MEMORANDUM -~ ._-_--......-~~--

TO~

FROM:

SHARON SNYDER

PRESS OFFICE tl

ROBERT J. COSTA :

ASSISTANT STAFF DIRE TOR

AUDIT DIVISION

1994

BJ004S90

SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT O~

HOUSTON HOST COMMITTEE, INCp

Attached please find a copy of the final audit report

a-nd rel-at-e-d documents on Hous ton Has t Commi t tee I Inc.. wh i ch

was approved by the Commission on Janu-ar-Y-S,--19-94 ..

Informational copies of the report have been received by

all parties involved and the report may be released to the

public.

Attachment as stated

cc: Office of General Counsel

Office of Public Disclosure

Reports Analysls Divlslon

FEe :":..l:;~a:-y
.. REPORT Of THE Al:DIT DI\*tON

0'

w

FEDERAL ElECTIOS CO'f"ISSIO'

999 E STREET.. ~.".

\\- -\SH I'f;T()'. D.C.
REPORT OF THE At"DIT DI\-1510'

(),

Houston Host Committee, Inc.

Januar~" 5.. 1994

FEDER..\L ELECTI()' C()\1\1ISSIO'

999 E STREET. '.\\.

\\".-\SHI'(;T()'. D.C.
Exe:~ti~e Summary

Fi~al A~Clt Repcrt

sac1o\ground.

Findings

Le-;al Analysis

Transmittal to Treasurer

Chronology

C~NTENTS

page

3

3

5

11

l5

17

r'i

1
FINAL AUDIT REPORT

ON

HOUSTON BOST COMMITTEE, INC.

EXECUTIVE SUMMARY

The Houston Host Committee, Inc. the C~mmittee'

registered with the Federal Election Comrnlssic~ on February

7, 1991. The Committee's primary cbjectlve ~as the

encouragement of commerce in Houston in relation to the 1992

Republican National Convention, as well as to project a

favorable image of the city tc convention attendees.~/

The audit was conducted pursuant to 11 C.F.R. 59008.9

which requires an examination and audit of each host committee.

The findings of the audit were presented to the Committee

at an exi~t conference held at the conclusion of the audit

fieldwork (2/18/93) and in an interim audit report ~approved~ by~

the Commission on August 19, 1993. The Committee was given an

opportunity to respond to the findings both after the exit

conference and after receipt of the interim audit report.

These responses have been included in the findings set forth in

this report.

The following is an overview of the findings contained in

the final audit report.

~- Apparent Prohibited Contributions - 11 eFR 9008.7(d)t2)

(i) and (iv). Local businesses may make donations to the

Committee prOVided they are located within the Consolidated

Metropolitan Statistical Area tCMSA} of the convention city.

The report questions whether 10 businesses which made in-kind

donations totaling $116,470, were located within the CMSA of

the convention city. The Committee responded by providing

local addresses for 3 of the businesses. Questions remain,

however, as to the legali~y of ~he S4~,~8: 1~nated cy the

other businesses.

~/ The Host Comm:ttee :5 d:s::ngulshed f:cm the party convention

committee which is funded by a r~b:1C g:ant and also subject

to audit.

Page 1

1 5 '94
-.:;..-

:2nventicn Re:ated Ex~e~=:~~res - :: eFR 9~S8.~' 1) and

4 \. - :'::'~a: reta::' businesse-s excludin= t:anks )'-, rna"; :nake

d'O r. a ": 1 ::;.s tea h 0 s ': comm itt e e ~:: r use :.:=.. de f ray i n g c ::./ e n tic n

expenses, but these donations must be ~rcportionate ~~ the

business's expected commercial returns. Alternatively, these

businesses may make donaticns to promote the suitability of the

city as a convention site, *elc~~e conventlon attendees,

faCllitate commerce and defray the administrative expenses of

thp hcst committee. Unlike =cn~ention-related donatlons, these

donations are not restricted. The report questions whether

in-kind donations totaling $656,368 represented goods and

services for convention expenses and therefore required

addltional documentation showing that they complied with the

"commercial return" restriction. In response, the Committee

provided information demonstrating that the donations related

to promoting the convention city and its commerce and were

therefore permissible.

Disclosure - 11 erR l04.11(a) and (bi. At the exit

conference, the Audit staff recommended that the Committee file

- ,amended reports to disclose debts and obligations to 16 vendors

totaling $930,168.81. The Committee filed the amended

disclosure reports.

Page ;,

1 5 /94
- -. '~r<c"

~'=-1

.-1

1

REPORT OF THE A~~:r D:VrSIO~

ON THE

HOUSTON HOST C0M~:TTEE, I~C.

A. Audit Authority

This report is based on ~he audlt of the Houston Host

Committee, Inc. (the Committee) to determine whether there has

been compliance with the provisions of the Federal Election

Campaign Act of 1971, as amended ':he Act). The audit was

conducted pursuant to 11 C.F.R. S9008.9 which states that the

Commission shall conduct an examination and audit of each host

committee registered under 11 C.F.R. 9008.12(a){1).

The audit se__e.ks to _de~er~ine if the campaign has

materially complied with the limitations, prohibitions ana

disclosure requirements of the Federal Election Campaign Act of

1971, as amended.

B. Audit Coverage

The audit covered the period from August 1, 1991

through December 31, 1992.1/ During this period, the Committee's

reports which covered January 1, 1991 through December 31, 1992

reflect an opening cash balance of $-0-, total receipts of

$10,072,866, total disbursements of S9,918,109, and a closing

cash balance of $154,757.

C. Campaign Organization

The Committee registere1 Nith the Federal Election

Commission on February 7, 1991. The Treasurers of the Commlttee

during the audit period were ~l::lam Spitz from 2:7/91 to 9:16 91

and Frank Maresh from 9/1"" '9: '::: :: 3: ;::. The current Treas"Jrer

is Frank Maresh.

During the period a~~~:e~, :~e ::~~:::ee estab:15hej

its headquarters in Hcu5tc~, :exas. :~e C~~ml:':ee's ~~rrent

office :5 also in Houston, 7exas.

!I T~e Committee's recelpts ~e:e :ev:e~e~ th:ough January, 1993.

Page 3

1,-5/94
The Cc~~:tree use~ :A~ bank a~=~~nts tG ~a~~:e its

financial activi~y.2/ F:~m these acccu~~s ~he Committee made

approximately 513 dIsburse~e~~s.l/ The :=~~i~tee received

monetary donaticns totaling $-,886,650. :~c~ the City of Houst~~

$7,746,650 and Harris County, Texas S:~~,C80). :~ addition.

the Commit~ee rercrted =e=ei~ing 138 l~-~l~d contrlb~tions,

totaling S2,105,~31.52, from :ndividuals and businesses.

D. AU~it Scope and Pr=cedures

The audit included a review

categories:

the following general

1. The recei?t c: contributions from prohibited

sources;

!~-

2 ..

3.

4 •

6.

8.

the itemization and proper disclosure of receipts

from local municipal corporations and government

agencies, and local labor organizatlons when

required, as well as the completeness and accuracy

of the information disclosed;

the itemization and proper disclosure of

disbucseIB_e_nts_ when requi red, as well as the

completeness and accuracy of tht!- information

disclosed;

proper disclosure of debts and obligations;

the accuracy of total reported receipts,

disbursements and cash balances as compared to

bank records:

adequate recordkeeping for transactions;

compliance with the regulations concerning

contributions and expenditures to promote the

convention city and its commerce;

compliance ~ith the regulations concerning

contributions and expenditures to defray

conventicn expenses; a~j

9. other audit ~r=:edures :ha: ~ere ~ee~ed ~e:essa~;

:~ the s:t~a:lon.

2/ One acccunt was inactl~e exceFt ~~r =~e transa:~lo~, a

transfer of 520 to t~e ~pera:lng accc~~:.

3/ The Committee d:d ~ot :ecelve mc~e:a:y donat:c~s f~cm

Individuals, local cusl~esses or labor ~~ganizations.

Page

1/5/94
~~less spe::~:~a::;

~~~-~~mF::an~e AaS ~e::~te:.

:~~rnlSSl~~ ~ay ~~:s~e ~~rtne:

~~:s repc:t i~ a~ e~f~::emen~

=:sc~ssed be::~l ~C ~a~e:ia:

:: s~J~:j be ~c:ed t~at the

any of the ma:~ers discuss~d :~

acti2:':.

'.

A. }\Ppar _e n t P_f ?h i bit edecn t ributi_~i\ s

Secti::::; 9008. 7 d) t ~" i) of Title 11 of the Cod@ of

Fe1eral Regulations states, 10 part, that l~cal businesses,

ex=~uding banks, local muni~ipal corporations and government

aaencies, local labor organizatlons and individuals may donate

:~~1s or make in-kind contrit~t1ons to a host committee for the

purposes set f~rth at 11 erR 9008.7~d\(2)(iii).

Section 900B.7(d}(2)(iv) of Title 11 of the Code of

Federal Regulations states that any business, municipal

corporation, agency or labcr ~rganization within the Metropolitan

Statistical Area (MSA)4/ of the convention city shall be

considered local. There shall be a rebuttable presumption that

any such entity located outside the MSA is not local. This

presumption may be rebutted by a showing that the volume of -- bu-siness in an area lytng outside the MSA would be directly

affected by the presence of the convention.

The Audit staff identified 10 in-kind contributions,

totaling $116,470, that appear to have been made by business

entities located outside the CMSA~

At the exit conference the Committee was provided with

a schedule of the in-kind contributions. Committee

representatives stated that several of the in-kind contributions

were received from corporate headquarters. The Committee

reported the addresses contained on the documentation for the

in-kind contributions. The documentation contained no reference

to local distributors or affiliates.

4/

:~ metropolitan comp:exes ~::h a pcp~la:~~~ ;:ea:e~ tha~ ~~e mllll:~

people, the MSA 1S comprlsej :f a Primary ~e~rs~:::tan Statlstlca:

Area (PMSA) and a Consolidated Met~opolitan S~at:S:lcal Area (CMSA .

F~r the purposes of this re~:e~, the Audi: staff ~sed the CMSA to

determine whether a business ~as lacal or not. The CMSA of Houstc~

:~:ludes the City of Houstc~ and s~~~oundir.; c~u~ties: Har:ls,

3razoria, Galveston, Chambers, For: Bend, Ll~erty, Montgomery, and ~";a~:er.

Page 5

1 'S 94
The interim audi~ re;:r: recc~~ended that the Co~~ittee

de~onstrate that the in-ki~1 =:~~:i~~:~:c~s are permissible cr

refund an amount eq~al to the ·:al~e _f the in-kind ccn~rlbutlcns

a~d provlde evidence of s0sh =efunds ~phctocopy ~: the front a~j

ta2K of the refund CheCK).

In response to the i~:e=:~ a~~:: report the Comm~~tee

pr~vided local addresses for 3 of the :0 businesses. The

reported value of the in-kind contributions from the 3 businesses

is $73,790. Based on the respcnse~ these contributions appear to

be permissible.

With respect to 2 ether businesses, COMPeO Metal

p:0ducts Co. which held a brea~fast and Phillip Morris USA ~h::~

held a reception, t~e Commit:ee stated:

"Through our research of these items we

believe these contributions were incorrectly'

accounted for and misreported as contributions

to the HHC {the Commi t tee J • In fact, we

believe that both the breakfast and reception

were independent events held by the sponsoring

organizations outside the operations or

purview of the Convention [Republican National

ConveJJtion] and the HHC as sanctioned by

Advisory Opinion -1983-23, and should --betreated as such.

Corroborative evidence from COMPCO Metal Products Co. or

Phillip Morris USA was not provided to demonstrate that the events

were held outside the purview of the Committee.

Regarding the remaining 5 businesses, the Committee

stated:

"When we accepted these contributions we

assumed, at the time, that these organizations

had a history of providing nominal value

products and merchandise to conventions as

official providers even though they are not

local businesses. We believe that the HHC was

one of many beneflciaries in this their normal

and usual business practice. The HHC is

attempting to ve:~fy this lnformation with

each of the app::ca~:e ~~mFa~:es. We will

send copies of t~ese verl~:cations when

received. If ~e s~bseq~en::y determi~e t~a~

our assu~ptio~ was :~:=:re::f ~e ~ill ~ake the

necessary refunds.

Page 6

: 5 /94
As of 11· 23 <? 3 , f1C :::~cumen:at:2n :ela::":-:

".·er::~.:atiC'ns ::::r ref'...l:1js :-.3":-:: :-eer: :C?":a?: .."ed"

In s~~~ary, ~~estis~s as :: :~e ~e:~:ss:~::l~Y ~: -

~c~:ributions :2tal:n; S~:rt:: rema:~.

Sections 900B.:\d 1 t3'\i), '.li' and (ii:; Qf :'It:'e 11 of

the Code of Federal Regu1..at:~!;s state, ::1 part, that lccal r~tal1

buslnesses, excluding banks, as wei: as :ccal muni~:pal

corporations and government agencies may donate f~~ds to a host

committee for use by that committee in defraylng c=nvention exp~nses. The amount of the donation under 11 CFR 9J08.-,j\' 3'; i'

must be proportionate to the :ommercial return reas~naoly expected

by the business, corporatior. cr agency during the life of the

convention. The host commit~e€ must ma:ntain funds d0nated under

11 eFR 9008.7td)(3)(i} in a separate account.

Section 9008./(d]{3'iV) 2f Title 11 of the Cede of

Federal Regulations states that for purposes of 11 eFR

9008.7(d}(3)(ii), the life of the convention shall begin seve~

days before the opening of the convention and end three days after

the close of the convention.

Section 9008. 7 (d)( 4) of Ti tie 11 of th~ Code of Federal

Regulations states, in relevant part, that the funds used by ~he

host committee in accordance with S9008.7(d)(3) shall not be

considered expenditures and shall not count against the

expenditure limitation under 11 C.F.rt. 9008.7{a\.

The Audit staff identified 13 in-kind contributions,

totaling $656,368 that appear to be goods and serVlces used to

defray convention-related expenses. Notations on the Committee's

records indicated that the in-kind contributions may be

convention-related. For example, Electronic Data Systems

Corporation (EDS) provided 5252,308 in computer network design

services. Documentation describing services prOVided by EDS

stated, "define computer net~ork archltecture for 7hree Allen

Center and Astrodome wide area ne~'''';0rk ( . J"

Further, CAP GEMIS: AMERICA prov:ded S2,S:C in computer

programming support services. A thank you :et~er f2r services

provided by CAP GEMINI AMER::A c::ei c~~pute= p=~?=a~mlng sup~cr:

to the Houston Host Commi:~ee fer :~e :~9: Rep~~:::3~ ~at::~a:

Convention. System One CJr~:ra~:c~ a~~ He~:ett-Pa:~a:d C~~~a~:

provlded computers and re:a:ej e~~:~~e~: :: the :~~: Repu=:::a~

~ati0nal C~nventicn tota::~; S~S.-~~ a~j 5:3:. ::~ :es;ect:~e:i.

The Co rom i t e e j j ;,:': ::::-.: : e d c u:ne : a : : C:1 d'oj r ::. e

fieldwork WhlCh demonstrated tha~ :~e d~na:lons were proport:onate

t~ the com~e~cial ret~rn reas~nat:i eXFec:ed by t~e b~sinesses

during the Ilfe of the cc~venticn.

Page -

: 5/94
At the exit c2~fere~~e t~e C2~~:~tee was F=~vided ~lth a

sched~le of the in-~:~d =8~:::t~:::~s. :7~~:~~ee !epresen~ative

stated that the Committee wcu:~ prcvlde e~:dence tc support t~at

the i~-ki~= ccntributicns ~e:e ~se~ t~ ~~:~ay hos~ c~mmittee

expenses s~ch as those lncurre= fer F:=~=ting the suitability of

the city as a conventic~ site, ~el~cmi~~ :~e c0nven~ion attendees

t~ the city, and faci::~atlnq ':::mmer:~. etc .. rather than to

defray convention expenses.

The interim report re=~~~e~jed that the C~mmittee:

o demonstra~e that the in-k~nd contributions were

used to defray expenses fer host committee

activities such as these described above, rather

than to defray :=~~en~lon-related expenses; or

demonstra~e that the 5656,368 in in-kind

contributions recelved were from local retail

businesses; and

o demonstrate that the S656,368 in in-kind

contributions received represent an amount

proportionate to the commercial return reasonably

expected by each local retail business during the

life of the convention.

The Committee's response to the interim audit report

appears to indicate that the in-kind contributions were used to

defray expenses for host committee activities, rather than

convention-related expenses. In its response the Committee

stated that the in-kind contributions of computer hardware,

computer software, coaputer installation and labor were integral

to the services provided by the Committee. These services

included an extensive computer network and database file of the

several thousand volunteers who participated in the effort to

welcome the Republican National Convention to Houston. The

system also tracked convention vlsit~r i~formation to coordinate

services ..

The Committee stated ~~r~~er:

"These serVlces and the ~omp~:er network ~ere

neither used by nor s~rved f~n:tions which

otherwise wou:d have tee~ ~e:formed by t~e

Committee C~ Arra~ge~e~~s ::: Republi:a~

~ational CC~~~~t10~. :~s:ea=, ~~e

contributic~ c: the ::e~5 des:::~~d :n ::e~s 1

thrcugh 135/ :foo~~::e adjej: ~e:e ~sed ~y and

in support-2: :he HH: e::::~ ~~ ~rcm0~e t~e

suitabillty c= HO~5:~~ as a ::~~entic~ s::e,

5/ This is a refere~ce :0 t~e :~:e:l~ a~dit re~ort Attachment 2,

~Schedule of In-Kind Co~:r:~~:::~s - ::~~e~tlc~-Related."

Page 8

:.. '5 94
~~ 1 • ;" :l :-.. fa::::':.: :. :- ~~ -; .. ~-. :---. e : :: e .3 :1 :1 :. ~": :-'.. ,,",: ~..'~ :~

were used tc def:ai ~~~~ent:=~ related

ex;e~ses as s~:~~:a:e~ In yc~: a~dit :et~e:.

Base~ C~ the i~f::~a~:~n c~~~a:~ej In t~e ~es~~nset i~

a~~ears tha~ tte aforeme~t::~ej ~~cds a~j servi ~s :e:a~e tc hcs:

comm:t~ee activ:tles.

~isclcsure c: ~ec~s a~d Cc::~a::2ns --------_...._~- ~----- ..------------~.-----

Section l04.11 i 3J and ·b lof 7itle 11 of the C~de of

Federa~ Regulations st3~ef ~~ re:e~ant part, that debts and

obligations owed by or to a political committee which remain

o~tstanding shall be contin~s~s:y reported until extinguished and

sha11 be reported on separate schedules together with a s~ateme~~

explaining the circumstances under ~hich each debt and obligaticn

was incurred; and debts of $500 or less shall be reported as of

time payment is made or ~ot later than 60 days after s~ch

obligation is incurred. Debts eve: 5500 shall be disclosed as cf

the date on which the debt or obllgation is incurred.

The Audit staff reviewed the Committee's documentation

for disbursements !invoices, con~racts, canceled c~ecks, etc.) and

id~ntified debts and obligations, totaling $930,168.81, owed to 16

vendors which were not disclosed. For the two reports filed, no

debts were reported.

At the exit conference the Committee was provided with

a schedule which detailed the debts and obligations not disclosed.

Committee representatives stated that the reports were prepared on

a cash basis; and indicated that the Committee would file amended

Schedules 0 to disclose the information and correct the public

record~

Amended Schedules were flIed on February 26, 1993.

Page 9

1 /5 '94
Page 10

1 /5/94
/

/

MEPlORANDUJlt

TO:

THROUGH:

FRO":

Rct-er~ J. Ccsta

ASSls~ant Staf~ir~ctor Audit z)iviS~ \

'\.-

John C. sUrina~) 5 t a f f 0 ire t ~~J < ,

~< "'

La',IlTrence M. Noble iGeneral Counsel Y

.., ."")

~im BriQht-Ccleman ~'..A·~'~

Associate General Counsel

Lorenzo Holloway -"h ,./J

Assistant G~neral Counsel

Gregory R. Baker

Attorney

SUBJECT: Proposed Final Audit Report on the Houston Host

Committee, Inc. (LRA 1450/AR 193-42)

The Office of General Counsel has reviewed the propos@d

Final Audit Report on the Houston Host Committe., Inc. ("the

Host Committee"), forwarded to this Office on Nov••ber 24, 1993.

The following memorandum contains our comments on the proposed

reportpll Should you have any questions regarding the proposed

report, please contact Greqory R. Baker, the attorney assigned

to this matter.

We concur with the Audit staff's findings with respect to

the convention-related expenses tII.B.). Th@ Audit staff

identified 13 in-kind contributions, totaling $656,368, which

appeared to represent goods and services used to defray

convention-related expenses. The Host Committee provided

information in its response to the Interim Audit Report ~hlCh

indicated that the in-kind contributions were not used t~ defray

conventicn-relate1 expenses. In fact, the informaticn

1/ Since the p:-cposed Final Audit Report does not include a-:: 1

matters exempt from public disclosure under 11 c.r.R. S 2.4, we

recommend that the Commission's discusslon of this document ce

conducted in open session. Moreover, we note that the

parentheticals refer to the sections in the proposed report.

Page 11

1/5/94
Memcrandumto Robert J. Costa

Proposed final Audlt Report C~ :~~

H?ustcr: H-:-s': Cc~:n:'~~4!@, !!1::.

'LRA .4S0."AR .93-~:

Pagt! 2

~emcns!rate~ tha~ ~~e g~cds a~~ s~rvices were related solely t~

~=st ~-~~~~~ee a::~~:~~es. :~_s. :he Audlt s~af~ :=ncluded that :~e C2~tributic~s ~e:~ r~iat@j := Host Committee activity and

:~at ~~ ~~~:her ac:::~ lS ~ar:a~:ej.

~e 3:S~ ::~r.c~r ~:th the A~~:~ staff's rec~=~endaticn to ~ake ~~:t~er a:t~:~ ~lth res;e:t to the Host ::mmlttee's

:al:'..:::e ':: ;:,rop~r:y ~:scl()se ::.s :::ebts and obllgations l, II .C. l.

The A~dlt staff reccmmended at t~e exit conference that the Host

:~rn~lt~ee £:le ame~ded reports :~:recting the omissions. The

Host :~mmittee fl:ed the amence~ :epcr:.s en Febr~ary 26 , 1993: ~hus, ~G f~rther a::ion is warran:ed.

The Audit staff ldentlfied :J in-kind contributions

~~taling 5116,4-:, ~hi~h appear :~ have been mad@ by business

entltles :ocated c~tside the Co~sclidated Metropolitan

Statistical Area ; ~:MSAn, of Hc~s~on, Texas.2/ However, the

Committee's response to the Interim Audit Report only resolved

three of the 10 cct.~ributions. :~us, the Audit staff questions

the permissibil~ty ~: the 7 remal~lng contributions totaling

$42,680.

We agree with the Audit Division.if A wide variety of

persons including individuals, ~ocal businesses, local

qcve£nment agencies~ and local unions, are permitted to donate

funds or make in-kind contributions to the host cottUuittee foruse in promoting the city and its commerce. See Explanation and

Justification for :1 C.F.R. S 9008.7, 44 Fed. Reg. 63036, 63037

(Nov. 1, 1979). However, any business that donates funds must

be located within the KSA. 11 c.r.R. S 9008.1{d)(2)(iv). If

the business is located outside the KSA, there must be a showing

that the volume of business in the area lying outside the KSA

2/ Under the Commission's regulations, the Metropolitan

Statistical Area (-MSA") shall be used to deter.in. whether a

business is local pursuant to :: C.F.R. S 9008.7(d)(2)(iv). In

metropolitan complexes with a population of aore than 1 million,

the MSA is comprised of: {1} the Primary MSA ("PKSA"); and (2)

the CMSA. Generally, the Audi~ staff uses the CMSA in areas

where the population exceeds: mlllion. See Interim Audit

Report on the Ne~ Y~rk '92 Hes: :~mmittee~nc., approved May

25, 1993. For the purposes c: th:s audit, the CMSA of Houston,

Texas includes the :ity of Hc~s~~~ and 8 surrounding countles.

3 The Host C~~~:~tee submlt~e~ adequate documentation

address:n; the con~ributio~s ~:: 1\ Fruit of the Loom;

2' Quaker Cats; a:-:i 3' W:::-::?~r:ect. However. :he Host

Committee has fa1:ed to provlce adequate documentation for the

remainin.g -: cor.-:r:b"..lto:-s: ::-:e Bonneau Company; ~2) Binney &

Srni th; (3) Compc8 ~etal Produc:5; '.4\ Cross Communications; 151

F~esh Te~hnology ::~pany; 6· ~~~e~ocd Flossmocr Community Hig~

School Job T:-a:~~~? Partnersh:p ::ass f~r Americans with

Jisabili:les; a~d -) Phil:p M~rr1S USA.

Page :2 ., .::. Q '- J. _ ,.,
Memorandum to ~obert J. Ccs~a

Pr~p~s.d Final ~udit ~eport on th@ Hous~~n Hcs~ ~omml~~.~, :~~

{LRA _450/AR .93-~:')

Page 3

wou:d t@ dlrectly affecte1 =1 :~~ ~~ese~~@ cf the con~en::~~.

!1. ~~e Hes: ::~~~~tee l~ :his :~stanc@ h~s n~: d@monstra:ed :~at the en::::es :n q~es~icn are lcca: cusin@ss•• , ncr has it

shc~~ t~at the ~::~~e cf ~~s:ness in th@ area w~e~e ea:h e~:it~

15 :=:a:ed ~as d:~ect:y af~e::ed by the c~~vention. Rathe:, the ~~s: :=~~~t:ee s:at~s t~a: :NC cc~:ributl~ns ~ere ~istaken:y

rep=r:~~ as :=~:r:but:cns :: :~e Host C:~~:ttee. 7he Host

:~~mlt:ee asser:s th~t the c~ntr:buticns stemmed from two @~e~:s

which were 5uppcsedly held and sponsored solely by th.

~~ntrib~tcrs, co~p~ete~y i~dependent from the Host C0mmitt~e.

T~e Hos~ Committee states f~rther that these e'lents W@r@ held ~u~side the purvlew of the :onv@ntion, and Host Committee,

conslstent with past Advisory Opinions. See Advisory Opinion

,HAO": 1983-23 '7he Commission concluded that certain payments

by a corporation in holding a reception a~ the convention woulj

~ot ~onstltu~e c~ntributions under the Act as long as no

a~tempts ~ere made to lnfl~ence the cut~ome of the ccnvention,

and the purpose of the function was neither to solicit

contributions to, nor advocate the election or defeat of, any

candidate for federal office). However, the Host Committee

failed to prOVide any corroborating evidence from the two

entities indicating that the events were held independently from

the Host Committee. Absent information from the entities

indicating that these events were held independently from the

_Host Committee, we believe the contributions should be

considered impermissible.

The Host Committee maintains that the 5 remaining

contributions stemmed from organizations that had a history of

providing nominal value products and merchandise to conventions

as official prOViders. The Host Committee states that they were

just one of the many beneficiaries of these practices. Official

providers may contribute nomlnal value products and .erchandise

to host committees. See AO 1980-53 (The Commission concluded

that the proposed donation by Kelly Services of canvas tote bags

to the host committees of both the Republican and Democratic

National Conventions for distribution to delegates and all other

attendees is permissible under the Commission'. convention

financina regulations under 11 C.F.R. Part 9008.7). See also AQ

1988-25 (The Commission concluded that the General Motors----

vehicle loan program did not c~ntravene the regulations

governing nominating conve~tic~s'. However/ the Host Comm:~tee

has failed to provide any s~p~ort:ng documen~aticn from the

entlties. Without furthe= 1oc~~e~tat~c~ frem the organlzatlc~S

concerning these contrlbut::~s, ~e be::e~e that their

permisSlbility should contln~e :~ te q~esticned. !~ a~y e~e~:.

the Comm:ttee has failed t: shew ~hat the entities :~ q~es:l~r.

Nere :ocated ~ithin the MSA cf Hcustc~. T~e Committee has als~

failed to rebut the presumptlcn WhlCh requlres that the vo:ume

~f buslness outslde the area -as direct:y affected by the

ccnventio&1 consistent with 11 :.r.R. S 9008. i (d){2){iv}. See

~egal Comments en ~he Fina: A~d:t Report C~ :~e Atlanta 'sS-- -: omm 1 t tee, ! nc ., da ted Aug'J S ': 3, : 99 C.

Page l3

: : 94

,

'i
.,...

Page 1,4

1 /S --94
Mr. Fran~ Maresh, ::eas~rer

Houston H:st Committee, Inc.

Three A::e~ Center

333 Clay, Suite 1000

HOUS:C~f :X 17002

Dear Mr. ~aresh:

At~ached please find the Final Audit Report on Houston

Rost Co~mittee, Inc. The Commlssion approved the report on

January 5, 1994.

7he Commission approved Final Audit Report will be

placed onthe__ p_ub~~_~ record on January 14, 1993. Should you

have any questions regardIrig---thepublic release-- of thereport, please contact the Commission's Press Office at <202\

219-4155. Any questions you have related to matters covered

during the audit or in the report should directed to Wan1a

Thomas or Nancy Pepe of the Audit Division at C202} 219-3120.

These individuals can be reached toll free at (SOO) 424-9530.

Sincerely,

~-L/:/:.:v

Robert J. ~osta ,

Assistan~Staff Director

Audit Division

Attachment as stated

Page 15

1 5 ,94
page 16

1/5/94
Pre-audlt :n~e~:~:y Ccmmenced

Interim Audi~ Repcr~

Commit~ee

Response Rece:~ed t~

Interim AUClt Report

Final Audlt Report Approved

Pace 1;

.., 94

93

5 94