Federal Home Loan Mortgage Corporation (Freddie Mac) Pays Largest Fine in FEC History

Washington -- The Federal Election Commission announced today that the Federal Home Loan Mortgage Corporation (“Freddie Mac”) has agreed in a Conciliation Agreement (“Agreement”) to pay a $3.8 million civil penalty to settle allegations that it violated the Federal Election Campaign Act (“the Act”) and FEC regulations, which prohibit corporations from making or facilitating contributions. The $3.8 million civil penalty is the largest civil penalty ever obtained by the Commission in a civil enforcement action.

"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.  “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.

Between 2000 and 2003, Freddie Mac used corporate resources to facilitate 85 fundraising events that raised approximately $1.7 million for federal candidates.  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 fundraisers were organized by Mr. Delk and former Vice-President Clark Camper, and benefited members of the House Financial Services Committee and other members of Congress. Consulting firms were hired to plan and organize the fundraising dinners, many of which were held at the Galileo Restaurant in Washington. Freddie Mac paid monthly retainers to those firms that grew to more than $25,000 per month by the end of 2002.

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 also found that Freddie Mac contributed $150,000 in 2002 to the Republican Governors Association (“RGA”), a contribution the RGA 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. 2 U.S.C. 441b(a) and 11 CFR 114.2(f).  A corporation illegally facilitates the making of contributions when it uses corporate resources or personnel to plan and carry out fundraisers for federal candidates. 

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.  However, Freddie Mac admits it violated the Act by contributing $150,000 to the RGA in October 2002, a contribution that Freddie Mac contends was intended for the party building fund.

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 Leland Brendsel, Mr. Camper, Mr. Delk or consulting firms hired by Freddie Mac.

The Commission determined to take no further action as to Galileo Restaurant, the Republican National Committee and the Republican Governors Association. The Commission also dismissed the allegation that Mr. 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.  The final Commission vote to resolve this matter was 5-1, with Chairman Michael Toner dissenting.

  The conclusion of this case represents another example of the Commission’s success in recent years in using its enforcement resources effectively.  2005 was the fourth consecutive year in which the FEC obtained more than $2 million in civil penalties. You can find a ranking of FEC enforcement cases by size of civil penalty at http://www.fec.gov/press/bkgnd/history.shtml.

Documents related to this matter are available on the FEC''''s web site by following this link.

*There are four administrative stages to the FEC enforcement process:

It requires the votes of at least four of the six Commissioners to take any action. The FEC can close a case at any point after reviewing a complaint.  If a violation is found and conciliation cannot be reached, then the FEC can institute a civil court action against a respondent.                                                     

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