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MEMORANDUM

FEDERAL ELECTION COMMISSION

WASHINGTON, 0 C 204bJ

April 8, 1999

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This infonnational memorandum is to advise you that on March 11, 1999, Perot '96, Inc.

wired funds in the amount of$I,706,915 to the United States Treasury in satisfaction ofits

repayment obligation arising from the above-referenced matter. Attachment 1.

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TO:

THROUGH:

FROM:

SUBJECT:

The Commission

James A. Pebrkon

Acting StaffDm·=e:tI'

Kim Bright-Coleman\W0

Associate General Co~l

Perot '96, Inc. Repayment to the lJnited States Treasury (LRA #507)

If you have any questions, please contact Susan L. Kay, the attorney assigned to this

matter, at 694-1650.

Attachments

1. Copy ofdeposit ticket for funds wired by Perot '96, Inc.
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DePOSIT

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DEPOSIT nCKET

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SlaVICI .'l~~.VILLI,.D 20'82 DEPAR~••• or THB ~8BA8v.rP.S-CRBDl~ ACCOVI~I.G aaa.CB

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FEDERAL ELECTION COMMISSION

W~DC20463

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DATE & TIME OF TRANSMITTAL: MondIy. March 1•• 1_ 11:00

BALLOT DEADLINE: Thu!!Clly. March 11. 1_ 4:00

COMMISSIONER: AIKENS, EWOTT, McDONALD, McGARRY, THOMAS

SUBJECT: Perot '96, Inc. ReqU88t for Ora' ....ring (LRA tS07).

Memorandum to the Commission cIIIt8d March 13, 1_.

( ) I approve the recommendation(s)

( ) I object to the recommend8tion(s)

COMMENTS: _

DATE:------ SIGNATURE:, _

A definite vote is required. All ballots must be signed and dated. Please return

ONLY THE BALLOT to the Commission 8ecretary. PIe88e return ballot no later

than date and time shown above.

FROM THE OFFICE OF THE SECRETARY OF THE COMMISSION

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March 13, 1998

FEDERAL ELECTION COMMISSION

WASHINeTON, D.C. 20463

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MEMORANDUM

f

Lorenzo Holloway ~4.~ Assistant General Counsel·

Su-. L. Kay Jit

Attorney

SUBJECT: Perot '96, Inc.

Request for Oral Hearing (LRA ##507)

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By: t-Coleman

General Couusel

On December 4, 1997, the Commission made a determination that Perot '96, Inc.

(the "Committee") must repay $2,310,127 to the United States Treasury. On February

26, 1998, the Committee submitted its written respGDSe to the repayment determination

and requested the opportunity to address the Commission in open session in connection

with its written response to the repayment determination as provided in the Commission's

regulations at 11 C.F.R. § 9OO7.2(c)(2)(ii). Sa Attachment. The Office ofGeneral

Counsel recommends that the Commission snnt the Committee'srequest for an oral

hearing and schedule the presentation for May 20, 1998.

The Commission'sregulations provide publicly ftmded candidates with the

opportunity to respond to a repayment cfetermiMtion by submittiDg written legal

and factual materialsto demonstrate that DO repayment, or a lesser repayment, is

appropriate. 11 C.P.R. § 9OO7.2{c)(2)(i). A candidate may request an opportunity to
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Memorandum to the Commission

'Perot '96, Inc.

Oral Hearing Request (LRA #507)

Page 2

address the Commission in open session. 11 C.F.R. § 9OO7.2(c)(2)(ii). The candidate

should identify in his legal and factual materials the repayment issues he or she wants to

~dress at the oral hearing. Id The Commission may grant this request by an affirmative

(vote offour ofits members, and inform the candidate ofthe date and time set for the oral

,rearing. Id

., The repayment detennination at issue is based on a surplus offunds that remained

unspent after the Committee's qualified campaign expenses were paid. 11 C.F.R.

o § 9007.2(b)(3). Specifically, the Committee will address two separate issues in

.connection with the repayment detennination. First, the Committee contends that it is

unable to tenninate by the originally expected date and, therefore, requests an extended

period to pay winding down costs. An extended winding down period will increase the

estimated winding down costs and decrease the amount owed to the United States

Treasury as a surplus. 11 C.F.R. §§ 9004.9(a)(I) and (2); 11 C.F.R. §9007.2(b)(3).

Second, the Committee disputes the conclusions contained in the Audit Report that

certain legal expenses are nonqualified campaign expenses and, therefore, cannot be

reflected as outstanding obligations on the Statement ofNet Outstanding Qualified

Campaign Expenses. 11 C.F.R. § 9004.9(a)(3).

The Office ofGeneral Counsel believes that an oral presentation may provide the

Commission with additional information and therefore may assist the Commission in

deciding whether the Committee has additional winding down costs and whether certain

litigation expenses are qualified campaign expenses. Accordingly, this Office

recommends that.the Commission grant the Committee's request for an oral hearing.

Should the Commission approve our recommendation, the Office ofGeneral

Counsel proposes that procedures similar to those used for previous presentations be

followed. Pursuant to these procedures, the Office ofGeneral Counsel will prepare an

analysis ofthe issues presented prior to the date ofthe presentation. This analysis will be

provided to the Commission and to the Committee.

At the presentation, the Chairman will make an opening statement. The

Committee will then be given 30 minutes in which to make a presentation on the issues

raised in the legal and factual materials submitted by the Committee. 11 C.F.R.

§ 9007.2(c)(2)(ii). Following the presentation, individual Commissioners, the General

Counsel, and the Audit Division may ask questions. 11 C.F.R. § 9007.2(c)(2)(ii). The

letter to the Committee will infonn the Committee ofthese procedures and also state that

any additional materials the Committee may wish to have the Commission consider

should be submitted to the Office ofGeneral Counsel within five (5) days following the

presentation.
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M~to theComminion .Perot &96. IDe.

Oral HeariDa Request (LRA ##S07)

Page 3

.RECOMMENDATIONS

I The Office ofGeneral Counsel recommends that the Coinmission:

Grant the request of Perot '96, Inc. for an oral hearing as

provided at 11 C.F.Re § 9007.2(c)(2)(ii);

2. Schedule the oral hearing for May 20, 1998; and

3. Approve the appropriate letter.

Attachment

Perot '96, Inc. !eSpOnse dated Febnlary 26, 1998

..
HUGHES& LueE. LLP

Attorne~·s ~nd Coun'ielors

February 25, 1998

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Su1te 1800

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2101 . q~9-5500

Austin

Houuon

A RClJlStered Limited Liability PartncRh,p IncludlnlJ Profcu,on~1 Corporallon~

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JoanD.A&

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Fed ection Commission

999 . Street N.W.

BsbingtOD, DC 20004

Via overnight delivery

Re: Respoase by Perot '96, Inc. (the "Committee" or "Perot '96") to the

Commission's Repayment DetermiDation; Request to Address the Comminion

Dear Chairman Aikeas:

We are COUDSeI to the Committee. This letter is submitted in that capacity pursuant to 11

C.F.R. § 9OO7.2(c)(2) with respect to the repayment determination included in the Audit Report

OD Perot '96 approved by the Commission on December 4, 1997 (the "Audit Report"). We also

request an oral heariDg regardiDg these matters pursuant to 11 C.F.R. § 9OO7.2(c)(2)(0).

We address two separate issues regard.iDg the repayment determination. F"1I'St, under FEC

regulations the Committee wiD be uuable to termiDate OperatiODS U hoped by April 1998.

Accordingly, associated wiDdiDs dowD expenses not in dispute wiD coDtiDue for a period longer

than anticipated. SecoDd, the Committee disputes the COndusiODS contained in the Audit Report

with respect to certain legal expeases associated with titigation initiated by the Committee.

Amended NOOCE

Included u AttacbmeDt A is a statement of Net Outstanding Qualified Campaign

Expenses ("NOQCE") amended u ofJanuuy 31, 1998. When rneetjng with Commission audit

staffin April 1997 to prepare the 0Jisiaal NOQCE, the Committee, which bad requested that the

audit begin u soon u possible, usumed that it would be able to termiDate by April 1998. It wiD

be unable to do 10. The resuItiDa reporting and disclosure requiremeDts, expenses related to

necessary persoDDe1, phone, rent aDd other overhead expeuses, will coDtiDue to be incurred, U

will legal services related to compliance, audit aDd wind down. Aft'ce- .i_.......'_~_

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Joan D. Aikens

Febnwy2S

Page 2

Matters which prevent the Committee from terminating include pending actions against

the Committee, two outstanding Matters Under Review by the Commission relating to claims

against the Committee, the lack of resolution of the audit, the possibility that the audit could

result in further enforcement actions against the Committee, the requirement of a final audit for

periods subsequent to those covered in the Audit Report, and the Committee's continuing

reporting obligations, all of which constitute qualified campaign expenditures as winding down

costs. While these matters are not within the Committee's control, we should expect resolution

of outstanding matters and claims against the Committee within 10 months of the original

estimate. We note in this r,egard that neither the Oole/Kemp nor Clinton/Gore committees have

made any notice ofintent to terminate before that date.

As reflected on the amended NOQCE, we believe the repayment determination included

on the Audit Report should be reduced to 51,581,573 (applying the repayment ratio). The

amended NOQCE separates Committee obligations and expense estimates from the actual and

estimated legal expenses associated with the litigation filed by the Committee and subject to the

dispute ofrepayment determination discussed below. None ofsuch costs or estimated expenses is

included in the calculation ofthe 51,581,573 repayment amount, which reflects only the extension

ofthe period for expenses approved under the Audit Report as proper winding down costs. We

understand this is a routine procedure consistent with other campaigns that were unable to close

as origiDally expected.

Subsequent review by the audit staffofthe actual expenses included in these estimates (as

well as those already incurred but Dot yet audited) win provide comfort to the Commission that all

such expenses did in fact constitute proper winding down costs, or the Committee will be required

to reimburse additional amounts. The Commission's determination now is not an agreement that

all such expenses will qualify u winding down costs, only that the Committee is prevented from

terminating its existence DOW and must continue operating for a period longer than anticipated

until resolution ofthe various outstanding claims against the Committee.

Disputed RepAyment Issues

On December 4, 1997 the Commission approved Recommendation # 1 contained in the

Audit Report regarding repayment of an amount calculated based on the September 30, 1997

NOQCE. Consistent with the amended NOQCE statement, UPlm;ng it is acceptable to the audit

staff and CommissioD, the reimbursement amount at issue is 51,581,573. We dispute the

Recommendation for the reasons set forth in the Committee's Objections to the Exit

Memorandum filed with the Commission on October 6, 1997 (included u Attachment B), and for

the reasons set forth below.

The dispute is relatively simple, and involves litigation expenses and anticipated litigation

expenses in connection with two matters. Both involve claims ofthe Committee arising during

the election report period. In one, relatiDg to the Commission on Presidential Debates ("CPO"),

litigation was initiated during the expenditure report period. In the other, involving claims for

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February 2S

Page 3

damages resulting from violation of campaign finance laws during .the expenditure report period

by the 1996 nominees ofthe Republican and Democrat parties, an action W2lS filed promptly after

the facts giving rise to the claim became known. Each ofthese is taken in turn.

The CPD litigation concerns the use. of subjective criteria in candidate selection by

corporations sponsoring debates in violation of election law regulations. The FEC asserted

exclusive jurisdiction to evaluate the potential violation, which the court upheld. Attorneys

re_ed in September 1996 to pursue the matter remained under engagement by the Committee

to continue the litigation, pending expiration ofthe period during which the Committee could not

return to court. (See Affidavits ofJamin Raskin and Sam Lanham included as Attachments C and

D) The FEC could have acted promptly and chose not to. In fact, over a year bas past and the

Committee has returned to the court to pursue a "failure to act" claim.

In the initial proceedings the court questioned the FEC's ability to in effect "moot" the

claim by failing to act until after the election. Counsel for the FEC informed the court that the

Committee would not be prevented from pursuing the claim, and that i~ was possible that the FEC

would itselfbring an action against the CPD.

The memorandum from the Office of General Counsel included with the Audit Report

quotes in part from page 13 of the court's decision. In the words chosen to be quoted by the

Office ofGeneral Couusel, the court usesses whether acquiescing to the FEe's claim of exclusive

jurisdiction will irreparably harm the Committee. While the judge" speculates that the FEC may

not act swiftly enough to protect the interests ofthe Committee from the alleged violation oflaw,

in the bench decision the judge speculates, as the Office ofGeneral Counsel quotes, that the harm

to the Committee in forcing a delay until the FEC acted might still afford some relie( "so that the

next cycle would not have these defects."

From this the Office of General Counsel concludes that litigation related to the claim is

about an election other than the 1996 election, and is not a qualified campaign expenditure or

winding down cost. (Office ofGeneral Counsel memo at 4) In fact, the court was substantiating

the right of Perot '96 to continue to pursue the litigation. This is made clear by reading the

sentence preceding the words quoted by the Office of General Counsel, which also place the

quoted words in context. The court notes that the Committee is entided to "come back to this

court later on in the process that is provided by the Federal Election Commission Act, under

437g(a)(a), the Federal Election Commission lawyer asserted they would not be mooted out if

they came back to court. What they would have lost iftile FEe doesn't agree with them and a

have to come to court is the opportunity to debate, but they still may be able to cure any defects

in the criteria they allege the debate commission has used. . . . ." The full text ofthe paragraph is

included as Attachment E. The position the Office of General Counsel takes today is different

from that taken before the court, when the right to continue the litigation was unquestioned.

Consistent with the position originally expressed by the FEC to the court, the audit staff

also informed Perot '96 that it could pursue the filing of an amicus briefin the Forbes litigation as

a qualified campaign expenditure and winding down cost, as a necessary prtftft.\Sid\e pending I

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February 25

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CPD litigation. (The CPD also filed an amicus brief because ofthe relevance ofthat case to the

Committee's claim against the CPD.) It was only at the end of the audit process, in the fall of

1997, that the FEC staff position shifted. That shift, as evidenced by statements in the Audit

Report, the Memorandum from the Office of General Counsel included in the Audit Report, and

in statements at the December 4th Commission Hearing (the transcript of which is included as

Attachment F), is based on an articulated supposition by the Office of General Counsel that

someone is up to no good here, that the litigation pertains to a future election and not the 1996

election.

The Office of General Counsel supports this position by asserting the lack of "nexus" to

the 1996 election (Memorandum of Office of General Counsel at 3) (ignoring the fact that the

claim and litigation were instituted during and pertain to the 1996 election, and could have been

resolved during the 1996 election had the FEC chosen to act prompdy); by reciting the partial

. quote from the court discussed above and informing the Commission "If you look at what the

court said in the initial litigation, . . . the court pretty much said, any reliefthat could be fashioned

could not be fashioned for the 1996 election. Therefore, it only could be for a future election"

(Memorandum ofOffice ofGeneral Counsel at 4; Commission Hearing Transcript at 6) (ignoring

the entire point of the judge's remarks, that the Committee would not be prevented from

continuing the litigation after the election); by "quoting" an alleged statement by Sam Lanham

appearing in a newspaper article on October 30, 1997 (Memorandum of Office of General

Counsel at 3) (which was not a quote but a statement by a reporter which Mr. Lanham disavows,

as reflected in the affidavit attached as Attachment D). In addition, in response to questions noted

on page S of the Commission Hearing Transcript, the audit staff suggested to the Commission,

inaccurately, that litigation with respect to the claim has ended. It has not. As evidenced by the

court decision, transitory audit staff approval of the Forbes amicus brief: and the ongoing legal

sen;ces being performed, it was expected to and bas continued.

With pretzel logic the FEC, which delayed the Committee in pursuing the claim, now

contends that the claim itself is intended to affect a future election. The Office of General

Counsel suggests that the purpose and nature of the claim somehow is now miraculously

transubstantiated into a claim involving a different election. What the Office ofGeneral Counsel

has in mind here as a benefit in a future election is certainly unclear: there is no usurance that if

the litigation is successful that objective criteria will be selected that has no "impact" on third

parties, Ross Perot, or anyone else, and in effect maintains the status quo. The situation in 1996

was unique: polls showed over 700At of voters believed Ross Perot should be in the debates; be

was denied participation based on an improper subjective determination; the campaign was

harmed as a result. While the Office of General Counsel seems preoccupied with its guess on the

future political motives of Ross Perot, which is both inappropriate and wrong (see Affidavit of

Ross Perot attached as Attachment G), the legal issue here is straightforward.

The Committee has a valid claim for redress. It is based on a violation of the regulation

that prohibits the use ofsubjective criteria by corporations in selecting participants for candidate

debates. It is a claim that pertains to the 1996 election. It is a claim that arose during the

expenditure report period and a claim that the Committee would have th~~had the FEC I

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February 2S

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acted promptly or left unchallenged the Committee's authority to bring its action in court.· The

claim and associated litigation expenses were and remain in furtherance ofthe 1996 election. A

commitment and retention of counsel to pursue the litigation until its conclusion was made during

the expenditure report period. The resolution of litigation initiated as a qualified campaign

expense that continues beyond the election (in this instance solely due to inaction by the

Commission) are continuations ofthe ~e claim and a valid winding down expense.

Moreover, the Commission has never before taken a position contrary to the right to

pursue to resolution litigation begun during an expenditure report period as a qualified campaign

expense. The position of the Audit Report and the Office of General Counsel is without legal

precedent. While we are aware ofthe relevant inexperience of all involved in public funding of

independent and third party candidacies, we believe the Audit Report misrepresents entirely the

position ofthe Commission in the 1980 John Anderson campaign.

Addendum # 2 to the Final Audit Report on the National Unity Campaign for Anderson is

included as Attachment H. As is noted on page 3 ofthe Anderson Report Addendum, and based

on knowledge and beliet: the Anderson campaign used funds awarded under the Presidential

Election Fund Act to pay legal expenses in connection with litigation it instituted as plaintifl:

which continued for three and four years following the end ofthe 1980 election. The audit staff

and Office ofGeneral Counsel state that this litigation was funded by court awards of attorneys'

fees. In actuality the litigation was funded from the Fund Act and actions for recovery oflegal

expenses were secondary to the underlying claims of ballot access rights, and depended on the

success ofthose claims. (The recovery of attorneys' fees is an issue related to the nature of the

ballot access claims which, if successful, can include actions for legal expenses which generally

cover only a portion of the fees.) As is clear from the second paragraph OD page 3 of the

Anderson Report Addendum included as Attachment H, publicly provided funds were used to

finance the litigation. The issue presented by the Anderson Audit Report was whether the

proceeds of any attorneys' fees awarded in connection with successful litigation would thereby

properly be repayable to the US Treasury.

The position ofthe Commission in the Anderson audit is- consistent with the position that

claims arisiDs duriDg the expenditure repon period which are pursued through litigation

continuing beyond the period constitute qua1i&ed campaign expenditures u winding down costs.

Simple fairness requires that the Commission apply consistently the regulations, particularly in the

situation faced by the Committee, where the timing ofthe expenditures wu dictated by the FEC.

The Office ofGeneral CouDsel queries how the election of 1996 could be affected by a decision in

the CPD litigation. It is affected in the same manner court decisions in 1984 regarding ballot

access affected the 1980 election. The determiDative issue is whether the litigation initiated

constitutes a qua1i&ed campaign expense. Where it does, u the Audit Repon concludes the CPD

litigation did, a committee is entitled to pursue its claim.

In the litigation involving illegal contributions and expenditures by Republicans and

Democrat parties, the Committee filed a cause of action seeking damages for harms to it incurred I An.lClllll'l _

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Febnwy2S

Page 6

during the campaign by the illegal activities of others. This claim is DO ditFerent ftom any ~Iaim

giving rise to a cause of action in which the Committee redreises its legal rights to collect

damages for harms done to it during the campaign. Arguably, the Committee has an obligation to

do so uncIer the rele'Vlllt regulations. Had the Committee discovered that it bad been harmed by

the theft of assets or been over-cbarSed under a contract during the course of the campaign, it

would similarly file an action in order to muster the asSets ofthe Committee. In accordance with

the Anderson audit precedent, it would appear that any recovery would be required to be returned

to the US Treasury.

YmaIly, we note that we disagree with cbancterizatioDs ill tile Audit Report of numerous

facts, aDd DOte the FEe is a party in opposition to the Committee in the subject litigation and

could have aD iDceDtive to &mit fimding of the aetioas reprdleu of their merit u qualified

campaip expeases and wincliDa down costs.

Footnotes (b), (c) and (d) to the amended NOQCE iDduded u AuacJunent A reflect the

appropriate adjustments necessary to include tbereiD the aetuI1lDd estimated expeases related to

matters disputed.

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IOMOAOO1:03D4G.O'
Attachment A

PEROT "6, INC.

STATEMENT OF NET OUTSTANDING QUALIFIED CAMPAIGN EXPENSES,

As 01December S, 1"6

As Dete...ined 'Jaaury 31, .".

ASSm

Cash on Hand S 700

Cash in Bank 3,295,644

Accounts Receivable 639,235

9 Total Assets 53,935,579

<J

• OBLIGATIONS

0

7 Accounts Payable for Qualified Campaign Expense 301,416

•

() Aetual WmcIiDa DownCosts (a) 2

5 (December 6, 1996'·January 31, 1998) 1,056,738 (b)

.. Estimated WmcIiDa Costs

1 (February 1, 1998:. February 28, 1999) 944,537 (c)

8 (See attached Scheduled I)

5

7 Total Obliptions 52,302,691 (b)(c)

Net OuataDdiDl Qualified Ca."'" EspeaJeI (Surpl_) SI,m·.(b)(c)(d)

(a> ActuaIIcpl feel cIealiq with 0DI0iDI compIiaDce, JeI1OI1iDI wiDd doWD, MUltI, audit, ICca"D'in.. aad

UDJeIIted to lDIIIeII.efeI....ill (b) aDd (c) were .meted to be SI00,OOO betweeD July 1997 aDd April

1998 (or 110,000 per 1IIODth). Actual COllI tIaaaP 1/31191 were 1113,011, iD part clue to IddiIioaa1

MURs flied ....tile cemprip addie dilpllled DrIft IIId rial Audit ReparL Abreak....01...

lepI calli tIuaqb 1/31/98 is aawJwd • ScbedaIe 0.

(b) LitipdoD expeD" paid tIaaaP 9130197 taIIIiDI 132,142 IN DDt included; Utiptioa ape_ItotIIiJII

1505,274 paid from 9130191 tIuaqb 1/31191 me aIIO DOt included TbaaP DOt iDClDded badllle

eli..... U qaaUfied cemprip ,....ad wiDdiq doWD CDIII by die Committee aDd subject to request

far I"NI'iaa01....,..- cteeenaiJIItiOI Pall 9130191 ,_'.'..subject to audit wriftcatioD ad

approval

(c) See I!tJChed 1CWuIe. Does..iDchIde 11,206,000Mi·""litipdoD COItI eli qaalitied

cempriP aplD. and wiadiIII doWD 0GItI by die C ..it subject 10 far RIariq of

...,..cIeIInaiDIIiGIL A subject to - ...1 IIIdIPPftWlL

(d) CbanIcterizItia 01..,·'.' I illfOOIDaIeI (b) ad (c) • .,'ifted mnpeip ape_ad

wiDdiq doWD 0GItI waaId DDt ill a .,..

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DRAFr

Schedule I

PEROT '96, INC.

Elti.ated Wi.d Do•• COlts

As orJanuary 31, 1"1

COMMm'a

OBLIGATIONS

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4,500

44.000

2.-

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1,100

1,000

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44,-

2.000

1,000

-

1.000

AId

4.soo

44.000

2,000

1,000

-

1,000

...,

4,500

44,000

2,000

500

1,000

1,000

....

4,SOO

44,000

2,000

500

1,000

1.000

I".

....,

4.SOO

44,000

2,000

500

1.000

1,000

!!I!!!

4.soo

44,000

2,000

soo

1,000

1.000

.... 'Ir

4.soo

44,000

2,000

500

1,000

1,000

0cfMer

4,500

44,000

2,000

soo

1,000

1.000

Ne, 'r .......

4.soo 4,500

44.000 44,000

2,000 2,000

SOO SOO

1,000 1,000

1.000 1,000

I",

.-..., r....,

4,500 4,500 51,511'

44,000 44,000 5'72,11C'

2,000 2,000 Z",,"

500 SOO '.sot

1,000 1.000 t)MI'

1,000 1,000 13'-

....... ' ..(cc."i...

,..... ... .......r .... MtJIb.... Ie ... ,. o)·n

10.000 10.000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 ......

o 0

!.:!!!... 1,96S 1,96S 1,96S

o 0 .....

MUJ' '4,H5 6U65 '64,965' 6ot,965

o

1,96'

o

1,964

M.M4

1,964

20.000

...... 1,964

20,000

..... 1,964

20,000

.....

20,000

1,964

....... 1,964

20,000

.......

o

1,964

M."4

o

1,964

T"~

...... ....'-(....... ,)

Odw

EIIiIMIII..................OodwiBac.-......a LcMI;e.tdya --.....

64,H5

-

COMMma

CLAIMS f 11ApI,..... Iu.- 125,111 125,111 lis.- I.....

1

"13I T.... 11f,H4 I.... -~ ."".. 1t2,M4

I (I) E..-.................. ........·_H

, - (2)

!!!!!!

1t2,M4

- !!!!!!

I.",

- !!!!!!

-.".... !!!!!!

164.t65

- !!!!I!!

1'4,965

- !!J:!!!!

164,M5

- ---'- .

64,965 Z,I58,53'

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10440,0001:0313441,0
Schedule 2

PEROT "6 NOQCE

Breakdown orLegal Espeases

Paid From July I, 1997 Through January 31, 199.

d._p.iapa LepI

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5

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J4ghes" Luee ,

SlwIden Arps

Total Co.pliaace Lea"

. Dimpled 1M" ' ....

JamiD Raskin

Cuddy " Lanham

GodwiD " Carlton

Thoits, Love

JamiD Raskin

Cuddy " Lanham

Mayberry

Hughes" Luce

TOTAL LEGAL EXPENSES

27,208

5.634

144,999

156,035

83,154

42,404

42,316

12.875

27

1,032

3,199

4,786

6,479

2.929

S,U'

87,577

2S.!ll

113,011 Poomote (a)

32,142 Pootaote (b)

411,714

11,452

S,039

S05,274 FootIIote (b)

1000.oooI:OJ2MG.o1 f

AftAmH.' --~

Pap ct of. 39. ......
ATTACHMENT.B

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PEROT~ - ------------ rOR PRESIDENT '96

Perot '06. Inc.

'.O.loxN

DaIIu, texas 75211 October 6, t997

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Robert J. Costa

A.sistant Staff'Director, Audit Division

Federal Election Commission

999 E StreetNW

Wuhinston, DC 20463

Dear Mr. Costa,

We object to cenain of me Audit findfnp and Recommendations concained ill me Exit

Conference Memoraadum of the Audit Divllion on Perot ." \EXIt Memorandum", as summarized

below and diKussed in the followinl paps.

• StaffAdvallces: Perot 'M sat all tlmel eomplied with the purpose aad Intcal of 11 CFR 111'-5.

"("he srated putpOll or 11 en f 116.5 is to prevent '''\ended 101M U) campaips in tiaaneiaJ

difficult)' under the auiae of employee ineurred campaian expenses not promptly reimbutIecL Tho Exit

Memorandum notes that • Perot '96 staff member in limited instances charpd to his credit card

incidental campaip expcnsa assocl&led with candidate appearances, primarily borel expenses or the

candidates and a junior Sbdl member wtdJout credit cards. Because Perot '96 was unable to obtain

campaign credit canis me statrdirectot bad no alternative. due to the impnctieality and FEe compliance

problems ulOCia&ld with travellnl widllup 1ID0UDtI of campaign cub, and the rcquircmcnu Cor credit

cards by ht*1s and others. The staff director was in ada instance promptly reimbursed - typically 1ft

Ins than halfthe time permiUed and always before he aetuaJly paid the expease. The purpose and incent

or t 116.5 were compiled with in fall. IDd any =lmical and unavoidable violation is do minimus

compared wim instances In which the Commission took no action, includina instances where

reimbursem",' was ftlVttmade or wu delayed until discovered in the Fee post clccLion audiL

.• OccapadonlE.plOJCr Dlldonn: '.rot '" ubtal•• aDd nled .app...........1 i.ronutio. i.

compll••• wltII PEe npiattODl••d la.tnac:tlon..

Ropons Analysil Divlsioa llaft'instructed ropresen&ativcs of Perol '96 while employee. or Perot

'92 that tho stall pref«red cumulative rather than replar amendmcnu to $Upply supplemental

conuibutor Information. When Informed of the cNngc in pn:C,--n:nec by the ~C audit saff, Perot '96

promptly flied Ibe Informatloft by amendment.

• Up' ape.... ,...taI 10 onp'a•••tten uader review before til. COID....IOII are q••Uftect

campalp .s,...... &lid wi.dia. dOWll coati.

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Anticipated lepl expenses relate to oUIIIMCUnS matterS under l'IYiew with respect to which the

Commission has not yet 1Cted. Had the FEe acted with rwspect to complaiAII involvina Perot '96 durin.

the c"pcnditcn rcpon period. l,pI expenses, inc1udinl auociated Udption expenses. would have been

qualified campailO expenditurel. The campaip conserved funds because the FEe had not yet acted

widl respect to these mmen. To deny me opportunity of representation In maucrs arisini durina the

campail" simply because the campaip ended before the FEe .clcd iI in.ppropriate and without"I

basis.

A. Pemt '"PM It'll tim. I. com......with the DIQlW en' 'atcpt 0'1"&$.

The polIDIial .b.... that 11 eFR. f 116J WII adopted to Iddras .... noc It laue here. In

adoptinl tJ en '11'" 1M Commiuion was explicit ill ill purpose: to prey_ the circumvention of

contn1Halioa limkl when • commiuee apcn.aca rUllllGia1 ditftculdes and • Mtr member coven

onaoifta commiuca c....-wth pmouJ 1'IIIOUI'CII without expeetadon of prompt reimbursement. 35

fed Rq 26,312-26. 3.3 (19'9).

n. Exit MemonadUIII fiacIinI iavolYel c:redtt card cbIIps IDCU1Nd by • campaip Itaft'

director durin, campatp nvel.1 AD sacb expeDJtI WWI promptl, Nimburled withi" the 60 day limit

from th8 closiDl dire of the emplo,.e·. bi11ins...... tft feet', lUdIc IIIfI' ..-ch rellecll tbIt

reimbursement was 11most always IIIIde widlill30 days 18..... apeIIII WIt jneprrc4. 1ft acb iaItaace.

the statrmember was reiaabarscd _1CCIIaI1y paid the..... At no dille cfuri8l1bi1 pIriod did

Perot ." nperience fiauciaJ cliIieulda. The use ofI cn:cIlt CInI by staffmember wu .'mply a

pl'lCbcal aeceuity. To __1bar...kuadaa is eqaiYalelll to 1'1 to circualv8llt cOIIiribudoe

limitations is complmly iDIIccInte. ItIlly violatioD ace••ed Ie was merely teebaic&llDd iaachen.-.

and quickly c:onected.

Perac ." soupt ......P credit ...ror aDdidata IDd staff UDCIIrtaIdnI CIIIIJIIIp 1rIV.1.

11Iae were IOUIbIIO noW die rIIk ofJMdvetIenI~.by ClDdid_ ad iliff. ... to maJncaIn

strict fineneiaJ controls. HowMw. ondit 0Ird ptOYiderldo flOC 00IIIidar political ....pai..IIDOII, dIoII

...twrprisn most cncIit-worday. Multiple requatI by PeNr tM tor crldit cards were cIcnicd. A. che Exit

Conference Memcnndana aocn. tine major credit cad CGlllplllies- weN unwWinI &0 prov" basinal

credit canis to Perot -H. A IIIIIIIOfDCIam cllraUIaa the etrons of .... '96 ia chis rcprd bas ...

previously suppUeclID .... audit iliff.

The .,.... at issue ... 101e., with expe.' iacurred .by the JUJT director charpd wt&ll

cweneein. and... IfJPIII'I1lC'I, lor boIwl of IIOII'IInIeI Mel iliff Itdrlftt credit CIIdI IDcI

iae..... Cllldia. ..p......,. CIIdit '" YendoII. TIle Il1O by the

.." eurec.r of lUI penoaaI aedII ani WIt .... Oldy lIIItive. If ampaJp credit CIIdI Ire

unavalla&le, it is anrcaIllCic 10 apecc pNSidenIiaI "ice-,.aldendal nominees to stand in hotel

cashier linea In an lnstanceI, or to aplCc aU staff IIpICIaDy ,.... Of col...iDdividaall

workin, Oft policicalClIft,.....to ...1M CNdit 10 be ....pmoaaJ ondit carda.

Ifthe audit ttafllnterpllllioft or.... repJatioa were corncc, .1oIIdou woulel be uaavoidabII

tor campai......icd acdlt... PNIidadaI .......1hoaIcI DOC ... fIqUind to ICIIId in

lines Mel youn. sWT pcnou'. c:redtt .. cIaded pardcipldoa in campalps due 10 an

2 ' .......OOOI:02tll7l6.o'

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r

interpretation or f 116.S. In Iddition, me.. Olber than VII of penonaJ credit cards would brIolve

Uly,lina with I.rae quantities of campaip cash. dnunatically Increasfn. &he possibility ollnappropriate

exptmdiwns and poIinl mUGh more sipificant repoftina, compliance and disclosure IsslaCI. And that

would not solve &he r~uircmcnt of veadon such II hotel., operIlOrS or auditoriuml and othcn who

.-.quit.. credit cards to parutM payIHDt. •

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Because the campaip was noc in rlftlftCial c1ifficulty.1nd because reimbursement was prompt.

any inference that the staff member mllilded to delay relmburlcmnt or made an MldYance" il

completely inaccurace. Tbe Commillion II..... to ..ill accord witb thIC coaclusioD. The 1992 Kerry

Demouatic praidendal primuy ampaip reedYed aftIdnaces from two campafp repmeacadves.

One appattndy diet no& SIlk reimburRJUllt until che Idvance .... ditcCMNCI in the poll election lUCIit

fieldwork by FEe ItItr, Iftd over S'7JOG wu never rcimbunccl. The dmina of1be advances and

economic liCUllion or.... campaip _gat that it was prmed lor ttIOUI'CeI. Nevertheless die mlltCr

was elosed wilhout • r_in. ofprobable cause to believe a vtoladon off 116" bad 0CC1IIftCL Sa MUk

3941.

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In Iddltion, we ItOIC &hM 11 C.P.R.. f 103.3 pnwida a polldcal commlDe 60 days cIurina which II

may refund exceIIiYe COllIn";... There is 110 jUllific8doa lor tradal ID -excIIIiw eoaaibadon"

ruultin. 6'om 1ft 'nadv•.,III! ..."1dvJacc" JDCn llrictly dIa ICtUII ....1.0 coatrIbucioal, tIJenby

dnyiDl a NMOIIablt oppoftUnky to ad .. uaialcatioaal YioIarioD. The mted, of • prampc

rtimbunemlnt Iboulcl blaftilable for.." adYMcc. coasidencI coaIributions under 1116.5. The stall'

member in question WII • ...,. promptly reimbursed, and Perot 'M ncei¥ed no accsaive COIIII11Kadon.

8. Perot" .,";'" U d OW ' """'a'...rdll, OCCP....... 'ad mpage "com".-wi'" 1M DC ' ", 1Mtncdcng.

The !xk MClIIOfIDd_ aoca dill audit Jratr cIurIIII fteldwork touad tbaI occupIdon and

employer inform_ion received belt cIfGrtI caa.... del Decenlbet S, 1996 hid not ,wi beea

lUbmiUlcl by amend...... The ·"..('enm-, ofttcIaII .... chII II • raull 01

communicatloa with the FcdnI SIIcaioD Conan,..- AftIIJsis DlYIsIoa sedchwIaI the 1992

campaJ.n, d1ey were under &he ialpralioD ....tilly 1eI DOC tile am...ded tepOdI Cordill'" electJoft

cycle .. hqueftrly ..die)' bad ......... 1992.11edan ~."

Pwoc '96 WII under dUs .pras_ (or pod~. _ of die 1tepons AnaJyIit

Division inIIrvcted IIDptoyea ofPerol'H wIaiJe"" wen employed by ,..'92'*to submit "P.. amendmenu CO ptOYicIe .."........ oocupItioa and an,.- iaConDIIioa. ". FEC informed the

campaJp Ie ..bcfna .",.......,. by 1I.-!JiDIof_........ cI......1oJer Md o"u,.ioa.

(Af'radavlr ofJanke E-. iacladed • A 1.) nil.. coallnMd Ie, .1.'" by ,.-'92 ewer

the courfe of..., tlliap aad COMe wtcb die PIC 0ftI' ......)WII. ifteladiftl ill its ...,onsa

10 MUR. 3121, MOlt 3734,'MUa. 3741, MtJa '74', MUlt 3763. IIId MUa. 1719. F. example. die

tollowl....., WM ......... 10 ...PIC .. 1993 (a ropy otwllich is inc...... 2):

PDOT'ft

October II, .993

,..,.......c........ c/oPllIIII".

999 U..... N.W.

3 , 16NO....':02t01MJU

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of""

I.ft&C'Wlt

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WISh....... D.C.2OtG

DeIrNI. SIMppIrd:

Iacloled II die Cwauladw AmtncIIneIt nr PInK 6ft for die period

tom M..u I, 1992 a-bIr 31,1992. latonudon 1hIt ..........

..,..... f'.Mllld .. or aIpIIa _,I..lIioaI Ind

..,.... or ......

AI)'OM an CO ill

PIC npanI ...., III III MINb 1m. This"""

COIRIIDId ....... JIlt 1992, '92 ....... your II

dllraad_ ........., III PIC I'tpotIIIIICI 10 ......

11II_CUIl1IIIdw .

v tor .._lid"••dnM procldlft ..

...r _WiD' ............ convtrIMlon ........ ,...Mr. an of".a v_.. ta J...., 19tJ, I ........

III ,. D.s., of Y-a, ........to,. Mr. DIIiII O MIa_ o-raa eo-a at ...'92, ..AprIl., ltn. "...- psnaI .......... NI'IitDeed II I_a_ aw willi .... PIC with fIIIIIICI • MUl mi. MUll m4, MUI.

"41, MUR"41. MUR ""."MURmt.

, ....... 1f~"'_ DIIIeI 0....... .."'''''''''''C''''''''~ 214-4SNIU. -b'.

1tlMa.... M ... T..... lie.... •

Tho IndIWluall who racch. &he Canna • cuanalartve aIIo

......., for ft... ,.,.,. lor,... ·N. In of COllY"'''' die

PEe AMI,.JI DIY.........,...'N.." ,.oat .-.arl1lddie ".,.,.. for

a CIUIIuJadw ......hid c....... (AtrIdott of ) Can '. I -.aIIdY.......... ..filed ..DllllDIIer 5, .9M,,,, wtchoII by PIC rtafI. It noc antil *' audit JtaIf

q--.s tile ....... 1ft of I""..,..'N WIIIdYIIed thai dill

prcra.c...,....••pt. Upoa ., fa .... PIC'. PI 'me·" PfOIItpdy

filed ........,,.,...tile oee 1Id..,_IafonIIIdon it hid tved.tnoe 0.....

5, 19M. (AftldaYi& ora-.)

..............1•• ill ,.,.. 'willi let........"""'II ........... inchJclial with ...... to till Ip'. boll omwts "..,sial CODtribator

occupadoa aDd ..,.,.. The t« 110I101 "p'ar......fttCIIC approech followtd

ift J992 nl.nc•., nc.

. :...,..•, I

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.... c. rem' '96 "'..I.a1W.eJlJoJneur and p.J IcC" Sosu relpl.d to 'Un'" "nder "vjew beCote the

Comm"moD •• Quallft.d Camp,ir" espcDsc, pnd wjndjD& down eMU.

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Lepl expenses in the resolution or ",allen initiated as qualified campaian expenses thar

continue beyond the reportins period due '0 action or inaction by the Commission IrC qualified

CAmpaip expenm and proper windinl down costs. Outstanding matten under review include onl)'

chose with respect to which the Commission has not acted. Had the FEe acted with respect to

complainu involving Perot c96 durin. eM expenditure report period. leaal expenses, includins associated

lieia_tion expenses. would have been qualified camptiII' expenditures. The campaign conserved fundi

becaUie the FEe hid not resolved these mafttrl. To deny Perot '96 oPPOmJn~ to continue to repraent

itselfin mlucrl artlins durin. the campailft limply because lb, camplip ended before the FEe acted is

inappropriate ad without I.p. bui.. Perot'96 is entitled to retain and expend amounts necessary for

I.pl l.rviCOl related to matten under review involvina iL

The audit report places emphuil on the pendin8 MUtt involvin. Perot '96 and the Commission

on Presidential Debates ("CPDj. TM FBC hu not qucslioned that lepl expense. incurred in relation to

the complaint filed by Perot '96 with the FEe .,,1111t the CPO was a qualified campaian expense

incuncd durinl rhe expenditure report period. HId the FEe acted on the complailltl filed with the PEe

by or a.linst Penn '96 durin. the expendilunt report period, iDcludin. the one involvin. the CPD. lepl

expensel related &0 them would without question have been qualified campaip expenditures. It Js a

Ittaft•• twist ortoaic to IUIPIt such eateprizarion il now Inappropriate when the IOle reason che periad

durin, which they would so qualify has paaed without their JftC\lIftDc. il • delay in FEe aerion on those

matten.

In (act, Perot "6 lOupt to avoid the delay the FF£ eould impose in reacbina resolution with

....pect to the MUR tiled .pillar the CPO duaup court action. In an effon CO prevent Perot '96 from

pumins the MUll at that time durin, the expendlmrc report period, tho FEe stated to the Federal

Dillriet Court that the campaJan" action would not be mooted by FEe review and expiralion or the

period durinl which the FEe .....d noluslve JUrildiction over tilt mitten subject to the MUR. To

now My expcndiuares may no Ionler be made which It. nec.ssary tb prevent lb. ODlome mauer from

beinl moot in praericaleffect. expenditu.... budaeted and conserved for by Lbo eampaip in reliance on

the PEe position, is wholly i"~nsiltent and withoul lqal buil. The anticipated expenses are directly

related to, an lUI intep"&1 pall orlad cannot be scpat&led from the cxpcndituru durin. me period when

such oxponditum .... unqueationably qualified Clmpaip expenlel.

11w position is eoasiJtent with prior ~luIloftJ by the Commi.ion. In the DukakisIBentsen

Final Auditbpon die Commiaioa determined that prifttia. and pomp COllI lor 125,000 holiday cards

sene aRer the el.moa and u .... u the followin. March were qualified campaip expenses U windina

down c~ta. Such expIIIMI have tar lets • ftlXUl U windiftl down com than do .epl expenses related to

outstandinl MURs ...d Utiptlon Oft.oina siDe. the apendlwn f'8POn period.

fn addition, the Final Audh Repon 01 the l1ukakislBentsen Commiuee nota that JcplserviclS

wlr. initiated rallied 10 the cletlOtal collele durin. &he expendian rwpon period. Althou.h the

.Iectoral collese rnccIs after the close of the expenditure repon period and lepl services were provided

aft.r che close orthe txpendiaart rwpon period. dw Comminioft correctly dctennincd that the expenses

were qualified campaip expenHl because they involved le,al services related to activities undenakcn

durin. the expendibde report period. 11\1 Commllsion did not and should not attempt to replace the

judsmcnt Mel decisions or the campaip. The questioft i. limply wheth.r properly ineurred legal

s . r(JlWO,OOOI'02907'601
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expenses for a legitimate campaign purpose are at issue. If so, they an: properly qualified campaign

expenses.

Similarly, in the Addendum to the final Audit Repon-National 'Unity Campaign for John

Anderson. amounts set aside as lepl expen..cs concerning a matter under review were approved by the

Commission as windina down costs. The Addendum stated that 11 e.F.a. §9004.4(aX4) allows public

funds to be used for winding down CO~IS which incJude but are nOI limited to lepl services related to

OftSOiftl MURa.

Moreover, Addendum #12 to the Final Audit Report of the National Unity Campaign. dAted

July 19, 1984, discusses poulble aROl'Dty tee awards for ballot access litigation. Audit stiff SOulht

reCund of the attorney ree award. because the funds awarded under the Pmidential Election Fund Act

were used to pay attorneys for the Supreme Coun litigation. Since the majority of the activity in the

cue, AndcrlQo y Cc1cbn:pc. occurred several yean after the close or tho 1980 general election

expenditure rem" period. the audit division claim suggests that all such spending constituces qualified

camp.ian CicpeMCS.

The Exit Memorandum also coruidm lepl expenses incurred by Perce 496 in connection with its

arnicus brief in k1ttln8. Edw:lIIitm r.lrIIIlDrt Co"""iUltm w. Ralph P. Forba, cum:ntly before the

Supreme Court. The proposed amicus brief expense and relevancy ofthe FQrbu cue wu preaentcd to

and approved by memben ofthe audit staff' prior to the paymeat in question. We were informed only at

the exit conference that the position of m. Commission bad changed foUowinl • staff review in

Washlnpon. The staft's iDitia1 judpalllt was correct. The Perot '96 expenditure was necessary in

relation 10 che onpina MUR related to the CPO. The CPD recognjzed the relationship to the pendina

MUR and also filed an amicus brief. These expenses arc qualified campail" expenses, because they

relate directly CO issues underlying_ MUR lnvolvins Perot '96. In making the expenditures, Perot '96

also relied on 'FEe ftprutl1t1tiOD thatsuch incurrence wu lCC~tablc:.

Perot '96 uraes the Commission to rec;osnize that Perot '96 ~olated neither \be purpose nor the

intent of t I1G.', ftJlIy compiled with the nc', instructions reprdinl tllInS supplemental information

on contributon. and is entitled to reserve for and incur lep! fees related to MURs and associaled lepl

claims u qualified campaip expenses and wir"'inl down ~sts, inGludioS those usoclated with the

Forbes c:uc. We also wish to compliment the Commission audit staffwho worked with us. both for their

cooperation in ob1iaina our requcst Cor ID audit u early .. posslbl., and for the professional way in

which die audit was handled.

Attachments

6 . 104-60.000I.01'0716 0 I

I
ID:

Attachment 1

AFFIDAVIT OF JANICE FnE.~

State ofTuu )

)

COWlty ofDallu )

Before me, a notary public, appeared Janice Estes, who, beins duly swom. deposed IS

follows:

.affidavit.

convicted of any crime of moral tulpitude or a felony IDd am 1U11y compeum to make tbiI

2. I wu employed by Perot '92 and am employed by Perot '96. My responsibilltiea

for both Perot 192 aDd Perot ·96 included preparation ofletters to demonstrate 100<1 faith efforts

to establish identification of contributors of $200 or more. IDd preparation and tilina of

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1. My aame is Janice Estes. I am over eighteen (18) years of age. I have never been

amendmcots to our reports telatecl to that iftformaticm.

3. In 1992 I bepD 1i1iDg amendments cantain !". updated contributor

occupmoDlcmployer iaformation UDder instructions from Perot 492 campaisn staff: flling them

every 10 days.

4. During the 1992 electioo CllDpaiaa we were iDformed by the FEe that it was

beina "overwhelmed" by ~ur amendments and requested that we fUc omy ODe master, cumulative

amcndmcat.

S. My respoDlibilities as a Perot 196 staff member included these same functions.

DuriDg the course ofthe 1996 election campaip 1haclnumcroUi telephone conf'ereDCea with the

awltt IDCl reponiDIstatt No one ever questioDed our approlCb orsugated that anythins bad

Amdavlt otJaD.Istca Pale 1 . 1~.OOOI:G29I066.01
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cbanled from the procedures followed at the request of the FEe during the 1992 electiolL- An

amendment coJUaiDiDI all the contributor occupation/employer information obtained through

best efforts was filed Oft December 5, 1996.

6. We YICI'C holdiDs iaformation received after December S. 1996 for a second

camulati.ve COaunDutor occupatiODIemployer ameadmcat. In March 1997t I leamecl by

discussion with audit staff clariDa the FEe audit of Perot '96 that the FEC's preference for

cumulative IIIICDCImcDts may have cbanpd. t theIefore promptly prepared III amencImeDt

COfttaiDinl all tbe iDfomIatioll tbal we had obtaiDed siDce December 5, 1996, aod that ameadmcnt

wu fil~ a few days thereafter.

7. Iswear UDder paalty ofperjury &bat tile CoreaoiDa is uue IDCl correct.

State ofTexu

Coumy ofDlUal

)

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SubscnDed ad swom to me, a NOliry Public. by JIDic:e Estes, known to me to be the

person whole aame illUblcribed to cbe toreaoiaa iDIInImeD.t.

Oiwu UDder my hIDd and...tbiI

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PEROT '92

1700 l..ak.ide Sqate

U37"7 Menc Ori.,.

Da11u. TeloU 7''2.5 l

Mike Pot.

TreuulW

October 11. 1993

By Federal Emnp

Fedeml Election Commission

c/o Pat Sheppard

999 E Street, N.W.

VVadUnl~n,D.C.2~

Dear Ms. Shcppud:

Enclosed is the Cumulative Amendment or Perot '92 tor the period from March I,

1992 throuCh December 31, 1992. Iaformation that requires explanation has been footnOted

with numeric or alpha explanations and expla1ncd on the back pages or this document.

As you will recall, Perot '92 bepn ftlinl reauJat amendments to its fEe reports

shortly after its orprdzation in It.farcb 1992. This practice continued through 1une 1992, when

Perot '92 qreed, at your request, to discontiDue rep1arly submittiDa amendments to its PEe

l'CpOlU and to instead me one cu~ ameftdment at a later date.

Your preferellce for d'Js cumu1adve amendment proceclure has since been reconfirmed

numerous times, includiq a _bone conversadon between you and Mr. Chris Wimpee of

Ernst " YOUfta irlla.nuary 1993, a subsequent telephone conversation between you and Ms.

Shannon Story or Ernst" YOWlI. IDd a leaer to you tram Mr. Daniel G. Routman, Associate

General Counsel of Perot 192, dared ApIi1 I, 1993. Tbis arranpment has also been rcterencecl

in responses filed with me PEe with respect to MOR. 3721. MUR 3734, MOR 3741, Mt1R

3748, MTJ'R 37~, aad MUR 3179•

.If you have any questions reprdia. this Cumulative Amenclmeat, please contact Daniel

G. Rcutman at 214-450-8883.

Mike Pass

Treasurer

Enclosure
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ATTACHMENT"C

DISTRICTOJI' COLUMBIA )

BefcIrc D1C••JU*JY public. Janlin 1WIkI, wIIo dcpotcd IS fullows:

J. My ...... is 1t8IIdD. J-.luwr eiptMa (11) yan of-.e.

2. I am 1ft MkneJ nfteCOId in OOftIMdIoft wida die Paul -96 cia...iInvIviaa the

ComIDiIsK... 011 PJelideaIiaI..,.... ) WM ........ by .ltwol '96 to IJ'DUC' thtIlftip,j under.

coaunitmeat b1 ....., (!nanittac ia 1996. I hDve onIItJ..a MeIlI: CbI:

. ea-m..ill thilllllllar undertbat 11_CO dill day.

3.

DI8T8Il:T0 ..COL1JMIIIA )

BtiI:ClRB ME, A He..,Pu_011 clay personally apps'Id J.u. R-tin. buwn In

,.-: In he*p:nnn ia k. the r.......In..tnImIIII.-I aebowladaod In

me .... Jk~.-ccUlDddie..,. tbe CCIIIiclclDtian...-ml"

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ATTACHMENT b

AfFIQAyrr OF SAMUEL W. LANHAM. JR.

STATE OF MAINE }

COUNTY OF PENOBSCOT }

Before me, • notary public. appeared Samuel w. Lanham, Jr., who deposed 81

follows:

1. My name Is Samuel W. Lanham, Jr. I am over eighteen (18) years of age.

2. I am an attorney of record in comeclion with the PelOt '98 claims Involving

the Comrnllllon on PresIdential Debates. I W81 retained by Perot '98 to pursue this

litigation und•• conmItment by the Committee made In September 1988. I have

<XlIiUrlUed to repreeent the CommIttee In this matter underthat commitment to this day•

3. In the OclDber 30, 1997 Issue of USA IQd&w an 8IttcIe on pege 10A

entitled ·Perot Asks for Ruling on Debate Exclulion- contains the following statement:

·Perot lawyer sam Lanham, without commenting on p...x-. plana, cor.ceded the court

action Is aimed tDw8rda the next presidential election. He laid it is deligned to plotee1

all third partIes..

4. The at8tement Is not a quote from me: II not reported ...quote from me:

the st8tement rrilrepnI••nta rtrf YIOral and intentlona, as.weII ..the motives of Pelot

'98 in pursuing thililligdon. The 8tatement is merely the nJPQJter'1 i .terpretatJon of my

response to • hypoIhetIcaI question about the conceivable consequences, but not the

motive, JUPOI8 orIUbject matter ofthe litigalkm. Iwould not have 88Id the litigation ia

·almed tDward8 the next presidential election- because It 18 not. The purpose ofthe

litigation W8S then, and remains the pursuit ofthe clain of Pelot '98 for the fBlure ofthe

Commission on Pnlsldent181 Deb8tas to comply with the legal AlqUlnlment that

I

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incorporat8d debate sponsors use objective crIterte in ....cling perticipents. Any other

reported expre88Ion was saIeIy the result of• repoIter'l mIIi!'*P'8t8tion.

5. I swear under penIIIty of peIjwy th8t the foregoing IItrue and correct.

-Jr.-

STATE OF MAINE

Penoblcot.•.

BEFORE ME, • Not8ry PublIc, on 1hIa d8y penIOft8Iy eppeMId the above-

...-ned S8nuII W. L8nh8m. Jr•• known to me to be..peI'IIGft .....name Ie ..

IUbscrtbed to the foregoing Instrument 8nd -m"'ldged to me thad he ~.che ..........

for...- _.... ---~ th -a- d .-. .....• .. same URI' puIJIO." _IU \Nt ..,..;eIWJ ••• • .: : . •••.• .... ~. .:- ....:-~ -;.' .•.. -;.

Given under my hand and ...tllill 25" d8y of Febru8ry. 1918. :.t .:: : = 1- ;~~;':.:' :=. \~\~ ..:: ·~i .,. .-. '. .. os"'- •• -..••....;... !I:I'

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Perot v. Federal Election Commission 1996 WL 56672 (D.D.C.), remanded in part _ ATTACHMENT E

97 F.3d 553 (D.C. Cir. 1996)

13

must attend then any debate that 1s then held, or I would rule

eventually, I suppose. on the other hand en.:e can be no debates

until they redo che criteria, which obviOUSly could not happen in

4 this presidential election cycle.

S Neighing that against the plaint1frs not being able to

6 partake in the debate or the remedy they may still pursue in

7 eheir complaints to the PBC and may bave a right eo come back to

a this Court later on 1n the proc... that is provic1ec1 by the

9 Pederal Bleccloft Commi.sion Act, UDd.~ 437g(&) (8), the 'ederal

10 Sleet-ion Coani••lon lawyer asserted they vou14 not: be mooted out

11 if ch.y c... bac:Jc to court:. Mb4It they would have l08t if the rBC

12 4oesn't agree with Cba. and they have to come to court is the

13 opportunity to debat., but they .cill may be able to c:uz:. any

14 4.eecC8 1n the crlt.~la they allege the Debac. C~••ion ha.

15 used.o that the next ~cl. would not. have th... defeets and

16 thereby have same relief, although not total relief.

17 But weighing the 1nc.l:f.~eDc. oe the Court • - and I' 1ft

18 ~iDg Dot only to likelihood of BUCC••• 011 the taerlt8 an<!

19 in:epa:able injuzy, but: balancing the equities and the public

20 ine.A.1:. -- the ham chat cou14 occur by the Court'. interference

21 in th1. proe••• aDd the reaching that che courc tlU8t make co

22 grant: t.he p~l1aa1IUlZY injUllctioD that it would have the right to

23 ••1: the crit.~i. or choo.e which criteria already out there are

2~ appropriate aDd di8a11ow ocher criterla. ove~ding ehe FIe'.

2S oppartun1cy to do that a. the agency •••1gDecI to clo that:. by

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MS. AIKENS:

HALTER:

MS. AIKENS:

HALTER:

MS. AIKENS

HALTER:

MS. AIKENS

HALTER

MS. AIKENS:

HALTER:

MS. AIKENS:

HALTER:

ATTACHMENT F

TRANSCRIPT OF PEROT '96, INC. AUDIT HEARING

BEFORE THE FEDERAL ELECTION COMMISSION

December 4, 1997

Roman Numeral Number II under Audit Matters, Item C as in "Charles",

the Perot '96 audit, this is Agenda Document Number 97-81 and we are

going to have Tom, is Tom coming, Rick Halter?

I think he is stuck in'the elevator.

Then who wiD present this particular matter for ...?

I will.

I'm sorry?

I will.

Yea. And we have trom the Office of General Counsel, Lorenzo

Honoway, and ....

Mr. CbairmaD, we can proceed now, ifyou like.

So, with that, Rick Halter, the Chair recognizes Rick Halter.

Thank you very much.

Would you pick that mike up, Rick, and speak right into it, please?

Tom Hintermister, who is the lead auditor on this job, will be here shortly.

I would like to mention that Marty FavoD, who was the audit maDager on

this job, who played a big part in the fie14 worle, could not be here today.

He sends his regrets; however, he is recovering very nicely from open heart

surgery, bad about six weeks ago, IDd he plans to return to work on

doctor's orders on schedule a 1iUIe bit later this month. So he sends his

regrets, he wishes he could be here. IfI may then proceed with the report.

As the report contains three findiDp, one ofwhich bas a recommendation,

I would like to briet1y summarize the first two findinp which do not have

reconunendatioDS, they begin at page 3 of the report and end at page 8.

The first finding identified u Finding 2A involves 11 eFR 116.5 advances

made by an iDdividual and it closes by statiDs that "although it appears the

committee did not gain any material finandal advantage &om the practice

ofusinB an iDdividual's personal credit card to defray the expenses ofother

committee staff and the vice presidential nominee under the provisions of

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MR. THOMAS:

MS. AIKENS:

MR. THOMAS

HALTER:

MR. THOMAS

HALTER:

'MR. THOMAS:

HALTER:

MR. THOMAS:

HALTER:

MR. THOMAS:

MS. ELLIO"..:

HALTER:

11 CFR 116.5, this activity resulted in an apparent excessive contribution

of$26,293.00. The second finding involves ...

Rick?

Mr. Thomas?

Excuse me, just to be sure. To what extent were these situations, where

the individual's credit card was being paid off before the due date by the

committee?

In almost every case it was paid offwithin about 30 days or less.

By the committee?

Yes.

This wun't something where the individual was paying the credit card and

then being reimbursed? In most cases ...

Well, no. Excuse me. The individual was being reimbursed in

approximately 30 days.

Thirty days from ...?

Thirty days from the incurrence dates. Thirty days from ... well, let me put

it this way. Thirty days from the close at: that's, wel~ no, it was thirty

days from the incurrence date. So ifthey went to the hotel on the 15th of

the month, then the reimbursement generally occurred within 30 days tram

then.

How was the individual paying the credit card? Were they getting a bill on

the 29th day or something and then ...?

Excuse me, Mr. Chairman, doesn't the report say that, that it sometimes

was paid before they got the bill, before he got the bill?

The transaction, I just check.ed with Tom, the transaction was that the

individual would submit the reimbursement request and would receive a

check from the committee to cover that and then the individual in tum

would to and pay their own bill to the credit card company. And of course

the problem is, is that, bad all ofthis been for the individual's own personal

travel and subsistence, then everything would have been OK. The ract that

this individual's card was being used to defray other committee staff

expenses is where the rub.

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MS. AIKENS:

MS. ELLIOIT:

MS. AIKENS:

TOM:

MS. AIKENS:

LARRY:

MS. AIKENS:

HALTER:

Commissioner Ms. Elliot?

I have a terrible time with this conclusion, and I cannot support it. When

you have a committee that cannot get credit cards, you have to go to the

use ofpersonal ones unless they are carrying ·cash. It is not possible to use

electronic fund transfers like you do checks. That requires an agreement

between banks and you have to know account numben and all kinds of

things. It's a complicated procedure unless people are doing it all the time

and repeatedly, and I do not think that that is an alternative. The fact that

if ... I think they make a good point when they say that treating an

excessive contribution resulting ftom an inadveneDt staff advance more

strictly than an actual excessive contribution thereby denying a reasonable

opportunity to cure the unintentional violation. It seems to me that they

bad to act prudently and that is not to give cash around, that they paid it

before the bills came in sometimes and certainly before they were due. I

don't see this as an excessive contribution. I think that cash advances are

very unrealistic here for staft and I understand that ifhe bad been paying

for his own, but the point is made, you can't expect a candidate for

President and a Vice President to stand in a Ions line to check out of a

hotel in order to use their own credit card. Yau have to have staff' help.

You just must have staffdoing some ofthese things. So I will not accept

that as excessive.

Thank you, Commissioner fvf..!. Elliot. We have now at the table Mr.

Thoma Hintermeister, who ... good morning, Tom.

Good morning.

And Larry Noble.

Well, the oaly response we would give to that is under the regulations, it is

a staff advance, it is a contribution, and the answer can't be that they

couldn't do it any other way, therefore, they bad to do it in violation ofthe

law, because there are alot of campaigns that could come in and say, well,

we could not get enough money to fund our campaign but for doing it a

certain way. Iftbat way is illegal, you can't do it.

Thank you, Larry. Rick Halter?

Thank you. The second findiDg involves the reporting ofoccupation, name

ofemployer and the committee in response to discussions during field work

filed alt of the appropriate amendments necessary to correct the public

record.

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MS. AIKENS:

HALTER:

MS. AIKENS:

MS.ELIOIT:

HALTER:

MS. ELLIOTI:

Thank you, Rick. Any comment? Mr. ~ter?

OK. The last finding which contains ~volves recommendation for

repayment to United States Treasury centers around the use of federal

funds to defray litigation expenses. Briefly, the committee believes that

these estimated costs are directly related to the candidate's '96 general

election efforts and should be permitted to be paid with federal funds. It is

our position with the concurrence from the Office of General Counsel that

since DO documentation bas been provided to show these expenses were

incurred prior to the close ofthe expenditure report period or to establish

that these expenses are valid winding-down costs pursuant to 11 CFR

9004.4A, that they cannot be defrayed with federal fUnds. Accordingly,

none ofthe expenses are reflected in the net outstanding qualified campaign

expense statement prepared by the audit division that is presented on page

10 of the report and this results in a surplus of 52,385,081.00.

Accordingly, audit stafftberefore recommends at page 17 ofthe report that

the commission make a determination that 52,310,127.00 in surplus ftmds

is repayable to United States Treasury pursuant to 26 USC 9007;81.

Thank you, Rick Halter. CommissionerElliot?

This report ofcourse bu to be limited or we would never get through them

all, but do I understand that these legal expenses wu incurred, or were

incurred, because ofthe '96 Presidential debates?

WeB, the way we understand it, there were certain legal expenses incurred

during the expenditure report period by Perot '96 baviDg to do with the

Commission on Presidential Debates and the candidate's exclusion from

those debates. The expenses related to that activity were viewed u

qualified campaip expenses and are not in contention here. The expenses

that we are, that we do contend are not qualified campaign expenses are

expenses that are estimated, some ofwhich have been already iDcuJTed but

these activities occurred in 1997, some of them are occurring right now

baviDg to do with other litigation that we have just been notified of: It is

our position that even though, let's say aD IIJUIDeDt, or let's say an

argument caD be made that some ofthese expenses have some relationship

simply because ofthe subject matter, the fact that these expenses were not

inc:urred duriDs the expenditure report period, that is enough for us to say

that they CIDDOt be defiayed with federal funds. Ifthat litigation, if the

candidate wants to pursue that litigation, he is fi'ee to pursue that litigation.

Let me uk you this. Ifthe argument between the Perot Committee and the

Debate Committee bad occurred eartier in the campaip so that there wu

more time for the attorneys' biDs to accrue, ifthose bills bad come in for

4

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work done during the reporting period, you would have allowed these

same expenses ifthey had come in at a difterent time, is that co~eCt? /--

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Mf" ELLIO".:

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HALTER:

MS. ELLIOTI':

HALTER:

I would say, just as we allowed other expenses related to it, I would say,

yes, although maybe counsel would like to ~d something to that.

But, my point is, if you are in litigation and it doesn't end for whatever

reason before the report period ends, for the same work and for the same

cause, we're not allowing it to continue using the funds. That doesn't

make any sense to me. If you start litigation, it seems to me everything

under that litigation ought to be covered ifit is allowable at any time.

All I can say, and I think Lorenzo wants to say something, the litigation, or

the expenses that we consider qualified campaign expenses that occurred

back in the Fall of '96, that litigation effectively at least ended then. We

are talking here about proposed litigation, some of which bas already

occurred. And that's all I'm going to say, and I think Lorenzo is going to

say something.

But the litigation, all ofit, any ofit. bas to do with the '96 campaign, and is

not for any peripheral issues that they made develop, it was all done for the

campaign, right?

I don't want to answer it that simply. I'D let Lorenzo respond ... ,."- ...

HOLLOWAY: That's a critical issue because we don't believe in fact it is being done for

. the '96 campaign. The '96 campaign is over. Nothing decided here can

now impact on the '96 campaign. It may be being done for future issues,

but that is not for the '96 campaign.

ELLIOTI: Well, let me ask you this. Ifthe Perot campaign wu suing somebody, I'm

not sure just who, because they felt that they were irreparably harmed by a

decision, they could go for damages, could they DOt, up for the Presidentia.l

election?

HOLLOWAY: Possibly not, I'm not sure under what situation ... there might be a situation

where they could go for tort damages against somebody for something that

happened during the election, I'm DOt sure in this cue.

MS. ELLIOTT: No, but the point of it is, if they feel that the debate, that the exclusion

from the debate wu responsible in large measure for the defeat or the

inability to raise money or do any IIUIDber of other tbings, then that had to

do with their '96 campaign.

MS. AIKENS: Lorenzo HaDaway.

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1.,

MS. AIKENS:

In responding to that, I think we need to look it, we need to ~ook ~t the

issue in two parts. One, we need to look at the time element, and that is

what Rick is talking about. It must be incurred during an expenditure

report period. But even if this is incurre.d during that period, we have

another element that is set forth in the regulations in the definition of

qualified campaign expense, and that is, it must be in furtherance of the

candidacy. So even if.it was incurred and there is a question, there is a

question about, well, what about any other type of litigation. Well, we

would like at that litigation to see whether or not it was in fact incurred in

furtherance of the campaign. Because it could have been in an expense

report period but it may Dot have been in furtherance of the campaign.

Those are the two critical issues that we look at. So what we are saying

here, one, it wu not incurred during an expenditure report period. It fails

that test. And secondly, it probably was not related to the ... it was not

related to the 1996 campaign. If you look at what the court said in the

initial litigation, they did not, the injunction, it said that any reliefthat could

be ... the court pretty much said, any reliefthat could be fashion would Dot

be fashion for the 1996 election. Therefore, it only could be for a future

election. And so, not only does it fail the time element of an expense

report period but it also fails the furtherance ofthe 1996 campaign element

ofqualified campaign expense.

Commissioner Ms. Elliot.

MS. ELLIOTT: Did we deny any legal costs during the reporting period of the Perot . campaign?

MS. AIKENS: Rick Halter.

HALTER: Any legal costs incurred during the expenditure report period relative to

the Commission on Presidential Debates or anything else, we did not deny

and we viewed them all as being qualified campaign expenses.

MS. ELLIOTI: So every one that was in the report period met both criteria. The timing

and the purposes.

HALTER: That is correct.

HOLLOWAY: But, I would like to respond to that directly. The prayer for reliefthat the

campaign started at that time was an injunction to either, I believe it is to

order his participation in the debate and for the court to review the debate

criteria Therefore, had the court actually granted that injunction, he could

have ... I guess be would have been, the court would have reviewed the

debate criteria, and he would have been allowed to participate in the

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MR.. THOMAS:

HOLLOWAY:

MR.. THOMAS:

debate. Therefore, it would have enfurbished under the 1996

election. However, in denying that injunction, the court went on to say !"..-

that anything, any reliefthat could be fashioned later on, would not be for

the 1996 election. Therefore, admission ot: yes, he satisfied the criteria for

incurring within an expenditure report period and the relief that he sought

would have been related to the 1996 election in that initial litigation.

Thank you, Lorenzo. Any further comment? Commissioner Thomas.

I'm still trying to work out this image in my mind ofRoss Perot suing for

intentioDll infliction of emotional distress because he didn't get into the

debate and didn't win the election so he could set money damages. Ha, ba,

ba. I don't think he'D do that. It's an interesting question, obviously. We

have in other contexts come up with the same kind ofissue. We all recall

in the BucbaDan audit, there wu a question of estimated legal expenses

that we batted back and forth. They were hoping that we would give them

credit for a much larger estimate of wind-down for legal expenses and

ultimately we disagreed with them. ADd I think that that's the nature ofthe

beast. We can just teDd sometimes to disagree with the estimates for the

claims of expenses that would in fact be wind-down. And in my view,

that's, ifanytbiDa, that'l the better argument for the committee to lIIIke is

that somehow these legal expenses might qualify u wind-down because at

least that is a dearly authorized opportunity to put on an estimate for

future legal expenses and have the commission grant it. But u I

understand it, tram what you are telliDg me, these estimated legal expenses

relate either to the recent suit filed by the committee against the

Commission for bavin& not acted in a timely fashion on the complaint filed

regardiDg the Presidemial Debates or for the other suit filed, I gather,

cbaIlengiDg the constitutional ... constitutioaality of the commission

structure and 10 on. Additionally, I gather there is some sort of possibility

that if somehow later on the commission does a certain action with

reprding to the complaint that·wu fUed iDvolviDg exclusion trom the

debates, there miabt be some sort of new suit at that point cballengiDg

whatever action the commission did take there for having for some reason

been contrary to law. So I suppose ... but, is there any other kind of

potential litigation that we can think ofthat they are arguing for? Is there

... I think I covered three different possibilities. Lorenzo?

I think Arkansu Educational Television Commission v. Forbes, I think •

amicus briefin that cue. So, ifthey panicipated in that litigation we are

also sayiDg that would be nonqualified campaip expense.

OK. But none of those, I don't think in my fit the winding-clown

concept and u you have noted they weren't incurred during the period. so

... Ijust wanted also to be clear on one tiling. When we were dealiDs with

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HALTER:

C} MS. AIKENS:

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HOLLOWAY:

THOMAS:

HOLLOWAY:

MS. AIKENS:

the Buchanan campaign I know I asked ~s question but I forgot what the

answer was. Ifit turns out for some reason that there are some additional

wind-down litigation expenses that they can.demonstrate are le8itimaie, do

they have any possibility ofgetting the commission to adjust the repayment

determination or does it become final to the point where even those

expenses, even though they would otherwise clearly be wind-down, they

just can't get that.

I would like before Lorenzo answers, one ofthe things we did is, we put in

a SIOO,OOO contingency and allowed for that. And of course that

contingency is for valid winding-down expenses ofthe legal nature.

Commissioner Ms. Elliot?

I have two questions, Mr. Chairman. First ofall ...

I'm sorry, could I get an answer first, before we move on?

I'm sorry, I thought you bad finished.

Wbai the committee could do, ifthey dispute the repayment determiDatioD,

they could file as a part of their legal factual materials disputing their

repayment determination to actually state tbat that is the case.

But. at some point the record closes, the matter is over. They can't come

back after everytbiDg is resolved and say, oh, now we have new litigation

stemming from 1996 that we want to undertake or new expenses from

1996.

And that point would be after we finish any sort ofrehearing?

On the repayment determiDatiOD, right. the final repayment determination.

The admiDistrative review ofdetermination.

OK, could they raise that oPPOrtuDity for a rehearing?

Well, the rebeariD& they would actually have to establish that the facts

could DOt have ... that the issue could not have been raised earlier.

It's possible, it sounds like ifthis situation arises.

It wu the impression ofthe chair Commissioner Ms. Elliot wanted to make

a point. We will 10 now to Commissioner Ms. Elliot.

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MS. ELLIOIT: Ifthese expenses are not viewed as qualified campaign expenses, can Mr~

Perot raise money outside the prohibitions and the limitations ofthe act and ,..,.--- -,

pay for his legal expenses from anybody who wants to contribute any1hing

to him since they are not seeming to be connected to the campaign?

LARRY; We would have to look at a case-by-case basis because as is noted there

are two reasons something would not be ... fall into the category. One is

that it fell outside the expenditure report period. Now that could still be

for the purpose of influencing an election even though it feU outside the

expenditure report period. The other reason would be ifit is not in fact in

connection with his campaign. Ifit is not in coDDection with his campaign.

'7 then yes it could be ... you can take money from any source to pay for it.

C} But there may very weD be, and I don't want to speculate at this point until

.. all the facts are in, but there may very well be in that area where some are

(1 used for the campaign but it falls outside getting federal funds for. 7

• MS. ELLIOIT; The second question I have is that ifI do not accept the aDa1ysis about the 0

2 credit card use, does that affect the table on page 10?

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1 amount ofsurplus?

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HALTER: No, it does not.

ELLIOTI: TbaDkyou.

MS. AIKENS: TbaDk you, Rick Halter. Mr. Thomas.

MR.. THOMAS: Would you like a motion?

MS. AIKENS: I think that would be appropriate.

MR.. THOMAS: Are we there, Rick. Can we ...?

HALTER: Yes. Yes, yes, yes.

MR.. THOMAS: Well, u I indicated I agree with the recommendation u it stands now and

based on the arguments that we have been presented with thus far, so Mr.

Chairman, I move approval ofRecomme:ndation 1 that is set forth on page

17 ofthe audit report for ....

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MS. AIKENS:

GROUP:

MS. AIKENS:

HALTER:

MS. AIKENS:

You have heard the motion. If there is no further comment, and there

appears to be none, the vote will occur on the Thomas Motion. All in

favor say aye. . .

AYE.

All opposed. It appears to the chair the vote is Sto O. Anything further,

Rick.

No.

I would announce before I take a very briefSminute break, and I hope we

can hold it to 5 minutes recognizing that we agreed that we are going to

conclude the momiDg session before 12:30, that in view of some time

coDStrlints, the chair ifthere is no objection is goiD& to adjust the agenda

and we wiD go next to Roman Numeral VI, EstabIishmeDt of FiIiDs

RequiremeDts For the PeaasyIvaia Special Election in the rust

Congressional District. We wiD foDow that with Roman Numeral Number

l1li. Draft Advisory Opinion 97-t8, which will be foDowed by Roman

Numeral Number In, Pete Wdlon for President Committee, Inc., and we

go to Roman Numeral Number V, Reall1atioDS only to move Item C to the

trom ofthat list ahead ofA, the Year-End statUs Report, and B. the SelfCodiDg Approach for SEC Disclosure Report. With all of that, the staff

will gather the appropriate staff people in that order and will now and

hopefilJly we'D hold til S and we can possibly even conclude everythiDg

before 12:30. That is our hope.

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"'lP'f' L~_ w% 3'
AFFIDAVIT OF ROSS PEROT

STATE OF TEXAS )

)

COUNTY OF DALLAS )

Before me, a notary public, appeared Ross Perot, who deposed as follows:

1. My name is Ross Perot I am over eighteen (18) years ofage.

ATTACHMENt 4.a ..

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2. I am not a candidate for any office in the year 2000. I have not considered

becoming a ~date for any office in the year 2000. I have made DO attempt to further my or

anyone else's election to any office in the year 2000.

3. My 1996 general election committee, Perot '96, Inc. C'Perot '96"), continues the

litigation Perot '96, Inc. v. Federal Election Commission solely to pursue its claims for a

violation of law requiring debate sponsors who accept corporate contributions to use objective

criteria in candidate selection.

4. Perot '96 filed the litigation against the Republican and Democratic National

Committees to pursue its claims, including damages, resulq from improper acts. It is my

belicftbat such actions damaged Perot '96 through the use oftile taxpayer funds to support their

candidates in Iddition to acceptina contributions and_kinl expendituresI believe to be illegal.

S. I swear under penalty ofperjury that the forqoiDa is true aDd comet.

a#l1Q~ Ross Perot

Affidavit orR. Perot Pap 1

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STATEOFTEXAS )

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r COUNTY OF DALLAS ) ,,;

BEFORE ME, aNotary Public, on this day personally appeared Ross Perot, known to me

to be the person whose DllDe is subscribed to the foregoing instrument and acknowledged to me

that he executed the same for the purposes and consideration thereiJi expressed.

Given Wlder my band and seal this.a61ay ofFc..... --.L-.LQREIIEE IMRIE JORDAN

:.L; NOTARY PUBLIC ~'Jf(.j • St8te Texas ~. ~~ Comm. ExP· 04-18-2000 t

AfDd.vit orRw Perpt ....2 / lCM40.0G01 :U2SJS7.01

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FEDERAL ELECTION COMMISSION

December 17. 1997

MEMORANDUM

SUBJECT: PUBLIC ISSUANCE OF THE AUDIT REPORT

ONPEROT·96

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TO:

FROM:

RON M_ HARRIS

PRESS OFFICER

PRESS OFFICE ;:ft:

ROBERT J_COSTA

ASSISTANT STAFF DI OR

AUDIT DIVISION

Aaached please find a copy ofthe audit report and related documents on Perot '96

which was approved by the Commi.ion on December 4, J997.

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

the report may be released 10 the public.

cc:: Office ofGeneral Counsel

Office o(Public Disclosure

Reports Analy. Division

FECLibiwy
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REPORT OFTHE AUDIT DIVISION

ON

PEROT '96

A"...... Deenaber 4, 1997

FEDERAL ELECTION COMMISSION

'"ESTREET, N.W.

WASIIINGTON, D.C.

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2rREPORT OF THE AUDIT DIVISION

ON

PEROT '96

Approved Deceaaber 4, 1997

FEDERAL ELECTION COMMISSION

'"ESTREET, N.W.

WASHINGTON, D.c.
c

TABLE OF CONTENTS

PEROT '96

Page

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9 Executive Summary 1

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• Audit Report 3

2 Background 3

5 Findinp 5

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1 Legal Analysis 21 8

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3, Transmittal to Committee 25

Transmittal to Candidate 27

Chronology 29
FEDERAL ELECTION COMMISSION

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REPORT OF THE AUDIT DIVISION

ON

PEROT '96

EXECUTIVE SUMMARY

Perot '96 (the Committee) registered with the Federal Election Commission on

August 15, 1996. The Committee was the principal campaign committee ofRoss Perot,

the 1996 Reform Party candidate for the office ofPresident ofthe United States.

The audit was conducted pursuant to 26 U.S.C. §9007(a), requiring the

Commission to audit committees authorized by candidates who receive Federal Funds.

The Committee received 529,055,400 from the Presidential Election Campaign Fund.

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

held on August 7, 1997 and in the Exit Conference Memorandum. The Committee

responses to those findings are contained in the audit report.

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

ApPARENT EXCESSIVE CONTRIBUTIONS RESULTING FROM STAFF ADVANCES2 U.S.C. §44la(a)(l)(A) and II CFR §116.S(b). The Audit stafTidentified one individual

who advanced funds on behalfofthe Committee in excess ofthe 51,000 contribution

limitation. This individual paid the transportation, travel, and other campaign expenses

incurred by other individual~ including the Vice Presidential candidate, using a personal

credit card. The highest excessive balance for this individual was 526,293. In response

to the Exit Conference Memorandum, the Committee stated they were unable to locate a

credit card company willing to offer credit cards and. therefore. the use ofthis

individual's personal credit card was the only alternative. Furthermore, the Committee

contended that it would have been impractical for the presidential and vice-presidential

nominees to stand in hotel cashier lines to pay their bills.

DISCLOSURE OF QcCUPATION AND NAME OF EMPLOYER -

2 U.S.C. §§434(b)(3)(A), 431(13)(A)9 and 432(i). The Committee did not disclose the

donor·s occupation and employer for a material number ofitemized contributions. All of

the missing infonnation was in the Committee's records but had been received after the

Committee filed its regularly scheduled disclosure report. During fielClwork, the Audit

staffquestioned why amended Schedules A-P (Itemized Receipts) disclosing this

information had not been filed. In response. the Committee stated that it was instructed

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in 1992 by the Federal Election Commission Reports Analysis Division to hold the

contributor infonnation and file a cumulative amendment. The Committee continued

this practice during the 1996 election cycle. In 1994, the Commission revised the

regulation governing the filing ofamendments containing the aforementioned contributor

information which specified that any contributor infonnation received after the

contribution has been disclosed on a regularly scheduled report, should be disclosed on or

before the due date ofthe next regularly scheduled report. See II CFR §I04.7. The

Committee filed amended Schedules A-P which corrected the public record.

AMOUNT RECEIVED IN EXCESSQEENTITLEMENT-26 U.S.C. §9007(b)(1),

11 CFR §§9007.2(a)(2), 9007.2(b)(3), and 9004.9(b). The Audit staffcalculated that the

Candidate received Federal funds in excess ofhis entitlement totaling 52,310,127. This

amount resulted primarily from the exclusion of$I,447,000 in projected litigation

expenses from the Committee's Statement ofNet Outstanding Qualified Campaign

Expenses. The Committee had included 51,447,000 in expenses related to possible

litigation and other legal services to challenge the debate criteria used for the 1996

Presidential debates. In its response to the Exit Conference Memorandum, the

Committee contended that the aforementioned expenses were directly related to the

Candidate's 1996 campaign and should be vie\\'ed as qualified campaign expenses

payable with Federal funds.

The Audit Report concluded that these projected litigation expenses were not

incurred prior to the close ofthe expenditure report period nor were they valid winding

down costs pursuant to 1) CFR §9004.4(a), and accordingly were not viewed as qualified

campaign expenses. On December 4. )997, the Commission made a determination that

$2,310,127 in surplus funds is repayable to the United States Treasury.

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FEDERAL ELECTION CO,\1f\,USSIOf\:

REPORTOF THE AUDITDIVISION

ON

PEROT '96

I. BACKGRQUND

Also. Section 9009(b) ofTitle 26 ofthe United States Code states.. in pan.

th3t the Commission may conduct other examinations and audits as it deems necessary to

carry out the functions and duties imposed on it by this chapter.

This report is based on an audit ofPerot '96 (the Committee). The audit is

mandated by Section 9007(a) ofTitle 26 ofthe United States Code. That section states

ihat ··after each presidential election. the COl1i.7nission shall conduct a thorough

examination and audit ofthe qualified campaign expenses ofthe candidates of each

political pan)' for President and Vice President.··

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A. AUDIT AUTHORln'

In addition to examining the receipt and use ofFederal funds. the audit

seeks to detennine ifthe campaign has materiall)' complied \\'ith the limitations.

prohibitions. and disclosure requirements ofthe Federal Election Campaign Act of 1971

(FECA). as amended.

B. AUDIT CO\'ERAGE

The audit ofthe Committee co\'ered the period from its inception through

December 31. 1996. 1The Committee reponed an opening cash balance of$-0-: total

receipts of $31.027.107; lotal disbursements ofS:!7..898.651 ; and a closing cash balance

of$3.128.456.1 In addition. a limited J'e\'ie\\' ofthe Comminee"s transactions through

September 30. 1997 was conducted to calculate the amount of expenditures subject to the

spending limitation and the amount of unspent Federal funds remaining in the

Comminee·s accounts.

The Comminee's inilial deposn was a S2q.O~SAOO payment from the Presidenual Election

Campaign Fund. deposned on AUJ:ust ~~. 19%

Figures in this repon arc rounded Iu the nearest dollar.

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c. CAMPAIGN ORGANIZATION

The Comminee maintains its headquaners in Dallas. Texas. The Treasurer

ofthe Committee. from inception to date. is J. Michael POSSe .

The Comminee registered "'ith the Federal Election Commission on

August IS. 1996 as the principal campaign committee ofRoss Perot. Refonn pany

candidate for the office ofPresident ofthe United States. To handle its financial acti\'ity.

the Comminee utilized three bank accounts. From these accounts the Committee made

approximately 2.900 disbursements. In addition. the Committee received approximately

20.300 contributions from 19.300 individuals. These contributions totaled approximately

5962.000.

On August 22. 1996. the Federal Election Commission detennined that

Mr. Perot. based on the votes he received in the 1992 general election. \\'as eligible to

recei\'e pre-election funding from the Presidential Election Campaign Fund: the

Committee receh'ed $29.055.400 from the United States Treasul)' on that same date.

This amount represented 470/0 ofthe 561.820.000 ma~imum entitlement recei"ed by each

major pan)' candidate.

D. Al:DIT SCOPE ASD PROCEDloRES

In addition to il rc\'ie,," of«:xpenditures made by the Committee to

det~nnine if the~' "'ere qu:lIified or non-qu:llified c3l11p3ign expenses. the audit covered

the follo\\'ing gcneral ciltc:~ories:

1.

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4.

5.

The receipt ofcontributions from prohibited sources. such as those

from corpol'3tions or 1300r organizations:

the receipt ofcontributions or loans in excess ofthe statutory

limitations (Finding lIoA.);

proper disclosurc of contributions from individuals. political

committees 3nd other entities. to include the itemization of

contributions ,...he:n required. as \"ell as. the completeness and

accuracy ofthe infortnation disclosed (Findin~ II.B.);

proper disclosure ofdisbursements including the itemization of

disbursements ,,"hc..-n n:quircd. as ,,·cll as" the completeness and

accurac~' ofthe infol1113tion disclused;

pro1"-'" disclosurc or carnpail!n dcbts and obliJ:!ations:

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the accuracy oftotal reponed receipts, 4isbursements and cash

balances as compared to campaign bank records;

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7. adequate recordkeeping for campaign transactions;

8. accuracy ofthe Statement orNet Outstanding Qualified Campaign

Expenses filed by the Comminee to disclose its financial condition

(Finding liLA.);

9. the Comminee·s compliance \\ith spending limitations; and.

10. other audit procedures that were deemed necessary in the situation.

As pan ofthe Commission·s standard audit process. an inventory of

campaign records is conducted prior to the audit fieldwork. This inventory is conducted

to detennine ifthe auditee·s records are materially complete and in an auditable state.

Based on our re\'ie\\' ofrecords presented. it "'as concluded that the records \\'ere

materially complete and field\\'ork be~an immediately.

Unless specifically discussed belo"·. no material non-compliance \\'as

detected. It should be noted that the Commission ma~' pursue funher any ofthe matters

discussed in this repon in an enforcement action.

II. 41;011 EI!Snl~GS AND RECQ!\I~tEND4.TIONS;

!'iOS.REPA\'MENT MATTERS

A. APPAREST EXCESSI\'[ COSTRIBl'TIOSS RESULTINC FROl\t STAFF

AD\'ASCES

Section 4418(a)(1 )tA) ofTitle 2 ofthe United States Code states.. in pan.

that no person shall make contributions to any cill1didate "'jth respect to any election for

Federal office \\·hich.. in the aggregate:. excc:ed S1.000.

Section 116.S( b) ofTitle J I of the Code of Feder&ll Regulations states that

the payment by an individual from his or her pc:rsol1&ll funds. including a personal credit

card. for the costs incurred in pro\'idinJ:!. ~oods and sen'ices to. or Obl&lining goods or

sen'ices that are used by or on behalf of. a candidate or a political committee is a

contribution unless the pil)'ment is exempted from the definition of contribution under IJ

CFR §tOO.7(bX8). Ifthe p3)'ment is not exempted under 11 CFR §IOO.7(b)(8). it shall be

considered a contribution by the indi\"idual unless; the pa)'ment is for the individLmrs

transponation expenses incun-cd "'hile tra\"eling on behalfof a candidate or political

committee of a political pan~' or for usual and nOnn&l1 subsistence expenses incurred hy

an indi\'idual. other than a \"oluntc..-er. ,,'hile: tra\'elin,; on behalf of a candidate or political

committee of a political pany: iUld. the individual is reimbursed \\'ithin sixty days after

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the closing date ofthe billing statement on which the charges first appear ifthe payment

was made using a personal credit card. or within thirty days after the date on which the

expenses were incurred if a personal credit card was not used. For purposes ofthis

section. the closing date shall be the date indicated on the billing statement which serves

as the cutoffdate for detennining which charges are included on that billing statement. In

addition, ··subsistence expenses" include only expenditures for personal living expenses

related to a panicular individual traveling on comminee business. such as food or

lodging.

The Audit staffrevie\\'ed the travel expense reimbursements and

contributions relative to one individual \\'ho apparently advanced funds on behalfofthe

Committee in excess ofthe S1.000 Iimi13tion. In order to calculate the amount of a

contribution resulting from an advance made by an individual on behalfofthe

Committee. payments made by the Committee were applied against those expenses that

had been incurred the earliest. The Audit staff notes that this individual paid the

transponation. travel. and other campaign expenses incurred by other individuals.

including the \'ice Presidential candidate. using a personal credit card. This individual

also contributed $500.00 to the Committee on September 5. 1996. The highest excessive

halance for this indh'idual "·as 526.293 on I0/16/96. The number ofdays outstanding

before reimbursement ofthe expenses included in this balance ranged from 21 to 36 days.

The Audit staff pro\'ided to the Committee a list ofthe relevant expenses

and contributions associatcd "'ilh this indi\·idual. In response. the Committee pro\'ided a

photocorY of an internal Committee memorandum. dated August 8. 1996. from the

Committee·s Nation:!1 Coordin:!tor to all campaign staff\\'hich stated that the Committee

\\'as unabl~ to locate any credit card companies \\·illing to offer credit cards to a political

entity. The memorandum also informed the camp:!ign staffthat they could apply for

individu:lI credit cards for tra\'el expenses.

In addition. the Committee provided a statement from a staffmember of

the Committee·s Accounts Pa}·able Depanment. d:!ted ApriI 2~. 1997, \\'hich explained

th:u the Committee \\'as rejected by three different credit card companies because current

policy prevented the companies from extending :l line of credit to political entities.

The Committee officials also provided the follo\\'ing rationale for the

manner in \\'hich they handled travel expenses. The Committee stated that they did not

\\'ant to risk violating the regulations by having expenditures made by the Vice

Presidential candidate count to\\"3rds the Presidential candidate·s 550.000 expenditure

limit at II CF~ §9003.2(c). The Committc:c also stated that:

••".it \\·as simply impractical in ccnain instances for the

presidential and ,·ice-presidential nominees to sland in hotel

cashier lines to pay their bills \\·hen. for example. cars to take

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them to television interviews or campaign functio~ were

waiting."

Notwithstanding the above" the Audit staffmaintained that this individual

apparently made contributions in excess ofthe $1,,000 contribution limit resulting from

staffadvances.

In the Exit Conference Memorandum. (the Memorandum) the Audit staff

recommended that the Committee provide evidence to support that the staffadvances

noted above were not excessive contributions" as ,,'ell as any additional comments it

believed relevant.

In its response to the Memorandum" the Committee restated the points

outlined above. and put forth additional arguments in support ofits position that the

Committee \\'as at all times in compliance \\ith the purpose and intent of 11 CFR §116.5.

The Committee noted that all such expenses were promptly reimbursed,

most \\'ithin 30 days after the expense \\'as incurred and before the indh'idual actually

issued payment to the credit card company. Since the Committee experienced no

financial difficulties during this period, to suggest that the situation is equivalent to an

attempt to circumvent contribution limitations is completely inaccurate. Ifany violation

occurred it \\'as merely technical and inad\'enent" and quickly corrected,

Gi\'en the Committee ,,'as unable to locate any credit card company

\\'illing to ofTer credit cards. it is then assened by the Committee that the use ofthis

indi\'idu:lI's personal credit card "'as the only alternative since it \\'ould be unrealistic to

expect presidential and \'ice-presidential nominees to stand in hotel cashier lines in all

instances. or to expect all staffmembers. especially young or college age individuals

\\'orking on political campaigns. to meet credit requirements necessary to qualify for

personal credit cards. The Audit staffackno\\'lcdges that traveling "'ith large quantities

ofcampaign cash "'ould not be appropriatc:, and "'ould not solve the requirement of

certain \'endors ,,'ho require credit cards to gU3r3Dtec payment.

The Committee then concludes its discussion by citing a closed

Commission compliance matter involvina: staffadvances \\'here the Commission closed

the matter \\'ithout a finding of probable cause to believe 3 violation of II CFR §116,5

occurred. (See MUR 3947), The Committee also notes that I J CFR §I03,3 provides a

political committee 60 days during "'hich it may refund excessive contributions. There is

no justification. according to th~ Committc.-c. tor treating an excessive contribution

resulting from an inad\'enent staff advance more stricti), than an actual excessive

contribution. thereb)' den)'ing a reasonable opponunil)' to cure the unintentional

violation,

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As to the Committee's first point" the Audit ~ff agrees that the individual

was reimbursed in a prompt manner; however, since the expenses at issue were not for his

transponation and/or subsistence, reimbursement even within 30 days from the date of

incurrence does not negate a contribution having been made. "The Committee"s financial

condition also does not negate a contribution having been made.

The Committee's second point relating to the use ofthis individual"s

persona) credit card as the ·"only alternative'· does not consider the use of electronic fund

transfers. or other appropriate means ofguaranteeing or effecting payment of expenses

when the vendor payee is knO\\l1 in advance.

As to the Committee·s concluding arguments, it should be noted that the

matter referred to in the closed compliance matter was also first addressed in the audit

repon and \\'as characterized as an apparent excessive contribution resulting from staff

advances in a manner similar to the issue at hand. With respect to the timing ofthe

reimbursements" the Commission's policy in previous election cycles and its current

policy is not to apply the pro\'isions of II CFR §I03.3 to excessive contributions

resulting from s~fT advances. Included in the provisions of 11 §CFR 116.5 are its o\\n

set oftime limitations separate and apan from those in II CFR §103.3.

Although it appears that the Committee did not gain any material financial

advantage from the practice of using an individual·s personal credit card to defray the

expenses of other Committee staff and the \'ice-presidential nominee" under the

provisions of II CFR §116.5 this acth'ity resulted in an apparent excessive contribution

of S:!6,,:?93.

B. DISCLOSl!RE OF OCCl'PATIOS ASD NA!\IE OF E!\IPLO\'ER

Section 434(b)(3)(A) ofTitle :? ofthe United States Code states" in pan"

that each repon shall disclose the identification of each person (other than a political

committee) \\·ho makes a contribution to the reponing committee during the reponing

period. \\'hose contribution or contributions have an aggregate amount or value in excess

ofS200 \\'ithin the calend3l' ye3l'. togcther \\'ilh the date and amount of any such

contribution.

Section 431(13)(A) ofTitle :! ofthe United States Code defines the term

"identification" as" in the case ofany indi\'idual. the name. the mailing address, and the

occupation ofsuch indi\'idual. as "·cll as the name of his or her employer.

Section 432(i) ofTitle :! ofthe United States Code states" in pan" that

"'hen the treasurer ofa political comminee sho\\'s that best effons ha\'e been used to

obtain" maintain. and submit the information required by this Act for the political

committee" any repan or any records ofsuch committee shall be considered in

compliance \\'ith this Act.

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The Audit staffreviewed a sample of contributi~nsreceived from

individuals to detennine ifthe identification ofeach contributor was itemized as required.

The sample results indicated that for a material number ofthe reponed entries, the

Committee did not disclose the occupation and name ofemployer. For these items, the

repon entries contained the annotation "Inf<:»rmation Requested."

The Audit stafflocated all ofthe missing infonnation in the Committee's

contribution files and noted that the Comminee had sent letters to each contributor

. requesting the information shonl)' after the Committee's receipt ofthe contributions. The

Audit staffpresented this matter to Committee officials. A Committee representative

explained that they "'ere waiting to make sure that all ofthe infonnation had been

received before submitting amended Schedules A-P (Itemized Receipts). In addition.

Comminee officials stated that as a result ofcommunications \\ith the Federal Election

Commission Repons Analysis Division staffduring the 1992 campaign, they were under

the impression that they should not file amended repons for the 1996 election cycle as

frequentl)' as they had during the )992 election cycle, Therefore. the Committee officials

stated that they decided to hold the contributor information and file a cumulative

amendment at a later date,

The Committee filed amended Schedules A-P \\'hich included all ofthe

missins infonnation noted during our fe\'ie\\·.

In the Memorandum. the Audit staffrecommended no funher action and

stated that the Committee could pro\·ide any additional infonnation or explanation

regarding this matter in its response to the Memorandum.

In its response to the Memorandum. the Committee explained that h[t]he

sole reason for not follo\\·ing the regular amendment approach followed in ]992 was due

to the instruction and for the con\'enience ofthe FEe.·' In suppon ofthis position. an

affidavit from the Comminee·s ChiefAccountant \\'as submitted. She was the individual

responsible for preparation ofletters to contributors requesting their occupation and name

of employer and the subsequent preparation and filing ofamendments to repons filed by

both Perot '92 and Perot '96 committees.

The affidavit states that during the 1992 campaign. amendments

containing updated contributor occupation and name of employer infonnation were

initially filed eve!')' 10 days; ho\\'e\'er. ··(d]uring the )992 election campaign we were

infonned b)' the FEC that it \\'as being ·o\'en\"hclmed' by our amendments and requested

that we file only one master. cumulati\'c amendment." This individual followed the same

procedure in 1996. and was not questioned about the timeliness ofthe amendments until

March. )997 during a discussion ,,'ith members ofthe Audit staff.

It appears that some t)'PC: ofmiscommunication OCCUlTed during the 1992

campaign. as evidenced by a lener. dated October II. 1993. that accompanied a

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cumulative amendment for Perot ·92 covering the period fro~ March 1, 1992 through

December 31, 1992. The letter, signed by the treasurer ofPerot ·92 (also treasurer ofthe

Committee), discusses the filing ofone cumulative amendment. rather than filing

amendments on a more frequent basis. .

Although it appears clear that the Committee strongI)' believes that it has

followed the instructions received in 1992. it should be noted that the Commission"s

Regulations at I J CFR §104.7 'Nere revised in 1994. In relevant pan. this revised

regulation requires that ifany contributor information is received after the contribution

has been disclosed on a regularly scheduled repone the political committee shall either

file \\'ith its next regularly scheduled repon.. an amended memo Schedule A listing all

contributions for \\'hich contributor identific..tions have been received during the

reponing period covered by the next regularly scheduled repon ..' or file on or before its

next regularly scheduled reponing date. amendments to the repon(s) originaH)' disclosing

the contribution(s) .,. Given this change to the Commission·s regulations occurred in

1,994. the Committee·s practice in 1992 and the continuance into 1996 is not relevant.

As stated in the Memorandum. the Committee filed amended Schedules

A-P \\'hich included all ofthe missing information noted during our re\'ie\\',

III. AITDIT fiNDINGS AND RECQ\II\IENDATIONSj AMOlJNTS PlJE

TO THE 11,5. TRE4SlJRY

A. Al\101'ST RECEI\'ED I~ EXCESS OF [~TITLEI\IE,,"T

Section 9007(b)( I) ofTitle 26 ofthe United States Code states that any

ponion ofthe payments made to the eligible candidates ofa political pany under section

9006 \\'as in excess ofthe aggregate payments to \\'hich candidates \\'ere entitled under

section 9004. it shall so notify such candidates. and such candidates shall pay to the

Secretary ofthe Tre3Sury an amount equal to such panion.

Section 9007.2(a)(~) ofTitle JI ofthe Code of Federal Regulations states

that the Commission "'ill notify the candidate of any repayment dctenninations made

under this section as soon as possible but not later than three years after the day ofthe

presidential election. The Commission's issuance ofthe audit repan to the candidate

under 1I CFR §9007,)(d) will constitute notification for purposes ofthis section.

Section 9007,2(b)() ofTitle JJ ofthe Code of Federal Regulations states

that if the Commission determines that :1 ponion of ~yments from the Fund remains

unspent after all qualified campaign expenses ha\'e been paid. it shall so notify the

candidate. and such c3l1didatc shall pa~ the United States Treasury that panion ofsurplus

funds.

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Section 9004.9(b) ofTitle 11 ofthe Code ofFederaJ R~gulations requires that

within 30 calendar days after the end ofthe expenditure repon period, the candidate shall

submit a statemel"lt ofnet outstanding qualified campaign expenses \\'hich contains,

among other items, all outstanding obligations for qualified campaign expenses and

estimated necessary winding down costs as ofthe end ofthe expenditure repon period.

The end ofthe expenditure repon period for the J996 General election \\'as

December S, 1996 as set fonh by 11 CFR §9OO2.12. The Audit staffreviewed the

Committeets financial activit~· through September 30. 1997 and prepared the follo\\ing

Statement oCNet Outstanding Qualified Campaign Expenses (NOQCE):

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Perot '96

STATEMENT OF NET OUTSTANDING QUALIFIED CAMPAIGN EXPENSES

As of December 5. 1996

As Determined September 30. 1997

ASSETS

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Cash on Hand

Cash in Bank

Accounts Receivable

Total Assets

OBLIGATIONS

Accounts Payable for Qualified Campaign Expenses

Actual Winding Down Costs

(December 6, 1996·Sept. 30, 1997)

Estimated Winding Down Costs

(October 1, 1997-ApriI30, 1998)

Contingency for Legal Services

Total Obligations

Net Outstanding Qualified Campaign Expenses (Surplus)

fooTNQTES TO NOQCE

700

3,295,644

639235 •

301,416

764,332 b

384,750 (

100,000 d

$ 3.935.579

$ 1 550498

$ 2385081

(a) nus fi[!ure includ~s a $10.000 reimbursement for consulting services initially paid by the

Commlnee and later d~lermlned 10 be an expense orthe Perot Reform Comminee (Perot's 1996

primary comminte). Since the amount was reimbursed. no repayment is warranted.

(b) Litigation expenses. totaling S3~.8~~. P31~ through 9'30'97 are not Included

(c) This eSlimate IS subject 10 audit \'erlficallon. Committee re:cords and disclosure: rcpons Will be

re\-Ie\\e:d and changes" ill made a~ necessa~

(d) A SI00.000 conlin~ency for legal cost~ related 10 complying with the post-election requirements

ofthe Act has been Included. subject to audu and verification ofthe actual expenses Incurred.

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The Committee included on its NOQCE, tiled <?n 4/16/97,.J an estimate of

$1,447,000 for projected legal expenses related to possible litigation and other legal

services to challenge the debate criteria used for the 1996 Presidential debates. A

challenge to the tax-exempt status ofthe Commission on Presidential Debates could also

result.

According to a preliminary budget prepared by the Committee titled

"Litigation Challenging Debate Criteria ofthe Federal Election Commission," the

. projected costs would include legal expenses for litigation activity, witness inter\'iews..

discovery, depositions, expens.. dispositive motions, trial (including trial" pretrial. and

post-trial activities). appeal ofissues to DC Coun ofAppeals. and litigation on Arkansas

Educational Tele\'ision Commission 'f. Forbes (appeal to US Supreme Coun from 8th

C· .)" IfCUIt •

Although the anticipated litigation ".as related to effons undenaken by the

Committee during the expenditure repon period. it did not appear. based on the

infonnation provided. that the anticipated litigation costs should be viewed as qualified

campaign expenses. The legal expenses incurred during the fall of 1996 relati\'e to Mr.

Perot"s exclusion from the 1996 Presidential Debates are \'ie\\'ed as qualified campaign

expenses since those expenses \\'ere incurred \\·ithin the expenditure repon period to

funher the candid,lte·s campaign for election to the office ofPresident (see 11 CFR

§9002.11 (a) and (b».

Ho\\'c\'er. the S 1.4~7.000 in projected litigation expenses apparently \\'ere

not incurred during the expenditure repon period and \\'ere not made in funherance ofthe

candidate·s 1996 campaign for election. In addition. these projected costs did not appear

to be associ:ued \\'ith the termination ofthe candid.lte·s general election campaign relative

to compliance \\'ith the post-election requirements ofthe Act nor did the)' appear to be

neceSs:lf)' administrati\'e costs associated \\'ith \\'inding do\\n the campaign pursuant to

II CFR §9004.4(aX4).

J

..

The Commin~'s initial NOQCE filed on 1'06'97 contaaned an estimate ofSI.ooo.Ooo for legal

fecs.

Expttnses 101311n; S~7.208 "er~ anCUfTe~ for Ic:t:al sen"lces rc:lated to preparing the Supreme Cuun

"m,cus brieffor the Commltttc The Commlll« IS~~ a check In payment on 7/3197, Since the

enure amount of projected hlll!6IUon COSb h3s bc:cn excluckd trom the NOQCE. the payment of

these expenses ,,'ould. per force. be: \'Ic"'cd as ~Ing made with prIvate funds, thus no repayment

pursuanllo II CFR §9007.2Cb)(~) IS warranled .n thiS Instance,

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In the Memorandum. these projected litigation ~xpenses were not

considered as part ofthe Committee's outstanding obligations. resulting in a calculated

surplus of52,293.574. Since the campaign \\'as funded by both federal and private funds.

S ' a pro rata repayment of52.221,496 could result .

In the Memorandum. the Audit stafTrecommended that the Comminee

demonstrate that it was entitled to all or a ponion ofthe $2.221,496 in surplus funds.

With respect to the 51.447.000 in estimated litigation expenses. it was funher

recommended that the Committee pro\'ide e\'idence to suppon that the expenses are

qualified winding down costs under JI CFR §9004.4(a)(4)(ii) or demonstrate that the

expenses were incurred by the Committee prior to the end ofthe expenditure repon

period and "'ere in furtherance ofthe candidate's 1996 campaign for election. The Audit

staffs recommendation funher Slated that absent such a demonstration that the

Committee was entitled to all or a ponion ofthe 52.221.496 in surplus funds. the Audit

staff would recommend that the Commission detennine that 52.221.496. or the

:.lppropriate ponion thereof. is repayable to the United States Treasury pursuant to 26

U.S.C. §9007(b)(I).

In its response to the Memorandum. the Committee provided several

arguments \\'hich it belie\'es are supponi\'e orits inclusion ofSI.447.000 in estimated

I~gal expenses. The response begins:

'·Legal expenses in the resolution ofmatters initiated as qualified

campaign expenses that continue beyond the reponing period due

to action or inaction by the Commission are qualified campaign

expenses and proper winding do\\n costs. Outstanding maners

under fevie,,' include only those ,,·ith respect to ,,'hich the

Commission has not acted. Had the FEC acted with respect to

complnints involving Perot '96 during the expenditure repon

period. legal expenses. including associated litigation expenses.

\\·ould have been qualified campaign expenditures. The

campaign consen'ed funds because the FEC had not resolved

these matters. To deny Perot ·96 opponunity to continue to

represent itselfin matters arlsin~ during the campaign simply

because the campnign ended before the FEC acted is

inappropriate and ,,-ithoul leJ;al basis- Perot ·96 is entitled to

retain and expend amounts necessaJ1' for legal ser\'ices related to

matters under re\·ie,,· in\'ol\*ing it.

,..-'

Rcpa}1nent •

Ratio

Tgta' FcckAl Fynd$ '"("'cd IbrQu:b December c; 1996

TOIa' DePOSIts thruu,h Occcm~r 5. ICJ96

• $'9 pc; :100 • 96.'~"..~.

$29.998.107

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The audit repon places emphasis on the pending MUR involving

Perot '96 and the Commission on Presidential Debates C-CPD').

The FEC has not questioned that legal expenses incurred in

relation to the complaint filed by Perot ·96 with the FEe against

the CPD was a qualified campaign expense incurred during the

expenditure repon period. Had the FEe acted on the complaints

filed with the FEC by or against Perot 696 during the expenditure

report period. including the one involving the CPD, legal

expenses related to them would without question have been

qualified campaign expenditures. It is a strange twist oflogic to

suggest such categorization is now inappropriate \\'hen the sole

reason the period during \\l1ich they would so qualify has passed

without their incurrence is a delay in FEe action on those

matters.

In fact.. Perot ·96 sought to avoid the delay the FEC could impose

in reaching resolution \\ith respect to the MUR filed against the

CPO through court action. In an effon to prevent Perot '96 from

pursuing the MUR at that time during the expenditure repon

period. the FEC stated to the Federal District Coun that the

campaign"s action "·ould not be mooted by FEe revie\\' and

expiration ofthe period during "'hich the FEe asserted exclusive

jurisdiction o\'er the matters subject to the MUR. To no\\' s:ty

expenditures ma~' no longer be made "'hich are necessary to

pre\'cnt the ongoing matter from beina: moot in practical effect,

expenditures budgeted and consen'ed for by the campaign in

reliance on the FEe position. is "i1oll~' inconsistent and without

legal basis. The anticipated expenses are direc:tI)' related to, are

an integral pan ofand cannot be separated from the expenditures

during the period ,,·hen such expenditures are unquestionably

qualified campaign expenses.-

The Committee·s response continues by citing several Commission

detenninations which in its \'ie\\' are supponh'e ofits position that the Committee is

entitled to reset'\'e for and incur le~al fees related to MURs and associated legal claims as

qualified campaign expenses and ,,·inding do\\'n costs. including those associated with the

Commission on Presidential Debates. Those cases are discussed separately belo,,'.

The issue presented to the Committee in the Memorandum concerned the

S1.447.000 in estimated litigation expc:r1ses and \\-hether these estimated expenses were

qualified campaign expenses. It \\"35 recommended that the Committee (a) provide

evidence to suppan that the expenses arc: qualified \\inding dO\\l1 costs under II eFR

§9004,4(a)(4)(ii). or (b) demonstrate: that the expenses "'ere incurred by the Committee

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prior to the end ofthe expenditure repan period and were in ~erance ofthe

candidate's 1996 campaign for election.

The Committee did not provide any contracts, retainer agreements, other

written arrangements or commitments to sho\\' that these questioned expenses were

incurred within the expenditure repan period. Rather. as stated above. the Committee

argued that ifthe Commission had acted on this matter during the expenditure repon

period. any legal expenses related to this maner would have been incurred during the

period and would be qualified campaign expenses. The Audit staffagrees that in the

hypothetical case cited by the Comminee, any legal expenses directly related to the CPD

matter penaining to actions occuning \\ithin the expenditure repan period, would have

been incurred \\ithin the period and \'ie\\'ed as qualified campaign expenses. The

expenses at issue \\'ere not.

In the Audit staff5 opinion. these estimated litigation expenses are not

costs associated with the termination ofthe candidate's general election campaign such as

complying \\'ith the post-election requirements ofthe Federal Election Campaign Act of

197 J• as amended. (the Act) and other necessaJ')' administrative costs associated \\,ith

\\'inding dO\\ll the campaign including office space rental. staffsalaries. and office

supplies, See II CFR §9004.4(a)(4). Ho\\·e\'er.legal expenses related to the completion

ofthe audit process. such as preparing a response to the Memorandum. or legal expenses

directly related to Commission enforcement actions. ifany. would fall into the category

of complying "'ith the post-election requirements ofthe Act.

The Committee cited sc\'eral examples of prior Commission action \vhich

it feels are consistent \\ith its position that the anticipated litigation expenses are directly

related to. are an integral pan ofand cannot be separated from the expenditures during the

period \\'hen such expenditures are unquestionably qualified campaign expenses.

I. Dukakjs'Bcntscn Committee Inc • Holjdil)'milnk You Notes

The Committee states in its response that printing and postage

costs for J:!5.000 holiday cards sent after the election and as late as the following March

were qualified campaign expenses as \\".nding do\\n costs. Such expenses have far less a

nexus as "'inding dO\\ll costs than do legal expenses related to outstanding MURs and

litigation ongoing since the expenditure repan period.

In the case ofthe holiday/thank you cards. the Audit staff notes

that a panion ofthe cards were mailed after the election but before the end ofthe

expenditure repan period. and the related expenses "'ere incurred during the expenditure

repan period, As stated in the Fin:!1 /\udit Repon. at page J7. since the expenditures for

postage for the cards arc a qualified campaign eXJk:nsc. the printing costs are also a

qualified campaign expense "'hich must be reimbursed by the General Election

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Committee to the Compliance Fund. The Compliance Fund reimbursed in January.

1991. These expenses were not characterized as winding down costs in the report.

2. Leaal Services Related to Electoral CQJJcKc

The Comminee notes that legal services were initiated related to

the Electoral College during the expenditure report period" and although the Electoral

College meets after the close ofthe expenditure report period and legal services "'ere

provided after the close ofthat period. the Commission correctly determined that the

expenses were qualified campaign expenses because they involved legal services related

to activities undertaken during the expenditure report period. The Committee added

U[t]he Commission did not and should not anempt to replace the judgment and decisions

ofthe campaign."

In this instance. the issue involved \,vhether the expenses. incurred

\\'ithin the expenditure repon period. were as the DukakislBentsen committee maintained

exempt from the definition of contribution and expenditure and therefore outside the

purvie\\' ofthe Commission. The Final Audit Repon concluded that the Electoral

College is pan ofthe entire general election process and the expenses incurred by the

General Election Comminee related to the Electoral College are qualified campaign

expenses \\'hich are subject to the overall expenditure limitation. Since an agreement \\'as

reached between the DukakislBentsen committee and the law firm before the end ofthe

expenditure repon period for the purpose ofan update to a 1980 Electoral College

memorandum. there \\'as no question concerning \\'hether the expenses \vere incurred

\\'ithin the expenditure repon period.

3. NjuiODal Unit), Committee For Jobn Anderson - Lei:611

Sco'ices RCI:ncd to Qni:oin~ MlJRs

The Committee states that during this audit, .....amounts set aside

as legal expenses concerning a matter under re\'ie,,' ,,'ere appro\'ed by the Commission as

\\'inding dO\\ll costs. The Addendum (to the Final Audit Repon] stated that I J C.F.R.

§9004,4(a)(4) allo\\'s public funds to be used for \\'inding dO\\T1 costs \vhich include but

are not limited to legal services related tu ongoing MURs:·

The Audit suff notes lh:u the legal analysis prepared b)' the

Commission"s Office ofGeneral Counsel ,,'hich accompanied the Addendum to the Final

Audit Repon ofthe National Unity Committee ForJohn Anderson contained a section

entitled ··AUDIT QUESTION: LEGAL FEES AS WIND DOWN EXPENSES:' In this

instance. the Audit staff had questioned the amount offees charged" panicularl)' on the

amount of a retainer for the remainder ofthe: ,,·inding dO\\ll period. because a minimal

amount ofactivit)' "'as antici~ted before the Anderson committee would be in a position

to terminate. The Office ofGeneral Counsel. in its comments. related that .....the legal

services itemized by the Comminee·s counsel appear to encompass the usual functions

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associated with the post-ejection repayment process and preparation ofresponses to a

MUR investigation." In conclusion, the Office ofthe General Counsel stated "[t]he

Committee is prepared to refund and tenninate in due coW'Se; there is no question of

litigation in the legal fees estimated to complete the winding down. Therefore. the legal

services noted by counsel may be considered pan ofthe valid winding down costs

contemplated by the Regulations."

4. National Unit)' Committee For John Anderson - AUQrne\, E=

A\\"ards Resultin~ From Ballot Access Ljtil:atjoD

As to this issue. the Committee stated ·'[s]ince the majority ofthe

activity in the case" Anderson ,t, CeJebre::e, occurred several years after the close ofthe

1980 genera) election expenditure repon period, the audit division claim suggests that all

such spending constitutes qualified campaign expenses.n

\\'ith respect to the inference dra\\n by the Committee. the Audit

statTnotes that" based on available information. the Anderson committee did make

payments to various legal counsel in 1980 to initiate ballot access litigation in a number

ofstates. Apparently" subsequent legal fees for ballot access litigation were offset by

coun av:ards \\·on through fa\'orable resolution ofthe Committee"s cases. A 161\\' finn in

\\'3Shington" D.C. \\'hich handled the litigation assessed fees and arranged for local

counsel in cenain states for ballot access "'ark" then apparently received the coun a\\'ards

directly, In most cases. this 161\\' finn attributed a ponioD ofthe coun award to fees

charged by local counsel in the panicul3l' s~te and kept the remainder for its 0\\11 fees or

for credit to\\'ard future similar litigation in other states, It \\'as not clear at the conclusion

ofthe audit \\'hether Ohio or any other state a\\·arded funds greater than the amount of

litigation fees assessed.

In the opinion ofthe Audit 5t3fT. the items cited by the Committee are

not persuasive, hems (I) and (2) in\'olved expenses incurred \\'ithin the expenditure

repon period and therefore. are not dispositi\'e, Item (3) invol\'ed legal expenses incurred

after the close ofthe expenditure repon period but directly related to complying with the

post election requirements ofthe Act - post election repayment matters and preparation

(not litigation) ofresponses to a t\·fUR investigation. Lastly" Item (4) concerned the

possible recovery of a coun a\\·ardCs) for legal fees resulting form ballot access litigation

initiated prior to the close ofthe expenditure repon period, Based on information

available" the litigation fees incurred after the close ofthe expenditure repon period were

defrayed "'jth funds received from coun :J\\'ards,

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In summary, since no documentation was prov!ded to establish that all or a

portion ofthe $1,447,000 in estimated litigation expenses were incuned prior to the close

ofthe expenditure repon period or to establish that these expenses are valid winding

down costs pursuant to 11 CFR §9OO4,4(8). the Audit staffhaS not included an)" amount

oflhis estimate' in the NOQCE presented above, Thus, a surplus repayment in the

amount·of 52.310.127 [52.385.081 surplus x ,968574 repayment ratio] is warranted.

Recommendatiop III

The Audit staffrecommends that the Commission make a detennination that

52.310.127 in surplus funds is repayable to the United States Treasury pursuant to 26

., U.S.C. §9007(b)(I).

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Th~ Commincc also assens in ilS response that the S~7.20a in le..1services in connection with its

UIff'CIlS brief in A,"""sas £d1l~Q/'on T.:ll~·IS"JIt C-OIIIlltW'un ,. Rulph P. Forbes was nec~ssary in

relation 101M onloing MUR related 10 t~ CPO. Th~ Commincc views these expenses as

qualifi~d campa'J" ~xpenses becau5t tht~· rel3t~ directly 10 ISSutS underlying the MUR. For the:

reasons staled abovc. th~ Audit staff has ~xclude:d thiS expenses from th~ NOQCE as it is pan of

the estimated liuplion expeftsn.

On October 29, 1997. the Comminec filed I complaint for declaratory and injunctive relief against

the Federal Election Commission in the Unlled Slates DIStrict Coun for thc District ofColumbia.

P~ '96. lite. "0 F«JcrQ/ £J«I1Oft CUllf8fUSIOl'le No. I:97cv02S54, (D.D.C. filed Oct. 29, 1997).

On November 5_ 1997. the Commlftft filed suit a,ainsllhe Federal Election Commission.

Clanton/Gore 0cMra1 Committee. Inc. and Dole for PresicIenI. Inc. that. 'III,.,. mill. challengesthe

constitutionality oflhe Federal Elecl.on Campa.p Act. ,..",1OttlII CU"""'"c.-c! ollhf: RefiWWl Ptm)'

" De.'ICrIJl"· AiMleffIII COllI..''''...•No. 9,...o.aa. (N.D. Cal. filed Nov. S. 1997). For th~ reasons

Cited In FmdlftllJl.A. oflhls report. an~' expenses paid 1»)' the Comminee associated with any of

Ihis liaigation -ould bt ~aewed as non-qualir~ campaip expenses and could be subject 10 the:

rep3)-menl provisIOnS 0(26 U.S.C. §9007IbM-I)

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November 10, 1997

FEDERAL ELECTION COMI\11SSIOl':

RECEIVED

'EDERAI. ELECTION

COMMISSION

AUOIT OlVISION

/lor 10 11"3 AIf '97

MEMORANDUM

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TO:

THROUGH:

FROM:

SUBJECT:

RobertJ.Costa

Assistant StaffDirector

AudjtDjV~

John c.t:;;'".~- StafTDI r~

Lawrence M. Noble /

General Counsel IL

Kim Bript-Coleman [GI

Associate General Counsel

Lorenzo Holloway -1. .,ij...

Assistant General Counsel

Proposed Audit Repon on Perot 996 (LRA 507)

The Office ofGeneral Counsel has reviewed the proposed Audit Report on

Perot ·96 (.. the Committee") which was submined to this Office on October 22. 1997.

This memorandum includes our comments on the proposed repone I We concur with the

findings in the proposed Audit Report that are not addressed in this memorandum. If you

have an)' questions concerning our comments. please contact Lorenzo HoIIOW8}'.

As a threshold matter. we note that in your cover memorandum to the proposed

Audit Report. you request that the Office ofGeneral Counsel review the report's

discussion ofthe fmding on the candidate·s receipt ofexcessive entitlement to ensure that

it complies with the confidentiality provisions set forth at II C.F.R. § 111.21. An Audit

Repon complies with confidentialit), provisions as long as it refers only to "alleged

Because the proposed Audit Repon concerns the audit or a publicly.rmanced Jeneral election

candidate. the ()ff'ace ofGeneral Counsel recommends &he Commission consider the Audit Repon in open

session. II C.F.R. § 9007.Ue)( I).

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Memorandum to Roben J. Costa

Proposed Audit Repon on Perot '96

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complaints" and does not address any information relating to Commission notifications

or investigations. See AO 1994-32.2

.

The proposed Audit Report includes a Statement ofNet Outstanding Qualified

Campaign Expenses that shows that the Comminee has a surplus of$2.385.081. Since

the Committee received private funds. there is a repayment ratio (96.8574%). Therefore.

the Audit Report recommends that the Commission make a detennination that the

Comminee repay 52.310,127 ($2.385.081 x .968574) to the United States TreasUl')' for

surplus funds. A portion ofthe surplus funds reflects the fact that the Audit Division did

not accept the Committee's estimate of51 ,447.000 in litigation costs as qualified

campaign expenses on the liability section ofthe Statement ofNet Outstanding Qualified

Campaign Expenses. The Audit Division notes that the litigation costs are nonqualified

campaign expenses because they were not incurred in the expenditure report period and

they were not a winding down cost.

. The amount the Committee estimated as litigation expenses was primarily related

to the candidate seeking a judicial remedy regarding a complaint he alleges he filed \vith

the Commission concerning the use ofobjective criteria to select panicipants for the

presidential debates.) On September 23. 1996. Mr. Perot filed a complaint in the United

States District Court that sought an injunction against the Commission and the

Commission on Presidential Debates from violating the Constitution. the Federal Election

Campaign Act and the Commission·s regulations. The district coun denied the request

for injunctive relief and granted summaJ')' judgment to the Commission and the

Commission on Presidential Debates. Perot ". Federal Election Commission 1996 WL

566762 (D.D.C). remanded in part 97 F.3d 553 (D.C. Cir. 1996). cerl. denied 117 S. Ct.

1692 (1997)." Ho\\'ever. the district coun noted that Mr. Perot could seek judicial relief

after the Commission considered the administrative complaint. Jd

The Committee contends that the litigation expenses should be considered

qualified campaign expenses. The Committee notes that the litigation expenses would

have been qualified campaign expenses ifthey were incurred during the expenditure

report period and that it would have incurred the expenses had the Commission acted on

the complaint during the expenditure repon period. Therefore. the Committee argues

Since there is no information regarding notifications or Investigations in this Office's

memorandum, it may be publici)' released

J The liti'llion expenses also Include the cost the Commanee incurred in filing an amicus briefin

A,/umsQS EduC""OII T~/I!t1IS'OIt COIII",W/tNI ". Forbes. 9l F.3d 497 (8th Cir. 19(6). cen. granted. 117 S.

Ct. 1243 (Mar. 17. 1997)(No. 96-779).

• On appeal, the United States Circuit Coun ofthe District ofColumbia affirmed the district coun

decision. but remanded the case on the Issue whether 1M CommiSSion Jacked authority to promulgate the

debate regulations at II C.F.R. §§ 110.13 and 1144(0 Perut ,. Fl:dc:rul £Jccllon Commw/on. 97

F.ld 553,561 (D.C. Cir. 1996). C~I denleJ 117 S. Ct. 1692 ('997). The remand instructed the district

toun to dismiSS the complaint without prejudICe /d

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and (b)

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Proposed Audit Report on Perot '96

Page 3

"[t]o deny Perot 96 opponunity to continue to represent itselfin matters arising during

the campaign simply because the campaign ended before the FEC acted is inappropriate

and without legal basis.tt

The Office ofGeneral Counsel believes that the litigation expenses should not be

considered qualified campaign expense or winding down costs within the meaning of 11

. C.F.R. § 9004.4(a)(4). A qualified campaign expense must. inter alia. be incUlTed to

further the candidate9s campaign and it must be incurred within the expenditure repone

II C.F.R. §§ 9002.11 (a){ 1) and (2). In order to be considered a winding down cost. the

expense must be associated with the tennination ofthe general election campaign for

such matters as complying with the post-election requirements ofthe Federal Election

Campaign Act and the Presidential Election Campaign Fund Act. 11 C.F.R.

§ 9004.4(a)(4)(i). An expenditure may also be considered a winding down cost ifit was

incUlTed prior to the end ofthe expenditure repon period and there was a wrinen

arrangement or a commitment was made prior to the end ofthe expenditure repon period.

II C.F.R. § 9004.4(a)(4)(ii). In this case. the litigation expenses are not related to the

tennination ofthe campaign. Rather. the expenses are related to litigation \\1th the

Commission.. Furthennore. there is no indication that the expenses were inculTed dwing

the expenditure repan period nor is there :my evidence of a prior \\Tinen arrangement or

commitment for legal services prior to the end ofthe expenditure repon period. Sec

Ad\'isory Opinion C·AO") 1988-5 (the Commission noted in reference to general election

financing that ··the timing of,,'hen an expense was incurred. including the dates ofthe

underlying acti\'ities "i1ich resulted in the expense. is determinative·').

There must be a nexus between the expenditure and the 1996 presidential election.

At this point it is unclear how any subsequent litigation involving the candidate's

panicipation in a debate ,,'auld be related to the candidate's campaign for an election that

was held on November S. 1996. Rather. any judicial reliefthat could be fashioned by a

coun at this time would be. at best. geared to\\-ard a future election. In a newspaper

anicle. the candidate's counsel. Sam Lanham. noted that the litigation is aimed at the next

election and it would protect all third panies. John Hanchette. Perol Aslcsfor Ruling on

Debate Exclusion. USA Today. October 30. 1997. Furthennore. the United States

District Coun. in denying Pero"s request for injunctive relief noted that Perot will lose

The expenditure repon pcnod expired 30 days after the general election. II C.F.R. §§ 9002.12(8)

Additionally, the arlument that thiS IItlgauon will create a precedent for future elections is

inconsistent with the Commission's position that "[Ilhe Matching Payment Act negates any notion of a

combined campaicn. spanninl two prcsidenllal election c~·cles. in that the definitions of qualified campaign

expense and matchina payment pmods arc limited 10 panacular lime periods and a presidenlial candidacy

within those periods." AO 1911-S. It should be notrd. however. thai the litigation expenses inculTed

during the initialliliaation when Mr. Perot 50ultht an Injunction against the Commission and the

Commission on Presidential Debates from vlolallnt! the ConstitUtion, the Federal Election Campaign Act

and the Commission·s fCgulations with mpcci 10 the 1996 presidenllal debates was a qualified campaign

expense since the expenses rcialcd 10 abe 1996 election. Sec Perm ,. FederQ/ EJecllon CommISSIon 1996

WL S66762 CD.D.C). ~mQltdcd,nport97 F.ld SS3 (D.C Cir. 1996).cert denied 117 S. Ct. 1692 (19Q7).

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Memorandum to RobertJ. Costa

Proposed Audit Report on Perot 196

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·1he opportunity to debate [in the 1996 elections], but [he] still·may be able cure any

defects in the [debate] criteria [he] allege[s] the Debate Commission has used so that the

next cycle would not have these defects and thereby have some relief, although not total

relief:"7 Perot v. Federal EJection Commission 1996 WL 566762 (D.D.C). remanded in

part 97 F.3d 553 (D.C. Cir. 1996), cerro denied 117 S. Ct. 1692 (1997).

The Office ofGeneral Counsel does not believe the Committee's citation to

previous audit reports (discussed in detail in the Audit Report) supp:>n a conclusion that

public funds may be used for litigation services incurred after the expenditure repon. In

the two examples ofexpenditW'es cited by the Comminee from the DukakislBentsen

audit (Holidayflbank You Notes and Legal Services Related to the Electoral College),

both expenditures were incurred by Comminee during the expenditure repon period. II

C.F.R. § 9004.4(a)(4)(ii). In the audit ofthe National Unity Comminee for John

Anderson, the legal expenses were related to continuing enforcement matters. The

National Unity Committee was a respondent in these matters and. therefore, they would

not be able completely wind down the campaign until the enforcement matters were

resolved. See Explanation and Justification for 11 C.F.R. § 9034.4 (parallel provision for

primary), 60 Fed. Reg. 31865 (June 16. 1995) (The Commission agreed with the

comment that ·'basic fairness requires campaigns to have the resources necessary to

defend themselves against enforcement proceedings·). In this case. the Committee is not

in a position of defending itselfin an enforcement proceeding. Finally, it appears that the

attorney fees arising out ofthe litigation in Anderson \'. Celebrezze that was referenced in

the audit repon on the National Unity Committee for John Anderson was not paid with

public funds. but with funds available from coun awards.

Funhennore. the Comm.nee·s pan.c.palaon an the litIgation an A,iunslLt Edllcallnn Tcl''''lslon

CommiSSion ,. Fo,bes 93 F.Jd 497 (Ith e,r ICJq6). cen. granted 117 S Cl 1243 (Mar. 17. J997)(No. 9()-

779). through the filing ofan amIcus brief could only be geared toward a future election cycle.

AO 1988-5.

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FEDERAL ElECTIOf\: COM,\1ISSIOf\:

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December 10, 1997

Mr. J. Michael Poss, Treasurer

Perot '96

7616 LBJ Freeway, Suite 505

Dallas. TX 75251

Dear Mr. Poss:

Attached please find the Audit Repon on Perot '96. The Commission approved

this repon on December 4. J997. As noted on page 3 ofthis repone the Commission may

pursue any ofthe maners discussed in an enforcement action.

In accordance \\ith 11 CFR §§9007.2(c)(l) and (d)(l). the Commission has made

a determination that a repayment to the Secretary ofthe TreasUl)' in the amount of

$2.310.127 is required ""ithin 90 calendar da)'s after service ofthis repon (March 13.

1998).

Should the Candidate dispute the Commission·s determination that a repayment is

required. Commission regulations at II CFR §9007.2(c)(2) provide the Candidate with an

opponunity to submit in "Titing. "oithin 60 calendar days after service ofthe

Commission·s notice (February II. 1998). legal and factual materials demonstrating that

no repayment. or a lesser repa~·ment. is required. Further. 11 CFR §9007.2(c)(2)(ii)

permits a candidate "'ho has submitted "Tinen materials to request an opponunity to

address the Commission in open session based on the legal and factual materials

submitted.

The Commission \\'ill consider any \\Titlen lei!al and factual materials submitted

"'ithin the 60 day period \\'hen deciding \\'hether to revise the repayment detennination.

Such materials may be submitted by counsel ifthe Candidate so elects. Ifthe Candidate

decides to file a response to the repayment detennination. please contact Kim L. BrightColeman ofthe Office ofGeneral Counsel at (202) 219·3690 or toll free at (800) 424-

9530. Irthe Candidate does not dispute: this determination \\ithin the 60 day period

provided. it will be considered final.

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Mr. J. Michael Poss. Treasurer

Paae2

The Commission approved Audit Repon and related information will be placed

on the public record on December 17. 1997. The documents to be placed on the public

record are also attached. Should you have any questions reg~ing the public release of

this repon, please contact Ron Hams ofthe Commission·s Press Office at (202) 219-

4155.

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

audit repon should be directed to Man~' Favin or Thomas Hintermister ofthe Audit

Division at (202) 219-3720 or toll free at (800) 424-9530.

Ro . Costa

Assistant StaffDirector

Audit Division

Attachments as Slated

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r_.- FEDERAL ELECTION COMMISSIO~

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December JO. 1997

. Mr. Ross Perot

clo Perot -96

7616 LBl Freeway. Suite 50S

Dallas, TX 75251

Dear Mr. Perot:

Anached please find the Audit Repon on Perot '96. The Commission approved

this repon on December 4. 1997. As noted on page 3 ofthis repone the Commission may

pursue any ofthe matters discussed in an enforcement action.

In accordance ,,·ith II CFR §§9007.2(c)(I) and (d)(I). the Commission has made

a detmnination that a repayment to the Sccrew,· ofthe Treasury in the amount of

$2.310.127 is required \\ithin 90 calendar da)'s after sen'ice ofthis repon (March 13.

1998).

Should )'ou dispute the Commission·s determination that a repayment is required.

Commission regulations at 11 CFR §9007.2(c)(2) provide you with an opponunity to

submit in "Titing. \\ithin 60 calendar cIa)·s after 5eI"\'ice ofthe Commission's notice

(FebruaJ')· II. 1998). legal and factual materials demonstrating that no repayment. or a

lesser repa~·ment. is required. Funher. 11 CFR §9007.2(c)(2)(ii) pennits a candidate who

has submitted "Titten materials to request an opponunit)· to address the Commission in

open session based on the legal and factual materials submitted.

The Commission will consider an~· "Tinen legal and factual materials submitted

"ithin the 60 day period ,,·hen deciding ,,·hethcr to revise the repayment determination.

Such materials may be submitted by counsel if you so elect. If you decide to file a

response to the repa)4'ment determination. please contact Kim L. Bright-Coleman ofthe

Office ofGeneral Counsel at (202) 219-3690 or toll free at (800) 424-9530. If you do not

dispute this determination \l,ithin the 60 day period provided~ it will be considered final.

The Commission approved Audit Rqx»n and related information will be placed

on the public record on December 17. 1997. The documents to be placed on the public

record are also attaChed. Should ..ou h:a\.~ an~' questions regarding the public release of

this repon~ please contact Ron Hams orthc: Commission·s Press Office at (202) 219-

4155.

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Mr. Ross Perot

Pap 2

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

audit report should be directed to Marty Favin or Thomas Hintermister ofthe Audit

Division at (202) 219·3720 or toll free at (IOO) 424-9530.

Sincerel)'•

/4Roben . Costa

Assistant StaffDirector

Audit Division

Attachments as stated

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CHRONOLOGY

PEROT '96

Audit Fieldwork

Exit Conference Memorandum

to the Committee

Response Received to the

Exit Conference Memorandum

Audit Repon Approved

Page 29

3/17/97 - 5123/97

Sn197

10/6197

1214/97
QI•o7•o§•123

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