FEDERAL ELECTION COMMISSION 

WASHINGTON. D.C.'20463 

MEMORANDUM DEC012015 

TO: 

FROM: 

Patricia C. Orrock 

Chief Compliance Officer 

Thomas E. Hintermister 

Assistant Staff Director 

Audit Division 

Lisa J. Stevenson 

Deputy General Counsel - Law 

Lorenzo Holloway 

Assistant General Counsel 

Compliance Advice 

Joshua Blume 

Attorney 

SUBJECT: Interim Audit Report on TeaPartyExpress.Org (LRA 995) 

I. INTRODUCTION 

The Office of the General Counsel has reviewed the Interim Audit Report ("lAR") on 

TeaPartyExpress.Org ("the Committee"). The lAR contains four findings: Misstatement of 

Financial Activity (Finding 1); Disclosure of Occupation/Name of Employer (Finding 2); Failure 

to File Reports and Properly Disclose Independent Expenditures (Finding 3);.and Failure to 

Itemize Debts and Obligations (Finding 4). We concur with Findings 1,2, and 4. Our comments 

address two aspects of the independent expenditures discussed in Finding 3: (i) expenditures not 

supported by the underlying communications and (ii) the absence of the dissemination date for 

24/48 hour reporting of independent expenditures. If you have any questions, please contact 

Joshua Blume, the attorney assigned to this audit. 
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II. FAILURE TO FILE REPORTS AND PROPERLY DISCLOSE INDEPENDENT 

EXPENDITURES (Finding 3) 

The lAR concludes that the Committee disclosed as operating expenditures or as other 

disbursements approximately $4.6 million of media-related expenses that, according to the Audit 

Division, may qualify as independent expenditures and therefore should have been reported as 

such. Of this total, approximately $845,000 was spent on expenditures for which copies of the 

underlying communications were available and the underlying communications could be 

associated with invoices and other supporting documentation. We have reviewed the underlying 

communications for these independent expenditures, and we concur that the expenses for these 

communications appear to be independent expenditures. 

Our comments are directed, first, to apparent independent expenditures identified in the 

lAR that were not supported by underlying communications, and second, to the absence of 

dissemination date information for some apparent independent expenditure communications, 

which would be used to determine whether the apparent independent expenditures were timely 

reported within 24 or 48 hours of their dissemination.' 

A. Independent Expenditures Not Supported By Underlying Communications 

With respect to the first subject, the JAR identifies approximately $3.8 million in apparent 

independent expenditures that the Audit staff could not completely verify with documentation. 

The lAR further subdivides these apparent independent expenditures into four subcategories. In 

the first two of these subcategories, the relevant cominunications were available for review, but 

other necessary documentation was not available.^ These subcategories are: (i) "Communications 

Without Invoice" (texts of communications that were not able to be associated with invoices) and 

(ii) "Details on Invoice" (texts of e-mails^ associated with invoices, but not traceable to 

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

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

or charts that show which advertisements are deemed independent expenditures along with a copy of the lAR so that 

the Committee may provide a fiilly informed response. 

' Some of these apparent independent expenditures were supported by underlying communications, but the 

communications were either not associated with invoices, or, if associated with invoices, were not traceable to a 

disbursement, database or a. bank. 

' The e-mails we examined included hyperlinks to other websites, including, most predominantly, a Tea Party 

Express donation page and the Committee's homepage, which, presumably, provides access to all of the pages on that 

website. In our comments on a previous audit, we concluded that an underlying communication accessible by 

hyperlink and containing additional language expressly advocating the election or defeat of a clearly identified 

candidate would be a separate communication. See OGC Comments on lAR on the National Campaign Fund (LRA 

847), at 3 (Nov. 10,2011). Here, some of the hyperlinks appear to lead to web pages that are no longer active while 

others lead to active web pages, but show their current content rather than the content they would have displayed on 

the date on which viewers received the e-mails containing the links to those pages. Because the contemporaneous, as 

opposed to the current, web pages, appear to be unavailable for examination at this time, we are confining our analysis 

at the present time to the texts of the e-mails themselves. 
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disbursement database or bank). In the second two subcategories, apparent independent 

expenditures were not supported by underlying communications, and the Audit staff inferred that 

these were apparent independent expenditures from other information. These subcategories are: 

(iii) "Use of Common Independent Expenditure Vendor (with invoice)" (no communications 

available; Audit staff inferred payments made for independent expenditures because same vendor 

provided other communications that Committee reported as independent expenditures and because 

content of invoices associated with disbursements suggested payments for communications 

containing express advocacy); and (iv) "Use of Common Independent Expenditure Vendor 

(without invoice)" (no communications or invoices available; Audit staff inferred payments made 

for independent expenditures because same vendor provided other communications that 

Committee reported as independent expenditures). These comments focus on subcategories (iii) 

and (iv). 

To be an independent expenditure, a communication must expressly advocate the election 

or defeat of a clearly identified candidate and must not be made in concert or cooperation with or at 

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

agents, or a political party committee or its agents. 52 U.S.C. § 30101(17); 11 C.F.R. § 100.16(a). 

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

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

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

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

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

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

Democratic nominee," "cast your ballot for the Republican challenger for U.S. Senate in Georgia," 

"Smith for Congress," "Bill McKay in '94," "vote Pro-Life" or "vote Pro-Choice" accompanied 

by a listing of clearly identified candidates described as Pro-Life or Pro-Choice, "vote against Old 

Hickory," "defeat" accompanied by a picture of one or more candidate(s), "reject the incumbent" 

or communications of campaign slogan(s) or individual word(s), which in context can have no 

other reasonable meaning than to urge the election or defeat of one or more clearly identified 

candidate(s), such as posters, bumper stickers, advertisements, etc. which say "Nixon's the One", 

"Carter'76", "Reagan/Bush" or "Mondale!" 11 C.F.R. § 100.22(a). 

Second, a communication may contain express advocacy if, when taken as a whole and 

with limited reference to external events, such as the proximity to the election, it could only be 

interpreted by a reasonable person as containing advocacy for the election or defeat of one or more 

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

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

not differ as to whether it encourages actions to elect or defeat one or more clearly identified 

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

With these standards in mind, and with respect to categories (iii) and (iv), we do not believe 

that the Audit staff may infer that disbursements were for independent expenditures solely on the 

basis of invoice descriptions or the use of common vendors. Since the communications are not 

available, it is difficult to determine whether they contain express advocacy. The information in 

invoices, generally, may not be adequate because invoices are not typically created for the purpose 
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of conveying the content of communications. Rather, invoices usually contain brief descriptions 

that are sufficient for both a vendor to identify the service provided and a committee to confirm 

that it is receiving the service for which it contracted prior to making payment. Similarly, although 

the auditors found that disbursements were made to some of the same vendors who had previously 

been paid by the Committee for communications containing express advocacy, its conclusion that 

these additional communications from the same vendor therefore contain express advocacy cannot 

be supported since it is possible that the same vendor provided services for communications that 

did not, in fact, contain express advocacy and thus were not independent expenditures. Given the 

difficulty of analyzing whether a communication contains express advocacy when the 

communication is available, we conclude descriptive information contained in an invoice, 

database, or bank statement or the use of a common vendor is too tangential to support a finding 

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

descriptive documentation than that relied upon by Audit staff here. 4 

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

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

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

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

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

Report on the Maine Republican Party" (LRA 817) (Dec. 17, 201 0). This type of adverse 

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

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

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

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

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

conclude that printed materials costs that the committee coded in its internal records as federal 

election activity ("FEA") but reported as operating expenses represents potential FEA while 

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

not exist here. 

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

media-related disbursements in categories (iii) and (iv) should not be categorized as independent 

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

for which the Committee has not provided sufficient documentation to verify its disclosure reports. 

When a committee reports financial activity, the Commission requires the committee to maintain 

records with respect to that financial activity. 11 C.F.R. § 104.14(b)(l). These records must 

As support for its approach, the Audit Division has directed our attention to advice we provided to it 

informally in the audit of , and states that it followed the guidance 

in this matter in fashioning its undocumented expenditure analysis in the current JAR. In the matter, we 

recommended that the Audit Division treat certain disbursements as independent expenditures in the interim audit 

report and invite the to respond to the report. See

. However, in , the texts of the underlying communications were available for us to review. Our 

recommendation was based on the absence of an explanation from for dividing its communications into 

independent and operating expenditures in the manner that it did. !d. In categories (iii) and (iv), however, we do not 

have the texts of the underlying communications. 
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provide, in sufficient detail, the necessary information and data from which the filed reports may 

be verified, explained, clarified, and checked for accuracy and completeness. Id. In the absence of 

this information, the auditors are unable to verify whether the Committee correctly reported its 

disbursements as operating expenditures or whether they should have been disclosed as 

independent expenditures. Thus, the Committee should be given the opportunity to provide copies 

of the communications, additional documentation, or other information and/or to explain any 

discrepancies in its reporting. In the alternative, the Audit staff may request the Commission to 

issue a subpoena for copies of the communications at issue or other documents the auditors believe 

may enable it to verify the Committee's reporting of these disbursements as operating 

expenditures.^ 

B. The Absence of Dissemination Date Information for 24/48 Hour Reporting of 

Independent Expenditures 

With respect to the second subject, we comment briefly on the portion of Finding 3 that 

discusses the Committee's apparent failure to file certain 24-hour and 48-hour reports of 

independent expenditures in a timely fashion. The lAR notes that for certain of the 

communications the actual dates of dissemination' were not known and that in such cases, the 

Audit Division used either the date of the invoice or the date of the incurrence of the expense for 

the independent expenditure as the date of public dissemination for the purpose of conducting its 

analysis. lAR, at 12, n.6. In subsequent discussion with the Audit staff, the Audit staff clarified 

that it did not actually use the date of the invoice or the incurrence of the expense itself as the 

dissemination date, but rather relied upon a "date range" listed on the invoice that the Audit staff 

assumes, in the absence of information from the Committee, represents the range of dates within 

which the underlying communications were publicly disseminated. 

We recommend that the Audit Division revise footnote 6 of the lAR to include this 

clarification, both for the Commission's benefit and so that the Committee may respond and 

indicate whether the Audit Division's assumption is correct. 

^ To the extent that any of the expenditures identified in Finding 4, Failure to Itemize Debt and Obligations, are 

apparent independent expenditures also identified in Finding 3, the Audit staffs further analysis of any additional 

information the Committee provides with respect to Finding 3 may require modification of Finding 4. 

' ' The Commission's regulations require committees to use the date of public distribution or dissemination of 

the underlying communication as the relevant date for determining compliance with the 24 and 48 hour reporting 

obligations. See 11 C.F.R. § 104.4(b)(2), (c). See aiso, e.g.. Final Audit Report of the Commission on the United 

Association Political Education Committee, at 9-10 (approved Sept. 15,2011) (Commission approved finding.that 

committee required to file 24 or 48 hour reports based on dissemination date rather than payment date).