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FEDERAl. ELECTION COMMISSION

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April 23, 1979

~1EMORA~DUM

Attached please find a copy of the final audit report

for the Krasnoff for Congress committee which was approved

by the Commission on February 12, 1979.

As of this date, all informational copies of the report

have been received by all parties involved and this report

t may be released to the public.

TO:

THROUGH:

FRO~l :

SUBJECT:

FRED EILAND

PIU'~SS OFFIC~ _

BOB COSTA

JUDY HAWKINS ).~_._

PUBLIC ISSUANCE OF FINAL AUDIT REPORT - KRASNOFF FOR CONGRESS COru~ITTEE (LA/I) •

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Attachment as stated

cc: FEC Library

Ri-"\D

~ublic Record

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rrDERAL ELECTION COMMISSION

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REPORT OF THE AUDIT DIVISION

ON

KRASNOFF FOR CONGRESS

I. Background

A. Overview

This report is based on an audit of the Krasnoff

for Congress ("the Committee") and the Candidate's reports

undertaken by the Audit Division of the Federal Election

Commission in accordance with the Commission's audit policy

to -cfe-Eermine-wh-e-ther there has -been compliance wLth th~

provisions of the Federal Election Campaign 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 investigations with respect to reports and statements filed under

the provisions of the Act.

The Committee registered with the Federal Election

Commission on August 11, 1977, in support of Sanford Krasnoff,

a candidate in the 1977 Special L1ection held to fill a vacanc~

in the Office of United States Representative from the First

Congressional District of Louisiana. The Committee maintained

its headquarters in New Orleans, Louisiana.

The audit covered the period June 1, .1976, the

inception date of the Candidate's campaign through ~cpternber 30,

1977, the final coverage date of the latest report filed by the

Candidate at the time of the audit. The Candidate reported a

beginning cash balance at June 1, 1976 of $-0-, total receipts

for the period of $120,807.98, total expenditures for the

period of $110,675.57 and a closing cash balance at September

30, 1977 of $10,132.41. During this period, the Committee

reported receipts and expenditures of $-0-.

This audit report is based on documents and workiu0

papers supporting each of its factual statements. They forn

part of the record upon which the Commission based its dccisio~1S

on the matters in this report and were available to Co~ission0rs

and appropriate staff for review.

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The principal officers of the Committee were

Mr. Sanford Krasnoff, Chairman, and Mrs. Dorothy Luckow Krasnoff,

Treasurer, during the period of audit.

c. Scope

Except as set forth in Findings A and B, the aurlit

included such tests as verification of total reported receipts and

expenditures and individual transactions; review of required supporting documentation; analysis of Committee debts and obligations;

and, such other audit procedures as deemed necessary under the

circumstances.

II. Auditor's Statement and Description of Findings

It is the opinion of the Audit st&ff_,.p.~?~.g upon examination

of the reports and statements filed and records pi~sent~d, ~h~t

the Candidate, Sanford Krasnoff, has not conducted his activities

in compliance with the Federal Election Campaign Act, as amended,

in certain material aspects noted below; and as noted in the preceding paragraph, the scope of our work was not sufficient to

enable us to express an opinion on the representations contained

in the Candidate's disclosure reports for the audit period.

A. Deposits and Expenditures

Section 437b(a) (1) of Title 2, United States Cooe,

in part, states that each candidate shall designate one or more

national or State banks as his campaign depositories. The

principal campaign committee of such candidate, and any other

political committee authorized by him to receive contributions

or to make expenditures on his behalf, shall maintain a single

checking account and such other accounts as the committee

determines to maintain at its discretion at a depository

designated by the candidate and shall deposit any contributions

received by such committee into such account. No expenditure

may be made by any such committee on behalf of a candidate or

to influence his election except by check drawn on such account,

other than petty cash expenditures.

Our review of the Candidate's bank records disclosed

that there was a total of $4,300.00 in reported receipts that

were not deposited into the Candidate's personal checking account

which he designated as his only ca~paign depository. The

Candidate used $3,800.00 of these receipts for the campaign

expenditures described in (1) and (3) below.
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According to the Candidate, the following items relate

to the $4,300.00 mentioned above:

(1) On July 14, 1976, $1,500.00 was paid to a vendor

from another checking account. The $1,500.00 payment represented

a contribution from the Candidate to his campaign.

(2) A contribution from an individual for $500.00 was

deposited into another unidentified account.

(3) On August 25, 1977, the Candidate borrowed

$20,000.00 from the Bank of New Orleans, which the Candidate

contributed to his campaign. Only $17,700.00 was deposited

into the campaign's checking account. The remaining $2,300.00

was used for a campaign expenditure to the Postmaster by a

certified check issued by the Bank of New Orleans.

We recommended that the Candidate and/or Committee:

1) provide tCY -the Audit staff a copy of thecanceLl~g check to

support the $1,500.00 disbursement to a vendor and to identify

the bank account on which the check was written: 2) pro~ide us

a copy of the deposit slip, and identify the bank account in

which the $500.00 received on September 1, 1976, was deposited:

and 3) provide us a copy of the certified check to the Postmaster

for $2,300.00

On !vlarch 28, 1978, \oJe received a letter from thp

Candidate with a copy of the $1,500.00 check to the vendntwritten on his law of.fice account.

B. Additional Information

Section l04.l2(b) (1) and (3) of Title 11, Code of

Federal Regulations, in part, requires each candidate, politicul

committee, or other person required to file any report or statement, to maintain records which shall provide in sufficient detail

the necessary information and data from which the filed reports

and statements may be verified, and to keep those records and

reports available for audi t, inspection, or examination by th(~

Con~ission or its authorized representatives for a period of not

less than 3 years from the end of the rear in which the report

or statement was filed.

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

requires all funds of a political committee to be segrcq<lted ~~~OI~\,

and not com~in~led with, any personal funds of officers, memb0~s,

or associates of such committee.
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(1) During our audit, the Candidate did not make

available copies of any deposit slips for the period June 1,

1976 to September 30, 1977. The Candidate also did not make

available his copies of loan agreements with the Bank of

NC\-l Orleans.

(2) Since the Candidate used his personal checking

account as his campaign depository, there was a total of

$33,911.09 in receipts dcvosited in the account that, according

to the Candidate, WC1-C not related to the campaign. The

Candidate's records did not disclose the source of these receipts

to verify that they were not campaign related. It appears that

t:1C Canc1ic1Llte has comminqled campaign funds wi th his personal

funds.

We requested the Candidate to provide us the records

noted in (]) above, and to identify the source of receipts noted

in (2) above. On March 28, 1978, we received copies of the loan

aq-r-ecmcn-ts.-\ve received ~J19thc~__ letter on March 30, 1978, which cx~lQined why the Candidate would no£ c6rnplt ~iEh our -request for

COL--ics of the dcposi t slips. He stated the bank would IU"ovidc the __1crosit slips l.o him, if he quaran teed to pay the cost of gatherin~J

the matcri[ll, but it \oJould not <Jive the Cl1ndidate an estimate of

the costs involved. Accordingly, Mr. Krasnoff was not willing

to incur the cost to comply with our request.

c. ~_upportinq Documentation of E:·:pendi tures

Section 102.9(c) of Title 11, Code of Federal

?.c .. :~lations, requires, in part, that the candidate and tr<'''cl~:>t1rcr

cbt:lin and keep a receipted bill from the person to whom the (;:·:~:enL1iture is made, stating the particulars, for every 0xpendi- ~~~~e made by or on behalf of the canJidatc in excess of $100, and ~or any such expenditures in a lesser amount if the aggregate .:t:"::o·~nt of such expenditures to the same person during the calendar ~'e~r exceeds $100. \~hcn a receipted bill is not available, the tr0~surer may keep a cancelled check with a bill, invoice, or

:0:: ~e::1por~neous :11cmorandur.l.

OUl· eX.:lmina tion rc\~calcd that the Candidate did not :::d':'::~.:lin ~-;llf[icicnt documentation to su~port 29 (61.70'5) of the ~-;- '-':'::JL~nd i.lures aggregatinq in excess of SlOO to payees durinr :

t::c c.:ll(~ndar year. The 29 expenditures totaled $42,613.82

(~3.39~ of the $109,292.33 in total itcrnizable expenditures) •
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We recommended that the Candidate obtain and furnish

to th<' Audit staff copies of adequate supporting documentation

for these expenditures, or evidence of their best efforts to

obtain it. On March 30, 1978, the respondent furnished copies

of letters to vendors requesting additional docu~entation for

eight (8) expenditures totaling $9,962.06.

Summary

Due to the insufficient response to our requests for

records noted above, the matters contained in Findings A, B, and C

were referred to the Commission's Office of General Counsel on May 8,

1978, for their review. On June 8, 1978, Matter Under Review 596

was initiated.

During the period June 8, 1978, through January 9, 1979,

the Office of General Counsel made numerous attempts to contact

the Candidate to afford him an -oPPQrt~I)iJ::Y__ :t9submit the documentation requested by the audit staff. In August and----Septernber of 1978

the candidate provided to the Office of General Counsel letters to

vendors, committee agents and political clubs requesting docum(~ntation for 30 expenditures totaling $45,613.82. On September 27, 1978,

the Office of General Counsel concluded that the Candidate had made

a best efforts attempt to obtain documentation for the expenditures

and recommended that no further action be taken regarding the

finding of a violation of 2 U.S.C. 432(d). (See Finding C) On

October 4, 1978, the Commission, by a vote of 4-0, approved the

Office of General Counsel's recommendation.

On January 18, 1979, the Commission, by a vote of 5-0,

found probable cause to believe that, with regards to the mattc'rs

contained in Findings A and n, the Krasnoff for Congress Committee

violated:

1) 2 U.S.C. 437b(a) (1) by failing to deposit certain

campaign receipts in designated accounts and failing to make ccrt~in

expenditures from the designatc~ campaign checking account.

2) 2 U.S.C. 432(b) by commingling campaign funds \·;ith

personal funds.

Furthermore, the COInmission authorized the ~cnera1 Counsel

to institute a civil suit with respect to the items noted ahove on

Jnnuary 18, 1979 •
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D. Other Matters

The following matters were noted during the audit

for which no further action is recommended.

(1) The Candidate did not have examples of his

campaign literature available for our review during our field

work. Fo110winq our request, the Candidate provided two (2)

examples of this information on M~rch 30, 1978. Our review of

the 1iter3turc revealed that the C~nnidate had not included the

authorization requireu by Section 44ld(1) of ~itle 2, united

States Code, on one of the exampl(~s. According to the Candidate,

he was not aware of the requirement.

(2) The Candidate received eight (8) contributions

totaling 51,400.00 which were not deposited within 10 days

of receipt as required by Section 103.3(a), Title 11, Code of

Federal Regulations. ~Thes_e co_ntriplltiol'1s vlcre received between

July 11, 1977 and l\uqust 20, 1977 and \-lcre noi cleposif-ed until

September 1, 1977.

nurinq thl~ audit the Candidate stated that there was

a de13y in clepositinq the contributions because the contributor

checks wc~c delivcrc~ to his office, which he seldom went to

during the campniqn. We informed the Cannidatc of the requirements of Section l03.3(a) •
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FEDERAL ELECTION COMMISSION

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ADDITIONAL INFORMATION REGARDmC 'lHIS ORGANIZATION

MAY BE IDC'ATED IN A CDMPLETED CDMPLIANCE AcrION

FILE RELEASED BY '!lIE (]H{[SSION AND MADE -PUBL1C IN

'!HE PUBLIC REOORDS OFFICE. FOR mIS PARTICULAR

ORGANIZATION'S 00MPIE1'ED CDMPLIANCE ACTION FILE

SlMPLY JSK FUR '!HE PRESS SlMfARY OF MUR 4~ S-)" ,

1HE PRESS S'lM-fARY wn.L PROVIDE A BRIEF HIS'roRY OF

'!BE C'ASE AND A S'lM-fARY OF mE AcrIONS TAI<EN, IF N.ri•

Audit #! 1~7