Partners received bonuses as apparent paybacks for making political donations
By Pat Murphy
BridgeTower Media Newswires
BOSTON, MA — Did Thornton Law Firm break campaign finance law by running an in-house program that used bonus payments to offset the political donations of three of the Boston firm’s partners?
Experts say the answer to that question will come down to what federal and state investigators uncover concerning the specifics of how the firm actually operated its payback program.
Whether they were illegal straw donations will turn on whether the capital accounts the firm says it was deducting from could be used for things other than political donations, whether the accounts were actually debited when partners left the firm, “and whether there was good accounting,” says Paul N. Barbadoro, an election law attorney with Baker, Braverman & Barbadoro in Quincy.
The legal world was rocked by an Oct. 29 investigative report by The Boston Globe in concert with the Center for Responsive Politics in Washington, D.C.
Between 2010 and 2014, partners Michael P. Thornton, Garrett J. Bradley and David C. Strouss made approximately $1.6 million in donations to mainly Democrat fundraising committees and politicians, according to The Globe. In turn, the newspaper reported that the Thornton firm paid those partners nearly $1.4 million in bonuses, with firm records showing that more than 280 of the partners’ contributions matched bonuses that they were paid within 10 days.
For example, the newspaper reported that Thornton, Bradley and Strouss each donated $2,000 to Sen. Harry Reid of Nevada on March 1, 2010, the same day they each received $2,000 bonuses from the firm.
The firm has taken the stance that the payback program complies with all state and federal campaign finance regulations and laws because the partners were paid bonuses out of their equity in the firm.
“The program was voluntary and only involved equity partners, who used their own personal after-tax money to make donations,” says the firm’s lawyer, Brian T. Kelly, in a statement. The Nixon Peabody attorney adds that 10 years ago his client hired an outside law firm to review how it wanted to handle donations to politicians and to obtain a legal opinion on how it should structure its program. Further, Kelly says the firm hired an outside accountant to review and implement the program.
Attorney General Maura T. Healey recently indicated the Federal Election Commission and the Massachusetts Office of Campaign and Political Finance have begun looking into the firm.
The Globe has since reported that prosecutors in Boston have opened a grand jury investigation into the campaign contributions by the Thornton Law Firm’s partners.
That bad news for the firm came on the heels of news that the Campaign Legal Center, an election watchdog organization based in D.C., has filed a complaint asking the FEC to investigate whether the Thornton firm’s “scheme” for reimbursing partners for their political campaign contributions violated federal election law.
According to the Campaign Legal Center’s Brendan Fischer, the Thornton firm and the three partners named in the complaint could be in trouble if two facts come to light, the first being whether the bonus payments came from the firm’s operating accounts rather than from the partners’ equity accounts.
“If the funds were coming from Thornton Law Firm’s general treasury, then that would be a clear violation of [FECA’s] straw donor ban,” he says. “It’s a means of evading the federal law’s contribution limits and disclosure requirements.”
Even if the bonuses were paid from the partners’ equity accounts, it will be important for the firm to be able to show that partners were able to access funds in their equity accounts for purposes other than political contributions, Fischer says. On that issue, he points out that, in a 2009 advisory opinion, the FEC concluded such a reimbursement policy is permissible only if it is part of a regular compensation program that employees may use as a salary equivalent for a variety of activities.
It may be more understandable why the Thornton firm may have thought it was on firm legal ground under state election law. While G.L.c. 55, §8 generally prohibits political donations to candidates from business or professional corporations and partnerships, a state regulation, 970 CMR 1.04(3), states that where “accounts are created by a partnership to hold the equity interest of individual partners, however, such accounts may be used by partners to make individual contributions.”
Boston campaign finance attorney Paul W. Johnson says the regulation appears to be relevant to the situation at the Thornton firm as reported by The Globe.
However, Johnson points out that the application of the regulation will depend on the facts uncovered in forthcoming investigations.
“The application of [970 CMR 1.04(3)] will turn on the circumstances relating to the internal accounting and bookkeeping at the Thornton law firm,” Johnson says.
Barbadoro is not so sure the regulation will ultimately save the firm and its partners from being penalized for breaking state election law.
“State election laws also prohibit straw donations,” he says. “The devil is going to be in the details.”
