As noted above, the Federal Election Commission obtained civil penalties from former Senator John Ensign and his parents totaling more than $50,000, for making and receiving excessive contributions and failing to disclose them to the FEC.  For the much-maligned former Senator, this news has been described as a footnote – a “sad end to a sad story.”  But for the regulated community, the case may have broader implications.

In 2009, Senator Ensign admitted to an affair with a former staffer, Cynthia Hampton, whose husband also worked for the Senator.  Soon after this story broke, the Senator conceded that his parents had given $96,000 to the Hamptons upon their departure from his staff.  A complaint was filed with the FEC alleging that the Ensigns had made an excessive contribution to the Senator’s campaign and PAC, and that the committees failed to disclose the payments to the FEC.

Despite a recommendation from the Office of General Counsel to initiate an investigation, the FEC voted 5-0 to dismiss the complaint.  The Ensigns had provided the FEC with an affidavit swearing that the $96,000 was a gift, not a severance payment.  In defending the dismissal, the Commissioners reasoned that “the sworn affidavits submitted by the Ensigns constitute the only direct evidence of their intent in making the payment” and “it is doubtful that an investigation would produce any additional evidence that would contradict or outweigh this testimony.”

Notwithstanding the Commissioners’ prediction, the Senate Ethics Committee uncovered evidence in its parallel investigation—both witness testimony and the Senator’s own writings—contradicting the Ensigns’ affidavit.  Prodded by the Senate Ethics Committee to take another look in light of the new findings, the FEC found “reason to believe” that violations of federal campaign finance law had occurred, and the $54,000 settlement soon followed.

Why is the Ensign case noteworthy for the regulated community?

Other government entities investigating campaign finance violations: The case continues a recent trend of government entities other than the FEC—most notably, the Office of Congressional Ethics—trying their hand as campaign finance regulators (see here and here).  This could have a significant effect on how alleged campaign finance violations are investigated.  The FEC, by law, may not commence a full-blown investigation until at least four of the six commissioners find “reason to believe” that the law has been violated, a standard that can be difficult to satisfy.  Other regulators, such as the Office of Congressional Ethics, do not have to make this threshold finding to initiate an investigation.  Consequently, it is easier for these other regulators to compel witness testimony and documents than it is for the FEC to obtain the same evidence.  As the Ensign case proved, having access to this evidence may be the difference between a dismissal and a five-figure penalty.

With third parties suffering the consequences: The congressional ethics committees and the Office of Congressional Ethics have jurisdiction over Members of Congress and their staffs.  But as the Ensign case showed, other government agencies (in this case, the FEC) can use evidence uncovered in ethics committee investigations to impose significant penalties on third parties (such as the Senator’s parents).  As a result, third parties that interact with Members of Congress need to be cognizant of ongoing ethics investigations and how they may affect their interests in parallel government investigations.

The personal can be political: Before his trial last year, John Edwards’ defense team pointed to the absence of charges against Ensign in arguing that the case against the former presidential candidate should be dismissed.  The jury’s acquittal of Edwards was thought to be a setback for efforts to regulate “personal” payments under the federal campaign finance laws.  But the Ensign case suggests that, under the right factual circumstances, the government can successfully use the federal campaign finance laws to regulate these types of payments.  It is a reminder to candidates and their supporters that they should consider the campaign finance laws when structuring their financial transactions.