Foreign Company Admits Illegal Cash Donations to U.S. State Campaigns

July 1, 2011 — -- A foreign subsidiary of U.S. corporate giant Koch Industries acknowledged making thousands of dollars in illegal contributions to state candidates between 2005 and 2009 and agreed to settle a case brought by the Federal Election Commission, the agency announced Friday.

The contributions came from Invista S.a.r.l., a chemical company, which is registered in Luxembourg but headquartered in Kansas, that is a subsidiary of Koch Industries. Koch Industries is believed to be the second largest privately held company in the U.S. and is owned by two brothers who are well known for their financial support to conservative political candidates and causes. The Federal Election Commission announced the settlement Friday, saying attorneys for Koch Industries came forward after an internal investigation determined their foreign-registered subsidiary had provided the money for the donations.

The company's submission "states that the violations resulted from a general lack of knowledge among company personnel of either the nature of INVISTA's legal structure or of the restrictions that applied to it as a foreign company," the FEC's general counsel wrote.

All but one of the seven political committees that received the illegal foreign money – which totaled more than $25,000 -- have returned the checks, according to the FEC. The recipients included state-level candidates from Virginia, Delaware, and Kansas, as well as a $15,000 contribution to the Democratic Governors Association made in 2007. (Invista's parent company, Koch Industries, gave over $1 million to the Republican Governors Association in 2010).

After recent changes to campaign finance law opened the door for the use of corporate money to assist federal candidates, President Obama and others raised the specter of foreign money entering federal elections. In part, they argued that the complex structures of many large multi-national corporations could lead to foreigners funneling money from abroad into the American political process. Supporters of the changes disputed that claim, noting that the law still prohibits foreign money from entering campaigns at any level – local, state or federal -- either directly or indirectly.

The Invista officials involved in arranging the contributions in this case were Americans based in Kansas, but because the company is registered in Luxembourg and the money for the contributions originated in foreign bank accounts, they were determined to be illegal. After Koch lawyers discovered the violations, they approached the FEC, according to documents released today. The FEC decided to settle the case, with the company agreeing to pay a $4,700 fine.