erran speaker
12-10-2007, 04:53 AM
"Is this a legitimate advertising company operating in the normal course of business. or is it a sham operation created to evade the campaign finance laws by posing as an advertising company?" Wertheimer asked. "That's the issue here."
Hello,
I’ve seen a pretty intense discussion taking place on the blimp project. I’ve been waiting for it to die, but it hasn’t really, so although I normally don’t like to involve myself…
This is a long post containing significant detail. Thank you for having the courage to read all of it carefully before responding. I am not a member of or spokesperson for Liberty Political Advertising, LLC (LPA). However, I may be able to provide a useful service in responding to some concerns. I am not being compensated for this article and LPA does not know I am posting it, because that would mean giving their approval – which I wish to avoid. I have made no financial contribution to the blimp project. I have financially contributed to the Ron Paul campaign. I am not a legal expert in campaign finance law, and I don’t know everything. I merely wish to make several points, some in response to questions posted in this forum, regarding the purpose, structure, and ramifications of the blimp project – bringing up items for and against based on my personal opinions and review of the situation, in the hopes they may provide a basis for friendly future discussions.
It is almost certain that there will be a legal challenge to the blimp – McCain of McCain-Feingold, for instance, may file an injunction to prevent it from flying in New Hampshire. Even if opposing candidates do not, the concept is radical enough, and challenges the efficacy of existing laws (even if the business model is upheld) so directly that there will almost certainly be an action on the matter at some point. What the company effectively does is put significant ‘independent expenditures’ within the reach of ordinary Americans (http://a257.g.akamaitech.net/7/257/2422/14feb20071500/edocket.access.gpo.gov/cfr_2007/janqtr/11cfr100.16.htm) by creating something that looks and smells like a PAC, but says it isn’t a PAC (or an SSF – think ‘corporate PAC’). I predict this will be a significant model in all future elections if it survives, but this is a direct challenge to the FEC rules and could go all the way to the Supreme Court. Here’s why (the MSM coverage of the legal issue will continue to be huge – probably bigger than the blimp itself):
Federal law defines the term “political committee” to mean any “group of persons which receives contributions aggregating in excess of $1,000 during a calendar year or which makes expenditures aggregating in excess of $1,000 during a calendar year.” 2 U.S.C. § 431(4). The terms “contribution” and “expenditure,” in turn, are defined to include the receipt or payment of anything of value “for the purpose of influencing any election for Federal office.” 2 U.S.C. §§ 431(8)(A) and (9)(A).
In Buckley, the Supreme Court construed the term “political committee” to “only encompass organizations that are under the control of a candidate or the major purpose of which is the nomination or election of a candidate.” 424 U.S. 1, 79 (1976) (emphasis added). The Court in McConnell, restated the “major purpose” test for political committee status as iterated in Buckley. 540 U.S. 93, 170 n.64 (2003).
In other words, the Supreme Court has added a “major purpose” test to the statutory definition of “political committee.” Therefore, (LPA) is a federal “political committee” if it meets both parts of the two-prong test for political committee status: (1) it has a “major purpose” to influence candidate elections and (2) it receives $1,000 in contributions or makes $1,000 in “expenditures,” defined by statute to mean receipt or payment of money for the purpose of influencing federal elections.
The Supreme Court made clear in Buckley that the test of whether a group has made $1,000 in “expenditures” is not limited by the “express advocacy” standard when applied to a “major purpose” group... Rather, the test for “expenditure” is the broader statutory standard of whether disbursements are made “for the purpose of influencing” any federal election, regardless of whether the disbursements are for an “express advocacy” communication.
The Buckley Court made clear that “major purpose” groups are not vulnerable to concerns of vagueness in drawing a line between issue discussion and electioneering activities because their activities “can be assumed to fall within the core area sought to be addressed by Congress. They are, by definition, campaign related.” 424 U.S. at 79. By contrast, the Court developed and applied the “express advocacy” test only to non-“major purpose” spenders, reasoning that when the maker of the expenditure is an individual or non-“major purpose” group, “the relation of the information sought to the purposes of the Act may be too remote.” To insure that the reach of FECA’s disclosure provisions was not impermissibly broad, the Court construed the term “expenditure” to “reach only funds used for communications that expressly advocate the election or defeat of a clearly identified candidate.” Id. at 79–80.
Express Advocacy: According to FEC regulations, this type of communication is one (a) that uses particular "magic words" like "elect," defeat," "vote for," or "vote against," or (b) when taken as a whole and with limited reference to external events, such as the proximity to the election, can only be interpreted by a "reasonable person" as advocating the election or defeat of one or more clearly identified candidate(s).
(http://clcblog.org/blog_item-35.html)
(http://www.verifiedvoting.org/downloads/vendors/standards/FEC_Prop527.pdf)
(http://www.campaignfinanceguide.org/f-expressadv.html)
LPA’s whole purpose is to claim it is not a political committee. The FEC’s whole purpose is to claim LPA is a political committee. Some have questioned the extensive legal representation of LPA and the significant legal fees of various attorneys. With some experience in these matters, I offer my opinion that a comprehensive legal team (and the decision to retain Brad Smith, in particular) is a smart move and the fees are not unreasonable. A retainer is a like a pre-paid phone card for an attorney, and the one under discussion is half what I would expect, with an hourly rate in-line with a high profile corporate attorney. Let’s be sure we understand what is at stake. If the blimp project and Liberty Political Advertising, LLC are proven to be a sham company fabricated solely to bypass existing campaign finance laws (by asserting they are really a PAC), it is possible that the company and its principals could be charged with election fraud. A charge of fraud can pierce the corporate veil, putting managers or officers of the company at personal liability for civil and criminal penalties (http://en.wikipedia.org/wiki/Piercing_the_corporate_veil) including fines and jail time. The civil penalty could be very high given the amount involved, conceivably between 100% and 1000% of the total amount raised. Criminal penalties include incarceration for up to 5 years. (http://www.wileyrein.com/publication_newsletters.cfm?ID=16&year=2003&publication_ID=9652&keyword=). Individuals buying time should be legally fine (because you would only be a contributor to a PAC under false pretenses - innocent victim - but I recommend seeking a legal opinion yourself if you are concerned) as long as they submit a required FEC form (http://www.fec.gov/pdf/forms/fecfrm5.pdf) for any independent expenditure over $250 (per calendar year). Please, if you have contributed $250 or more, make sure you have filed your independent expenditure report. Individuals purchasing more than $10,000 of time must file within 48 hours (24 hours if less than 20 days from the election) of public dissemination (probably the launch date, but I recommend doing it on donation).
I will break now to give a bullet point list answering certain questions and question types, with references, in order to discuss why this works the way it does. By the way, if LPA’s legal counsel has done anything other than tell the company members and managers to not post a lot of q&a then I am surprised. Several responses by a campaign spokesperson in this forum are already suspect. A q&a in the Ron Paul forums could be inimical to their interest, even if it makes people sad not to hear from the principals. The FEC has ruled that an entities public communications are used to determine major purpose. Any answer that could be misinterpreted could be used against them, etc., etc. with all the negative ramifications cited.
1. As a side note and beginning with what I consider the least serious discussion, I am sure LPA will make miscalculations and mistakes with the money they receive (hiring 2 videographers vs. 1 or GPS positioning or $1k/wk payroll for a webmaster - but remember, if you payroll somebody, you pay them more than what they actually receive, including: matching payroll taxes, any benefits, any workman’s comp or unemployment insurance, overhead for processing pay and complying with government regulations, etc., unless the web master owns their own company which can be arranged, noting that many industries add 50% - 100%/hr to the employees stated wage to cover the overhead of employing a professional individual - and I suspect they are interested in limited, polite feedback). This may be a new business for these individuals, and anyone with extensive start-up experience can testify both to the learning curve and to the incredible nature of LPA’s success (which success is also a tribute to purchasers of advertising space). The lack of advocacy regarding Ron Paul's positions at blimp stops is not a mistake. It is a requirement, and the only way to even maybe dodge the 'express advocacy' bullet if they avoid the ‘major purpose’ test described above.
2. Regarding the purchase of advertising time. You are not buying stock, shares or membership. You are buying retail advertising time. The advertisement is the big message on the side. If a one page USA Today ad were to be sold incrementally, you would not be buying shares in USA Today, you would be buying square inches of ad space. All questions from individuals considering buying advertising time that reference stock, being part of a company, etc. are spurious and inapplicable. Start up costs are likely nothing - $1,000 tops with little or no fixed assets. Thus, there is a difference between financing start-up costs and buying a chunk of advertising time. The advertising/product being sold is not a start up cost. Operational costs (ongoing expenses, salaries, blimp rental etc.) are not start-up costs and the business model looks to fund any costs above and beyond the LLC filing from gross receipts. Offers to cover start-up costs convey either profound ignorance or treachery (i.e. - someone wants to steal the company from the dumb Ron Paul guys after it becomes successful by claiming they helped get it going). References to venture capital standards are likewise out of place. The SEC is worse than the FEC and offering or selling membership shares (securities) in a private company comes with huge strings (can’t publicly advertise shares, can only sell to accredited or sophisticated investors, ad nauseum) and bigger penalties than those already cited. I have had modest involvement in raising funds/selling shares of startups. LPA cannot give pieces of their company to those buying ad time on the blimp (begin with: http://en.wikipedia.org/wiki/Securities_law). Additionally, contributions (including capital contributions) to any entity making independent expenditures are regulated. Calls for disclosure of business model details, financing details, etc. – including the ‘transparency’ page – for this private company are at best premature, at worst a significant risk on the part of the principals for the penalties described above.
3. Contributions from the official Ron Paul campaign, foreign nationals, corporate sponsorship. The fact that this is a for-profit company does not bypass all election rules.
a. Purchase by the Campaign. There are two types of advertising applicable in this discussion, namely ‘independent expenditures’ and ‘coordinated communications’. Independent expenditures have little regulation and no limit. Coordinated communications are subject to the standard restrictions (http://www.fec.gov/pages/brochures/indexp.shtml). There are three tests to prove coordination with the campaign. They are Payment, Content, and Conduct. You must meet all three to qualify as a coordinated communication and become subject to the typical limitations. The blimp seems to meet the Content test because it specifically references a Presidential Candidate 120 days before a primary and is shown in the jurisdiction in which the candidate will be competing. It may meet the test for Conduct because “the communication is created, produced or distributed at the suggestion of the person paying for the communication (my insert – this means you if you bought advertising time) and the candidate, authorized committee, political party committee or agent of any of the foregoing assents to the suggestion”. Remember Dr Paul talking about the blimp? Can that convey consent? Hopefully, LPA has built a nice firewall (an actual legal object). The third test is payment, and it may be the easiest to pass. Any donation from the Campaign, a committee, an agent of any of these, etc. would kill the project and bring the aforementioned consequences.
b. Foreign nationals. A US citizen is not a foreign national even if they live abroad and can buy time without restriction. Also, this is not buying stock in an American company, like a foreign national buying shares of Coke. This is buying paid advertising time for a declared presidential candidate. Once you use the words ‘Ron Paul’, a foreign national cannot participate or the project is illegal. In fact, the name Ron Paul is not required. Something as vague as a nickname or ‘the Republican candidate for president’ (in the general election) would be sufficient. Hopefully, LPA is screening purchasers carefully, because: “The Federal Election Campaign Act (FECA) prohibits any foreign national from contributing, donating or spending funds in connection with any federal, state, or local election in the United States, either directly or indirectly. It is also unlawful to help foreign nationals violate that ban or to solicit, receive or accept contributions or donations from them. Persons who knowingly and willfully engage in these activities may be subject to fines and/or imprisonment” (http://www.fec.gov/pages/brochures/foreign.shtml). Foreign nationals can only finance educational programs not related to a clearly identified candidate. Foreign nationals cannot contribute to PAC’s despite what may have been said elsewhere.
c. Corporate sponsorship (the Google push). A for-profit corporation may not make an independent expenditure or contribution in any way, and non-profit corporations have hoops to jump through and limitations if they make it through said hoops. This is similar to the foreign national argument above. It just can’t be done, though they might be able to form an SSF and abide by the applicable limitations (http://www.fec.gov/pdf/colagui.pdf). For these reasons, even small advertisements on the blimp that subsidize the project may be deemed to de-legitimize the entire project. The argument in favor of small corporate advertisements would be similar to corporate advertisements in USA Today when a Ron Paul advertisement is carried. If you have a business, do not buy ad time from LPA using your business name or credit card.
4. Legitimate business model. In order to overcome nearly inevitable legal challenges, the company will have to demonstrate a legitimate business model that is sustainable beyond this one effort. Although LPA may get some slack under the argument I present below, this basically means that volunteer efforts are not allowed, particularly those solicited from the grass roots. Let me repeat, they should not even think about staffing their company with Ron Paul volunteers; it would be too dangerous. Interested individuals may wish to consider forming companies and hiring themselves out to LPA at a discount, carefully noting in-kind contribution limitations and regulations. For instance, individuals may rent data-center space, purchase servers and related equipment, select volunteer web designers, design all intended aspects of the site, and offer that site and management thereof to LPA. Also Ron Paul fans, LPA must pursue additional contracts, preferably not related to Ron Paul, and demonstrate a going concern with legitimate profit potential or risk being shut down. This is required to avoid the ‘major purpose’ label above, so that there expenditures can be claimed to not be ‘express advocacy’ (this is also why they can’t say “Ron Paul for President”, “Elect Ron Paul”, “Vote Ron Paul”, etc.). Again, they must avoid both ‘major purpose’ and ‘express advocacy’. They are shaky enough just engaging in political advertising at all, and I am already concerned that they wish to limit their brand to a ‘Liberty’ philosophy. Cutting their salaries was a calculated risk because it was done under pressure from the grassroots. Questions like: “Are you doing this to help Ron Paul or to line your pockets?” are clear traps and they cannot be seen falling for those traps. If I worked for a competing campaign, I would immediately come to a forum like this and demand a direct apology from Trevor and Elijah, asking them to declare this a real grassroots effort to elect Ron Paul. If they did not respond, I would disparage them until they did or the project was fatally weakened, trusting that the avergae forum user would not go verify all this information for themselves. For any of the LPA people, particularly the principals, to indicate they only want to do this to help Ron Paul is to openly and clearly invite the immediate destruction of the project, admit to fraud with all the penalties attached, and is a perfect example of why they should not communicate or q&a in the forums at all. Some responses to various individuals have been potentially incriminating. Ron Paul supporters should instead note that they are doing this project on a shoestring to get their company up and going and that Ron Paul supporters have a unique opportunity to take advantage of that shoestring budget. Some previous assertions regarding PAC’s, charities, and non-profits are accurate. ‘Non-profits’ often pay far better salaries and have a much higher overhead than this project, so don’t be alarmed at the words ‘for profit’ or apply an unsavory connotation unnecessarily.
This brings up the one real defense I see that LPA has against being labeled a PAC and suffering accordingly. If I were to defend this company in court, I would make the case that my client’s chief principal, Trevor Lyman, is a sneaky entrepreneurial bastard, and that as a former music promoter, he saw a chance (following the successful November 5th mass donation day) to turn his newfound fame into a career. By building on his name recognition, he would be able to start a for-profit company using his contacts among the grass roots supporters of the Ron Paul campaign. Any posting indicating otherwise was just him and his companions being sneaky bastards and spinning their company in a positive manner as a sales pitch to the grassroots, including the original attempt to form a PAC. Hopefully, this would be exemplified by his creating other projects at profit for other issues or candidates, solidifying LPA as a broker of advertising time for groups that might wish to make independent expenditures together and not a PAC with an agenda. It’s an argument that I hope keeps him and the others out of a fraud conviction. Those who want clear statements contradicting this argument from LPA or its principals are directly asking them to ground the blimp and risk hurting themselves, perhaps severely. Let me be more specific. Elijah apologizing is asking for this thing to blow up, and for him and his companions to suffer extensively. They can't tell you even if they want to people.
It may be that the individuals at LPA are heroes - pledging their lives (up to 5 years in prison), their fortunes (millions in fines), and their sacred honor (a felony conviction that will stay with them for the rest of their lives) for a profound act of civil disobedience protesting onerous campaign finance laws.
Or maybe they are just sneaky bastards testing out a for-profit business model. Under the circumstances, I won’t be pressing them too hard to say otherwise.
PS – I will respond to additional comments or questions below, but certainly not more than once per day. For those of you interested in instantaneous responses – I apologize for the limitation.
PPS – Congratulations to purchasers of advertising time on the blimp. You are directly supporting a real revolution - what may be a Supreme Court level challenge to the rules of the establishment. This is very very V for Vendetta moment, maybe more than you realize.
Hello,
I’ve seen a pretty intense discussion taking place on the blimp project. I’ve been waiting for it to die, but it hasn’t really, so although I normally don’t like to involve myself…
This is a long post containing significant detail. Thank you for having the courage to read all of it carefully before responding. I am not a member of or spokesperson for Liberty Political Advertising, LLC (LPA). However, I may be able to provide a useful service in responding to some concerns. I am not being compensated for this article and LPA does not know I am posting it, because that would mean giving their approval – which I wish to avoid. I have made no financial contribution to the blimp project. I have financially contributed to the Ron Paul campaign. I am not a legal expert in campaign finance law, and I don’t know everything. I merely wish to make several points, some in response to questions posted in this forum, regarding the purpose, structure, and ramifications of the blimp project – bringing up items for and against based on my personal opinions and review of the situation, in the hopes they may provide a basis for friendly future discussions.
It is almost certain that there will be a legal challenge to the blimp – McCain of McCain-Feingold, for instance, may file an injunction to prevent it from flying in New Hampshire. Even if opposing candidates do not, the concept is radical enough, and challenges the efficacy of existing laws (even if the business model is upheld) so directly that there will almost certainly be an action on the matter at some point. What the company effectively does is put significant ‘independent expenditures’ within the reach of ordinary Americans (http://a257.g.akamaitech.net/7/257/2422/14feb20071500/edocket.access.gpo.gov/cfr_2007/janqtr/11cfr100.16.htm) by creating something that looks and smells like a PAC, but says it isn’t a PAC (or an SSF – think ‘corporate PAC’). I predict this will be a significant model in all future elections if it survives, but this is a direct challenge to the FEC rules and could go all the way to the Supreme Court. Here’s why (the MSM coverage of the legal issue will continue to be huge – probably bigger than the blimp itself):
Federal law defines the term “political committee” to mean any “group of persons which receives contributions aggregating in excess of $1,000 during a calendar year or which makes expenditures aggregating in excess of $1,000 during a calendar year.” 2 U.S.C. § 431(4). The terms “contribution” and “expenditure,” in turn, are defined to include the receipt or payment of anything of value “for the purpose of influencing any election for Federal office.” 2 U.S.C. §§ 431(8)(A) and (9)(A).
In Buckley, the Supreme Court construed the term “political committee” to “only encompass organizations that are under the control of a candidate or the major purpose of which is the nomination or election of a candidate.” 424 U.S. 1, 79 (1976) (emphasis added). The Court in McConnell, restated the “major purpose” test for political committee status as iterated in Buckley. 540 U.S. 93, 170 n.64 (2003).
In other words, the Supreme Court has added a “major purpose” test to the statutory definition of “political committee.” Therefore, (LPA) is a federal “political committee” if it meets both parts of the two-prong test for political committee status: (1) it has a “major purpose” to influence candidate elections and (2) it receives $1,000 in contributions or makes $1,000 in “expenditures,” defined by statute to mean receipt or payment of money for the purpose of influencing federal elections.
The Supreme Court made clear in Buckley that the test of whether a group has made $1,000 in “expenditures” is not limited by the “express advocacy” standard when applied to a “major purpose” group... Rather, the test for “expenditure” is the broader statutory standard of whether disbursements are made “for the purpose of influencing” any federal election, regardless of whether the disbursements are for an “express advocacy” communication.
The Buckley Court made clear that “major purpose” groups are not vulnerable to concerns of vagueness in drawing a line between issue discussion and electioneering activities because their activities “can be assumed to fall within the core area sought to be addressed by Congress. They are, by definition, campaign related.” 424 U.S. at 79. By contrast, the Court developed and applied the “express advocacy” test only to non-“major purpose” spenders, reasoning that when the maker of the expenditure is an individual or non-“major purpose” group, “the relation of the information sought to the purposes of the Act may be too remote.” To insure that the reach of FECA’s disclosure provisions was not impermissibly broad, the Court construed the term “expenditure” to “reach only funds used for communications that expressly advocate the election or defeat of a clearly identified candidate.” Id. at 79–80.
Express Advocacy: According to FEC regulations, this type of communication is one (a) that uses particular "magic words" like "elect," defeat," "vote for," or "vote against," or (b) when taken as a whole and with limited reference to external events, such as the proximity to the election, can only be interpreted by a "reasonable person" as advocating the election or defeat of one or more clearly identified candidate(s).
(http://clcblog.org/blog_item-35.html)
(http://www.verifiedvoting.org/downloads/vendors/standards/FEC_Prop527.pdf)
(http://www.campaignfinanceguide.org/f-expressadv.html)
LPA’s whole purpose is to claim it is not a political committee. The FEC’s whole purpose is to claim LPA is a political committee. Some have questioned the extensive legal representation of LPA and the significant legal fees of various attorneys. With some experience in these matters, I offer my opinion that a comprehensive legal team (and the decision to retain Brad Smith, in particular) is a smart move and the fees are not unreasonable. A retainer is a like a pre-paid phone card for an attorney, and the one under discussion is half what I would expect, with an hourly rate in-line with a high profile corporate attorney. Let’s be sure we understand what is at stake. If the blimp project and Liberty Political Advertising, LLC are proven to be a sham company fabricated solely to bypass existing campaign finance laws (by asserting they are really a PAC), it is possible that the company and its principals could be charged with election fraud. A charge of fraud can pierce the corporate veil, putting managers or officers of the company at personal liability for civil and criminal penalties (http://en.wikipedia.org/wiki/Piercing_the_corporate_veil) including fines and jail time. The civil penalty could be very high given the amount involved, conceivably between 100% and 1000% of the total amount raised. Criminal penalties include incarceration for up to 5 years. (http://www.wileyrein.com/publication_newsletters.cfm?ID=16&year=2003&publication_ID=9652&keyword=). Individuals buying time should be legally fine (because you would only be a contributor to a PAC under false pretenses - innocent victim - but I recommend seeking a legal opinion yourself if you are concerned) as long as they submit a required FEC form (http://www.fec.gov/pdf/forms/fecfrm5.pdf) for any independent expenditure over $250 (per calendar year). Please, if you have contributed $250 or more, make sure you have filed your independent expenditure report. Individuals purchasing more than $10,000 of time must file within 48 hours (24 hours if less than 20 days from the election) of public dissemination (probably the launch date, but I recommend doing it on donation).
I will break now to give a bullet point list answering certain questions and question types, with references, in order to discuss why this works the way it does. By the way, if LPA’s legal counsel has done anything other than tell the company members and managers to not post a lot of q&a then I am surprised. Several responses by a campaign spokesperson in this forum are already suspect. A q&a in the Ron Paul forums could be inimical to their interest, even if it makes people sad not to hear from the principals. The FEC has ruled that an entities public communications are used to determine major purpose. Any answer that could be misinterpreted could be used against them, etc., etc. with all the negative ramifications cited.
1. As a side note and beginning with what I consider the least serious discussion, I am sure LPA will make miscalculations and mistakes with the money they receive (hiring 2 videographers vs. 1 or GPS positioning or $1k/wk payroll for a webmaster - but remember, if you payroll somebody, you pay them more than what they actually receive, including: matching payroll taxes, any benefits, any workman’s comp or unemployment insurance, overhead for processing pay and complying with government regulations, etc., unless the web master owns their own company which can be arranged, noting that many industries add 50% - 100%/hr to the employees stated wage to cover the overhead of employing a professional individual - and I suspect they are interested in limited, polite feedback). This may be a new business for these individuals, and anyone with extensive start-up experience can testify both to the learning curve and to the incredible nature of LPA’s success (which success is also a tribute to purchasers of advertising space). The lack of advocacy regarding Ron Paul's positions at blimp stops is not a mistake. It is a requirement, and the only way to even maybe dodge the 'express advocacy' bullet if they avoid the ‘major purpose’ test described above.
2. Regarding the purchase of advertising time. You are not buying stock, shares or membership. You are buying retail advertising time. The advertisement is the big message on the side. If a one page USA Today ad were to be sold incrementally, you would not be buying shares in USA Today, you would be buying square inches of ad space. All questions from individuals considering buying advertising time that reference stock, being part of a company, etc. are spurious and inapplicable. Start up costs are likely nothing - $1,000 tops with little or no fixed assets. Thus, there is a difference between financing start-up costs and buying a chunk of advertising time. The advertising/product being sold is not a start up cost. Operational costs (ongoing expenses, salaries, blimp rental etc.) are not start-up costs and the business model looks to fund any costs above and beyond the LLC filing from gross receipts. Offers to cover start-up costs convey either profound ignorance or treachery (i.e. - someone wants to steal the company from the dumb Ron Paul guys after it becomes successful by claiming they helped get it going). References to venture capital standards are likewise out of place. The SEC is worse than the FEC and offering or selling membership shares (securities) in a private company comes with huge strings (can’t publicly advertise shares, can only sell to accredited or sophisticated investors, ad nauseum) and bigger penalties than those already cited. I have had modest involvement in raising funds/selling shares of startups. LPA cannot give pieces of their company to those buying ad time on the blimp (begin with: http://en.wikipedia.org/wiki/Securities_law). Additionally, contributions (including capital contributions) to any entity making independent expenditures are regulated. Calls for disclosure of business model details, financing details, etc. – including the ‘transparency’ page – for this private company are at best premature, at worst a significant risk on the part of the principals for the penalties described above.
3. Contributions from the official Ron Paul campaign, foreign nationals, corporate sponsorship. The fact that this is a for-profit company does not bypass all election rules.
a. Purchase by the Campaign. There are two types of advertising applicable in this discussion, namely ‘independent expenditures’ and ‘coordinated communications’. Independent expenditures have little regulation and no limit. Coordinated communications are subject to the standard restrictions (http://www.fec.gov/pages/brochures/indexp.shtml). There are three tests to prove coordination with the campaign. They are Payment, Content, and Conduct. You must meet all three to qualify as a coordinated communication and become subject to the typical limitations. The blimp seems to meet the Content test because it specifically references a Presidential Candidate 120 days before a primary and is shown in the jurisdiction in which the candidate will be competing. It may meet the test for Conduct because “the communication is created, produced or distributed at the suggestion of the person paying for the communication (my insert – this means you if you bought advertising time) and the candidate, authorized committee, political party committee or agent of any of the foregoing assents to the suggestion”. Remember Dr Paul talking about the blimp? Can that convey consent? Hopefully, LPA has built a nice firewall (an actual legal object). The third test is payment, and it may be the easiest to pass. Any donation from the Campaign, a committee, an agent of any of these, etc. would kill the project and bring the aforementioned consequences.
b. Foreign nationals. A US citizen is not a foreign national even if they live abroad and can buy time without restriction. Also, this is not buying stock in an American company, like a foreign national buying shares of Coke. This is buying paid advertising time for a declared presidential candidate. Once you use the words ‘Ron Paul’, a foreign national cannot participate or the project is illegal. In fact, the name Ron Paul is not required. Something as vague as a nickname or ‘the Republican candidate for president’ (in the general election) would be sufficient. Hopefully, LPA is screening purchasers carefully, because: “The Federal Election Campaign Act (FECA) prohibits any foreign national from contributing, donating or spending funds in connection with any federal, state, or local election in the United States, either directly or indirectly. It is also unlawful to help foreign nationals violate that ban or to solicit, receive or accept contributions or donations from them. Persons who knowingly and willfully engage in these activities may be subject to fines and/or imprisonment” (http://www.fec.gov/pages/brochures/foreign.shtml). Foreign nationals can only finance educational programs not related to a clearly identified candidate. Foreign nationals cannot contribute to PAC’s despite what may have been said elsewhere.
c. Corporate sponsorship (the Google push). A for-profit corporation may not make an independent expenditure or contribution in any way, and non-profit corporations have hoops to jump through and limitations if they make it through said hoops. This is similar to the foreign national argument above. It just can’t be done, though they might be able to form an SSF and abide by the applicable limitations (http://www.fec.gov/pdf/colagui.pdf). For these reasons, even small advertisements on the blimp that subsidize the project may be deemed to de-legitimize the entire project. The argument in favor of small corporate advertisements would be similar to corporate advertisements in USA Today when a Ron Paul advertisement is carried. If you have a business, do not buy ad time from LPA using your business name or credit card.
4. Legitimate business model. In order to overcome nearly inevitable legal challenges, the company will have to demonstrate a legitimate business model that is sustainable beyond this one effort. Although LPA may get some slack under the argument I present below, this basically means that volunteer efforts are not allowed, particularly those solicited from the grass roots. Let me repeat, they should not even think about staffing their company with Ron Paul volunteers; it would be too dangerous. Interested individuals may wish to consider forming companies and hiring themselves out to LPA at a discount, carefully noting in-kind contribution limitations and regulations. For instance, individuals may rent data-center space, purchase servers and related equipment, select volunteer web designers, design all intended aspects of the site, and offer that site and management thereof to LPA. Also Ron Paul fans, LPA must pursue additional contracts, preferably not related to Ron Paul, and demonstrate a going concern with legitimate profit potential or risk being shut down. This is required to avoid the ‘major purpose’ label above, so that there expenditures can be claimed to not be ‘express advocacy’ (this is also why they can’t say “Ron Paul for President”, “Elect Ron Paul”, “Vote Ron Paul”, etc.). Again, they must avoid both ‘major purpose’ and ‘express advocacy’. They are shaky enough just engaging in political advertising at all, and I am already concerned that they wish to limit their brand to a ‘Liberty’ philosophy. Cutting their salaries was a calculated risk because it was done under pressure from the grassroots. Questions like: “Are you doing this to help Ron Paul or to line your pockets?” are clear traps and they cannot be seen falling for those traps. If I worked for a competing campaign, I would immediately come to a forum like this and demand a direct apology from Trevor and Elijah, asking them to declare this a real grassroots effort to elect Ron Paul. If they did not respond, I would disparage them until they did or the project was fatally weakened, trusting that the avergae forum user would not go verify all this information for themselves. For any of the LPA people, particularly the principals, to indicate they only want to do this to help Ron Paul is to openly and clearly invite the immediate destruction of the project, admit to fraud with all the penalties attached, and is a perfect example of why they should not communicate or q&a in the forums at all. Some responses to various individuals have been potentially incriminating. Ron Paul supporters should instead note that they are doing this project on a shoestring to get their company up and going and that Ron Paul supporters have a unique opportunity to take advantage of that shoestring budget. Some previous assertions regarding PAC’s, charities, and non-profits are accurate. ‘Non-profits’ often pay far better salaries and have a much higher overhead than this project, so don’t be alarmed at the words ‘for profit’ or apply an unsavory connotation unnecessarily.
This brings up the one real defense I see that LPA has against being labeled a PAC and suffering accordingly. If I were to defend this company in court, I would make the case that my client’s chief principal, Trevor Lyman, is a sneaky entrepreneurial bastard, and that as a former music promoter, he saw a chance (following the successful November 5th mass donation day) to turn his newfound fame into a career. By building on his name recognition, he would be able to start a for-profit company using his contacts among the grass roots supporters of the Ron Paul campaign. Any posting indicating otherwise was just him and his companions being sneaky bastards and spinning their company in a positive manner as a sales pitch to the grassroots, including the original attempt to form a PAC. Hopefully, this would be exemplified by his creating other projects at profit for other issues or candidates, solidifying LPA as a broker of advertising time for groups that might wish to make independent expenditures together and not a PAC with an agenda. It’s an argument that I hope keeps him and the others out of a fraud conviction. Those who want clear statements contradicting this argument from LPA or its principals are directly asking them to ground the blimp and risk hurting themselves, perhaps severely. Let me be more specific. Elijah apologizing is asking for this thing to blow up, and for him and his companions to suffer extensively. They can't tell you even if they want to people.
It may be that the individuals at LPA are heroes - pledging their lives (up to 5 years in prison), their fortunes (millions in fines), and their sacred honor (a felony conviction that will stay with them for the rest of their lives) for a profound act of civil disobedience protesting onerous campaign finance laws.
Or maybe they are just sneaky bastards testing out a for-profit business model. Under the circumstances, I won’t be pressing them too hard to say otherwise.
PS – I will respond to additional comments or questions below, but certainly not more than once per day. For those of you interested in instantaneous responses – I apologize for the limitation.
PPS – Congratulations to purchasers of advertising time on the blimp. You are directly supporting a real revolution - what may be a Supreme Court level challenge to the rules of the establishment. This is very very V for Vendetta moment, maybe more than you realize.