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TO THE
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CHICAGO COMMITTEE FOR 1996
ATIN DON DAVIS

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Let me briefly try to explain these two points.
Again, if you put yourself in the situation we were in, in
the Summer of 1994, trying to figure out who can pay for
what, in the Convention Committee versus the Host Committee,
we start with the plain language of the regulation. And,
again, its states that the Host Committee can pay for
offices and office equipment, air conditioning, electricity,
similar convention-related facilities and services.

The auditors, themselves, conceded that it was
permissible for the Host Committee to pay for the provision
and installation of telephone equipment. In their audit,
again, they permitted all of these other office-related
facilities and services to be paid for by the Host
Committee.

By any reasonable reading, the use of telephone
equipment is a similar facility or service to the equipment
itself. It’s like saying that somebody can pay for the
typewriter but not the typewriter ribbon. There’s just no
basis in the language of the regulation itself for such a
distinction.

Nor can you say that the regulation somehow gives
us notice that there’s a distinction between equipment and
the use of that equipment, because again air conditioning,
electricity, services that all of us regard as utilities,
like our telephone bill, right, that we pay every month, are

Heritage Reporting Corporation
(202) 628-4888

ATTACHMERT _D_
Page O_of Sb



b)

ce)

a)

b)

-2-

In addition to the monthly price, the Customer will
pay: i) service connection charges at then-prevailing
tariff rates; and ii) sales and excise taxes and
tariff surcharges that applicable laws and tariffs
require the Customer to pay.

The Customer shall pay to the Company advance payments

-. prior to the commencement of the Service. The amount
‘of the advance payments will be agreed to by the

Customer and the Company prior to the commencement of
the Service.

The Customer has the flexibility to increase and
decrease the number of lines under this Request for
Service at any time during the Service Period so long
as the number of lines remains within the range
specified in Paragraph 1. Lines added within the
range incur service connection charges at
then-prevailing tariff rates. Lines subtracted within
the range do not incur tariffed termination charges.
Termination charges apply only for lines terminated by
the Customer below the range.

If the Customer wishes to increase the number of
Intellipath II lines above the range, or if the
Customer requests Service at a location or locations
not identified in Appendix B, the Customer may do so
by placing an order with the Company. The Company
will develop a price and present the price to the
Customer for its consideration.

* * * * *

THE 1992 DEMOCRATIC NATIONAL NEW YORK PHONE

CONVENTI.

Signature
Typed Name Eugene P. Connell]

Typed Name Ronald H. Broqwn

Title

Date

President

NO Title Vice President M&T

October 23, 1991

THE 1992 DEMOCRACTIC NATIONAL
CONVENTION COMMITTEE, INC.

Signature Ls¢
c
Typed Name Alexis M, Herman

Signature =

Title Assistant Treasurer

Date

October 23, 1991

Wise

vy

yn

[PAN

Date _October 25, 1991

NEW YORK TELEPHONE COMPAN

Typed Name William F. Murphy

Title Convention Manager
Date _ October 25, 1991

ATTACHE
Page )5 ot 1A9_



the “actual convention services.” The Host Committee disagrees that the voting system's
furtherance of a partisan party function would prohibit its use by the DNCC, arguing that
“because a convention naturally must serve one party or another, it is implicitly
understood that the convention itself is partisan while a host committee remains
nonpartisan.” Also, the Host Committee stated its understanding that “similar Voting
Systems have been donated for past conventions and no regulatory problems have been
raised.” As a result, the Host Committee concluded that the delegate voting system “falls
squarely within the parameters of 11 C.F.R. Section 9008.52(c).”

The responses discussed above do not demonstrate that the in-kind
contribution was permissible under the regulations. Furthermore, they confirm that the
Audit staff correctly interpreted the basic purpose of the electronic voting system. In
light of this, the Audit staff concluded that use of the voting system, valued at $150,000,
resulted in a prohibited in-kind contribution to the DNCC. On January 22, 1998. the
Commission, during its consideration of the audit report on the San Diego Host
Committee/Sail to Victory San Diego ‘96, voted that the use of funds for a voting
tabulation system was a permissible host committee expense.

2. Polaroid Corporation

Section 9008.7(a)(4)(ix) of Title 11 of the Code.of Federal
Regulations states that “Convention expenses” include all expenses incurred by or on
behalf of a political party’s national committee or convention committee with respect to
and for the purpose of conducting a presidential nominating convention or convention-
related activities. Such expenses include expenses for printing convention programs, a
journal of proceedings, agendas, tickets, badges, passes, and other similar publications.

In the ECM, the Audit staff identified an in-kind contribution from
Polaroid Corporation of a “credentials management system” assigned a value of $15,000
by the vendor. According to Polaroid’s proposal, the system would capture and maintain
a text and image database of all DNCC and host committee employees. Included in the
$15,000 valuation were six months rental of the system, labor logo scanning, training,
shipping. and card design. According to DNCC training materials, the credentials were to
be wom by every attendee, and, the passes granted five levels of access, designated by
credential color, to different sections of the convention facility.

The Audit staff concluded that the donation of the credentials
management system provided the DNCC with the same benefit as if the Host Committee
had paid a convention expense, and consequently, is not a permissible use of host
committee resources as defined at 11 CFR §9008.52(c)(1). As a result, the Host
Commitee apparently made a prohibited in-kind contribution of $15,000 to the DNCC.
Also, it was recommended in the ECM that the Committee provide documentation to
demonstrate that the credentials management system was put to permissible uses pursuant
to 11 CFR §9008.52(c) and did not result in prohibited in-kind contributions to the

DNCC.

attacmest A
Page! of 22



leritech

©O Box 1520
Taro! Stream i. 60197 4520

escebboodbabealaollel

9 134K 2522" “EG

OEMOCRATIC NATIONAL
ENTION

CONV!
510 N PESHTIGO CT FLA6
SHICAGO IL 60611 4309

Wb vebebeed

73220832019962552006100200610000021 380000043881

Please inciude vour 14-digit
account numoer on vour check
aador any corresponaence

Account Number
312 632.1996 2559

MAR 1 1996

43881

CURRENT CHARGES
, PAST DUE AFTER...

Mau Caymerns to: Ameragen. © ©. Bos 4520. Caro: Sueam « 65197-4520
CUSTOM BUSINESS SERVICES
BILLING SUMMARY

fl anid mad top section with your check payebie te Amermech Wike eccourm rumnoer on cheat.
PLEASE ALLOW FIVE DAYS WHEN PAYING BY MAR OR AT AN AUTHORIZED AGENCY.

MAR 29,1996  Aucuntoue. 438.81

312 832.1996 2559

For Oeta:ieo Cnarges -
Montniy Service
Local Calls
Loca! ang st
Taxes (It!

Amentech

MAR 1 1996
~~ =.“ <5 a =
‘4210.42 | ess | 0.00 08 °
DEMOCRATIC NATIONAL CONVENTION S10 N PESHTIGO CTF
SUMMARY OF CURRENT CHARGES
AMER I TECH



| transportation operations center, during the period from and
including July 21, 1996 through and including September 8, 1996.
14.4. Access. The Convention Offices shall be available
for use by pNcc staff 24 hours a day. A loading dock must be
available at the location referred to in section 14.1 on weekends
and after working hours during the period from and including
July 5, 1996 through the end of the Convention Proceedings
Period. ;

14.5. Utilities. Electricity and water available on a 24-
hour basis; heating, ventilation and air conditioning as normally
provided, except on a 24-hour a day basis (including weekends)
during the Unlimited Access Period, janitorial service and any
other utilities and services needed for the Convention Offices.

14.6. Telephone system. A telephone system for use in the

Convention Offices prior to installation of the system to be
developed and installed under section 12.1 hereof.

14.7. Equipment and supplies. The following items of
equipment, facilities and supplies for use in the Convention
Offices, in such quantities and of such types as are mutually
agreed by the City and the DNCC:

(a) office furnishings and related items;

(b) office supplies;

(c) use of a postage meter and postage;

(d) use of photocopying equipment, and supplies for and

Maintenance service for such equipment;

-62-

atucmaxt _&

Page NI or 129





9 EXHIBIT 17.01 .CITY AND HOST COMMITTEE BUDGETS

——— _-—WNew “York City Budget

a Rental $ 4,700,000
. Construction 4,345,000
Transportation 650,000
Parking 175,000
Telephone 350,000
Insurance 2,000,000
Secruity _ 125,000
Printing 250,000
Office Space/Equipment 175,000
Medical 50,000
Voting System 100,000
Subtotal 12,920,000
10% Contingency 1,292,000
Police
(including contingency) 6,600,000
Total $20,812,000
@ . Host Committee Budget
NYC RFP
Promotion
Decorations $ 325,000
Parties 400,000
Printing 40,000
Administration
Communication Equip. 7,500
Computer
hardware/software 325,000
Office furniture/equip. 275,000
Office supplies 75,000
Office refreshments 10,000
Storage space 2,500
Security Guards 35,000
Messenger service 7,500
Janitorial service 20,000
VCR & TV receivers . 2,500
Local cable TV 1,000
DNC Staff Housing 120,000
Host Committee
Staff Support 700,000

ATTACHMENT E



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for the 2000 convention.

To the extent that that’s true, we would urge the
Commission, within the next year or so, at least to begin
the process to develop rules for the following cycle, for
2004, so that when we are sitting here four years from now,
and beginning negotiations for that convention, we'll all
know and understand what the rules are.

This situation should have been avoided in the
past, through Commission rules that were clear. I think we
can avoid this situation in future, if not for this
immediate cycle that we're in, then the future cycle.

But for. purposes of this audit, we have to come to
the conclusion that the DNC, the Democratic National
Convention Committee, was not put on fair notice of the
disallowance of telephone service charges. And for that
reason, we urge the Commission to revisit the repayment
determination, and decide that the Convention Committee
should not be penalized, should not be required to repay
these expenses, which we had every reason to believe, at the
time, were permissible under the Commission’s regulations.

Thank you very much, Mr. Chairman and members of
the Commission. We would be pleased to answer any questions
you may have.

CHAIRMAN THOMAS: Thank you, Joe. I will just ask
one question at the outset, just so we are all very clear on

Heritage Reporting Corporation
(202) 628-4888

ATTACHAS. 2
Page

Bio


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June 28, 1996 Vw

Brad Kiley

Director of Administration out
1996 Democratic National Convention Commitee, Inc.

320 North Clark Street

Chicago, IL 60610

Dear Brad:

We seek concurrence of the 1996 Democratic National Convention
Comminee. Inc. (“DNCCTM) for the cash expenditure for cell phones and
accessories as follows:

! EQUIPMENT CASH VALUE
Thirty cell phones @ $73.95/mo :
for 1 month $2218.50
| Thirty cell phones @$49.95/mo.
for | month . 1,498.50
Sales tax : 223.02
150 minutes of additional air
time per phone @ $.70/minute
for 30 cell phones for July 3.150.00°°
| TOTAL $7,090.02

**Chicago ‘96 will increase or decrease this amount based on actual monthly
usage of cellular phones in June.

Please approve the cash expenditure of $7,090.02 that will be charged against
line item #65, CELLULAR PHONE SYSTEM, by signing, dating and
returning one copy of this letter to my attention.

Very truly yours,

aay ona

Finance Director
Chicago ‘96

Accepted and acknowledged:
1996 DEMOCRATIC AL CONVENTION COMMITTEE, INC.

E
Page lab or 1A

320 North Clark Seree:, Sue 402. Chucago. IL 60610 + fac 214-1996 © Fax 312-263-8009
e-masl crucage9@AlS.NET pee e cmsetee



* Form #9606. ~

Commitee for '96 ENTERED APR 04 SFB,

CHECK REQUEST FORM

ae A, —

, 11%
x : 1, . DNCC OFFICE SUPPLY/REIMBURSEMENT 277 Cm. Yop

(OMS OCU ZVA

ra -
receipt of pootvservceenfrmadty <n! Dey
arte el BL ee ——

All requests for check disbursement must be accompanied by the original invoice or receipts.

Approval signatures: a .
se me a ee
“a Check Preparer ,on Sas Finance Director
cewtemeen pete eee Steveiee
*,, Date received = stele cha wis, Commract #
Thm tte eee. rehearse Ne ware

a
mote tee 1.

v-

Check eosin confirmation sass:
(for pick up only) ~



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n

did not include those in the numbers. So that may be a way
to explain part of it. But without seeing the specific
bills and the payments in question, you know, I really can’t
-- I just can’t tell you.

COMMISSIONER MCDONALD: I understand. But just so
I -- on the factual side, so I understand, you don’t except
the premise that that’s how you’ve analyzed this payback.

MR. HALTER: What premise?

COMMISSIONER MCDONALD: The premise about the cell
phones not being included, at least in part. You really
don’t know --

MR. HALTER: We do not except that, because on a
sheet that I’m looking at, that’s not as detailed as I would
like it to be, there are cellular phone charges. So --

COMMISSIONER MCDONALD: I mean, it’s just a
factual question I’m asking. I know that we don’t have time

: MR. HALTER: We didn’t try to split cell phone
minute charges, cell phone long distance charges or anything
like that.

COMMISSIONER MCDONALD: Okay. Okay. I was just
trying to be sure that I was following. And you can kind of
go back and take a look at that and see what you think may
have transpired there, from your own work papers, I gather.

CHAIRMAN THOMAS: Bob?

Heritage Reporting Corporation
. (202) 628-4888



Section 9008.52(c) of Title 11 of the Code of Federal Regulations states.
in part, that contributions received by host committees may be used to defray those
expenses incurred for the purpose of promoting the suitability of the city as a convention
site; to defray those expenses incurred for welcoming the convention attendees to the city,
such as expenses for information booths, receptions, and tours; to defray those expenses
incurred in facilitating commerce, such as providing the convention and attendees with
shopping and entertainment guides and distributing the sampics and promotional material
specified under 11 CFR §9008.9(c); to defray the administrative expenses incurred by the
host committee, such as salaries, rent, travel, and liability insurance; and to provide the
national committee use of an auditorium or convention center and to provide construction
and convention related services for that location such as: construction of podiums; press
tables; false floors; camera platforms; additional seating; lighting; electrical, air
conditioning, and loudspeaker systems; offices; office equipment; and decorations.

Further, contributions may be used to defray the cost of various local
transportation services, including the provision of buses and automobiles; to defray the
cost of law enforcement services necessary to assure orderly conventions; to defray the
cost of using convention bureau personnel to provide central housing and reservation
services; to provide hotel rooms at no charge or a reduced rate on the basis of the number
of rooms actually booked for the convention; to provide accommodations and hospitality
for committees of the parties responsible for choosing the sites of the conventions; and to
provide other similar convention facilities and services.

Section 9008:7(a)(4) of Title 11 of the Code of Federal Regulations states
that “Convention expenses” include all expenses incurred by or on behalf of a political
party's national committee or convention committee with respect to and for the purpose
of conducting a presidential nominating convention or convention-related activities.

Background

The Audit staff identified payments made by and contributions to
Chicago's Committee for ‘96 (the Host Committee) and payments made by the City of
Chicago (the City) relative to several vendors totaling $2,580,742, which appear to be for
convention-related expenses and not for items noted above at 11 CFR §9008.52(c). Most
of the information pertaining to the vendors was obtained as a result of our audit of the

Host Committee.

On August 4, 1994, the City of Chicago and the 1996 Democratic National
Convention Committee, Inc. entered into a written agreement (the Convention Contract
or Contract). One section of this agreement provided for the establishment of a host
committee to serve. in part. as a separate fund to satisfy the financial obligations of the
City specified in the Convention Contract. and, for securing cash and in-kind
contributions necessary to obtain goods and services needed for the Convention. The
Host Commitee formally registered with the FEC on August 16, 1994 as Chicago's
Committee for *96.

A

ATi gcsseaT WT

Page __Y of 22



~ —Loinmiires for '96 >» ENTERED NW 21 M6 — KEL

ore .
pre se

2 A BUSI 25

BLS SUMES SO, DNCC OFFICE SUPPLY/REIMBURSEMENT
: CHECK REQUEST FORM

-_——- 2 meso

wie ALT. Tech”
waxr *538° 1537"

Date Ehec Faker needed” SAP
Vendor invoice number (3 (7%

Purpose of expenditure Prone Service

7

Receipt of goods/service confirmed by De. Dwis

Person requesting disbursement : D. Dee's

All requests for check disbursement must be accompanied by the original invoice or receipts.

Loni Tete SOL Te Te

sat Willa Finance Director
Date received Lf-19-9¢ Contract #
Check # 259) . Check receipt confirmation signature:
I 7 (for pick up only)
Date of check _//320-5 @
rT ae : eo od an .
Name/Title
Fund : Account :
Applies to contract line

ATECHENT _
ae arcu — fe


DETAILED CHARGES Page 2

os
_—_—_—_————

Biting Questions, Call 1 800 480-2203 312 832-1996 255 0
Changes in Service, Cail 1312 750-2000 _
Repair Service, Call 1 800 884-2550 | UL 1, 1988
IMPORTANT INFORMATION

Our records show that you have selected Aseritech as your
Presubscribed carrier for all of your IntraLATA long distance service.

Our records show that you have selected AT&T your presubscribed
carrier for all of your InterLaTA long distance service.

NO OTHER CALLING CARO iS EASIER TO USE TWAN YOUR AMERITECH CALLING CARD.
While long distance carr 8 may ask you to dial extra digits to piace a
local call using their calling card, Ameritech stil! offers the
convenience of dialing “°0° pius the telephone number. With the

Aner ieemeGailing Card, you siaply dia! °O° followed by the number you
went to reach. After the tone, enter your erea code and phone nuaber
Plus your easy-to-remember PIN (or special 14-digit code, if
eppiicabie). If you need a new Ameritech Calling Card, please cal!
1-800-614-CARD, ext. 421. If you would like to change your 4-Digit
Personal identification Number (PIN), call 1-800-569-9100.

CURRENT CHARGES
Menthly Serviee - Jul 1 thru Jul 31

Remote Cai! Forwarding Service . 18.51

Remote Cali Fudg Serv Adi Line . 155.10
Total Monthly Service Charges ....cccccccccccccsecccccccs 170.61
Leeal Calle

Measured Service

Local Area Calls ...... See e cece cee e scene nceeens 40.52

S08 Cali(s) during
1246 Minute(s)

312 Cali(s) during 10% Discount Period total ing
826 winute(s)

18 Cali(s) during 40% Discount Period total ing

16 Minute(s)

Kk Rate Period totaling

FOR CALLING CODES PLEASE SEE THE BACK OF THE FIRST PAGE



The following are jointly recognized

as unaccounted for expenses.
~ AC for 1250 Broadway
- Fire Department

- AIC for One & Two Penn Plaza

TOTAL
REMAINING

-MBE Electric
TOTAL

REMAINING

20,000
28,000

95,000

96,744

°o

owoo

98,744

95,000

$1,458

11,061
11,000

76,018

22,726

meager


ey ATLANTA "QE COMRITTEE, INC. 26-Sep-29 oe
SREARTNENT BUDGET STATEMENT. 11:26 aM

. . TRANSPOSTAT ON

>, a3tigs

YEAR TOTAL
10 BUDGETED

400621 SALARIES & WAGES \ 9.00 121,994.52 188,276.73 63,282.18
40092: INTERKS 9.99 0.00 0.00 0.00
hoo, 10121 PRO SERVICES 9.00 $6,854.40 0.09
a 420121 TRAVEL-!0 9.09 489.46 = 100, 067
420221 STAFF TRAVEL-OUT Cf AREA 0.00 1,020.25 1,820.28 0.00
- 6 430121 RENTAL OF SPACE ¢.00 0.00 0.00 0,00
a 440121 OFFICE SUPPLIES 2.00 02146 (679.00 (142.46)
. 440221 SDSTAGE 0.06 0.00 0.00 0.00.
en oan 440321 CTHER SUPPLIES 9,00 34,316.12 30,000.00 (4)31.12)
450521 EQUIP & FURN RENTAL 9.00 2,974.00 $,000.00 2,026.00
‘ 7. $0012! CORRUNECATIONS , 0.00 0.66 0.00 0,00
> 440221 MEDIA DEPOT 0.00 6,398.97 $,000,00 (1,398.07) i
1.) 60321 FRELSHT 0.00 880.00 750.00 (160,00) Lo
* 46042! CONFERENCES 28 0,00 0.00 9.00 oy
\ 40082) EMPLOYEE SVE CEN 4 9.00 0.00 0.00 .
~. 460621 ADVERT: SING i] 0.90 0.00 3.00
490821 DATA PROCESSING oar) 0.00 0.00 = (8,00
440021 PARKERS 0.33, 5,629.80 $,000.00 (829.00)
41021 LUNES aM ore 0.000. 167.98)
401121 HOUSING 2.08 5,226.30 §,000.00 (226,36)
609921 NISCELLANEOUS 3.00 2,606.19 0.00 12,906.19! ©
60121 LINCUSINES Ear) 0.00 0.00 9.00
8.98 7,608.29 °S,688.00 8,997.2)
$e 33,076.68 46,962.00

0.29 «3,027.12 25,090.00
2.20 387,211.00 370,932.00 57,578,007
260 19,753.52 13,602.00 (6,18!
‘30062! TRAILER PARKING 0.20 138,863.00) 0.00 38, S63.

€.00 738,639.27 700,000.00 (38,639.77)

335ancng2auersevsrcwreues seseuscnaauceesesousesesceessere

. v d r

£
ATTAC OM.
Pegs AC ot BT


May 28. 1996

Brad Kiley

Director of Administration

Democratic National Convention Comminee
320 N. Clark. Room 600A

on Coll i
= samtl ow Chicago, IL 60610
Meyer
“tC Newer when H.bain Dear Brad:
- Sever. breve & Poe i
Lome Fon '
trerwwre Ovemer i We seek the concurrence of the 1996 Democratic National Convenuon

Commitee. Inc. (“DNCCTM) for the expenditure of the following tunds
Line item: 63 - Communication Systems Cash expense

Vendor: Amentech
: Assount Cos
| 312 336-1996 $8285.43

Note: The total invoice was $8.758.34 out of which $472.90 was

i charged earlier as part of the artached lener. The $472.90 was

| determined by totaling the installation charges in the “other charges and
credits” section of the bill.

Please acknowledge the above expenditures by signing. dating and
returning one copy of this letter to my attenuon.

Sincerely,

Dam

Don Davis

Finance Director

Chicago ‘96

Accepted and acknowledged:

1996 Democratic National Convention Commitee, Inc.

By; Date:_ 27 Low, LIIL

ce: Nancy Clawson. Counsel. Chicago ‘96
Leslie Fox, Execuuve Director. Chicago ‘96
Janet V. Green. Deputy Chief Executive Officer. DNCC

Alfonse McMillan, Counsel, DNCC 1 E
fee fl of AT

312-214-1996 * Fax 312-263-8009 _
NET

qiLLINOIsS 320 North Clark Sewer, Suite 402. Chicago. IL 60610

2 einen enes Hom monmer = e-mail. ci Ss.



Forai“9006 vee ee pee _¥ /:20! Gf .

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ee ENTERED aR 27 rm PD" & achig Done
aint DNCC OFFICE SUPPLY/REIMBURSEMENT __ ES)
CHECK REQUEST FORM

nan

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Amount ” Goes 2

Date check needed "Lap

Vendor invoice numbe@ AZ p25 1Se OA= =) 0 (p

Purppse of expenditure ——~heleplarntc hei etprLMie

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ADEE VLELEFaI

Receipt of goods/service confirmed by

Person requesting disbursement

All requests for check disbursement must be accompanied by the original invoice or receipts.

Approval signatures: ‘
“ee, .
Check Preparer
ee Accopted grt akacaletyed.
Sem jem fel oe gm Tebcs, IN
Date received 1206 Oeancerati: No Contec wer Tetes INE

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<<. fay Check receipt confirmation sigeature:
. for pick up, oaly)

Check #

Date of check _—

Acct #

Ere Applies to contract li


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overhead, such as telephone charges.

The other aspect of that that could be significant
is whether there is any reliance in advance on that
argument, or it was simply an after-the-fact inconsistent
application here. Let me just ask you that. Are you
contending there was any reliance on the Commission allowing
these other overhead charges to be paid by the Host
Committee, or is it simply you are saying we are
inconsistently applying the regulation?

MR. SANDLER: Our reliance was on the language of
the regulation itself, its plain meaning, and its history.

In prior conventions, the Host Committees clearly
paid these charges. In New York, in 1992, they were paid.
In Atlanta, in 1988, they were paid by the Host Committee.
But there was no audit of Host Committee expenses at that
time. So we were all dealing a bit in the dark here --

VICE CHAIRMAN WOLD: All right.

MR. SANDLER: -- in terms of practice, which is all
the more reason why we had to rely simply on, you know, the
common sense application of the regulations.

VICE CHAIRMAN WOLD: Okay.

MR. SANDLER: The arbitrary application in terms
of cell phone, but not hard-line charges, that was after the
fact --

VICE CHAIRMAN WOLD: All right.

Heritage Reporting Corporation
(202) 628-4888

D

Page

ATTACHMGUT —Sb
73 of Ob


Mr. Pastrick served as treasurer of the DNCC from October 5. 1995 to
January 20, 1997, and also served as treasurer of the DNC Services Corporation/
Democratic National Committee, Democratic Unity Fund, and six other committees
registered withthe Commission, according to the FEC Disclosure Data Base for the 95-
96 cycle. The DNCC did not defray the cost of Mr. Pastrick's hotel expenses during
convention week. During fieldwork, the Audit staff requested copies of the hotel bill and
related expenses and information concerning the payment of these expenses. Also
requested was information as to why no portion of these expenses relate to the
convention, even though Mr. Pastrick and Mr. Rosen were both present during
convention week and met with persons attending the convention.

The DNCC responded by stating that “during the week of the convention.
Mr. Pastrick’s sole function, other than a five minute speech at the Monday Convention
session, was to serve in a fundraising capacity for the DNC [Democratic National
Committee].” The DNCC went on to explain that there was no point during the week of
the convention where Mr. Pastrick was required to serve in the role of treasurer of the
DNCC. A copy of Mr. Pastrick’s remarks of August 26th was provided. He was
introduced as “Treasurer of the Democratic National Committee.” In his remarks, Mr.
Pastrick made references to Party finances, campaign finance reform, and the November
general election. Information relating to the hotel expenses and payment thereof was not
provided. .

In the Audit staff's opinion. the expenses associated with Mr. Pastrick’s
suite during convention weék would seem, at least in part, allocable to the DNCC. as
would the two additional rooms, given his position and responsibilities as the DNCC
treasurer.

In the ECM, the Audit staff requested that the DNCC provide support for
its position. The documentation was to include (a) copies of the hotel bill and related
expenses for Mr. Pastrick’s suite and the two additional rooms, (b) information
conceming the payment of these expenses, (c) a copy of Mr. Pastrick’s appointment
calendar or other written record of his activities during convention week, and (d) any
additional information the DNCC believes is relevant in support of its current position.

In its response to the ECM. the DNCC did not submit any of the
documentation requested in the ECM in support of its position. The DNCC did reiterate
the points discussed above and further stated:

[I]t is fundamental to the Convention financing system that the
costs of national party fundraising at the Convention should not be paid
for with public Convention grant. 11 CFR §9008.7(a)(4)(viii)(B). Thus. it
is clear that no part of Mr. Pastrick’s expenses should have been allocated

to the DNCC.” The Audit Division's insistence that part of the expenses
of a Party official to attend the Convention should be charged to the public
The Audit Division's position. were the Commission to uphold it, would

ATTACHE? A

ze
Page —ft of



* ditmeritech os

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GENERA: ot! wil 5 Please inciude sour I4-aigit
account number on sour chech
dior any correspondence
402 “

UllsstHesvsllllsleeolal sls SERIRr at —_—_—_—_—_—_——.

AMERITECH Account Number

PO Box 4520 wunienttend 312 E95-1192 5153

Caro! Stream IL 60197-BB2Q eu

SEP 16, 1996

VMeeberseDbooceebbereddoLocbsollallessbeleseseld osobobes! 9648 354/362
1756 AT 1 Beane “30GT 2285

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$10 N PESHTIGO CT
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CHICAGO 9. 60611-4309

5

PASTOUEAPTER> OCT.11,1996  AwouNTouE. 22.85

2 Detach and mail tep section wath your check peyabis to Ammerasch Write eccourn rasnoer on check. . z
PLEASE ALLOW FIVE DAYS WHEN PAYING BY MAM OR AT AN AUTHORIZED AGENCY
Mad paymerss to: Amernacn. PO Box 4520. Caro! Stream & 60197-4520

CUSTOM BUSINESS SERVICES

312 95-1132 5153
—_—_—

BILLING SUMMARY SEP 16. 1996

ae le | “erm a charges Ammgurt Due
22.96 | 7.78 | 15.20 7.8 :
GENAL NATL CONVENTION 510 N PESHTGO CT rine

SUMMARY OF CURRENT CHARGES

AMERITECH

Monthly Service .. se eeeeeeeeeeees
Other Charges and C See Section 1,
Local & State Acd'! Cnarges (See Section

Taxes (IL +34) (Cty a)
AMERITECH CURRENT CHARGES .

TOTAL CURRENT CHARGES (La:

dmeritech ; Pagel! 6 oo 135


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distance charges. Is there a separate reference to local
services charges, monthly use, or whatever?

° MR. HALTER: I can say on the budget, the long
distance commitment was $367,250. There is like an
installation of a half a million, installation commitment.

VICE CHAIRMAN WOLD: Was anything challenged for
installation charges? The Host Committee paid that, then.

MR. HALTER: No, we didn’t challenge that.

VICE CHAIRMAN WOLD: What about the local service
charges? Were there monthly charges for anything?

MR. HALTER: There’s not a separate line item
listed in the budget for local.

VICE CHAIRMAN WOLD: Do you know if they are
included in the amount at issue here? Is there any
distinction to be made between long distance charges and
other local charges?

MR. HALTER: No.

VICE CHAIRMAN WOLD: Thank you.

CHAIRMAN THOMAS: Commissioner McDonald, and then
Larry Noble.

COMMISSIONER MCDONALD: Thank you. Let me just go
back one second to one thing that’s a little bit unclear to
me, in terms of -- we had the regulation. There was a
conflict between the regulation itself and the E and J.
We’ve had this question brought up about the advisory

Heritage Reporting Corporation
(202) 628-4888

ATTACE:

Page _S2 of Sb



restrictions were met, the host committee could spend the funds for any “convention
expenses.” See Explanation & Justification, section 9008.7, 44 Fed. Reg. at 63038.

In promulgating the current version of the regulations, the Commission decided to
eliminate what it regarded as complex and unworkable distinctions between “local” and
“local retail” businesses. 59 Fed. Reg. at 33610. But the new rules continued to provide,
as the Commission explained, that “both host committees and government agencies and
municipalities may accept monetary and in-kind donations from local businesses and
other local organizations and individuals to defray a variety of expenses for promoting
the convention city and paving for convention-related facilities and services.”
Explanation and Justification (“E&J”), section 9008.52, 59 Fed. Reg. at 33614 (emphasis
added). Significantly, the Commission retained, in the final language of the current rules
in section 9008.52(c), the exact same list of permissible host committee disbursements as
had been set forth in prior section 9008.7(b)(2) in 1979, including “{o]ther similar
convention related facilities and services,” for which a host committee could use funds
donated by local retail businésses under section 9008.79(d)(3). The Commission openly
recognized, in 1979, that this list allowed the host committee to “defray convention
expenses,” without limitation, and that was precisely the reason there had been placed
severe limitations on the source of the funds. 44 Fed. Reg. at 63037-38. Thus, the
legislative history of the language of the current regulation indicates no intent whatsoever
to limit the use of host committee funds for administrative expenses.

That leaves, of course, the one sentence of the E&J of the current regulation,
asking convention committees to “Please note that the revised rules do not permit host
committees or municipalities to pay. . . the convention committee’s or the national party's
overhead and administrative expenses related to the convention. 59 Fed. Reg. at 33614.
The problem with this sentence is that it is flatly contradicted by the language of the
regulation itself, rendering it essentially unintelligible. The E&J language does not say
that a host committee can pay some administrative expenses, but not telephone charges.
It says that a host committee may not pay any administrative or overhead expenses of the
convention committee. Yet the plain language of the regulation itself clearly permits
payment of such expenses, in particular, “offices” and “office equipment.” Offices and

office equipment are administrative and overhead expenses, by anybody’s definition.

B

ATTACH 2 =. .-

Page — oof 1



PaG!

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Bie c/o, cut chan! t
AMER
329 NORTH CLARK STREET #0, 80H Ju0076
4
CHICAGO IL 60610-4711 CINeTHNATI OM 45274-0076

PAYMENT .
DUE DaTe AM

A FINANCE CHARGE OF 1.50% WILL BE APPLIED TO ALL OVER DUE BALANCES.

PURCHASE ORDER INVOICE DATE MESSAGE AREA

10/15/96 0002017413

REFERENCE DESCRIPTION OF CHARGES
PREVIOUS BALANCE AS OF 98/4 / 13.638.

Finance Charge On 10/077 200. 3
Statement On 10/08/' 7.23). CR

Finance Charge On 10/14 /! 1.33
12-600-Bbu ALPHA NUMERIC. SERVICE 09/30/' 11/077 114. 1bCR
12-400-! 3 ALPHA NUMERIC SERVICE 09/30/' 11/077 114. 16CR
12-400-' a8 ALPHA NUMERIC SERVICE 09/30/' 11/077 114. 14CR
12-400-' a®k Pager Subtota) --> 05/30/' 11/077 342.42CR
STATE TELECOMM TAX Bik
ADDL CHRG-MUNICIPAL 17.13CR

CURRENT PERIOD ACTIVITY. . : 6 28h: $3er
FOR BILLING INQUIRIES CALL 1-800-765-7243 .

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If you wren te cnange your peger summer te 6 cov G80 cumber.yes any eo oe can. If yoo ot
o> te cnange your pager eamser to 0 sev 773 cammer.you way Go se after fon 13. aneritoes
Saneet guarantee thet your corrent pager semper will be evailable 12 the cov arcs come.

PAYMENTS AND TRANSACTIONS OCCURRING AFTER 10/14/96 WILL APPEAR ON YOUR NEXT INVOICE.

CURRENT 1 -_30 DAYS 31 - 60 DAYS 61 - 90 DAYS OVER 90 DAYS TOTAL OU
292.03 5,970.33 0.00 0.00 0.00 + 262.3)
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320 North Clark Street, Room 600-A -
Chicago, IL 60610

Dear Brad:

February 29, |

‘We seck concurrence of the 1996 Democratic Convention Comminee, inc. (DNCC)
for the cash expendiiure associated with telecommunication line activation by
Ameritech in the expanded ONCCT space on the sixth floor of 320 North Clark Street.

The cost breakdown is as foll

Qqry VENDOR & DESCRIPTION Ei EXT'D PRICE
' Ameritech Re arrange workmg oq 1080.00
6th fone winng cise
1 -Amenvesh howe one sania ~ 540.90
’ Amernach Remove dead cabie 140.00
Jwmpers on 6th Boor
0 Ameruss (naa! 70 enalog lanes 102.74 | 7191.80
1 Ameraseh Inmall 70 [SON Unes 10274 | 7191 80
ts Arservesh tnmell 113 voces madeoens 13.00 | 1723.0
1 Ameracah roster) handing 621.00
100 aTaTt 100 NT-1 fer ISDN lene 180.00 | 18000.00
100 aTaT 100 Power Suppices for above NT-' 27.00 | 2700.00
CASH CASH .
Telecommunications $39,409.60

‘The attached cost estimate represents a not-io-exceed upper limit maximum which
will be applied to budget line item #63 TELECOMMUNICATIONS.

Please acknowledge the above expenditure by signing, dating, and returning coe
copy to my anention. Chicago ‘% this signed document as our Notice-To

Pamenlook
Oto / es yl mY, 35877
'
Dts Ox oy a” dy, 855
Floance Director
Chicago 96
Accepted and

acknowledged:
by lag Peles CONVENTION COMMITTEE, INC.
" . of
0 1944-1 =

320 Nemth Clark Seren, Sait 402. Chicago, 11 60610 > 312-214-1996 = Fax 312-263-8009
owas: cengu9GQ@ALS. NET

Ta 130.



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That separate regulation, again, is completely
useless in interpreting the Host Committee regulations,
because there are a number of categories of expenses that
can be paid for either by the Host Committee or by the
Convention Committee. So the fact that something can be
paid for by the Convention Committee, under the regs, that
it's a permissible use of our public funds, doesn’t tell you
anything about whether the Host Committee could also pay for
that. -

For example, that same regulation says that the
cost of preparing and maintaining the convention site and
renting the hall ¢an be paid for by the Convention
Committee, using it public funds. But the Host Committee
regulations say the Host Committee could also pay for that.

Similarly, the Convention Committee -- the list of
what the Convention Committee can use its own funds to pay
for says that it can pay for administrative expenses,
including office supplies and office machines, but the Host
Committee regulations say the Host Committee could pay for
those instead. And, in fact, the Host Committee did, in our
case, and the auditors allowed it.

So that sentence in the separate regulation about
the Convention Committee’s use of its own funds in no way
renders this issue any more intelligible. It doesn’t tell
us, in any way, which office-related service charges and

Heritage Reporting Corporation
(202) 628-4888

D

ATTACHMENT

Page _t3- of Sh



enitech

73120832019%2552315S500200b,00000294 Sagooo0s 1448

GENFFS° To Please inciuge sour 14-digit
account number on vour check
and/or any corresnondence,

LM ecDevoeeedMebecdessbelealslelecebllellBS JUN <7 P2:38
AMERITECH Account Number
PO Box 4520 312 632-1996 2559
Taro! Stream iL 60197-4520 TELECOMS SI LOM3,
JUN 1 1996
Valbeodbesoells oll esebabeal
504329198 51888
DEMOCRATIC NATIONAL
CONVENTION
510 N PESHTIGO CT FLARE
CHICAGO. IL 60611-4309
CURRENT CHARGES TOTAL
PasToucarteR. JUL 1, 1996 amounToue 518.88

LEASE ALLOW FIVE DAYS WHEN PAYING BY MAR OR AT AN AUTHORIZED AGENCY
‘Man paymems io Ameraecn PD Bor 4S2C Gare Svea . 42'5° 4520

CUSTOM BUSINESS SERVICES

mail iop section wan vour creck Daveple to Amernech Wrle sccoum mumnbe: on checs

312832 1996 2559

BILLING SUMMARY JUN 1 1996

ll eel ee
| 20058 0.00 ' 0.00 204.58 | 224.30 518.88

DEMOCRATIC NATIONAL CONVENTION 510 N PESHTIGO CT FLAG

SUMMARY OF CURRENT CHARGES

AMER | TECH

For Detailed Charges - S

MOATN ly SOFVICE 20... cere e reece cece eee tere ee eeeneeees 170.61
Local Cal 42.81
Local +27
Taxes (111 10.67
TOTAL CURRENT CHARGES 224.30

TM\

Kn 98 or 149



the provision of the transportation services contemplated herein
and to help design plans for overall transportation coordination
for the Convention.

14. FACILITIES POR DHCC OPERATIONS

The City shall provide or procure for the use of the DNCC
the following facilities and services for officers, staff and
volunteers of DNCC and affiliated organizations:

14.1. Office space. A minimum of 60,000 square feet of
office space in a mutually acceptable building, for use as the
DNCC’s headquarters office, of which 7,500 square feet shall be
available to DNCC from and including June 1, 1995 through and
including October 12, 1996, and the remainder of which shall be
available on a schedule to be mutually agreed, contemplating use
of all 60,000 square feet during the period from and including
June 1, 1996 through and including September 30, 1996. The City
shall cause to be constructed buildouts and other modifications.

14.2. Ticketing operations office. A minimum of 3,500
usable square feet, at at least one location and not more than
three locations reasonably acceptable to DNCC and convenient to
the hotel district, to serve as a ticketing operations office,
during the period from and including July 7, 1996 through and
including September 8, 1996.

14.3. Transportation center office. A minimum of 5,000

Square feet, at a location acceptable to DNCC, to serve as the

-61-

ATTACHMENT
Page HO of ar


Ww

related services for that location such as: construction of podiums;
press tables; false floors; camera platforms; additional seating;
lighting, electrical, air conditioning and loudspeaker systems;

offices: office equipment; and decorations; . . .

(xi) Toprovide ot ilar convention-related facilities and services.

The Final Audit Report concedes that payment by the Host Committee and/or the
City for Convention Committee for offices and office equipment, whether at the
Convention Hall or off-site, was entirely permissible under this language. Final Audit
Report at 10. Further, the Audit Division reviewed and allowed payments by the Host
Committee and/or the City for numerous office-related service charges, including
maintenance, cleaning, use of office supplies, equipment rental charges. cellular phone
service charges, pager service charges, and the like. Nevertheless, Final Audit Report
drew a distinction between all of these charges for office equipment facilities and
services, on the one hand, and telephone service charges, on the other hand, citing a
single sentence of the language of the Commission's Explanation and Justification for its
Convention regulations: “Please note that the revised rules do not permit host
committees or municipalities to pay salaries of those working for the convention
committee or the national party, or to pay the convention committee’s or the national
party’s overhead and administrative expenses related to the convention.” Presidential
Election Campaign Fund and Federal Financing of Presidential Nominating Conventions,
Final Rules, 59 Fed. Reg. 33606 at 33614 (June 29, 1994).

In these circumstances, requiring the Convention Committee to repay payments
made by the Host Committee and the City for telephone service charges would be
arbitrary, capricious and contrary to law, for two reasons. First, given the ambiguous and
contradictory language of the regulation and the E&J, and their contradictory application
by the Audit Division, the Convention Committee simply did not have fair notice that the
regulation could be interpreted to allow payment by a host committee for a whole vanety
of administrative and overhead expenses, but not including telephone service charges.
Second, the Commission’s reliance on the one sentence of language in its E&J as
governing the scope of the regulation is in violation of the Administrative Procedure Act.
5 U.S.C. §§ 553(b) and (c), because the Convention Committee clearly was not afforded

any notice of or opportunity to comment on the entire concept that convention committee

AG TACROS SL _b __

Page ——_——-

ot


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ur

our written submission, the rule in the District of Columbia
Circuit is that of course agencies can change a final rule
from a proposed rule. But another round of comment is
required if the final rule is not a logical outgrowth of the
proposed rule.

And the District of Columbia Circuit applies a
common sense test in determining that, which is simply was
there enough of a hint, enough of a suggestion in the
proposed rulemaking to give people, again, fair notice that
something like this was being considered, and give them an
opportunity to comment on it.

In thig case, it clearly cannot be said that this
language in the explanation and justification was a logical
outgrowth of the proposed rules. There wasn’t the slightest
hint in the proposed rules that we had a chance to comment
on, that the Commission was going to be considering a major
new restriction on the kinds of expenses that Host
Committees could pay for.

Had there been such an indication in the proposed
rules, you can be sure we would have been most interested in
commenting on it. And, in fact, we believe our comments
would have been very useful to the Commission in flagging
the very kinds of practical issues and problems that
unfortunately we have to bring to you today, after the fact,
about interpreting and applying such a concept of

Heritage Reporting Corporation
(202) 628-4888

ATTACHNEST

D
Page _Io. of Se



0233203362996 40404 O2S200%80e4O0000Soo000000000087583424

Please include vour 14-digit

account number on vour check

andor ans correspondence

AMERITECH Account Number
PO Box 4520 312 336-1996 2528 ©
Carol Stream iL 60197-4520

MAY 16, 1996
VaUesderselbeosoelllle 9 82G !
15 FN38 1 F 83065 875834
CHICAGO 96

%CORNEILA HEINS
320 N CLARK AM 402
CHICAGO IL 60610-4711

PASTOUEAPTER® «JUN 12,1996 Aucuntoue.. 8,758.34

T ‘Detach ond mel top section with yeur check peyebte to Ammermecn. We sccourt ramnoe! on creck.

PLEASE ALLOW FIVE DAYS WHEN PAYING BY MAIL OR AT AN AUTHORED AGENCY.
Mad paymerss to: Ameraech. PO Bos 4$20, Caro! Sueam & 60197-4520

CUSTOM BUSINESS SERVICES seme eve ree

BILLING SUMMARY MAY 16, 1996

Previous Agwatmeras Balance | Current Total

os Thome Ver You ' | Crarges , Amount Que
' 3s240.00 = | j | ereasa isan |

CHHCAGO 0s SCORMELA HERS 320 N CLARK RM 602

SUMMARY OF CURRENT CHARGES

aman i TECH

uonthiy service . 6,583.02

Local Usage Serv 1,109.97

Other Charges anc Cre 619.64

itemized Calis (See Section 12.14

Local & State Add’! Charges ( 7.83

Taxes (IL 415.50 415.50

AMERITECH CURRENT CHARGES ...... 8,748.10

OAN
Long Distance (See Section 2, Page
Taxes (IL 49)
OAN CURRENT CHARGES oe



73320832019962552334300200b100000518aa0000074078

~

Please inciude vour 14-digit
account number on vour chec
and/or any correspondence

LMeolbecocselldabostecsLbeabslebecclstlesselbaal

P.O. Box 4520
Carol Stream. tL 60197-4520

UMecd ose orveedMecsebealbessbeselbecsdMecbellberssstell
49AV1 E24 45846 “SOGT . 74078
DEMOCRATIC NATIONAL

ONVENTION

Cc
320 N CLARK RM 402
CHICAGO, IL 60610-4711

| PASTOUEAPTER ©JUL 29,1996  amcunToue.. 740.78

% Ostech and mail tep section with your check peyabie to Ameritech. Write sccount number on check.
PLEASE ALLOW FIVE DAYS WHEN PAYING BY MAL OR AT AN AUTHORIZED AGENCY.
Maul paymerss to: Amernecn. P.O. Box 4520. Caro! Stream. i 60197-4520

| 312 e32-1996 2559

CUSTOM BUSINESS SERVICES
BILLING SUMMARY JUL 1, 1996
| Previous Payments | Adustmerss . | Past Dus Current Total
oa + Amount Amount Due
| $18.88 0.00 | 0.00 518.68 | 740.78
DEMOCRATIC NATIONAL CONVENTION 20 N CLARK All 402
SUMMARY OF CURRENT CHARGES
AMER I TECH
For Detailed Charges - See Page 2
wontnly Service . sees on 170.61
Loca! Calls ....... 40.52
Loca! and State Add:t +21
Taxes (111 10.56) 10.56

TOTAL CURRENT CHARGES


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opinion process.

And then, pursuant to the advisory opinion
process, we’ve had the discussion about whether, as
Commissioner Mason pointed out, and I’m kind of where he is,
if I can figure out how we can do it -- it’s kind of an
interesting problem.

In an advisory opinion process, you essentially
sign off as well. Well, you know, you may call it something
else, but you sign off, as well.

And what I do want to understand, as this is kind
of important, is the reason that you didn’t seek an advisory
opinion was that you based it on ‘88 and ‘92, and you saw
the regulation as overriding, or what am I missing about why
you would not have asked for one, in view of what you've
said?

MR. SANDLER: In view of the language of the
regulations, it really -- it did not occur to us that
telephone service charges were going to be an issue.

COMMISSIONER MCDONALD: There are two things about
the telephone service that I would -- particularly for my
good friend, Vice Chairman Wold, I have talked to the phone
company and asked if they would charge me on a per word
basis, as opposed to per minute, because I think it’s
discriminatory against some of us that speak slowly.

VICE CHAIRMAN WOLD: I thought you meant some of

Heritage Reporting Corporation
(202) 628-4888

ATTA

Page _ $3 of a —


ea

to -
in Date g 4 i? \
ey ; | ENTERED sn APR 2 7 1998 5 Regd Do 4b GG .
‘pNCC OFFICE SUPPLY/REIMBURSEMENT
a) CHECK REQUEST FORM

“Sata Anestak
_pmoun * [325277

Lee cape

Date check needed .
Vendor ivoice number _ 3/2 -336-/77C 2528

i AAs
wes

Receipt of goods/service confirmedby _ Dee
Person requesting disbursement yoy owen

All requests for check disbursement must be accompanied by the original invoice or receipts.

Approval signatures: >
- + ¢
Check Preparer ” Executi Finance Director
. SheMet &
oa : nae . «
Date received Accented endacknowt * Coneract #
: Wet: COON GCC di nat) sven
Check # wip Check receipt confirmation signature:
oe 2" AL” (for pick up only): ae
Date of check 7 5

Acct #

. 0204 K
O15 77



1280 PARKING

TOTAL

REMAINING

TOTAL

REMAINING

Present insurance
Additional Car insurance
Deductible for 175 cars*

TOTAL

REMAINING
* 8/92 Estimate for deductibie is $13,000.

BUDGETED AMOUNT:
Security needs at 1260
Broadway, Headquarters
hotels, Ramada ...
TOTAL

REMAINING

2,000,000

46,000 46,699
20,000 18,000
27,000 33,365
9 4.510
$3,000 104,574
0 (19,874)
294,700

202,100 202,100 202,100
86,500 85,500 68,320

294,700 294,700 277.520

0 t) 17,180

1,401,750

1,283,780 1,233,750 1,233,750
98,000 98,000 95,000

70,000 70.000 = 13,000
1,401,780 1,401,750 1,341,760

° 0 60,000


12

contradictory and inconsistent. And, as in General Electnc, it was surely reasonable for
the Convention Committee to regard telephone service charges as being an “other similar
convention-related service” within the meaning of the regulation, similar to office
equipment and supplies, to utility charges, and to service charges for office equipment
that the Audit Division in fact treated as permissible for payment by the Host Committee.
In these circumstances, it is manifest that the Convention Committee was not

provided with “fair warning” of the Commission’s interpretation, was not “on notice” of
the Commission’s “ultimate interpretation” imposed for the first time in this audit, and

therefore “may not be punished” with a repayment obligation of more than $700,000.
General Electric Co., supra, 53 F.3d at 1333-34.

II. THE CONVENTION COMMITTEE WAS NOT PROVIDED WITH ANY

NOTICE OR OPPORTUNITY FOR COMMENT ON THE E&J

LANGUA OMM: NOW INT, IN

As noted, the Final Audit Report, in holding that the Host Committee and city
payments of telephone servicé charges for the Convention Committee were
impermissible, relies almost entirely on the language of the E&J indicating that the
revised rules “do not permit host committees or municipalities to . . . pay the convention
committee’s ... overhead and administrative expenses related to the convention.” Final
Audit Report at 10-12, citing E&J, 59 Fed. Reg. at 33614. To the extent that the
Commission has conferred on this language the force of a new regulation, controlling the
entire scope of section 9008.52(c) of the regulations, the Commission has clearly violated
the Administrative Procedure Act, 5 U.S.C. §§ 553(b)&(c), by failing to provide the
Convention Committee or the DNC any notice of or opportunity to comment on this new
restriction on the scope of permissible host committee disbursements.

The Commission issued a Notice of Proposed Rulemaking, with a request for
comments on new rules governing federal financing of Presidential nominating
conventions, on August 12, 1993, 58 Fed. Reg. 43046. Section 9008.53 of the proposed
new rules essentially retained the concept of the former rules: host committees could
accept donations from local retail businesses, in amounts proportionate to the expected
commercial return, and the host committee could use those funds to defray essentially
any convention expenses. The proposed rules further clarified that municipalities could

ATTACHNEN? _b
L of 14.

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were. I can --

COMMISSIONER MASON: It’s enumerated in the
contract that the Host Committee or the city would pay for
these phone charges that are at issue?

MR. SANDLER: Yes.

COMMISSIONER MASON: That sort of brings up an
idea that I had had, vis-a-vis, how to handle this in the
future, because you’ve talked about your difficulties in
negotiating a contract now.

What would be your reaction to the concept of
submitting whatever contract you negotiate, perspectively,
for the 2000 Convention to the Commission, through the
advisory opinion process?

MR. SANDLER: Well, we're dealing with numerous
categories of expenses and hundreds of line items. I just -
- I think it’s theoretically possible to do that. I don’t
know that the Commission would want to put itself in the
position of writing the convention contract or micro-
managing, you know, the convention contract, to that extent.

And the other problem is we do have a problem of
timing in the sense that this is something that we would be
negotiating and bringing to closure in the next couple of
months. .

And I think the Republican National Convention,
they've already chosen their city, Philadelphia, for 2000.

Heritage Reporting Corporation

(202) 628-4888

ATTACHBET? D

Page «of Ks G



10

and for the purpose of conducting a presidential nominating convention or convention-related
activities. 11 C.F.R. § 9008.7(a)(4). Some examples of convention expenses include
administrative and office expenses for conducting the convention including stationery, office
supplies, office machines, and telephone charges, but exclude the cost of any services supplied by
the national committee at its headquarters or principal office if such services are incidental to the
convention and not utilized primarily for the convention. 11 C.F.R. § 9008.7(a)(4)(x).
Generally, convention expenses incurred with respect to a presidential nominating convention are
subject to the expenditure limitation. See 11 C.F.R § 9008.8(a). Nevertheless, certain
expenditures related to a convention are not subject to the expenditure limitation. For example,
permissible host committee expenditures like those examples listed in 11 C.F.R § 9008.52 shall
not be considered convention committee expenditures and shall not count against the convention
committee’s expenditure limit. 11 C.F.R. § 9008.8(b)(1).° Host committee expenditures that are
not in accordance with section 9008.52 are in-kind contributions to the convention committee
that may be considered convention committee expenditures and count against the expenditure
limit. See id.

If the Commission determines that a national party committee accepted contributions to
defray convention expenses which, when added to the amount of payments received, exceeds the
expenditure limitation, it shall notify the national committee of the amount of contributions so

accepted, and the national-committee shall pay the amount specified to the United States

6 Additionally, Host Committee expenditures that are permitted under section 9008.52 are exempt from the

prohibition of corporate and labor organization contributions or expenditures. 11 C.F.R § 114.1(a)(2)(viii).


The Audit staff requested that the Convention Committee provide documentation that

the telephone charges were a permissible host committee expense pursuant to 11 C.F.R.

§ 9008.52(c). Jd. The Audit staff also cited the Explanation and Justification for 11 C.F.R.

§ 9008.52, 59 Fed. Reg. 33614 (June 29, 1994), which states that the revised rules do not permit
host committees to pay for the convention committee’s or the national party’s overhead expenses
for the convention. /d. at 10. Finally, the Audit staff concluded that the telephone charges were
an overhead expense of the convention, and did not promote the City of Chicago or prepare the
convention site. Jd. at 12.

On October 21, 1997, the Convention Committee filed its written response to the ECM.
The Convention Committee stated that it interpreted 11 C.F.R. § 9008.52(c) to permit the Host
Committee to pay for telephone service charges for the convention, and that the regulation does
not distinguish between the costs of office telephones and the costs of using the telephones.
Attachment A at 11. Moreover, the Convention Committee argued that the Explanation and
Justification for 11 C.F.R. § 9008.52 should not be given precedence over the plain language of
the regulation, and that the language of the Explanation and Justification is ambiguous. Id.

On June 25, 1998, the Commission approved the Audit Report of the Convention
Committee, including a determination that the Host Committee made in-kind contributions
totaling $600,325 to the Convention Committee, and the City of Chicago made in-kind
contributions totaling $126,510. Jd. Thus, the Commission determined that the Convention
Committee should make a repayment of $726,835 to the United States Treasury for the in-kind
contributions received from the Host Committee and the City of Chicago. /d. at 12; 26 U.S.C.

§ 9008(h); 11 C.F.R. § 9008.12(b)(3).


7

(e) an account with an overnight courier service and an
account with a ground delivery service;

(f) local messenger service;

(g) use @f audiovisual equipment and subscriptions to cable
television service;

(h) subscriptions to newspapers, magazines and minority
publications; and

(1) office furnishings.

14.8. Staff security. Security for all Convention Offices;
a photo identification security system to control access to the
Convention Offices; and use of a safe for the DNCC at the
location referred to in section 14.1 during the periods such
offices are to be available to the DNCC.

14.9. Staff housing. The City shall provide housing and
furnishings for DNCC staff as needed on a schedule to be mtually
agreed. Such housing shall be conveniently located with respect
to the Convention Facilities, the hotel designated by the DNCC as
its headquarters and the Convention Offices and shall be
Otherwise mutually satisfactory to the City and DNCC, provided
that the City shall not be required to expend for such housing in
excess of the amount specified in Exhibit A.

14.10. Transportation Passes. Up to 40 passes shall be
Provided, for the City’s public transportation system, on a
Schedule to be mutually agreed.

-63-

Ey

Pepe ot


a particular category of expense may be paid for by the convention committee itself, it
cannot be paid for by the host committee or municipality, and any such reading would be
flatly contradicted by the language of the regulations.

Therefore, it is utterly meaningless that the convention committee could lawfully
have paid for all of its own administrative and overhead expenses. The question is
whether the convention committee was fairly put on notice that certain categories of
admunistrative and overhead expenses could be paid for by the host committee, while
others, specifically telephone charges, could not. The definition of “convention
expenses” is wholly irrelevant and useless in addressing that question.

E. The Convention Committee Was Not Provided Fair Notice that the
Regulation Prohibited Host Committees from Paying for Telephone Service

Charges

In the circumstances described above, where the regulation obviously failed to
give fair warning of the conduct the Commission now seeks to prohibit—i.e., payment by
host committees of telephone sérvice charges—it would be unlawful for the Commission
to force the Democratic National Committee to repay those Host Committee payments.
In Gates & Fox Co., supra, a federal contractor working on the Washington Metro system
was cited for violating an OSHA regulation requiring that certain breathing devices be
provided for workers near the “advancing face” of a shaft and that “such equipment”
shall be on certain equipment in that area “and in other areas” where employees might be
trapped by smoke. The contractor had not been working near an “advancing face”, but
was working in another area where employees might be trapped by smoke. The court
found that the language was ambiguous because it was not clear whether the “other
areas” were only those near an advancing face, or could include other areas as well. The
court concluded that the contractor could not be fined for the violation because it “did not
receive constitutionally adequate notice” that OSHA would apply the regulation to such
other areas. 790 F.2d at 156. The court reasoned that:

Courts must give deference to an agency’s interpretation of its own regulations.
. Where the imposition of penal sanctions is at issue, however, the due process
clause prevents that deference from validating the application of a regulation that
fails to give fair warning of the conduct it prohibits or requires.

Id.

ATTACHRE:

Page _4- of 19


x entech Teh it

0333234953132404040535009804 30002 I0000000000000014b6413

ort en steyices Please include vour 14-digit
account number on your check”
and/or anv correspondence

WMesllessebeedobeclslevsblalblleten dll 23 321

AMERITECH | Ageount Number
PO Box 2500 we wpe 312 695-1132 51538
Bediord Park iL 60499-2500 “2.1 CIMTMM si’ 8

OCT 16. 1995
LMaolboneebbecsoedbeoebLabeobesdbalbece ges 019/029
2280 CP 1 B 20 | 56078 °CR 78 18664
GENRL NATL CONVENTION
SION
ARS

| SREPEUESEAES NOV 10,1995  Ancunroue. 186.64

% Dewen ane mai top section with your creck peyabis to Armerusch. Write scosura rusnbet on creck. 2?
PLEASE ALLOW FIVE DAYS WHEN PAYING BY MAR OR AT AN AUTHORIZED AGENCY.
Mai paymeres to: Amerason, PO Box 2500, Bedtord Park &. 60499-2500
| stze9s-1122 5183

CUSTOM BUSINESS SERVICES
BILLING SUMMARY | OCT 16, 1995
| Previous 7] Paymeres | Achuumerss | Balance Currern | Tom
aa : Charges Amount Dus
| . | 108.84 | 108.84
GEL NATL CONVENTION 810 NPESHTIGO CT ARG
SUMMARY OF CURRENT CHARGES
amma TECH
WOMEN y BOPVIC® 2.0... . ccc cece cece cence eees ewe eeeee 6.76
Other Charges and Credits (See Section 1, Page 3) .. 162.75
Leos! & State Add’! Charges (See Section -17
Taxes (IL 8.48 (Cty 8.48). 18.96
ABERITECH CURRENT CHARI 106.64
TOTAL CURRENT CHARGES (Late Paysent Charge after 11-10) 186.64

Page_23 or _129_



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11

12

13

14

15

16

17

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“yICcE CHAIRMAN WOLD: -- through the convention
itself. Is that right?

: MR. SANDLER: Yes, that’s right.

VICE. CHAIRMAN WOLD: All right. Thank you.

That was my understanding. I just wanted to make
sure that there isn’t something lingering here or something
I missed.

I wanted to ask you about one aspect of your
argument here. You had said that the audit staff has
allowed expenses to be paid by the -- what is it? -- the
Host Committee, which could also be considered to be
overhead. You mentioned particularly the cell phones and
pager charges, and I think janitorial or maintenance, and
other administrative expenses. And I would like Audit’s
response on that.

I recall something in the reports we have in front
of us that there were some such charges, but they were not
of a material nature which would, I think, tend to reduce
any argument based on those.

But I think you’re argument raises two -- or has
two aspects to it. One is whether there has been a
consistent application of the regulation, and we are not
simply arbitrarily disallowing one element there. And if
the other charges that were allowed were material, then we
cannot be arbitrary and disallow simply one element of the

Heritage Reporting Corporation
(202) 628-4888

»)

ATTACHMENT __—="__—

Page UL ot _Sb



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11
12
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16
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COMMISSIONER ELLIOTT: So that was in the
contract?

: MR. SANDLER: Definitely.

COMMISSIONER ELLIOTT: And when they paid that,
they were going with the contract as it had been signed?

MR. SANDLER: That's correct.

COMMISSIONER ELLIOTT: Okay. Now in previous
Convention Committees, with the city or a Host Committee,
did it include telephone use?

MR. SANDLER: Yes.

COMMISSIONER ELLIOTT: And was that allowed by us?

MR. SANDLER: Well, there was no -- as I
understand, prior to the current regulations, there was no
separate audit of the Host Committee, itself.

COMMISSIONER ELLIOTT: No, but you had to pay --
but they paid for them, and you didn’t.

MR. SANDLER: Correct.

COMMISSIONER ELLIOTT: So there was an audit of
your committee.

MR. SANDLER: That’s right.

COMMISSIONER ELLIOTT: And there was no question
raised about the fact that you hadn’t paid for the telephone
use. ~

MR. SANDLER: That's correct.

COMMISSIONER ELLIOTT: Thank you very much.

Heritage Reporting Corporation
(202) 628-4888



FEDERAL ELECTION COMMISSION

WASHINGTON D.C 20h

MEMORANDUM April 21, 2000

TO: Ronald M. Harris
Chief, Press Office

FROM: Kim Leslie Bright
Associate General Counsel

Rhonda J. Vosdingh’S
Assistant General Counsel

SUBJECT: Public Issuance of the Statement of Reasons for the 1996 Democratic
National Convention Committee, Inc. (LRA #471)

Attached please find a copy of the above-referenced Statement of Reasons which the
Commission approved on April 13, 2000.

Informational copies of the Statement of Reasons have been received by all parties
involved and the document may be released to the public.

Attachments as stated.

ce: Audit Division
FEC Library
Public Disclosure
Reports Analysis Division


Jan 21 2 59 PH "99
BEFORE THE
° FEDERAL ELECTION COMMISSION

REQUEST OF
1996 DEMOCRATIC NATIONAL CONVENTION COMMITTEE, INC.
FOR ADMINISTRATIVE REVIEW OF
REPAYMENT DETERMINATION

Ss NTA. JB ION

Pursuant to the letter dated November 20, 1998 from Associate General Counsel
Kim Bright-Coleman, the 1996 Democratic National Convention Committee, Inc. (the
“Convention Committee”) hereby submits additional written materials for the
Commission’s consideration, in connection with the Convention Committee’s Request
for Administrative Review of Repayment Determination filed with the Commission on
September 8, 1998. These additional materials are intended to respond to the requests of
Commissioners, made during the oral hearing on January 13, 1999, for clarification of

certain matters raised during the oral hearing.

IL Payment of Local and Long Distance Telephone Service Charges for 1992

and 1988 Democratic National Conventions

During the oral hearing, several Commissioners questioned whether the Host
Committees for the 1988 and/or 1992 Democratic National Conventions paid local or
long distance service charges for telephones used by the Convention Committee and, if
so, whether any such payments were disallowed in the Final Audit Reports on the
Convention Committees for those Conventions.

A. 1992 Convention

We have not been able to locate a complete file of original invoices from the 1992
Convention or audit workpapers. It appears from the documents available in the files that
the City of New York budgeted $350,000 for “Telephone” costs and that, of this amount,

part was used for local telephone service that included local telephone service charges.

artucmmyn
dye oe 137


>

Receipt oF goods/service confirmed by'___~

oy.

Person requesting disbursement

wet Ase a wots veo Sion te
All requests for check disbursement must be accompanied by the original invoice or receipts.
Te ER Oy lle SER at Se



Jeeae 7 ST

3, INC.

unaet STATEMENT

. ADAINISTRATION
— 6/31/88
YEAR TOTAL vO BU0SET
a0] SLOGETED VS
ACCOUNT DESCRIPTION OATE AMOUNT YTD ACTUAL
400611 PERSONNEL 0.00 34h, 877.78 395,236.00 33,658.28
400911 INTERNS 9.00 13,000,00 24,550.00 (8,450.00)
W1O111 PROFESSIONAL SERVICES 6.00 278,319.80 341,982.
42011) STAFF TRAVEL-IN AREA 0.96 7,007.42 2 oY
. 20211 STAFF TRAVEL-GUT JF AREA 2.00 7,425.46 3,774.00 ’
. ASOLLL RENTAL OF SPACE 0.06 281,714.32 277,000.99 (4,713, 33——
a0 6,303.9? 54,449.06 148,03
0,00 20,833.20 22,945.90 29180 yy
5.06 7,824.24 5,000.00 (3,504.24),
0.08 gma 20,509.00 10,723. a .
eo ¢ > 78,912.65 75,028.09 .
. $420.00 ’
ae03t! FRet " 4,322.00
Y 400611 CONFERESCES a NEETINES 9120.00
$0081! EMPLOVNENT SEVE: $67.90
3888.00
48887 — 1,278.90
37,003.58 43,412.00
7,093.03 3841000
‘ 30,385.18 125,00 (38,260.18) 1 ~
oe 3,706.98 + 0.00 (70608:
8% 0.00 33,306.34 33,106.34
0.06 $2,079.83 - 0.00 ($2,079. $3)
0.08 050,20 9.00 (880,203
. 0.30 16,200.38 6,024.00 10,176.35)
i S696 1)110)468,16 — 1,328,000.09 284,982,
a, 243,289.95 288,730.66 ie )$29
. $61,622.23 3,035, 679.33
sagasasasseguasssezasazazeet:
WA

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Page of |

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=>
033320832199b40404025S500%324 4oo0o0s000000OCOCCOOSéSe336
aress Please include vour 14-digtt
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and/or anv correspondence
VMasDaccobooldobeodeboosebelalels Hralbeverkelel « 2312
AMERITECH a Account Number
PO Box 2500 312 632-1996 255 9
Bediord Park 60499-2500 |, . _
- “NOV 1, 1995
Vlleaboccelbocscebbosedbabesberdbelbesobelesooel Moesbebea! 9305 !
737 Z 1 89 8 85007 “SOGT S8s63
DEMOCRATIC NATIONAL
CONVENTION
S10 N PESHTIGO CT FLR 6
CHGO IL 60611-4309
SURRENT CHARGES * TOTAL
| PAST OUE AFTER. NOV 28, 1995 aMouNT ove. 585.63
” E “Deaseh oh inal te ebcaien wits yous ‘ cheek Geyab® to Arnertéch wrt ecoinise rurnbéron check wore seeerss 2°

PLEASE ALLOW FIVE DAYS WHEN PAYBiG BY MAL OR AT AN AUTHORIZED AGENCY.

Mail paymeras to: Amernecn, PO Box 2500. Bectord Park & 60480-2500
312 632.1996 2559

CUSTOM BUSINESS SERVICES i

BILLING SUMMARY ; NOV 1, 1995
| Previous ~ Paymerss Adamimerss Gaiance Current Tom

os Charges j Amourt Dus
| | | =o jun

DEMOCRATIC NATIONAL CONVENTION $10 NPESHTIGO CT FLAS

SUMMARY OF CURRENT CHARGES

AMER ITECH

MOMIEM ly SOPVIC® 0... cece cece cece ccc cccecceeeeeeesseees 170.61

Other Charges and Credits (See Section 1, Page 3)... 386.63

Local & State Add’! Charges (See Section 1, Page 4) 53

Taxes (IL 27.86 +) ee eecceeee . 86

Atieritech ‘ATTACHMENT E
Sage Ol of 13d



Presidential Election Campaign Fund Act and the Commission regulations. Attachment A;
26 U.S.C. § 9008(g); 11 C.F.R. § 9008.11.

The Host Committee was established to serve as a host committee for the Democratic
National Convention pursuant to 11 C.F.R. §§ 9008.50 - 9008.54. The Host Committee did not
receive any public funds pursuant to Title 26 of the United States Code. However, the Host
Committee received $21,481,973 from other sources, and it spent $20,960,388 in connection
with the 1996 Democratic National Convention.'

On August 7, 1997, the Commission’s Audit staff held an exit conference with the
Convention Committee to discuss preliminary findings and recommendations based upon
information obtained during the audit that the Audit staff planned to submit to the Commission
for approval. See 11 C.F.R. §§ 9008.11, 9038:1(b)(2)(iii) and 9007.1(b)(2)(iii). The Audit
Division’s preliminary findings and recommendations were contained in an Exit Conference
Memorandum (“ECM”). See id. In the ECM, the Audit staff identified payments to Ameritech

totaling $512,637 from the Host Committee and $105,621 from the City of Chicago for local
telephone charges related to Convention Committee telephone numbers or accounts assigned to
the Convention Committee. Attachment A at 11. The Audit staff also identified payments to
AT&T totaling $87,688 from the Host Committee and $20,889 from the City of Chicago for long
distance charges related to Convention Committee telephone numbers or accounts assigned to the
Convention Committee. Jd. Memoranda from the Host Committee also attributed the

expenditures for telephone charges to the Convention Committee. Jd.

1 Pursuant to 11 C.F.R. § 9008.54, the Commission audited the Host Committee, and the receipts and

expenditures stated above are as of March 31, 1997, the effective date of the Audit Report. The Commission
approved the Host Committee’s Audit Report on June 25, 1998.


,UUIrIIIIY

TION

wh S -

ON CASAL
CHICAGS. 'L 6!

DIRECT PAYMENT VOUCHER >
PURCHASE NUMBER vO MEN No VENDOR NUMBER Page
PDUs SoUssoooS UD SOUDI IDS UIsezy v T

REMITTANCE ADDRESS: DELIVERED TO:

["AMERI TECH . —_TM [OFFICE OF BUDGET & MANAGEMENT a +
P.O. BOX 4520° 2 d
CAROL STREAM, IL pi

601974520 ACCEPTANCE DATE: 07/11/96 5
TELEPHONE SERVICE FOR ONCC OFFICES
COMMOOITY INFORMATION L
COMMODITY CATALOG # QUANTITY UNIT UNIT COST TOTAL COST
001 9157700000 - ca 8.758.340 8,758.34

TELEPHONE SERVICES. LONG DISTANCE ANO LOCAL

TELEPHONE SERVICE FOR ONCC OFFICES
eee VENDOR INVOICE NUMBER FOR THE ABOVE LINE IS 312336-1996 ses
TOTAL 8,758.34
ACCOUNTING INFORMATION
GFYR FUND OPT ORGN APPR ACTV OBJECT RPTG U0S/PROU TOTAL COST
o1 98 629 99 2008 9038 0423 6,758.34
TOTAL 8.758.346
ree BS
Page of
ana Basbaes,
omer neo DEPARTMENTAL APPROVAL
v
ENTERED | Rerety certify thet the inverces Nave net been previeusiy voucnered
ey ane Tat the goods oF services indicated were received and thet Me above
eccount 13 approved trom epprepristions @3 shewn move
AUDITOR'S
APPROVAL
RECEIVED
gy OATE DA



Co ol.Tt amy. ee
- : No Samy TA
a DIRECT PAYMENT VOUCHER *

- PURCRASE NUMBER vouontn ne VENDOR NUMBE?
PD UD SOUDIIOUS.. US JoussyoUS UISeZy v
— — a »
1) REMITTANCE ADDRESS: DELIVERED TO:
S| ARERITECH ~ ICE OF BUDGET & MANAGEMENT —\
\©]|} P.O. Box 4520 meee
na CAROL STREAM, IL
a 601974520 ACCEPTANCE DATE: 08/20/96
a {
a 4
r)
a
TELEPHONE SERVICE FOR ONCE OFFICES
— COMMOOITTY INFORMATION
COMMODITY CATALOG « QUANTITY UNIT UNTY CosT TOTaL COST
oc: 9187700000 . ca 320.620 720.62

TELEPMONE SERVICES. LONG DISTANCE ANO .O0CA.
TELEOMONE SERVICE FOR ONCC OFFICES

. see VENOOR INVOICE NUMBER FOR TmE ABOVE LINE IS ee eee
TOTAL 220.62
ACCOUNTING INFORMATION :
BFYR FUND OEPT oRQN APPR ACTVY OBVECT RPTG VOS/PROY TOTAL COST
oO: 95) 629 99 2005 9038 0423 220 62
ToTa, 220.62

plete biden BO ISCES

[Preynee 214-4843 OEPARTMENTAL APPROVAL
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BY ECCOuMt 13 eDOrevEy, Irom apereerisuens e3 shewn speve
| AUDITOR'S |
APPROVAL -

BY OaTe Tate



£ Attached as Exhibit 1 hereto is the formal request for payment from the City of
New York approving payment of $185,000 in costs for the Convention Committee for a
New York Telephone Company (NYNEX) service known as “Intellipath II.” Attached to
that letter are the summaries of the City and Host Committee budgets showing a
commitment of $350,000 by the City for “Telephone” costs. .

Attached as Exhibit 2 hereto is the signed Convention Committee order for
“Intellipath II,” that indicates that this service includes the normal monthly usage
charges, per line, for local service and Centrex access.

Attached as Exhibit 3 hereto is a summary of funds expended by the City as of
August 25, 1992, subsequent to the Convention. It reflects payments by the City of
$202,100 to New York Telephone and $68,320 to AT&T. It is unclear, however,
whether any of the payments to AT&T includes any long-distance service charges.

t Therefore, we cannot determine with any reliability whether the City or Host Committee
in 1992 paid any long distance telephone service charges.

To the extent Convention Committee local telephone service charges were
included in the City of New York’s expenditures, it appears that such charges were not
referenced or discussed, and were not disallowed, in the Final Audit Report.

B. 1988 Convention

We have not been able to locate original invoices or audit work papers from the

La 1988 Convention that would indicate the extent to which the City of Atlanta or the Host
Committee (“Atlanta ‘88”) paid telephone service charges for telephones used by the
Convention Committee.

Attached as Exhibit 4 hereto is a Department Budget Statement for Atlanta "88
dated September 27, 1988, subsequent to the Convention. Under the heading
“Telecommunications,” it shows an expenditure by the Host Committee of $204,230 for

~ “Telecommunications Service.” This line item, however, is not broken out between
possible equipment and installation charges and telephone service charges.

It is not possible, therefore, for us to determine with any reliability whether any
local or long distance telephone service charges for the Convention Committee were paid

by the Host Committee in 1988.

pe A 2



STATEMENT OF NET OUTSTANDING CONVENTION EXPENSES ”
As of October 13, 1996 7
As Determined at 10/21/97

ASSETS
Cash on Hand $1,649,981
Accounts Receivable: 295,030
Capital Assets 0

Total Assets $1,945,011

OBLIGATIONS
Accounts Payable for Convention $1,855,019
Expenses
In-kind Contributions 726,835 (a)

Winding Down Costs
10/01/97 and later: Estimated 39.375 (b)

Total Obligations $2.621.229
NET OUTSTANDING CONVENTION EXPENSES (3676218)

FOOTNOTES TO NOCE
(a) Ths & the amount from Finding II.A2.. previously dscussed in this report.
(b) ‘Inchides approximately $6,600 in reponied waxing down costs paid 10/22/98-3/31/98 and estimated winding down

costs of approxsnately $33,000. The Aude staff will review the Commatee’s disclosure reports and records to
Compare the ectual figures with the esurnated figures and prepare adjustments as necessary.

aot A
41

Page of 2



ati ined
FORM. Lt

Se oe

a a 24 :
Amount : -
Date check needed p

Vendor invoice number

Purpose of expenditure 2) MES frome. Se
LUO GSCI GOS

Receipt of goods/service confirmed by TR Der

Person requesting disbursement yon Dus

All requests for check disbursement must be accompanied by the original invoice or receipts.

Approval signatures:

Dl.

Check Preparer i Finance Director

Contract #

Check receipt confirmation signature:
(for pick up only)

Name/Title
Aces. “G29-91- 10S F038 -ON2 3 ©

6 _- 5-77
—_—_ contract Aten ec:
Se ne eT gs. 0158294

coset gece
Pags_105 of



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3
” commrsstONER MASON: Do you know who paid for it?

MR. SANDLER: It was a Host Committee -- the
Internet access was a Host Committee item. Now, we paid --
the Convention Committee paid for the hosting of its own web
site, I believe. But I believe that the Internet charges
and the Internet service provided were paid for by the Host
Committee. I know that it was provided for that way in the
contract.

COMMISSIONER MASON: So if you had taken advantage
of, say, E-mail service or Internet telephony, that also
would have been a Host Committee expense?

MR. SANDLER: Yes, that’s my understanding. It
was provided -- I don’t know how it came out in the final
budget. We could provide that information to the
Commission. But it was in the bid and in the Internet
services provided for in the contract with Chicago, that the
Host Committee would assist and pay for that.

COMMISSIONER MASON: Just of interest to me in
making distinctions among the various types of expenses and
so on, my reaction to Commissioner Thomas’ comment on the
telephones being attached to the wall, of course, is that we
now have wireless phones. So I think it’s difficult to
separate these things out.

Lastly, is it your position that the position

taken by the Audit Division, which is that telephone service

Heritage Reporting Corporation
(202) 628-4888

ATTACHMENT _D
Page 92 of



-27-% wie.
5 #9606 Date S C17 le . ua

Committee for '96

. in )
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Rag 3 DNCC OFFICE SUPPLY/REIMBURSEMENT :
CHECK REQUEST FORM.

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amount __ BST £274.65

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Vendor invoice number

Purpose of expenditure Phone Survie be Deer

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$32 - 7% © L199

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All requests for check disbursement must be accompanied by the original invoice or receipts.

a> Dt

Check Preparer Executive Director Finance Director
. eM erent wes LL
Date received » Contract #
Check # Ao Check receipt confirmation signature: .
ae (for pick up onty) aot =

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‘ u

Applies to contract line ETF on a

LA ePe



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several questions.

First, just on this point, on the ‘88 and ‘92
Democratic Committees, and if either of you can establish,
it sounds as if. the Convention Committees in those years
paid some telephone charges.

Counsel is telling us that it’s his believe or
knowledge that the Host Committee also paid some telephone
charges in those years. And the audit staff is telling us
they don’t know, because it just wasn’t an audit -- it
wasn’t an item in the audit; that it may have been true that
the Host Committees paid those charges, but we didn’t
uncover them or didn’t identify them as an issue, if they
did.

MR. HALTER: That’s certainly true.

COMMISSIONER MASON: Do you think, Mr. Sandler,
that you could provide us with any information indicating
those payments in ‘88 and ‘92?

MR. SANDLER: Yes, we'll try to come up with those
from ‘92.

COMMISSIONER MASON: You made a sort of
interesting observation about what I would say was kind of a
geographical limitation on convention expenses. You said,
now, of course, when the convention staff is just a few
people here in Washington, those charges -- and I think you
were specifically talking about phone charges -- would have

Heritage Reporting Corporation
(202) 628-4888

Sut _b
ATTACH a =

Page


FEDERAL ELCCTION COMMISSION
WASHINGTON. DC 20463

REPORT OF THE AUDIT DIVISION
ON THE
1996 DEMOCRATIC NATIONAL CONVENTION COMMITTEE, INC.

1 BACKGROUND
A. AUDIT AUTHORITY

This report is based on an audit of the 1996 Democratic National
Convention Committee, Inc. (the Committee or DNCC), to determine whether there has
been compliance with the provisions of the Federal Election Campaign Act of 1971, as
amended (the Act). The audit was conducted pursuant to Section 9008(g) of Title 26 of
the United States Code which directs the Commission to conduct an examination and
audit of the payments for presidential nominating conventions no later than December 31
of the calendar year in which the presidential nominating convention is held.

In addition to examining the receipt and use of Federal funds, the audit
seeks to determine if the Committee has materially complied with the limitations.
prohibitions and disclosure requirements of the Federal Election Campaign Act of 1971.
as amended.

B. AUDIT COVERAGE

The audit covered the period from February 6, 1995, the date the
Committee initially deposited funds from the Democratic National Committee (DNC),
through September 30, 1996. In addition, certain financial activity was reviewed through
September 30, 1997, to determine any amounts due to the United States Treasury. The
Committee reported an opening cash balance of $-0-, total receipts of $12,380,763, total
disbursements of $9,859,144, and a closing cash balance on September 30, 1996 of
$2,521,619.

c. COMMITTEE ORGANIZATION

The Committee registered with the Federal Election Commission on June
6, 1995, as a National Convention Committee of the Democratic Party. The Treasurers
for the period audited were Robert T. Matsui from June 6, 1995 to October 6, 1995, R.

All figures in this report have been roanded to the nearest dollar.

ATTACEMENT _f

Page __!__ of wt


PENTISCD aus 9? s99¢ | EDD Wi Fe os

= “he geet DNCC OFFICE SUPPLY/REIMBURSEMENT te -
‘= . “CHECK REQUEST FORM .

” "payee Name —__Zfaur Teoh

oom 8 195 FR Sos
pws Ady

* Vendor i invoice number al, 1b, (7%
Purpose of expeodinue. L feet Srue

DTT ToS

Receipt of goods/service confirmed by Den Dwic
Person requesting disbursement _ Den I ~~ te)

All requests for check disbursement must be accompanied by the original invoice or receipts.

Name/Title

"rund 95° - Heel [pte account £29: 99-2005- 7038-6423
2mm Yaadet : OAS BUT
See
Applies cons Iie 44 : 4§-TT

com?



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(10:08 a.m.)

CHAIRMAN THOMAS: Good morning. The special open
meeting of the Federal Election Commission will please come
to order.

Our agenda today is an oral hearing on behalf of
the 1996 Democratic National Convention Committee,
Incorporated. The Convention Committee has requested this
opportunity to address the Commission in open session
concerning a repayment determination, which is contained in
the Audit Report approved June 25, 1998.

In the Audit Report, the Commission determined
that expenditures for telephone charges totaling’ $600,325 by
Chicago’s Committee for ‘96 (the "Host Committee") and
$126,510 by the City of Chicago were in-kind contributions
to the Convention Committee.

Thus, the Commission determined that the
Convention Committee must repay $726,835 to the United
States Treasury. The Commission also determined that the
interim repayment of $120,562 that the Convention Committee
paid to the United States Treasury for unspent funds should
be considered a credit against the amount due. Therefore,
the net repayment amount is $606,273.

The sole purpose of this meeting is to give the
Convention Committee an opportunity to address the

Heritage Reporting Corporation
(202) 628-4888


>
i
v

MA oy ace
2°°N, ~ASALWE STREET
CmICAGS. L 60602
OIRECT PAYMENT VOUCHER

PURCHASE NUMBER von EN No VENDOR NUMBER
PPD US seus veacU US JeUSTIS LU TOZ0TT K
— — —_—
REMITTANCE ADDRESS: DELIVERED TO:

RITECH =,
P.O. BOX 4520°
CAROL STREAM, IL
601974520

TELEPHONE SERVICE FOR ONCC OFFICES

COMMODITY INFORMATION
COMMODITY CATALOG # QUANTITY UNIT
001 9157700000 1 iz}
TELEPHONE SERVICES. LONG DISTANCE AND LOCAL
TELEPHONE SERVICE FOR ONCC OFFICES
ss* VENOOR INVOICE NUMBER FOR THE ABOVE LINE IS

UNIT COST
13,252.330

312 3361996 see

TOTAL
ACCOUNTING INFORMATION ‘
BFYR FUND DEPT  ORGN APPR ACTV OBJECT RPTG U08/PROU
01 95 629 99 2005 9038 0423
TOTAL

sind thd SALDSES

ICE OF BUDGET & MANAGEMENT

ACCEPTANCE DATE:

04/20/96

TOTAL COST
13,282.33

13,252.33

TOTAL COST
13,252.33
13,252.33

arc E
Page 02 or 1D

PREPARED |214-4843 DEPARTMENTAL APPROVAL
BY

ENTERI | nerevy certity that the imwverces Neve net been previously vouchered
ne ano tat te goods oF Services indicated were received and thet tne aove

eccount 1s approved from aperepriatiens #3 shewn apove

‘AUDITOR'S

APPROVAL

RECEIVED \
BY DATE DATE



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signed the contract in August of ‘94. I think the E and J

was -- let’s see, was it? We were aware of it.

- MR. NOBLE: But you thought the E and J --

MR. SANDLER: Yes, June, yes.

MR. NOBLE: You thought the E and J taken with the
regulation -- was not consistent with the regulation.

MR. SANDLER: Well, it wasn’t consistent and there
wasn’t any -- we understood you were clearly emphasizing no
staff salaries. But in terms of how that language could be
reconciled with offices, office equipment, similar
convention facilities and services, it didn’t -- there was
no way, meaningfully, to apply it.

MR. NOBLE: So you felt now there was some
conflict between the E and J and the regulations.

MR. SANDLER: Certainly.

MR. NOBLE: Okay. Thank you.

CHAIRMAN THOMAS: Any other questions from my
colleagues?

(No response. )

CHAIRMAN THOMAS: If I could just sort of explore
one thing, briefly.

What is your sense of what convention cities offer
to other types of conventions? What happens, for example,
when the doctors want to do a convention in Chicago? Do you
get a sense that there’s anything analogous in those

Heritage Reporting Corporation
(202) 628-4888



DETAILED CHARGES rege

Cal
Billing Questions. Call 1 800 480-2203 312 336-1996 252
Changes wn Service. Cal! 1312 750-2000
JUN 16 1996
SUMMARY OF CURRENT CHARGES . cont inuec
For Deta:ied Cnarges - See Page 27
Long Orstance 18.33
Taxes (!1! ) 92
MCI TELECOMMUNICATIONS CURRENT CHARGES . 19.25
*
SPRINT
For Detailed Charges - See Page 28
Long Distance ...... 7.25
Taxes (111 “
SPRINT CURRENT CHARG! 7.
TOTAL CURRENT CHARGES 6,638.42

ao
fae 1) ot LO

ENO Ratti anne:



977- W797

033320336399b40404O25200948024 00000Sooo000000001L 32523333
Please include vour 14-digtt
unt Rumeer oo vour check
Jor any correspondence

VMeoDbasossel bobeodossbebecdstedeselsMlessedbecl

AMERITECH
PO Box 4520
Carot Stream i 60197-4520

Account Number
312 336-1996 2528

MAR 16. 1996

LsMoaddoseaDlsssorlllls Doveldoodoldesseubell 9 626G !
15 PN3B1 E 46245 1325233
CHICAGO 96

% DAVE TKAC

320 N CLARK RM 402

CHGO IL 60610-4711

PASTOUEAPTER, «APR 12,1996  AmcuNToUE. 13,252.33

Mail peymeras to: Amerascn. PO Box 4620, Caro! Sveam & 60197-4520

CUSTOM BUSINESS SERVICES eee
BILLING SUMMARY | MAR 16, 1996
Prenous ~ Paymenss Adhmumerts Balance | Current Tom
i: | Trank You | Charges: 1 Amourt Dus
2453.08 | 2483.08 | | 1328233 i 13252.33
CHICAGO BS % DAVE TKAC 320 N CLARK RM 462
SUMMARY OF CURRENT CHARGES
AMER I TECH
Montniy Service . 4,161.71
Loes! Usage Servic 1.56
Other Charges anc c 8,497.81
itemized Calls (See Section 80
Local & State Add’! Cnarges (See 11,67
Taxes (IL 579.18 ) ........ - 579.18
AMBRITECH CURRENT CHARGES .... eeeceee 13,282.33
Sen UTEP EEE EEN Od
TOTAL CURRENT CHARGES (Late Payment Charge after 04-12) 13,282.33
armcmeyt — ©

Ameritech Page ba of


—ommime tor 96 Ex TERED AUG 1 5 ss ML

specs DNCC OFFICE SUPPLY/REIMBURSEMENT
: . CHECK REQUEST FORM

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payee Name fivcetke Cybluahay Senlicen _
pmo SebreeSO “6, 26.75

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Contract #

Check receipt confirmation sienature:
(for pick o, om, ;

Mar _ Name/Title
Fund
Applies to contract line aif mer a {
pet 1A of 12t



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MR. SANDLER: -- with respect to the 1996
convention.

: VICE CHAIRMAN WOLD: Okay. Thank you. That’s the
extent of my questions at this point, Mr. Chairman. Thank
you.

CHAIRMAN THOMAS: I didn’t note at the outset, by
the way, that one of our colleagues, Commissioner Sandstrom,
is recused in this matter. So, I might ordinarily turned
him for questions, but instead I’m going to turn to
Commissioner McDonald.

COMMISSIONER MCDONALD: Thank you, Mr. Chairman.

Now how, is that he is recused? This is the kind
of deal I want to get involved in.

He owns the phone? Is that what I heard someone
uttered? I won’t say who. It wouldn’t be fair to
Commissioner Elliott. He owns a phone. I tried that
yesterday.

Joe, Neil, welcome. Thank you for coming.

Actually, you kind of got to the heart of

‘something that I was very curious to ask about. First of

all, Joe, just to be sure I understand your comments, you're
not suggesting, are you, that we are sometimes -- we have
contradictory positions? Surely, you wouldn’t be saying
that about the Federal Election Commission. If I didn’t
know better, I’d be suspicious of that.

Heritage Reporting Corporation
(202) 628-4888

armacee: —D_.,.
2

Page of 2b



FS,
| ACCOUNT NAME: OME.C.0 CHICAGO 96 . , Page: ;
ACCOUNT NUMBER: 3125390094004 BILL DATE: JUL 12; 1996 =

MONTHLY SERVICE CHARGES 5366.26 ous
AIRTIME CHARGES 1396.64
TOLL CHARGES 7 27.20
ROAMING CHARGES 104.31
OTHER CHARGES AND CREDITS 152.86
724.23
TOTAL CURRENT CHARGES AND CREDITS 7971.50

LS
SUIGURY OF CURRENT CHARGES AND CREDITS
MONTHLY SERVICE CHARGES

ONC120 PRICE bar} ( 34 LINES)
ONC120 PRICE P ¢ 64 LINES)
FREE SILL Serair (98.00 VALUE) ¢ 1 LINES)
ONC PHONE RENTAL CHARGE 34 LINES)
DONC PHONE RENTAL TAX ( 34 LINES)
ONC PHONE RENTAL ¢ 66 LINES)
ONC PHONE RENTAL TAX ( 66 LINES)

TOTAL MONTHLY SERVICE CHARGES.............0cceeeee0-- 5566.26

AIRTIME CHARGES MINS USED MINS BILL RATE CHARGE

ONC120 PRICE PLAN
PEAK 2561.0 .43 1101.23
OFFPEAK 687.0 .43 295.41
3248.0 1396.66

TOTAL AIRTIME CHARGES.........cccccccceeccccccccccnes 1396.64

TOLL CHARGES
SEE INDIVIDUAL ACCOUNT DETAIL

TOTAL TOLL CHARGES... 2.00... cece ccc c ccc c cece cece scence 27.20

ROAMING CHARGES
SEE INOIVIGUAL ACCOUNT DETAIL

TOTAL ROAMIND CHARGES.......... cc ccccccccccccccsccces 104.3)
OTHER CHARGES we ae CREDITS
INTERCONNECT CHARBE (. eon 115.88
LATE PAYMENT CHARSE & 36.98
TOTAL OWE CAMS AWD CREDITS .cccccccsecseeene ne 152.86
TAXES

FEDERAL Ti 178.29
STATE. basa TAX 277.
STATEH in 798

LOCALS T, 276.94
te ADDITIONAL CHARES DUE TO STATE AMD LOCAL TAXES WHERE APPLICABLE:

TOTAL TAMES........2.-..- 720.23

TOTAL CURRENT CWARGEB.......cccccccccccccccccccce@? 7971.58

eritech
APTACHENT ae
188 v127 RAD Page 129 of



“Qn

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fol 3 x car aa

7312022600982000S52b900230b100000000000000021849

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and/or any correspondence

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LMosDecseeeld dele Vebosels lM sosedbecl OO
AMERITECH Account Number
PO Box 4520 312 226-0982 0002

Carol Stream iL 60197-4520

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SEP 25 1996

VMeolbocredbecseel Mbacssteolle

2535 AT 1 B 24.4 1376 "30G 21849
CHICAGO 96
‘% CORNELIA HEINS 000
320 N CLARK-RM 402
CHICAGO IL 60610-4711
CURRENT => TOTA
U iL
cHances DUE UPONRECEIPT amountoue 218.49
+ Detach and mai iop section wan your check payables to Amersecn Wrne accourn number oncneck.
PLEASE ALLOW FIVE DAYS WHEN PAYING BY MAM OR AT AN AUTHORIZED AGENCY
Mani payments to: Amernecn PC Bor 4520 Caro: Stream . $5197 4820 —_—_—_—_—_——_
312 226-0982 0002
CUSTOM BUSINESS SERVICES
—_—_————
BILLING SUMMARY SEP 2¢ 1996
Final Bill
Previous 1 Paymerss Adiusiments Batance Current Total
: Cnarges Amount Due
0.00 0.00 0.00 + 0.00 ‘218.49 | 21849
CHICAGO 66 ‘+ CORNELIA HEINS 000 220 N CLARK-AM 402
SUMMARY OF CURRENT CHARGES
AMER | TECH
For Detailed Cnarges - See Page 2
Local Calis .......... 22.42
intormation Charges 1.50
Otner Cnarges ano Crecits ... 194.43
Local and State Add:t:ona: Cnarges . mr}
TOTAL CURRENT CHARGES 218.49

ArcmoNT __
fmeritech Page lO of


wu

administrative and,overhead charges would be excluded from the category of permissible

disbursements by a host committee or municipality.

L. THE AMBIGUOUS AND CONTRADICTORY LANGUAGE AND
APPLICATION OF THE REGULATION AND E&J FAILED TO
PROVIDE THE CONVENTION COMMITTEE WITH FAIR NOTICE

THAT PAYMENT OF TELEPHONE CHARGES WAS PROHIBITED

To be sure, “substantial deference” must be given “to an agency's interpretation
of its own regulations.” Thomas Jefferson University v. Shalala, 512 U.S. 504, 512
(1994). Where the imposition of a civil sanction Is at stake, however, “the due process
clause prevents that deference from validating the application of a regulation that fails to
give fair warning of the conduct it prohibits or requires.” Gates & Fox Co., Inc., v.
Occupational Safety and Health Review Commission, 790 F.2d 154, 156 (D.C. Cir.
1986)(Scalia, C.J.). “In the absence of notice—for example, where the regulation is not
sufficiently clear to warn a party about what is expected of it—an agency may not
deprive a party of property by imposing civil or criminal liability.” General Electric Co.
vy. United States Environmental Protection Agency, 53 F.3d 1324, 1328 (D.C. Cir. 1995).
As the court explained in Diamond Roofing Co. v. Occupational Safety & Health Review
Commission, 528 F.2d 645 (5" Cir. 1976), the regulated entity:

is entitled to fair notice in dealing with his government. Like other statutes
and regulations which allow monetary penalties against those who violate them,
an occupational safety and health standard must give an employer fair warning of
the conduct it prohibits or requires. . . .

If a violation of a regulation subjects private parties to criminal or civil
sanctions, a regulation cannot be construed to mean what an agency intended but
did not adequately express... . (T]he. . . enforcer of the Act has the responsibility
to state with ascertainable certainty what is meant by the standards he has

promulgated.
528 F.2d at 649. See also, Rollins Environmental Services, Inc. v. U.S. Environmental
Protection Agency, 937 F.2d 649, 654 (D.C. Cir. 1991)(lack of adequate notice resulting
from regulation’s inherent uncertainty in meaning resulted in setting aside penalty for

violating regulation).

B

ATTACH —_—\———_

Page of 12



“228 od
eta

[ARERITECH _
P.O. BOX 4520:
CAROL STREAM,

IL

COMMODITY INFORMATION
COMMODITY

001 9157700000

TELEPHONE SERVICES,

CATALOG #

601974520

TELEPHONE SERVICE FOR ONCC OFFICES

DIRECT PAYMENT VOUCHER aN
PAYMENT " - =<
PURCHASE NUMBER VOUCHER NC VENDOR NUMBEF ace
TD US SoUsvvocl =. US JoUssooc1 FOUL x T
— /
(
REMITTANCE ADDRESS: DELIVERED TO: \

[OFFICE OF BUDGET & MANAGEMENT _-

ACCEPTANCE DATE: 04/20/96

QUANTITY UNIT UNIT COST TOTAL COST

TELEPHONE SERVICE FOR DNCC
s** VENDOR INVOICE NUMBER FOR THE ABOVE LINE IS 1996 .2515 see

ACCOUNTING INFORMATION

.

1 iz} 224.480 224.48

LONG DISTANCE AND LOCAL

TOTAL 224.48

ws

BFYR FUND DEPT ORGN APPR ACTV OBJECT RPTG U08/PROU TOTAL COST
01 98 629 99 2008 «= 9038 0423 224.48
TOTAL 224.48
ATEACDENT E
Pegs 13 of 134
2 20655
PREPARED 214-4843 DEPARTMENTAL APPROVAL
ENTERED | nerepy certify that the imvarces Neve net been previously voucnered
4 ane thet Me goods er services indicmad were recewed end thst te epove
account 1s approved from appropriations as shown spove
AUDITOR'S
APPROVAL
RECEIVED
By

OATE DATE



vers _.. ma A a

Committee for '96 35-0 F: : 7s ~ og.
BLIND Siete ENTERED Nov 21 199 —F@E_ -~ 7°
- TE: ~_ DNCC OFFICE SUPPLY/REIMBURSEMENT --~ :
fk - CHECK REQUEST FORM ©

Payee fiame — fearrilenle
Date check needed __ AGRV
Vendor invoice number__09 NZ, 18
Purpose of expenditure PAsa BL

Receipt of goods/service confirmed by De Dws

5

Person requesting disbursement iD Des

.

All requests for check disbursement must be accompanied by the original invoice or receipts.

wear
|. foo SRS
Approval signatures:
ttt: Wllswe! “Da LS
Check Preparer Finance Director
Date received /0-//- Contract # :
Check # $00 Check receipt confirmation signature:
: 5 (for pick up only) -
Date of check _/0-
® a aro re aes “* 4
Acct. #
Name/Title
Fund Account

Applies to contract line
‘ assucmoyr _E
ch Pare 11D 2:


In Kooritzky v. Reich, 17 F.3d 1509 (D.C. Cir. 1994), the Labor Department’s
tules permitted employers to substitute alien workers on labor certifications. DOL issued
a notice of proposed rulemaking to implement legislative changes in the immigration
laws, including changes in the system for priority dates, but not mentioning any change in
the ability of employers to substitute aliens. Then, in the final rule, the department
amended its rules to limit the validity of labor certifications to the alien named on the
employer's application. The court held that the rule was invalid because the department
had failed to afford notice of or opportunity to comment on the no-substitution provision.
The court noted that that the NPRM “did not contain the terms of the no-substitution rule
it later promulgated; it did not propose abolishing substitution; and it did not mention the
issues involved in doing so.” 17 F.3d at 1513. Acknowledging that “a final rule need not
match the rule proposed,” the court nevertheless held that “a necessary predicate. . . is
that the agency has alerted interested parties to the possibility of the agency’s adopting a
tule different than the one proposed. The adequacy of notice depends, . . . on whether the
final rule is a ‘logical outgrowth’ of the proposed rule.” Id. The court ruled that, in this
case:

The Department’s interim final rule does not even come close to complying with

the notice requirement of § 553. Something is not a logical outgrowth of nothing.

The notice of proposed rulemaking contains nothing, not the merest hint, to

suggest that the Department might tighten its existing practice of allowing

substitution. . .

Id. The court concluded that, “Interested persons. . . therefore had no opportunity to
present their views on the matter before the Department acted.” Id. at 1514. See also,
National Mining Ass’n v. Mine Safety and Health Adm’n, 116 F.3d 520, 530-32 (D.C.
Cir. 1997)(new rule invalidated where NPRM made no mention of changing significant
aspect of rule; notice considered inadequate when “interested parties could not
reasonably have anticipated final rulemaking from draft rule’).

Likewise, in the case of the Commission’s rulemaking, the NPRM contained
“nothing, not the merest hint, to suggest” that the Commission was going to prohibit host
committees from using any of their funds to pay for convention committee administrative
and overhead expenses. The DNC would obviously have been very interested in

commenting on such a proposal. Manifestly it was deprived of any such opportunity,



[ ‘am a
}

/ =
, New York Telephone
ANYNEEX Company :

x 100 Church Street
NYNEX Systeme Merketing New York. New York 10007

September 6, 1991

Mr. Mark Bilsky

Democratic National Convention Committee
430 South Capital Street S.E.
Washington, DC 20003

Dear Mark:

This is a follow-up to our conversation regarding the advance
payment for the Democratic National Convention Committee’s
Intellipath II System. ,

Per section 3C of the “Request for Service" document, New York
Telephone has requested an advance payment for the Committee’s
Intellipath II system. This payment is for New York Telephone’s
system. The committee will be directly billed by AT&T for the
station equipment and wire.

Due to the fast-paced, dynamic and unique nature of the
convention, the committee’s Intellipath II system will be
changing rapidly. The advance payment insures that funds are
available for system growth at all times. Specifically, it
eliminates the possibility of service delays due to potential
discrepancies over billing issues and reduces the lead-time
required for system expansion. Furthermore, the advance payment
minimizes the administrative time required to keep track of the
system’s dynamic growth.

The advance payment will be placed in the Democratic National
Convention Committee’s account and will be jointly monitored and
updated on an ongoing basis. The committee will be continuously
informed of all debits and credits to this account. Of course,
account balances Will be available at any time upon your
request.

It is our understanding that the Democratic National Convention
Committee will provide New York Telephone with an advance
payment in the amount of $185,000. Once again, this payment
will be applied toward the Intellipath II system costs.

Ry

ATTACHMENT __.-
Page of L&W



FEDERAL ELECTION COMMISSION

IN THE MATTER OF:

ORAL HEARING

1996 DEMOCRATIC NATIONAL
CONVENTION COMMITTEE

Agenda Docket No.

Federal Election Commission
999 E Street, N.W., 9th Floor
Washington, D.C. (zip code)

Wednesday,
January 13, 1999

The above-entitled matter came on for hearing,

pursuant to notice, at 10:08 a.m.

BEFORE: SCOTT E. THOMAS
CHAIRMAN

APPEARANCES :

Scott E. Thomas, Chairman, FEC

Darryl R. Wold, Vice Chairman, FEC

Lee Ann Elliott, Commissioner, FEC

David M. Mason, Commissioner, FEC

Danny Lee McDonald, Commissioner, FEC

Lawrence M. Noble, General Counsel, FEC

Delbert Rigsby, General Counsel’s Office

James A. Pehrkon, Acting Staff Director, FEC

Robert J. Costa, Dep. Staff Director, Audit Div., FEC
Rick Halter, Audit Division, FEC

Witnesses on behalf of the Democratic Convention
Committee:

Joseph E. Sandler, Esquire
Neil Reiff, Esquire

Heritage Reporting Corporation
(202) 628-4888

‘ATTACEMGT D -
Page of a



JVUUIIIOU

"220N WAS.
CHICAGC.
DIRECT PAYMENT VOUCHER

s~aes-
sdegt

PURCHASE NUMBER voutneenNe VENDOR NUMBES east | if
PD US soussunes US SoUSIISOS UISezy v = it
. - —_ _ °
REMITTANCE ADDRESS: DELIVERED TO: \-
[-AMERI TECH 7 ICE OF BUDGET & MANAGEMENT hl
P.O. BOX 4520 ° at ir
CAROL STREAM, IL ie
601974520 ACCEPTANCE DATE: 07/12/96 a
TELEPHONE SERVICE FOR ONCC OFFICES
COMMODITY INFORMATION L
COMMODITY CATALOG # QUANTITY UNIT UNIT COST TOTAL COST
001 91857700000 ca 274.650 274.65
TELEPHONE SERVICES, LONG DISTANCE AND LOCAL
TELEPHONE SERVICE FOR ONCC OFFICES
s*© VENOOR INVOICE NUMBER FOR THE ABOVE LINE IS: 5/16/96 eee
TOTAL 276.68
ACCOUNTING INFORMATION
BFYR FUND. DEPT © ORGN APPR ACTY OBJECT RPTG vOs/PROU TOTAL COST
01 98 629 99 2005 9038 0423 274.65
TOTAL 276.68
7

Ab tDiA iM BAIOCES

fare _96 ~ or 129

PREPARED |214-4843 DEPARTMENTAL APPROVAL
BY
ENTERED | Rereby certify thet the imverces Neve net been previousiy voucnered
BY and tat te gees of services indicated were received anc that tne above
account 13 appreved from appropriations as shown above
AUDITOR'S
APPROVAL
RECEIVED
BY DATE Dare



DECORTNENT BUDGET STATEMENT

; MEDIA
x . . a3iea
- - . ~
i. eo
YEAR TOTAL YE SUOSET
Cunaent 1 BUDGETED ve .
account DESCRIPTION NONTH MATE AMOUNT «= + YTD ACTUAL
Pewee nnn ne en enn wenn nes ceceseecns ns: Jeeetb ence cnecccncccnseccccncccosecococosess: ones
400628 PERSONNEL, 0.00 47,859.73 46 93S bb (924,07)
: =¥ 600920 INTERNS 9.00 0.00 0,00
re "410128 PRO SERVICES 0,00 0.00, ae
420128 STAFF TRAVEL-IN AREA 0.00 1a 2 ea
420220 STAFF TRAVEL-GUT OF AREA 0.00 394,06 3,06
430128 RENTAL OF SPACE 0.90 2,199.00 2,199.00
~aA 40128 CFFICE SUPPLE 0.20 Pare 1,401.78
a) 440228 POSTAGE ¢.00 8,520.40 12,402.59
> 440528 OTHER SUPPLIES 0.00 1,186.81 1,099.51
» 450326 EQUIP. & FURN, RENTALS 0.00 1,624.13 1,024.13
wot. Net COMMUN! CAT ONS . nce 0,00 0.00
“ 60228 PUBLICATION, PRINT, SUBS 9.90 UAT 28, bh 20 8,790.26
YY 4oo328 FRETEHT 0.98 50.50 0.00 ($0,$0)
440428 CONFERENCES ¢.39 0.00 0.00 0.00
00528 EMPLOYEE DEVELCPMENT 0.00 0.00 9.00
400628 AIVERTISING/PUBLIC 77,889.20 44,988.46 17,130,28
400828 DATA PROCESSIN 0.00 0.00 0.00
$0026 FARKING 9,00 0,00 0.00
461028 LUNCHEON HEET INES 133,25 133,25 0.00
401128 HOUSING 425459 426 (10.00)
449928 AISCELLAMEDUS-OTHER 30.8 380 0.00
117,067.06 146,029.72 28,101.66
scszzezecsszsa=sczsseasseacasseassneaesneass yf
J v



16

before the Commission acted in adopting the E&J language and thereby changing the
scope of the entire regulation, at least as the Commission now seeks to apply it. In the
absence of any notice of or opportunity to comment on this significant language
effectively adopted as part of the final rule, the Commission has violated the
Administrative Procedure Act. Therefore the rule was not validly adopted.

ONCLUSI

The Commission may have good reasons to craft a rule that limits the scope of
disbursements by host committees and municipalities for convention committee
administrative and overhead expenses. The answer is to undertake a rulemaking that
proposes such a rule, a rule which makes clear to host and convention committees exactly
what types of convention committee expenses can and cannot be paid for by host
committees and municipalities, and that invites public comment on such a proposed rule.

To require convention committees to guess about the meaning of a vague,
ambiguous and contradictory fegulation together with its equally contradictory preamble
language, with a penalty of hundreds of thousands of dollars in repayment obligations for
guessing wrong, violates fundamental precepts of constitutional due process and
administrative law. The Convention Committee was not even remotely afforded fair
notice that section 9008.53(c) prohibited host committee payment of telephone service
charges while permitting host committee payment of numerous other categories of
convention committee expenses, including overhead expenses. And had the DNC been
provided notice of and an opportunity to comment on the entire concept of limiting host
committee payment of convention committee administrative expenses, in the first place,
the rule could have been clarified and the entire problem could have been avoided. The
Commission’s failure to provide such notice and opportunity to comment is a clear

violation of the Administrative Procedure Act.

ATTACH. 8

Paze__i bo of

19



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x
x*
. August 18. 1996 * ~/TM

Brad Kiley

Director of Administration oust
1996 Democratic National Convention Commitiee. Inc.

320 N. Clark, Room 600A

Chicago, IL 60610

Dear Brad:

We seek the concurrence of the 1996 Democratic National Convention
Committee. inc. (*DNCCTM) for the expenditure of the following funds

Line item 63 - Communication Systems Cash expense
Vendor: Amentech

Account Cos.

312 83222515 $10.24

Please acknowledge the above expenditures by signing. dating and
retuming one copy of this lener to my attention.

Sincerely,
Dy
on
Don Davis
Finance Director
Chicago ‘96 .
Accepted and acknowledged:

1996 Democratic National Convenuon Comminee, Inc.

py Zl 9 A Date:_/* As 19%.

ce: Nancy J. Clawson. Counsel. Gincagn ‘96
Leslie Fox, Exccutive Director. Chicuge ‘96
Janet V. Green. Deputy Chief Executive Officer. DNCC
Alfonse McMillan. Counsel, DNCC

astacmaNT
Page_/07 of |

UME Neth bark Stiget Sane ae Oe rer vo



Committee for '96 = J yO
a“ r for an cite eee we | PO dbe $5.
Plat ae EXTERED iy = ae - -. /
= ws 9G _.DNCC OFFICE SUPPLY. titted

_ : __ CHECK REQUEST FORM

E mote 22PE2 -
rants se _
: “Vendor invoice number _@ . ~
Purpose of expenditure __- axe /77b
x i+ 4. «
Receipt of goods/service confirmed by Den Duwis
Person requesting disbursement : Dba Deis

All requests for check disbursement must be accompanied by the original invoice or receipts.

mn Ab oe

Check Preparer Finance Director
Date received J Contract #
Check# Check receipt confirmation signature:
: . (for pick up only)
Date of check
Acct Hn oe :
“ee ' NameTite . . - -—_

tye a . 12-2005. 1038. 6123
(telef _ Account “oe GS-77

Appi ssonet ine B= ean atest

wn So a ls YE OSE 2TY

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AN



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731L208320251525S2327400e00.1000000119000090522i-

. andiat any carrespondence sie
shh ARAMBAEP A910 ee
Been SEE AIT ass
+ 4520 crs 1 S
Carol Stream. IL 60197-45PBLECUS Ione. mS _

—
Al 11

IaMleatfaccaMassselbecoabestostfsllscalsessssllMeseledl UG 1 1996

177 AV 1B 44 11576 “SOGT

DEMOCRATIC NATIONAL 2214 |

ATTN GENERAL SVCS.
510 N PESHTIGO CT FLR6
CHICAGO. IL 60611-4309

CURRENT CHARGES TOTAL
PAST DUE AFTER, AUG 29,1996  amountous 22.14

Detach anc mail top section wih your check payable io Amernecn Wrne accoum number on check
PLEASE ALLOW FIVE DAYS WHEN PAYING BY MAIL OR AT AN AUTHORIZED AGENCY
Mau payments to Amernecn PO. Bor 4520. Caro! Stream 60187-4520
312 832 2515 2559

CUSTOM BUSINESS SERVICES

EE

BILLING SUMMARY AUG 1 1996

eree | Seman | “ment SSRI) Time
54.70 j 4280 ‘0.00 , 11,90 22.14
OEMOCRATIC NATIONAL CONVENTION ENERAL SVCS
SUMMARY OF CURRENT CHARGES

AMER ITECH

For Deta:ied Cnarges - See Page 2

Monthly Service ... See eee eee eee eee ee eeee 8.57
Local Calls ....... .07
Other Charges ano Credits .... .O9CR
Local and State Additiona! Charges 1.26
Taxes (111 430) -43
TOTAL CURRENT CHARGES 10.24

22UCHENT
Page 10% of


10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Ov

2

MR. HALTER: Well, I do know that there are some
cell. phone charges included in the amount that is at issue.
I can’t respond specifically if the local cell phone or the
per-minute charges are in there or are not in there. I can
try to get the research done while this is continuing. I
just can’t --

COMMISSIONER MCDONALD: Well, I think it would be
instructive. Because let’s say part of it is. What would
it be based on if you had part of it?

If you take my phone out, I can call anywhere for
a dime. Regrettably, I talk so much that I'd now have a
thing that I can talk for about two. cents, because I’m on it
alot. I’m just trying to understand the difference.

Would the rationale have been that you could use
your cell phone locally, maybe, but you could not use it on
a long distance? I’m just trying to understand the
breakout.

MR. HALTER: What I said in the beginning was in
those instances where we could identify telephone usage,
whether its desk phone or cell phone or -- I guess they are
the only two types -- to the DNCC, paid by the host or paid
by the city, we included that in the amount in question.

There may have been other telephone payments made
by the Host Committee and by the city. And if we did not or
could not tie those in to the National Committee, then we

Heritage Reporting Corporation
(202) 628-4888

Page “ZL of s.


10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

uw
oO

And our understanding is that they’ve already concluded
negotiation in their contract. So to reopen that, based on
the results of an advisory opinion, might be difficult.

I think it would be possible to identify certain
specific kinds of issues like this, that are particularly
troublesome or puzzling, and possibly bring those to the
Commission’s attention, and ask for guidance from the
Commission, through the advisory opinion process. And
that’s something that we would certainly be willing to
entertain and discuss with whatever city and its Host
Committee that is selected for the 2000 convention.

COMMISSIONER MASON: Is it your contention that
had you been on notice about the telephone service charge
restriction that you might have negotiated the contract
differently?

MR. SANDLER: Certainly, if the ‘94 regulations -
- the language in the regulations had said, equipment but
not including, you know, the usage charges or something of
that nature. And, clearly, we wouldn’t have put that in the
contract, and we would have provided for that in our own
budget.

COMMISSIONER MASON: Do you know if the convention
staff on-site in Chicago had Internet access?

MR. SANDLER: They did, I believe, yes, at some
point.

Heritage Reporting Corporation
(202) 628-4888

D)

TTACHENT
Page 3) i:


10

Similarly, in Satellite Broadcasting Co., Inc. v. FCC, 824 F.2d 1 (D.C. Cir. 1987),
the FCC dismissed.a company’s application to operate a microwave radio station because
the application had been filed in the wrong place. The court found that the FCC’s rules
addressed the proper place for filing in a “baffling and inconsistent fashion.” 824 F.2d at
2. One section of the rules said that private radio applications should be filed in
Gettysburg, PA, while another section suggested that applications for any lottery should
be filed in accordance with the rules for each service, and for that specific service, the
place of filing was Washington. The company filed in Washington but the FCC ruled
they should have filed in Gettysburg. The court vacated the FCC’s dismissal decision as
arbitrary and capricious, holding that the company’s interpretation of the confusing rules
was equally reasonable and that:

Traditional concepts of due process incorporated into administrative law
preclude an agency from penalizing a private party for violating a rule without
first providing adequate notice of the substance of the rule. .. . The Commission
through its regulatory power cannot, in effect, punish a member of the regulated
class for reasonably interpreting Commission rules. Otherwise the practice of
administrative law would come to resemble “Russian Roulette.” The agency’s
interpretation is entitled to deference, but if it wishes to use that interpretation to
cut off a party’s right, it must give full notice of its interpretation.

Id. at 3-4.

Again, in General Electric Co. v. U.S. Environmental Protection Agency, 53 F.3d
1324 (D.C. Cir. 1995), the EPA fined GE for distilling the contaminated solvent from
certain PCB’s before incinerating them. One section of EPA’s complex rules appeared to
allow intermediate processing for purposes of disposal. Another section required
disposal of the solvent by an approved method, which would not include distillation, only
immediate incineration. The court held that EPA’s reading of its regulations was
reasonable, and would be upheld, but that the agency could not impose any fine or
penalty on GE for violating that regulation based on such the agency’s interpretation:

Due process requires that parties receive fair notice before being deprived
of property. . . . In the absence of notice—for example, where the regulation is not
sufficiently clear to warn a party about what is expected of it—an agency may not
deprive a party of property by imposing civil or criminal liability.

53 F.2d at 1328. The court noted that there had been no pre-enforcement efforts to bing

about compliance and no other way for GE to have known the EPA would interpret the



TOTAL BUDGET* 21,027,843

RECAP REMAINING:
Rental of Facilities (49,866)
Construction (418,443)
Transportaion 50,882
Parking (11,874)
Telephone 17,180
Insurance 60,000 -
Security 0
Printing 8,000
Office Space Equipment 77,288
Medical Services + 10,000 -
Voting System 60,000
Unaccounted For Expenses 0
Contingency 22,726
(170,682)
a

* $332,000.00 of Media Charge Back Funds reduced to $215,843.

artacuugnt __E

Page_Al_ ot 129



permissible Host Committee expenses. while local and long distance telephone service

charges would be singled out as impermissible expenses. As noted in our initial
submission and in the oral argument, the regulations clearly allow the Host Committee

and City to pay for, the Host Committee and City did pay for, and the Audit Division
allowed their payments for, a variety of administrative and overhead expenses, including
offices, use of office equipment and the provision and installation of such equipment.
Further, even if the Audit Division included some, or most, cellular and pager service
charges in the disallowed amounts, the Final Audit Report clearly allowed a variety of
other usage and service charges in support of the Convention Committee's administrative
and overhead function, including office electricity and air conditioning, office supplies.
rental of office equipment, postage and the like.

In these circumstances, the Convention Committee simply did not have fair notice
that the regulation would be interpreted as it has been interpreted in the Final Audit
Report—that is, to allow payment by the Host Committee and City for a whole variety of
administrative and overhead expenses, including service charges of various kinds, but not
telephone service charges. In the absence of such fair notice, an agency may not deprive

a party of property by imposing civil liability. General Electric Co. v. United States
Environmental Protection Agency, 53 F.3d 1324, 1328 (D.C. Cir. 1995). Therefore, the

Commission should not require the Convention Committee to repay the local and long

distance telephone service charges paid for by the Host Committee and the City.

ATTACHMENT

nar ieee



I.

II.

APPENDIX A
Page 1 of 1
* STANDARD AND OPTIONAL FEATURES

Automatic Call Back

Call Forwarding

- All calls

- Busy

- Don’t Answer

Call Hold

Call Pick-Up

Call Transfer

Call Waiting

- Dial

- Incoming

- Originating

Code Restrictions
Consultation Hold

Dial Transfer Arrangement on Incoming Trunk Groups
Directed Call Pick-up

- With Barge-In

- Without Barge-In
Direct Inward Dialing
Direct Outward Dialing
Distinctive Call Waiting Tones
Distinctive Ringing
Hunting

Intercept

Line Treatments
Station-to-Station Calling
Three-Way Calling

Authorization Codes

Automatic Route Selection (ARS) Basic (1)

Uniform Call Distribution (2)

Speed Calling - 10 No. List

Electronic Telephone Set (ETS Capability (300)
Display Features (10) & Group Intercom (20)

Meet-Me Conference (10)

Six Way Conference (10)

Attendant Console per Customer (1) & Console (1)

Network Speed Calling (1)

Virtual Numbers (150)

Call Arrangements (200)

Hot Line (50)

Centrex Customer Rearrangement System (CCRS) (1)

Remote Acce 5)

Simplified Message Desk Interface (SMDI) (1)

ATMCHENT

E
Page! ve Lod
w


* August 12. 1996

Brad Kiley

Director of Administration

1996 Democratic National Convention Commitice, inc.
320 N. Clark. Room 600A :
Chicago, IL 60610

Dear Brad:

We seek the concurrence of the 1996 Democratic National Convention
Committee. Inc. (““DNCCTM) for the expenditure of the following funds

Line item: 63 - Communication Systems Cash expense

Vendor: Ameritech

Account Cos
312 832-1996 $220.62

312 E95-1132 —l
$228.38

Please acknowledge the above expenditures by signing, dating and
returning one copy of this letter to my attention.

Sincerely,

= mo | DOL
Don Davis
Finance Director
Chicago ‘96

Accepted and acknowledged:
1996 Democratic National Convention Commitee, Inc.

Date:_ 8-2 -M,
ce: Nancy J. Clawson. CounseNChicuge ‘96

Leshe Fox. Executive Director, Chicage ‘96
Janet V. Green. Deputy Chief Executive Officer, DNCC

Alfonse McMillan, Counsel. DNCC

UMMC Leek Mie Mente 1 tna gee HE eam te Cre bas


—__

Gr = sés

*22,000 Xerox invoice outstanding
TOTAL

REMAINING

eg tings

"BUDGETED AMOUNT:

-8 & 10th Floors
(Awalting accounting)
-Utilities(OEP)
~Alterations(OGS)
-Clean up & furniture removal
TOTAL

REMAINING

eres oY

Delegate voting system.
TOTAL
REMAINING

*Final uthities, alterations and cleanup bills outstanding.

50,000

100,000

100,000
75,000

10,000

10,000

60,000

172,000
13,502
185,802

78,000

62,292
62,418

124,710

76,290

ATTACHMENT
Page

180.000
13,502
70,000

255,502

8,000

31,172
91,575
9
122,747

77,283

10,000

60,000



,

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: a

; Person requesting ing disbursement

. 4

for check disbarsement

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CHICAGO COMMITTEE FOR 1996 2500
ATTN DON DAVIS,
120 LASALLE ROOM 604 aime

CHICAGO W 60602 enancn ed

Un ct 1 $ 66.
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14.11. Recycling. The City shall involve all Convention-—
@ oe esces and other Convention operations in its ‘recycling
initiative to the greatest extent practicable.’
15. HOTEL RESERVATIONS SYSTEM

15.1. Reservations system. (a) The City will provide
housing applications and the envelopes and postage necessary to
mail them to prospective Convention attendees requesting housing
in connection with the Convention.

(b) The City will make available the computerized
reservation system of the Chicago Convention and Tourism Bureau
for use in receiving housing applications and assigning
accommodations to Convention participants.

16. PERSONS WITH DISABILITIES

16.1. Statutory requirements. The City shall endeavor in
good faith to ensure that all of the Convention Pacilities,

transportation and telecomminications services, staff housing and
Other spaces, structures, services and facilities of whatsoever
nature to be procured by the City under this Agreement shall meet
or exceed the applicable requirements of the Americans with
Disabilities Act, 42 U.S.C. § 12181 et seq., and the Illinois
Environmental Barriers Act, 410 ILCS 25/1 et seq.

16.2. Qutreach to persons with disabilities. Through its
Mayor’s Office for People with Disabilities (*MOPD") and such

-64-



THON Sa sacte
CHICAGO.

civ man.

we ae site ~

DIRECT PAYMENT VOUCHER

PURCHASE NUMBER

PAYMENT

VOUCHER NO.

VENDOR NUMBER

REMITTANCE ADORESS:
[ARERITECH -.
P.O. BOX 4520

CAROL STREAM, IL

601974520

"20 20eT K T
| - _?
DELIVERED TO: \

ICE OF BUDGET & MANAGEMENT

ACCEPTANCE DATE: 04/02/96
TELEPHONE SERVICE FOR ONCC OFFICES
COMMODITY INFORMATION :
COMMODITY CATALOG @# QUANTITY UNIT UNIT COST TOTAL COST
001 9187700000 ea 151.010 151.01
TELEPHONE SERVICES. LONG DISTANCE AND LOCAL
TELEPHONE SERVICE FOR ONCC OFFICES
se VENOOR INVOICE NUMBER FOR THE ABOVE LINE IS: 3/29/96 sce
TOTAL 181.01
.
ACCOUNTING INFORMATION
SFYR FUND O€PT OREN §=6APPR ACTV OBJECT RPTG JO8/PROU TOTAL COST
0195 629 99 2008 9038 0423 151.08
TOTAL 151.01 (
{
Pags_A"l or 120
Pree ARES DEPARTMENTAL APPROVAL
YY
' rerawy coruty wt that the mverces hove net been previeusly vouchered
ENTERED and tat the goeds or services indicated were received end that the sove
8 Account 1s appreved from epprepriguens es Shewn above.
AUDITOR'S
APPROVAL
RECEIVED ‘
BY DATE OATE



BEFORE THE FEDERAL ELECTION COMMISSION

In the Matter of
The 1996 Democratic National )
Convention Committee, Inc. ) LRA #471
)
)
)
STATEMENT OF REASONS

On April 13, 2000, the Federal Election Commission (the “Commission”) determined that
the telephone expenses paid by Chicago’s Committee for ’96 (the “Host Committee”) and the
City of Chicago on behalf of the 1996 Democratic National Convention Committee, Inc.

(the “Convention Committee”) are permissible expenses under 11 C.F.R. §§ 9008.52(c)(1)(v)
and 9008.53(b)(1) and thus, the telephone expenses are not in-kind contributions to the
Convention Committee that count against the Convention Committee’s expenditure limit.

11 C.F.R. § 9008.8(b)(1). The Commission also determined that there is no repayment due by
the Convention Committee and the Democratic National Committee (the “DNC”) to the United
States Treasury. This Statement of Reasons sets forth the legal and factual basis for the
Commission’s determination that no repayment is due. 11 C.F.R. § 9007.2(c)(3).

I. BACKGROUND

On June 6, 1995, the Convention Committee registered with the Commission as a
national convention committee of the Democratic Party. The Convention Committee received
$12,364,000 in public funds under the Presidential Election Campaign Fund Act. 26 U.S.C.

§§ 9001-9013. After the Convention was completed, the Commission conducted an audit and

examination of the Convention Committee’s receipts and disbursements, as provided in the


including 9:00 a.m. CDT on the day following the last day on
which Convention proceedings take place.

"Limited Access Period" means the period from and including
way 23, 1995 through and including the fourth day following the
jast day on which a game is played at the United Center during
the 1995-96 season (including playoff schedule if applicable) of
the Chicago Bulls basketball team or, if later, by the Chicago
Blackhawks ice hockey team.

"post-Convention Period" means the period from 9:01 a.m. COT

on the day following the last day on which Convention proceedings

take place through and including September 9, 1996. .

"Restricted Access Period" means the period from and
including the date of this Agreement through and including
May 22, 1995.

‘Unlimited Access Period" means the period from and
including the fifth day following the last day on which a game is
played at the United Center during the 1995-96 season (including
playoff schedule if applicable) by the Chicago Bulls basketball
team or, if later, by the Chicago Blackhawks ice hockey team,
through and including 9:00 a.m. CDT on the day following the last
day on which Convention proceedings take place.



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was about’ approximately $50,000. And in the event the
Commission upholds the repayment determination, they should
also: adjust the net amount due by the Convention Committee.

MR. SANDLER: It doesn’t that happen
automatically.

CHAIRMAN THOMAS: We’ll certainly take that under
advisement. Thank you.

Very well, thank you, again, for taking the time,
and we will consider your comments, accordingly. Again, if
there any materials that, based on the discussion today, you
would like to submit, we would, of course, like to see
those. That would be helpful.

VICE CHAIRMAN WOLD: They are going to -- I
understand they are going to submit the experience with
previous payments, by Host Committees or cities.

MR. SANDLER: And we'll also confirm our
understanding of where this is in the language of the 1996
contract, to the extent it hasn’t already been provided.

CHAIRMAN THOMAS: So no further business
appearing, this hearing is concluded.

MR. SANDLER: Thank you very much, Mr. Chairman.

(Whereupon, at 11:20 a.m. the hearing was
adjourned.) _

//
//

Heritage Reporting Corporation
(202) 628-4888

armacncest PB

page SS of

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The DNC, the Democratic National Committee,
submitted comments on those proposed rules. I presented
testimony at this very table on those proposed rules. This
issue was nowhere to be found in the notice of proposed
rulemaking.

The Commission held a number of open meetings in
April, May, and June of 1994. And there was, again, never
any hint of any new limit on permissible Host Committee
expenses until the very last of those meetings.

In fact, the final agenda document for the very
last meeting stated that the new rules would continue to
allow local businesses and organizations to contribute to
the Host Committee or the city for a variety of purposes
involving the cost of convention facilities and services.
No hint of a limit or restriction, some new fundamental
principle distinguishing that certain categories would be
allowed, and certain would not be.

That concept was introduced at the last open
meeting, well after the comment period had closed. A
suggestion was made by a commissioner that the language
itself was created by the General Counsel’s Office, with no
discussion by the Commission, inserted in the E and J, which
was adopted on, you know, on a tally vote with no further
discussion by the Commission.

Now as explained in more detail in our brief, in

Heritage Reporting Corporation
(202) 628-4888

Page

PTACHME “2 _4
LS of SO


TRANSCRIPT OF PROCEEDINGS

FEDERAL ELECTION COMMISSION

In the Matter of:

ORAL HEARING

1996 DEMOCRATIC NATIONAL
CONVENTION COMMITTEE

Agenda Docket No. 99-5

Wy3n39
Noi:
No1l03
6.

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58am
2tEEe

G@ coz
sszre

S Jases

CB =

=

=

Pages: 1 through 55
Place: Washington, D.C.

Date: January 13, 1999

HERITAGE REPORTING CORPORATION
Official Reporters
1220 L Street, NW, Suite 600
Washington, D.C.
(202) 628-4888

ATTACEMSLIT
| or 36

Page

4



- AG american Celebration
*

aw May 22. 1996
Chicago'g,. | waarin .

+ Director of Administration
Democratic National Convention Committee
320 N. Clark. Room 600A

corer Cod teary | Chicago. IL 60610
= tee Rucnore 81. Wess
sereer Maver i
pore |
oera Sewweers — Wutem 81, Oats | Dear Brad
merwere Mover. Brewed Pon |
Conte bor i
Cerone ror ' We seek the concurrence of the 1906 Democratic National Conv entior
Commuttes. Ine. (DNCO") lor the expenditure of the following funus
Line item 65 - Communication Sv stems Casi cxpense

Vendor: Ameritech

: 312 83251996 $220 64
312 832-2515 . $308

312 E95-1132

‘Total

Please acknowledge the above capendiures by signing. dating and
returning one copy of this letter 10 My altenuon

Sincerely,

—
Co Do
Don Davis
Finance Director
Chicago ‘96

Accepted and acknowledged:
1996 Democratic National Convention Commitee. INC

Py Baad inl) Klas Date._J°-29-9e

cc: Nancy Clawson. Counsel, cage “Yo
Leslie Fox. Executive Director. Chicuyu ‘96
Janet V. Green. Deputy Chief Executve Officer. DNCC

Alfonse McMillan. Counsel, DNCC
ATUACHENT E
Page_65 of _| 3!
@ILLINOIs 320 North Clark Street, Suite a ree Ont Plaid . fm 312-263-nu09 see



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better to have the risk on the private parties on this? I
don’t know.

: I really am concerned about how much we can sign
off on it in advance, because I think what you suggest,
Commissioner Mason, is correct, that once we did sign off on
it, they would be entitled to rely on it. And that’s one
concern I have here, the extent to which there was reliance
on the past interpretations or past practices, or whatever.

MR. HALTER: Do you want me to --

VICE CHAIRMAN WOLD: What is the provision? Is it
something you can --

MR. HALTER: Well, I can go through it pretty
quickly. Under Section 12, Telecommunications, it says the
city will provide a telecommunications system, including
such features as the DNCC shall reasonably request and
otherwise meeting specifications to be mutually established
by the DNCC and the city in consultation with applicable
vendors.

The city will provide the following additional
items: a cellular phone system, including a combination of
a number of cellular phones and minutes of air time, a pager
system, a two-way radio system, satellite up-link and down-
link services, and electronic voting system for use in the
convention hall; 12.3, long distance service, the city shall
pay for all long distance charges incurred by the DNCC at

Heritage Reporting Corporation
(202) 628-4888

sacmzt _D

s-ge €O of Sh.



: "In its response to the ECM, the Host Committee disagreed that the
use of the credentials management system was not in compliance with 11 CFR
9008.52(c). The Host Committee asserts that the system “related directly t< the security
services necessary to ensure safety and orderly conduct for the convention staff and
participants,” and therefore came under provision which allow host committees to defray
the costs of law enforcement services necessary to ensure orderly conventions.
According to the Host Committee, the system “provided photo identification passes for a
variety of personnel working at the 320 North Clark location (which housed both
Chicago ‘96 and the DNCC, as well as numerous other city and state offices and
courtrooms) as well as at the United Center,” the site of the convention. The DNCC’s
response addressed this issue in a similar manner.

In order to clarify representations made above, the Audit staff
contacted both committees. Statements made by representatives of the DNCC and the
Host Committee, along with documents contained in the audit workpapers, corroborate
that the credentials management system generated identification cards which were used
exclusively as a security measure for employees of both committees to gain access to the
320 North Clark Street office facility and United Center, but only during construction and
preparation phases leading up to the Convention. There was no evidence that the
credentials management system assisted the DNCC in managing the movement of
delegates or other personnel once inside the Convention. Accordingly, the Audit staff
concludes that the use of the donated credentials management system was within the
scope of 11 CFR §9008.52(c)(1)(vii) and did not result in a prohibited in-kind
contribution to the DNCC.

Cc. IMPROPER USE OF FUND PAYMENTS

Section 9008.12(a) of Title 11 of the Code of Federal Regulations
states, in relevant part, that a national committee that has received payments from the
Fund under 11 CFR Part 9008 shall pay the United States Treasury any amounts which
the Commission determines to be repayable under this section. The Commission will
notify the committee of any repayment determinations made under this section as soon as
possible, but not later than 3 years after the last day of the Presidential nominating
convention. The Commission's issuance of an audit report to the committee will
constitute notification for purposes of the three year period.

Section 9008.12(b)(4) states, in relevant part, that if the Commission
determines that any amount of any payment to the national committee or convention
committee under 11 CFR 9008.6(b) was used for any purposes other than the purposes
authorized at 11 CFR 9008.7, it shall notify the national committee of the amount
improperly used and the national committee shall pay to the Secretary an amount equal to
the amount specified.

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Page__!S of 22


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73120832019%625529337002006100000141420000031594

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acs

Lad decsoslDdbeotecodebeadslalessbeldleosebbeal

AMERITECH Account Number
PO Box 4520 312 632-1996 2559
Carol Stream iL 60197-4520

OCT + 1996
VUbseDbecsedbeosselMDecssderdbecebecrddessdbsoalMbecsebell
29329 AT 1 B 134A 25302 “30GT 31594
DEMOCRATIC NATIONAL,
CONVENTION

320 N CLARK RM 402
CHICAGO. IL 60610-4711

Fug s3
CURRENT CHARGES TOTAL
Past Due AFTER. OCT 29, 1996 AMOUNT DUE 345-94 71

PLEASE ALLOW FIVE DAYS WHEN PAYING BY MAIL OR AT AN AUTHORIZED AGENCY
Man payments to. Amernecn © D Bor 4520. Caro! Seam. . 60197-4520
312 632 1996 2559

CUSTOM BUSINESS SERVICES

BILLING SUMMARY OCT : 1996

Previous Paymems Agusiments, Past Due Curren Tota!

Bil , Amount : Charges Amount Due
141.42 0.00 "0.00 | 14142 | 17482 n
OBMOCARATIC NATIONAL CONVENTION 320 N CLARK RM 402 — UC. YC
SUMMARY OF CURRENT CHARGES 19 53)
AMER ITECH .
For Detailed Cnarges - See Page 2

wontniy Servic 159.50
Loca! Calis 6.55
Loca! and St 17
Taxes (Itt 8.30
TOTAL CURRENT CHARGES 174.52

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CELLAR SERVICES qn eritecn
P.O. BOX 6766 .
CHICAGO, iL 60680-4766

PAYMENT QUE
AUG 06, 1996

BALANCE DUE AMOUNT ENCLOSED
* DPS * 797/.50
agpooooooogocoooNooodosLe33900%4oOoNooOoOOLO4sebOooO0O?_

BILL DATE
JUL 12, 1996

~~ACCOUNT NUMBER
3123390096006

REMIT CHECK PAYABLE TO:
2 2-11 F.1 A 91960.
ONC C 0 CHICAGO 96 AMERITECH

SHIRLEY ROMADANI - P.O. BOX 6766
320 N CLARK FL 6 CHICAGO, IL 60680-4766
CHICAGO IL 60606 Lallasdevvelleabed Mosel lDecabeelloloal

Cheex here 1 sour address has changeu See revene Deusch here ang return upper pomion win payment

ACCOUNT NAME: ONC C O CHICAGO 96 PAGE
ACCOUNT NUMBER: 3123390094006 BILL DATE: JUL 12. 1996 1

IMPORTANT SERVICE INFORMATION - SEE LAST PAGE

CELLULAR ACCOUNT SUMMARY:

TOTAL AMOUNT OF LAST BILL 2465.10 as
PAYMENTS RECEIVED 0.00 =
PAST OUE - PLEASE REMIT IMMEDIATELY 2665.10 © ——
CURRENT CHARGES ANO CREDITS: .

MONTHLY SERVICE CHARGES 5566.26

AIRTIME CHARGES 1396 166

TOLL CHARGES 27.20

ROAMING CHARGES 106.31

OTHER CHARGES ANO CREDITS 182.86

TOTAL TAXES 726.23
TOTAL CURRENT CHARGES AND CREDITS
BALANCE DUE BY AUG 06, 1996 ®

* FOR BILLING OR SYSTEM RELATED INQUIRIES. CALL CUSTOMER SERVICE AT
1-800-221-0996 OR BY DIALING *611 AIRTIME FREE FROM YOUR CELLULAR PHONE.

* FOR SERVICE OR EQUIPMENT RELATED INQUIRIES CALL YOUR AGENT:
AMCI EMPLOYEE

TM PEAK HRS ARE 6 AM TO 10 PM. MON - FRI. OFFPEAK HRS ARE 10:01 PM TO

5:59 AM PLUS WEEKENDS ANO THESE HOLIDAYS: NEW YEAR'S DAY, INDEPENDENCE
DAY, LABOR DAY, THANKSGIVING, AND CHRISTMAS.

—_ met = E Ameritech



a Ameritech

In the Exit Conference Memorandum (ECM), the Audit
staff identified 10 payments to Ameritech, which net of refunds to the Host Committee
from the vendor, totaled $512,637. In addition, payments by the City totaling $105,621
were identified. A review of the invoices disclosed that all of the billings were local
telephone service charges for Convention telephone numbers or accounts apparently
assigned to the DNCC. Furthermore, internal Host Committee memoranda attributed all
of the expenses to the DNCC.

b. AT&T

The Audit staff identified 15 payments by the Host
Committee to AT&T, totaling $87,688. A review of the invoices disclosed that all of the
billings were long distance telephone service charges for Convention telephone numbers
or accounts apparently assigned to the DNCC. Furthermore, internal Host Committee
memoranda attributed all of the expenses to the DNCC. Payments by the City totaling
$20,889 to AT&T were also identified.

In the ECM, the Audit staff concluded that service charges
for telephone calls made by the DNCC in support of its operations were a convention
overhead expense which did not contribute to preparation of convention center premises
or promotion of the City of Chicago. Therefore, the $600,325 paid by the Host
Committee and $126,510 paid by the City for telephone service charges, result in in-kind
contributions to the DNCC. The Audit staff also recommended that the Committee
provide documentation to demonstrate that the payments for telephone service charges
were allowable Host Committee or City expenses pursuant to 11 CFR §9008.52(c) and
did not result in prohibited in-kind contributions to the DNCC.

In its response, the DNCC argued that “by any reasonable
reading, the regulation on its face [emphasis in original] authorizes the host committee to
pay for the costs of telephone service for the Convention.” In the DNCC’s opinion, “[t]o
say that the costs of office telephones are not an overhead or administrative expense but
that the costs of using the telephones are such an expense is to draw a distinction that no
reasonable reading of the piain language of the regulation would support.” The DNCC
then criticized the “language of the Explanation and Justification (E&J),” declaring that it
should “not be given precedence over the plain language of the regulation,” and that “the
E&J language is itself ambiguous.”

. The Host Comminee took a different approach in its
response, stating that the telecommunications systems “existed for the benefit of
Chicago ‘96” and that without having provided these services, it would have been
impossible for the Committee to fulfill its obligations under the Convention Contract.

ATTACEMENT _AL

Page tl of _22



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on

us don’t use longer words.

COMMISSIONER MCDONALD: Well, that’s another Le

problem.

I did want to point out to Joe, I think using the
Olympic Committee is somewhat unfortunate. It appears to me
that they truly have about everything paid for.

MR. SANDLER: That’s right, yes.

COMMISSIONER MCDONALD: And I do mean everything.

MR. SANDLER: This particular one.

COMMISSIONER MCDONALD: And I do mean everything.

Thank you. It’s helpful. I just want to be clear
about that, so we’ll have an understanding.

CHAIRMAN THOMAS: We might having to look into
that aspect of it, if we go to the Convention Committee. So
we do have an opportunity to give you a word of caution
there.

Any other questions? Larry Noble, did you --

MR. NOBLE: Actually, Commissioner McDonald asked
the question I was going to ask.

CHAIRMAN THOMAS: Okay. Very well, unless there
are other comments you need to make before we close it up --

Neil Reiff?

MR. REIFF: In August of 1998, the Convention
Committee closed its accounts, and refunded the amounts of
unspent funds that were remaining in the account. And that

Heritage Reporting Corporation
(202) 628-4888



Dita

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0132320336299b404040252009802400000500132523300219%bb713

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AMERITECH " Ascount Number
PO Box 4! 312 336-1996 2528
Carol Sucen IL 60197-4520

APR 16. 1996

WaMleaMassalevsealHTossbosDbealosafossTbedalTDsscutall 9 826
2FN6B1 aw

CHICAGO

%CORNEILA HENS

320 N CLARK RM 402
CHICAGO IL 60610-4711

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PASTOUEAPTERTM” ~MAY 13,1996  AucuNToUE.. 35,249.00

Betsch Your check peyebie to A
PLEASE ALLOW FIVE DAYS WHEN PAYING BY MAL. OR AT AN AUTHORIZED AGENCY.
Mad paymeras to: Amemech, PO Box 4520, Caro! Seam & 60197-4520

CUSTOM BUSINESS SERVICES 82996-1996 2528
BILLING SUMMARY

| |

crecago es SCORNELA HERES

SUMMARY OF CURRENT CHARGES

AMEAITECH

MONTH IY BOPVIO® 6. ..c cece cece eee e eens 6,523.02
Local Usage Services ..... tesees 492.36
Other Charges and Credits (See Section 1, 13,988.38
Itemized Calis (See Section 1) ...... wees 9.71
Local & State Ago’! Charges (See Section 1) : 17.96
Taxes (IL 965.06) .. testes : 965.08
AMERITECH CURRENT CHARGES 2.0... cc ccc cece sccces 21,996.49

lamediately following are charges from jong distance
companies. Ameritech provices billing for these companies
a8 a convenience to you so tnat you do not receive
aultiple bills. ameritech is not affiliated in any way
with these fong distance companies.

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7 an celeorauon

4, ,

February 29, 1996

‘ Mr. Brad Kiley
! Director of Administration .
| Ca 0 Deinocratic Natiortal Cunvention -
320 North Clark Sireet, Ruom ouv-a
. Chicago, IL 60610 a)
oe AVE oO}
Heeerer Co-Chairs Dear Drad: —_—.: a —_—_
im Leger ‘Mirberd 81. Untey *
— IME Seek concurrence Uf the 19% Demucrntie ( emvenntion Committee, ine. (1NCC)
otters for the cash expenditure associatey with telecommumecanion line activation by
‘we eee Net ee rr Atentech in the expanded UNCC: Shace un the sinth flour of 320 North Clark Sucet
on
= The cost breakdown 1s as follows:
ree rece ik y VENDOK # | DESCKIFTION | unt Nhs ren |
perernseny Waa beer
peat via Fradetymashs | 1 Ameneci: Ke arrange workin cunt, 1 | usu]
so tenmeeeesammees ties 6th How wieme chee!
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rary Teme) Atom
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on eee — Will be applied to budget iine nem #63 TLLECOMMUNICATIONS,
Corpereme ae ae caste Copeman
= Wetem 1 Sonny Please acknowledge the above expenditure by ‘Sigiung. dating, and Feturning on
1 Companme, so Copy to my attention. Ciucugo '¥6 tus signed document as our Notice-1y
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320 Nerh Clark ‘Swen, Sune 402. IL 60610 + 312-214.1990 « Feat 26)-muem ae
ILLINOIS: pay 13 NE "



BEFORE THE
FEDERAL ELECTION COMMISSION

REQUEST OF
1996 DEMOCRATIC NATIONAL CONVENTION COMMITTEE, INC.
FOR ADMINISTRATIVE REVIEW OF
REPAYMENT DETERMINATION

Pursuant to 11 C.F.R. $§ 9008.12(c) and 9007.2(c)(2), the 1996 Democratic
National Convention Committee, Inc. (the “Convention Committee") hereby disputes the
repayment determination set forth in the Report of the Audit Division on the 1996
Democratic National Convention Committee, Inc., approved by the Commission on June
25, 1998 and served on the Convention Committee on July 8, 1998 (the “Final Audit
Report”), and requests administrative review of that determination.

Pursuant to 11 C.F.R. §§ 9008.12(c) and 9007.2(c)(2)(ii), the Convention
Committee further requests that the Commission provide an opportunity for the
Convention Committee to address the Commission in open session, to demonstrate that
no repayment is required.

The sole issue presented by the Final Audit Report is whether the Convention
Committee should be required to repay $600,325 paid by Chicago’s Committee for '96
(the “Host Committee”) and $126,510 paid by the City of Chicago (the “City”) for local
and long distance telephone service charges for telephone calls made by the Convention
Committee. (Final Audit Report at 10-12). That question turns on the application of the
Commission’s regulation governing permissible disbursements by a host committee, 11
C.F.R. § 9008.52(c),' which reads in pertinent part:

(1) Local businesses (excluding banks), local labor organizations and
other local organizations or individuals may donate funds or make in-kind
donations to a-host committee to be used for the following purposes: . . .

(v) To provide the national committee use of an auditorium or

convention center and to provide construction and convention

‘ Prvate contnbunons to a separate fund or account or a government agency or municipality may be made
to pay for the same categories of expenses as those for which a host commuttee may pay. 11 C.F.R.§
9008.53(b)(1).

Be
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P.O. Box 4520 | 3132 832-1996 2559
Carol Stream, iL 60197-4520 TELECOMM Ts. |” -

MAY 1, 1996

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29658 ZP 1 B 163C 25281 “SOGT
DEMOCRATIC NATIONAL
CONVENTION

510 N PESHTIGO CT FLAS
CHICAGO, IL 60611-4309

ool besabebeal
- 29458

7

PASTOUEAPTER «MAY 29,1996  AvcuNTDUE_ 294.58

your
ALLOW FIVE DAYS WHEN PAYING BY MAL OR AT AN AUTHORIZED AGENCY.
Mail paymeras wo: Amerasen, P.O. Box 4520. Caro! Steam, i 60197-4520

CUSTOM BUSINESS SERVICES | Si2ez1996 2588
BILLING SUMMARY May 1, 1996
ba fare, jem ee |S oe
“643 378.40 0.20 | 73.84 720s | 234.58
DEMOCRATIC NATIONAL CONVENTION CTFLAG
SUMMARY OF CURRENT CHARGES
Amma i TECH
For Detailed Charges - See Page 2
Monthly Service . oe 170.61
Local Calls ..... 39.32
Local and State Additionai: Cnarg -21
Taxes (111 10.80 ) 10.50
TOTAL CURRENT CHARGES 220.64
asuconyt —_ E
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PO. Box 4520 312:336-1996 2528
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CONVENTION
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CHICAGO IL 60610-4711 ts 33 (53 77

CURRENT CHARGES “ rotat
Bast OuearTeR. NOV 13, 1996 AMOUNT DUE 328.98

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312.336 1996 252

BILLING SUMMARY OCT 16 1996
hala Paymems Aqgiustmems nas! Que enayes qo nt Due
ees7e057 | 0.00 0.00 66678057 =» §451.59CR 661328.98
OEMOCRATIC NATIONAL CONVENTION ‘%~CORNEILA MEINS:
SUMMARY OF CURRENT CHARGES
AMER 1 TECH

For Detailed Cnarges - See Page 3

Monthly Service 9,404.85
Loca! Calis ... 980.30
information Charges 48.3)
Other Charges anc Creaits 15,834 .28CF
Long Distance ............ sees 1.56
Local anc State Acditiona: Cnarges . 4.17CE
Taxes (!11 .249.43CR) .... 249.43CF
AMBRITECH CURRENT CHARGES .... 5,652. 86CK
atTat

For Deta:ied Charges -

Intorm on Charges ...

Long Distance ........

Taxes (i111 8.99 )

AT&T CURRENT CHARGES ...

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® af
July 22. 1996 * ww
Chicago ‘
Brad Kiley
Director of Administration

1996 Democratic National Convenuon Commitee, Inc.
320 N. Clark. Room 600A
Chicago, IL 60610

Dear Brad:

We seek the concurrence of the 1996 Democratic National Convention
Commitee. Inc. (*DNCCTM) for the expenditure of the following funds

Line item: 63 - Communicauon Systems Cash expense

Vendor: Amentech

Cos.
$11.90

Account
312 832-2515

Please acknowledge the above expenditures by signing. dating and
returning one copy of this letter to my attention.

Accepted and acknowledged:
1996 Democratic National Convention Commitee. Inc.

By Beeel Da7 J Xm Date:_32 Jul, eg

Nancy J. Clawson, cole Chicago ‘96
Leslie Fox. Execuuve Director. Chicago ‘96

Janet V. Green. Deputy Chief Executive Officer. DNCC
Alfonse McMillan. Counsel. DNCC

E
pare BOW or 1a

320 North Clark Soreet. Suse 402. Chicago. IL 60610 + 312-214-1990 + Fax 312-263-8009
e-mail chicagovera-AlS. NET

Reps www ci.chi il.us Chicagove’ qiL.ino.


=
— eritech —_
73120832025152552230400200b),00000000000000001193
Genre. 22 viCL5 Please include vour 14-digit
account number on vour check
andor any correspondence...
[Maadbecssoelabeslecstebelel lL SGMLG AAD © 2 SZ —_—_—_—_—_——
AMERITECH Account Number
PO Box 4820 “312.832.2515 2559
Carol Stream. IL 60197 452% op Clee od
P
UallatbesoHlesssllosllalotsstblDsclalassstflsslabel SEP | 1996
183 AV 1B 5 A 66932 “"S0GTM
OEMOCRATIC NATIONAL 1193
CONVENTION
ATTN GENERAL SVCS
510 N PESHTIGO CT FLRE
CHICAGO. IL 60611-4309
CURRENT CHARGES TOTAL
PAST DUE AFTER. SEP 30, 1996 AMOUNT DUE 11.93
‘) Getscn ‘ana mau iop section wan your check payeDw to Ameraech Wrae sccourn mumber on check. “ys
PLEASE ALLOW FIVE DAYS WHEN PAYING BY MAR OR AT AN AUTHORIZED AGENCY
Mau caymencs to Amernecn. © © Bos 4520 Caro: Seam . $2187 4820 ww yi26s2 2818 2559
CUSTOM BUSINESS SERVICES
BILLING SUMMARY SEP 1 1996
Previous : Paymens Adusimerns Batance | Current Total
Bil Thank You Charges Roan D
: 1
j 22.14 E-aTy | 0.00 0.00 11.93 (ve)
DEMOCRATIC NATIONAL CONVENTION ATTN GENERAL S¥CS
SUMMARY OF CURRENT CHARGES
AMERITECH
for Oeta: ied Charges - See Page 2
MONTMly SOFViC® 2.0... ee eee reece eee een eeeenes 8.57
Local Calis ... 1.59
Local ang State Additione! Cnerges 1.26
Taxes (11! 51) oe +51
TOTAL CURRENT CHARGES 11,93
artacment
mTMeritech Page_1IT of 1B



UV ~ ATLANTA (36 COMMITTEE, 2NC.
SESQR7MENT GUDGET STATEMENT

F009
L . e/31/00
og. \
yeaa TOTAL YT) BUdsET
UDGETED ys .
ACCOUNT vescrI?Ticn amouuT =. YTD ACTUAL
460624 PERSONNEL 3,00 20,320.04 17,$81.75 (2,738.29)
400924 INTERNS 3.90 0.00 0.00 0.00
410124 PROFESSIONAL SERVICES 0.90 39,322,39 wee s
420124 TRAVEL-IN g.00 0.00 2 #>
420224 TRAVEL-OUT 0.90 4.00 00°
430124 RERTAL OF SPACE . 0.00 0.00 )
440124 OFFICE SUPPLIES 0.00 0,00 00
440224 POSTASE 9.80 0.00 00
440324 OTHER SUPPLIES 9.00 $2.50 30
480324 EQUI® & FURN RENTAL 0.39 0.00 0.00
oo. 440124 CORRUNICATZONS . 9,90 0.00 9.00
2 . 400224 PUBLICATIONS * 6.06 0.09 9.09
VU 400324 FRESGHT d.00 0.00 0.00
440424 CONFERENCES pen 9.06 0,00
‘40524 EMPLOYEE DEVELCPHENT 5,09 9.90 0.00 .
$0024 ADVERTISING 1608 0,00 0,00 . ;
440924 DATA PROCESSINE Ey 2.90 0.00. 3.00
480926 PARKING 6.00 0.09 0.00 0.09
461024 -UNCH 4.00 9.90 0,00 0.90
41124 HOUSING 9.00 9,00 0,00 0.00 :
409926 nie 2.00 9.00 $0,210.00 «$0,210.00 ‘é

9.90 $9,096.93 9,501.34 30,080.41 wie

J / x

armacmenr__ &

Page_2G oz [BT



0333214951132404040515009804200204000000074 Socooo1soola
; GENERA’ SFO¥ICTS

Please inciude vour 14-digit
account number on vour cneck

% APR 26 PI ss andor anv corresponcence

i
Account Number

seDoabadadosobelUdoseadbe

4520 tcgss: - 2: 312 £95-1132 $183
Caso! Stream iL 60197-4520 TELE CG
APR 16, 1996
WMasbbesseldocsoebeosdlolectesd Ml essbeborscelDbecsdebee! 9e46 200/208
1703 CP 1A178 97878 °CR 3 1500
NATL CONVENTION

$10 N PESHTIGO CT
FLAG
CHICAGO I 60611-4309

PASTOUEAPTERTM «MAY 13,1996 Xattwroue. 15.00

L Dewen ond mai top secnon with vour check peyanie te Amerasch Write scosura rasnoes on creek.
PLEASE ALLOW FIVE DAYS WHEN PAYING BY MAR OR AT AN AUTHORIZED AGENCY.
Mad paymeras wo: Amerascn, PO Box 4520. Caro! Seam & 60197-4620 !

CUSTOM BUSINESS SERVICES _eeeneess
BILLING SUMMARY | APR 16, 1996
| Previous | Paymerss Adusunerss Pasi Dus | Curren Tom
a | Amount Amount Due
| | yar Cm) 18.00
GEL NATL CONVENTION 510 N PESHTIGO CT
SUMMARY OF CURRENT CHARGES
Amma (TECH
Monthly Service 6.76
Otner Charges anc Crecits (See Section , +10
Local & State Adc’! Charges (See Section 01
Taxes (IL. -34 (Cty mM)... 68
AMBRITECH CURRENT CHARGES ............ . 7.85
TOTAL CURRENT CHARGES (Late Payeent Charge after 05-13) 7.55
asucooyt

tTMeritech Page 04 ot



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service charges on the one hand, and telephone service

charges on the other.

Our problem with that distinction goes to two
fundamental principles of administrative law. The first is
that people who are regulated have to be able to understand
the regulations so they can follow them.

Obviously, like any other agency, this Commission
can interpret its own regulations any way it wants to, but
the people who are regulated have to be put on notice of
that interpretation before the fact, not afterwards.

As clearly established in the cases we discussed
at length in our prief, which I won’t be revisiting today, a
regulatee can’t be penalized for filing a rule based on an
interpretation that it simply did not have fair notice of.
And that’s the situation in this case.

The other basic principle is that under the
Administrative Procedure Act, a regulated party has to be
given notice and an opportunity to comment on rules before
they are promulgated.

Like any other agency, this Commission cannot come
up with an interpretation that completely changes the
meaning and import of a rule that, in effect, creates a new
rule without the people who are being regulated having been
given notice of that, and an opportunity to comment on it,
and that’s exactly what happened here.

Heritage Reporting Corporation
(202) 628-4888

ATTACINGLT _D_
Page a i of Sb


disallowed by the Audit Division. Copies of these invoices are attached as Exhibit 6
hereto.

Assuming that these payments are the ones disallowed by the Audit Division, they
are all for focal telephone service and access charges and do not include cellular

telephone or pager usage charges. We have identified at least three payments for such

charges:

(1) $61,826.75 to Ameritech on August 15, 1996, including $30,000 of pre-paid

cellular phone cards, i.e., airtime costs for cellular telephone use;

(2) $6,348.04 to Ameritech on November 15, 1996, for alphanumeric paging

service;

(3) $7,971.50 to Ameritech on August 1, 1996 for cellular telephone airtime

charges.

Copies of the documentation for these payments are attached as Exhibit 7. We do
not believe these are inclusive of all charges for pager service and cellular telephone
usage, and are not certain if any of these invoices, or corresponding invoices for such
service charges, were in fact disallowed by the Audit Division, although it appeared to us
that they were not.

It is unclear, then, whether and to what extent cellular telephone service charges
and pager charges were allowed as permissible Host Committee expenses. It may be that
the Audit Division intended to disallow all such expenses, and simply did not identify
certain charges. It may also be the case that the Audit Division disallowed all such
charges, and that we were confused about what was included in and excluded from the
disallowed amounts. In any case, we do not in any way fault the Audit Division for the
manner in which the audit was conducted. To the contrary, the Convention Committee's
experience with the Audit Division was extremely positive, and the Convention
Committee indeed greatly appreciated their courtesy and professionalism.

Our contention, again, is that no reasonable person reading the plain language of
the Commission’s regulations, the history of the regulations, and the Explanation and
Justification, could possibly anticipate that a whole range of charges related to
administrative and overhead functions of the Convention Committee would be treated as

ATTACHMENT E
Pago of 159 _



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“And, secondly, before I get to my questions,
you're going to Boston, Los Angeles, and where?

; MR. SANDLER: The three finalist cities are
Boston, Los Angeles, and Denver. So one of those cities
will be the convention. And I mentioned that because we are
actually reviewing the proposed budgets with them right now.

COMMISSIONER MCDONALD: Well, just don’t go to San
Diego. I know a lot about that place.

Let me, if I might, just ask a couple of things
I’m just curious ‘about. You answered one of my questions
which was, when you were referring to the history, I did not
realize or recognize that the Host Committees had made those
payments in Atlanta and in New York. I think that’s awfully
important. And I was not aware of that. And I was going to
ask you about that. So that is news to me, and that is
helpful.

I would like to ask the auditors, so I could just
talk to both of you, in relationship to the cell phone
activity, first of all, is that assessment that Joe assumes,
is that a correct assessment of how this breaks out, Rick or
Bob?

MR. HALTER: Well, what we did, in the cases where
we could identify cell phone charges to the Convention
Committee, those charges are within the $700,000-plus total.

There were instances where we could not tell where

Heritage Reporting Corporation
(202) 628-4888



committee or convention committee in accordance with 11 CFR 9008.9: expenditures by
host committees in accordance with 11 CFR 9008.52; expenditures to participate in or
attend the convention under 11 CFR 9008.8(b)(2); and legal and accounting services
rendered in accordance with 11 CFR 9008.8(b)(4) will not ‘xe considered private
contributions or expenditures counting against the limitation.

Section 9008.8(a)(1) of Title 11 of the Code of Federal Regulations states.
in part, that the national party committee of a major party may not incur convention
expenses with respect to a Presidential nominating convention which, in the aggregate,
exceed the amount to which such committee is entitled under 11 CFR 9008.4 and 9008.5.

Section 9008.8(b)(1) of Title 11 of the Code of Federal Regulations states
that expenditures made by the Host Committee shall not be considered expenditures by
the national committee and shall not count against the expenditure limitations of this
section provided the funds are spent in accordance with 11 CFR 9008.52.

In addition, 11 CFR §9008.8(b)(2) states that expenditures made by
government agencies and municipal corporations shall not be considered expenditures by
the national committee and shall not count against the expenditure limitations of this
section if the funds are spent in accordance with the requirements of 11 CFR 9008.53.

Section 9008.10(g) of Title 11 of the Code of Federal Regulations states,
in part, that a convention committee shall file, no later than sixty days after the last day of
the convention, a statement of that committee's net outstanding convention expenses. A
revised statement shall be filed no later than 30 calendar days after the end of the ninth
month following the last day of the convention, and shall be accompanied by the interim
repayment, if required under 11 CFR 9008.12(b)(5)(ii).

Section 9008.12(b)(3) of Title 11 of the Code of Federal Regulations
states that if the Commission determines that the national committee accepted
contributions to defray convention expenses which, when added to the amount of
payments received, exceeds the expenditure limitation of such party, it shall notify the
national committee of the amount of the contributions so accepted, and the national
committee shall pay to the Secretary an amount equal to the amount specified.

Section 9008.12(b)(7) of Title 11 of the Code of Federal Regulations
states, in part, that the Commission may seek a repayment from the convention
committee if the convention committee knowingly helped, assisted or participated in
making convention expenditures by the host committee, governmental agency or
municipal corporation that are not in accordance with 11 CFR §§9008.52 or 9008.53.

Section 9008.12(c) of Title 11 of the Code of Federal Regulations states
that the Commission will follow the same repayment determination procedures, and the
committee has the same rights and obligations as are provided for repayment



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under the regulations.

MR. NOBLE: What I’m trying to get here is where
you ‘arew the lines. What did you think was not payable by
the Host Committee?

MR. SANDLER: Staff salaries of the convention
committee, overhead administrative expenses, you know, in
Washington, that were not on the convention site, and other
things that are, you know, specifically excluded from the
language of the regulations.

MR. NOBLE: But you think these calls would have
been something that Commission could have explicitly
excluded? .

MR. SANDLER: Specifically excluded, yes. I think
the Commission has wide latitude in developing these
regulations.

MR. NOBLE: So you’re not drawing a distinction on
the purpose of the calls; that these really did go more to
what the Host Committee should pay for, but really just that
we didn’t tell you the Host Committee can’t pay for those?

MR. SANDLER: Correct, that’s right. It’s a
reasonable judgment that the Commission could have made, but
they didn’t -- they didn’t make it in a way that we could
ascertain and understand it, and intelligently apply it
before the fact.

MR. NOBLE: I’m curious about your distinction

Heritage Reporting Corporation
(202) 628-4888

ATTACEMENT _h
rag? 3. 2f SB


ll

Treasury. 11 C.F.R. § 9008.12(b)(3); see also 26 U.S.C. §§ 9007(b)(3), 9008(h); and 11 C.F.R.
§ 9008.12(a).” A convention committee’s entitlement to public funds shall be adjusted so as
not to exceed the difference between the expenditure limitation and the amount of private
contributions received to defray convention expenses. 11 C.F.R. § 9008.5(b). If the Commission
determines that any portion of the payments to the national committee or convention committee
was in excess of the aggregate payments to which the national committee was entitled under

11 C-E.R. §§ 9008.4 and 9008.5, it shall notify the national committee and the national
committee shall pay an amount equal to such portion to the United States Treasury.

11 C.F.R. § 9008.12(b)(1); see also 26 U.S.C. § 9007(b)(1). If the Commission determines that
the national committee or convention committee incurred convention expenses in excess of the
limitation, it shall so notify the national committee and the national committee shall pay an
amount equal to such excessive expenditures to the United States Treasury. 11 C.F.R.

§ 9008.12(b)(2); see also 26 U.S.C. § 9007(b)(2). In the case of in-kind contributions from a
host committee, government agency or municipal corporation that cause the convention
committee to exceed the expenditure limitation, the Commission may seek repayment if a
convention committee knowingly helps, assists or participates in the making of a convention
expenditure by a host committee, government agency, or municipal corporation that is not in

accordance with 11 C.F.R. §§ 9008.52 or 9008.53. 11 C.F.R. § 9008.12(b)(7).

7 The statute authorizes the Commission to require repayment of public funds equal to any contributions,

26 U.S.C. § 9007(b)(3), while the regulation requires a repayment equal to those contributions that, when added

to the amount of public funds received, exceed the expenditure limit, 11 C.F.R. § 9008.12(b)(3). In these
circumstances, the full amount of any contributions is subject to repayment under either the statute or the regulation
because the Convention Committee received public funds equal to its expenditure limit.


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those charges went, and we did not include them. There were
instances in our testing that did not show any material
problem with other types of divisions between equipment
versus supplies or other topics that were brought up.

The focus, based on the testing, was with the
regulation dealing with the telephone charges. Without some
rather extensive research back in the work papers, which I
can’t do right now, as far as the beeper charges and stuff
like that, I just can’t respond to that.

MR. SANDLER : I think we have to distinguish
between -- long distance charges, when you use a cell phone
and there’s some, long distance carrier involved, and the
per-minute charges, which are equivalent to local calling
that you use, whether those were in-kind or paid in cash, I
don’t -- they may have been donated in-kind.

But in either case, they would have been reported
and presumably, you know, subject to the audit process. And
as far as we can tell, there was no discussion or effort to
disallow the cell phone usage charges. Maybe the long
distance were either on the same bill or part of the same
package. We could check that further. I don’t know.

COMMISSIONER MCDONALD: I’m still not quite clear.
Do you think you did or did not allow the cell phone
charges? I apologize. I’m just not quite sure I
understand.

Heritage Reporting Corporation
(202) 628-4888



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“MR. HALTER: I would just like to note for the
record, we've been auditing the Host Committee since, I
guess, ‘76 but, of course, not necessarily the city or the
city -- or the municipal corporation that may have been
involved.

CHAIRMAN THOMAS: Commissioner Elliott?

COMMISSIONER ELLIOTT: Then let me ask, when we
have audited previous Host Committees, have we allowed the
previous Host Committees to pay for the use of the phones,
rather than the committees?

MR. HALTER: Well, the way I can answer that is
that it has not been an issue in audits -- in prior audits
of Host Committees whether -- this topic has not been an
issue. I can say in the last two or three -- at least the
last two conventions, at least going back to ‘92, that the
Convention Committees themselves have paid in the six
figures, over $200,000, in telephone charges. Beyond that,
I can’t be more responsive.

COMMISSIONER ELLIOTT: Thank you.

CHAIRMAN THOMAS: Commissioner Mason?

COMMISSIONER MASON: First of all, let me
apologize to my fellow commissioners and counsel for my
tardiness. - I had a sick child at home, and my wife was
wanting to talk to me. But I read the presentation ahead of

time, and I very much appreciate it. And, in fact, I have

Heritage Reporting Corporation
(202) 628-4888

ATTACH
Page 32 of



Vendor i invoice nate ar 29 1%
Purpose _ fexpendins = fly 91
832 -/7%2

Receipt of goods/service confirmed by 7 >, mas
. 2
Person requesting disbursement > Dus : : ‘a

All requests for check disbursement must be accompanied by the original invoice or receipts.

Approval signatures:
Check Preparer ch Executive Director \ Finance Director le 4
am - 1. ;

Date received [/-/9-96 » Contract # - ‘
yrs 734 93 j

Check # DSK 5 Check recep confirmation signee: & & Y
este ie ot . (for pi up only) > ‘
Date of check _/[-b6- ~ ~~ , .. eee |
Wes . Wes. ;
Acct # . i
Name/Title \
Fund Account :

Applies to contract line

ATTACHMENT _£ .
Page 1! of JAG



7

Weare unable to determine whether the City of New York or the 1992

Host Committee paid for any long distance service charges. We are also

unable to determine who paid for the 1988 Convention Committee’s local

and long distance telephone service charges.
Attachment E at 3. The Convention Committee also states that its contract with the City of
Chicago required the City and/or the Host Committee to pay for telephone charges. Id. at 3, 4.
This contract provision required the “City to pay for cellular telephone usage charges (air time)
and long distance service charges for the Convention Committee.” /d at 4. Furthermore, the
Convention Committee states that “we have been unable to determine definitively how the Audit
Division treated cellular telephone and pager charges, because we cannot determine exactly
which invoices were included in the $726,835 disallowed.” Id.
Ill. ANALYSIS

A. LAW

In order to be eligible to receive public funds to finance the presidential nominating
convention, a national party committee must establish a convention committee, which is
responsible for conducting the day to day arrangements and operations of that party’s presidential
nominating convention and must register with and report to the Commission as a political
committee. 11 C.F.R. §§ 9008.3(a)(1), (a)(2) and (b). A national party committee and its
convention committee must also file a written agreement with the Commission agreeing to
conditions set forth in 11 C.F.R § 9008.3(a)(4)(i) through (viii) to be eligible for public funding.
11 C.F.R. § 9008.3(a)(4). ‘As part of this agreement, the national party committee and its
convention committee must agree to comply with 2 U.S.C. §§ 431 through 451, 26 U.S.C.

§ 9008, and applicable Commission’s regulations. 11 C.F.R. § 9008.3(a)(4)(vii). Thus, the

committees must agree to abide by 2 U.S.C. §§ 441a and 441b, which prohibit, inter alia,


for all long-distance charges incurred by the DNCC at the Convention Facilities and at
any media or hospitality lounge to be provided in this Agreement.”

The “Definitions” section (Article 2) defines “Convention Facilities” to include
the “Convention Offices,” which is defined in tum to include the facilities and spaces
described in section 14. 1, which requires the City to provide office space for the
Convention Committee.

Thus, the 1996 Convention Committee’s contract with the City of Chicago
specifically required the City to pay for cellular telephone usage charges (air time) and

long distance service charges, for the Convention Committee.

III. Payment of Cellular Telephone and Pager Charges for 1996 Convention

Committee

In our September 8, 1998 Request for Administrative Review, and in our oral
argument, we referred to the fact that the Final Audit Report had apparently treated as
permissible the payment by the City of Chicago and/or its Host Committee of cellular
telephone and pager system usage charges. It was suggested by the Audit Division
during the oral argument that the Audit Division had in fact disallowed any cellular
telephone usage charges it had identified during the audit, and that such charges were
included in the $725,835 total of telephone charges recommended for repayment.

We have been unable to determine definitively how the Audit Division treated
cellular telephone and pager charges, because we cannot determine exactly which
invoices were included in the $725,835 disallowed. We have identified 18 payments to
AT&T by the Host Committee or the City, totaling $115,335, all of which were for long
distance telephone charges. We believe that, with various adjustments, it is likely that
this number corresponds to the $108,577 in AT&T charges disallowed by the Audit
Division. As best we can determine, none of this amount includes any cellular telephone
or pager service charges.

We have also identified payments to Ameritech for local telephone service,
totaling $ 614,641, which approximates the $ 618,258 in payments to Ameritech

artacmext ©

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clear in its own factual conference memory and audit report

that-you did not challenge the actual installation and

equipment, itself. You said use of a phone sitting on

somebody's desk, you allowed the cost for that.

yes;

MR. COSTA: I allowed installation and wiring,

and then the hardware,

itself, absolutely.

But the

service charge, once you picked up the phone was included,

absolutely.

for your presentation.

CHAIRMAN THOMAS:

COMMISSIONER ELLIOTT:

Commissioner Elliott?

Thank you, Joe.

I have a couple questions.

Did you have separate contracts with the Host

Committee and another contract with the city of Chicago?

MR. SANDLER: No,

city of Chicago.

COMMISSIONER ELLIOTT:

Thank you

there was one contract with the

Host Committee responsibilities?

MR. SANDLER: Yes.

COMMISSIONER ELLIOTT:

things that Host Committees do?

MR. SANDLER: That’s right.

COMMISSIONER ELLIOTT:

In that contract,

And that included their

did it

specifically state that they would pay for the telephone

use?

MR. SANDLER: Absolutely.

Heritage Reporting Corporation

(202)

628-4888

ATTACHMENT

Page

The contract covered those

»
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apR Dae Bn ut C

. ... = DNC OFFICE ¢ SUPPLY REIMBURSEMESy
a? __ CHECK REQUEST FORM ERED JUL 15 wee 48C-

mayest Name’ Aner Laks

Date check needed

Vendor invoice number

Purpose of expenditure fhext service

BBLS ES SG

Receipt of goods/service confirmed by D. nw a
Person requesting disbursement io Deis

All requests for check disbursement must be accompanied by the original invoice or receipts.

Approval signatures: >. -. =

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Pr ' Accepted an ackno« sediet

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REPORTER'S CERTIFICATE

DOCKET NO.: 99-5
CASE TITLE: 1996 Democratic National Convention Committee
HEARING DATE: January 13, 1999

LOCATION: Washington, D.C.

I hereby certify that the proceedings and evidence are
contained fully and accurately on the tapes and notes
reported by me at the hearing in the above case before the

Federal Election Commission.

.

Date: January 13, 1999
on
Navene ANC
ri wm
Official Reporter
Heritage Reporting Corporation
Suite 600
1220 L Street, N. W.

Washington, D. C. 20005

Heritage Reporting Corporation
(202) 628-4888



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identified. Now, I understand that, from the --

MR. NOBLE: Right.

MR. SANDLER: -- from the convention --

MR. NOBLE: I just wanted to clarify that.

MR. SANDLER: -- from the Audit staff. Okay.

MR. NOBLE: Putting the E and J aside for a
moment, did you believe that the rules were clear, when you
read them, about what was included and what was not
included, that the Host Committee could pay?

MR. SANDLER: They seemed reasonably clear.
Putting the E and J language aside?

MR. NOBLE: Yes.

MR. SANDLER: Yes, they were.

MR. NOBLE: So you thought that part was clear,
that you could pay for the phone service charges?

MR. SANDLER: Yes.

MR. NOBLE: On what basis did you make that
determination?

MR. SANDLER: Office equipment, office supplies --
offices, office equipment, similar convention facilities and
services. It’s like, again, we wouldn’t have drawn a
distinction between the typewriter and the ribbon, or the
printer and the ribbon, these days.

MR. NOBLE: So you drew no distinctions based on
the service of something used, the cost of using something,

Heritage Reporting Corporation
(202) 628-4888



7332083203 9%625S5250%200200b1 00000224 ISC000044943
GENFF A: iP RYICES

Please tnclude vour 14-digit
account cumeer oc your check
and/or anv correspondence

WMetlvssellldededlalsbbedlludal AFR 9 B94
AMERITECH Accourt N:

jumper
P.O. Box 4520 wep ea ns 312 632-1996 2558
Caro! Stream, IL 60197-4520 TeLecet

APR 1, 1996

Lallles
32282 ZP 1 B 136+ 74862 “SDGT 44043
DEMOCRATIC NATIONAL

CONVENTION

510 N PESHTIGO CT FLARE
CHICAGO, IL 60611-4309

| supe qusden APR 29,1996  AmcuNToUe_ 449.43

“2. Dewan one mall top sation with yeu check peyabte to Ammeraseh Writs scamura mummeten creck.
PLEASE ALLOW PIVE DAYS WHEN PAYING BY MAL OR AT AN AUTHORIZED AGENCY.

Mad paymeras ©: Amerassh, P.O. Box 4520, Carci Sueam, iL 60197-4520

CUSTOM BUSINESS SERVICES 1_Sizeaiese 2550
BILLING SUMMARY [APR 1.1998
= = ' Peat Due Carrere Tota
‘Thank You Amount Charges Arourt Ous
CONVENTION S10 N PESHTIGO CT FLAS
SUDMARY OF OF CURRENT CHARGES
Amma TECH
Por Detailed Char
Monthly Service 170.61
Loeea!l Calls ... 42.98
Local end State 21
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June 25, 1996 ww

Chicage
Brad Kiley ; .
Director of Administration ee

1996 Democratic National Convention Committee, Inc.
320 .N. Clark, Room 600A
Chicago, IL 60610

Dear Brad:

We seek the concurrence of the 1996 Democratic National Convention
Committee, Inc. (“DNCC”) for the expenditure of the following tunds

Line item: 63 - Communication Systems Cash expense
Vendor: Amentech

Account Cos.
312 336+1996 $8,538.42

Please acknowledge the above expenditures by signing. dating and
returning one copy of this letter to my attention.

Sincerely,

Don Davis

Finance Director

Chicago ‘96

Accepted and acknowledged:

1996 Democratic National Convention Committee. Inc.

By: Date: 2b Yisne 1296

ce: Nancy J. Clawson, Co! Insel, Chicago ‘96
Leslie Fox, Executive Director. Chicago ‘96
Janet V. Green, Deputy Chief Executive Officer, DNCC

Alfonse McMillan, Counsel, DNCC

320 North Clark Serwet. Suste 402. Chicago. IL 60610 + 312-214-1996 + Fax 312-263-8004

e-mail chicagos6@alS NET

pee ee ee Thee wee e emcee



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clearly permitted to be paid for by the Host Committee under

the regulations.

And, again, the auditors allowed cell phone
charges -- cellular phone charges, pager charges to be paid
for by the Host Committee.

So there’s no notice in any -- in the language of
the regulation itself of any distinction that would disallow
the Host Committee from paying for telephone service
charges, while allowing them to pay for these other
administrative and office-related service charges.

That’s how we read the regulation in the summer of
1994, which was shortly after the Commission issued its new
regulations for the convention scheme. But I waht to
emphasize secondly, that the history of this regulation is
completely consistent with the reading that we had of it in
the summer of ‘94.

As you know, the whole idea of the Host Committee
regulations is that while the convention was to be publicly
financed, a city and its Host Committee could use private
contributions to pay for certain convention facilities and
services, as long as the Commission could be sure that the
purpose of those contributions was to promote the city and
to enhance the business of the companies making the
contributions, rather than political purposes; rather than
carrying favor with the political party giving the

Heritage Reporting Corporation
(202) 628-4888

= »)
ATTACIEYT
Page a_i of Sh



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firm of Sandler & Reiff, here in Washington.

7 I serve as General Counsel, and Mr. Reiff is
Deputy General Counsel of the Democratic National Committee,
and we also served as counsel to the 1996 Democratic
National Convention Committee.

We very much appreciate the opportunity to appear
before the Commission today to discuss the basis for our
request that the Commission revisit and reconsider the
repayment determination in the final audit report on the
1996 Democratic National Convention Committee.

As you know, the Convention Committee is publicly
financed, but the Commission’s regulations permit the host
city and the Host Committee to receive private contributions
from certain sources, local businesses, labor organizations,
and individuals to pay for categories of convention expenses
that are set out in the Commission's regulations.

The sole issue in this repayment determination is
whether it was permissible for the city of Chicago and
Chicago’s Host Committee, Chicago '96, to pay for local and
long distance telephone charges for the Convention
Committee. These are the actual, by minute telephone
service charges for telephone calls made by the Convention
Committee staff.

The final audit report takes the position that it
was not permissible for the Host Committee to pay for those

Heritage Reporting Corporation
(202) 628-4888

ATTACHMENT D

Page _Ss_ of Sh


services to be provided as stagehands, riggers, teamsters, projectionists. broadcast 4
engineers, cameramen, carpenters, and decorators for the convention.

d. Theatrical Resources, Inc.

The Audit staff identified one payment in the amount of
$132,808 to Theatrical Resources, Inc. made during July 1996. A review of Host
Committee records disclosed that the disbursement covered payroll for riggers and
electricians working during July and August 1996 pursuant to a contract between the
DNCC and the vendor. The expense was allocated to budget line “19-Production
Personnel.” A separate review of the convention committee’s records disclosed that the
DNCC subsequently paid this vendor a total of $59,848 with three additional checks
written during September 1996 and February 1997.

e. VANCO Lighting Services

The Audit staff identified one payment in the amount of
$175,000 to VANCO lighting services during July 1996. A review of Host Committee
records disclosed that the expense was allocated to budget line “31-Lighting.” Vendor
invoicing described the services provided during July and August 1996 as a “rigging
package” and identified the Convention as the “show” to be supported by VANCO.

f. . Vari-Lite, Inc.

. The Audit staff identified one payment by the Host
Committee in the amount of $120,000 to Vari-Lite, Inc. during August 1996 as payment
against invoice #1701/02. A review of Host Committee records disclosed that the
expense was allocated to budget line “31-Lighting.” Vendor invoicing identified the
Convention to be the “producer” using automated lighting and technical support provided
during July and August 1996. The Audit staff also reviewed City memoranda asserting
the equipment provided to be “lighting instruments, border and cyclorama striplights,
follow spotlights, floodlights, special effects lighting, spotlights, etc.” for the Convention.
A payment of $120,000 by the City against Vari-Lite invoice #1701/01 was also
identified.

In the ECM, the Audit staff concluded that payments to the
vendors described above are not expenses properly paid by the Host Committee or the
City pursuant to 11 CFR §9008.52(c) or §9008.53(b). Rather, they are convention
expenses that should have been paid by the DNCC pursuant to 11 CFR §9008.7(a) for
reasons discussed below.

As noted previously, some of these disbursements relate to
salaries for electricians and other individuals for labor such as rigging cameras and
lighting. Although 11 CFR §9008.52(c) allows a host committee to defray salaries and
convention related expenses such as construction of camera platforms and lighting. the

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June 28, 1996

Brad Kiley

Director of Administration -

1996 Democratic National Convention Commitee, Inc.
320 North Clark Street

Chicago, IL 60610

Dear Brad:

We seek concurrence of the 1996 Democratic National Convention
| Commitee. Inc. (““DNCCTM) for the cash expenditure for the following pager
order:

' EQUIPMENT CASH

— EXPENDITURE

: 40 Motorola Flex Pagers for

| 8 weeks @ $21.95/week $7,024.00
40 Motorola Flex Pagers for

| | week @ $24.95/week 998.00

| Sales tax 481.33

: TOTAL $8503.33

| Please approve the cash expenditure of $8.503.33 which will be charged
against line item #66, PAGER SYSTEM by signing, dating and recurring
one copy of this letter to my attention.

Very truly yours,

a.m

Don Davis
Finance Director
Chicago ‘96

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it

to indicate that the.host committee could not pay for convention committee
administrative expenses. That suggestion was adopted without a formal vote by the
Commission. The exact wording was created by the Office of General Counsel and
inserted in the E&J, which was finally approved by the Commission, presumably on tally
vote, and issued on June 29, 1994. There was no advance notice whatsoever that this
new concept would suddenly be introduced and adopted at the last Commission meeting
on the proposed new rules, let alone an opportunity for anyone to comment on it.

Agencies are of course allowed to modify proposed rules during the rulemaking
process, without necessarily affording an opportunity for a second round of comment. As
the District of Columbia Circuit has explained, however:

The test we have developed for deciding whether a second round of
comment is required in a particular case is whether the final rule promulgated by
the agency is a “logical outgrowth” of the proposed rule. .. . We apply that
standard functionally by asking whether “the purposes of notice and comment
have been adequately served,” . . . that is, whether a new round of notice and
comment would provide the first opportunity for interested parties to offer
comments that could persuade the agency to modify its rule.

American Water Works Ass’n v. Environmental Protection Agency, 40 F.3d 1266, 1274
(D.C. Cir. 1994)(citations omitted). Accord, United States v. Bethlehem Steel Cor.. 3
F.3d 862 (7th Cir. 1994); Shell Oil Co. v. Environmental Protection Agency, 950 F.2d
741 (D.C. Cir. 1991).

In the case of the Commission’s rules governing host committee disbursements, it
is clear that the restriction on the ability of host committees to pay for convention
committee administrative and overhead expenses was in no way a “logical outgrowth” of
the proposed rule. Nothing in the proposed rules even hinted that such a restriction
would be imposed. The DNC was given no opportunity whatsoever to comment on such
a restriction. Had the DNC been afforded such an opportunity, it could have called on the
Commission to clarify exactly what types of convention committee expenses the host
committee would be precluded from paying, thereby obviating all of the confusion and
uncertainty that gave rise to the repayment obligation imposed by the Final Audit Report.
Manifestly, then, the “purposes of notice and comment” have not been “adequately

served” in this case.

ATTSCHLOY?

Page of 19 _



FEDERAL ELECTION COMMISSION

WASHINGTON. DC 20463

January 4, 1999

TO: KIM L. BRIGHT-COLEMAN
ASSOCIATE GENERAL COUNS

THROUGH: JAMES A. PEHRKON
ACTING STAFF DIRE;

FROM: — ROBERTJ. COSTA Kfc—
ASSISTANT STAFF DIRECTOR
AUDIT DIVISION

SUBJECT: 1996 DEMOCRATIC NATIONAL CONVENTION COMMITTEE INC.
RESPONSE TO AUDIT REPORT - AUDIT DIVISION COMMENTS

Based on our review of the subject committee’s response to the audit report, it
does not seem that the conclusions reached by the Commission in the audit report relative
to the telecommunications’ expenses require any modification. However, I would note
that a check ($46,144.47) made payable to the U.S. Treasury was received from the
subject committee on August 31, 1998. This amount can be viewed as a credit against
the amount due (See Audit Report, page 20 and Recommendation #3). Once applied the
net repayment due is now $560,129.

Should you have any questions, please contact Wanda Thomas at 694-1200

arracuuenr __C

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MR. COSTA: I’d only like to clarify for the
record, the focus of the review was to identify use. And if
the use was tied directly to the convention, and paid for by
the host, we challenge that.

And if it was for a phone that’s out on the desk,
or if it was for a cell phone, and we could associate it
directly with convention activity, we said that’s a
convention expense, paid for by the Host Committee, and we
challenged it.

So that’s truly the basis of it, and it’s a mix.
My guess is, it’s some of all of those. Probably more
hardware phones gitting on desks than cell phones, but
that’s not necessarily true, either. But the focus was, if
it was used and paid for by the Host Committee, and we could
associate it directly with convention activity and
convention people, we charged it.

COMMISSIONER MCDONALD: Okay. That's helps some,
because I think there’s even a dispute about, in essence,
what we're trying to examine.

Mr. Chairman, I think that’s all the questions I
have for right now.

CHAIRMAN THOMAS: So in light of that discussion,
did you want to add anything further on this actual
question?

MR. SANDLER: Clearly, the Audit Division made

Heritage Reporting Corporation
(202) 628-4888

wd

ATTACHMENT

Page c& 7 of SO,



AGREEMENT
1926 Democratic National Convention

THIS AGREEMENT is entered into on August 4, 1994, by and
among the city of Chicago (the "City"), 1996 Democratic National
Convention Committee, Inc. (the "DNCC"), a District of Columbia
non-profit corporation affiliated with the Democratic National
Committee (the "DNC"); and United Center Joint Venture, an
Illinois general partnership (*UCJV").

WHEREAS, the Honorable Richard M. Daley, Mayor of the City
of Chicago, by authority of a resolution of the Chicago City
Council adopted on April 13, 1994 and published in the City
Council Journal of Proceedings at pages 48622-24, through, among
other things, the submission of a formal proposal in response to
the Request for Proposal issued by the DNC, has invited the
Democratic Party to call the 1996 Democratic National Convention
(the "Convention") to meet in the City of Chicago; and

WHEREAS, the DNCC was formed to plan and implement, and is
vested with the operational and financial responsibility for, the
Convention; and

WHEREAS, by authority of the Charter of the Democratic
Party, the DNC, acting for and on behalf of the Democratic Party,
has accepted said invitation, subject to the execution and
delivery of this Agreement obligating the City to provide the
facilities, equipment, services, funding and other items which
the City has offered in its proposal (and the supplements

wage 24 ot 12


“e “
XN
1B AR TOTAL Th SU0gs?
10 f * BUDSETED VS
ACCOUNT ore anOUNT m Actua.
400623 PERSONNEL V2, TI. 47 1034176028 uN, 156.23)
400923 INTERNS : ¢.00 Te ae
410123 PRO SERVICES 10,431.08 :
420123 STAPF TRAVEL - iX ASEA 1,701.96 2,086.58 304,62
420223 TRAVEL-OUT 2,548.73 0,00 (2,548.75)
430523 RENTAL OF SPACE 0.00 0.00 0,00
440123 OFFICE SUPPLIES S01 33.01 0.00
440223 SOSTARE 0.00 0.00 0.00
440323 OTHER SUPPLIES 78,62 20.80 {57,62)
430323 EQUIP & FURN RENTAL 0.00 0.00 9.00
460123 COMMUNICATIONS 9.00 9.00
460223 PUBLICATIONS 0.00 0.00
0.00 (4,829.08)
¢.00 (3,820
y 600.00 \.
0023 ADVERTISING 9.00 9.00
$0823 DATA SROCESS: 85 9.00 0.05
460923 PARKING wale 9.00 ro
461023 LUNES west 6.00 (268.98)
S61173 HGUSING 00 $48.09 1,000.06
462423 £80) Bras 6.00 173,901
3.60 200,088.08 170,604.04 (39,399.42)

¢

i



Scott Pastrick from October 6, 1995 to February 5, 1997 and Carol Pensky from February
5, 1997 to the present. During the audit period, the Committee maintained offices in
Washington, D.C. and Chicago, IL. The Committee records are maintained in

Washington, D.C..
The Committee used seven bank accounts to handle its financial activity.
From these accounts it made approximately 1,958 disbursements. The Committee
received $12,364,000 in federal funds which represents the full entitlement established at
26 U.S.C. §9008(b). _
D. AUDIT SCOPE AND PROCEDURES

The Audit of the Committee covered the following general categories as

appropriate:
1. The receipt of contributions from prohibited sources;
2. the receipt of contributions or loans in excess of the statutory limitations

(Findings II.A. and B.);

3. proper disclosure of receipts including the itemization of receipts when
required, as well as, the completeness and accuracy of the information
disclosed;

4. proper disclosure of disbursements including the itemization of
disbursements when required, as well as, the completeness and accuracy of
the information disclosed;

5. proper disclosure of Committee debts and obligations;

6. the accuracy of total reported receipts, disbursements and cash balances as
compared to Committee bank records;

“7. adequate record keeping for transactions;

8. accuracy of the Statement of Net Outstanding Convention Expenses filed
by the Committee to disclose its financial condition (Finding II.D.);

9. compliance with requirements concerning expenditures for convention
expenses (Finding I1.C.);

10. the Committee's compliance with spending limitations; and,

11. other audit procedures that were deemed necessary in the situation
(Finding II.E.).



=
&

STAANTA. G2 COMPITTES, CNC,
DEPORTMENT BUDGET STATEMENT
TELECOMMUNICAT IONS

- 8/31/88
iQ.
YEAR TOTAL YTD BUDGET
CURRENT 79 SuDseTeD vs :
ACCOUNT DESCRIP? ION WONTK «=, DATE ARQUMT «= «YTD ACTUAL
400623 PERSONNEL 4,702.85 0.00 (6,702.85)
400925. INTERNS 0.00 0.00 0.09
410125 PROFESSIONAL SERVICES B26 Tih TM
420128 TRAVEL-IN 0.00. Re iis
420225 TRAVEL-OUT 0.00 “0,00 ~ 0.00
430125 RENTAL CF SPACE 0.00 0.00 0300
440125 OFFICE SUPPLIES 0.00 0.00 0.00
40225 POSTAGE 0.90 0.00 0.96
440325 OTHER SUPPLIES 0.09 0.00 0.00
480328 EQUI> & FURN RENTAL 10,212.65 18,810.69 $,298.96
4082S TELESONMUNICATION SERV. 264,230.23 3,800.00 (202,730.23;
460225 PUBLICATION 0.00 0.00 0.09
400328 FRE! M00 0.00 (34,90)
400425 CONFERENCES 0.00 0,08 0.00
460525 EMPLOYEE DEVELCERENT 0.00 0.00 0
460625 ADVERTISING 0,00 0,00 on
460828 DATA PROCESSING 30,000.90 $7,300.00 - 7,890.00
460925 PARKING 16.00 0.00 (156,06)
61028 LUNCH 6.00 0.00, 0.00 24
461125 HOUSING . 0.00 0.00 0.00 :
449028 wISe 0.00 “0,00 2,00 “
490025 CONT: NGENCY 0.00 «(287,593.99 287,593.99 .

0.00 304,S7L.42 397,260.08 92,468.66

st

d v

4TTachant
Passe 24 of

ody



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Commission and to demonstrate that no repayment, or a lesser
repayment, is required.

: This is not an adversarial or trial-like hearing.
Counsel for the Convention Committee will have 30 minutes to
make remarks. At the conclusion of the Convention
Committee's presentation, each Commissioner will have an
opportunity to ask questions. I will then ask the General
Counsel and the Audit Division if they have any questions
for counsel.

After this hearing, the Convention Committee will
have five days in which to submit additional materials for
the Commission’s consideration. The Commission will then
make a repayment determination following administrative
review and issue a Statement of Reasons in support of that
determination.

Representing the Convention Committee today is
Joseph E. Sandler. I would ask Mr. Sandler that his
presentation not exceed 30 minutes, as noted, and must be
limited to those matters raised in your written response to
the Commission’s repayment determination.

Welcome, Mr. Sandler. I see joining you will be
the honorable Neil Reiff, as well. Neil, welcome, as well.

MR. SANDLER: Thank you very much, Mr. Chairman.

Mr. Chairman and members of the Commission, I’m
Joe Sandler. This is my partner, Neil Reiff, with the law

Heritage Reporting Corporation
(202) 628-4888

D

ATTACHMENT —~*—
Page__ of



4

On September 8, 1998, the Convention Committee submitted legal and factual materials
to demonstrate that no repayment is required to be paid to the United States Treasury.
Attachment B;? 11 C.F.R. § 9007.2(c)(2)(i). The Convention Committee also requested an
opportunity to address the Commission in open session pursuant to 11 C.F.R. § 9007.2(c)(2)(ii).
Attachment B at 1. On November 8, 1998, the Commission granted the Convention
Committee’s request for an oral hearing, which was held on January 13, 1999. Attachment D.
Within five days after the oral hearing, the Convention Committee submitted a supplemental
submission. Attachment E.

Il. CONVENTION COMMITTEE’S RESPONSE TO THE REPAYMENT

DETERMINATION

The Convention Committee disputes the repayment determination based on the
conclusion that telephone charges paid by the Host Committee and the City of Chicago are in-
kind contributions to the Convention Committee. Attachment B at 1. The Convention
Committee states that there should be no repayment because the Commission did not provide
“fair notice” that 11 C.F.R. § 9008.52(c) prohibited a host committee’s payment of telephone
service charges. Jd. at 2. The Convention Committee argues that the Commission is imposing a
“civil sanction”? against the Convention Committee without giving the Convention Committee

notice of the conduct that is prohibited. /d. at 3.

2 The Commission’s Audit Division noted that there was no need to modify the conclusions reached in the

Audit Report based on these materials. Attachment C.

3 There is a critical distinction between repayments and civil liability or violations of law. A repayment
involves the return of public funds received by a political committee to the United States Treasury. Contrary to the
Convention Committee’s assertion, the Commission’s repayment determination does not impose any civil penalty
upon the Convention Committee. See Kennedy v. FEC, 734 F.2d 1558, 1565 (1984); see also Reagan Bush Comm.
v. FEC, 525 F. Supp. 1330, 1337 (1981) (repayment determinations are not considered to involve violations of law).


YOUSYIS53S,

Critace. we 6060 4
DIRECT PAYMENT VOUCHER
PURCRIASE NUMBER voutren NO VENDOR NUMBER Pac:
[PDUs JoUssyas> 5 TOZUIT a9 By
REMITTANCE ADDRESS: DELIVERED TO:
7 AMERITECH - [OFFICE OF BUDGET & MANAGEMENT
P.O. BOX 4520 .
CAROL STREAM, IL
601974520 ACCEPTANCE DATE: 06/03/96

TELEPHONES SERVICE FOR ONCC OFFICES
COMMODITY INFORMATION

COMMODITY CATALOG «# QUANTITY UNIT UNIT COST TOTAL COST
00* 9157700000 ' zy 282 220

TELEPHONE SERVICES. LONG DISTANCE 4ND LOCA.

TELEPHONE SERVICE FOR ONCC OFFICES

s** VENDOR INVOICE NUMBER FOR THE aBOVE LINE IS se eee
TOTAL 282.22
*
ACCOUNTING INFORMATION
SFYR FUND DEPT  ORGN APPR ACTV OBJECT RPTG JOB/PROU Tota. cost
o' 9s 629 99 2005 9038 0423
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ATTACHENT

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BY

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BY

AUDITOR'S
APPROVAL

RECEIVED
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OEPARTMENTAL APPROVAL

| Rereey cerity Gt We wwerces Reve nel Been Oreveutiy veucnered
wo That te peees oF Services inmicmed were recewec end the! te apeve
SCCOUnt 1S MDEFOvEE rem eppreeristiens 3 Shewn apeve

DATE



DETAILED CHARGES

Gilling Questions, Cail 1 800 480-2203 312 632-1996 2559
Changes in Service. Cail 1312 760-2000
Repair Service, Call 1 800 684-2550 SUL 1, 1986

Leea!l Calls - continued

Calls Over B MIIOS on. cece cc eer c cc cccrervreeeenvece -00
© Call(s) during Peak Rate Period totaling
0 Minute(s)
© Call(s) during 10% Discount Period totaling
0 Minute(s)
© Call(s) during 40% Discount Period totaling
0 Minute(s)
Calis Over 15 Wiles ... see eee cece eeee -00

© Call(s) during ried totaling
© Minute(s)

0 Call(s) during 40% Discount Period totaling
© minute(s)

Peek Period is: Ses-8pm, Mon thru Fri
10% Discount Period is: Sam-Sem, 11ea-2pa
Qpe-Opea - Mon thru Fri
* 0-15 Miles Only
40% Discount Period is: Spe-Sem - Mon thru Fri and
All Dey Set, Sun, Holidays

2096 Tote! Billed Minute(s)

Tota! Measured Service ....... tee eerececevees se eeeeee 40.52
Total Leeal Calle ....cc recess cccccccceccccccecccesevcees 62
Lecal and State Additional Charges

State Additional Charges ............ eee cece cccccence 21
Taxes

Hitineis et S& 10.66
TOTAL AMBRITECH CURRENT CHARGES 221.90

aITACHENT E

Page_GO 5: 12

FOR CALLING CODES PLEASE SEE THE BACK OF THE FIRST PAGE



eritech

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Please include sour 14-dipit
account mumoer on vour che:
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Vlad HM. sdeaabebocabellerselbal _——
AMERITECH Account Number
P.O Box 4520 312 832-1996 2559

Caro! Steam IL 60197-4520

SEP + 1996

VMerbecredboceredEDesoederdesebecstdeoetlosbelbesssobell

38 AV’ = 3.466933 "50S" 14182
DEMOCRATIC NATIONAL

CONVENTION

320 N CLARK RM 402

CHICAGO IL 60610-4711

CURRENT CHAR TOT.
PASTBUEAPTER §©6SEP 30, 1996 AMGUNT DUE 141.42

Oetach and mail top section wan vour Check Dayeple to Amermech Wmie accoumt number on cnecn.
PLEASE ALLOW FIVE DAYS WHEN PAYING BY MAiL OR AT AN AUTHORED AGENCY
Mail payments tc Amernecn © S Bor 452C. Caro: Seam © 62197-4520

312 832 1996 25:

CUSTOM BUSINESS SERVICES

BILLING SUMMARY SeP 1 1996
~ oe a
404.88 609.87 0.00 124.99CR 266.41 141.42
DEMOCRATIC NATIONAL CONVENTION: 320 N CLARK RM 402
SUMMARY OF CURRENT CHARGES

AMER ITECH

For Detailed Charges - See Page 2

wontniy Service . 159.50
Local Calis .. 93.99
Local and State Aca:t:iona! Cnarges .. 25
Taxes (11! 12.67 ) 12.67
TOTAL CURRENT CHARGES 266.41

eritech fee LAN of ars
Cumeritech



An American Celebration
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Chicagdgg

seasrery Co-Chatrs
ed ‘Risnard M. Duty

Ueners C. Neseenrt William M. Dairy
owen Mayer, Brows & Plat
Latte Bos
Keereere Corer

April 22, 1996

Brad Kiley

Director of Administration

Democratic National Convention Committee
320 N. Clark, Room 600A

Chicago, IL 60610

Dear Brad:

We seek the concurrence of the 1996 Democratic National Convention
Committee, Inc. (““DNCC”) for the expenditure of the following funds:

Line item: 63 - Communication Systems Cash expense

Vender: Amenitech
Account Cost
312 336-1996 $8,141.57

Note: The total invoice was $21,996.67 out of which $13.855.10 was
charged earlier as part of the ‘attached letter. The $13.855.10 was
determined by subtracting the information call charges ($1.80. $3.68.
and $127.80) from the $13.988.38 “other charges and credits” section
of the bill.

Please acknowledge the above expenditures by signing, daung and
returning one copy of this letter to my attention.

Sincerely,

Don Davis

Finance Director

Chicago ‘96

Accepted and acknowledged:

1996 Democratic National Convention Committee, INC.

cae Date: 29-76
N
cc: Nancy Clawson, Co . |, Chicago ‘96

Leslie Fox. Executive Director, Chicago ‘96
Janet V. Green, Deputy Chief Executive Officer, DNCC

Alfonse McMillan, Counsel, DNCC me, E
of

320 North Clark Street, Suste 402. Chicago, IL 60610 + 312-214-1996 + Fax 312-263-8009
e-mail. chucagod6@AlS.NET



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MR. SANDLER: Thank you, Commissioner.

VICE CHAIRMAN WOLD: One other -- first, one other
question about the facts, just to make sure we are clear.

Is there any limitation as to the period of time for which
these telephone charges are an issue? In other words, is
there any distinction between the period of time during the
preparation for the convention, and during the convention
itself? Is there any distinction to be made at all in that
regard?

MR. SANDLER: Well, there’s a period of time when
the convention staff actually begins. There’s a small group
of people in Washington, D.C. Clearly, those expenses are
paid for by the Convention Committee.

VICE CHAIRMAN WOLD: Right.

MR. SANDLER: We’re talking about, as I understand
it, all of the telephone local, long distance charges for
the offices of the Convention Committee in Chicago.

VICE CHAIRMAN WOLD: But as far as the time in
Chicago, these charges don’t relate exclusively to any
particular period of time, such as the preparation of the
hall, charges incurred in connection with the installation
of the podium, press table, false floors, camera platforms,
and so on. ‘They were incurred during the whole period of
time --

MR. SANDLER: That’s right.

Heritage Reporting Corporation
(202) 628-4888

TTACESIT _b

Page 2-1 of So


Section 9008.12(c) o7 Title 11 of the Code of Federal Regulations states
the Commission will follow the same repayment determination procedures, and the
committee has the same rights and obligations as are provided for repayment
determinations involving publicly funded candidates under 11 CFR 9007.2(c) through

@).

During our review of the DNCC’s disbursements, we identified payments.
totaling $33,183, to seven vendors for expenses which did not appear to be convention-
related. In the case of four vendors, the payments ($14,131) defrayed the travel expenses
of non-DNCC staff or represented overpayments of DNCC convention-related expenses.
The DNCC sought and received reimbursements in each instance; therefore, no

repayment is necessary.

As to the remainder, ($19,052), these payments involved (a)
reimbursements to two vendors for lost telecommunications equipment, $15,902, and (b)
airline tickets purchased for which no convention-related purpose could be shown,
$3,150. On July 24, 1997 a check drawn on an account of the Democratic National
Committee and payable to the United States Treasury was received, representing a
repayment of $19,052 pursuant to 11 CFR §9008.12(b)(4).

In response to the ECM, the Committee stated that the recommended
repayment has been made.

Recommendation #2 +

The Audit staff recommends that the Commission determine that the total amount
of $19,052 is repayable to the United States Treasury. As noted above, the repayment has
already been made.

D. DETERMINATION OF NET OUTSTANDING CONVENTION EXPENSES AND
AMOUNTS SUBJECT TO THE SPENDING LIMITATION

Sections 9008(b)(1) and (5) of Title 26 of the United States Codes state, in
relevant part, that the national committee of a major party shall be entitled to payments
under paragraph (3), with respect to any presidential nominating convention, in amounts
which, in the aggregate, shal] not exceed $4,000,000, as adjusted pursuant to the
provisions of 2 U.S.C. §441a(c).

Section 9008.5(b) of Title 11 of the Code of Federal Regulations, states
that the entitlements established by 11 CFR 9008.4 shall be adjusted so as not to exceed
the difference between the expenditure limitations of 11 CFR 9008.8(a) and the amount
of private contributions received under 11 CFR 9008.6(a) by the national committee of a
political party. Except as provided in 11 CFR 9008.12(b)(7), in calculating these
adjustments. amounts expended by Government and municipal corporations in
accordance with 11 CFR 9008.53. in-kind donations by businesses to the national

arracwent A
Pagel of 22



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the facts that are before us.

Which expenses are we talking about? Are we

talking about specifically only telephone service charges,
local and long distance, as distinguished from cell phones?

MR. SANDLER: Yes. It’s our understanding that
the Audit Commission, the $726,000-some dollars is local and
long distance telephone service charges, and that the
cellular phone charges of $90,000, approximately, and
another $50,000 of pager/beeper charges were reviewed,
clearly they are material, and they were allowed by the
Audit Division, as best we can determine.

CHAIRMAN THOMAS: And were --

MR. SANDLER: There’s some confusion in the Audit
Division’s analysis of our response, in which they seem to
suggest that what’s being disallowed is cellular phone and
pager charges -- yes, the General Counsel's analysis,
right -- cellular phone and pager charges. But, in fact,
it’s the opposite.

CHAIRMAN THOMAS: Also, I asked that question just
because it helps to crystallize the discussion a little bit,
because we're dealing with phones that are at least attached
to an office by a wire.

One could perhaps argue that cell phones maybe are
something other than office equipment. And you might have a
different kind of debate going on about whether or not those

Heritage Reporting Corporation
(202) 628-4888



networks described in section 11.1 and otherwise for use by DNCC
staff, in such quantities and including such features as the DNCC
shall reasonably request in accordance with a schedule to be
determined by: the DNCC no later than September 1, 1995 that shall
reasonably reflect the incremental build-up of staff and
workflow.
11.3. Special application needs. The City shall provide:
(a) a stand-alone computer aided design system, to be
installed at the Convention Offices at least 120 days prior to
the first day of the Convention Proceedings Period, including all
necessary hardware, software and printers; and
(b) wire services as agreed.
11.4. Installation and integration. The City ghall provide
{ asi services and materials necessary to install and maintain the
hardware and software to be provided under this Article 11, and
the networks to be created under section 11.1. The City agrees
to contract with a mutually acceptable firm to provide consulting

with respect to systems integration.

12. TELECOMMUNICATIONS

12.1. Telecommmnications system. The City will provide a
telecommunications system including such features as the DNCC
shall reasonably request and otherwise meeting specifications to
be mtually established by the DNCC and the City in consultation
“ith applicable vendors.

-58-

ATTAC: iNT
srucopas



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The sentence says the Host Committee can’t pay for
administrative and overhead expenses. The language of the
regulation says the Host Committee can pay for
administrative and overhead expenses, office equipment and
offices, which is, fundamentally, what the administrative
and overhead expenses are.

So it’s impossible to figure out how we were
supposed to make sense of the sentence that’s flatly in the
E and J, that’s flatly contradicted by the language of the
regulation itself. You can’t figure it out by taking one or
the other which are going to be allowed, what kind of
administrative overhead expenses are going to be allowed,
what kind of office-related charges will be allowed, and
which ones won’t be allowed.

Now, the other element that the Audit Division
relies on especially is a separate regulation that allows a
Convention Committee to pay for its own administrative
expenses. That regulation, 9008.7 (A4x), provides that the
Convention Committee can use its own funds, you know, as a
permissible use of the public money to pay for
administrative expenses, including offices and telephone
charges.

The Audit Division says, well, that’s a definition
of administrative expenses. It shows you that the
administrative expenses includes office charges.

Heritage Reporting Corporation
(202) 628-4888

ATTACHMENT eet?

Page _te o



that “[i]t could not be clearer that the items for which these six. vendors were paid are
within the scope of this subsection.”

- Furthermore, the DNCC asserted in its response that the
“.,.Audit Division has completely misperceived the purposes of these expenditures.”
adding that “[m]Juch of the labor and equipment involved would have been required even
if the Convention had never been broadcast.” The DNCC goes on to say that “...to the:
extent tha: sound, lighting, and other electrical was [emphasis in original] needed or used
to facilitate television, radio or cable broadcast of the Convention proceedings. the
expenses of such equipment are manifestly a permissible expense under section
9008.52(c)(1)(v).”

The DNCC contended that “[nJothing in the language, prior
history or Explanation and Justification for the current regulations in any way suggests
any limitation on the Host Committee’s ability” to defray expenses “...related to
facilitating broadcast or other press coverage of the Convention, as distinct from other
expenses of constructing and preparing the Convention Hall.” The DNCC concluded that
the Audit staff had “...no basis for such a distinction,” adding that there is “no possibility”
that any committee “could have been aware of any such distinction by reading the

regulations.”

Of special interest was a section of the DNCC’s response
providing details regarding 1 the $113,500 Host Committee payment to Audiotek
Corporation. According to the DNCC, services provided by this vendor comprised

...public.address systems, wiring and speakers so that people in all parts of the Hall
could hear the proceedings while they were taking place, delegate microphone systems, a
hearing impaired wireless system for the Hall (so that hearing-impaired persons within
the Hall could follow the proceedings), amplification for the orchestra playing within the
Hall. and labor to install and assist in the operation of this on-site sound equipment.”
Based on these additional details, the Audit staff concluded Audiotek’s services were
essentially similar to “loudspeaker systems,” and therefore permissible under 11 CFR
§9008.52(c)(1)(v).

Regarding the remaining five vendors, however, other
statements in the DNCC's response confirm that at least some portion of the payments
were used to facilitate television, radio or cable broadcast of the Convention proceedings.
Furthermore, other than Audiotek, the responses from both the DNCC and Chicago ‘96
failed to offer any new documentation or basis for allocation which identify those parts of
the expenses that would have been required even if the Convention had never been
broadcast, as recommended in the ECM. The Audit staff believes that the regulations.
together with the explanatory material published in the Federal Register, forma
reasonable basis for its position, and therefore concludes that Chicago ‘96 and the City of
Chicago made prohibited in-kind contributions to the DNCC in the amount of $1,461.907
($1.688,907—$227,000).



In this case, it cannot possibly be said that the Convention Committee had fair
warning that the Commission's regulation prohibited the payment by a host committee or
municipality of telephone service charges, for the following reasons.

A. The Language of the Regulation Does Not Distinguish Between
Telephone Service Charges and Other Office Equipment Facilities

and Services -
“A regulation should be construed to give effect to the natural and plain meaning
of its words.” Diamond Roofing Co., supra, 528 F.2d at 649. It is impossible to glean

from a reading of the plain language of the regulation, section 9008.52(c)(1), that host
committees are permitted to pay for a wide variety of office-related facilities and
services, but not telephone service charges.

The regulation clearly permits host committees to pay for “offices” and “office
equipment.” 11 C.F.R. § 9008.52(c)(1)(v). The regulation goes on to allow host
committees to pay, without limitation, to “provide other similar convention-related
facilities and services.” Id. § 9008.52(c)(1)(xi)(emphasis added). Thus, host committees
are indisputably permitted to pay for the provision and installation of telephone
equipment for the convention committee. Any natural and plain reading of the regulation
would give rise to the conclusion that the host committee is also permitted to pay for
“other similar” “services,” and that use of a telephone is a “service” similar to the
provision and installation of telephone “facilities”.

Further, the very use of the phrase “other similar convention-related facilities and
services” indicates that the list provided in the preceding subsection of the regulations is
illustrative rather than exclusive. Cf Puerto Rico Maritime Shipping Authority v.

Interstate Commerce Commission, 645 F.2d 1102, 1112 n. 26 (D.C. Cir. 1981)(use of
word “including” indicates specified list is illustrative, not exclusive). Clearly the use of

telephones is an “other service,” “similar” to the provision, for example, of other utilities
for which a charge is paid—specifically, air conditioning and electricity, specifically
listed in subsection (c)(1)(v).

Nothing in the plain language of this regulation, therefore, gives the convention
committee any notice whatsoever that the provision and installation of office equipment

may be paid for by a host committee, but not service charges for use of such equipment,



cM 35 ootee-
‘TON, CASAL =
CHICAGS. w. 60602 _

DIRECT PAYMENT VOUCHER

PURCHASE NUMBER vOUCHeE NO VENDOR NUMBE= Pace
TPDUs S5US9955> | FOZ0ET v ~
—— —E ‘
REMITTANCE ADDRESS: DELIVERED TO:

[ARERITECH -.
P.O. BOX 2500

BEDFORD PARK, IL

PIVIIIIID|

ICE OF BUDGET & MANAGEMENT

i
604992500 ACCEPTANCE DATE: 01/30/96 |
|
TELEPHONE SERVICE FOR ONCC OFFICES |
COMMODITY INFORMATION +
COMMODITY CATALOG # QUANTITY UNIT UNIT COST TOTAL COST
001 9157700000 1 €s 13,302. 660 13,302.66
TELEPHONE SERVICES, LONG DISTANCE AND LOCAL
TELEPHONE SERVICE FOR ONCC OFFICES
= VENDOR INVOICE NUMBER FOR THE ABOVE LINE 1S. 31283251525 eee
TOTAL 13,302.66
ACCOUNTING INFORMATION *
GFYR FUND DEPT  ORGN APPR ACTV OBJECT RPTG U08/PROU ‘ TOTAL COST
0:95 629 99 2008 «9038 0423 13,302 66
TOTAL 13,302.66
wrucney
Page 49 oz 139,
5 55
PREPARED 214-4843 DEPARTMENTAL APPROVAL
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BY and that the geeds of Services indicated were received snc inet the spove
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AUDITOR'S:
APPROVAL
RECEIVED
By DATE DATE



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All requests for check disbursement must be accompanied by the original invoice or receipts.

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expenses.

7 I would ask the Commissioners to put themselves in
our position, the position of the Convention Committee in
the summer of 1994, as we tried to negotiate our contract
with the City of Chicago, and its Host Committee, and
determine the convention budget, which requires us to figure
out who can pay for what: what expenses can be paid for by
the Host Committee, which expenses must be paid for by the
Convention Committee, itself.

The plain language of the Commission’s regulations
states that the city, the host city, and the Host Committee
may pay for offices and office equipment, and similar
convention-related facilities and services. Any reasonable
reading of this regulation is that the Host Committee's
payment for a service similar to offices and office
equipment is permissible.

Under this language -- this very same language,
the Chicago Host Committee paid for, and the auditors -- the
Audit Division accepted and allowed charges for cellular
phone use and pager service in the total amount of some
$140,000; electricity, air conditioning, office-related
charges, including maintenance, cleaning, use of office
supplies, equipment rental charges, and the like.

But the. final audit report purports to distinguish
between all of these administrative and office-related

Heritage Reporting Corporation

(202) 628-4888

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The Host Committee asserted that the “telecommunications system served to accomplish
a wide variety of tasks directly related to the Convention” including construction as well
as security. The Host Committee concluded that expenditures for the phone charges “fall
within the parameters of 11 C.F.R. Section 9008.52(c),” and therefore, it was appropriate ©
to pay for them.

Despite the arguments presented above, the Audit staff
believes that the E&J offers a reasonable starting point for applying the regulations as
intended by the Commission. The Audit staff further concludes that charges for local and
long distance telephone calls made by the DNCC are most appropriately classified as
administrative and overhead expenses of the convention committee and not construction
or security expenses benefiting the host committee. Therefore, the total amount of
$600,325 paid by the Host Committee and $126,510 paid by the City for telephone
charges, result in in-kind contributions to the DNCC.

Recommendation #1

The Audit staff recommends that the Commission determine that the Host
Committee made in-kind contributions totaling $600,325, and the City of Chicago made
an in-kind contribution of $126.510, and that this total of $726,835 is repayable to the

United States Treasury. In addition. the Committee should file an amended disclosure
report and itemize these in-kind contributions.

B. IN-KIND CONTRIBUTION TO THE HOST COMMITTEE VIEWED AS
APPARENT CONVENTION EXPENSES

Section 9008.12(b)(3) of Title 11 of the Code of Federal Regulations
states that if the Commission determines that the national committee accepted
contributions to defray convention expenses which, when added to the amount of
payments received. exceeds the expenditure limitation of such party, it shall notify the
national committee of the amount of the contributions so acccpted, and the national
committe shall pay to the Secretary an amount equal to the amount specified.

In the Convention Contract, the City agreed, in part, to provide the DNCC
with “an electronic voting system for use in the Convention Hall” and “a photo security
system to control access to the Convention Offices.” During a review of the Committee's
donor records, the Audit staff identified in-kind contributions from two vendors totaling
$165,000. In the ECM, the Audit staff stated that contributed equipment appears to have

been used for convention-related purposes pursuant to terms of the Contract and not for
items noted above at 11 CFR §9008.52(c)(1) as discussed below.
1.* AT&T

During a review of the Host Committee's donor records, the Audit
staff identified an in-kind contribution from AT&T of an “electronic voting systemTM

ATTacuuzur_A
ere
Page_J% of 22



1.  THE_CONVENTION |

Subject to the terms and conditions of this Agreement, DNCC
agrees to cause the Convention to be called in the City during
August 1996 to select nominees of the Democratic Party for the
offices of President and Vice President of the United States of
america, and to take such other actions as the Convention may

deem appropriate.

2. DEFINITIONS

For the purposes of this Agreement:

"Contractor" means any person or entity with whom or which
the City enters a contract for the provision of goods, facilities
or services which the City.is obligated to provide under this
Agreement.

"Convention Facilities" means and includes, collectively,
all of the following: the Licensed Premises (as defined in
section 5.1 hereof); the Media Pavilion (as defined in section
9.1 hereof); the auditorium facility described in section 9.2
hereof; the hotel designated by the DNCC as its headquarters; and
the Convention Offices.

"Convention Offices* means and includes, collectively, the
facilities and spaces described in sections 14.1, 14.2 and 14.3
hereof.

"Convention Proceedings Period" means the period beginning
12:01 a.m. CDT on the day preceding the first day on which the

Convention proceedings are scheduled to take place through and

-3-

atmacment_£
Pago 46 ot 129 _


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charges are not allowable to the Host Committee, would be
reasonable if it had been clearly propounded, and pursuant
to the APA, that proper notice had been given, opportunity
for comment, and so on like that.

In other words, if we now said well, maybe this
wasn’t real clear and we are now going to go back and
clarify it, and here’s where we are going to draw the line.
Would that be a reasonable regulatory position to take?

MR. SANDLER: Yes. The issue is the extent to
which the categories expenses, in some way, relate to --
directly relate to the convention, and the putting on of the
convention. And, certainly, the Commission has a wide
latitude in making judgments under the general <
reasonableness test about that.

And, certainly, had it been propounded, had it
been made clear, had we been given notice and an opportunity
to comment, that would be -- we would not be contending that
was an unreasonable or arbitrary place to draw the line.

COMMISSIONER MASON: Thank you.

CHAIRMAN THOMAS: I’m going to go to Bob Costa,
next. I know he had wanted to ask a question a little while
ago. But you can ask any other questions you'd like as this
time. .

MR. COSTA: Just a point of clarification, you
were asked earlier to provide for the record any information

Heritage Reporting Corporation
(202) 628-4888

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TM DNCC OFFICE SUPPLY/REIMBURSEMENT
CHECK REQUEST FORM

Payee Name. 1 Acecle Tek ae 2
Amount 252°°

Date check needed Ashi f

Vendor invoice number
Purpose of expenditure Lommnnicelnngs Epilen s

B32 11% —pag 220L) Pl) fiero UE OSGESIS

32-2515 L/ 24.63
£15 1132, pw 46 DSS.

fas2.2r12

Receipt of goods/service confirmed by = Den Des

Person requesting disbursement D.~ Tues

All requests for check disbursement must be accompanied by the original invoice or receipts.

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Check # . , Check receipt confirmation si signature:

tye sad & (for pick up only) Yee eae!
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regulations the way'it did: “[W]e conclude that the interpretation is so far from a
reasonable person's understanding of the regulations that they could not have fairly
informed GE of the agency’s perspective.” Id. at 1330. The court found that the
regulations on their face did not prohibit use of distillation as a pre-disposal process, that
other parts of the regulation appeared to permit use of distillation, that the parties
themselves were confused about which sections of the rules actually applied. EPA
pointed to a policy statement purporting to address PCB separation activities, but the
court found that the application of that policy was itself unclear. The court concluded

that:
E id not provide GE with fair warning of its int ie of the regulations.

Where as here, the regulations and other policy statements are unclear, where the

petitioner’s interpretation is reasonable, and where the agency itself struggles to

provide a definitive reading of the regulatory requirements, a regulated party is
not “on notice” of the a: su ti the regulati and ma

not be punished.

Id. at 1333-34 (emphasis added). See, to the same effect, United States v. Hoechst
Celanese Corp., 964 F. Supp. 967 (D.S.C. 1996), aff'd in part, rev'd in part, 128 F.3d
216 (4" Cir. 1997), cert. denied, 118 S. Ct. 2367 (1998)(where regulation was
unambiguous and unclear and there was no pre-enforcement warming of agency
interpretation, there could be no finding of liability or penalty imposed); United States v.
Consolidated Edison Co. of New York, 1988 U.S. Dist. LEXIS 13234, No. CV 88-0049
(E.D.N.Y., Nov. 16, 1988)(where EPA regulation was ambiguous, regulated party was
not put on fair notice of EPA interpretation and no penalty could be imposed).

As in these cases, the Commission’s regulations governing permissible
disbursements by host committees are “baffling and inconsistent,” Satellite Broadcasting,
supra, 824 F.2d at 2, to say the least. As in Gates & Fox, supra, the plain language of the
regulation does not draw the distinction the Commission seeks to impose, between
telephone service charges and other administrative expenses. The language of the
regulation, expressly allowing payment of some convention committee overhead and
administrative expenses by host committees, flatly contradicts that of the E&J, purporting
to prohibit any payment by host committees of convention committee administrative and
overhead expenses. The application of the regulation by the Audit Division itself was



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been paid by the Convention Committee, rather than the Host
Committee. Why do you say, "of course"?

; MR. SANDLER: Well, when people are still here in
Washington, I guess, we regard that as clearly not being
more in the nature of true, you know, general and
administrative overhead planning for the convention, working
on numbers and papers and so forth, and not directly on site
in support of the convention.

They are, in effect, considered kind of a division
of the DNC, at that point, although they are paid for --
basically, the DNC advances Federal money to pay those
expenses, and then is reimbursed from the grant when we
receive it.

COMMISSIONER MASON: I asked that specific
question, and let me broaden it out into a little more
general one. Because it seemed to be the thrust of your
presentation that there was really no limitation on
convention-related expenses that a Host Committee could pay
overhead; that the Host Committee could pay overhead, and
the Convention Committee could pay overhead.

And I’m just wondering what, if any, walls or
distinctions -- and I understand there are obviously going
to be some expenses that are overlapping. But you seem to
be going a little further than that, and saying, the Host
Committee could pay for anything.

Heritage Reporting Corporation
(202) 628-4888



r Teritech

7as20ase025) S25seq16000200b.0000002sc.00000000N8
GENFRAL SERVIC ERease include vour 14-digit

‘account number on vour check
and/or any corresponaence

LMectdacosselldalesdosadobesdsleleselslboolleel 96 MAY <9 AQ:
AMERITECH Account Number
P.O, Box 4520 , 312 632.2515 2589
Carol Suream, IL 60197-4520 TELE : =

LallecMassaMbsssoMbcalDeecloalfallsaTsbeceelTIosalaeal MAY 1.1996
29669 ZP 1 B 163C 25281 “SOGT
DEMoc nang NATIONAL

ONVENTION
arn GENERAL SVCS
510 N PESHTIGO CT FLR6
CHICAGO, IL 60611-4309

; PAYMENT IS NOT REQUIRED aaance. 0.98CR

CUSTOM BUSINESS SERVICES j s1zeaz2515 2558
BILLING SUMMARY | MAY 1, 1996

Paymerss AGustmerns | Balance Current Tom
Amount Due

Previous

ay ;

25.01CR 0.00 | 0.20 25.01CR (Ine > ! osecr
DEMOCRATIC NATIONAL CONVENTION re sves

SUMMARY OF CURRENT CHARGES

AMERITECH

For Oetailed Charges - See Page 2
Wonthiy Service .. oe

Local Calls ....

Local and State Additional Cnarges .
Taxes (!11 1.08

TOTAL CURRENT CHARGES

Attieritech


leritech

731208320199b2S552621400200bLO00002b4Y2b0000048488

H
P.O. Box 4520
Carot Stream. IL 60197-4520

(ey fren eee
24 AV 1 E24 11578 “SOG
DEMOCRATIC NATIONAL
CONVENTION

320 N CLARK AM 402
CHICAGO. IL 60610-4711

Please include vour 14-digit
account number on vour che.
andior any correspondence,

Account Number
312 632-1996 2559 t

AUG | 1996

svalbecsldesbsMMecoeebell

48488

CURRENT CHARGES

PaST DUE AFTER.. AUG 29, 1996

TOTAL
AMOUNT DUE.

~ PLEASE ALLOW FIVE DAYS WHEN PAYING BY MAIL OR AT AN AUTHORIZED AGENCY

‘Mail payments to: Amernecn. P C. Box 4520 Caro! Sweam 1. 0197-4520

312 832 1996 2559

CUSTOM BUSINESS SERVICES

BILLING SUMMARY AUG 1 1996
Previous Paymems Adwusiments Past Due Current Total
Bu Thank You | ; Amount D

740.78 «7e82, | 0.00 | 260.26

DEMOCRATIC NATIONAL CONVENTION

SUMMARY OF CURRENT CHARGES

AMER ITECH

For Oetailed Charges :
Monthly Service
Local Calis . see
Otner Charges and Crecits

See Page 2

ctu 10.50 )

~and State Add:tiona! Cnarges .

159.50
57.81
.40Cr

10.50

TOTAL CURRENT CHARGES

’mTMenitech

220.62

Page }O4 of 124


73120832625152552421300200b1000000009a0000004280

GENERA) | CPVITEE Please inciude vour 14-digit

account number on your cneck
and/or any correspondence,

VMalbecrsollsbdelbellel lll. .36! Ls -7 2239 ————————
AMERITECH Account Number
0 Box 4520 312 632-2515 2559

Caro! Stream. iL 60197-4520 TELECUMMENIC A ONS
JUN + 1996

Massdalesssallldecobebeel

WsMaatdecseldosoreldoradlels
Joana 23 + 8 170K 8555"
DEMOCRATIC NATIONAL 4280
CONVENTION

CON

ATTN GENERAL SVCS

510 N PESHTIGO CT FLR6
CHICAGO. IL 60611-4309

—————

CURRENT CHARGES TOTAL
PasTOuearTeR. JUL 1, 1996 amounToue 42.80

. ¢ chwex DayeDte 10 Amernech Wrne accoumn number on creck
PLEASE ALLOW FIVE Days WHEN PAYING BY MAL OR AT AN AUTHORIZED AGENCY
Maul payments to: Amernecn PO Bor 4520 Caro: Stream . 65°59" 4520

CUSTOM BUSINESS SERVICES

312 832 2518 2559

BILLING SUMMARY JUN 1 1996
a a ae
0.98CR 0.00 ‘ 0.00 o.sscr 43.78 _ 42.80
DEMOCRATIC NATIONAL CONVENTION ATTW GENERAL SVCS
SUMMARY OF CURRENT CHARGES
AMER ITECH

For Detailed Charges - See Page 2

MontNiy Service . 8.71
Local Calls .......... 31.76
Local and State Additions: Cnarges 1.29
Taxes (Ti! 2.02 ) 2.02
TOTAL CURRENT CHARGES 43.78



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issued in the rulemaking in 1994, the Commission eliminated
and,. of course, simplified some of the restrictions on the
source of the contributions. But the Commission did not
change the language of the regulations as to what the Host
Committee and the cities’ funds could be used to pay for.

The list of permissible Host Committee
disbursements is exactly the same as the 1979 regulations,
including the language that we relied on -- offices, office
equipment, other similar convention facilities and services.

Now what the Commission did do, of course, in the
1994 rulemaking was add a single sentence to the explanation
and justification, the preamble to the regulation that says
please note that the revised rules do not permit Host
Committees or municipalities to pay salaries of those
working for the Convention Committee or the National Party,
or to pay the Convention Committee’s or the National Party’s
overhead and administrative expenses related to the
convention. And, of course, the Audit Division, in the
final audit report, places great emphasis and reliance on
that single sentence in the explanation and justification.

Our problem with this is that that sentence is
flatly contradicted by the language of the regulation
itself, making it impossible for us, as a Convention
Committee, to figure out, in any way, what it’s supposed to
mean.

Heritage Reporting Corporation
(202) 628-4888

D

ATTACINE AT
L( of 2b

Page


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MR. SANDLER: Looking at the language of the
regulations, again, just from the -- I don’t think we were
saying it could pay for anything.

But looking at the language of the regulations, it
appears that offices and office equipment is a permissible
expense for the Host Committee, whether it’s literally on
the convention site, or whether, because of space
limitations, it may be off-site, but elsewhere in the city.
That's sort of the logical reading of the regulations.
That's how the Audit Division has interpreted it. We've
never read it to include expenses in Washington.

When I.say there was no limitation, there was no
limitation in terms of not being able to pay generally for
administrative and overhead expenses, in the plain language
of any of these versions of the regulations.

But if you look at the plain language, it
clearly -- it associates it with the city, with the site of
the convention, on its face. And I think that, we did have
fair notice of, and we’ve never taken the position that
outside of that convention city, you could pay for staff and
their offices.

COMMISSIONER MASON: Were the phone charges an
item in the contract between the Committee -- the Democratic
Committee and the Host Committee in Chicago?

MR. SANDLER: The city of Chicago -- yes, they

Heritage Reporting Corporation
(202) 628-4888

wong D

ATTACENIas —
Page _ 3s of Sb



REQUEST FOR SERVICE

R
(100 or more lines)

The 1992 Democratic National Convention Committee, Inc.
(Customer) orders Intellipath IIR Digital Centrex Service
(Service) from New York Telephone Company (Company) at the
prices set forth in this Request for Service.

1. DESCRIPTION OF SERVICE

The Service is Intellipath II service, which is described

in the Company’s PSC No. 900 Tariff, and the Service is

offered under the standard terms and conditions of the

tariff. The Customer may take any number of lines within a

range of 20 to 650, and the Service includes the standard

and optional Intellipath II features listed in Appendix A.

The Service will be provided at the Customer’s locations

identified in Appendix B.

2. CUTOVER AND SERVICE PERIOD

a) The cutover will be a phased cutover beginning in
September 1991 with the installation of 20 lines at
1250 Broadway, New York, New York. The Customer
expects to have cutover approximately 650 lines, and
the price specified in Paragraph 3 is premised on the
Customer taking approximately 650 lines. The Customer
and the Company will agree on a cutover implementation
schedule. The Customer will be billed for each line
as it is installed.

b) The Company will provide the Service to the Customer
over a period of 12 months (Service Period), beginning
on the date the first lines are cutover.

3. PRICES

a) The monthly price of an Intellipath II line, including
the standard and the optional features specified in
Appendix A, is $42.00 per line. This monthly price
includes the Federal End-User Common Line Charge
(EUCL) of $5.69 and the Centrex Exchange Access Charge
(CEAC) of $1.61. This monthly line price is
guaranteed against Company-initiated change during the
Service Period.

atte ATTACHMENT

Page_13 of



zuvvsr vou,

DIRECT PAYMENT VOUCHER

PURCHASE NUMBER youre NG VENDOR NUMBER Pace
PPD US SeUsaao0U > JeUSTIDOU UISezy v T
—— — —
REMITTANCE ADDRESS: DELIVERED TO: _
("AMERI TECH x ICE OF BUDGET & MANAGEMENT
P.O. BOX 4520° Lot
CAROL STREAM, IL
601974520 ACCEPTANCE DATE: 07/30/96
TELEPHONE SERVICE FOR ONCC OFFICES
COMMODITY INFORMATION
COMMODITY CATALOG # QUANTITY UNIT UNIT COST TOTAL COST
001 9187700000 1 ca 241.450 241.45

TELEPHONE SERVICES. LONG DISTANCE AND LOCAL
TELEPHONE SERVICE FOR ONCC OFFICES

ses VENDOR INVOICE NUMBER FOR THE ABOVE LINE IS 7/1/96 eos
TOTAL 261.48
ACCOUNTING INFORMATION
SFYR FUND DEPT  ORGN APPR ACTV OBUECT RPTG vOS/PROU TOTAL COST
0195 629 9 2005 9038 0423 241.45
TOTAL 2461.48

TAS

ereeeneo 214-4843 DEPARTMENTAL APPROVAL

ENTERED | nerepy certify that the inverces Neve net been oreviousiy voucnered
BY ana that the geees oF services indiceted were received end tne tne above
account 1s appreved trom appropriations as shown speve

AUDITOR'S
APPROVAL

RECEIVED
BY



- APPENDIX B

Page 1 of 1
CUSTOMER LOCATIONS
1250 Broadway 150 Lines
Madison Square Garden 300"
Hotel Pennsylvania 75 "
Hilton Hotel 50 "
Sheraton Centre and Towers 50"
Fashion Institute of Technology 22C=~S
E

ATTACHMENT
pags_1O of 12d


The NOCE as calculated by the Audit staff shows a deficit of $676,218 which is
in contrast to the DNCC’s most recent calculation, prepared October 21, 1997, showing ~*
unspent funds of $50,617. The Audit staff's inclusion of $726,835 in in-kind
contributions, viewed as subject to the spending limitation, created this situation.

Prior to receipt of the ECM, the DNCC made a repayment to the U.S. Treasury in
the amount of $120,562, representing its calculation of an interim repayment of unspent
funds pursuant to 11 CFR 9008. 12@)6Xii). Since the repayment was made, the DNCC
identified an additional $69,945° in convention expenses, thus explaining the $50,617 in
unspent funds shown on its October 21, 1997 statement ($120,562 - $69,945 = $50,617).

Since the value ($726,835) of in-kind contributions received from the Host
Committee and the City i is repayable to the U.S. Treasury (see Recommendation #1 at
page 12), the $120,. 562’ already paid to the U.S. Treasury is viewed as a credit against the
amount due.

Recommendation #3

It is recommended that the Commission determine that the $120,562 paid to the
U.S. Treasury by the DNCC be considered a credit against the $726,835 repayment due
related to the acceptance of in-kind contributions discussed at Finding II.A.2. The net
repayment due is $606.273 ($726,835 - $120,562).

E. APPARENT ALLOCABLE CONVENTION-RELATED EXPENSES

During our review of background materials related to the convention, we
identified a possible in-kind contribution to the DNCC. According to published reports.*
the Democratic National Committee was assuming about $25,000 in hotel bills incurred
at the Chicago convention in August, 1996, “partly because of concerns that a donor who
originally paid the bill might have used foreign funds, according to sources.” The hotel
bill reportedly covered costs associated with Democratic National Committee finance
chairman Rosen's stay in the presidential suite at Chicago’s Four Seasons, R. Scott
Pastrick’s stay in a smaller suite, and two additional rooms.

. The DNCC identified additional accounts receivable of $11,986 and additional accounts payable
of $81,931 which resulted in a net increase in convention expenses of $69,945.

’ The DNCC may, at its option, submit a written request to the Commission requesting that funds
previously refunded to the U.S. Treasury be certified for payment of convention expenses
(1! CFR §9008.12(b)(5)ii). If such a request was made and if approved by the Commission. the
net repayment due of $606.273 would increase by an amount equal to the amount certified to the
DNCC for payment of convention expenses.

. The Washington Post, Dec. 12. 1996. p.A28; and Jan. 8, 1997, p. Ald.

artaccyt AP

Page 20 of 27



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| April 19, 1996
Pa Pr
‘ '
ICago % Brad Kiley
z | Director of Administration .
! Democratic National Convention Commitee :
' 320 N. Clark. Room 600A
Hl Chicago, IL 60610

vere Co-Chair
ead Risnare M. Dutry
ore

wec ewe wane. baa Dear Brad:
— Maver. Browe 4 Pas:

ato bon
femwors vem We seek the concurrence of the 1996 Democrauc National Convention

Comminee. Inc. (*DNCCTM) for the expenditure of the following funds
. Line item: 63 - Communicauon Systems Cash expense
Vendor: Amentech

Account Cos
312 832-1996 $224.48

312 832-2515 5.48.3
Total $273.41

Please acknowledge the above expenditures by signing. dating and
returning one copy of this lener to my attention.

Sincerely,

| S.bes
| Don Davis
! Finance Director
Chicago ‘96
Accepted and acknowledged:
1996 Democratic National Convention Communee. INC.

By Beet tin 67. LK, Date 4 -/9- 7%.

ce: Nancy Clawson. Counsel, Chicago ‘96
Leslie Fox. Execuuve Director. Chicago ‘96
Janet V. Green. Deputy Chief Executive Officer. DNCC
Alfonse McMillan. Counsel. DNCC
ATTACHE? _ E __
Pave 7  9

_ 320 North Clark Seree:, Suite 402. Chicago. IL 60610 + 312-214-1996 + Fax 312-263-8009 ~~
@HLLINOIS cheaqotoglals NET



as a convention site;” (ii) “welcoming the convention attendees to the city;” (iii) “facilitating
commerce;” (vi) “local transportation services;” (vii) “law enforcement;” (viii) “convention
bureau personnel to provide central housing and reservation services;” (ix) “hotel rooms at

no charge or at a reduced rate;” and (x) “accommodations and hospitality for committees

of the parties responsible for choosing the site of the conventions.” 11 C.F.R. § 9008.52(c)(1)(i)-
(iii) and (vi)-(x). Host committees may also provide “use of an auditorium or convention center
and to provide construction and convention related services” such as “construction of podiums,
press tables, false floors, camera platforms, additional seating, lighting, electrical, air
conditioning and loud speaker systems, offices, office equipment, and decorations.” 11 C.F.R.

§ 9008.52(c)(1)(v). Finally, in addition to those facilities and services specifically enumerated in
11 C.F.R § 9008.52(c)(1)(i) through (x), a host committee is permitted to provide “other similar
convention-related facilities and services” under section 9008.52(c)(1)(xi).

Government agencies and municipal corporations may also provide services to a party
convention. The Commission’s regulations permit local businesses (excluding banks), local
labor organizations and other local organizations or individuals to donate funds or make in-kind
donations to a separate fund or account of the government agency or municipality to pay for
expenses listed in 11 C.F.R. § 9008.52(c). 11 C.F.R. § 9008.53(b)(1). However, the fund or
account must not be restricted for use in connection with any particular convention, and the
donations to the fund or account must be unrestricted and not solicited or designated for use in
connection with any particular convention. Jd.

A convention committee may use its public funds only for the purposes set forth at
11 C.F.R § 9008.7. See 26 U.S.C. § 9008(c). Convention expenses include all expenses incurred

by or on behalf of a political party’s national committee or convention committee with respect to


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July 30, 1996 * Aw

Brad Kiley

Director of Administration

1996 Democratic National Convenuon Commitee. Inc.
320 N. Clark. Room 600A :
Chicago, IL 60610

Dear Brad:

We seek the concurrence of the 1996 Democratic National Convenuon
Commuinee. Inc. (*DNCCTM) for the expenditure of the following funds

Line item: 63 - Communication Systems Cash expense
Vendor: Amentech

Account . Cos.
312 336-1996 $8.945.99

Please acknowledge the above expenditures by signing. dating and
returning one copy of this letter to my anenuon.

Sincerely,

De B
Don Davis

Finance Director
Chicago ‘96

Accepted and acknowledged:
1996 Democratic Nauonal Convenuon Commuinee, Inc.

By Bradlee J ASfon Dae: R-/- $e

ce: Nancy J. Clawson. covfet Chicago ‘96
Leslie Fox, Execuuve Director. Chicago ‘96
Janet V. Green. Deputy Chief Executive Officer. DNCC
Alfonse McMillan. Counsel. DNCC

Pags_ G9 of 124

320 North Clark Soreet Suite 402. Chicago. IL 60610 » 312-214-1906 + ax 312-263-4000
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ATLANTA "BB COMMITTEE, INS, te-Sep-d8
TEPARTNENT BLOGET STATEMENT 11:32 AR
CONSTRUCTION/CONVENT ION FACILITIES
2 as3se8
tes
YEAR TOTAL YTD SuDGET
CURRENT 10 WUDGETED vs .
ACCOUNT DESCRIPTION AONTH 3 ancuuT YTD ACTUAL
e .
400629 PERSONNEL 0,00 «(12,021.76 7,722.00 (4,298.96)
400929 INTERNS 0.00 0.00 0.00 0.00
410129 CONSTRUCT ION- TURNER 0,00 (109,103.50 180,009.00 oa. . SQ):
620129 TRAVEL-IN 0.00 0,00.
420229 STAFE TRAVEL-OUT OF AREA 0.00 40.00 4.00000
430\24 RENTAL OF SPACE 0.60 O08 0.00 0.00
440129 OFFICE SUPPLIES 4,20 9.00 0.00 0.00
440229 POSTAGE 0.60 0.00 0.00 0.00
440329 OTHER SUPPLIES 0,00 1,{7i.% 12.09 (759.871
450329 SEATING RENTAL 0,50 4400.00 68,000.00 (29,400.00)
460129 COMMUNICAT LOX8 . 0.00 9500 0.00 0.00 =
440229 PUBLICATIONS 0.00 0.00 0.00 0.00 :
480329 FREIGHT MD SHIFPING 0.00 227,95 207.70 20,25) Je
460429 CONFERENCES 9,08 0.00 0.00 0.90 i
460529 EWPLOVEE DEVELCPHEN” 2.90 0.00 0.00 0,00 7
640029 ADVERTISING 0.60 ¢.00 0.00 0.00
40829 DATA PROCESSING 0.00 6.00 0.00 0.06
460929 PARKING 0.00 0.00 0,00 0.00 :
461029 LUNCH 0.00 0.00 0. 0.00 .,
441129 NOUSINE 0.00 4,070.06 3,106.97" (972.89) ¢
530029 CONSTRUCTION 0.00 «26,924.81 0000 (24,924081)
530429 CABLE 6.00 12,370.00 13,000.00 630.00
620129 ARCHITECTS/ORNT AODEL 0,00 «127,759.70 = 281,049.96 - 123,290.26
660529 OHNE LEASE 2,00 1,39,490.40  1,499,99%.02 180,509. 22
60829 BMCE LEASE 0.00 «97,613,590 785,000.02 7,584.52 -
670029 CAPITAL EXPENDITURES 3,00 2,422,824.00 1,907,009.08 ($18,835.94)
71029 CAP, E1P-DECOR. UNITED E190 0.00 190,751.57 00,000.00 (40,781.37)
672029 RECOVERY-BXY 80% 3.09 3.06 (30,000.00) (30,000,007
2g 672129 RECOVERY tac . 0.30 9.00 (138,000.00) (138,000,007
441429 FOO ict 3,500.00 0.90 (3,300.00) :
30027 ATE. INCOME 9.00 (7,984.19) 0.00 7,S64.i8
300679 ANCHOR BOSTA 10d (264,301. 00) 0.00 (244, 301.00
3OCS29 BROADCAST PLATFORE 2.00 (347,203.00 6600 187,203.05
0.00 4,640,682.06 4,578,039. 22 (62,643.44)
. sears: a
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12.2. Other facilities and services. The City will provide
the following additional items:

(a) ‘a cellular phone system, including a combination of
number of cellular phones and minutes of air time;

(b) a pager system;

(c) a two-way radio system;

(a) satellite uplink and downlink services;

(e) an electronic voting system for use in the Convention
Rall.

12.3. Long distance service. The City shall pay for all
long-distance charges incurred by the DNCC at the Convention
Pacilities and at any media or hospitality lounge to be provided
in this Agreement, provided that the City shall not be required
to expend for this item in excess of the amount shown in
Exhibit A.

13. TRANSPORTATION

13.1. Commitments. The City agrees to provide:

(a) the use of up to 100 air conditioned buses, a
significant number of which (to be mutually determined by the
City and DNCC) shall be equipped for access by persons with
disabilities, and a significant number of which (to be reasonably
determined by the City) shall operate on alternative fuels,
during the period from and including a date to be mutually agreed
Rot earlier than August 15, 1996 through and including two days

after the last day of the Convention Proceedings Period, with

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DATE

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A FINANCE CHARGE OF 1.50% WILL BE APPLIED TO ALL OVER DUE BALANCES.

PURCHASE ORDER wvOIcr DATE MPSsAGr AREA ACCOUNT NUMBER
| 1115796. | | 0002017413
REFERENCE OF SCRIPTION OF CHARGES AMOUNT DUE

PREVIOUS BALANCE AS OF 1
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PAYMENTS AND TRANSACTIONS OCCURRING AFTER 11/14/96 WILL APPEAR ON YOUR NEXT INVOICE.

CURRENT 1 - 30 Day: 1 = 60 DAYS 61 - 90 DAYS OVER 90 DAYS TOTAL OD
85.68 arrest 3 5,970.33 3 0.00 3 0.00 g i oH
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qiLLINOIs:
ILLINOIS

March 27. 1996

Brad Kiley

Director of Administration lous
Democratic National Convenuon Comminee

320 N. Clark. Room 600A

Chicago. IL 60610

Dear Brad:

We seek the concurrence of the 1996 Democratic National Conv enon
Commitee. inc. (*DNCCTM) tor the expenditure of the following tunds

Line item 63 - Communication Sv stems. Cash expense

Vendor: Amemtech

Account Los
312 832-1906 $224.98
312 832-2515 - new charge S$ 4148
credit for paying 852-2515 twice ia
Total $181.01

Please acknowledge the above expenditures by signing. dating and
returning one copy of this letter to my attention

Sincerely.

— = —
sen Low
Don Davis

Finance Director
Chicago ‘96

Accepted and acknowledged:

1996 D; MOCRATIC NAalONat CONVENTION COMMITTEE
By: te Dae:_3 27 Ge

ce: Nancy Clawson. Counstl. Chicuge ‘96
Leslie Fox. Executuve Director. Chicuge ‘96
Janet \V’. Green. Deputy Chief Exccutve Officer. DNCC
Alfonse McMillan. Counsel. DNCC

reg

320 North Care street. Suite 402. Cricago. IL 606100 + 312-21410
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13
donate or expend their own funds to defray any convention expenses, without limitation
in amount. The preamble to the NPRM confirmed that the only changes to the existing
rules were to combine certain sections, confirm that host committees could accept in-kind
as well as cash donations, confirm that banks do not qualify as local retail businesses and
clarify that municipalities could donate funds to host committees without restriction in
amount. 58 Fed. Reg. at 43051-52. There was no suggestion anywhere in the NPRM
that the Commission was considering any new restriction on the use of funds donated by
local retail businesses to host committees, under this section, for payment of
administrative or overhead expenses. .

The DNC submitted comments on the proposed new rules and also presented oral
testimony before the Commission at an open hearing on October 27, 1993. Of course, the
DNC, having been given no indication whatsoever that the Commission was considering
restricting the scope of permissible host committee disbursements for convention
committee administrative or overhead expenses, did not think to comment on any such
concept either in its written comments or at the hearing. As best as we can determine
from the record, no one commented on this issue in any way.

The Commission considered the new rules at a number of open meetings during
April, May and June of 1994. The final Agenda Document, #94-58, had revised section
9008.52 to eliminate the requirement that the amount donated to a host committee by a
local business be proportionate to the expected return, but added a requirement that it be
in the ordinary course of business for the local donors to make donations to nonpolitical
conventions. Id. at 5-6. The Agenda Document made clear, however, that with respect to
the scope of permissible host committee disbursements, the new “rules allow local
businesses and other local organizations to make monetary or in-kind donations to either
the host committee or the municipality for a variety of purposes involving the promotion
of the convention city and the costs of convention facilities and services.” Agenda
Document #94-58, Discussion § O at p. 5(emphasis added).

Indeed, the entire concept of limiting the scope of permissible host committee
expenditures with respect to convention commuttee administrative expenses was not
introduced, to our knowledge, until the very last meeting of the Commission on the new

rules. At that meeting, one of the Commissioners suggested adding language to the E&J



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DIRECT PAYMENT VOUCHER

=
PURCHASE NUMBER VOLCHEE NO. VENDOR NUMBE® Page
PDUs Seuss I5eL US OUST IDOL UISEZS Tv T
——— —
REMITTANCE ADORESS: : DELIVERED TO: ;
["AMERI TECH = ICE OF BUDGET & MANAGEMENT
P.O. BOX 4520" ° id i
CAROL STREAM, IL q
601974520 ACCEPTANCE DATE: 08/01/96 S
TELEPHONE SERVICE FOR DNCC OFFICES
COMMODITY INFORMATION
COMMODITY CATALOG # QUANTITY UNIT UNIT cost TOTAL COST
001 9157700000 . 1 ea 8.945.990 8.945.99
TELEPHONE SERVICES. LONG DISTANCE ND LOCAL
TELEPHONE SERVICE FOR DNCC OFFICES
e+ VENOOR INVOICE NUMBER FOR THE ABOVE LINE IS: 7/16/96 wee
TOTAL
ACCOUNTING INFORMATION :
SFYR FUND DEPT  ORGN APPR ACTV OBJECT RPTG UO8/PROU TOTAL COST
01 98 629 99 2008 9098 0423 2.945.99
TOTAL 6,945.99
weecmmn EF
Pape !00_ oe 134
tau _patocss
PREPARED |214-4843 DEPARTMENTAL APPROVAL
BY
ENTERED | heresy certify that the wwerces Neve net Been previously voucnered
ey ana thet the geees or Services indrcsted were received anc thst tne speve
eccoumt 1s approved trem eppreeriauens es Shown aspove
AUDITOR'S
APPROVAL

RECEIVED
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OATE DATE



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CHICAGO COMMITTEE FOR 1996
ATTN DON DAVIS:
120M LA SALLE ROOM 604
CHC AGO & 60607

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corporate and labor organization contributions or expenditures in connection with conventions,
and they must agree to comply with the applicable expenditure limitation set forth at 26 U.S.C.
§ 9008(d) and 11 C.F.R § 9008.8. 11 C.F.R. § 9008.3(a)(4)(vii) and (i), respectively. The
national committee of a major party may not make expenditures with respect to a publicly-
financed presidential nominating convention which, in the aggregate, exceed the amount of
payments to which such committee is entitled under 26 U.S.C. § 9008(b)(1). 26 U.S.C.

§ 9008(d)(1). Thus, the expenditure limitation is equal to the convention committee’s
entitlement to public funds. 26 U.S.C. § 9008(d).

A host committee may be created to represent a city hosting a nominating convention in
matters involving a presidential nominating convention. 11 €.F.R. § 9008.51. Any local
organization that is not organized for profit, whose net earnings do not inure to the benefit of any
private shareholder or individual and whose principal objective is the encouragement of
commerce in the convention city, as well as the projection of a favorable image of the city to
convention attendees, may serve as a host committee. 11 C.F.R § 9008.52(a). 4

Host committees may receive funds or in-kind donations from local businesses
(excluding banks), local labor organizations, and other local organizations and individuals for
specific purposes relating to hosting a national party convention.’ The purposes for which a
host committee may use funds in connection with a nominating convention are specified in

11 C.F.R § 9008.52(c)(1)@) through (xi) and include: (i) “promoting the suitability of the city

4 Section 9008.52(a) gives the following examples of local organizations that may serve as host committees:

a local civic association, business league, chamber of commerce, real estate board, board of trade, or convention
bureau.

5 Host committees may also accept goods or services from commercial vendors under the terms and
conditions set forth at 11 C.F.R. § 9008.9, which also apply to convention committees. 11 C.F.R. § 9008.52(b).


SERVICES dimeritech
Th 60680-4766

ACCOUNT NUMBER
3123390094006

PAYMENT DUE
AUG 06, 1996

AMOUNT ENCLOSED
* 797.50
gg00000000000000400000312339009400040000001L0434—.0000007

~ 425° 1996

REMIT CHECK PAYABLE TO:
2 --11 F 1 A 91960

ONC C_O CHICAGO 96 AMERT TECH
SHIRLEY ROMAOANT P.O. BOX 4764
320 N CLARK FL 6 CHICAGO, IL 60680-47646

CHICAGO IL 60606 Lallaabeseoldecbecladlosecleallosets _ baal

goscnges Ea


How can a convention committee make any sense whatsoever of a sentence in the
~ E&J that says a host committee cannot pay convention committee administrative
expenses and a regulation that says a host committee can pay administrative expenses?
Certainly, such contradictory language cannot even remotely be said to give fair notice of
which types of administrative expenses will be allowed—in particular, which types of
office facilities and services will be allowed to be paid by the host committee and which
will not.

The Final Audit Report suggests that the “E&J offers a reasonable starting point
for applying the regulations.” Final Audit Report at !2. But a “reasonable starting point”
is not enough to tell a party committee that it is going to be held liable for more than
$700,000 in repayments based on a distinction that is nowhere to be found in the
language or history of the rules. For these reasons, nothing in the administrative history
of the regulation—including the E&J language on which the Final Audit Report places so
much reliance—gives fair notice that telephone service charges would be disallowed as a

permissible host committee disbursement.

GQ The Application of the Regulation by the Audit Division Was
Contradi TT °

The Audit Division itself interpreted and applied the language of section
9008.52(c), and the E&J language, in an entirely contradictory and inconsistent way. The
Host Committee and the City paid for, and the Audit Division allowed their payments for,
a variety of administrative and overhead expenses for convention-related facilities and
services for the Convention Committee, including use of office equipment as well as
provision and installation of such equipment. Indeed, the Audit Division itself
acknowledges that, notwithstanding the language of the E&J purporting to bar host
committee payments for any convention committee administrative or overhead expenses,
it was permissible for the Host Committee to pay for Convention Committee offices and
office equipment, including telephone systems. Final Audit Report at 10.

Moreover, as best we can determine from the record, the Audit Division allowed
payments by the Host Committee for service charges which are conceptually and
definitionally indistinguishable from telephone serve charges Convention Committee

PPACLEE LT 8

ATTACIN

Page ~ 7 of 11

”



Convention Expenditures
Reservations
Printing

Subtotal
10% Contingency

Total

Grand Total

45,000
40,000

$ 2,431,000
243,100

$2,674,100

$23,486,100

ATTACHMENT

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CHICASS.

‘S TASALE stRee-

6060

DIRECT PAYMENT VOUCHER

‘Fe YD FOURTIOUS

e, [7
[ PURCHASE NUMBER voucnen NG VENDOR NUMBER Pace
PV-US SOUS TOUS UTSezy 1°) Py

REMITTANCE ADDRESS:

|

DELIVERED TO:

{ARERI TECH . [OFFICE OF BUDGET & MANAGEMENT
| P.O. BOX 4520: fF
| CAROL STREAM, IL
601974520 ACCEPTANCE DATE: 08/20/96
TELEPMONE SERVICE FOR ONCE OFFICES
SOMMOOTTY INFORMATION
COMMODITY CATALOG # QUANTITY UNIT UNIT COST TOTAL COST
oc: 9 +87 700000 ' ta 19 240 10.26
TELEOMONE SERVICES. LONG DISTANCE ANO LOCAL
TELEOMONE SERVICE FOR DNCC OFFICES
s+ VENDOR INVOICE NUMBER FOR THE ABOVE LINE IS aes coe
TOTAL 10.26
ACCOUNTING INFORMATION
QFYR FUND DEPT ORGN APPR ACTV OBJECT RPTG VOS/PROU ToTaL COST
co: 98 629 99 2008 = 9038 0423 10.26
TOTAL 10.24
ee a
Page 106 of LAG
PREPARED OEPARTMENTAL APPROVAL
BY
Py RI | Nereey certty tat Me wwerces Neve Net been srevieusiy veucnered
an ED ‘and That Me geees OF Services mecmed were recerved ENE thet He apeve
scout 15 aBerevER prem apereeriuens @3 ihewn epeve
AUDITOR'S
APPROVAL = a
: SoM oS
RECEIVED LZ Z
Sv oar TATE



Audit staff believes that the expenses paid by the Host Committee related to rigging
cameras, automated lighting, and atidio systems with the stated purpose of providing
media feeds or cable broadcasts are not the same as building a platform from which
cameras can be-used for the television production. Furthermore, the Host Committee
defrayed DNCC contracted labor costs unrelated to rigging or construction, i.e.,
projectionists, broadcast engineers, and cameramen. Whereas the Host Committee made
numerous other disbursements separate from the production expenditures relating to
construction of podiums, platforms and othier facilities at the Convention center, the
disbursements in this case appear to be related to the overall processes of television
production and broadcasting.

Categories of permissible host committee expenses
enumerated at 11 CFR §9008.52(c)(1) deal with preparing the convention site to host the
convention and to promote the convention city. In contrast, production expenditures
made by the Host Committee directly facilitated television and other media coverage of
Convention proceedings through press feeds and cable broadcasts. Instead of merely
preparing the convention center premises or promoting the City of Chicago, these
expenditures aided the Democratic Party in bringing its message to the public in hope of
influencing support for the political party hosting the convention and its candidate for
President. Furthermore, expenditures related to putting on a stage “production” to be
seen by the country are clearly costs of conducting a convention as described at 11 CFR
§9008.7(a) and not the type of disbursement envisioned under the host committee
regulations. Consequently, in the ECM, the Audit staff concluded that the total amount
of $1,455,407 paid by the Host Committee and $233,500 paid by the City for production
expenses, result in an in-kind contribution to the DNCC. In addition, the Commitee is
required to itemize these in-kind contributions on an amended report.

In the ECM, the Audit staff recommended that the
committees provide documentation to demonstrate that the payments described above
were allowable Host Committee and City expenses pursuant to 11 CFR §9008.52(c) and
did not result in prohibited in-kind contributions to the DNCC. Also, for these specific
items, the Committee was to address whether these disbursements would have been
necessary for the convention hall if not for the television production requirements. If the
Committee elected to view any of the aforementioned expenses as allocable in whole or
in part to permissible activities, the documentation supporting the Committee's basis for
such allocation was to be presented.

In response to the ECM, the DNCC challenged the Audit
staff's position, stating “...it is clear that these expenses were of a type that the
Commission's regulations explicitly and specifically provide may be paid for by the Host
Commitee or the City.” The DNCC summarized payments to each vendor, asserting that
“[a]ll of the expenses at issue were incurred for lighting or sound equipment used within
the Convention Hall, or for services or equipment directly involved in constructing and
preparing the podium.” Citing 11 CFR §9008.52(c)(1)(v) and (xi), the DNCC concluded

artacazyt __A
Page __Y of ZZ



_As part of the Commission's standard audit process, an inventory of
committee records was conducted prior to the audit fieldwork. This inventory is
conducted to détermine if the auditee’s records are materialiy complete and in an
auditable state. Based on the review of records presented, fieldwork began immediately.

Unless specifically discussed below, no material non-compliance was
detected. It should be noted that the Commission may pursue further any of the matters
discussed in this report in an enforcement action.

. AUDITFINDINGS AND RECOMMENDATIONS — AMOUNTS DUE
TO THE U.S. TREASURY

A. APPARENT CONVENTION EXPENSES PAID BY THE Host COMMITTEE
AND CITY OF CHICAGO

Section 9008(h) of Title 26 of the United States Codes states, in part, that
the Commission shall have the same authority to require repayments from the national
committee of a political party as it has with respect to repayments from any eligible
candidate under section 9007(b). .

Section 9008.3(a)(4)(vii) of Title 11 of the Code of Federal Regulations
states, the convention committee shall agree to comply with the applicable requirements
of 2 U.S.C. 431 et seq., 26 U.S.C. 9008, and the Commission's regulations at 11 CFR
Parts 100-116 and 9008.

In addition, Section 104.3(a) of Title 11 of the Code of Federal
Regulations states, in part, that each report filed under 104.1, shall disclose the total
amount of receipts for the reporting period and for the calendar year and shall disclose the
information set forth at 1] CFR 104.3(a)(1) through (4).

Section 9008.12(b)(3) of Title 11 of the Code of Federal Regulations
states, in part, if the Commission determines that contributions accepted to defray
convention expenses which, when added to the amount of payments received, exceeds the
expenditure limitation of such party, it shall notify the national committee of the amount
of the contributions so accepted, and the national committee shall pay to the Secretary an
amount equal to the amount specified.

Section 9008.12(b)(7) of Title 11 of the Code of Federal Regulations
states, in part, that the Commission may seek a repayment from the convention
committe if the convention committee knowingly helped, assisted or participated in
making convention expenditures by the host committee, governmental agency or
municipal corporation that are not in accordance with 11 CFR §§9008.52 or 9008.53.



5

Specifically, the Convention Committee asserts that the language of the regulation does
not enable persons to distinguish between equipment, facilities and services that are permissible
host committee expenses and telephone charges. /d. at 4. In addition to items specifically
mentioned in 11 C.F.R. § 9008.52, the regulation provides that host committees may pay for
“other similar convention-related facilities and services.” 11 C.F.R. § 9008.52(c)(xi). The
Convention Committee argues that telephone service charges should be considered as other
similar convention-related facilities and services. Jd. Moreover, it argues that telephone service
charges should not be considered any different from items such as air conditioning and
electricity, which are specifically mentioned in the regulation as permissible host committee
expenses. Jd.

Additionally, the Convention Committee argues that the administrative history of
11 C.F.R. § 9008.52 does not give fair notice that telephone charges are excluded as permissible
host committee expenses. Attachment B at 5. The Convention Committee states that the
language in the Explanation and Justification, which reads “please note that the revised rules do
not permit host committees ... to pay the convention committee’s or the national party’s
overhead and administrative expenses related to the convention,” directly contradicts the
language of the regulation which permits administrative and overhead expenses, such as “offices
and office equipment.” Attachment B at 6.

Furthermore, the Gonvention Committee argues that the Audit Division applied 11 C.F.R.
§ 9008.52(c) in a contradictory and inconsistent manner because it allowed the Host Committee
to pay for Convention Committee expenses such as pager charges, usage charges for cellular
phones, rental of certain office equipment, office supplies and postage, but not telephone charges.

Attachment B at 7, 8. Moreover, the Convention Committee disagrees with the Commission’s


400612 PERSONNEL
400012 NT
440812 PRE
4208! TRAVEL-!5 SEA
420212 STAFF TRAVEL-OUT SF SREA
430212 RENTAL OF Space

440112 OFFICE SUPPLIES

$40212 POSTARE

440312 OTHER SUPPLIES

450312 EQUIP & FURN LEAGE
440112 COMMUNICATIONS *
400212 PUBLICATION, PRINT, SUBS
400312 FREIGHT AND SHIPPING
4b0412 CONFERENCES

400312 EMPLOYMENT DEVELOPMENT
400612 ADVERTISING

400812 QATA PROCESS!NB

40952 PARKING

401052 LUNCHECN MEST INES

402112 HOUSING

4b0982 MISCELLAMEGUS-37 “ER

ATLANTA “SB COMAITTEE, INC,
SEFARTMENT SUDEET STATERENT
SCNTRACT OBLIGATIONS .-

9/31/88 a.

vEae Tora YD RISE .
% quaeeren

a
3

m7

3,631.76 3,452.70
0.00 0.00
ee) 1,709, 78
0.00 0.00
477,78 {77.74
433.30 1,366.08
0.00 0.00
1,642.20 1,042.20 i
203,25 172.28 {$41,900 :
6.90 0,00 0.00

350.00 350.00 ao
0.00 0.99
0,00

0.06

0.50 1, 42. 8
i { +N

sorcays —E 5


The Final Audit Reports on the 1988 Convention Committee and Host Committee
do not reference or discuss the allowability of telephone service charges as a permissible
City or Host Committee expense.

C. Conclusion

It appears that a substantial amount of local telephone service charges for the
1992 Convention Committee were paid for by the City of New York. We are unable to
determine whether the City of New York or the 1992 Host Committee paid for any long
distance service charges. We are also unable to determine who paid for the 1988
Convention Committee’s local and long distance telephone service charges.

As we noted in the oral argument before the Commission on January 13, 1999, it
is not the contention of the 1996 Convention Committee that it relied on any decision by
the Audit Division, one way or the other, on the payment by the City or Host Committee
of local or long distance telephone charges for the Convention Committee in 1988 or
1992. In determining the allocation of expenses and the budgets for the 1996 Democratic
National Convention in Chicago, the 1996 Convention Committee was not aware that the
allowability of such charges had ever been an issue.

In signing a contract obligating the City of Chicago and/or its Host Committee to
pay these expenses, the Convention Committee relied on the plain language of the
regulations and their legislative history, as explained in detail in our Request for

Administrative Review filed with the Commission on September 8, 1998.

Il. Provisions in Contract with City of Chicago Relating to Telephone Service

Charges

Several Commissioners questioned whether the 1996 Convention Committee's
contract with the City of Chicago specifically provided for payment of telephone service
charges by the City and/or its Host Committee.

Attached as Exhibit 5 hereto are relevant portions of the Contract, specifically. the
“Definitions” section (Article 2); Article 12, dealing with ““Telecommunications;” and
Article 14, dealing with “Facilities for DNCC Operations.” Section 12.2(a) provides that
the City will provide “a cellular phone system, including a combination of number of

cellular phones and minutes of air time.” Section 12.3 provides that, ‘The City shall pay

€

Page__3 or 139


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administrative and overhead expenses.

= So we submit to you that in this case, to the
extent that this language in the E and J is all controlling
here, the purposes of notice and comment clearly have not
been served. And we respectfully suggest that to the extent
the final audit report relies on that, E and J language is
completely changing the meaning and import of this
regulation, and that’s a violation of the Administrative
Procedure Act.

Now in closing I want to just suggest that here we
are now in 1999. We're sitting here again in the same
situation. 5

We have begun discussions with our three finalist
cities for the 2000 Democratic Convention, Boston, Denver,
and Los Angeles, about the budget. And they respond to
requests for proposals. We begin to negotiate the budget.
We eventually select one those cities.

And then, of course, in the next couple of months,
we'll refine that budget and memorialize the Host
Committee’s obligations to pay for certain categories of
expenses in a contract that we will sign with one of those
cities and/or its Host Committee.

The Notice of Proposed Rulemaking that was just
issued in the Presidential financing scheme correctly points
out that it is virtually too late to develop new rules, even

Heritage Reporting Corporation
(202) 628-4888

ATTACEMEST _D__—

Page l fl of 2 &



am leritech . oo

73120336019%6252152260023061000)729b7_,0002b24275

Please inciude vour 14-digit
account oumber on vour check
andior anv correspondence.

VM bersorelMabeodosabeberbedadossdel ecsebbeol ,
AMERITECH Account Number
P.O Box 4520 312336-1996 2826
Caro! Stream. IL 60197-4520

JUL 16 1996

VM eodbecredbeccsel MM essebeelbosebeoeleceIdeclldeccoobell

7.SP6E 1A 78365 SNGLP 2624275
CHICAGO 96

-CORNEILA HEINS

320 N CLARK RM 402

CHICAGO. IL 60610-4711

AgroueaPren AUG 13,1996 Ancunroue ZEZIZFE 5115.56

% Detach end mau top secuon wah your check peyabie io Ammernech. Wrne eccourn numnber on check. ca
PLEASE ALLOW FIVE DAYS WHEN PAVING BY MAR OR AT AN AUTHORIZED AGENCY.
Maul paymerns to: Amerascn. P.O. Box 4520. Caro! Sueam. & 60197-4620
312 336-1996 2528

CUSTOM BUSINESS SERVICES

BILLING SUMMARY | JUL 16, 1996
| Previous Paymerss Acuatmerss ! Past Ove
| Bit Amoura
17296.76 0.20 0.20 17296.76
CHICAGO 8s CORNEA HES
SUMMARY OF CURRENT CHARGES
AMER I TECH
For Detailed Charg + See Page 3
Monthly Service 6,506.78
Local Calis 1,526.97
275.99
92
18.42
9.93
Taxes (!1t 415.80 ) .. 415.80
AMERITECH CURRENT CHARGES 8,754.81
INTERNATIOWAL TELEMEDIA ASSOC.
For Detailed Charges - See Pa 38
Long Distance ... 79.84
Taxes (111 3.99 ) .. 3.99
INTERNATIONAL TELEMEDIA assoc. c 83.83

Ammentech asucnpr —E



valued at $150,000 by the vendor which appears to have been used for convention-related
purposes and not for items noted above at 11 CFR §9008.52(c)(1). The donated voting 5
system fulfilled Convention budget line number “70-Electronic Voting.”

The Host Committee asserted that the electronic voting system
“enabled state delegations to have interactive contact with leadership and other personnel
on the convention podium itself.” According to the Host Committee, the voting system
was used in the United Center as a part of the actual convention services in accordance
with the Convention Contract. A Democratic National Convention press release issued
during November, 1995. confirmed that AT&T was designated as an official technology
provider, and that delegates would be using AT&T integrated technology on the
Convention floor.

In the ECM, the Audit staff found that the donation of a voting
system provided the DNCC with the same benefit as if the Host Committee had paid a
convention expense, and therefore was an impermissible use of Host Committee
resources. Categories of permissible uses for contributions to host committees
enumerated at 11 CFR §9008.52(c)(1), involve preparing the convention site to host the
convention and promoting the convention city. In contrast, the equipment donated by
AT&T was used to provide Democratic Party leadership with rapid tabulation of delegate
voting. This enhancement to political operations at the Convention served a partisan
function in conflict with the host committee regulations. Therefore, the Audit staff
concluded that use of the voting system. valued at $150,000, resulted in a prohibited
in-kind contribution to the DNCC. The Audit staff also recommended in the ECM that
the Committee provide documentation to demonstrate that the electronic voting system
was put to permissible uses pursuant to 11 CFR §9008.52(c) and did not result in
prohibited in-kind contributions to the DNCC.

In response to a conference held at the close of audit fieldwork, the
DNCC verified that “(t)he electronic system used to count the votes of delegates at the
Convention” served as “ a core part of the physical systems needed to run the
convention.” Later, in its response to the ECM, the DNCC pointed out that 11 CFR
§§9008.52(c)(1)(v) and (vi) permit the host committee to pay for office equipment in the
convention hall as well as similar convention-related facilities and services. According to
the DNCC, “(t}here is no logical difference between telephone receivers used to
communicate information to the podium and a computerized system that does the same
thing.” The DNCC found it “difficult to imagine a ‘facility’ more ‘related’ to the
Convention than a system for counting delegate votes.” The DNCC also rejected the
Audit staff's position on the grounds that “[tJo say that a voting system is an
“enhancement to political operations’ contributes nothing to any analysis of permissibility
of this expenditure, since virtually every expenditure...specifically allowed by section
9008.52(c)(1)(v) Gould be said to ‘enhance’ political operations.”

In response to the ECM. the Host Committee described its
obligation to provide a delegate voting system under the Convention Contract as part of

armewent_ A

Page__!3 of 22%


thereto) and containing such other terms and conditions as shall
pe satisfactory to the Chairman of the DNC; and

WHEREAS, it is anticipated that the Convention will attract
a substantial number of people to the City, will stimlate
substantial economic development in the City and its environs and
will generate substantial good will and other benefits for the
City and its environs, including substantial opportunities for
Chicago firms and for employment of citizens of Chicago; and

WHEREAS, the City and DNCC are committed to achieving the
-sximum economic benefit for the City of Chicago; and

WHEREAS, the City and the DNCC are committed to working
together to achieve efficiencies and cost savings so as to
minimize the costs of the Convention to the City; and

WHEREAS, the City and the DNCC are committed to involve and
provide opportunities for minorities, women and persons with
disabilities in connection with the planning of and provision of
goods and services for the Convention; and

WHEREAS, the City and the DNCC desire to obtain from UCJV,
and UCJV desires to grant to the City and DNCC, a license to use
certain facilities in the United Center for the Convention,
pursuant to the terms and conditions provided herein;

NOW THEREFORE, in consideration of the foregoing and of the
mutual covenants hereinafter set forth, the parties hereto hereby

agree as follow: ~



i T2Y “OF : DO.
FUE? GR TENT ODF TENA NOB

* 7 OFFICE OF THE COMPTROLLER.
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AMOUNT —
*7.971.50

**7,971.50

OODLE IS ane TI TT ase tugs 131 of EX}



12

B. REPAYMENT DETERMINATION UPON ADMINISTRATIVE REVIEW

The Commission determines that the telephone charges of $726,835 paid by the Host
Committee and the City of Chicago on behalf of the Convention Committee were permissible
expenses. Therefore, the telephone charges are not in-kind contributions to the Convention
Committee that count against the Convention Committee’s expenditure limit. 11 C.F.R.
§ 9008.8(b)(1). The Commission also determines that there is no repayment due by the
Convention Committee and the DNC to the United States Treasury. 11 C.F.R. § 9007.2(c)(3).

The telephone charges paid by the Host Committee are permissible host committee
expenditures under 11 C.F.R. § 9008.52(c)(1)(v). Section 9008.52(c)(1)(v) lists office
equipment as a permissible host committee expense, and the Commission concludes that the cost
of using the equipment is a part of providing the equipment. Thus, in addition to paying for the
telephone equipment and the installation of the telephone equipment, the Host Committee is
permitted to pay for telephone charges associated with using the telephone equipment. The Host
Committee paid telephone charges totaling $600,325. Similarly, the City of Chicago is permitted
to pay for the telephone charges on behalf of the Convention Committee. The City of Chicago
paid telephone charges totaling $126,835. The Commission’s regulation, which concerns
receipts and disbursements of government agencies and municipal corporations for party
conventions, permits those government agencies and municipal corporations to receive donations
for expenses listed in 11 C.F.R. § 9008.52(c). 11 C.F.R. § 9008.53(b). The cost of using office
equipment is a permissible host committee expense under 11 C.F.R.§ 9008.52(c)(1)(v).
Therefore, the Commission concludes that the City of Chicago could pay for the telephone

charges.


SEPARTHENT BUOGET STATENENT .

C27 ar a rr as

a7 ,ANTA 39 COMMITTEE, INC,

HgTe
ase tg

TOTAL

YEAR yt super
CURRENT 10 WUDEETED “ef
Account DESCRIPTION ONT + DATE AROUNT YTD ACTUAL
ove ia
400641 PEREONNEL 0.00 7114308 70,302.06 (841,62)
400941 TWTERNS 0.20 9.00 0.00 0.00
) $4141 PRO SERVICES 0,00 1,911.70 0,00 (1,911,799
420141 STAFF TRAVEL-IN AREA 0.00 MSS. U4 AINE
420244 STAFF TRAVEL-OUT OF AREA 0.09 wu fi: ial)
430144 RENTAL OF SPACE 0.990 9.00 0,00 0,08
84014) OFFICE SUPPLIES 0.08 8,645.43 4,800.00 (1,948,435
. 440241 POSTASE 0.02 0,077.33 7,000.00 1,077.13)
440341 OTHER SUPPLIES 0.00 23,910.00 $0,000.00 26,090.00
#80341 EQUIP & FURN RENTAL 0.00 0.00 0.00 3.90 7
. (60141 COMMUNICATIONS 0.59 440,88 3,396.00 2,958.32
a oe “TL 4b0241 PRINTING Coe -3E,87.99 54,208.00 21,923.01
uy 440341 FREIGHT AND SHIPPING 0.98 275 200.00 76.75
400441 CONFERENCES 2.90 74.10 100.00 75.62
400841 ERPLOVEE DEVELOPHENT 0.00 0.00 0.00 0,00
<AOOb4L ADVERTISING /PLBLIC REL. 0.02 -24,970,13 20,000.00 (4,970.53)
400841 DATA PROCESSING 9.00 0.00 0.00, 0,00
480061 PARKING o.0¢ 199,09 50.00 - (169.89)
461041 LUNCH 0.00 wt 0.00 (36.96)
401141 HOUSENG 0.06 9,247.88 440,007 (8,807.69)
~ AbISEL ©D PROJECTS 0.00 «18,278.10 17,000.00 724.90
* qb98L RISC 0.00 3,088.06 40,000.00 36,914.94
\, #81241 SPECI, EvEnTE-asac 0.00 44,038.25, 40,000.00 © (4,996.29) a
\. #90541 EVENTS -panngon 4.90 ASyi8b. 22 00,000.00 1386.2 m 2
A9084L CnEMNING STUDIOS 0.6 74,784.11 708,000.00
490741 EVENTS@UM?TED #790 0.9% 4b,019.50 280,000.01
7 COVOBAL DELESATE PARTIES 9.00 btm. "
APOE VOLUNTEER ACTIVITIES 0.0 «© 38,7804 30,000.00
; von, ~ aa) 0.00 70,000.00
sS7 agg arent 3.58 ——" — BHT. — 70,903.00
90241 HOST TOURE 2.00 308,486,15~ 297,265.99
it 0.0¢ = '4,220,00 000
491141 COMBRESBTONAL FUNCTICKE 0.90 | 16,401, 0.00 (14,401.39 :
dertas FOOD * ee eee) ee veo eet dtl faa
s70041 iREORCE 9.005 380.00 “O60 "—  t330.000 (
320120 PRIVATE CONTRIBUTIONS 0.06 ($92,483.99) (490,000.00) 102,483.99
64074, FUND RAISING REVENUES 0.00 © (32,347.00) (408,629.89) (416,272.83)
0.00 1,023)107.3? 35,181.68 (188,005.74)

1,1 v J



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73120336019%62521919700230610000875834000172%b 7b

Please include vour 14-digit
account number on vour ch
andvor any correspondence

LMecbbecsereLMabosbooebedoatebabessbsd esoslbea! _—_—_——_
AMERITECH Account Number
PO Box 4520 312 336-1996 252
Caro! Stream. IL 60197-4520
JUN 16 1996
66100

172967€

320 N CLARK RM 402

CHICAGO. IL 60610-4711

PASTOUEAPTER, «JUL 11,1996  amounToue. 17,296.76

top section with your Check Bevebie to Amernecn. We sccoumt number on check.
~ PLEASE ALLOW FIVE DAYS WHEN PAYING BY MAZ OR AT AN AUTHORIZED AGENCY
Mas paymerns 10: Amernecn. P © Bor 4520. Caro! Swear 4. 65157-4520

CUSTOM BUSINESS SERVICES 312 336-1996 282
BILLING SUMMARY JUN 16 1996
Previous Paymers Aguaimerns Past Due Cur Total
| Ga | Amount ges Amount Oue
; Seams 0.00 | 0.00 5788.34 6638.42 17296.76
CECAGO 68 *CORNELA HERS 220N 1K RM 402
SUMMARY OF CURRENT CHARGES
AMBRITECH

for Detailed Charges - See Page 3

Monthly Service . 6,504.94
Loca! Calts .... 1,364.92
Information Charges .. 202.13
Other Charges and Creaits 2.10
Long Distance 23.54
Lo and State 10 9.70
(lit 404.235). 404.23

TECH CURRENT CHARGES eee eeee 8,511.56

ely following are cnarges from iong aistance
companies. aAmeritecn provices Dilling for tnese companies
as @ convenience to you so tnat you go not receive
multiple DIIIs. Ameritecn ts not affiliated in any way
with these jong distance companies.

MCI TELECOMMUNICATIONS

aeucmmn — &
diferitech suelo oc 1


determinations involving publicly funded candidates under 11 CFR 9007.2(c) through .
h). .

The 19396 Democratic Convention ended on August 29, 1996. The DNCC

filed its initial Statement of Net Outstanding Convention Expenses (NOCE), as of
October 13, 1996, on October 29, 1996. A revised NOCE, also as of October 13, 1996,
was filed on October 21, 1997. The Audit staff reviewed the DNCC’s financial activity
through September 30, 1997, analyzed winding down costs, and prepared the figures

shown below.



Ves s+ Ow

RCOM $02 IY mace

125 N CASALE STREET
CHICAGS. iL 60602 s
DIRECT PAYMENT VOUCHER
PURCHASE NUMBER voUtneEN NO. VENDOR NUMBER PAGE
UE EEEEr a US JoUSTISZ7 FOL0IT K T
REMITTANCE ADDRESS: : DELIVERED TO:
[AMERI TECH + ICE OF BUDGET & MANAGEMENT —TM
P.O. BOX 4520 2 oF
CAROL STREAM, IL
601974520 ACCEPTANCE DATE: 04/24/96

TELEPHONE SERVICE FOR ONCC OFFICES

COMMODITY INFORMATION
COMMODITY CATALOG #

001 9157700000

QUANTITY UNIT UNIT COST TOTAL COST

1 izy ~ 21,996.670 21,996.67

TELEPHONE SERVICES. LONG DISTANCE AND LOCAL
TELEPHONE SERVICE FOR ONCC OFFICES

sss VENDOR INVOICE NUMBER FOR THE ABOVE LINE IS 336-1996 see
TOTAL 21,996.67
ACCOUNTING INFORMATION * bad
BFYR FUND DEPT oRGN APPR OACTV OBuECT RPTG JO8/PROU TOTAL COST
01 95 629 99 2005 9038 0423 21,996 67
TOTAL 21,996.67

atucmant _
Pags_99 or _|

13

tam

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PREPARED 214-4843 DEPARTMENTAL APPROVAL

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ENTERED | nereey certity thet the mwerces neve net been previously voucnered
By na that the goods ef services indicated were received and mat tne above

account 13 apereved trem appropriations es shown speve.

AUDITOR'S

APPROVAL

RECEIVED
BY OATE

DATE


,uvv se sv

"20 UN, ~ASALWE SURES
cmicage St edeoe

DIRECT PAYMENT VOUCHER ~
PURCHASE NUMBER vouchea NC VENDOR NUMBER ~ PAGE
PD US SeUsvyo00 US JoUSyIseu UISeZy 1s) ra
REMITTANCE ADORESS: DELIVERED TO:

(ARERITECH -
P.O. BOX 4520:
CAROL STREAM, IL

—TM [OFFICE OF BUDGET & MANAGEMENT

601974520 ACCEPTANCE DATE: 07/11/96

TELEPHONE SERVICE FOR ONCC OFFICES

COMMODITY INFORMATION
COMMODITY CATALOG #

001 9157700000

QUANTITY UNIT UNIT COST TOTAL COST
1 ca 8.838.420 8,538.42

TELEPHONE SERVICES. LONG OISTANCE ANO LOCAL
TELEPHONE SERVICE FOR DNCC OFFICES

se* VENOOR INVOICE NUMBER FOR THE ABOVE LINE IS 6/16/96 eos
TOTAL 8,538.42
ACCOUNTING INFORMATION
BFYR FUND DEPT ORGN APPR ACTV OBJECT RPTG VJOS/PROU TOTAL COST
o' 98 629 99 2005 9038 0423 | 8.538. 42
TOTAL 8,538.42

asucment E
Bago or 1D

mwAS Se

AibtAd M BOIDCES
PREPARED |214-4843
BY

DEPARTMENTAL APPROVAL

ENTERED
BY

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account 1s spereved frem appreprimuens as shown epove

AUOITOR'S
APPROVAL

RECEIVED
BY

ard that the goods or services mdicated were received and tna me soove

OaTE



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ov

CHAIRMAN THOMAS: One last question, if we decide
to try to put in some distinctions that would solve this
riddle for the 2000 election cycle in our pending
rulemaking, will you be of the view that we are unfairly
attempting to do that, since the rules that we have put out
don’t adequately go to those -- give you notice of those?

MR. SANDLER: Well, I mean, I think it’s -- well,
I think if it’s done expeditiously it could be relevant to
the 2000 cycle. I mean, there is no specific proposal in
the Presidential findings that NPRM issued, for which the
comments are due at the end of this month.

And if .there were, you know, obviously, we would
want an opportunity to comment on something specific before
it was issued. But if it was done expeditiously enough, and
it wasn’t so radical as to change the whole nature of the
relationship, but there were specific items taken out, like
the telephone service charges, it would not be too late to,
you know, within reason, to amend a convention budget.

CHAIRMAN THOMAS: Thank you.

Vice Chairman Wold?

VICE CHAIRMAN WOLD: If you are finished, Mr.
Chairman.

One question, either to you, Mr. Sandler, or to
Mr. Costa, does the Commission have a copy of the contract
with the city in which the allocation of telephone charges

Heritage Reporting Corporation
(202) 628-4888



as

STUANTR 39 COMMITTEE, NC,

TEFARTMENT SUDGET STATEMENT whidd an
SECURITY ,
. 5/31/88 S
. a. » .
YEAR TOTAL YTD suDeeT
CURRENT 10 BUDBETED ve
ACCOUNT DESCRIPTION AONTH ATE mouar = YTD ACTUAL
400631 PERSONNEL 0,60 77,821.45, $8,404.75 (22,036.70
$0093! INTERNS 0.00 0.00 0.00 0.00
41013 ORO SERVICES 9.90 0.00 .
420131 TRAVEL-IN 0.00 0.00
$2023: STAFF TRAVEL ~£L7 0.06 501.00
0.0 0.00
ant 0.00
440231 PCOSTASE G06 0,00 0.00 0,00
440331 OTHER SUPPLIES 0,00 8,979.77 301.48 (5,298.29)
450331 EQUI? & FURW RENTAL 9.20 0,00 0.00 ¢.00
40013! CONRUN:CAI TONS 2430 1,345.57 0.90 (MSS
40231 PUBLICATION PRINT SUBS.” 0,00 5,226.67 5,226.67 0.09
460331 FREIGHT AND SHIPPING 0.00 680. 25 432,73 (227,30)
400431 CONFERENCES 0.09 431.37 0,00 (43,37)
‘400831 EMPLOYEE DEVELOPHENT 0.00 0,00 0.00 0.00
400631 ADVERTISING 0.00 0.00 0.00 0.00
400831 DATA PROCESSING 9.00 9,00 0.00 0,90
80931 PARKING 0.00 78.00. 13.00 (65.00)
481031 LUNCHEON MEETINGS 0.00 3,950.99 2,500.16 (1,444.83)
40113 NOUSINE 9.09 0.00 ) 9,00
44993) NISCELLANEQUS-OTHER 0.09 S347 AMGHSBZS 117,319.00
490231 SERVICES-C!TY SF ATUMITA 0.00 0.00 2,100,000.00 nee
490331 SERVICES-FULTON COUNTY 9.90 0.00 ~ 351,912.00 "
490431 SERVICES-£7ATE OF GEORGIA 0.6 0.00 $62,881.00 © 56, 891.
Ob0331 PARK! RS 57 LEASES 2.00 © 76,009.90 -- 74,000.00
4143! FOS att Nate. 4s 0.90 (28,988.42)
0,50 19,208.27 3,278,627.86 3,075,422.

sa¢eeanectssc2zseeseaszzsaseaessesuseeseesass 322322:

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that you have concerning the Host Committee’s payment of
telephone expenses for the Convention Committee in the past.

: I think it would be helpful to the Commission if
you could specifically identify whether it’s a Host
Committee or a municipality or whatever that you're dealing
with, and that the telephone expenses that you are saying
were paid were not their telephone expenses, but were, in
fact, convention expenses.

MR. SANDLER: That’s my understanding. We'll
clarify that for the record.

CHAIRMAN THOMAS: Any other questions? Larry?

MR. NOBLE: First, just to clarify something.
Joe, you said that our memo was wrong in referring to the
cellular phone and pager charges. I assume you are taiking
about page six? I just want to clarify something that seems
to have come out of this, which is --

MR. SANDLER: Right.

MR. NOBLE: -- what that memo states, to my
understanding, that this is true, that the Audit Division
included the cellular phone and pager charges, where they
could identify them.

MR. SANDLER: Oh, I see. You weren’t saying that
that was ail that was included --

MR. NOBLE: No, no, we were just --

MR. SANDLER: -- including those that were

Heritage Reporting Corporation
(202) 628-4888



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Chicage

July 15, 1996

Brad Kiley

Director of Administration

1996 Democratic National Convention Commitice, Inc.
320.N. Clark. Room 600A

Chicago. IL 60610

Dear Brad:

We seck the concurrence of the 1996 Democratic National Convention
Commitiec. Inc. (*DNCC”) for the expenditure of the following tunds

Line item 63 - Communication Systems Cash expense

Vendor: Ameritech

Account Cos
312 832-1996 $221.90
312 £95-1132 —L&i ‘

Please acknowledge the above expenditures by signing, dating and
retuming one copy of this letter to my attention.

Sincerely.

Don Davis
Finance Director
Chicago '96

Accepted and acknowledged:
1996 Democratic National Convention Committee, Inc.

ce: Nancy J. Clawson. Counsel! Chicago ‘96
Leslie Fox. Executive Director. Chicago ‘96
Janet V. Green. Deputy Chief Executive Officer. DNCC

Alfonse McMillan, Counsel, DNCC

320 North Clark Street. Suite 402. Chicago. IL 60610 + 312-214-19%6 + Fax 312-263-R008
e-mail chicagote@AlS NET
ito rane cr emi il usChicago%6 @t1_t omseves



13

IV. CONCLUSION

For the foregoing reasons, the Commission determines that the telephone expenses paid
by the Host Committee and the City of Chicago on behalf of the Convention Committee are
permissible expenses under 11 C.F.R. §§ 9008.52(c)(1)(v) and 9008.53(b)(1). Therefore, the
Commission determines that no repayment is due by the 1996 Democratic National Convention
Committee, Inc. and the Democratic National Committee to the United States Treasury.
Attachments

A. Audit Report on the 1996 Democratic National Convention Committee, Inc., approved
June 25, 1998.

B. Request of 1996 Democratic National Convention Committee, Inc. for Administrative
Review of Repayment Determination, dated September 8, 1998.

C. Memorandum from Robert Costa to Kim Bright-Coleman regarding the 1996 Democratic
National Convention Committee, Inc.’s response to the Audit Report, dated January 4, 1999.

D. Transcript of the 1996 Democratic National Convention Committee, Inc. Oral Hearing before
the Federal Election Commission on January 13, 1999.

E. Supplemental Submission of the 1996 Democratic National Convention Committee, Inc.,
dated January 21, 1999.


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situations where the doctors’ organization negotiates with
the city to try to have the city pay for a lot of expenses
of preparing the convention hall, and providing offices, and
perhaps evening providing telephone service?

I’m just curious as a matter of background. You
may not have occasion to understand all of that as well
since you are dealing always with negotiations over
convention set-ups. But I’m just curious.

MR. SANDLER: I’m not really familiar with that.
The problem is, the only convention activity that we are
familiar of that’s of this scope, and it’s actually much
bigger than this scope, is the Olympics, which is a bad
analogy, because all -- through corporate sponsorships, it’s
all, you know, essentially, the Olympic -- the local
organizing Olympic Committee raises hundreds of millions of
dollars through corporate sponsorships, and then essentially
pays for everything.

So it’s not -- you don’t have an analogy where a
municipality -- I mean, the Host Committee does pay for
everything, and the International Olympic Committee
essentially pays for nothing, which is the analogy.

So it’s not a useful analogy. I just don’t know
where -- you know, of anything quite of that nature, that’s
big enough to involve the establishment, you know, of the
Host Committee, to that extent.

Heritage Reporting Corporation
(202) 628-4888



"REMITTANCE, sADVIGE=-

= EP Brae: ~ AAS? iioj 97106294:

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7



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ut
ray

the Convention Facilities, and at any media or hospitality
lounge to be provided in this agreement, provided that the
city shall not be required to expend for this item in excess
of the amount shown in Exhibit A.

MR. SANDLER: I'd like to point out that the word
"Convention Facilities" is capital "C" and "F". It‘’sa
defined term. It includes the Clark Street offices in the
contract.

MR. HALTER: Yes.

MR. SANDLER: It’s defined in the contract to
include that.

COMMISSIONER MCDONALD: And what was the amount
that was reflected in Exhibit A, just out of curiosity?

MR. HALTER: Well, it’s over $2 million.

COMMISSIONER MCDONALD: So, really, the Host
Committee owes you over a million dollars?

MR. SANDLER: That may be for all of the items in
that.

COMMISSIONER MASON: They were really on their
cell phones.

MR. COSTA: We didn’t challenge installation or
any of those things, again, only the service charges. And,
also, to clarify the record, we didn’t get this contract
until we commenced field work.

VICE CHAIRMAN WOLD: I heard that it included long

Heritage Reporting Corporation
(202) 628-4888



ih ok ea

Commins for 96 bo bw. ENTERED NOV 0°? 1998 FEL

~ SESS Es oe
DNCC OFFICE SUPPLY /REIMBURSEMENT _ LvIz
~ CHECK REQUEST FORM tothe. * cy SD

er €> x

Payee Name _. —Aneink * = TX 0
power "3.78 . P OCT 2 5 1996 |
cones Zab” _ By t4/

Vendor invoice number

Purpose of expenditure £32 -25/§ — F723 LA 33
ENS - 1/32 F2285 LW S22

Receipt of goods/service confirmed by RD. DR
Person requesting disbursement : Dw Dw:

6

All requests for check disbursement must be accompanied by the original invoice or receipts.

Approval signatures: -
Heli Wllawe De Ow
Check Preparer | Finance Director

Date received (b= 7-46 or <tc cemaee dl

Boone "2.28 Memes Clue! a cen
Check # _ 3S 0/ Check recei fmation ti .
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"Applies to contract line __6 3 — Te 4c Commuaies liens
amucuy;  E
: Page 115 la,



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Please inciude sour I4-digit-
account number on vour check
andor any correspungence

Mall WWebecbessbebestabebocededlessetbeat

AMERITECH Account Number
PO Box 4520 312 £95-1132 5153
Caro! Stream iL 60197-4520

MAY 16 1996
LMesdeorelbecrerDdorelbabeslestdeldacslalessselllassbebeat 9868 229/239
+700 C® » 816 M $7798 °C 003 "510
GENRL NATL CONVENTION
510 N PESHTIGO CT

FLAG
CHICAGO IL 60611-4309

rs

BASTEUEAPTER ©JUN 12,1996  Awountoue 15.10

payee io Amernecn We eccoum ‘rumnoer on crecs
PLEASE ALLOW Fv FIVE DAYS WHEN PAYING by MAIL OR AT AN AUTHORIZED AGENCY
Mail payments to: Ameragen ©O Bor 4520. Carot Sueam . 62157-4520

312 €95 11325153

CUSTOM BUSINESS SERVICES

BILLING SUMMARY MAY 16 1996
—
Previous Paymems Adiusiments Past Oue Current Total
_ Bil Thank You Amount Charoes Amount Due
| 18.00 748 | ee er ?) 15.10
GENAL NATL CONVENTION 510 N PESHTIGO CT FLAG
SUMMARY OF CURRENT CHARGES
AMER TECH
MONTMly S@rvice® 0.0... ce ee eee eee eee reece eee enees 6.76
Otner Cnarges and Creaits (See Section 1, Page Yow. +10
Local & State Add’! Cnarges (See Section 1, Page 1) 01
Taxes IL -34 =) (Cty a) -68
AMERITECH CURRENT CHARGES . 7.88
TOTAL CURRENT CHARGES (Late Payment Charge after 06-12) 7.55

seen —E ng
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pte :

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for choc ag New York Telephone for your

Thank you
Please call me at (212) 513-9195 if you

communications system.
have any questions.

=

Timothy J. Livolsi
Account Manager . -

cc: W. Murphy
c. Bates

armcmsinn  &
Page_!O_ of


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expenses are permissible and which aren’t.

So, again, on this whole point, sitting there in
the summer of ‘94, trying to determine the convention budget
and negotiate the convention contract, we simply in no way
were put on fair notice that all of these categories of
office-related service charges were going to be allowed,
cell phones, pagers, electricity, air conditioning, rental
of copy machines, you name it, but not telephone service
charges.

There is no way we could have read into the
language of the regulations, the history, balancing this
conflicting language -- no way we could have drawn that
conclusion, as we determined what the Host Committee could
pay for.

Now if it’s the Commission’s position that the
entire meaning of that plain language of the Host Committee
regulations was intended to be changed by that single
sentence in the explanation and justification, we have a
different problem. And that problem is that there was never
any opportunity for any notice -- any opportunity for us to
comment on that language.

The notice of proposed rulemaking for these
current regulations was issued in August, 1993, without any
hint of any new limit on what the Host Committee would be
able to pay for.

Heritage Reporting Corporation
(202) 628-4888



A

¢imeritech

To: Democratic National Convention a vo
~ Pi re ‘
Date: August 13, 1996

Re: Cellular & Paging Service Invoice Bi

Per your Technology Request PO 0027, a payment of $66. 452.50 will be requirec in
order to establish the requested services.

Tre following details the breakdown of tnese charges

Description Quantity Per Unit Total
Cellular teiepnone
including 2 batteries and charger 210 49.95 10,489.50
$30 Pre-paid cellular phone card 100 30.00 3.000.0C
S60 Pre-paid cellular phone card 100 60.00 6.000.00
$90 Pre-pai¢ cellular phone card 100 90.00 9,000.00
$120 Pre-paid cellular phone card 100 120.00 12,000.00
Flex Pager - 1 week prior to convention 360 21.95 7,902.00

- Week of convention 360 24.95 8,882.00

QIN

Flex Pager - 3 weeks prior to convention 100 21.95 (34(41) 4-685-66

- Week of convention 100 24.95 2,495.00
TOTAL AMOUNT DUE ROAST SU |

C4, 25 SO
Payments should be made payable to Ameritech Corporation and forwarded to:
Ameritech Corporation % [ g 26.6
1

Atten: Denise Robens
225 W Randolph HQ-5C

Chicago, lilinois 60606 pr Camra_
M wline
ad Carta acé

C2) E a
naa eee. rl


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are the kinds of things that are specifically allowed for in
the Host Committee regulations.

° But here we are talking about telephones that are
hooked up by lines to offices that were used by Convention
Committee employees and staff and so forth. Is that right?

MR. SANDLER: That's our understanding, Mr.
Chairman.

CHAIRMAN THOMAS: And then just for our amusement,
would you like to clarify for the record which Commissioner
it was that made that suggestion.

MR. SANDLER: I believe it was you.

MR. MCDONALD: Oh, fine..

CHAIRMAN THOMAS: Thanks for bringing that up. So
in other words, the reason we are all sitting here today,
perhaps --

MR. MCDONALD: Here we go again.

CHAIRMAN THOMAS: So I won’t ask any more
questions. Thank you.

Vice Chairman Wold, would you like to ask some
questions?

VICE CHAIR the MAN WOLD: Thank you, I would.

First, I want to complement you, Mr. Sandler, on
an excelleritt presentation. It was very articulate, very
well organized. And I appreciate the analysis you bring to
the problem here.

Heritage Reporting Corporation
(202) 628-4888

ATTACHMENT D

Page _1210O_ of Sb



can Celebration

4

—
Chicago,

Weenere At. Dates
terer

|
Neveerrs iam At Wats
Niven trend Pat |

UILLINOIS:

“June 23, 1996

Brad Kiley

Director of Administration

1996 Democratic National Convention Commutice. Inc.
320 N. Clark. Room 600A

Chicago. IL 60610

Dear Brad:

We seek the concurrence of the 1996 Democratic National Convention
Committee. Ine. (“DNCCTM) for the expenditure of the following tunds

Cash expense

Line item: 63 - Communication Systems

Vendor: Ameritech

Account , Cos.
312 832-1996 224.30
312 832-2515 42.80
312 E95-1132 LSS

Total $274.65

Please acknowledge the above expenditures by signing. dating and
returning one copy of this letter to my attention.

Sincerely,

Dae

Don Davis
Finance Director
Chicago ‘96

Accepted and acknowledged:
1996 Democratic National Convention Committee, Inc.

Bridle Hatg __pw: oy esos 19%

ce: Nancy J. Clawson. Counsel. Chicagu ‘96
Leslie Fox. Executive Director, Chicago ‘96
Janet V. Green. Deputy Chief Executive Officer. DNCC

Alfonse McMillan, Counsel, DNCC
Nev Gor 15

320 North Clark Street, Suite 402. Chicago. IL 60610 + 312-214-1996 + Fax 312-261-2004 |
e-mau chicagodaAlS NET



On August 19, 1996, the City and the DNCC amended the Contract. in
part, with a budget revision entitled “Chicago ‘96/City Budget.” Each expense
classification in the revised budget was identified by line number, line item, tctal amount
budgeted, total cash spent, and total in-kind contributions allocated to that line item. The
Audit staff's review of management controls disclosed that the Host Committee's
disbursement records included memoranda which identified expenditures made on behalf
of the DNCC and the budget line number to which each expense should be allocated.

The apparent objective of these controls was to facilitate managerial reporting and
compliance with the budget. Furthermore, the Host.Committee obtained written
concurrence from the DNCC for all of the payments. In accordance with the Convention
Contract, expenses defrayed fell into one of two major budgetary classifications.
production expenses or telecommunications costs, as discussed below.

The issue of the permissibility of these payments was addressed in Exit
Conference Memoranda (ECM) resulting from the audits of both Chicago ‘96 and the
DNCC. Both committees, as well as the City of Chicago, were given an opportunity to
respond to the Memoranda, and information provided by them is incorporated in the
discussions below.

In response to the respective Exit Conference Memoranda, both the DNCC
and the Chicago's Committee for ‘96 argued that most or all of the expenses discussed
below are covered by one of the categories of permissible host committee expenses at 11
CFR §9068.52(c)(1) or, referring to 11 CFR §9008.52(c)(1}(xi), are “similar” to expenses
covered by one of the permissible expense categories. To read 11 CFR 9008.52(c)(1) as
broadly as both committees propose would effectively negate the limitation on
convention expenses at 26 U.S.C. §9008(d); the prohibition on contributions to a
convention committee that has received the full federal payment (11 CFR §9008.6(a));
the prohibition on the use of corporate contributions in connection with federal elections
at 2 U.S.C. §441b; and the Commission's clear statement in the
Justification (E&J) supporting the provisions contained in 11 CFR 9008.52(c)(1) that
allowing the host committee to pay selected convention expenses is “intended tobea
very narrow exception to the statutory limitation on convention expenses.”

“1, Production Expenses

Pursuant to the Contract, the City agreed to provide, among other
things, the following production hardware and related services to the DNCC: “a lighting
system and the services of lighting consultants and a lighting designer to operate the
system;” “an audio system (including but not limited to microphones at each delegation
and all audio feeds) and the services of audio consultants and an audio designer to operate
the system:” “the broadcast on one of the City’s cable television stations gavel to gavel
coverage of the Convention and special programming directly related to the ConventionTM

See 44 Fed. Reg. 63.038 (Nov. 1. 1979).



¢Mferitech — -

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account number oo vour check
and/or anv correspondence

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AMERITECH | Aecount Number
PO Box 2500 ,; 312 832-1996 6600
Bedtord Park IL 60499-2500

NOV 2. 1995
VMeableseodbecoeeDbeoell sMevebedoossel eosbebecd 9305 342/353
20 N38 1 € asoce 1093363
CITY OF CHICAGO
CITY OF CHICAGO CNET-
510 N PESHTIGO CT FLRE6

CHICAGO IL 60611-4309

Guanes «© DUEUPON RECEIPT © An@unroue., 10,933.63

Mad paymerns to: Ameraecn. PO Box 2500. Bectord Park iL 60499-2500

CUSTOM BUSINESS SERVICES

| 312 632-1996 660 0

>

BILLING SUMMARY | NOV 2, 1995
Final Sil

| Previous Payments Agwustments. Pasi Ous Current Tow

i Os Amoura harges Amount Due

: 1128289 318.96CR 10832.83 :
CITY OF cracago CITY OF CHICAGO CNET-OMC S10 N PESHTIGO CT FLAG
SUMMARY OF CURRENT CHARGES
AMER ITECH
Other Charges and Credits (See Section 1, Page ye. 478.86CR
Itemized Calls (See Section 1, Page 9) ...... rere 00
Local & State Add’! Charges (See Section 1, Page 10) .23CR
Taxes (IL 17.17CR) .... 17. 17CR
AMERITECH CURRENT CHARGES ............ 496.26CR
immediately following are charges from jong distance
companies. ameritecn provides billing for these companies
as a convenience to you so that you do not receive
@uitipie DIlis. Ameritecn is not affiliated in any way
with these long distance companies.
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arose?

MR. SANDLER: Yes.

VICE CHAIRMAN WOLD: So we have the provision, and
we could look at the provision?

MR. SANDLER: It has to be publicly filed, right?

MR. HALTER: Yes, and plus we have it in the work
papers.

VICE CHAIRMAN WOLD: All right. Can either of you
tell me how specifically that contract did deal with the
issue of telephone charges? Was that something that’s been
inferred into it now, or after the fact, or was it
specifically listed in there as an expenditure allocated to
the Host Committee?

MR. HALTER: I can get that.

VICE CHAIRMAN WOLD: All right. We touched on
this earlier, but it may be helpful to look at the language,
itself.

COMMISSIONER MASON: While they are looking, could

VICE CHAIRMAN WOLD: Sure, go ahead.

COMMISSIONER MASON: -- follow-up on that related
point, because this is starting to bother me. I asked about
the AO process, and I appreciate Mr. Sandler wanting to
Spare us the work. Of course, the way the process works, if
he submits the AO, we have to respond within a fairly

Heritage Reporting Corporation
(202) 628-4888



On April 23, 1998 the Commission, during its
consideration of the audit report on the 1996 Committee on Arrangements for the
Republican National Convention, voted that the use of funds, for such services as
provided by the remaining five vendors discussed above, is a permissible host committee

expense.
2. Telecommunications

Section 9008.7(a)(4)(x) of Title 11 of the Code of Federal
Regulations states that “Convention Expenses” include all expenses incurred by or on
behalf of a political party’s national committee or convention committee with respect to
and for the purpose of conducting a presidential nominating convention or convention-
related activities. Such expenses include administrative and office expenses for
conducting the convention, including stationery, office supplies, office machines, and
telephone charges; but exclude the cost of any services supplied by the national
committee at its headquarters or principal office if such services are incidental to the
convention and not utilized primarily for the convention.

As mentioned above, 11 CFR §9008.52(c) permits host committees
to provide the national committee use of a convention center and convention-related
services for that location such as offices and office equipment. In addition, an
explanation of the regulatory intent behind 11 CFR §9008.52(c), printed in the Federal
Register (Vol. 59, No. 124, Page 33614), states, in part, that the revised rules do not
permit host committees or municipalities to pay the convention committee's or the
national party's overhead and administrative expenses related to the convention.‘

Pursuant to the Convention Contract, the City agreed: to provide
the DNCC with a telecommunications system; to provide the DNCC with a cellular
phone system; and, to pay for all long distance service charges incurred by the DNCC at
the Convention facilities. The Audit staff's review of disbursements disclosed that the
Host Committee and City made substantial payments on behalf of the DNCC for
telephone installation and service. Because telephone installation costs are allocable to
office equipment, and therefore are permissible host committee expenses pursuant to
11 CFR §9008.52(c)(1)(v), the following discussion focuses on telephone service
charges.

According to Host Committee records, payments totaling $600,325
were made to defray local and long distance telephone service charges. Furthermore,
documents obtained by the Audit staff indicate that the City of Chicago paid an additional
$126.510.° These payments were apparently made in execution of the Contract’s
provisions related to telecommunications and are discussed in more detail below.

‘ See 59 Fed. Reg. 33.614 (June 29. 1994)

s 3
See Foomote 3.



For these reasons, pursuant to 11 C.F.R. § 9007.2(c)(3), the Commission should
revise the repayment determination in the Final Audit Report to find that the Host
Committee payment of $600,325 of telephone service charges and the City payment of
$126,510 of telephone service charges were permissible disbursements and not in-kind
contributions to the Convention Committee, and therefore, that no repayment by the

Convention Committee is required.

Respectfully submitted,

Joseph E. Sandler

Neil P. Reiff

SANDLER & REIFF, P.C.
6 E. Street, S.E.
Washington, D.C. 20003
(202) 543-7680

Counsel for 1996 Democratic National Convention
Committee, Inc.

Dated: September 8, 1998

ATTACH

-Page UU



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”

about -- that Commissioner Mason asked about, the geographic
distinction. Your view then, again, is that the purpose of
the “expenditure wasn’t important. It was where the
expenditure was.

MR. SANDLER: Well, the regulation at issue, the
specific one in 9008.52 (Clv) talks about convention-related
services for that location, such as -- and then it goes on
to talk about electrical air conditioning system, offices,
office equipment.

And it’s our understanding that the offices, if
they are in the city, the fact that they may be outside, in
the case of Chicago, the United Center, where there is very

*
limited physical space for offices, and they are a mile or
two away on Clark Street, wasn’t -- and, of course, the
Audit Division agreed with that -- wasn’t a significant
distinction.

But we never believed that -- and I think it’s the
word "location" there that puts you on notice that you
really can’t reasonably, you know, assume that anything in
Washington can be paid for by the Host Committee or the
city.

.

MR. NOBLE: Now moving to the E and J, was the
committee aware of the E and J, when it signed the contract
and when it allocated these expenditures?

MR. SANDLER: It was close, but yes. I mean, we

Heritage Reporting Corporation
(202) 628-4888

Db)

ATTACHMENT

Page ey of Sh



PJUUIIIVZYO

ACCM 3 ~ i
12)°N WASALLE STREET
CHICAGO. IL 606C.

DIRECT PAYMENT VOUCHER

PURCHASE NUMBER VOU RR NO. VENDOR NuMBE® 2 ace
PD US 960595552 ~ US S6U5F555< USsb29 G ry

REMITTANCE ADORESS: DELIVERED TO:

[AMERITECH — ICE OF BUDGET & MANAGEMENT ~~]
PO BOX #4764 - oe
CHICAGO IL

606804764 ACCEPTANCE DATE: 08/01/96

CELLULAR PHONE SERVICE FOR ONCC OFFICES
COMMODITY INFORMATION

COMMODITY CATALOG # QUANTITY UNIT UNIT COST TOTAL COST
001 7255100000 . 1 ga 7.971.800 7,971.80
RADIO TELEPHONES (INCLUDING CELLULAR TYPE FOR VEHICLE. MARINE, ETC.
USE)
CELLULAR PHONE SERVICE FOR ONCC OFFICES
se VENOOR INVOICE NUMBER FOR THE ABOVE LINE IS 7/12/96 see
TOTAL 7,971.50
ACCOUNTING INFORMATION *
SFYR FUND O€PT ORGN =6APPR ACTV OBVECT RPTG VJOB/PROU ‘ TOTAL COST
01 95 629 99 2008 9038 0423 7.971.580
TOTAL 7,971.80

Pee EO" fa

dibths M B2IOCES
PREPARED |214-4843 DEPARTMENTAL APPROVAL
ey
ENTERED | nereby certity thet the wwverces have net been previcusiy voucnered
wr ane mar the goods or Services indicated were received and tat te spove
ccount '3 approved trem apprepriauions es shown speve
AUDITOR'S
APPROVAL

OaTE OATE

RECEIVED
BY



be an open invitation for furure abuse—an invitation to national party
committees to slough off part of their fundraising costs on the taxpayers.
That is exactly what the Commission should be discouraging, not :
encouraging. The Audit staff's hunt for further documentation, proof of
Mr. Pastrick's activities during the Convention, etc., is pointless and
counterproductive. His expenses were properly paid for by the DNC.

Given the lack of documentation provided in response to the request
contained in the ECM, the Audit staff's position is unchanged.

F. SUMMARY OF AMOUNT DUE TO THE U.S. TREASURY

Finding I1.A.2. In-Kind Contribution- S$ 726,835
Telecommunications
Finding II.C. Improper Use of Funds £19,052
Subtotal $ 745,887
Amounts paid to date: - ($19,052)
- ($120,562)
Net Amount Due £.606.273

TRACES _AL —

Page 22% or_2u_



“April 19. 1996

Brad Kiley

Director of Administration . ous
Democratic National Convention Commitee

320 N. Clark. Room 600A

Cott i
saad own Chicago. IL 60610
: Maver
C setweern Witten A, Da Dear Brad:
a Mover. Brome & Plem
Lem f00
Aeeveure Owen We seek the concurrence of the 1996 Democrauc National Convention

Comminee. inc. (7DNCCTM) for the expenditure of the following 1unds
Line item: 63 - Communicauion Systems Cash expense

Vendor: Amentech

Account Cos.
312 336-1996 $4.895.34
Note: The total invoice was $13.2$2.33 out of which $8.358.99 was

charged earlier as part of the anached letter. The $8.358.99 was
determined by subtracung the information call charges ($7.82 and
$130.80) from the “other charges and credits” section of the bill.

Please acknowledge the above expenditures by signing. daung and
retuming one copy of this lener to my attention

Sincerely.

Don Davis

Finance Director

Chicago ‘96

Accepted and acknowiedged:

1996 Democratic Nauional Convenuon Communee. INC.

By: Boavaitiee/ ane Date eee

ce: Nancy Clawson. Courisel, Chicago 96
Leslie Fox. Executive Director. Chicago ‘96
Janet V. Green. Deputy Chief Execuuve Officer. DNCC
Alfonse McMillan. Counsel. DNCC

foe LO =D

320 North Clark Servet. Suite 402. Chicago. 1L 60610 + ae 214-1996 + Fax 312-263-8009
qILLINOIS: rma chcayoneals


ATLANTA ‘88 COMMITTEE, INC,

DEPARTRENT BUDGET STATEREKT

. INFGRMATION SYSTERS
8/31/88

TOTAL YTS SU33E°

BUDGETED vs

ANGUNT TD ACTA
63,970.06 $2,728.54
0.00 0,00
342,50 42.80
830.28 0.00

§20424 OTHER TRAVEL

me 430114 RENTAL OF SPACE 9,00 00: :
430256 RENOVATION 2.00 * (0.00
430316 SE2ATRS & MAINTENANCE 2,077.00 2,077.00
M0214 POSTARE 10,803.71 9, 964,46 (839.08)
490214 EQUIPMENT LEASE 120,980.70 106,011.00 (16,969.205
440314 OTHER SUPPLIES 3,770.92 288.00 (5,496,921
AGOL14 CORMUNICAT IONS 0.00 0,00 0.00
.. 400214 PUBLICATION, PRINT, SUBB, 7 Poa 0.00
. 440316 FREIGHT 0.00 0,00 0.60
o 460414 CONFERENCES 0.00 0.00 0.00
480814 EMPLOYMENT DEVEL CEMENT 178.00 175.00 0,00
480014 ADVERTISING 0,00 0,00 0.00 ao
9,00 9.00 9.00 8

400814 DATA SRICESBING

472114 RECCVERY-38C 0.00 (430,000.00) = (130,000.00)

49,613. (35S, 379, 47)

sussaseeesersseess22:2228:

6.9: 206,989.14

ATTACHM EN: _&
page AO or 1a



provided that the “station shall make available to the DNCC a tape of such
coverage...without charge for rebroadcast, display, or other rights;” and, “all necessary >
production control personnel, including camera persons, grips, video control and tape
operators, audio and video maintenance engineers, chyron operators, video and utility
personnel, riggers, gaffers, property master and such other production assistants as may

be required.”

The Audit staff's review of the Host Committee’s disbursement
records identified payments to six vendors totaling $1,455,407. Furthermore, documents
obtained by the Audit staff indicate that the City of Chicago paid an additional $233.500.°
These payments were apparently made in execution of the Contract’s provisions related
to production; these expenditures are discussed in detail below.

a. Audiotek Corporation

The Audit staff identified one disbursement by the Host
Committee to Audiotek Corporation dated August 19, 1996, in the amount of $113,500 as
partial payment against invoice #12542. Host Committee internal memoranda allocated
the payment to budget line item “32-Audio.” According to the Host Committee's
contract with Audiotek, the vendor was to provide public address systems, press and
media feed distribution systems, delegate microphone selection systems, and on site
technicians for the convention. A payment of $113,500 by the City against the same
invoice was also identified.

b. ° Automated Studio Lighting

The Audit staff identified four payments to Automated
Studio Lighting, totaling $299.016, from July through October 1996. Host Committee
records disclosed that all but one of the payments was allocated to budget line item
“31-Lighting.” The remaining disbursement, in the amount of $48,070, was allocated to
budget line “19-Production Personnel.” Vendor invoices reviewed by the Audit staff
supported the Host Committee's expense classifications.

c. Chicago Scenic Studios, Inc.

The Audit staff identified two payments to Chicago Scenic
Studios, Inc. during August and November of 1996, totaling $615,083. The Audit staff's
review of Host Committee records disclosed that both disbursements were allocated to
budget line item “19-Production Personnel.” Vendor documentation confirmed that all
charges submitted were for production labor. A proposal from the vendor described labor

No audit was performed of the City of Chicago: however, we do note that pursuant to
11 CFR §9008.53(b) expenditures made by a municipality or government agency should also
meet the requirements of 11 CFR §9008.52(c).

atiacsat A
Page __ G of 22 a



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convention.

To effectuate that purpose, the original

regulations that the Commission put out in 1976, and the
revision that was put out in 1979, took the approach of
restricting the source of contributions to the city and the
Host Committee. Only local retail businesses could
contribute, and only to the extent that the contribution was
proportionate to the commercial return that they could
reasonably expect, the business benefit that they could
reasonably expect from making that contribution.

But with that restriction on the source of the
contribution of the Host Committee, there was never, in the
1976 regs or the ‘79 version, any restriction on the
purposes for which the Host Committee could expend those
funds. In fact, the 1976 explanation and justification that
this Commission submitted to Congress said that these funds
could pay for what would otherwise be a convention expense
by the National Committee.

In 1979, again, no restriction whatsoever in the
regulations -- in the language of the regulations -- or in
the explanation and justification, any indication that there
was any restriction on the purposes for which the Host
Committee Could spend its funds in terms of covering the
costs of convention facilities and services.

Now in the current version, in 1994, that was

Heritage Reporting Corporation
: (202) 628-4888



form #yeuo va » F
Committee for '96 _

-.DNCC OFFICE SUPPLY/REIMBURSEMENT
CHECK REQUEST FORM ENTERED
. ht

Payee Name _. faa cele Jace "hee
arty ‘Se Chi - same =

Amount 4 —_ VN q

Date check needed _ PAs eouassaicsce. .. “HEF 2 5 1958

Vendor invoice number H445 4, By. Hy

Purpose of expenditure

Receipt of goods/service confirmed by

Person requesting disbursement

we.

. e
All requests for check disbursement must be accompanied by the original invoice or receipts.

tt. keke

Pewent r

A. Dare

= c+: . Finance Director

e mesa) SPA

Approval signatures:

: oo . t, a .
Date received /o-Ti- soa CnBress - Contract #
- 0th mar Bites OLS re
“teraa?. i .
Check # —B499 “eee < a om ane 7e0:: e
Sgete #-a-¢:: : (for pick up only) eee

Date of check (0-299 Gener teeta rete een ee Ce

vetne wwe ELTM CHO SS

Loe:

Acct. #

Name/Title

Fund Account

Applies to contract line

oe Tea ; Fee 10d of 124.

ee



ues

DESCRIPT SON

ADMINISTRATION
CONTRACT OBLIGATIONS
INFORPATION SYSTENS
TRANSPERTAT IGN
SOUSINE

COR
TELECORMUNITAT IONS
RESTA

SOMVENTION FACSLITIES

SECURITY

TOTAL
BUDGETED
anguult

YTD sues?
¥§
- YTD ACTUAL

C58 2,80 ,022.13

148, rs RINE

4,369.26

O92 ANG 32S 114,732, 7
Jed 204,805.18 09,613.67 18S, 375.479
2.92 738,639.27 700,000.00 (32,439.27
170,486.68 (30,399.40)
cote SEAS 98S. 38,805.41
N22 WEEP42 37,240.08 $2,988.65
eM 117,807.86 148,028.72 28 tases
9.00 4,669,662.96  4,578,039.22 (42,083.48:
2.9 199,208.27 37021.54 3,975, 022.29
0.86 1,023,187.39 “BSS\t81.65 c198,008.74;
50 50,410,106.53 13,399, 990.92 2,989,893.97

4

v

wit)



CONCLUSION

For the reasons set forth above, and in the Request for Administrative Review of
Repayment Determination filed with the Commission on September 8, 1998, the
Commission should revise the repayment determination in the Final Audit Report to find
that the Host Committee payment of $600,325 of telephone service charges and the City
payment of $126,510 of telephone service charges were permissible disbursements and,

therefore, that no repayment by the Convention Committee is required.

Respectfully submitted,

a

. Joseph E. Sandler
Neil P. Reiff
SANDLER & REIFF, P.C.
6 E. Street, S.E.
Washington, D.C. 20003
(202) 543-7680

Counsel for 1996 Democratic National Convention
Committee, Inc.

Dated: January 21, 1999

ATTACHMENT

wacom — or


—-s7 ee

ae ~

- OY 7 elon

. THe City oF New York
a OFFICE OF THE MavorR
New York, N.Y. 10007

September 17, 1991

Anita Mullin

Director of Budget

Department of Business Services

Battery Maritime, Bldg. 4th Floor

New York, NY 10004

Dear Anita,

This is to certify that the attached letter from New York Telephone to the Democratic
National Convention Committee in asking for $185,000 toward telephone services can be
paid and this payment will count toward our overall commitment of $350,000 toward
telephone expenses that was made by the City of New York in a contract signed with the
1992 Democratic National Convention Committee Inc., dated 7/11/90. Also attached is

exhibit 17.01 City and Host Committee budget to show the allocation of $350,000 towards

the telephone system.

Sincerely, .
Jbeaebe fC fhiotl
Charles R. Howell

City Coordinator

1992 Democratic National Convention

51 Chambers Street, Rm. 525
New York, NY 10007 ~

cc: Deputy Mayors
Henry Miller
Mario Cooper
Mark Bilsky

attacuuert_ E

Pags_8 or LAT


6

reliance upon 11 CFR. § 9008.7(a)(4)(x) with respect to the types of convention expenses that
should be paid by the convention. Attachment B at 8. Specifically, the Convention Committee
argues that because a convention committee may pay for certain expenses with its own funds, it
does not necessarily mean that the host committee may not also pay for such expenses. Jd.

Finally, the Convention Committee asserts that the notice of proposed rulemaking on
11 C.F.R. § 9008.52 contained no suggestion that there would be prohibitions on host committee
use of funds to pay convention committee administrative and overhead expenses. Attachment B
at 12-15. While it acknowledges that agencies may modify proposed rules, the Convention
Committee argues that language in the Explanation and Justification for 11 C.F.R. § 9008.52,
which restricts a host committee’s payment of convention administrative and overhead expenses,
appears to control the entire scope of section 9008.52(c), that it was inserted at the final
Commission meeting on the proposed regulation, and that they did not have notice or opportunity
to comment upon such language. Id. at 13, 14.

During the oral hearing, the Convention Committee’s counsel argued that the
Commission’s regulations restrict only the source of funds that can be donated to host
committees, but does not restrict “the purposes for which the Host Committee could spend its
funds in terms of covering the costs of convention facilities and services.” Attachment D at 10.
The Convention Committee’s counsel also stated that “in prior conventions, the Host
Committees clearly paid these [telephone] charges.” Jd. at 23.

In its supplemental submission to the Request for an Administrative Review of the
Repayment Determination, the Convention Committee noted that after searching its records,

it appears that a substantial amount of local telephone service charges for
the 1992 Convention Committee were paid for by the City of New York.


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versus the cost of buying it or acquiring it in the first
place?
° MR. SANDLER: No.”

MR. NOBLE: What was the purpose of the phone
calls that were made?

MR. SANDLER: The purpose of the phone calls was
to do the business of putting on the convention in the city,
for the staff to talk to each other, and to talk to the
staff at the hall, and to talk to the vendors; of course, to
talk to the Host Committee. A lot of it was back and forth
to the Host Committee in the city, and all the people,
contractors, et cetera, that were working with various
aspects of the convention.

As well as -- I mean, some of it, of course, is
just necessarily communication with the DNCC staff. And I’m
sure there are phone calls to the DNCC, the White House, and
other officials of that nature that go into it. But,
essentially, it’s conducting the business of putting on the
convention.

MR. NOBLE: Did you view them as being to promote
the convention city?

MR. SANDLER: That’s a hard thing to say. I don’t
know that they were any more or less to promote the
convention city than the provision of the offices themselves
on Clark Street, in Chicago, which were clearly permissible

Heritage Reporting Corporation
(202) 628-4888

D
ATTACEENT ——
Page YL -f Se



or that certain types of service charges for use of offices or office equipment may be paid
for by the host committee (e.g., electricity for offices), but not telephone service charges.

B. Nothing in the Administrative History of the Regulation, Including

the E&J, Gives Fair Notice That Telephone Charges Are Excluded
From ¢! ist 0 es for Which Host Committees Mav Pa

Nothing in the administrative history of the regulation gives a convention
committee any indication that certain types of convention committee administrative
facilities and services may be paid for by a host committee, but not telephone service
charges. First, the regulation has never contained, in any of its formulations, any
limitation on payment of convention committee administrative expenses by a host
committee, provided that the source of funds was permissible. The first regulations
promulgated by the Commission allowed certain local businesses to donate funds to a
host committee in an amount “proportionate to the commercial return reasonably
expected” by that business during the convention, and allowed the host committee to use
those funds “to pay for what Would otherwise be a convention expense by the national
committee,” obviously including convention committee administrative costs. Former
section 121.9(b), 41 Fed. Reg. 35965 (Aug. 25, 1976). The Commission’s explanation to
Congress made clear that such funds could be used by the host committee, “‘if it so
chooses, to. . . defray convention expenses of the national party. . . . “ House Doc. 95-44,
95" Cong., 1* Sess. 137 (1977).

The second version of the regulation, promulgated in 1979, added the list of
purposes for which expenditures could be made by government agencies and
municipalities, including the term, “other similar convention related facilities and
services,” and provided that host committees could make expenditures for purposes that
“include but are not limited to” the purposes listed for municipalities, provided the funds
were donated by local retail businesses in an amount proportionate to the commercial
return reasonably expected. Former sections 9008.7(b)(2) and (d)(3), 44 Fed. Reg. 63036
at 63041-42 (Nov. 1, 1979). In essence, the concept of these regulations, carrying
forward the policy of the original regulations, was that the restrictions on source of the

funds would ensure that the donations were commercially motivated and that, once these

ATTACEMENT: B

Page__S of

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eritech Th =

0131208322515404040255009324 4o00000000000000000007b7435

eos Please include vour 14-digit

and/or any correspondence
WMasDeroaboalsbosdedseoedelelollbsollantld | > 3213
AMERITECH

, Account Number
PO Box 2500 ' 312 832-2515 2559
Bedtord Park iL 60499-2500 an .

NOV 1, 1995
LallealLecesDlovseoldecsbLobectoatbsborsbebecseeddEbossbobel
738 ZP | B 9 B 85007 “SOGT 930s !
DEMOCRATIC NATIONAL 7874
CONVENTION
ATTN GENERAL SVCS

510 N PESHTIGO CT FLA 6
CHGO IL 60611-4309

account number on vour check

SYBRENT CHARGES “Noy 28,1995  WiSherou. 76.74 ties

” Z “Welsch eid nal tei section with your chock SeyaW to Amertéch: Writs scoourl nisnbér on chock ©" "~*~
PLEASE ALLOW FIVE DAYS WHEN PAYING BY MAL OR AT AN AUTHORIZED AGENCY.
Malt paymerss to: Amersecn, PO Box 2500, Bectord Part &. 60486-2500

st

AieTitech pv 20

CUSTOM BUSINESS SERVICES | SIP RSz25IS 280
BILLING SUMMARY | NOV 1, 1985

: ow Paymerss Adustmerss Baiance Gurent Tom Due

| re74 nm

DEMOCRATIC NATIONAL *" convenmnion ATTN GENERAL SVCS
SUMMARY OF CURRENT CHARGES
AMER ITECH
Monthly Service .. . 8.71
Local Usage servic . . . 3.84
Other Charges and Cred [4 . 60.48
Local & State Add’! Charge: 06
Taxes (IL - ) 3.65
AMER I TECH CURRENT CHARGES 76.74
TOTAL CURRENT CHARGES (Late Payment Charge after 11-28) 76.74


DRAFT 6-25-92

4,700,000

MADISON SQUARE GARDEN

POST OFFICE

FIT

ONE PENN PLAZA (MID CITY ASSOC.)°

TWO PENN PLAZA

ONE PENN PLAZA (AT&T)

CREDENTIALS OFFICE

CLEANING, A/C, CLOSEDOWN

MSG STORAGE (C.H. Workorders)° *
TOTAL

REMAINING
“Helmsley Spear invoice for $110,661 outstanding.
**Includes estimate from MSG.
BUDGETED AMOUNT: . 4,345,000

ARCHITECT
CONSTRUCTION (On time start) 4g add cs

SOUND SOweo “Aondon gen erg

DISABLED ALTERATIONS
CON EDISON/TRANSFORMER
CON ED/TRANSFORMER POWER USAGE
ELEMCO STAND-BY ELECTRICIANS
MSG LABOR CHARGES
MSG POWER USAGE

TOTAL

REMAINING
332,000 of Media baok funds reduced to $215,843 .

650,000

AIRPORT SHUTTLE *
IN TOWN SHUTTLE:
AIRPORT SHUTTLE(ATLANTIC PARATRANS)
CREATIVE TRANSPORTATION
T-SHIRTS
misc
EMPLOYMENT AGENCY
TOTAL

REMAINING
* Grayline Invoice for $78,000 outstanding.

4,839,177
4,000,000 4,000,000 4,000,000
40,000 25,000 25,000
76,000 75,000 75,000
514,727 614,727 533,612
18,015 13,015 13,015
47,664 47,054 47,786
63,781 63,781 64,130
16,000
79,000 81500 130,000
4,839,177 4,770,677 4,888,643
0 68,500 (49,366)
6,521,970
644,450 475,000 475,000
5,425,184 6,425,184 5,243,026
100,000 t') ()
25,000 ° 0
127,000 0 126,316
tC] ° 11,609
0 t') 21,462
0 t) 950,000
Q Q 110,000
6,321,634 §,900,184 6,937,413
200,336 621,786 (415,443)
550,000
152,000 181,500
252,354 252,384
17,500 17,500
7,250 7,250
31,000 31,000
0 3,864
Q 36,000
460,104 499,468
69,896 50,682
ATTACHMENT

pcm — Eo



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reasonable period of time.

And if we are in the position where the committees
are filing contracts in advance of the convention, and we
have them in-house, and we know what the contract says, and
then we are waiting for two years, a year and-a-half, or
whatever, to commence an audit, and then we are saying, oh,
well, you know, this provision here in the contract is a
problem, I don’t think we are operating particularly
efficiently. And maybe the AO process isn’t the right
answer.

But if we are getting these contracts, and there
are generic things like this, you know, where it’s in the
contract, and we think that’s in conflict with the regs, we
may want to come up with a way to deal with that ahead of
time because, as Mr. Sandler says, if you give them a notice
a year or so ahead of time, they can always go back and
amend the contract.

You know, it might not be easy to do, but it would
be doable. And I don’t see a whole lot of sense ina
problem which we could identify well in advance, waiting for
the audit to resolve.

VICE CHAIRMAN WOLD: I think I would be a little
concerned about the extend to which we are then signing off
on the contract, and any interpretation of it, but things
that are not. readily apparent on the face of it. Is it

Heritage Reporting Corporation
(202) 628-4888

ATTACH

Page YT of SO _


pager (“‘beeper’) charges, usage charges for cellular phones, rental of certain types of
office equipment, and consumable office supplies such as paper, printer and fax
cartridges, pens, pads, fasteners and the like, as well as postage for use by the Convention
Committee. The Audit Division, again, approved such payments notwithstanding the
language of the E&J suggesting that a host committee may not pay for any convention
committee administrative and overhead expenses.

Thus, the Audit Division’s own inconsistent and contradictory application of the
regulation demonstrates that no regulated entity could possibly figure out, or have been
put on notice, that the regulation contained distinctions between certain kinds of
administrative expenses and others, or that certain kinds of service charges would be
allowable and others would not. For this reason too, the regulation did not provide fair

notice to the Convention Committee that telephone service charges would be disallowed.

D. The Definition of Convention Expenses Is Useless in Interpreting the Scope

The Final Audit Report places some reliance on the fact that the Commission's
tules of course allow a convention committee itself to pay for its own administrative and
overhead expenses. The Final Audit Report cites 11 C.F.R. § 9008.7(a)(4)(x), which
permits a convention committee pay for its own “[a]dministrative and office expenses for
conducting the convention, including. . . telephone charges.” Reference to these
regulations was also made during the open Commission meeting on June 25, 1998, at
which the Final Audit Report was approved.

That a convention committee may pay for certain expenses with its own funds,
from the public grant, says nothing whatsoever about whether a host committee may also
pay for such expenses. There are numerous categories of expenses which the regulations
allow either the convention committee or the host committee to pay for, including its own
offices and office equipment, and expenses for preparing the physical site of the
convention, including rental of the hail, platforms and seating, all of which are
specifically set forth both in section 9008.7(a)(4), as permissible convention committee
expenses, and in section 9008.53(c)(1), as permissible host committee expenses. There is

no provision in the regulations, anywhere, or in the E&J, even remotely suggesting that if