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March 19, 2014

FEC Lets Chevron Off the Hook for $2.5 Million Super PAC Contribution

Federal ‘Pay-to-Play’ Law Prohibits Political Contributions by Federal Contractors

WASHINGTON, D.C. – The Federal Election Commission (FEC) was wrong to use the legal distinction between Chevron USA Inc. and Chevron Corporation to dismiss a complaint that Chevron violated the federal pay-to-play law when it made a $2.5 million super PAC contribution, Public Citizen said today. The organization called on the FEC to revisit its policy of drawing artificial distinctions between affiliates within the same wholly owned corporate family.

The complaint – filed March 5, 2013, by Public Citizen, Friends of the Earth U.S., Greenpeace and Oil Change International – charged that Chevron’s $2.5 million contribution during the 2012 election to the Congressional Leadership Fund, a registered super PAC reportedly tied to House Speaker John Boehner (R-Ohio) and the National Republican Congressional Committee, may have violated a federal law prohibiting government contractors from making “any … contribution to any political party, committee or candidate for public office or to any person for any political purpose or use.”

A database of federal contractors indicated that both Chevron USA, Inc., Chevron’s principal operating company, and Chevron Corporation, Chevron’s corporate parent, had federal contracts around the time of the contribution.

“The very soul of a strong pay-to-play law at the federal, state and local levels is to prevent wealthy companies from ‘buying’ – or even appearing to buy – lucrative government contracts by indebting lawmakers through campaign contributions,” said Craig Holman, government affairs lobbyist for Public Citizen. “The same restriction also protects against officials extorting money from companies wishing to do business with the government.”

Chevron argued that the campaign contribution was made by the corporate parent, Chevron Corporation, and that this particular member of Chevron’s corporate family did not hold an active government contract on October 7, 2012, when it made the campaign contribution. Although the federal database of government contractors appeared to show that Chevron Corporation had government contracts around the time of the contribution, Chevron contended that either the database or the contracts themselves were in error, and that the actual contractors were other members of Chevron’s corporate family.

But the FEC’s legal analysis shows how closely related Chevron Corporation is to Chevron USA. It notes, for example: “Chevron (Corporation) holds 100% of the stock of Chevron Investments, Inc., which in turn owns the stock of other companies, including 100% of the stock of Texaco, Inc. Texaco, Inc. owns the stock of other companies, including 100% of Chevron USA Holdings, Inc., which in turn owns 100% of the shares of Chevron USA.” Both Chevron Corporation and Chevron USA also use the same mailing address.

Despite its own findings, the FEC dismissed the complaint using the rationale that when related corporations are “separate and distinct” legal entities, the ban on campaign contributions applies only to the specific corporation that has the contract. The agency stated that Chevron Corporation itself “does not appear to have been a federal contractor during the relevant time period.”

“This distinction without a real difference essentially guts the law,” said Robert Weissman, president of Public Citizen. “Any business can establish legally distinct entities, and then have the parent corporation dole out campaign cash with the hope of winning government contracts, while its subsidiary takes in those contracts. Public officials with influence over government contracts are unlikely to miss the relationship between the source of the contributions and the company seeking the contract.”

Public Citizen urges the FEC to take a closer look at the damage done to the federal pay-to-play law by its policy of drawing artificial distinctions between affiliates within the same wholly owned corporate family, and to revisit this policy in light of the facts.

The FEC’s “Factual and Legal Analysis” underlying its dismissal of the complaint against Chevron is available.

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