FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

Nay 22, 2009 

MEMORANDUM 

TO: John D. Gibson 

Chief Compliance Officer 

Joseph F. Stoltz 

Assistant Staff Director 

Audit Division 

THROUGH: Robert A. Hickey 

Staff Director 

FROM: Christopher Hughey j 

Deputy General Counsel 

Lawrence L. Calvert, 

Associate General Counsj 

General Law and Advic^/ ^ 

)uns;(|^fc^ ^ 

Lorenzo Holloway cZ^Z^ ^ 

Assistant General Counsel 

Public Finance and Audit Advice 

Danita C. Le 

Attomey 

SUBJECT: Report of the Audit Division on Tennessee Democratic Party (LRA #772) 

L INTRODUCTION 

The Office of General Counsel reviewed the Report of the Audit Division 

("Proposed Report") on the Termessee Democratic Party ("Committee") submitted to this 

Office on December 17, 2008. We concur with any findings not specifically discussed in 

this memorandum. In this memorandum, we address issues pertaining to the 

Committee's disclosure on schedule H6 of non-allocable Federal election activity 

(Finding 1). The Proposed Report found that the Committee improperly paid nonallocable Federal election activity ("FEA") with Levin funds and reported these 

transactions as Disbursements of Federal and Levin Funds for Allocated Federal Election 

Activity (on Schedule H6). The allocated amount includes payments for campaign 

rallies, polls, and automated phone banks. The Proposed Report concludes that the 

disbursements were non-allocable FEA because each of the Committee activities referred 
Memorandum to John D. Gibson 

Tennessee Democratic Party Audit Report (LRA #772) 

Page 2 of7 

to a clearly identified Federal candidate. We raise some proof questions about the 

auditors* conclusion that the payments for the rallies were not allocable because the 

communications at the rallies referenced a clearly identified Federal candidate. We 

recommend that the auditors raise this issue in the cover memorandum that forwards the 

Proposed Report to the Commission. We recommend that the Audit Division accede to 

the Committee's position as to whether the polls constituted FEA because the Committee 

did not use the polls to collect information to identify voters, but we concur with the 

Audit Division's conclusion that the polls constituted FEA because the poll questions 

promoted, supported, attacked, or opposed Federal candidates. We agree that payments 

for the phone banks should not have been allocated, but we reconunend that the auditors 

clarify the analysis in the Proposed Report regarding the automated phone bank 

allocation. If you have any questions, please contact Danita C. Lee, the attomey assigned 

to this audit. 

IL NON-ALLOCABLE FEDERAL ELECTION ACTIVITY DISCLOSED ON 

SCHEDULE H6 (Finding 1) 

A. Background 

The auditors found that some of the Committee's campaign rallies, polls, and 

automated phone banks were FEA that included references to a clearly identified 

candidate miming for Federal office and concluded that expenses for these activities 

should not have been allocated between the Federal account and the Levin fund. Rather, 

the Proposed Report concludes, these expenses should have been paid entirely by the 

Federal account. The auditors identified 12 invoices directed to a specific Federal 

candidate that the Committee paid, reported as "generic get-out-the-vote** ("GOTV'*) 

activity, and disclosed as allocable FEA. The Committee submitted an affidavit 

contending that all but one of the invoices was improperly labeled and that the campaign 

rallies were for "generic GOTV.'* The Committee states that its polls were not FEA and 

that the costs should have been properly reported as operating expenditures. The 

Committee agrees wdth the auditors that the automated phone bank expenses were not 

allocable Federal election activity. We discuss the specifics of each of these findings in 

the remainder of this memorandum. 

B. Commission Must Decide Whether Campaign Rally Invoices Represent 

GOTV activity 

The auditors identified payments associated with 12 apparent campaign rally 

invoices totaling $37,421 that were addressed to or referenced events on behalf of 

candidate Harold Ford, Jr. The respective invoices stated, "Prepared for Harold Ford for 

Senate Campaign," "Sold to Harold Ford Jr. Campaign," or "Bill to Harold Ford Jr.** The 

Committee paid the invoices which were for items or services such as tents, staging, 

refreshments, audio, parking, and clean-up. The Committee reported the disbursements 

for the invoices as "generic GOTV** activities and disclosed them on Schedule H6 as 

Federal election activity allocable between Federal and Levin funds. 
Memorandum to John D. Gibson 

Tennessee Democratic Party Audit Report (LRA #772) 

Page 3 of7 

The auditors conclude that the Committee's payments for the invoices were not 

for generic GOTV. The auditors conclude that the invoices show that the services were 

for campaign rallies benefitting and, apparently, incurred by the Senate candidate, Harold 

Ford, Jr. The Committee conceded that one invoice was for the benefit of the Ford 

campaign. It stated that the remaining 11 invoices were improperly labeled by the 

vendors as services provided to the Ford campaign. The Committee submitted a 

declaration from Randy Button, the Director of Tennessee Victory 2006, a Committee 

project, stating that the costs associated vsdth the rallies were not for the Ford campaign. 

Mr. Button said that the invoices should have been invoiced to the Committee, the 

services or items provided were for generic GOTV rallies, the rallies were not 

coordinated with any Federal candidate, and no Federal candidates attended the rallies. 

A state committee of a political party that makes expenditures or disbursements 

for Federal election activity must use Federal funds for that purpose. 11 C.F.R. 

§ 300.32(a)(2). Paying an invoice incurred by a Federal candidate*s authorized 

committee may or may not be FEA, but it is unquestionably a coordinated party 

expenditure, subject to limit pursuant to 2 U.S.C. § 44la(d), and also payable with 100% 

Federal fimds. 11 C.F.R. § 109.32(b); 11 C.F.R. § 106.7(b). A state committee, 

however, may spend Levin funds on Federal election activity for voter identification, 

GOTV, or generic campaign activity conducted in connection vydth an election in which a 

candidate for Federal office appears on the ballot. 11 C.F.R. § 300.32(b)(l)(ii). The 

FEA for which the disbursement is made must not refer to a clearly identified candidate 

for Federal office. 11 C.F.R. § 300.32(c). A state committee may allocate disbursements 

or expenditures between Federal funds and Levin funds for voter identification, GOTV, 

or generic campaign activities. 11 C.F.R. § 300.33(a)(2). 

While the Committee and the auditors reference "generic GOTV," there is a 

distinction between generic campaign activity and GOTV activity. Generic campaign 

activity means a public communication that promotes or opposes a political party and 

does not promote or oppose a clearly identified Federal candidate or a non-Federal 

candidate. 11 C.F.R. § 100.25. GOTV activity means contacting registered voters by 

telephone, in person, or by other individualized means, to assist them in engaging in the 

act of voting. 11. C.F.R. § 100.24(a)(3). GOTV activity includes, but is not limited to: 

(I) providing to individual voters information such as the date of the election, the times 

when polling places are open, and the location of particular polling places; and (2) 

offering to transport or actually transporting voters to the polls. 11 C.F.R. 

§ I00.24(a)(3)(i)and(ii). 

Although the Committee reported the expenditures associated with the invoices as 

"generic GOTV" and the auditors also refer to the activities as "generic GOTV," generic 

campaign activity (and not GOTV) is the focal point of our analysis because the 

Committee states that the expenses were associated with rallies and invoices reference 

items and services normally associated with rallies such as tents, staging, audio, meals, 

parking and traffic management. Rallies generally do not involve assisting individuals by 
Memorandum to John D. Gibson 

Tennessee Democratic Party Audit Report (LRA #772) 

Page 4 of7 

individualized means in engaging in the act of voting.' Tlie specific issue is whether 

there is sufficient documentation to show that the rallies constitute generic campaign 

activity. 

Whether the documentation shows that there was generic campaign activity, 

however, is a close issue because there is little documentation on either side of the 

question. The documentation and/or information necessary to resolve the question may 

not be available and may not exist. Generic campaign activity may promote or oppose a 

political party but may not promote or oppose a clearly identified Federal or non-Federal 

csmdidate. 11 C.F.R. § 100.25. Whether a Federal candidate was promoted or opposed at 

the rallies depends on what was said at the rallies and what authorized signage was 

displayed. About this we know little or nothing. We have not uncovered any 

documentation or information either supporting or contradicting Mr. Button's declaration 

that the invoice expenditures were for generic activity. The auditors reviewed the 

documentation obtained during the course of the audit to determine whether invoices 

from other vendors might provide insight about the rallies. The auditors, however, did 

not identify other vendor invoices that could be linked to the rallies or that provided 

additional insight. The auditors reviewed the Ford committee's disclosure reports to 

determine whether the Ford committee used common vendors which might then reveal 

more information on the specifics of the rallies. The auditors found that the Ford 

campaign did not use common rally vendors. The audit did not uncover copies of 

invitations or announcements or the specific dates of the rallies. We do not have a copy 

of Mr. Ford's campaign itinerary during the time period covered by the invoices. 

Invitations or announcements might state the purpose of the rallies or indicate whether 

Mr. Ford or other candidates participated in the rallies. The dates of the rallies could be 

used to link Mr. Ford to rallies or be used to research media accounts of the rallies. Mr. 

Ford*s itinerary might show which, if any. Committee rallies he attended. This Office 

also attempted to identify media accounts of the rallies but was unable to do so. 

Accordingly, the Commission must weigh the information on the invoices 

themselves against Mr. Button* s declaration that the invoices were mislabeled and his 

conclusory assertion that the rallies were generic, and determine what weight to give 

each. We recommend the auditors raise this issue, noting the lack of supporting 

documentation, in the cover memorandum that forwards the Proposed Report to the 

Commission. 

C. Polls May Not Have Constituted Federal Election Activity 

The Committee paid $24,500 for two statevsdde telephone interview polls 

conducted between October 14,2006 and October 28,2006.^ The polls' questions refer to 

' The Conunittee may be reporting the expenses as GOTV because GOTV activity took place at the 

rally. The type of expenses noted on the invoices, however, do not indicate that the expenses were related 

to GOTV activity. 

^ The Committee originally reported the cost of polls on Schedule H6 as allocated between Federal 

and Levin funds. The Interim Audit Report correctly pointed out that polls could not be paid with Levin 

funds because they referred to clearly identified Federal candidates. The Committee responded by agreeing 
Memorandum to John D. Gibson 

Tennessee Democratic Party Audit Report (LRA #772) 

Page 5 of7 

two clearly identified candidates for the United States Senate and a candidate for 

Govemor of Teimessee. The auditors conclude that the cost of the polls represented 

Federal election activity that should have been paid solely by the Federal account. The 

auditors identified four factors they believe support their conclusion that the polls should 

have been paid solely with Federal fimds. The four factors are that: I) the polling 

occurred within the FEA time frame as set forth in 11 C.F.R. § 100.24(a)(1); 2) the 

Committee initially disclosed the payments for the polls as "voter identification;" 3) the 

poll questions asked about the respondents* personal impressions 

("favorability/unfavorability") of the Federal candidates; and 4) the polls asked 

respondents their likelihood of voting for specific Federal candidates. The auditors also 

explained to staff their belief that the nature and tone of the poll questions required that 

the polls be paid by Federal account funds. The Committee, in response to the interim 

audit report, stated that the polls were not FEA and that it used the polls intemally to 

track information on the 2006 Federal and non-Federal elections and to get information 

regarding the views and opinions of Tennessee voters for general planning purposes. The 

Committee also said that it did not append any of the information collected from the polls 

to voter lists or voter files maintained by the Committee. 

The auditors' concems about the polls relate to two ways in which activity can be 

FEA: voter identification, 11 C.F.R. § 100.24(a)(4), and, through the concem about the 

"nature and tone" of the questions, public communications that promote, attack, support 

or oppose ("PASO") any candidate for Federal office, 11 C.F.R. § 100.24(b)(3). Their 

concems led them to conclude that the polling expenditures should have been paid with 

Federal funds. Therefore, we examine whether the polls constitute either voter 

identification or PASO communications. 

We begin by examining the meaning of voter identification. The regulations 

define voter identification, in part, as "acquiring information about potential voters" and 

also provide a non-exhaustive list of examples of voter identification. 11 C.F.R. 

§ 100.24(a)(4). The list of examples include "obtaining voter lists" and "creating or 

enhancing voter lists by verifying or adding information about the voters' likelihood of 

voting in an upcoming election or their likelihood of voting for a specific candidates." 

Id. Nothing in the regulation, or in the Explanation and Justification for either the 2002 

version of the regulation or the amendments adopted in 2006 in response to Shays v. 

Federal Election Commission, 337 F. Supp. 2d 28 (D.D.C. 2004), suggests that ordinary 

opinion polling is voter identification if no information about individual voters is 

supplied to the committee paying for the poll. We believe the plain language of the 

definition, noting that the information is used to create or enhance a list and the 

information is used in such a maimer to recall the voters' likelihood of voting or 

likelihood of voting for specific candidates, suggests that voter identification involves 

activity that identifies individual voters. 

it had incorrectly reported payments on Schedule H6, but assented the polls could have been paid for as 

ordinary Federal/non-Federal operating expenses reportable on Schedule H4. The auditors' position is that 

because the polls referred to candidates, occurred within the FEA time frame, and was voter identification 

activity, it had to be paid for with Federal funds. 
Memorandum to John D. Gibson 

Tennessee Democratic Party Audit Report (LRA #772) 

Page 6 of7 

The facts in this case do not show that the Committee collected and maintained 

information for these purposes. The Committee's interim audit report response states that 

it did not include any of the information from the polls in its voter lists or voter files. The 

results of the polls, which the Commission possesses, are presented only in terms of 

aggregate percentages. The auditors indicate that they do not have any information 

showing that the Committee used the poll results to identify individual voters. The fact 

that the Committee*s polling occurred within the FEA time frame does not convert 

ordinary opinion polling to voter identification. Therefore, we conclude that the polls did 

not constitute voter identification. 

The auditors have also asserted in staff conversations that the nature and tone of 

the poll questions promote, support, attack or oppose candidates for Federal office. Some 

of the poll questions contain positive and/or negative information about Federal 

candidates and ask if the recited statements make the listener more or less likely to vote 

for a candidate. However, in order to be so-called "type 3** FEA payable with 100% 

Federal funds, a communication must be both a "public communication** and must 

promote, support, attack or oppose a clearly identified candidate. 2 U.S.C. 

§431(20)(a)(iii). 

We believe that the poll phone banks constituted public communications in that 

there were more than 500 calls of a substantially similar nature within a 30-day period. 2 

U.S.C. § 431(22) and (24); 11 C.F.R. § 100.28. We also believe the nature and tone of 

the positive and negative statements promoted, supported, attacked or opposed the named 

candidates. ^ Thus, we concur with the auditors that the polls constituted ^^type 3*' FEA. 

2U.S.C.§43l(20)(a)(iii). 

D. Auditors Should Clarify the Purpose of Allocating Phone Bank Expenditures 

The auditors indicate that the Committee paid $36,400 for two automated phone 

bank programs. The scripts for both phone banks refer to a clearly identified candidate 

running for Federal office. The auditors, therefore, conclude that the costs of the phone 

banks can not be considered allocable FEA or paid with Levin fimds. However, in the 

final paragraph of the Proposed Report's discussion on the automated phone banks, the 

auditors state that "the Audit staff has allocated the cost of the Govemor Script'..." 

(emphasis added). The auditors also conclude that the costs of the phone banks 

^ The Office of General Counsel acknowledges that there may be some questions as to whether 

these types of polls support or attack named candidates. The polls in this case are similar to the polls in a 

recent Matter Under Review, MUR S83S. In MUR 5835 (Democratic Congressional Campaign Conunittee 

or "DCCC"), the Commission considered whether telephone calls containing negative statements about a 

Federal candidate required a disclaimer under 2 U.S.C. § 44 Id. Section 44 Id includes a list of modes of 

communications that require a disclaimer. The modes include newspaper, magazines, and "any other type 

of type of general public political advertising." In recommending probable cause to believe that the DCCC 

violated the disclaimer provision, the Office of General Counsel argued that a telephone bank was a mode 

of communication under 2 U.S.C. § 44 Id. We also argued that the telephone banks in that case included 

political advertising. The probable cause recommendation failed on a 2-3 vote (with one recusal). 
Memorandum to John D. Gibson 

Tennessee Democratic Party Audit Report (LRA #772) 

Page 7 of7 

represented coordinated party expenditures. We recommend the auditors clarify the 

Proposed Report to explain that the Audit staff must first allocate the phone bank 

expenditures between candidates, in accordance with 11 C.F.R. § 106.1, to determine the 

amount of coordinated party expenditures. Thus, the Proposed Report should make clear 

that the allocation is not related to FEA but instead is necessary to analyze the 

coordinated expenditures.