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FEC Uncovers Unity08 Plans for Zero Interest, Optional Payback Loans

The Federal Elections Commission has obtained a document drawn up by Unity08 to solicit loans of unlimited size from undisclosed entities. This document was released by DC district court yesterday. You can review the entire Unity08 loan agreement form for yourself, but I’d like to draw your attention to two clauses in Unity08’s loan agreement form. These clauses indicate Unity08’s intentions:

Unity08 loan document from FEC court records May 25 2007

That’s right: Unity08 is suing the FEC in DC district court so it can go ahead with plans for zero-interest loans of unlimited size that it can pay back (or not) at its sole discretion.

The FEC explains in its associated filing that Unity08 has always been permitted to take out the same sort of loans that you or I can receive:

As a matter of law, FECA expressly permits Unity08 to obtain loans in any amount. 2 U.S.C. § 431(8)(B)(vii); 11 C.F.R. § 100.82. The only relevant requirement is that these loans be made by a bank “in the ordinary course of business.” 11 C.F.R. § 100.82(a). Indeed, political committees frequently take out loans of millions of dollars, and the Commission has expressly affirmed their permissibility. See, e.g., General Counsel’s Report #2, MUR 5421, available at http://eqs.sdrdc.com/eqs/searcheqs (approved Dec. 12, 2005) (finding Kerry for President committee did not violate FECA by borrowing approximately $7 million). It is, therefore, indisputable that Unity08 is permitted to solicit and receive loans without fear of prosecution, and plaintiffs’ injury-in-fact argument must fail because nothing in AO 2006-20 provides (or could provide) otherwise. If Unity08 is unwilling to solicit a bank loan or unable to obtain one, those decisions would reflect its own preferences or those of commercial lenders, not anything caused by AO 2006-20….

Because FECA permits Unity08 to receive loans, plaintiffs’ reliance (Resp. at 11-16) on Chamber of Commerce v. FEC, 69 F.3d 600 (D.C. Cir. 1995), is misplaced. Unlike the Chamber of Commerce plaintiff, which was injured by a regulation that specifically prohibited its course of conduct, Unity08 is entitled to a safe harbor under a statute and regulation that expressly permit the activity Unity08 claims to desire — i.e., to seek bona fide loans.

But Unity08 doesn’t want ordinary, bona fide loans — you know, the kind you pay interest on, and the kind you have to pay back. Unity08 wants special loans — the kind you don’t pay interest on, and the kind you only have to pay back if you decide to. As the FEC puts it:

On the one hand, Unity08 has voluntarily decided not to accept contributions more than $5,000 (see Mem. at 8-10; FEC Facts ¶¶ 12-18), but, on the other hand, alleges that it wants large “loans” that are generally indistinguishable from the large contributions it purportedly does not want. Unity08’s proposed “Loan Agreement” provides that Unity08 will not pay any interest on the borrowed funds and, in fact, will not repay the loan at all unless “in its absolute discretion” it chooses to do so. UNI 1551-53 at 1551 ¶¶ 2, 4 (Exh. 31) (emphasis added). An interest-free loan that need not be repaid is not commercially available from any bank, and therefore plaintiffs are attempting to claim injury from Unity08’s alleged inability to receive what are actually large contributions while Unity08 simultaneously continues to pledge — both publicly and in sworn declarations to this Court — never to accept contributions in excess of $5,000.

Let’s put this in context. Unity08, to this day, continues to publicly claim its movement will be “funded solely by small-dollar donations from everyday Americans.” Unity08 has demanded that other presidential candidates obtain the majority of their dollars from contributions of $250 or less. But it is already grabbing the vast majority of its money from $5,000 contributions from hedge fund managers, venture capitalists and DC Beltway denizens. And now it wants to power its movement by getting loans of unlimited size, at no interest, to be paid back or not at Unity08’s discretion.

Who do you think those zero-interest, optional-payback loans are going to come from? From Iowa elementary teacher Jane Hackensack?

What sort of person or corporation (oh yes, the Unity08 loan agreement notes in Paragraph 7 that a lender may be a corporation) gives a zero-interest, optional-payback loan? Why do you think they might do that?

You’ll have to use your imagination to answer those questions, because Unity08 isn’t talking.

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