Dec. 23 (Bloomberg) -- U.S. companies, forbidden to give money directly to political action committees, are taking advantage of controversial federal rules allowing them to ask employees to do it for them in exchange for matching charitable donations.
It’s legal and gives businesses from Wal-Mart Stores Inc. to Coca-Cola Co. to Hewlett-Packard Co. a way to fund their PACs, which direct money to political candidates. The matching contributions provide an incentive for employees, most of them managers, to contribute to the PAC.
The practice was approved by the Federal Election Commission in the late 1980s and has become commonplace at a time when companies face increasing scrutiny over their political donations. The FEC split over the legality of matching PAC contributions with charitable donations at least seven times between 1994 and 2009.
In an interview, former FEC chairman Scott Thomas said the exchange flouts the spirit of campaign-finance laws, which forbid companies from reimbursing for donations, including through a bonus or “other form of direct or indirect compensation.”
“It was too close to the line,” said Thomas, explaining his rationale for opposing the practice during his 20 years at the FEC. “It struck me as offering a chunk of money” to PAC donors. Judith Ingram, an FEC spokeswoman, declined to comment.
Employees receive no tax deduction for the donations, as they do by giving to a charity directly. When soliciting employee contributions to PACs in exchange for charitable donations, companies typically say they want to increase voluntary participation in the political process and support pro-business candidates. Many companies offer a one-for-one match and donate the money to a charity of the employee’s choosing. Coca-Cola and HP both do this.
Wal-Mart goes further. It offers a two-for-one match, and the contribution must go to the Associates in Critical Need Trust, or ACNT, a charity the company started in 2001 to help its own store workers facing financial distress. Wal-Mart gave the ACNT about $3.6 million in double-matching funds in the year that ended January 31, according to an audit of the charity’s financial filings.
“It’s rare for a corporate PAC’s charitable match program to be restricted to a charity that the corporation wholly controls and finances,” Laurence E. Gold, an attorney at Trister, Ross, Schadler & Gold, a Washington law firm that handles campaign-finance issues, said in an e-mail.
David Tovar, a Wal-Mart spokesman, said in a telephone interview that the match has been well received by management employees and is “a great way for people who contribute to the PAC to also do good for fellow associates. This provides them an opportunity to support the company and the things we’re advocating for on behalf of our shareholders, our associates, our customers in places like D.C. and state capitals.”
In a Mar. 3, 2004, memo reviewed by Bloomberg News, Wal-Mart’s then general counsel Tom Mars explained the company had transitioned from a single-match to a double-match program beginning in February of that year. “We’re going to be relentless in encouraging participation until 100% of our management associates are on board,” Mars said of the PAC and associates charity. “Every contribution counts, no matter how small. Therefore, if you haven’t contributed to these important causes, please do so TODAY.”
In 2009, IntercontinentalExchange Group Inc., which operates global commodity and financial products marketplaces, asked the FEC for an advisory opinion on starting a double-matching program. The commission split evenly on the matter and issued no opinion. According to an audio recording of the meeting that April, three of six commissioners concluded double-matching would “skew the incentives” and “undercut the voluntariness” of contributions to the PAC. One said a double-match would “smack of buying off the contributor,” noting it could open the door to five-to-one matching or more.
Wal-Mart hasn’t requested an FEC opinion on its double-matching program. Without an opinion, corporations that double-match could face complaints they have not complied with existing law and regulations, according to the commission. No complaints have been filed about Wal-Mart’s double-match, the FEC’s online database shows.
The matching program was controversial inside Wal-Mart, according to a former official at the Wal-Mart Foundation and associates charity. While there’s a need to raise political action funds, incentivizing employees with a promise to support associates in need doesn’t seem like the right answer, said the person, who requested anonymity to speak about a former employer. Tying the PAC and the charity could confuse donors, said the person, who expressed discomfort about the program to colleagues.
The introduction of the double-match in 2004 coincided with rapid growth of Wal-Mart’s PAC. Measured by contributions it takes in, it’s the ninth-largest corporate PAC in the U.S., according to FEC data.
Officially called Wal-Mart Stores Inc. PAC for Responsible Government, it raised more than $3.1 million in the 2012 election cycle, according to data filed with the FEC. Contributions came from employees, including executives at the Bentonville, Arkansas, headquarters and store managers across the country. Many of the contributions were deducted directly from employees’ pay.
Wal-Mart’s PAC spent about $3.2 million in the 2012 election cycle, according to FEC data. Of that amount, the PAC gave about $1.2 million to candidates for the U.S. House of Representatives and the U.S. Senate, about evenly divided between Republicans and Democrats, according to data compiled by the Center for Responsive Politics, a Washington-based non-profit research group that tracks money in politics.
Recipients included Republican House Speaker John Boehner of Ohio, Republican Senator Ted Cruz of Texas, Democratic Representative James Clyburn of South Carolina and Democratic Senator Mark Pryor of Arkansas. Wal-Mart has been vocal on issues including the minimum wage.
While offering matching charitable donations in exchange for PAC contributions has been allowed since at least 1987, the issue of corporate influence in politics has taken on more significance since 2010, when the U.S. Supreme Court’s Citizens United decision allowed corporations and unions to spend unlimited sums of money supporting or opposing candidates. That money isn’t sent directly to campaign coffers. Rather, companies contribute funds to such pro-business groups as the Chamber of Commerce that in turn pay for things like advertising on behalf of candidates.
Matching donations to charity is a way for companies to increase participation in their PACs. Heavy participation is important because federal law limits individuals’ PAC donations to $5,000 a year. Last year, Atlanta-based Coca-Cola paid more than $217,000 in PAC-matching funds to charities. Its PAC raised more than $428,000 that year, according to data filed with the FEC.
On its website, Coca-Cola says its “PAC Match program provides support to organizations that focus on environment, well-being and community involvement” such as Special Olympics International, United Service Organization and The Nature Conservancy. Employees designate their choice of charity, and the company provides a match “in a dollar amount equal to their year-end PAC contributions total,” according to the site.
Petro Kacur, a Coca-Cola spokesman, declined to elaborate further on its PAC matching program.
At Hewlett-Packard, which started its program in 2010, employee donors must contribute at least $2,500 to the company’s PAC to be eligible for the match.
“The ultimate success of HP PAC directly depends on the support that it receives from eligible HP employees,” the company said in an annual report about the program. “As a way to thank those who contribute to the PAC, HP established the HP PAC Match Program.” The company matches contributions on a dollar-for-dollar basis to charities or educational institutions of the employee’s choice.
Sarah Pompei, a spokeswoman for the Palo Alto, California-based company, declined to comment.
Boeing Co. offers a match, too. The Chicago-based company matches 50 cents on the dollar to employees who put at least $100 annually into the PAC. Employees can select as many as four charities and designate the percentage each receives.
“The objective of our campaign contributions is to strategically and tactically support candidates with whom we have alignment on issues of interest to the candidate and to Boeing,” Gayla Keller, a Boeing spokeswoman, said in an e-mail. “The BPAC charitable match practice was instituted in 2009 and contributions have positively impacted communities around the country for the last three years.”
The FEC has split over charitable matches for PAC contributions at least seven times, according to advisory opinions reviewed by Bloomberg News. In 1994, Thomas and fellow commissioner Danny McDonald said in a dissenting opinion that they couldn’t “believe that the Commission would allow the exchange, albeit indirectly, of corporate treasury monies for political contributions.” They were overruled.
Thomas is now an attorney at the Washington law firm Dickstein Shapiro LLP, whose clients include Wal-Mart. McDonald, who declined to comment, is now a commissioner on the North Carolina Industrial Commission, a state agency.
In a Sept. 27, 2002, e-mail to Wal-Mart managers, Bob Hart, then chairman of the Associates in Critical Need Trust, explained the role of the PAC.
“As our company has grown, WAL-PAC has become an increasingly important tool in Washington, D.C., to help us support pro-business candidates representing both political parties,” Hart said in the e-mail. “This in turn helps protect our associates and customers from unnecessary or potentially harmful laws and regulation.”
Data filed with the FEC show hundreds of store-level employees such as managers and pharmacists have donated to Wal-Mart’s PAC.
“They’re being induced to bankroll political campaigns that might not be in their best interests but instead are in the best interests of their employer,” said Stephen Spaulding, staff counsel for Common Cause, a Washington-based advocacy group that supports stronger campaign finance laws.
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