Statutes violated by Rep. Richard Morgan and the NC Republican Mainstreet Committee

Statutes violated by Rep. Richard Morgan and the
North Carolina Republican Mainstreet Committee

Q: What laws were broken by Richard Morgan and his North
Carolina Republican Mainstreet Committee (NCRMC), in their
coordinated campaign to reelect him and his legislative
allies in 2004?

A: The NCRMC was created as a federal "527" committee,
also sometimes called a "527 political group." The press
routinely reports that 527s are prohibited from coordinating
their activities with any candidate or campaign, e.g.,

http://www.mooregop.org/ad_campaign_defends_morgans_cooperation_highlighted.html

But it turns out to be more complicated than that. The actual
wording of the provision in the federal statue defining such
committees prohibits coordination with candidates for federal
office, but contains no such prohibition of coordination with
candidates for State and local office:

http://www.law.cornell.edu/uscode/html/uscode26/usc_sec_26_00000527----000-.html
(see 527(e)(5)(D) "Participation of Federal candidate or office holder")

I am not a lawyer, but my conclusion is that Morgan & the
NCRMC apparently did not, by their coordination, violate
this federal law. (I presume that the federal law's intent
was to let such matters be covered by State law.)

But I examined Chapter 163, Article 22A of the NC General
Statutes, and found several provisions which Morgan & the
NCRMC apparently did violate.

Note, however, that Article 22A (G.S. 163-278.5 through
168-278.40I) was significantly revised in the second half of
2004, and again in 2005. Both of those revisions were after
the NCRMC concluded its advertising for Morgan et al.
These are the bills which revised Article 22A in the second
half of 2004 and in 2005:

http://www.ncleg.net/Sessions/2003/Bills/House/HTML/H737v7.html
http://www.ncleg.net/Sessions/2005/Bills/House/HTML/H1128v6.html

I've been unable to find a complete on-line copy of Chapter 163
exactly as it read in early 2004, but here are links to the
current version and the 2001 version, respectively:

2006: http://www.ncleg.net/EnactedLegislation/Statutes/HTML/ByChapter/Chapter_163.html (or here)
2001: http://web.archive.org/web/20011024235119/http://www.ncga.state.nc.us/statutes/statutes_in_html/chp1630.html (or here)
(press ctrl-F and search for "Article 22A.")

All the language in the current version about "electioneering
communication" was added in late 2004, as was some of the
language about "independent expenditures." Also, the 2004
revisions repealed G.S. 163-278.12A & G.S. 163-278.8(c), both
of which you can read in the 2001 version of Chapter 168.

But the language limiting contributions from federal political
committees is unchanged, as is the language defining
"political committees," and the language prohibiting corporate
contributions to political committees.

Here are some relevant sections, and how each one pertains to
Morgan and the NCRMC. These are all provisions which were
in effect in early 2004, when the Morgan/NCRMC violations took
place:

| G.S. 163-278.6(6), 163-278.6(9), & 163-278.6(9a) (definitions)
| G.S. 163-278.6(14)
G.S. 163-278.7(b)
G.S. 163-278.7A
G.S. 163-278.12A
G.S. 163-278.13(a)
G.S. 163-278.13(b)
G.S. 163-278.14A
G.S. 163-278.15
G.S. 163-278.19
G.S. 163-278.22
| G.S. 163-278.23
G.S. 163-278.27
G.S. 163-278.34
G.S. 163-278.35

G.S. 163-278.6(6) The terms "contribute" or "contribution" mean
any advance, conveyance, deposit, distribution, transfer of
funds, loan, payment, gift, pledge or subscription of money
or anything of value whatsoever, to a candidate to support
or oppose the nomination or election of one or more clearly
identified candidates, [or] to a political committee...
These terms include, without limitation, such contributions
as labor or personal services, postage, publication of
campaign literature or materials, [or] in-kind transfers...
The term "contribution" does not include an "independent
expenditure."
G.S. 163-278.6(9) The terms "expend" or "expenditure"
mean any purchase, advance, conveyance, deposit, distribution,
transfer of funds, loan, payment, gift, pledge or subscription
of money or anything of value whatsoever, whether or not made
in an election year, and any contract, agreement, promise or
other obligation, whether or not legally enforceable, to make
an expenditure, to support or oppose the nomination, election,
or passage of one or more clearly identified candidates, or
ballot measure. Supporting or opposing the election of clearly
identified candidates includes supporting or opposing the
candidates of a clearly identified political party. The term
"expenditure" also includes any payment or other transfer
made by a candidate, political committee, or referendum
committee. The special definition of "expenditure" in
G.S. 163-278.12A applies only in that section.
G.S. 163-278.6(9a) The term "independently expend" or
"independent expenditure" means an expenditure to support or
oppose the nomination or election of one or more clearly
identified candidates that is made without consultation or
coordination with a candidate or agent of a candidate whose
nomination or election the expenditure supports or whose
opponent's nomination or election the expenditure opposes.
Supporting or opposing the election of clearly identified
candidates includes supporting or opposing the candidates of
a clearly identified political party. ...

**** NOTE: One possible defense that could be offered by
Morgan is that the NCRMC's activities were "independent
expenditures." According to (9a), to qualify as an
"independent expenditure" the NCRMC's activities must
have been "without consultation or coordination" with
Morgan and his campaign team. But that doesn't pass the
laugh test. Since Morgan provably coordinated with the
NCRMC, and told the press what the NCRMC was going to
do before they did it, and publicly identified its
plans as being his own, its expenditures were certainly
not "independent expenditures" under NC law.
See also G.S. 163-278.13(a), and (since the NCRMC was
a federal committee) 11 CFR 109.21 (the federal
definition of "coordination")

G.S. 163-278.6(14) The term "political committee" means a
combination of two or more individuals, such as any person,
committee, association, organization, or other entity that
makes, or accepts anything of value to make, contributions
or expenditures and has one or more of the following
characteristics:
a. Is controlled by a candidate;
b. Is a political party or executive committee of a
political party or is controlled by a political party
or executive committee of a political party;
c. Is created by a corporation, business entity,
insurance company, labor union, or professional
association pursuant to G.S. 163-278.19(b); or
d. Has as a major purpose to support or oppose the
nomination or election of one or more clearly
identified candidates.
Supporting or opposing the election of clearly
identified candidates includes supporting or opposing the
candidates of a clearly identified political party.
An entity is rebuttably presumed to have as a major
purpose to support or oppose the nomination or election of one
or more clearly identified candidates if it contributes or
expends or both contributes and expends during an election
cycle more than three thousand dollars ($3,000).

|*** NOTE #1: It appears that the NCRMC was a "political
committee" under NC law by virtue of both (a) and (d).
(a) applies because the NCRMC was controlled by Morgan, McComas
& Brubaker, all of whom were candidates at the time (Morgan
was pulling the strings, but two of its three officers were
McComas & Brubaker). (d) also applies since its
purpose was (in Morgan's own words) to "support" his
legislative allies and "protect" him.
| However, I'm informed that the enforcibility of (d) is
| in question due to a current court case. Also, the
| term "expenditure" does not have its common dictionary
| definition. It has the much narrower definition in
| G.S. 163-278.6(9), which refers by implication
| to G.S. 163-278.14A.

**** NOTE #2: The legal presumption is that the purpose
was to support or oppose the nomination or election of
the candidates. The burden of proof is on Morgan et al
to show otherwise.
| However, I'm informed that this provision has been voided
| by court decision.

**** NOTE #3: In addition, it was reported in the press
(Raleigh News & Observer, May 23, 2004) that, "Morgan has
received an opinion from the state Board of Elections
that his committee is not for political purposes."
| It turns out, however, that the opinion letter from the
| SBOE was not addressed to Rep. Morgan, but rather to Mr.
| Rodger Knight. I have obtained the a copy of the letter
| which Mr. Knight wrote to the SBOE to elicit that reply.
| Mr. Knight's letter failed to mention that the NCRMC was
| controlled by candidates Morgan Brubaker & McComas
| (in fact, it failed to mention that the NCRMC had any
| connection to any candidate), and it mischaracterized
| the NCRMC's purpose, to try to get the SBOE opinion that
| they wanted: that the NCRMC was not a "political committee"
| under NC law. Even so, they didn't get quite the
| opinion they wanted: the SBOE opinion contained two
| significant caveats:
| 1) "this advisory opinion assumes that all contributions
| received and expenditures made will only be for the
| production of... 'issue advocacy' ads. If this assumption
| is incorrect, this advisory opinion will not be valid."
| 2) "it should be noted that the Fourth Circuit decision
| is presently under review by the United States Supreme Court.
| ... If the ruling should be overturned, this advisory opinion
| would be nullified."
| It is my understanding that the Fourth Circuit decision is
| still up in the air, but, because of the 12/10/2003 McConnell
| decision, which upheld the use of contextual factors to
| classify commmunication, the Fourth Circuit decision is
| likely to be reversed.

G.S. 163-278.14A. Evidence that communications are "to support
or oppose the nomination or election of one or more clearly
identified candidates."
(a) Either of the following shall be means, but not
necessarily the exclusive or conclusive means, of
proving that an individual or other entity acted "to
support or oppose the nomination or election of one or
more clearly identified candidates": ...
(2) Evidence of financial sponsorship of communications
whose essential nature expresses electoral advocacy
to the general public and goes beyond a mere
discussion of public issues in that they direct
voters to take some action to nominate, elect, or
defeat a candidate in an election. If the course
of action is unclear, contextual factors such as
the language of the communication as a whole, the
timing of the communication in relation to events
of the day, the distribution of the communication
to a significant number of registered voters for
that candidate's election, and the cost of the
communication may be considered in determining
whether the action urged could only be interpreted
by a reasonable person as advocating the
nomination, election, or defeat of that candidate
in that election.

**** NOTE: I have only partial quotes from the NCRMC ads, such
as this one: "It is because of strong leaders like Speaker
Morgan [that] Republicans were able to shape a legislative
agenda that focused on finding real solutions to real
| problems." That doesn't use the examples of "magic words"
| listed in the statute to advocate Morgan's reelection, but
| it is obviously a statement which supports a candidate rather
| than advocating any issues. Moreover, the law says that if
the "course of action" which is being encouraged by the ad
is unclear, the "contextual factors" should be considered.
In this case, the contextual context makes it perfectly
clear what the purpose was, and Morgan's own words to the
Winston-Salem Journal, stating the purpose as "a Morgan
protection plan," confirmed it, conclusively: the purpose
was "to support or oppose the nomination or election of
one or more clearly identified candidates."
| However, I'm informed that the enforcibility of the
| "contextual factors" clause is in question, due to a current
| court case, though, because of the 12/10/2003 McConnell
| decision, which upheld the use of contextual factors to
| classify commmunication (per BCRA), when the dust settles
| the "contextual factors" clause is likely to be upheld.
| But even if it is not, the opening sentence of 163-278.14A(a)
| clearly states that the enumerated tests in that section are
| not an exclusive list of the ways for proving the purpose
| of the committee and its ads. I contend that another conclusive
| way of proving the purpose would be a public admission by the
| candidate -- such as the boast that Morgan made to the
| Winston-Salem Journal.

G.S. 163-278.7(b) Each appointed treasurer shall file with the
Board at the time required by G.S. 163-278.9(a)(1) a
statement of organization that includes: ...
(2) The names, addresses, and relationships of affiliated
or connected candidates, political committees,
referendum committees, political parties, or similar
organizations; ...
(c) Any change in information previously submitted in a
statement of organization shall be reported to the Board
within a 10-day period following the change.

**** NOTE: Morgan's campaign treasurer did not include the NCRMC
as an "affiliated or connected committee" in his statement
of organization for the Richard Morgan Campaign Committee.
Neither did Brubaker's. Neither did McComas's. That's
another violation, by each of them. Morgan and Brubaker
were also required by law to report their connections with
another political committee, called "Citizens for Honesty
& Integrity" (which never paid a $2226 debt), but neither
did so.

G.S. 163-278.7A. Gifts from federal political committees.
It shall be permissible for a federal political committee, as
defined by the Federal Election Campaign Act and regulations
adopted pursuant thereto, to make contributions to a North
Carolina candidate or political committee registered under this
Article with the State Board of Elections or a county board of
elections, provided that the contributing committee does all
the following:
(1) Is registered with the State Board of Elections
consistent with the provisions of this Article.
(2) Complies with reporting requirements specified by the
State Board of Elections. Those requirements shall not
be more stringent than those required of North Carolina
political committees registered under this Article,
unless the federal political committee makes any
contribution to a North Carolina candidate or political
committee in any election in excess of four thousand
dollars ($4,000) for that election. "Election" shall be
as defined in G.S. 163-278.13(d).
(3) Makes its contributions within the limits specified
in this Article. ...

**** NOTE #1: "Contributions" from federal committees such as
the NCRMC are subject to NC's legal limits. This section
makes it clear that being organized as a federal committee
doesn't exempt them from the limits which apply to other
political committees.

**** NOTE #2: The NCRMC did not register as required with the SBOE,
and did not comply with the SBOE reporting requirements. In
fact, they filed no reports at all with the SBOE.

163-278.12A. Disclosure of spending for material that names candidates.
(a) General Duty to Report. Any individual, person,
political committee, or other entity that makes an expenditure
for printed material or advertisements broadcast or distributed
to anyone other than members of the entity shall report those
expenditures in accordance with subsection (b) of this section
if the printed material or advertisement names a candidate or
names an individual whose prospective or potential candidacy is
the principal purpose of a political committee. The disclosure
requirements of this section do not apply to the following:
(1) Material that is solely informational and is not
intended to advocate the election or defeat of a
candidate or prospective candidate; or
(2) The owner of a newspaper, magazine, radio outlet, or
television outlet, if that owner is not a candidate,
political committee, or the parent entity of a
political committee under G.S. 163-278.19.
(b) Procedures for Reporting; Exceptions. Any political
committee or other entity otherwise required by this Article to
file reports with a board of elections shall include an
expenditure described in subsection (a) of this section on those
reports. Any entity not otherwise required by this Article to
file reports shall report expenditures described in subsection
(a) of this section to the State Board of Elections within 10
days after the aggregate expenditure has reached the lowest
threshold amount set for candidates and political party
committees in G.S. 163-278.10A. After the initial report, each
entity shall report subsequent expenditures described in
subsection (a) of this section according to the schedule set out
in G.S. 163-278.9(a) or Part 2 of this Article, whichever is
appropriate.
(c) Definition. For the purpose of this section,
notwithstanding G.S. 163-278.6(9), the term "expenditure" means
any purchase, advance, conveyance, deposit, distribution,
transfer of funds, loans, payment, gift, pledge, or subscription
of money or anything of value whatsoever, whether or not made in
an election year, and any contract, agreement, promise, or other
obligation, whether or not legally enforceable. An individual or
entity is deemed to have made an expenditure for printed material
or advertisements if that individual or entity has agreed to
compensate another individual or entity for purchasing such
printed material or advertisements.
(d) No Criminal Liability. No duty imposed by this section
alone, and by no other law, shall be relied upon or otherwise
interpreted to create criminal liability for any person. (1997-
515, s. 11(a).)
| Note: 163-278.12A was repealed by Session Laws 2004-125, s. 4,
| effective July 20, 2004. (But that was after the 2004 primary
| campaign in which the NCRMC was active.)

G.S. 163-278.13. Limitation on contributions.
(a) No individual, political committee, or other
entity shall contribute to any candidate or other
political committee any money or make any other
contribution in any election in excess of four thousand
dollars ($4,000) for that election.

**** NOTE: As a political committee under NC law, the NCRMC was
prohibited by (a) from MAKING any contribution valued at
more than $4000. But it spent $237,366 on behalf of a
handful of legislative candidates. I contend that those
expenditures were "contributions" under G.S. 163-278.6(6)
("such contributions as... publication of campaign
literature"), and most of them were therefore illegal.

G.S. 163-278.13. Limitation on contributions.
(b) No candidate or political committee shall accept or
solicit any contribution from any individual, other
political committee, or other entity of any money or any
other contribution in any election in excess of four
thousand dollars ($4,000) for that election.

**** NOTE: The NCRMC was prohibited by (b) from RECEIVING any
contribution valued at more than $4000. But it received
contributions of $100,000, $25,000, $15,000, $15,000,
$12,000, $10,000, $10,000, $5000, $5000, $5000, and $4178:
http://www.mooregop.org/CPI_527-North_Carolina_Republican_Main_Street_Committee-totcon-2004.xls

G.S. 163-278.15. No acceptance of contributions made by
corporations, foreign and domestic.
No candidate, political committee, political party, or
treasurer shall accept any contribution made by any
corporation, foreign or domestic, regardless of whether such
corporation does business in the State of North Carolina.
This section does not apply with regard to entities permitted
to make contributions by G.S. 163-278.19(f).

**** NOTE: Nearly all of the contributions to the NCRMC were
from corporations. Since the NCRMC was a "political
committee" under NC law, accepting those contributions
was illegal. (None of the corporations which contributed
to the NCRMC were entities permitted to make contributions
by G.S. 163-278.19(f).)

**** NOTE: Both the NCRMC and the corporate contributors are
guilty of Class 2 misdemeanors.

G.S. 163-278.22. Duties of State Board.
It shall be the duty and power of the State Board: ...
(4) To make statements and other information filed with it
available to the public at a charge not to exceed
actual cost of copying.
(5) To preserve reports and statements filed under this
Article. Such reports and statements, after a period
of two years following the election year, may be
transferred to the Department of Cultural Resources,
Office of Archives and History, and shall be preserved
for a period of 10 years. ...
(7) To make investigations to the extent the Board deems
necessary with respect to statements filed under the
provisions of this Article and with respect to alleged
failures to file any statement required under the
provisions of this Article, and, upon complaint under
oath by any registered voter, with respect to alleged
violations of any part of this Article.
(8) After investigation, to report apparent violations by
candidates, political committees, referendum
committees, individuals or persons to the proper
district attorney as provided in G.S. 163-278.27.

**** NOTE: By filing complaint under oath to the SBOE, any
registered voter can trigger a duty by the SBOE to
investigate violations of Article 22A.

G.S. 163-278.27. Criminal penalties; duty to report
and prosecute.
(a) Any individual, candidate, political committee,
referendum committee, treasurer, person or media who
intentionally violates the applicable provisions of G.S.
163-278.7, 163-278.8, 163-278.9, 163-278.10, 163-278.11,
163-278.12, 163-278.13, 163-278.13B, 163-278.14,
163-278.16, 163-278.17, 163-278.18, 163-278.19,
163-278.20, 163-278.39, 163-278.40A, 163-278.40B,
163-278.40C, 163-278.40D or 163-278.40E is guilty of a
Class 2 misdemeanor. The statute of limitations shall
run from the day the last report is due to be filed with
the appropriate board of elections for the election
cycle for which the violation occurred.
(b) Whenever the Board has knowledge of or has reason to
believe there has been a violation of any section of
this Article, it shall report that fact, together with
accompanying details, to the following prosecuting
authorities:
(1) In the case of a candidate for nomination or
election to the State Senate or State House of
Representatives: report to the district attorney
of the prosecutorial district in which the
candidate for nomination or election resides; ...

**** NOTE: The SBOE is required by law to refer such violations
to the DA, for prosecution.

G.S. 163-278.23. Duties of Executive Secretary-Director of Board.
The Executive Secretary-Director of the Board shall
inspect or cause to be inspected each statement filed with the
Board under this Article within 30 days after the date it is
filed. The Executive Secretary-Director shall advise, or cause to
be advised, no more than 30 days and at least five days before
each report is due, each candidate or treasurer whose
organizational report has been filed, of the specific date each
report is due. He shall immediately notify any individual,
candidate, treasurer, political committee, referendum committee,
media, or other entity that may be required to file a statement
under this Article if:
(1) It appears that the individual, candidate, treasurer,
political committee, referendum committee, media, or
other entity has failed to file a statement as required
by law or that a statement filed does not conform to
this Article; or
(2) A written complaint is filed under oath with the Board
by any registered voter of this State alleging that a
statement filed with the Board does not conform to this
Article or to the truth or that an individual, candidate,
treasurer, political committee, referendum committee,
media, or other entity has failed to file a statement
required by this Article.
The entity that is the subject of the complaint will be given
an opportunity to respond to the complaint before any action is
taken requiring compliance.
The Executive Secretary-Director of the Board of Elections
shall issue written opinions to candidates, the communications
media, political committees, referendum committees, or other
entities upon request, regarding filing procedures and compliance
with this Article. Any such opinion so issued shall specifically
refer to this paragraph. If the candidate, communications media,
political committees, referendum committees, or other entities
rely on and comply with the opinion of the Executive Secretary-
Director of the Board of Elections, then prosecution or civil
action on account of the procedure followed pursuant thereto and
prosecution for failure to comply with the statute inconsistent
with the written ruling of the Executive Secretary-Director of
the Board of Elections issued to the candidate or committee
involved shall be barred. Nothing in this paragraph shall be
construed to prohibit or delay the regular and timely filing of
reports. The Executive Secretary-Director shall file all opinions
issued pursuant to this section with the Codifier of Rules to be
published unedited in the North Carolina Register and the North
Carolina Administrative Code.

|*** NOTE: The reason that the NCRMC sought an opinion from
| the SBOE was to trigger the shield from prosecution in
| this section: "If the [candidate or committee] rely on and
| comply with the opinion of the Executive Secretary-Director
| of the Board of Elections, then prosecution or civil action
| on account of the procedure followed pursuant thereto and
| prosecution for failure to comply with the statute inconsistent
| with the written ruling of the Executive Secretary-Director of
| the Board of Elections issued to the candidate or committee
| involved shall be barred." However, since the information
| which the NCRMC provided to the SBOE to elicit that opinion was
| misleading and incomplete, the opinion rendered presumably
| would not shield the NCRMC from prosecution. The most obvious
| and blatant omission was the NCRMC's failure to disclose that
| the committe was, per G.S. 163-278.6(14)(a), controlled by
| a candidate.
| (Note: 163-278.23 was modified by Session Law 2005-430, s. 8,
| in 2005. But that was after the 2004 primary campaign in which
| the NCRMC was active.)

G.S. 163-278.34. Civil penalties. ...
(b) Civil Penalties for Illegal Contributions. - If an
individual, person, political committee, referendum
committee, candidate, or other entity intentionally
makes or accepts a contribution in violation of this
Article, then that entity shall pay to the State Board
of Elections, in an amount to be determined by that
Board, a civil penalty and the costs of investigation,
assessment, and collection. The civil penalty shall
not exceed three times the amount of the unlawful
contribution or expenditure involved in the violation.
The State Board of Elections may, in addition to the
civil penalty, order that the amount unlawfully received
be paid to the State Board by check, and any money so
received by the State Board shall be deposited in the
Civil Penalty and Forfeiture Fund of North Carolina.

**** NOTE: Treble damages, plus reimbursement to the State,
plus costs of the investigation! For the NCRMC, since
nearly all the contributions it received were illegal
corporate contributions, that could come to as much as
$900,000 plus costs of the investigation.

G.S. 163-278.35. Preservation of records.
All reports, records and accounts required by this Article to
be made, kept, filed, or maintained by any individual, media,
candidate or treasurer shall be preserved and retained by the
individual, media, candidate or treasurer for at least two
years counting from the date of the election to which such
reports, records and accounts refer.

**** NOTE: Morgan and the NCRMC will be permitted to destroy
their records from the 2004 primary election two years
after that primary, on July 20, 2006.

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Statutes violated by Rep. Richard Morgan and the
North Carolina Republican Mainstreet Committee

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Statutes violated by Rep. Richard Morgan and the North Carolina Republican Mainstreet Committee

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Statutes violated by Rep. Richard Morgan and the
North Carolina Republican Mainstreet Committee