United States District Court, D. Delaware
Nesin, Lisa J. Stevenson, Kevin Deeley, Harry J. Summers,
Robert W. Bonham III, FEDERAL ELECTION COMMISSION,
Washington, DC Attorneys for Plaintiff.
Stephen M. Hoersting, Chris Gober, THE GOBER GROUP PLLC,
Austin, TX Attorneys for Defendants.
U.S. District Judge.
case is an enforcement action by the Federal Election
Commission (“FEC” “Commission” or
“Plaintiff) against Christine O'Donnell
(“O'Donnell”), a candidate for the United
States Senate; the Friends of Christine O'Donnell, a
campaign committee supporting O'Donnell's candidacy
(“Committee”); and Matthew Moran, in his official
capacity as the Committee's treasurer (collectively,
“Defendants”). On September 21, 2016, the Court
granted summary judgment, determining that Defendants
unlawfully used campaign contributions to pay the rent for
O'Donnell's residence. See Fed. Election
Comm'n v. O'Donnell 2016 WL 5219452 (D. Del.
Sept. 21, 2016). At that time, the Court declined to
determine the appropriate remedy for Defendants'
violations. See Id. at *12-14.
the Court's decision on summary judgment, the parties
indicated to the Court that they were engaged in negotiations
in an effort to reach a settlement. (See D.I. 66 at
3) The parties subsequently participated in mediation
proceedings with Chief Magistrate Judge Thynge. (See
D.I. 67, 68, 69) Having failed to reach a settlement
agreement, the parties submitted letter briefs to the Court
addressing what remedy is appropriate for Defendants'
personal-use violations. (See D.I. 70, 71, 72, 73)
reasons stated below, the Court will order (i) O'Donnell
to disgorge $5, 701.85, (ii) Defendants jointly to pay a
penalty of $25, 000, and (iii) enjoin Defendants from
converting campaign contributions to personal use.
the Federal Election Commission Act (“FECA”),
following “a proper showing that the person involved
has committed . . . a violation of this Act, ” a court
“may grant a permanent or temporary injunction,
restraining order, or other order, including a civil penalty
which does not exceed the greater of [$7, 500] or an amount
equal to any contribution or expenditure involved in such
violation.” 52 U.S.C. § 30109(a)(6)(B); 11 C.F.R.
§ 111.24(a)(1). The Court has considerable discretion to
determine the appropriate remedies for violations of the
statute. See Fed. Election Comm'n v. Craig for U.S.
Senate, 816 F.3d 829, 847 (D.C. Cir. 2016); see also
United States v. Mun. Auth. of Union Twp., 150 F.3d 259,
264 (3d Cir. 1998).
Commission submits that the appropriate remedy for
Defendants' conversion of campaign funds to pay for
O'Donnell's personal residence is to: order
O'Donnell to disgorge $5, 701.85, which is an estimate of
the benefit she received from her violations, plus
pre-judgment interest; impose a civil penalty of $25, 000,
jointly payable by O'Donnell and the Committee; and enter
an injunction prohibiting Defendants from converting campaign
funds for personal use. Defendants do not contest that the
Court may impose the Commission's proposed remedies.
(See D.I. 73 at 1) But Defendants contend that
disgorgement plus a lower civil penalty - of $11, 403.70 -
“would equally serve the interests of justice and
- a remedy within the statutory category of “other
order[s], ” 52 U.S.C. § 30109(a)(6)(B) - may be
proper when it is “necessary to avoid the unjust
enrichment” of the violator. Fed. Election
Comm'n v. Craig for U.S. Senate, 70 F.Supp.3d 82, 97
(D.D.C. 2014), aff'd, 816 F.3d 829 (D.C. Cir.
2016); see also SEC v. Hughes Capital Corp., 124
F.3d 449, 455 (3d Cir. 1997). Disgorgement is not meant to be
punitive or compensatory; rather, “the primary purpose
of disgorgement is . . . to deprive the wrongdoer of his
ill-gotten gain.” Craig, 816 F.3d at 847
(internal quotation marks and alteration omitted); see
also SEC v. Teo, 746 F.3d 90, 105 (3d Cir. 2014).
is appropriate here. The Court previously concluded that
“[e]ven assuming it could be viewed as proper for the
Committee to pay the portion of the rent and facilities on
the Townhouse associated with the non-personal residence
parts of the Townhouse, and for O'Donnell to have to pay
only the portion of the rent and facilities associated with
the master bedroom and the other parts of the house which she
used or had control over, the uncontested facts still
establish that O'Donnell's payments to the Committee
were insufficient.” O'Donnell, 2016 WL
5219452, at *8. The Court determined that “[a]
reasonable, conservative estimate of O'Donnell's fair
share . . . is equal to $1, 694.29 per quarter. But the
undisputed evidence is that O'Donnell paid only $770 per
quarter, which is far less than the value of what she
obtained.” Id. Based on these figures, the
Commission calculates that O'Donnell underpaid by
approximately $4, 620 ($924.29 per quarter, for five
quarters). (See D.I. 71 at 4) The Commission then
estimates pre-judgment interest to be $1, 081.85. (See
Id. at 4-5) Defendants do not dispute that the
Commission's calculations result in a reasonable estimate
of the amount O'Donnell benefitted from the personal use
of campaign contributions. (See D.I. 73 at 2) Thus,
the Court finds that disgorgement and pre-judgment interest
are warranted and that $5, 701.85 is a reasonable, but
conservative, estimate of the amount O'Donnell benefitted
from the Committee's improper payment of her residence.
Court will order O'Donnell to disgorge these funds to the
U.S. Treasury. Although disgorgement to a candidate's
campaign committee is sometimes appropriate, here it would
not be, as “the Committee is largely inactive”
and the Committee has transferred at least $142, 000 to
O'Donnell's own PAC. (D.I. 71 at 4; see also
D.I. 70 at 3; Craig, 70 F.Supp.3d at 101) Therefore,
disgorging to the Committee would not meaningfully accomplish
the goal of depriving O'Donnell of her ill-gotten gain.
In such circumstances, “courts of appeals have often
affirmed the propriety of directing disgorged funds to the
U.S. Treasury.” Craig, 816 F.3d at 848;
see also SEC v. Cavanagh, 445 F.3d 105, 117 (2d Cir.