FEDERAL ELECTION COMMISSiON 

WASHINGTON, D.C. 20463 

MEMORANDUM 

December 8, 2009 

TO: 

THROUGH: 

FROM: 

SUBJECT: 

John D. Gibson 

Chief Compliance Officer 

Joseph F. Stoltz 

Assistant StaffDirector 

Audit Division 

D. Alec Palmer ^Jj^ ^ 

Acting StaffDirector . 

Christopher Hughey 

Deputy General Counsel ^ 

Lawrence L. Calvert, Jr.^ 

Associate General Cou; 

General Law and Advice 

Lorenzo Holloway ^^^^^ 

Assistant General Counsel 

Public Finance and Audit Advice 

Allison T. Steinle 

Attomey 

Proposed Final Audit Report on Biden for President, Inc. (LRA 742) 

L INTRODUCTION 

The Office of the General Counsel has reviewed the proposed Final Audit Report 

("FAR") ofthe Audit Division on Biden for President, Inc. ("the Committee"),' which you 

submitted to this Office on August 31,2009. Our comments address Finding 1 (Net 

Outstanding Campaign Obligations) and Finding 2 (Receipt of Contributions tiiat Exceed 

' This audit pertains to Mr. Biden's campaign for the Office of President in the primary election. It 

does not pertain to Mr. Biden's can^aign for the Office of Vice President in the general election. 
Memorandum to John D. Gibson and Joseph F. Stoltz 

Proposed FAR on Biden for President, Inc. (LRA 742) 

Page 2 of6 

Limits). We concur with any portion of findings not specifically discussed in this 

memorandum. If you have any questions, please contact Allison T. Steinle, the attomey 

assigned to this audit. 

IL FINDING 1 - NET OUTSTANDING CAMPAIGN OBLIGATIONS 

The Committee accepted private general election contributions during the primary 

election period under the conditions set forth in Advisory Opinion ("AO") 2007-03 

(Obama). When Mr. Biden withdrew from the Presidential primary race on January 3, 

2008, the Committee was required to refund or redesignate those contributions. See 11 

CF.R. § 102.9(e)(3); AO 2008-04 (Dodd); AO 2007-03 (Obama); AO 2003-18 (Smith). 

Although it is not clear from the proposed FAR, we understand that the Committee's 

Statement of Net Outstanding Campaign Obhgations (**NOCO Statement") cunently 

includes the private general election contributions as part of cash on hand, and the 

subsequent general election refunds and redesignations as part of accounts payable. The 

Audit Division's cover memorandum to the proposed FAR raises the question of whether 

these general election contributions, refunds, and redesignations should be included in the 

NOCO Statement. 

There is nothing that legally either requires or prohibits the inclusion of general 

election contributions, refunds, and redesignations in the NOCO Statement.^ See 11 

C.F.R. § 9034.5. Thus, we conclude that the Audit Division may take either approach, 

provided that, ifthe general election contributions and any subsequent refund and 

redesignation obligations are included in the NOCO Statement, they net each other out as 

assets (cash on hand) and liabilities (accounts payable). 

In our opinion, however, it appears that excluding private general election 

contributions, refunds, and redesignations from the NOCO Statement is the approach most 

consistent with both the purpose ofthe NOCO Statement and two recent Commission AOs 

addressing the receipt of general election contributions by Presidential primary candidates. 

The purpose of a NOCO Statement is to determine a candidate's fmancial status and 

entitlement to matching funds after the DOI with respect to that candidate's participation in 

the primary election under the Presidential Matching Payment Account Act ("Matching 

Payment Program"). See 11 CF.R. § 9034.5; Explanation and Justification for 11 CF.R. § 

9034.5,44 Fed. Reg. 20,336,20,340 (Apr. 4,1979). Although section 9034.5 does not 

explicitiy exclude private contributions made for the general election from the funds that 

should be included on the NOCO Statement, contributions designated for the general 

election but received during the primary election period should not affect a candidate's 

financial status or entitiement to matching funds with respect to the primary election. 

While the Commission allows a candidate participating in the Matching Payment Program 

to raise general election contributions during the primary election period, once the 

candidate fails to qualify for the general election or elects to receive public financing for 

^ This applies both to NOCO Statements submitted by committees after their dates of ineligibility 

("DOI") in support of their requests for matching funds, and to the NOCO Statements as adjusted by the 

Audit Division that are included in its audit report of any publicly financed presidential primary committee. 
Memorandum to John D. Gibson and Joseph F. Stoltz 

Proposed FAR on Biden for President, Inc. (LRA 742) 

Page 3 of6 

the general election, the general election contributions become impennissible funds that 

must be refunded, redesignated, or disgorged. See AO 2008-04 (Dodd); AO 2007-03 

(Obama); AO 2003-18 (Smith). For this reason, a candidate who is participating in the 

Matching Payment Program is required to use an acceptable accounting method to 

distinguish between contributions designated for the primary and contributions designated 

for the general election, must limit access to the general funds, and may not use the general 

fiinds for any purpose. See 11 C.F.R. § 102.9(e); AO 2008-04 (Dodd); AO 2007-03 

(Obama). Assuming that a committee has adequately segregated general election 

contributions from its primary election funds as required by section 102.9(e) and AO 2007-

03, the general election contributions and any obligations to make general election refunds 

or redesignations should net each other out as assets and liabilities and thus should neither 

increase nor decrease the amount of post-DOI matching funds to which a committee may 

otherwise be entitled. 

Based on the above analysis, we believe that the general election contributions, and 

the conesponding obligation to refund them that attaches to the campaign of an 

unsuccessful primary candidacy, should not be included in the NOCO Statement as a 

matter of policy.^ Again, however, there is nothing that legally prevents these amounts 

from being included in the NOCO Statement. See 11 CF.R. § 9034.5. Accordingly, the 

Audit Division may elect to include these amounts in the NOC^O Statement, so long as the 

general election contributions and any obligations to make general election refunds or 

redesignations net each other out as assets and liabilities. 

IL FINDING 2 - RECEIPT OF CONTRIBUTIONS THAT EXCEED LIMITS 

A. THE FAR SHOULD INCLUDE ADDITIONAL DETAIL ABOUT WHY 

THE ONLINE CONTRIBUTION SCREEN DID NOT PROVIDE 

ENOUGH INFORMATION TO ATTRIBUTE CONTRIBUTIONS TO 

OTHER CONTRIBUTORS OR DESIGNATE A PORTION OF 

EXCESSIVE PRIMARY CONTRIBUTIONS TO THE GENERAL 

Finding 2 in the proposed FAR includes a projected dollar value of $106,016 in 

unresolved excessive contributions. This number includes sample enors related to 

contributions received through the Committee's online contribution screen. Consistent 

with the Commission's conclusion in the Preliminary Audit Report ("PAR"), the proposed 

FAR states that these enors are because "the website did not provide sufficient notice to 

the contributor to constitute an attribution of a portion of the contribution to another person 

or to designate a portion of the contribution to the general election." Proposed FAR at 12. 

^ We recognize that one disadvantage to this approach is that it fails to provide an accurate "overall" 

picture ofthe Committee's financial status. However, this concem could be addressed by the Audit Division 

by adding an accompanying foomote to the NOCO Statement that explains the existence of the additional 

general election funds. Moreover, the general election funds will be reflected on the Committee's disclosure 

reports. 
Memorandum to John D. Gibson and Joseph F. Stoltz 

Proposed FAR on Biden for President, Inc. (LRA 742) 

Page 4 of 6 

Regarding the attribution problem, we recommend that the proposed FAR include 

more detail about the sample enors, if any, related to the attribution of joint contributions, 

and explain how the attribution problem is related to the Committee's online contribution 

screen. See 11 CF.R. § 110.l(k). 

Regarding the designation problem, while we concur with the Audit Division that 

the online contribution screen did not provide enough information to properly designate 

the excessive primary election contributions, we recommend that the proposed FAR 

include more detail about why the online contribution screen was inadequate. Specifically, 

we know that the Committee's online contribution screen stated that the Committee could 

"accept contributions from an individual totaling up [to] $2,300 per election." It did not 

state that an individual could contribute $2,300 to the primary election and $2,300 to the 

general election or a total of $4,600 to both elections, and failed to provide an opportunity 

for the contributor to designate a contribution for each election. Accordingly, we carmot 

discem whether a contributor intended to contribute part of his or her contribution to the 

general election when that contribution was made during the primary election period. See 

11 CF.R. § 110.1(b)(2)(ii); Explanation and Justification for 11 CF.R. § 110.1(b), 52 Fed. 

Reg. 760,763 (Jan. 9,1987) (stating that for a contributor to "effectuate a designation," a 

committee may provide a preprinted form "that clearly states the election to which the 

contribution will be applied"); cf. FAR on Craig Romero for Congress, Inc. (Oct. 18,2007) 

(concluding that that a contributor fact sheet with language statmg that it would allow "an 

individual donor to make a contnbution of $6,000 before [the primary election date], 

designating $2,000 to each ofthe [primary, general, and mnoff] election cycles" was 

sufficient to show contributor intent). The contrast between the contribution screen here 

and the detailed contributor notice at issue in the Romero audit is particularly compelling. 

The notice in Romero explained clearly the limits with respect to each election for which 

the candidate sought contributions, permitting an inference that a contribution above the 

primary election limit was intended for a later election. The screen here contained no such 

detail. 

B. ADDITIONAL DECLARATIONS PROVIDED BY THE COMMITTEE 

ARE NOT SUFFICIENT TO ESTABLISH THAT THE COMMITTEE 

TIMELY SENT PRESUMPTIVE REDESIGNATIONS 

Finding 2 in the proposed FAR also includes a projected dollar value of $1,092,899 

in late resolved excessive contributions. The Committee received undesignated 

contributions prior to the primary election greater than the primary election contribution 

limit and treated these contributions as redesignated to the general election. After Mr. 

Biden withdrew from the Presidential primary race, the Committee then obtained written 

redesignations from these contributors to redesignate the contributions to Mr. Biden's 2008 

Senate elections. The Committee claims that it sent presumptive redesignation letters to 

the contributors that would authorize the redesignations from the Presidential primary 

election to the Presidential general election, but has not been able to produce them for the 

auditors. The Committee was able to produce redesignation forms completed by the 

contributors authorizing the Committee to redesignate Presidential general election 

contributions to tiie 2008 Senate primary election, or to the 2008 Senate general election to 
Memorandum to John D. Gibson and Joseph F. Stoltz 

Proposed FAR on Biden for President, Inc. (LRA 742) 

Page 5 of6 

the extent that the contribution to the Senate primary election would result in an excessive 

contribution. Consequentiy, the PAR concluded that the Presidential general to Senate 

written redesignations were the functional equivalent of imtimely presumptive 

redesignatons of these same contributions from the Presidential primary to the Presidential 

general. 

In response to the PAR, the Committee has submitted swom declarations from four 

contributors and a staff member that it claims are sufficient to establish that the untimely 

resolved excessive contributions addressed in Finding 2 were, m fact, timely. See 

Committee Response at 2-3. The declarations from the four contributors state that they 

*'recall receiving a letter from tiie Committee in 2007 that in form and substance" matched 

the Committee's boilerplate presumptive redesignation letter. The declaration from the 

staff member states that he worked with the deceased staff member who was primarily 

responsible for sending the presumptive redesignation letter^ and *'recall[s] regularly 

preparing and sending notices to contributors that, in form and substance" matched the 

Committee's boilerplate presumptive redesignation letter. 

The issue presented here is whether the additional declarations provided by the 

Committee are sufficient to establish that the Conimittee timely sent the presumptive 

redesignations. As a legal matter, there is no specific legal or precedential basis for 

concluding that a declaration would be sufficient evidence with regard to timely 

reattributions or redesignations. In fact, the Commission's regulations expressly state that 

a contribution will not be considered timely redesignated if a conimittee does not retain the 

written records concerning that redesignation. 11 C.F.R. § 110.1(l)(5); see also 

Explanation and Justification for Section 110.l(l)(4) and (5), 67 Fed. Reg. 69,928,69,934 

(Nov. 9,2002) (rejecting a process by which conimittees could orally notify contributors of 

the redesignation and then write a memorandum ofthe conversation as documentation 

because it "would provide too great an opportunity for fraud and abuse"). 

The D.C. Circuit has addressed whether declarations are sufficient supporting 

documentation in the context of cost attributions to state expenditure limits under Title 26. 

In John Glenn Presidential Comm. v. FEC, 822 F.2d 1097,1103 (D.C. Cir. 1987), the 

court concluded that a one-sentence affidavit signed by a person whose relationship to the 

campaign was unknown was not sufficient to establish that bumper stickers were 

distributed to other states after they were shipped to New Hampshire. The court concluded 

that it was neither arbitrary nor inational for the Commission to reject an affidavit that 

purported to convey common rather than personal knowledge and provided no specific 

information regarding the actual allocations. More recently in LaRouche's Comm. for a 

New Bretton Woods v. FEC, 439 F.3d 733,738 (D.C Cir. 2006), the court concluded that 

the Commission was not required to find that a charged vendor mark-up was a qualified 

campaign expense based solely on an expert affiant's "general, unsubstantiated, and 

conclusory opinion that the charged mark-up was reasonable." In contrast, in Robertson v. 

FEC, 45 F.3d 486 (D.C. Cir. 1995), the court concluded that the Commission could not 

reject proof of postage and an affidavit by a campaign worker verifying that a mailing had 

taken place without explaining why it had done so. While the court noted that the 
Memorandum to John D. Gibson and Joseph F. Stoltz 

Proposed FAR on Biden for President, Inc. (LRA 742) 

Page 6 of 6 

accounting burden fell on the committee, it stated that the Commission could not reject 

uncontroverted documentation relevant to the state expenditure limits. 

Applying this caselaw to the case at hand, it is clear that the declarations provided 

by the Committee are more like those in Glenn and LaRouche than Robertson. The 

declarations provide no specific information regarding the main contested element ofthe 

finding: whether the Committee sent the presumptive redesignation notices within 60 days 

ofits receipt oftiie excessive contributions. ^eeUCRR. § 110.1(b)(5)(ii)(B)(5)-(6). The 

four contributors do not attest to when the presumptive redesignations were postmarked, or 

even the specific date they received them; they only attest to recalling receiving a letter in 

2007. Moreover, it is unclear whether the declarations are from contributors who triggered 

the sample errors. Even ifthey were, they presumably would make up only a small 

percentage of the contributors whose presumptive redesignation letters the Conimittee 

could not produce. Likewise, the staff member does not attest to having personal 

knowledge that the presumptive redesignation notices at issue here were sent or when they 

were sent; he only generally attests that his job duties "included sending notices and other 

letters seeking re-designations, re-attributions, and authorizations from contributors to 

transfer funds between Biden for President and [Mr. Biden's Senate committee]," and he 

recalls regularly doing so. Accordingly, we are ofthe view that the additional declarations 

are not sufficient to establish that the Committee timely sent the presumptive 

redesignations. 

Nevertheless, we note that the Commission has recently accepted affidavits as 

supporting documentation in lieu of the documentation required by Commission 

regulations, although it has not yet done so in the context of reattributions or 

redesignations. Specifically, the Commission has accepted partial timesheets for seven 

staff members and one affidavit attesting that staff members spent 25 percent or less of 

their time in connection with a federal election for purposes of allocating staff salary. 

Commission regulations state that a committee must maintain a monthly log of the 

percentage of time each employee spends in connection with a federal election pursuant to 

11 CF.R. § 106.7(d)(1). See FAR on the Missouri Democratic Party (Feb. 3,2009).