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f[()[RAI. [1.[eTION COf\,1f\1ISS10N

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\\,,\~t liNG 1()N.I)C. 2n·I(J \

REPORT OF TilE AUDIT DIVISION

ON

BR0HUFOR PRE SID [ NTeor·i t-i ITT EE

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1. Bac~.l"oLJnd

This report covers an audit of the Brown for Pre~idcnt

Committee, undertaken by the Audit Division to determine

\'1 hc the r' the r' e has bee ncorn p1ian c C \'/ i t h the red c r' a1 r. 1c c t ion

C(l til poi 9n i\ c t 0 f 19 71, a samend c d (II the Act II ) • The aud i t \'1 as

con duc ted pu1"sua nt to Sec t ion 43g ( (l ) ( 8) 0 f the fl. c t, \'1 h; c h

d ire c t s the C0 ~:lfn ission tog i ve p rio r i t Y to aud it; Ii 9 0 f the

verification for, and the receipt and usc of, an~ payments

received by a candi d~te under' Charter's 95 or 96 of the

1n tel" n (l 1 Rev c nu e Cod e 0 f 19 5'1, and by aut h0 r i t Y 0 f Sec t ; 0 n

90 38 ( it) \': h; ch d i t" ec t s the Comrn; s s ion aftere(l Ch mat chi n9

pay In ent pet.. i 0 d to con due tath0 r 0 ugh exam; nat ion nd a udi t

of the qualified campaign expenses or every c:lndidate and his

authori'·t)d conmittecs that received payments under Section

9037.

The uud oj teo\' ere d the peri 0 d f t" 0 n r·, arc h 22, 1976, the

date 0 f t 11 ceo I~~ mit tee lsi nee p t ion, t hr 0 ugh J un e 30, 19 77 •

oU 1" i n ~J t h 0 pc)' i 0 d (., arc h 2 2, 19 7G t h rOll qh ,lu n e 30, 19 77, the

Co fit r.1 °i t tee rep 0 l'ted totil 1 r' e C e; p l5 0 f 2 , 21 3 , 0 39. 76 and tot a1

ex pr. nd i t u 1" eS 0 f $2 , 1e3 , 181 • G4 •

As 0 f J unc 30, 19 77, the Co LU'l; t t P. (~ h(l d $? 4 , fl5 8. 12 i n

cas h- 0 n- h ndan d S1 G4 , 621 • 25 i n r e1:1 tl i n i n ~J deb t .

Th0 pl"incipal officers of the COt.l~d ltce dur'ing the period

co\, C' red by t h(' nud i t \'1 ere r~, r . Leo T. r: cCat.. thy, C;1 airfll an; and

N1"s. r·i a r i n(1 Pf a c 1 z c r, Trca sur e r .

Th oj S il U d ; t 1" ep n 1" t ; s b,1 5 cd 0 n doc U::1 C n t san d \'J 0 r kin 9 pap c t" s

S lJ Pl) 0 .. tili 9 C II C h 0 fits fur t uu1 s t (l t ( ::0. nt s . Ttl CY for m pa '" t 0 f

the l"l' C (' 1" d U po n \.: h ; c Ii the Co IIIIll; S S ion bas cd; t s dec i s ion son the

I:: J t t c }" i '1 t h; s r (' :' 0 r t, i1 nd \'J (' r e fa v.-' 1il b1e to (' 0 mill iss; 0 ncr' \t :~ d

(l Ppro pr i :t t csti\ f f for rev i P\'J •

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1I • Findings ancl Conclusions

A. Disclosure of Contributor Information

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Section 434(b)(2) of tha Act requires disclosure

r aJl 0 t' t s to con til ; n t he full nuIIIc it nd rna ; 1 i n9 il dd r ass ( 0 c cup at; on

a n· d l he p1" inc i pill P1ace 0 f bus inc SSt ; fany) 0 feu c h pet"son \-/ h0

huse0 nt l' i l> utedin C x c e s S 0 f $100 • 00 loa coIIIm; t tee \'/ i t h ina

cal end ilryeit r t tog c the r \'/ i t h the am0 untand date 0 f sue h con - tributions. Also Section 434(b) of the Act states the committee

t t" cas \I ret' s ha 11 bed c em edt0 be inc 0 IIIP1 ian c e \'J hen theyea n ~. ", ,0 \'/

best efforts have been used to obtain the information rcquir(d

by Section 434(b).

Review of the Committee's contribution records and

disclosure reports revealed that 21 of 145 contributors (14.48~) tested who gave in excess of S100.00 were not itemized,

and t hat 111 0 f 380 co nt rib utors ( 29 • 21 ~:') t cst ed 0 f tho s e

i t eIII i zed () 11 the rep 0 r t s did not ha ve 0 c cup a t ion 0 't" the pr inc i pal

p1acp of business disclosed.

The Committee filed an amendment to Schedule A on

Jan LJ ar'y 2~, 19 77, for the m0 nth s 0 f r·, ay and J une, 19 76, \'/ hi ch

listed 15 of the 21 contributors not previously itemized as contri~uting in excess of $100.00 and disclosing the occupation

and principal place of business for 69 of the 111 originally

1ac kin 9 suchi nf 0 l"mJ t ion . A1so, the Co IIIm; t tee has r c que s ted

i n f 0 l~m a t ion 0 n 0 C cup a t ion and the P1'; nc ; pa1 p1il ceo f bIIsin es s

f )" 0 m the rep 0 r ted con t rib utors 1ac kin 9 t hat ; nf 0 r'm a t ion .

Rcc0 r~~ mr nda t ion -----------

The J\udit staff recommends the Commission determine that

the r. 0 I~l ii1i t tee has mad e its l> cst e f f 0 1" t s too bt a i nthe ; nforIII u- t ; 0 n inc 0 In P1ian Cc \,/ i titSe c t ion 434 ( b) 0 f the J\ c tand n0 fur the }"

action Lc taken on this matter.

B. Failure to Oisc1osc Sourc~ of a Transfer

Section 43~(b){'l) of the Act pt"ovidcs that each

t" e POt" t 0 f r e c c i p t sand e xpen di t U I" e s s ha 11 dis c10 sethen il me

and il d dr c S 0 f c () ch pol it; cal C 0 IIImit tee 0 1" Cit nd; dale f 1" f) In \'J hie h

1. hp ~' e ~~ C l" tin 9 commit tee 0 r C\1 ndid il t ereC ; veduny t 1" unsf e '" 0 f

fUll d(), t 0 !.J (! t 11 C r' \oJ i t h the am0 lJ nt sand dute S 0 f all t ran s f P I" S •

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The Committee did not itemize the transfer of

$4,000 received May 5, 1976, from the CWA COPE Political

Contributions Committee. A $1,000 transfer dated April 30.

1976, from the same committee was reported properly by the

Committee.

When this matter was brouqht to the attention of the

Committee's Assistant Controller and TreasurC'r, they stated

they could not recall the specific transfer because of the

large volume of transactions. After contacting the Campaign

Manager and CWA COPE to confirm the transaction and reviewing the Committee's internal records, the Committee produced documentation indicating that an error in classifying the transfer

had occurred. The Committee stated, in \'iriting, that the

transfer had been deposited into the Committee's bank account

when received, but that it had been inadvertently reported with the uniternized contributions. The Committee filed an

am endmen t to its rep 0 r t \'J hi ch pro per 1y c1ass i fie d the t ran sfer

on Janua ry 24, 1977.

Recommendation

The Committee's failure to itemize the transfer is an

apparent violation of the Act, Section 434(b)(4). However,

we suggest that the failure to disclose the contribution was

an isolated procedural error rather than an intentional

subterfuge. In our opinion, the Committee's action in this

case was not its practice and does not constitute a serious

violation of the Act. The Audit staff recommends no action

be taken on this matter.

C. Fa; 1 ~J r e toOi s clos e Co mOl itt ee R~J) 0s ; tor; es

Section 433(b)(9) of the Act requires that the

Committee disclos~ all repositories used by th~ Committee.

The Committee failed to file a timely amendment to

its Stat~lI1ent of Organization disclosing five (5) of their

t h; r t e n (1 3) d pas ito r' i es . The sea C COLI n t s \'i e r' e usedon1y a s

; mpl'" est ace 0 U n t s, and the t ran sac t ion sin ach 0 f theIII \" e,.. e

rcpor'tcd timely to the Commission. The Committee produced

r C cor' cf S r' C ~) a )" din 9 the sea Cc 0 lJ nt s tot he f~ ud; t s t a f f . An

aIII en(!cdS tal eIII c nt 0 fOr g c1 ni z at; 0 n 1 i s tin 9 the f i ve ." e p 0 sit 0 r i e s

\.: a sf; 1e don reb t" II a r y 3, 19 7 7 •

The f\ lJ d ; t s t a f f r e c 0 t~l In end s no act ion beta ken 0 n

t h i $ I~l J t t e ." .

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o. R(!pilympnts

Pa'~t 134.3(c)(2) of the Commission's Regulations

p "0 v ide s t hat i f 0 nthc 1a s t d II Y 0 fell n d ; dit tee1 i 9 i b i 1 i t Y

there arc nct outstanding cilmpllign ohli9ations, any matching

pilymen l$ rece; vccl may be t'cta i ned for a peri od not exceed; n9

six months after the end of the matching payment period in

o ,~,d e r t 0 1 i qui date tho s e 0 b1i QcJ t ; 0 ns . J\ ny aIII 0 U nt spa ; d \'1 h; ch

a,'c not use tI t 0 1 i q II i ddte the net 0 u t s t il 11 tI i n9 c it IIIPa i 9 nob1 i -

9 \l t ; 0 n s \'/ i t h ins; x III0 nth s s hall b erepdid toth e Trca sur'Y •

Go v ern o,~ nr 0 \'/n I s can d; dil CY t e,.. min ate don J u1y 14 ,

19 7G, the dc1 teo f the Pre sid e n t i a 1 no nli nut ion by the 0CillO C r' at; c

Ndlion"l Convention. lie then became ineligible to receive

ma t eh; ng PilYlill~n ts 0 ther tha n to defrlly qua 1; fi ed campa i gn

e xPPIl S e s • 011 the date 0 f Go vel' nor Br 0 VI n lsi n0.1 ; 9 i bi 1 i t y, his

C() III nli t t e P. f i 1edadeh t s t II l eI~ I t \ r'1 t sh0 \': i n9 S30 3 , 71 3• 00 inne t

outstanding carnpaiun obli~Jationc;. The Committee had nct

outstanding Cillllpili~Jn obligations ;n th(' amount of $148,319.63

on II unua r y 21, 19/7, the date 0 f tit e Co 111m itteel s fin a 1 subm; $ S ion for III tl t chi 11 g fun ds . The l' e for e, 11 0 rep II y m'~ n t ; s

r c qui red p u,.. sua n t toPil r t 13'1 • 3(c ) ( 2) 0 f the Re ~l u1il t ion s ·

Part 13~.2(a)(2) of the Regulations provides, however,

that the Commission shall infortll the candidate "if the

C0 11~ miss ion de t e rIll i nesthat any at;: 0 unt 0 fan y puy men t mad e

t 0 a c c. ndid ate f l' (lm the mJ t chi n9 paymen t ace 0 lJ n t \.: a sus c d for

any purpose other than:

1 ) to de f l~ «y qua 1 i fie d cumPII ; 9n c xpen s c s; 0 r

2 ) to,' epity loa ns \.: h; c h \'/ ere usc d to dc f '" ay

qualified campaiun expenses •• • ."

olJ r' ... c v -i C\'1 d; s c los edthceot:lmit tee pa ; don J une 4,

1976, $306.00 to the District Court of the State of Or'egon,

r·j lJ 1 t n (1 I!lu h Co u n t y, 0 r e ~l 0 n • The T f e as lJ r (' l' S tatedt hcpay In Cn t

\'1 it S for «p pro x ; IIIJ t (~ 1y 60 par kin 9 tic k(' t $ iss uedt 0 pcop 1e

it t ll~ IH1 i ngal"ill 1yeo 11 due t r d by the c lll.~ r J i ~J n • 0n \1 u1y 14, 1977 , the COlli In i ~; S ; 0 n Pl' 0.1 i Ill; nII l' i 1y de tel'm; ned the ex pen d; t u ref 0 r the

pa ,.. kin 9 tic ke t s did 11 0 t l' e In" esc n t a II q U II 1i fie d c l\ III Pa i 9n c xpen s e • II

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I n detc rill i ni n9 t hat sue h are pity111 e n t \'1 as r cqui ..'ed, the

Commission considered the Committee Treasurer's position that

the non-qu\11 i fi cd Cllmpa i gil expenses shoul d be offset aga i nst

o the t' qua 1 i fie d c aIn pili gn e xpen sesthat c xc e (' dedthe ilm0 un t 0 f

Fcderul lIlatching funds received, thereby rcquir'ing no repayment.

If 0 \.J P Vlq~, l hceomnt iss ion did not ace cpt t hJ t po sition . The

Co IIImit t (' t' () n 1\ II gus t 4, 1977, 1" C111 ittedt0 the ComIn ission a c he c k

in the 11ll1l)Unt of $306.00 made payable to the U.S. Treasurer.

The Audit staff recommends that the Commission take no

further action on this matter.

I I I. AucI ito r I $ Stat (~ men t

Excppt for the milttet~S specifically noted ;n this report,

the it udi t d; s c los edt hilt the Br 0 \'111 for' Pre sid c nt \ Com111 itt e e

co tl d1I C ted the; r act i vi tic sin a c cor dan c e \'1 i t h the Fed e 1" il 1

[lcction Campaign Act of 1971, as amended, and Chapter 96 of

Title 26, U.S.C., in all material aspects.

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