The Kentucky Registry of Election Finance is the state agency charged with making sure that candidates and campaigns use donor and contributor funds to the campaign in a way that is consistent with law.
As candidates begin to file for 2022 races and to tell voters about themselves, it is only natural to share their work and the passion they have for the jobs they do. For small business owners particularly, having created a successful business is a huge part of who they are. Their ability to manage finances, figure out marketing, employ others, and provide a product the state needs is vital to their skills as a candidate and as a representative of the people.
But, there is a real line between a candidate talking about job skills (“I built a small business that employs 50 people”) and advertising a business (“Nell’s Auto is my business. It provides auto repair by female mechanics”). Kentucky law prohibits using any campaign or donor funds to provide a private pecuniary benefit to the candidate or the candidate’s business.
KRS 121.175(1) provides, in pertinent part:
"Allowable campaign expenditures" means expenditures including reimbursement for actual expenses, made directly and primarily in support of or opposition to a candidate, constitutional amendment, or public question which will appear on the ballot and includes, but is not limited to, expenditures for staff salaries, gifts and meals for volunteer campaign workers, food and beverages provided at a campaign rally, advertising, office space, necessary travel, campaign paraphernalia, purchases of advertisements in athletic and scholastic publications, communications with constituents or prospective voters, polling and consulting, printing, graphic arts, or advertising services, postage, office supplies, stationery, newsletters, and equipment which is used primarily for the administration of the campaign. "Allowable campaign expenditures" does not include expenditures of funds in a campaign account for any purpose made unlawful by other provisions of the Kentucky Revised Statutes or which would bestow a private pecuniary benefit.
Allowable candidate account expenditures are those that provide a direct benefit to the campaign and are directly and primarily related to the candidacy. (See KREF Advisory Opinion (“AO”) 2016-003) Direct communications about the candidate/campaign to voters are permissible uses of campaign funds. (A.O. 2015-002; A.O. 2014-001.
Recent cases brought by KREF include a case where a candidate’s business sign was visible behind him in campaign materials, and a case where a candidate listed his businesses and their logos on a campaign mailer. KREF argued that both of these were examples that the candidate was using campaign funds to advertise the businesses. The candidates were able to prove that there was no pecuniary benefit or intent to advertise the business in each of those cases, but it was a lengthy and stressful process as they participated in legal briefings and public hearings on the matter.
The statute requires that such a benefit to the business be shown. This means that KREF may ask the business to provide income statements or customer data to determine whether the business increased its services as a result of being listed on the candidate’s advertising. In both of the recent cases KREF argued that the campaign materials “could have increased patronage at the businesses that remained open . . . thus providing a direct pecuniary benefit to [the candidate owner of the business] . . .” In both cases the candidates were ultimately successful in showing no pecuniary benefit to the candidate as a business owner as a result of mentioning the business or showing the business logo in the campaign materials.
The Kentucky Supreme Court has affirmed that “[t]he most commonly stated rule in statutory interpretation is that the "plain meaning" of the statute controls. This Court has steadfastly adhered to the plain-meaning rule ‘unless to do so would constitute an absurd result.’ The plain-meaning rule is consistent with directions provided by the legislature on how to interpret the statutes enacted by it.” (Wheeler & Clevenger Oil Co. v. Washburn)
In a disciplinary action, the accusations must be proven by the party or entity bringing such disciplinary action. (Perkins v. Stewart) The statute does not state that suspicion that a private pecuniary benefit may have been speculatively possible is sufficient to find an offense. The clear language prohibits a proven private benefit to the candidate and KREF must prove that such a benefit was created. (Kentucky Rule of Civil Procedure 43.01(1))
Bottom line: Candidates should continue to promote their work skills and business ability, but should refrain from specifically listing their business in campaign materials paid for by funds contributed for use in the campaign, so that they avoid a claim that the campaign funds are bringing them private pecuniary benefit. Candidates should not show the business name/logo in campaign photographs.
Anna Whites is a Frankfort attorney who has worked on political campaigns and cases for the past three decades. She represents Democratic candidates for any office in circuit courts, district courts, appellate courts, and Kentucky Registry of Election Finance and Legislative or Executive Ethics cases. For more than a decade Anna provided the free candidate training for all candidates for the Kentucky Legislature, twice a year – once prior to the filing deadline, and once just after the primary, so that all candidates knew the nuts and bolts of how to campaign effectively and in accordance with Kentucky law and regulations.