REPORT OF THE AUDIT DIVISION

ON

Bush-Quayle '92

Primary Committee, Inc.

December 27, 1994

FEDERAL ELECTION COMMISSION

999 E STREET, N.W.

WASHINGTON, D.C.
TABLE OF CONTENTS

BUSH-QUAYLE '92 PRIMARY COMMITTEE, INC.

Executive Summary

Final Audit Report

Background

Findings

Legal Analysis

Transmittal to Committee

Transmittal to Candidate

Chronology

Page

1

5

5

7

57

67

69

71
FEDERAL ELECTION COMMISSION

WASHINGTON, D.C. 20463

REPORT OF THE AUDIT DIVISION

ON

BUSH-QUAYLE '92 PRIMARY COMMITTEE, INC.

EXECUTIVE SUMMARY

AK005833

Bush-Ouayle '92 primary Committee, Inc. (the Primary

Committee) registered with the Federal Election Commission on

October 11, 1991. The primary Committee was the principal

campaign committee of President George Bush, the 1992 Republican

presidential nomination.

The audit was conducted pursuant to 26 U.S.C. §9038(a)

which requires the Commission to audit committees that receive

Federal funds. The Primary Committee received $10,658,521 in

matching funds.

The audit findings were presented to the primary Committee

at the exit conference held on October 7, 1993 and in the

interim audit report approved by the Commission on April 4,

1994. The Primary Committee's responses to the audit findings

have been included in this report.

In the final audit report, the Commission made an initial

determination that the primary Committee pay the U.s. Treasury

a total of $700,049 in connection with expenditures which

benefited the candidate's general election campaign; matching

funds received in excess of entitlement; and Primary Committee

checks that were never cashed. The Commission also determined

that an additional payment of $141,801 was required in

connection with the receipt of excessive contributions. The

total payment to the u.S. Treasury therefore totaled

$841,850.

These and other matters are summarized below.

Apparent General Election Expenditures - 26 U.S.C. §9038

(b)(2) and 11 CFR §9038.2(b)(2). Although the Primary Committee

contended that it had properly allocated spending between the

primary and general campaigns, the final audit report found that

the Primary Committee had incurred $807,249 in nonqualified

campaign expenses benefi ting·the··gene-ral -el·ec·t-ion campaign. Of

this amount, $195,224--the pro rata portion paid with Federal

matching funds--was repayable to the u.s. Treasury.

Page 1, Approved 12/27/94
...;2-

Matching Funds Received in Excess of Entitlement - 26

u.s.c. §9038(b)(1). Based on an analysis of the Primary

Committee's financial situation, the audit found that the

Primary Committee had received $485,631 in matching funds in

excess of the amount to which the candidate was entitled. The

Commission determined that the Committee was required to repay

that amount to the u.s. Treasury.

Apparent Unresolved Excessive Contributions - 2 U.S.C.

§441(a)(I)(A), 11 CFR §110.1(k), 103.3(b)(3) and (4). The

Commission determined that the Primary Committee had to pay

$141,801 to the u.s. Treasury, representing the value of

unresolved excessive contributions from individuals. Generally,

although the Primary Committee appeared to have issued the

refund checks in a timely manner in November 1992, virtually all

the checks were still uncashed in August 1993. The Primary

Committee has made the payment to the u.s. Treasury.

Disclosure of Contributor's Occ~pation and Name of Employer

- 2 U.S.C. §§434(b)(3)(A), 431(13)(A) and 11 CFR §104.7 (a) and

(b). A sample review of contributions received by the primary

Committee revealed that its reports did not include occupation

and name of employer for 56 per cent of the items tested. In

addition, language in several of the solicitations did not meet

the "best efforts" standard for notifying the contributor that

the reporting of the information is required by law. The

interim report recommended that the primary Committee contact

all contributors who did not provide the required information.

The Primary Committee contended that it had satisfied the "best

efforts" standard; thus, it did not contact its contributors nor

file amended reports.

Use of Corporate Aircraft - 11 CFR §114.9(e). The Primary

Committee did not as required, pay two corporations in advance

for travel on their aircraft. The $10,810 in payments were made

approximately three weeks after the flights. The primary

Committee viewed these incidents as both isolated and

unintentional, and took actions which appeared to have prevented

any reoccurrence.

Excessive Contributions Resulting From Staff Advances - 2

U.S.C. §441a(a)(1)(A) and 11 CFR §116.5(b). The audit

identified an excessive contribution of 12,598, representing

funds for travel and other expenses advanced by an individual.

This amount was reimbursed by the Primary Committee, though not

within the required time period; therefore the amount

constituted an impermissible contribution. The Primary

Committee argued that no contribution resulted because the time

period" was not-applicable in this case-s-ince"the i-ndividual was

a commercial vendor who normally first billed expenses and later

received payment. However, it failed to provide adequate

documentation supporting its contention that the individual

provided services as a business.

page 2, Approved 12/27/94
-3-

Reporting of Debts and Obligations - 2 U.S.C. §434(b)(8),

11 CFR §104.11(a) and (b). The Primary Committee did not

disclose $1,767,548 in obligations owed to vendors. Although

the Primary Committee disagreed with the basis for this finding,

in August 1994, it filed amended reports to correct the problem.

Use of Government Conveyance for Campaign Related Travel - 11 CFR §9034.7(a). The interim report recommended that, absent

a demonstration to the contrary, the primary Committee pay the

united States Air Force (USAF) $259,636 representing an apparent

"underpayment" for campaign-related trips on USAF aircraft. In

response, the Primary Committee provided documentation which

demonstrated that, under the circumstances, it had reimbursed

the USAF on a reasonable basis.

Stale-dated Committee Checks - 11 CFR §9038.6 Finally, the

Primary Committee was required to pay the u.S. Treasury $19,194,

the value of stale-dated Primary Committee checks still

uncashed. This payment has been made.

Page 3, Approved 12/27/94
Page 4, Approved 12/27/94
- ----- ----------

FEDERAL ELECTION COMMISSION

WASHINGTON, D.C. 20463

REPORT OF THE AUDIT DIVISION

ON

BUSH-QUAYLE '92 PRIMARY COMMITTEE, INC.

AK005774

I. Background

A. Audit Authority

This report is based on an audit of the Bush-Quayle '92

Primary Committee, Inc. (the Primary Committe~). The audit is

mandated by Section 9038(a) of Title 26 of the United States

Code. That section states that "after each matching payment

period, the Commission shall conduct a thorough examination and

audit of the qualified campaign expenses of every candidate and

his authorized committees who received payments under Section

9037." Also Section 9039(b) of the United states Code and

section 9038.1(a)(2) of the Commission's Regulations state that

the Commission may conduct other examinations and audits from

time to time as it deems necessary.

In addition to examining the receipt and use of Federal

funds, the audit seeks to determine if the campaign has

materially complied with the limitations, prohibitions and

disclosure requirements of the Federal Election Campaign Act of

1971, as amended.

B. Audit Coverage

The audit covered the period from the Primary

Committee's inception, September 30, 1991, through September 30,

1992.. During this period, the Primary Committee reports reflect

an opening cash balance of $-0-, total receipts of $38,426,892,

total disbursements of $38,205,475, and a closing cash balance of

$221,417. In addition, a limited review of primary Committee

transactions was conducted through June 30, 1994, for purposes of

determining the Primary Committee's remaining matching fund

entitlement based on its financial position.

Page 5, Approved 12/27/94
-2-

C. Campaign Organization

The primary Committee registered with the Federal

Election Commission on October 11, 1991. The Treasurer of the

Primary Committee is J. Stanley Huckaby.

During the period audited, the campaign established

offices in 43 states in addition to its national headquarters

located in the District of Columbia. The campaign's current

office is in Alexandria, Virginia.

To handle its financial activity, the campaign used 18

bank accounts at various times. From these accounts the campaign

made approximately 14,799 disbursements through October 14, 1992.

Approximately 133,980 contributions were received from 103,329

persons through September 30, 1992. These contributions totaled

$28,066,466.

In addition to contributions, the campaign received

$10,658,521 in matching funds from the united States Treasury.

This amount represents 77.2% of the $13,810,000 maximum

entitlement that any candidate could receive. The Candidate was

determined eligible to receive matching funds on November 27,

1991. The campaign made a total of 13 matching funds requests

totaling $10,720,792. The Commission certified 99.4% of the

requested amount. For matching fund purposes, the Commission

determined that President Bush's candidacy ended August 20, 1992.

This determination was based on Section 9032(6) of Title 26 of

the united States Code which states that the matching payment

period ends " ..• on the date on which the national convention of

the party whose nomination a candidate seeks nominates its

candidate for the office of President of the United States, ... " also see 11 C.F.R. §9032.6. The campaign continued to receive

matching fund payments through April 2, 1993, to defray expenses

incurred before August 21, 1992, and to help defray the cost of

winding down the campaign. Attachment 1 to this report is a copy

of the Commission's most recent Report on Financial Activity.

The amounts shown areas reported to the Commission.

D. Audit Scope and Procedures

In addition to a review of the qualified campaign

expenses incurred by the campaign (see Finding III.C.), the audit

covered the following categories:

1. The receipt of contributions or loans in excess of the

statutory limitations (see Findings II.B. and D.)i

2. the receipt of contributions from prohibited sources,

such as those from corporations or labor organizations

(see Finding II.C.);

Page ~, Approved 12/27/94
-3-

3. proper disclosure of contributions from individuals,

political committees and other entities, to include the

itemization of contributions when required, as well as,

the completeness and accuracy of the information

disclosed (see Finding II.E.);

4. proper' disclosure of disbursements including the

itemization of disbursements when required, as well as,

the completeness and accuracy of the information

disclosed;

s. proper disclosure of campaign debts and obligations (see

Finding II.F.);

6. accuracy of total reported receipts, disbursements and

cash balances as compared to campaign bank records;

7. adequate recordkeeping for campaign transactions;

8. accuracy of the statement of Net Outstanding Campaign

Obligations (NOCO) filed by the campaign to disclose its

financial condition and establish continuing matching

fund entitlement (see Findings III.A. and D.);

9. the campaign's compliance with spending limitations;

and,

10. other audit procedures that were deemed necessary under

the circumstances.

As part of the Commission's standard audit process, an

inventory of the Primary Committee's records was conducted prior

to the audit fieldwork. Since this inventory determined that the

records were materially complete and in an auditable state, the

audit commenced on January 19, 1993.

Unless specifically discussed below, no material

non-compliance with statutory or regulatory requirements was

detected. It should be noted that the Commission may pursue any

of the matters discussed in this report in an enforcement action.

II. Findings and Recommendations - Non-repayment Matters

A. Use of Government Conveyance for

Campaign-Related Travel

Section 9034.7(a) Title 11 of the Code of Federal

Regulations" states -that notwithstanding the provisions of 11 CFR

part 106, expenditures for travel relating to the campaign of a

candidate seeking the nomination for election to the office of

President by any individual, including a candidate, shall,

Page 7, Approved 12/27/94
-4-

pursuant to the provlslons of 11 CFR 9034.7(b), be qualified

campaign expenses and be reported by the candidate's authorized

committee(s) as expenditures.

sections 9034.7(b)(I) through (6) of Title 11 of the

Code of Federal Regulations state for a trip which is entirely

campaign-related, the total cost of the trip shall be a qualified

campaign expense and a reportable expenditure.

For a trip which includes campaign-related and

non-campaign related stops, that portion of the cost of the trip

allocable to campaign activity shall be a qualified campaign

expense and a reportable expenditure. Such portion shall be

determined by calculating what the trip would have cost from the

point of origin of the trip to the first campaign-related stop,

and from that stop through each subsequent campaign-related stop,

back to the point of origin. If any campaign activity, other than

incidental contacts, is conducted at a stop, that stop shall be

considered campaign-related.

For each trip, an itinerary shall be prepared and such

itinerary shall be made available for Commission inspection.

For trips by government conveyance or by charter, a list

of all passengers on such trip, along with a designation of which

passengers are and which are not campaign-related, shall be made

available for Commission inspection.

If any individual, including a candidate, uses

government conveyance or accommodations paid for by a government

entity for campaign-related travel, the candidate's authorized

committee shall pay the appropriate government entity an amount

equal to the first class commercial air fare plus the cost of

other services, in the case of travel to a city served by a

regularly scheduled commercial service; or the commercial charter

rate plus the cost of other services, in the case of travel to a

city not served by a regularly scheduled commercial service.

Travel expenses of a candidate's spouse and family when

accompanying the candidate on campaign-related travel may be

treated as qualified campaign expenses and reportable

expenditures. If the spouse or family members conduct

campaign-related activities, their travel expenses will be treated

as qualified campaign expenses and reportable expenditures.

President Bush and Vice President Quayle, frequently

accompanied by staff, media personnel, u.S. Secret Service agents,

campaign employees, and other "guests", made campaign-related

trips on aircraft provided by the United states Air Force (USAF).

In most cases, trips made by the President were identified and

billed as Air Force I, whereas, trips made by the Vice President

were identified and billed as Air Force II. Further, there were

Page 8, Approved 12/27/94
-5....

several instances when the First Lady, and advance personnell/ also

made campaign-related trips on aircraft provided by the USAF:

These trips were usually identified and billed as Airlift

Operations.

The billings for the trips noted above originated in

either the white House Military Office or in the Office of the

Director of Airlift Operations, USAF. In most cases, the billings

included a manifest which detailed the passengers aboard each

flight, a summary memorandum which identified the number of

political (campaign-related) passengers, the airfare charged per

individual, and the total amount to be reimbursed. The billings

were forwarded to the White House Administrative Office and then

onto the primary Committee, accompanied by a memorandum requesting

reimbursement for the campaign-related trips.

Virtually all flight destinations were cities served by

regularly scheduled commercial service. Thus, in accordance with

11 C.F.R. §9034.7(b)(5), the Primary Committee was required to

reimburse (the United States Treasury/Air Force) the first class

commercial airfare plus the cost of other services.~/

The Audit staff analyzed the billings noted above in an

effort to determine if the airfares charged to the primary

Committee were equivalent to the first class airfares available on

the date of the trips. Further, the analysis would determine

whether or not the total amount paid by the Primary Committee for

its use of government conveyance was in accordance with 11 C.F.R.

§9034.7(b). For the purpose of the analysis, the Audit staff

selected the lowest unrestricted and non-discounted first class

airfare, not subject to any type of conditional purchase/booking

agreements, available on the date of the trip.

It should be noted that in instances where the aircraft

flew "empty" (without campaign-related passengers aboard) to a

specific location for the purpose of transporting campaign-related

individuals back to Andrews AFB or onto another campaign event

(positioning flights), the Audit staff charged an equivalent of

one first class airfare.

!/

~/

Advance personnel were identified on the manifests/billings

as "preadvance" personnel. Typically these individuals

traveled to event destinations to coordinate and organize in

advance of the actual event.

It should be noted that the WhiteHouse Communications

Agency did"·'not bill"thepri"ma"ry Cammi ttee for the costs

associated ·withthe installation and maintenance of

secured communication lines. According to the Assistant

Treasurer, the White House Communications Agency considered

these costs to be part of national security and did not

bill the primary Committee.

Pag,e 9, Approved 12/27/94
-6-

On December 8, 1993, Primary Committee representatives

stated that it was not billed for "positioning flights". It was

also their understanding that the 1988 campaign was not billed for

such flights. The representatives further stated that the Primary

Committee was only billed for campaign-related trips, but added

that certain billings required adjustment, to correct the number

of passengers inappropriately considered campaign-related by the

USAF. The primary Committee also provided documentation in

support of the above statements.

It is the opinion of the Audit staff, that the Primary

Committee should be charged the equivalent of one first class

airfare for each "positioning flight". The Audit staff applied

this charge, with respect to government conveyance, throughout the

1992 Presidential cycle.

For purposes of our analysis, the Audit staff used the

number of campaign-related passengers as identified on the trip

itinerary/manifest provided by the USAF.

Further, the Audit staff identified five apparent

campaign-related trips that were excluded from the above analysis.

In response to request for additional documentation, the Primary

Committee submitted invoices from the White House Office of

Administration and copies of Primary Committee checks in payment

thereof, for all trips except the April 30, 1992 trip (Andrews AFB

to Columbus, OH to Andrews AFB). However, no official

manifests/trip itineraries (from the USAF) were provided and the

Audit staff could not verify the number of campaign-related

passengers aboard each trip. In addition, discrepancies were

noted in campaign-related stops identified on the invoices

provided and the previously provided candidate schedules.

The amount calculated as "underpaid" represents the net

difference between the amount paid by the Primary Committee and

the correct billable amount as determined by the Audit staff.

Based on this review, the Primary Committee "underpaid" the USAF

$259,636. Below is a discussion of the differences identified.

Air Force I

Our review of "Air Force I" revealed a net underpayment

of $118,200. The majority of this amount was a result of the USAF

billing at an airfare that was less than the first-class amount

determined by the Audit staff ($100,785). The remaining

underpayment was due to the Primary Committee not paying for an

apparent campaign-related trip ($12,534) and in six instances

manual adjustments were made to the billings received from the

White House Administrative Office ($4,881 relating to apparent

campaign-related passengers). In these cases, the passengers were

identified as campaign-related on the military itinerary/manifest

and on the initial billings from the White House. However, manual

adjustments were made before the Primary Committee paid the bill.

It should be noted that in many cases the documentation reviewed

Page 10, Approved 12/27/94
-7-

did not identify the passenger and/or reason for the adjustment.

Absent documentation, the Audit staff considered the passengers as

campaign-related.

Air Force II

The first class airfare issue and the manual adjustments

noted above were also prevalent in the "Air Force II" billings.

Further, we identified an additional problem area. In sev~ral

instances an entire trip was identified on the military manifest

as campaign-related, while the White House con~idered only a

portion of the trip to be campaign-related.

For example, the Vice President and other individuals

traveled aboard "Air Force II" for several campaign-related events

in Ohio, on August 6 & 7, 1992. Specifically, the plane went from

Andrews AFB to Akron-Canton to Wilmington to Columbus to Mansfield

before returning to Andrews AFB. Annotations on the military's

manifest for this trip identifies the entire trip as "unofficial"

(i.e., campaign-related). The billing from the Office of the Vice

President did not consider the wilmington and Mansfield legs to be

campaign-related. Absent evidence to the contrary, the Audit

staff considered the entire trip as campaign-related.

Airlift Operations

It should be noted that the same situation as noted

above occurred frequently in the "Airlift Operations" billings and

is the major underlying cause of the $51,703 underpayment.

Interim Audit Report Recommendation

In the interim audit report, the Audit staff recommended

that the primary Committee demonstrate that the United States Air

Force was not underpaid in the amount of $259,636, or make a

payment to the United States Air Force in the amount of $259,636.

Further, the Primary Committee was to submit official

manifest/trip itineraries from the USAF for the five trips noted

above, including supporting documentation for the manual

adjustments/deletions of individuals and/or flight legs.~/

Analysis of Primary Committee's Response

The Treasurer stated, "The investigation undertaken by

the Committee indicates that the airfare billed by the White House

and paid by the Committee was proper."

~/ The documentation submitted was materially complete, and it

appears that the amounts paid by the Primary Committee were

reasonable.

page 11, Approved 12/27/94
-8-

Further, the Assistant Treasurer states,

"On July 5, 1994, I spoke with Chris Vein,

who worked in the White House Travel Office

during the 1992 campaign ...Mr. vein

explained that, on the day of travel, the

White House Travel Office would determine

the first-class airfare between the cities

on the itinerary using the SABRE computer

reservation system and that the office used

only unrestricted, first-class airfares ••• In an effort to confirm the airfares used

by the White House Travel Office, the

Committee recently contacted both a travel

agent and American Airlines. The Committee

was informed, however, that outdated fares

were not available for more than a few

months back. The Committee is thus in a

position of receiving two different fare

quotes, but has not yet been able to

confirm either•.• the White House Travel

Office and the audit staff each used first

class airfare for their calculations, the

Committee is at a loss to explain the

discrepancy. However, since first class

airfare was in fact billed and paid, the

Committee respectfully submits that no

further action should be taken with respect

to this issue."

With respect to positioning flights, the

Treasurer stated there is no commercial

airline that would charge its passengers

for the necessity of bringing a plane to

the city to provide service. As with a

commercial airline, it is the

responsibility of the united States Air

Force to ensure that it has aircraft in the

position to provide the service. Moreover,

the Audit staff's current interpretation of

the regulations differs from its

interpretation during the 1984 and 1988

presidential campaigns. According to the

Assistant Treasurer, Mr. Vein confirmed

that the White House Travel Office did not

charge for positioning flights in past

election campaigns.

BaSed on the Primary Committee's response, the Audit

staff re-examined a portion of the campaign-related flights. The

results of this review indicate that, in most cases, the Primary

Committee paid an amount equal to or greater than a published

unrestricted first class airfare; however, the airfare was

page 12, Approved 12/27/94
-9-

discounted. The Audit staff's original calculation was based on

unrestricted and non-discounted first class airfares that were not

subject to conditional purchase agreements.

The regulation at 11 C.F.R. §9034.7(b)(S)(i) requires

that first class commercial air fare plus the cost of other

services be used as a basis to determine the amount paid to the

government entity, apparently in an attempt to equate a

trip aboard government conveyance to that of a scheduled

commercial flight with the same origin and destination points,

alon9 with an equivalent level of service. In the Audit staff's

opinion, travel encumbered with such conditions does not equate

with the unrestricted use of government conveyance, therefore, the

reimbursement for less than an unrestricted and non-discounted

first class rate with no conditions attached is contrary to the

intent of the regulation.

Nonetheless, because of (1) the specific facts presented

above, (2) the inherent difficulty presented to committees in

determining first class rates in the context of the reimbursement

requirement at 11 C.F.R. §9034.7(b)(5), and (3) prior Commission

determinations in this area4/ it appears that the amount paid by

the Primary Committee satisfies the regulatory provision as

currently written.

It should be noted that in the interim audit report, the

Audit staff's analysis identified an apparent campaign-related

trip aboard "Air Force I" that was not paid for by the primary

Committee. The cost of this trip, as calculated by the Audit

staff, was $12,534. Based on our re-examination, the net result

of the amount not paid, considering instances where trips were

overpaid and underpaid, was insignificant.

The Audit staff also identified several instances where

manual adjustments were made to the billings from the White House

Administrative Office for the flights aboard Air Force I, Air

Force II, and Airlift Operations. In response to the interim

audit report, the Assistant Treasurer stated that the adjustments

were made after the Primary Committee discovered that the billings

included charges for travel by non-campaign personnel.

Based on the Audit staff's analysis, we determined that

the individuals' travel was not campaign-related and the manual

adjustments to the billings were reasonable.

Finally, it remains our opinion that the Committee

should be charged the equivalent of one first class airfare for

each positioning flight. However, in light of the above, any

difference which may have resulted from this application remains

insignificant.

See the Final Audit Report on Americans for Harkin, Inc.,

approved by the Commission on March 15, 1994, pages 7-1~.

Page 13, Approved 12/27/94
-10-

B. Apparent Unresolved Excessive Contributions

section 441(a)(1)(A) of Title 2 of the United states

Code states that no person shall make contributions to any

candidate with respect to any election for Federal office which,

in the aggregate, exceed $1,000.

section 110.1(k) of Title 11 of the Code of Federal

Regulations states, in part, that any contribution made by more

than one person, except for a contribution made by a partnership,

shall include the signature of each contributor on the check,

money order, or other negotiable instrument or in a separate

writing. If a contribution made by more than one person does not

indicate the amount to be attributed to each contributor, the

contribution shall be attributed equally to each contributor. If

a contribution to a candidate on its face or when aggregated with

other contributions from the same contributor exceeds the

limitations on contributions, the treasurer may ask the

contributor whether the contribution was intended to be a joint

contribution by more than one person. A contribution shall be

considered to be reattributed to another contributor if the

treasurer of the recipient political committee asks the

contributor whether the contribution is intended to be a joint

contribution by more than one person, and informs the contributor

that he or she may request the return of the excessive portion of

the contribution if it is not intended to be a joint contribution;

and within sixty days from the date of the treasurer's receipt of

the contribution, the contributors provide the treasurer with a

written reattribution of the contribution, which is signed by each

contributor, and which indicates the amount to be attributed to

each contributor if equal attribution is not intended.

section 103.3(b)(3) of Title 11 of the Code of Federal

Regulations states, in part, that contributions which exceed the

contribution limitation may be deposited into a campaign

depository. If any such contribution.is deposited, the treasurer

may request redesignation or reattribution of the contribution by

the contributor in accordance with 11 CFR sections 110.1(b) and

110.1(k), as appropriate. If a redesignation or reattribution is

not obtained, the treasurer shall, within 60 days of the

treasurer's receipt of the contribution, refund the contribution

to the contributor.

Section 103.3(b)(4) of Title 11 of the Code of Federal

Regulations states, any contribution which appears to be illegal

under 11 CFR 103.3(b)(1) or (3), and which is deposited into a

campaign depository shall not be used for any disbursements by the

political committee until the contribution has been determined to

be legal. The political committee must either establish a

separate account in a campaign depository for such contributions

or maintain sufficient funds to make all such refunds.

page 14, Approved 12/27/94
-11~

The Commission notified the Primary Committee, by a

letter dated June 2, 1992, that a sampling technique would be used

to identify the dollar amount of excessive contributions received

by the Primary Committee. The letter stated, in part, that

Commission regulations provide 60 days in which to seek

reattribution, redesignation or refund of excessive contributions

(see 11 C.F.R. 103.3(b)(3)). The Commission no longer recognizes

any untimely refunds, redesignations or reattributions made more

than 60 days foll.owing a candidate's date of ineligibility or

after the date of receipt of this letter, whichever is later.

After that date, the Commission will request that all unresolved

excessive contributions be paid to the United states Treasury.

Excessive contributions resolved by the committee outside these

time periods will not be considered mitigated violations.

1. Non-negotiated Refund Checks

The Primary Committee maintained a separate

checking account used to refund excessive contributions. In

conjunction with our testing of contributions subject to the

$1,000 limitation, the Audit staff reviewed all refunds,

outstanding as of September 30, 1992, issued from this account.

The Audit staff identified excessive contributions

totaling $132,751 related to non-negotiated refund checks. It

should be noted that the Primary Committee appears to have issued

refund checks in a timely manner for all but three of the

excessive contributions noted above. However, 156 refund checks,

all of which were dated prior to November 10, 1992, had not been

negotiated by the contributors and remained outstanding as of

August 31, 1993.

As previously stated, the Commission notified the

Primary Committee, by letter dated June 2, 1992, that the

Commission will no longer recognize any untimely refunds made more

than 60 days following the candidate's date of ineligibility or

after receipt of this letter, whichever is later. With respect to

the Primary Committee, the operative date is October 19, 1992, 60

days following the candidate's date of ineligibility.

During the fieldwork this matter was discussed with

representatives of the Primary Committee. The representatives

stated they were aware refunds checks were not being cashed and

sent follow-up letters to the contributors, however, they did not

pursue this matter to its disposition.

In addition, the Audit staff identified three

excessive contributions totaling $3,000 (excessive portion). One

of the excessive contributions ($1,000) was received on April 17,

1992, but not refunded to the contributor until January 14, 1993.

Although in this instance the refund check was cashed, application

of the above stated Commission policy renders this exc,essive

Page 15, Approved 12/27/94
-12-

contribution unresolved. The remalnlng two excessive

contributions ($2,000) were incorrectly attributed, and remain

unresolved.

On October 21, 1993, the Primary Committee issued a

check payable to the United states Treasury which included payment

of non-negotiated refunds, totaling $119,501 [of the $132,751

noted above]. As a result, excessive contributions totaling $16,250 ([$132,751 - 119,501] + 3,000) were not resolved.

In response to the interim audit report, the

Primary Committe~ made a payment of $16,250 to the United states

Treasury.

2. Joint Fundraising

The Primary Committee participated in a joint

fundraising event with the Ohio Republican Party Federal Account

and Ohio Republican party State Account. The participants

established the "Republican Leadership Fund" as the joint

fundraising agent. According to the joint fundraising agreement,

the Primary Committee was to receive the first $1,000 of all

permissible contributions from individual donors who had not

exceeded the contribution limit.

The Audit staff identified seven contributions,

totaling $6,050, in excess of the limitation related to the joint

fundraising events. Six of the seven contributors previously

contributed directly to the primary Committee.

It should be noted that the excessive contributions

were received (by the Primary Committee) on August 14, 1992 and

not refunded until December 4, 1992. Since the refunds were made

after October 19, 1992 and therefor considered untimely, the

excessive contributions are considered unresolved and necessitate

a payment to the United States Treasury in the amount of $6,050.

At the exit conference, the primary Committee was

provided with a schedule of the unresolved exceSSlve

contributions. The Primary Committee did not comment on this

matter.

In response to the interim audit report, the

Primary Committee made a payment of $6,050 to the United states

Treasury.

C. Prohibited Contributions

Use of Corporate Aircraft

section 114.9{e) of Title 11 of the Code of Federal

Regulations states that a candidate, candidate's agent, or person

travelin9 on behalf of a candidate who uses an airplane which is

owned or leaaed by a corporation Qr labor organization other than

Page 16, Approved 12/27/94
-13-

a corporation or labor organization licensed to offer commercial

services for travel in connection with a Federal election must,

in advance, reimburse the corporation or labor organization in

the case of travel to a city served by regularly scheduled

commercial service, the first class air fare; in the case of

travel to a city not served by a regularly scheduled commercial

service, the usual charter rate shall be used.

The Audit staff identified disbursements to two

corporations (Irvine Company - $1,434 and Mosbacher Energy

Company - $9,384) for use of company aircraft.51 The flights

occurred between January 28, 1992 and January 30, 1992; however,

the Primary Committee did not reimburse the corporations until

February 18, 1992. The amounts billed and paid, which

approximated first class airfares, satisfied the billing rate

standard of the Regulations.

As stated, 11 C.F.R. §114.9(e) requires reimbursement

in advance for use of corporate aircraft. Since reimbursement

did not occur until approximately three weeks after the flights,

it is the opinion of the Audit staff that the Primary Committee

received prohibited contributions totaling $10,818 ($1,434 +

9,384) during this time period.

At the exit conference, the primary Committee was

provided with copies of checks and company invoices related to

the transactions noted above. The Primary Committee did not

comment on this matter.

In the interim audit report the Audit staff recommended

that the Primary Committee provide information to show that these

transactions do not constitute prohibited contributi~ns.

In response to the interim audit report

recommendations, the Primary Committee provided information in an

effort to demonstrate that the aforementioned transactions did

not constitute prohibited contributions. Several points are

addressed.

o The corporations, within three weeks of the

flights, were fully and completely reimbursed for their costs.

According to the Primary Committee, reimbursement occurred

immediately upon learning about the flights, eliminating any

benefit to the campaign;

o

basis; and,

The reimbursements were disclosed on a timely

~I The corporate status of the companies was verified with the

appropriate Secretary of State.

Page 17, Approved 12/27/94
-14-

o The incident was both isolated and unintentional.

In general, the Primary Committee did not allow campaign

personnel to use corporate aircraft and, once this issue arose,

reaffirmed its earlier policy with a written policy statement

prohibiting the use of such aircraft and requiring requests for

exceptions to be discussed with its General Counsel well before

the date of travel. (The written policy statement in the form of

a memorandum to senior campaign personnel was included as part of

the Primary Committee's response).

Although the Primary Committee's actions appear to have

prevented any reoccurrence involving improper usage of corporate

aircraft, the fact remains - reimbursement did not occur until

approximately three weeks subsequent to the dates of these

flights; whereas the regulation requires payment in advance.

D. Excessive Contributions Resulting from Staff

Advances

Section 441a(a)(I)(A) of Title 2 of the United States

Codes states that no person shall make contributions to any

candidate and his authorized political committee with respect to

any election for Federal office which, in the aggregate, exceed

$1,000.

Section 116.5(b) of Title 11 of the Code of Federal

Regulations states, in part, that the payment by an individual

for the costs incurred in providing goods or services to, or

obtaining goods or services that are used by or on behalf of, a

candidate or political committee is a contribution unless the

payment is exempted from the definition of contribution under 11

CFR 100.7(b)(B). If the payment is not exempted, it shall be

considered a contribution unless it is for the individual's

transportation and normal subsistence expenses incurred by an

individual, other than a volunteer, while traveling on behalf of

a candidate; and, the individual is reimbursed within sixty days

after the closing date of the billing statement on which the

charges first appear if the payment was made using a personal

credit card, or within thirty days after the date on which the

expenses were incurred if a personal credit card was not used.

"Subsistence expenses" include only expenditures for personal

living expenses related to a particular individual traveling on

committee business, such as food or lodging.

During the review of the Primary Committee's expense

reimbursements, the Audit staff noted that one individual, Robert

B. Holt, advanced funds on behalf of the primary Committee in

excess of the $1,000 limitation. The excessive portions of

contributions and advanced funds totaled $12,598. The expenses

incurred were for travel and subsistence and campaign-related

goods and services. This individual also contributed $1,000, by

check, on October 8, 1991. It should be noted that all advances

by this individual were eventually reimbursed.

Page 18, Approved 12/27/94
At the exit conference a schedule depicting this

advance activity was provided to the Treasurer. The Treasurer

stated that Mr. Holt operates his business as a sole

proprietorship and he maintains a separate account for his

personal expenses related to his political activities. All

reimbursements made to him were credited to that account. The

Treasurer further stated that Mr. Holt viewed himself as a

commercial vendor and is willing to provide a statement to that

effect.

Subsequent to the exit conference, the Primary

Committee submitted a signed statement from Mr. Holt.

Among other things, Mr. Holt states:

"I conduct my fundraising activities on a

volunteer basis. When the federal

election laws are applicable, and

consistent with my understanding of them,

I always seek payment for travel and

telephone expenses from the entity on

whose behalf those expenses are incurred.

My assistant send (sic) invoices to that

entity on letterhead bearing the name

"Robert B. Holt", my business name. When

I receive payment of the invoices, the

proceeds are deposited into my checking

account, and all expenses are paid out of

that checking account. This account is

used for all of my business and volunteer

activity. Any reimbursement for business

or volunteer activity flows through this

account as in a normal commercial

transaction."

The Primary Committee's arguments are not persuasive

and appear to be inconsistent with certain statements made by Mr.

Holt. He said he was a volunteer and has not offered any

evidence to show that the expenses incurred on behalf of the

Primary Committee should be viewed as other than advances by an

individual.

In the interim audit report the Audit staff recommended

that the Primary Committee provide evidence that the staff

advances are not excessive contributions, including, if

applicable, a demonstration that portions of the amounts a~~

exempt from the definition of a contribution under 11 C.F.R.

100.7(b)(B), or demonstrate that the individual acted as a

commercial vendor and that the activity described above is in the

vendor's "ordinary course of business" pursuant to 11 C.F.R.

§116.3.

page 19, Approved 12/27/94
-16-

In its response, the Primary Committee attempted to

demonstrate that Mr. Holt is a "commercial vendor" and his

practice of billing expenses and later receiving reimbursement is

in the normal course, and therefore should be viewed acceptable

under 11 C.F.R. §116.3, thereby rendering the analysis under 11

C.F.R. §116.5 not pertinent.

In support of its position that Mr. Holt "was properly

treated by the Primary Committee as a commercial vendor," the

Primary Committee raised several points:

o The fundraising services provided by Mr. Holt were

of a kind commonly purchased by campaigns from commercial vendors

and were provided in the same manner as the services Mr. Holt

provides to other organizations;

o The fact that Mr. Holt did not charge a fee for

the value of his time does not change his status as a commercial

vendor to the campaign;

o An interpretation of 11 C.F.R. §116.3 as

inapplicable to the case at hand would raise serious First

Amendment issues by (1) with no adequate justification, treat an

"individual commercial vendor" who desired to volunteer for a

campaign differently than such a vendor who was being paid, and

(2) such an interpretation would impose an unjustifiable burden

on a campaign that accepted the services of a "volunteer

commercial vendor," thus restricting the campaign's First

Amendment rights of speech and association.

Although the Primary Committee has presented several

arguments in support of Mr. Holt's status as a commercial vendor,

the question seems to turn on whether he meets the regulatory

definition at 11 C.F.R. §116.1(c):

For purposes of this part, commercial

vendor means any persons providing goods or

services to a candidate or political

committee whose usual and normal business

involves the sale, rental, lease or

provision of those goods and services

(emphasis added).

The Primary Committee has provided several pieces of

information regarding Mr. Holt's fundraising activities (Davis

Declaration at paragraph 12, Holt Declaration, Attachment 5 to

interim audit report.) However, in the Audit staff's opinion,

this information is not dispositive with rega~d to the question -- whether or not Mr. Holt can be viewed as a commercial vendor,

as defined at 11 C.F.R. §116.1(c}. No showing has been made that

Mr. Holt's usual and normal business involves fundraising for

both political and non-political entities, the latter of whi~h is

not required by the regulations to meet the definiti~n of

commercial vendor.

Page 20, Approved 12/27/94
-17-

There seems to be little question as to whether or not

Mr. Holt performs fundraising services for a variety of entities;

however, whether the provision of fundraising services represents

his usual and normal business remains unclear. The only

indications, based on information made available to date,

regarding Mr. Holt's "business activities" (other than

aforementioned fundraising) is contained on his stationery (see

below) and disclosure reports filed.!/

Robert B. Holt

Oil Properties

[address omitted]

Our review of entries in which Mr. Holt's contributions

were itemized indicates that Mr. Holt's reported occupation was

in the field of oil production (12 of 15), investments (2 of 15)

or ranching (2 of 15).7/ Mr. Holt's name of employer was listed

as self-employed (or variations thereof), except for one instance

when the name of employer was "Robert G. [sic] Holt Company."

Given the absence of documentation which clearly

demonstrates that Mr. Holt's usual and normal business is the

provision of fundraising services, the Audit staff must view the

transactions at issue under 11 C.F.R. Sl16.5.8/ Therefore, our

position remains unchanged from the interim audit report.

E. Disclosure of Occupation and Name of Employer

Section 434(b)(3)(A) of Title 2 of the United States

Code states, that each report shall disclose the identification

of each person (other than a political committee) who makes a

contribution to the reporting committee during the reporting

period, whose contribution or contributions have an aggregate

amount or value in excess of $200 within the calendar year,

together with the date and amount of any such contribution.

!/ A name search was performed against the Commission's 1991-92

Disclosure Data Base.

1/ One entry listed oil, gas and ranchin9.

~/ The Primary Committee, in commenting on the Audit staff's

calculations (assuming 11 C.F.R. §116.5 was applicable)

asserted that rather than apply.iog reimbursements received to

the 'ear1iest'- ex'pense io'curi'ed', the methodology employed

should apply a given reimbursement amount to the specific

expenses to which it relates. The methodology employed by

the Audit staff, as approved by the Commission for use durin9

the 1992 cycle, is consistent with the provisions of 11 C.F.R

§116.5. No change in methodology is necessary.

Page 21, Approved 12/27/94
-18-

Section 431(13)(A) of Title 2 of the United States Code

defines the term "identification" as, in the case of any

individual, the name, the mailing address, and the occupation of

such individual, as well as the name of his or her employer.

Section 102.9(d) of Title 11 of the Code of Federal

Regulations states, in part, that in performing recordkeeping

duties, the treasurer or his or her authorized agent shall use

his or her best efforts to obtain, maintain, and submit the

required information and shall keep a record of such efforts.

Section 104.7 of Title 11 of the Code of Federal

Regulation states, in part, that if best efforts have been used

to obtain, maintain, and submit the information required by the

Act for the political committee, any report of such committee

shall be considered in compliance with the Act. The treasurer

will not be deemed to have exercised best efforts to obtain the

required information unless he or she has made at least one

effort per solicitation either by a written request or by an oral

request documented in writing to obtain such information from the

contributor. For purposes of 11 C.F.R. 104.7(b), such effort

shall consist of a clear request for the information (i.e., name,

mailing address, occupation, and name of employer) which request

informs the contributor that the reporting of such information is

requi"red by law.

The Audit staff conducted a sample of receipts from

individuals to determine if for contributions requiring

itemization, the requisite information was adequately disclosed.

An error rate of 56% was noted with respect to the disclosure of

occupation and name of employer on reports filed.

Although, the solicitation devices examined did contain

a request for the contributor's occupation and name of employer,

the notice was incorrect: "the Federal Election Commission

requires us to ask the following information" (emphasis added).

The Regulations require it to state "the reporting of such

information is required by law". Therefore, it is the opinion of

the Audit staff that the Primary Committee has not met the best

efforts provision of 11 C.F.R. §104.7.

At the exit conference, the Audit staff advised the

Primary Committee of the high error rates. The Primary Committee

did not comment on this matter.

Subsequent to the exit conference a representative of

the Primary Committee stated that, in response to a Commission

notice, all individual contributions disclosed on Schedules A-P

were reviewed to identify those lacking occupation and name of

employer. Once identified, the Primary Committee searched its

receipts data base in an effort to determine if a contributor

made a subsequent contribution (for which occupation and name of

employer was p~ovided). As a result, the Primary Committee filed

amended reports disclosing occupation and name of employer for

Page 22, App~oved 12/27/94
-19-

approximately 500 contributors. The Primary Committee did not

recontact its contributors in order to obtain the missing

information.

The Audit staff compared the entries on the amended

reports to its sample errors. It was noted that none of the

errors were corrected by the amendments. It is the opinion of

the Audit staff that a material deficiency still exists and that

the Primary Committee has not met the best efforts provision of

11 C.F.R. §104.7.

Based on the above, it was recommended in the interim

audit report that the Primary Committee contact all contributors

who did not provide the required contributor information and file

amended disclosure reports to correct the public record.

Further, the Audit staff noted that the request for the

information must include the appropriate notice that "the

reporting of such information is required by la~".

In response to the interim audit report the Treasurer

states that the Primary Committee complied with the "best

efforts" provisions of 11 C.F.R. §104.7(b). The Treasurer

explains that the Primary Committee contacted each contributor

and requested their name, mailing address, occupation, name of

employer and notified the contributors that "the Federal Election

Commission requires us to ask the following information."

Further, the Treasurer states the Primary Committee

altered the language on its contributor solicitations in response

to a July 1, 1992 memorandum issued by the Commission. The

revised notification to its contributors stated, "[t]he Federal

Election Commission requires us to report the following

information." The Treasurer claims the Audit staff determined

that the "best efforts" provisions were not met because the

Primary Committee used the phrase "Federal Election Commission

requires" as opposed to "the law requires."

The Treasurer contends that the "best efforts"

provisions were met for several reasons. First, the Treasurer

states that the distinction between "the Federal Election

Commission" and "the law" is insignificant because "the

regulations properly promulgated by the Commission have the force

of law." Second, the Treasurer maintains that no specific reason

is identified in the interim report as to why the language used

by the Primary Committee was "deficient." The Treasurer

continues, "[t]he regulation does not require that specific words

be used, only that contributors be informed of the substance of

the message", and claims the Audit staff's "interpretation would

'coristittite- O-a' material -'chan"ge "iri "the "regulation that cannot

properly be implemented without a rulemaking proceeding."

In the opinion of the Treasurer, the Primary Committee

interpretation of the regulation was reasonable and the adopted

language was consistent with the "best efforts" requirements.

Page 23, Approved 12/27/94
-20-

Finally, the Treasurer stated that the Primary Committee

estimates that it would cost well over $40,000 to contact

contributors as recommended in the report.

As stated by the Treasurer, the regulation at 11 C.F.R.

§104.7 does not require that specific words be used, only that

contributors be informed of the substance of the message. The

substance of the message is that the reporting of a contributor's

name, mailing address, occupation, and name of employer is

required by law.

Although the Primary Committee has put forth several

arguments in support of its position that its actions satisfied

the best efforts provision in effect at the time of the

solicitations, the language used by the Primary Committee: "The

Federal Election Commission requires us to ask the following

information", does not inform the contributor that the reporting

of the information is required by law.

The Primary Committee did not contact all contributors

who did not provide the required contributor information as

recommended in the interim audit report. Consequently, no

amended reports containing information regarding these

contributors were filed.

F. Reporting of Debts and Obligations

Section 434(b)(8) of Title 2 of the United States Code

requires that each report shall disclose the amount and nature of

outstanding debts and obligations owed by or to such political

committee.

Section 104.11(a) of Title 11 of the Code of Federal

Regulations states, in part, that debts and obligations owed by or

to a political committee which remain outstanding shall be

continuously reported until extinguished.

Section 104.11(b) of Title 11 of the Code of Federal

Regulations states, in part, that a debt or obligation, the amount

of which is $500 or less, shall be reported as of the time payment

is made or not later than 60 days after such obligation is

incurred, whichever comes first. A debt or obligation, the amount

of which is over $500 shall be reported as of the date on which

the debt or obligation is incurred, except that any obligation

incurred for rent, salary or other regularly reoccurring

administrative expense shall not be reported as a debt before the

payment due date.

During our review of selected disbursements, the Audit

staff noted that 76 obligations, totaling $1,767,548 were not

disclosed. The obligations were for telephone charges, media,

direct mail, travel expenses, hotel charges, computer consulting,

etc.

Page 24, Approved 12/27/94
-21-

At the exit conference, the Primary Committee was

provided with a schedule of unreported debts and obligations. The

Treasurer stated that the invoice date is not necessarily the date

the invoice was received by the Primary Committee. He did not

consider any obligations as debts for reporting purposes until the

invoice had been received by the Accounting Department and

approved for payment by the appropriate personnel. Further, it

should be noted that the Primary Committee did not date-stamp

vendor invoices upon receipt but rather when the invoices arrived

in the Accounting Department. The Treasurer also stated that the

invoices were then paid within a few days of receipt by the

Accounting Department.

The regulatory standard is the date of incurrence not

the date the invoice is received in the primary Committee's

Accounting Department.

A written response from the Primary Committee, dated

October 22, 1993, reiterated its position as described above and

provided explanations as to why certain invoices were not received

timely.

For example: the original invoice was either not

received or sent to the wrong address, and at a later date

obtained from the creditor; in certain instances, invoices issued

by sub-contractors to the Primary Committee were forwarded to the

contractor, who then forwarded the invoices to the Primary

Committee.

Although the information provided may explain the delay

in the Primary Committee's actual receipt of a particular invoice,

such explanation does not, in the Audit staff's opinion, remove or

modify the regulatory requirement that these debts be disclosed as

of the date incurred.

In the interim audit report the Audit staff recommended

that the Primary Committee file amended reports to correct the

public record.

In response to the interim audit report, the Treasurer

states that the standards used by the Audit staff in reviewing

debts and obligations misapplies the regulations and, as applied,

would "place an unreasonable burden on political committees." The

Treasurer specifies that the "regulation expressly defines the

debt or obligation as 'a loan, written contract, written promise

or written agreement to make an expenditure'."

The Treasurer contends that the regulation cited is not

relevant becaus-e·the·· aforementionedtr-an'sactions were generally

"undertakenwithout a 'written' agreement specifying precis-e

charges in advance and therefore do not fall into the categories

listed in the regulation."

Page 25, Approved 12/27/94
-22-

In addition, the Treasurer maintains that the Primary

Committee promptly paid and/or reported debts and obligations in

accordance with its policy, which in the opinion of the Treasurer,

created no financial benefit. According to the Treasurer, the

issue was the timing of disclosure.

In conclusion, the Treasurer states that the Primary

Committee has begun to prepare amended reports to disclose the

transactions.

The Primary Committee indicated that the Audit staff

considered all debts over $500 as reportable, as of the date

incurred, regardless of when the invoice was received. It should

be noted that the interim audit report does not suggest that the

Primary Committee should have reported all debts (over $500) as of

the date incurred. The debts in question were determined to have

been incurred during a reporting period and outstanding at the end

of that specific period.

It is the opinion of the Audit staff that the scope of

the regulation at 11 C.F.R. §104.11(b) is not limited to loans,

written contracts, written promises and written agreements but,

inclusive of all debts and obligations including those mentioned

above. Therefore, contrary to the interpretation of the primary

Committee, the regulation cited does apply to the transactions at

issue.

As stated above, the regulatory standard is the date of

incurrence not the date the invoice is received in the Primary

Committee's Accounting Department. In the Audit staff's opinion,

the Primary Committee's response sufficiently explains why the

above debts were not disclosed, however, the explanation does not

modify the regulatory requirement that the aforementioned debts

are required to be disclosed.

The Primary Committee did not file amended reports with

its response to the interim audit report. However, amended

reports, which materially disclosed the debts and obligations,

were filed on August 12, 1994.

III. Findings and Recommendations - Repayment Matters

A. Determination of Net Outstanding Campaign Obligations

Section 9034.5(a) of Title 11 of the Code of Federal

Regulations requires that within 15 calendar days after the

candidate's date of ineligibility, the candidate shall submit a

statement of net outstanding campaign obligations which contains,

'amongothe'r items, the'totalof'all'outsbandi-ng 'obl-igations for

qualified campaign expenses and an estimate of necessary winding

down costs. Subsection (b) of this section states that the total

of outstanding campaign obligations shall not include any accounts

payable for non-qualified campaign expenses.

Page 26, Approved 12/27/94
-23-

In addition, 11 C.F.R. §9034.1(b) states, in part, that

if on the date of ineligibility a candidate has net outstanding

campaign obligations as defined under 11 CFR §9034.5, that

candidate may continue to receive matching payments provided that

on the date of payment there are remaining net outstanding

campaign obligations.

Sections 9033.5(c) and 9032.6(a) of Title 11 of the Code

of Federal Regulations define the date of ineligibility for a

candidate seeking the nomination of a party which nominates its

Presidential candidate at a national convention as the date of

such nomination.

President Bush's date of ineligibility was August 20,

1992, the date on which he was nominated as the Republican Party's

presidential candidate.

The Primary Committee filed a Statement of Net

Outstanding Campaign Obligations (NOCO) which reflected a

$1,229,306 deficit at August 20, 1992. The Audit staff reviewed

the Primary Committee's financial activity through June 30, 1994,

analyzed estimates of winding down costs prepared by the Primary

Committee and developed the figures shown below.

Page 27, Approved 12/27/94
-24-

Bush'-Quayle' '92 Primary Committee, Inc.

Statement of Net Outstanding Campaign Obligations

August 20, 1992

Audit Analysis

$ 700

356,592j1

613,797

602,001

1,108,826 g[

$2,681,916

2,892,228~

21,250

7,041

329

1,071,598.

44,400 .

14,400

10,000

1,000

75,OOO~

$4,137,246

1.$1 ,455,33»

Assets:

Cash on Hand

Cash in Bank

Capital Assets

Accoun1s Receivable:

Estimated Deposits

Amount due from BUsh-Quayle '92 General Committee, Inc. *

Total Assets:

Obligations:

Accoun1s Payable for Qualified C8fTl)aign Expenses at 8/2!J/92

(actual disbursements 8/21/92-6/30/94)

Amount due U.S. Treasury (Excessive Contributions)

Amount due RepLblican Leadership Fund

Amount due General Committee

Winding down Costs (Based on actual disbursements 8/21/92-6/30/94)

Estimated Winddown (For the period 7/1 /94-6/~/95):

Salaries and Overhead

Storage

Rent

Supplies

Legal and Accounting Expense

Total Obligations:

Net Outstanding Campaign Obligations: (Deficit)

* Hereafter referred to as the General Committee•.

Footnotes to NOCO:

1l Cash in bank (reconciled) at 8/20/92 of ($12,482); $369,074 In contributor checks dated prior to

8/21/92 and deposited on/aftBt' 8/21/92.

g[ Representa apparent General Election expenses paid for by the Primary Committee of

$807,248; $301,577 In expenses reimbursed by the General Committee subsequent to 8/20/92.

MAccoums payable developed per Audit staff review of post-date of ineligibility actual

disburse~..

This amount does not Include the Treasur&r's estimate of $40,000 necessary to contact

contributors Who have not provided occupations and/or namefi of employers (see Finding II.E.).

Should the COmmission require the Primary Committee to contact its contributors, the AudIt staff

will adjust the NOCO statement and the amoll'rt of matching funds received in excess of the

Candidate's entitlement (see Finding 11I.0,).

page 28, Approved 12/27/94
-25-

As calculated by the Audit staff, the Primary Committee

was in a deficit position ($1,455,330) on the Candidate's date of

ineligibility. Please refer to Finding 111.0. for a discussion of

matching funds received in excess of the amount to which the

Candidate was entitled.

B. Calculation of Repayment Ratio

Section 9038(b)(2)(A) of Title 26 of the United States

Code states that if the Commission determines that any amount of

any payment made to a candidate from the matching fund payment

account was used for any purpose other than to defray the

qualified campaign expenses with respect to which such payment was

made it shall notify such candidate of the amount so used, and the

candidate shall pay to the Secretary an amount equal to such

amount.

Section 9038.1(c)(1)(v) of Title 11 of the Code of

Federal Regulations states, in part, that the Commission will

issue an interim audit· report to the candidate and his authorized

committee. The interim audit report may contain Commission

findings and recommendations regarding preliminary calculations

with respect to future repayments to the United States Treasury.

Section 9038.2(a)(2) of Title 11 of the Code of Federal

Regulations states that the Commission will notify the candidate

of any repayment determination made under this section as soon as

possible, b~t not later than 3 years after the end of the matching

payment period. The Commission's issuance of an interim audit

report to the candidate under 11 CFR 9038.1(c) will constitute

notification for purposes of the 3 year period.

Section 9038.2(b)(2)(iii) of Title 11 of the Code of

Federal Regulations states that the amount of any repayment sought

under this section shall bear the same ratio to the total amount

determined to have been used for non-qualified campaign expenses

as the amount of matching funds certified to the candidate bears

to the total amount of deposits of contributions and matching

funds, as of the candidate's date of ineligibility.

Pursuant to 11 C.F.R. §9033.5(a) and 9032.6(c), the

Commission determined President B~sh's date of ineligibility to be

August 20, 1992.

The formula and the appropriate calculation with respect

to the Primary Committee's receipt activity is as follows:

Total Matching Funds Certified Through the Date

of Ineligibility (August 20, 1992)

Numerator plus Total Deposits Through Date of Ineligibility

$9,502,152

$9,502,152 + $26,837,308 = .2614a3

Page 29, Approv.ed 12/27/94
-2~-

Thus, the repayment ratio for non-qualified campaign

expenses is 26.1483%.

C. Apparent Non-qualified Campaign Expenses

Section 9032.9(a) of Title 11 of the Code of Federal

Regulations, in part, defines a qualified campaign expense as one

incurred by or on behalf of the candidate from the date the

individual became a candidate through the last day of the

candidate's eligibility; made in connection with his or her

campaign for nomination; and neither the incurrence nor the

payment of which constitutes a violation of any law of the united

states or the state in which the expense is incurred or paid.

Section 9033.11(a) of Title 11 of the Code of Federal

Regulations states, in part, that each candidate shall have the

burden of proving that disbursements made by the candidate or his

or her authorized committee(s) or persons authorized to make

expenditures on behalf of the candidate or committee(s) are

qualified campaign expenses.

Section 9033.11(b)(2) of Title 11 of the Code of Federal

Regulations requires, in part, that all disbursements have a

record disclosing the identification of the payee, the amount,

date and purpose of the disbursement if made from a petty cash

fund, or a canceled check negotiated by the payee that states the

identification of the payee, and the amount, date and purpose of

the disbursement.

Section 9034.4(a)(1) of Title 11 of the Code of Federal

Regulations states that all contributions received by an . individual from the date he or she becomes a candidate and all

matching payments received by the candidate shall be used only to

defray qualified campaign expenses or to repay loans or otherwise

restore funds (other than contributions which were received and

expended to defray qualified campaign expenses) which were used to

defray qualified campaign expenses.

Section 9003.4(a)(1) of Title 11 Code of Federal

Regulations states, in part, that a candidate may incur

expenditures before the beginning of the expenditure report

period, if such expenditures are for property, services or

facilities which are to be use in connection with the general

election and which are used during the expenditure report period.

Such expenditures will be considered qualified campaign expenses.

Examples of such expenditure include but are not limited to:

Expenditures for establishing financial accounting systems,

expenditures for organizational planning and expenditures for

polling.

Further, 11 C.F.R. §9003.4(b), in relevant part, limits

the sources of funds used to make expenditures prior to the

expenditure report period to: a candidate obtaining a loan which

Page 30, Approved 12/27/94
-27-

meets the requirements for loans in the ordinary course of

business; borrowing from his or her legal and accounting

compliance fund; use of the candidate's personal funds up to his

or her $50,000 limit; and, for a candidate who has received

federal funding under 11 CFR part 9031 et seq., borrowing from his

or her primary election committee(s) an amount not to exceed the

residual balance projected to remain in the candidate's primary

account(s) on the basis of the formula set forth at 11 CFR

9038.3(c).

Section 9038.2(b)(2) of Title 11 of the Code of Federal

Regulations states, in relevant part, that the Commission may

determine that amounts of any payments made to a candidate from

the matching payment account were used for purposes other than to

defray qualified campaign expenses. The amount of any repayment

under this section shall bear the same ratio to the total amount

determined to have been used for non-qualified campaign expenses

as the amount of matching funds certified to the candidate bears

to total deposits, as of the candidate's date of ineligibility.

Total deposits is defined in accordance with 11 CFR 9038.3(c)(2).

1. Apparent General Election Expenditures

During the review of Primary Committee vendor

files, the Audit staff identified $1,641,246 in disbursements in

payment for goods and services which appear to have benefited the

general election campaign. Goods and services relative to

polling, focus group surveys, direct mail in~luding list rentals,

materials including shipping ($1,305,652); print media services

($130,789); leased office space ($40,228); and equipment ($164,577) were noted. It should be noted that the Candidate's

date of ineligibility was August 20, 1992, the date on which he

received his party's nomination. State primary elections/caucuses

were held through June 9, 1992.

a. Polls/Focus Group Surveys, Direct Mail,

Campaign Materials - $1,305,652

(1) Polls/Focus Group Surveys

Vendors conducted polls and focus group

surveys. The majority of the invoices relative to such activity

were dated between June 26, 1992 and August 31, 1992 .. The

questionnaires for polls and surveys dealt with, for the most

part, positions and/or past records of both President Bush and the

Democratic nominee Bill Clinton. Further, many questions included

references to Ross Perot.

A CaliforniaSt~tewide Poll contained

questions such as "Here are some races that will be on the ballot

in California this November ..... For President: George Bush, Bill

Clinton, Ross Perot, Don't know, Refused/NA." "For each

candidate, please rate THE PROBABILITY that you might v~te for him

Page 31, Approved 12/27/94
-28-

or her this November. Ross Perot, Bill Clinton, George Bush."

The majority of the questions centered around the above named

candidates.

It should be noted, that for the most

part, only the November Presidential election was addressed in the

questionnaire. There was one question for Bush voters, Clinton

voters, and Perot voters asking if they voted for George Bush or

Michael Dukakis in the 1988 Presidential election.

In addition, interviews were conducted

with 600 individuals in Monmouth County, New Jersey on July 27,

1992. There was a recontact of 500 individuals on August 14,

1992. The original interviews (July 27) contained questions such

as:

Do you feel things in the country

are generally going in the right

direction;

Do you approve or disapprove of the

way George Bush is handling his job

as President;

I'd like you to rate some people in

the news today - George Bush, Bill

Clinton, Dan Quayle, Al Gore, Tom

Kean, Nicholas Brady, etc.;

If the presidential election were

held today, would you vote for - George Bush, Bill Clinton, Ross

Perot, Don't know, Refused/NA.

The questions then centered around

issues, such as, the budget deficit, the economy, creating more

jobs, taxes, foreign trade, etc. and asked who would do the best

job handling it as President. The choices were George Bush, Bill

Clinton, Don't know, or Refused/NA.

The recontact interviews (August 14)

contained the same questions, plus additional questions about

George Bush and Bill Clinton.

The Primary Committee stated that, for

the most part, polls/focus group surveys taken in July/August

1992 focused on issues, and were pre-convention expenditures that

can be paid by the primary Committee.

(2) Direct Mail

Direct mail pieces featured pictures of

both President Bush and Bill Clinton, along with their positions

Page 32, Approved 12/27/94
-29-

on certain matters and their past records. There were no

requests for funds.

The Marilyn Quayle package contained a

letter from Mrs. Quayle dated August 4, 1992, a poster, bumper

stickers and a position paper. The letter addresses kicking off

our campaign to re-elect President Bush in a few weeks. It gives

President Bush's position on a number of issues, and comments on

Bill Clinton's economic game plan. It also gives a special

Volunteer Hotline number active through Labor Day. One side of

the position paper features a picture of President Bush,

addresses issues and accomplishments, while the reverse side

features a picture of Bill Clinton, and comments on issues and accomplishments~

In addition, a direct mail piece, mailed

August 3, 1992, and August 6, 1992, contains a picture of Bill

Clinton and addresses his record as Governor of Arkansas.

Finally, the Colorado Victory Self

Mailer features 5 pictures of President Bush and 4 pictures of

Bill Clinton and addresses each candidate's position on specific

issues such as taxes, the deficit, crime, the economy, health

care, defense and foreign policy.

According to the primary Committee, the

purpose of direct mail letters and volunteer cards was to recruit

volunteers and to generate excitement for the Convention and, if

mailed, shipped, or distributed before August 21, 1992, the

associated costs represent a primary expense.

(3) Campaign Materials

Materials were purchased and shipped to

various state offices in July/August 1992, including, but not

limited to, flags, tee shirts, bumper stickers, hats, pins,

signs, and brochures. According to the primary' Commi ttee' s

response to the exit conference, the Primary Committee paid for

materials purchased on or before August 20, 1992. Materials

purchased after August 20, 1992, were paid by Bush-Quayle '92

General Committee, Inc. (General Committee). Charges for

shipping the above material were paid by the Primary Committee if

shipped on or before August 20, 1992. Whereas, delivery charges

for the same type of material shipped on August 21, 1992, were

paid by the General Committee.

The Primary Committee further stated

that campaign materials purchased and shipped to state offices' b~fot~ the CohVertti6n ~r~b t~Pi~s~rit·ptim~r~expen.es.

The Audit staff has considered the

Primary Committee's position with respect to the above

disbursements. It is our opinion that the cost of the

Page 33, Approved 12/27/94
-30-

polls/focus group surveys, direct mail, and campaign materials

benefited the candidate's general election efforts, and

therefore, should have been paid by the General Committee.

b. Print Media - $130,789

The Primary Committee's media vendor placed

advertisements in 5 newspapers and 3 publications which appear to

have benefited the candidate's general election efforts. In

addition, the media vendor paid for a national focus group survey

conducted on August 12, 1992.

On July 29, 1992, the same full page

advertisement appealing for the votes of Ross Perot's supporters,

appeared in the USA Today, Dallas Morning News, Orlando Sentinel,

Denver Post, and the Orange County Register. The advertisement

included the following:

"His message has reached many

receptive ears. And his recent

decision not to run has left a void.

That's why in these days following

his withdrawal, I'm asking for your

vote. Give me the chance to earn

it. Over the next few months, study

the two remaining candidates. study

our positions on issues like welfare

reform. Fighting crime and drugs.

Upholding family values. Creating

jobs and balancing the budqet."

Further, the primary Committee paid for an

advertisement which appeared in the Fall '92 (October) issue of

the Louisiana Trooper and Mississippi Trooper. Although generic

in nature, the ads addressed President Bush's anti-crime program.

However, the ads stated they were "paid for by the Bush-Quayle

'92 General Committee, Inc." In addition, the Primary Committee

also paid for an advertisement in the Christian American,

September/October 1992 issue, comparing traditional family value

positions of President Bush and Bill Clinton. The ad also stated

it was paid for by the Bush-Quayle '92 General Committee, Inc.

Finally, the media vendor contracted with

Market strategies to conduct national focus group surveys on

August 12, 1992, in Towson, Maryland. According to the invoice,

the focus groups were (1) conducted among two groups of 13

participants each, (2) primarily straight focus groups with

storyboard ad testing, and (3) primarily composed of indivi~uals

who leaned toward Bill Clinton or were undecided, and a few who

favored President Bush.

with respect to the advertisement appealing

to Ross Perot's supporters a representative of the Primary

Committee stated: "This ad was to recruit support from former

Page 34, Approved 12/27/94
-31-

Perot supporters, after he withdrew his candidacy. It was part

of on-going efforts to build support and attract volunteers to

the campaign."

with respect to the advertisement which

appeared in the above mentioned publications, the General

Commi ttee reimbursed the Primary Commi ttee for the p,roduction

costs and placement fees.

Finally, with respect to the focus group

surveys, the primary Committee stated the cost was a

pre-convention expense.

It is the op1n1on of the Audit staff that the

above advertisements and focus group surveys placed through the

Primary Committee's media vendor and paid by the Primary

Committee benefited the candidate's general election efforts, and

therefore, should be paid by the General Committee.

c. Leased Office Space - $40,228

In certain instances, the Primary Committee

leased office space in a state during that state's primary

election, closed the office after the date of the primary and

then re-opened the same office or an office at another location

in July/August, 1992. Lease payments up to and including August

20, 1992, were paid by the Primary Committee and after August 20,

1992, by the General Committee.

For example, the Primary Committee's

Connecticut office space was leased for the period February 28,

1992 to March 28, 1992. The Connecticut state primary was held

on March 24, 1992. The Primary Committee re-opened an office

from July 20, 1992 to November 19, 1992. 'Lease payments were

made by the Primary Committee for the period July 20, 1992

through August 20, 1992. The General Committee made the lease

payments for the remainder of the lease (August 21, 1992 through

November 19, 1992).

A representative of the Primary Committee

stated: "State offices were opened for two basic purposes - to

support activity relating to a specific primary election, caucus,

or convention, and to serve as branch offices of the national

campaign. The state offices served in this second capacity

throughout the primary period up to August 20, independent of

individual state primaries."

It is the Audit staff's opinion that

establishfngs-'fate offIce's in 'the 'July/August '1992 time period

benefited the candidate's general election efforts. Expenses

associated with these leases should have been paid by the General

Committee.

page 35, Approved 12/27/94
-32-

d. Equipment - $164,577

During July and August of 1992, the primary

Committee purchased and/or leased computer components and related

software. The equipment was shipped to either a state office or

to the national office. If the equipment was purchased before

August 21, 1992, it was paid for by the Primary Committee. If

equipment was leased, the Primary Committee paid the lease

payments up to and including August 20, 1992. The General

Committee paid these expenses subsequent to August 20, 1992.

Further, if at the time the equipment was leased, the Primary

Committee purchased supplies such as laser toner, fax refills,

etc. and had the equipment and supplies shipped to a state, the

Primary Committee paid the entire ~ost of supplies and shipping

even though the lease expense was pro-rated.

For example, the Primary Committee leased a

computer and a laser printer for the period July 30, 1992 through

August 29, 1992. At the same time, the Primary Committee

purchased laser toner and fax refills. The vendor shipped

everything to the Phoenix, AZ office. The primary Committee paid $796 representing (a) lease expense - July 30th through August

20th - ($213), (b) the entire cost of the laser toner ($240) and

fax refills ($240), and (c) shipping charges ($103). The General

Committee paid only a pro-rated share of the lease expense ($87).

It is the opinion of the Audit staff that, in

the above example, the leased equipment and supplies benefited

only the candidate's general election efforts, therefore, the

entire cost should have been paid by the General Committee.

Further, it is also our opinion that any equipment purchased in

July/August 1992, except for purchases shipped to Houston or

directly related to Convention activity in Houston, benefited the

candidate's general election efforts and should have been paid

for by the General Committee.

It is the position of the Primary Committee

that expenditures incurred prior to August 20, 1992 were

appropriately paid by the Primary Committee, while expenditures

incurred after the completion of the nominating convention were

of course paid by the General Committee.

Interim Audit Report Recommendation:

The Audit staff recommended that the primary Committee

demonstrate that the expenses discussed above are expenses in

connection with the Candidate's campaign for nomination or obtain

reimbursements from the General Committee of $1,604,461

($1,641,246 - 36,785 already reimbursed by the General

Committee).

Specifically, the Primary Committee was to submit

documentation which demonstrated the following with respect to

each expendituce:

Page 36, Approved 12/27/94
-33-

polling/focus group surveys - explain and document

how the results of each poll/focus group survey was

used in connection with the candidate's campaign for

nomination, as opposed to being considered used for

the candidate's campaign for election. For example,

the report discusses the California Statewide Poll.

Explain and document how the results of this poll,

that contains questions concerning the three

candidates and the November presidential election, be

considered in connection with the candidate's

campaign for nomination.

direct mail - explain and document how direct mail

pieces which target volunteers and provide a

volunteer Hotline number active through September 7,

1992 can be viewed in connection with the candidate's

campaign for nomination and not in connection with

the candidate's campaign for election. Further,

explain and document how direct mail pieces which

include a picture of only Bill Clinton and discuss

his record as Governor of Arkansas can be considered

in connection with the candidate's campaign for

nomination. Similar explanations should be provided

for all other direct mail pieces noted in this

finding.

campaign materials - explain and document how the

campaign materials discussed at C.1.a.(3) above were

used in connection with the candidate's campaign for

nomination. Further, explain and document how the

cost of materials, shipped on August 20, 1992, and

received for distribution in a state on or after

August 21, 1992 can be considered in connection with

the candidate's campaign for nomination.

print media/focus group survey - explain and document

the relationship between the July 29, 1992

advertisement and the candidate's campaign for

nomination. The ad contains a request for the votes

of former Perot supporters. Since, the next election

in which votes were to be cast would have been the

1992 general election, explain how a request for

these votes relates to the candidate's campaign for

nomination. Further, explain and document how the

results of a national focus group survey, conducted

August 12, 1992, that was primarily composed of

individuals who leaned toward Bill Clinton can be co~sidei~d in ~orin~ction with ~hecandidate's

campaign for nomination.

leased office space - explain and do~ument how the

opening of campaign offices in the July/August 1992

time period and equipping such offices with

Page 37, Approved 12/27/94
-34-

computers, fax and copying machines, etc. are in

connection with the candidate's campaign for

nomination and not in connection with the candidate's

campaign for election.

equipment - explain and document how equipment

purchased/leased was used in connection with the

candidate's campaign for nomination. Such

explanation should include the specific use of the

equipment. Further, explain and document the

apparent inconsistent treatment of equipment

purchased versus the same type of equipment leased.

For example, equipment purchased on August 15, 1992,

is considered (by the Primary Committee) a primary

expense. Where as, equipment leased from August 15,

1992 through September 15, 1992, is pro-rated as

follows, August 15, 1992 through August 20, 1992 - Primary Committee, and August 21, 1992 through

September 15, 1992 - General Committee.

Absent such a demonstration, the Audit staff will recommend

that the Commission make an initial determination that a pro rata

repayment to the United States Treasury of $405,622 is due

pursuant to 11 C.F.R. §9038.2(b)(2).

In response to the interim audit report the Primary

Committee states, in part,

The Report questions four categories of

expenditures that should be attributed to

the General Committee and not the Primary

Committee. All of the expenditures were

incurred prior to August 20, 1992, when

President Bush accepted the Republican

nomination to run for President. Some of

the polls, surveys and materials addressed

the comparison between President Bush and

the Democratic nominee, Bill Clinton.

Because the expenditures "appear to have

benefitted the general election campaign,"

the report concludes that they should have

been paid by the General Committee.

The Report reaches this conclusion because

"it has applied the wrong standard for

determining whether an expenditure was a

qualified primary campaign expenditure.

The Presidential Primary Matching Payment

Account Act defines a 'qualified campaign

expense' as any payment 'incurred by a

candidate, or by his authorized committee,

in connection with his campaign for

nomination for election, and . . . neither

the incurring nor payment of which

page 38, Approved 12/27/94
.... 35-

constitutes a violation of any law . . 26 U.S.C. § 9032(9) (emphasis added). The

Commission's regulations track this

definition, defining, in relevant part, a

qualified campaign expense as an expense

'incurred by or on behalf of a candidate . . . through the last day of the candidate's

eligibility ... made in connection with

his or her campaign for nomination .••' 11 C.F.R. § 9032.9(a) (emphasis added).

The Commission has in the past used a

bright-line test based on the date of a

candidate's nomination, not a subjective

review of content, to allocate expenses

between the primary and general elections."

"The expenses challenged in the Report meet

the test for qualified primary campaign

expenses. First, President Bush's

eligibility as a primary candidate ended on

August 20, 1992, when the Republican Party

nominated him as its candidate for

President. See 11 C.F.R. §§ 9033.5 and

9032.6(a). The expenses were incurred

prior to his nomination while President

Bush was still an eligible primary

candidate. Second, there is no suggestion

that these expenditures violated any law.

Finally, as explained more fully below, the

expenditures were made 'in connection with'

the President's 'campaign for nomination.'

There is no requirement that an

expenditure's exclusive effect be to

benefit the campaign for nomination. See

Adv. Ope 1978-99, Fed. Election Camp. Fin.

Guide (CCH) 5387, at 10,396 (1979)

(campaign materials ordered and received

only one day before the primary election,

which were both used in the primary

election and the general election, may be

treated as primary campaign expense).17/"

[Footnote #17 omitted]

"Indeed, the Commission has previously held

that expenditures having an obvious benefit

to the general election campaign may

~o~~~Jhel~~§_be a,tt~~_~~t~.ci.~~· a. pr.~m.a~y

campaign. For example, in auditing the

1984 primary campaign of President Reagan,

the Commission considered whether certain

advertising production expenses incurred by

the Reagan-Bush primary committee were

properly allocated for advertisements that

page 39, Approved 12/27/94
-36-

aired both during the primary and the

general election periods. The Commission

did not challenge payments by the primary

committee for broadcast time prior to the

convention, even though the very same

advertisements were aired again after the

convention during the general election."

"Based upon this clear precedent, the

Committee used August 20, 1992 -- the date

that President Bush accepted the nomination

of the Republican Party -- to allocate

expenses between the primary and general

committees.181

[Footnote #18 omitted]

The Report ignores this traditional

approach and substitutes instead a

subjective determination, almost two years

after the expenditures were incurred, about

whether the general campaign benefitted

from the expenditure."

"As explained in the attached affidavit of

Mary Matalin, the Committee's Deputy

Campaign Manager for Political Affairs

(Exhibit 4), virtually every expenditure

made by a successful primary candidate will

also benefit the candidate's general

election campaign. The reason that

political parties hold a series of

primaries and then a convention is to

select a candidate that can win the general

election in November. A candidate must

therefore convince the delegates that he or

she can do just that: Win in November.

Thus, from the very beginning of their

campaigns, primary candidates take polls

and conduct focus groups asking, inter

alia, who the respondents would vote for

Tff""the general election were held today.'

See, ~, Matalin Decl. at ,r 18 and

Attachment A. Candidates publicly attack

their counterparts in the opposing party.

Id. at Attachment B (sample news articles).

They argue to the voters that their

policies are better than the. policies of

the other party's candidates. In general,

the candidates seek to build support among

all voters -- not just those registered

Page 40, Approved 12/27/94
-37-

with their own party -- so that they can

credibly claim to their party's convention

delegates that they would, if nominated,

win in November."

"The run-up to the Republican National

Convention in 1992 provides a particularly

good illustration of this point. After the

Democratic Convention, Bill Clinton took a

commanding 20-point lead in the public

opinion polls. Matalin Decl. at 8. The

effect was to shake the confidence of some

members of the Republican Party about the

ability of President Bush and Vice

President Quayle to win the November

election. Prominent Republicans, such as

George Will and Tommy Thomas, made public

calls for President Bush to change his Vice

Presidential candidate or even to step down

himself to open the Convention to another

candidate. Id. At best, this dissension

was undermining the ability of President

Bush to generate the enthusiasm necessary

for a favorable Convention atmosphere or to

forge a political platform acceptable to

him.19/"

[Footnote #19 omitted]

"The most effective way for President Bush

to counter such criticism was to show that

he could beat Bill Clinton in November.

Matalin Decl. at 13. That meant, most

importantly, raising his standings in the

polls with all voters, not just delegates

to the Republican Convention. The campaign

therefore took polls and surveys to

ascertain why the Bush-Quayle ticket was

lagging in the polls and generated

advertisements and promotional materials

designed to bolster those ratings as well

as to build overall excitement during the

Convention. Id. Thus, polls that analyzed

the issues important to voters in the

November election, advertisements that

addressed Bill Clinton, and appeals to Ross

Perot's supporters were all an integral

part of the .president'spre__Convf!ntion

·s'trcffeglf:--Id-.' at-',r"~l,f~ -''-'S'o' long as "these

expenditureswere 'in connection with' the

c'ampaign for nomination, it is, we

Page 41, Approved 12/27/94
-38-

respectfully submit, simply irrelevant that

these efforts may have also benefitted the

general election campaign.20/

[Footnote #20] - In addition, the

expenditures at issue could not be

allocable to the general election campaign.

They were not made 'for use during the

expenditure period' as required by 11

C.F.R. Sect. 9003.4(a)(1) because President

Bush was not a 'candidate' as required

under 11 C.F.R. Sect. 9002.2 until after

August 20, 1992."

"Moreover, the Report seems to assume that,

at some easily determinable time, President

Bush had 'locked up' the Republican

nomination, and needed to do no more 'in

connection with' his campaign for the

nomination. As Ms. Matalin's affidavit

shows, however, the delegates of many

states were not legally 'bound' to cast

their votes for President Bush. Moreover,

since the days of Lincoln, an integral part

of the nomination process has been the

drafting and adoption by the delegates of a

party platform. Many platform issues were

in dispute until it was adopted on the

floor of the Convention."

"By abandoning the bright-line approach,

the Commission would force political

campaigns to make subjective

determinations, subject to later

second-guessing, concerning the relative

impact of a given expenditure on the

primary versus the general election. Such

a change in interpretation of the

regulations would cripple a campaign. For

example, under the approach suggested by

the Report, polls, recruiting efforts, and

campaign speeches in states immediately

after their respective primaries might be

viewed as sufficiently connected to the

general election to be attributable to the

general election committee.21/

[Fo-otnote#21 omitted]

Because of this uncertainty and because of

restrictions on general election expenses

prior t-o the nomination, a campaign could

avoid these problems only by shutting down

Page 42, Approved 12/27/94
-39-

in each state after each primary and

shutting down completely after 'locking up'

the nomination. Indeed, an incumbent

running unopposed arguably would be

prevented from campaigning at all until

after the nomination. Since the advent of

the federal campaign laws, this has never

been the practice; nor should it be now.

The consequences of such conduct would be,

as Ms. Matalin states, 'political suicide.'

Matalin Decl. at ,r 14. 22/"

[Footnote #22 omitted]

"Turning to the specific expenditures cited

in the Report, their connection with the

nomination should be clear:

a. Polling/Focus Group Surveys: The

polls and surveys discussed in the Report,

which were completed before the Convention,

sought to ascertain voters' feelings about

various candidates, including George Bush,

Bill Clinton, and Ross Perot, and about a

variety of issues, including the budget

deficit, taxes, and foreign policy.

Similarly, direct mail pieces sent in early

August addressing the records of President

Bush and Bill Clinton were designed to

generate enthusiasm and to counter the

attacks on President Bush and Vice

President Quayle from inside the party in

late July and early August.

b. Direct Mail: The Report asks the

Primary Committee to explain how the direct

mail pieces, mailed before the Convention,

'can be viewed in connection with the

candidate's campaign for nomination and not

in connection with the candidate's campaign

for election.' Report at 28. Again, we

respectfully submit that the Report sets

forth the wrong standard. While a

qualified primary campaign expense must be

made in connection with the bid for

nomination, it is' irrelevant if that effort

also benefits the general election

campaign. Nevertheless, as Ms. Matalin's D~~I~i~tI6n shows,-~fiese eipenditures

clearly were made in connection with the

campaign for nomination. Matalin Decl. at

,r 14.

page 43, Approved 12/27/94
-40-

With respect to the nomination, the direct

mail pieces sought to recruit volunteers

and generate excitement leading up to the

Convention. Likewise, items that addressed

Bill Clinton and his record as Governor of

Arkansas were part of the response to the

dissension among the Republican ranks

during the pre-Convention build-up. The

Primary Committee was seeking to establish

for the benefit of the delegates that the

Bush-Quayle ticket could and would win the

November election.

c. Campaign Materials: Shipments of

campaign materials made on or before August

20, 1992, were paid for by the Primary

Committee while shipments after that date

were paid for by the General Committee.

See Adv. Ope 1975-9, Fed. Election Camp.

Fin. Guide (CCH) ,r 5110 at 10,035 (1975).

This approach is consistent with the

bright-line cutoff based upon the date of

ineligibility used by the Commission in the

past .•.. Campaign materials were shipped

across the country in a constant stream

throughout the primary season. These

materials were used to campaign for

primaries and caucuses and then to generate

support leading up to the Convention. It

would not be possible objectively to set a

date when these same materials somehow

became a general election expense."

d. "Print Media/Focus Group Survey: The

July 29, 1992 advertisement, including the

appeal to former Perot supporters, again

constituted par't of the attempt to build

President Bush's support in advance of the

Convention so that the delegates would enth~siastically support him at the

Convention. Matalin Decl. '13. Likewise,

focus group surveys played an important

part in the development of the campaign's

pre-convention strategy. Id.

e. Leased Office Space: The campaign

offices served an important role throughout

the primary campaign season and in the

pre-Convention preparation by ·supporting

efforts of and disseminating information

from the national campaign headquarters.

For example, efforts by the campaign to

stay in contact with Convention delegates,

provide them current information about the

Page 44, Approved 12/27/94
-4.2-

which benefited the candidate's general election campaign. Based

on documentation made available, all expenses identified by the

Audit staff should have been paid in their entirety by the General

Committee.

The Primary Committee stresses that the Commission, in

consideration of the final audit report for the 1984 Reagan Bush

Primary Committee, held that expenditures having an obvious

benefit to the general election campaign may nonetheless be

attributed to a primary campaign. Indeed, the Commission made a

determination that certain polling expenses, as well as voter

registration expenses made in a state after that state's

primary/caucus were made in connection with the candidate's

campaign for nomination and therefore a qualified campaign

expense.

However, it should be noted that the 1984 Reagan Bush Primary

Committee also acknowledged making four expenditures, totaling

approximately $64,000, that were subsequently reimbursed by the

1984 Reagan Bush General Committee. These expenditures were for

telemarketing and phone deposits incurred and initially paid by

the 1984 Reagan Bush primary Committee prior to the 1984

convention.

The Primary Committee also argues that after the Democratic

Convention, the Democratic nominee took a commanding 20 point lead

in the public opinion polls which caused dissension within the

Republican Party. It further states, the most effective way for

President Bush to counter such criticism was to show he could beat

Bill Clinton in November. That meant raising his standing in the

polls with all voters not just delegates to the Republican

Convention.

The Primary Committee further stated that the polling results

with respect to issues important to voters in the November

election, advertisements that addressed Bill Clinton and appeals

to Ross Perot's supporters were in connection with the campaign

for nomination, it is, (the Primary Committee states) simply

irrelevant that these efforts may have also benefited the gene'ral

election campaign.

It is the opinion of the Audit staff that the expenditures

for polls, advertisements that addressed Bill Clinton, and the

appeals to Ross Perot's supporters can only be viewed as made for

the Candidate's campaign for election. The polls, advertisements,

and appeals represent initial attempts to determine campaign

strategy, identify potential voters, not for purposes of

no~i!1~ti 01'l.Q~. <:onv~n tJ9J:l_~1l~.h~s la.sm.

The Primary Committee asserts that the interim audit report

assumes that at some easily determinable time, President Bush had

"locked up" the Republican nomination, and needed to do no more

"in connection with" his campaign for nomination. According to

Ms. Matalin "the delegates of many states we~e not legally 'bound'

page 45, Approv.ed 12/27/94
-43-

to cast their votes for President Bush." The Primary Committee

further states that by abandoning the bright-line approach, the

Commission would force political campaigns to make subjective

determinations. Such a change in interpretation of the

regulations would cripple a campaign. For example, under the

approach suggested by the interim audit report, polls, recruiting

efforts and campaign speeches in states immediately after their

respective primaries might be viewed as sufficiently connected to

the general election.

It should be noted that the interim audit report does not

address a point in time that President Bush had "locked up" the

nomination. It merely addresses expenditures incurred, for the

most part, during the July/August 1992 time period. The approach

suggested by the interim audit report will not cripple a campai9n,

nor will it require a campaign to shut down. It does not question

expenditures made immediately after a states' primary. As stated

above, it does question expenditures incurred during a defined

time period (for the most part July/August 1992). The regulations

at 11 C.F.R. § 9003.4(a) envision such expenditures during this

period:

"A candidate may incur expenditures before

the beginning of the expenditure report

period, as defined at 11 CFR 9002.12, if

such expenditures are for property,

services or facilities which are to be used

in connection with his or her general

election campaign and which are for use

during the expenditure report period. Such

expenditures will be considered qualified

campaign expenses. Examples of such

expenditures include but are not limited

to: Expenditures for establishing financial

accounting systems, expenditures for

organizational planning and expenditures

for polling."

Further, in support of its position that the expenditures

were made in connection with the President's campaign for

nomination and that there is no requirement that an expenditure's

exclusive effect be to benefit the-campaiqn for nomination, the

Primary Committee references Advisory Opinion 1978-99.

In that Advisory Opinion, a non-publicly financed committee,

not subject to any spending limitations, requested an opinion as

to the correct reporting of a debt incurred, prior to the date of

the primary election, for campaign materials used before and after

the primary election. The Commission concluded that the full

balance owed may, if the committee wishes, be treated as a primary

debt.

page 46, Approved 12/27/94
-41-

campaign, and garner their support for

particular platform items were often

coordinated with local campaign offices.

Matalin Decl. at 14. Similarly, these

offices helped support the more general

efforts to generate enthusiasm for the

Convention. Id.

f. Equipment: Again, the equipment being

used by the campaign, both nationally and

across the country, was part of the effort

to prepare for and generate excitement for

the Convention as well as the efforts to

counter the Republican attacks on the

Bush-Quayle ticket. With respect to the

treatment of leased versus purchased

equipment, there is no inconsistency.

Leases were pro-rated between the two

committees on the basis of the August 20,

1992, date of ineligibility. Purchased

equipment was sold to the General Committee

pursuant to the practice set forth in

footnote 18 above.

AS a final matter, even under the

excessively restrictive standard proposed

by the Commission, many of the primary

expenses challenged in the Report would

still constitute qualified primary

expenditures. For example, the palm cards

printed by the Todd/Allen Printing Co. were

shipped to and distributed at the

Convention. Similarly, the

'Accomplishment' brochures printed by

Corporate Press were also used at the

Convention. A detailed exposition

concerning the expenses is included as

Attachment F to the Davis Declaration."

Analysis of the Primary Committee's Response to the Interim Audit

Report'

In addition to the above text, the Primary Committee provided

a declaration .from Keith A. Davis (Assistant Treasurer) and Mary

Matalin (Deputy Campaign Manager for political Affairs), along

with copies of various news articles. The declarations and news

articles, in part, explain and attempt to justify the Primary

CommittE!e' s an~~ t1?-~ ~~!l~r~l ..Commi.~t.t~_~ 'sc~.~RaYJllent, .. of._expe,n.ses in

que 'st:fan·-. - .

In its response, the primary Committee maintains that it h-as

properly allocated expenses between the Candidate's primary and

general election campaigns. In the Audit staff's opinion, no

basis exists to pro rate expenses paid by the primary Committee

Page 47, Approved 12/27/94
-44-

The primary Committee also cites Advisory Opinion 1975-9, to

support its "bright-line cutoff" approach. As stated above, the

Primary Committee's position is that the expenses related to

shipments of campaign materials made on or before August 20, 1992

were properly paid by the Primary Committee, while post-8/20/92

shipments were properly paid by the General Committee.

Advisory Opinion 1975-9 is in response to a non-publicly

financed committee questioning whether a primary election in which

there is only one candidate seeking the nomination is an election

for purposes of the contribution and spending limitations of 18

U.S.C. §608. The Commission concluded that those expenditures

made solely to defray expenses incurred with respect to the

primary election would not be chargeable to the unopposed

candidate's expenditure limits in the general election.

It is the opinion of the Audit staff that neither opinion

cited is relevant. Advisory Opinion 1978-99 did not address a

situation where spending limitations were applicable. In Advisory

Opinion 1975-9, the Commission clarified the application of

contribution and expenditure limitations in the case of an

unopposed candidate.

The single most relevant question is, did the expenditures

benefit the Primary Committee's campaign for nomination or the

General Committee'S campaign for election? We believe the general

election campaign received the benefit of the expenditures

discussed in this report for the following reasons:

First, as previously stated, certain expenditures by the 1984

Reagan Bush Primary Committee were questioned by the Audit staff.

The 1984 Reagan Bush Primary Committee determined that the actual

benefit of expenditures, totaling in excess of $64,000, was to the

1984 Reagan Bush General Committee even though the expenditures

were incurred prior to the Convention. Therefore, in our opinion,

the pertinent qu~stion is what committee/campaign benefited from

the expenditure, as opposed to when the expenditure was incurred.

The Primary Committee's arguments that the polls were conducted in

order to counter dissension within the Party or with delegates

and, therefore, were primary election expenditures, are not

persuasive. We do believe, however, that such polls/focus groups

resulted in information necessary to develop campaign strategies

for the general election.

Second, in our opinion, advertisements which targeted Ross

Perot's supporters can only be viewed as a general election

expense and not as the Primary Committee contends, an attempt to

build support in advance of the Convention so that delegates would

enthusiastically support President Bush. The advertisements were,

in our opinion, an attempt to influence voters in the November

general election. The advertisements stated " ... I'm asking for

your vote. Give me the chance to earn it. Over the next few

months, study the two remaining candidates. Study our positions

on issues..• " The use of the words "over the next few months" can

Page 48, Approved 12/27/94
-45-

only mean the period of time between when the ads ran (July 29,

1992) and the November election, and not the eighteen day period

between July 29th and the start of the Republican Convention.

Further, the statement, " ... asking for your vote", in the Audit

staff's opinion, targets the November general election. The

identity of the two remaining candidates is obvious.

Third, as in the case of polls and the focus group surveys,

expenditures for campaign materials, leased office space, and

equipment are the types of activity envisioned by the Regulati~ns

as start-up costs. Such expenditures can be made with funds

borrowed from the Primary Committee prior to the start of the

expenditure report period, provided that the amount borrowed be

repaid (by the General Committee) within 15 days of receipt of

payments received by the Candidate under 11 C.F.R. §9005. (See 11

C.F.R. §9003.4(b)).

Further, as noted above, the Primary Committee's position

with respect to polls, advertisements, and appeals to Ross Perot's

supporters as well as its contention that it is "simply

'irrelevant" that the expenditures may have benefited the general

election is without merit.

The "benefit" to the general election, whether intentional or

not, cannot be dismissed as "simply irrelevant".

Finally, during our review of information provided by the

primary Committee in its response to the interim audit report, the

Audit staff re-examined certain expenditures. For the most part,

these included consulting fees and travel expenses not related to

a specific poll, survey, or focus group; the cost of palm cards

used at the Convention; and a survey conducted just prior to the

North Dakota primary. As a result of our review, the above

expenses, totaling $59,494, are now viewed as qualified campaign

expenses of the Primary Committee. Therefore, the amount of

non-qualified campaign expenses stands at $1,581,752 ($1,641,246 - 59,494).

On December 8, 1994, the Commission determined that it would

allow 50 percent of the apparent general election expenses paid by

the Primary Committee to be considered primary electi~n related

(see Attachment 2).

It should be noted that apparent general election

expenditures, totaling $83,992, were either reimbursed by the

General Committee or paid by the Primary Committee subsequent to

January 12, 1993, the last day matching funds (that the Primary

Committee was entitled to) were present in the Primary Committee's ac~6unts. As result, no repayment of m~tchin9 funds, pursuant

to 11 C.F.R. §9038.2(b)(2), will be requested at this time with

respect to these expenditures.

page 49, Approved 12/27/94
-46-

Recommendation #1

The Audit staff recommends that the Commission make an

initial determination that a pro rata repayment to the united

states Treasury of $195,224 «$1,577,196 - $83,992) + 2 x

(.261483)), representing the value of non-qualified campaign

expenses, is due pursuant to 11 C.F.R. §9038.2(b)(2).~1

D. Matching Funds Received in Excess of Entitlement

Section 9038(b)(1) of Title 26 of the United states Code

states if the Commission determines that any portion of the

payments made to a candidate from the matching payment account was

in excess of the aggregate amount of payments to which such

candidate was entitled under section 9034, it shall notify the

candidate, and the candidate shall pay to the Secretary an amount

equal to the amount of excess payments.

Section 9034.1(b) of Title 11 of the Code of Federal

Regulations states that if on the date of ineligibility a

candidate has net outstanding campaign obligations as defined

under 11 CFR §9034.5, that candidate may continue to receive

matching payments for matchable contributions received and

deposited on or before December 31 of the Presidential election

year provided that on the date of payment there are remaining net

outstanding campaign obligations, i.e., the sum of the

contributions received on or after the date of ineligibility plus

matching funds received on or after the date of ineligibility is

less than the candidate's net outstanding campaign obligations.

This entitlement will be equal to the lessor of: (1) the amount of

contributions submitted for matching; or (2) the remaining net

outstanding campaign obligations.

Based on our analysis of the Primary 'Committee's NOCO

statement, the Candidate had net outstanding campaign obligations

on August 20, 1992 of $1,455,330 (see Finding III.A.).

The Primary Committee deposited private contributionslOI

totaling $784,592 from August 21, 1992 to January 5, 1993. In--

addition, the Primary Committee received federal matching fund

payments of $175,216 on September 2, 1992 and $440,884 on November

3, 1992. Therefore, on January 5, 1993, the Candidate's remaining

~I Should the Primary Committee be reimbursed (by the General

Committee) for the remaining general election expenses, or

portion thereof, the repayment amount will be adjusted

accordingly.

101 The "private contributions" calculation excludes the amount

of contributor checks dated 8/20/92 or earlier and deposited

after 8/20/92; further, contributor checks that were later

returned for "Not Sufficient Funds" or refunded were also

excluded.

Page 50, Approved 12/27/94
-47-

entitlement was $54,638. Further, the Primary Committee received

a matching fund payment of $98,829 on January 5, 1993, which

exceeded the Candidate's entitlement in the amount of $44,191.

The Primary Committee received two additional matching

fund payments: March 2, 1993 ($340,662), and April 2, 1993

($100,778). As a result, matching fund payments totaling

$485,631, were received in excess of the Candidate's entitlement.

Recommendation #2

The Audit staff recommends that the Commission make an

initial determination that the Candidate was not entitled to

$485,631 in matching funds pursuant to 11 C.F.R. §9038.2(b)(1)(i),

and that the Primary Committee make a repayment of $485,631 to the

united states Treasury pursuant to 26 U.S.C. §9038(b)(1).

E. Stale-dated Checks

Section 9038.6 of Title 11 of the Code of Federal

Regulations states that if the committee has checks outstanding to

creditors or contributors that have not been cashed, the committee

shall notify the Commission. The committee shall inform the

Commission of its efforts to locate the payees, if such efforts

have been necessary, and its efforts to encourage the payees to

cash the outstanding checks. The committee shall also submit a

check for the total amount of such outstanding checks, payable to

the united states Treasury.

The Audit staff reviewed the Primary Committee bank

accounts and identified stale-dated checks as of August 31, 1993,

totaling $17,278. These checks were dated between January 20,

1992 and January 22, 1993.

At the exit conference, th~ Primary Committee was

provided with a schedule of these stale-dated checks. The Primary

Committee did not comment on the matter.

On October 7, 1993, the Primary Committee provided

documentation that demonstrated a $123 reissued check had cleared

the bank and $287 represented an amount not owed. Further, on

October 21, 1993, the Primary Committee issued a check payable to

the united States Treasury in the amount of $16,868 ($17,278 - 410) .

On October 15, 1993, the Primary Committee issued a

refund check payable to the Republican Leadership Fund, a joint

f~nc}raisin9 agent, in the a.~~unt. of $2..,326. Ho:wever, Jhe

Republican Leadership Fund could not negotiate the check, since it

had closed its bank account. As a result, on July 25, 1994, the

primary Committee issued a check payable to the United States

Treasury in the amount of $2,326.

Page 51, Approved 12/27/94
-48-

Recommendation #3

The Audit staff recommends that the Commission make an

initial determination that·stale-dated checks, totaling $19,194

($16,868 + 2,326), a~e payable to the United states Treasury. The

payments were made on October 21, 1993 and July 25, 1994.

IV. Repayment Summary

Presented below is a recap of the amount due the united

states Treasury:

Finding II.B. - Apparent Unresolved $141,801 ~/

Excessive Contribution

Finding III.C. - Apparent Non-qualified 195,224

Campaign Expenses

Finding 111.0. - Matching Funds Received 485,631

in Excess of Entitlement

Finding III.E. - Stale-dated Checks 19,194 ~/

Sub-total $841,8'50

Amount Paid to U.S. Treasury 160,995

Amount Due $680,855

~/ The Primary Committee paid th.ese amounts to the United

States Treasury, leaving a balance of $680,855

($841,850 - 141,801 - 19,194).

Page 52, Approved 12/27/94
Adlu.'ed Rectlp••

(Through september 30. 1994)

....

J~ Feder.. .......... p-e', and 0IhIr Contlibu1lon, CandId... Ofterl_ Adfy....

Matching Conlrlbuttont emt. Contlb' from IN l.ntMnuI MnuI Othtt Tot..

....RtIundI YnUiReUdl Cancld... ____ Rtp8Y'M"11 Aepeymenll RtwIpel

R__

:J ~l Dlm""l.'

~~ larry AgrIn '211.8" 1331.831 to '500 .c(p.. 13,000 ".021 $3,001 "'.112

Jerry ....n 14.231."5 '5.178._ 10 SO SO SO t4.H3 ••••20.37.

BIICIlnIDn "2.1".'30 '2•••3." '2••21 SO SO

" '30.72. '37.ISt.I72

TomH-'dn '2,t03.SS2 13,010.208 "'1.570 SO SO SO '22.101 '5.at.721

BabIC.., '2.1••2M 13.113.332 t:M'.711 SO SO (".225) '5.131 "._.011

lyndon laRouc:M '518••

" ".eeM.OIS SO SO SO SO ".23t '2.110.130 I

'8,lSI ,oeaI c::3"

P.,'Teanoa' 13.031.381 '5.012,.1 13._ SO '.5,000 ('1.115) to 0"\

...........

["-

Doug'WI1d8r '281,021 '508,511 '750 $0 SO SO ",039 ''',"4

I

N

........... N

'~~_2C!____t~,113.131~ r-f

Tota' Otmocra'i '25,225.8SO $A4.870,488 ___'7!~.012 SSOO '~!QOO (SI.170) i, 8IgMcwJ1

•

S

Patrtdl Ouch.,an S4.991.083 '7.157,808 '2••750 SO S04 .... SO $43.140 $12.221••

"

" George Bush SI0.858.513 $27.088,825 .....250 SO SO 10 '222,417 '31.0t••OO5 ... (V)

lJ)

] OIIwt Duke' SO S220.715 to SO II.OOD 10 SO 1271.811 Q)

.'

g

T" RepuIlIcIrtl $15,851.498 134.417.348 .,000 SO ".00D SO 'aI.357 '50.112.301

p..,

.i De- PartY

~~ Andre Mlrrou' SO $512.710 S181 $118 "5,000 10 SO '571,011

~~ lenora Ful8nI' ",035.524 $2.201,400 SO S325 CS' .258) ".200 SO '4,137.211

Q).aJ John Hageln $353.110 S5I3,8oo $441 SO SO '5.130 $5,318 $121.315

~~Ii _Totat Other_Pertr ____ '2.288,184 -- '3,328,080 __ ___ ""t "3,742__ ",130 ___ -'-","8 '5,143.703

Grand Tota' "'3,112.830 Sl2,485,874 S841.702____ S941 '82,142 ('2.1401 '347,193 "~,I39.'.2

Perot SO 13.105,594 SO '85.544.735 '2.058.371 SO '5,807

. '71,512,501

"

,. ,~.. ,.'

Final Audit Report

AR005773

Attachment 2

Page 1 of 1

Bush-Quayle '92 Primary Committee, Inc.

Recap of General Election Expenses Paid by the Primary Committee

Vendor

. Market strategies

Karl Rove & Company

The Tarrance Group

Spalding Companies

James R. Foster & Associates

Corporate Press, Inc.

Campaign Services Group

western Wats Center

Todd/Allan Printing Co., Inc •.

strategic Planning

Direct Communication

Satellite Network Systems, Inc.

Direct Mail Systems, Inc.

Anjoy Research, Inc.

Campaign Tel Ltd.

BCE Corporation of Rockville

Andrews Office Products

The Core Group

Depue & Associates

Radio Shack

Various - Office Space

November Company

Amount

$ 133,164

301,551

25,920

122,512

4,500

39,031

43,056

44,873

6,299

20,104

22,000

81,660

19,726

25,000

357,692

150,644

2,317

5,184

.5,021

481

40,228

130,789

Subtotal 1,581,752

capital assets reimbursed by the General <4,556>

Committee

Subtotal 1,577,196

Expenses recognized by General Committee <37,301>

as general election related and reimbursed

by the General Committee.

Total §1. 53 9,895

50% viewed as general election expenses paid $769.948

by the Primary Committee ($1,539,895 * 50%)

Total amount of general el~ction expenses $807.249

paid by. thePrima.ry Comm! ttee ($76~., 948 +

$37,301)

PaeJe 55, .Approved 12/27/94
Page 56, Approved 12/27/94

I

.
\~ i'~Vl \

,<;)-")-~-~+

FEDERAL ELECTION COMMISS~ON

'WASHINGTON, 0 C 204b3

October 24, 1994

MEMORANDUM

TO:

THROUGH:

FROM:

Robert J. Costa

Assistant Staff Director

Audit Division . \'

• f \', i

~~~~f COi ~~.~~~~ \J~':~'> .~;"./

Lawrence M. Nobl~ .

General Counsel \(~

Kim Bright-Coleman~'~

Associate General Counsel

/.// I

Kenne thE. Ke 11ne r / ,,"" //1

Assistant General Couhsel

Delanie DeWitt Painter /f\ ['1 f)

Attorney ~rCt~

Jane whang ~~ At torney l! ' Y

SUBJECT: proposed Final Audit Report on Bush~Quayle '92

Primary Committee (LRA #425/AR #94-16)

I. INTRODUCTION

The Office of General Counsel has reviewed the proposed

Final Audit Report on the Bush-Quayle '92 primary Committee

(the "Committee") submitted to this Office on August 24,

1994. The following memorandum summarizes our ~omments ~n

the proposed Report. We concur with findings in the proposed

Final Audit Report which are not discussed separately in the

following memorandum.l/ If you have any questions concerning

our comments, please ~ontact Delanie Dewitt Painter, the lead

attorney assigned to this audit.

I/Par~nthe_.tJ,-,-c_al x_ef_erences-are..tothe.,p-lace-ment of fi'ndings in

the proposed report. Throughout our comments, "FECA" refers to

the Federal Election Campaign Act of 1971, as amended, 2 U.S.C.

§§ 431-455. The Commission's discussion of this document is not

exempt fr-om disclosure under the Commission's Sunshine R.egulations

and the document should be considered in open session. 11 C.F.R.

§ 2.4.

Page 57, Approved 12/27/94
Memorandum to Robert J. Costa

Final Audit Report

Bush-Quayle '92 Primary

(LRA #42'S/AR #94-16)

Pag.e 2

II. APPARENT NON-QUALIFIED CAMPAIGN EXPENSES -- GENERAL

ELECTION EXPENDITURES PAID BY PRIMARY COMMITTEE

(III. C.)

The Committee paid for expenses totaling $1,641,24~

which benefited the candidate's general election campaign,

including polling, focus group surveys, direct mail, list

rentals, shipping and materials, print media services, leased

office space, and equipment. These expenditures were

incurred prior to the candidate's date of ineligibility but

after the state primary elections and caucuses.2/ The Audit

Division states that there is insufficient information to

divide portions of specific expenditures between the

Committee and the GEC. The Audit staff concludes that all ~f

the expenses were related to the general election, and that

the Committee should seek reimbursement from the GEC. Until

the GEC reimburses these expenditures, they are non-qualified

campaign expenses subject to repayment. The proposed Final

Audit Report includes an initial determination that the

Committee make a pro rata repayment of $335,791.3/ While we

concur with the proposed repayment determination~ our

analysis of this issue differs from that of the Audit

Division.

Expenditures made in connection with a primary

candidate's campaign for nomination prior to the candidate's

date of ineligibility are qualified campaign expenses

provided that the expenditures do not constitute a violation

of the law. 11 C.F.R. S 9032.9(a). Expenses incurred after

a candidate's date of ineligibility are non-qualified except

to the extent permitted under 11 C.F.R. S 9034.4(c)(3) for

winding-down costs. 11 C.F.R. S 9034.4(b)(3).

The Committee argues that the "Commission has in the

past used a bright-line test based on the date of a

candidate's nomination, not a subjective review of content,

to allocate expenses between the primary and general

elections." Response to Interim Audit Report dated July 6,

1994, at 18. Thus, the Committee allocated expenditures

between the primary and general elections based on whether

~/ state primary elections or caucuses were held through

June 9, 1992. The candidate's date of ineligibility was

August 20, 1992.

~/ The Committee's repayment ratio for non-qualified

campaign expenses is 26.1483%. The proposed Final Audit

Report notes that, for purposes of calculating the repayment,

the original total of $1,641,246 has been reduced because the

GEC reimbursed some of the funds and the Committee paid for

some expenditures after the last day that matching funds were

present in the Committee's acc~unts. Thus, these funds are

not subject to repayment.

Page 58, Approved 12/27/94
Memoranaum to Robert J. Costa

Final Audit Report

Bush-Quayle '92 Primary

(LRA #42s/AR #94-16)

Page 3

they were incurred before or after August 20, 1992, the date

that the candidate accepted the nomination. As support for

its position, the Committee argues that the Commission's

decision in the Reagan Bush '84 Primary Committee audit

permits the Committee to fund any general election expenses

as long as the expenses were incurred prior to the

candidate's date of ineligibility.41 See Final Audit Report

on Reagan Bush '84 Primary (approved July 7, 1986).

Moreover, the Committee contends that certain

expenditures were part of a "pre-convention strategy"

intended to combat dissension in the party, improve the

candidate's standing in the polls, and "build overall

excitement during the Convention." Response at 20-25. The

Matalin affidavit attached to the Committee's response

asserts that these expenditures were necessary to dispel

dissension within the party and convince convention delegates

of the viability of President Bush's candidacy.sI The

Committee further asserts that certain expenditures should be

considered qualified campaign expenses even under what the

Committee terms an "excessively restrictive standard."

Response at 25.

41 The Committee cites Advisory Opinion ("AO") 1978-99 to

iupport its contention that an expenditure need not

exclusively benefit the campaign for nomination to be

a qualified campaign expense. In AO 1978-99, the Commission

permitted a committee to report a debt incurred prior to the

date of the primary election, for materials to be used in

both the primary and general elections as a primary election

debt. This opinion is not on point. The determination of

whether an expenditure may be considered part of a

committee's primary debt for Title 2 reporting purposes has

no bearing on whether an expenditure is a qualified campaign

expense of a publicly-financed presidential campaign.

Indeed, the Commission has more recently confirmed that

determining whether an exp~nditure is related to the primary

or general election is based on both the timing and the

purpose of the expenditure. See AO 1984-15.

51 The affidavit from Mary Matalin, the Committee's Deputy ~ampaign Manager for Political Affairs, concerned campaign

developments and strategy during the summer of 1992. Ms.

Matalin stated that prior to the Republican convention,

President Bush was substantially behind the Democratic

nominee in the polls and face.q ,J:~,pp,ositioofrom wLthin "his own

par'ty;· i~Ifcludin9" calls f'oi' him to change his Vice Presid~ntial running mate, or to step down himself.

Ms. Matalin contends that because some delegates were not

legally bound to cast their votes for him, President Bush

ultimately had to convince convention delegates that if

nominated, he would be successful in the genecal election.

Page 591. Approved 12/27/94
Memorandum to R·obe rt J. Costa

Final Audit Report

Bush-Ouayle '92 Primary

(LRA #425/AR #94-16)

pa-ge 4

A "bright line test" based solely on the date that an

expenditure is incurred has never been applied by the

Commission. In relying on this test, the Committee focuses

on only one of the two key elements for assessing qualified

campaign expenses. It is not enough merely for an

expenditure to be incurred prior to the candidate's date of

ineligibility to be considered a qualified campaign

expenditure. To be qualified, an expenditure must also be

made in connection with a primary candidate's campaign for

the nomination. 11 C.F.R. S 9032.9(a). Thus, the correct

standard for determining whether an expenditure is a

qualified campaign expense relies on both the timing of the

expenditure and the nature of the expenditure. See AD

1984-15.

We believe that the decision in the Reagan Bush Audit,

which was based on the particular facts in that case, does

not support the Committee's position. See Final Audit Report

on Reagan Bush '84 primary (approved July 7, 1986). In the

Reagan Bush audit, the Commission concluded that certain

specific expenditures for polling, consulting and voter

registration incurred prior to the candidate's date of

ineligibility and apparently related to the general election

campaign could be considered qualified campaign expenses of

the primary committee. However, the Reagan Bush general

committee also reimbursed the primary committee $64,000 for

telemarketing expenditures incurred prior to the candidate's

date of ineligibility, thus demonstrating that the timing of

an expenditure alone does not determine whether it is related

to the primary or general election. Final Audit Report on

Reagan Bush '84 Primary, (approved July 7, 1986). Contrary

to adopting a "bright line" test, this precedent supports

examining all of the particular facts surrounding an

expenditure.

Moreover, matters concerning coordinated party

expenditures, which involve publicly-financed presidential

campaigns and expenditure limitations, are analogous to the

issue of qualified campaign expenses presented here. In

situations involving coordinated party expenditures, the

Commission has considered not only the timing, but also the

purpose of expenditures when determining to which election an

expenditure should be attributed. AD 1984-15. For example,

in AD 1984-15, the Commission considered whether the purpose

of expenditures was to influence the general election

campaign in order to determine if the expenditures were

coordinated party expenditures. The Commissi~n noted that

while "timing is relevant," coordinated party expenditures

are not restricted to· the time petiod between the nomination

and the general election, and it would be inconsistent with

the purpose of the limitation on coordinated expenditures to

"permit expenditures made prior to nomination but with the

purpose and effect of influencing the outcome of the

Page 60, Approved 12/27/94
Memorandum to Robert J. Costa

Final Audit Report

Bush-Quayle '92 Primary

(LRA #425/AR #94-1~)

Page 5

presidential general election to escape this limitation." AO

1984-15.

It is possible that some of the expenditures at issue

were intended, in part, to build excitement for the

Convention and secure the candidate's nomination. For

example, if, as the Committee contends, state offices were

actually used to disseminate information to delegates prior

to the convention, the expenditures for the offices may have

been, in part, qualified campaign expenses. Where an

expenditure benefits both the general and primary elections,

it would be an equally incorrect application of a ""bright

line test" to allocate the entire expenditure to the general

election as it would be to allocate it to the primary election. Rather, such an expenditure should be allocated

reasonably between both committees. For some of the

expenditures in this case, the Committee's arguments that the

expenditures were related to the convention could in fa~t

justify such an allocation if supported by evidence.

However, even for these expenditures, the evidence does not

justify an allocation between the primary Committee and the

GEC other than that made by the Audit Division.~/

Most of the expenditures at issue have no apparent

connection to the nomination, aside from the Committee's

assertion that they were part of a "pre-convention strategy,"

but appear instead to be related solely to the general

election. For example, the Primary Committee paid for a full

page advertisement in five newspapers on July 29, 1992, after

Ross Perot announced he would not run for President. The

advertisement appealed for the votes of Perot supporters in

the upcoming election. Although this advertisement appeared

before the Republican convention, the timing and nature of

the advertisement indicates that it was intended to sway

Perot supporters for the general election.

In addition, there is ample evidence that the

expenditures at issue were related to the general election.?/

Many of the expenditures, incurred in July and August 1992,-

6/ In order to support an allocation of a specific

expenditure between the Committee and the GEC, the Committee

would need to provide documentation such as memoranda,

invoices, or other documentation demonstrating the extent

that the activity in the state offices was related to

preparing for the Convention.

7/ Indeed, the expenditures described in the report appear

to be general election expenses incurred prior to the date of

ineligibility, which are permissible under 11 C.F.R.

§ 9003.4(a)(1). The expenditures were incurred during July

and August, 1992, a time period when start up expenditures

for the general election campaign were likely.

Page 61, Approved 12/27/94
Memorandum to Robert J. Costa

Final Audit Report

Bush-Ouayle '92 Prima£y

(LRA #425/AR 494-16)

Page 6

appear intended to establish an infrastructure of office

space, equipment and materials to be used in the forthcoming

general election campaign.~/ In addition, the Committee paid

for polls related to the general election that contained

questions concerning the November election and potential

candidates George Bush, Bill Clinton, and Ross Perot.

Similarly, direct mail and advertising expenditures were

related to preparing for the general election rather than to

the primaries or the convention. The direct mail featured

pictures of Bush and Clinton and discussions of their

positions and records on issues. One "Marilyn Quayle" letter

sent on August 4, 1992 discussed kicking off the re-election

campaign, and provided a volunteer hotline number active

through Labor Day. The Committee has not demonstrated that

the advertisements at issue have any connection to the

Republican convention.

Thus, most of the expenditures appear to be related to

continuing the campaign effort into the general election

period by obtaining office space, equipment, materials, poll

data, volunteers, and supporters, rather than to ensuring the

candidate's nomination. 11 C.F.R. S 9032.9(a). Indeed some

of the expenditures, such as the Perot advertisement, seem

calculated to secure votes for the November election.

Therefore, these expenditures are non-qualified and must be

reimbursed by the GEC. If the GEC does not reimburse the

Committee for these funds, the unreimbursed expenditures paid

by the Committee are subject to a pro rata repayment of

$335,791.

Finally, the Committee asserts that certain palm cards

and brochures were shipped to and distributed at the

Convention and thus were qualified campaign expenses even

under our "excessively restrictive standard." Response at

25. While some questions remain concerning the use of these

expenditures, however, given the Committee's identification

of which specific brochures and palm cards were used at the

Convention, we believe that these expenditures should be

considered qualified campaign expenses and removed from the

amount subject to repayment.

8/ These expenditures include the purchase of misc~llaneous

campaign materials such as flags, hats, brochures and signs

which were shipped to various state offices in July and

August 1992; the re-opening in July and August 1992 of state

offices that had been closed since the primary elections and

subsequently remained open through the general election; and

the purchase and lease of computer equipment, software and

related supplies. The Committee paid the costs for these

items through August 20, 1992 and the GEC paid the exact same

types ~f costs following that date.

Page 62, Approved 12/27/94
Memorandum t·o Robert J. Costa

Final Audit Repo~t

Bush-Quayle '92 Primary

(LRA #425/AR #94-16)

pa9.e 7

In conclusion, we believe that the Committee's proposed

"bright line" standard would enable a primary committee to

use private contributions and public matching funds to pay a

portion of the general election campaign expenses, thus

circumventing the general election expenditure limitation and

the law's prohibition on receipt of private contributions by

publicly funded general election candidates. 2 U.S.C.

S 441a(b)(1)(B); 26 U.S.C. S 9003(b)(1) and (2). Moreover,

such an interpretation is inconsistent with section

9003.4(a)(1), which permits general election campaigns to

incur certain expenses prior to the date of the nomination.

This provision was "designed to permit a candidate to set up

a basic campaign organization before the expenditure report

period begins." Explanation and Justification, 45 Fed.

43375 (June 20, 1980). This regulation would not be

necessary if all expenditures made prior to the date of

ineligibility were qualified campaign expenses of the primary

committee, even if the expenditures related to the general

election. This Office does not advocate that the Audit staff

question all expenditures made prior to the date of

ineligibility that may have proven incidentally beneficial to

the general election campaign. However, where, as here,

expenditures are made within two months of the date of

ineligibility and appear to be primarily related to the

general election, we believe the expenditures should be

subject to an analysis regarding their allocation. Here, we

believe that such an analysis supports the Audit Division's

allocation.

III. OTHER REPAYMENT MATTERS (III. D., E., F.)

We concur with the Audit Division's finding that the

Committee received matching funds in excess of its

entitlement totaling $981,153. We note that after the

Interim Audit Report, the Audit Division made adjustments

based on the elimination of a $259,636 payable for air travel

and the GEC's payment of $190,000 for certain Primary

Committee non-capital assets. These adjustments

substantially increased the amount in excess of the

entitlement. In addition, this amount may change based on

the resolution of the pre-funding issue. Any matching funds

received in excess of the entitlement must be paid to the

Treasury. 26 U.S.C. S 9038(b)(1). Therefore, we concur with

the initial repayment determination that the Committee must

repay $981,153 to the United States Treasury pursuant to 26

u.s.c. S 9038(b)(1).

Mo r-eove ,we -concur with the ini t ialdetermi na t i on that

the Committee pay $19,194 to the United States Treasury for

stale-dated checks. The Committee has already made this

payment. Finally, we concur with the Audit Division's

conclusion that the Committee has n~t exceeded the overall

expenditure limitation.

Page 63, Approved 12/27/9,4
Memorandum to Robert J. Costa

Final Audit Report

Bush-Quayle '92 Prima~y

(LRA #425/AR #94-16)

Pa'ge 8

IV. EXCESSIVE CONTRIBUTIONS FROM STAFF ADVANCES (II. D.)

The Interim Audit Report found that an individual,

Robert B. Holt, volunteered his own fundraising services, and

advanced $12,598 in excessive funds for travel, subsistence,

and campaign-related goods and services. These expenses were

eventually reimbursed. The Interim Audit Report recommended

that the Committee show that these advances were not

excessive by demonstrating that portions were either exempt,

pursuant to 11 C.F.R. S 100.7(b)(8), or by demonstrating that

the individual was a "commercial vendor," pursuant to 11

C.F.R. § 116.3.

The Committee contends that Mr. H-olt was a commer<::ial

vendor, who provided his fundraising activities on a

volunteer basis, and sought "payment f~r travel and telephone

expenses." The Committee argues that Mr. Holt's payments for

travel and telephone should be treated under section 116.3,

as extensions of credit by a commercial vendor, despite the

fact that Mr. Holt was volunteering his services. The

Committee further contends that the Audit staff's

interpretation of section 116.3 raises First Amendment issues

by restricting the campaign's rights of speech and

association. It argues that the auditors' disparate

treatment of volunteer commercial vendors from paid vendors

imposes "an unjustifiable burden" on a campaign's acceptance

of such volunteer services. Finally, the Committee contends

that even if Mr. Holt were deemed to be a volunteer, his

travel expenses should not be considered contributions since

they were reimbursed within the time period given in section

116 . 5 ( b) .,2./

9/ The Committee also asserts that the Commission's Advisory

5pinions ("AO") 1980-42 and 1982-4 allow committees to reimburse

volunteers for expenses incurred for the campaign without in-kind

contributions resulting. Reliance on these opinions is misplaced,

however, since they were issued before the promulgation of 11

C.F.R. S 116.5 by the Commission in 1990. In addition, while both

opinions allow committees to make direct or prior payments for

volunteer expenses, they do not state that committees may

reimburse staff advances without creating in-kind contributions.

To the contrary, AO 1982-4 held that materials used by volunteer

carpenters, plumbers and other tradesmen "which were donated -to

the Committee must be reported as an in-kind contribution to the

Committee." Id. at 3.

Further, the Committee incorrectly argues that AO 1991-37

allowed a campaign "to be charged for expenses while receiving

accounting and other consultation services as an in-kind

contribution." Response at 10. While the Commission stated in AO

1991-37 that it would be acceptable for a campaign to pay for

travel related expenses incurred by such accounting staff, it

"d[id] not express an opinion on whether ... initial payment [by

Page 64 , Approved 12/27/94
fiemUlanaum CO ~ODer~ J. costa

Final Audit Report

Bush-Quayle '92 Primary

(LRA #425/AR #94-16) Pag~ 9

The Commission's limitation on staff advances does not

violate the First Amendment. This regulation was implemented

to carry out the FECA's limitations on contributions,lO/ and

the United States Supreme Court has held that the FECA's

contribution limitations are neither overbroad, nor

unconstitutional. Buckley v. Valeo, 424 u.s. 1, 29, 35

(1976). The Court, inter alia, noted that such restrictions

serve the FECA's primary purpose of limiting "the actuality

and appearance of corruption resulting from large individual

financial contributions." Id. at 26. Indeed, the Court

expressly said that volunteers' incidental expenses for a

campaign, such as travel or food or beverages, should be

treated as contributions in order to "foreclose . . . an

avenue of abuse without limiting actions voluntarily

undertaken by citizens." Id. at 37. The "ultimate effect

[of such advances] is the same as if the person had

contributed the dollar amount to the candidate." Id. at

36-37.

The Committee's argument that the Commission should

treat a paid commercial vendor's expenses in a similar manner

to a volunteer vendor's expenses is equally meritless. The

distinction between the two type. of expenses is that the

former is incurred in the ordinary course of business, while

the latter is incurred on behalf ~f a campaign, and as such,

must be guarded against appearances of impropriety. Mr.

Holt's advances were in-kind contributi~ns, and were subject

to the contribution limitations.

Further, the Committee's argument that the regulations

impose an unjustifiable burden on acceptance of volunteer

services is also unpersuasive. A commer~ial vendor who

wishes to volunteer his services may do so without

restriction. See 11 C.F.R. S 100.7(b)(3). However, if a

commercial vendor wishes to obtain reimbursement for goods

and services or for others~ travel and subsistence under the

theory that he is a "commercial vendor," then he must prove

he is one. Under section 116.1(c), a commercial vendor

"means any persons providing goods or services to a candidate

or political committee whose usual and normal business

involves the sale, rental, lease or provision of those goods

and services." The Committee has failed to prove that Mr.

(Footnote 9 continued from previous page)

the volunteer accounting staff, with later reimbursement by the

campaign] would constitute an in-~ind·~ontribution by that emplbye~.n AO 1991~17 ~t 7.

10/ A contribution includes "any gift, subscription, loan,

advance, or deposit of money or anything of value made by any

person for the purpose of influencing any election fo~ Federal

office." 2 u.s.c. S 431(8)(A)(i).

Page 65, Approved 12/27/94
Memorandum to Robert J. Costa

Final Audit Report

Bush-Quayle '92 Primary

(LRA #425/AR #94-16)

Page 10

Holt is a~tually a fundraiser in his business. Further, if

he were one, then pursuant to the Commission's regulations,

any expenses incurred or extensions of credit made for a

committee must be within "the ordinary course of the

commercial vendor's business and ... the terms ... [must

be] substantially similar to extensions of credit to

nonpolitical debtors." 11 C.F.R. § 116.3. As already

admitted by Mr. Holt, he volunteered his fundraising services

to the Committee. Consequently, unless Mr. Holt provides

evidence to show that he provides fundraising services

without charge within "the ordinary course" of his business,

it appears that Mr. Holt was a volunteer, and not a vendor.

Finally, the Committee argued that Mr. Holt's expenses

are not contributions because they were reimbursed, pursuant

to 11 C.F.R. S 116.5(b). However, the regulations clearly

provide that a person can only be reimbursed for his or her

own transportation and subsistence expenses, and not for

others. Therefore, the amounts that Mr. Holt paid for

others' travel and subsistence should be considered an

in-kind contribution.

Page '66, Approved 12/27/94
.', ~,- "

AK005807

December 27, 1994

Mr. J. Stanley Huckaby, Treasurer

Bush-Ouayle '92 Primary Committee, Inc.

228 South Washington Street

Suite 200

Alexandria, VA 22314

Dear Mr. Huckaby:

Attached please find the Final Audit Report on Bush-Quayle

'92 Primary Committee, Inc. The Commission approved this report

on December 27, 1994. As noted on page 3 of this report, the

Commission may pursue any of the matters discussed in an

enforcement action.

In accordance with 11 crR 9038.2(c)(1) and (d)(1), -the

Commission has made an initial determination that the Candidate is

required to repay to the 'Secretary of the Treasury $700,049 within

90 days after service of this report (March 30, 1995). Of this

amount, $19,194 has been repaid.

Should the Candidate dispute the Commissions determination

that a repayment il required, Commission regulations at 11 erR

S9038.2(c)(2) provide the Candidate with an opportunity to submit

in writing, within 30 calendar days after service of the

Commission's notice (January 30, 1995), legal and factual

materials to demonstrate that no repayment, or a lesser repayment,

is required. rurther, 11 crR S9038.2(c)(3) permits a candidate

who has submitted written materials to request an opportunity to

make an oral presentation in open session based on the legal and

factual materiall submitted.

The Commission will consider any written legal and factual

materials submitted by the Candidate within the 30 day period in

making a final repayment determination. Su~h materials may be

submitted by counsel if the Candidate so elects. If the Candidate

decides tQ tile r.e.P9ns~ to the initial repayment determination,

please contact Kim L. Bright-Coleman of the Office of General

Counsel at (202) 219-3690 or toll free at (800) 424-9530. If the

Candidate does not dispute this initial determination within the

30 day period provided, it will be considered final.

Page 67, Approved 12/27/94
Letter to J. Stanley Huckaby

Page 2

The Commission approved Final Audit Report will be

placed on the public record on December 29, 1994. Should you

have any questions regarding the public release of this

report, please contact Ron Harris of the Commission's Pr~ss

Office at (202) 219-4155.

Any questions you may have related to matters covered

during the audit or in the audit report should be directed to

Tom Nurthen of the Audit Division at (202) 219-3720 or toll

free at (800) 424-9530.

Sincerely,

•

11 ' j I . f r, T j , .' I~ '. - \-

J

. Robert J. Costa ~f,VAssistant Staff Dire·ctor

/ Audit Division

Attachment as stated

Page 68, Approved 12/27/94
AitOOS807

December 27, 1994

The Honorable ~eorqe Bush

c/o Mr. J. Stanley Huckaby

Huckaby & Associates

228 South Washington Street

Suite 200

Alexandria, VA 22314

Dear Mr. Bush:

Attached please find the Final Audit Report on Bush-Quayle

'92 Primary Committee, Inc. The Commission approved this report

on December 27, 1994. As noted on page 3 of this report, the

Commission may pursue any of the matters discussed in an

enforcement action.

In accordance with 11 CFR 9038.2(c)(1) and (d)(1), the

Commission has made an initial determination that you are required

to repay to the Secretary of the Treasury $700,049 within 90 days

after service of this report (March 30, 1995). Of this amount,

$19,194 has been repaid.

Should you dispute the Commi••ions determination that a

repayment is required, Commission regulations at 11 crR

S9038.2(c)(2) provide you with an opportunity to submit in

writing, within 30 calendar days after service of the Commission's

notice (January 30, 1995), legal and factual materials to

demonstrate that no repayment, or a lesser repayment, is required.

Further, 11 crR 19038.2(c)(3) permit. a candidate who has

submitted written .aterials to request an oppo~tunity to make an

oral pre.entation in open .es.ion ba.ed on the legal and factual

materials submitted. .

The Commission will consider any written legal and factual

materials submitted by you within the 30 day period in making a

final repayment determination. Such materials may be submitted by

counsel if you so elect. If you decide to file a response to the

'inItial fepayment'd'elet'mirii'tion, 'please contact -KrilL':'

Briqht-Coleman of the Office of General Counsel at (202) 219-3690

or toll free at (800) 424-9530. If you do not dispute this

initial determination within the 30 day period provided, it will

be considered final.

Page 69, Approved 12/27/94
Letter to The Honorable George Bush

Page 2

The Commission approved Final Audit Report will be placed

on the public record on December 29, 1994. Should you have any

questions regardinq the public release of this report, please

contact Ron Harris of the Commission's Press Office at (202)

219-4155.

Any questions you may have related to matters covered

during the audit or in the audit repor~ should be directed to

Tom Nurthen of the Audit Division at (202) 219-3720 or toll free

at (800) 424-9530.

Attachment as stated

Page 70, Approved 12/27/94
CHRONOLOGY

BUSH-QUAYLE '92 PRIMARY COMMITTEE, INC.

Pre-audit Inventory Commenced

Audit Fieldwork

Interim Audit Report to

the Committee

Response Received to the

Interim Audit Report

Final Audit Report Approved

Page 71, Approved 12/27/94

12/07/92

1/19/93-9/10/93

4/04/94

7/06/94

12/27/94
:- .... :

.. .. . .. F~;"';~.~- ~_",J •

- <J : '''.J .... ,. ' .•

. -: -. : , _.

~.EKORANDUK

FE.[)t=" "~:.: .... ,.., .:Jt.. \ L

July 12, 1994

... . ~.. ..'

TO:

FROM:

THROUGH:

THE COMMISSIONERS

JOHN C. SURIN,~);:," .,/ .

STArr OIllECT07 //~

ROBERT J. cOErrA' -~X"'~ ASSISTANT STAFF O:~E~TOR

AUDIT DIVISION

SUBJECT: REPAYMENT OF 522,300 RECEIVED FROK BUSH-OUAYLE '92

PRIMARY COKKITTEE, INC.

,,~----------.--·--------Tlfis'-·in-formati·ona·l--memocandum._ is_ to__ ~_c;lyj._~_~ .._y~~ ~~_~ __ S22, 300

payment received from Bush-Quayle ' 92 priaary Co_ittee, Inc-:---·rtne-----·_--

0' Committee). The check represents a payment by the Committee for

unresolved excessive contributions.

Attached is a copy of the check and the receipt showing d~livery to the Department of the Treasury.

If you have any questions concerning this matter, please

:ontact Ray Lisi at 219-3720.

-..... ., ""

~ttachments as stated
:"~~. ". ... ".::::.:,. .~: ..... " .. "". ,:.: _0.........".:..' . ' .. _...

50370

....,;;;,J...::;u~1...:..v--:..6__" 9 4

BUSH • QUAYlE ' 92 PRIMARY

COMMlnEE. INC.

fUND JIA8tICQ ACCOUNT

22! S. WASHINGTON STREET. SUITE 200

----- _._----_._--~~~~'?~~._~ ~~~

------ -_._---- ----- ---- ---.-.._-_.. _---------._--._-------------- -

":>- PAY Twenty-Two Thousand Three-Hundred and 00/100******

r , DOlLARS S 22.300.00

r--. ,--,0

....-,

.,,' ..

TO

'lliE

OAOE~

Of

S:ates Treasu~y
~w ~O".. ... • 0 • _ ..

.:: • 0 ' •• '~""'>.

:••".'\0

.... \ .... '.. ',,:-- .1''':',.. '

July 11, 1994

RECEIPT FROM THE

UNITED STATES OEPART~ENT OF TREASU~Y

FOR A

PAYMENT TO THE GENERAL FUND or THE U. S. TREASURY

Received on July 11, 1994, from the Federal Election Commission

\=1 hand delive:y), a check d:a~~ =n F=3~kl:~ Nati~nal Sank

(CheCk 'S0310) in the amount of $22,300. The check represents a

payment from Bush-Quayle '92 primary CC~~lttee, Inc. fer

unresolved excessive contributions.

The payaent should be deposited into the General Fund of the

u. S. Treasury.

-'.

.~

- __ 0 _

------ - .----- - - --- 0 __• __• __

o 0 •• •

.. --_. ---

Bush-Quayle '92 pri.ary~coil.rttee~_. ti'lc:-

Amount of Payment: $22,300

... --- . ------ ------

,..... '-- . Presented by: Received by:

4 for the

Uni~ed States T:easury
':":.:._ - :: -. ~. .. --.

r" - •

F .":. .:.

August 9, 1994

MEMORANDUM

TO:

THROUGH:

FROM:

SUBJECT:

THE COMMISSIONERS" /'..

~~~~FCOI~~~i~~~> ROBERT J. COS:rt::

ASSISTANT STAFF DIRE TOR

AUO!T DrVISION

REPAYMENT OF $2,326 RECEIVED FROM BUSH-QUAYLE '92

PRIMARY COMMITTEE, INC.

~_==. This informatiQnal m~morandum is to advise you of a $2,326 .. _ --..--.-----.- pay-ment-Ye-c-e'ive-d- f r-om-Bu·sh-Quayle--!-92-.P-~i.ma..r..y._ Co_m.mi_t_t.~.e.l __ J_n_~. _ '" (the Commi ttee). The check represents a payJient by the ----

Committee for excessive contributions received from a joint

fundraiser.

..... '-_.,.

" ..

1·.n

Attached is a copy of the check and the receipt showing

delivery to the Department of the Treasury.

If you have any questions concerning this matter, please

contact Ray Lisi at 219-3720.

Attachments as stated
-:;....: . . ;-';.r.

. ---. - .. ---_4" .. ~. 41 •

BUSH .. QUAYLE '92 PRIMARY

COMMITTEE, INC.

FUND RAISING ACCOUNT .

229 S. WASHINGTO~ STREET. SUITE 200

ALEx.ANORlA. VA 22310'

_______ Ju lv 25 c· 1'9~

,

50372

Two-1housand Three-Hundred Tventv-Six and 00/100···*** PAy _

r I

TO

THE

O"OEA

OF

United States Treasury

01 0 SO 3 ? 2US -+ I: 0 5 L. 0 0 5 L. ?I: 20 ab j 2 58 II' _ 2

C0 II A "S S 2, 325. 00

- .. BU;H~UA~LE-~;. . . - '" _. - - _. - - ~~AC~ '4~O ~~:IN-;:~ -S~A~~""~~'; - - - 2.~~f ~iir{;4. 7;1-. ~i ~r.J ...... c AT""'"'AC: ..t:::t cwllC... .. ,.. C. ,....w. cac.-.c:..a:J:C ae.-.o--w "{ ""'-.,. .,. I ~'.' PRJMARY COMMITTEE, INC. II "'c~ cC••Cc:"" -.0"- _~.. ..__ I

fUND AAISING ACCOUNT DELUXE .. fORM WVCP-3 V~

.DEse"IPTION

_._·==... Il'l~/9S RepaymeQt for joinC fundraiser, as per FEe 'audit of the

.;__ -_._- ,._. -Republic~ln- L"e'aae-rsn:ip-'Fun-d--- .. -, .. -.,

.-.

"-"

......

........ .

.._.- -2,·326.00-..-

I

. ,

;.
...:

August 8, 1994

RECEIPT FROM THE

UNITED STATES DEPARTMENT OF TREASURY

:OOR A

PAYMENT TO THE GENERAL FUND OF THE U. S. TREASURY

Received on August 8 , 1994 , from the Federal Election Commission

(by hand delivery), a check drawn en Franklin National Bank

(CheCK t50372) in the amount of S2,326. The check rep:esents a

payment from Bush-Ouayle '92 Primary Committee, Inc. to:

execessive contributions received from a joint fundraiser.

The payment should be deposited into the General Fund of the

u. S. Treasury .

..---Bush':'-Quayle'--,-g 2--'p'ri-lIla-ry' -Commi t tee ;- -In'c;

Amount of payment: $2,326

..........

~.

.,,",

-;:

-... .....

Presented by:

/) i\ I:. /~fl~ dr the 7. I

federalLllection Commission

Received by:

~or the

Un!ted States Treasury
FEDERAL ELEeTI 0 COi\"","'\1 SS10"

.M·.:···~~-l~:.~

:"'-7:

DATE & TIME TRANSMITTED: TUESpAY, MARca 21. 1995

BALLOT DEADLINE: FRIDAY, MARCH 24, 1995

4:00

4:00

COMMISSIONER: AIKENS, ELLIOTT, MCDONALD, McGARRY, POTTER, THOMAS

SUBJECT: BUSH-QUAYLE '92 PRIMARY COMMITTEE,

INC. REQUEST FOR AN ORAL

PRESENTATION (LRA '425). ~EMORANDUM

TO THE COMMISSION DATED MARCH 21,

1995.

" . - - - ---.... - _. ------ "---.---_.- - .... - -- -~~.;--- ---c·-r---·---·--I a-pp-r-ove': the--r-ec-olllJZlendat..io·n.l.s L

I object to the recommendation(s)

.... " . .' .\ :

'" - 1.. _ •

...... - ..

COMMENTS:

DATE:----- SIGNATURE:-------------------

A definite vote is required. All ballots must be signed and datpd.

Please return ONLY THE BALLOT to the Commiss~~n Secretary,

Please return ballot no lat~r than date and time shown abov p •

FROM THE OFFICE OF THE SECRETARY OF THE COMMISSION
': _- -_. - ~.. ' ... 1

FEDERAL ElECTIO:,\: CO,\',\1ISSIO:S

March 21, 1995

f.:: -', ' FE:'::' .:.. .:. ,-.... C,.·\-",· ':~, '.

. , ...

' .. , ;~

: ;;•.

RIUtORANDUII

TO: The Commission

THROUGH: John C. Surina

Staff Director

Lawrence M. Noble

General counsel

FaOM:

By:

'/6C trJ GI6 Kim Briaht-Coleman ~I

Associa~e General Counsel

Kenneth E. Kellne~ Assistant General~nsel

Oelanie DeWitt Painter

_____. -.:....::. ..__:.. ..At~_~!.!l~~_:' ..: _..__:~.._ .. _._ .'

v',

Jane Whang ~/

Attorney ?1' '"

SUBJECT: Bush-Ouayle '92 Primary Committee, Inc.,

Request for an Oral Presentation (LRA i 42S)

The Commission approved the Final Audit Reports on the

Bush-Ouayle '92 Primary Committee, Inc. ("Primary

Committee"), the Bush-Ouayle '92 General Committee, Inc.

("GEe"), and the Bush-Ouayle '92 Compliance Committee, Inc.

("Compliance Fund") on December 27, 1994. On March 1, 1995,

this Office received the responses of the Primary Committee,

the GEC and Compliance Fund to the Final Audit Report and

repayment determinations. Attachments 1 and 2. In its

response, the primary Committee requests the opportunity to

make an oral presentation before the Commission with respect

to the repayment determination pursuant to 11 C.f.R.

S 9038.2(c)(3).1/ We recommend that the Commission arant the -

l/ The GEC and Compliance Fund response also requests an

oral presentation. However, staff of this Office discussed

the responses with Keith Davis, the Assistant Treasurer of

the Primary Committee, GEe and Ccmpliance fund, ~h~ ~larified

that the commlttees are seeking only one oral presentation,

by the primary Committ~e, which will address issues that also

have an impact on the GEe.
:~•. '- : :;;. - ; '\.'---

Memorandum to the Commission

Bush-Ouayle '92 Primary Committee, Inc.,

Request for an Oral Presentation (LRA I 425)

Page 2

primary Committee's request for an oral presentation and

schedule the presentation for May 17, 1995 at 10:00 a.m.

The Commission's regulations provide publicly funded

candidates with the opportunity to respond to an initial

repayment determination by submitting written legal and

factual materials to demonstrate that no repayment, or a

lesser repayment, is appropriate. 11 C.F.R. § 9038.2(c)(2).

In addition, a candidate may request the opportunity to

address the Commission in open session. 11 C.F.R.

S 9038.2(c)(3). The Commission may grant this request by an

affirmative vote of four of its members, and inform the

candidate of the date and time set for the oral presentation.

11 C.F.R. S 9038.2(c)(3).

The Primary Committee's response primarily focuses on

the issue of non-qualified campaign expenses arising from

general election r~lated expenses paid for by the primary

Committee. We believe that an oral presentation, with

questions from Commissioners and staff, may help the

Commission in reaching a final repayment determination.

If the Commission grants the request, we propose that __ procedures similar to those used for previous presentations

--.' -- ----o-o----shou.l.cLobe_o_f_Q)._lo~.!!9_~ __o_~.!J_~~~o __~tte_ date of the presentation,. ,- the Office of General Counsel will -p-r-°epaofe--a-n---an-aly"sfs --of--the---------~- ------

issues presented. This analysis will be provided to the

C' Commission and the Committee. This Office will also prepare

an aqenda document containing materials relevant to the

Committee's oral presentation.

c

'n

At the presentation, the Chairman will make an opening

statement. The Committee will then be allotted 30 minutes to

make a presentation on the issues raised in its response.

Following the presentation, individual Commissicners, the

General Counsel, and che Audit Division may ask questions.

If the Primary Committee wishes to submit any additional

materials for Commission consideration, the materials should

be submitted to the Office of General Counsel within five

days following the presentation. The letter to the primary

Committee will delineate these procedures.

RECOMMENDATIONS

The Office of General Counsel recommends that the

Commission:

1. Grant the request by the Bush-Ouayle '92 primary

Committee, Inc. to make an oral presentation as F=~~ided in

11 C.F.R. S 903B.2{c)(3)i

2. Set the date for the oral presentaticr.

1995; and

i-iay .-J. f ,
Memorandum to the commission

Bush-Quayle '92 primary Committee, Inc.,

Request for an Oral Presentation (LRA. 425)

Page 3

3. Approve the appropriate letter.

Attachaents

,. '-" -.Jo- -' ...>." "-.' . •• "'. •- •• : .,:" •- '-'- -~. . ,... =-- ...:- ", ....-, :-., .. ,.~

.. ,.., .... ,

1. Response to the Final Audit Report and Request for an

Oral Presentation by Bush-Ouayle '92 primary Committee, Inc.

(Attachments deleted).

2. Response of Bush-Quayle '92 General Committee, Inc., and

Bush-Quayle '92 Compliance Committee, Inc .

...... . - , . -- --_. ---...---------- --._-----. - ... ----._-.

C'

------ ----- ..__. -

---------.------_.--------_.- -----.._-------_.. - ---- --_..- --_.
Bus~92 0UAYLE Whtng-

* ** *.* *** * * * *

Stan Hucbby, Treasurer

March 1, 1995

VIA HAND DELIVERY

:-- .

''':...

/':..

Ms. Jane Whang

Staff Attorney

Office of the General Counsel

Federal Election Commission

999 E S~~eet, N.W.

Washington, D.C. 20463

Re: Primary Committee Audit Report

....

---.--·------·--De-ar-- Ms .-.-Whang-:-. - '.- -.~ ..._'~---_.- .---.:. .:.. . . .. _. _._ .. ._~ ~_ ...,:;-

r',

'--)

.-.

This letter together with the attached exhibits

constitutes the response of Bush-Quayle '92 Primary Committee,

Inc. (the "Primary Committee- or the -Committee-) to the Audit

Report of the Committee dated December 27, 1994 (the -Report-).V

By letter dated January 30, 1995, the Commission granted an

extension of time until March 1, 1995, to submit a response.

Pursuant to 11 C.F.R. § 9038.2{c) (2), the Committee's

response is limited to demonstrating that -no repayment, or a

lesser repayment, is required. R The Committee reserves the right

to respond to any issue raised by the Commission in other

proceedir.gs. il The repayment issues are addressed in the order

raised in the Report.

The Committee requests an opportunity to address the Comm~ssion in open session.

1/ The Committee also incorporates by reference its response

dated July 6, 1994, to the Interim Audit Report.

1/ :e=~ain findings of the Audit Report do not appear to

conscitute ~repayment issues" and for that reason are not

addressed in this response.

Post Office Box 19992. Was~D.C. 2OO3lHl992

Telephone 7Q3.549-8692 • fAX'1OJ..684..()68

Paid for by Bush· Quayle '92 Primary Committee, Inc.

ATTACiP£ENT -1-= . Page --L- oT:li::
--'-.- . -'_:~~

,J...

Ms. Jane Whang

March 1, 1995

Page 2

I. FINDINGS AND RBCOMMBNDA'l'IOHS -.. RlPAYKENT MATTIRS

A. Deteraination of Net OUt.tanding

~'mp.iqg Obligatiop.

The determination of the Primary Committee's net

outstanding campaign obligations depends, of course, on resolution

of issues raised in the Report. Based on the positions set forth

in this Response, the Committee respectfully submits that no

repayment is or should be required.

B. Calculation of Repayment Ratio

This section does not require a response from the

Committee.

C. Apparent Non-qualified C'ppaign Expense. . . .- .• .. . -.' .... . . : 11' 'd'" . . . ---- -- --- ------------------ The__ Comm1:sJ:u!~n __ ~as __~_!.t1.~ y .~~~n~~ __~~at '5_0 percent· . ~:- of each of a series of Committee expenditures totalling--'$-1-~-5-3-!r;-895---------------

challenged by the audit staff should have, but not yet have, been

paid by the Bush-Quayle '92 General Committee, Inc. (the -General

Committee W ). The expenditures include (i) polls/focus group

surveys, direct mail, and campaign materials; (ii) print media;

(iii) leased office space; and (iv) equipment. All of these

expenditures were made prior to President Bush's date of

ineligibility (-DOl a ) of August 20, 1992, when he received the

nomination of the Republican Party.

'1'"I

For the reasons set forth below, as well as in the

committee's response to the Interim Audit Report, the Committee

respectfully submits that the challenged expenditures were treated

properly by the Committee as qualified primary campaign expenses

and that, regardless of the standard the Commission applies in the

future, the Committee's approach was appropriate in light of the

laws, regulations, and Commission opinions in effect at the time.

1. The C~••ion Should U•• a Bright

Line Approach, De-=ing Expenditure.

Before the Date of Nomination To S.

Qualified Campaign Expen.e. of the

Primary Committee.

The Presidential Pri~arl Matching Payment Account Act

defines a "qualified campaign expense" as any payment which (i) is

made within the period of a candidate'S eligibility; (ii) is made

~~~;C~70&
~.~::. -:'.:~ Y.'· •• •

::-'.:

.':'

O.~

Ms. Jane Whang

March 1, 1995

Page 3

"in connection with his or her campaign for nomination"; and (iii)

does not otherwise violate the law. 26 U.S.C. § 9032(9). There

is no dispute that the expenditures at issue were made within the

time period for the primary campaign and did not otherwise violate

the law. And the uncontroverted evidence presented by the

Committee -- through the Declaration of Mary Matalin attached to

the Committee's Response to Interim Audit Report, the Declaration

of David Carney attached hereto as Exhibit 1, and numerous

contemporaneous media accounts -- demonstrates that the challenged expenditures had a direct and substantial connection to the

campaign for the nomination.

In contrast, the expenditures do not qualify for t~eatment as quali~ied campaign expenses of the general election

committee. The general election regulations define aqualified

campaign expense" to mean any expenditure not otherwise unlawful

incurred to further a candidate'S campaign for President or Vice

President, but that also is:

. -Incurred within the expend~ture report pe~iod, as ____000_._·__ --ciefined._und~r._1J!_·_~fR~.?.Q.9.~.J.~-!_: ~o~ incurred l1efo~e . I •

the beginning of such period in accordance vitlfOll--- ---- -..----------0 -

CFR 9003.4 to the extent such expenditure is for

property, services or facilities to be used during

such period. ft 11 C.F.R. § 9002.11(a) (2) (emphasis added) .

Thus, while expenditures incurred prior to the date of nomination

may be payable by the general election committee, they are payable

by the general committee only if they are for goods or services

"used during such- general election period. While it is possible

for the s~aff to speculate that certain polling or focus group

information was ·used during- the general election period, there

is no evidence in the record to prove that point, and there is

much evidence to the contrary. Moreover, the campaign carefully

allocated rental payments between the primary and general

committees. The challenged rental payments for state office space

relate only to rents paid for space used prior to the nomination,

not "during R the general period, and accordingly, such rental

payments are clearly DQt qualified campaign expenses of the

general committee. The same principles apply to the challenged

print media and equipment charges.

Based on these regulations, which distinguish

expenditures based on they were incurred, the Committee

respectfully submits that the Commission should use a bright-line

test based on the candidate'S DOl to determine when expenditures

may no longer be attributed to the primary campaign. The reasons

for using this approach were set forth in the Committee's response

AT!ACHMENT ---.'--

Fage 3 o! '5
'" "- .~~~

Ms. Jane Whang

March 1, 1995

Page 4

to the Interim Audit Report as well as in the comments recently

submitted by the Republican National Committee ("RNC") and the

Democratic National Committee ("DNC·) in connection with the

Commission's Notice of Proposed Rulemaking ("NPRM~). S9 Fed. Reg.

S1006 .11

The position taken by the ONe is identical to the one

advocated by the Bush-Quayle '92 Primary Committee: WIn our view,

for several reasons, the Commission should adopt a rule that

expenses incurred before the date of ineligibility (i.e., on o~

before the last date of the national nominating convention) for

goods or services used before the DOl. should be considered ~ualified campaign expenses for the primary." Letter from Joseph

E. Sandler to Susan Propper dated January 9, 1995, at p. lS

(enphasis in original) (attached as Exhibit 3 hereto). The DNC

continued:

- · - ---_.._- ---._. ."

r'

~.

,'-'

'.

"No one looking at this statutory scheme could

reasonably conclude that the Congress intended the

Commission to U1\d.ex:.taka subj e<:;ti ve , c;andi4qt.e I Py . .' . ..' ------.--- - '-candi-dat'e,-- case--·by--ease--analyses--o.f--When ·the----. _._- ... -- . _

candidate 'began to focus' on the general election

or when the general election period 'really' began

based on some audit staffer's personal view of the

course of presidential politics during a particular

year ... (Tlhe Congress adopted a simple,

objective, bright line test for determining which

expenses were for the primary and which for the

general election: expenses incurred before DO! for

goods and services used before DOl are primary

expenses, period. That is the approach that should

be adopted by the Commission.~ ~. at 15-16.

'... ,: .. These comments further support the Committee's arguments

that the standard applied by the Commission in its Initial

Determination is unsupported by law, is not administratively

feasible, will wreak havoc on presidential campaigns of both

parties, and will inevitably lead to inconsistent and unfair

results. The Report applies the 50/50 allocation rule to a group

of expenditures identified by the audit staff on an ad hoc basis

more than a year after the primary campaign ended. The Committee

had no way to know in 1992 which expenses might be challenged.

Similarly, if the Commission applies this approach to the 1996

election cycle, the candidates will have no way to determine at

21 These comments arp included as Exhibits 2 and 3, respectively, and are incorporated in this response.
-...

-. ;

Ms. Jane Whang

March 1, 1995

Page 5

the time which expenditures might be subject to a SO/50 allocation.

To take an example, the Report criticizes a California

Statewide Poll that contained questions asking respondents to rate

the probability that they would vote in November for -George Bush,

Bill Clinton, Ross Perot, Don't know, Refused/NA.- Report at 27.

However, candidates ask identical questions from the outset of

their campaigns. (Samples of such questions are included as

Exhibit 4.) For example, on January 28, 1992, the Committee

conducted a poll that aSked -If the Presidential election were

being held today and George Bush was the Republican candidate and

Bill Clinton was the Democratic candidate, would you be voting for

Bush or Clin~o~?". Exhibit at 4. S~~ilarly, in December ~,

the Committee conducted a poll asking "If the presidential

election were being held today and George Bush was the Republican

candidate and Mario Cuomo was the Democratic candidate, would you

be voting for Bush or CUomo?- Exhibit 5 ac 9. There is no

principled reason why these polls should be treated as primary __. .' Fam~aigq expenses.wpile.polls ask~ng the same quest~oD8. con~uqted . - -.. .;_.- -:-!-----. -in·--t;-he--summe·r--should-·be- treated -as-....!'hybrid·---expeDs.es and ..&pI_it . _

SO/SO between the primary and general election campaigns. Rather,

the audit staff has arbitrarily selected a date -- June 26, 1992

-- as the date after which horse race polls would be presumed to

benefit the general election campaign, even though an identical

poll taken a day before would not be subject to that presumption.

While an arbitrary date may be necessary, we respectfully but

strongly urge that the date be the DOl, a date which a candidate

can objectively ascertain during the campaign.

,-.~ I

'--'

Furthe~, as discussed below, the bright line tesc was

employed in the audit of the 1984 Reagan-Bush campaign. Similarly, the Commission allowed the Clinton for President 1992

primary campaign to treat equipment purchases made up to the

Democratic National Convention as primary expenditures. v

Nevertheless, the Commission is requiring the Bush-Quayle '92

Primary Committee to treat equipment purchases made prior to the

Republican National Convention as SO percent primary and fifty

percent general expenditures. Such disparate results are

inevitable under the ad hoc approach in the Report.

1/ The equiEment was then sold to the general election campaign

committee at bO percent o! i:s purchase price.

.ATrAC~NT I

Page c-:--15-. I-_-_
..... -,' ..~~

Ms, Jane Whang

March 1, 1995

Page 6

2. The Committee's Interpretation of the

Legal Standard was Reasonable

At the outset of the primary campaign, the Committee

undertook an investigation of the applicable laws, regulations,

audit reports, and advisory opinions pertaining to the appropriate

characterization of expenditures as primary and general election

expenses. Both the statute and the Commission's regulations

indicate without any further explanation that a qualified campaign

expense need only be made -in cOnnection with [the candidate'S)

campaign for nomination .. ,.- 11 C.F.R. § 9032.9(a) (emphasis

added). There is no requirement that the expenditure be made

exclusively, or even pri~~rily, for the benefit of the primary campaign. Moreover, the Commission had applied this language in

the past to include expenditures made up to the date of a party's

nomination of a candidate for President (~, the DOl), even when

there was only the most tenuous of connections to the candidate'S

campaign for nomination, While the Commission regulations allowed

for some general election expenditures prior to the DOl, they were

-:" , l~m~te~ to t;xpend.ib1~~ fol;' goads .-or· servic~s ,-for use d~ring .the .. ' -----.--------gxP-endJ:ture ..report-penod~·---_l-l--C-.·F-;·R-._--5--·9003 .. 4-·~a-)-(1·)--(empbas-i8----

~- added). Thus, the Committee adopted a bright-line approach using

the DOl to divide f!:XPenses between the Primary Committee and the

General Committee. 1/

-".....

c.

The Committee's approach was modelled in large part on

the Commission's treatment of the 1984 primary campaign of

President Reagan where precisely this issue arose.ll In that

audit, the audit staff challenged voter registration, polling, and

political consulting expenditures made after the primaries and

caucuses had ended, b~~ before the DOl. The audit staff contended

that these expenditures -appeared to benefit the candidate's

~I Accordingly, on-going expenses, such as leases, printed

material, office supplies, and the like, were allocated to the

Primary Committee prior to August 20, 1992, and to the General

Committee after that date (monthly leases were pro-rated) . Equipment valued at $2,000 or more and purchased prior to the DOl

was transferred to the General Committee at 60 percent of its

purchase price. Equipment valued at less than $2,000 was

transferred to the General Committee, with the exception of three

payments made by the General Committee to the Primary Committee

totalling S290,000 for the partial sale of non·capital assets.

i/ At the December 8, 1994, Commission meeting, now Vice

Chairman Elliott observed the applicability to this case of the

Commission's decision in the audit of the 1984 Reagan-Bush

campaign. Tr. at 17 (Exhibit 6).
': .

'"' ". Of,

Ms. Jane Whang

March 1, 1995

Page 7

general election campaign only· and that they were therefore not

made "in connection with his nomination for election.- Federal

Election Commission, Final Audit Report; Reagan-Bush '84 (The

Candidate's Primary Committee), July 10, 1986 at 3. (Exhibit 7)

(emphasis in original) .

The Reagan-Bush campaign responded by arguing that (i)

the statute required only that primary expenditures be made before

the DOl; (ii) the audit staff's challenge conflicted with the

Commission's required deference to a candidate'S spending determinations; and (iii) expenditures made after the delegate selection process are entitled to the same deference as those made

before. lQ. at 5-6. The audit staff found these arguments

unpersuasive and ar~ued that expenditures, such as voter

registration expenses made after a state's primary/caucus, ·can

only influence the ... general election.· ~. at 7. In sharp

contrast to the audit staff's views, the Commission accepted the

campaign's arguments and found that the expenses ·were made in

connection with the candidate's campaign for nomination for - . el~~iop anFi aJ;e therefore.. qualified campaign expenses.· .I$1.2I . - ..---.---- --- ~ne' -committee-·respece·fully-submi-ts--~hat-.votei.-regiStrat:1oh _~ ._.__.__.:. _

'<:~ expenditures in a state after that state's primary has taken place

have less connection to the campaign for nomination than any of

the expenditures at issue here.

C.'

Although the Report acknowledges this finding, Report at

42, the Report relies on the fact that the Reagan-Bush Primary

Committee made four expenditures prior to the candidate's DOl

totalling $64,000 that were subsequently reimbursed by the ReaganBush General Committee. The Report suggests that this fact

escablishes that the Commission has looked at the relative

benefics or purposes and not just the DO! in deciding whether an

expenditure can be treated as a primary campaign expense. The

Committee respectfully submits that this suggestion is erroneous

for several reasons.

As an initial matter, the Report mischaracterizes the

$64,000 expenditures from the 1984 campaign. These expenditures

included, for example, phone deposits for phone services that were

apparently used during the general election campaign period and

were thus fairly attributable to the general election campaign.

Report at 42. More generally, the Committee understands that all

of the $64,000 in expenditures were for goods and services

actually used during the general election campaign. 11 C.F.R.

2./ Significantly, the General Counsel's c:fice indicated at the

December 8 meeting that "We don't believe the law has changed"

since the 1984 election cycle. Tr. at 16 (Exhibit 6).

A;TACHMENT _,_,"'~ Page J of -2-
':.:

'...;-'

.-,

......

Ms. Jane Whang

March 1, 1995

Page 8

§ 9002.11 (qualified general election campaign expenses include

those incurred -before the beginning of such period . . . to the

extent such expenditure is for . . . services . . . to be

during such period.·) (emphasis added) .1/ In contrast, none of

the Bush-Quayle '92 expenditures at issue here were for services

during the general election campaign.

Second, the Reagan-Bush campaign chose to treat the

$64,000 in expenditures as general election expenses. The

Commission never ruled on whether those expenditures were solely attributable to the general election campaign; the voluntary

actions of the Reagan-Bush campaign obviously do not stand as

Commission precedent. Undoubtedly, certain expenditures will benefi~ both the primar)' and the general election efforts. As

both the Commission staff and the Commissioners made clear at the

hearing on December 8, 1994, a Committee may itself choose to

attribute certain of these campaign expenses to the general

election campaign when it is not required to do so.l' The issue

here is whether the Committee treat the challenged ._.~~_._. . expenditures ~s .general election cam~aign ~ns.es. ....----- _.0. -_.- -- __._-~-- -- .- e. ---- _-_ .. . _. __ . __ . •. _0. .

--- _.._-----... ------ .. - --------- Finally, the 1984 Reagan-Bush campaign's voluntary treatmen~ of the $64,000 in expenditures does not undermine the

Commission's actual ruling on voter registration lists,

advertising, and similar expenses by the Reagan-Bush campaign.

There is no principled reason why the Commission should allow

voter registration expenditures made after a primary -- for which

it is extraordinarily difficult to find a direct connection to the

nomination -- to be treated as primary campaign expenses in 1984,

while requiring the polling and print media expenses made by the

Bush-Quayle Committee -- for which the Commission has ample

evidence establishing their direct relationship related to the

campaign'S effort to shore up President Bush's bid for the

nomination -- to be treated as general election campaign expenses in 1992. At most, the report of the 1984 Reagan-Bush campaign would stand for the proposition that a campaign could choose

1/ Indeed, the Commission specifically examined .~ these

services were used- before allOWing them to be treated as

qualified general election expenses. Federal Election

Commission, Final Audit Report; Reagan-Bush '84 General Election

Committee, May 11, 1987 at 17 (emphasis added). (Exhibit 8).

1/ The Chairman observed that ftIt doesn't work the other way.

If [the campaign says] that they're general election related, we do~'t ~e~~ire them to allocate it SO percer.t to the primary.w Tr. at 41. The audit scaff generally agreed, but noted that

"we're not dealing with that right now.- lQ.

ATTACHMENT l Page~ O-f---.l-;-
. _ ..... :""'. ";,.-..--

Ms. Jane Whang

March 1, 1995

Page 9

whether to attribute such expenditures to the primary or the

general eleccion expenses. In any evenc, the report certainly

does not support a SO/SO allocation.al

, .. , .-..~~~

\. ~'-

Another argument by the audit staff warrants correction.

During the December 8, 1994, Commission hearing, the audit staff

stated that the Bush-Quayle Primary committee had initially paid

for expenses totalling $37,000 that were later paid by the General

Committee, and based on this fact suggested that the Committee had

itself failed to follow a bright line approach. Tr. at 37

(Exhibit 6). Nothing could be further from the truth. As the

Report itself makes clear, the $37,000 in expenditures were for

advertisements ordered prior to the DOl that were intended to

appea= -- to be ~usedn -- after the DOl. Each advertisemen~ bore

the Ge~e~al Committee's disclaimer. A1~hough the Primary

committee paid for them by mistake, it obtained prompt and full

reimbursement from the General Committee as soon as the error was

detected. Thus, the Committee's actions were fully consistent

with the bright line approach reflected in the regulations and . . conunissi"Oo. precedeqt.. .' .. .... 1. .' '. •

-- -- - .....- ------'--- _..- ------ .._-- ... _ .. ---- --- _....._- - --- - ---.. - .. - .. _. .. .. ---- .... _...._._----- ---... --

'--'

'{)

Several other facts underscore the lack of any substantial precedent to support the approach adopted in the Report.

First, a review of the Commissioners' discussion at the December 8

meeting makes abundantly clear that the Commission was struggling

to fashion a new standard. Exhibit 6. Indeed, it is

indisputably clear that the Commission has never applied a SO/SO

split of certain expenses between the primary and general election

ll' The Report also seeks to distin~yish two other Commiss:on opini~ns indicating that expenditures made during a primary campa~gn that might also benefit the general election campaign

can nonetheless be paid by the prima~ campaign. See also Adv.

Op. 1975-9, Fed. Election Camp. Fin. Guide (CCH) 1 5110 at 10,035

(1975) (holding expenditures during primary by unopposed

candidate -allocable to that primary election rather than to a

subsequent general election-); Adv. Op. 1978-99, Fed. Election

Camp. Fin. Guide (CCH) 1 5387, at 10,396 (1979) (campaign

materials ordered and received only one day before the primary

election, which were used both in the primary election and the

general election, may be treated as primary campaign expense) . The Report's observation that these Advisory Opinions were not

rendered to publicly financed campaigns does not serve as a valid

distinction, since the campaigns at issue -- just like the

Committee here -- had an obligation to segregate their primary

and general campaigns for pu~oses 0: contribution limitations as

well as contribution and expenditure reporting.
• ~I..:'••~.

Ms. Jane Whang

March 1, 1995

Page 10

campaigns. Any new standard should, we submit, be applied

prospectively only.

Second, and perhaps most tellingly, the Commission's

decision to issue a notice of proposed rulemaking (-NPRM-) on this

issue reflects an understanding that the Commission has not

previously adopted the approach used in either the Interim or the

Final Reports. 59 Fed. Reg. 51006. The NPRM indicates that the

approach set forth therein "reflects the Commission's experience

in administering this program during the 1992 election cycle- and

addresses a lack of ·specific guidance- in this area. ~. at

51006 and 51011. If the law were as clear in 1992 as the Report

would seem to indicate, the NPRM would have been unnecessary.

Therefore, under the law, regulations, and precedents

available at the time, it was reasonable for the Committee to

conclude that any campaign-related expenditure made prior to the

DOl could be treated as a qualified primary campaign expense.

Moreover, even assuming some review of the purpose of the --. .expe~diture, tpe Co~issiop should, ~t most,. consiqer whe~her

-- --- -------·f·here--is-a-··-plausib-le··-connee·t-ion·--between--the- expe.ndi.ture_ and__the _ , candidate's campaign for nomination. If there is such a

connection, then the expenditure can properly be treated as a

Primary Committee expense. As previously demonstrated and as

amplified below, the expenditures at issue clearly meet this test.

c

3. The Challenged BxpencU.tures Were Made

in Connection With the Campaign for

Nomipatiop

Even under the standard apparently applied by the

Commission in the Report. the challenged expenses are properly

payable by the Primary Committee. ll' The Commission acknowledged

the connection between the challenged expenditures and the fight

for the nomination in making its initial determination at the

December 8 meeting. In moving for the SO/SO allocation,

Commissioner Thomas observed that "the Committee [has made] the

demonstration . . . that there is a primary component to these

[expenditures.]" Tr. at 40 (emphasis added). Chairman Potter

concurred when he stated that -all these expenditures have

~! The Report does not make clear whether the connection

between the expenditure and the primary campaign must be

exclusive, primary, substantial, significant, or the some other

adject:ve. The Commic~ee con:e~cs that, under the particular

circumstances faced by the Bush-Quayle campaign, the connection

was both direct and substantial.
'

-......

Ms. Jane Whang

March 1, 1995

Page 11

primary component, that's obviously what Commissioner Thomas'

motion takes into account ....- Tr. at 41 (emphasis added) .lll

The Committee respectfully submits that this connection is

sufficient to qualify the expenditures as primary expenses under

the standard set forth in the statute and regulations.

Nevertheless, several Commissioners indicated at the

December 8 meeting that they would like to see the Committee

elaborate on the connection between the challenged expenditures

and the campaign for nomination. Assuming, arguendo, that the law

requires an additional showing, the Committee is submitting

herewith additional materials addressing this issue. As the

Committee explained at some length in its response to the Interim

Audit Report, the expenditures at issue were part of the overall

ef:ort by the Bush-Quayle campaign to shore up support for the

nomination and to forge a party platform that would receive

enthusiastic support from the delegates at the Convention.

Mary Matalin, the Political Director of the campaign, --. .describe~ in he~ decl~ation how the c~~di~g lead that Bi~l . . .. -.;.._:-- --...---- -Clinton· had-taken- -in-·~he-pcills-and- the_distr.ac_tions_._caJ,u~e.d_Qy.J!.Qss ~~ _ - Perot shook the confidence of Republican delegates and leaders.

0, She described how the polls, surveys, printed materials, and the

like were designed to convince Republican delegates enthusiastically to support the Bush-Quayle ticket. These efforts provided

guidance to the campaign in building the platform as well as

ammunition for use in persuading convention delegates. Although

the Report suggests that attempts to raise President Bush's

standing "with all voters" indicates that the expenditures solely

benefitted the general election campaign, Report at 45, the

staff's suggestion ~hat any campaign for a party's presidential

nomination could or should ignore the candidate's appeal to the

overall electorate is, we respectfully submit, nonsense. U1

David M. Carney, Political Director and Director of

Political Affairs for the Committee, explains in his attached

III Vice Chairman Elliott also explicitly acknowledged the

connection between the challenged expenditures and the campaign

for the nomination. Tr. at 21 and 36.

III It would be no response to suggest that a primary committee

should hold funds in reserve so that, in similar circumstances,

it could advance money on behalf of the general committee for

later repayment. Requirement of such a -reserve- would effectively lower the spendi~g li~:tations o~ primary campaigns

without statutory author~zation, and raise a host of other

issues.

Al'7ACHYEllT _\--:11_

Page \\ of \
; -:,_ _ ,Z•• ' •••••

.-".;

........

'-r:

Ms. Jane Whang

March 1, 1995

Page 12

declaration that the period between the primaries and the

Republican Convention was characterized by often frenetic campaign

activity, all designed to ensure the proper atmosphere and results

at the national convention. The declaration is included at

Exhibit 1.

Two platform issues illustrate the need for the campaign

to continue its efforts on both the national and the state levels.

First, a sizeable pro-choice movement in the Republican Party

sought t'o remove the pro-life plank from the party's platform. A

pro-life faction led in significant part by supporters of Patrick

Buchanan -- who had yet to relinquish his campaign for the

nomination -- was adamantly opposed to any concessions on the

abo=::on issue. The rift threatened the unity of the party i~self. Both sides engaged in intense lobbying at the state

level, during the platform committee meetings in July and August,

and at the Convention itself. When it became apparent that the

pro-life plank would remain, the Republicans for Choice vowed to

take the fight to the Convention floor for debate and vote prior ~o ~he delegat~ vote Qn tbe presidential nomination. A floor

-flight -on --an--emotiona-l--platform-issue---such--as abort-ion--woul'd--have-----------

been disastrous for the campaign. Carney Decl. at " 7-9.

As described in the news articles included as Exhibit 9

to the response, the Republicans for Choice began a grass roots

campaign to ~arner support for the pro-choice position at the

Convention.ll These efforts included lobbying delegates

individually and in meetings and led up to a six-state caravan to

the Convention that began in late July. Under Rule No. 8 of the

Rules of the Republican Party, this group needed a majority of

delegates in only six states to bring the issue to the Convention

floor. The Committee, through Mr. Carney and others, worked to

prevent such a disastrous floor fight. Campaign personnel in sta~e offices would monitor the local delegates and alert the

national office about meetings and other significant developments.

Where possible, campaign personnel, including Mr. Carney, would

intervene to diffuse the situation and/or to try to persuade

delegates not to join an opposition group at the Convention.

Carney Decl. at " 10-11.

Second, the "no-new-taxes" issue presented another

serious controversy. The pledge by President Bush in 1988 not to

ll: For example, the Los Angeles Tur.es reported on July 28 that

"Republican women who favor abortion rights Monday kicked off a pre-=~~vention campaig~ t~ change the GCP platform, warning that

it would be 'political suicide' for the party to continue its

strong anti-abortion stance," Exhibit 9 at 15. 1

A!1ACr-~~T 7"'_15- page~ Q.
... ····-1··~

Ms. Jane Whang

March 1, 1995

Page 13

raise taxes and the subsequent 1990 tax increase led to a dispute

over how to handle this issue in 1992. One faction sought to

denounce the 1990 decision and to reaffirm the no-new-taxes pledge

with even greater force in a new platform plank. Another group,

including the Committee, sought to down-play this issue to avoid

accentuating its importance in the minds of voters. This group

sought to prevent any mention of the issue in the platform adopted

by the Convention. The dispute is described in Mr. Carney's

declaration as well as in numerous news articles included as

Exhibit 10 to this response. Carney Decl. at , 13. As with the

abortion issue, intense lobbying by both factions took place at

the local level, at the platform committee meetings, and at the

Convention itself. llt

Although ~~ch of the campaign's effort was targeted at

the struggle over the platform, the campaign also was aware that

under Republican Party rules no delegate is • committed- to a . . candidate and that no candidate is guaranteed the nomination until __ it is actually made. Both the Republican and Democratic Party ____ ._! ~~.~~.!.E:.~~ow. into .question. wnet.her any- de]..egate c~ be legal·ly.' ~. bound at tbe-·Conventidn:----~Comments-·from--RNC--(at-p.--23)--and -DNC---_. _

(at p. 16-17) (Exhibits 2 and 3). Indeed, in its recent NPRM, the

Q'\ Commission acknowledged that • a candidate who appears to have

secured the nomination early in the campaign may in fact fail to

obtain it .... R 59 Fed. Reg at 51013.~

A1'~ACf.MENT \ S"

Pa.ge of-LL

c

.-.. '-

'"

.... ,

'~'.

All of the expenditures challenged in the Report were

integral parts of the campaign'S efforts to forge an acceptable

~I The ~mportance of this issue is demonstrated by the

defection of prominent Republicans in Orange County, California

just after the Convention. The story as reported in the Loa ~~geles 7imes on A~gust 22, 1992, and included as Exhibit ~1

indicated that one of the key reasons for the defection was the

no-new-taxes issue. It was precisely this kind of intra-party

disaffection at the Convention that the Committee sought to

minimize through its efforts over the summer.

at The Commissioners may also recall that Nelson Rockefeller

began a campaign for the Republican nomination in 1968 too late

to enter the state primaries. A similar crisis of confidence

raised the possibility that he could take the nomination from

Richard Nixon. His entry and ultimate withdrawal turned on polls

showing the likelihood that Nixon or Rockefeller would win in the

November election. These events are described in Michael Wheele~'5 ~ies. Da~~ Lies, and S:atistics at pp. 119-22 (1976)

(an evaluation of the significant roll that public opinion polls

have i~ O~~ society).
,--.

.....

-. '- .

·-'-~::~!

Ms. Jane Whang

March 1, 1995

Page 14

resolution of the platform issues and to bolster support of the

Bush-Quayle ticket at the Convention. The polls, surveys, and

focus groups helped guide the campaign in formulating the platform

as well as in persuading delegates that they should enthusiastically support the nomination of President Bush and Vice

President Quayle.

For example, the national survey conducted on July 6-8,

1992, included 10 questions concerning Vice President OUayle

asking, among other things, whether President Bush should -Replace

Dan ouayle as his running mate" and whether the respondent

napprove(s] or disapprovers] of the way Dan Quayle is handling his

job as Vice President?" (Exhibit 12 at 3, 16, and 22-23). A July

24-26, :992, poll examined "thoughts people might have if George

Bush replaced Dan Quayle as his running mate." (Exhibit 13 at 5).

2' Similarly, other questions in the challenged polling efforts asked

whether respondents were pro-life, in-between, or pro-choice on

the abortion issue. (~libit 14 at 5). The polls also sought to __ measure the effect of Governor Clinton's and Ross Perot's pro-

--_-. .__ .._. __choic~._s_tJmQ _Q~_ aborcion. (Exhibit 12 at.. 1"7 and 21; Exhibit 14 at .~ . . 9). These results-'were---fmportaiit-t-o--the--aecisi"on -by-Pres-i-dent -------- ----

Bush to continue with Vice President Quayle as his running mate

and in the platform struggle with Republicans for Choice. tu

While the abortion and no-new-taxes issues are two

prominent examples, the Republican Party platform is a sweeping

document that sets forth the Party's position on a wide range of

topics, including the family, education, health care, the

homeless, older Americans, cultural values, diversity, crime,

international relations, the economy, job creation and security, national defense, taxes, deregulation, government spending,

international trade, science and technology, agriculture, reform

of the legal system, and property rights. (Exhibit 15). The

polls and surveys challenged by the Commission provided the

Committee with valuable information to determine which issues to

include in the platform and how best to present them.

Furthermore, the reopening of the state offices was

necessary not only to coordinate planning for the Convention, but

also to monitor delegates and to counter the insurgencies on

platform issues. For example, the only state office specifically

mentioned in the Report was located in Connecticut; COnnecticut

was one of the key states in the dispute over the abortion issue.

The need for constant communication with the state delegates may

UI ReDublicans for Choice was arguing, for example, that a

majority of Republicans were pro-choice on the basis of poll

results. (Exhibit 9 at 16) .

ATTACHYEJT b5-

Page J...J- of .-
...-:--- <:5.~

Ms. Jane Whang

March 1, 1995

Page 15

best be illustrated by the efforts of the Committee during the

Convention itself. The Committee had over 50 people assigned to

stay with and monitor delegates to prevent defections. Many of

these people worked around the clock for 48 or more hours in an

effort to ensure a favorable outcome on these and other important

issues. These efforts at the Convention were a continuation of

the efforts that took place over the summer. Carney Decl. at , 12.

In short, the polls, focus groups, print media, office

leases, and equipment expenditures were part of the overall buildup of excitement for the Convention and were therefore made Win

connection with the campaign for nomination.-

As a final consideration, Mr. Carney observes that some

of the challenged expenditures, particularly the polls and focus

groups, did not provide a significant benefit to the General

Committee. In a Presidential campaign in particular, events move

so quickly that the useful life of a poll is no more than lO-l~. .. .~> .. days'. Ca:rmey -Decl., at, '·5. Indeed, · nUmerous poils were· puhilslied ' ,--.,.:.---:-,t--fn· ·t"he-nationa·I-medi-a-·every--week-:-----TDeCOtiiaiIifsl.on-"sta-ff-ac"kriciWl=--·-----·-------

edged the rapid obsolescence of poll results at the December 8

C' meeti.ngf 111 and further acknowledgement is found in the Commiesian's regulations. 11 C.F.R. § 106.4(9). The polls reflected by

the challenged expenditures were taken in June, July, and early

August .111 They would have provided no significant value to the

campaign after August 20.~1

.---

'J;.

ill In response to a question from Commissioner McDonald, the

audit staff stated that -I think there'S various articles and

statements made and Commission regulations that they decrease in

value sharply after, well depending, seven days, ten days, two

weeks." Tr. at 20.

III The Report indicates on page 31 that the -majority· of polls

and focus groups occurred between June 26 and August 31. The

Commission should be aware that it is perhaps the majority of

challenged polling expenses that occurred in that period, but not

the majority of polling expenses during the entire primary

campaign period.

III The -SO/SO split W does not accurately apply the polling

regulations. If both the primary and general committee are

deemed to be responsible for the polling expenses, any benefit to

the general commitcee would need to be further reduced by at

least another 50\ to reflect the obsolescence of the polls. See

11 C.F.R. § 106.4(g) (1).
" .......... : .- .:: .. '

RBIIORANDUM

TO:

THROUGH:

FROM:

FEDER·\L ELECT10~ CO'\'\MISSIQN

March 22 t 1995

The Commission ~._) . , l' \ John C. Surina . .t-'\.tstaff Director

Lawrence M. Noble

General Counsel

, .. . ·.···.·;,··i.~~

PLlb( (G !2t!,,,cclrcl .~~:;

hA~ ZZ 3 3:s iii '95

--.-.----.....--- --Del~nie- -o-ewttt--Painte-r-W1it:.liI//J---- -------- _.-- -.... ---_.

Attorney

Jane J. Whang ~/ Attorney {I ..

......

" '

I.;'"

By:

Kim Bright-Coleman

Associate General Counsel

Kenneth E. Ke llne r J{i1C bJ fflI}

Assistant General Counsel

SUBJECT: Bush-Quayle '92 primary Committee, Inc.,

Request for Oral Presentation (LRA .425)

On March 21, 1995, this Office circulated to the

Commission a memorandum recommending that the Commission

grant an oral presentation to the Bush-Ouayle '92 Primary

Committee ("Primary Committee"). Please find attached for

your review the last two pages that were missing from

Attachment 1 of the memorandum.

Attachment as stated.
Ms. Jane Whang

March 1, 1995

Page 16

D. Matching Funds Received in Excess of Entitlement

The Commission initially determined that the Committee

received matching funds in excess of entitlement amounting to

$485,631 that should be repaid to the government. This finding

stems from the Commission's initial determination in Section C

above."" If the Commission finds, as the Committee contends that it

should, that the challenged expenditures were properly paid by the

Primary Committee, then the Committee would not have received any

matching funds in excess of its entitlement, there would be no

repayment for non-qualified expenses, and the Committee thus would

have no remaining repayment amount required.

E. Stale Dated CheCKS , ....

'.

--i.~. -..------!. __ ._ .• __ ..!- __ ._._.~ '0 .•. .' .

the

ber

As stated in the Report, at page 48, the Committee paid

recommended amounts to the United States Treasury on Octo21, 1993 and July 25, 1994,

:-" R~~ctfUl-1Y" -subail'i.ted., -'" ,"

J~~ Treasurer

In

AT'TACH)(Eft _

Page of _
.,- -:

DECLARATION

1 declare under penalty of perjury that the foregoing is

true and correct to the best of my knowledge, information, and

belief. Executed in Washington, D.C. on this 1st day of March

1995.

:........ " :i _/~/ ¥-d ....: St"~CkabY --- _. -------_. - .---_._--------------- ._---- _. --_ .._-- --_ ...- -._---------_.. _- ------- -..-.- - .. -_. ----._---_.

If:

.IT'UClDWn: I _

Page crt _
· . ..

FEDERAL ELECTIOl' (0/\.1;'-115510'-

DATE & TIME TRANSMITTED: MONDAA,', JANUARy 2;. )095 11-00

BALLOT DEADLINE: T HURSDAY, .1 A N II A By?':'. 1 9 a 5 4 '.00

COMMISSIONER: AIKENS, ELLIOTT, McDONALD, McGARRY, ?OTTER, THO~~S

SUBJECT: BUSH-QUAYLE '92 PRIMARY COMMITTEE, INC.,

BUSH-QUAYLE '92 GENERAL COMMITTEE, INC., AND BUSH

QUAYL~ '92 COMPLIANCE COMMI77EE, I~C. REQUESTS FOR

EXTE:~~rO:";s OF TI=~~ ':0 RESPC:-~~ ':~ FI~rlL AUDIT

REPORTS (LRA 425). HEr\ORANDUM TO THE COMMISSION

DATED JANUARY 20, 19S5.

- -.--_.._- --._.--. -._-_.- .'. -'.. -. - _. . .. - ...- . 1 approve the - re-c-ommend-ii-t-n>n-Cs')

1 object to the recommendation(s)

COMMENTS:

,r-

-'-- ------------

OATE: _ SIGNATURE: _

A definite vote is required. All ballots must D~ signed and dated.

please return ONLY THE BALLOT :0 t~e Ccm~ission Se:~~tary.

please return ballet no later than dat~ and time shown above.

FROM THE OFFICE Of THE SECRETARY OF THE COMMISSION
_. : ...-..... ~.

PlEMORANDUM

FEDERAL ELECTIO~ CO."t\:\ISSIO~

January 20. 1995

-" .

TO:

THROUGH:

FRO":

BY:

The Commission f~. , I t

• ..I I

John c. surina \..--A· , oJStaff Director

Lawrence M. Noble

General Counsel

Kim Bright-Coleman ~~ Associate General Counsel

"/A/ Kenneth E. Kellner~'~'/1

Assistant General ~ounsel . . -~- -----.--------- --- ----~~~~~~:~~~~i t P~i ~-t~~~ttif- ----------- -------------.----.--------------

.~

........

1-""\

·.1 ,

~- ~.

SUBJECT: Bush-Ouayle '92 Primary Committee, Inc.,

Bush-Ouayle '92 General Committee, Inc., and Bush

Quayle '92 Compliance Committee, Inc. Requests for

Extensions of Time to Respond to Final Audit

Reports (LRA i 425)

The Commission approved the Final Audit Reports on the

Bush-Ouayle '92 primary Committee, Inc. ("Primary

Committee"), the Bush-Ouayle '92 General Committee, Inc.

("GEe"), and the Bush Ouayle '92 Compliance Committee, Inc.

("Compliance Fund") on December 27, 1994.

The Commission sent the Final Audit Reports to the

Primary Committee, GEC and Compliance Fund on December 27,

1994. Thus, the Committees' written responses to the

Commission's initial repayment determinations are due on

January 30, 1994. In a letter dated January 11, 1995, the

Committees requested a 30 day extension of time, until March

1, 1995, to respond to the Final Audit Reports and initial

repayment determinations. Attachment 1.

The Commission made an initial de:ermination that ~he

Primary Committee must pay S8~1,850 to the United States

Treasury. This amount includes repayments of $485,631 for

matching funds received in excess of the Primary Committee's
". :.,-~""'! ••"". '. ':"M~'m'c;rand;im""to the c'omnii"ss-ron

Requests fo~ Extensions of Time

to Respond to Final Audit Reports

Bush-ouayle '92 Committees (LRA t 425)

Page 2

entitlement, and $195,224 for apparent non-qualified campaign

expenses 1/: and payments of $141,801 for apparent unresolved

excessive-contributions and $19,194 for stale-dated checks.

Because the Primary Committee has already paid $160,995 for

the excessive contributions and stale-dated checks, the

amount now due is $680,855.

Moreover, the Commission made an initial determination

that the GEe and compliance Fund must pay a total of $29,775,

consisting of: $19,023 for GEe stale-dated checks; $2,086 for

a gain on an insurance settlement; and $8,666 for Compliance

Fund stale-dated checKs. Because the GEC and Compliance Fund

have already paid these amounts to the United States

Treasury, the amount due is $0. In addition, the Final Audit

Report concluded the GEe made expenditures in excess of the

expenditure limitation totaling $553,258, but these

expenditures may be reimbursed by the Compliance Fund.

".'-.. -':'-;:-':::~

The Office of General Counsel recommends that the

V) Commission grant the requested extensions of time. Although

the Committees' letter does not discuss the specific reasons

for the extension request, we believe that the request is

reasonable because Counsel for the Committees aust prepare

0: . r~spooses to two Final Audit Reports simultaneously.2/ _. ·~,=-__·_---~-~·~·~-Aecordl.n.9-ly., __th';_[~s.~q~~_~.~ .~~ul~:'~· due' by clos& of business . . on Karch 1, 1995. ---.--. - .. _- --. .---- .. .__ . _

RECOKKBNDATIONS

The Office of General Counsel recommends that the

Commission:

.......

,-'.

,..... •• J ,

1. Grant the requests of the Bush-Quayle '92 Primary

Committee, Inc., the Bush-Quayle '92 General Committee, Inc.,

and the Bush Quayle '92 Compliance Committee. !~C. for an additi~nal 30 days to respond to the Final Audit Reports and

initial repayment determinations; and

2. Approve the appropriate letter notifying the

Committee of the Commission's decision.

Attachaents

Letter from Thomas O. Barnett dated January 11,

1995.

1/ This amount will be adjusted if the the GEC reimburses

the primary Committee for general election expenditures paid

for by the ?~imary Committee.

2/ ~e note that the Committees requested and were granted

extensions of time to respond ~o the Interim Audit Reports.
·0':,_0- -:-.

THO....AS O. BARNETT

DtItCCT ONMeCIII

1~~leW·~"

BY HAND

...... 0 0...... ......:' ......

COVINGTON & BURLING

1201 PtNN5Y\.VANI,. AVENU£. N. W.

P. O. 80X 75ee

WA~HtNGTON. D.C. 2004.·7566

12021 662·eOOO

'C,-C"Aa .aOzl ...,....'

T(,-U 88·S.:I ICOVl.'''O WSH'

CAs,-' COV\"INO

January 11, 1995

W'OO"",;n ....

.~

'Cu.~ 0" .

T'nC"" 0" )100

....,..\.I~"" OITU

.....""~oc• .,.,..

.IIIJUCL.I lO6O

1"t~~ » ...... ..-0

,~..tr..... 1II" ~''1IM

...........

.....

... '.

Kim L. Bright-Coleman

Office of the General Counsel

Federal Election Commission

999 E Street, N.W.

Washington, D.C. 20463

Re: Final Audit Reports -- Bush·Ouayle '92

Dear Ms. Bright-Coleman:

-.----------....-..--_..:. .=. - ----._:..Conf_irm~ng_y~~!: ~onversation with Bobby Burchfield, . this letter constitutes a-forma1- -'requ-est--~or- a: "3"O'~-day -extens-ion ---'--'-- .----

of time for Bush-Quayle '92 Primary Committee, Inc., Bush-Quayle

'92 General Committee, Inc., and Bush-Quayle '92 Compliance

Committee, Inc. <the ACommittees") to comment on or respond to

the final audit reports dated December 27, 1994, for each of the

respective Committees. We calculate that the responses currently

are due January 30, 1995, and that a 30-day extension would

require the Committees to respond prior to or on March 1, 1995.

Sincerely,

'_'i

Thomas O. Barnett
"" ..'':"'{:' : - . ...-:.~..... .-. ,'.'. .. : . - . . , ... t=..:vJ

:~.~

BEPORE THE FEDERAL ELECTION COMMISSION

In the Matter of )

)

Busb-Cusyle '92 Primary Committee, )

Inc., Bush-QUayle '9~ General Committee, ) Agenda Document .95-82

Inc., Lnd Bush-Quayle '92 Compliance ) Co~ttee, Inc .• Proposed Pinal )

Repayment Determinations and State::11e.nt )

of Reason. (LRA '425) • )

CERTIPICATION

I, Delore. Hardy, recordiDg ·••cretary for the Federal

'-- -.-- . . .__._EJ~.~_9tioo Commission open meeting on Thursday, August 3, 1995, ---- ..., -, '-._-----_._--------- ---------------------_._----------- -------._---_._---

do he~eby certify that the Commission took the following

actione with respect to Agenda Document 195-82:

'n• I

':." ..

2.

Fa~led in a ~ote of 3-3 t~ pass a ~o~io~

to approve the recommendations a8 submitted

in Agenda Document *95-82, subject to

including all 33 offices as primary

q~a:ified caopaign expeoses.

Cocmlssioners Ai~ens, Elliott, and Potter

voted affirmatively for the motion;

Commissioners McDonald, McGarry, and

Thomas dissented.

Pailed in a vote of 3-3 to pass a motion to

approve tbe recommendatioDS, as submitted

i~ Agenda Document #95-82.

Co~is8ioner8 McDonald, McGarry, and 7homas

voted a!firmatively for the motion;

Commissioners Aikens, Elliott, and Potter

dissented.

(continued)

ATT.&.cmLE.'rt' _ ..... 1...1 _ F~6 ( c'!:.2-
": .-'.,\ '''_...:.'••.•:••': ......... e;=

Pederal Election Commission

Certification for Busb-Quayle '92

Primary Committee, Inc., Bush-Quayle

'92 General Committe., Inc., and

Bush-Quayle '92 Compliance Committee,

Inc. - Propo.ed Pinal Repayment

Determination. and Statament of

Reason. (LRA 1425) . Thursday, August 3, 1995

3. Decided by • vote of 6-0 to approve the

recommendations, as submitted in Agenda

Document *9S-8~, except reduce the ~ount8, as appropriate, by the cost of

the state offices wbich bad been included

in thoae numbers, purs~ant to the meeting

diacu••ion.

Page 2

_,_ ••••••_ _ .' • ,eo • CommiIl8iQDK.~Aik.e.n., .Blliott., MeDould,. . .... ------- -------------...--- -Mcgarry; -·Pott.r--Imd-·-rhoma-..-voted--,.-ff-i-rma-------.- ~_._. _~

tively for the decision.

,.-.... \..--

(; 'L(:'I I • .J. I' L ~4e6:

/ Date

U

I I

7

Attest:

!!~!~;-:' I _'7__....-

Page L ot
.' -: .. ':.

,- ..:.. ... ~t~

--:.:.,

FEDERAL ElECTIO~ CO·"\.'ISS :'

BALLOT DEADLINE:

DATE & TIME TRANSMITTED: MONDAY, AUGUST 14, 1995 ------

THURSDAY, AUGUST 17, 1995

11:00

4:00

COMMISSIONER: AIKENS, ELL!OTT, MCDONALD, McGARRY, POTTER, THOMAS

SUBJECT: PROPOSED FINAL REPAYMENT DETERMINATIONS

A~~ STATEMENT OF REASONS - BUSH-QUAYLE

'92 PRIMARY COMMITTEE, INC. BUSH-QUAYLE

'92 GENERAL COMMITTEE, INC., AND BUSHQUAYLE '92 COMPLIANCE COMMITTEE, INC.

(LRA '425). MEMORANDUM TO THE COMMISSION

D~TED AUGUST 11, 1995.

-.----.::..:_- :--=._~--.:.. ..:=-_- ---"-._:-_--_... . ....- ._-- .-_... _.- .. --. _0. 1 approve the recommendation-(s)' .__._---._.-._- ------_._._--_..- ------

....'

..........

COMMENTS:

1 object to the recommendation(sl

01\TE:----- SIGN.l\TURE:-------------------

A de:inite vcte is ~eauired. All ball~ts must be signed and dated.

Please return O~LY THE BALL07 to the Ccm~:ssion secretary.

Please r~tu:n ba!l=: no la:~= tha~ da~e a-: ti~~ sh~~n a~c,eo

fPCM THE OFf!C~ C~ THE SE:RETAPY Of THE COMMISSION
· . " '" - ..:.... ~~

?:.

,:. \ ..... "" . '. ;.

~tCElvEO

FEDERAL ELECTION

COMMISSION

SECRETARi4T

III II 3 '45 PH '95

August 11, 1995

FRO":

THROUGH:

KEMORANDUK

TO: The

c

Lawrence M. N~ble h)l1JJ b.,~ 1C,.f1G General Coun¥l f77

Kim Bright-Coleman I~~ Ass~::ate Ge~e:al ~unsel

Kenneth E. ~ellner Ul~ ~J ICjK Assistant Qeneral counselr

'1

Oelanie oe~i tt Painte r j)fjfJ /",j {{,f1C Attorney \. "vl --~~'~~-- ~--- -_.-_~ --~-~~~~~~;~Wiaiig<;t.\tV- ---- -' _..:_--_ .._-'-~_._.~. --".- -- _.---..----.- -~_.. ..-

~:

SUBJECT: Proposed Final Repayment Determinations and

Statement of Reasons - Bush-Quayle '92 Primary Committee, Inc., Bush-Ouayle '92 General Committee, I~:., and Bush-Quayle '92 Compliance Committee,

1:-.:. (LRA ; 425,

;"..

'- I .. INTRODUCTION

C,,,

On August 3, 1995, the Co~ission approved the proposed

Statement of Reasons supporting final repayment and payment determinations on the Bush-Quayle '92 primary Committee (Wthe

primary Committee"), the Bush-Ouayle '92 General Committee,

Inc. (Rthe GEe R) and the Bush-Quayle '92 Compliance

Committee, Inc. (the ~Compliaoce Fund ft ) as submitted in

Agenda Oocu~ent ;95-82. However, the Commission directed

this Office to make specific amendments related to the

Committees' state offices.ll Attached for the Commission's app~oval is a~ amended dralt Statement of Reasons supporting

1/ The attached Statement is being circulated for the

Commission's vote in orde: for a certification containing the

final repay~ent determlna:ion flgures to be issued.
c

• _ I ..

Memorandum to the Commission

Final Deteraination

Bush-Ouayl! '92 Committees

Page 2

the revise~ repayment determinatio~s.: !n addition to the

s?ecific changes directed by the CommIssion, other minor

changes were made to make the draft consistent ~lth the

Commission's amendments.3/

In the event that the Commission objects to this draft,

we request that this document be placed on the open session

agenda for August 17, 1995.

II. REVISED STATEMENT OF REASONS

On August 3, 1995, the Commission considered the draft

Statement of Reasons and the Office of General Counsel's

recommendations. Specifically, °in the draft Statement of

Reasons, this Office recommended that the Commission consider

the expenditures for leased office space, equipaent and

materials associated with the 11 state offices discussed in

the Larson and Dudley declarations to be qualified primary campaign ex?enses, but not revise the SO/SO\ allocation of

expenditures related to the remaining 22 state offices. A

motion to :onsider 100\ of the expenditures related to all 33

state offices to be qualified campaign expenditures of the

primary campaign failed by a three to three vote.

subsequently, a motion to approve this Office's

recommmendations also failed by a three to three vote. The

affirmative vote of four.members is required for the -- ---------- -COIDJll"i-s-s-ion--t-o -t-ake-any- ac-tion-under:--tb.-pre-s-iden-ti-al--pt;=-i-aar-y--- -------------. ~~ Matchin9 Payment Account Act or the Presidential Election

Campaign Fund Act. 2 U.S.C. S 437c(c). Therefore, the

amounts of expenditures for leased space, equipment and

materials related to all of the state offices4/ at issue

totaling $107,031 have been removed from the total amount of

non-qualified campaign expenses.~/

r:"

'.r)

,-

Based on this change, the amount of non-qualified campaign expenditures subject to repaymen~ has been reduced

to $409,12~ and the P~imary Ccnmit~ee's p:o rata repayment for t~e nc~-qualified campaign expenses r.as been reduced to

2/ Attach~ents 1-16 to the draft Statement were circulated to

the Commission with Agenda Document 195-82, and are incorporated

by reference with the attached Statement. The certification of

the Commiss:on's vote on August 3, 1995 is the ~nly new attachment

to this memorandum. See Attachment 17.

3/ The attached draft is marked to indicate where amendments

nave been wade.

4/ The expenditures re~ated to the natlonal headquarters are not

considered qualified campaign expenses.

5/ This figure reflects the total amount of expenditures for

Teased spa:e, equlpmen~ and ma~eria~s pertaining to the state

offices. In the Final Audit Report, 50\ of this amount was in~lu~ed as qualified pr:~ary campai;~ expenses.
~~..-! ••• ••

Memorandum to the Commission

final Determination

Bush-Quayle '92 Committees

Page 3

S:05,9i9. Moreover. ~he amount c: matching funds that the

?:lmary Committee received in excess of its entitlement has

been reduced to $216,853, based or. the increased qualified

campaign expenses. Therefore, we recommend that the

Commission make final repayment determinations in the reduced

amounts. The amount of the payment for stale-dated checks

remains unchanged.

With respect to the GEe and Compliance Fund, the

expenditures subject to the GEe's o~erall expenditure :~~ita~ion have been reduced by a total of $333,1i2, which

reduces the amount in excess of the GEe's overall expenditure ::=itation to $220,086. The draft Statement of Reasons

recommends that the Compliance Fund reimburse the GEe in the

amount of $220,086, and submit documentation of the

reimbursement to the commission. The draft Stateaent of

Reasons includes final determinations for the GEe's payment

for stale dated checks and income and the Compliance Fund's ~ay~en~ for stale-dated checks. 7he amounts 0: these

payments have not changed, and no additional payment is due :~=~ the Gg~ C~ Compliance Fund.

·7~~.,:,.~

....:

,.. .

'--

Therefore, the Office of GeneraJ Counsel has prepared

the attached draft statement of Reasons supportinq a final

determination that the primary Committee must repay $323,832 .--. . ($106,9.79 +.$216,.6~3) to the United State's Treaeury. Th&·· :.• _. ~-- 0- - --d , aOf t -S-ta-telitfrit--of--Rtt"a s cns -als0-include 8 -a--flrta 1-payaent -- _0 . __·0 ._.- - -'. _. ---

determination of $19,194 for stale-dated checks, which the

Committee has already paid to the United States Treasury.

Moreover, the draft Statement of Reasons includes final

determinations that the GEe must pay $21,109 and the

Compliance Fund must pay $8,666 to the United States ~reasury. The GEC and Compliance Fund have paid these a:'-.=1;t~ ts.

III. RECOMMENDATIONS

·.r'! The Off:ce of General Cour.se: =ec~~~en=s that the

Commission:

'"'

'- . 1. Make a final determination that the Bush-Quayle '92

Primary Committee, Inc. must repay $216,853 to the

United States Treasury pursuant to 26 U.S.C.

S 9038(b)(1)i

2. Make a final determination that the Bush-Ouayle '92

Primary Co~~ittee, Inc. must repay $106,979 to the

United States Treasury pursuant to 26 U.S.C.

§ 9038lbl\2);

3. Make a final determlnation that the Bush-Quayle '92 P:~mary Co~mit~ee, !~=. mus: pay S19,194 to the

United States Treasury pursuant to 11 C.F.R.

S 9~38.E;

~. Make a final determination that the Bush-Quayle '92

General Commlttee, :r.c. must pay $19,023 to the
...... \..? .c"" .. .._ .'". '" t'_ .

Memorandum to the Commission

Final Determination

Bush-Quayle '92 Committees

page 4

United States Treasu:y pursuant to 11 C.F.R.

S 9007.6.

5. Make a final determination that the Bush-Ouayle '92

General Committee, Inc. must pay 52,086 to the

United States Treasury pursuant to 11 C.F.R.

S 9007.2(b)(4}.

6. Make a final determination that the Bush-Ouayle '92

Compliance Committee, Inc. must pay 58,666 to the

United States Treasury pursuant to 11 C.F.R.

S 9007.6.

7. Recommend that the B~sh-Quayle '92 Compliance

Committee, Inc., reimburse $220,086 to the

Bush-Quayle '92 General Committee, Inc. and sub_it

documentation of the reimbursement to the

Commission within 30 days;

8. App:ove the Statemer.~ c: Reasons supporting che

Final Dete:minations; a~~

9. Approve the appropriate letter.

Attachment

Statement of Reasons _ .. .._.__._- --_._----...- -- - -_._-_ ..

............ -..:.~~~

.__..... _.. --.---- .._._--- - --'-

,.

:0
••-'." .. oo ....~.':. ............ "

BEFORE THE FEDERAL ELECTION COMMISSION

In the Matter of )

)

president George Bush, )

V:ce President Dan Ouayle }

:',;sh-Ouayle '92 primary Committee, Inc., ) B~sh-Quayle '92 General Committee, Inc., anj )

E;sh-Quayle '92 Compliance Commlttee, Inc. ) r~~al Repayment Determinations )

STATEMENT or REASONS

........ --~

;~,;

On , 1995, the Commission made a final

=~:ermir.a~:~~ t~a~ Preside~t Gec:ge Bus~ an= :~e Bush-Quayle 'S:

p:lmary Committee, Inc. ("the Primary Committee") must repay

5323,832 to the United States Treas~ry. The Commission'S

determination incl~def! a pro rata. repayment of nOQ:qu.alified .

- ~;_._-- .----cainpaf9ii-expens·ea':'-riii·t'ed·-to~·~gen~i~1-·electi'on ex~~n'~es i~·-·'t.ie':':-··_···_-_· -_.-

aoount of $106,979. In addition, the Commission determined that

the Primary Committee must repay matching funds received in

ex~ess of its entitlement in the amount of S216,853. Finally,

~, tte Commission made a final determination that the Primary

::~~:ttee m~s: pay $19,19~ for stale-cla:ed c~ecks.ll 26 U.S.C.

'1""\ I... '

,..... ~_ .

55 9038(b)(1) and (2)i see also 11 C.F.R. SS 9038.2(b)(1) and

(~). The Primary Committee has already made a payment of

519,194 for the stale-dated checKS. Therefore, the Primary

.. Throughout this S~atement of Reasons, "FE:A lO refers to :~~ federa~ E:ection campaign Act of 1971, as a~ended, 2

C.s.c. S 431-455, the "Matching Payment Act" refers to the

?=~sidentia~ P~lmary Matchir.g Pal~e~t Ac:ou~: A:~, :5 C.S.:.

S ;G31-90~2, and the "Presidential Election Campaign Fund A~:" refers to the Presidential Election Ca~pa:gn Fund Act, ~: U.S.C. S 9001-9013.
~:~ -- ..

-2-

C:~~:ttee is ordered to repay S3~3,8;: t~ the United States

!:easury within 30 days of receipt 0: this determination. 11

C.F.R. S 9038.2(d)(2).

......... ...~:." ..~.:.~~

t,.,t.

Moreover, on , 1995, the Commission made a

final determination that President Ge~rge Bush, Vice President

Dan Quayle and the Bush-Quayle '92 General Committee, Inc. ("the

GEe") must pay $21,109 to the Unlted States Treasury,

representing a gain on an insurance settlement of $2,086 and

stale-dated checks totaling $19,023. 11 C.F.R. S 9007.6;

S 9~C7.2!b)(4~. ~he C~rnm:ssion a:so ~ade a final determination

that the Bush-Quayle '92 Compliance Committee, Inc. ("the

Compliance Fund") must pay $8,666 for stale-dated checks. The

GEe and Compliance Fund have paid these amounts. Accordingly, 4C • • •• • • ••• •

--~~- --'------no-addlt1-onal-payment----f-roii---tlie-GEC---or--Coapi-t-a°rice---Pund -1-&--------0-------:--; ---

required. Moreover, the Commission recommends that the

Compliance Fund reimburse $220,086 to the GEe and submit

d::~~entatic~ c~ ~he =eimburse~e~: :c :he C:~ission within 30

........... days.

. I

.-,.,\ I

."'..

:his Statement 0: Reasons se:s :~=tr. t~e legal and factual

bases for the final repayment de~erm:~ations and payment

determinations for the primary Commit:ee, GEC and Compliance

Fund. 11 C.F.R. S 9038.2(c)(4).

1. BACKGROUND

President George Bush (the "Cand:date"~ was a candidate for

the Republican presidential nomination in 1992. The Bush-Ouayle

'92 Primary Committee, Inc. was his a~thori~ed committee for the

primary campaign. The primary Committee received $10,658,521 in
•• ..••• :.".... • ,_. ;: 0",

-3~

pub~~~ funds ~~der the Matching payment Act for ~se in the

p~imary campaign. President Bush's date of ine~~gibility was

August 20, 1992, the date of his nomination as the Republican

party nominee. Folloving the Candidate's date of ineligibility,

the Commission conducted an audit and examination of the Primary

Committee's receipts, dlsbursements and qualified campaign

expenses, as provided in the Matching Payment A~t an~ the

Commission'S regulations. 26 u.s.c. S 9038(a); 11 C.P.R.

S 9038.1(a}(1).

Preside~~ Bush and ~ice Preside~: Ja~ O~a¥:e were the

;._. '.' .:-.fj

Republican party nominees for President and Vlce President for

the 1992 general election. The autAorized committee of

President Bush and Vice President Ouayle for the general . . .. .... .... . ... .... . .. ·__··_-_·_-_·--·;lectfon-·c-.i-mpaTgn-was·-theBusl1~ouayie'92Gener-ii.-Coam-ft-t-ee-;--··---··--·-------- ..,:01'

c.:

-.

.....

Inc., and the Bush Quayle '92 Compliance Committee, Inc. was the

campaign's legal and accountinq compliance fund. The GEe

received $55,240,000 in federal funds for the general election

campaign under 26 u.s.c. S 9006. Pursuant to 26 U.S.C.

§ ;:::(a', t~e Cc~~iss:cn conducted a~ audit a~= examina:io~ of

the GEe and :ompliance Funds' receipts, disbursements, and

expenses.

The Commission approved the Interim Audit Reports on the

Pr~~acy Comro~~tee, GEe, and Compliance Fund on ~arch 24, 1994.

11 C.F.R. §§ 9038.1(c)(1), 9007.2(c); Attachments 1 and 2. The

Interim Audit Reports contained the Commission's preliminary

calculations of the amounts due to the United S~ates Treasury.

The Primary Committee responded to the Interim Audit Report on
. ",

-4-

J~:V 6, 1994.2/ Attachment 3. The GEe and Comp:iance Fund . - res~onded to the Interim Audit Report on the same date.

Attachment 4.

After considering the Committees' submissions in response

to the Interim Audit Reports, the Commission approved the Final

Audit Reports and initlal repayment determinations on

De:e~ber 27, 1994. See 11 C.F.R. S5 9038.1{c)(3) and (d);

9007.2(c); Attachments 5 and 6. The Final Audit Report on the

Primary Committee concluded that the Primary Committee incurred

$::7,249 in Dcn-qua:~:ied ca~?a:g~ expenses that benefited the

general election campaign.il The Commission made an initial

determination that the Primary Committee mU6t repay a pro rata

portion of these non-qualified campaign expenses totaling . -- . . . .. .... . . ._- -" ""~------'-$-195~·i24-t"o-'·th-e·· U-n(ted-Sta-tes--T're-asury":!/-- 26"'U ~S. C. ". -,-., ... _. -..-,.----------- ',:-

S 9038(b)(2); 11 C.F.R. S 9038.2(b)(2). In addition, the Final

Audit Report contained an initial repayment determination in the

a~:~nt of 5~65,E31 for matching funds that the ?:imary Committee

., received in excess of its entitlement. 26 U.S.C. S 9038(b)(1)i

,.-

"'"-.

2/ On May 3, 1994, the, Commission granted requesta by the

Primary Committee and the GEC for 4S day extensions of time

to respond to the Interim Audit Reports.

3/ The GEe reimbursed 537,301 of this amount to the

C::::-.:n itte e .

4! The Commiss:on's regulations provide that the amount of

the repayment shall bear the same ratio to the total amount 0: the non-qualified campaign expenses as the amount of

matching funds certified bears to the total amount of

deposits of c~ntrib~:ions and ~a:=h~~; :~~ds, as 0: the

candidate's date of ineligibillty. 11 C.F.R.

S 9038.2Cb\(2)(iii). Thus, the Primary Committee's repayment ra~:~ fer ncn-quallf:ed campaign expenses is 26.1~83\.
• ,~ .. -I. .~.'- :"'.~

'...~::

-5-

: C. F. ?. § 9 C38 . 2 ( b } l '. . fin a 11 y, he ComAIll SSion ma de an

initial determination that the Primary Committee must pay

S19,19~ to the Treasury for stale-dated checks pursuant to 11

C.F.R. S 9038.6. The Primary Committee made this payment prior

to the initial determination.~/

The Final Audlt Repcrt en the GEC and Compliance Fund

con:ained initial determinations tha~ the GEe pay $21,109 to the

United States Treasury, representing a gain on an insurance

settlement of $2,086 and stale-dated checks totaling $19,023.

11 :.:.R. §§ 9007.2(b)(~:; 9007.6. :~e Commission also mace an

i~:~:a: determination that the Compliance Fund must pay $8,666

for stale-dated checks. The GEC and Compliance Fund have paid

these amounts. The Final Audit Report further concluded that • •• • ... • ••• ..... •••• • .1

_. --.-----th-eo-GEC-exceeded its- ovoeraii ·e·x·penditure °fi.itatiOon by--------o...-.--------

$SS3,258.~/ The Commission, however, recognized that the

Compliance Fund could reimburse the GEC for the excessive amount

c~ and el~minate any result~n9 repaymen:. Thus, the Final Aue~t

, Report stated that the Compliance Fund should reimbu~se the GEC

of the

.....

" .

reimbursement, but did not include an initial repayment

determination for this amount.

5/ The primary Committ~e also made a payment to the United

States Treasury in the amour.t of $:~:,801 for unresolved

excess:ve contributions.

6/ The Co~~ission cons:de:e1 the a=:~nts of non-qualified

campalgn expenses paid by the Primary Committee related to

the ge~eral election to be gene~al election expenditures and

applied them to the GEC's expenditu~e limita~ion.
-6-

The Primary Committee disputed the Commlssion's initial

:epayment determinations in its written response submitted on

March 1, 1995.21 Attachment 7. In its response, the primary

Committee requested the opportunity to make an oral presentation

before the Commission with respect to the repayment

de:ermlnations pursuant to II C.F.R. S 903S.2(c)(3). On March

- f -.. , 1995, the Commission granted the Primary Committee" request

for an oral presentation.

The GEe also filed a response on March 1, 1995, and

s :'007.2(c){3).~/ Attachment 8. The Commission's Audit Division

analyzed both responses in a memoraRdum dated May 4, 1995.

A~tachment 9. On May 10, 1995, the Commission granted the GEe's \ ...... • .. • .. • •• .. e.

-- -'--.- request--for--a 'ro"rot ·o·r-al--~p-t"e6entatlon-with---tlie--p·tlilia-rY---··· -- ----------------.:- .- ,~

Committee.

The Primary Committee and the GEe made a joint oral

~~. ;=~sentatio~ C~ May 17, 199:. Attachment 10. On May 24, 1995,

, the Primary Committee and GEe submitted additional materials

.,....

I.

.....

... .

:;~~:d:r.g ~a::ers addressed cur~~q ~~e ~:a: ~:esentation.

A~tachment 11. The Commission's Audit Division analyzed the

a=ditional submission in a memorandum dated July 14, 1995.

Attachment 12.

71 The Commission granted both Committees' ~equests for 30

cay extensions of time to respond to the Final Audit Reports C~ January 26, :995.

e' The GE: ' s :' e S p0 r. s e :: : pc :- ate j t e ? :- :.=a r y Comm i t e e ' s

:esponse by reference, and primarily addressed the issue of ;~neral election expenditures paid by the Primary Committee. :~:s lss~e does not result ~~ a repaycent by the GEC.
· ....

-7-

7r.e Cornm:ssi=~ ccnsi=ered all materia:s provided by the

~o~~ittees during the aucit and in response to the Interim Audit

Repor~s and the Final Audit Reports, including the oral

presentation, and documentation submitted by the Committees

following the oral presentation, in reaching its repayment

determlnatlons.

II. NON-QUALIFIED CAMPAIGN EXPENSES -- GENERAL ELECTION

EXPENDITURES· PAID BY PRlKARY COIUtITTEE

A. BACKGROUND

In the Final Audit Report on the Primary Committee( the

Commission made an initial repayment deter~i~aticn of $19S,:2~

based on a pro rata portion of non-qualified campaign expenses

", .......-:,. '." ~,;,y

..~

related to the general election campaiqn. The Primary Committee

__~~__·~..P_~ i d-=-.f<>r __c_~_r t~J!!__e xE!!_rrd~_~~~.~~"._~~~·~.:.~W~ a·t.~~_ ~.Q.J?~11~ f _~~_he _~_" . _._:. ~...:.~_

Candidate's general election campaign, including polling, focus

group surveys, direct mail, list rentals, shipping and

materials, print media services, leased office space, and

e~~ipmen~. These expend~tures were incurred prior to the

.-

\'.

Candidate's date of ineligibility, but after the state pri~~~y

e:ec~ions a~d ca~c~ses.i; The ?:~Qary Commlttee and the GEe

allocated expenditu:es be~ween the primary and general elec~ions

based on whether they were incurred and used before or after

August 20, 1992, the Candidate's date of ineligibility.

Specifically, the expenditures include polls and focus

group surveys that asked ~~es~ions about P:es:dent Bush, the

9/ State prlmary elections or caucuses were held through June 9, 1992. The Candida~e's da~e of inel:q:bility was

August 20, 1992.
.. ...

'-'''-.-': .:. ~":·z

-8-

~emccrat:c nominee Bill clinton, and lndepe~dent candidate Ross

?e:ot. The invoices for these p~lls were dated between June 26,

1~32 and August 31, 1992. For example, one California statewide

poll asked voters to rate the probability that they would vote

for Bush, Clinton or Perot in the general election. Attachment

l~. Slmllarly, a New Jersey poll conducted in late July and

~~:-August asked individuals about the Candldate's job

performance, whether ftthiogs in the country are generally going

i~ the right direction," whom they would vo~efor in the general

e:e:~io~, and ~~ether E~s~ O~ Cl:~~c~ would do a be~te: job

handling certain issues. Id.

In addition, the Primary Commi~tee paid for direct mail

;:e~es tha~ featured pictures 9f President Bush and Bill Clinton ... . ... .. .. . ., .... .. . . . -=-- ~~------an(r' coiipi-rl-sori's-·o'f·--the-ir'-po'sftlon-s'--and' -rec-o-r-a--on'-vail-ous -issues :--'--.:~;;'-'-

'.

For instance, a letter from Marilyn Ouayle dated August 4, 1992

discussed kicking off the re-election campaign and included

::~?a:gn materials, a crcchure c:=~aring the t~o candidates and

'. a volunteer Hotline number active through Labor Oay. Attachment

'" :~e ?rimary Co~m:~:ee also ~a:d fc: ad~ert:semen~s related

to the general election campaign. Most notably, the Primary

Committee paid for a full page advertisemen<: in five newspapers,

including USA Today, appealing for the votes of Perot supporters

a::e: Ross Perot withdrew from the race. Attachment 14.

The Primary Committee re-opened 33 state offices In 32

states after the date of the state primary or caucus, in July

a~~ August, 1992. The Primary Committee paid the rent fer these

offices through August 20, 1992. For example, the Connecticut
...;;..: .:..... - .. . ." ..

-9-

prl~ary ~as on March 24, 1992, and the state office was closed

on March 28, 1992, bu~ re-opened from July 20,1992 until

November 19, 1992. Moreover, the Primary Committee purchased

and leased computer equipment and software; again, the Primary

Committee paid for equipment and software purchased before

August 20, 1992, and payments for leases were divided between

~he prima:y Com~ittee and the GEe based on that date. In

addition, the Primary Committee purchased and shipped campaign

materials such as flags, bumper stickers, hats, pins, signs,

br=:h~~es ar.d sh::~s :~ s~a~e offices. The ?:lmary Committee

.' .. "~::?

.:.:",

........

"--'

pa:d the costs incurred for purchasing and shipping these

materials up to and including Augusc 20, 1992.

In the Final Audi t Reports on' the. primary C.o~i tt:ee. and .the . . -.. . .. .. -- ,.,=----.-. -GEc-'-ancf'Colapli-ance . rund~ '-'the- 'Comm{ss-i'on -'allocated-the' -ap·pare-ti-t"------- .-

general election expenses approximately 50/50% between the

Primary Committee and the GEC. Consequently, the 50% allocated

to the Primary Committee are qualified ?ri~a:y campaign expe~ses

not subject to repayment. The Commission conc:uded that the

?~:ma:y Ccmmi~:ee shou:d see~ rei~~~rsemer.t ::om the GE: fo: the

... '"' .

remaining $746,602 in expenditures related to the general

election. Until the GEe reimburses these expenditures, they are

non-qualified campaign expenses subject to repayment. Thus, the

Coemission mace an initial repayment deter~ination that the

primary Committee must repay 5195,224, based on a pro rata

portion of the non-qualified campaign expenses.

Moreover, in the Final Audit Report on the GEe and

Compliance Fund, the Commission applied the amounts of general
·:.. : .........: ... -

-10-

elec~ion expenditures paid by the primary Comm~ttee :0 the vEe's

overall expenditure limitation. The Commission concluded that

the GEC exceeded its overall expenditure limitation by $553,258.

Since the Compliance Fund may reimburse the GEC for the

excessive expenditures, the Commission did not make an initial

repayment determination for this amount. Nevertheless, any

change in the amount of non-qualified campaign expenses related

to the general election paid by the Primary Committee will

result in an equivalent change to the GEC's expenditures subject

t~ the o~erall limita~:~~. Further, any chang~ to t~e a~our.t of

general election expendicures subject to the GEC's overall

expenditure limitation would change. the amount of the necessary

Complia~ce Fund rei~bursement. . .. ...- ..

- ---~_._----- ·--~---:--S-llJiJiOOlY··- oP-coJiKrrru"-USanMSES-- '.0;- B. C-Vft

,... . '-

.--

...

, _r")

In their written responses to the Final Audit Reports and

oral presentation, the Committees argue that the expenditures at

:ssue ~ere legitimate qualifiec campaign expenses of ~~e primary

campai9n.lO/ Attachments 1, 8, 10 and 11. The Committees contend

that the Commission shou:d use a "bright line~ approach based on

the Candidate's date of ineligibility, and deem all expenditures

incurred and used before the date of nomination to be qualified

campaign expenses of the Primary Committee. Moreover, they

offer legal and prac~ical reasons why the Commission's division

of the expenditures between prlmary and general election

~o.' ::: its written respo:1se, -:::e GEe inc:·rp~rates t::e

pr:mary Committee's a~guments ~y reference. Thus, citatior.s

to the primary Committee's ~rl:~en response, represent the argu~en~s cf both the P~~~a~y :~c~ittee ar.d t~e GEC.
.-::~::.:'::':_ 0 __ " ." ..

-11-

campaigns at the Final Au=~t Repor~ stage is ina?p:opriate.

Flnally, the Committees contend that even 1£ the Commiss::~ does

not adopt a "bright line" standard, the expenditures were

qualified campaign expenses of the Primary Committee because

they were made in connection with the Candidate's campaig~ for

the Republican nomination.

Citlng the la~guage of the Matching Payment Act and the

commission's regulations, the Committees argue that the

expenditures at issue meet the legal requirements of the term

"qualified ca~pai9n expenses~ as de::nea~ed at ~6 U.S.C.

S 9032(9) and 11 C.F.R. S 9032.9 because the expenditures were

made within the time period of the candidate's eligibility and

"had a direct ~qd sUb~~antia! connectioQ to. th~ c~mpaiqn for toe

--------_.:. -----~--- _.. .. .. - . _. -_. -- - --- - -- -----------...... -----------_.- -- -- ~:. nomination. w Attachaent 7 at 3, Attachaent 10 at 8-11. During

~. the oral presentation, Counsel to the Committees defined this

-bright-line test" as: ~expenses incurred prior to the ,-

'-'

..":

'."-

c=nvention a~e in connec~:on witt the p=imary, unless they a:e

for goods and services to be used during the general election

:e:iod." A:=a=h~ent:O a: 60. :~ de:erm:ning ~hether a~

expenditure is "in connection wit~&" the primary, th~ Committees

contend that "the standard is use, not benefit." Id. at 9-10.

The Committees base this "much less stringent test" on their

i~terpretation of the language of the Presldential Election

Campaign Fund Act and Commission regulations governing general
".r'\

.

,1

-12-

e:ection expenditures.!ll ld. Moreover, the Committees argue

~~3t the expenditures are not qualified campaign expenses of the

general election because they were not incurred within the

general election expenditure report period and were not for

services, property or facilities to be used during the

ex?enditure report perlod. See 11 C.F.R. SS 9002.11(a)(2)i

;~03.~; Attachment 10 a~ 9-10.

As support for their position, the Committees argue that

the Commission applied a "bright line" test in its decision in

Report on Reagan Bush '64 Primary lapproved July 7, 1986). In

ad'dition, the Committees cite several advisory opinions,

Advisory Opinion ("AO") 1975-9 and AO 1978-99, to support their _ \ .. -It .. " .. . .... _!__ "_.·o~_" cont~n-t-fori---tnil--an -ex'p«fnalturtfo'lfeed- ncit--«!'it"cltfsively-benefl-t-t:ne-'-- -_.:_--.---_...- -"

campaign for nomination to be a qualified campaign expense.

Further, the Committees argue that the Commission applied a

~"' ..... ~0'SO' split that had ne~er been a~~:~e~ be~o:e. The Co==~::ees

''', believe that any new standard should only be applied

,"

.~

.....

;:~spec~ively, a~d noted ~hat the C~~~iSSlon was revie~:~g :~lS

issue in a rulemaking. See Notice of proposed Rulemaking

.. It ~? RM .,) 59 Fed. 51 006 (0c t 0 be r 4, 199 ) . Du r in9 the 0 r a 1

11; Specifically, the Committees note that 26 u.s.c.

S-9002Cll) defines a general election qualified campaign

expense as an expense "incurred within the expenditure report ~~riod" or "incurred before the beginning of such perlod tc

the extent such expense is for property, services or

!a:ilities used during such per:~~.1t See 11 ~.F.R.

S 9002.11(a)("to be used during"}; 11 C.F.R. S 9003.4 ("to be

used in connection with his or her general e~e=tion

:a::-.?al;n ll'.
".-:..- =.;:~.

-13-

presentatior., :~~nse: ~o :~e Co~mittees referred to proposals tc

include certain "bright line" standards in the rulemaking which

was ongoing at that time. See e.g., Attachment 10 at 17-19.

In support of their argument that the expenditures were

qualified campaign expenses of the primary campaign, the

Commlttees submitted additional materials to demonstrate that

the expenditures were part of an overall effort to shore up

support for the Candidate's nomination at the Republican

National Convention ("the Convention"). The Committees provided

=e::ara~io~s ::~~ Ma=y ~ata:in and Davld Carney, politlcal

direc~o(s of the primary campaign, describing campaign

developments and strategy prior to ~he Convention during the

summer of 1992.lll A:.ta:hments 3.at 60-6;5 anQ 7.. at. 20-23 .._.: _ ,~,. ~=-~... _-~.: __ ._.__ .. _--~ ..__._._- .__ .---- ._--_._.__.----- ._.. .. .. _... _.. _- .. _....__ .._-_._------------ Accord~9 to these individuals, certain expenditures were part

of a pre-Convention strategy intended to combat dissension

within the party, improve the Candidate's standing in the polls

'- to convince Co;.v~ntion delegates of t~e viabil::y 0: Presice~:

Bush's candidacy, and build excitement for the Convention.

The Xa:a::~ declaration notes that prlcr ~o the Co~ven~lo~,

President Bush was substantially behind the Democratic nominee

in the polls and faced opposition from within his own party,

including calls for him to change his Vice Presidential running

mate, or to step down himself, and disputes over platform issues

such as abortion. Attachment 3 at 60-65. The Matalin

12.. The Ccrn:r::'~':.ees re:er t= tr.e declaration by Ms. Xa:a 11.

attached to the response to the Interim Audit Report, wh ch

is incorporated by reference i~ the response to ~he Fina

Audit Report. See A':.~a:hment 3 at 60-65.
...... ~-

-14-

declara~io~ also descr:bes how pc::s and other ma:eria:s were

used to sO:ldify Convention delegate support :or the Candidate

by demonstrating his appeal to the overall electorate. Id.

Similarly, oavid Carney states that campaign activity during the

period between the primaries and the Convention was intended to

build suppo:t for the Candidate a~ the Conventlon, and avoid

conflicts ove: the party platfor~. Attachmer.~ 7 at 20-23. The

attachments to the Committees' responses also include a number

of news articles which describe the political climate of this

._ ..... ,..~:~

Committees contend that because delegates were not legally bound

to cast their votes for him, President Bush ultimately had to

convi"nce Cor.'."ention dele9at~st~at if nominated., h~ \lIoul.d be . .. ... .. .. . . . .. .. . -.. .. ... .. . ._- ------succe·ssr\if' lii'-the -ge~erar-'e'lec-tio'n ,. --At"ta~·h.ent '3-' af-6()~6-5'-,;----" .---...-...----- - - ~-: ..

Attachment 7 at 13, 20-23.

The Co~ittees assert that particular expenditures at issue

r·. -Here "i:':~eg=a~ parts:~ the campaig:1's effor~s to forge an

" acceptable resolution of the plat:~:m issues and to bolster

"...

.-

'_'I

support =! :~e Bush-Q~ayle :lcket at t~e Con~e~tio~."

Attachment 7 at 13-14; Attachment :0 at 20-23, 47-50. For

example, expenditures for polls helped the campaign with the

campaign platform and the question of whether to keep Vice

presiden~ O~ayle on the ticket. . . !o. Moreover, the Committees

argue that the polls at issue here, -hich aske= voters whether

they would vote for President Bush, Bill Clinton, or Ross Perot

in the Novemner electlon, were simllar to pol:s cc~ducted
-.: ..----..

-15-

~h~~ughout :~~ :a~paig~, ~ncluding pc~ls as ea:ly as December,

199~ .13:'

The Committees also assert that the polls and focus groups

did not provide a significant benefit to the general election

campaign because numerous independent organizations have

tracking polis of presidential campaigns, and "the value of

polling inf~:oatlon decl:~es precipitously." Attachment 10 at

20. Since the rapid obsolescence of polls limited their

usefulness to 10-14 days, the Committees contend, the polls at

:ss~e, conc~::e: :~ J~~e 3~d July, 1992, wo~:d have had no

...... '-.

signlflcan~ value to the campaign after August 20, 1992.l!/

The Committees contend that expenditures for state offices

were intended to coordinate planning .fpr .the Convention, monitor .. . .. ·----·--~--·---(iete9ate6;- -and-- ·coun-te-i---i"nsurqenc"fe·s on platfor. issu~-s. -15/--------_.---- -.- ......

-:--.

.....

.........

Attachment 7 at 14; Attachment 10 at 24-26, 72-75. The

Committees submitted declarations from Chris Dudley, Executive

Directcr for the state c~ Connecticut~ and Je:~rey T. ta:son,

the Regional Political Advisor for the Weste:n Region in support

of their arg~~er.:s. ~~. :a:scn ~as respo~s:=:e for sta~e

:3/ The Com~i~tees supplled copies of polls taken in late ~91 and January, 1992 which they contend contain similar

questions to the polls at issue.

14/ In addition, 'the Committees cite 11 C.F.R. S 106.4(9),

wnich reduces the value c! poll results by 5:~ IS days after

receipt, as evidence tha: the Commission acknowledges the

rapid obsolescence of pol:s. The Commi~tees argue that a

SO/50% split does not take into account the obsolescence of

the pol~s.

15/ The Com~ittees note ~hat salaries of sta:f ~ho ~or~ed in

tne state o:fices ate nc~ at issue. Atta~h~e~~ 11 at ~.
:~: :~ . _.. .;".

-16-

off~ces in the 12 states in the ~estern region. At~achment 11

at 37, and 40-41. The Dudley declaration states that activity

in the Connecticut state office was related to the state

convention and preparations for the national Convention such as

monitoring delegates and platform issues. Attachment 11 at 31.

Similarly, the Larson declaration states that activity in state

cffices in the Western Region was "an in:egral part of the

preparation and build-up" for the Convention, and included

selecting individual delegates; resolving challenges; preparing

f== a~~ ?articipa~ing i~ state party ccnventic~s held in June

and July, 1992; organizing and monitoring the state delegation;

and logistical and administrative planning for the Convention.~/

Attachment 11 at 40-41.

there is no evidence that the equipment and campaign materials

were not used by the primary campaign prior to the Candidate's

'-.. da~e c: :':le11s:::il::y.l- I ;..~tachrnent lC at €. The Committees

assert that AO 1978-99 provides a basis to allocate all

~a~e::a:s :ece~ve~ by a state of:ice pr::: t~ ~~e date of

ineligici:ity as primary expenditures. finally, the Committees

16' The Committees did not submit declarations or other

evidence concerning the :emalning 22 0: :he 33 s:ate offices

at issue.

17/ Moreover, the Committees contend that the Commission

treated ce=~ain equipment purchases by t~e C:in~on for

President 1992 Primary campaign as primary expenditures sold

:: ~~e gene:al e~ectic~ :a=~aign at 60' :: t~e p~rchase

prlce, ~hich, the Commlt~ees argue, differs from the

Commisslon's treatment of :he primary Ccc~ittee's equipment

expe:--.d=. tures.
'.' '.:.... ...... '.

--.

-17-

a:;~e that :~e direct mail and advertisements in disp~:e were

targeted a~ Republicans and intended to solidify suppc:t for the

Candidate at the Convention. Attachment 10 at 23.

c. ANALYSIS

Expend:~ures made in connection with a primary candidate's

campalgn fcr nomination prior to the candidate's date of

ineligibility are qualif:ed campaign expenses provide= t~at the

expenditures do not constitute a violation of the law. 11

C.F.R. S 9032.9(a). Expenses incurr~d after a candidate's date

of :~eligi=::~:l are nc~-qua~ifie= except to the exten~

permitted unde: 11 C.F.R. S 9034.4\c)(3) for winding-down costs.

11 C.F.R. S 9034.4(b)(3). In addit~on, the Commission's

regulations permit general election c~mp~ign~ to incur expenses

.. - ..: .• ~.~

accounting systems, and organizational planning to be used

,.

......

during the expenditure report period prior to the beginning of

the expenc::~:e report period. ~l C.F.R. S 9003.~(a~{1}.~1

1. -Bright Line- Test

The C:=.=:.:~~es' re::ance 0:'1 their proposed "b:-ig:-.: line"

, r-'

" ,

""-

-.....

test is mis~:aced. Contrary to the Committees' assertions,

prior to the Commission's recent revision of the public

financing regulations for the 1996 presidential election cycle,

~/ This p:o"lision 'Was "designed to permit a candidate to

setup a basi: campaign organiza:ion before the expendlture

report period begins.~ Explanation and Justification, 45

fee. ':::3-5 :June :: ... :980~. ;..while the :egulat.lc~.

enumerates examples 0: permlsslble expenditures incurred

prior to the expendi:ure report period such as polling, these

examples are ~~t all-inclusive.
.. :":;'t::t~

• 't~..

-18-

:~e :~~=~ssion did not apply a "bright line test" based solely

C~ the date of ineligibility to determine if an expenditure is a

primary qualified campaign expense.19/ Rather, the Commission

looked at both the timing and the purpose of expenditures to

determine whether they were qualified campaign expenditures.

Tr.e Committees' "bright line" standard fails to satisfy

c~~h of the two key elements for assessing qualified campaign

expenses. See 26 u.s.c. S 9032(9); 11 C.F.R. S 9032.9(a). In

additio~ to being incurred prior to the candidate's date of

:~e:igicility, to be qual:fied, an expe~=::~:e must a~so be made

-:.:: :on".e:t.ion w~th" a primary candidate's campaign for the

nomination. 11 C.F.R. S 9032.9{a)., The Committees'

:nterpretation of the "in connection with" requirement relies on . .. . ..... ... -:. ---=---- --- ·-vtieth-er-a~--expenditure-is·--.u-sed.--prto-ro-t-o--tbe-c-andi-dat-e's-dat-.------:..-· __0·_""-

., :-

.oJ"'"•

,.,.

,- .

19/ The Commission recently adopted new "bright line" rules

=::ited :~ "cer~ain specific types of expenditures that may be~e:it both the primary and the general election. These

include expenditures for polling; state or national offices;

campaign materials; media production costs; campaign

communications; and campaign-related travel costs." Public ::~a~:i;.; 0: Presidential Primary and Genera~ Election

Candidates: Final Rule, Explanation and Justification 60 red.

Rea. 31854 at 31867 (June 16, 1995). The new rules are n~

un!:orm:y based on the date an expenditure is incurred; while

polling 1S allocated based on the date results are received,

=edia production costs for media aired both before and after ~~e candldate's nomination would be split 50-50% between the ;e~e=al and primary committees. Id. These revisions are new

rules for the 1996 election cycle, not a codification of ;:i~~ CC~=:SSlC~ policy in this area. Indeed, the adop::c~

:f :~e new rules nece$sitated the revision of 11 C.F.R.

S 9~C3.4:ai to reflect the new rules for polling expenses . • ...; at :.~.
o~-:;O-oo- ..... -10 :--_ • __ .- .. 0

'---

"....: '.-;" .."-=~ "- ~";~~

-19-

constitute sufficient ~use" fo: an expense to be qualified ~nder

this standard. Contrary to the Committees' contention, the mere

receipt of equipment or publication of an advertisement is

insufficient to establish that an expenditure was used "in

connection wlth" the primary campaign. Rather, an expenditure

must be intended to have actual substantive usefulness to the

'primary campaign to be a qualified campaign expenditure made -in

connection with" the primary campaign.

~~~ ~==:ect s:andar= :== ce:ermining whether an expend~t~=e

:s a prima:y qualified campaign expense relles on both the

timing of the expenditure and the nature of the expenditure .

See AO 1984-15. .TO be "in con~ection ~ith" the primary

_oo- . ._

--~:~----:-··--campaI9n,··a-- "quiil-fled--"ciiipalgo' exp"encs"itur-e '~~'st be priaarily

related to the primary campaign. A portion of an expenditure

_.,

.-

\,

I.D

20.. The C~n~~ttees base ~h~s a:~~~ent on :~e defini:lcn of a q~=::f:ec :a~~aign expense fo: tfe general election at 26

U.S.C. § 9002(1l}, which provides, in part, that the ~xpenditure may be lnc~rred ~efore the beginning of the

expenditure report period if it is "for property, services cr

facilities used during such period." See 11 C.F.R.

S 9002.11; S 9003.4. This definition aces not apply to the

issue of whether the expenditures are qualified campaign

e,xpenditures of the primary campaign. Nevertheless, the

language of the cited statute and regulations also requires

that a general election qualified campaign expense have so:e

substantive relationship to the candidate's general electicr.

campaign. The Presidential Election Campaign Fund Act, at 26

U.S.c. S 9002(11), states that a qualified =ampaign expe~se

1S an expense incurred "by the candidate of a political pa::y

for the of:lce of President ~o further his election to such

office or to :urther the election" of his Vice Presidential

:-unnir.g ma:e, "or both." See 11 C.F.R. S S:02.:1. The

phrase "to further his electIon" is equivalent to the "in

connection with" language in the ~atchin9 Payment Act. 26

u.s.c. S 9032(9).
....:::~

-20-

cc~:d be qua:::ie= and a po:::~n r.on-q~alified if the purpose of

an expenditure is mixed. In the i~stan~ case, most of the

expenditures appa:ently had a mixed purpose. Thus, in the Final

Audit Reports, the Commission divided the expenses SO/50\

between the primary and general campaigns to reflect that mixed

purpose.

The decision in the Reagan Bush '84 audit, which was based

on the particular facts in that case, also does not support the

co~~it~ees' position. See Final Audit Report on Reagan Bush '84

primary !approved July 7, 198el. :~ :~e Rea;a~ Bush audit, the

CommiSSlon concluded that certain specific expenditures for

polling, consulting, and voter registration incurred prior to

the candidate's date of ineligibility t~at appeared to benefit . . . . ... . .'... ...:.. .'. . -.-,. -- ----L!..!-the--geiieial--il-ect-fon--caJipaign-·-coulc!" be---ecirislde-red quaifti"ed _.--- - - -----.----- .:~:.

.

:j.., campaign expenses of the Reagan Bush Primary Committee .

Contrary to the Committees' assertion, the Commission did not

adop: a "brig~t l:~e" test in that case; rath~~, this precedent

'- supports examining all of the particular facts surround~n9 an

ex~ene::~~e :~ determine whe:~e: ~: ~as -'in ::nnection ~itht. the

primary election.

Neither one of the advisory opinions cited by the

Committees, AO 1975-9 and AO 1978-99, supports the Committees'

p:opose~ "bright line" standard. These opinions do not involve

publicly financed campaigns or the issue of qualified campaign

expenses. For example, in AO 1978-99, the Commission permitted

a committee to report a debt incurred prior to the date of the

primary election, for materlals to be used in both the primary
" ". _··:·····;-~1

,-

-21-

and gene~a: electio~s, as a ~:l~ary ele:::cn debt. This opinion

~oes not acd:ess whether such a debt would be a qualified

primary campaign expense in a publicly financed campaign, but

only whether an expenditure may be considered part of a

committee's primary debt for Title 2 reporting purposes.

Indeed, the Commission has more recently confirmed that

determining whether an expenditu:e :s re~ated to the primary or

general election is based on both the timing and the purpose of

the expend:ture. See AO 1984-15 (Commission considered whether

..... ' -,

the purp~5e :: expe~=:~~:es was to ~~fluence the general

election campaign in order to determine 1£ the expenditures were

coordinated party expenditures.) AO 1984-15, which involves a

publicly financed presidential campaign and expenditur~ . . - ----- ..-.. .._-. -- - ---- -_._- --_..- -"'--ffxiiIf-atlons, concluded that in situations involving coordinated

party expenditures, not only the timing, but also the purpose of

expenditures should be considered when determining to which

,

.....'-

c

." d.

C"

election an expenditu:e should be a::rit~:ed. ~hil~ "~irning is

relevant," coordinated party expenditures are not restricted to

:he time ~e:iod bet~ee~ the no~ina::on a~= the gen~~al election,

and it wou~d be inconsistent with the purpose of the limitatio~

on coordinated expenditures to "permit expenditures made prior

to nomination but with the purpose and effect of influencing the

cutcome cf :~e presidentlal general election to escape this

limitation." See AO 1984-15.

Moreover, the "bright line" standard proposed by the

Commlttees :s inconsistent with section 9~:3.4(a)(1) of the

regulations applicable to the 1992 election cycle, which permits
·.::'\~~.. _.. • .... : .I •••• ~- ...

-22-

ge~e~a: elect:=~ =a~~a:g~s to in~~~ certain expenses prior to

the d3te of the nomination. This :egulation would not be

necessary if all expenditures made prior to the date of

ineligibility were qualified campaign expenses of the primary

committee, even if the expenditures related to the general

elect:on.

2. Analysis of Particular Expenditures

The committees' alternative argument is that even absent a

"bright line" rule, the expenditu:es at issue were made "in

conr.e=~ion with" ~~e prima~y ele::ic~. In s~P?ort of their

ar9u=e~t ~ha: In:ernec:~e party conf~lc~s seriously challenged

president Bush's nomination and that the expenditures at issue

were intend,ed ,to dispel dissension, build exci tement for the _._---- ._ _._---_. .!...-- =-------~._--_. ""'.. ...•. .'. ... - . Convention and··ctinvi-lice---de l·ega·tes--of-- the-- viability-·of·-·t·he --_.._- .:__ . "-'- ----

~, Candidate in order to secure his nomination, the Committees

provided declarations from four campaign officials. During the

Com=:ssion's considerat~c~ of the fi~al A~=it Reports and

initial repayment determinations, the Commission acknowledged

elec:io~ component, and adopted a 50/50\ division of the

expe~ditures at issue to reflect the dual purpose of the
., -.0· 0_."

-23-

expend::·"::'~S.~" In :'eaching l~S fina: 1etermina~:ons, t~e

Commiss:cn reviewed the entlre record fer each· category of

expenditures separately to determine whi:h, if any, expenditures

were qualified primary campaign expenses. Based upon its

review, the Commission has determined that certain expenditures

for polling and focus groups were quallfled campaign

expendit'Jres of the primary Comm:..ttee. ~~reover, s:.nce t~.e

Commission was unable to reach an agreement of four of its

members ,concerning the leased space, equipment and materials

related :0 ~he state offices, :hose expe~ditures ha~e bee~

removed from the to:al 0: non-qualified campaign expenditures.

Accordingly, the Commission has revised the amount of

, ':<~

"9;'<

non-qualified campaign ex~en~i~ures.

. ..-- _._. ----- . -'--- -'a-~ ... -- 'pofriiig'-'- ....

The Committees have provided evidence from campaign

operatives that President Bush trailed the Democratic nominee in

.... -. .....

.~

... : ,

"~".

21/ !~e Commission's regulations use s~milar so:~::..ons for

other allocation issues where expenditures have a dual pu~pose. For exampie, the regulations ~ermit priwary campaigns to treat 50\ of expenditures as exempt fundraising expenditures not subject to the state expenditure limitations

in order to recognize the fundraisin9 component in all

expenditures. 11 C.F.R. S 110.8(c)(2)~ see also AO 1988-6

(Gore ?:esidential Committee could alloca~e ~of television

advertisement containing a solicitation as exempt fundraising

expendi:ure). Moreover, the Commission's recent revision of

the puc::~ financing regulations discusse~ here:n applies a

50/50\ allocation for media production costs. Public

Financing of Presidential Primary and General Elec~ion

Candidates: Final Rule, Explanation and Justificatlon 60 Fed.

Re 9. 318 54 (June 16, 1995 ) . F1 n a 11y, t ::e Commissi on use d--r:ne

same approach in the Clinton for President audit. See Final

Audit Report on Cl:n~on :~r President ::~~:~tee la:=ro~ed

December 27, 1994); Final Audit Report cn Clinton/Gore '92

Committee and Clinton/Gore '92 General Election Cc~pliance

Fund (approved Oececber 2~, 1994).
~~.r.'. .,..... .~-~

-24-

tree ~~lls ~~ior ~~ t~e ~e~~blican conventio~, and used polling

to convince delegates c: :~e viability of his candidacy. See

Attachment 3 at 60-65; Attachment at 20-23. Poll results

could have been used, as the Committees argue, to get voter

input on crucial issues such as the party platform and the

question of whether to keep Vice President Quayle on the ticket.

:~ he~ declaration, Mary Mata~in stated that the primary

Committee sought to persuade "Republican voters and delegates to

the :onvention that the Bush-Quayle ticket represented the

correct policies and values and that the Bus~-Quayle ticket was

li~~:1 to win ~he elec~icn in November." At~achment 3 at 60.

y~

Thus, "our basic purpose in conducting these polls was to enable

. the Primary Committee to show Republican voters that George ~ush . ;-:-: .. .;.-,. . . . ...:. -.. -., .-. : ...... . . .-. .. ..-. .'. .. . ---~:-._--- ---could-beat -a---like-ly -De.oc~ati·G·:nOIll-l-0ee- in· ~oveJaher-.~--.Id...-at--61.---- .__

Ms. Matalin further stated:

Polls, surveys and focus groups were conducted to determine

why President Bush had fallen so far behind Bill Clinton in

the standings and hc~ the primary Committee could bolster ~~s support in the polls. A~ :hat point in time, our

principal concern was to convince the Convention deleQates

that President Bush and Vice President Quayle would be

s:ron; candi~ates :~ ~he Fa~:.

Id. at 63 (emphasis in original).

,--,

'- . Similarly, cavid Carney's declaration sta~es that "the

campaign faced one of the most difficult national conventions in

an "open re~olt" ~~ :e:~ain

Re?ublicans in July and August, 1992. Attach~ent 7 at 20. The

ca~paign tried to:

diffuse these intra-party dlsputes and to ensure the proper a~mosphere and results at the Conventio~.... the most

critical question for the delegates was whether the candida~es could win in Novettbe:-. Th\;s, :a:'sing the
-25-

sus~-Quayle ti:~e~'s s~a~ding i~ the ~~_~s before the

Convention was a primary goal and one that was dlrectly

connected to the campaign for the no~:nation. The polls,

surveys, and focus groups also proviced guidance on

platform issues.... [but] provided little, if any

benefit to the general election campai9n .... polling information more than about two weeks old would have

been essentially worthless to the campaign.

A~tachment 7 at 20-21.

~he polls at issue contain some similar questions to polls

the ?~imary Committee conducted early in t~e primary campaign,

such as questions asking voters to choose between potential

party nominees. While there are some significant differences

bet~een the polls at issue and earlie~ pc::s, s~ch as ~te focus

, '-.. of the polls and specific questions, the similarity of the

questions about voter preferences supports the Committees'

_..='-~ ..._.._$:o.o.ten t..~.Qlt~.~b~.~ .. _t.h~ _.'polJ..iJl.9 ..e~p~~~~_s .. ~~.r!L'pr ~m~.ry. g~~1.JJ1_e_q_:. . ._...._..

campaign expenses.

Moreover, the Committees contend that the polling

expenditures provided only limited, insig~ificant benefits to

-..... :he ;eneral elec~lon campaign because nume:ous independent

o~ga~izations maintain tracking polls cf ?:esidential ca~?aigns

......

a~d :~e ~a:ue o~ polling results "declines ~recipitously" after

:ess :han :wo ~ee~s. See A~tachment 10 a: ZC, ~8. The

Comm~ttees correctly note that the Commission has explicitly

recognized the decrease in value of polling results after

fifteen days in the regulations at 11 C.F.R. S 106.4(9). Since

~~~ =~;:d ~bsvles:e~:e o~ pol~ing res~:ts ::~:ts their

usefu~ness after 10-15 days, the pol~s conducted in mid-summer

~f :992 ~ould ha~e had lit:le value a~ter :r.e Candidate'S date
-26-

c: ineligibi~ity C~ August 20, 19S:. Therefore, based on t~e

fn:egoing, the Commission has determined that the polling and

focus group expenditures totaling $614,108.33 were made· in

connection with the primary campaign, and thus, were qualified

campaign expenses. As a result, these expenditures are not

subject to repayment.

b. State Offices

The Committees have also. submitted evidence to support

their contentions that state offices were used to plan for the

co~vention, disse~:nate in:o~~a~:c~ t~ delegates, and monitor

de:egates and platform issues. See Attachment 3 at 60-65;

Attachment 7 at 14, 20-23; Attachment 10 at 24-26, 72-75;

_. Attachment 11 at 37, 40-41. Specifically, the Committees .... ... -. . . .. -. ... . ..:.... . .... _:. _:_~-'~_. -···submitted- de~-f~rati-on'lr -frOc)IC tvo-·ca.pa-rgn -o'fflcl-ali-who· worke-d-'---"---_.- '"

with 13 state offices; which address activities in 11 of the 33

offices at issue.

.--..

'-0....

...........

'.~

The Dudley decla=ation describes ho* ac:ivity in the

Connecticut state office was related to the state convention and

p~e;ara:ions :=~ the ~a:ic~a: C~nve~::c~: ~~y firs~, and ~cs:

important, task was to prepare for the sta~e convention ...

from the time of my arrival in Connecticut in mid-July and up to

and including the National Convention in Houston, our state

~:::ce was ex~ens:';e~y invc~ved 1n monitor1ng the delegate

ratification process and maintaining contact with the state

delegation." Attachment 11 at 37. Moreover, the declaration

describes how state office staff "gathered Information on the

delegates and issues" related to the party platform, such as the
.... _~

-27-

a~orticn ~ss~e, anc ~r=vided in:ormatlcr. to the national

~.eadquarters.£.£/ Id.

Similarly, the Larson declaration describes activity in 12

state offices in the Western Region, of which 10 are relevant to

t~e non-qualified expenditure repayment determination, and

concludes ~hat "the campaign could not have prepared for the

NatlCnal Ccnven:ion without the acti~e and extensive support

provided by the state campaign office personnel." Attachment 11

a~ 41. Mr. Larson stated: "the state offices were the point of

~:ntact ce:~ee~ the na~ional campaign and the state delegations

a~d engaged in a wide range of activities." Id. State office

staff "helped to prepare for the state conventions and attended

the conven~ions as active participan~s" and were involved in ............._._ ..... .----_ .. -- •••__ 'O __• •• • • __

... ····-------se·lec-fing·-defe·qa-tes··yho· would -support President Bush (jenerally I

but who also would support his views on various platform

issues." Id. Thus, they "were involved in resolving challenges

'-.' tothe s tate del ega t i 0 r.s . "l~/ ! d . :- eove r, the st a -: e 0 f f ice 5

.~... "were exte~sively involved in the logistical and administrative

~:a:1nir:g" :-=>: t~e Con·~·entio~. ;"'~tachment II at ':1. In addition

:n

.....

..' .

M:-. L·arscr: states that state office staff:

met wlth delegates and helped to organize the delegation, ... {and) were the eyes and ears of the national

22' Fer exa::tple, "Co~~e=~icut ·..·as a key state in the

struggle to avoid a floor fight" on the abortion issue, and

the state office monitored the state delegation and provided i~:ormation to national headquarters through the Convention.

r:..

2: ~:. :a:son discussed several instances where supporters of other p:esidential candidates challenged delegate

selections, and attached documentation of these cha:lenges to

his declaration. Attachment 11 at ~:-~7.
. - .... -::-. ~"" ..,..;;;

.~y

"\pO;:

-28-

campaign. State ca~paign pe:s~~~e1 ~ould meet with the

state delegates and help to monitor their views on issues

of importance to the campaign. The campaign ~a6

particularly concerned that dissension among the delegates

would lead to a disastrous floor fight at the Convention on

the Party Platform. Accordingly, the campaign spent large

amounts of time and effort soliciting the vie~s of the

delegates and to persuade them to support the positions

espoused by the campaign.

la.

In a memorandum dated July 28, 1995 accompanying a draft

Statement of Reasons, the Commission's Office of General

Counsel recommended that the Commission determine that the

ex~enditures for leased c::ice space, equi?=e~~ and materials

associated ~l~h the 11 state offices dis~ussed in the Larson and

Dudley declarations totaling $10,734.64 are qualified primary

campaign expenses which are not.subject to repayment. However, 'R~VtS(D -:-. . 0·.. .-. . ." • .~.... .... .... ... ...... --- =.-_._. --_. -the -o-l-fici--of-Gine-ral-Counse"-l--' did'-ilot--r'eco_end -that-·the-· - ._----. - ..---- "-

Commission change the 50/50\ allocation of expenditures related

to the remaining 22 state offices. On August 3, 1995, the

\._,

.........

C:~missicn considered the dra~t S~ate~ent 0: Reasor.s and the

Office of General Counsel's recommendations. A motion to

offices to be qualified campaign expenditures of the primary

campaign failed by a three to three vote. SUbsequently, a

motion to approve the Office of General Counsel's

:e:ommmendations also failed by a three to three vote. An

·n

.. 1" - . :::1S10e: v ... 33 s~ate

affirmative vote of four members is required for the Commission

to take any action under the Presidential primary Matching

Payment Account Act or the Presidential Election Campaign Fund

Act. 2 U.S.C. S 437c\c). Therefore, the amounts of

expenditures for leased space, equipment and ma~erial6 related

~~ all of the state offices a~ lssue tc:aling $10i,031 have been
( -:.-: ..-.~.:.. '.- ...

-29-

re~~~ed fr~~ ~he tota~ a~~~~: ~: ~~~-qua:~::ed campaign

ex~enses.:';/ J

.• ' .... ,,<\""'\C

...._~.

c. Other Expenses

The Commission has also determined that the Committees have

net provided sufficient evidence to demonstrate that the

remaining expenditures were made in connection with the primary

ca~pAign. !ndeed, the direct ~a:: and advertising expenditures

have no apparent connection to the nomination, but appear

instead to be related to the general election.2S1 For example,

t~e ?r:mary Committee paid fa: a full page advertise~ent 1n five

ne~spapers on July 29, 1992 after independent candidate Ross

Perot announced he would not run far President. Attachment 14.

~he advertisement, written as a letter from President Bush to ------_.- ._._----- ----- -._---.._.- --_.- .-- -------_ -_._ -- ..-. ----_.. _. .. - _.._-_ --- __-- .~ Perot supporters, appealed for their votes in the general

election: "in these days folloWing [Perot's] withdrawal, I'm

asking for your vote. Give me the chance to earn it. Over the

........

::cax: fe ....· =.:nths, s-;.udy the t,,:o :-ema~ning candidates." !d .

Although this advertisement appeared before the Convention, the

2~1 This figure represents the total amount of expenditures for

:eased space, equipment and materials with respect to the state ~~~ :~fi:es. :n the Final Audit ReFo:t, SC~ :! this a:cunt ~as

consldered to be qualified primary campaign expenses.

~5/ while direct mail and advertising ate not specifically IIs~ed as permissible expenditures by section 9003.4{a)\1),

that section should be interpreted to permit a committee to l~C~: expe~ses clearly relate= ~o se~ti~; up the genera:

election campaign, including direct mail and advertising intended to influence potential supporters and volunteers for ~~e general election campaig~.
..: ~: ~.

-30-

t:~:~; an~ nature of the adve~tise~ent indicates that it was

intended to s~ay Perot sup~c:~ers for the general election.

In their written responses and the oral presentation, the

Committees were unable to demonstrate how this advertisement,

targeted at supporters of an independent candidate, was

cc~r.ected to the Convention. At the oral presentation, Counsel

for the Committees stated:

the Perot advertisement was intended to shore up Republican &upport at the convention in light of ROS6 Perot's impact

on the race. When Mr. Perot withdrew, he had eroded the

Republican base, and the advertisement in USA Today and

ether papers was intended to add~ess principaily the Republica~s who had defected to Ross Perot.

Attachment 10 at 24. It is unclear from the record how this

advertisement could affect support for the Candidate at the

" ....... .-:--"!f ....

. con~ention, ~ince it is- un~i~ely. thac aRy Perot suppotte~s'~u1d' . .... .... . ._- -- _..--_.._.- --------_._.- - ---- -- - - _. - -~ . ~. . .. - .... - -- - - - .. ... . ..._.. --_..-------_._-_.. -- _.._-

be Convention delegates. Moreover, the language of the

advertisement explicitly refers to the general election, not the

Convention.

S:~:larly, the Commictees' argument that the direct mail at

issue ~as targeted at Republicans dces not prov:de a suf!icient

cor.~ec:::n to t~e primary ca~?aign O~ the Con'le~tion. The

direct ~ail featured pictures of Bush a~d Clinton and

discussions of their positions and records on issues. See

Attachments 13 and 15. Fer example, the "Marilyn Ouayle" ~ette=

sent on August 4, 1992 discussed kicking off the re-election

carnpaig~, and provided a vo:~~:eer hotline number active through

Labor Day. The letter states: "{a~ true grass=oots campalg~

orga~iza~ion tha~ includes yc~ ~ill make the difference 10
-31-

Wc~ki~g togethe:, we ~:~: ~ave a victcry in

~ovember."26/ Attachment 13 at 2. The Committees contend that

:he direct mail pieces were "intraparty mailing[s)" to

Republicans rather than the general .public, and that the Marilyn

Quayle letter "asked putative supporters of the President ...

:~r volunteer help with the convention and other activities.-

Attachment 10 at 23.

Even if the mailings were only sent to Republicans, the

content of the mailings appears to be general election campaign

literatu:e ~=~parir.; the pos:~i:~s 0: ?resi~ent Bush and

G:~ernQr C:inton, the general e:ection candidates. There is no

evidence that the direct mail was targeted at Convention

delegates. Moreover, the Marily~ Ouayle le~ter appears to be

campaign, not to prepare for the Convention. Most of the

suggested grassroots activities have no apparent connection to

:he Convention, and the voluntee~ hotline :e~a:ned ~pen thro~;~

......, Labor Day, several weeks after the Convention. Although these

.....

-

--..... ..

=:~ces mat tave bee~ mailed ptic: ~~ the Ca~~ida~e's date of

26/ The Marilyn Quayle letter asks for volunteer help ~=ludins: asking friends to volunteer; helping the state

Bush-Quayle campaign; writing letters to newspapers and

calling radio talk shows; using ~he enclosed campaign ~a~erials: conVincing former ?er:~ supp~r~ers to support

President Bush; and attending a Convention watch party. Id.

The Convention party is the only suggested a=tivity related

t= the Co~ve~tion. The mailing a:so included a poster, t~~per st:ckers, a paper comparing Preslden~ Bush's and

Governor Clinton's accomplishments and positions on issues, a~d a vol~~:eer response card. :~e :es~c~se card has a c~e~k-off :.st of volunteer actlvlties such as "Work the

polls" and "Distribute literature." none of ~hich were

ccnnected to the Convention.
\

~:'.......-,~v

..... :..;~~

-32-

:~e::;:ci:ity, they appear to antici?ate responses by potential

~olu~teers and supporters during the general election campaign

period.

In addition, as a result of the Commission's three to three

vote regarding the 33 state offices, the remaining expenditures

for equlpment and materlals for the state offices that were

i~curred in July and August 1992 are not included in the amount i

j

of non-qualified campaign expenses.121 These expenditures include

the purchase of miscellaneous campaign materials such as flags,

hats, b~ochures and signs which were shipped ~o various s:ate

offi=es in July ar.d August, 1992 and the purchase and lease of

computer equipment, software and related supplies. The Primary

Commi ttee paid the costs for these items through .August 20, 19~2.. .. .. ... - .. .... .. . _. ~~:~~--·--··--a-nd-~·tne--ciEc--p·ai·d-··fO-r-t.he.·-fOlTovi·~9·-that·-date ..··_· _.,. ." - _. - ----------------.-----

C' Other than those expenditures related to the 33 state JN~W

offices, the Primary Committee bears the burden of demonstrating

C.' that the expenditu:es had so!:e connection to the primary

-"'.. campaign. The COmt:littees have provided no evidence to p:ove ,.-

\,

:n to the 33 state offices for the primary campaiqn. For example,

the Committees have not provided evidence that these materials

were distributed to Convention delegates or brought to the

:onve~~:on, or chat computer equipmenc was used to monitor

dele;ates or perform other Convention-related administra:ive

2'7/ However, the Committee's expenditures for equipment and 1, N~"" mater:als that were sent ~o ~he natlonal heaccuarters a:~

:ons:dered non-qua:::led campaign expenses. .
-33-

~eter~ined that the remaining expenditures for advertisements,

direct mail, office space ren~a:, equipment and materials not

related to the state offices are related to the general election

campaign. The Commission thus determines that the Primary

Committee incurred non-qualified campaign expenses for these

items to~aling $446,536.29/ Therefore, the Commission has made a

final determination that the Primary Committee must repay

$106,979, a pro rata portion of the non-qualified campaign

expenses totaling $~C9,123.

With respect to the GEC, the Commission has reduced the

expenditures subject to the GEe's Qverall expenditure limitation

by $333,172, reflecting the changes associated with polling and

-.._-~..

-~. ,--.

materials expenses related to the state offices which the

Commission has concluded were qualified campaign expenses of the

28/ The Committees' contention that the Commission treated equipmen~ expenditures differe~~ly in this audit than in the

Clinton for President audit is incorrect; the Commission

adopted a consistent approach for both the Clinton and Bush

campaigns. See Final Audit Report on Clinton for President

Committee (approved Oecember 27, 1994); Final Audit Report on

:linton/Gore '92 Committee and Clinton/Gore '92 General

Election Compliance Fund (approved December 27, 1994); Final

Repayment Determination on Clinton for President Committee :appr~ved February 13, 1995~. ~hile most of the expenditures

at issue were divided 50/50\, capital assets such as

equipment were consistently d:vided in both audits using the

60/40\ depreciation.

29/ The amount of non-qualified campaign expenses SUbject to repay~e~t, $409,123, resul~s from adjust~e~ts to this amount

for expenditures reimbursed by the GEC totaling $37,301 and

expenditures paid after March 2, 1993, the last day that the

Primary Committee had public ~unds in its accounts.
: .

-34-

F:imary Committee. ~his reduces the amount in excess of the

GEe's overall expenditure limitation to S220,086. The

Compliance Fund may reimb~rse the GEe for this amount. The

Commission recommends that the Compliance Fund reimburse the GEe

• .---:,.-:-••....,. ..•-:i! ..~:!!l',_•

. "-.,:-

and provide documentation of the reimbursement to the Commission

""'i thin 30 days.

III. PRlKARY COMMITTEE RECEIPT OF FUNDS IN EXCESS OF

ENTITLEMENT

During the candidate's period of eligibility, the candidate

is entitled to receive public funds to the extent that the

candidate received matchable contributions. 11 C.F.R. §

'~l 9034.1(a). After the candidate's date of ineligibility, the

, candidate is entitled to receive additional matching payments

_____• .__~_C?_~:..~a~.~~~_~~-=..: c:.~~_~~.~_~ut_~.q.~_~=_ ~~~e.~ v~~_ C!~~ _~~~.s_i ~_e~'- ~,~.··.~~_~J~.eJ-o-r-e-.-=-:. _.__ .._. .'='- ._

' ...

.'"' '. "

......

...........

December 31 of the presidential election year provided that on

the date of payment there are remaining debts reflected in the

Statement of Net Outstanding Campaign Obligations ("NOeO

Statement"). 11 C.F.R. S 9034.1{b). Any portion of the

payments made to a candidate from the matching payment account

ir. excess of the aggregate amount of payments to ~hich the

candidate was entitled under section 9034 shall be repaid to the

Secretary of the Treasury. 26 U.S.C. S 9038(b){1). The

Commission may seek a repayment of public funds received in

excess of the candidate's entitlement to the extent that

payments made a~ter the candidate's date of inellg:bility are

greater than the debts reflected in the NOCO Statement. :1

C.F.R. S 9038.2~b){1)(i~.
.0 ,,_. .....-:;~

::•...•

-35-

:~ the :lna: A~cit Re~::~ on the Pri~ary Committee, the

Commission determloed that the Primary Committee received funds

in excess of its entitlement totaling $485,631. This amount has

been revised. Based on the Commission'S analysis of the Primary

Committee's NOCO statement, the Primary Committee had net

outstanding campalgn obligations on August 20, 1992 of

$1,816,043. The Primary Co~ittee deposited private

contributions totaling $876,527 between August 20, 1992 and

March 2, 1993. The Primary Committee received matching fund

payments of $714,529 between August 20, :992 and January 5,

1993. The Primary Committee's remaining entitlement prior to

receiving the March 2, 1992 matchinq payment was $224,587. The

primary Committee received Qatching payments of $340,662 on -------_...__ .... -_.- .__.. _- ._- ---- _... ---- --- - .... _. -- ------ --_._----- -_..-.-.. _---

Karch 2, 1993, which exceeded its entitleaent by $116,075. The

primary Committee received an additional matching fund payment

of $100,778 on April 2, 1993. As a result, the Primary

Committee receive= $216,853 matching fu~ds pay~e~:s in ex:ess

--

'-

of its entitlement.

The:efore, ~~e CommiSSl~n has made a final de~erminatic~

that the Primary Committee received $216,853 in matching fur.-:s

in excess of its entitlement and must repay $216,853 to the

United States Treasury pursuant to 26 U.S.C. 5 9038(b)(l).

III. STALE-DATED CBEC~S - PRIMARY COMMITTEE

Section 9038.6 of the Commission's regulations provides

that if a committee has outstanding checks that have not been

cashed, the commit~ee should submit a che~k for the total amount

of the outstanding checks to the United States Treasury.
...: .......'C'

-36-

In the Final Audit Report on the Primary Cornmlt:ee, the

Com~ission made an initial determination that the Primary

Committee must pay $19,194 for stale-dated checks to the United

States Treasury. See 11 C.F.R. S 9038.6. The primary Committee

paid this amount to the Treasury on October 21, 1993 and July

25, 1994. Therefore, the Commission has made a final

determination tha~ $19,194 is payable to the United States

Treasury pursuant to 11 C.F.R. S 9038.6. Since the Primary

Co~~ittee has made this payment, no additional payment is

IV. GEe AND COMPLIANCE FUND PAYMENTS

The Commission's regulations pr~vide that if a committee

•.•::. -~. _.".- \r~

~~:" .~

has checks outstanding. that haye not been cashed, the Committee - ... ".. .,- .-.. . ... . . . . . . - .

_! ~;:;----_!.-·-··~haff--subJirf--i -cnecx··-fo-r:··the--t·otal--uount-··of- -the--outst~~di""nCJ-----------:-.---

checks to the United States Treasury. 11 C.F.R. 5 9007.6. In

addition, if a candidate receives income as a result of

:::- i:1·..·estrnent 0: other use of i'ublic funds, he shall i'ay the a:lount

, of the income to the United States Treasury. 11 C.F.R.

I~_ J

~.

The Commission made an initial determination that the GEC

must pay $19,023 to che United States Treasury for stale-daced

checks. The GEC made this payment on October 21, 1993, and does

no: contest the payment. !~e Co~mission also made an initial

determination that the GEe pay $2,086 to the United States

Treasury for income gained from an insurance settlement. The

GEe notes in its response thac lt "disagrees ... that the

insurance settlement at issue created income" but provides no
-37-

lega: c: :a~:ual ar;umen~s to suppc:c thlS statement.

Attachment 6 at 3-4. The GEe made the $2,086 payment on July 6,

1994. Finally, the Compliance Fund made a payment to the United

states Treasury for stale-dated checks totaling $8,666 on

October 21, 1993.

Therefore, the Commission has made a final determination

that the GEe must pay $21,109 to the United States Treasury,

representing a gain on an insurance settlement of $2,086 and

stale-dated checks totaling $19,023. 11 C.F.R. SS 9007.2(b)(4)i

9007.6. The Commission further has made a final determination

that the COQpliance Fund must pay $8,666 for stale-dated checks.

Since the GEe and Compliance Fund have paid these amounts they

do not owe any amount to the United States Treasury.

'. v. CONCLUSION

.-

.~• I ,

,"._'"'",

For the foregoing reasons, the Commission has made a final

determination that the primary Committee must repay a pro rata

portion of non-qualified ca~?aign expenses tota::~g $~CS,123 in

the amount of 5106,979 ($409,123 x .261483) to the United States

Treasury. :~rther, the Commission has made the final

determina~ion that the Primary Committee must repay $215,853 to

the United States Treasury for matching funds received in excess

of its enti t1ement.· The Commission has also made a final

determlnation that the Primary Committee must pay $19,164 to the

united States Treasury for s:ale-dated checks. Because the
..........

-~

-38-

?=i~ary Committee has ~a:e a ?ay~er.~ for the stale-date= checks,

the total amount due to the United States Treasury is $323,832.

Moreover, the Commission has made a final determination

that the GEe must pay $21,109 and the Compliance Fund must pay

$8,666 to the United States Treasury. 11 C.F.R.

55 900~.2(b}(~~; 9C~~.6. As no~ed, the GEe and Compliance Fund

have made these payments and no additio~al payment i·s due f:om

the GEC or Compliance Fund. Finally, the Commission recommends

that the Compliance Fund reimburse $220,086 t~ the GEe to

eliminate the GEe's expenditures in ex=ess of its overa:~

Attachments

13 .

14.

15 . .

8 .

9.

-I •

4 .

5 .

6 .

C',

,."

'-

-~

--". . 1. :., I.nt~rim.·i\udi t Repor.t..- pr imary Coami.ttee. . . '. .: ---- ---. - -2-;- - --I-nte-ri.--Audit---Report-..--GEe-and-- Coapli-ance -.. Fund-'-- . --'- ----.- --.----- ------

....:- 3. primary Committee Response to Interim Audit Report dated

IJuly 6, 1994 (portions of attachments deleted)

GEC and Compliance Fund Response to Interim Audit Report dated July 6, 1994 (portions of attachments deleted)

primary Committee Final Audit Report

GEC and compliance Fund Final Audit Repo~t

Primary Committee Response to Final Audit Report

GEe and Compliance Fund Response to Final Audit Report Audit Analysis of Responses to Final Audit Reports Oral ?:esen~a~:on T:a~s::~~:

1:. Submlssion of additional materials :ollc~ing oral

presentation l~. Audit analysis of oral presentation and additional

submission

Marilyn Quayle letter

Perot Advertisement

Direct mail brochures Califor~ia and ~e~ ~ersey po._ sc::pts

17. Certification of Commission's vote on August 3, 1995
FE DE RAL ELECTIO" CO,\-' \\ISSIO'-

DATE & TIKE TRANSMITTED: FRIDAY, SEPTEMBER 15, 1995

BALLOT DEADLINE: WEDNESDAY, SEPTEMBER 20, 1995

12:00

4:00

COMMISSIONER: AIKENS, ELLIOTT, McDONALD, McGARRY, POTTER, THOMAS

SUBJECT: PETITION OF THE BUSB-QUAYLE '92 PRIMARY COMMITTEE,

INC., THE BUSB-QUAYLE '92 GENERAL COMMITTEE, INC.

AND THE BUSB-QUAYLE '92 COMPLAINCE COMMITTEE, INC.

TO STAY REPAYMENT PENDING APPEAL (LRA 1425).

MEMORANDUM TO THE COMMISSION DATED SEPTEMBER 14, 1995.

. . -.. --.-------__ ----_0 __ -

--'--I--approve '-the-r-e-c;-j\meri"dati"onTs)

~, I object to the recommendation(s)

:,~~' COMMENTS:

.......

: ,..., . I I

"

••••_----•• - --__ 0 - __

OATE: _ SIGNATURE:-------------------

A definite vote is required. All ballots must be signed and dated.

Please return ONLY THE BALLOT to the Commission Secretarv.

Please return ballot n0 later than date and time shown above.

FROM THE OFfICE Cf THE SECRETARY OF THE COMMISSION
... ' ::.- -

~'::\

SEP \ 4;3 fH'5S

MEMORANDUM

TO: The Commission

FRO":

THROUGH: John C. Surina

Staff Director

Lawrence M. Noble . General Counsel

Kim Bright-Coleman ICf~ Associate General Cbunsel

Kenneth E. Kellner~~ Assistant General to~n~l

~-~.~-~ .:--...:----:~--·_··----.~~~~~~:;Dew~.t,t--p~i:n.t:~r-tfJf-~----------.--~~_:-~.--.---

.~ SUBJBCT: Petition of the Bush-Quayle '92 Primary Committee,

Inc., the Bush-Ouayle '92 General Committee, Inc.

and the Bush-Ouayle '92 Compliance Committee,

Inc. to Stay Repayment Pending Appeal

(LRA 1425)

I. I Wl'RODUCTION

.-... ...... .

On August 22, 1995, the Bush-Quayle '92 Primary Committee,

Inc. ("the primary Committee"), the Bush-Quayle '92 General

Committpe, Inc. ("the GEC") and the Bush-Quayle '92 Compliance Committee, Inc. (the "Compliance Fund") filed petitions for

review of the Commission's final repayment determinations and a

joint motion to consolidate with the United States Court of

Appeals for the District of Columbia Circuit. On the same date,

the Committees sent a letter petitioning the Commission to "stay pending appeal the Committees' repayment of the amounts set

forth in the final repayment determinations sent to the

Committees on August 17, 1995" pursuant to 11 C.F.R. S 9007.4(c)

and S 9038.5(c). Attachment 1. It should be noted that the

letter does not petition on behalf of President George Bush, the

candidate. For the reasons set forth in this memorandum, this

Office recommends that the Commission deny the petition.
.'... "0 ..0. .,'. . 0..... .._. -:.. " ......_ '0.... ~. (. ., . .. ".. .. ".- .~.•.-.~

Memorandum to The Commission

Request to Stay Repayment Pending Appeal Bush-Quayle '92 Committees

(LAA .425)

Page 2

II. BACKGROUND

On August 17, 1995 the Commission approved the Statement of

Reasons supporting final repayment and payment determinations

for the primary Committee, GEC, and Compliance Fund.1/

Specifically, the Commission made a final determinatTon that the

Primary Committee must repay $323,832 to the United States

Treasury, including a pro rata repayment of non-qualified

campaign expenses related to the general election in the amount

of $106,979 and a repayment of $216,853 for matching funds that

the Primary Committee received in excess of its entitlement.

The Statement of Reasons also included a final determination

that the primary Committee make a payment of $19,194 for

stale-dated checks, which the primary Committee has already paid

to the united States Treasury.

Moreover, the Statement of Reasons included final dete~minations that the GEe must pay 521,109 fo~ stale-dated

checks and a gain on an insurance settlement and that the

Compliance Fund must pay S8 t 666 for stale-dated checks to the

United States Treasury. The GEe and Compliance Fund have paid

these amounts. Finally, the Statement of Reasons recommended

that the Compliance Fund reimburse the GEe $182,785 in order to

eliminate the GEe's expenditures in excess of its overall

expenditure limitation. 2 U.S.C. 5441a(b). . -- :....-----·--·--.-It·I-~·--ANALYSIS -. . . :

.. ---- -..._-----------_.-

"'..' ..

.-. '- .

'n

.-..

" '

The Primary Committee, GEC and Compliance Fund requested a

stay of the final repayment determination pursuant to 11 C.F.R.

S 9038.S(c)(iii).2/ Under this provision, a stay may be qranted while judicial review is pending if a candidate meets all of the

following criteria: 1) the candidate demonstrates that he or she

will suffer irreparable harm in the absence of a stay; 2) the

candidate has made a strong showing of the likelihood of success

on the merits of the judicial action; 3) such relief is

consistent with the public interest; a~d 4) no other party inte~ested in the proceedings would be substantially harmed by

1/ The Statement of Reasons was hand delivered to counsel

Tor the Primary Committee, GEC, and Compliance Fund on the

same date.

2/ This provision applies to primary campaigns. The

Committees also cite a similar provls~on for general election

campaigns, at 11 C.F.R. § 9007.5(c'. However, that provision

does not apply here because the only outstanding repayment

amount is due from the primary Committee.
'-,', :"""'~ -';;.: . ~~

,"-"~.

.- - .-........

'Memorandum to The Commission

Request to Stay Repayment pending Appeal

Bush-Quayle '92 Committees

(LRA 4425)

Page 3

the stay.3/ 11 C.F.R. S 9038.5(c)(2)(iii). For the purposes of

11 C.F.R.-S 9038.5(c)(2)(iii), in determining whether the

candidate has made a strong showing of the likelihood of success

on the merits, the Commission may consider whether the issue on

appeal presents a novel or admittedly difficult legal question

and whether the equities of the case sU9gest that the status QUo

should be maintained.!/ 11 C.F.R. S 9038.5(c)(3).

We note at the outset that there is no repayment amount

outstanding from either the GEC or the Compliance Fund, and

therefore, it is unnecessary for those committees to seek a

stay. Indeed, the GEe and Compliance Fund have no standing in

this matter; the outstanding repayment at issue is due from the

primary Committee and the candidate. Accordingly, we recommend

that the Commission deny the petitions for a stay made by the

GEe and the Compliance Fund.

In addition, the Primary Committee has not satisfied the

four elements required by 11 C.F.R. § 9038.5(c)(2l(iii) for the

Commission to grant the requested stay. Its first argument is

that the repayment would cause irreparab:e harm because the

primary Committee does not have sufficient funds to make the

repayment, and the Compliance Fund would require "difficult and

substantial fundraising activities" to raise the amount.

Attachment 1 at 4-5. The Primary Committee contends that if it __ :-,~_.~ . ultimatel)C p:5'evai.ls· .OR appeal,.. ~he Pri.mar.y com.miJ:tee and , .. .... -- co-DipTfa'nce--rund 'would'-lose -- the---fundr'a-i-si ng-- e.xpendi tu-res- needed _.__ . _ . to raise the repayment amount and will incur additional costs to

refund the contributions. In support of this argument, the

petitioning Committees submitted an affidavit from Assistant

Treasurer Keith Davis stating that the Committees do not have

sufficient funds to make the repayment and it would cost at

.') 3/ The other alternatives available to candidates and their

authorized committees are: 1) to place the entire amount at

issue in a separa~e interest-bearing account pending the

outcome of the appeal, with withdrawals from the account only

by joint signatures of representatives of the candidate and

the Commission (11 C.F.R. S 9038.5(c)(2)(i»i or 2) to post a

surety bond guaranteeing payment of the entire amount at

issue plus interest (11 C.F.R. § 9038.5(c'(2)(ii}'.

4/ The Commission's regulations are consistent with the

test for determining whether a stay is warranted developed in

case law in the D.C. Circuit. See Vir~inia Petroleum Job

Ass'n v. Fed. Power Com'n, 259 ~d. 9 1, 925 (o.c. Cir. 19~8); Wash!n ton Metro olitan Area Transit Commission v.

Holiday '!ou=s, Inc., F.., D.. Clr. 77);

see also Explanation and Justification of 11 C.F.R. S 9038.5, ~Fea:-~. 20673 at 20673-4 fJune 3, 1987l.
--"Memorandum to The Commission

Request to Stay Repayment Pending Appeal

Bush-Ouayle '92 committees

(LRA #425)

Page 4

least $100,000 to raise su~ficient fur.~s t? make the repayment.~/

Attachment 1 at 8-10.

The foregoing does not demonstrate the requisite

irreparable harm under 11 C.F.R. 5 9038.5(c)(2)(iii). Since the

candidate is personally liable for the full amount of the

repayment, the primary Committee may avoid incurring fundraising

expenses if the candidate makes the repayment.~/ In any event,

to establish irreparable harm, "(m)ere injuries, however

substantial, in terms of money, time and energy necessarily

expended in the absence of a stay, are not enough." Virginia

Petroleum, 259 F.2d at 925. Moreover, -the possibility that

adequate compensatory or other corrective relief will be

available at a later date, in the ordinary course of litigation,

weighs heavily against a claim of irreparable harm." Id. Since

the harm postulated by the Primary Committee is not inevitable

absent the requested stay, and the Primary Committee may recover

the repayment amount from the Commissio~ if it prevails on the

merits of its appeal. the P~i~ary Com~:~~ee has not established

"irreparable harm. "2/

.:.. ~: ':~J

The Primary Committee also asserts that the repayment

determinations "involve difficult and close legal issues" and

that it has "a reasonable probability of success on the merits."

Attachment 1 at 5-6; 11 C.F.$. S9038.5(c)(2)(iii). To

--_.:. e$taP.lish the requisi·te "substantial indication of probable· - ~;-_-- .. - -sifc·c-e-s-s·ft··-on--tlie···me-r-rts--of-i ts-ap-p·eal-;---·;ti-rg1-nIa--pe-troreum~-2-59----·.._._...

.

c.

::;

'-'" .....

5/ Mr. Davis states that as of AUgust 22, 1995, the ~ommittees had the following net balances: the primary

Committee, $5,550.63; the GEe, $8,734.33, and the Compliance

Fund, $76,930.63.

6/ President George Bush, the candidate, has not petitioned

tor a stay. To become eligible for public funds, the

candidate agreed in writi~g, inter al:a. to pay any amounts

required to be repaid unde~ 26 U.S.C. § 9038. 26 U.S.C.

S 9033(a), 11 C.F.R. 55 9033.1, 9033.2. Moreover, 26 U.S.C.

S 9038 provides that "the candidate shall pay" repayments to

the United states Treasury for amounts received in excess of

entitlement and non-qualified campaign expenses. 26 u.s.C.

S9038(b)(1) and (b)(2). Therefore, the candidate is

personally responsible to make the repayment, and the

Commission may seek payme~t from him.

7/ Moreover, the Primary Committee could mitigate the

potential harm by requesting an extensic~ of time or

installment plan to make the repayment. In addition, the

Primary Committee could have sought a stay on the basis of a

surety bond, which would likely cost less than the full

repayment amount. No evice~ce has been provided that the

Primary Committee or the candidate would be unable to obtain

or pay for a surety bond.
-_.... -: -.,.".-" ::-'''Heino"i a·nd~m· .to The Commi's s ion

Request to Stay Repayment Pending Appeal Bush-Ouayle '92 Committees

(LRA i425)

page 5

F.2d at 925, the primary Committee need not demonstrate a

mathematical probability of success, but must raise serious,

substantial and difficult legal questions and demonstrate that

the equities are in favor of maintaining the status quo. washington Metropolitan, 559 F.2d 841, 843-844; 11 C.F.R.

S 9038.5(c)(3). "(Mlalntaining the status quo is appropriate

when a serious legal question is presented, when little if any harm will befall other interested persons or the public and when

denial of the order would inflict irreparable injury." Id.

--_.._--

~.~- .. ~~~

".

The Primary Committee has failed to demonstrate a strong probability that it will prevail on the merits of its appeal. The Commission has rejected the "bright line test" proposed by the Bush-Quayle '92 Committees. As analyzed in the Commission'S

Statement of Reasons, the Bush-Ouayle '92 Committees have

misinterpreted the Commission's re9~lations and precedent.

contrary to the arguments presented, the statute, applicable Commission regulations, and Commission precedents do not support application of a "bright line test" based on the candidate's

date of ineligibility to determine if an expenditure is a

primary qualified campaign expense. Rather, the Commission has

looked at both the timing and the purpose of expenditures to

determine whether they were qualified campaign expenditures made

"in connection with" the primary campaign. See 26 U.S.C.

S 9032(9); 11 C.F.R. S 9032.9(a). !1oreover,t'fie Commission did

;--'. ." 110t.·apply.a.-"broii.ght line .test" to. other ~.udits £~OID the;1992·. . ... - --_._. ~- - '-'pr e-sTdeil"t i a l--e l·e·c t-ion--cycle-.-- - 5e e--ri"na1--Audi t -·Rep·o rt- on" C1t nt-on--·--- -- _._._-_.:-

;.- for President Committee <approved December 27, 1994). While

certain factual aspects of this matter, such as polling expenditures and ot~te offices, presented close factual issues,

the Commission resolved each of those close factual questions in

favor of the Bush-Ouayle '92 Committees. The remaining non-qualified expenditures that form the basis of the

Commission's final repayment determination are clearly related

to the general election campaign. Therefore, the final

repayment determination does not present a "novel or admittedly difficult legal question." 11 C.F.R. § 9038.5(c}(31.

......

'-

The Primary Committee also argues that a stay would not

harm the government interest because the money "is not needed

immediately by the United States Treasury." Attachment 1 at 6;

11 C.F.R. S 9038.5(c)(2)(iii). To the contrary, the first

matching payments are due to candidates and committees eligible for public funds in the 1996 presidential elections in a mere

five months. The amounts of repayments made pursuant to 26

u.s.c. S 9038 are deposited into the Matching Payment Account,

the source of public funding for the 1996 presidential primary and general election campaigns and the major party nominating conventions. 26 U.S.C. § 9038(d). It is unlikely that an

appellate case will be resolved before 1996. Thus, the stay

could harm the interests of interested third parties, the 1996

presidential campaigns and conventions.
Appeal

":.-.::=r-a:'-·· '"

Memorandum 'to'The Commission

Request to stay Repayment pending

Bush-Quayle '92 Committees

(LRA 4425)

Page 6

Finally, the primary Committee argues that the equities of

the situation favor maintaining the status quo. Attachment 1 at

6; 11 C.F.R. S 9038.5(c){2)(iii). To the contrary, public

policy considerations favor protecting the public fisc. The

requirements of the regulations are intended to protect the

public treasury if the Commission's repayment determination is

upheld on appeal. See Explanation and Justification of 11

C.F.R. S 9038.5, S2 Fed. Rea. 20673 (June 3, 1987). A stay unsupported by a surety bon or escrow account raises the risk

that in the event the Commission prevails on the merits, the

repayment will be delayed. Moreover, it creates a precedent

that could encourage other campaigns to indulge in frivolous

challenges to repayment determinations to delay repayment.

.. .:;.. '. 'Y:;;-;-~J

: --:~

Therefore, since the primary Committee has failed to

establish any of the four required factors for the Commission to

grant a stay under 11 C.F.R. S 9038.S{c)(2)(iii), the Office of

General Counsel recommends that the Commission deny the

requested stay, We recommend, however, tha~ the Commission

permit the primary Committee and the candidate to obtain a

surety bond or establish an escrow account and submit a revised ~~ request for a stay based on 11 C.F.R. S 9038.S(c)(2)(i) or (ii)

within ten days. This Office's letter to the Primary Committee

will suggest these alternative methods of obtaining a stay.

. . --_. . _.. '.

'C.--- ....

r"

'-

, ....

-. _.- - ----.-----.-.._- .. "_.. '-

The Office of General Counsel recommends that the

Commission:

1. Deny the requests, of the Bush-Ouayle '92 Primary'

committee, Inc., the Bush-Quayle '92 General Committee, Inc.,

and the Bush-Quayle '92 Compliance Committee, Inc. to stay the

Commission's final determination that the Bush-Quayle '92

primary'Committee, Inc. must repay $323,832 pending the appeal

filed in the United States Court of Appeals for the District of

columbia Circuit; and

2. Approve the appropriate letter.

Attachlllent

1. Letter dated August 22, 1995 from Bobby R. Burchfield

with attached Petitions for Review dated August 22, 1995
THO~AS 0_ 8ARN£TT

VZA ~~ DELIVERY

COVINGTON & BURLING

1201 P£NNSY\..VANIA AVENUE. N W

PO SOX 1566

W-'SHINGTON 0 C 20044·7566

1202; 662-6000

yCLC,..... .zoz' eea· .1••

TtL~••0· 50~ 1C:0\l\..",<: -aWl

e••\.c eov\.'llto

August 22, 1995

: ." >..i:.@

-:.~~

~CC:OO<r~ -o...w:

c~rOh ,""cr"

~C»cOON.,. 84'

C'Q.A'C)

I'O.Z"'NQtC ..." ........_!15

Tn.P~ -'''''~-JoO

tIlIUS~. c~POoClOIT 0"'" - "'VOIUt Ott "'"

--...a.. '0.0 K1.GIUM

TC!..~ » .• sr,.-..o

"U,C"A' JoI , 1M

Ms. Kim Bright-Coleman

Associate General Counsel

Of:ice of the General Counsel

:ederal Electio~ Commission

f:::' ?loor

999 E Street, N.W.

Washington, D.C. 20463

- ... __0_- __..._._--- --

.-, '. ,

Dear Ms. Bright-Coleman:

You will find enclosed a copy of three petitions for

review and a joint motion to consolidate filed today on behalf of

Bush-Quayle '92 Primary Committee, Inc. (the "Primary ~~~mittee"), Bush-Quayle '92 General Comm~ttee, Inc. (the

"3eneral Committee"), and Bush-Quayle '92 Compliance Committee, ~-- t:he "Compliance Commit~ee") (collectively, the "=';)~::-;:.':~ees") w:..t.h the United States Court of Appeals for the

Districc of Columbia Circuit .

Pursuant to 11 C.F.R. §§ 9007.4{c) and 9038.S(c), the

Commit.tees hereby petition the Commission to stay pending appeal

che Committees' repayment of the amounts set forth in the final

repayment determinations sent to the Committees on August 17,

:395. The Commission found as part of its final repayment

determination that the Primary Committee-must repay to the United

States Treasury a pro rata portion of non-qualified campaign

expenses in the amount of $106,979 a~d matching funds received in

excess of entitlement in the amount of $216,853. Related to ~hese repayment determinations is a Commission recommendation t~at the Compliance Committee reimburse the General Committee in ~he amount of $~82,78S. As noted in the materials accompanying ~~e Final Repayment Determination, the Committees have already =epa~d the c~he= amoun~s.

C

··lr:'''""f\ ,

ATTA ;::;-=...t 1 --2-

Page , of.-. \
c:-

~... .

;j":. . : - .

COVINGTON & BUR\.ING

Ms. Kim Bright-Coleman

August. 22, 1995

Page 2

I. PACTUAL AND PROCImT1RAL BACltGROUND

Prior to the 1992 primary campaign season, Primary

Committee personnel reviewed the law, regulations, and existing

precedent con=erning the proper treatment of expenditures made up

to the date of ineligib~l~ty. The law and regulations state, in

pertinent part, that such expenditures may be treated as primary

campaign expenses if they are made "in connection with" the

campaign for nomination. 26 U.S.C. § 9032(9); 11 C.F.R.

§ 9032(9). Neither the regulations nor Commission precedent

indicated that the purpose of the expenditure must be exclusively

or even primarily related to the campaign for nomination. To the con~rary, Commission staff had questioned the relative bene:it of

ce=tain expendi~ures by the Reagan-Bush campaign during the 1984

elec~ion cycle. As an examp~e, the scaff sought to treat

expenditures for voter registration efforts made in states after

the primaries had taken place as general election expenses. The

Reagan-Bush campaign had responded that, although some of these

expenditures may have benefitted the general e~ection campaign, _= --.:.._.. ~_h.~y_~~.!"_~_~n~~el:e~.s_pa-z;t 6f· a ~eneral.: b\)ild-up -ed the .... . ..: ~... Republican Nat.i onal Convention-.---'The -commi~fs·l<5n-·acc·epte-d- ·tliis- .. --' -..'.. '.----- - -_.-

explanation and deemed the expenditures to be qualified primary

campaign expenses. Other Commission precedents were in accord.

See Adv. Op. 1975.-9. Fed. Election Camp. Fin. Guide (COIl 1 5110

at 10,035 (1975) (holding expenditures during primary by

unopposed candidate "allocable to that primary election rather

than to a subse~~ent general election"): Adv. Cp. 1978-99, Fed.

Election Camp. Fin. Guide (eca) 1 5387, at 10,396 (1979)

(campaign materials ordered and received only one day before the p=~~a~ electio~, which we~e used both in the ?~imary electio~

and ~he general election, may be treated as primary campaign

expense) .

.-. \. .. On the basis of this review, the Committees adopted a "br~ghc-line" approach based on the dace of ineligibility

("DOI"), which was August 20, 1992 .. The Committees treated

expendicures for advertising, equipment, offices, salaries, mater~als, and the like as primary campaign expenses so long as

they were made prior to the DO! and were connected to the

campaign for nomination.

During the audit, the Commission staff adopted the same

position that haQ been rejected by the Commission in the ReaganBush '84 audit. The staff selected a series of expenditures,

including polling, advertising, equipment and materials, and

office space that the staff contended had a larger benefit t~ the

general elec~~cn campa~gn ar.d should therefore have been t=ea~ed

as a general election expense. ~he Commission :ni~ially agreed ~n ~~s interim Aud~~ Reports ~ss~ed on March 24, 1994.

~T'!'ACi-:llU;T :-abc1- 0-
.' . -.. -,,: ...:

COVINGTON &. BURLING

Ms. Kim Bright-Coleman

-August 22, 1995

Page 3

The Committees submitted responses to the Commission in

which they explained the following: (i) the law and precedent

indicated that the Committees' "bright-line" approach was proper,

(ii) the primary benefit test applied by the Commission was

inconsistent with the law and regulations, (iii) the Committees

had, in any event, not received adequate prior notice of the

Commission's standard, and (iv) the expenditures were nonetheless

sufficiently connected to the campaign for nomination as to meet

the prima~ benefit standard reflected in the Interim Audit

Reports.

.. -~

:.-.....

'.'

'-

-...

During the open meeting on December 8, 1994, the

Commission expressly aba~doned the primary benefit test in the

Interim Aud~~ Reports ~~~ agreed that the Committees had shown a

connection be~ween a~: == ~he challenged expenditures and the

campaign for nomination. The Commission adopted a new approach,

however, in which it split the challenged expenditures evenly

between the Primary and General Comm.it~ees. This approach does

not appear in the regulations, had never been adopted in a prior __..:.~_"auqit:.I_~"n~.~__ I!<.?~_.~_':.~suggested by the audit staff, and apparently " a-,ose for the first t.ime -'dur"ing--t"lle -meet-ing-:----- --.---------.-----------_.

. After rece1v10g the initial final determination, the

Committees submitted additional materials and made an oral

presentation to the Commission further explaining the arguments

mentioned above and pointing out that, regardless of whether the

Commission's interpretacion was permissible under the law, the

Commission had not given the campaign adequate prior notice that

this novel approach would be applied.

A: its mee~ings on August 3 and 17, 1995. ~he

Commission found that additional expenditures, such as polling

and state office expendit~=es, could be treated entirely as q~alified primary campaign expenditures, but declined to modify

its repayment determinations with respect to the remaining

challenged expenditures. The Committees are now seeking judicial

review of this issue.

Unless the repayment requirement is stayed or extended,

the Committees will have only until September 16, 1995, to raise

the money to make the repayment, a process that would be

difficult if not impossible to complete in that time. Further,

in view of t~e Petitions for Review of the Commission's

determinations filed by the Committees with the D.C. Circuit, the

Committees would suffer irreparable harm if forced to comply with

the determination prior to resolution of their appeal.
·.~.: .. ......

..-' \0. .. _'

COVINGTON & 8URl.ING

Ms. Kim Bright-Coleman

August 22, 1995

Page 4

II. ARc;mmrr

A. Requirements for Entry of a Stay

The Commission has the authority and discretion to

issue a stay of its repaymen~ determinat~ons. 11 C.F.R.

§§ 9007.5(c) and 9038.S(c}. More generally, the test for a p~eliminary injunction, the equivalent c= a stay pending appeal,

is set forth in Virginia Petroleum Jobbers Ass'n v. ~, 259 F.2d

921 (D.C. eire 1958).

The principle issue on appeal will be whether the P~imary Committee acted reasonably in treating as primary

campaign expenditures the cos: of advertising, equipment, and ~ate~ials that were used during the primary campaign period for

purposes that had a connection to the campaign for nomination.

For the reasons set forth below, the Committee respectfully

submits that (i) requiring repayment prior to the resolution of

the appeal would cause irreparable harm, (ii). the Committee has a

_.=-.!.._-~----- sUb.s-t:_an~·~~~_;p..r.Q.~~~~ i.~.Y.:..9j__ :P~t::c_~~~ __~~ .~_!!~_ ~~~_~ .. ~~_i~~!~_C!.~e~ -!JY . ._ ':- the Comnu.SSl.on'S own struggle to resolve the dJ.ffJ:cult underlying . . legal and factual issues, (iii) there is no compelling government .~ interest in requiring repayment at this point, and (iv) the

equities favor maintaining the status quo. Accordingly, the

Commission should stay the repayment pending resolution of the

appeal .

B. A Stay Pending Appeal II Warranted Here

" .

.-.'-J'

Because of the s~stantial legal issues presented by

:he ~ommittees' appeals, and the irreparable injury that would be

incurred in complying with the repayment order, a stay is

appropriate here .

First, requiring immediate repayment would cause

irreparable harm to the Primary Committee and others. The

Primary Committee does not have funds sufficient to pay the

amount required in the repayment determination. The Compliance

Committee would need to raise the balance through difficult and

substantial fundraising activities, largely if not exclusively ~hrough direct mail appeals. While raising money is never easy,

it is particularly difficult several years after the election

during the heat of the next presidential election campaign that

is already well underway with 10 active Republican candidates.

As Keith A. Davis, Assistant Treasurer to the Committees,

explains in the attached declaration, the fundraising would have ~o be l~mited to the Pri~a~ and Compliance Co~~ittees, and only

:nd:v:duals who have not already con~ributed the $1,000 maxi~um

:0 these Com~ittees would be allowed to contribute. Mailing

A::AClj"1t1i'NT _1_-

rage30f 21
....,' ."'-..._......-r

COVINGTON" BUR\.ING

Ms. Kim Bright-Coleman

August 22, 1995

Page 5

lists would have to be culled and contributions would have to be

screened to ensure that each was proper and allowable.

As a result of these difficulties, the cost of raising

the funds would likely consume more than one third of the amount

raised and could easily reach one half of that ·amount. If the

Committees prevail on appeal, the time, effort, and expense of

the fundraising will have been entirely wasted. The government

would presumably pay back the money paid to U.S. Treasury, but it

would not reimburse the Committee, the fundraising volunteers, or

the contributors for their time or for the expense of the

fundraising. This loss would thus be irreparable.

A second i~reparable loss wou~d occur after the

Committee received the refund from the Treasury, again assuming a

favorable outcome on appeal. The Committee would refund the rema~n~ng money -- thus incurring substantial additional

administrative and postage expense ---leaving the contributors

substantially less than their original contributions. On the ___=- .. ... _o.ther __h~ft¢J:"_~?L_ge~~io~_.J}95__.~_t;_~_ ;-_efuIi~' the money would also leaVe

-;,-- the contribl~tors irreparably harmed. --'.- _.. ......__ . -. __ .--- -.------.--.--------. '-

\ .. :

'r

,.... '-- .

Second, as the Commission itself recognized during its

deliberations, the repayment determinations involve difiicult and

close legal issues that indicate that the Committees have a

reasonable probability of success. on the merits. For example,

there is a substantial question as to whether the Commission has

applied the proper legal standard in making its determination.

The applicable statute and regulations require, in pertinent ~a=t, ohlv that exoe~ditu=es be made n~~ connection with" t~e

campaign for nomination, 26 U.S.C. § 9C32(9); 11 C.F.R.

§ 9032(9). The Commission, however, applied a much higher

standard; it required that the expenditures qmust be primarily rela~ed to the primary campaign." Statement of Reasons at 19

(emphas~s added). Moreover, the Commission has recently adopted

the "bright line" test advocated by the Committees for the 1996

election cycle. If the "SO/SO split R prevails on appeal, only

the 1992 cycle will have been subjected to this standard.

Even if the "primarily-related- standard were to be

found to be within the Commission's discretion, another

substantial legal issue is whether the commission provided the

Commictees with adequate notice of its interpretation prior to

the 1992 campaign. The statute and regulations do not on thei=

face suggest that expenditures for goods and services received

and used p~ior to the date o~ ineligibility ("DOl") must either

be pr~ma=~:y related to the primary ca~paign or otherwise alloca~ed 50/50 between the Primary Co~~i~tee and the Gene~a:

Com~~~~ee. Nor has the Comm~ss~on been able to point to a slngle

~TTACmj;S.liT_~_' ~age .-2.- o~ -..61._
" ~o .. o. 0 _ -"': _

COVINGTON & BURLING

Ms. Kim Bright-Coleman

August 22, 1995

Page 6

instance before 1992 in which a presidential campaign was

required to allocate such expenditures on a SO/50 basis.

Third, the government would not be harmed by a stay.

While the repayment demand is substantially in excess of the Com~it~ees' current ability to pay, it is not needed immediately

by ~~e United States Treasury. If t~e Commission's determination

is upheld on appeal, the Committees will be as able to raise the

funds for the repayment at the end of the appeal process as they

are now. Moreover, the Commission's rules provide that ·stays

shall ~equire the payment of interes~ on the amount at issue."

11 C.F.R. § 9038.S(4}.

:-..•- ..• .{.~f.;

.~

.

Finally, the equities of the situation favor ma~~~aining the status quo. The Committees QndertooK a review of

the existing law, regulations, and precedents concerning the

allocacion of expenditures between the Primary and General

Committees, and, based on that review,- adopted a coherent

__ • app:oac;:~ that. ~as. C?C?nsi:'te?tl¥. applied: .The ..~d~i~tees promptl)' ".• - -.. '_L_~"----·-correc-ted"--t=-he-·-rel-at.~vely--few"':l.nadvert.eti.t-_de~J..atl..ons_~from_that ...__... _

~. approach that the Commission staff revealed during the post·

election audit. Several Commissioners made clear in their

comments during their deliberations that they do not question

that the Committees sought in good faith to comply with the

Commission'S requirements and that the issues presented were di~=iculc. Moreover, the Commissioners have made clear, both in

the regulations recently published and their comments during the

open meetings, that the -bright-line" approach under which the Com~ittee believed it was operating is the better policy .

..,..

• I

........

......... .

For the reasons set forth above, the Committee requests

that the Commission stay the repayments not already made by the Commit~ees pending the resolution of the appeal .

RespectfUlly submitted,

B~£r~~ Thomas O. Barnett

Counsel to the Committees
. .: ..- .. .-':,.'

COVINGTON & eURL'NG

._...,... . -..... .. -. "\ ".' . ..' .

DBCLARA'rION

.: .._.,_. o. ~o~·:.~.

I declare under penalty of perjury that the foregoing

is true and correct to the best of my knowledge, information, and

belief. Executed in Washington, D.C. on this 22nd day of August

1995.

~~Ra.. Bobb)iR:BU£ hfield'

'T'rrAC~f.k"NT ( ............ 1

Page ..-:L.- of
"::.... •• -t.. """.~'-. ' .. _.'~,,:-::.-: •• ': .

BBPORB TUB FEDERAL ELBCTION CO~SSION

)

Bush-ouayle '92 primary }

Committee, Inc., }

)

Petitioner )

)

v. )

}

Federal Election Commission, ,

)

Respondent. )

)

---------------}

Petition for Stay

DECLARATION OF gITH A. DAVIS

:~ acco~dance with 28 U.S.C. § 1746, I, Keith A.

Davis, hereby declare as follows:

1. During the 1992 Presidential campaign, I served

_.. ".....__ ... __··.._ ..:-a:;_.._~~~st~t _~_~.~~s~e~.~ .~~:.~~~~~_~.~~~~~ '~~._!_~~~%y. Commit~ee, .. ._---------. ---... ----_._-- ----;

Inc. (nprimary Committee"), Bush-OUayle '92 General Commi~tee,

....

'. '

Inc. (ftGeneral Committee"), and Bush-Quayle '92 Compliance

Committee, Inc. (WCompliance Committee") (collectively, the

"Committees"). As part of my responSibilities, I was involved

w:th virtually every aspect of the finances of the Committees,

including the fundraising efforts made by the Primary and

Compliance Committees. I have been involved with campaign

finance activities since 1979. This declaration is based upon

my personal knowledge, experience, and expertise.

2. The Commission's final repayment determination

requires, in part, that the Primary Committee repay to the

United States Treasury $106,979 for non-qualified campaign

expenses and $216,853 :cr match~~g funds received in excess of

A 'IAC;'-J."':NT I r~ge g o-r.....6-\-
·.,," ... -'. .

- 2 -

entitlement. The Commission also recommends that the

Compliance Committee reimburse the General Committee for

$182,785 to eliminate expenditures in excess of the General

Committee's overall expenditure limitation.

3. The Com~ittees currently lack the funds to make

such payments. As of August 22, 1995, the three funds had the

following net balances:

,.....

'--"

Primary Committee

General Committee

Compliance Committee

$ 5,550.63

. $ 8,734.33

$76,' 930. 63

4. If the Primary and General Committees are

!.n

,-.,

......

~eauired to make the payments set forth in t~e Ccmmission's

final determinations, they will have to undertake expensive

and dif:icult fundraising efforts. The only realistic method

for raising·the amounts necessary to comply with the repayment

determination ~s a d~rect mail appeal to the Primary and

Compliance Committee contributor lists. Since many of those

contributors have already contributed the maximum amount to

those Committees, the Committees' most reliable contributors

would need to be de~eted from the mailing.

ATTACli1LENT I --- Page~of .( \
-_.... -._-_.~--:~~._----_.

.••.•.·r~~

.;·:·f

- 3 -

S. The cost of raising funds during an election

campaign typically amounts to about one third of the funds

raised. To raise funds several years afcer an election,

however, the cost would be substantially greater.

6. The difficulty i~ raising funds for a past

Presidential election campaign is increased further by the

ex~ensive fundraising ef:or~s currencly being made by the 10

Re~'ib:icans seek~ng ~~e ~o~~nat~o.. for tte :996 electio~. It

could well be easier to raise funds after the 1996 election

than it would be to do so now. • I . _.. - --_ ...

7. As a result of these factors, I estimate that

......

'-' .

the cost of ~aising the funds necessary to make the repayments

re~Jired by the Commission would be at least $100,000 and

cc~ld exceed 5150,000. These cos~s do not include the time

a~~ e==or~ by volun~eers helpi~g ~~ch the fu~draising ef:c:~s.

I declare under penalty of perjury that the

foregoing is true and correct. Executed in Washington, D.C.,

O~ August 22, 1995.

K~th A. Davis

. I r. _ t_•••• ---

:ra~e \0 c: ..<\
.~.-

TMOMAS O. BAAN[T~

o--c<=' 00&.. """·.C· ~o~ eel 54cn

COVINGTON & BURLING

1201 PENNSYLVANIA AVENUE. N W

POBOX 7566

WASHINGTON 0 C 2004 <'-7566

t2021 662 ·6000

'[Lt'-.. ll 'ZOZI eel'.,••

TtLCll 80·5g~ 'COVL''''O WSfoO

C".~r. COVLII'CO

August 22, 1995

. . .. - ....

..ceoorn.o oClUSC

CUiloo. a.-.u"

L~"'I".&a

",",.uC)

TQ.(tOWOIC w.m..., ,." TtL"'''' ....",.~.)oO

IIIIUIlC.t ca-c~.O"'FlQ

•• MI'bIu( DC I UTI

....,.~, ·040 M:L~

'"~t~ lo' , !l:I._ec

'"'tL(T& I ". , !IOI

.:--

--.

Mark Langer

Clerk of the Court

Cnited States Coun of Appeals

for the District of Columbia Circuit

Room 5423

333 Constitution Avenue, N.W.

Washington. D.C. 20001·2866

----_.-._.._------------_._----._--- -- .- ------_._----------------- --- -._-----

Re: Petitions for Review Submitted by Busb-Qaayle '92

Primuy Collllllittee, IDe., Bush-Quayle '92 GeDeral

Committee, IDe. aDd Bush-Quayle 'n CompliaDce

Committee, IDe.

Dear ~1r_ Langer:

You \\;11 find enclosed an original and four copies of the follo\\ing: ,-

.-• .J I

1. A petition by Bush·Quayle '92 Primary Committee, Inc. for review

of fmal audit detenninations of the Federal Election Commission:

2. A petition by Bush-Quayle '92 General Committee, Inc. for review

of final audit determinations of the Federal Election Commission~

3. A petition by Bush-Quayle '92 Compliance Committee, Inc. for

revie\\· of final audit determinations of the Federal Election

Commission; and

4. A joint motion by the three committees to consolidate consideration

of the three petitions.

ATTAC~~T_J_

Page It of-2l-
·~ .. ••••, ••"""'~ .-•• C": ':~ .. :. "r,.. -. . .... .- -'-~"'.:-..,:.

COVlNGTON & BURLING

Mark Langer

August 22, 1995

Page 2

You will also fmd enclosed three checks in the amount of S100.oo each

payable to the United States Court of Appeals for the District of Columbia Circuit for the

filing fees for each petition.

Please date-stamp and return a copy of each paper \\ith our messenger.

Your cooperation in this matter is appreciated.

Sincerely,

.B~

Thomas O. Barnett

....' ..:

.'"".'

TOB:rmh

Enclosures

.' '. ,. .....
!:-- -"! ..,. ... -. . _ .... : ....;: ....... ..-.

UNITED STATES COURT 01' APPEALS

POR THE DISTRICT OF COL~~ CIRCUIT

)

Bush-Quayle '92 Primary )

Committee, Inc., }

}

Petitioner )

)

v. )

}

Federal Election Commission, )

)

Respondent. )

---------------)

Petition for Review

'.'

.....

....

Bush-Quayle '92 Primary Co~~~~tee, Inc. (the

nprimary Committee") hereby petitions the Court for review of

the final determinations sent to the Primary Committee by the

__-=-- f-e~~raJ:..~~~~~~.9n. _Co~i:~sion on AUgus~ 17, 1995. In addition,

. ".,;0 because the issues raised ~~ -~~i~~;~al :~: -Cl~S:l~----- -- ---- -----

interrelated to those raised in the petitions filed today by

Bush-Quayle '92 General Committee, I~c. and Bush-Quayle '92

Compliance Committee, Inc., thp Primary Committee requests

:hat ~he Cour: consolidate the three petitions.

:;,

.-'" '

Respectfully submitted,

Bobby ~~R. Burchfield

Thomas O. Barnett

COVINGTON & BURLING

P.O. Box 7566

1201 Pennsylvania Avenue, N.W.

Washington, D.C. 20044 (202~ 662-5000

Attorneys for Petitioner

August 22, 1995

A:~ACH1!!NT _

: ;;e \ 2 of _ I
CERTIFICATE OF SERVICE

.1. Thomas O. Barne~ certify that a copy of the foregoing document was

served by hand on this 22nd day of August, 1995. on the following:

Lawrence ~1. Noble. Esq.

Kim Bright·Colem~ Esq.

Delanie Painter, Esq.

Federal Election Commission

999 E Street. N.W.

\Vashington. D.C. 20463

........

'"

~-- -- _._-_-=..-:_----_. .~-~~--~._--~-

, . -.. ..

..< 42.~_ .. _. --Thomas-O.-Bamett ---------. ----------- - .. -.------
.. -. - - "

'ONn'BD STATES COURT 01' APPEALS

POR THE DISTRICT OF COLUMB~ CIRCUIT

, .

Bush-Quayle '92 General

Committee, Inc.

Petitioner

v.

Federal Election Commissior.,

Respondent.

)

)

)

}

}

)

Petition for Review

Bush-Quayle ' 92 General Committee, Inc. l "General

Committee") hereby petitions the Court for' review of the final

determinations sent to the General-Committee by the Federal

_ .. ------- Election .. Conunission - 0_- . _on August 1.7, 1.995. In addition, because _·-·--- 0 _

.-------_ ---_0 . .__

the issues raised in this appeal are closely interrelated to

those raised in the petitions filed today by Bush-Quayle '92

P=imary Committee, Inc. and Bush-Quayle '92 Compliance

"" ..

'f)

,"",

.... '

Committee, Inc., the General Committee requests that the Court

consolidate the three petitions.

Respectfully submitted,

B~B£:~ Thomas O. Barnett

COVINGTON & BURLING

P.O. Box 7566

1201 Pennsylvania Avenue, N.W.

Washington, D.C. 20044

(202) 662 .. 5000

Attorneys for Petitioner

A~gus~ 22, 1995

AT'I'AC:n~NT '

Eage IS Of:iIL
' ,. -.. ' .

..--: ' ..

CERTIFICATE OF SERVICE

I. Thomas O. Barnett. certify that a copy of the foregoing document was

served by hand on this 22nd day of A~ 1995. on the following:

Lawrence M. }\;oble. Esq.

Kim Bright-Coleman., Esq.

Delanie Painter, Esq.

Federal Election Commission

999 E Street, N.W.

Washington. D.C. ~0463

~.-

_.._----'--....-_.-_.:.-_~-!~.--_:_.- ..- •

.--\...

...
y." -,-:: '",~:.-:, ',,::-: :-.~ '"

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT or COLOMB~ CIR~T

Bush-Quayle '92 Compliance }

Committee, Inc., )

)

Peti~ioner )

)

v. )

}

Federal Election Commission, }

)

~espondent. }

----------------}

Petition for Review

--.

Eush-Quayle '92 Compliance Commi~tee, :nc.

("Compliance Committee") hereby petitions the Court for review

of the final determinations sent to the General Committee by

_.':-=- --_.-_.-,-- ---'--t'}~e-Feae'ral'-'Electicfn--Commiss1on" on--AU-gust-'17; --1.995:-'- -In-'" --'--' - ---_._'.-

':.>-.

'- .,"

.

~. I

'- .

addition, because the issues raised in this appeal are closely

interrelated to those raised in the petitions filed today by

Bush-Quayle '92 Primary Committee, Inc. and Bush-Quayle '92

General Committee, Inc., the Compliance Committee requests

that the Court consolidate the three petitions.

Respectfully submitted,

BO~BU~£~ ·

Thomas O. Barnett

COVINGTON & BURLING

P.O. Box 7566

1201 Pennsylvania Avenue, N.W.

Washington, D.C. 20044

(202) 662-5000

Attorneys for Petitioner

Augus~ 22, :995

ATTACHMENT (

Page ,'\ of-l.L
--:-::: -'m.

CERTIFICATE OF SERVICE

t Thomas O. Barnett. certify that a copy of the foregoing docwnent was

served by hand on this ~2nd day of August, 1995. on the folloVling:

La\\TeDCe M. Noble, Esq.

Kim Bright..Cole~ Esq.

Delanie Painter, Esq.

Federal Election Commission

999 E Street, N.Vl.

\Vashington. D.C. 20463

:".

... . - --- ... _-_. ---- -._---_.__ . -- ---_... --- ._---_.

-.

-'

'.

. ... ~o ;12.....£!~. ';' . - --- Tbomas-·O;-Bamett------ ---.----- ------ .------- --'-

f A'I'TACE~ENT _

Fage I of J J
·.. ,; :-.-.-:: ~.:: '7.!:.!

-=";".

UNITED STATES COURT or APPEALS

POR THE DISTRICT OP COLOMBXA CIR~T

)

Bush-Quayle '92 Primary )

Committee, Inc., )

Bush-Ouayle '92 General )

Committee, Inc., and ) E~sh-Quayle '92 Compliance )

Committee, Inc., )

)

Petitioners )

)

v. )

)

Federal Election Commission, )

)

Respondent. }

---------------)

Petit~on for Revi..

..... ...

,--

..........

.....-

:n

C'.

JOnrr MOTION POR COHSOL:IDAnQ1l- or PITUIONS POR gvXB!!

"Primary Conurittee"), Bush-Quayle '92 General Commdttee, Inc.

(the "General Committee"), and Bush-Quayle '92 Compliance

Committee, Inc. (the "Cc~pliance Committee") (collectively,

the .t Committees n) have petitioned the Court for review of the

:~nal determinations sen~ to the Committees by the Federal

E:ection Commission on August 17, 1995. For the reasons set

forth below, the Committees jointly move the Court to

consolidate consideration of the three petitions for review.

The primary issues raised by all three petitions

c~ncern the Commission's determina:ion that certain

expenditures should have been paid by the General Committee

rather than by the Primary Committee. Because the resolution

~= these issues a:fects ~he final Commission determinations

w~~h respec: to all of ~~e Co~mit:ees, the Commission
-:;--'::'.~-~ .,. '"':

... '.

- 2 -

addressed the issues on a cc~solidated basis, and the

Committees respectfully submit that it would be more efficient

for the Court to do the same.

Counsel for the Committees has consulted with the

General Counsel for the respondent Federal Election Commission

G~ th~s motion, which has ~C: yet ~eached a determination on

the issue.

Respectfully submitted,

J~B~ Thomas o. Barnett

_z -.!.... _ _ " -.:.::...-.:.~:.... __"__~:....:.._ ".. • •••• " COVINGroN ."&. BURLJ:N&. :.. : . .~' ------ ----------.-.- -- .. -~ --P:O.-Box--'56-6-·------- .-------- ----- .---------.-. -

1201 Pennsylvania Av~nue, N.W.

Washington, D.C. 20044

(202) 662-5000

Attorneys for Petitioner

August: 22, 1995

'-

-

'.n

A':'rACHMENT I

:a5e-.1::Qo~

. !
. . ..... . .• ... - ...... :0.. _. .. .... • o. r ~::-" .. , .

CERTlFICATE OF SERVlCE

I. Thomas O. Barnett. certify that a copy of the foregoing document was

•. _: • ··t-:'". ::~ -_."

served by hand on this 22nd day of August.. 1995, on the following:

Lav,Tence ~t !'4oble. Esq.

Kim Bright-Coleman, Esq.

Delanie Painter, Esq.

Federal Election Commission

999 E Street, N.W.

\Vashington. D.C. 20463

~-eA --l9'-~l . ._ ....-Thomas O_Bamett.. ._. ... -.-..-----.-

,- . ,..

:.;)

C"

ATTACH1S1iT I

?age -2L of~T