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FEDERAL ELECTION COMMISSION AK007529

February 5, 1996

MBHORANDUM

TO:

FROM:

RON M. HARRIS

PRESS OFFICER

PRESS OFFICE

ROBERT J. COS'l'A

ASSISTANT STAFF DIREC

AUDIT DIVISION

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SUBJECT: PUBLIC ISSUANCE OF THE PINAL AUDIT REPORT ON

JUDE FOR COHGRESS

Attached please find a copy of the final audit report

and related documents on Jude for Congress whichvaa approved

by the Commission on January 25, 1996.

Informational copies of the. report have been received by

all parties involved and the report 1Ul" be released to the

public.

Attachment as stated

cc: Office of General Counsel c~ Office of Public Disclosure

Reports Analysis Division

FEC Library

lE iE',P-\' T< )0"" A..... O TOMORRO\\

D£DI( -\Hf1 T( l "'HP1 .... c., THE Pl.'BUC l"'I,jfORMED

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REPORT OF THE AUDIT DIVISION

ON

Jude for Congress

approved January 25, 1996

FEDERAL ELECTION COMMISSION

999 E STREET. N.W.

\\r.-\SffiNGTON, D.C.
TABLE OP CON'1'Bll'1'S

JUDE FOR. CONGRESS

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Executive S~ry

Final Audit Report

Background

Findings

Legal Analysis

Transaittal to C~ttee

Chronology

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FEDERAL ELECTION COMMISSION

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PIRAL AUDI'!' RBPORT

Olf

JUDE FOR COJIGRBSS

EXBCtJ'l'IVB SUllKARY

The Committee registered with the Clerk of the U.S. House

of Representatives on June IS, 1992, as the principal campaign

committee for Thaddeus Jude, Republican candidate for the U.S.

House of Representatives, Minnesota, 6th District.

The audit was conducted pursuant to 2 u.s.c. S438(b),

which states that the Commission may conduct audits of any

political committee whose reports fail to meet the thre8hold

level of compliance set by the Commission.

The findings of the audit were presented to the Ca..ittee

at an exit conference held after the audit fieldwork (5/18/95)

and later in an interim audit report.

The following is an overview of the findings contained in

the final audit report.

Candidate Loan

Sections 431(8)(A)(i) and 441a(a)(l)(A) of Title 2 of the

United States Code; Sections 100.7(a)(1)(i) and 110.10(8) and

(b) of Title 11 of the Code of Federal Regulations. It appears

that the Candidate's mother, Ruth M. Jude, made a total of

$51,000 in contributions, exceeding the general election

contribution limitation by $50,000.

The Candidate's mother, Ruth Jude, issued a $50,000 check

on October 31, 1994, from the Ruth M. Jude Revocable Trust

account, payable to the Candidate's deceased father's trust,

the Victor N. Jude Revocable Trust. The Victor N. Jude

Revocable Trust, in turn, issued a $50,000 check payable to Tad

Jude (Candidate); the Candidate sig;~d the check on behalf of

the trust. This check was then deposited into the Candidate's

personal checking account, r.. ld jointly with his wife. 'fhe

Candidate then issued his p~rsonal check to the Committee.

Further, the Candidate issu:~j other checks, totaling $1,500,

drawn on the Victor N. Jude ~,,··.vcable Trust that were deposited

into the Committee's campa~-;~.. ,2.:count.
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According to the COImIlittee's attorney -the loan aade by

the candidate'. mother to the candidate's deceased father's

trust was to provide liquidity to the Victor R. Jude Trust.

The candidate/beneficiary of the Victor N. Jude Trust then

received a portion of his share in his father'. trust. This

was not a loan for the purpose of influencing the election but

rather a loan to the candidate of a portion of his share of the

Victor N. Jude Trust following his father's death. Victor Jude

died in August, 1994."

It should be noted, however, that neither the Victor N.

Jude Trust Agreement nor the Ruth M. Jude Revocable Trust

Agreement provided for such a distribution at the time the

checks were issued.

Itemization of Contributions From Individuals

Sections 434(b)(3)(A) and 431(13)(A) of Title 2 of the

United States Code. The audit identified 28 contributions from

individuals, totaling 19,550, that were not ite.ized on

Schedule A, as required. 0'

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The Committee responded by filing a.ended SChedules A,

which materially corrected the itemization error••

Itemization of Contributions Prom Political Co ittee.

Sections 434(b)(3)(B) and 431(4)(A) of Title 2 of the

United States Code. The Audit staff identified 32

contributions, totaling $19,753, which were not it~.ed Oft

Schedule A, as required.

The Committee responded by filing -.ended SChedules A,

which corrected the above omissions.

Disclosure of Disbursements

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

and Section l04.3(b)(3)(i)(A) and (8) of Title 11 of the Code

of Federal Regulations. The Audit staff identified a aaterial

number of disbursement entries on Schedule B that failed to

adequately identify the purpose of the disbursement.

The Committee responded by filing amended Schedules a,

which materially corrected the public record.

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FEDERAL ELECTION COMMISSION

REPORT OF THE AUDIT DIVISION

ON

JUDE FOR CONGRESS

Alt007383

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I • Background

A. Audit Authority

This report is based on an audit of Jude For Congress

(the Committee), undertaken by the Audit Division of the Federal

Election Commission in accordance with the provisions of the

Pederal Election Campaign Act of 1971, as amended (the Act). The

audit was conducted pursuant to section 438(b) of Title 2 of the

United States Code which states, in part, that the Commission .ay conduct audits and field investigations of any political

committee required to file a report under section 434 of this

title. Prior to conducting any audit under this subsection, the

Commission shall perform an internal review of reports filed by

selected cOllDDittees to determine if the reports filed by a

particular committee meet the threshold requirements for

substantial compliance with the Act.

B. Audit Coverage

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The audit covered the period January 1, 1993 through

December 31, 1994. During this period, the CODDDittee reported a

beginning cash balance of $997; total receipts for the period of

$705,343; total disbursements for the period of $699,417; and an

ending cash balance of $6,923 !/

o. c. Campaign Organization

The Committee registered with the Clerk of the u.S.

House of Representatives on June 15, 1992 and maintained its

headquarters in Minneapolis, Minnesota. During the audit period,

Mr. Scott R. Riddle was the Treasurer of the Committee. The

current Treasurer is Mr. Kevin Dittbenner.

To manage its financial activity, the Committee

maintained one checking account and one savings account. The

Committee reported receiving 68.6' ($483,331) of its receipts

from individual contributions, 22.1' ($156,065) fr,"'nl political

!/ The figures cited in this report were rounded to the

nearest dollar.

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action commi'ttees, 7.3' ($51,500) from the candidate, 1.9'

($13,257) from political party committees and the rest from

offsets to operating expenditures.

D. Audit Scope and Procedures

The audit included testing of the following general

categories:

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

statutory limitations (see Finding II.A.)J

2. the receipt of contributions from prohibited source.;

3. proper disclosure of contributions from individuale,

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 Findings II.B. and e.);

proper disclosure of disbursements including the

itemization of disbursements when required, as well 8S,

the completeness and accuracy of the information

disclosed (see Finding 11.0.);

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proper disclosure of campaign debts and obligations;

the accuracy of total reported receipts, disbursements

and cash balances as compared to bank records;

adequate recordkeeping of campaign transactions; and,

other audit procedures that were deemed necessary

in the situation.

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. Audit Findings and Recommendations

A. Candidate Loan

Section 431(8}(A)(i, of Title 2 of the United States

Code states, that the term "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 for Federal office.

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Section 100.7(4)(I)(i) of Title 11 of the Code of

Federal Regulations states, in part, that the term loan includes

a guarantee, endorsement, and any other form of security.

Sections 110.10(a) and (b) of Title 11 of the Code of

Federal Regulations state, in part, that candidates for Federal

office may make unlimited expenditures from personal funds. Por

purposes of this section, personal funds means any assets which,

under applicable state law, at the time he or she became a

candidate, the candidate had legal right of access to or control

over, and with respect to which the candidate had either:

legal and rightful title, or an equitable interest. A candidate

may use a portion of assets jointly owned with his or her spouse

as personal funds. The portion of the jointly owned assets that

shall be considered as personal funds of the candidate shall be

that portion which is the candidate's share under the

instrument(s) of conveyance or ownership. If no specific share

is indicated by an instrument of conveyance or ownership, the

value of one-half of the property used shall be considered a8

personal funds of the candidate.

Section 441a(a)(1)(A) of Title 2 of the United States

Code states, in part, that no person shall make contributions to

any candidate and his authorized political committees with

respect to any election for Federal office which, in the

aggregate, exceed $1,000.

The Committee reported receiving a $50,000 loan fro.

the Candidate, Thaddeus V. Jude, on OCtober 31, 1994. The

reported loan transaction was made via check drawn on a bank

account that is jointly held by the Candidate and his spouse.!1

It should be noted that a deposit in the amount of $50,000 vas

made to the joint checking account held by the Candidate and his

spouse on OCtober 31, 1994.

During the course of the fieldwork, the Audit staff

requested that the Committee identify the source of the OCtober

31, 1994 deposit made to the joint checking account, and if made

from an account controlled by the Candidate; copies of the

accnunt statements for the period OCtober through November 1994.

At the exit conference, the Candidate's attorney stated

that the source of the $50,000 deposit into the joint checking

account was from a trust account. The Audit staff again

requested that the Committee provide copies of the October and

November 1994 bank statements for the trust account. The Audit

staff also requested the Committee identify the type of trust,

provide a copy of the trust agreement as well as any codicil(s)

2/ This check was returned by the bank on November 2, 1994 due

to insufficient funds. The Committee re-deposited the check

on November 15, 1994.

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to the trust agreement. It should be noted that the Candidate

issued checks, totaling $1,500, dated October 7, 1994, drawn on

the Victor N. Jude Revocable Trust.

The Committee did not provide any of the documentation

requested within the 10 day period provided subsequent to the

exit conference.

Given the above, at the time of the interim audit

report, it appeared that the source of the loan was the trust

account. However, absent documentation with respect to the type of trust, the trust agreements, statements for the account, etc.,

a determination as to the actual source of funds and whether the

loan was pe~i8sible was not certain.

In the interim audit report the Audit staff recommended

that the Committee provide the OCtober and November 1994 bank

statements for the trust account,~1 identify the type of trust,

provide a copy of the trust agreement and codicil(s) if any. The

Committee was also reques~ed to provide a statement that

demonstrated that the funds from the trust account were

permissible for use in federal elections.

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In response to the interim audit report the Ca.mittee

provided the following:

- copy of the Ruth M. Jude Revocable Trust Agreement (Candidate's mother];

- copy of the Victor N. Jude Revocable Trust Agreell8nt [Candidate's father];

- copies of the OCtober 7 through November 10, 1994

bank statement for each trust account;

- copies of the October 1994 and November 1994 bank

statements for the Candidate and spouse joint checking account; and,

- copies of checks relevant to the above loan

transaction.

According to the documents provided, on November 2,

1994 a $50,000 check, payable to Victor N. Jude Revocable Trust,

was issued from the Ruth M. Jude Revocable Trust Account. The

3/ If a deposit was made to the trust account to cover the

check (from the trust account) deposited into the

Candidate's personal account, bank statements associated

with the check deposited into the trust account should be

made available.

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memo line is annotated "loan to Thaddeus Jude taken from Vic Jude

Trust". The c~eck was deposited into the Victor N. Jude

Revocable Trust Account on November 2, 1994.

On OCtober 31, 1994 a $50,000 check payable to Tad Jude

(signed by Tad Jude) was issued from the Victor N. Jude Revocable

Trust. The memo line was annotated "loan". The balance in the

Victor N. Jude Revocable Trust Account on OCtober 31, 1994, prior

to this check being issued was approx~ately $2,444. This check

was deposited into the Candidate's joint checking account.

According to the Committee's attorney "the loan made by

the candidate's mother to the candidate's deceased father's trust

was to provide liquidity to the Victor N. Jude Trust. The

candidate/beneficiary of the Victor N. Jude Trust then received a

portion of his share in his father's trust. This was not a loan

for the purpose of influencing the election but .rather a loan to

the candidate of a portion of his share of the Victor N. Jude

Trust following his father'S death. Victor Jude died in August,

1994."

Based on our review of the Victor M. Jude Revocable

Trust Agreement, the Candidate did not have legal and rightful

title or an equitable interest to any portion of Victor H. Jude

trust assets on October 31, 1994.

With respect to distribution of the assets of this

trust, it appears only Article III. (Dispositive Provisions),

Paragraph 3.3 (Upon Death of the Settlor with a Surviving Spouse)

and Paragraph 3.4 (Upon Death of the Settlor without a Surviving

Spouse, or Disposition of Family Trust Upon Death of Settlor'.

Spouse) is relevant.

Victor N. Jude was survived by his spouse, Ruth K.

Jude. Therefore, Paragraph 3.3 governs distribution of the trust

assets. There is no stated directive that provides a

distribution to the Candidate pursuant to Paragraph 3.3.

Paragraph 3.3 provides, in relevant part, that upon

the death of the Settlor leaVing a surviving spouse, the Trustee

shall from the trust property: pay certain expenses unless these

payments are otherwise provided for; distribute a gift provided

for; transfer an amount to the Settlor's sur~iving spouse; if

any balance is remaining, transfer an amount to the Family

Trust; if a balance still remains transfer this amount to the

surviving spouse. (According to the Ruth M. Jude Revocable

Trust Agreement, upon the death of Ruth M. Jude, after payment

of just debts, expenses and gifts, the balance of the trust

property (including the Family Trust) would be distributed

outright to the Settlor's children in equal shares,

stirpes. )

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Rather Paragraph 3.4.3 states, absent a surviving

spouse, the Candidate, as well as, eight other children would

have received in equal shares, per stirpes, the balance of the

trust property subsequent 'to distributions required at Para9raphs

3.4.1 and 3.4.2. [payment of just debts and gift provisiona).

Based on documentation made available, the source of

the, $50,000 loan was the Ruth M. Jude Revocable Trust Account,

not the personal funds of the Candidate a8 posited in the

Committee's response. As a result, it appears Ruth K. Jude, the

Candidate'S mother, made a $50,000 excessive contribution to the

Committee. Ruth N. Jude previously contributed $1,000 to each

election.

Finally, as previously stated the Candidate issued

checks, totaling $1,500, drawn on the Victor N. Jude Revocable

Trust. Article III., Paragraph 3.3, does not provide for such a

distribution.

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

Code states, in part, that each report under this section shall

disclose the identification of each person who .akes a

contribution to the reporting committee during the reportin9

period, whose contribution or contributions have an aggregate

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

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

defines identification in the case of any individual, 8S the

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

as well as the name of his or her employer.

During our review of contributions, it was noted that

28 contributions from individuals were not itemized on Schedule

A, as required. The contributions, totaling $19,550, were

received in the OCtober/November 1994 reporting periods.

At the exit conference the Committee was provided

schedules of contributions requiring itemization. The Committee

stated that it would amend its disclosure reports to rectify the

errors noted above.

In the interim audit report the Audit staff recommended

that the Committee file amended Schedules A to correct the

omissions noted above.

In response to the interim audit report the Committee

filed amended Schedules A which materially corrected the

itemization errors.

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c. Itemization of Contributions From Political C~ttees

Section 434(b)(3)(B) of Title 2 of the United Stat•• Code states, in part, that each report under this section ahall

disclose the identification of each political committee which

.ekes a contribution to the reporting committee during the

reporting period, together with date and amount of any such

contribution.

Section 431(4)(A) of Title 2 of the United States Code

states, in part, that the term "political committee" means any comm~ttee, club, association, or other group of persons which

receives contributions aggregating in excess of $1,000 during a

calendar year or which makes expenditures Aggregating in excess

of $1,000 during a calendar year.

The Committee's receipt records were reviewed to

determine whether all contributions received from political

committees were itemized. The Audit staff identified 32

contributions, totaling $19,753, which were not itemized as

required on Schedule A.

At the exit conference, the Committee was provided a

schedule of the aforementioned contributions. The Comaittee

stated that they would file the appropriate amendments.

In the interim audit report the Audit staff reca.aended

that the Committee file amended Schedules A to correct the above

omissions.

In response to the interim audit report the Ca..!ttee

filed amended Schedules A which corrected the itemization errors.

D. Disclosure of Disbursements

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

Code states, in part, that each report under rhis section ehall

disclose the name and address of each person ~c whom an

expenditure in an aggregate amount or value '.n excess of $200

within the calendar year is made by the rn?o,...t~n9 cODDittee to

meet a candidate or conunittee operating expt-..:H.5e, together with

the date, amount, and purpose of such oper~ting expenditure.

Section 104.3{b)(3)(i)(A) and :B~ of Title 11 of the

Code of Federal Regulations states, in ~art, that purpose means a

brief statement or description of why the disbursement was made.

Examples of statements or descriptions which meet the

requirements include the following: dinner expenses, media,

salary, polling, travel, party fees, phone banks, travel

expenses, travel expense re~ursement, and catering costs.

However, statements or descriptions such as advance, election day

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expenses, other expensesI expenses, expense reiabursementI

miscellaneous, outside services, get-out-the-vote and voter

registration would not meet the requirements of 11 CPR

l04.3(b)(3) for reporting the purpose of an expenditure.

The Audit staff's review of the disbursements itemlled

on Schedule B identified a material number of 1994 disbursement

entries that contained inadequate purposes. In .ast cases the

itemized entries included a purpose, however, descriptions such

as "expense reiabursement" and "various campaign expenses" for

payments made to Committee personnel and to vendors do not

satisfy the disclosure requirements.

The Cam-ittee representatives were shown examples of

the inadequate purpo8es at the exit conference. The Committee

agreed to amend its 1994 disclosure reports to correct the

irregularities.

In the interim audit report the Audit staff recommended

that the Committee file amended Schedules B to its 1994

disclosure reports providing an adequate purpose for

disbursements.

In response to the inter~ audit report the Committee

filed amended Schedules B which materially corrected the public record.

Page Ie, Approved 1/25/~6
FEDERAL ELECTION COMMISSION

WASHINCTON. 0 C 2(Me»)

Deceaber 18. 1995

EXHIBI'l' A

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MEMORANDUM

TO: Robert J. Costa

Assistant Stafr.Uil·~31'

Audit Divisi ..

THROUGH: John C.

Staff Dircc1:00~

FROM:

BY:

Lorenzo Ho oway .,,'}-

Assistant Counsel

Abel Montez

Attorney ,."/'/, I

SUBJECT: Proposed Final Audit Report on Jude for Congress

(LRA #480)

1. INTRODUcnON

The Office ofGeneral Counsel bas reviewed the proposed final Audit Report on

Jude for Congress (~ Committee") submitted to this Office on November 2, 1995.' The

following memorandum summarizes our comments on the proposed report. We concur

with findings in the proposed report which are not discussed separately in the following

Because the proposed Final Audit Report does not include any matten exempt from public

disclosure under II C,F.R. § 2.4, we recommend that 1M CommISSion's discussion ofthis document be

conducted in open sess1011.

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Memor.id_ toRobatJ. Costa ,... Audit Report for

Jude for Congress (LIlA , 480)

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memonndum. Ifyou have any questions concerning our comments, please contact Abel

M6atez, the attorney assigned to this audit.

D. CANDIDATE LOAN (II.A.)

The cover memorandum to the proposed Final Audit Report raises a question that

relates to the original source of a $50.000 loan from the candidate to the Committee. The

proposed Final Audit Report notes that the Committee reported receiving a 550,000 loan

from the candidate on October 31. 1994. The loan was disbursed from a checking account

that wasjointly held by the candidate and his spouse. Based on cl.....-:umentation submitted

in response to the Interim Audit Repo~ the auditors traced the 550.000 to the candidate's

mother's revocable trust.

The Candidate's father, Vietor N. Jude, died in August 1994. On October 31. 1994,

the balance in the Vietor N. Jude Revocable Trust ("Victor Trust") was approximately

52..444.2 On October 31, 1994, a S5O,OOO check payable to the candidate Tad Jude, signed

by Tad Jude, was issued &om the Victor Trust. On October 31, 1994, the Committee

reponed receiving a $50,000 loan &om the Candidate. The check's memo line was

armotated MI08D." On November 2, 1994, due to iDsufficicnt fUnds in the Victor Trust

accoun~ the bank returned the check to the CornrDittee. On November 2, 1994, the

Ruth M. Jude Revocable Trust ("Ruth Trust") issued a check for S5O,OOO 10 the Vietor

Trust.) The check's memo line is annotated Mloan to Tbaddeus Jude taken &om Vic Jude

Trust." The caDdidaIc _ loaned the same _ to the Committee on

November 15, 1994; the Committee re-deposited the S5O,OOO check tbat bad been

previously issued on October 31. 1994 by the Vietor Trust

The proposed Final Audit Report notes that the candidate did not have legallDd

rightful title or an equitable interest in the assets from the Vietor Trust when the funds

YJere disbursed to the candidate on October 31. 1994. Therefore, the 550.000 was not the

personal funds oftbe candidate as defined in 11 C.F.R. § 110.IO(b). The auditorsreviewed

the relevant portions ofthe Vietor Trust concerning the distribution oftrust property upon

the father's death (with the survival oftile spouse. Ruth M. Jude). The auditors note

priority ofpayments ofthe property and conclude that the candidate did DOt have any lepl

or rightful title to the trust propeny on the date the $50,000 was disbursed from the Vietor

Trust. Therefore, the Audit Division concludes that Ruth M. Jude made a SSO,OOO

contribution to the Committee.

The candidale's faIher was the orilinal trustee with the candidate as the SU~trustee. This trust

was established by the fIIher with the principal purpose being the management ofthe fathds assets.

) The candidate's mother was the original trustee w~ the candidate as the successor trustee. The

Ruth Trust was established by the candidate's mother, with the principal purpose being the management of

the mothers assets.

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Memorandum to Roben J. Costa

Final Audit Repon for

Jude for Congress (LRA #I 480)

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The Committee argues that the $50,000 from the Ruth Trust made available to the

Victor Trust was for the purpose of providing liquidity to the Victor Trust. The Committee

contends that the candidate then received a ponion of his share in the Vietor Trost. The

Committee characterizes the disbursement to the candidate as a loan that was not intended

to influence a federal election. but a disbursement ofthe candidate's share ofthe Vietor

Trust.

A candidate may mak ' ~ unlimited expenditures of personal funds to his committee.

11 C.F.R. § 110.1O(a). PersoncJ funds means any assets the candidate had legal right to or

control over (at the time he became a candidate) and which the candidate had legal and

rightful title or an equitable interest. 11 C.F.R. § 110.1O(b)(1)(i) and (ii).· Personal funds

also includes income from trusts that were established before candidacy and income from

trusts established by ~uest after candidacy ofwhich the candidate is the beneficiary. II

C.F.R. § 110.1O(bX2).s

The Office ofGeneral Counsel notes that in the situation where Ruth Jude survived

Victor Jude, the candidate would only be entitled to the trust propeny upon the subsequent

death ofRuth Jude. Therefore, any benefit that the candidate could receive from the Vietor

Trust was based 011 a condition that had not occurred on the date the funds were made

available to the candidate.' Thus. the candidate received an advance oftile trust propeny

before the date that he was entitled to the disbursement ofthe funds. MINN.STAT.ANN.

§ 5018.81(29) (West 1989) (S!ate statute allows the trustee to advanc~ income to or for the

use ofa beneficiary); Matter QfWard. 360 N.W.2d 650 (Minn.App. 1985) (tnJStee's

advancement of anticipated income to life beneficiary oftestamentary trust was not an

invasion oftrust principal, where it \\115 authorized by statute). The candidate may be

personally liable to repay the loan to the trust estate. MINN.STAT.ANN. § 5018.81(29)

(West 1989) (pursuant to state statute. ttustee has a lien on the future benefits ofthe

beneficiary receiving an advance). As a result. the candidate did not have legal or rightful

title to nor did he have a present equitable interest in the S50.000 payment on the date it

Commission regulations view the equitable owner as the person to whom trust funds are

attributable. See 11 C.F.R. § 9034.2(c)(2) (checks drawn on a trust account are matchable provided the

contributor has equitable ownership ofthe account): II C.F.R. § 110.l(i)(2)(ii) (child may use the proceeds

of a trust to make a contribution to the extent the child IS a benefiCiary).

S Cf MUR 3097 (Commission found no reason to beheve that the Louis DuPont Smith for Congress

Committee violated 2 U.S.C. § 44la(f) when the cand.date obtained funds from a trust, under coun order.

that was In addition to his ordinary income from the trust, an Statement of Reasons. the Commission

concluded that because trust propeny was the personal funds ofthe candidate before the trust was created ,

the candidate retained an equitable interest an the trust propeny after the creation ofthe trust).

• The candidate only had control over the property of the Victor Trust in accordance with his

ftduciary duty as the trustee.

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EXHIBIT A

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Memorandum to Robert J. Costa

Final Audit Repon for

Jude for Congress (LRA 1# 480)

Pile 4

W81;clisbursed.' 11 C.F.R. §§ 110.1O(b)(1)(i) and (ii). Furthermore. there is no indication

that the pa~ent was merely income from the trust that the candidate ·.VM entitled to as a

beneficiary.' t 1C.F.R. § t lO.IO(b)(2).

Because the S50.ooo payment was a loan to the candidate. the proceeds ofwhich

were made available to the Committee. the Office ofGeneral Counsel believes that the

candidate obtained the loan on behalf ofthe Committee. See 1J C.F.R. §§ 101(8) and (b).

Therefore, the Office ofGeneral Counsel believes that the Committee received a

contribution when the Victor Trost advanced funds to the candidate.9 11 C.F.R.

§ 100.7(a)( 1). Th~ the Office ofGeneral Counsel recommends that the Audit Division

revise the proposed Final Audit Report to reflect the view that the disbursement from the IV.ictor Trust was a loan to the candidate an~ therefore. a contribution to the Committee

that did not derive from the candidate•s personal funds,,lbut from a contribution made by

the candidate·s mother. See I} C.F.R. § 110.1O(b). I

The original source ofthe loan was a transfer from the Ruth Trust. According to

the Ruth T~ the candidate was oot entitled to any income from the trust during the life

ofthe candidate·smother. Rather, the candidate could only share in the trust property

upon the mother's do-~th. Because the transfer from the Ruth Trust to the Vietor Trust was

during the life ofthe mother, the candidate was not entitled to nor did he have any present

equitable interest in the S50,000 disbursement.to 11 C.F.R. §§ 110.1O(bXlXi) and (ii).

However, because the mother was the only individual entitled to income from the Ruth

Trost during her life. the Office ofGeneral Counsel believes that the candidate's mother

made the contribution to the Committee." Cf 1J C.F.R. § 110.I(iX2)(ii) (8 minor child

may make a contribution to a comminee from proceeds of a trust for which the child is the

beneficiary).

II. PUBLIC DISCLOSURE

In the cover memorandum of the proposed report. the Audit Division raises the

question whether the infonnation concerning the trust accounts should be disclosed in a

Unlike the candidate in MUR 3097. the candidate in this maner never had an equitable interal in

the trust property prior to the creation ofme trust The original property in the Vietor Trust was owned by

the candidate's father and the SSO,OOO was deri\'ed from the Ruth Trust.

• Since the Vietor Trust provided income to the candidate's father durang the father's life.. the

candidal( was not entitled to income from the trust as a bequest. See 11 C F.R. § IIO.IO(b)(2).

• We note that the candidate issued checks. totaling SLSOO, dated October 7, 1994, drawn on the

Victor Trust.

10 The original property in the Ruth Trust was owned by the candidate's mother. .. We note that the funds passed through the candldate's personal checksng account that wasjointly

held with his spouse. However, becauSte the onganal source of the contribution was the candidate's mocber,

we do not believe that the candidate"s spouse made a contrlb:Juon to the Committee. See II C.F.R.

§ 110.IO(b)(3).

Page 14, Approved 1/25/96
Memanndum to RobertJ. Costa

FiDIJ Audit Repon for

Jude for Congress (LRA II 480)

PIpS

EXHIBIT A

public report. Pursuant to the Commission'sregulations promulgated under the Freedom

of Information Act, 5 U.S.C. § 552, the Commission shall make audit reportS discussed in

open session available for public inspection and copying. 11 C.F.R. § 4.4(8). Ifa final

audit report does not include any matters exempt from public disclosure under 11 C.F.R.

§ 2.4.. the report will be discussed in the Commission open session meeting. This Office

believes that this infonnation should be disclosed. given that the Committee provided the

Revocable Trust Agreements of Victor N. Jude and Ruth M. Jude, and documents related

to the S50,000 transaction in ~sponse to the Com.."Ilission's formal audit inquiry.

However, because it is the Commission's policy t~ "make the fullest possible disclosure of

public records, consistent with the rights ofindividuals to privacy[..]" 11 C.F.R.. § 5.2(8).

we recommend that you anach both trusts, but redact any financial or commercial

information that is privilege or confidential. 11 C.F.R. § 2.4(b)(2).

Page 15, Approved 1/25/96
o

C-.

Page 16, App~ 1/25/96
FEDERAL ELECTION COMMISSION

WASHINCTON. 0 ( 2(Mbl

AK007479

c

o

o.

January 29, 1996

Mr. Keith Dittbenner, Treasurer

Jude for Congress

clo Ruth Ann Jlichnay

1323 Strawberry Bill Road

Afton, 1m 55001

Dear Mr. Dittbenner:

Attached please find the Final Audit Report on Jude for

Congress. The Cam.i88ion approved the report on January 25,

1996.

'1'he Ca.ai.8ion app:rovecl Pinal Audit Report viii be placed

on the public record on Pebruary 5, 1996. Should you have any

questions regarding t.he public release o~ _the~~rt, please

contact the Ca..i.8ion's Press Office at (202) 219-4155. Any

questions you have related to matters covered during the audit

or in the report should be directed to Sea Owusu or llurthen

of the Audit Division at (202) 219-3120 or toll free at (800)

424-9530.

Sincerely,

-/FrLr-L~ Robert J. ~ta Assistant Staff Director

Audit Division

Attachment as stated

cc: Mr. Gregory R. Troy, P.A.

Page 17, Approved 1/25/96
o

Page 18, Approved 1/25/96

I
CHROROLOGY

JUDE FOR CONGRESS

Audit Fieldwork S/1/95 - 5/18/95

o

c

-'--

r ... \..-

Inter~ Audit Report to

the Committee

Response Received to the

Interim Audit Report

Final Audit Report Approved

8/31/95

10/3/95

1125/96

Page 19, Approved 1/25/96
r~c£''IEO 'EOERAlllECltOM

COMM1SS\CtI

_~F~l\Ll J.R'~t

FEDERAL ELECTION COMMISSION

WASHINCtON OC 204l>\ .. 3 3 01 fI 'S

AK007400

January 3, 1996

'l'O1 COMMISSIONERS

'1'BROUGB: JOHN C. SURINA

STAFF DIR£C'l'OR

FROB: ROBERT J. COSTA -k-.

ASSISTANT STAFF D~~ AUDIT DIVISION

S1JBJBC'!'1 PINAL AUDIT REPORT - JUDB FOR COIIGRBSS

Attached is paCJe 5 of the Office of General Counsel' 8

legal analysis that was inadvertently a.itted fraa the

circulation.

Should you have any questions, please contact 'loa llurthen

at 219-3720 ..

Attachment as stated
c

Memorandum to Robert J. Costa

Final Audit Report for

Jude for Congress (LRA # 480)

PageS

public report. Pursuant to the Commission's regulations promulgated under the Freedom

of Infonnation Ac~ S U.S.C. § 552. the Commission shall make audit reports discussed in

open session available for public inspection and copying. 11 C.f.R. § 4.4(a). If a fmal

audit report does not include any matters exempt from public disclosW'e under 11 C.F.R.

§ 2.4, the report will be discussed in the Commission open session meeting. This Office

believes that this infonnation should be disclosed, given that the Committee provided the

Revocable Trust Agreements ofVictor N. Jude and Ruth M. Jude, and docmnents related

to the S50,000 transaction in response to the Commission's fonnal audit inquiry.

However, because it is the Commission's policy to "make the fullest possible disclosure of

public records, consistent with the rights ofindividuals to privacy[,]" t I C.F.R. § S.2(a)~

we recommend that you attach both trusts, but redact any financial or commercial

infonnation that is privilege or confidential. 11 C.F.R. § 2.4(b)(2).