FEDERAL ELECTION COMMISSION 

WASHINGTON, O.C. 20463 

May 3, 2013 

MEMORANDUM 

TO: 

FROM: 

Patricia C. Orrock 

Chief Compliance Officer 

Thomas Hintermister 

Assistant Staff Director 

Audit Division 

Lisa J. Stevenson 

Deputy General Counsel - Law 

isel 

Lorenzo Holloway 

Assistant General Counsi 

Compliance Advice 

Danita C. Alberico 

Attorney 

SUBJECT: Proposed Interim Audit Report on the Democratic Party of Illinois (LRA 887) 

I. INTRODUCTION 

The Office of the General Counsel reviewed the proposed Interim Audit Report ("lAR") on 

the Democratic Party of Illinois CThe Committee"). Our comments address Finding 3: 

Fundraising Receipts.' We concur with the conclusion reached in the finding as to four of the 

iundraising events but recommend that the auditors expand the report's analysis regarding all ten 

of the iundraising events at issue in the audit finding using an additional standard to evaluate the 

permissibility of the iunds deposited in the Committee's federal account. We concur with any 

fmdings not specifically discussed in this memorandum. If you have any questionis, please contact 

Danita C. Alberico, the attorney assigned to this audit. 

' We recommend that the Commission consider this document in Executive Session because the Commission 

may eventually decide to pursue an investigation of matters contained in the proposed lAR. 11 C.F.R. §§ 2.4(a) and 

(b)(6). 
Comments to the Interim Audit Report 

Democratic Party of Illinois (LRA 887) 

Page 2 

II. FUNDRAISING RECEIPTS (Finding 3) 

A. Background 

The proposed lAR finds that the Committee participated in 10 iundraising events that 

raised funds which were dq)osited in both its federal and non-federal accounts. The fundraising 

events were not disclosed on Schedules H-2 (Allocation Ratios). The auditors determined that the 

federal account received $75,800 (or approximately 8%) and that the non-federal account received 

$ 1,103,925 (or approximately 92%) of the total amount of funds that the Committee received finm 

the fundraising events.^ 

The proposed lAR indicates that the Conunittee did not have copies of any written 

fundraising agreements, as required under 11 C.F.R. § 102.17(c)(1), but that some of the events 

appear to have involved and/or were sponsored by members of the Illinois House of 

Representatives as well as local businesses. The auditors found that the Committee's federal 

account did not share in the costs of the efforts associated with any of the fundraising events for 

which it received proceeds.^ See 11 C.F.R. § 106.7(d)(4). The auditors also found that the 

fundraising event solicitations did not include information typically required in joint fundraising 

notices, see 11 C.F.R. § 102.17(c)(2)(i)(A)-(D), or information regarding the receipt of federal 

contributions. The proposed LAR recommends that the Committee document the costs associated 

with each of the fundraising events as well as who paid the costs or, in the alternative, transfer the 

$75,800 to the Committee's nonfederal account. 

In its exit conference response to the proposed finding, the Committee claimed that all of 

the fundraising events through which it received contributions were nonfederal in purpose. The 

Committee also said that four of the fundraising events were not even Committee events and the 

Committee did not participate. The Committee further contended that it did not solicit any of the 

federal contributions it received. The Committee characterized the total amount deposited in its 

federal account from the ten fundraising events as "de minimis" in comparison to the total amount 

of nonfederal funds that it received fiom the ten events. It said that some of the funds that it 

received were, in fact, contribution checks that the Committee "received fhrou^ other means [and 

which] were sometimes batched with checks received through events held around the same time." 

According to the Audit Division, Committee representatives also claimed that contributors 

attending some of the fundraising events gave contributions benefiting the Committee's federal 

account on their own initiative. 

We consider this finding by grouping the ten fundraising events into two categories. In the 

first category, we examine four fiindraising events that were held to benefit the nonfederal 

campaign committee of the Committee's chairman, Michael Madigan, and consider whether the 

funds the Committee received from the four events were the result of joint fundraisers in which the 

Committee participated. In the second category, we examine the remaining six fundraising events 

' The auditors were not able to determine the total amount of funds raised from the ten fundraising events. 

' The auditors also noted that the Committee's nonfederal account did not pay any fiindraising costs associated 

with the funds it received. 
Comments to the Interim Audit Report 

Democratic Party of Illinois (LRA 887) 

Page 3 

and clarify the standard the auditors should apply to determine whether the funds the Committee 

deposited in its federal account from the fundraising events were permissible. 

B. Four of the Fundraising Events Were Not Committee Events and Funds from those 

Events Were Impermissibly Deposited in the Committee's Federal Account 

Political committees that wish to engage in joint fundraising with other political 

committees must comply with certain requirements, including solicitation and disclosure 

obligations, as detailed in the draft Interim Audit Report. See. e.g., 11 C.F.R. § 102.17(a)(l)(i) 

(participants in a joint fundraising effort must either establish a separate committee or select a 

participating committee to act as the fundraising representative); 11 C.F.R. § 102.17(c)(1) 

(requiring written agreement amongst participants); 11 C.F.R. § 102.17(c)(2)(i)(A)-(D) (setting 

forth requirements for joint fundraising notice). 

As to four of the events discussed in the proposed lAR, the Committee asserts that it was 

not a joint fundraising participant, even though it received and deposited in its federal account a 

total of $6,150 in funds from these events. We conclude that the Committee's claim that it did not 

participate in these events or solicit any federal funds through these events may have merit. If the 

Committee's assertion is true, it raises the question of whether a state party committee may receive 

and deposit in its federal account funds from fundraising events in which it did not participate. 

The Committee acknowledged that it received contributions that were deposited in its 

federal account as a result of four fundraising events held on behalf of the Friends of Michael J. 

Madigan committee.* The Committee contends that the events were non-Committee events and 

that it did not solicit the contributions. The four fundraisers were: 

• 2009 Lake Event held on a date unknown; 

• 2010 Lake Event held on April 26,2010; 

• Luciana Event held on September 21,2010; and 

• Union League Event held on September 23,2010. 

The auditors' review of the solicitations for these four events supports the Committee's 

assertion that the fundraisers were non-Committee events and were not intended to raise funds for 

the federal account. We reviewed the available solicitations for three of the events - the 2009 Lake 

Event, the Luciana Event, and the Union League Event - and agree with the auditors' assessment.® 

* Friends of Michael J. Madigan is a non-federal committee. Michael J. Madigan is the Speaker of the Illinois 

House of Representatives and serves as the Chairman of the Democratic Party of Illinois. 

' The auditors do not possess a copy of the solicitation for the 2010 Lake Event so this Office is unable to 

examine the content of the solicitation. The auditors indicated, however, that the Lake Events were annual events and 

that they reviewed a copy of the 2010 Lake Event solicitation while conducting the audit field work. The auditors said 

that there were no substantive differences between the content of the 2009 and 2010 Lake Event solicitations, and this 

Office has no reason to question that conclusion. 
Comments to the Interim Audit Report 

Democratic Party of Illinois (LRA 887) 

Page 4 

Based on the content of the solicitations and information provided by the auditors, it 

appears that the 2009 Lake Event, 2010 Lake Event, the Luciana Event, and the Union League 

fiindraising events may have been solely for the benefit of the nonfederal campaign account of 

Michael Madigan. We do not have any facts to suggest that the Committee solicited funds fium or 

participated in these events. The Committee's assertion - that some contributors attending the 

fiindraising events benefitting Madigan's state-level campaign may have used the occasion to also 

contribute conveniently to the Committee of which Madigan was the chair - seems plausible. 

Although federal funds do not appear to have been solicited, the Committee accepted and 

deposited, in its federal account, a total of $6,1 SO as a result of these events. 

2009 and 2010 Lake Events. The event solicitation for the 2009 Lake Event indicates that 

contributions were solicited to support the Friends of Michael J. Madigan Committee and asked 

that contribution checks be made payable to "Friends of Michael J. Madigan." The Committee 

received a total of $1,650 in funds which it deposited in its federal account as result of this event. 

The funds the Committee received were comprised of $150 in cash, and three checks each payable 

to the "Democratic Party of Illinois" in the amounts of $250, $250 and $1,000, respectively. The 

2009 Lake Event solicitation includes a statement on Illinois' requirements for reporting 

contributor occupation and name of employer and notes that contributions are not deductible for 

federal income tax purposes. The solicitation indicates that it was prepared by and for the Friends 

of Michael J. Madigan Committee and advises that a copy of that committee's report is available at 

the State Board of Elections. 

Luciana Event. The event solicitation for the Luciana Event was in the form of an 

invitation from Illinois House of Representatives Assistant Majority Leader Frank J. Mautino 

"honoring Speaker Michael J. Madigan." The solicitation asked that contribution checks be made 

payable to "Friends of Michael J. Madigan" and mailed to the host of the event, the Committee firr 

Frank J. Mautino. The Democratic Party of Illinois received $2,500 in funds as a result of the 

event which it deposited in its federal account. The funds were contributed by a single donor who 

made his chedc payable to "DPI" (the Corrunittee]. The solicitation does not contain any 

disclaimers and notes that a copy of the Madigan corrunittee report is on file with the State Board 

of Elections. 

Union League Event. The event solicitation for the Union League Event said that it was "a 

fundraiser in honor of Michael J. Madigan" and asked that contribution checks be made payable 

and mailed to "Friends of Michael J. Madigan." Illinois Strategies, L.L.C. hosted the event, and 

the Committee received $ 1,000 in funds as a result of the event. The funds were contributed by a 

single donor who made his check payable to the "Illinois Democratic Party." The solicitation 

notice indicates that the Madigan committee report was on file with the State Board of Elections. 

Given that these events were fimdraising events in which the Committee did not appear to 

participate, a question arises regarding whether the Committee can permissibly accept and deposit 

in its federal account funds fi-om these events. Section 102.5, which governs organizations 

financing political activity in connection with federal and non-federal elections other than through 

transfers and joint fundraisers, gives guidance on when funds may be deposited in a corrunittee's 

federal account. See 11 C.F.R. §102.5. Under these provisions, committees must meet one of the 
Comments to the Interim Audit'Report 

Democratic Party of Illinois (LRA 887) 

Pages 

three listed conditions for depositing contributions into their federal account: the funds (1) were 

designated for the federal account; (2) resulted from a solicitation which expressly stated that the 

contribution would be used in connection with a federal election; or (3) were fiiom contributors 

who were informed that all contributions were subject to the prohibitions and limitations of the 

Act. 11 C.F.R. § 102.S(a)(2)(i)-(iii). The Explanation and Justification for this provision indicates 

that "the purpose of this regulation is to assure that funds placed in [the federal] account are from 

contributors who know the intended use of their contributions." Explanation and Justification for 

Organizations Financing Political Activity in Connection With Federal and Non-Federal 

Elections, Other Than Through Transfers and Joint Fundraisers: Accormt and Accounting, 67 Fed. 

Reg.49,073(July29,2002). 

Based on the information the auditors possess, we conclude that none of the funds the 

Committee received as a result of these events appear to meet the regulatory requirements for 

deposit in the Committee's federal account. We, therefore, conclude that the funds totaling $6,150 

that the Committee received and deposited in its federal account from the events benefiting the 

Friends of Michael J. Madigan Committee are impermissible and should be transferred to the 

Committee's nonfederal account. Id. 

C. The Proposed lAR Should Be Revised to Analyze the Remaining Six Fundraising 

Events Under a Different Standard 

The proposed lAR finds that the Committee received and deposited in its federal account 

funds from fundraising activity but that the federal account did not pay any costs associated with 

the fundraising activity. As discussed, above, four of the events in the proposed lAR were not 

Committee events. Therefore, our comments here address the six remaining fundraising events 

which the auditors advised this Office may be either joint fundraising events with other political 

committees or Committee fundraising events benefiting solely its federal and nonfederal accounts. 

The auditors lack sufficient information at this time to determine which category these events fall 

into. The auditors identify these events as follows: 

• WesPAC/IBEW Event held on February 24,2010; 

• Reza's Dinner held on August 12,2010; 

• Janssen Event held on September 28,2010; 

• Hospitality Event held on October 6,2010; 

• DC Event held on October 14,2010; and 

• DC 2009 Event held on a date unknown. 

The auditors said that with the exception of the WesPAC/IBEW Event, the Committee 

failed to document the costs of the fundraising events and the amounts that the Committee paid.^ 

' The auditors advised this Office that the Committee provided fundraising cost information for the 

WesPAOTBEW Event totaling S842.17. The auditors said that they were not able to determine whedier the 

Committee paid a share of the costs for the WesPAC/IBEW Event because the Committee did not provide any other 

details clarifying whether the $842.17 represented the total costs for the event or whether the amount represented an 

allocated portion of the costs. 
Comments to the Interim Audit Report 

Democratic Party of Illinois (LRA 887) 

Paged 

The proposed lAR notes that the Committee did not provide copies of written joint hindraising 

agreements identifying the fundraising repriesentatives, setting forth the allocation formulas, and 

setting forth the distribution percentages for the joint fundraising proceeds and expenses in 

accordance with 11 C.F.R. § 102.17(c)(1). The proposed lAR suggests that the funds the 

Conunittee deposited in its federal account may be permissible funds if the Committee 

demonstrates that it paid its share of the fundraising costs associated with each of the fundraising 

events. The proposed lAR recommends that the Committee document all of the costs of the 

fundraising events as well as who paid the costs. It further recommends that, absent such a 

demonstration, the funds deposited in the Committee's federal account be considered 

imperaiissible and that the Committee transfer the impermissible funds to its non-federal account. 

We do not believe the auditors possess sufficient information at this time to conclude that 

any of the six remaining fundraising events were joint fundraisers with other political committees. 

Despite the event solicitations directing contributors to make their checks payable to the 

"Democratic Party of Illinois," we do not have any information suggesting that the Committee was 

establishing fundraising events with other committees with the objective of shared costs and the 

benefit of shared proceeds.^ In addition, even though some of the solicitations request that 

contributors mail their checks to the event sponsor and/or include "paid for by" disclaimers, these 

statements do not establish that the events were joint fundraisers with other political committees. 

We recommend that the auditors revise the proposed lAR to specifically ask the 

Committee to identify which, if any, of the six events were joint flmdraising events with other 

political committees or which, if any, were Committee events benefiting solely its federal and 

nonfederal accounts. Given that the present facts show that the Committee deposited funds from 

these six events in its federal account, we also recommend the analysis in the proposed lAR be 

expanded to address two issues: First, the proposed lAR should consider whether the Committee 

complied with the requirements of 11 C.F.R. § 102.5(a)(2), as discussed in section II.B. above. 

Second, to the extent that there exists information showing that the Committee participated in a 

fundraising event for both its federal and non-federal accounts, whether the Committee properly 

allocated costs between the two accounts as required imder 11 C.F.R. § 106.7(d)(4). 

The CommiRee, in its exit conference response, said that the fundraising events were nonfederal in purpose.