RRVISE3D) 

FEDERAL ELECTION COMMISSION 

WASHINGTON, 0.e. 20463 

Hay 4, 2011 

MEMORANDUM 

TO: 

THROUGH: 

FROM: 

Patricia Cannona 

Chief Compliance Officer 

Josqih F. Stoltz 

Assistant Staff Director 

Audit Division 

Alec Palmer 

Acting Staff Director 

Christopher Hughey 

Acting General Counsel 

Lawrence L. Calvert, Jr. 

Associate General Couns 

General Law and Advice 

fP 

^ 

Lorenzo Holloway 

Assistant General Counsel 

Public Finance and Audit Advice 

Albert Veldhuyzen ^ ygo A/^ 

Attorney n ^ 

Margaret J. Forman 

Attomey 

SUBJECT: Interim Audit Repoit on The Legacy Political Action Committee (LRA #815) 

1. INTRODUCTION 

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

("Proposed Report") on The Legacy Political Action Committee ("LCP" or **Committec**). We 
Memorandum to Patricia Cannona 

The L^acy Political Action Committee lAR 

Page 2 

concur with Finding I in the Proposed Report (Misstatement of Financial Activity). In its cover 

memorandum, the Audit Division requested a legal analysis of Finding 2 (Failure to File Notices 

and Properly Disclose Independent Expenditures). We analyze this issue below.' If you have 

any questions, please contact Maigaret J. Fornian, the attomey assigned to this audit. 

IL BACKGROUND 

LCP made expenditures for fundraising letters, many of which also included express 

advocacy. LCP originally categorized these expenditures as operating expenditures. After 

receiving notices from the Reports Analysis Division ("RAD"), LCP agreed that a number of its 

fundraising letters also included express advocacy. RAD advised LCP it should amend its 

reports to disclose communications containing express advocacy as independent expenditures. 

LCP admitted, after discussions with RAD, that the fundraising letters ^Mncluded content which 

contained some words of express advocacy." ETEXT ATTACHMENT, Dec. 18,2008 (FEC 

Image #28935204773). LCP then disclosed over $1 million in independent expenditures on 

Schedule E of its amended repoits, and filed some, but not all, of the 24/48-hour notices. Audit's 

review determined that some ofthe letters disclosed as independent expenditures in the amended 

reports contained express advocacy and should also have been timely disclosed through 24/48-

hour notices. Audit determined, however, that many ofthe letters disclosed as independent 

expenditures in the amended reports did not, in fact, contain express advocacy.^ Audit's review 

also revealed that LCP reported the independent expenditures when the invoices were paid, 

rather than when the materials were disseminated. The draft interim audit report recommends 

that LCP provide evidence demonstrating that the disbursements were not independent 

expenditures and therefore did not require 24/48-houi notices, and submit and implement revised 

procedures for reporting ind^endent expenditures and tracking dissemination dates for 

independent expenditures to ensure timely filing of24/48-hour notices. 

Though LCP ultimately admitted that some ofthe fundraising letters included express 

advocacy, LCP advanced two main reasons why it believed these fundraising letters should not 

be categorized as independent expenditures: 1) Characterizing the mailings as independent 

expenditures "has the effect of greatly overstating and inflating Ihe actual funds used by ihe 

organization to influence the election by express advocacy;'* 2) It also has the effect of 

"misleading the public into thinking that this type of committee is making significant fulfilbnent 

expenditures when in fact all of the funds in the mailing program are simply being used for 

fundraising." fd. 

^ Audit staff detemiined that, of the S1,139.647 LCP disclosed as independent expenditures in its amended 

reporu, only S390,626 of these expenditures "appeared to meet the definition oflndependent expendinires and 

comaiived languace eiCDresslv.adxofiatinit the eteetiOn.er-defeafcof a clearly identiijed candidate," Djaft Interim 

Audit Report. 
Memorandum to Patricia Oarniona 

The Legacy Political Action Committee lAR 

Page 3 

III. ANALYSIS 

First, we will examine whether fundraising letters can be independent 

expenditures as a matter of law. Second, we will examine the letters through a general 

discussion to detennine whether the costs for those letters are independent expenditures. 

Third, we will advise the auditors as to whether the independent expenditures are 

correctly reported as being made for the 2008 general electioa 

A. Flmdraising Commuoications as Indepcndeot Expenditures 

The Commission has found that ftandraising solicitations containing express advocscy 

should be reported as independent expenditures. In MUR 5809, the Christian Voter Project 

{*Wf") failed to file independent expenditme notices for the costs of fundraising letters that 

expressly advocated the election/defeat of candidates. The CoRWiission fotmd reason to believe 

that CVP's failure to file independent expenditure notices viohtted the Act, and aeccipted a 

conciliation agreement with the committee based on that violation, bi MUR SS 18 (Hawaii 

Democratic Party), a party communicaUon contained at least three messages: an invitation to 

precinct meetings, express advocacy ofthe defeat of a clearly identified Federal candidate, and a 

fundxaising appeal. The Office of General Counsel concluded the coromunicatioa should have 

been reported either as an independent expenditure or as federal election activity, and 

recommended reason to believe findings. The Commission rejected our recommendation, itdr on 

grounds that solicitations could not be indepoident expenditures but on grounds that invitations 

to precinct meetings permitted treatment aa a federal/non-feddral allocated administrative 

expense under the exception to the deiinition of federal election activity for costs of local 

politica) coovaOicnBi 2 U^C f 431(20XBXiji»' Io paiticuhuv Cmnmiasionos von Spakovaky 

and Weintraub stated in theh* Statement of Reasons that **had this invitation been mailedmore 

broadly than it was, and in sufficient numbers to raise questions about wheither it was a bona fide 

invitation, or if it was really just a fiindrsising or advocacy piece masquerading as an invitation, 

(his wnufd be a dilSsrent case." MUR 5518 (Hawaii Oemoerattc Party), Statement cf Reasons of 

Commissioners Hans A. von Spakovsky and Ellen L. Weintraub, at 3 (Feb. 23,2007); ^ MURs 

5511 and 5525 (Swift Boat Veterans for Thitii) (fundraising solicitations containing express 

•advocacy were expenditures that counted towards organization's threshiold for political 

committee status). 
Memorandum to Patricia Cannona 

The Legacy Politieal Action Committee f AR 

Page 4 

B. Detailed Information Regarding FuodraisiDg 

This Ofiflce has reviewed die 60 types of fundraising letters msiled by LCP, which fonn 

the basis for Audit's finding that the Committee &iled to file notices and properly disclose 

independent expenditures.'^ We will first discuss the ftindraiaing letters that we cotielude contain 

express advocacy. We then will discuss why we do not conclude that the remaining Ihndraising 

letters were express advocacy.^ We generally agree with the auditors' finding. In our teview of 

the 60 fundraising letters, however, we have detennuied that some additional letters also 

included express advocacy and should therefiyce also been reported as independent expenditures, 

as discussed below. 

1. FttDdraislng Letters That Conraid Express Advocaey 

We conclude that Letters 6,11,18-24,26-41,43-47,49-53,55-60 contain express 

advocacy pursuant to section 100.22(a). The language from Letters 6,11,18-20,22-23, 26-36, 

I 39-41,43-47,49-53,56-60 included phrases such as 'lielp elect John McCain," *teake sure John 

j McCain is elected in November," **Vote John McCain!" "help stop Hillaiy Clinton," and **John 

I McCain for President!" An independent expenditure is a non^coordinated expenditure for a 

communication that expressly advocates the election or defeat of a clearly identified candidate.' 

2 U.S.C. § 431(17); 11 C.F.R. § 100.16(a). A conununication tiiat "expressly advocates" 

includes language such as **votB for the President," "re-elect your Congressman," "defeat," or 

[ other words, which in context, can have no other reasonable meaning than to urge the election or 

defeat ofone or more clearly identified candidates. 11 C.F.R ^ \(iOJ22ia)i see Buckley VL Valeo. 

424U.S.l,44n.52(l976). 

Some ofthese solicitations included phrases that were marginally less direct than "Vote 

for John McCain" but did not change tiw **essential nature" ofthe letters. FEC v. MCFL, 

479 US. 238,249 (1986); see Letters 21,24,37,38 and 55. For example, some ofthe letters 

emphasize the importance ofthe reader's participation in putting John McCain in the Whhe 

How9i One exempt is Letter 39, wJiidi aSa for Ihe ledpieat^s yOO% comnaiment *^or Jolm 

McCain to achieve victory and to ensure that be has a Reptiblican Congress to enact his 

agenda." The letter also asks for "WHATEVER IS YOUR 100% COMMTTMENT TO 

FUTTINQ JOHN MCCAIN, A TRUE AMERICAN HEAO, m THE WHITE HOUSE." In both 

ofthese examples, the words are less marginally direct than "Vote for John McCain," but the 

essentfaf nature of this letter is the same. 

* In addition to the 60 t>pes of fiindniiing letteiB, LCP developed a carrier envelope that slates "JOHN 

MCCAIN FOR PRESIDENT." which is express advocacy pursuant lo 11 CF.R. 9100.32(a). We do not know hew 

LCP used diis carrier envetope. If this carrier envekipe accoiapsaied any of the fbndniising letters that we are 

ceneMit^ do not COIOKB expmi edvecaey, ourcoadiotoe mtM duage for ime AnAajsay kamk 

' We have no infonnation lhat die communications wcve cooidinated witfi any candidate. 
Memorandum to Patricia Carmona 

The Legacy Political Action Comniittee lAR 

Page 5 

Letter 21 contains "an official Republican Presidential Elections Committee Petition of 

Support to Senator John McCain and the Republican Party." The letter states, "so much is at 

stake... the fate ofthe White House, the fate of Reptiblican ideals and the fate of America... 

And fhaf s why I need you to rush your generous $150 contribution along with your signed 

Petition of Support." The Petition of Support states, "I, the undersigned, as a citizen of the 

United States of America, do hereby petition and notify you that I support you, your strong, 

principled leadership and candidacy for the White House." The solicitation sends tiie recipient 

an American flag, and asks the recipient to "keep tiie American flag I sent you as a reminder of 

how critical your support for the Republican Party and Republican Presidential candidate John 

McCain is to the fhture of our country." The sentence informs the reader that their "support" for 

McCain is "critical to the fUture of our country." A message calling on the reader or listener to 

"support" a candidate qualifies as express advocacy pursuant to section 100.22(a). 

Some letters ask for die reader to cast a ballot or pledge to vote for John McCain. Letter 

24 asks. "Do you support John McCain to be tiie next President of the United States?" The letter 

goes on to declare, "I certamly hope you saul 'YES!'" It also asks, "Will you help me work to 

elect Senator John McCain and keep the White House in Republican hands?" The letter says, "I 

am counting on your vote to show our Republican leaders that R.P.E.C. members arc standing 

behind John McCain." The actual ''ballot," is tiie Republican Presidential Elections Conunittee 

2008 Ballot, not the Election Day ballot. The recipient is instructed to indicate tiieir choice 1^ 

checking "yes" or "no." The recipient is also asked to make a contribution, and **to check all that 

apply," which includes a space to check that the R.P.E.C. Ballot Completed, and also a separate 

space to check that a contribution is enclosed. The line "I am counting cn your vote" refers to 

the "ballot" attached to the letter, not the actual presidential election, and therefore does not 

constitute express advocacy. But Letter 24 also contains the phrase: "Will you help me to work 

to elect Senator John McCam and keep die White House in Republican hands?" followed by the 

phrase, "or will you allow Barack Obama and Hillary Clinton to impose their radical socialist 

values on you and your famiiyT' Posed in such a manner, (he phrase 'Viff you help me worfe to 

elect Senator John McCain" becomes an appeal to "help me to woik to elect" McCain in tiie 

form of a rhetorical question. An appeal to "help work to elect" a cleariy identified candidate is 

express advocacy pursuant fo section (00.2ZCa). 

Letter 37 contains a pledge to vote in tiie election and an optional question as to whether 

fhtredpieat will vote for John McCain or Banck Qbama. The letter states^ "Unless you want 

Barack Obama to be ainging a victory speech on November 4th, our Republican ticket needs 

your vote." This is essentially the same as saying. "Vote for the Republican nominees." "Vote 

for" is one ofthe action phrases in section i00.22(aX and the candidates opposed and supported 

are clearly identified. Thus, letter 37 contains express advocacy and is an independent 

expenditure. 

Letter SS also contains express advocacy pursuant to section 100.22(a). Letter SS 

includes tiie following: "You can be that Loyal Friend by sending your generous contribution of 

$100 to the Republican Presidential Elections Conrnu'ittee to support in the fig^t to ensure that 

John McCain is the next President of tiie United States of America." By explicitly asking tiie 

reader to take action *to ensure tiiat John McCain is tiie next President ofthe United States of 

America,'* the communication contuns express advocacy as defined in 11 CF.R. § 100.22(a). 
Memorandum to Patricia Cannona 

The Legacy Political Action Conunittee lAR 

Page 6 

We also conclude that Letters 9,42 and 48 contain express advocacy pursuant to section 

100.22(b). An advertisement satisfies the requirements for express advocacy pursuant to the 

Commission's regulations at 11 C.F.R. § 100.22(b) if, when taken as a whole and with limited 

reference to extemal events such as tiie proximity to the election, it could only be interpreted by 

a reasonable person as containing advocacy of the election or defeat of one or more clearly 

identified candidates because (1) the electoral portion is unmistakable, imambiguous, and 

suggestive of only one meaning and (2) reasonable minds could not differ as to whether it 

encourages actions to elect or defeat the clearly identified candidates or encourages some other 

kind of action. In Letters 9,14,42 and 48, there is an electoral portion that makes a specific 

reference to the 2008 election so the electoral portion is unmistakable, imambiguous, and 

suggestive of only one meaning. Additionally, each of these letters encourages actions to elect 

or defeat one or more clearly identified candidates. 

Letter 9 references a "2008 Election figiht to keep Barack Obama out of tiie Oval Office" 

and urges the reader to "[s]tand up for John McCain." The electoral portion is umnistakable and 

imambiguous; there is a reference to a "2008 Election figiht to keep Barack Obama out of the 

Oval Office." It is suggestive of only one meaning - an attempt to defeat Barack Obama ("keep 

Barack Obama out of tiie Oval Office") and elect John McCain. The action encouraged is for the 

voter to send money, but the idea is to send money to be used to advocate the election of John 

McCain and the defeat of Barack Obama. References to money being used generically in House 

and Senate races could arguably permit allocation of this piece between those parts that are 

independent expenditures on behalf of McCain and tiie generic messages pursuant to 

11 C.F.R. § 106.1. See AO 2010-10 (National Right to Ufe PAC). 

In Letter 42, tiie reader is asked to "stand[ ] witii John McCaiui^' and to "help stop Barack 

Obama." This provides an unambiguous reference to the election. 11 C.F.R. § l00.22(bXI). 

The specific way readers are told they can "help stop Barack Obama" is by "ru8h[ing] your 

generous contribution today" to Legacy PAC, which the letter says in almost as many words will 

be used Sor that purpose ("Please rush'your generous coi^bu^on today to help stop Barack 

Obama.") Reasonable minds cannot differ that on its foce, the action called for is an action to 

help defeat Obama by sending money to Legacy PAC. 11 C.F.R. § 100.22(b)(2). 

Letter 48 states, "every do/far f raise between now and efection day2008 will go to help 

expose Hillary Qinton's critical threat to your fiiture and your beliefs." It coiu;ludes by stating, 

"Please don't fail me in this crisis. I am counting on you to help me stop Hillary Clinton!" Prior 

to the "please don't fail me" ai^al, there are a minimum of 12 sq)arate references to the 

election, including to "the extraordmary danger America faces if Hillary Clinton is elected 

president," "every dollar I raise between now and election day 2008 will go to help expose 

Hillary Clinton's critical threat to your future and beliefs," and the need to make sure "during the 

coming election" that "every American knows what you know — Hillary Clinton is a dangerous, 

far-left liberal posing as a moderate just to get elected." Given these umnistakable and 

unambiguous references to the presidential election and the dangers of electing Hillary Clinton 

president, reasonable people caimot disagree that m appeal to "help me stop Hillary Clinton" is 

an appeal to take action to help Michael Reagan stop Hillary Clinton fix>m being elected 
Memorandum to Patricia Carmona 

The Legacy Political Action Conmiittee lAR 

Page? 

President —specifically, by sending money to tiie Legacy PAC that will be used to oppose her 

candidacy. 

For these reasons, we conclude that the impropriate 24- and 48- hour notices should have 

been filed for independent expenditures associated with the specific letters referenced. We 

recommend that the auditors modify theu: finding in accordance with our conclusion. 

2. Fundraisfaig Letters That Do Not Contain Express Advocacy 

We conclude that Letters 1-5,7-8,10,12-17,25 and 54 do not contain express advocacy. 

Some of the letters simply do not contain elements of express advocacy. Many of tiie letters 

contain some elements of express advocacy, but not all tiiat are required under sections 100.22(a) 

or 100.22(b). 

Some letters simply do not contain any elements of express advocacy and therefore do 

not constitute independent expenditures. One example of such a letter is Letter 14, *Ten-Day 

Strategy Initiative." In this letter, dated and mailed after the election, the recipient is asked to 

make a contribution to pay down the debt of tiie Rqniblican Presidential Elections Committee. 

Letter 14 does not meet the requirements of an independent expenditures pursuant to 

2 U.S.C. § 431(17) because it does not reference a clearly identified candidate. 

Another example is Letter 4, which includes a Republican Presidential Elections 

Committee Pledge of Commitment. In this letter, the recipient is asked to "[pjroudly sign the 

enclosed Republican Presidential Elections Committee Pledge of Commitment to show the 

Democrats that loyal, patriotic Republicans will never give up tiie battle for our values and 

principles." The communication does iu>t meet the requkements of an independent expenditures 

pursuant to 2 U.S.C. § 431(17) because it does not reference a clearly identified candidate. 

Many ofthe letters contain some elements of express advocacy, but not all that are 

required under sections I00,22(a) or 100.22(b). An example of a tetter that coResins aarae, but 

not all ofthe elements of express advocacy is Letter 25. In Letter 25, ihe recipient is asked "[i]f 

Election 2008 were held right now^ would you vote for John McCain as your next president?" 

The letter asks the recipient to retum tiie Registered Sampling Survey and to include a generous 

contribution. It says, "During tiiis critical time, I need every tool I can possibly get to ensure that 

we keep the White House under Republican control." Letter 25 does not contain the elements of 

express advocacy pursuant to section 100.22(a) because it does not uses phrases urging the 

recipient to vote for oc against any cleady iderttiSad caitdidate, and, while it iderttiSes John 

McCain as a candidate for President, it does not urge tiie recipient to vote for or against him. 

Rather^ it simply has a one-question survey^ if the election were held today^ would tiie recipient 

"yes,** vote for John McCam, **no,"not vote for John McCain, or is the recipient not sure? Letter 

25 does contain a reference to "Election 2008" and tiierefore contains at least some electoral 

element, under section 100.22(b). But Letter 25 fails the second prong of section 100.22(b) 

because it does not encourage actions to elect or defeat any clearly identified candidates. The 

closest Letter 25 comes to encouraging actions to elect any clearly identified candidates is a 

phrase that states tiiat "[d]uring this critical time, I need every tool I can possibly get to ensure 
iiHi 

Memorandum to Patricia Cannona 

The Legacy Political Action Committee lAR 

Pages 

tiiat we keep the White House under Republican control." We conclude that Letter 25 fails to 

meet the requirements for express advocacy in sections 100.22(a) or 100.22(b). 

Another example is Letter 12, which says "You must know what is at stake if Barack 

Obama succeeds in taking the White House on November 4^, 2008." And: "I want you to know 

what is at stake if you and I do not succeed in putting John McCain in the White House on 

November 4th, 2008." It also says "Please help me get out the tmth. Do not allow Barack 

Obama to succeed in pulling the wool over the people's eyes and stealing the presidency." The 

reply form states "I know what is at stake. I will not allow the Democratic National Committee, 

the Obama campaign and the liberal media to succeed in taking the White House, raising taxes, 

cuttmg defense and intelligence, and socializing medicine. In the final push for victory, I am 

rushing my generous contribution of...." Letter 12 contains an electoral poition, in that it 

references the 2008 general election. The call to "help me get out tiie tmth," and "[d]o not allow 

Barack Obama to succeed in pulling the wool over the people's eyes..." however, is subject to 

different interpretations. It could advocate the reader to vote against him. It could, however, 

encourage the reader to not allow him to succeed with lies and misrepresentations, such that, if 

he wins, he wins honestly. We conclude that Letter 12 fiuls to meet the requirements for express 

advocacy in sections 100.22(a) or 100.22(b). 

Similarly, Letter 54 asks "Will you proudly cast your ballot to make John McCain your 

president?" The actual ballot is the Republican Presidential Elections Conmuttee Republican 

National Convention Ballot, not an actual ballot for Election Day. And tiie reply form says: 'To 

help in the figiht to make John McCain tiie next President ofthe United States, I am casting my 

vote with him and with the Republican Presidential Elections Committee and sending a 

contribution of...." Letter 54 also states: "If you, like me, want a man of courage, conviction, 

integrity and deep faitii in ttie White House, tiien I am asking you to give everytiung you can to 

the figiht - just as John McCain always does. Please do everytiung you can to ensure this battle 

is wun." This language is a very ehse call, but we woahd as a matter cf discretion tooorranead 

that Letter 54 not be subject to reporting as an independent expenditure. 

For these reasons, we conclude that no 24- and 48- hour notices should have been filed 

for independent expenditures associated with Fundraising Letters I-S, 7-8,10,12-17,25 and 54. 

We pBGomiaend tfist tfie aaditors modify tiieir Rnding in accordance wi^ otnr conclusion. 

C. Reporting of Independent Expenditures 

LCP aggregated and reported all ofthe independent expenditures as being made for the 

general election. Additionaiiy, Audit's and RAD's aggregation of the independent expendiCares 

also were based on a general election timefirame. Some ofthe letters described above, however, 

occasionally reference tiie Republican National Conventioiv as well as Barack Obaxna and 

Hillary Clinton, botii candidates for the Democratic presidential nomination. Audit has asked for 

our guidance as to whetiier LCP*s, Audit's and RAD's aggregation and reporting of tiie 

independent expenditures based on the general election was correct. Our conclusion is that this 

approach is correct - each of the letters constituting independent expenditures are primarily 

focused on voting John McCain into ^ office of Presi^dent for the GeneraH Election. See 

2 U.S.C. § 434(g); 11 C.F.R. § 104.4(b); AO 2003-40 (aggregation oflndependent expenditures 
Memorandum to Patricia Carmona 

The Legacy Political Action Committee lAR 

Page 9 

for 48-hour notices are with respect to a given election). We note that some ofthese letters 

specifically advocate tiie reader to "stop Hillary." Even these letters, in context, appear to be 

focused on stopping Hillary and other Democrats fix>m wimiing the presidency in the general 

election, not their party's nomination. 
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