Committee seeks to ban payments to family members

Written testimony of Maine Citizens for Clean Elections. Actual given testimony was a bit different because of developments at the hearing.

Maine Citizens for Clean Elections (MCCE) testifies neither for nor against LD 2015.

Representative Mills’ bill addresses a problem that became apparent when the Ethics Commission audited the reports of gubernatorial candidate Barbara Merrill. The audit revealed that Merrill paid her husband $109,000 as a consultant for her campaign media.

MCCE was disappointed that the Ethics Commission chose not to fully investigate this expenditure. Their feeling was that since it is not illegal to pay a spouse they had no authority to find a violation, and therefore, it would have been an empty exercise to investigate the matter further.

In light of the Merrill case and the Ethics Commission’s belief that they don’t have the authority to investigate such an incident, MCCE understands the importance of taking some legislative action that would prevent a similar incident from occurring again. However, we find the proposed restriction to the Maine Clean Election Act contained in LD 2015 to be both insufficient to solve problems like that revealed in the Merrill case and at the same time perhaps overly restrictive in prohibiting some legitimate campaign expenditures for candidates running under the Maine Clean Election Act.
MCCE believes that the details of the Merrill case brought up several troubling facts, only one of which was the fact that Phil Merrill is the husband of the candidate. We were also troubled by the lack of transparency about who was actually receiving the money. We were troubled that Phil Merrill, as an officer of the campaign, was authorized to make expenditures to himself of MCEA funds. And we were troubled by the lack of evidence that Phil Merrill was qualified to earn $109,000 for the specific services for which he was compensated – in other words, that he was paid commensurate with what someone else would conceivably pay him to do similar work. We hoped that the Ethics Commission would probe a bit further to make sure this payment was a legitimate campaign expenditure and not part of a personal enrichment scheme.

We believe that the Commission had then and still has the authority to pursue vigorous investigations whenever the facts raise questions about a possible enrichment scheme, whether the red flag is a family or spousal relationship or something else. We believe the Merrill situation would have been equally troubling if the expenditure had been made to a boyfriend, for example, or a cousin.
Last year when a similar proposal came before this committee, MCCE was not in favor. We still believe candidates have the right to pay for campaign related professional services from their Clean Election distribution, and we do not think it is appropriate to limit who may provide those professional services. While we generally support candidates’ right to pay family members or others for professional services, we emphatically do not support such payments when they are for the personal expenses of the candidate or anyone else, and we do not believe such payments should be allowed when they constitute a windfall for the candidate’s friends or family.

We suggest that the Committee consider amending the bill to include similar language as that in Federal statute. Federal law says that family members may be paid out of campaign funds as long as the expenditure is for a bona fide service to the campaign and the amount paid is the fair market value of that service. This provision, coupled with the disclosure requirement proposed in LD 2070, would put additional tools in the Ethics Commission’s toolkit that would give them a standard against which they can test flagged expenditures.

We further suggest that this requirement apply to all candidates whether privately or publicly funded. The Federal law obviously applies to congressional candidates, all of whom are privately funded, and we think that similar concerns about the impropriety of these expenditures are raised in privately funded races.

We would also support a proposed amendment creating a “rebuttable presumption” that payment of campaign funds to a spouse or family member are for personal expenses. This would have the effect of largely disallowing such payments unless the candidate’s campaign were prepared to demonstrate that they did constitute payment for bona fide services to the campaign at fair market value.

We agree with the sponsors of LD 2015 that the Merrill case reveals important problems that must be addressed. And it seems clear that the Ethics Commission feels it needs clearer, more specific authority to investigate controversial expenditures. We urge the Committee to be as thoughtful and thorough as possible as it wrestles with an appropriate amendment to LD 2015.