Saturday, May 26, 2007

Campaign Finance Laws and Steve Shine's comments

I listened to Steve Shine's comments on WOWO and they were quite interesting.

I think the most interesting thing he said was that he had consulted with two Campaign Finance Law experts concerning the manner in which the Kelty Campaign reported the loans to his campaign. Steve Shine said that one expert thought that the method used by The Kelty Campaign was perfectly acceptable; while the other expert said that it was wrong.

Realize that Campaign Finance Laws should be established so that they can be easily understood by candidates for all public offices. Many of the people who run for office are not attorney's, CPA's and the like.

My wife and I are both CPA's. I just became a CPA while Karena has been a CPA for a long time. She certianly knows more about accounting then I do; however, I know more about politics and Campaign Finance. Both Karena and I held the position of Treasurer last year for campaigns in Allen County.

I would argue that Karena and I know at least as much as the average Campaign Treasurer in Allen County and I imagine the readers of this blog would agree with that statement.

She and I agree that we would have sent a written letter to The Allen County Election Board and asked them how to report the loans. Assuming that we got a vague response that referred us to Indiana code (Which I am relatively sure is what the Allen County Election Board would do) Karena and I would then have reported it differently. We currently have differing opinions on how the loans should be reported!

I think that tells you everything anyone needs to know...

If Steve Shine consults two different Election Law experts and gets two completely different answers that tells you that the law has different interpretations.

I think you will find that those people who support Matt Kelty will think he did nothing wrong while those who oppose Matt Kelty will think he violated the law.

When I go back and read the comments on this blog that is exactly what all of the comments show except for Scott. Scott feels differently because he rightly despises Camapign Finance Laws.

Mike Sylvester

31 comments:

Anonymous said...

Mike,

Notwithstanding the supposed complexity of the campaign finance laws. I CANNOT imagine having an individual commit $150,000! to me for use in my campaign and me not coming to the conclusion that I needed to DISCLOSE who the heck gave me the money whether it be a loan or otherwise. Come on guys, I know you dont want to dis your beloved Kelty but PLEASE how do you not come to the conclusion that you need to report this regardless of how "confusing" the law might be.

Clearly, somebody did not want this disclosed, either the campaign or the donor.

The Smell test is not passed.

Anonymous said...

now... funds given to the campaign as a contribution are not repayable, loans are....but if this individual gave the money directly as loan and Matt lost, he would not get his money back if he lost. By giving it to him as a personal loan, with signed note.. he is assured of getting him money back with I would also assume... interest...guaranteeing him his money back

Anonymous said...

Mike, I just want to commend you for your constant postive interest in the Kelty campaign! Families like yours are what America should strive for!

JED

Charlotte A. Weybright said...

Does anyone know who the "experts" were?

I have read the statutory provisions governing this situation, and, to be honest, they don't seem confusing at all.

The "loan" is considered a "contribution." Once the loan is defined as a contribution, the statutes say it must be disclosed.

Maybe I am missing something, but that seems pretty clear.

Mike, could you please tell me what is so confusing about that? I am not an accountant, so I don't know if the confusion arises from the accounting end of it or the definitional end.

Those who argue that the money could be used by Kelty for anything miss the point that Rost almost certainly would not have loaned Kelty the money if Kelty weren't running for office.

Anonymous said...

The bigger issue is that if it was wrong, why was it not address immediately, before the primaries?

If it wasn't a big deal before the primary, and apparently it wasn't, it shouldn't be a big deal now. If it's a big deal now, it should have been a big deal four months ago.

Anonymous said...

Charlotte,

What you are missing, assuming that you are reading the correct statute, is the word "donation." That word cannot be ignored. For anything to be a "contribution" it must first be determined to be a donation. A "real" loan, which requires repayment, is most assuredly not a "donation" and thus is als not a contribution subject to reporting.

How does your position treat the word "donation"?

Jeff Pruitt said...

Anon,

You are wrong. Read the statute defining a contribution (I blogged this here). It's quite clear that any LOAN made for the purpose of influencing an election is a contribution.

If you look at the latest rhetorical parsings coming from Kelty and Rost you'll see that they are now claiming that the loan wasn't "earmarked" for the campaign. They are deliberatly making this point because if it were earmarked for the campaign then it would certainly have to be reported and thus they would be in violation.

Now let's be honest here. Does anyone actually believe that this $148K was for any reason OTHER than helping w/ the campaign?

Jeff Pruitt said...

Just as a follow up to my above comment I will post the text that shows that a loan is clearly defined as a donation and thus as a contribution:

"“Contribution” means a donation (whether characterized as an advance, a deposit, a gift, a loan, a subscription, or a contract or promise to make a donation)"

That comes from Indiana Code 3-5-2-15 and is unambiguous...

Anonymous said...

Jeff-

Thanks for posting the statute. The parenthetical following "donation" means that you look to see if the transaction is, in truth, a "donation" regardless of the form the transaction takes or the characterization of the transaction. The parenthetical does not mean that all of the included examples are donations.

Donation is an un defined term (within the statute) so its' ordinary definition applies. Loans and donations are hardly synonymous. If I loan money to the Salvation Army with the expectation of repayment and an obligation on the part of the Salvation Army to repay, the transaction is a loan, regardless of whether my motive is to benefit the Salvation Army or to make interest on the money I have loaned.

Conversely, if I donate used clothing to the Salvation Army, with no expectation of payment or provision of services, that transaction is a donation, whether I was motivated by a desire to support the good works of the Salvation Army or only by the desire to add a charitable deduction to my tax return.

There is no prohibition upon a candidate borrowing money personally, so long as it is a legitimate loan with a binding obligation to repay. If the money must be repaid, the lender hasn't "donated" anything to anybody. If there is no "donation", the intent test of the statute is never reached.

Anonymous said...

Unbelieveable that this is even being debated.

A loan of $148,000 to a mayoral candidate for living expenses or whatever is most definitely a campaign contribution and in fact is the largest contribution to a mayoral campaign in the history of the State of INDIANA!!

You guys arguing for Kelty should only do it on blogs because there is no way you will be able to keep a straight face if you do it in person.

This is an absolute no brainer.

By the way, this WAS an issue in the primary. Kelty was asked by the press and other parties about the origins of the loan BUT he mislead. He responded that it was from personal funds and personal accounts. NOW, he had to explain it in order to open up the wallets of the largest contributors. These people did not want to contribute to a candidate that would end up being involved in a swirling campaign finance scandle SO they asked for documentation.

Anonymous said...

Sorry anonymous 12:25, you are arguing based upon what you think the law ought to be, which is quite different from what the law actually is.

And by the way, the proceeds of a loan are the property of the borrower, unless the terms of the loan specify otherwise.

If I borrow $5000.00 from Joe and put it in my checking acoount, it is my personal property. If Bill, who has a $5000.00 judgment against me for an earlier loan that I didn't repay, he can garnish my checking account and I don't get to defend by saying "that is Joe's money, not mine." If I earn interest on the money, I have to pay the taxes, not Joe. If I prepare a financial statement, the $5000.00 in my checking account must be disclosed as a personal asset and the loan to Joe is disclosed as a liability.

Anonymous said...

Conversely, if I donate used clothing to the Salvation Army, with no expectation of payment or provision of services, that transaction is a donation, whether I was motivated by a desire to support the good works of the Salvation Army or only by the desire to add a charitable deduction to my tax return.

And I CAN DO IT ANNONYMOUSLY, in this days of 'silent' donations to nonprofit organizations, it is surprising that the government can not do the same. I do see it reasons...but I strongly depise the campaign laws. I find it amusing that there have been no statement of Kelty doing good things with the money. NPO donors want to ensure their funds are spent, explains annual reports and 990 forms (that conceal the name of the donors, if name is given). It is not how much is given, who gave it, but what is being done with the money. I could see that this would be an issue, if Kelty spent it on Marijuana Joints or Rosary Beads for all Fort Wayne joints, but come on? Kelty spent on advertisements for his campaign...which lead to the objective...Winning!

Charlotte A. Weybright said...

Anon 11:16 and Anon 12:18 (wouldn't it be easier if a name went with these back and forth discussions?)

Yes, I was reading the correct statutes. I read several of them and understand them. But Jeff answered your question. I posted an expanded definition on his site that also deals with the word "property."

From Jeff's post above:

"Contribution" means a donation (whether characterized as an advance, a deposit, a gift, a loan, a subscription, or a contract or promise to make a donation) of property (as defined in IC 35-41-1)"...

If you then go to IC 35-41-1 you will find an extensive list of items considered to be property.

Anon, the statute says "whether characterized as...a loan..." The bottom line is that the reporting requirement applies. The legislature purposefully included the word "loan" to ensure that candidates simply just didn't sign meaningless promissory notes to avoid reporting the contribution.

And, anyone who is now trying to say this wasn't a contribution is truly not understanding statutory interpretation.

My question is this, "Would Rost and the Jehls have given Kelty this money if he weren't running for office? I don't think they would, therefore, their contributions fall within the statute and need to be reported.

ROACH said...

KELTY-GATE!

Anonymous said...

Anon 12:38 you are either too blind or too dumb to understand the campaign finance laws. Can you imagine if you were allowed to shield donors by trying to play these type of games? At that point, they might as well get rid of the laws. In my mind if the Rost loan is not disclosable then nothing is.

Anonymous said...

To argue that the Rost and Jehl loans were not for the campaign is to argue the absurd. Come on guys, give me a break!

Anonymous said...

> The bigger issue is that if it was wrong, why was it not address immediately, before the primaries?

Exactly. Kelty is not the only one who does not pay attention to issues that a reasonable pre-teen would be able to resolve. You are missing much bigger issue too. And it is trivial. Just think about it.
-------------------------------
Sometimes I sit and think, and sometimes I just sit.
(Sheikh Spear)

Jeff Pruitt said...

"Thanks for posting the statute. The parenthetical following "donation" means that you look to see if the transaction is, in truth, a "donation" regardless of the form the transaction takes or the characterization of the transaction. The parenthetical does not mean that all of the included examples are donations."

Wow, that's a very generous reading of the statute and I disagree with it. It will be interesting to see if the Kelty campaign will make that argument to the election board - I would doubt it...

Anonymous said...

Jeff-

You find my reading geneous, but what alternative reading? The statute cannot be construed by simply omitting or ignoring words that do not support a preferred construction.

The parenthetical begins "whether characterized as". Basic rules of statutory construction and grammar dictatethat the parenthetical modifies, relates to or explains the word or clause that preceeds it- in this case "donation". The word "characterized" is unnecessary and misleading if all loans (or advances, etc.) must be included within the meaning of "donation." This would also be inconsistent with the common meaning of "donation".

The statute means that all donations to a candidate must be scrutinized, using the two-part test, to determine if they qualify as a "contribution." In conducting the inquiry, the "characterization" of the transaction by the parties is not controlling. But if the transaction is, in fact, a loan, Kelty appears to have done nothing wrong.

Here is a simple evample. Employers are to pay FICA and withhold for all employees, regardless of whether the person is chacterized as an independent contractor or consultant. This does not mean that all persons labeled independent contractors must be employees; it means that in determining whether a person is an employee or an independent contractor, the labe or characterization used by the parties is not controlling or even particularly pertinent.

The statute means that you can't hide a donation simply by labeling it a loan does not mean that everything labeled a loan is a donation. If you have an alternate interpretation that accounts for all of the terms of the statute, I'll be happy to reconsider.

Jeff Pruitt said...

I believe your argument, if made by the Kelty campaign, would fail due to the fact that if we follow your argument to its logical conclusion then we must say that NO LOAN needs to be reported because, by your very definition, it would NOT be considered a donation.

If that were the advice given to the Kelty campaign then a simple question would be why would you report the PERSONAL loan in the first place?

I still reject your reading of the statute and I think that common sense (if used in legal proceedings) leads nearly everyone to the conclusion that loans specifically made for the campaign should be reported.

Does anyone know when this statute was enacted? It would interesting to get the opinion of those that authored it - I am 99.9% sure they would side w/ my interpretation...

Anonymous said...

You are correct concerning the logical conclusion of my position. True loans to the candidate in his/her personal capacity do not have to be reported. If the candidate then contributes or loans money to his campaign committee, that contribution or loan must be reported, as apparently Kelty did.

These loans occur frequently in Indiana. Kelty's situation is noteworthy because of the size of his loan to his campaign, which is probably the largest in the history of Indiana politics. Pretty high profile if you think you are doing something wrong.

Please consider that if these are true loans, the lenders didn't do that big a favor. They provided liquidity, but the money still has to be paid back. If you need a new car, and the bank agrees to loan on a schedule that meets your needs, I guess that's nice, but not too many people write thank you notes for their car loan.

As for the intent of those who wrote the statute, you only get there if the statute is ambiguous on its face. Consider, though, that those who wrote it are those who would have to live by it- perhaps you think they were trying to see how hard they could be on themselves.

Anonymous said...

Looks like Kelty's lawyer is posting. Boy, I haven't seen twists and turns like this since Clinton "depends on what the meaning of is...is"

Based on whats been reported and based on what Matt Kelty has stated, IF THIS transaction, loan, sweet heart deal, contribution, wink wink nod nod, (whatever you want to call it) IS NOT reportable then they ought to just throw out the campaign finance laws altogether. If somebody can finance your entire LIFE with $150,000 and it is NOT reportable, then rip of the campaign finance laws, and let anything go.

Robert Enders said...

Anonymous 6:52pm
I support the spirit in which campaign finance laws are intended. A person running for public office does waive certain rights to financial privacy. In some elections candidates are required to disclose how much they make in a year. After this, perhaps candidates should be required to disclose loans and sources of income.

Of course here is one possible loophole. Let's say a florist runs for mayor promising to eliminate Cherry Master game machines and also wants to build a casino downtown. She reports that she makes $50,000 as a florist. She does not report that she sold a simgle dandilion to the ACME Casino Company for $20,000.

The reason why campaign finance laws are so complex is because politicians are constantly looking for loopholes. While these laws are far from perfect, I still think that they are needed.

In the case of Kelty, I think he got some poor legal advice at first, but he is now complying with the letter and spirit of the law. He has voluntarily reported the loan.

Anonymous said...

He has not voluntarily done anything Mr. Enders. He had this dragged out of him. I will say this, you guys are truly big L libertarians. Anything goes whether legal or not.

Jeff Pruitt said...

"If the candidate then contributes or loans money to his campaign committee, that contribution or loan must be reported, as apparently Kelty did."

Why must it be reported? According to your own logic ONLY "donations" must be reported and since it was a loan then it shouldn't need to be reported. That's the problem with Kelty making that argument - it's inconsistent.

If he truly thought loans didn't need to be reported then he shouldn't of reported the personal one. Of course that he knew that would be a violation and thus he tried to circumvent the law by reporting it as a personal loan...

Mike Kole said...

I'll add my two cents...

If it had been my campaign, I would have reported the loan as a contribution without question. I would have been afraid to have neglected to include it.

When I ran, I did not accept any loans. However, candidates accept loans with regularity, even at the municipal level. Here in Fishers, a candidate for Town Council loaned himself $5,000 as starter money.

My opinion of the campaign finance laws is that they are designed to create exactly what you see here- a candidate mired in crap with opponents given gotchas. While to some it shows the nature of leadership the candidate will exhibit in office (no argument), these laws and this effect also tends to keep people out of the game for a distaste for dealing with it.

In the meantime, who is discussing the issues that affect Fort Wayne? As judging the number and scope of the posts, nobody. For that reason alone, campaign finance reporting should be greatly simplified.

Anonymous said...

FYI It was reported on his original campaign finace report as a loan, from him.. He has a peronal loan.. (which makes it his money) and a promissory note to pay it back

Anonymous said...

Mike Kole,

Yes loans in campaigns are common place and ALL a candidate needs to do is tell people who gave them the darn money. How complicated is this? You guys act like this was some sort of difficult conundrum to sort through. A campaign backer gave Kelty more than 1/8th of a million dollars to run his campaign, and it was in the form of a loan? How is this a close call?

If you believe that KELTY is pure as the driven snow on this, then at least you have to severely call into question his judgment.

999 out of 1000 candidates would have properly disclosed this huge loan.

Tim Zank said...

Forgive me, I don't want to oversimplify this, and I don't have a dog in this fight, but wouldn't it be prudent, if you're going to run for anything to just disclose everything from day one and void any hint of impropriety?

Jeff Pruitt said...

Exactly Tim - we're in full agreement. The idea that the laws are "convoluted" or "complicated" doesn't hold water. It's very simple - report everything and in a transparent manner. If you have to ask the question about whether you should report something or not then odds are you should...

Anonymous said...

Jeff and Tim, I agree 100%, but you know it was only $150,000, so it is kind of a grey area. At the end of the day its only about 150 times larger than a typical large local contribution of $1,000. I can see were Kelty might have viewed this as being one of too close to call items, especially since it was essentially ALL of the funds for his ENTIRE campaign.

Without these "loans", I believe Kelty raised about $674 and 12 cents.