Perkins Coie 

700 Thirteenth Street. N.W.. Suite 600 

Washington, D.C 2000S-3960 

Brian G. Svoboda 

PHONE; 202.654.6200 

raoNE; (202)434-1654 

• ,... But 202.654.6211 PAX: (202)654-9150. _ ,. www.perMnscoie.com EMAIL: BSvoboda@pcrisinsGoic.com 

October 4,2012 

BY HAND 

Ms. Shawn Woodhead Werth 

Secretary and Clerk 

Federal Election Commission 

999 E Street, N.W. 

Washington. DC 20463 

Re: Democratic Party of Illinois 

Request for Consideration of Legal Question 

Dear Ms. Werth: 

I write oil behalf of my client, the Democratic Party of Illinois ("the DPI"), pursuant to the Policy 

Statement Regarding a Program for Requesting Consideration of Legal Questions by the 

Commission, 76 Fed. Reg; 45,798.(2011). The Commission should reject the Audit Division's 

contention that, under the allocation rules^a state party, when paying employees entirely with 

federal funds, must still keep logs showing the percentege of time they spent in connection with 

a federal election. Neither the Act nor Commissioa rules support this position. 

The Commission selected the DPI for audit under 2 U.S.C. § 438(b) for its 2010 election cycle 

activities. The DPI cooperated with the auditors throughout, provicling the requested recoids.and 

responding to the auditors' inquiries. The auditors.began field work on April 30,2.012,.and held 

the exit conference on May 18,2012. On September 12,2012, the auditors formally informed 

the DPI of a finding that it failed to keep monthly logs for its employees in violation of 11 C.F.R. 

§ 106.7(d)(1), even though the DPI did not allocate the costs of these employees' salaries and 

benefits, but rather paid them entirely with federal funds. 

It is not the Commission's recordkeeping rules at part 104 that are at issue here, but rather its 

allocation rules at part 106. The particular rule involved, 11 C.F.R. § 106.7(d)(1), implements 

the restrictions on financing Federal election activity under the Bipartisan Campaign Reform Act 

of 2002, which generally prohibit state political parties from paying for FEA with nonfederal 

funds. The stated purpose .of section 106.7(d)(1) was to "provide dooxratamlon for attocatioh 

3m204)OOI/LBaA1.248l5631.l 

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PerMnsCoieup 
Ms. Shawn Woodhead Werth 

October 4.2012 

Page 2 

purposes." Prohibited and Excessive Contributions; Non-Federal Funds or Soft Money, 67 Fed. 

Reg. 49,064,49,078 (2002) (emphasis added). The reason was clear. If BCRA allows state 

parties to pay employees with nonfederal funds only when they devote no more than 2S percent 

of their time to federal elections, then there must be a way to determine how they spent their 

time. But when the state party pays its employees 100% federally, then there is no need to verify 

its decision not to allocate. In that case, there is no allocation, and the employees by definition 

have been properly paid. 

The Commission wrote, section 106.7(d)(1) with some sensitivity for the burdens that it would 

place on state parties. It rolled back an initial proposal to have the employees keep "time 

records," realizing after notice and comment that this proposal would be "burdensome" and 

"impractical." Id. The auditors' novel interpretation would have the Commission lurch in the 

opposite direction. It would create a whole new category of burden, while serving no evident or 

stated purpose. 

If adopted and enforced, the auditors' interpretation would violate the Administrative Procedure 

Act, which bars "agency actions, findings, and conclusions" that arc "arbitrary, capricious, an 

abuse of discretion, or otherwise not in accordance with the law." 5 U.S.C. § 706(2)(A). The 

agency must examine the relevant data and articulate a satisfactory explanation for its action, 

demonstrating a "rational connection between the facts found and the choice made." Burlington 

Truck Lines v. United Stales, 371 U.S. 156,168 (1962). Here, there is no such connection. 

There is no rational connection between 106.7(d)'s recordkeeping requirement, and the need to 

ensure compliance with the soft money spending limitations, when the employees are paid 100% 

federally in the first place. 

Courts have already corrected the Commission over its rules on paying state parly employees, 

and their logic is instructive here. In Shays v. FEC, 414 F.3d 76 (D.C. Cir. 2005) ("Shays 1"), the 

United States Court of Appeals for the District of Columbia Circuit held that the Commission 

acted arbitrarily and capriciously when it failed to explain the state party employee allocation 

rules. See id at 110-12. The court looked to the "statutory context" behind the rules, and asked 

how the FEC could justify allowing employees who spent up to 25 percent of their time on 

federal election activities to be paid entirely nonfederally. Id at III. The Commission replied 

that its policy was a necessary "implication" of the requirement that parties pay more federally 

active employees entirely with federal funds. Id. at 110. The court found that this implication 

"makes no sense," that "the Commission gave no other justification for" its rule, and that the rule 

was arbitrary and capricious as a result. Id at 112. 

By the court's logic, the auditors' position suffers from the same defect. Here, the "statutory 

context" is allocation. The law is intended to ensure that state parties do not impermissibly 

subsidize their Federal election activity with soft money. Id at III. Because section 

106.7(d)(1) says simply that state parties "must keep a monthly log of the percentage of time 

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Ms. Shawn Woodhead Werth 

October 4,2012 

Page 3 

each employee spends in connection with a Federal election", the auditors draw the "implication" 

that the recordkeeping requirement extends to federally paid employees, as well. 414 F.3d at 

110. Yet there is no logical Connection between the statutoiy objective of avoiding 

circumvention of the soft money restrictions, and the auditors' position. Requiring state parties 

to keep time logs to support paying their employees 100% federally "makes no sense." Id. at 

112. 

Finally, the auditors' position adds insult to injury. In a world where corporations and unions 

may make independent expenditures, see Citizens United v. FEC, 558 U.S. 310 (2010); where 

nonconnected PACs may raise unlimited, imrestricted contributions to make independent 

expenditures, see SpeechNow.org v. FEC, 599 F.3d 686 (D.C. Cir. 2010) (en banc); and where 

national parties may raise federal funds in larger, amounts indexed to inflation, see 2 U.S.C. § 

441a(a), state parties are arnong the most disfavored actors. The auditors' position would 

compound the heavy coriipiiance burdens that are already laid upon the state parties' shoulders, 

adding an arbitrary, unsupported recordkeeping requirement. The Corrunission .can fully enforce 

BCRA, and avoid worsening the gaping imbalance between state parties and other actorS, by 

rejecting the auditors' position. 

We appreciate the Commission's consideration of this matter. 

Very truly yours, 

Brian G. Svoboda 

Counsel to the Democratic Party of Illinois 

cc (by electronic mail); Chair Hunter 

Vice Chair Weintraub 

Commissioner Bauerly 

Commissioner McGahn 

Cotrunissioner Petersen 

Commissioner Walthcr 

Anthony Hermtm, General Counsel 

Thomas Hintermister, Assistant Staff Director, Audit Division 

Marty Favin, Audit Division 

Bill Antosz, Audit Division 

39920-0001/LEGAL2481S631.1