Gov. Candidate Kevin Smith Collects on LLC Loophole
No candidate in the 2012 gubernatorial race benefited more from a major loophole in New Hampshire's political-finance regulations than Republican Kevin Smith.
State election law limits corporate campaign contributions to $7,000 per election cycle, the same as individual donors. But nothing in the law prohibits multiple limited-liability companies controlled by the same individual to donate on behalf of each LLC, making it easy for wealthy donors to exceed the statutory limits.
In campaign-finance disclosures filed this week, Smith's political committee, Kevin Smith for New Hampshire, reported more than $324,000 in donations since November 2011.
As the Associated Press reported this morning, nearly $100,000 came from dozens of Dunkin' Donuts franchises, nearly all of which, according to the report, operate from the same street address in Westborough, Ma. Another $55,000 in donations came from two addresses — one in Newington, N.H., the other in Yonkers, N.Y. — that serve as headquarters for Planet Fitness health clubs.
Ovide Lamontagne, Smith's rival in the September 11 Republican primary, raised nearly $1.2 million, including $43,000 from seven LLCs owned the Brady Sullivan real estate firm, all listed at a single Manchester address.
If this sounds familiar, the same loophole came up in the 2010 governor's race.
Just before the primary that year, the campaign of incumbent John Lynch asked New Hampshire Attorney General Michael Delaney to clarify whether Republican John Stephen had exceeded the $7,000 limit by accepting $124,000 from businesses that, according to Stephen's disclosure, shared two addresses in Connecticut and Massachusetts. More than $20,000 appeared to originate with a single Dunkin' Donuts franchise holder, who made contributions on behalf of 18 different LLCs.
New Hampshire Assistant Attorney General Matt Mavrogeorge says his office has never received a complaint challenging the LLC issue specifically. However, the AG has weighed in on two related issues: the so-called 5+1+1 rule; and an election law that gives corporations the same status as individuals when it comes to political donations.
Like most candidates for high-level office in New Hampshire, Smith and his gubernatorial competitors began raising money well before they officially filed paperwork to be included on the ballot. This "pre-declaratory" status allowed each of them to collect as much as $5,000 from each individual donor.
Once they filed as official candidates, the limit dropped to $1,000 from each donor. The primary winners can receive another $1,000 per contributor for the general election, for a total of $7,000 per election cycle, or 5+1+1.
In a response to Lynch's complaint, Deputy Attorney General Orville B Fitch II wrote that because of "ambiguities in the election law," the AG was obliged to "enforce only the least restrictive interpretation of the contribution limits," meaning Stephen's individual LLC contributions, which may have originated from the same addresses but met the 5+1+1 rule, were legal.
Earlier this year, anticipating a similar issue in the 2012 races, Delaney issued a "comprehensive" interpretation of the 5+1+1 rule. The AG concluded that the pre-declaratory, primary and general contributions would be treated separately.
So, just as John Stephen's LLC donations were within New Hampshire law, so are Kevin Smith's.
Note: This story was updated to include information about Ovide Lamontagne.