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Case: 5:18-cr-00106-GFVT Doc #: 33-1 Filed: 11/30/18 Page: 1 of 36 - Page ID#: 157

IN THE UNITED STATES DISTRICT COURT


FOR THE EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION
LEXINGTON

UNITED STATES OF AMERICA,


Case No. 5:18-cr-106-GFVT
Plaintiff,

v.

GERALD G. LUNDERGAN and


DALE C. EMMONS,

Defendants.

DEFENDANT LUNDERGAN’S MEMORANDUM IN SUPPORT OF MOTION TO


DISMISS (INTRAFAMILIAL CONTRIBUTIONS)
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TABLE OF CONTENTS

INTRODUCTION........................................................................................................................ 1

BACKGROUND .......................................................................................................................... 2

A. The Lundergan Companies .................................................................................... 2

B. Lundergan’s Political Career and Relationship with Dale Emmons ..................... 3

C. Alison Lundergan Grimes’ Campaign for U.S. Senate.......................................... 4

D. The Indictment ....................................................................................................... 5

ARGUMENT ................................................................................................................................ 8

A. The FEC’s Interpretation and Application of FECA is Entitled to


Substantial Deference ........................................................................................... 8

B. Limiting Intrafamilial Contributions Violates the First Amendment .................... 9

C. Where the FEC No Longer Enforces Contribution Limits Among Family


Members Where There is an Asserted and Demonstrable Pattern of Gift-
Giving, Proceeding with a Criminal Prosecution Here Would Violate Due
Process ................................................................................................................. 14

D. The Disparate Treatment of the Use of a Candidate’s “Personal” Funds


and Intrafamilial Contributions Violates Equal Protection................................. 20

E. FEC Guidance and Enforcement of the Personal Use Ban Raises


Additional Due Process Issues as to the Emmons Payments .............................. 22

CONCLUSION .......................................................................................................................... 29

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TABLE OF AUTHORITIES
CASES

Anderson v. Crosby,
No. 5:04CV164SPMMD, 2005 WL 3357220 (N.D. Fla. Mar. 25, 2005) ...............................14

Buckley v. Valeo,
424 U.S. 1 (1976) ............................................................................................................. passim

Burson v. Freeman,
504 U.S. 191 (1992) ...................................................................................................................8

Campaign Legal Ctr. v. FEC,


312 F. Supp. 3d 153 (D.D.C. 2018) .....................................................................................9, 20

Citizens for Responsibility & Ethics in Wash. (CREW) v. FEC,


892 F.3d 434 (D.C. Cir. 2018) .............................................................................................9, 20

Citizens United v. FEC,


558 U.S. 310 (2010) .......................................................................................................8, 12, 13

Cox v. Louisiana,
379 U.S. 559 (1965) .................................................................................................................19

CREW v. FEC,
164 F. Supp. 3d 113 (D.D.C. 2015) .....................................................................................9, 20

CREW v. FEC,
236 F. Supp. 3d 378 (D.D.C. 2017), aff’d, 892 F.3d 434 (D.C. Cir. 2018) ...............................9

Elrod v. Burns,
427 U.S. 347 (1976) .................................................................................................................13

FCC v. Fox TV Stations, Inc.,


567 U.S. 239 (2012) .....................................................................................................14, 16, 18

FEC v. Craig for U.S. Senate,


70 F. Supp. 3d 82 (D.D.C. 2014), aff’d, 816 F.3d 829 (D.C. Cir. 2016) .................................27

FEC v. Democratic Senatorial Campaign Comm.,


454 U.S. 27 (1981) .....................................................................................................................9

FEC v. Machinists Non-Partisan Political League,


655 F.2d 380 (D.C. Cir. 1981) ...................................................................................................8

FEC v. Nat’l Right to Work Comm.,


459 U.S. 197 (1982) ...................................................................................................................8

FEC v. O’Donnell,
209 F. Supp. 3d 727 (D. Del. 2016) .............................................................................27, 28, 29

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TABLE OF AUTHORITIES (Continued)

FEC v. Wis. Right to Life,


551 U.S. 449 (2007) .................................................................................................................27

First. Nat. Bank of Bos. v. Bellotti,


435 U.S. 765 (1978) .................................................................................................................13

In re Sealed Case,
223 F.3d 775 (D.C. Cir. 2000) ...................................................................................................9

Lawrence v. Texas,
539 U.S. 558 (2003) .................................................................................................................20

McCutcheon v. FEC,
572 U.S. 185 (2014) ......................................................................................................... passim

People v. Ferguson,
24 P.2d 965 (Cal. Dist. Ct. App. 1933) ....................................................................................18

Protect My Check, Inc. v. Dilger,


176 F. Supp. 3d 685 (E.D. Ky. 2016) ..........................................................................20, 21, 22

Raley v. Ohio,
360 U.S. 423 (1959) ...........................................................................................................18, 19

Schiff v. People,
141 P.2d 892 (Colo. 1943) .......................................................................................................18

U.S. v. Critzer,
498 F.2d 1160 (4th Cir. 1974) .................................................................................................20

U.S. v. Sexton,
719 Fed. Appx. 483 (6th Cir. 2017) .........................................................................................14

United States v. Int’l Union of Operating Eng’rs,


638 F.2d 1161 (9th Cir. 1979) ...................................................................................................8

United States v. Jumah,


493 F.3d 868 (7th Cir. 2007) ...................................................................................................18

United States v. Kanchanalak,


192 F.3d 1037 (D.C. Cir. 1999) .................................................................................................9

United States v. Levin,


973 F.2d 463 (6th Cir. 1992) ...................................................................................................24

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TABLE OF AUTHORITIES (Continued)

STATUTES

11 C.F.R. § 100.33(b)(6) ..........................................................................................................16, 21

11 C.F.R. § 100.52(d)(1) ..................................................................................................................6

11 C.F.R. § 111.16 ...........................................................................................................................5

18 U.S.C. § 1001(a)(2) .................................................................................................................6, 7

18 U.S.C. § 1519 ..............................................................................................................................7

18 U.S.C. § 371 ................................................................................................................................6

52 U.S.C. § 30101(26)(B)(vi) ..................................................................................................16, 21

52 U.S.C. § 30101(8) .......................................................................................................................6

52 U.S.C. § 30109(2) .......................................................................................................................5

52 U.S.C. § 30109(d)(1)(A)(i) .........................................................................................................6

52 U.S.C. § 30114(a), (b)(1) ..........................................................................................................23

52 U.S.C. § 30118 ............................................................................................................................5

60 Fed. Reg. 7862, 7866 (Feb. 9, 1995) ..................................................................................23, 24

FEC Advisory Opinion 1988-07 ....................................................................................................17

FEC Advisory Opinion 1994-08 ......................................................................................................7

FEC Advisory Opinion 1994-22 ................................................................................................7, 23

FEC Advisory Opinion 2002-05 ..................................................................................23, 24, 25, 26

FEC Advisory Opinion 2011-01 ..........................................................................................1, 13, 14

FEC Advisory Opinion 2011-02 ....................................................................................................26

FEC Advisory Opinion 2015-13 ....................................................................................................28

Federal Election Campaign Act of 1971 ..........................................................................................5

H.R. Rep. No. 94-917 (1976).......................................................................................................8, 9

MUR 5138 (Ferguson) .............................................................................................................15, 21

MUR 5321 (Robert) .......................................................................................................................15

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TABLE OF AUTHORITIES (Continued)

MUR 5724 (Feldkamp) ................................................................................................14, 15, 16, 17

MUR 6127 (OFA) ..........................................................................................................................25

MUR 6863 (Grimes) ........................................................................................................................5

MUR 7100 (Donald J. Trump for President, Inc.) ...........................................................................7

MUR 7111 (Donald J. Trump and Donald J. Trump for President, Inc.) ........................................7

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Defendant Gerald G. Lundergan, by counsel, moves to dismiss the Indictment (Dkt. No. 1)

in its entirety. Each of the ten counts alleged against Lundergan and Defendant Dale Emmons is

based on allegations that intrafamilial contributions, from a father to his daughter’s Senate

campaign, violate the federal campaign finance laws. Prosecution under this theory violates

Defendants’ First Amendment, equal protection, and due process rights. In support, Lundergan

submits as follows.

INTRODUCTION

This case represents an unprecedented effort to hold a father criminally liable for purported

violations of federal campaign finance law, based on actions taken to support his daughter’s Senate

campaign through payments that he or his closely-held company—of which he was the sole owner

and shareholder—made to vendors and a consultant. Several of these payments moreover, were

made post-election, after his daughter lost to the incumbent officeholder and was no longer a

“candidate” for purposes of federal campaign finance law. 1


To permit the Government to proceed with this prosecution would run directly contrary to

Supreme Court precedent, which establishes that the only constitutional justification for imposing

limits on political expenditures is to protect against quid pro quo corruption risks between the

donor and the candidate. Whatever merit the laws that the Government alleges were violated may

have in other situations, their application here cannot meet constitutional muster. There is no real

or perceived risk that a parent’s contributions to a child’s campaign raise the specter of quid pro

quo corruption—specifically, the danger that the contribution will result in the child using their

political office, once obtained, to benefit the parent—independent of the familial relationship. And

the Government’s insinuation here that such a risk can justify criminally prosecuting a father for

payments made when his daughter was not a federal officeholder or candidate is facially unsound.

Indeed, for over a decade the Federal Election Commission (“FEC”) has suspended civil

enforcement of campaign finance violations involving intrafamilial gifts where respondents argue

1
See FEC Adv. Op. 2011-01 (Carnahan) (“Ms. Carnahan lost the 2010 general election. She is no longer a candidate
for any Federal office nor does she hold any Federal office.”).

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and present evidence of a pattern of gift-giving between the family member and the candidate.

Citing the obvious conclusion that the circumstances do not give rise to the only type of corruption

that the Supreme Court has held can justify such restrictions and the confusion surrounding this

area of the law, the FEC expressed that enforcement would be inappropriate. Because any criminal

conviction under these circumstances would clearly violate both Lundergan’s First Amendment

and due process rights, the Indictment should be dismissed in its entirety.

For similar reasons, prosecution of Lundergan under the theory enshrined in the Indictment

would also violate the Equal Protection Clause. There is simply no relevant difference between a

candidate supporting her own campaign with “personal funds” that were, minutes earlier, funds

controlled by her parent, and a parent directly supporting the candidate’s campaign with the exact

same funds. This is particularly so in light of the unequivocal Supreme Court precedent that

establishes that the only legitimate basis for such prohibitions is to combat the risk of real or

perceived quid pro quo corruption. Against this constitutional backdrop, this evident arbitrary and

differential treatment of the exact same funding source—where one is not even subject to civil

penalties, and the other could result in a lengthy prison sentence—cannot stand.

Finally, to the extent that the Government relies upon payments that Lundergan allegedly

made to Emmons, a longtime family friend and consultant of both Lundergan’s businesses and

Lundergan himself, those charges raise independent due process issues, because prosecution based

on those payments runs contrary to decades of FEC guidance related to the personal use provision,

providing additional grounds for dismissal.

BACKGROUND

A. The Lundergan Companies

The oldest son of five children, Lundergan was born in Maysville, Kentucky. Growing up,

Lundergan and his siblings contributed to the support of the family by hawking lemonade and fried

ham sandwiches at Kentucky’s festivals and fairs. From that experience, in 1979, Lundergan

started a catering company with the help of his brothers, which they named Lundy’s. Lundergan

worked hard to build the business, and by 2013 Lundy’s was one of several divisions, all wholly

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owned and operated by Lundergan and his immediate family, organized under the corporate entity

S.R. Holding Co., Inc. (collectively, the “Lundergan Companies”). 2 The Lundergan Companies

provide full services, including food, tenting, staging, and equipment, for events of all sizes.

Lundy’s was a primary vendor for the 1996 Olympic games, Pope John Paul II’s 1986 visit to the

United States (a particularly meaningful event for Lundergan, a devout Roman Catholic), and both

Clinton inaugurals, one G.W. Bush inaugural, and both Obama inaugurals. The Lundergan

Companies also provide long-term, temporary living and business facilities, and Lundergan has

expanded their work into comprehensive disaster relief, including providing temporary housing

and food service primarily to power workers. In doing all of this, Lundergan relies upon a regular

vendor base, with which he subcontracts for all types of services. During the entirety of Lundy’s

nearly 40-year history, it, and all of the Lundergan Companies, have always been closely-held

companies with no owners or stockholders beyond immediate members of the Lundergan family.

During the time period relevant for the purposes of this action, Lundergan was the sole owner of

all of the Lundergan Companies.

B. Lundergan’s Political Career and Relationship with Dale Emmons

In addition to his business career, Lundergan has been active in Kentucky politics for

decades. Lundergan served in the Kentucky House of Representatives from 1980 to 1985 and again

from 1987 to 1989. He served as the Chair of the Kentucky Democratic Party on two separate

occasions, in 1988 and then again from 2005 to 2007.

Dale Emmons is a well-known political consultant in Kentucky, and he is a close friend

and business advisor to Lundergan. The personal relationship between Lundergan and Emmons

dates back to at least 1980. During their many years of friendship, Emmons has provided paid

political consulting services to Lundergan, including on Lundergan’s races for the Kentucky House

of Representatives and when he chaired the Kentucky Democratic Party. In addition to their

personal and political relationship, Lundergan and Emmons share a business relationship. For

2
At the time of the events referenced in the Indictment, the Lundergan Companies included S.R. Holding Co., Inc.,
and the d/b/as Lundy’s Catering, Lundy’s Special Events, Signature Special Events, and Emergency Disaster Services.

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years, using his extensive connections developed through politics, Emmons has assisted the

Lundergan Companies in business development. Emmons has also helped with the execution of

events and expositions for the Lundergan Companies.

Lundergan has always compensated Emmons on an ad-hoc, informal basis. There is no

express business agreement between Lundergan and Emmons, and Emmons has not always been

paid by Lundergan contemporaneous with services provided or the event worked. Rather, Emmons

has been paid when cash-flow permits.

C. Alison Lundergan Grimes’ Campaign for U.S. Senate

Lundergan married his high school sweetheart and they have five daughters, including

Alison Lundergan Grimes (“ALG”), Kentucky’s current Secretary of State. ALG was first elected

in 2011, becoming the youngest Secretary of State in the country. She was quickly identified as a

rising star in the Democratic Party and was recruited to run for U.S. Senate against the incumbent

Republican Senator Mitch McConnell.

ALG announced her Senate candidacy on July 1, 2013, and on July 30, her campaign was

kicked off with an event hosted at Carrick House, a property owned by Lundergan in historic

downtown Lexington. More than 1,000 people attended the event, which included live music and

speeches and video messages from family members and supporters. 3 ALG then set off on a “Road

to Fancy Farm Tour,” that began in Bowling Green and made six stops in Western Kentucky before

she appeared on August 2 at Kentucky’s largest statewide political event, the annual Fancy Farm

picnic. Theirs is a tightly knit family; all of the Lundergan daughters have worked for the family

businesses at some point, and many—including ALG’s parents, her siblings, and even her

grandmother (who became well known for her appearances in ALG’s campaign advertising)—

were involved in some way in her efforts to become the next Senator from Kentucky. Although

ALG fought a tenacious campaign, she lost the general election to Senator McConnell on

November 4, 2014.

3
The Indictment refers to ALG as “Candidate A” and her principal campaign committee, Alison for Kentucky, as
“Political Committee 1” (referred to in this brief as simply the “Campaign”).

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Over the course of the campaign, ALG’s Senate Campaign reported to the FEC over

$225,000 in disbursements to Lundergan, the Lundergan Companies, and Emmons and Co., Inc.

See Ex. A (summarizing disbursements to the Lundergan Companies and Lundergan reported on

Campaign’s publicly filed FEC reports); Ex. B (same for Emmons and Emmons and Co. Inc.). In

other words, the fact that they were providing a significant amount of services to the Campaign

was no secret, as anyone could learn by simply viewing the public FEC reports. Indeed, in late

August 2014, the Republican Party of Kentucky (“RPK”) filed an FEC complaint (known as an

“MUR,” or “matter under review” 4), alleging that the Campaign had violated federal campaign

finance law because the rate that it paid to rent a bus owned by the Lundergan Companies was

purportedly “below market rates.” MUR 6863 (Grimes) Compl. at 1 (Aug. 22, 2014). 5 The FEC
denied the RPK’s request for an investigation, finding that the facts did not warrant “reason to

believe” that the campaign finance laws were violated. See MUR 6863 (Grimes) SOR of Vice

Chair Hunter & Comm’rs Goodman & Peterson at 1 (Feb. 15, 2017). 6

D. The Indictment

The Government issued the Indictment on August 31, 2018. It sets forth ten counts against

Lundergan and Emmons. Indictment at 1, 21-29. All are related to Lundergan’s support of and

involvement with ALG’s run for Senate in 2013 and 2014. The allegations largely focus on

expenditures by the Lundergan Companies or Emmons to vendors during the early days of ALG’s

Senate campaign—in particular, in July 2013—and after ALG lost the election. Id. ¶¶ 21(a)-(c).

4
MURs dating back to 1977 are available on the FEC website at https://www.fec.gov/data/legal/search/enforcement/.
To find a particular MUR, enter the MUR Number in the field that appears on the far left side of the screen. After the
search results appear, click on the name of the MUR to bring up the complete MUR case file. The first page that
appears will show a Summary of the MUR, including its disposition. On the far left side of the screen, click on the
“Documents” link to find the complaint, responses, General Counsel’s report, and Statements of Reasons (“SOR”).
5
The MUR further noted that the Campaign’s “favored event vendor appears to be The Lundergan Group as the
Campaign has reported disbursements [in its FEC reports] to a number of The Lundergan Group companies, including
Signature Special Event Services, Lundy’s Catering, and The Carrick House.” MUR 6863 (Alison for Kentucky)
Compl. at 1 n.1 (Aug. 22, 2014).
6
MURs proceed before the FEC in several stages. In the first, the FEC determines whether there is “reason to believe”
that a violation of the Federal Election Campaign Act of 1971, as amended (“FECA”), 52 U.S.C. § 30118, occurred,
assuming that the MUR’s allegations are true. 52 U.S.C. § 30109(2). If and only if the FEC determines there is reason
to believe that a violation occurred, is the matter then referred to the Office of General Counsel (“OGC”), to determine
whether the allegations are supported by probable cause. See 11 C.F.R. § 111.16.

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In total, the Indictment cites 19 payments for services it alleges were provided to the Campaign by

the Lundergan Companies or their vendors, that either were not reported to the FEC by the

Campaign, or were reported late. Id. ¶¶ 21(a)-(d), (j), (z), (ff)-(rr). 7 The Indictment also cites one

payment of $20,000 in August 2013 and three payments of $23,500 in September, October, and

November of 2013 to Emmons, which the Government contends were for consulting services to

the Campaign. Id. ¶¶ 21(f), (l), (x), (cc).

The Government contends that all of these payments constitute corporate “in-kind”

contributions to the Campaign in violation of FECA, which prohibits contributions to federal

campaigns by corporations. Id. ¶ 23. 8 In accordance with that theory, the charges are as follows:

• Count 1 charges Lundergan and Emmons with conspiracy, in violation of 18 U.S.C. § 371,
“to cause unlawful and unreported corporate contributions from S.R. Holding Co., Inc., to
[the Campaign], and to cause [the Campaign] unwittingly to file false reports of
contributions that concealed from the FEC and the public the corporate contributions
caused by Lundergan and Emmons.” Id. ¶¶ 13, 21(a)-(rr).

• Count 2 charges Lundergan and Emmons with aiding and abetting in a substantive violation
of the prohibition against corporation contributions, in violation of 52 U.S.C. §§ 30118(a)
and 30109(d)(1)(A)(i). Id. ¶ 23.
The remaining counts assert charges related to the failure to report the source and amount of those

same corporate contributions in the Campaign’s FEC reports, under two statutory prohibitions:

• Counts 3, 5, 7, and 9 allege substantive violations of 18 U.S.C. § 1001(a)(2), which makes


it an offense to make a materially false, fictitious, or fraudulent statement or representation
regarding a matter within the jurisdiction of the executive branch of the federal
government. In this case, § 1001 was purportedly violated by the Defendants “knowingly
and willfully” causing the Campaign to “unwitting[ly]” file FEC reports that were
“materially false” in that they “fail[ed] to report the source and amount of the contributions
to the campaign by a corporation, namely S.R. Holding Co., Inc.” Id. at ¶¶ 25, 29, 33, 37.
The first two of these counts are asserted against Lundergan and Emmons jointly and relate
to the Campaign’s FEC filings on October 14, 2013 (Count 3) and January 30, 2014 (Count
5). The remainder are against Lundergan alone, and relate to the Campaign’s post-election
FEC filings on October 15, 2015 (Count 7) and January 30, 2016 (Count 9).

7
After grand jury subpoenas were issued in early 2016, the Lundergan Companies undertook a review and determined
that $31,609 of services they provided to the Campaign had mistakenly not been invoiced. They promptly invoiced
the Campaign and the Campaign paid—and reported—those invoices. See Ex. A; see also Indictment ¶ 16.
8
A “contribution” includes anything of value for the purpose of influencing a federal election. 52 U.S.C. § 30101(8).
Non-monetary contributions are referred to as “in-kind” contributions. 11 C.F.R. § 100.52(d)(1).

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• Counts 4, 6, 8, and 10 allege substantive violations of 18 U.S.C. § 1519, which makes it an


offense to knowingly conceal, cover up, falsify, or make a false entry in any record or
document with the intent to impede, obstruct, or influence the investigation or proper
administration of any matter within the jurisdiction of any department or agency of the
federal government. Similar to the § 1001(a)(2) counts, the § 1519 counts allege that this
statute was violated by causing, “with the intent to impede, obstruct, and influence the
investigation and proper administration of a matter within the jurisdiction of . . . the United
States,” the Campaign to file FEC reports “that falsely failed to report the source and
amount of contributions to the campaign by a corporation, namely S.R. Holding Co., Inc.”
Id. at ¶¶ 27, 31, 35, 39. The first two of these counts are alleged against Lundergan and
Emmons jointly and relate to the October 14, 2013 (Count 4) and January 30, 2014 (Count
6) filings; the last two are against Lundergan only, and relate to the Campaign’s post-
election filings on October 15, 2015 (Count 8) and January 30, 2016 (Count 10).

In total, the services that the Government alleges to have been prohibited in-kind

contributions by Lundergan in support of his daughter’s Campaign amount to $206,673.29. With

the exception of the payments that were discovered as having not been timely invoiced and were

late reported, these services do not include the over $225,000 in services that the Lundergan

Companies and Emmons provided to the Campaign that were timely disclosed in FEC filings. See

Ex. A. The Government appears to acknowledge that those payments were properly made to the

Lundergan Companies acting in their capacity as vendors to the Campaign, and thus not subject to

the corporate contributions ban. See generally Mot. to Dismiss (Vendor Payments). 9

9
The corporate contribution ban can be a trap for the unwary where candidates use a family business as vendor. If the
vendor charges too little, it may be accused of making an “in-kind” contribution. See FEC Adv. Op. 1994-08 (Friends
of Mike Parker for Congress) at 2-3; see also FEC Adv. Op. 1994-22 (Combs) at 2-3 n.1 (making same caution to
family-owned partnership). But if it charges too much, it may be accused of profiting off the campaign in violation of
the personal use ban. See FEC Adv. Op. 1994-08 at 2-3 (Friends of Mike Parker for Congress); see also FEC Adv.
Op. 1994-22 (Coombs) at 2-3 n.1; infra at 22-29 (discussing prohibition against personal use and separate
constitutional issues that it raises in relation to the Government’s case here). Like the porridge in Goldilocks, the
regulated actor has to be “just right.” Similar complaints were filed with the FEC in connection with the 2016
presidential election, asserting that lawyers employed by the Trump Organization were impermissibly working on
behalf of the campaign without compensation. Ltr. from Right to Rise PAC, Inc., to FED (Dec. 9, 2015), available at
http://static.politico.com/7a/81/2f78523f418da73765752e8ba52e/trump-letter-and-complaint.pdf. Another complaint
was filed asserting that a Trump Organization employee helped write a speech for Melania Trump at no cost to the
campaign. MUR 7111 (Donald J. Trump and Donald J. Trump for President, Inc.) Compl. (July 21, 2016); Factual &
Legal Analysis (June 18, 2018). At the same time the campaign faced complaints that it benefited from in-kind
contributions from the Trump Organization, it also had to defend against complaints it was paying too much for
services it obtained from the Organization. MUR 7100 (Donald J. Trump for President, Inc.) Compl. (June 29, 2016);
Certification (May 10, 2018) (showing FEC lacked the votes to find that Trump Organization and Trump campaign
violated FECA, so matter was closed). In the case of the Lundergans, although the RPK’s MUR against the Campaign
about the bus rental was dismissed, it demonstrates that this is a particularly tricky needle to thread, and even when
within the bounds of the law, candidates often still draw complaints.

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ARGUMENT

A. The FEC’s Interpretation and Application of FECA is Entitled to Substantial


Deference
When Congress enacted FECA, it envisioned that campaign finance violations would be

resolved principally through civil administrative enforcement, not criminal prosecution. It thus

vested the FEC “with exclusive jurisdiction over civil enforcement of the Act.” FEC v. Nat’l Right

to Work Comm., 459 U.S. 197, 198 n.2 (1982) (citations omitted). In contrast, FECA allows

criminal prosecution of only “a narrow range of aggravated offenses.” United States v. Int’l Union

of Operating Eng’rs, 638 F.2d 1161, 1168 (9th Cir. 1979). Congress’s intention was that the vast

majority of issues that arose under the highly technical statute, many of which implicate serious

First Amendment concerns, would be informed by the FEC’s “specialized knowledge and

cumulative experience.” H.R. Rep. No. 94-917, at 4 (1976) (citations omitted). These issues have

gotten no less technical over time, leading to a point where “[p]eople of common intelligence must

necessarily guess at the law’s meaning and differ as to its application.” Citizens United v. FEC,

558 U.S. 310, 324 (2010) (citations omitted). To say the law in this area is complex would be a

gross understatement. See id. at 334 (noting, as of 2010, FECA regulations “impose[d] unique and

complex rules on 71 distinct entities,” which were “subject to separate rules for 33 different types

of political speech,” and that the FEC “has adopted 568 pages of regulations, 1,278 pages of

explanations and justifications” for the same, “and 1,771 advisory opinions”) (citations omitted).

Constitutional concerns are particularly heightened, because the campaign finance rules

“operate in an area of the most fundamental First Amendment activities,” and regulation in this

area raises serious risks of unjustified intrusion into core constitutional rights. FEC v. Machinists

Non-Partisan Political League, 655 F.2d 380, 392 (D.C. Cir. 1981) (quotation marks omitted); see

also Burson v. Freeman, 504 U.S. 191, 196 (1992) (“[T]he First Amendment has its fullest and

most urgent application to speech uttered during a campaign for political office.”) (citations

omitted). The courts, the FEC, and Congress have struggled over the past thirty years to strike a

constitutionally sound balance between protecting the integrity of the electoral process, countering

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corruption, and ensuring the free flow of speech and ideas. One way that they have sought to

protect against serious intrusions into constitutional rights is to afford decisions in this area by the

FEC with substantial deference, including in criminal prosecutions. See, e.g., In re Sealed Case,

223 F.3d 775, 779 (D.C. Cir. 2000); United States v. Kanchanalak, 192 F.3d 1037, 1047 n.17 (D.C.

Cir. 1999). It is well-established that, where the only relevant authority on a question is a decision

from the six-member FEC that resulted in deadlock, it is the three dissenting Commissioners whose

decision controls, and is entitled to deference. See, e.g., Citizens for Responsibility & Ethics in

Wash. (CREW) v. FEC, 892 F.3d 434, 437 (D.C. Cir. 2018); CREW v. FEC, 236 F. Supp. 3d 378,

390 (D.D.C. 2017), aff’d, 892 F.3d 434 (D.C. Cir. 2018); Campaign Legal Ctr. v. FEC, 312 F.

Supp. 3d 153, 159 (D.D.C. 2018); CREW v. FEC, 164 F. Supp. 3d 113, 117 (D.D.C. 2015) (citing

Democratic Cong. Campaign Comm’n v. FEC, 831 F.2d 1131, 1135 (D.C. Cir. 1987)). 10 To hold

otherwise would have the absurd—and constitutionally troubling—result of putting an individual’s

liberty at risk for activity that would not be subject to civil enforcement.

B. Limiting Intrafamilial Contributions Violates the First Amendment


The growing body of jurisprudence on campaign finance law supports the conclusion that

limiting intrafamilial contributions to candidates—whether through individual contribution limits

or the corporate contribution ban, where a corporation wholly owned by a family member is the

entity alleged to have made contributions to the campaign—violates the First Amendment. As a
result, the charges against Lundergan, all of which relate to contributions that he is alleged to have

made to the Campaign in support of his daughter’s Senate candidacy, through payments to vendors

and purportedly for campaign “consulting” services, should be dismissed.

10
The FEC is comprised of six members, with three from each major political party. The even partisan division is
meant to ensure fair treatment of individuals and entities across the political spectrum, and ensure that the campaign
finance laws are not selectively enforced for partisan gain or to mete out political punishment. See, e.g., FEC v.
Democratic Senatorial Campaign Comm., 454 U.S. 27, 37 (1981) (explaining FEC “is inherently bipartisan in that no
more than three of its six voting members may be of the same political party . . . and it must decide issues charged
with the dynamics of party politics, often under the pressure of an impending election”); cf. H.R. Rep. No. 94-917, at
3 (1976) (stating that requirement that FEC obtain four votes (at least one from each political party) to find a violation
“serves to assure that enforcement actions . . . will be the product of a mature and considered judgment”).

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FECA’s modern-day federal campaign finance framework has its roots in comprehensive

amendments that Congress made to the Act in 1974, including the establishment of the FEC, and

extensive and complex limitations on election-related spending by both individuals and entities.

Almost immediately after those sweeping amendments were enacted, they were the subject of legal

challenge, and the U.S. Supreme Court first tackled the thorny First Amendment issues raised by

limiting spending in relation to political campaigns in Buckley v. Valeo, 424 U.S. 1 (1976).

In Buckley, the Court recognized that FECA’s limitations on contributions to campaigns

and expenditures made in support of a candidate “operate in an area of the most fundamental First

Amendment activities.” Id. at 14. As a result, the Court found that, “the Act’s contribution and

expenditure limitations both implicate fundamental First Amendment interests,” and must be

subject to “exacting scrutiny.” Id. at 16, 23. They may withstand constitutional challenge only “if

the State demonstrates a sufficiently important interest and employs means closely drawn to avoid

unnecessary abridgment of associational freedoms.” Id. at 25.

Applying this test, the Court found that limits on independent expenditures—that is,

“expenditures for express advocacy of candidates made totally independent of the candidate and

his campaign,” id. at 47—were unconstitutional, explaining that, “[t]he absence of prearrangement

and coordination of an expenditure with the candidate or his agent . . . alleviates the danger that

expenditures will be given as a quid pro quo for improper commitments from the candidate.” Id.

(emphasis added). The Court rejected the Government’s other stated interests in the limitations,

including “equalizing the relative ability of individuals and groups to influence the outcome of

elections” as inadequate “to justify” the limitation that such restrictions put on others’ First

Amendment rights. Id. at 48-49. The Court also invalidated the limits on a campaign’s

expenditures, finding the Government’s primary interest in such restrictions, which “appear[ed] to

be designed primarily to serve the governmental interests in reducing the allegedly skyrocketing

costs of political campaigns,” insufficient to justify their restraints on speech. Id. at 57.

And, of particular importance to this case, the Court invalidated the Act’s limitations on

expenditures by a candidate from his personal funds, finding they also could not be justified by

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any governmental interest in “the prevention of actual and apparent corruption of the political

process.” Id. at 53. 11 In doing so, the Court approvingly quoted the Court of Appeals’ conclusion

that: “Manifestly, the core problem of avoiding undisclosed and undue influence on candidates

from outside interests has lesser application when the monies involved come from the candidate

himself or from his immediate family.” Id. (emphasis added). Indeed, the Court recognized, “the

use of personal funds” actually “reduces the candidate’s dependence on outside contributions and

thereby counteracts the coercive pressures and attendant risks of abuse to which the Act’s

contribution limits are directed.” Id. (emphases added). Although the same would logically seem

to be true of contributions by a candidate’s close family member, the Court stopped short of

invalidating FECA’s limitations on such contributions. Although it recognized that, “the risk of

improper influence is somewhat diminished in the case of large contributions from immediate

family members,” it still found in a footnote, with little in the way of explanation, that it could not

conclude “that the danger is sufficiently reduced to bar Congress from subjecting family members

to the same limitations as nonfamily contributors.” Id. at 53 n.59.

In the nearly 40 years that have passed since Buckley, the Court’s evolving pronouncements

on the strong protections that the First Amendment affords both individuals and entities against

campaign finance restrictions require the conclusion that there is no longer a constitutional basis

for limiting contributions to candidates by close family members. Indeed, the justifications for

doing so have eroded to such a degree that the FEC no longer enforces them civilly. See infra at

14-17. As a result, pursuing criminal prosecution against Lundergan for allegedly violating

contribution bans in supporting his daughter’s political campaign would violate the First

Amendment. This conclusion is unavoidable for several reasons.

First, in recent cases, the Supreme Court has repeatedly clarified that the only governmental

interest that can justify such restrictions, which by their nature infringe upon core First Amendment

11
Again the Court rejected the “ancillary [governmental] interest in equalizing the relative financial resources of
candidates competing for elective office” as “clearly not sufficient to justify the provision’s infringement on
fundamental First Amendment rights.” Id. at 54.

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rights, is the interest in preventing “quid pro quo corruption.” Citizens United, 558 U.S. at 359.

Whatever uncertainty there may have been in the years after Buckley about the types of corruption

concerns that can sustain a restriction’s constitutionality, the Court has now unequivocally held

that, “[a]ny [campaign finance] regulation must . . . target what we have called ‘quid pro quo’

corruption or its appearance.” McCutcheon v. FEC, 572 U.S. 185, 192 (2014); see also id. at 207

(“Congress may target only a specific type of corruption—‘quid pro quo’ corruption”).

Governmental concerns about mere “favoritism or influence” or the “appearance of mere influence

or access” are not constitutionally sufficient. Id. at 208; see also id. at 192 (finding “[i]ngratiation

and access . . . are not corruption”). In other words, since Buckley suggested that contributions

from family members could be “corrupting,” the Court’s concept of the type of corruption that

may permissibly be targeted by campaign finance limitations has significantly narrowed such that

only regulations that guard against the risk “of a direct exchange of an official act for money,” id.,

may be constitutionally regulated.

There is little chance that a campaign contribution could give rise to actual or apparent quid

pro quo corruption between family members separate and apart from the already-existing

closeness of the familial relationship. Indeed, people already suspect that family members have a

greater ability to influence a candidate or officeholder’s policy positions than the average donor.

Thus, even Buckley recognized that “the core problem of avoiding undisclosed and undue

influence on candidates from outside interests has lesser application when the monies involved

come from the candidate himself or from his immediate family.” 424 U.S. at 53; see also id. at 27

(stating purpose of regulating appearance of corruption is to maintain “confidence in the system

of representative Government”) (quotation marks omitted).

In light of these changes in the Court’s thinking about the type of interests that can justify

the inherent intrusion that campaign finance regulation has on First Amendment rights,

intrafamilial contribution limits no longer have constitutional support. As a result, this prosecution

cannot proceed in step with the Constitution. Simply put, where intrafamilial contributions are

concerned, there is no “fit between the stated governmental objective” of abating quid pro quo

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corruption, “and the means selected to achieve that objective”—here, criminal prosecution.

McCutcheon, 572 U.S. at 199. Indeed, to sustain this prosecution, the Government would have to

prove that Lundergan’s daughter, with whom he had a close relationship prior to her running for

office, was more susceptible to corruptive influence because of his contributions—and,

specifically, more likely to take official action that would be beneficial to her father as a result of

contributions that he made or caused to be made to her campaign—than she would have been

absent those contributions. See First. Nat. Bank of Bos. v. Bellotti, 435 U.S. 765, 786 (1978)

(holding burden on government to prove compelling interest in limiting speech); Elrod v. Burns,

427 U.S. 347, 362 (1976) (same); see also McCutcheon, 572 U.S. at 207. This, the Government

cannot do. 12

This is true of all the alleged contributions at issue, which were purportedly made by or at

the direction of the candidate’s father or his solely-owned company. But it is doubly so of the post-

election contributions described in Paragraphs 21(ii) to (rr) of the Indictment. In each of those

cases, the contributions were made after ALG lost the election and was no longer a “candidate”

under federal law. See FEC Adv. Op. 2011-01 (Carnahan). To sustain the Indictment on the basis

of these contributions, the Government would have to demonstrate that there was a real risk of

quid pro quo corruption—i.e., risk “of a direct exchange of an official act for money,”

McCutcheon, 572 U.S. at 192—where a father contributed to the debts of his child’s failed

campaign. But, by then, there was no possibility that ALG would be seated as a Senator with the

power to undertake “official act[s],” and the prosecution of Lundergan for assisting the Campaign

in making good on its debts, simply cannot be sustained under the weight of the Supreme Court’s

modern campaign finance jurisprudence, which only permits regulation where justified to prevent

quid pro quo corruption or its appearance. See, e.g., McCutcheon, 572 U.S. at 207.

12
The line between quid pro quo corruption and influence may seem vague at times, but the distinction is critical to
safeguard basic First Amendment rights. See Citizens United, 558 U.S. at 359-61 (explaining elected officials must be
responsive to supporters, but this is not usually quid pro quo, and the First Amendment prevents bans that are
“asymmetrical to preventing quid pro quo corruption”). “In drawing that line, the First Amendment requires us to err
on the side of protecting political speech rather than suppressing it.” McCutcheon, 572 U.S. at 209.

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In sum, the Court should hold that limits on intrafamilial campaign contributions, such as

those at issue in this case, violate the First Amendment, and dismiss the Indictment in its entirety.

C. Where the FEC No Longer Enforces Contribution Limits Among Family Members
Where There is an Asserted and Demonstrable Pattern of Gift-Giving, Proceeding
with a Criminal Prosecution Here Would Violate Due Process
Recognizing the serious First Amendment issues that arise in this context, the confusing

nature of the law, the FEC’s own spotty enforcement history, the fact that candidates may spend

unlimited personal resources on their own campaigns, and the inherent tension between the

interests underpinning FECA and the limitations on contributions from family members, the FEC

stated its intent to defer from pursuing even civil penalties for intrafamilial violations of the

campaign finance limits in 2009 and has stayed true to its word under the circumstances presented

in this case. See, e.g., MUR 5724 (Feldkamp) SOR of Vice Chair Peterson & Comm’r Hunter at 3

(Dec. 11, 2009) (recognizing “the reduced risk of corruption posed by [intrafamilial] gifts and the

constitutional right of a candidate to spend an unlimited amount of personal funds on his or her

election”); see also id. at 3-6 (explaining FEC has “struggle[d] to determine: (1) under what

circumstances gifts from a candidate’s family become that candidate’s personal funds, (2) when

such family gifts instead constitute contributions to the candidate’s campaign, and (3) what

penalties, if any, are proper for family contributions that exceed the Act’s limits” and describing

inconsistent enforcement in virtually identical situations).

In light of this extensive, nearly decade-long suspension of civil enforcement of

contribution limits in intrafamilial contribution cases involving a pattern of gift giving, prosecuting

Lundergan criminally for providing financial support to his daughter would be a violation of due

process. See FCC v. Fox TV Stations, Inc., 567 U.S. 239, 254 (2012) (finding due process violation

when defendant was subject to an FCC guideline that was not yet in place when television

broadcast at issue aired). 13 Thus, even if the Court were to decline to find that the contribution

13
Due process clause violations use an objective standard—asking whether “a ‘person of ordinary intelligence’” (as
opposed to the specific defendant) would have “‘a reasonable opportunity to know what is prohibited, so that he may
act accordingly.’” U.S. v. Sexton, 719 Fed. Appx. 483, 485 (6th Cir. 2017) (quoting Grayned v. City of Rockford, 408
U.S. 104, 108 (1972)); see also Anderson v. Crosby, No. 5:04CV164SPMMD, 2005 WL 3357220 (N.D. Fla. Mar. 25,

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limits themselves, as enforced against immediate family members, are unconstitutional, due

process requires the dismissal of the Indictment. This is particularly so given the substantial

deference due to the FEC as to the reach of FECA. See supra at 8-9.

The FEC’s “handling of enforcement matters involving monetary gifts from family

members has been inconsistent, to put it charitably.” MUR 5724 (Feldkamp) SOR of Vice Chair

Petersen & Comm’r Hunter at 1 (Dec. 11, 2009). In 2003, the FEC assessed a candidate a $210,000

civil penalty for receiving a $1 million family monetary gift and then transferring $525,000 of

those funds to his campaign. See MUR 5138 (Ferguson) Conciliation Agreement (June 13, 2003).

Two Commissioners dissented from the size of the penalty, criticizing the decision as inconsistent

with Buckley’s observation that “the potential for actual or apparent corruption from familial

contributions is not as great as from contributions from persons outside a candidate’s family.”

MUR 5138 (Ferguson) SOR of Comm’rs Smith & Toner at 2 (June 12, 2003). A year later “in a

matter presenting materially indistinguishable facts,” the FEC voted not to pursue the complaint

at all. MUR 5724 (Feldkamp) SOR of Vice Chair Petersen & Comm’r Hunter at 1 (Dec. 11, 2009)

(citing MUR 5138 (Ferguson) and MUR 5321 (Robert)). There, a candidate loaned money to her

campaign after receiving an $800,000 check from her mother three months before the general

election, which was in significant excess of the largest gift her mother had previously given her.

Yet the FEC rejected the OGC’s recommendation to conciliate the matter—a far cry from referring

it for criminal prosecution—instead dismissing it outright. MUR 5321 (Minnesotans for Janet

Robert) Certification (June 8, 2004). The decision prompted one Commissioner to list twenty

factors showing that the cases were materially indistinguishable, and to conclude that “the

corruption potential of such transfers is so insignificant as to make penalties for them

unnecessary.” MUR 5321 (Ferguson), SOR of Comm’r Mason at 9 (July 13, 2004). Three

Commissioners “issued statements roundly criticizing the Commission’s incoherent approach to

2005) (stating “petitioner’s subjective beliefs are irrelevant to the due process inquiry,” which is “determined by
objective standards”) (citation omitted).

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family gifts . . . as ‘arbitrary and capricious’ and inconsistent with Supreme Court precedent.”

MUR 5724 (Feldkamp) SOR of Vice Chair Petersen & Comm’r Hunter at 1 (Dec. 11, 2009).

The FEC’s freeze on enforcement began in 2009, when the Commission again failed to

garner the four votes necessary to impose a civil penalty on a candidate who put family gifts toward

his campaign. In this matter, the candidate, whose mother customarily gave him gifts in the form

of cash and stocks, received a $75,000 monetary gift from his mother during his campaign. Id. The

candidate deposited the check into his personal account and then made loans of $77,500 to his

campaign on the basis that his mother’s gift was part of his own personal funds. Id. Although the

Democratic Commissioners voted to find that the mother’s gift was a violation of the law, the

Republican Commissioners refused to impose any penalty at all. Compare SOR of Vice Chairman

Petersen & Comm’r Hunter with SOR of Comm’rs Bauerly & Weintraub, MUR 5724 (Feldkamp)

(Dec. 11, 2009). The Republican Commissioners concluded that: “[A]ll that is necessary for a

monetary gift to be considered a candidate’s personal funds, rather than a contribution to the

candidate, is that a custom of gift-giving was established prior to any candidacy.” MUR 5724

(Feldkamp) SOR of Vice Chair Petersen & Comm’r Hunter at 6 (Dec. 11, 2009). 14

The “custom of gift-giving” requirement that the Republican Commissioners articulated is

reflective of FECA’s definition of “personal funds” and FEC regulations recognizing the

diminished risk of corruption attendant in intrafamilial gifts. See 52 U.S.C. § 30101(26)(B)(vi)

(defining “personal funds” to include “gifts of a personal nature that had been customarily received

by the candidate prior to the beginning of the election cycle”); 11 C.F.R. § 100.33(b)(6) (providing

a candidate’s “personal funds” include gifts from family that “had been customarily received by

the candidate prior to the beginning of the election cycle”). Moreover, the Commissioners

emphasized that “neither the regulations nor the statute require gifts to be identical” or even

14
The Commissioners stated this did not mean they would never support civil penalties in matters involving family
gifts, noting penalties might be warranted, “for instance . . . where a prohibited source (such as a corporation, labor
union, or foreign national) sought to funnel money into a campaign coffers via a family member of that candidate.”
Id. at 7 (emphasis in original). The instant situation does not raise one of these exceptions. The only owner of the
Lundergan Companies was the candidate’s father and the Indictment does not allege that anyone other than Lundergan
was the real source of the alleged contributions.

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“substantially similar in magnitude or form to pre-candidacy gifts” to constitute personal funds

that, consistent with the First Amendment, cannot be subject to any limitations. MUR 5724

(Feldkamp) SOR of Vice Chair Petersen & Comm’r Hunter at 6 (Dec. 11, 2009); see also Buckley,

424 U.S. at 51-54 (finding expenditure limits on candidate’s personal funds unconstitutional).

Although the Republican Commissioners concluded that the contribution in the Feldkamp

MUR was compliant with the law, they made clear that they would have dismissed the matter

regardless. MUR 5724 (Feldkamp) SOR of Vice Chair Petersen & Comm’r Hunter (Dec. 11,

2009). They reasoned that, given the “hopelessly muddled” state of the law around familial gifts,

as well as the inherent difficulty in trying to parse out when one’s family’s funds became personal,

pursuing further civil action against Feldkamp would have demonstrated a blatant disregard of due

process and fundamental fairness. Id. at 7. Moreover, the contradictory results in the Ferguson and

Robert matters “provide[d] inadequate notice to the regulated community about what is permitted

and what is not.” Id. at 2 (emphasis added). In conclusion, the Commissioners issued a call to the

FEC to clarify its guidance, and signaled they would not pursue future enforcement actions

involving familial gifts until guidance was issued. Since that time, the Commission has never

sought a penalty in a case where the respondents put forth evidence of any pattern of gift-giving

between the family member and the candidate that pre-dated the election.

As discussed, the FEC’s decisions—including where the Commissioners split 3-3—are

entitled to substantial deference. See supra at 8-9. Thus, in light of the FEC’s stated intention and

decade-long history of no enforcement of the contribution limits where a parent has a history of

making gifts to his children, permitting this prosecution to proceed would raise grave due process

concerns. 15 The Supreme Court has held that the requirement of clarity in regulation is essential

to due process, and laws that regulate protected speech are held to an even higher standard:

15
Lundergan established a custom of giving with ALG (and his four other daughters) prior to her candidacy. See, e.g.,
FEC Adv. Op. 1988-07 (Bakal). Over the past 25 years Lundergan has given ALG gifts worth several times more than
the expenses in question in this matter. Accordingly, even if Lundergan were found to have directed additional gifts
to ALG during her campaign, there would be a strong basis for finding them to be ALG’s personal funds. Although
the Government may argue that the regulations at least imply a distinction when those gifts are given in the form of
in-kind contributions, there can be little serious argument that, had Lundergan instead simply given ALG the cash to
cover the exact same expenditures, there is no chance the FEC would have pursued civil penalties in this case and,

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A fundamental principle in our legal system is that laws which regulate persons or
entities must give fair notice of conduct that is forbidden or required . . . . A
conviction or punishment fails to comply with due process if the statute or
regulation under which it is obtained fails to provide a person of ordinary
intelligence fair notice of what is prohibited, or is so standardless that is authorizes
or encourages seriously discriminatory enforcement. . . . When speech is involved,
rigorous adherence to those requirements is necessary to ensure that ambiguity does
not chill protected speech.
Fox Television Stations, 567 U.S. at 253 (quotation marks omitted). It has long been recognized

that both agency guidance and officials’ actions are pertinent in determining whether it would

violate due process to criminally prosecute a person for behavior that Government actors have

indicated, either expressly or implicitly, will not give rise to criminal liability. See, e.g., Raley v.

Ohio, 360 U.S. 423, 425-31 (1959); United States v. Jumah, 493 F.3d 868, 874 (7th Cir. 2007)

(describing common law “public authority defense” as “grounded in the principle that prosecuting

an individual who acts in reliance upon official statements that one’s conduct is lawful offends due

process”); Schiff v. People, 141 P.2d 892, 893 (Colo. 1943) (“‘[T]he pendency of an injunction

restraining the enforcement of a municipal ordinance is a complete defense to a prosecution for

violation of such ordinance.’”); People v. Ferguson, 24 P.2d 965, 970 (Cal. Dist. Ct. App. 1933)

(“The regulation which has not been complied with . . . covers one of the most complicated phases

of modern commercial life. . . . It is under the administration of the commissioner and his decisions

in most cases are final. If the appellant early in his real estate career found himself in honest doubt,

notwithstanding his high education and legal accomplishments, went to the fountain head itself for

information and was there advised that such organizations were not under the department’s

jurisdiction, and if after he had this identical organization ready to launch, he went to the

corporation commissioner himself and was advised in the same manner, we cannot believe the law

so inexorable as to require the brand of felon upon him for following the advice obtained.”).

given the clear due process violations that would follow from a criminal prosecution, little chance the Government
would have brought this action. This inconsistency in treatment for the exact same result provides further reason to
dismiss the Indictment, particularly given the serious constitutional issues that this situation already raises, where there
is no legitimate risk of quid pro quo corruption to justify the enforcement of the campaign finance regulations here.

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This principle was at play in Raley v. Ohio, where four people appealed their conviction

for failing to answer questions by the Ohio State “Un-American Activities Commission.” 360 U.S.

at 425-31. All had asserted their Fifth Amendment right to be free of self-incrimination, and the

Commissioners either accepted that response or affirmed that it was appropriate. Id. Nevertheless,

the State charged them with a crime because an Ohio statute gave them immunity from prosecution

based on their answers; thus, they had no grounds to assert the Fifth Amendment and were simply

refusing to answer an investigative body’s questions. See id. at 431-32. The Supreme Court

reversed the convictions on the grounds that it violated due process to convict people for activity

the State misled them into undertaking. Id. at 437-39. Similarly, in Cox v. Louisiana, 379 U.S. 559,

560-61 (1965), a person was convicted for violating a statute that prohibited picketing “near” a

courthouse. But because the police chief had given the demonstrator permission to picket on the

particular area of the sidewalk, judging it not to be “near” the courthouse, the Supreme Court

determined that the conviction violated due process. Id. at 568-71.

Even more analogous is the Court’s decision in United States v. Pennsylvania Industrial

Chemical Corporation (PICCO), which overturned the criminal conviction of a chemical

corporation for dumping industrial refuse matters into a river. 411 U.S. 655, 656-58 (1973).

Federal law prohibited the discharge of refuse into navigable water, but the Army Corps of

Engineers had consistently interpreted the relevant statute to extend only to matter that would

impede or obstruct navigation, which PICCO’s refuse did not do. Id. at 659-60, 672-73. The district

court refused to allow PICCO to introduce evidence of the agency’s interpretation at trial. Id. at

660. In ruling this was error, the Supreme Court explained that,

The Corps is the responsible administrative agency under the 1899 Act, and [as
such, their] . . . “‘rulings, interpretations, and opinions . . . constitute a body of
experience and informed judgment to which . . . litigants may properly resort for
guidance.’” Moreover, although the regulations did not of themselves purport to
create or define the statutory offense in question, it is certainly true that their
designed purpose was to guide persons as to the meaning and requirements of the
statute. Thus, to the extent that the regulations deprived PICCO of fair warning as
to what conduct the Government intended to make criminal, we think there can be

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no doubt that traditional notions of fairness inherent in our system of criminal


justice prevent the Government from proceeding with the prosecution.
Id. at 674 (emphasis added). 16

Thus, for all of the reasons discussed, due process, specifically traditional notions of

fairness and the threat of discriminatory enforcement, requires dismissal of the Indictment. This is

particularly so, given the complexity of the relevant laws and the uncertainty surrounding their

enforcement. See also U.S. v. Critzer, 498 F.2d 1160, 1162 (4th Cir. 1974) (holding “[a]s a matter

of law, defendant cannot be guilty of willfully evading and defeating income taxes on income,

[because] the taxability of which is so uncertain that even co-ordinate branches of the United States

Government plausibly reach directly opposing conclusions,” thus “defendant’s actual intent is

irrelevant,” because “[e]ven if [she] had consulted the law and sought to guide herself accordingly,

she could have had no certainty as to what the law required”). It also necessarily follows from the

substantial deference that courts must afford the FEC, and the extremely thorny First Amendment

issues that regulation (not to mention criminal prosecution) in this area raise. See, e.g., CREW, 892

F.3d at 437; CREW, 236 F. Supp. at 390; Campaign Legal Ctr., 312 F. Supp. 3d at 159; CREW,

164 F. Supp. 3d at 117 (citing Democratic Cong. Campaign Comm’n, 831 F.2d at 1135.

D. The Disparate Treatment of the Use of a Candidate’s “Personal” Funds and


Intrafamilial Contributions Violates Equal Protection
The disparate treatment between a candidate’s use of their personal funds to support their

campaign, even where the original source of those “personal” funds was a gift from a family

member while the candidate was running for office, and the direct use of a family member’s funds

for the exact same purpose, also violates the equal protection clause. As this Court recognized in

its decision in Protect My Check, Inc. v. Dilger, 176 F. Supp. 3d 685, 691 (E.D. Ky. 2016),

differential treatment of speakers in campaign finance regulation is subject to strict scrutiny. As a

result, the Government bears the burden of justify[ing] the disparate treatment at issue,”

specifically by “demonstrating ‘that its classification has been precisely tailored to serve a

16
The Supreme Court has also regarded the decision not to enforce a statute as a factor in determining whether the
conduct at issue should be universally decriminalized. See Lawrence v. Texas, 539 U.S. 558, 573 (2003).

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compelling governmental interest.’” Id. (quoting Plyler v. Doe, 457 U.S. 202, 217 (1982)). It

cannot possibly carry this burden under the circumstances at issue here.

For reasons already discussed, there are no relevant differences that justify the disparate

treatment at issue. The only possible governmental interest that can justify the restraints on speech

that form the basis for Lundergan’s prosecution is to target quid pro quo corruption or its

appearance. See McCutcheon, 572 U.S. at 207 (“Congress may target only a specific type of

corruption—‘quid pro quo’ corruption”) (emphasis added). Forty-two years ago, the Supreme

Court recognized that there was no constitutional interest that could justify placing any expenditure

limits on a candidate’s personal funds. Buckley, 424 U.S. at 51-54. In doing so, the Court

recognized that, “the core problem of avoiding undisclosed and undue influence on candidates

from outside interests has lesser application when the monies involved come from the candidate

himself or from his immediate family.” Id. at 53 (emphasis added). Indeed, the Court recognized,

“the use of personal funds” actually “reduces the candidate’s dependence on outside contributions

and thereby counteracts the coercive pressures and attendant risks of abuse to which the Act’s

contribution limitations are directed.” Id. (emphases added). FECA itself defines “personal funds”

to include “gifts of a personal nature that had been customarily received by the candidate prior to

the beginning of the election cycle,” 52 U.S.C. § 30101(26)(B)(vi); see also 11 C.F.R.

§ 100.33(b)(6) (providing a candidate’s “personal funds” include gifts from family that “had been

customarily received by the candidate prior to the beginning of the election cycle”). And for over

a decade, the FEC has not civilly enforced the Act against candidates who receive large family

gifts during the course of their campaign when there is a pattern of gift-giving, even where the

candidate turns right around and uses the same money to issue a “personal loan” to the campaign.

As several FEC Commissioners have recognized, issuing even civil penalties in these cases is

inconsistent with Buckley’s observation that “the potential for actual or apparent corruption from

familial contributions is not as great as from contributions from persons outside a candidate’s

family.” MUR 5138 (Ferguson), SOR of Comm’rs Smith & Toner at 2 (June 12, 2003).

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There are simply “no relevant differences,” Protect My Check, 176 F. Supp. 3d at 691,

between a candidate supporting her own campaign with money that she obtained from a close

family member in the form of a “gift” given to her during the campaign, and that close family

member directly supporting the candidate’s campaign with the exact same funds. Specifically,

there can be no serious contention that “the threat of [quid pro quo] corruption might be greater”

in the latter situation as opposed to the former. Id. To find otherwise would be to endorse the

wholly illogical conclusion that candidates can “contribute thousands of dollars” to their own

campaigns, even if those thousands of dollars were, minutes earlier, the funds of their parents, “but

a single dollar” from a parent directly (or, in this case, from a company owned solely by the

candidate’s father) “would destroy public confidence in democracy.” Id. at 690 (quotation marks

omitted). If anything, this situation presents a starker reason for finding the disparate treatment

unconstitutional than that considered in Protect My Check: there, a non-profit corporation brought

a civil action to obtain an injunction to permit it to contribute to political candidates, political

action committees, and party committees prospectively, id. at 687, whereas here an individual’s

liberty is at stake—the arbitrary and differential treatment of the exact same source of funds, under

circumstances that clearly do not prevent quid pro quo corruption or its appearance (much less can

be said to be “precisely tailored” to do so, id. at 691), could result in Lundergan’s felony conviction

and decades’ long imprisonment.

For all of these reasons, the Court should find that the prosecution of Lundergan under the

Government’s theory as outlined in the Indictment, violates equal protection, and dismiss the

Indictment in its entirety.

E. FEC Guidance and Enforcement of the Personal Use Ban Raises Additional Due
Process Issues as to the Emmons Payments
As discussed, given the complexity and substantial gray areas that propagate across the

regulatory landscape, it is not unusual for candidates that do business with their family’s

companies to become the subject of campaign finance law complaints. See, e.g., supra n.9

(describing similar issues that arose during the 2016 presidential elections). This complicated

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balancing act is in large part the result of FECA’s “personal use” prohibition, which provides that,

“[a] contribution accepted by a candidate . . . shall not be converted by any person to personal

use.” 52 U.S.C. § 30114(a), (b)(1) (emphasis added); see also Contribution & Expenditure

Limitations & Prohibitions: Personal Use of Campaign Funds; Final Rule, 60 Fed. Reg. 7862, 7866

(Feb. 9, 1995) (“FEC Personal Use Final Rule”) (emphasizing personal use prohibition applies

“regardless of whether the beneficiary is the candidate, a family member of the candidate or some

other person”); FEC Adv. Op. 1994-22 (Coombs) at 2-3 n.1 (warning candidate who wished to use

campaign funds to lease a mobile home from a family business that paying more than the usual

and normal charge would be a personal use violation, while “on the other hand,” paying less would

be a contribution). The consequences of violating the personal use provision can be severe and the

risk of prosecution significant. At the same time that the Supreme Court has been narrowing the

types of corruption that can justify regulations that threaten to infringe upon First Amendment-

protected activity, courts have been emphasizing that the conversion of campaign funds to personal

use is not protected activity, and civil and criminal prosecutions for such violations are on the rise.

To avoid this risk, the FEC has consistently emphasized that regulated persons must err on

the side of paying for any questionable or mixed-use expenses with personal, rather than campaign,

funds. Accordingly, persons involved with federal campaigns are ordinarily exceedingly careful

to not use campaign funds where there is doubt as to whether the expense would have existed

irrespective of candidacy. The FEC has maintained this position even in circumstances where the

expenses provided a clear in-kind benefit to a candidate, such as at an event that includes some

discussion of campaign activity. See FEC Personal Use Final Rule at 7866. Similarly, with legal

fees, the FEC has advised that, even where “the underlying legal proceedings have some impact

on the campaign or the officeholder’s status,” expenses are often personal in nature and payment

with campaign funds would be a personal use violation, unless the proceedings arise from

campaign or officeholder activities. Id. at 7868. The FEC’s guidance has been the same even where

a corporation has paid for an expense that benefits a candidate, but which would have existed

irrespective of candidacy. See, e.g., FEC Adv. Op. 2002-05 (Hutchinson). This is not a new

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regulatory posture; it has been the FEC’s position for over 23 years. See id. As a result, for the

same reasons discussed supra at 17-20, to the extent the Indictment rests on payments made to

Emmons for his consulting services, it cannot be maintained consistent with due process. 17

As noted, Lundergan and Emmons have a longstanding and close relationship that long

predates the Campaign. The Government could not possibly dispute this. 18 In the course of that

relationship, Emmons has long provided consulting services both to the Lundergan Companies

and to Lundergan personally. Lundergan has also long had political interests and ambitions

independent from his daughter’s Senate Campaign: he is both a former member of the Kentucky

House of Representatives and the former Chair of the Kentucky Democratic Party and remains

closely interested in politics. 19 The payments to Emmons upon which the Indictment rests are
consistent with payments that Lundergan made to Emmons for business and political consulting

services before ALG’s candidacy, and include payment for services previously rendered, which

would have been made irrespective of ALG’s candidacy. Consistent with the FEC’s longstanding

guidance clearly instructing regulated persons to err on the side of not using campaign funds where

there is any doubt as to whether the expense would have existed irrespective of the candidacy,

even if the Campaign benefitted to some degree from Emmons’ continued provision of consulting

services to Lundergan, all parties involved would have run significant risk of violating the personal

use ban if campaign funds were used for this purpose. See, e.g., FEC Personal Use Final Rule at

7871 (“If the payment would have been made even in the absence of the candidacy, the payment

should not be treated as a contribution” and “[i]f [a] third party is continuing a series of payments

17
Public records reflect that the Campaign did directly compensate Emmons for consulting services for the quarter
beginning January 1, 2014, see Ex. B, thus the Government’s allegations in this regard appear to only relate to services
Emmons is alleged to have provided in the Campaign’s nascent first few months.
18
The Sixth Circuit has affirmed decisions in criminal cases where the district court has looked beyond the indictment
to undisputed extrinsic evidence in granting a pre-trial motion to dismiss. See, e.g., United States v. Levin, 973 F.2d
463, 467, 469 (6th Cir. 1992) (affirming decision to dismiss and explain that “a two or three week trial of the
substantive criminal charges would not have assisted the district court or this court in deciding the legal issues joined
by the defendant’s pretrial motion to dismiss” where “the government was, as a matter of law, incapable of proving
beyond a reasonable doubt the requisite intent required to convict the appellees of the controversial counts of the
indictment which were dismissed with prejudice”).
19
In fact, Lundergan was seeking the chairmanship of the Kentucky Democratic Party in 2016 when federal grand
jury subpoenas were issued to him and his businesses. Due to the investigation, he withdrew from consideration.

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that were made before the beginning of the candidacy, the [FEC] considers this convincing

evidence that the payment would have been made irrespective of the candidacy, . . . not . . . a

contribution”). To prosecute Lundergan criminally would thus violate due process.

This conclusion is supported not only by the FEC’s clear and long-standing guidance, but

also several of its decisions, which have found personal use violations where campaign funds have

been used to pay for services where the benefit to the candidacy was much clearer than here. For

example, in 2002, the FEC was asked how a mayor who was then a congressional candidate should

pay for a flight to Washington, D.C., where the candidate planned to engage in official activities

related to her position as mayor (25 percent of her time), federal campaign activities (25 percent),

and personal activities (50 percent). The options were to have the City pay 100 percent of the flight

costs; have the campaign pay 100 percent; or allocate between the City and the campaign. Federal

campaign finance law treats municipalities as corporations. FEC Adv. Op. 2002-05 (Hutchinson).

Accordingly, if the City paid for the flight, the campaign would be directly benefitting from a

corporate in-kind contribution. FEC Adv. Op. 2002-05 (Hutchinson) at 4 n.8. Nevertheless, the

FEC concluded that the City should pay for 100 percent of the airfare and that it would be illegal

for the campaign to pay any of it. FEC Adv. Op. 2002-05 (Hutchinson).

In 2009, the FEC issued a similar opinion, in which it concluded that President Obama

impermissibly used campaign funds to travel to Hawaii in the waning days of his campaign. See

MUR 6127 (OFA) (Oct. 21, 2008). His grandmother was terminally ill and the soon-to-be

President-elect wanted to say goodbye to her while still performing campaign activities. See id.;

see also Resp. from Barack Obama, OFA, and Martin Nesbitt, Treasurer (Dec. 22, 2008). Although

he did perform campaign activities in Hawaii and on the flight, the OGC concluded that Obama’s

flight expense “appears to have been a defined expense that would have existed irrespective of the

campaign activity” and could not be paid with campaign funds. MUR 6127 (OFA), First OGC Rpt.

at 6 (June 18, 2009). The OGC explained that “the statutory prohibition against personal use . . .

and the definition of personal use in [FEC regulations], which apply the ‘irrespective test,’ trumps”

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the competing regulatory provision requiring the use of campaign funds to pay for travel to a

destination where any non-incidental campaign activity was performed. Id. at 7. 20

In 2011, the FEC was presented with an even more extreme case. Then-Senator Scott

Brown sought to promote his book across the country and hold campaign fundraisers in the same

cities. The FEC explained the situation, “present[s] both the problem of possible personal use of

campaign funds (if the Committee uses campaign funds for expenses related to the promotion of

the book) and the problem of prohibited corporate contributions (if the Publisher pays expenses

related to a campaign event).” FEC Adv. Op. 2011-02 (Brown), Draft B at 14. Three

Commissioners concluded that allowing the use of corporate funds to pay for travel to cities where

fundraising events would be held took the principle too far. They reasoned that, “[t]he book tour

is not an event that predates Senator Brown’s Federal office or his campaign; [he] will be

simultaneously planning both the tour and the campaign events.” Id. at 15. The Senator’s

candidacy was also a “substantial topic” of the book. Thus, the Commissioners reasoned that,

“[t]hese factors make it difficult to be certain that the book tour would have existed irrespective of

[his] campaign or office.” Id. at 16. But the other three Commissioners concluded that the principle

applied even in this extreme case, where non-campaign and campaign activity were intertwined.

In the view of these Commissioners—whose opinion is controlling and subject to substantial

deference, see supra at 8-9—“the airfare to those cities is a defined expense that would have

existed irrespective of any personal or campaign activities.” FEC Adv. Op. 2011-02 (Brown), Draft

A at 14. Accordingly, it would be improper – illegal, in fact – to use campaign funds to pay for it.

The crackdown on personal use is also reflected in recent aggressive criminal and civil

enforcement in this area. In 2013, the Government elicited a felony guilty plea from former

Congressman Jesse Jackson Jr. for illegally converting campaign funds to personal use. Michael

S. Schmidt, Jesse Jackson Jr. Pleads Guilty: ‘I Lived Off My Campaign,’ N.Y. Times (Feb. 20,

2013), https://www.nytimes.com/2013/02/21/us/politics/jesse-l-jackson-jr-pleads-guilty-to-wire-

20
Ultimately, the OGC concluded—and the FEC concurred—that the amount was not significant enough to pursue,
and sent a cautionary letter. See Factual & Legal Analysis (Nov. 25, 2009).

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and-mail-fraud.html. And, in 2016, it sought and obtained an indictment of former Congressman

Aaron Schock for illegally converting campaign funds to personal use (among other alleged

offenses). Katherine Skiba, et al., Former U.S. Rep. Aaron Schock Indicted on 24 Criminal Counts,

Chicago Trib. (Nov. 10, 2016), http://www.chicagotribune.com/news/local/breaking/ct-aaron-

schock-indicted-20161110-story.html. The FEC, too, has made personal use a top enforcement

priority, even in an era where civil enforcement of campaign finance violations is down. For

example, the FEC sued former Senator Larry Craig for impermissibly using campaign funds to

pay legal fees associated with his arrest in a Minneapolis bathroom. FEC v. Craig for U.S. Senate,

70 F. Supp. 3d 82 (D.D.C. 2014), aff’d, 816 F.3d 829 (D.C. Cir. 2016). Likewise, the FEC sued

former Senate candidate Christine O’Donnell for using campaign funds to pay the rent of the

apartment she used while campaigning for office. FEC v. O’Donnell, 209 F. Supp. 3d 727 (D. Del.

2016). The FEC won both cases.

These FEC matters and prosecutions all caution regulated parties to avoid paying for

services that may result in any personal benefit—either to the candidate or to a person associated

with the candidate—with personal funds. However here, in alleging it was illegal for Lundergan

to pay Emmons -- as the Government alleges -- for consulting services that benefited the Campaign

in some way, the Government is necessarily implying that the correct course was for the Campaign

to pay Emmons. But where the payments to Emmons were in any way “personal” to Lundergan,

it would have violated the personal use prohibition had the Campaign made the payments. As

Chief Justice Roberts has warned, the Government cannot take a “heads I win, tails you lose”

approach when regulating the electoral arena. FEC v. Wis. Right to Life, 551 U.S. 449, 471 (2007).

These cases are also consistent with the two prominent trends that have emerged in recent

years in campaign finance enforcement and jurisprudence. The first is the recognition that the

expenditure of funds—regardless of source—for campaign purposes is core political speech and

expenditure restrictions are constitutionally permissible only if they are “closely drawn” to combat

quid pro quo corruption or its appearance. See, e.g., McCutcheon, 572 U.S. at 217-18; see also

supra at 10-12. The second is the conclusion that the use of campaign funds for expenses that

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would have existed irrespective of candidacy is not political speech, does not enjoy First

Amendment protection, and should be proscribed. See, e.g., O’Donnell, 209 F. Supp. 3d at 739-

40.

The apogee of the deregulatory movement was the decision in McCutcheon, where Chief

Justice Roberts set forth how courts must evaluate restrictions on political speech:

Buckley held that the Government’s interest in preventing quid pro quo corruption
or its appearance was “sufficiently important”; we have elsewhere stated that the
same interest may properly be labeled “compelling,” so that the interest would
satisfy even strict scrutiny. Moreover, regardless whether we apply strict scrutiny
or Buckley’s “closely drawn” test, we must assess the fit between the stated
governmental objective and the means selected to achieve that objective. Or to put
it another way, if a law that restricts political speech does not “avoid unnecessary
abridgement” of First Amendment rights, it cannot survive “rigorous” review.
572 U.S. at 199 (citations omitted) (emphasis added). As discussed, the Court explicitly reiterated

that it “has identified only one legitimate governmental interest for restricting campaign finances:

preventing corruption or the appearance of corruption.” Id. at 206-07. It further made clear that the

type of corruption that the government may permissibly target was exceedingly narrow: and that

“Congress may target only a specific type of corruption—‘quid pro quo’ corruption.” Id. at 207;

see also id. at 208 (explaining government “may not [constitutionally] seek to limit the appearance

of mere influence or access”).

Although at first glance it may seem contradictory, the crackdown on personal use is an

essential element of the judicial trend toward greater protections for political speech. The FEC’s

leading proponent of deregulation, Commissioner Lee Goodman, has explained that the view that

campaign speech should be protected from government interference “largely depends on the

personal use prohibition.” Discussion of Draft Adv. Op. 2015-13 at 3:26, FEC Open Mtg. (Dec.

17, 2015), https://www.fec.gov/resources/audio/2015/2015121703.mp3. This is because the ban

on personal use “is the dividing line between what is personal – what constitutes bribery and gives

rise to direct corruption – versus what is free speech – what does not go into the pocket to enrich

the individual officeholder.” Id. at 3:41. Absent a strict ban on personal use, the Government would

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be forced to regulate campaign contributions as if they were personal gifts. But with a strict ban in

place to block the flow of campaign money to the coffers of a candidate and her family, the

Government can deregulate campaign spending and permit a more fulsome expression of First

Amendment rights. 21

For all of these reasons, to permit the Government to pursue prosecution of Lundergan in

this case, based on the payments to Emmons, would run directly contrary to decades of FEC

guidance and enforcement and, as a result, violate due process.

CONCLUSION
For the foregoing reasons, the Court should dismiss the Indictment in its entirety.

Respectfully submitted,

TRUE GUARNIERI AYER, LLP

By: /s/ J. Guthrie True


J. Guthrie True
Whitney True Lawson
Philip C. Lawson
124 Clinton Street
Frankfort, KY 40601
Telephone: (502) 605-9900
Facsimile: (502) 605-9901
E-mail: gtrue@truelawky.com

Marc E. Elias (pro hac vice)


PERKINS COIE LLP
700 13th Street, NW, Suite 600
Washington, D.C. 20005-3960

Counsel for Defendant, Gerald G.


Lundergan

21
Courts, too, have begun to recognize the relationship between the personal use ban and enhanced protections for
political speech. See, e.g., O’Donnell, 209 F. Supp. 3d at 739-40.

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CERTIFICATE OF SERVICE

The undersigned hereby certifies that a copy of the foregoing has been served on all counsel
of record this 30th day of November, 2018, by filing a copy of the same with the Electronic Court
Filing System of the United States District Court for the Eastern District of Kentucky.

/s/ J. Guthrie True__________


Counsel for Defendant, Gerald G. Lundergan

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