FEDERAL ELECTION COMMISSION

WASHINGTON, DC 20463

April 13,2001

MEMORANDUM

•

TO:

FROM:

RON M. HARRIS

PRESS OFFICER

PRESS OFFICE

(l "-.," 'j/l

ROBERTJ.COSTA~,~(t£f)~

ASSISTANT STAFFjr5¥CTOr

AUDIT DIVISION '

• SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON

SCHUMER'98

Attached please find a copy ofthe final audit report and related documents on

Schumer '98 which was approved by the Commission on April 6, 2001.

Informational copies ofthe report have been received by all parties involved and

the report may be released to the public on April 13,2001.

Attachment as stated

cc: Office ofGeneral Counsel

Office of Public Disclosure

Reports Analysis Division

FEC Library
REPORT OF THE AUDIT DIVISION

ON THE

SCHUMER '98

Approved April 6, 2001

FEDERAL ELECTION COMMISSION

999 E STREET, N.W.

WASHINGTON, D.C.
TABLE OF CONTENTS

SCHUMER '98

Page

•

f,

Executive Summary

Final Audit Report 5

Background 5

Findings 7

Analysis 27

Transmittal to Committee 29

Chronology 31
FEDERAL ELECTION COMMISSION

WASHINCTOl\. 0 C 204bJ

SCHUMER '98

EXECUTIVE SUMMARY

A99-04

•

•

Schumer '98 (the Committee) registered with the Federal Election Commission

on April 28, 1997, as the principal campaign committee for Charles E. Schumer,

Democratic Candidate for the U.S. Senate from the state ofNew York.

The audit was condulited pursuant to 2 U.S.C. §438(b), which states that the

Commission may conduct audits of any political committee whose reports fail to meet the

threshold level ofcompliance set by the Commission.

The findings ofthe audit were presented to the Committee at an exit conference

held at the completion of fieldwork on March 29, 2000 and later in the interim audit

report. The following is an overview ofthe findings contained in the audit report.

Receipt of Contributions from Individuals in Excess of the Limitation -

2 U.S.C. §§441a(a) and 431(11),11 CFR §§100.7(a), 103.3(b), 110.1(b), (k) and (1),

II CFR §103.3(b). The Audit staff's review ofcontributions conducted during audit

fieldwork identified 836 apparent excessive contributions from 789 individuals, 36

partnerships, and 11 political committees totaling $999,879. Ofthis amount, excessive

contributions totaling $97,050 were reattributed, redesignated or refunded, but not in a

timely manner. The Committee attributed many ofthe remaining contributions to more

than one contributor or to more than one election, but the requisite documentation to

support those attributions was not made available during the audit.

In response to the interim audit report, Committee Counsel argues that

contributions in excess ofthe statutory limits were not greater than $61,540. Counsel

further states that Schumer '98 is unable to demonstrate that it obtained and maintained

all ofthe records related to its redesignation and reattribution efforts. Counsel goes on to

state that the auditors identified $902,829 in such contributions and that the Committee

has produced documents that demonstrate $201,050 ofthat amount is not excessive. As a

result, Counsel argues that contributions unresolved by documentation totals only

$640,239.

Based on the Audit staff's review ofthe documentation submitted, the Committee

has not demonstrated that contributions totaling $951,454 were not in excess ofthe

limitation. Ofthis amount, $854,404 requires refund. The difference, $97,050, has been

Page 1 of 31
either refunded, reattributed or redesignated. However, as previously stated such actions

were not timely.

Misstatement of Financial Activitv - 2 U.S.c. §434(b). The Audit staffs

reconciliation ofthe Committee's reported activity to its bank activity revealed a material

misstatement with respect to ending cash on hand at December 31, 1998. Specifically,

reported ending cash on hand was understated by a net amount of$171 ,385.

In response to the interim audit report, the Committee filed amended disclosure

reports that materially corrected the misstated activity.

Transfers From the Friends of Schumer Committee - 11 CFR §§ 104.3(a) and

110.3(c). The Committee did not report receiving transfers, totaling $229,848, from the

Candidate's 1996 congressional committee. Further, the Committee did not disclose

properly the contributions within the transfers that were received subsequent to the 1996

general election.

In response to the interim audit report, the Committee filed amended disclosure

reports which disclosed the above transfers on Schedule A, as well as those contributors

whose contributions were received after the 1996 general election (by Friends of

Schumer) on memo Schedules A.

Itemization of Contributions Received from PACs/Other Political

Committees - 2 U.S.C. §§434(b) and 431(13). The Committee did not itemize twentyfour contributions from PACs/Other Political Committees, totaling $67,950.

In response to the interim audit report, the Committee filed amended disclosure

reports disclosing the above contributions.

Itemization of Contribution Refunds - 2 U.S.c. §434(b) and 11 CFR §104.3

(b). During audit fieldwork, the Audit staffidentified 60 contribution refunds, totaling

$58,225, that were not reported. Moreover, the disclosure ofthe related contribution

transaction(s) was also deficient.

In response to the interim audit report, the Committee filed amended disclosure

reports disclosing the contribution refunds.

Disclosure ofloformatioo 00 Reports of Expenditures - 2 U.S.c. §434(b).

The Audit staffidentified 289 disbursements, totaling $6,354,835, that were not disclosed

properly. The majority ofthe disclosure errors consisted of 267 disbursements, totaling

$6,332,663, that were summed by payee, by reporting period and disclosed as a single

entry for each payee.

In response to the interim audit report, the Committee filed amended disclosure

reports which materially disclosed the above disbursements, including the date and

amount of each disbursement.

Page 2 of3 I
r~,

ru

Filing of 48 Hour Notices - 2 U.S.c. §434(a). The Audit staffreviewed all

contributions greater than or equal to $1,000 with a receipt date between August 27, 1998

and September 12, 1998 and between October 15, 1998 and October 31, 1998. The Audit

staff identified 1,407 contributions, totaling $1,534,500, that required 48 hour notices.

The Committee did not file notices for 57 contributions totaling $89,500. Ofthe

remaining 1,350 notices filed, totaling $1,445,000, 180 notices, totaling $186,500, were

filed late.

In response to the interim audit report, Counsel for the Committee stated that of

the 180 notices identified, nearly every one was filed within 72 hours and all ofthem

were filed before the election. Further, the Committee did not present evidence that 48-

hour notices for 57 contributions, totaling $89,500, were filed.

Schumer '98 Joint Fundraising Activities - 11 CFR. §102.17(b) and (c). The

Committee was a participant in two joint fundraisers. The joint fundraising

representatives were Victory in New York (Victory) and Win New York (Win); neither of

which were audited. Regarding the Victory joint fundraising activity, a question arose

during fieldwork concerning the Committee's share of expenses - it appeared the

Committee either did not pay its proportionate share or did not report all contributions

related to the activity. In response to the interim audit report, the Committee provided a

detailed schedule of all Victory contributions and also filed amended memo Schedules A

which disclosed additional contributor information in support ofthe joint fundraising

proceeds.

Our review ofthe Win joint fundraising activity which reportedly raised

approximately $729,000 identified only $3,750 in expenses allocated to the Committee.

The Committee received $176,850 in joint fundraising proceeds or 24.3% ofthe total

distributed proceeds, while the other participant's allocable share was $549,764 (75.7%).

Win did not report any joint fundraising expenses on its original disclosure reports

through December 31, 1998. Absent documentation identifying the joint fundraising

expenses, it was not possible to verify the accuracy of the Committee's reports filed with

respect to memo Schedules A or determine if either participant received/made a

reportable in-kind contribution.

In response to the interim audit report, Counsel for the Committee stated, in part,

that expenses related to Win were paid by the Committee as part ofthe Committee's preexisting overhead and administrative expenses.

Ifthe total joint fundraising expenses paid by the Committee exceeded $6,667, it

is likely that the Committee made an excessive in-kind contribution to the Liberal Party.

The dollar value of any potential excessive in-kind contribution cannot be calculated

without documentation supporting total joint fundraising expenses which was not

provided in response to the interim audit report.

Page 3 of31
n.l

Page 4 of31

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,"

FEDERAL ELECTION COMMISSION

WASHINGTON, DC 2046J

REPORT OF THE AUDITDIVISION

ON

SCHUMER '98

A99-04

,. I. BACKGROUND

A. AUDIT AUTHORITY

"

This report is based on an audit ofSchumer '98 (the Committee), undertaken

by the Audit Division ofthe Federal Election Commission in accordance with the provisions

ofthe Federal Election Campaign Act of 1971, as amended (the Act). The audit was

conducted pursuant to Section 438(b) ofTitle 2 ofthe United States Code which states, in

part, that the Commission may conduct audits and field investigations ofany political

committee required to file a report under Section 434 ofthis title. Prior to conducting any

audit under this subsection, the Commission shall perform an internal review ofreports filed

by selected committees to determine ifthe reports filed by a particular committee meet the

threshold requirements for substantial compliance with the Act.

B. AUDIT COVERAGE

The audit covered the period January I, 1997 through December 31, 1998.

During this period, the Committee reponed a beginning cash balance of $0; total receipts for

the period of$16,825,676; total disbursements for the period of $16,671,881; and an ending

cash balance of$153,795.'

C. CAMPAIGN ORGANIZATION

The Committee registered with the Federal Election Commission on April 28,

1997, as the principal campaign committee for Charles E. Schumer, Democratic Candidate

for the U.S. Senate from the state ofNew York. The Treasurer ofthe Committee during the

Figures in this report are rounded to the nearest dollar. Ending cash, as initially reported, was

materially misstated, See Finding I1,B,

Page50f31
period covered by the audit was Steven D. Goldenkranz. Mr. Goldenkranz continues as

Treasurer. The Committee maintains its headquarters in Brooklyn, New York.

To manage its financial activity, the Committee maintained five operating

accounts and six investment accounts. The audit indicated the Committee was financed

primarily through contributions from individuals ($10,410,758), transfers of excess campaign

funds from Friends of Schumer, the Candidate's 1996 congressional committee ($5,299,010),

contributions from political action committees ($585,248), and interest/dividends from

investments ($454,700).

D. AUDIT SCOPE AND PROCEDURES

The audit included testing ofthe following general categories:

•

1.

2.

The receipt of contributions or loans in excess ofthe statutory

limitations (see Finding IIA);

the receipt of contributions from prohibited sources, such as those

from corporations or labor organizations;

3. proper disclosure of contributions from individuals, political

committees and other entities, to include the itemization of

contributions when required, as well as the completeness and accuracy

ofthe information disclosed (see Findings H.C. and D.);

4. proper disclosure of disbursements including the itemization of

disbursements when required, as well as the completeness and

accuracy ofthe information disclosed (see Findings II.E. and F.);

5. proper disclosure of committee debts and obligations;

6. the accuracy oftota] reported receipts, disbursements and cash

balances as compared to committee bank records (see Finding II.B.);

7. adequate recordkeeping of committee transactions; and

8. other audit procedures that were deemed necessary in the situation (see

Findings II.G. and H.).

Unless specifically discussed below, no material non-compliance with

statutory or regulatory requirements was detected. It should be noted that the Commission

may pursue further any ofthe matters discussed in this report in an enforcement action.

Page 6 of31
II. AUDIT FINDINGS AND RECOMMENDATIONS

A. APPARENT EXCESSIVE CONTRIBUTIONS

Section 441a(a)(l)(A) ofTitle 2 ofthe United States Code states that no

person shall make contributions to any candidate and his or her authorized political

committees with respect to any election for Federal office which, in the aggregate, exceed

$1,000.

Section 431 (11) ofTitle 2 ofthe United States Code states that the term

"person" includes an individual, partnership, committee, association, corporation, labor

organization, or any other organization or group ofpersons, but such term does not include

the Federal Government or any authority ofthe Federal Government.

Section 441 a(a)(2)(A) ofTitle 2 ofthe United States Code states that no

multicandidate political committee shall make contributions to any candidate and his or her

authorized political committees with respect to any election for Federal office which, in the

aggregate, exceed $5,000.

Section 100.7(a)(l)(iii) of Title 11 ofthe Code of Federal Regulations states,

in part, that the term "contribution" includes a gift, subscription, loan, advance, or deposit of

money or anything of value made by any person for the purpose ofinfluencing any election

for Federal office. The term "anything of value" includes all in-kind contributions.

Section 103.3(b)(3) ofTitle 11 ofthe Code of Federal Regulations states, in

part, that contributions which exceed the contribution limitations may be deposited into a

campaign depository or returned to the contributor. If any such contribution is deposited, the

treasurer may request redesignation or reattribution ofthe contribution by the contributor in

accordance with 11 CFR 11 0.1 (b) or II O.l (k). If a redesignation or reattribution is not

obtained, the treasurer shall, within 60 days ofthe treasurer's receipt ofthe contribution,

refund the contribution to the contributor.

Sections 110.1(b)(2)(i) and (ii) of Title II ofthe Code of Federal Regulations

states, in relevant part, that contributions to candidates, with respect to any election meansin the case of a contribution designated in writing by the contributor for a particular election,'

the election so designated. Contributors to candidates are encouraged to designate their

contributions in writing for particular elections. In the case of a contribution not designated

in writing by the contributor for a particular election, the next election for that Federal office

after the contribution is made.

Section 110.1(b)(4) of Title 11 ofthe Code of Federal Regulations states, in

part, that a contribution shall be considered to be designated in writing for a particular

election if the contribution is made by check, money order, or other negotiable instrument

which clearly indicates the particular election with respect to which the contribution is made;

the contribution is accompanied by a writing, signed by the contributor, which clearly

Page 7 on]
indicates the particular election with respect to which the contribution is made; or, the

contribution is redesignated in accordance with 11 CFR 110.1 (b)(5).

Section IIO.I(b)(3) ofTitle II ofthe Code of Federal Regulations states, in

part, that a contribution designated in writing for a particular election, but made after that

election, shall be made only to the extent that the contribution does not exceed net debts

outstanding from such election. To the extent that such contribution exceed net debts

outstanding, the candidate or the candidate's authorized political committee shall return or

deposit the contribution within ten days from the date ofthe treasurer's receipt ofthe

contribution as provided by 11 CFR 103.3(a), and if deposited, then within sixty days from

the date ofthe treasurer's receipt the treasurer shall take the following action. Refund the

contribution using a committee check or obtain a written redesignation by the contributor for

another election in accordance with II CFR I 10.1 (b)(5); or obtain a written reattribution to

another contributor in accordance with II CFR 110.1(k)(3). In order to determine whether

there are net debts outstanding from a particular election, the treasurer shall calculate net

debts outstanding as ofthe date ofthe election. For purpose ofthis section, net debts

outstanding means the total amount of unpaid debts and obligations incurred with respect to

an election, including the estimated cost ofraising funds to liquidate debts incurred with

respect to the election, less the sum ofthe total cash on hand available to pay those debts and

obligations and the total amounts owed to the candidate or political committee in the form of

credits, refunds of deposits, returns, or receivables, or a commercially reasonable amount

based on the collectibility ofthose credits, refunds, returns, or receivables.

Section 110.I(b)(5) ofTitle II ofthe Code of Federal Regulations states, in

relevant part, that the treasurer of an authorized political committee may request a written

redesignation of a contribution by the contributor for a different election ifthe contribution

exceeds the limitation on contributions set forth in II CFR 110.1 (b)(1). A contribution shall

be considered to be redesignated for another election ifthe treasurer ofthe recipient

authorized committee requests that the contributor provide a written redesignation ofthe

contribution and informs the contributor that the contributor may request a refund ofthe

contribution and within 60 days from the date ofthe treasurer's receipt ofthe contribution,

the contributor provides the treasurer with a signed redesignation of the contribution for

another election.

Section 11O.1(b)(6) of Title II ofthe Code ofFederal Regulations states, in

part, that a contribution shall be considered to be made when the contributor relinquishes

control over the contribution. A contributor shall be considered to relinquish control over the

contribution when it is delivered by the contributor to the candidate, to the political

committee, or to an agent ofthe political committee. A contribution that is mailed to the

candidate, or to the political committee or to an agent of the political committee, shall be

considered to be made on the date of the postmark.

Section 110.1 (k) ofTitle 11 of the Code of Federal Regulations states, in part,

that any contribution made by more than one person, shall include the signature of each

contributor on the check, money order, or other negotiable instrument or in a separate

Page80f31
wntmg. A contribution made by more than one person that does indicate the amount to be

attributed to each contributor shall be attributed equally to each contributor. If a contribution

to a candidate on its face or when aggregated with other contributions from the same

contributor exceeds the limitations on contributions, the treasurer may ask the contributor

whether the contribution was intended to be a joint contribution by more than one person. A

contribution shall be considered to be reattributed to another contributor if the treasurer of the

recipient political committee asks the contributor whether the contribution is intended to be a

joint contribution by more than one person, and informs the contributor that he or she may

request a return ofthe excessive portion ofthe contribution ifit is not intended to be ajoint

contribution; and within 60 days from the date ofthe treasurer's receipt ofthe contribution,

the contributors provide a written reattribution ofthe contribution, which is signed by each

contributor, and which indicates the amount to be attributed to each contributor if equal

attribution is not intended.

Section 110.1(l)(5) ofTitle 11 ofthe Code of Federal Regulations states, in

part, that if a political committee does not retain the written records concerning

redesignations or reattributions, the redesignation or reattribution shall not be effective and

Ii,} the original designation or attribution shall control.

Section 103.3(b)(4) ofTitle II of the Code ofFederal Regulations states, in

relevant part, that any contribution which appears to be illegal under II CFR 103.3(b)(3), and

which is deposited into a campaign depository shall not be used for any disbursements by the

political committee until the contribution has been determined to be legal. The political

committee must either establish a separate account in a campaign depository for such

contributions or maintain sufficient funds to make all such refunds.

The Audit staffs initial review of contributions conducted during audit

fieldwork identified 836 apparent excessive contributions from 789 individuals, 36

partnerships, and 11 political committees totaling $999,879. Of this amount, excessive

contributions totaling $97,050 were reattributed, redesignated or refunded, but not in a timely

manner. With respect to the remaining $902,829 in apparent excessive contributions, the

Audit staff noted the following:

Sole Account Holders

In many instances a contribution in the amount of$2,000 was made by

check drawn on an account solely held by an individual. The Committee disclosed these

contributions as being designated $1,000 to the primary ejection and $1,000 to the general

election. In other instances (other than a $2,000 check), contributions aggregating b'T'eater

than $1,000 were disclosed as being designated to both the primary and general election.

However, during audit fieldwork no documentation was made available for review in support

ofsuch designations.

Page 9 of31
Joint Account Holders

In many instances contributions in the amount of$2,000 or greater

were made by check drawn on ajoint account. Only one ofthe account holders' signatures

appeared on the check. In the case of a $2,000 check, the Committee disclosed this

contribution as being attributed $1,000 to each account holder for either the primary or

general election. In the case of a $4,000 check the Committee disclosed these contributions

as being attributed $1,000 to each account holder for the primary election and attributed

$1,000 to each account holder for the general election. Again, no documentation was made

available for review during audit fieldwork in support of the aforementioned reattributions or

redesignations.

Check Memo Line Designations

Our review of copies of checks made available identified many cases

where it appeared that the memo line ofthe check had been annotated "primary election,"

"general election," or "primary/general" by someone other than the contributor. Given this

inconsistency, the Audit staff pursuant to 11 CFR §11 0.1 (b)(2)(ii) applied such contributions

to either the primary or general election based on the date ofthe contributor's check.

Contributions Received After the Primary Election but Designated by

the Committee for the Primary Election

Certain contributor checks dated and received subsequent to the

primary election were designated by the Committee for the primary election. Based on

documentation made available, the Audit staff calculated that the Committee did not have

primary debt as ofSeptember 15, 1998 (date ofthe primary election).

Although requested during audit fieldwork, the Committee could not

produce a statement which demonstrated that as ofthe date ofthe primary election it had net

outstanding primary debts. Therefore, contributions totaling $62,400 received after

September 15, 1998 and designated for the primary election by the contributor should have

been refunded. These contributions are not included in the excessive contributions discussed

above.

The Audit staff discussed these matters with the Committee representatives at

the exit conference and presented them with detailed schedules ofthe excessive

contributions. The Committee representatives were confident that these were merely

recordkeeping issues.

In the response period following the exit conference, the Committee provided

a calculation ofits net debt position as ofSeptember 15, 1998. The Audit staff determined

that certain components ofthe net primary debt calculation were not supported by sufficient

vendor documentation. Specifically, from August 24, 1998 through September 14, 1998, the

Committee made payments to its media vendor totaling $3,279,080. Although requested, the

Page 10 of31
c=C :.

U::i.

Committee did not provide the necessary documentation to detennine ifthese payments were

for primary or general election media.

In the interim audit report, the Audit staffrecommended that the Committee:

(a) provide evidence and/or documentation that demonstrated the

contributions were not excessive;

(b) with respect to the media payments noted above, provide copies ofmedia

ads, station invoices and print materials, including distribution dates

related to the $3,279,080 in payments;

(c) provide any other relevant documentation that demonstrated that the above

payments related to either the primary or general elections; and,

(d) absent such evidence, refund the above contributions ($902,829 +

$62,400) and provide evidence ofsuch refunds (copies ofthe front and

back ofthe negotiated refund checks). Iffunds are not available to make

the necessary refunds, the Audit staffrecommended that the contributions

be disclosed as debts on Schedule D (Debts and Obligations) until such

time that funds become available to make the refunds.

In response to the interim audit report, Counsel for the Committee stated that

the Committee's compliance staff had the task of processing over $17 million in receipts and

expenditures, most ofit in just ~even weeks between the mid-September primary and the

November general election. Counsel also stated:

"Over the course ofthe year-long audit ofthe Committee's

books and records, only $61,540 in contributions from

individuals and political action committees exceeded the

$2,000 individual and $10,000 PAC aggregate primary and

general elections limits, representing less than 0.36% of the

total amount raised by the Committee. The auditors did not

identify a single issue related to any contributions from

prohibited sources, such as corporations or foreign nationals."

"Overall, Schumer '98 did an exceptional job of ensuring that

both the letter and the spirit of the Federal Election Campaign

Act's statutory contribution limits were followed, but with

respect to a small percentage of contributions, they are unable

to fully demonstrate that the Committee obtained and retained

documents related to the largely ministerial regulatory task of

collecting redundant written redesignations and reattributions

where the donor's intent to abide by the contribution limits was

clear and unambiguous.'

Page II of31
The Commission acknowledges that the designation

and attribution documentation requirements are a

regulatory burden on candidate committees and in its

2000 recommendation to Congress the Commission

proposed changes that would remove this unnecessary

burden. See page 4 for additional discussion regarding

this issue."

"The Schumer '98 staff had procedures in place to ensure

compliance with the Federal Election Campaign Act of 1971,

as amended (the 'Act'). The compliance and fundraising staff

distributed copies ofthe 'Contribution Limits and Restrictions'

fact sheet to donors instructing them how to properly designate

their checks before making a contribution. See Exhibit 1. In

addition, they carefully followed the six-step redesignation and

reattribution process set forth in the Commission's regulations

which require campaigns to request and obtain a letter signed

by the donor, that restates the donor's intent to have his or her

$2,000 election-cycle contribution allocated $1,000 for the

primary and $1,000 for the general elections. With respect to a

small percentage of contributions, Schumer '98 is unable to

demonstrate that it obtained and maintained all ofthe records

related to its redesignation and reattribution efforts. The

auditors ide'1tified $902,829 in such contributions and the

Committee has produced documents demonstrating that

$201,050 ofthat amount is not excessive. As a result,

contributions unresolved by documentation totals only

$640,239, representing 3.7% ofthe $17 million raised and

spent by the Committee. [Footnote omitted]"

Counsel's representation of excessive contributions and their relationship to

total contributions raised by the Committee is misplaced. It should be noted that of the $17

million that Counsel portrayed as processed by the Committee's compliance staff,

approximately $5 million was transferred to the Committee from the Candidate's 1996

congressional committee; the Committee raised approximately $10,400,000 from individuals.

Counsel attempts to characterize excessive contributions as either "resolved as excessive"

($61,540) or "unresolved by documentation but within the per person ejection limits set forth

in the Act" ($640,239). Regardless how characterized by Counsel, the contributions when

examined in the relevant context ofthe Act and Commission regulations were still

excessive. 2

After citing that the Commission. on numerous occaSIOns, has recommended that Congress amend the

Act by changing the contribution limits from a per-election basis to an electlOn-cycle basis, Counsel

suggests that the Commission can, by amending its own regulations, elimmate the unnecessary election

Page 12 of31
Counsel acknowledges that under 11 CFR 110.1 a candidate committee is

required to count a donor's contribution against the $1,000 limit for the next scheduled

election unless the donor designates in writing that the contribution is for a different election.

Given this interpretation, Counsel went on to state:

"The Act does not require this interpretation. It simply states

that the per person election limit is $1,000. 2 U.S.C.

§441 a(a)(l)(A). The presumption ofthe § 110.1 regulation is

that donors intend to violate the election limit when they write

a $2,000 contribution prior to the date ofthe primary election

to a Senate candidate but inadvertently or unknowingly fail to

write '$1,000 primary I $1,000 general' on the memo line of

their check. Obviously, donors have no such intent to make

excessive primary election contributions. They are simply

combining their $1,000 primary and $1,000 general election

contributions in a single check, in compliance with the Act.

The regulatory presumption should be that individuals intend to

comply with the law, rather than break it."

Counsel argues that the Statutory and Regulatory provisions should be

interpreted far more liberally than indicated by their plain language. The audit finding was

based on documentation made available during the fieldwork; there were no presumptions or

assumptions made as to whether a contributor did or did not intend to comply with the Act or

Regulations. The Act with respect to the contribution limitation for individuals is clear. An

individual may contribute $1,000 to a candidate committee for the primary election and

$1,000 for the general election. The Regulations are clear with respect which election a

specific contribution is applied. If made on or before the date ofthe primary election, it is a

primary election contribution. If made after the date ofthe primary election, the contribution

is applied to the next election. Specific documentation is required to reattribute a

contribution from one donor to another. Specific documentation is required to redesignate a

contribution from one election to another. The Commission does not view excessive

contributions, unresolved by documentation but within the per person election limits, as

pemissible. A $2,000 contribution for a primary election is $1,000 in excess ofthe statutory

SI,000 per election limit.

Check Memo Line Designations

Counsel stated a major point of contention between the auditors and

the Committee is the issue ofannotations on the memo line of contribution checks. Counsel

asserted that many $2,000 contribution checks included the designation "$1,000 primary I

SI,000 general" written or typed on the memo line, and were treated as excessive primary

designation requirement imposed on donors and free candIdate comminees from an unnecessary

regulatory burden.

Page 13 of31
contributions because the auditors somehow determined that the donor did not make the

annotation.

The Committee did in fact receive a number of $2,000 contributions

made by check and signed by one individual. In order for the contribution to be applied

$1,000 to the primary and $1,000 to the general, the Committee must either (a) obtain and

maintain additional documentation signed by the contributor in accordance with II CFR

110.l(b)(5) or (b) maintain the contribution instrument (e.g., check) or an attached writing

signed by the contributor which clearly indicates the particular election with respect to which

the contribution is made.

The Audit staff did in fact review such annotations. In a number of

instances, the Audit staff noted checks from contributors having dissimilar surnames and

addresses, annotated on the memo line in a similar manner and apparently in the same

handwriting. Further, certain contributor checks were typed or computer-generated but the

election designations in the memo line area were recorded in a completely different font and

size. Given the patterns noted, the Audit staff did not consider such annotations to be

contributor-generated. As previously stated, given this inconsistency the Audit staff applied

such contributions to either the primary or general election, based on the date ofthe

contribution. The response to the interim audit report did not contain any documentation

from any ofthe contributors affirming such "annotations" questioned by the Audit Staff.

Net Debt and Pre-primary Media Payments

Counsel stated: "Although this issue was not raised by the

auditors until after the Exit Conference, the Committee has

produced evidence and documentation that the $3,279,000 in

pre-primary media expenditures during the period August 24,

1998 through September 15, 1998 were for primary election

media. In the Interim Report, the auditors presumed that the

entire $3.3 million was used for general election media

expenses, despite the fact that Senator Schumer was engaged in

a contested primary. When it comes to pre-primary

expenditures, the auditors presumed that they were for the

general election, but, as discussed above, in the case ofpreprimary contributions their presumption was different. As a

result ofthis presumption that pre-primary expenditures were

made for the election following the next scheduled election, the

auditors contend that the Committee did not have a primary

debt. Expenditures prior to the date of an election are under the

law presumed to be for the next election. The position ofthe

auditors is inconsistent with the FEe bright line rule applicable

to presidential campaign expenditures."

Page 14 of 31
"The auditors identified $62,400 in post-primary contributions

that were properly designated for the primary debt. As a result

ofthe Committee's demonstration that it was in a net debt

position as ofthe primary date, these properly designated

contributions should not be considered excessive."

It should be noted the issue ofwhether or not the Committee had net

primary debt was first addressed during the audit fieldwork. Numerous requests were made

during fieldwork for the Committee's calculation ofits net primary debt position. No such

calculation was made available. As previously stated, it was not until the response period

following the exit conference that the Committee provided a calculation ofits net debt

position as ofthe date ofthe primary election. At that time, the Audit staff allowed

additional time for the Committee to submit documentation for 7 disbursements totaling

approximately $3.3 million. The Committee still did not provide the necessary

documentation and the matter was addressed in the interim audit report.

Ifthe net primary debt statement was made available during fieldwork,

the Audit staffwould have followed the same procedures and requested any such

documentation necessary to verify the accuracy of the Committee's statement. Finally,

contributions were not classified as excessive in the interim audit report as alleged by

Counsel (see page 6, paragraph 2 of this report).

Based on the documentation made available in response to the interim

audit report, the Audit staff verified that the Committee had sufficient net debt on the date of

! L:: the primary election. Therefore, contributions totaling $62,400 no longer require refund.

Summary ofExcessive Contributions

Committee Counsel argues that contributions in excess ofthe statutory limits were

not greater than $61,540. Counsel further states that Schumer '98 is unable to demonstrate

that it obtained and maintained all ofthe records related to its redesignation and reattribution

efforts. Counsel goes on to state that the auditors identified $902,829 in such contributions

and that the Committee has produced documents that demonstrate $201,050 ofthat amount is

not excessive. As a result, Counsel argues that contributions unresolved by documentation

totals only $640,239.

The Audit staff has reviewed the documentation and detennined

contributions initially questioned totaling $52,000 were not excessive and $3,575 in

additional excessive contributions were identified. As to the $52,000 now viewed as not

excessive, approximately $32,000 was confinned as duplicate entries or misspellings/entry

errors and $20,000 was cleared by the submission of adequate supporting documentation. It

should be noted, a portion of the documentation submitted had already been made available

during audit fieldwork and considered in our initial analysis.

PagelSof31
Accordingly, the Committee has not demonstrated that contributions

totaling $951,454 ($999,879 + $3,575 - $52,000) were not in excess ofthe limitation. Ofthis

amount, $854,404 requires refunds. The difference, $97,050, has been either refunded,

reattributed or redesignated. However, as previously stated such remedies were not timely

(see Attachment 1).

B. MISSTATEMENT OF FINANCIAL ACTIVITY

Section 434(b)(l) (2) and (4) of Title 2 ofthe United States Code states, in

part, that a political committee shall disclose the amount of cash on hand at the beginning of

the reporting period and the total amount of all receipts and the total amount of all

disbursements for the reporting period and calendar year.

The Audit staffs reconciliation ofthe Committee's reported activity to its

bank activity revealed a material misstatement with respect to ending cash on hand at

December 31, 1998. Specifically, reported ending cash on hand was understated by a net

amount of$171,385. This understatement was primarily due to the Committee not reporting

transfers received from (1) Friends ofSchumer, the Candidate's 1996 congressional

committee ($229,848), (2) joint fundraising activity ($38,800) and (3) PAC/Other Political

Committees ($19,550). Further, the Committee reported a transfer of$75,000 from the

Democratic Senatorial Congressional Committee that it did not receive. The Committee also

deposited certain excessive contributions, but only reported the amount up to the limitation

and did not report the excessive portion ($66,225) or related refunds ($58,225). Finally, an

unexplained difference of $51,563 remained between the reported activity and bank activity.

The Audit staff discussed this matter with the Committee representatives at

the exit conference and provided them with copies ofthe bank reconciliation schedules. The

Committee representatives agreed to file the necessary amendments to correct the public

record.

In the interim audit report, the Audit staffrecommended that the Committee

file amended reports for the appropriate reporting period in 1997 and 1998 to correct the

misstatements identified above.

In response to the interim audit report, Counsel stated that the ending cash on

hand overstatement was due primarily to minor bookkeeping oversights in the processing of

$17 million. The Committee filed amended disclosure reports that materially corrected the

misstated activity.

C. TRANSFERS FROM THE FRIENDS OF SCHUMER COMMITTEE

Section 104.3(a)(3)(vi) of Title 11 of the Code of Federal Regulations states,

in relevant part, that an authorized committee of a candidate for Federal office shall report the

total amount ofreceipts received during the reporting period for transfers from other

authorized committee(s) ofthe same candidate, regardless of amount.

Page 16 of 31
Section 104.3(a)(3)(i)(A) ofTitle 11 ofthe Code of Federal Regulations

states, in part, that an authorized committee of a candidate for Federal office shaH report the

total amount ofitemized contributions from persons, other than any committees, including

contributions from individuals, but excluding contributions from a candidate to his or her

authorized committees.

Section I04.3(a)(4)(i) ofTitle I I ofthe Code of Federal Regulations states, in

part, that the identification of each contributor and the aggregate year-to-date total for such

contributor shall be reported for each person, other than any committee, who makes a

contribution to the reporting committee during the reporting period, whose contribution or

contributions aggregate in excess of$200 per calendar year, together with the date ofreceipt

and amount of any such contributions.

Section 104.3(a)(4)(iii)(A) ofTitle II of the Code of Federal Regulations

states, in relevant part, that an authorized committee of a candidate for Federal office shall

report the identification of each authorized committee which makes a transfer to the reporting

committee, together with the date and amount ofsuch transfer.

Section 110.3(c)(4) ofTitle II ofthe Code of Federal Regulations states, in

relevant part, that the contribution limitations of I I CFR I 10.1 and 110.2 shall not limit the

transfers offunds between a candidate's previous Federal campaign committee and his or her

current Federal campaign committee provided that the funds transferred are not composed of

contributions that would be in violation ofthe Act.

Section 110.3(c)(4)(iii) of Title II ofthe Code of Federal Regulations states in

relevant part that for purposes ofthe contribution limits, a contribution made after an election

has been held, or after an individual ceases to be a candidate in an election, shall be

aggregated with other contributions from the same contributor for the next election unless the

contribution is designated for the previous election, or is designated for another election.

The Commission's long-standing interpretation ofthe reporting requirements

is that when one authorized committee transfers funds to another committee authorized by

the same candidate, the recipient committees must report the individual contributors that

meet the itemization threshold. In 1978, the Commission addressed a situation where a

candidate ran for two different Senate seats in successive elections. The Commission

determined that Hfor purposes of disclosure under 2 U.S.c. § 434(b)(2), [post election]

contributions to the now terminated Senate I committee need not be aggregated with those

made to the 'new' Senate 2 committee but only to the extent they were expended by Senate I

and not included in any direct or indirect transfers made by the Senate I committee to the

Senate 2 committee." Advisory Opinion ("AO") 1978-19. In 1979, the Commission

expressly concluded that a Senate committee may lawfully transfer all ofits funds to a House

Committee for the same candidate, H[i]fthe House Committee reports funds received from

the Senate Committee as contributions received from the original contributors." AO 1979-

51. In 1982 and again in 1984, the Commission reached the similar conclusions in

AO's 1982-1 and 1984-38.

Page 17 of31
The Committee reported receiving two transfers totaling $5,299,010

($5,297,259 and $1,751) from the Candidate's 1996 congressional committee, in June 1997

and January 1998 respectively. However, a "Schedule ofTransfers to Schumer '98 from

Friends of Schumer" provided by the Committee included 13 transfers totaling $5,528,858, a

difference of $229,848.

Further, the Committee did not disclose properly the contributions within the

transfers that were received subsequent to the 1996 general election. The Audit staff

calculated that the amount transferred included $351,076 in contributions received

subsequent to the 1996 general election which, pursuant to 11 CFR §110.3(c)(4)(iii), are

contributions to the candidate's primary election campaign for the U.S. Senate.3 Ofthis

amount, $336,298 in contributions required itemization on memo Schedules A.

The Audit staff discussed this matter with the Committee representatives at

the exit conference and provided them with the schedule oftransfers discussed above. The

Committee representatives agreed to file the necessary amendments to correct the public

record.

In the interim audit report, the Audit staffrecommended that the Committee

file amended reports for the appropriate reporting periods in 1997 and 1998 to disclose the

transfers that were not reported and to disclose the contributors whose contributions were

received after the 1996 general election on memo Schedules A as required.

In response to the interim audit report, Counsel stated in relevant part that:

"The contributions to Friends of Schumer were itemized

pursuant to the Regulations on its reports filed with the

Commission. When transfers are made between a candidate's

authorized committee (e.g. from Friends of Schumer to

Schumer '98) in different election cycles, the receiving

committee does not have to itemize contributions transferred

between the committees as long as the original contributions

count against the limits for the election for which the

contributions were intended '" When a candidate's authorized

committees transfer funds in the same election cycle, the

receiving committee does not need to re-itemize the sources of

the funds transferred (the contributions that comprise the

transfer) ifthe transferring committee has already itemized

them in its report ... Such contributions received by a

candidate's authorized committee are aggregated with

contributions from the same contributor for the next election ...

Accordingly, contributions received and reported by Friends of

These contributions were included in our review of apparent excessive contributions.

Page 18 of31
Schumer after the 1996 election count against a contributor's

per person 1998 election limits, but Schumer' 98 was not

required to re-itemize such contributions on its reports."

The Committee filed amended disclosure reports which disclosed the above

transfers on Schedule A, as well as those contributors whose contributions were received

after the 1996 general election (by Friends ofSchumer) on memo Schedules A.

D. ITEMIZATION OF CONTRIBUTIONS RECEIVED FROM PACS/OTHER POLITICAL

COMMITTEES

Sections 434(b)(2)(C) and (D) ofTitle 2 of the United States Code state, in

part, that each report shall disclose, for the reporting period and calendar year, the total

amount of contributions from political party committees and contributions from other

political committees.

Section 434(b)(3)(B) ofTitle 2 ofthe United States Code states that each

report shall disclose the identification of each political committee which makes a

contribution to the reporting committee during the reporting period, together with the date

and amount of any such contribution.

Section 431(l3)(B) ofTitle 2 ofthe United States Code states that the term

identification means, in the case of any other person, the full name and address ofsuch

person.

The Committee did not itemize twenty-four contributions from PACs/Other

Political Committees, totaling $67,950. The dollar value oftwenty-one ofthese contributions

($57,450) was reported on the Detail Summary Page at Line II c. but the contributions were

not itemized on Schedules A. The other three contributions, totaling $10,500, were not

reported.

The Audit staff discussed this matter with the Committee representatives at

the exit conference and provided them with a schedule of contributions discussed above. The

Committee representatives agreed to file amended reports to correct the public record.

In the interim audit report, the Audit staff recommended that the Committee

file amended reports for the appropriate reporting periods in 1998 to disclose these

contributions.

In response to the interim audit report, the Committee filed amended

disclosure reports disclosing the above contributions.

Page 19 of31
E. ITEMIZATION OF CONTRIBUTION REFUNDS

Section 434(b)(4)(F) of Title 2 ofthe United States Code states, in part, that

each report shall disclose, for the reporting period and calendar year, the total amount of all

disbursements for contribution refunds and other offsets to contributions.

Section 104.3 (b)(4)(v) ofTitie 11 ofthe Code of Federal Regulations states,

in relevant part, that each authorized committee shall report the full name and address of each

person who receives a contribution refund or other offset to contributions from the reporting

committee, together with the date and amount ofsuch refund or offset.

During audit fieldwork, the Audit staff identified 60 contribution refunds,

totaling $58,225, that were not reported. We noted cases where the Committee refunded an

excessive contribution but did not disclose the refund on Schedule B for Line 20, as required.

Moreover, the disclosure ofthe related contribution transaction(s) was also deficient. For

example, even though the Committee received and deposited a contribution of $1 ,500, in

certain instances, it would only disclose $1,000 on Schedule A for Line 11.

The Audit staff discussed this matter with the Committee representatives at

the exit conference and provided them with a schedule ofthe contribution refunds discussed

above. The Committee representatives agreed to file amended reports to correct the public

record.

In the interim audit report, the Audit staffrecommended that the Committee

file amended reports for the appropriate reporting periods in 1997 and 1998 to disclose these

refunds.

In response to the interim audit report, the Committee filed amended

disclosure reports disclosing the above contribution refunds.

F. DISCLOSURE OF INFORMATION ON REPORTS OF EXPENDITURES

Sections 434(b)(4)(A) and (5)(A) ofTitle 2 ofthe United States Code state

that each report shaH disclose expenditures made to meet candidate or committee operating

expenses, and the name and address of each person to whom an expenditure in an aggregate

amount or value in excess of $200 within the calendar year is made by the reporting

committee to meet a candidate or committee operating expense, together with the date,

amount, and purpose ofsuch operating expenditure.

The Audit staff identified 289 disbursements, totaling $6,354,835, that were

not disclosed properly. The majority ofthe disclosure errors consisted of 267 disbursements,

totaling $6,332,663, that were summed by payee by reporting period and disclosed as a single

entry for each payee. For example, during the reporting period April I, 1998 through June

30, 1998, the Committee may have issued 15 payments, totaling $150,000, of various

amounts on various dates to vendor A. However, the Committee would itemize one payment

of $150,000 to this vendor.

Page200f31
The Audit staff discussed this matter with the Committee representatives at

the exit conference and provided them with a schedule of all disclosure errors. The

Committee representatives agreed to file amended reports to correct the public record.

In the interim audit report, the Audit staff recommended that the Committee

file amended reports for the appropriate reporting periods in 1997 and 1998 to correct the

disclosure irregularities noted above.

In response to the interim audit report, Counsel stated in relevant part that:

"The total amount paid to a vendor in a reporting period was

disclosed by the Committee. A staff person simply decided to

combine multiple payments to one vendor."

The Committee filed amended disclosure reports which materially disclosed

the above disbursements, including the date and amount of each disbursement.

G. FILING OF 48 HOUR NOTICES

Section 434(a)(6) of Title 2 ofthe United States Code requires that each

treasurer ofthe principal campaign committee of a candidate shall notify the Secretary or the

Commission, and the Secretary of State, as appropriate, in writing, of any contribution of

$1,000 or more received by any authorized committee ofsuch candidate after the 20th day,

but more than 48 hours before, any election. This notification shall be made within 48 hours

after the receipt ofsuch contribution and shall include the name ofthe candidate and the

office sought by the candidate, the identification of the contributor, and the date ofreceipt

and the amount ofthe contribution. The notification required under this paragraph shall be in

addition to all other reporting requirements under this Act.

The Audit staffreviewed all contributions greater than or equal to $1,000 with

a receipt date between August 27, 1998 and September 12, 1998 and between October 15,

1998 and October 31, 1998. The Audit staff identified 1,407 contributions, totaling

$1,534,500, that required 48 hour notices. The Committee did not file notices for 57

contributions totaling $89,500. Ofthe remaining 1,350 notices filed, totaling $1,445,000,

180 notices, totaling $186,500, were filed late.

The Audit staffdiscussed this matter with the Committee representatives at

the exit conference and provided them with schedules ofthe identified items. The

Committee had no comment with respect to this matter.

In the interim audit report, the Audit staffrecommended that the Committee

submit evidence that the 57 required 48 hour notices were filed or submit any written

comments it considered relevant.

In response to the interim audit report, Counsel stated that:

Page 21 of31
"The purpose of the 48-hour notice disclosure requirement is to

make information available to the public prior to the election.

Ofthe 180 48-hour notices identified by the auditors as filed

late, nearly every one was filed within 72-hours and all ofthem

were filed before the election. The Committee filed 95.9% of

the 1,407 48-hour notices it was required to file but it does not

have any additional evidence to submit with regard to the 57

48-hour notices identified as missing by the auditors."

As noted above, the Committee did not present evidence that the

57 48-hour notices, totaling $89,500, were filed.

H. SCHUMER '98 JOINT FUNDRAISING ACTIVITIES

Section 102.17(b)(I) ofTitle II of the Code of Federal Regulations states that

participating committees may establish a separate political committee to act as fundraising

representative for all participants. This separate committee shall be a reporting political

committee and shall collect contributions, pay fundraising costs from gross proceeds and

from funds advanced by participants, and disburse net proceeds to each participant.

Section 102.17(c)(I) of Title 11 of the Code of Federal Regulations states, in

relevant part, that the participants in a joint fundraising activity shall enter into a written

agreement. The written agreement shall identify the fundraising representative and shall state

a formula for the allocation offundraising proceeds. The formula shall be stated as the

amount or percentage of each contribution received to be allocated to each participant.

Section 102.17(c)(6) of Title 11 ofthe Code of Federal Regulations states, in

relevant part, that the fundraising representative shall allocate proceeds according to the

formula stated in the fundraising agreement.

Section 102.17(c)(7)(i)(A) ofTitle II of the Code of Federal Regulations

states, in relevant part, that after gross contributions are allocated among participants under

II CFR 102.17 (c)(6), the fundraising representative shall calculate each participant's share

of expenses based on the percentage ofthe total receipts each participant had been allocated.

To calculate each participant's net proceeds, the fundraising representative shall subtract the

participant's share of expenses from the amount that participant has been allocated from

gross proceeds.

Section 102. I7(c)(8)(i)(B) ofTitle II ofthe Code of Federal Regulations

states that after distribution of net proceeds, each political committee participating in a joint

fundraising activity shall report its share of net proceeds received as a transfer-in from the

fundraising representatives. Each participating political committee shall also file a memo

Schedule A itemizing its share of gross receipts as contributions from original contributors to

the extent required under 11 CFR 104.3(a).

Page 22 of31
Section 102.17(c)(8)(ii) ofTitle II ofthe Code of Federal Regulations states

that the fundraising representative shall report all disbursements in the reporting period in

which they are made.

The Committee was a participant in two joint fundraisers. The Committee and

the Democratic Senatorial Campaign Committee, Inc. (DSCC) federal and non-federal

accounts were participants in one joint fundraising effort. The joint fundraising

representative was Victory in New York (Victory). In addition, the Committee and the

Liberal Party of New York (Liberal Party) were the participants in the second joint

fundraising effort. The joint fundraising representative was Win New York (Win). It should

be noted that neither Victory nor Win was audited, however, disclosure reports filed by both

joint fundraising representatives were reviewed.

Victory in New York

The Committee received $684,800 in joint fundraising proceeds or

22.9% ofthe total distributed proceeds. The DSCC's federal account share was $2,195,000

(73.4%), while its non-federal account share was $109,000 (3.7%). Victory reported joint

fundraising expenses totaling $201,405. As a result, the Committee's share ofthe joint

fundraising expenses was $46,122 ($201,405 x 22.9%).

Relative to the proceeds received, the Committee reported

contributions, totaling $686,780, on memo Schedules A. The difference between the amount

reported on memo Schedules A ($686,780) and the amount received by the Committee

($684,800) should represent the dollar value ofjoint fundraising expenses allocated to the

Committee by the joint fundraising representative. Based on the above, the Committee was

allocated $1,980 ($686,780 - $684,800) in joint fundraising expenses. However, as

previously stated, the Committee's share of expenses based on the distribution ofjoint

fundraising proceeds was $46,122. The difference, $44,142 ($46,122 - $1,980), represents

either unreported contributions on memo Schedules A, which could result in additional

excessive contributions received by the Committee or an in-kind contribution to the

Committee by either the DSCC federal account or the DSCC non-federal account, or both.

Win New York

The Committee received $176,850 in joint fundraising proceeds or

24.3% ofthe total distributed proceeds, while the Liberal Party's allocable share was

$549,764 (75.7%). Relative to the proceeds received, the Committee reported $180,600 in

contributions on memo Schedules A. The difference between the amount reported on memo

Schedules A ($180,600) and the amount received by the Committee ($176,850) should

represent the dollar value ofjoint fundraising expenses allocated to the Committee by the

joint fundraising representative. Based on the above, the Committee was allocated $3,750

($180,600 - 176,850) in joint fundraising expenses on its original disclosure reports through

December 31, 1998. However, Win did not report any joint fundraising expenses on its

original disclosure reports through December 31, 1998. Absent documentation idcnti fying

Page 23 of31
the joint fundraising expenses, it is not possible to verify the accuracy ofthe Committee's

reports filed with respect to memo Schedules A or determine if either participant

received/made a reportable in-kind contribution.

The Audit staff discussed these matters with the Committee representatives at

the exit conference and provided them with schedules supporting the Audit staffs

calculations. Subsequently, a Committee representative stated, with respect to Win, that the

Committee paid all joint fundraising expenses since Committee staff conducted all joint

fundraising activity by phone from its headquarters. Further, there were no fundraising

events, catering charges, etc. relating to thisjoint fundraising effort.

In the interim audit report, the Audit staffrecommended that the Committee,

with respect to Victory:

(a) provide a detailed schedule of all contributions received by the joint

fundraising committee to include the contributor name, date and amount

and a breakdown ofhow such contributions were allocated to each

participant in accordance with the joint fundraising agreement;

(b) file amended memo Schedules A disclosing additional contributor

information in support ofthe joint fundraising proceeds received by the

Committee, if necessary;

(c) refund any excessive contributions to the contributors that may result from

(b) above and provide evidence ofsuch refunds;

(d) provide an explanation of the $44,142 difference between the amount of

fundraising expenses allocated to the Committee by the joint fundraising

representative ($1,980) and amount ofthe Committee's share ofjoint

fundraising expenses based on the distribution of proceeds ($46,122);

(e) should (d) above result in an in-kind contribution from the DSCC nonfederal account, refund the dollar value ofthe in-kind contribution and

provide evidence ofsuch refund.

In response to the interim audit report, Counsel stated, with respect to Victory:

"The Committee amended its reports disclosing $733,730 in

contributions to the joint fundraising committee, Victory in

New York, that were allocated to the Committee. The

contributor information for the allocated expenditures is

reported on amended Schedules A filed by the Committee. As

a result ofthese amendments, the Committee's share ofjoint

fundraising expenses allocated to the Committee was $48,930

or 24.3%. The Committee's share ofjoint fundraising

Page 24 of31
expenses calculated by the auditors was $46,122 ($201,405 x

22.9%). As a result, the joint fundraising expenses allocated to

the Committee were $2,808 greater than the $46,122 calculated

by the auditors. These amendments demonstrate that the

Committee was allocated its correct share ofjoint fundraising

expenditures and that it did not receive an in-kind contribution

from the DSCC's non-federal account."

The Committee provided a detailed schedule of all contributions received by

the joint fundraising committee (Victory) to include the contributor name, date and amount

and a breakdown of how such contributions were allocated to each participant in accordance

with the joint fundraising agreement.

The Committee also filed amended memo Schedules A which disclosed

additional contributor information in support ofthe joint fundraising proceeds.

Based on the above, the Audit staff did not identify any additional excessive

contributions. As a result, the Committee materially complied with all recommendations.

In the interim audit report, the Audit staffrecommended that the Committee,

with respect to Win:

(a) provide a detail schedule of all joint fundraising expenses paid by either

participant, to include the identity of the entity paying such expenses;

(b) file amended memo Schedules A disclosing additional contributor

information in support ofthe joint fundraising proceeds received by the

Committee, if necessary, and;

(c) refund any excessive contribution to the contributors that may result from

(b) above and provide evidence ofsuch refunds.

In response to the interim audit report, Counsel stated, with respect to Win:

"Expenses related to the Win New York joint fundraising

committee were paid by the Committee as pan ofthe

Committee's pre-existing overhead and administrative

expenses. The Schumer '98 staff raised funds for Win New

York by phone from Committee headquarters. There were no

fundraising events, catering charges, etc. related to the Win

New York joint fundraising effort. The only costs were

administrative expenses such as rent, phone charges, and staff

salary owed by the Committee whether it participated in the

Win New York joint fundraising activity or not. The

Committee disclosed the overhead and administrative expenses

Page 25 of31
,.

on its reports but because no additional overhead or

administrative expenses were incurred related to the

Committee's participation in the Win New York joint

fundraising activity, a detailed schedule ofjoint fundraising

related expenditures can not be provided. In the event that

there were any costs, they were de minimus and within the

contribution limits between the joint fundraising participants to

one another."

The Committee filed amended memo Schedules A which disclosed $179,350

in contributions relative to the proceeds received ($176,850). Based on the above, the

Committee was allocated $2,500 in joint fundraising expenses, a reduction from the original

allocation of $3,750.

In calendar year 1999, Win disclosed operating expenses of $194 (unitemized)

and an additional transfer to the Liberal Party of $2,1SO. Further, in April 1999, Win filed an

amended report covering the period 11/24/98 through 12/31/98. However, Win's beginning

cash on hand was $5,000 less than originally reported. No explanation was provided. Win

also disclosed $4,253 on lines 12 (Transfers From Affiliated/Other Party Committee) and 21 b

(Other Federal Operating Expenditures). There were no supporting schedules filed with

respect to either line item. It is possible this $4,253 represents an in-kind contribution. In

calendar year 2000, Win filed reports but did not disclose any receipt or disbursement

activity.

As previously stated, the Audit staff did not audit Win. If, in fact, the

Committee paid all joint fundraising expenses, the dollar value ofcontributions on amended

memo Schedules A should equal the dollar value ofjoint fundraising proceeds received.

Therefore, the amended memo Schedules A are not accurate. Further, according to Win

disclosure reports the joint fundraising effort raised approximately $729,000 and the Liberal

Party received approximately 75% ofthe proceeds. Ifthe total joint fundraising expenses

paid by the Committee exceeded $6,667, it is likely that the Committee made an excessive

in-kind contribution to the Liberal Party. The dollar value of any potential excessive in-kind

contribution cannot be calculated without documentation supporting total joint fundraising

expenses.

It is the opinion of the Audit staff that the Committee did not comply fully

with the recommendations pertaining to the Win joint fundraising activity.

Page 26 of31
Sr' "Tler '98

r .udi! Report

2[;~ ,,07 ~1l]2S ,,26~!"9 Attachment #1

"ge 1 of 1

A I B I C ,- D I

Summary of Excessive Contributions

Final Audit Report Analysis

Excessive Individual Primary Election Contributions Resolved Untimely

Excessive Individual Primary Election Contributions Unresolved

Less: Contributions Determined not to be Excessive Based on Response to Interim Audit Report

Excessive Individual Primary Election Contributions Requiring Refund

Total Excessive Individual Primary Election Contributions

Excessive Individual General Election Contributions Resolved Untimely

Excessive Individual General Election Contributions Unresolved

Less: Contributions Determined not to be Excessive Based on Response to the Interim Audit Report

Excessive Individual General Election Contributions Requiring Refund

"0 Total Excessive General Election Contributions

&f1)

Iv

'-.l

o

:::; Excessive Partnership/PAC/Other Political Committee Contributions Resolved Untimely

Excessive Partnership/PAC/Other Political Committee Contributions Unresolved

Less: Contributions Determined not to be Excessive Based on Response to Interim Audit Report

Excessive Partnership/PAC/Other Political Committee Contributions Requiring Refund

Total Excessive Partnership/PAC/Other Political Committee Contributions

Total Excessive Contributions Resolved Untimely (Sum of Lines 5 + 13 + 21)

Total Excessive Contributions Requiring Refund (Sum of Lines 8 + 16 + 24)

Total Excessive Contributions (Sum of Lines 9 + 17 + 25)

E I

$586,194.00

($9,775.00)

$243,610.00

($32,650.00)

$73,025.00

($6.000.00)

F

$91,050.00

$576,419.00

$667,469.00

$5,000.00

$210,960.00

$215,960.00

$1,000.00

$67,025.00

$68,025.00

$97,050.00

$854,404.00

$951,454.00
•

•

Page 28 of31
FEDERAL ELECTION COMMISSION

WASH INCTOr-;, 0 C 20463

•

•

ru

'11I ..

April 10,2001

Mr. Steven D. Goldenkranz, Treasurer

Schumer '98

1551 East 23rd Street

Brooklyn, NY 11210

Dear Mr. Goldenkranz:

Attached please find the Report ofthe Audit Division on Schumer '98. The

Commission approved the report on April 6, 2001.

The Commission approved Final Audit Report will be placed on the public record

on April 13,2001. Should you have any questions regarding the public release ofthe

report, please contact the Commission's Press Office at (202) 694-1220.

Any questions you have related to matters covered during the audit or in the report

should be directed to JeffSpilizewski or Tom Nurthen ofthe Audit Division at (202)

694-1200 or toll free at (800) 424-9530.

/

Sincerely, , / I ) I'~~

\ t/;~1 ,.r.///,,/1 ,Robeti. Costa

ssistant Staff Director

Audit Division

Attachment as stated

cc: Jim Lamb; Ryan, Phillips, Utrecht & MacKennon

Page 29 of31
Page 30 of31
•

Audit Fieldwork

Interim Audit Report

to the Committee

Response Received to the

Interim Audit Report

Final Audit Report Approved

CHRONOLOGY

SCHUMER '98

Page 31 of 31

June 16, 1999 - March 29, 2000

July 7, 2000

August 24, 2000

April 6, 200 I