On November 22, the U.S. Department of Justice announced that a U.S.-based civil engineering company, Dannenbaum Engineering Corporation (DEC), and its parent company, Engineering Holding Corporation (EHC), agreed to enter into a deferred prosecution agreement (DPA) to resolve a criminal investigation involving violations of the Federal Election Campaign Act (FECA) involving a multi-year conduit contribution scheme. That resolution included DEC’s agreement to pay a $1.6 million fine.
The Department stated that according to the two companies’ admissions made in connection with the DPA,
from 2015 through 2017, DEC and EHC made $323,300 in illegal conduit contributions through various employees and their family members to federal candidates and their committees. DEC corporate funds were used to advance or reimburse employee monies for these contributions. DEC did not reveal to any of the federal candidates that the corporation was the true source of the contributions. The object of the scheme was for DEC, its CEO James Dannenbaum, and a former employee to gain access to and potentially influence various candidates for federal office, including candidates for the presidency as well as the Senate and House of Representatives.
The Department also stated that it reached the resolution with DEC “based on a number of factors, including DEC’s cooperation with the investigation, the internal investigation conducted and the significant remedial measures taken.” Those remedial measures included
- DEC altering its board structure to ensure that the former CEO, Dannenbaum, “does not control the board”;
- Stopping “all politically-related payments to its employees (including, but not limited to, payments treated as “marketing advances”), which resulted in a cessation of these expenditures; and
- Hiring and/or designating a full-time chief governance and compliance officer.
The Department briefly noted that it “also took into account the companies’ inability to pay a fine,” but nonetheless obtained the $1.6 million fine. Finally, it stated that the former CEO Dannenbaum was charged in a separate criminal information.
N.B.: Corporate compliance officers should take note of this resolution and – particularly because the 2020 Presidential election campaign is underway — use it as reminder to relevant corporate executives about the importance of adhering to the companies’ policies concerning campaign contributions. Candidates for federal office and campaign fundraisers are not the only categories of people whom the Department can prosecute under the FECA.