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Sunday, February 24, 2008

More On McCain's FEC Problem

As I wrote below, McCain has probably locked himself into the public financing system for the primaries. His lawyer says he's out regardless of what the FEC says. This seems reckless to me - McCain is flirting with a 5 year prison term, although of course he would never serve it. But the Republicans are now in a huge fix.

Here is the relevant page of the loan agreement. I have manually typed below (there could be minor errors) the relevant paragraph:
Additional Requirement: Borrower and Lender agree that if Borrower withdraws from the public matching funds program, but John McCain then does not win the next primary or caucus in which he is active (which can be any primary or caucus won the same day) or does not place at least within 10 percentage points of the winner of that primary or caucus, Borrower will cause John McCain to remain an active political candidate and Borrower will, within thirty (30) days of said primary or caucus, (i) reapply for matching funds, (ii) grant to Lender, as additional collateral for the Loan, a first priority perfected security interest in and to all of Borrower's right, title and interest in and to the public matching funds program, and (iii) execute and deliver to Lender such documents, interests and agreements as Lender may require with respect to the foregoing. Borrower and Lender agree that Borrower will provide oral or written notice to Lender at least 24 hours before notice of withdrawal from the matching funds program is provided by Borrower or John McCain to the Federal Election Commission.
Okay, so my claim is that this is a constructive pledging of the funds as collateral for a bank loan, which should disqualify McCain from withdrawing during the primary election. I am basing this on the interpretations of what would be considered a pledging of retirement accounts. The bottom line is that the loan would not have been granted without this provision. If you included a similar clause in a loan agreement to try to get a loan by using your IRA funds as security without actually paying the taxes on the funds, I think you'd lose that battle!

If you disagree, please explain why?

Also I would like to cite a portion of a comment at the prior post by Daniel Newby:
Certainly McCain would make a magnificent Caesar. His willingness to fight for his people is beyond doubt, and he seems to have a real distaste for intrigue. He would likely pick competent proconsuls, unlike the walking disaster Bush sent to Iraq.

But does that make him loyal? For me, the heart of the American philosophy is that we keep our political interests out in the open. We put our churches and Klansmen and animal rights activists and everybody else in parades so folks will see plainly what they look like and how they act. The McCain-Feingold Act drives that underground. It teaches free men to either act from the shadows or give up, it quenches solidarity and shared interests among people who work together. I believe these predictable results are corrosive to civil society, and therefore profoundly disloyal.
I thought this was well stated. I also think the apparent arrogance of McCain's saying that he is withdrawing whether the SEC lets him do so or not is highly disturbing. Certainly it should raise doubts in his supporters' minds.

I think the only valid argument that McCain's lawyers can make to assert that he did not pledge the matching funds as collateral is that the agreement is not legally enforceable. That would would make this a loan gained under false pretexts and bad faith, which does not seem better to me. I don't like it if Casey Serin does it, and I don't like it if John McCain does it. At least I am consistent.

The FEC has a major problem here, because of course if they pass this, any candidate could do the same, thus effectively nullifying the "no pledge" rule. Usually courts will not construe even regulatory law in a way that would nullify a provision, unless, of course, the provision is unconstitutional.

Just to clarify, if his lawyers were to make this argument he could find himself in a deposition saying that although the agreement was executed, he knew that the bank could not force him to remain in the public funds system so he never intended to keep his promise. And to what, I ask you, would he be confessing if he did so?

Here is my original post regarding my inability to vote for McCain. And Teri, I would say this is a case of McCain not believing that the same rules hold for the officers as the enlisted pukes!

PS: Here is McCain's withdrawal letter, and here is the FEC's response asking him to explain his claim of not having pledged the funds as security. This is a link to the Dec 17th loan modification. See also the paragraph on page 2 that reads:
COMPLIANCE WITH THE FEDERAL ELECTION COMMISSION'S MATCHING FUNDS PROGRAM. Borrower agrees and covenants with Lender that while this Agreement is in effect, Borrower shall not, without Lender's prior written consent, exceed overall or state spending limits imposed under the Federal Matching Funds Program, irrespective of whether Borrower is subject to such program as of any applicate date of determination.
Read the whole thing. It stinks. On the one hand the campaign covenants to pay back from matching funds if necessary, and on the other hand all the collateral descriptions are rewritten to exclude campaign matching funds.

The most important statement you made was that Mccain is not subject to the Rule of Law since unlike ordinary citizens he would not face jail time for his felony.Equal protection under the Law has always been more of a dream than a reality,but it was and is a worthy goal...and the casual acceptance and expectation that the wealthy and powerful are exempt from the rules does much to harm society,It is the difference between a republic and a tyranny.
I read your post on why you won't vote for McCain. I, too, am having difficulty with his being the inevitable nominee. Do you think Obama or Clinton would nominate justices who would be inclined to remove more of the restrictions of McCain-Feingold? It would be a good question for the Democrat candidates.
Anon, I don't casually accept it. That was a bitter, heartfelt cry of agony. I never, ever see cases in which the campaign does something criminal and the candidate gets in trouble. It's always a flunky. Hillary got nailed but good for her first campaign, and some underling got indicted.

Belle, my only thought is that I think the Republicans in the Senate would give intense scrutiny to Obama's nominees, but I am afraid they would give McCain's a pass. Also, I am sorry to say this but it sometimes seems as if Obama has a less autocratic streak than either McCain or Hillary. He seems to have a bit more of a sense of leaving things up to the people which is noticeable in his approach to healthcare.

Romney was supposedly a conservative, but he signed a bill that forced people to buy health insurance. Obama criticizes that approach. I know a lot of Independents and Republicans who are considering voting for him. They are basically appalled at his socialism, but doubtful that there is the money to implement his plans, and somewhat more comfortable with his overall approach than that of the other candidates.

If he wins, that will be the reason.

I'm in an electoral quandary. I have no feeling on what to do. I personally believe that unless McCain backs down from his position on this one very quickly he is basically disqualifying himself as the Republican nominee. Let's suppose you were a strong McCain supporter. How comfortable would you be heading into the general with an FEC case like this hanging over his head? It's not a mere technicality.
I suppose we had better have the audacity to hope that the Obamessiah proves as capable in the office as another president who had only two years national experience - Abe Lincoln.

Otherwise, we're facing a choice of indictees.
I was just discussing that with my older brother. He couldn't believe that he ended up voting for Obama in the primary, but he did.

Personally, when I think about voting in the general election I feel the strong urge to fall to the floor and suck my thumb. This is going to hurt!!!
I think Obama is the best choice,Hillary is too divisive to get much done,and Mccain is too compromised.I would like better candidates,and wish we had viable 3rd and 4th parties...Ron Paul vs Edwards in a debate would be a pleasure.As far as Obama,I am a life long NRA member and I will vote for him over Mccain because I think his vigor and oratorical skills will be a plus in the next few very rough years.And he should try to get Hillary as VP,there is no better life insurance if he becomes the first black prez.Tom Stone
We will be lying right next to you, Mama, sucking our thumbs as well. This is a tough one.
In McCain's loan agreement, page 2 includes various references to the matching funds program, but page 3 states, "It is expressly understood and agreed that, 'Collateral' specifically excludes any certification of matching funds eligibility now held by Borrower and/or John McCain, and any right, title and interest of Borrower and/or John McCain to receive payments thereunder."
EXACTLY - look at the last sentence of my post "On the one hand the campaign covenants to pay back from matching funds if necessary, and on the other hand all the collateral descriptions are rewritten to exclude campaign matching funds."

It's a deliberate attempt to get around the rules. On one hand, the loan agreement promises that matching funds will be used to pay back the loan if necessary, which makes them collateral. On the other hand, the loan agreement is rewritten to say they are not.

I will not say what I think of the bank that did this, but it is obvious that the campaign was trying to create a technical exception. To me, this makes it worse. An inadvertent error is not as serious.

I'll just repeat that if the FEC lets this stand, the rule saying that using matching funds as collateral will be effectively null and void.
Viola, I do not know what it says about McCain's candidacy that it reduces us to thumb-sucking.

It seems to me that McCain is best in experience, but has temperament problems, to put it kindly. He also has created a genuine ethical and legal problem here.

Hillary has ethical problems. Uggh, voting for her? I don't like her approach to problems either. Everything's pass a law and mandates. It's extremely dictatorial and unlikely to work.

Obama really doesn't have the experience. But he's less of a jerk than the other two. I think his plans have no chance of working out because we don't have the money, but his approach to problems is basically more small-d democratic than Our Peerless Leadress and Our Fearless Leader.
Mama, I have to agree with Anon 8:27...my household also wished there were viable 3rd and 4th parties. We are simply not impressed right now.
Couple of more interesting things over on the Wall Street Journal article:
In response to Mr. Dean's announcement, the McCain campaign said Mr. Dean tried to withdraw from the program in the same manner when Mr. Dean was a presidential candidate in 2003.

So it sounds like there is already a prescident to withdraw and I don't recall any screams of outrage when (and if!) Dean did this.
Although Mr. McCain hasn't received any of the federal money, he opened a $4 million line of credit in November for which the commission says he may have used federal matching funds as collateral.
If they are saying "may have", it means they don't know. Did they rush this story into print too?
Mr. Mason said the commission won't be able to act on Mr. McCain's request until the Democratic-controlled Senate approves nominees to the commission.
So the reason they can't have a ruling on this is because the Dems are holding up approving the nominees to the commission, which is why we can't get a resolution on this today. How very convenient for the Dems ;)

Let me pose this question to you, since I'm no fan of McCain-Feingold either--do you think that maybe, just maybe, if this cause McCain some pain that he will step in and work to see the law repealed? Because I can easily see him doing that very thing. I do not see this as a deal breaker or proof that there is anything illegal being done. It's the continued focus on McCain from the MSM and the continuing silence over some of the stories starting to surface on Obama.
Teri - he does have the right to withdraw as long as he hasn't used the money. Pledging the matching funds is considered use of the money. They don't get matching funds until next month, I think, so he would have had no problem withdrawing except for this loan.

No, I don't think McCain is rethinking his stance. I'd be happy to see it.
Why is everyone looking to the criminal section of FEC law? McCain will weasel out of that, sure nuf! However, when you look at the loan agreement and compare it to his letter sent to the FEC, wherein he denies matching funds were collateral, well, shouldn't that be construed as making a false statement within the jurisdiction of the United States? SEE: 18 USC Section 1001. Now all that needs be done is for a federal Grand Jury to issue an indictment, and let a petit jury decide if he did make a false statement!
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