FEDERAL ELECTION COMMISSION 

WASHINGTON. O.C. 20463 

June 17, 2011 

MEMORANDUM 

TO: Patricia Carmona 

Chief Compliance Officer 

Joseph F. Stoltz 

Assistant Staff Director 

Audit Division | 

FROM: Christopher Hughey 

Acting General Counsel f 

Lawrence L. Calvert. Jr. 

Associate General Couziisep 

General Law and Adyfpe^^ 

Lorenzo Holloway//^ ^ Cd. 

Assistant General Qa(msw T 7 

Public Finance and Audit Advit& 

Margaret J. Forman Ol^d ^ 

Attorney ^ 

SUBJECT: Interim Audit Rq>ort on National Campaign Fund (LRA n 847) 

I. INTRODUCTION 

The Office of General Counsel (*^C*)has reviewed the Interim Audit Report 

("Proposed Report") on the National Campaign Fund CIMCF" or "Committee*"). We concur with 

Finding 1 in the Proposed Report (Misstatement of Financial Activity). In its cover 

memorandum, the Audit Division requested a legal analysis of Finding 2 (Failure to File Notices 
Memorandum to Patricia Carmona 

National Campaign Fund lAR 

Page 2 

and Properly Disclose Independent Expenditures). We analyze this issue below.' If you have 

any questions, please contact Margaret J. Forman, the attorney assigned to this audit. 

II. BACKGROUND 

NCF made expenditures for direct mail letters that included fundraising requests.' Many 

of these letters included express advocacy. On its April 2008 Quarterly Report, NCF originally 

repotted these types of expenditures as operating expenditures. NCF, however, amended that 

repoit to disclose such communications as independent expenditures, and NCFs subsequent 

reports also disclosed such communications as independent expenditures. NCF ultimately 

disclosed, in aggregate, approximately SI.SS million in communications as independent 

expenditures on Schedule E of its reports, and it filed 24/48'hour notices. Audifs review 

determined that many of the letters disclosed as independent expenditures in these reports 

contained express advocacy and should also have been timely disclosed through 24/48-hour 

notices. Audit determined, however, that some of the letters disclosed as independent 

expenditures in the amended reports did not, in fact, contain express advocacy. As a result, 

Audifs review indicated that approximately SI. 18 million of the SI.55 million in expenditures 

appeared to meet the definition of an independent experxiiture. Audifs review also revealed that 

NCF reported the independent expenditures when the invoices were paid, rather than when the 

materials were disseminated. The draft interim audit report recommends that NCF provide 

evidence demonstrating that the disbursements were not independent expenditures and therefore 

did not require 24/48-hour notices, and submit and implement revised procedures for reporting 

independent expenditures and tracking dissemination dates for independent expenditures to 

ensure timely filing of 24/48-hour notices. 

Though NCF disclosed the letters as independent expenditures, NCF advanced two main 

reasons why it believed the fundraising letters should not be categorized as independent 

expenditures: 1) Characterizing the mailings that include fundraising requests as independent 

expenditures'treates a costly regulatory burden for small donor committees like ours that do not 

have the financial backing, permanent stafT, and infrastructure to keep up with the filing^*and 2) 

It misleads the public by artificially inflating the amount spent on independent expenditures. 

III. ANALYSIS 

As a pan of our analysis in this memorandum, we will: 1) examine whether fundraising 

letters can be independent expenditures as a matter of law, and 2) generally discuss the legal 

requirements to determine whether the costs for those letters are independent expenditures. This 

will provide the general framework and guidelines for the letters which we have reviewed and 

analyzed in tenns of express advocacy. We have attached a table listing a description of all of 

the letters, their mailing codes and dates, and Audifs and OGCs classifications as to whether 

' The only letter we reviewed that did not oppear to include a Amdraising request did not contain express 

advocacy iKcause it pertains to the 2008 Presidential general election, and was mailed out aOer the election. 
Mcfnonndum to Patricia Carmona 

National Campaign Fund tAR 

Page 3 

they contain express advocacy. This table includes a detailed description and anal^ 

the letters, .explaining wlwjeachJcttetdde&e&dee¬contain express advocacy. 

of each of 

A. Fuodraising Communicatioiu as lodependeot Expenditures 

The Commission has found that fundraising solicitations containing express advocacy 

shouk) be reported as indeperident expenditures. In MUR 5809, the Christian Voter Project 

(**CVP") failed to file independent expenditure .notices for the costs of fundraising letters that 

expressly advocated the election/defeat of candidates. The Commission found reason to believe 

that CVP's failure to file independent expenditure notices violated the Act, and accepted a 

conciliation agreement with the committee based on that violation. In MUR 5518 (Hawaii 

Democradc Party), a party communication contained at least three messages: an invitation to 

precinct meetings, express advocacy of the defeat of a clearly identified Federal candidate, and a 

fundraising appeal. The Office of General Counsel concluded the communication shouk) have 

been reported either as an independent expenditure or as federal election activity, and 

recommended reason to believe findings. The Commission rcg'ected our recommendation, not on 

grounds that solicitations could not be independent expenditures but on grounds that invitations 

to precinct meetings permitted treatment as a federal/non-federal allocated administrative 

expense under the exception to the deflniiion of federal election activity for costs of local 

political conventions, 2 U.S.C. § 43 l(20)(BXiii)). In panicular, Commissioners von Spakovsky 

and Weihtraub stated in their Statement of Reasons that *'had this invitation been mailed more 

broadly than it was, and in sufficient numbers to raise questions about whether it was a bona fide 

invitation, or if it was really just a fundraising or advocacy piece masquerading as an invitation, 

this would be a difTerent case.*' MUR 5518 (Hawaii Democratic Party), Statement of Reasons of 

Commissioners Hans A. von Spakovsky and Ellen L. Weintraub, at 3 (Feb. 23,2007); cf. MURs 

5511 and 5525 (Swifl Boat Veterans for Truth) (fundraising solicitations containing express 

advocacy were expeiiditures that counted towards organization's threshold for political 

committee status). 
Memorandum to Patricia Carmona 

National Carr^ign Fund lAR 

Page 4 

B. General Gaidance For Reviewing Fundraising Letters 

For the purpose of this memorandum, and as general guidance, we will discuss examples 

of the types of letters that wc would conclude contain express advocacy. We have reviewed the 

various types of letters mailed by NCF, which form the basis for Audit's finding that the 

Committee failed to file notices and properly disclose independent expenditures, and have 

attached a table that analyzes each of these letters in terms of express advocacy. While we 

generally agree with the auditors* finding, we recommend that the Audit Division review this 

memorandum and attached table, and adjust the Proposed Report in accordance with this 

Office's review and categorization of each individual letter with regard to whether the letter 

contains express advocacy. 

1. Fuodraislog Letters That Would Contain Express Advocacy 

We would conclude that letters containing phrases such as: *'help elect John McCain," 

"make sure John McCain is elected in November,'* **Vote John McCain!" "help stop Hillary 

Clinton," and "John McCain for President!" contain express advocacy pursuant to section 

100.22(a). An independent expenditure is a non-coordinated expenditure for a communication 

that expressly advocates the election or defeat of a clearly identified candidate.^ 

2 U.S.C. § 431(17); 11 C.F.R. § 100.16(a). A communication that "expressly advocates" 

includes language such as *Vote for the President," **re-elect your Congressman," "defeat," or 

other words, which in context, can have no other reasonable meaning than to urge the election or 

defeat of one or more clearly identified candidates. 11 C.F.R § 100.22(a); see Buckley v. Valeo. 

424U.S. I,44n.52(1976). 

We would also conclude that letters contain express advocacy if they included phrases 

that were marginally less direct than "Vote for John McCain" but did not change the "essential 

nature" of the letters. FEC v. MCFL. 479 U.S. 238,249 (1986). Our attached table reflects 

which letters meet this provision. Additionally, we also would conclude that a letter contains 

express advocacy pursuant to section 100.22(b), if it meets the requirements. An advertisement 

satisfies the requirements for express advocacy pursuant to the Conunission*8 regulations at 11 

C.F.R. § i00.22(b) if, when taken as a whole and with limited reference to external events such 

as the proximity to the election, it could only be interpreted by a reasonable person as containing 

advocacy of the election or defeat of one or more clearly identified candidates because (1) the 

electoral portion is uiunistakable, unambiguous, and suggestive of only one meaning and (2) 

reasonable minds could not differ as to whether it encourages actions to elect or defeat the 

clearly identified candidates or encourages some other kind of action. Again, our attached table 

specifies which letters fall under this type of express advocacy. 

We have no infonnation that the communications were coordinated with any candidate. 
Memorandum to Patricia Carmona 

National Can^ign Fund lAR 

Pages 

2. Fundraising Letters That Do Not Contain Express Advocacy 

We conclude that letters do not contain express advocacy if the requirements of sections 

100.22(a) and 100.22(b) of the Commission's regulations are not met. A letter would not meet 

these requirements if it simply did not contain elements of express advocacy, or it contained 

some, but not all of the required elements. Our attached table indicates which letters do not meet 

the requirements for express advocacy pursuant to section 100.22(a) and section 100.22(b). 
FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

November 10, 2011 

MEMORANDUM 

TO: 

FROM: 

Patricia Carmona 

Chief Compliance Officer 

Tom Hintermister 

Acting Assistant StafT Director 

Audit Division 

Christopher Hughey 

Deputy Cjeneral Counsel 

Lawrence L. Calvert, Jr. 

Associate General Counsel 

General Law and Advi^'^ 

Lorenzo Holloway 

Assistant General Counsel 

Public Finance and Audit Advice 

Margaret J. Forman -yj ^ ^ ^ 

Attorney 

SUBJECT: Interim Audit Report on National Campaign Fund (LRA 847) 

I. INTRODUCTION 

The Office of General Counsel C^OGC") previously reviewed and submitted legal 

comments to the Interim Audit Report ("Proposed Report") on The National Campaign 

Fund. C*NCF**). These comments addressed Finding 2 of the Proposed Report, and 

primarily analyzed 61 fundraising letters to determine whether they expressly advocated 

die election or defeat of a clearly identified candidate, for the purpose of disclosing 

independent expenditures in applicable reports and notices. The Audit Division 

subsequently brought to our attention 28 additional communications for our legal review, 

and which we understand the auditors also plan to address in Finding 2 of die Proposed 
Memorandum to Patricia Carmona 

LRA 847 - National Campaign Fund - lAR L^gal Comments 

Page 2 of3 

Report. We analyze these additional communications below.' If you have any questions, 

please contact Margaret J. Forman, the attorney assigned to this audit. 

II. ANALYSIS 

Our comments here will supplement our memorandum dated June 17,2011. We 

recoiTunend that the Audit Division attach a copy of both this memorandum and our 

memorandum dated June 17,2011 to its Interim Audit Report submitted to the 

Conunission. Additionally, upon further review, we have modified some of the 

communications submitted in our previous comments, and reconunend that you detach 

the chart previously submitted from our previous memoranda, and submit the attached 

chart in its entirety along with our current and previous memoranda. 

We analyze whether the 28 additional communications expressly advocate the 

election or defeat of a clearly identified candidate. Our analysis is reflected in the 

attached chart, which includes all 89 communications (61 fundraising letters plus the 28 

additional conununications), and replaces the chart attached to our June 17,2011 legal 

comments. Twenty-seven of the additional communications, which are communications 

62-88 on our attached chart, were sent by NCF as a link embedded in emails to viewers. 

At present, we have only one example of the emails that were sent including the 

communications, which is classified in the attached chart as communication number 89. 

Apparently, NCF, as an advertiser, paid a magazine. Human Events, to send emails to a 

list or lists of email addresses, the fimher nature of which is unknown. In the original 

email message. Human Events asked the reader to open the link to read a message "from 

one of our advertisers," and those who did would see one of the messages noted as 

conununications 62-88. 

Additionally, the conununications themselves contained additional hyperlinks, 

sometimes to video advertisements that appear to pertain to President Obama. At 

present, we have no examples of these underlying corrununications. The auditors 

requested these underlying communications fh>m NCF, though it is our understanding 

that NCF maintains it no longer has access to these underlying communications. 

However, the Comminee indicated that the content of these underiying communications 

"in general... consisted primarily of forms with the Expose Obama Masthead at die top, 

and virtually the identical verbage [sic] as on the letters. Otherwise, the pages simply 

contained form fields for the people to input the required infonnation if they made a 
Memorandum to Patricia Carmona 

LRA 847 - National Campaign Fund - lAR Legal Comments 

Page 3 of3 

contribution..." Thus, our analysis of whether the communications expressly advocate 

the election or defeat of a clearly identified candidate is limited to the infonnation we 

currently have. An underlying conununication accessible by hyperlink and containing 

additional language expressly advocating the election or defeat of a clearly identified 

candidate would be a separate conununication, and would be added to our attached chart 

if tiiey were available. See MUR 4957 (Buchanan Reform, Inc.), First General Counsel's 

Report at S.^ We recommend diat the auditors explain, in their Proposed Report to the 

Conunission, their attempts to obtain additional iriformation pertaining to these additional 

underlying communications, and the response from the Committee. 

' In MUR 4957, each email and hyperlink constituted a separate communication for the purposes 

of providing a disclaimer. MUR 49S7, FGCR at S. see 11 C.F.R. § 110.11 (a)(S)(ii). Each email and 

hyperlink were viewed as separate because a viewer or recipient "of an email communication may elect not 

to go on to a linked web site in order to obtain additional information or to make contributions." 

Additionally, another secondary consideration for viewing each email and hyperlink as separate involved 

the limitations of electronic communications at the time of MUR 49S7. Specifically, as pointed out In the 

MUR. not all email systems permitted '^clicking" to an Internet web site. 
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