FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20*63 

June 15, 2009 

MEMORANDUM 

TO: 

FROM: 

John D. Gibson 

Chief Compliance Officer 

Joseph F. Stoltz 

Assistant Staff Director 

Christopher Hughey 

Deputy General Counsel ' 

Lawrence L. Calvert, JCN^...„ 

Associate General C^unsi^ 

Lorenzo Holloway 

Assistant General Counse 

For .Piiblic Finance and Audit Advice 

Delanie DeWitt Painter ^ 

Attorney 

SUBJECT: Final Audit Report on Tennessee Republican Party (LRA # 745) 

1. INTRODUCTION 

The Office of General Counsel has reviewed the Final Audit Report ("Proposed Report") 

on the Tennessee Republican Party ("TRP"). We offer the following comments regarding 

Finding 3 (Excessive Coordinated Party Expenditures) in the Proposed Report. We concur with 

the Audit staff that TRP did not meet the volunteer materials exemption and recommend that the 

Audit staff revise tlie Proposed Report to: 1) summarize the Commission's actions in MUR 

5598; and 2) state that it appears that TRP might have made an excessive coordinated 

contribution of $716,093 but no further corrective action by TRP is necessary to resolve this 

finding. We concur with the remaining findings and issues in the Proposed Report not 

specifically addressed in this memorandum. If you have any questions, please contact Delanie 

DeWitt Painter, the attorney assigned to this audit.^ 

' The Office of General Counsel recommends tliat the Commission consider this document in open session 

since the Proposed Report does not include matters exempt from public disclosure. See 11 C.F.R. § 2.4. 
Memorandum to Joseph F. Stoltz 

Final Audit Report 

Tennessee Republican Party (LRA 745) 

Page 2 of4 

IL DIRECT MAIL EXPENSES DID NOT MEET THE VOLUNTEER MATERIALS 

EXEMPTION (Finding 3) 

The Proposed Report concludes that TRP exceeded the coordinated party expenditure 

limits by $716,093 because it paid for direct mail supporting Bob Corker for Senate which, the 

auditors contend, meets the content and common vendor conduct standards for coordinated 

expenditures. See 11 C.F.R§§ 109.37,109.21. TRP assigned its coordinated party expenditure 

limitation to the National Republican Senatorial Committee, which spent most of the combined 

limit on media supporting Bob Corker for Senate. The auditors questioned whether TRP 

disbursements to Creative Direct, LLC for direct mail which appears to support Bob Corker were 

excessive coordinated expenses because the Corker campaign had previously used the same 

vendor. In response to Audit questions, TRP and Creative Direct indicated tiiat they considered 

the direct mailings to be exempt volimteer activities. See 2 U.S.C. § 43 l(8)(B)(ix) and 

(9)(B)(viii); 11 C.F,R. §§ 100.87 and 100.147. In determining whether mailings qualify for the 

volunteer materials exemption, the Commission has considered whether there was sufficient 

volunteer involvement based on the specific facts and circumstances of the case, even where 

there was some involvement by a commercial vendor. If the direct mail pieces qualify for the 

volunteer materials exemption, the possible "common vendor" coordination issue would be 

immaterial because exempt activity may be coordinated, and TRP would not have exceeded the 

coordinated party expenditure limitations by paying for the direct mail. 

The Interim Audit Report ("lAR") requested additional information about the volmteer 

activities. In response, TRP described its procedures at the Victory Field office. TRP recruited 

volunteers and organized them to complete the following tasks: 1) unloaded boxes of unmarked 

mail (without stamps and addresses) from wrapped pallets and carried them into the office; 

2) stacked the boxes in the office; 3) sat at tables and applied the Tennessee Republican Party 

non-profit postage indicia with a hand operated ink stamp to each piece of mail; 4) placed the 

mail pieces back into boxes after they had been stamped with the party indicia; 5) stacked the 

boxes of mail near the door and 6) loaded the truck for delivery to the mail house to address the 

mail. A Volunteer Team Leader opened the boxes and stacked the mail on tables for the 

volunteers to stamp. TRP stated that during this process a volunteer physically touched each 

piece of mail to hand stamp it with the non-profit party indicia. The Audit Division concludes 

that this "limited participation" by volunteers does not meet the requirements of the volunteer 

materials exemption and that TRP made an excessive coordinated contribution and should seek 

reimbursement firom Bob Corker for Senate in the amount of $716,093. 

Following the Commission's approval of the lAR, the Commission considered the 

volunteer materials exemption in the context of Matter Under Review ("MUR") 5598. See 

Statement of Reasons of Coimnissioners Petersen, Bauerly, Hunter and Weintraub in MUR 

5598, Utah Republican Party et al. (April 9,2009)("MUR 5598 SOR"). That matter had very 

similar facts to the volunteer activity described by TRP here. In the Utah Republican Party 

("URP"). case, this Office concluded that the volunteer activity was not sufficient to meet the 

volunteer materials exemption. URP claimed that its mailers met the volunteer materials 

exemption because volunteers processed, sorted, and hand-stamped the mail pieces and delivered 
Memorandum to Joseph F. Stoltz 

Final Audit Report 

Tennessee Republican Party (LRA 745) 

Page 3 of 4 

them to the post office for mailing, but this Office's investigation found that URP's volunteers 

only stamped the bulk mail permit indicia on the mailers and helped load boxes of mailers into a 

truck that took the mailers back, to the mail vendor, which then printed addresses, sorted them by 

postal route and delivered them to the post office for mailing. Id. at 3. The majority of the 

Commission neither accepted nor rejected this Office's legal analysis but instead, concluded that 

there is great confiision in the regulated community about how much volunteer involvement is 

necessary to qualify for the exemption. The four Commissioners concluded that they **voted to 

dismiss this matter against all parties in an exercise of our prosecutorial discretion." MUR 5598 

SOR at 2, citing Heckler v. Chaney. 470 U.S. 821, 831 (1985). The Commissioners explained: 

The Office of the General Counsel concluded that the URP's mailers did not 

qualify for the exemption. URP stated that it believed that its actions were 

consistent with the exemption, and given the complicated history of the 

application of the volunteer materials exemption, we voted to dismiss this matter 

in an exercise of our prosecutorial discretion. See Heckler v. Chaney 470 U.S. 

821, 831 (1985). We plan to issue more detailed guidance to clarify the volimteer 

materials exemption and the circumstances in which it applies. 

Id at 4. 

MUR 5598 is not cited in the Proposed Report, but is only noted in the cover memorandum to 

this Office, which states that the Audit staff concluded that TRP did not meet the requirements 

for the volunteer materials exemption because the MUR 5598 SOR "is inconclusive as it does 

not address whether the activity by the volunteers did, or did not, meet the requirements for the 

exemption." 

This Office concurs with the Audit Division's conclusion that TRP's volunteer activity 

was not sufficient to meet the volunteer materials exemption. Our conclusion is consistent with 

this Office's analysis of the similar facts in MUR 5598. In both matters, the volunteers did little 

more than stamping the indicia on the direct mail pieces, and it appears that most of the 

processing and mailing was done by the direct mail vendor. This Office does not believe such 

minimal volunteer activity is sufficient to meet the volunteer materials exemption. Nevertheless, 

the Proposed Report should also acknowledge the outcome of MUR 5598. While the 

Commission did not expressly conclude in MUR 5598 that the volunteer activity was substantial 

enough to meet the volunteer materials exemption, it also did not conclude that the activity was 

not substantial enough to meet the exemption. Rather, the Commission discussed the 

"complicated history of the application of the volunteer materials exemption" and indicated a 

need for "more detailed guidance to clarify the volunteer materials exemption and the 

circumstances in which it applies." MUR 5598 SOR at 4. In the absence of that additional 

Commission guidance clarifying the application of the volunteer materials exemption, we do not 
Memorandum to Joseph F. Stoltz 

Final Audit Report 

Tennessee Republican Party (LRA 745) 

Page 4 of 4 

think this finding should be pursued fiirther in the audit process or in any other context that 

might otherwise be appropriate.^ 

We recommend that the Audit Division revise the Proposed Report at Finding 3. in two 

ways. First, the finding should sunmiarize the Commission's actions in MUR 5598. Second, the 

finding should be less definitive about the potential violation and conclude that it appears that 

TRP might have made an excessive coordinated contribution of $716,093 but no further 

corrective action by TRP is necessary to resolve this finding. 

^ Currently, the volunteer materials exemption issue is not the subject of any proposed rulemaking. If the 

Audit Division believes that this audit should be the vehicle in which the Commission issues fliis guidance, then the 

Audit Division should indicate this in the cover memorandum that forwards the Audit Report to the Commission.