PAC Alert

PAC Alert
Riker Danzig Governmental Affairs Group.
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The New Jersey Election Law Enforcement Commission (ELEC) has begun the first round of enforcement actions for violations of the New Jersey Campaign Contributions and Expenditures Reporting Act under new, and greatly enhanced, penalties. Any entity that operates a Continuing Political Committee (CPC) (more commonly referred to as a PAC) or candidate committee in New Jersey should be aware of these new penalties.

In June of 2003, ELEC amended several of its regulations (N.J.A.C. 19:25-17.1, 17.1A and 17.2) and adopted new rules (N.J.A.C. 19:25-17.3A, 17.3B, 17.3C, 17.3D, 17.4 and 17.5.) to allow for enhanced "dollar-for dollar" monetary penalties. ELEC has begun to look back for the first time for violations committed after June 2003. It should be noted that these penalties will attach where there is a finding that a PAC has inadvertently failed to file necessary ELEC reports. Deliberate evasion of the law is not necessary for a penalty under this new regulatory scheme.

Under the June 2003 regulatory amendments, a fine must be equal to the total amount received or spent by the PAC during the period in which the PAC failed to file a report. N.J.A.C. 19:25-17.3A. Each contribution made or received by a PAC that was not reported represents a separate offense. N.J.A.C. 19:25-17.3A. For example, if a PAC failed to file a 48 hour pre-election report during which time the PAC received four (4) contributions equaling $20,000 and made three contributions equaling $15,000, then the recommended fine from ELEC for the failure to file the report will be $35,000. If the PAC that fails to file the report spends under $6,000 in that period, then the recommended fine from ELEC will be $6,000. N.J.A.C. 19:25-17.3A.

ELEC deems the failure to file a Report of Contributions & Expenditures (Form R1), Receipts, Expenditures Quarterly Report (Form R3), and the Supplemental Contributor and Expenditure pre-election Reports (Form IND, Form C-1, Form C-3, Form E-1, and Form E-3) to be the most egregious reports for a PAC to fail to file. N.J.A.C. 19:25-17.3A. The fines for failure to file all other forms with ELEC carry a minimum penalty of 25% of the maximum penalty, which equals $1,500 for the first offense and $3,000 for every subsequent offense. N.J.A.C. 19:25-17.3A(g).

ELEC views the failure to file a report worse than the late filing of a report. N.J.A.C. 19:25-17.3A(a). A PAC may mitigate a failure to file by filing late, in which case the CPC will face a lesser fine. However, if a PAC fails to file a 48 hour pre-election report by the date of the election, then it will be deemed as a failure to file and subject the PAC to enhanced penalties, even if the report is filed after the election. N.J.A.C. 19:25-17.3B(d).

ELEC does retain some discretion on the final amount that it may fine a PAC that violates the reporting requirements. N.J.A.C. 19:25-17.3C. The regulations list a number of mitigating factors that ELEC may consider, including: whether the entity has had previous offenses; penalties given in similar cases; if the report was delayed until after the election for political reasons; gross neglect of reporting responsibility; failure of the entity to cooperate with ELEC's investigation; and failure to respond to a subpoena. N.J.A.C. 19:25-17.3C. ELEC may also consider undue hardship upon the PAC or the organizational treasurer. N.J.A.C. 19:25-17.3C(e). ELEC has also indicated its willingness to reduce penalties for the PAC's cooperation in an investigation; however, the reduction thus far has only been minor. In certain circumstances, ELEC may allow for a payment schedule to pay off a fine. N.J.A.C. 19:25-17.3D. Please be aware that if ELEC files a complaint against a PAC, the organizational treasurer is likely to be named as a defendant as well. N.J.A.C. 19:25-9.1. State law specifies that a PAC's organizational treasurer is jointly and severally liable for ELEC violations. N.J.S.A. 19:44A-22. However, it should be noted that historically, treasurers have rarely been fined directly. ELEC accepts funds from a PAC to pay fines against the organizational treasurer and the PAC.

In 2004, the Legislature made amendments to the Campaign Contributions and Expenditures Reporting Act which increased monetary penalties for violations of the Act. ELEC may view the statutory changes as a signal that the Legislature embraced the new enhanced regulatory penalty provisions. Upon enactment of the law, one of the bill's sponsors stated that "Failure to disclose contributions or miss reporting deadlines are not rules meant to be broken or bent at whim. They are serious violations that should carry serious punishment." ELEC indicated in its original rule proposal that the enhanced penalty structure will encourage PACs and candidate committees to properly file with ELEC rather than face higher penalties.