CREW: FEC: Regarding Violations by MZM Inc., Mitchell Wade: 7/5/2007 - FEC General Counsel's Report

8/6/2019 CREW: FEC: Regarding Violations by MZM Inc., Mitchell Wade: 7/5/2007 - FEC General Counsel's Report

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123145.6'7.

e 0BEFORE THE

In the Matter of IMitche11'Wad.e. "

. . . . . . '... . . . . .'TrueNorte;.'Inc..-fMa_ . MZM , Inc.. . . . . . . . . . . .

FEDERAL'ELECTION COMMISSION

1.1.. . . . . . .: : : : .chistime. . . . . . ade. ' :::, . _ ,

8 ' ::, ' ":King,lChristopher F. Rosche, and Roger A.. .

. .. . . . . .. . . . . . . .. . . . . .: . ..I,' :.: ..6 .Comorate:OfficerRespondents: Frank B. Bragg; )17. . . . .: .Anthony. Capray onathanD..lowers, James C. )

' Swinford . .'20: . .2122

' . , . ' ,. . .. I .. . .

1.Conduit Respondents: Robin Berglund, Cynthia.S. )

. , .:BraggyAmy,Cain, ,Sharon Capra, Jane T.' ' ,,.ers,.R alph . G anis., Robert A. Harrell, . )3. :'.'. : . F]bw24252627

28293031323334..35

J\JC 6 200

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. . . . . . .. . . . . .. .. . . . . .. . . . .

. . . . . . . . . . . ...... . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . .. . .. . . . . . . . . .. . . ......, .:.... . . . . . . . . . . . . ._ .,,.....

" ' .. . - .. . . . . . . . . .. .. . . . . . . . . . . . . . .. . . . . . . . . . . .. . . .. . . . . . . . . . ... . . . . .UR 5666 . . . . . . . .. .. . .Pre-MUR 43.9 ' .' -!. . . .. . . . . .. .. ... .

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. . .. . . . . . . . .. . . . . . . . . .. . . .. . . . .. . . :.: . . . .. . ? . > '. . . . . . . .. . ._._ . '. . . . .'

1 .

, '_ . . . :. . . .. . ..j'. . . . .. . .. -Donna J. Harrell, Joseph R. James, May I.James, Jeneane C. King, M atthew B. Shafferand Gregory V. Wade . ) I1 . . ' c-:;

' . GENERALCOUNSEL'SREP~RT#~ . , $+-0. .I. ACTIONS RECOMM ENDED f--.....cxl

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' MZM , a Nevada corporation with offices in Washington D.C., was established by Mitchell W ade in 1993. Wadeheld 94% of MZM stock w hile his three children held the remaining6% of the stock. MZM's corporate documentslisted M itchell Wade as the so le officer and director of MZM. In September 2005, Wade sold MZM's assets toAthena Innovative Solutions, Inc. ("Athena"), which has continued MZM's defense contracting business, for .approximately $40.5 million. The terms of sale specified that Athena did not assum e any liability in connectionwith any ongoing litigation, claims and investigations, including this Office's ongoin g investigation of allegationsthat MZM and Mitchell Wade violated federal campaign finance laws. See Bill of Sale and.Assignment andAssumption Agreement, dated August 17,2005. After the asset sale to Athena, M ZM changed its name to TrueNorte, Inc.

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, General Counsels Report #2MUR 5666Pre-MUR 439 @. .(2) merge Pre-MU R 439 into MUR 5666; (3) find reason to believe that Richard

. . .Berglund know ingly and willfully violated 2 U.S.C. 0 441f

(4) take no further action and close the file as to MZ M, Inc. PAC andJeanne O Neil, in her official capacity as treasurer; and ( 5 ) take no further action and close thefile as to Christiane W ade.11. INTRODUCTION

The Com mission previously found reason to believe that Mitchell Wade and M ZM, afederal governm ent contractor, violated 2 U.S.C. $8 441 by441c, and 441f by using corporatefunds to reimburse contributions made by MZM employees and family mem bers of MZMemployees to federal candidates. * The Com mission also found reason to believe that severalhigh-level MZM officials know ingly and,willfully violated 2 U.S.C. 40 441b and 441f byconsenting to the use of MZM corporate funds in the reimbursement schem e and that the otherindividual conduit respondents violated 2 U.S.C. 6 441f by allowing their names to be used tomake reimbursed contributions. The Com mission also found reason to believe that MZM, Inc.PAC and Jeanne ONeil, in her official capacity as treasurer (MZM PAC ), knowingly and

On February 24,2006, Mitchell Wade pleaded guilty to multiple felony offenses, including unlawfully makingcampaign contributions in the name o f another in violation of 2 U.S.C. $5 441f and 437g(d)(l)(D). See Statement ofOffenses, United States v. Mitchell J. Wade (D.D.C. Feb. 24,200 6) (Wade Statement of Offenses). On July 2 1,2006, Richard Berglund p leaded guilty to a misdem eanor violation of 2 U.S.C. $6 441 f and 437g(d)(l)(A)(ii) byunlawfully making contributions in the name of another. See Statement o f Offenses, United States v. Richard A.Bergfund, D.D.C. Jul. 2 1,2 00 6) (Berglund Statement of Offenses).

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General Counsels Report #2MUR 5666Pre-MUR 439wi llhl ly violated 2 U.S.C. $5 441b and 441c by accepting funds that were so licited usingcoercive method^.^

After the Commissions reason to believe findings, the Department of Justice referredPre-MUR 439 after a plea agreement with respondent, Richard A. Berglund, an MZM managerwho assisted W ade by recruiting other MZM employees to serve as cond uits and distributingreimbursement to other MZM employees. See supra n. 2. In considering MUR 5666 at the FirstGeneral Counsels Re port stage, the Comm ission found reason to believe that Berglund violated2 U.S.C. $ 441f by making reimbursed contributions. Because Berglund is already a respondentin MUR 5666 and his involvement in the reimbursement scheme perpetuated by Mitchell Wadeand MZM has already been discussed in detail in the First General Counsels Report for MUR5666 , we recommend that the Comm ission merge Pre-MUR 439 into MUR 5666.

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During the cou rse of the investigation, we reviewed over sixty thousand pages ofdocum ents obtained by the Federal Bureau of Investigation during its investigation of MZM andWade, reviewed additional information obtained from R epresentatives Goode and H arris,conducted interviews of respondents and m ultiple w itnesses, and obtained declarations fromsome respondents we were not able to interview personally. The investigation confirmed thatMitchell Wade used MZ M funds to directly or indirectly reimburse 20 MZM employees orfamily members of MZM employees for $78,000 in con tributions to tw o federal political

MZM PAC recently received a notification under the Administrative Fine program that the C ommission foundreason to believe that MZM , Inc. PAC and Jeanne ONeil, as treasurer, violated2 U.S.C. 6 434(a) by failing to file arequired report. In challenging the Administrative Fine notice, counsel for Ms. ONeil argues thatMs. Neilceased to serve as the treasurer of MZM PAC as of September 2005, when Athena acquired MZM. See Letter fromMatt Herrington to O ff ke of Administrative Review (March 12,2007). MZM PA C has not designated anothertreasurer to replace Ms. ONeil; consequently, Ms. ON eil remains a respondent in this matter in her capacity astreasurer of MZM PAC.

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. .General Counsel's Report #2MUR 5666Pre-MUR 439 . .

1 com mittees, Goo de for Congress and Friends of Katherine Harris: Our investigation into the'2 . . .solicitations. . mad e by M itchell Wade and other MZM officials for contributions to m M ZM AC,

I . . . .. . 3 ' .. .howev er,.dbtermined hat there is insufficient information to conclude that employees were;.:':; : . . .. . . . .. . . . . . . . . :, :. .. . . . . . . . . . . . .. .. . aking co,ntributions o MZM PAC.

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. . .. . . . .. . . . . ... . 'W e recommend that the C qmm ission find reason to believe that Richard';. ' '

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. Berglund knowing ly and willfully violated 2 U.S.C.' 0 441f, , '. . .. . . .

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. .. .Finally, Christiane Wade, Mitchell Wade's wife, was not reimbursed for her. .

contribution. We, therefore, recommend that the Com mission take no further action and closeIthe file as to Mrs. Wade. As discussed below, we are not making any recommendations as to the

. . .corporate officers and conduits 1 . .. .. .

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The Commission did not make any findings as to the two com mittees, and they are not respondents in this matter.The inv estigation did not reveal any information indicating that the committees were aw are that someof the MZM-related contributions they received were reimbursed by Wade and MZM . The investigation revealed that theComm ittees contacted MZM-related contributors after press reports indicated that some con tributors believed theircontributions were coerced and offered to refimd any contributions that were coerced and don ated all the MZM -related contributions not refunded to charity. Since the committees are no longer in possession of any MZM-relatedcontributions, including the reimbursed contributions at issue in this matter, we concluded that it was unnecessary torequire the committees to disgorge the reimbursed contributions;

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General Counsels Report #2MUR 666Pre-MUR 4391 111. FACTUAL SUMMARY2 During the events described below, Mitchell Wade served as President and CEO of3 MZM , with complete operational control over the activities of the company. The corporate4 officer respondents, Frank Bragg, Anthony C apra, Jonathan Flowers, James K ing, Christopher5 Rosche and R oger Swinford held high-level positions at MZM, ranging from Vice President to6789

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Senior Executive Vice President to Chief Operating Officer, at the time they made thecontributions at issue in this matter? Respondent Richard Berglund served as the manager ofMZM s Foreign Supp lier Assessment Center in Martinsville, Virginia at the time of hiscontributions. Respondents Amy C ain, Ralph Ganis, Robert Harrell, Joseph James , MatthewShaffer and Gregory Wade were employees of MZM at the time o f their contributions. Finally,respondent Christiane Wade was the wife of M itchell Wade and responden ts Cynthia Bragg,

12 Sharon Capra, Jane Flowers, Donna Harrell, May Jam es and Jeneane King w ere married to13 MZM employees at the time of their contributions.14 From 2003 through 2005, Mitchell Wade used MZM corporate h d s o funnel $78,00015 in illegal corporate contributions to the campaign comm ittees of two members of the House of16 Representatives, Representative V irgil Goode and Representative Katherine H arris. See Table of17 Reimbursed Contributions at Attachment 1. Representative Goodes com mittee, Goode fo r18 Congress, received a total of $46,000 in contributions from MZM employees and their family19 members that were reimbursed by Mitchell Wade using MZM corporate fbnds. Representative20 Harris comm ittee, Friends of Katherine Ha rris, received $32,000 in reimbursed contributions

Notwithstanding their titles signifLing corporate officer status, it appears that all of these individuals were notgiven any significant authority with regard to directing the activities of MZM. ee infra pp. 15-17.

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0General Counsel's Report #2MUR 5666Pre-MUR 439from MZM employees. Richard Berglund assisted Wade in his reimbursement scheme bydistributing $1 4,000 of the co ntribution reimbursements to himself, his wife, and four other

123 MZ M em ployees and their family members. Wade and Berglund have both pleaded guilty to. . . . . . . .. . . . . .. . . . . '.._. . . . . . .. : ' . ,. .. >. .

. _. , . vi,olations of2 'U .S.C . 5 441f. .. . . . . . . . . . .. . . . . . . . . .imbursed C ontributions to Goode for ,Congress '

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. .. . . .. : . . . . . .. . . . . .. . . . . . . . . .. . ' . . . . . .. I . . 2003. Contributions Reimbursed Direc tly.by Wade'. .. . .. . . . .. . . . . . .. . . . . . . . . . . . . . . .. .e:.:.. . .

. . . . .. . . . .. . . . .. .:March 26; 2003, M itchell Wade and M ZM PAC ,held a fundraiser for Repres . .

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... 8 Virgil G oode at M .ZM headquarters in W ashington, D.C. The event generated over"$35,0OO 'for'j'. . . . . . . .. . . . . .. . . . . . .. .. . ._. . . . . . . .. . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . ._. . . .' _ . ._ . . .. .'. . , '..... . . . . .

' 9 . . ...Representative .Goode's authorized comm ittee, Goode for Congress. Of this amount, at'-least


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General Counsel's Report #2MUR 666Pre-MUR 439denied receiving any reimbursement from Wade for his contribution. See Rosche Response,dated Aug. 9,200 6.

2. 2005 Contribution s Reimbursed Directly by WadeIn 2005, Wade again approached MZM employees about making contributions to

Rep resen tathe Goode and reimbursed the employees and their family mem bers for contributionsto G oode for Congress. Wade, directly or indirectly, reimbursed ten MZM employees and sevenwives of M ZM employees for a tota! of $36,000 in contributions to Goode for Congress. SeeAttachment I.

Specifically, at the end of February 2005, Wade met with Anthony C apra and askedCapra and his w ife to'm ake a contribution to Goode for Congress instead of to MZM PAC.

. . Capra left the,meeting with W ade with theunderstand ing that he would receive a bonus, and'W ade later handed him $4,200 in cash which . .Capra and his wife, Sharon, each used to m ake a $2 ,000 contributions to the Goode comm ittee.Id. After meeting with W ade, Anthony Capra and his wife, Sharon Capra, used cash receivedfrom Wade to each make a $2,000 contribution to Goode for Congress.

Around that same time, Frank Bragg approached Jonathan Flowers and asked Flowers tosupport Virgil Goode. At afollow-up meeting attended by Flow ers, Wade and B ragg, Wade handed Flowers $4,000 n cash.Id. Flowers thought that the money was linked to his contributions to Goode and questionedWade and B ragg about whether it was legal for him to receive the money and was informed byWade that it was legal. Id. Subsequently, Jonathan Flowers and his wife, Jan e Flowers, eachmade a $2,000 contribution to Goode for Congress.

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General Counsels Report #2Pre-MUR 439 MUR5666 8

. .1 In addition to meeting directly with em ployees to request contributions fo r Goode for23

Congress, Wade also sent cash directly to employees with the expectation that they would m akea contribution. In early 2005, James King received a Federal Express package at his home

4 containing $4,000 in cash and an envelope addressed to the campaign com mittee for5 Representative Goode. Although King did not have any discussions

. ..6 with W ade about contributing to Goode prior to receiving the cash,.King and his w ife, Jeneane, .. .

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each made a $2,000 contribution to Goode for Congress. King Proffer.Further, Roger S winford and his fiance at the time, Amy Cain, also an MZM mployee,

also used cash received from W ade to each make a $2,000 contribution to Good e for Congress.Before m aking the contributions, Swinford and Cain received a Federal Express package at theirhome containing $4,000 in cash. .

2 Prior to receiving vie , ,13 package, W ade telephoned Swinford and told Swinford he was sending him a contribution to14 Representative Goode. The Federal Express envelo pe contained two15 stacks of cash with post-it notes, one fo r.Swinford and one for Cain, and the note G oode for

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Finally, Wade also admitted to reimbursing Frank and Cynthia Bragg and G regory Wade. Frank and Cynthia Braggor their contributions to Goode for Congress in 2005.

19 and Gregory Wade each made a $2,000 contribution to G oode for Cong ress in 2005.620

Frank and Cynthia Bragg have denied receiving any reimbursementfrom Wade for their contribution. See BraggResponse, dated July 3,2006 (Bragg Response).

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General Counsel's Report #2MUR 5666Pre-MUR 4393. 2005 Contributions Reimbursed Through Berglund

On or around February 16,2005 , Wade met with Richard Berglund at M ZM headquartersin Washington, D.C. and p rovided Berglund with approximately $16,000 in cash to reimburseemployees for political contributions. Berglund, the Manager of MZ M's Foreign Suppliers

. .. .. . .. . . , . ., : '. .. . .3 . . " ,Assessmentcenter. . . . n M artinsville, Virginia, met privately with W ade at M ZM headquhington, D.C. ith three other Martinsville employees, Joseph JaRalph G anis, to attend a meeting with government officials. At

meeting, Wade told B erglund that he wanted to give people bonuses to encourage the

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. .. ...'contribute.o Representative Goode',s campaign.

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Wade provided Berglund with the cash to use for the em ployee1112

, bonuses. and. nformed Berglund about the limits on con tributions to candidates and also told ..... ,. .. ... .' . ..; .. ..' .. .. .. . . . . . . ,.. .. .. . .Berglund what size bonus to give to the employees? Id.

13 After returning to M artinsville, Berglund approached James, Shaffer, Robert Harrell and14 Ralph Ganis, all Martinsville employees, to solicit contributions to Goode for Congress.

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16171819 would be reimbursed. When Berglund was questioned

Berglund told S haffer and James that their contributions to Goode fo r Congress .

' erglund left the meeting with Wade carrying an envelope o f cash in his briefcase and informed Joseph James thatWade had given him $16,000and asked hi m to ident.iQ people w illing to support Representative Goode's campaign.On the return trip to Martinsville, James informed Sh affer thatWade gave Berglund a stack of cash, which Berglund did not dispute.

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1, ' 2 .,

3 . .' 4 ',

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General Counsel's Report #2MUR 5666Pre-MUR 439about the legality of the reimbursement, Berglund informed James that the activity was not .

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. .Iillegal . .nd'to ld Shaffer not to worry since this type of activity happened all the time. Id:

. .haffer1,with.. . . .2,000 in cash, and Ganis with $2,000 incash. See id. James and his wife, . . . . .ay .. . . . . ".: : .. .

.:', ' ..

. . . . . . . . .erglund'ultim ately provided James with $4,000 in cash, Harrell'w ith $3,000 in c,ash;:..;. ... .

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2,000 con tribution.to Goode for Congress. Harrell and his w ife, D '00 contribution to Goode for Congress. Shaffer and G anis also ma

o'Goo de for Congress. . .. . . .. . .

. ., ., . .' I ' '. .. In .addition'to.reimbursing1 1,000 in con tributions made by Martinsv ille empl . . I . . . . .. .

I . : .. . . . .. . . . .. . . . .. . . . . . . . . . . . . . . ... . . . . . .. . . . . . . . . .. _ .. * :.. .their :family, B,erglund also gave himself a $3,000 cash'bonus, which Berglund .a& his wif+,..;. . ..' ?.: . . .. . . .. . . . . . . . e.. . . . .. _. .Robin Berglund, used to make $4,000 in contributions to G oode for Congress. Berglund '.. : 'Statement. . .. . .f Offenses at 2. After the reimbursements, Berglund returned the leftover cash,,. . . . . . ' '

. .... _. .. .approximately $2,000,. o Wade..(;.,.. :. . . . .. . . . . . .. . . . . . .. ' . : . , ,. . ::. '. .: .' . .. . . . .. . . ._ .

B.In 2004, Wade approached several MZM employees and gave the employ ees cash or

Reimbursed Contributions to Friends of K atherine Ha rrisI

otherwise reimbursed them and, in some cases, their spouses, for contributions to F riends ofKatherine Harris. Ultima tely, Wade reimbursed five MZM em ployees, James King, Jonathan 'Flowe rs, Frank Bragg, Roger Swinford and G regory Wade, and three spou ses of MZM , ., _.employees, Jeneane King, Jane Flowers and C ynthia Bragg, for a total of $32,000 incontributions to Friends to Katherine Harris.

Berglund also approached Ganis and offered him a $4,000 cash bonus and informed G anis that he could contribute '$2,000 o Good e for Congress and that his wife could contribute another$2,000. .July 6,2006.Despite Berglund's assurances that the offer was not against the law, Ganis felt uncomfortable anddeclined the bonus. Id. Ganis then contacted Wade to inform him that he could not accept the bonus and that he didnot have the money to contribute to the Goode campaign, but w ould be able to consid er 'making the contribution ifWade paid an additional $2,000 or a pistol Wade had purchased fiom G anis. Id. Wade directed Berglund to pay .Ganis the additional $2,000, and Ganis used that money to make a contribution to Goode for Congress.. .

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, General Counsels Report #2MUR 5666Pre-MUR 43912 Harris. .. :. Although Wade did not discuss reimbursem ent with King

Around March 11 2004, W ade called James King and asked King to support Katherine

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during the call, several days later, on March 1 6,2 004, King received an expense check for$9,150 desp ite the fact that K ing did not submit a request for expenses. Id. On March 23,2006 ,

5 King and his wife, Jeneane, made $8 ,000 in contributions to Friends of K atherine Harris.678

In early M arch 200 4, Jonathan Flowers attended. a meeting with Wade and Frank Bragg.where Flow ers was asked to support Representative Harri.Although reimbursem ent was not directly discussed at this m eeting, on March 18,2004, Flowers

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received a cash bonus from Wade in the amount of $8,250. Id. On March 23 ,2006 , Flowers andhis wife, Jane, made $8,000 in con tributions to Friends of K atherine Harris.

2Wade also had a c onversation with Roger Swinford in early 2004 w here Wade directed

Swinford to write two checks to Representative Harris, one for the primary election and one for34.

the general election. Swinford received a $4,500 check from Wade, $500 of which wasearmarked for a contribution to MZM PAC. Swinford then made $4,000 in contributions to

Friends of Katherine Harris and a $500 contribution to MZM PAC67

Wade further admitted to reimbursing Frank and C ynthia Bragg and Gregory Wade fortheir contributions to Friends o f Katherine Harris in 2004.his wife, Cynthia, made $8,000 in contributions to Friends of Katherine Harris and GregoryWade made another $4,000 in contributions to Friends of Katherine H a r r i ~ . ~

Frank Bragg and

The Braggs, who acknowledged that Frank Bragg received bonus payments, deny that they recognized any of thesepayments as reimbursements for their contributionsto Friends of Katherine Harris. Bragg Response.

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General Counsels Report #2

1MUR 5666Pre-MUR 439

C. Coercion Allegations2 We conducted an extensive investigation into the allegations that MZM and Wade, as a3 corporate officer of M ZM, v iolated 2 U.S.C. j41b(b)(3)(C) by c oercing contributions to MZM4 PAC, violated 11 C.F.R. 5 114.4(f)(2)(iv) and 2 U.S.C. 5 441b(a) by soliciting contributions5 using the threat of adverse employm ent action, and that MZM PA C v iolated 2 U.S.C.6789

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5 441b(b)(3)(A) by accepting funds solicited using coercion. We interviewed respondents, arepresentative sample of former MZM employees who contributed to MZM PAC o r candidatessupported by Mitchell Wade, and the former General Counsel of MZM and former treasurer ofMZM PA C. The employ ees described an environment where MZM and Wade emphasized theimportance of MZM s political activities. The company new sletters regularly highlightedMZM s political activities, including congressional fundraisers and other events, as well as the

12 fundraising efforts of MZM PAC.13 Former MZM employees have stated that contributions to MZM PAC were made in14 response to annual solicitations to M ZMs restricted class. These annual solicitations, in the15 form of mem oranda fiom M itchell Wade, described the functions of MZM PAC and asked that16 employees and their family members make contributions to MZM PAC. The MZM PAC17 solici tation clearly indicated that contributions were voluntary and suggested a contribution18 amount, generally ranging from $500 to $1,000,based on the employees position in the19 company.

l o MZM , Inc. PAC (MZM PAC), a separate segregated fund connected to MZM , filed its initial Statement ofOrganization with the Commission on October24,2001. From 2001 hrough February 2006,MZM PAC disclosed$153,955 n contributions fiom MZM employees. On February 13,2006, t the direction of Mitchell Wade, MZMPAC made a donation in the amount of $70,892.71,he balance of funds in its account, to the Intrepid Fallen HeroesFund. Also on February 13,2006,MZM PA C attempted to file a termination report with the Commission. ThisOffice notified MZM PAC that its termination request could not be granted due to its status as a respondent in thisMUR. See Letter from Lynn Tran to B rian Heberlig (Feb.22,2006). MZM PAC has not engaged in any activitysince it attempted to terminate in February 2006.

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eGeneral Counsel's Report #2 .MUR 5666Pre-MUR 4391 When asked about their contributions to M ZM PAC, many em ployees indicated that,

.2 although they did not feel they were coerced into making the contributions, they made the '1. . :. . . . . . . . . . .: ..:, . .3 contribution in response to a solicitation for contributions to M ZM PAC because they believed it. . .. . . . . . .. . . . . . . . . . . . . . . . . . . . . . .. ... .. . . . . . . . . . . .. . .. ... ..4 .. was expected'that executives contribute, and because they wanted to be nefit MZM,. T he . . . ' .... . : . . . . ',I : . .. . . . . . . .. . . . . . . .. . . . . . . . . . . .. .. . .. ...

a situation where they felt pressure to contribute to MZ M PAC nlatile personality and they were afraid that they would n ot be ab. .

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any if they were on bad terms with Wade. ,. .. . .g '

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... , ,.. .; , . While the'circumstances presented by the em ployees indicates that so m e employees felt' . '

.,pressure:jomak e contributions to MZM PAC, this pressure was created ,primarily by th..:

'. . .. . . .. .. . . . . . .. . . . . . . .. .. . . .of MZM as a highly-compartmentalized company run by a temperam ental boss and not by:any

specific actions or statements of Wade or other MZM officials." It appea rs that MZM :.,',... . ;.:- . .employees'were motivated to make contributions 'in part because of what they described ,as.thei,r.

. . . . :., . .. . . . .. . . . . . . . . . . . _,:. . .. . . . ,.. . . .. . . . : . . . .. .

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fear of Wade's volatile personality, and not because of any particular actions by Wade or anycorporate officers of MZ M. It does not appear that Wade followed up with em ployees to seewhether they intended to contribution the M ZM PAC; Furthermore, we have not found anyevidence that any employee was subject to financial retribution, adve rse employ ment action or '

Two employees, Roger Swinford and Su san Hogan, described conversations with the formerMZM PAC reasurerand former General Counsel of MZM, Joseph Co rnelison, where they felt that Cornelison directed them to m akeparticular contributions. Swinford indicated that he made a$300 contribution to M ZM P AC in 2002 only afterreceiving a call from Cornelison wh o asked Swinford how much he could contribute after Swinford stated that hecould not contribute the amount suggested in the solicitation.Cornelison suggested she contribute to Goode for Congress after she followed up on a M ZM P AC solicitation andindicated she was resistant to contributing to MZM PA C because she wanted to kno w wh ere the funds were going.While Swinford stated that Cornelison did not inform him duringtheir conversation that the contribution toMZM PAC w as voluntary, Hogan stated that Cornelison w as careful totell her that he was not pressing her to contribute and there was no expected amou nt for her contribution. Whilethese incidents suggest that there was a focus at MZM on soliciting contributions to MZM PAC and favoredcandidates, we do not believe that this activity rises to the level of coercion under the Act. It does not appear thatCornelison indicated to either Sw inford or Hogan that they would be subject to reprisals for failure to contribute toMZM PAC or implied that they would be subject to reprisals for failing to contribute. Furthermore, in Swinford'scase, Mitchell Wade provided him w ith funds to make a later contribution to M ZM P AC.

Hogan indicated that

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, General Counsel's'Report#2MUR 666Pre-MUR 439other reprisals for failing to contribute to MZM PAC. In sum, employees who failed to. _1

2 contribute in response to every solicitation did so without any apparent repercussions.3 IV. DISCUSSION45

1

The investigation has confirmed that MZM and Mitchell Wade knowingly and willfullyviolated '2 U.S.C. $5 441 a, 441 b'and 441f by reimbursing MZM employees for theircontributions. In addition, Richard A. Berglund knowingly. and willfully violated 2 U.S.C. .44 1 f by assisting in making con tributions in the name of another. While the availableinformation confirms that the other respondents were. eimbursed by Wade fo r theircontributions, it does not appear that the'violations were knowing and willful. With respect tothe o ther respondents,' it appears that one respondent, Christiane Wade, was not reimbursed forher contribution. As to the allegations regarding coerced contributions to MZM PAC, there. sinsufficient evidence to establish that MZM employees were,coerced into contributing to MZM . ,

A. Contributions reimbursed by M itchell Wade and M ZM5

161718

PAC. Each respondent's liability is discussed in turn.

As detailed in W ade's criminal plea agreement, Wade knowingly and willfblly violatedthe Act by reimbursing MZM employees and their family members a total of $78,000 for thesecontributions. See Wade Statement of Offenses. Wade and MZM have not contested theCommission's knowing arid willful findings

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I General Counsels Report #2MU R 5666Pre-MUR 4391 B. Richard Bernlund2 Berglund has already pleaded gu ilty to a knowing and wi ll h l violation of 2 U.S.C.3 $3 441 f and 437g(d )( l)(A)(ii). by assisting W ade in a scheme to reimburse contributions.4 Berglund Statement ~ fO ff ~ i3 se s;n h is criminal plea, Berglund admitted to using $3,000 cash5 that he received from Wade to make a $2 ,000 contribution to Goode for Congress in his name678

Ig0

and another $2,000 contribution in the name of his wife, Robin Berglund. SeeBerglundStatement cf Offenses at 2. Berglund also admitted to providing $2,000 in cash to twoemployees and telling them that W ade wanted them to contribute to G oode for Congress. Id.

Based on interviews with Berglund and other employees of MZMs M artinsville facility,it appears that Berglund distributed a total of $1 1,000 in cash to four MZM employees: $4,000to Joseph James, $3,000 to Robert Harrell, $2,000 to Matthew S haffer and $2,000 to R alph

, Ganis. e13 The em ployees used the cash bonuses to make contributions to Goode for Congress.14 Combined with the $3,000 Berglund u sedto for his contri,butionand his wifes contribution to15 Goode for C ongress, Berglund distributed a total of $14,000 from W ade to reimburse161718

contributions made to Goode for Congress. Berglund has not contested the Com missionsfinding that he violated 2 U.S.C. 0 441f, has cooperated with the investigation

Accordingly, we recommend that the Comm ission find reason192021 C. Corporate Officer.Respondents2223

to believe that Richard Berglund know ingly and willfully violated 2 U.S.C. 3 441f

The Comm ission previously found reason to believe that corpo rate officers, Frank B.Bragg, Jr ., Jonathan D. Flowers and James C. King: know ingly and.w illfully violated 2 U.S.C.

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General Counsel's Report #2MUR 5666Pre-MUR 439123'4.

0 441b by c onsenting to the use of corporate funds in a reimbursement scheme. Theinvestigation co n f i h e d that the following corporate officer respondents also violated 2 U.S.C. 8441f by allowing their names to be used for contributions to Goode for Congress andFriends of K atherine H arris: Frank B.Bragg, Anthony Capra, Jonathan D. Flowers, James C.. . . . .. . . .. . . . . .. . . . . . . . . .. - .

' 5 i . . . . . .King , 'Christopher F. Rosche and Roger .A. Swinfo rd. See Attachment 1. Of these res. . . . .. . . . . . . .. . ....

. . . . . . . . . .. . . . . . . . . .. . .. . . . . . . . , ~ , . . . . . . . . : ' .: . . . . . .'6 . . onlyyFrank..Bragg nd C hristopher Rosche deny that W ade reimbursed them .for,the ir" ,;,\ .,.

.... . , '. ', 7 See Bragg Response; Rosche. Response.. . .

. . ' ., .

, . .9 '.;Ope.ratingOfficer, these respondents appear to have been c orporate officers in.name only

..

10

. . .. . . . . . .,

. . . ._ . .

.. . ,

. . . . . . .. . ,. . . . . . . . . . . . . .. . . .. . . . . . . . . . . . . . . . . .. . .. . . . .. . : .

. . . . ._.":. , . ' ., ' I . .._ . . _ .. _.. .Despite titles ranging from Vice President to S enior Executive Vice President t o Chief:.'., 8 . ..

. . . . .. ..; ' .

. . . .. .

operations of MZM appear to have been managed so lely by M itchell Wade. 3 Although the '.. . . . . . . .' . _ ' . , :. . . ........... .. ' ... . _. , . ' I? ; ,. . , . , : . .. . < ,' ., . .

. .

First, Wade admitted to reimbursing Frank and Cynthia B ragg $1 2,OOO'.for . 'contributions they m ade to Friends of Katherine Harris in 2004 and Good e for Congress in 2005 as part of hiscriminal plea agreement and in discussions with federal investigators. Second, interviews with other conduits andwitnesses indicate that Bragg served as Wade's right hand man and was active in soliciting contributions to bothMZM PAC and to candidates supported by Wade and MZM. Finally, one conduit, Jonathan Flowers, recalls Braggbeing present when W ade-provided him with $4,000 in cash, which Flowers believed was linked to his contributionsto Good e for Congress. At the meeting, Flowers questioned the legality of receivingthe funds and was told byBragg and Wade that it was legal. Id. When questioned about the meeting with Flowers,Bragg did not recall the discussion but indicated he would have believed Wade if Wade stated that'activity was ,legal. Based on the available evidence, however, it appears that Bragg andhis wife, Cynthia Bragg, w ere reimbursed for their contributions in violationof 2 U.S.C. 5 441 f.

.

Although there is some evidence that Frank Bragg may have been aware that Wade was reimbursing other. .. . .individuals for their contributions, and therefore should have know n that his contributions and his wife'scontributions were also reimbursed by Wade, in the interest if reaching a resolution in this matter, we do not 'recommend proceeding as to Bragg at this time.As with the Braggs, the contribution by Rosche to Goo de for Congress was included as a reimbursed contribution inWade's criminal plea and disclosed during Wade's conv ersations with investigators. Absent additional. information,which Rosche has not provided, the available evidence supports the conclusion that Rosche w as reimbursed for hiscontribution in violation of 2 U.S.C. 0 441f.l 3 Respondents and w itnesses described a situation where Wade had sole financial control over the operations o fMZM including writing all company checks and keeping the MZM checkbook in a drawer in his desk. Despite thetitles held by the corporate officer respondents, the evidence suggests that they di d not have responsibilities orauthorities of an actual corporate officer of MZM. For examp le, there is no ind ication that they had the ability toapprove the expenditure of MZM corporate funds or even to write checks from MZ M's corporate accounts.

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General Counsel's Report #2MUR 666Pre-MUR 4391 corporate officer respond ents were aware that they received either bonus es or reimbursem ents

I

' 2 . from . .itchell W ad e aroun d'the time they made the co ntributions at issue, for the most part, 'it... 3 . , .wa s not until af te rt he fact that they realized that the reimbursements were illegal. These .. : .'..:: ':'

. . . .

. . . . . .. . .. . . . . . . . .. . . . . . . . . . . .. . . . . . . ... .._... , ,. .. , . . : .. _ -.4 , . respond,ents,'like. . .. the lower-level conduits discussed below, were also not sophisticated politic.al. . . . . ...: : . . . ..

. .. . : . . .. . . .. . . . . ... . . . . . . . .. . . .. .. . . . . . . . . . . , . : ...:.

. , . .. .I

.>

' 5 : : ' .ctors'and'did. . . . . . .ot'h av e a history of making political con tributions prior to receiving reque . . ,. .. I

. . .com plete control over the manag ement of MZM and his prope

out comm ensurate respon sibilities, the ev idence indica tes. . .. . . . . . . . . . .. . : . .. . . . .. . . . . . . . - . .

. ., . .; . . ' . : ' '.' .' ] : . . . . .. . 0. . . .:. 9 ..corpora te officer respo ndents positions within MZM did no t significantly differ from th ,, _ . .. . . . . . .. . . .. .10 level conduits, which would justify treating the corporate officer respondents in the same m k e r

. . .12131415 I

i16 .17181920

11 . as.the conduit respon dents. As with the other conduits, we are not makin g any recommendations. . . .. . . .. . . . . . . . . . . . . .. . . . . .. . . . .. ...:. . . . . .. ., .. . .. . . :.. :........ . .. . .. . .as to the corpora te officer respondents at this time. '

' I

D. Conduit RespondentsThe investiga tion confirmed that the following conduit respon dents also violated 2 U.S.C.

fj 441f by allowing their names to be used for corporate contributions to Good e for Con gress 'and Friends ofKatherine Harris: Robin Berglund, Cynthia S. Bragg, Am y C ain, Sharon Capra,

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General Counsels Report #2MUR 5666Pre-MUR 43 9Jane T. Flowers, Ralph P. Ganis, Robert A. Harrell, Donna J. Harrell, Joseph R. Jam es, May I.James, Jeneane C. King, Matthew B. Shaffer, and,Gregory V. Wade.14 We confirmed that thecondu it respondents received funds, either directly or indirectly, from W ade and MZM around ,the time they m ade contributions to G oode for Congress and Friends of Katherine Hams and thatWade intended to reimburse the conduits for their contributions. See Attachment 1.

The av ailable information indicates that these conduit respondents had never made anypolitical contributions prior to the contributions at issue in this case,were not familiar with theprocess of making political contributions and were not awa rethat their actions were illegal.

*

E. Christiane WadeThe investigation revealed that C hristiane Wade was not reimbursed for a $2,000

contributiqn she m ade to G oode for,Congress in 2005. In response to the reason to believefinding, counsel for Mrs. Wade denied that she was reimbursed for her contribution andindicated that the contribution was made using funds from her personal checking account and not from joint account shared with Mr. Wade. This is consistent with both Mitchell Wades pleaagreement and with his statements to federal investigators regarding the contributions he

l4 Conduit respondents Cynthia Bragg, Sharon.Capra, Jane Flowers, Donna Harrell, May James and Jeneane Kingwere married to MZM employees at the time of their contributions.

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31415161718192021

eeneral Counsel's Report #2MUR 5666Pre-MUR 43 9reimbursed . Bec ause of we do not have any specific evidence indicating that Ch ristiane Wadewas reimbursed, we recommend that the Com mission take no hr th er ac tion and close the file asto C hristiane Wade.

F. MZM, Inc. PAC . .The investigation confirmed that there is 'insufficient evidence to establish that MZM

employees were coerced into contributing to MZM P AC. As discussed above, it appears that. .

.. .

many MZM employees made contributions to MZM PAC in part to'stay on good te rn s withMitchell W ade and not because they were coerced to contribute by either Wade or any corporateofficers of MZ M. The investigation did not find any evidence to support a conclusion that anyemployee was subject to financial retribution, adverse employm ent actio n,o r any o ther reprisalsfor failing to contribute to MZM PAC. Accord ingly, we recommend that the Com mission takeno further action and close the file as to MZM, Inc. PAC and Jeanne O 'Neil, in her official, . .capacity as treasurer.V.

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General CouIisel's Report #2MUR 5666Pre-MUR 43 912 ,

. . ... . . . . . .( . : ' ,

2. . . :. ..

1'31415 i16 I

1718190

20

. . . .. .. . .. .

. . . . . . . . .... . . . . . . . ..

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. . .. .. . . . .

. . .. .. . . . . . . .. . .. . . . .i . . . ... . . .. .; .

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5 .

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e, General Counsel's Report #2MUR 5666Pre-MUR 439

2345

. .1011 VI. RECOMMENDATIONS1213 1.141516 2. Merge Pre-MUR 439 into MUR 5666;17

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General Counsel's Report #2MUR 5666Pre-MUR 4393. Find reas on to believe that Richard Berglund knowingly and willfully violated .

1 . .. 2 U.S.C.,$ 4 4 1 f3 . .

. . . .. . . . . . . . .. . .

7.,. . ... .

. .6:. . . . . . . .: . :,4. :.Take no further action and close the file as it pertains to C hristiane Wade; . . . . . .. .. . .. . . . . ..... . .. . .. . . . . . . .. . .. . . . ., . ..'.,: ::.9 .. i . . ; .;.. O'Neil,' in h er'official capacity as treasurer; and. 5 . . . .Take.no. fiuthe r action and close the file as it pertains to MZM, Inc. PAC and:. . . .... .. . . . . . . .. . . . . . . . . . . .1 , ,:,. . . . e appropriate letters. .

. .

. . . . .' I . _. .. . Thomasenia P. Duncan . . . ..5,.6 . ,7

9

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5

8

4.

, , " __. . : :. . .. .. .. . . . . . . . . .. . . . . .

. . . .

. .. .

. . General Counsel ., ... .

. . . .Acting Associate General Counsel. . .. . . . . . . . . . .

rn'.. . .

. .. ./S/a7,.Date ' BY: Ann Marie Terzaken

for Enforcement.. . . : . : '.. . . .. _ . ...:... . . .. .

Mark D . ShonkwilerAssistant General Coun sel

LYM ~Y. ran -Attorney

Attachments1. Table of Reimbursed C ontributions2.3.

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I Date James KingJames KingJeneane KingJeneane KingJames KingJeneane King

Table of Reimbursed Contributions~~ __ __ ~Goode for Congress- $2,000Goode for Congress $2,000

Goode for Congress $2,000Goode for Congress $2,000Goode for Congress $2,000Goode for Congress $2.000

ResDondent I Committee I Contribution I

James KingJeneane KingJeneane KingJonathan Flowers

I 3/4/05Friends of Katherine Harris $2,000Friends of Katherine Harris $2,000Friends of Katherine Harris $2,000Friends of Katherine Harris $2.000

I 3/4/05

3/23 043 2 3 043/23/04

I 3/23/04 Jonathan Flowers Friends of Katherine Harris $2,000Jane Flowers Friends of Katherine Harris $2,000Jane Flowers Friends of Katherine Harris $2.0003/4/053/4/053/2/053/4/05

James Kina I Friends of Katherine Harris I $2,000 I

Jonathan Flowers Goode for Congress $2,000Jane Flowers Goode for Congress $2,000Anthony Capra Goode for Congress $2,000Sharon CaDra Goode for Congress $2.0003/23/043 2 3 043/5/053/2/05

Roger Swinford Friends of Katherine Harris $2,000Roger Swinford Friends of Katherine Harris $2,000Roger Swinford Goode for Congress $2,000Amy Cain Goode for Congress $2.0003/4/053/2/053/2/05

Robin Berglund Goode for Congress $2,000Robert HarrellL Goode for Congress $2,000Donna Harrell Goode for Congress $2.000

I 3/2/05 I Richard Berglund 1 Goode foxongress I $2.000 1

3/2/053/4/053/4/053/4/05

Ralph Ganis Goode for Congress $2,000Joseph James Goode for Congress $2,000May James Goode for Congress $2,000Matthew Shaffer Goode for Congress $2,000Gregory WadeGregory WadeGrenorv Wade

Friends of Katherine Harris $2,000Friends of Katherine Harris $2,000Goode for Congress $2.0003126103 I Christopher Rosche I Goode for Congress I $2,000 IFrank BraggFrank BraggCynthia BraggCvnthia Brang

Friends of Katherine Harris $2,000Friends of Katherine Harris $2,000Friends of Katherine Harris $2,000Friends of Katherine Harris $2.000Frank BraggCynthia Bragg

Richard Berglund used $3,000 he received from Wade to make a $2,000 contribution in his name and a $2,000contribution in the name of his wife, Robin Berglund.

Goode for Congress $2,000Goode for Congress $2,000 J

* Robert Harrell used $3,000 he received from Berglund to make a $2,000 contribution in his name and a $2,000contribution in the name of his wife, Donna Harrell.

Documents

CREW: FEC: Regarding Violations by MZM Inc., Mitchell Wade: 7/5/2007 - FEC General Counsel's Report