invista.gifAs Americans prepared to celebrate their independence from a foreign power, the Federal Election Commission reached a settlement in a case involving a foreign corporation making thousands of dollars in illegal campaign contributions to state-level political candidates over a four-year period.

Last week the FEC announced the agreement with Invista S.à.r.l., a Luxembourg-registered subsidiary of Kansas-based Koch Industries, one of the largest privately held companies in the United States and a powerful force in U.S. politics through its billionaire owners, conservative benefactors Charles and David Koch. Invista, which Koch Industries bought from DuPont in 2004 for $4.4 billion, is the world's largest manufacturer of high-tech textiles including Lycra fabric and Stainmaster carpeting.

Because the campaign contributions came from the Invista S.à.r.l. entity, as opposed to a U.S.-registered Invista entity, they violated U.S. law banning foreign corporations from contributing to non-federal elections. The company self-reported the violations to the FEC last December.

The FEC found it plausible that high-level Invista personnel weren't aware that the company was foreign-registered, raising questions about the purpose of that registration.

But first, some background on the FEC case: Last December, Invista informed the agency that it had made 12 illegal donations to state campaigns totaling $26,800 between 2005 and 2009. The majority of the illegal contributions were made to candidates in Virginia, where Invista has textile manufacturing plants in Waynesboro and Martinsville. The company also has operations in other states along the eastern seaboard from New York to Georgia as well as in Tennessee and Texas.

The single biggest recipient of the illegal Invista contributions was the Democratic Governors Association, which received $15,000. The second-biggest recipient was the Virginia Manufacturers Association Political Action Committee, taking in $5,000.

Among individual candidates, the single biggest recipient was Phill Kline, the former Republican attorney general of Kansas, who accepted $2,000 from Invista. He was followed by Deborah Hudson, a Republican state representative in Delaware.

The other three recipients were all state lawmakers from Virginia: Delegate Steve Landes, a Republican who represents the 25th District in the Blue Ridge Mountains ($1,500); Sen. Emmett Hanger, a Republican who represents the 24th District in the Shenandoah Valley ($1,000); and Delegate Chris Saxman, a Republican who served the Staunton, Va. area from 2002 until his retirement last year ($500).

According to the FEC filing, all of the recipients have returned Invista's contributions except for the Democratic Governors Association. The chair of that group is Gov. Martin O'Malley of Maryland and the vice chair is Gov. Bev Perdue of North Carolina, where Invista has operations in Kinston, Wilmington and Charlotte.

As part of its settlement with the FEC, Invista will pay a civil penalty of $4,700.

'Where one is well off, there is his country'

That Invista was registered in a foreign country was apparently not known among even top-level employees making decisions about the company's political strategy.

There was "a general lack of knowledge among company personnel of  ... the nature of INVISTA'S legal structure," according the FEC filing. "[I]t was not unreasonable for personnel to think INVISTA was a U.S. company, as it is owned by Koch, its bank is domestic, its senior leaders are U.S. citizens, its assets are principally in the United States, it was created to operate U.S. facilities, and its employees are overwhelmingly U.S. citizens."

Invista certainly has a complicated ownership structure: While its physical headquarters are in Kansas, the company is a wholly-owned subsidiary of Invista B.V., which is based in the Netherlands. Invista B.V., in turn, is a subsidiary of Koch Industries, which is also headquartered in Kansas. Invista's Luxembourg operations are little more than a shell -- "limited to a single administrative office and one Luxembourger director," as the FEC notes.

So why would Invista be registered in Luxembourg? The FEC filing does not say. However, Luxembourg has long had a reputation as a tax haven -- so much so that in April 2009 the G20, a group of finance ministers and central bank directors from 20 major economies, added the Grand Duchy to its  "grey list" of nations with questionable banking practices. Luxembourg has since been removed from that list after agreeing to revise its banking laws to better enable authorities to track tax evaders.

But Luxembourg still has a reputation for banking secrecy.  Consider this review of the country's banking system by the PTClub, an online business that helps customers set up secret banking services like offshore mail drops and anonymous ATM cards:
In [Luxembourg] banking secrecy is part of the national culture more than anywhere else we know. As a small, rich country it has avoided the socialist problems of Switzerland where some politicians want to abolish bank secrecy. And while the Swiss apply a 35% withholding tax, investments in Luxembourg are tax free for non residents. And where else but in our beloved Luxembourg can you find the biggest banks disguising their plastic cards as guides to global time zones, or providing paper shredders for client use in branches?
The PTClub's motto is, "Where one is well off, there is his country." Apparently Koch's Invista takes a similar view.