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Final Audit Report of the 

Commission on 

Canseco for Congress 

(January 1, 2009 - December 31, 2010) 

Why the Audit 

Was Done 

Federal law permits the 

Commission to conduct 

audits and field 

investigations of any 

political committee that 

is required to file 

reports under the 

Federal Election 

Campaign Act (the 

Act).' The Commission 

generally conducts such 

audits when a 

committee appears not 

to have met the 

threshold requirements 

for substantial 

compliance with the 

Act. The audit 

determines whether the 

committee complied 

with the limitations, 

prohibitions and 

disclosure requirements 

of the Act. 

Future Action 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to any of 

the matters discussed in 

this report. 

About the Campaign (p. 2) 

Canseco for Congress is the principal campaign committee for 

Francisco R. Canseco, Republican candidate for the U.S. 

House of Representatives from the State of Texas, 23"* District, 

headquartered in San Antonio, Texas. For more information, 

see the chart on the Campaign Organization, p. 2. 

Financial Activity (p. 2) 

• Receipts 

o Contributions from Individuals 

o Contributions from Other 

Political Committees 

o Candidate Loans 

o Other Receipts 

Total Receipts 

• Disbursements 

o Operating Expenditures 

o Repayment of Candidate Loans 

Total Disbursements 

$ 972,233 

316,035 

321,880 

9,794 

S 1,619,942 

$ 1,481,985 

58,505 

$ 1,540,490 

Commission Findings (p. 3) 

• Receipt of Prohibited Contributions (Finding 1) 

• Receipt of Contributions that Exceed Limits (Finding 2) 

• Misstatement of Financial Activity (Finding 3) 

On September 1,2014, the Federal Election Campaign Act of 1971, as amended ("the Act"), was 

transferred from Title 2 of the United States Code to the new Title S2 of the United States Code. 

' 52 U.S.C. §30111 (b) (formerly 2 U.S.C. §438(b)). 
Final Audit Report of the 

Commission on 

Canseco for Congress 

(January 1, 2009 - December 31, 2010) 
Table of Contents 

Page 

Part I.. Background 

Authority for Audit 1 

Scope of Audit 1 

Audit Hearing 1 

Part II. Overview of Campaign 

Campaign Organization 2 

Overview of Financial Activity 2 

Part III. Summaries 

Commission Findings 3 

Part IV. Commission Findings 

Finding!. Receipt of Prohibited Contributions S 

Finding 2. Receipt of Contributions that Exceed Limits 10 

Findings. Misstatement of Financial Activity IS 
Parti 

Background 

Authority for Audit 

This report is tased on an audit of Canseco for Congress (CFC), undertaken by the Audit 

Division of the Federal Election Commission (the Commission) in accordance with the 

Federal Election Campaign Act of 1971, as amended (the Act). The Audit Division 

conducted the audit pursuant to 52 U.S.C. §30111(b) (formerly 2 U.S.C. §438(b)), which 

permits the Commission to conduct audits and field investigations of any political 

committee that is required to file a report under 52 U.S.C. §30104 (formerly 2 U.S.C. 

§434). Prior to conducting any audit under this subsection, the Commission must 

perform an internal review of reports filed by selected committees to determine whether 

the reports filed by a particular committee meet the threshold requirements for substantial 

compliance with the Act. 52 U.S.C. §30111(b), (formerly 2 U.S.C. §438(b)). 

Scope of Audit 

Following Commission-approved procedures, the Audit staff evaluated various risk 

factors and as a result, this audit examined: 

1. the receipt of excessive contributions and loans; 

2. the receipt qf contributions from prohibited sources; 

3. the disclosure of contributions received; 

4. the disclosure of individual contributors' occupation and name of employer; 

5. the consistency between reported figures and bank records; 

6. the completeness of records; and 

7. other campaign operations necessary to the review. 

Audit Hearing 

CFC requested a hearing before the Commission. The request was granted and the 

hearing was held on June 12,2014. At the hearing. Counsel addressed two issues, one 

related to the receipt of prohibited contributions in Finding 1 and the second, outstanding 

amounts owed to contributors for excessive contributions identified in Finding 2. 
Part II 

Overview of Campaign 

Campaign Organization 

Important Dates 

• Date of Registration January 7,2004 

• Audit Coverage January 1,2009 - December 31,2010 

Headquarters San Antonio, Texas 

Bank Information 

• Bank Depositories Two 

• Bank Accounts Two Checking Accounts 

Treasurer 

• Treasurer When Audit Was Conducted Randy Blair 

• Treasurer During Period Covered by Audit Randy Blair 

Management Information 

• Attended Commission Campaign Finance 

Seminar 

No 

• Who Handled Accounting and 

Recordkeeping Tasks 

Paid Staff 

Overview of Financial Activity 

(Audited Amounts) 

Cash-on-hand ® January 1,2009 S 0 

Receipts 

o Contributions from Individuals 972,233 

o Contributions from Other Political 

Committees 316,035 

o Candidate Loans 321,880 

o Other Receipts 9,794 

Total Receipts SI,619,942 

•Disbursements 

o Operating Expenditures 1,481,985 

o Repayment of Candidate Loans 58,505 

Total Disbursements SI,540,490 

Cash-on-hand @ December 31, 2010 S 79,452 
Part III 

Summaries 

Commission Findings 

Finding 1. Receipt of Prohibited Contributions 

During audit fieidwork, the Audit staff identified two contributions totaling $100,000 that 

appear to be prohibited contributions from a foreign national corporation. CFC Counsel 

(Counsel) stated that these transactions were loans from the candidate: however, the 

funds ajppear to have originated from the account of a foreign national corporation. 

Counsel later stated these funds represent draws from partnership capital accounts of the 

candidate and his sister. 

In response to the Interim Audit Report, Counsel disputed this finding and disagreed with 

the classification of these loans as contributions from a foreign national corporation. 

However, on May 1. 2013, CFC issued a check for $55,395 to refund the contribution 

received from the foreign national corporation. The remaining $44,605 is a prohibited 

contribution that has not been resolved. 

The Commission approved a finding that CFC accepted prohibited contributions from a 

foreign national corporation in the amount of $100,000, of. which $44,605 remains unresolved, and amended disclosure reports have not been filed. (For more detail, see p. 5.) 

Finding 2. Receipt of Contributions that Exceed Limits 

During audit fieidwork, the Audit staff identified three transactions that Counsel stated 

were loans from the candidate. However, these transactions appear to be excessive 

contributions from four individuals who loaned the candidate funds. The total amount in 

excess of the individual contribution limit is $170,343. 

In response to the Interim Audit Report, Counsel provided documentation demonstrating 

that $160,293 was refunded to the appropriate contributors in an untimely manner. 

However, the documentation was not sufficient to demonstrate that CFC had repaid the 

remaining $ 10,050 to the appropriate contributors ($170,343 - $160,293= $10,050). The 

Audit staff considers the remaining $10,050 to be excessive contributions from two 

individuals that are not resolved. 

The Commission approved a finding that CFC accepted excessive contributions in the 

amount of $170,343, of which $10,050 remains unresolved, and amended disclosure 

reports have not been filed. (For more detail, see p. 10.) 
Finding 3. Misstatement of Financial Activity 

During audit fieldwork, a comparison oFCFC's reported financial activity with its bank 

records revealed misstatements of beginning and ending cash-on-hand, as well as, 

misstatements of receipts and disbursements for calendar years 2009 and 2010. For 

2009, CFC overstated beginning cash-on-hand by $32,344, understated receipts by 

$13,161, understated disbursements by $31,048, and overstated ending cash-on-hand by 

$50,231. For 2010, CFC overstated beginning cash-on-hand by $50,231, overstated 

receipts by $324,404, overstated disbursements by $313,123, and overstated ending cashon-hand by $61,512. 

In response to the Interim Audit Report, Counsel stated that, in order to avoid multiple 

filings of amendments, CFC would comply with all the recommendations once the 

Commission had finalized the audit. 

The Commission approved a finding that CFC misstated its financial activity for calendar 

years 2009 and 2010, and amended disclosure reports have not been filed. (For more 

detail, see p. 15.) 
Part IV 

Commission Findings 

Finding 1. Receipt of Prohibited Contributions 

Summary 

During audit fieldwork, the Audit staff identified two contributions totaling $100,000 that 

appear to be prohibited contributions from a foreign national corporation. CFC Counsel 

(Counsel) stated that these transactions were loans from the candidate; however, the 

funds appear to have originated from the account of a foreign national corporation. 

Counsel later stated these funds represent draws from partnership capital accounts of the 

candidate and his sister. 

In response to the Interim Audit Report, Counsel disputed this finding and disagreed with 

the classification of these loans as contributions from a foreign national corporation. 

However, on May 1,2013, CFC issued a check for $55,395 to refund the contribution 

received from the foreign national corporation. The remaining $44,605 is a prohibited 

contribution that has not been resolved. 

The Commission approved a finding that CFC accepted prohibited contributions from a 

foreign national corporation in the amount of $100,000, of which $44,605 remains 

unresolved, and amended disclosure reports have not been filed. 

Legal Standard 

A. Receipt of Prohibited Contributions - General Prohibition. Candidates and 

committees may not accept contributions (in the form of money, in-kind contributions, or 

loans): 

• In the name of another; 

• From the treasury funds of the following sources: 

o Corporations (i.e., any incorporated organization, including a non-stock 

corporation, an incorporated membership organization, and an 

incorporated cooperative); 

o Labor Organizations; and 

o National Banks; 

• From Federal Government Contractors (including partnerships, individuals, and 

sole proprietors who have contracts with the federal government); or 

• From Foreign nationals (including individuals who are not U.S. citizens and not 

lawfully admitted for permanent residence; foreign govemments and foreign 

political parties; and groups organized under the laws of a foreign country or 

groups whose principal place of business is in a foreign country, as defined in 

22 U.S.C. §611(b)). 52 U.S.C. §§30118. 30119, 30121 and 30122 (formerly 2 

U.S.C. §§441 b, 441 c, 441 e and 441 f). 

B. Contribution. A gift, subscription, loan (except a loan made in accordance with 11 

CFR §§ 100.82 and 100.83), advance, or deposit of money or anything of value made by 

any person for the purpose of influencing any election for federal office is a contribution. 

The term loan includes a guarantee, endorsement, and any other form of security. A loan 
thai exceeds the contribution limitations of S2 U.S.C. §30116 (formerly 2 U.S.C. §44la) 

and 11 CFR part 110 shall be unlawful whether or not it is repaid. A loan is a 

contribution at the time it is made and is a contribution to the extent that it remains 

unpaid. The aggregate amount loaned to a candidate or committee by a contributor, when 

added to other contributions from that individual to that candidate or committee, shall not 

exceed the contribution limitations set forth at 11 CFR part 110 and 11 CFR §100.S2(a) 

and (b). 

C. Authorized Committee Limits. An authorized committee may not receive more than 

a total of $2,400 per election from any one person or $S,000 per election from a 

multicandidate political committee. S2 U.S.C. §30116 (a)(1)(A), 2(A) and (0, (formerly 2 

U.S.C. §441a(a)(l)(A), (2)(A) and (0); 11 CFR §§110.1(a) and (b) and 110.9(a). 

D. Partnership Contributions. In addition to counting against the partnership's limits, a 

contribution from a partnership must be attributed to individual partners: 

• According to each partner's share of the partnership's profits; or 

• On another basis agreed to by the partners. 

If the partnership attributed contributions on the basis of option 2 above, it must reduce 

only the contributing partners' profits (or increase their losses) and the profits must be 

reduced in proportion to the contribution attributed to the partner. Under both options 

listed above, the portion attributed to each partner must not, when aggregated with other 

contributions from that person, exceed his or her contribution limit. 11 CFR §110.1(e). 

E. Questionable Contributions. If a committee receives a contribution that appears to 

be prohibited (a questionable contribution), it must follow the procedures below: 

• Within ID days after the treasurer receives the questionable contribution, the 

committee must either: 

o Return the contribution to the contributor without depositing it; or 

o Deposit the contribution (and follow the steps below). 

11 CFR § 103.3(b)(1). 

• If the committee deposits the questionable contribution, it may not spend the 

funds and must be prepared to refund it. Therefore sufficient funds to make the 

refunds must be maintained or a separate account in a campaign depository must 

be established for possibly illegal contributions. 11 CFR § 103.3(b)(4). 

• The committee must keep a written record noting the basis for the appearance of 

illegality, and it must include this information when reporting the receipt of the 

contribution. 11 CFR §103.3(b)(S). 

• Within 30 days of the treasurer's receipt of the questionable contribution, the 

committee must make at least one written or oral request for evidence that the 

contribution is legal. Evidence of legality includes, for example, a written 

statement from the contributor explaining why the contribution is legal or an oral 

explanation that is recorded by the committee in a memorandum. 

11 CFR §103.3(b)(1). 

• Within the 30-day period, the committee must either: 

o Confirm the legality of the contribution; or 

o Refund the contribution to the contributor and note the refund on the 

report covering the period in which the refund was made, 

o 11 CFR§103.3(b)(l),(5). 
F. Personal Funds. Personal funds of a candidate consist of assets, income, or jointly 

owned spousal assets. Assets are amounts derived from any asset that, under applicable 

state law, at the time the individual became a candidate, the candidate had legal right of 

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

title or an equitable interest. Personal funds may also be income received during the 

current election cycle of the candidate, including salary and other earned income from 

bona fide employment and income from stocks or investments, including interest, 

dividends or proceeds from the sale of such stocks or investments. 11 CFR § 100.33. 

G. Expenditures by Candidates. Candidates for Federal office may make unlimited 

expenditures from personal funds as defined in the paragraph above. 11 CFR §110.10. 

H. Reporting Loans. All loans received by a committee must be itemized and 

continuously reported until repaid. All repayments made on a loan must also be itemized. 

11 CFR §§104.3(a)(4)(iv). (b)(4)(iii) and 104.11. 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff identified two transactions totaling $100,000 

($14,000 + $86,000), which Counsel stated were loans the candidate made to CFG. The 

source of these funds appear to be prohibited contributions from a foreign national 

corporation and not the candidate's personal funds. 

Prohibited Contribution-$ 14.000 

On January 29,2010, $14,000 was transferred into a CFC bank account. This transaction 

was not disclosed on CFC's reports (See Finding 3- Misstatement of Financial Activity, 

Loans Not Reported). Counsel stated that this amount was a loan to the candidate from 

his partnership. In support of this statement. Counsel provided a letter stating that the 

loan was made to the candidate from Inmuebles Caza, S.A.de C.V ("Caza"). Caza is 99 

percent owned by Canseco Investments, Ltd. ("Canseco Investments"), while 1 percent is 

owned by Jorge Canseco, a brother of the candidate. In addition, the candidate is a 

limited partner of Canseco Investments.'* Counsel also provided several e-mails between 

other partners and from the president of Caza, which taken together explain that this 

amount was borrowed from Caza, based on the candidate's capital account in the 

partnership. The Audit staff did not review bank documentation relating to the source of 

these funds because it came from an account that was not owned by CFC. CFC did not 

make any repayments on this loan prior to the audit. 

Prohibited Contributions-$86.000 

On April 13, 2010, a check for $86,000 was deposited into a CFC bank account. This 

transaction was disclosed as a loan from the candidate on CFC's reports. A copy of the 

deposit documentation shows that this was a cashier's check remitted by Caza. Counsel 

provided two signed promissory notes showing that $58,000 was a loan to the candidate 

from his sister, and $28,000 as a loan to the candidate from Canseco Investments. The 

' Caza is a Foreign national corporation registered in Mexico. 

* According to its filings with The Texas Secretary of State, Canseco Investments, Ltd. is a domestic 

limited partnership with FMC Developers, Inc., a corporation, as its general panner. 
e-mails described in the preceding paragraph also explain that these amounts represent 

the balance of each partner's capital account in Caza. 

CFC reported repayments totaling S44,60S to the candidate on its disclosure reports. 

However, Counsel did not provide documentation demonstrating that these payments 

were paid to either the candidate or Caza. Additionally, the Audit staff could not trace 

payments, as reported, to CFC's bank account. 

The Audit staff concludes that the amounts of SI 4,000 and S86,000 represent apparent 

prohibited contributions from a foreign national corporation. Counsel maintains that 

these amounts represent personal investments in the partnership;^ however. Counsel did 

not provide documentation to support that these were distributions to partners from 

Canseco Investments. Furthermore, the business registration of Canseco Investments 

does not indicate whether any of these individuals are partners; the only listed partner is a 

corporation. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff presented these apparent prohibited contributions 

to CFC. Counsel said that CFC would take another look at this matter. 

The Interim Audit Report recommended that CFC demonstrate that the sources of funds 

for the amounts deposited were made with the candidate's personal funds or other 

permissible funds. Absent such a demonstration, it was recommended that CFC refund 

the $14,000 apparent prohibited contribution and the $41,395^ remaining of the $86,000 

apparent prohibited contribution. Additionally, the Audit staff recommended that CFC 

amend its reports to correctly disclose the source of these funds. 

C. Committee Response to the Interim Audit Report 

In response to the Interim Audit Report, Counsel disagreed with the classification of 

these loans as prohibited contributions from a foreign national corporation. Counsel said 

that the loans represent the candidate and his sister's equitable interest in Canseco 

Investments and, therefore, represent their personal funds. Furthermore, Counsel said 

that Canseco Investments acts as a holding company for its only investment, Caza, and 

Canseco Investments relies on Caza to provide for its banking needs. All transactions for 

Canseco Investments are processed by Caza and through Caza's accounts. Specifically, 

Counsel said that (1) "all of the expenses and payments on behalf of Canseco Investments 

arc made directly by Caza in the ordinary course of business; (2) Caza pays dividends 

directly to the owners of Canseco Investments, which are treated for tax purposes as 

dividends from Cansecp Investments and not Caza; and (3) tax payments and expenses 

If the funds received from Caza are deemed permissible and not prohibited contributions from a foreign 

national corporation, the amount of funds from the candidate's sister and/or the partnership may be 

considered an excessive contribution. 

Information provided by Counsel in response to the Interim Audit Report showed that a S30,000 

repayment and two repayments totaling SI4,600 were erroneously applied to the S86,000 CFC reported 

as a candidate loan. The S30,000, was in fact a repayment of excessive contributions from individuals 

noted in Finding 2. Repayments totaling SI4,600 have not been applied to the prohibited contribution 

amounts in either finding because Counsel has not provided documentation to verily receipt by the 

appropriate payee. 
incurred by Canseco Investments are paid for by Gaza." Counsel said the loans made to 

the candidate and his sister were paid by Caza, akin to other expenses paid on behalf of 

Canseco Investments. Moreover, the loans represent the candidate's and his sister's 

proportional interests in the assets of Canseco Investments, less an estimated tax 

liability.'* 

Counsel stated that, "while these loans may not meet the technical requirements set forth 

in 11 CFR §100.83, they are fundamentally different than a contribution for two key 

reasons." First, Counsel considered the loans derived from an asset for which the 

candidate had a legal ownership share and an equitable interest. He compared the loans 

to borrowing against a retirement plan or a life insurance policy. Second, Counsel stated 

that the interest rates charged by Caza on these loans to the candidate and his sister were 

above commercially available lending rates; hence, the candidate was not given an unfair 

lending advantage or a "sweetheart deal." 

While CFC's explanation expanded on previous statements made during fieldwork, the 

information did not establish that the funds at issue constituted the candidate's personal 

funds (I I CFR § 100.33(b)). Funds originating from Caza, a foreign national corporation, 

do not lose their character merely because the company is an asset held by a U.S. limited 

partnership, i.e., Canseco Investments. The Audit stafT concluded that Caza was the 

source of funds for the candidate's SI00,000 loan to CFC. 

Subsequently, on May 1,2013, Counsel submitted documentation demonstrating that 

CFC made untimely repayments of the loan to Caza totaling $55,395. CFC has not filed 

amended reports to correctly disclose the loan indicating the source of the loan as Caza. 

Counsel stated that, in order to avoid multiple filings of reports, CFC would comply with 

all the recommendations, once the audit had been finalized. Below are details explaining 

the resolution of these repayments. 

Prohibited Contribution-Sl4.000 

On May 1,2013, CFC issued a check to Caza repaying what Counsel had said was a 

$14,000 loan. The Audit staff considers this amount a repayment of a prohibited 

contribution that was resolved in an untimely manner. 

Prohibited ContributionS'$86.000 

On May I, 2013, CFC issued a check to Caza repaying $41,395 of what was disclosed by 

CFC as an $86,000 loan. The Audit staff considers this amount a prohibited contribution 

that was resolved in an untimely manner. 

On June 5,2013, Counsel stated that a portion ($30,000) of the $44,605 reported as a 

repayment to the candidate was attributable to another candidate loan (See Finding 2). 

The Audit staff requested documentation to substantiate that the remaining $44,605 was 

repaid to the candidate or Caza. Counsel has not provided this documentation. As such, 

the Audit staff considers the remaining $44,605 to be a prohibited contribution that has 

not been resolved in response to the Interim Audit Report. 

Counsel provided a redacted K-l for the candidate showing his partnership interest in Canseco 

investments. Counsel also stated that the funds were loaned to the candidate and not distributed due to 

various lax concerns. 

Counsel asserted that the borrowers' percentage of ownership interest is at risk for non-payment of loans 

that are secured by their ownership interest in Canseco Investments. 
10 

D. Draft Final Audit Report 

The Draft Final Audit Report disagreed with the CFC's argument that the funds received 

were from the personal funds of the candidate, but did acknowledge that CFC repaid 

$SS,39S of the prohibited contribution, leaving an outstanding balance of $44,605. In 

addition, the Draft Final Audit Report noted that CFC did not file amended reports to 

correctly disclose the source of these funds. 

E. Committee Response to the Draft Final Audit Report 

CFC responded to the Draft Final Audit Report by requesting an audit hearing. 

F. Audit Hearing 

At the audit hearing. Counsel did not introduce any new information. Counsel disagreed 

with the classification of these loans as prohibited contributions from a foreign national 

corporation. Counsel stated that the funds, totaling $100,000, represented the candidate 

and his sister's personal funds because they were drawn from their respective equitable 

interests in Canseco Investments. 

Counsel said that Canseco Investments preferred not to make a personal funds 

distribution to the candidate and his sister for tax reasons; and therefore, preferred to 

distribute the funds as a loan. Counsel said that while these loans might not have met the 

technical requirements of 11 CFR §100.83, they were fundamentally different than 

contributions for two reasons. First, the funds were derived from an asset for which the 

candidate had a legal ownership share or equitable interest. Moreover! that these loans 

were identical to loans where an individual borrows from a retirement plan or whole life 

insurance policy in which the individual has invested funds in those plans. Second, the 

loans were not a "sweetheart" deal because they were collateralized by the candidate's 

equitable interest in Canseco Investments (and therefore less risky than other loans), the 

terms were commercially reasonable, and the interest rates charged were above market 

rates. 

Counsel also stated during the audit hearing, that the promissory notes securing the 

$100,000 in loans reflected agreements between the candidate and Canseco Investments. 

Furthermore, Counsel stated that the candidate did not know that the funds he loaned to 

CFC were from Caza. 

Commission Conclusion 

On September 18,2014, the Commission considered the Audit Division 

Recommendation Memorandum in which the Audit staff recommended the Commission 

find that CFC accepted prohibited contributions from a foreign national corporation in the 

amount of $100,000, of which $44,605 remains unresolved, and amended disclosure 

reports have not been filed. 

The Commission approved the Audit staffs recommendation. 

Finding 2. Receipt of Contributions that ESxceed Limits 

Summazy 

During audit fieldwork, the Audit staff identified three transactions that Counsel stated 

were loans from the candidate. However, these transactions appear to be excessive 
II 

contributions from four individuals who loaned the candidate funds. The total amount in 

excess of the individual contribution limit is $ 170,343. 

In response to the Interim Audit Report, Counsel provided documentation demonstrating 

that SI60,293 was refunded to the appropriate contributors in an untimely manner. 

However, the documentation was not sufficient to demonstrate that CFG had repaid the 

remaining $10,050 to the appropriate contributors ($170,343 - $160,293= $10,050). The 

Audit staff considers the remaining $10,050 to be excessive contributions from two 

individuals that were not resolved. 

The Commission approved a finding that CFC had accepted excessive contributions in 

the amount of $170,343, of which $10,050 remains unresolved, and amended disclosure 

reports have not been filed. 

Legal Standard 

A. Contribution Limits. During the 2009-2010 cycle, no individual or group (other than 

a multicandidate committee) was permitted to contribute more than a total of $2,400 per 

election to a federal candidate's campaign (the campaign includes the candidate and his 

or her agents and authorized committees). 52 U.S.C. §30116 (a)(1)(A) (formerly 2 

U.S.C. §441 a (a)(1)(A)). 

B. Contribution. A gift, subscription, loan (except a loan made in accordance with 11 

CFR §§ 100.82 and 100.83), advance, or deposit of money or anything of value made by 

any person for the purpose of influencing any election for federal office is a contribution. 

The term loan includes a guarantee, endorsement, and any other form of security. A loan 

that exceeds the contribution limitations of 52 U.S.C. §30116 (formerly 2 U.S.C. §44Ia) 

and 11 CFR part 110 shall be unlawful whether or not it is repaid. A loan is a 

contribution at the time it is made and is a contribution to the extent that it remains 

unpaid. The aggregate amount loaned to a candidate or committee by a contributor, when 

added to other contributions from that individual to that candidate or committee, shall not 

exceed the contribution limitations set forth at 11 CFR parts 110. 11 CFR § 100.52(a) and 

(b). 

C. Handling Contributions That Appear Excessive. If a committee receives a 

contribution that appears to be excessive, the committee must either: 

• Return the questionable contribution to the donor; or 

• Deposit the contribution into a campaign depository and keep enough money on 

account to cover all potential refunds until the legality of the contribution is 

established. 11 CFR § 103.3(b)(3) and (4). 

D. Personal Funds. Personal funds include salary and other earned income from bona 

fide employment and income from stocks or investments, including interest, dividends or 

proceeds from the sale of such stocks or investments. 11 CFR § 100.33(b). 

E. Reporting Loans. All loans received by a committee must be itemized and 

continuously reported until repaid. All repayments made on a loan must also be itemized. 

11 CFR §§I04.3(a)(4)(iv), (b)(4)(iii) and 104.11. 
12 

Facts and Analysis 

A. Facts 

During audit fieidwork, the Audit staff identified three transactions that Counsel stated 

were loans from the candidate; however, they appear to be excessive contributions from 

four individuals. The total amount that exceeds the individual contribution limit is 

$170,343. 

Excessive Contribution-$150.000 

On April 27,2010, a deposit of $150,000 was made to the CFG bank account. The 

deposit documentation showed that this was a check from an individual written to the 

candidate, but deposited directly into CFC's bank account. 

The $150,000 transaction was disclosed as a loan from the candidate on CFC's reports. 

The Audit staff requested documentation showing that this loan was made with the 

candidate's personal funds. Counsel responded that the funds were derived from the sale 

of the candidate's stock. Later, Counsel stated that this was a personal loan made to the 

candidate from an individual and provided a copy of a signed promissory note. 

The Audit staff concluded, in accordance with 52 U.S.C. §30102(e)(2) (formerly 2 

U.S.C. §432(e)(2)), that the candidate had received a personal loan as an agent for CFC. 

Therefore, absent further explanation and documentation, this transaction resulted in an 

excessive contribution of $147,600^ from the individual. 

CFC disclosed a repayment of $10,000 to the candidate on April 28,2010, in connection 

with the reported $150,000 loan. However, CFC has not provided sufficient 

documentation to substantiate that the funds were repaid to the original contributor. 

Although CFC disclosed the repayment transaction on a report to the Commission, the 

only document provided to the Audit staff was a bank statement showing a $10,000 

check. No documentation was provided to identify the payee. 

Excessive Contributions-$30.000 

On December 10 and 18,2009, $22,000 and $8,000, respectively, were transferred into 

CFC's bank account from the candidate's personal bank account. The $22,000 was 

incorrectly disclosed on CFC's reports as a loan; the $8,000 loan was not reported. (The 

misreporting of these loans are included in Finding 3. Misstatement of Financial Activity, 

under Loans Not Reported of $| 5,330.) Counsel stated that these amounts 

represented loans from the candidate. However, additional documentation provided by 

CFC showed that the funds used to make these transfers did not come from the 

candidate's personal funds. The funds were personal loans from different individuals 

made to the candidate and deposited into the candidate's personal account. Since these 

funds were used for campaign activity, the personal loans resulted in contributions to 

CFC. The Audit staff performed a cash balance analysis on the candidate's personal 

account and determined that the funds transferred to CFC ($22,000 and $8,000) could 

only have come from three individuals. Absent further documentation and explanation, 

CFC's receipt of these funds results in contributions by three individuals that exceed the 

contribution limits by $22,743.'° 

' This amouni was derived by subtracting S2,400, the contribution limit for an individual, from the 

the contribution amount, S130,000. 

The excessive amount reflects contributions of SI 3,093, S7,]37, and S7,693, minus a S2,400-

contribution limit for three individuals (S7,200). 
13 

B. Interim Audit Report & Audit Division Reeommendation 

During an interim fieldwork meeting, the Audit staff requested further information to 

support that the contributions described above were permissible. At the exit conference, 

Counsel stated that the candidate had already repaid some of the contributions that 

comprised the $22,000 and $8,000 contributions. The Audit staff commented that CFG 

may need to make further refunds. CFG has not reported repayments to these individuals 

and the Audit staff has not received documentation to support the repayments. 

The Interim Audit Report recommended that GFG demonstrate that the contributions 

were not excessive or that they originated from the candidate's personal funds. Absent 

such a demonstration, the Audit staff recommended that GFG refund the excessive 

contributions, $147,600 and $22,743, to the original contributors or provide 

documentation showing that refunds had already been made and that the refund checks 

were negotiated. Furthermore, the Audit staff recommended that GFG amend its reports 

to correctly disclose the source of funds for these loans. 

C. Committee Response to the Interim Audit Report 

In response to the Interim Audit Report, Counsel submitted documentation demonstrating 

that GFG made repayments totaling $160,293, as outlined below. GFG did not file 

amended reports. Counsel stated that, in order to avoid multiple filings of reports, GFG 

would comply with all the recommendations once the Commission had finalized the 

audit. 

In a subsequent meeting held with Counsel to discuss report changes made since the 

issuance of the Interim Audit Report, Counsel expressed concern regarding the 

repayment of the two excessive contributions for $10,050. Counsel felt that an affidavit 

submitted by an intermediary payee, a Mr. Beckelhymer," supporting the repayment 

should be sufficient documentation and that GFG should not have to make a second 

repayment. In addition. Counsel thought this might be an issue GFG would want to raise 

with the Commission. 

Excessive Contribution-$150.000 

On May 1, 2013, GFG issued a checkto the contributor for $147,600 to repay the 

excessive contribution amount. The Audit staff considers the $147,600 an excessive 

contribution that was refunded untimely. 

Excessive Contributions-$30.000 

Counsel submitted documentation showing that a cashier's check for $28,000 was issued 

to Mr. Beckdhymer on September 22, 2010, who then paid other individuals who had 

loaned the candidate funds or whom GFG owed interest on their loans. Counsel did not 

provide sufficient documentation to demonstrate repayment to the other two contributors 

who made excessive contributions. The Audit staff considers $12,693 to one of the three 

contributors as an excessive contribution that was refunded in an untimely manner and 

II Mr. Beckelhymer was not only an intermediary payee, but obtained loans for the candidate that were 

deposited into CFC's accounts. 

' The Audit staff was provided a copy of the canceled check and the corresponding bank statement that 

supponed the contributor's repayment. 
14 

the remaining $ 10,050 from two contributors to be excessive contributions that CFC has 

not refunded. 

D. Draft Final Audit Report 

The Draft Final Audit Report acknowledged that CFC repaid $160,293 to the appropriate 

contributors in an untimely manner. However, the documentation was not sufficient to 

demonstrate that CFC had repaid the remaining $10,050 to the appropriate contributors 

($170,343 - $160,293= $10,050). The Audit staff considers the remaining $10,050 to be 

excessive contributions from two individuals that were not resolved. 

E. Committee Response to the Draft Final Audit Report 

CFC responded to the Draft Final Audit Report by requesting an audit hearing. 

F. Audit Hearing 

At the audit hearing. Counsel disputed the Audit staffs conclusion that $10,050 remains 

unresolved and said sufficient documentation had been provided to demonstrate that 

excessive contributions totaling $10,050 were repaid to the original contributors. 

Counsel stated that the Commission was provided a signed affidavit by Mr. 

Beckelhymer,'^ who coordinated raising funds to make the loan to the candidate and that 

the affidavit showed that Mr. Beckelhymer repaid the other excessive contributors. 

Counsel, in responding to questions concerning why records were not available to 

support the repayments described in the affidavit said, it was his understanding that Mr. 

Beckelhymer was repaid with a cashier's check for $28,000'^, because he was 

resppnsible for the repayment to the other original contributors. Counsel also said he had 

never spoken to the original contributors and did not have their personal banking records, 

which made it a challenge to provide adequate documentation to the Audit staff. 

Counsel also explained why the original contributors were repaid via Mr. Beckelhymer 

and not directly by CFC. (Tounsel stated that the excessive contributions were returned to 

the original contributors in the same manner in which they were received and recorded by 

CFC; that is, the funds were received from the candidate, recorded and reported as a loan 

from the candidate; and therefore, refunded to the candidate, who then issued the 

cashier's check to Mr. Beckelhymer. 

In conclusion. Counsel stated that amounts considered unresolved by the Audit staff were 

already repaid to the original contributors and that if the Commission determines that 

CFC must repay another $10,050, then double payments will have been made with 

campaign funds in violation of the personal use regulations at 52 U.S.C. §30114(b)(1)) 

(formerly 2 U.S.C. § 439 (b)(1)). 

ij CFC should prcvide'documeniation for the remaining S 10,050 to support that the two other contributors 

received refunds. 

Mr. Beckelhymer provided a signed declaration that stated it was made, "under penalty of perjury." 

A copy of the Cashier's check was provided to the Audit staff. 
15 

Commission Conclusion 

On September 18,2014, the Commission considered the Audit Division 

Recommendation Memorandum in which the Audit staff recommended the Commission 

find that CFG had accepted excessive contributions in the amount of SI 70,343, of which 

$ 10,050 remains unresolved, and amended disclosure reports have not been filed. 

The Commission approved the Audit staffs recommendation. 

Finding 3. Misstatement of Financial Activity 

Summary 

During audit fieldwork, a comparison of CFC's reported financial activity with its bank 

records revealed misstatements of beginning and ending cash-on-hand, as well as, 

misstatements of receipts and disbursements for calendar years 2009 and 2010. For 

2009, CFG overstated beginning cash-on-hand by S32,344, understated receipts by 

SI3,161, understated disbursements by S31,048, and overstated ending cash-on-hand by 

S50,231. For 2010, GFG overstated beginning cash-on-hand by S50,231, overstated 

receipts by S324,404, overstated disbursements by S313,123, and overstated ending cashon-hand by S61,512. 

In response to the Interim Audit Report, Counsel stated that, in order to avoid multiple 

filings of amendments, GFG would comply with all the recommendations once the 

Commission had finalized the audit. 

The Commission approved a finding that GFG misstated its financial activity for calendar 

years 2009 and 2010, and amended disclosure reports have not been filed. 

Legal Standard 

Contents of Reports. Each report must disclose: 

• The amount of cash-on-hand at the beginning and end of the reporting period; 

• The total amount of all receipts for the reporting period and for the election cycle; 

• The total amount of all disbursements for the reporting period and for the election 

cycle; and 

• Certain transactions that require itemization on Schedule A (Itemized Receipts) or 

Schedule B (Itemized Disbursements). 52 U.S.G. §30104(b)(l), (2), (3), (4) and 

(5) (formerly 2 U.S.G. §434(b)(l). (2), (3), (4) and (5)). 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff reconciled CFC's reported financial activity with 

its bank records for calendar years 2009 and 2010. The following chart outlines the 

discrepancies for the beginning cash balance, receipts, disbursements, and ending cash 

balance for 2009. Succeeding paragraphs address the reasons for the misstatements. 
16 

2009 Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance 

@ January 1,2009 

$ 32,344 $ 0 $ 32,344 

Overstated 

Receipts $160,551 $173,712 $ 13,161 

Understated 

Disbursements $101,630 $132,678 $ 31,048 

Understated 

Ending Cash Balance 

@ December 31,2009 

$ 91,265 $ 41,034 $ 50.231 

Overstated 

The beginning cash balance on January 1,2009, was overstated by S32,344. The Audit 

staffs analysis could not explain this overstatement but it likely resulted from prior 

period discrepancies. 

The understatement of receipts resulted from the following; 

• Receipts not reported S 1,000 

• Loans received by CFC not reported or incorrectly reported (Net) 15,330 

• Reported contributions from individuals not supported by 

deposits (2,025) 

• Unexplained difference (1.144) 

Net Understatement of Receipts S 13.161 

The understatement of disbursements resulted from the following: 

• Disbursements not reported 

• Reported disbursements not supported by a check 

or debit 

Net Understatement of Disbursements 

$41,912 

(10,864) 

uim 

CFC overstated the ending cash balance on December 31,2009, by $50,231 as a result of 

the misstatements described above. 

2010 Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance 

^ January 1, 2010 

$ 91,265 $41,034 $ 50,231 

Overstated 

Receipts $1,770,634 $1,446,230 $ 324,404 

Overstated 

Disbursements $1,720,935 $1,407,812 $ 313,123 

Overstated 

Ending Cash Balance 

@ December 31, 2010 

$ 140,964 $ 79,452 $ 61,512 

Overstated 
17 

The overstatement of receipts resulted from the following: 

• Receipts not reported S 1,676 

• Return deposit items reported as loans (305,000) 

• Loans received by CFC not reported 14,000 

• Duplicate reporting of contributions (22,121) 

• Unexplained difference (12.959) 

Net Overstatement of Receipts $ (324:404) 

The overstatement of disbursements resulted from the following: 

• Disbursements not reported $ 36,250 

• Return deposit items reported as loan repayments (305,000) 

• Reported disbursements not supported by a check or debit (44,369) 

• Unexplained different ( ^ 

Net Overstatement of Disbursements S (313.123) 

As a result of the above discrepancies, CFC overstated the ending cash balance on 

December 31, 2010, by $61,512. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff provided Counsel with a list of discrepancies and 

report adjustments. Counsel acknowledged the adjustments. The Audit sta^ informed 

Counsel that it would recommend these adjustments in the Interim Audit Report. 

The Interim Audit Report recommended that CFC amend its FEC filings to correct 

misstatements and amend its most recently filed report to correct its cash-on-hand 

balance.'^ The Audit staff also recommended that CFC reconcile the cash balance of its 

most recent report to identify any subsequent discrepancies that might affect its 

adjustments. 

C. Committee Response to the Interim Audit Report 

In response to the Interim Audit Report, CFC did not file amended reports. Counsel 

stated that, in order to avoid multiple filings of reports, CFC would comply with all the 

recommendations once the Commission had finalized the audit. 

D. Draft Final Audit Report 

The Draft Final Audit Report acknowledged CFC's response, that it would comply with 

all the recommendations once the Commission had finalized the audit. 

E. Committee Response to the Draft Final Audit Report 

Although, CFC requested a hearing on other matters in this report, no additional 

comments were provided relating to this matter. 

F. Audit Hearing 

This finding was not addressed at the audit hearing. 

" Some of the adjustments changed based on subsequent information received from CFC and the Audit 

staffs determination of the proper handling of these misstatements. CFC was subsequently notified of 

these adjustments and informed that the changes would be incorporated in the Draft Final Audit Report. 
18 

Commission Conclusion 

On September 18,2014, the Commission considered the Audit Division 

Recommendation Memorandum in which the Audit stafT recommended the Commission 

Hnd that CFC misstated its financial activity for calendar years 2009 and 2010, and 

amended disclosure reports have not been filed. 

The Commission approved the Audit staffs recommendation.