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CONGRESSIONAL AUDIT REPORT

Votes Cast: General Election - Edward Roybal (0) Jim ~adrid (R) r1arilyn Seal s (PFP)

Primary Election - Unopposed

Location: Central Los Angeles

- 57,966 - 71. 9°~

- 17,737 - 22~~

- 4,922 - 6. 1%

_.: Jt' L.; .~ P;j: I 5 (\J • ...-

Jim ~1adrid

Total Expenditures for Period: $6,396.72

iotal Receipts for Period: 56,396.72

Other Candidates Audited: Edward Roybal (D) Marilyn Seals (PFP)

Major Opponent(s): Edward Roybal (0)

Political Party Affiliation: Republican

District: 25

State: California

Candidate/Committee:

, First Elected (if applicable): ~I/~
H2S STREET "'.w w..\SHI~CTON.D.C. 20';b3

FEDERAL ELECTION COtv\MISSION

This audit report is based on documents and working

papers sUP90rting each of its factual statements. ~hey fo~

part of t~e record upon which the Comrniss~on based ~ts decisions

on the mat~ers in t~is repor~ and were available ~o Commiss~oner3

and appropriate staff for review.

The audit covered the period ~ay 1, 1976 through

December 28, 1976, the date of the termination report filed by

the Co~~ittee. ~he Committee reported a beginning cash balance

at .January 1, 1976 of $-0-, total receipts of $11,016.05, total

expenditures of $7,578.63 and a closing cash balance of

53,437.42. 1/

The Committee registered with the Federal Election .. Commission on May 7, 1976, in support of James Benitas ~adrid, .. Candidate for election to the Office of United States

Representative from the 25th Congressional District of California.

The Committee maintained its headquarters in Los Angeles, Califor:lia.

A. Overview

REPORT OF THE AUDIT DIVISION

ON THE

COMMITTEE TO ELECT JIM MADRID

U.S. CONGRESS, 25TH DISTRICT

~his report is based upon an audit of the Committee

to Elect .Jim ~1adrid-U. S. Congress, 25th District (" 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 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 ~o make

from time to time audits and field investigations with respect to

re90rts and statements filed under the provisions of the Act.

I. Background

1../ .; ~eview 0= the CC~'nittee's recor::s disclosed that total

=eceipts we=e overs~a~ed by S~,619.33, total expendi~~res

'. b:' 5:,131.91, and ending ~ash by $3,43i.42. (See Fi:1di:lg '='\

.'~ .;...'..••.:._;:, ~, -0 , -'ne '-_ C""'rnml.' \",Jl ....... .. '-__Q 1_ ;:;_ .. _"st ....

"eoor"'- beroan "::. ,.,1.' t'I ..:...••:.. ":"e _.4 -e"'; __0"'; ........ -,'

; - ganuary 1, 1976, however, the Comrni~tee'3 f~rs~ fi:1ancia1

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. . . ~.:~J.=:1. :"5 -...... - ~/ advised '-••- ..:»

Sect~.., .. :-~n ".__oJ" " (' ':"'i .. , Q ." ""0 "e' !"\.: ':"Q" 1"" .' ... -' , ," .. ,3., .0-:- -_ '- __ J.7" '- c. '.,;7 __cera :.~~u... a,-_c."s,

i:1 ,par~,?ron~~~ts any ?ol~t~cal co~~~~tee ~av~ng outstanc~ng =eb~s

or cbli;ations inc~rred on behalf of Federal candidates fro~

~e~i:1a~ing its reporting requirements.

B. Key Personnel

The orincioa16fficers -oftheCommiitee::or the~period,

covered by the-aueit-were Mr. Samuel William Yorty and

Mr. Benjamin Fernandez, Honorary Co-Chairmen: Mr. Richard ,E.

Ferraro, First Deputy Chairman: Mr. Charles R. Cook, Treasurer

(May 1, 1976 - July 29, 1976) and Mr. Melford Murrie Duncan, Sr.,

Treasurer (August 23, 1976 - December 28, 1976). ~/

C. Scope

The auei~ included such tests as verification of total

reported 'receipts and expenditures and individual transactions:

revie·.... of required' supported documentation: analysis of Committee

debts and obligations: and, such other audit :rocedures as deemed ~necessary under the circumstances. - . .

. The audit did not include the review 0:: cancelled.checks

for 8 of the Co~~ittee's 12 expenditures lac~ing supporting

documentation as tl1e'l .were'not maintained bv·t:"eCommittee. ': The'

auditors were unacle-to satisfy' themselves as to the Ccmmittee's

,compliance with the respective-Sections of the Act for chese

expenditures'by ~ea~s of ot:"er auditing proced~res (see Finding D) •

,.II. Auditor's Sta~ementand Description of Findingi

A. Termi~a~~on of Principal Campa~g~ Co~~i~tee . with Outstanding Debt and Excessive ~ontrib~tions'

It'J.s the opinion of the Audit staff, based upon examination

of t:"ereports and statements filed and the records presented, that,

except for the effects of the above :nentioned scope limitat:ion

and the deficiencies as noted below,the reports and statements of

the .Committee ,to E:ect Jim Madrid-U.S. Congress, 25th District,

fairly present the financial actiYityof the C~~~ittee for the , period covered by ~he audit. Further, excepc fer the effects of

the above mentioned scope limitation and the findings as noted, . belcw~no :naceria:problems in complying with the Federal Election

Carnpai:;:1 Act were discovered during the course of the audit.

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Section 4341b) (12) of Title 2, United States Cbde,

in part, recuires that a committee disclose the amount and nature

of debts and obligations owed by the committee, in such form as

the Commission may prescribe, and a continuous reporting of 'its

debts and obligations after the election at such periods as the

Commission may require until such debts and obligations are

extinguished, together with a statement as to the circumstances

and conditions under which any such debt or obligation is extingUished and the consideration therefor.

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

prohibits a person f~om making a cont~ibution to any candidate

and his authorized political committees with respect to any

election :or Federal office which, in the aggregate, exceeds Sl,OOO.

Section 44la(f) of Title 2, United States Code, in pa~t,

states that no candida~e or political committee shall knowingly

accept any cont~ibution in violation of the p~ovisions of this

section.

~he Committee :iled a 7er~i~atior. ?eport with the

Commission on ~arch 4, 1977 which disclosed ou~standing deb~s

of $10,937.42. A review of the Committee's accounts payable

disclosed tha~ such an amount was ye~ outstanding.

~he Candidate acknowledged ~he existence of the debt,

but indicated it had been incurred by the public relations fi~m

which manaced the Committee's financial activitv. He stated he instructedJ~he public relations :i~m not to incur debts on his

behal: in excess of the amount of ~he Commi~tee's cash on hand.

Therefore, the Candida~e indicated tha~ he did not intend tc

make, nor had ~he public relations :ir~ soug~t, any repa~rment.

This matter was ~eferred ~o the Commission's Office of

General Counsel on Mav la, 1978, where ~atter Cnder ~eview (~UR)

603(78) was initiated: On Septembe~ 20, 1973, the Commission

found reasonable cause to believe ~hat ~he Co~mit~ee had vic:ated

2 U.S.C. 44~a(f) in receiving excessi7e cont~ibutions by vir~~e of

the forgi7eness of the 510,937.42 ~eb~.

en :ebr~ary 23, 1979, the Candida~e (on behalf of ~~e

Commit~ee) s~g~ed a =cncilia~ion agreement a~c on ~arch l~, ~979

the Commission ioted to close the :i1e with no :u~ther acticn.

,
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B. Excessive Cash Contribution ~nd Corporate . Contribution

at~empts

Committee inadver~en"::... 1976, Which was . ~he

.:. ...-I ,

that ~~e Cc~~i~~ee ~ade

to ~ake a re:~nd,

the fact ,

-.

Our review also ~isclosed ~~at

accep~ed a 520.00 contribu~ion dated ~ay

~rawn on a corporate account.

Our review of the contribution records disclosed that

the Committee d.eoosited a third ::lartv check drawn on a corporate

accoun~ for Sl,OOO sn June i, 1976, ~hich was returned by the

bank ~~e to insuffi=ient funds. Or. June 11, 1976, ~~e Committee

deoosited Sl,OOO in currencv from t~e same contributor. The

Candidate stated t~at he thought that the third party check drawn

on a corporate account constituted a corporate contribution t~at

could not be accepted; therefore, he advised the contributor

that ~e could not accept the check, but could accept Sl,OOO in

cash. The Candidate stated that he was not aware 0: the

orohibiti:m in the Act or the recuirernent of the Commission's

~egula~i~ns regarding excessive contributiens of currency.

On April 2~, 19i8, ~he Co~mittee ~rovided ~ocumentatior.

~~at ~~e cor;ora~; ccnt=ibution had been ~e=~~ded.

The ~at~er relating to t~e ex=essi~e ~as~ =ontribu-

~~on ~as =e=e~~ed ~~ ~~e S==ice 0= ~e~eral :ou~sel ~n ~ay 10,

1973 and Nas a:so ~~e sub:ec~ of ~~R 603(79). 3ased on:

Section 44lb(a) of Title 2, united States Code, in part,

prohibits any corporation from makina a contribution in connection

with any Federal election and prohibits any candidate or political

committee from acce~ting any contribution from a corporation.

Section 110.4(c) (2) ~f Title 11, Code of Federal

Regulations, in par~, requires a candidate or committee receiving

a cash contribution in excess of SlOO to promptly return the

amount ever SlOO to the contributor.

Section 441g of Title 2, Gnited States Cede, provides

in part, that no person shall make contributions of currency to

or for the benefit 0f any candidate which, in the aggregate, exceed

SlOO, with respect to any campaign of such candidate for nomination

for election, or for election, to Federal office.
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Recommendation

Reccrr.mendat~on

C. ,Itemization of Transfers

Cpon our recommendation an amended report was filed on ~~ril 24, 1978 itemizing these nine (9) transfers.

Our review of the contribution records disclosed that'

the·Committee received a total of nine (9) transfers of funds

totaling S632.50~ none of which were ~temized on ~EC reports.

The Candidate stated that he was not ~ware that these contributions, ·....hich ~·;ere, :rom local organizations, ~~'ere :::onsidered transfers

requiring itemization on a separate l~ne!schedule of :EC repor~s

regardless of amount.

I

Since the corporate contribution has been refunded and

MUR 603(78) has been closed, the Audit staff recommends that no

further action be taken on these matters.

The ~udit staff recommends that no :~rther act~on be taken

on th~s :nat'ter.

3. ,the signing of a· conciliation agreement. by the

contributor, the Commission voted on March 14, 1979 to close

the file with no furtheraction~

2. the Candidate's misunderstanding of the related

Sections of the Act, i.e. thinking a 3rd party check drawn on

a corporate account constituted a corporate contribution, and

Section 434(b) (4) of Title 2, Cnited States Code, . requires in part, that a committee itemize the name and address

of each political committee from which the reporting committee

or candidate received any transfer of funds, together with the

amounts and dates of all trans:ers. :urther, Section 100.4 (a) P)

of Title 11, Code of Federal Regulations, expands the meaning

of ·"transfer of funds" to include those received from other

political organizations or similar sources whether or not such

organizations are political coromittees. . •
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D. Retention of Supporting Documentation for 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 ofS100, or for expenditures

aggregating in excess of SlOO, to the same person within a calendar

year.

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

in part, provides t~at when a receipted bill is not available, the .. treasurer may keep the cancelled check(s) showing payment of the

bill; and the bill, invoice, or other contemporaneous memorandum

of the transaction. ' .

Ourexami~ation of the Committee's records revealed . that of 16 expenditures requiring supporting documentation, 12

'expenditures or 75% lacked a receipted bill, voucher, invoice

or contemporaneous memorandum. These 12 expenditures totaled

53,089.38, andre?resented77.25~ o~ the doll~r amount of '~expenditures req~iring such documentation~

In addition,' the Committee had misplaced four (4) bank

statements and the related cancelled checks (nine (9) checks

totaling $2,599.62). The Audit staff requested that the Committee

obtain copies of the bank statements from the bank, but not the

missing cancelled checks, due ..to the Committee's financial position.

As a result, of t~e 12 expenditures lacking supporting documentation

(receipted bill or bill, invoice, or contemporaneous ~emorandum

together with the ca~celled check) eight (8) were lacking cancelled

checks.

Ten of t~e 12 expenditures lacking doc~~encacion were

,made, to the Commi~tee's public relations firm which ~anaged the

campaign. Two (2) ~ailings were made by the Candidate to obtain

copies of the ~issing receipted bills or some other doc~mentation

for these 12 ex?end~tures. 30t~ were returned by t~e ?os~~aster

~unclaimed~. A t~ird mailing ~as ~ade by the Audi~ staff, but,

it too was unsuccessful.
Recommendation

Recommendation

Itemization of Expenditures

... =~-~~ .. -""",,. ---::--.;, '-"-".

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I

Our ~eview ~: -:he Committee's records disclosed thac

the Corr~it':ee, :or a ?eriod :rom June 2, 1976, through ~ecen=er

28, 1975, overstated ~ocal ~ecei?ts by 54,619.33, total ex?e~d~~~~es =y 51,:3:.3:, a~d endi~g cash as 0: December 23, 1~i6, ::::- 53,~37.~2. :':-.. e ~':r:'.rni.:.~ee's O~le:-s-:.a-:.e!:\ent 0: rece:'?~s

:. Overstatement 0: Receipts, Expenditures

and Cash-en-Hand

~~eAudit sca== =eco~mends that no :urther action be taken

on thi.s :-:lacter.

" Section 43~ :b) (1), (3), and (11) 0: Title 2, ..t:ni-:ed

States Code, in ?a~t, requi~es a committee ':0 report the ~ount

of cash =n hand a~ ~~e, beg~~ni~g of the ~epcrti~g period :nd ~~e

toca~ S~~ ~: all.::ce~?:s ~nd e~penditur~s ~y o~ :or such co~m~-:':ee O~ can~~~a':e ~ur~ng tne report~ng ?er~od.

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Our e:<:alni:1ation of theCommittee' s expenditure records ~evealed that seven (i) ex~enditures of a total of 16 iternizable ex~enditures (~3.i5;) were-not itemized in the disclosure reports.

The expenditures cotaled $1,399.76 (35% of $3,999.38 in

itemi=able expenditures) .

Upon our request an amended report was filed on April tt

24, 1978 itemizing these seven (7) expenditures.

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

part, ~equires the committee to disclose the name and address

of each person to whom expenditures have been made by such

committee or candidate which in the aggregate exceed SlOO within

a calendar year, together with the purpose, amount and date of

the expenditures.

Based on the Committee's efforts outlined above, the

Audit staf: recommends that the Commission determine that the

Committee has demonstrated its best efforts to comply with

2 U.S.C. 432(d) and that no further action be taken on this

matter. (Re:erto scope li:nitatJ.on in "Scope" Section and

qualification in ".;uditor's Statement" Section).
• _~ _ l

'Reoorting~of'C~ange:in

... Section···.;3 2 (a)." 'of~''!'i tle":'2 , .. :United States .Code,

" . ·~ar"t·· t"" , ~':':;;::"~~';"''''s~·''l..at· ;""': ....-._"- ,J..';'1 eve"'~,····ool;";c~'<·-omm;+-"QQ -_ _ -"-. -- ,,,"- -----:="'-ha'l I.a'·eJ a ,

':::.. chair:na:l. and a' t=easurer.;::l.. addition,' :10., cor.~=ibution and·' ,. ::no ex~e:l.c.:':t-.i=e shall be, accented .;or:' ::lac.e,.b'loi: on beha::: of . , .. , ' " , -" . "'."", ' " " .

:a' ?ol':' t':' =a:;=or.uni t tee a t 30"; ~i::\e:N::'e~.: t::'ere,.:.s '30: ,?acanc:,;.;:: i:1, _..e,' ·,·,,,'~;of=ice'<c= 'c~ai=:':lan:,e:~:-.h,~reasu::er,":~e::'-e·of';.:·- "-,," ,~," .,.
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(3) Solicitation and Authorization Statements on

Camoaien Literature • c

Section 435(b) of Title 2, United States Code,

requires that each =olitical co~~ittee shall ~~clude on the face

or :ront page of a:: li~erat~=e and advertisements sclici~i~g

contribut~ons ~~e following ~otice:

e Sectio~n ~33(c) of Title 2, United States Code, requires

that a political committee report any change in information pr'~'1iously submi t-:ed in a statement of. organization to the

Cornrnissionwithin'a lO-day period following the change.

A'~review of the Committee's statement of organization

and amendments thereto indicates that the Committee's original

treasurer resigned in writing (to the Commission) on July 29, 1976

but his successor was not designated on the .Committee's statement

of. organization .~~til August 23, 1976.'

(2) Disclosure of Fundraising Events

Section ~34(b) (6) (A) of Title 2, United States Code,

requires in part, that a committee disclose the total amount,

of proceeds from the sale of tickets to each dinner, luncheon;

rally, and other f~ndraising event.

Durine the" entrance conference, the Candidate stated

that the Committee held two (2) fundraisers .and provided ~s

,with the promotio~alliterature relating ~o one (1) of t~em.

The Committee'had filed 'no Schedule D's in its reports to the

Commission. The only records made available by the Co~mittee

pertaining to fundraising events were a listing of the people,

together with dollar amounts~ who attended one (1) of the fund- .., raising receptions. The Committee reported the receipts in

unitemized receipt totals and, according to the Candidate,

reported the related expend~tures through payments to its public

relations =irm~ 7he Candidate s~ated he was unfamiliar with

the Commission =cr~ Schedule D.The Commi-:tee filed an amendmen~

on February 5, 1979 disclosing the activity for one (1) fundraising event on Schedule D.
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"A copy of our report is filed with the Federal

Election Commission and is available for purchase from the Federal

Election Commission, Washington, D.C."

Section 44ld(ll of Title 2, United States Code,

requires i~ part, that campaign literature expressly advocating

the election of a clearly identified candidate through any type

of general pUblic political advertising, if authorized by a

candidate or his authorized political committee, shall clearly

and conspicuously, in accordance with regulations prescribed by

the Commission, sta~e that the literature has been authorized.

Our examination of the Committee's campaign

literature soliciting the purchase of tickets to attend a $20/plate

dinner reception on the Candidate's behalf revealed that the

Committee had not included the statement required by Section

43S(b). This Committee literature did include the name, address,

and phone number of the Committee.

Our examination ~f the Committee's campaign literature advoca~ing the election of ~he Candidate revealed that the

Committee had not included the recuired authorization statement.

This Committee literature di= inciude the address and phone number

of the Co~mittee's campaign headquarters.

In discuising these ~atters with the Candidate he

stated that he was not aware of the solicitation or authorization

statement requ~remen~s.
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FEDERAL. ELECTION COMMISSION

112') '" "110:11 I '-.\\.

\\'.\"HI'-C 10'-.1 H .!n4t> \

AIDmONAL INFORMATION REGARDING '!HIS ORGANIZATION

MAY BE 1DCATED IN A OOMPLETED cn1PLIANCE ACIION

FILE RELEASED BY THE <nMISSION AND MADE PUBLIC IN

'!HE PUBLIC RECX>RDS OFFICE. FOR '!HIS PARTICULAR

ORGANIZATION'S COMPI.E1ED OOMPLIANCE ACITON FILE

SlMPLY JSK FUR mE PRESS StH-1ARY OF MJR # £, {).:;

'!HE PRESS SlJloMARY WIlL PROVIDE A BRIEF HISroRY OF

'!HE CASE AND A stJM1&\RY OF THE ACrIONS TAKEN, IF Pm.

Audit 4fr IIi