declaration that defendants violated the Act; and a permanent injunction against all defendants prohibiting them from violating the Act in the future. Id. at 14. Defendants opposed the FEC's motion on November 13, 2013, arguing in part that a portion of the legal fees were lawful campaign expenditures. Defs.' Opp. [Dkt. # 19]. Plaintiff filed its reply on January 10, 2014. FEC's Reply Mem. [Dkt. # 21] ("FEC Reply"). The Court heard oral argument on plaintiff's motion on July 17, 2014. After the hearing, the Court ordered defendants to submit a supplemental pleading "itemizing and quantifying all of the legal expenses included in any of the bills submitted ... by Kelly & Jacobson and Sutherland, Asbill, and Brennan" that defendants maintained were permissible. July 17, 2014 Minute Order. Defendants submitted their pleading on August 15, 2014, and the FEC responded on August 29, 2014. Defs.' Pleading Itemizing & Quantifying Legal Expenses [Dkt. # 24] ("Defs.' Supp. Mem."); FEC's Resp. to Defs.' Pleading [Dkt. # 25] ("FEC Resp.").
Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). The party seeking summary judgment bears the "initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (internal quotation
The Court finds that there are no genuine issues of material fact in dispute in this case, and that defendants are liable as a matter of law for converting campaign funds to personal use in violation of section 30114(b) of the FECA. Defendants admitted all of the material facts with respect to their liability in their answer to the complaint, and the Court has already concluded that those facts amount to a violation of the federal campaign finance law. The Court has wide discretion to fashion a remedy in this case, and it will order defendant Craig to pay $242,535 to the United States Department of the Treasury. This amount is comprised of a disgorgement of $197,535, the amount of campaign funds that were unlawfully converted to personal use, plus a penalty of $45,000, which the Court finds necessary and appropriate to punish defendants' misconduct and to deter future misconduct by others. The Court will also issue the declaratory relief that the FEC seeks, but it finds that injunctive relief is not appropriate in this case.
In its previous opinion in this case, the Court found that, accepting the allegations in the complaint as true, the FEC had shown that defendants had violated the FECA's ban on converting campaign funds to personal use.
After the court issued its opinion denying defendants' motion to dismiss, defendants answered and admitted the critical facts. Compare Compl. ¶¶ 12-31 (setting forth the facts section of the complaint), with Answer ¶¶ 12-31 (admitting all of the factual allegations contained in the corresponding paragraphs of the complaint but maintaining Senator Craig's innocence as a matter of law). In particular, defendants admitted that "the Sutherland law firm received at least $139,952 for providing legal services to Mr. Craig in connection with his efforts to withdraw his guilty plea," and that "[t]he Kelly law firm received approximately $77,032 from the Craig Committee for providing legal services to Mr. Craig in connection with efforts to withdraw his guilty plea." Compl. ¶¶ 19-20; Answer ¶¶ 19-20. Thus, defendants have now admitted to utilizing campaign funds in a manner that the Court has already found to be a violation of the personal use ban of the FECA. See Craig, 933 F.Supp.2d at 113; see also Defs.' Opp. at 2 ("Although defendants maintain that they did not violate the [FECA's] personal use ban, they recognize that the Court's order denying their motion to dismiss essentially held to the contrary."). On that basis, alone, the Court could grant summary judgment to the FEC.
Nevertheless, defendants contend that the FEC's motion should be denied because "material facts ... remain in doubt." Defs.' Opp. at 2. First, defendants take issue with the Commission's failure, in their view, "to provide a full and accurate depiction of facts material to this matter." Id. at 4. Defendants submit that the FEC has not taken the following facts into account: the date on which Senator Craig retained counsel; Senator Craig's reliance on the arresting officer's assurance that he would not "call media"; Senator Craig's state of mind immediately after his arrest; and Senator Craig's dispute with the Idaho Statesman newspaper. Id. at 4-6; see also Defs.' Statement of Material Facts in Dispute [Dkt. # 19-1] ¶¶ 1-15. But even if all of these alleged facts are true, they do nothing to alter the Court's conclusion that defendants' expenditure of campaign funds in connection with the Minnesota matter violated the FECA's personal use ban. See Craig, 933 F.Supp.2d at 118 ("Neither the charge nor the underlying conduct had anything to do with [Senator Craig's] performance of his official duties, so the legal expenses they generated were not incurred in connection with those duties."). These facts may illuminate why Senator Craig did what he did, but they do not change what he did: the Senator's arrest was personal and the attendant legal expenditures were not incurred in connection with his official duties, even if he either elected to plead guilty or to change course with his public image in mind.
Defendants also claim that there is an issue of material fact with respect to defendants' good-faith reliance on an FEC Advisory Opinion. Defs.' Opp. at 7, 9-11, citing FEC AO 2006-35 (Kolbe), 2007 WL 419188 (Jan. 26, 2007). But the Court has already concluded that any reliance by defendants on the Kolbe opinion does not relieve them of liability because the Kolbe opinion does not actually support their claims. Craig, 933 F.Supp.2d at 124 ("[D]efendants' suggestion that the [Kolbe] Advisory Opinion stands for something other than what it said is unsupported."). Although the question of defendants' good faith may still be relevant to the question of punishment and the Court's determination of the remedy it will impose, see infra section III.B.1, it does not alter the
Next, defendants argue that the Court cannot grant summary judgment for the FEC because there is a question of material fact as to the total amount of funds defendants converted to personal use. Defs.' Opp. at 12-13. The Court agrees that the FEC has failed to pinpoint the precise dollar amount that defendants unlawfully converted, but that is not a material fact that precludes summary judgment. There is no question that defendants unlawfully converted funds to personal use. Thus, there is no material fact in dispute on the question of defendants' liability. Rather, the dispute centers on the amount of that liability, which the Court will address further below.
Finally, defendants argue that a recently-released FEC Advisory Opinion indicates that they should not be found liable in this case. Defs.' Opp. at 15, citing FEC AO 2013-11 (Miller), 2013 WL 6022101 (Oct. 31, 2013). But this opinion has no bearing on defendants' case. The Advisory Opinion concerns Joe Miller, a former candidate for U.S. Senate in Alaska. During Miller's campaign, certain media outlets sued to obtain personnel records related to his previous public employment. Id. at *1. The court found that Miller's "right to privacy ... [was] outweighed by the public's significant interest in the background of a public figure that is running for U.S. Senate," and ordered the release of the records. Id. Miller then requested an Advisory Opinion from the FEC as to whether his campaign committee could use campaign funds to post the cash deposit required to appeal the ruling, "and/or to pay the judgment should his appeal be unsuccessful." Id. at *2. The FEC determined that it was lawful for Miller to use campaign funds in this manner because the underlying lawsuit and the verdict would not have arisen but for Miller's status as a candidate for office. Id. at *3. As the FEC explained: "[T]he Alaska media outlets' suit to obtain Miller's personnel records, as well as the court's order granting that relief, directly related to his federal campaign." Id.
Defendants claim that "[m]uch like Miller's decision to fight disclosure of personal material that could harm his campaign, Senator Craig's challenge to his plea stemmed from his desire to counter allegations that he believed would be damaging to his public stature as a United States Senator and his viability as a future candidate." Defs.' Opp. at 15-16. But the Miller ruling was not based on the fact that Miller had his public profile in mind; it was based on the fact that the lawsuit in which the fees were incurred was occasioned
Thus, the Court finds that defendants have not identified any material facts in dispute as to their liability. The Court therefore holds that defendants violated section 30114(b) of the FECA by converting campaign funds to the personal use of Senator Craig.
Although the FEC has proven that defendants violated the FECA, neither the FEC nor defendants have established the precise amount of funds that defendants unlawfully converted. Defendants admitted in their answer that they paid $216,984 in campaign funds to the Sutherland and Kelly law firms for "legal services" related to the Minnesota guilty plea. See Answer ¶¶ 19-20; see also Compl. ¶¶ 19-20. But they contend that $46,464 of that amount was permissible under FEC Advisory Opinions that provide that spending on legal services related to media and ethics issues can be exempt from the personal use ban. See Defs.' Supp. Mem. at 1-4, 18. In response, the FEC argues that defendants have not carried their burden to establish that any portion of the $216,984 was permissibly spent, and it urges the Court to find that the full amount was converted to personal use, or, in the alternative, to apply a flat discount rate of 10 percent, resulting in a reduction of only $10,856. FEC Resp. at 10-13.
The Court finds that while defendants have established that some portion of the $216,984 in campaign funds was permissibly spent, their estimate of that lawful portion is over-inclusive. But the FEC's approach fares no better: it is under-inclusive, imprecise, and disconnected from its legal underpinnings. Therefore, the Court has undertaken its own line-by-line analysis of defendants' legal invoices, and it concludes — to the extent it is possible to derive a dollar figure — that $19,449 of the $216,984 spent was a permissible use of campaign funds under the principles set forth in the FEC's Hilliard and Vitter Advisory Opinions. See Appendix A (detailing the Court's calculations); see also Ex. 1 to FEC Resp. [Dkt. # 25-1] (the relevant invoices).
The Hilliard and Vitter opinions establish that certain legal expenses devoted to media relations or responding to ethics
There is no question that the invoices that defendants submitted to the FEC and to the Court include charges for legal services related to both public relations and the Senate Ethics Committee inquiry. See, e.g., Ex. 13 to Defs.' Opp. [Dkt. # 19-15] at "Craig 36" ("Research and review draft Press Release."); id. at "Craig 59" ("Teleconference regarding Senator ethics issues; discussion with ethics counsel."). But defendants' legal invoices utilize a "block" billing style, where multiple tasks performed are grouped together within undifferentiated blocks of time. See, e.g., Ex. 1 to FEC Resp. at "Craig 34" (reflecting charges for 5.10 hours of work described as follows: "Revise motion to withdraw guilty plea and supporting affidavit. Discuss same with B. Martin and K. Verdi. Various calls with Senate staff ... [and] with T. Kelly regarding legal issues associated with motion. Various calls with J.
Still, the Court gave defendants one more chance to make this showing. After hearing oral argument on the FEC's motion for summary judgment, the Court ordered defendants to submit a supplemental pleading "itemizing and quantifying all of the legal expenses included in any of the bills submitted ... by Kelly & Jacobson and Sutherland, Asbill and Brennan that they contend were permissible under [the Hilliard and Vitter] FEC Advisory Opinions." July 17, 2014 Minute Order. The Court further instructed that "[d]efendants' submission should separately identify each entry by date and by attorney and indicate the amount of time involved and the specific dollar amount they claim constituted an appropriate use of campaign funds." Id. Defendants submitted a pleading on August 15, 2014, and the FEC submitted its response on August 29, 2014. See Defs.' Supp. Mem.; FEC Resp.
The Court finds that defendants have still failed to establish what portion of their legal bills was permissibly paid with campaign funds under the standards articulated in the Hilliard and Vitter opinions. Rather than complying with the Court's instruction to identify the specific amounts of time spent on activities that might constitute an appropriate use of campaign funds, defendants simply discounted entries containing a mix of exempt and non-exempt activities by a flat and unduly generous 50 or 25 percent. For instance, defendants applied a 50 percent discount to 7.5 hours billed by the Sutherland firm for the following:
See Defs.' Supp. Mem. at 7. There is no apparent factual basis for applying the 50 percent discount to this entire entry; defendants should have applied any discount only to the portion of the time that was spent on the calls with the public relations consultant concerning "legal and publicity issues." In another instance, defendants discounted by 50 percent the 9.9 hours of legal work by the Sutherland firm described in the following block entry:
See id. at 6. But the only portion of that entry that is even arguably media or ethics related is the first sentence about the conference calls; the remaining two sentences of the entry describe work that is purely
The FEC argues that in light of defendants' failure to document the expenditures that should be exempt from the personal use ban, the Court should either consider the full $216,984 to have been converted to personal use, or apply a flat discounting rate of 10 percent. FEC Resp. at 10-12. The FEC's proposed approach would result in a discount of zero or $10,856. Id. at 13. But although defendants' legal invoices are not sufficiently specific, and although defendants have been maddeningly cavalier in responding to both the FEC's and the Court's inquiries, the Court is bound to follow the law, and the bills are not so vague that the Court cannot do a better job than that in calculating the exempt amount.
The Court undertook its own evaluation of the invoices provided by the parties, and it determined that of the $216,984 at issue here, defendants permissibly spent approximately $19,449 in campaign funds on media or ethics related legal services. See Appendix A. The Court's review of the invoices from the Sutherland and Kelly law firms revealed forty-nine entries that included at least some legal work related to public relations or ethics matters. The Court found that fourteen of these entries described work that was fully payable with campaign funds and that the remaining thirty-five entries billed for a mix of tasks that were only partially exempt from the personal use ban. Given the undifferentiated nature of the data, the Court used its best judgment to estimate the amount of time spent on the exempt activities, multiplied those hours by the relevant attorneys' rates, and deducted that amount from the full $216,984 that defendants
Now that the Court has found that defendants converted $197,535 in campaign funds to personal use, it must determine the appropriate remedy for defendants' violation of the FECA. The Court's judgment in this case will be the first of its kind; it appears that no other court has been asked to determine the remedy for a violation of the particular section of the FECA involved here.
The FEC asks the Court to: (1) order Senator Craig to disgorge the full amount of funds converted to personal use; (2) levy a $70,000 civil penalty against Senator Craig; (3) levy a $70,000 civil penalty against the Craig Committee; (4) issue a declaration that defendants violated the Act; and (5) order a permanent injunction against all defendants that prohibits them from violating the Act in the future. FEC Mot. at 14. Defendants contend that the FEC's request for both a disgorgement and civil penalties is excessive and unwarranted, and that injunctive relief is not appropriate in this case.
The FECA provides that a court
52 U.S.C. § 30109(a)(6)(B). Despite defendants' claim that "no authority justifies [the FEC's] request for both disgorgement and sizable civil penalties," Defs.' Opp. at 2, the plain language of the Act accords the Court the discretion to call for disgorgement (an "other order"), a penalty, the declaration, and the injunctions that the FEC seeks.
In addition, several FEC conciliation agreements provide for relief similar to the relief the FEC requests in this case; that is, some combination of penalties, disgorgement, refunds, and injunctions. See, e.g., Istook Conciliation Agreement at 5-7 (Sept. 25, 2008)
Thus, based on the language of the FECA, the case law, and the FEC's own conciliation agreements, the Court concludes that it has broad discretion to impose a remedy that it deems appropriate
The Court will require defendant Craig to pay $242,535, which is comprised of a disgorgement of the $197,535 the Court has determined that defendants converted to personal use, plus a penalty of $45,000. The $242,535 is to be paid to the U.S. Department of the Treasury.
The Court finds that the disgorgement order is necessary to avoid the unjust enrichment of Senator Craig, and to "deprive the wrongdoer of his ill-gotten gain." SEC v. Bilzerian, 29 F.3d 689, 697 (D.C.Cir. 1994). Moreover, even defendants do not dispute that they should be required to repay an amount equal to the funds they converted to personal use. See Defs.' Opp. at 16 ("If the Court does find a violation of the personal use ban, then ... the penalty should be no greater than the amount the Commission can establish was improperly spent solely on legal issues relating to the Minnesota case."). Therefore, the Court finds that a disgorgement is warranted in this case.
The Court further finds that a penalty over and above the disgorgement is also appropriate given the seriousness of the violation here. Although the D.C. Circuit has not articulated any standards to guide the Court's discretion in imposing a penalty, courts in this district and elsewhere have turned to the factors articulated by the Ninth Circuit in Furgatch. See 869 F.2d at 1258; see also Comm. of 100 Democrats, 844 F.Supp. at 7 (applying Furgatch factors); FEC v. Am. Fed. of State, Cnty., & Mun. Employees-P.E.O.P.L.E. Qualified, No. 88-3208(RCL), 1991 WL 241892, at *2 (D.D.C. Oct. 31, 1991) (same); Kalogianis, 2007 WL 4247795, at *6 (same). The Court will do the same.
In Furgatch, the Ninth Circuit looked to the following factors to determine whether a civil penalty was appropriate: "(1) the good or bad faith of the defendants; (2) the injury to the public; (3) the defendant's ability to pay; and (4) the necessity of vindicating the authority of the responsible federal agency." 869 F.2d at 1258, citing United States v. Danube Carpet Mills, Inc., 737 F.2d 988, 993 (11th Cir.1984). The FEC also asks the Court to consider the need to deter and punish serious violations of the FECA. See FEC Mem. at 18. The Court finds that all of these factors and considerations are relevant and, taking them together, that a penalty is appropriate in this case.
The facts and circumstances of this case do not suggest that defendants have acted in particularly good or particularly bad faith. Defendants reiterate the claim that they relied in good faith on the FEC's Kolbe for Congress Advisory Opinion. Defs.' Opp. at 2, 23-24. Defendants also contend that they tried in good faith to comply with the requirements of FECA, noting in particular that their unlawful expenditures were authorized by counsel and disclosed to the FEC. See Defs.' Opp. at 2-3. And defendants argue that when the Senate Ethics Committee authorized Craig to set up a legal defense fund and trust, it "necessarily acknowledged that Senator Craig's legal expenditures `relate to or arise by virtue of the service of the Member.'" Id. at 3.
Now, defendants again point to the record underlying the Kolbe opinion as evidence that they relied on that opinion in good faith. Defs.' Opp. at 10-11. While it may be true that there is "[n]o bar ... on [defendants'] use of the [Kolbe] record to establish good faith reliance" at the penalty stage of the case, Defs.' Opp. at 11, the Court has already concluded that the Kolbe record does not support defendants' arguments. See Craig, 933 F.Supp.2d at 124. Furthermore, defendants' purported evidence of their longstanding reliance on the Kolbe opinion — a letter from Senator Craig's counsel to the Senate Ethics Committee in November, 2007 — only indicates that defendants relied on the Kolbe opinion as authority for spending campaign funds on representation before the Senate Ethics Committee, which is not included in the $197,535 the Court has found defendants wrongfully converted to personal use. See Defs.' Opp. at 9; see also Ex. 6 to Defs.' Opp. [Dkt. # 19-8] at 6-9. Any reliance on the Kolbe opinion to authorize that spending is therefore irrelevant to the question of what penalty the Court should impose.
It is true, though, that defendants reported the expenditures at issue in this case to the FEC as required by law, and that the Senate Ethics Committee permitted Senator Craig to establish a legal defense fund and trust. But as with the Kolbe Advisory Opinion, defendants disregard the stern admonition contained in the Senate Ethics Committee's letter of approval: "the Committee's approval of the Fund and of the trust agreement does not indicate approval of your continuation of the proceedings in State of Minnesota v. Larry Edwin Craig." Ex. 9 to Defs.' Opp. at 2. The letter further states: "The Committee also reminds you that it has not approved your use of campaign funds for the payment of legal expenses in connection with this proceeding, noting in its Public Letter of Admonition that `[i]t appears that some portion of these expenses may not be deemed to have been incurred in connection with your official duties.'" Id. at 3. Given these express admonitions, it is difficult to understand how defendants can claim that the Senate Ethics Committee "acknowledged that Senator Craig's legal expenditures `relate to or arise by virtue of the service of the Member.'" Defs.' Opp. at 3.
It is undisputed that defendants sought advice from counsel as to whether they
But whether or not defendants would have made the expenditures at issue in this case without counsel's approval, defendants have been on notice since at least February 13, 2008 that their expenditures might not comport with the law. See Ex. 7 to Defs.' Opp. at 1-2 (public letter of admonition from Senate Ethics Committee dated Feb. 13, 2008 stating "[i]t appears that some portion of these expenses may not be deemed to have been incurred in connection with your official duties, either by the Committee or by the Federal Election Commission"). Defendants persisted in expending campaign funds on the Minnesota lawsuits for several more months, despite this warning. See, e.g., Ex. 1 to FEC Mot. at "Craig 75" (legal invoice from the Kelly law firm for legal services provided between April 1, 2008 and September 15, 2008). And defendants decided to forego what would have been a significant demonstration of good faith and declined to request an advisory opinion from the FEC about their spending before disbursing the funds. FEC Mem. at 26.
In sum, the Court finds that the evidence of defendants' good or bad faith in this case points in both directions: defendants ignored clear admonitions against their use of campaign funds and declined to seek an advisory opinion from the FEC, but they also relied on the advice of counsel and disclosed all of their spending. Thus, the Court concludes that the factor that takes defendants' "faith" into consideration was largely neutral, and it neither aggravates nor mitigates the penalty the Court will impose.
The Court finds that these factors weigh in favor of imposing a penalty in this case. First, although the injury to the public caused by defendants' misappropriation of campaign funds is difficult to discern, "there is always harm to the public when FECA is violated." P.E.O.P.L.E. Qualified, 1991 WL 241892, at *2. It is also reasonable to conclude that defendants' actions caused harm to the contributors to the Craig Committee, who presumably intended that their donations be used for lawful, campaign-related purposes. Moreover, a penalty here would certainly vindicate the authority of the FEC and strengthen its ability to enforce the FECA's personal use ban in the future.
In addition, the FEC argues that a penalty is necessary to deter similar violations and to punish defendants, noting that the
Despite defendants' protestations to the contrary in their opposition brief, defendants' counsel acknowledged at oral argument that Senator Craig has the ability to pay the full $216,984 disgorgement plus the $70,000 penalty that the FEC seeks. Hr'g Tr. at 48-49
The Court finds that all of the Furgatch factors are either neutral or weigh in favor of imposing a penalty. This is not a case like Furgatch, where the defendant plainly acted in bad faith and refused to report the unlawful expenditures, which warranted a penalty equal to the amount of the violation. See 869 F.2d at 1259. On the other hand, this is also not a case like Ted Haley, where the court assessed no penalty because the statute and regulations were unclear, the defendants acted in good faith, and the defendants quickly remedied their unintentional violations. See 852 F.2d at 1116-17. Some penalty, therefore, is called for.
But the Court does not agree that defendants' violation warrants the full $140,000 penalties the FEC seeks on top of an order of disgorgement. The FEC states that it requested penalties in the amount of $70,000 for defendants Craig and the Craig Committee because the sum must be sufficient to deter and punish violations of section 30114(b) without being overly punitive. See FEC Mem. at 18. At oral argument, counsel for the FEC noted that penalties that are too low are ineffective, since they "threaten[] to become something equivalent to interest on a loan payment for the immediate use of campaign funds." Hr'g Tr. at 16.
This argument has some force, but in the court's view, the proposed $140,000 penalty would be excessive given all of the facts and circumstances, including the amount that was diverted. The Court notes that the total penalty requested here exceeds the assessment in most of the conciliation agreements that the FEC cites in its pleadings. See, e.g., Campbell for Senate Conciliation Agreement at 3-4 (Oct. 31, 2003) (assessing civil penalty of $79,000 where violation was not willful or knowing and requiring refund of up to $104,434 in excess contributions); Meeks for Congress Conciliation Agreement at 8 (Feb. 4, 2008) (assessing civil penalty of $63,000 against campaign committee and ordering refund and disgorgement of other funds). But see America Coming Together Conciliation
Furthermore, the Court will not order that any funds be disgorged to the Craig Committee,
Under these circumstances, where the Craig Committee is little more than an alter-ego for Senator Craig himself, the Court finds that any disgorgement of funds to the Committee would be little more than an empty gesture and a logistical headache. So, the Court will simply order Senator Craig to pay both the $197,535 disgorgement and the $45,000 penalty to the U.S. Department of the Treasury.
The FEC asks the Court to declare that defendants violated the FECA by converting campaign funds to personal use. Defendants do not object to this request beyond their general contention that they did not break the law. As the Court has already determined that defendants did, indeed, violate section 30114(b) by converting campaign funds to the personal use of Senator Craig, the Court will issue the declaration that the FEC seeks.
The FEC seeks a permanent injunction precluding defendants from repeating the unlawful conduct involved in this case. FEC Mena. at 30. "An injunction is appropriate `if there is a reasonable likelihood that the wrong will be repeated.'" P.E.O.P.L.E. Qualified, 1991 WL 241892, at * 1, quoting SEC v. Manor Nursing Ctrs., Inc., 458 F.2d 1082, 1100
The Court finds that defendants are liable as a matter of law for violating the FECA's ban on converting campaign funds to personal use. The Court will therefore order Senator Craig to pay $242,535 to the U.S. Department of the Treasury, including a disgorgement of $197,535, the funds defendants unlawfully converted, plus a penalty of $45,000. The Court will also issue a declaration that defendants violated section 30114(b) by converting campaign funds to the personal use of Senator Craig. The Court will not, however, issue a permanent injunction in this case, nor will it order any relief against the Craig Committee. A separate order will issue.
Legal Description ( exemptions Total Exempt Hourly Exempt
Law Firm Date Prof'l italicized and bolded ) Hours Hours Rate Amount Page
Attend to public relations
issues regarding motion to
withdraw guilty plea. Call
with C Garrett (Impact
Sutherland, Strategies) regarding same.
Asbill, & 9/28/ K.H. Review draft q&a regarding Craig
Brennan 2007 Sinclair same.) 1.10 1.10 $355 $390.50 311
Attend to public relations
issues related to ACLU
Sutherland, involvement in motion to
Asbill, & 9/29/ K.H. withdraw guilty plea. Call to Craig
Brennan 2007 Sinclair M. Ware regarding same 0.20 0.20 $355 $71.00 31
Confer with local counsel
regarding upcoming hearing.
Miscellaneous calls with press
Sutherland, staff and staff of Senator Craig
Asbill, & 9/17/ K.H. regarding legal and media Craig
Brennan 2007 Sinclair issues pertaining to motion to 2.10 0.50 $355 $177.50 32
[Editor's Note: The preceding image contains the reference for footnote1 ].
Legal Description ( exemptions Total Exempt Hourly Exempt Law Firm Date Prof'l italicized and bolded ) Hours Hours Rate Amount Page withdraw guilty plea. Review ACLU amicus brief2 Various calls with M. Ware,J. Smith ,3 T. Kelly regarding upcoming hearing on motion to withdraw guilty plea. Confer with L. Craig regarding same. Review ACLU amicus Sutherland, brief. Attend to miscellaneous Asbill, & 9/18/ K.H. legal andmedial [sic]issues Craig Brennan 2007 Sinclair regarding same. 1.10 0.50 $355 $177.50 32 [Editor's Note: The preceding image contains the references for footnotes2 ,3 ]
Legal Description ( exemptions Total Exempt Hourly Exempt Law Firm Date Prof'l italicized and bolded ) Hours Hours Rate Amount Page Telephone call with L. Craig regarding upcoming hearing and factual details surrounding conversations with prosecutors. Call with M. Ware regarding case status, Meet with L. Craig, M. Ware regarding case status. Brief Senator A. Specter regarding case status. Travel to and from same. Various calls with T. Kelly,J. Smith regarding Sutherland, procedural issues. Review Asbill, & 9/20/ K.H. Motion to strike ACLL; amicus Craig Brennan 2007 Sinclair brief. 5.20 1.00 $355 $355.00 32 Review motion to strike ACLU amicus brief Draft waiver of appearance Discuss same with T. Kelly, L. Craig.Discuss various publicity issues with J. Smith, C. Sutherland,Garrett. Discuss motion to Asbill, & 9/21/ K.H. strike ACLU brief with B. Craig Brennan 2007 Sinclair Martin. 2.10 0.50 $355 $177.50 32 Prepare for hearing on motion to withdraw guilty plea Various calls withJ. Smith, T. Kelly, M Ware, L. Craig regarding upcoming hearing. Confer with B. Martin regarding motion. Review government response to Sutherland, motion to withdraw guilty Asbill, & 9/24 K.H. plea. Review case law Craig Brennan 2007 Sinclair regarding same. 4.60 0.50 $355 $177.50 32 Finalize motion. Discuss same with B. Martin.Research on ethics and procedural rules regarding media. Discussion with L. Craig regarding motion. Calls with M. Ware Sutherland, regarding motion. Discussion Asbill, & 9/9/ K.H. of final edits to motion with T Craig Brennan 2007 Sinclair Kelly 7.50 2.00 $355 $710.00 33
Legal Description ( exemptions Total Exempt Hourly Exempt Law Firm Date Prof'l italicized and bolded ) Hours Hours Rate Amount Page Various calls withJ. Smith, M. Ware, L. Craig, T. Kelly regarding case status and strategy. Attend to issues Sutherland, relating to filing of motion to Asbill, & 9/10/ K.H. withdraw guilty plea. Review Craig Brennan 2007 Sinclair rules regarding same. 2.30 0.50 $355 $177.50 33 Various calls with M. Ware, L. Craig, J. Smith, T. Kelly, B. Sutherland, Martin regarding legal and Asbill, & 9/11/ K.H.media issues related to motion Craig Brennan 2007 Sinclair to withdraw guilty plea. 1.60 0.50 $355 $177.50 33 Various calls withJ. Smith, M. Ware, B. Martin, T. Kelly regarding case filing. Review Sutherland, draft of ACLU brief. Attend to Asbill, & 9/12/ K.H. issues related to scheduling Craig Brennan 2007 Sinclair hearing. 2.20 0.50 $355 $177.50 33 Various calls with T. Kelly, J. Smith regarding legal andmedia issues related to motion to withdraw guilty plea and Sutherland, upcoming hearing. Review Asbill, & 9/13/ K.H. ACLU arguments related to Craig Brennan 2007 Sinclair constitutional law. 1.40 0.50 $355 $177.50 33 Various calls with M. Ware, J. Smith, B. Martin, T. Kelly regarding upcoming hearing on motion to withdraw guilty plea andrelated media issues. Sutherland, Review media documents and Asbill, & 9/14/ K.H. revise same Transmit same to Craig Brennan 2007 Sinclair M. Ware and D. Whiting. 3.00 1.00 $355 $355.50 33 Consult with client regarding case strategy and costs and benefits of motion to withdraw plea. Research and draft motion to withdraw guilty plea. Discuss same with B. Martin Various calls with Sutherland, Senate staff regardingpublic Asbill, & 9/4/ K.H.relations and legal issues. Craig Brennan 2007 Sinclair Various discussions withJ. 4.50 1.00 $355 $355.00 34
Legal Description ( exemptions Total Exempt Hourly Exempt Law Firm Date Prof'l italicized and bolded ) Hours Hours Rate Amount Page Smith regarding legal issues. Draft and revise motion to withdraw guilty plea. Discuss same with B. Martin. Various calls to Senate staff regarding legal and political issues associated with motion. Sutherland,Various calls with J. Smith Asbill, & 9/5/ K.H.regarding publicity issues Craig Brennan 2007 Sinclairassociated with motion. 10.50 2.00 $355 $710.00 34 Attend to finalizing motion to withdraw guilty plea and affidavit. Additional research regarding same. Discuss same with B. Martin and K. Verdi Various calls with Senate staff regarding legal issues associated with motion to withdraw guilty plea. Various calls withJ. Smith regarding legal andpublicity issues associated with motion to withdraw guilty plea. Various calls with T. Kelly regarding Sutherland, motion to withdraw guilty Asbill, & 9/6/ K.H. plea. Review supporting Craig Brennan 2007 Sinclair materials for same. 7.50 1.50 $355 $532.50 34 Revise motion to withdraw guilty plea and supporting affidavit. Discuss same with B. Martin and K. Verdi. Various calls with Senate staff regarding legal issues associated with motion Various calls with T. Kelly regarding legal issues associated with motion. Sutherland,Various calls with J. Smith Asbill, & 9/7/ K.H. and staffregarding publicity Craig Brennan 2007 Sinclairissues associated with motion. 5.10 1.50 $355 $532.50 34
Legal Description ( exemptions Total Exempt Hourly Exempt Law Firm Date Prof'l italicized and bolded ) Hours Hours Rate Amount Page Review response letter from Statesman. Discuss same with B. Martin. Discuss same with J. Smith. Conference call with Sutherland,M Ware, B. Roberts, S. Asbill, & 8/9/ K.H.Smith, S. Potano, W. Hart, D. Craig Brennan 2007 SinclairWhiting. Draft reply letter. 2.40 2.40 $355 $852.00 35 Sutherland,Draft response letter to Asbill, & 8/10/ K.H.Statesman. Discuss same with Craig Brennan 2007 SinclairJ. Smith. 1.40 1.40 $355 $497.00 35 Sutherland,Strategy call with M. Ware, S. Asbill, & 8/15/ K.H.Smith, W. Hart, D. Whiting, J. Craig Brennan 2007 SinclairSmith. 0.80 0.80 $355 $284.00 35Draft response letter to Statesman. Confer with J. Sutherland,Smith regarding same. Confer Asbill, & 8/16/ K.H.with B. Martin regarding Craig Brennan 2007 Sinclairsame. Transmit same to client. 1.50 1.50 $355 $532.50 35 Attend tomedia and legal issues surrounding Minneapolis proceedings.Attend to senate ethics issues. Sutherland, Numerous teleconferences Asbill, & 9/1/ K.H. with M. Ware, J. Smith, B. Craig Brennan 2007 Sinclair Martin regarding same. 6.80 2.50 $355 $887.50 35 Teleconference to discuss Sutherland, arrest of Senator Craig and Asbill, & 8/27/ B. possible legal andPR Craig Brennan 2007 Sinclairimplications of arrest. 1.00 0.50 $650 $325.00 36 Teleconference with Senator Craig, Office of the Sutherland, Prosecution and local counsel. Asbill, & 8/30/ B.Press accounts and PR Craig Brennan 2007 Sinclairstrategy. 0.80 0.40 $650 $260.00 36
Legal Description ( exemptions Total Exempt Hourly Exempt Law Firm Date Prof'l italicized and bolded ) Hours Hours Rate Amount Page Research and review draft Press Release ; telephone conversation with client; discuss options,prepare and Sutherland,review of press conference; Asbill, & 9/1/ B.telephone conference with Craig Brennan 2007 MartinStan Brand. 4 2.50 2.00 $650 $1.300.00 36 Meetings in Minneapolis with trial team, T. Kelly, K. Sinclair Sutherland, andPR team to prepare for Asbill, & 9/26/ B. hearing andpress conference. Craig Bremmam 2007 Martin Attendance at Motion hearing. 14.00 3.00 $650 $1.950.00 36 8/28/ Case law research; 2007 Supplemental research; Draft to correspondence and court Kelly & 9/26/ J. documents,Field and redirect Craig Jacobson 2007 Katanmedia calls. 8.00 2.00 $110 $220.00 44 Attend to filing notice of appeal. Confer with P. Jacobson regarding same.Confer with J. Smith and D. Sutherland, 10/Rene regarding media issues. Asbill, & 15/ K.H. Call to L. Craig regarding Craig Brennan 2007 Sinclari status of appeal. 1.80 0.80 $355 $284.00 49 Sutherland, 10/ Asbill, & 19/ K.H.Review media goals statement. Craig Brennan 2007 Sinclari Revise statement of case. 0.60 0.30 $335 $106.50 49Review draft question and Sutherland,answer documents. Confer Asbill, & 10/5/ K.H.with J. Smith and Senate staff Craig Brennan 2007 Sinclariregarding same. 0.70 0.70 $355 $248.50 50 Sutherland,Review draft question and Asbill, & 10/6/ K.H.answer for poll. Confer with Craig Brennan 2007 SinclairSenate staff regarding same. 6.60 0.60 $355 $213.00 50 [Editor's Note: The preceding image contains the reference for footnote4 ]
Legal Description ( exemptions Total Exempt Hourly Exempt Law Firm Date Prof'l italicized and bolded ) Hours Hours Rate Amount Page Review draft question and answer documents. Confer with J. Smith regarding same. Attend to scheduling issues. Sutherland, Attend to issues related to Asbill, & 10/7/ K.H. upcoming poll.Confer with Craig Brennan 2007 SinclairD. Whiting regarding same. 2.10 2.10 $355 $745.50 50 Attend conference call with M. Ware, L. Craig,J. Smith and Senate staff regarding next Sutherland, steps. Discuss notice appeal Asbill, & 10/8/ K.H. with T. Kelly. Prepare notice Craig Brennan 2007 Sinclair appeal. 2.70 0.50 $355 $177.50 50 Attend to filing issues related to notice of appeal with local counsel. Attend to billing issues in relation to FEC disclosure. Confer with T. Kelly regarding notice appeal. Confer with P. Jacobson regarding notice of appeal.Confer with J. Smith Sutherland, 10/regarding public relations Asbill, & 12/ K.H.issues related to notice of Craig Brennan 2007 Sinclairappeal. 3.10 0.60 $355 $213.00 50 Conference call with Senator Sutherland, Craig, K. Sinclair andPR team Asbill, & 10/4/ B. to discuss and review Judge's Craig Brennan 2007 Martin decision. 1.50 0.75 $650 $487.50 51 Sutherland, 10/ Asbill, & 15/ B.Review of Press Release for Craig Brennan 2007 Martinappeal. 0.50 0.50 $650 $325.00 51Attend to various public relations issues. Research Sutherland, procedures for filing notice of Asbill, & 10/2/ K.H. appeal. Discuss same with T. Craig Brennan 2007 Sinclair Kelly. 2.10 1.00 $355 $355.00 51 Prepare for issuance of order. Review procedures for filing appeal. Various calls to client, Sutherland,J. Smith, Senate staff Asbill, & 10/3/ K.H. regarding scheduling and Craig Brennan 2007 Sinclair procedural issues. 3.10 0.30 $355 $106.50 51
Legal Description ( exemptions Total Exempt Hourly Exempt Law Firm Date Prof'l italicized and bolded ) Hours Hours Rate Amount Page Teleconference regarding Sutherland, 10/Senator ethics issues; Asbill, & 30/ B.discussion with ethics Craig Brennan 2007 Martincounsel. 1.50 1.50 $650 $975.00 59 Sutherland, 10/ Asbill, & 26/ K.H. Review appellate rules.Attend Craig Brennan 2007 Sinclairto media issues with J. Smith. 1.10 0.50 $355 $177.50 59Call with M. Ware, B. Roberts, D. Whiting regarding Senate Ethics Committee issue. Conference call with M. Ware, B. Roberts, D. Whiting, S. Brand, B. Martin, Sutherland, 10/J. Smith regarding Ethics Asbill, & 31/ K.H.Committee issues and media Craig Brennan 2007 Sinclairrelations. 0.70 0.70 $355 $248.50 60 Sutherland, 11/Review ethics committee Asbill, & 14/ K.H.submission. Confer with B. Craig Brennan 2007 SinclairMartin regarding same. 0.30 0.30 $355 $106.50 60 Sutherland, 11/ Asbill, & 29/ K.H.Call with M. Ware regarding Craig Brennan 2007 Sinclairpublic relations issues. 0.30 0.30 $355 $106.50 61 Review research on factual basis of guilty plea. Confer with T. Kelly regarding case Sutherland, 11/ status and research issues. Asbill, & 30/ K.H.Conference call on public Craig Brennan 2007 Sinclairrelations issues. 1.30 0.80 $355 $284.00 61 Revise appellate brief. Confer with B. Martin regarding same. Call to Senator's staff Sutherland, 12/ regarding legal and political Asbill, & 19/ K.H. issues related toIdaho Craig Brennan 2007 SinclairStatesman. 1.30 0.80 $355 $284.00 71 Call to B. Roberts.Review Sutherland, 12/draft letter to Idaho Asbill, & 20/ K.H.Statesman. Review revisions Craig Brennan 2007 Sinclair to appellate brief. 0.30 0.10 $355 $35.50 71
Legal Description ( exemptions Total Exempt Hourly Exempt Law Firm Date Prof'l italicized and bolded ) Hours Hours Rate Amount Page Redraft and finalize oral arguments; Telephone conferences with counsel for the defense; Review of cases; Preparation for oral arguments with counsel for the defense; Court — Appellate Hearing; Craig Kelly & 9/8/ T. Debrief with co-counsel;Post-hearing Jacobson 2008 Kellypress conference. 13.00 1.00 $550 $550.00 75 Review Judge Porter's Orders; Review court transcript; Assist in drafting Notice of Appeal & Statement of Case documents; Research relevant case law; Telephone conferences with the prosecuting attorney; Telephone conferences with the Appellate Court Clerk; Review court filings from prosecuting attorney; Review public statements made by client regarding the case;Handle calls from sources wanting factual information relevant to the case ; Review of 9/27/ ACLU court filings; Review 2007 Appellate Court Orders; to Multiple telephone 11/ conferences and email Kelly & 30/ T. correspondence with counsel Craig Jacobson 2007 Kelly for the defense. 7.50 1.50 $550 $825.00 79 9/27/ 2007 Draft correspondence and to court documents;Field and 11/redirect media calls ; Facilitate Kelly & 30/ T. filing of Appellate Court Craig Jacobson 2007 Katan documents. 1.00 0.50 $110 $55.00 87 TOTAL $19,449
1998 WL 108618, at *4, quoting FEC Advisory Opinion 1997-12 (alteration in original).
