FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

August 10, 2011 

MEMORANDUM 

TO: 

FROM: Christopher Hughey 

Thomas Hintermister 

Acting Assistant Staff Director 

Acting General Counsel Ay 

Lawrence L. Calvert, Jr. 

Associate General Counsqj/ v 

Lorenzo Holloway '^J^ — 

Assistant General Counsel 

For Public Finance and Audit Advice 

Delanie DeWitt Painter 

Attomey 

SUBJECT: Draft Final Audit Report for Los Angeles County Democratic Central 

Committee (LRA 816) 

The Office of the General Counsel has reviewed the proposed Draft Final Audit 

Report ("DFAR") for the Los Angeles County Democratic Central Committee (the 

"Committee").' We comment on the payment of $7,700 for delayed credit card proceeds 

to the Coinmittee by the Committee's accounting firm, Durkee & Associates (D&A). We 

concur that this transaction was not a contribution by D&A.^ We also concur with fhe 

remaining findings not specifically discussed in this memorandum. If you have any 

questions, please contact Delanie DeWitt Painter, the attomey assigned to this audit. 

The Interim Audit Report ("IAR") recommended that the Committee provide 

information to demonstrate that an apparent $7,700 advance to the Committee was in the 

' We recommend that the Commission consider this document in open session as there is no legal 

basis to justify a closed Commission meeting. 

D&A is an accounting and business management firm operated by the Committee's treasurer, 

Kinde Durkee. The firm handles the Committee's accounting, recordkeeping, and reporting and acts as its 

credit card processor. D&A used a merchant account to process credit card transactions for the Committee 

and other clients including political committees. The Committee explained in response to the IAR that 

D&A is a single principal limited liability company, and the sole owner is Kinde Durkee. who reports 

D&A's income on a Schedule C of her individual tax retum. 
Memorandum to Thomas Hintermister 

Draft Final Audit Report for Los Angeles County 

Democratic Central Committee (LRA 816) 

Page 2 

ordinary course of business. The Committee's federal account received payments from 

D&A totaling $7,700 for delayed credit card proceeds. D&A apparently became aware 

of a delay in transmission from the credit card company to D&A's merchant account of 

funds for credit card contributions to the Committee. However, it apparently was not 

aware of the actual amount of contributions that were delayed. It estimated the amount of 

the delayed credit card proceeds and paid the Committee $7,700 from the merchant 

account on December 22 (in a check of $5,700) and December 26 (in a check of $2,000), 

2008. Checks in the same amounts from the Committee to repay D&A were prepared on 

the same dates but did not clear the bank until February 17,2009.^ D&A provided the 

auditors a list of credit card contributions associated with these transactions, which 

totaled $5,887. The auditors, however, determined that the net credit card proceeds that 

should have been transferred from D&A to the Committee amounted to $5,424. 

In response to the IAR, the Committee contends that the $7,700 payment was an 

extension of credit by D&A in the ordinary course of business and provided the following 

information, along with a signed declaration fiom Ms. Durkee. The Committee 

explained that D&A reviews credit card contribution transactions, and if the transactions 

are approved by the contributor's credit card company but payment is not received within 

a reasonable period of time, D&A transfers the funds to the client and repays itself when 

the payment is received from the credit card company. D&A charges clients a 3% fee for 

each credit card transaction and considered the "advance to its clients as one of the client 

benefits encompassed by its 3% credit card transaction fee." IAR Response at 2. D&A 

said it considered the cost of this benefit as minimal compared to the fee received 

because it was unusual for credit card companies to delay forwarding funds. The 

Committee further explained that D&A offers similar terms to non-political customers of 

similar size and risk of obligations. The Coinmittee provided a list of 45 advances to 

non-political customers over a ten year period (March 27,2001 to April 13,2011) for 

amounts ranging fiom $20 to $15,000. Based on the Committee's response, the auditors 

conclude in the DFAR that the Committee demonstrated that the payment from D&A was 

in the ordinary course of business. 

We conclude that, at a minimum, $5,424 of this transaction was not a 

contribution. A contribution includes any gift, subscription, loan, advance, deposit of 

money, or anything of value made by any person for the purpose of infiuencing a federal 

election. 2 U.S.C. § 431(8)(A)(i); 11 C.F.R. § 100.52(a). Anytiiingof value includes 

goods and services provided without charge or at less than the normal charge. 11 C.F.R. 

§ 100.52(d). 

The Committee stated that the repayment was on February 17,2009 because the last batch of 

delayed credit card proceeds was received from the credit card companies at that time. The auditors, 

however, conclude that the last batch of credit card funds included in the payment was received later than 

that date. 
Memorandum to Thomas Hintermister 

Draft Final Audit Report for Los Angeles County 

Democratic Central Committee (LRA 816) 

Page 3 

In our comments on the IAR, we stated that additional information was necessary 

to clarify whether this transaction was an advance that resulted in an excessive or 

prohibited contribution or an extension of credit in the ordinary course of business. See 2 

U.S.C. § 431(8)(A)(i); 11 C.F.R. §§ 100.55,116.1(e), 116.3. Having considered the 

matter furtiier, we are of the opinion that the transaction does not precisely fit the 

definition of either an advance or an extension of credit. While we do believe that D&A 

provided the Committee with something of value, we do not believe the facts indicate 

that the provision of something of value was made for the purposes of infiuencing a 

federal election. Thus, at a minimum, $5,424 of the transaction was not a contribution. 

The Commission's regulations define "extension of credit" as including, but not 

being limited to, 

(1) any agreement between tiie creditor and political committee that full 

payment is not due until after the creditor provides goods or services to tiie 

political committee 

(2) any agreement between the creditor and the political committee that 

tiie political committee will have additional time to pay the creditor 

beyond the previously agreed to due date; and 

(3) the failure of the political committee to make full payment to the 

creditor by a previously agreed to due date. 

11 C.F.R. § 116.1(e). The facts here do not show that there was an extension of credit 

from D&A to tiie Conimittee in the sense of D&A providing goods or services for which 

it accepted a delayed payment. Rather, it was tiie Committee that was owed money by 

the credit card company, through D&A. 

The transaction here was closer to being an advance of funds by D&A to the 

Committee. Unlike "extension of credit," "advance" is not defined by the Act or 

regulations. However, the transaction was not an "advance" in the sense of being an early 

payment of money due at a later time; contributors had made contributions to the 

Coinmittee which were supposed to be forwarded to the Committee between 10 and 30 

days after receipt, see 2 U.S.C. § 432(b)(2), so the funds appear to have been due and 

payable to the Committee. They simply had not yet made their way to the Committee 

due to delay on the part of the credit card company. 

But however the transaction is characterized, the D&A funds provided to the 

Committee constituted something of value. To be a contribution, it is necessary not 

merely that tiie funds constituted somethmg of value, but that they have been provided 

"for the purpose of influencing any election for Federal office." 2 U.S.C. § 43 l(8)(A)(i). 
Memorandum to Thomas Hintermister 

Draft Final Audit Report for Los Angeles County 

Democratic Central Committee (LRA 816) 

Page 4 

The information submitted in response to the IAR suggests that D&A did not 

provide this service for the purpose of infiuencing a federal election. Rather, it was 

treating the Committee in the same way that it treats its other non-political clients who 

are in a similar situation. The Committee demonstrated that D&A has provided 45 

similar payments for delayed credit card funds to non-political clients over a period of ten 

years ranging from $20 to $15,000. D&A considers these payments as one benefit paid 

for by its 3% charge on its clients' credit card transactions. Thus, we conclude that the 

payment had a business purpose, consistent with D&A's services for its other clients, and 

was not for the purpose of infiuencing a federal election. Therefore, this transaction was 

not a contribution. 

We note that D&A's estimated $7,700 payment to the Committee exceeded the 

net delayed credit card proceeds that should have been transferred of $5,424. The 

Committee has not provided any mformation clarifying whether the amounts paid to 

other non-political clients were estimated and similarly exceeded the amounts of delayed 

credit card proceeds to those clients. Nevertheless, given the fact that D&A could have 

contributed the estimated excess of $2,276 to the Committee within Durkee's limitation, 

we do not believe this aspect of the transaction is worth pursuing further. See 2 U.S.C. 

§441a(a)(l)(C).