FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

MEMORANDUM 

Nay 24, 2011 

TO: 

FROM: 

Joseph F. Stoltz 

Assistant StaffDirector 

Christopher Hugihey 

Acting General Counsel ' 

Lawrence L. Calvert, 

Associate General Co 

Lorenzo Holloway 

Assistant General Counsel 

For Public Finance and Audit Advice 

Delanie DeWitt Painter 

Attomey 

SUBJECT: Draft Final Audit Report for Chris Dodd for President, Inc. (LRA 744) 

The Office of the General Counsel has reviewed the Draft Final Audit Report ("DFAR") 

for Chris Dodd for President, Inc. ("Conunittee"). We generally concur with the findings in the 

DFAR and have specific comments on Finding 2: Receipt of Prohibited Contribution and 

Contributions that Exceed Limits and Finding 3: Misstatement of Financial Activity. If you have 

any questions, please contact Delanie DeWitt Painter, the attorney assigned to this audit. 

I. COMMITTEE RECEIVED APPARENT PROHIBITED IN-KIND 

CONTRIBUTION FROM lAFF (Finding 2) 

We concur that the Committee received an apparent prohibited in-kind contribution of 

$15,423 from the Intemational Association of Firefighters ("lAFF"), a labor organization. The 

LAFF apparently paid $15,423 for the rental of a bus that the Committee used between 

December 17,2007 and January 4,2008, at the end of the Iowa campaign. The Committee 

explained that the lAFF initially paid for the bus rental for transportation to lAFF events, and the 

Committee later obtained use of the bus for its campaign. The lAFF sent the Committee a 

February 12,2008 invoice for the bus, which stated that "as advised by our election law legal 

counsel the campaign has 60 days from the conclusion of the Iowa caucus to reimburse the lAFF 

for the rental cost as it is considered a transportation cost." The invoice continued that the 

Committee should reimburse the L\FF's separate segregated fiind, lAFF FIREPAC ("FIREPAC") 
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by March 4,2008.' But the Committee did not pay FIREPAC for the bus rental until October 21, 

2009, more than a year and a half later, when it paid $32,233.^ 

The Committee has not demonstrated that it did not receive a prohibited in-kind 

contribution or that the lAFF did not pay for the bus rental. See 2 U.S.C. § 44lb. In response to 

the Preliminary Audit Report ("PAR"), the Committee contends that the 60 day timetable for 

reimbursement of other means of transportation in 11 C.F.R. § 100.93should not apply because the 

bus was primarily a form of advertising. It argues that since the ^'primary purpose of the wrapped 

bus was not to transport people from place to place, but rather to serve as an unusual form of 

campaign visibility, like the C-Span bus or the Ron Paul blimp," the question should be whether 

the campaign paid for the bus within a commercially reasonable time, and it cites 11 C.F.R. 

§ 114.9(d). The Conimittee asserts that it did not receive a prohibited contribution because the 

invoice instmcted it to pay FIREPAC, not lAFF. Finally, it contends that the payment was delayed 

because it was in a deficit position with competing obligations and that it paid the full cost of the 

bus rental and decoration "in an abundance of caution." 

The Committee's arguments are not persuasive. The Committee paid for the bus more than 

a year and a half after both the invoice date and the payment due date listed on the invoice. This 

delayed payment was neither within the section 100.93 standard for reimbursement of other means 

of transportation nor within a commercially reasonable time. Because the bus was used, at least in 

part, for transportation, there would have been no contribution if the Committee had timely 

reimbursed lAFF for the bus rental cost. The Conunittee could have properly paid the cost ofthe 

bus rental as an other means of transportation not operated for commercial passenger service 

within 30 days of receipt of the invoice or 60 days after the travel began. See 11 CF.R. 

§ 100.93(d). The Committee's failure to make timely reimbursement resulted in a prohibited 

in-kind contribution. See 11 C.F.R. § 100.93 (b)(2). Altematively, ifthe bus rental cost is 

considered a form of campaign advertising like a blimp or rolling billboard that was provided by a 

vendor or as a labor organization facility used by the Committee, the Conunittee should have paid 

for the bus rental cost within a commercially reasonable time. See 11 C.F.R. § 114.9(d), see also 

11 C.F.R. § 116.3. Yet it failed to do so. The invoice directed the Committee to pay by March 4, 

2008, but the Committee paid a year and half later. The fact that the Committee was in a deficit 

position and had other debts does not make the delayed payment of this debt commercially 

reasonable. Moreover, the amoimt at issue relates only to the cost of bus rental and not to the 

decoration of the bus, which would be more clearly related to an advertising purpose. Further, the 

fact that the Committee was instmcted to pay FIREPAC rather than lAFF does not change the fact 

The lAFF billed the Committee $12,087.54 for 18 days of the 48 day total that the lAFF and the Dodd 

campaign used the bus. The Conmiittee, however, paid the $32,233 total cost of the bus rental and decoration. We 

note that the $16,810 cost of decorating die bus was apparentiy paid by FIREPAC and is not at issue in the DFAR. 

^ Both tiie Committee and FIREPAC disclosed the full $32,233 cost oftiie bus as a debt owed by tiie 

Committee to FIREPAC beginning with tiie March 2008 reports and continuing until tiie Committee paid tiie debt in 

full in October 2009. The Committee provided a copy of a check to FIREPAC, dated October 21,2009, for $32,233. 
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that the lAFF, a union, paid for the bus rental cost. Therefore, the Committee received a prohibited 

in-kind contribution fmm the lAFF. 

While we concur with your conclusion, we suggest that the discussion at page 12 of the 

DFAR be revised to delete the references to 11 C.F.R. § 103.3 in the second and third paragraphs. 

We do not think a 30 day standard based on section 103.3 is appropriate here. Section 103.3 

contains the mles for deposit and refund of contributions like checks rather than an in-kind 

contribution that results fix)m a bus rental. 

IL CLARIFY IMPACT OF INVESTMENT ACCOUNT LOSSES ON EXCESSIVE 

CONTRIBUTIONS AND MISSTATEMENT (Findings 2 and 3) 

We concur with the Audit staffs analysis of excessive contributions (Finding 2) and 

misstatement of financial activity (Finding 3) but suggest several revisions to clarity these findings 

in the DFAR.^ The Audit staff should clarify the impact of the Committee's investment accoimt 

on these findings. The Committee had an investment account ("General Account") with a 

brokerage for general election contributions received during the primary election period under the 

conditions set forth in AO 2007-03 (Obama), which lost a substantial amount of value during the 

audit period because of the decline in the stock market.^ See AO 2008-04 (Dodd). In response to 

the PAR, the Committee made numerous arguments about why the General Account's losses 

should not result in excessive contributions. However, these arguments are irrelevant to the draft 

you have asked us to review. Instead, they seem to refer to a potential issue raised by the auditors 

at a previous stage in the audit about whether the Committee properly valued assets transferred 

from the General Accoimt to Senator Dodd's Senate committee. At an earlier stage in the audit, 

the Audit Division believed that the value of those transferred assets, which were intended to cover 

redesignations of presidential general election contributions to the Senate committee, could 

potentially have raised excessive contribution issues. The DFAR, however, does not contain any 

finding of excessive contributions arising from a loss in value of tiie General Account assets 

transferred to the Senate committee. Most of the contributions from the General Account are 

considered either timely or untimely resolved based on the Committee's response to the PAR. For 

the Committee's benefit, the DFAR should make clear that the two references to the investment 

account in the misstatement finding are not related to the value of the assets transferred from the 

General Accoimt to the Senate committee and that the excessive contributions finding is not now 

based on the value of the General Account assets transferred to the Senate committee. 

The DFAR should provide additional explanation to clarify the misstatement finding 

(Finding 3). The misstatement finding refers to the Committee's failure to report $150,370 in net 

realized investment losses. This has nothing to do with the transfer of any assets from the General 

In addition to these changes, we suggest tiiat the discussion of apparent excessive contributions fiiom other 

political conunittees at pages 12-13 be revised to clarify how the specific contributions identified in the bullet points 

on page 12 were resolved by the Conunittee's response to the PAR. 

^ . After Senator Dodd withdrew fiiom die primary race on January 3,2008, he was no longer a potential general 

election candidate, and the Committee was required to refund or redesignate the general election contributions. See 11 

C.F.R. § 102.9(e)(3); AO 2008-04; AO 2007-03; AO 2003-18 (Smitii). 
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Account to the Senate committee, because that transfer took place in October 2008, after the close 

ofthe audit coverage period on September 30,2008. Nor, contrary to the Committee's contention, 

does it reflect any unrealized losses, which are not required to be reported. Rather, this part of the 

misstatement finding simply reflects the accumulated net realized losses resulting from activity in 

the investment accounts from January 1,2008 througih September 30,2008, which were identified 

as net realized losses on the broker statements. Realized capital losses must be reported as "other 

disbursements" in the reporting period in which they are realized. See Memorandum to Wanda J. 

Thomas, Audit Report on Friends of Weiner (Mar. 4,2009) (This Ofiice concluded that the 

committee was not required to report unrealized gains and losses as cash on hand under 11 CF.R. 

§ 104.3(a)(1), but the report should be clarified to reflect that the Audit Division's view was that 

die committee failed to report realized gains and losses.) The Committee failed to report these net 

realized losses, which, in part, resulted in the misstatement. 

The misstatement finding also states that the Committee overreported $351,210 in 

transfers to the Senate committee. Althougih this amount relates to the transfer of assets from the 

General Account to the Senate committee, the overreporting finding is based on the timing of that 

transfer, not on the appropriate value of the assets. The Committee reported that the transfer 

occurred in September 2008, but in fact it did not occur until October 2008. The transfer should 

not have been reported on the report covering September 2008. More to the point, the 

misreporting of the transfer results in an overstatement of disbursements for the audit coverage 

period because the transfer did not in fact take place during the audit coverage period as originally 

reported. We understand that the Committee has amended its reports to correct this misstatement. 

The excessive contributions finding (Finding 2) should clarify that the excessive 

contribution finding is not based on the value of the assets moved from the General Account to the 

Senate committee for redesignated contributions, and that these contributions are considered 

resolved. In several places (text and foomote 10 on page 13, footnote 11 on page 15) the DFAR 

states that the Committee had redesignation letters for moving general contributions to the Senate 

Committee, but it had insufficient funds to make the transfers. Foomote 11 states that there is 

$173,210 in contributions for which the Committee provided redesignation letters but has not 

provided evidence that it actually moved the funds to the candidate's Senate Committee. Because 

the excessive contributions finding is not based, as we understand it, on any lack of funds or failure 

to move the funds for redesignated contributions, we question the need for these references. 

In addition, we suggest several other changes throughout the DFAR to clarify that the 

valuation of assets moved from the General Account to the Senate committee has no impact on the 

findings in the DFAR. We suggest you delete the last sentence of foomote (a) of the Statement of 

Net Outstanding Campaign Obligations on page 7, which states *This loss and subsequent losses 

are the basis for the excessive contributions of $244,050 identified during audit fieldwork 

discussed in finding 2." We also suggest you delete the last sentence in the last paragraph of 

Finding 1 on page 8, which states "The valuation of the investment account has no impact here, but 

is discussed further in Findings 2 and 3." These sentences could create confusion because the 

$244,050 in excessive contributions related to the General Account identified in the PAR was 
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based on lack of documentation of redesignations or other resolution of those contributions, not on 

the loss of value of the General Account.