[co-author: Pavla Ovtchinnikova]

U.S. companies are allowed to make contributions to super PACs, which is exactly what Wheatland Tube, LLC did in this case. However, the decision to contribute involved conversations with a foreign national, and that led to an $975,000 fine to settle charges that the contribution by a U.S. company violated the ban on contributions made by foreign nationals. The fine is the third-largest in the agency’s history and provides an important lesson about the limits of foreign national involvement in decisions by U.S. companies to be involved in the political process.

The complaint concerned contributions totaling $1.75 million to a federal super PAC by U.S. company Wheatland Tube, LLC. Wheatland Tube is wholly owned by a U.S. corporation, Zekelman Industries, Inc. Zekelman Industries is owned by a Canadian citizen, Barry Zekelman, who is also the CEO of Zekelman Industries.

Mr. Zekelman acknowledged that he discussed the contributions with Wheatland Tube’s president, a U.S. citizen who also served as general counsel of Zekelman Industries. But Wheatland’s president said that he exercised independent judgment in making the decision to contribute. The FEC rejected this defense, concluding that even if a U.S. citizen has “final decision-making authority or final say” over the making of a contribution, a foreign national – an individual who is not a U.S. citizen or lawfully admitted for permanent residence – may not participate, directly or indirectly, in a decision-making process regarding U.S. election-related spending. The FEC made clear that none of the funds involved appeared to have come from non-U.S. sources; the only violation was Mr. Zekelman’s involvement in the decision to contribute. To that end, the settlement also involved Zekelman Industries, because, even though it is a U.S. company, its executives were involved in the decision to contribute, and they were acting at Mr. Zekelman’s direction.

Not all participation by foreign nationals in U.S. election is prohibited, the FEC ruling noted, citing earlier rulings that a foreign national could volunteer his services to perform at a fundraising concert and allow the campaign to use his name and likeness in emails promoting the concert, and that a foreign national could perform clerical duties, such as online research and translation, during an internship for a political party. On the other hand, the FEC emphasized, it has consistently found violations where foreign funds are used by a U.S. subsidiary of a foreign corporation to make contributions in U.S. elections and where foreign nationals participate in the management or contribution decisions of a corporate PAC.

The important takeaway from this settlement is the need to shield any election activity by U.S. companies from executives who are foreign nationals. This can be complicated when senior decision makers, such as CEOs, are not U.S. citizens. Possible ways to navigate this could include:

• Having policies and procedures in place prohibiting foreign nationals from being involved in political giving (the ban on foreign nationals applies to federal, state, and local political contributions) and PAC giving.
• Making certain that foreign nationals are not involved in initiating or participating in conversations about political giving.
• Having PAC bylaws that vest decision-making controls with U.S. citizens, and limiting any foreign national involvement in selecting the decision makers.