FEDERAL ELECTION COMMISSION 

SENSITIVE 

BEFORE THE FEDERAL ELECTION COMMISSION 

CO 

^

<TMi

^

rsi

TM

5[

Q

oo

 In the Matter of:

 The November Fund and

 Bill Sittman, in his official

 capacity as treasurer;

 U.S. Chamber of Commerce

 Tom Donohue

 )' 

)

)

 ) 

) 

) 

) 

 MUR5541 

STATEMENT OF REASONS OF COMMISSIONERS 

CYNTHIA L. BAUERLY AND ELLEN L. WEINTRAUB 

On October 21, 2008, the Commission failed, by a vote of 3-3, to accept a signed 

conciliation agreement with the November Fund and Bill Sittman, in his official capacity 

as treasurer ("The November Fund"), that would have settled violations of 2 U.S.C. 

§§433, 434, 441a(f), and 441b(a) of the Federal Election Campaign Act of 1971, as 

amended ("FECA"). We voted to adopt the recommendation of the Office of the General 

Counsel to accept the signed conciliation agreement. We write to articulate our reasons 

for doing so and to express our concern about the dramatic departure this result represents 

from the Commission's prior enforcement efforts and the law itself. 

Although our colleagues who voted to reject the signed conciliation agreement 

have not yet issued their Statement of Reasons, we believe it is important to provide the 

public with some understanding of the decision in this matter. Our discussion of their 

arguments is based on the articulation of their reasons thus far and we will respond to any 

further arguments in a second Statement if necessary. 

I. Background 

This matter arose from a complaint filed by Citizens for Responsibility and Ethics 

in Washington alleging, inter alia, that the U.S. Chamber of Commerce ("the Chamber'1) 

and Tom Donohue as president, violated the FECA by making corporate contributions or 

expenditures to influence a federal election in connection with a $3,000,000 contribution 

to an organization called The November Fund, and that the November Fund violated the 
Statement of Reasons in MUR 5541

 

Page 2 of6

 

FECA by failing to register and report as a political committee. The allegations in the 

complaint were very similar to those in several prior Matters Under Review ("MUR"), 

including MUR 5365 (Club for Growth); MUR 5403 (America Coming Together); MUR 

5440 (The Media Fund); and MUR 5487 (Progress for America Voter Fund), all of which 

dealt with the political committee status of organizations registered under section 527 of 

the Internal Revenue Code ("527 organizations"). 

On March 8,2005, the Commission found reason to believe the November Fund 

violated §§ 433,434,441a(f) and 441b(a) of the Act, and that the U.S. Chamber of 

Commerce and Thomas Donohue, President & CEO, violated 2 U.S.C. § 441b(a) of the 

Act. At that time, the Commission launched a formal investigation into the matter. The 

K

 investigation spanned several years and uncovered thousands of pages of documents. We 

^ will not attempt to recite all of the relevant facts, but summarize as follows: 

<\i 

(N • The November Fund was created in November 2004 by Ken Rietz, COO 

^ of Burson Marsteller, and officials at the United States Chamber of 

5. Commerce, a client of Burson Marsteller. 

O 

<x> • The Chamber contributed $3,000,000 to The November Fund for the 

TM purpose of preventing John Edwards from being elected Vice President of 

the United States. The Chamber's contribution represented 95% of the 

total contributions to The November Fund. See Factual and Legal 

Analysis at 2. 

• Solicitations to potential donors, which netted a total of $ 124,718, 

indicated that the funds received would be used in Presidential election 

battleground states to attack Sen. Edwards and his career as a trial lawyer 

and raise voters' concerns about his influence were he to be elected Vice 

President. 

• The November Fund spent approximately $1,172,962 on Internet 

advertisements and direct mail pieces directly attacking Senator Edwards. 

The remainder of The November Fund's disbursements, orapproximately 

$1,951,756, was for fundraising and administrative costs, and television 

and radio advertisements that were intended to "complement" the antiEdwards advertisements. 

Upon completion of the investigation, based upon the voluminous body of 

evidence uncovered during the investigation and consistent with Commission precedent 

regarding other 527 organizations, the Commission authorized the Office of General 

Counsel to enter into pre-probable cause conciliation negotiations with The November 

Fund. 

Pursuant to the Commission's instructions, the Office of General Counsel 

successfully negotiated a conciliation agreement with the November Fund and Bill 

Sittman, in his official capacity as treasurer. The legal theory upon which this matter was 
Statement of Reasons in MUR 5541

 

Page 3 of6

 

based is the same legal theory that the Commission has consistently applied in other 

enforcement matters regarding 527 organizations. See MUR 5365 (Club for Growth); 

MUR 5403 (America Coming Together); MUR 5440 (The Media Fund); MUR 5487 

(Progress for America Voter Fund); MUR 5542 (Texans for Truth); MUR 5568 

(Empower Illinois); and MUR 5754 (MoveOn.org). Specifically, the Commission 

analyzes whether an organization has received contributions or made expenditures, as 

defined in the FECA, in excess of $1,000 during a calendar year and, if it has, then looks 

to whether the organization's "major purpose" is campaign activity. 

II. Legal Analysis 

00

 The Act defines a "political committee" as any committee, club, association, or 

2 other group of persons that receives "contributions" or makes "expenditures" for the 

rsi purpose of influencing a federal election which aggregate in excess of $ 1,000 duringa 

rM calendar year. See 2 U.S.C. § 431 (4)(A). For the purpose of triggering political 

^ committee status, the Act defines the terms "contributions" and "expenditures" as 

,_, including "anything of value made by any person for the purpose of influencing any 

0 election for Federal office." See 2 U.S.C. § 431 (8)(A)(i), (9)(A)(i). 

oo 

<M The November Fund exceeded the statutory threshold for political committee 

status when it received "contributions" exceeding $1,000 in response to fundraising 

solicitations clearly indicating that funds received would be used to target the defeat of 

Sen. Edwards in the 2004 Vice Presidential election. Money received in response to 

fundraising solicitations that clearly indicate the funds being sought will be targeted to 

the election or defeat of clearly identified federal candidates constitute contributions 

under the Act. 2 U.S.C. § 431(8)(A); FEC v. Survival Education Fund, Inc., 65 F.3d 285, 

295 (2d Cir. 1995) ("Survival Education Fund"); see also 11 C.F.R. § 100.57. In this 

matter, the evidence showed that the language used in a series of fundraising solicitations 

sent by and on behalf of The November Fund to the Chamber, and in some cases other 

donors, clearly indicated that the funds received would be targeted to the reelection of 

George W. Bush and/or the defeat of a specific federal candidate, Sen. John Edwards, and 

by extension Sen. John Kerry.' 

Some of our colleagues have suggested that the Commission could not apply 

11 C.F.R. § 100.57 in this matter because that regulation was promulgated after the 

activity at issue in this matter occurred. This assertion is faulty for two reasons. First, 

the Factual and Legal Analysis in this matter, which formed the basis of the 

Commission's decision to find reason to believe the November Fund violated the Act, 

makes no mention of 11 C.F.R. § 100.57 and instead relies on Survival Education Fund. 

See 65 F.3d 285,295 (2d Cir. 1995) (finding that a mailer solicited "contributions" 

1

 For example, a July 19,2004, solicitation from the November Fund to the U.S. Chamber of Commerce 

stated in part: ""The Truth about Trial Lawyers" campaign should have the following objectives:... Positively impact the Bush-Cheney re-election by helping to solidify the base while having an impact on 

swing voters" and "During the final two weeks of the campaign, we will continue the broadcast advertising 

without Edwards1 name, while using direct mail, print and the Internet to go after Edwards." 
Statement of Reasons in MUR 5541

 

Page 4 of6 

under FECA when it left "no doubt that the funds contributed would be used to advocate 

[a candidate's] defeat at the polls, not simply to criticize his policies during the election 

year.1'). Second, although section 100.57 was indeed promulgated a month after the 

activity at issue in this matter occurred, the definition at 11 C.F.R. § 100.57 merely 

codified Survival Education Fund and did not create a new framework for which the 

November Fund was not already on notice.2 See Explanation and Justification, Political 

Committee Status, Definition of Contribution, and Allocation for Separate Segregated 

Funds and Nonconnected Committees, 69 FR 68056 (Nov. 23, 2004); Supplemental 

Explanation and Justification, Political Committee Status, 72 FR 5595 (Feb. 7,2007). 

Thus, we believe that the rule of Survival Education Fund, as codified in 11 C.F.R. 

§ 100.57, is directly applicable to this matter and any suggestion to the contrary is not 

°* tenable. Applying this standard to the factual record here results in a finding that The 

^ November Fund received far more than the $1,000 statutory threshold for contributions in 

(\i response to its solicitations, thereby triggering political committee status. See 2 U.S.C. 

<N §431(8)(A). <\i 

JJ With respect to the "major purpose" test, the Supreme Court has held that

 i4[t]o 

Q fulfill the purposes of the Act'* and avoid "reaching] groups engaged purely in issue 

<x> discussion," only organizations whose major purpose is campaign activity can be 

(M considered political committees under the Act. See, e.g., Buckley v. Valeo, 424 U.S. 1, 

79; FEC v. Massachusetts Citizens for Life, 479 U.S. 238,262 (1986) ("MCFL "). 

An organization's "major purpose" may be established through public statements 

of purpose. See, e.g., FEC v. Malenick, 310 F. Supp. 2d 230,234-36 (D.D.C. 2004) 

(court found organization evidenced its "major purpose" through its own materials which 

stated the organization's goal of supporting the election of Republican Party candidates 

for federal office and through efforts to get prospective donors to consider supporting 

federal candidates); FEC v. GOPAC. Inc., 917 F. Supp. 851,859 (D.D.C. 1996) 

("organization's [major] purpose may be evidenced by its public statements of its purpose 

or by other means").3 An organization also can satisfy Buckley's "major purpose" test 

through sufficient spending on campaign activity. MCFL, 479 U.S. at 262-264 (political 

committee status would be conferred on MCFL if its independent spending were to 

become so extensive that the group's major purpose may be regarded as campaign 

activity). 

- Indeed, the Notice of Proposed Rulemaking, which signaled the Commission's intention to codify 

Survival Education Fund, was published in the Federal Register on March 11,2004 and a hearing on the 

proposed rule was held in April 2004, several months before the November Fund came into existence. 

3

 In its IRS Notice of 527 Status, The November Fund states that its purpose is to "engage in political 

activities that educate the general public regarding the public policy positions of candidates for federal, state and local office and mobilize voters in compliance with federal and state laws." The November Fund, 

Form 8871 (Aug. 11,2004). 
Statement of Reasons in MUR 5541

 

Page 5 of6

 

In this matter, The November Fund's public statements and solicitations made 

clear that its mission was to oppose John Edwards's candidacy in 2004.4

 Furthermore, 

The November Fund spent virtually all of its money on federal campaign activity. 

Specifically, of its $3,124,718 budget, The November Fund spent $456,127 on Internet 

advertisements and $716,835 on direct mail pieces that attacked Senator Edwards. The 

November Fund's website, which it spent $56,500 to create and manage, also focused 

almost exclusively on John Edwards and the Kerry-Edwards campaign. The remainder 

of The November Fund's disbursements financed administrative costs ($384,802) and 

television and radio advertisements ($1,510,454) that did not identify a federal candidate 

but were - by its own admission - intended to complement the anti-Edwards 

advertisements. Thus, through its public statements regarding its purpose and its 

O spending on campaign activity, it is clear that The November Fund's major purpose was 

O* campaign activity, satisfying Buckley's test. iTMi 

(\i 

(SJ In refusing to accept the signed conciliation agreement, some of our colleagues 

CM have suggested that The November Fund's major purpose was issue advocacy focused on 

**r trial lawyers rather than campaign activity to defeat John Edwards. The facts here simply 

^ do not support this view. The November Fund's strategic choice to focus on the fact that 

JjJ John Edwards was a trial lawyer as its vehicle for attacking his candidacy does not negate 

^ the fact that its statements and spending show that its major purpose was to defeat the 

Kerry-Edwards ticket in the November 2004 election. Nothing in its communications or 

solicitations could be read, for example, as promoting tort reform legislation or any other 

related issue. Instead, what is clear is that it aimed to prevent a trial lawyer from 

achieving the "biggest prize of all - the White House." It is also worth noting that the 

organization's choice of'The November Fund" as its name leaves little to the 

imagination about its intent to influence the November 2004 general election. 

The facts in this matter clearly establish that The November Fund exceeded the 

$1,000 threshold for political committee status set forth in 2 U.S.C. § 431(4) by receiving 

over $1,000 in contributions in response to fundraising solicitations clearly indicating that 

the funds received would be targeted to the election or defeat of a clearly identified 

federal candidate. As a result, because The November Fund had the major purpose of 

federal campaign activity, The November Fund had a duty to register as a political 

committee with the Commission and to disclose its receipts and disbursements to the 

public through reports filed with the Commission. This is a duty the November Fund has 

apparently acknowledged by voluntarily entering into a conciliation agreement with the 

* For example, The November Fund's major purpose is evident in a "Strategic Overview" memorandum 

provided to its board by its senior strategist. The memo suggests that since •'Kerry-Edwards are leading 

narrowly in public polls as of early August in Ohio, Nevada, New Mexico, and Wisconsin," "these four 

should be top priorities." In the final section of the memo, the author argues that The November Fund 

"should attempt to simply raise the 'doubt level' on Edwards by reinforcing known attitudes that play to 

our greater strengths." Additionally, in an overview document prepared for and distributed to prospective 

large donors. The November Fund stated that it would "have a single focus - to tell the truth about trial 

lawyers, especially the career of John Edwards. Now, they are after the biggest prize of all - The White 

House - with over 1,000 political appointments and potentially four members of the Supreme Court. We 

formed The November Fund to promote a full discussion of those issues before November 2nd." 
Statement of Reasons in MUR 5541 

Page 6 of6 

Commission. Our colleagues' refusal to accept the signed conciliation agreement with 

the November Fund amounts to a refusal to enforce the law. 

*~i

^

PJ

CM

(N

We do not dispute the ability of the current Commissioners to depart from the 

decisions of past Commissioners in the enforcement context. In fact, if those decisions 

were arbitrary and capricious or contrary to our regulations or the law, we believe it is 

our duty to depart from those decisions and enforce the law fairly, equitably, and in a 

manner that comports with Congressional intent. That is not what happened here. The 

Commission's previous decision to find reason to believe the November Fund violated 

the FECA; the decision to open an investigation; the decision to enter into conciliation 

prior to a finding of probable cause to believe; and the terms that the Commission 

 approved in its proposed conciliation agreement, were all decisions well grounded in law, based upon the facts, and in accordance with Commission precedent. That is why we 

 supported the recommendation of the Office of the General Counsel to accept the 

 agreement signed by the November Fund, and why we are gravely concerned by the 

 refusal of three of our colleagues to do so. 

O 

rsi _ 

Cynthia UBauerly

Commissioner 

 Date 

Ellen L. Weintraub

Commissioner 

 Date