FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

July 10,2009 

NIEMORANDUM 

To: Judith Ingram 

Press Officer 

From: Joseph F. Stoltz (}ttl

Assistant Staff ~r Audit Division 

Subject: Public Issuance of the Audit Report on Ciro D. Rodriquez for Congress 

Attached please find a copy of the audit report on Ciro D. Rodriquez for Congress, 

which was approved by the Commission on June 24, 2009. 

All parties involved have received informational copies of the report and the report 

may be released to the public July 10,2009. 

Attachment as stated 

cc:	 Office of General Counsel 

Office of Public Disclosure 

Reports Analysis Division 

FEC Library 

lTD Web 
Why the Audit 

Was Done 

Federal law permits the 

Commission to conduct 

audits and field 

investigations of any 

political committee that is 

required to file reports 

under the Federal 

Election Campaign Act 

(the Act). The 

Commission generally 

conducts such audits 

when a committee 

appears not to have met 

the threshold 

requirements for 

substantial compliance 

with the Act. 1 The audit 

determines whether the 

committee complied with 

the limitations, 

prohibitions and 

disclosure requirements 

ofthe Act. 

Future Action 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to any ofthe 

matters discussed in this 

report. 

Report of the 

Audit Division on 

Ciro D. Rodriguez for Congress 

January 1, 2005 - December 31,2006 

About the Campaign (p. 2)
 

Ciro D. Rodriguez for Congress (CRFC) is the principal
 

campaign committee for Ciro D. Rodriguez, Democratic
 

candidate for the U.S. House of Representatives from the state of
 

Texas, n'd District and is headquartered in San Antonio, Texas.
 

For more information, see the Campaign Organization Chart, p. 2.
 

Financial Activity (p. 2) 

•	 Receipts 

o	 Contributions from Individuals $858,616 

o	 Contributions from Political 

Committees 700,144 

o	 Loans by the Candidate 35,585 

o	 Other Receipts 35,536 

o	 Total Receipts $ 1,629,881 

•	 Disbursements 

o Operating Expenditures	 $ 1,410,590 

o Loan Repayments	 35,585 

o	 Other Disbursements 5,200 

o	 Total Disbursements $ 1,451,375 

Findings and Recommendations (p.3) 

•	 Misstatement of Financial Activity (Finding I) 

•	 Failure to file 48-Hour Notices (Finding 2) 

•	 Impermissible Contributions (Finding 3) 

•	 Impermissible Receipt and Use of Funds (Finding 4) 

I 2 U.S.c. §438(b). 
Table of Contents 

Part I. Background 

Authority for Audit
 

Scope of Audit
 

Part II. Overview of Campaign 

Campaign Organization
 

Overview of Financial Activity
 

Part III. Summaries 

Findings and Recommendations 

Part IV. Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

Finding 2. Failure to File 48-Hour Notices 

Finding 3. Impermissible Contributions 

Finding 4. Impermissible Receipt and Use of Funds 

Page 

2
 

2
 

3
 

5
 

7
 

8
 

10
 
Part I 

Background 

Authority for Audit 

This report is based on an audit of the Ciro D. Rodriguez for Congress (CRFC), 

undertaken by the Audit Division of the Federal Election Commission (the Commission) 

in accordance with the Federal Election Campaign Act of 1971, as amended (the Act). 

The Audit Division conducted the audit pursuant to 2 USC. §438(b), which permits the 

Commission to conduct audits and field investigations of any political committee that is 

required to file a report under 2 USc. §434. Prior to conducting any audit under this 

subsection, the Commission must perform an internal review of reports filed by selected 

committees to determine if the reports filed by a particular committee meet the threshold 

requirements for substantial compliance with the Act. 2 U.S.c. §438(b). 

Scope of Audit 

This audit examined: 

1. The receipt of excessive contributions and loans. 

2. The receipt of contributions from prohibited sources. 

3. The disclosure of contributions received. 

4. The disclosure of disbursements, debts and obligations. 

5. The consistency between reported figures and bank records. 

6. The completeness of records. 

7. Other committee operations necessary to the review. 
2 

Part II 

Overview of Campaign 

Campaign Organization 

Important Dates Ciro D. Rodriauez for Conzress 

• Date of Registration February 5, 1997 

• Audit Coverage January I, 2005 - December 31, 2006 

Headquarters San Antonio, Texas 

Bank Information 

• Bank Depositories One 

• Bank Accounts Three checking & One investment 

account 

Treasurer 

• Treasurer When Audit Was Conducted Luis Vera 

• Treasurer During Period Covered by Audit Juan Jose Amaro (Ill/OS to 10/23/06) 

Luis Vera (10/24/06 to Present) 

Manazement Information 

• Attended FEC Campaign Finance Seminar Yes (Subsequent to the audit period) 

• Used Commonly Available Campaign 

Management Software Package 

Yes 

•	 Who Handled Accounting and Paid Staff 

Recordkeeping Tasks 

Overview of Financial Activity 

(Audited Amounts) 

Cash on hand (iiJ January 1,2005 $ 3,285 

0 Contributions from Individuals 858,616 

0 Contributions from Political Committees 700,144 

0 Loans by the Candidate 35,585 

0 Other Receipts 35,536 

Total Receipts $1,629,881 

0 Operating Expenditures 1,410,590 

0 Loan Repayment 35,585 

0 Other Disbursements 5,200 

Total Disbursements $ 1,451,375 

Cash on hand @ December 31, 2006 $ 181,791 
3 

Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

A comparison of CRFC's reported activity to bank records revealed that CRFC 

understated receipts by $43,317 in 2005 and overstated receipts by $56,824 in 2006. 

Disbursements were also overstated by the net amount of $13, 170 in 2006. Beginning 

cash on hand for 2005 was overstated by $7,840 and ending cash on hand for 2006 was 

overstated by $9,141. A comparison ofCRFC's original reports to bank records for 2006 

also revealed that disbursements were understated by $382,827. The Audit staff 

recommended that CRFC amend its reports to correct the misstatements for 2005 and 

2006 and also provide any additional information or comments that it considers relevant 

to its underreporting of disbursements on its original reports in 2006. In response to the 

interim audit report, CRFC filed amended reports to materially correct the misstatements 

in 2005 and 2006. Counsel for CRFC stated that problems with reporting software may 

have created the understatement of disbursements on their original reports. (For more 

detail, see p. 5) 

Finding 2. Failure to File 48-Hour Notices 

CRFC failed to file 48-hour notices for 49 contributions totaling $75,200. Most of the 

notices not filed were for contributions made prior to the run-off election. The Audit 

staff recommended that CRFC provide evidence that the 48-hour notices were timely 

filed or provide any comments that it believes relevant. In response to the interim audit 

report, counsel for CRFC stated that CRFC had received an unusually high volume of 

contributions prior to the run-off election which they were not accustomed to handling. 

(For more detail, see p. 7) 

Finding 3. Impermissible Contributions 

The Audit staff identified contributions totaling $89,150 that CRFC redesignated to the 

2006 primary election. These contributions were received in 2004 and originally 

designated to the 2004 general election. After a contested 2004 primary election, the 

Candidate did not win his Party's nomination and therefore did not participate in the 2004 

general election. Any contribution received for that election should have been refunded 

to the contributors or redesignated to another election within sixty days. CRFC did not 

refund or provide documentation of redesignations for any of these contributions prior to 

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

CRFC refund the contributions or disgorge the money to the U.S. Treasury. In response 

to the interim audit report, counsel for CRFC stated that CRFC was unable to identify 

redesignation letters sent or obtained for the 2004 election cycle. As a result, CRFC 

issued contribution refunds totaling $89,150 to those contributors identified by the Audit 

staff. Of these contribution refunds, $75,400 has cleared CRFC's account. Any 

contribution refunds that CRFC fails to provide evidence as being negotiated are 

considered unresolved and the sum of such amounts should be disgorged to the U.S. 

Treasury. (For more detail, see p. 8) 
4 

Finding 4. Impermissible Receipt and Use of Funds 

The Audit staff identified $6,460 that was impermissibly transferred from the Candidate's 

Legal Expense Trust Account on April 19, 2006. This account was established for 

expenses related to a recount of the votes cast in the 2004 primary election for the 28th 

district in Texas. The transfer was reported by CRFC as part of a loan from the 

Candidate which was subsequently repaid on December 5, 2006. The Audit staff 

recommended that CRFC seek reimbursement ofthe $6,460 from the Candidate and then 

either make refunds to the funds donors or disgorge the funds to the U.S. Treasury, or 

dispose of the funds in a manner not related to Federal elections. Evidence was also to be 

provided to demonstrate the Candidate did not convert the $6,460 from CRFC to personal 

use and that the Candidate's use of the funds was permitted under the Act. In response to 

the interim audit report, CRFC received reimbursement of $6,460 from the Candidate and 

subsequently made a payment to the' U.S. Treasury for the same amount. The 

Commission did not adopt the conclusion of the Audit staff regarding the personal use of 

campaign funds by the Candidate. 

(For more detail, see p. 10) 
5 

Part IV
 

Findings and Recommendations
 

I Finding 1. Misstatement of Financial Activity 

Summary 

A comparison ofCRFC's reported activity to bank records revealed that CRFC 

understated receipts by $43,317 in 2005 and overstated receipts by $56,824 in 2006. 

Disbursements were also overstated by the net amount of $13, 170 in 2006. Beginning 

cash on hand for 2005 was overstated by $7,840 and ending cash on hand for 2006 was 

overstated by $9,141. A comparison of CRFC's original reports to bank records for 2006 

also revealed that disbursements were understated by $382,827. The Audit staff 

recommended that CRFC amend its reports to correct the misstatements for 2005 and 

2006 and also provide any additional information or comments that it considers relevant 

to its underreporting of disbursements on its original reports in 2006. ln response to the 

interim audit report, CRFC filed amended reports to materially correct the misstatements 

in 2005 and 2006. Counsel for CRFC stated that problems with reporting software may 

have created the understatement of disbursements on their original reports. 

Legal Standard 

Contents of Reports. Each report must disclose: 

•	 The amount of cash on hand at the beginning and end of the reporting period; 

•	 The total amount of receipts for the reporting period and for the calendar year; and 

•	 The total amount of disbursements for the reporting period and for the calendar year; 

•	 Certain transactions that require itemization on Schedule A (Itemized Receipts) or 

Schedule B (Itemized Disbursements). 2 U.S.C. §434(b)(l), (2), (3), (4) and (5). 

Facts and Analysis 

The Audit staff reconciled CRFC's reported financial activity to its bank records for 2005 

and 2006. This reconciliation was based on the latest amended reports filed prior to 

notification of the audit. The audit disclosed that CRFC materially misstated receipts in 

both years and disbursements in 2006. The following charts outline the discrepancies for 

each year and provide explanations for the materially misstated activity. 

2005 Activity 

Reported Bank Records Discrepancy 

Opening Cash Balance 

@J January I, 2005 

$11,125 $3,285 $7,840 

Overstated 

Receipts $192,382 $235,699 $43,317 

Understated 

Disbursements $160,436 $161,400 $964 

Understated 

Ending Cash Balance 

@JDecember 31,2005 

$43,071 $77,584 $34,513 

Understated 
6 

The net understatement of receipts was the result of the following: 

• Contributions from individuals not reported + $23,741 

• Contributions from political committees not reported + 20,550 

• Contribution reported with incorrect amount 1,000 

• Unexplained difference + 26 

• Net Understatement of Receipts $43,317 

2006 Activity 

Reported Bank Records Discrepancy 

Opening Cash Balance 

(Q), January I, 2006 

$43,071. $77,584 $34,513 

Understated 

Receipts $1,451,006 $1,394,182 $56,824 

Overstated 

Disbursements $1,303,145 $1,289,975 $13,170 

Overstated 

Ending Cash Balance 

@J December 31, 2006 

$190,932 $181,791 $9,141 

Overstated 

The net overstatement of receipts was the result of the following: 

• Disbursement incorrectly reported as a receipt $41,500 

• Contributions from individuals over-reported (Net) 2 29,128 

• Contributions from political committees underreported (Net) + 19,279 

• Contributions from the Candidate not traced to deposits 225 

• Unexplained difference 5,250 

• Net Overstatement of Receipts $56,824 

The net understatement of disbursements was the result of the following: 

• Disbursements not reported + $34,814 

• Disbursement incorrectly reported as a receipt + 41,500 

Disbursement reported twice 51,909 

• Disbursements reported but not traced to bank activity" 32,578 

• Disbursements reported with incorrect amount (Net) + 975 

• Unexplained differences 5,972 

• Net Overstatement of Disbursements $13,170 

Cash Balance: 

The beginning cash on hand on January 1,2005 was overstated by $7,840 and likely 

resulted from prior period adjustments. The reporting discrepancies identified above also 

2 Most of the overstatement appears to be for unitemized contributions reported in the April Quarterly 

Report. CRFC did not provide workpapers detailing the contributions to support reported amounts for 

unitemized contributions from individuals. 

3 Some of this amount consisted of credit card expenses that should have been reported as memo entries. 

CFC erroneously reported both the individual credit card expenses and the associated credit card payment. 
7 

resulted in the misstatement of the reported cash balance throughout the period covered 

by the audit. On December 31,2006, the cash balance was overstated by $9,141. 

Original Reports Filed: 

In addition to the reconciliation of amended reports, the Audit staff compared CRFC's 

original disclosure reports filed to bank records. This comparison revealed that CRFC 

originally underreported disbursements by $382,827 in 2006. A CRFC representative 

stated that the misstatements on the original reports were likely due to problems with the 

campaign finance software. CRFC filed amended reports prior to the audit to correct the 

majority of these misstatements. 

At the exit conference, the Audit staff provided CRFC representatives with schedules of 

the reporting discrepancies. In response, CRFC representatives stated the reporting errors 

would be corrected and amended reports would be filed. 

Interim Audit Report Recommendation and Response 

The Audit staff recommended that CRFC amend its reports to correct the misstatements 

noted above and also provide any additional information or comments that it considers 

relevant to its underreporting of disbursements on its original reports in 2006 . 

In response to the interim audit report, CRFC filed amended reports to materially correct 

the misstatements in 2005 and 2006. Counsel for CRFC stated that problems with 

reporting software may have created the large understatement of disbursements on their 

original reports. 

I Finding 2. Failure to File 48-Hour Notices 

Summary 

CRFC failed to file 48-hour notices for 49 contributions totaling $75,200. Most of the 

notices not filed were for contributions made prior to the run-off election. The Audit 

staff recommended that CRFC provide evidence that the 48-hour notices were timely 

filed or provide any comments that itbelieves relevant. In response to the interim audit 

report, counsel for CRFC stated that CRFC had received an unusually high volume of 

contributions prior to the run-off election which they were not accustomed to handling. 

Legal Standard 

Last-Minute Contributions (48-Hour Notice). Campaign committees must file special 

notices regarding contributions of $1,000 or more received less than 20 days but more 

than 48 hours before any election in which the candidate is running. This rule applies to 

all types of contributions to any authorized committee of the candidate, including: 

• Contributions from the candidate; 

• Loans from the candidate and other non-bank sources; and 

• Endorsements or guarantees of loans from banks. 11 CFR §104.5(f). 
8 

Facts and Analysis 

The Audit staff reviewed those contributions of $1,000 or more that were received during 

the 48-hour notice filing period for the primary, general, and run-off elections. CRFC 

failed to file 48-hour notices for 49 contributions totaling $75,200, as summarized below. 

Primary General Run-off Total 

48 Hour Notices Not Filed $4,000 

(4) 

$3,000 

(3) 

$68,200 

(42) 

$75,200 

(49) 

At the exit conference, CRFC representatives were informed of this matter. A CRFC 

representative noted that many of the 48-hour notices were filed properly and the failure 

to file the notices prior to the run-off was due to the bookkeeper being sick. 

Interim Audit Report Recommendation and Response 

The Audit staff recommended that CRFC provide evidence that the 48-hour notices were 

timely filed or submit any additional comments it considers relevant. 

In response to the interim audit report, CRFC stated that in addition to the reasons stated 

above, CRFC had received an unusually high volume of contributions prior to the run-off 

election which they were not accustomed to handling. 

IFinding 3. Impermissible Contributions 

Summary 

The Audit staff identified contributions totaling $89, ISO that CRFC redesignated to the 

2006 primary election. These contributions were received in 2004 and originally 

designated to the 2004 general election. After a contested 2004 primary election, the 

Candidate did not win his Party's nomination and therefore did not participate in the 2004 

general election. Any contribution received for that election should have been refunded 

to the contributors or redesignated to another election within sixty days. CRFC did not 

refund or provide documentation of redesignations for any of these contributions prior to 

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

CRFC refund the-contributions or disgorge the money to the U.S. Treasury. In response 

to the interim audit report, counsel for CRFC stated that CRFC was unable to identify 

redesignation letters sent or obtained for the 2004 election cycle. As a result, CRFC 

issued contribution refunds totaling $89,150 to those contributors identified by the Audit 

staff. Of these contribution refunds, $75,400 has cleared CRFC's account. Any 

contribution refunds that CRFC fails to provide evidence as being negotiated are 

considered unresolved and the sum of such amounts should be disgorged to the U.S. 

Treasury. 

Legal Standard 

A. Contributions to General Election. Any contributions designated to a general 

election for which the candidate is no longer campaigning shall be refunded to the 

contributor or the committee can request a written redesignation to another election. 

11 CFR §§102.9(e)(3) and 110.l(b)(5). 
9 

B. Redesignation of Contributions. The treasurer of an authorized political committee 

may request a written redesignation of a contribution by the contributor for a different 

election. A valid redesignation must include the following: 

I.	 The redesignation must be signed by the contributor; 

2.	 The redesignation must be received by the committee within 60 days after the 

committee received the original contribution"; and 

3.	 The contributor may instead request a refund of the excessive amount. II CFR 

§110.I(b)(5). 

Within 60 days after receiving the excessive contribution, the committee must either 

receive the proper redesignation or refund the excessive portion to the donor. 11 CFR 

§§103.3(b)(3) and 110.I(b)(5)(ii)(A). Further, a political committee must retain written 

records concerning the redesignation in order for it to be effective. 11 CFR §11 0.1(1)(5). 

Facts and Analysis 

The Candidate was on the ballot for the primary election for the 28th district in Texas 

held on March 9, 2004. Initially, it appeared that the Candidate won the primary election, 

however, a recount was conducted and, on April 6, 2004, it was announced that that he 

had been defeated. Thereafter, the Candidate filed several lawsuits to dispute the election 

results. The Candidate ultimately lost these court decisions and conceded the election on 

August 11, 2004. As of that date, the Candidate was no longer a participant in the 2004 

general election and was required to refund or obtain contributor redesignations for 

contributions designated for that election within sixty days. 

The Audit staff provided CRFC a list of contributions totaling $89,150 that had been 

designated for the 2004 general election. These contributions were subsequently 

redesignated to the 2006 primary election according to the amended reports filed in 

November 2004. The Audit staff requested that CRFC provide documentation to support 

that refunds were made or redesignations of these contributions to another election were 

received. CRFC provided no documentation or information regarding this matter. 

Interim Audit Report Recommendation and Response 

The Audit staff recommended that CRFC provide evidence that the contributions are 

permissible. Such evidence was to demonstrate that CRFC refunded the contributions or 

obtained signed redesignations for the contributions within sixty days. Absent such 

evidence, the Audit staff recommended that CRFC refund the contributions or disgorge 

the money to the U.S. Treasury. Copies of the front and back ofthe negotiated refund 

checks was to be provided. 

In response to the interim audit report, counsel for CRFC stated that CRFC was unable to 

identify redesignation letters sent or obtained for the 2004 election cycle. As a result, 

CRFC issued refunds totaling $89,150 to those contributors identified by the Audit staff. 

Of these contribution refunds, $75,400 has cleared CRFC's account. Any contribution 

4 Since the outcome of the 2004 primary election was not ultimately decided until August 11,2004, CRFC 

was allowed 60 days from this date to refund or redesignate the contributions for the 2004 general 

election to the 2006 primary election. 
10 

refunds that CRFC fails to provide evidence as being negotiated are considered
 

unresolved and the sum of such amounts should be disgorged to the u.s. Treasury.
 

[ Finding 4. Impermissible Receipt and Use of Funds 

Summary 

The Audit staff identified $6,460 that was impermissibly transferred from the Candidate's 

Legal Expense Trust Account on April 19,2006. This account was established for 

expenses related to a recount of the votes cast in the 2004 primary election for the 28th 

district in Texas. The transfer was reported by CRFC as part of a loan from the 

Candidate which was subsequently repaid on December 5, 2006. The Audit staff 

recommended that CRFC seek reimbursement of the $6,460 from the Candidate and then 

either make refunds to the funds donors or disgorge the funds to the U.s. Treasury, or 

dispose of the funds in a manner not related to Federal elections. Evidence was also to be 

provided to demonstrate the Candidate did not convert the $6,460 from CRFC to personal 

use and that the Candidate's use of the funds was permitted under the Act. In response to 

the interim audit report, CRFC received reimbursement of $6,460 from the Candidate and 

subsequently made a payment to the U.S. Treasury for the same amount. The 

Commission did not adopt the conclusion of the Audit staff regarding the personal use of 

campaign funds by the Candidate. 

Legal Standard 

A. Receipt of Funds Not Subject to the Act. Federal candidates and officeholders may 

not solicit, receive, direct, transfer, or spend funds in connection with an election for 

Federal office unless the funds are subject to the limitations, prohibitions, and reporting 

requirements of the Act. 2 U.S.C. §44Ii(e)(l)(A). 

B. Advisory Opinion 1978-92 (Miller). The Commission concluded that any funds 

received by a separate organizational entity established by the candidate's authorized 

committee solely for the purposes of funding an election recount effort would not be 

subject to the contribution limitations of 2 U.S.c. §441 a, and would not trigger political 

committee status or reporting obligations for the separate election recount entity. The 

Commission also concluded that the separate recount entity could not accept funds from 

corporations, labor organizations. and national banks. 

C. Advisory Opinion 1998-26 (Landrieu). The Commission considered a candidate's 

principal campaign committee that established, as a wholly separate entity, a contested 

election trust fund. The Commission concluded that the trust fund was not subject to 

reporting requirements and could accept amounts in excess of the contribution limitations 

in 2 U.S.C. 441a, but could not accept funds from prohibited sources, as specified in the 

predecessors to the recount regulations, II CFR §§ I00.7(b)(20) and 100.8(b)(20). 

D. Use of Campaign Funds. Using campaign funds for personal use is prohibited. 2 

U.S.c. §439a(b)(l). 

E. Personal Use Defined. Personal use is defined as any use of funds in a campaign 

account of a present or former candidate to fulfill a commitment, obligation or expense of 
11 

any person that would exist irrespective of the candidate's campaign or duties as a 

Federal officeholder. 

Facts and Analysis 

As previously noted in Finding 3, the Candidate was involved in a 2004 primary election 

recount for the 28th district in Texas. CRFC established a separate Legal Expense Trust 

Account solely for activity associated with the ejection recount. After expenses relating 

to the recount and subsequent judicial proceedings were paid, the account had a balance 

of $6,460. On April 19, 2006, CRFC received an impermissible transfer of $6,460 from 

the Candidate's Legal Expense Trust Account. Also on that date, CRFC reported the 

receipt of a Candidate loan for this same amount. This Candidate loan was ultimately 

repaid to the Candidate on December 5, 2006. It is noted that CRFC did not maintain a 

sufficient cash balance to cover the apparent impermissible amount which indicates the 

funds were spent in connection with the 2006 primary election. Because the funds in the 

Legal Expense Trust Account were not subject to the limitations, prohibitions, and 

reporting requirements of the Act, CRFC should not have received or spent them in 

connection with the 2006 primary election. 

In addition to receiving and spending funds not subject to the Act, the repayment to the 

Candidate may have resulted in the conversion offunds in CRFC's account to the 

Candidate's personal use. In accordance with 2 U.S.c. §439a(a), Candidates may only 

use funds in a campaign account for certain expenditures that exist as a result of the 

candidate's election campaign or duties as a Federal officeholder. 

This matter was discussed with CRFC by representatives of the Reports Analysis 

Division and Audit Division. In both instances, the FEC staff informed CRFC that the 

transfer of $6,460 was not permissible and may require a refund or disgorgement to the 

U.S. Treasury. CRFC representatives have expressed a willingness to handle the 

transaction as deemed appropriate. 

Interim Audit Report Recommendation and Response 

The Audit staff recommended that CRFC seek reimbursement of the $6,460 from the 

Candidate and then either make refunds to the donors, disgorge the funds to the U.S. 

Treasury, or dispose of the funds in a manner not related to Federal elections. Evidence 

was also to be provided to demonstrate the Candidate did not convert the $6,460 from 

CRFC to personal use. To do this, CRFC should provide evidence that the Candidate's 

use of the funds from CRFC was permitted under 2 U.S.c. § 439a(a) or 11 CFR §113.2. 

In response to the interim audit report, CRFC received reimbursement of $6,460 from the 

Candidate and subsequently made a payment to the U.S. Treasury for the same amount. 

Counsel for CRFC maintains that the funds in the Legal Expense Trust Account were 

deposited in the CRFC campaign account and subsequently paid to the Candidate in 

error. Counsel for CRFC explained that the transfer of the funds from the Legal Expense 

Trust Account to CRFC was the result of incorrect advice offered by private, local 

counsel to the legal expense trust. The subsequent misreporting of the funds was the 

result of an error made by the CRFC personnel. Counsel for CRFC contends that since 

the $6,460 was not campaign funds, but rather surplus legal expense funds, there is no 

basis for the personal use of the funds by the Candidate. 
12 

The Audit staff maintains that personal use restrictions are applicable to these CRFC 

funds that were paid directly to the Candidate. However, it is noted that there is no 

evidence the Candidate or CRFC intentionally converted campaign funds to personal use. 

Rather, the conversion of campaign funds was a result of two errors related to the initial 

payment from the Legal Expense Trust Account:(l) the initial mistake of law by the 

CRFC, which is addressed by 2 U.S.c. §44Ii(e)(l)(A); and (2) the misreporting ofthe 

payment from the Legal Expense Trust Account. Had either of these two errors not 

occurred, the Legal Expense Trust Account could have permissibly paid its residual funds 

directly to the Candidate, subject to applicable state laws. 

The Commission did not adopt the conclusion of the Audit staff regarding the personal 

use of campaign funds by the Candidate.