Freddie Mac has agreed to pay a record $3.8 million fine to settle allegations it made illegal campaign contributions, the Federal Election Commission said today.

 

The fine is by far the biggest levied in the Commission’s history, the agency said.

 

Freddie Mac was accused of illegally using corporate resources between 2000 and 2003 for 85 fundraisers that collected about $1.7 million for federal candidates, the commission said.

 

The mortgage giant, whose formal name is the Federal Home Loan Mortgage Corporation, has agreed in a conciliation agreement to pay a $3.8 million civil penalty to settle allegations that it violated the Federal Election Campaign Act and FEC regulations, which prohibit corporations from making or facilitating contributions.

“Freddie Mac takes these issues, which relate to prior management of both the company and its Government Relations operation, very seriously,” said Freddie Mac spokesman David Palombi in a statement. “The settlement announced today is part of the company’s ongoing efforts to put behind us regulatory and legal issues dating back to 2003 and earlier.”

 

In 2003 Freddie Mac retained an outside law firm to investigate the company’s campaign finance law compliance and voluntarily disclosed the findings of its outside counsel to the FEC and cooperated fully with the Commission’s subsequent investigation, Palombi said.

 

In March 2004, Fannie Mae, Freddie’s fellow government-sponsored enterprise, was one of three organizations fined a total of $132,000 for violating the Federal Election Campaign Act. Under conciliation agreements made with the FEC, Fannie Mae agreed to pay $10,000 in civil penalties, the Republican National Committee agreed to pay $98,000 and the National Republican Senatorial Committee agreed to pay $24,000.

 

Freddie Mac does not contest, but does not concede, that it violated the Act by using corporate resources to produce campaign fundraising events or collect and transmit contributions from corporate executives to federal candidates, the FEC said.

 

However, the FEC said, Freddie Mac admits it violated the Act by contributing $150,000 to the Republican Governors Association in October 2002.

  

“The outcome in this matter once again shows the FEC’s commitment to vigorous enforcement of campaign finance law,” said FEC Vice Chairman Robert Lenhard in a statement.

 

“It sends a clear signal that prohibitions on the use of corporate or union resources to make or facilitate contributions to federal candidates are not just technicalities and that violations have real consequences.  It also reminds federally chartered corporations that they have additional obligations under campaign finance law and they must be mindful of those restrictions,” Lenhard said.

 

Between 2000 and 2003, Freddie Mac allegedly used corporate resources to facilitate 85 fundraising events that raised approximately $1.7 million for federal candidates, the commission said.

 

Freddie Mac documents, prepared by former Senior Vice President of Government Relations R. Mitchell Delk and others and directed to Freddie Mac’s Board of Directors and CEO, described the fundraisers as “political risk management” undertaken because Freddie Mac differed from most major corporations which have “a well-funded PAC to buttress their lobbying activities,” the commission said.

 

The fundraisers were organized by Delk and former Vice-President Clark Camper, and benefited members of the House Financial Services Committee and other members of Congress, the commission said.

 

Consulting firms were hired to plan and organize the fundraising dinners, many of which were held at the Galileo Restaurant in Washington, and Freddie Mac paid monthly retainers to those firms that grew to more than $25,000 per month by the end of 2002, the commission alleged.

 

In addition to conducting fundraising events, Freddie Mac executives used corporate staff and resources to solicit and forward contributions from company employees to federal candidates, the FEC said. The FEC also allegedly found that Freddie Mac contributed $150,000 in 2002 to the Republican Governors Association, a contribution the association later returned.

 

As a federally chartered corporation, Freddie Mac is prohibited from making contributions in connection with any election to political office and Commission regulations prohibit a corporation (including its officers, directors or agents) from facilitating or acting as a conduit for contributions, the FEC said.

 

A corporation illegally facilitates the making of contributions when it uses corporate resources or personnel to plan and carry out fundraisers for federal candidates. 

 

Based on Freddie Mac’s payment of a civil penalty of $3.8 million and agreement to cease and desist from violating the law, the commission has decided, in exercise of its prosecutorial discretion, to send admonishment letters and take no further action as to former Freddie Mac Chairman and CEO Brendsel, Camper, Delk or consulting firms hired by Freddie Mac, the commission said.

 

The Commission will take no further action as to Galileo Restaurant, the Republican National Committee and the Republican Governors Association, it said.

 

The Commission also dismissed the allegation that Delk or his wife exceeded the overall calendar year contribution limits for individuals by making in-kind contributions of the cost of food and beverages at campaign fundraising events held at Galileo. 

 

***

Send tips or a Letter to the Editor to janis@inman.com or call (510) 658-9252, ext. 140.

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