VRFEDERAL ELECTION COMMISSION

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> PUBLIC HEARING ON: :
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> PROPOSED RULEMAKING ON COORDINATED :
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> AND INDEPENDENT EXPENDITURES :
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> Thursday, October 24, 2002
>
> Ninth Floor Meeting Room
>
> 999 E Street, N.W.
>
> Washington, D.C.
>
> The public hearing in the above-entitled
>
> matter convened, pursuant to notice, at 9:36 a.m.
>
> before:
>
> [COMMISSIONERS PRESENT]{.underline}:
>
> DAVID M. MASON, Chairman
>
> KARL J. SANDSTROM, Vice Chairman
>
> BRADLEY A. SMITH
>
> MICHAEL E. TONER
>
> SCOTT E. THOMAS
>
> DANNY LEE McDONALD
>
> [ALSO PRESENT]{.underline}:
>
> LAWRENCE H. NORTON, General Counsel
>
> ROSEMARY SMITH, Acting Associate
>
> General Counsel
>
> MARY DOVE, Commission Secretary
>
> [C O N T E N T S]{.underline}
>
> [WITNESSES]{.underline} [PAGE]{.underline}
>
> Lawrence M. Noble, Executive Director,
>
> Center for Responsive Politics,
>
> accompanied by Paul Sanford, Director,
>
> FED Watch 4
>
> Donald J. Simon, Sonosky, Chambers, Sachse,
>
> Endreson and Perry, Counsel for Common Cause
>
> and Democracy 21 8
>
> Glen Shor, Associate Legal Counsel,
>
> Campaign and Media Legal Center 13
>
> Thomas J. Josefiak, Chief Counsel,
>
> Republican National Committee 144
>
> Joseph E. Sandler, Reiff and Young, P.C.,
>
> Counsel for the Democratic National Committee 152
>
> Heidi K. Abegg, Webster, Chamberlain and
>
> Bean, Counsel for the American Taxpayers
>
> Alliance 219
>
> John Pomeranz, Non-Profit Advocacy Director,
>
> Alliance for Justice 225
>
> [P]{.underline} [R]{.underline} [O]{.underline} [C]{.underline}
> [E]{.underline} [E]{.underline} [D]{.underline} [I]{.underline}
> [N]{.underline} [G]{.underline} [S]{.underline}
>
> CHAIRMAN MASON: The Special Session of the Federal Election Commission
> for October 24, 2002, will come to order. This is the second day of
> our hearing on coordinated and independent expenditures, one of our
> rulemaking projects as a result of the bipartisan Campaign Finance
> Reform Act. Commissioner McDonald is in the building but temporarily
> absent and we are going to go ahead and press forward. Know that he
> will be here soon. And I know that he has studied the witnesses\'
> statements before the hearing.
>
> The panel this morning have all testified with us before, indeed, in
> the same rulemaking, so I don\'t need to explain the lights in any
> great detail, but you\'ll have five minutes for an opening statement
> and then we\'ll go to a round of questions from Commissioners and the
> General Counsel.
>
> The panel has determined the order of testimony and we\'ll begin with
> Larry Noble, Executive Director of the Center for Responsive Politics,
> and, of course, the former and longtime General Counsel of the Federal
> Election Commission. Welcome back, Larry.
>
> MR. NOBLE: Thank you, Mr. Chairman. Mr. Chairman, Mr. Vice Chairman,
> members of the Commission, Mr. General Counsel, and staff, the Center
> for Responsive Politics in its campaign finance law project, FEC
> Watch, are pleased once again to have an opportunity to testify on the
> coordination phase of the rulemaking to implement BCRA. As you
> mentioned, I\'m Larry Noble, Executive Director and General Counsel of
> the Center for Responsive Politics. With me is Paul Sanford, Director
> of FEC Watch. We have submitted detailed comments, so I only have a
> few opening remarks.
>
> First, as the BCRA rulemaking begins to wind down, at least in some
> form, I\'d like to applaud the staff on the Commission for the
> Herculean effort they have been putting into this rulemaking.
> Regardless of what disagreements we have with some of the
> Commission\'s ultimate decisions, there is no doubt that the staff has
> worked above and beyond the call of duty to meet the deadlines imposed
> by Congress, and I will say that, having been at the Commission for a
> long time, I can only imagine the type of hours they\'ve been putting
> in and the type of work they\'ve been doing.
>
> Of course, the job is not yet done, which is why we are here today.
> This coordination rulemaking goes to the heart of the campaign finance
> regulation framework established by the Supreme Court over 25 years
> ago in [Buckley v. Valeo]{.underline}. One of the central pillars of
> the [Buckley]{.underline} analysis is the distinction between
> contributions to a candidate or political party and expenditures made
> independently of a candidate or political party. And contrary to the
> predictions and possibly hopes of many on both sides of the debate,
> the Court has stood by that distinction for over a quarter century. In
> the Court\'s view, contributions are subject to greater regulation
> than speech that is undertaken independently of a campaign.
>
> One of the reasons for this, according to the Supreme Court, in their
> words, is that the contribution ceilings prevent attempts to
> circumvent the Act through prearranged or coordinated expenditures
> amounting to disguised contributions. Unlike contributions, such
> independent expenditures may well provide little assistance to the
> candidate\'s campaign and, indeed, may prove counterproductive. The
> absence of prearrangement and coordination of an expenditure with a
> candidate or his agent not only undermines the value of the
> expenditure to the candidate, but also alleviates the danger that
> expenditures will be given as a quid pro quo for improper commitments
> from the candidate.
>
> Thus, the definition of \"coordination\" goes to the heart of the law.
> It defines the law between contributions and independent activity,
> which is the wall between activity that the Court has found is
> potentially corrupting and that which it felt can be subject to only
> limited, if any, regulation. Once again, we understand the desire for
> bright lines, but the desire for bright lines should not be used to
> undercut one of the major principles in campaign finance law, that
> activity undertaken in coordination with a candidate or party presents
> the same dangers of actual or apparent corruption found with money
> contributions given directly to the candidate.
>
> We said that in the present situation, there is a relatively simple
> solution to the problem at hand. Begin with the pre-[Christian
> Coalition]{.underline} definition of coordination. If an expenditure
> is made with the cooperation or with the prior consent of, or in
> consultation with, or at the request or suggestion of a candidate or
> any agent of the candidate, it is a coordinated expenditure. Under
> this approach, coordination is presumed when an expenditure is based
> on information about the candidate\'s or party\'s plans, projects, or
> needs, or when made through an agent or employee or fundraiser of the
> committee or candidate.
>
> As we know, the agency used that definition for years, and it wasn\'t
> until one lower court rewrote the law and the FEC adopted that
> court\'s construct without seeking higher review that the FEC embarked
> down a path that has resulted in Congress instructing the agency to
> redo its regulations.
>
> If you decide not to go back to the previous definition, we urge you
> to remain faithful to the core goal behind the coordination rule, to
> ensure that activity you are willing to treat as independent is truly
> so and not just an easily disguised coordinated expenditure. We will
> be glad to answer your questions. Thank you.
>
> CHAIRMAN MASON: Thank you, Larry.
>
> Next, we have Don Simon from the law firm of Sonosky, Chambers,
> Sachse, Endreson and Perry, representing Common Cause and Democracy
> 21. Welcome back, Don.
>
> MR. SIMON: Thank you, Mr. Chairman and members of the Commission. I
> appreciate the opportunity to again testify on behalf of Common Cause
> and Democracy 21 in another important rulemaking to implement the
> mandates of the bipartisan Campaign Reform Act.
>
> The rules and coordination are essential to the effectiveness of the
> campaign finance laws. Without a reasonable but meaningful rule on
> coordination, the result will be open cheating and evasion of the
> campaign finance laws. Candidates, as a practical matter, will simply
> work with and through outside spenders, who will do the bidding of the
> candidate in the guise of supposedly independent spending that will,
> as a practical and functional matter, be coordinated. The contribution
> limits will become meaningless and so will the ban on the spending of
> corporate and treasury union funds. That\'s why this is an important
> rulemaking.
>
> The Commission got this issue largely right in its longstanding
> pre-[Christian Coalition]{.underline} regulation defining
> coordination, which was based directly on the language of the standard
> formulated by the Supreme Court in [Buckley]{.underline}. Then the
> Commission got this issue largely wrong when, contrary to the advice
> of your lawyer, and contrary, I believe, to good practice, you rushed
> to codify the untested view of a single district court judge and
> dramatically narrowed the definition of coordination to a point where
> the test would almost never be met. The fact that the Commission then
> dismissed several major investigations based on this new test
> illustrates how dramatically the enforcement capabilities of the
> agency were to be compromised by this new rule.
>
> I think the best understanding of Section 214 of the BCRA is that
> Congress has now also said that the Commission got it wrong in
> adopting the new rule and to try again. In so doing, I urge you to
> return to the more flexible test of the pre-[Christian
> Coalition]{.underline} rule, which defined coordination for what it
> really is, spending made with the cooperation or in consultation with
> or pursuant to any arrangement with or direction by a candidate. These
> are practical, functional, common sense terms that depend on a careful
> case-by-case review of particular facts in a given situation.
>
> This is not an area of the law where a bright line test is meaningful
> or appropriate, and the Supreme Court has never said that one is
> necessary. As we all know, when the Supreme Court believes there\'s a
> constitutional imperative to drawing bright lines in the application
> of the campaign finance laws, the Court knows how to require one.
>
> To the contrary, every time the Supreme Court has addressed the issue
> of coordination, it has taken just the opposite approach. In
> [Buckley]{.underline}, the Court stressed that only those expenditures
> made with an absence of prearrangement and that are totally
> independent of a candidate, only those expenditures alleviate the
> danger that the expenditure will be given as a quid pro quo for
> improper commitments from a candidate. [Buckley]{.underline} itself
> formulated the practical but not bright line test that totally
> independent expenditures are those not made in cooperation with or
> with the consent of a candidate or his agents.
>
> In [Colorado I]{.underline}, the Court said that spending was
> independent only where it was not pursuant to any general or
> particular understanding with a candidate, thus clearly implying that
> even a general understanding between a candidate and a spender would
> be sufficient to compromise the independence of the expenditure.
>
> So, too, in [Colorado II]{.underline}, the Court said there should be
> a functional, not formal, definition of a contribution, which includes
> expenditures made in coordination with a candidate. The Court noted
> that independent expenditures are only those without any candidate\'s
> approval or wink or nod.
>
> Now, we are not urging the Commission to adopt a wink or a nod
> regulation, but we are urging you to write a regulation that is
> crafted in light of the Supreme Court\'s approach to this issue, an
> approach that marks not a bright line, but a practical line.
>
> As Senator McCain said in discussing Section 214 of the BCRA, it\'s
> important for the Commission\'s new regulation to ensure that actual
> coordination is captured by the new regulations. Informal
> understandings and de facto arrangements can result in actual
> coordination as effectively as explicit agreement or formal
> collaboration.
>
> Both Congress and the Supreme Court take a functional and practical
> approach to the issue of coordination. So, too, should the Commission.
> You should not erect standards that are so high that they will never
> be met and thereby allow functional coordination to undermine the law.
> Nor should you feel compelled to chase bright line standards that are
> not constitutionally required nor practically appropriate. You should
> write these regulations with the goal of ensuring the integrity of the
> law you are charged with enforcing. I will be happy to answer any
> questions.
>
> CHAIRMAN MASON: Thank you, Mr. Simon.
>
> The final member of the panel this morning is Glen Shor, Associate
> Legal Counsel of the Campaign and Media Legal Center. Welcome back,
> Glen.
>
> MR. SHOR: I would, of course, like to thank the Commissioners for
> having me here today. As Larry indicated, I think that the
> Commissioners and the staff have done amazing work through this
> rulemaking. Obviously, we\'ve had our substantive agreements. It\'s
> obviously a major load and a critical assignment that Congress has
> tasked you with within a very compressed timetable, and I am sure
> people have been working around the clock over the last couple of
> months, the staff in particular, and I think you are certainly to be
> commended for your efforts to meet the statutory time table for
> promulgating BCRA regulations.
>
> As you can see, I came with reinforcements today.
>
> \[Laughter.\]
>
> MR. SHOR: I think they have some very, very fascinating things to say
> to you, so really ask them lots of questions.
>
> I fully subscribe to sort of the analysis that has just been discussed
> by Don and Larry and I\'m not going to repeat it. I\'ll just sort of
> say in summary that I acknowledge that this issue, in particular, is
> devoid of easy answers, but in my mind, the lack of easy answers
> shouldn\'t lead one to take the easy course and essentially give up on
> this part of the statute.
>
> The coordination language of FECA was basically written by none other
> than the Supreme Court in [Buckley]{.underline}. The concept of
> treating coordinated spending as contributions was an integral part of
> the Court\'s holding in that case, and this concept is intended and
> sorely needed as a critical safeguard of the integrity of our
> political system.
>
> I know you\'re going to be weighing lots of factors and considerations
> during this rulemaking. I just ask that the statute and the very, very
> important interests it serves be accorded a significant place on the
> scale. I\'ll do my best to answer your questions.
>
> CHAIRMAN MASON: Thank you very much.
>
> We have a longer schedule than normal because of the three-witness
> panel, a longer block of time, and so I\'m going to recognize my
> colleagues for questions and we\'ll initially have a ten-minute round
> of questions and that will still allow for a brief follow-up round if
> Commissioners so desire after such a lengthy period.
>
> I\'d also like to thank all of the witnesses for their commendations
> to the staff, which, of course, we share and have expressed ourselves
> numerous times.
>
> The first questioner this morning is Commissioner Toner.
>
> COMMISSIONER TONER: Thank you, Mr. Chairman. Good morning, gentlemen.
> It\'s a pleasure seeing you here again. It seems like we meet like
> this on a regular basis. I look forward to the day when perhaps we
> have a lot of this work behind us.
>
> Mr. Shor, I wanted to start with the content standard and this issue
> of a content standard which we discussed at length yesterday and all
> the comments address. Do you believe that we are required by the
> statute or by the Constitution to have a content standard in this
> area?
>
> MR. SHOR: I think the statute talks about expenditures which are for
> the purpose of influencing an election. I think that in this context,
> it is clear that an expressed advocacy requirement is not required.
> You know, the Supreme Court would have said that if the Supreme Court
> clearly had expressed advocacy on its mind in the
> [Buckley]{.underline} case and could certainly have required one for
> coordinated expenditures, and for good reasons, it did not. But, yes,
> I think there needs to be some sort of a content component to the
> coordination analysis.
>
> COMMISSIONER TONER: Why is that, do you think?
>
> MR. SHOR: Well, I think the Court was looking at the issue of when,
> basically, expenditures that are arranged with a candidate present a
> threat of actual or apparent corruption, and I think that requires
> some degree of analysis of the nature of the expenditure.
>
> COMMISSIONER TONER: Does that express that at least some
> communications, whatever the consultations that may have occurred,
> because of their content do not raise those threats of corruption that
> you mention?
>
> MR. SHOR: I think it would be fair to say that I think some types of
> communications financed don\'t\--certainly, some sorts of
> communications would not properly fall under the coordination
> analysis.
>
> COMMISSIONER TONER: Mr. Simon, do you concur in that analysis?
>
> MR. SIMON: Yes. Let me, if I could just take a step back, I think
> it\'s an important set of questions. It\'s interesting to me that for
> the last, what, 30, 25 years or so, the Commission has had a
> regulation on coordination and the regulation has not had as part of
> it a content standard. I think as a practical matter, the Commission
> has applied a sort of de facto content standard. Whether you call that
> content standard a \"for the purpose of influencing\" standard or an
> electioneering message standard or a promoter supporter standard, I
> think the Commission has always sort of assumed that there has to be
> some nexus, some kind of nexus between what the communication says and
> the coverage of the campaign finance laws.
>
> COMMISSIONER TONER: Did you think that was an appropriate assumption
> the Commission made?
>
> MR. SIMON: Yes. I mean, I think the campaign finance laws as a whole,
> in all aspects, assume some electoral nexus, and there are different
> tests. In the context of independent expenditures, the Court has
> imposed an expressed advocacy test, but the Court has never imposed
> that test in the context of coordinated expenditures.
>
> I think the Commission over time has applied a different and a much
> broader test for what establishes the nexus in coordinated
> expenditures, and even though that has not been facially written into
> the coordination rule, I think it has been there, and if you want to
> write it facially into the coordination rule, I think that\'s fine,
> but I agree with Glen that it should not be so narrow as an expressed
> advocacy test or even expressed advocacy plus electioneering
> communication.
>
> COMMISSIONER TONER: Mr. Noble, Mr. Sanford, do you agree that we
> should have at least some content test here?
>
> MR. NOBLE: Right. I agree with what Mr. Simon and Mr. Shor said, and I
> think it is implicit in the rules. However, I think what you have to
> be very careful about is recognizing that this type of content
> standard is not a very high standard in terms of electioneering
> communication or expressed advocacy because what you\'re dealing with
> is communication, by its very nature, means we\'ve already assumed
> you\'ve tripped the coordination standard, the factual standard of
> coordination. It is, in fact, a communication that is viewed under the
> law the same as one coming from a party or a candidate, and as the
> Court has said, that when you\'re dealing with a communication coming
> from a candidate or political party, there\'s a lot less concern about
> vagueness, there\'s a lot less concern about understanding the purpose
> behind it.
>
> So there may very well be certain types of communications that would
> not meet a content standard for coordination, but I would say that you
> don\'t have to worry about extremely bright lines there because, in a
> sense, you almost have a presumption that when a candidate is doing
> something or a political party is doing something, that there is a
> political motive behind it.
>
> COMMISSIONER TONER: So it sounds like we have some common ground that
> at least there has to be some content indicia to meet the elements of
> the coordinated activity. The question I have is, as I understand your
> comments, the view is that communication doesn\'t necessarily even
> have to depict a candidate. If, for example, as I understand the
> comments, essentially the communication echoes some of the positions
> that a candidate may be articulating, some of the key themes in a
> race, is it fair to say that for you, that that would meet the content
> standard we\'re talking about?
>
> MR. NOBLE: Yes. We talked about actually trying to do that as you get
> closer to the election. But again, if you have coordination with the
> candidate and you can show that these ads were coordinated with the
> candidate and it is picking up on the theme of a candidate, then yes,
> I think that raises the same danger as coordination of something that
> is more explicit. So, yes, we do think that that type of activity
> should be picked up.
>
> COMMISSIONER TONER: And is your view the same even if it could be
> shown that the themes that are in the communication are themes that
> are publicly known, either through the speeches that a candidate is
> making, the press coverage, what the [New York Times]{.underline} may
> be focusing on, would that change the analysis at all?
>
> MR. NOBLE: Well, that may go to the question of whether or not there
> was actually coordination. We are very aware of the fact that you can
> have coordination\--you can have practical coordination, if not legal
> coordination\--it may not be legal coordination\--by just reading the
> newspapers. I mean, this has been discussed over the years, that in
> some instances, you can tell what a campaign is doing just by reading
> the [Washington Post]{.underline} or the [New York Times]{.underline}
> and you get a good idea and you can still have an independent
> expenditure.
>
> But we are really, again, talking about a world where what we presume
> has gone first is an actual discussion with a candidate, a
> candidate\'s agent, or agent of the party about the projects, plans,
> and needs of the candidate in that specific field. So I think in that
> context, then you are excluding situations where the information was
> just picked up from the newspapers or other publicly available sources
> and you\'re focusing on information that was received from the
> candidate or a candidate\'s agent.
>
> COMMISSIONER TONER: I think you raise a very important point, and
> it\'s something that we talked about a little bit yesterday, in terms
> of the conduct standard, moving away from the content analysis,
> whether or not there should be some protections for groups that rely
> on publicly available information, whether it be press statements,
> things that are posted on a candidate\'s website. The theory would be
> that if you rely on this publicly available information, that
> shouldn\'t in any way meet the conduct standard because, after all,
> it\'s out in the public domain. Would you be comfortable with that
> type of an approach?
>
> MR. NOBLE: Yes, with this caveat. The\--
>
> COMMISSIONER TONER: I thought there would be one.
>
> MR. NOBLE: There\'s always a caveat. With the caveat that you have to
> be careful about what you define as publicly available information.
> But if\--
>
> COMMISSIONER TONER: What are your thoughts on that? How should we
> approach that?
>
> MR. NOBLE: You know, if it\'s obviously something that is truly
> publicly available through the press, you know, if there\'s an article
> in the paper that talks about what a campaign is doing, has some
> quotes from the press secretary talking about what issues they think
> are important, I don\'t think anybody is saying here that that would
> give rise to coordination.
>
> But if you are talking about something that is much more specific and
> something that they put on their website, that they really call, they
> start making phone calls to certain individuals and saying, you better
> take a look at this, then you may be dealing with a different
> situation. I think it\'s a factually dependent situation.
>
> COMMISSIONER TONER: Mr. Simon, do you concur with this idea, at least
> in concept?
>
> MR. SIMON: Yes, and let me tell you why. This whole topic of
> coordination rests on, I think, a very important conceptual foundation
> in [Buckley]{.underline}, which is that the touchstone for this
> discussion is whether the coordination could create the opportunity
> for a quid pro quo arrangement or discussion between the spender and
> the candidate, and that\'s why in [Buckley]{.underline}, the Court
> said only totally independent spending does not create that
> opportunity because there\'s no connection, no discussion between the
> candidate and the spender.
>
> If somebody reads the newspaper and sees what the candidate\'s themes
> are and then goes out and makes some expenditure on the basis of that,
> I mean, in one sense, that is coordinated, but I don\'t think it
> triggers the conceptual concern here of the opportunity for a quid pro
> quo understanding, and, therefore, I would say it should not meet the
> conduct test for legal coordination.
>
> COMMISSIONER TONER: Would you counsel be we should look at this as a
> possible safe harbor but be very careful about how we construct it?
>
> MR. SIMON: Yes, and look at it as a safe harbor through the prism of
> whether the Court\'s concern in [Buckley]{.underline} is implicated by
> how you craft the bounds of the safe harbor.
>
> COMMISSIONER TONER: Mr. Shor, I\'m interested in your thoughts. We
> obviously had a debate in the electioneering communications realm
> about lobbying activities and whether that\'s something that we need
> to deal with in the regulations. Do you believe there should be any
> provisions or safe harbors or however we might want to characterize it
> for bona fide lobbying activities in the coordination area?
>
> MR. SHOR: Mr. Commissioner, is it a question relating to conduct that
> might account for lobbying?
>
> COMMISSIONER TONER: That\'s correct.
>
> MR. SHOR: Well, I think that that certainly is something that the
> Commission can consider. I don\'t think that it\'s covered, the way
> that the standards are written right now. I don\'t think that a pure
> lobbying conversation between a Hill staffer and an outside group
> about legislation, does your boss support this legislation, et cetera,
> is going to be covered. If there is a desire to achieve greater
> clarity and it\'s properly constructed, I don\'t think that there
> would be a problem with that.
>
> COMMISSIONER TONER: Because the concern would be perhaps consultations
> or discussions that go on between lobbying groups, other interest
> groups, and members of Congress, where obviously that can get very
> specific about legislation that\'s pending on the Hill, the political
> environment in which the issues are being framed, and any possible
> concern that what we do here could adversely affect those kinds of
> discussions, and I wanted to get a sense from you on whether you
> think, A) that concern is something we should look at, and B) if so,
> whether we should try to craft language to deal with it.
>
> MR. SHOR: I think the Commission always has to be concerned, or just
> attentive, in the course of promulgating coordination regulations that
> it does not reach too far to preclude lobbying, you know, what are
> purely lobbying conversations. I think the Commission has been
> sensitive to that and I don\'t see in this proposed rulemaking that
> it\'s going down that road. If there was a desire to create some sort
> of safe harbor and it was properly constructed, I don\'t think that
> that would be a problem.
>
> MR. NOBLE: If I could just add something to that, under the previous
> analysis that the Commission used for a number of years, I think there
> was always an implicit understanding that you\'re talking about the
> sharing of information relative to the campaign and talking about the
> projects, plans, or needs of the candidate as candidate.
>
> So I think if you\'re talking about the need to get certain
> legislation passed, the strategy to get certain legislation passed, I
> think you\'re talking about something that wouldn\'t necessarily fall
> under coordination. Whether you want to call it a safe harbor or just
> something that is not reached by the regulation, I think that is
> there. That has always been there.
>
> COMMISSIONER TONER: Would you be comfortable with us having some
> language that said any discussions of projects, plans, or needs
> outside of the campaign environment, that kind of thing?
>
> MR. SIMON: Could I just take a swing at that one?
>
> COMMISSIONER TONER: Sure.
>
> MR. NOBLE: I have a pinch hitter here.
>
> MR. SIMON: Look, I think this is a little bit of a\--in one way, it\'s
> an important discussion. In another way, I think it\'s a little bit of
> a red herring because I think this is an apples and oranges kind of
> analysis.
>
> When you go in and lobby a member of Congress, you don\'t have to talk
> about their campaign and you don\'t have to talk about their electoral
> campaign plans, strategies, and needs. You\'re lobbying them about a
> bill pending in Congress or about an issue. And if you do go into
> their office under the guise of, I\'m going to go lobby, and you end
> up talking about their campaign plans and needs, then I don\'t think
> you should be insulated from the coordination rules or the campaign
> finance laws simply because you said or even you thought you were
> going to go in there and lobby them about an issue, but you end up, in
> fact, talking about how to coordinate a campaign ad with them.
>
> COMMISSIONER TONER: Would you be comfortable in these regulations if
> we said, discussions about issues, discussions about an office
> holder\'s approach to issues, is permissible?
>
> MR. SIMON: Well, you know, the devil\'s in the details. I mean,
> conceptually, certainly, these rules are not meant to regulate or
> chill lobbying, but I think you need to retain the flexibility to
> enforce the law that if the discussion gets outside the bounds of
> lobbying and gets into the realm of sharing information about campaign
> activities, then you have an obligation to enforce that.
>
> MR. NOBLE: And the only other concern there is that when you put in a
> safe harbor, and I\'m not saying this would happen in this situation,
> but when you put in a safe harbor, you have to be concerned that it
> then doesn\'t become a shield where they can hide a lot of other
> activity behind that safe harbor, that they say, well, we discussed
> lobbying and, therefore, you can\'t look at this any further. So
> that\'s why I said that I think it\'s always been implicit in the
> rules and that what we\'re focusing on is a very specific type of
> activity, a very specific type of conduct, and that is discussing the
> campaign.
>
> COMMISSIONER TONER: Thank you, Mr. Chairman.
>
> CHAIRMAN MASON: Vice Chairman Sandstrom?
>
> VICE CHAIRMAN SANDSTROM: I want to thank each of you for being here
> today. Your testimony is consistently thoughtful and provocative. But
> I notice a number of areas very consistent with each other and you\'re
> arguing for almost the identical language and proposal. I gather you
> coordinated your testimony?
>
> MR. NOBLE: Mr. Vice Chairman, I will say, yes, we coordinated some of
> this testimony.
>
> VICE CHAIRMAN SANDSTROM: And you probably did that because you are
> seeking similar objectives and to make sure your message essentially
> on those objectives was consistent?
>
> MR. NOBLE: Well, in some areas\--when I say we coordinated, we are
> actually being a little bit glib. We discussed it. We met. We talked
> about it. There are some things we probably don\'t agree on. There are
> some areas we went different ways on. It wasn\'t a situation, though,
> where we said that we need you to do this because it\'s going to be
> most helpful to us, but I would say probably the discussions we had
> would fall under the rule of coordination if we were talking about a
> campaign.
>
> VICE CHAIRMAN SANDSTROM: Okay. In 1994, the Minority Leader at the
> time, Newt Gingrich, decided he was going to get together with his
> colleagues and pollsters and come up with a theme which all the
> Republicans throughout the country essentially could run under, and
> that name was Contract With America. It had a number of proposals, but
> it was essentially the legislative program that the Republicans would
> promise to enact if they were to be successful in \'94.
>
> They therefore, because it was run by all the members and if ads were
> run by the National Republican Congressional Campaign Committee, is
> that the sort of creating a favorable issue environment that would
> create coordination issues with all the candidates and all the office
> holders they had discussed those themes with before running the ads in
> their district?
>
> MR. NOBLE: It would really depend on the specific facts of the case
> and what they were doing. Generally discussing legislative strategy
> would not fall\--
>
> VICE CHAIRMAN SANDSTROM: This is electoral strategy. These are the ten
> things that we promise to enact in our first, how many days, 120 days
> or 100 days. If we are elected, these are the things that\--and they
> went out and they recruited candidates. People signed pledges
> indicating that they were for these things and that if they were
> elected as a challenger in an open seat, they would be with the
> majority. So it\'s certainly both legislative and electoral. I don\'t
> know how to separate the two.
>
> MR. SIMON: Well, I mean, I guess my reaction is that you\'re making
> the unremarkable observation that parties coordinate with their
> candidates, which I think is true, and I think it\'s then a question
> of the party spending money within its 441a(d) limits and which kinds
> of expenditures fall within those limits.
>
> VICE CHAIRMAN SANDSTROM: But as I understand from your testimony, just
> the promotion of these legislative themes/electoral themes would be of
> the character that would require them to treat them as expenditures
> under 441a(d) or as in-kind contributions up to the \$5,000 they would
> be permitted to contribute.
>
> MR. SIMON: Yes, I understand the question. I guess the answer is, it
> depends. It depends on when the expenditures are made, what the
> expenditures\--
>
> VICE CHAIRMAN SANDSTROM: Made in the 60 days before the election.
>
> MR. SIMON: Well, certainly, I think if the expenditures are proximate
> to the election, the parties out spending money promoting its
> candidates, yes, I think that that certainly should be a 441a(d)
> expenditure.
>
> MR. NOBLE: Yes, absolutely. If a political party is getting together
> with its candidates and saying, okay, these are ads we are going to
> put out on this legislation or that legislation, we are going to push
> certain legislation, and then we are going to go with ads into your
> district touting it, yes, then that is classic coordinated activity.
>
> VICE CHAIRMAN SANDSTROM: So that\'s our party-building activities,
> trying to create party unity would all be subject to the limits.
>
> MR. NOBLE: Well, wait a second. Excuse me. If I may clarify something
> here, the act of coordination itself does not trigger anything. It\'s
> what you then go out and do after the coordination.
>
> VICE CHAIRMAN SANDSTROM: It\'s the ads. I don\'t think there\'s any
> confusion there and I appreciate the clarification.
>
> With respect to common vendors, former employees, independent
> contractors, are payments to them, is that a strict liability offense?
>
> MR. SIMON: I don\'t understand.
>
> VICE CHAIRMAN SANDSTROM: The outside group hired a vendor who happened
> to also work for a political party or for a candidate, and unbeknownst
> to them, that person who had been employed as a film editor, as
> providing a direct mail list, the fact that they hired the common
> vendor, is that a strict liability offense and they would have made a
> prohibited contribution?
>
> MR. NOBLE: I don\'t look at it as a strict liability because there\'s
> still more things you have to look at. I think you have to look at
> what the vendor is doing, what type of vendor it is, what type of
> information they have. But if the vendor is working, doing substantive
> work for one campaign, policy work\--let\'s take the easiest example,
> doing policy work and policy strategy for a campaign and then goes out
> and works for a so-called independent group working on that campaign,
> working on that group\'s activity in regard to that campaign, then,
> yes, I think as long as you can show that the vendor had material
> information, I think that strict liability\--
>
> VICE CHAIRMAN SANDSTROM: Strict liability. So even the person
> purchasing, and may not be, you said, working on that campaign, they
> may be running an electioneering message to essentially lobby Congress
> at the time and mentions a candidate, but that would be the sort of\--
>
> MR. NOBLE: No, what I said was it was strict liability if the
> independent expenditure was also involved in doing campaign activity.
>
> VICE CHAIRMAN SANDSTROM: But this is not an independent expenditure.
> This could be just electioneering. So, essentially, is there any
> vendor liability under the statute?
>
> MR. SIMON: I don\'t think so, but to respond to your earlier question,
> I mean, I don\'t see a problem. If I want to make an independent
> expenditure, I think I have a legal obligation to make sure I am, as
> the Supreme Court said, operating totally independently of a candidate
> or his campaign, and if I want to hire a vendor, a media company to
> craft my ads, I don\'t think it\'s too much to ask that I inquire of
> the vendor whether they are working for the candidate or his campaign
> that I\'m going to do the spending with, and if they are, I think that
> raises an enormous red flag and the Commission ought to require a real
> showing that the common vendor is not going to compromise
> independence.
>
> VICE CHAIRMAN SANDSTROM: So it\'s a strict liability offense, but
> essentially, you can avoid liability if you inquire?
>
> MR. SIMON: No. No. Just the opposite. It\'s\--
>
> VICE CHAIRMAN SANDSTROM: What if you inquire, and since there\'s no
> vendor liability, they don\'t tell you, my film editor I just hired
> from this other company and they had done film editing for a campaign?
>
> MR. SIMON: It\'s a pretty simple question, I think. I\'m thinking
> about making an independent expenditure and I want to go hire a media
> consultant. I go to the ABC company and I say, I\'m thinking about an
> independent expenditure relating to Candidate Smith. Are you working
> for Candidate Smith this election cycle? If they say, yes, we are,
> then I, as a proposed independent spender, have a real problem and I
> have to take, I think, extra steps to ensure that my hiring of this
> common vendor doesn\'t, in fact, compromise my independence and my
> ability to make that expenditure. I can go hire a different company\--
>
> VICE CHAIRMAN SANDSTROM: But does it, in fact, do\--
>
> MR. SIMON: \--if I want, or I can work with this common vendor to make
> sure that I\'m still operating independently.
>
> VICE CHAIRMAN SANDSTROM: So you can work with a common vendor and
> still be independent?
>
> MR. SIMON: Well, as we\--
>
> VICE CHAIRMAN SANDSTROM: What are the conditions under which you can
> use a common vendor and still be deemed independent?
>
> MR. SIMON: As we said in our comments, I think having a common vendor
> creates a rebuttable presumption that the independence is going to be
> compromised, and if the common vendor can take sufficient steps, which
> perhaps the Commission should specify what they might be, to ensure
> that the independence is not compromised, then you can go forward.
>
> Now, for instance, I could imagine that if I go out and hire a media
> company and that company is working for the candidate that I\'m going
> to do the spending about, you know, maybe that company could establish
> sufficient internal Chinese wall-type protections where the people in
> the company working on the candidate\'s account will have nothing to
> do with the people working on my account, and maybe that would be
> sufficient to guarantee independence.
>
> VICE CHAIRMAN SANDSTROM: So I gather from your testimony there\'s two
> things you can do. You have an obligation to inquire, and if such does
> exist, we should put it in the regulations. And then you have to
> determine whether they can create the sort of Chinese wall that
> prevents the conveyance of what sort of information?
>
> MR. SIMON: Well, to ensure there\'s no compromise of my independence
> by having a flow of information from the candidate to me as an
> independent spender through the common vendor.
>
> VICE CHAIRMAN SANDSTROM: I mean, do you have to physically keep people
> apart and not let them have conversations?
>
> MR. SIMON: Perhaps that might be necessary.
>
> VICE CHAIRMAN SANDSTROM: I\'d like maybe some supplemental testimony
> about what sort of standards you would approve, because I think the
> vendors might need that.
>
> One last question, or maybe I\'ll have to save it for the next round,
> with respect to treating all political parties as one entity. Do you
> know of any available enforcement mechanism that a national party
> would have available to it to prevent a local precinct or ward
> committee from taking out a newspaper ad?
>
> MR. SHOR: Mr. Commissioner, I think that there are probably different
> opinions and factual perspectives on the degree to which there
> is\--national parties can do that and are in consultation and work
> cooperatively with State and local parties. But this sort of takes me
> back to a broader point here.
>
> VICE CHAIRMAN SANDSTROM: Excuse me. Before you go to the broader
> point, you say that there is\--you\'re all lawyers. Do you know the
> legal mechanism of\--
>
> MR. SHOR: A legal mechanism\--
>
> VICE CHAIRMAN SANDSTROM: \--the national party can invoke\--
>
> MR. SHOR: I don\'t know if it would need to\--
>
> VICE CHAIRMAN SANDSTROM: \--to prevent the local committee from\--
>
> MR. SHOR: I\'m sorry, sir.
>
> VICE CHAIRMAN SANDSTROM: I\'m just saying, you may not need to, but do
> you know of one, is my question. Do any of you know of a legal
> mechanism a national party could invoke to prevent a ward committee in
> Chicago from taking out an ad in a community newspaper?
>
> MR. SHOR: I don\'t know of one, but that doesn\'t mean that there
> isn\'t one.
>
> VICE CHAIRMAN SANDSTROM: Again, any supplemental testimony you could
> provide on that point, I would appreciate.
>
> CHAIRMAN MASON: Commissioner Smith?
>
> COMMISSIONER SMITH: Thank you, gentlemen, for being here again today.
> I want to make a couple comments just at the start which I really
> don\'t want to get in a debate, because I have more important things I
> want to get your opinions on, but I think they\'re worth making in
> some of the opening comments.
>
> I think, first, that for me, at least\--I won\'t pretend to speak for
> my colleagues, but for me, the Commission\'s decision to adopt a new
> coordination regulation in 2000 was not due to the result of the
> [Christian Coalition]{.underline} case. It was due to the fact that,
> in my view, the old coordination definition did not work, and in
> particular, it did not work because it resulted in too many long,
> intrusive, and chilling investigations. In fact, this is what the
> Court means when they say that investigations themselves could be
> chilling of speech without bright lines is big investigations will
> scare people away from speaking because it\'s not worth it, even
> though ultimately they are exonerated.
>
> I think, also, when we talk about [Buckley]{.underline}, of course,
> it\'s true that [Buckley]{.underline} acknowledged that coordinated
> expenditures can be regulated as contributions, but
> [Buckley]{.underline} also defined expenditures as being limited to
> expressed advocacy. When they gave an example of a coordinated
> contribution, they used an expressed advocacy example.
>
> Now, I think that in the end, [Buckley]{.underline} wasn\'t really
> thinking along the lines of how things have since developed. I guess
> the point I simply want to make is that I think people on either side
> would make a mistake not to cite [Buckley]{.underline} and those parts
> of it which seem to support their view, but I think people on either
> side would be making a rather serious mistake in speaking very
> confidently that, well, [Buckley]{.underline} has pretty much settled
> the issue in the direction that they favor.
>
> I just say that in light of your opening comments and the fact that
> they\'ve been made on national television and so on, that I thought it
> might be useful to put out the other side. But I don\'t want to debate
> those issues with you at this point in time. We\'ll save that for our
> many colloquies and law review articles and so on.
>
> Rather, I want to focus in now\--I take your comments as being, again,
> comments that represent an agenda point of view, but I don\'t think
> the only one in interpreting [Buckley]{.underline}. I have particular
> comments.
>
> First, thinking about the content standard, that all of you agree that
> perhaps something is necessary. Would I be correct to think that all
> of you would agree that for political party committees, for parties, a
> content standard based on the \"promote, support, attack, oppose\"
> language would be an acceptable content standard, on sort of the
> theory that Congress has decided in the provisions dealing with party
> soft money activities, that those activities that need to be paid for
> with hard dollars and, therefore, kind of affect Federal elections, if
> that would be an acceptable content standard.
>
> MR. SIMON: I mean, I guess my reaction to that is sure, and I say that
> with a sort of ambivalence because I don\'t, in my mind, distinguish
> greatly between the \"promote, support\" standard that is kind of on
> the table now and the old electioneering message standard that the
> Commission used for many years, which sort of was the same concept of,
> you know, is the message to garner votes or sort of oppose a
> candidate. I think that\'s essentially what the Commission has
> historically used to establish the nexus for 441a(d) purposes with a
> party head.
>
> MR. NOBLE: I agree with that with this caveat. It depends how you
> define \"promote, support.\" I think it has to be a very broad
> standard and that really should not be narrowed. Looking at, and I\'m
> always reluctant to use this phrase in front of this Commission,
> looking at the old electioneering message standard, the words that
> shall not be spoken, I think it was considered a very broad standard.
>
> COMMISSIONER SMITH: I mean, you have previously, I think, argued to us
> that the words are self-explanatory and need no further definition,
> and that has been the view that I have taken throughout this, so we, I
> think, can agree on that.
>
> Let me go further. I think the more important part of my question
> here, or at least the equally important part, is would I be correct,
> though, if I understand your past testimony and your written comments
> here that you do not think that that would be a sufficiently precise
> standard to be applied to non-party entities, that in that case,
> because of the lower presumption that what they\'re doing is
> campaign-related, that might raise constitutional issues of vagueness?
>
> MR. SIMON: Well, let me try that first. I think that that standard
> does not work in the context of independent spending. I think it is a
> somewhat different question in the context of coordinated spending
> because by\--if you meet the conduct standards and are, therefore,
> coordinating, as Larry suggested before, you\'ve sort of brought
> yourself within the electoral arena. I don\'t think there\'s, within
> that electoral arena, where you\'re coordinating with a candidate, I
> don\'t think you need the same kind of bright line of content test.
>
> COMMISSIONER SMITH: I do think that bright line standards are
> important, because if you don\'t have bright lines and coordination,
> they effectively can erode the bright lines that exist in other areas
> because it\'s very easy always to make an allegation of coordination
> and thereby trigger a major investigation, and that is exactly the
> type of thing that creates the chilling effect. Again, it\'s not that
> what they did is ultimately found to have violated the law, it\'s that
> it\'s easy for people to make allegations that pull them into lengthy
> government investigations of their affairs and lead them off.
>
> So I do think that a bright line is necessary. Maybe it doesn\'t have
> to be quite so bright as in certain other areas, but I think it would
> be a mistake to suggest that you can have kind of a floating system
> out there.
>
> MR. SIMON: Could I respond to that?
>
> COMMISSIONER SMITH: Sure.
>
> MR. SIMON: It is an important topic, and let me approach it this way.
> I think when you\'re talking about the need for a bright line standard
> in this area, you\'re only looking at half the picture, because as
> we\'ve been discussing all morning, a finding of coordination involves
> both a judgment about content and a judgment about conduct, and the
> Commission\'s rule on coordination in terms of conduct has never been
> a bright line test. It wasn\'t under the pre-[Christian
> Coalition]{.underline} rule. It wasn\'t under the 2000 rule. And it\'s
> not under the rule that\'s before us today as a proposed rule. It\'s
> never a bright line test.
>
> COMMISSIONER SMITH: And I think that was one of the problems with the
> old one and why we tried to make it a brighter\--at least, I support
> trying to make it brighter.
>
> MR. SIMON: Well, but it\'s still not a bright line test, and so even
> if you insisted on a, quote, \"bright line test\" for the content
> standard, you\'re still going to be left with a factually driven,
> case-by-case determination in judging the conduct.
>
> MR. SHOR: And, in fact, I think that\'s among the reasons that the
> judge rejected an expressed advocacy standard in [Christian
> Coalition]{.underline}.
>
> COMMISSIONER SMITH: Right. Well, I\'m glad you approve of [Christian
> Coalition]{.underline}. Again, I don\'t really want to debate those
> issues\--
>
> MR. SIMON: That part, I do.
>
> COMMISSIONER SMITH: \--I just want to make the point that I think the
> bright line test, in fact, in the content standard can alleviate the
> less bright line that apparently is going to exist in the conduct\--
>
> MR. SIMON: Let me, if I may\--
>
> COMMISSIONER SMITH: No, I want to ask you a couple of questions, if I
> can. I think there, we\'re getting into an academic debate that we
> both have views on, and I\'m sorry, they don\'t get me quite where I
> want to get your opinions on today.
>
> A second thing, I want to relate to a couple more content questions
> and then get at conduct. Lobbying issues, now I think all of you have
> suggested that close to an election, the content standards should be
> more open, in other words, that we might be more willing to say, even
> if you\'re not mentioning a candidate, it should be viewed as a
> coordinated expenditure if the conduct standard is met, is that
> correct?
>
> MR. SIMON: Correct.
>
> COMMISSIONER SMITH: Okay, now, here\'s the issue I have. If you meet
> with a Congressman in January of an election year and you talk about
> wanting to pass some legislation and you decide that your group is
> going to run some ads that will help build support for this, and so
> you meet all of the conduct standards, you plan the ads together and
> what districts they ought to go in because he tells you who\'s
> vulnerable and so on, and you run these ads in January, it seems to be
> legal.
>
> If Congress puts the bill off and then takes it up again in September
> or October, all of a sudden, you\'re telling me they can\'t run the
> same ads as they were running in January, and I\'m not sure why, if
> that was viewed as a lobbying ad in January, it\'s not viewed as a
> lobbying ad in September, and it makes me question whether or not we
> have, in fact, obliterated the ability to lobby, at least during the
> last 60 days, if we were to use that kind of test that you propose.
>
> MR. NOBLE: Well, first of all, if I understand your hypothetical
> correctly, in January, they are talking about taking out ads in
> support of legislation, but they\'re also talking about who are the
> vulnerable members of Congress, and\--
>
> COMMISSIONER SMITH: No, they\'re talking about what members they need
> to run those ads in because they\'re the ones who are on the fence,
> they\'re the ones who may need to be persuaded on the issue to get
> grass roots calling in their issue.
>
> MR. NOBLE: Well, then you may not, in fact, have tripped the
> coordination standard in terms of discussing information regarding the
> campaign. You may not have tripped the first part of the standard.
>
> COMMISSIONER SMITH: So then you think our current regulation in the
> NPRM is too sweeping, it needs to be narrowed, because now it says if
> the communication is created, produced, or distributed at the request
> or suggestion of a candidate or authorized committee, political party,
> committee, or agent of any of the foregoing, and I just gave you that
> as a possibility, that the legislator said, well, we can pass this
> bill, but we\'ve got to get these guys on the fence. You need to run
> some ads in their districts. Here are the guys you\'ve got to get.
> Here\'s what the ads should probably say that would rouse up some
> grassroots support. So you\'re saying we need to narrow that request
> or suggestion to something pertaining to a campaign?
>
> MR. NOBLE: Well, I think the assumption has always been that the
> coordination is about something pertaining to the campaign. Now, there
> are always these little traps that are set here. If what you\'re
> talking about is they\'re going to say during this discussion in
> January that if we target the right districts, when it gets closer to
> the election, then we\'ll really have some input and it\'ll really
> help the party, then I think you have started talking about the
> campaign. But I don\'t think anybody here is talking about discussions
> that have absolutely nothing to do with a campaign.
>
> COMMISSIONER SMITH: I see my time is up, but I will just conclude by
> saying, as I understand it, if that\'s your position, then I think the
> rule that we have in the Notice of Proposed Rulemaking is too broad
> because it doesn\'t give you that kind of exception. It simply says,
> if the communication was created. And so if we take the position that
> we either would have to narrow that definition or we would have to
> reject your idea that any ad run in the last 60 days counts, because
> one of those two is going to bring in stuff that you just told me
> should not count. But I\'m out of time, so I can\'t develop that more
> right now. Thank you, Mr. Chairman.
>
> CHAIRMAN MASON: Commissioner McDonald?
>
> COMMISSIONER McDONALD: Mr. Chairman, thank you. Commissioner Smith,
> would you like me to yield you a little of my time? I\'d be happy to.
> Do you want to pursue a question?
>
> COMMISSIONER SMITH: Well, I probably would go another ten minutes,
> Commissioner McDonald\--
>
> \[Laughter.\]
>
> COMMISSIONER SMITH: \--so while I appreciate that, why don\'t we do
> best to let you go, and hopefully, we\'ll get time for a second round.
> I thank you.
>
> COMMISSIONER McDONALD: I doubt very seriously, because when you\'re
> in\--that\'s one of the frustrating things about our arrangement.
> It\'s the only way it can be, but when you\'re kind of on a roll,
> you\'re entitled to proceed.
>
> First of all, let me thank the witnesses for coming. It\'s good to see
> you again, and Lynn, you did the right thing by bringing back the
> reinforcements. I think that was smart.
>
> MR. SHOR: As you can see, the plan is working very well.
>
> COMMISSIONER McDONALD: I gather you all probably did sit down and talk
> about this, as the Vice Chairman asked you about, and probably
> coordinated. Let me assure any of you who have not been here, Larry\'s
> been here. Commissioners have been coordinating with each other for
> years, so that\'s not a particularly new phenomenon and one that we
> haven\'t heard of before.
>
> Let me try to go back and pin down for just a minute some of the
> things that have been brought up by my colleagues, because they\'re
> important and they\'re trying to get at some of the practical
> difficulties that we have in this area.
>
> It\'s been suggested, and let me start with Larry Noble, if I might,
> Larry, how many years were you here? I apologize. I know I should know
> this.
>
> MR. NOBLE: You keep asking me to relive this stuff.
>
> COMMISSIONER McDONALD: I know. I apologize.
>
> \[Laughter.\]
>
> MR. NOBLE: Twenty-three years.
>
> COMMISSIONER McDONALD: Twenty-three years. Do you recall any
> incidents\--I don\'t, and I\'ve only been here 21 years\--but do you
> recall incidents where we went after someone who might have been a
> film maker or transferred from one campaign to another? Do you recall
> at any level of any people like that we\'ve pursued under the
> coordination rules?
>
> MR. NOBLE: No. The Commission worked with a concept which I used to
> call the active versus passive vendor, which is there are people who
> could be vendors who did not really have any substantive creative
> input, if you will, into the process, and the Commission was not
> involved with those people. But, in fact, the Commission was involved
> with a case where a political consultant worked actually on one
> campaign in the primary and then another one in the general and the
> court found them to have coordinated because this person could not
> separate out their brain, if you will, put a Chinese wall in their own
> brain that they had information. So the Commission always focused on
> what I would call the more creative, the more policy input-type
> people.
>
> COMMISSIONER McDONALD: I think it\'s important, because I think all
> the questions that my colleagues are asking are extremely important
> and I want to be sure that we kind of separate out who the players
> are, because as Commissioner Smith pointed out, this may be viewed by
> others, painful though it may be\--I am not sure it will be, but
> let\'s say it is, and I don\'t want to leave the impression, which
> we\'ve come away from in some of these hearings since the BCRA law has
> been enacted of going after minor players.
>
> It brings up another question. I believe the question was asked in
> relationship to State and local officials. Do you recall any precinct
> officials that we went after in your 23 years? I just don\'t. Maybe we
> did.
>
> MR. NOBLE: I don\'t think the local parties or precinct officials were
> that much of a focus of what the agency was doing. I don\'t remember.
> There may have been some cases. I just don\'t remember them.
>
> COMMISSIONER McDONALD: The reason I bring it up, I think Commissioner
> Sandstrom asked an important question and there are mechanisms, quite
> frankly, and the mechanisms are in relationship like they are to
> seating delegates at the national convention. Anyone could be wild and
> off the reservation, there\'s no question about that, and as a
> practical matter, that happens today under a variety of rules.
>
> But having said that, the Commission doesn\'t have interest in those
> incidental matters. From my perspective, at least, in the 21 years
> I\'ve been here, the goal is not to try to figure out some way to
> entrap either party officials or political players. That\'s simply not
> the goal of the Commission, as best I can tell, and I hope that
> everyone keeps that in mind because we\'re only interested, obviously,
> in those that have a major impact on this political process, or at
> least speaking for myself.
>
> My colleagues have brought up a lot of questions in the last few days
> that are very good questions. On the example Commissioner Smith just
> gave in terms of lobbying, I gather he was saying that the ad\--I\'m
> sorry he\'s out, but I gather he was saying that the ad was created
> maybe in January with a focus on trying to aid and assist people in
> January and would it change closer to the election, if it was the same
> content, the bill came back up in October, for example. I want to be
> sure I understand you right. Your position is it would change in
> relationship to time, would it not? Could change?
>
> MR. NOBLE: Well, you\'re looking at different things when you get
> closer to the election. Clearly, what we were suggesting was that
> outside this 30-, 60-day period that we talked about, if you did not
> mention the candidate, then there would not be an issue here.
>
> Now, again, it\'s unfortunate because Commissioner Smith is out of the
> room here, but my understanding of his hypothetical was that you
> create the ad in January. The ad doesn\'t mention the candidate. You
> talk in January about the need, where you need to put on this ad
> because you have certain members who are wavering and where it will be
> most effective. The bill then comes back up again right before the
> election, and I presume there\'s no further discussions about the use
> of this ad in districts regarding the campaign or regarding now how
> they\'re vulnerable because we\'re up for reelection, and they just
> put the ad back on again. Then I think you have a different situation
> and a lobbying situation.
>
> I want to say something broader about this. The lobbying issue in both
> this part of the rulemaking and the earlier part of the rulemaking
> seems to be driving, legitimately, a lot of the concern. But again,
> the history of the Commission has not been to get involved in a lot of
> regulation of lobbying, and there are some bright lines that exist.
>
> One of them is, for the most part, we are talking about coordinating
> campaign activity, not coordinating lobbying, and that is what the
> Supreme Court talked about. That is what these rules are supposed to
> go to. And I think this concern for lobbying is valid, but could
> result in the Commission creating a major shield for these, or a major
> loophole, which is everybody will claim what they are doing is, in
> fact, lobbying, and I think that is a very, very dangerous road to go
> down and I don\'t think there\'s any support in the law, in what the
> Supreme Court has said or what Congress has said to allow that.
>
> MR. SIMON: If I could just also make an observation\--
>
> COMMISSIONER McDONALD: Sure.
>
> MR. SIMON: \--about Commissioner Smith\'s hypothetical, if I
> understand it, and again, it\'s too bad he\'s out of the room, but as
> I understand it, he\'s talking about in January, you know, I\'m a
> lobbyist and I sit down with Representative A and we say, we need to
> get the votes of Congressmen B, C, and D on this bill, so let\'s run
> an ad in their district, and then the ads subsequently run.
>
> But it seems to me it\'s a very material fact that if the coordination
> of the conduct is with Congressman A but the ad is actually relating
> to other members, and I haven\'t had any discussion with those other
> members, that that\'s a very different kind, and I think much less
> threatening, sort of coordination than if I had the conversation
> directly with the members or their staff who the ad concerns. So that
> kind of, I think, classic lobbying situation is really not implicated
> in what we\'re talking about today, where the independent spender is
> dealing with the candidate or agents of that candidate himself.
>
> MR. NOBLE: And, by the way, one other thing which Paul just pointed
> out to me, we also included a targeting\--when you get within that
> time, we included a targeting element, and it supports what Don was
> saying, that you\'re also talking about targeting to the candidate\'s
> district. If you don\'t have that, then there\'s nothing to trigger it
> anyway.
>
> COMMISSIONER McDONALD: Well, it\'s an important point, because I
> thought the example Commissioner Smith gave was a good one because
> it\'s the kind of issues that we\'ll see.
>
> In relationship to the time element, and Don, maybe this is more a
> practical question to ask you, I\'m not sure, but I know in my own
> home State, we have rules and regulations, and I know because I served
> on that commission. At the Corporation Commission, you cannot take
> money within a certain time frame as a candidate, period, and that\'s
> fairly common in a number of States, quite frankly, that that\'s a
> norm. Have you had any experience with it in relationship to this sort
> of\--
>
> MR. SHOR: I think there\'s maybe analogy with the House franking rule,
> I think. I think there\'s a certain time period in which you can\'t
> use the frank.
>
> MR. SIMON: And frankly, there\'s an analogy closer to home, which is
> the electioneering communication provisions of the statute. I mean, I
> think, again, what we\'re trying to ground here is a sort of nexus
> between an ad and a campaign, and time is a relevant consideration in
> creating that nexus. Now, it may not be dispositive, but it certainly
> is relevant, and this very legislation in the context of 441b makes
> time, the proximity to an election, a very material factor to
> consider. I think it\'s really borrowing that concept into these
> coordination regulations to suggest that an ad run proximate to the
> election is of a sufficient nexus to be within the scope of the rule.
>
> COMMISSIONER McDONALD: Thank you. Thank you very much, Mr. Chairman.
>
> CHAIRMAN MASON: I wanted to start off a bit like Commissioner Smith
> and just make a couple of quick observations. I agree with
> Commissioner McDonald that local parties have not been a big focus of
> our enforcement efforts, but we maybe are still in court with the
> former chairman of the Orange County Democratic Party, which we ended
> up taking him to court and getting a conviction as to a party
> expenditure on behalf of a candidate there\--
>
> COMMISSIONER McDONALD: Which is bigger than my home State.
>
> CHAIRMAN MASON: Well, yes, yes, but local party nonetheless, and we
> have an ongoing case with local parties now involving an issue of
> whether they\'re independent and coordinated. Now, these are
> relatively small, but the concern some of us are trying to raise is
> that it\'s one thing if this is a couple-thousand-dollar expenditure
> case which may have tripped the 441a(d) limit or involved inaccurate
> reporting. But if you have the kind of death sentence which is the
> result of that small independent expenditure, is no party
> organizations can make coordinated expenditures, then you\'ve got a
> problem.
>
> And so we do have the history, albeit at a small level, but that\'s
> exactly the point, and we\'re kind of grappling with is there any way
> to deal with the situation that we have, in fact, had, that local
> parties, perhaps unintentionally, you know, they go out and do
> something and they\'re not even meaning to make an independent or
> coordinated expenditure, but we look at it and we say, well, you
> didn\'t think that was expressed advocacy but we think it was,
> or\--and I think all of you appreciate that and I just want to bring
> that out, that it\'s something we\'re wrestling with, and I think even
> the people who support the unified party theory would recognize that
> there may be particular circumstances in which we need to find a way
> to deal with, if not the renegade local party, the inadvertent local
> party.
>
> If anybody differs, say so later, but I think that at least we could
> agree at a low level, there ought to be something we could address.
>
> I want to ask, there hasn\'t been a lot of attention to the statutory
> language about agreement or formal collaboration, but could any of you
> quickly give me a definition of \"agreement\"?
>
> MR. SIMON: Oh, I guess\--I mean, there\'s a definition suggested in
> the proposed rules which, I mean, I guess I can look at it, but when I
> read it, it seemed okay to me.
>
> CHAIRMAN MASON: Let me just take out Black\'s, because I think when we
> encounter a statutory term and there isn\'t a definition in the
> statute, Black\'s says an agreement is a meeting of two or more
> minds\--it sounds kind of like a contract\--and it goes on for a
> paragraph or two describing things that you, as attorneys, would
> recognize as contracts, an act of two or more persons uniting,
> expressing a mutual and common purpose with a view of altering their
> rights and obligations. Again, it sounds like a contract.
>
> And it finally comes down to sort of summing up and says that it\'s
> often used as synonymous with contract, but that it\'s a
> broader\--agreement is a broader term, e.g., an agreement might lack
> an essential element of a contract.
>
> Now, I say that to simply raise the question about how much statutory
> guidance we\'ve actually been given here, because I think one of the
> things we all agreed upon, and I remember having this conversation
> with Larry Noble, is that everybody agreed that coordination didn\'t
> require a contract. So when we have a statute that says, well, okay,
> then you can\'t draw standards so high as to require a meeting of the
> minds, or something closely akin to that, I don\'t know how much that
> helps us write a rule.
>
> Now, that\'s preferatory to my question, which goes to the
> [Orloski]{.underline} decision, which I know most of you are familiar
> with, which was reviewing a decision made by the Commission, where for
> 441b purposes, which Mr. Simon mentioned, that it was a permissible,
> not required, but permissible interpretation of the statute to use the
> expressed advocacy line in the case of a speech by a candidate/member
> of Congress paid for by the corporation. And while coordination
> wasn\'t really at issue in the case per se, it was clearly a
> coordinated communication. I mean, the corporation and so on went back
> and forth. And so there, we had the D.C. Circuit saying, well, yes,
> that\'s within the Commission\'s authority under the statute.
>
> Now, my question is this. If we disagree, for instance, with Mr.
> Simon\'s reading of the statute and what it ought to be in terms of
> the statutory reading and the policy behind it and we adopt something
> akin to the D.C. Circuit\'s [Orloski]{.underline} rationale, would
> that be corrupt?
>
> MR. SIMON: Well, I think it will lead to corruption. I mean, I don\'t
> mean to be glib, but that\'s what I assume\--
>
> CHAIRMAN MASON: Would it be corrupt on the part of the Commissioners
> who voted for such a standard?
>
> MR. NOBLE: Let me say, since I never used the word corrupt, I will say
> I think it would be arbitrary and capricious and contrary to law.
>
> CHAIRMAN MASON: And you are free, of course, to disagree with the D.C.
> Circuit\'s [Orloski]{.underline} opinion in that regard, but it is a
> D.C. Circuit opinion.
>
> MR. NOBLE: But Congress has spoken since [Orloski]{.underline}, and
> Congress used the context of the coordination the phrase
> electioneering communication. So we know that Congress has rejected
> that reading of [Orloski]{.underline}. And also, as a practical
> matter, [Orloski]{.underline} was something of an anomaly, but we also
> know that the Court in [Christian Coalition]{.underline} said that
> expressed advocacy was not required if you have coordinated activity.
>
> So I do think, given that, given the fact that Congress gave a
> specific example of coordinated activity, that should be considered
> coordinated even if it did not contain expressed advocacy. It would be
> contrary to law for the Commission to now say the only standard we\'re
> adopting is an expressed advocacy standard.
>
> CHAIRMAN MASON: Well, certainly, and I think everybody recognized that
> electioneering community is now within the ambit and republication of
> campaign materials. The question is, what else?
>
> Mr. Simon, I want to give you an opportunity. Is it corrupt if we
> adopt that standard?
>
> MR. SIMON: Well\--
>
> CHAIRMAN MASON: I don\'t mean, would it lead to corruption by other
> people or circumvention. I mean, would it be corrupt on the part of
> the Commissioners to vote for such a standard?
>
> MR. SIMON: I will identify myself with Larry\'s answer. I think it
> would be arbitrary, capricious, and contrary to law.
>
> CHAIRMAN MASON: But not corrupt?
>
> MR. SIMON: Well, you know, I mean, if you define corruption to mean
> the Commission not correctly discharging its statutory
> responsibilities, you know, I think it would be the Commission
> discharging its statutory responsibilities properly. But I think it
> would be a violation of your obligations under the BCRA, the FECA, and
> the APA.
>
> CHAIRMAN MASON: So a difference in interpretation or reading amounts
> to a violation of our obligations?
>
> MR. SIMON: Well, I mean, ultimately, that is something that would get
> adjudicated by a court.
>
> CHAIRMAN MASON: But that\'s the point I\'m trying to get at. I
> appreciate the testimony of all three of you and the way you\'ve
> brought up arguments and so on like that, and I think everything
> you\'ve raised is legitimate and useful. There\'s some of it I agree
> with, a lot of it I don\'t going in. But I\'m trying to get at the
> issue of whether our disagreements about how we read the relevant
> court cases, how we read the statutory phrases, and so on amount to
> corruption, and you\'re hesitant to use that term, and I think
> properly so, but I\'m trying to\--
>
> MR. NOBLE: Let me say something here. First of all, I\'m not sure I
> understand the relevance of the point as a legal matter for the
> hearing. But be that as it may, I don\'t think, based on the
> information I have now, I would not say that that decision would be
> corrupt. I do think that decision, as I said before, would be contrary
> to law. I do think that decision would not be, in this particular
> case, would not be\--would not represent the Commissioners following
> their statutory duties to implement the law as Congress wrote it.
> Others may disagree with whether it\'s corrupt or not. I don\'t think
> that it fits in the traditional definition of \"corruption.\" It may
> fit under the definition of not following your duties, of being
> arbitrary and capricious, but not necessarily corruption.
>
> CHAIRMAN MASON: And I appreciate that. We all recognize that there are
> a lot of times when there are disagreements over the reading of the
> law and courts make their renderance on exactly that.
>
> Mr. Shor, I won\'t put you on the spot if you don\'t wish to get
> involved in this, but your cohort in the Campaign and Media Legal
> Center is part of a lawsuit where this issue has been raised. Do you
> have any observations?
>
> MR. SHOR: Look, I think everybody\'s aware of sort of the roots of
> this question and the broader political dynamic and I just don\'t
> think it\'s useful for me to characterize the Commission one way or
> the other in this instance. I certainly do subscribe to what Don and
> Larry said. I think it would be the wrong choice by the Commission and
> arbitrary and capricious, but beyond that, I just don\'t think it\'s
> useful for me to engage in characterizations.
>
> CHAIRMAN MASON: I don\'t think it\'s useful, either, and that was the
> point of my question.
>
> Commissioner Thomas?
>
> COMMISSIONER THOMAS: Thank you, Mr. Chairman. Well, the dream team is
> back.
>
> \[Laughter.\]
>
> COMMISSIONER THOMAS: I\'m going to try to cover a few different topics
> and so I\'ll try to keep questions short, and maybe if you can keep
> the answers punchy, we can cover a fair amount of ground.
>
> The first area, defining agent. We set out the Notice of Proposed
> Rulemaking in a way where we were asking you to contemplate whether
> there might be some officials or people associated with, say, a
> candidate\'s campaign organization or who might be associated with a
> party committee structure who should be viewed as having such a
> position that we could, in essence, say that they are an agent in a
> per se fashion and any involvement by them in connection with
> somebody\'s effort to put out a non-coordinated communication would,
> in essence, taint the independence of that coordination.
>
> I had in mind at the time we might want to put out some rules
> specifying that the chairman of a candidate\'s campaign, the treasurer
> of a candidate\'s campaign, the chairman of the national party, or
> some of the higher-level executives should be perhaps in a
> classification where if you want to call it a per se rule, they could
> not be involved with anybody undertaking an independent expenditure.
> Any comments on whether that\'s workable?
>
> MR. SIMON: Well, I guess my reaction is, that\'s fine. That\'s not how
> I read the proposed rule. I read the proposed rule as agent being
> limited to the class of campaign officials mentioned, and my concern
> about that is I think the rule has to have flexibility to recognize
> that there may be other people in the campaign who are not in the
> small class of top officials delineated in the rule and those other
> people may, in fact, in a given instance, operate as an agent of the
> campaign for purposes of transmitting information and thereby
> compromising the independence of an expenditure.
>
> MR. SHOR: Mr. Commissioner, I still had a question about what was, in
> fact, the definition of \"agent\" in the rule, because I read in the
> commentary that an agent would be somebody who was, and I apologize
> for reading, but I want to get this right, expressly authorized by
> specific principal to engage in specific activities, engages in those
> activities on behalf of that specific principal, and those activities
> would result in a coordinated communication if done directly by the
> candidate or political party official, which seems to me to be
> different and extremely problematic, but different from the idea of
> that there are certain people in the campaign who are per se agents,
> which I think must be the case. I don\'t think that\'s the limit of
> who\'s an agent.
>
> Then I read the language of the rule and I wasn\'t quite sure what to
> make of it, so maybe you can tell me what\--are there per se agents
> under this draft rule?
>
> COMMISSIONER THOMAS: That\'s a fair question in return. I think as
> drafted, we crafted a standard that doesn\'t delineate a class of
> folks who, by their very position, would be per se agents. But we
> wanted to see comment on whether that would be a good idea to add that
> in.
>
> Related in the agency area, you\'ll recall from the way we dealt with
> the agency concept in the soft money and electioneering rulemaking,
> we\'ve gone down a road of suggesting that we\'ll analyze whether or
> not when someone is undertaking a particular action, they\'re acting
> in the scope of their agency arrangement. That has opened the door to
> thinking on the part of many that as long as a separate basis of
> agency can be established, working on behalf of someone else, that a
> person would be able to, in essence, argue that, well, gosh, I wasn\'t
> acting as an agent of Party A. I was actually operating as an agent of
> Party B when I was undertaking the activity in question, the so-called
> \"two hat\" theory. I\'m wondering if you all have any thoughts about
> whether or not that\'s an approach that we should be avoiding here.
>
> MR. NOBLE: I do think that\'s an approach that you should be avoiding
> here. I think you should have avoided it earlier but were unable to.
>
> I think working with a per se rule as to certain people is not a bad
> idea, but again, you have to then leave open looking at agency when
> other people don\'t fit into that category, because the agency is
> going to be used\--our definition of \"agency\" is going to be used as
> a shield or as a safe harbor, some want to call it, to bring people in
> to effectively coordinate activity and the argument is going to be,
> well, they\'re not technically agents. Therefore, we don\'t have to
> worry about it.
>
> I think the focus really has to be back to what we started with here,
> which is the discussion of what [Buckley]{.underline} was concerned
> about with coordination and the fact that you\'re dealing with people
> who have material information and can share that information and,
> thus, aid in the so-called independent expenditure. So I think agency
> can start off with a core group of per se agents, but it has to move
> beyond that.
>
> COMMISSIONER THOMAS: Moving on a little bit, what about this idea of
> rebuttable presumption that I\'ve seen in comments that you all have
> prepared for us? You suggest maybe in these difficult areas a common
> vendor or perhaps prior employer, employee, and even perhaps in the
> area of party ads, as a general concept, we might work with a
> rebuttable presumption, will, in essence, presume there is
> coordination and allow for rebutting by the spender in question.
>
> How would you see that working? Should we use the rebuttable
> presumption to, in essence, automatically get us to reason to believe
> there\'s a violation that would trigger an investigation, or would it
> just serve as something where they would be able, once they received,
> say, a copy of a complaint that\'s been filed, they would submit a
> response and the Commission would somehow take into account that
> response in evaluating whether or not to find reason to believe in the
> first instance and conduct an investigation? Can you help us,
> procedure-wise, how you envision the rebuttable presumption working?
>
> MR. NOBLE: For me, I would see any of those options working in a
> particular case. It is possible, and while I was here, there were a
> few cases where somebody could come back in their response to the
> complaint for reason to believe and rebut the presumption, come back
> with evidence, and people actually did submit evidence, submitted
> affidavits, submitted very explicit documents, very explicit
> affidavits that you might look at and say, given the situation, there
> is no reason to believe.
>
> On the other hand, what I\'m always cautious about in these situations
> is when you get back a conclusory affidavit that then says, we can
> rebut the presumption we were not agents or we did not coordinate
> this. I still think you need to investigate that.
>
> So I don\'t think you need to focus on as much at what stage the
> decision is made that the presumption has been rebutted, but rather,
> you need to focus on what evidence will rebut the presumption.
>
> MR. SIMON: Yes. I mean, I largely agree with that. To me, these
> situations of common vendor, former employee, and party spending are
> situations that were based on sort of objective facts, like is there a
> common vendor? Did this guy work for the candidate in the same
> election cycle? That raises immediately, just based on the facial
> facts, raises an enormous red flag and I think it\'s legitimate under
> those circumstances to basically shift the burden to the person who
> claims to be independent to make a pretty substantial factual
> demonstration that there really is independence in a situation where I
> think a reasonable observer would be very suspicious of it, just based
> on those facts.
>
> How that kind of fits into the procedural stages of the Commission\'s
> enforcement actions, I haven\'t really thought about, but, I mean, at
> first blush, I think that if somebody came back with the kind of
> factual showing that we\'re talking about prior to a reason to believe
> stage, that would be fine.
>
> COMMISSIONER THOMAS: Let me try this issue of party committees all
> being viewed as one big ball of wax, and if one party committee unit
> somewhere undertakes some independent expenditures, that would in some
> fashion preclude any other unit within the party structure from
> undertaking coordinated expenditures.
>
> You have cited to us the language of the statute, which on its face
> seems pretty clear to me. You\'ve cited to us the legislative history,
> which on its face seems very clear. I was just wondering whether, in
> light of the Vice Chairman\'s comments about how this could be
> administered and is there any way that the national parties could
> protect one another, if you could sort of relay your understanding of
> how the parties for quite some time have been dealing, say, with the
> fact that only the national party committee has a coordination
> expenditure allowance and it has to basically work\--in the
> Presidential area\--and that it has to, in essence, work with State
> parties, and in some cases local party committees that want to do
> something that would be viewed as a coordinated expenditure on behalf
> of a Presidential campaign.
>
> MR. SIMON: Well, yes. I mean, I think that\'s a very relevant analogy.
> But just stepping back a bit, I mean, I understand that several of
> you, including the Vice Chairman, think this statutory provision is
> perhaps a poor policy choice and the question is, what can you do
> about it?
>
> I guess, you know, every year, the Commission makes legislative
> recommendations and it seems to me that\'s your venue here. With all
> due respect, I think this one is above your pay grade. For better or
> worse, Congress made a choice. You know, there are many members of
> Congress who are familiar with how the political parties work and they
> thought this was a reasonable choice and I don\'t know that you have
> too much discretion to try to fix it if it needs fixing, because I
> think, as you do, that the statutory language on its face is crystal
> clear and I think the legislative history on this specific point is
> simply overwhelming.
>
> I think the Commission\'s obligation is to take that at face value. If
> it proves to be onerous to the political parties, Congress is going to
> have to provide them relief.
>
> COMMISSIONER THOMAS: I don\'t know if you had a third response or not.
>
> CHAIRMAN MASON: Go ahead.
>
> MR. SHOR: I just wanted to also raise the issue that I think, in many
> cases, there\'s a common contribution limit between State and local
> parties and how they\--they are certainly working together in terms of
> the administration of that, too, which is another thing that helps
> bind them.
>
> CHAIRMAN MASON: Larry Norton?
>
> MR. NORTON: Thank you, Mr. Chairman, and good morning, panel. It\'s
> good to see all of you again.
>
> I wanted to pick up first with Commissioner Toner\'s line of
> questioning about whether you would agree that it would be appropriate
> to create an exception to the conduct standard for publicly available
> information. Larry, I think you testified that it would be
> appropriate, but there really ought to be a caveat in terms of
> defining publicly available and that if the information was on the
> website and you called and individual and said, hey, take a look at
> this, perhaps wouldn\'t this be a great ad, that kind of crosses the
> line.
>
> I\'m trying to satisfy for myself what I think is going to be a fairly
> common and maybe more problematic situation, and that is where the
> material is simply on the website. For example, if a candidate
> finances the filming and production of a video, puts it on the
> website, and does nothing more, would your position be that that kind
> of conduct would constitute coordination if a third party picked up
> the video from the website without any encouragement and launched a
> major media campaign?
>
> MR. NOBLE: No, it would probably fall in the republication provision,
> because in that respect, that\'s really no different than somebody
> videotaping a commercial and then going to a station and asking that
> the commercial be replayed, so, in a sense, increasing the volume of
> it. If there is absolutely no discussion, no contact over it, you fall
> in the republication provision, which, frankly, has always been
> somewhat problematic for the Commission, the republication provision.
>
> MR. NORTON: What if the ad campaign only relied on the ideas and
> concepts and themes but didn\'t republish the video that was placed on
> the website?
>
> MR. NOBLE: In terms of whether it would be considered republication at
> that point or whether it would be considered coordination?
>
> MR. NORTON: Whether it would be considered coordination.
>
> MR. NOBLE: If there was no discussion between the campaign and the
> expender, no, it would not be considered coordination.
>
> MR. NORTON: I kind of think the exception Commissioner Toner was
> addressing is more a matter of an exception to the content standard
> and not conduct, the themes, the positions of the candidate. Would it
> be your position that if the Commission were to create that kind of
> safe harbor, that if there were some conferring about media use and
> frequency and funding, that that would then take it out of any
> exemption for coordination?
>
> MR. NOBLE: Yes, and I think you raise a very good point here, that to
> keep separate the conduct standard from the content standard. What you
> were positing before was situations where the content was the same but
> there was no conduct that reached coordination. I think that\'s a very
> important distinction to keep.
>
> MR. NORTON: Commissioner Thomas suggested some hypotheticals
> yesterday. I\'m not sure whether you\'re aware of them. I don\'t think
> any of you were here. The hypotheticals, in short, involved ads that
> were constructed with close collaboration by candidate and third
> party. They address only issues in that there is no reference to a
> candidate, but they address salient issues to a campaign. They are
> drafted in the month before the election, and, in fact, to make it as
> clear a hypothetical as possible, they\'re actually drafted by the
> candidate for the third party to run.
>
> As I understood Mr. Simon\'s testimony earlier, and I think the
> testimony of others, that would clearly be in an electoral context.
> But if, on the other hand, we were to do what Mr. Simon suggested in
> his written comments and use the lobbying exception that was proposed
> back in the electioneering rulemaking, then that kind of coordination
> wouldn\'t be legal coordination under our rule. Which way should it
> be?
>
> MR. NOBLE: We did say in the recommendation that when you get within
> the time period right before the election, you don\'t need to mention
> the candidate. I would say it becomes a factual question of what they
> actually did discuss. I\'m not sure how often you\'re going to get in
> a situation, in all honesty, where right before an election, they\'re
> discussing an ad, a, quote, \"lobbying\" ad and they\'re not
> discussing the campaign. I think as a practical matter, in most of
> those instances, you\'re going to get a discussion of the campaign and
> so it\'s really going to become a factual situation.
>
> But I\'m not sure, again, how often these are going to come up if you
> look at all the lines that you have to cross before you reach
> coordination. In terms of right before a campaign, if you have no
> mention of a candidate, in terms of what we were suggesting, it still
> has to be targeted and it has to be right before the election. So I
> don\'t think that\'s one of these areas that you\'re going to actually
> see a lot of problems in. They\'re interesting hypotheticals. I don\'t
> think you\'re going to see a lot of problems. I think if you actually
> do investigate those areas, you\'re going to find out that, in fact,
> there was discussion of the campaign.
>
> MR. NORTON: So your position would be that it would not be advisable
> for the Commission to craft an exception to the content standard for
> lobbying ads along the lines that you proposed during electioneering
> communications rulemaking or some of the alternatives?
>
> MR. NOBLE: Well, we were talking about\--
>
> MR. NORTON: The reason I ask, Larry, is because that kind of content,
> if that\'s an exception that we build into the content standard and
> that kicks you out of coordination, even if\--
>
> MR. NOBLE: Right.
>
> MR. NORTON: \--the conversation is very explicitly about running that
> ad for the benefit of the\--
>
> MR. NOBLE: The only exception, I think, would be a conduct standard, a
> possible conduct standard, not the content standard.
>
> MR. NORTON: Mr. Shor, in your testimony, you agree with your
> colleagues that we ought not have, or that it might be appropriate to
> create a lobbying exception to the content standard with respect to
> ads that are run in the 30- and 60-day window. You also say in your
> testimony that you\'d recommend the addition of other appropriate
> exceptions, and I wondered if you could elaborate on what you had in
> mind.
>
> MR. SHOR: Let me first address the lobbying example. I think you raise
> a very good point, and I think I would\--you know, in the instance of
> an ad of the nature that you described and it\'s coordinated
> extensively with the candidate, aired in their district, highly
> proximate to an election, you know, I think some sort of attempt to, I
> think, of an ad of that nature, if that was attempted to be cloaked
> under the guise of lobbying, it\'s not, and it shouldn\'t be accepted.
>
> You know, I think of one other example, and it\'s sort of based on an
> AO that I saw. If you had a Federal candidate appearing in an ad where
> it was a pretty bare bones endorsement of a State candidate and it was
> a State candidate that appeared in\--that was running for election at
> the same time in that district. You know, if it didn\'t go overboard,
> and I think that potentially there are ways that the Commission could
> sort of craft this, then I don\'t think I would have a problem with
> that. I sort of read an AO that dealt with former Congressman Jacobs
> and the endorsement there was very straight up and I don\'t think it
> was a disguised campaign ad at all. So that\'s one potential exception
> I had in mind.
>
> MR. NORTON: You\'ve all suggested that the Commission\--that the best
> approach for the Commission to take would be to re-adopt the
> pre-[Christian Coalition]{.underline} definition, and I was looking
> back at that definition and again at the definition of \"agent\" that
> was in effect then, and I think is still in effect now in 109.1. The
> definition of agent in 109.1 is a person who has actual oral or
> written authority, either express or implied, to make or to authorize
> the making of expenditures, or means any person who has been placed in
> a position within the campaign organization where it would reasonably
> appear that in the ordinary course of campaign-related activities, he
> or she may authorize expenditures.
>
> I take that definition to exclude the situation that, I think, Larry
> and Paul, you expressed concern about, which is the employee who might
> be sitting in a meeting, perhaps a low-level, mid-level employee, not
> integral to decision making, doesn\'t say a word, and the rogue
> employee, if you will, who then goes off and coordinates with a third
> party.
>
> Under the pre-[Christian Coalition]{.underline} standard and the
> definition of agency, that kind of factual scenario wouldn\'t have
> constituted coordination, would it?
>
> MR. NOBLE: Well, in fact, the Commission under that standard did, in
> fact, define coordination where an employee went off and shared
> information, or where somebody within the campaign went off and shared
> information. In looking at that, I think, and what I said in my
> opening statement is really begin with the [Christian
> Coalition]{.underline} standard. The definition of agency is somewhat
> problematic in that in that it is narrow. But I think, overall, the
> pre-[Christian Coalition]{.underline} standard is a good place to
> start.
>
> But, again, the Commission did have cases where you just had a person
> who was in on meetings who went out and then took that information and
> passed it on and it was considered coordination.
>
> MR. SIMON: If I could just add to that, I don\'t want our comments to
> be misunderstood or, I suppose, taken too literally in the sense that
> we\'re not saying you should take the former 109.1 and just
> repromulgate it as is. I think what we are saying is that\'s an
> approach that is more appropriate in setting out broad standards of
> what constitutes coordination. But there are parts of that old
> regulation that certainly can be improved, and I think the definition
> of \"agent\" is one of them.
>
> MR. NORTON: You\'ve all suggested that we ought to adopt as part of
> the definition of agency the concept of a parent authority, yet I\'m
> looking at the comments of Center for Responsive Politics that say
> there ought to be agency unless the staff person was under explicit
> instructions not to disclose that information and the candidate or
> committee considers the disclosure a breach of the staff person\'s
> duty to the candidate or committee. We\'re really talking about
> something that negates actual authority, not parent authority. In
> other words, the parent authority concept really isn\'t something that
> you\'re suggesting we ingraft here.
>
> MR. NOBLE: Well, we suggested earlier on that you graft parent
> authority and all the other parts of this rulemaking. The Commission
> has not done it yet. So we started off by saying that we really think
> you should do that, but we\'re being realistic about it and suspect
> that you\'re not going to do it here.
>
> What we\'re really in our comments getting at is, I think, a very
> practical approach to this, which is the approach that the candidate
> or the political party has an obligation to make it very clear that,
> in fact, nobody has authority or it will be a breach of their
> responsibilities if they go out and make this information available.
>
> What we say there is that, in response to those who will scream that,
> oh, no, we can\'t do that, it\'ll be too burdensome, as a practical
> matter, they do that in a lot of respects. They do give employees
> instructions. They do give volunteers instructions on what they\'re
> supposed to do. And all we\'re suggesting there is that one of the
> things that you need to do with these people is to make it clear to
> them that they do not have the authority, in fact, it would be a
> breach of their authority to go out and make this information
> available.
>
> MR. SIMON: Could I add one thing to that? In three places in the
> proposed regulations, with common vendors, with former employees, and
> with republication, the proposed rules take a bifurcated approach of
> saying it\'s a situation where the spender is making an in-kind
> contribution, but the candidate is not receiving an in-kind
> contribution, and this may be a fourth area where that same
> bifurcation might be appropriate, where the candidate really has taken
> the kind of measures that Larry is suggesting to prohibit the\--has
> taken reasonable measures to prohibit the transmission of information,
> but the agent has, nonetheless, gone forward and passed the
> information and it\'s appeared to the spender to be an apparent agent
> and legitimately coming from the campaign. It may be that the spender
> is making an in-kind contribution even though the steps taken by the
> campaign are sufficient to mitigate the receipt of an in-kind
> contribution. But that\'s an approach which is already in the proposed
> rules that does make some sense in these sort of odd situations.
>
> MR. NORTON: Well, thank you very much, and thank you, Mr. Chairman.
>
> CHAIRMAN MASON: I think most of my colleagues are desirous of a second
> round and so we\'ll go back around in the same order, starting with
> four minutes. Commissioner Toner?
>
> COMMISSIONER TONER: Thank you, Mr. Chairman. I\'ll stipulate for the
> record that if any of the members of this panel disagree with my views
> in this area, I will not view them as corrupt, and actually, I think
> there\'s a serious point here. Instead, I would view it as a situation
> of reasonable people disagreeing about what the law means in this
> area. I think when people in Washington, members of Congress and
> otherwise, throw out labels like that, it usually indicates they
> don\'t have a very strong argument on the merits, and I don\'t think
> this is any exception here.
>
> Anyway, I appreciate very much the testimony this morning. I just want
> to follow up on a couple other key points.
>
> Mr. Noble, you made a distinction that you indicated was part of our
> earlier regulations between active and passive vendors, this kind of
> concept. Does this go to the idea that so-called passive vendors,
> however we define those, shouldn\'t be included in the regulations or
> that we should treat them differently in terms of coordination?
>
> MR. NOBLE: Really, all that was, and it evolved over time, it was an
> answer to the question, well, Federal Express is a common vendor of
> most campaigns or most groups. Does that mean that if everybody uses
> Federal Express, you\'ve compromised independence? The answer is
> obviously no, they are a passive vendor. They are doing ministerial
> acts, if you will. That\'s really the type of distinction I was
> drawing.
>
> COMMISSIONER TONER: Do you think the same type of distinction could
> work in terms of campaign staff who perform, as you\'re indicating,
> ministerial functions?
>
> MR. NOBLE: There, I think the focus has to be the information that
> they have access to and the information that they share, or the
> information they\'re given access to. So I don\'t think you should be
> able to avoid coordination by basically having a low-level employee
> who has limited official responsibilities sit in on meetings and it
> being understood that they\'re going to go out and talk to this
> third-party group and say what the campaign strategy is.
>
> COMMISSIONER TONER: I want to follow up with obviously a very
> difficult issue that we\'re grappling with, and Mr. Simon, this is
> this issue of political party organizations and the statutory language
> in terms of coordinated expenditures and independent expenditures, and
> I think Commissioner Thomas lays it out very well and I think your
> comments did about the statutory language and also the legislative
> history that you bring to our attention.
>
> So I just want to have a sense from you, let\'s say we had Senator
> Feinstein running for reelection in California and let\'s say the
> State party of California chose, in their own judgment, to make
> independent expenditures. Would we have to take the position that the
> national committees, the Democratic National Committee or the
> Senatorial Committee, would then be barred from making any coordinated
> expenditures on behalf of the Senator?
>
> MR. SIMON: Yes\--
>
> COMMISSIONER TONER: Is that your view?
>
> MR. SIMON: Yes, it is, and I think this obviously puts a real burden
> on the parties to sort of get their internal act together for this
> purpose. I mean, the parties are going to have to establish internal
> rules and procedures to come to grips with this restriction and
> they\'re going to have to talk to each other, I mean, the various
> party committees and party personnel are going to have to talk to each
> other and reach a common understanding about which road they\'re going
> to go down, because I think the statute is pretty clear. They can\'t
> go down both roads.
>
> COMMISSIONER TONER: So if Terry McAuliffe and the DNC didn\'t have
> their act together and the California Democratic Party, because they
> felt very strongly about issues, made independent expenditures, the
> DNC would be out of business.
>
> MR. SIMON: I think that it would have that preclusive effect.
>
> COMMISSIONER TONER: I want to ask you, and I understand you\'re not
> necessarily speaking on behalf of other organizations, but obviously,
> as a lawyer who\'s very schooled in this area, is it your view that
> this would be a constitutionally permissible outcome?
>
> MR. SIMON: Yes, it is.
>
> COMMISSIONER TONER: It would be constitutionally sound? Do you agree
> with that, in your own view as a lawyer in this area?
>
> MR. NOBLE: Yes.
>
> COMMISSIONER TONER: Mr. Shor?
>
> MR. SHOR: Yes, sir.
>
> COMMISSIONER TONER: We have unanimity. Great.
>
> MR. SANFORD: We have four votes.
>
> \[Laughter.\]
>
> COMMISSIONER TONER: We could have a rulemaking in that environment.
>
> Thank you, Mr. Chairman.
>
> CHAIRMAN MASON: Vice Chairman Sandstrom?
>
> VICE CHAIRMAN SANDSTROM: I do have to concede here today that I
> neither carry the benefits nor the burdens of the longevity of some of
> our witnesses and some of our Commissioners, and I certainly have to
> concede that I am not fully cognizant of our yet-to-be-articulated
> minor player exemption. If there is one, I would like to be able to
> tell people out there precisely when that comes into play, because I
> think if you look at our enforcement docket, that there are a number
> of individuals who would probably have considered themselves minor
> players and might want that defense available to them.
>
> But at 109.21(d)(4), we list a number of commercial vendors who would
> be swept into the rule dealing with common vendors. Some of these, I
> want to know if you agree with. Like (g) is people who provide voter
> lists. Would you agree that we should include people who provide voter
> lists?
>
> MR. SIMON: Yes, I do.
>
> VICE CHAIRMAN SANDSTROM: Do you realize that, nationally, there\'s
> only a very few companies who actually provide voter lists?
>
> MR. SIMON: Well, that\'s why\--
>
> VICE CHAIRMAN SANDSTROM: A handful. I\'m talking three\--
>
> MR. SIMON: Yes, I understand the point. I mean, that\'s why the
> approach I\'m suggesting is not to make this a per se rule or
> conclusive bar, but to impose an obligation that the company take
> whatever measures are appropriate internally to ensure that
> information that is gained in their dealings with the candidate is not
> passed on in their dealings with the independent spender.
>
> VICE CHAIRMAN SANDSTROM: So, again, I think it would be very useful to
> help us with some language there, because we get into areas like media
> buyers and we have the same problem. There are very few people who buy
> media. Some information they have is going to be shared because
> they\'re being hired for their political expertise. They know with
> respect to the reach of a particular channel what people are going to
> be reached and what demographics at a certain time, and then you hire
> a political media buyer because you want someone who knows
> Congressional districts, which stations have the best coverage there.
> So you\'re almost invariably going to hire the same media buyer and
> you\'re going to look to them for the same expertise that the
> candidate came in and hired you for.
>
> MR. NOBLE: Mr. Vice Chairman, if I could respond to that, I think, as
> I understand one of your witnesses yesterday testified, that maybe one
> of the reasons that there are so few vendors in this area is because
> people like the idea they\'re going to somebody who knows all the
> other strategy of the candidates, that, in fact, if the Commission had
> a rule like this and enforced a rule like this, it may be a good
> opportunity for more vendors to surface, that more people would have
> to surface.
>
> VICE CHAIRMAN SANDSTROM: So, essentially, they should be covered if
> they\'re being hired for the same expertise?
>
> MR. NOBLE: If, in fact, in their job\--
>
> VICE CHAIRMAN SANDSTROM: Knowledge of the Congressional district, for
> example.
>
> MR. NOBLE: If, in fact, in the job they are dealing with one party and
> getting information on that party and their expertise in that party is
> strategic information, then yes, I think in that situation that it
> could compromise independence of an expenditure if another party hires
> them to do the same exact thing to support the first candidate.
>
> VICE CHAIRMAN SANDSTROM: We may need some venture capitalists to go
> out there and create companies in which\--I think the margins here are
> rather small and the amount of business is rather small and the
> expertise is not widely shared. Essentially, people who do political
> work want that expertise and there is not a huge enough market, or
> we\'re going to drive up the price substantially, and certainly most
> of your organizations argued against, or for proposals that drive down
> the cost of campaigns. This is one, I think, that would drive them up
> tremendously in order to pay the costs of people acquiring that
> expertise.
>
> CHAIRMAN MASON: Commissioner Smith?
>
> COMMISSIONER SMITH: Thank you, Mr. Chairman. I\'ll ask a couple
> questions about the same part of the regulation, since the Vice
> Chairman brought us there, but a slightly different angle.
>
> Looking at some of the same lists he\'s raised, subsection (g), people
> who develop voting lists, (h), people who select personnel or
> contractors, where I would also apply perhaps (d), fundraisers. Where
> is the corruption or the potential for quid pro quo corruption or the
> ability to coordinate any strategy or campaign or tactics here? In
> other words, we\'re talking about a group, and they\'re going to go
> out and run some ads that will be supportive of a candidate and they
> want to hire a vendor who has provided something to that candidate for
> selecting personnel for that candidate.
>
> And I\'m just trying to figure out, how does that create an
> opportunity, really, to actually coordinate campaign strategy to add
> value to the, what would otherwise be an independent expenditure and,
> therefore, unregulated? How does the fact that the vendor they use
> once hired somebody create that kind of problem that we\'re trying to
> get at, that as Mr. Simon indicated in his opening remarks, that
> potential for quid pro quo corruption there? I think some of those are
> a little bit over-broad, but I\'m open to the idea that maybe there is
> some way they create corruption.
>
> MR. NOBLE: Well, the\--
>
> COMMISSIONER SMITH: I\'m talking again about (d), (g), and (h), in
> particular.
>
> MR. NOBLE: Well, (d), I think, is an easier one. In (d), the problem
> there is that the candidate hires a fundraiser and in that learns the
> fundraising strategy of the candidate, or advises the candidate on the
> fundraising strategy, or develops the fundraising strategy for the
> candidate and then goes out and works with an independent group and
> has knowledge of where the candidate is doing the fundraising and the
> independent group goes out and, quote\--or a, quote, \"independent
> group\" goes out and starts targeting those same people with ads
> supporting the candidate. So that is the coordination.
>
> Now, once you have the coordination, Congress and the courts have
> presumed the potential for corruption there, because there, what you
> have is the opportunity for a potential quid pro quo\--
>
> COMMISSIONER SMITH: But how does one do a public communication like
> this, target it to the people who gave money? That\'s a pretty small
> group. You certainly aren\'t going to be running TV ads targeting the,
> you know, couple thousand donors, maybe, who gave money to the
> campaign.
>
> MR. NOBLE: You may very well be talking about a fundraising appeal
> that deals with issues that most fundraising appeals do, deal with
> specific issues and are really reflective of the campaign strategy.
> That gives the fundraiser potential inside information that will be
> very helpful to a third party to make sure that the expenditure
> they\'re making is helpful to the candidate and that the candidate
> then knows that we\'ve got a group out there that is doing everything
> it can\--
>
> COMMISSIONER SMITH: Can\'t they get all that from looking at FEC
> reports?
>
> MR. NOBLE: There are a lot of ways you can get it. What the law gets
> at is coordination. The law gets at the actual action between
> individuals or between people or committees where they work together.
>
> COMMISSIONER SMITH: I understand. I\'m not saying that there\'s
> necessarily coordination here just on the basis of that, or much
> potential for quid pro coordination.
>
> Let me ask you one other question on that, because we\'re running out
> of time. I\'d like to more develop that, because I think that\'s an
> important argument and I think that you have raised some good points,
> Larry, and at least gotten somewhat to what I\'m after, but consulting
> or otherwise providing political or media advice. What is covered
> there that is not covered in items (a) through (h) under that
> subsection? I\'m sure this is thrilling for the national audience.
>
> \[Laughter.\]
>
> MR. SIMON: You know, that strikes me as kind of a catch-all category,
> but I think that, in a sense, best expresses the potential problem. I
> mean, if you have a vendor who is crafting the message of the
> candidate and that same person is hired by a supposedly independent
> spender to put a message out about the candidate, I mean, it\'s almost
> impossible not to have coordination in that situation.
>
> COMMISSIONER SMITH: Yes, except for I think they would probably have
> been covered in one of the others if they were developing a message,
> because they would have been developing a content of a public
> communication or producing it or so on.
>
> Because of time, if I can ask one real quick question and just get a
> quick answer, what would you think about a fair use exception for
> republication, similar to a copyright law, if you want to use some
> small piece?
>
> MR. NOBLE: Off the top of my head, I think it\'s an interesting idea.
> I mean, I want to think about it more, but if there was nothing else
> other than you just picked it off the Web or you went into the\--the
> classic one is you go into the campaign headquarters and you pick up a
> brochure. You take it out to Kinko\'s and you make another 100,000
> copies. You\'ve never talked to anybody in the campaign.
>
> You know, I think that\'s an interesting concept. You may not be able
> to do it under the republication standard. Congress did put in the
> republication provision. It seems to like that, because it\'s been in
> there for a while, so I\'m not sure you have the authority to do it,
> but it\'s an interesting idea and I want to think about it more.
>
> COMMISSIONER SMITH: Another other thoughts?
>
> MR. SIMON: I guess it strikes me as a republication problem.
>
> COMMISSIONER SMITH: That that would exceed\--the statute says any
> republication\--
>
> MR. SIMON: Yes, because the statute is pretty categorical on that.
>
> COMMISSIONER SMITH: Thank you very much, gentlemen.
>
> Mr. Chairman, I just want to say that we\'re going to run over, it
> looks like, and I think we should, and, therefore, I may need to walk
> out on my last couple colleagues, and I apologize to you. I want to
> thank all of you for coming and for your comments an I will read the
> remainder of the transcript if I have to leave early. Thank you.
>
> CHAIRMAN MASON: Commissioner McDonald?
>
> COMMISSIONER McDONALD: Mr. Chairman, thank you. Let me first say to
> anyone who may be viewing these proceedings, clear a few things up. I
> think we\'ve talked a little bit in code this morning for some folks,
> and I think that the point that the Chairman made early on, I\'m not
> so sure I would have directed it to this panel, but I can appreciate
> his concern.
>
> There\'s been a discussion about corruption and this Commission.
> Senator McCain, in an interview several weeks ago, I guess, alluded to
> the corrupt Federal Election Commission. I want to cite the Senator
> specifically, because, one, I have a great deal of respect for Senator
> McCain. I\'ve worked with him from Moscow to Mexico. I can truthfully
> say I\'ve never talked to him about the Federal Election Campaign
> activities because we were there in different capacities. And I
> certainly have great respect for what he\'s done in relationship to
> service to his country.
>
> On the other hand, the term \"corruption\" is a fairly serious charge.
> I have been here 21 years. I can truthfully say of my colleagues, who
> I have some very fundamental differences of opinion about aspects of
> this law, are, without question, above board, honorable, work hard,
> and take their job very seriously, whether I agree with them or not.
>
> Senator McCain was once accused of corruption some years ago, and I\'m
> sure it was exceedingly painful for him during that process. I
> remember it quite well, quite frankly. There were five United States
> Senators involved and he was one of them. He was absolved, obviously,
> of those complaints.
>
> I hope in the 21 years I\'ve been here, I\'ve learned something. When
> I came here, at that point, I was the youngest Commissioner here. I am
> sorry to report I am now the oldest Commissioner here. But I do hope
> that I\'ve learned something out of this process.
>
> It\'s one thing to have very fundamental differences of opinion about
> the law, and certainly, I have fundamental differences of opinion
> about the law with my learned colleagues. But I don\'t question for a
> minute their integrity, and I would hope that no one else, whether
> they be a member of Congress or a member of the general public, would
> do the same.
>
> The theory behind this great nation of ours, I think, is that you can
> differ, and it\'s a hot time of the year in politics. It is getting to
> be a very tough, sensitive hour. But the one thing that we\'ve said
> all over the globe, whether it\'s Senator McCain or myself or
> Commissioner Smith, who just went and did some work in Ecuador,
> wherever you may be, we\'ve always taken the position that a
> difference of opinion should be allowed and aired and that everyone
> accept it for what it is.
>
> As Commissioner Toner alluded to earlier, it\'s a difference of
> opinion. Those aren\'t criminal manners, unless someone can bring
> forth information that I\'m not aware of. They\'re a difference of
> opinion.
>
> So I hope as we go through the process, and whatever happens and
> whatever we do and however this Commission comes out, however the
> courts come out, that people not confuse a difference of opinion with
> corruption. I think that would do a great disservice, not just to the
> Commissioners. We\'ve been called lots of things. I\'ve probably been
> called more things than most people on this panel, maybe everybody put
> together.
>
> The former Speaker of the House called us nuts. The former chairman of
> one of our committees called us pathetic. I note that when you support
> things that members of Congress are for, suddenly, they think we\'re
> pretty good. That\'s just how politics is, and this is a political
> environment, and these questions are extremely important.
>
> This panel, this is a very distinguished panel, as has been every
> panel that has appeared before us. They\'ve given long thought to what
> their position is. They\'re products of their environment, as we all
> are. I applaud anyone who will come forward and state their position.
>
> But it is extremely important, if we don\'t come away with anything
> else, that we realize that a difference of opinion, no matter how
> fundamental it is, does not equate to corruption. I am hopeful that
> the Senator, who I really do have great respect for, if he had an
> opportunity, would rethink that term because he obviously has a great
> forum in this country and people pay a great deal of attention to what
> he says. He was on \"Saturday Night Live,\" I think last week. That
> alone probably draws a few more people than the Federal Election
> Commission does\--maybe. We\'re hopeful that everyone\'s watching us.
>
> But I\'m hopeful that we can get past this, and it dawned on me that
> people may not really appreciate what this discussion was about. It\'s
> tough to ask a panel that. The panel wasn\'t the ones who said that,
> so I wanted to give them a little slack. But I took the Chairman\'s
> point because I think he made a very good point in terms of what is at
> stake here.
>
> So I hope as we proceed, we\'re careful about what we say in terms of
> at least what people\'s motives are. I happen to think, in the service
> of the Commissioners that I currently serve with, that their motives
> are good in terms of what\--they\'re acting in the faith they believe
> in, and I think that\'s legitimate and I hope we can keep it to that
> sort of dialogue.
>
> Thank you, Mr. Chairman.
>
> CHAIRMAN MASON: Commissioner McDonald\'s time has expired, but if
> he\'d like some more, I\'d be happy to give it to him.
>
> \[Laughter.\]
>
> CHAIRMAN MASON: I appreciate those remarks, and I think the panelists
> recognize that they weren\'t the targets. But I had brought it up in
> this rulemaking because in a previous rulemaking, we had
> disagreements, and as Commissioner McDonald was pointing out, that
> charge arose out of it. As I say, I appreciate both the specific
> comments that this panel has put forward and the way they have done
> it.
>
> A couple of specific questions. Mr. Shor, you referred to some issues
> with inconsistency in the way we used the term \"public
> communication\" in the regulation in your written testimony, and this
> played into a concept I\'d asked some of the panelists about
> yesterday. About page four, you talked about, at the top, the
> regulation doesn\'t define or consistently use the term \"coordinated
> communication,\" and then you talk about some cross-referencing issues
> and so on like that.
>
> My question is, whatever content standard we end up using, whether it
> would be a good idea to include that as a definition of
> \"expenditure\" for the purpose of 441a(a)(7), which is what we\'re
> talking about, and one of our problems is we\'ve got expenditure over
> in 431(9), general definition of the statute. We\'ve got it over in
> 441b as to corporations. And then we have it here as to coordination.
> As Larry Noble well knows, there\'s been this argument about what does
> \"expenditure\" mean for purposes of this particular section. Is
> putting a definition of \"expenditure\" in a way to get at that
> problem?
>
> MR. SHOR: I\'m not totally sure I follow. I mean, I think that as a
> practical matter, if you adopt a specific rule and it says that this
> is the content standard and you need a conduct standard and you need
> the meeting of a conduct element and a content element in order to
> trigger a finding of coordination, I would say that as a practical
> matter, sort of what you have done is defined the content standard for
> coordination, and I would assume that the Commission\--I don\'t know
> what the substance of that would be. I would assume that the
> Commission would sort of view\--
>
> CHAIRMAN MASON: I agree with that at the practical level, and what
> I\'m trying to get at is, administratively, is this may be a good way
> to do it. But Larry and Paul were discussing. I\'d be happy to have
> your views on it. And there\'s no trick to this\--
>
> MR. NOBLE: No, I know there\'s no trick. We were saying that we\'re
> also not quite sure where it\'s going. I mean, it may not be a bad
> idea, but I have to tell you, I have an overall reaction that every
> time you start defining a word differently in different sections, it
> just leads to a lot of problems, and so I\'m always reluctant to say
> we\'ll define the word differently for different sections of the law.
>
> MR. SHOR: Yes, I think that\'s right. And the one thing I was talking
> about in my comments at that point is I think the reg says, 109.21
> says, what is a \"coordinated communication,\" and it sort of sets up
> a discussion of you\'re going to define the term \"coordinated
> communication,\" and yet that term is never actually defined, and it
> gave rise to some confusion on my part and I was suggesting a more
> technical\--
>
> CHAIRMAN MASON: Okay. I want to try to move quickly to the
> Presidential issue, and I know why everyone\'s concerned about that,
> but just posit a hypothetical, which is that we have a factual
> situation identical to the situation that gave rise to the
> [Colorado]{.underline} litigation, a Presidential nomination which is
> not, as has consistently been the case, not settled before the
> convention, and we have, let\'s say, three major competitive
> candidates coming into the convention. The primaries are, for all
> purposes, over in March. The convention is not going to be until
> August. The political party looks around and says, well, gee, the
> incumbent\'s in. He\'s financing his own campaign. He\'s not even
> under spending limits, and we\'ve got to do something to fix it so
> that whoever our nominee is in August, they\'re not already out of the
> box.
>
> Now, I understand that [Colorado]{.underline} explicitly said, we\'re
> not addressing that, but under the rationale in
> [Colorado]{.underline}, how could you fail to reach a similar
> conclusion?
>
> MR. NOBLE: Well, I think you can avoid the similar conclusion by
> recognizing that the Presidential system is different because it\'s
> publicly\--or the publicly-funded Presidential system is different
> because it is publicly funded.
>
> I fully understand the dilemma that the parties face, but it\'s also
> that same dilemma that they use to justify putting out the so-called
> issue ads during that period of time. They\'ve used that to justify
> doing a lot of things. It may be an issue Congress has to expressly
> address in the public funding system, and what happens between March
> and August. But I don\'t think that\'s justification for allowing the
> independent expenditures with the parties in the context of a
> publicly-funded Presidential campaign. I think that presents very
> different issues.
>
> CHAIRMAN MASON: But if it were in the primary and the opposing
> candidate weren\'t taking public money and the expenditures were in
> opposition to that candidate\--
>
> MR. NOBLE: But presumably, the candidate on the side of the
> expenditures is taking the public money.
>
> CHAIRMAN MASON: One of them might be, ye.
>
> MR. NOBLE: And again, I think you\'re talking about problems that may
> exist or issues that may exist within the whole public funding system
> at this point. The system has evolved probably in a way that was never
> originally contemplated. So I think it\'s something that may need to
> be looked at.
>
> But we were jumping off from [Colorado]{.underline}\'s statement that
> the public funding system does present separate issues and the
> constitutional justification for allowing the political parties to
> make \"independent expenditures\" in a non-publicly-funded arena are
> very different than the publicly-funded arena, where the candidate has
> opted to accept public funding. It\'s a voluntary system, and in that
> system, we think it is appropriate to say, then, that you have a
> different relationship with your party and the party can\'t make
> independent expenditures.
>
> CHAIRMAN MASON: Commissioner Thomas?
>
> COMMISSIONER TONER: Thank you. I was going to ask questions in that
> area, but let me just finish up with what I think is important to lay
> out.
>
> We\'ve had some experience with what happens in that time frame, and I
> suppose I would say, first of all, even given the approach that we\'ve
> laid out in the proposed rulemaking, much of what we\'ve seen in the
> past in the Presidential area would certainly qualify as coordinated
> activity and would not be viewed as independent by any stretch.
>
> So the question, I guess, would come down to whether or not the party
> committees might be able to set up some structure from that point when
> the nominee is fairly certain on through the general election, whereby
> they could be making what we would consider to be independent
> expenditures.
>
> There was, after the [Colorado I]{.underline} decision, some effort by
> the Senatorial Campaign Committees, in particular, to try to undertake
> what they were considering independent expenditures. The Commission
> never really analyzed any of those as to whether or not they really
> were independent, but literally millions of dollars in Senatorial
> races were expended. Through the grapevine and through reporting in
> the media, we were seeing references to the fact that the party
> committees were, although they were undertaking coordinated
> expenditures at the very same time, they were claiming that they could
> set up a separate division or department with separate staff that
> would be undertaking the independent expenditures simultaneously.
>
> I\'ll throw it out for any of you. Can you see any conceivable way
> that, in reality, a national party committee would be able to
> undertake what we would consider to be an independent expenditure,
> especially given the new BCRA provisions about you can\'t do both?
>
> MR. SIMON: And I think the new BCRA provisions arise directly out of
> that experience in the 1996 campaign that you refer to, that in the
> wake of [Colorado I]{.underline}, the parties just sort of set up
> these supposedly independent units and engaged in a lot of supposedly
> independent spending at the same time they were doing spending under
> 441a(d), and I think the judgment of Congress is that that was a sham
> and that it wasn\'t sufficiently independent and that\'s what gave
> rise to Section 213 of the bill.
>
> I mean, my own reading of [Colorado]{.underline} is that it is an
> exceedingly narrow opinion on very odd facts and should be read to be
> limited to those facts. And though, in principle, the parties, like
> any other individual or political committee, has a constitutional
> right to make independent expenditures, like any other political
> committee, the party has to be truly independent, and I think under
> the unusual facts of [Colorado I]{.underline}, the court found true
> independence, but I think post-nomination, it\'s very unlikely a party
> is going to be truly independent, and certainly if it\'s also making
> coordinated expenditures at the same time, Congress has made a
> judgment under those situations it cannot be sufficiently independent
> to make independent expenditures at the time. I think that\'s the
> philosophy of Section 213.
>
> COMMISSIONER TONER: Thank you. I\'ll offer you a chance at this moment
> to say whether you think what happened in the 1996 cycle was legal or
> not. Does that help you? I guess that\'s not of any value, either.
>
> \[Laughter.\]
>
> MR. NOBLE: I think I\'m on record on that.
>
> \[Laughter.\]
>
> COMMISSIONER TONER: Thank you, Mr. Chairman.
>
> CHAIRMAN MASON: Larry Norton?
>
> MR. NORTON: Thank you, Mr. Chairman. Just a couple of things.
>
> We\'ve talked a little bit this morning about the debate between
> whether the unitary structure is required by the statute or whether
> the national party committees and the States and locals can be looked
> at differently. Of course, the concern is that a single local party
> committee can make a small, independent expenditure and prevent the
> national party committee from thereafter using the coordinated
> expenditure authorization.
>
> Were the Commission to accept your view that the statute requires a
> unitary structure here, what would be your view, any of you, about a
> safe harbor where the State chair could file a declaration with the
> national party certifying that no independent expenditures would be
> made by the State or subordinate party committee? Would that be an
> appropriate safe harbor under that structure?
>
> MR. NOBLE: I would not want to say that that would be an appropriate
> safe harbor in all cases. There might\--you know, one thing we
> haven\'t discussed here in this context is the Commission always has
> enforcement discretion, which it uses quite often. That might be an
> element that goes to a question of what the Commission does about a
> specific situation, but that would almost be a shield. I think what
> you\'d find is everybody would be filing those affidavits and then not
> worrying about what goes on afterwards.
>
> So I would be reluctant to say that you could have a safe harbor by
> just filing a statement that says, we are not undertaking any of this
> activity. I think you would have to look at it as specifically case by
> case. I am not sure how often this is going to come up, this\--
>
> CHAIRMAN MASON: If both of you would withhold, because Commissioner
> McDonald raised his hand, and I\'ll give you, Larry, a chance to go on
> to another question, but this is of interest to me because the issue
> is that the statute says, well, after you\'ve done one, you can\'t do
> the other. Now, if the parties, let\'s say, legitimately decide they
> want to go the coordinated route but they don\'t want to spend the
> money until a couple of weeks before the election, the problem is then
> somebody locally, who\'s perhaps trying to engage in exempt activity,
> fails to meet some of the requirements for exempt activity and all of
> a sudden it turns out to have been coordinated, or in this example,
> we\'d have to say independent.
>
> I think what Larry Norton was getting at is in that circumstance, yes,
> the local party that made the independent expenditure would have
> violated the law, but could we perhaps allow the parties to file a
> statement early declaring their intention, and then allow that to
> determine, as it were, which side of the violation we go after,
> instead of having the first one through the gate end up prohibiting
> everyone else.
>
> MR. NOBLE: All right. I may have misunderstood the question. I think
> that\'s something to take a look at, that you file this declaration of
> intent. But again, it would not be an absolute safe harbor. You would
> have to still look at exactly what happened. But it may later inform
> your prosecutorial discretion about what you\'re going to do about it.
> If there\'s a statement of intent and you\'re saying and then the
> local party didn\'t follow the statement of intent, I think it would
> be a factual question, but it may be something that you would want to
> take a look at.
>
> CHAIRMAN MASON: Commissioner McDonald?
>
> COMMISSIONER McDONALD: Mr. Chairman, thank you. The Chairman really
> was getting to my very point, and I gather where Larry Norton was
> going. We want to have a system, I hope, that, one, complies with the
> statute, and two, is practical in its application.
>
> As Larry Noble pointed out, we\'ve had great latitude and discretion
> in the past in enforcement matters. I suppose the way you could really
> do this is you could make an expenditure right out of the box at the
> national level, I guess you could start doing it the day after the
> cycle started and it would preclude everyone else. I mean, there\'s
> all kinds of scenarios that we can put forward, but I like the
> Chairman\'s approach and question.
>
> At the end of the day, most party structures\--I\'m going to go back.
> I was told yesterday that the Arkansas party structure is somewhat
> different than the type of structures that I\'m familiar with. But at
> the end of the day, usually speaking, the apparatus runs uphill, from
> the local to the State. The State has the authority. The Federal has
> the authority. Now, there may well be exceptions to that rule.
>
> We do have a program, the Vice Chairman is right, we certainly have a
> program that gathers in its net what I consider fairly insignificant
> players, and I am opposed to the program. But I must say to you that
> here, I hope our goal is to figure out a way to have the practical
> aspect so that someone who\--you could certainly create the scenario,
> I can\'t stand our party chairman, whoever that may be, so I run out
> locally and do something immediately to throw the entire\--the party
> chairman beat my friend for national party chairman, so I\'ll show
> them. I\'ll go out and make an expenditure of \$500 and it will shut
> down the entire apparatus.
>
> You know, it may well be that we\'ll have to have a designation at the
> outset, and then if someone does not follow that designation,
> obviously, we\'ll take a look at it, because again, it\'s like having
> employees. You can\'t always keep employees or agents or whomever in
> line just because it\'s the rule. But if you serve notice, I think
> they jeopardize themselves more than you jeopardize yourself.
>
> And so I hope we can get something that\'s applicable on a practical
> side, and I kind of am leaning in the direction of the Chairman and
> the suggestion of the General Counsel. If we can figure out something
> so that we don\'t make it look ridiculous, then I do think that the
> comment Don Simon made earlier at the outset is, obviously, we would
> like to have Congress go back and revisit this if there\'s some way to
> do it. If there\'s no, we for years made legislative recommendations,
> and believe it or not, they didn\'t take them, and we were in shock.
>
> \[Laughter.\]
>
> COMMISSIONER McDONALD: Now, ultimately, I\'m proud to say, they did
> take some, so maybe they would take this on an emergency basis. But
> there are ways to get at this without the implication that, oh, we
> just can\'t proceed, because that\'s just not the case, and we\'re
> going to have to proceed because it\'s the law.
>
> CHAIRMAN MASON: I\'m going to get back to you, Larry, but I recognize
> Vice Chairman Sandstrom.
>
> VICE CHAIRMAN SANDSTROM: There\'s is a very big issue that\'s been
> alluded to that I think we should touch upon. In 1993, President
> Clinton, in pursuit of his health care initiative, looked to whether
> to use outside groups to promote that initiate and coordinate it or
> whether to use the political party in order to try to bring a national
> health care system. He looked and made the decision that it actually
> was better from a legal and ethical point of view to use the party.
> The White House policy staff, the policy staffs informed the
> discussion and those ads. They had to build support around the country
> and explain the program. A very large campaign was undertaken to
> promote national health. It was three years before he\'d be up for
> reelection again.
>
> Two years later, the President found himself in the situation in
> August and September of 1995 of a Republican Congress having been
> elected and the first major fight over budget. So the decision was
> made, in order to break this budget deadlock, determine what the
> country\'s economic priorities would be, they would run ads in August
> and September, October, when the appropriations and budgets are being
> considered, to break that deadlock.
>
> Now, of course, if the President were successful, those efforts would
> help his reelection. But for many people who were successful in the
> efforts, they felt it would improve their lives and the reasons they
> had voted for President Clinton.
>
> Doesn\'t there need to be a time limitation on when coordination
> clicks in, that if you\'re running ads in August and September of 1995
> that do not expressly advocate your election, never refer to you as a
> candidate for election, but that are trying to resolve a major issue
> facing the country, how the country\'s tax funds are going to be
> spent, the party should have the opportunity, rather than relying on
> outside groups to dictate what the legislative debate would be?
>
> MR. SIMON: Commissioner Sandstrom, I just don\'t buy your recitation
> of the facts. I think that is a profound mischaracterization of what
> actually happened and what the Commission found happened in the course
> of its investigation. I think that campaign by the DNC was just shot
> through in every way by the Clinton reelection committee. It was
> controlled by the committee. It certainly was coordinated with the
> committee. And I think there is plenty of evidence that those ads were
> written and targeted for electoral purposes. You know, I think for
> those reasons that that was a massive violation of the campaign
> finance laws.
>
> VICE CHAIRMAN SANDSTROM: I profoundly disagree with you what the
> evidence shows in that case, but let\'s go back with respect to the
> national health campaign, because during the discussions there was
> should we reach back even into 1993, into those ads?
>
> MR. SIMON: Well, as I said earlier this morning, I think time is a
> factor. Time is a consideration that you take into account. I think\--
>
> VICE CHAIRMAN SANDSTROM: What should the time be?
>
> MR. SIMON: Well, I don\'t know that it\'s a matter of drawing a bright
> line and saying, in this context, anything before a certain date goes
> and anything after a certain date falls into a different category. I
> think the Commission has to do an evaluation of multiple factors in
> the context of what was going on, what the message was, who was
> controlling the spending, what the involvement of the campaign
> committee was, what the evidence shows the motivation was, and then
> make a judgment, and time is a factor.
>
> VICE CHAIRMAN SANDSTROM: Thank you. But the President in those cases
> made a determination. He reviewed the ads.
>
> MR. SIMON: Yes, and\--
>
> VICE CHAIRMAN SANDSTROM: Both the health care company\--
>
> MR. SIMON: \--as did the senior campaign advisors.
>
> VICE CHAIRMAN SANDSTROM: So?
>
> MR. SIMON: Well, that, to me\--
>
> VICE CHAIRMAN SANDSTROM: They were also serving as pollsters for the
> DNC to determine how to sell that campaign. I know we profoundly
> disagree on the facts of that case, and we shouldn\'t argue that case.
> I was just asking the question, if you go on my recitation of the
> facts and they were accurate, shouldn\'t there be an ability for a
> national committee to run such a campaign a year before an election in
> order to try to affect major issues pending in Congress?
>
> CHAIRMAN MASON: Larry Norton?
>
> MR. NOBLE: If I can just\--I hate to leave that question hanging
> there, and I\'ll speak only for myself. My answer is, yes, there
> should be. But on the specific facts that you\'ve given, that\'s not a
> problem. As Mr. Simon said, those weren\'t necessarily the specific
> facts we had to deal with in that particular case.
>
> But, sure, the party should be able to run an ad, discuss it with the
> President, that\'s dealing with a specific legislative issue. When you
> start bringing campaign people into the ad, when the ads start looking
> like campaign ads, I think you\'ve crossed another line.
>
> VICE CHAIRMAN SANDSTROM: And because of the indefiniteness of those
> standards is why we didn\'t proceed in those matters. Thank you.
>
> CHAIRMAN MASON: Larry Norton?
>
> MR. NORTON: Mr. Chairman, you are happy not to be here in 1996.
>
> \[Laughter.\]
>
> CHAIRMAN MASON: I was just thinking that.
>
> MR. NORTON: Actually, your follow-up question really got to the heart
> of my concern and my issue and I didn\'t have any further questions.
> Thank you.
>
> CHAIRMAN MASON: I\'d again like to thank the panelists for being with
> us so long. Mr. Shor, I hope your second trip wasn\'t as arduous as
> you perhaps found your first Commission trip.
>
> MR. SHOR: Nothing could be.
>
> \[Laughter.\]
>
> COMMISSIONER TONER: Having gotten somewhat into this subject of what
> Senator McCain said, on reflection, I think I\'ve figured it out.
> He\'s been horribly misquoted. There\'s a longstanding, healthy
> competition between Navy people and Marine people, the Marine Corps. I
> think the phrase he was using was the FEC is \"Corps-ed up.\"
>
> \[Laughter.\]
>
> COMMISSIONER TONER: It has a slightly different meaning. It\'s not
> good, necessarily, but it\'s different.
>
> \[Laughter.\]
>
> CHAIRMAN MASON: We will be in recess until two o\'clock.
>
> \[Whereupon, at 11:54 a.m., the Commission recessed, to resume at 2:00
> p.m.\]
>
> [A]{.underline} [F]{.underline} [T]{.underline} [E]{.underline}
> [R]{.underline} [N]{.underline} [O]{.underline} [O]{.underline}
> [N]{.underline} [S]{.underline} [E]{.underline} [S]{.underline}
> [S]{.underline} [I]{.underline} [O]{.underline} [N]{.underline}
>
> CHAIRMAN MASON: The Special Session of the Federal Election Commission
> for October 24, 2002, will reconvene. This is our hearing on
> coordinated and independent expenditures, and we have a very
> distinguished panel this afternoon consisting of former Commissioner
> Tom Josefiak, Chief Counsel of the Republican National Committee.
> Welcome back, Tom.
>
> MR. JOSEFIAK: Thank you, Mr. Chairman.
>
> CHAIRMAN MASON: Stay a while. And Joseph Sandler, of Sandler, Reiff
> and Young, counsel for the Democratic National Committee. Welcome,
> Joe. Both are familiar to us.
>
> We will give you five minutes for an opening statement, and then go to
> a round of questions from Commissioners and the General Counsel. Tom,
> I think we agreed we were going to start with you, so please go ahead.
>
> MR. JOSEFIAK: Thank you, Mr. Chairman, members of the Commission. I
> don\'t envy your task here. As I sat reading this stuff again and
> again and again, my eyes glazed over in trying to decipher, if I were
> part of the regulated community, how I could possibly react to this.
>
> I sat with some of you when we dealt with the allocation regulations,
> and there, we had basically 100 State party committees and the
> national committees and we thought at the time that was sort of a
> challenge. And when I look at the scope of these regulations applying
> to the national, State, and local organizations and trying to decide
> what you could possibly tell the regulated community, specifically the
> party committees at that level, I just, again, don\'t envy you.
>
> Having said that, I think it\'s important for me to say that you have
> the unenviable task as a Commission to try to adopt regulations based
> on a statute, BCRA, that my committee is challenging in the courts
> right now as being unconstitutional, so anything I say is premised on
> the fact of you trying to make some sense of something that I don\'t
> particularly agree with and I think is suspect to begin with.
>
> Having said that, again, another point I think I have to make here is
> that when I look at this statute and any attempt to come up with
> regulations, no matter how simple or complex they are, I look at the
> regulated community and I see a chilling effect. I see a chilling
> effect by some who look at this and say, we\'re not getting involved
> at all. We can\'t afford this. We don\'t want to get into trouble. And
> on the other side, I see people saying, well, it doesn\'t matter
> because this is unenforceable. How is anyone going to possibly police
> this thing? I\'m going to do what I want to do.
>
> And so, again, you\'ve created this sort of unknowing world out there,
> to phrase the sponsors in their response to you, the real world, and
> trying to figure out how the real world is going to react to this.
>
> In my real world, my concern is that when you have a group of party
> leaders sitting down before an election and discussing what we term as
> victory plans, sort of the \"get out the vote\" plan that affects
> everyone on the ticket\--I don\'t know what Joe\'s party calls them,
> but we call them victory plans\--and trying to decide who is supposed
> to do what and involve party leaders, including candidates, in those
> operations, even though the candidates may be paying for their fair
> share of an event, that that in and of itself could create a
> coordination perspective that would jeopardize anything that the
> parties would do in the future because that may be viewed as
> coordinated activity with a candidate under certain circumstances.
>
> So I just think, having said that, the Commission needs to adopt, in
> my mind, in my view, the broadest standard possible, and quite
> frankly, as I said in my brief remarks, written remarks to the
> Commission earlier, I don\'t see why the Commission even has to
> address the coordination issue with regard to parties and their
> candidates, particularly at this point in time.
>
> There\'s nothing that I see in BCRA that requires that, and my
> perspective is, under the circumstances that the Commission is under
> right now and having to adopt a regulation process and regulations
> within a short time frame, there is no reason to broaden this in
> scope, with due respect to the Commission, that most of the
> Commissioners really may not understand the inner workings of
> political party committees, particularly at the local level.
>
> Again, think in terms of\--a word that I would leave with you is a
> \"workable,\" and I find that to be impossible under these
> circumstances. So having said that, I\'d like to leave a couple
> considerations for you, maybe misconceptions in your own proposal.
>
> First of all, the idea of when you\'re trying to deal with
> coordination and whether I\'m making a coordinated expenditure or an
> independent expenditure, how that\'s going to jeopardize the food
> chain, the party committees up and down the food chain. The proposal
> the Commission is offering is groupings, a national grouping and a
> State grouping, and I think there is some misconception there because
> that is based on sort of what I view as an affiliation standard of
> some sort, establishment or maintenance, or even broader than that in
> some proposals.
>
> But that\'s not necessarily the case at the national level. There is
> severe competition at the national level, and we by no means as the
> Republican National Committee establish or maintain the Senatorial
> Committee or the Congressional Committee. So that standard, I don\'t
> think, is a standard that makes any sense, if you\'re going to use
> that standard from a national perspective.
>
> I would even say that\'s the case at the local level. The State and
> local committees, the further down in the food chain, they may have
> some sort of an article in the State party bylaws, but by and large,
> from my experience, trying to deal with a powerful county committee,
> for example, in the State of New Jersey with regard to the State party
> and trying to say that, somehow, the State party controls what a
> county committee does has not been my experience at all. And so to say
> that, somehow, these kinds of groupings solve the problem, I think,
> misses the mark.
>
> The other thing, even if you were to establish that kind of a grouping
> system that you\'re talking about, it\'s clear to me that the sponsors
> of BCRA take a very different view of that and they view all the party
> committees to come under the one umbrella for that purpose. And so I
> think you\'ve got that conflict already built in there for you to
> decide how you\'re going to handle this.
>
> In my mind, again, the broader the standard, the better. Coordination,
> in my mind, to work at all, if you\'re going to regulate the party
> committees, has to be based on a particular communication, not an
> overall plan, but each communication in and of itself, from the
> example I gave you earlier talking about victory plans, talking about
> other things. If you\'re going to come up with a broad standard
> that\'s going to implicate all of the activities of a party committee
> and not a particular expenditure, if you adopt some sort of a
> coordination standard, then I think you\'re going to jeopardize the
> ability of party committees to do anything because of the very nature
> of what party committees do.
>
> The definition of \"agent\" that you talk about, I think the agency
> definition that you used early on in your soft money regulations is
> the way to go, and having said that, I think I\'ve spoken my mind.
>
> The summary of that speech is, be cautious, be careful, understand
> party committees. There\'s no reason to go into this detail at this
> point in time, and if you\'re going to establish a standard, establish
> a standard that affects one communication at a time and not the
> broader statement, so thank you, Mr. Chairman.
>
> CHAIRMAN MASON: I take it your plea that we should understand party
> committees means that you\'re going to waive your objections to our
> discovery request?
>
> MR. JOSEFIAK: Not a chance.
>
> \[Laughter.\]
>
> CHAIRMAN MASON: I thought I\'d give it a try.
>
> \[Laughter.\]
>
> CHAIRMAN MASON: Mr. Sandler?
>
> MR. SANDLER: Thank you, Mr. Chairman and members of the Commission. I
> appreciate the opportunity to appear today to offer some views on
> behalf of the Democratic National Committee.
>
> Our principal concerns relate to the Commission\'s proposal to
> regulate the interaction between a party committee and its own
> candidates, the issue of coordination between a party and its own
> candidates. The overriding consideration here would echo the sentiment
> expressed by my colleague, Bob Bauer, yesterday on behalf of the
> Congressional Campaign Committees, is that nothing in BCRA mandates
> that the Commission at this juncture make up new rules to determine
> when a party disbursement counts as an in-kind contribution to or
> coordinated expenditure on behalf of its candidate.
>
> When Congress wanted the Commission to make new rules, it certainly
> knew how to say that, and that\'s precisely why we\'re here today,
> because in Section 214 of BCRA, Congress said to the Commission, you
> need to make new rules to determine the standards for figuring out
> when there is coordination between party and candidates, on the one
> hand, and an outside organization, a non-party entity, a corporation,
> labor union, individual, on the other hand, or organization.
>
> There wasn\'t any such mandate or directive clearly with respect to
> coordination between a party and its own candidates, and so we believe
> there\'s simply no reason for the Commission to get into this issue
> now and that there is not sufficient time, given the demands on the
> Commission for the regulations that it is required under the statute
> to make, for the Commission to devote adequate time and consideration
> to these difficult issues.
>
> The biggest problem, almost, just to introduce this subject, under
> proposed Section 109(3)(1) would define party coordinated expenditure
> to include anything of value in connection with a general election
> campaign of a candidate. \"In connection with\" is not defined in
> these\--including, but it doesn\'t say limited to, party coordinated
> communications.
>
> How do you tell what else is included? It\'s not even clear\--does
> \"in connection with\" mean it\'s something other than or different
> from or in addition to party coordinated communications? If so,
> there\'s a whole world of issues that the Commission hasn\'t even
> begun to address in this rulemaking.
>
> Even the new definition of party coordinated communications, to us, is
> highly problematic because of the inappropriate application to the
> relationship between a party committee and its own candidates of the
> tests that are applied to the relationship between candidates, on the
> one hand, and outside independent actors, or reportedly independent
> actors, on the other.
>
> Consider the simple everyday case of a press release from the
> Democratic National Committee criticizing the President, President
> Bush, for some position or action or another. Presumably, the mere
> issuance of the press release is not a public communication, and
> assume that, as is always the case, these things are discussed with
> the leadership of the party and various people, some of whom are
> probably going to be running for President. Now it\'s mailed out,
> right, to 5,000 or 10,000 activists or donors. Maybe it\'s blast
> faxed. Maybe it\'s mailed. Now we have a public communication.
>
> Does the cost of every one of those things have to be counted against
> the Presidential 441a(d) limits? How about the fixed cost of the
> research that goes into this? Of course, both parties do this. It\'s
> just not comprehensible that the result of these regulations is
> supposed to be not only that the national parties have to spend all
> hard money, but their total budget for a two-year election cycle is
> now \$14 million, because they can\'t do anything that\'s not
> considered a contribution to or expenditure on behalf of the
> Presidential candidate?
>
> There really isn\'t\--I mean, this entire section, proposed section of
> the regulations, is a solution in search of a problem. There is no
> mandate to get into this area. There is no indication, no
> controversial problem or decision that we\'re aware of where the issue
> of coordination between a party and its own candidates has been
> problematic in the resolution of any enforcement matter or anything
> else of that nature.
>
> There\'s just no reason for the Commission to get into this area at
> all at this juncture. At more leisure, when the Commission has more
> time and resources to devote to the very difficult issues presented
> here, then it might make sense to revisit this topic.
>
> Thank you very much, Mr. Chairman.
>
> CHAIRMAN MASON: Thank you. First in the questioning order this
> afternoon is Commissioner McDonald.
>
> COMMISSIONER McDONALD: Mr. Chairman, thank you. Well, I don\'t know
> two more learned scholars of the Federal Election Campaign Act than
> the two gentlemen before us. Joe, it\'s good to see you. I don\'t know
> whether I should call you Tom or Commissioner Josefiak. Maybe I\'ll
> call you both, if that\'s all right. But I welcome both of you, and
> you raise some very, very interesting points.
>
> I notice that unlike a number of our commentors, your comments were
> very brief, and I gather that that has something to do with the time
> frame in which we\'re holding this session today. Am I right about
> that?
>
> MR. JOSEFIAK: Certainly from my perspective, that is accurate, but
> you\'re under a time frame to get regulations done and what happens in
> a week and a half from now is irrelevant to what you have to do and
> we\'re trying to be as cooperative as we can under the circumstances.
>
> COMMISSIONER McDONALD: Well, we appreciate it, because I know you all
> are under a terrible time frame at this point.
>
> It\'s been said by a number of witnesses\--and I certainly would not
> suggest that any of the witnesses have coordinated their testimony, I
> want to be clear\--it\'s been said that, and it\'s a good point, about
> how far we ought to go in this area or whether we should go in this
> area. Joe just made a fairly compelling argument about the party and
> relationship to its own candidates.
>
> Let me be sure I understand. Is it either of you\'s point of view that
> we needn\'t get into the area at all, or should we not get into the
> area this time, the candidate in relationship to the party activities?
> What is your suggestion there, Joe?
>
> MR. SANDLER: I think our position, and I think this is true of the
> Democratic Congressional Committees, is that the Commission should not
> get into it at this time. Following the, I guess the [Colorado
> I]{.underline} decision, the Democratic Congressional and Senatorial
> Campaign Committees filed a petition for rulemaking with the
> Commission, six years ago. If six years is not enough time for the
> Commission to thoughtfully and appropriately address these matters,
> then six days or six weeks or whatever it is that you have surely is
> not enough, either.
>
> I think the position is, not at this time. Certainly if there are
> issues or problems that the Commission deems warrant clarification
> through a rulemaking at another time, since this is not mandated by
> the Congress to be completed in any particular time table, that would
> certainly be appropriate.
>
> COMMISSIONER McDONALD: Well, it\'s a good point. As you know, I guess,
> and my colleagues can correct me because I really don\'t remember when
> the first BCRA legislation itself was introduced, and I think it was
> even further back than our six years, but I take your point as a very
> good point. I suppose, I guess, the question is, if not now, when? Do
> you have any more thoughts about that?
>
> This issue about the six years came up yesterday, and I think it\'s a
> very\--first of all, I think it\'s a very legitimate concern.
> Secondly, it kind of reminds me in my health program, which is, since
> I haven\'t done anything for the last six or seven years, should I
> start? And I think maybe I should start, I don\'t know.
>
> But my question, I guess, gets to be, we were told that after the
> election process, there would be a lot more time, which made some
> sense in terms of just reflecting on what\'s out there and what kind
> of concerns you have, particularly in this vendor area, which, as
> you\'ve alluded to in your comments, Joe, is going to be a pretty
> tough area for us.
>
> Are you thinking after the first of the year? I\'m just trying to get
> some sense of what you all see happening, or should happen.
>
> MR. JOSEFIAK: Commissioner, from my perspective, it\'s not just
> timing. I think what Joe was alluding to is that we have a series of
> changes in the law. We have a series of new regulations. And, quite
> frankly, the reason we even are here and talking about this issue is
> issue ads. The issue ad controversy seems to have been addressed in
> the statute, and from our perspective, as of a week and a half from
> now, if we go in further and do anything like that, it\'s going to be
> 100 percent Federal, and I think that is part and parcel of the issue,
> as opposed to other groups, who still have the capability of using
> unregulated money for this purpose, and I think that is, from my
> perspective, the issue.
>
> Whether or not you\'re going to try to delve into any sort of
> coordinated activities between parties and candidates, I think, goes
> into the issue or question that I raised earlier about what happens
> when you sit down in meetings with these folks and you\'re just trying
> to come up with a plan for the cycle? Is that, in and of itself, going
> to be the kind of coordination that\'s going to impact on whether or
> not it\'s an allocable expenditure, because as Joe says, this goes
> beyond a communication, or appears to go beyond a communication, and I
> think the Commission has to look long and hard, look at what actually
> transpires, and then move into this area, because particularly from
> the perspective of the interaction with our State and local
> operations.
>
> We\'re already challenging BCRA on its face for challenging our right
> to associate. I don\'t know, quite frankly, when I read some of these
> provisions, the impact on that. To me, it seems very broad as to how
> that\'s going to impact on our ability even to talk to these folks and
> talk to our candidates at the same time, to associate on whatever the
> issue is, whether it\'s in direct relation to the campaign or
> otherwise.
>
> I think that\'s the kind of thing that, from my perspective, I\'m
> cautioning on, that it\'s not necessarily, oh, we don\'t want to deal
> with this now. It\'s there are sufficient questions raised and the
> fact that you\'re not required to deal with this now, I think that
> there should be a systematic review of what this really means, and
> then if you think that you need to act, then act. But from my
> perspective, I see no reason to act at this point in time because, in
> my mind, it\'s really these issue ad communications that were at the
> core of this.
>
> COMMISSIONER McDONALD: Well, let me close, because I won\'t ask
> another question, but the other thing I want to say about that,
> because I appreciate your comments, is that, of course, we\'re here
> also part and parcel, needless to say, but we\'re here because the
> Congress found that our position on the coordination rules were
> unacceptable, and that\'s part of our problem, needless to say.
>
> MR. JOSEFIAK: At least you have the flexibility of making the decision
> what it was. You\'ve got the categories you have to look at. But you
> never were told specifically what that was, and there\'s nothing in my
> mind that says you can\'t, you know, approach it and look at it in a
> different way. But there\'s no reason to react to, just because you
> have to look at those sections, that that means you have to adopt a
> very odd view of this. You\'ve got time to deal with that.
>
> COMMISSIONER McDONALD: Sounds like me and my fitness program time.
> Thanks. It\'s good to see you.
>
> CHAIRMAN MASON: Commissioner Toner?
>
> COMMISSIONER TONER: Thank you, Mr. Chairman. Mr. Josefiak, Mr.
> Sandler, good afternoon, always a pleasure having you here with us. We
> clearly have to stop meeting so regularly, but it is a pleasure to
> have you here to help us deal with these issues.
>
> You\'ve alluded to one of the key things that we\'re coming to grips
> with, and that obviously is what to do with the party structure and
> how we view the party structure and the statutory language that deals
> with coordinated expenditures and independent expenditures and this
> sort of Hobson\'s choice that has been put out, that if a party
> committee makes an independent expenditure after a candidate is
> nominated, that all other party committees within the political party
> would be barred from making coordinated expenditures and vice versa.
>
> Mr. Sandler, I\'m interested, obviously, you\'ve alluded in some of
> your testimony to this idea that State parties often have their own
> views about how they want to proceed politically, that in addition to
> sort of the rogue State party chairman, or someone who might do
> something just because he or she wants to prove their own
> independence, you also might have a situation where a State party just
> believes this is how things ought to be done politically.
>
> And so an example we talked about this morning is suppose Senator
> Feinstein is running in California for reelection and the California
> Democratic Party chooses to make independent expenditures, because in
> their political judgment as a party, that\'s what they want to do out
> in California. The question is, should we then read the statute as
> barring the Democratic National Committee or another national
> committee from making any coordinated expenditures on behalf of the
> Senator? What are your views on that?
>
> MR. SANDLER: Our view is that the Commission in the proposed
> rulemaking has taken the correct approach in treating the national and
> local parties, on the one hand\--I mean, the State and local parties,
> on the one hand, and the national committees, on the other hand, as
> two separate groups for purposes of the ban on making coordinated and
> independent expenditures within this same cycle.
>
> The example you cite is a very real one, but the one that comes up all
> the time, and that has repeatedly come up, is the situation of local
> parties making what could count as expenditures for Federal
> candidates. Every cycle, we have county parties taking out newspaper
> ads. Sometimes it\'s a slate card format or something that endorse our
> Presidential candidate, notwithstanding our guidance that you don\'t
> have any 441a(d) authority. You\'re not supposed to do that.
>
> The fact of the matter is, they do do it, and if the Office of General
> Counsel should determine to proceed against these committees\--the
> expenditure is probably \$500 and the civil penalty would presumably
> be in accordance with that. But if the penalty for it is that the
> Democratic National Committee then is barred from expending \$14
> million in hard money on behalf of its Presidential nominee, that\'s a
> different story. It\'s a ridiculous result, obviously.
>
> COMMISSIONER TONER: Do you\--
>
> MR. SANDLER: For that reason, I respectfully, strongly would disagree
> with the position taken by some of the commentors that the national,
> State, and local parties should all be regarded as one group for
> purposes of the prohibition on coordinated and independent
> expenditures being made by the same entity.
>
> COMMISSIONER TONER: For these reasons, is this an area where you think
> we ought to seriously consider narrowly construing the statute to
> avoid some of those constitutional concerns and recognize the reality
> you\'re talking about, that even local committees, State parties, are
> their own actors and will make their own judgments, that we should
> construe this provision in a way that would not possibly bar a
> national party from doing coordinated expenditures?
>
> MR. SANDLER: Yes. I think the reading of the statute that\'s taken in
> the proposed regulations is a correct one and the only one, as opposed
> to the alternative, that really would be constitutionally defensible.
> I don\'t think you can say under [Colorado I]{.underline}, well,
> parties have the right to make independent expenditures, and by the
> way, even though you didn\'t talk to this one, you\'re the same and
> you really don\'t have that right. It just doesn\'t compute.
>
> COMMISSIONER TONER: Do you think we should extend that analysis to
> county parties, as you were indicating?
>
> MR. SANDLER: I think that that probably will ultimately prove to be,
> and again, we\'re not parties to the current litigation, although some
> of the State parties are. I think that will ultimately prove to be the
> constitutionally necessary result. I don\'t know that the statute, as
> currently worded, permits that reading, that you separate the State
> and local.
>
> COMMISSIONER TONER: Mr. Josefiak, do you agree?
>
> MR. JOSEFIAK: That is my concern, and I totally agree with Joe that to
> have this sort of national versus State is a good one for the
> Commission to take. My concern is that the question of who falls under
> those umbrellas is determined by the definition of what I view as the
> current, or even modified version of \"affiliation,\" and the point I
> was trying to make is that even the three national committees are not
> in the sense of established or maintained by each other, and they
> would strongly argue against that.
>
> It even gets more pronounced, I think, when you get down to some of
> these local operations, where the States can\'t control them, and the
> Commission hasn\'t, in fact, adopted\--for example, in Iowa, where
> they have said that the county committees have, even under the
> standard of affiliation, have a separate limit because they don\'t
> meet the standard of established, financed, maintained, or controlled.
>
> So that\'s the point I was trying to make here, that it shouldn\'t be
> just an automatic assumption that everybody is lumped together. The
> idea of a presumption maybe the other way, unless you can prove the
> opposite, that it\'s not automatically going to take the ability of
> even a State party committee from doing something if one of these
> committees, and to be honest with you, what usually happens in those
> situations, they would probably be viewed as more of an independent
> expenditure than a coordinated by some of these locals because they
> don\'t talk to anybody. They just do it.
>
> So that\'s my concern, that you\'re going to have some local
> organization that\'s viewed under this law and the Commission
> regulations of making an independent expenditure, totally unbeknownst
> to the State party, and then precludes the State party from making a
> coordinated. That\'s my concern with this. But the idea of having two
> separate pools is a good one.
>
> COMMISSIONER TONER: I see that I\'m out of time. I hope to have a
> quick chance to do some follow-up in the next round. Thank you, Mr.
> Chairman.
>
> CHAIRMAN MASON: Commissioner Thomas?
>
> COMMISSIONER THOMAS: Thank you, Mr. Chairman. Gentlemen, thank you for
> coming.
>
> To scratch at this topic we\'ve just been hearing about, currently,
> the party officials are confronted with a rather difficult chore. For
> example, the national party only has a coordinated expenditure
> allowance vis-a-vis Presidential campaigns and you have to try to make
> sure that some State party committee doesn\'t go off the reservation
> and spend money that would be viewed as an in-kind contribution or
> coordinated expenditure, and likewise, some local party committee.
>
> So I gather that if that happens on occasion, in order to rescue them,
> if you will, you have said, well, all right, for this limited reason
> or this limited time, we will authorize you to utilize some of the
> national party committee\'s coordinated expenditure amounts for the
> Presidential race.
>
> But aside from that, what I\'m kind of curious about is what do you do
> in terms of trying to educate all of your State and local party folks
> about the rule that, in essence, when it comes to the Presidential
> race, if it\'s a publicly funded candidate, there can be no
> contribution and the only authority that the party has is the national
> party\'s coordinated spending allowance and they\'re to basically stay
> out of it and avoid the problems. How do you deal with that on a
> current basis?
>
> MR. SANDLER: Well, we undertake extensive education and training of
> our State parties and the people who do work for the State parties in
> our field operations about that very point. Of course, one of the
> things you have to educate them to is what counts towards a
> coordinated expenditure limit. We think we have some sense of that
> under the current regime.
>
> But when you get to local party committees, that\'s a far different
> story. I mean, there\'s more than 150 local party committees just in
> Georgia. There\'s more than 80 county party committees just in Kansas.
> There\'s more than 200 city and town committees in the Commonwealth of
> Massachusetts. The idea that you\'re going to be able successfully to
> educate them and somehow be accountable for them is just not realistic
> in any way, manner, or form, despite our best efforts. And again, you
> have to say, well, yes, theoretically, they\'re still bound by that.
>
> But if you\'re going to pin the ability of a national party committee
> to make coordinated expenditures in a U.S. Senate race or a U.S.
> Presidential race on the inevitable slippage of some of these county
> party committees, which, in fact, is independent, in reality, and,
> therefore, legal anyway, that\'s a big problem.
>
> MR. JOSEFIAK: We do the same thing that Joe does for the DNC, a lot of
> compliance seminars, education for our executive directors every time
> we have meetings, memos back and forth, conference calls. But to my
> knowledge, we have never given our Presidential coordinator authority
> to anybody. We\'ve used it ourselves. I don\'t think we\'ve ever given
> it to anyone else.
>
> And part of that was is that we would focus on the non-allocable
> exempt activities that State and local parties can do on behalf of a
> Presidential as a vehicle for them to get their excitement out there
> and do what they want to do under the restrictions of that provision,
> and if then somebody slipped, again, I think it would probably be most
> defined as an independent expenditure because it wasn\'t coordinated
> with anyone. It certainly wasn\'t coordinated with the candidate. It
> wasn\'t coordinated with the party at any level. They just did it.
>
> And so I think that has always been a fail-safe method, that it
> didn\'t intrude on our coordinated expenditure ability because you had
> other vehicles available. Granted, the new rules do not change the use
> of the volunteer exemption, but you still have this issue that if you
> have a rogue organization out there, if you took the language of the
> statute as extreme, it could jeopardize our ability. So that\'s why I
> think it\'s a good idea to have the two pots, at least.
>
> MR. SANDLER: And incidentally, Commissioner, with respect\--when these
> things are almost always discovered after the fact, and so the Office
> of General Counsel\'s position is that you cannot cover an expenditure
> that should be counted against the 441a(d) authority once it\'s made
> with a post hoc assignment of authority, at least the words that
> we\'re most familiar with. I don\'t know if there\'s been any more
> recent developments in this area, so I\'m not sure the solution
> that\'s suggested would even be acceptable at this end of the table.
>
> COMMISSIONER THOMAS: Yes. I was getting at a situation where if you
> were confronted with this urge on the part of a party committee, you
> might, if you knew about it in advance, provide some use of your
> coordinated expenditure allowance in order to avoid a problem. I was
> just trying to explore the possibility\--
>
> MR. JOSEFIAK: We would probably, if we knew about it, we\'d tell them
> no.
>
> MR. SANDLER: It would be a moot point.
>
> \[Laughter.\]
>
> COMMISSIONER THOMAS: I would hope that would be the first response,
> but there are all these other options that you noted, and that was
> very helpful.
>
> I see I\'m out of time. I\'ll wait until the next round. Thank you.
>
> CHAIRMAN MASON: You\'re both aware that the new law defines
> coordinated electioneering communications as contributions, and while
> we have put in an exemption for expenditures, including everything the
> parties do, from the definition of electioneering communication, as we
> look at that, I think it\'s a fair reading to say, well, when we are
> talking about party coordinated communications, that we\'d have to
> rope in electioneering communications. I\'m getting a nod from Joe.
>
> MR. SANDLER: Yes, absolutely. That\'s\--
>
> CHAIRMAN MASON: And this gets to the point that Tom was bringing up
> about issue ads. We all understand that national party issue ads and
> State party issue ads that name Federal candidates are going to have
> to be 100 percent Federal under the new legislation. Nobody\'s really
> arguing that proposition. But we have a special election coming up in
> Hawaii on January 5 under the new rules. Tom, I\'m sure you hope
> that\'ll be competitive for the Republicans, but if that one won\'t,
> the next one will, or another one will.
>
> The party committees are going to want to run party ads, non-expressed
> advocacy ads, touting their candidates, would be my guess,
> particularly in special elections. They\'ll be willing to burn up some
> of their hard money that way. What are you going to tell the parties
> about whether they may or may not discuss those ads with their
> candidates?
>
> MR. JOSEFIAK: It\'s a privileged conversation.
>
> \[Laughter.\]
>
> MR. JOSEFIAK: I\'m only kidding.
>
> CHAIRMAN MASON: But in the context of urging us to say, well, gee, you
> know, I understand your argument. We\'re not legally bound in this
> rulemaking to address these issues and your plea vis-a-vis your busy
> schedule and ours and so on. But this is upon us, and it seems to me
> there are some grave problems with just sort of running forward with
> these new standards, because the most straightforward reading of the
> law, the conclusion I\'d come to is that if you coordinate any ad
> which mentions a Federal candidate with that candidate under whatever
> our contact standard would be, that that would be a contribution.
>
> That\'s different, very different from the rule that the parties have
> been living under up to now and right to the current day. I don\'t\--I
> understand your reason for caution and playing for time and so on, but
> I don\'t think you\'re exactly putting your clients in a good
> position, to say we\'re going to walk into this new era and either
> just tell them, well, yes, that\'s it, you can\'t talk about that with
> your candidates anymore, and in particular, if we explicitly say,
> well, this doesn\'t apply to parties, what do you even say about the
> contact standard? In other words, how much can they talk to their
> candidates?
>
> MR. JOSEFIAK: I don\'t think that\'s unusual. I don\'t know what Joe
> and his colleagues, how they handle that issue, but for a long time,
> our folks have been very squeamish about coordinating any sort of
> issue advertising and have gone out of their way not to do that. So
> it\'s not something that we\'re going to have to deal with outside the
> Presidential arena with these Congressional candidates because
> they\'re familiar with that.
>
> My experience has been, they just don\'t talk about it, and they\'ll
> do it almost like, quote-unquote, an independent expenditure just to
> avoid the allegation that, somehow, this is a campaign contribution,
> so that when someone does file a complaint, the response is very
> easily made by these candidates that there has been no coordination.
>
> Now, granted, the standard may be a little different under any new law
> or new regulation as to what you mean by that, but under the current
> statute and regulation regarding independent expenditures, that\'s the
> standard that\'s followed. So there were even attempts not to use
> common vendors for these kinds of expenditures as more as a fail-safe
> isolation for the candidate from getting involved in this kind of
> matter under review at the Commission as opposed to anything else.
>
> So for the near future, that is not going to be an issue when it comes
> to the Congressional race, let\'s say, from my perspective, at least,
> because we have taken that policy of not talking to the candidates
> about these things.
>
> CHAIRMAN MASON: Well, if you\'re comfortable with that and you\'re
> comfortable with that for the indefinite future, then why wouldn\'t
> you be comfortable with a rule that said you can\'t talk to candidates
> about these ads at all and you can\'t use common vendors?
>
> MR. JOSEFIAK: Because it\'s our policy to do that and we can modify
> it. It\'s not a legal requirement. It is a policy decision to protect
> the clients and not to\--
>
> CHAIRMAN MASON: My point is, you\'re saying that that\'s where you are
> now, and you\'re there, in part, because of the jeopardy of
> investigation, and you\'re asking us\--
>
> MR. JOSEFIAK: With regard to certain candidates, not all candidates,
> with regard to certain candidates.
>
> CHAIRMAN MASON: And you\'re asking us to leave you there.
>
> MR. JOSEFIAK: Yes, exactly. It should be our decision how we want to
> handle our interaction with the candidates, and as best you can leave
> us to doing that ourselves under our associational rights under this
> new law, that\'s what we\'re asking you to do.
>
> CHAIRMAN MASON: Vice Chairman Sandstrom?
>
> VICE CHAIRMAN SANDSTROM: I\'d like to thank the witnesses for
> appearing here today, and I particularly would like to thank them for
> pointing out in the beginning of their testimony what I consider one
> of the most troubling provisions in our proposed regulation, and that
> is 109.20(b).
>
> As I look at it, it\'s, I guess, sometimes an advantage and sometimes
> to a party a disadvantage to have an incumbent President. I think that
> if you look at who has served as the head of various national
> committees during the tenure of a President, that the person who\'s
> appointed over there is always an ally, it seems, of the President,
> who probably has regular meetings with the White House staff and maybe
> even impose some burdens on the committees.
>
> But as I understand how these rules might work in practice, now that
> everything has to be done out of a Federal account, so everything by
> the nature is being reported to the disbursement as expenditures, that
> under one reading of 109.20(b), everything that\'s likely to occur
> after November 5, as we enter the Presidential election cycle, is
> conceivably going to be a coordinated expenditure by the Republican
> National Committee. So if you have a budget of \$100 million each of
> the next two years, you\'d be conceivably making in-kind contributions
> of \$100 million. If the Democrats have a budget and no candidate,
> they\'re making no in-kind contributions. It seems to me a certain
> unfairness that would follow from that, would you agree?
>
> MR. JOSEFIAK: It\'s the price of having the White House, I guess.
> Well, that\'s what I was trying to get at, is the broad nature of
> definitions here could implicate just having meetings and that being
> viewed as a coordinated effort of some sort. But there does seem, in
> my mind, to be some sort of a proposed cut-off period where some of
> this would or would not be perhaps attributable to any campaign, and
> then that sort of bothers me, again, because if the message itself
> doesn\'t trigger something, then the timing shouldn\'t trigger it,
> either.
>
> VICE CHAIRMAN SANDSTROM: And you\'re not even getting to any
> communication. I mean, we can deal with the rest of it, the
> regulations, the communications, but juts the every day political
> activity, all the expenditures they\'re engaged in. The White House
> can\'t lobby on issues, so it has to look to someone to do some
> lobbying and contacting people, explaining their positions to people.
> They look to the party, in part, to do that to a political audience.
>
> And then if you take the Democratic Senatorial Campaign Committee and
> its counterpart in the National Republican Senatorial Campaign
> Committee, all of their activities are coordinated because the people
> who run the show are candidates and office holders. So every
> expenditure, if you read 109.20, that they undertake would be
> coordinated. So if they wanted to do something promoting the party,
> and it may not be a public communication, but just the general letting
> people around the country, leaders, telephone calls, talking with
> pollsters, all of that would be swept into being a coordinated
> expenditure to the members of those committees.
>
> Isn\'t that the real danger here, is that this fails to take into
> consideration that those committees, by their very nature, can\'t be,
> as someone referred to in [Buckley]{.underline}, expenses completely
> independent, because the people making them are themselves candidates
> and office holders.
>
> MR. SANDLER: I think that\'s an excellent point, Commissioner. We
> totally agree with it. I had mentioned Section 109.31, but the
> interaction of Section 109.20(b), as you point out, proposed Section
> 109.20(b) and 109.31, is, in fact, to make every expenditure,
> everything that the national party does, at least in the Presidential
> cycle and the National Congressional Campaign Committees in every
> cycle, subject to the coordinated expenditure limit.
>
> I want to point out in this regard that the provision of BCRA cited by
> the Chairman is important in this regard. The reason that that
> provision is limited to electioneering communications, I believe, is
> that when the bill came out of the Senate in 2001, we went to
> Congressman Meehan and pointed out that, as worded, because it wasn\'t
> limited to electioneering communications, it would have precisely the
> result that we\'re talking about today.
>
> And the language has changed, and I realize, with all due respect,
> that these reform groups sometimes have short memories when it comes
> to the real legislative history of these provisions. But the fact of
> the matter is that this language was changed to avoid this result. So
> I believe it is not at all consistent with the statute to put 109.31
> together with 109.20(b) and come up with that result.
>
> That being said, I think the Chairman has a good point, that the
> statutory provision with respect to electioneering communications is
> supposed to apply to party committees and that it may be appropriate
> in that limited sphere to provide some kind of guidance on a shorter
> time frame than we\'re talking about for this broader issue. But
> clearly, the result that Commissioner Sandstrom is pointing to is a
> very real result under the regulations as proposed. It\'s a result, I
> believe is inconsistent with the statutory intent, and it\'s one that
> would absolutely make it impossible for the national party committees
> to operate.
>
> VICE CHAIRMAN SANDSTROM: Draconian? I\'m just asking, draconian?
>
> MR. SANDLER: Yes, right.
>
> CHAIRMAN MASON: Speaking of draconian, Commissioner Smith.
>
> \[Laughter.\]
>
> COMMISSIONER SMITH: I\'m not quite sure what that means.
>
> CHAIRMAN MASON: No point at all.
>
> \[Laughter.\]
>
> COMMISSIONER SMITH: I thought you were referring to my Romanian
> heritage or something.
>
> Thank you, gentlemen. As I mentioned to Mr. Bauer and to Mr. McGahn
> yesterday, I take note of your comments about addressing the issue at
> this time and I think those are excellent points. So without
> prejudicing my final thinking about that, though I want to go ahead
> and ask you questions as if we\'re going to move on this since we\'ve
> got you here today, and if we do make that decision, we need your
> input with that in mind.
>
> Commissioner Josefiak, I take from your comments earlier you were
> talking about staying clear of certain types of activities as it
> pertains to legal party issue advertising and so on, so it sounds to
> me like that\'s another way of saying that already under the current
> coordination regime, the party finds itself somewhat chilled from
> doing speech that it believes is, or at least probably is legal. In
> other words, you shy away from that because you don\'t want to be
> investigated for coordination.
>
> MR. JOSEFIAK: To keep the candidates from being investigated for
> coordination. It\'s a matter of convenience for them, but again, it\'s
> a policy decision that\'s made by our choice and not by the statute.
>
> COMMISSIONER SMITH: It really is a chilling matter, in other words, to
> avoid speech which should be legal to avoid those kinds of issues.
>
> But I want to ask both of you if you would agree with your colleagues,
> Mr. McGahn and Mr. Bauer yesterday, who indicated that they felt that
> coordination investigations by the FEC are particularly burdensome.
> Would both of you agree with that, or would either of you disagree?
>
> MR. SANDLER: I would certainly agree with that. It\'s interesting that
> Mr. Josefiak in his remarks talked about the victory plans that the
> Republican National Committee works out with its State parties for
> identifying and turning out the Republican vote. He said he hadn\'t
> recalled what they were called in the Democratic Party. They\'re
> actually called coordinated campaign plans, and that\'s because it\'s
> always been considered appropriate, at least in a real world sense,
> for State and national parties to work together with their candidates
> to achieve economies of scale and unification through joint efforts to
> register, identify, persuade, and turn out the party\'s voters.
>
> In recent years, I\'ve advised our clients in the national and the
> State Democratic Parties, to no avail, that they ought to change the
> name of that because in the eyes of the Federal Election Commission,
> coordination ranks up with fornication as one of the seven deadly sins
> and we ought to just call it something else, but these people can\'t
> get this out of their head.
>
> \[Laughter.\]
>
> COMMISSIONER SMITH: I suggest you not call it the fornicated plan or
> whatever.
>
> \[Laughter.\]
>
> MR. SANDLER: But the fact is that because\--it\'s precisely for the
> reason you say, that coordination is inherent in the nature of what we
> do, except when there\'s some very, very deliberate decision, and
> there hadn\'t been in the case of the Democratic National Committee
> yet in the last six years, to avail themselves of the rights under
> [Colorado I]{.underline}. And consequently, it is very\--because of
> that inherent need of parties to coordinate with their candidates,
> these investigations are extremely intrusive, chilling, and difficult
> to deal with.
>
> COMMISSIONER SMITH: Mr. Simon of Common Cause testified this morning
> that the conduct standard test is, of necessity, somewhat vague, which
> is an assessment that I would agree with, at least. I wonder if some
> of that vagueness there to create a bright line, to knock off some of
> this chilling effect, could be accomplished through a tighter content
> standard. Do you think a content standard can serve some role in that,
> in alleviating the chilling effects of the coordination rules?
>
> MR. JOSEFIAK: It depends, I guess, on what that standard is. I mean\--
>
> COMMISSIONER SMITH: Well, let me\--
>
> MR. JOSEFIAK: I\'m nervous about\--see, you have to understand my
> prejudice, obviously, is that it was clear before, unless you had
> expressed advocacy, you didn\'t have to worry about any of this. Now,
> we\'re dealing with something very different and I don\'t know
> where\--to be honest with you, I was perplexed when I read this
> content standard and where the Commission was going to go with this.
>
> COMMISSIONER SMITH: Let me ask you this, and the Vice Chairman in his
> questioning has raised some excellent points about 109.20 and 109.31
> and exactly how far they ought to reach, but talking about public
> communications, obviously, expressed advocacy qualifies. The statute
> makes very clear now electioneering communications, and republication
> has long been defined as an expenditure under the statute.
>
> Do you think there\'s anything in the statute that requires us to go
> further in terms of the type of communications we would regulate, or
> would those three be a permissible limitation to the statute?
>
> MR. JOSEFIAK: I think that, from my perspective, that\'s where you
> should be\--
>
> MR. SANDLER: With respect to party committees?
>
> COMMISSIONER SMITH: With respect to communications, coordinated
> communications by party committees, right, when we do public, when
> we\'re talking about communications to the public.
>
> MR. SANDLER: And, I\'m sorry, and the three categories you
> mentioned\--
>
> COMMISSIONER SMITH: The three categories would be expressed advocacy,
> electioneering communications, and republication.
>
> MR. SANDLER: We absolutely would agree with that, but limiting, and
> again, it\'s pertinent to the, I think, the Chairman\'s point, which
> is well taken, limiting the universe to that definitely obviates a lot
> of the problems inherent in determining and enforcing a conduct
> standard, as you alluded to Commissioner, and it does lead to problems
> identified by the Chairman of whether it\'s appropriate on some more
> accelerated time frame to determine what the criteria are for
> determining coordination with respect to so-called hard money issue
> advertising. But that\'s a much more limited, much more manageable and
> limited universe.
>
> COMMISSIONER SMITH: Just one final question, then, Mr. Sandler. Would
> you view that as a permissible interpretation of the statute, to limit
> coordination to those three types of public communications?
>
> MR. SANDLER: For party committees? Absolutely.
>
> COMMISSIONER SMITH: Thank you.
>
> CHAIRMAN MASON: Larry Norton?
>
> MR. NORTON: Thank you, Mr. Chairman. Good afternoon, gentlemen.
>
> Mr. Sandler, I just want to make sure before I leave today that I
> understand your concern with 109.20(b) and with 109.31. Both proposed
> regulations use the term \"expenditure,\" which is a familiar term.
> Indeed, the statutory authority for the regulation derives from
> Section 213 of BCRA, which speaks in terms of coordinated
> expenditures, as opposed to Section 214, which deals with coordinated
> communications.
>
> Wouldn\'t there still be a limitation there with respect to whatever
> payments you\'re talking about, that that payment would have to be for
> the purpose of influencing a Federal election? It wouldn\'t
> necessarily sweep in all party activity, or is your reading of our
> regulation that it would sweep more broadly than the current
> definition of expenditure?
>
> MR. SANDLER: Isn\'t that the working assumption of BCRA, that
> everything the national party does influences a Federal election and
> that\'s precisely why they\'re now required to spend 100 percent
> Federal money?
>
> MR. NORTON: And so that\'s what you would construe that Section 213 to
> mean and our regulations to mean, that \"for the purpose of
> influencing\" covers any expenditure whatsoever?
>
> MR. SANDLER: Right. I think, as Commissioner Sandstrom just pointed
> out, by definition, everything a national party disburses is now also
> an expenditure because there\'s only one account, the Federal account.
> It\'s all deemed for the purpose of influencing a Federal election.
>
> MR. JOSEFIAK: About the only thing that probably wouldn\'t be is if
> you made a direct contribution to a non-Federal candidate out of your
> Federal funds and reported that as another disbursement. But you
> don\'t have the ability to treat overhead differently now. You don\'t
> have the ability to treat anything differently now. So I would agree
> with Mr. Sandler that under BCRA as a general theme, everything that
> national party committees do are viewed as Federal election influence.
>
> MR. NORTON: Okay. Let me turn to the coordinated communications
> section. Mr. Sandler, you gave the example earlier of the blast fax
> that would be produced that might criticize the position of President
> Bush on a particular position. As you know, the proposal in the NPRM
> would include a content standard, and one of those content standards
> is expressed advocacy. Another is electioneering communication that
> would require all the targeting that\'s associated with it. There\'s
> an alternative proposed that would require not only that the
> communication be within a time frame shortly before the election, but
> also such things as containing express statements about the view of
> the candidate, of the clearly identified Federal candidate.
>
> I guess my point here is that there are any number of limitations on
> the content standard that would exclude lots of these blast faxes and
> other kinds of communications that the party would be making. Isn\'t
> that a correct assumption?
>
> MR. SANDLER: Well, the alternatives under (4)(a), (b), (c), would not.
> That\'s probably the most troublesome aspects of the content standard
> with respect to these types of communications by parties.
>
> MR. NORTON: Troublesome, meaning they would be included under\--
>
> MR. SANDLER: Over-inclusive. I take it the electioneering is defined
> for purposes of this to be limited to broadcast communications, the
> same way as it is under the electioneering regulations, right?
>
> MR. NORTON: That\'s right.
>
> MR. SANDLER: So that\'s a much more limited\--I agree, that\'s much
> more limited.
>
> MR. NORTON: But you think the proposals for (c)(4) that requires that
> the communication be a public communication, looking at alternative
> (c), it\'s made 120 days or fewer before a general election, directed
> to voters in the jurisdiction of the clearly identified candidate, and
> makes express statements about the record or position or views on an
> issue or the character, qualifications, and fitness of a clearly
> identified Federal candidate, that that alterative would capture a lot
> of the activity you\'re talking about?
>
> MR. SANDLER: I think it would. In the case of the example, the
> commonplace example that I cited, obviously, the jurisdiction of the
> clearly identified candidate is the entire country, assuming that a
> President is seeking reelection, and, therefore, in the example I
> gave, assuming it\'s made 120 days, whatever, four months before the
> general election, for that matter, four months before the primary,
> although you have that issue\--
>
> MR. JOSEFIAK: Basically, the year.
>
> MR. SANDLER: Well, again, it depends on whether\--like as in the case
> of the electioneering communication, for the Presidential, the
> primaries, it\'s limited to the State where you run it. But let\'s
> assume this blast fax was issued four months before the Presidential
> election. Clearly, it would be encompassed by that alternative.
>
> MR. NORTON: Let me turn quickly to the suggestion that you made
> concerning a safe harbor for common vendors, where they enter into a
> legally binding confidentiality agreement. I assume what you\'re
> proposing is that where such an agreement exists and it was presented
> to the Commission, that that would be the basis for the Commission not
> to find reason to believe in that case that there had been
> coordination. In other words, the candidate or the party enters into a
> confidentiality agreement. The individual, notwithstanding the
> confidentiality agreement, engages in coordinated activity. As a legal
> matter, it wouldn\'t be coordination under our statute, is that the
> proposal?
>
> MR. SANDLER: I think so. I don\'t think it was necessarily intended to
> mean that\--and again, this is supposed to relate to the issue of
> common vendors as it relates to parties, on the one hand, and other
> organizations on the other, I take it. I don\'t think it was intended
> to preclude any inquiry and investigation, but just so that there
> wouldn\'t be sort of an automatic presumption the other way, given the
> fact that people in these occupations move from organizations to
> parties to candidates with great frequency.
>
> MR. NORTON: There wouldn\'t be anybody to enforce a violation of an
> agreement like that or anyone with incentive for enforcing a violation
> of an agreement like that, particularly where the individual may have
> violated the agreement by going to another candidate of the same
> party.
>
> MR. SANDLER: When you say there wouldn\'t be any incentive, do you
> mean because\--
>
> MR. NORTON: Why would the party\--
>
> MR. SANDLER: \--no one would have\--the imposing candidate wouldn\'t
> have the incentive to file a complaint?
>
> MR. NORTON: What would be the incentive of the party to initiate any
> action for violation of a confidentiality agreement like that?
>
> MR. SANDLER: Well, the party wouldn\'t have an incentive, but if there
> was evidence of actual coordination, I think others would have an
> incentive to pursue enforcement action.
>
> MR. JOSEFIAK: My experience on that is it\'s self-enforcing. If you
> have an agreement with a vendor and it\'s violated, they\'re not going
> to work for you any more, and it\'s a very limited group of people
> that do that and it becomes very known in the community that that\'s
> an issue and you just won\'t work anymore. I think if you\'re going to
> the degree of having a confidentiality agreement, which most of us, I
> think, do, and they live up to them or else they don\'t get the job
> any more, and it gets around very quickly.
>
> CHAIRMAN MASON: The time scheduled for this panel is up. I know at
> least a couple of my colleagues wanted a second round, and so I will
> run back through and note that if we all take a second round, we will
> be here until six o\'clock tonight, which is not my desire.
>
> Commissioner McDonald?
>
> COMMISSIONER McDONALD: I\'m fine.
>
> CHAIRMAN MASON: Thank you. Commissioner Toner?
>
> COMMISSIONER TONER: Thank you, Mr. Chairman.
>
> If I could follow up on the General Counsel and the analysis he was
> advancing dealing with former employers or former vendors, it\'s
> obviously been an issue we\'re struggling with. Mr. Sandler, in your
> papers, you introduce the possible idea of turning on confidentiality
> agreements.
>
> Mr. Josefiak, I\'d be interested in your thoughts on another possible
> approach, which would essentially be a cooling-off period. That is, if
> a vendor or an employee moves from the employ of a national committee
> or a State party, then subsequently works for a candidate, if a period
> of time elapsed between employment\--60 days, 30 days, some period of
> time that we could focus on\--that, essentially, there would be a safe
> harbor. And if that time period elapsed, then that person would be
> free to work for his new employ without restriction.
>
> Is this something, A) that you think we should consider or think about
> analytically, and B) if so, what kind of time period do you think
> would be sensible?
>
> MR. JOSEFIAK: If you think that helps, but I really think it\'s a
> perception issue. I mean, I\'ve seen\--as I alluded to, it\'s a very
> small group of people who move from one to the other and my experience
> has been when they move to one employ, that\'s the end of it. It\'s
> not a clandestine operation, that you\'re brought over to do something
> that you\'re going to have an inside track with something.
>
> And so I think if it helps, maybe that\'s something to consider. I
> don\'t know what that would be. My experience is, you run from a
> campaign to a vendor and back again, and when a Presidential campaign
> is over, let\'s say, you run to a party committee or go to another
> kind of company and you\'re working for that company. They\'re usually
> under their own confidentiality agreements, and you do your job and
> you leave your past employment behind you.
>
> But if it is going to be in this world of perceptions, which I think a
> lot of this is, if it would be something that would be helpful, then
> maybe you should at least consider it. But my concern is that this is
> somewhat like, you know, people make a decision. They\'re not working
> for the Federal Government. There are no regulations or rules that say
> that you can\'t do certain kinds of things. If you work, for example,
> at the White House or on the Hill, you can\'t go and lobby. This is,
> to me, a decision that\'s made by individuals to do a certain kind of
> thing.
>
> This is still, from my perspective, even though it\'s federally
> regulated to death, a private operation and the party operation is not
> a government operation and\--
>
> COMMISSIONER TONER: Not yet, anyway.
>
> MR. JOSEFIAK: Not yet, anyway, and there should be that right to move
> around. I mean, that flexibility is there. It happens all the time,
> and I\'ve not seen an abuse of that. But again, if it\'s something
> that is going to be helpful to encourage the ability of being able to
> do that without automatically tainting an expenditure of some sort or
> coordination trigger, then I think it should be considered.
>
> COMMISSIONER TONER: Mr. Sandler, you indicated if we do go forward and
> adopt a coordination standard for party committees, that limiting the
> content standard to expressed advocacy, electioneering communications,
> and republication would be a permissible reading of BCRA, would be a
> permissible reading of the statute.
>
> Is it fair to say\--I would like your thoughts on a couple of other
> possible content standards. How about the electioneering message
> standard? Would you be comfortable if we were to adopt that as a
> content standard for parties?
>
> MR. SANDLER: When you say electioneering message standard, meaning as
> opposed from the definition of electioneering?
>
> COMMISSIONER TONER: The electioneering message standard that we had
> for many years, turning on whether a communication tends to garner or
> diminish support for a candidate, that type of a content analysis.
>
> MR. SANDLER: No. I think that the Commission found that standard to be
> completely unworkable in the context of evaluating the issue advocacy
> advertising done by national and State parties on both sides of the
> aisle in the 1995-96 cycle, and I\--
>
> COMMISSIONER TONER: So you would not be comfortable with that? How
> about \"promote, support, attack, oppose,\" some type of content
> standard turning on that?
>
> MR. SANDLER: I\'m not sure that anybody would regard that as being
> particularly different in nature from the electioneering, you know,
> simply referring to a candidate. I know there was a lot of fuss about
> that in the Title I rulemaking, but I think it was a much ado about
> nothing. There isn\'t a substantial difference, to me, from the
> standpoint of the party committees.
>
> COMMISSIONER TONER: Mr. Josefiak, do you agree with that?
>
> MR. JOSEFIAK: I agree.
>
> COMMISSIONER TONER: Thank you, Mr. Chairman.
>
> CHAIRMAN MASON: Commissioner Thomas?
>
> COMMISSIONER THOMAS: Thank you. I just briefly wanted to make a point
> and see if you would agree. That language that was alluded to by Vice
> Chairman Sandstrom in the regulations that we\'re proposing that seems
> to suggest that even outside the communication context, an expenditure
> that\'s coordinated would be viewed as an in-kind contribution or a
> coordinated expenditure. It does have a tag line at the end that says
> that rule would not apply if any of the other standard exceptions that
> are otherwise in the regulations are available. My understanding was
> that what we were trying to get at was that outside of communications,
> there might indeed be a lot of support services that a party might
> provide to help a candidate or that some third party group might
> provide to help a candidate.
>
> We had a real-life case, and it happened to be in the Presidential
> area. The Dole Presidential campaign was coming up against its
> spending ceiling in the \'96 Presidential race and we saw a lot of
> staffers move over from the Dole campaign onto the RNC payroll, and
> the Commission dealt with a compliance-related case that dealt with
> that issue, and some of us, I think Vice Chairman Sandstrom leading
> the charge, were feeling that those staffers, those advance staffers
> who seemed, at least on the basis of the evidence, to be going over
> onto the RNC payroll and actually helping the Dole campaign, with the
> Dole campaign advance work, perhaps should be\--that the value of that
> cost being picked up by the RNC should be treated as an in-kind
> contribution or coordinated expenditure from the party to the Dole
> campaign.
>
> I think that\'s kind of what we were trying to get at. There might be
> a set of circumstances where you\'d want to treat something like that
> as subject to the contribution or coordinated expenditure limits, even
> though it\'s not necessarily a communication-type cost.
>
> We have this regulation that\'s still valid that says that, by
> contrast, as a general concept, if you have operating expenses or
> overhead expenses of a party committee or generic party-building costs
> like voter registration and so on, you don\'t have to attribute that
> as being on behalf of a particular candidate unless it could be said
> to be directly related to that candidate\'s campaign efforts.
>
> So I\'m wondering if, in that context, that draft regulation that you
> were talking about makes a little more sense?
>
> MR. JOSEFIAK: No. If you have a regulation currently on the books that
> would address that issue, the statement that these people were, in
> fact, advancing for the Dole committee is a question that needed to be
> investigated under the current regulations. It is not uncommon for
> staffers from a primary campaign to go to the national committee. It
> happens all the time. The only reason that was before the Commission,
> it was before the Commission as a result of a matter under review that
> was filed.
>
> However, I think that the idea of advancing for the party for its
> programs and fundraising, as opposed to advancing a Presidential
> candidate, has clearly been addressed before. It was clearly addressed
> where the candidate him or herself would avail themselves of perhaps
> an allocation. That no longer happens because of some matters under
> review. But the idea that the current regulations don\'t address that
> as an in-kind contribution or some sort of an expenditure that\'s
> allocable is still there with or without this regulation, and I don\'t
> think this matters at all.
>
> What I think it does, however, is it increases the possibility of
> things that would normally have been viewed as general administrative
> and overhead expenditures, like I alluded to in sitting down and
> talking about general victory programs, or what Joe talked about in
> communication, are now going to be perhaps viewed as a subject of
> further investigation, and again, as Joe alluded to, these kinds of
> coordinated effort investigations can prove to be very frustrating on
> both sides of the table. I just think that the Commission has an
> opportunity not to make it even more difficult for itself and for the
> regulated community by adopting a standard that seems much more vague
> than the current regulations.
>
> MR. SANDLER: I think that, first of all, before fully answering your
> question, the Commission fooled around with the language of Part 106
> and 106(a) in the Title I regulations and I\'d like to think more
> about what the implications of those modifications were before
> assuming that, in fact, the Commission is now of the view that
> overhead expenditures by a national party committee are not
> attributable to Federal candidates specifically or generally or
> whatever. I don\'t think that\'s clear.
>
> I think with respect to\--obviously, the situation if a party
> committee pays for computers or rent for a candidate, that that should
> be treated as an in-kind contribution. There\'s no dispute about that.
>
> But with respect to the Dole situation you mentioned, and I don\'t
> know, I don\'t recall how that matter under review, how it came out,
> but the fact is, advance people working on a trip, a trip under other
> regulations of the FEC is either a campaign trip or a party trip.
> There\'s a whole regulatory scheme about that. And if it\'s a party
> trip, then it doesn\'t count. If it\'s a campaign trip, then it
> clearly counts, and that\'s the current rule and there shouldn\'t be
> any need to suddenly swoop in everything a party does in order to get
> at those kinds of situations.
>
> COMMISSIONER THOMAS: Well, thank you. I should have thought Tom would
> have wanted to be very tough in that context now. The shoe is on the
> other foot.
>
> MR. JOSEFIAK: Absolutely not.
>
> \[Laughter.\]
>
> COMMISSIONER THOMAS: Well, there is some small comfort. The Commission
> was unable to figure out what to do. We split three-to-three, if
> memory serves, and so the law is about as unclear as you can imagine.
> Thank you, Mr. Chairman.
>
> CHAIRMAN MASON: I have no additional questions.
>
> Vice Chairman Sandstrom?
>
> VICE CHAIRMAN SANDSTROM: I don\'t want to return to history, but this
> morning\'s witnesses, I asked about whether there should be a temporal
> restriction so that only expenditures may be, in an election year, for
> example, might be governed by a coordinated expenditure, and I gave an
> example, probably more relevant to Mr. Josefiak now, but was very
> relevant to Mr. Sandler in the past, was if you ran a campaign and the
> issue was very important to the President, like health care, and he
> wanted to go and break a legislative deadlock on health care, should
> he be able to have his party run ads a year before the election
> promoting his views on that issue to try to convince the public to
> urge their elected representatives to get behind the plan the
> President has proposed?
>
> MR. JOSEFIAK: Well, we would certainly hope so.
>
> VICE CHAIRMAN SANDSTROM: The witnesses this morning said it should be
> based on the facts and circumstances of the ad, and if you use, for
> instance, political consultants to do the ad, that should move it into
> the category of being a coordinated expenditure and an in-kind
> contribution. What do you think of us really getting into each of
> these ads and exploring the facts and circumstances?
>
> MR. JOSEFIAK: What do they mean by a political consultant doing the
> ads? I mean, I don\'t know about Joe\'s operation\--
>
> VICE CHAIRMAN SANDSTROM: They said Dale Morris\--
>
> MR. JOSEFIAK: \--but we don\'t sit around now with people that
> actually produce and cut and do all that and put it together and do
> the video. I mean, we hire people to do that based on what the issue
> is, and why should that have any difference if we\'re controlling what
> the message is? I don\'t understand why using somebody to put it
> together for you should make a difference if the message and the
> entity putting out the message is fine. Why should the consultant have
> anything to do with it?
>
> VICE CHAIRMAN SANDSTROM: We shouldn\'t have a list of tainted people
> who, you know, come up with people who work for candidates and put
> them in a category? One of the other witnesses said that may
> essentially create more business for others and, therefore, maybe it
> would be good, I don\'t know if for the economy or just generally for
> political consultants. We should divide people into lists, those who
> do political and those who do issues.
>
> MR. JOSEFIAK: Good luck. My experience has been, when you hire a
> producer for this, they do corporate, commercial, charities. That\'s
> their business and they\'re going to go where the client is and
> they\'re going to produce the best spot they can for that client, and
> it runs the gamut. It\'s just not strictly\--especially when you\'re
> dealing with these production\--you\'re using the example of a TV
> spot, and these folks have a much broader range of clients than do
> some other kinds of political consultants.
>
> VICE CHAIRMAN SANDSTROM: One last question, because I think it brings
> in ethical and legal questions. If you\'re going to do a campaign on
> the defense budget, for instance, and the President supports a missile
> defense, would you prefer that it be done through the party or through
> Boeing, Raytheon, and Northrup?
>
> MR. JOSEFIAK: The obvious.
>
> VICE CHAIRMAN SANDSTROM: Thank you.
>
> CHAIRMAN MASON: Commissioner Smith?
>
> COMMISSIONER SMITH: I just want to thank the witnesses again for
> giving us, again, some real world experience. I agree with those who
> have said that it\'s very important that we not just operate on
> formalistic assumptions but that we really consider how this impacts
> in the real world. But given the time, I have no further questions
> now.
>
> CHAIRMAN MASON: Larry Norton?
>
> MR. NORTON: No other questions.
>
> CHAIRMAN MASON: We are going to take a recess. I would ask my
> colleagues to make it a brief recess, so we\'ll say five minutes and I
> will gavel it back in order. Before then, I would invite our next
> panel to come on up to the table. We will recess for five minutes.
>
> \[Recess.\]
>
> CHAIRMAN MASON: The Special Session of the Federal Election Commission
> for Thursday, October 24, 2002, will reconvene. This is our public
> hearing on coordinated and independent expenditures and we are down to
> our last panel, which we\'re glad about, but we\'re particularly glad
> to see both of you: Heidi Abegg, with Webster, Chamberlain and Bean,
> representing the American Taxpayers Alliance\--welcome back\--and John
> Pomeranz, Non-Profit Advocacy Director with the Alliance for Justice.
>
> I might be overlooking someone, but I believe Mr. Pomeranz is the only
> non-Commission employee who has been through all the panels thus far.
> At least I think I\'ve seen him at all, so I thank him for his
> attention and I\'m sure his remarks will be all the more enlightening
> for that.
>
> MR. POMERANZ: We\'ll see, Mr. Chairman.
>
> CHAIRMAN MASON: We\'ll start with Heidi. Please make a five-minute
> opening statement. We will make your prepared statement a part of the
> record and then we\'ll, as usual, go to a round of questions from the
> Commissioners and the General Counsel.
>
> Please go ahead.
>
> MS. ABEGG: Thank you, Mr. Chairman, Mr. Vice Chairman, Members of the
> Commission. I appreciate the opportunity to testify today on behalf of
> the American Taxpayers Alliance and I thank the Commission for its
> work in drafting a completely new set of regulations so soon after
> grappling with this difficult issue only two years ago.
>
> As noted in ATA\'s written comments, ATA is a Section 501(c)(4)
> organization dedicated to government reform through grass-roots
> organization and public education and discussion of issues. One way in
> which ATA pursues government reform is through lobbying, education,
> and discussion of the issues, both with members of Congress through
> meetings and with the general public through the use of television and
> radio ads.
>
> ATA agrees with the general structure the Commission put forth in the
> Notice of Proposed Rulemaking. A constitutional standard must
> necessarily define two things: what is coordinatable, the content
> standard; and what is coordination, the conduct standard. However, it
> is there that ATA parts company with the proposed regulations.
>
> The goal, as stated in the Notice of Proposed Rulemaking, is to
> regulate communications made for the purpose of influencing a federal
> election. However, while the proposed coordination regulations,
> including the alternatives, attempt to encompass every possible
> communication that may influence an election, they also reach a
> substantial amount of speech that is also educational or lobbying.
>
> One way to avoid this over-broad reach, then, is to limit the content
> standard to only those communications which expressly advocate.
> However, should the Commission not limit the reach of the coordination
> regulations in this fashion, ATA urges the Commission in its effort to
> reach communications whose subject matter is reasonably related to an
> election to confine the content standard to only those communications
> which are express advocacy or electioneering.
>
> Otherwise, the Commission faces the difficult task of where to draw
> the line, because clearly the line cannot and should not be drawn in
> an effort to reach all speech that may in any way influence an
> election.
>
> Apart from a constitutional argument which is set out in our written
> comments, there is another reason to limit the content standard to
> only express advocacy or electioneering communications. A standard
> that captures communications which merely name a candidate, as
> proposed in Alternative A, would prohibit an organization from
> lobbying members of Congress while at the same time running
> grass-roots lobbying ads.
>
> This is not a far-fetched hypothetical and an example of its potential
> effects can be seen today. With less than a month before the
> elections, Congress was debating the war on Iraq, homeland security,
> and government spending\--all important issues.
>
> Non-profit organizations like ATA have a legitimate interest in
> communicating with members of the public on these issues, as well as
> with members of Congress to influence public policy. Had the proposed
> regulations been in place, ATA would not have been permitted to lobby
> and coordinate its grass-roots lobbying strategy on the Iraq
> resolution with members of Congress without running afoul of the law.
>
> ATA\'s goal was not necessarily to influence the election, but rather
> to influence public policy. To effectively influence public policy and
> legislative outcomes, it is often necessary to coordinate lobbying and
> educational efforts with members of Congress.
>
> But regardless of the breadth of the content standard, there still
> remains a concern that coordination, the conduct standard, be defined
> in a way that permits as much contact and discussion between
> individuals, organizations, and their elected officials.
>
> In any event, the Commission should not draft regulations that presume
> that any contact or discussion is politically or electorally
> motivated. ATA submits that the focus of a constitutional conduct
> standard should be on the result rather than on the form or amount of
> contact.
>
> ATA urges the Commission to incorporate three things into the conduct
> standard: one, require that coordination, in fact, occurred; two,
> require that coordination is specifically related to the disbursement
> alleged to have met the content standard; and, three, require
> causation, that is that the communication was made as a result of the
> request or suggestion or substantial discussion.
>
> Suggestions have been made that lobbying is not reached under the
> proposed regulations because coordination must pertain to a campaign
> before it can be regulated. But as can be seen with the Iraq example,
> legislative issues can also have an influence on an election and may
> turn into campaign issues.
>
> So I don\'t think that one can easily dismiss ATA\'s concern that
> lobbying, both direct and grass-roots, is potentially prohibited under
> the proposed coordination regulations. It is easy to make an
> allegation of coordination, but without a narrow standard it is
> difficult and expensive to disprove that no coordination occurred.
> Without a focus on the result, but rather on the form or amount of
> contact, it opens up to investigation all contact between
> organizations and elected officials.
>
> These issues are not easy, and I note that there are differing
> opinions on various aspects of the proposed regulations which have not
> been definitively settled by the courts. But I would urge the
> Commission to adopt narrow standards which would restrict and chill
> the least amount of speech.
>
> Thank you.
>
> CHAIRMAN MASON: Thank you.
>
> Mr. Pomeranz.
>
> MR. POMERANZ: Good afternoon, Mr. Chairman, Mr. Vice Chairman,
> Commissioners, Mr. Norton. My name is John Pomeranz and I\'m the
> Non-Profit Advocacy Director for the Alliance for Justice. I\'d like
> to thank you for the opportunity to testify here today on the rules
> related to what the Alliance for Justice believes to be one of the
> least discussed and potentially most dangerous provisions of the
> Bipartisan Campaign Finance Reform Act.
>
> The Alliance is a national association of advocacy organizations and
> we work with a variety of non-profit educational, lobbying, and
> political organizations. And it\'s with that constituency in mind that
> we have filed our written comments, and I am here today as well.
> We\'ve limited our comments on these proposed rules to a discussion of
> the rules related to coordination by these non-party organizations.
>
> I needn\'t remind the Commission, but of course I will anyway, of the
> competing constitutional principles that constrain all of your
> work\--the need to provide clear, straightforward rules versus the
> need to regulate only speech that is susceptible of regulation by the
> Commission; in short, the need to steer a course between
> unconstitutional vagueness and unconstitutional over-breadth.
>
> The comments we\'ve filed are attempts to create clear tests and
> explicit safe harbors, rules that the non-profits we work with can use
> to quickly and correctly determine that they are indeed safe in
> pursuing legitimate activities in furtherance of their mission.
>
> It\'s these groups, the groups whose interests we seek to represent,
> that are those that typically can\'t or won\'t seek prior approval for
> their activities from the Commission, or even seek approval from legal
> counsel who are sophisticated in the federal election laws.
>
> Without the clarity that we\'re seeking, many of these organizations
> are going to self-censor. They are going to avoid important and
> legitimate speech for fear of Commission sanction, or even for fear of
> the burden of a Commission investigation, even an investigation that
> ultimately vindicates these groups.
>
> I just want to briefly highlight in the time I have remaining two key
> points from our written testimony. First, I\'d like to join Heidi in
> supporting an express advocacy standard for content.
>
> As we describe more fully, and as others have done more eloquently,
> there are constitutional concerns at issue here, and I think that
> there\'s a strong argument to be made that it is constitutionally
> required that any coordination content standard be one of express
> advocacy.
>
> I think that it is possible to use that as your touchstone and to
> limit the reach of some of the other standards, including some of the
> standards that seem statutory. For example, I think that the
> re-publication standard could be constrained by an express advocacy
> content standard. We urge the Commission to avoid expanding the
> content standard beyond this express advocacy standard.
>
> The second point I\'d like to address is I\'d like to urge you to
> consider, wherever possible, clear safe harbors. These are the things
> that are going to be useful to the groups that don\'t have counsel,
> that won\'t be seeking an advisory opinion from you.
>
> We\'ve mentioned some in our written comments. We don\'t think that
> you should adopt any of the three alternatives you suggest, A, B, or
> C, but we think that there are some ideas in there that could be
> turned into safe harbors, useful for the regulated community.
>
> For example, if it doesn\'t identify a federal candidate\--any
> communication that does not identify a federal candidate should be,
> per se, not coordinated. We think that it\'s possible to create time
> limits where, if it falls outside of those time limits rather than
> creating a problem if you have a communication within those time
> limits, that any communication outside those time limits would be safe
> for the communicating organization.
>
> I think there are other alternatives and other options that have been
> discussed. I\'d be very interested in seeing the Commission adopt some
> sort of lobbying exception. I do not come prepared with language at
> this time, but if the Commission would like to go in that direction,
> I\'d be happy to see if we can prepare something at the Alliance that
> might be helpful to you.
>
> I think that we would support a broader definition of lobbying
> communications than many might support. But if they were a safe
> harbor, even a narrow definition of lobbying communications would be
> more useful than none. I think that\'s the advantage of taking a safe
> harbor approach rather than an approach where you define the regulated
> activity.
>
> So I will leave the remainder of our time to entertain any questions
> from the Commission. I thank you for your time.
>
> CHAIRMAN MASON: Thank you. I am first in the question order for this
> panel.
>
> Mr. Pomeranz, you\'re a tolerably clear here, but I just want to make
> sure we\'ve got it on the record, lest Commissioner Smith or
> Commissioner Toner have to ask. Your position is that limiting the
> content to express advocacy would be an acceptable construction of the
> statute in these circumstances?
>
> MR. POMERANZ: That\'s correct.
>
> CHAIRMAN MASON: I don\'t know if both of you have actually done any
> lobbying. I hope it\'s the case that you have because I want to ask,
> in your experience, if you have, is it unusual for a member of
> Congress when you come in to lobby them on something to discuss public
> opinion in his or her congressional district or state as an element?
>
> In other words, \"Gee, I\'d like to be with you, but,\" or \"I
> haven\'t heard from anybody,\" or something like that\--is that a
> common experience?
>
> MR. POMERANZ: Certainly, one of the first things we like to inform the
> members about is why their constituents would be in favor of them
> supporting our position, and they certainly ask about it.
>
> CHAIRMAN MASON: So in other words, as a normal, routine part of
> lobbying contact, you might come into a congressional office with
> information about public opinion on a question, and indeed that
> information might be focused in terms of polling on the member\'s
> district or state?
>
> MR. POMERANZ: Absolutely, some of the most powerful information we can
> have.
>
> MS. ABEGG: I know that my firm\'s clients routinely research that
> before they go to the Hill.
>
> CHAIRMAN MASON: And the point I\'m getting at is that that would very
> quickly generate into discussions about communications on the issue
> and the effect of those communications on public opinion, and that
> fairly quickly gets into election-related territory.
>
> John was here earlier when we had some discussion about, well, yes,
> lobbying, but if it\'s real lobbying, it\'s not sham lobbying, as it
> were. And the point I\'m trying to bring out is that the public
> support\--i.e., electoral support or potential electoral valence of an
> issue is a critical element of lobbying. Is that not true?
>
> MR. POMERANZ: I think that\'s right.
>
> CHAIRMAN MASON: Heidi, you proposed a standard that sounds appealing,
> and certainly from the perspective of the group you\'re testifying on
> and the people you represent might be helpful in terms of triggering a
> coordination finding only if, I believe you said, the communication
> was as a result\--correct me if I\'m wrong exactly what your
> phraseology was\--of the contact. In other words, just a discussion
> wouldn\'t be enough. We would have to show that the discussions spawn
> the communication.
>
> And you said something that I didn\'t quite understand, which is that
> this would make investigations less onerous, and that\'s what I want
> to try to understand. I mean, it strikes me that if you add that
> requirement, you\'re making it harder for the Commission to prove
> coordination, which may be a good thing from your perspective, maybe
> from mine, but that you would be adding an extra step to the
> investigation.
>
> Was there anything in particular you were thinking about in terms of
> making it less onerous, other than setting the bar a little higher in
> terms of our proof?
>
> MS. ABEGG: No, I wasn\'t referring to anything particularly.
>
> CHAIRMAN MASON: The problem that I think I had run into before is
> that, in essence, in some respects the higher the bar, the more
> intrusive the investigation in order to investigate whether it was
> reached. In other words, the bar is if you talk to them about it at
> all, that\'s relatively easy to find out.
>
> If the bar is, well, you had to talk to them, it had to be substantial
> and it had to result in the communication being made, you\'ve got to
> go through several steps in order to prove it, and that tends to be a
> more intrusive inquiry.
>
> But I take it you would still prefer that because of the protection it
> gives?
>
> MS. ABEGG: Correct.
>
> CHAIRMAN MASON: I have no more questions, so Commissioner McDonald.
>
> COMMISSIONER McDONALD: Mr. Chairman, thank you.
>
> Heidi, John, thank you all for being here. I\'m not sure, John, that I
> share the Chairman\'s accolades for you being here all day, both days.
> It actually makes me worry about you a little bit, but nevertheless
> you are here and we appreciate it very much.
>
> I want to go to the lobbying aspect for a moment because I\'m truly
> fascinated by this. I have a number of friends that are lobbyists in
> this town, very successful lobbyists I must say.
>
> This morning, we were told in an exchange over the aspect about
> lobbying that typically when you went in to lobby, these individuals
> who have obviously lobbied Capitol Hill a number of years, as
> well\--some of them had; some of them I don\'t think really had\--had
> a different take on lobbying. And I just want to kind of go over your
> experience a little bit. I thought the Chairman was just going to
> steal my thunder entirely because I agree with him about trying to
> figure out this aspect of what goes on.
>
> We\'re down to about 45 days to go, we\'ll say. You want to go in and
> you walk to talk about Iran and Iraq, or you want to talk about the
> Middle East bombing or health care or whatever it might be. Obviously,
> I understand, and we understand even as Commissioners when we lobby
> our own legislation or we lobby our budget, we go over and we pitch
> the members and tell them what good things we\'ve done, and so on and
> so forth.
>
> You were saying that one of the things that\'s critical from, I guess,
> both of your vantage points is that the groups obviously research
> these issues, know where the constituents are, make your pitch to the
> member. My experience is that members are acutely aware of where their
> constituents are.
>
> Am I just totally off base? I mean, I don\'t think you have to tell
> them. When I go to talk to them and my colleagues go to talk to them
> about their budget, if you go see Representative Ney or Congressman
> Hoyer, for example, I\'m telling you they can tell us everything about
> our budget.
>
> Is that not part of what you find, or do you really find that the
> members are not really up on how their constituents view these issues?
>
> MR. POMERANZ: Well, I think it varies, Commissioner, with the issue.
> And I think you\'re right that every successfully-elected legislator
> knows a good bit about his or her electorate. I think, however, that
> they may not know, for example, from the Alliance\'s perspective how
> many non-profit organizations there might be in their
> district\--something that we care very much about.
>
> Or an environmental organization might be doing polling to determine
> how many of their members who live in the member\'s district feel this
> way or that way about a particular piece of legislation. And I think
> that sort of useful, current information is something that not only do
> not all elected officials have on tap, but are inevitably grateful for
> receiving because, of course, it does help them develop that knowledge
> that you rightly say they need and want to have.
>
> COMMISSIONER McDONALD: So you wouldn\'t be going in to talk to them
> about the environmental question. You\'d be going in there to talk to
> them about the politics of the environmental question.
>
> MR. POMERANZ: I think we would talk about the substantive merits of
> the argument and we\'d talk about where their constituency was on this
> issue and where their constituency was on competing issues.
>
> COMMISSIONER McDONALD: And what would you do with that information? I
> mean, when you\'d go back out and you\'d leave a member\'s office and
> they\'re not convinced yet, do your ads take the position or posture
> that you\'re going to give out more information, or are you, in fact,
> going to not give out information on the subject matter but on the
> member\'s position?
>
> MR. POMERANZ: Well, I should say that the Alliance is not
> resource-rich enough to frequently run broadcast ads. But if I
> understand your question, I think that if you leave the office, you go
> back and you discuss where that member seems to be and you develop a
> strategy that\'s appropriate to that member based on your needs to
> convince them and the different ways to convince them, and that runs
> the whole gamut.
>
> COMMISSIONER McDONALD: It could be in terms of the issue, per se, or
> it could be in terms of the politics, per se?
>
> MR. POMERANZ: I think that there is a spectrum, that it\'s hard to
> sort of drop those on one side or the other.
>
> COMMISSIONER McDONALD: I thank you. Thank you all again for coming.
>
> CHAIRMAN MASON: Commissioner Toner.
>
> COMMISSIONER TONER: Thank you, Mr. Chairman, and thank you very much,
> Mr. Pomeranz, Ms. Abegg, for being with us.
>
> Ms. Abegg, you indicated in your papers that you think we should
> propose exempting the Internet from the coordination rules. Why do you
> think we should do that?
>
> MS. ABEGG: First of all, I think it would be consistent with the rest
> of FECA.
>
> COMMISSIONER TONER: It certainly would be consistent with the way we
> approached it in the Title I area, in the soft money area.
>
> MS. ABEGG: Right.
>
> COMMISSIONER TONER: Would you argue that we should make some
> distinctions between television and radio, sort of the professional
> media, where some of the concerns that the sponsors have focused on
> have been most acute, from grass-roots media, like the Internet, like,
> say, newspaper advertisements, things like that?
>
> MS. ABEGG: I would agree with that, to be more consistent with the
> types of media that are included under electioneering communications.
>
> COMMISSIONER TONER: Mr. Pomeranz, would you share that sentiment?
>
> MR. POMERANZ: I think generally, yes. We, of course, as you know,
> filed written comments in response to your Internet rulemaking, and
> similar comments with the Internal Revenue Service when they actually
> asked about their regulation of the Internet.
>
> I think that the distinction can be drawn between different media in
> terms of the barriers to entry to those media and the presumed problem
> of regulating one over another. I think that the broadcast spectrum,
> as limited as it is, although cable, of course, has expanded the
> outlets, makes it more susceptible of regulation than the Internet,
> where any kid with a cheap computer can put something up and the smart
> ones can do good pages.
>
> COMMISSIONER TONER: We heard in the prior panel this question of what
> about blast faxes, what about things that reach a limited audience but
> aren\'t on television, some type of exemption for that kind of
> activity. Would you be comfortable with that?
>
> MR. POMERANZ: I\'d obviously like to see the regulation, but it sounds
> like a good idea.
>
> COMMISSIONER TONER: Would that be something that would help your
> organization in terms of its lobbying activities, in terms of getting
> its message out to your members, to your non-profit groups?
>
> MR. POMERANZ: As I mentioned, not living in the broadcast world, we
> spend a lot of our time in those cheaper fora and I\'d like to try
> that, yes.
>
> COMMISSIONER TONER: Mr. Pomeranz, I\'m trying to get a sense of what
> you\'re proposing. You say very strongly in your papers that express
> advocacy really ought to be the touchstone for us here, for
> constitutional reasons and others. And then as I understand it,
> you\'re advocating a couple of safe harbors. One would be any
> communication that doesn\'t mention a federal candidate would be
> exempt.
>
> MR. POMERANZ: That\'s correct.
>
> COMMISSIONER TONER: And then you\'re proposing another type of safe
> harbor in terms of re-publication of campaign materials that, if it
> didn\'t contain express advocacy, that would be exempt?
>
> MR. POMERANZ: That\'s correct.
>
> COMMISSIONER TONER: And then some type of an exemption for bona fide
> lobbying activities.
>
> MR. POMERANZ: That\'s correct as well.
>
> COMMISSIONER TONER: Do you think if we were to adopt that approach in
> whole that we wouldn\'t have to do anything else, that those really
> are the key elements?
>
> MR. POMERANZ: Oh, I think that there are still problems to be
> resolved. I fear that some of the conduct standards might create
> problems. I imagine this as a sort of small sphere of sort of the
> platonic ideal of what we should be regulating as coordinated
> activity, and if you read the regulations, what the reader will view
> as regulated activity lies somewhat beyond that.
>
> The advantage of carving out safe harbors is that you trim off bits
> and pieces of that improperly regulated, or perceived to be regulated
> activity. I don\'t think you\'ll ever successfully trim off
> everything, but the object is to develop safe harbors that capture the
> most egregious cases where people might be misled into thinking that
> it\'s a regulated, coordinated activity, when perhaps they shouldn\'t
> be.
>
> COMMISSIONER TONER: And as I understand your papers\--I want to make
> sure I have this right\--would you support a safe harbor based on the
> time periods in which activity is occurring, say a 120-day time frame?
>
> MR. POMERANZ: Yes. I think that there is opportunity to discuss what
> number should be, but we definitely support such a safe harbor.
>
> COMMISSIONER TONER: And the fact that that\'s something that\'s
> knowable, something that doesn\'t turn on whatever discussions may
> happen\--is that something that lends additional clarity from your
> standpoint? It\'s more understandable?
>
> MR. POMERANZ: Precisely. It guarantees the organization that if they
> stay within that safe harbor, they won\'t be subject to an
> investigation, they won\'t be subject to sanctions. I might add
> incidentally that it eases the Commission\'s burden so that you can
> ignore that particular activity in terms of your enforcement
> activities, devoting the resources you have to more questionable
> cases.
>
> COMMISSIONER TONER: Thank you. Thank you, Mr. Chairman.
>
> CHAIRMAN MASON: Commissioner Thomas.
>
> COMMISSIONER THOMAS: Thank you, Mr. Chairman. Thank you both for being
> here. I\'ll just note at the outset I was reading your comments with
> interest, and earlier was a topic of discussion that the
> [Orloski]{.underline} decision is significant in this area.
>
> And I have gone back to it again to look at it and it strikes me that
> it\'s very clear in saying that as a constitutional standard, the
> Commission would not have to require express advocacy as a standard.
> As I read the decision, it was emphatic on that point.
>
> And it was also clear that that case was in a fairly limited context,
> and the court was very clear in noting that as well. That was in the
> context of a picnic, a senior citizens event that a Congressman was
> setting up so that he could meet with the constituents. And indeed the
> Commission did seem to have adopted a standard in those contexts where
> for those kinds of things expenses of, say, refreshments and bus
> transportation could be paid for by a corporate sponsor as long as
> there wasn\'t express advocacy and there was no evidence of soliciting
> of contributions in connection with the event. But I only raise that
> for the point that I think it\'s a fairly limited-scope decision.
>
> A quick comment on that?
>
> MR. POMERANZ: I think that you\'re right that no court has ruled
> definitively that the standard that we propose, express advocacy, be
> required. I point out that none has ruled otherwise as well.
>
> COMMISSIONER THOMAS: The [Christian Coalition]{.underline} decision?
>
> MR. POMERANZ: I think you\'re correct that the district court in
> [Christian Coalition]{.underline} looked at and considered express
> advocacy and rejected it. I should have clarified my answer. I\'d like
> to see\--well, I\'d like to see the Supreme Court rule that we are
> correct, of course, but I think that the district court\'s ruling in
> [Christian Coalition]{.underline} is wrong on that point.
>
> COMMISSIONER THOMAS: I was going to say I think Commissioner
> McDonald\--I should give him full credit\--he said we tried to get the
> issue up to the Supreme Court, but so far they haven\'t take it or we
> haven\'t gotten a consensus to try to get there again.
>
> Let me deal with one of the other points raised. If we try to attach a
> content standard, we\'re up against some odd results, certainly,
> almost no matter how you cut it. But I want to read in a sample ad.
> I\'m going to change it because when I read this ad the other day, I
> read it as it was issued. And it\'s an ad that has been put out by the
> People for the American Way and it\'s obviously designed to go from
> their perspective, but I\'m changing the terms.
>
> COMMISSIONER McDONALD: Well, don\'t do that.
>
> COMMISSIONER THOMAS: I was, I think, kidded by some folks because it
> looked as though I was trying to read into the record for the world to
> see a partisan ad. I\'ll structure it the other way, although I must
> say reading it from the other perspective may not actually work very
> well.
>
> But let\'s say this ad was run 61 days before the general election in
> a state where the primary had maybe been in March and it actually had
> started running just after the primary and was running all the way up
> to the 61st day; in other words, before the electioneering
> communication test would kick in.
>
> Here\'s the ad: \"One vote away. Today, the Senate is controlled by
> the left wing of the Democratic Party by just one vote. Their
> unchecked power would be devastating for the anti-abortion cause,
> private property rights, saving Social Security with private
> investment and business freedom, and could guarantee a Supreme Court
> controlled by the far left for decades. With your family\'s future at
> stake, should one political party have this much power? Your vote for
> Senator counts on November 5.\" It doesn\'t mention a particular
> candidate.
>
> What if that ad was run by an organization you\'re familiar with and
> the candidates had basically crafted that ad and handed it to you or
> to this organization to run and had picked the days on which it was
> going to run? What should we do?
>
> MR. POMERANZ: That should not be coordination.
>
> COMMISSIONER THOMAS: Even if the candidates drafted the ad and brought
> it to you or your organization and said \"please pay for the air time
> for this?\"
>
> MR. POMERANZ: That\'s correct.
>
> COMMISSIONER THOMAS: The same for you?
>
> MS. ABEGG: I agree.
>
> MR. POMERANZ: I don\'t mean to sort of give you a short answer and
> leave you hanging. I think that inevitably in this area of regulation,
> there are going to be ads that strike people as ads that perhaps
> shouldn\'t be run, or shouldn\'t be run in consultation with elected
> officials or party officials.
>
> I think that, however, if you regulate too broadly, we can create just
> as many, perhaps more, examples of ads where groups with particular
> expertise or particular knowledge would not be able to speak in areas
> where we would think it necessary for them to speak, for them to share
> their information with our policymakers, with the general public. And
> that\'s the problem.
>
> Yes, there are going to be cases, as the Supreme Court recognized in
> [Buckley]{.underline}, where we\'re not going to be able to fix
> everything with statute and regulations, and that\'s all right.
> That\'s part of our constitutional process.
>
> COMMISSIONER THOMAS: Well, I appreciate it. I know it\'s going to be
> tough for us to try to sort through this. There have been some other
> folks who have testified who came up with some options that we might
> work with where there is very clear coordination, and we may be able
> to fashion something that we all could live with, your groups
> included, where we would try to build in some of these safe harbors
> that you\'ve identified as well.
>
> Thank you very much.
>
> CHAIRMAN MASON: Commissioner Smith.
>
> COMMISSIONER SMITH: Thank you, Mr. Chairman.
>
> I guess going along those same lines, I appreciate, Mr. Pomeranz, your
> mentioning the point [Buckley]{.underline} makes that the discussion
> of issues is intrinsically linked with the discussion of candidates.
> And I think at one point they say it\'s not going to take any\--I\'m
> kind of paraphrasing here\--it\'s not going to take any particular
> brains for people to figure out how to do independent expenditures
> that don\'t include express advocacy that can still influence a
> campaign.
>
> But that\'s just sort of the price we pay, some of the language of
> [Buckley]{.underline} along there, and I think that\'s important to
> note that in other words, the mere fact that there are going to be ads
> out there that will influence races doesn\'t change it. And I think
> there\'s some reason why.
>
> This morning, we went over, in talking with some of our earlier
> witnesses, the possibility of groups running coordinated activity to
> build public support to pass legislation. Now, these witnesses have
> suggested that there should be no content standard at all, at least in
> the last 60 days.
>
> What we pointed out was that if they had clearly coordinated the ad,
> then, then an ad that didn\'t mention a candidate, that didn\'t
> mention a party, that would be the ideal ad that we\'d all say for
> issues in some kind of bizarre good-government dream world where
> issues are separate from politics, would still then be covered as a
> coordinated expenditure because they clearly sat down and said, now,
> where shall we run this, and so on. So I think you\'ve really laid the
> point out there.
>
> Let me ask you\--and I\'ll go Ms. Abegg here because I gather you
> folks do sometimes get on the airwaves, unlike Mr. Pomeranz\'s
> impoverished clients.
>
> MS. ABEGG: Right.
>
> COMMISSIONER SMITH: Let\'s suppose you\'re out there and you\'re
> sitting down and talking about getting some grass-roots support going
> for an issue that\'s important. And so you\'re talking with your
> allies in the legislature and they say, \"Well, let\'s start ads, we
> need to run some ads in some of these districts of these members that
> are kind of waffling and start to build up some public support for
> this issue. Let them hear from their constituents.\"
>
> And let\'s suppose that some of the people\--there are two folks on
> the fence and one of them is in a very, very safe electoral seat and
> the other is in a very, very marginal electoral seat. Which one are
> you more likely to advertise in if you can only advertise in one?
>
> MS. ABEGG: Probably the latter.
>
> COMMISSIONER SMITH: And why would that be?
>
> MS. ABEGG: Probably because the voters in that district are more
> likely to be paying attention because if it\'s a close race, they\'re
> paying attention.
>
> COMMISSIONER SMITH: So the electoral aspect is inextricably linked
> with the issue aspect?
>
> MS. ABEGG: Correct.
>
> COMMISSIONER SMITH: Part of what makes the issue ads effective is that
> they will potentially influence how folks vote.
>
> MS. ABEGG: If it\'s a legislative issue, it\'s probably also going to
> be a campaign issue, especially in tight races.
>
> COMMISSIONER SMITH: Okay. Now, a content standard can help to clarify
> some things. I wonder, Mr. Pomeranz, if you would just address for a
> moment\--in your written testimony, you talk a little bit about how
> Commission investigations of possible coordination can itself be a
> penalty, and argue something that I said at the outset of yesterday\'s
> hearing that I think this is perhaps the most important of the
> hearings we\'re having.
>
> I wonder if you would just elaborate a little bit more on your
> comments there when you talk about why coordination investigations are
> particularly burdensome.
>
> MR. POMERANZ: Certainly, and I\'m certain that we\'re not the first to
> note this. We have yet to be subject to a Commission investigation. We
> hope never to be there, but we\'ve spoken with so many organizations
> that particularly in this coordination area face incredible burdens in
> proving that what they did was legitimate.
>
> Think about particularly a broad definition of coordination. In order
> to prove that you did not coordinate your activity, you\'ll need to go
> to every possible instance of coordination, every contact between a
> member of your staff or board or volunteers and people who work for or
> used to work for candidates, parties, campaigns, common vendors
> perhaps.
>
> I think that what would be necessary to vet every one of those
> communications and make sure that they did not discuss the
> communication alleged to have been coordinated is overwhelming,
> overwhelming, the amount of e-mail and phone calls and letters and
> meetings on the street. It\'s astonishing that these investigations
> ever close.
>
> COMMISSIONER SMITH: We talked a little about [Orloski]{.underline}
> earlier. I\'m not sure that I would quite agree with Commissioner
> Thomas\' interpretation of what [Orloski]{.underline} said about the
> constitutional issue. But leaving that aside, [Orloski]{.underline}
> pretty clearly said that it was a permissible standard under the
> statute to require express advocacy.
>
> Is that your understanding of the case?
>
> MS. ABEGG: That\'s my understanding.
>
> COMMISSIONER SMITH: Other than the requirement written to include as
> coordinated activities electioneering communications that are
> coordinated, is there anything in BCRA that would change that part of
> [Orloski]{.underline}?
>
> MR. POMERANZ: No.
>
> MS. ABEGG: Not that I\'m aware of.
>
> COMMISSIONER SMITH: Thank you.
>
> CHAIRMAN MASON: Vice Chairman Sandstrom.
>
> VICE CHAIRMAN SANDSTROM: Thank you for appearing here today. I gather
> you both represent organizations that are national in scope. I would
> note that our proposed regulation was particularly with respect to
> common vendors identifying a list of people who perform certain tasks.
> Fundraising, voter files, media buyers, I think would be swept in.
>
> Is it conceivable that you could very often be able to identify a
> vendor out there who provides sort of political/ideological support in
> a campaign\--not a candidate\'s campaign, your campaigns\--who
> wouldn\'t be working for some candidate?
>
> MR. POMERANZ: Well, if we take the definition of \"vendor\" in the
> Notice of Proposed Rulemaking, I think that it will be challenging in
> a lot of places.
>
> You have mentioned, Mr. Vice Chairman, in the course of these hearings
> the problem of the limited number of list brokers out there. I have
> anecdotal reports from Oregon that there is but one union print shop
> in all of Oregon, and certainly groups on my side of the political
> spectrum and Democratic candidates like to use a union print shop. So
> I think that there are all sorts of problems.
>
> MS. ABEGG: I don\'t think that my clients necessarily go out and look
> for a vendor that\'s also working for a candidate. They go out and
> choose a vendor that has done the best job in the past and that is
> going to do a good job for them, and I don\'t think they necessarily
> know who else they\'re working for.
>
> VICE CHAIRMAN SANDSTROM: And should there be any circumstances where
> you unknowingly hire a vendor who happens to be working for a
> candidate that then would trip liability on your parts, or do you
> think there should be a standard here that you have to knowingly
> employ a vendor who is providing strategic advice?
>
> MR. POMERANZ: I think that might be one way to constrain the rule. I
> think that if common vendors in any sort of broad form make it into
> the regulations, you\'re going to see a lot of people attempt to
> create the sorts of Chinese walls to inquire of their vendors to see a
> firm split between the candidate half and the interest group half. And
> we\'ll deal with it, but in the meantime it will be a great burden on
> all of the participants in the process and some will inadvertently
> step over some lines.
>
> MS. ABEGG: I think it could also affect the small non-profits. If the
> common vendors have to choose between a candidate who is bringing in
> big business and a non-profit who is going to run just a few ads, the
> non-profit is going to have trouble.
>
> VICE CHAIRMAN SANDSTROM: You mentioned Oregon. I grew up in Oregon.
> When I was a child growing up, I was going to parochial school and at
> the time there was something called the Legion of Decency, and it
> actually would take all the movies and rate them and put them in
> various categories. And the last one was \"C,\" for \"Condemned,\" and
> so you wanted always as a young boy to make sure you didn\'t visit one
> of these condemned movies. I was a very young boy, in a parochial
> school.
>
> But I came across one day that there on the condemned list was \"The
> Three Musketeers.\" Now, I had seen the \"The Three Musketeers\" and I
> didn\'t know if I was going to be condemned to hell for having
> seen\--or immediately rushed to confession. I realized later the book
> and such, and the treatment of the cardinal some people may not have
> thought was fair.
>
> But it did teach me one last thing that I don\'t want to have
> standards\--content standards are almost indecipherable and the
> simpler the standard is, the better, and this Commission shouldn\'t be
> turned into a legion of political decency. And to the extent we can
> avoid having to have investigations, having to review ads, we serve
> the country well, while at the same time if those clear standards can
> be drafted to support the purposes of the statute.
>
> So your testimony in that regard has been very helpful, and I will
> tell for this Commissioner, I will try to avoid becoming a
> legionnaire.
>
> CHAIRMAN MASON: Speaking of legionnaires, Larry Norton.
>
> MR. NORTON: Well, thank you for that introduction, Mr. Chairman, and
> good afternoon.
>
> MR. POMERANZ: Good afternoon.
>
> MR. NORTON: Ms. Abegg, in your opening remarks you addressed an issue
> that you addressed more fully in your comments, and that\'s the
> chilling effect that the proposed content standard\--you talked
> specifically about Alternative A in the Notice of Proposed Rulemaking
> as presenting a particular chilling effect on legislators\'
> willingness to discuss issues with public interest organizations.
>
> And just for the record, I wonder whether you could address another
> content standard that\'s proposed in the NPRM, and that\'s Alternative
> C. Were the Commission to adopt that, would that create the same kind
> of chilling effect, in your view, on the discourse between legislators
> and public interest organizations?
>
> MS. ABEGG: Well, as written, definitely. I mean, 120 days before a
> general election or 120 days before a primary\--you\'re looking at a
> large part of the year, so quite a bit of your lobbying is going to be
> chilled if you want to run ads.
>
> MR. NORTON: You know, I just would note that there are three different
> factors that are identified in Alternative C and all three of those
> would have to be satisfied. So, in your view, even requiring all three
> of those factors to be satisfied, that would be insufficient
> protection for the organization you represent?
>
> MS. ABEGG: Correct.
>
> MR. NORTON: Okay. Just one quick question. Commissioner Smith noted
> that nothing in BCRA suggests that Congress wants the Commission to
> prohibit coordination of anything other than express advocacy or
> electioneering communications.
>
> I assume you both would agree, and you\'ll tell me if you don\'t, that
> meaningful coordination rules are necessary to give effect to some of
> the broad prohibitions on soft money that are contained in BCRA.
>
> MR. POMERANZ: I think that you certainly need a definition of
> coordination. Actually, I stopped at the point where you characterized
> Commissioner Smith\'s position there. I think that if I understood his
> question, it was more of a concern that nothing in BCRA suggested that
> an express advocacy standard would be prohibited. I don\'t think it
> perhaps went as broadly as you said.
>
> In any event, have I responded to your question?
>
> MR. NORTON: Well, no, I don\'t think so. The question is do you think
> it provides reason for the Commission to enact meaningful coordination
> rules, that the Commission is obligated to give some effect to the
> broad prohibitions on soft money that are contained in BCRA. Are those
> related concepts as far as you\'re concerned?
>
> MR. POMERANZ: I\'d have to look more closely at the soft money
> regulations. I can\'t tell you.
>
> MR. NORTON: Do you have a feeling about that, Ms. Abegg?
>
> MS. ABEGG: No.
>
> MR. NORTON: I don\'t have anything else. Thank you very much.
>
> CHAIRMAN MASON: Do Commissioners desire a second round?
>
> If not, we\'d like to thank you very much for your testimony. We
> appreciate it.
>
> This meeting is adjourned.
>
> \[Whereupon, at 4:14 p.m., the Commission was adjourned.\]
>
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