May 31 (Bloomberg) -- Virginia businessman William Danielczyk was sentenced to two years and four months in prison for illegally reimbursing donors to Hillary Clinton’s campaigns in a case that challenged the ban on direct corporate contributions to candidates.
Danielczyk’s associate in the scheme, Eugene Biagi, 78, was sentenced to two months’ probation because of his age and smaller role. Danielczyk, 51, was also fined $50,000 today by U.S. District Judge James Cacheris in Alexandria, Virginia.
Danielczyk and Biagi pleaded guilty Feb. 26 to felony charges of using funds belonging to Galen Capital Corp., a banking company based in McLean, Virginia, to reimburse straw donors who gave $186,600 to Clinton’s Senate and presidential campaign committees. Danielczyk was Galen’s chairman and chief executive officer, and Biagi was its treasurer.
“This sentence promotes respect for the law” while avoiding “unwarranted disparities” with other campaign finance prosecutions, Cacheris said.
Prosecutors, citing Danielczyk’s leadership in the scheme and repeated attempts to cover it up, asked for the maximum sentence, five years. Danielczyk sought probation.
Abbe Lowell, one of Danielczyk’s lawyers, said penalties for campaign finance law violations vary widely, even when fact patterns are similar. The government’s requested penalty was “so far out of line with the real precedents that I don’t know where to begin,” he told the judge.
A 2011 case involving former lobbyist Paul Magliochetti was described at the time as “one of the worst campaign finance cases in history” yet resulted only in a 27-month sentence, Lowell said.
Cacheris cited similarities with the Magliochetti case in imposing a comparable sentence on Danielczyk.
The case against Danielczyk and Biagi attracted national attention when Cacheris threw out one of the charges against the men, saying the U.S. Supreme Court’s ruling in Citizens United, which gave corporations the same rights as people to spend money independently to support candidates, meant they also should be able to make direct campaign donations.
The U.S. Court of Appeals in Richmond, Virginia, reversed Cacheris’s decision, upholding the century-old ban on direct corporate contributions to campaigns. After the Supreme Court declined to hear their appeal, Danielczyk and Biagi pleaded guilty.
The pleas cover illegal contributions to Clinton’s 2008 presidential campaign and her 2006 Senate bid. They involved at least 35 straw donors, at least 32 of whom were reimbursed using corporate money.
Clinton, who this year stepped down as the U.S. secretary of state, wasn’t implicated in the scheme. The judge said she didn’t know about it.
“I am very mad at myself,” Danielczyk said before being sentenced. “I always tried to lead by example. I obviously didn’t do that here.”
Danielczyk hosted fundraisers for Clinton, a Democrat, and “committed to reimbursing his own employees as well as many non-employees if they would contribute to the campaign,” according to the prosecution’s sentencing memorandum.
Biagi “personally authorized and used corporate funds to reimburse the straw contributors,” prosecutors said.
A five-year sentence was warranted for Danielczyk because “well-heeled individuals with access to vast financial resources are unlikely to be deterred” from conduct like his if the only consequence is a fine, according to prosecutors.
Danielczyk engaged in a broad pattern of misconduct and may face civil litigation involving a Galen pension fund as well as criminal tax charges, Assistant U.S. Attorney Eric Gibson told Cacheris.
Cacheris said he would consider only the campaign finance case before him in determining a sentence.
Danielczyk has reached a tentative agreement to pay a $50,000 fine to settle civil campaign-finance violations with the Federal Election Commission, according to his attorneys.
He was ordered to begin serving his sentence on July 15.
Prosecutors said that, because of Biagi’s “advanced age and physical infirmities” and lesser role in the scheme, probation would be enough.
Danielczyk’s assistant, April Spittle, was fined $5,000 in April on a misdemeanor count of assisting in the reimbursement scheme.
Philip Layton, Galen’s information-technology officer, was sentenced to 60 days in jail and fined $3,000 on a felony count of aiding a scheme to obstruct justice in connection with the cover-up of the straw-donor plan.
The case is U.S. v. Danielczyk, 11-cr-00085, U.S. District Court, Eastern District of Virginia (Alexandria).
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