Campaign funds are seizable assets in bankruptcies?

Just got a call from former state lawmaker Jill Chambers, a Republican from Atlanta, who says that she found herself on the short end of a federal bankruptcy judge’s ruling this morning.

Chambers filed Chapter 13 bankruptcy last year, in an attempt to protect $64,000 from being seized by creditors of her husband’s failed business.

We haven’t seen the order yet, but Chambers said the judge declared her campaign fund to be a personal asset exposed to creditors.

Chambers, who had chaired the MARTA oversight committee, had failed to incorporate her re-election campaign.

Chambers lost to Democrat Elena Parent in November.

Asked if she were planning a comeback, Chambers said no – any funds she raised for her campaign could be tapped by her creditors.

“No, I can’t come back, thanks to this decision,” she said.

By the sound of it, the decision could have repercussions for many other financially troubled public officials as well. We’ll post it as soon as some kind soul sends us a copy.

Updated at 2:50 p.m.: Chambers had said that, from the bench, the judge had said it wouldn’t have mattered if she had incorporated her campaign fund. But Marc Hershovitz, the attorney representing the creditors, called to say she must have misunderstood – that incorporation would have made all the difference.

The judge has yet to reduce his opinion to writing, but Hershovitz said the decision largely tracked with this brief he filed on the matter.

- By Jim Galloway, Political Insider

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24 comments Add your comment

Jane

May 11th, 2011
1:09 pm

I wonder if Tom Graves has read this yet?

Gabriel Sterling

May 11th, 2011
1:35 pm

This is why ALL campaign committees should incorporate. Jill’s wasn’t which left the door open to this decision. To be fair, almost no one incorporated when Jill originally set hers up. The incorporation provides an extra level of protection.

Jill

May 11th, 2011
1:52 pm

Gabe,

If campaign funds are now personal assets, then they are subject to liens, garnishment and seizure on behalf of creditors for the candidate, his family, and his business partners.

The tax implications are not yet known. If the funds are considered personal assets, then that makes them INCOME. donors would have to issue 1099’s on all contributions and dinners with lobbyists could be income, too.

The judge was clear that incorporating a campaign account is not a safeguard for campaign donations. He said that the only way to protect the funds is to create a spendthrift trust on behalf of the campaign.

He used Federal statute to make this ruling, so I guess this voids state ethics laws regarding campaign finance.

Blake

May 11th, 2011
2:12 pm

I just checked PACER; the decision hasn’t been posted yet.

Bobby

May 11th, 2011
2:15 pm

I can see this kind of both ways. Campaign funds are monies that are received by the bankrupt’s estate and thus should be listed as an asset if not used during the campaign. On the other hand, if the funds are indeed considered assets they would be subject to taxaction and other legal issues which I don’t believe they currently are. Perhaps the warning here is use up those funds on behalf of the campaign and have nothing left over to be considered a personal asset. On the other hand what criteria would the court use to determine if campaign funds were properly spent in a bankruptcy case?

Not sure if this is an appealable decision or not, but it’s interesting.

Georgia Law Notwithstanding

May 11th, 2011
2:46 pm

§ 21-5-9. Penalties
Except as otherwise provided in this chapter, any person who knowingly fails to comply with or who knowingly violates this chapter shall be guilty of a misdemeanor.

§ 21-5-33. Disposition of contributions
…Contributions and interest thereon, if any, shall not constitute personal assets of such candidate or such public officer.

The Ghost of Lester Maddox

May 11th, 2011
2:59 pm

Why of all the NERVE…..now those liberal federal (bankrupty) judges are thinking they can seize LEGALIZED BRIBES from politicians.

Hell, what’s next? Actually making people pay their bills and take responsibility for their actions? Why I never!

You People Are Suckers

May 11th, 2011
3:26 pm

I presume “Jill” is the former (thankfully) legislator in this matter. Ms. Chambers – you made a very silly mistake not incorporating your campaign account for many reasons, this just being one of them. If a campaign employee or volunteer had injured someone else while working for you, you would have been personally liable for it. An incorporated campaign committee would have protected against that too.

As for the assertion that when you first ran “almost no one” incorporated their accounts, I’m not sure where that’s coming from. I filed incorporation papers for more than one political campaign in the 1980s. Not incorporating is such a silly mistake I personally believe it calls into question a candidate’s judgement and knowledge of how the world works.

In this case, I have to say your error resulted in a justice being done, however. Your creditors get the money they are owed, you’re out of office, and you didn’t get to spend the money sending those awful mailings I used to get in my mailbox.

Reality

May 11th, 2011
3:52 pm

Obamas are “Common” ghetto trash.

Congressman Tom Graves

May 11th, 2011
4:30 pm

Thanks for the tip – on hold with my business lawyer now.

SpaceyG on Twitter

May 11th, 2011
4:46 pm

Lots of lawyers getting a call from a GA pol about right now… no doubt.

MrLiberty

May 11th, 2011
4:50 pm

I don’t know about you, but I don’t give campaign contributions to candidates so that some government-paid judge can give my money to their creditors.

Aquagirl

May 11th, 2011
5:07 pm

Well, Mr. Liberty, maybe you should be careful when forking over your money.

And if “government-paid” judges upset you, who do you think should be paying their salary? Are we going to put advertising on their robes like NASCAR drivers?

[...] came out on the losing end of a bankruptcy judge’s ruling today, according to the venerable Jim Galloway in the AJC. For those who don’t remember, in the midst of a heated re-election, Chambers filed [...]

Bob

May 11th, 2011
5:52 pm

Hey Water(Head)Girl! Why don’t you ever say something constructive rather than always finding something negative to say about other’s opinions?

Serious Robuck

May 11th, 2011
6:05 pm

Bob,

Huh?

What was helpful about Mr. Liberty’s comment. Who do YOU want to be paying judges?

Bob

May 11th, 2011
6:17 pm

It’s his opinion Serious…what’s wrong with that?

pn

May 11th, 2011
6:32 pm

Campaign funds are nothing but legalized slush funds. Nowadays people run for office just to line their pockets and have money left over to bribe others and buy favors Our elected officials spend 90% of their time and attention raising money with almost no meaningful scrutiny or regulation. For these reasons, I applaud what the judge has done. Politics has become a grotesque greed-fest.

Jason

May 11th, 2011
7:18 pm

Jill is the person the Republicans put in place to keep oversight over MARTA, which has an annual budget in the hundreds of millions. Perhaps they should have put a bit more thought into that appointment.

Ellijay

May 11th, 2011
7:54 pm

Here’s a strategy for avoiding having your assets, or those of your spouse, seized by creditors. Pay your bills.

Sick of Republicans

May 12th, 2011
6:55 am

And as always she is putting all the blame on Albert when in fact it was her business also. What a jerk she is.

Another Government Employe

May 12th, 2011
8:34 am

I wonder if she will get cited for misappropriation for this? I am thinking so.

yuzeyurbrane

May 12th, 2011
2:03 pm

This has a lot of God-fearing Republican officials calling their lawyers.

righteousjuror

May 12th, 2011
10:59 pm

According to State Law, and the Ethics Rules, the dispostion of campaign funds cannot be done so for reasons that are personal and that are not spelled out in the law. A bankruptcy or any lein, lawsuit against the candidate is just that, a personal matter and clearly is not withing the legal means spelled out in the law. To attach those funds to any of those actions would make the disposition for personal reasons. Plain and simple. This judge will have to make this clear or help re-write state law and a whole bunch of other state’s laws.

A similar case regarding the legal disposition of funds is coming against former Clayton Sheriff Victor Hill. He created a Nevada corporation and wrote campaign checks to the corporation that he created after he lost reelection. The campaign had 40k left in it after the loss. According to this judge he should of just listed the campaign account on his bankruptcy. NOT!