News-Record.com

February 1, 2007

Mr. John R. Wallace
Wallace, Nordan & Sarda, L.L.P.
P. O. Box 12065
Raleigh, N.C. 27605

Re: Advisory Opinion Pursuant to N.C.G.S. § 163-278.23; Use of Political Committee Funds for Legal Fees and Expenses

Dear Mr. Wallace:

You have asked for an opinion pursuant to N.C.G.S. § 163-278.23 on whether, under Article 22A of Chapter 163 of the General Statutes, the funds of the Jim Black Committee may be spent for the legal expenses of the Committee, its Treasurer Virginia Kelly and other campaign staff, Speaker Black, and Speaker Black's legislative staff. Effective October 1, 2006, "[a] candidate or candidate campaign committee may use contributions only for the following purposes" as set forth in N.C.G.S. § 163-278.16B:

(1) Expenditures resulting from the campaign for public office by the candidate or candidate's campaign committee.
(2) Expenditures resulting from holding public office.
(3) Contributions to an organization described in section 170(c) of the Internal Revenue Code of 1986 (26 U.S.C. § 170(c)), provided that the candidate or the candidate's spouse, children, parents, brothers, or sisters are not employed by the organization.
(4) Contributions to a national, State, or district or county committee of a political party or a caucus of the political party.
(5) Contributions to another candidate or candidate's campaign committee.
(6) To return all or a portion of a contribution to the contributor.
(7) Payment of any penalties against the candidate or candidate's campaign committee for violation of this Article imposed by a board of elections or a court of competent jurisdiction.

Legal fees and expenses have been incurred because of investigations into the fund raising activities of the Jim Black Committee, its treasurer and others, including the Speaker himself, and investigations related to his tenure in legislative office. These legal expenses arising from investigations into his campaigns or service in office appear to fall under the statute's authorized purposed in that they are "[e]xpenditures resulting from the campaign for public office by the candidate or candidate's campaign committee" or "[e]xpenditures resulting from holding public office." Thus, they are permitted expenditures under Article 22A of Chapter 163 of the General Statutes.

It could be argued that legal fees incurred because of activities which are ultimately deemed to be illegal are not proper expenditures under the statute. Such a ruling would be inconsistent, however, with the legislature's determination in subsection (7) of N.C.G.S. § 163-278.16B that any penalties assessed against "the candidate or candidate's campaign committee for violation" of Article 22A of Chapter 163 of the General Statutes may be paid from the committee's funds. If a penalty resulting from an investigation into a campaign finance violation is a permissible expenditure, then it is reasonable to infer that the legislature intended that it is also a permissible expenditure for a candidate's committee to pay any legal fees incurred in the course of the investigation that led to the penalty.

For your information, a study committee of the Senate has been appointed to study the issue of legal assistance funds for candidates and elected officials. Any legislation adopted by the General Assembly on this issue may impact this opinion.

This opinion is based upon the facts as stated in your letter of December 21, 2006. If those facts should change, you should evaluate whether this opinion is still applicable and binding. Finally, this opinion is made pursuant to N.C. Gen. Stat. § 163-278.23 and will be filed with the Codifier of Rules to be published unedited in the North Carolina Register and the North Carolina Administrative Code.

Sincerely,

Gary O. Bartlett

cc: Julian Mann, III Codifier of Rules