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 tfae Federal 

Election Campaign Act 

(tiie Act). Tfae 

Commission generally 

conducts sucfa audits 

wfaen a committee 

appears not to faave ni.-i • 

the tfaresfaold 

requirements for 

substantial compliance 

with tfae ActJL^g^udit 

determin 

comm^ge complied 

tfae liifflgLons, 

profaibitiOMa|id 

disclosure rel^^ments 

of tfae Act. 

About the Committee 

RIGHTMARCH.COM PAC 

candidate committee faead 

more information, see tfai 

Financia 

• Receipts 

o Contribution^ 

TQ|al Receipts 

on-connected, multiin Braselton, Georgia. For 

mmittee Organization, p. 2. 

• Dishiirsi* 

o O' 

o Co: 

- o Loari^paymen 

o Indep^ment Expenditures 

P Total Disblbl^ents 

Teal Committees 

$ 684,675 

$ 684,675 

$ 97,888 

14,988 

2,500 

563,277 

$ 678,653 

dings and Recommendations (p. 3) 

Wement of Financial Activity (Finding 1) 

^tension of Credit by a Commercial Vendor (Finding 2) 

Failure to File Notices and Properly Disclose Independent 

Expenditures (Finding 3) 

Future Actioi 

Tfae Commission m^y 

initiate an enforcement 

action, at a later time, 

witfa respect to any of tfae 

matters discussed in tfais 

report. 

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

the Audit Division on 

RIGHTMARCH.COM PAC INC 

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

Page 

Part I. Background 

Autfaority 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. Misstatement of Financial Activity 

Finding 2. Extension of Credit b^^aCommercial 

Finding 3. Failure to File Notices^^Sroperly Disci 

Independent Expendituri 
Part I 

Background 

Authority for Audit 

Tfais report is based on an audit of tiie RIGHTMARCH.COM PAC INC (RMC), 

imdertaken by the Audit Division of the Federal Election Commission (the Commission) 

in accordance witfa tfae Federal Election Campaign Act of 1971, as amended (tfae Act). 

Tfae Audit Division conducted tfae audit pursuant to 2 U.S.C. §438(b), wfaicfa permits tfae 

Commission to conduct audits and field investigations of any pol^ial committee tfaat is 

required to file a report under 2 U.S.C. §434. Prior to conducjg^an^udit under tfais 

subsection, tfae Commission must perform an intemal revieM^beports filed by selected 

committees to determine if tfae reports filed by a particu^i^omn^^e meet tfae tfaresfaold 

requirements for substantial compliance witfa tfae 

Scope of Audit 

Following Commission-approved procedures! 

factors, and as a result, tfais audit examined: 

1. tfae consistency between reported figures and bank i 

2. tfae disclosure of individual contrTOjors* occupation 

3. the disclosure of independent expel^m^ijgnd. 

4. other committee operations necessarwo^S^i^w. 

valuated var^Mrisk 

ame of employer; 

temei 

Request for Ea^ 

Questions 

Pursuant to tfae P 

Legal Questions by tfae 

questions ^J^^S^WB tii 

an exten|^^^fc^M^ulti 

2.) Thj^^cond quest! 

be r^o^^^s independ 

:qmmissiqg^onsi^»ation of Legal 

Establisfaing l^mgram for Requesting Consideration of 

[C requested early consideration of two legal 

stion was wfaetfaer certain fees represented 

n-kind contributions and reportable debt. (See Finding 

expenses for fundraising communications should 

penc^ js. (See Finding 3.) 

Tfae CommiH^^did not r^lve tfaese matters or provide guidance on faow to proceed. 

Tfaerefore, purs^yo tfaeM>mmission's policy on early consideration of legal questions, 

tfae Audit Division^^^hijia tfaese matters in this report. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

Date of Registration April 23,2003 

Audit Coverage 

Headquarters 

January 1,20Q|FDecember 31, 2008 

Bank Information Emssmmm 

Bank Depositories 

Bank Accounts 

Treasurer 

Treasurer When Audit Was Conducted 

Treasurer During Period Covered by Audit 

Management Information 

• Attended Commission Campaign Fin 

Seminar 

• Wfao Handled Accounting and 

Recordkeeping Tasks 

ial Activity 

Lounts) 

Cash-ojg^^ljl @ January^^007 ''^B^ $ 9,161 

Receipts ^''^^ r 

o Contributio^MiMnIndivic^ls 684.675 

Total Receipts M $ 684,675 

Disbursements 

o Operating Expenditures 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 witfa its bank 

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

receipts and endmg casfa-on-faand by $23,940 and $16,750, resn^^^y. For 2008, RMC 

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

response to tfae Interim Audit Report, RMC indicated tfaat^^i^^dwitfa tfae Audit staff 

conclusion and would file amended disclosure reports td^rrect^^misstatements. To 

date, no amendments faave been filed. (For more de|^|i[sel^p. 4.) 

Finding 2. Extension of Credit^'a C 

During audit fieldwork, tfae Audit staff initially i^^^e d 

tfaat may faave extended credit to RMC outside of it 

allowing invoices to remain outstandpg for a consider 

did not appear to make commercially 

services rendered, tfaereby making an aj 

$1,650,327 ($1,655,327 - $5,000 = $1,6 

RMC demonstrated tfaat tfae terms of tfae 

business. (For more 

Lor 

'company 

merciai 

imited liabilii 

1 course of business by 

ength of time. Tfais vendor 

attemptsl^|ollect $1,655,327 for 

L-wyssive in-^^p^ntribution of 

32"'i lirtesponse Jfme Interim Audit Report, 

areffilf^^rmal course of tfae vendor's 

Finding 3. 

Independent 

During 

follow 

and Properly Disclose 

independent expenditures and noted tfae 

ices for up to $ 139,067; and 

independent expenditures totahng $2,172,135 

seminated) prior to payment as "memo" entries on 

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

debt on ^^^leJ^Debts and Obligations). 

In its response to tfa&Piterim Audit Report, RMC stated tfaat it disagreed witfa tfae Audit 

staffs interpretation of tfae fundraising scripts. Tfae RMC also stated tfaat because tfae 

Commission was unable to reacfa a conclusion witfa regard to tfais question under tfae early 

consideration policy, RMC requests tfaat tfae finding be removed from tfae Interim Audit 

Report and tfaat tfae discussion be moved to an Additional Issues section. Given RMCs 

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

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

Findings and Recommendations 

I Finding 1. Misstatement of Financial Activity 

Summary 

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

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

receipts and ending casfa-on-faand by $23,940 and $16,750, respe^sdy. For 2008, RMC 

understated reported disbursements by $9,889 and ending cas|Bm-faand by $6,625. In 

response to the Interim Audit Report, RMC indicated tfaat^^^d witfa the Audit staff 

conclusion and would file amended disclosure reports to^rrect^wiisstatements. To 

date, no amendments faave been filed. 

Legal Standard 

Contents of Reports. Eacfa report must disciDs< 

• Tfae amount of casfa-on-faand at tfae beginning 

• Tfae total amount of receipts for the reporting peri 

• The total amount of disbursemen^c^i ir.j reporting p 

and 

• Certain transactions tfaat require itenf 

Scfaedule B (Itemized Disbursements) 

Facts and Anal 

A. Facts 

During audit^ 

records 

for bei 

ye 

ing casfa b; 

eeding para; 

rf tHb reporting ];^iod; 

for tfae calendar year; 

and for tfae calendar year; 

temized Receipts) or 

1), (2), (3), (4) and (5). 

reported financial activity witfa bank 

e following cfaarts outiine tfae discrepancies 

bursements and ending casfa balances for eacfa 

e reasons for tfae misstatements. 

2007 Ac8^ m 

Reported Bank Records Discrepancy 

Opening Casfa B,^nce 

@ 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 Casfa Balance 

@ December 31,2007 

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

Understated 
Tfae understatement of receipts resulted from tfae following: 

• Receipts deposited to operating account not reported 

• Unexplained difference 

Understatement of Receipts 

$ 22,208 

1.732 

$ 23.940 

Tfae $16,750 understatement of tfae ending casfa-on-faand resulted from tfae misstatements 

described above, as well as discrepancies in opening casfa-on-faand and disbursements. 

2008 Activity 

Reported Bank RfiMn*ds Discrepancy 

Opening Casfa Balance 

@ January 1,2008 

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

Understated 

Receipts. $179,084 ^1^178,8% k ^^^^ n^Overstated 

Disbursements $188.794j| ^198,683 

iM^rstated 

Ending Cash Balance 

@ December 31,2008 

$8,558 ^^1^^,183 ^ $6,625 

Understated 

Tfae understatement of disbursements u^'.iiri folU 

• Disbursements not reported ^ 

• Fundraising fee paid in 2009, rjivir! jtl in 2(iOS'" - • 

• Fees reported bjfflitl^fapported by%^k or de^^ 

• Unexplaine^ffiffereiK^ 

Net Undmi^^ment (M)isbursemej 

$ 15,563 

(5,000) 

(826) 

152 

$ 9.889 

Tfae $6,62^ 

describe^ftove,^ 

B. MilmLAudit Repoi 

At tfae exi^mference. tfael 

representativ^fed provide 

le erit£^^^gH>n-faand resulted from tfae misstatements 

fancies in opening casfa-on-faand and receipts. 

Aud^^vision Recommendation 

idit sraff discussed tfae misstatements witfa RMC 

Icopies of relevant scfaedules. 

Tfae Interim Audif^l^|<^fecommended tfaat RMC: 

amend its ren^s to correct tfae misstatements noted above; and 

• amend its most recently filed report to correct tfae casfa-on-faand balance with an 

explanation that tfae cfaange resulted from a prior period audit adjustment. 

Furtfaer, tfae Audit staff recommended tfaat RMC reconcile tfae casfa balance of its 

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

adjustment recommended by tfae Audit staff. 

C. Committee Response to Interim Audit Report 

In its response to tfae Interim Audit Report, RMC stated tfaat it agreed witfa tfae auditors' 

conclusions regarding tfae misstatement of financial activity and would comply witfa tfae 
Audit staffs recommendation to amend its disclosure reports. To date, RMC faas not 

filed any amendments. 

Finding 2. Extension of Credit by a Commercial Vendor | 

Summary 

During audit fieldwork, tfae Audit staff initially identified one limited liabiHty company 

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

allowing invoices to remain outstandmg for a considerable leneti^yLtime. Tfais vendor 

did not appear to make commercially reasonable attempts to C||pct $1^,655,327 for 

services rendered, tfaereby making an apparent excessive in^^ftcontribution of 

$1,650,327 ($1,655,327 - $5,000 = $1,650,327). In resp^e tdm^terim Audit Report, 

RMC demonstrated tfaat tfae terms of tfae contract aremti^normarwui of tfae vendor's 

business. 

Legal Standard 

A. Contribution defined. A gift, subscription, lo^|kxgS^t ^en made in^ccordance 

witfa 11 CFR§§ 100.72 and 1.00.73), advance, or depo^mjnonev or anytfaing of value 

made by a person for tfae purpose of i^toencing any elec^nfor Federal office is a 

contribution. The term "anytfaing of vS^liicliiiles all in-l^igj^ntributions. 

Tfae usual and normal cfaarge for a servic^ the 

would expect to pay at th^lilig.the service^^e rende! 

reasonable rate that one 

The provision of ^p^|s at a c@ge less tfaam 

in-kind contribution. T^^aludioucfa a cont 

tfae usual andn^n^l cfa£ 

billed and^^SSmfeitRS 1 ^^fcfa) ancT 

jsual and normal cfaarge results in an 

fion would be tfae difference between 

tfae amount tfae political committee was 

B. Q@^||ibutions bv if 

treatmen^fea corooratio 

contributiol^^mfiuence 

faaving been Mgfrom a 

and tfaus subjectl^^in 

contribution from a 

cfaosen to be treated 

ited int^nity Company. An LLC tfaat does not elect 

der feneral tax law or faave publicly-traded sfaares may make 

eral elections. Sucfa a contribution will be considered as 

ersfaip and govemed by tfae rules pertaining to partnersfaips 

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

e individual if tfae LLC is a single-member LLC tfaat 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 wfao 

provides goods or services to a candidate or poUtical committee and wfaose usual and 

normal business involves tfae sale, rental, lease or provision of tfaose goods or services. 

11 CFR §116.1(c). 

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

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

and 

• Tfae terms of tfae credit are similar to tfae terms tfae vendor observes wfaen 

extending a similar amoimt 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 wfaetfaer credit was 

extended in tfae ordinary course of business, tfae Commission will consider wfaetfaer: 

• Tfae commercial vendor followed its establisfaed procedures and its past practice 

in approving tfae extension of credit; 

• Tfae commercial vendor received prompt, fiill pa3mien^^lfpf^iously extended 

credit to tfae same candidate or political committee; 

• Tfae extension of credit conformed to tfae usual andporiS^|^actice in tfae 

commercial vendor's industry or trade. 11 CFR ^l^6.3(cj? 

F. Continuous Reporting Required. Apolitij 

and nature of outstanding debts and obli{ 

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

"committee must disci 

intil tnW debts are ex! 

X 

e amount 

shed. 2 

G. Continuous reporting of debts. 

committee wfaicfa remain outstandil 

extinguisfaed. Debts for wfaicfa tfae 

date on wfaicfa tfae debt was incurred. 

|bts and obliganij^yjwed by or to a political 

^be continuop^^eported until 

jer $500 si^Se reported as of tfae 

CFl^l^l . 

Facts and Anah 

A. Facts 

During audit fieldwork 

may faave si^i^^iEsdit t! 

invoice 

con 

sfaall on: 

invoice to 

tfae program.^ 

contingency fee^ 

remain 

tetween RM 

obligated to' 

Ltent of tfac' 

funds 

d o i 

ja^^entified a limited liabiUty company tfaat 

C ouE^Bi^^normal course of business by allowing 

din||^ ^ considerable length of time^. The terms of tfae 

tfais v^l ^ Political Advertising (PA), states, "tfae client 

tfae ^tingency fee stated on Political Advertising's 

ntributions tfaat are actually received by Client as a result of 

crated as a result of tfae program are less tfaan tfae 

litical Advertising's invoices, tfaen tfae client sfaall only be 

obligated to tfae ex^^^rfae proceeds received from tfae program." 

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

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

fundraising services sucfa as telepfaone calls and tfae printing and mailing of follow-up 

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

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

understanding ofthe terms of tfae contract, RMC only reported amounts paid against 

invoices. RMC did not consider tfae majority of tfae 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 tfae terms of tfae contract state tfaat RMC was responsible only up to 

tfae amounts raised by tfae fimdraising service^. During fieldwork, RMC provided no 

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

Tfaerefore, during fieldwork, tiie Audit staff questioned wfaetiier $1,650,327 ($1,655,327 -

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

matter was discussed witfa tfae RMC representatives during fieldwork and tfae Audit staff 

requested furtfaer information. 

B. Early Commission Consideration of Legal Questions 

Pursuant to tfae Commission Policy Statement Establisfaing a Pilotf rogram (July 20, 

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

(Request). In its Request, RMC asked tfae Commission to cojej^er wfaetfaer the terms of 

the contract resulted in an extension of credit, an in-kind c^l^Mon and reportable debt. 

Specifically, RMC requested that tfae Commission consioir tfae folMdng: 

First, RMC contended tfaat tfae weekly o 

reportable debt and neitfaer tfae Act na 

term "debt." Based on Advisoiy Opinio: 

State law govems wfaetfaer an alleged 

debt is and wfaicfa persons or^^tities are 

debt 

ngency fees do nofe^^itute 

ommf^ion's regulat^ffitdgfine tfae 

sion "faas IcJ^faeld tfaat 

in^m^xistsi wfaat tfae amount of tfae 

for paying a debt," RMC respo: 

wrote. As sucfa, RMC contenl^|^||^tfaere wouh 

termination of tfae contract bet^^^@&|Cand PA. 

debt to report imtil tfae 

• Second, RMC mentioned a fundra! !SueinMUR5635* 

(Conservative 

tfaan tfae con|fet betw! 

contract iij^^^i5635 

fimds were not 

Howj^^g^Qunser 

ndedt^^JC 

TmM^e request 

coursB^jbusiness 

poHticanmistry. 

PAC) and^ntended mat it was substantially different 

liRMC and m. Specifically, according to RMC, tfae 

truly "no-r%^ince it provided tfaat if sufficient 

littee ^luld not be responsible for the debt. 

It tfae contract between RMC and PA 

^ecome obligated for all unpaid contingency fees if 

ract prior to August 15,2012. 

ilained tfaat RMC and PA made tfae contract in tfae ordinary 

tfaat tfais type of contract is a fairly standard contract in tiie 

^ RMC reported debt of $279,564 to PA and filed Schedules D for this amoimt 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" fimdraising 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. §§ 100.55 and 116.3 (or their regulatory predecessors) to determine whether 

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

memorandum to tfae Commission^ concluded tfaat tfae contract at issue is a "no-risk" or 

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

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

debts. However, OGC notes tfaat tfaere is little information at tfais time about tfae presence 

or absence of tfae safeguards^ tfaat tfae Commission faas identified in relevant enforcement 

matters or advisory opinions and tfaat RMC may yet be able to demonstrate tfaat tfae 

contract did not result in any in-kind contribution. 

Tfae Commission did not resolve or provide guidance on faow to proceed witfa tfais matter. 

Tfaerefore, pursuant to tfae Coinmission's policy on early consid^^ra^ of legal questions, 

tfae Audit Division included tfais matter in tfae Interim Audit .^&rt. 

C. Interim Audit Report & Audit Division Recomm^l^ation^ 

Tfae Audit staff discussed tfais issue witfa RMC repr^^^tives at tfaS^^conference. 

Tfae representatives expressed tfaeir disagreemen^^mfa tfae Audit staff ^^^bsequently 

filed tfae Request noted above. 

Tfae Interim Audit Report included tfae following rec mdations. 

RMC sfaould provide documen^^njncluding stl^|ents from PA tfaat 

demonstrate tfaat tfae credit exteM^^^^iB tfae norm^^drse of PA's business 

and did not represent an excessivBm-ki^^^^dbutioiproy PA. Tfae information 

provided was to include examples %Q^CT nSB^^'^al customers and cUents of 

similar size andg^ffl^^j^faicfa simil^pervices vjlre provided and similar billing 

arrangemenl^ere US^|A1SO, tfae Inwim Audit Report staff requested tfaat 

RMC provf^^^rmati^conceming t||^esence of safeguards sucfa as billing 

policies for simflMbonJfe^ work, advance payments poUcies, 

debtiii^UiQP pol^^!Znap^Hii^es. 

EC sfaould its refiect all debt owed to PA. 

D. Com^^ee Responsel 

In responset^jie Interim 

PA and fimdra^ikcontrac 

ilntepfin Audit Report 

ht Report, RMC provided an affidavit from tfae president of 

from teleiharketing vendors similar to PA. 

RMC faigfaligfated tfa^^spects of tfae contract witfa PA to demonstrate tfaat tfae credit 

extended was in tfae^rmal 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 early and demand full payment as a result of poor fundraising performance. 
10 

Profitability 

RMC stated tfaat tfae agreement witfa PA was a bona fide commercial transaction 

undertaken consistent witfa Commission precedent. According to RMCs 

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

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

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

imfiilfiUed 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 tfae fiiture. Based upon past figures used by the Commission for 

calculating tfae value of sucfa lists, PA estimated a cons^SRvi^commercial value 

($.10/name) of sucfa names to be $31,596, altfaougfa ^^se l for RMC stated tfaat 

tfae actual value is likely mucfa faigfaer and tfae esti| 

profitability to date. 

Conformity 

Tfae affidavit filed by PA's president |^^^a t Pi 

fundraising services to RMC on tfae sameglkral 

to its otfaer political and non-political clients^ 

organizations tfaat ultimately ^gse not to retain^ 

any special discounts or finan^^^£entives to 

clients. 

Counsel for RMC 

vendors, many 

Security ^ 

PA's agreement 

forces tfae agreement's 

Use of 

Tfae contri 

receive an 

|draising 

luci 

ffered its teiet^Magting 

ct terms tfaaJ^A offered 

ing mose non-profit 

services. PA did not give 

t it did not offer to otfaer 

ting contracts from different 

feguards built into it to ensure payment 

kbo?^^H^e Timelv Pavments Under tfae Contract 

itfa I^lt) required an independent financial institution to 

eparate tfaird-party escrow agent to disburse all of tfae 

ceeds tfaat were generated. Botfa agents were contractually 

bound to administer tfae funds in accordance witfa tfae 

s of tfais contract. RMC faad no power to witfafaold payment or exp 

contr^^ver tfae amount due. Tfae lockbox mecfaanisms guaranteed tfaat 

PA received timely and full payment of all amounts due and owed under 

tfae contract. 

2. Ownersfaip of Intellectual Propertv Developed During tfae Fundraising 

Campaign 

As mentioned earlier, tfae fimdraising program on befaalf of RMC also 

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

243,025 survey responder names tfarougfa December 31,2010 tfaat are tfae 
11 

3. 

4. 

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

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

Use of Test Calls 

Anotfaer safeguard tfaat PA faad in place was tfae use of test calls to faelp 

estimate tfae financial retums from tfae fundraismg program. Tfae affidavit 

stated tfaat tfae initial retums were positive and indicated tfaat tfae 

fundraismg program would be profitable. If tfae calls faad not sfaown 

positive results, PA could faave terminated tfae fundraising program 

immediately, pursuant to tfae RMC contract. 

Tfae Abilitv to Monitor Results of tfae Fundra^^ Program in Real 

Time 

Counsel for RMC stated tfaat PA was abl^^ue to1§iS|fc/e. real-time nature 

of tfae telemarketing program, to mon^^l^e^rogra^^^rofitability and 

that it faad sole discretion to stop t^effort tfae moment^^^gsults trended 

toward becoming financially uo^ductive.^ 

5. RMCs Obligation to Bear Certain 

of the Program's Sue 

Regardless of wfaetfaer 

always responsible for 

materials tfaat were used 

PA faad determined tfaat 

increasQ^^^l^er of persd 

le Agreement Regardless 

am generat^l^y revenues, RMC was 

of tfae^^p^envelopes, and otfaer 

itfa P^^fundraising program. If 

draising success was to 

bontactedSIEiy mail, RMC would faave 

assu||u-il :lie adPipnal risk uiMer tfae terms of tfae contract. 

RMC furtfaer explained 

reportable ^Ltasydjdid ni 

suggestions 

amou^K)sted as a Pi 

on fi^^^statements ti 

tfaat PA cSi^am if tfae ti 

dy statements from PA were not 

lissible extension of credit to RMC. RMC 

stal^sQts may Have been misleading since tfaere was an 

ll Bam^e^owever. according to RMC, tfae amoimts listed 

Lg $1^^,327 represented tfae maximum possible amounts 

larking campaign were exceptionally successful. 

Under its agree^^twitfa^^tmarcfa, PA was entitled to be paid 95% of tfae funds 

generated by tfae t^b^^ing program, up to tfae fee cap figure of $2.50 per call. RMC 

believes it made tim^^ayments in full to PA for all services. 

Tfae Audit staff reviewed tfae documentation provided in response to tfae Interim Audit 

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

tfais review any additional contracts tfaat it faad witfa its otfaer clientele; ratfaer, RMC 

provided an affidavit from tfae president of PA attesting to tfais. As sucfa, tfae Audit staff 

cannot confirm tfaat PA's contract witfa RMC was offered on tfae same terms as otfaer PA 

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

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

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

and its requirement tfaat tfae cUent maintain in place tfae collection faciUties so tfaat all 

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

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

mentioned by tfae Commission. Because of tfais, it does appear tfaat tfaese types of 

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

appears tfaat PA may have extended credit in the ordinary course of business and tfaus did 

not contribute an excessive in-kind contribution. 

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

RMC demonstrated tfaat PA extended credit in tfae ordinary course^f business and tfaus 

did not contribute an excessive in-kind contribution. Witfa resPj^^^mie reporting of 

debt, tfae outstanding fees and expenses fasted on tfae weekly^^^ices totaling $1,524,657 

are debts subject to tfae reporting requirement of 11 C.F.R^IT9^^« Tfae Commission 

faas consistently treated sucfa expenses in tfaese types of ^ingem^^ ^ extensions of 

credit by vendors (See MUR 5635- Conservative I^jp^^i ^ PAC)^Mas a type of debt. 

Commission regulations do not base tfae reportin^^debts and obligat^^^ tfae amoimt 

tfaat a committee ultimately will pay to a credi^^it ratfa^tfae approximi^^unt or 

value of tfae debt at tfae time tfae report is fileaTlc^psfaoi 

appropriate reporting periods. At tfae termination ol 

forgive tfae reported debt following (]^mission procee 

)ort debts toj ^ for tfae 

fontract, RMC may seek to 

for debt termination. 

V Finding 3. Failure to File 

Independent ESxp^^aditures 

iperly Disclose 

[dependent expenditures and noted tfae 

)ur notiS^Tor up to $139,067; and 

se mdependent expenditures totaling $2,172,135 

Summary 

During audit fieldworl 

following: 

lg247 

IC did noT^S|jerly 

ie (i.e., publiqW[isseidH!Sd) prior to payment as "memo" entries on 

lie E (Itemi^SiInde^ndent Expenditures) and $1,892,571 as reportable 

debf^i '''i-faedule E^)ebts and Obligations). 

In its response td^^|nt^h Audit Report, RMC stated tfaat it disagreed witfa tfae Audit 

staffs interpretatio^^^e fimdraising scripts. Tfae RMC also stated tfaat because tfae 

Commission was uncrole to reacfa a conclusion witfa regard to tfais question under tfae early 

consideration policy, RMC requests tfaat tfae finding be removed from tfae Interim Audit 

Report and tfaat tfae discussion be moved to an Additional Issues section. Given RMCs 

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

recommendations. 

Legal standard 

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

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

defeat of a clearly identified candidate tfaat is not made in coordination witfa any 

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

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

be reported on Scfaedule E if, wfaen added to otfaer 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 Scfaedule E and as a reportable debt on Scfaedule D. Independent expenditures 

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

tiiose expenditures on line (b) on Schedule E. 11 CFR §§104.3(b)g)(vii), 104.4(a) and 

104.11. 

C. Last-Minute Independent Expenditure Reports (24pIo1^^Dtices). Any 

independent expenditlires aggregating $1,000 or more^^^m resp^jfiaanv given election, 

and made after tfae 20^ day but more tfaan 24 faoursbp^^ the day o8^|election must be 

reported and tfae report must be received by tfae^^mnission within 24^^g^ after the 

expenditure is made. A 24-hour notice is requ|^£acfa tifl^additional iiH^adent 

expenditures aggregate $1,000 or more. Tfae dat^^ ^ c^pj^unication is mrolicly 

disseminated serves as tfae date tfaat tfae committee nffi|j||^ to aetermine wnetfaer tfae 

total amount of independent expendi1au;es faas, in tfae et^^gate, reacfaed or exceeded tfae 

tiu-esfaold reporting amount of $1,000TM ( I R §§104.4(1^^104.5(g)(2). 

D. Last-Minute Independent Expendi^re K^^^||48-HQJ1 F Notices). Any 

independent expenditure aggregating $ 10-l^Og^iiOT^^^lfespect to any given election, 

at any time during a calj^^^B^ar, up to anqpcluding ^e20tfa day before an election, 

must be disclosed 48 m^g each time^ expenditures aggregate $10,000 or more. 

Tfae notices must bf^^^witfa im Commissio^gjtiiin 48 faours after tfae expenditure is 

made. 11 CFR §§104]^ki4^^Vn . 

Facts 

A. frai 

RMC dis^^^independ^gpxpei^&itures, totaling $563,277, on Scfaedule E. Tfaese 

disbursemeniS|jere for fuwaising pfaone calls and follow-up letters and were disclosed 

as being in oppoSfeon to wlary Cluiton, Hillary Clinton and Barack Obama, or Barack 

Obama. Tfae Audn^^^iewe d tfaese expenditures to determine wfaetfaer tfaey were 

properly reported onWhedule E. It sfaould be noted tfaat RMC did file 24/48-faour 

notices, but the noti^s were filed based on payment date ratfaer tfaan tfae date of 

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

2007. A review of tfae pfaone scripts,^ follow-up letters and invoices for tfaese 

independent expenditures revealed tfae 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-faour notices for independent expenditures amounting to 

as mucfa as $139,067 for tfae period December 24,2007 tfarougfa November 3, 

2008: and 

RMC reported independent expenditures wfaen tfae invoices were paid, eitfaer in 

part or in full. However, RMC made most of tfaese payments weeks or montfas 

after tfae dissemination or pfaone-call dates. For expenditures totaUng $2,172,135, 

RMC sfaould faave disclosed independent expenditures as memo entries on 

Scfaedule E, filed witfa reports covering tfae dates wfaen tfae materials were 

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

B. Early Commission Consideration of Legal Questions 

In its Request, RMC asked tfae Commission to consider 

fimdraising program, wfaicfa identified one or more federMoffice 

to tfaem as candidates or mention any election, sfaou 

expenditures ratfaer tfaan operating expenditureCounsel for RMC stated tfaat tfae contract betwee 

fundraising contract in tfae political industry and 

to individually contact members of thegeneral public 

identify voters, advocate issues and/oS^^||lection or de: 

office, provide political information an^nit^j^e same 

relating to a 

but did not refer 

endent 

is a fairly ^mdard 

ose of the conu'act is for PA 

one and follow-up mail to 

candidates for federal 

ine the function of 

donor acquisition and/or donor renewal mXo ao^ro^^he goa^of RMC." Counsel for 

RMC also pointed out tfaat tfae entire cost ^admc oF^^^Htract is based on tfae fimds 

raised by the telemarkegf^l^^iail prograwtDounsel]^ RMC discussed the content of 

tfae four telemarketim^riptsl^mindicated tfaey were typical of fundraising scripts 

used in tfae politica?TM|^trv. .^pording to Co^pl for RMC, tfae scripts: 

isnes 

to ^t^fess ^f^^^p ^ a public issue (in tfais case, tfae 

^galH^^ation); 

;atedly ask flQstenerR>Bonate money to a campaign to stop illegal 

iml ration; 

Tell 

Clinton an( 

ler th^&e Committee is working to defeat politicians like Hillary 

[sic] Obama; and 

• Ask the listener to tell tfaeir fiiends to oppose Hillary 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 = 

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

Quarterly 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 furtfaer explained tfaat tfae scripts do not: 

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

• refer to anyone's cfaaracter 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. 

Counsel for RMC also explained tfaat tfaese scripts were 

raise money by toucfaing on faot-button political issues 

of tfae issues prominent officefaolders were taking, 

In closing. Counsel for RMC said tfaat RMC faaMteported €pme of its 

expenses as independent expenditures witfaomTOft||yice oaSpunsel. To c( 

problem, RMC was inconsistent witfa tfae classifica^^Q|j^lehses on repc 

operating expenses or independent expenditures. 

OGC considered RMCs position, and 

concluded tfaat to tfae extent tfaat tfaese sc 

defeat of a clearly identified candidate, 

expenditures and file ap^^| e 24/48-noi 

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

candidate, Hillary^^bon, Bara^ Obama or 

advocacy under 11 C.lN^SlOC 

scripts designed to 

listeners wfaicfa side 

ound tfae 

as 

lorandum 

)ressly 

)mmission, 

Seated tfae election or 

as independent 

Tfae m^5randum noted tfaat tfae tfaree 

(cd by tfae name of a clearly identified 

tuming tfaese messages into express 

Tfae ComHl^^M8il||Qt res)s^^pr provi 

Tfaere^RpursuantlB^Coni 

tfae i^M)ivision incluiSktfais 

idance on faow to proceed witfa tfais matter, 

jpn^s policy on early consideration of legal questions, 

in tfais report. 

C. Interim^bdit Report^ Audit Division Recommendation 

Tfae Audit stafS^hcussed ^s e issues at tfae exit conference and provided appropriate 

scfaedules to RM^^f^^tatives. Conceming tfae reporting of 24/48-faour notices. 

Counsel for RMC sfS^^tfaat tfaese independent expenditlires were intended for tfae 

general election and^t for tfae primaiy elections. Tfaus, RMC representatives contended 

tfaat tfaese notices were not necessary. 

Tfae Interim Audit Report recommended tfaat RMC take tfae 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 Early Conunission 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 tfaat would demonstrate tfaat tfaese 

disbursements were not independent expenditures and tfaerefore did not require 

24/48-faour notices; 

Submit and implement revised procedures for reporting independent expenditures, 

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

timely filing of 24/48-faour reporting notices; and 

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

entries on Scfaedule E and report corresponding debt on Scfaedule D. 

D. Committee Response to Interim Audit Report 

In its response to tfae Interim Audit Report, RMC noted tfaat 

staffs interpretation of tfae funcfaaising scripts during audit 

conference. Also, because the Commission was unable 

relation to tfais matter, RMC objected to tfais issue beii 

finding of tfae Commission. Ratfaer, RMC requester 

Interim Audit Report and moved to an Additions 

approved by tfae Commission. Given RMCs 

taken witfa respect to tfae Audit staffs recommeni 

iguted tfae Audit 

ork and at tfae exit 

y guidance in 

audit report as a 

findinl^^EBmoved from tfae