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Federal Election Commission v. Craig for U.S. Senate

United States District Court, D. Columbia.

September 30, 2014

FEDERAL ELECTION COMMISSION, Plaintiff,
v.
CRAIG FOR U.S. SENATE, et al., Defendants

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For Federal Election Commission, Plaintiff: Harry Jacobs Summers, Kevin Deeley, Kevin Paul Hancock, Robert William Bonham, III, LEAD ATTORNEYS, FEDERAL ELECTION COMMISSION, Washington, DC USA.

For Craig For U.S. Senate, Larry E. Craig individually, and in his official capacity as Treasurer of Craig for U.S. Senate, Defendants: Andrew Dewald Herman, LEAD ATTORNEY, MILLER & CHEVALIER, CHARTERED, Washington, DC USA; Stanley McKennett Brand, LEAD ATTORNEY, BRAND LAW GROUP, PC, Washington, DC USA.

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MEMORANDUM OPINION

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

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former treasurer of the Craig Committee,[1] contending that defendants converted campaign funds to personal use in violation of the Federal Election Campaign Act (" FECA" or " the Act" ) when they expended those funds to pay legal fees incurred in connection with Senator Craig's efforts to withdraw his plea. Defendants moved to dismiss the complaint for failure to state a claim on August 2, 2012, and the Court denied that motion on March 28, 2013. The FEC then moved for summary judgment on September 30, 2013, seeking an order disgorging from Senator Craig the $216,984 sum that the FEC contends was unlawfully converted, a $70,000 civil penalty against defendant Craig, a $70,000 civil penalty against the Craig Committee, and declaratory and injunctive relief.

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.

BACKGROUND

The following facts are not in dispute.[2] Defendant Larry Craig was a United States Senator from Idaho from January, 1991 to January, 2009. Compl. [Dkt. # 1] ¶ 6; Answer [Dkt. # 12] ¶ 6. Senator Craig is named in this case both in his personal capacity and in his official capacity as treasurer of defendant Craig for U.S. Senate. See May 1, 2013 Minute Order. Defendant Craig for U.S. Senate is a political committee authorized to receive contributions and make expenditures on behalf of defendant Craig. Compl. ¶ 7; Answer ¶ 7. Plaintiff, the Federal Election Commission, is an agency of the United States government that is authorized to enforce the Federal Election Campaign Act. Compl. ¶ 5; Answer ¶ 5.

On June 11, 2007, Senator Craig was arrested in the Minneapolis-St. Paul International

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Airport and charged with two violations of Minnesota criminal law: " disturbing the peace-disorderly conduct," and interference with privacy. Compl. ¶ 12; Answer ¶ 12. On August 8, 2007, Senator Craig pled guilty to disorderly conduct, a misdemeanor. Compl. ¶ 12; Answer ¶ 12; see also FEC's Resp. to Defs.' Statement of Alleged Material Facts in Dispute [Dkt. # 21] ¶ 1 (" FEC Facts Resp." ). But on September 10, 2007, Senator Craig filed a motion in Minnesota state district court to withdraw his guilty plea. Compl. ¶ 14; Answer ¶ 14. Senator Craig's efforts to withdraw his plea were unsuccessful, and his final appeal was denied on December 9, 2008. Compl. ¶ 14; Answer ¶ 14.

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)[3] when they disbursed

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campaign funds to pay legal expenses related to the Senator's efforts to withdraw his guilty plea in Minnesota. Compl. ¶ ¶ 33-34. The FEC alleged that defendants unlawfully " converted the Craig Committee's funds to personal use" because these expenditures were not " made in connection with Mr. Craig's campaign for federal office and were not ordinary and necessary expenses incurred in connection with his duties as a Senator." Id. ¶ 33. Defendants moved to dismiss the complaint on August 2, 2012 for failure to state a claim. Defs.' Mot. to Dismiss [Dkt. # 3]. On March 28, 2013, the Court denied defendants' motion. See FEC v. Craig for U.S. Senate, 933 F.Supp.2d 111, 113 (D.D.C. 2013). Accepting the allegations in the complaint as true, the Court found that the FEC had stated a claim that defendants violated the Act by converting campaign funds to personal use. Id. at 116-119. The Court further found that defendants had failed to demonstrate that they were immune from prosecution based on their alleged reliance on prior FEC Advisory Opinions because all of those opinions were distinguishable. Id. at 120-25.

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." ).

STANDARD OF REVIEW

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

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marks omitted). To defeat summary judgment, the non-moving party must " designate specific facts showing that there is a genuine issue for trial." Id. at 324 (internal quotation marks omitted). The existence of a factual dispute is insufficient to preclude summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute is " genuine" only if a reasonable fact-finder could find for the non-moving party; a fact is only " material" if it is capable of affecting the outcome of the litigation. Id. at 248; Laningham v. U.S. Navy, 813 F.2d 1236, 1241, 259 U.S.App.D.C. 115 (D.C. Cir. 1987). In assessing a party's motion, the court must " view the facts and draw reasonable inferences 'in the light most favorable to the party opposing the summary judgment motion.'" Scott v. Harris, 550 U.S. 372, 378, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007) (alterations omitted), quoting United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962) (per curiam).

ANALYSIS

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.

I. Defendants violated 52 U.S.C. § 30114(b).

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.[4] See Craig, 933 F.Supp.2d at 116-119. The Court " reject[ed] defendants' assertion that the expenditures were permitted under the Act" because it found that legal expenses incurred in withdrawing a plea to personal criminal conduct in the airport could not be characterized as " ordinary and necessary expenses in connection with Senator Craig's duties as an office holder." Id. at 113. Therefore, " the campaign funds were converted to Senator Craig's personal use as that term is defined in the Act." Id. In addition, the Court found that defendants could not find safe harbor in prior FEC opinions since they had " misstate[d] the holding of those opinions, minimize[d] the key distinctions between those cases and [their own], and disregard[ed] clear

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admonitory language" in the advisory opinion on which they relied most heavily. Id.

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

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Court's finding that defendants violated ...


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