DOJ ANNOUNCES FIRST CRIMINAL PROSECUTION FOR COORDINATION OF FINANCES BETWEEN POLITICAL COMMITTEES

FROM:  U.S. JUSTICE DEPARTMENT
Thursday, February 12, 2015
Campaign Manager Pleads Guilty to Coordinated Campaign Contributions and False Statements
First Criminal Prosecution in the United States For

Campaign Finance Coordination between Political Committees

A campaign finance manager and political consultant pleaded guilty today in the Eastern District of Virginia for coordinating $325,000 in federal election campaign contributions by a political action committee (PAC) to a Congressional campaign committee.  This is the first criminal prosecution in the United States based upon the coordination of campaign contributions between political committees.  

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Dana J. Boente of the Eastern District of Virginia and Assistant Director in Charge Andrew G. McCabe of the FBI’s Washington Field Office made the announcement.

“The Department of Justice is fully committed to addressing the threat posed to the integrity of federal primary and general elections by coordinated campaign contributions, and will aggressively pursue coordination offenses at every appropriate opportunity,” said Assistant Attorney General Caldwell.

“Campaign finance laws exist to guard against illegal activity such as coordinated campaign contributions,” U.S. Attorney Boente said.  “The citizens of the Commonwealth of Virginia can rely this office enforce federal campaign finance law.”

 “Today, Mr. Harber took responsibility for violating federal election campaign laws by illegally coordinating payments between a super pac and a candidate’s campaign committee,” said Assistant Director in Charge McCabe.  “The FBI will continue to investigate allegations of campaign finance abuse which are in place to ensure openness and fairness in our elections so the people’s interests are protected.”

Tyler Eugene Harber, 34, of Alexandria, Virginia, pleaded guilty to one count of coordinated federal election contributions and one count of making false statements to the FBI before U.S. District Judge Liam O’Grady of the Eastern District of Virginia.  A sentencing hearing is scheduled for June 5, 2015.

 According to the plea documents, Harber was the Campaign Manager and General Political Consultant for a candidate for Congress in the November 2012 general election.  At the same time, Harber participated in the creation and operation of a PAC, which was legally allowed to raise and spend money in unlimited amounts from otherwise prohibited sources to influence federal elections so long as it did not coordinate expenditures with a federal campaign.

Harber admitted, among other things, that he made and directed coordinated expenditures by the PAC to influence the election with $325,000 of political advertising opposing a rival candidate.  The coordination of expenditures made them illegal campaign contributions to the authorized committee of Harber’s candidate, and Harber admitted that he knew this coordination of expenditures was an unlawful means of contributing money to a campaign committee.  He further admitted that he used an alias and other means to conceal his action from inquiries by an official of the same political party as Harber’s candidate.

Harber further admitted that he told multiple lies when interviewed by the FBI concerning his activities.

This case was investigated by the FBI’s Washington Field Office, Northern Virginia Resident Agency.  The case is being prosecuted by Richard C. Pilger, Director of the Election Crimes Branch of the Criminal Division’s Public Integrity Section, and Chief Mark D. Lytle of the Financial Crimes and Public Corruption Unit of the Eastern District of Virginia.

FORMER DUNKIRK, NEW YORK MAYOR CHARGED FOR USING CAMPAIGN CONTRIBUTIONS FOR PERSONAL USE

FROM:  U.S. JUSTICE DEPARTMENT S
Tuesday, January 20, 2015
Former Mayor Charged with Wire Fraud for Using Campaign Contributions for His Own Personal Benefit

A former mayor of Dunkirk, New York, was indicted today for engaging in a scheme to defraud his mayoral campaign and supporters by stealing campaign contributions for his personal benefit, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney William J. Hochul Jr. of the Western District of New York.

Richard L. Frey, 83, of Dunkirk, New York, was charged today in a 13-count indictment with 12 counts of wire fraud and one count of making a false statement to the FBI.

According to the indictment, from January 2003 through June 2012, Frey allegedly solicited and received several campaign contributions from area businesses and businesspeople and then, instead of depositing the donations into his campaign accounts, either cashed the checks for his personal use or deposited the checks into his personal bank accounts.  The indictment further alleges that Frey concealed the existence of these campaign contributions by not reporting or disclosing them on his campaign disclosure reports, as was required of local candidates for public office.  When asked about the scheme, Frey allegedly provided false information to the FBI.

The charges and allegations contained in the indictment are merely accusations and the defendant is presumed innocent unless and until proven guilty.

The case is being investigated by the FBI’s Buffalo Field Office and the U.S. Housing and Urban Development Office of Inspector General.  The case is being prosecuted by Trial Attorney Edward P. Sullivan of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney John E. Rogowski of the Western District of New York.

SEC RAISES ALERT REGARDING "PAY TO PLAY" CAMPAIGN CONTRIBUTIONS

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., Aug. 31, 2012
– The Securities and Exchange Commission issued an alert to strengthen compliance with a Municipal Securities Rulemaking Board rule that limits political contributions by municipal securities professionals to campaigns of public officials of issuers with whom they are doing or seek to do business.

The Risk Alert issued by the agency’s Office of Compliance Inspections and Examinations notes that SEC examiners have observed practices that raise concerns about firms’ compliance with their obligations under MSRB Rule G-37, which clamped down on so-called "pay to play" practices. These concerns include:
Compliance with the rule’s ban on doing business with a municipal issuer within two years of a political contribution to officials of the issuer by any of the firm’s municipal finance professionals
Possible recordkeeping violations
Failure to file accurate and complete required forms with regulators regarding political contributions
Inadequate supervision
The Risk Alert identifies practices that examiners have seen some firms use to comply with applicable federal, state, and local rules on contributions. These include training programs for municipal finance professionals, self-certification of compliance with restrictions on political contributions, surveillance for unreported political contributions, and preclearance or restrictions on political contributions when permitted by state or local law. The Risk Alert stresses that the practices are described only to inform firms about approaches being used to strengthen compliance efforts; these practices may not be applicable to a particular firm, and other practices may be appropriate to consider instead.

"This Risk Alert is intended to help firms to strengthen their compliance and risk management efforts with regard to political contributions," said OCIE Director Carlo di Florio. "We hope that by describing practices that our examiners have observed, we will promote compliance by helping firms to consider how each of them can most effectively meet their obligations under MSRB rules."

The alert is the fourth this year and the sixth in a continuing series of Risk Alerts that the SEC’s examination staff began issuing in 2011. It is intended to assist senior management, risk management, and legal and compliance staff as they review compliance with Rule G-37 by brokers, dealers, and municipal securities dealers.

The following staff contributed substantially to preparing this Risk Alert: Robert Miller, Suzanne McGovern, Julius Leiman-Carbia, and George Kramer.