If your favorite politician goes bankrupt, can your campaign contribution — that $100 the U.S. Supreme Court has declared to be a form of free speech — be seized to satisfy his or her debt?
It is a question that has suddenly made elected officials in Georgia very nervous. Especially politicians behind on their bills.
Last September, at the height of campaign season, the roof fell in on state Rep. Jill Chambers, a Republican from Atlanta.
The art supplies business she owned with her husband in Buckhead had collapsed. The couple owed money. Lots of it.
Like far too many couples under economic pressure, they split. Still, their bills didn’t go away. As creditors often do, they quickly began scouting for pots of cash with Chambers’ name attached.
Such hunts are often a guessing game. And in a Wachovia bank, her business’ landlord chanced upon $60,000 — given by friends and the well-connected for Chambers’ re-election campaign. The landlord had the money seized.
Chambers filed for bankruptcy in an effort to free the cash and save her campaign. It didn’t work.
The money remained frozen. Chambers’ campaign tanked, and she became one of the few Republicans in the country to lose in November, to Democrat Elena Parent.
Six months later, Chambers can no longer afford the political life, and now works for a private investigation agency — in pursuit of her own P.I. license. But she isn’t finished making waves.
Last week, a federal bankruptcy judge declared the $60,000 seized in October to be part of Chambers’ estate, something to be divvied up by her creditors.
Elected officials across the state shuddered.
Let us be clear: There are varying opinions about the reach of the decision by Judge Ray Mullins of the U.S. Bankruptcy Court of the Northern District of Georgia — in part because it has yet to be reduced to writing.
Marc Hershovitz, the attorney for Chambers’ landlord, says the judge’s decision was almost “pedestrian” in its reliance on well-established precedent.
First, Hershovitz said that Chambers neglected to incorporate her campaign committee — a basic step that would have protected the lawmaker’s campaign cash.
But the former counselor to Gov. Roy Barnes also made another argument: On one hand, Georgia law prohibits campaign cash from being used for a candidate’s personal gain. Yet Hershovitz also outlined how a politician — legally, under that same Georgia law — can “launder” that cash and make it available for personal use.
“This is not a far-fetched hypothetical,” Hershovitz wrote in a brief. He cited Gov. Sonny Perdue’s 2007 conversion of $787,000 in campaign cash. In essence, the attorney argued that if politicians can have personal access to campaign funds, then creditors should, too.
Hershovitz says the ruling breaks no new ground, but others disagree.
“The ruling has certainly sent shock waves through politicians and those who represent them,” said Stefan Passantino, a partner with the McKenna Long & Aldridge law firm in Atlanta. He regularly conducts seminars for elected officials and prospective candidates, to make sure they know the rules of campaign finance.
Even without incorporation, a candidate and her campaign committee should be considered legally separate entities. For one thing, Passantino said, think about the reverse situation: A candidate could become personally liable for the debts incurred by his campaign.
That may not sound like a big deal to you or me. But think about a candidate for governor or U.S. Senate, about to embark on a $15 million campaign.
Mullins’ decision also has implications for campaign contributors, Passantino said. “If the ruling were to be upheld, it would require a donor to conduct a financial vetting of the candidate,” he said.
And that would make many people uncomfortable. The state Capitol, city halls, county commission and school board offices across Georgia are filled with people living on the brink. Their neighborhoods are no different than yours.
Last year’s race for governor exposed Nathan Deal’s shaky finances to scrutiny. Up in north Georgia, U.S. Rep. Tom Graves and state Senate Majority Leader Chip Rogers are embroiled in a lawsuit over a $2.2 million loan.
Chambers says she intends to appeal the ruling. But in the meantime, she must appear in federal tax court. If the $60,000 is indeed hers, the next question is whether the cash is taxable. Not that she could pay it.
The former state lawmaker says she has recently had many engaging conversations with personnel at the U.S. Internal Revenue Service, instructing them in the many quiet ways that lobbyists at the state Capitol add to the lifestyles and incomes of lawmakers.
“I’m educating that department on how lobbyist money, contributions and entertainment work,” she said.
- By Jim Galloway, Political Insider