rwilkins on PROD1PC63 with RULES

31438 Federal Register / Vol. 72, No. 109 / Thursday, June 7, 2007 / Rules and Regulations 

Title—7 Agriculture 

PART 24—[Removed and reserved] 

 1. Remove and reserve part 24, 

consisting of §§ 24.1 through 24.21. 

PART 400—GENERAL 

ADMINISTRATIVE REGULATIONS 

 2. Revise the authority citation for part 

400 to read as follows: 

Authority: 40 U.S.C. 121, 41 U.S.C. 421. 

 3. Amend § 400.169 by revising the 

last sentence of paragraph (c) and 

paragraph (d) to read as follows: 

§ 400.169 Disputes. 

* * * * * 

(c) * * * Such determinations will 

not be appealable to the Civilian Board 

of Contract Appeals. 

(d) Appealable final administrative 

determinations of the Corporation under 

paragraph (a) or (b) of this section may 

be appealed to the Civilian Board of 

Contract Appeals in accordance with 48 

CFR part 6102. 

Title 36—Parks, Forests, and Public 

Property 

PART 223—SALE AND DISPOSAL OF 

NATIONAL FOREST SYSTEM TIMBER 

 4. The authority citation for part 223 

continues to read as follows: 

Authority: 90 Stat. 2958, 16 U.S.C. 472a; 98 

Stat. 2213, 16 U.S.C. 618, 104 Stat. 714–726, 

16 U.S.C. 620–620j; unless otherwise noted. 

 5. Amend § 223.138 by removing 

paragraph (b)(8) and revising paragraphs 

(b)(7)(i)(C) and (D) and by removing 

paragraph (b)(7)(i)(E) to read as follows: 

§ 223.138 Procedures for Debarment. 

* * * * * 

(b) * * * 

(7) * * * 

(i) * * * 

(C) State the period of debarment, 

including effective dates (see § 223.139); 

and 

(D) Specify any limitations on the 

terms of the debarment. 

* * * * * 

Title 48—Federal Acquisition 

Regulations System, chapter 4, 

Department of Agriculture. 

PART 409—CONTRACTOR 

QUALIFICATIONS 

 6. Revise the authority citation for part 

409 to read as follows: 

Authority: 40 U.S.C. 121, 41 U.S.C. 421. 

 7. Remove § 409.470. 

PART 432—CONTRACT FINANCING 

 8. Revise the authority citation for part 

432 to read as follows: 

Authority: 40 U.S.C. 121, 41 U.S.C. 421. 

 9. Revise § 432.616 to read as follows: 

§ 432.616 Compromise Actions. 

Compromise of a debt within the 

proceedings under appeal to the 

Civilian Board of Contract Appeals is 

the responsibility of the contracting 

officer. 

PART 433—PROTESTS, DISPUTES 

AND APPEALS 

 10. Revise the authority citation for 

part 433 to read as follows: 

Authority: 40 U.S.C. 121, 41 U.S.C. 421. 

 11. Revise § 433.203–70 to read as 

follows: 

§ 433.203–70 Civilian Board of Contract 

Appeals. 

The organization, jurisdiction, and 

functions of the Civilian Board of 

Contract Appeals, together with its 

Rules of Procedure, are set out in 48 

CFR part 6101. 

Done in Washington, DC, this 25th day of 

May 2007. 

Mike Johanns, 

Secretary of Agriculture. 

[FR Doc. 07–2702 Filed 6–6–07; 8:45 am] 

BILLING CODE 3410–01–M 

FEDERAL ELECTION COMMISSION 

11 CFR Part 104 

[Notice 2007–13] 

Statement of Policy Regarding 

Treasurers’ Best Efforts To Obtain, 

Maintain, and Submit Information as 

Required by the Federal Election 

Campaign Act 

AGENCY: Federal Election Commission. 

ACTION: Statement of Policy. 

SUMMARY: The Federal Election 

Commission (the ‘‘Commission’’) is 

issuing a Policy Statement to clarify its 

enforcement policy with respect to the 

circumstances under which it intends to 

consider a political committee and its 

treasurer to be in compliance with the 

recordkeeping and reporting 

requirements of the Federal Election 

Campaign Act, as amended (‘‘FECA’’). 

Section 432(i) of FECA provides that 

when the treasurer of a political 

committee demonstrates that best efforts 

were used to obtain, maintain, and 

submit the information required by 

FECA, any report or records of such 

committee shall be considered in 

compliance with FECA or the statutes 

governing the public financing of 

Presidential candidates. In the past, the 

Commission has interpreted this section 

to apply only to a treasurer’s efforts to 

obtain required information from 

contributors to a political committee, 

and not to maintaining information or to 

submitting reports. However, the district 

court in Lovely v. FEC, 307 F. Supp. 2d 

294 (D. Mass. 2004), held that the 

Commission should consider whether a 

treasurer used best efforts under FECA 

with regard to efforts made to submit a 

report in a timely manner. This Policy 

Statement makes clear that the 

Commission intends to apply FECA’s 

best efforts provision to treasurers’ and 

committees’ efforts to obtain, maintain, 

and submit information and records to 

the Commission consistent with the 

holding of the Federal court in Lovely. 

Further information is provided in the 

supplementary information that follows. 

DATES: Effective Date: June 7, 2007. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Ron B. Katwan, Assistant General 

Counsel, or Ms. Margaret G. Perl, 

Attorney, 999 E Street, NW., 

Washington, DC 20463, (202) 694–1650 

or (800) 424–9530. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. Statutory and Regulatory Provisions 

FECA states the ‘‘best efforts defense’’ 

in 2 U.S.C. 432(i) as follows: 

When the treasurer of a political committee 

shows that best efforts have been used to 

obtain, maintain, and submit the information 

required by this Act for the political 

committee, any report or any records of such 

committee shall be considered in compliance 

with this Act or chapter 95 or chapter 96 of 

title 26. 

The Commission implemented this 

provision in 11 CFR 104.7(a) with 

regulatory language virtually identical 

to the statutory provision: 

When the treasurer of a political committee 

shows that best efforts have been used to 

obtain, maintain and submit the information 

required by the Act for the political 

committee, any report of such committee 

shall be considered in compliance with the 

Act. 

Paragraph (b) of 11 CFR 104.7 

specifies the actions that treasurers of a 

political committee must take to 

demonstrate that they have exercised 

best efforts to obtain and report the 

‘‘identification’’ of each person whose 

contribution(s) to the political 

committee and its affiliated political 

committees aggregate in excess of $200 

in a calendar year (or in an election 

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Federal Register / Vol. 72, No. 109 / Thursday, June 7, 2007 / Rules and Regulations 31439 

cycle in the case of an authorized 

committee).1 ‘‘Identification’’ includes 

the person’s full name, mailing address, 

occupation, and name of employer. See 

11 CFR 100.12. 

Both the language of FECA and the 

Commission’s regulation at 11 CFR 

104.7(a) apply the best efforts defense 

broadly to efforts by treasurers to 

‘‘obtain, maintain and submit’’ the 

information required to be disclosed by 

FECA. In past enforcement actions, 

however, the Commission has 

interpreted this statutory and regulatory 

language to apply only to efforts to 

‘‘obtain’’ contributor information.2 This 

interpretation draws from an example 

contained in the provision’s legislative 

history. See H.R. Rep. No. 96–422, at 14 

(1979) (‘‘One illustration of the 

application of this [best efforts] test is 

the current requirement for a committee 

to report the occupation and principal 

place of business of individual 

contributors who give in excess of 

$100’’). 

B. The Lovely Decision 

In Lovely, a political committee 

challenged an administrative fine the 

1 The U.S. Court of Appeals for the District of 

Columbia Circuit referred to 11 CFR 104.7(b) as a 

‘‘Commission regulation interpreting what political 

committees must do under [FECA] to demonstrate 

that they have exercised their ‘best efforts’ to 

encourage donors to disclose certain personally 

identifying information.’’ Republican Nat’l Comm. 

v. FEC, 76 F.3d 400, 403 (D.C. Cir. 1996). 2 In 1980, the Commission explained that ‘‘[i]n 

determining whether or not a committee has 

exercised ‘best efforts,’ the Commission’s primary 

focus will be on the system established by the 

committee for obtaining disclosure information.’’ 

Amendments to Federal Election Campaign Act of 

1971; Regulations Transmitted to Congress, 45 FR 

15080, 15086 (Mar. 7, 1980) (emphasis added). In 

1993, the Commission referred to ‘‘the requirement 

of [FECA] that treasurers of political committees 

exercise best efforts to obtain, maintain and report 

the complete identification of each contributor 

whose contributions aggregate more than $200 per 

calendar year.’’ Final Rule on Recordkeeping and 

Reporting by Political Committees: Best Efforts, 58 

FR 57725, 57725 (Oct. 27, 1993). And in 1997, the 

Commission stated that ‘‘[t]reasurers of political 

committees must be able to show they have 

exercised their best efforts to obtain, maintain and 

report [contributor identification information].’’ 

Final Rule on Recordkeeping and Reporting by 

Political Committees: Best Efforts, 62 FR 23335, 

23335 (Apr. 30, 1997). In 2003, the Commission 

asserted in the Lovely litigation: ‘‘the Commission 

has long interpreted the best efforts provision as 

creating a limited safe harbor regarding committees’ 

obligations to report substantive information that 

may be beyond their ability to obtain.’’ FEC 

Supplemental Brief at 1, Lovely (Civil Action No. 

02–12496–PBS). Furthermore, ‘‘when Congress 

originally enacted the ‘best efforts’ provision, it 

could not have been more clear that it was creating 

a limited defense regarding the inability to obtain 

specific information that was supposed to be 

disclosed, not the failure to file reports on time.’’ 

Id. at 12–13. The Lovely court summarized the 

Commission’s argument: ‘‘The FEC in its briefing 

claims that it limits the reach of the best efforts 

statute to best efforts to ‘obtain’ contributor 

information.’’ Lovely, 307 F. Supp. 2d at 300. 

Commission had assessed for failing to 

file timely a report. The committee 

argued that it had made best efforts to 

file the report and that this constituted 

a complete defense to the fine. The 

court concluded that the plain language 

of the Act requires the Commission to 

entertain a best efforts defense in the 

Administrative Fine Program (‘‘AFP’’), 

and that it was unclear from the record 

if the Commission had done so. 

In so holding, the court drew on the 

legislative history of the best efforts 

provision, and specifically noted the 

1979 amendments to FECA that made 

the best efforts defense ‘‘applicable to 

the entirety of FECA, rather than merely 

to one subsection.’’ Lovely, 307 F. Supp. 

2d at 299. The court quoted the 

provision’s legislative history: 

The best efforts test is specifically made 

applicable to recordkeeping and reporting 

requirements in both Title 2 and Title 26. The 

test of whether a committee has complied 

with the statutory requirements is whether its 

treasurer has exercised his or her best efforts 

to obtain, maintain, and submit the 

information required by the Act. If the 

treasurer has exercised his or her best efforts, 

the committee is in compliance. Accordingly, 

the application of the best efforts test is 

central to the enforcement of the 

recordkeeping and reporting provisions of the 

Act. It is the opinion of the Committee that 

the Commission has not adequately 

incorporated the best efforts test into its 

administration procedures, such as the 

systematic review of reports. 

Id. (emphasis added) (quoting H.R. Rep. 

No. 96–422, at 14 (1979), reprinted in 

1979 U.S.C.C.A.N. 2860, 2873). 

After remand of the Lovely case, the 

Commission acknowledged in its 

Statement of Reasons that ‘‘[t]he Court 

held that FECA’s ‘best efforts’ provision 

. . . requires the Commission to 

consider whether a committee’s 

treasurer exercised best efforts to submit 

timely disclosure reports.’’ Statement of 

Reasons in Administrative Fines Case 

#549 at 1 (Oct. 4, 2005), available at 

http://www.fec.gov/law/ 

law_rulemakings.shtml under the 

heading ‘‘Best Efforts in Administrative 

Fine Challenges.’’ (‘‘Lovely Statement of 

Reasons’’). Upon further review, the 

Commission determined that the 

committee’s treasurer had not made best 

efforts in filing the report in question 

and assessed a civil money penalty. Id. 

at 5. 

C. Proposed Policy Statement 

The Commission sought public 

comment on a Proposed Statement of 

Policy that would clarify the 

Commission’s current enforcement 

practice to consider whether the 

treasurer and committee made best 

efforts to obtain, maintain or submit the 

required information under 11 CFR 

104.7(a). See Proposed Statement of 

Policy Regarding Treasurer’s Best Efforts 

to Obtain, Maintain, and Submit 

Information as Required by the Federal 

Election Campaign Act, 71 FR 71084 

(Dec. 8, 2006). The Commission 

received two comments, which are 

available at http://www.fec.gov/law/ 

policy.shtml under the heading ‘‘Best 

Efforts.’’ One comment made several 

recommendations as to how the 

Commission could further clarify the 

best efforts defense by incorporating the 

business management concept of ‘‘best 

practices’’ regarding corporate 

operation, financial controls, risk 

prevention and risk assessment. The 

comment also suggested that the Policy 

Statement provide guidance to political 

committees and treasurers regarding 

what conduct would qualify under the 

best efforts defense, and not rely solely 

on examples of conduct that would not 

qualify under the defense. The other 

comment was not relevant to this Policy 

Statement. 

II. Policy Regarding the Best Efforts 

Defense 

Although the court decision in Lovely 

only concerned permissible defenses 

within the AFP, the Commission has 

decided to adopt the court’s 

interpretation of the best efforts defense 

with regard to other enforcement 

matters. While the Commission’s 

enforcement practices formerly reflected 

the view that the best efforts defense 

was limited to obtaining certain 

contributor identification information 

(see note 2 above) the Commission 

recognizes that this narrow application 

of the defense in previous enforcement 

matters derives from a single example of 

the defense’s application in its 1979 

legislative history.3 In light of these 

considerations, the Commission hereby 

notifies the public and the regulated 

community through this Policy 

Statement that henceforth it intends to 

apply the best efforts defense of 2 U.S.C. 

432(i), as promulgated at 11 CFR 104.7, 

not only to efforts made to obtain 

contributor information as currently set 

forth in section 104.7(b),4 but also to 

3 A respondent’s assertion in an enforcement 

matter that best efforts were made to maintain and/ 

or submit required information was formerly 

considered by the Commission to be a mitigating 

factor, but not an outright defense to an alleged 

violation of the recordkeeping and reporting 

requirements. 

4 As stated above, the standards for determining 

whether the best efforts defense is applicable in the 

context of obtaining specific contributor 

information are set forth at current 11 CFR 104.7(b). 

This Policy Statement does not affect or modify 

those standards. 

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31440 Federal Register / Vol. 72, No. 109 / Thursday, June 7, 2007 / Rules and Regulations 

efforts made to obtain other information, 

to maintain all information required by 

the statute, and to submit required 

information on disclosure reports. 

This Policy Statement does not affect 

the Commission’s AFP, but applies only 

to matters in the Commission’s 

traditional enforcement and audit 

programs, and in the Alternative 

Dispute Resolution program (‘‘ADR’’). 

The Commission recently completed a 

rulemaking adding a best efforts defense 

to the enumerated defenses available in 

the AFP. See Final Rules for Best Efforts 

in Administrative Fines Challenges, 72 

FR 14662 (Mar. 29, 2007). In that 

rulemaking, the Commission 

incorporated the statutory best efforts 

standard, while taking into account the 

unique streamlined nature of the AFP. 

See id. at 14666. 

The Commission considers best 

efforts to be ‘‘a standard that has 

diligence as its essence.’’ E. Allan 

Farnsworth, On Trying to Keep One’s 

Promises: The Duty of Best Efforts in 

Contract Law, 46 U. Pitt. L. Rev. 1, 8 

(1984). As the Commission explained in 

its Lovely Statement of Reasons at 2: 

Section 432(i) creates a safe harbor for 

treasurers who ‘‘show[] that best efforts’’ 

have been made to report the information 

required to be reported by the Act. ‘‘Best’’ is 

an adjective of the superlative degree. ‘‘Best 

efforts’’ must therefore require more than 

‘‘some’’ or ‘‘good’’ efforts. Congress’s choice 

of a ‘‘best efforts’’ standard, rather than a 

‘‘good faith’’ standard, suggests that a 

treasurer cannot rely upon his or her 

earnestness or state of mind to gain the 

shelter of Section 432(i)’s safe harbor. Rather, 

a treasurer has the burden of showing that 

the actions taken—the efforts he or she made 

to comply with applicable reporting 

deadlines—meet the statute’s demanding 

benchmark. 

With respect to 11 CFR 104.7(a), the 

Commission intends to consider a 

committee’s affirmative steps to keep 

adequate records and make accurate 

reports, as well as the reasons for its 

failure to obtain, maintain, or submit 

information properly. The Commission 

generally intends to consider the 

following: (1) The actions taken, or 

systems implemented, by the committee 

to ensure that required information is 

obtained, maintained, and submitted; 

(2) the cause of the failure to obtain, 

maintain, or submit the information or 

reports at issue; and (3) the specific 

efforts of the committee to obtain, 

maintain, and submit the information or 

reports at issue. This general policy 

does not modify other guidance and 

policy standards issued by the 

Commission addressing specific 

circumstances, such as the Internal 

Controls for Political Committees, and 

Policy Statement Regarding Safe Harbor 

for Misreporting Due to Embezzlement, 

72 FR 16695 (Apr. 5, 2007), both 

available at http://www.fec.gov/law/ 

policy.shtml. 

The Commission will generally 

conclude that a committee has shown 

best efforts if the committee establishes 

the following: 

• At the time of its failure, the 

committee took relevant precautions 

such as double checking recordkeeping 

entries, regular reconciliation of 

committee records with bank 

statements, and regular backup of all 

electronic files; 

• The committee had trained staff 

responsible for obtaining, maintaining, 

and submitting campaign finance 

information in the requirements of the 

Act as well as the committee’s 

procedures, recordkeeping systems, and 

filing systems; 

• The failure was a result of 

reasonably unforeseen circumstances 

beyond the control of the committee, 

such as a failure of Commission 

computers or Commission-provided 

software; severe weather or other 

disaster-related incidents; a widespread 

disruption of information transmission 

over the Internet not caused by any 

failure of the committee’s computer 

systems or Internet service provider; or 

delivery failures caused by mail/courier 

services such as U.S. Postal Service or 

Federal Express; and 

• Upon discovering the failure, the 

committee promptly took all reasonable 

additional steps to expeditiously file 

any unfiled reports and correct any 

inaccurate reports. 

In contrast, the Commission will 

generally conclude that a committee has 

not met the best efforts standard if the 

committee’s failure to obtain, maintain, 

or submit information or reports is due 

to any of the following: 

• Unavailability, inexperience, 

illness, negligence or error of committee 

staff, agents, counsel or connected 

organization(s); 

• The failure of a committee’s 

computer system; 

• Delays caused by committee 

vendors or contractors; 

• A committee’s failure to know or 

understand the recordkeeping and filing 

requirements of the Act, or the Act’s 

filing dates; or 

• A committee’s failure to use 

Commission-or vendor-provided 

software properly. 

Under this policy, the Commission 

intends to consider the best efforts of a 

committee under section 432(i) when 

reviewing all violations of the 

recordkeeping and reporting 

requirements of FECA, whether arising 

in its traditional enforcement docket 

(Matters Under Review), audits, or the 

ADR Program. The best efforts standard 

is an affirmative defense and the burden 

rests with the political committee and 

its treasurer to present evidence 

sufficient to demonstrate that best 

efforts were made. The Commission 

does not intend to consider the best 

efforts defense in any enforcement or 

ADR matter, or in an audit unless a 

respondent or audited committee asserts 

the facts that form the basis of that 

defense. 

Effective as of this date, the 

Commission intends to apply the best 

efforts standard to all matters currently 

before the Commission in which a 

respondent has already asserted such a 

defense, and any matters in the future 

involving treasurers’ and political 

committees’ obligation to obtain, 

maintain, and submit information or 

reports. When treasurers make a 

sufficient showing of best efforts, the 

treasurers or committees shall be 

considered in compliance with FECA. 

The above provides general guidance 

concerning the applicability of the 

Commission’s best efforts defense and 

announces the general course of action 

that the Commission intends to follow. 

This Policy Statement sets forth the 

Commission’s intentions concerning the 

exercise of its discretion in its 

enforcement and audit programs. 

However, the Commission retains that 

discretion and will exercise it as 

appropriate with respect to the facts and 

circumstances of each matter or audit it 

considers. Consequently, this Policy 

Statement does not bind the 

Commission or any member of the 

general public. As such, it does not 

constitute an agency regulation 

requiring notice of proposed 

rulemaking, opportunities for public 

participation, prior publication, and 

delay in effective date under 5 U.S.C. 

553 of the Administrative Procedure Act 

(‘‘APA’’). The provisions of the 

Regulatory Flexibility Act, which apply 

when notice and comment are required 

by the APA or another statute, are not 

applicable. 

Dated: June 1, 2007. 

Robert D. Lenhard, 

Chairman, Federal Election Commission. 

FR Doc. E7–10997 Filed 6–6–07; 8:45 am] 

BILLING CODE 6715–01–P