Part I
Background

Authority for Audit

This report is based on an audit of LaRouche in 2004 (LaRouche 04), undertaken by the
Audit Division of the Federal Election Commission (the Commission) as mandated by
Section 9038(a) of Title 26 of the United States Code. That section states “After each
matching payment period, the Commission shall conduct a thorough examination and
audit of the qualified campaign expenses of every candidate and his authorized
committees who received [matching] payments under section 9037.” Also, Section
9039(b) of the United States Code and Section 9038.1(a)(2) of the Commission’s
Regulations state that the Commission may conduct other examinations and audits from
time to time as it deems necessary.

Scope of Audit

This audit examined:

1. The receipt of excessive contributions and loans.

2. The receipt of contributions from prohibited sources.

3. The receipt of transfers from other authorized committees.
4. The disclosure of contributions and transfers received.

5. The disclosure of disbursements, debts and obligations.

6. The recordkeeping process and completeness of records.

7. The consistency between reported figures and bank records.
8. The accuracy of the Statement of Net Outstanding Campaign Obligations.
9. The campaign’s compliance with spending limitations.

10. Other campaign operations necessary to the review.

Inventory of Campaign Records
The Audit staff routinely conducts an inventory of campaign records before it begins the
audit fieldwork. LaRouche 04’s records were materially complete and the fieldwork

began immediately.


the date on which the candidate qualifies to receive winding down costs. Contributions
dated after the candidate's date of ineligibility may be used to continue to campaign, and
may be submitted for matching fund payments. Payments from the matching payment
account that are received after the candidate's date of ineligibility may be used to defray
the candidate's net outstanding campaign obligations, but shall not be used to defray any
costs associated with continuing to campaign unless the candidate reestablishes
eligibility. 11 CFR §9034.4(a)(3)(ii).

Entitlement to Matching Payments after Date of Ineligibility. If, on the date of
ineligibility (see above), a candidate has net outstanding campaign obligations as defined
under 11 CFR §9034.5, that candidate may continue to receive matching payments
provided that on the day when the matching payments are made the sum of contributions
plus matching funds received on or after the date of ineligibility is less than the
candidate’s net outstanding campaign obligations. 11 CFR §9034.1(b).

Post-ineligibility Expenditures. Any expenses incurred after a candidate's date of
ineligibility are not qualified campaign expenses except for winding down expenses
permitted under 11 CFR §9034.4(a)(3)(i). 11 CFR §9034.4(b)(3).

Facts and Analysis

The Candidate’s date of ineligibility (DOI) was March 4, 2004. The Audit staff reviewed
LaRouche 04’s financial activity through December 31, 2006, analyzed estimated
winding down costs, and prepared the Statement of Net Outstanding Campaign
Obligations that appears on the next page:


Overview of Financial Activity

(Audited Amounts)

Cash on hand @ January 5, 2001 $0
o Contributions from Individuals 8,315,592
o Matching Funds Received 1,456,019
o Contributions from Political 3,846
Committees
o Offsets to Operating Expenditures 4,879
o Other Receipts 1,118
Total Receipts $ 9,781,454
o Operating Expenditures 9,618,799
o Contribution Refunds 103,997
o Other Disbursements 1,375
Total Disbursements $ 9,724,171
Cash on hand @ December 31, 2004 $57,283



Part II
Overview of Campaign

Campaign Organization

Important Dates

LaRouche in 2004

¢ Date of Registration

January 10, 2001

¢ Eligibility Period *

October 8, 2003 — March 4, 2004

e Audit Coverage

January 5, 2001 — December 31, 20047

Headquarters Leesburg, VA
Bank Information
e Bank Depositories One

e Bank Accounts

One - checking

Treasurer

e Treasurer When Audit Was Conducted

Kathy A. Magraw

e Treasurer During Period Covered by
Audit

Kathy A. Magraw

Management Information

e Attended FEC Campaign Finance Seminar | No

© Used Commonly Available Campaign Yes
Management Software Package

¢ Who Handled Accounting and Paid Staff

Recordkeeping Tasks

2 This period began with the date the candidate satisfied matching fund eligibility requirements and ended when the

candidate received insufficient votes as determined by the Commission. See 11 CFR §9033.

3 Limited reviews of receipts and expenditures were performed up until March 31, 2006 to determine whether the

Candidate was eligible to receive additional matching funds.


Part IV
Findings and Recommendations

| Finding 1. Net Outstanding Campaign Obligations

Summary

Based on its financial activity through December 31, 2006, and estimated winding down
costs necessary to terminate the campaign, LaRouche 04 did not receive matching fund
payments in excess of the Candidate’s entitlement.

Legal Standard
Net Outstanding Campaign Obligations (NOCO). Within 15 days after the
candidate’s date of ineligibility (see definition below), the candidate must submit a
statement of “net outstanding campaign obligations.” This statement must contain,
among other things:
e The total of all committee assets including cash on hand, amounts owed to the
committee and capital assets listed at their fair market value;
¢ The total of all outstanding obligations for qualified campaign expenses; and
e Anestimate of necessary winding-down costs. 11 CFR §9034.5(a).

Date of Ineligibility. The date of ineligibility is whichever of the following dates occurs
first:
e The day on which the candidate ceases to be active in more than one state;
e The 30th day following the second consecutive primary in which the candidate
receives less than 10 percent of the popular vote;
¢ The end of the matching payment period, which is generally the day when the
party nominates its candidate for the general election; or
¢ Inthe case of a candidate whose party does not make its selection at a national
convention, the last day of the last national convention held by a major party in
the calendar year. 11 CFR §§9032.6 and 9033.5.

Entitlement to Matching Payments after Date of Ineligibility. If, on the date of
ineligibility (see above), a candidate has net outstanding campaign obligations as defined
under 11 CFR §9034.5, that candidate may continue to receive matching payments
provided that he or she still has net outstanding campaign debts on the day when the
matching payments are made. 11 CFR §9034.1(b).

Continuing To Campaign after Date of Ineligibility. If the candidate continues to
campaign after becoming ineligible, the candidate may only receive matching funds
based on net outstanding campaign obligations as of the candidate's date of ineligibility.
The statement of net outstanding campaign obligations shall only include costs incurred
before the candidate's date of ineligibility for goods and services to be received before the
date of ineligibility and for which written arrangement or commitment was made on or
before the candidate's date of ineligibility, and shall not include winding down costs until


FEDERAL ELECTION COMMISSION
Washington, DC 20463

March 15, 2007

MEMORANDUM
To: Robert W. Biersack
Press Officer
Through: Margarita Maisonet ue?
Chief Compliance Offiter
From: Joseph F. Stoltz
Assistant Staff tor
Audit Division
Subject: Public Issuance of the Audit Report on LaRouche in 2004

Attached please find a copy of the audit report and related documents on
LaRouche in 2004, which was approved by the Commission on March 8, 2007.

The report may be released to the public on March 15, 2007.

Attachment as stated

ce: Office of General Counsel
Office of Public Disclosure
Reports Analysis Division
FEC Library
DSDD Website


The Statement of Net Outstanding Campaign Obligations as of March 4, 2004 presented
above shows LaRouche 04 to be in a deficit position in the amount of $704,427.
Presented below are adjustments for funds received after March 4, 2004:

Net Outstanding Campaign Obligations (Deficit) as of 3/4/04 ($704,427)

Private Contributions Received 7/30/04 through 9/ 1/04* 42,211

Matching Funds Received 3/5/04 through 9/1/04 451,652

Net Outstanding Campaign Obligations (Deficit) Remaining ($210,564)
as of 9/1/04

As presented above, LaRouche 04 did not receive matching fund payments in excess of
the amount to which the Candidate was entitled.

The Candidate continued to campaign after March 4, 2004, his date of ineligibility. No
matching fund payments received were used to defray continuing to campaign expenses.

| Finding 2. Stale-Dated Checks

Summary

The Audit staff identified 42 stale-dated checks (checks not cashed by the recipients)
totaling $6,087 issued by LaRouche 04. In the preliminary audit report the Audit staff
recommended that LaRouche 04 provide evidence that the checks were not outstanding
or make a payment of $6,087 to the U.S. Treasury. In response to the preliminary audit
report, LaRouche 04 documented that seven of these checks totaling $2,568 had been
reissued and cashed by the recipients. Finally, LaRouche 04 submitted a payment to the
United States Treasury totaling $3,219.

Legal Standard

Handling Stale-Dated (Un-cashed) Checks. If a committee has issued checks that the
payees (creditors or contributors) have not cashed, the committee must notify the
Commission of its efforts to locate the payees and encourage them to cash the
outstanding checks. The committee must also submit a check payable to the U. S.
Treasury for the total amount of the outstanding checks. 11 CFR §9038.6.

Facts and Analysis

The Audit staff’s reconciliation of LaRouche 04’s bank accounts through December 31,
2004, and review of financial activity through April 30, 2005, identified 42 stale-dated
checks totaling $6,087 issued by LaRouche 04. The checks were dated between January
5, 2004 and August 27, 2004, and had not been cashed as of March 17, 2006.

4 LaRouche 04 received its final matching fund payment on September 1, 2004.


LaRouche in 2004
Statement of Net Outstanding Campaign Obligations
As of March 4, 2004
Prepared December 31, 2006
Assets
Cash in Bank $(25,588) [a]
Accounts Receivable 5,166
Total Assets $(20,422)
Liabilities
Accounts Payable for Qualified Campaign Expenses at 3/4/04 643,647
Winding Down Costs:
Paid 7/30/04 — 12/31/06 37,139 [b]
Amount Payable to the U.S. Treasury for:
Stale-Dated Checks (See Finding 2) 3,219
Total Liabilities $684,005
Net Outstanding Campaign Obligations (Deficit) as of March 4, 2004 ($704,427)

[a]

[b]

(d)

Footnotes to NOCO Statement:

This amount is negative due to checks that were written prior to March 5, 2004 that had not yet been
cashed, but exceeded the amount of cash available at that time. The negative amount represents the
Committee’s book balance. The actual amount in the Committee’s bank account on March 4, 2004 was
$75,867.88.

This amount does not include expenses incurred between March 5, 2004 and July 29, 2004, the period
during which the Candidate continued to campaign.

The Audit staff will review LaRouche 04’s disclosure reports to compare actual figures with the estimates
and make adjustments accordingly.

In its response to the preliminary audit report, LaRouche 04 settled this liability by submitting a payment
to the United States Treasury in the amount of $3,219. As a result, no amounts are owed to the United
States Treasury.


Part III
Summaries

Findings and Recommendations

Finding 1. Net Outstanding Campaign Obligations

Based on its financial activity through December 31, 2006, and estimated winding down
costs necessary to terminate the campaign, LaRouche 04 did not receive matching fund
payments in excess of the Candidate’s entitlement. (For more detail, see p. 5)

Finding 2. Stale-Dated Checks

The Audit staff identified 42 stale-dated checks (checks not cashed by the recipients)
totaling $6,087 issued by LaRouche 04. In the preliminary audit report the Audit staff
recommended that LaRouche 04 provide evidence that the checks were not outstanding
or make a payment of $6,087 to the U.S. Treasury. In response to the preliminary audit
report, LaRouche 04 documented that seven of these checks totaling $2,568 had been
reissued and cashed by the recipients. Finally, LaRouche 04 submitted a payment to the
United States Treasury totaling $3,219. (For more detail, see p. 7)

Amounts Owed to the U.S. Treasury

No amounts are owed to the United States Treasury.


Table of Contents

Part I. Background
Authority for Audit
Scope of Audit
Inventory of Campaign Records

Part II. Overview of Campaign
Campaign Organization
Overview of Financial Activity

Part III. Summaries
Findings and Recommendations
Amounts Owed to the U.S. Treasury

Part IV. Findings and Recommendations
Finding 1. Net Outstanding Campaign Obligations
Finding 2. Stale-Dated Checks

Page

wn


Report of the
Audit Division on
LaRouche in 2004

January 5, 2001 —- December 31, 2004



Report of the Audit Division on

LaRouche in 2004
January 5, 2001 — December 31, 2004

Why the Audit

Was Done

Federal law requires the
Commission to audit
every political
committee established
by a Presidential
candidate who receives
public funds for the
primary campaign.' The
audit determines
whether the candidate
was entitled to all of the
matching funds
received, whether the
campaign used the
matching funds in
accordance with the law,
whether the candidate is
entitled to additional
matching funds, and
whether the campaign
otherwise complied with
the limitations,
prohibitions, and
disclosure requirements
of the election law.

Future Action
The Commission may
initiate an enforcement
action, at a later time,
with respect to any of
the matters discussed in
this report.

About the Committee (p. 2)
LaRouche in 2004 is the principal campaign committee for
Lyndon H. LaRouche, Jr., a candidate for the Democratic
Party’s nomination for the office of President of the United
States. The Committee is headquartered in Leesburg, VA.

For more information, see chart on the Campaign

Organization, p. 2.

Financial Activity (p. 3)
« Receipts

fe}
°
°

°
fe}
fe}

Contributions from Individuals
Matching Funds Received
Contributions from Political
Committees

Offsets to Operating Expenditures
Other Receipts

Total Receipts

¢ Disbursements

°

°
fe}
fe}

Operating Expenditures
Contribution Refunds
Other Disbursements
Total Disbursements

$ 8,315,592
1,456,019
3,846

4,879
1,118
$ 9,781,454

$ 9,618,799
103,997
1,375

$ 9,724,171

Findings and Recommendations (p. 4)
e Net Outstanding Campaign Obligations (Finding 1)
e Stale-Dated Checks (Finding 2)

' 26 U.S.C. §9038(a).


The Audit staff provided LaRouche 04 a schedule of stale-dated checks at the exit
conference.

Preliminary Audit Report Recommendation & Committee Response
The Audit staff recommended that LaRouche 04 provide evidence that:
¢ The checks were not outstanding by providing copies of the front and back of the
negotiated checks along with bank statements; or
¢ The outstanding checks had been voided by providing either:
o Copies of the voided check with evidence that no obligation exists, or
o Copies of the front and back of the negotiated replacement checks along with
bank statements.
e Absent such evidence, the Audit staff recommended that $6,087 be paid to the
USS. Treasury; and
e The amount due should have been disclosed on Schedule D-P (Debts and
Obligations) until paid.

In response to the preliminary audit report, LaRouche 04 provided documentation that
seven checks totaling $2,568 had been reissued and cashed by the recipients. Finally,
LaRouche 04 submitted a payment to the United States Treasury for the remaining stale-
dated checks totaling $3,219.° The Audit staff concludes that LaRouche 04 has
materially complied with the recommendation and no further action is warranted.

5 LaRouche 04 documented that a check in the amount of $300 included on the stale-dated check list was
actually $20 and as a result made a $300 adjustment ($6,087 - $2,568 - $300).