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February 16, 1979

MEMORANDUM

Attached please find a copy of the final audit report

for the Lowenstein '76 Committee (NY/5) which was approved

by the Commission on January 31, 1979.

As of this date, February 16, 1979, all info~ationa1

copies of the report have been received by all parties

involved and this report may be released to the public.

The release of this report will complete the 5th District

of New York •

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TO:

THROUGH:

FROM:

SUBJECT:

FRED S. EILAND

PRESS OFFICE

....BOB COSTA

JUDY HAWKINS 2-

PUBLIC ISSUANCE OF AUDIT REPORT - LOWENSTEIN '76 COMMITTEE (NY/S)

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Attachment as stated

cc: FEC Library

RAe

Public Record
• FEDERAL ELECTION COl\\j\t

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REPORT OF THE AUDIT DIVISION

ON THE

LOWENSTEIN '76 COMMITTEE

I. Background

A. Overview

This report is based on an audit of the Lowenstein '76

Committee ("the Committee"), undertaken by the Audit Division

of the Federal Election Commission in accordance with the

Commission's audit policy 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 438(a) (8) of Title 2 of the United States

Code which directs the Commission to make from time to time

audits and field investigations with respect to reports and

statements filed under the provisions of the Act.

The Committee registered with the Federal Election

Commission on July 12, 1976, in support of Allard K. Lowenstein

for the office of Representative of the Fifth Congressional

District of New York. On July 12, 1976, the Committee was

designated by the Candidate as his principal campaign committee

for the 1976 election. The Committee maintained its headquarters

in Rockville Centre, New York.

The audit covered the period from July 1, 1976 through

September 30, 1977, the final coverage date of the latest report

filed by the Committee at the time of the audit. During this

period the Committee reported a beginning cash balance of $ -0-,

total receipts of $112,442, total expenditures of $112,302 and

a closing cash balance on June 30, 1977 of $140.

This audit report is based on documents and working

papers which support each of the factual statements. They form

part of the record upon which the Commission based its decisions

on the matters in the report and were available to Commissioners

and appropriate staff for review •

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B. Key Personnel

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The principal officers of the Committee were Mr. Paul

Tully, Chairman, and Mr. Charles Castelli, Treasurer.

c. Scope

The audit included such tests as verification of total

reported receipts and expenditures and individual transactions:

review of required supporting documentation: analysis of Committee debts and obligations: and such other audit procedures as

deemed necessary under the circumstances.

II. Auditor's Opinion and Description of Findings

It is the op1n10n of the Audit staff, based upon examination

of the reports and statements fil~g and the records presented, that,

except for the deficiencies noted below, the ~reportsand statem~Jl!:~~

of the Lowenstein '76 Committee fairly present the financial

activities of the Committee for the period covered by the audit• Further, except as noted below, no material problems in complying

with the Federal Election Campaign Act were discovered during the

course of the audit.

A. Apparent Corporate and Labor Union Contributions

Section 44lb(a) of Title 2, United States Code, states

that it is unlawful for any political committee knowingly to

accept or receive any contribution from any corporation or labor

organization.

Section l03.3(b) of Title 11, Code of Federal Regulations,

requires that contributions which appear to be illegal shall be,

within 10 days (1) returned to the contributor; or (2) deposited

into the campaign depository, and reported, in which case the

treasurer shall make and retain a written record noting the basis

for the appearance of illegality. The treasurer shall make his or

her best efforts to determine the legality of the contribution.

Refunds shall be made when a contribution cannot be determined to

be legal within a reasonable time, and the treasurer shall so note

by amending the current report or noting the change on the

candidate's or committee's next required report•
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Our examination of the Committee's contribution records

revealed that the Committee received eight (8) contributions from

eight (8) corporations totaling $1,290 and one (1) contribution

from a labor union totaling $100. Two (2) of th~ contributions,

totaling $1,000, were each in excess of $100. There were no

procedures in use by the Committee to determine if companies or

businesses, which sent contributions drawn on their accounts, were

incorporated. The Audit staff verified the corporate status of

the businesses through inquiries with the appropriate Secretary of

State.

We discussed the retention of apparent corporate and

labor union contributions with the Controller and he could offer

no explanation regarding this matter. He stated that he was

unaware that the Committee had accepted corporate or labor union

contributions other than a few known to be from "one-person"

corporations. He stated the Committee would be m~re careful in

the future and agreed to return all corporate and labor union

contributions "provided the Committee's cash flow permitted."

On May 8, 1978, the Audit staff received copies of

seven (7) certified Committee checks totaling $1,190. The

seven (7) checks were used to refund seven (7) of the nine (9)

contributions. The Audit staff also received c~~ies of two (2)

letters from the two (2) remaining contributors indicating that

their contributions did not contain corporate or labor union

treasury funds.

The Audit staff referred this matter to the Commission's

Office of General Counsel on May 16, 1978, where Matter Under

Review 611(78) was initiated.

Based on its review, the Office of General Counsel

recommended that since all corporate and labor union contributions

were refunded, no further action should be taken. On October 2,

1978, the Commission voted to find no reasonable cause to believe

that Section 44lb(a) had been violated and to take no further

action in this matter.

B. Disclosure of "Payments on Behalf of the Committee"

Section 431(e) (1) (A) of Title 2, United States Code,

states in part that a contribution means a gift, subscription,

loan, advance, or deposit of money or anything of value made

for the purpose of influencing the election of ary person to

Federal office •
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Section 434(b) (5) of Title 2, United States Code,

states that each report shall disclose each loan to or from any

person within the calendar year in an aggregate amount or value

in excess of $100 together with the full names and mailing

addresses (occupations and the principal places of business, if

any) of the lender, endorsers, and guarantors, if any, the date

and amount of such loans.

Section 434(b) (9) of Title 2, United States Code,

requires the Committee to disclose the identification of each

person to whom expenditures have been made on behalf of the

Committee within the calendar year in an aggregate amount or

value in excess of $100, the amount, date, and purpose of each

such expenditure.

Section 44la(a) (1) (A) of Title 2, United States Code,

states that no person shall make contributions to any candidate

Ci.J1g_hJ_s authorized political conunittee(s) with respect to any election -for-Federal office- wh-icn- in the aggregate exceed $1,-000.-

Section 44la(f) of Title 2, United States Code, states

that no candidate or political committee shall knowingly accept

any contribution or make any expenditure in violation of the

provisions of Section 441a.

1. One (1) individual made three (3) payments totaling

$2,683 on behalf of the Committee as an advance of rental and ~atering expenses for a fundraiser held on July 13, 1976.

The amounts and dates of these payments were:

July 9, 1976

July 12, 1976

July 19, 1976

Total

$1,550

1,065

68

$2,683

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During discussions with the Committee, it was learned

that the hotel where the fundraiser was to be held required advance

payment of the expenses and that the Committee did not have

sufficient funds available to make these payments. Therefore, this

individual, a friend and supporter of the Candidate, made the

required pai~ents, and the Committee agreed to repay these amounts

advanced with the proceeds from the fundrais~r•
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On August 5, 1976, the Committee repaid the $2,683

in three (3) checks in the same amounts as the original payments. 1/

The,Committee reported the payment of this amount as a reimbursement

on September 30, 1976. However, due to its treatment of the

transactions as reimbursements, the Committee did not report the

payments on its behalf as receipts or expenditures.

2. On September 21, 1976, the Committee Controller made

a $2,000 payment to a vendor on behalf of the Committee from his

personal funds. On the same day, the Committee issued its check

for the same amount to reimburse the Controller for this payment.

This reimbursement check to the Controller was not negotiated until

October 7, 1976, 16 days after the date it was drawn. During

most of this period, the Committee did not have sufficient funds in

its depository to honor the check. 2/ The Committee reported this

transaction as a reimbursement to the Controller on September 21,

1976. However, due to its treatment of this payment as a reimbursement, the Committee did not report the payment on behalf of

the Committee as a receipt or expenditure.

During discussions- -with the Cont-roller _as tQ the

circumstances surrounding the payment to the vendor, he stated

that the vendor would not accept a Committee check but would

accept his personal check since he had previous business dealings

with the vendor. He stated that the Committee issued to him a check

for $2,000 and that he then made the payment with his personal

check. He characterized this transaction as a "favor" to tne

Committee so that service from the vendor would not be interrupted.

He stated that the delay in negotiating the Committee check was

due to an oversight by his secretary, who neglected to deposit

the check in his account. Upon his discovery of this, he immediately

deposited the check himself.

3. In June, 1977, four (4) individuals made loans of

$1,000 each on behalf of the Lowenstein '76 Committee and the

Lowenstein '74 Committee, to a promoter which represented an

advance to be used for expenses in connection with a fundraising

concert to be held on August 4, 1977.

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The checks were paid by the Committee's bank on September

14 and 15, 1976.

On October 1, 1976, the Committee deposited sufficient

funds to be able to honor the $2,000 check •
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On August 12, 1977, the promoter repaid the loans to

each individual. The Committee did not report these transactions

on its reports. During discussions with the Committee, it was

revealed that while this money was advanced for expenses pertinent

to the fundraiser, it actually was never used by the promoter,

therefore the Committee did not consider these reportable transactions.

We informed the Committee that, in our 0p1n1on,

based on the facts related to us and examination of the documentation

in the aforementioned three (3) situations, these payments on behalf

of the Committee constituted loans, and as such represented reportable contributions during the time they were outstanding. We further

advised the Committee of the limitation on individual contributions

addressed in Section 44la(a) (1) (A) of the Act and noted that the

transactions mentioned in (1) and (2) above were in excess of the

$1,000 per election limitation.

On May 5, 1978, the Commit~ee filed amendments-which

included the necessary disclosure for items (1), (2), and (3) above

in response to our request of March 30, 1978 .

Because item (3) above involved only disclosure

irregularities, the amendment filed by the Committee was sufficient

and no further action was necessary.

The Audit staff referred items (1) and (2) above

to the Office of General Counsel on June 12, 1978, for its review.

On June 21, 1978, these two (2) items were incorporated into

Matter Under Review 611 (i8).

For item (1) above, the review by the Office of

General Counsel resulted in a conciliation agreement, signed by

the Committee Controller on October 25, 1978. In consonance with

the conciliation agreement, toe Committee paid a civil penalty of

$200 for violating Section 44la(f) of the Act. On November 21,

1978, the Commission voted to accept the conciliation agreement

and to close the matter.

For item (2) above, since the Committee disclosed

the transaction as a loan to the Committee and as an expenditure

to the vendor, and promptly reimbursed the Controller for funds

expended on its behalf, the Commission voted on October 2, 1978,

to find no reasonable cause to believe that the Committee violated

2 U.S.C. 44la(f) by accepting a payment on its behalf by the

Committee's Controller. Therefore, no further action was taken •
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C. Itemization of Expenditures

Section 434(b) (9) and (10) of Title 2, United States

Code, requires that a committee disclose the identity of each

person to whom expenditures have been made which aggregate in

excess of $100 within a calendar year, together with the amount,

date, and purpose of each expenditure.

Our examination of Committee expenditure records

revealed that 86 expenditures (15.25% of all itemizable expenditures) aggregating in excess of $100 were not itemized as

required. These expenditures represent a total amount of

$3,315.43 (3.60% of all itemizable expenditures), of which

$2,640.84 was paid to campaign employees for personal services

and $674.59 was paid to various vendors and other individuals.

The Audit staff was informed that the Committee misund~~~~Q~4 the itemization requirements of the Act, and thus

did not itemize -tJ'ieacove mentioned -expendi-tures.

On May 5, 1978, the Committee filed a comprehensive

amendment which included the itemization for the expenditures

not previously itemized.

Recommendation

Since the Committee filed the comprehensive amendment, the

Audit staff recommends no further action.

D. Other Matters

Described below are matters noted during the audit for

which the Audit staff believes no further action is required by

the Committee.

1. During our examination of the petty cash fund, we

were able to dete~ine that $2,188.09 in various cash receipts,

including $948 from a postage stamp refund, was used in the petty

cash fund without first being deposited into the Committee bank

account. We advised the Committee of the necessity of depositing

all contributions into its account within 10 days of receipt•
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The Committee replied that the $948 was received very close to

election day and the funds were needed to pay campaign expenses

on election night. The Committee was unable to explain why the

balance of these funds was never deposited. The Committee pointed

out that these funds were reported on FEe disclosure reports as

required.

2. The Committee did not deposit contributor checks

totaling $3,800 within the 10 day period as required by section

103.3(a) of the Commission's Regulations. The Controller

attributed the late deposits to various problems encountered

through banking by mail and that delays were occasionally caused

by "business travel and pressures of other matters."

3. It was noted during our examination of Committee

receipt records that in one (1) instance, a member of the

Committee commingled Committee funds with his personal funds

as prohibi-ted bySec~tion ~432 (b) of 'I'i. t~J.~ 2-' United States Code.

The Controller explained that the commingling

occurred when he collected $221 in cash at a fundraising event• Rather than send cash through the mail to the bank, he wrote a

personal check for $221 and deposited it in the Committee account,

keeping the cash in exchange •
• Candica:;/Ccrrm;tte~:

CONGRESSICNAL ~UOI7 ~~?CRr

Allard Lowenstein

State:

Dis~ric~:

LOCJt~cn:

New York

5th

Long Island - Central and Southwestern Nassau County

John Wydler (R, C)

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Democrat (Liberal)

John Wydler (R, C)

'Iotas Cas~: G~n~r~i ~1ac~icn - John Wydler (R, C) - 110,366 - 55.i~

Allard Lo~enstein (0, L) - 37,3E2 - 1~

?~imJ~J ~1ec:icn - Unopposed

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S112,442

$112,302

1969-71
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FEDERAL ELECTION COM,\lISSION

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ADDITIONAL INFORMATION REGARDING 'lHIS ORGANIZATION

MAY BE I.DC'ATED IN A CDMPLETED OOMPLIANCE ACrION

FILE RELEASED BY THE ~sfdN-AND-MADE-PUBLIC-m

'1l1E PUBLIC RECORDS OFFICE. FOR THIS PARTICULAR

ORGANIZATION'S COMPIE1'ED CDtPLIANCE ACrION FILE

SlMPLY JSK FUR nm PRESS SlH-1ARY OF MllR 41 6"/1

'!HE PRESS Stl+1ARY WIIL PROVIDE A BRIEF HISTORY OF

'!HE CASE AND A StM1ARY OF 'mE ACrIONS TAKEN, IF J.NY•

Audit ~: 1.5.$