Case spotlights alleged loophole in campaign-finance law. Federal agency appeals ruling on post-election contributions

A case working its way through the federal courts has the potential to extract some of the teeth from the federal campaign-finance law. The Federal Election Commission (FEC) is appealing a decision handed down by the United States district court in Tacoma, Wash., arising from Ted Haley's unsuccessful 1982 bid for a seat in Congress. The court ruled last year that financial support Mr. Haley received after the election to retire campaign debts was not subject to the limit for individual contributions set by federal law.

``This is an important case,'' says FEC spokeswoman Karen Finucan. ``If we lose, it will undermine the law.''

After the election, Haley obtained a $50,000 personal loan from a local bank to pay off campaign debts. Six of his friends supplied guarantees for the loan - four people for $10,000 each and two for $5,000 each. The loan and the guarantees were reported to the FEC, and by 1983 the loan was repaid.

The FEC asserts, however, that under the election law and the commission's regulations an endorsement or guarantee of a campaign-related loan counts as a contribution and is subject to the $1,000 federal limit.

The term ``contribution'' includes any gift, subscription, loan, advance, or deposit of money or anything of value made by any person for the purpose of influencing any election for federal office.

The FEC took Haley to court, arguing that the guarantors had in effect made excessive contributions and that the Haley campaign committee violated campaign laws by accepting the support.

The lower court found that ``post-election loan guarantees ... are presumptively for the purpose of influencing an election under the statute. This presumption, however, is not conclusive, but rebuttable.'' The court held that the defendants had successfully rebutted this presumption. Thus the guarantees should not have been viewed as contributions subject to FEC restrictions.

``The timing of the solicitation, the nature of the relationships between Haley and the guarantors,'' showed that the loan was not intended to influence the outcome of the election, the court said.

In its appeal to the US Court of Appeals for the Ninth Circuit last month, the FEC disputed the district court's conclusions. ``The close relationship between Haley and the guarantors, who apparently were his relatives and paid campaign staff, cannot undermine applicability of the contribution limits, for the Supreme Court held long ago that even members of a candidate's family are subject to the same restrictions under the act,'' the commission said.

Meanwhile, backed by the lower-court decision, the Haley campaign committee has filed with the FEC a ``rulemaking petition'' to amend the regulations governing limits on contributions to federal candidates.

The proposal would allow contributors to demonstrate that a post-election contribution was not intended to influence a contest and thus should not be subject to the $1,000 limit.

The Haley proposal has been criticized from an unlikely source - the campaign committee for Sen. John Glenn's failed presidential bid in 1984, which still is retiring more than $23,000 of campaign debt. William R. White, treasurer for the Glenn committee, says the Haley proposal is ``too broad.''

In his comments to the FEC, Mr. White says, ``If adopted, the rule proposed could encourage a campaign to intentionally incur debt prior to an election in the hope that, shortly after, the committee could conduct unrestricted, unregulated, and unreportable fund raising. ... The funds could be in any form, including large amounts of cash.''

White says the ``basic test'' should be the intent or purpose underlying campaign decisions that resulted in post-campaign debt. If the debts are legitimate, then ``restrictions should be relaxed.''

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