FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

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230 F:J- U P 3: 

February 4, 2010 

MEMORANDUM SENSmVE 

TO: 

FROM: 

The Commission 

SUBJECT: 

Christopher Hughey fi^ 

Deputy General Counsel / 

Lawrence L. Calvert, Jr. 

Associate General Counsel' [ 

Lorenzo Holloway ^^A^ _ 

Assistant General Counsel 

Public Finance and Audit Advice 

Margaret J. Forman 9/{0^ 

Attomey ' * 

Danita C. Lee 

Attomey 

Electronic Redesignation of Contributions/Date of Withdrawal 

Hillary Clinton for President (C00431569) 

LRA #726 

The Audit Division has asked the Office of General Counsel two questions pertaining to 

the Section 438(b) audit of Hillary Clinton for President (the "Committee" or "Presidential 

Committee"): (1) whether contributions originally designated to the Presidential Committee that 

are redesignated electronically to Hillary Clinton's ("Clinton") Senate Committee are valid 

redesignations; and (2) when Clinton withdrew her candidacy in the 2008 Presidential election 

season. While we normally do not bring these issues to the attention ofthe Commission prior to 

the issuance of comments to the interim audit report, we are doing so in this case because the 

answer to Audit Division's questions greatly affect the workload, and ultimately. Commission 

resources used in this audit. The auditors need to know these answers because the answer to 

each question affects the extent of sampling and reworking ofthe sample for excessive 
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HillarN' Clinton for President - Memorandum to Commission 

Page 2 

contributions. Additionally, the answer to each of these questions affects the other question, and 

the workload associated with the other question. For example, redesignations are affected both 

by the validity of the electronically redesignated contributions and the timeliness of the 

redesignations, and the samples would need to be more extensive depending on each answer. 

Additionally, refunds are time sensitive. Thus, we are presenting these issues to the extent that 

the answers could avoid significant unnecessary work by the auditors. Our recommendations 

and conclusions are presented below. 

I. ELECTRONIC REDESIGNATIONS 

A. Introduction 

The Audit Division asked whether contributions originally designated to the Presidential 

Committee that are redesignated electronically to Clinton's Senate Committee are valid 

redesignations. Clinton attempted to redesignate approximately $6 million in contributions 

originally designated to the Committee's general election campaign to Clinton's Senate 

committee. For a number of these contributions, Clinton attempted to facilitate the 

redesignations by sending an email that directed the contributors to a website where they would 

redesignate their contributions using an online form. Section 110.l(b)(5)(i), however, explicitly 

requires that such redesignations must be written redesignations. Explanation and Justification 

for 11 C.F.R. § 110.1(b)(5), 67 Fed. Reg. 69,928, 69,934 (Nov. 19,2002). Nevertheless, given 

the Committee's efforts, and the fact that electronic technology has changed significantly since 

the Commission promulgated these regulations, we recommend that the Commission consider 

accepting the electronic redesignations here if the Committee can provide additional information. 

B. Regulatory and Advisory Opinion Background 

The Commission has considered the use of electronic technology to complete 

contribution redesignations. In 2002, the Commission rejected the use of email redesignations 

when it considered eliminating the signature requirement for redesignations and reattributions 

that cannot be presumptively redesignated or reattributed. Explanation and Justification for 

11 C.F.R. § 110.1(b)(5), 67 Fed. Reg. 69,928,69,934 (Nov. 19,2002). When the Commission 

decided to reject the use of email redesignations in the promulgation of its 2002 regulations, the 

Commission appeared to be discussing emails sent from the contributors to the committees by 

which contributors attempt to redesignate contributions. In this case, however, the contributors 

did not send emails to the Committee redesignating their contributions. Rather, the Committee 

sent emails to individual contributors that included a website link for a contributor to click on if 

the contributor wanted to redesignate the contribution electronically. Additionally, the 

Committee initially mailed the contributor a letter that also included the website, as well as the 

option to retum a signed redesignation.' Thus, the Committee's actions are distinguishable from 

' In some cases, the contributors opted to retum a signed redesignation to the Committee. The auditors 

estimate that roughly half ofthe redesignations were completed in writing from the contributors and half were 

completed electronically. Since the amounts of the general election contributions were not the same from each 

contributor, the auditors* estimate does not necessarily result in half ofthe approximately S6 million in 

redesignations being redesignated in writing and half electronically. Further analysis as to the projected amount 
LRA #726 

Hillary Clinton for President - Memorandum to Commission 

Page 3 

the contributor-initiated redesignations the Commission considered and rejected during its 2002 

rulemaking. Nevertheless, for the contributions at issue there are still no traditional written 

signatures from the Committee's contributors, and the Commission's decision not to accept 

email redesignations was considered in the overall context of rejecting the elimination of the 

written signature requirement. See id. 

The Commission has, however, been willing to interpret the Act and its regulations 

"consistent with contemporary technological innovations .. . where such technology would not 

compromise the intent ofthe Act or regulations." AO 1999-09 (Bradley); see also AO 2007-17 

(DSCC); AO 2007-30 (Dodd); AO 1999-3 (Microsoft PAC); AO 1999-36 (Campaign 

Advantage); 1995-09 (NewtWatch). Specifically, the Commission has allowed the use of 

electronic signatures to authorize payroll deductions of contributions and to authorize 

solicitations for contributions to a separate segregated fund. AO 2001-4 (MSDW PAC); AO 

1999-3 (Microsoft PAC); AO 2000-22 (Air Transportation Association). Under circumstances 

where the Commission has allowed electronic signatures, it has required a verification process 

that makes clear the contributor's intent and confirms the identity ofthe contributor. See id. 

While these advisory opinions do not involve the use of electronic signatures to redesignate 

contributions, we believe that the Committee's efforts at electronic redesignation can be 

considered in light of the advisory opinions based on the Committee's verification process. The 

same underlying interests are at stake - the contributors' identity and intent. Given that the 

Commission has not considered electronic redesignations since 2002, our analysis below 

assumes that there may be circumstances under which the Commission will accept electronic 

signatures for the purpose of redesignating contributions. 

C. Committee's Electronic Redesignations Are Impermissible Because Its 

Verification Process Did Not Confirm Contributor Identify and Intent Under 

AO Standards 

We start by examining those situations where the Commission has accepted electronic 

signatures. In AO 2001-4, the Commission approved a verification process in which MSDW 

PAC confirmed the identity of its restricted class members authorizing payroll deductions 

through electronic signature. MSDW PAC used a process where the would-be contributors 

entered the web address to a specific website, logged in using a personally unique employee 

identification number, entered their occupation and name of employer, then through a series of 

screens viewed the restrictions on who can contribute, and then entered a screen that stated that 

by entering their full name and clicking on the website link, they agreed to authorize the 

contribution pledge. Finally, a screen appeared stating that a confirmation would be emailed to 

the contributors. Microsoft PAC used a similarly secure verification process with the use of 

personal passwords and an email reply notifying an "employee of its receipt ofthe [payroll 

deduction] form and to request final confirmation of the employee's intention to participate in 

the payroll deduction program." AO 1999-3. The Air Transportation Association also used a 

password protected website and email confirmations acknowledging its receipt of a contribution 

form as well the use of a process through which Air Transportation Association could "ensure 

redesignated in writing and electronically would require significant Commission resources to complete; however, 

the auditors believe that a significant portion of the $6 million in redesignations were performed electronically. 
LRA #726 

Hillary Clinton for President - Memorandum to Commission 

Page 4 

that the electronic mail to which the executed [prior approval] form [consenting to receive 

solicitations]... was sent from [a specific] representative's email address." AO 2000-22. The 

Commission noted that "such security measures are important to assuring that the ability to sign 

and retum the prior approval will reside only with that representative. The Commission also 

assumes that the Associations have the ability to verify that the electronically signed 

authorization came from the particular representative." 

When we analyze the Committee's electronic redesignations in light of the type of the 

processes and precautions used in the advisory opinions to establish electronic signatures, we 

conclude that the Committee did not obtain an electronic signature for the redesignations. The 

Committee's process for obtaining redesignations did not have sufficient safeguards to verify the 

identity of the contributor and to ensure contributor intent - the two prerequisites, per the 

advisory opinions, to establishing electronic signatures. 67 Fed. Reg. at 69,934 (Nov. 19,2002). 

These two requirements usually work together. If a committee caimot verify the identity of the 

original contributor, then it cannot be assured that a redesignation of the contribution carries out 

the contributor's intent. 

We acknowledge that the Committee took a number of steps to obtain redesignations of 

Presidential general election contributions from the contributors. However, the Committee's 

actions fell short in two important areas identified in the advisory opinions discussed above: (I) 

the link/website did not restrict access through the use of a password (or other unique identifier), 

thus leaving open the potential for identity fraud; and (2) the Committee did not confirm the 

contributors' intent in a communication separate from the initial website link-based 

redesignation. 

The Committee's efforts to obtain redesignations involved first mailing letters requesting 

that the contributors redesignate their general election contributions. In these mailings, the 

Committee provided the contributor with a form to sign and retum authorizing the redesignation, 

and also gave the contributor an option to go to the campaign website to redesignate the 

contribution. Then, if the contributor responded, either by returning the signed designation letter 

or by going to the campaign's website, the Committee redesignated the presidential general 

election contribution to the 2012 Senate election(s). If the contributor did not respond, the 

Committee followed up with a second letter, a postcard and email(s). 

The Committee states that it obtained a contributor's email address when the contributor 

made a contribution, and only used these email addresses in email communications. If the 

contributor responded to one of the follow-up mailings or emails, then the contributor no longer 

received the emaii(s) requesting redesignation. The Committee sent out its last emails to the 

remaining contributors on August 28,2008, stating: "[ajction required by midnight." Each of the 

emails included a link that stated: "[c]lick here to transfer your contribution" (the last email 

stated "[cjlick here to transfer your contribution before midnight.").^ If the contributor clicked 

on the link, the contributor would be directed to provide information personal to the donor, 

including the contributor's first and last name, address, phone number, email address and 

See infra Section 11 for a discussion of the 60-day deadline to redesignate contributions. 
LRA #726 

Hillar)' Clinton for President - Memorandum to Commission 

Pages 

employer and occupation. When the Committee received the information, it generated a "receipt 

record" of this information provided by the donor. The Committee also retained these receipt 

records, which were entered into a database that it kept and produced for the auditors. 

Contributors would also see a message thanking them for redesignating their 2008 general 

election contributions to the 2012 Senate campaign after entering the information online to 

redesignate the contribution. The Committee provided the auditors with samples of individual 

contributions and associated requests for redesignations that the Committee made by postal mail 

and email. 

The request that the contributor enter occupation and name of employer information can 

be a starting point for verifying the contributor's identity, but we do not think that it is sufficient 

to confirm the contributor's identity. First, there is no information that the Committee took any 

steps, automated or otherwise, to verify that information against information already in the 

Commission's records; a contributor who had not provided the information in the Hrst place, and 

had not responded to Committee requests for the information pursuant to 11 C.F.R. § 104.7, 

could have been providing the information for the first time. More importantly, absent a 

password or other unique identifier known to the contributor, there would be a heightened risk 

that a spouse, family member, co-worker or friend with access to the contributor's email account 

might be able to effect the redesignation without the contributors' knowledge simply because 

they would likely know or have access to the name, address, phone number and employer 

information and could enter the information into the website and complete the redesignation 

process. 

The confirmation screen that appeared at the end of the online redesignations process did 

not verify the identity of the contributor. If someone other than the contributor gained access to 

the contributor's email account and engaged in the Committee's website/link-based 

redesignation process, then only the "imposter" would see the confirmation message thanking 

him or her for the redesignation. Given that the Committee could not verify the identity of the 

original contributor, it cannot be assured that the redesignations reflected the contributors' intent. 

We, therefore, recommend that the Commission not accept the Committee's electronic 

redesignations based on the information it has provided at this point in the audit process. 

However, we believe the Commission should consider other information from the Committee, if 

available, on contributor intent and identity, as discussed below. 

D. Committee Should Be Given Opportunity to Show Sufficiency of Its Contributor 

Identity and Intent Verification Process 

Although the Committee did not utilize verification processes (passwords/unique 

identifiers and separate confirmation communications) like those in AOs 2001-4, 1999-3, and 

2000-22, to definitely establish contributor identity and intent, there may be other ways for the 

Committee to show it has met the intent behind the requirements for signed, written 

redesignations. While in our view the Committee's processes were not sufficient to provide the 

same degree of certainty about contributor identity and intent as was present in the electronic 

signature procedures approved in the AOs, they did provide some assurance that it was more 

likely than not that the person redesignating the contribution was the original contributor. If the 

Committee could show that the contributor had exclusive access to his or her email account 
LRA #726 

Hillary Clinton for President - Memorandum to Commission 

Page 6 

and/or the Committee website or link, the Committee might be able to establish that it 

sufficiently confirmed the contributor's identity through the use of personal information. Under 

those circumstances, the screen message confirmation might be sufficient to confirm contributor 

intent because no one but the contributor would likely have seen the message thanking him or 

her for the redesignation. Information confirming that the contributor had exclusive access to his 

or her email account would likely be in the hands of the contributor, not the Committee. For 

purposes of this audit, however, the Committee might be able to show that the contributor had 

exclusive access to his or her email account if it obtained a statement from the contributor 

certifying that the contributor's email was password protected or that only the contributor had 

access to the email account. Thus, the Committee should not be limited to showing that it 

confirmed contributor identity and intent in the precise ways used in AOs 2001-4,1999-3, and 

2000-22, respectively. We recommend that the Committee be permitted to establish that it 

resolved all concems the Commission raised in these advisory opinions regarding identity fraud 

and contributor intent even though the Committee's processes differed from those in the AOs. 

II. DATE OF WITHDRAWAL OF PRESIDENTIAL CANDIDACY 

A. End of Senator Clinton's Presidiential Candidacy 

In addition to the question of electronic redesignations, the Commission must consider 

whether the electronic and written redesignations were timely. The timeliness question depends 

on when Clinton was no longer a candidate for the general election. Specifically, the Audit 

Division needs to know when Clinton decided that she would no longer be a Presidential 

candidate, to determine when to begin counting the 60 days that the Committee must refund, 

redesignate, or reattribute contributions designated for the general election. See 

11 CF.R. § 102.9(e). We recommend that the Commission conclude that on June 7,2008, 

Clinton announced her withdrawal from the race for President, beginning the period of 60 days 

that the Committee was required to redesignate, refund, or reattribute contributions designated 

for the general election. Id. Clinton's campaign states that Clinton ended her candidacy on June 

29,2008. The impact of the June 7,2008 date as the date Clinton ended her campaign could 

result in a possible finding of up to $6 miUion in late redesignations, as well as a possible finding 

of approximately $16 million in late refunds.^ 

we also recommend that the 

Commission exercise its discretion not to pursue a finding of late redesignations or late refunds 

based on Clinton's June 7,2008, withdrawal of her candidacy. 

B. Regulatory and Advisory Opinion Background 

A committee may receive, prior to the date of the primary election, contributions 

designated for the general election. 11 C.F.R. § 102.9(e)(1); see 11 C.F.R. § 110.1(b). A 

committee, however, is required to take certain actions with regard to general election campaign 

ftinds during and when withdrawing his or her candidacy. These actions are designed to prevent 

' A number of the redesignations may still have been timely using the June 7 date; however, a projection of 

the amount of timely redesignations would require the use of signiHcant Commission resources. 
LRA #726 

Hillary Clinton for President - Memorandum to Commission 

Page 7 

the use of general election funds for primary election activities. A committee must use an 

acceptable accounting method to distinguish between contributions received for the primary and 

general elections, which may include the keeping of separate accounts or separate records for 

each election. 11 C.F.R. § 102.9(e)(1). Regardless of the method used. Commission regulations 

are designed so that a committee carmot use general election contributions for the primary in a 

manner that would result in excessive contributions. See 11 C.F.R. §§ 102.9(e)(1) and (2), 

110.1(b). A committee "must demonstrate that, prior to the primary election, recorded cash on 

hand was at all times equal to or in excess of the sum of general election contributions received 

less the sum of general election disbursements made." 11 C.F.R. § 102.9(e)(2). Finally, if a 

candidate is not a candidate in the general election, general election contributions must be 

refunded to the contributors, or redesignated or reattributed in accordance with the redesignation 

or reattribution regulations. 11 C.F.R. § 102.9(e)(3). The candidate has 60 days from the end of 

the candidacy to refund the contributions, or ask contributors to redesignate or reattribute their 

contributions. AO 1992-15 (Russo). The issue presented in this audit is when Clinton withdrew 

her candidacy, which began the counting of the 60 days to redesignate, refund, or reattribute 

contributions designated for the general election. 

C. Senator Clinton's Presidential Candidacy Ended June 7,2008 

There are three situations when it is clear that a candidate in a primary election will not 

be a candidate in the general election: (1) when a candidate is defeated for nomination in the 

primary election: AO 1992-15 (Russo); (2) when the candidate fails to qualify for the primary 

ballot (with the exception of a write-in candidate); and (3) when the candidate, sometime before 

the nomination, withdraws and does not reestablish candidacy whether with the same or a 

different political party. The question presented in this matter is when Senator Clinton withdrew 

her candidacy. 

On June 7,2008, Senator Clinton made the following statement: "As I suspend my 

campaign, I congratulate [Barack Obama] on the victory he has won and the extraordinary race 

he has run. I endorse him and throw my full support behind him.*' NPR All Things Considered 

(Pg. Unavail. Online), June 7, 2008, 2008 WLNR 10915409; NBC News: Nightly News (Pg. 

Unavail. Online), June 7,2008,2008 WLNR 10834310. During that speech, Clinton also said: 

"The way to continue our fight now, to accomplish the goals for which we stand is to take our 

energy, our passion, our strength, and do all we can to help elect Barack Obama, the next 

president ofthe United States." NBC News: Nightly News (Pg. Unavail. Online), June 7,2008, 

2008 WLNR 10834310. 

Despite these comments, Clinton's Committee asserts Clinton did not make any remarks 

indicating that she was withdrawing from the contest on June 7,2008 and did not withdraw her 

candidacy until she made a joint appearance with her opponent on June 29,2008. See Committee 

Response to RFAI, Etext Attachment, FEC Image # 28993139834, 

http://images.nictusa.com/Ddf/834/28993139834/28993139834.Ddf 

Senator Clinton's explicit endorsement of her opponent on June 7,2008 would appear to 

have made clear that Clinton no longer sought nomination, and thus would not be a candidate in 

the general election. Clinton nevertheless makes three arguments that she did not withdraw her 
LRA #726 

Hillar>' Clinton for President - Memorandum to Commission 

Pages 

candidacy on June 7,2008: (1) she "suspended" her campaign on June 7,2008, and did not use 

the term "withdraw" at that time; (2) the Democratic National Committee ("DNC") mles provide 

that if a candidate merely suspends his or her campaign, the individual technically is still a 

candidate; and (3) during the month of June, she continued contesting delegates at the state and 

local levels. 

In her first argument, that on June 7,2008, she "suspended" rather than * Vithdrew," she 

admits that the term "suspend" has no legal meaning. 

Clinton's second argument is that the DNC Rules provide that ifa candidate merely 

suspends his or her campaign, the individual technically is still a candidate. While the party's 

rules may control when an individual is a candidate for the purpose of the party's activities, the 

question here is not one of the party's rules. Rather, it is when has the candidate so effectively 

withdrawn that it is clear she no longer seeks to be a candidate in the general election. In our 

view, an endorsement of the candidate's opponent meets that threshold. Moreover, we have 

found nothing in the Charter and Bylaws of the Democratic Party of the United States {as 

amended by the Democratic National Committee, February 3, 2007), or in the Regulations of the 

Rules and Bylaws Committee for the 2008 Democratic National Convention ("DNC 

Regulations") that addresses what happens when a candidate suspends his or her campaign; 

however, the DNC Regulations address the allocation of delegates to a presidential candidate 

based on whether that candidate is still a candidate. See Democratic National Committee 

Regulations of the Rules & Bylaws Committee for the 2008 Democratic National Convention at 

Reg. 5.7., Article VII.C.l. Thus, DNC Regulations address Clinton's ability to retain delegates 

at the Democratic National Convention when she is no longer a candidate. 

Finally, Clinton claims that, during the month of June, she continued contesting delegates 

at the state and local levels. Clinton asserts that she did not release her delegates until the 

Democratic National Convention, and that her campaign continued to attempt after June 7,2008, 

at state conventions and elsewhere, to add to the total of delegates who would be pledged to vote 

for her at the convention. Even if she did undertake these activities, they would not detract from 

her June 7,2008 statements clearly endorsing and supporting her opponent. Cf. Sharpton 2004, 

Memorandum to Commission. Notification of Date of Ineligibility. March 22,2004 at 2-3 and 

Attachment 1 (Press Release from Sharpton 2004 website, March 15,2004); Correspondence to 

Rev Alfred C. Sharpton re: Date of Ineligibility, Signed by Bradley A. Smith, Chairman, March 

30,2004, Memorandum to Joseph F. Stoltz on the Preliminary Audit Report on Sharpton 2004, 

July 5,2007 at 1,2-4 n. 4 (public financing determination where the Commission found a 

Presidential primary candidate to be ineligible for primary matching funds due to inactive 

candidacy, where that candidate announced his support for another presidential primary 

candidate, but stated that he would remain an active candidate for the purpose of garnering 

delegates).'' The Committee makes no other assertions of campaign activity beyond delegate 

We recognize that there are some limitations to using the factors for candidates receiving public funds 

because Clinton did not accept public fiinds. These factors, however, provide guidance in resolving this issue. The 

Commission's regulations penaining to the Presidential Primary Matching Payment Account Act address factors 

unique to presidential candidates, including delegates and the fact that there are multiple primaries. Thus, 

examining the regulations promulgated pursuant to the Presidential Primary Matching Payment Account Act that 
LRA #726 

Hillary Clinton for President - Memorandum to Commission 

Page 9 

activity, though such activity suggests that the Committee continued employment of at least 

some campaign personnel. 

Considering all of the above factors, including Clinton's statements on June 7, 2008, and 

her actions following her statements, we recommend the Commission conclude that Clinton 

ended her candidacy on June 7, 2008. Clinton's statements on those dates indicated that she no 

longer intended to pursue her candidacy for President. As a result, the Committee would be 

required to refund, redesignate or reattribute contributions designated for the general election 

within 60 days from the date that she ended her candidacy, or August 6,2008. 

11 C.F.R. §§ 102.9(e), 110.1(b). See AO 2008-04 (Dodd) (political committee ordinarily must 

refund all general election contributions for which it was unable to obtain written redesignations 

within 60 days after the candidate withdraws from the race); AO 1992-15 (Russo) (60-day period 

begins to run on date committee has actual notice that it needs to obtain redesignations). 

/e would also recommend that the Commission exercise its discretion not to pursue a 

finding of late redesignations or late refunds based on Clinton's June 7,2008 withdrawal of her 

candidacy. 

III. RECOMMENDATIONS 

1. Reject the electronic redesignations in these circumstances as invalid, but permit the 

Committee to respond and show whether and/or how its electronic redesignation 

process confirmed contributor identity and intent; and 

2. Conclude that Clinton withdrew her candidacy on June 7, 2008, but do not pursue a 

finding of late redesignations or late refunds based on that withdrawal date. 

address whether a candidate is actively conducting campaigns also offers some factors that may be useiiil to take 

into account when considering whether Clinton was still a candidate after June 7,2008.