American Federation of Labor and Congress of Industrial Organizations

815 Sixteenth Street, N.W.

Washington. D.C. 20006

(202) 637-5000

www.aflcio.org

RICHARD L. TRUMKA

PRESIDENT

EXECUTIVE COUNCIL

ELIZABETH H. SHULER

SECRETARY-TREASURER

Gerald W. McEntee

Michael Goodwin

Elizabeth Bunn

Joseph J. Hunt

Leo W. Gerard

William Hite

Warren George

Nancy Wohlforth

Rose Ann DeMoro

Fred Redmond

Fredric V. Rolando

Newton B. Jones

John P. Ryan

Michael Sacco

William Lucy

Michael J. Sullivan

Clyde Rivers

Ron Getiellinger

John J. Flynn

Gregory J. Junemann

James C. Little

Mark H. Ayers

Matthew Loeb

Diann Woodard

D. Michael Langford

DeMaurice F. Smith

Frank Hurt

Robert A. Scardelletti

Harold Schaitberger

Cecil Roberts

James Williams

John Gage

Laura Rico

Alan Rosenberg

Ann Converse, R.N.

Randi Weingarten

Patrick D. Finley

Robert McEllrath

BakJemar Velasquez

ARLENE HOLT BAKER

EXECUTIVE VICE PRESIDENT

Patricia Friend

R. Thomas Buffenbarger

Edwin D. Hill

William Burrus

Vincent Giblin

Larry Cohen

Robbie Sparks

Capt. John Prater

Richard P. Hughes Jr.

Rogelio •Roy" A. Flores

Malcolm B. Futhey Jr.

Roberta Reardon

John W. Wilhelm

November 16,2009

Joseph F. Stoltz

Assistant Staff Director

Federal Election Commission

999 E Street, NW

Washington, DC 20463

Re: Draft Final Audit Report for AFL-CIO COPE PCC

(2005-06)

Dear Mr. Stoltz:

I am responding on behalf of the AFL-CIO and the AFL-CIO Committee on Political

Education Political Contributions Committee ("AFL-CIO COPE PCC") to your October 28,

2009 letter to Elizabeth H. Shuler. AFL-CIO COPE PCC Treasurer; the Federal Election

Commission's ("the Commission") draft final audit report for AFL-CIO COPE PCC in the 2005-

06 election cycle ("Draft Report"); and the October 15, 2009 memorandum of the Office of

General Counsel ("OGC Memorandum") commenting on the Draft Report. As explained below,

AFL-CIO COPE PCC requests a hearing before the Commission on certain aspects of Finding 2

of the Draft Report.1

Overview and Request for Hearing

Draft Finding 2, "Transfers Received From Separate Segregated Funds," concerns what

we have been advised triggered the audit itself: the longstanding collecting agent/joint

fundraising arrangements between, first, the AFL-CIO and AFL-CIO COPE PCC and the

Communications Workers of America ("CWA") and its separate segregated fund, CWA COPE

PCC, and second, between the AFL-CIO and AFL-CIO COPE PCC and the American

Federation of Teachers ("AFT") and its separate segregated fund, AFT COPE.2 The Draft

Report concludes that those separate segregated funds lawfully could and did act as collecting

agents for AFL-CIO COPE PCC when they transferred, in total during 2005-06, SI .1 million to

1

 Draft Finding I, "Missiatement of Financial Activity." addresses misstatements of cash on hand and disbursements

during the audit period. As the Draft Report states, AFL-CIO COPE PCC has complied with the Audit Division's

recommendations in its interim audit report dated July 21, 2009 ("Interim Report") to amend past reports and to

correct the cash balance on a current report. Accordingly, we accept Finding 1 as drafted.

2

 The CWA and AFT separate segregated funds are occasionally referred to below as "the CWA and AFT SSFs."
AFL-CIO COPE PCC. But the Draft Report also concludes that AFL-CIO COPE PCC was

responsible for ensuring that the CWA and AFT SSFs each acted as an ordinary collecting agent

in rull compliance with 11 C.F.R.§ 102.6. OGC concurs with both parts of that analysis.

As explained below, AFL-CIO COPE PCC disagrees with the Draft Report's

characterization of the arrangements at issue as cabined by 11 C.F.R. § 102.6, and contends that,

due to the simultaneous joint fundraising arrangements with the CWA and AFT SSFs, the

collecting agent regulations do not dictate the implementation, recordkeeping and reporting of

the funds that were transferred. We do agree with Finding 2 that, if those requirements strictly

apply, AFL-CIO COPE PCC and the CWA and AFT SSFs complied with the transfer timeliness

requirements at 11 C.F.R. § 102.6(c)(4) during the audit period.

As we also show below, for over 20 years before this audit commenced in December

2007 AFL-CIO COPE PCC and at least nine and as many as 14 different Commission-registered

separate segregated funds ("SSFs") connected with labor organizations that were constitutionally

affiliated with the AFL.--CIO routinely engaged in joint fundraising from their common restricted

classes, and since 1993 alone those committees routinely reported on their respective Forms 3X,

at both ends of the transaction, 183 transfers to AFL-CIO COPE PCC thai exceeded the

$5,000/yr. committee-to-committee limit. Yet as far as we know, until October 2004 no office at

the Commission ever questioned these arrangements or any of the 366 over-$5,000 entries on

Forms 3X that reported them, or the 198 under-$5,000 transfers, which were recorded 396 times

on Forms 3X, between the same committees and that further increased the aggregate annual

payments from a particular union SSF to AFL-CIO COPE PCC over the $5,000 mark.

AFL-CIO COPE PCC requests a hearing so we may present oral argument concerning

these facets of Finding 2, pursuant to the Commission's Notice 2009-12, "Procedural Rules for

Audit Hearings," 74 Fed. Reg. 33140 (July 10, 2009), as revised by Notice 2009-19, "Procedural

Rules for Audit Hearings," 74 Fed. Reg. 39535 (August 7, 2009). We request that this hearing

be held in a closed session if, at the time of the hearing, the ongoing separate audit of CWA

COPE PCC, which focuses on the same matters that Finding 2 covers, has not yet concluded

with a public release of a final report by the Commission. That is because the two audits have

been linked throughout; we are advised that CWA COPE PCC has complied with the Audit

Division's recommendations set forth in the draft final report concerning CWA COPE PCC; and

the OGC Memorandum, which would be made public in advance of the hearing on the AFL-CIO

COPE PCC audit, applies to both audits.

More Than 20 Years of Fully Reported Joint Fundraising Between AFL-CIO COPE PCC

and at Least Nine Other Union-Connected Separate Segregated Funds Elapsed Before

RAD First Questioned the Arrangement and Before the Current Audit Was Initiated

This audit commenced in December 2007 following a series of correspondence between

AFL-CIO COPE PCC and the Reports Analysis Division ("RAD") that began on October 20,

2004; between RAD and CWA COPE PCC that began on December 22, 2004; and between

RAD and AFT COPE that began on September 13, 2006. Again, RAD's inquiries and this audit

have questioned for the first time ever arrangements between the AFL-CIO, AFL-CIO COPE

PCC and numerous labor organizations and their separate segregated funds that have continued

year-in, year-out for almost a quarter-century, and that have been ftilly reported to the

Commission throughout that lengthy period by every participating committee.
An Audit Division summary. "Line 12 Transfers from Affiliated Committees"3

(Attachment 1). shows that between 2001 and 2004 the CWA and AFT SSFs and the SSFs of

four other labor organizations made 66 separate joint fundraising transfers to AFL-C1O COPE

PCC. Of these, 49 exceeded the $5.000/yr. contribution limit from one political committee to

another, see 2 U.S.C. § 441a(a)(2)(C), and the other 17, when aggregated with other transfers by

the same SSF to AFL-CIO COPE PCC in the same year, totaled more than $5,000. Of the 49

over-$5,000 transfers:

• 2 were over $5,000 and up to SI0,000

• 36 were over S10,000 and up to $25,000

• 1 was over $25,000 and up to $50,000

• 2 were over $50,000 and up to $ 100,000

• 8 were over $ 100,000 and up to $250,000

AFL-CIO COPE PCC, a monthly filer, reported these joint fundraising transfers on Form

3X, Line 12. Previously, and since at least 1993 (the earliest period covered by reports available

on the Commission's website4), AFL-CIO COPE PCC reported similar receipts on Line 1 l(c), as

the attached spreadsheet (Attachment 2) demonstrates. During the eight-year period from 1993

to 2000, AFL-CIO COPE PCC's Form 3X reports and those of the transferor SSFs similarly

explicitly alerted the Commission to the nature of these arrangements, as follows:

1. AFL-CIO COPE PCC reported 315 separate receipts from labor organization SSFs that

were parties to collecting agent/joint fundraising arrangements:

2. 236 of these transactions were reported by the transferor SSF as "joint fundraising

transfers."

3. 78 of these transactions lacked a "purpose" designation.

4. One transfer was reported as a "contribution."

5. 134 of these transfers exceeded $5,000, as follows:

3

 We understand the Audit Division's use of the term "affiliated" here to mean the constitutional relationship

between the AFL-CIO and the transferor SSF, rather than to mean affiliated in the sense of 11 C.F.R. § lOO.S(g).

Except for the Transportation Trades Department AFL-CIO PAC and AFL-CIO MI COPE PCC, none of the listed

committees was so "affiliated" with AFL-CIO COPE PCC.

4

 The Commission presumably can readily review its records prior to 1993. AFL-CIO internal records other than

AFL-CIO COPE PCC Forms 3X indicate that these joint fundraising arrangements date back at least to 1985, and

that between 1985 and 1992 they entailed transfers of similar orders of magnitude as occurred after 1992. Those

records indicate that at least four union SSFs other than those listed in the text on page 4 participated in these

arrangements prior to 1993: the International Longshoremen's Association AFL-CIO Committee on Political

Education I LA-COPE; the former Transportation Communications International /Brotherhood of Railway and

Airline Clerks SSF; the National UFW- Volunteer PAC (a/k/a United Farm Workers of America AFL-CIO Federal

PAC); and the American Federation of Teachers Staff Union Committee on Political Education.
• 50 transfers of over $5,000 and up to SI 0,000

• 62 transfers of over SI 0,000 and up to S25,000

• 12 transfers of over S25;000 and up to $50,000

• 7 transfers, each over $50.000 and up to $ 100,000

• 3 transfers of over $ 100,000 and up to $240,000

All told, between 1993 and 2004, AFL-CIO COPE PCC received joint fundraising

transfers in one or more years from the following nine SSFs of labor organizations that are

constitutionally affiliated with the AFL-CIO, in each case in amounts that exceeded $5,000/yr.:

• American Federation of Teachers Committee on Political Education

• Campaign Fund of the Allied Industrial Workers of America, AFL-CIO

• Communications Workers of America Committee on Political Education Political

Contributions Committee

• International Brotherhood of Electrical Workers Political Action Committee

• Office of Professional Employees International Union - Voice of the Electorate

• SEIU COPE (Service Employees International Union Committee on Political

Education)

• UNITE HERE TIP Campaign Committee, and its predecessors ILGWU

Campaign Fund and UNITE Campaign Committee

• United Auto Workers Voluntary Community Action Program

• United Food and Commercial Workers International Union Active Ballot Club

Again, apparently the Commission's first inquiry about these arrangements was a letter

from RAD to AFL-CIO COPE PCC on October 20, 2004. In that letter RAD evinced what

might be termed a surprising duelessness about the structure of the AFL-CIO and its affiliated

national labor organizations, despite the decades of their reporting to the Commission, the

Commission's long familiarity with them, and the explicit regulatory recognition of that structure

at 11 C.F.R. §§ 100.5(g)(3), 100.134(h) and (i), and 114.1(e)(5) and (6): RAD asked AFL-CIO

COPE PCC whether it was "actually...affiliated" with CWA COPE PCC. And, that letter

initiated a series of correspondence between RAD and, variously, AFL-CIO COPE PCC, CWA

COPE PCC, AFT COPE and the UAW Voluntary Community Action Program that continued,

fitfully and formalistically, for over three years until the Commission voted in December 2007 to

undertake the current audit. Specifically regarding the CWA and AFT SSFs, correspondence

between RAD and AFL-CIO COPE PCC or CWA COPE PCC was exchanged in October,

November and December 2004; then in January, February and March 2005; then nothing for 15

months; then another RAD-initiated round in July, August, September and October 2006; and

then nothing until the audit 14 months later. Meanwhile, RAD initiated similar correspondence

with AFL-CIO COPE PCC and AFT COPE in July 2006, which continued in August, September

and October 2006; then nothing for 11 months until RAD sent a letter to AFL-CIO COPE in

September 2007, to which AFL-CIO COPE PCC responded in October; and then, two months

later, the audit. And, despite the initiation of this audit, RAD and AFT COPE exchanged further

such letters in March, April, July and August 2008, and January and February 2009.5 (All of this

correspondence is attached as Attachment 3.)

5

 A review of this correspondence back and forth should raise concerns about how RAD operates. Not only did it

appear unaware of the basic structure of the labor movement, but it repeatedly sent form letters asking the same

questions over and over despite detailed responses from the various committees, including requests that RAD seek
The Collecting Agent/Joint Fundraising Arrangements Among the SSFs

The pertinent facts are as follows concerning the structures of the arrangements at issue

in draft Finding 2. For clarity, we address the status of the parties and the arrangements among

the AFL-C1O, AFL-CIO COPE PCC, CWA and CWA COPE PCC; the same status and

arrangements also pertain to the AFL-C1O, AFL-C1O COPE PCC, AFT and AFT COPE, as the

Draft Report describes.

CWA is a "labor organization" within the meaning of 2 U.S.C. § 441b(b)(l), and it is

"affiliated" with the AFL-CIO within the meaning of 11 C.F.R. §§ 100.134(h) and 114.1(e)(4).

The AFL-CIO is also a "labor organization" under 2 U.S.C. § 441b(b)(l), and it is a "federation"

under 11 C.F.R. §§ 100.134(h) and (i), and 114.1(e)(4) and (5). All members of CWA are also

members of the AFL-CIO, so the two organizations' restricted classes overlap to the full extent

of CWA's membership. See id. However, CWA is not "affiliated" with the AFL-CIO for

purposes of aggregating contributions to and by their respective SSFs. See 11 C.F.R. § 100.5(g).

CWA/AFL-CIO members routinely authorize payroll-deducted joint contributions to both

CWA COPE PCC and AFL-CIO COPE PCC pursuant to voluntary individual written

authorizations that explicitly designate both of those SSFs. Those contributions are routinely

collected by employers that are signatories to CWA collective bargaining agreements in

accordance with 11 C.F.R. § 114.5, and those employers then remit these contributions directly

to CWA COPE PCC. CWA itself directly receives a relatively small amount of contributions

from restricted-class members whom CWA itself employs, pursuant to identical payroll

deduction authorizations, and CWA remits those contributions directly to CWA COPE PCC.

CWA COPE PCC initially receives, processes and reports to the Commission all such

payroll-deducted contributions, including by itemizing on Form 3X, Schedule A every member

whose contributions aggregate more than $200 in a calendar year, in accordance with 11 C.F.R.

§ 104.8. CWA COPE PCC then makes periodic joint fundraising transfers of a small fraction of

these contributions to AFL-CIO COPE PCC, and each SSF reports that transfer as described

above - CWA COPE PCC on Schedule B, Line 22, and AFL-CIO COPE PCC on Schedule A,

Line 12.(> The timing and amounts of those transfers occur at the mutual discretion of the

officials of the SSFs' connected organizations, the AFL-CIO and CWA.

ANALYSIS

AFL-CIO COPE PCC Has a Joint Fundraising Arrangement with Each SSF

guidance from OGC and that the underlying legal issues be addressed in an orderly and efficient manner.

Undersigned counsel did meet with RAD and OGC staff in 2006 without a conclusive result, and RAD's rote RFAIs

then continued as before. Meanwhile, since RAD first initiated its inquiries over five years ago, as far as we have

been made aware the October 15. 2009 OGC Memorandum marks the first time that OGC has prepared any legal

analysis of RAD's and the Audit Division's cursory contentions over the years that these longstanding arrangements

are in any way unlawful, despite AFL-CIO COPE PCC's repeated requests that OGC be engaged.

6

 In recent years AFL-CIO COPE PCC and the other SSFs, upon the informal advice of a RAD analyst some time

ago - as to which, we acknowledge, no record was made - have so reported the joint fundraising transfers as

"transfers." (In light of that informal advice, as well. RAD's later inquiries were unexpected and perplexing.)
Under the Federal Election Campaign Act ("the Act"), there is no limit on the amounts of

joint-fundraising proceeds that may be transferred between committees that jointly fundraise.

See 2 U.S.C. § 441a(a)(5)(A); 11 C.F.R. § 110.3(c)(2). The Draft Report asserts that AFL-CIO

COPE PCC cannot have a joint fundraising relationship with another SSF because the

Commission's joint fundraising regulation, 11 C.F.R. § 102.17, "Joint fundraising by committees

other than separate segregated funds," does not apply to them. See Draft Report at 11. But no

such restriction appears in the Act or the regulations. Nor does the Act or the regulations require

that a joint fundraising transferee record and report to the Commission the individual

contributors to the transferor committee whose contributions might be deemed to be among the

funds transferred.

Thus, 11 C.F.R.§ 110.3(c)(2) provides that the usual contribution limitations do not apply

to "[transfers of joint fundraising proceeds between organizations and committees participating

in the joint fundraising activities provided that no participating committee or organization

governed by 11 C.F.R. § 102.17 receive[s] more than its allocated share of the ftinds raised."

OGC contends that "since section 102.17 is specifically limited to committees other than SSFs,

this provision allowing unlimited transfers specifically does not apply to CWA [COPE] PCC or

AFL[-C1O COPE] PCC." OGC Mem. at 5 n. 4. But, that is not what 11 C.F.R. § 110.3(c)(2)

says: rather it sets forth a general rule about entities that are parties to joint fundraising

arrangements, and then imposes a special condition on the subset of those entities that are subject

to 11 C.F.R. § 102.17, namely, they must conform to their respective allocated shares of jointly

fundraised receipts.

OGC also misstates AFL-CIO COPE PCC's position as relying on a "joint fundraising

'rationale' that, 'if...accepted, [would mean that] any two committees who share contributors

would be able to claim that they too are doing joint fundraising." OGC Mem. at 5. n 4. In fact,

AFL-CIO COPE PCC and the CWA and ACT SSFs do not simply "share contributors"; they are

parties to longstanding joint fundraising arrangements, and their incoming contributions derive

from individually executed instruments that identify both of the recipient joint fundraising

committees. Only where there is such a commonly raised corpus of funds can there be transfers

between committees without regard to the S5,000/yr. limit. Moreover, because it appears that

only SSFs with common restricted classes fit within our analysis, we believe that it could apply

only to organizations with national federation structures, and only insofar as they are not actually

affiliated for contribution-aggregation purposes anyway. See 11 C.F.R. §§ 100.134(h) and (i),

114.1(e)(4)and(5).

Draft Finding 2 also appears to dispute that AFL-CIO COPE PCC and the CWA and

AFT SSFs had joint fundraising agreements because "no joint fundraising agreement was

presented." Draft Report at 8. However, the absence of a specific written agreement is legally

irrelevant. 11 C.F.R. § 102.17(c)(l) does not apply, and even the collecting-agent regulations do

not require a written agreement between a collecting agent and a recipient committee. See

generally 11 C.F.R. § 102.6. Therefore, there is no statutory or regulatory requirement that the

two SSFs either enter into a written agreement to govern their arrangement (let alone that they

agree on a formula to allocate contributions between them, which neither the Audit Division nor

OGC suggests is required.) Moreover, the Draft Report concedes that the underlying payroll

check-off authorization cards of CWA/AFL-CIO members and AFT/AFL-CIO members

authorize contributions to both the CWA or AFT SSF and AFL-CIO COPE PCC. Id. And, as
the Draft Report also notes, see id., the parties' practice has been that CWA and AFL-CIO

officials confer and agree, on a periodic basis, as to the amount and timing of transfers, as do

AFT and AFL-CIO officials.

As described above, the transferor SSF and transferee AFL-CIO COPE PCC each

routinely reports the transfers between them as a lump sum payment that is not attributed to

particular individual member-contributors to the transferor. That is legally sufficient. Membercontributors authorize the actual remittance of their contributions only to their union's SSF, and

there is no basis at the time of receipt for the SSF to do otherwise. That is, the contributors

themselves authorize that their contributions be remitted solely to their SSF, and their employers,

of course, must comply with that instruction. And, the member-contributors delegate to their

union's SSF and AFL-CIO COPE PCC the decision as to the ultimate distribution of their

contributions between their own union's SSF and AFL-CIO COPE PCC. The timing and

amounts of the transfers occur without regard to which particular individual contributions were

received - the contributions are, in fact, fungible for purposes of making the joint fundraising

transfers. Only when a transfer from the CWA or AFT SSF to AFL-CIO COPE PCC later

occurs might a prior receipt be even theoretically considered to be part of the transferred sum -

but that occurs after the CWA or AFT SSF has received the contribution, logged it into its

recordkeeping and reporting system, and deposited it into its own account when it does not

necessarily know when the next transfer to AFL-CIO COPE PCC will occur. Nothing in the Act

or the Commission's regulations compels them to decide that in advance so as to attribute

particular incoming contributions to the transfer.

Accordingly, transfers are most accurately viewed as comprised of funds that are not

attributable to any particular individual contributor, but are comprised of an unitemized

aggregate of a portion of all of them. It is perfectly accurate, then, for the SSF that directly

receives the individual contributions to treat all of them as its contributions, and then if and when

it decides to transfer sums to AFL-CIO COPE PCC, to treat that transfer as a conventional

transfer from one joint fundraising partner to the other that does not require disaggrcgation into

prior individual contributors for attribution to the transferee, but requires only the reporting of its

date and amount, just as is the case with transfers in other circumstances. See generally 11

C.F.R. §§ 104.3(a)(2)(v), 104.3(a)(4)(iii), 104.3(b)(l)(ii), 104.3(b)(3)(ii).

OGC asserts that the practice of CWA COPE PCC reporting all contributions received by

it, "regardless of whether it keeps them or transmits them to AFL[-CIO COPE] PCC, would be

permissible [only] if both organizations were 'affiliated,' sharing a single contribution limitation.

See 2 U.S.C. § 441a(a)(l)(C); 11 C.F.R. §§ 100.5(g)(3), 110.3(a)." OGC Mem. at 3 n.2.

However, none of these cited provisions states that a transfer between affiliated committees must

be reported in any particular manner; indeed, none pertain to reporting at all. Indeed, the

collecting agent rules that the Draft Report and the OGC Memorandum contend apply in every

respect to these arrangements themselves can be read to require only date and amount reporting

by AFL-CIO COPE PCC of the transfers it receives. 11 C.F.R. § 102.6(c)(7) requires an SSF to

itemize contributions received from a collecting agent only "to the extent required under 11 CFR

104.3(a)," and that section in turn requires the recipient committee of a "transfer" from another

organization to report only its "date and amount," not information about the original contributors

of the transferred funds. See 11 C.F.R. § 104.3(a)(4)(iii)(B). (OGC does not acknowledge the

reference in 11 C.F.R. § 102.6(c)(7) to 11 C.F.R. § 104.3. See OGC Mem. at 4.) These

regulations, then, do not require a shift to AFL-CIO COPE PCC of the responsibility either to
report a share of individual contribution receipts as itemized or unitemized contributions, or to

keep records as to individual contributors so long as the CWA and AFT SSFs do so.

Each SSF Is Also a Collecting Agent for AFL-CIO PCC, But That Relationship

Docs Not Trigger the Full Application of 11 C.F.R. $ 102.6

Under their arrangements, CWA and CWA COPE PCC, and AFT and AFT COPE, are,

respectively, not only joint fundraising partners but also collecting agents for AFL-CIO COPE

PCC. CWA and AFT each is an "international union collecting contributions on behalf of the

separate segregated fund of [a] federation with which the international union is affiliated.1' 11

C.F.R. § 102.6(b)(l)(iv). As such, each union is an "unregistered organization" within the

meaning of 11 C.F.R. § 102.6(b)(2). And, because the CWA and AFT SSFs are separate

segregated funds, each may act as a collecting agent under 11 C.F.R. § 102.6(b). See 11 C.F.R.

§ 102.17(a)(3).7

As just described, however, unlike the ordinary collecting agent contemplated in 11

C.F.R. §102.6(c), the CWA and AFT SSFs do not transmit all of the contributions that they

collect to AFL-CIO COPE PCC; rather, each SSF is, principally, also a committee that receives

contributions to itself, pursuant to its joint fundraising arrangement with AFL-CIO COPE PCC.

The collecting-agent regulations themselves explicitly acknowledge the possibility of such a dual

capacity: "Nothing in [them] shall preclude a separate segregated fund from soliciting and

collecting contributions on Us own behalf" 11 C.F.R. § 102.6(b)(4) (emphasis added). OGC

accuses AFL-CIO COPE PCC and the CWA and AFT SSFs of trying to "create their own

exception and make their own rules. Either they fit into one of the specifically described

exceptions [to the S5,000/yr. contribution limit], or their transactions with each other are subject

to contribution limits." OGC Mem. at 5. But, again, nothing in 11 C.F.R. § 102.6 or the

Commission's other regulations imposes any such specific requirements on a committee when it

performs the dual role of raising contributions for itself in joint fundraising with another SSF

with which it shares a restricted class. Generally, if an activity is not clearly addressed by the

Act or a Commission regulation, then it is simply not regulated, let alone subject to some

"default rule," in OGC's term, see id., that, as far as our research shows, the Commission has

never asserted as such.

7

 OGC concurs that CWA COPE PCC may be a collecting agent, but cites instead Advisory Opinion 2000-03 as

authority. See OGC Mem. at 3. It should be noted that the course of dealing here has revealed a failure of internal

communication and consistency within the Commission. Following its audit fieldwork, the Audit Division's Exit

Conference Outline given to AFL-CIO COPE PCC placed the burden on that committee to demonstrate why it did

not have to refund S1.1 million to CWA COPE PCC and AFT COPE. And, Interim Report Finding 2 asserted that

"[ujnless it is shown that AFT and CWA COPE can act as collecting agents for AFL-CIO COPE, these committees

are limited to making contributions up to $5,000 annually to AFL-CIO COPE." However, RAD itself had previously

explicitly and repeatedly informed AFL-CIO COPE PCC and the CWA and AFT SSFs that those SSFs could act as

collecting agents for AFL-CIO COPE PCC. In an RFAI to CWA COPE PCC on July 12, 2006 - based on

submissions by AFL-CIO COPE PCC and CWA COPE PCC that we have both echo and amplify- RAD stated that

"CWA COPE PCC could legally function as a collecting agent" for AFL-CIO COPE PCC. RAD reiterated that

conclusion in RFAIs to AFL-CIO COPE PCC on July 19, 2006, and in another RFAI to CWA COPE PCC on

September 13. 2006. And, RAD stated the identical conclusion with respect to AFT COPE's collecting agent

capacity for AFL-CIO COPE PCC in RFAIs to AFT COPE on September 13, 2006, March 12, 2008, and July 18,

2008, and an RFAI to AFL-CIO COPE PCC on September 28, 2007. AFL-CIO COPE PCC (and, we submit, the

CWA and AFT SSFs) justifiably relied upon those conclusions, and it was surprising, inconsistent and unfair for the

Audit Division in 2008 to impose a burden on any of them to prove that this was the case.
Finding 2, however, asserts that the Commission's various collecting-agent rules must be

followed here without regard to the joint fundraising ~ namely, that the CWA and AFT SSFs

must operate a separate transmittal account solely for AFL-C1O COPE contributions; transfer

funds within 10 or 30 days, depending on the amounts involved8; and "[fjorward all

recordkeeping information relating to the transfers to AFL-CIO COPE...." Draft Report at 8. It

is true that the CWA and AFT SSFs do not use a transmittal account solely for AFL-CIO COPE

PCC contributions, keep separate records of contributors attributable to their respective transfers

to AFL-CIO COPE PCC, or report that information to AFL-CIO COPE PCC. But, again, the

key difference between this collecting-agent arrangement and that contemplated by 11 C.F.R. §

102.6 is that CWA COPE PCC and AFT COPE each is both a collecting agent for AFL-CIO

COPE PCC and a separate segregated fund soliciting and receiving for //^^//'contributions from

the same members in its own right. From our research, it appears that the Commission has never

addressed the relative reporting obligations of two SSFs undertaking such an arrangement, let

alone one where all incoming contributions were fully and accurately reported by one of them.

Cf. AO 1980-74 (approving local union's solicitation of members for two SSFs without

specifically requiring such reporting).

Nor is the AFL-CIO COPE PCC's assumption of individual contributor recordkeeping

and reporting "necessary... to monitor itemization and limitation requirement," as the Draft

Report, at 9, contends. First, the CWA and AFT SSFs itemize all joint contributions under the

$200.01/yr. threshold as is required. Second, of course, neither SSF accepts accept more than

$5,000/yr from any member as a matter of legal compliance policy, and in any event, as is

common among union-connected SSFs, no member ever comes close to contributing $5,000 per

year anyway. And third, CWA/AFL-CIO and AFT/AFL-CIO members who contribute to their

union's SSF never contribute separately to AFL-CIO COPE PCC. Accordingly, there is no need

for distinct AFL-CIO COPE PCC itemization in order to monitor compliance with limitation

requirements.

In any event, insofar as the Commission might have discretion to interpret and apply the

Act and its regulations, no public purpose would be served by shifting this recordkeeping and

reporting obligation to AFL-CIO COPE PCC. For, doing so would not add any information to

the public domain; in fact, the most likely consequence would be, ironically, a reduction of

public information, for surely some individual contributors who would reach the $200.01 annual

aggregate reporting threshold if they were recorded and reported solely by the CWA or AFT SSF

would not reach that threshold if a portion of their contributions instead were attributed solely to

AFL-CIO COPE PCC. It is difficult to discern how the disclosure goals of the Act would be

served by imposing such requirements.

The Commission's Lengthy History of Acceptance of the Openly Reported Joint

Fundraising Arrangements and the Burdens That Would Result If Changes Were

Compelled Counsel Heavily Against Adoption of the Draft Report's Recommendations

8

 The Draft Report concedes that the transfers during the audit period satisfied the timeliness requirements in light of

their amounts and the routine frequency and volume of the member contributions received by the CWA and AFT

SSFs. See Draft Report at 8-9. Even so, AFL-CIO COPE PCC asserted in its response 10 the Interim Audit Report

that it "would commit that it will accept transfers only if the transferring SSF itself also received at least the

transferred amount within the previous 30 days (as both SSFs at issue did during 2005 and 2006)." The Draft

Report fails to acknowledge that commitment, which we reiterate here.
As described above, for over 20 years before RAD's inquiries began AFL-CIO COPE

PCC and the SSFs of many of its constitutionally affiliated national labor organizations entered

into and implemented the joint fundraising/collecting agent arrangements described above, and

reported hundreds of times to the Commission transfers that exceeded the S5.000/yr committeeto-committee limit, without, as far as we are aware, eliciting a single objection or inquiry from

the Commission, let alone from any member-contributor or anyone else. While we acknowledge

that, as far as we are aware, the Commission did not explicitly approve these arrangements (with

the exception of RAD's numerous RFAIs confirming that various union SSFs could act as

collecting agents for AFL-CIO COPE PCC), it is clear that the Commission at least tacitly

accepted and approved them, year in and year out. Otherwise, why would it never raise a

question about openly reported transfers, repeatedly termed "joint ftmdraising transfers," that far

exceeded $5,000 between committees whose Form 1 Statements of Organization reflected no

affiliation between them, and that were part of a national labor federation structure with which

the Commission has been well conversant at least since the post-Buckley amendments in 1976?

The AFL-CIO, AFL-CIO COPE PCC, the AFL-CIO's numerous affiliated national

unions and their SSFs have justifiably relied upon the Commission's tacit acceptance for many

years. The SSFs have devised increasingly complex computer and accounting systems and

transmittal relationships with innumerable employers that administer employee payroll deduction

systems for contributions to the SSFs (the means by which virtually all member contributions to

union SSFs are made). Those systems treat all incoming contributions as contributions to the

SSFs, and they receive, deposit, process, track and aggregate contributions from individual

members so that they are fully and accurately recorded and reported by the SSFs in compliance

with the Act. The Draft Report effectively demands the disruption and revamping of all of these

systems in order to recharacterize these contributions, impose new recordkeeping and reporting

requirements on AFL-CIO COPE PCC, and require the SSFs in advance to arbitrarily designate

particular contributions as the corpus of their transfers to AFL-CIO COPE PCC.

This history and those burdens counsel heavily against a belated determination by the

Commission that everyone has been doing this wrong for all these years and systems and

relationships suddenly have to be changed. That is especially the case where there has been no

intervening change of law; all of the participants, including the contributing members

themselves, are evidently satisfied with it; everything is accurately recorded and reported; and

the changes sought would result in less itemization of contributors. It is telling that neither the

Draft Report nor the OGC Memorandum deigns to acknowledge or explain this history, which

we spelled out during the audit process, and that only the Draft Report even acknowledges the

fact of our showing that that its recommendations would impose severe burdens.

The Draft Report's Recommendation That AFL-CIO COPE PCC Amend Its

2005-06 Reports to Itcmi/c Individual Contributors Is Unfair and Burdensome

The Draft Report appears to stand by the Interim Report's recommendations that AFLCIO COPE PCC amend its reports during the audit period to list the transfers from the CWA and

AFT SSFs on Line 11, rather than Line 12, and itemize individual contributors. See Draft Report

at 10-11. AFL-CIO COPE PCC is agnostic as to the appropriate reporting line, and over the

years it has variously reported them on Line 1 l(c) and more recently, Line 12 in response to

informal RAD advice. But even if the Draft Report were correct about which SSF must itemize,

10
it would be unfair and overly burdensome at this point to require AFL-CIO COPE PCC to

reconstruct the originating contributors to the funds transferred from the CWA and AFT SSFs

during 2005 and 2006. OGC itself acknowledges that "it may be impossible for the SSFs to fully

correct their reports because of the long-standing failure to keep separate records for AFL[-C1O

COPE] PCC contributors. Accordingly, it may be impossible to recreate past reports correctly."

OGC Mem. at 7.

Meanwhile, the draft final audit report to CWA COPE PCC does not require that it

identify and transmit contributor information to AFL-CIO COPE PCC for the audit years, yet

AFL-CIO COPE PCC would be completely reliant on CWA COPE PCC to do so in order to

amend its 2005-06 reports as the Draft Report suggests. Plainly, it would be unfair in any final

report regarding CWA COPE PCC to require it to reconstruct, or, more accurately, create records

about the contributors that could be deemed to underlie its transfers to AFL-CIO COPE PCC.

Meanwhile, there has been no audit or, as far as we are aware, other Commission action with

respect to AFT COPE's participation in these arrangements other than the RAD inquiries

described above. Surely, then, even if the Commission accepts the Draft Report's conclusions

about recordkeeping and reporting obligations, those requirements should be enforced only

prospective! y.

Conclusion

There is no sound reason to disturb the longstanding respective recordkeeping and

reporting arrangements among AFL-CIO COPE PCC and the SSFs of AFL-CIO-affiliated

unions to which hundreds of thousands of individual member-contributors have acceded for

more than a generation. Absent clear and compelling statutory or regulatory support for a legal

theory that would disrupt these open and fully reported practices, the Commission should decline

to adopt the Draft Report insofar as it recommends that the various committees discontinue them

and instead adopt new and burdensome requirements that do not advance the disclosure goals of

the Act.

Thank you for your consideration.

Yours truly,

Laurence E. Gold

Associate General Counsel, AFL-CIO

LEG:sjb

Attachments

cc: Elizabeth H. Shuler, AFL-CIO COPE PCC Treasurer

Karen Ackerman, AFL-CIO Political Director

M