l\ttachment as stated

PUBLIC ISSUANCE OF AUfH'l' REPOR? -

~vARD FOR CONGRESS Cm1MITTEE (OK/ 3)

JUDY HAWKINS

PRED EILAND

PRESS OFFICE . __ j .--

BOB COSTA 1\..//(/ ( I !/

1\2", " '>IRIII W.

W,,'>, U~(; I< )~.I) {'. 2114h \

FEDERAl. ELECTION COMMISSION

Informational copies of this report have been received

by all parties involved and this report may be released to

the public.

With this release, the Oklahona 3rd District is now

complete.

cc: FEC Library

Ri"\D

P.ublic Record

November 19, 1979

Attached please find a copy of the final audit report

of the Ward for Congress Committee (OK/3) which was approved

by the Commission on Novenber 7, 1979.

SUBJECT:

FRO~l:

TO:

r-1E~ORANDUM

'i'llROUGII: ~"--

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tn·

It:

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W·\SllI:'>;C; 10-..;.() l· . .!1l.t6 \

FEDERAL ELECTION COMMISSION

A negative cash balance was reported due to a COr.lmittee

error in carrying over year to date totals• ~/

REPORT OF THE AUDIT DIVISION

ON THE·

WARD FOR CONGRESS COr~ITTEE

The Committee registered with the Federal Election

Commission on June 23, 1976, in support of Charles :L.eland Ward

candidate for election to the office of U.S. Representative

frOI'l t!le 3rd Congressional District of Oklahoma. The Committee

maintained it headquarters in Durant, Oklahoma.

The audit covered the period from June 20, 1976

through April 29, 1977, the final coverage date of the

termination report filed by the Conunittee. The Committee

reported a beginning cash balance on June 21, 1976, of $-0-,

total receipts for the period of $134,865.41, total expenditures for the period of $132,589.20, and a closing cash

baL:mce on April 29, 1977 of ($1,546.16). !/

This report is based on an audit of the Ward for

Congress Committee (lithe 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·of the

United States Code which directs the Commission to make from

t.ime to time audits and field investigations with respect to

reports and statements filed under the provisions of the Act.

I • ~ack<J round

A. Overview

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~1UR 581

B. Key Personnel

C. Scope

II. Audit Findings and Reconmlendations

Except as set forth in Findings A, B, and C the audit

included such tests as verification of total reported receipts

and expenditures and individual transactions; review of required

supporting documentation and analysis of Committee debts and

obligations; and such other audit procedures as deemed necessary

under the circumstances.

rr'he principal officers of the Committee durin<J the

period covered by the audit were Mr. Don Dage, Chairman, and

Mr. Rector Swearengin, Treasurer.

'l'his audit report is based on documents and working

papers which support each of the factual statements. They

form part of the record upon which the Commission based its

decisions on the matters in-the report and were available to

Commissioners and appropriate staff for review.

.The following matters were "referred "to the Comnlission's

. Office of General Counsel on May 10, 1978, based on the

Committee's inadequate response to the Audit Division's letter

of audit findin<Js and recommendations. As discussed below,

the Commission voted on November 7, 1978 and December 21,

1978, to find reason to believe and reasonable cause to

believe, respectively that the Committee had violated several

provisions of the Act. After months of negotiation with

the Committee, the Commission accepted a signed conciliation

agreement on June 5, 1979, along with payment of a $1,000 civil

penalty, and voted to close the file as it pertained to violations

by the Corami t tee.

In

l!':

l~'
In «'sn

onse

to the 1\Udit lliVision ' 5 recommendation

the com,,,i t teo pr~)"ided copies 0 f the onc county' s bank records

,'0<;ueS ted; hOwever. tho coromi t tee "as unahIe to prc'Jide an,'

additional records pert~ininq to activi~ in ~e counties•

On March 30. 1978, the Mdit staff recoromended that the

comn,i tte

e

contact all county C\1airpersons and obtain all records

,', ' \ atin'l to rec

e

i ptS , ex;,enditures. and debts and obli'lation

s

""L currently in its possession and suhmit these for review

\,'/ the i\Ul1it starf \.;'ith1n 30 da::"S.

1\. RecorlH'.(·( 'ping - - --_.--

1\ review of the coromittee'S receipt and expenditure

"""ords rev

ealcd

that the Coromittee maintained incomplete records

"" the financial activities of individuals acting on the

c""uni t tee' 5 bella

l

f in various counties, "'he 1\udit staff "as

p,-"vided "ith a list of 39 in,lividuals identified as "county Chair people" operat,ing

on behalf of 1'\'" committee in 23 counties,

n,sed on the records avoilable to the N,uit staff, it was determined

that recordS maintained by four (~) county organizations reflect

eu

more in expenditures than receipts, During telephone conversatiOnS

wtth the 1\udit staff. other county cha i rpersons indicated the

possibilitY o[ aduitiOn,l inform,tion concerning receipts, expenditures. and dehts and obliqatiOns not supplied to the Committee

and not reported. In a~ition, al~Ou.h requested. one (1) of the

[our (,I) county organizations that maint,in

ed

a checkin'J account

,,,,d not supplied the Mdit staff "lith its b,nk records. The

trpasurer cf the committee has stated that he attempted to repOl't

all county activity but that he did not h,W

e

control over the

individu~l counties involved.

secti"" ~32(C) of Title 2, united States code. states

that it is the ,h.1 Y of the treasurer of a political coromi

ttee

to keep a detaU,'" and exact account of (1\ all contributions made

to or for such c",,,mittee ; (2) the identification of every person

making a contrihution in excess of $50, and the date and amount

thereof. and, if a person' s contributions aggregate more than $100.

the account shall include occupation. and the principal place of

businesS (if any); (3\ al\ expenditures made bY or on behalf of

such committee; and (~) the identification of every person to "h"'"

any 0xpendit

ure

is made. the date and amount thereof and the nanl<'

and addresS of. and the office sou'1ht by, each candidate on "hO'w

heh.• \ r such expenditure waS made.

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B. Failure to Maintain Campaign Depositories

reviC\v of the available county records revealed that

of ten county committees which carried on significant financial

activities, six (6) counties apparently maintained no bank

accounts and thus did not process their receipts and expenditures

through a designated depository. The records indicated approximately $5,810.78 in receipts and $7,215.09 in expenditures not

processed through campaign depositories.

c. Hcporting of Hcceipts and E:.:pendi tures

For the period covered by the audit, the Committee

revorted total receipts of $134,865.41 and total expenditures

of 5132,589.20. A review of the Co~nittee's bank records along

wi::.11 uVuilabll:l records on county activi t~i disclosed recei~ts of

$141,831.49 and expenditures of $143,560.30. Therefore, at a

mini!:lum, thL~ Commi t tee's reports understated receipts by

$7,016.0B und expenditures by $10,971.10. Since these corrected

totals are basoJ on incomplete records maintained by the ten

county commi t tees having si'Jnifican t financial activity the

AuJit staff is unable to verify the totals as accurate.

Section 434(b) (8) and (11) of 'l'itle 2, United States

Code, states in part, that a political conmlittee shall report

the total sum of all receipts [01- the conunittee and the total

sUla of expenditures made by the conunittee during the calendar

year. In addition, Section 434(b) (2) and (9) of Title 2, United

States Code, rC4uires a conunittee to re~ort the full name and

mailin~ address (occupation and principal place of business, if

any) of each person who has made one or more contributions to or

for such cOlluni ttee or candidatc wi thin the calendar year in an

aggregate amount or value in excess of $100, together with the

amount and date of such contributions: and, the identification

of each person to whom expenditures have been made by the committee

or on behalf of the conunittee or candidate within the calendar

ye.:lr in an agqregate amount or value in excess of $100 with the

amount, date, and purpose of tho e;·:pc:1diture.

Section 437b(a) (1) of Title 2 United State Code states,

in part, that the principal cilmp.-.lign committee of a candidate

shall maintain a single checkinq account and such other accounts

as the cOltuni ttce determines to maintain at its discretion at a

depository designated by the candidate and shall deposit any

contributions received by such committee into such account. No

expenditure may be made by any such co~nittee on behalf of a

candidate or to influence his election except by check drawn on

such account. . .
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On March 30, 1978, the Audit staff recommended that

the Committee file amended reports within 30 days of notification to include the unreported receipts and expenditures,

itemizing those aggregating in excess of $100, and any additional

receipts and expenditures determined to have been made by the

county organiz~tions for which the Committee did not have

records available at the time of the audit.

Tlw Committee agreed in the conciliation agreement

signed on May 14, 1979, tb amend its reports to the fullest

extent possible '"rom the records available to reflect the

unreported r0ce i (It:; ilIll1 expendi.tures. ]\n amended report was

filed on ,July 2(), 197 1), correcting the Committee's reported

year-to-date tot~ls.

D. Corpor~te (·lIll.tributions

Section 4411.(,-\) of Title 2, United States Code, states

in p~rt, that it is till I ,twful for any corporation to make a

contribution or expen1liture in connection with any election to

any poli tic.:.l1 of fice or for. any candidate, political committee,

01" other person knm·!inq.1 y to accept or receive any contribution

pl-ohibi ted by this sec;!: ion.

A review of the Committee's contribution records revealed

a $500 contribution recQived from an incorpor~ted entity on

,July G, 1976.

On M~rch 30, 1978, the Audit staff recomended that

the' Conunitteo prc"!scnt to the ]\udit stnff evidence that the contribution did not contain corporate funds or refund the contribution anci submit documentntion thereof to the Audit staff within

30 days of notification.

The Committc'c provided the l\udit staff with a copy

of a check dated July 29, 1978, refunding the contribution.

Based on the Committee's actions the Commission voted on

December 21, 1978, to take no further action in rcqards to the

contribution.

Section 441a(a) (1) (A) of Title 2 United States Code

states th~t no person shall make contributions to any candidate

and his authorized po] i tic.J.l commi ttees ~yi th respect to any

election for Federal office which, in the aggregate, exceed $1,000.
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Section 44lil(f) of Title 2 United States Code states that no

candidate or. po Iitical conun i ttee shall knm.,ringly accept any

contribution or make any expenditure in violation of the

provisions of" this section. Section 43l(e) (1) of Title 2

United Stat(~s Cnde states, in part, that a loan is a contribution and Section 43l(e)(5)(q)(ii) states, that a loan of

money by a nd t: i nnal or Stato hilnk shall be l.onsidered a loan

by each endorspr or guarantor, in that proportion of the

unpaid billance thereof that each endorser or guarantor hears

to the total number of endorsers or guarantors.

Accord i.nq to disclosure reports filed, the Committee

received an $8,000 10rm on Septemb0r 20, 1976, from the

First National Hank of Durant endorsed hy only three individuals. Therefore, each endorser is liable for $2,666.66 and

thus placing each in excess of the $1,000 limitation. The

loan was repaid on October 27, 1976.

F. D0.bts and Obligations

Section 434(b) (12) of Title 2, United States Code,

stiltes in pilrt, that a political cOTI1Inittee's reports shall

disclose the ilmount and nature of debts and ohligations owed

by the comlnittee and il continuous reporting of their debts

an~ obligations after the election until such debts and

obligations are extinguished tonethcr with a statement as to

the circumstances and conditions under which any such debt

or obliqation is C'xtinguished and the consideration therefor.

:'. comparison of the C()Jumitte0's expenditures made

;llld im'oice:? m.::tintained reve.::tlod seven (7) invoices totalinq

$7,453.l~ for which no indication of payment nor debt settlement

stat(~me!1t was provided by the Committec>. The Committee did

not disclose the debts on a debt and obligation schedule and

held fih~d a termination report. The treasurer of the Committee stated that some bills were not paid due to lack of

funds and ~lJ.so because the COIrell ttee was not aWure they had

l)l~cn i11CUl""1-t:C!.

0:\ ~1arch 30, 1978, t:1t~ ;"I.'..ldit staff recommended

tll.:1 t tl:(~ Cr;I:1ffi Lt tee resume f i1 i ncr re;-Jorts disclosing all

dt'bts ;lncl ob li.~1iJ.tions unt.i.l e:-:ti nr:uished or provide informatl on on the settlement of the debts.
-7-

On r-'~lrch 30, 11)78, th(~ l\udit staff recommended that the

Committee fill' an amended t,tatcment to includL' the missing information within 30 days of notification.

G. Disclosure of Depositories

'l'he Committee filed an amended stat0rnent of organization

disclosing the five (5) c1c'positories. Bnsed on the Cornmittee's

Clctions the Conunission vot.ed on December 21, ]978, to take no

further Clction in the md t bJr.

During the courSf~ of the audit, it was determined that

the Cornmittec' maintained si:{ (6) checkinq accounts in six (6)

d0positories. Five (5) of these depositories were not disclosed

on the Committee's statem01lt of organization filed on June 23,

1976. The treasurer of the Committee stated that the undisclosed

accounts were maintained by four of th0 county organizations

and he wns unaware of their existence at the time the statement

was filed.

Section 433 (b) (9) and (c) of Ti tIe 2, united States Codl',

requires a committee to include on its statement of organization ...

listing of all banks, safety deposit boxes, or other repositories

used and report any chanqo in information previously submitted in

a statement of organization to the Commission within a 10 day

period following the chanqe.

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

in part, th.,t. it shall D{" thc~ duty of the treasurer to obtain

and keep a recei:;ted bill, statinq the pnrticulars for every

expendi tun~ m~lcle in excc-'s:=; of $100, and for expenditures in

a lesser amount, if the .:I'.lClreqate amount of such expenditures

to the same person durin<j a cCllendar year exceeds $100.

The Committee was able to provide the Audit staff with

a paid invoice for one debt of S527.03 bringing the total to

$~,926.l1. The Committee agreed in the conciliation agreement

siqned on r-1ay 14, 1978, to file debt settlement schedules for

the remaining $6,926.11 in outstanding debts. The Conunittee

was unable to provide the debt settlement statements: however,

an amended termination report was filed on July 26, 1979, disclosing the debts as outstanding. The Committee has and will

continue to report these outstanding debts until they are

paid or until satisfactory debt settlements are accepted by

tho Commission.
1. Contributions in Excess of Limit

A review of the Committee's records revealed $1,979.40

in contributions ,made to the Committee and expenditures made on

behalf of the Committee by a county chairman from July 24, 1976

through Oc~ober 14, 1976. One thousand ,one hundred and ten dollars

of this amount \'las expendcdbet\-Jeen the date of the primary U\ugus t

24, 1976) and the rlllloff election (September 21, 1976). There::orc,

iL appeared the individ~al exc~ede~ his personal contribution limit

[or the runoff election. ' ,

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Section 441a(a) (1) (A) of Title 2, United States Code,

anLi Section 110.1(~1) (1) of the Code of Federal Regulations state

that no person shall make contrib~tions to ariy 6andidat~ and,

his authorized political committees .with respect ,to any election " for Federal office which, in the aggregate, exceed $1,000. In'

addition, Section 110.9(a) of the Code of Federal Regulations

states, in part, that no candidate or political committee shall

accept any contribution or make any e~penditure in violation

of Part 110.

Sectio~i02.9(c) (4 ) "of the" Code of Federal Regulations

states, in part, that when a 'receipted bi11"'is not available, the

treasurer may keep the cancelled check and the bill, invoice or

other contemporaneous memorandum. . ' " .' ,.' ,

'l'heCommit tee did not maiu'tain proper suppo"rting

"documerit"ation ~or 81 expenditures made, totaling $58,866.24. 'These

expenditures, accounted for 47.89% of the total dollar amount and

32. 40~,', of the total number of expenditures requiring such docur:lentation. The Committee treasurer, stated that ,he would attempt to gathe~ the missing information.

On r·1arch 30, 1978, ,the Audit staff reconul1endedthat

the Conunittee'obtain'supporting documentation for the 81 expenditures and submit copic~:; ,for, revie\v, or present evidence"of their

efforts to ~o so, within 30 days of notification. '

Prior to referral to ,the Commission' sOffice of:,

General Counsel, theCbrnmittee provided .the Audit staff , with supporting documc'illationfor 39 of the 81 expenditures

totaling $7,786.90. Onl"ebruary 12,1979, the Committee provided

documentation or evidence of their best efforts to obtain the

documentation forthc remaining 42 expenditures to ,the Com~,

mission's Office, of General Counsel. ' ' ,

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On March 30, 1978, the Audit staff recomr:tended that

t hI' COIIIlI\i ttce ei ther prcscmt evidence that the excessive portion

()f the contribution relates to other than the runoff election

or l'\)fund the amount in excess of the limit to the contributor

within 30 days of notification.

On February 12, 1979, the Committee provided a copy

of cancelled chucks dated February 11, lQ77, refunding $748.05 to

the county chilirman. Rased on the fact that the amount of the

excessive contribution was de minimus and that the Committee

had refunded more than was required under the Act, the Commission voted on December 21, 1978, to take no further action

agLlinst the Committee and the contr"ibutor.

J. Cash Contribut.i ons in Excess of Limit

Section 441g of Title 2, United States Code, states

that no person shall mLlke contributions of currency to or for

the benefit of any candidate which, in the u<]gregate, exceed

$100, with respect to any campaiqn of such candidate for

nomina t.i on for election, or for electi on, to Federal office.

contribution records maintai l)(~d hy the Commi ttce

indica tr~ the receipt of $250 in cash on Septemher 13, 1976,

Llttributcd to one (1) individual. The Committee treasurer

could oE[er no explanation as to why the contribution was

accepted.

On ~lLlrch 30, 1978, the i'\udit staff recorr.r:H::nded that the

Committl~l:~ refund the umount in excess of the limit to the

contributor and submit copies of both sides of the refund check

within 30 days of notification.

The Committee provided the Audit staff with a copy

of a letter dated ."June 20, 1978, from the contributor stating

that his contibution amounted to $100 with the remainder being

attributed to six other indivduLlls in amounts of SlOO or less.

Based on this infOl.-mution the Audit Division recommends no

furthc~ action on this mutter.

K. Other ~atter

Presented below is other matter noted during the

ilUc1i t for whic:1 the staff feels no further Commi ssion action

is warr;:l!1tcd. ':'he Ccmmittee was made a\':are of the discrepancies

and i!1~0rmcd of the respective requirement of the hct .
-10-

In four (4) instances the Committee dr.ew checks

payable to cash in excess of $100 which were not used to replenish a petty cash fund. The checks totaled $1,233.60 and

were paid to various campaign workers in reimbursement for

duties performed.
C'

FEDERAL ELECTION CO",\,\..lISSION

It!, I\. 1RII I '-.\\'.

\\".-\"'HI'-C 10~.() t .!tl4fd

AlDITIONAL INroRMATION REGARDING nilS ORGANIZATION

MAY BE WCATED IN A <D1PI.E1'ED CXM'LIANCE AcrI~

FlIE RELEASED BY THE CXH1ISSI~ AND MADE PUBLIC IN

THE PUBLIC RECDRDS OFFICE. FOR nITS PARTIaJLAR

ORGANIZATION'S <D1PI.E1'ED roMPLIANCE ACITON FlLE

SlMPLY }SK FOR THE PRESS SlM1ARY OF MUR 4F S-S/

mE PRESS SlMofARY WIlL PROVIDE A BRIEF HISTORY OF

mE CASE AND A stM1ARY OF tHE ACITONS TAKEN, IF fiN{.

Audit 4ft I f'f