MEMORANDUM

FEDERAL ELECTION COMMISSION

FRED EILAND

PRESS OFFICE~

BOB COSTA

PUBLIC ISSUANCE OF FINAL POST-PRIMARY

AUDIT REPORT - CITIZENS FOR LAROUCHE

April 13, 1981

Attachment as stated

Informational copies of this report have been received

by all parties involved and this report may be released to

the public.

cc: FEC Library

RAO

Public Record~/

Attached please find a copy of the final post-primary

audit report of Citizens for LaRouche which was approved by the Commission on March 17, 1981.

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FEDERAL ELECTION COMMISSION

WASHINGTON. D.C. ~Oolb3

~EPORT OF THE AUDIT DIVISION

ON THE

CITIZENS FOR LAROUCHE

I. Background

A. Overview

This report is based on an audit of the Citizens For

LaRouche·· ("the Committee"), to determine whether there has been

compliance with the provisions of the Federal Election Campaign

Act of 1971, as amended ("the Act"). The audit was conducted

. pursuant to Section 9038(a) of Title 26 of the United States

. Code which. states that "after each matching payment period, the

Commission shall conduct a thorough examination and audit of the

qualified cfuupaign expenses of every candidate and his authorized

cOffi..inittees who received pay-ments under Section 9037. II . .

In addition, Section 9039(b) of Title 26 of the United

States Code and Section 9038.1(b) of Title 11 of the Code of

Federal Regulations state, ,in relevant part, that the Commission

r:-.ay,., conduct other examinations and auditsfrom time to time "as

it deems necessary.

The Committee. registered with the Federal Election

Commission on January 29, 1979, as the principal campaign

committee for Lyndon H. LaRouche, Jr.',theU.S. Labor Party's

candidate for the Office of President of the United States. On

November 9, 1979, the Committee ~uended its Statement of Organization to disclose that the candidate was seeking the"Democratic

Party's nomination for President of the United States. The

Committee maintains its headquarters in New York City.

The audit covered the period from January 29, 1979, the

inception date of the Com..mittee, through April 17, 1980, the date

determined by the Commission to be the candidate's date of

ineligibility for purposes of incurring qualified campaign

expenses. During this period, the Committee reported an opening

cash balance of $-0-, total receipts of $1,376,290.95, total

expenditures of $1,372,129.80, and a closing cash balance of

$4,026.15. 1:/

!/ There is an apparent understatement of. $135.00 in ending

cash .. This is due to arithmetical errors in receiDts and

expenditures. -
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At the time of the completion of the audit fieldwork,

the Committee had reported financial activity through June 30,

1980. Furthermore, the Audit staff performed a review of the

Committee's financial activity from April 18, 1980, through

June 30, 1980 •.

This report·is based upon documents cc and working papers

'which" support each of the factual statements•. They form part of

the record upon which the Commission based its decisions on the

matters in the report and were available to Commissioners and

'appropriate staff for review.

B. key Personnel

. The principal officers of the Commi'ttee during the.

period audited. were: ·Ms. Carol White, Chairman and Ms. 'Felice

M.· Gel~ani Treasurer.

C. Scope

• ••••• ..' c" The audit included such tests as verification of total . -r~ported receipts,expendituiesand individual transactions;'

. review of required supporting documentation; analysis of debts

=and obligations; review-of. contribution and expenditure limita-'

.. tions; and such .other audit procedures as deemed necessary under •the circumstances. .-. .. "- ". -"'''-'' .. ;.~ __..

II ~Audit Findings and 'Recomrnemdations .

-A. ·Findings Relating to Title 20f the United States Code

1. , - . , .

Disclosure.of'Contributor.Inforrnation.

Se6tion 434(b) (3) (A) of Title 2 o~ 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, or. in any.1esser amount if the.reportingcomrnittee should

so elect, . together with the. date and amount of" each. contribution>

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During the review of the Comrnittee' s 'contribution ..

records and reports, a sample of contributions was randomly

selected and tested for proper disclosure of contributor information

(occupation/nw~e of employer). The sample indicated that at a

90% confidence level between 21% and 61% of the contributions

that aggregated in excess of $200 were disclosed without the

contributor's occu?ation and/or name of employer. Soweveri

for the most part, this information was contained within the

.Committee's contrib.utor fites. *

* It should be noted that the interim rep6rt cit~d-an erroi

rate based on an itemization threshold of $100 which was

applicable before ,the enactment of· the" '79 Amendments

'of the Act.
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Committee officials stated that this information

was not disclosed on its reports due to programming oversights.

On November 13, 1980, the Commission approved an

Audit staff recorr!Iriendation that the Committee file amended-reports·

11isc10sing the required contributor information within 30 days

of receipt of the interim report.

The Committee's response to the interim report,

received on Dece~ber 29, 1980, discusses its basis for the itemization 6f individual contributions and disclosure of contributor

information, however, a~ended disclosure reports were not submitted.

The response also questions the Audit staff's testing of contributions greater than $100 for disclosure of contributor information

whcin, "As the statutes now stand, all that is requi=ed of the

committee is disclosure of the information specified for contributors of $200.00 or over••• "

Finally, the Committee indicated that computer

hardware problems have prevented the filing of amendments· (for

contributors of $200.00 or more) until sometime after filing the

year-end report •

Recoffill1endation

In view of the Co~~ittee's computer hardware problems, as

indicated in its response, the Audit staff recorr~ends that t~e

Corr~ittee be afforded an opportunity to file the amendments

within 30 days of receipt of this report.

2. Allocation of Expenditures to States

Section 44la(b) (1) (A) and 441a(c) of Title 2

of the United States Code state, in part, that no candidate

for the Office of President of the United States who is

eligible under Section 9033 of Title 26 to receive payments

from the Secretary of the Treasury may make expenditures in

excess of $10,000,000 in the case of a ca~paign for nomination

for election to such office, except the aggregate of expenditures

under this subparagraph in anyone state shall not exceed the

greater of 16 cents multiplied by the voting age population of

the State, or $200,000 adjusted by the change in the Consumer

Price Index from the base period (1974).

Section l06.2(a) of Title 11 of the Code of Federal

Regulations states" in part, that expenditures made by a Presidential candidate"s authorized committee(s) which seek to influence

t~e nomination of the candidate in a particular state shall be

attributed to t~at state. This allocation of expenditures shall

be reported on FEC form 3Pc.
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Section 106.2(b) of Title 11 of the Code of

Federal Regulations states, in part, that expenditures for

staff, media, printing, and other goods and services used in

a campaign in a specific state shall be at~ributed to that state.

Section 106.2(c) of Title l10f the Code of

Federal Regulations states that an expenditure by a Presidential

candidate for use in two or more states, which cannot be attributed

in specific amounts to each state, shall be attributed to each

state based on the voting age population in each state which can

reasonably be expected to be influenced by such expenditure.

Our review of Committee expenditures for the

audit period included testing to determine the Con~ittee's

compliance with the allocation of expenditures among states

as required by· the Act. It should be noted that the Committee

filed an amendment to its state allocation schedules, FEC form

3Pc, in June 1980, which substantially corrected the allocation

discrepancies noted through calendar year 1979.

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The state allocation findings which follow make

reference to expenditures that have not been allocated, expenditures that have been improperly allocated and certaip expenditures

that require additional documentation in order to determine

proper allocation. In addition, specific reference is also made

to the allocation discrepancies that affect the New Hampshire

state spending limitation, the only state spending limitation

which appears to have been exceeded by the Co~~ittee.

a. Unallocated/Improperly Allocated Media Expenditures

i) Our review of Committee expenditures to a

vendor supplying advertising services indicated that $35,359.85.

of the $196,738.44 billed to the Committee during January and

February 1980 was not allocated to states. Since the Corrmitteewas

~.' unable to provide adequate records regarding a detailed composition

of each bill (bills were structured by category, i.e. total television

and radio costs, etc.) we could not identify specific states where

voters might be reasonably influenced by the advertisements. However,

a majority of these expenditures that were allocated during January

and February involved a media campaign directed to ~ewHampshire,

Massachusetts, Connecticut, Maine and Vermont. It would appear

that some portion of the $35,359.85 in unallocated expenditures may

require allocation to states.
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On November 13, 1980, the Commission approved

-an Audit staff recommendation that within 30 days of receipt of J

the interim report, the Committee obtain and submit the documentation:

to determine proper. allocation for.. the $35,359.85 in expenditures.. '

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Further, the Committee should review this documentation and amend

its state allocation schedules (FEC form 3Pc) where necessary.

Committee worksheets detailing any amendments should also be

submitted to the Audit staff for review•

. The Committee's response was

received on December 29, 1980.

The Committee states that,

"The report alleges that CFL·

fai1ea to allocate to state

or nation~l~xpenditures

$35,359.85 out of a total of

$196,738.44 billed from arnedia

advertising agency. The report

suggests.that some portion of

thisrnay require allocation to' ~ew-Hampshire, Massachusetts, . Connecticut, ~aine, and Vermont,

states in which the candidate was

active in the January-February

period covered by those bills.

The Report then notes three pages

later (after discussion of several

other items), 'that the Committee

has subsequently amended its allocation schedule (FEC form 3Pc) and

submitted computational schedules

which support the $35,359.85 in

media costs not previously allocated'. (page 8) thereby rendering

moot the earlier allegation that t~e expenditure was not fully

allocated, and leaving only the ~ecorrmendation that CFL provide the

vendor documents upon which the

allocation was based. This was

omitted in the course of the audit

through an oversight and is included ~ere as Exhibit C."
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The vendor documentation submitted by the

Committee as Exhibit C was, in fact, examined during the fieldwork

and considered to be inadequate for the purpose of determining

proper allocation. This documentation appears to be limited to .

production costs which do not require allocation to states. Furtheri

the vendor documentation provides only broad categories of charges

for editing, rentals, and broadcasts. However, our examination of

the amended allocation schedule and related computational schedules

shows that various non-production related charges were allocated

to several states. A portion of the non-production related charges

covered television and radio placement costs, totaling $8,098.42,

were allocated to four (4) states (Wisconsin, Michigan, Illinois,

Iowa) and national overhead. The vendor documentation makes no

such reference to these states. Further, the computational

schedules show other charges for bumper stickers, billboards,

postage and airline tickets allocated to exempt fundraising,

national overhead or a state (:-lassachusetts). It is the Audit

staff's ooinion that the vendor documentation submitted does not

provide s~fficient detail and scope to determine proper state(s)

allocation of the Comrnittee-expenditures to this vendor.

With respect to the ~~ended allocation

schedule (FEC form 3Pc) and computational schedules ~hich detail

the $35,359.85 in media costs not previously allocated, the

Committee has adjusted the amount of unallocated media costs

from $35,359.85 to $33,382.11. The Committee indicated that

billing errors were t~e reasons for this adjustment. In addition,

in its amended state allocation schedule (FEC form 3Pc) ,an'

additional $796.63 (includes production costs) of the media costs

were allocated to New Hampshire.

Our review has indicated that $1,941.11

should be allocated to ~ew Hampshire. This amount represents

an allocation of $55.32 based on the voting age population of

~ew Hampshire in addition to a proportional share of February's

direct television charges totaling $1,885.79. The above amounts

were calculated as follows:
~- " ,. . - - -.

:,1',780 •.89'.',

-15,'640; 68 ..

,2-,200.20

-$i.3~'760,~34:

x ;~O'0402 "

S -55.,32:" ,

.. 'S'· :i":'·2()'0,'2'0 ~:·.,t:. : '.", ,,' ~.":,,~.,,. ::;",,'.~-":~';:",~""

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.AmoUnt :~t:o'. be:: allocated 'based:·'on

:the VAP>' ." ,_." ..

New' ~amp~'~~t~·'~t~~~i;~~~~~e'·of~VAP., . ,(see vAP 'formula o~:following page)

Amount, .allocable to-:New-, Hampshire, " .. " -, ".-",:',,--." ",... ,. \, "' . ,,,,.

·f..~bruaiY~'i'···.'terevision':~charges" -' '(\~BZ~Bo~'ton Market) "..'"

. :.... ·'p~rC:~I1tagE!~·"'a).:I.o-cable ~~o:N.e~ :'Hampshiie

'. ..;~~t~~i,l,~~~l~;:~~_~~~~;~~f~~t£~_ _,,!.i;8~5,: 7_~_c~; :L:':, .. -'" ••, .,-•.,,~ - "~',- ~- w" ". ' - - " .-,

. Total"amount allocable to. New .Hampshire,:S" 1,941;11':·:: ~:"(a':and=.~) '..--' .....' , "" -",:'

.,n; :'should be, noted .thattheamount .. identified· above:'as' " alloc.ablc!,oto NeW.·Hampshire, ;(Sl;144~48) h'as'be'en-included:in the':.

amount "in:',excess::'of'theNew .Hampshi-re s,tate:1iniit~;:and,recominended::::

as repayable t'o the-~U~.s. ,:Treasury.pursuant to 26, U~S.~C. '9038,(b):(2f< (see.overall repayriientsection). .., "

. 'l

* The same, apP1icationnot~d in Findinq 3a(iii) has ,been

applied to ;th~,se ,charges,.

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,,'3ased:on.. the above, the, Audit staff ,recommends 'that. within ,'"

,3,0 days: of',reCe'iptof;',.thisreport"the C()riunittee, amend~'its"':state', ',:!

"allocationsched\11e -,;to.':,allocate' an: additional Sl, l'44~48:;:'(~1,94Lll~:i

'less.-S796; ' - -~->.,., '. y "'" ,"-".63"previouslyalloca1:~d). ~"-~ ", '~. .'~-. . . . "" : ,. ,.,

,- ,,..,- ow-" , ,", -~. -.t ,.,. • > ,.~..,"~

-\:;k~~6~;nerid~tion~: ::~. '.

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~- :-'~~:: "'--:.:-';:'_~~' ":"_."::':"~::::::'::'-::':~-,~.~~",,,,:-::.".:~ ~;.~::.-: -~"::'::::::<':::::;':--~.:-::.:.~.: ~::" .-~

:~::~::~:~--:: ,{TC)'t.ai~·amOunt'-:ol'medi'a~c~st:s. ...

'tess: ,Ja~uary:"s-prOd~cti:oll' cos;t:s.

'February.!s. production»costs

February;'s 'televfsion charges, "(WBZ-Bostoli')narketf' ' .. , .....
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ii) Committee expenditures for political

broadcasts on two (2) national network television stations in

January 1980 were reviewed for proper allocation. It was

determined that the Committee paid $163,231.02 in vendor placement

costs (the charge for airing the broadcast with local stations)

which was not allocated to any state(s). Further, production

costs for these two (2) broadcasts could not be specifically

identified to determine proper allocation. Committee officials

acknow1edgea that the $163,231.02 in placement costs and an unknown

dollar amount of production costs were not allocated to states.

The staff advised the Committee that

one (1) method of' allocating the'se expenditures would be based

on the voting age population (VAP) of each state plus the District

of Columbia. Based on this method, the Audit staff has determined

that $492.71 should be allocated to New Harnpshire~

VAP FO~U~

VAP (~ew Hampshire) x ($163,231.02 x .75 operating

VAP (50 States + Distr1ct of Columbia) portion) =

634 (in thousands) x $122,423.27 =

157528 (in thousands)

$492.71 Allocable to New Hampshire

On November 13, 1980, the Commission approved

the Audit staff recommendation that within 30 days of receipt of

the interim report, the Committee amend its state allocation .

schedules to properly allocate expenditures made in conjunction

with the political broadcasts (New Hampshire) $492.71 plus a

representative portion of production costs).* Committee worksheets relating to any amendments should also be submitted to

the Audit staff for review.

The Committee's response was

received on December 29, 1980.

It'states that,

"The Interim Report claims that

costs associated with two nationally

televised television broadcasts

require allocation across the states

involved. These costs include both

broadcast charges and costs incurred

in the production of the tapes so

broadcast. The Commission has already

determined, for other political committees,

that such production costs are not required

to be allocated to states. *

* At the time the interim audit report was approved by the

Commission (November 13, 1980) the production cost element

of media broadcasts required state allocation. Upon further

consideration, however, the Commission determined that such

costs do not require allocation to atates. The Committee

was notified of this determination.
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CFL's" posi,t,ion remains tha't none

of these costs are properly

allocable to state expenditure

limitations because the intent of

the broadcasts was not to influence

any particular state(s), but

national climate of opinion asa

whole. In support of this inten't,

CFL points out 'that it would have

been far cheaper 'to air broadcasts

in several targeted regional

location~--such as New England from

Boston, the Greater New York and

Chicago areas, etc.--rather than

network-wide broadcasts which by

their nature and intent reach

many states in which the candidate

has not declared active candidacy,

but whose primary elections or

other delegate selection procedures

could be shaped in sucha way as to

favor the candidate's success elsewhere or in the National Convention as

such. Not only woulda targetting

strategy have been cheaper, but it

would have required far less exertion

of effort and manpower to achieve

access to the media.

However, in the event that the

Commission ultimately rules in

favor of the state-by-state

allocation, CFL requests documentation (sources, worksheets,

etc.) by which the Audit staff

computes the report figure of

$492.71 allocable to ~ew Hampshire.

These are not provided in the attachments to the Interim Reoort. We would

appreciate being infor~ed as to whether

the sample allocation methods are being

applied to the Kennedy and Carter

campaigns and on what basis those

campaigns allocated media costs.

CFL thus cannot comolv with

Reco~~endation #1 (interim Report

page 8) until (1)a Commission

decision is provided concerning the

allocability of the Qxpenditure in

question, and pending that
outcome, (2) the Commission'

provides the approved method of

allocation."

(:~ It is our opinion that the application of

11 C.F. R. 106.2 '(b) and (c) necessita'tes allocation· of these expenditures to. New Hampshire since expenditures for radio and television

advertisements that are broadcast in more than one state 'must be

attributed to each state on a formula basis in proportion to the ~~timated voting age-viewing population of the state. The two

advertisements in question were broadcast in more than one state,

therefore, the express language of 11 C.F.R. 106.2(c) (1) requires

the allocation to the states. It also has been the Commission's

practice to apply this application to all presidential committees.

Recommendation

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The Audit staff recommends that the Commission reaffirm its

preliminary determination that the Co~mittee amend its state

allocation schedules to properly allocate expenditures (exclusive

of production costs) made in conjunction with the political . broadcasts (:.7ew Hampshire 492.71). This amendment is to be filed

within 30 days of receipt of this report•

It should be noted that the amount identified above as

allocable to New Hampshire ($492.71) has been included in the

amount in excess of the New Hampshire state limit and recommended a~ repayable to the u.s. Treasury pursuant to 26 U.S.C. 9038(b) (2)

(see overall repayment section).

iii) The Candidate was not on the Massachusetts

primary ballot. The final ballot access date for the Massachusetts

primary was January 4, 1980. However, the Committee placed

television and radio spots as well as newspaper ads between

January 9, 1980, and February 8, 1980, totaling $57,393.62, and

allocated 86% of the cost or $49,358.53 to Massachusetts, 12% or

$6,887.21 to ~ew Hampshire and 1\ or $573.94 to both Vermont and

Connecticut. The Committee utilized industry publications which

provided the percentage of the population which may have viewed

the advertisements, as its source for determining the above

allocation.

The Committee was informed that the portion of

the expenditures that was allocated to Massachusetts ($49,358.53)

should have been allocated to ~ew Hampshire, Vermont, or Connecticut,

as applicable. Committee officials stated that, even though the

candidate was not on the ~assachusetts ballot, he was, in fact,

campaigning for the uncommitted delegates from that state.
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It is the Audit staff·' s opJ.nJ.on that $42 ,: 305.20

of the $49,358.53 allocated to Massachtisetts sh6uld be-allocated--

to New Hampshire and the remaining $7,053.33 should be allocated

equally between Connecticut and Vermont. This allocation w~s

determined by applying the 86% (previously allocated to

Massachusetts) to each of the three (3) states based on the

Committee's proportional distribution of costs noted above (New

Hampshire 12%, Connecticut .1%, and Vermont 1%). Accordingly, 85.71%

(12/14) of the $49,358~53 should be allocated to New Hampshire and -_

14.29% (2/14) should be allocated 'equally bet\>leen Connecticut and' ,

Vermont. The Audit staff used the same industry publications

iri determining the required allocation for New Hampshire, Connecticut

and Vermont. .

On November 13, 1980, the Commission approved

an Audit staff recommendation that within 30 days of receipt of

I:heinterim report, the Cotnrilittee amend its state allocation , schedules to properly allocate that portion of the media expenditures

($49,358.53) improperly allocated to ~~assachusetts after the, ballot

Llccess.date - (New Hampshire $42,305.20, Connecticut and Vermont,

$3,526~66 each). Ccmmittee \>lorksheets relating to these amendments

should also be submitted to the Audit staff for review.

The Committee's response to the interim report,

received on December 29, 1980, asserts that the recommendation to

re-allocate the $49,358.53 iri media expenditures to states other

than Massachusetts (primarily New . Hampshire) -is based on an."

" •.. arbitrary and idiosyncratic ••• interpretation of the phrase

'influence voters'" and the Committee "finds no basis in the

Statute or Regulations, or reasonable interpretation thereof, in

justification of the recommendation." It is the Committee's opinion

that neither the Statute nor Regulations restrict the meaning of

influencing votes to the narrow goal of getting them to vote for

one (1) particular candidate by name on the ballot. The basis for

this conclusion appears to rest with the Committee's camriaign

strategy which was not to influence Massachusetts' citizens to cast

votes for LaRouche but to "influence" them to make an "uncommitted"

vote for some unknown, future candidate in lieu of the current two

(2) major Democratic candidates (Kennedy and Carter). If the

strategy was successful, the Committee felt the election could

result in a large nU!i'.ber of votes for the IINone of the Above" option

resulting in the selection of "uncommitted" delegates. The Committee

further stated that these delegates may, in fact, have a preference

for particular candidates, or could, perhaps, be influenced to

support LaRouche and important convention issues (such as the so

c,alled "Open Convention" Rule llH). The Committee's response

notes that the COmmittee was not seeking "write-in vO,tes" but

uncommitted delecates throuch the no oreference slot on the

~assachusetts bailot. The Committee ~lso states that the

~ational Dembcra~ic policy, which is binding on all state parties,

requires that delegate selection procedures provide an "uncommitted"

slate of delegates. Further, they note that Massachusetts stat~law

mandates this option.
Recommendation

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b. Literature

uelega~es are bound to vote on the :irst ballot for the

candida~e they are commi~ted to bv rule of the ~assachusetts

Democratic ?a~ty. -

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During the review of expenditure records it ~as

noted that literature (leaflets, fliers, stickers, etc.) costs

appeared to be improperly allocated. The Committee generally

allocated a percentage of the total invoiced amount to each state

that apparently received literature. Typically, literature costs

were spread on a 5% basis for 14 key states in which the Corr~ittee

actively campaigned (70% of the total cost), 10% in a state which

It should be noted that the amount identified above as allocable

to New Hampshire ($42,305.20) has been included in the amount in

excess of the ~ew Hampshire state limit and recom!nended as repayable

to the U.S. Treasury pursuant to 26 U.S.C. 9038(b) (2) (see overall

repayment section).

The Audit staff reco~~ends that the Corr~ission reaffirm its

preliminary determination that the Committee amend its state

allocation schedules to properly allocate that portion of the media

expenditures ($49,358.53) improperly allocated to Massachusetts

after the ballot access date (~ew Hampshire $42,305.20, Connecticut

and vermont $3,526.66 each) within 30 days of receipt of this

report.

It should be noted that the Massachusetts

primary ballot provided a space in which voters could inseL"t "No

Preference. II If the nwnber of no preference votes reached the

applicable percentage threshold (applied to candidates appearing

on the ballot), Congressional District caucuses would have been held

for the selection of uncommitted delegates. As with committed

delegates, all candidates for any uncommitted delegate spots were

required to be identified as to their uncommitted status, at all

levels of the process, and were required to file a statement, by

February 4, 1980, declaring their uncommitted/non~preference

status.* Therefore, CFL could not influence the election of delegates

committed to, or with preference for, the candidate through the

uncommitted delegate process, since by definition and Party rule,

such elected delegates could not have had such a preference or been

so co~mitted. Firially, the Massachusetts primary ballot also

provided a blank line for write-in votes. This procedure for delesate selection based on write-ins follcwed the same procedure explained,

above, that is, if write-in votes for a Candidate reached the

rlesignated threshold percentage, Congressional District caucuses

for that candidate would be held. However, as noted above, CFL

acknowledges that it did not stage a write-in campaign in Massachusetts;

nor seek to influence the write-in vote in that state.

co.

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c.
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~/ 14 of the 160 invoices, totaling S40,852, have not been

allocated to states.

the Committee extensively campaigned and 20% to the National headquarters overhead.

This amount has been decreased for the 6 invoices previously

allocated (lOO%) to ~ew Hampshire. *

The Committee's response to ,the interim audit

report, received on Decewber 29, 1980, states, in part, that until

several points of law are resolved, the Committee cannot begin to

consider the audit recommencations. The Committee raises these

"points of law" as questions regarding the establishment of certain

criteria for compliance, the application of the criteria to.. existing

law and other candidates, the reasonableness of the criteria used

by the Co~-nittee and finally, the need for compliance after the fact

A review of literature purchases from four (4)

Committee vendors (248 invoices totaling $287,724.13) indicated . that in 45 instances (PMR) literature (costing $44,167) clearly

targeted at New Hampshire was being allocated on a 5% basis to

New Hampshire. Subsequent amendments filed by the Committee

increased the allocation basis for New Hampshire up to 75% in some

instances. A portion ($24,764.77) of the aforementioned 45 PMR

literature invoices was not allocated to New Hampshire even though

the literature was clearly targeted toward New Hampshire. However,

sample copies of literature were not available for 160 invoices 2/

totaling $193,199.13, and therefore could not be examined for - proper allocation. . .

On September 9, 1980,.the Committee submitted copies

(some only in part) 'of literature for 50 of the 160 invoices.

'rhe photocopies of literature associated with invoices, totaling

$20,159.14, were reviewed for proper allocation in conjunction

with the Committee's response on December 29, 1980. It'was

determined that a portion of the invoices, totaling $2,620.40 . should be allocated to New, Hampshire since the literature was-

"clearly targeted to that state.' It should be noted that the

. ,Committee has not provided sample copies of literature. for more

than 104 invoices* totaling $170,344.99.

On Novewber.13, 1980, the Commission aooroved the

Audit staff.. recommendation that the Co:::..-nittee obtain ~~d submit

the documentation necessary. to 'determine proper allocation for

the 160 vendor invoices (totaling $193,199.13). In addition, the

Audit staff recommended that the Committee amend its state allocation

schedule to properly allocate that portion of the literature costs

associated with the 45 invoices that were clearly targeted at New·

Hampshire but not entirely allocated to New H~-npshire ($24,764.77)~

Committee worksheets relating to these amendments should also be

submitted to the Audit staff for review.

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-14-

with great expense when adequate guidelines were not provided by the

COilimis·sion. The Corninittee then proceeds to discuss these que"stions

at some length. After listing the sections of the Code of Federal

Rc~ulations relevant to allocation, the response comments on the

limited scope of the regulations and asserts that under law the

Committee has no obligation to maintain files of literature used

in the campaign.

The response accurately notes that the Audit report

did not provide the specific criteria used to determine that the

allocation of certain literature expenditures appeared unreasonable.

It also lists several but not all of the criteria used to determine

the need for a re-allocation of these expenditures (the criteria

was discussed with Committee officials during the fieldwork). The

criteria essentially consisted of language appearing on the literature suggesting targeting to New Hampshire. "In its response, the

Comlnittee presented its position with respect to the criteria and

, concluded that a 100% allocation is not justified.

During a discussion of various figures presented in

the report, the Committee alleges that of the missing literature

samples requested, 16 entirely and 22 in part were, in fact, "

provided to the auditors and were apparently ignored. Audit workpapers developed during the fieldwork indicate that the literature

in question was not provided, and the Committee has not included

any copies of this literature with its response. The response also

states that four (4) other invoices for literature were allocated

100% and thus, copies of the literature are not necessary. The

response goes on to state that of the missing literature requested,

an additional 32 invoices for literature are so clearcut by the

title or connection to similar literature for which samples were

provided that copies are unnecessary. Finally, the Committee "

concludes that as a result of the above the actual number of invoices

with missing literature samples is less than 40, with ~any of them

so c1earcut, such as fundraising items, that copies are also

unnecessary.

Irnolicit in the Co~mittee's discussion is the

assumption that there is no requirement to ~aintain copies of

literature, and if there is, they are not required to iliaintain

copies for items that were allocated to fundraising, national overhead or which have been already allocated 100% to a state.

The Committee also points out that some of the

"unavailable" literature requested by the Commission ,\.;as beyond the

scope of the audit which was to have covered the period through

April 17, 1980. The failure to properly allocate a significant

amount of literat~re which was reviewed and other criteria of audit

procedures ~ed t~e ~udit sta== to r0quest all ~issing literature,

even if it was invoiced subsequent to ~pri1 17, 1980.
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It is the view of the Audit staff that the Committee

does have an obligation to furnish the Commission any eV1dence

regarding qualified campaign expenses made by the prin~ipal. campaign

cominittee, as reauired under Section 9033.1(a) (1) of the Matching

Fund Regulations: Indeed, the candidate agreed to this requirement

in his Candidate agreement dated December 19, 1979. Further,

Section 9033.l(a) (3) requires the candidate to furnish the Commission;

with any books, and records, for all accounts and other informa·tion

that the Commission may request. Finally, Section 104.14(b) (1) of

Title 11 of the Code of Federal Regulations requires a political

committee to maintain records with respect to matters required to

be reported from which filed reports and statements may be verified,

explained, clarified and checked for accuracy and completeness. It

is the Audit staff's opinion that copies of literature must be provided regardless of literature title or actual allocation to enable

a determination to be made regarding the reasonableness of allocation, particularly in view of the state allocation problems noted

during the review of literature samples maintained by the Committee.

With res?ect to the Committee's corr~ent concerning

the scope of the audit, it should be noted that the Committee was

notified by letter on July 23, 1980, that the audit would cover

the period beyond the date of ineligibility (4-17-80), as is the

case with all audits of 1980 publicly funded presidential candidates.:

The Audit staff disagrees with the Corr~ittee's

statement that the titles on rr.any of the invoices are clearcut that

sample copies of literature are not necessary to determine allocation~

It is our opinion that even though a majority of the invoiced .

. amounts were allocated, it is impossible to determine proper

allocation without sample copies of the literature produced.

Recommendation

It is the recommendation of the Audit staff that within

30 days of receipt of this report the Committee amend its

state allocation schedules to allocate the amount identified

above ($27,385.17 ($24,764.77 + $2,620.40) to New H~~pshire. With

respect to the literature samples for the re~aining 104 invoices,

totaling $170,344.99, the Audit staff reco~~ends that within 30 days

of receipt of this report the Co~~ittee obtain and submit t~e

documentation necessary to determine proper allocation.

It should be noted that the amount identified above as

allocable to ~ew Hampshire ($27,385.17) has been included in the

w~ount in e~cess of the ~ew Eampshire state limit and reco~~ended

as repayable to the u.s. Treasury pursuant to 26 U.S.C. 9038(b) (2)

(see overall repayment section).
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c. Candidate Residence and Telephone

. Also noted during our review of. expenditure records

we r.e·' disbursements for a rented house in New Hampshire used

by the candidate during the campaign. For the period October 1979

through March 1980 the Conunittee paid $10,094 in rent ($800 of

which represents a rental deposit). 3/ The Conunittee has allocated 52~ of the rental payments ($5,205.40) to New Hampshire and 48' to .

fundraising and national campaign headquarter's overhead. In suppor;

of the method used to allocate the rent expenses, Committee official:

stated that when the candidate was not campaigning, he was "resting";

which was considered headquarter's overhead and therefore not

allocable. However, 11 C.F.R. 106.2(b) states, in part, that

expenditures for administrative, staff, and overhead costs directly

related to the National Campaign Headquarters shall be reported

but need not be attributed to individual states. Expenditures

for staff and other goods. and services used in a campaign in a

specific state shall be.attributed to that state. -

In addition, teleph6neexpenses incurred through

December, 1979,' totaled' $1,425.49. 4/ The telephone expenses were

allocated 50% :($712.74) to New Hampshire and 50% to headquarter's."

overhead. " The. Committee was also assessed an, amount for damages.

',to the house, which it has failed to allocate to New Hamoshire • . _.' "

. - On ~overnber13, . 1980, the commission~ppr6ved the

Audit staff reco~~endation that the Committee amend its state

allocation schedules to properly allocate that portion of the

housing costs that was not allocated to New Hampshire - rent

$4,888.60, telephone $712.75, and damages $2,481.00. Information

to include a description of· the damages and the circUmstances under

which these d~~agesoccurredweretobe provided to t~e Audit staff

within 30. days of receipt of the report. With respect to the

telephone expenses for 1980 associated with the rental property,' it

was recommended that the Committee obtain and submit the documentation necessary to determine the proper allocation for these expenses~

and amend its state allocation schedules accordingly. Further,

Committee worksheets supporting these.amendments should also be

submitted to the Audit staff for review.

Allocation .~~endment #III filed by the Committee on September

24, 1980, reflected a portion of the rental pa~~ents as a

deposit. Although there is disagreement on the actual amount

of the deposit (the Committee appears to claim $3,000 although

the lease provides for a deposit of $800), it is our opinion

that both the rental and deposit payments requir~ allocation

since the deposit was applied to the damages. " ,

T~e ~udit staff could not determine Co~~it~ee teleDhone

expenses associated with the candidate's residence-for

the year 1980.
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The Committee's response to the interim report,

received on December 29, 1980, states that the house was rp-nted for

the purpose of lodging the candidate. between campaign appearances

.in New Hampshire to avoid the expense of flying back to his

'residence in Michigan. The Committee also notes that they allocated

rental cost of the house based on the time the candidate was in

New Hamp~hire and campaigning and, that the location of a vendor,

,service, or orIgrn of goods is not the basis for determining how'

,those goods or services should be allocated., .To support their

,position, the Committee cites.Advisory Opinion 1979-73 concerning . the allocation by state of the'salaries and per diem expense of

advance staff.,,' In. a. summary of the opinion, the response states,

" .••the Advisory Opinion makes it absolutely clear. that it is the

activity being organized ,that determines the,allocation ••• not the

location'of the person(s) doing the-organizing." . .,

" ,,--- ,~--, ..

., .. " .' .,The Commi.ttee :has' also' questioned figures contained

in.theaudit 'report: by stating that the $10,094 in rental payments

,included a $3,000 deposit which was"subsequent1y applied to ..the

,::rent. Since, the, figures contained. in the ,report.. were developed

':from the Committee records examined during the fieldwork, the' ... interim report, dl.dnot. distinguish between rental. navrnents and.,. Od.eposits. y, ..... ,. . . ......., '.' ,...

. ' ".~fter, revl.ewing AflocatiC)n AlliendmentiII and

the Committee' 5 response to the interim audit· report ,', the; ;::.....: .

".Audit staff has determined that, absent':a showing to 'the coritr-ary,

....~renta1 ,payments' (including the $800 deposit)totaling $10,094, •.

damages to the 'prooerty totaling·$4~18l,.. arid telephoneexDenses'

(through December~~1979) totaling$1,425~'49 should have b~en' .,'

allocated,toNew.Hampshire. As prevJous1y stated the Conunittee

nasa1located:'$S; 205~ 40 in rental pa::-wents arid $712 ; 74 in 'telephone

expenses. to New Hampshire. ,.

It is t.heopinion of the Audit staff that'll C.F'.R.

106.2 (b) cle.ar1y states that expenditur'esfor goods and services:'·

used in a campaign in a oarticular state shall be attriout.ed to '.

that state •., Furthermore(, just as the . entire , amount of staff.>oer:

diem o'r hotel' accoITunodations used in a. state is allocable to' that

state (see.AO 1979-73), so too is the entire amount of candidate

lodging in a state attributable to that state.

Recommendation

It is the reco!i1rnendation of the Auait staff that within 30

.days of receipt of'thisrepor!- the Coromittee amend its state

~llocation schedules to properly allocate that p6rtion ~f the

housing .costs that was not allocated to New Hamp?hire rent

It should be noted that the lease,agre.ement required a

deposit of $800 a'nd rent at $1,500 per month' (subiect

:to i::lcrease with additional space being made available)..
It should be noted that the amount identified as allocable to

New Hampshire ($9,782.35) has been included in the amount in excess

of the New Hampshire state limit and recommended as repayable to the

u.s. Treasury pursuant to 26 U.S.C. 9038(b) (2) (see overall repayment

section).

$4,8'88.60, telephone $712.75, and damages $4,181.00, or provi~e

docu~entation(i;e., cancelled deposit/rental checks) that

demonstrate the amount of rental payments ($10,094) noted in

this report is incorrect.

with respect to the telephone expenses for 1980 associated

with the rental property, the Audit staff recommends that within 30

days of receipt of this report the Committee obtain and yubmit the

documentation necessary to determine the proper allocation f~r these

expenses (copies of phone bills associated with the rental payments

for 1980, etc.) and amend its state allocation schedules accordingly.

Further, Committee worksheets supporting these amendments should

also be submitted to the Audit staff for review.

This amount was reflected on the Committee's amended state

allocation schedule filed on September 24, 1980. It does

not include the ~~endment filed for the January, 1981,

monthly report. This amendment decreases the total amount

allocated to New H~~pshire by $14,539.13 (candidate security

$10,485.15 and media production $4,053.98). The Co~~ittee

has not provided worksheets detailing these adjustments.

Ho~ever, the Audit staff will consider a reduction for

these expenses upon =eceipt of Co~~ittee documentation

supporting sane.

This ~~ount does not include the expenditures noted in 3b

($170,344.99), and 3c (an undetermined amount of telephone

expenses for 1980) that may require allocation to New

Hampshire based upon the documentation not yet presented by

the Corrunittee.

368,060.34 ?/

$ 73,660.34

$294,400.00

288,791.05 Y

(1,840.62)

Recap of Expenditures Affecting the New

Hampshire State Spending Limitation

Total expenditures in excess of limitations

resulting from reco~~ended New Hampshire

allocations

Allocation required from Finding 3a (i) 1,144.48

Allocation required from Finding 3a (ii) 492.71

Allocation required from Finding 3a(iii) 42,305.20

Allocation required from Finding 3b 27,385.17

Allocation required from Finding 3c 9,782.35

Total recommended allocations to New Hampshire

Amount allocated to New Hampshire

New Hampshire state spending limit

Media (TV & ~adio) nroduction costs

. included above not requiring state

allocation

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Findings Relating to Title 26 of the

United States Code

1. Determination of Ne't Ou'tstandinq. Campaign

Obligations and Repayment to the U.S. Treas~

Section 9034.5(b) of Title 11, Code of Federal

Regulations requires that the candidate submit a Statement of

Net Outstanding Campaign Obligations which contains, among other

items, the total of all outstanding obligations for qualified

campaign expenses and an estimate of necessary winding down costs

within 15 days of the candidate's date of ineligibility.

Section 9038{b) (1) of Title 26 of the United States

Code states that if the Commission determines that any portion of

the payments wade 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 pa~~ents.

Further, Section 9038(b) (2) (A) of Title 26 of the

United States Code states that if the COI~~ission deter~inesthat

any amount of any payment made to a candidate from the matching

payment account was used for any purpose other than to defray the

qualified campaign expenses with respect to which such payments

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.

The Committee filed a Statement of Net Outstanding

Campaign Obligations (NOCO) on April 22, 1980. 8/ This statement,

as ~~ended, and the results of our verification-of the items

contained thereon, appear below.

The Co~~ittee amended its original NOCO on May 19, 1980,

June 16, 1980, July 7, 1980, and July 28, 1980. In addition,

on .~ugust 4, 1980, the COillItlittee filed an "alternative" NOCO

to the amended July 28, 1980 NOCO. Since the August 4 NOCO

was submitted after the completion of the :~ew York fieldwork,

it was not incoroorated into the interim reoort. Our analvsis

of the "alternative" NOCO filed on .~ugust 4·, 1980, is located

at page 23 of this ~eport.
7-28-80

A!.DIT AUDIT

AS Av.:mm

( 4,399.65) ( 1,440.73) 39,541.05 36,466.7•

35,141.40 35,026.01

(652,275.32) (388,593.50)

406,466.72 378,869.51!S1

568,685.78 579,764.82 14/

($ 83,5ag.54) $ -0-

$280,950.00 $ 44,750.00

687,416.72 423,619.51

4,500.00

-0- 111

2,500.00 -

6,250.00

-0- W

-0- 111

-0- III

-0-

5,000.00

9,250.00

-0- 12/

-0- IT/

2,250.00 -

15,000.00 15,000.00

1,500.00

1,200.00

5,000.00

5,000.00

9,250.00

66,500.00

27,000.00

2,250.00

4,500.00

35,000.00

2,500.00

6,250.00

100,000.00

Office Expenses

legal ~.ses (General)

Misce1l.a:vn.ls Staff Exc:e-"1SeS

Field Offices - TrallSp:)r-...atian

:btels, Freight' Per Diem Ca.~ate Travel , Iodginq

Aunt 1 7ls weeks - ib::m

Personnel., Ac:cctmtant , AttGI:Jey Fees

JI.!:dit 2 6 weeJts

FB: Rx:m

?e..""SO."l."le1

Attcrr.ey Fees am~.ses .

Travel For F=x: ~lated BusinesS'

Q&-Jler Co..:p1iance~...er Cost

:'t:."1Craising Costs

Ca.'"Y!{">ate 5ec-urity

s+..crage

Nr:l' a...'l'S.:..:..:.::>m:; 0l.~A!~ C5!.I~WS

DEFICJ."1'

e:tC-.!3t'r!C1;S;Y"....:rc:-m~ nN)S

APPT-!ED '!O~..RD m:FICIT

1I:Jdit Ar.alysis of Co::rrJ.ttce N:XD State::cnts As A:;e.~ed 'I!lrcugh July 28, 1980

7-28-80

lC(X)

AS~

'!he Q::::mission preli..-.rlr..ar-ly dete...-..n.i.o;ed em August 7, 1980 that the items

l.isted a..--e rot 1egiti.",:,ate "'"in:linq doI.n costs. '!be Ctx:rr.i~.ee "'as affor..ed 30 d~"S in tr..i:::h t.o to t.'ll! C::!:r.ission's ?rel'::"-::.i.-.axy Cete:a.'.i.~.Jan (Ccr.•:ittee's ::espo.'lSe "''as aole 10/5/80). !<o :reS?=J'-Se "'-as :ecei...'ed =-'"'t:IIl

t."e Ca:r..it'tse. r'.Jrt.'le=:c..-e, t.'ll! Co:!r.ittee did not ?':"'''"S".Je its s--atutory

ridlt t.o COo"1test: to'll! C=:r.,issio."1' s eete=.ir.ation in t.'ll! Court of ~or ~;e nist::.-ict of cel~ia (see 26 U.S.C. 9041 (a» • ••

C1sh em Hand as of 4/17/80 !I . Prcpa:r'llCl1ts and 5ec:urity Deposiu

'lUL\L ASSETS

April 17, 1980, is the date cietem.i."led by to'll! Corrr.J..ssion to be t.'le Ca."XllCate'.

date of i:leligibility for p:..'7C5eS of i."'C'.lrri.,''1q ~..:allfied ca::pai~ ~-.ses.

10/ 'lm.s fig-.lI1! does net inc1u.::.e C::t:rci.ttee e~.s of $27,597.21, d:1e to CFI,'s

faill:..-e to proviGe t.1;e S"~rtin; cioc'.r.e.-:tation I'eici--ea 11 C.F.R. 9033.1 (a) (1).

"itt ex:::l-.x:i."'lq t.."e ite::s in !oot:lote 11 !ran ~~ated ...'i.'ldi."'l9 cb.'n ecsts, t.~ Cc:7r.itt.ee is no lc."'l::Je:" :n a =e~icit pcsition, t.'lere!ore, t....e ~ro;ec'"....ed =-';'-C=a:'s:"'"lg ~sts f~ 81lS (~te ot" ~a:-.:...-.ati.on of :e::-oc=atic' ca=.c''''ate) to 12/31/30 are ,.tOt: iipp1i::::ab1e.

13/ =ai.~"'lq it.....""':'S ac:pear ~.able ~t are subject to !'eVision based uron a~....:al ecst :inc'.lt'red.

W

recsi,,"E!d

'n1e ~tt.ee em .~ril only24, inc1wE!d 1980. $330.00 of t.'le $11,409.04 in :::'t.::!ili1q ~~

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., , As noted above, the Audit staff's verification

of the items on the Committee's NOCO statement (amended through

7-28-80) revealed various differences which resulted in a net

difference (overstatement) in net outstanding campaign obligations

of $263,681.82. Therefore, the Committee's NOCO as of, the date of

ine1igibi1ity,,(April 17,1980) should have disclosed a deficit of

$388,593.50 and not $652,275.32 as stated by the Committee in its

amended NOCO statement filed on July 28, 1980.

In' addition, our review of the Committee's

deposits indicated that for the period April 18, 1980, through

June,16, 1980, the Committee received $374,332.73 15/ in

i.ndividual contributions and matching funds. gaseaon the

above, the Committee's remaining entitlement was $14,260.77

($388,593.50 - $374,332.73) as of June 16, 1980 (see"ll C.F.R•.

9034.5(a).· However, the Committee received three (3) subsequent

Jll;'ttching fund payments totaling $36,958.19 resulting in an,

l)verpayment.,of $22,697.42 ($36,958.19 - $14;260.77). , " c " " ,

On November 13", '1980, the Commission approv-ed

" the reco~~endation of the Audit staff contained in the interim

audit report and preliminarily determined that $22,697.42 was

'payable to ,the U~ S. Treasury pursuant to 26 U.S.C.9038 (b) (1). ,'-

In addition, the' recommendation stated-that the Committee obtain

and submit documentation for the unverified items noted, and within

; 30 days of notification, the Committee obtain and submit the June

bank records for its Ohio account as well as financial records for

the TeamstersComrnittee to Elect LaRouche, an authorized committee.

On December 29, 1980, the Conunittee =es?onded~ in

part, that "in addition to the ~rrors,detailed below, the Audit

document fails outright to consider the Co~~ittee's relevant

submission of record, its Statement of Net Outstanding Campaign

Obligations of August 4, 1980. Despite the Report's disclaimer

that this material "will be included in the final audit report"

(Interim Report page. 10, footnote.5), the Committee .wonders what

soit of "inclusion" could be intended when no orovision is ~ade

fortheCorr~ittee to resoond civen the ore3ent·omission of the

i.aterial from Audit Divi;ion;onsideration.

15/ The ,Corrmittee actually received $375,412.34, however, the

NSF checks that were ~atched ($589.07) and the leans/refund

that were matched ($490.54) h~ve been deducted from this

amount (see Finding 32 :nd 3). In addition, the Audit staff

was not provided with the June bank records of the Ohio

depository or the bank records of the Teamsters Committee

to :::lect LaRouche. T!1ere:ore, a reconciliation of Corr.nittee

receipts t!1rough June 16, 1980 could not be com~leted.
In brief the Audit Division claims that the committee · - must repay the Treasury $22,697.42 as a result of the above: the ' ,~~ Commi~tee claims that it has remaining entitlement to matching funds of over $200,000.00."

The points to be discussed here 'fall under four

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-22-

headings: ...

1. Determination of cash on hand as of April 17, 1980

(The Interim Report is in error).

2. Determination of Committee debts as of April 17, 1980

(The Report is again in error).

3. Determination of what constitutes legitimate "Winding Down Expenses."

4. Determination of what time period constitutes the winding. down period.

As noted in footnote 8 (page 19 of this report) the

Committee filed an alternative NOCO to its amended July 28, 1980,

NOCO. The NOCO statements, as amended, through August 4, 1980, , and the results of our verification of the items contained thereon, 'appear below.
•

$299,192.39 $ 44,750.00 !I

705,659.11 423,769.51

(670,517.71)(388,743.50)

568,685.78 579,765.89 it

($101,831.93) $ -0-

y 5,000.00

9,250.00

~- d/

di' ~- 81

2,250.00 -

8-4-80 8-4-80

taX) AtDl'r taX) A1Dl'r AS~ AS AMmDED

( 4,399.65) ( 1,440.73)

39,541.05 36,466.74

35,141.40 35,026.01

406,466.72 379,019.51

I

4,500.00 4,500.00

47,500.00 !?/ 2,500.00 2,500.00

6,250.00 6,250.00

37,400.00

450.00 ~- Sf

2,500.00 2,500.00

12,500.00 12,500.00 f

4,125.00

5,000.00

9,250.00

21,926.25

128,339.44

14,701.70

2,250.00

April 17, 1980, is t.'1/! eate ca~ by t..'1/! Ccr:mission to be the c.mlldate'.

date of :"-.;E;iliility for ?J-'7-Cse5 of i.'1..-.:rri."'ll3 qualified e~c;n ~.

C=r..issia." preliminarily dete-""Tli."'lad en kJq'.:st 7, 1980 t.'1at t.'1/! ita!B

lisU!d ·.p-re :'lOt le-;iti:rate ·..-=""rli"'1g <bon a:lsts. ca:r.tittee "'"as afforr:3eQ 30

ca".:'S :n ..~c."I to re~"'Id to t."Ie On::i.ssi.on's prelilrdr.uy det.e::minaticn

(C:x:r..,j.t7...ee's respao..se "'"as cue 10/5/80). :eS?='..se "'"'as received fran the

ca:::-it-t.ee. Furt.':.e:::;cre, t."Ie Co::r.'itt.ee Cia not pI.1..-sue its statutory ric;ht

to c:::."'l~t t."Ie C:c::r.-.ission's dete:=:ti..-.at.:ia1 in to'1e Court of for the

Dis-..rict of Co1u::bia (see 26 U.S.C. 9041 (a) ) •

D".Jr:"~ t.'":!! :ielc:~"Crk p:-~ of t.'le audit, t."Ie eo.-:rni.t~ had bee." infc:::::ed t.~.at a.-T.! ~~cc:'s/adj1.:St::e::ts to its ~o:o st3te::e.:'1t \oOUld :equire

s~rt:.."1~ doc'.:::c."12ti.on. Augl."St 4, 1980, was presented after

t.'le o:::q:letion of t.'1e fielC"olOrlc. The Cc:r.rni.ttee did net provide ~tatic."Ia1

sc."Ie:::aes or a."1y ot.'1er doc':.e.."1tacon cetai.l:ing t.'1e estir.'a2s/costs, the%efo:e,

t."Iey a..-e net co."lSiCored 'I;'alid ",,"i.~~ expe."'ISeS. ~, lnclusian of these .

-23-

Audit k ...lysis of Conmittee NCCO statamnt As Ar.ended 'lbmuqh August 4, 1980

Office ~"..5P-S

!egal ~".ses (GP....ne.ral)

:-'.iSO!lla."Y":O.JS Staff

Field Offices - Tran~r-...at.i.a1

:i:lt.els, Freisht & ?>-r Diem c.:.."')~'~3te Trava1 & !DCg:i:19

A:Jdit 2 @ 1 .~~

;>;1di.t 1 @ 8 we:::ks :u= ::cc:mJ

~~_'"lel

Audit & ot.~ ?3:A related legal ~n..ses

:.:Jdit & ct.'1er :FB:A, ncn-FE:A

:el3.~ kc:;,:::1ta."1t Fees &

~"lSO-S

T=a'~1 For F3: :e:!.ated 3'.:s:....1eSS

e....her C=pE.::.;ce/Cc::;:"..:ter ~st

~l.ia"lCe (to 11/30)

Fu.-ma.isi."lq (to 7/28/80)

:'..:.."ldr-<>isi."lg (7/29-8/15/80) Storage .

c.cm:-"I!37I'!a:S~.:rt:-m~ FtJNOS

;"-r.LI:D ~:lD DU1C1T

~~

cash en na.-n as of 4/17/80 a/ Prc~"ts ani &:-e.Jrity DcIi;lsits

TC1l7\L AS~

NET a:tlS~.::m~ CA.':?AI~ ClBLIGAI'IC:fG

m:FIClT

.....

. ..,

,---

I

,

.,·c
".

.".

-,'

(~~

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-24-

in the t«X:O statenent does not msult in any additional entitlenent due tJ1e

Qmnittee, but wculd negate the xecxI'liiendation for a J:epayIII!nt ($36,958.19)

noted in this finding.

By excludinq the items in footnote fran estimated winding down costa, the

camd.ttee is no 100ger in a deficit position, therofol'e, the projected fundraising costs fran 7/29/80 to 8/15/80 are not appUcable.

'111e remaini.nq items a[p!ar reasonable but are subject to revision based upon

actual cost incurred.

'!'he Comnittee ooly included $330.00 of the $11,409.04 in matching funds mceived

at April 24, 1980 and anitted $1.07 of mat:chi.nq funds received at July 31, 1980•

•
As previously stated, the COmmittee's remaining

entitlement was $14,260.77 as of June 16, 1980 and that subsequent

matching fund payments resulted in an overpayment of $22,6~7.42.

However, the Audit staff has subsequently determined that the

Committee received sufficient individual contributions during the

period June 16, 1980 through June 18, 1980, to satisfy its net ou~~ .

standing campaign obligations ($14,260.77). On June 19,1980, the

Committee received the first of three (3) matching fund payments,

totaling $36,958.19. Since the Committee was not entitled to

any matching fund payments as of June 19, 1980, the three (3)

payments (6/19/80 $18,872.77, 7/2/80 $17,996,35, 7/31/30 $89.07)

resulted in an overpayment to the Committee totaling $36,958.19.

- -- . Recommendation

2. Insufficient Funds Checks Matched

Section 9034.2(a) (3) of Title 11, Code of Federal

~egulations states that a ~atchable campaign contribution is one

in which the a~ount of the contribution which is submitted for

~atching shall be actually received by the candidate or any of

the candidate's authorized committees and deposited in a designated

campaign depository maintained by the principal campaign committee.

-25-

-The Audit staff-has determined that consideration

4, 1980 NOCO does not affect the staff's previous

that the Committee is not entitled to additional

payments.

Finally, since the Committee has not submitted the June "bank"

records for its Ohio account as well as the financial records for

the Teamsters Committee to Elect LaRouche, an authorized Committee,

the Audit staff recowmends that the Committee obtain these

records and submit them to the Audit staff within 30 days.of

receipt of this report.

of the August

determination

matching fund

The Corr~ittee has not submitted documentation for the

unverified items as noted in footnote lOon page 20 of this

report. Therefore, the Audit staff"reco~~ends that $36,958.19

"is repayable to the u~s. Treasury pursuant to 26 U.S.C. 9038(b) (1).

Such repayment is to be made within 90 days of receipt of this

report. Further, the Committee is afforded 30 days from receipt

of this report to present legal or factual .materialsto show that

a payment is not required (See 11 C.F.R. 9038.2(b».

...... '

>~....

,.....

\

,~ ...
(

....

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-26-

In accordance with the Guideline for Presentation

in Good Order "approved by the Commission on May 17, 1979~

committees are required to present a list of all instruments

r~turned by the bank because of insufficient funds. This list

fOl."'ms the basis for adjustments to matching. fund payments for

contributions, which may have been submitted for matching and

subsequently returned by the bank as non-negotiable.

The review of Committee records indicated that

14 contributions were returned by the campaign oepository due

to insufficient funds in the contributor account. Six (6) of

these contributions totaling $145.00 were from identifiable

contributors which were not included on the non-negotiable

instrument list submitted by the Co~~ittee with its matching fund

submissions. Matching funds actually disbursed for these contributions after the application of the appropriate submission

error rates totaled $139~07. The remaining eight (8) contributions

totaling $450.00 were from contributors whose identification could

not be ascertained from available records. Therefore, the Audit

staff was not able to determine whether these contributions were

in fact, matched.

The Commission approved the interim report reco~~endation on November 13, 1980 which stated that absent a

shewing to the contrary within 30 days of receipt of the report,

the Commission preliminarily determined that a repayment of

$589.07 be made to the u.S. Treasury pursuant to 26 U.S.C. 9038

(b) (1) and llC.F.R. 9038.2(a) (1).

It should be noted that the Committee acknowledged

the above interim report recorrmendation and on December 29, 1980

a repayment of $589.07 was received and forNarded to the U.S.

Treasury for deposit.

Recommendation

The Audit staff recommends no further action.

3. Loans/Refunded Contributions ~atched

Section 9034.3(b) of Title 11 of the Code of

Federal Regulations defines non-matchable contributions to

include a sUbscription, loan, advance, or deposit of money or

anything of value.
(

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-27-

As part of our testing, we reviewed the Committee's

loan records (including repayments) and records relating to

contribution refunds. Three (3) instances were noted which, _ require recovery~of$490~54 in matching funds certified for payment

to the u.s. Treasury.

a. the Corr~ittee submitted for matching two (2)

$1,000 loans from two (2) individuals. Both-loans were received

in September of 1979,. One (1) loan was repaid in full by the

COlllmittee in November, 1979 and the other loan was repaid to the. _ exl'.c~nt of $995 in January,. 1980. The loan repayments were verified

by a review of the .cancelled checks negotiated by the individuals.

However, on ,January 14, 1980, the"Committee submitted, a matching

fund submission to the COffi.'ilission which included signed statements

dated December.' 10, 1979 from the individuals who made the loans,

which indicated that $250 of the $1,000 loans were, in fact~ not

a'loan'but ra.ther a donation/contribution. '

b. the Committee submitted for matching on

December 31, 1979, a contribution of $20 which was refunded on

October 6, 1979 at t~erequest-of the contributor. The refund

transaction ~as not recorded in the Co~~ittee's data base and

as a result, the $20 contribution was improperly included 'in

a, matching fund submission. Matching. funds actually' paid out

for the refunded contribution and the two (2) loans'after

the'. application: of the 'appropriate submission err6r rates

totaled $490.54.

On ~ovember 13, 1980, the Co~~ission approved

the interim report recorrmendation that absent a showing to the

contrary within 30 days of receipt of the report, the Commission

preliminarily determined that, a repayment of $490.54 be made to

the U.s~ Treasury pursuant to 26 U.S.C. 9038(b) (1) and 11 C.F.R.

9038.2 (a) (1) •

On Dece~~er 29, 1980, the Audit staff received

,a repayment of $490.54 and forwarded the repaynent to t~e u.s.

Treasury.

Recor:u~endation

The Audit staff reco~~ends that no further action be taken

with respect to the repay~ent of this amount ($490.54) pursuant

to 26 u. S•C• 9038 (b) (1) •
Certain other matters noted during ~'1e audit

were referred to the Conunission's Office of General Counsel

for consiceration on J~~e 13, 1980, September 5, 1980,

and January 14, 1981.

The Audit staff recommends that the Conunittee re:"ay to ~'1e

u.S. Treasury $110,618.53 within 90 days of receipt of this report

pursuant to 26 U.S.C. 9038(b) (1) and (2). Further, the Committee

is afforced 30 days irom receipt of this report to present legal

or factual materials to show that a repayment is not required

(see 11 C.F.R. 9038.2(b».

$ 73,660.34

36,958.19

589.07

490.54

$110,618.53*

$111,698.14

( 1,079.61)

4. ~atters Referred to the Office of General Cou~se1

See foot~ote 11 on ?age 18 for discussion of possible adjust~ent to the repayment figure shown. *

-28-

rh:~Go!!'.mencation

Repayment Summary

~epa~nent required from Finding A3

Repayment required from Finding 31

Repayment required from Finding 32

Repayment required from Finding B3

Subtotal

i'\mount ~epaid (Re: Finding 92 & 93)

FEDERAL ElfCflON COMMISSION

\\ ASHI~C10"'. 0 C ;'('4b3

October 1, 1982

fI,EMOP.ANDUM

'1'0 :

FROM:

SUBJECT:

FRED S. EILAND

PRESS OFFICE'1'fZ

BOB COSTA ~~

PUBLIC ISSUANCE OF ADDENDu~ TO THE

FIKAL AUDIT REPORT - CITIZ~NS FOR L~ROUCHE

Attach~d please find a copy of the Addencum to the Final

Audit R~port of Citizens For LaRouche which was approved by

the Co~~ission on September 24, 1982.

A copy of the r.ddenc~m to the Final ~uait Report has been

received by the Committee's Counsel, therefore, the r.doendum ~ay be released to the public.

Mttac~~ent as stated

cc: FEC Library

?".;D

/A,;,-,__ ..>.~, i C -'_~F-cord_

"
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'1'0:

THROUGH:

FROM:

SU3,jECT:

HOE RAl ELECTION COMMISS10:--J

\\'A5HI~C10~. DC 204&3

Septe~~er 21, 1982

TH~ CO~~ISSIONERS

B. ALLEN CLUTTER

STAFF DIRECTOR ~~

Q. c-~ ~V BOB COST.~ c1\0\ l{r'}\'

~DDENDUM TO TEE FINAL ADD!: ~?ORT -

CITIZ~NS FOR LAROUCHE

..

I. Su~~=rv of Issues and Recoffimendatio~s

On May 6, 1981, the Audit staff r~cE:vea from Citizens For

Lcrtouche ("the Corr.Iii~ttee"), its reSOO:1se :0 :!le final aucit

report. ~:so, o~ June 7, 1982, the·Corr~::t~e prov:cec certain

records to :te Kuci~ Division in res?o~se to our ~?ril 19, 1982

letter. Eased on our review of the ffiater:als presentec, t!le a~ount calc~la:ec as re?aya~le to the U.s. 7reasury has been

revised fro~ $110,c12.53 to $5~,671.24 (==e :u~~ary at ?cse 9).

Further, it is ::eco:7.;7,enced tbat -chis Cocu..iilent be placed on

the public reccrd as an accena~rn to t~e ~~~licly released final

audit report.

II. 3ad:sro~nc

On April 8, 1981, the Committee :ec::vec a copy of t~e final c~~it report. T~e report cfforaed tte Cc~~ittee 30 cays to re5~onc :0 certai~ f:~ci~~s and conc:~s:c~£ con:ained ~~e~~:n.

In ~ddition, t~e Cc~~ittee ~as noti::ec by letter en J~1y

13, 1981 that th~ Co~~is£ion cet~r~i~ec ~~at Expencitures :or

salaries paid to certain national cas?ais~ staff ~hile

te~p8:ari:y ~orki~s in states a~c certai~ lcng distance tele?~o~e

c~arces cid ~ot recuire allocation to £tc:es. T~e hudit ~iv:sion

a150-hana-ae1i~ere~ a copy of the letter to the Co~~it~~e's

:':::::::i9=-:'. J~..:l~' 20, 19~1. ~he ·Co;7\;r.i~:.c:~ ',-.as re-q,uestec to
-2-

( determine if its state allocations were affected by the

Commission's determination and was afforded 30 days from receipt

of the letter to submit an amended state allocation schedule (FEe

Form 3Pc) to the Audit Division. In addition, all computational ~chedules including copies of bills, expense vouchers, or any

()ther documentation detailing such amencment was to be submitted.

The Committee's response was due on August 19, 1981. The

Committee's attorney stated that the Committee currently has a

lawsuit against the Commission and is "on hold" pending the

outcome of the 13wsuit.

In early November 1981, the Audit staff notified the

Committee that if they planned to submit an a~ended state

allocation schedule with supporting docuffientation such action

:,hould occur within 15 days, otherwise the Audit staff's

repayment calculation ~ould be tased on information available to

date.

On November 20, 1981 the A~dit staff received a telegram

from the Committee which stated that their attor~ey ~as presently

engaged in litigation in ~ew Jersey and u~able to assist in t~eir

response. 7he Co~rnittee resuested additional ti~e to Dec~m~er

15, 1981 in o~der to file any ~~end~~nts.

.. ..... .

The Audit staff notified the Co~~itt~e by letter (dated Dece~ber 4, 1981) that tte Dece~ber 15, 1981 time fra~e would be

acceptable. To date, no a~endffients h3ve been received from the

Commmittee in response to the July 13, ~98l letter.

A. Disclosure of Contributor Information

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

States Code states t~at each report s~all disclose the

identifica:ion of each person (other than a political committee)

who makes a contri~~tion to the reporting cc~mittee during the

:e?orting period, ~~8se contrib~ti0n or contributicr.s h~ve an

aggrega:e a~o~nt or \alue in excess of $200 ~ithin the caler.dar

year, or in any lesser a~ount if ~~e ~epo:ting committee should

so elect, together with t~e date and a~oc~t of each contribution.

During the review of t~e Co~~ittee's contribution r~cords and reports, a sa~?le 0: contri~~ti0ns was randomly

selected and tested for orooer cisclo2~~e of contributor: ~nfor~aticn (occu~aticn/;a~~ of ~0?lc~er). 7he sa~ple indicated t~at at a 90% ccnficence level bet~~~~ 21% and 61% of t~e

contri~~tions t~at 3sg~esated in 0XC~~S of $200 ~ere disclosed \-,~:~t.cut ~~.e l"':o:1t~i~i~:O:'S OCCI"':~3til:":i ?:::c,'C'r :'"'.:"::7le of €":7':plo::;er.
. .

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-3-

However, for the most part, this information was contained within

the Committee's contributor files.

In its response to the final audit report, the

committee stated that they are hindered from filing the

amendments because their computer vendor is involved in

bankruptcy proceedings, and to retain another vendor or process

the information by hand would be lIT.possible at this time. A

review of Committee reports filed through March 31, 1982 !/

indicated that the necessary amenJrnents for proper disclosure of

contributor information have not been filed.

The Commission has det~rmined that the bankruptcy

proceedings involving CFL's computer vendor does not absolve CFL

from filing c::iC::lded reports.

?,r:cC';,.::''?:1Cat ion

Si:1ce the necessary contributor information (occupation/name

of employer) is contained in the Committee's contributor files,

the Cc~rr,i2sion rr:cc~~0ncs t~2t the C0~mittee file a~r:naed r~ports

~ithin 30 cays of receipt of this letter •

B.

1. Finding II.A.2.b. on pages 12 through 15 of the

final audit report contained a reco~~~ncation that the Co~~ittee

a~end its ~tate allocation schedule within 30 days of receipt of

the report to allocate $27,385.17 to Ke~ Eampshire for the

purchase of literature targeted to that state. The report also

included a reco::-.:7,encation t:-:at the Conmittee obtain and submit docum~ntation (literature samples) necessary to deter~ine proper

allocation for 104 invoices totaling $170,344.99 ~ithin 30 cays

of r~ceipt of ~he fi~al a~dit r~?ort.

);/ This is t~e latest report filed to cc~e. "
".-..

" "
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-4-

The COiTiInittee responded to the Audit staff's

recommendation on May 6, 1981, by providing worksheets and

schedl11es increasing the Committee's allocation to New Hampshire

by $6,067.24. On ,June 1,1981, the Committee filed an itmended

state allocation schedule (Form 3Pc) providing for public

disc]osure of the increase in New Hampshire's state allocation

total. The Committee's increased allocation to New Hampshire

resulted from their review of the $27,385.17 in literature costs

noted in the final audit report as requiring allocation to New

Hampshire and literature costs not supported by documentation

necessary to determine proper allocation.

The Com~ittee's response offers, for the first time,

detailed explanations of distribution, usage and--co-nte-nt in--

support of their allocation of literature costs incurred

throughout the campaign. These expla~ations Enabled the Audit

~;taff to re-examine literature previu~sly considered to require

100% allocation to the state of Kew ~c~~s~ire. In addition, the

explanations aided in evaluating the allocation of literature

costs for additional s~~ple li:erature included ~ith the

CODmittee's response. The Co~mittee else prc\iced a crossreferencing system to identify previously exa~ined literature

samples for proper allocation. The cdditional literature samples

2nd cross-referencing syst~m, once adjust~d for erro:s and

literature sub~itted 35 a~location a~~~~~ent III on ~ay 6, 1981,

provided the hudit staff ~ith the opportc~ity to review

$87,955.05 in lit~rature costs. It s~oulc ce ~cted, ho~ever, at

that ti~e t~e Co~~ittee did not p~ovice doc~~entation necessary

to deter~i~e proper allocation for the r~~aining $82,389.94 of

literature costs. Prior to rec~estinc Cc~~ittee records in Aoril

1982, the Audit staff acain J revic~ed Invoice dcscriDtions • of the

remaining $82,389.94 in literature costs. Eased on that review,

it ~as determined that invoices totaling S6,165.00 did not

contain any direct or indirect refere~ce to !\e~ H~~pshire.

Therefore, the cost of the re~aining litE:at~re samples not

provided ~as rec~ced to $76,224.94 (S22,329.94 - $6,165.00).

On June 7, 1982, i~ :~~?c~se to our request, the

Co~~ittee providea t~e hudit staff ~i~h t~e c?portur.ity to review

en additional $35,672.00 in litErctur~ CC2tS. ~o~ever, the

Co~mittee did not ?rovice doc~~~ntaticn ~~c~ssary to cetermine

proper allocation for the r0~aining $~O,552.94 of literature

costs.

Ec sEd 0 n arevic 'r." C t :-~ e CC' :-:-.;'- itte e 's 1 i t e'r a t ur e

ccsts ~:;d :c~~ect:\'e ~~~'...' E~::-,~:'s:;i=--t.: al}or:=.::'O:1 \..;orks~::ets, the h~dit staff has ~et~r~i~ed that fo~ t~e lite~at~re saDples

?rc~ided thus ~ar, ~~~ Cc~~ittee's ~0~ho~ o~ allocation appears

:: :: :: ~;~ 2::-1 e . ~.; i :!l :- C ::- :' E- c t t- 0 1:::'.:- :: C: :: =- e ~:: :-:-.;: c s ;) 0 t Y t ?: 0\· ide d ,

~~e ~udit staff no':ed :.rc,:r. a :-e\,"ic:\-.· of t:.:-:~ CC:-:-.:~ittc:e's ',..·o:i\s:-,e:ets
.,

(

5'· - -

that the Committee allocated these costs ($40,552.94) using the

same percentages applied to the literature costs for which

documentation was submitted, therefore, the Audit staff

recommends no further action on this matter.

2. Finding II.A.2.c. on pages 16 through 18 of the

final audit report contained a recommendation that the Committee a~end its state allocation schedule to properly allocate that

portion of housing costs not allocated to New Hampshire (rent

$4,888.60, telephone $712.75, and damages $4,181.00) and provide

documentation that demonstrates the amount of rental payments

($10,094) noted in the final report was incorrect. Further, it

was recommended that, within 30 days of receipt of the final ~udit report, the Committee obtain and submit the documentation

necessary to determine the proper allocation of telephone I xpenses incurred in 1980 and amend their state allocation

:;cbedu1e accord ing1y.

The Committee's response indicated that the rental

portion of the housing costs for the candicate, from October

1979, through termination of the lease on March 31, 1980, totaled

$8,594 (more precisely at $6,930.14 through the New Hampshire

Primary Election on February 26, 1980). The Committee's response

also ~oted that a $3,000 deposit, required for securing the

loase, ~as applied to the rental charge for ~arch and the re~aining portion ~as used to reduce a $4,181 charge for damages

to the residence.

In su~~arizing the basis used for the allocation

of rental payments, the Committee indicated that only a portion

of each Donth's rent ~as allocated to Ne~ Hampshire ~hich

represented the number of days the candidate actually campaigned

in the state, ending with the primary election on February 26,

1980. hs of ~ay 1981 the Co~mittee had allocated $3,834.92 of

the $8,594 in rental payments to New Hampshire but none of the

darr,age charge.

Kith re~pect to the allocation of telephone expe~2es, the Committee responded that the audit report figure of $l,425.~9 act~ally :epresented costs incurred through February,

1980, rather than thro"1gh Decer.,ber, 1979. l:-.S noted on page 16 of

the final audit report, Committee telephone expenses ~ere

allocated 50% ($712.74) to I~ew Eampshire and 50% ($712.75) to

national overhead.

"

hfter ~aking a se~ies of adjust~ents to the

portIon or tClepnone costs allocated to natio~al overhead, the Co~~ittee i~dicated that an a~ditional $302.53 has been allocated

to ~:':: .." r::::~?.shire (51,015.27 total) and $~10.22 reii,ains allocated

to na~ional ov~rtead for long distance charges.
-6-

Based on the dOCllmp.ntation submitted, the Audit

staff agrees with the Committee's calculation of $12,775 for rent

($8,594) and damages ($4,181), and that telephone expenses for

lhe period of the lease totaled $1,425.49. However, the Audit ~;taff disagrees with the Committee's basis for allocating such

(·xpenses (see Final Audit Report, page 17). Furthermore, this

matter will be addressed in the Commission's statement of reasons

in accordance with 11 C.F.R. 9038.2(d).

Su~mary - B.l through B.5

The downward adjustments noted in sections B.l and B.2

will be reflected in the Commission's final repayment

cletermination.

r;~~ E.}~~shire Recap-E_xpenditures Affecting State Spending

Limitation

...,

Amount Allocated Per Committee Reports,

as amended

$277,693.73

1979

1980

$ 91,220.03

186,473.70

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Additional Allocations to New Hampshire:

!·~ed i a expenses

!o1ecii a expense s

Media expenses

Rousing

expenses

Total Amount Allocable to ~ew Eampshire

Less: Kew Hampshire Limit

A~ount in excess to te repaid to

U.S. Treasury

1,1~4.48 !:./

492.71 2/

42,305.20 ~/

9,350.30

$330,986.42

( 294,400.00

S 36,586.42

!:./ CFL's resoonse and the Co~mission's :inal determination

,,;ith :-esp~ct to t~ese r..atters will !:e acdressed in'the Co~~ission's state~ent of [~~sons.
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C. Determination of Net Outs~~nding Campaign Obligations

Finding II.Bol on pages 19 through 25 of the final

dudit report contained a recommendation that the Committee be

Jf:quired to repay $36,958.19 to the u.s. Treasury within 90 days

of receipt of the report. Further, the Committee ~as afforded 30

days from receipt of the report to present legal or factual

materials to show that a repayment was not required. The audit

report also recommended that the Committee supply the Audit staff

with certain bank records for its Ohio account along with

financial recoras of the Teamsters Committee to Elect LaRouche

(an authorized committee) within 30 cays of receipt.

The Co~mmittee responded to the Audit staff's r0co~~endation by submitting a revised NOCO state~ent along with

(locumentation detailing a portion of the list'?d \t;inding down

costs. The Committee's financial position as presented on its

NOCO statement indicates that as of April 17, 1980, the

Candidate's cate of ineligibility, the Co~~ittee had a deficit of

$471,983.59. Furthermore, according to the Committee's NOCO state~ent, as of June 30, 1980, the Committee ~as entitled to an cdditio~a1 $6,146.65 in Gatching funds.

On hpri1 19, 1982, the Audit staff requested that the Co~mittee pro~ide s~pporting doc~m~ntation for $9,658.00 in undoc~~entea ~inddc~n expenses. In addition, it ~as requested

that t~e Co~~ittee provide certain bank r~corcs for all of its

accounts.

The Committee responded to the Audit staff's request on

June 7, 1982 by submitting docuwentation to support $3,000.00 of

the u~documented winddown expenses. In addition, the Committee

submitted sufficient bank recorcs for the Audit staff to

calculate the amount of ~atching payments received in excess of

e rJ tit 1 E 17. en t .

The Audit staff reviewed the doc~~entation submitted

a~d aeter2i~ed that as of ~pri1 17, 1980, the Co~~ittee's deficit ~as $~50,540.55. Further, duri~g the period 4/18/80 through

7/2/80, the Co~mittee recei~ed sufficient private contributions

and ~atching fund pay~ents to e1i~inate this deficit.

T:, E Cel:"l IT! itt e e 's NOC0 s tat eIT. '? n t 2 n d the res u1t s r 0 f 0 u r

verification of itc~s con:ai~ed t~ereon c~?ear ~~low.

l

I

I

I
r. '-c.-:- .... .:._- --- ._.--::

.,

?_~~:::: ..:.... ~s Z-~ Sec-.:=:i ty

~?'=~: ~5

C=:...: C! ~: c~:s ----"'_..--

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::"~:~ C:::.~

~. :~_- ...=.?=: :..2.'':'':''c=: I ::_:::,.: ::.s , :=~:.. ;-:....: ?_-.:' ::-e= !:,::...-:"

3,:~E.50

13. ';~::'. 00

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(2,265. j)

:n,fS2.74

3?5,S47.90

-c-

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./

(2,265.73) ,

./

:n,E.96. ,,,-

./

364,.<62. E6

.'- _:':.. -: : c . "::..:-",,c: ... ---- ;'.:..: ~:=:-.; ~=s-:;....-.-.=!.

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:-.:.~ C-~~c.:':==/C:::.:-,·';:'== c...."",-

S:.==!,;e

?"=.::...=~:..-.; :....~":.S

:.= ~-::-BC'

~:.:~ : ....::..s:..E:~-.; Cc....~s:-:

:.=:...:;:::..: =:--5 :-:::. c:::

----..- .... : -c:: ";:;- ",._:-...- - - -- ,-- - - - -. - "'---:0

5,00:'.00

~::,i5~.90

:2,:'5:.00

.:E,::i4.00

2,3'::.00 cJ

9, "75::'.:-0 eJ

:2,2:::.00

46,3i4.0:'

:;,s.·n.Ol £.I

5-S,:lO.iO

" e I

'';£9,OlE,E9--J

-C'-
( .

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-8(1-

As a result of the CFL response to the final audit report,

the discrepancies which existed in the categories between

CFL and the Audit staff have been entirely and/or

substantially eliminated.

.

"( ... .

r'

~/

- ~/

The Commission preliminarily detercined on August 7, 1980

that this item is not a legitimate winding down cost.

The Co~mittee was afforded 30 days in which to respond to

the Commission's preliminary detercination (Committee's

response ~as Que 10/5/80). No response ~as received from

the Committee. Furthermore, the C0~~ittee did not pursue

its s tat u tor y rig h t toe 0 n t E: S t the Co:~:n ission '5 de t e r -

mir,ation in the Court of hppeals for the District of

Columbia (se:e 26 U.S.C. 9041(a)).

Th~se figures rtpresent documEnted winding down costs. Our

April 19, 1982 letter requested the Co~~ittee to provide

ccc-c'Ja:e GOCIj:7"2~tation it; SUDoort of t:-avel for FEe related :- . ~. -... . 8~Sl~~SS and 0stl~atec acaltlo~al C0~8uter costs. SInce

the Ccr..?i1i ttee failed to ?rovide the necessary doc'.1!7ientation,

the undoc~~ented portion (52,658 and $4,000 respectively) ~~50ciated ~ith the a~o~e two ite~s has been ~xcluced from

o~r calc~lation of ~i~coc~n Ex~enses.

Since a deficit still existed en Jc~e 16, 1980, CFL, in our

o?inion, is entitled to additional fundraising expe~ses in

oreer to eliminate such deficit.

This fi9~re represents private contributions end ~atching

fund ~~y~ents received through July 2, 1980 per the Co~~ittee's bank records. Since this amount ($~69,016.69)

is s~ffici~~t to extinguish the ceficit of ($~50,540.55),

the CC ;;:T. itt(: e i s not e:J tit:2. edt 0 fur t :-. '== r :T. ctc~: i n9 ? Co y:71 en t s •

..
I o' •

-9-

Based on a review of the Committee1s revised NOCO

statement and related documentation, the Audit staff determined

that the Committee received sufficient private contributions and

matching fund payments to eliminate its deficit (as calculated

by the Audit staff as $450,540.55) prior to its receipt on July

3, 1980, of a matching fund payment of $17,996.35. Furthermore,

the July 31, 1980 payment of $89.07 was also received when no

entitlement existed.

Concerning the financial records for the Teamsters

Committee to Elect LaRouche (TCEL), the Office of General Counsel

has received a letter from the bank* stating that no records

exist with respect to TCEL. Since TCELls reported activity

totals only $45.00 the effect on CFL's entitlement would be

minimal, if any. Therefore, the Commission has determined that

no further action should be taken with respect to this matter.

.,...

'- '.

Item II.B •

Item II.C.

Rev i sed ;'.iTtoun t

Expenditures in Excess of

New Hampshire State

Limitation

~atching Funds Received

in Excess of entitlement

$36,5e6.42

$54,671.84

"

III. Suoport for the Recommendation

Based on the Audit staff's review of the material submitted

by the COffimittee, it is recom~ended that a downward adjustment of

$55,946.69 be reflected in the Commission's final repayment

determination.

. -.

IV. Staff Coordination

A copy of this ~emorandum was furnis~ed to the Office of

General Counsel for their consideration. Their co~~ents are

attached.

..

* TCEL's stat0ment of organization discloses the Michigan ~atior.al 3a~k as its depository.

l... . . .J>..... _ -- ......_----- -
c:.~..

. ,

{

Audi t 4.: 'tit .1

FEDERAL ElECTION COl"'1,\1ISSION

H25 II. SIRHT ~w.

\\·-\SHI"Cl0~.DC. 20463

ADDrnm:~ ND~~TION REG.!W)ING TIUS ORG.t..NIJ.ATION

}!AY BE LDC:-\TED IN A OJ:1PLt.."ll:D CCMPLIANCE ACTION

FILE REI.EASED BY TIlE (IT·MISSION AND HADE PUBLIC IN

1:1£ PUBLIC REOJRDS OFFICE. FOR 'TIllS PARTICl.JI..AR

ORGrl..~IO~tS miPLl:TED ro·:PLIA:.~CE ACTION FILE

. .-; --'

SDRY ASK roR TIlE nESS Sl.}~ARY OF }!IJR /F .I / :"j~'~. I>~~-51 \ :, /Ij/.

'mE PRESS Sl~'H\RY HILL ~VIDE A BRIEF HISIORY OF i .-: (I :f

'mE CASE ~1ID A SL~'!'~-\RY OF TIlE ACTIONS TAKEN. IF PNY.
·...

'..

..'

,-

FEDERAL ElECTION COMMISSION

1~25~ SIlU~1 \\

W~SHI""C10 0 ( 2(I-1b3

AlDmCNAL lNFORMATION REGARDING 'IRIS ORGANIZA'l'IOO

MAY BE IDCATED IN A CXH'lZlED <D1PLIANCE ACrIOO

FILE REt.EASED BY 'nIE CIM1ISSION AND MAIE PUBLIC IN

'!HE PUBLIC REOORDS OFFICE. R)R 'IHIS PARTIaJIAR

ORGANIZATION'S CXH'lZlED OH'LIANCE ACl'ION FILE

SlMPLY ASK FOR nIE PRESS stl+1ARY OF MJR 4; /2(I l- .

'!HE PRESS st:M1ARY WIIL PROVIDE A BRIEF HIS'roRY OF

'IHE AND A StM1ARY OF 'mE ACrICNS TAKEN, no Mfri.
f .,

-,'

...

~"

FEDERAL ElECTION COMMISSION

H2'i lIU (l .... \\'

\\'-\~H"'C10"".[)( .?!l~6j

AIDmOOAL mroRM/\TION REGARDING 'IRIS ORGANIZ.A1'IOO

MAY BE IDeATED IN A CXH'lEIED <XK'LIANCE

FILE m.EASED BY 'mE a:M1ISSI~ AND MADE PUBLIC IN

'DtE PUBLIC REOJRDS OFFICE. FUR 'lHIS PARTIaJLAR

ORGANIZATION'S <:n1PlEI'ED CXM'LIANCE ACITON Fn.E

SD1PLY ASK FUR 'nIE PRESS SU+fARY OF M.JR /1 I Jrt . ;

'DtE PRESS St.I+1ARY WIIL PROVIDE A BRIEF HIS'IURY OF

'IHE CAS AND A SlM1ARY OF 'mE ACl1.OOS TAKEN. IF ~.

FEDERAL ELECTION COMMISSIO~

WASHI",CTOi'O 0 C 20463

December 23, 1982

?at~icia Do1beare, Treasurer C~~~zens for LaRouche

:;04 :\es~ 58th Street

Ne~ ;or~, Ne~ York lOrr19

~ea~ ~s. Dolbeare: .

?ursuant to-26 U.S.C. S 9038(b)! on Dece~ber 16, 198~

t~e Federal Election Commission made a final determination ~~at Lyr.=on LaRouche and the Citizens for LaRouche should

repay $54,671.84 in primary matching funds to the United

States T~easury. Enclosed is the Statement of Reasons in

support of the Commission's final repayment determination.

Please note that, under 11 C.F.R. S 9038.2(e), the

554,67:.84 should be repaid wit~in twe~ty (20) days. The

?ay:":'.e:1 s~culd be sent, to the Cornrnission, 'but. made payable ~o t~e w.S. Treasury.

I: you have any questions concerning ~~is matter, Flease

cal2. !-1ar~:;'a Gentner of tl1e CCrr::7lission I 5 Of::ice of General Co~~sel, at (202) 523-4175.

Sincerely,

CC'..:rlse:

UI.~I!!.l."""""·~·~.:':'~~~~U:iCl._=_IIU!llW.=""4"4(IIJS"III'I ••t;:li.IIC"'&••1JI2_••••__£1•• 11
•

r"

STATEMENT OP REASONS

On December 16, 1982, the Federal Election Commission

[hereinafter cited as Co~~ission on FEC] made a final

determination that Citizens· for LaRouche [hereinafter cited as

eFL] and Lyndon LaRouche should repay $54,671.84 in primary

matc~ing funds to the Secretary of the United States Treasury.

26 U.S.C. S 9038(0). Pursuant to 11 C.F.R. S 9038.2(b), the

. Commission submits to eFL the following statement of reasons in

support of the FEC~s final repayment-dete:mination.ll

I. State °Expenciture Allocations

A. Expenditures for Political Broadcasts on National

Television

The Co~~ission's audit staff discovered in the pest primary

audit of CFL that $163,231.02 in CFL expenditures for political

broadcasts on national television were not allocated to state

expenditure limits by the committee. Accordingly, pursuant to 11

C.F.R. S l06.2(c) (1), these expenditures were allocated by the

Commission to the fifty states in proportion to the estimated

viewing audience of voting age in each state ("VAP"). On this

basis, $492.71 of these eFt expenditures were allocated by the

II This statement of reasons aoc:esses o~ly t~ose issues raised

by t~e Commission's preliminary repayment determination as co~tained in the Final Audit Report of the Citizens for LaRouche,

!nc. (approved March 17, 1981), which remain contes~ed by CFL i~

its Response to the Final Audit Report (May.6, 1981). See

11 C.F.R. § 9038.2(b) ,(c) and (c). (The eFL res?c~se is ap?e~cec

hereto as At:achment I.) Certain of these contested matters,

however, were resolved in CFL's favor by the Commission on

Seotember 16, 1982, and therefore will not be addressed herein.

See Addendum to Final Audit Report for Citizens for LaRouche,

Inc. (September 21, 1982). (Attachment II).

__________-....-alj~t-'l_~ IIlPI.•• ..~i.""_.....-.J!S""""".""=E'._"""~il'~t'''''.....~.IIIq!Qj,.,..Ji.-"'"'.......u:~___.~_........._
, •

-2-

Commission 2 ' to New Hampshire. _I CFL in its Response to the Pinal

r···

Audit Report (hereinafter cited as CFL's response] acknowledges

that the VAP formula used by the Commission is the most accurate

allocation formula; however, CFL asserts that the political

broadcasts in question should not be allocated to any state

expenditure limitations. The regulations expressly provide to

the contrat;y.

Section l06.2(~) (1) of title 11 of th~ Code of Federal

Regulations st~tes:

Expenditures for pUblication and distribution of

newspapers, magazine, radio, television, and other

types of advertisements distributee in more than

one State shall be attributed to each State in

proportion to the estimated viewing audience or

readersbip of voting age which can reasonably be

expected to be influenced by these advertisements.

"The $163.231.02 of expenditures were for media advertisements 1/,

and were broadcast in more than one state, including New

(- Hampshire, and therefore, by the express terms of the regulation

quoted above were allocable; in part to New Hampshire, and all

other states in which the broadcasts were received. CFL argues

1/ The formula used is specified at page 8 of the Final Audit

Report of the Citizens for LaRouche, Inc., approved by the

Commission on March 17, 1981, and received by CFL on April 8,

1981. .

1/ CFL states in its response that in one of the nation~l

broadcasts at issue, LaRouche did not even m~ntion his campa:gn, inti~atinc t~at the broadcast was no~ to infl~ence voters and

thus shouid no~ be allocated to a state. Such reasoning does not

support CFL's position, however, for if the expendit~re, in fact,

was not campaign related, then it was not a qualified campaign expenditure, !!! 26 U.S.C. S 9032.9(A) and 11 C.F.R.

5 9032.9(a) (2), and thus CFL would be required to repay the

entire amount of that expenditure to the U.S. Treasurye See

26 U.S.C. S 9038 (b) (2) (A) and 11 C.F.R. S 9038.2 (a) (2) (i).
·,..

, ,

I

-3-

in its response that these broadcast expenditures should not be

allocated to any state because they were intended to affect

-national opinion as a whole-; yet the committee cites no

statutory or regulatory language that provides for such an

exc~ption to the clear and unequivocable language of 11 C.F.R.

5 l06.2(c) (1) requiring the allocation to states of media

expenditur~s. Thus, the Commission has determined that $492.71,

== .402% of the $~;3,231.02 c~ CFL natio~a~ media ~~~endi~~~~s

are allocable ~o the committee's New Hampshire state expenditure

limitation.

An additional $13,760.34 in eFL media costs not allocated to

any state was found by the auditors. !!! Final Audit Report at

7. Again, using the VAP formula over SO states, $55.32 or .402%

of the $13,760.34 was allocated by the Commission to CFL's New

Hampshire state expenditures. While the CFL response did not

specifically address this $55.32 allocation, the basis for that

allocation by the Commission is, as the foregoing demonstrates,

that 11 C.F.R. S l06.2(c) (1) expressly requires such an

allocation.

B. Expenditures Allocated to Massachusetts

CFt p~aced television, radio, and newspaper advertisements

between January 9 and February 8, 1980, totalling $57,393.62, and

allocated these expenditures on the following basis: $49,358.53

. or 86% to Massachusetts; $6,887.21 or 12% to New Hampshire; and

$573.94 or 1%, each, to both Vermont and Connecticut. Due to the

structure of the Massachusetts Democratic delegate selection,
....

-4-

process, the fact that Lyndon LaRouche was not on the ballot in

the Massachusetts primary, and that these expenditures occurred

after the final ballot access date of January 4, 1980, the

Commission made a preliminary de'termination that the $5:7 ,393 .62

in advertisement expenditures were not properly allocable by CFL

to Massachusetts in any portion. Therefore, the Commission

determined that CFL must amend its allocation schedules to

attribute 85.71% of -those exp~~ci~ures to New Ba~rs~ire, or

$42,305. 20.. Oe~pi te the fact that LaRouche was not and could not

have been on the Massachusetts ballot as of the time the

$57,393.62 was expended, CFL has asserted in its response that

86% of those expenditures were properly allocated to

Massachusetts because the campaign was seeking to obtain the wno

perference ft vote in that state.

The Massachusetts primary was held en March 4, 1980. As

(~ previously noted, the final ballot access date for the primary

was January 4, 1980. However, prior to the primary, district

caucuses of the state Democratic party were held in Massachusetts

on February 10, 1980. Specifically, a congressional district

caucus was held on that date for each candidate on the Democratic

primary bal~ot. Every participant in a particular candidate's

caucus was required to sign a pledge in support of that . cancidate. if Rule 9 of the Massachusetts Delegate Selection

~/ Each candidate for delegate was also required to file by

February 4, 1980, a statement of delegate candidacy stating the

presidential candidate whom the delegate candidate supported, or

an uncommitted status. Rule 8 of the Massachusetts Delegate Selection Plan for the 1980 Democratic National Convention.

----- -----.-----------------
,....

-5-

Plan for the 1980 Democratic National Convention [hereinafter

cited as Dele9ate Plan Rule __]. In addition, no person could

participate in more than one district caucus. ~. These

caucuses in turn selected those delegates who would represent the

particular primary ballot candidate for whom the caucus was held.

Because the Massachusetts primary ballot also provided for a

"no preference" selection, district caucuses were also held on

February 10, 1980, ~or the no preference delegate selection. The

chair of each no preference. caucus was required to be appointed

by the Chairman of the Massachusetts State Democratic Committee

no later than January 15, 1980. !!! Delegate Plan Rules 5 and 6.

The chairs of the no preference caucuses were required to sign an

affidavit to the effect that the chair represented no candidate,

announced or otherwise. Participants in 'the no preference

caucuses also had to sign pledges that they supported no

candidate at that time. Delegate Plan Rule 9. Delegates to

represent the "no preference" choice were then selected at these

caucuses•.a/

Following the March 4, 1980 Massachusetts Democratic

primary, delegates to the Democratic National Convention were

~/ All delegate candidates in the no pr~ference caucuses were

required to sign an affidavit by February 4, 1980, attesting to

their uncommitted status, see n. 4, sucra, and to maintain this unco~~itted status throuch~e primarv. See belega:e Plan Rule

8. Thus eFL's contention in the affidavit of Lawrence Sherman

(Exhibit A to eFL Response) and at page 8 of the CFt response that thirty delegates who were elected as uncommitted delegates

·were in fact committed to ••• LaRouche's candidacy· is

misleading and inaccurate.

ea:... sax ac 41.2 '.'*..U4!'JIIf L a 4
( ,

-6-

designated based on the number of votes for each candidate on the

ballot. !!! generally Delegate Plan Rule 15. Uncommitted

delegates to the Democratic National Convention were designated

on the basis of the percentage of "no preference" votes in the

Massachusetts primary. !/~. All candidates for delegate and

e~ected delegates were required to be identified as to their

respective presidential preference or uncommitted status !! all . levels of the ~rocess, from the caucus, to .the primary, and up

until the convention. Delegate Plan Rule 8. Furthermore,

- delegates selected for a particular primary ballot candidate were

required to vote for that candidate at least through the first

ballot at the Democratic National Convention. !S.

In light of the Massachusetts Democratic delegate selection

procedures in 1980 as outlined above, it is clear that the CFL

expenditures for the advertisements in question, dating from

,- January 9 to February 8, 1980, could not reasonably be expected

to influence the Massachusetts viewing voting age population to

vote for Lyndon LaRouche, or for delegate candidates supporting

LaRouche, in either the March 4, 1980 primary or the preceding

district.caucuses held on February 10, 1980. See 11 C.F.R.

§ 106.2(c) (1). Inasmuch as LaRouche was not on the primary

ballot, no person could be influenced to vote for him in the

i/ The Massachusetts primary did provide a blankline for write

in votes, Mass. Gen. Stat. Chap. 53 570E, and if a write-in

candidate secured enough votes, a caucus to choose delegates in

support of that person to attend the national convention, would

be held after the primary. Delegate Plan Rule 15. However, CFL

acknowleges in its response to the Commission that the committee

did not stage a write-in campaign in Massachusetts or seek to

influence the write-in vote in that state.
-7-

primary ana no caucus could be held to pick delegates to support

him. Moreover, as all no preference delegates selected by virtue

of the primary and no preference caucuses had to maintain their

declared uncommitted status at least through the March 4 primary,

!!! Delegate Plan Rule 8, CFL could not by its January 9 to

February 8, 1980, advertisements influence the election of

delegates w~o supported LaRouche through the no preference slot

on the primary bal~ot. 1/

The essence of CFL's argument in support of its allocation - of 86' of its media expenditures to Massachusetts is that the

committee was attempting to influence the voters of that state to

specifically vote Wno preference-, because it was CFt's opinion

,-. that uncommi tted dele9at~s might lead to the committee' s goal of

f •

an wopenw Democratic National Convention. Nothing in the record,

however, supports eFt's contention that its January 9 to February

8, 1920, media advertisements were directed at influencing voters

to cast a "no preference" vote in the Massachusetts primary. eFt

acknowledges the only documentation it provides in support of its

position is a campaign strategy memorandum from Barbara Boyd of

the committee. Exhibit B of CFL's response. That document

is not prob~tive on this issue, as it merely makes passing

reference to the Massachusetts race in two places. First, on

page 2 of the memorandum, there is a referenc~ to a slate of

1/ Furthermore, since participants in the no preference caucuses

were required to pledge they supported no candidate for the

presidential nomination, eFL could not have influenced the

outcome of the no preference delegate selection caucuses to

select pro LaRouche candidates, either.
r·

-8-

"uncommitted", however what appear to be relevant portions of

this documentary reference have been -blacked-out" by the

committee, making the document unreliable evidence for the

purpose for which eFL proffers it. The second referenc~ to

Massachusetts in the document is on the third page, which simply

notes the Massachusetts caucus date, and makes no mention of any

CFL strategy for Massachusetts, let alene one by CFL to stage a

no p:eference adve~~ising ca~pai9n. Moreover, the fact that CFL

did not even stage a write-in campaign on behalf of LaRouche in

Massachusetts, although there were no legal impediments such as

those for ballot access in initiating a write-in campaign, belies

the assertion that CFL was attempting by its January 9 to

February 8, 1980 advertisements to influence Massachusetts voters

to in some way support the LaRouche campaign.

The Commission has consistently refused to permit a

candidate to allocate expenditures to a state in which the

candidate is not on the primary ballot, where the expenditures

have been made after the ballot access date. !/ See e.a. Final - ....-...-

AUdit Report of the [1976] Udall for President Committee.

Moreover, .the Commission also applies this policy to the

candidate's benefit by not applying the "10' rule" of 26 U.S.C.

~/ However, if the expenditures are made pri?r to the ballot

access date in a state primary, the Commission will permit them

to be allocated .to that state even if the candidate SUbsequently does not appear on the ballot. Thus, 1% of the January 9 to

February 8, 1980, expenditures appropriately were allocated by

CFL to Vermont, although LaRouche was not on the ballot in that

state, since the final ballot access date in Vermont was February

12, 1980.
• r'

, ....

,..

-9--'

S 9033(c) (1) (B) to the candidate in a state where the candidate

is net on the ballot. 1/ !!! 11 C.P.R. S 9033.S(b). Thus,

neither the record, the statute and regulations, nor prior

Commission action support CPL's attempt to allocate 86' of its

$57,393.62 in expenditures to Massachusetts, where LaRouche was

not on the ballet and did not even stage a write-in campaign, and

only 12% of .those expenditures to New Hampshire where the

ca~didate was on t~~ primary ballot. C~. Gel~an v. FEC, 63l.F.2d

939,9'3 (D.C. C~r. 1980), £!!S. denied 445 U.S. 876 (1980)

("where [asserted] construction leads to a conclusion that is

illogical or at odds with apparent purpose of the statute, there

can be no doubt as to the correctness of the agency's

position").lO/

For the foregoing reasons, the Commission has also

determined that CFL improperly allocated 86% of its $2,200.20 of

February 1980, television charges to Massachusetts, and that

1/ Bad the Commission considered LaRouche to have actively

campaigned in Massachusetts as CFL now asserts, the provisions of

26 U.S.C. S 9033{c) (1) (B) would have operated to make LaRouche

ineligible for further matching fund payments, since it would

have been the second consecutive primary in which LaRouche

received less than 10% of the vote.

10/ The Commission notes that CFt has erroneously stated the

position the FEe took in the Gelman action. The FEe position in

that case was merely that LaRouche failed to get 20% of the votes

cast in the Michigan Democratic presicential primary, and

therefore that the requirement of 26 u.s.c .. § 9033 (c) (4) (B) to

regain eligibility for matching funds had no~ been met by the

candidate. It was eFL, however, that asserted to the court that

votes cast for the "uncommitted" slot in a primary are not votes

wfor a candidate". See Gelman v. FEC, 631 F.2d at 941.
-10-

85' of those expenditures, or $1,885.79, should have been

allocated instead to New Hampshire. Therefore, since CFL already

allocated $796.63 of this amount to New Hampshire, the remaining

$1,089.16 has been attributed by the Commission to ClL's New

Hampshire expenditure totals.

C. Re"tal of Bouse in New Hampshire and Associated

Telephone Expenditures

The Commis~ion has determined that $4,759.08 in rental

payments, $410.22 for telephone charses, and $4,181 for damages

associated with~ house in New Hampshire leased by CFt from

~~ October 1979 through February 1980, and allocated by the

committee to national overhead must be allocated to CFL's New

,....

Hampshire expenditure limitation. Section l06.2(b) of the

Commission's regulations states that expenditures for goods and

services used in a campaign in a specific state shall be

allocated to that state. !!!!!!E 11 C.F.R. S 106.2(a); FEC

Advisory Opinion 1979-73, Fed. Elec. Camp. Fin. Guide (CCB)

,5449. Based upon these regulatory provisions, the Commission

has consistently required that the entire amount of candidate

lodging while campaigning in a state be attributed to that state.

The fact that the candidate lodging CFt expended funds on was a_

rental property rather than more transient locging such as a

hotel does not provide a sufficient basis for distinguishing

those payments and waiving t~e state allocatron requirement. The

rental property*was used in conjunction with the LaRouche

campaign in New Hampshire; indeed it is clear that but for that
....

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New Hampshire campaign CFt would not have rented a house (and

thus paid for phone service for that house) in that state. CFt

stated in its response to the Commission's preliminary repayment

determination that the New Hampshire house was rented to mitigate

the costs to the committee of flying Mr. LaRouche in and out of

New Hampshire to campaign. Thus, admittedly the rental and

telephone p~yments were for goods and services used in the

:ampaign i~ New Ra~sphire, anc therefore under 11 C.F.R.

S l06.2(b) must_be. allocatee to New Hampshire.

In support of its allocation of the amount in question to

"national overhead", CFt states that a portion of the c~ndidate's

time spent at the New Hampshire rental property was devoted to

work on a book and campaign materials, as well as for candidate

Wrest" and ·other personal activties·. The regulations define

national overhead expenditures to be those for wadministrative

staff, and overhead coets directly relating to the national

campaign headquarters. w 11 C.F.R. Sl06.2(b). Rental payments

and associated telephone charges 11/ for candidate lodging in a

state do not fall within this regulatory definition. Moreover,

11/ The Commission notified CFt by letter of July 2, 1981, that

certain long distance telephone charges would not be required ta

be allocated to states if amended allocation schedules and

detailed documentation supporting the charges, including copies of bills supporting the charges, was presented to the Co~~ission

within thirty days of receipt of the letter•. The CFL response to

tbe July 2, 1981 letter was originally due on August. 19,.1961,

but SUbsequently was extended by the Commission until December

15, 1981. To date, CFt has not submitted any amended allocation

schedules or supporting documentation pursuant to the FEC's July

2, 1981 letter.
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to the extent the Commission accepts CFt's assertion that the New

Hampshire house paia for by public funds was used by LaRouche for

personal matters ana non-campaign related purposes (!!! CFL's

response, at 18,19), those payments were not qualified. campaign

expenditures and therefore are subject to 100% repayment, in any

event. See 11 C.F.R. - S5 100. 8 (a) (1) and 9032. 9 (a} (2) •

•

.r-

.,~

# -,

D. Expenditures in Excess of New Hampshire Limitation.

P~rs~~nt to 11 ·C.F.R. 5 9035.1(a), the-expenditure

~imitation for ~ew Hampshire in 1980, was $294,4QO. Including

the items noted above, $330,986.42 of the funds CFL spent in the

1980 campaign were or should have been allocated by the committee

to New Hampshire. Therefore, inasmuch as CFL exceeded the New

Hampshire limit by $36,586.42, these funds cannot be

cha~acterized as qualified campaign expenses. 11 C.F.R.

S 9034.4(a). Accordingly, the Commission has determined

$36,586.42 must be repaid by CFt to the O.S. Treasury. 11 C.F.R.

S 9034.4 Ca> and 9038.2 Ca> (2).

II. Excessive Payments of Matching Funds to Which The Candidate

Was Not Entitled

On August 7, 1980, the Commission preliminarily determined

that the statement of net outstanding campaign obligations

[hereinafter cited as NOCO statement) submitted by CFt pursuant

to 11 C.F.R. S 9034.5Cb) on July 28, 1980, and the alternative

NOCO statement submitted by CFt on August 4; 1980, were

inaccurate. Specifically, the Commission determined that certain

expenditures, inter alia "general legal expenses", claimed by CFt

to be winding down expenses did not qualify as such, !!!
e ••

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11 C.F.R. 5 9034.4(c), and that other claimed outstanding

campaign obligations were not adequately documented. !!!

11 C.F.R. 55 9033.1(a) (1) and 9038.2 (a) (3). The Commission

notified CFL of this determination and the basis therefore by

letter of September 3, 1980, and invited CFL to submit a response , within 30 days. No response from CFL was received by the FEC

within that. time framell/ and, accordingly, on October 5,1980

the Co~~:~~ion's ::~:imina=y decisio~ beca~e ~inal. CFt did not

see~ review of this decision in the court of appeals as provideo

for by 26 U.S.C. 5 9041(a).

Subsequently, the Commission, in its final audit report of

CFt again set forth the FEC audit verified NOCO Statement fer

CFt. Based on that NOCO Statement, it was preliminarily

determined that CFL had received matching fund payments after the

committee had reached the point where its net outstanding

campaign obligations did not exceed its cash on hand and other

assets (when CFt "zeroed out~), and that therefore CFL should

repay those funds to the u.S. Treasury. 26 U.SoCo

is 9033 (c) (1) and (2), and 9038 (b) (1); 11 CoF.R. SS 9034.4 (c),

9034.5, and 9038.2 (a) (1) •

12/ CFt alleges to have sent a letter on September 19, 1980 I

responding to the Commission's Septe:rlber 3, 1980 letter .. T~e

mailroom dockets, as we:l as the records of the Commission, the

Office of General Counsel, and t~e Audit ~ivision show t~at this

letter was never received by the Commission, and CFt offers no

proof of receipt by the Commission. In any event, a copy of the

letter is attached to the CFt response and thus has been reviewed

by the Commission in ma~ing its final repayment ceter~ination.

a- . ...........__~_"""'~~~~.~__
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CFL, in its May 6, 1981 response to the final audit report

submitted yet another NOCO Statement. Upon review of this latest

NOCO Statement, as well as additional documentation submitted by

CFL on June 7, 1982, an addendum to the final audit report was

issued by the Commission finding the committee ·zeroed out" for

purposes of the Presidential Primary Matching Payment Account

Act, as of July 2, 1980, and that the $36,586.42 in matching . funds received by.eFt after that date should be repaid. However,

the Commission:o~tinues to reject as le;itimate wi~din9 down

expenses the $13,400 for general legal fees that CFL has claimed

in its July 28, 1980, August 4, 1980, and May 6, 1981 NOCO

Statements, and $4,000 of the $13,750.90 CFL lists as other

....- compliance/computer costs in its May 6, 1981 NOCO Statement.ll/

With respect to the $13,400 in general legal fees disallowed

by the Commission, a detailed basis fer this determination was

set forth and provided to CFL in the FEC's letter of September 3,

1980, and is hereby incorporated by reference to this statement

of reasons. (!!! Attachment III). The committee's failure to

timely exercise its right to judicially challenge the

Commission's determination in this regard after it became final

on October 5, 1980, arguably could be considered a waiver of any

right to contest that d@cision. !!! 26 U.S.C. S 9041(a).

11/ The May 6, 1981 NOCO Statement was the fi:st one in which

CFt claimed $13,750.90 for computer/compliance costs. P:evious

CFL NOCO Statements had claimed only $9,250 for this category of

expenses.
....

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AsSuming arguendo, however, that CFL is not estopped from

now contesting this issue, CFL has not demonstrated the expenses

claimed are qualified campaign expenditures. The $13,400 was for

legal fees in connection with three defamation suits against

Lyndon LaRouche and CFL. Actions in defense of a defamation suit

are not undertaken wfor the purpose of influencing any election

for Federal office", and thus expenses incurred in so doing are

n~t "expenditures", · .m 11 C.F.R. S 100.8 fa) (1). Therefore,

these payments ~ere not win~ing down or other qu~lified campaign

expenditures. See FEe Advisory Opinions 1980-4 and 1979-37, Fed.

Elec. Comp. Guide " 5457, 5419. See also FEC Advisory Opinion

1980-57, g. at '5310. £!. 11 C.F.R. S 9032.9 (a) (3).

Consistent with this interpretation, the Commission has not

required that the amounts spent by eFt in defending these

defamation suits be allocated to CFL's overall or state

expenditure limitations. See FEC Advisory Opinion 1980-4, suora.

The other item listed on the most recent CFL NOCO Statement

that the Commission continues to reject as part of CFL's net

outstanding campaign obligations is $4,000 of the compliance and

computer costs claimed by the committee. Notwithstanding

extensive opportunities provided by the Commissio~ to CFL to

submit additional documentation, CFt has failed to provide the

supporting materials for these $4,000 of expe~ditures as requirec

by 11 C.F.R. S ~033.1(a). Thus, the Commission rejects eFL's

claim that this $4,000 payment which was not documented in
(' -

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accordance with the regulations may be defrayed by pUblic

matching funds. 11 C.F .R. 5 9038.2 (a) (3) .ll/

As the NOCO Statement contained in the Commission's addendum

to the CFL final audit report shows, as of JUly 2, 1980, CFL no

longer had any net outstanding campaign obligations. Therefore,

eFL was not entitled to the two matching fund payments it

received on July 3 and July 31, 1980, totalling $18,085.42 • . Accordingly, the ~ommission has determined ~hat amount should be

repaid by CFt ~nd Lyndon LaRouche to the United States Treasury.

§..!! 26 0.5 .C. 5 9038 (b) (1) •

III. Summary of Repayment Determination

The Commission has determined CFt exceeded its state

expenditure limitation for New Hampshire by $36,586.42. In

addition, the Commission has determined that CFL received

matching funds of $18,085.42 in excess of its entitlement.

Therefore, pursuant to 26 U.S.C. 5 9038(b) (1) and (2), Lyndon

LaRouche and CFL must repay $54,671.84 to the United States

Treasury.

14/ eFL .in its response to the final audit report also seems to

challenge the Commission's August 7, 1980 determination that CF~

expenditures in connection with travel to and lodging at the

Democratic 'national convention were not leg i timate winding dewn·

expenses. See 11 C.F.R. S 9034.4(c). However, the NOCO

Statement submitted by CFt with its response does not li~t those

expenditures as campaign obligations. In anv event, as the CFL

response acknowledges, CFL's attendance at -the nominating

convention was ,not an attempt to ter=ninate campaign activi.ty, but

to continue and escalate it. Id. Therefore, since these expenses

were incurred long after LaRouche's April 17, 1980 date of

ineligibility, and since they do not qualify as winding down

expenses, the statute mandates that these expenses not be

defrayed with matching funds. 26 U.S.C. S 9033(c).