Subject: Campaign Finance / Use of Campaign Funds
Requested By: L. Steven Grasz on behalf of Lorelee Byrd
Questions Presented: May the campaign funds of a candidate committee be used to pay legal expenses?
Conclusion: No, unless the legal expenses are campaign related.
Facts: Lorelee Byrd served as the Nebraska State Treasurer from October 2001 to January 2004. She was initially appointed to the office and was elected in 2002. In 2003 an investigation was conducted by the Nebraska State Patrol. Subsequently, the Attorney General filed criminal charges against Ms. Byrd alleging official misconduct. Ultimately, Ms. Byrd pleaded guilty to a single misdemeanor and resigned from office. In the course of these proceedings Ms. Byrd incurred legal expenses. According to the request, certain of these expenses may be characterized as personal in nature since she would have incurred them even if she had not been a candidate for office. The request further states that other expenses were incurred with the law firm representing her in the form of consultation with the governmental affairs specialists of the firm. The request states that certain legal expenses would not have been incurred but for her intent at the outset of the proceedings to seek reelection in 2006. She wishes to know if any part of these legal expenses can be paid out of the campaign funds of her candidate committee.
Analysis: Section 49-1446.01 of the Nebraska Political Accountability and Disclosure Act (NPADA) generally provides that no committee may expend or transfer funds except to make an expenditure as defined in §49-1419. Subsection 3 of §49-1419 sets forth exclusions to the definition of expenditure. None of the exclusions appear relevant here. Subsection 4 of §49-1419 relates to lobbying expenditures and is not relevant here. The balance of §49-1419 provides as follows:
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1. Expenditure shall mean a payment, donation, loan, pledge, or promise of payment of money or anything of ascertainable monetary value for goods, materials, services, or facilities in assistance of, or in opposition to, the nomination or election of a candidate or the qualification, passage, or defeat of a ballot question. An offer or tender of an expenditure is not an expenditure if expressly and unconditionally rejected or returned.
2. Expenditure shall include a contribution or a transfer of anything of ascertainable monetary value for purposes of influencing the nomination or election of any candidate or the qualification, passage, or defeat of a ballot question. (Emphasis added.)
Section 49-1446.01 includes a non-exclusive list of purposes for which campaign funds can be spent. None appear relevant here.
Section 49-1446.02 provides in part that “…no committee shall expend or transfer funds for the purchase or payment of:… (5) Personal services, including the services of a lawyer or accountant, except campaign services subject to reporting pursuant to the provisions of section 49-1455”.
Section 49-1455 describes what information must be disclosed on a campaign statement.
It is appropriate to review what the Legislature intended by this statutory arrangement and how the Commission has viewed it in the past.
Sections 49-1446.01 and 49-1446.02 were enacted into law in 1981 as part of LB 134. State Senator Chris Beutler, one of the sponsors of LB 134 made the following statement as to LB 134 before the Miscellaneous Subjects Committee:
All of the changes are really aimed at one central goal, and that is to take the first steps towards defining what the difference is between campaign uses and personal uses. (Testimony of January 30, 1981)
During the floor debate on LB 134, State Senator Don Wesely stated:
…[T]he bill tries to say that if you can identify a use of your campaign funds that would further your candidacy…and if it was clear that the use that you have in mind would further your electability and perhaps your candidacy, …chances are it would be covered. (Floor Debate on LB 134, April 10, 1981)
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Since the enactment of LB 134 the Commission has consistently held that campaign funds must be used for campaign purposes and not for personal purposes.
“It is submitted that the legislative intent for §§49-1446.01 to 49-1446.03 was to restrict the use of campaign funds to activities which are reasonably related to campaigning and to prohibit their conversion to other uses.” (Advisory Opinion #60, 1983)
"Certainly the clear intent behind section 49-1446.02 of the Accountability Act is to prohibit the personal use of campaign funds." (Advisory Opinion #88, 1986)
“Taking §49-1419, §49-1446.01, and §49-1446.02 as a whole, it is apparent that the intent of the Legislature was to restrict the use of campaign funds. Section 49-1419 restricts the use of campaign funds. Section 49-1446.02 restricts the use of campaign funds. Section 49-1446.01 generally restricts the use of campaign funds and provides certain exceptions to those restrictions.” (Advisory Opinion #135, 1991)
Having determined that campaign funds must be used for campaign purposes and not for personal purposes, we examine the situation before us.
First, we must determine if Ms. Byrd was a candidate for public office at the time of the proceedings.
Section 49-1409(1)(d) of the NPADA defines the term "candidate". It provides in part that "[a]n elected officeholder shall, if eligible under law, be considered to be a candidate for reelection to that same office for the purposes of sections 49-1401 to 49-14,138 only." Ms. Byrd had been appointed to the office of State Treasurer in 2001. She was elected to the office in 2002. The Constitution of the State of Nebraska provides as follows:
The treasurer shall be ineligible to the office of treasurer, for two years next after the expiration of two consecutive terms for which he was elected. Article IV, Section 3, Constitution of the State of Nebraska.
While the eligibility of a person to hold office is not for the Commission to decide, the plain language of the State Constitution appears to permit the State Treasurer to hold office for two elected terms. Ms. Byrd was eligible for reelection to a consecutive term. She was thus a candidate pursuant to §49-1409(1)(d).
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Next we must establish how to determine if an expense is personal in nature or if it is in assistance of the nomination or election of a candidate.
In Advisory Opinion #86 (1986) we stated, that “one must look to the purpose of the expenditure to determine whether it may be made with campaign funds.”
In Advisory Opinion #88 (1986) the Commission adopted the "but for/primarily related" test for determining the purpose of the use of campaign funds. In Advisory Opinion #146 (1994) the Commission described in detail the "but for" test and gave the following examples of its application:
A. But for his candidacy, he would not have purchased the yard signs. The statement is true since there is no purpose in purchasing yard signs unless one is a candidate.
B. But for his candidacy, he would not have had the dental work done. The statement is not true since people normally have dental work done as a matter of personal health rather than as a campaign matter. Even if a candidate attempts to state the dental work is being done so that he has better looking teeth and wishes to enhance his appearance for the purpose of furthering his candidacy, dental work is still primarily personal in nature and the benefit is still primarily personal.
C. But for his candidacy, he would not have attended the seminar regarding legislation required in order to be eligible for federal matching funds. The statement is not true. The legislator is attending a seminar so that he can better carry out his legislative duties. While being a good officeholder may enhance one's acceptability as a candidate, the seminar is primarily related to the holding of a public office and not to the candidacy.
As stated, Ms. Byrd was the subject of a criminal investigation and criminal proceedings. The investigation and proceedings were related to her activity as State Treasurer. While there might be some basis for disagreement as to whether the investigation and proceedings were personal in nature or related to the duties of her public office, there is no basis for claiming that they were campaign related. Thus, the legal expenses related to the proceedings generally cannot be paid for out of campaign funds. However, to the extent that specific expenses for specific services comply with the "but for" test, those specific expenses could be paid for out of campaign funds. Whether a specific use of campaign funds complies with the "but for" test must be determined on a case by
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case basis. It is up to the candidate committee to establish that the use of campaign funds under specific circumstances is permissible under the law. This opinion should not be construed as an approval of any of the legal expenses alluded to in the request.
Summary: A candidate committee may not use campaign funds to pay legal expenses unless the use of the funds is an expenditure as defined in §49-1419. That is, the expenditure is in assistance of the nomination or election of a candidate. It is the candidate committee which must establish that the use of campaign funds to pay legal expenses qualifies as an expenditure.
ADOPTED as an advisory opinion pursuant to Section 49-14,123(10) and Title 4, Chapter 1, Rules of Practice and Procedure. As provided in Section 49-14,123(10), this advisory opinion shall be binding upon the Commission unless amended or revoked, concerning the person or public body who requested the opinion and acted in reliance thereon in good faith unless material facts were omitted or misstated by the person in the request for the opinion.
DATED this ______ day of October 2004
NEBRASKA ACCOUNTABILITY AND DISCLOSURE COMMISSION
John Bergmeyer, Chairman