Senate votes to restrict investment of campaign funds

The Senate approved 32-1 Monday evening a bill by Sen. Doug Overbey, R-Maryville, that puts new restrictions on legislators making investments with campaign funds.

The bill (SB377) comes after an audit found former Rep. Jeremy Durham, R-Franklin, had invested more than $100,000 of campaign money in a company operated by a major political donor and also used the funds to make substantial loans to a professional gambler and his wife. That’s not illegal under current law, though Durham is under investigation for multiple other allegations of activity that would be illegal.

Overbey’s bill declares that campaign funds can be invested only in federally-insured accounts at a bank or credit union. The sole no vote came from Sen. Todd Gardenhire, R-Chattanooga, who in a committee hearing last week declared “you can’t legislate against stupidity” and observed that the bill would prohibit some relatively safe and non-controversial investments such as municipal bonds.

Overbey said that “reasonable minds might differ” on where to draw a line on permitted investments, but that his bill simply restricts campaign money investing to what most legislators already use after “some things that never would have occurred to most of us to do.. did occur.”

Note: Press release below.

News release from Senate Republican Caucus

(NASHVILLE), February 28, 2017 — The full Senate voted overwhelmingly on Monday in favor of legislation sponsored by Senator Doug Overbey (R-Maryville) to require that funds donated to a campaign be deposited and maintained in a traditional bank or credit union account insured by the Federal Deposit Insurance Corporation (FDIC). Current law allows campaign funds to be invested in a private or publicly traded company, causing ethics concerns and a gap in transparency in the state’s campaign finance laws.

Senator Overbey, who is Chairman of the Senate Ethics Committee, said the legislation would put Tennessee in line with other states that limit lawmakers to maintain funds in federally-backed accounts.

“I think we all understand that campaign funds should not be invested in private companies,” said Senator Overbey. “This legislation will end that practice. Campaign funds should only be placed in bank accounts, CDs (Certificates of Deposits), or other safe investment vehicles, not in private corporations. Such investments should be off limits.”

The legislation comes after an audit showed a former member of the Tennessee House of Representatives invested $100,000 in campaign funds in a company owned by a donor.

Under Senate Bill 377<http://wapp.capitol.tn.gov/apps/BillInfo/Default.aspx?BillNumber=SB0377>, sponsored by Senator Doug Overbey (R-Maryville), any investment not authorized would be prohibited and the candidate, or in the case of a multicandidate political campaign committee, the treasurer, would be subject to a civil penalty by the Registry of Election Finance of not more than $10,000 or 115 percent of the amount invested. It also requires that any interest, dividends or income earned on campaign funds by an investment made legally, such as CDs, be reported on the candidate’s financial disclosure.

The bill now goes to the House of Representatives Local Government Subcommittee where it is sponsored by Representative Gerald McCormick (R-Chattanooga).