November 30,2010 

Perkins Coie 

607 Fourteenth Street N.W. 

Washington, D.C. 20005-2003 

PHONE: 202.628.6600 

MX: 202.434.1690 

www.perklnscoie.com 

BY HAND 

Mr. Joseph F. Stoltz 

Assistant StaffDirector 

Audit Division 

Federal Election Commission 

999 E Street, N.W. 

Washington, DC 20463 

Re: Chris Dodd for President, Inc. 

Response to Preliminary Audit Report 

Dear Mr. Stoltz: 

On behalf of our client, Chris Dodd for President, Inc. ("the Committee"), we write in response 

to the Preliminary Report of the Audit Division C*the PAR"). We appreciate the additional time 

provided for our response. 

INTRODUCTION 

Now completing his last term in the Senate before retuming to private life. Senator Chris Dodd 

ran for President for the first time in the 2008 primary election. He did not immediately resolve 

to seek public funds. Rather, he made that decision late in 2007, which required the Committee 

quickly to revise its intemal control and compliance procedures. The Committee's core 

compliance functions were handled in-house. 

Senator Dodd dropped out of the race on the night of the Iowa caucuses. As the PAR*s 

Statement of Net Outstanding Campaign Obligations shows, the Committee was substantially in 

debt on Caucus Night. Moreover, after the election, the Committee faced the novel situation of 

having to dispose of its general election contributions. These circumstances, and the abrupt end 

of the Senator's campaign, contributed to some of the lapses noted in the PAR. 

The Committee disputes in part the PAR's two adverse findings. First, the PAR overstates the 

amount of excessive and prohibited contributions accepted by the Committee. Second, it 

exaggerates the misstatements on the Committee's reports. In each case, the error seems largely 

to involve the Committee's permitted use of brokerage accounts to keep its general election 

contributions. 

63870-0001/LEGALI9643667.1 

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MENLO PARK • PHOENIX • PORTLAND • SAN FRANCISCO • SEATTLE • SHANGHAI • WASHINGTON. D.C. 

Perlcins Coie LLP and Affiliates 
Mr. Joseph F. Stoltz 

November 30, 2010 

Page 2 

The Committee provides this response and supporting docimientation to address these issues, and 

otherwise to comply with the auditors' reconmiendations. 

DISCUSSION 

I. The PAR Overstates the Amount of Excessive and Prohibited Contributions 

Received by the Committee 

A. The Committee did not receive a prohibited contribution from the 

Firefighters' union. 

The Committee paid $32,233 to FIRE PAC, the separate segregated fund of the Intemational 

Association of Firefighters ("lAFF"), for use of a "wrapped" bus decorated to promote Senator 

Dodd's candidacy. Initially, the lAFF rented the bus as a partisan conunimication; FIREPAC 

paid for the wrap as an independent expenditure. After learning of the wrapped bus, the 

Committee sought to acquire its use to promote Senator Dodd's candidacy. The PAR assumes 

that the Committee received a prohibited contribution from the lAFF because it failed to pay 

within 60 days for the portion of the expense that was attributable to the bus rental. See PAR at 

8 (citing 11 C.F.R. § 100.93(b)(2), (d)).' 

The PAR assumes that the Committee received a prohibited contribution fi'om the lAFF - a 

union treasury fund. But the invoice directed the Conunittee to pay FIRE PAC - the lAFF's 

separate segregated fund. The Committee cannot be found to have received a prohibited union 

treasury contribution, when it was told to pay the PAC. 

Moreover, even if the Committee should have paid the lAFF, the 60-day timetable in section 

100.93 should not apply. The rule applies only to nonconunercial forms of transportation. See 

11 C.F.R. § 100.93(a)(l)(ii). But here, the transaction involved a form of advertising that the 

campaign sought to convert for its own use. The primary puipose of the wrapped bus was not to 

transport people from place to place, but rather to serve as an unusual form of campaign 

visibility, like the C-SPAN bus or the Ron Paul blimp. Analyzed in this way, the proper question 

is whether the campaign paid for the use of the bus within a commercially reasonable time. Cf. 

11 C.F.R, § 114.9(d). 

Finally, the PAR does not adequately consider the circumstances that led to the delay in 

payment. While the payment remained outstanding, the Committee was in a deficit position with 

many competing obligations that it sought to manage as best it could. In the end, the Committee, 

' The PAR does not contend that FIREPAC coordinated its independent expenditure with the Committee. It simply 

alleges that the Committee failed timely to pay under 11 C.F.R. § 100.93, after being invoiced for the wrapped bus. 

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Mr. Joseph F. Stoltz 

November 30,2010 

Page 3 

in an abundance of caution, chose to pay the full cost of the bus rental and wrap, even though 

there was a strong argument that it could have paid less. 

B. The Committee did not receive many of the excessive contributions identified 

by the PAR. 

Finding 2 of the PAR asserts that the Conunittee received $295,050 in excessive contributions 

potentially payable to the Treasury.^ Of this amount, $244,050 involves contributions for which 

the Committee supposedly "has not obtained the required redesignation letters". PAR at 4. The 

other $51,000 is said to result from excessive PAC contributions. Id. 

The true amounts are lower. Of the $295,050 in asserted, excessive contributions, only $59,200 

remained imresolved on receipt of the PAR. 

Of the $244,050 in asserted unredesignated and unrefimded contributions,^ the available 

documentation shows that only $14,900 awaited refund or disgorgement upon receipt of the 

PAR: 

• For $74,800, the Conunittee timely obtained written redesignations. A schedule of these 

contributions and copies of the signed redesignation letters are attached as Exhibit B. 

• For $7,300, the Committee had issued refunds and disgorgements that cleared the bank. 

A schedule of these contributions and copies of the supporting docimientation are 

attached as Exhibit C. 

• For $144,950, the Committee issued refund checks which later became stale-dated. A 

schedule of these contributions, copies of the original refund check stubs and a copy of a 

disgorgement check in this same amount to the U.S. Treasury are attached as Exhibit D.^ 

' Finding 1 correctly states that the Committee did not receive matching ftinds in excess of entitlement. The 

Committee does not dispute Finding I, except to note that the Statement of Net Outstanding Campaign Obligations 

presents incorrect amounts for "General Election Cash in Bank" and "General Election Accounts Payable." The 

NOCO Statement uses the fair market value of the brokerage account in which these funds were kept, instead of the 

basis value of the account. While this error does not affect the Committee's net ftnancial position, it is significant in 

light of Findings 2 and 3, which we discuss later herein. 

^ The auditors identified the contributions that were supposed to comprise the $244,050 in a spreadsheet provided to 

the Committee after submission of the PAR. A copy of the spreadsheet is attached as Exhibit A. 

^ While the Committee agrees that the stale-dated reftind checks must be disgorged, many do not provide an 

appropriate basis for a finding of excessive contributions, in that they were lawftilly received and timely refunded. 

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Mr. Joseph F. Stoltz 

November 30,2010 

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• For $2,100, the Committee's data indicates that the check identified by the auditors was 

retumed for non-sufficient funds, and hence requires no refund. See Exhibit E. 

Upon receipt of the PAR, the Committee lacked evidence of refunds or timely redesignations for 

$14,900.^ A schedule of these contributions, copies of refund checks aggregating $12,100, and a 

copy of a disgorgement check for the remaining $2,800 to the U.S. Treasury, are attached as 

Exhibit F. 

And of the $51,000 in asserted excessive PAC contributions, no more than $44,300 awaited 

refund or disgorgement. $6,700 were not excessive: 

• The National Apartment Association PAC is said to have made a $1,500 excessive 

contribution to the Committee. But neither Commission nor Committee records show 

any such contribution. The PAC gave $5,000 for the primary election on March 30, 

2007, but did not give for the general election. See Exhibit G. . 

• SI A PAC is said to have made a $2,700 excessive contribution. But the PAC did not give 

to the Committee. The PAC did make a $5,000 contribution to the Senate re-election 

campaign on October 25,2006, which was transferred to the Committee for the primary 

election. SeeExiabiXH. 

• The Hartford Advocates Fund is said to have made excessive contributions of $5,000 and 

$2,500, respectively, to the Committee. The PAC gave $5,000 to the Senate re-election 

committee on October 3,2006, which was transferred to the Committee for the primary 

election. And the PAC gave $5,000 to the Committee on March 22,2007, for the general 

election. But neither Commission nor Committee records show an additional $2,500 

contribution. A copy of a refund check for the general election contribution is attached 

with the other supporting documentation as Exhibit I. 

With regard to the $44,300 in asserted PAC excessives, the Committee complies with the 

auditors' recommendations by issuing refunds. Copies of the refund checks are attached as 

Exhibit J. 

C. The changing value of the Committee's brokerage account did not result in 

any excessive contribution 

On carefiil review, it becomes clear that much of the PAR's excessive contribution finding has 

nothing to do with lack of written redesignations. Rather, the PAR relies instead on the fact that 

' These contributions were from donors for whom the Committee had no current address, and to whom it could not 

issue reftinds. 

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Page 5 

the brokerage account in which the Committee kept general election contributions declined in 

value during the audit period. Page 4 of the PAR claimed that the Committee "received 

contributions totaling $244,050 for which it has not obtained the required redesignation letters." 

This claim, as shown above, is incorrect. But page 6, foomote [a] of the PAR says that 

investment account "losses are the basis for the excessive contributions of $244,050 discussed in 

Finding 2." Because the fair market value of the brokerage account in fall 2008 was less than the 

total amount of general election contributions, the PAR seems to contend that the redesignated 

contributions were not fully resolved, and that the Committee received a prohibited contribution 

as a result.^ 

As Commission mles expressly permitted, the Committee kept general election contributions in 

an investment accoimt with Morgan Stanley. See 11 C.F.R. § 103.3(a).^ The same broker 

maintained another investment account for the Senate campaign. When Senator Dodd dropped 

out ofthe presidential race, the Committee worked to obtain written redesignations of its general 

election contributions to the Senate campaign. At the same time, the Committee sought a 

Conimission advisory opinion to extend the time for obtaining redesignations and making 

refunds, and to get permission to transfer the redesignated funds to the Senate campaign. After 

obtaining written redesignations for $351,210 in general election contributions, and after 

obtaining the advisory opinion, the Committee directed its broker to transfer those contributions 

to the Senate campaign's brokerage account. The broker did this by joumal entry. 

The PAR wrongly uses paper investment losses to generate a finding of excessive contributions.' 

To determine the balance available for transfer, it did not look to the basis value of the account, 

but instead to the fair market value on the date of transfer.'° Yet the account was not sold. The 

^ See PAR at 10 C'Even if [the Committee] were to obtain the required redesignation letters, it lacks the fiinds to 

complete the transfer or refund."). 

^ The Commission has permitted the investment of political committee ftinds in a variety of investment vehicles. 

See Advisory Opinion 1997-06 (permitting investment in govemment securities and money market ftinds); Advisory 

Opinion 1986-18 (pennitting investment in a cash management account maintained by an investment and brokerage 

firm; Advisory Opinion 1980-39 (permitting investment in an open-end diversified investment trust which is a 

professionally managed money market ftind). The Conunission has viewed these transfers as "merely a conversion 

of one form of cash on hand to another." Advisory Opinion 1999-8. 

' See Advisoiy Opinion 2008-04. The Committee sought the opinion because of the lack of clear authority in the 

rules to redesignate or transfer general election contributions ftom a publicly ftinded primary committee. The 

Commission wrote those rules when presidential campaigns normally sought public funds in both the primary and 

general elections, and eschewed private general election fiindraising. 

' The transfers occurred in ftill 2008, when the market was in the midst ofan historic collapse. 

'° After the transactions in this audit occurred, it became known that the Audit Division has advanced a position on 

investment account valuation similar to that seemingly advanced here. See Report of the Audit Division on Friends 

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Mr. Joseph F. Stoltz 

November 30,2010 

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broker simply made a journal entry when directed to transfer the funds. This is why the 

Committee disclosed a transfer of $351,210 to the Senate re-election campaign. It was the total 

amount of contributions for which it had obtained timely written redesignations, and these 

contributions remained in the account. 

Even if investment losses had deprived the Committee entirely of the funds available for a 

transfer in response to redesignations, the Committee still would not have received an excessive 

contribution. The purpose of section 102.9(e)(3)'s refund or redesignation requirement is to 

deprive the Committee of the use of its general election contributions, and hence to preserve the 

integrity of the primary election contribution limit. This is why the Commission has disallowed 

candidate proposals to send stale-dated general election refunds to charity: it has deemed that the 

funds must remain "not usable."'' This is also why the Conunission allows disgorgement to the 

Treasury, even though § 102.9(e) does not expressly provide that option. Here, too, the funds 

remain unusable. 

The PAR does not suggest that the Committee retained any use of these general election 

contributions. Instead, ignoring the puipose of 102.9(e)(3), it seeks to punish the Committee for 

an historic decline in the stock market. Under the PAR's view of the law, if the Conunittee had 

maintained the $351,210 in a federally chartered depository institution,'^ ifthe bank had failed 

(as many did in fall 2008), and if the Committee were eligible only for the standard $250,000 in 

deposit insurance, then the Committee would have received a prohibited contribution in the 

amount of $101,210. We know of no Conunission authority for such a result, nor of any way for 

a prudent political committee to guarantee against it. 

And yet, as demonstrated above, with the exceptions acknowledged by the Committee, it has 

made all required refunds. The PAR provides no basis for a finding of excessive contributions 

based on the redesignated funds kept in the Committee's brokerage account. 

II. The PAR Overstates the Level of Misstatement of Financial Activity 

After the date of ineligibility, the Committee had some difficulty in preparing its reports. This 

owed mainly to problems experienced in the use of its financial database, which were explained 

and documented in the Committee's written response to the Exit Conference. This is why, for 

of Weiner (July 22,2009), at 17 C'Initially, the Audit staff recommended that all invesmient gains and losses should 

be reported regardless of whether they had been realized, thus reflecting the investment's market value at the close 

of the reporting period."). 

" See Advisory Opinion 2003-18 (issued to Sen. Bob Smith). 

"5ee 11 C.F.R. §103.2. 

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November 30,2010 

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example, the Committee failed initially to disclose on its FEC report a matching fund payment 

received on July 17,2008, even though the payment was otherwise a matter of public record. 

This is also why the Committee over-reported a $144,757 loan repayment. The Committee is 

complying with the PAR's recommendations by filing amendments to correct these 

misstatements. 

Still, the PAR does not correctly present the level of misstatement, again mainly because of its 

incorrect treatment of the Committee's brokerage account. First, it contends that the Committee 

overstated its disbursements by reporting the $351,210 transfer of general election contributions 

discussed above.'^ Second, it contends that the Committee failed to report $202,336 in "realized 

losses." But as the Committee noted in its response to the Exit Conference, the PAR appears to 

confuse fluctuations in the account's fair market value, which do not need to be reported, with 

the actual sale of the portfolio assets. 

We appreciate the Commission's attention to these matters. 

Very tmly yours. 

Marc E. Elias 

Brian G. Svoboda 

cc: Mr. Alex Boniewicz 

Mr. Kendrick Smith 

Ms. Kathy Damato 

Attachments 

The auditors take issue with the timing of the transfer's reporting. The Committee reported the transfer as having 

occurred on September 30,2008. But, the auditors note, and the Committee has acknowledged, that the broker did 

not execute the transfer until October. The Committee is amending its report to conform to the auditors' 

recommendation . But, an early, good-faith disclosure ofthe transaction should not provide the basis for any ftiture 

action. 

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