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JanuarylO"l980

PUBLIC ISSUANCE OF AUDIT REPORT - COMMITTEE TO ELECT RONNIE GENE FLIPPO (AL/5)

FRED EILAND

'PRESS OFFICE~: :", '_ " -- ... : -

BOB COSTA I ' - . < '"

JUDY HAWKINS ,,' -, ~- -

H Dl RAl ElECTION COMMISSION

Attachment as stated

cc: FEe Library

RAD

Public Record

Attached please find a copy of the final audit report

of the Committee to Elect Ronnie Gene Flippo (AL/5) which

was approved by the Commission on December 31, 1979. , '

SUBJECT:

FROM:

THROUGH: '

TO:

MEMORANDUM '

Informational copies of the report have been received

,: by all partiesinvolved'and the report-maybe released to , , the public. ,- " , ' , , , "

- wi th this release, the Alabama 5th Congressional District,

is now complete.

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A. Overview

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FEDERAL [I LCTION COMMISSION

The Committee was exempt from filing disclosure reports

for the first two (2) quarters of 1977. ~he FEC Form 3a

was filed on April 7, 1977 •

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The Committee registered with the Federal Election

Commission on March 6, 1976, in support of Ronnie Gene Flippo,

candidate for election to the Office of United States

Representative from the 5th Congressional District of Alabama •

The Committee maintained its headquarters in Florence, Alabama.

REPORT OF THE AUDIT DIVISION

ON THE

CO~1I~TEE TO ELECT RONNIE GENE FLIPPO

The audit covered the period January 1, 1976, the

inception date of the Committee, through June 30, 1977. The

Committee reported a beginning cash balance at January 1, 1976,

of $-0-, receipts for the period of $258,583.25, total expenditures

for the period of $253,692.50 and a closing cash balance at

December 31, 1976, of $4,890.75. !/

This report is based upon an audit of the Committee

to Elect Ronnie Gene Flippo ("the Committee") undertaken by the

Audit Division of the Federal Election Commission in accordance

with the Commission's audit policy to determine whether there

has been compliance with the provisions of the Federal Election

Campaiqn Act of 1971, as amended (lithe Act"). The audit was

conducted pursuant to Section 438(a) (8) of Title 2, United States

Code, which directs the Commission to make from time to time

audits and field investiqations with respect to reports and

statements filed under the provisions of the Act.

I. Background

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B. Key Personnel

The principal officers of the Committee were

Mr. Oliver Jones, Chairman and Mr. R. Lonnie Flippo,

Treasurer during the period of audit .

Scope

A. Contribution Limitation

Findings and Recommendations

C.

II.

During the campaign there were four (4) substantial.

loans made to the Committee. Two (2) loans were obtained by

the Committee on March 18 and April 19, 1976, for $33,000

and $10,000 respectively, from the Shoals National Bank of

Florence, Alabama. Two (2) extension agreements were also

negotiated with regard to the $33,000 loan. All of the agreements involved with these two (2) loans were signed by R. Lonnie

Flippo, the Treasurer of the Committee. Questions arose during

the audit as to the capacity in which he had signed the

agreement and therefore as to his personal liability on the

notes .

The audit included such tests as verification of

total reported receipts and expenditures and individual

transactions; review of required supporting documentation;

analysis of Con~ittee debts and obligations; and, ·such other

audit procedures as deemed necessary under the circumstances.

This audit report is based on documents and working

papers supporting each of its factual statements. They form

part of the record upon which the Commission based its decisions

on the matters in this report and were available to Commissioners

and appropriate staff for review.

Section 44la(a) (1) (A) of Title 2, United States Code,

requires that no person shall make contributions to any candidate . and his authorized political committees with respect to any

election for Federal office, which in the aggregate, exceed

$1,000. Section 43l(e) (1) defines a contribution to include a

loan and Section 43l(e) (5) (G) (ii) defines the endorser of the

loan as a contributor.

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The third loan in the amount of $5,000.00 was made

to till' Committee by the Candidate on April 12, 197(, from

fund:; loaned to the Candidate by the Treasurer. In its

disclosure reports, the Committee itemized this 10illl as being

from the Candidate. The C'ommi ttee provided a signed ilgreeJfI(mt

between the Treasurer and Candidate for our review, however,

there was no signed aqreemc!nt between the Candidate and thl'

Committee.

The fourth loan, in the amount of $30,000.00, WilS

made to the committee by the Candidate on April 20, 1976 from

funds borrowed by the Candidate from the First National Bilnrof Birmi nqham in Birmingham, Alabama. The Candidil te' signed

the note ilS the maker, with the Treasurer and one other

individuill as endorsers. In its disclosure reports, the

Committee also itemized this loan as being from the Candidate.

No agreement was signed between the Candidate and the Committee.

'l'he Committee repaid the first two (2) loans by

July 22, 1976 and the third and fourth loans by October

22, 1976.

In ilddition to the Tr0asurer's involvement with the

loans previously mentioned, th0 Treasurer milrle contributions

to the Committee as follows:

Date of Contribution Amount

March 16, 1976 $ 500

March 23, 1976 20

April 2, 1976 400

May 17, 1976 1,500

Total Contributions $2,420

The Candidate ran in three elections, a primary on

May 4, 1976, a runoff on May 25, 1976, and the general on

November 2, 1976.

This matter was referred to the Commission's

Office of General Counsel on January 31, 1978. The outcome

of the investigation is summarized on pages 5 and 6 of this report .
This matter was initially referred to the

Commission's Office of General Counsel on December 9, 1977.

The outcome of the investigation is summarized on pages 5 and

of this report.

Our review of additional contributor information

submitted on April 4 and April 24, 1978 (see Finding C)

disclosed nine (9) additional individuals who made

contributions of currency in excess of $100.00. These

contributions totaled $1,900.00 in excess of the limit.

The Committee officials stated that at one time,

there was a complete list of all individuals from which it

received contributions. This list was not provided to us

during the audit. The Committee also recorded most of the

information concerning their contributions on bank deposit

slips and submitted this information to us•

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B. Excessive Cash Contributions

C. Recordkeeping Requirements

Section 432(c) (1) and (2) of Title 2, United States

Code, in part, requires the treasurer of a political committee

to keep a detailed account of all contributions made to or for

such committee, and the identification of every person makinq

a contribution in excess of $50.00.

During the campaign the Committee received contributions of currency in excess of $100 from 12 individuals

totaling $6,274.00. During the audit, the Committee stated

that they were not aware of the requirements of the applicable

sections of the United States Code and the Commission's

Regulations. In accordance with our request, the Committee

refunded the amounts in excess of $100.00 per contributor

and submitted copies of the refund checks (fronts and backs)

on March 6, 1978.

Section 44lg of Title 2, United States Code, in

part, requires that no person shall make contributions of

currency for the benefit of any candidate which, in the

aggregate, exceed $100, with respect to any campaign of

such candidate for nomination for election, or for election,

to Federal office. Section 110.4(c) (2) of the Commission's

Regulations, in part, requires a candidate or committee

receiving a cash contribution in excess of $100 to return the

amount over $100 to the contributor.

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Our review of this information disclosed that there

were no explanations in the Committee's bank records regarding

the contributors for 34 deposits totaling $24,324.10. Of that

total, $9,586.65 were in currency deposits.

We requested the Committee to obtain additional

information as to the identity of the contributors making the

contributions for the deposits described above.

On April 4 and April 24, 1978 the Committee submitted

the names and addtesses of contributors, the amourit of the

contribution, and the month in which the contribution was made.

The contributions totaled $21,727.39. The Committee had

itemized contributors on their disclosure reports that were

not recorded on the previously mentioned deposit slips. Including these contributors, the remaining unaccounted for contrib~tions, totaled $510.79. .

This matter was referred to the Commissioner's Office

of General Counsel on January 31, 1978. The outcome of the

investigation is summarized below.

Summary -Matters Referred to the Commision's Office of General

Counsel.

As previously mentioned, the initial matter noted

in Finding B was referred to the Office of General Counsel

on December 9, 1977, and the matters noted in Findings A and

C were referred to the Office of General Counsel on January

31, 1978. On April 24, 1978, Matter Under Review 527(78) was

initiated. The additional contributions of currency in excess

of $100.00 mentioned in Finding B were referred to the Office

of General Counsel on June 23, 1978 and were subsequently

incorporated .into this Matter Under Review.

After receiving additional information from and

conducting .extensive negotiations with the Committee, the

Commission found probable cause to believe on June 27, 1979

that:

1.) the Committee and the Candidate had violated

2 U.S.C. 441a(f) in knowingly accepting contributions in excess

of limitations,

2.) the Treasurer and one other individual violated

2. U.S.C. 44la(a) (1) (A) in making contributions to a candidate

and his authorized political committees with respect to election

for Federal office which, in the aggregate, exceeded $1,000.00,

and
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Recommendation

We recommend the Commission take no further action on

this matter•

D. Corporate Contributions

At our request, the Committee refunded these

contributions and submitted documentation on March 6, and

on JUly 5, 1978 disclosing that the contributions had been

refunded.

Our review of the bank records disclosed that the

Committee received three (3) contributions, totaling $85.00,

from entities verified as being corporations by the respective

Secretaries of State. The Committee was of the opinion that

these contributions had come from individuals.

Section 441b(a) of Title 2, United States Code,

in part, prohibits any corporation from making a contribution

or expenditure in connection with any election for Federal

office.

Letters of notification and conciliation agreements

had been sent earlier to the Committee and individuals previously

mentioned. After further negotiations the attorneys for all

respondents signed and returned the agreements which included

civil penalities totaling $9,800. The Committee also sent

two (2) checks totaling $9,800.

Based upon the recommendation of the Office of General

Counsel, the Commission voted on October 1, 1979 to accept the

conciliation agreements and to close the file.

3.) seventeen individuals, including the Treasurer,

violated 2 U.S.C. 441g in making contributions of currency in

excess of $100.00.

'I'he Commission also voted to take no further action

with respect to the violation of the recordkeeping requirements

of 2 U.S.C. 432(c).

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Recommendation

E. Understatement of Receipts, ~xpenditures

and Cash-on-Hand

F. Itemization of Contributor Information

We recommend the Commission take no further action on

this matter •.

In accordance with our request, the Committee filed

an amendment on March 6, 1978 correcting their receipts,

expenditures, and ending cash on hand.

Section 434 (b) (1), (8), and (11) of Title 2, United

States Code, in part, requires a committee to report the amount

of cash-on-hand at the beginning of the reporting period, and

the total sum of all receipts and expenditures by or for such

committee or candidate during the reporting period.

Our review of the Committee's records disc10sedthat

the Committee understated total receipts by $4,946.71 and total

expenditures by $4,896.71 for the period February 23, 1976

through December 31, 1976; and ending cash as of December 31,

1976 by $50.00. Most of the understatement appears to be from

the activity in an account at the Bank of Huntsville.

Section 434(b) (2) of Title 2, United States Code, in

part, requires a political committee to disclose the full name

and mailing address (occupation and principal place of business,

. if any), of each person who has made one or more contributions

aggregating in excess of $100 to the committee or candidate

within a calendar year. Also, the Commission's prescribed form,

Schedule A, requires the disclosure of aggregate year to date

totals of all contributions aggregating in excess of $100.

1.) Our examination of the Committee's contribution

records revealed that 54 contributions in excess of $100.00 in

amount or in the aggregate, totaling $8,286.00, were not

itemized in the disclosure reports. These figures represent

17.42% of the total number and 8.70% of the total dollar value

of total itemizable contributions from individuals. In addition,

it was determined that 7.62% of the itemized contributions

from individuals lacked the correct aggregate year-to-date

contribution figure for that individual •

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At our request, the committee filed an amendment

on March 6, 1978 substantially correcting the information

mentioned in (1) above.

2.) Of the 256 individual contributions originally

itemized, 74 (28.91%) lacked the contributor's occupation,

and 153 (59.77%) lacked complete information concerning the

contributor's principal place of business.

The Committee stated that they did not initially

realize that this information was a requirement of the Act. Prior

to the audit, the Commission staff contacted the Committee

concerning their report for the period July 1, 1976 through

September 30, 1976, and requested they supply this information.

1'here was a total of 45 contributions requiring the contributor's

occupation and principal place of business. The Committee's

original disclosure report had none of the required information.

The Committee amended their report and included all the contributors'

occupations .and all but two (2) of the contributors' principal

place of business~

Recommendation

Due to the completeness of the amendment filed by the

Committee in (1) above and their efforts to comply with the.

Act in (2) above, we recommend the Commission take no further

action concerning the matters noted in (1) and (2) above.

G.. Itemization of Expenditures

Section 434(b) (9) of Title 2, United States Code,

requires the committee to disclose the name and address of

each person to whom expenditures have been made by such

committees or candidate which in the aggregate exceed $100

within a calendar year, together with the purpose, amount

and date of the expenditure.

Our examination of the Committee's expenditure

records revealed that the Committee did not itemize 43

expenditures (excluding loan repayments), totaling $6,995.36,

which were in excess of or aggregated in excess of $100.00

These figures represent 26.06% of the total number and 3.97%

of the total dollar value of operating expenditures requiring

itemization. Most of the omissions of expenditures resulted

because the Committee did not have a recordkeeping system

for the aggregation of expenditures.

In accordance with our request, the Committee filed

an amended report on March 6, 1978, properly disclosing this

information.
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Reconunendation

We reconunend that no further action be taken by the

Comnlission on this matter •

. 11. Supporting Documentation of Expenditures

Section 432(d) of Title 2, United States Code, in

part, requires the treasurer to obtain and keep a receipted

bill, stating the particulars, for every expenditUre made

by or on behalf of a political committee in excess of $100~

and for any such expenditure in a lesser amount if the aggregate

amount of such expenditures to the same person during the

calendar year exceeds $100.

Our examination revealed that the Conunittee did

not maintain a receipted bill, invoice, or contemporaneous

memorandum to support 47 expenditures, totaling $21,155.75,

requiring such documentation. These expenditures represent

28.48% of the total number and 12.01% of the total dollar

value of expenditures requirin9 supporting documentation.

,'!'he Conunittee informed the Audit staff that they were not

. aware of the section of the law requiring supporting

" " . documentation for expenditures' in' excess of, $100.00 in amount

or, in, the aggregate.

',' "In accordance with~ur request,theconunittee-' '.,

'attempted to obtain supporting documentation for all 47'"

expenditures and submitted documentation on March 6, 1978'

':'for32 of the expenditures totaling $15,037.58.,

, " Reconunendation

" In our opinion, the Conunittee has made their best efforts

-to comply with the requirements of the Act regarding the matter

noted above. Therefore, we reconunend.theConunission take no . 'further action on this matter: . , .

I. "State~entof Organization

. , . Section 4 33 (b) (9) , in part, requires' a political

conunitteeto include in its statement of organization a

'listing of banks used."
Recommendation

At our request, the Committee filed an amended

statement of organization and the Candidate filed an amended

Statement of a Candidate for Nomination or Election to Federal

Office disclosing the above mentioned bank accounts.

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We recommend the COIM\ission take no further action on

this matter •

During the campaign the Committee had two (2) checking

accounts, that were not disclosed on the Committee's statement

of organization. One account was at the Bank of Huntsville in

Huntsville, Alabama, and the other account was at the First

National Bank of Tuscumbia in Tuscumbia, Alabama. In addition,

the Candidate did not include the Bank of Huntsville on his

Statement of a Candidate for Nomination or Election to Federal

Office.

Section 437b(a) (1), in part, requires each candidate

to designate one or more national or state banks as his

campaign depositories.

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Audit # 2/1

AlDITIONAL INroRMATION REG\RDmG 'lHIS ORGANIZATION

MAY BE IDCATED m A aH'I.ETED CD1PLIANCE AcrIOO

FlIE RELEASED BY mE CXM1ISSION AND MADE PUBLIC m

'lBE PUBLIC REOORDS OFFICE. FUR nus PARTICULAR

ORGANIZATION'S CXH'1E1'ED CXH'LIANCE ACITON FILE

SIMPLY ASK FOR mE PRESS S\Ho1ARY OF MUR /1 S-J.7 .

'lBE PRESS StM1ARY wnL PROVIDE A BRIEF HIS'roRY OF

'lBE CASE AND A SlMfARY OF 'mE ACrIOOS TAKEN. IF /IN'[.

II.?> '" , ~II , W.

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FEDERAL ELECTION COMMISSION

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