er

)('(5$/(/(&7,21&200,66,21

:$6+,1*721 '& 

February 10, 2022 

MEMORANDUM 

To: The Commission 

Through: Alec Palmer 

Staff Director 

Dayna C. Brown 

Assistant Staff Director 

Audit Division 

From: Patricia C. Orrock 

Chief Compliance Offic ce 

n

Directo

Officer Off 

Rickida Morcomb 

Audit Manager 

By: Ryan Krogen 

Lead Auditor 

Subject: Resubmission: Audit Division Recommendation Memorandum on Mike 

Braun for Indiana (A19-02) 

This office is resubmitting the subject Audit Division Recommendation Memorandum 

(ADRM). The original ADRM circulated to the Commission on January 10, 2022 and was 

withdrawn on January 19, 2022. The resubmitted ADRM recommends that in light of the 

potential impact that a decision by the U.S. Supreme Court in Ted Cruz for Senate v. Federal 

Election Commission, Civil No. 19-cv-908 (D.C. Dist. Ct., June 3, 2021) may have on 

certain proposed findings in this audit, the Commission refrain from acting on those 

proposed findings until the Court issues its decision. 

Pursuant to Commission Directive No. 70 (FEC Directive on Processing Audit Reports), 

the Audit staff presented the Draft Final Audit Report (DFAR) to Mike Braun for Indiana 

(MBFI) on September 16, 2021 (see attachment). In response to the DFAR, MBFI 

requested an audit hearing on October 4, 2021. The Commission granted the audit hearing 

on October 12, 2021. The audit hearing was held on November 10, 2021. 
 

 

2 

This memorandum provides the Audit staff’s recommendation for each finding outlined in 

the DFAR. 

In response to the DFAR, MBFI provided additional information, as noted below. 

Finding 1. Misstatement of Financial Activity 

In response to the DFAR, MBFI filed amended disclosure reports that corrected the 

public record. This matter was not discussed at the audit hearing. 

The Audit staff recommends that the Commission find that MBFI overstated its 

reported receipts and disbursements by $6,293,350 and $6,294,482, respectively, in 

calendar year 2018. 

Finding 2. Failure to File 48-Hour Notices 

In June 2021, MBFI filed, albeit late, three 48-Hour Notices totaling $3,400, and in 

response to the DFAR, amended its disclosure reports to correct the receipt date for 

these contributions. Also, in response to the DFAR, MBFI amended its disclosure 

reports to correct the receipt date for four additional contributions totaling $5,700. 

Additionally, MBFI provided a time-stamped FEC Form 6 (48-Hour Notice) to 

demonstrate that contributions totaling $253,500 were previously disclosed; 

however, the original Form 6, timely filed in April 2018 was illegible due to a fax 

transmission issue.1

 The Audit staff notes the illegible fax transmission resulted in 

MUR 7490.2 On April 7, 2019, the Commission used its prosecutorial discretion 

to dismiss MUR 7490. Given the Commission’s dismissal of the MUR, the fact that 

MBFI provided a legible copy of the FEC Form 6 in August 2018, and after 

consultation with the Office of General Counsel and the Reports Analysis Division, 

the Audit staff accepts the explanation and documentation provided by MBFI. 

Given the resolution of the 48-Hour Notices totaling $253,500 related to the fax 

transmission issue, the remaining errors for seven untimely filed 48-Hour Notices 

totaling $9,100 ($3,400 + $5,700 noted above) are no longer material. This matter 

was not discussed at the audit hearing. 

The Audit staff recommends that the Commission find that MBFI materially 

complied with the requirement to timely file 48-Hour Notices. 

Finding 3. Disclosure of Occupation and/or Name of Employer 

In response to the DFAR, MBFI filed amended disclosure reports that materially 

corrected the public record. This matter was not discussed at the audit hearing. 

1

 On April 25, 2018, MBFI filed a 48-Hour Notice (FEC Form 6) via fax with the Secretary of the Senate for 

contributions received on April 23, 2018. On April 26, 2018, the Reports Processing Branch of the 

Commission’s Reports Analysis Division contacted the Secretary of the Senate’s office concerning the 

illegible FEC Form 6. The Secretary of the Senate’s office confirmed the FEC Form 6 provided to the 

Commission was exactly what it received, and that it was unable to reach MBFI when it attempted to 

contact the Committee regarding the illegible FEC Form 6. On August 22, 2018, MBFI re-transmitted a 

fully legible FEC Form 6 for the contributions received on April 23, 2018. 2

 MUR 7490 was based on an external complaint related to MBFI appearing to have failed to file a 48-Hour 

Notice. 
 

 

 

3 

The Audit staff recommends that the Commission find that MBFI failed to disclose 

or inadequately disclosed occupation and name of employer information for 

contributions from 1,363 individuals, totaling $1,464,449. 

Finding 4. Receipt of Apparent Prohibited Contributions – Loans 

A. Assurance of Repayment – Bank Loans 

In response to the DFAR, MBFI objected to the DFAR’s assertion that MBFI 

received apparent prohibited loans and lines of credit totaling $7,049,405 

because they were not made on a basis that assured repayment and restated the 

response it provided to the Interim Audit Report. 

During the audit hearing,3

 MBFI stated that it wanted to request the hearing on 

the finding because the “Audit Division’s two conclusions in this finding are 

clearly erroneous and unsupported by the facts and the law.” 

MBFI stated that the commercial bank loans and lines of credit, totaling 

$7,049,405, were expressly permitted under regulations and precedents, and 

were not prohibited contributions as the Audit staff contends. 

MBFI also stated that its previous treasurer left and, as a result of his departure, 

it was unable to obtain all the documents needed to address the findings. MBFI 

included a similar statement in its written DFAR response. The Audit staff notes 

that it did correspond with the former treasurer during the audit process, with 

the written permission of MBFI. The former treasurer stated all records, paper 

and electronic, were provided to the current treasurer upon his departure. 

Additional documentation provided by MBFI after the DFAR response and 

hearing request, but prior to the audit hearing being held, included letters from 

bank vice presidents and previous years loan documentation addressing the 

following issues: (1) the length of the Candidate’s relationship with the bank; 

(2) the Candidate’s creditworthiness, net worth, assets and repayment history; 

(3) the bank’s underwriting criteria for unsecured loans of the type made to the 

Candidate; and (4) information demonstrating that the loan terms were not 

unduly favorable to the Candidate. Based on the documents provided, the Audit 

staff concludes that the bank loans and lines of credit were made on a basis that 

assured repayment and were not unduly favorable to the Candidate. 

The Audit staff recommends that the Commission find that MBFI received loans 

and lines of credit totaling $7,049,405 that were made in the ordinary course of 

business. 

B. Corporate Contributions Reported as Candidate Loans 

In response to the DFAR, MBFI objected to the DFAR’s assertion that MBFI 

received $1,500,000 in corporate checks from an impermissible source. MBFI 

provided a letter from the Candidate's CPA confirming that the funds were the 

Candidate's personal funds obtained from proceeds from selling his shares of 

3 https://www.fec.gov/resources/cms-content/documents/AH20211110.txt 
 

 

4 

stock and not from a corporate impermissible source. The same letter was also 

provided in response to the Interim Audit Report. 

During the audit hearing, MBFI stated that the Candidate personally contributed 

$1,500,000 in stock proceeds to the campaign and acknowledged that it would 

have been advisable to have first deposited these funds into his personal account 

prior to the campaign account. MBFI also stated that these were not prohibited 

corporate contributions as the Audit Division contends. 

Additional documents provided after the DFAR response and hearing request, 

but prior to the audit hearing being held, included the stock valuation and stock 

redemption agreement demonstrating the stock sale supported by the CPA’s 

letter. The Audit staff notes that income from the Candidate's stocks or other 

investments including interest, dividends or proceeds from the sale or liquidation 

of such stocks or investments fall under income per 11 CFR§100.33(b)(2) and 

therefore, would not be corporate checks from an impermissible source. 

The Audit staff recommends that the Commission find that the $1,500,000 was 

received from a permissible source. 

Finding 5. Receipt of Contributions in Excess of the Limit 

A. Contributions from Individuals 

In response to the DFAR, MBFI provided copies of reattribution and 

redesignation letters which did not materially resolve excessive contributions 

from individuals. However, some of the reattribution and redesignation letters 

were timely, which reduced the finding total from $985,345 to $898,166.4 MBFI 

stated the current treasurer found some refund checks that had been prepared by 

the former treasurer but not sent to the contributors, and further stated that it is 

unknown the extent to which “normal and customary procedures” of preparing 

reattribution and redesignation tasks were completed by the former treasurer. 

Additionally, MBFI stated the Audit Division should amend this finding since 

the district court decision in Ted Cruz for Senate v. Federal Election 

Commission, Civil No. 19-cv-908 (D.C. Dist. Ct., June 3, 2021) held 

unconstitutional the candidate loan repayment provision at 52 U.S.C. § 30116(j). 

The district court decision is on appeal before the Supreme Court, which recently 

heard oral argument in the case. Considering the potential impact the Court’s 

decision may have on this finding, MBFI believes “it is imperative for the 

Commission’s Audit staff to either postpone or reconsider its audit findings, 

reissue a revised Draft Final Audit Report, and give the Committee the 

opportunity to respond to the revised Draft Final Audit Report.” This issue was 

not discussed at the audit hearing. 

The Audit staff acknowledges the potential impact that the Supreme Court’s 

decision this term in Cruz may have on this portion of the proposed finding. The 

4

 This amount is based on sample testing and high dollar contributions not included in the sample 

population. The $898,166 consists of contributions not resolved via presumptive letter or refund totaling 

$271,010; contributions not resolved via signed reattribution letter or refund totaling $566,556; and 

untimely resolved or refunded contributions totaling $60,600. 
 

 

 

5 

Audit staff therefore recommends the Commission refrain from making a 

finding on whether MBFI received excessive contributions from individuals 

totaling $898,166 until the Court issues its decision. Thereafter, the Audit staff 

will recommend disposition of this finding in a Final Addendum Audit Report 

for the Commission’s consideration. 

B. Contributions from Political Committees 

In response to the DFAR, MBFI did not provide documentation demonstrating 

the political committees’ contributions were not excessive. MBFI stated the 

current treasurer found some refund checks that had been prepared by the former 

treasurer but not sent to the contributors, and further stated that it is unknown 

the extent to which “normal and customary procedures” of preparing 

reattribution and redesignation tasks were completed by the former treasurer. 

Additionally, MBFI stated the Audit Division should amend this finding since 

the district court decision in Ted Cruz for Senate v. Federal Election 

Commission, Civil No. 19-cv-908 (D.C. Dist. Ct., June 3, 2021) held 

unconstitutional the candidate loan repayment provision at 52 U.S.C. § 30116(j). 

The district court decision is on appeal before the Supreme Court, which recently 

heard oral argument in the case. Considering the potential impact the Court’s 

decision may have on this finding, MBFI believes “it is imperative for the 

Commission’s Audit staff to either postpone or reconsider its audit findings, 

reissue a revised Draft Final Audit Report, and give the Committee the 

opportunity to respond to the revised Draft Final Audit Report.” This issue was 

not discussed at the audit hearing. 

The Audit staff acknowledges the potential impact that the Supreme Court’s 

decision this term in Cruz may have on this portion of the proposed finding. The 

Audit staff therefore recommends the Commission refrain from making a 

finding on whether MBFI received excessive contributions from political 

committees totaling $188,212 until the Court issues its decision. Thereafter, the 

Audit staff will recommend disposition of this finding in a Final Addendum 

Audit Report for the Commission’s consideration. 

Finding 6. Disclosure of Memo Entries and Candidate Loans 

A. Transfers from Joint Fundraising Committees 

In response to the DFAR, MBFI filed amended disclosure reports that materially 

corrected disclosure of the joint fundraising memo entries. This matter was not 

discussed at the audit hearing. 

The Audit staff recommends that the Commission find that MBFI failed to 

correctly disclose joint fundraising memo entries totaling $933,814. 

B. Disclosure of Loans 

In response to the DFAR, MBFI did not correct the disclosure of loan terms and 

dates, repayment amounts, loan forgiveness, and outstanding balances on 

Schedule C (Loans) and Schedule C-1 (Loans and Lines of Credit from Lending 

Institutions). MBFI reiterated the statement it provided in response to the 

Interim Audit Report, “...it is still unclear to the Committee how the Audit 
 

6 

Division concluded that the Committee accepted two unreported candidate loans 

totaling $96,520 since this finding does not correspond to any of the 

Committee’s records.” Furthermore, MBFI believes the Supreme Court’s 

pending ruling in Ted Cruz for Senate v. Federal Election Commission will 

impact the facts and conclusions of this finding. MBFI believes “it is imperative 

for the Commission’s Audit staff to either postpone or reconsider its audit 

findings, reissue a revised Draft Final Audit Report, and give the Committee the 

opportunity to respond to the revised Draft Final Audit Report.” This matter 

was not discussed at the audit hearing. 

The Audit staff notes that this finding is not related to MBFI making Candidate 

loan and interest repayments in excess of the $250,000 limit permitted for 

repayment to the Candidate, as discussed in Finding 7. The Disclosure of Loans 

finding is based on whether or not the reporting of the loan terms is supported 

by the loan documentation provided by MBFI, and not based on the Candidate 

loan repayment limitation amount. Pursuant to 11 C.F.R. §§ 104.3(d) and 

104.11, the Schedule C must disclose the date of the loan, original loan amount 

and payments to reduce the principal on each report until the loan is repaid. The 

Schedule C-1 must disclose the date, amount and interest rate of the loan, as well 

as the name and address of the lending institution. MBFI incorrectly disclosed 

loan terms and dates, repayment amounts, loan forgiveness, and outstanding 

balances on Schedules C and C-1, disclosure requirements which exists 

irrespective of the Cruz litigation cited by MBFI. 

The Audit staff further notes that MBFI was provided the schedule of the 

unreported loans and lines of credit totaling $96,520 at the exit conference and 

again upon receipt of MBFI’s response to the Interim Audit Report. The 

converted candidate loans should have been disclosed as memo entries on 

Schedule A (Itemized Receipts) and Schedule B (Itemized Disbursements) or 

MBFI could have filed a Form 99 (Miscellaneous Electronic Submission) in lieu 

of filing amendments with memo entries for Schedules A and B. 

The Audit staff recommends that the Commission find that MBFI failed to 

correctly disclose loan balances and loan terms for transactions totaling 

$11,569,963. 

Finding 7. Prohibited Candidate Personal Loan Repayments 

In response to the DFAR, MBFI stated “To the extent that the facts and conclusions 

in Finding 7 relate to the $250,000 loan repayment limit found in Section 403 of 

BCRA or the Committee’s acceptance of debt retirement contributions, the Audit 

Division should amend this finding because of the recent federal court decision in 

Ted Cruz for Senate v. Federal Election Commission, Civil No. 19-cv-908 (D.C. 

Dist. Ct., June 3, 2021). Since many of the facts and conclusions of Finding 7 

involve and are impacted by the loan repayment limit, the Commission’s 

conclusions rely on an unconstitutional provision that renders Finding 7 invalid, or 

at least a portion of it.” This matter was not discussed at the audit hearing. 

The district court found the loan repayment provision at 52 U.S.C. § 30116(j) 

unconstitutional. Ted Cruz for Senate v. Federal Election Commission, Civil No. 
7 

19-cv-908 (D.C. Dist. Ct., June 3, 2021). The decision is now on appeal before the 

Supreme Court, which recently heard oral argument in the case. Considering the 

potential impact that the Supreme Court’s decision this term in Cruz may have on 

this proposed finding, the Audit staff recommends the Commission refrain from 

making a finding on whether MBFI made excessive Primary candidate loan and 

interest repayments totaling $750,669 until the Court issues its decision. Thereafter, 

the Audit staff will recommend disposition of this finding in a Final Addendum 

Audit Report for the Commission’s consideration. 

The Office of General Counsel has reviewed this memorandum and concurs with the 

recommendations. 

If this memorandum is approved, the Proposed Final Audit Report will be prepared and 

circulated within 30 days of the Commission’s approval. 

If this Audit Division Recommendation Memorandum is not approved on a tally vote, 

Directive No. 70 states that the matter will be placed on the next regularly scheduled 

open session agenda. 

Documents related to this audit report can be viewed in the Voting Ballot Matters folder. 

Should you have any questions, please contact Ryan Krogen or Rickida Morcomb at 694-

1200. 

Attachment: 

- Draft Final Audit Report of the Audit Division on Mike Braun for Indiana 

cc: Office of General Counsel 
 

Why the Audit 

Was Done 

Federal law permits the 

Commission to conduct 

audits and field 

investigations of any 

political committee that is 

required to file reports 

under the Federal 

Election Campaign Act 

(the Act). The 

Commission generally 

conducts such audits 

when a committee 

appears not to have met 

the threshold 

requirements for 

substantial compliance 

with the Act.1 The audit 

determines whether the 

committee complied with 

the limitations, 

prohibitions and 

disclosure requirements 

of the Act. 

Future Action 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to any of the 

matters discussed in this 

report. 

Draft Final Audit Report of the

Audit Division on 

Mike Braun for Indiana 

(August 7, 2017 - December 31, 2018) 

About the Campaign (p. 2) 

Mike Braun for Indiana is the principal campaign committee for 

Michael K. Braun, Republican candidate for the United States 

Senate from the state of Indiana, and is headquartered in 

Zionsville, Indiana. For more information, see the Campaign 

Organization Chart, p. 2. 

Financial Activity (p. 2) 

x Receipts 

o Contributions from Individuals $ 6,336,454 

o Contributions from the Candidate 13,938 

o Contributions from Other Political 

Committees 833,940 

o Transfers from Other Authorized 

Committees 802,946 

o Candidate Loans 11,666,483 

o Offsets to Operating Expenditures 3,097 

Total Receipts $ 19,656,858 

x Disbursements 

o Operating Expenditures $ 18,016,343 

o Candidate Loan Repayments 1,148,925 

o Contribution Refunds 76,875 

o Other Disbursements 342,000 

Total Disbursements $ 19,584,143 

Findings and Recommendations (p. 3) 

x Misstatement of Financial Activity (Finding 1) 

x Failure to File 48-Hour Notices (Finding 2) 

x Disclosure of Occupation and/or Name of Employer 

(Finding 3) 

x Receipt of Apparent Prohibited Contributions – Loans 

(Finding 4) 

x Receipt of Contributions in Excess of the Limit (Finding 5) 

x Disclosure of Memo Entries and Candidate Loans (Finding 6) 

x Prohibited Candidate Personal Loan Repayments (Finding 7) 

1

 52 U.S.C. §30111(b). 
Draft Final Audit Report of the 

Audit Division on 

Mike Braun for Indiana 

(August 7, 2017 - December 31, 2018) 
Table of Contents 

Page 

Part I. Background

Authority for Audit 1 

Scope of Audit 1 

Part II. Overview of Campaign

Finding 7. Prohibited Candidate Personal Loan Repayments

Campaign Organization 2 

Overview of Financial Activity 2 

Part III. Summaries 

Findings and Recommendations 3 

Part IV. Findings and Recommendations

Finding 1. Misstatement of Financial Activity 6 

Finding 2. Failure to File 48-Hour Notices 8 

Finding 3. Disclosure of Occupation and/or Name of Employer 10 

Finding 4. Receipt of Apparent Prohibited Contributions – Loans 13 

Finding 5. Receipt of Contributions in Excess of the Limit 22 

Finding 6. Disclosure of Memo Entries and Candidate Loans 28 

33 
1 

Part I 

Background 

Authority for Audit 

This report is based on an audit of Mike Braun for Indiana (MBFI), undertaken by the 

Audit Division of the Federal Election Commission (the Commission) in accordance with 

the Federal Election Campaign Act of 1971, as amended (the Act). The Audit Division 

conducted the audit pursuant to 52 U.S.C. §30111(b), which permits the Commission to 

conduct audits and field investigations of any political committee that is required to file a 

report under 52 U.S.C. §30104. Prior to conducting any audit under this subsection, the 

Commission must perform an internal review of reports filed by selected committees to 

determine if the reports filed by a particular committee meet the threshold requirements 

for substantial compliance with the Act. 52 U.S.C. §30111(b). 

Scope of Audit 

Following Commission-approved procedures, the Audit staff evaluated various risk 

factors and as a result, this audit examined: 

1. the receipt of excessive contributions and loans; 

2. the receipt of contributions from prohibited sources; 

3. the disclosure of contributions received; 

4. the disclosure of individual contributors’ occupation and name of employer; 

5. the consistency between reported figures and bank records; 

6. the completeness of records; and 

7. other committee operations necessary to the review. 
Cash on hand @ August 7, 2017 $ 0 

Receipts 

o Contributions from Individuals 6,336,454 

o Contributions from the Candidate 13,938 

o Contributions from Other Political 

Committees 

833,940 

o Transfers from Other Authorized 

Committees 

802,946 

o Candidate Loans 11,666,483 

o Offsets to Operating Expenditures 3,097 

Total Receipts $ 19,656,858 

Disbursements 

o Operating Expenditures 18,016,343 

o Candidate Loan Repayments 1,148,925 

o Contribution Refunds 76,875 

o Other Disbursements 342,000 

Total Disbursements $ 19,584,143 

Cash on hand @ December 31, 2018 $ 72,715 

2 

Part II 

Overview of Campaign 

Campaign Organization 

Important Dates 

x Date of Registration August 10, 20172 

x Audit Coverage August 7, 2017 3 - December 31, 2018 

Headquarters Zionsville, Indiana 

Bank Information 

x Bank Depositories One 

x Bank Accounts One checking account 

Treasurer 

x Treasurer When Audit Was Conducted Thomas Datwyler (1/1/2019 – Present) 

x Treasurer During Period Covered by Audit Travis Kabrick (8/7/2017 – 12/31/2018) 

Management Information 

x Attended FEC Campaign Finance Seminar Yes 

x Who Handled Accounting and 

Recordkeeping Tasks 

Paid Staff 

Overview of Financial Activity

(Audited Amounts) 

2 MBFI filed a Statement of Organization on August 10, 2017. Mike Braun filed a Statement of Candidacy on 

August 9, 2017. 3 MBFI opened its bank account on August 7, 2017. 
3 

Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity

During audit fieldwork, a comparison of MBFI’s reported financial activity with its bank 

records revealed a misstatement of receipts and disbursements in calendar year 2018. 

MBFI overstated receipts by $6,293,350 and disbursements by $6,294,482. In response 

to the Interim Audit Report recommendation, MBFI did not file amendments or a Form 

99 (Miscellaneous Electronic Submission). MBFI stated, “...the former treasurer did not 

ultimately report the repayments from the Candidate’s personal funds correctly” and that 

loan repayments should have been reported as in-kind contributions instead of as memo 

entries as recommended by the Audit staff. Absent the filing of amended reports or a 

Form 99, MBFI’s receipts and disbursements remain misstated. 

(For more detail, see p. 6.) 

Finding 2. Failure to File 48-Hour Notices 

During audit fieldwork, the Audit staff identified that MBFI failed to file or untimely 

filed 48-hour notices for ten contributions totaling $262,600. This amount included 

seven contributions totaling $9,100 for which MBFI misreported contribution dates. In 

response to the Interim Audit Report recommendation, MBFI did not file amendments or 

a Form 99 (Miscellaneous Electronic Submission). MBFI stated the former treasurer 

failed to properly file the 48-hour notices and that “the Committee will amend the reports 

to report the correct dates of all contributions.” Absent the filing of amended reports or a 

Form 99, MBFI did not correct the public record for the misreported dates of the seven 

contributions totaling $9,100. 

(For more detail, see p. 8.) 

Finding 3. Disclosure of Occupation and/or Name of 

Employer 

During audit fieldwork, a review of contributions from individuals requiring itemization 

indicated that 1,363 contributions totaling $1,464,449 lacked or inadequately disclosed 

the required occupation and/or name of employer information. MBFI did not sufficiently 

demonstrate “best efforts” to obtain, maintain and submit the required information. In 

response to the Interim Audit Report recommendation, MBFI did not file amendments or 

a Form 99 (Miscellaneous Electronic Submission), but stated it prepared amended reports 

and obtained the missing information for all but 387 contributors. Absent the filing of 

amended reports or a Form 99, MBFI did not correct the public record for contributions 

totaling $1,464,449 that lacked or inadequately disclosed the required occupation and/or 

name of employer information. 

(For more detail, see p. 10.) 
 

 

 

4 

Finding 4. Receipt of Apparent Prohibited Contributions – 

Loans 

During audit fieldwork, a review of loan documents provided by MBFI, indicated 

apparent prohibited loans and lines of credit totaling $8,549,405. This included five 

loans and eleven lines of credit from financial institutions, totaling $7,049,405, that did 

not appear to be made in the ordinary course of business. These loans were not made on 

a basis that assured repayment and, therefore, appeared to be prohibited contributions 

from the financial institutions. 

Additionally, the Audit staff identified two checks from one corporation totaling 

$1,500,000 that were reported as loans. 

In response to the Interim Audit Report recommendation, MBFI did not provide 

documentation from MBFI’s financial institutions, but stated it “fervently” disagreed that 

the loans and lines of credits were not made in the ordinary course of business and stated 

that the Audit Division had not correctly applied the law or Commission precedents. 

Additionally, MBFI stated that the Audit Division failed “to recognize that unsecured 

lines of credit are not unique to candidates for public office.” MBFI also provided a 

letter it asserts supports that the two corporate checks were from a permissible source. 

However, no documentation was provided to support the assertions outlined within the 

letter. Absent additional documentation, the Audit staff maintains the loans and lines of 

credit totaling $7,049,405 were not made on a basis that assured repayment and the 

$1,500,000 in corporate checks were not from a permissible source. 

(For more detail, see p. 13.) 

Finding 5. Receipt of Contributions in Excess of the Limit

During audit fieldwork, the Audit staff reviewed contributions from individuals and 

political committees to determine if any exceeded the contribution limit. Based on these 

reviews, MBFI received apparent excessive contributions totaling $1,173,557. This 

included apparent excessive contributions from individuals totaling $985,345 and from 

political committees totaling $188,212. These errors occurred as a result of MBFI not 

resolving the excessive portion of contributions in a timely manner and by designating 

contributions for Primary or General debt that had already been extinguished. 

In response to the Interim Audit Report recommendation, MBFI did not provide 

documentation that the contributions in question were not excessive. MBFI stated it will 

provide confirmations from the contributors regarding the reattribution and redesignation 

of contributions, based on the reconciliations performed by MBFI’s current treasurer. 

Absent documentation, the Audit staff maintains that MBFI received excessive 

contributions from individuals totaling $985,345 and from political committees totaling 

$188,212. 

(For more detail, see p. 22.) 

Finding 6. Disclosure of Memo Entries and Candidate 

Loans 

During audit fieldwork, the Audit staff determined that MBFI failed to properly disclose 

joint fundraising memo entries totaling $933,814 from 13 joint fundraising committees. 

MBFI also failed to properly disclose the correct loan balances and loan terms for 29 
5 

transactions totaling $11,569,963. In response to the Interim Audit Report 

recommendation, MBFI did not file amendments or a Form 99 (Miscellaneous Electronic 

Submission) and did not provide any documentation. However, regarding disclosure of 

joint fundraising memo entries, MBFI stated “all have been corrected and will be 

included in the amendments that have been prepared to be filed.” Regarding the 

disclosure of loan balances and loan terms, MBFI did not agree with the finding. Absent 

filing of amendments or a Form 99, MBFI has not corrected the public record regarding 

memo entries from joint fundraisers totaling $933,814, and loan balances and terms for 

transactions totaling $11,569,963. 

(For more detail, see p. 28.) 

Finding 7. Prohibited Candidate Personal Loan 

Repayments 

Based on a review of loans, the Audit staff determined that MBFI made excessive 

Primary candidate loan and interest repayments totaling $750,669. This amount is in 

excess of the $250,000 limit permitted for repayment to the Candidate within 20 days 

following the Primary election. In response to the Interim Audit Report recommendation, 

MBFI stated, “...the Audit Division should amend this finding because of the recent 

federal court decision in Ted Cruz for Senate v. Federal Election Commission, Civil No. 

19-cv-908....” The Audit staff maintains MBFI did not comply with 11 CFR §116.11 

(d). 

(For more detail, see p. 33.) 
6 

Part IV 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

Summary 

During audit fieldwork, a comparison of MBFI’s reported financial activity with its bank 

records revealed a misstatement of receipts and disbursements in calendar year 2018. 

MBFI overstated receipts by $6,293,350 and disbursements by $6,294,482. In response 

to the Interim Audit Report recommendation, MBFI did not file amendments or a Form 

99 (Miscellaneous Electronic Submission). MBFI stated, “...the former treasurer did not 

ultimately report the repayments from the Candidate’s personal funds correctly” and that 

loan repayments should have been reported as in-kind contributions instead of as memo 

entries as recommended by the Audit staff. Absent the filing of amended reports or a 

Form 99, MBFI’s receipts and disbursements remain misstated. 

Legal Standard 

Contents of Reports. Each report must disclose: 

• The amount of cash on hand at the beginning and end of the reporting period; 

• The total amount of receipts for the reporting period and for the election cycle; 

• The total amount of disbursements for the reporting period and for the election cycle; 

and 

• Transactions that require itemization on Schedule A (Itemized Receipts) or Schedule B 

(Itemized Disbursements). 52 U.S.C. §30104(b)(l), (2), (3), (4), and (5). 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff reconciled MBFI’s reported financial activity with 

its bank records for calendar years 2017 and 2018. In addition to the bank records 

provided by MBFI, on May 9, 2019, the Commission issued subpoenas to one vendor and 

its financial institution to obtain documentation necessary to complete the comparison of 

MBFI’s financial activity to the information contained in the disclosure reports filed with 

the Commission. 4

 The reconciliation determined that MBFI misstated receipts and 

disbursements for 2018. The following chart details the discrepancies between MBFI’s 

disclosure reports and bank activity. The succeeding paragraphs explain why the 

discrepancies occurred. 

2018 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash on hand @ 

January 1, 2018

 $2,313,439 $2,313,439 $0 

Receipts $22,376,798 $16,083,448 $6,293,350 

4 MBFI was cooperative and attempted to comply with the Audit staff’s request for documentation but was 

unable to obtain the requested information from the associated vendors, resulting in the issuance of 

subpoenas. 
 

 

 

 

 

 

 

 

7 

2018 Committee Activity 

Reported Bank Records Discrepancy 

Overstated 

Disbursements $24,618,654 $18,324,172 $6,294,482 

Overstated 

Ending Cash on hand @ 

December 31, 2018 

$71,583 $72,715 $1,132 

Understated 

The overstatement of receipts resulted from the following: 

-

-

+ 

-

+

The Candidate loan and loan repayments totaling $6,388,558 were the result of MBFI 

misreporting the conversion of Candidate loans to contributions. The converted loan 

MBFI. 5

which overstated receipts and disbursements, respectively. 

and some fees being under-reported. 

x Two unreported Candidate loans + 96,520 

x Candidate loans incorrectly reported 6,388,558 

x Unexplained differences 1,312 

Net Overstatement of Receipts $ 6,293,350 

The overstatement of disbursements resulted from the following: 

x Disbursements not reported or reported incorrectly 2,736 

x Credit card fees over-reported 4,472 

x Candidate loan repayments not reported 96,520 

x Candidate loans incorrectly reported - 6,388,558 

x Unexplained differences - 708 

Net Overstatement of Disbursements $ 6,294,482 

The $1,132 understatement of the ending cash on hand was a result of the reporting 

discrepancies described above. 

amounts should have been disclosed as memo entries on Schedule A (Itemized Receipts) 

and Schedule B (Itemized Disbursements), given the campaign finance software used by 

 Instead, MBFI reported the loan amounts as transactions on Schedules A and B, 

The credit card fees totaling $4,472 were the net result of some fees being over-reported 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter during the exit conference with MBFI 

representatives and provided schedules detailing the misstatement of financial activity. 

In response to the exit conference, MBFI submitted a written response as follows: 

“The Committee provided documentation related to this finding during the audit 

process, including access to all banking records, electronic transaction processors, 

5 Various campaign finance software handle the conversion of a candidate loan to a contribution differently, 

but in no case should this conversion be reported as an in-kind contribution. The software used by MBFI 

treats the conversion of a candidate loan to a contribution as memo entries on Schedules A and B. 

Regardless of which campaign finance software a committee chooses to use, the amounts in the disclosure 

reports must match the bank statement activities. 
 

8 

and the Committee’s electronic information database. The Committee has no new 

materials to provide with this response, but it is the Committee’s belief that the FEC’s 

preliminary finding mischaracterizes certain transactions. The Committee will likely 

be requesting Commission guidance on legal questions related to this finding6

, and 

the Committee intends to take further corrective action as may be required at the 

conclusion of this matter.” 

The Interim Audit Report recommended that MBFI amend its disclosure reports or file a 

Form 997 to correct the misstatements noted above and reconcile the cash balance on its 

most recently filed report to correct any subsequent discrepancies. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, MBFI stated, “...the former 

treasurer did not ultimately report the repayments from the Candidate’s personal funds 

correctly” and “The current treasurer has since conferred with the software provider and 

legal counsel, and they are all in agreement that the proper reporting of the payments is as 

an in-kind contribution.” MBFI stated that the lines of credit were in the name of the 

Candidate and repaid from his personal funds, without first being deposited into MBFI’s 

bank account, and it prepared amended reports to “more clearly disclose the source(s) of 

the funds.” MBFI also stated that “...while the transaction(s) were not reported on the 

correct lines of the FEC report, all the transactions were publicly disclosed.” 

The Audit staff notes the Candidate loans and lines of credit were not taken out in the 

name of MBFI, as such, the repayments were not made on behalf of MBFI and should not 

be reported as in-kind contributions. The transactions were between the Candidate and 

the financial institution. As a result, and in consultation with the Reports Analysis 

Division, the Audit staff maintains that the converted loans should have been disclosed as 

memo entries on Schedule A and Schedule B, given the campaign finance software used 

by MBFI5

, rather than in-kind contributions. The Audit staff further notes that MBFI has 

not filed amendments or a Form 99 as of this report. 

Absent the filing of amended reports or a Form 99, MBFI’s 2018 receipts remain 

overstated by $6,293,350 and disbursements overstated by $6,294,482. 

Finding 2. Failure to File 48-Hour Notices 

Summary 

During audit fieldwork, the Audit staff identified that MBFI failed to file or untimely 

filed 48-hour notices for ten contributions totaling $262,600. This amount included 

seven contributions totaling $9,100 for which MBFI misreported contribution dates. In 

response to the Interim Audit Report recommendation, MBFI did not file amendments or 

a Form 99 (Miscellaneous Electronic Submission). MBFI stated the former treasurer 

failed to properly file the 48-hour notices and that “the Committee will amend the reports 

6 MBFI did not submit a Request for Consideration of a Legal Question by the Commission with respect to 

this finding.

7 MBFI was advised by the Audit staff that if it chose to file a Form 99, instead of amending its disclosure 

reports, the form must contain all pertinent information that is required on each schedule. 
9 

to report the correct dates of all contributions.” Absent the filing of amended reports or a 

Form 99, MBFI did not correct the public record for the misreported dates of the seven 

contributions totaling $9,100. 

Legal Standard 

Last-Minute Contributions (48-Hour Notice). Campaign committees must file special 

notices regarding contributions of $1,000 or more received less than 20 days but more 

than 48-hours before any election in which the candidate is running. This rule applies to 

all types of contributions to any authorized committee of the candidate, including: 

• Contributions from the candidate; 

During audit fieldwork, the Audit staff identified 302 contributions totaling $2,345,363 

that equaled or exceeded $1,000 and were received during the 48-hour notice reporting 

period for the Primary and General elections. A review of these contributions indicated 

that MBFI did not file 48-hour notices for three contributions totaling $3,400 and 

untimely filed 48-hour notices for seven contributions totaling $259,200. 

were disclosed with the incorrect receipt dates. 

Primary General Total 

48-Hour Notices Not Filed $0 $3,400 $3,400

48-Hour Notices Filed Untimely $253,500 $5,700 $259,200 

TOTAL $253,500 $9,100 $262,600 

These 

contributions are summarized below. 

• Loans from the candidate and other non-bank sources; and 

• Endorsements or guarantees of loans from the banks. 11 CFR §104.5(f). 

Facts and Analysis 

A. Facts 

In addition, seven contributions totaling $9,100 for the General election, noted above, 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter during the exit conference with MBFI 

representatives and provided a schedule of the contributions for which 48-hour notices 

were not filed or were filed in an untimely manner, as well as contributions with 

misreported dates. 

In response to the exit conference, MBFI submitted a written response as follows: 

“The Committee provided documentation related to this finding during the audit 

process, including providing the FEC with access to the Committee’s accounts and 

electronic information database. The Committee has no new materials to provide 

with this response, and the Committee intends to take any such corrective action as 

may be required at the conclusion of this matter.” 
 

 

10 

The Interim Audit Report recommended that MBFI provide any additional comments it 

deemed necessary and submit documentation demonstrating that: 

x The 48-hour notices for the contributions in question were timely filed; 

x The contributions were received outside of the 48-hour notice reporting period; 

and 

x Amend its disclosure reports or file a Form 997 to correct the misreported dates 

for the seven contributions totaling $9,100. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, MBFI stated, “Although the 

former treasurer’s failure to file 48-hour notices is uncorrectable at this point, the 

Committee will amend the reports to report the correct dates of all contributions if the 

Audit Division’s team will provide to the Committee a list of 48-hour notices that were 

either not timely filed or not filed at all.” 

The Audit staff notes, as stated in Section B of this finding, MBFI was provided with a 

schedule of the contributions for which 48-hour notices were not filed or were filed in an 

untimely manner, as well as contributions with misreported dates at the exit conference. 

In addition, the Audit staff offered to send the schedule again with the issuance of the 

Interim Audit Report if MBFI requested it; however, MBFI did not make the request at 

that time. The Audit staff again provided the relevant information upon receipt of 

MBFI’s response to the Interim Audit Report. 

The Audit staff acknowledges MBFI’s statement that the “...former treasurer’s failure to 

file 48-hour notices is uncorrectable at this point...” as the response to why there were 

untimely and unfiled 48-hour notices totaling $262,600. However, absent the filing of 

amended reports or a Form 99, MBFI has not corrected the public record for the 

misreported dates of the seven contributions totaling $9,100. 

Finding 3. Disclosure of Occupation and/or Name of 

Employer 

Summary 

During audit fieldwork, a review of contributions from individuals requiring itemization 

indicated that 1,363 contributions totaling $1,464,449 lacked or inadequately disclosed 

the required occupation and/or name of employer information. MBFI did not sufficiently 

demonstrate “best efforts” to obtain, maintain and submit the required information. In 

response to the Interim Audit Report recommendation, MBFI did not file amendments or 

a Form 99 (Miscellaneous Electronic Submission), but stated it prepared amended reports 

and obtained the missing information for all but 387 contributors. Absent the filing of 

amended reports or a Form 99, MBFI did not correct the public record for contributions 

totaling $1,464,449 that lacked or inadequately disclosed the required occupation and/or 

name of employer information. 

Legal Standard 

A. Itemization Required for Contributions from Individuals. An authorized 

candidate committee must itemize any contribution from an individual if it exceeds 
52 U.S.C. §30104(b)(3)(A) and 11 CFR §§100.12 and 104.3(a)(4)(i). 

C. Best Efforts Ensure Compliance. When the treasurer of a political committee 

shows that the committee used best efforts (see below) to obtain, maintain, and 

submit the information required by the Act, the committee’s reports and records will 

be considered in compliance with the Act. 52 U.S.C. §30102(i) and 11 CFR 

§104.7(a). 

D. Definition of Best Efforts. The treasurer and the committee will only be deemed to 

have exercised “best efforts” if the committee satisfied all of the following criteria. 

x All written solicitations for contributions included: 

x A clear request for the contributor's full name, mailing address, occupation, 

and name of employer; and 

x The statement that such reporting is required by Federal law. 

x Within 30 days of receipt of the contribution, the treasurer made at least one effort 

to obtain the missing information, in either a written request or a documented oral 

request. 

x The treasurer reported any contributor information that, although not initially 

provided by the contributor, was obtained in a follow-up communication or was 

contained in the committee’s records or in prior reports that the committee filed 

during the same two-year election cycle. 11 CFR §104.7(b). 

Facts and Analysis 

A. Facts 

MBFI did not disclose or inadequately disclosed the required occupation and/or name of 

employer information for contributions requiring itemization on its FEC reports, as of the 

11 

$200 per election cycle, either by itself or when combined with other contributions 

from the same contributor. 52 U.S.C. §30104(b)(3)(A). 

B. Required Information for Contributions from Individuals. For each itemized 

contribution from an individual, the committee must provide the following 

information: 

x The contributor’s full name and address (including zip code); 

x The contributor’s occupation and the name of his or her employer; 

x The date of receipt (the date the committee received the contribution); 

x The amount of the contribution; and 

x The election cycle year-to-date total of all contributions from the same individual. 

date of the audit notification letter. 

Contribution Lacking or Inadequate Occupation and/or Name of Employer Disclosure 

Number of Contributions 1,363 

Dollar Value of Contributions $1,464,449 

Percent of Contributions 26% 
 

 

12 

1. Contributor Information Provided but Amendments Not Filed: 

During audit fieldwork, MBFI provided the Audit staff with the required contributor 

occupation and/or name of employer information; however, MBFI did not report the 

required amendments for the following: 

Contributor Information Provided but Amendments Not Filed 

Number of Contributions 888 

Dollar Value of Contributions $73,622 

2. Best Efforts Documentation Not Provided: 

MBFI did not provide the Audit staff records to document “best efforts” for the 

following: 

Best Efforts Documentation Not Provided by Committee 

Number of Contributions 1,275 

Dollar Value of Contributions $1,390,827 

3. Additional Information: 

MBFI disclosed the following unacceptable entries on Schedule A: 

x “Information Requested” for 1,125 contributions totaling $1,340,623, and 

x Inadequate occupation and/or name of employer for 238 contributions totaling 

$123,826. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff provided schedules and discussed the disclosure of the contributors’ 

occupation and/or name of employer information with MBFI representatives during audit 

fieldwork and at the exit conference. MBFI representatives did not provide any 

comments during audit fieldwork. 

In response to the exit conference, MBFI submitted a written response as follows: 

“The Committee provided documentation related to this finding during the audit 

process and has no new materials to provide with this response. To date, the 

Committee has made additional preemptive adjustments to its contributor information 

and intends to take any such corrective action as may be required at the conclusion of 

this matter.” 

8 MBFI’s database for the audit period, provided to the Audit staff during fieldwork, contained the 

occupation and name of employer information. 
 

13 

information for most donors for which the Audit Division identified as missing 

information. As of this writing, there are only 387 remaining donors with 

‘Information Requested’ for the 2018 election cycle. The Committee will continue its 

ongoing ‘best efforts’ to obtain and report the employer/occupation information for 

the remaining 387 donors from the 2018 election cycle.” 

The Audit staff notes that MBFI has not filed amendments or a Form 99 as of this report. 

Absent the filing of amended reports or a Form 99, MBFI has not corrected the public 

record for contributions totaling $1,464,449 that lacked or inadequately disclosed the 

required occupation and/or name of employer information. 

Finding 4. Receipt of Apparent Prohibited Contributions – 

Loans 

Summary 

During audit fieldwork, a review of loan documents provided by MBFI, indicated 

apparent prohibited loans and lines of credit totaling $8,549,405. This included five 

loans and eleven lines of credit from financial institutions, totaling $7,049,405, that did 

not appear to be made in the ordinary course of business. These loans were not made on 

a basis that assured repayment and, therefore, appeared to be prohibited contributions 

from the financial institutions. 

Additionally, the Audit staff identified two checks from one corporation totaling 

$1,500,000 that were reported as loans. 

In response to the Interim Audit Report recommendation, MBFI did not provide 

The Interim Audit Report recommended that MBFI amend its reports or file a Form 99 7 

to report and submit the occupation and/or name of employer information for the 1,363 

contributions. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, MBFI submitted a written 

response as follows: 

“The Committee has researched all donors whose contributions require ‘best efforts’ 

to obtain and report employer/occupation information. Amended reports have been 

prepared and the Committee has obtained and will report employer/occupation 

documentation from MBFI’s financial institutions, but stated it “fervently” disagreed that 

the loans and lines of credits were not made in the ordinary course of business and stated 

that the Audit Division had not correctly applied the law or Commission precedents. 

Additionally, MBFI stated that the Audit Division failed “to recognize that unsecured 

lines of credit are not unique to candidates for public office.” MBFI also provided a 

letter it asserts supports that the two corporate checks were from a permissible source. 

However, no documentation was provided to support the assertions outlined within the 

letter. Absent additional documentation, the Audit staff maintains the loans and lines of 

credit totaling $7,049,405 were not made on a basis that assured repayment and the 

$1,500,000 in corporate checks were not from a permissible source. 
14 

Legal Standard 

A. Loans Excluded from the Definition of Contribution. A loan of money to a 

political committee by a state bank, a federally chartered depository institution 

(including national bank) or a depository institution whose deposits and accounts are 

insured by the Federal Deposit Insurance Corporation or the National Credit Union 

Administration is not a contribution by the lending institution if such loan is made in 

accordance with applicable banking laws and regulations and is made in the ordinary 

course of business. 

circumstances on a case by case basis in determining whether the loan was made 

on a basis which assured repayment. 11 CFR §100.82(e). 

the time it is made and is a contribution to the extent that it remains unpaid. The 

aggregate amount loaned to a candidate or committee by a contributor, when added to 

other contributions from that individual to that candidate or committee, shall not 

exceed the contribution limits set forth at CFR § 110. A loan, to the extent it is 

repaid, is no longer a contribution. 11 CFR §100.52(b)(2). 

or loans):

A loan will be deemed to be made in the ordinary course of business if it bears the 

usual and customary interest rate of the lending institution for the category of loan 

involved; is made on a basis which assures repayment; is evidenced by a written 

instrument and is subject to a due date or amortization schedule. 11 CFR §100.82(a). 

B. Assurance of Repayment. Commission regulations state a loan is considered made 

on a basis which assures repayment if: 

x The lending institution making the loan has perfected a security interest in 

collateral owned by the candidate or political committee receiving the loan; 

x Amounts guaranteed by secondary sources of repayment, such as guarantors and 

cosigners, do not exceed the contribution limits of 11 CFR part 110; 

x The lending institution making the loan has obtained a written agreement whereby 

the candidate or political committee receiving the loan has pledged future 

receipts, such as public financing payments; and 

x If these requirements are not met, the Commission will consider the totality of 

C. Gift, subscription, loan, advance or deposit of money. A loan is a contribution at 

D. Receipt of Prohibited Contributions General Prohibition. Candidates and 

committees may not accept contributions (in the form of money, in-kind contributions 

x In the name of another; or 

x From the treasury funds of the following prohibited sources: 

x Corporations (this means any incorporated organization, including a nonstock corporation, an incorporated membership organization, and an 

incorporated cooperative); 

x Federal government contractors (including partnerships, individuals, and 

sole proprietors who have contracts with the federal government); and 

x Foreign nationals (including individuals who are not U.S. citizens and not 

lawfully admitted for permanent residence; foreign governments and 

foreign political parties; and groups organized under the laws of a foreign 
15 

that appears to be prohibited (a questionable contribution), it must follow the 

procedures below: 

x Within 10 days after the treasurer receives the questionable contribution, the 

committee must either: 

x Return the contribution to the contributor without depositing it; or 

x Deposit the contribution (and follow the steps below). 11 CFR 

§103.3(b)(1). 

x If the committee deposits the questionable contribution, it may not spend the 

funds and must be prepared to refund them. It must therefore maintain sufficient 

funds to make the refunds or establish a separate account in a campaign 

depository for possibly illegal contributions. 11 CFR §103.3(b)(4). 

x The committee must keep a written record explaining why the contribution may 

be prohibited and must include this information when reporting the receipt of the 

contribution. 11 CFR §103.3(b)(5). 

x Within 30 days of the treasurer’s receipt of the questionable contribution, the 

committee must make at least one written or oral request for evidence that the 

contribution is legal. Evidence of legality includes, for example, a written 

statement from the contributor explaining why the contribution is legal or an oral 

explanation that is recorded by the committee in a memorandum. 11 CFR 

§103.3(b)(1). 

x Within these 30 days, the committee must either: 

x Confirm the legality of the contribution; or 

x Refund the contribution to the contributor and note the refund on the report 

covering the period in which the refund was made. 11 CFR §103.3(b)(1) 

and (5). 

G. Reporting Bank Loans, Home Equity Loans and Other Lines of Credit. When a 

country or groups whose principal place of business is in a foreign 

country, as defined in 22 U.S.C. §611(b). 52 U.S.C. §§30118, 30119, 

30121, and 30122. 

E. Receipt of Prohibited Corporate Contributions. Political committees may not 

accept contributions from the general treasury funds of corporations. This prohibition 

applies to any type of corporation including a non-stock corporation, an incorporated 

membership organization, and an incorporated cooperative. 52 U.S.C. §30118. 

F. Questionable Contributions. It is the Treasurer’s responsibility to ensure that all 

contributions are lawful. 11 CFR §103.3(b). If a committee receives a contribution 

political committee obtains a loan from, or establishes a line of credit at, a lending 

institution as described in 11 CFR §100.82(a) through (d) and 100.142(a) through (d), 

it shall disclose in the report covering the period when the loan was obtained, the 

following information on Schedules C-1: 

x The types and value of the collateral or other sources of repayment that secure the 

loan or line of credit, and whether that security interest is perfected; 

x An explanation of the basis upon which the loan was made or the line of credit 

established, if not made on the basis of either traditional collateral or the other 

sources of repayment described in 11 CFR §§100.82(e)(1) and (2) and 

100.142(e)(1) and (2); and 
 

16 

x A certification from the lending institution that the borrower’s responses to 11 

CFR §104.3(d)(1)(i)-(iv) are accurate, to the best of the lending institution’s 

knowledge; that the loan was made or the line of credit established on terms and 

conditions (including interest rate) no more favorable at the time than those 

imposed for similar extensions of credit to other borrowers of comparable credit 

worthiness; and that the lending institution is aware of the requirement that a loan 

or a line of credit must be made on a basis which assures repayment and that the 

lending institution has complied with Commission regulations at 11 CFR 

§100.82(a) through (d) and 100.142(a) through (d). 11 CFR §104.3(d)(1)(iii)-(v). 

H. Income. Income received during the current election cycle, of the candidate, 

including: 

None of the five lending institution agreements provided to the Audit staff 

indicated collateral9 or guarantors were used to secure the loans and lines of 

x A salary and other earned income that the candidate earns from bona fide 

employment; 

x Income from the candidate's stocks or other investments including interest, 

dividends, or proceeds from the sale or liquidation of such stocks or investments; 

x Bequests to the candidate; 

x Income from trusts established before the beginning of the election cycle; 

x Income from trusts established by bequest after the beginning of the election cycle 

of which the candidate is the beneficiary; 

x Gifts of a personal nature that had been customarily received by the candidate 

prior to the beginning of the election cycle; and 

x Proceeds from lotteries and similar legal games of chance. 11 CFR 

§100.33(b)(1)-(7). 

Facts and Analysis 

A. Assurance of Repayment - Bank Loans 

1. Facts 

MBFI received five loans and eleven lines of credit totaling $7,049,405. These loans 

consisted of promissory/consumer bank notes and open-ended lines of credit in the 

name of the Candidate, Mike Braun (‘Candidate’), supported with agreements from 

five lending institutions. 

Information About the Bank Loans 

x

credit. 

x MBFI reported $2,856,163 in loans and lines of credit as secured with 

collateral on Schedule C-1 (Loans and Lines of Credit from Lending 

Institutions). The remaining $4,193,242 in loans were not reported as 

secured. 

9 The Audit staff reviewed the Candidate’s financial forms filed with the Senate. Based on these 

documents, the Candidate appeared to have enough personal equity to cover the loans obtained. 

However, no property or assets were listed as collateral on the financial institution documents, provided 

to the Audit staff, to secure the loans and lines of credit. 
17 

Based upon the documents provided by MBFI, it did not appear that the loans were 

made in the ordinary course of business because, per 11 CFR §100.82(e), they were 

not made on a basis that assured repayment based on either of the following: 

x A loan may be considered made on a basis that assures repayment if the 

lending institution making the loan perfects a security interest in collateral 

owned by the candidate or political committee receiving the loan. Documents 

supplied by MBFI showed no guarantor nor collateral offered to the financial 

institutions making the loans. 

x A loan may be considered made on a basis that assures repayment if the 

lending institution has obtained a written agreement whereby the candidate or 

Committee has no new materials to provide with this response, but it is the 

Committee’s belief that the documentation already provided establishes that the 

loans in question were provided by commercial lenders on terms customary in the 

ordinary course of business. The Committee will likely be requesting 

Commission guidance on legal questions related to this finding, and the 

Committee intends to take further corrective action as may be required at the 

conclusion of this matter.” 10

was not limited to submission of: 

x

political committee receiving the loan has pledged future receipts. MBFI did 

not provide documentation to support that it or the Candidate gave the 

financial institutions a pledge of future receipts or other method of assuring 

repayment. 

2. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter with MBFI representatives during audit 

fieldwork and at the exit conference and provided a schedule of the loans. During 

audit fieldwork, MBFI verified loan receipt and repayment amounts and provided 

additional loan documentation. 

In response to the exit conference, MBFI submitted a written response as follows: 

“As requested by the FEC, the Committee provided extensive documentation for 

the loan agreements considered by the FEC in this preliminary finding. The 

The Interim Audit Report recommended that MBFI demonstrate the loans and lines of 

credit totaling $7,049,405 were made in the ordinary course of business and were 

made on a basis that assured repayment. Documentation could have included, but 

Fully signed copy of the loan agreement. 

x Required lending institution certifications. 

x Amended disclosure reports, consistent with 11 C.F.R. §104.3(d)(1), to 

support its contention that the loans and lines of credit were made on a basis 

that assured repayment. 

x Other information to demonstrate that the loans and lines of credit were based 

on the assurance of repayment to include the following information from each 

10 On April 8, 2020, counsel for MBFI submitted a Request for Consideration of a Legal Question by the 

Commission (Request). MBFI asked whether an unsecured line of credit issued by a commercial lending 

institution to a “high-net-worth, creditworthy” candidate may be deemed to be made within the ordinary 

course of business under 11 C.F.R. §100.82. Two or more Commissioners did not agree to consider the 

Request. MBFI was informed of this outcome on April 21, 2020. 
 

18 

of the lending institutions at issue: (1) the length of time of the Candidate’s 

relationship with the bank; (2) the Candidate’s creditworthiness, net worth, 

assets and repayment history; (3) the bank’s underwriting criteria for 

unsecured loans of the type made to the Candidate; and (4) information 

demonstrating that the loan terms were not unduly favorable to the candidate. 

3. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, MBFI stated it “fervently 

disagrees with this finding” for the following reasons: 

obtain the unsecured line of credit “without a net worth that remotely 

purpose of influencing the outcome of the Candidate’s candidacy.” 

According to MBFI, “There should be no dispute” that the loans satisfy three 

of the four components necessary for a loan to be deemed made in the 

Regarding the fourth component, MBFI stated, “The critical inquiry, 

therefore, is whether the [l]oans were made on a basis that assures 

repayment.” 

(i) “The Audit Division simply fails to recognize that unsecured lines of credit 

are not unique to candidates for public office.” 

MBFI provided a redacted copy of an unsecured line of credit issued to the 

MBFI counsel in March 2017. MBFI asserted that commercial lending 

institutions provide unsecured lines of credit to “creditworthy” individuals 

who are unlikely to default on the loan. MBFI counsel stated he was able to 

approaches that of the Candidate’s.” 

(ii) “Under Commission rules, a perfected security is a “safe harbor,” not an 

essential element, for demonstrating assurance of repayment.” 

“...it is the undersigned counsel’s understanding and belief that the 

commercial lending institutions that made the [l]oans did so in their ordinary 

course of business (i.e., in their own commercial interests), and not for the 

ordinary course of business per 11 CFR §100.82 and §104.3(d)(1)(iii)-(v). 

MBFI further stated, “Commission rules provide several express 

ways for commercial lending institutions to satisfy this remaining element, 

including obtaining a perfected security interest in collateral such as real or 

personal property and certificates of deposit, or a written agreement pledging 

a security in future receipts. While candidates, political committees, and the 

commercial lending institutions may rely on these express provisions as a 

‘safe harbor,’ the Commission’s rules also contain a fallback provision that 

permits the Commission to apply a ‘totality of the circumstances’ test to 

determine whether loans were made on a basis that assures repayment.” 

(iii) “Prior Commission advisory opinions and enforcement decisions indicate 

deference to commercial lending institutions in assuring repayment, including 

considerations of the candidate’s creditworthiness.” 

MBFI stated, “In its own advisory opinions..., the Commission has noted that 

the critical inquiry is whether the terms, placed within the larger 

understanding of the relationship between the lending institution and the 
 

19 

Commission highlighted that “unsecured lines of credit can be made on a 

basis that assures repayment” and that the AO “citied several important 

contextual factors, including: the long-standing relationship between the 

commercial lender and the candidate; that the interest rates and additional 

contractual clauses were standard form agreement provisions matching 

agreements given to other customers; and the terms were not unduly favorable 

to the candidate.” 

MBFI further noted that in the Matter Under Review (MUR) 5198 (Cantwell) 

enforcement matter, “the Commission considered the prior existing 

relationship between the candidate and the lending institution. Importantly, 

the Commission’s analysis emphasized how the candidate’s personal net 

worth far exceeded the actual value of the line of credit, and the Commission 

ultimately concluded that the banking institution validly relied on the very 

favorable ratio between the candidate’s net worth and the value of the line of 

credit to determine that the risk of non-repayment was small.” 

MBFI concluded that, “the Commission accepted the lending institution’s 

conclusion that the loan agreement sufficiently mitigated the risk of nonrepayment because it bore the signature of a high-net-worth, creditworthy 

individual who, in the bank’s own judgment, was very unlikely to default on 

the loan.” 

Concerning section (i) above, the redacted bank documentation provided by MBFI 

demonstrates that no collateral was provided for the MBFI counsel’s line of credit. 

However, the Audit staff notes MBFI did not provide the fully signed copy of a loan 

agreement, lending institution certificates or any other documentation from its 

financial institutions demonstrating that MBFI’s loans were not unduly favorable to 

the Candidate, as required by 11 C.F.R. §104.3(d)(1). 

borrower, evidence an agreement that mitigates the risk of the loans to such a 

degree that repayment is assured.” 

MBFI further stated, “...the deference ordinarily given to a lending 

institution’s commercial judgment (i.e., their own commercial interest) is not 

eliminated from the analysis simply because the loans are unsecured. Rather, 

the Commission must nonetheless give that deference while performing its 

analysis to determine whether significant risk mitigation still exists in the 

relationship between the parties to the agreement.” 

MBFI noted that in the Cunningham Advisory Opinion (AO 1994-26), the 

Concerning section (ii) above, the Audit staff agrees this finding is about MBFI 

receiving loans and lines of credit that were not made on the basis of assured 

repayment, because: (1) documentation provided by MBFI showed no guarantor nor 

collateral offered to the financial institutions making the loans and (2) MBFI did not 

provide documentation to support that it or the Candidate gave the financial 

institutions a pledge of future receipts or other method of assuring repayment. The 

Commission can make a determination based on the totality of circumstances on a 

case-by-case basis in determining whether the loans were made on a basis which 
20 

history; (3) the bank’s underwriting criteria for unsecured loans of the type made to 

the Candidate; and (4) information demonstrating that the loan terms were not unduly 

favorable to the Candidate. Absent this documentation, the Audit staff maintains the 

loans and lines of credit totaling $7,049,405 were not made in the ordinary course of 

business because they were not made on a basis that assured repayment. 

B. Corporate Contributions Reported as Candidate Loans 

1. Facts 

During audit fieldwork, the Audit staff identified two checks received by MBFI 

totaling $1,500,000 that appeared to be from a corporation, which is a prohibited 

source. These checks, dated October 17, 2018 and October 25, 2018, were from 

Meyer Distributing, and were reported as loans on Schedule C (Loans), and memo 

text identified these transactions as ‘Personal Funds’. The Audit staff verified the 

corporate status of Meyer Distributing, as of the date of the contribution, with the 

applicable Secretary of State office. Based on the Indiana Secretary of State website, 

this business entity is a for-profit corporation. The Candidate was President of Meyer 

Distributing during the audit period. Loans other than from lending institutions are 

considered contributions to the extent of the outstanding balance of the loan. MBFI 

did not repay the $1,500,000; rather MBFI reported $1,250,000 as a contribution from 

the Candidate on the disclosure reports and reported the remaining $250,000 as an 

outstanding loan balance on the disclosure reports. 

However, MBFI did not correctly report the $1,250,000 contribution from the 

Candidate as a memo entry (see Finding 1. Misstatement of Financial Activity). 

MBFI did not maintain a separate account for questionable contributions. 

Additionally, MBFI did not maintain a sufficient balance in its bank account to refund 

the apparent prohibited contributions. 

assured repayment. However, based upon the submitted documentation, the Audit 

staff believes MBFI did not demonstrate the loans and lines of credit were made on a 

basis of assured repayment due to the reasons listed above, irrespective of the totality 

of circumstances. 

Concerning section (iii) above, the Audit staff notes that MBFI’s reference to 

Advisory Opinion 1994-26 and MUR 5198 is applicable. However, MBFI failed to 

provide documentation to demonstrate that the loans and lines of credit were based on 

the assurance of repayment to include the following information from each of the 

lending institutions at issue: (1) the length of time of the Candidate’s relationship 

with the bank; (2) the Candidate’s creditworthiness, net worth, assets and repayment 

2. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter with MBFI representatives during audit 

fieldwork as well as at the exit conference and provided a schedule of the apparent 

prohibited contributions. MBFI representatives did not provide any comments during 

audit fieldwork. 

In response to the exit conference, MBFI submitted a written response as follows: 
 

 

21 

“To support this preliminary finding, the FEC identified two checks paid from 

Meyer Distributing to Mike Braun. Despite the FEC’s mischaracterization of 

these checks, the Committee properly reported the associated value of these 

checks as loans to the Committee. The Committee intends to provide additional 

documentation demonstrating that the checks in question were initially issued to 

Mr. Braun, pursuant to his employment agreement, as compensation for services 

that he provided to Meyer Distributing; however, the Committee has been unable 

to obtain the relevant documentation because of the ongoing COVID-19 crisis, 

and the information will be provided to the FEC upon its receipt. Furthermore, 

Mr. Braun then endorsed these payments to the Committee directly as a loan to 

Submit documentation demonstrating that the funds represented salary or 

other income the Candidate earned from bona fide employment and thus were 

the personal funds of the Candidate. Or that the contributions in question 

totaling $1,500,000 were not from a prohibited source or, if prohibited, were 

resolved through the timely issuance of refunds. 

x

timely resolved, MBFI should have refunded these apparent prohibited 

to a qualified charitable organization.11 

x

the Committee without first depositing and re-issuing payment, an option 

permitted by FEC rules.” 

“The Committee’s compliance with the FEC’s recommendation regarding this 

preliminary finding would cause the Committee to knowingly misrepresent the 

transactions in question and incorrectly disclose prohibited corporate 

contributions that did not take place. Therefore, the Committee declines to take 

the FEC’s recommended remedial action at this time.” 

MBFI contended that the $1,500,000 represented compensation paid to the Candidate 

from Meyer Distributing for services rendered pursuant to his employment 

agreement. MBFI did not provide the employment agreement or any additional 

documentation regarding the checks in question. 

The Interim Audit Report recommended that MBFI: 

x

Absent documentation that the funds were from a permissible source or were 

contributions to the corporation or disgorged them to a governmental entity or 

If funds were not available to make the necessary refunds or disgorgement, 

MBFI should have disclosed the contributions requiring refunds on Schedule 

D (Debts and Obligations) until funds became available to make such refunds. 

3. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, MBFI stated these funds 

were “...the personal funds owed by Meyer Distributing to the Candidate, and the 

Candidate paid taxes on the amount as income to him.” To support this statement, 

MBFI provided a letter from the Candidate’s Certified Public Accountant (CPA). 

The Audit staff notes that MBFI’s exit conference response indicated that the funds in 

question were compensation for services the Candidate provided Meyer Distributing; 

however, the letter from the CPA, in response to the Interim Audit Report, states the 

funds were for stock sale. The Audit staff further notes MBFI did not provide any 

11 See 26 U.S.C. §170(c). 
22 

documentation the CPA indicates he reviewed to make the determination the funds 

were from the sale of stock and the CPA appeared to not have first-hand knowledge 

of the transactions. Additional documentation is needed to assist the Commission in 

determining whether the $1,500,000 was from the sale of stock. 

Political committees must maintain records which provide in sufficient detail the 

necessary information and data from which filed reports and statements may be 

verified. Absent records such as a stock purchase agreement between the Candidate 

and Meyers Distributing, or the financial documents that the CPA reviewed to 

determine the stock sale, the Audit staff maintains the $1,500,000 appears to be from 

a prohibited source. 

x Return the questionable check to the donor; or 

x Deposit the check into its federal account and: 

x Keep enough money in the account to cover all potential refunds; 

x Keep a written record explaining why the contribution may be illegal; 

x Include this explanation on Schedule A if the contribution has to be itemized 

before its legality is established; 

Finding 5. Receipt of Contributions in Excess of the Limit 

Summary 

During audit fieldwork, the Audit staff reviewed contributions from individuals and 

political committees to determine if any exceeded the contribution limit. Based on these 

reviews, MBFI received apparent excessive contributions totaling $1,173,557. This 

included apparent excessive contributions from individuals totaling $985,345 and from 

political committees totaling $188,212. These errors occurred as a result of MBFI not 

resolving the excessive portion of contributions in a timely manner and by designating 

contributions for Primary or General debt that had already been extinguished. 

In response to the Interim Audit Report recommendation, MBFI did not provide 

documentation that the contributions in question were not excessive. MBFI stated it will 

provide confirmations from the contributors regarding the reattribution and redesignation 

of contributions, based on the reconciliations performed by MBFI’s current treasurer. 

Absent documentation, the Audit staff maintains that MBFI received excessive 

contributions from individuals totaling $985,345 and from political committees totaling 

$188,212. 

Legal Standard 

A. Authorized Committee Limits. For the 2018 election, an authorized committee may 

not receive more than a total of $2,700 per election from any one person or $5,000 

per election from a multicandidate political committee. 52 U.S.C. §§30116(a)(1)(A) 

and (a)(2)(A); 11 CFR §§110.1(a) and (b) and 110.9. 

B. Handling Contributions That Appear Excessive. If a committee receives a 

contribution that appears to be excessive, the committee must either: 
23 

x Seek a reattribution or a redesignation of the excessive portion, following the 

instructions provided in the Commission regulations (see below for 

explanations of reattribution and redesignation); and 

x If the committee does not receive a proper reattribution or redesignation 

within 60 days after receiving the excessive contribution, refund the excessive 

portion to the donor. 11 CFR §§103.3(b)(3), (4) and (5) and 110.1(k)(3)(ii) 

(B). 

C. Joint Contributions. Any contribution made by more than one person (except for a 

contribution made by a partnership) must include the signature of each contributor on 

the check, money order, or other negotiable instrument or in a separate writing. A 

joint contribution is attributed equally to each donor unless a statement indicates that 

the funds should be divided differently. 11 CFR §110.1(k)(1) and (2). 

D. Reattribution of Excessive Contributions. The Commission regulations permit 

committees to ask donors of excessive contributions (or contributions that exceed the 

committee’s net debts outstanding) whether they had intended their contribution to be 

a joint contribution from more than one person and whether they would like to 

reattribute the excess amount to the other contributor. The committee must inform 

the contributor that: 

x The reattribution must be signed by both contributors; 

x The reattribution must be received by the committee within 60 days after the 

committee received the original contribution; and 

x The contributor may instead request a refund of the excessive amount. 11 CFR 

§110.1(k)(3). 

Within 60 days after receiving the excessive contribution, the committee must either 

receive the proper reattribution or refund the excessive portion to the donor. 11 CFR 

§§103.3(b) (3) and 110.1(k)(3)(ii)(B). Further, a political committee must retain 

written records concerning the reattribution in order for it to be effective. 11 CFR 

§110.1(l)(5). 

Notwithstanding the above, any excessive contribution that was made on a written 

instrument that is imprinted with the names of more than one individual may be 

attributed among the individuals listed unless instructed otherwise by the 

contributor(s). The committee must inform each contributor: 

x How the contribution was attributed; and 

x The contributor may instead request a refund of the excessive amount. 11 CFR 

§110.1(k)(3)(ii)(B). 

E. Redesignation of Excessive Contributions. When an authorized candidate 

committee receives an excessive contribution (or a contribution that exceeds the 

committee’s net debts outstanding), the committee may ask the contributor to 

redesignate the excess portion of the contribution for use in another election. The 

committee must inform the contributor that: 

x The redesignation must be signed by the contributor; 

x The redesignation must be received by the committee within 60 days after the 

committee received the original contribution; and 
24 

x The contributor may instead request a refund of the excessive amount. 11 CFR 

§110.1(b)(5). 

Within 60 days after receiving the excessive contribution, the committee must either 

receive the proper redesignation or refund the excessive portion to the donor. 11 CFR 

§§103.3(b) (3) and 110.1(b) (5) (ii) (A). Further, a political committee must retain 

written records concerning the redesignation in order for it to be effective. 11 CFR 

§110.1(l)(5). 

Presumptive Redesignation- When an individual makes an excessive contribution to a 

candidate’s authorized committee, the campaign may presumptively redesignate the 

excessive portion to the general election if the contribution: 

x Is made before that candidate’s primary election; 

x Is not designated in writing for a particular election; 

x Would be excessive if treated as a primary election contribution; and 

x As redesignated, does not cause the contributor to exceed any other contribution 

limit. 

The committee is required to notify the contributor of the redesignation within 60 

days of the treasurer’s receipt of the contribution and must offer the contributor the 

option to receive a refund instead. 11 CFR §110.1(b)(5)(ii)(B)(1), (2), (3), (4), (5), 

and (6). 

F. Contributions by Multi-candidate Committees. A contribution designated in 

writing for a particular election, but made after that election, shall be made only to the 

extent that the contribution does not exceed net debts outstanding from such election. 

To the extent that such contribution exceeds net debts outstanding, the candidate or 

the candidate’s authorized political committee shall return or deposit the contributions 

within ten days from the date of the treasurer’s receipt of the contribution and if 

deposited, then within sixty days from the date of the treasurer’s receipt the treasurer 

shall take that the following action, as appropriate: 

x Refund the contribution using a committee check or draft; or 

x Obtain a written redesignation by the contributor for another election in 

accordance with 11 CFR §110.2(b)(5). 11 CFR §110.2(b)(3)(i). 

Facts and Analysis 

A. Contributions from Individuals 

1. Facts 

The Audit staff utilized sample testing and a review of high dollar contributions not 

included in the sample population to identify apparent excessive contributions from 

individuals, as noted below. 
25 

Excessive Contributions - Testing Method 

Sample Projection Amount12 $568,545 

High Dollar Review Contribution Error 

Amount $416,800 

Total Amount of Excessive Contributions $985,345 

Reason for Excessive Contributions 

Contributions not resolved via presumptive 

letter or refund $327,710 

Contributions not resolved via signed 

reattribution letter or refund $642,935 

Contributions refunded untimely $14,700 

Total Amount of Excessive Contributions $985,345 

2. Additional Information 

Contributions, totaling $642,935, could not be presumptively reattributed or 

redesignated by MBFI. These contributions were either made with a single account 

holder check, joint account holder checks that exceeded the per election limit for both 

individuals or credit cards which required signed authorization from its contributors 

or a refund. 

MBFI did not maintain a separate account for questionable contributions. 

Additionally, based on its cash on hand at the end of the audit period ($72,715), it 

appears that MBFI did not maintain sufficient funds to refund the apparent excessive 

contributions. 

3. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter with MBFI representatives during audit 

fieldwork as well as at the exit conference and provided a schedule of the apparent 

excessive contributions. MBFI representatives did not provide any comments during 

audit fieldwork. 

In response to the exit conference MBFI submitted a written response as follows: 

“The Committee provided documentation related to these findings during the 

audit process and has no new materials to provide with this response. To date, the 

12 The sample error amount ($568,545) was projected using a Monetary Unit Sample with a 95 percent 

confidence level. The sample estimate could be as low as $378,477 or as high as $947,020. 
26 

Committee has made additional preemptive adjustments to its contributor 

information and intends to take any such corrective action as may be required at 

the conclusion of this matter.” 

The Interim Audit Report recommended that MBFI: 

x Provide evidence demonstrating that the contributions totaling $985,345 were 

not excessive or were timely resolved. 

x Absent evidence that the contributions were not excessive or were timely 

resolved, MBFI should have reviewed its contributions to determine which 

were excessive and how each should be resolved. For any excessive 

receipt of a signed authorization letter from the contributor or by refund, 

4. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, MBFI submitted a written 

early 2019, he found a number of refund checks that had been prepared but not 

sent to donors, with some information suggesting that the former treasurer had 

initiated the reattribution and redesignation tasks required of a treasurer. It is 

refunds were sent to donors at that time.” 

contributions that MBFI could have resolved by sending a presumptive 

redesignation and/or reattribution letter, it could now send letters to inform the 

contributors how the committee designated and/or reattributed the 

contribution and offer a refund. Absent the contributor’s request for a refund, 

these letters would obviate the need to refund the contributions or 

disgorgement to a governmental entity or to a qualified charitable 

organization.11 

x For any excessive contributions that were not resolved through the timely 

MBFI should have obtained signed authorization notification from the 

contributor or make refunds in response to the audit. 

x If funds were not available to make such refunds, MBFI should have reported 

the excessive contributions as debts owed on Schedule D (Debts and 

Obligations) until funds became available to make the refunds. 

response as follows: 

“When the current treasurer took over the accounting and compliance duties in 

unknown the extent to which those normal and customary procedures were 

completed. All reattributions and redesignations were completed by the current 

treasurer in 2019 after he took over the accounting and reporting duties, and 

MBFI indicated it will provide confirmations from the contributors regarding the 

reattribution and redesignation of contributions, based on the reconciliations 

performed by MBFI’s current treasurer. MBFI also stated “...to the extent that the 

facts and conclusions in Finding 5 relate to the $250,000 loan repayment limit found 

in Section 403 of the Bipartisan Campaign Reform Act of 2002 (“BCRA”) and 28 

U.S.C. § 2884 or the Committee’s acceptance of debt retirement contributions, the 

Audit Division should amend this finding in light of a recent decision of the federal 

court regarding the constitutional validity of the provision of law on which the Audit 

Division is relying on.” MBFI further stated that the Audit staff should reconsider its 

findings, reissue the Interim Audit Report and give MBFI the opportunity to respond 
 

27 

to the revised report, in light of the decision in Ted Cruz for Senate v. Federal 

Election Commission, Civil No. 19-cv-908. 

Although there was a decision in the D.C. District Court, the Commission is 

appealing the decision. MBFI did not provide any documentation demonstrating the 

contributions from individuals totaling $985,345 were not excessive or were timely 

resolved. 

B. Contributions From Political Committees 

1. Facts 

Contributions Received in Excess of Primary Debt 

As of May 8, 2018, the date of the Primary election, the Audit staff calculated that 

MBFI had net debt outstanding of $191,951. The review determined that there was 

no Primary debt as of June 30, 2018. A review of all contributions from political 

committees received after May 8, 2018 and designated by the political committees for 

primary debt, determined that MBFI received 2213 apparent excessive contributions 

totaling $78,000 which exceeded the amount needed to retire the net debt outstanding 

for the Primary election. 

Contributions Received in Excess of General Debt 

As of November 6, 2018, the date of the General election, the Audit staff calculated 

that MBFI had net debt outstanding of $101,066. The review determined that there 

was no General debt as of December 18, 2018. A review of all contributions received 

from political committees after November 6, 2018 and designated by the political 

committees for general debt, identified that MBFI received 3413 apparent excessive 

contributions totaling $110,212 which exceeded the amount needed to retire the net 

debt outstanding for the General election. 

MBFI did not maintain a separate account for questionable contributions. 

Additionally, MBFI did not maintain a sufficient balance in its bank account to refund 

the apparent excessive contributions. 

2. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter with MBFI representatives at the exit conference 

and provided schedules of the apparent excessive contributions. 

In response to the exit conference, MBFI submitted a written statement as follows: 

“The Committee provided documentation related to these findings during the 

audit process and has no new materials to provide with this response. To date, the 

Committee has made additional preemptive adjustments to its contributor 

information and intends to take any such corrective action as may be required at 

the conclusion of this matter.”14 

13 Two contributions totaling $4,500 moved from the General to Primary election after issuance of the 

Interim Audit Report due to the designation on the contributors’ check memo line. The total excessive 

contributions from political committees remains $188,212. 14 On April 23, 2019, counsel for MBFI submitted a Request for Consideration of a Legal Question by the 

Commission. MBFI asked whether the proceeds from the Candidate’s personal lines of credit were 
28 

sent to donors, with some information suggesting that the former treasurer had 

initiated the reattribution and redesignation tasks required of a treasurer. It is 

unknown the extent to which those normal and customary procedures were 

completed. All reattributions and redesignations were completed by the current 

treasurer in 2019 after he took over the accounting and reporting duties, and 

refunds were sent to donors at that time.” 

MBFI indicated it will provide confirmations from the contributors regarding the 

reattribution and redesignation of contributions, based on the reconciliations 

performed by MBFI’s current treasurer. MBFI also stated “...to the extent that the 

facts and conclusions in Finding 5 relate to the $250,000 loan repayment limit found 

in Section 403 of the Bipartisan Campaign Reform Act of 2002 (“BCRA”) and 28 

U.S.C. § 2884 or the Committee’s acceptance of debt retirement contributions, the 

Audit Division should amend this finding in light of a recent decision of the federal 

court regarding the constitutional validity of the provision of law on which the Audit 

Division is relying on.” MBFI further stated that the Audit staff should reconsider its 

findings, reissue the Interim Audit Report and give MBFI the opportunity to respond 

to the revised report, in light of the decision in Ted Cruz for Senate v. Federal 

Election Commission, Civil No. 19-cv-908. 

Although there was a decision in the D.C. District Court, the Commission is 

appealing the decision. MBFI did not provide any documentation demonstrating the 

contributions from political committees totaling $188,212 were not excessive or were 

timely resolved. 

Finding 6. Disclosure of Memo Entries and Candidate 

Loans 

The Interim Audit Report recommended that MBFI provide documentation 

demonstrating that the contributions in question were not excessive, or if excessive, 

were resolved by refund. 

3. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, MBFI submitted a written 

response as follows: 

“When the current treasurer took over the accounting and compliance duties in 

early 2019, he found a number of refund checks that had been prepared but not 

Summary 

During audit fieldwork, the Audit staff determined that MBFI failed to properly disclose 

joint fundraising memo entries totaling $933,814 from 13 joint fundraising committees. 

“personal loans” per 11 C.F.R. §116.11(a); and whether the $250,000 post-election loan-repayment 

limitation was a constitutional and enforceable limitation. On June 20, 2019, the Commission concluded 

that MBFI may not repay the Candidate in excess of $250,000 more than 20 days after the Primary 

election and rejected MBFI’s argument that the candidate loan repayment requirements are 

unconstitutional. 
29 

MBFI also failed to properly disclose the correct loan balances and loan terms for 29 

transactions totaling $11,569,963. In response to the Interim Audit Report 

recommendation, MBFI did not file amendments or a Form 99 (Miscellaneous Electronic 

Submission) and did not provide any documentation. However, regarding disclosure of 

joint fundraising memo entries, MBFI stated “all have been corrected and will be 

included in the amendments that have been prepared to be filed.” Regarding the 

disclosure of loan balances and loan terms, MBFI did not agree with the finding. Absent 

filing of amendments or a Form 99, MBFI has not corrected the public record regarding 

memo entries from joint fundraisers totaling $933,814, and loan balances and terms for 

transactions totaling $11,569,963. 

Legal Standard 

A. Contents of Reports. Each report must disclose for the reporting period and for the 

election cycle, the total amount of: 

x Contributions from persons other than political committees; 

x Contributions from authorized committees which makes a transfer to the reporting 

committee; 

x Loans made by or guaranteed by the candidate and the identification of each 

person who makes, endorses or guarantees a loan to the committee. 

52 U.S.C. §30104(b)(2)(G), (3)(E) and 4(D). 

B. Contents Required - Information for Contributions. For each itemized 

contribution, the committee must provide the following information: 

x The contributor’s full name and address (including zip code); 

x The contributor’s occupation and the name of his or her employer (for individual 

contributors); 

x The date of receipt (the date the committee received the contribution); 

x The amount of the contribution; and 

x The aggregate year-to-date total of all contributions from the same individual. 11 

CFR §§100.12 and 104.3(a)(4) and 52 U.S.C. §30104(b)(3)(A). 

C. Itemization of Contributions from Joint Fundraising Efforts. Participating 

political committees shall report joint fundraising proceeds in accordance with 11 

CFR §102.17(c) (8) when such funds are received from the fundraising 

representative. 11 CFR §102.17(c)(3)(iii). 

Each participating political committee reports its share of the net proceeds as a 

transfer-in from the fundraising representative and shall also file a memo Schedule A 

itemizing its share of gross receipts as contributions from the original contributors to 

the extent required under 11 CFR §104.3(a). 11 CFR §102.17(c)(8)(i)(B). 

D. Itemization required. Political committees must itemize: 

x Any contributions from an individual if it exceeds $200 per calendar year (or per 

election cycle in the case of an authorized committee) either by itself or when 

aggregated with other contributions from the same contributor. 11 CFR 

§104.3(a)(4)(i); and 

x Every contribution from any political committee, regardless of the amount. 

52 U.S.C. §30104(b)(3)(A) and (B). 
30 

E. Itemizing Loans. Each person who makes a loan to the political committee during 

the reporting period must be disclosed with the following information: 

x Identification of any endorser or guarantor of the loan; 

x The date the loan was made; 

x The amount of the loan. 11 CFR §104.3(a)(4)(iv). 

F. Schedule C. On a Schedule C, both the original loan and payments to reduce 

principal must be reported each reporting period until the loan is repaid. The 

committee need only list the candidate as the source of the loan. Also, the type of 

loan the candidate receives (i.e., bank loan, brokerage account, credit card, home 

equity line of credit) must be disclosed in either the first box for endorsers and 

guarantors with a notation for loan type or in the box for “Loan Source” after the 

candidate’s name. 11 CFR §104.3(d) and §104.11. 

G. Reporting Bank Loans, Home Equity Loans and Other Lines of Credit. A 

political committee must disclose in the report covering the period when the loan was 

obtained on Schedules C-1: 

x The date, amount, and interest rate of the loan; 

x The name and address of the lending institution; and 

x The types and value of the collateral or other sources of repayment that secure the 

loan, if any. 11 CFR §104.3(d)(4). 

Facts and Analysis 

A. Transfers from Joint Fundraising Committees 

1. Facts 

The Audit staff’s review of all joint fundraising transfers identified that MBFI failed 

to properly disclose joint fundraising memo entries totaling $933,814 from 13 joint 

fundraising committees. The chart below details the $933,814 as follows: 

Disclosure Errors 

Type of Review 100% 

Memo Entries Not Itemized $29,785 

Memo Entries Disclosed on Schedule A - Incorrect Receipt Date $904,029 

Total Amount $933,814 

2. Additional Information 

For the contributions that were disclosed on Schedule A, totaling $904,029, MBFI 

reported the date of the transfer from the joint fundraising committee rather than the 

date the contribution was reported received by the joint fundraising committee. 
 

31 

contribution entries. The Committee intends to take further corrective action as 

may be required at the conclusion of this matter.” 

The Interim Audit Report recommended that MBFI provide additional documentation 

demonstrating that the joint fundraising memo entries were correctly disclosed on 

Schedule A. Absent such documentation, it was further recommended that MBFI 

amend its disclosure reports or file a Form 99 7 to correct the memo entries totaling 

$904,029 and itemize the missing memo entries on Schedule A totaling $29,785. 

4. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, MBFI submitted a written 

statement as follows : 

“Regarding the receipts from joint fundraising committees (“JFCs”), two years 

ago the current treasurer reviewed all receipts from JFC’s and personally 

contacted all the JFC treasurers from whom the Committee did not have memo 

entries related to the transfers. He then added those memo entries to the 

Committee’s reports as the information was obtained. Some of the reported JFC 

transfers were missing memo entries and others were reported on line 11c, not 

line 12. All have been corrected and will be included in the amendments that 

have been prepared to be filed.” 

The Audit staff notes that MBFI has not filed amendments or a Form 99 as of this 

report and maintains, absent filing of amendments or a Form 99, that MBFI has not 

corrected the public record for disclosing memo entries from joint fundraisers totaling 

$933,814. 

B. Disclosure of Loans 

3. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter with MBFI representatives during the exit 

conference and provided schedules of the incorrectly disclosed joint fundraising 

memo entries. 

In response to the exit conference, MBFI submitted the written response as follows: 

“The Committee provided documentation related to this preliminary finding 

during the audit process and has no new materials to provide with this response. 

To date, the Committee has made additional preemptive adjustments to its 

contributor information, including identifying memo entries to be added to 

1. Facts 

During audit fieldwork, the Audit staff reviewed 31 bank loans, lines of credit and 

candidate loans to MBFI totaling $11,666,483. Of this amount: 

x Three bank loans, 13 lines of credit and 13 candidate loans, for 29 transactions 

totaling $11,569,963 were disclosed incorrectly on Schedules C and C-1; and 

x Loans and lines of credit for two transactions, totaling $96,520, were not 

reported (see Finding 1. Misstatement of Financial Activity). 
32 

Disclosure errors consisted of disclosing incorrect or missing information including: 

loan terms and dates, repayment amounts, loan forgiveness, outstanding balances, as 

well as disclosing the Candidate’s spouse as a guarantor for a loan. The loan 

documentation did not support the information that was reported on the disclosure 

reports. 

2. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter with MBFI representatives during the exit 

conference and provided a schedule of the loans and lines of credit disclosed 

incorrectly. 

In response to the exit conference, MBFI submitted a written response as follows: 

“The Committee provided documentation related to this preliminary finding 

during the audit process and has no new materials to provide with this response. 

The Committee intends to take further corrective action as may be required at the 

conclusion of this matter.” 

The Interim Audit Report recommended that MBFI provide additional documentation 

demonstrating that the identified loans and lines of credit were correctly disclosed. 

Absent such documentation, it was further recommended that MBFI amend its reports 

or file a Form 997 to correct the disclosure errors. 

3. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, MBFI stated, “...it is 

currently unclear to the Committee how the Audit Division concluded that the 

Committee accepted two unreported candidate loans totaling $96,520 since this 

finding does not correspond to any of the Committee’s records.” There was no 

specific comment regarding the disclosure of the 29 transactions totaling 

$11,569,963. Additionally, MBFI further stated: 

“Furthermore, to the extent that the facts and conclusions in Finding 6 relate to 

the $250,000 loan repayment limit found in Section 403 of BCRA or the 

Committee’s acceptance of debt retirement contributions, the Audit Division 

should amend this finding because of the recent federal court decision in Ted 

Cruz for Senate v. Federal Election Commission, Civil No. 19-cv-908 (D.C. Dist. 

Ct., June 3, 2021). Since many of the facts and conclusions of Finding 6 may 

involve and may be impacted by the loan repayment limit, the Commission’s 

conclusions may rely on an unconstitutional provision that renders Finding 6 

invalid, or at least a portion of it. 

Given the significant impact that the Ted Cruz for Senate ruling may have on 

Finding 6, the Committee believes it is imperative for the Commission’s Audit 

staff to reconsider its preliminary audit findings, reissue a revised Interim Audit 

Report, and give the Committee the opportunity to respond to the revised Interim 

Audit Report. For this reason, the Committee will refrain from providing any 

additional response to Finding 6 until that occurs.” 
 

 

33 

cited by MBFI. MBFI has not filed amendments or a Form 99 as of this report. The 

Audit staff maintains, absent filing of amendments or a Form 99, that MBFI has not 

corrected the public record regarding the proper disclosure of the loans, including the 

loan balance and loan terms, and incorrectly disclosing the Candidate’s spouse as a 

guarantor for transactions totaling $11,569,963. 

Finding 7. Prohibited Candidate Personal Loan 

Repayments 

Summary 

Based on a review of loans, the Audit staff determined that MBFI made excessive 

Primary candidate loan and interest repayments totaling $750,669. This amount is in 

excess of the $250,000 limit permitted for repayment to the Candidate within 20 days 

following the Primary election. In response to the Interim Audit Report recommendation, 

MBFI stated, “...the Audit Division should amend this finding because of the recent 

federal court decision in Ted Cruz for Senate v. Federal Election Commission, Civil No. 

19-cv-908....” The Audit staff maintains MBFI did not comply with 11 CFR §116.11 

(d). 

Legal Standard 

A. Limitation on Repayment of Personal Loans. Any candidate who incurs personal 

loans made after the effective date of the Bipartisan Campaign Reform Act of 2002 in 

connection with the candidate’s campaign for election shall not repay (directly or 

indirectly), to the extent such loans exceed $250,000, such loans from any 

contributions made to such candidate or any authorized committee of such candidate 

after the date of such election. 52 U.S.C. §30116(j). 

The Audit staff notes that MBFI was provided the schedule for the unreported loans 

and lines of credit totaling $96,520 at the exit conference, as it relates to the 

unreported loans outlined in Finding 1, Misstatement of Financial Activity. In 

addition, the Audit staff offered to send the schedule again with the issuance of the 

Interim Audit Report if MBFI requested it; however, MBFI did not make the request 

at that time. The Audit staff again provided the relevant information upon receipt of 

MBFI’s response to the Interim Audit Report. 

The Audit staff notes that this finding is not related to MBFI making Candidate loan 

and interest repayments in excess of the $250,000 limit permitted for repayment to 

the Candidate, as discussed in Finding 7, and therefore is not impacted by the ruling 

B. Restriction on an Authorized Committee’s Repayment of Personal Loans 

Exceeding $250,000 Made by the Candidate to the Authorized Committee. 

Specific to this finding, personal loans mean a loan or loans, including advances, 

made by a candidate, using personal funds, as defined in 11 CFR §100.33, to his or 

her authorized committee where the proceeds of the loan were used in connection 

with the candidate's campaign for election. Personal loans also include loans made to 

a candidate's authorized committee that are endorsed or guaranteed by the candidate 

or that are secured by the candidate's personal funds. 11 CFR §116.11(1)(a). 
34 

For personal loans that, in the aggregate, exceed $250,000 in connection with an 

election, the authorized committee: 

x May repay the entire amount of the personal loans using contributions to the 

candidate or the candidate's authorized committee provided that those 

contributions were made on the day of the election or before; 

x May repay up to $250,000 of the personal loans from contributions made to the 

candidate or the candidate's authorized committee after the date of the election; 

and 

x Must not repay, directly or indirectly, the aggregate amount of the personal 

loans that exceeds $250,000, from contributions to the candidate or the 

used to repay the loan as a contribution by the candidate. 

filed after the election pursuant to 11 CFR §104.5(a) or (b) and 11 CFR 

§116.11(1)(c)(1),(2) and (3) 

This section applies separately to each election. 11 CFR §116.11 (d). 

Facts and Analysis 

A. Facts 

Based on a review of loans, the Audit staff determined that MBFI made Primary 

candidate's authorized committee if those contributions were made after the date 

of the election. 11 CFR §116.11(1)(b)(1),(2) and (3). 

If the aggregate outstanding balance of the personal loans exceeds $250,000 after the 

elections, the authorized political committees must comply with the following 

conditions: 

x If the authorized committee uses the amount of cash-on-hand as of the day after 

the election to repay all or part of the personal loans, it must do so within 20 

days of the election. 

x Within 20 days of the election date, the authorized committee must treat the 

portion of the aggregate outstanding balance of the personal loans that exceeds 

$250,000 minus the amount of cash-on-hand as of the day after the election 

x The candidate’s principal campaign committee must report the transactions in 

paragraphs (c) (1) and (c) (2) of this section in the first report scheduled to be 

x

candidate loan and interest repayments totaling $1,000,669 after the May 8, 2018 Primary 

election. MBFI could have repaid up to $250,000 of the personal loans for the Primary 

election from contributions made to the Candidate after the date of the election. Also, 

after 20 days following the Primary election, MBFI was required to treat as a contribution 

the amount which was equal to the outstanding balance of the candidate Primary loans 

less the repayment limit. 14 Therefore, the Audit staff identified that MBFI made 

excessive Primary candidate loan and interest repayments totaling $750,669. 

x Primary candidate loan and interest repayments + $1,000,669 

x Allowable repayment amount of candidate loans 

from contributions limit - 250,000 

Excessive Primary Candidate Loan and Interest Repayments $750,669 
35 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter with MBFI representatives at the exit conference 

and provided schedules of the apparent excessive contributions. 

In response to the exit conference MBFI submitted a written response as follows: 

“The FEC’s preliminary finding shows no apparent “mis-disclosure” of the 

transactions in question. The Committee has no new materials to provide with this 

response, but it is the Committee’s belief that the FEC’s preliminary finding is based 

on the FEC’s mischaracterization of certain loans (which, in turn, would require the 

Federal Election Commission, Civil No. 19-cv-908 (D.C. Dist. Ct., June 3, 2021). 

Since many of the facts and conclusions of Finding 7 involve and are impacted by 

the loan repayment limit, the Commission’s conclusions rely on an 

unconstitutional provision that renders Finding 7 invalid, or at least a portion of it. 

and others, the Committee believes it is imperative for the Commission’s Audit 

staff to reconsider its preliminary audit findings, reissue a revised Interim Audit 

the decision.

loans to be converted to personal contributions and not repayable). The Committee 

will likely be requesting Commission guidance on legal questions related to this 

finding.”6 

The Interim Audit Report recommended that MBFI provide additional documentation to 

demonstrate the Primary candidate loan and interest repayments were not excessive and 

provide any relevant comments on the matter. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, MBFI stated: 

“To the extent that the facts and conclusions in Finding 7 relate to the $250,000 

loan repayment limit found in Section 403 of BCRA or the Committee’s 

acceptance of debt retirement contributions, the Audit Division should amend this 

finding because of the recent federal court decision in Ted Cruz for Senate v. 

Given the significant impact that the Ted Cruz for Senate ruling has on Finding 7 

Report, and give the Committee the opportunity to respond to the revised Interim 

Audit Report. For this reason, the Committee will refrain from providing any 

additional response to Finding 7 until that occurs.” 

Although there was a decision in the D.C. District Court, the Commission is appealing 

 Therefore, the Audit staff maintains that MBFI made excessive Primary 

candidate loan and interest repayments totaling $750,669.