Selling the LNC Building — Legal Limits

An article from Dan Fishman

Dan Fishman writes

The law is crystal clear for political parties. Let’s preface this conversation that I oppose campaign finance law and I think this is all stupid.

When I took over as ED the LP was in dire straits financially (though nothing like today). So I started exploring ways we could make money.
As Executive Director I got pretty far into the weeds on this.

TL;DR: political parties can ONLY make money by donations. ONLY. ONLY. When the LP “sells” t-Shirts at the lp store, those sales are actually for donations. The reason why is that otherwise it would be easy to get around the max donation per person limit. I could sell a pin that costs me $1 to make for $50k and then a person who wanted to get past the $41k donation limit (to the general find) could buy 10 pins.

But I knew we had a building. So I found out that we could have 3 other purposed funds: Building, legal and convention — which are all self-descriptive in terms of what their find can be used for. The cap on the purposed accounts is always 3x the cap on the general fund.
So I thought — let’s first pay off this building entirely and then buy more buildings with the continued donations of the people who were giving to the building fund. Real Estate is an easy way to make money.

Let’s clarify what can be in the building fund — just the building. Computers for the building cannot be paid for with the building fund. Security for the building cannot be paid for with the building fund. Only the building and physical plant expenses.

We had an FEC consultant who advised us and other political entities. I had read the regulations and I thought there *might* be some way to make money from buying another building, and then leasing it to another entity. The answer is no. While you *could* lease a building, you cannot profit from it. The maximum you can collect is your yearly expenses.

So then I thought we could buy a really NICE building, use half of it and rent the other half out, and still be profiting. The answer is no. We would have to prorate our expenses based on the percentage that we used.
There were some games we could play — for example have a big space and allow people to rent it — but then it still counted as a donation for those people. The only way the LP can receive money is via a donation.

In addition to that restriction, the FEC prevents a political party from using money to generate income. Specifically,what I thought was a brilliant idea, was prohibitted. I had proposed we would buy properties in DC, hold on to them for 5 years and then sell them, returning all the “investors” money and pocketing the profits.

The FEC had already thought of that. The donors get back the share of sales equal to their share of donation.

So the answer is, the donors have a legal right to expect that their money will be returned. Even though much of the money was not deposited into a segregated building fund (as should have been done legally), the donors will tell you they were specifically solicited to donate to the building fund. In fact there’s even a special plaque and some jewelry building donors got.

David Blau, Esq. was the Secretary of the LNC who spearheaded the drive to buy the building, and was a major donor to the project. I believe there is plenty of legal firepower to make sure that the sale money is frozen until it’s returned to the donors.