The Hillary Victory Fund (probably) did not commit money laundering. If they committed any crime, it was a violation of Section 30116 (f) of Title 52:
No candidate or political committee shall knowingly accept any contribution or make any expenditure in violation of the provisions of [Section 30116 Limitations, Contributions, and Expenditures]. No officer or employee of a political committee shall knowingly accept a contribution made for the benefit or use of a candidate, or knowingly make any expenditure on behalf of a candidate, in violation of any limitation imposed on contributions and expenditures under [Section 30116 Limitations, Contributions, and Expenditures].
Section 30116 establishes limits for contributions by individuals to political candidates, and various state, local and national PACs.
Today, that limit for individuals is $2,700 per election to a candidate committee, $5,000 per year to a PAC, $10,000 per year to state, district or local PACs, $33,400 per year to the DNC, and $100,200 per year per account to additional Party Committee accounts. Here’s a handy chart by the FEC, so you don’t have to take my word for it!
Similar restrictions are in place for PACs that donate to individual candidates or other PACs. Since it's perfectly acceptable for certain PACs to raise an unlimited amount of money directly from donors, the individual limits for PACs prevent a PAC from simply funneling that unlimited money directly to an individual candidate. It's a byzantine system, and that's probably on purpose. There are all sorts of ways to legally "launder" money through the system to a particular candidate without directly disclosing the donation.
McCutcheon DID NOT Eliminate Individual Limits
McCutcheon v. FEC got rid of the aggregate limits that any individual or PAC can donate in an election year, but the individual limit is still there to serve as the final check on the unrestrained influence of donors on candidate's seeking reelection. Even the Conservative justices in McCutcheon reaffirmed the importance of the individual limit as the key defense against allegations of quid pro quo influence.
In the majority's opinion, the justices consider a hypothetical where a donor seeking influence over a particular candidate named Smith seeks a way to donate to the candidate's campaign. He donates the individual limit to a Committee related to Smith's campaign, but now the donor has to "turn to other PACs" where he cannot dominate the total receipts or exercise undue influence, especially since, according to the Court, "He cannot retain control over his contribution, direct his money 'in any way' to Smith, or even imply that he would like his money to be recontributed to Smith."
In other words, to the Conservative majority, the key protection against quid pro quo influence are those specific limits established by FEC regulations (limits against coordinating between PACs and candidate campaigns, and the individual campaign contribution limits). It is precisely those limits that the HFV appears to be violating.
NY BOE Referral Against De Blasio’s Campaign
Why do I suspect that the HFV’s activities may be illegal? Well, the NY BOE, interpreting a similar state statute, Election Law Section 14-126 (6), believed that Mayor DeBlasio’s reelection efforts for NY State Senate violated the law when it arranged to have state and local PACs serve as “straw donors” for three individual state senate candidates.
For some background, on April 22, the New York Daily News obtained a memo written by the NY Board of Elections' legal counsel outlining possible criminal violations of campaign finance law. The NY BOE referred the matter to the NY AGs office and the US AG in Manhattan. Both offices are launching separate investigations. The memo says that the BOE's staff found "willful and flagrant" violations of campaign finance laws related to NY Mayor DeBlasio's 2014 efforts to win election for several key NY state senate seats.
The memo suggests there is evidence that De Blasio, his campaign staff, several paid consultants, and several county and local campaign committees laid out in advance a system where certain donations to local and state PACs from certain individual donors would be directly transferred to three state senate campaign committees. The counsel's office concluded that these donations "should be considered contributions to the candidates and subject to the candidates' contribution receipt limits." The counsel's opinion was that the state and local PACs were serving as "straw donors" for these individual candidates. For example, a donation above $10,300 would be deposited in a local PAC, and then almost immediately that same amount would be transferred from the PAC to the senate candidate.
The system was effective because the individual limit for donors to state and local PACs is $103,000, but the individual limit for a specific candidate is only $10,300. The memo claims that the DeBlasio team (and this implicates a pretty large number of NY political players, including several unions and consultants that work with a variety of Democratic candidates) used the local PACs to solicit donations larger than the $10,300 individual limit allowable by law that were intentionally earmarked for the local NY senate candidates. For example, a donor would contribute $50,000 to the county PAC, which would then immediately transfer that same amount to the individual candidate's account. The Memo concluded that this coordination allowed DeBlasio's team "to evade contribution limits and to disguise the true names of the contributors, conduct which may violate Election law."
The Hillary Victory Fund
Although the AG investigation into DeBlasio’s campaign is ongoing, the underlying legal conclusions of the memo raise difficult questions for Hillary Clinton's fund raising activities in the 2016 primary. The Clinton Campaign has established a Joint Fundraising Committee (the HVF), which has been soliciting high-dollar donations from big donors to benefit Hillary's primary election campaign, but also the DNC and state PACs.
A joint fundraising committee DOES NOT allow a candidate to raise more money from an individual donor than would be allowable under election laws. Instead, it allows an individual donor to write one big check that is distributed to multiple candidates, as long as the individual amount that each candidate receives is less than the individual limit. For instance, I'm a bigwig and I donate the maximum allowable to HVF. The Clinton Campaign will receive $2,700 (maximum allowable individual donation to an individual candidate), and then the DNC will receive $33,400 (maximum allowable yearly donation by an individual to a National Party Commitee, and then $10,000 will go to the State Committee, but I'll only write one check to the HVF. There are variations on how these amounts can be distributed based on the type of committees, but you get the general idea.
In order for all of this to be legal, the HVF must ensure that the money from individual donors does not exceed the federal limits on individual political donations. In other words, no more than $33,400 of my money can legally go to the DNC. But guess what? It appears as if state political committees are transferring some of the money they receive from the HVF almost immediately back to the DNC. This would appear to make those state committees straw donors for the DNC, and potentially, depending on the coordination occurring between the DNC, HVF, and the Clinton campaign, represent a violation of the individual donation limits.
Keep in mind that it is a violation of federal campaign finance laws if any candidate or political committee “knowingly accepts” any contribution above the individual limit for that candidate or political committee set by the FEC. In this instance, it appears as if a HVF staff member is the one that automatically controls the transfer of funds from the state or local committee back to the DNC. That would appear to show clear coordination between the HVF, the DNC, and the State Committee, and if, as a result of that transfer, the DNC is receiving more than $33,400 from a single donor, that’s a likely violation of campaign finance laws.
To my knowledge, there is no formal investigation underway by the FEC of this fundraising arrangement. And, since the system is so opaque, there may be details of the transfers that would provide an argument for why this system is legal. However, it certainly appears to violate the spirit of the individual donation limits.
A Quick Note on the Individual Limit
We are engaged in a presidential election that will determine the future of the US Supreme Court, which will, in turn, determine the future of our campaign finance laws. If Justice Clarence Thomas has his way, there will be no limits on individual donors, and we will be back to an age of American politics where the wealthy are able to bankroll political candidates to their heart's content.
We complain about the Koch Brothers influencing politics, but without individual limits, it would be legal for the Koch Brothers to bankroll the political campaigns of every single Republican (and Democrat) in Congress. It would have been legal for Mitt Romney to donate an unlimited amount of his own money to a Democratic candidate in the Democratic primary in order to challenge President Obama prior to the 2012 election. It would be a revolutionary new world of corporate greed, unchecked by any semblance of government regulation. It would officially usher in a new gilded age.
Once you realize the danger of breaking down the last barrier of campaign finance laws, it becomes almost unbelievable that Democratic candidates appear to be establishing campaign finance systems intentionally designed to circumvent individual limits. Yes, we need to fight fire, with fire. But Democrats must also recognize that the individual limit is the only firebreak we have left. Without it, every campaign funding structure that attempts to represent the interests of the 99 percent will be destroyed by a sea of unregulated money from the 1 percent. The success stories of Democratic fundraising represented by President Obama's 2008 campaign and Bernie's 2016 primary will no longer be possible, because a single individual's donation could easily equal or exceed the collective donations of millions of Americans.
The investigation into DeBlasio's fundraising will continue, and perhaps more information will become available to exonerate his team. However, it seems more likely that DeBlasio's attorneys will argue that what he was doing was completely legal. And, in making that argument, the attorneys will be effectively arguing a position that even the Supreme Court's majority in McCutcheon didn't embrace. They will be arguing for the end of individual limits.
Also, as a final note, I know that Bernie’s team also established a Joint Fundraising Committee. It’s not the establishment of the committee that violates the law. It is how that committee transfers funds between candidates. That committee must ensure that the money transferred to the DNC or to individual candidates does not exceed the individual limits established by the FEC.