BEFORE THE FEDERAL ELECTION COMMISSION

)

Mike Braun for Indiana )

Request for Consideration of Legal Question )

)

REQUEST FOR CONSIDERATION OF LEGAL QUESTION

Through counsel Mike Braun for Indiana, (the “Committee”) is seeking the 

Commissioners’ consideration of a genuine material question of law presented in the Federal 

Election Commission’s (“FEC” or “Commission”) preliminary audit findings and 

recommendations delivered to the Committee during an exit conference held on March 4, 

2020. Pursuant to the Permanent Program for Requesting Consideration of Legal Questions 

by the Commission established by the Commission in 76 Fed. Reg. 45798 (August 1, 2011), 

the Committee requests the Commissioners’ guidance regarding the following question of 

law:

QUESTION PRESENTED

Is a line of credit issued by a commercial lending institution to a high-net-worth, 

creditworthy person made outside the “ordinary course of business” within the meaning of 

11 C.F.R. § 100.82 simply because it is unsecured, even if the same commercial lending 

institution regularly issues unsecured lines of credit to other high-net-worth, creditworthy 

customers in the ordinary course of its business?

BACKGROUND

Mike Braun was elected to the U.S. Senate in 2018, and Mike Braun for Indiana is his 

authorized candidate committee (the “Committee”). During the 2018 election cycle, Mr. 

Braun loaned funds to the Committee, some of which originated from unsecured lines of 

credit (collectively, the “Loans”) that Mr. Braun obtained from FDIC-insured commercial 

lending institutions. 

As part of the Commission’s audit of the Committee’s 2018 activity, the FEC’s Audit 

Division staff met with representatives of the Committee on March 4, 2020, to summarize 

their preliminary findings. During this “exit conference,” the Audit Division revealed its 

finding that the Loans constitute prohibited contributions from commercial lending 

institutions because, in the Audit Division’s view, the Loans were not made in the “ordinary 

course of business” since they were not secured by collateral or a guarantor.1 

1 See Mike Braun for Indiana Exit Conference Outline, Audit Division Staff, Wednesday March 4, 2020 at Finding 

4 - Finding 4 – Receipt of Apparent Prohibited Contribution – Bank Loan - 11 C.F.R. §§100.82(e), 100.52(b)(2); 
Request for Consideration of Legal Question

April 8, 2020

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To be clear, unsecured lines of credit are not unique to candidates for public office. As 

evidenced by Exhibit A, which is a copy of an unsecured line of credit issued by BBVA 

Compass to the undersigned counsel in March 2017, commercial lending institutions provide 

unsecured lines of credit to creditworthy individuals who, in the bank’s own judgment, are

very unlikely to default on the loan. And despite being creditworthy in the eyes of BBVA 

Compass, the undersigned counsel can assure the Commission that he was able to obtain the 

unsecured line of credit without a net worth that remotely approaches that of Mr. Braun’s.

ANALYSIS

1. Under Commission rules, a perfected security is a “safe harbor,” not an essential 

element, for demonstrating assurance of repayment.

As the Commission is aware, the Federal Election Campaign Act of 1971, as amended, 

prohibits commercial institutions from contributing to a federal candidate’s authorized 

campaign committee. This prohibition includes loans from commercial institutions that are 

not made in the “ordinary course of business” and outside applicable banking practices, laws, 

and regulations.2 The FEC has supplemented this statutory restriction with rules defining 

the relevant terms, including what does and does not constitute a loan made in the “ordinary 

course of business.” According to current FEC regulations, a loan is made in the “ordinary 

course of business” if it: 

(1) bears the usual customary interest rate of the lending institution; 

(2) is made on a basis that assures repayment;

(3) is evidenced by a written instrument; and

(4) is subject to a due date or amortization schedule.3

Satisfaction of the four elements is intended to demonstrate that when commercial 

lending institutions extend credit to federal candidates and political committees, they are 

doing so in their ordinary course of business (i.e., in their own commercial interests) rather 

than for the purpose of influencing the outcome of a federal election. In the instant matter, it 

is the undersigned counsel’s understanding and belief that the commercial lending 

institutions that made the Loans did so in their ordinary course of business (i.e., in their own 

52 U.S.C. §§30118. (“Based upon the documents provided by MBFI, it did not appear that the loans and/or lines 

of credit were made in the ordinary course of business, because they were not made on a basis that assured 

repayment.”). For the Commission’s reference, the Committee is providing copies of this material, including all 

loan documentation reviewed by the Audit Staff in consideration of this finding.

2 See generally 52 USC §30118(a)(1)-(2).

3 11 C.F.R. § 100.82.
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April 8, 2020

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commercial interests), and not for the purpose of influencing the outcome of Mr. Braun’s 

candidacy. 

There should be no dispute that the Loans satisfy three of the four elements 

established by the Commission: (1) the Loans were evidenced by a written instrument; (2) 

the Loans each bear the customary interest rate of the lending institution; and (3) the Loans 

are subject to a due date or amortization schedule. The critical inquiry, therefore, is whether 

the Loans were made on a basis that assures repayment. 

Commission rules provide several express ways for commercial lending institutions 

to satisfy this remaining element, including obtaining a perfected security interest in 

collateral such as real or personal property and certificates of deposit, or a written 

agreement pledging a security in future receipts.4 While candidates, political committees, 

and the commercial lending institutions may rely on these express provisions as a “safe 

harbor,” the Commission’s rules also contain a fallback provision that permits the 

Commission to apply a “totality of the circumstances” test to determine whether loans were 

made on a basis that assures repayment.5

2. Prior Commission advisory opinions and enforcement decisions indicate 

deference to commercial lending institutions in assuring repayment, including 

considerations of the candidate’s creditworthiness.

Since the Commission’s earliest considerations of whether commercial loans were 

made on a basis that assures repayment, the FEC has clearly analyzed such loans in their full 

context. In its own advisory opinions, for example, the Commission has noted that the critical 

inquiry is whether the terms, placed within the larger understanding of the relationship 

between the lending institution and the borrower, evidence an agreement that mitigates the 

risk of the loans to such a degree that repayment is assured.6

To be clear, the deference ordinarily given to a lending institution’s commercial 

judgment (i.e., their own commercial interest) is not eliminated from the analysis simply 

because the loans are unsecured. Rather, the Commission must nonetheless give that 

deference while performing its analysis to determine whether significant risk mitigation still 

exists in the relationship between the parties to the agreement.7

As the Commission highlighted in its Cunningham advisory opinion, unsecured lines 

of credit can be made on a basis that assures repayment. The Commission cited several 

important contextual factors in that opinion, including:

4 See 11 C.F.R. § 100.82(e)(1)-(2).

5 11 C.F.R. § 100.82(e)(3).

6 FEC Advisory Opinion 1980-108 (Anderson).

7 FEC Advisory Opinion 1994-26 (Cunningham).
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(1) the long-standing relationship between the commercial lender and the 

candidate; 

(2) that the interest rates and additional contractual clauses were standard form 

agreement provisions matching agreements given to other customers; and

(3) the terms were not unduly favorable to the candidate.8

More recently, the Commission has considered the applicability of its “totality of the 

circumstances” analysis in the context of enforcement actions. In the Cantwell enforcement 

matter, the Commission considered the prior existing relationship between the candidate 

and the lending institution. Importantly, the Commission’s analysis emphasized how the

candidate’s personal net worth far exceeded the actual value of the line of credit, and the 

Commission ultimately concluded that the banking institution validly relied on the very 

favorable ratio between the candidate’s net worth and the value of the line of credit to 

determine that the risk of non-repayment was small. 

The analysis and conclusion reached in the Cantwell enforcement matter is 

instructive in the instant case because it is another clear example of the Commission 

deferring to the lending institution’s commercial judgment (i.e., their own commercial 

interest) as to whether the candidate is creditworthy. Stated differently, in the Cantwell 

enforcement matter, the Commission accepted the lending institution’s conclusion that the 

loan agreement sufficiently mitigated the risk of non-repayment because it bore the 

signature of a high-net-worth, creditworthy individual who, in the bank’s own judgment, was 

very unlikely to default on the loan.9

CONCLUSION

The Audit Division’s preliminary findings assert that the Loans constitute prohibited 

contributions from commercial lending institutions because, in the Audit Division’s view, the 

Loans were not made in the “ordinary course of business” since they were not secured by 

collateral or a guarantor. It is the Committee’s position, however, that the Audit Division has 

not correctly applied the law or Commission precedents in this matter. 

Therefore, the Committee respectfully requests that the Commission clarify the Audit 

Division’s application of the Commission’s rules, particularly 11 C.F.R. § 100.82(e), and 

answer the following question: Is a line of credit issued by a commercial lending institution 

to a high-net-worth, creditworthy person made outside the “ordinary course of business” 

within the meaning of 11 C.F.R. § 100.82 simply because it is unsecured, even if the same 

8 Id.

9 FEC Matter Under Review 5198 (Cantwell) (“Bank approved the increase in the line of credit to $600,000 as 

it was partially secured and guaranteed by the candidate’s signature.”).
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commercial lending institution regularly issues unsecured lines of credit to other high-networth, creditworthy customers in the ordinary course of its business?

Thank you in advance for your consideration of this question of law, which is being 

submitted pursuant to the Commission’s Permanent Program for Requesting Consideration 

of Legal Questions, and for your clarification and guidance based on the facts presented. 

Sincerely,

Chris K. Gober

Counsel to Mike Braun for Indiana