FEDERAL ELECTION COMMISSION

WASHINGTON. O.c. 20463

January 21,2000

MEMORANDUM

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TO:

FROM:

RON M. HARRIS

PRESS OFFICER

PRESS OFFICE !l;-

ROBERT J. COSTA

ASSISTANT STAFF DIRE TOR

AlTIDITDI"ISION

SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON

DEAR FOR CONGRESS, INC.

Attached please find a copy ofthe final audit report and related documents on

Dear For Congress, Inc. which was approved by the Commission on January 13,2000.

InfOlmational copies ofthe report have been received by all parties involved and

the report may be released to the public on January 21,2000.

Attachment as stated

cc; Office ofGeneral Counsel

Office ofPublic Disclosure

Reports Analysis Division

FEC Library
M

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REPORT OF THE AUDIT DIVISION

ON

DEAR FOR CONGRESS, INC.

Approved January 13, 2000

FEDERAL ELECTION COMMISSION

999 E STREET, N.W.

WASHlNGTON, D.C.
TABLE OF CONTENTS

DEAR FOR CONGRESS, INC.

PAGE

Executive Summary

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Final Audit Report5

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tiff Background

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iJ1 Findings

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1"11 0 Transmittal to Committee 19

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p,;:

F\ Chronology 21 ...•

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FEDERAL ELECTION COMMISSION

WASHINGTON. D.C. 20463

A99-01

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DEAR FOR CONGRESS, INC.

EXECUTIVE SUMMARY

Dear For Congress, Inc. registered with the Federal Election Commission on July

29, 1997.

The audit was conducted pursuant to 2 U.S.C. Section 438(b), which states that

the Commission may conduct audits of any political committee whose reports fail to

meet the threshold level of compliance set by the Commission.

The findings arising from the audit were presented to the Treasurer at an exit

conference held at the conclusion offieldwork on July 15, 1999, and later in an interim

audit report. The following is an overview ofthe findings contained in the audit report.

Year-End Report - 11 CFR §104.5(a). The Committee had not filed a

disclosure report for the October I, 1998 through December 31, 1998.

Tn response to the interim audit report, the Committee filed a disclosure report

covering the above period. The report materially disclosed the receipt and disbursement

activity.

Excessive Contributions - 2 U.S.C. §441a(a)(1)(A), 11 CFR §§ 100.7(a),

103.3(b), and 1l0.1(b) and (k). The Audit staffidentified 511 excessive contributions

from 325 individuals and 2 political committees, totaling $563,913.

In response to the interim audit report, Counsel for the Committee stated the

Committee made refunds to 107 contributors, totaling $27,120. However, only 80

refunds totaling $254,550 related to excessive contributions identified by the Audit staff.

With respect to the remaining 247 contributors, whose excessive contributions totaled

$309,363, the Committee did not disclose as debts the amount ofrefunds due the

contributors on amended Schedules D, as recommended.

Maintenance and Disclosure of Contributor Information - 2 U.S.C. §§432(c)

and (d), 434(b) and 431(13),11 CFR §§ 100.7(a) and 104.7(a) and (b). The Audit staff

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identified a material number ofreceipt records that did not contain contributor mailing

addresses. In addition, the Committee did not initially maintain records pertaining to the

contributor's occupation and name ofemployer. Albeit not timely, the Committee made

follow-up phone calls in an effort to obtain the missing contributor information. Even

though the Committee was successful in obtaining some additional information via its

follow-up phone requests, the Committee did not disclose this new information on

amended reports.

In response to the interim audit report, the Committee provided documentation

demonstrating its attempts to contact each contributor. The Committee was successful in

obtaining the contributor's occupation/name of employer for approximately one-third of

the items tested and disclosed such information on amended reports. The Committee did

not provide any additional documentation with respect to the mailing addresses.

Recordkeeping For and Disclosure of Disbursements - 2 U.S.C. §§432(c) and

(d) and 434(b). The Audit staff identified 17 disbursements, totaling $905,356, that were

not documented. The majority ofthis amount represented wire transfers to direct mail,

phone bank and media vendors. With regards to those disbursements for which

supporting documentation was available, the Audit staff identified disclosure

irregularities totaling $380,469.

In response to the interim audit report, the Committee provided copies of invoices

which materially documented the disbursements. Further, the Committee filed amended

disclosure reports which materially corrected the disclosure irregularities.

Filing of 48 Hour Notices - 2 U.S.c. §434(a). The Audit staff identified 49

contributions received fwm individuals totaling $77,500 that required 48 hour notices.

The Committee did not file notices for 4 contributions, totaling $7,000. For the

remaining $70,500, notices were filed, albeit untimely.

In response to the interim audit report, the Committee did not address directly this

matter.

Misstatement of Financial Activity - 2 U.S.C. §434(b). The Audit staff's

reconciliation ofthe Committee's reported activity to its bank activity revealed material

misstatements with respect to disclosure reports filed in calendar year 1998.

In response to the interim audit report, the Committee filed amended disclosure

reports which materially corrected the misstated financial activity.

Money Order Patterns -11 CFR §110.4(b). The Audit staff noted 63 money

orders totaling $50,150. The money orders were issued by several entities and were

within various size groups of consecutive numbers. For example, eight consecutively

numbered money orders, all dated April 7, 1998, all in the amount of$l,OOO, were

received from individuals with different surnames.

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In response to the interim audit report, Counsel for the Committee stated that the

money orders in question demonstrated little cause for concem. The Committee

provided signed statements from 32 contributors attesting that the contributions were

made from their personal funds. However, no additional information was provided with

respect to the remaining $25,750 in contributions made in the form ofmoney orders.

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FEDERAL ELECTION COMMISSION

WASHINGTON. D.C. 20463 . A99-01

• 1.

REPORT OF THE AUDIT DIVISION

ON

DEAR FOR CONGRESS, INC.

BACKGROUND

til. A. AUDIT AUTHORITY

• This report is based on an audit of Dear for Congress, Inc. (the Committee),

undertaken by the Audit Division ofthe Federal Election Commission in accordance with the

provisions ofthe Federal Election Campaign Act of 1971, as amended (the Act). The audit

was conducted pursuant to Section 438(b) ofTitle 2 ofthe United States Code which states,

in part, that the Commission may conduct audits and field investigations of any political

committee required to file a report under Section 434 ofthis title. Prior to conducting any

audit under this subsection, the Commission shall perfonn an internal review of reports filed

b~' selected committees to determine ifthe reports filed by a particular committee meet the

threshold requirements for substantial compliance with the Act.

B. AUDIT COVERAGE

The audit covered the period July 1, 1997 through December 31, 1998.

Between July 1, 1997 and September 30, 1998, the Committee reported a beginning cash

balance of $0; total receipts for the period of$I,729,019; total disbursements for the period

of $1,485, 164; and an ending cash balance of $243,646.1 As ofthe close of audit fieldwork,

the Committee had not filed a disclosure report covering the period from October 1, 1998 to

December 31, 1998 (see Finding U.A.).

C. COMMITTEE ORGANIZATION

The Committee registered with the Federal Election Commission on July 29,

1997, as the principal campaigti. committee for Noach Dear, Democratic Candidate for the

U.S. House ofRepresentatives from the state ofNew York, 9th District.

Totals do not foot due to minor mathematical errors in the Committee's supporting schedules. Figures

in this report are rounded to the nearest dollar.

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To manage its financial activity, the Committee maintained 4 accounts. The

accounts were identified as Primary Not For Profit NOW, Primary Insured Money Market,

General Not For Profit NOW and General Insured Money Market.2

The audit indicated the Committee was financed primarily through

contributions from individuals ($1,694,932), and contributions from political party

committees ($27,250).

The Treasurer ofthe Committee during the period covered by the audit was

Abraham Roth, who remains its Treasurer. The Committee maintains its headquarters in

Brooklyn, NY.

s D. AUDIT SCOPE AND PROCEDURES

s

The audit included testing ofthe following general categories. It should be

noted that the scope oftesting receipts from individuals with respect to limitations and

itemization of contributions was limited due to a lack of any formal aggregation system and

failure to maintain andlor provide a receipts database:

1. The receipt of contributions or loans in excess ofthe statutory

limitations (see Finding II.B.);

') The receipt of contributions from prohibited sources, such as those

from corporations or labor organizations;

J. Proper disclosure of contributions from individuals, political

committees and other entities, to include the itemization of

contributions when required, as well as the completeness and accuracy

ofthe information disclosed (see Finding II.C.);

4. Proper disclosure of disbursements including the itemization of

disbursements when required, as well as the completeness and

accuracy ofthe information disclosed (see Finding II.D.);

5. Proper disclosure ofcommittee debts and obligations;

6. The accuracy oftotal reported receipts. disbursements and cash

balances as compared to committee bank records (see Finding II.F.);

7. Adequate recordkeeping of committee transactions (see Findings II.C.

and D.); and,

2 The Candidate lost in the Primary Election and therefore was not a candidate in the General Election.

However, the General Not For ProlitNOW and General Insured Money Market accounts were active

during the primary period and used to fund pri.mary expenses.

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8. Other audit procedures that were deemed necessary in the situation

(see Findings II.A., E. and G.).

Unless specifically discussed below, no material non-compliance with

statutory or regulatory requirements was detected. Itshould be noted that the Commission

may pursue further any ofthe matters discussed in this report in an enforcement action.

II. AUDIT FINDINGS AND RECOMMENDATIONS

A. 1998 YEAR-END REpORT

Section 104.5 (a) ofTitle 11 ofthe Code ofFederal Regulations states, in part,

that each treasurer ofa principal campaign committee supporting a candidate for the House

ofRepresentatives shall file reports on the dates specified. Further, this section states, in

part, that quarterly reports shall be filed no later than the 1501 day following the close ofthe

immediately preceding calendar quarter, except that the report for the final calendar quarter

ofthe year shall be filed on January 31 ofthe following calendar year.

As ofAugust 31, 1999, the Committee had not filed a disclosure report for

period October 1, 1998 through December 31, 1998. During this period Committee receipts

totaled approximately $640 and disbursements totaled approximately $49,000. The

Committee Treasurer explained he did not file a report during this period because the

previous disclosure reports filed were not correct and he was attempting to resolve such

discrepancies. The Treasurer related he considered it a better practice to file no report rather

than an incorrect report.

In the interim audit report, the Audit staff recommended that the Committee

file: a disclosure report for receipt and disbursement activity transacted between October 1,

1998 and December 31, 1998.

In response to the interim audit report, the Committee filed a disclosure report

covering the above period. the report materially disclosed the receipt and disbursement

activity noted above.

B. APPARENT EXCESSIVE CONTRIBUTIONS

Section 441a(a)(IXA) ofTitle 2 ofthe United States Codes states that no

person shall make contributions to any candidate and his or her authorized political

committees with respect to, any election for Federal office which, in the aggregate, exceed

$1,000.

Section IOO.7(a)(1)(iii) ofTitle 11 ofthe Code ofFederal Regulations states,

in part, that the term "contribution" includes a gift, subscription, loan, advance, or deposit of

money or anything ofvalue made by any person for the purpose ofintluencing any election

for Federal office. The term "anything ofvalue" includes all in-kind contributions.

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Section 103.3(b)(3) ofTitle 11 ofthe Code ofFederal Regulations states, in

part, that contributions which exceed the contribution limitations may be deposited into a

campaign depository or returned to the contributor. If any such contribution is deposited, the

treasurer may request redesignation or reattribution ofthe contribution by the contributor in

accordance with 11 CFR llO.I(b) or 110.1(k). Ifa redesignation or reattribution is not

obtained, the treasurer shall, within 60 days ofthe treasurer's receipt ofthe contribution,

refund the contribution to the contributor.

Section 103.3(b)(4) ofTitle 11 ofthe Code ofFederal Regulations states, in

relevant part, that any contribution which appears to be illegal under 11 CFR 103.3(b)(3),

and which is deposited into a campaign depository shall not be used for any disbursements

by the political committee until the contribution has been determined to be legal. The

political committee must either establish a separate account in a campaign depository for

such contributions or maintain sufficient funds to make all such refunds.

Section 11O.1(b)(3)(i) ofTitle II ofthe Code of Federal Regulations states, in

part, that if a candidate is not a candidate in the general election, all contributions made for

the general election shall be either returned or refunded to the contributors or redesignated in

accordance with 11 CFR 11O.1(b)(5), or reattributed in accordance with II CFR 110.I(k)(3)

as appropriate.

Section IIO.l(b)(5) ofTitle II ofthe Code of Federal Regulations states, in

relevant part, that the treasurer of an authorized political committee may request a written

redesignation of a contribution by the contributor for a different election if the contribution

exceeds the limitation on contributions set forth in 11 CFR 110.1(b)(I). A contribution shall

be considered to be redesignated for another election if the treasurer of the recipient

authorized committee requests that the contributor provide a written redesignation of the

contribution and informs the contributor that the contributor may request a refund of the

contribution and within 60 days from the date ofthe treasurer's receipt of the contribution,

the contributor provides the treasurer with a signed redesignation ofthe contribution for

another election.

Section 110.1(k) ofTitle 11 ofthe Code ofFederal Regulations states, in part,

that any contribution made by more than one person, shall include the signature of each

contributor on the check, money order, or other negotiable instrument or in a separate

writing. A contribution made by more than one person that does indicate the amount to be

attributed to each contributor shall be attributed equally to each contributor. If a contribution

to a candidate on its face or when aggregated with other contributions from the same

contributor exceeds the limitations on contributions, the treasurer may ask the contributor

whether the contribution was intended to be ajoint contribution by more than one person. A

contribution shall be considered to be reattributed to another contributor ifthe treasurer of

the recipient political committee asks the contributor whether the contribution is intended to

be ajoint contribution by more than one person and informs the contributor that he or she

may request a return ofthe excessive portion ofthe contribution if it is not intended to be a

joint contribution; and within 60 days from the date ofthe treasurer's receipt ofthe

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contribution, the contributors provide a written reattribution ofthe contribution, which is

signed by each contributor, and which indicates the amount to be attributed to each

contributor if equal attribution is not intended.

Section 110.1(k)(3)(ii)(B)(5) ofTitle 11 ofthe Code ofFederal Regulations

states, in part, that if a political committee does not retain the written records concerning

redesignations or reattributions, the redesignation or reattribution shall not be effective and

the original designation or attribution shall control.

The Audit staffs review of contributions, although limited by the lack of any

formal aggregation system or receipts database, identified 511 apparent excessive

contributions from 325 individuals and 2 political committees, totaling $563,913. The Audit

staffidentified certain patterns which accounted for the majority ofthe excessive

contributions:

Sole Account Holders

In many instances contributions in the amount of $2,000 were made by check

drawn on an account solely held by an individual. The Committee disclosed

these contributions as being designated $1,000 to the primary election and

$1,000 to the general election. In other instances (other than a $2,000 check),

contributions aggregating greater than $1,000 were disclosed as being

designated to both the primary and general election. However, there was no

documentation made available for review in support ofsuch designations.

Joint Account Holders

In many instances contributions in the amount of $2,000 or greater were made

by check drawn on a joint account. Only one of the account holder's

signatures appeared on the check. In the case of a $2,000 check, the

Committee disclosed this contribution as being attributed $1,000 to each

account holder for the primary election. In the case of a $4,000 check the

Committee disclosed these contributions as being attributed $1,000 to each

account holder and designated for the primary election, and attributed $1,000 .

to each account holder and designated for the general election. In other

instances (other than a $4,000 check), contributions aggregating greater than

$2,000 from eitherjoint or solely owned accounts were attributed to

individuals With the same surname and designated to both the primary andlor

general elections. Again, there was no documentation made available for

review in support of any reattribution or redesignation.

The Audit staffdid note that in a few instances contributors designated their

contribution to the general election. The memo line ofthe check was annotated (by the

contributor) «general election." It should be noted that the Candidate failed to obtain his

party's nomination in the primary election. Therefore, the Candidate was not a candidate in

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party's nomination in the primary election. Therefore, the Candidate was not a candidate in

the general election. The amount of any contributions designated for the general election

should have been refunded to the contributors.

Further, the Audit staffreviewed approximately 20 solicitation devices used

by the Committee. One ofthe solicitations contained language that "a couple may contribute

$2,000." However, the solicitation did not explain that both contributors must either sign the

check or provide a signed and dated statement concerning the portion being contributed by

each individual.

Finally, the Committee did not deposit excessive contributions into a separate

account, nor maintain sufficient funds to refund these contributions. The Audit staff

determined that the Committee's cash balance as of September 30,1998 was $132,627 and

was not sufficient to refund all outstanding excessive contributions.

On July 15, 1999, the Audit staff discussed this matter with the Committee

Treasurer at the exit conference and presented a detailed schedule of the excessive

contributions. Although it is apparent that the Committee did not maintain any signed

reattribution letters, the Treasurer stated that Committee fundraisers were aware ofthe

contribution limitation and immediately obtained reattribution letters from each

contributor(s) at the time the contributions were made and that thoseletters were either lost

or destroyed after the Candidate's primary election effort failed. With respect to

contributions being designated to the general election, the Treasurer stated that the

Committee to the best of his knowledge did not solicit contributions for the general election.

He further stated that he believed that upon receipt of a contribution greater than $1,000 from

an single account holder (greater than $2,000 from a joint account) data entry personnel

immediately split the contribution between the primary and general elections. Finally, the

Treasurer stated he was in the process ofrefunding all contributions greater than $2,000.3

Although requested, the Treasurer did not provide copies of the refund checks

issued in calendar year 1999, during the response period available to the Committee

subsequent to the exit conference. However, the Treasurer did file the July 31, 1999 midyear report. That report discloses cash on hand at January 1, 1999 of $78,451, total receipts

for the period of $101,596, total disbursements for the period of $300,878 (all contribution

refunds) and ending cash at June 30,1999 of<$120,831>. When questioned, the Treasurer

stated that refund checks were written but not mailed until the Committee was able to secure

additional contributions to cover the refund checks.·

The Treasurerstated during the exit conference that he did not consider contributions in the amount of

$2,000 made by checks drawn onjoint checking accounts to be excessive even though only one

signature was present in the Committee's records.

Although calendar year 1999 was not within the scope ofour audit, a cursory review of contributions

disclosed revealed that certain contributors were already included on our schedule of excessive

contributions. When questioned, the Treasurer stated he thought that since the contributions were

made in calendar year 1999, contributors could give an additional $1,000 [for the 1998 primary

election}.

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In the interim audit report, the Audit staffreeommended that the Committee

provide evidence and/or documentation that demonstrated the contributions were not

excessive. Absent such evidence, the Committee was to refund the excessive contributions

and provide evidence ofsuch refunds (copies ofthe front and back ofthe negotiated refund

checks). Iffunds were not available to make the necessary refunds, the Audit staff

recommended that the excessive contributions be disclosed as debts on Schedule D (Debts

and Obligations) until such time that funds become available to make the refunds. Further, it

was recommended that the Treasurer review all contributions received in 1999 to identify

any additional excessive contributions and take appropriate action.

In response to the interim audit report, Counsel for the Committee (Counsel)

restated text from the interim audit report in an effort to demonstrate that the Committee

attempted to comply with the broad provisions ofthe Act, but failed to grasp fully its more

detailed provisions. With respect to the contribution limitation, Counsel stated "While the

Committee's staff and volunteers understood the practical rule that a couple together could

contribute up to $4,000 for a candidate's effort to seek federal office, they did not grasp the

series of technical and procedural requirements to which a committee must adhere in order

to raise such amounts".

Finally, Counsel stated the Committee has made refunds to 107 contributors,

totaling $275,120; has reviewed its records to identify other contributors to whom refunds

are required: and, will disclose pending refunds as debts on Schedule D.

The Audit staff reviewed all refund checks made available by the Committee.

Several refunds were made to individual/entities that were: I) not identified by the Audit

staff as making excessive contributions and 2) for amounts larger than the amount identi lied

as excessive. As a result the Alldit staff applied refunds to 80 contributors totaling

5254,550. With respect to the remaining 247 contributors, whose excessive contributions

totaled $309,363, the Committee did not disclose as debts the amount of refunds due the

contributors on amended Schedules D, as recommended.

C. MAINTENANCE AND DISCLOSURE OF CONTRIBUTOR INFORMATION

Sections 432(c) and (d) ofTitle 2 ofthe United States Code state, in relevant

part, that the treasurer of a political committee shall keep an account of all contributions

received by or on behalf ofsuch political committee; the name and address of any person

who makes any contribution in excess of $50, together with the date and amount ofsuch

contribution by any person; and the identification of any person who makes a contribution or

contributions aggregating more than $200 during a calendar year. The treasurer shall

preserve all records required to be kept by this section and copies of all reports required to be

filed by the subchapter for 3 years after the report is filed.

Section 100.7(a)(I)(iii) ofTitle 11 ofthe Code ofFederal Regulations states,

in part, that the term "contribution" includes a gift, subscription, loan, advance, or deposit of

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money or anything of value made by any person for the purpose ofinfluencing any election

for Federal office. The term "anything ofvalue" includes all in-kind contributions.

Section 434(b)(3)(A) and (G) ofTitle 2 ofthe United States Code states, in

part, that each report under this sectionshall disclose the identification of each person who

makes a contribution or provides any dividend, interest, or other receipt to the reporting

committee during the reporting period, in an aggregate amount or value in excess of $200

within the calendar year, together with the date and amount of any such contribution.

Section 43 1(13)(A) ofTitle 2 ofthe United States Code defines identification

in the case of any individual, as the name, the mailing address, and the occupation ofsuch

individual, as well as the name ofhis or her employer.

Sections 104.7(a) and (b) ofTitle II ofthe Code ofFederal Regulations state,

in part, that when the treasurer of a political committee shows that best efforts have been

used to obtain, maintain, and submit the infonnation required by the Act, any report ofsuch

committee shall be considered in compliance with the Act. The treasurer and the committee

will only be deemed to have exercised best efforts if all written solicitations for contributions

include a clear request for the contributor's full name, mailing address, occupation and name

of employer, and include an accurate statement ofFederal law regarding the collection and

reporting of individual contributor identifications; the treasurer makes at least one effort

after the receipt of each contribution aggregating in excess of $200 per calendar year, in

either a written request or documented oral request, within 30 days ofreceipt ofthe

contribution, to obtain the infonnation; and, the treasurer reports all contributor infonnation

not provided by the contributor, but in the committee's possession, including infonnation in

comributor records, fund raising records and previously filed reports, in the same two year

election cycle.

The Committee's receipt records made available consisted of copies of bank

deposit tickets that reflected only the amount of each contribution deposited and copies of

contributor checks that were attached to each deposit ticket. The Committee did not provide

any type of contributor database, returned solicitation devices completed by the contributor,

or any other records in support ofthe contributions received. Therefore, the only record

containing contributor information was the check copy. As a result, the Audit staffidentified

a material number ofreceipt records that did not contain contributor mailing addresses.

In addition, the Committee did not initially maintain records pertaining to the

contributor's occupation and! name ofemployer. Sample copies ofsolicitation devices did

request this information. Further, the Committee contacted contributors by telephone in an

attempt to obtain the missing contributor infonnation and provided evidence ofsuch

attempts. However, those attempts were not timely as they were made more than 30 days

after the contributions were deposited. Even though the Committee was successful in

obtaining some additional information via its follow-up phone requests, the Committee did

not disclose this new infonnation on amended reports. As a result, the Committee did not

satisfy the best efforts provisions at 11 CFR §104.7(a) and (b).

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During the exit conference, the Committee Treasurer agreed that the

maintenance of contributor records as they pertained to occupation and name of employer

was deficient. The Treasurer related the contributor mailing address infonnation was

maintained by the Committee during the campaign, but thoserecords could not be located.

In the interim audit report, the Audit staffrecommended that the Committee

provide any additional infonnation/documentation that demonstrated its efforts to obtain the

required contributor infonnation. Further, it was recommended that the Committee file

amended reports disclosing the occupation/name ofemployer infonnation obtained through

follow-up phone contacts with contributors.

In response to the interim audit report, the Committee provided

documentation demonstrating its attempts to contact each contributor by phone and where

applicable send a follow-up letter. The Committee was successful in obtaining the

contributor's occupation/name of employer for approximately one-third ofthe items tested

and disclosed such information on amended reports. With respect to the remaining items,

the Committee's amended reports were annotated "infonnation requested." The Committee

did not provide any additional documentation with respect to the mailing addresses.

Sections 432(c)(5) and (d) of Title 2 of the United States Code state that the

tr.:asurer of a political committee shall keep and account of the name and address of every

p.:rson to whom any disbursement is made, the date, amount and purpose ofthe

disbursements, and the name ofthe candidate and the office sought by the candidate, if any,

for \\'hom the disbursement was made, including a receipt, invoice or canceled check for

.:ach disbursement in excess of$200. The treasurer shall preserve all records required to be

k.:pt by this section and copies of all reports required to be filed by this subchapter for 3

y.:ars after the r.:port is filed.

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D. RECORDKEEPING FOR AND DISCLOSURE OF DISBURSEMENTS

Sections 434(b)(4)(A) and (5)(A) ofTitle 2 ofthe United States Code state

that each report shall disclose expenditures made to meet candidate or committee operating

expenses, and the name and address ofeach person to whom an expenditure in an aggregate

amount or value in excess of$200 within the calendar year is made by the reporting

committee to meet a candidate or committee operating expense, together with the date,

amount, and purpose ofsuch operating expenditure.

1. Documentation for Disbursements

The Audit staffreviewed disbursements to detennine ifrecords were

maintained as required and ifthe disbursements were adequately disclosed. This review

identified 17 disbursements, totaling $905,356, that were not documented. The majority of

this amount ($854,902) represented wire transfers to direct mail, phone bank and media

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vendors. No debit memoranda, vendor invoices, contracts or contemporaneous memoranda

in support of the above were made available.

2. Disclosure Irregularities

With regards to those disbursements for which supporting documentation was

made available for our review, the Audit staffidentified disclosure irregularities, totaling

$380,469. Errors noted involved: (a) no purpose disclosed on Schedule B ($204,421); (b)

inadequate purpose disclosed or incorrect purpose disclosed ($139,164); and, (c) vendor

addresses omitted, memo entries omitted related to credit card payments and other

miscellaneous errors ($36,884).

At the exit conference, the Treasurer was provided with schedules detailing

the above. Concerning the missing documentation, the Treasurer related he had all ofthe

missing documentation and he would send it to the Audit staff within the response period

following the exit conferences As to the disclosure irregularities, he would attempt to obtain

the information and file amended reports.

In the interim audit report, the Audit staffrecommended that the Committee

obtain and submit the missing disbursement documentation noted in I. above (to include

copies of debit memos and related invoices). The Audit staff further recommende.d that the

Committee file amended Schedules B to correct the disclosure irregularities noted in 2.

above.

In response to the interim audit report, the Committee provided copies of

invoices which materially documented the disbursements in l. above. Further, the

Committee filed amended disclosure reports that materially corrected the disclosure

irregularities noted in 2. above.

E. FILING OF 48 HOUR NOTICES

Section 434(a)(6) ofTitle 2 ofthe United States Code requires that each

treasurer ofthe principal campaign committee of a candidate shall notify the Secretary or the

Commission, and the Secretary ofState, as appropriate, in writing, ofany contribution of

$1,000 or more received by any authorized committee ofsuch candidate after the 20th day,

but more than 48 hours before, any election. This notification shall be made within 48 hours

after the receipt ofsuch contribution and shall include the name ofthe candidate and the

office sought by the candidate, the identification ofthe contributor, and the date ofreceipt

and the amount ofthe contribution. The notification required under this paragraph shaH be

in addition to all other reporting requirements under this Act.

The Audit staffreviewed all contributions greater than or equal to $1,000 with

check dates on or after August 27, 1998 and deposit tickets dated on or before September 12,

This documentation was not provided as ofAugust 3I, 1999.

Page 14 of 22 Approved 1/13/00
11

that required 48 hour notices. The Committee did not file notices for 4 contributions, totaling

$7,000. For the remaining $70,500, notices were filed, albeit untimely.

At the exit conference, the Committee was provided with a schedule ofthese

items. The Treasurer stated"he would review this matter.

In the interim audit report, the Audit staffrecommended that the Committee

submit evidence that the four required notices were filed or submit any written comments it

considered relevant.

In response to the interim audit report, Counsel merely makes reference to this

matter as evidence ofthe Conunittee's broad efforts toward compliance with the Act.

F. MISSTATEMENT OF FINANCIAL ACTIVITY

Sections 434(b)(I), (2), and (4) ofTitle 2 ofthe United States Code state, in

part, that a political conunittee shall disclose the am01.U1t of cash on hand at the beginning of

the reporting period and the total amount of all receipts and the total amount of all

disbursements for the reporting period and calendar year.

The Audit staff's reconciliation of the Committee's reported activity to its

bank activity revealed a material misstatement occurred with respect to reports filed covering

the period from January 1, 1998 through September 30, 1998. Specifically, reported

disbursements were understated by $123,455. This understatement was primarily due to the

Committee not disclosing disbursements made between August 31, 1998 and September 16,

1998. As a result, reported cash on hand at September 30,1998 was overstated.

The Committee's Treasurer was provided schedules of the above at the exit

conference. The Treasurer agreed to file amended reports.

In the interim audit report, the Audit staff recommended that the Committee

file an amended October 15, 1998 Quarterly Report to correct the misstatements identified

above.

In response to the interim audit report, the Committee filed amended

disclosure reports which materially disclosed the above disbursements and corrected cash on

hand as of September 30, 1998.

G. MONEY ORDER PATIERNS

Section 110.4 (b)(I) and (2) ofTitle 11 ofthe Code of Federal Regulations

states, in part, no person shall make a contribution in the name of another; knowingly permit

his or her name to be used to effect that contribution; knowingly help or assist any person in

making a contribution in the name of another; or knowingly accept a contribution made by

one person in the name of another. Examples of contributions in the name ofanother include

Page 15 of 22 Approved 1/13/00
12

include - giving money or anything ofvalue, all or part ofwhich was provided to the

contributor by another person (the true contributor) without disclosing the source ofmoney

or the thing of value to the recipient candidate or committee atthe time the contribution is

made.

During receipt testing, the Audit staff noted 63 money orders totaling

$50,150. The money orders were issued by several entities, including the U.S. Postal

Service, Travelers Express, Chase, Dime Savings Bank, Chase Personal, and Citibank. The

money orders were within various size groups of consecutive numbers. For the most part, the

named individuals do not appear to be related. For example, eight consecutively numbered

money orders, all dated April 7,1998, all in the amount of$I,OOO, were received from

individuals with different surnames.

With the exception of one series ofmoney orders, the Committee, for the

most part, did not disclose a contributor's occupation and name of employer. However, the

occupation and name of employer for three contributors, who each contributed $[,000 via six

consecutively numbered $500 money orders, was listed as Executive! Essex Gallery Ltd.

The only other point of interest with respect to information disclosed

concemed the inconsistencies between the actual dates ofthe money orders and the receipt

datcs related thereto on Schedule A. Three consecutively numbered $1,000 money orders,

d,1ted January 23, 1998, were disclosed as being received on December 31, 1997. Two

co nsccutively numbered $1,000 money orders, dated April 6, 1998, were disclosed on March

31. 1998. Six consecutively numbered $500 money orders, dated April 7,1998, were

disclosed on March 3 1, 1998. Finally, eight consecutively numbered $1,000 money orders,

datcd April 7, 1998, were disclosed on either January 19, 1998 or January 20, 1998. We

\\ere nol auk to ascertain the reason(s) for the discrepancics.

The Committee Treasurer was provided schedules of tile money orders in

question during the exit conference. The Treasurer related it is possible that the contributors

work.ed at the same companies but did not have checking accounts.

In the interim audit report, the Audit staffrecornmended that the Committee

obtain a signed and dated statement from each ofthe individuals, identifying the source of

the funds used to purchase the money orders.

In response to the interim audit report, Counsel offers the following:

(T]he Audit Staff draws the inference that the funds

contributed were other than the contributors' own. As a

threshold matter, there is nothing inherently inappropriate

or suspect about contributions made through money order.

Commission regulations place money orders squarely

alongside checks as varieties of"written instruments"

through which donors may contribute .

Page 16 of 22 Approved 1/13/00
13

A review ofthe "Schedule ofMoney Orders" attached to

the Interim Report demonstrates little cause for concern.

Several ofthe money orders listed by the Audit Staff come

only in pairs or even one at a time. (see Interim Audit

Report, Attachment 2.) Even when some are shown to

have given at the same time, there is no prima facie

evidence ofcontributions in the name of another. Rather, / ------------- -theevidence suggests only concerted political action.

Nevertheless, we are including signed statements from a

large number ofthe individuals who contributed via money

order attesting to the fact that their contributions came from

personal funds.

The Audit staff does not suggest that contributions cannot be made with

money orders. It appears Counsel has concluded that the money orders in question

demonstrated little cause for concern since several of the money orders listed come only in

pairs or even one at a time. Such conclusion is misplaced. It should be noted that of the 63

money orders addressed only 13 were part of a pair or single issue. However, the serial

numbers of these "single" money orders were close to other series of consecutively numbered

money orders.

Further, the Committee provided signed statements from 32 contributors

attesting that the contribution was made from their personal funds. No additional

information was provided with respect to the remaining $25,750 in contributions made in the

fornl of money orders.

Page 17 of 22 Approved 1/13/00
Page 18 of 22 Approved 1/13/00
FEDERAL ELECTION COMMISSION

WASHINGTON. D.C. 2046]

Wi.

•

January 14,2000

Mr. Abraham Roth, Treasurer

Dear for Congress, Inc.

c/o Roth & Company

5612 18th Avenue

Brooklyn, NY 11204

Dear Mr. Roth:

Attached please find the Final Audit Report on Dear for Congress, Inc. The

Commission approved the report on January 13,2000.

The Commission approved Final Audit Report will be placed on the public record

on January 2\, 2000. Should you have any questions regarding the public release of the

report, please contact the Commission's Press Office at (202) 694-1220. Any questions

you have related to matters covered during the audit or in the report should be directed to

Ms. Mary Moss or Mr. Tom Nurthen of the Audit Division at (202) 694-1200 or toll free

at (800) 424·9530.

Sincerely,

-/fd

Robert J. osta

Assistant StaffDirector

Audit Division

cc: Ms. Christine Neville, Attorney, Perkins Coie, LLP

Mr. Marc E. Elias, Attorney, Perkins Coie, LLP

Attachment as stated

Page 19 of 22 Approved 1/13/00
Page 20 of 22 Approved 1/13/00
CHRONOLOGY

DEAR FOR CONGRESS, INC.

•

Audit Fieldwork

Interim Audit Report to

the Committee

Response Received to the

Interim Audit Report

Final Audit Report Approved

05/24/99 - 07/07/99

09/03/99

11/05/99

01/13/00

Page 21 of 22 Approved 1113/00
•

•

e

Page 22 of 22 Approved 1/13/00
"

•

..

TO:

FROM:

SUBJECT:

FEDERAL ELECTION COMMISSION

WASHINGTON, D.C. 204&3

February 15,2000

RON HARRIS

PRESS OFFICER

PRESS OFFICE

ROBERT J. COSTA

ASSISTANT STAFF DIRECTOR

AUDIT DIVISION

CORRECTION IS EXECUTIVE SUMMARY - DEAR FOR

CONGRESS, INC.

A typographical error was discovered on page one ofthe Executive

Summary - Dear for Congress, Inc. A99-01. Attached is a corrected page;

correction is in paragraph seven, italics.

Attachment as stated

cc: Office of General Counsel

Office ofPublic Disclosure

Reports Analysis Division

FEC Library
.-

FEDERAL ELECTION COMMISSION

WASHINGTON, D.C. 204&3

A 99-01

DEAR FOR CONGRESS, INC.

EXECUTIVE SUMMARY

CORRECTED 2-15-00

Dear For Congress, Inc. registered with the Federal Election Commission on July

29,1997.

The audit was conducted pursuant to 2 U.S.C. Section 438(b), which states that

the Commission may conduct audits of any political committee whose reports fail to meet

the threshold level of compliance set by the Commission.

The findings arising from the audit were presented to the Treasurer at an exit

conference held at the conclusion offieldwork on July 15,1999, and later in an interim

audit report. The following is an overview ofthe findings contained in the audit report.

Year-End Report - 11 CFR §104.5(a). The Committee had not filed a disclosure

report for the October 1,1998 through December 31,1998.

In response to the interim audit report, the Committee filed a disclosure report

covering the above period. The report materially disclosed the receipt and disbursement

activity.

Excessive Contributions - 2 U.S.C. §441a(a)(1)(A), 11 CFR §§ 100.7(a),

103.3(b), and 110.1(b) and (k). The Audit staffidentified 511 excessive contributions

from 325 individuals and 2 political committees, totaling $563,913.

In response to the interim audit report, Counsel for the Committee stated the

Committee made refunds to 107 contributors, totaling $275,120. However, only 80

refunds totaling $254,550 related to excessive contributions identified by the Audit staff.

With respect to the remaining 247 contributors, whose excessive contributions totaled

$309,363, the Committee did not disclose as debts the amount ofrefunds due the

contributors on amended Schedules D, as recommended.