FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

August 2,2012 

MEMORANDUM 

To: 

Tfarougfa: 

From: 

By: 

Tfae Commission 

Alec Palmer 

Staff Director 

Patricia C. Orrock 

Cfaief Compliance Officer 

Tom Hintermistef"^^^\ 

Assistant Staff Director 

Audit Division 

Alex Boniewicz jAy 

Audit Manager 

Rosa Crussiahrv/y^ 

Lead Auditor U^ ' 

Subject: Audit Division Recommendation Memorandum on Rightmarcfa.com PAC, 

Inc. (A09-25) 

Pursuant to Commission Directive No. 70 (FEC Directive on Processing Audit Reports), 

tfae Audit staff presents its recommendations below and discusses tfae findings in the attached 

Draft Final Audit Report (DFAR). The Office of General Counsel faas reviewed tfais 

memorandum and concurs witfa tfae recommendations. 

Finding 1. Misstatement of Financial Activity 

In response to the DFAR, Rightmarcfa.com PAC, Inc. (RMC) concurred it had 

misstated its activity and noted it would work with the Audit Division to file amended 

disclosure reports. To date, no amendments have been filed. 

The Audit staff recommends that tfae Commission find that RMC misstated receipts 

and disbursements for calendar years 2007 and 2008. 

Finding 2. Extension of Credit by a Commercial Vendor 

In its response to the DFAR, RMC acknowledged tfaat tfae Audit staff determined 

ttie commercial vendor did not make an impermissible extension of credit to RMC. 

RMC continued to dispute the need to disclose debts arising from the weekly 

invoices and reiterated that tfae expenses do not become payable unless certain 

events occur in tfae future. Tfae response noted ttiat RMC is not aware of any 
instance in wfaicfa tfae Commission faas faeld tfaat a committee must report 

contingent liabilities as debts under 2 U.S.C. §438(b)(8) and 11 CFR §104.11. 

Tfae regulations at 11 CFR § 104.11 state tfaat "if tfae exact amount of a debt or 

obligation is not known, tfae report sfaall state tfaat tfae amount reported is an 

estimate." Once tfae exact amount of tfae debt is known, a committee sfaould tfaen 

amend its reports to reflect tfae correct amount. 

Tfae Audit staff recommends that the Commission find tfaat RMC failed to disclose 

debts totaling $1,524,657. 

Finding 3. Failure to File Notices and Properly Disclose Independent 

Expenditures 

In response to the DFAR, RMC stated tfaat it faas disputed tfais issue tfarougfaout tfae 

audit process, including a request for early consideration by tfae Commission. 

RMC objected to tfais issue being included in tfae audit report and requested tfaat 

tfae audit report be revised to discuss RMCs alleged failure to report independent 

expenditlires in tfae "Additional Issues" section at tfae end of tfae audh report. 

Tfae Audit staff maintains tfaat RMC did not timely file 24/48-faour notices for 

independent expenditures totaling $139,067. Furtfaer, RMC did not properly 

disclose independent expenditures totaling $2,172,135 prior to payment as 

"memo" entries on Scfaedule E (Itemized Independent Expenditures) and 

$1,892,571 as reportable debt on Scfaedule D (Debts and Obligations). 

Tfae Audit staff recommends tfaat tfae Conimission find tfaat RMC failed to file 

notices and properly disclose independent expenditures. 

RMC did not request an audit faearing. 

If this memorandum is approved, a Proposed Final Audit Report will be prepared within 

30 days ofthe Commission's vote. 

In case of an objection. Directive No. 70 states that tfae Audit Division Recommendation 

Memorandum will be placed on tfae next regularly scfaeduled open session agenda. 

Documents related to tfais audh report can be viewed in tfae Voting Ballot Matters folder. 

Sfaould you faave any questions, please contact Rosa Crussiafa or Alex Boniewicz at 694-

1200. 

Attacfaments: 

- Draft Fmal Audit Report of tfae Audit Division on Rigfatmarcfa.com PAC, Inc. 

- Legal Report Analysis (LRA842) of tfae Draft Final Audit Report on 

Rigfatmarcfa.com PAC, Inc. 

cc: Office of General Counsel 
Draft Final Audit Report of the 

Audit Division on 

RIGHTMARCH.COM PAC INC 

(January 1, 2007 - December 31, 2008) 

Why the Audit 

Was Done 

Federal law permits tfae 

Commission to conduct 

audits and field 

investigations of any 

political committee tfaat is 

required to file reports 

under the Federal 

Election Campaign Act 

(ttie Act). The 

Commission generally 

conducts such audits 

when a committee 

appears not to have me| 

the tfaresfaold 

requirements for 

substantial compliance^ 

with the Act^L^lih&audit 

determine 

commj|Ke complied^ 

the liffikbns, 

prohibitiaft|nd 

disclosure ^Bsements 

ofthe Act. 

About the Committee 

RIGHTMARCH.COM PAC 

candidate committee head 

more information, see thellhart 

is a non-connected, multiin Braselton, Georgia. For 

mmittee Organization, p. 2. 

Financia 

• Receipts 

o Contribution^ 

T Q ^ Receipts 

Dis 

o Oj%ratin; 

o Coi^^Hons 

o Loan^paymen 

o Indepelyent Expenditures 

Total Disblby^ents 

ical Committees 

$ 684,675 

$ 684,675 

$ 97,888 

14,988 

2.500 

563,277 

$678,653 

idings and Recommendations (p. 3) 

Statement of Financial Activity (Finding I) 

!!xtension of Credit by a Commercial Vendor (Finding, 2) 

Failure to File Notices and Properly Disclose Independent 

Expenditures (Finding 3) 

Future Actio] 

The Commission m ^ 

initiate an enforcement 

action, at a later time, 

with respect to any ofthe 

matters discussed in this 

report. 

2 U.S.C. §438(b). 
Draft Final Audit Report of 

the Audit Division on 

RIGHTMARCH.COM PAC INC 

(January 1, 2007 - December 31, 2008) 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 

Scope of Audit 

Request for Early Commission Consideration of Legal Questions 

Part II. Overview of Committee 

Committee Organization 

Overview of Financial Activity 

Part III. Summaries 

Findings and Recommendations 

Part IV. Findings and Recom 

Finding 1. Misstatementof Financial Activity 

Finding 2. Extension of Credit b)^Commercial 

Finding 3. Failure to File Notices^m^operly Disci 

Independent Expenditun 
Parti 

Background 

Authority for Audit 

This report is based on an audit ofthe RIGHTMARCH.COM PAC INC (RMC), 

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 2 U.S.C. §438(b), which permits the 

Commission to conduct audits and field investigations of any poH^ial committee that is 

required to file a report under 2 U.S.C. §434. Prior to conductyfany^udit under this 

subsection, the Commission must perform an intemal reviej^^||^orts filed by selected 

committees to determine if the reports filed by a particu 

requirements for substantial compliance with the Ac^ 

Scope of Audit 

Following Commission-approved procedure: 

factors, and as a result, this audit examined: 

1. the consistency between reported figures and ban! 

2. the disclosure of individual contritoars' occupation 

3. the disclosure of independent expe^pl^^^d, 

4. other committee operations necessanyoTnHhaisw. 

Request for Ea^ 

Questions 

Pursuant to the Pi 

Legal Questions by the 

questions i^^^l^tiCS 

an exten^^fo^^fBSi^ulti; 

2.) TJ^econd questi 

be 

€ meet the threshold 

risk 

ame of employer; 

ration of Legal 

>gram for Requesting Consideration of 

^ted early consideration of two legal 

it. TM^mg^stion was whether certain fees represented 

^n-kind contributions and reportable debt. (See Finding 

penses for fundraising communications should 

jis independeiBbxpencipBfes. (See Finding 3.) 

The CommilS^^^id not rwlve these matters or provide guidance on how to proceed. 

Therefore, pursiwLto the^rommission's policy on early consideration of legal questions, 

the Audit Division^^M^d these matters in this report. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Dateof ReRistration April 23, 2003^ ^ 

• Audit Coverage January 1,20^FDecember 31,2008 

Headquarters Braselton, 

Bank Information 

• Bank Depositories ThreoftiA 

• Bank Accounts T h ^ checking ^'^^l^j^. 

Treasurer 

• Treasurer When Audit Was Conducted \!l®feiG^tei^ 

• Treasurer During Period Covered by Audit Willia^£eene 

Management Information 

• Attended Commission Campaign Fina^fiH|||| No -

Seminar 

• Who Handled Accounting and \ 

Recordkeeping Tasks j^g^s^ ^ 

lew of Fins ial Activity 

Lounts) 

Cash-op^^^^® January^SnD07 ^^fp^ $ 9,161 

Receipts "'^^j^ 

o Contribution^^ Indivic^ls 684.675 

Total Receipts W $ 684,675 

Disbursements 

o Operating Expenditidfes 97.888 

o Contributions to Political Committees 14.988 

o Loan Repayments 2.500 

o Independent Expenditures 563.277 

Total Disbursements $ 678,653 

Cash-on-hand @ December 31,2008 $ 15,183 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

During audit fieldwork, a comparison of RMCs reported financial activity with its bank 

records revealed misstatements for 2007 and 2008. For 2007, RN ^ understated reported 

receipts and ending cash-on-hand by $23,940 and $16,750, resn^^oly. For 2008, RMC 

understated reported disbursements by $9,889 and ending ca^^n-hand by $6,625. In 

response to the Interim Audit Report, RMC indicated tfaa^l^^dwitfa the Audit staff 

conclusion and would file amended disclosure reports to'^rrectn^Disstatements. To 

date, no amendments have been filed. (For more degP^ee»p. 4.) 

Finding 2. Extension of Credi 

During audit fieldwork, the Audit staff initia 

that may have extended credit to RMC outside 

allowing invoices to remain outstandmg for a conside 

did not appear to make commercial lyl^^nable attempt^ 

services rendered, thereby making an a^lQlsKPessive 

$1,650,327 ($1,655,327 - $5,000 = $1,65032 

RMC demonstrated that the terms of the clhtri 

business. (For more d|^iiiS||^. 6.) 

mercial'Wmlor 

imited liabil^company 

course of business by 

gthoftime. This vendor 

$1,655,327 for 

ntribution of 

onse|0^tne Interim Audit Report, 

brmal course of the venclor's 

Finding 3. re tSll e Notices and Properly Disclose 

Independent Eaq 

During audi^l^HS^Kk. the^ 

followii 

lit stai ^ed independent expenditures and noted tfae 

48-faTl^l^ices for up to $139,067; and 

discjjSse independent expenditures totaling $2,172,135 

sseminated) prior to payment as "memo" entries on 

Independent Expenditures) and $1,892,571 as reportable 

debt on SI^|^le^(Debts and Obligations). 

In its response to th^^erim Audit Report, RMC stated that it disagreed with the Audit 

staffs interpretation ofthe fundraising scripts. The RMC also stated that because the 

Commission was unable to reacfa a conclusion with regard to this question under the eariy 

consideration policy, RMC requests that the finding be removed from the Interim Audit 

Report and that the discussion be moved to an Additional Issues section. Given RMCs 

objection to the finding, RMC took no action with respect to tfae Audit staffs 

recommendations. (For more detail, see p. 12.) 
Part IV 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

Summary 

During audit fieldwork, a comparison of RMCs reported financial activity with its bank 

records revealed misstatements for 2007 and 2008. For 2007, RMC understated reported 

receipts and ending cash-on-hand by $23,940 and $16,750, resp||^^y. For 20Q8, RMC 

understated reported disbursements by $9,889 and ending casWn-hand by $6,625. In 

response to ttie Interim Audit Report, RMC indicated that^lB^di with the Audit staff 

conclusion and would file amended disclosure reports to^rrecrffespisstatements. To 

date, no amendments have been filed. 

Legal Standard 

Contents of Reports. Each report must disc! 

• The amount of cash-on-hand at the beginning 

• The total amount of receipts for the reporting 

• The total amount of disbursement^||^ylie reporting 

and . 

• Certain transactions that require iten%ati^^|^hedule ^[itemized Receipts) or 

Schedule B (Itemized Disbursements)^ L^lx!^^|^l) , (2), (3), (4) and (5). 

Facts and Anali 

reporting {Jeriod; 

for the calendar year; 

1 for the calendar year; 

A. Facts 

During 3uditfi|||^rork, ti 

records fojgMCTlBMBM-s 2( 

for beaming cash blMjigs. rec 

yeasf^^^ieeding paragtBus adc 

sited reported financial activity with bank 

id 2008rThe following charts outiine the discrepancies 

sbursements and ending cash balances for each 

le reasons for the misstatements. 

2007 A^bx. m 

Reported Bank Records Discrepancy 

Opening Cash BjiRlnce 

@ January 1,2007 

$11,070 $9,161 $1,909 

Overstated 

Receipts $481,887 $505,827 $23,940 

Understated 

Disbursements $474,689 $479,970 $5,281 

Understated 

Ending Cash Balance 

@ December 31. 2007 

$18,268 $35,018 $16,750 

Understated 
The understatement of receipts resulted from the following: 

• Receipts deposited to operating account not reported 

• Unexplained difference 

Understatement of Receipts 

$ 22,208 

1.732 

?R 23.940 

The $16,750 understatement of the ending cash-on-hand resulted from the misstatements 

described above, as well as discrepancies in opening cash-on-hand and disbursements. 

2008 Activity 

Reported Bank R«rds Discrepancy 

Opening Cash Balance 

@ January 1,2008 

$18,268 ^^l^^8 $16,750 

Understated 

Receipts $179,084 Aj^^.l78,^l» 

sr 

k ^^^^ ftsiuOverstated 

Disbursements $188,79^ 1^198,683 ^m^.889 

l^perstated 

Ending Cash Balance 

@ December 31.2008 

$8,558 ^^^in5,i83 ^ $6,625 

Understated 

The understatement of disbursements r^^jEHilb&pm the 

• Disbursements not reported 

• Funchaising fee paid in 2009, rep^edM^2T 

• Fees reported hjflniyiported by^^ck or del 

• UnexplainedMifferenc 

Net Und^flffl^ent (f@)isbursemei 

$ 15,563 

(5,000) 

(826) 

152 

The $6,625 

describedlroove, 

temenT^BQhe ei!81lip|||fP^on-hand resulted from the misstatements 

^as dSraspancies in opening cash-on-hand and receipts. 

B. ni^iqi^udit Repoi 

At the cxBftnference. the^ 

representati^l^d provide 

Aud^Efivision Recommendation 

idit staff discussed the misstatements with RMC 

fcopies of relevant schedules. 

The Interim AudiflS^^Precommended that RMC: 

• amend its re^Ks to correct the misstatements noted above; and 

• amend its most recently filed report to correct the casfa-on-faand balance witfa an 

explanation that the change resulted from a prior period audit adjustment. 

Further, ttie Audit staff recommended ttiat RMC reconcile the cash balance of its 

most recent report to identify any subsequent discrepancies that may affect tfae 

adjustment recommended by the Audit staff. 

C. Committee Response to Interim Audit Report 

In its response to the Interim Audit Report, RMC stated that it agreed with the auditors' 

conclusions regarding the misstatement of financial activity and would comply with the 
Audit staffs recommendation to amend its disclosure reports. To date, RMC has not 

filed any amendments. 

I Finding 2. Extension of Credit by a Commercial Vendor 

Summary 

During audit fieldwork, the Audit staff initially identified one limited liability company 

that may have extended credit to RMC outside of its normal course of business by 

allowing invoices to remain outstanding for a considerable leng^^ime. This vendor 

did not appear to make commercially reasonable attempts to Q^lct$1,655,327 for 

services rendered, thereby making an apparent excessive i^l^&contribution of 

$1,650,327 ($1,655,327 - $5,000 = $1,650,327). In respdSe tcnf^nterim Audit Report, 

RMC demonstrated that the terms ofthe contract are jjLtl^normai^piirse ofthe venclor's 

business. 

Legal Standard 

A. Contribution defined. A gift, subscription, lc)Mfex^fl^tv6'hcnmade inf^ccordance 

witfa 11 CFR§§ 100.72 and 100.73), advance, or depolKmoney or anytiiing of value 

made by a person for tfae purpose of iffi|b|jencing any elei^&ufor Federal office is a 

contribution. The term "anything of v3!Stefiludes all in^fl^fiontributions. 

The usual and normal charge for a service 

would expect to pay at tb|g9iBafi.the servicel 

The provision of s^e^fteg at a cRge less thai^ 

in-kind contribution, ^m^alueifilsucfa a cont 

tfae usual and^onm^ chu 

billed ancy^!t^^Hl£R§10ffi^a) anT 

reasonable rate that one 

re rende! 

le usual and normal cfaarge results in an 

Fion would be the difference between 

the amount the political committee was 

B. pg^^utions by a 

treatmen^^corporatioi 

contributioi^^nfluence 

having been iro^^om a 

and tfaus subjectl^^in 

contribution from a 

chosen to be treated 

ited I^Wlfity Company. An LLC that does not elect 

der feoeral tax law or have publicly-traded shares may make 

leral elections. Such a contribution will be considered as 

ersfaip and govemed by the rules pertaining to partnerships 

election limit of $5,000. The contribution is considered a 

b individual if the LLC is a single-member LLC that faas not 

a corporation under Intemal Revenue Service rules. 11 CFR 

§110.1(b)(1) and (g)(2) and (4). 

C. Definition of Commercial Vendor. A commercial vendor is any person who 

provides gocxls or services to a candidate or political committee and whose usual and 

normal business involves the sale, rental, lease or provision of those goods or services. 

11 CFR §116.1(c). 

D. Extension of Credit by Commercial Vendor. A commercial vendor, whether or not 

it is a corporation, may extend credit to a candidate or political committee provided that: 
• The credit is extended in the vendor's ordinary course of business (see below); 

and 

• The terms of the credit are similar to the terms the vendor observes when 

extending a similar amount of credit to a nonpolitical client of similar risk and 

size of obligation. 11 CFR §116.3(a) and (b). 

E. Definition of Ordinary Course of Business. In determining whetfaer credit was 

extended in the ordinaiy course of business, the Commission will consider whether: 

• The commercial vendor followed its established procedures and its past practice 

in approving the extension of credit; 

• The commercial vendor received prompt, full paymentjypft pffeviously extended 

credit to the same candidate or political committee; 

• The extension of credit conformed to the usual a^Bnori!l^|^ctice in the 

commercial vendor's industry or trade. 11 CFR 9^[6.3(c)? 

F. Continuous Reporting Required. A poHti 

and nature of outstanding debts and oblig 

U.S.C § 434(b)(8) and 11 CFR §§ 104.3(d) ani 

'Committee must disci 

intil those debts are exl 

-.1. 

e amount 

shed. 2 

G. Continuous reporting of debts, ^ebts and obligatl^t^pwed by or to a political 

committee whicfa remain outstandi^ftj|^lbe continuoI^Wepprted until 

extinguished. Debts for which the a^S^feBver $500 sf^|^ reported as of the 

date on which the debt was incurred, M CF|EPS|M.1 . 

Facts and Analysj 

A. Facts 

During audit fieldwork, 

may haveaigiiBteredit tc 

invoice^oremainGlBluidinf 

contrg^between RM< 

sfaall onlQ^Bobligated to" 

invoice to UNxtent of tfael 

the program.^^^e funds 

contingency feelAlKd oi 

[ialhmentified a limited liability company that 

[C ouilW^^normal course of business by allowing 

considerable length of time^. The terms of tfae 

.tfais Political Advertising (PA), states, "the client 

the ^tingency fee stated on Political Advertising's 

btributions that are actually received by Client as a result of 

lerated as a result of tfae program are less than the 

)litical Advertising's invoices, then the client shall only be 

obligated to the extl^^l^he proceeds received from the program." 

On August 20,2007, RMC entered into a contract for fimdraising services with PA. 

From August 13,2007 tfarougfa December 31,2008, PA invoiced RMC $2,223,370 for 

fundraising services such as telephone calls and the printing and mailing of follow-up 

letters. RMC paid $568,043 ofthe total invoiced. As of December 31,2008, the Audit 

staff calculated the outstanding balance owed by RMC to be $1,655,327. Based upon its 

understanding of the terms of the contract, RMC only reported amounts paid against 

invoices. RMC did not consider the majority of the outstanding amounts reportable as 

^ PA is a division of Political Call Center, LLC, an Arizona limited-liability company which files it taxes 

as a partnership. 
debt owed because the terms of the contract state that RMC was responsible only up to 

the amounts raised by the fundraising service^. During fieldwork, RMC provided no 

evidence tfaat tfais vendor made commercially reasonable attempts to collect tfais debt. 

Therefore, during fieldwork. ttie Audit staff questioned whetfaer $1,650,327 ($1,655,327 -

$5,000 = $1,650,327) sfaould be considered an excessive in-kind contribution. Tfais 

matter was discussed with the RMC representatives during fieldwork and the Audit staff 

requested further information. 

B. Early Commission Consideration of Legal Questions 

Pursuant to the Commission Policy Statement Establishing a PilotJ[rogram (July 20, 

2010), RMC filed a Request for Early Commission Considerati^RHtCgal Questions 

(Request). In its Request, RMC asked the Commission to ccjsflfcr whether the terms of 

the contract resulted in an extension of credit, an in-kind^Snmn^n and reportable debt. 

Specifically, RMC requested that the Commission consi^ the K^Q^ng: 

• First, RMC contended that the weekly coimngency fees do not^mitute 

reportable debt and neither the Act nqiil^'ommi 

term "debt." Based on Advisory Opinion^iifi Ci 

State law govems whether an alleged debt i; 

debt is and which persons or ^titles are respohl 

wrote. As such, RMC contenlmyiat tfaere woul 

^ion's regulatiSl^djBfine tfae 

ision "faas loj^faeld ttiat 

Fxists*, wfaat the amount of the 

for paying a debt," RMC 

IP debt to report until the 

termination of tfae contract bet jand PA. 

• Second, RMC mentioned a fundra! fsuein MUR 5635* 

(Conservative^ 

tfaan tfae con^|t betwT 

contract iif'A!BS«ii5635 

funds were not 

Hoji^lim^unsei 

inate 

PAC) anc^ntended nmt it was substantially different 

^RMC and Specifically, according to RMC, the 

truly "no-r^^ince it provided that if sufficient 

littee would not be responsible for the debt, 

ft the contract between RMC and PA 

J)ecome obligated for all unpaid contingency fees if 

ract prior to August 15,2012. 

Tnfi^^e request 

cours^ll^usiness 

politicar^^try. 

ilained that RMC and PA made the contract in the ordinary 

that this type of contract is a fairly standard contract in the 

^ RMC reported debt of $279,564 to PA and filed Schedules D for this amount from the 2007 Year-End 

report through the 2008 Year-End report. The 2009 April Quarterly report did not include an outstanding 

debt balance owed to PA. RMC did not provide documentation to explain how this debt was calculated or 

why it was not reported after 2008. 

* The Commission has specifically addressed "no-risk" or "limited risk" fundraising agreements like the 

one at issue here in enforcement matters and advisory opinions throughout the years. The Commission has 

consistently applied 11 C.F.R. §§ lOO.SS and 116.3 (or their regulatory predecessors) to determine whether 

such arrangements were extensions of credit that resulted in in-kind contributions. 
The Office of General Counsel (OGC) considered RMCs position and in its 

memorandum to the Commission^ concluded that the contract at issue is a "no-risk" or 

"limited risk" contract that may result in in-kind contributions to RMC from PA. OGC 

also concluded that fees and expenses resulting from such a contract are reportable as 

debts. However, OGC notes that there is littie information at this time about the presence 

or absence of the safeguards^ that the Commission has identified in relevant enforcement 

matters or advisory opinions and that RMC may yet be able to demonstrate that the 

contract did not result in any in-kind contribution. 

The Commission did not resolve or provide guidance on how to proceed with this matter. 

Therefore, pursuant to the Commission's policy on early consiiMlm^ of legal questions, 

the Audit Division included this matter in the Interim Audit I^Kort. 

C. Interim Audit Report & Audit Division Recommdfflation^ 

The Audit staff discussed this issue witti RMC reprj^ft^nves at tfal^fejconference. 

The representatives expressed their disagreemeiij^^h the Audit staff al^ybsequently 

filed the Request noted above. 

The Interim Audit Report included the following rec Indatibns. 

• RMC should provide documei 

demonstrate that the credit extei 

and did not represent an excessivl 

provided was to include examples 

similar size and|^IHB|wfaich simill 

arrangementi^ere usel^lfVlso, the 

RMC pro 

policies for simi 

debyeflAleiliffln poll 

D. Comfi^^e Response* 

In response^rae Interim 

PA and fundraSmcontrai 

including stad^jents from PA that 

norniSMrse of PA's business 

butio^y PA. The information 

ha\ customers and clients of 

ervices w^e provided and similar billing 

im Audit Report staff requested that 

conceming tn^presence of safeguards such as billing 

clients^Md work, advance payments policies, 

and tPTtH^^cles. 

reflect all debt owed to PA. 

Intenm Audit Report 

Idit Report, RMC provided an affidavit from the president of 

from telemarketing vendors similar to PA. 

RMC highlighted thlj^spects of the contract with PA to demonstrate that the credit 

extended was in theinormal course of PA's business and did not represent an excessive 

in-kind contribution by PA. 

' See Request for Early Commission Consideration of Legal Questions Arising in the Audit of 

Rightmarch.com PAC. Inc. (LRA 842) Memorandum to the Commission dated March 14,2011. p. 2. 

' Safeguards proposed by the Commission have included requiring advance deposits by a committee to 

reimburse vendors for potential shortfalls, limiting the term of the contract, or allowing vendors to 

terminate the contract eariy and demand ftill payment as a result of poor fundraising performance. 
10 

Profitability 

RMC stated that the agreement witfa PA was a bona fide commercial transaction 

undertaken consistent with Commission precedent. According to RMCs 

response, the contract to date has generated $1,650,429 in total revenue and a casfa 

profit of $57,074 for PA. In addition, tfae affidavit stated tfaat tfae fundraising 

program on befaalf of RMC also generated 35,089 donor names, 37,845 

unfulfilled pledge names and 243,025 survey responder names tfarougfa December 

31, 2010. Tfaese names are tfae property of PA and may be used by PA witfaout 

restriction in the future. Based upon past figures used by ttie Commission for 

calculating the value of such lists, PA estimated a cons^^l^^ commercial value 

($.10/name) of such names to be $31,596, altiiough Odffisel for RMC stated tfaat 

tfae actual value is likely much higher and the esti 

profitability to date. 

Conformity 

The affidavit filed by PA's president §1 

fundraising services to RMC on the same 

to its other political and non-political clients^ 

organizations tfaat ultimately not to retain 

any special discounts or finan^lbifientives to 

clients. 

Counsel for RMC 

vendors, many 

prces tfae agreement's 

Security 

PA's agreement 

fronni^miikLcludi 

ffered its telerm^mg 

ct terms tfaaj||PA offered 

those non-profit 

services. PA did not give 

t it did not offer to other 

ting contracts from different 

PA received 

the contract. 

feguards built into it to ensure payment 

i^re Timelv Pavments Under the Contract 

required an independent financial institution to 

eparate third-party escrow agent to disburse all of the 

ceeds that were generated. Botfa agents were contractually 

bound to administer the funds in accordance with the 

s of this contract. RMC had no power to withhold payment or 

the amount due. The lockbox mechanisms guaranteed that 

timely and full payment of all amounts due and owed under 

2. Ownership of Intellectual Propertv Developed During tfae Fundraising 

Campaign 

As mentioned earlier, the fundraising program on behalf of RMC also 

generated 35,089 donors' names, 37,845 unfulfilled pledge names, and 

243,025 survey responder names ttirough December 31,2010 that are the 
11 

property of PA and may be used by PA without restriction in the future. 

PA placed a conservative value on this property of $31,596. 

Use of Test Calls 

Another safeguard that PA faad in place was tfae use of test calls to faelp 

estimate the financial returns from tfae fundraising program. The affidavit 

stated that the initial retums were positive and indicated that the 

fundraising program would be profitable. If the calls had not shown 

positive results, PA could have terminated the fundraising program 

immediately, pursuant to the RMC contract. 

The Abilitv to Monitor Results of the Funclra|^^ Program in Real 

Time 

Counsel for RMC stated that PA was abl^gue to^nive, real-time nature 

ofthe telemarketing program, to mon^ft^^e^programwrpfitability and 

that it had sole discretion to stop^jreffort the moment^bssults trended 

toward becoming financially upimiuctive.'^ 

RMCs Obligation to Bear Certain ider the Agreement Regardless 

of the Program's Success 

Regardless of whether^^^rogram genera^^toy revenues, RMC was 

always responsible for pBm^flfycpst of the pmi^envelopes, and other 

materials that were used iffi£onn^^|^^h P^^fiindraising program. If 

PA faad determined tfaat tfae%e^Mnai^^lfidraising success was to 

increase^riH|M?er of perso^contactecpl^ mail, RMC would have 

assuniffitfae aoHbnal risk uAer the terms ofthe contract. 

RMC further explainecf^B|tii^fami^son theplfeekly statements from PA were not 

reportable 4^^|^^id ncl^^ltOTHS^fi^issible extension of credit to RMC. RMC 

suggested^rattne^lByy staHbjPts may have been misleading since there was an 

amoun^osted as a Prmtol Bam^^owever, according to RMC, tfae amounts listed 

on ffl^^^statements ^^bng $1^^,327 represented tfae maximum possible amounts 

that PA c^ltteam if the t^RnarkdTing campaign were exceptionally successful. 

Under its agree!^yUwithJSi|htmarch, PA was entitled to be paid 95% of the funds 

generated by the tSmailreting program, up to the fee cap figure of $2.50 per call. RMC 

believes it made timlPpayments in full to PA for all services. 

The Audit staff reviewed the documentation provided in response to the Interim Audit 

Report. Althougfa contracts from similar vendors were provided, PA did not provide for 

this review any additional contracts that it had with its other clientele; rather, RMC 

provided an affidavit from the president of PA attesting to ttiis. As such, tfae Audit staff 

cannot confirm tfaat PA's contract witti RMC was offered on ttie same terms as otfaer PA 

clients, eitfaer political or non-political. Tfae contracts provided are similar to PA's 

agreement with RMC and appear to demonstrate, in differing degrees, no risk or limited 

risk conditions. In addition, PA's ability to terminate the agreement with one-day notice 
12 

and its requirement that the client maintain in place the collection facilities so that all 

proceeds generated as a result of PA's services during the term of this agreement, and for 

a period of 180 days afier termination, appear to meet some of tfae necessary safeguards 

mentioned by the Commission. Because of this, it does appear that these types of 

contracts may be fairly standard in the industry. Based on the documentation provided, it 

appears that PA may have extended credit in the ordinary course of business and thus clid 

not contribute an excessive in-kind contribution. 

Based on the additional information provided in response to the Interim Audit Report, 

RMC demonstrated that PA extended credit in the ordinaiy course^f business and thus 

did not contribute an excessive in-kind contribution. With respg^ra^e reporting of 

debt, the outstanding fees and expenses listed on the weekl^y^pices totaling $1,524,657 

are debts subject to tfae reporting requirement of 11 C.F.^^(ffi|L. The Commission 

has consistentiy treated such expenses in these types of ^rangeml^^s extensions of 

ciedit by vendors (See MUR 5635- Conservative I^ftl^hft> PAQ^^js a type of debt. 

Commission regulations do not base tfae reportii^f debts and obligatSR^n tfae amount 

tfaat a committee ultimately will pay to a ci'sditj^^it rath&^he approxiin^MPibunt or 

value of tfae debt at tfae time tfae report is filedT^^^^faoup^port debts toW\ for tfae 

appropriate reporting periods. At the tennination orlffli^ontract, RMC may seek to 

forgive the reported debt following Commission proceoAlfi for debt termination. 

Finding 3. Failure to File 

Independent ESxprnditures 

^erly Disclose 

dependent expenditures and noted the 

Summary 

During audit fieldworl 

following: 

le 2473^||0ur noticSfTor up to $ 139,067; and 

IC did nofpA^rly^^ksemdependent expenditures totaling $2,172,135 

ie (i.e., pubuHKissemRted) prior to payment as "memo" entries on 

S'S^ule E (ItemilAlndeilndent Expenditures) and $1,892,571 as reportable 

debn^^chedule fS^ebts and Obligations).. 

In its response tcT^^nte^h Audit Report, RMC stated that it disagreed with the Audit 

staffs interpretatiorrfmne fundraising scripts. The RMC also stated that because ttie 

Commission was unaole to reach a conclusion with regard to tfais question under the early 

consideration policy, RMC requests that the finding be removed from the Interim Audit 

Report and that the cliscussion be moved to an Additional Issues section. Given RMCs 

objection to the finding, RMC took no action with respect to tfae Audit staffs 

recommendations. 

Legal Standard 

A. Definition of Independent Expenditures. The term "independent expenditure" 

means expenditure by a person for a communication expressly advocating the election or 
13 

defeat of a clearly identified candidate that is not made in coordination with any 

candidate or authorized committee or agent of a candidate. 11 CFR § 100.16. 

B. Disclosure Requirements - General Guidelines. An independent expenditure shall 

be reported on Schedule E if, when added to other independent expenditures made to tfae 

same payee during tfae same calendar year, it exceeds $200. Independent expenditures 

made (i.e., publicly disseminated) prior to payment sfaould be disclosed as "memo" 

entries on Schedule E and as a reportable debt on Schedule D. Independent expenditures 

of $200 or less do not need to be itemized, tfaougfa the committee must report the total of 

those expenditures on line (b) on Schedule E. 11 CFR §§104.3(b]Q^)(vii), 104.4(a) and 

104.11. 

C. Last-Minute Independent Expenditure Reports (2^foMNLotices). Any 

independent expenditures aggregating $1,000 or more "^^m respSftaany given election, 

and made afier the 20"* day but more than 24 hours^ftre the day oW||election must be 

reported and the report must be received by the Commission within 24IR|ILS afier the 

expenditure is made. A 24-hour notice is req 

expenditures aggregate $1,000 or more. The 

disseminated serves as the date that the committee 

total amount of independent expenditiues has, in the 

threshold reporting amount of $l,000^^£yFR §§104.4( 

D. Last-Minute Independent Expend! 

independent expenditure aggregating 

at any time during a 

must be disclosed wi 

The notices must bfr^lwith US Commissio 

made. 11 CFR §§104. 

Facts 

additional inolQj^ent 

nication is ^Dlicly 

etermine whether the 

te, reached or exceeded the 

.5(g)(2). 

[48-Hq£lf Notices). Any 

Tespect to any given election, 

[eluding tllS 20th day before an election, 

expenditures aggregate $10,000 or more, 

lin 48 hours afier the expenditure is 

A. 

RMC dis^^ ^ independeSpxpeifditures, totaling $563,277, on Schedule E. These 

disbursemein^e for fuiRaising phone calls and follow-up letters and were disclosed 

as being in opp^mon to Wary Clinton, Hillary Clinton and Barack Obama, or Barack 

Obama. The Audn^^^viewed these expenditures to determine whether they were 

properly reported on^Kedule E. It should be noted tfaat RMC did file 24/48-faour 

notices, but the notifies were filed based on payment date rather than the date of 

dissemination. As a result, the notices did not cover amounts invoiced past September 

2007. A review of the phone scripts,^ follow-up letters and invoices for these 

independent expenditures revealed the following: 

^ Four scripts were used. Of these, three contained express advocacy. The fourth contained no express 

advocacy (generic) and per RMC was used after the 2008 General Election. 
14 

RMC did not file 24/48-hour notices for independent expenditures amounting to 

as much as $139,067 for the period December 24,2007 tfarougfa November 3, 

2008;and 

RMC reported independent expenditures when the invoices were paid, either in 

part or in full. However, RMC made most of these payments weeks or months 

afier the dissemination or pfaone-call dates. For expenditures totaling $2,172,135, 

RMC should have disclosed independent expenditures as memo entries on 

Schedule E, filed with reports covering tfae dates wfaen tfae materials were 

disseminated, and reported $1,892,571^ in corresponding dfibt on Scfaedule D. 

B. Early Commission Consideration of Legal Questions 

In its Request, RMC asked the Commission to consider 

fundraising program, whicfa identified one or more fede 

to them as candidates or mention any election, shoi^ 

expenditures ratfaer tfaan operating expenditures. 

enses relating to a 

but did not refer 

endent 

Counsel for RMC stated ttiat the contract betweeffin^ndp^P is ^ ^^^^^V sSndard 

fundraising contract in the political industry and tfaa^fan^ffposc of the contact is for PA 

to individually contact members of tljegeneral public^mephone and follow-up mail to 

identify voters, advocate issues and/oi^|filecrion or def^Kfcandidates for federal 

office,provide political informationan^^^|ghjBsame tim^^^^ine tfae function of 

donor acquisition and/or donor renewal &to a^Bte^e goa^f RMC." Counsel for 

RMC also pointed out that the entire cost l^j^^reoPB^ytttract is based on the funds 

raised by the telemark^)l(f|^ynail prograMXounsel^RMC discussed the content of 

the four telemarketim|Pcripts^gkindicated tlmt they were typical of fundraising scripts 

used in the politicafl^^ry. .fording to Cra^l for RMC, the scripts: 

Ask^ 

SI 

to BHiiess alff^lSpil^^ a public issue (in this case, the 

kigration); 

;atedly ask tfll^l^tenerpPBonate money to a campaign to stop illegal 

ition; 

Tell the^ 

Clinton anc 

the Committee is working to defeat politicians Hke Hillary 

[sic] Obama; and 

• Ask the listener to tell their friends to oppose Hillaiy Clinton and Barak [sic] 

Obama. 

* This amount differs because RMC did acknowledge debt of $279,564 and filed Schedule D for this 

amount from the 2007 Year-End report until the 2008 Year-End report ($2,172,135 - $279,564 » 

$1,892,571). As stated in footnote 3, RMC stopped reporting this debt balance starting with the 2009 April 

Quarteriy report. RMC did not provide the Audit staff with documentation to explain how this debt was 

calculated and why it was excluded from disclosure reports in 2009. 
15 

Counsel for RMC further explained that the scripts do not: 

• mention any candidacy, party affiliation, public office, voting or any election; 

• refer to anyone's character or fitness to faold office; 

• run in close proximity to any election or were targeted to any particular state;^ 

• make any comparison between candidates; or 

• repeat any candidate's slogans or messages. 

scripts designed to 

listeners which side 

Counsel for RMC also explained that these scripts were 

raise money by touching on faot-button political issues a 

of tfae issues prominent officefaolders were taking. 

In closing, Counsel for RMC said that RMC hjjgKported spme of its 

expenses as independent expenditures withomi^^dyice ^gpunsel. To cdp^ound the 

problem, RMC was inconsistent with the classificaH^^^Kpehses on repons as 

operating expenses or independent expenditures. 

OGC considered RMCs position, and 

concluded that to the extent that these sc^ 

defeat of a clearly identified candidate, 

expenditures and file apMj|ffi|||^ 24/48-nof 

scripts at issue includ^me wfl^kdefeat'* foil 

candidate, Hillary^^fi^, Bar S Obama or 

advocacy under 11 CnllliSlOC 

lorandum fc 

iressly 

10 

immission, 

Seated the election or 

as independent 

The m^!5randum noted that the three 

l^ed by the name of a clearly identified 

tfajjuming tfaese messages into express 

The ConiD|fiMil^^)t resWjLor proviS^|iJidance on how to proceed with this matter. 

Thcre|^i;pursuantt!^mLCoimft policy on early consideration of legal questions, 

the ^'i^l^ivision incl^fcthis i^^ r In this report. 

C. Interim'^^^t Reportmg Audit Division Recommendation 

The Audit sta^^jcussed ^s e issues at the exit conference and provided appropriate 

schedules to RMSmri^^atives. Conceming ttie reporting of 24/48-hour notices. 

Counsel for RMC s^STthat these independent expenditures were intended for the 

general election and^not for the primary elections. Thus, RMC representatives contended 

that these notices were not necessary. 

The Interim Audit Report recommended that RMC take the following action: 

' Counsel for RMC pointed out that, according to RMCs calculations, 93% of the calling scripts were 

used in 2007, a non-election year. 

'° See Request for Eariy Commission Consideration of Legal Questions Arising in the Audit of 

Rightmarch.com PAC, Inc. (LRA 842) Memorandum to the Commission dated March 14,2011, page 10. 
16 

• Provide any documentary evidence that would demonstrate that tfaese 

disbursements were not independent expenditures and tfaerefore did not require 

24/48-hour notices; 

• Submit and implement revised procedures for reporting independent expenditures, 

as well as for tracking dissemination dates for such expenditures to allow for 

timely fiHng of 24/48-hour reporting notices; and 

• Amend its reports to disclose independent expenditures properly as "memo" 

entries on Schedule E and report corresponding debt on SchediUe D. 

D. Committee Response to Interim Audit Report 

In its response to ttie Interim Audit Report, RMC noted that it^M^ute d the Audit 

staffs interpretation of the fundraising scripts during audit fkmrork and at the exit 

conference. Also, because the Commission was unable tQ^5W||||anv guidance in 

relation to this matter, RMC objected to this issue beiiygflgludeai|fa|C audit report as a 

finding of the Commission. Rather, RMC requested^fi^^ findinf^kemoved from the 

Interim Audit Report and moved to an Additionaj^Sues section of the^Mreport 

approved by the Commission. Given RMCs junction totfje finding, no^^BO'%as 

taken with respect to the Audit staffs recommenS&sis. 
FEDERAL ELECTION COMMISSION 

WASHINGTON. D.C. 20463 

May 14, 2012 

MEMORANDUM 

TO: 

FROM: 

SUBJECT: 

Patricia Carmona 

Chief Compliance Officer 

Tom Hintermister 

Assistant Staff Director 

Audit Division 

Cfaristopfaer Hughey 

Deputy General Counsel / 

Lawrence L. Calvert, Jr. 

Associate General Couni 

General Law and Advii 

Lorenzo Holloway 

Assistant General Counsel 

Public Finance and Audit Advice 

Margaret J. Forman Ov^<1 -4-

Attomey (J^ 

Allison T. Steinle 

Attomey 

Drafi Final Audit Report on Rightmarcfa.com PAC, hic. (LRA 842) 

I. INTRODUCTION 

The Office of General Counsel ("OGC") has reviewed tiie proposed Draft Final Audit 

Report ("DFAR") on Rightmarcfa.com PAC, Inc. ("Rightmarcfa"), as well as ttie responses to ttie 

Interim Audit Report ("lAR") submitted by Rigfatmarcfa and Political Call Center, LLC. We 

generally concur witfa tfae Audit Division's findings in ttie DFAR. hi tfais memorandum, 

faowever, we specifically address tfae extension of credit by a commercial vendor discussed in 

Finding 2, and tfae failure to file notices and property disclose independent expenditures 
Memorandum to Patricia Carmona 

Rightman;h.com PAC, Inc. (LRA 842) 

Legal Conunents on Proposed Draft Final Audit Report 

Page 2 of 13 

discussed in Finding 3. If you faave any questions, please contact Margaret J. Forman, tfae 

attomey assigned to tfais audit. 

II. BACKGROUND 

On February 3,2011, Rig|htmarch requested, and tfae Commission granted, a Request for 

Early Review of Legal Questions by ttie Commission, pursuant to the Policy Statement 

Establishing a Pilot Program for Requesting Consideration of Legal Questions by ttie 

Commission, 75 Fed. Reg. 42,088 (July 20,2Q10).' On Febmaiy 16,2011, Rightmarch 

submitted a supplemental Request for Consideration of Legal Questions by the Commission 

("Rightmarch Suppl. Req."). We submitted a memorandum to the Commission, dated March 14, 

2011, in response to this request, whicfa provided legal analysis of two issues: (1) wfaetfaer tfae 

"ever-cfaanging weekly contingency fees" invoiced by Rightmarcfa's vendor. Political 

Advertising, resulted in in-kind contributions and were required to be reported as debts; and (2) 

whether fundraising communications were independent expenditures. Iri our analysis ofthe first 

issue, we concluded that the fees may have resulted in in-ldnd contributions, and were reportable 

debts. We also stated, however, that we needed additional information from Rightmarch to assist 

the Commission in resolving this issue. Our analysis of the second issue concluded that the 

fundraising communications constituted express advocacy pursuant to 11 C.F.R. § 100.22(a) and 

were, therefore, independent expenditures. The Commission, after considering ttie legal 

questions, was unable to reacfa an agreement and issue a response. Pursuant to Commission 

dlirection, Rightmarch received a copy of our memorandum in response to their request. 

Although our memorandum stated that we need additional information fiom Rightmarcfa to assist 

tfae Commission in resolving these issues, RighUnarcfa submitted no additional information in 

response to tfae memorandum. Accordingly, ttie Audit Division proceeded by including ttiese 

issues as findings in ttie lAR, wfaicfa was approved by tfae Commission on October 25,2011. See 

Policy Statement Regarding a Program for Requesting Consideration of Legal (^estions by tfae 

Commission, 76 Fed. Reg. 45,798,45,799 (Aug. 1,2011). Rigfatmarcfa and Political Call Center, 

LLC botfa submitted responses to tfae lAR. 

III. ANALYSIS 

A. Extension of Credit by a Commercial Vendor (Finding 2) 

1. Introduction 

Rightmarcfa, a non-connected political committee, entered into a five year fimdraising 

telemarketing contract with Political Advertising, a division of Political Call Center LLC, on 

August 20,2007. Submission of Political Call Center, LLC in Response to tfae Interim Audit 

Report Conceming Rigfatmarcfa.com PAC, Inc. at Ex. C (Dec. 12,2011) ("Political Call Center's 

' The pilot program was in place during the period in which Rightmarch requested consideration of legal 

questions by the Conimission. The Commission subsequently replaced this Pilot Program with a Policy Statement 

Regarding a Program for Requesting Consideration of Legal (^estions by the Commissioa 76 Fed. Reg. 45,798-99 

(Aug. 1.2011). 
Memorandum to Patricia Carmona 

Rightmarch.com PAC, Inc. (LRA 842) 

Legal Conunents on Proposed Draft Final Audit Report 

Page 3 ofl 3 

Resp."). Pursuant to the terms of the contract, Political Advertising charges Rightmarch a "flat 

contingency fee" of $2.50 per completed call, plus actual costs of associated activity such as 

sending a response card or accessing a call list. Id. at Ex. C ^ 5.2. However, depending on 

developments over the course of the contract, Rightmarch may never be liable for this "flat 

contingency fee." 

Under the contract, Rightmarch is guaranteed a minimum of five percent of the gross 

proceeds of the fundraising activity. Id. at Ex. C ^ 6.2. Moreover, Rightmarcfa is only obligated 

to pay the "flat contingency fee" to ttie extent that Political Advertising receives funds in 

response to its fundraising efforts. Id. at Ex. C % 5.3-.4. If Political Advertising's fundraising 

efforts are not sufficient to cover a particular week's fees and expenses, Rightmarch still receives 

five percent of the gross fundraising proceeds, and the remaining proceeds go towards paying off 

the total amount of outstanding fees and expenses without requiring Rightmarcfa to pay the 

remaining balance from its own fiinds. Id. 

Pursuant to the terms ofthe contract, Political Advertising provides Rightmarch with a 

weekly "Statement of Contingency Fees (INVOICE)" showing the fees and expenses and "fiat 

contingency fees" for its services that week, and the accumulated net balance of fees and 

expenses and "fiat contingency fees" not covered by the proceeds of the fundraising project to 

date. Id, at Ex. C ^ 5.2. However, Rightmarch can never be liable for any of the "flat 

contingency fees" unless it terminates ttie contract prior to its 2012 expiration date, in which case 

it becomes immediately liable for the full amount of fees and expenses accumulated to date. Id. 

at Ex. C \ 7.4. The contract itself refers to this arrangement as a "No Risk Guarantee." Id. at Ex. 

CIS. 

The lAR included a finding ttiat, as a result of this contract, Rightmarcfa faad an 

outstanding debt to Political Advertising in the amount of $1,524,657.35 at the conclusion of the 

audit period. Rigfatmarch reported only a small portion of this amount as outstanding debt for 

this period.^ The lAR also included a finding that this arrangement may have resulted in in-kind 

contributions to Rightmarch from Political Advertising. 

In response to the lAR, Rightmarch argues that ttie Audit Division has misunderstood the 

terms of the contract and the weekly statements provided to Rightmarcfa by Political Advertising. 

Rightmarcfa argues that Political Advertising never extended any credit to Rightmarcfa, and tfaat 

tfae weekly statements were prepared by a third-party escrow company using a standard format 

designed for real estate transactions, which caused the statements to include a "Principal 

Balance" even though this amount reflected the "maximum possible amount that [Political 

Advertising] could have received from Rightmarch if ttie fundraising program had exceeded 

expectations." Submission ofRightmarch.com PAC, Inc. in Response to the Interim Audit 

Report on Riglhtmarcfa.com PAC, hic. at 3-4 (Dec. 13,2011) ("Rightmarcfa's Resp."). 

' The Audit Division does not know why Rightmarch elected to report only a small portion ofthe 

outstanding fees and expenses. Rightmarch stopped reporting any of this amount as debt in 2009. Rightmarch 

reported the fundraising proceeds as contribution receipts and the amount of proceeds that Political Advertising 

applied to its outstanding fees and expense as expenditures to third-party vendors. 
Memorandum to Patricia Carmona 

Rightmarch.com PAC, Inc. (LRA 842) 

Legal Conunents on Proposed Draft Final Audit Report 

Page 4 of 13 

Rightmarcfa contends tfaat tfae weekly statements were not "invoices" because tfaey "did not 

represent a debt that was due and owing" and that Political Advertising was paid in-full and ontime each week in accordance witfa tfae contract. Id. at 4. 

In a separate response to tfae lAR, Political Call Center faas provided an affidavit from its 

president attesting tfaat Political Advertising offered its telemarketing fundraising services to 

Rigfatmarcfa on tfae same general terms tfaat were offered to Political Advertising's otfaer political 

and non-political clients, and tfaat no special discounts or financial incentives were offered to 

Rigfatmarcfa tfaat were not offered to ottier clients. Political Call Center's Resp. at Ex. B. In 

addition. Political Call Center has provided 32 telemarketing contracts from other fundraising 

vendors with political and non-political clients that it claims establish tfaat ttie contract 

conformed with "ttie usual and normal practice in Political Advertising's industry." Id. at 11, 

Exs. D-FF. Political Call Center argues ttiat the $2.50 "fiat contingency fee" was, in fact, a 

"contingency fee cap" or "fee cap provision" tfaat represented tfae maximum amount Rigfatmarcfa 

could be cfaarged for fundraising services, and the weekly statements did not represent a debt that 

was due and owing. Id. at 3. Political Call Center also states that it made a profit on the 

contract, and tfaat the contract was entered into in the ordinary course of business and did not 

result in an in-kind contribution. Id. at 6. Political Call Center notes that the contract includes a 

"lock-box" provision that requires a third-party escrow company to receive and disburse all the 

fundraising proceeds; allows PoHtical Advertising to retain intellectual property rights to the 

materials that were developed, including mailing lists that it estimates to have a fair-market value 

of at least $31,595; permits Political Advertising to make test-calls before moving forward witti a 

full-scale fundraising program and monitor the telemarketing program's success in real-time; and 

requires Rig|htmarch to pay tfae costs of ttie paper, envelopes, and "otfaer materials tfaat were used 

in connection witfa Political Advertising's fimdraising program" regardless of wfaetfaer the 

program generates any revenues. Id. at 12-16. 

2. Contributions, Extensions of Credit, and **No Risk" Contracts 

The Act defines a contribution as "any gift, subscription, loan, advance, or deposit of 

money or anything of value made by any person for the purpose of influencing any election for 

Federal office." 2 U.S.C. § 43I(8)(A)(i). Under tfae Commission's regulations, tfae term 

"anytfaing of value" includes all in-kind contributions, and unless specifically exempted, tfae 

provision of goods and services for no charge or at a charge that is less than the usual and normal 

charge. 11 C.F.R. § 100.52(d)(1). 

An extension of credit to a political committee by a conunercial vendor is a contribution 

unless the credit is extended in the ordinary course of business and on tfae same terms as 

extensions of credit to non-political debtors of similar risk and for an obligation of similar size. 

11 C.F.R. §§ 100.55,116.3(b). An extension of credit occurs wfaen tfaere is an agreement 

between a creditor and a political committee tfaat full payment is not due until after tfae creditor 

provides goods or services to tfae political committee. 11 C.F.R. § 116.1(e)(1). In determining 

wfaetfaer an extension of credit was in tfae ordinary course of business, tfae Commission considers 

wfaetfaer tfae vendor followed established procedures and past practices, wfaetfaer tfae vendor 

received prompt payment in fiill for previous extensions of credit, and wfaetfaer tfae extension of 
Memorandum to Patricia Cannona 

Rightmarch.com PAC, Inc. (LRA 842) 

Legal Conunents on Proposed Draft Final Audit Report 

PageSof 13 

credit conformed to tfae usual and normal practice in tfae industry. 11 C.F.R. § 116.3(c). If a 

vendor extends credit and fails to make a commercially reasonable attempt to obtain repayment, 

a contribution will result. 11 C.F.R. §§ 100.55, 116.4(b)(2). 

Wfaen addressing fundraising programs tfaat compensate vendors using fimdraising 

proceeds, tfae Commission faas expressed concem tfaat '^regardless of tfae degree of success of tfae 

effort to raise funds, tfae committee would retain contribution proceeds while giving up little, or 

the committee would assume littie to no risk with the vendor bearing all, or nearly all, the risk." 

Advisory Opinion 1991-18 (New York State Democratic Committee). "No-risk" or "limited 

risk" contracts similar to the one at issue here may result in in-kind contributions from vendors in 

two ways. First, they may result in a vendor rendering services for tfae committee for essentially 

no cfaarge, or for what at the end of a series of transactions will wind up being less tfaan tfae usual 

and customary charge. See 11 C.F.R. § 100.52(d)(1). Second, because these arrangements 

almost by definition involve the provision of services by the vendor before payment is received, 

they involve extensions of credit, and must meet all of ttie requirements set forth in the 

regulations for extensions of credit not to be contributions. See 11 CF.R. §§ 100.55, 116.3-.4. 

The Commission has consistently applied its regulations to determine whetfaer sucfa 

arrangements resulted in in-kind contributions. See, e.g., MUR 5635 (Conservative Leadersfaip 

PAC) (addressing a "no risk" fundraising contract wfaere tfae committee was not responsible for 

the costs of fundraising in excess of the money raised); Advisory Opinion 1991 -18 (addressing a 

"limited risk" fundraising contract where ttie committee's full payment of the vendor's 

commissions was tied to the prospect tfaat die fundraising would pay for itself over several 

years); Advisory Opinion 1979-36 (Committee for Fauntroy) (addressing a "limited risk" 

fundraising contract wfaere tfae committee was only required to pay tfaree-fourtfas of tfae total 

amount of contributions received irrespective of tfae actual amount of fees and expenses).^ In 

doing so, ttie Commission faas required committees to faave safeguards in place to ensure that 

committees in fact pay for ttie costs of the fundraising programs. See MUR 5635; Advisory 

Opinion 1991-18; Advisory Opinion 1979-36. Specifically, the Commission has focused on 

whetfaer a committee would receive anything of value without timely and proper compensation 

first being paid to the fundraising firm and any third-party vendors. See MUR 5635; Advisory 

Opinion 1991 -18; Advisory Opinion 1979-36. Safeguards proposed by the Commission have 

included requiring advance deposits by a committee to reimburse vendors for potential shortfalls, 

limiting the term of the contract, or allowing vendors to terminate the contract early and demand 

full payment as a result of poor fundraising performance. See MUR 5635; Advisory Opinion 

1991 -18; Advisory Opinion 1979-36. 

^ The Commission also has addressed contracts and dealings in contexts other than fundraising in which 

conunittees assumed no risk or limited risk See, e.g., MURs 5069 and 5132 (Comite Acevedo Vila Comisionado 

2000) (determining that no contribution resulted when a Puerto Rico advertising agency bought television time on 

behalf of a candidate without first receiving payment based on evidence of conunon industry practice in Puerto 

Rico); MUR 4742 (Juan Vargas for Congress) (finding a reportable extension of credit, but no contribution, 

resulting from a "deferred compensation" contract with a candidate's general consultant where the consultant's 

retainer was only to be paid if the vendor and the committee agreed that the committee could afford to pay it without 

harm to campaign's viability). 
Memorandum to Patricia Carmona 

Rightmarch.com PAC, Inc. (LRA 842) 

Legal Conunents on Proposed Draft Final Audit Report 

Page 6 of 13 

For example, in MUR 5635, the committee entered into a "no risk" contract with a 

fundraising firm. The arrangement provided that the committee would be responsible for the 

costs of fundraising only up to the amount of funds raised. The fundraising program was not 

sufficient to cover the vendors' expenses, and the fundraising firm made several disbursements 

to the committee before the vendors' expenses were fully paid. Accordingly, the Commission 

concluded tfaat this arrangement resulted in contributions trom the fundraising firm because the 

arrangement was not in the ordinary course of business given tfae size of the disbursements and 

short-term nature of the program, and even if it was, the fundraising firm had forgiven the debt, 

resulting in a contribution under 11 C.F.R. § 100.55(d)(1). See General Counsel's Report #2, 

MUR 5635, at 5-6. 

Likewise, in Advisory Opinion 1991-18, the committee proposed entering into a 

"Prospecting Program" where the costs of fundraising would be paid out of fundraising proceeds 

and the conunittee would be responsible for the costs of fundraising only up to tfae amount of 

funds raised. Moreover, under the first year of the program, the vendor would provide the 

committee with net revenues even wfaen the vendor had not yet been fully paid for an earlier 

round of solicitations. Because of the "inherently speculative" nature of the prospecting effort, 

including the likelifaood that the vendor would not receive the full contract price for more than 

one year, the Commission determined that it could not approve the program "in the absence of a 

record by [the vendor] or similar companies of the implementation of a program of similar 

structure and size in the ordinary course of business." Altematively, the Commission suggested 

safeguards ttiat would prevent the program from resulting in in-kind contributions, including 

using short, defined periods of time in which the committee and the vendor would settie 

accounts. 

3. Analysis: Political Advertising Extended Credit in Ordinary Course of 

Business 

The DFAR concludes that Political Advertising has demonstrated tfaat it extended credit 

in tfae ordinary course of business and tfaus did not make an in-kind contribution to Rigfatmarch. 

The DFAR also concludes ttiat outstanding fees and expenses and "flat contingency fees" listed 

on the weekly statements are debts subject to the reporting requirement of 11 C.F.R. § 104.11. 

We agree for the reasons discussed below. 

Here, similar to the fundraising programs in MUR 5635 and Advisory Opinion 1991-18, 

the contract specifies that Rightmarch can never be liable for any of ttie "flat contingency fees" 

unless it terminates the contract prior to its 2012 expiration date. Indeed, the contract itself refers 

to this provision as a '*No Risk Guarantee." Political Call Center's Resp. at Ex. C ^ 5. And 

similar to the programs in MUR 5635 and Advisory Opinion 1991-18, ttie contract provides that 

Rightmarch receives five percent of the gross fundraising profits regardless of whether Political 

Advertising is paid in full for its services. Thus, the arrangement here is similar to tfae "no risk" 

contracts tfaat the Commission found resulted in in-kind contributions in MUR 5635 and 

Advisory Opinion 1991 -18. 
I Memorandum to Patricia Carmona 

I Rightnuirch.com PAC, Inc. (LRA 842) 

Legal Conunents on Proposed Draft Final Audit Repoit 

! Page 7 of 13 

A significant difference in this case, however, is tfaat Rigfatmarcfa and Political 

Advertising faave provided tfae "record by [tfae vendor] or similar companies of tfae 

implementation of a program of similar structure and size in tfae ordinary course of business" that 

was missing in Advisory (Dpinion 1991-18. As noted above. Political Call Center has provided 

an affidavit from its president attesting that Political Advertising offered its telemarketing 

fundraising services to Rightmarch on the same general terms that were offered to Political 

Advertising's other political and non-political clients, and that no special discounts or financial 

incentives were offered to Rightmarch that were not offered to otfaer clients. See Political Call 

Center's Resp. at Ex. B ^ 3-5. Political Call Center also has provided 32 telemarketing 

contracts from other fundraising vendors with political and non-political clients that include 

similar "no risk" fundraising agreements. Id. at 11, Exs. D-FF. 

Moreover, based on Political Call Center's submission, it appears tfaat several otfaer 

clients were offered a percentage of the gross fundraising profits. Political Call Center asserts 

that this provision is required by certain states wfaen dealing witfa non-profit organizations, but it 

cites no state laws to tfais effect.^ See Political Call Center's Resp. at Ex. B ^ 3-4. The 

important point, however, is that Political Call Center faas provided documentation indicating 

tfaat tfae provision of a percentage of gross fundraising profits to non-profit clients is not unusual 

in tfae telemarketing fundraising industry. Id. at 11, Exs. D-FF. 

The contract also appears to have contained two important safeguards identified in the 

Commission's previous matters: Political Advertising was permitted to make test calls before 

moving forward with a full-scale fundraising program, and had the ability to terminate the 

arrangement in the event of early poor performance. It also was permitted to slow tfae rate of 

fundraising or make otfaer adjustments to ensure tfae program's profitability based on its 

monitoring of tfae program's performance. Political Call Center's Resp. at 14-15,18, Ex. B ^ 6, 

Ex. C ^ 5.5,7.2. Implementation of an initial test period was one of tfae safeguards tfaat led the 

Commission to approve the arrangement in Advisory Opinion 1979-36, and was suggested in 

Advisory Opinions 1995-34,1991-18, and 1990-14. 

We believe tfaere remains a question, faowever, as to wfaetfaer Rigfatmarcfa faas, in fact, 

bome a sufficient amount of the cost or risk of the program to avoid receiving an in-kind 

contribution. "With respect to tfae payment or non-payment of an extension of credit, tfae 

Commission faas made plain tfaat in political committee fundraising, *none of tfae costs of tfae 

program [may] be left unpaid by tfae Committee.'" General Counsel's Report #2, MUR 5635, at 

8 (quoting Advisory Opinion 1990-14). As Political Call Center's submission points out, ttie 

* It appears that most states only require professional solicitation contracts to state the fundraiser's 

compensation or the gross percentage that the organization will receive and do not specify a minimum amount. See, 

e.g., Ariz. Code § 44-6554(E) (requiring a professional solicitation contract with charitable organizations to cleariy 

state the compensation ofthe contracted fundraiser); Ind. Code § 23-7-8-2(d) (requiring professional solicitation 

contracts with charitable organizations to specify the percentage of gross revenue that the organization will receive 

or the terms on which a determination can be made about the gross revenue from the solicitation campaign that the 

organization will receive, expressed as a fixed percentage of the gross revenue or a reasonable estimate ofthe 

percentage ofthe gross revenue). 
Memorandum to Patricia Carmona 

Rightmarch.com PAC, Inc. (LRA 842) 

Legal Conunents on Proposed Draft Final Audit Repon 

Page 8 of 13 

contract requires Rigfatmarcfa to pay tfae costs ofthe paper, envelopes, and "other materials that 

were used in connection witti Political Advertising's fundraising program" regardless of whetfaer 

tfae program generates any revenues. Political Call Center's Resp. at 5, Ex. C. ^ 5.2-.3. But this 

does not appear to include other overfaead cost$, sucfa as labor, tfaat Political Advertising 

presumably would pay from tfae $2.50 "flat contingency fee." And wfaile ttie contract permits 

Political Advertising to retain tfae mailing lists generated as tfae result of tfae program. Political 

Call Center's response estimates the fair-market value of ttie list to be $31,595.^ Id. at 14, Ex. B 

^ 10. This amount is considerably less than ttie $1,524,657.35 in fees and expenses and "flat 

contingency fees" listed on the weekly statements at the end of the audit period. 

Nevertfaeless, Political Call Center claims ttiat the program resulted in $1,650,429 in total 

revenue and $57,073 in cash profit for Political Advertising between August 20,2007 and 

December 31,2010.^ Political Call Center's Resp. at Ex. B ^ 8. Assuming this is true, the 

existence of profit indicates that costs of the program were ultimately paid by its revenues. 

Accordingly, we concur with the Audit Division's finding that Political Advertising has 

demonstrated tfaat it extended credit in the ordinary course of business and thus did not make an 

in-kind contribution to Rightmarcfa. 

4. Analysis: Rightmarch Was Required to Report Debt 

Altfaougfa Political Advertising faas demonstrated tfaat tfae contract did not result in in-kind 

contributions to Riglhtmarch, $1,524,657.35 in fees and expenses and "fiat contingency fees" 

remained outstanding at tfae end of the audit period. Therefore, with respect to the debt reporting 

question, we maintain that all $ 1,524,657.35 in fees and expenses and "fiat contingency fees" 

listed on the weekly statements are debts subject to the reporting requirements of 11 C.F.R. 

§ 104.11. As discussed above, in analyzing whether these types of arrangements result in in-kind 

contributions, the Commission has consistently treated them as extensions of credit by vendors. 

See MURs 5069 and 5132 (Comite Acevedo Vila Comisionado 2000) (finding a reportable 

extension of credit, but no contribution, resulting from a "deferred compensation" contract with a 

candidate's general consultant where the consultant's retainer was only to be paid if the vendor 

and the committee agreed that ttie committee could afford to pay it without harm to campaign's 

viability); see also MUR 5635; MUR 4742 (Juan Vargas for Congress); Advisory Opinion 1991-

18; Advisory Opinion 1979-36 (Committee for Fauntroy). Commission regulations treat 

extensions ofcredit as a type of debt. See 11 C.F.R. §§ 100.52,100.55,116.3; Advisory Opinion 

1991 • 18 (concluding that extensions of credit made by a vendor would result in debt). Political 

committees are required to continuously report all debts and obligations until they are 

extinguished. 11 C.F.R. § 104.11 (a). Commission regulations do not base the reporting of debts 

^ Political Call Center relies on the formula aniculated in MUR 5682 (Bachmann for Congress) to estimate 

the commercial value ofthe 35,089 donor names, 37,845 unfulfilled pledge names, and 243,025 survey responder 

names that it claims have been generated by the program to date. It has not, however, provided any documentation 

to verify this claim. 

' It is unclear whether this number reflects net or gross profit. 
Memorandum to Patricia Caimona 

Rightmarch.com PAC, Inc. (LRA 842) 

Legal Conunents on Ih-oposed Draft Final Audit Report 

Page 9 of 13 

and obligations on the amount that a committee will ultimately pay to a creditor, but rather on the 

approximate amount or value of the debt at the time the report is filed. See 11 C.F.R. 

§ 104.11 (b) (requiring committees to estimate the amount of a debt or obligation where the exact 

amount is unknown and report tfaat figure); 11 C.F.R. § 116.10 (requiring committees to repoil 

debt even if it is disputed); 11 C.F.R. § 116.10(a) (permitting committees to note in tfaeir reports 

that the disclosure of debt does not constitute an admission of liability or a waiver of any claims 

the committee may have against the creditor); see also Advisory Opinion 1999-38 (Calvert for 

Congress) (noting that a committee was correct in reporting disputed debts even wfaere tfae 

vendors no longer existed or were legally barred from collecting tfaat debt). 

B. Failure to File Notices and Properly Disclose Independent Expenditures 

(Finding 3) 

Our March 14,2011 memorandum analyzed the recommended finding on the failure to 

file notices and the proper disclosure of independent expenditures. We analyze the independent 

expenditures again below. Additionally, we concur with the Audit staffs finding in tfae 

Proposed Report, but address Rightmarcfa's response to tfae lAR. 

1. Fundraising Communications as Independent Expenditures 

In its Request for Eariy Review of Legal Questions by the Commission, Rightmarcfa 

asked whether the expenses for fundraising solicitations must also be reported as independent 

expenditures. We concluded that, to the extent these solicitations expressly advocated tfae 

election or defeat of a clearly identified candidate, tfaey must be reported as independent 

expenditures. See 2 U.S.C. § 434(b)(4)(H)(iii); 11 C.F.R. § 104.4(a). We fiirtfaer concluded ttiat 

appropriate 24/48-faour notices must be disclosed as required. See 2 U.S.C. § 434(g); 

11 C.F.R. §§ 104.4(b)(2), 104.4(c). 

Rightmarcfa submitted to tfae Audit Division four scripts ttiat were developed for use by 

Political Advertising in telemarketing pfaone calls.^ After an introduction, screening questions 

ask wfaetfaer tfae listener considers illegal immigration a serious problem. Rightmarch Suppl. 

Req. at Ex. C-F. Calls to ttiose who did not were terminated. Those wfao did faeard additional 

content. In one of ttie scripts, the additional content contains no language advocating the 

election or defeat of any candidate; it is therefore not reportable as an independent expenditure. 

Id. at Ex. F. Three ofthe four scripts contain language advocating ttie defeat of Hillary Clinton, 

Barack Obama, or both Hillary Clinton and Barack Obama. Id. at Ex. C-E. Specifically, the 

otfaer scripts state 'Sve're working to defeat politicians Hke [Barack Obama/Hillary 

^ Rightmarch provided the scripts and the contract to the Audit Division eariy in the audit process; 

however, citations to the contract will be to the materials submitted by Political Call Center in its response to the 

lAR, consistent with other citations in this memorandum. 

The contract between Political Advertising and Rightmarch specifies that "[a]ll written materials, including 

scripts, fulfillment packages, emails and websites shall either be created by the CLIENT [Rightmarch], or be subject 

to the CLIENT'S [Rightmarch's] final approval." Political Call Center's Resp. at Ex. C. ^ 4.1. 
Memorandum to Patricia Carmona 

Righttnarch.com PAC, Inc. (LRA 842) 

Legal Conunents on Proposed Draft Final Audit Report 

Page 10ofl3 

Clinton/Barack Obama and Hillary Clinton], wfao support AMNESTY for illegal aliens!" as well 

as "and please tell your friends to OPPOSE [Barack Obama/Hillary Clinton/Barack Obama and 

Hillary Clinton]." A/. 

The communications in the three scripts at issue here are required to be reported as 

independent expenditures because they expressly advocate the election or defeat of a clearly 

identified candidate pursuant to section 100.22(a). An independent expenditure is a noncoordinated expenditure for a conununication that expressly advocates the election or defeat of a 

clearly identified candidate." 2 U.S.C. § 431(17); 11 C.F.R. § 100.16(a). A communication tfaat 

"expressly advocates" includes language such as **vote for the President," "re-elect your 

Congressman," "defeat," or other words, whicfa in context, can faave no otfaer reasonable 

meaning tfaan to urge tfae election or defeat of one or more clearly identified candidates. 

11 CF.R § m.22(jBi); see Buckley V. Valeo, A2A V.S. 1,44 n.52 (1976). Rigfatmarcfa's 

communications in tfae tfaree scripts at issue are required to be reported as independent 

expenditures because tfaey include tfae word "defeat" followed by tfae name of tfae clearly 

identified candidate: Hillary Clinton, Barack Obama, or botfa.^ Rigifatmarcfa Suppl. Req. at Ex. 

C-E. 

Rigfatmarcfa argues tfaat no matter tfaeir text, tfae scripts do not contain express 

advocacy—and thus cannot be independent expenditures—because they are part of a fundraising 

effort. Rightmarcfa contends tfaat, in context, any communication wfaose principal message can 

be distilled to a request for funds "may be reasonably interpreted as sometfaing otfaer than an 

unmistakable, unambiguous exhortation to vote for or against a candidate at an election." See 

Rightmarch Suppl. Req. at 8. Although Rightmarcfa does not include a citation, ttiis sentence 

applies tfae standard of 11 C.F.R. § 100.22(b). 

Tfae scripts tell listeners tfaat "we are working to defeat politicians like Barack Obama" 

and that ttiey should "tell tfaeir fiiends to OPPOSE Hillary Clinton," and ttie use of tfae words 

"defeat" and "oppose," in reference to a clearly identified candidate, turns the message of the 

calls into simple express advocacy under 11 C.F.R. § 100.22(a). See id. at Ex. C-E. The 

Commission has found that fundraising solicitations containing express advocacy should be 

reported as independent expenditures. In MUR 5809, the Christian Voter Project ("CVP") failed 

to file independent expenditure notices for the costs of fundraising letters that expressly 

advocated the election/defeat of candidates. The Commission found reason to believe that 

CVP's failure to file independent expenditure notices violated the Act, and accepted a 

conciliation agreement witti the committee based on that violation. In MUR 5518 (Hawaii 

Democratic Party), a party communication contained at least three messages: an invitation to 

precinct meetings, express advocacy of the defeat of a clearly identified Federal candidate, and a 

fundraising appeal. The Office of General Counsel concluded the communication should have 

' We have no infbrmation that the communications were coordinated with any candidate. 

I ' The contract between Political Advertising and Rightmarch identifies one of the purposes of the 

agreement is to "advocate issues and/or the election and defeat of candidates for federal office." Political Call 

Center's Resp. at Ex. C H 1.1. 
Memorandum to Patricia Cannona 

Rightmarch.com PAC, Inc. (LRA 842) 

Legal Comments on Proposed Draft Final Audit Report 

Page 11 of 13 

been reported either as an independent expenditure or as federal election activity, and 

recommended reason to believe findings. The Commission rejected our recommendation, not on 

the grounds that solicitations could not be independent expenditures but on the grounds that 

invitations to precinct meetings permitted treatment as a federal/non-federal allocated 

administrative expense under the exception to the definition of federal election activity for costs 

of local political conventions, 2 U.S.C. § 431(20)(BXiii))- In particular, Commissioners von 

Spakovsky and Weintraub stated in tfaeir Statement of Reasons tfaat "faad tfais invitation been 

mailed more broadly tfaan it was, and in sufficient numbers to raise questions about wfaetfaer it 

was a bona fide invitation, or if it was really just a fundraising or advocacy piece masquerading 

as an invitation, tfais would be a different case." MUR 5518 (Hawaii Democratic Party), 

Statement of Reasons of Commissioners Hans A. von Spakovsky and Ellen L. Weintraub, at 3 

(Feb. 23,2007); cf MURs 5511 and 5525 (Swift Boat Veterans for Truth) (fimdraising 

solicitations containing express advocacy were expenditures that counted towards organization's 

tfaresfaold for political committee status). 

Additionally, Rightmarch asserts that these communications do not contain express 

advocacy under any meaning of section 100.22 because they do not "[m]ention any candidacy, 

party affiliation, public office, voting or any election;/[r]efer to anyone's cfaaracter or fitness to 

faold office;/[r]un in close proximity to any election or targeted to any particular state;/[m]ake 

any comparison between candidates; or/[r]epeat any candidates' slogans or messages." 

Rightmarcfa Suppl. Req. at 8. However, the three communications at issue here fall squarely 

within the meaning of express advocacy pursuant to section 100.22(a). The three 

communications specifically state that Rightmarch is "working to defeat politicians like Hillary 

Clinton," "working to defeat politicians like Barack Obama," and "working to defeat politicians 

like Hillary Clinton and Barack Obama." Id. at Ex. C-E. Again, however, whatever may be the 

utility of the presence or absence of these facts in analyzing the communication under section 

100.22(b), no such analysis is necessary here because the scripts contain express advocacy as 

defined in section 100.22(a). 

Rightmarcfa also asserts tfaat 93 percent of tfaese communications occurred in 2007, tfae 

year before the 2008 election. A/at 4,8 n.5. Nothing in section 100.22(a) states that the 

communication must occur in the same year as tfae election. A communication tfaat expressly 

advocates tfae election or defeat of a cleariy identified candidate can be made in a year otfaer tfaan 

an election year. In fact, botfa Hillary Clinton and Barack Obama were candidates during ttie 

time that Rightmarch's three scripts at issue faere were used. Hillary Clinton filed her statement 

of candidacy seeking the office of President on January 22,2007.'° Barack Obama filed fais 

statement of candidacy seeking the office of President on February 12, 2007. According to 

information provided to the Audit Division by Rightmarcfa, tfae script tfaat states tfaat Rigfatmarcfa 

is "working to defeat politicians like Hillary Clinton" was used by tfae vendor from August 16, 

2007 tfarough February 15,2008.'' The script that states that Rightmarch is "working to defeat 

Hillary Clinton's canq>aign states that she ceased being a presidential candidate on June 29,2008, though 

she was still a candidate for reelection to the U.S. Senate for 2012. 

" The vendor invoiced Rightmarch $2,109,465 for calls during this period. 
Memorandum to Pabicia Cannona 

Rightmarch.com PAC, Inc. (LRA 842) 

Legal Comments on Proposed Draft Final Audit Repon 

Page 12 of 13 

politicians like Hillary Clinton and Barack Obama" was used from February 16,2008 tiu-ougfa 

May 31,2008.'^ Tfae script tfaat states tfaat Rigfatmarcfa is "working to defeat politicians like 

Barack Obama" was used from June 1,2008 ttirough November 3,2008.'^ Election Day was 

November 4,2008. 

Simply put, Rigifatmarcfa's arguments about express advocacy advance one proposition: 

tfaat communications by a political committee that explicitly exhort the listener to tell tfaeir 

friends to oppose named candidates for President nevertfaeless are not express advocacy if tfaeir 

principal purpose is to raise nioney. We are aware of no autfaority for tfais proposition. 

We tfaerefore conclude tfaat tfae solicitations made in coimection witfa two of tfaese tfaree 

scripts expressly advocate tfae defeat of a clearly identified candidate. 11 C.F.R. § 100.22(a). 

We furtfaer conclude tfaat tfae solicitations made in connection witfa tfae tfaird script expressly 

advocate the defeat of two cleariy identified candidates (Hillary Clinton and Barack Obama). 

Costs associated with these solicitations must be reported as independent expenditures.'^ 

2 U.S.C. § 434(b)(4)(H)(iii); 11 C.F.R. § 104.4(a). Additionally, appropriate 24/48-faour notices 

must be disclosed as required. 2 U.S.C. § 434(g); 11 C.F.R. §§ 104.4(b)(2) and 104.4(c). 

2. Placement of Independent Expenditures Finding in the lAR 

In ttie lAR, tfae Audit staff recommended tfaat Rigfatmarcfa provide evidence to support 

tfae conclusion tfaat tfae expenditures did not require reporting as independent expenditures or 

24/48-faour notices, or amend tfae reports to disclose tfae independent expenditures correctiy. 

Additionally, the Audit staff recommended that Rightmarcfa submit and implement revised 

procedures for reporting independent expenditures. 

In Rightmarcfa's response to tfae lAR, counsel for Rigfatmarcfa requested tfaat tfae lAR be 

revised to delete tfais finding. Rigfatmarcfa's Resp. at 4-5. Counsel for Rigfatmarcfa asserts that 

Commission Directive 70 requires the finding to be moved to the "Additional Issues" section of 

the lAR because the Commission "deadlocked" when it considered its legal question submitted 

pursuant to the Commission's Policy Statement Establishing a Pilot Program for Requesting 

Consideration of Legal Questions by ttie Commission, 75 Fed. Reg. 42,088-89 (July 20,2010). 

Id. 

Commission Directive 70 does not require, or even authorize, ttie recommended finding 

at tfae lAR stage to be moved to tfae "Additional Issues" section of tfae lAR. Ratfaer, Commission 

" The vendor invoiced Rightmarch $49,497.50 for calls during this period. 

The vendor invoiced Rightmarch $57,410 for calls during this period. 

In fact, Rightmarch reponed approximately $563,000 in fundraising solicitations as independent 

expenditures during the 2007-2008 election cycle. We understand, however, that there may be factual and practical 

issues in determining the costs associated with the solicitations that constitute independent expenditures, due in pan 

to the state of Rightmarch's records. 
I Page 13 of 13 

I 

Memorandum to Patricia Carmona 

Rightmarch.com PAC, Inc. (LRA 842) 

Legal Comments on Proposed Draft Final Audit Report 

Directive 70 requires tfaat after tfae Commission faas voted on tfae Draft Final Audit Report, "[f]or 

any recommended finding that does not receive four or more votes either approving or rejecting 

the recommendations, the Audit Division will move tfae discussion [in tfae Proposed Final Audit 

Report] to an ^Additional Issues' section."'^ Furtfaermore, tfae Commission's procedures 

enabling persons and entities to Request Consideration of Legal Questions by tfae Commission 

specifically provides tfaat "if witfain 60 business days of tfae filing of a request for consideration, 

tiie Commission faas not resolved tfae issue or provided guidance on faow to proceed witfa tfae 

matter by the affirmative vote of four or more Commissioners, the ["Office of Compliance," 

whicfa includes the Audit Division] may proceed witfa tfae matter." 75 Fed. Reg. at 42,089. 

After tfae Commission was unable to resolve tfae issue or provide guidance pursuant to its 

Policy, the Audit Division proceeded. Id. The Audit Division drafted an lAR tfaat included tfae 

recommended finding pertaining to the independent expenditures, and consistent witfa our 

memorandum to tfae Commission, dated Mardi 14,2011. Tfae Commission approved tfae lAR, 

including tfais recommended finding. Tfais finding is included again in tfae DFAR, pursuant to 

tfae procedures in Commission Directive 70. The Commission will have the opportunity to vote 

on this recommended finding again when tfae Audit Division submits tfae ADRM to tfae 

Coinmission. Commission Directive 70. 

Audit Reports are drafted at difTerent stages and in chronological order as the Interim Audit Report, the 

Draft Final Audit Report, the Proposed Final Audit Report, and the Final Audit Report Conunission Directive 70. 

Additionally, a person or entity may seek Commission consideration of a legal question eariier in the audit process 

under the Conunission's Program for Requesting Consideration of Legal Questions. Policy Statement Regarding a 

Program for Requesting Consideration of Legal Questions by the Commission, 76 Fed. Reg. 45,798-99 (Aug. 1, 

2011). 

The new program is identical on ihis point, allowing the Office of Compliance to proceed v^en the 

I Conunission has not, within 60 business days, resolved or provided guidance by four or more affirmative votes of 

Commissioners. Policy Statement Regarding a Program for Requesting Consideration of Legal C^estions by the 

I Commission, 76 Fed. Reg. 45.798,45.799 (Aug. 1,2011). 

i 

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