FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

MEMORANDUM 

TO: Patricia Cannona 

Chief Compliance Officer 

Joseph F. Stoltz 

Assistant StaffDirector 

FROM: Christopher Hughey X- ^ 

Acting General Counsel f 

Lawrence L. Calvert, 

Associate General Couns unseP^ ^ I — ^ 

SUBJECT: 

Lorenzo Holloway ^""ij^— 

Assistant General Counsel 

For Public Finance and Audit Advice 

Delanie DeWitt Painter i h 

Attomey 

Draft Final Audit Report ofthe Audit Division on the United Association 

Political Education Committee (LRA 818) 

The Office of Oeneral Counsel has reviewed the Draft Final Audit Report of the 

Audit Division C*Draft Report'*) and the Audit Division's Recommendation 

Memorandum ("ADRM") on the United Association Political Education Committee 

("UAPEC" or the "Committee") and has the following comments. The Draft Report sets 

forth the Audit Division's basis for three findings: Finding 1. Excessive Contributions to 

Candidates and Other Political Committees; Finding 2. Failure to File Notices and 

Properly Disclose Independent Expenditures; and Finding 3. Failure to Properly Disclose 

Transfers from Affiliated Committees. The Committee responded to the Draft Report on 

December 7,2010 ("DFAR Response") but did not request an audit hearing. The 

Committee, however, raises the legal issue of how to determine for reporting purposes 

when independent expenditures are disseminated to the public if the nature of the 

materials (yard signs, mini billboards, shirts, hats, etc.) that are sent from the national 

union to local chapters and members makes it difficult to know when the materials are 

disseminated to the public.^ Our comments focus on this legal issue (Finding 2). If you 

We note that we have not commented at any prior stage of this audit. 
Memorandum to Joseph F. Stoltz 

Draft Final Audit Report of the Audit Division on the 

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have any questions, please contact Delanie DeWitt Painter, the attomey assigned to this 

audit. 

L BACKGROUND - FAILURE TO FILE NOTICES AND PROPERLY 

DISCLOSE INDEPENDENT EXPENDITURES (FINDING 2) 

The auditors conclude that UAPEC did not properly disclose independent 

expenditures on its reports and did not timely file 24 and 48 hour notices for its 

independent expenditures.^ UAPEC made 8 disbursements totaling $510,314 to purchase 

materials such as mini billboards, yard signs, posters, shirts, hats, etc. UAPEC itemized 

these disbursements as independent expenditures supporting Barack Obama on Schedule 

E as of the date of payment. Most of these independent expenditures relate to one 

payment of $324,209 made on December 3,2008, after the 2008 general election, and 

disclosed on line 24 Schedule E with a date of December 10,2010. The auditors state 

that UAPEC should have disclosed these independent expenditures as memo entries on 

Schedule E for the reports covering the dates when the materials were publicly 

disseminated, and included a corresponding debt on Schedule D. In addition, UAPEC 

did not timely file any 24 or 48-hour notices of independent expenditures. Because 

UAPEC did not maintain docimientation of the public dissemination date for any ofthe 

materials, the auditors do not know the exact amount that required such notices. The 

auditors conclude that some of the materials were likely disseminated within the notice 

period because ofthe dates of some invoices close to the election and the $324,209 

payment after the election and because UAPEC acknowledges that the materials were 

disseminated prior to the election. 

The Draft Report states that UAPEC representatives told the auditors they were 

unsure how to determine the dissemination date because UAPEC generally distributes 

these materials directly to local union members or ships the materials to local unions for 

distribution. UAPEC suggested that in the future it would change its method of filing the 

required notices and use the date that materials are first received at UAPEC headquarters 

as the dissemination date for filing 24 and 48-hour notices. 

In the Interim Audit Report ("lAR"), the auditors recommended that UAPEC 

implement revised procedures to properly disclose independent expenditures on 

^ The auditors provided us with additional information to clarify the facts in the Draft Report. We 

suggest that this information be included in the revised finding. Specifically, the auditors have infonned us 

that the revised finding will clarify that UAPEC eventually filed notices, but did not file them timely, and 

that a $324,209 payment on December 3,2008 was related to numerous invoices. 

^ According to the Audit staff, one payment check dated December 3,2008 related to $324,209 of 

the independent expenditures and was payment for a number of invoices dated between March 31,2008 

and November 18,2008, but the invoices could not be traced directly to the payment. The remaining seven 

invoices ibr independent expenditures totaling $186,105 were dated between August 20,2008 and 

November 7,2008 and paid between August 27,2008 and November 12,2008. 
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Schedules E and D and to track aggregation and dissemination for the 24 and 48 hour 

notice requirements. The Draft Report states that in response to the LAR, UAPEC agreed 

with the Audit staffs conclusion, and provided the recommended written copy of hs new 

independent expenditure tracking procedures. 

Nevertheless, the Committee addresses the issue in its response. It states that it 

understood the independent expenditure notice requirements but was not able to identify 

an earlier dissemination date because the nature of the material made it unable to know 

precisely when the material was disseminated to the public. The Committee explained 

that the material "is not typically disseminated on the date the material is received at 

UAPEC headquarters, the date the material is sent to the affiliates or the date the material 

is sent to members of the restricted class." DFAR Response at 2. Instead, the material 

would only be disseminated to the public on "multiple unknown dates" when "a shirt is 

worn in public or a yard sign is posted in a yard." Id. The Conunittee contends that the 

statute and regulations do not provide guidance on when such materials should be 

considered disseminated. The Committee stated, however, that "given the impossibility 

of identifying the dates of dissemination" it will in the future consider the material to be 

disseminated for reporting purposes on the date the material is received. Id. at 2-3. We 

understand that the auditors concur that this approach would be acceptable. 

IL UAPEC MAY REPORT INDEPENDENT EXPENDITURES AS OF 

DATE WHEN IT RECEIVES MATERIALS FROM VENDORS 

BECAUSE OF PRACTICAL IMPOSSIBILITY OF DETERMINING 

ACTUAL DATES OF PUBLIC DISSEMINATION 

The issue here is how to determine when materials are publicly disseminated for 

reporting purposes when the nature of the materials, such as yard signs, mini billboards, 

shirts, hats, etc. that are sent firom a union to local union chapters and members makes it 

difficult to know when the materials are actually disseminated to the public by imion 

members. We concur with the Audit staff that UAPEC may use the date when UAPEC 

receives the independent expenditure materials from vendors as the date of public 

dissemination for reporting and aggregation purposes. UAPEC could also use a later 

date, such as the date it ships the materials to local unions or union members, if it 

maintains records to support that date. 

An independent expenditure is a communication expressly advocating the election 

or defeat of a clearly identified candidate that is not coordinated with any candidate or 

authorized committee. 11 C.F.R. § 100.16(a). A committee must report independent 

expenditures as of the date when they are publicly distributed or publicly disseminated. 

See 11 CF.R. §§ 104.4,104.5(g), see also 11 C.F.R. § 109,10. 

A conunittee must file notices within 48 hours of the date an independent 

expenditure is publicly distributed or otherwise publicly disseminated for independent 

expenditures aggregating $10,000 or more with respect to a given election made at any 
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time during the calendar year up to and including the 20th day before an election. 11 

C.F.R. §§ 104.4(b)(2) and 104.5(g). In addition, a committee must file a notice within 24 

hours of when each independent expenditure aggregating $1,000 or more with respect to 

any given election is publicly distributed or otherwise publicly disseminated if that occurs 

after the 20th day but more than 24-hours before the election. 11 C.F.R. §§ 104.4(c) and 

104.5(g). To determine when a committee must file 24 and 48-hour notices, independent 

expenditures are aggregated as ofthe first date that an independent expenditure is 

publicly distributed or otherwise publicly disseminated. 11 C.F.R. § 104.4(f), 104.5(g). 

The Commission explained in the mlemaking that the term "publicly distributed" 

for independent expenditures has the same meaning as the term does for electioneering 

communications in 11 C.F.R. § 100.29(b)(3).^ Explanation and Justification, "Bipartisan 

Campaign Reform Act of 2002 Reporting," 68 Fed. Reg. 404,407 (Jan. 3,2003). The 

Commission fiuther explained that "publicly disseminated" "refers to commimications 

that are made public via other media, e.g., newspaper, magazines, handbills." Id. at 407 

and 409. The Commission noted that when a communication is publicly distributed or 

disseminated, the person paying for the communication would be able to determine 

whether the commumcation meets the independent expenditure requirements including 

express advocacy. Id. at 407 

The materials at issue here would be "publicly disseminated" rather than 

"publicly distributed" because they are not broadcast communications. See 68 Fed. Reg. 

404,407 and 409 (Jan. 3,2003). The regulations and regulatory history are silent on how 

to determine the date when independent expenditures such as shirts, hats, yard signs, or 

mini billboards provided by a union to local unions and members are "publicly 

disseminated." The term "publicly disseminated," however, can be generally understood 

to mean the first date when a communication could be seen or heard by a member of the 

public, equivalent to the publication date for printed media such as a newspaper.^ Thus, 

we believe that the date these materials are publicly disseminated is the first date when 

the materials can be viewed or heard by members of the public, rather than only members 

of the union's restricted class under section 114.1(j). The types of materials at issue here 

* Section 100.29 (b)(3Xi) defines "publicly distributed" for electioneering conununications as aired, 

broadcast, cablecast or odierwise disseminated through the facilities of a television station, radio station, 

cable television system, or satellite system. Electioneering communications do not include any 

communication publicly disseminated through a means other than broadcast, such as print media. 11 

C.F.R. § 100.29(bX3). 

^ In a pre-BCRA rulemaking in 2001 and early 2002 for then-section 109.1, the Commission 

considered a multi-prong test to determine when an independent expenditure was made for reporting 

purposes but decided on a rule that an independent expenditure is made on the first date on which the 

conununication is published, broadcast or otherwise publicly disseminated. See Explanation and 

Justification fbr 11 CF.R. § 109.1,67 Fed. Reg. 12837 (Mar. 20,2002). One conunenter on the 

rulemaking objected to the other possible prongs and to using the word "printed" (which the Commission 

changed to "published" based on tfae comment) because an independent expenditure is not made until the 

communication is disseminated to the public. Id. 
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are likely to be eventually seen by meml)ers of the public at some time. See 

Memorandum to Joseph F. Stoltz, "Proposed Interim Audit Report, Democrat, 

Republican, Independent Voter Education Political Campaign Committee ("DRIVE") 

LRA 729" at 3-4 (Dec. 27,2007). The conunittee here implicitly acknowledged that was 

its intent for these materials by reporting disbursements for them as independent 

expenditures. The materials were paid for and obtained by the national office of 

UAPEC, distributed by the national office to local unions, and then either publicly 

disseminated by the local unions or, and particularly in the case of items such as t-shirts, 

and yard signs, distributed by local unions to the individual members of the restricted 

class who then **publicly disseminated" the materials when they decided to wear the tshirt, put up a sign in their yard, etc. 

We concur with the auditors that UAPEC failed to timely file 24 and 48 hour 

notices or to properly report these independent expenditures. While we acknowledge the 

inherent difficulty of determining the precise date of public dissemination of these 

materials, there is no indication that UAPEC made any attempt to disclose these 

independent expenditures in a way that would make the information available to the 

public prior to the date of the election. Nor did it maintain records that would assist it or 

the auditors in determining a date that would be as close as possible to the date of public 

dissemination. 

The problem for future disclosure is that in the case of the materials that are 

distributed by UAPEC through the local unions to union members for display at a time of 

the individual members' choosing, it is practically impossible for UAPEC to know 

precisely when these kinds of campaign materials are first viewed by members of the 

public rather than only by members of its restricted class. A union member could wear a 

shirt, for example, to a union meeting or in the member's home and the shirt would only 

be seen by members of the restricted class, but once the individual ventures out in public, 

assuming the shirt is visible, the message would be disseminated to the public. Similarly, 

a local union could give a yard sign to a member, who could put it into his garage for 

several days before putting it on this lawn where it could be viewed by the public passing 

by. So one box of materials sent to one local union chapter could result in public 

dissemination of the materials over a number of different dates, because each of many 

union members would make individual decisions about when to publicly disseminate the 

materials by wearing or displaying them. Those individual decisions are the actual dates 

when the independent expenditures are **publicly disseminated." It would be burdensome 

and impractical to require a union to track the use of these types of materials to determine 

when they are first viewed by members of the public. 

Because it is impractical to determine the actual dates when these materials are 

publicly disseminated, UAPEC could use the next earliest date in the distribution chain: 

the first date when the local union makes these materials available to members of its 

restricted class (or when the local union itself publicly displays materials such as "minibillboards," which we understand are four-foot by eight-foot signs.) These dates could be 
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determined for fiiture independent expenditures, but might create an additional 

recordkeeping responsibility for UAPEC and its local union chapters. These would be 

the latest dates that UAPEC could pragmatically use to detennine the dates of public 

dissemination of these independent expenditures. The Committee, however, has 

evidently decided that using those dates - or an earlier date, when it sends the materials 

from its national headquarters to its local unions or members - would impose too much 

of a recordkeeping burden, and instead proposes an even earlier date, when it receives the 

materials from its vendors. The Audit Division appears to concur with this approach. 

The date a national union receives materials from vendors is not the actual date of 

public dissemination; however, this date is earlier than would otherwise be required and 

would disclose the relevant information to the public for a longer period before the 

election. Therefore, we concur that this approach is acceptable, as long as UAPEC 

ensures that the materials are eventually publicly disseminated by the local unions and 

union members so that their reporting of them as independent expenditures is accurate.