Trump's Campaign Finance Law Violations: What Happened?

In April 2023, former US President Donald Trump was indicted on 34 felony charges of falsifying business records in the first degree. The charges related to hush-money payments made to two former mistresses during the 2016 election campaign. The indictment document accused Trump of violating campaign finance laws by concealing the payments as legal expenses. Trump pleaded not guilty to the charges. The case raises questions about the applicability of state and federal law, with Trump's lawyers likely to challenge the charges on these grounds.

Trump's violation of the Federal Election Campaign Act

In March 2023, a New York state courtroom charged former US President Donald Trump with 34 felony charges of falsifying business records. The charges were related to hush-money payments made to two former mistresses to buy their silence during the 2016 election campaign. The payments were made with the intention of influencing the election and thus constituted campaign spending.

Trump's failure to report these expenses violated the Federal Election Campaign Act, which requires candidates for federal office to disclose to the public how much money they are spending on their campaigns and what for. In addition, the payments were made through a shell company, which was not providing legal services, in violation of campaign finance law.

Trump's former personal attorney, Michael Cohen, pleaded guilty in 2018 to campaign finance crimes committed in conjunction with the payments. Cohen told a federal judge and Congress that he arranged these payments at the direction of and in coordination with Trump. However, federal prosecutors did not charge Trump with these violations, citing an internal Department of Justice policy that prohibits charging a sitting president with crimes.

The involvement of shell companies

One notable example is the Trump campaign's use of American Made Media Consultants LLC (AMMC) as a conduit to funnel money to individuals close to the campaign and family. AMMC, established in April 2018, served as a pass-through entity to direct payments to political consulting firms, family members, and individuals who did not properly register payments with the Federal Election Commission (FEC). This shell company structure allowed the Trump campaign to conceal transactions and violate federal law's transparency requirements, hindering voters' right to know how campaigns are spending money to influence elections.

Another instance of shell company usage involves Harris Sikes LLC, a mysterious firm utilised by the Trump campaign to funnel money to ad buyers. Harris Sikes LLC has no public presence and is linked to National Media, a firm that faced scrutiny for allegedly facilitating illegal coordination between the Trump campaign and the National Rifle Association (NRA). The Trump campaign's use of this shell company allowed it to continue working with the same ad buyers while avoiding direct associations with National Media and its affiliates.

The Trump campaign's opaque structure, facilitated by shell companies, has raised serious concerns about transparency and compliance with campaign finance regulations. These companies have enabled the campaign to obscure the identities of sub-vendors, the amounts paid, and the timing of transactions.

Furthermore, shell companies have also been implicated in the Trump campaign's ties to protests in Washington, D.C., on January 6, 2021. The campaign's use of shell companies has made it difficult to ascertain the full extent of its financial dealings and connections to the individuals involved in organising the rally.

The role of intermediaries

One of the key intermediaries was Michael Cohen, Trump's former personal attorney and fixer. Cohen played a central role in facilitating the hush-money payments. He paid $130,000 to Stormy Daniels through a shell company, Essential Consultants LLC, which he specifically set up for this purpose. Additionally, Cohen arranged for the corporation AMI, which owned the National Enquirer, to purchase the rights to McDougal's story and then not publish it. Cohen's involvement added a level of separation between Trump and the payments, potentially making it more difficult to trace the transactions back to Trump.

Another intermediary involved in the transactions was Bradley Crate, the treasurer for the Trump campaign and four related political committees. Crate ran the company Red Curve, which received payments from the Trump campaign and committees totalling $7.2 million. The Campaign Legal Center, a watchdog group, accused Trump's campaign of using Red Curve as a conduit to conceal payments for legal services. They argued that this violated the reporting requirements of the Federal Election Campaign Act, which mandates detailed disclosures of campaign expenditures.

The use of intermediaries in the hush-money payments created a level of obscurity that made it challenging to determine the true nature and purpose of the transactions. By utilising shell companies and unrelated businesses, the intermediaries helped to obscure the source and destination of the funds, potentially violating campaign finance laws that require transparency and full disclosure of campaign-related expenditures.

The legality of using campaign funds to pay legal bills

Trump has relied on donations to his campaign and affiliated Political Action Committees (PACs) to cover his legal expenses. After his 2020 election loss, Trump received over $250 million in donations for an "election defense fund," which he divided between two PACs: Make America Great Again (MAGA) PAC and Save America PAC. By early 2024, MAGA PAC had spent $30 million on Trump's legal expenses, while Save America had contributed approximately $70 million.

The legality of using PAC funds for personal legal expenses is a grey area. While the FEC prohibits the use of campaign funds for personal expenses, this restriction does not apply to PAC money. This loophole allows candidates like Trump to use PAC funds for personal matters, including legal bills. Additionally, leadership PACs like Save America PAC are not subject to the same restrictions on personal use of funds as campaign committees due to the FEC's failure to address this issue.

Trump's use of PAC money to cover legal expenses, including those related to personal matters, tests the boundaries of the law. However, due to the FEC's lackluster enforcement and inability to agree on whether PAC money can be used for personal legal funds, there have been limited repercussions.

To address this issue, experts and watchdog groups have called for significant reforms to campaign finance laws. They advocate for extending restrictions on the personal use and misappropriation of campaign funds to all types of PACs, including super PACs and leadership PACs. Additionally, they emphasize the need for a broader overhaul of federal campaign finance rules to enhance enforcement and improve transparency.

The failure of the Federal Election Commission to hold Trump accountable

The Federal Election Commission (FEC) is an independent agency of the US federal government that is responsible for administering and enforcing the Federal Election Campaign Act (FECA) of 1971. This Act regulates the raising and spending of money in campaigns for federal offices.

As of December 2023, the FEC had received 59 allegations that Donald Trump or his committees violated the FECA. In 29 of these cases, nonpartisan staff in the FEC’s Office of General Counsel (OGC) recommended the FEC investigate Trump. However, the FEC's three Republican commissioners have voted against every outside complaint brought against Trump or his committees.

In 21 of the 29 cases where the FEC received recommendations to enforce the law against Trump, Republican commissioners justified non-enforcement by invoking prudential or discretionary factors. When dismissing the recommendations to investigate Trump, the Republican commissioners have claimed that the FEC should not take any action because “proceeding further would not be an appropriate use of Commission resources” or that the resources would be “best spent elsewhere”.

In the Stormy Daniels case, the FEC's professional staff recommended finding that Trump violated multiple provisions of the Act, and that the violations were “knowing and willful”. Once again, the FEC did not enforce anything against Trump.

In another instance, a campaign watchdog group, the Campaign Legal Center, filed a formal complaint to the FEC accusing Donald J. Trump’s presidential campaign and related political committees of concealing payments of $7.2 million in legal fees by paying them through an unrelated shell company in violation of campaign finance law. The complaint stated that the Trump political committees had used Red Curve, a company that did not appear to offer legal services, "as a conduit to conceal payments for legal services".

The FEC's failure to hold Trump accountable has been criticised, with some arguing that it set the stage for his later crimes.

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