The Federal Election Commission, after two years of prodding from a House member and then a federal court, has filed suit accusing two multimillion-dollar political organizations tied to Sen. Jesse Helms (R-N.C.) of violating election laws.
The FEC complaint, filed in U.S. District Court in Raleigh, charges that the National Congressional Club, one of the nation's wealthiest political action committees, and Jefferson Marketing Inc., a political advertising and consulting company that counts on the club for most of its revenue, are a single entity.
As a consequence, FEC lawyers contend, the Congressional Club has violated financial disclosure laws by failing to include the receipts and disbursements of Jefferson Marketing in its reports to the FEC.
Some observers say the legal action could shatter the conservative fund-raising network that has built up around Helms since 1973 and perhaps result in substantial fines. But lawyers and spokesmen for the Congressional Club and Jefferson contend that the consequences will be minor if the FEC prevails.
The dispute dates to an October 1982 complaint by Rep. Charlie Rose (D-N.C.) over a television commercial titled "Free-O-to-Rio" that both his Democratic and Republican opponents used in an unsuccessful effort to unseat him.
The campaign committee for Rose's opponent in the Democratic primary, Thomas Gibson, contracted with Jefferson Marketing to produce the ad, which criticized Rose for taking a trip at taxpayers' expense to Rio de Janiero with an aide, whom he has since married. Rose's Republican challenger, Edward Johnson, used the same commercial after Gibson lost.
Rose charged that the expenses of producing and airing the ad were considerably more than Gibson reported and thus amounted to an illegal corporate contribution by Jefferson Marketing.
In his FEC complaint, Rose charged that Jefferson Marketing, supposedly a for-profit corporation established in 1978, was "merely an extension" of the not-for-profit Congressional Club. Jefferson Marketing, Rose complained, "works hand-in-hand" with the club, supports only those candidates the club supports, undertakes only campaigns approved by the club and is funded by the club.
The FEC took no action for months, then decided in May 1983 that there was "reason to believe" Jefferson Marketing and the Club had violated election laws. It did not take the next step, voting on "probable cause," until Oct. 16, 1984, after Rose's lawyers had convinced U.S. District Court Judge Louis Oberdorfer that the delays in the investigation were unjustified and illegal.
All this took place in secret. Then in late January, the Congressional Club and Jefferson Marketing filed a suit -- since withdrawn -- seeking an injunction against the FEC and disclosing that conciliation efforts had failed.
The FEC countered by filing its lawsuit in Raleigh on Feb. 5, repeating many of Rose's charges and expanding them to demand public disclosure of all of Jefferson Marketing's receipts and disbursements. The lawsuit charges that Jefferson Marketing "has been at all times dependent on the Congressional Club" for most of its revenue, has received interest-free loans from the club, and was "created, financed and controlled" by the club through the club's managing officials, R.E. Carter Wrenn and Thomas Ellis.
The Congressional Club was formed in 1973 by Helms and Ellis, a Raleigh lawyer and political strategist, to pay off a $150,000 debt from Helms' first Senate campaign. It grew within a few years into a powerful direct-mail advertising, lobbying and fund-raising machine.
Jefferson Marketing, according to the FEC lawsuit, was organized in December 1978 and staffed mostly with former Congressional Club employes; it operates out of the same Raleigh building, providing "political advertising and consulting services that had previously been provided by the Congressional Club." Since 1981, the suit says, Ellis and Wrenn have controlled all of Jefferson Marketing's voting shares of stock.
In addition to public disclosure of Jefferson Marketing's receipts and expenditures, the FEC has asked that the company and the club be fined $5,000 each "or an amount equal to any contribution or expenditure involved in the violations found," whichever is greater. The only dollar amounts mentioned in the complaint involve the few hundred dollars Jefferson Marketing "charged" for services in connection with the Free-O-to-Rio ad.
The Congressional Club said it "assumed" the expense as a contribution to candidate Gibson's committee, but the FEC contends that it was a cut-rate price and that the difference between it and the "fair-market value" of the services amount to an illegal corporate contribution by Jefferson Marketing.