Final Audit Report of the 

Commission on 

RIGHTMARCH.COM PAC INC 

(January 1, 2007 - December 31, 2008) 

Why the Audit 

Was Done 

Federal law permits the 

Conunission to conduct 

audits and field 

investigations of any 

political committee that is 

required to file reports 

under the Federal 

Election Campaign Act 

(tiie Act). The 

Commission generally 

conducts sucfa audits 

wfaen a committee 

appears not to faave met 

the tfaresfaold 

requirements for 

substantial compliance 

witii tiie Act.' The audit 

determines whetfaer tfae 

committee complied witfa 

tiie limitations, 

profaibitions and 

disclosure requirements 

of tiie Act. 

Future Action 

Tfae Commission may 

initiate an enforcement 

action, at a later time, 

witfa respect to any matter 

discussed in tfais report. 

About the Committee (p. 2) 

RIGHTMARCH.COM PAC INC is a non-connected, multicandidate committee faeadquartered in Braselton, Georgia. For 

more information, see chart on Committee Organization, p. 2. 

Financial Activity (p. 2) 

• Receipts 

o Contributions from Individuals $ 684,675 

Total Receipts $ 684,675 

Disbursements 

o Operating Expenditures 

o Contributions to Political Coinmittees 

o Loan Repayments 

o Independent Expenditures 

Total Disbursements 

$ 97,888 

14,988 

2,500 

563,277 

$678,653 

Commission Finding (p. 3) 

• Misstatement of Financial Activity 

Additional Issues (p. 3) 

• Extension of Credit by a Commercial Vendor (Issue 1) 

• Reporting Payments for Communications (Issue 2) 

2 U.S.C. §438(b). 
Final Audit Report of the 

Commission on 

RIGHTIiAARCH.COM PAC INC 

(January 1, 2007 - December 31, 2008) 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Request for Early Commission Consideration of Legal Questions 1 

Audit Hearing 1 

Part II. Overview of Conmiittee 

Committee Organization 2 

Overview of Financial Activity 2 

Part III. Summaries 

Conunission Finding 3 

Additional Issues 3 

Part IV. Cominission Finding 

Misstatement of Financial Activity 4 

Part V. Additional Issues 

Issue 1. Extension of Credit by a Commercial Vendor 6 

Issue 2. Reporting Payments for Communications 13 
Parti 

Background 

Authority for Audit 

This report is based on an audit of tiie RIGHTMARCH.COM PAC INC (RMC), undertaken by 

the Audit Division of the Federal Election Conunission (tiie Commission) ui accordance with the 

Federal Election Campaign Act of 1971, as amended (the Act). Tfae Audit Division conducted 

tfae audit pursuant to 2 U.S.C. §438(b), wfaicfa permits tiie Commission to conduct audits and 

field investigations of any political committee that is required to file a report under 2 U.S.C. 

§434. Prior to conducting any audit under this subsection, the Commission must perform an 

intemal review of reports filed by selected committees to determine wfaetiier tfae reports filed by 

a particular committee meet the tfaresfaold requirements for substantial compliance witfa the Act. 

2 U.S.C. §438(b). 

Scope of Audit 

Following Commission-approved procedures, tiie Audit staff evaluated various risk factors and, 

as a result, this audit examined: 

1. the consistency between reported figures and bank records; 

2. tiie disclosure of individual contributors' occupation and name of employer; 

3. the disclosure of independent expenditures; and 

4. other committee operations necessary to the review. 

Request for Early Commission Consideration of Legal Questions 

Pursuant to the "Policy Statement Establisfaing a Program for Requesting Consideration of Legal 

Questions by tfae Commission," RMC requested early consideration of two legal questions raised 

during tfae audit. First, RMC questioned wfaetfaer certain fees represented an extension of credit 

resulting in in-kind contributions and reportable debt. (See Issue 1.) Second. RMC questioned 

wfaetfaer expenses for fundraising communications sfaould be reported as independent 

expenditures. (See Issue 2.) 

The Commission did not resolve these matters or provide guidance on how to proceed. 

Therefore, pursuant to the Commission's policy, the Audit staff included these matters in this 

report. 

Audit Hearing 

RMC declined the opportunity for an audit hearing before the Commission. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Dateof Registration April 23, 2003 

• Audit Coverage January 1,2007 - December 31,2008 

Headquarters Braselton, Georgia 

Bank Information 

• Bank Depositories Three 

• Bank Accounts Three checking 

Treasurer 

• Treasurer When Audit Was Conducted William Greene 

• Treasurer During Period Covered by Audit William Greene 

Management Information 

• Attended Coinmission Campaign Finance 

Seminar 

No 

• Who Handled Accounting and 

Recordkeeping Tasks 

Paid Staff 

Overview of Financial Activity 

(Audited Amounts) 

Cash-on-hand @ January 1,2007 $ 9,161 

Receipts 

o Contributions from Individuals 684,675 

Total Receipts $ 684,675 

Disbursements 

o Operating Expenditures 97,888 

o Contributions to Political Committees 14,988 

o Loan Repayments 2,500 

o Independent Expenditures 563,277 

Total Disbursements $ 678,653 

Cash-on-hand @ December 31,2008 $ 15,183 
Part III 

Summaries 

Commission Finding 

Misstatement of Financial Activity 

During audit fieldwork, a comparison of RMCs reported financial activity with its bank 

records revealed misstatements for 2007 and 2008. For 2007, RMC understated reported 

receipts and ending casfa-on-faand by $23,940 and $16,750, respectively. For 2008, RMC 

understated reported disbursements by $9,889 and ending cash-on-hand by $6,625. In its 

response to the Interim Audit Report, RMC indicated that it agreed with the Audit staff 

conclusion and would file amended disclosure reports to correct the misstatements. To 

date, no amendments have been filed. 

In its response to the Draft Final Audit Report, RMC concurred that it had misstated its 

activity and noted it would work with the Audit staff to file amended disclosure reports. 

To date, no amendments have been filed. 

The Commission approved tfae finding tfaat RMC misstated receipts and disbursements 

for calendar years 2007 and 2008. (For more detail, see p. 4.) 

Additional Issues 

Issue 1. Extension of Credit by a Commercial Vendor 

The Audit staff initially identified a vendor appearing to have extended credit to RMC 

outside of its normal course of business and not making commercially reasonable 

attempts to collect $1,655,327 for services rendered. After audit fieldwork, the Audit 

staff concluded that RMC had demonstrated that it had not received an impermissible 

extension of credit but recommended that RMC report debts relating to the agreement. 

The Commission could not reach consensus on whetfaer RMC demonstrated that the 

terms of the contract are in the normal course of the vendor's business or if weekly 

statements received from the vendor reflected debt. Thus, the Commission did not 

approve, by the required four votes, tfae Audit staffs conclusion tfaat RMC faad 

demonstrated tfaat tfae terms of the vendor contract were in the normal course of business 

or the recommendation that the disclosure of debts of $1,655,327 was required. 

Pursuant to Commission Directive 70,^ matters not approved by the required four votes 

are discussed in the "Additional Issues" section. 

(For more detail, see p. 6.) 

Issue 2. Reporting Payments for Coinmunications 

With respect to the expenditures, totaling $2,172,135. identified by tfae Audit staff as 

appearing to meet tfae definition of an independent expenditure, the Commission could 

Available at http://www.fec.gov/directtves/directive_70.pdf. 
not reach a consensus on whetfaer tfaese communications cx)ntained express advocacy and 

sfaould be reported as independent expenditures. Tfaus, tfae Commission did not approve, 

by tfae required four votes, tfae Audit staffs recommendation tfaat payments for tfaese 

coinmunications requured reporting as independent expenditures. 

(For more detail, see p. 13.) 

Pursuant to Conunission Directive 70, matters not approved by tfae required four votes 

are discussed in tfae "Additional Issues" section. 

Part IV 

Commission Finding 

Misstatement of Financial Activity 

Summary 

During audit fieldwork, a comparison of RMCs reported financial activity with its bank 

records revealed misstatements for 2007 and 2008. For 2007, RMC understated reported 

receipts and ending casfa-on-faand by $23,940 and $16,750, respectively. For 2008, RMC 

understated reported disbursements by $9,889 and ending casfa-on-faand by $6,625. In its 

response to tiie Interim Audit Report, RMC indicated tiiat it agreed witfa the Audit staff 

conclusion and would file amended disclosure reports to correct the misstatements. To 

date, no amendments have been filed. (For more detail, see p. 4.) 

In its response to the Draft Fmal Audit Report, RMC concurred that it had misstated its 

activity and noted it would work with the Audit staff to file amended disclosiure reports. 

To date, no amendments have been filed. 

The Commission approved tfae finding tfaat RMC misstated receipts and disbursements 

for calendar years 2007 and 2008. 

Legal Standard 

Contents of Reports. Each report must disclose: 

• tiie amount of cash-on-hand at the beginning and end of the reporting period; 

• the total amount of receipts for the reporting period and for tfae calendar year; 

• tfae total amount of disbursements for tiie reporting period and for tiie calendar year; 

and 

• certain transactions tfaat require itemization on Scfaedule A (Itemized Receipts) or 

Schedule B (Itemized Disbursements). 2 U.S.C. §434(b)(l), (2), (3), (4) and (5). 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff reconciled reported financial activity with bank 

records for calendar years 2007 and 2008. The following charts outiine the discrepancies 
for beginning cash balances, receipts, disbursements and ending casfa balances for eacfa 

year. Succeeding paragrapfas address tfae reasons for tfae misstatements. 

2007 Activity 

Reported Bank Records Discrepancy 

Opening Cash Balance 

@ January 1,2007 

$11,070 $9,161 $1,909 

Overstated 

Receipts $481,887 $505,827 $23,940 

Understated 

Disbursements $474,689 $479,970 $5,281 

Understated 

Ending Cash Balance 

@ December 31,2007 

$18,268 $35,018 $16,750 

Understated 

The understatement of receipts resulted from the following: 

• Receipts deposited to operating account not reported 

• Unexplained difference 

Understatement of Receipts 

$ 22.208 

1.732 

$ 23.940 

The $16,750 understatement of tiie ending casfa-on-faand resulted from the misstatements 

described above, as well as discrepancies in opening casfa-on-faand and disbursements. 

2008 Activity 

Reported Bank Records Discrepancy 

Opening Cash Balance 

@ January 1,2008 

$18,268 $35,018 $16,750 

Understated 

Receipts $179,084 $178,848 $236 

Overstated 

Disbursements $188,794 $198,683 $9,889 

Understated 

Ending Cash Balance 

<§> December 31, 2008 

$8,558 $15,183 $6,625 

Understated 

The understatement of disbursements resulted from the following: 

• Disbursements not reported 

• Funcfaaising fee paid in 2009, reported in 2008 

• Fees reported but not supported by check or debit 

• Unexplained difference 

Net Understatement of Disbursements 

$ 15,563 

(5,000) 

(826) 

152 

$ 9.889 

The $6,625 understatement of the endmg cash-on-hand resulted from the misstatements 

described above, as well as discrepancies in opening cash-on-faand and receipts. 
! B. Interim Audit Report & Audit Division Recommendation 

j At tfae exit conference, tfae Audit staff discussed tfae misstatements with RMC 

! representatives and provided copies of relevant schedules. 

The Audit staff recommended that RMC: 

• amend its reports to correct the misstatements noted above; and 

• amend its most recently filed report to correct the cash-on-faand balance witfa an 

explanation that the change resulted from a prior period audit adjustment. 

Further, RMC should reconcile the cash balance of its most recent report to identify any 

subsequent discrepancies that may affect tfae adjustment recommended by the Audit staff. 

C. Committee Response to Interim Audit Report 

In its response to the Interim Audit Report, RMC stated that it agreed with the auditors' 

conclusions with regards to the misstatement of financial activity and would comply with 

tiie Audit staffs recommendation to amend its disclosure reports. To date, RMC has not 

filed any amendments. 

D. Draft Final Audit Report 

The Draft Final Audit Report noted that RMC had not amended its reports to correct the 

misstatements. 

E. Committee Response to the Draft Final Audit Report 

In response to the Draft Fmal Audit Report, RMC concurred tfaat it had misstated its 

activity and noted it would work with the Audit staff to file amended disclosure reports. 

To date, RMC has not filed any amendments. 

Commission Conclusion 

On October 18,2012, the Coinmission considered the Audit Division Recommendation 

Memorandum in whicfa tfae Audit staff recpnimended tfaat tfae Commission adopt a 

finding that RMC misstated its financial activity for calendar years 2007 and 2008. 

The Coinmission approved the Audit staff's recommendation. 

Partv 

Additional Issues 

Issue 1. Extension of Credit by a Commercial Vendor 

Summary 

The Audit staff initially identified a vendor appearing to have extended credit to RMC 

outside of its normal course of business and not making commercially reasonable 

attempts to collect $1,655,327 for services rendered. After audit fieldwork, the Audit 
staff concluded that RMC had demonstrated that it had not received an impermissible 

extension of credit but recommended tfaat RMC report debts relating to tfae agreement. 

The Commission could not reach consensus on whetfaer RMC demonstrated tfaat tfae 

terms of tfae contract are in tfae normal course of tfae vendor's business or if weekly 

statements received from tfae vendor reflected debt. Tfaus, the Coinmission did not 

approve, by the required four votes, tiie Audit staffs conclusion that RMC had 

demonstrated that the terms of the vendor contract were in tfae normal course of business 

or the recommendation that the disclosure of debts of $1,655,327 was required. 

Pursuant to Coinmission Directive 70, this matter is discussed in the "Additional Issues" 

section. 

Legal Standard 

A. Contribution defined. A gift, subscription, loan (except when made in accordance 

with 11 CFR§§100.72 and 100.73), advance, or deposit of money or anytiiing of value 

made by a person for the purpose of influencing any election for Federal officio is a 

contribution. The term "anytiiing of value" includes all in-kind contributions. 

The usual and normal charge for a service is the commercially reasonable rate that one 

would expect to pay at the time the services were rendered. 

The provision of services at a charge less tfaan tfae usual and normal cfaarge results in an 

in-kind contribution. Tfae value of such a contribution would be the difference between 

tfae usual and normal charge for tfae services and tfae amount tfae political committee paid. 

11 CFR§ 100.52(a) and (d). 

B. Contributions by a Limited Liability Company (LLC). An LLC not electing 

treatment as corporation under federal tax law or not faaving publicly-traded sfaares may 

make contributions to influence federal elections. Sucfa a contribution will be considered 

as faaving been made from a partnersfaip and govemed by tfae mles pertaining to 

partnersfaips and subject to a single election limit of $5,000. Tfae contribution is 

considered a contribution from a single individual if tfae LLC is a single-member LLC 

tfaat faas not cfaosen to be treated as a corporation under IRS mles. 11 CFR §110.1(b)(1) 

and (g)(2) and (4). 

C. Definition of Commercial Vendor. A commercial vendor is any person wfao 

provides goods or services to a candidate or political committee and wfaose usual and 

normal business involves the sale, rental, lease or provision of tiiose goods or services. 

llCFR§116.1(c). 

D. Extension of Credit by Commercial Vendor. A commercial vendor, whetfaer or not 

it is a corporation, may extend credit to a candidate or political committee provided tfaat: 

• tfae credit is extended in tfae vendor's ordinary course of business (see below); and 

• tfae terms of tfae credit are similar to tfae terms tfae vendor observes wfaen 

extending a similar amount of credit to a nonpolitical client of similar risk and 

size of obligation. 11 CFR § 116.3(a) and (b). 
E. Definition of Ordinary Course of Business. In determining wfaetfaer credit was 

extended in tfae ordinary course of business, tfae Coinmission will consider wfaetfaer: 

• tiie conimercial vendor followed its establisfaed procedures and its past practice in 

approving tfae extension of credit; 

• the commercial vendor received prompt, full payment if it previously extended 

credit to the same candidate or political committee; and 

• the extension of credit conformed to the usual and normal practice in the 

commercial vendor's industry or trade. 11 CFR §116.3(c). 

F. Continuous Reporting Required. A political committee must disclose the amount 

and nature of outstanding debts and obligations until those debts are extinguished. 2 

U,S.C § 434(b)(8) and 11 CFR §§ 104.3(d) and 104.11(a). 

G. Continuous reporting of debts. Debts and obligations tiiat are owed by or to a 

political committee and remain outstanding shall be reported continuously until 

extinguished. Debts for whicfa tfae amount is over $500 sfaall be reported as of tfae 

date on wfaicfa tfae debt was incurred. 11 CFR § 104.11. 

Facts and Analysis 

A. Facts 

During audit fieldwork, tfae Audit staff mitially identified an LLC tiiat may faave extended 

credit to RMC outside tfae normal course of business by allowing invoices to remain 

outstanding for a considerable lengtfa of time^. Tfae terms of the contract between RMC 

and tiiis vendor. Political Advertising (PA), stated, "tiie client shall only be obligated to 

pay tiie contingency fee stated on Political Advertising's mvoice to the extent of the 

contributions that are actually received by Client as a result of the program. If tfae funds 

generated as a result of tfae program are less than the contingency fee stated on Political 

Advertising's invoices, then the client shall only be obligated to the extent of the 

proceeds received from the program." 

On August 20,2007, RMC entered into a contract for fundraismg services with PA. 

From August 13, 2007 tiirough December 31,2008, PA invoiced RMC $2,223,370 for 

fundraising services such as telephone calls and the printing and mailing of follow-up 

letters. RMC paid $568,043 of tiie total invoiced. As of December 31,2008, tiie Audit 

staff calculated the outstanding balance owed by RMC to be $1,655,327. Based upon its 

understanding of the terms of the contract, RMC reported only amounts paid against 

invoices. RMC did not consider tfae majority of tfae outstanding amounts reportable as 

debt owed because the terms of the contract state that RMC was responsible only up to 

the amounts raised by tfae fundraising service^. During fieldwork, tfae Audit staff 

PA is a division of Political Call Center, LLC; an Arizona limited liability company that files taxes as a 

partnership. 

* RMC reported debt of $279,564 to PA and filed Schedules D for ttiis amount from the 2007 Year-End 

report through the 2008 Year-End report. The 2009 April Quarterly report did not include an outstanding 

debt balance owed to PA. RMC! did not provide documentation to explain how this debt was calculated or 

why it was not reported after 2008. 
questioned wfaetiier $1,650,327 ($1,655,327 - $5,000 = $1,650,327) should be considered 

an excessive in-kind contribution. Audit staff noted that, during fieldwork, RMC 

provided no evidence that PA made commercially reasonable attempts to collect this 

amount. Audit staff discussed this matter witii the RMC representatives during fieldwork 

and Audit staff requested further information. 

B. Early Commission Consideration of Legal Questions 

Pursuant to the Commission Policy Statement Establishing a Pilot Program (July 20, 

2010), RMC filed a Request for Early Commission Consideration of Legal Questions 

(Request). In its Request, RMC asked the Commission to consider whetfaer "an evercfaanging weekly contingency fee" constituted reportable debt, wfaetfaer the terms of the 

contract resulted in an extension of credit, or, altematively, whetfaer tfae terms of tfae 

contract resulted in an in-kind contribution. Specifically, RMC requested tfaat tfae 

Coinmission consider tfae following: 

• First, tfaat tfae weekly contingency fees do not constitute reportable debt. RMC 

asserted tfaat neitfaer tfae Act nor tiie Commission's regulations define tfae term 

"debt." RMC asserted tfaat, in prior Advisory Opinions, tfae Commission "faas 

long faeld that State law govems whetfaer an alleged debt in fact exists, wfaat tfae 

amount of the debt is and whicfa persons or entities are responsible for paying a 

debt." As such, RMC believed there would be no debt to report until the 

termination of the contract between RMC and PA. 

• Second, RMC mentioned a fundraising contract at issue in MUR 5635^ 

(Conservative Leadership PAC) and contends that it was substantially different 

than the contract between RMC and PA. Specifically, according to RMC, the 

contract in MUR 5635 was tmly "no-risk" since it provided tiiat if sufficient 

funds were not raised, tiiat committee would not be responsible for the debt. 

However, Counsel for RMC stated that tiie contract between RMC and PA 

provided that RMC would become obligated for all unpaid contingency fees if 

RMC terminated the contract prior to August 15,2012. 

• Third, the Request asserted that the contract between RMC and PA was made in 

the ordinary course of business and that this type of contract is a fairly standard 

contract in the political industry. 

The Office of General Counsel (OGC) considered RMCs position and in its 

memorandum to the Commission^ concluded that the contract at issue was a "no risk" or 

"limited risk" contract that may result in in-kind contributions to RMC from PA. OGC 

also concluded tfaat fees and expenses resulting from sucfa a contract were reportable as 

^ The Commission has specifically addressed "no risk" or "limited risk" fundraising agreements like the 

one at issue here in enforcement matters and advisory opinions through the years. The Commission has 

consistentty applied 11 CF.R. §§ 100.55 and 116.3 (or their regulatory predecessors) to determine whether 

such arrangements were extensions of credit that resulted in in-kind contributions. 

^ See Request for Early Commission Consideration of Legal Questions Arising in the Audit of 

Rightmarch.com PAC, Inc. (LRA 842) Memorandum to the Commission dated March 14.2011, p. 2. 
10 

debts. However, OGC noted tfaat tfaere was littie information at that time about the 

presence or absence of the safeguards^ that the Coinmission has identified m relevant 

enforcement matters or advisory opinions and that RMC may yet be able to demonstrate 

that tfae contract did not result in any in-kind contribution. 

Tfae Commission did not resolve or provide guidance on how to proceed with this matter; 

therefore, pursuant to the Conunission's policy on early consideration of legal questions, 

ttie Audit staff included tfais matter in tfae Interim Audit Report. 

C. Interim Audit Report & Audit Division Recommendation 

Tfae Audit staff discussed tfais issue with RMC representatives at the exit cx)iiference. 

The representatives expressed their disagreement witfa tfae Audit staff and subsequentiy 

filed the Request noted above. 

The Interim Audit Report recommended that RMC provide documentation, to include 

statements from PA that demonstrated the credit extended was in the normal course of 

PA's business and did not represent an excessive in-kind contribution by PA. The 

information provided was to include examples of otfaer non-political customers and 

clients of similar size and risk for wfaicfa similar services were provided and similar 

billing arrangements were used. Also, RMC was requested to provide information 

conceming tfae presence of safeguards sucfa as billing policies for similar non-political 

clients and work, advance payments policies, debt collection policies, and billing cycles. 

The Interim Audit Report also recommended tfaat RMC amend its reports to reflect all 

debt owed to PA. 

D. Committee Response to Interim Audit Report 

In response to the Interim Audit Report, RMC provided a response from PA and 

fimcfaaising contracts from telemarketmg vendors similar to PA. 

This submission faigfaligfated tfaree aspects of tfae contract witfa RMC to demonstrate tfaat 

tfae credit extended was in tfae normal course of PA's business and did not represent an 

excessive in-kind contribution by PA. 

• Profitability 

The submission stated that the agreement with PA was a bona fide commercial 

transaction undertaken consistent with Conimission precedent. According to 

RMCs response, tfae contract to date faas generated $1,650,429.27 m total revenue 

and a casfa profit of $57,073.43 for PA. hi addition, tiie affidavit stated tiiat tiie 

fundraising program on befaalf of RMC also generated 35,089 donor names, 

37,845 unfulfilled pledge names and 243,025 survey responder names tiirougfa 

December 31,2010. Tfaese names are tfae property of PA and may be used by PA 

witfaout restriction in tfae future. Based upon past figures used by tfae Commission 

for calculating the value of such lists, PA estimated a conservative commercial 

value ($0.10/name) of such names to be $31,596.90, altiiough PA's Counsel 

^ Safeguards proposed by the Commission have included requiring advance deposits by a committee to 

reimburse vendors for potential shortfalls, limiting the term of the contract, or allowing vendors to 

terminate the contract early and demand full payment as a result of poor fundraising performance. 
11 

stated that the actual value is likely much higher and the estimate reinforces the 

agreement's profitability to date. 

Conformity 

The submission filed by PA stated tfaat PA offered its telemarketing fundraising 

services to RMC on tfae same general contract terms that were offered to PA's 

other political and non-political clients, including those non-profit organizations 

tfaat ultimately chose not to retain PA's services. PA did not give any special 

discounts or financial incentives to RMC that it did not offer to other PA clients. 

Counsel for PA also submitted copies of telemarketing contracts from different 

vendors, many of which contain similar conditions. 

Security 

PA's agreement with RMC had several safeguards built mto it to ensure payment 

from RMC, including the following: 

1. Use of a Lockbox to Ensure Timelv Pavments Under the Contract 

The contract with RMC required an independent financial institution to 

receive and a separate third-party escrow agent to disburse all of tfae 

fundraising proceeds tfaat were generated. Botfa agents were contractually 

and fiduciarily bound to admmister tfae funds in accordance witfa tfae 

explicit terms of this contract. RMC had no power to withhold payment or 

control over tfae amoimt due. Tfae lockbox mecfaanisms guaranteed tfaat 

PA received timely and full payment of all amounts due and owed under 

tfae contract. 

2. Ownership of Intellectual Propertv Developed During the Fundraising 

Campaign 

As mentioned earlier, the funchraising program on behalf of RMC also 

generated 35,089 donors' names, 37,845 unfulfilled pledge names, and 

243,025 survey responder names tfarougfa December 31,2010, wfaicfa are 

tfae property of PA and may be used by PA without restriction in the 

future. PA placed a conservative value of $31,595.90 on this property. 

3. Use of Test Calls 

Anotfaer safeguard tfaat PA faad ui place was the use of test calls to help 

estimate the financial retums from the fundraismg program. The 

submission stated tfaat the initial retums were positive and indicated that 

the fundraising program would be profitable. If the calls had not shown 

positive results, PA could have terminated the fundraising program 

immediately pursuant to the RMC contract. 

4. The Abilitv to Monitor Results of the Fundraising Program m Real 

Time 

Counsel for PA stated that PA was able, due to the live, real-time nature of 

tiie telemarketing program, to monitor the program's profitability, and that 
12 

PA had sole discretion to stop the effort the moment the results veered 

toward becoming financially unproductive. 

5. RMCs Obligation to Bear Certain Costs Under the Agreement Regardless 

of the Program's Success 

Regardless of whetfaer tfae program generated any revenues, RMC was 

always responsible for paying tfae cost of tfae paper, envelopes, and otfaer 

materials tfaat were used in connection with PA's fundraising program. If 

PA had determined that the best chance of fundraising success was to 

increase the number of persons contacted by mail, RMC would faave 

assumed tfae additional risk under tfae terms of tfae contract. 

RMC furtfaer explained tiiat tfae amounts on tfae weekly statements from PA were not 

reportable debts and did not result in an impermissible extension of credit to RMC. RMC 

suggested tfaat tiie weekly statements may have been misleading since tiiere was an 

amount posted as a Principal Balance. However, according to RMC, the amounts listed 

on financial statements totalmg $1,655,327 represented the maximum possible amounts 

that PA could eam if tiie telemarketing campaign were exceptionally successful. 

Under its agreement with Rightmarcfa, PA was entitled to be paid 95 percent of tiie fiinds 

generated by tiie telemarketing program, up to the fee cap figure of $2.50 per call. RMC 

believes it made timely payments in fiill to PA for all services. 

i The Audit staff reviewed the documentation provided in response to the Interim Audit 

Report. Althougfa it provided contracts from similar vendors, PA did not provide, for tfais 

I review, any additional contracts tiiat it faad witfa its other clients; ratiier, RMC provided an 

affidavit from the president of PA attesting it offered similar terms to its otfaer clients. As 

sucfa, the Audit stajpfcaimot confum that PA's contract witfa RMC was offered on tfae 

same terms as other PA clients, either political or non-political. However, the contracts 

provided are similar to PA's agreement with RMC and appear to demonstrate in differing 

degrees, no risk or limited risk conditions. In addition, PA's ability to terminate the 

agreement with one-day notice and its requirement that the client maintain in place the 

collection facilities so that all proceeds generated as a result of PA's services during the 

term of the agreement, and for a period of 180 days after termination, appear to provide 

some of the necessary safeguards mentioned by the Commission. Based on the 

documentation provided, it does appear tfaat tfaese types of contracts may be fairly 

standard in the industry. 

Based on the additional information provided in response to the Interim Audit Report, the 

Audit staff concluded that RMC demonstrated that PA extended credit in the ordinary 

course of business and thus did not make an excessive in-kmd contribution. 

The Audit staff further concluded that the outstanding fees and expenses listed on the 

weekly invoices totaling $1,524,657 were debts subject to the reporting requirement of 11 

C.F.R § 104.11. The Audit staff opined tfaat tfae Commission faas consistentiy treated 

sucfa expenses in these types of arrangements as extensions of credit by vendors and as a 
13 

type of debt, citing MUR 5635 (Conservative Leadership Fund). According to Audit 

staff. Commission regulations do not base the reportmg of debts and obligations on tfae 

amount tfaat a committee ultimately will pay to a creditor, but ratfaer tfae approximate 

amount or value of the debt at the time the report is filed. The Audit staff noted that, at 

the termmation of the contract, RMC could seek to forgive the reported debt following 

Commission procedures for debt termination. 

E. Draft Final Audit Report 

The Draft Final Audit Report noted tiie various reasons RMC provided to dispute tiie 

extension of credit finding. It also noted that in the view of the Audit staff the 

commercial vendor did not make an impennissible extension of credit to RMC; tiie Audit 

staff stated, however, that RMC sfaould faave disclosed debts arising from the weekly 

invoices. 

F. Committee Response to the Draft Final Audit Report 

In its response to the Draft Final Audit Report, RMC acknowledged that in the view of 

the Audit staff, the commercial vendor did not make an impermissible extension of credit 

to RMC. RMC continued to dispute the need to disclose debts arismg from the weekly 

invoices and reiterated that the expenses do not become payable unless certain events 

occur in the future. 

Commission Conclusion 

On October 4, 2012, October 18, 2012, and November 18, 2012, tiie Commission 

considered the Audit Division Reconunendation Memorandum in which the Audit staff 

concluded that there was not an impermissible extension of credit by the vendor and 

reconunended that tfae Commission adopt a finding tfaat RMC failed to disclose debts 

totaling $1,524,657. The Commission did not approve tiie recommended finding by the 

required four votes. Three Commissioners voted to approve tiie finding. Three 

Commissioners did not vote to approve the finding. These Commissioners indicated that 

tiie "invoices" at issue were properly viewed as status reports that did not reflect 

reportable debt, and expressed concems that if the debt was contingent, it may not require 

disclosure. 

A Commissioner subsequentiy moved to approve a finding solely that there was not an 

impermissible extension of credit by the vendor. The Commission did not approve this 

finding by tfae required four votes. Some Commissioners voted to approve tfae finding. 

Other Commissioners did not vote to approve the finding because they did not view tfais 

issue as severable from the issue of whetfaer RMC failed to disclose reportable debt. 

Pursuant to Commission Directive 70, tfais matter is discussed in tfae "Additional Issues" 

section. 

I Issue 2. Reporting Payments for Communications 

Summaiy 

Witfa respect to tfae expenditures, totaling $2,172,135, identified by tiie Audit staff as 

appearing to meet the definition of an independent expenditure, tfae Commission could 
14 

not reach a consensus on whetfaer tfaese conununications contained express advocacy and 

sfaould be reported as independent expenditures. Tfaus, tfae Coinmission did not approve, 

by tiie required four votes, tfae Audit staffs recommendation tfaat payments for tfaese 

communications required reporting as independent expenditures. 

Pursuant to Coinmission Directive 70, tfais matter is discussed in tfae "Additional Issues" 

section. 

Legal Standard 

A. Definition of Independent Expenditures. Tfae term "independent expenditure" 

means expenditure by a person for a communication expressly advocating tfae election or 

defeat of a clearly identified candidate tfaat is not made in coordination witfa any 

candidate or authorized conimittee or agent of a candidate. 11 CFR §100.16. 

B. Disclosure Requirements - General Guidelines. An independent expenditure shall 

be reported on Schedule E if, when added to other independent expenditures made to the 

same payee during the same calendar year, it exceeds $200. Independent expenditures 

made (i.e., publicly disseminated) prior to payment should be disclosed as "memo" 

entries on Schedule £ and as a reportable debt on Schedule D. Independent expenditures 

of $200 or less do not need to be itemized, though the committee must report the total of 

tiiose expenditures on line (b) on Schedule E. 11 CFR §§104.3(b)(3)(vii), 104.4(a) and 

104.11. 

C. Last-Minute Independent Expenditure Reports (24-Hour Notices). Any 

independent expenditures aggregating $1,000 or more, with respect to any given election, 

and made after the 20^ day but more than 24 hours before the day of an election, must be 

reported and the report must be received by the Conunission within 24 hours after the 

expenditure is made. A 24-hour notice is required each time additional independent 

expenditures aggregate $1,000 or more. The date tiiat a communication is publicly 

disseminated serves as tfae date tfaat tfae committee must use to determine wfaetfaer tfae 

total amount of independent expenditures faas, in tfae aggregate, reacfaed or exceeded tfae 

tiu-eshold reporting amount of $1,000. 11 CFR §§104.4(f) and 104.5(g)(2). 

D. Last-Minute Independent Expenditure Reports (48-Hour Notices). Any 

independent expenditure aggregating $10,000 or more with respect to any given election, 

at any time during a calendar year, up to and including the 20th day before an election, 

must be disclosed within 48 hours each time the expenditures aggregate $10,000 or more. 

The notices must be filed with the Commission witiiin 48 hours after the expenditure is 

made. 11 CFR §§ 104.4(f) and 104.5(g)(1). 

Facts and Analysis 

A. Facts 

RMC disclosed independent expenditures, totaling $563,277, on Sc;hedule E. Tfaese 

disbursements were for fundraising phone calls and follow-up letters and were disclosed 

as being in opposition to Hillary Clinton, Hillary Clinton and Barack Obama, or Barack 
15 

Obama. The Audit staff reviewed these expenditures to determine whetfaer they were 

properly reported on Schedule E. RMC did file 24/48-hour notices, but the notices were 

filed based on payment date rather tfaan on tfae date of dissemination. As a result, tfae 

notices did not cover amounts invoiced past September 2007. A review of tfae phone 

scripts, follow-up letters and invoices for these independent expenditures revealed the 

following: 

• RMC did not file 24/48-hour notices for independent expenditures amounting to 

as much as $139,067 for the period December 24, 2007 tfarougfa November 3, 

2008;and 

• RMC reported independent expenditures wfaen tfae invoices were paid, eitfaer in 

part or in fiill. However, RMC made most of tfaese payments weeks or montfas 

after tiie dissemination or pfaone-call dates. For expenditures totaling $2,172,135. 

RMC sfaould faave disclosed independent expenditures as memo entries on 

Scfaedule E, filed with reports covering the dates when the materials were 

disseminated, and reported $1,892,571^ in corresponding debt on Schedule D. 

B. Early Commission Consideration of Legal Questions 

In its Request, RMC asked the Commission to consider whetfaer expenses relating to a 

fundraising program, wfaicfa identified one or more federal officefaolders but did not refer 

to them as candidates or mention any election, should be reported as independent 

expenditures rather than operating expenditures. 

Counsel for RMC stated tiiat tiie purpose of tiie contract between PA and RMC was for 

PA to contact members of the general public mdividually by telephone and follow-up 

mail to identify voters, advocate issues and/or the election or defeat of candidates for 

federal office, provide poiitical information and ".. .at the same time, combine the 

function of donor acquisition and/or donor renewal as to advance the goals of RMC." 

RMCs Counsel also pointed out that tiie entire cost stmcture of tiie contract to RMC was 

based on the funds raised by the telemarketing and mail program. RMCs Counsel 

discussed the content of the four telemarketing scripts and indicated they were typical of 

fundraismg scripts used in the political industry. According to RMCs Counsel, tiie 

scripts: 

• Ask the listener to express an opinion on a public issue (in this case, the 

seriousness of illegal immigration); 

• Repeatedly ask tiie listener to donate money to a campaign to stop illegal 

immigration; 

' This amount differs from the preceding figure because RMC did acknowledge debt of $279,564 and filed 

Schedule D for ttiis amount from ttie 2007 Year-End report until ttie 2008 Year-End report ($2,172,135 -

$279,564 = $1,892,571). As stated in footnote 3, RMC stepped reporting ttiis debt balance starting with the 

2009 April Quarterly report. RMC did not provide documentation to Audit staff to explain how it 

calculated this debt and why it was excluded from disclosure reports in 2009. 
16 

I 

• Tell the listener that tiie Committee is working to defeat politicians like Hillary 

i Clinton and Barak [sic] Obama; and 

I • Ask the listener to tell their friends to oppose Hillary Clinton and Barak [sic] 

j Obama. 

RMCs Counsel furtfaer explained tfaat tfae scripts do not: 

• Mention any candidacy, party affiliation, public office, voting or any election; 

• Refer to anyone's cfaaracter or fitness to faold office; 

• Run in close proximity to any election or were targeted to any particular state;^ 

• Make any comparison between candidates; or 

• Repeat any candidate's slogans or messages. 

RMCs Counsel also explained tfaat these scripts were fundraising scripts designed to 

raise money by touching upon hot-button political issues and informing listeners about 

which side of the issues prominent officeholders were taking. 

; In closing, RMCs Counsel said tiiat RMC had reported some of its fundraising expenses 

as independent expenditures without the advice of Counsel. To compound the problem, 

' RMC was inconsistent with the classification of expenses on reports as operating 

expenses or independent expenditures. 

OGC considered RMCs position, and in its memorandum to tfae Commission,'^ 

concluded tfaat to tfae extent tfaat tfaese solicitations expressly advocated tfae election or 

defeat of a clearly identified candidate, tfaey must be reported as independent 

expenditures and tfaat appropriate 24/48-notices must be disclosed. The memorandum 

noted that the tfaree scripts at issue include tfae word "defeat" followed by tfae name of a 

clearly identified candidate, Hillary Clmton, Barack Obama or both, tuming these 

messages into express advocacy under 11 C.F.R. § 100.22(a). 

The Coinmission did not resolve or provide guidance on how to proceed with this matter; 

therefore, pursuant to the Commission's policy on early consideration of legal questions, 

the Audit Division included this matter in tiiis report. 

C. Interim Audit Report & Audit Division Recommendation 

I Tfae Audit staff discussed tfaese issues at tfae exit conference and provided appropriate 

scfaedules to RMC representatives. Conceming tiie reporting of 24/48-faour notices. 

Counsel for RMC stated tfaat tfaese independent expenditures were intended for the 

' RMCs Counsel points out that, according to RMCs calculations, 93 percent of the calling scripts were 

used in 2007, a non-election year. 

'° See Request for Early Commission Consideration of Legal Questions Arising in the Audit of 

Rightmarch.com PAC, Inc. (LRA 842) Memorandum to the Commission dated March 14.2011, p. 10. 
17 

general election and not for the primary elections. Thus, RMC representatives indicated 

that these notices were not necessary. 

The Audit staff recommended that RMC take the followmg action: 

• Provide any documentary evidence that would demonstrate that these 

disbursements were not independent expenditures and therefore did not requu:e 

24/48-hour notices; 

• Submit and implement revised procedures for reporting independent expenditures, 

as well as for tracking dissemination dates for sucfa expenditures to allow for 

timely filing of 24/48-hour reporting notices; and 

• Amend its reports to disclose independent expenditures properly as "memo" 

entries on Schedule E and report corresponding debt on Schedule D. 

D. Committee Response to Interim Audit Report 

In its response to the Interim Audit Report, RMC noted that it had disputed the Audit 

staffs interpretation of the fundraising scripts during audit fieldwork and at the exit 

conference. Also, because tfae Commission was unable to provide any guidance in 

relation to tfais matter, RMC objected to tfais issue being included in the audit report as a 

finding of the Commission. Rather, RMC requested that tfae finding be removed from tfae 

Interim Audit Report and moved to an Additional Issue section of tfae final audit report 

approved by the Commission. Given RMCs objection to the finding, no action was 

taken witfa respect to tfae Audit staff's recommendations. 

E. Draft Final Audit Report 

The Draft Final Audit Report noted the various reasons RMC provided to dispute this 

issue and its request that tiiis finding be moved to the Additional Issue section of the audit 

report. 

F. Committee Response to the Draft Final Audit Report 

In response to the Draft Final Audit Report, RMC stated tiiat it had disputed this issue 

throughout the audit process, including tfarougfa a request for early consideration by tiie 

Commission. RMC objected to this issue being included in the audit report and requested 

that tiie audit report be revised to discuss RMCs alleged failure to report independent 

expenditures in the "Additional Issue" section at tiie end of the audit report. 

Conunission Conclusion 

On October 4, 2012 and again on October 18. 2012, the Commission considered the 

Audit Division Recommendation Memorandum in which the Audit staff recommended 

that the Coinmission adopt a finding that RMC failed to file notices and properly disclose 

independent expenditures. 

With respect to tiie expenditures, totaling $2,172,135, identified by the Audit staff as 

appearing to meet the definition of an independent expenditure, the Coinmission could 

not reach a consensus on wfaetiier these communications contamed express advocacy and 

should be reported as independent expenditures. The Commission did not approve, by 

the requked four votes, the Audit staffs recommended finding that payments for these 
18 

communications required reporting as independent expenditures. Some Commissioners 

voted to approve the finding. Other Commissioners did not approve tfae finding. One of 

tiiese Conunissioners noted tfaat tfaese scripts could be viewed as supporting or opposing 

issues ratfaer than candidates. 

Pursuant to Conimission Directive 70, this matter is discussed in the "Additional Issues" 

section.