Final Audit Report of the 

Commissioii on Ted Cruz for 

Senate 

(JanuEuy 18, 2011 - December 31, 2012) 

Why the Audit 

Was Done 

Federal law permits the 

Commission to conduct 

audits and ileld 

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. llie audit 

determines whether the 

committee complied with 

the limitations, 

prohibitions and 

disclosure requirements 

of the Act. 

Future Action 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to the matter 

discussed in this report. 

About the Committee (p. 2) 

Ted Cruz for Senate is the principal campaign committee for Ted 

Cruz, Republican candidate for the Unit^ States Senate from the 

state of Texas, and is headquartered in Austin, Texas. For more 

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

Financial Activity (p. 2) 

• Receipts 

o Contributions from Individuals 

o Contributions from Political 

Committees 

o Transfers from Other Authorized 

Committees 

o Candidate Loans 

o Other Receipts 

Total Receipts 

• Disbursements 

o Operating Disbursements 

o Candidate Loan Repayments 

o Contribution Refunds 

o Other Disbursements 

Total Disbursements 

$ 12,044,368 

1,407,608 

175,347 

1,430,000 

40,960 

S 15,098,283 

$ 13,814,542 

587,000 

192,327 

25,000 

S 14,618,869 

Commission Finding (p. 3) 

• Reporting and Disclosure of Candidate Loans 

52 U.S.C. §30111(b). 
Final Audit Report of the 

Contmiasion on 

Ted Cruz for Senate 

(January 18, 2011 - December 31, 2012) 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Audit Hearing 1 

Part II. Overview of Campaign 

Campaign Organization 2 

Overview of Financial Activity 2 

Part III. Summary 

Commission Finding 3 

Part IV. Commission Finding 

Reporting and Disclosure of Candidate Loans 4 
Parti 

Background 

Authority for Audit 

ITiis report is based on an audit of Ted Cruz for Senate (TCFS), 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 52 U.S.C. §30111 (b), which permits the Commission to 

conduct audits and field investigations of any political committee that is required to file a 

report under 52 U.S.C. §30104. 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. 52 U.S.C. §30111(b). 

Scope of Audit 

Following Commission-approved procedures, the Audit staff evaluated various risk 

factors and as a result, 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 individual contributors' occupation and name of employer; 

5. the consistency between reported figures and bank records; 

6. the completeness of records; and 

7. other committee operations necessary to the review. 

Audit Hearing 

TCFS declined the opportunity for a hearing before the Commission on the matters 

presented in this report. 
Part II 

Overview of Campaign 

Campaign Organization 

Important Dates 

• Date of Registration February 2,2011 

• Audit Coverage January 18,2011 - December 31,2012 

Headquarters Austin, Texas 

Bank Information 

a Bank Depositories Three 

• Bank Accounts Seven Checking 

Treasurer 

• Treasurer When Audit Was Conducted Bradley S. Knippa 

• Treasurer During Period Covered by Audit Bradley S. Knippa 

Management Information 

• Attended Commission Campaign Finance 

Seminar 

Yes 

• Who Handled Accounting and 

Recordkeeping Tasks 

Paid Staff 

Overview of Financial Activity 

(Audited Amounts) 

Cash-on-hand ^.January 18,2011 $0 

Receipts 

o Contributions from Individuals 12,044i3.68 

o Contributions from Political Committees 1,407,608 

o Transfers from Other Authorized 175,347 

Committees 

o Candidate Loans 1,430,000 

o Other Receipts 40,960 

Total Receipts $ 15i098.283 

Disbursements 

o Operating Disbursements 13,814,542 

o Candidate Loan Repayments 587,000 

o Contribution Refunds 192.327 

o Other Disbursements 25.000 

Total Disbursements 14.618,869 

Cash-on-hand @ December 31,2012 $ 479,414 
Part Hi 

Summary 

Commission Finding 

Reporting and Disclosure of Candidate Loans 

During audit fieldwork, the Audit staff reviewed loans from the Candidate to TCFS for 

calendar years 2011 and 2012. The Candidate made five loans in the amount of 

$1,430,000 to TCFS. Two loans, totaling $400,000, were made to TCFS for the runoff 

election and were repaid in full prior to the start of the audit. The remaining three loans, 

totaling $1,030,000, were for the primary election; TCFS repaid the Candidate $485,000 

for these loans. However, the remaining outstanding balance of $545,000 was reported 

as a loan payable to the Candidate and was not converted to a personal candidate 

contribution, as required. Subsequent to the exit conference (in April 2015), TCFS 

converted the $545,000 to a personal candidate contribution. In response to the Interim 

Audit Report recommendation. Counsel for TCFS provided no additional comments 

regarding this matter. As such, TCFS has corrected the public record and had no 

additional comments in response to the Draft Final Audit Report. 

The Commission approved a finding that TCFS failed to timely convert an outstanding 

personal loan balance in the amount of $545,000 to a candidate contribution. (For more 

detail, see p. 4.) 

After the Interim Audit Report, the Audit staff was made aware that TCFS failed to 

disclose that $1,064,000 of $1,430,000 in Candidate loans previously reported were from 

commercial lenders, and it did not file the required Schedules C-1. The loans originated 

from a Citibank revolving line of credit for $264,000, and from three Goldman Sachs 

margin loans totaling $800,000. The remainder of the loan amount come from the 

Candidate's personal funds, totaling $366,000. The Audit staff recommended TCFS 

amend the necesssary reports to include corrected Schedules C and the appropriate 

Schedules C-1 to correctly disclose the source of fimds loaned. TCFS did not file 

recommended amendments to correct the public record, nor did it provide any comment 

in response to the Draff Final Audit Report. (For more detail, see p. 4) 

The Commission approved a finding that TCFS failed to properly disclose $1,064,000 of 

Candidate loans that originated with commercial lenders and that it failed to file the 

correct Schedules C and C-1. 
Part IV 

Commission Finding 

Finding 1. Reporting and Disclosure of Candidate Loans 

Summary 

During audit fieldwork, the Audit staff reviewed loans from the Candidate to TCFS for 

calendar years 2011 and 2012. The Candidate made five loans in the amount of ' 

$1,430,000 to TCFS. Two loans, totaling $400,000, were made to TCFS for the runoff 

election and were repaid in ftill prior to the start of the audit. The remaining three loans, 

totaling $1,030,000, were for the primary election; TCFS repaid the Candidate $485,000 

for these loans. However, the remaining outstanding balance of $545,000 was reported 

as a loan payable to the Candidate and was not converted to a personal candidate 

contribution, as required. Subsequent to the exit conference (in April 2015), TCFS 

converted the $545,000 to a personal candidate contribution. In response to the Interim 

Audit Report recommendation. Counsel for TCFS provided no additional comments 

regarding this matter. As such, TCFS has corrected the public record and had no 

additional comments in response to the Draft Final Audit Report. 

The Commission approved a finding that TCFS failed to timely convert an outstanding 

personal loan balance in the amount of $545,000 to a candidate contribution. 

After the Interim Audit Report, the Audit staff was made aware that TCFS failed to 

disclose that $1,064,000 of $1,430,000 in Candidate loans previously reported were from 

commercial lenders, and it did not file the required Schedules C-1. The loans originated 

from a Citibank revolving line of credit for $264,000, and from three Goldman Sachs 

margin loans totaling $800,000. The remainders of the loan amount come from the 

Candidate's personal funds, totaling $366,000. The Audit staff recommended TCFS 

amend the necessary reports to include corrected Schedules C and the appropriate 

Schedules C-1 to correctly disclose the source of funds loaned. TCFS did not file 

recommended amendments to correct the public record, nor did it provide any comment 

in response to the Draft Final Audit Report. 

Legal Standard 

A. Personal Funds. Personal funds of a candidate consist of assets, income, or jointly 

owned spousal assets. Assets are amounts derived from any asset that, under applicable 

state law, at the time the individual became a candidate, the candidate had legal right of 

access to or control over, and with respect to which the candidate had legal and rightful 

title or an equitable interest. Personal funds may also be income received during the 

current election cycle of the candidate, including salary and other eamed income from 

bona fide employment and income from stocks or investments, including interest, 

dividends or proceeds from the sale of such stocks or investments. 11 CFR § 100.33. 
B. Restriction on an Authorized Committee's Repayment of Personal Loans 

Exceeding S2S0,000 Made by the Candidate to the Authorized Committee. Personal 

loans mean a loan or loans, including advance, made by a candidate, using personal 

funds, as defined in 11 CFR §100.33, to his or her authorized committee where the 

proceeds of the loan were used in connection with the candidate's campaign for election. 

For personal loans that, in the aggregate, exceed $250,000 in connection with an election, 

the authorized committee may: 

• Repay the entire amount of the personal loans using contributions to the candidate 

or the candidate's authorized committee provided that those contributions were 

made on the day of election or before; 

• May repay up to $250,000 of the personal loans from contributions made to the 

candidate or the candidate's authorized committee afler the date of the election; 

and 

• Must not repay, directly or indirectly, the aggregate amount of the personal loans 

that exceeds $250,000 from contributions to the candidate or the candidate's 

authorized committee if those contributions were made after the date of the 

election. 

If the aggregate outstanding balance of the personal loans exceeds $250,000 after the 

elections, the authorized political committees must comply with the following conditions: 

• If the authorized committee uses the amount of cash-on-hand as of the day after 

the election to repay all or part of the personal loans, it must do so within 20 days 

of the election. 

• Within 20 days of the election dale, the authorized committee must treat the 

portion of the aggregate outstanding balance of the personal loans that exceeds 

$250,000 minus the amount of cash-on-hand as of the day after the election used 

to repay the loan as a contribution by the candidate. 

• The candidate's principal campaign committee must report the transactions in 

paragraphs (c) (1) and (c) (2) of this section in the first report scheduled to be 

filed after the election pursuant to 11 CFR § 104.5(a) or (b). 

• This section applies separately to each election. 11 CFR §116.11(a), (b), (c) and 

(d). 

C. Candidate as an Agent. Any candidate who receives a contribution, obtains a loan 

or makes any disbursement, in connection with his or her campaign shall be considered 

as having received such contribution, obtained such loan or made such disbursement as 

an agent of his or authorized committee(s). 11 CFR §101.2. 

D. Reporting Loans. All loans received by a committee must be itemized and 

continuously reported until repaid. All repayments made on a loan must also be 

itemized. 11 CFR §104.3(a)(4)(iv) and (b)(4)(iii). 11 CFR §104.11. 

E. Schedule C. Both the original loan and payments to reduce principal must be 

reported each reporting period until the loan is repaid. The committee must report the 

following: 

• The source of the loan; and 

• The type of loan the candidate received (i.e. bank loan, brokerage account, credit 
• card, or hemp equity line of credit) either in the first box for endorsers and 

• guarantors with a notation for loan type or in the box for "Loan Source" after the 

candidate's name. 11 CFR § 104.3(d) and § 104.11. 

F. Schedule C-1. 

1. Loans to Candidates. When a candidate obtains a loan from an advance on the 

candidate's brokerage account, credit card, home equity line of credit or other 

line of credit for use in connection with the candidate's campaign, the candidate's 

principal campaign committee must disclose in the report, covering the period 

when the loan was obtained, the following information on Schedule C-1 or C-P-1:; 

• The date, amount, and interest rate of the loan, advance, or line of credit; 

• The name and address of the lending institution; and 

• The type and value of collateral or other sources of repayment that secure the 

loan, advance, or line of credit, if any. 11 CFR § 104.3(d)(4). 

2. Loans to Committees. When a committee obtains a loan from a bank or other 

permissible lending institution it must also file Schedule C-1 with the first report 

due after a new loan or line of credit has been established. The committee must 

disclose the following information on Schedule C-1: 

• The date and amount of the loan; 

• The interest rate and repayment schedule of the loan, or on each draw of line 

of credit; 

• The type and value of collateral or other sources of repayment that secure the 

loan or the line of credit, and whether that security interest was perfected; and 

• An explanation of the basis upon which the loan was made, if not made on the 

basis of either collateral or ofter sources of repayment. 

3. Loan Agreement/Line of Credit- The committee must also attach a copy of the 

loan agreement. In the case of a committee that has obtained a line of credit, a 

new Schedule C-1 must be filed with the next report whenever the committee 

draws on the line of credit. An authorized representative of the lending institution 

must sign the statement on Line I. 11 CFR § 104.3(d)(1) and (3). 

Facts and Analysis 

A. Reporting of Candidate Loans 

1. Facts 

During audit fieldwork, the Audit staff reviewed five loans fi:om the Candidate to TCFS 

totaling $1,430,000. Two of these loans totaling $400,000 were for the runoff election 

and were repaid to the Candidate before the audit commenced, leaving three loans to 

TCFS for the primary election totaling $1,030,000. The following chart outlines the 

amounts and dates of these primary election loans and the repayments that TCFS has 
made to the Candidate within 20 days of the primary election on May 29,2012; 

Date Amount Transaction Running Balance 

3/31/2012 $70,000 Primary Loan $70,000 

5/18/2012 $400,000 Primary Loan $470,000 

5/22/2012 $560,000 Primary Loan $1,030,000 

6/16/2012^ $( 235,000) Loan Repayment . $795,000 

Repayment Limit 

Primary Loan Balance to Report as Candidate 

Contribution 

($250,000)^ 

$545,000 

As noted above, the balances of the Candidate's loans for the primary election totaled 

$795,000 on the twentieth day following the election. TCFS may repay up to $250,000 

of the personal loans for the primary election from contributions made to the Candidate 

after the date of the election. Also, TCFS was required to treat as a contribution the 

amount of $545,000 ($795,000 - $250,000) which is equal to the outstanding balance of 

the Candidate primary loans less the repayment limit. TCFS was required to report the 

contribution of $545,000 on the first report scheduled to be filed afler the election (2012 

July Quarterly). TCFS, however, continued to report the remaining balance as an 

outstanding primary loan from the Candidate on Schedule C (Loans) instead of 

converting the loan to a personal contribution from the Candidate on Schedule A, Line 

11(d) (Contributions from the Candidate). 

2. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the loans with TCFS at the exit conference and subsequently 

provided a detailed schedule outlining amounts loaned to TCFS, its repayments to the 

Candidate, and the loan balance outstanding. Counsel commented that TCFS should be 

allowed to pay off the balance of the loan and questioned the necessity of the loan 

conversion. However, in response to the exit conference. Counsel stated that TCFS 

reviewed the Audit staffs schedule of loans, compared it to its accounting records, and 

concluded that the schedule of loans was correct. 

Counsel further stated that TCFS will report the loan balance of $545,000 as a contribution 

from the Candidate per 11 CFR §116.11 (c). Counsel also noted that the Candidate may 

wish to note on the report his belief that the statute establishing limits on the amount of 

personal debt that may be repaid to a candidate, is unconstitutional. 

Subsequent to the exit conference, TCFS disclosed the conversion of the loan to a 

contribution by the Candidate on Schedule A of its 2015 April Quarterly report. TCFS 

also informed the audit staff that it reserves the right to challenge the constitutionality of 

this provision of the law. Per 11 CFR §116.11 (c)(3), the Audit staff considered the 

disclosure of the Candidate contribution to the 2012 primary election as untimely. 

^ Single payment made within the 20 day period after the primary election. 

' In accordance with 11 CFR §116. II (b)(2), the Candidate was repaid a total of $250,000 for the primary 

election loans with contributions made to the TCFS after the May 29,2012 primary date. 
The Interim Audit Report recommended that TCFS provide any comments it deemed 

relevant with respect to this matter. 

3. Coinmittec Response to Interim Audit Report (Report) 

In response to the Interim Audit Report recommendation, Counsel for TCFS provided no 

additional comments regarding this matter. In response to the initial Draft Final Audit 

Report, Counsel reiterated that it had no comments and stated that no hearing was being 

requested^ 

4. Draft Final Audit Report 

The Draft Final Audit Report acknowledged that TCFS amended its disclosure reports to 

convert the outstanding loan balance to a candidate contribution. 

5. Committee Response to the Draft Final Audit Report 

TCFS's response to the Draft Final Audit Report provided no additional comments. 

Commission Conclusion 

On May 24,2017, the Commission considered the Audit Division Recommendation 

Memorandum in which the Audit staff recommended that the Commission find that 

TCFS failed to convert an outstanding personal loan balance in the amount of $545,000 

to a candidate contribution. 

The Commission approved the Audit staffs recommendation. 

B. Disclosure of Candidate Loans 

1. Facts 

During audit fieldwork, the disclosure of loans from the Candidate were reviewed, and 

based upon documentation available at that time, the Audit staff found no reasonable 

basis to believe there was a material loan disclosure problem (all loans were disclosed 

as personal, none were disclosed as commercial loans). However, subsequent to the 

issuance of the Interim Audit Report to TCFS, the Audit staff became aware that most 

of the money loaned by the Candidate to TCFS came from borrowed funds. 

Specifically, of the $1,430,000 disclosed on TCFS's Schedule C, $1,064,000 was 

obtained from the commercial lenders. One of the loans in the amount of $264,000 

came from a Citibank revolving line of credit and $800,000 came from three Goldman 

Sachs margin loans. Only $366,000 appears to have come from the Candidate's 

personal funds. Moreover, Schedules C-1 should have been filed which would have 

disclosed the terms of the loans and other loan details. 

As the facts concerning the disclosure of loans became known, TCFS filed a 

Miscellaneous Text Report, Form 99, and disclosed some but not all of the required loan 

information. After reviewing this filing, the Commission's Reports Analysis Division 

requested TCFS file the necessary Schedules C and C-1To date, TCFS has not 

* A Draft Final Audit Report was issued to TCFS in December 2015, prior to the Audit staff being made 

aware that some Candidate loans originated with commercial lenders. 

^ These schedules are defined under the Legal Standards section of this report beginning on page 5. 
amended its reports to disclose the additional information. Accordingly, the Audit staff 

recommends that TCFS correctly file the necessary information on Schedules C and C-1. 

2. Draft Final Audit Report 

The Draft Final Audit Report recommended that TCFS file amended Schedules C and C1 to correct the public record. 

3. Committee Response to the Draft Final Audit Report 

TCFS's response to the Draft Final Audit Report provided no amendments nor additional 

comments. 

Commission Conclusion 

On May 24,2017, the Commission considered the Audit Division Recommendation 

Memorandum in which the Audit staff recommended that the Commission find that 

TCFS failed to properly disclose $1,064,000 of Candidate loans that originated with 

commercial lenders and that it failed to file the correct Schedules C and C-1. 

The Commission approved the Audit staffs recommendation.