CLARK HILL 

Clark Hill PLC j 

1001 Pennsylvania Avenue NW ' 

Suite 1300 South j 

Washington, DC 20004 \ 

T 202.772.0909 i 

Charles R. Spies F 202.772.0919 i 

T 202.572.8663 I 

F 202.572.8683 clarkhlll.com 

Email: csples@clarkhlll.com , j 

September 12,2017 

Lisa J. Stevenson, Esq. 

Acting General Counsel 

Federal Election Commission 

999 E Street, NW 

f Washington, DC 20463 

1 VIA FAX: (202) 219-3923 

4 2 MUR 6920—^Response to General Counsel's Brief in Support of Finding 

7 Probable Cause 

Dear Ms. Stevenson: 

We are writing this letter on behalf of American Conservative Union ("ACU") in response to 

your letter dated August 29,2017, in which you inform ACU of the Office of General Counsel's 

("OGC") intention to recommend finding probable cause to believe ACU violated the Federal 

Election Campaign Act of 1971, as amended (the "Act"). Included in your letter is OGC's brief 

in support of its recommendation to find probable cause. 

I. ACU has made repeated attempt to engage in pre-probable cause conciliation with 

the Commission in an effort to quickly resolve this matter 

As you know, this matter involves activity that occurred five years ago. The Complaint and 

Responses were filed over two years ago, and the Commission found reason to believe on 

January 24,2017—almost two years later. The Coromission and the Office of General Counsel 

("OGC") have had ample time to consider this matter and engage in pre-probable cause 

conciliation; yet, here we are, within weeks of the statute of limitations expiring in this matter, 

proceeding to probable cause briefing. 

Our client is keenly aware that the ability of the Commission to take any further action in this 

matter will soon be time barred. Nevertheless, our client, ACU, actively pursued engaging in 

pre-probable cause conciliation with OGC. Several months ago we expressed ACU's desire to 

attempt to resolve the matter through conciliation. 

On August 2,2017, OGC sent a revised tolling agreement that, according to 
September 12, 2017 

Page 2 

with discovery. On August 2, 2017, OGC sent a revised tolling agreement that, according to 

OGC, was "in consideration for the Commission's agreement to consider Respondent's request 

that the Commission authorize pre-probabie cause conciliation." On August 9, we signed that 

tolling agreement on behalf of ACU, agreeing to toll for 15 days beginning on August 9,2017 

through August 24, 2017, wliich has had the effect of ACU providing 29 days (July 26 - August 

24) for the Commission to authorize and/or OGC to engage in pre-probable cause conciliation. 

To our- knowledge, OGC did not make this request. Instead, several weeks later, OGC came 

back and requested that our client toll for an additional 60 days in order to "consider [our] 

request that the Commission authorize pre-probable cause to believe conciliation," resulting in a 

total of 75 days of tolling by our client without an assurance that the Commission would even in 

engage in such pre-probable cause conciliation. This request was simply unrealistic and would 

clearly require our client to act against its interests. 

ACU has in good faith attempted to resolve this matter and even agreed to toll the statute for a 

limited period. This, ironically, may have the effect of the statute running prior to any action 

being taken, against other respondents, and ACU receiving disparately negative treatment as a 

result of trying to work with the Commission to resolve this issue. 

n. This is a matter of first impression and the Commission has not issued binding 

precedent that Section 30122 applies in the context of Independent ExpenditureOnly Committees 

As we stated in our letter dated March 15,2017, the Commission has not issued binding 

precedent that Section 30122 applies in this context. Indeed, OGC was insistent that any 

conciliation agreement state, without qualification, that Section 30122 applies to Independent 

Expenditure-Only Committees. If that were truly the case, then presumably this would not have 

been a concern for OGC. Moreover, when discussing potential penalties, OGC acknowledged on 

several occasions that there is no Commission precedent for setting a penalty in a matter 

involving Section 30122 and an Independent Expenditure-Only Committee.' The activity at 

issue in this matter occurred in 2012, the first full election cycle after the U.S. Supreme Court's 

decision in Citizens United. At the time, there was significant discussion and debate on the 

applicability of portions of the Act to the activities of Independent Expenditure-Only 

Committees. The Statement of Reasons in MURs 6485 (W Spaim LLC, et al.), 6487 &. 6488 

(F8, LLC, et al.), 6711 (Specialty Investments, Inc., et al.), and 6930 (SPM Holdings LLC, et al.) 

where the Commission, for the first time, stated (albeit separately) that they would apply Section 

30122 in this context was not issued until April of 2016—while this matter was pending. 

' We are aware of the Statements of Reasons issued in MURs 6485 (W Spann LLC, et a!.), 6487 & 6488 (F8, LLC, 

et al.), 6711 (Specialty Investments, Inc., et al.), and 6930 (SPM Holdings LLC, ct al.). The Statement of Reasons 

issued by then Vice Chairman Steven T. Walther and Commissioners Ann M. Ravel and Ellen L. Weintraub, states 

that Section 30122 "squarely applies in this case" citing to the decisions that were cited, in the F&LA in this matter 

and in the General Counsel's Brfef. These decisions are not on point. The Statement of Reasons of then Chairman 

Matthew S. Petersen and Commissioners Caroline C. Hunter and Lee E. Goodman provides an analysis in the 

context of contributions made via a closely held corporation or corporate LLC. 

CLARK HILL 
September 12,2017 

Page 3 

Moreover, the anti-circumvention interest that Section 30122 is designed to prevent is not at 

issue here. The Supreme Court has clearly stated that "independent expenditures.. .do not give 

rise to corruption or the appeai-ance of corruption," whereas contributions can be restricted to a 

candidate because of the risk that they will lead to quid pro quo cotruption.^ OGC again cites to 

the O'Donnell^ and Boende/ cases (Ninth Circuit and Seventh Circuit, respectively) as the legal 

basis for applying Section 30122 in this context; however, those eases involved contributions 

made to a Federal candidate's campaign committee through straw donors. In both cases, the 

contributors were subject to the Act's "hard money" contribution limits and prohibitions, which 

is not the case here. 

As we stated previously, prior to the enactment of the Biparlisan Campaign Reform Act of 2002 

("BCRA"), Courts concluded that Section 30122 (then 2 U.S.C. § 44lf) does not apply in the 

soft money context.^ For example, the U.S. Court of Appeals for the District of Columbia 

Circuit concluded that "there is no soft money counterpart to § 441fin FECA itself, which 

prohibits conduit transfers of 'contributions,' i.e., hard money." ^ Likewise, the U.S. Court of 

Appeals for the Third Circuit stated that the disclosure requirement of § 44 if was limited to 

"contributions of hard money."' Although tlie Supreme Court's decision in Citizens United v. 

FEC was not about national party soft money," the Supreme Court struck the "hard money" 

prohibition that applied to independent expenditures. Furthermore, the U.S. Court of Appeals for 

the D.C. Circuit's decision in SpeechNow v. FEC resulted in the elimination of "hard money" 

limits to entities that make independent expenditures.' Thus, Super PACs arc not subject to 

"hard money" contribution limits and prohibitions, which raises legitimate questions as to the 

applicability of Section 30122 to Super PACs and their contributors.'® 

' Citizens United v. FEC. 558 U.S. 310, 357 (2010). 

' United States v. 0-Donnell, 608 K.3d 546 (9th Cir. 2010) 

^ United States v. Boender, 649 F.3d 650 (7th Cir. 2011). 

' See United States v. Trie, 23 F. Supp.2d 55 (D.D.C. 1998); United States v. Kanchanalak, 192 F.3d 1037,1042 

(D.C. Cir. 1999); Mariani v. United States, 212 F.3d 761, 775 (3rd Cir. 2000). 

' United States v. Kanchanalak, 192 F.3d 1037, 1042 (D.C. Cir. 1999). 

' Mariani v. United States, 212 F.3d 761, 775 (3rd Cir. 2000) (concluding "that Congress was free to determine that 

disclosure of hard money donations was the most important form of disclosure, and to limit the regulation to that 

area."). 

' See Citizens United v. FEC, 558 U.S. 310,360 (2010). 

' See SpeechNow v. FEC, 599 F.3d 686 (D.C. Cir. 2010) (en banc). 

We note that the Courts in tlie Trie and Kanchanalak cases held that the Commission's regulation at 11 C.F.R. 

§104.8(a),(e) required political committees to report soh money; however, this created the bizarre situation where an 

individual or political committee could violate a regulation but not the statute the regulation was purportedly rooted 

in, as well as potentially subject an individual to felony prosecution for false statements or conspiracy but not be 

able to prosecute that individual under FECA's misdemeanor provisions. See Robert D. Probasco, Prosecuting 

Conduit Campaign Contributions - Hard Time for Soft Money, 42 S. Tex. L. Rev. 841 (2001). 

CLARK. H)L(, 
September 12,2017 

Page 4 

This matter is more akin to the cases addressing soft money prior to tire enactment of BCRA. 

The O 'Donnell and Boender cases cited in the F&LA deal with candidate committees where 

there are strict contribution limits and source prohibtions that do not exist in the Super PAC 

context. Moreover, the rationale in those cases was not just the disclosure interest, which is what 

OGC suggests, but more so an anti-circumvention interest, which is inherent in any contributions 

made to candidates. The anti-circumvention interest is not at issue here. 

Even if the Commission suggests that 0'Donnell and Boender are applicable here, this area of 

law is gray with respect to committees that can accept unlimited contributions. The Commission 

has not produced any binding precedent that indicates Section 30122 applies in this context, and 

doing so via an enforcement matter is nothing more than engaging in regulation via MUR. " 

III. ACU did not knowingly enter into an agreement to allow its name to be used to 

effect a contribution in the name of another 

Section 30122 of the Act states "No person shall make a condibution in the name of another 

person or knowingly permit his name to be used to effect such a contribution, and no person shall 

knowingly accept a contribution made by one person in the name of another person." The 

inclusion of the word "knowingly" adds an element of intent to the violation.'^ As stated in the 

Stipulation of Facts provided to OGC, on October 31, 2012, Government Integrity transferred 

$ 1,800,000 to ACU, and on the same day, ACU transferred $1,710,000 to Now or Never PAC. 

The communications ACU provided to OGC confiim that this is what occuired. The 

communications, however, do not include any discussions by any of the individuals regarding 

how the contribution to Now or Never PAC would be reported. OGC, of course, turns this lack 

of discussion into an inference that "ACU agreed to allow the parties to use its name to make the 

contribution in the name of another."''' OGC's support for this inference is an email where an 

ACU employee states he will "take action immediately upon receipt" of the wire, which OGC 

believes "provides a stiong interference that the pai'ties entered into an agreement by which ACU 

permitted its name to be used to effect a contribution to Now or Never PAC in the name of 

another."'^ Actually, one could also infer that the ACU employee simply meant what he said -

" See Republican Nat'I Committee v. FEC, 76 F.3d 400,407-08 (D.C. Cir. 1996) (courts will look to whether an 

agency's interpretation of a statute is the product of sound rulemaking procedures where there is ample opportunity 

for notice and comment); Shays v. FEC, 424 F. Supp. 2d 100,114 (D.D.C. 2006) (an agency's adoption of a standard 

rulemaking procedure is crucial in that it gives those parties affected by the rules "advance notice of the standards to 

which they will be expected to conform in the future, and uniformity of result is achieved"); See also MUR 5835 

(Democratic Congressional Campaign Committee), Statement of Reasons of Vice Chairman Mattliew S. Petersen 

and Commissioners Caroline C. Hunter and Donald F. McGahn II, at 9. 

52 U.S.C. § 30122 (emphasis added). 

" We recognize that OGC is not recommending that any violation was "knowing and willful," which, the 

Commission may find under its statutory enforcement authority at 52 U.S.C. § 301.09. 

5ee General Counsel's Brief at 8. 

CLA,F<K HILL 
September 12, 2017 

Page 5 

that he would immediately wire the funds. This one email does not support an inference that the 

parties had an agreement regarding how this contribution would ultimately be reported. 

Moreover, the second email OGC cites as support for its inference was an email from an ACU 

employee that was forwarded to ACU's legal counsel—experienced election law counsel— 

characterizing the contribution as a "pass tlrrough" and asldng whether ACU had an obligation to 

file a report with the Commission. Rather than supporting an inference of an "agreement" with 

respect to the reporting of the contribution, this email ai'guably supports the opposite—^that ACU 

was not at all clear on how or when the contiibution would be reported. More importantly, legal 

counsel advised ACU that there was no FEC reporting obligation. This consultation with 

prominent counsel and subsequent public reporting of the money flow indicates a good faith 

effort by ACU to comply with what may be changing interpretations of technical reporting 

requirements. 

Finally, in response to the investigative subpoena, Mr. Thomas confirmed that he did not discuss 

"how the transaction would be reported" and that he had no knowledge of "any agreement, plan 

or arrangement between or among GI LLC, ACU, Now or Never PAC, or any third party 

concerning how ACU would use the funds provided by GI LLC or how the tiansaction should be 

reported to the Commission."'® Thus, it is far from clear that ACU knowingly entered into any 

agreement to allow its name to be used to effect a contribution in the name of another, which is 

the standard necessary to find a violation of the Act by ACU. 

Finally, OGC's characterization of the $90,000 that ACU received from GI LLC as a "fee for 

allowing its name to be used" is false. There is nothing in tlie record that supports OGC's theory 

that this was a fee for the use of ACU's name. This was a contribution from GI LLC and was 

reported as such on ACU's original and amended 2012 990 reports. 

OGC's inferences are nothing more than speculation and coiijectuie designed to lead to the 

desired conclusion that there was "an agreement among the parties" that ACU would allow its 

name to be used to effect the contribution. Such speculation and conjecture should not form the 

basis of a fmding of probable cause to believe ACU knowingly permitted its name to be used to 

effect a contribution in the name of another. 

IV. Conclusion 

In liglit of the evolving interpretations in this area of reporting, ACU has been willing to work 

with OGC to resolve this matter through conciliation. Instead, almost five years after the alleged 

violation, OGC has been intransigent in its insistence and extreme interpretation of the facts of 

tliis matter. Consequently, we respectfully request that the Commission reject OGC's 

recommendation to find probable cause to believe Respondent violated the Act and dismiss the 

matter with regards to Respondent ACU. 

See Response of James Thomas to Investigative Subpoenas at 6. 8-9. 
September 12,2017 

Page 6 

ibmitted, 

rles R. Spies. 

Elizabeth B. White 

Counsel to American Conservative Union 

4 

CLA.RI<: HfLL