gober hiigers 

LAW FIRM" 

Chris k. gober 

gober hllgers pile 

2.101 cedar springs road 

suiielOSO 

dalias, 1x75201 

214.842.6025 direci 

877.437.5755 fax 

gober@goberhligers.cam 

September 12,2012 

Tim Hintermister 

Assistant Staff Director, Audit Division 

Federal Election Commission 

999 E Street, NW 

Washington, DC 22210 

Re: Interim Audit Report of the Audit Division on Canseco for Congress 

Dear Mr. Hintermister: 

Canseco for Congress in is receipt of the Federal Election Commission's Interim Audit Report 

regarding the audit of Canseco for Congress's records from January 1,2009 - December 31, 

2010. Canseco for Congress (the "Committee"), through counsel, hereby responds to the findings 

and recommendations of the Audit Division staff resulting firorh the audit. 

Compliance with Recommendations 

The Committee does not dispute all findings and recommendations listed in the Interim Audit 

Report; however, in order to prevent the Committee from filing multiple amendments to the 

same reports, it is the Committee's prefwence to comply with all recommendations once the 

disputed findings have been resolved and the audit has been finalized. 

Among other findings and recommendations, the Interim Audit Report recommends in Finding 1 

that the Committee provide documentation demonstrating that the Candidate made the loans 

from his personal funds or that the Committee refund the remaining $55,395. The Interim Audit 

Report recommends in Finding 2 that the Committee reflmd $147,600 from a personal loan made 

100 CONGRESS AVE 

SUITE 2000 

AUSTIN. TX 78701 

T 1512.354.1787 

2101 CEDARSPRINGS RD 

STE 1050 

0ALLA5. TX 75201 

T I 214.842.6829 

1028 G ST 

LINCOLN. NE 68508 

T 1402.218.2106 

14301 FNB PKWY 

5TE 100 

OMAHA. NE 68154 

T I 402.218.2106 

1155 F 5T. NW 

STE 1050 

WASHINGTON. DC 20004 

T I 202:417.3529 

gober hllgers pile www.goberhilgers.com 
Chris K. Gober 

September 12,2012 

Page 2 of 4 

by an individual to the Candidate. While the Committee is waiting for the disputed finding to be 

resolved and for the audit to be finalized before it complies with Interim Audit Report's 

recommendations, please note that the Committee is segregating $202,995 from the Committee's 

operating account and placing these funds in a separate account. The Committee does not intend 

to utilize these funds in connection with the 2012 general election, and they will be preserved by 

the Committee until diis matter has been resolved. 

Finding 1 

In Finding 1 of the Interim Audit Report, the Audit Division staff finds that personal loans to the 

Candidate totaling $100,000 constituted a prohibited contribution from a foreign national. The 

Committee disputes this finding. 

Canseco Investments, Ltd. ("Canseco Investments") is a U.S. company owned by the Candidate 

and his seven siblings. The Candidate owns 12.125% of the company, which is evidenced by a 

redacted copy of the 2010 Schedule K-l attached hereto as Attachment A. 

While Canseco Investments previously owned multiple companies, it sold various assets until 

Inmuebles Caza, S.A. de C.V. ("Caza") was left as Canseco Investment's only remaining asset. In 

its current state, Canseco Investments does not maintain funds in its own bank account and 

essentially operates as nothing more than a holding company for Caza. It appears, for example, 

that: (1) all of the expenses and payments on behalf of Canseco Investments are made directly by 

Caza in the ordinary course of business; (2) Caza pays dividends directly to the owners of 

Canseco Investments, which are treated for tax purposes as dividends from Canseco Investments 

and not Caza; and (3) tax payments and expenses incurred by Canseco Investments are paid for 

by Caza. 

Under 11 C.F.R.§ 100.33(a), personal funds of a candidate include "amounts derived from any 

asset that, under applicable State law, at the time the individual became a candidate, the 

candidate had legal right of access to or control over, and with respect to which the candidate had 

(1) legal and rightful title; or (2) an equitable interest." The source of funds for $58,000 of the 

personal loans represents the Candidate's equitable share of the assets held by Canseco 

Investments, Ltd., less tax liability, which was advanced to him by the company. 

The intention of the partners was to provide the Candidate with access to his equitable share of 

Canseco Investment's assets less the company's projected tax liability upon distribution; 
Chris K. Gober 

September 12,2012 

Page 3 of 4 

however, due to various tax concerns, the company ultimately made two separate loans to the 

Candidate with funds maintained in Caza's bank account. See Attachments B and C.' For both 

loans, the company charged interest at a rate high enough to eliminate any advantage that the 

Candidate may have had by maintaining his ownership share. While these loans may not meet 

the technical requirements set forth in 11 C.F.R. § 100.83, they are fundamentally different than 

a contribution for two key reasons. 

First, because the funds "derive from" an asset over which the Candidate had a legal ownership 

share and equitable interest in, they should be treated as personal funds. In many ways, these 

loaiis are identical to loans in which an individual boirows against the assets in their own 403(b) 

retirement plan or whole life insurance policy. In those circumstances, an individual invests in 

their retirement plan or whole life insurance policy, and the assets in that plan or policy remain 

that person's personal assets at all times. The circumstances are no different here, as the funds 

that were loaned to the Candidate represented his personal assets at all times. They should be 

recognized as such by the Commission. 

Second, these loans may be analyzed under 11 C.F.R. § 100.83. First, the loans are secured by 

the Candidate's ownership interest in Canseco Investments and its cash value. Second, the terms 

of the loans are commercially reasonable. Indeed, the interest rate set forth in each loan exceeds 

the commercial interest rates that were available in the open market at the time the loans were 

made. Furthermore, these loans were far less risky than a traditional commercial bank loan 

because the value of the secured collateral was equal to or exceeded the loan principle; in other 

words, this was a low-risk opportunity for Canseco Investments to earn 10-14% on funds that 

they otherwise could not distribute. This was no "sweetheart deal," and it is certainly not the kind 

of transaction that the drafters of these rules sought to prevent as a means to circumvent the 

contribution limits and prohibitions. 

As stated above, the source of funds for SS8,000 of the personal loans represents the Candidate's 

equitable share of the assets held by Canseco Investments less tax liability. The remaining source 

of the personal loans referenced in Finding 1 was Patricia Bruce, one of the Candidate's siblings 

and a co-owner of Canseco Investments. According to Ms. Bruce, she obtained a $58,000 

' The Committee recently obtained final executed versions of the loan agreements from a coowner of Canseco Investments. The Committee previously provided unsigned drafts of the loan 

agreements in response to the Commission's inquiries regarding these loans. 
Chris K. Gober 

September 12,2012 

Page 4 of 4 

personal loan under the same conditions as the Candidate, and she then loaned those funds to the 

Candidate under a separate loan agreement. See Attachments D and E. 

Please note that affidavits regarding this loan may be sent to the Commission under separate 

cover. 

Conclusion 

Thank you for your consideration of this response. If you require additional information, or if I 

can be of any assistance, then I can be reached at (214) 842-6825. 

Sincerely, 

Chris K. Gober 

Counsel, Canseco for Congress