FEDERAL ELECTION COMMISSION 

WAS) IINC.TDN. (I.e.. ilKiri'l 

DEC 22 20f5 

MEMORANDUM 

TO: 

FROM: 

Patricia C. Orrock 

Chief Compliance Officer 

Thomas E. Hintermister 

Assistant Staff Director 

Audit Division 

Lisa J. Stevenson 

Deputy General Counsel -1 AW 

Lorenzo Holloway 

Assistant General Counsel 

Compliance Advice 

Margaret J. Forman^J^ /C- 2 

Attorney 

! 

SUBJECT: Interim Audit Report on the Illinois Republican Party (LRA 1006) 

I. INTRODUCTION 

The Office of the General Counsel has reviewed the proposed Interim Audit Report 

("proposed lAR") on the Illinois Republican Party ("IRP" or "Committee"). T he lAR contains 

five findings: Misstatement of Financial Activity (Finding 1), Failure to File Reports and 

Properly Disclose Independent Expenditures (Finding 2), Receipt of Apparent Prohibited InKind Contributions (Finding 3), Reporting of Debts and Obligations (Finding 4), and 

Recordkeeping for Employees (Finding 5).' We generally concur with the findings, except as 

addressed below regarding finding 2, Failure to File Reports and Properly Disclose Independent 

Expenditures. If you have any questions, please contact Margaret J. Forman, the attorney 

assigned to this audit. 

We recommend that the Commission consider this document in Executive Session because the Commission 

may eventually decide to pursue an investigation of matters contained in the proposed lAR. 11 C.F.R. §§ 2.4(a) and -

(b)(6). 
LRA 1006 • Illinois Republican Party 

lAR Legal Commenis 

Page 2 

11. FAILURE TO FILE REPORTS AND PROPERLY DISCLOSE INDEPENDENT 

EXPENDITURES' 

A. Reporting of Independent Expenditures Section 

The Audit staff identified disbursements for printed materials and phone calls totaling 

S1,971,04U, which the Audit staff determined should have been reported as independent 

expenditures. The Committee disclosed these expenditures as Federal Election Activity or 

Disbursements for Allocated Federal/Non-fedcral activity. The IRP stated that all of the direct 

mail expenditures were for candidate-specific mass mailings performed by volunteers; however, 

the Audit staff received documentation showing volunteer activity only for some of the mailings. 

The Audit staff applied the volunteer materials exemption only to activity which it could directly 

correlate to specific candidates. We discuss the implications of this in .section B, infra, and 

analyze the independent expenditures immediately below. 

The audit report places these expenditures into two main categories of independent 

expenditures: I) independent expenditures for which there are no underlying communications 

and 2) independent expenditures supported by the underlying communications.' 

I. lodependeht Expenditures For Which There Are No Underlying 

Communications 

For the independent expenditures for which no underlying communications were 

provided, the auditors identified 12 invoices for disbursements totaling $77,336 for two 

congressional party candidates. 16 disbursements identified on reports as FEA 100% Federal 

Volunteer Mail and postage for direct mail, for which there were no ads or invoices, and 11 

disbursements totaling $189,662 for the telephone program, but no invoices or scripts.^ Since 

the coriununications were not available for the auditors to review, the Audit staff reviewed other 

available documentation such as the Committee's invoices. The auditors conclude that, in the 

absence of documentation demonstrating that the disbursements did not require reporting as 

independent expenditures, the Committee should amend its reports to disclose the disbursements 

^ Before proceeding with our principal comments, we have a brief, ancillary comment relating to the 

presentation of this finding to the Committee. We recommend that the Audit Division furnish to the Comminee, 

along with the lAR, lists or charts specifically identifying the advertisements the auditors beiieve may be 

independent expenditures so that the Comminee may provide a fiilly informed response. 

' The Audit staff included, in the category of independent expenditures with no underlying communications. 

SI .323.447 in disbursements for 34 mailers, for which Audit had a copy of the mailers at issue but the expenditures 

were not supported with invoices. IRP disclosed the S1. 132,447 in disbursements as FEA Volunteer mail. We 

recommend that the Audit staff either move these mailers to the second category (perhaps as a separate 

subcategory), which addresses independent expenditures with underlying communications, or otherwise distinguish 

these mailers separate from this-category. In our analysis, we address these 34 mailers as if they are in the second 

category, since that is where we discuss the substance of the communications. 

* The Audit suff identified 9 scripts that could not be connected to any vendor. These 9 scripts will be 

addressed in the analysis of the Second category. 
LRA 1006 - Illinois Republican 

lAR Legal Comments 

P«gp3 

as independent expenditures on Schedule E and submit revised procedures for reporting 

independent expenditures. 

We believe that more information is needed to support a finding that the disbursements 

meet the requirements to be considered independent expenditures. To be an independent 

expenditure, the communication must expressly advocate the election or defeat of a clearly 

identified candidate and must not be made in concert or cooperation with or at the request or 

suggestion of that candidate, the candidate's authorized political committee, their agents, or a 

political p^y comminee or its agents. 52 U.S.C. § 30101(17); 11 C.F.R. § 100.16(a). A 

candidate is clearly identified in a communication when the name of the candidate involved 

appears; a photograph or drawing of the candidate appears; or the identity of the candidate is 

apparent by unambiguous reference. 52 U.S.C. § 30101(18); 11 C.F.R. § 100.17. 

A communication can expressly advocate the election or defeat of a candidate in two 

ways. First, a communication expressly advocates the election or defeat of a clearly identified 

candidate when it uses phrases such as "vote for the President," "re-elect your Congressman," 

"support the Democratic nominee," "cast your ballot for the Republican challenger for U.S. 

Senate in Georgia," "Smith for Congress," "Bill McKay in '94," "vote Pro-Life" or "vote ProChoice" accompanied by a listing of clearly identified candidates described as Pro-Life or ProChoice, "vote against Old Hickory," "defeat" accompanied by a picture of one or more 

candidate(s), "reject the incumbent" or communications of campaign slogan(s) or individual 

word(s), which in context can have no other reasonable meaning than to urge the election or 

defeat of one or more clearly identified candidate(s), such as posters, bumper stickers, 

advertisements, etc. which say "Nixon's the One", "Carter '76", "Reagan/Bush" or "Mondale!" 

II C.F.R. § 100.22(a). 

Second, a communication may contain express advocacy 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 for the election or defeat of one or 

more clearly identified candidate(s), because: (1) the electoral portion of the communication is 

uiunistakable, unambiguous, and suggestive of only one meaning; and (2) reasonable minds 

could not difTcr as to whether it encourages actions to elect or defeat one or more clearly 

identified candidate(s) or encourages some other kind of action. 11 C.F.R. § 100.22(b). 

With these standards in mind, we do not believe that Audit staff may infer that 

disbursenients were for independent expenditures solely on the information provided in the 

invoices.' Since the communications are not available, it is difficult to determine whether they 
LRA 1006 - Illinois Republican Party 

lAR Legal Comments 

Page 4 

contain express advocacy. For example, the intbrmatlon contained in invoices, generally, may 

not be adequate because invoices are not typically created for purposes of conveying the content 

of communications. Rather, invoices usually contain brief descriptors that are sufficient for both 

a vendor to identify the service provided and a committee to confirm that it is receiving the 

service for which it contracted prior to making payment. Given the difficulty of analyzing 

whether a communication contains express advocacy when the communication is available, we 

conclude descriptive information contained in an invoice is too tangential to support a finding 

that express advocacy exists absent a copy of the underlying communication or other more 

descriptive documentation than that relied upon by Audit staff here. 

We acknowledge, however, that there are instances where drawing inferences is 

appropriate. For example, in the allocation context, we believe that Audit staff may infer that 

certain types of ordinary overhead expenses such as postage, consulting, travel reimbursements, 

printing, and accounting fees are allocable absent information demonstrating that the expenses 

are solely non-federal. See Legal Analysis Memorandum to the Audit Division, "Interim Audit 

Report on the Maine Republican Party" (LRA 817) (Dec. 17,2010). This type of adverse 

inference can be supported because the Commission, through the regulatory process, has already 

determined that administrative expenses of this type are, in fact, allocable absent a demonstration 

otherwise. There has been no such regulatory guidance by the Commission here. Audit staff 

also may use adverse inferences where a committee's internal records specifically identify the 

type of expenditure though its reports disclose the expenditure differently. See id (Audit staff 

may conclude that printed material costs that the committee coded in its internal records as 

Federal election activity ["FEA"] but reported as operating expenses represents potential FEA 

while giving the committee an opportunity to clarify the discrepancy). Such discrepancies, 

however, do not exist here. 

To address the lack of information at this stage of the audit, we recommend that the 

disbursements for which no underlying communication was provided should not be categorized 

as independent expenditures. Instead, the disbursements should be treated as a separate category 

of expenditures for which the Committee has not provided sufficient documentation to verify its 

disclosure reports. When a committee reports financial activity, the Commission requires the 

committee to maintain records with respect to that activity. 11 C.F.R. § 104.14(b)(1). These 

records must provide, in sufficient detail, the necessary information and data from which the 

filed reports may be verified, explained, clarified, and checked for accuracy and completeness. 

Id. In the absence of this information, the auditors are unable to verify whether the Committee 

correctly reported its disbursements as Federal Election Activity or Disbursements for Allocated 

Federal/Non-federal activity (or Advocacy Call for Candidates, in the case of the reported 

scripts), or whether they should have been disclosed as independent expenditures. Thus, the 

Committee should be given the opportunity to provide copies of the communications, additional 

documentation, or other information and/or to explain any discrepancies in its reporting. In the 

alternative, the Audit staff may request the Commission to issue a subpoena for copies of the 

communications at issue or other documents the auditors believe may enable it to verify the 

Committee's reporting of these disburserhents as operating expenditures. 
LRA 1006 - Illinois Republican Party 

lAR Legal Comments . 

Pages 

2. Independent Expenditures Supported by the Underlying 

Communications 

For the independent expenditures identified by Audit for which the underlying 

communications were available, the auditors identified 17 disbursements totaling $278,780. The 

Audit stalT noted that many of the communications included language expressly advocating the 

election or defeat of a clearly identified candidate along with a photograph of a clearly identified 

candidate. The Audit staff noted that some of the mailers included the phases "Vote Robert Dold 

for Congress," "Vote no on Brad Schneider for Congress," and "Vote Judy Biggert for 

Congress." The lAR, therefore, concludes that all of the disbursements at issue should have been 

disclosed as independent expenditures rather than Federal Election Activity or Disbursements for 

Allocated Federal/Non-federal activity. 

We reviewed the communications, and we concur with Audit staff that many of the 

disbursements should have been reported as independent expenditures because they contain 

express advocacy.' However, we have identified 14 communications which we do not believe 

contain express advocacy as analyzed below, and therefore should not be including in Finding 2. 

Eight of the communications do not contain express advocacy under 11 C.F.R. § 100.22 

because they do not appear to contain any call to vote. Rather, these communications contain 

biographical information about the candidate and/or the candidate's positions on issues, ^ee 

Randy Hultgren direct mailers ("Working to preserve the American Dream," "Helping Small 

Business Create Jobs," and "Working for more opportunities & jobs"). Some of these 

"informational" communications are critical of the identified individual; however, these 

communications nevertheless do not include any call to vote. See Bill Foster direct mailer ("This 

Grinch's heart was two sizes too small... He's a mean one... Mr. Foster" (detailing "The grinch 

who fired people" at Christmas)), a Bobby Schilling direct mailer ("Cheri Bustos [love symbol 

of a heart] taxes!'), Jason Plummer direct mailers ("Your Candidates for Congress ... A Fair 

Comparison of the Candidates", and "Congressional candidate Bill Enyart is on the record 

supporting cuts of $719 BILLION from Medicare." One of the communications is positive, and 

refers to the individual as a candidate, but does not include a call to vote: "Jason Plummer... 

The only Real Social Conservative in the race for Congress"). 

Further, the Audit staff identified six of nine scripts as referencing a Congressional 

candidate. These scripts are split into two subcategories: (1) where the recipient does not 

answer and the call forwards to voicemail, and (2) where a recipient answers the phone. We 

concur with the Audit staff on the subcategory of calls that forward to voicemail. However, for 

* This includes a number of Obamacare communications that are identical to each other except for the name 

of the candidate. These communications clearly identify a federal candidate (President Obama), contain a call to 

vote, the communication is suggestive of only one meaning, and reasonable minds could not differ thai it encourages 

actions to defeat that candidate. .11 C.F.R. § 100.22(b). Another pending audit includes similar Obamacare 

communications, which will be addressed in that audit. 

^ These voicemail scripts state: "Min Romney will rebuild the American economy by reducing taxes, 

government regulation and dramatically cutting the out of control spending that has happened under President 
LRA 1006 - Illinois Republican Party 

lAR Legal Commenis 

Page 6 

the subcategory of scripts where the recipient answers the phone, the scripts only use questions 

pertaining to polling and language to encourage voting generally. We. therefore, conclude that 

this second subcategory does not include language expressly advocating for or against a 

candidate. 11 C.F.R. § 100.22. 

B. Levels of Volunteer Involvement and Documentation needed to Qualify for the 

Volunteer Materials Exemption 

The IRP stated that all of the direct mail expenditures were for candidate-specific mass 

mailings performed by volunteers. However, the Audit staff received documentation showing 

volunteer activity only for some of the mailings. The IRP provided four sign-in sheets, two 

alTidavits and twenty-four photographs for seven mailers to document the use of volunteers. The 

proposed lAR concludes that, ba.sed on the documentation provided, the Audit staff could only 

match four mailers to photpgraphs for which an invoice was provided, totaling $33,972. The 

Audit staff notes the uncertainty regarding the amount of volunteer involvement needed to 

qualify for the volunteer materials exemption and recommends that IRP provide further 

documentation to support its use of volunteers under this exemption. Absent such evidence, the 

Audit stalTrecommends that the IRP amend its reports to disclose these disbursements as 

independent expenditures and submit revised procedures for reporting independent expenditures. 

Similar to other audits, this audit report notes that there is a lack of clarity with respect to 

the information required to satisfy the volunteer materials exemption. See DFAR on Arizona 

Republican Party (LRA 889), Final Audit Reports in the Democratic Executive Committee of 

Florida (DECF), OGC Commenis on Final Audit Report on the Tennessee Republican Party 

Federal Election Account (LRA 74S); OGC Comments on Final Audit Report on the Washington 

State Democratic Central Committee (LRA 737) (discussing Statement of Reasons of 

Commissioners Petersen, Bauerly, Hunter, and Weintraub in MUR SS98, Utah Republican Party, 

et al. (April 9,2009)). The, IRP, however, provided documentation supporting its assertions of 

volunteer exempt activity with respect to mailings on behalf of some, but not all of the 

candidates. Since the IRP has provided .some of the information, we recommend that the Audit 

Division raise this issue in the cover memorandum to the Commission. 

Obama. Please join the Republican ticket to get the countiy back on track and gelting Americans working again. 

Because you are an imponant voter and because your opinion matters to Illinois, this call has been paid for by the 

Illinois Republican Party...." Thus, the scripts identify a clearly identified candidate (Mitt Romney), include a call 

to action ("Please join the Republican ticket.... Because you are an important voter...."), and contain specific 

information about what the candidate will do, once elected, in response to what "has happened under President 

Obama." 11 C.F.R. § 100.22(b).