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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> Wednesday, October 23, 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 9:33 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}
>
> Robert Alt, Fellow, Center for
>
> Constitutional Jurisprudence,
>
> Claremont Institute 17
>
> Gregory S. Casey, President and Chief
>
> Executive Officer, Business Industry
>
> Political Action Committee 20
>
> Robert F. Bauer, Perkins Coie, LLP,
>
> Counsel for the Democratic Senatorial
>
> Campaign Committee and the Democratic
>
> Congressional Campaign Committee 77
>
> Donald F. McGahn, II, General Counsel
>
> National Republican Congressional
>
> Committee 84
>
> Robin Kolodny, Ph.D., Associate Professor
>
> of Political Science, Temple University 163
>
> Craig Holman, Ph.D., Legislative
>
> Representative, Public Citizen\'s
>
> Congress Watch 165
>
> [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 Wednesday, October 23, 2002, will please come to order. I\'d like
> to welcome everyone to the Commission\'s hearing on the Notice of
> Proposed Rulemaking related to coordinated and independent
> expenditures.
>
> The proposed rules we\'re discussing today were included in a Notice
> of Proposed Rulemaking published on September 24, 2002, and these
> proposed rules address the changes in the Federal Election Campaign
> Act under Title II of the Bipartisan Campaign Reform Act of 2002.
>
> These rules would revise the definition of independent expenditure,
> address coordinated communications, and would set new restrictions on
> the timing of independent and coordinated expenditures made by
> committees of political parties and also cover reporting related to
> these issues.
>
> We appreciate the willingness of the commenters to assist us in this
> effort by giving their views on these proposals, and we want to thank
> particularly witnesses who will be taking time today and tomorrow to
> give us the benefit of their experience and expertise in this area.
>
> I want to particularly thank the commenters and witnesses for the
> attention that they have given to the constitutional issues involved
> in this rulemaking. As several commenters have noted, the necessity
> for a distinct treatment of independent and coordinated expenditures
> arises from the Supreme Court\'s [Buckley v. Valeo]{.underline}
> decision, and the Supreme Court specifically included that this
> distinction is of constitutional significance. The distinction was
> reinforced in the two [Colorado]{.underline} decisions and was, of
> course, at issue in the district court opinion in [Christian
> Coalition]{.underline}.
>
> While a few commenters have noted that they believe BCRA\'s statutory
> requirement to treat coordinated electioneering communications as
> contributions as unconstitutional, those commenters recognize that the
> statutory issue is being addressed in the McConnell litigation
> challenging the constitutionality of the Bipartisan Campaign Finance
> Reform Act.
>
> Thus, the bulk of the comments on the constitutional issues usefully
> focus on the principles and guidance which can be derived from the
> relevant court decisions and other principles. And I thank everyone
> for that attention and for the way that it has been directed. I think
> all of the comments, the ones I agree with and the ones I don\'t agree
> with, are usefully addressed to areas that the Commission needs to
> consider.
>
> I\'m going to recognize my colleagues for any opening statements that
> they wish to make and then we\'ll move to the panels in accordance
> with the schedule that has been established.
>
> I\'ll just briefly note that each witness will have time to make a
> five-minute opening presentation and then we\'ll have time for at
> least one round of questions from the Commission and the General
> Counsel. We have attempted to arrange the schedule in time slots
> according to the number of witnesses on the panels. I want to thank my
> colleagues for having adhered so well to the schedule in our previous
> hearings and urge our witnesses to continue to do the same.
>
> Mr. Vice Chairman, do you wish to make an opening statement?
>
> VICE CHAIRMAN SANDSTROM: No.
>
> CHAIRMAN MASON: Commissioner Smith.
>
> COMMISSIONER SMITH: I\'ll make a couple quick remarks, I guess. I
> didn\'t have a formal opening statement, but I do want to make a
> couple comments.
>
> This is one of several rulemakings that we have to implement the
> Bipartisan Campaign Reform Act. It has drawn less attention that a
> couple of the others, particularly the ones on party soft money, as it
> is sometimes called, and on electioneering communications. But in my
> mind, this is probably the most important of the three, or of all of
> them, really.
>
> For example, the electioneering communications which was the subject
> of a great deal of attention\--this was the brown-out period on ads
> run within 60 days before an election where citizens are limited in
> their ability to comment on public officials, or 30 days before an
> election. It\'s a standard that I think is very problematic from a
> constitutional standpoint.
>
> Even the Brennan Center, which has been an ardent cheerleader for
> suppressing this type of speech and really kind of came up with the
> 60-, 30-day limits, notes in their studies, at least to the extent
> that I can glean the information from them, their buying time studies
> on which Congress relied\--that even under their own studies,
> approximately 30 percent of what even they view as genuine speech
> which ought to be unregulated would be regulated under that speech.
> And then they have other speech which they think is not legitimate and
> the government should control.
>
> So it\'s over-broad, but at least it\'s not vague. It is a bright line
> standard in electioneering communications of 30 or 60 days. If you
> name a candidate in 60 days, the government is going to be regulating
> what you\'re doing. That is just one example there.
>
> But you look at the coordination issue and we\'re back to both, I
> think, vagueness and over-breadth. Some of the proposals that I\'m
> seeing in the comments are\--well, I just find them almost astounding.
>
> It has been suggested among some of the commenters that coordination
> should be found when somebody acts relative to a campaign even if they
> are not an agent of that campaign. It has been suggested that national
> parties and campaigns and candidates can be legally bound or have
> their rights legally restricted by the actions of persons over whom
> they have no legal or actual control.
>
> It has been suggested that going beyond the electioneering
> communications 60-day ban, if you name a candidate, that that should
> be limited even if they don\'t name a candidate within 60 days of an
> election.
>
> And, of course, the very basic statutory requirement that we\'re
> required to deal with here is we need to come up with a way to prove
> that two groups or campaigns or, you know, a party and a campaign are
> coordinating their activity even if there is no collaboration or
> agreement, which leaves one wondering how do you coordinate without
> collaboration or agreement. I think for most people that is sort of
> what coordination means.
>
> One Senator has been going so far as to suggest that those who
> disagree with him on interpreting the Act are actually corrupt. I
> think that is kind of extreme language that doesn\'t serve much
> purpose. But if it serves any purpose, it may be worth noting that May
> 4th, quoting Michael Oakeshott, the great conservative political
> philosopher who once noted that efforts to do the impossible
> inherently lead to corruption.
>
> It may well be that we have been asked to take an Act which is deeply
> offensive to the First Amendment and harmonize it with the First
> Amendment. And that is not an easy chore to do and I think the chore
> that we have to do in this part of the rulemaking is the most
> difficult rulemaking to do that in.
>
> So what I\'m going to be after in questioning our witnesses today and
> tomorrow is trying to get a sense of this working in the real world.
> We\'ve been admonished repeatedly by some groups that we really need
> to be thinking about the real world and get away from sort of
> formalistic approaches.
>
> And I think that is an important thing to do. I think it is very
> important to figure out how this is going to work in the real world
> and not to come up with some kind of vague, sweeping statements, well,
> you can just, you know, do away with these kinds of problems with the
> wave of a wand.
>
> One of the things that I\'ve found repeatedly throughout this is
> we\'ve been told, well, this bill is not really all that radical, the
> Commission can interpret it reasonably, you can create exceptions that
> are viable exceptions, and so on.
>
> But every time that we try to actually create an exception, or every
> time we try to interpret it in a way that would seem to me to take
> account to the real world of how campaigns and people operate and how
> the American citizens participate in politics, we\'re excoriated for
> violating the spirit of the law in some odd way.
>
> And when we ask for help\--well, how do we do this\--we\'re
> consistently either given no advice at all other than \"we\'re sure
> you can,\" or we get proposed to us exemptions which are so
> meaningless that in another recent hearing I referred to them as sham
> exemptions, exemptions that purport to give the citizens certain
> rights but in reality do not. So I have a great deal of concerns about
> this rulemaking.
>
> I appreciate that in the Notice of Proposed Rulemaking our staff has
> worked very hard to try to harmonize these very difficult, to say the
> least, competing concepts. And I do appreciate that we do have a great
> many comments and the commenters have spent a great deal of time
> attributed to this. And I\'m looking forward to some very helpful
> hearings, and again I particularly hope that commenters will try to
> focus on how this is actually going to be enforced in the real world.
>
> Thank you.
>
> CHAIRMAN MASON: Commissioner Thomas.
>
> COMMISSIONER THOMAS: Well, thank you, Mr. Chairman. I\'ll try to be
> brief. I know that my colleague, Commissioner Smith, is a true
> believer and he is certainly entitled to his views. I would just urge
> that throughout this rulemaking that he keep an open mind.
>
> I think there is a large body of law by now that does very clearly
> establish that coordinated expenditures are to be treated as
> contributions and can constitutionally be restricted. The Supreme
> Court has clarified that and there is simply no doubt about it.
>
> What we\'re here about now is to try to figure out under what
> circumstances we want to put in a regulation that coordination does or
> does not exist. But it is an important consideration because if there
> is coordination in connection with a certain activity, it can be
> regulated as a contribution\--it must be regulated as a contribution,
> according to the statute, and the purpose there obviously is to
> prevent interest groups or persons with huge amounts of money from
> being able to spend so much on behalf of a candidate that the
> candidate would be expected to perhaps provide a favor in return, if
> asked. That goes to the heart of our governmental structure and
> that\'s why these things are important.
>
> These kinds of restrictions, putting restraints on folks with lots and
> lots of money, are designed actually to further the interests of the
> little guy in the process and give the little guy in the political
> process a chance to compete in the political marketplace.
>
> It allows them to have a chance to meet with their legislator and get
> their view across and not be drowned out by those who can put up tons
> and tons of money to support a candidate. That\'s what this is all
> about. So we come at from a different philosophical perspective, but I
> think these hearings will be very helpful to help us to work through
> this process.
>
> I would just also note that this has been a very contentious issue at
> the Commission over the years, this issue of what is coordination, and
> the Commission a couple years ago adopted a district court decision\'s
> analysis for what should be viewed as coordination.
>
> Some of us were upset with that approach because we felt that the
> Commission\'s existing regulations were just fine and we should have
> appealed and try to defend those. But a majority of the Commission
> decided to go with that approach outlined in a district court
> decision.
>
> Congress basically said \"We don\'t like that approach, FEC. We want
> you to go back to the drawing board and put some meat back in your
> coordination regulations.\" So, in essence, that\'s where we are.
> We\'re trying to carry out the guidance that has been given to us by
> Congress that we\'re to try to do a little bit better job, try to
> apply real-world approaches and define coordination in way that will
> carry out, yes, the spirit of the law as well as the letter of the
> law.
>
> Thank you.
>
> CHAIRMAN MASON: Commissioner Toner, no statement.
>
> Commissioner McDonald.
>
> COMMISSIONER McDONALD: Mr. Chairman, just to thank the witnesses. I
> know they will be coming shortly. I\'d rather have the debate as we
> progress along.
>
> Thank you very much.
>
> CHAIRMAN MASON: All right.
>
> I see Mr. Alt, if you would please come forward. I don\'t see Mr.
> Casey, who we informed him would be starting at ten o\'clock. So we
> may get an early break.
>
> Could we perhaps check and see if he is even in the building yet?
>
> Thank you, Richard.
>
> We\'re going to just wait just a minute to see if Grey is nearby.
>
> \[Pause.\]
>
> CHAIRMAN MASON: We\'ll be in recess for ten minutes.
>
> \[Recess.\]
>
> CHAIRMAN MASON: The Federal Election Commission\'s hearing on
> coordinated and independent expenditures will reconvene.
>
> We are prepared for our first panel, both of whom are well-known and
> even personal friends to me, so welcome: Robert Alt, who is a Fellow
> at the Center for Constitutional Jurisprudence at the Claremont
> Institute, and Greg Casey, who is President and CEO of BIPAC, the
> Business Industry Political Action Committee.
>
> I\'d like to let my colleagues know that, like myself and Commissioner
> McDonald, Mr. Casey is not an attorney and he assures me that he has
> written his comments himself, which relieves me greatly.
>
> Both of you will have five minutes to summarize your opening
> statements. We will make your written statements a part of the record,
> so you don\'t need to read those in their entirety, and that will be
> followed by a round of questions from the Commissioners and General
> Counsel, about five minutes each.
>
> We\'ll use the light system. When the red light comes on, go ahead and
> finish your sentence, but I appreciate your help in keeping us on time
> in that regard.
>
> We\'ll begin with Mr. Alt.
>
> Go ahead, Robert.
>
> MR. ALT: Thank you, Mr. Chairman and Members of the Commission. When
> last we spoke, or when last I testified, one of the primary concerns
> that I raised were limits upon this Commission\'s authority to enact
> certain of the exemptions with regard to some of the electioneering
> communications questions.
>
> Today, we face a very different situation. Here, Congress, rather than
> circumscribing your activity, has done what in technical
> administrative law terms is referred to as a punt. They have
> essentially tossed out the old rules and given you a fair amount of
> leeway to craft new ones. Keeping that in mind, I think that there\'s
> a few things that this Commission should look to when crafting these
> new rules.
>
> First of all, there is a definitive need for clear regulations. The
> regulated community need not fall into traps for the unwary. As such,
> to the extent possible bright lines should be the order of the day for
> these sorts of determinations.
>
> An example of something which I think would not necessarily fall into
> a clear or bright line area or something which could potentially be a
> trap for the unwary would be implicit violations of the law. Implied
> agency, for instance, the idea that someone could fall prey to
> liability based upon the frolic or detour of someone in their employ,
> seems to be wholly outside that which a reasonable person could
> control. So, therefore, I would advise against such expansive
> definitions.
>
> Second of all, as I mentioned at moderate length in my written
> comments, independent expenditures, of course, are highly protected by
> the Supreme Court. [Buckley]{.underline} made this abundantly clear.
> As such, the line-drawing that is done for coordinated expenditures,
> which are in essence a carve-off based upon conduct and/or content of
> such communications, should be very narrowly and carefully drawn to
> avoid capturing any more protected speech than is absolutely
> necessary.
>
> This would seem to run headlong into the so-called need to prevent
> against \"wink and nod\" coordination. This phrase, drawn from
> [Colorado Republican II]{.underline}, it should be noted is dicta in
> that decision and is not binding precedent upon this Commission.
>
> However, the high standard which the Court has held in terms of
> protection both for independent expenditures and for the freedom of
> association is, in fact, binding precedent which this Commission
> should look to as a matter of first impression in crafting these
> regulations.
>
> With that said, I would also like to draw attention to one other issue
> within my comments, which is the idea of a fair use exception for
> re-publication. As the proposed regulations currently stand, there is
> an exception for those re-publications which are used to oppose or
> attack a candidate for office.
>
> However, this would seem to capture in a great deal of communications
> which may be neutral or may have no bearing on the particular
> candidate which may seek to lobby for legislation, to promote a
> particular issue, or to promote a non-federal candidate. As such, some
> sort of a fair use exemption is necessary to assure that these sorts
> of protected communications are indeed protected. With those issues in
> mind, I yield back any remaining time.
>
> CHAIRMAN MASON: Thank you.
>
> Mr. Casey.
>
> MR. CASEY: Thank you, Mr. Chairman, Members of the Commission. Keeping
> with that wonderful introduction you gave me about not being an
> attorney, I\'m reminded by some of the remarks that the Honorable Jan
> Baran has elsewhere in his testimony that what we\'re doing here in
> preparation of regulations should require the understanding of
> ordinary intelligence. So I offer myself before the Commission as that
> ordinary intelligence that has been referenced to by Mr. Baran.
>
> Thank you for extending us the right to comment on what we think at
> BIPAC is probably one of the most important issues in the long-term
> health of our Republic, and that is the ability of those people, the
> citizens of a country, to affect the election of representatives.
>
> It may be only a historical footnote, but I think it\'s a fact
> nonetheless, that were it not for the intercession of a few business
> people financially assisting a cash-strapped George Washington in his
> first run for the Virginia House of Burgesses in 1757, he would not
> have been able to run, and thus might not have ever become President.
>
> I think it\'s also worthy to note that the first issue advocacy on
> record in this country was that published by a group of businessmen
> and women in Boston, Massachusetts, against the economic policies of
> Alexander Hamilton in 1791.
>
> The point of all this is rather obvious. It is that the financial
> involvement of business, both in support of candidates and in support
> of political messages, is an American tradition as noble as it is
> necessary. And despite the assertions of some to the contrary, the
> financial involvement of business in both its support of candidates
> and issues is neither new nor necessarily corruptive. Our point would
> be that tradition should not change with the enactment of BCRA.
>
> Now, as I mentioned in our stated remarks\--I will not repeat anything
> else, except to say that BIPAC opposed the enactment of BCRA and we
> support litigation ongoing in the federal courts that would cause it
> to be overturned.
>
> However, in the unlikely event that the court does not overturn that
> law, we feel it is necessary and appropriate to work with you to craft
> regulations that will work in the real world. Therefore, as the
> Chairman mentioned, this was a testimony crafted not by attorneys,
> although I have a great deal of respect for attorneys, but it was
> crafted by those folks who would, in the corporate and association
> community, end up being the folks charged with implementation. And
> thus we probably do, in fact, hit that ordinary intelligence
> threshold.
>
> I will leave it to my other learned colleagues to talk about the
> constitutionality of the law. I\'ll leave it to some of the attorneys
> to talk about whether or not your regulations meet the compliance
> under the law.
>
> What we want to talk about is whether or not the regulations that you
> do indeed promulgate will work in reality, because that\'s the world
> in which we deal. In order for that to happen, we believe they have to
> be clear, they have to be measurable, they have to be concise, and
> they have to be realistic.
>
> We should reject every attempt at a per se finding or anything that
> would assume coordination without having it improved by both your
> content and conduct standards. It is impossible for us in the
> practitioner\'s world to proceed to maintain the tradition that I
> mentioned earlier unless there are bright lines that guide us as to
> our permissible behavior.
>
> I don\'t know if I yield back my time or you just take back.
>
> CHAIRMAN MASON: Thank you, Mr. Casey.
>
> In accordance with the questioning order I had circulated, Vice
> Chairman Sandstrom is first in this round.
>
> Mr. Vice Chair.
>
> VICE CHAIRMAN SANDSTROM: I would like to thank the witnesses for
> appearing here today, and I can assure Mr. Casey that his intelligence
> may be ordinary, but before this Commission not necessarily customary,
> in that I find some of the practical perspective you bring to this
> very beneficial.
>
> One area, looking at your written comments, I\'m particularly
> interested in that I will be exploring with a number of the witnesses
> is the use of common vendors and former employees.
>
> On page 2 of your comments\--I can quote from it\--you said, \"Under
> proposed Section (b)(2), the Commission emphasizes that a candidate or
> political party with whom or which a communication is coordinated does
> not receive an in-kind contribution from the conduct described in
> sub-paragraph (d)(4), a common vendor or a former employee or
> independent contractor unless the candidate, party, or agent engages
> in conduct described in paragraphs (d)(1) through (d)(3) of this
> section.\" And that seems to be a pretty common-sense understanding,
> but what is remarkable is it is not found in the testimony of many
> others.
>
> Could you explain what led you to write this?
>
> MR. CASEY: I\'m not lawyer. In reality, this was my attempt to play a
> lawyer.
>
> Well, basically, we looked at what you were trying to establish, which
> was a three-pronged approach. Actually, it made good sense in the face
> of it that, first of all, the money had to be paying for something and
> it was not paid for by the candidate or party, that there had to be
> conduct and there had to be content.
>
> That seems fairly logical to us that there are these three bright-line
> qualifications. I could sit down with somebody and say these are the
> things that if you do these things, all three of these things, then
> you have reached that point of coordination for purposes of FEC
> definition.
>
> And I believe what we were trying to do here was to say you cannot
> make exceptions with regard to per se findings with previous vendors
> or with congressional staff unless they, too, have met the thresholds
> of a content and an actual conduct that would constitute coordination.
>
> VICE CHAIRMAN SANDSTROM: So, essentially, bad hiring decisions you
> made in the past shouldn\'t travel with you if that person should do
> something completely unknown to you in the future?
>
> MR. CASEY: Well, yes, particularly in the world of politics. I\'m sure
> all of you have worked in a campaign. Campaigns are organized
> confusion, and I use the word \"organized\" liberally. It is very
> difficult in both congressional offices and in campaign offices to
> have clear lines of authority. People act doing things in campaigns as
> they think is appropriate.
>
> One of the other points we make in here is so what? You cannot hold
> the campaign or folks who are contributing to the campaign accountable
> for the over-zealous actions of folks who may be on your staff who are
> acting outside of their scope of authority.
>
> Again, going back to the three prongs that you have, was the money
> paid for, did the conduct reach the threshold, and was the conduct
> really a conduct of coordination within the scope of the authority of
> the individual with the conduct.
>
> VICE CHAIRMAN SANDSTROM: And let\'s look at the other side of that
> transaction, too, because I think it raises some serious problems.
> Let\'s say one of the organizations that is a member of BIPAC decides
> to produce an ad. They hire someone, unbeknownst to them, who provided
> some film editing services to a campaign.
>
> Should that organization then be considered to have made an in-kind
> contribution if, unbeknownst to them, they hired a film editor who had
> worked for a campaign or for a consultant of a campaign?
>
> In order for there to be an in-kind contribution, there almost has to
> be some sort of knowing contribution. They have to know they are
> employing a common vendor.
>
> MR. CASEY: I would agree.
>
> VICE CHAIRMAN SANDSTROM: Mr. Alt, do you have\--
>
> MR. ALT: I certainly would. I mean, that is the sort of trap for the
> unwary that I think this Commission should try and avoid. I mean, at
> the very least\--I mean you can imagine those sorts of situations that
> you would probably have. People start, you know, having questionnaires
> or something for hirees to say \"have you ever worked for,\" blah,
> blah, blah, in order to avoid that.
>
> But even so, as crafted, it seems that it would almost be a strict
> liability type offense, wherein if they actually had done this, you
> would be found to have entered into a coordinated expenditure even if
> you had taken reasonable steps to prevent that. So I would certainly
> agree that that would be troublesome.
>
> VICE CHAIRMAN SANDSTROM: I know neither of you are lawyers, so this
> may be a difficult question.
>
> MR. CASEY: He\'s not a lawyer?
>
> VICE CHAIRMAN SANDSTROM: Oh, you are a lawyer.
>
> MR. ALT: Yes.
>
> MR. CASEY: I thought there were just three of us.
>
> VICE CHAIRMAN SANDSTROM: Thank you. I thought he had the benefits of
> ordinary common sense and wasn\'t\--
>
> MR. ALT: So with that, common sense is now out the window.
>
> \[Laughter.\]
>
> VICE CHAIRMAN SANDSTROM: The statute itself\--where does it identify
> the liability? Is the vendor liable or is only the person who hires
> the vendor and pays the vendor liable for making the in-kind
> contribution?
>
> If the vendor themselves hasn\'t put any of their own money out of
> pocket, who do you believe the statute contemplates being the
> responsible party here for making the in-kind contribution?
>
> MR. ALT: Well, I think the statute is silent on that particular point
> itself, and once again it seems to be another area where the statute
> has punted to the Commission to make those determinations.
>
> VICE CHAIRMAN SANDSTROM: So it is liability in search of an offender?
>
> MR. ALT: Well, it essentially suggests that there may be liability, as
> I understand it, and kicks it to the Commission to determine how that
> liability should be structured, which would seem to include oddly
> enough who is liable.
>
> VICE CHAIRMAN SANDSTROM: Just as a lawyer, is that essentially an
> appropriate decision, you know, to be made on a regulatory basis?
> Should the statute be identifying who made a contribution, who didn\'t
> make a contribution?
>
> It just seems to me that when it says payment to a common vendor,
> it\'s difficult to determine how you get vendor liability out of that.
> Now, maybe within our general rulemaking authority we have the ability
> to do so, even though that person hasn\'t given anything of value
> other than their own expertise because they have been paid by someone
> else. But I was somewhat troubled by how we should analyze this
> legally with respect to liability.
>
> MR. ALT: Generally speaking, I mean, given the construction, there is
> clearly an inclination towards the liability being against the
> individual who initiates the payment. But as I said, the statute is
> somewhat vague.
>
> To the extent that it is vague in this regard, however, if it is seen
> as a delegation to this Commission to apply liability to a particular
> entity, that might be seen as an impermissible delegation, as being
> too broad in some ways. So that might mitigate against reading the
> ability for this Commission to establish liability against vendors.
>
> VICE CHAIRMAN SANDSTROM: One last quick question. Isn\'t that a
> practical question you are seeking answers to, Mr. Casey?
>
> MR. CASEY: Exactly.
>
> VICE CHAIRMAN SANDSTROM: Thank you.
>
> MR. CASEY: But I thought you made that point very clearly.
>
> CHAIRMAN MASON: Commissioner Smith.
>
> COMMISSIONER SMITH: Thank you, Mr. Chairman. Thank you, gentlemen, for
> coming. I\'m going to indulge myself just briefly to note that I\'ve
> been identified as a true believer this morning. I am a very proud to
> be a true believer in the First Amendment. I think it\'s important
> that we have some true believers here on the Commission.
>
> I\'m a true believer in the common sense of the American people, and
> I\'m a true believer that the American people can be trusted to
> participate in the political process and to make good decisions. I\'m
> also a true believer that one dollar is not, quote, \"huge amounts of
> money,\" or, quote, \"lots and lots of money,\" or, quote, \"tons and
> tons of money.\" And as I understand it, these provisions would apply
> to expenditures of even one dollar, so they do have a far reach.
>
> And while I agree that the Supreme Court has made clear that
> coordinated contributions can be regulated, coordinated expenditures
> can be regulated, I think it\'s also clear\--and I appreciate, Mr.
> Alt, you pointing this out in your prepared testimony\--that there are
> a great many limits on that, and that it appears that this Commission
> has frequently overstepped those limits in the past. So I appreciate
> your testimony.
>
> But I need to get down to business here and, Mr. Casey, I\'d like to
> ask you a couple questions. As I indicated in my opening, I\'m
> concerned about the real-world impact here, and I want to know, do
> your groups and do similar type groups and the groups that make up
> BIPAC, and so on, coordinate your public affairs efforts with
> supporters in Congress?
>
> In other words, if you want to get some kind of legislation passed or
> defeated, do you coordinate your efforts with supporters in Congress?
> Do you work with them?
>
> MR. CASEY: On legislative coalitions, yes.
>
> COMMISSIONER SMITH: Yes, okay. Does your group or do similar groups
> that you know of ever do public-type lobbying; in other words,
> communications to the public to try to drum up support for some of
> these legislative positions?
>
> MR. CASEY: Absolutely.
>
> COMMISSIONER SMITH: Now, since September 6, which would be 60 days
> before the 2002 elections, has Congress considered any issues that
> would be important to BIPAC or similar groups?
>
> MR. CASEY: I\'m certain they have.
>
> COMMISSIONER SMITH: It does seem like they have, haven\'t they. So I
> mean I\'m not trying to set this up too much, but I guess I am.
>
> \[Laughter.\]
>
> MR. CASEY: It doesn\'t appear that way at all.
>
> COMMISSIONER SMITH: Is it important that you still be able to engage
> in lobbying activities, including public lobbying activities, in the
> last 60 days before an election if Congress is in session?
>
> MR. CASEY: It is imperative that we be able to engage in lobbying
> activities any time Congress is meeting, any time any legislative or
> regulatory body is meeting. That\'s what we\'re supposed to do.
>
> COMMISSIONER SMITH: If we were to adopt a rule, then, that any
> advertisements that were coordinated within the last 60 days of an
> election, whether they even mention a candidate or not, would be
> deemed to be contributions, would that have a chilling effect on your
> members\' protected First Amendment activity?
>
> MR. CASEY: Absolutely.
>
> COMMISSIONER SMITH: Okay, thank you.
>
> Mr. Alt, I want to take you quickly to an issue on re-publication of
> materials. You discuss a little bit some of the problems with the
> re-publication standard that we have and you suggest that we should
> use a fair use standard, and I just wonder if you would flesh that out
> a little bit better for those of us who may not be totally familiar
> with copyright law. How would you see that working?
>
> MR. ALT: Well, essentially, I just would try to pull some parallels to
> copyright law. I mean, generally speaking, you know, there\'s
> prohibitions on re-publishing in whole or in part another author\'s
> work without providing compensation. However, there\'s the standard
> exemption for fair use.
>
> Generally, red flags may be done if, you know, you excerpt portions
> for profit. But if you\'re excerpting it to, for instance, criticize
> or to speak about either positively or negatively the materials,
> that\'s permissible. Generally speaking, you know, any sort of
> journalistic or sort of public opinion use of another individual\'s
> materials would be permissible for these purposes.
>
> So, essentially, what I\'m suggesting is that rather than have the
> current exemption, which is sort of a one-way ratchet, if you oppose
> the candidate, then you have an exemption. You can actually quote from
> their materials. This would allow sort of nominal re-publication; you
> know, for instance, excerpts, be it, you know, selections of speeches
> or campaign slogans, or so forth, if it\'s used to explain and is not
> necessarily used for the purposes of express advocacy.
>
> COMMISSIONER SMITH: Let me ask you\--now, the NPRM suggests that
> re-publication would still require some type of work together, some
> type of conduct activity as well. You don\'t think that alone handles
> it, handles that kind of concern; in other words, that a group could
> just take something they have seen or gotten from the organization,
> you know, gotten like publicly as public information, and use that and
> it wouldn\'t be coordinated because it wouldn\'t meet the conduct
> standard. But I gather you still think there should be a fair use
> exception.
>
> MR. ALT: Part of that is ultimately going to be driven by, you know,
> how stringent the conduct standard is. As I noted in my comments,
> there certainly are situations where you could have relatively
> incidental contact and yet still seem to fall within the strictures of
> the restrictions.
>
> COMMISSIONER SMITH: One last question while our yellow light is on. In
> your experience and opinion, within the real world is it an effective
> tactic for citizens concerned about campaigning, doing independent
> expenditures or lobbying, to use excerpts from candidates\' campaign
> materials?
>
> MR. ALT: Oh, absolutely. I mean, it has to be remembered that these
> sorts of excerpts, quoting politicians, oftentimes raises the
> identification level of organizations and of issues. And so whether
> you\'re promoting an environmental cause or you\'re promoting, you
> know, gun control or the NRA\--wherever you are on the issue, having a
> statement from a candidate that they, you know, take a particular
> position, you know, may promote the issue in a very strong way, yes.
>
> COMMISSIONER SMITH: Thank you, gentlemen.
>
> CHAIRMAN MASON: Commissioner McDonald.
>
> COMMISSIONER McDONALD: Mr. Chairman, thank you.
>
> Mr. Alt, nice to see you again. Mr. Casey, welcome. You know my old
> friend Don Cogman. Do you go back that far with\--
>
> MR. CASEY: I do.
>
> COMMISSIONER McDONALD: You do?
>
> MR. CASEY: Yes.
>
> COMMISSIONER McDONALD: You have my sympathy. He has just moved to
> another big house. Did he tell you that?
>
> I welcome you all. I guess I\'m a true believer, and I\'ve read all of
> Barry Coffer\'s stuff and so I think I know what the true believer is.
> Let me say at the outset I\'m for the First Amendment, citizens
> groups, people\'s rights, et cetera. I don\'t want to miss the
> disclaimer here.
>
> I do think the issue is very important, and I think that my two
> colleagues kind of defined it at the outset in their opening remarks
> in relationship to what the battle ground is about.
>
> Mr. Casey referred to\--it\'s getting quite coverage lately, by the
> way, about George Washington. You know, George Will used that a few
> weeks ago and that comes from the Congressional Quarterly, \"Dollar
> Politics.\" It was written in about 1981. It was written the year I
> came here, actually.
>
> And for those folks who do not have a real background in campaign
> finance, it\'s probably one of the most scholarly works overall in
> relationship to the law. One of the things I think that it said was,
> quite frankly, that there were a number of pieces of legislation on
> the books, starting with the Pendleton Act in the 1860s, in
> relationship to the conduct of a federal employee and whether that
> employee could be forced to give money to a campaign if they didn\'t
> want to do so. Later, there was the Tillman Act in 1907, and then
> later the Corrupt Practices Act, before we get obviously to the
> Taft-Hartley Act in the \'40s.
>
> I bring that up because it kind of gets to the point\--and Mr. Casey
> made me think about it\--it gets to the point that the debate is
> about. And it\'s a fair and legitimate debate and I hope we can all
> kind of remember that the debate itself is the strength of the
> country, that the ability to argue about what the law should be and is
> is what makes the country strong.
>
> It\'s not whether some people are trying to suppress people\'s rights
> and others are trying to corrupt the process in terms of our
> responsibility. Our responsibility is to try to make sense out of what
> the Congress did. They rejected what we had done in this area and then
> turned around and gave us no particular guidance, which was not very
> helpful, I gather.
>
> But I\'d like to ask\--I\'d go back to a point that Mr. Casey was
> talking about early on. Under the scenario that the Vice Chairman
> outlined, I would gather that if there was no knowledge, there would
> be no coordination. That wouldn\'t be a problem.
>
> And under the Corrupt Practices Act, what happened historically was
> that candidates for the U.S. Senate and the House were required to
> fill out forms, and the forms they filled out always showed that they
> had no expenditures, which was remarkable. And they had no
> expenditures because they were under the theory of \"hear no evil, see
> no evil, speak no evil.\"
>
> Our problems get to be, I think, from a very practical standpoint what
> do people know and what is their relationship with others. That\'s
> what we have to come to grips with. It may not be right. Mr. Casey may
> be right; it may not be constitutional. I think we\'re going to find
> out fairly soon.
>
> But do you have any thoughts for us in terms of when we talk
> about\--either of you, what your scenario is in terms\--I\'m intrigued
> and I appreciated Commissioner Smith pursuing a little bit the fair
> use issue.
>
> But as a practical matter, short of people kind of announcing and
> signing a statement that, yes, they helped coordinate, don\'t you
> think basically the problem is that people can always figure out how
> to get around the process?
>
> And the intent, quite frankly, of the Congress\--Mr. Smith indicated
> that he had great belief in the American people, as I do I, as I think
> do all of my colleagues. And I have great faith in the Congress to
> pass the legislation. It may not be right from the court\'s point of
> view. We\'ll have to wait and see.
>
> But how do we get to a balance where we can do something that has a
> practical application and that will work? Can either of you help us on
> that score?
>
> MR. CASEY: Well, there\'s a fundamental question you ask yourself. Is
> it worth keeping all money out of the political system to keep soft
> money out from being coordinated? We really have to get at what we\'re
> trying to get at here.
>
> It seems to me in our system\--
>
> COMMISSIONER McDONALD: Are you asking me whether Congress now\--
>
> MR. CASEY: I\'m asking\--
>
> COMMISSIONER McDONALD: You understand what our problem is.
>
> MR. CASEY: This is sort of the theoretical question: What is really at
> play here? We\'re passing a law to keep soft money from going into
> campaigns. If, as we do that, we keep all money out of the campaign,
> what have we really done? What is worse? What is worse is no money
> going into the political system at all. That would be the worst
> outcome.
>
> Secondly, in our system\--
>
> COMMISSIONER McDONALD: Just so we can pursue that, you\'re forgetting
> about hard money, which you could use.
>
> MR. CASEY: Right, because right now we\'re talking about soft money. I
> think the ability of people who are not sophisticated, who are not
> giving money to candidates\--for them simply to buy an ad or
> participate in the political process.
>
> We sometimes forget that, you know, these are real people in the real
> world outside Washington where they don\'t live by FEC regulations
> each and every day. They need to be able to get up and clearly express
> themselves without running afoul of the law, which brings me to my
> second point.
>
> What really bothers me sometimes about the debate and about the
> regulations is this presumption of guilt or this presumption of
> coordination. The system is not perfect, but we have sort of a rule in
> our country that you are really innocent until proven guilty.
>
> I mean, the basis of proof is on the law enforcement end to prove that
> the conduct or the content actually\--and I think that\'s what we
> should do here, too. I don\'t think we can presume coordination.
>
> I hear about this \"wink and nod\" thing. Well, you know, there may be
> a time or two\--there may be instances in which there is coordination
> that suddenly for some reason doesn\'t rise to the content or the
> conduct standard for proof. But that\'s the way our system is built.
>
> We don\'t punish the innocent to get at the guilty. We actually allow
> sometimes those things to occur because that\'s the way our system is
> supposed to work. I think that concept has worked fine. I think it
> should be applied here as well.
>
> COMMISSIONER McDONALD: Well, of course, there was a wink and a nod
> with the Enron scandal, as an example. I mean, I want to be clear what
> we\'re talking about here. I want to go back to what was said at the
> outset, maybe before you arrived.
>
> But the debate at least is in terms of the money in the process. It\'s
> not about the people and shutting off their ability to speak. I don\'t
> know of any citizen in this country that can\'t say anything they
> think, and they do very vehemently. And they should, by the way.
> That\'s what it should be about. But I want to be clear that a wink
> and a nod can be fairly tricky, depending on what the wink and nod is
> about.
>
> I appreciate you all coming very much because it\'s very important and
> it is a tough area, and obviously it is an area in which there are
> very strong feelings. I thank you for coming.
>
> CHAIRMAN MASON: Commissioner Toner.
>
> COMMISSIONER TONER: Mr. Chairman, I\'m certainly heartened by the fact
> that my colleagues are indicating they are true believers and believe
> in the First Amendment and fundamental rights. That\'s extremely
> encouraging. I hope they vote that way in our proceedings.
>
> And there obviously has been a great deal of effort to have this
> Commission regulate activities like winks and nods, and perhaps we\'ll
> have the opportunity to talk about the wisdom of that.
>
> But, Mr. Alt, I\'m interested in your views of the content standard
> for coordination, and I take it that your view is that we need to have
> a content standard.
>
> Is that a fair statement?
>
> MR. ALT: Yes.
>
> COMMISSIONER TONER: And in your remarks, I think you suggest, and also
> in your written comments, that perhaps a content standard that
> included electioneering communications would not be sufficient, would
> not provide sufficient clarity. Is that fair?
>
> MR. ALT: That\'s true. I would harken back and say that the express
> advocacy standard provides a bright line which would be more conducive
> to giving guidance to the regulated community.
>
> COMMISSIONER TONER: Is it your view that the express advocacy standard
> is the only permissible content standard we can adopt?
>
> MR. ALT: It\'s my personal view that it is probably the only standard
> which doesn\'t fail for over-breadth. I do understand that Congress,
> through Section 202, included it in the list of potential
> contributions. However, Congress did not require that it be included
> within this regulatory proceeding, and so therefore this Commission is
> not required to include electioneering communication within its
> definition of coordinated expenditures.
>
> COMMISSIONER TONER: Would you be comfortable if we adopted a standard
> of express advocacy, plus perhaps including some of the protections
> you\'ve talked about, re-publication of campaign materials, and have
> that be the content standard?
>
> MR. ALT: Yes, yes, you know, with the caveat to provide for reasonable
> re-publication for the purposes of issue advocacy, you know, to permit
> issue advocacy.
>
> COMMISSIONER TONER: I\'m also interested in your views on the proposed
> conduct standard that was in the NPRM. Do you think that provides
> sufficient clarity when we talk about in terms of material
> involvement\--that\'s one of the key phrases that we have in the
> NPRM\--substantial discussions, that type of phraseology?
>
> How, in the real world\--how practical do you think\--how much clarity
> does that provide?
>
> MR. ALT: I have great trepidation. The reason for my lack of comments
> in that area is I quite frankly, looking at it, was unable to craft
> more precise language myself to recommend in its place. But
> materiality and substantial conversations\--neither of those were
> defined to a level of clarity that, sitting down with a client who
> wished to know what he could or couldn\'t do\--you know, you would
> almost be forced to say, \"Look, you\'re better off just not talking
> to the candidate or to the campaign committee.\"
>
> That\'s the only way you\'re going to be sure that you\'re not going
> to run afoul of this, and that\'s a very dangerous place to be. That,
> of course, is going to restrict a lot more speech than is necessary in
> order to eliminate the coordination.
>
> COMMISSIONER TONER: Well, you indicate in your written papers that you
> think we should still have some element of formality, formal
> collaboration, required. Is that your view?
>
> MR. ALT: Specifically, I noted that while Congress said that you
> couldn\'t have formal collaboration, the emphasis that this Commission
> has placed on the word \"formal\" in that context is important, that,
> in fact, you still have to have collaboration. It can\'t simply be
> merely incidental contact with a campaign, a mere conversation. There
> has to be something more.
>
> Whether or not it\'s a formal agreement, there has to
> be\--essentially, coordinated expenditures\--the courts are going to
> allow limitations there because they view them in certain ways as good
> as cash. And unless you have something like an agreement, you know,
> some form of collaboration.
>
> The courts have actually noted that in independent expenditures they
> can actually have negative effects. You word them poorly and this
> actually hurts the candidate. So I believe there has to be some form
> of collaboration in order to meet the coordination standard.
>
> COMMISSIONER TONER: Some indicia of collaboration and the key is to
> define it in a bright-line manner?
>
> MR. ALT: Precisely.
>
> COMMISSIONER TONER: Mr. Casey, I\'m very interested. You\'ve talked in
> your testimony today about the lobbying activities your group does at
> the grass-roots level. You have also spoken about \"agent\" and how we
> define \"agent\" as a key issue.
>
> Many people are pressing us to include in these regulations\--and, in
> fact, they did in the soft money proceedings, also\--creating
> liability for people who don\'t have any actual authority to act.
>
> MR. CASEY: Right.
>
> COMMISSIONER TONER: In your view, as someone who thankfully is not a
> lawyer and is working in the real world, what impact would that have
> on your organization?
>
> MR. CASEY: Well, that would have a chilling effect across the board.
> You need to understand in terms of the corporate community
> corporations have folks who deal in federal regulations and federal
> lobbying. They have folks back in their home states who deal with
> local lobbying.
>
> These are multi-varying organizations with multi levels of authority.
> The way we read that is that any one of these folks would somehow
> under these regulations be able to act as an agent of that
> corporation, which is simply in the real world not how things operate.
>
> You know, there are certain people who have the ability to act
> officially and very many folks who don\'t. Well, you can imagine what
> would happen if, you know, a guy who is from the home state of a
> representative wanted to go and meet with his representative on issues
> relative to his home state. He\'s from a corporation. The way we read
> this, he could be acting or be seen as an agent.
>
> And unless you apply some scope of authority standard, he could be
> considered an agent under these rules. And, of course, that would just
> have a chilling effect on all activity. One, would any of these people
> be able to meet with their elected representatives? Two, if they met
> with their elected representatives, would they be able to, in fact, be
> involved as a corporation, corporation-wide, in any kind of political
> activity, both of which we think are important?
>
> COMMISSIONER TONER: And one last question. In your professional view,
> if we adopted a regulation that included individuals who didn\'t have
> any authority to act, would that severely hinder your group\'s ability
> to lobby Congress?
>
> MR. CASEY: It would undermine the entire representative process from a
> corporation from an economic interest standpoint. That simply cannot
> stand.
>
> COMMISSIONER TONER: Thank you.
>
> CHAIRMAN MASON: Commissioner Thomas.
>
> COMMISSIONER THOMAS: Thank you, Mr. Chairman.
>
> Gentlemen, thank you for coming. First, let me touch a little bit on
> the suggestion that we just go with an express advocacy standard. I
> just want to be clear. You would feel that it would be a permissible
> construction of our statute if we were to say that we would only treat
> as a coordinated communication something that rose to the level of
> express advocacy, even if the candidate crafted the ad and decided
> which dates it was to run and on what stations and simply asked the
> spender to put up the money? You\'re comfortable with that kind of a
> construction?
>
> MR. ALT: It almost sounds like you\'re quoting from the Clinton \'96
> campaign.
>
> COMMISSIONER THOMAS: It might be a perfect example to use. You\'re
> right.
>
> MR. ALT: In fact, yes, I would be comfortable with that.
>
> COMMISSIONER THOMAS: We all are very familiar with some of the ads
> that are running these days. Many of them fall well short of what I
> suppose we would agree is express advocacy. For example, I\'m pulling
> out an article in the Washington Times on October 16. It\'s a
> Democratic ad apparently running in Georgia. The scene is a dog
> jumping through a circus hoop and the announcer says, \"Saxby
> Chambliss. He\'s been well trained by the HMOs and drug companies.\"
>
> I guess that\'s it, but if the Democratic campaign organization had
> basically crafted that ad and asked some organization to pay for
> running it, you would have no problem saying that that doesn\'t have
> to be treated as a contribution. Is that where we\'re going?
>
> MR. ALT: It is, and I would say for a couple of reasons. First of all,
> I think even in that particular ad you could imagine that an HMO or an
> organization that seeks health care reform\--that an ad placed, even
> if it\'s coordinated extensively with\--they have worked extensively
> with a candidate, then it may push their view on, say, a prescription
> drug benefit or the like.
>
> Oftentimes, issue advocacy groups once again are able to more
> effectively get their message out at times proximate to an election
> and with messages directed toward particular candidates. So long as
> it\'s not advocating the express election or defeat of a candidate,
> once again I think that it should be permissible to allow the
> protected issue advocacy element to continue.
>
> Second of all, for any example that you suggest, you know, where it
> appears that perhaps they are promoting, supporting, attacking, or
> opposing a particular candidate, you can come up with myriad
> hypotheticals where it\'s going to be difficult to draw those lines.
>
> To the extent that you have an ambiguous standard, it\'s going to
> create a situation in which you\'re going to quash more speech than is
> necessary. Once again, given the very high level of protection that
> the Supreme Court has said is requisite for independent expenditures,
> I believe it\'s necessary for this Commission to use bright lines in
> order to prevent quashing that particular speech.
>
> So for those reasons, yes, I think you should permit that which you
> might think, you know, is close to the line or perhaps crosses the
> line to prevent capturing a great deal of speech which clearly
> doesn\'t cross the line.
>
> COMMISSIONER THOMAS: Thank you.
>
> Mr. Casey, help the lawyer out. He\'s working in the world of law and
> technicalities. You\'re not constrained by that. That hypothetical I
> raised\--I gather from your testimony you\'re not saying we would need
> to confine ourselves to an express advocacy standard.
>
> And I\'m looking at page 3 of your comments. You seem to open up the
> possibility of dealing with other content that would in some fashion
> express support or opposition to a candidate. Can you tell me how your
> concept would work, given the hypothetical I put out?
>
> MR. CASEY: Well, much to the chagrin of all those folks who want to
> argue about the constitutionality of this, I read this as saying, you
> know, Congress has given you a mandate. What was before is not going
> to be. So we may have liked the standard used for coordination prior
> to BCRA. They said that\'s not good enough.
>
> In the instance that you\'re talking about, when we looked at the
> three-pronged thing, give me the rules and let me live by the rules
> and tell me how I\'m going to figure out if I\'m breaking these rules
> or not.
>
> The fact that somebody coordinates or somebody sits down with a party
> and comes up with an ad, I think they are coordinated. You made that
> clear. You\'re not supposed to sit down with them and have this
> discussion for purposes of a result, and I think that\'s the thing
> that\'s also missing in the regulations. Did that meeting, did that
> discussion result in something that violates the content so that the
> conduct resulted in coordination?
>
> I think, okay, if that\'s where we\'re going to go with this that you
> have paid-for content and conduct and the bright lines are that there
> is a result-oriented linkage between these things\--if that\'s where
> we\'re going to go, we can live with that because it gives us the
> bright lines necessary for us to make determinations as to what
> behavior is permissible or not permissible.
>
> There\'s a lot of vagueness in here. It\'s when you start using per se
> application of \"agent\" and assuming that somebody\--simply because
> of a previous step, that these things exist, and because they exist it
> meets the conduct threshold. I think that\'s where we get into
> trouble.
>
> COMMISSIONER THOMAS: Thank you.
>
> CHAIRMAN MASON: I wanted to start, Robert, with a question for you
> about, I guess, if you will, focusing a little bit on this content
> issue. And it strikes me that the problem we\'ve dealt with in statute
> is under 441a(a)(7)(B), \"expenditures made by a person in
> cooperation, consultation, or concert with the candidate are
> contributions.\" And so, in essence, what we\'re arguing about is what
> are expenditures for that purpose.
>
> You\'re arguing in favor of an express advocacy standard. Other
> witnesses whom we\'ll hear from later want a much more expansive
> standard. But I wanted to ask just a question about our approach, and
> that is whether there is any value to looking at that and crafting a
> definition of \"expenditure\" for the purposes of 441a(a)(7)(B) as
> distinct from 431(9), the general definition of \"expenditure,\" or
> 441b, the special definition as to corporations.
>
> MR. ALT: I think that actually would promote\--anyone who has spent
> time recently thumbing through the regulations and the statutes, you
> know, have gotten their fingers bloody cross-referencing, and I fear
> that judges will be doing that soon, as well.
>
> I think that that would be a reasonable approach, in that it would
> provide some clarity in putting the definition more directly where
> it\'s necessary. Of course, the definition of \"expenditure\" has been
> an issue for some time. There\'s been some confusion based upon the
> fact that [Buckley]{.underline} defined expenditure in terms of
> express advocacy.
>
> However, expenditures sometimes used elsewhere for things that seem to
> be non-communicative, whereas in a situation like this where the
> regulation is expressly directed at communicative expenditures\--I
> think that placing the definition under 441a\--was it
> a(a)(B)(7)\--would be a logical placement.
>
> CHAIRMAN MASON: Let me ask about \"wink and nod.\" I think that came
> up before and it sort of strikes me that the problem we have in
> regulating winks and nods in this context is that most of the time
> when that\'s done, it\'s on \"The Sopranos\" or something, which is to
> say that it\'s done when there\'s an underlying illegal activity.
>
> In other words, if there\'s graft going on or improper payments or
> some kind of criminal activity and a public official winks at it and
> you can show he knew about it and didn\'t do anything, that may be
> enough to say, you know, this is a person who had an obligation to
> stop that and didn\'t stop it, and furthermore seemed to encourage it.
>
> And it seems to me the flaw here is that the underlying activity, the
> issue ad, is constitutionally protected and, generally speaking, even
> leaving aside constitutional principles, not a bad thing, not illegal,
> nothing wrong with it.
>
> First of all, tell me if I\'m wrong about that. And, second, are there
> some legal principles out there that we could point to in trying to
> make that distinction and explain why we think it\'s difficult to
> regulate winks and nods.
>
> MR. ALT: Well, one I fully agree. I mean, certainly, that\'s a key
> distinction. I mean, generally speaking, you\'re right. When you talk
> about wink and nod, what you\'re really talking about is more
> something like conspiracy law. It would be a very close analogy.
>
> You know, first of all, there has to be an underlying criminal
> activity which an individual becomes a party to, and upon their
> becoming a party they become\--it\'s a means for basically applying
> liability.
>
> Here, the underlying activity is protected, and even in the scenario
> that Commissioner Thomas suggests where you have a coordinated
> message, promoting issue advocacy in this way is once again
> presumptively protected. And so I would say that it actually shifts
> the\--you know, the analysis should shift the other way.
>
> I mean, the presumption should begin with one of protection and you
> have to actually demonstrate that you\'ve crossed the line into
> criminal activity before you start, I think, permitting the sort of
> wink and nod analysis as a threshold matter.
>
> CHAIRMAN MASON: Greg, you were nodding about that.
>
> MR. CASEY: Well, I agree. Commissioner McDonald earlier had said
> something about the Enron thing. There\'s a fundamental difference.
> You know, there is an underlying illegal activity there. We\'re
> talking about political activity in this country, which is a good
> thing. You know, it is nice, it is good to get people involved
> politically. So the underlying activity here is a good thing. So to
> equate wink and nod with regard to FEC regulations on elections with
> Enron is\--you know, it\'s wholly inappropriate.
>
> COMMISSIONER McDONALD: Oh, now I want to respond. I don\'t think it\'s
> totally inappropriate. The question, quite frankly, is what\'s
> inappropriate, it seems like to me, is to pretend all of us\--there\'s
> no one around the table that doesn\'t take the position that money is
> an important issue in this whole agenda.
>
> And my only point was, respectfully\--I appreciate the Chairman
> letting me have the floor for just a moment, since I was addressed and
> it\'s totally inappropriate. I hope that\'s not so because the concern
> is whether or not, under the examples you gave, people are proceeding
> in an area that they may not be able to proceed in under the examples
> that you gave. That would be the wink and the nod if they coordinated
> and simply indicated that they didn\'t coordinate.
>
> That would be the concern and I would want to apologize to you if you
> think that\'s inappropriate, but I didn\'t mean for it to be
> inappropriate. I think there are circumstances where vast sums of
> money are involved that people do wink and nod. That do that in the
> election business as well, I think. Or the Congress thinks that.
> Let\'s put it like that.
>
> CHAIRMAN MASON: I was actually more concerned with Commissioner
> Thomas\' analogy because we\'re now attacking animals.
>
> \[Laughter.\]
>
> COMMISSIONER McDONALD: I was trying to find the issue advocacy in that
> ad.
>
> CHAIRMAN MASON: Larry Norton.
>
> MR. NORTON: Thank you, Mr. Chairman.
>
> I wanted to explore the concept of bright lines and how we can achieve
> that objective with respect to some of the things I think Congress has
> asked the Commission to do in the statute.
>
> To start with, one of the things Congress said the Commission was
> required to address were payments for communications made by a person
> after substantial discussion, after a communication with a candidate
> or a political party.
>
> My question, I guess I\'d address first to you, Mr. Casey, is is it
> your position that there is no way to transform that into a bright
> line rule. And if not, how would we comply with our congressional
> directive there?
>
> MR. CASEY: No, my position isn\'t that you couldn\'t translate that
> into a bright line rule. I mean, there has to be some way. I think we
> made comments about further investigation as to how you do that.
>
> What we questioned was there was a material involvement, and also the
> substantial discussion. Why do you need material involvement if
> substantial discussion would obviously have to have material
> involvement involved in it?
>
> If you\'re going to have a material discussion or a substantial
> involvement sort of threshold, I mean we\'re going to have to have
> some bright lines attached to it. I don\'t think you\'re there yet,
> but that doesn\'t mean that it\'s not possible.
>
> MR. NORTON: What about \"request or suggestion?\" As you know, the
> statute codifies [Buckley]{.underline} in that respect and the
> language is mirrored in the proposed rule, one of the conduct
> standards. The first one is that the communication is created at the
> request or suggestion.
>
> Assuming that \"suggestion\" means something different than
> \"request,\" is there a way to create a bright line rule that would
> give meaning to that term, \"suggestion?\"
>
> MR. CASEY: You would have to ask the attorneys because I\'m not sure
> what that would be, but I would suspect it would go back to the
> expressed advocacy or the formal agreement or the agreement
> between\--some agreement had existed between them.
>
> MR. NORTON: Did you have a thought on that, Mr. Alt?
>
> MR. ALT: Well, I mean once again \"suggestion\" is vague enough that
> you could have an individual speaking before a candidate speaking on
> television saying, you know, we really need people to get out there
> and talk about why the environment is important. And I mean sort of
> taken at its broadest point, that could be a suggestion for a
> particular advertisement.
>
> I think \"request\" is a little easier to nail down in terms of bright
> line provisions than is \"suggestion.\" \"Suggestion,\" as some of the
> other commentators have pointed out, just tends to be inherently more
> vague and is troublesome.
>
> I would certainly welcome caviting \[ph\] language. At this present
> moment, I can\'t think of anything that would cavit \[ph\] in
> \"suggestion,\" you know, other than perhaps once again bringing in a
> proper content standard with it in terms of express advocacy and
> suggesting something like an express suggestion, you know, and perhaps
> providing detail that it has to, you know, be not merely sort of
> precatory or wishful, but more directed in nature.
>
> MR. NORTON: Let me turn to \"agency\" for a second yet again. Mr.
> Casey, I think you observed there, too, that it was important that the
> Commission adopt a bright line rule. In your written comments, you
> suggest that the standard should require that an agent be acting
> within his or her expressed authority, and that the information be
> gained from the areas of the campaign within his or her scope of
> authority.
>
> And it struck me that that sort of standard would almost require in
> every case the kind of inquiry, investigation by the Commission that
> the bright line rule would seek to avoid. And what I would suggest is
> that the proposed rule, although it appears we\'ve done it
> unsatisfactorily to your taste, was an attempt to create a bright line
> rule by saying that if you\'ve got actual authority to be doing
> certain things, to make or authorize communications, to create or
> distribute a communication, to be materially involved in the
> decisions, then that is going to be the end of the inquiry, regardless
> of titles, regardless of whether the information you shared was gained
> from areas within your scope of authority.
>
> Does it seem to you that the rule as proposed would create a bright
> line rule, but the bright line rule we\'ve created isn\'t a
> satisfactory one?
>
> MR. CASEY: I don\'t know. I\'ll look at your \"agent\" definitions
> again and be glad to talk with you about that. As we looked it, our
> concern was that \"agent,\" if not\--and maybe you have, and again we
> will look at that\--if \"agent\" is not carefully construed as
> concerning only those areas within the scope of that authority, that
> that would be an overly broad use of the word \"agent.\" And virtually
> anybody acting in a campaign or in a corporation, et cetera, would
> find themselves possibly in violation of the coordination rules
> because of an overly-broad application of \"agent.\"
>
> But I will look at it again and be glad to see if you\'ve brought some
> things to light that maybe would change our opinion with regard to
> that definition.
>
> MR. NORTON: Mr. Alt, BCRA at Section 202, which is entitled
> \"Coordinated Communications as Contributions,\" says that when any
> person makes any disbursement for any electioneering communication and
> such disbursement is coordinated with a candidate or an authorized
> committee, such disbursement shall be treated as a contribution to the
> candidate supported by the electioneering communication and as an
> expenditure by that candidate.
>
> Can your position that the Commission ought only consider express
> advocacy in its content standard be reconciled with Congress\'
> language in that section that suggests that electioneering
> communications can be coordinated?
>
> MR. ALT: I think it can in this particular aspect. I mean, once again
> I certainly acknowledge the controlling nature of that language.
> However, Congress had the capacity to have imposed that specifically
> on this rulemaking and did not.
>
> With that said, once again given the relatively broad discretion that
> this Commission has for the purposes of establishing this set of
> rules, I would say that, you know, there is an example, for instance,
> of a bright line that\'s not necessarily a good bright line, a bright
> line that is drawn too broadly that sweeps in too much speech, which
> I\'ve mentioned previously there\'s no particular reason that this
> Commission has to restate that provision in these regulations.
>
> The failure to do so does not moot the existence of Section 202, but
> it simply expresses this Commission\'s understanding that the clearer
> line, the better line, is express advocacy.
>
> MR. NORTON: Thank you, Mr. Alt. Thank you, Mr. Chairman.
>
> CHAIRMAN MASON: I\'d like to thank the panelists. I\'m getting an
> indication about a second round. I would note we\'re right on schedule
> now. I would be happy to recognize Commissioner Toner, but if it
> creates a cascading request, we\'re going to mess up the schedule for
> the rest of the day.
>
> So Commissioner Toner has a quick question.
>
> COMMISSIONER TONER: I\'ll be very brief. Whether it promotes a
> cascade, I guess we\'ll have to see.
>
> Mr. Casey, I think you made the most important point that has been
> made in this proceeding thus far, this idea that it would be wholly
> inappropriate for this agency to have the mindset of criminal
> authorities and regulators who are dealing with the Enron matter.
>
> I think your key point is, you know, there\'s no constitutional right
> to engage in securities fraud, but there is a constitutional right to
> talk about public issues and engage in issue advocacy, and I think
> your point was very well taken.
>
> I just want to ask one quick question. Mr. Alt, in terms of the
> content standard that we might adopt, is it also your view that the
> \"promote, support, attack, oppose\" statutory phrase would not
> provide sufficient clarity?
>
> MR. ALT: To harken back to my testimony when I was here last time when
> I quoted McCain for the very language that \"promote, support, attack,
> and oppose\" is too vague and basically would require a roving speech
> commission, I concur with that. It is too vague and I therefore would
> suggest that that is not a bright line, that is not one that this
> Commission should consider.
>
> COMMISSIONER TONER: Thank you, Mr. Chairman.
>
> CHAIRMAN MASON: Commissioner McDonald.
>
> COMMISSIONER McDONALD: Mr. Chairman, thank you.
>
> Mr. Casey, did you follow by chance the foreign activity money that
> was involved in the presidential election in \'96?
>
> MR. CASEY: Well, I tried, but it got awfully confusing and after a
> while I couldn\'t figure out who had done what to whom.
>
> COMMISSIONER McDONALD: Yes. Well, if you get a chance, you might want
> to look at it because I think, my colleagues, I obviously have hit a
> nerve and I apologize. But there was a lot of winking and nodding
> there and the people did go to jail.
>
> The inference wasn\'t that people as a practical matter\--as my
> colleagues know, of course, we don\'t have criminal authority, but the
> concern again, just so there\'s not a misunderstanding\--and that was
> the reference made\--was that the concern is that there are lots of
> activities in this world where there is an understanding implicit or
> otherwise, and that is the concern.
>
> And quite frankly I appreciated the effort you made, and I thought a
> very good effort, to try to outline for us, under the circumstances of
> what we\'ve got and what the Congress, that we have to address this in
> some way. And I do concur with my good friend, Commissioner Toner, in
> one respect, which is that your comments were very important. Please
> give my old friend Don Cogman my regards.
>
> I thank both of you for coming.
>
> CHAIRMAN MASON: Vice Chairman Sandstrom.
>
> VICE CHAIRMAN SANDSTROM: I don\'t know if it will prove particularly
> edifying, but the origin of the phrase \"wink and a nod\" is that old
> British expression that a wink and a nod is the same to a blind horse.
>
> \[Laughter.\]
>
> CHAIRMAN MASON: What does that tell us about our public officials?
>
> I\'d like to thank the panelists for coming and invite our next panel
> to come forward.
>
> Robert J. Bauer is a partner in the firm of Perkins Coie, LLP, and is
> counsel to the Democratic Senatorial Campaign Committee and the
> Democratic Congressional Campaign Committee. Donald F. McGahn, II, is
> General Counsel to the National Republican Congressional Committee.
>
> I believe both of you have been here previously. We\'ll give you five
> minutes for an opening statement and then go to a round of questions
> from Commissioners and the General Counsel. I\'d like to invite Mr.
> Bauer to begin.
>
> Welcome, Bob.
>
> MR. BAUER: Thank you, sir, Mr. Chairman, Mr. Vice Chair and Members of
> the Commission. I will be very brief. The DNC, the DCCC, and DSCC
> filed written comments, and so I\'ll avoid repeating them in their
> entirety.
>
> What I wanted to stress in my comments here is that the Commission has
> been laboring under a very stringent deadline to produce rules
> implementing the new statute, and everybody obviously is impressed by
> the pressures on the agency and the manner in which it has attempted
> to come to terms with them.
>
> We would urge that it not take on more than it is compelled to here
> because presumably, all of these rules being in practical impact and
> in text complex, it wants to limit as much as it possibly can the
> effort to what is absolutely necessary on this sort of not terribly
> favorably timetable to produce these kinds of rules.
>
> I mean, these rules we all acknowledge are going to have a material
> impact on the regulated community, on how politics in this country is
> conducted. The timetable provided by Congress for these purposes is
> necessarily not a particularly extended or generous one, and so
> everybody is doing the best they can under difficult circumstances.
>
> For this reason, one of the points that we emphasize in our comments
> is that there are some specific questions that have been put about the
> relationship between political parties and their candidates and the
> coordination standard as it would apply to political party activity
> which are very complicated questions, very significant questions I
> think you could imagine that I and Don as party lawyers would say, and
> they simply don\'t allow for the sort of discussion and careful
> deliberation that this timetable quite frankly precludes. I mean,
> there is simply too much complexity here, too much difficulty here to
> be accommodated within this BCRA rulemaking effort.
>
> The Commission specifically asks questions of this somewhat sweeping
> nature, and they are very good questions\--there is no question here
> of the Commission\'s good faith in formulating the appropriate
> questions, but questions like should political party communications be
> subject to the same conduct standards as are communications by other
> persons, should the content standards be the same for political party
> communications as for communications for other persons; if not, how
> should the standards vary; would such variations be confusing; and
> then further questions about the particular issues raised by the
> significant, obviously, and very different relationship between
> political party committees and their candidates.
>
> And we have appealed to the Commission to set this segment of the
> rulemaking exercise aside. We, for one, do not have the time and the
> resources to adequately address these questions. We\'re in the middle
> of an election campaign, and I think you\'ve noticed by the increased
> brevity of the responses that you\'ve received from the party
> committees that our resources have been stretched and you know we\'re
> no doubt almost overwhelmed.
>
> I\'m sure the Commission from now will institute rulemaking only
> during the period\--sort of on the same theory as electioneering
> communications, 30 days before a primary, 60 days before a general,
> and limit your exposure to our extended commentary.
>
> But we don\'t have the resources, the time, or the ability to focus at
> the moment on issues of this magnitude, and BCRA doesn\'t compel it.
> BCRA does not compel or mandate that the Commission take this up in
> the way that obviously it is compelled to do in other cases.
>
> So I set that before you as our first point of emphasis.
>
> The only other point that I would make on the other questions that
> we\'ve raised which have to do with how party committee agency is
> defined, a subject we\'ve all had some painful experience with in
> recent months\--the whole question of agency and also how common
> vendors would be treated, how former employees and independent
> contractors would be treated, and how we would define a content
> standard\--the only other comment I\'d make on that is one that I\'ve
> made before.
>
> I\'m going to return to my old, tired appeal, and that is the
> Commission does face a difficult decision. The statute obviously does
> set out some parameters, some expectations that I know the Commission
> is obligated by law to meet. I would beseech you, however, to do what
> you can\--and I think there is evidence the Commission has tried to do
> this up to this point\--to strike a balance among options, between
> what would be theoretically the most attractive in achieving clarity,
> bright line rules, certainty of enforcement on the one hand, and
> practical workability for the regulated community on the other.
>
> We\'ve pointed out that the \"agency\" standard creates major issues
> for the political parties in managing their own liability problems.
> There are people who wander in and out of our affairs everyday. We
> encourage them to wander in and out of our affairs. Sometimes we
> encourage them to wander in, sometimes we encourage them to wander
> out.
>
> But in any event, they are there on a regular basis and it is an
> ever-changing number of people with a wide range of roles within the
> political party structure. So your attempt to define \"agency,\" while
> motivated, I think, by the language of the statute and the concerns of
> the statute, has to take into effect the practical impact on the
> relationship that we as a political party have to establish with our
> many different kinds of supporters offering us different kinds of
> assistance and fashioning with us different kinds of relationships.
>
> Likewise, in discussing questions like content standards or conduct
> standards, we once again would like obviously, because we\'re
> organizations engaged in practical politics, to focus you on the
> practical implications of what you decide to do, how you define
> specific terms, how you fashion specific rules of liability.
>
> There is a significant problem with creating per se inclusions within,
> for example, these rules for certain types of people providing certain
> types of services to the party committees. And this is a significant
> issue both for those persons and again for the party committees and
> for candidates in establishing relations with these persons and
> managing liability.
>
> So with great respect for what you face and understanding perfectly
> well that none of these choices are easy, I would argue for
> simplicity, practical workability, and a focus as much as possible on
> the consequences of implementing a rule which on its face may seem the
> clearest, most bright line rule, but which in practical effect would
> prove to be very burdensome and possibly disruptive to important
> working relationships and to the party committees\' ability to manage
> their liability issues in the post-BCRA era.
>
> And with that, I\'ll turn it over to Mr. McGahn or to the Chair.
>
> CHAIRMAN MASON: Don McGahn.
>
> MR. McGAHN: Thank you, Mr. Chairman, Mr. Vice Chairman, Commissioners,
> Mr. General Counsel, Mr. Staff Director, who is not here, but I would
> thank him if he were here. Thank you for having us here today. I
> appreciate it.
>
> I would like to echo many of Mr. Bauer\'s comments and try to keep
> this brief, which, of course, whenever a lawyer says that, that means
> there\'s another 15 minutes of speech to come. But I will sincerely
> try to keep it brief.
>
> The first point is we are about a dozen days out from an election, and
> as you can see from the increasing lack of ink spilled by our
> comments, our resources are being stretched thin. And we are of more
> limited resources than my counterpart, at least in the legal respects.
> That being said, though, this is a very important issue and one that I
> think I have to make a few points on.
>
> First, one point glossed over in my comments which I should have made
> much more clear\--Mr. Bauer was much more articulate on this
> point\--is that BCRA does not necessarily mandate that we get into the
> party committee muddle at this juncture. Although there is a call for
> rules, it\'s not particularly clear to me that the statute requires
> the Commission to revisit thorny issues of coordination and
> independence and [Colorado I]{.underline} and all these other issues
> which frankly are, as Mr. Bauer noted, very, very complex.
>
> Two, that being said, though, we are probably eventually going to get
> to such issues and I hope today to begin that dialogue. What I ask is
> that we be given the opportunity, as Mr. Bauer noted, to work with the
> Commission to provide hopefully some of the practical backdrop of what
> actually occurs within party committees, their communications with
> candidates and the like.
>
> Thirteen days before the election, it\'s particularly challenging to
> get into a whole lot of detail, as we guard such conversations
> jealously. But over time, hopefully we can at least provide to the
> Commission the actual factual basis upon which regulations can be
> promulgated.
>
> The problem with doing such things through the enforcement process is
> once you get into enforcement situations, it is much more difficult to
> have a candid discussion about factual underpinnings when you get into
> sort of discovery and depositions and the like, where at least in this
> stage in the rulemaking hopefully we can be much more helpful to the
> Commission as far as understanding the practical implication of what
> these rules may mean, because as Mr. Bauer noted, they are very
> critical to the existence of party committees.
>
> Like the Democratic Party, we also have people wandering in and out of
> our structure. We encourage that, and like the Democrats, we encourage
> some people to sign up and other people to make an exit. I will not
> mention any names to protect the innocent or guilty.
>
> But in any event, I just would like to conclude and say that the one
> issue that concerns me the most and the issue I\'ve heard most from
> folks I work with is the idea of former party committee employees
> going off and doing other things, common vendors and the like.
>
> The concern isn\'t so much, \"Gee, how are we going to keep doing what
> we\'re doing?\" It\'s \"How am I going to earn a living, can I still
> have more than one client? If I work for the party committee, does
> that mean I can\'t work for campaigns anymore? What if some outside
> group wants me to do some ads in the off-year?\"
>
> These are all complicated questions that people are very concerned
> about because ultimately there\'s a handful of people on either side
> of the aisle who do this kind of work, whether it\'s polling or media
> or list development or even fundraising. And, frankly, we\'ll run out
> of people on the bench very quickly if we get too complicated with who
> can work for whom and who can\'t work for whom and that sort of thing.
>
> So there are very real, practical applications here that are going to
> affect real people, and hopefully we can assist the Commission in
> understanding these things.
>
> CHAIRMAN MASON: Thank you.
>
> First in the round of questioning for this panel is Commissioner
> Smith.
>
> COMMISSIONER SMITH: Thank you, Mr. Chairman. Thank you, gentlemen, for
> coming at this very busy time.
>
> I think you both made a very good point about whether, in fact, we
> should proceed with the rule as it pertains to party committees at
> this time, whether it\'s not required and whether we might not be
> better served to have a round of comment after the election, at which
> time people might be able to think about some of these issues in more
> detail.
>
> So I would definitely consider that, but I\'m going to focus my
> questions sort of with the assumption that we will move forward at
> this point anyway because if we do, we\'ll need that kind of
> information.
>
> I wonder if either or both of you gentlemen would agree with me that
> investigations into allegations of coordination are some of the most
> extensive and intrusive investigations that the Commission undertakes.
> Would you agree with that characterization?
>
> MR. McGAHN: In my experience, yes, without a doubt.
>
> MR. BAUER: I would agree with that by their nature. I mean, I\'m not
> critiquing the Commission\'s task for formulating a workable standard
> because that\'s what the law compels you to do. But the discussion of
> coordination eventually becomes an inquiry into speech\--it just
> does\--and the way relationships are conducted and what information
> passes between political allies or actors. So by nature, it is
> inescapable that it is intrusive, inescapable.
>
> COMMISSIONER SMITH: Do you think that the intrusiveness tends to have
> any kind of detrimental effects on the amount of speech or the types
> of what would otherwise be legal campaign approaches but are not done
> simply because of the concerns about that type of investigation?
>
> MR. McGAHN: Absolutely, yes. I mean, certainly not to get into my
> specific advice to clients, but my advice is certainly not necessarily
> based simply on the current statute, the current rules, but on past
> enforcement matters and what the Commission may or may not do in an
> enforcement context. So it absolutely does affect how we proceed.
>
> COMMISSIONER SMITH: This is important again because again we keep
> being reminded that we shouldn\'t take some formalistic approach but
> need to consider how this really works in the real world.
>
> Obviously, however, coordinated activity is illegal. Is it helpful in
> terms of trying to continue or engage in political activity without
> this concern about these types of intrusive investigations to have
> some kind of content standard as to what type of speech will be
> considered as a possibility for coordinated activity? A content
> standard is helpful? I get affirmative nods.
>
> MR. McGAHN: Sure, yes.
>
> COMMISSIONER SMITH: Then the question I\'d have\--
>
> MR. BAUER: I was also, by the way, winking.
>
> \[Laughter.\]
>
> COMMISSIONER SMITH: Thank you, Mr. Bauer. Well, Mr. Bauer, okay, I\'ll
> focus in on you now, since you are a wink and a nod.
>
> \[Laughter.\]
>
> COMMISSIONER SMITH: Obviously, if we talk about content, express
> advocacy would be subject to coordination possibilities. And I think
> the statute makes clear now that electioneering communications and
> re-publications would be subject to that.
>
> Do you think that we would be within our statutory authority to limit
> the coordination investigations to public communications that fall
> within those three categories?
>
> MR. BAUER: Three categories? I\'m sorry.
>
> COMMISSIONER SMITH: The three categories would be express advocacy,
> electioneering communications, or re-publication. Do you think that
> would be within our statutory authority to try to limit it to those
> categories of speech?
>
> MR. BAUER: With one caveat, I\'ll answer the question in the
> affirmative. I want to make it clear that I\'m now going to offer you
> answers to questions because you\'re putting them to me as long as
> you, Commissioner, appreciate that we haven\'t taken on behalf of
> party committees a formal position on that issue.
>
> COMMISSIONER SMITH: Right. Yes, in fact, that\'s important. I mean, I
> don\'t want to say necessarily that that\'s what you would recommend,
> but that would be a permissible interpretation of the statute.
>
> MR. BAUER: I believe, speaking as someone who deals with this area of
> the law, that it would be within the Commission\'s statutory
> authority, yes.
>
> COMMISSIONER SMITH: Mr. McGahn, would you agree?
>
> MR. McGAHN: With the save caveats, yes.
>
> COMMISSIONER SMITH: And again thinking about the real world, you\'ve
> both raised the issue of vendors and former employees, and so on.
> Also, talk just a little bit about the relationships between
> committees.
>
> I mean, what level of control do the national party committees have
> over various state and local party committees? I mean, are you able to
> control or veto the activities of the Oakland County Republican Party
> or the Oakland County Democrats?
>
> MR. BAUER: First of all, we have no control over Republican state and
> local parties?
>
> \[Laughter.\]
>
> COMMISSIONER SMITH: Those were separate questions.
>
> MR. BAUER: Very hard to manage.
>
> MR. McGAHN: There was that one in southern California that one time,
> but\--
>
> MR. BAUER: I think it is fair to say that they operate on our side
> with a significant measure of independence. They have it legally, they
> have it as an operational matter, and it is correct to assume that we
> do not exercise that control.
>
> That is not to say the national party is not influential in working
> with state and local committees on programs of common concern\--it
> certainly is\--or that it hasn\'t been influential when, for example,
> funding those programs or when involving federal officials and
> candidates in those programs. But that is correct. We do not control
> them.
>
> COMMISSIONER SMITH: Are either of you aware of cases in which local
> party committees, for example, have taken positions contrary to what
> the national parties were attempting to take, whether because of
> internal political feuds or different theological interests or
> whatever? Are you aware of such situations?
>
> MR. McGAHN: Yes.
>
> MR. BAUER: Yes, absolutely.
>
> MR. McGAHN: It happens all the time.
>
> COMMISSIONER SMITH: The issue I\'m kind of getting at which you may
> sense is we\'ve got a requirement that we treat as one unit every
> committee that\'s a Republican committee or every committee that\'s a
> Democratic committee in the entire country. And if one local
> Democratic Party committee somewhere spends \$250 on independent
> expenditures, the entire national party would lose its ability to
> coordinate expenditures. So that is what I\'m getting at.
>
> But I see I\'m out of time, so having made clear that issue, I\'ll
> yield. Thank you, Mr. Chairman.
>
> CHAIRMAN MASON: Commissioner Thomas.
>
> COMMISSIONER THOMAS: Thank you, Mr. Chairman. Well, to help my
> colleague out, let me pick up there.
>
> I think that provision of the statute is interesting, to say the
> least. It is a provision that, in essence, says at one point that all
> of the committees of a party are to be treated as one ball of wax, at
> least as I read it and as I read the legislative history.
>
> Mr. McGahn, you refer to that as absurd. Help me through this, though.
> Let\'s say that based on our reading of the statutory language and the
> legislative history, we feel we have to go with that approach whereby
> they are all treated as one ball of wax.
>
> How would you go about living under that kind of a system where you
> would in some fashion have to be responsible if indeed some local
> party committee did undertake some independent expenditures after the
> nomination and that would in some fashion then put brakes on you? Is
> there some sort of system you think you could devise? Have you thought
> about that?
>
> MR. McGAHN: Other than an Article III court to bail us out, no, and
> that\'s the concern. I mean, there are a lot of different levels on
> this. The statute is, to me, bizarre that they want to treat everyone
> alike as one big entity, given that so many times the left hand
> doesn\'t know what the right is doing on either side of the partisan
> divide.
>
> If the local party were to do that, chances are I wouldn\'t even know
> about it until it was too late, until we\'ve authorized whatever we
> were going to do. So then we would have to come back here and hope
> that we could work out a conciliation agreement, I suppose, because I
> don\'t see any way around the unintended consequence of a local party
> doing something that is just not brought to the attention of the folks
> in Washington.
>
> The other point\--and Mr. Bauer and I are in the same situation. We
> represent sort of the House and Senate campaign committees. I just do
> the House side. There\'s another fellow who does the Senate side, but
> we\'re different from the national committee. So even taking it away
> from the local party situation, there are so many times where we
> don\'t agree with what the national committee wants to do, or they
> don\'t agree with us or we just have different theories.
>
> You know, everybody plays the violin a different way, I suppose, and
> there are just different disagreements and different theories on how
> to spend money and when to spend money and that sort of thing.
>
> We have our own bylaws, our own governance and all that, and simply
> because the RNC may decide to do something really ought not affect us.
> The problem is the statute doesn\'t really want to draw that
> distinction. Even on that level, I\'m not sure how to police it and
> how to simply say, gee, someone made a small independent expenditure,
> therefore we can\'t do coordinated expenditures. I\'m baffled.
>
> COMMISSIONER THOMAS: You folks are representing for the most part
> national party committees in your presentation here today, but under
> the statute for years state and local party committees have had to for
> the most part operate under one set of contribution limits and they
> are, in essence, in most instances presumed to be affiliated unless
> they can go through some sort of fairly thorough evidentiary process
> to demonstrate otherwise.
>
> They have for the most part managed under that regime to sort of keep
> in touch with one another and come up with an understanding so that,
> working as a whole group of political entities, they don\'t go over
> the limit. I suppose in a sense that forces those party committees to
> communicate with each other and to coordinate and cooperate.
>
> That\'s not a bad thing, though, is it?
>
> MR. McGAHN: Common limits for parties? No, I don\'t think that\'s a
> bad thing, no, but there are many states where the local parties are
> not affiliated with the state party. And there are many instances
> where even when they are affiliated, they still do things and put
> money, for example, in the non-federal account to avoid the
> entanglements of the common limit because they are really only worried
> about a local race.
>
> So although I understand your example, I\'m not sure it applies to the
> money going out the door. It may apply coming in the door in certain
> situations, but as far as actually managing campaigns and working with
> campaigns and working among the party committees on the actual
> communications and political operations, I\'m not so sure it\'s the
> same.
>
> COMMISSIONER THOMAS: Let me come back to the suggestion you\'ve made
> to us that we ought to in some fashion defer our rulemaking on the
> coordination issue as it relates to party committees.
>
> Give me some help. How would that play out? Obviously, there is
> concern on the part of the FEC that for several years now we have
> basically ourselves created a huge void in the area of the law that
> deals with these kinds of entities. For many years, we operated under
> the so-called electioneering message approach whereby we basically
> said if a party\'s message that is paid for by the party includes
> reference to a clearly identified candidate and contains something
> that could be interpreted by all as something designed to influence
> the electorate to vote for or against a particular candidate, that
> would be something we would treat as a coordinate expenditure and
> hence subject to the coordinated expenditure ceiling.
>
> A majority of the Commission decided that they didn\'t care for that
> approach and that was thrown over in \'99. And really since \'99, the
> parties haven\'t had much clarity as to what to do in this area.
>
> How are you dealing with that now? How would you see the parties going
> into the 2004 election cycle if the Commission defers this current
> rulemaking?
>
> MR. BAUER: Well, I would respond. First of all, the parties obviously
> do the best they can with the authority that currently exists. And I
> think the Commission would be well served if it was going to create
> additional law in this area simply to do so on a timetable that
> allowed for greater consideration. It\'s certainly not something that
> needs to be done on a BCRA-mandated schedule. That\'s our concern. We
> literally don\'t have the time to deal with it right now and it\'s a
> huge issue.
>
> I should mention the Commission, while it did overthrow the
> electioneering message standard, has also recognized that these are
> not, all of them, the most urgent issues because, to cite one example,
> our committees, the DCCC and the DSCC\--I don\'t believe the DNC was a
> party\--filed a petition for a rulemaking immediately after the
> [Colorado]{.underline} case asking for some law on the question of how
> parties could establish relationships with their candidates that met
> the standard of independence while at the same time operating on their
> behalf in the coordinated expenditure arena, and that was six years
> ago.
>
> I think the Commission rightly recognized there were other priorities,
> more pressing priorities. The Commission generally, as we all know, is
> extremely pleased with the way Mr. McGahn and I represent our
> committees and the quality of compliance that they have demonstrated
> and they have looked elsewhere for grist for the regulatory mill.
>
> If they wish to turn their attention to it now, which doesn\'t trouble
> me\--I mean, if that\'s what the majority of the Commission or all of
> the Commission wishes to do, that\'s fine, but this is something that
> could be deferred past the November 5th election. We could have the
> discussion of this with really ample opportunity for the parties to
> consider these proposed rules, make detailed, not relatively limited
> comments as you have before you today, and I think the parties would
> be much better served by that, much better served, as would
> candidates, as would people who support candidates and parties.
>
> So I don\'t think there is a huge urgency to it and I don\'t think
> there\'s any reason to believe we can\'t get into the 2004 cycle and
> operate under the authority as we understand it to be right now.
>
> COMMISSIONER THOMAS: Your soothing voice is very reassuring. Thank
> you.
>
> MR. BAUER: Thank you. I just want you to be comfortable.
>
> \[Laughter.\]
>
> MR. BAUER: You have so many things to worry about.
>
> CHAIRMAN MASON: I wanted to ask a question about something Mr. Bauer
> said, though, Don, please feel free to comment, and it was as to the
> standard for liability on the part of employees, because we had done
> something in the NPRM that was certainly intended to be helpful and I
> thought was helpful, which is that in the old rule, not the one that
> was overturned, but I think the sort of original one going back two or
> three years, there was a particular focus on fundraisers.
>
> And it struck me that in the context of coordinated communications,
> the idea that people who had fundraising authority for the committee
> were the ones you worried about was kind of a disconnect; that, if you
> will, in the real world of campaigns, the fundraising crew and the
> fund-spending crew, if you will, are often fairly separate.
>
> And obviously at the top they come together, and obviously there are
> particular campaign exceptions. But in the NPRM, the focus is on
> people who have authority to make communications. And looking at our
> actual investigations that we\'ve done in the past that we can talk
> about, the people we\'ve been concerned about have tended to be
> campaign managers, press secretaries, and in the party context
> executive directors and chairmen. I mean, in actual litigation, in
> actual investigations, those have been the people who have been the
> focus of our attention.
>
> And so I just wanted to ask\--maybe some refinement is necessary or
> whatever, but wasn\'t that a productive way to go in terms of telling
> committees and campaigns who it was we were going to be concerned
> about and to focus on the people who were responsible for crafting and
> getting the message out as opposed to fundraisers or organizational
> people?
>
> Bob, you were the one who brought the issue up.
>
> MR. McGAHN: He called on you.
>
> \[Laughter.\]
>
> MR. BAUER: You can\'t trust Republicans.
>
> The point we\'re making here is not that you weren\'t trying to be
> helpful or that this approach, you know, is somehow an abomination.
> That\'s not what we were suggesting. We were suggesting that as we
> look at the way this particular proposed rule is crafted, it is going
> to have materially chilling effects on the progress of the careers,
> the mobility, the flexibility of both those who would hire these
> people and these people who would like to be hired.
>
> For example, the use of the word \"use\" focusing on the use that they
> might make of information that they gained previously from their
> association with a candidate\--that is for the conservatively-inclined
> not the sort of baggage anybody particularly would like to have
> accompany a new employee into the organization.
>
> I mean, I think you can understand that there is a concern that that
> is a sufficiently flexible test, one that frankly probably will not
> result in doubts being put to rest unless fully litigated, that really
> provides for much comfort on the part of either those who would want
> to move on to other organizations or the organizations who would want
> to hire them.
>
> And the second concern we have is that when you create very, very
> specific categories of people whom you\'re concerned with\--the rule
> follows specific, designated people\--it seems to me that there has to
> be a more detailed, elaborated justification for those forms of per se
> inclusion.
>
> And you suggested\--and maybe I simply don\'t remember\--that it was
> also reflected in the Notice of Proposed Rulemaking that this is based
> on the enforcement experience of the Commission. That may or may not
> be an adequate reason to have done it that way, but that is at least a
> reason.
>
> To us, it just struck us as a very broad sweep that was going to
> significantly affect not only those organizations that are trying to
> manage their liability concerns, but the careers of the people who are
> included in that per se inclusive category. I think I\'m answering
> your question, but perhaps I\'m not.
>
> CHAIRMAN MASON: Well, you\'re getting at my second question, which is
> former employees, and that\'s fine and you\'ve addressed that. But
> let\'s set aside former employees for a moment, current employees
> only.
>
> The focus of the NPRM was on employees who had decisionmaking
> authority as to communications, and it struck me that that was a
> better-focused look at who we were concerned about in the campaign or
> party structure than the former approach, which was to focus on
> fundraising authority, which among other things was sort of, A, two
> different functions, and, B, in my experience much more prone to a
> rotating cast of volunteers and people who you weren\'t sure had what
> authority, and so on.
>
> So I\'m asking as to current employees who, let\'s say, stay with the
> campaign or with the outside organization through the duration, isn\'t
> this focus on the authority to make or authorize communications more
> helpful?
>
> MR. BAUER: If I may, and then I\'ll happily defer to the comments that
> Don McGahn may want to make, but can I just ask you, because maybe
> I\'m not following the question, to be concrete about the sort of
> situation that you\'re concerned with? Which situation addressed by
> the rules are you\--
>
> CHAIRMAN MASON: Well, the question is who in the campaign are we going
> to be concerned about in terms of a coordinated communication. We have
> an allegation that there\'s a coordinated communication that has been
> paid for by a non-campaign entity, and an allegation that it was
> coordinated with the campaign.
>
> Who are we going to look at in the campaign to determine whether there
> was coordination? Are we going to look at every campaign employee and
> say that, well, if there was any contact, we\'re going to investigate
> that? Or are we going to restrict it and say we want to know who in
> the campaign had authority to make or authorize communications on
> behalf of the campaign and that those are the people we\'re going to
> be concerned about?
>
> MR. BAUER: Well, I\'ll just offer you this one observation because we
> obviously didn\'t address this at length in our comments, and that is
> that even that standard\--and I\'m not suggesting it can\'t be
> refined, as you said, and worked so that it achieves a level of
> concreteness that is helpful. I don\'t want to suggest that, but even
> that inquiry is a very, very open-ended inquiry.
>
> I mean, the numbers of people who presumptively have had some
> involvement with campaign communications is a very, very large number
> of people in one form or another, to a lesser or greater degree.
>
> CHAIRMAN MASON: I understand, but just let me try to get a direct
> answer to this. Isn\'t that\--
>
> MR. BAUER: You\'re not going to get that, okay?
>
> CHAIRMAN MASON: Isn\'t that better than focusing on fundraisers for
> purposes of this rule?
>
> MR. BAUER: Well, as you know from our comments, we\'re eager to get
> away from a focus on fundraisers.
>
> CHAIRMAN MASON: I\'ll take that as an affirmative.
>
> MR. BAUER: Well, yes, but if you mean am I concerned about the impact
> on fundraisers, I am, for the reasons set forth in the comments. But I
> don\'t want to suggest, therefore, that I find the current formulation
> in the Commission rules, you know, altogether satisfactory, but I
> understand better wherein it came from.
>
> CHAIRMAN MASON: Don, my time is up, but if you\--
>
> MR. McGAHN: Yes, time is up. I\'m baffled.
>
> Good job.
>
> I think your instincts are sound. I mean, like I think Bob was saying,
> focusing on who makes the decisions on how the money is spent is not
> something I\'m going to buy into sitting here today. But the idea of
> focusing it away from the fundraisers to me makes sense.
>
> And this reminds me of a conversation that we had in the prior
> rulemaking I think I had with the General Counsel about those who
> spend the money and those who bring in the money. And merely because
> the fundraisers may have, let\'s say, some sort of presentation to
> donors and they talk about here\'s what we\'re doing and then these
> groups go out and do ads or what not, that\'s not the sort of
> so-called coordination that I think anyone is really concerned about.
> So I think that to the extent we can shift the focus to a little more
> narrow, I think that makes a lot of sense.
>
> CHAIRMAN MASON: Vice Chairman Sandstrom.
>
> VICE CHAIRMAN SANDSTROM: You\'re addressing one Commissioner who might
> take comfort in the thought that they wouldn\'t have to grapple with
> some of these issues in any short time frame, but at least for today,
> I\'m going to attempt to grapple with a couple of the issues.
>
> And one\--and I\'ll try to do this rather briefly and use an
> example\--Chicago is known to have rather robust ward and precinct
> politics, and they historically have been organized down to the
> precinct level.
>
> Can you imagine some ward committee\--and I\'ll choose a Democratic
> example\--this year\--the Chair of that ward committee doesn\'t
> particularly like the Senate candidate, Mr. Durbin. It\'s hard for me
> to imagine why because I think he\'s a wonderful Senator, but let\'s
> imagine there\'s a feud that goes back and so he engages in a little
> mischief.
>
> He takes out a small ad in the local newspaper saying \"vote for
> Senator Durbin,\" and that would preclude, then, the party, if we
> treat this all as one entity at every level, from making a coordinated
> expenditure. How do we deal with that?
>
> Mr. McGahn, would you have a suggestion of how you could possibly\--we
> couldn\'t enjoin speech.
>
> CHAIRMAN MASON: Mr. McGahn, you could suggest that the result is to
> Senator Durbin and it wouldn\'t bother you a bit.
>
> MR. McGAHN: It\'s a hypothetical, though.
>
> Perhaps there\'s a way to formulate a rule where you require knowledge
> of the parties or something to get around the sort of local renegades.
> But even that doesn\'t necessarily address my more pressing concern,
> which is the difference between the national committee and us, and
> we\'re even in the same building, and then you go further down the
> stream. It becomes a slippery slope where\--
>
> VICE CHAIRMAN SANDSTROM: What I\'m thinking it highlights is the
> complete lack of control.
>
> MR. McGAHN: Oh, yes.
>
> VICE CHAIRMAN SANDSTROM: And the very nature of these of being
> independents means there\'s no control being exerted.
>
> MR. McGAHN: And your hypothetical rendered two lawyers speechless, so
> I should note that for the record.
>
> VICE CHAIRMAN SANDSTROM: One of the other questions I have as we get
> into the common vendors and the employees is we have put in a proposed
> rule that would say that the committee doesn\'t accept the
> contribution, would not have received an in-kind contribution unless
> they engage in conduct that would establish that they knowingly
> participated in it.
>
> But how about the situation in which an entity comes to a common
> vendor, you know, another committee, an ideological group, hires a
> film editor to edit an ad? Would they be considered as having made an
> in-kind contribution to a candidate whom they didn\'t even know that
> the vendor had employed or was employed by the\--
>
> MR. BAUER: Is the question whether you think it\'s possible or whether
> it\'s unfortunate?
>
> MR. McGAHN: I think it illustrates the problem with the common
> vendors. You have all different kinds of vendors. Even in TV ads, you
> have the person who writes the script, you have the person who does
> the research, you have the production house, you have the editor, you
> have the person who places the media buy. You have all these people,
> very few of which really have any say over the content of the
> communication.
>
> I think you mentioned the editor who is basically told what to do, and
> merely because he happens to be editing spots for a campaign and a
> party committee and an outside group\--chances are that editor may
> also be editing a spot not only for my client, but perhaps for Mr.
> Bauer\'s client. I mean, there are so many vendors and as a practical
> matter you have to be real careful when you get into this thicket to
> understand the distinctions between what different folks do, or else
> you\'re going to have people feeling they can\'t work for certain
> people and all sorts of other horrible things.
>
> VICE CHAIRMAN SANDSTROM: In our proposed rule, we also included people
> who identify or develop voter lists. It seems to me that the
> experience there is there are very few such vendors and it\'s hard to
> imagine how you could not use a common vendor if you\'re going to
> purchase a voting list. There isn\'t that big a market.
>
> MR. BAUER: That\'s a specific example we cite in our comments. There
> are going to be certain vendors who, let\'s put it this way, represent
> an industry, if you will, or a commercial sector, however you want to
> define it, that is relatively limited in number and that if you put
> these sorts of disabilities on them under the rules, it\'s going to be
> hard for alternative services to be procured. I mean, it\'s a
> practical problem.
>
> VICE CHAIRMAN SANDSTROM: And one last issue. I do not expect you both
> to be familiar with all the comments we\'ve received, but a number of
> the commenters have suggested our content test should include ads that
> don\'t even mention a candidate, because I guess you\'re creating a
> favorable issue environment and therefore if you discuss it with any
> candidates and you then run an issue ad, that would be an in-kind
> contribution to that candidate.
>
> With respect to the committees that you represent, it\'s hard to
> imagine, therefore, what ad could be run that was an issue ad by a
> party committee of your character because either the employees are
> agents of office-holders and candidates or the candidates and
> office-holders themselves are making the expenditure. So it
> essentially would serve as a complete bar.
>
> Is that your understanding of the results of such a proposal?
>
> MR. BAUER: I\'d be very concerned about that, yes.
>
> MR. McGAHN: As would I, yes.
>
> VICE CHAIRMAN SANDSTROM: Thank you, Mr. Chairman.
>
> CHAIRMAN MASON: Commissioner Toner.
>
> COMMISSIONER TONER: Thank you, Mr. Chairman.
>
> Mr. Bauer, Mr. McGahn, welcome, great to see you. I want to follow up
> on some of the issues that my colleagues have discussed, one being the
> former employees/former consultant conundrum. And, Mr. McGahn, I\'m
> very interested in your thoughts on this.
>
> One approach we could take\--I understand this emphasis about moving
> away from fundraisers and sort of classifying people by their
> substantive responsibilities. Another approach that we could take in
> tandem with that is to develop some safe harbors. One could be that
> there would be periods of time\--30 days, 60 days, 90 days\--outside
> of which we would allow those individuals to operate without
> restriction.
>
> And, Mr. McGahn, you make this key point: People have to be able to
> make a living, wear these multiple hats. What are your thoughts on
> this approach from a practical perspective? Is that something we
> should focus on, establishing periods of time, safe harbors? Would
> that alleviate any of these concerns?
>
> MR. McGAHN: I haven\'t really thought it through. My instinct is that
> you\'re getting warmer, but it still doesn\'t avoid the central
> problem. And merely because you have a certain time period, you\'re
> still affecting who people can and can\'t work for and you still have
> to think through your next job and your prior job and all that. So
> even if you do put what appears to be some sort of bright line, it may
> not necessarily address the concern that we\'re raising.
>
> COMMISSIONER TONER: It would essentially be a cooling-off period that
> we would set out in the regulations and that once you got past that,
> you\'d be able to work for your new employer without restriction kind
> of approach?
>
> MR. McGAHN: Again, my instinct is that makes some sense, but as a
> practical matter, for example, let\'s say an employee of my committee
> leaves the committee at the end of the year. Whether they begin
> working in January of next year or January of the following year or
> August of the following year, what they have learned and experienced
> in this election cycle probably will have very little, if anything, to
> do with what they will be doing or what we\'ll be doing or what the
> candidates will be doing, saying issues or what not, next time. So
> even with the cooling-off period, I\'m not so sure that that as a
> practical matter is going to do the trick.
>
> COMMISSIONER TONER: Mr. Bauer, your thoughts on this particularly when
> someone moves within an election cycle?
>
> MR. BAUER: First of all, I mean I think when you say a cooling period,
> you mean that 90-day period would operate as a period of time in which
> they could still take a job with another employer, but they would
> simply be under a somewhat sharper legal scrutiny or they would have
> to accept that.
>
> COMMISSIONER TONER: Correct.
>
> MR. BAUER: Again, I think I\'d echo what Don said. That is an attempt,
> I think, to come to grips with the concern that we have. Whether as a
> practical matter creating two time frames, one with higher legal risk
> and one with lesser, would altogether solve the problem, I cannot say.
>
> One thing that occurs to me\--and again I haven\'t given this a huge
> amount of thought\--one thing that occurs to me is that to some extent
> it highlights for the future employer the overall legal risk of hiring
> that particular employee because the employee is not assuring them
> that at the end of the 90-day period the risk has vanished altogether,
> merely that it\'s of a lower order.
>
> COMMISSIONER TONER: Right.
>
> MR. BAUER: So it requires him to say \"I can\'t talk to you right now,
> see me in 90 days when I\'m not completely radioactive,\" and that\'s
> a tough interview note.
>
> COMMISSIONER TONER: Right.
>
> MR. McGAHN: The one thing I do want to note\--the other distinction is
> it\'s one thing to talk about the so-called rock stars of politics who
> have been doing it for years and are well-known and eventually have
> their own TV shows and all that. But the vast majority of the people
> in politics are young, right out of college or what not, starting out,
> and they move from job to job to job to job very quickly.
>
> And there are people who may spend a couple months at the NRCC or the
> DCCC who then go out and do a primary campaign for someone who isn\'t
> necessarily on the party committee\'s radar but wanted to run a
> campaign, and then may go, you know, raise money for somebody in
> Washington and then get another job. They\'re trying to get
> experience.
>
> And even with the cooling-off period\--for us, it\'s one thing for us
> to think long term and think 90 days or 30 days isn\'t that long. But
> for someone in their mid-20s, that can be an eternity and that could
> be forcing them to give up opportunities that they otherwise ought to
> be able to reap the benefit of.
>
> COMMISSIONER TONER: It\'s a very difficult area, obviously.
>
> Mr. Bauer, you had indicated earlier that it would be a permissible
> reading of the statute for us to adopt as a content standard express
> advocacy, electioneering communications, and re-publication, and
> essentially that could occupy the field in terms of content.
>
> In terms of your views as a practitioner in this area which are
> obviously well developed, do you believe it would create
> constitutional difficulties for us to go beyond those areas as a
> content standard?
>
> MR. BAUER: Yes.
>
> COMMISSIONER TONER: Would you answer the same way in terms of the
> \"promote, support, attack, oppose\" framework that that would create
> constitutional difficulties?
>
> MR. BAUER: Yes.
>
> COMMISSIONER TONER: In terms of a standard that turned on whether or
> not a clearly identified candidate was in the communication?
>
> MR. BAUER: Yes.
>
> COMMISSIONER TONER: Clearly, then, a communication that didn\'t have a
> candidate referenced at all?
>
> MR. BAUER: Would be obviously at the heightened risk of constitutional
> difficulty.
>
> COMMISSIONER TONER: So if, in our view, in interpreting the statute we
> wanted to minimize constitutional difficulties, would it be fair to
> say that you would advise us to limit the content standard to express
> advocacy, electioneering communications, re-publication?
>
> MR. BAUER: Yes.
>
> COMMISSIONER TONER: Mr. McGahn, your views on this?
>
> MR. McGAHN: I agree with Mr. Bauer. Obviously, limiting to express
> advocacy is the safest way constitutionally. The further you get away
> from that, the more constitutional problems you\'re going to have.
>
> The idea that you can reach out for an issue ad where a federal
> candidate isn\'t even mentioned, to me, seems totally unreasonable on
> its face. And the idea that that would be presented seems somewhat
> strange, although maybe I\'m just not thinking of whatever
> hypothetical they are thinking of. So I don\'t want to sound too
> harsh, but I agree with Mr. Bauer\'s affirmative responses to your
> questions.
>
> COMMISSIONER TONER: Thank you, Mr. Chairman.
>
> CHAIRMAN MASON: Commissioner, McDonald.
>
> COMMISSIONER McDONALD: Mr. Chairman, thank you.
>
> Donald, welcome back. I want 10 percent of just investing and putting
> you guys on the road together. I think that\'s what I\'d like to be
> involved in.
>
> I think you all have been very helpful because this is obviously a
> very tricky and difficult area. Let me start with one of the last
> points that Commissioner Toner made which I thought was an awfully
> good question, and Don answered the question and asked him if it kind
> of coincides with the point made by the Chairman earlier, which was
> that there are a lot of young people that apparently go from campaign
> to campaign. That\'s just the nature of it. I vaguely remember being
> young and I did the same. It has been a long time ago, needless to
> say. And I think you\'re absolutely right. I mean, that\'s practically
> what happens.
>
> What the Chairman alluded to, though, in his remarks was that he was
> trying to focus on\--and I think that\'s what we\'re trying to do in
> the Notice in terms of the players that we tried to get at were not at
> that level. Historically, we have just not been interested. I think
> you can make a pretty compelling case that that\'s true, or I hope you
> can, no matter what one\'s position is.
>
> First of all, based on your assessment of enforcement actions that
> we\'ve had here that you alluded to earlier, do you think that\'s
> right? I mean, would that be a fair characterization of what you think
> has transpired over time?
>
> MR. McGAHN: I would say that\'s fair. My recollection is that the
> emphasis was on the campaign manager types or the executive director
> types.
>
> COMMISSIONER McDONALD: The only reason I ask is that it is\--and first
> of all, let me say I agree with both of you about the timing, and I
> want to pursue that with you as well because I\'m stunned you\'re here
> at all with as little time left as you\'ve got. We really do
> appreciate it, because I can only imagine how difficult it must be
> right now.
>
> In trying to figure out this issue about who the major players are and
> how they are affected in this process, you indicated earlier\--you
> said you wouldn\'t go into your particular counsel, which seems fair
> to me, what you\'ve counseled your clients in the past in this area,
> but you did say that you looked to previous enforcement matters. I
> think I\'m right.
>
> MR. McGAHN: Yes, that\'s what I said.
>
> COMMISSIONER McDONALD: What would be several of those that you\'ve
> just alluded to?
>
> MR. McGAHN: Enforcement matters?
>
> COMMISSIONER McDONALD: Yes.
>
> MR. McGAHN: Well, without getting into what\'s not on the public
> record\--and it\'s well documented in the press\--within the \'96
> cycle there were a couple rather cumbersome enforcement matters that
> still seem to be fresh in my mind.
>
> COMMISSIONER McDONALD: Okay, that\'s fair enough, that\'s fair enough.
> I appreciate that.
>
> You said something else that interested me a great deal, and before I
> turn to Bob let me just ask you\--and I just wasn\'t aware of this,
> but I\'m only reflecting on one state\'s politics. You said a number
> of states that I gather the local\--we call them counties; in some
> places they call them other things, I guess, but are not part and
> parcel of the state apparatus. Did I get that correct?
>
> MR. McGAHN: I can\'t say how many states offhand. I just know in my
> current world of where we have hot congressional races that there are
> some states\--I think Arkansas\--local parties aren\'t affiliated with
> the state party, for example.
>
> COMMISSIONER McDONALD: Well, it\'s very helpful. I honestly didn\'t
> realize that. I didn\'t know where\--we once had a case years ago that
> was withdrawn, an advisory opinion request on an Ohio local party
> question. I think Bob might well remember it. It was in the early to
> mid-\'80s. I have kind of forgotten now, but the issue there kind of
> ultimately got to be, even though the request was withdrawn, was
> whether or not they were, in fact, part and parcel of the state
> committee. And when you mentioned that, I was greatly interested in
> it.
>
> Bob, let me say to you that, one, I agree with both you and Don about
> the timing. But it brings up the question, so if we don\'t get to
> it\-- first of all, when do we get to it, I guess is the first
> question. What is your thought on that in terms of just how things are
> going right now? What is a practical\--
>
> MR. BAUER: A practical deadline for the Commission addressing this
> issue?
>
> COMMISSIONER McDONALD: That we can get more input from you all in
> terms of timing.
>
> MR. BAUER: I don\'t have a better proposal to make. I suppose anytime
> after November 5 that you initiate a process is certainly better than
> anything that requires our comment before November 5. And, again, I
> think the Commission has to balance it against other matters and
> determine what really ought to consume obviously what are your limited
> resources.
>
> So I don\'t have a specific\--I mean, if the question is whether I
> thought that this was among the issues that compelled the
> Commission\'s attention sooner rather than later, I must say I
> didn\'t. But if the Commission elects to do it, then my only
> suggestion would be, I think, keeping in mind something Commissioner
> Thomas said, that without any damage to the Commission\'s interest in
> enforcing the law, it is something that could be taken up at the
> beginning of the next cycle.
>
> COMMISSIONER McDONALD: You mentioned earlier\--and I think everybody
> kind of agrees with this phrase and it gets tossed around fairly
> liberally at our table. I think everybody is for clarity. What\'s
> clear to one person doesn\'t always appear to be clear to another.
> That\'s kind of where the rub starts and that\'s where lawyers
> apparently come in, the best I can tell not being one.
>
> We were talking about the per se rule. Obviously, you could make a
> fairly compelling argument that a per se rule is clear and once you
> back off the per se rule, you start having problems.
>
> Is that even a fair characterization, I mean, of just kind of the
> problem that we\'re running into? This isn\'t taking a position
> because I don\'t know what the position ought to be, but it\'s part
> and parcel of kind of the problem that we have.
>
> MR. BAUER: Yes, and I think you\'ve put your finger on something,
> which is if you go to a per se rule, you risk over-inclusiveness. If
> you step away from the per se rule, you risk confusion and vagueness.
> So I\'m not disputing that there are some circumstances in which a per
> se rule satisfies what you need to accomplish regulatorily. The
> question is which circumstances are suited to a per se rule.
>
> And in some instances, I would say\--and I think we\'ve identified
> some here\--a per se rule causes more problems than it solves, simply
> because in those circumstances the over-inclusiveness, the rigidity of
> the per se rule works a hardship that outweighs whatever advantages
> there are regulatorily.
>
> COMMISSIONER McDONALD: But you wouldn\'t disagree that then the
> clarity problem gets to be a little more difficult?
>
> MR. BAUER: Absolutely. I do not dispute that it\'s a tradeoff of some
> sort, absolutely.
>
> COMMISSIONER McDONALD: I thank both of you. It\'s good to see you.
>
> CHAIRMAN MASON: Larry Norton.
>
> MR. NORTON: Thank you, Mr. Chairman.
>
> Hello, Mr. Bauer and Mr. McGahn. Thanks for coming and thanks for your
> written comments. One of the commenters tomorrow has said in written
> comments that party committees coordinate most of their expenditures
> for communications with their candidates.
>
> Is that, in your experience, an accurate statement, an accurate
> characterization?
>
> MR. BAUER: I\'m not quite sure to what effect\--
>
> MR. McGAHN: How do they define some of the terms and what are they
> talking about specifically?
>
> MR. BAUER: Yes. What do they mean?
>
> MR. McGAHN: It\'s a great sound bite, but what does it really mean?
>
> MR. NORTON: Well, tell me a little bit about the difficulty. Is it a
> difficult question to answer or what are the variables that it depends
> on? I mean, in our effort to sort of get a real-world idea as to what
> we\'re dealing with here, are we dealing with the great majority of
> communications, are we dealing with a smaller percentage, or is it too
> difficult to really get our arms around that?
>
> MR. BAUER: I\'d be surprised if Don disagreed, but parties are issuing
> communications, large and small, minor and major, significant and
> insignificant, worthy and unworthy, all throughout the day, the week,
> the month, and the year.
>
> In some instances, it attains explicit candidate involvement in the
> drafting of the planning of a particular message. In many, many cases,
> it does not, but operates on the belief that the communication is
> completely consistent with what candidate expectation would be.
>
> I mean, parties are not easily divorced in these various activities
> from the interests or the involvement of their candidates because the
> intersection between party and candidates occurs at so many levels.
> That\'s why we asked you what does that person mean when he or she
> says that we coordinate all of our communications with candidates.
> Does that mean there\'s not a single communication that the party
> issues that the candidate does not know about in advance and approve?
> No, that\'s certainly not true.
>
> Does it mean that the party believes typically that the communications
> that it issues will be beneficial to the candidates based on what they
> know about the candidates just generally? I\'m sure that\'s always
> true because parties rarely issue communications that they believe to
> be potentially harmful to their candidates. So that\'s the difficulty
> which I think was reflected in our sort of drawing up short at the
> citation that you made to the other comments.
>
> MR. McGAHN: I would agree with that. I think you have to break it down
> into what sort of communications we\'re talking about because exempt
> party functions, slate cards and that sort of thing, sure, they can be
> coordinated, but a lot of times they\'re really not coordinated in the
> sense of showing it to the campaign before it goes out.
>
> Sometimes, coordinated expenditures, even though they can be
> coordinated, are not coordinated to the degree you would think because
> many times what we will produce, a TV ad or a mail piece, the campaign
> may not be particularly thrilled about, but we think it\'s the right
> decision. So even though it can be coordinated, it\'s certainly not
> the campaign dictating the speech.
>
> So the statement and the comments that you read are so overly broad as
> to miss these subtle, practical distinctions that frankly really
> aren\'t that subtle.
>
> MR. NORTON: Mr. Bauer, obviously, as you know, under our current
> regulations national committees are prohibited from making independent
> expenditures in connection with the general election campaign of a
> candidate for President, and the proposed regulations would repeal
> that regulation, except to the extent that the national committee is
> the principal campaign committee or the authorized committee.
>
> I\'m assuming from your recommendation here that the Commission defer
> dealing with party committees and party committee coordination that
> the Commission ought to leave the current rule intact with respect to
> presidential elections.
>
> MR. BAUER: Well, let me say two things. First of all, as you know, we
> submitted this comment in partnership, if you will, with the
> Democratic National Committee, which obviously has a very direct
> interest in what you just said.
>
> And Joe Sandler would have to speak directly to whether he has any
> different view of the timing of Commission action on that issue. I
> don\'t want to speak for the Democratic National Committee on that
> issue here. I\'d rather let Joe do that, and I\'m sure that he\'d be
> glad to either by some separate written communication on the record or
> whatever.
>
> I think I should say that because I don\'t want to express his
> judgment on that issue on the question of timing or how it should be
> bundled into or not bundled into the other party issues without
> conferring with counsel of the DNC.
>
> MR. NORTON: Mr. McGahn, you raised equal protection concerns in your
> written comments. You say that even though regulation on its face
> appears to treat parties equally from non-parties\--and I think you
> would agree that\'s true of the proposed regulations\--as a practical
> matter, there could be disparate impact that would raise equal
> protection concerns.
>
> Could you expand a little bit on your thinking in terms of that?
>
> MR. McGAHN: Party committees talk to candidates all the time about a
> variety of things, as opposed to lobbying groups and the like, and I
> think we are uniquely situated when it comes to how we deal with
> candidates. For example, a candidate is not going to call, I don\'t
> think, a labor union or a pro-gun group or a pro-life group or a
> pro-choice group for legal advice, but they are going to call the
> party committee for legal advice.
>
> And although on the surface you may think that we\'re all the same,
> we\'re really not, because there are a whole host of reasons for the
> party committees to be talking to their candidates other than issue
> ads and whatever other things that the newspapers like to talk about,
> whereas with the outside groups they are more concerned with their
> legislative agenda and that sort of thing. So that\'s the basic gist.
> We can talk about it more at length if you\'d like.
>
> MR. NORTON: I see my time is limited. I wanted to turn to Mr. Bauer
> with my last question, and I know that you\'re here suggesting that we
> punt. Punting seems to be the theme of the morning, but you\'ve
> offered a suggestion that I take it is a serious one for the
> Commission to define \"suggest\" under \"request or suggestion.\"
>
> And one of your suggestions about defining \"suggest\" is that we
> define it as a palpable communication intended to, and reasonably
> understood to convey a request for some action. That sounded
> reasonable to me.
>
> Is that something that you think would be a satisfactory way of
> defining that term and providing clarity?
>
> MR. BAUER: Are you referring to something I said in these comments?
>
> MR. NORTON: I think it was in your written comments.
>
> CHAIRMAN MASON: Page 3, bottom paragraph.
>
> MR. NORTON: Page 3.
>
> MR. BAUER: Yes, there it is. I\'m sorry.
>
> MR. NORTON: About five or six lines up from the bottom.
>
> MR. BAUER: Yes. What I was driving at there\--and if I left you with
> the impression that I was trying to formulate the actual words of a
> rule, I apologize.
>
> MR. NORTON: No. We were thankful for it, actually.
>
> \[Laughter.\]
>
> MR. BAUER: You will received a corrective submission this afternoon.
>
> \[Laughter.\]
>
> MR. BAUER: That\'s why my question was where is that, what did I do,
> where did I make a helpful suggestion?
>
> What I was trying to do was to set up the argument or the point that I
> made in the paragraph that immediately follows on page 4, which is
> there are really very different meanings to the term \"suggest.\" And
> so certainly I was appealing, if you insist on pursuing the suggestion
> course here\--that is to say focusing on \"suggest\"\--that you note
> that there is a significant difference between the alternative
> definitions.
>
> And as a conceptual matter, there is a difference between, as I
> recited in the case of the New Shorter Oxford English Dictionary
> definition, \"a slight trace or a hint of something,\" on the one
> hand, and what I refer to as \"a palpable communication intended to,
> and reasonably understood to convey a request for some action.\"
>
> Whether I hit all the right words\--and other words might do as
> well\--I couldn\'t say at the moment, but that was the point I was
> trying to stress there, is that the word \"suggest\" encompasses, as I
> pointed out in that dictionary definition, everything from the most
> explicit to the absolute most evanescent. And I think we obviously
> would prefer something that is explicit.
>
> MR. NORTON: Thank you. Thank you, Mr. Chairman.
>
> CHAIRMAN MASON: Commissioner Toner again wants a second round.
>
> Commissioner Toner.
>
> COMMISSIONER TONER: I\'ll try to be brief, Mr. Chairman. I just wanted
> to follow up.
>
> Commissioner Thomas, I think, made a very good point in terms of the
> statutory definition of parties and whether or not they should all be
> treated as one entity at the national, state, and local level, and
> what are we going to do in terms of coordinated expenditures and
> independent expenditures. I think that was a very good point. I just
> wanted to follow up on that briefly.
>
> Mr. Bauer, again, as a practitioner in the field\--and I just want to
> do two quick sort of possibilities. Suppose the L.A. Democratic Party
> made independent expenditures on behalf of Senator Feinstein out in
> California and we were to adopt regulations that then, because of
> that, would bar the state Democratic Party of California from making
> coordinated expenditures on the theory that they are one and the same.
>
> And again I recognize you\'re not speaking for the Democratic National
> Committee or other entities, but as a practitioner in this field, do
> you think that would create serious constitutional problems?
>
> MR. BAUER: I am certain of it.
>
> COMMISSIONER TONER: Would you strongly advise us not to interpret the
> statute that way?
>
> MR. BAUER: Well, I want to approach this with some humility because we
> didn\'t make a specific suggestion to you on this. This particular
> provision inherently creates an issue for us.
>
> I mean, it\'s not that we\--to make the record clear so I can keep
> hate spam out, I don\'t oppose it. I\'m not here to oppose or support
> particular provisions, but the very choice that is forced upon party
> committees is going to be in and of itself, I\'m certain, at some
> point controversial; that is to say, coordinated expenditure,
> independent expenditure, not both.
>
> But in the context that you\'re describing, that particular
> hypothetical that you cite, I would urge the Commission to take very
> actively into consideration the likelihood that at some point, in some
> way, one of two things is going to happen.
>
> Either the law will be widely violated because its demands are found
> by political actors to be unreasonable and they simply will not comply
> with it\--I mean, a state committee simply will not stop working with
> their candidates because the L.A. county committee went out and made a
> \$500 independent expenditure. It will not happen, it will simply not
> happen, and therefore on the general principle the agency should not
> promulgate rules that promote defiance of the regulatory community.
> I\'d work to try to avoid that.
>
> And then the second thing I think that will happen is that it will be
> in some application at some point in the future on a hypothetical like
> that tested constitutionally. What I want to be very clear to say is I
> think the problem is embedded in the choice that the statute forces on
> parties.
>
> I don\'t know that I can offer you a helpful or constructive way of
> solving that problem, but I agree that in the hypothetical you cite
> the problem is not solved.
>
> COMMISSIONER TONER: Mr. McGahn, do you share those views?
>
> MR. McGAHN: Yes, for the most part. It\'s a very difficult issue when
> you read the statute to understand why it says what it says and what
> it really means. And I\'m still struggling to really come to some sort
> of grips, at least on a bigger level, why this is considered to be a
> good thing.
>
> And this is the point that Commissioner Thomas was making to me that
> the statute says what it says, and although I\'m not going to concede
> it necessarily says what it says, you know\--
>
> CHAIRMAN MASON: It comes close.
>
> MR. McGAHN: It comes close, yes. How about that? It may be vague
> somewhere. I\'m still working on that. But, yes, it doesn\'t make
> sense. You have the [Colorado Republican I]{.underline} case in 1996
> which I thought had established the law on this. And it has been a
> while, but the last time I read [Marbury]{.underline}, the court
> decides these issues, not necessarily the Congress.
>
> But yet they are not only undoing [Colorado I]{.underline}, they want
> to put more bells and whistles on the expenditures concerning
> transfers of hard money and other committees doing things that you
> have no control over. To me, you don\'t solve the constitutional
> problem presented in [Colorado I]{.underline} by putting more
> regulation onto the issue, and it\'s an issue that is going to come
> back.
>
> And Mr. Bauer\'s concerns about renegade local committees or what not
> just saying \"we think we have a good argument, we\'re going to do
> what we want to do,\" I think is unfortunately a very real concern
> that has been forced by the statute, and I\'m not so sure what the
> Commission can do at this juncture to avoid that.
>
> COMMISSIONER TONER: Thank you very much. Thank you, Mr. Chairman.
>
> CHAIRMAN MASON: Vice Chairman Sandstrom.
>
> VICE CHAIRMAN SANDSTROM: Just a quick question at the Chairman\'s
> urging.
>
> If we narrow with respect to common vendors the liability to those who
> knowingly employ such a person who provides strategic campaign
> advice\--I know it may not solve your problems, but does it at least
> help? At least you have to knowingly employ that person and that
> person has to provide strategic advice in some cases.
>
> MR. BAUER: Based on what they are believed to possess in the way of
> information about the candidate.
>
> VICE CHAIRMAN SANDSTROM: Yes.
>
> MR. BAUER: Yes, I think that would be helpful.
>
> MR. McGAHN: Yes, you\'re definitely getting warmer. Remember,
> pre-FECA, when you had all these sort of outside, unauthorized
> committees where people knew\--we tried to get rid of that the first
> time, and to the extent that we can keep it based on a knowledge
> standard and that when you know that you\'ve got someone who is going
> to give you information and that\'s why you\'re hiring them, I think
> you\'re getting a lot more reasonable than the more amorphous
> standards, yes.
>
> VICE CHAIRMAN SANDSTROM: Thank you.
>
> CHAIRMAN MASON: Commissioner Thomas.
>
> COMMISSIONER THOMAS: Thank you, Mr. Chairman. I just want to use this
> golden opportunity to run past a couple of true experts yet another ad
> that is actually, I guess, out on the airwaves as we speak. And I
> bright it up in the context of this issue of whether we should, in the
> coordination rules, be trying to graft on some sort of content
> standard.
>
> It has been suggested that maybe we should confine any application of
> the coordination rules to communications that have either express
> advocacy or that would qualify as an electioneering communication,
> which means they would have to be run within 30 days of the primary or
> 60 days of a general, or, thirdly, any communications that would be
> re-publication of candidate materials.
>
> That actually turns out to be a fairly narrow or restricted group of
> communications, given the creativity of today\'s campaign consultants.
>
> The ad I\'m thinking of, it\'s apparently being\--and I\'m once again
> relying on my favorite newspaper, the Washington Times. It has a
> reference to an ad being run these days by the People for the American
> Way. It says, \"One vote away. Today, the White House and the House of
> Representatives are controlled by the right wing of the Republican
> Party and with just one more vote they\'ll control the U.S. Senate.
> Their unchecked political power would be devastating for a woman\'s
> right to choose, our environment, Social Security, and corporate
> accountability, and could guarantee a Supreme Court controlled by the
> far right 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.\"
>
> Now, let\'s say a bunch of Democratic Senate candidates had basically
> crafted that ad, had their consulted craft it and had picked what
> dates it was to run and, in everybody\'s understanding of
> coordination, had coordinated up the wazoo. That ad doesn\'t, as I
> understand it, even reference a clearly identified candidate.
>
> The question is should this agency be marching down the road of a
> content standard if it\'s going to not reach communications like that
> that clearly are coordinating?
>
> I would note, by the way, the old Commission approach for party
> activity did require reference to a clearly identified candidate along
> with the \"designed to influence the election\" standard, and that
> standard was the one that was thrown over.
>
> MR. BAUER: Well, apart from being struck by the wisdom of its
> political message, I am not altogether comfortable with expressing an
> opinion about an ad that\'s running right now. I have to be honest
> with you. I mean, I don\'t really want to say whether\--first of all,
> I have no reason to believe that\--and I\'m not expressing that; if I
> were, I\'d be concerned. But I don\'t know whether or not this ad was,
> you know, coordinated with anybody at any time whatsoever, connected
> to members of the United States Senate, and so forth.
>
> Let me just make this general observation, and I do actually think
> it\'s responsive without talking about the People for the American Way
> or other ads of that kind, which I hope have a substantial advertising
> budget behind them.
>
> There are going to be ads, I\'m sure, that are intuitively troubling
> to the members of this Commission and by some common-sense standard
> will slip the net; that is to say, if the regulations are crafted with
> an eye toward what is possible, what is practical, what is
> appropriate, what is consistent with what Congress has done, and also
> somewhat in tune with constitutional requirements, I am certain we
> will find instances over the next several years when someone will
> pound their fist on the table and say that ad ought to have been
> included or affected by whatever content standard you devise.
>
> And I think that it is a mistake to worry too much that there will be
> outlying ads that you think ought to have been swept in the applicable
> standard that you find are not, because our intuitive judgments about
> whether an ad in this case has crossed the line or in that case has
> crossed the line really ought not to be the controlling judgments.
>
> It can inform the way we think about these issues, but it cannot be
> the controlling factor in determining what\'s included and what\'s
> not. And I see this very frequently in the debate over campaign
> finance reform where someone says, whether it\'s on the floor of the
> Senate or someone else\-- puts up a message of an ad or shows an ad at
> the National Press Club and says \"Isn\'t it obvious this ad is
> intended to influence the outcome of an election?\"
>
> Well, it may be obvious to some, it may be not obvious to others, or
> it may be obvious to most people. And at the same time, they recognize
> that there is a limit on what this agency can accomplish under the
> statutory scheme and under constitutional requirements in restricting
> certain kinds of political communications.
>
> So I think that\'s responsive to your question in the sense that I\'m
> sure you can find types of advertisements that on some of the
> approaches that I\'ve favored here would not be reached under the
> content standard, but I think we have to be willing to live with the
> possible and still not feel that the agency has not done its job or
> not made a material difference with the implementation of this law.
>
> MR. McGAHN: This kind of rhetoric in the ad is so over the top it\'s
> going to backfire and we\'re going to be victorious on election day
> because we\'re committed to prescription drug coverage and maintaining
> Social Security for our seniors and assuring President Bush has the
> tools he needs to fight the war on terror. Fight fire with fire; more
> speech, not less speech.
>
> Look, People for the American Way is out there; they are very
> aggressive. What troubles me more is the idea of non-partisan
> get-out-the-vote when they go to precincts that are 60, 70, 80,
> 90-percent Democrat registration. So I mean you can certainly look at
> a lot of different examples where things are on their face
> non-partisan, but to partisans they certainly are things that trouble
> me as a political hack, not necessarily as a lawyer. I agree with Mr.
> Bauer. There are going to be fish that swim through the net, but it\'s
> an interesting ad.
>
> COMMISSIONER THOMAS: Before it\'s over, I\'ll be sure to read some
> other ads on the other side.
>
> Thank you, Mr. Chairman.
>
> CHAIRMAN MASON: Commissioner McDonald.
>
> COMMISSIONER McDONALD: Mr. Chairman, thank you.
>
> The last time both you gentlemen were before us, you indicated that
> one of your concerns was that there was not legislative history in
> relationship to a number of the issues that were before us, or at
> least it was not clear and that the law came in the middle of the
> night, et cetera.
>
> I don\'t know if either of you have had a chance\--I suspect you
> haven\'t with the timing being like it is, but I would love to have at
> some point seriously your thoughts about the letter that was submitted
> by Shays, Meehan, and Senator McCain and Senator Feingold in this
> regard and to today\'s hearing simply because there are a lot of very
> specific underlying pronouncements that they make referencing
> legislative history.
>
> And it\'s ironic because it struck me in terms of this is a very, very
> difficult area. I concur totally that there will be committees that
> will proceed on; I just can\'t imagine them not. Now, having said
> that, that may be different than what we have to end up with and how
> we have to handle it, but I agree with Bob\'s point that he made
> earlier about that.
>
> But I don\'t know. Have either of you have a chance at all to even
> look at the comments that were sent in regard to this rulemaking, by
> any chance?
>
> MR. BAUER: I\'ve only seen a summary, Commissioner.
>
> COMMISSIONER McDONALD: I would just love to have it at some point,
> particularly if we do as both of you suggested, if this is not
> resolved in the waning days of this campaign, if you get a chance to
> look at them because, again, on the practical side this is a very
> difficult area.
>
> I agree with the point Commissioner Smith made at the outset this
> morning in terms of what the implications of this may be. I\'m not
> sure he and I will philosophically agree on the final product, but I
> certainly don\'t disagree with him about the impact.
>
> And I don\'t frankly know where I\'m going to come out on this, but
> after all the shouting is said and one, I\'d love to get both of your
> input on that.
>
> MR. BAUER: Sure.
>
> MR. McGAHN: My pleasure.
>
> COMMISSIONER McDONALD: Thank you again for coming.
>
> CHAIRMAN MASON: Other Commissioners?
>
> I had just two questions which I\'ll ask the witnesses to try to get
> to quickly, and if you can\'t, just say you don\'t know, don\'t have a
> short answer. I\'ll be satisfied.
>
> I asked the previous panel about the structural possibility of
> whatever content standard we use, whether it\'s express advocacy or
> \"promote, support, attack, oppose\" or something else, if it might be
> useful to incorporate that as a definition of expenditure for purposes
> of 441a(a)(7). And I just wonder if you have any quick reactions to
> that as a structural suggestion to deal with some of the lack of
> clarity as to what expenditure means there versus 431, versus 441b,
> now.
>
> MR. BAUER: I don\'t have a view on that at the moment, Commissioner. I
> mean, I\'m happy to supply one at a later date.
>
> MR. McGAHN: I don\'t have a short answer, but I\'m more than happy to
> think it through for you.
>
> CHAIRMAN MASON: The second question I had is if you have any quick
> comments on the issue of party committees or outside organizations
> buying footage from campaigns. We have a state case in Minnesota right
> now on that issue. We had that issue arise in the 1996 Dole for
> President audit. In the \'96 Clinton campaign, there wasn\'t a
> purchase, but actually a 50-50 split between the DNC and the Clinton
> campaign on footage.
>
> And I\'m told\--I haven\'t seen it, but I\'m told there are press
> reports of a complaint in South Dakota right now involving a similar
> sort of thing. So this obviously happens. It seems to me to be kind
> of, if you will, a special case of alleged or potential coordination.
>
> Do you have anything to offer about how we address that?
>
> MR. BAUER: I would very much like to hear Mr. McGahn\'s view on that
> subject.
>
> \[Laughter.\]
>
> MR. BAUER: He strikes me as a sensible man. I could learn something.
>
> MR. McGAHN: I don\'t have a short answer. Perhaps after the election,
> we can talk more about purchasing footage.
>
> CHAIRMAN MASON: Well, I\'m not trying to catch anybody. Well, let me
> put it this way: I\'ll take it as agreement that these are
> transactions that we know go on with candidates of both parties and it
> looks to be something we would need to treat in some way or another if
> we wanted to have a complete rule to address the actual interactions
> that parties and candidates have in the midst of a campaign.
>
> MR. BAUER: Well, let me just say very quickly, let\'s take your
> statement we know it goes on, therefore we need a rule. I don\'t know
> that I agree with that formulation. There are a lot of things that go
> on for which we don\'t need a rule.
>
> And the other thing I would only point out is that without
> speaking\--and I don\'t have a position to offer you today and I
> don\'t want it to be taken as a formal position, but this is a good
> example of a situation where there may well be commerce over the
> acquisition of some material and it would not, in fact, create or
> appropriately raise any concerns about coordinated activity, keeping
> in mind that the impact of that standard is to restrict the spending
> of money.
>
> So I leave you with that maybe excessively cryptic thought, but I just
> wanted to make sure I\--you\'ve twice said to me today \"I take it
> that you will agree\" and then you stopped, and I\'d like to agree
> with you, but I think today is not the day.
>
> CHAIRMAN MASON: Commissioner Smith, did you have any additional
> questions?
>
> COMMISSIONER SMITH: No; given the time, no.
>
> CHAIRMAN MASON: Then we will be in recess until two o\'clock.
>
> \[Whereupon, at 12:23 p.m., a luncheon recess was taken.\]
>
> [AFTERNOON SESSION]{.underline}
>
> \[2:03 p.m.\]
>
> CHAIRMAN MASON: The Special Session of the Federal Election Commission
> for Wednesday, October 3, 2002, will come to order. This is our public
> hearing on coordinated and independent expenditures.
>
> Our only panel for this afternoon consists of Robin Kolodny, Ph.D.,
> Associate Professor of Political Science, Temple University,
> testifying in her own capacity\--I don\'t know that the university has
> views on campaign finance\--and Craig Holman, Ph.D., Legislative
> Representative of Public Citizen\'s Congress Watch.
>
> You\'ll see that we have a light set on the table in front of you
> there and that will give you five minutes to make opening statements,
> after which we\'ll go to a round of questions from Commissioners and
> the General Counsel. Obviously, go ahead and complete your thought
> when the red light comes on, but we do appreciate your help in keeping
> on the schedule.
>
> We will make your written statements a part of the record, and so
> please feel free to summarize those in your statements now, and we
> will start with Ms. Kolodny if that\'s acceptable.
>
> Go right ahead.
>
> MS. KOLODNY: Thank you very much. Mr. Chairman, I brought some
> additional tables with me and I wondered if they could be inserted as
> a late addition to my public comments.
>
> CHAIRMAN MASON: Without objection.
>
> MS. KOLODNY: Thank you, and at some point I can make those available.
>
> As you said in your comments, I am a political science professor. I
> study congressional campaign committees and have spent most of my
> career looking particularly at coordinated and independent
> expenditures, especially coordinated expenditures, and recently I have
> been studying the role of political consultants in elections. I should
> also add that I have been part of two of the Dave Magelby studies on
> outside money. I have authored two of the case studies there.
>
> So what I bring to the table is not obviously legal skills and a
> particular familiarity with some of the picayune points of regulations
> and things that you\'ve done in the past, but rather a practical
> perspective and some data I hope will be helpful to the Commissioners.
>
> I also have come because of a particular divide, I think, within the
> political science and regulatory communities that sort of says that
> political scientists amass data and then don\'t share it with the
> people who might be able to use it. So I hope that I can be helpful
> today.
>
> As you can see in my written statements, my comments focus mostly on
> common vendors and political party expenditures. And part of the
> reason that I brought some additional data to share with the
> Commission is to underscore the point that recently I have had an
> article accepted for publication that shows that over 90 percent of
> the coordinated expenditures that political parties make in
> congressional campaigns go to political consultants.
>
> So obviously the issue of common vendors and political party spending
> is important for your regulatory purposes, and I hope that some of the
> other data that I have here today that we can talk in more detail
> about can be helpful in your deliberations.
>
> COMMISSIONER McDONALD: Mr. Chairman, can I just ask would it be
> possible\--can we get those now? Would that be all right? Would you
> mind if we\--
>
> MS. KOLODNY: Sure. I don\'t know if I approach\--
>
> COMMISSIONER McDONALD: Thank you.
>
> CHAIRMAN MASON: Thank you for that very succinct opening statement.
>
> Mr. Holman.
>
> MR. HOLMAN: That was succinct. I hope I don\'t have to follow in that
> sort of pattern. I was looking at her, waiting for her to go on.
>
> My name is Craig Holman and I\'m Legislative Representative with
> Public Citizen. I just moved here, so I\'m still living out of boxes.
> So I\'m a little bit disorganized, but not for this presentation,
> hopefully.
>
> As a political scientist, I am acutely aware of the concern between
> making sure that we have a bright line test in administering the
> Bipartisan Campaign Reform Act and trying to avoid treading into too
> much subjectivity, and so that\'s one of my major concerns that I see
> in these regulations.
>
> There are four areas of the regulations that I\'d like to address. One
> is the definition of \"agent,\" the second is the content standard,
> the third is the conduct standard, and the fourth is the two party
> groups. And there are only small points that I want to address, so
> I\'m not going to be discussing the whole thing.
>
> With the definition of \"agent,\" I find that the definition generally
> offered of actual authority, whether express or implied, seems to be
> fairly satisfactory in terms of how I read it. I understand there is
> some concern about whether or not such agents will be conveying
> information to other committees, and that I would like to discuss
> later. But at this point, the definition of an agent having some sort
> of actual authority, whether explicit or implied, in the
> decisionmaking process of a campaign seems to be a nice bright line
> standard.
>
> Now, where the definition of the proposed regulation starts crossing
> over into subjectivity that concerns me is when it is further
> qualified that the agent must be acting within the scope of his or her
> authority in order for any sort of participation to be considered
> coordination.
>
> That starts getting quite narrow, first of all, in the sense that it
> would require the Commission or some investigative body to try
> determining whether or not that agent was actually acting within the
> scope of their authority.
>
> I find it to be a much clearer bright line standard to offer a
> presumption of coordination. If there is an agent that has actual
> authority, whether implied or explicit, in a campaign committee and
> then that agent is participating in any capacity with a third-party
> committee, I would prefer to see the Commission come up with a simpler
> definition of coordination, with a presumption of coordination going
> on between those campaigns.
>
> My second concern focuses on the content standard. Now, the content
> standard, to me, has come across as fairly redundant. It repeats parts
> of election law that are clearly already covered in other aspects,
> such as the content of a campaign message counts as an in-kind
> contribution to a candidate campaign. I find the content criteria
> offers very little in terms of trying to develop a cohesive regulation
> when it comes to coordination. Quite frankly, I would really minimize
> the content standard and focus more on the conduct criteria.
>
> Within the content standard of choices that are being offered, one is
> Alternative A, which in my mind, if there is any content standard at
> all, Alternative A in my mind covers most everything you\'d want to
> talk about.
>
> We\'re getting close to the end already.
>
> And that is simply that if it identifies a candidate within the course
> of the communication, then it begins to fall under the bright line
> test.
>
> The third conduct criteria that I find the most important criteria in
> determining whether any activity is coordination\--it\'s fairly well
> established, I think, in this regulation. I generally like the
> regulation, with the one very important exception that generally an
> agent or a common vendor not be required to have it proven that that
> vendor conveyed material information to the committee in order to
> count as coordination.
>
> Again, I would like to see more of a bright line test in which there
> is an assumption of coordination if you have agents working on a
> candidate campaign and a third-party campaign.
>
> And, finally, I\'ll just wrap it up. The two-party regulation that
> defines parties as two different entities on the national and state
> level\--I think that directly contradicts the law and BCRA itself, and
> it certainly runs contrary to the history of party advertising that
> we\'ve seen in the 2000 election cycle.
>
> CHAIRMAN MASON: Thank you.
>
> The first in the question order this afternoon is Commissioner Thomas.
>
> COMMISSIONER THOMAS: Thank you, Mr. Chairman. Thank you both for being
> here.
>
> Let me start with you, Ms. Kolodny. I\'ve seen you make presentations
> before and I find it fascinating. It might be helpful for this agency
> to hear a little bit about the trends that you\'ve seen in recent
> years about how the party committees are spending their money.
>
> In the earlier years, I gather you saw more activity reported as a
> coordinated expenditure. But apparently once the party committees
> caught on that, hey, we don\'t have to worry about using up our
> coordinated expenditure allowance which requires use of entirely hard
> money, let\'s start putting out issue ads just like all the outside
> groups. And all of a sudden you saw coordinated party outlays,
> coordinated expenditure outlays, disappear in some respect from the
> political scene in terms of what the parties are doing.
>
> And what we\'re left with now is this new legislation which is
> designed to certainly reduce the use of soft money by outside groups,
> but it\'s also trying to reduce the use of soft money by party groups.
>
> But I thought it would be helpful if you just sort of give us a little
> bit of the history of where we\'re going with how the parties are
> spending their money.
>
> MS. KOLODNY: You should never ask an academic to give you a little bit
> of history, but I will try.
>
> COMMISSIONER THOMAS: Use the rest of my red light, up to the red
> light.
>
> MS. KOLODNY: Well, thank you.
>
> The research that I did on the congressional campaign committees
> originally actually starts in 1866 and goes through 1994, so I will
> not trouble you with that. But the one consistent theme, let me
> bracket this by saying, is that political parties are highly adaptive
> actors. And despite what some of the panelists said today, I am
> certain that once BCRA is in effect that they will figure out ways to
> help their candidates, and that has been a long-running theme.
>
> When the FECA was first enacted, obviously parties had to get into the
> money-raising and spending business, and that\'s what they did and
> they did it very successfully and, as you all know, helped to invent
> the soft money loophole for themselves in the early \'80s in terms of
> bringing in funds for party-building, and then only in the \'90s
> learned to use those funds in a series of events that are familiar to
> all of you to use soft and hard money together to spend on issue
> advocacy advertising.
>
> So predominately in the \'80s the congressional campaign committees,
> in particular, had used coordinated expenditures as a way that they
> could help their candidates. And what was nice about it and what sort
> of troubles me in a way about what is in the thrust of BCRA, which is
> not something that you can do much about, is an effort in essence to
> almost force the parties to not use coordinated expenditures, making
> this choice between coordinated and independent.
>
> Clearly, the parties are going to come to the conclusion that the
> amount of coordinated money they will be allowed to spend is so tiny
> in comparison to what they have been used to spending in the last few
> cycles that they will choose independent over coordinated.
>
> The problem with that is that coordinated money is the party\'s money.
> It\'s not money that\'s in the control of the candidate. And this is
> where if what the court has said in other instances is to be the case
> that we want our candidates to be connected with political parties, we
> don\'t want them to be just islands unto themselves and have the
> parties not have a role in electioneering.
>
> Coordinated was a way to guarantee that if you wanted the money that
> the party was legally entitled to spend for you, you needed to talk to
> them about it. And it was a decision that you came to together on how
> would we best help your campaign by spending this money.
>
> With the advent soft money issue advertising, what the parties found
> is that they could, by taking some of that hard money they might have
> ordinarily spent, mix it with soft and then obviously commit many more
> resources to a particular race.
>
> Now, with the new law and the regulations that you\'re promulgating,
> the parties will really be in an interesting situation about how they
> are going to have relationships with their candidates because when
> forced to make this decision\--and I\'m happy to get into more of the
> details of that because I think it\'s an interesting problem that you
> have here, however you define the party groups\--the parties will, I
> think, make the choice to make independent expenditures instead of
> coordinated expenditures post-nomination because of the amount of
> money that they would be free to spend and the leverage that they
> would have. And I think that that is potentially troubling because of
> the division it will create between candidates and parties.
>
> COMMISSIONER THOMAS: Just to follow up, one issue that we\'re working
> with here is whether to build in a content standard. If we build in a
> content standard that, for example, doesn\'t include ads that don\'t
> mention a particular candidate, even with full-blown coordination we
> wouldn\'t be able to treat that as a coordinated expenditure.
>
> And it raises that question of what are those kinds of communications.
> If they are coordinated, but they are falling outside the FEC\'s
> definition because we\'ve built in this content standard, what are
> those? Are the parties going to be able to in some fashion find a way
> to perhaps use some money that isn\'t entirely restricted under the
> federal laws?
>
> MS. KOLODNY: Well, obviously the money is restricted in the sense that
> it\'s hard money, so this is going to be the first constraint on the
> parties.
>
> Secondly, I\'ve been wrestling with the content and the conduct
> standards, and I think that the parties already, in how they have
> spent independent expenditures\--I had another chart that I did not
> distribute to you. It\'s hard to take a lesson from what they\'ve done
> in the past with independent expenditures to project what they might
> do in the future because they have had this soft money mix available
> to them previously.
>
> But in the 2000 cycle, for example, the Democratic Congressional
> Campaign Committee spent almost \$2 million in independent
> expenditures, but not on ads. The communication they used was
> phone-banking, all of it in competitive races, all of it in the last
> few days before the election.
>
> And even though according to your content standard, if you took that
> just alone, it would qualify as coordinated, in terms of conduct it
> certainly did not; that is, you don\'t have to assure me at all that
> the parties did not coordinate with the campaign by saying, \"hey, is
> it all right if we operate a phone bank?\"
>
> They knew that the candidates would be delighted to have a phone bank
> and that it wouldn\'t interfere with their electioneering needs. So
> there has only been a small amount of experimentation on what to do
> with independent, per se, and so far I believe that they will comply
> with the conduct standards that you set; that is, that they wouldn\'t
> cross any of those lines. The other one\--if the standard is to take
> them all together, then I think they wouldn\'t have trouble meeting
> that.
>
> CHAIRMAN MASON: I\'m next in the question order and I wanted to ask
> Dr. Kolodny about former employees.
>
> If I recall, in your written statement you suggested a relatively
> lengthy cooling-off period for former employees and I wonder if you
> would discuss what the rationale for that is.
>
> MS. KOLODNY: I\'d be happy to because that\'s the thing that obviously
> struck me the most and that I spent the most time in my written
> remarks commenting on.
>
> What I have been trying to do as an academic is to look at the
> connections between consultants and parties and candidates by finding
> out which consultant had been hired by political parties, by
> competitive candidates, and by interest groups.
>
> And the problem that I am having, and that\'s what prompted my
> comments to you, is what I guess we would call in political science a
> unit of analysis problem, which is to say that one firm in one cycle
> will not be the same firm in the next cycle and figuring out how many
> principals are in a particular firm is only something that will be
> volunteered if that firm would like to offer that information.
>
> CHAIRMAN MASON: Can I get you, though, to focus on why we\'re even
> worried about common employees or firms between election cycles?
> What\'s the threat that you\'re trying to get at? When somebody works
> for a party in 1994 and then turns around and works for some different
> set of people in 1996, what\'s being coordinated that\'s of material
> value?
>
> MS. KOLODNY: Well, obviously it helps you endorsing to try to come up
> with that magic moment when a piece of information is given from one
> person to the next. But I guess I would contend that at the conclusion
> of one election cycle is when most candidates begin to prepare for the
> next election cycle, and so the fact that you\'re now switching
> employers means that you are taking a lot of insight and information
> you had about how strategy was decided in the previous set of
> elections or for a previous party and now taking it with you into your
> new employment circumstance.
>
> In fact, that\'s probably the reason you\'re hired by the next group
> is because you have that kind of information and insight. And so I
> guess I would submit that if what we\'re trying to do with these sets
> of regulations are to stop that kind of coordination that we\'re\--
>
> CHAIRMAN MASON: That\'s what I assumed was behind your theory and I
> want to explore that a little more, that kind of coordination. And if
> you will, you seem to be saying that what we might call joint
> strategic concepts are coordination.
>
> For instance, the Democrats\--and there\'s nothing necessarily wrong
> with them doing it\--have something called the Coordinated Campaign
> which doesn\'t really have to do per se with coordinated
> communications. It might, but it mostly has to do with their
> get-out-the-vote efforts, and so on like that.
>
> And I take it then that you are suggesting that the idea that there\'s
> some common doctrine that Republican entities may generally use,
> Democratic entities may generally use, in your mind constitutes
> coordination such that it can leak across from one election cycle to
> the next and that we need to police that.
>
> MS. KOLODNY: Well, I would contend that the kinds of information, when
> you talk about material information that you are mentioning here, is
> not as generic as you suggest. I think that, for example, a two-year
> window isn\'t helpful enough for Senate candidates who run in a
> six-year cycle.
>
> And having material information about how one campaign might be run
> might cover you for a longer period of time in terms of information
> that might then be helpful for running in that same state or running
> in a very similar kind of state or working with interest groups, then,
> that also work with a similar set of candidates.
>
> CHAIRMAN MASON: I\'m sorry to keep interrupting you and I don\'t want
> to pester you too much, but I want to focus on information that might
> be helpful.
>
> And, yes, it\'s true when you move from one employer to another\--and
> it wouldn\'t have to be from a campaign to an interest group.
>
> MS. KOLODNY: Right.
>
> CHAIRMAN MASON: It could be from interest group to interest group or
> campaign to campaign. You may have helpful information. Are you saying
> that information that\'s helpful constitutes a coordination that we
> need to police?
>
> MS. KOLODNY: No. If you put it that way, then you can\'t say that
> people who have expertise are necessarily on their face coordinating.
> That would be true, and I think that it also would be the case that it
> would be harder to police and harder to enforce something about former
> employees than it would common vendors.
>
> Common vendors concern me more than former employees. The previous
> panel talked about 20-somethings and their experience and you
> wouldn\'t want to stop their political career development. That, I
> have certainly taken, and as you suggest, they are unlikely to have
> the kind of information that we might consider to be material.
>
> CHAIRMAN MASON: The previous panel talked about the problems with
> limited numbers of vendors. Are you taking the position, for instance,
> that a vendor who has worked for a party committee and, let\'s say,
> candidates of that party extensively should be prohibited from making
> issue ads on behalf of interest groups for that reason?
>
> MS. KOLODNY: In the same campaign, I think so because we know that it
> obviously happens today. The parties have been very careful about the
> kinds of vendors that they hire and what they do, but those same
> vendors can then go out and work for interest groups and make issue
> ads in races that they now have the party perspective. They have
> insight into what the party is doing. Then they have insight,
> obviously, into what the interest groups want.
>
> The other thing, though, that can\'t be\--and this was part of my
> comments as well\--that can be quantified is that it\'s a very small
> community, as the previous panel suggested. Even though people will
> say there are thousands of political consultants, my numbers show
> something like 200 firms that are active in federal campaigns.
>
> They all know each other. Everybody knows who is working for whom. And
> this is my concern for your regulations: The Commission can\'t police
> every lunch that happens in Washington and any other kind of
> communication that could result in material information being passed
> from one vendor to another but that falls outside the parties\' and
> candidates\' regulatory framework.
>
> I\'m not suggesting that you can really regulate this kind of
> communication. I\'m suggesting that it\'s almost an impossible
> standard that the Commission should consider when you\'re looking at
> how to define what a common vendor is because we just know that
> there\'s a lot of anecdotal information\--it\'s a problem I can\'t
> make a table for you\--that shows that everybody knows what everybody
> else is doing.
>
> CHAIRMAN MASON: Thank you.
>
> Vice Chairman Sandstrom.
>
> VICE CHAIRMAN SANDSTROM: I want to thank the witnesses for appearing
> today and your testimony is very useful.
>
> I\'ll begin with questions for you regarding media buyers. How many
> political media buyers are there?
>
> MS. KOLODNY: That\'s a question again that I can\'t exactly answer,
> but I can tell you that the Democratic Party in the last cycle used
> two or three and the Republicans used something like three or four.
>
> VICE CHAIRMAN SANDSTROM: Then how could you not have a common vendor?
> I mean, the media buyer makes his\--
>
> MS. KOLODNY: Oh, I said they should be included.
>
> VICE CHAIRMAN SANDSTROM: What?
>
> MS. KOLODNY: I believe the media buyers should be included in your
> list.
>
> VICE CHAIRMAN SANDSTROM: If you use a common vendor and there are only
> two or three out there to do this extensively, that seems to me to
> preclude a wide range of organizations from using media buyers in
> placing their ads because if they used any media buyer, there was a
> high likelihood it would be one used by a party or the candidate.
>
> MS. KOLODNY: Obviously, the small number, as the previous panel
> reported, could be a problem that way. It doesn\'t mean that they are
> the only media buyers available. What I gathered from the
> Commission\'s comments, though, was a question about the role of the
> media buyers.
>
> And so one issue, which I don\'t think is what you were originally
> asking about, is whether the marketplace would be kept intact. The
> question really was did the media buyers have information that might
> be material that could be then shared with other entities. And if
> that\'s the question, then the answer is that, yes, the media buyers
> have\--they are not just, you know\--
>
> VICE CHAIRMAN SANDSTROM: But if they didn\'t have that information,
> they couldn\'t be in the business. The very business they\'re in
> requires them to have that information and that\'s what they sell to
> candidates. How do you effectively place an ad in this market? Who can
> give me the best rates? When should I run it? What demographics am I
> going to get? So if you only have two or three, I can\'t see how you
> couldn\'t be employing a common vendor.
>
> I have a series of questions. I don\'t want to get bogged down.
>
> You seem to have studied political parties to some extent. What sort
> of control does a national party have over the precinct committees of
> Chicago?
>
> MS. KOLODNY: Well, I would agree with the previous panel that they
> don\'t have a controlling say in what a precinct committee in Chicago
> would do. However, what I think is missed is that the precinct
> committee in Chicago seldom has an interest in forming a committee to
> report to you for the purpose of spending in federal elections. And so
> the practical matter is that usually there is no problem, no
> confusion, with who is going to be\--
>
> VICE CHAIRMAN SANDSTROM: Usually, but you often will have little
> violations of law that aren\'t pursued.
>
> MS. KOLODNY: Of course, yes.
>
> VICE CHAIRMAN SANDSTROM: Someone will take out an ad listing a slate
> for the local area, distribute a slate, and they\'ll include the
> federal candidate on that slate. And they will not have even
> coordinated it with the candidate. They are just doing the slate. And
> if it were over \$250, it would have to be reported to us as an
> independent expenditure, or they do the exempt activities and do it
> under the exempt activities.
>
> I\'m just going to those instances where\-- because you can\'t assert
> control, how then can you police, as you said, these committees to
> prevent them from making you a violator?
>
> MS. KOLODNY: Well, I don\'t see that you can.
>
> VICE CHAIRMAN SANDSTROM: Okay, thank you.
>
> Mr. Holman, I really appreciate your testimony because it\'s somewhat
> unexpected, and maybe that\'s because you\'re new here in Washington.
> Usually, your organization is associated with groups that are often
> referred to as the reform community.
>
> But you seem to be arguing that there should be a content standard
> with respect to at least a clearly identified candidate, and if there
> isn\'t a clearly identified candidate you would allow a party to
> coordinate its issue campaign even if that issue campaign creates a
> favorable environment for its candidates to run.
>
> For instance, an issue campaign done by the Democratic National
> Committee on health care in \'93\--you would allow that sort of issue
> campaign as long as it doesn\'t mention a federal candidate?
>
> MR. HOLMAN: Well, I did rattle through these points rather quickly.
> That is something I had written in my original submission. However, I
> would like to amend that that also if a party is identified along with
> a candidate. That would be something that would call for coordination
> because\--
>
> VICE CHAIRMAN SANDSTROM: So you couldn\'t build your party through
> saying, you know, \"We want prescription drug benefits, vote
> Democratic?\" A party could not run such an ad because there is such a
> danger that its candidates might be corrupted by that?
>
> MR. HOLMAN: I\'m talking about if there is an agent that works within
> the party as well as within a candidate campaign and then focuses on
> the activity with a third-party committee.
>
> VICE CHAIRMAN SANDSTROM: If a committee like the Democratic
> Congressional Campaign Committee or the Republican national Senate
> campaign committee\--they consist of candidates, they consist of
> agents of candidates. It\'s better for them to run issue campaigns, I
> think, than outside interest groups to run issue campaigns. If they
> have to rely on the outside groups to run issue campaigns, they lose
> control of the party\'s message.
>
> So isn\'t better that if we\'re going to have national health care
> campaign, it\'s better that it be run by the Democratic National
> Committee than the AMA doing it on their behalf?
>
> MR. HOLMAN: Well, I\'m not trying to testify on which is a better
> source to do a campaign like that. What I\'m trying to testify on is
> what should be considered coordinated. If you have agents within
> either a candidate or a party committee working with a third-party
> committee, that I would consider a coordinated effort, and so it\'s
> coordination I\'m trying to get at.
>
> You know, quite frankly, I would like candidates to be discussing
> these issues more than parties, and parties more than third-party
> groups. But that\'s not my choice, that\'s not my choice.
>
> VICE CHAIRMAN SANDSTROM: But doesn\'t most of what your group does
> when they go around to my door is discuss issues? We allow Public
> Citizen to discuss these issues and not the party. That\'s a better
> way for the country to formulate policy?
>
> MR. HOLMAN: Of course, we discuss those issues, but Public Citizen
> does not coordinate with candidates or political parties in doing
> this. It\'s the coordination effort and the coordination regulation
> that I am here testifying about at this point.
>
> VICE CHAIRMAN SANDSTROM: I appreciate it. Maybe I\'ll get a chance to
> pursue this if there\'s another round of questioning, but I\'m not
> understanding how those committees, since they consist of candidates,
> could ever do an issue campaign, then.
>
> CHAIRMAN MASON: Commissioner Smith.
>
> COMMISSIONER SMITH: Thank you, Mr. Chairman.
>
> Mr. Holman, I was afraid you were going to start to feel neglected
> there, but I see Commissioner Sandstrom got you into things now. I
> haven\'t seen you in a while, but I appreciate your coming in to see
> us, and as well you, Professor Kolodny.
>
> I wanted to talk a little bit first to you, Mr. Holman, about the
> conduct issue, and you\'ve suggested that there should be a
> presumption of coordination where the agent is involved, I gather, on
> both ends of things.
>
> Would this be a rebuttable presumption of coordination or would you
> view it as an absolute presumption of coordination?
>
> MR. HOLMAN: I think it would be best to view it as a rebuttable
> presumption. I just have avoided trying to get into explaining what a
> rebuttable presumption is, since I\'m not a lawyer, but it would
> provide a certain safeguard in the event that it could be demonstrated
> by an agent that they, in fact, you know, are not doing any
> coordination whatsoever. A rebuttable presumption does certainly seem
> like the sound policy.
>
> COMMISSIONER SMITH: I think it would have to be under [Colorado
> I]{.underline}, where we had basically an irrebuttable presumption and
> the court said, no, you can\'t, you know, go against the facts that it
> was an independent expenditure.
>
> But that leads me to my next question. You\'ve kind of hinted perhaps
> at what your answer might be. If it\'s a rebuttable presumption, how
> does one rebut it? I mean, what would you see in a kind of a case? How
> would somebody rebut the presumption of coordination?
>
> MR. HOLMAN: Yes. I\'m not clear on how a rebuttable presumption works,
> since I am not a lawyer and I haven\'t been involved in those kind of
> events. I could just hypothesize that a certain stream of events\--I
> don\'t know\--coincidences or something could have been demonstrated
> by an agent, and therefore they weren\'t actually\--it shouldn\'t be
> assumed that they were doing a coordinated effort. But that is not my
> expertise, so I did not want to really get into that.
>
> COMMISSIONER SMITH: Okay, all right. Let me go over to you, Professor
> Kolodny, and ask you a question about\--you\'ve raised a number of
> issues, I guess, and I guess I\'m wondering a little bit. I\'m not
> sure how you\'re suggesting we resolve them, or are you simply trying
> to make sure that we\'re aware of them and leaving it up to us to
> resolve them?
>
> MS. KOLODNY: It\'s more the latter.
>
> COMMISSIONER SMITH: For example, with the various political
> consultants, you suggest they form various different partnerships with
> various principals\--Smith and Jones Consulting, or Smith, Clark and
> Wilson Media and Telemarketing where Jones and Clark are principals.
> And you say, \"How will the Commission know which vendors or
> independent contractors are coordinating services if they incorporate
> differently, as illustrated above? How will the Commission verify that
> a former employee is involved?\"
>
> Do you have any suggestions there, or are you saying that basically
> this is an issue that can\'t be dealt with very adequately through
> regulation? This idea of common vendors is not something that someone
> can deal with very effectively?
>
> MS. KOLODNY: Well, that\'s exactly what I\'m saying, and I want to
> make it clear that I didn\'t come here with a particular platform to
> further, but rather as a political scientist to bring to your
> attention a set of problems. And this is only one, because of my own
> work in the last several years, that I had been aware has been a
> problem, and that is that I think that most electoral actors\--and by
> that I mean political parties, groups, and candidates\--have for some
> time now been using their common vendors as a way to avoid charges of
> coordination or collusion between them.
>
> And it\'s easier to do in a way, as everybody knows who is working for
> everyone else. You just let the chips fall where they may. And
> unfortunately what the consultants themselves figured out\--by the
> way, in another piece of work that I\'ve done we know that more than
> half of political consultants used to work for a political party
> committee, and then another 30 percent of them used to work in
> candidate campaigns.
>
> So as one former political party executive director said to me, \"It
> makes more sense for us to have small payrolls and hire consultants to
> do our work because they are our people and we know, because they were
> just our employees five minutes ago, that they will remain loyal to
> our organization and they know how we operate.\"
>
> So my point only is that you run the risk here, when you can\'t have a
> very clear way of defining who you\'re going to keep track of and how
> you\'re going to do it and what the time period should be, of inviting
> the private sector to go ahead and create these fictions among
> themselves about, well, no, I was a firm called this this time and now
> I\'m a different firm this time. Or maybe I\'m a different firm if I
> work for interest groups and parties and candidates. I have a
> different name and so how could I be the common vendor, even though a
> principal might be the same for all of these various firms. And I was
> shocked to find the extent to which that actually happens.
>
> COMMISSIONER SMITH: Now, to what extent does this really result in
> coordination? In other words, you have these vendors who are experts
> in their area.
>
> MS. KOLODNY: Yes.
>
> COMMISSIONER SMITH: So they are applying their expertise for any
> particular candidate or party. Some of that may have been learned
> elsewhere. In other words, they know what other folks have done, but I
> wonder how much serious, real idea-sharing there is in the sense that
> I mean I can go out and tell you\--and I don\'t know any of this
> stuff, but I can tell you generally\--you know, common sense and what
> you read in the papers\--what themes a candidate ought to hit, what
> people he ought to try to appeal to, and that sort of thing.
>
> So I question whether there\'s ever really much coordination that
> takes place there in terms of strategy and tactics as much as it\'s
> just the obvious of saying I\'m going to use my expertise to get you
> maximum bang for the buck. But the fact that I use that expertise for
> somebody else who is from your party as well is\--I get the impression
> the vendors are not really serving as some kind of conduit for a
> coordinated campaign strategy. They are just applying their expertise
> in a normal fashion.
>
> MS. KOLODNY: Well, I would say that that is probably the case in the
> vast majority of races. However, we\'re only in this particular cycle,
> if you take the House of Representatives, looking at potentially 40
> competitive races, and so I would agree with you. For the 395 that
> most people aren\'t paying attention to, the kinds of material
> information that might be provided would be the kind that you could
> get from reading the newspaper and just hanging around in that
> particular congressional district.
>
> But I would submit to you that there is a lot of competition for air
> time, for radio time, and things like this, especially in the last 30
> days or so of a campaign, and that there is more material-sharing than
> I think we\'re all aware of, more than certainly I\'m aware of, and
> I\'m aware of some that is concrete.
>
> And that\'s my concern, is that I can see that the parties, the
> groups, and the candidates, especially the parties and the groups,
> will gravitate toward using common vendors as a way to say, \"Hey, I
> don\'t know what the group is doing. I only know what we\'re doing,
> but the fact that we let the same firm have a conversation with its
> various principals and that they are all aware of what various
> interests are planning to do is enough.\"
>
> COMMISSIONER SMITH: And where does the corruption come in there, then?
>
> MS. KOLODNY: Well, my assumption was that we were supposed to be
> setting up some firewalls here, that the groups have free speech
> rights and that they are able to go ahead and say what they would like
> to say and have their statement in campaigns. And the parties likewise
> should be articulating for their candidates.
>
> But knowing that one side has information in a poll that might help
> the other side knowing that a certain issue is not a good one to push
> for the candidates\--that\'s material information that might cause the
> corruption that we\'re talking about, a problem where those actors
> aren\'t acting independently.
>
> COMMISSIONER SMITH: Well, we\'re out of time so I won\'t beat it, but
> I sure don\'t see much danger of quid pro quo type corruption. That
> sounds to me like just people who have similar interests applying
> those interests in a way that is effective. But I\'m out of time, so
> I\'ll leave it there.
>
> CHAIRMAN MASON: Commissioner McDonald.
>
> COMMISSIONER McDONALD: I\'ll yield part of my time. Do you want to
> pursue that, Commissioner?
>
> COMMISSIONER SMITH: No. You go right ahead.
>
> COMMISSIONER McDONALD: After you explained to me about this consulting
> business, I\'m willing to make an offer. Why don\'t you and I do a
> bipartisan group when our term ends? This might be our only hope.
>
> I thank both of you for coming and we appreciate it very much.
>
> COMMISSIONER SMITH: I think that firm should be named Smith and
> McDonald.
>
> \[Laughter.\]
>
> COMMISSIONER McDONALD: I knew we\'d finally have a breakdown in
> communication.
>
> Let me pursue just a minute the point raised by Commissioner Smith
> because this is a tough area and actually I got exactly the same
> thing. Maybe this is in preparation for our future ventures together.
> I kind of got the same impression, and I don\'t mean that negatively,
> but I did get the impression you raised some interesting issues, but
> let me talk about two things specifically.
>
> First, the one Commissioner Smith was pursuing. It appears to me that
> most consultants pitch the fact that they\'ve been successful doing
> something, or they\'ve worked with somebody or they\'ve done
> something. And the universe is pretty small.
>
> And the question about corruption\--of course, the Congress has made a
> judgment on that. Right or wrong, they have made a judgment. Whether
> it will hold up or not, one doesn\'t know, but they have made, at
> least in their opinion, a judgment about these activities.
>
> What do you do in terms of the firewalls that you\'ve alluded to? I
> mean, if I am a vendor and there are three or four races out there and
> some of the races overlap\--the Congress and the Senatorial race, the
> parties involved, et cetera, et cetera\--I suspect there\'s a lot more
> information going on. I wouldn\'t say more information than we think,
> but as a practical matter and under our current rules you really have
> to work overtime to get caught, would be the most diplomatic way to
> put it.
>
> Is there something in your experience that tells you that there is a
> way to approach these problems to be more effective, to be more clear,
> and at the same time have a truly practical impact?
>
> MS. KOLODNY: I can only say that I know that some of the party
> organizations have struggled with this, and historically I know one
> party committee that in a recent election cycle had a contract with
> one vendor to do their issue advocacy advertising and said to that
> vendor, \"In return for this contract, you must\--one of the
> conditions of this contract is that you will not have any other
> candidates for the U.S. House of Representatives from our party as
> clients.\"
>
> And they agreed to that and that was the term of the contract, and I
> think that that is a responsible approach to say to a vendor that you
> will operate as our exclusive vendor because then we know that you
> will not be directly sharing material information with the candidates
> that our campaign of issue advocacy here is intended to help.
>
> I don\'t know that you could potentially put that into your
> rulemaking, but that\'s a good example of where the vendors wouldn\'t
> be losing their livelihood, but nevertheless would not be in a
> position where even if they might not intend to, they would have
> information that would be shared with a variety of other sides.
>
> Now, I believe the same group also did work for some interest groups
> that were interested in some of the campaigns that they were making
> ads for, so that, you know, it wasn\'t completely above board. But it
> was better than some of the things that could go on, although I think
> the parties have tried hard not to give the appearance of using the
> common vendor.
>
> And I guess I would submit to you that since they are concerned in the
> absence of any explicit regulation telling them that they should be,
> then there has got to be a \"there\" there. And I wish could be more
> precise than that, but unfortunately this is the nature of social
> science, is that it\'s clear that they presume that when they are
> hiring a vendor to do a campaign that\'s going to be targeted for
> particular races, which they could very well again do to spend
> independent expenditure money under the new regulations, that they
> wouldn\'t then allow that same vendor to be working in candidate
> campaigns where they were also making those independent expenditures.
>
> COMMISSIONER McDONALD: Well, Mr. Holman, I don\'t want to leave you
> out. I have another question for her, but I think I\'d better turn to
> you a moment because I don\'t want to leave you out.
>
> MR. HOLMAN: I don\'t feel amiss, by the way.
>
> COMMISSIONER McDONALD: Well, I wanted to let you actually\--because
> you had said this during your opening comments, I wanted to be sure
> that you had an opportunity to tell us anything else that you wanted
> to because you kind of indicated in your opening comments you were
> running out of time.
>
> Was there something you\'d like to add to your opening statement or
> anything in general you\'d like to comment on?
>
> MR. HOLMAN: There were some interesting political science figures that
> I wanted to introduce.
>
> COMMISSIONER McDONALD: That would be fine.
>
> MR. HOLMAN: I just have completed a study on television advertising by
> candidates, parties, and special interest groups in the 2000
> elections, called \"Buying Time 2000.\" And what I found
> fascinating\--when it came to the issue of trying to distinguish
> between state political parties and national parties as being two
> different groups, I found that when it comes to at least television
> advertising, there really was no difference going on here.
>
> First of all, in the 1996 election cycle it was readily admitted by
> staffers in the Clinton administration that the national party had
> transferred \$32 million down to state Democratic parties, with
> instructions on how to spend this money in the campaign.
>
> In the year 2000, although I don\'t have any kind of admission like
> that, I certainly have the data. Of all party ads aired in the 2000
> campaign, 77 percent were paid for by state parties. Only 23 percent
> were paid for by the national parties.
>
> But at the same time, all the money came from the national parties,
> where the national parties transferred \$274 million in soft money
> down to the state parties. So to try to suddenly\--I mean, that really
> is the reason why BCRA wanted these two entities, if you want to call
> them that, to be considered as single entity. They really are.
>
> COMMISSIONER McDONALD: Yes, it\'s an interesting point. I thought
> about asking the witnesses about that this morning. Clearly, just a
> cursory review would give you some sense that that\'s precisely what
> does happen, and I was interested at the party counsels indicating the
> great degree of independence. You usually don\'t have much
> independence where money is involved. If I give you the money, I want
> to be sure that you\'re doing the appropriate thing with it, it seems
> to me. I mean, I think that\'s part and parcel.
>
> If I might just ask Ms. Kolodny one real quick question, the Vice
> Chairman raised an interesting point that has been kicked around today
> some about kind of a renegade precinct out in Chicago.
>
> My experience with Chicago tells me that at least within the framework
> of Chicago, there may not be many renegade precincts, but it may be
> renegade to the national committee. I\'m not sure. Obviously, from my
> perspective I\'m not interested in a precinct, with the full
> understanding of what this new language might create for us.
>
> But would it be your opinion, or either of your opinion, that the way
> to address that kind of a problem might be that we might have to
> institute thresholds like we do for everything else under the law in
> terms of what we would pursue or wouldn\'t pursue?
>
> MS. KOLODNY: That would certainly help. I still I guess am not
> convinced that this will be a pervasive problem. I can see that it
> would be a minor problem in this sense, that when I have looked at
> coordinated expenditures, for example, for the last several cycles and
> found what you\'re just talking about that many times even for hard
> money coordinated expenditures national party committees would
> transfer hard dollars to state committees and state committees would
> then go ahead and make the hard money expenditure, it still means that
> somebody at that state or local level even to do that straight
> pass-through motion has to file forms and set up an entity and get a
> treasurer, do these kinds of bureaucratic things which require more
> thought.
>
> And I think with dissemination of information about the BCRA that most
> of these organizations would at least come to the understanding that
> they should be notifying somebody that they\'re doing this. Probably
> some of them would not, but I would think that you don\'t have very
> many local-level committees that already report to you in federal
> committees as it stands now.
>
> And I don\'t see that this new law is going to put the idea into
> thousands of precinct committees\' minds that they ought to be
> engaging in these independent expenditures or coordinated expenditures
> to get the national committees into trouble.
>
> I think that they\'re really not very interested, is the bottom line,
> and I think that what you have found is that when those kinds of
> expenditures have happened, it\'s at the encouragement of the national
> parties in the first place, who send the money and say, \"Here, we
> would like you to make the following expenditure for us.\" And then
> they would call back and say, \"Well, tell us how to do it.\" \"Well,
> you have to get this form.\" And that\'s the part of the puzzle that I
> think will not be there with these maverick groups.
>
> MR. HOLMAN: If I could quickly add on to that, in my research I also
> looked at local party spending in terms of federal elections, which I
> did group in with state parties, and there was very little local party
> spending in terms of federal elections. I mean, it was almost always
> done by the state parties, with just some minor exceptions of like a
> local Democratic club in the San Fernando Valley or something did
> something, but very limited.
>
> I wouldn\'t worry so much about thresholds. I would like to go back to
> this rebuttable presumption standard, have a presumption of
> coordination, but allow it to be rebuttable, given the particular
> situations involved in any specific case.
>
> COMMISSIONER McDONALD: I thank both of you.
>
> CHAIRMAN MASON: Commissioner Toner.
>
> COMMISSIONER TONER: Thank you, Mr. Chairman. I must disclose at the
> outset I had the great privilege of going to graduate school with
> Professor Kolodny at Johns Hopkins. Clearly, she went on to get her
> doctorate and was a far greater student of American politics than I
> could ever be. But it\'s great to see you today, Professor.
>
> And, Mr. Holman, good to see you as well. You certainly have two major
> virtues. You\'re not a lawyer and you haven\'t lived your whole life
> in Washington, D.C., so we\'re certainly eager to hear your thoughts.
>
> I wanted to follow up on a couple things that have been discussed.
> First, Mr. Holman, I just want to make sure I understand your
> testimony. Is it your view that we should therefore treat party
> organizations as one sort of super-structure, national, state, local
> level? That\'s how we should treat them?
>
> MR. HOLMAN: In relationship to federal candidate campaigns, yes.
>
> COMMISSIONER TONER: And you were here for the morning session when we
> talked with the party committee lawyers and I just wanted to follow
> up, then. Would it be your view\--and I understand you\'re saying that
> you don\'t think this would necessarily happen, but I just want to
> make sure I understand your testimony.
>
> If a state Democratic party or any state party made independent
> expenditures on behalf of, say, Al Gore when Gore was running for
> President, in your view that would therefore bar the Democratic
> National Committee from making any coordinated expenditures on behalf
> of Gore, that that would be what we should adopt?
>
> MR. HOLMAN: When one distinguishes the party having the right of
> independent versus coordinated party expenditures, they should do one
> or the other. You know, personally I would simplify it, but I don\'t
> know if this is within the constraints and, you know, allow the
> independent expenditure activity prior to the nomination, and then
> after that it would be coordinated party expenditures. But, you know,
> I\'m not any constitutional scholar, so I\'m not clear on how you
> could deal with that issue.
>
> COMMISSIONER TONER: But in terms of the general election, you\'d be
> okay if basically Terry McAuliffe would be barred from making any
> coordinated expenditures for Al Gore if any state Democratic party
> made independent expenditures?
>
> MR. HOLMAN: I would have the parties clearly understand what the
> campaign finance rules are. I mean, I do not want to see anyone barred
> in any kind of speech whatsoever. I just want to see all the players
> participating according to the proper legal framework.
>
> COMMISSIONER TONER: Well, it certainly would save Mr. McAuliffe some
> money, which I\'m sure he\'s always focusing on.
>
> Professor, I\'m interested in something that we talked about a little
> bit in the NPRM and get your thoughts, and that is the use of publicly
> available information and whether or not that should have any bearing
> on meeting the conduct standard.
>
> The idea would be information that\'s available in the public domain,
> whether it be press releases, a candidate\'s policy papers,
> information available on a website or the World Wide Web\--the idea
> would be that any use of that information to formulate a communication
> would not in any way have a bearing on meeting the conduct standard,
> on the theory that that\'s in the public domain and there should be
> fair use of that.
>
> MS. KOLODNY: Correct.
>
> COMMISSIONER TONER: Would you be comfortable with that type of an
> approach?
>
> MS. KOLODNY: Oh, I think that there\'s no other way to do it.
> Obviously, anything that is in the public domain or that you gather in
> the context of regular study of politics would be allowable, I think,
> for any entity.
>
> COMMISSIONER TONER: Even if that information is very pertinent? For
> example, a candidate could put on his own website his specific
> thoughts on key issues\--let\'s say he\'s running for statewide
> office\--the key areas of the state that he or she needs to turn out
> voters. Would the view be, look, that\'s in the public domain, it\'s
> fair game?
>
> MS. KOLODNY: Absolutely, because what I think your concern should be
> is not about that kind of information, but more about the kind of
> information about exactly what the content of a particular advertising
> campaign will be, when it will be broadcast, how many times will it be
> occurring. Those are the kinds of material information that I think
> are more problematic.
>
> If people have that kind of detailed knowledge, then they alter what
> they ordinarily would do because what the groups, the parties, and the
> candidates all want is in the end to see the person they champion win.
> And what you\'re talking about on the one hand and what others have
> talked about is free speech, and talking about issues and ideas, and
> that\'s fine.
>
> But where I think you get into the grayer area is when people will
> alter what they are saying just to influence the outcome of the
> election and not because that\'s the views that they normally would
> want to put out there.
>
> COMMISSIONER TONER: Mr. Holman, I wanted to follow up on an earlier
> discussion and I just want to make sure I understand your testimony.
> In terms of the content standard, is it your view that we have to have
> a content standard and that what it ought to be is if a communication
> doesn\'t clearly identify a federal candidate nor refer to a political
> party, that in your view it shouldn\'t be covered as a coordinated
> communication? Is that fair?
>
> MR. HOLMAN: Yes, that is a reasonable assessment. I don\'t consider
> the content standard a very important element of this coordinated
> regulation. If there is a content standard, that would be about where
> I would limit the content standard.
>
> COMMISSIONER TONER: You think that\'s a fair reading of the statute
> and that if we adopted that kind of approach, it would be sensible?
>
> MR. HOLMAN: I do try to side with a bright line test and try to remove
> as much subjectivity out of these kind of regulations as possible.
>
> COMMISSIONER TONER: You mentioned in your testimony and I was
> interested\--you indicated that your organization doesn\'t coordinate
> with candidates, doesn\'t coordinate with public officials. And I was
> wondering, I mean, does Public Citizen lobby on issues of public
> concern?
>
> MR. HOLMAN: Yes, Public Citizen does lobby.
>
> COMMISSIONER TONER: Do they, then, in the course of doing that meet
> with public officials to express their views on issues of the day?
>
> MR. HOLMAN: Yes, they do, and I notice Senator McCain offered that as
> an important element that ought to be included in the content standard
> to exclude lobbying activities, and that I would find acceptable. I
> had not thought of that when I was preparing my submission.
>
> COMMISSIONER TONER: I think you make a good point. Are you therefore
> concerned that if we had an overly broad conduct standard that the
> bona fide lobbying activities that your organization engages in,
> talking to members of Congress, expressing what you think they ought
> to do on major issues, could be caught up in this process?
>
> MR. HOLMAN: There should be an exemption for lobbying activity, yes.
>
> COMMISSIONER TONER: Do you have any sense of how we should craft that?
>
> MR. HOLMAN: No, I had not worked on trying to craft that.
>
> COMMISSIONER TONER: But you think it\'s a key issue that we should
> focus on?
>
> MR. HOLMAN: I think it\'s significant, yes.
>
> COMMISSIONER TONER: Thank you, Mr. Chairman.
>
> CHAIRMAN MASON: Larry Norton.
>
> MR. NORTON: Thank you, Mr. Chairman, and thank both of you for coming
> and testifying today.
>
> Mr. Holman, were you here for the testimony this morning?
>
> MR. HOLMAN: No, I was not here.
>
> MR. NORTON: Well, that\'s unfortunate because I wanted to follow up on
> some questions that Commissioner Thomas asked. And the gist of it was
> that the candidate sits down with a third party during the campaign
> and says \"What I really need desperately are ads on this particular
> issue and what I\'d like the ad to say is this,\" and the candidate or
> the candidate\'s agent essentially scripts the ad.
>
> The ad doesn\'t mention a federal candidate, and let\'s say for the
> sake of discussion that it doesn\'t mention a party. But it\'s on an
> issue, whether it\'s health care or gun control, that is salient and,
> in fact, likely to be dispositive with respect to the election. The
> candidate not only makes the request, but exercises total editorial
> control over the content of the ad.
>
> That seems like a bright line test under the conduct standard, but the
> content does become important either way. If you decide that the rule
> is appropriate to exclude that kind of ad, that\'s significant. And if
> you focus entirely on a conduct standard and say that sort of an ad
> would be coordinated, then that becomes important.
>
> So I wonder what your reaction is to a rule that would\--you know,
> whether that sort of coordination ought to be embraced in a definition
> of coordination that the Commission would promulgate.
>
> MR. HOLMAN: That is a very good point. I wish I would have been here
> for the earlier testimony. I would assume that any direct request by a
> candidate or a candidate\'s staff member for a type of advertising
> campaign by a third-party group would have to be considered a
> coordinated.
>
> I keep trying to deemphasize the content standard because I really
> don\'t consider that a significant standard. I have recommended
> Alternative A because I found that to be the simplest content
> standard, but in my submission I also do say that you could do without
> a content standard altogether, quite frankly, and focus on the conduct
> standard, which is what I consider the key towards indicating any kind
> of coordination between candidates and third-party committees.
>
> MR. HOLMAN: I think all I\'m really trying to suggest is that I think
> it\'s important whether the content standard is there or not because
> you run into circumstances like the ads Commissioner Thomas talked
> about earlier and the hypothetical coordination.
>
> I wanted to try to pursue for a second the idea of the rebuttable
> presumption and try to approach it in a way that wouldn\'t require you
> to make a legal judgment. Rather, I\'m interested in whether you think
> this would be workable as a practical matter. You suggested that there
> ought to be a presumption with respect to common vendors and then
> testified later, I think, that it would perhaps be appropriate if that
> were a rebuttable presumption.
>
> Is it a workable standard to say that the way that an independent
> person could rebut that presumption would be to demonstrate that the
> information the constituted the content of the ad, the timing or the
> placement of the ad, was the product of communications with some other
> person and not with the vendor, not with the common vendor or not with
> the former employee; rather than attempt to show a negative,
> demonstrate that the information was actually obtained some other way?
>
> MR. HOLMAN: Right. I\'m relying on counsel at this point, but that
> certainly sounds like something that I would consider as evidence to
> try to rebut such a presumption.
>
> I could imagine some other cases, too. For instance, suppose the San
> Fernando Democratic Party, you know, did some minor expenditures for a
> congressional candidate, but was completely unaware of the law itself
> and had no consultation with the state or national parties.
>
> I mean, I could consider something like that also perhaps as evidence
> in a particular case that would rebut the presumption of coordination.
>
> MR. NORTON: Dr. Kolodny, we had a discussion this morning and then
> later this afternoon about the impact of viewing the national and
> state and local party as one super-structure for purposes of making
> election on coordinated expenditures or independent expenditures, or
> this binary system.
>
> I was wondering whether you have any thoughts on what effect our
> choice would have on whether national parties make independent
> expenditures and the extent to which they would make independent
> expenditures.
>
> MS. KOLODNY: Well, I\'ve been thinking about this a lot especially
> after listening to this morning\'s testimony. The first problem is
> that if you go to one party group\--and much of the testimony that
> I\'ve seen since I submitted my remarks seems to indicate that that is
> what the intent of Congress is\--then you are going to reduce the
> amount of coordinated money available for parties to spend because, by
> definition, if I\'m following this correctly, the coordinated
> expenditure in a House race would be one \$10,000 times CPI allotment
> or one state-by-state allotment based on voting age population and not
> the double allotment which is currently allowed to an agency agreement
> potentially by one organization, but where a national committee and a
> state committee could each make the same amount of coordinated
> expenditure.
>
> By going to the one-party ball of wax, as I heard it called this
> morning, you are going back a definition that effectively cuts the
> amount of available coordinated expenditure money in half for parties
> to spend on candidates.
>
> What I think that will mean, and if I am also understanding past
> interpretations by the Commission, is that you don\'t necessarily have
> to spend coordinated funds after a nominee is known. I know that it
> has been presumed for a while that the national committees, for
> example, can spend coordinated monies before the presidential nominee
> is made on behalf of the presidential nominee, in that there are some
> instances of where party committees have made coordinated expenditures
> for the eventual nominee without naming that individual, as long as
> once that allotment is spent, then time is up and that\'s the limit.
>
> And that\'s why I asked the questions that I did about what\'s a
> nomination and when is it, and that partly comes from the fact that
> I\'m teaching in Philadelphia which borders on New Jersey, which do I
> need to say more?
>
> You know, it\'s easy to gloss over that, but sometimes that could be a
> little loophole that might allow for some extra independent
> expenditure. Let\'s say you did the independent before the coordinated
> and then you maybe switch back in some moments of chaos. I think that
> going to one-party ball of wax will mean that the parties will spend
> their coordinated money before the nomination in most cases and then
> spend independently afterwards.
>
> MR. NORTON: Thank you, Dr. Kolodny. Thank you, Mr. Chairman.
>
> CHAIRMAN MASON: Commissioners wishing a follow-up round? I\'m getting
> a couple of nods.
>
> Vice Chairman Sandstrom.
>
> VICE CHAIRMAN SANDSTROM: I\'ll give you, Mr. Holman, a chance maybe to
> amend your testimony again and this is with regard to the definition
> of \"agent\" which you commented fairly favorably on, as I read your
> testimony.
>
> But the principal sponsors of the legislation did not embrace it quite
> as warmly as I read your testimony to. They said defining \"agent\" to
> include only an individual with actual authority, express or implied,
> to engage in certain activities could very well limit the effective
> application of the coordination rules.
>
> Because of the concerns of over-breadth, would you disagree with the
> principal sponsors?
>
> MR. HOLMAN: I read the statements of Senators McCain and Feingold on
> that, and as I was trying to discuss in my presentation, I do prefer
> the brighter-line test of defining an agent as someone who has some
> actual authority either expressly or implicitly involved within the
> campaign.
>
> The standard of offering that that agent then has to convey the
> substantive information to the other committee in order for it to be
> considered coordination is what I would take out of that definition. I
> would not include that in the definition.
>
> If I were to amend it again, I would perhaps offer the conveyance of
> information that is materially important to the committee under the
> conduct standard, which is really the standard that I would focus on
> in terms of coordination perhaps as a seventh criteria within the
> conduct standard.
>
> VICE CHAIRMAN SANDSTROM: Okay. A question about content again. Has
> Public Citizen, for instance, lobbied on national health insurance or
> health issues?
>
> MR. HOLMAN: Sure, Public Citizen lobbies on a great deal of
> activities, of which most of them I do not know, but I know a lot of
> them.
>
> VICE CHAIRMAN SANDSTROM: If Public Citizen went into, let\'s say,
> Senator Stabenow\'s office, who has been very concerned about health
> care costs and prescription coverage under Medicare, and went in and
> said, \"you got elected on this and we\'d like to see you push
> it\"\--she says, \"Yes, but the drug companies are running ads up in
> my area essentially comparing us to the Canadian system. If we go
> under Medicare, they are saying we\'re going to have the same problems
> and we\'re going to bankrupt the system and we\'re going to be getting
> Canadian type of health care.\" And she says, \"That doesn\'t work in
> the Great Lakes. If you\'re going to run ads, you\'ve got to pull
> those ads comparing it to the Canadian system,\" assuming that Public
> Citizen was running such ads.
>
> You would consider that is a sort of coordination on an issue that
> Senator Stabenow is very concerned with, got elected on, to actually
> be precluded?
>
> MR. HOLMAN: I would exempt most normal lobbying activities. But
> certainly if there is a conduct in which a candidate or office-holder
> requests or suggests that a certain type of campaign activity should
> be conducted by any third-party group, then I would put that under the
> conduct standard of coordination.
>
> VICE CHAIRMAN SANDSTROM: But let\'s talk about lobbying in the real
> world for a moment. You go in and the Senator is saying, \"Your ads
> that you\'re running, because you\'re comparing us to the Canadian
> system, are killing me. You can\'t run those in the Great Lakes. They
> have too many people who are familiar with long lines in Canada. You
> can\'t run those ads. You have to do an ad stressing Medicare, you
> know, our system and get away from comparing it to the Canadians.\"
>
> MR. HOLMAN: Especially in the way you\'re highlighting the voice and
> the pleas of the candidate and office-holder saying what kind of ads a
> group should be running, yes, that sounds like coordination to me.
>
> If an office-holder is saying you\'ve got to stop running those ads
> and maybe run these other ads in this other area\--
>
> VICE CHAIRMAN SANDSTROM: She\'s not up for election for six years.
> What she ran on and what she\'s trying to get people to lobby for is
> providing prescription drug benefits under Medicare, and you\'re
> saying she can\'t have what would be a natural conversation with a
> lobbyist saying \"you\'re killing us by running the wrong ads.\"
>
> Thank you.
>
> MR. HOLMAN: A candidate in the same election cycle should not be able
> to do that. That should be the conduct standard.
>
> CHAIRMAN MASON: Commissioner Toner.
>
> COMMISSIONER TONER: Thank you, Mr. Chairman. I just wanted to follow
> up.
>
> Mr. Holman, we discussed a possible safe harbor for use of
> publicly-available information by interest groups such as your own.
> Would you also support such a safe harbor for use of
> publicly-available information, as Professor Kolodny indicated?
>
> MR. HOLMAN: I would presume so, although I\'m not clear on what the
> concept means in terms of the safe harbor on publicly-available
> information, but I would presume so.
>
> COMMISSIONER TONER: Well, the idea would be that any information
> that\'s in the public domain, whether it be press statements that a
> candidate issues, public policy papers the campaign may issue,
> information the candidate posts on his or her website, all of that
> could be used without regulation or restriction by interest groups in
> running their communications and it would in no way be viewed as
> satisfying any conduct standard.
>
> That would be the idea, on the theory that this is out there in the
> public domain and otherwise, what, are we going to say that special
> interest groups can\'t read the New York Times in terms of the issues
> that candidates are mentioning? But that would be the idea.
>
> MR. HOLMAN: That\'s right. I mean, that does sound like a safe harbor.
> It doesn\'t involve any actual authority within the campaigns
> themselves.
>
> COMMISSIONER TONER: Would you be comfortable if we were to adopt such
> a safe harbor?
>
> MR. HOLMAN: I believe I would, yes.
>
> COMMISSIONER TONER: Professor, I just wanted to follow up on a couple
> other things. In terms of common vendors and former vendors, you
> testified at length about the fact that there\'s a great overlap in
> terms of vendors that are used by candidate committees and party
> committees, and your concerns about the potential issues that arise
> from that kind of overlap.
>
> Do you think the same in your study in American politics\--first of
> all, does the same phenomenon tend to happen with vendors being shared
> between parties and special interest groups? Does the same kind of
> overlap happen?
>
> MS. KOLODNY: Yes.
>
> COMMISSIONER TONER: Do you think the same concerns arise in that
> context?
>
> MS. KOLODNY: Yes, I think that that\'s the problem that I think is
> worse. As I said previously, I\'m not against parties and candidates
> having some degree of coordination. That\'s why in response to the
> General Counsel\'s question I\'m certain that parties will favor
> independent over coordinated expenditures under the BCRA, and I don\'t
> think that\'s such a healthy thing.
>
> What is a little more troubling is the groups being able to be privy
> to information that the parties might have. You see, the groups and
> the parties have different agendas and they would just use each other
> for information and strategic insight, I think is the problem.
>
> Your safe harbor is not a concern for me. What I\'m more concerned
> about is the much more detailed insider information about the timing
> of ads, the tone of ads, the choice of particular issues in response
> to polling data which may only be known by a few people, and they tend
> to be the same few people.
>
> COMMISSIONER TONER: You\'ve obviously studied parties in the American
> political system for a long time. Obviously, we\'re having to struggle
> with should the same standards for coordination apply vis-a-vis
> political parties as apply to other groups. And it\'s often advanced
> that parties should be treated differently on the theory that they are
> different.
>
> You know, activists and people who work for political parties by their
> very nature have close connections with candidates, and this is, in
> fact, a good thing to foster this kind of grass-roots connection.
>
> Do you think that we should consider having a separate standard for
> coordination for political parties or that we should try to fashion
> one across the board for everybody?
>
> MS. KOLODNY: Well, it seems to me that the standard you have fashioned
> is basically the same for all groups, and the problem is that within
> the confines of the BCRA I don\'t see that you can do anything but
> adopt the same kind of conduct and content standards that you have,
> for the following reason.
>
> As long as coordinated expenditures are at a low level, and especially
> if party committees are considered one entity and that level is very
> low\--I wanted to state before I think right now that level is about
> \$38,000 for a House race. In House race that might cost \$2 million,
> that\'s not a whole lot of help that comes from a party. And so the
> party would, you know, logically say if that\'s a competitive House
> race, then we might want to go ahead and spend independently.
>
> But the more that you do that, the more that the party and the
> candidate don\'t have an opportunity to coordinate and discuss what
> might be a good direction for the party overall. That\'s what get\'s
> lost, and that\'s something that I don\'t see how the Commission can
> do within the confines of BCRA.
>
> COMMISSIONER TONER: Thank you very much.
>
> CHAIRMAN MASON: Commissioner Smith.
>
> COMMISSIONER SMITH: Thank you, Mr. Chairman.
>
> Mr. Holman, I wanted to just ask a couple more questions of you. Last
> time he was up for reelection in Wisconsin, Senator Feingold was
> supported, if you will, by party ads, independent party expenditures
> praising him or criticizing his opponent\'s stands on issues. I don\'t
> remember the exact content of the ads. And Senator Feingold asked the
> party to stop running those ads and they did.
>
> Would that be coordination?
>
> MR. HOLMAN: That\'s an interesting question. I would not consider that
> coordination. I guess this would be a good time to try to invoke the
> rebuttable presumption at that point.
>
> COMMISSIONER SMITH: Why would it not be coordination? I mean, they
> have talked about strategy. He said, \"This is not helpful to my
> campaign. Please stop.\"
>
> MR. HOLMAN: It wasn\'t really a discussion about strategy. If my
> recollection is correct, it was a discussion about ethics and the
> stance that Feingold has taken when it comes to campaign finance
> activity. He really did not want the national party to be that
> involved in his campaign activity. He was really discussing strategy
> with the national party.
>
> COMMISSIONER SMITH: So it would be important to us to go into the
> Feingold campaign, then, in the event of a complaint and ask for all
> memoranda and conversations, and so on, pertaining to the decision to
> ask the Democratic Party or whichever group was running those ads to
> stop in order to find out what their motivation was?
>
> MR. HOLMAN: If one were to file a legal complaint on that, perhaps
> that\'s what a rebuttable presumption would entail. But I could also
> envision that no one would think of that in any sense as being
> coordinated activity and would want to file any complaint on that.
>
> COMMISSIONER SMITH: I think of it as being coordinated. I can\'t think
> of any reason why it\'s not, to be honest, and it\'s not an idea that
> originated with me. I first had other people raise that with me
> saying, well, is that a coordinated issue now, since he has asked them
> to stop and they stopped, even under the old definition?
>
> Well, if that\'s the case, let\'s suppose we have an organization that
> is engaged in politics and asked to meet with both of the candidates,
> and they meet with the candidates and talk with them about the various
> issues that are important to them for the purpose of deciding whom
> they\'re going to endorse. And they talk to the two candidates, they
> choose to endorse one on the basis of what he said about issues, and
> so on, and then they start running ads on that candidate\'s behalf
> without any further discussion with the candidate.
>
> Coordination?
>
> MR. HOLMAN: Without discussing the strategy, I would not offhand call
> that coordination. No, I would not.
>
> COMMISSIONER SMITH: If we had a presumption of coordination, they
> would be tied up trying to prove that for quite some time\--to
> disprove that.
>
> One of the problems that we heard testimony on this morning is that
> coordination investigations are inherently among the most intrusive
> investigations that we get because they rely on plowing through the
> files of candidates and trying to guess at their motivation and who
> knew what, and so on.
>
> And they are one of the easiest complaints to file because, as
> Professor Kolodny has noted, you know, there are a relatively small
> number of consultants. They work together. You know, your group
> lobbies on a lot of issues. There are other groups that do that. They
> talk to people all the time around Washington. So it\'s always very
> easy to find some point of contact that you can just file the
> complaint saying, well, we think this was coordinated because, look, I
> mean, gosh, it\'s the same theme as the candidate is using or
> something.
>
> So they are easy to file, hard to defend against, extremely intrusive.
> And I\'m just trying to get a grip on whether there is some way to
> narrow that intrusive aspect and just now far it reaches. And it
> sounds like we\'re putting people in a position where what we\'re
> telling you is if you want to be involved in politics, it\'s okay, but
> you have to be involved in it in the dark. You better not try to find
> out anything about the candidates you want to support because if you
> do, then we\'re going to call it coordination.
>
> I mean, you can read what\'s in the New York Times, I guess. We agree
> on that, but\--
>
> MR. HOLMAN: Could I respond to that?
>
> COMMISSIONER SMITH: Yes, yes, I would like you to.
>
> MR. HOLMAN: Okay, thanks.
>
> COMMISSIONER SMITH: In other words, that was kind of a question in a
> way.
>
> \[Laughter.\]
>
> MR. HOLMAN: I understand the difficulty of trying to come up with some
> coordination language that actually accurately captures activity that
> is truly coordinated and still does not stifle free speech. I
> understand that\'s a problem, especially when it comes to this
> activity, coordination, which I recognized it from the very beginning
> of trying to offer some advice on what I\'d like to see in terms of
> coordination.
>
> That is why, no matter what type of regulation you\'re going to come
> up with in terms of coordination, including the old standard or any
> new standard that you may come up with, this is a problem and it is
> abused in some cases, which is why I take the stand that the simpler
> and the more bright line test in terms of coordination that can be
> developed in terms of the regulation, the less of a problem this is
> going to be.
>
> If you go by a number of these other regulative proposals that
> introduce all kinds of subjectivity in terms of trying to critique
> whether or not coordination happened, you\'re going to have even more
> problems, I would suspect, than if you went with some more clear
> bright line standard like I would like to see happen.
>
> COMMISSIONER SMITH: Thank you.
>
> CHAIRMAN MASON: Larry Norton.
>
> MR. NORTON: Thank you, Mr. Chairman.
>
> I just wanted to follow up briefly, Mr. Holman, on a question that
> Commissioner Toner asked you. I think if I understood your testimony
> correctly, you testified that you would be supportive of a safe harbor
> for use of information that\'s in the public domain. Is that correct?
>
> MR. HOLMAN: Yes, I would. I hadn\'t thought about it in my submission,
> but since it was brought up here, it sounds very reasonable, of
> course.
>
> MR. NORTON: I wanted to ask you one question that is an effort to test
> the limits of that kind of a safe harbor. If a candidate filmed or
> arranged or financed the filming of a video commercial and placed it
> on the website of that candidate and a third party downloaded the
> video and made it part of a major media campaign, is that something
> you think ought to be part of a safe harbor for publicly-available
> information?
>
> MR. HOLMAN: If that sort of video were put on the Internet and
> distributed publicly?
>
> MR. NORTON: It\'s on the candidate\'s website. It\'s not distributed
> anywhere, but if I or you or any other person\--
>
> MR. HOLMAN: I would not classify that as coordination. I was just
> involved in a case in Montgomery County yesterday in which a group had
> downloaded pictures of candidates that they had posted on their
> website and put it on their own literature. Of course, it would stamp
> across the forehead \"wrong,\" you know, but I would not call that
> coordination.
>
> MR. NORTON: Okay, thank you.
>
> CHAIRMAN MASON: I had another question I wanted to ask Mr. Holman, and
> that is just a hypothetical to see how you would handle it. If a PAC
> comes into a race and calls a campaign and says, \"Hey, we\'re
> thinking about getting involved in the race here, doing some
> independent expenditures, and we want to know a little about what your
> intentions are and what you\'re doing,\" and the campaign gives them
> some general information back and then there are a couple of different
> conversations between the campaign and the PAC and then eventually the
> campaign sends a package of opposition research material and says
> \"somebody needs to get this out\" and then the PAC goes ahead and
> runs an ad, is that coordinated?
>
> MR. HOLMAN: That would sound like it crosses the line of coordination.
> When it comes to the other hypothetical example that I was asked about
> earlier in which a group merely interviews the various candidates to
> find out their stands on issues to decide who to endorse, you know,
> that I would not consider crossing the line of coordination. But when
> it comes to\--
>
> CHAIRMAN MASON: Let me urge you to go back to your organization and
> talk to your colleagues from the litigation group about a case called
> [FEC v. Public Citizen]{.underline} that had nearly exactly that set
> of facts, where your lawyers were contending that that didn\'t
> constitute coordination under our old regulations. And thankfully for
> your organization, they won the case and we lost.
>
> I assumed you didn\'t know about that and I apologize a little bit.
> And I just want to say I sort of knew it was a trick question, but I
> think it illustrates the fact that a lot of these hypotheticals we\'re
> asking occur in the real world and can have some difficult efforts at
> actual application.
>
> Other Commissioners?
>
> Commissioner McDonald.
>
> COMMISSIONER McDONALD: Mr. Chairman, thank you. I really wasn\'t going
> to, but Commissioner Smith actually triggered some history about our
> place and the Chairman pointed out yet another matter.
>
> On the question that Commissioner Smith asked, actually we did have
> that and it\'s a good case to go back and look at and see if you can
> figure it out. And if you do, well, please call me.
>
> Senator Santorum\--we had a case involving distribution of some
> materials and the committee did not care for it and asked them to be
> redone, which they were. I can\'t remember the number of the MER. I\'m
> sorry I wasn\'t prepared.
>
> Yes, it was with the Archdiocese, I think, of Philadelphia. Am I
> right? I think that\'s right. That\'s a pretty interesting case and I
> was glad Commissioner Smith brought that up. It\'s one that you might
> want to take a look at. It\'s an instructive case.
>
> CHAIRMAN MASON: We needed Commissioner Smith on the Commission.
>
> COMMISSIONER McDONALD: We needed Commissioner Smith on the Commission.
> If he would have joined us, we would have been golden.
>
> CHAIRMAN MASON: Other Commissioners?
>
> Vice Chairman Sandstrom?
>
> VICE CHAIRMAN SANDSTROM: I do have trouble with coordination after the
> fact, after an ad is placed. Even with your lobbyists, if somebody
> came in and said \"your ad is killing us\" as part of a legislative
> campaign and you pulled the ad, I would not hope that would be deemed
> to be coordination because you have chosen not to spend money.
>
> CHAIRMAN MASON: Commissioner Thomas.
>
> COMMISSIONER THOMAS: For what it\'s worth, ditto.
>
> \[Laughter.\]
>
> COMMISSIONER TONER: I hope the New York Times is here.
>
> CHAIRMAN MASON: I\'d like to thank our panelists for coming and thank
> my colleagues. We will reconvene tomorrow morning at 9:30.
>
> \[Whereupon, at 3:30 p.m., the Commission was adjourned, to reconvene
> at 9:30 a.m., Thursday, October 24, 2002.\]
>
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