.'

• Candidate/Commit:ee:

CONGRESSICNAL ~UO!7 ~~?C~,

James Guffey - 3 Ith~

State:

Ois:ric::

t.oca:icn:

South Dakota

1st

Sioux Falls

Larry Pressler (R)

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Democr"at

Larry Pressl er - J./tI/7'i

'Iotas :as::

. •=--,:r:ar-J =._ ,::s,--': •'-•. IW"" ..I • -

Larry Pressler (~)

James Guffey (0) Donald Stevens (I)

Unopposed

121 , 587 - 79. 3~~.

29 , 533 - 19. 4:~

1,282 - I) • 3:~

542,328.38

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rll)lRAl ELECTION CO,\1,\lISSION

1\2:>, 1\ tKit I \'\'

\\ \"1 "'ClO".l>(' . 204h\

REPORT OF THE AUDIT DIVISION

ON THE

GUFFEY IN THE FIRST CO~~IITTEE

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I. Background

A. Overview

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This report is based on the audit of the Guffey In

The First Committee ("the Committee") undertaken by the Audit

Division of the Federal Election Commission to determine whether

there has been compliance with the provisions of the Federal

Election campaign Act of 1971, as amended (lithe ~.ct"). The audit

WItS conducted pursuant to Section 438 (a) (8) of Title 2, United

States Code, \~hich authorizes the Commission to make from time

to time audits and field investigations with respect to reports

und statements filed under the provisions of the Act.

The Committee reaistered with the Federal Election Co~~ission on ~arch 29, 1976, as the principal campaign committee

for Mr. James V. Guffey, a candidate for election to the United

States House of Representatives from the First District of

South Dakota. The COI'Cm\ittee maintained its headquarters in

Sioux Falls, South Dakota.

The audit covered the period April 1, 1976 through

June 30, 197i. During that period the Committee reported

Ll.oginning cash of $460.00 11, receipts of $42,328.38, expenditures of $40,021.47 and enaing cash of $2,766.91.

This audit report is based on documents and working

papers supporting each of its factual statements. They form p~rt of the record upon which the Commission based its decisions

on the matters in this report and were available to Commissioners ~nd appropriate staff for review.

!/ The reported cash actually represented uni~emizable receipts

collected by the Co~nittee during the pcr~cd ~arch 24 through

March 31, 1976, the first week of its operations•

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B. Key Personnel

The princip~l officers of the Committee during the

period of the audit were Mr. Lawrence Piersol, Chairman, and

t/tr. Jilme:; 'f. ~1cDermott, Treasurer.

c. Scope

The audit included such tests as verification of total

reported receipts and e:~pcnditures and individual trilnsactions;

review of required supporting documentation, analysis of Committee

debts and obligations; and such other audit procedures as deemed

necessary under the circumstances.

II. Auditor's Statement ilnd Description of Findings

It is the opinion of the Audit staff that, based on the

examination of disclosure reports and records presented, the

Guffey In The First Committee has not conducted its activities

in compliance with the Federal Election Campaign Act of 1971,

as amended, and that the disclosur~ reports, as originally filed,

do not fairly -present t-he -financial ac-tivity ofthe__ CQ~'t\~_tt.~~ ~or

the audit period.

In a letter dated January 23, 1978, the Co~~ittee Treasurer

and the Candidate were formally advised of the audit findings,

and requested to respond to the various reca~~endations therein

within 30 days of notification. An additional 15 day extension

to the response period was granted to March 14, 1978. Due to the

lack of response from the Treasurer and only minimal response from

the Candidate, the various matters contained herein were referred,

at the request of the Commission, to the Office of General Counsel

on April 7, 1978, for treatment as'Matter Cnder Review #573.

On May 5, 1978, the Commission found reason to believe

that the Co~~ittee and/or Candidate had violated those Sections

of the Act pertinent to each as set forth below.

After allowing a reasonable period for the Committee and

the Candidate to demonstrate why no further action should be

taken against them, the Commission, on July 12, 1978, found

reasonublc cause to believe that the Committee and/or the

Candidate had violated the Sections of the Act noted below. Subseque~tly, the Co~~ission entered into a conciliation

process with the Co~~ittee and the Candidate during which

efforts ~cre made by respondents to achieve compliance by filing

various amended reports and documentation, as detailed below •
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The conciliation process culminated in revised agreements,

providin'J for civil penalties of $50, which were signed by the

Cundidat.l' and Committee Treasurer on December 29, 1978 and

Deccmbcl· IS, 1978 respectively, and accepted by the Commission

on January 23, 1979.

Ba~eu on the recommendation of the Office of General Counsel,

the Commission voted on January 23, 1979 to close the file on this

matter and take no further action.

A. Filing of Year-End Disclosure Report

Section 434(a) (1) (b) of Title 2 of the United States

Code requires each treasurer of a political committee supporting

a candid~lte for election to Federal office, in an election year,

to file with the Commission a year-end report of receipts and

expenditures as of December 31 of such calendar year. The report,

to be filed not later than January '31 of the following calendar

ye--ar, shal-l b-e- comple-te- as of the close of- the calendary~a1=.

Our review of the Committee reports filed during the

period showed no evidence that a year-end report had been filed

on or before January 31, 1977 disclosing all activity between

November 23, 1976 and December 31, 1976, as well as totals for

the calendar year. Discussions with the Treasurer confir~ed

that the subject report had not been filed, but no explanation

was offered for its omission.

We recommended that the Committee file within 30 days

a year-end report for 1976, including all unreported activity

from ~ovember 23 - December 31, 1976, and accurately reflecting

year-end totals. As a result of efforts made during the conciliation stage of the compliance procedure, the Committee

Treasurer sub~itted the required year-end report for 1976 on Septerr~er 1, 1978.

Rccornncndaticn

Since the Committee has satisfactorily complied in this

matter, we recc~~end no further action •
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B. Disclosure of Debts ~nd Obliqations Until Ext1ngu~shcd, Can~~datc Hcportinq, and Rccordkccpinq

Section 434(b) (12) of Title 2 of the United States Code

requires a committee or candidate to continuously report debts

ilnd obligations ufltil extinguished and further requires di~closurc

of the circumst.:lIlCe~~ and conditions under which any debt or

obligation is extinguished.

Section l02.4(b) (2) of Title 11, Code of Federal

Regulations, furtlH...~r provides that a principal campaign corrunittee

may not terminate until the candidate has tcnninated candidate

status under the Act. A candidate may not terminate status,

according to Section 101.1 of the Regulations, until all campaignrelated debts and obligations for which he is personally obligated

are extinguished.

Section 434(a) of Title 2 of the United States Code

requires candidates as well as committees to file reports of

receipts and expenditures, although Section 101.3 of the

Commission's Regulations provides that a candidate may be relieved

fr-omfi-lirig- per-sonal re-porEs i-f -he will rece-i~je no c6id:.r-ibut.ions

that arc not surrendered to an authorized committee, or make no

expenditures for which he will not be reL~burscd by his campaign

committee. The waiver from reporting remains in effect as long as

the candidate complies with the conditions under which it is

granted.

Section l04.12(b) (1) of the Commission's Regulations

requires a political co~ittee or candidate to maintain records

of sufficient detail on matters required to be reported so that

reports can be verified.

The last full report filed by the Committee at the time

of audit fieldwork (30-day post-general election report) 2/ reflec~ed total outstanding debts and obligations of $16,343.39,

including S8,500 owed to the Candidate which represented personal

bank loans obtained by him and then loaned to the Coromittee. The

Treasurer indicated that the Candidate has ~s3Uwcd the responsibility for all of the Committee's previously reported debts and

obligations. However, disclosure of the liquidation of the

Committee's d~bts by transfer to the Candid~te was not made.

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?:./ As noted in Finding A above, the Co~nittee did not file a

year-end report for 1976 as required. Tho Co~~ittcc filed

only FEe Form 3a (postcard form) for the first calendar

quarter of 1~77 •
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The Candidate, who had requested a waiver from filing

personal candidate reports pursuant to Section 101.3 of the

Commission's Regulations 3/, advised that he had expended personal

monics in payment on some-of the Committee's debts and obligations

nince the last full disclosure report was filed by the Committee.

The Candidc:lte, upon personul assumption of the Committee's debts

and obligc:ltions and his subsequent personal expenditures made in

payment on those debts, was no longer entitled to a waiver from

reporting and became subject to the reporting requirements of

Section 434(a) of Title 2 of the United States Code. However,

such a report was not filed by the Candidate.

We recommended that the Committee and/or the Candidate,

within 30 days: 1) File a Committee report and a Candidate report

showing the Candidate's assumption of campaign debts and

obligations from the Committee, cumulative payments made to date

by the Candidate, and balances outstanding; 2) File candidate

reports as applicable from the closing date of the report disclosir:r;

the Candidate's debt assumption until all c~~paign-related debts

and obligations are extinguished andCandidat~_'_~_~~~t~_si~_ 't._~~_­

lilated-~ -as requirea- by the Act; -jf-Obtaln -from the bank involved,

and submit to the Audit staf~ for review, a complete history of

loans made to the Candidate, to include cop~es of the original

notes, a description of collateral, if any, ter~s, interest rate,

and any repayment(s) made to date •

As a result of efforts made during the conciliation

stage of the compliance procedure, the Co~~ittee Treasurer filed

on September 1, 1978, a year-end report for 197i which adequately

disclosed the Candidate's ass~:nption of campaign debts and

obligations. The Candidate filec on September 25, 1978, a report

satisfactorily showing his assumption of the debts, payments made

by him and outstanding balances. In addition, on March 17, 1978

and October 18, 1978, the Candidate submitted satisfactory documents

pertaining to his bank loans used for c~~paign purposes.

Recommendation

Since the Committee and the Candidate have satisfactorily

complied in these matters, we reco~~end no further action.

~/ Although th~ Commission's Regulations were not yet in effect

at the time the waiver was requested, the Co~mission was

honoring tho waiver provisions when a candidate indicated on

his Statement of a Candidate (FEC Fo~ 2) that all campaign

finar.ces were being handled by an authorized con~ittee•

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c. Reporting of Expenditures

Section 434(b) (9) and (10) of Title 2 of the United

Stutes Code requires a committee to identify in their disclosure

reports each person to whom expenditures have been made within

the calendar year in an aggrcg~te amount in e:<cess of $100,

tOY0thcr with the amount, date and purpose of each such

expenditure: and, Section 434(b) (11) of Title 2 of the United St~tcs Code requires a committee to report the total sum of

expenditures rn~de by such ccnlInittee during the calendar year.

During the campaign, the Committee maintained two (2)

bank accounts, one for general campaign purposes and the other

as an expense account for the Candidate's personal travel expenses

during the campaign. The latter account was, according to the

Treasurer, supposed to be funded only by transfers from the

general campaign fund.

During the course of our examination of expenditures,

it was determined that a total of 81 e:<penditures made by the

Caromit te_e_,_J:'_~P_~~?~I}J;)..I}g 23."* % of t:"e total number made, were

not reported b:t the Coroml.Etee iii its- disclosure reports filed

with the Co~~ission. These expenditures amounted to $4,082.81

(9.3% of the total dollar value of all expenditures incurred by

the Conunittce), and included all e:·:pendi t·..lres made from the

candidate expense account ~hich to~aled $3,292.44. In addition,

the Co~~ittee failed to ite~i=e 25 of these expenditures totaling

$1,957.16 wh~ch were in excess of $100 O~ aggregated in excess 0:

$100. The Treasurer stated that these ex~enditures were omitted

from the reports and not ite~i=ed as req~~red due to a combinatio~

of clerical ov~rsight and la=k of contro~ over the Candidate's

travel expenses.

We reco~~ended tha~ the Conmittcc file a comprehensive

amendment for 1976, including the previo~sly omitted expenditur~s

itemized where required, within 30 days. As part of the efforts

made during t~e concilia~icn stage of t~e co~pliance procedures,

the Cc~~ittee Trea~urer submitted an Sep~~~er 1, 1978, a

comprehensive ~end~cnt for 1976 and a report for 1977 accurately

disclosing the subj~ct expenditu~es.

Recommendation

Since the Corr~ittee has complied in this matter, we recorr~e~c

no furt~er action •

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Section 432(c) (1) of Title 2 of the United States

Code requires the treasurer of a political committee to keep

a detailed and exact account of all contributions made to or

for such committ~c and to identify each person making a

contribution in c:-:ces., of $50, and the dute and amount thereof. ~;cction 434 (b) (8) of Title 2 of the United States Code requires

a committee to report the total sum of all receipts by such

committee during the reporting period. Section 434(b) (2) and

(4) of Title 2 of the United States Code further requires the

committee to report the full name, mailinfJ uddrcss, occupation

and principal place of business (if any) of each person who has

made one or more contributions within the calcndur year in an

aggregate amount in excess of $100, and/or the name and addrcss

of each political committee from which funds were transferred,

together with the date and amount of the trunsfer and/or

contribution.

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Reporting of Receipts and Rccordkccping

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Our audit revealed that there were two (2) deposits

to the candidate expense account totaling $1,236.86 which were

not inter-account transfers frc~ the general ca~paign account

an-a for- -\~;hicl1- t-hc Tre-a-surer did not maint-ain -any account-or

record thereof. Further~ore, we determined that the Committee

did not include these deposits in its receipt totals in reports

filed to date with the Con~ission.

Our audit also disclosed receipts for the period

totaling $460 which were not reported as such, but rather, which

the Co~~ittee included as beginning cash on its first disclosure

report filed (April 1, 1976 through ~ay 17, 1976).

We reco~mended that the. Committee and/or the Candidate

submit for review within 30 days sufficient documentation

establishing the source of the unidentified deposits to the

candidate e;·:pense account and file a cOr.1prehensive ar.~endment for

1976 includi~g the total of these receipt~ ($1,696.86), itemized

as necessary. As part of the efforts made during the conciliatic~

stage of the compliance procedure, the Co~nittee Treasurer and

the Candi~a~e submitted on September 1, 1978 ~nd October 18, 1978,

respectively, suf:icient documcnt~tion cstablishing the source

of the deposits in question and an a~cnd~d report ma~erially

disclosing the receipts, as required.

Recornraenca tion

Since the Cc~~ittce and C~ndidate have satisfactorily

complied in these matters, we rcco~~c~d no further ac~ion.

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E. Retention of Supporting Documentation for Expenditures

section 432(d) of Title 2 of the United States Code

requires the treasurer to keep a receipted bill, stating the . '.\ r l iculilrs, for every e:-:penu i turc made by a political commi ttee

in excess of $100 in amount or aggrcgoting in excess of $100

to the same person during a calcnd~r year.

It was determined that of 238 expenditures requiring

~upporting docurn~ntation, 104 expenditures (or 43.7%~ lacked

adequate support~ng documentation. These 104 expend~turcs

tot~lcd $20,855.74, and represented 47.8% of the total expenditures requiring such documentation. Of the inadequately supported l';.~:'~;1uiturcs, 68 represented reir;.bursemcnts to campaign staff

wo~kcrst 13 for various media expenses, and 23 were for miscellaneous purposes. The Treasurer noted that this problem was most

likely caused by a lack of control over invoice retention during

the campaign.

We recommended that the Committee obtain and furnish

to th~ft~9~t staf: within 30 days copies of ~dequate supporting docu.~e:1tation for tfi!~see:<ljehd-ittrres, orevicie:1ce- of the-ir best

efforts to obtain it. As part of efforts mace curing the

conciliation stage of the ccmplia~ce procedures, the Co~~ittee

Treasu~er submitted on ~ugust 21 and September 1, 1978, suffi~icnt

docu~e~tation and/or f·vidence of e:forts to obtain documentation

for 94.3% of the above cited expenditures.

Reco~endation

Since the Co~~ittcc has complied satisf~ctorili· in this

matter, we recorrmend no further action .
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FEDERAL ELECTION COM,\1ISSION

It!r; 1\ "IIKI i 1 '\i \N

\\,.\"It il~( , t0"-.1) l. .!( )-'h \

ADDITIONAL INFORMATION RE~ING 'lHIS ORGANIZATION

MAY BE I.DC'ATED m A CDMP.LETED OOMPLIANCE ACIION

FILE RELEASED BY THE cn+nSSION AND·MADE PUBLIC ·IN

'lBE PUBLIC RECORDS OFFICE. FOR '!HIS PARrICULAR

ORGANIZATION'S CD1PIE1ED OOMPLIANCE ACnON F1LE

SIMPLY FUR '!HE PRESS SlM1ARY OF MJR /1 ~;'3

'!BE PRESS sur+fARY WIll. PROVIDE A BRIEF HIS'lURY OF

'!HE CASE AND A StMfARY OF 'mE ACrIONS TAI<EN, IF J.NY.•

Audit !! I'; 1