We circle back today to postmaster general Louis DeJoy, who stands accused of pressuring employees in the 2010s to make political donations to his preferred Republican candidates. That’s a felony violation of campaign finance laws, and a fascinating glimpse of a compliance risk that can catch companies unprepared.

DeJoy, you might recall, is already under fire for questionable policy and governance moves he has made since taking over at the U.S. Postal Service earlier this summer. Those questions are legitimate, but separate from this new scandal that snared DeJoy over the weekend. 

DeJoy

The allegations, laid out first by the Washington Post and subsequently confirmed by other media, are that while DeJoy was chief executive of New Breed Logistics in the 2000s and 2010s and building a reputation as a prolific fundraiser for GOP candidates, he pressured employees to donate money to various candidates and then reimbursed those employees with higher bonuses. 

In political finance circles that’s known as a “straw donor scheme.” It’s meant to circumvent legal limits on how much money a person can donate to a candidate, and to mask who truly is bankrolling the campaign of a candidate. Straw donor schemes are a felony at both the state and federal level, and enforcement is no joke. People have gone to prison for this stuff.

If you want the full story of how DeJoy supposedly pressured and rewarded employees, read the Post article. For the record, DeJoy denies any wrongdoing, and at least some former New Breed employees say they never felt pressure to donate to GOP candidates. 

For our compliance purposes here, we can focus on two items.

First, the Washington Post analyzed campaign finance records from 2000 through 2014, when DeJoy sold New Breed to XPO Logistics. During that time, 124 New Breed employees collectively donated more than $1 million to state and federal Republican candidates. Most had never made political donations before working at New Breed Logistics. Most never made any donations again after leaving the company. 

During those same 14 years, a total of nine New Breed employees donated $700 to Democrats.

That math alone is enough to raise eyebrows, even in DeJoy’s very Republican home state of North Carolina. Then there’s this analysis from the New York Times:

campaign finance

Again, that seems statistically strange — certainly odd enough to merit investigation, and North Carolina state attorney general Josh Stein (a Democrat) strongly hinted over the weekend that his office plans to do exactly that

Yes, This Is a Compliance Concern

First, these allegations are yet another example of how domestic political corruption laws can trip up a business right here in the United States. We’ve already seen two instances this summer of U.S. businesses implicated in the bribery of U.S. politicians; these accusations against DeJoy are a reminder that even fundraising without a bribery purpose can still bring risk.

We should draw a distinction here from corporate support for Super PACs, which can raise unlimited amounts of money to spend on political causes but aren’t affiliated with specific politicians. Such donations might be a sleazy exercise of corporate power, but they’re legal because U.S. political finance law is so weak. 

DeJoy is in trouble for individual donations to political campaigns, which are much more highly regulated. Moreover, because political donations are public record at both the state and federal level, they can’t be ignored as a compliance issue. The data is there for anyone to see — so if your company is somehow swept up in a campaign finance violation, that will be there for anyone to see, too. 

For compliance officers, that’s really the most interesting part of this DeJoy story. A bunch of political reporters decided to sift through state and federal campaign donation records, and pieced together credible evidence of a straw donor scheme. Only after they broke the story did North Carolina’s attorney general start talking about an investigation, but anyone with a modicum of time and data analytics capability could have done the same. 

Put another way: the evidentiary trail for political donations is voluminous. Dates, amounts, donors, donors’ personal data such as home address and employer — it’s all available, and the records go back for decades. When your exposure to that potential enforcement and reputation risk is so high, you ignore it at your peril. 

A Campaign Finance Compliance Program

First, consider whether you need policies and procedures for employees’ political campaign donations. Businesses such as investment advisory firms, for example, already need to monitor the donations of certain employees to be sure the firm doesn’t violate pay-to-play rules with public pension funds. 

Your business might need similar policies, or policies warning against straw-man donations such as what DeJoy is accused of doing, or procedures for employees to report potential abuses they witness. 

Second, train employees and executives alike about the strictures around campaign donations. Lots of successful executives want to exert influence with political figures. That’s fine, so long as they follow the rather exacting standards of campaign finance law. So educate executives about what those standards are and how to obey them. Educate employees on what they can’t be asked to do, and that they should report abuses they see. 

Third, have suitable internal controls to catch potential abuses. Let’s not forget that DeJoy is also accused of reimbursing employees for their donations via overly generous bonuses. That’s inappropriate use of corporate assets. In sufficiently large amounts, abuses like that can raise questions about accounting fraud. So consider how corporate money might be used to cover up campaign finance violations, and what internal controls might prevent that.

Fourth, monitor employee donations. You can do that easily. Donations for federal office are tracked by the Federal Election Commission and the Center for Responsive Politics. Every state maintains its own similar database of donations for local office. 

You can also find vendors that track those donation databases daily and then (for a fee) will cross-reference them to your employees. You can get immediate reports on which employees are making donations and confirm whether they’re doing so in or out of company policy.

Fifth, use data analytics to identify suspicious patterns. After all, that’s what the Washington Post did. You can compare donation dates, amounts, prior donation histories, and so forth to see whether any pattern of donation strikes you as warranting further investigation. 

Meanwhile, let’s give a round of applause to Louis DeJoy. Rare is the executive who can give us two teachable moments in corporate compliance in his first three months on the job. 

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