March 1997 Federal Election Commission Volume 23, Number 3

Table of Contents

Budget

1 FEC Seeks Supplemental Funds to

Investigate Alleged Campaign

Finance Abuses

Compliance

1 MUR 4090

4 MUR 4121

4 MUR 3673

Court Cases

2 FEC v. DSCC

5 Bush-Quayle ‘92 Primary

Committee v. FEC

Reports

6 Texas Special Election

Statistics

7 Registered PAC Numbers Rise

7 Advisory Opinions

Workshops

8 FEC Announces Workshop Sites

for Candidates and Political

Committee Officials

 11 Index

Budget

FEC Seeks Supplemental

Funds to Investigate Alleged

Campaign Finance Abuses

Faced with investigating the

“extraordinary problems associated

with the 1996 election,” the FEC

has asked the U.S. Congress and the

federal Office of Management and

Budget to provide $1.7 million in

supplemental funding for this fiscal

year and an additional $4.9 million

for 1998.

Commission Vice Chairman Joan

D. Aikens, who heads the agency’s

finance committee, told the Senate

Committee on Rules and Administration that the additional money is

needed to investigate allegations

that the Federal Election Campaign

Act (the Act) was violated on an

unprecedented scale during the 1996

election cycle. Financial activity in

the 1996 election cycle surged to

more than $2.7 billion, and the

Commission received a third more

complaints than during the 1994

election cycle.

A laundry list of alleged campaign finance abuses from last

year’s elections was chronicled

almost daily in the nation’s newspapers, Ms. Aikens told the panel. And

the uproar has not stopped with a

new year. “The alleged abuses

involve fundraising from nonresi-

(continued on page 3)

Compliance

(continued on page 4)

MUR 4090

Corporation and Officers

Net $91,000 Penalty for

Prohibited Contributions

Firearms Training Systems Inc.,

its former president and its former

chief operating officer agreed to pay

a total of $91,000 to the FEC after

making six contributions with

corporate funds during elections in

the early 1990s and using a financial

scheme of bonus payments to mask

reimbursements for two of the

contributions.

With respect to each of the six

contributions, the Commission

found reason to believe that the

Georgia-based Firearms Systems

and the company’s former president,

Jody D. Scheckter, knowingly and

willfully violated the Federal

Election Campaign Act (the Act) by

making corporate contributions,

making contributions while a

government contractor and making

contributions in the name of another. 2 U.S.C. §§441b(a),

441c(a)(1) and 441f. The Commission found reason to believe that the

violations surrounding the last two

of the six contributions were

committed knowingly and willfully.

Firearms Systems and its former

president were assessed a joint civil

penalty of $90,000.
Federal Election Commission RECORD March 1997

2

Federal Election Commission

999 E Street, NW

Washington, DC 20463

800/424-9530

202/219-3420

202/501-3413 (Flashfax Service)

202/219-3336 (TDD for the

hearing impaired)

800/877-8339 (FIRS)

John Warren McGarry, Chairman

Joan D. Aikens, Vice Chairman

Lee Ann Elliott, Commissioner

Danny L. McDonald,

Commissioner

Scott E. Thomas, Commissioner

John C. Surina, Staff Director

Lawrence M. Noble, General

Counsel

Published by the Information

Division

Louise D. Wides, Director

Angela Rucker, Editor

http://www.fec.gov

Court Cases

FEC v. DSCC (95-2881)

On January 16, 1997, the U.S.

District Court for the Northern

District of Georgia ruled that the

Democratic Senatorial Campaign

Committee (DSCC) violated the

Federal Election Campaign Act (the

Act) when it contributed $17,500 to

a Senatorial candidate’s runoff

election after having already contributed the same amount during the

primary and general elections.

The second contribution violated

the Act at §441a(h), which sets a

$17,500 limit for national committees—such as the DSCC and the

National Republican Senatorial

Committee (NRSC)—when giving

to a candidate for the U.S. Senate.

Background

The excessive contribution was

made during the unusual circumstances surrounding the 1992

Senatorial campaign in Georgia. A

state law, which has since been

changed, required that the winner of

the Senate seat receive a majority of

the vote.

Former Senator Wyche Fowler

Jr., a Democrat, had a plurality in

the general election in 1992, receiving 49 percent of the ballots cast.

Republican Senator Paul Coverdell,

who challenged Mr. Fowler in the

race, came in second with 48

percent of the vote. Because no

candidate received a majority of

votes, a runoff election was held

between the two men. Mr. Coverdell

won that race with 51 percent of the

vote.

During the primary and general

elections, the DSCC contributed

$17,500 to Mr. Fowler’s campaign,

and then contributed another

$17,500 to his runoff election.

District Court Finds for FEC

The court ruled in the FEC’s

favor. The court held that the

language and legislative history of

the Act, coupled with accepted

principles of statutory construction,

support the view that §441a(h)

precluded the DSCC from making a

second contribution of $17,500.

The court pointed out that, unlike

individuals and other committees,

national committees have a higher

contribution limit under §441a(h)

and greater discretion in allocating

the sum during the length of a

campaign. For example, individuals

have a $1,000 contribution limit per

election (primary, general and

runoff), per candidate.

Multicandidate PACs have a $5,000

contribution limit per election, per

candidate. The court held that

national committees, such as the

DSCC, may allocate part or all of

their $17,500 contribution limit to a

Senatorial candidate at any stage of

the election campaign.

The DSCC had argued that the

FEC had erroneously interpreted the

$17,500 limit with respect to postgeneral election runoffs and that

Congress had intended the statute to

be part of an effort to expand the

role of national committees. However, the court said that the language

of §441a(h) was unambiguous and

that, even if it were not, the FEC’s

interpretation of it would be entitled

to deference. In AO 1978-25, the

court pointed out, the Commission

had confirmed that §441a(h) did

indeed establish a single contribution limit without regard to whether

there were primary, general or

runoff elections.

The DSCC had also argued

unsuccessfully that the unusual

nature of the Georgia majoritywinner rule was not taken into

account when Congress adopted the

statute, and that, had its members

known of such a scenario, it would

have drafted the law differently. The

court said that such speculation

would not cause the court to disregard the language of the law.

The court rejected the DSCC’s

claim that its First and Fifth Amendment rights of freedom of association and equal protection were

violated. The DSCC said the law

denied them the freedom to associate with Mr. Fowler’s campaign

because “no committee would ever

reserve funds for the uncertain

prospect of a runoff.” It also pointed

out that other types of committees

and individuals were able to contribute to Mr. Fowler’s runoff election.

The court said that, while a

difficult allocation issue confronted

the DSCC, the law does not infringe

on its right to associate with whomever it wishes. The DSCC lawfully

made more than $200,000 in

coordinated expenditures under 2

U.S.C. §441a(d)1 in support of Mr.

Fowler’s runoff campaign. Further,

1

 Under 2 U.S.C. §441a(d), the national

party is entitled to make limited

expenditures for the general election in

cooperation with the candidate (in

addition to the contributions it is

otherwise entitled to make).

(continued on page 5)
March 1997 Federal Election Commission RECORD

3

Budget

(continued from page 1)

dent foreign nationals, the use of

soft money possibly spent to

circumvent the party spending limits

on behalf of publicly funded presidential candidates, coordination in

assertedly independent expenditures, and massive, but undisclosed,

expenditures on issue advertisements with an electioneering

message by labor and business

interests,” she said.

The 1997 supplemental budget

would allow the Commission to hire

7.8 full-time employees—including

investigators, attorneys, auditors,

systems analysts and clerical

support—to investigate the alleged

violations of the Act that occurred

during the 1996 election cycle. The

supplemental also would help cover

the administrative costs associated

with the investigations.

At the same time she requested

the 1997 supplemental, Ms. Aikens

presented the agency’s 1998 budget

request: $29.3 million plus a supplemental of $4.9 million to continue

the investigations of alleged 1996

election violations.

At the floor funding level request

($29.3 million), several operations

would be affected.

• The FEC would have to slow

planned enhancements to its PC

network and put off expansion of

its digital imaging technology for

documents other than financial

reports filed by political committees.

• In performing desk audits of

committees, the Reports Analysis

division would face increased

strains because of a combination

of too few staff and larger

financial disclosure reports.

(More than 8,000 committees

report to the FEC, and large

committees—Senate campaigns

over $500,000 and other committees with activity over

$250,000—represent the bulk of

the work.) While higher tolerance

thresholds would reduce the

workload, they also would result

in some glossing over of reports

with errors.

• The Commission would not be

able to handle as many enforcement cases as it had the previous

year. Despite the implementation

of a system to prioritize compliance cases, the FEC has more cases

than current staff can handle. At

the end of December 1996, the

FEC had a total caseload of 361

Matters Under Review (MURs)

and 86 staff in the Office of

General Counsel. Of those cases,

just 112 were being actively

worked, down from 160 cases in

1995. Increasingly complex

investigations and civil actions are

too important to dismiss, Ms.

Aikens said, and often too complex

for just one or two staff attorneys

to handle.

The 1998 budget request would

allow for the equivalent of 313.5 fulltime employees. The supplemental

request would allow the FEC to hire

another 47 full-time employees.

Ms. Aikens added that changes to

the campaign finance laws could

affect the FEC’s mission. “We know

that Congress is going to be deliberating a number of proposals that

would significantly amend the law,”

she said. “Any additional mandate

imposed on the agency for rapid

implementation will likely require

additional funding.”

A complete copy of Ms. Aikens’s

written testimony before the Senate

panel is available at the FEC’s

homepage on the Internet. A news

release about the budget request also

is available. The address is http://

www.fec.gov. Click on “What’s

New!” to find both documents. ✦

0

500,000

1,000,000

1,500,000

2,000,000

1984 1986 1988 1990 1992 1994 1996

Transactions Entered Into FEC Database During

Election Cycles

(As of December of Election Year) Transactions

Election Cycle
Federal Election Commission RECORD March 1997

4

Compliance

(continued from page 1)

MUR 3673

DNC, Rainbow Coalition

Fined for Corporate

Donations

The National Rainbow Coalition

and the Democratic National

Committee (DNC) each agreed to

pay a $5,000 civil penalty to the

FEC for violating sections of the

Federal Election Campaign Act

prohibiting corporate contributions.

The Rainbow Coalition, a

nonprofit corporation, and its

president, the Rev. Jesse Jackson

Sr., made in-kind corporate contributions of more than $22,000 to the

DNC to carry out a voter registration drive in violation of 2 U.S.C.

§441b(a). The DNC violated the

same statute by accepting the

contributions.

Between September 11, 1992,

and November 3, 1992, the DNC

initiated a generic party voter

registration drive in conjunction

with the Rainbow Coalition. The

DNC intended to pay for all costs

associated with the drive. However,

the Rainbow Coalition paid for the

start-up costs for the project in the

form of employee compensation for

those working on the voter drive.

The Rainbow Coalition also advanced certain goods and services

for which the DNC made reimbursements of approximately $22,000.

The Commission learned of the

transactions through a complaint

filed with the agency by Ralph

Reed, executive director of the

Christian Coalition. The agency

conducted a limited investigation

and eventually entered into conciliation agreements with the Rainbow

Coalition and the DNC. ✦

MUR 4121

Lipinski for Congress Fined

for Lack of Disclaimer

Congressman William Lipinski’s

principal campaign committee,

Lipinski for Congress, agreed to pay

a $6,000 civil penalty to the FEC for

failing to include a disclaimer on

three pamphlets and fliers that

contained express advocacy and

were distributed to the general

public.

A disclaimer is required on

communications that expressly

advocate the election or defeat of a

clearly identified candidate and are

distributed in any newspaper, direct

mailing or other form of general

public political advertising. 2 U.S.C.

§441d(a). The disclaimer must

clearly identify the person, committee or other entity who authorized

and paid for the communication. 2

U.S.C. §441d(a)(1) and (2).

Express advocacy in communications includes phrases such as “reelect,” “vote for,” “Smith for

Congress,” “vote against” or

“reject” in advocating the election

or defeat of a candidate. When those

phrases are not present, a communication still may be considered

express advocacy when, taken in

context, it can have no other reasonable meaning than to urge the

election or defeat of a candidate. 11

CFR 100.22.

The Lipinski committee paid

$6,308 for three pamphlets that

expressly advocated his election to a

seat in the third Congressional

district of Illinois. One flier contained the phrase “Bill Lipinski for

Congress” and another said “Let’s

Keep Bill Lipinski working for us.

Punch 81.” None of the communications, which were distributed to the

general public, had disclaimers.

The Commission learned of the

communications through a complaint filed with the agency by the

Illinois Republican Party during the

1994 Congressional elections. After

reviewing the complaint, the

Commission found reason to believe

that violations of the Federal

Election Campaign Act had occurred and eventually entered into a

conciliation agreement with

Lipinski for Congress. ✦

The Commission also concluded

that Firearms Systems former chief

operating officer, Robert Motter,

knowingly and willfully violated the

Act by making corporate contributions and contributions in the name

of another. He agreed to pay a

$1,000 civil penalty.

This MUR was generated by the

FEC in the normal course of carrying out its duties.

Between 1991 and 1993, Mr.

Scheckter made $7,500 in contributions from his personal checking

account to various Democratic and

Republican congressional candidates, as well as to the Democratic

Congressional Campaign Committee.

In the case of four of the contributions, Mr. Scheckter’s secretary

submitted a request to Firearms

Systems for reimbursements equal

to the contributions made. The

requests indicated that the reimbursements were for political

contributions.

In the case of the other two

contributions, Mr. Motter, who took

over the position of chief operating

officer in November 1992, submitted requests for payroll bonus

checks for Mr. Scheckter. Mr.

Scheckter received $2,000 in

reimbursements in this manner.

Prior to disclosure to the Commission, Mr. Scheckter reimbursed

Firearms Systems for the contributions for which he was initially

reimbursed. The company also

instituted procedures to insure that

future political activity would not

violate the Act or FEC regulations.

After reviewing the relevant

facts, the Commission found reason

to believe that violations of the Act

had occurred. In an effort to resolve

the matter, the Commission did not

complete a formal investigation, but

entered into conciliation agreements

with the parties. ✦
March 1997 Federal Election Commission RECORD

5

Court Cases

(continued from page 2)

the DSCC does not have to be

treated the same as other types of

committees in respect to contribution limits. “Party committees,

individuals, and other organizations

and corporations are not similarly

situated entities for election regulation purposes,” the court said.

Pursuant to a prior agreement of

the parties, the court ordered

briefing on the appropriate sanctions

for DSCC’s violation of §441a(h).

U.S. District Court for the

Northern District of Georgia,

Atlanta Division, 95-2881. ✦

Bush-Quayle ‘92 Primary

Committee v. FEC

On January 14, 1997, the U.S.

Court of Appeals for the District of

Columbia Circuit remanded this

case to the FEC and asked it to

explain why the Commission

departed from precedent, or remedy

that departure, when it required the

Bush-Quayle ‘92 Primary Committee to repay $323,832 of the federal

matching funds it received.

Background

As required by law, the FEC, at

the end of the 1992 election cycle,

audited former President George

Bush’s 1992 campaign. The audit

included the primary committee, the

Bush-Quayle ‘92 General Committee and the legal and accounting arm

of the general election committee,

the Bush-Quayle ‘92 Compliance

Committee. The latter two committees are party to this lawsuit.

During the 1992 election, the

primary committee received nearly

$10.7 million in public funds

through the Matching Payment Act.

Once Mr. Bush and his running

mate, Dan Quayle, had received the

Republican nomination for President and Vice President, the general

committee received $55.2 million in

public funds.

The Law

The Matching Payment Act

provides partial public funding—

paid for through the $3 check-off on

federal tax forms—to Presidential

primary candidates who meet

certain qualifications. Candidates

who receive public funding must

agree to limit expenditures to

“qualified campaign expenses,” i.e.,

those expenses that are incurred by

the candidate in connection with his

or her campaign for nomination and

that do not violate state or federal

law. 26 U.S.C. §9032(9)(A).

The Commission also must

conduct an audit of every publicly

funded campaign after it ends and

require the committee to repay the

U.S. Treasury for any nonqualified

campaign expenses that were paid

for with public funds. The Commission also can require a committee to

repay any matching funds that it

received in excess of what the law

allows. 26 U.S.C. §9038(b)(1).

Final Repayment Determination

The FEC issued a final repayment

determination to the primary

committee on August 17, 1995,

having determined that $409,123 in

expenses incurred by the primary

committee were not qualified

primary campaign expenses because

they had, in fact, been made for the

benefit of the general election

campaign as well.

The expenses in question included disbursements for direct

mailings and political advertisements and for equipment and

materials sent to the Bush

campaign’s national headquarters.

All these disbursements took place

before August 20, 1992—the day

Mr. Bush was nominated by his

party to run for President. Concluding that expenses benefited both the

primary and general campaigns, the

Commission determined that half of

the expenses should be assigned to

the general election committee and

the other half to the primary committee.

The FEC calculated the repayments as follows:

• The primary committee would pay

its share of the nonqualified

campaign expenses—$106,979—

plus an additional $216,853 that

the FEC determined it had received

in excess of the matching fund

allowance.

• As a result of reassigning half of

the expenses in question to the

general committee, the FEC found

that the general committee had

exceeded its expenditure limit by

$182,785. The FEC recommended,

but did not order, that the compliance fund reimburse the general

committee for this overspending.

That would resolve the general

committee’s excess expenditure

problem.

Expenses in Connection With

Primary

The Bush-Quayle committees

challenged the FEC’s final repayment determination in court, saying

the Commission should have used a

“bright-line” rule and allocated

expenses based solely on whether

they were incurred before the

August 20 Presidential nomination

or after the party’s Presidential

contender had been named.

The Commission had rejected

this approach, arguing that whether

an expenditure is a primary qualified expenditure depends on both its

timing and nature. To qualify, the

Commission had explained, the

expense must be primarily in

connection with the primary. The

committees had argued that any

connection to the primary campaign

would qualify an expense fully as a

qualified primary campaign expenditure.

Finding that arguments from both

the agency and the committees were

(continued)
Federal Election Commission RECORD March 1997

6

Texas Special Election Reporting

 Committees* involved in the March 15 Special Election to fill the seat

vacated by the late Congressman Frank Tejeda must follow the reporting

schedule below. Note that 48-hour notices are required of authorized

committees that receive contributions of $1,000 or more between February 24

and March 12. If no candidate receives a majority of the votes during the

Special General Election, Texas Gov. George W. Bush will call a Special

Runoff Election within five days after the Special General Election votes are

certified. If a runoff is required, the Commission will establish additional

reporting dates for that election.

Pre-General Report

Post-General Report**

Mid-Year Report***

Close of Certified/ Filing

Books Registered Date

Mail Date

Feb. 23 Feb. 28 March 3

April 4 April 14 April 14

June 30 July 31 July 31

* These committees include authorized committees of candidates running in

the election and other political committees that support these candidates and

do not file monthly.

** Filed only if there is a majority winner in the Special General Election.

*** If a Special Runoff Election is required, the Mid-Year report for committees that do not participate should cover financial activity between February

24 and June 30.

defensible, the court upheld the

FEC’s interpretation, based on

Chevron U.S.A. Inc. v. NRDC1. That

case requires that, where statutory

language is ambiguous, courts must

uphold the agency’s interpretation

so long as it is reasonable. The court

added, however, that another

committee objection to the

Commission’s decision merited

further consideration.

Arbitrary and Capricious

The committees charged that the

FEC had acted “arbitrarily and

capriciously” because it had treated

expenditures of the Bush-Quayle

1992 campaign differently than

similar expenditures of the 1984

Reagan-Bush campaigns.

In the 1984 election, the committees said, the FEC had concluded

that certain pre-nomination expenditures by the Reagan-Bush Primary

Committee were primary expenses

despite the fact that some benefited

the general election campaign.

The FEC responded that the two

cases were distinguishable from

each other and thus were treated

differently. It also said that in the

Reagan audit, the FEC had not

adopted a “bright line” test based on

the date of the candidate’s nomination.

The court found the FEC’s

response inadequate. Further, the

court said: “An agency interpretation that would otherwise be permissible is, nevertheless, prohibited

when the agency has failed to

explain its departure from prior

precedent.”2

The court noted further that the

FEC’s determination was especially

problematic given the fact that the

agency had adopted new regulations

two months before making its

repayment determination concerning the Bush-Quayle campaign,

but had not applied the approach

embodied in those regulations to

that determination. The court said

that the new rules use a “brightline” approach to determine

whether expenses should be

attributed to primary or general

elections.

The court remanded the matter

to the FEC either to justify its

approach or to reconsider the

repayment determination.

U.S. Court of Appeals for the

District of Columbia Circuit, 95-

1430, consolidated with 95-1431

and 95-1432. ✦

Court Cases

(continued from page 5)

1 Chevron U.S.A. Inc. v. NRDC, 467

U.S. 837, 844 (1984).

2

 See Interstate Quality Servs. Inc. v.

RRB, 83 F. 3d 1463, 1465 (D.C. Cir.

1996); ANR Pipeline Co. v. FERC, 870

F. 2d 717, 723 (D.C. Cir. 1989);

Greater Boston Tel. Corp. v. FCC, 444

F. 2d 841, 852 (D.C. Cir.), cert denied,

403 U.S. 923 (1971).
March 1997 Federal Election Commission RECORD

7

Statistics

Date

PAC Count During Election Years

(As of December 31)

*

This number represents all other PACs.

Committee Type Total

C r orporate Labo

Trade/

Membership/

Health

Nonconnected Cooperative

Corporation

W t ithou

Stock

1 3 976 4 4 3 2 * 2 4 6 89 1,14

1 6 980 1 7 ,20 2 6 9 5 4 7 3 2 7 4 65 1 2,55

1 2 984 1 4 ,68 3 8 9 6 3 9 1 2 ,05 5 0 1 9 3 4,00

1 6 988 1 4 ,81 3 6 5 7 5 8 1 9 ,11 5 8 1 8 3 4,26

1 5 992 1 7 ,73 3 0 4 7 5 7 1 6 ,14 5 2 1 5 4 4,19

1 2 996 1 2 ,64 3 8 3 8 3 3 1 1 ,10 4 3 1 9 2 4,07

Registered PAC Numbers

Rise

The number of political action

committees registered with the FEC

increased by 46 during the second

half of last year, bringing the total

number of federally registered PACs

to 4,079.

The FEC’s semiannual survey of

registered PACs found that corporate PACs continued to lead among

the various categories.

The greatest gains among the

PAC categories came in

nonconnected PACs with an increase of 45 PACs. Nonconnected

PACs are those not connected to or

sponsored by a corporation or labor

organization and not related to a

candidate’s campaign or a political

party.

While the overall increase in the

total number of PACs was nominal

between July and December 1996—a

1.14 percent increase—the number of

PACs has increased dramatically over

the last 20 years. The chart below

shows the year-end PAC counts

during Presidential election years

since 1976. Between 1976 and 1996,

PAC numbers increased 256 percent—from a total of 1,146 to 4,079.

More information about PAC

statistics from 1974 to today is

available in a January 24, 1997,

news release. Look for it at the

FEC’s web site at http://

www.fec.gov (click on “News

Releases and Media Advisories” at

the main menu) or request a copy

from the agency’s Public Records

office by calling 1-800-424-9530

(press 3). The news release also is

available on the FEC’s Flashfax

service at 202-501-3413 (request

document 526). ✦

Advisory

Opinions

(continued)

AO 1996-49

Affiliation between Joint

Venture Partnership PAC

and SSF of Owner

PrimeCo, a joint venture partnership, may establish a nonconnected

committee that would be affiliated

with the separate segregated funds

(SSFs) of an affiliated corporation

that is one of the owners.

PrimeCo is owned by PCSCO

Partnership and PCS Nucleus L.P.

(PCSN). Each holds a 50 percent

partnership interest in PrimeCo.

PCSN is a limited partnership

owned 50-50 by two corporations,

AirTouch Communications and US

West.

PCSCO also is a limited partnership. It is owned 50-50 by Bell

Atlantic Corporation and NYNEX

Corporation, through wholly-owned

subsidiaries of those corporations.

Bell Atlantic and NYNEX are

expected to merge their corporations

this year. The resulting corporation

will be known as Bell Atlantic

Corporation, and this advisory

opinion assumes that the merger is

effective.

PCSCO and PCSN do not have

political committees, but Bell

Atlantic, AirTouch and US West

each has at least one SSF. PrimeCo

wants to create a nonconnected PAC

to advance its political interests,

which often differ from those of its

owners.

In the partnership agreement

establishing PrimeCo, a six-member

executive committee is responsible

for managing the business affairs of

PrimeCo. Three of the members

represent Bell Atlantic (and

NYNEX) and three represent

AirTouch and US West. The entire

voting power of each side of the

partnership (i.e., the PCSCO side
Federal Election Commission RECORD March 1997

8

Advisory Opinions

(continued from page 7)

and the PCSN side) is voted as a

single unit.

FEC regulations state that

committees that are established,

financed, maintained or controlled

by the same corporation, including

any parent, subsidiary, branch or

division, are affiliated. Contributions made to or by such committees

are considered to have been made

by a single committee, and affiliated

committees have one contribution

limit. 11 CFR 100.5(g)(2).

Corporations may solicit the

restricted class—that is, the executive and administrative personnel,

stockholders and families of those

groups—of its subsidiaries or other

affiliates for SSF contributions. 11

CFR 114.3(a)(1) and 114.5(g)(1).

This holds true even when affiliates

are entities other than corporations,

such as partnerships.1

When an entity is not an acknowledged subsidiary of another,

the Commission weighs several

factors to determine whether the

sponsoring entities and, hence, their

respective SSFs are affiliated. 11

CFR 100.5(g)(4)(i) and (ii)(A)-(J),

and 110.3(a)(3)(i) and (ii)(A)-(J).

The Commission applied these

factors in this case and concluded

that PrimeCo is an affiliate of Bell

Atlantic and, thus, any

nonconnected political committee

PrimeCo creates would be affiliated

with the SSFs established by Bell

Atlantic and its affiliates. This

conclusion was based on a number

of factors:

By virtue of its ownership of one

of PrimeCo’s partners, PCSCO, Bell

Atlantic exercises 50 percent control

over PrimeCo’s executive committee. The agreement of members on

the Bell Atlantic side is necessary

for PrimeCo to take a significant

number of actions. Moreover,

PrimeCo’s executive committee is

composed of the chief operating

officer of Bell Atlantic and two

other high-ranking officials of Bell

Atlantic affiliates. Additionally, Bell

Atlantic helped create PrimeCo.

However, PrimeCo would not be

affiliated with the SSFs of either

AirTouch or US West. Unlike Bell

Atlantic, neither corporation by

itself can exercise a controlling vote

necessary to prevent PrimeCo’s

executive committee from taking an

action. Although either corporation

could obstruct a vote by the PCSN

side, this would happen only at the

secondary voting level, rather than

the primary level exercised by the

two corporations together. Also, at

this secondary level of decision

making, the powers that each

corporation could exercise are

speculative since they have no

arrangements for selecting a deciding senior representative to carry out

the decision-making in the event

that the members from the PCSN

side disagree with each other.

Although partnership PACs

normally can solicit the general

public, PrimeCo’s nonconnected

PAC may only solicit its restricted

class and the restricted class of Bell

Atlantic and its subsidiaries. This

restriction results from the fact that

a PAC of a partnership that is an

affiliate of a corporation that has an

SSF must follow the rules that apply

to SSF solicitations. 11 CFR

114.5(g)(1), AO 1992-17 and 1989-

8. PrimeCo may not solicit

AirTouch’s or US West’s restricted

class because it is not affiliated with

these corporations.

Because PrimeCo and Bell

Atlantic are affiliated, Bell Atlantic

may pay for the administrative and

solicitation costs of PrimeCo’s

PAC. 2 U.S.C. 441b(b)(2)(C), AO

1996-38 and 1992-17. Alternatively,

PrimeCo may pay the administrative

and solicitation costs of its own

PAC. While normally the Commission does not allow a partnership to

act as a connected organization, it

treats joint venture partnerships

differently as a result of the

partnership’s ownership by and

affiliation with corporations. If a

joint venture partnership is owned

entirely by corporations and is

affiliated with at least one of them,

it may perform the functions of a

connected organization for its PAC.

AO 1994-11, 1994-9 and 1992-17.

If the funding is provided directly

by Bell Atlantic, or indirectly by

Bell Atlantic by virtue of support

from PrimeCo, then PrimeCo should

name Bell Atlantic as its connected

organization on its statement of

organization.

Date Issued: January 17, 1997;

Length: 9 pages. ✦

1

 See AOs 1996-38, 1994-11, 1992-17,

1989-8, 1987-34 and 1983-48.

FEC Announces

Workshop Sites for

Candidates and

Political Committee

Officials

 As an attempt to educate

committee officials in campaign

finance law, specialists from the

Commission's Information

Division will visit the following

six cities this spring and summer:

 • Cleveland, OH

 • Princeton, NJ

 • Des Moines, IA

 • Madison, WI

 • Phoenix, AZ

 • Bismarck, ND

 The specialists will meet with

candidates for the U.S. House of

Representatives and the U.S.

Senate, political party committees

and PACs. Specific locations and

dates have not yet been finalized.

To receive additional

information, call the Information

Division at (800) 424-9530 (press

1) or (202) 219-3420.

 Regional conferences will be

scheduled later, beginning in the

fall of 1997. Watch future

editions of the Record for

additional information.
March 1997 Federal Election Commission RECORD

9

AO 1996-51

Status of State Affiliate as

Political Committee

The Reform Party of Arkansas

(Reform Party/AR) constitutes a

state committee of a political party

because it satisfies the definition

and requirements set out in the

Commission’s statutes and advisory

opinions.

Arkansas officially recognizes the

Reform Party/AR as a state party,

and the state party as an affiliate of

the National Reform Party.

The Federal Election Campaign

Act defines a state committee as

“the organization which, by virtue

of the bylaws of a political party, is

responsible for the day-to-day

operation of such political party at

the State level.” 2 U.S.C. §431(15).

The definition of a state committee

also requires the existence of a

political party. A political party is

“an association, committee, or

organization which nominates a

candidate for election to any Federal

office whose name appears on the

election ballot as the candidate of

such association, committee, or

organization.” 2 U.S.C. §431(16).

In AO 1992-30, the Commission

identified two requirements necessary for state political committee

status. The first is that the organization must have a state affiliate

agreement that “delineates activities

commensurate with the day-to-day

operation” of a party at a state level.

Second, the state affiliate must gain

ballot access for its Presidential and

other federal candidates. See also

AOs 1996-43, 1996-27 and 1995-

49.

According to Reform Party/AR’s

bylaws, its purpose is to nominate

and endorse candidates for public

office and engage in political

activities in Arkansas. Among its

other responsibilities are to hold

state conventions and insure that the

Reform Party’s Presidential and

Vice Presidential candidates are on

AO 1996-50

Disaffiliation of Agricultural

PACs

The Farm Credit Council (FCC)

and the National Council of Farm

Cooperatives (Co-ops) and their

respective PACs are no longer

affiliated with each other because

the relationship between the two

agricultural groups has changed

substantially.

FCC is a not-for-profit membership organization, while Co-ops is a

not-for-profit association of cooperative businesses owned and

controlled by farmers. Both focus on

agricultural issues, and both created

political committees that have been

affiliated since 1985.

The major purpose of FCC is to

promote the common interests of

institutions chartered under the

Farm Credit Act. FCC’s voting

membership comprises the National

Bank for Cooperatives and six

District Farm Credit Councils.

The major purpose of Co-ops is

to promote the interests of farm

cooperatives, including individual

farmer’s rights to market their

products collectively. Co-ops’

membership includes agricultural

cooperative associations, state

cooperative councils and certain

Farm Credit System institutions.

After restructuring in 1990, FCC

substantially increased its size and

the scope of its activities. At that

time, FCC and Co-ops entered into

an agreement that guaranteed that

their business relationship would

continue despite the changes at

FCC. That agreement expired on

June 30, 1996.

Commission regulations state that

political committees established,

financed, maintained or controlled

by the same corporation, including

any parent, subsidiary, branch or

division, are affiliated. Contributions made to or by such committees

are considered to have been made

by a single committee, and affiliated

committees have one contribution

limit. 11 CFR 100.5(g)(2), (continued)

110.3(a)(1) and 110.3(a)(1)(ii).

When an entity is not an acknowledged subsidiary of another,

the Commission weighs several

factors to determine affiliation status

and whether their respective PACs

are affiliated. 11 CFR 100.5(g)(4)(i)

and (ii)(A)-(J), and 110.3(a)(3)(i)

and (ii)(A)-(J).

PAC affiliation between the two

agricultural groups had been based

on a number of factors: management

of FCC and Co-ops was interrelated,

executives at Co-ops participated in

the selection of FCC’s president, the

two organizations shared office

space, a treasurer and benefits

programs, and the PACs of the two

groups shared an assistant treasurer.

Since the agreement between

FCC and Co-ops lapsed in June

1996, the relationship between the

two has changed materially.

Neither FCC or Co-ops has

controlling interest in the other

entity or participates in the governance or hiring decisions of the

other. Both are governed by independent boards with no overlap in

their memberships. The two agricultural organizations no longer share a

common employee benefits program

or treasurer. FCC PAC and Co-ops

PAC also no longer have the same

assistant treasurer. When all these

factors are taken into account, the

two organizations and their respective PACs are no longer affiliated.

That decision is not changed by

the fact that FCC and Co-ops are

housed in the same building and

share a receptionist and some

administrative expenses, such as

copier supplies. Further, the limited

degree of overlap between the

two—seven Farm Credit Banks are

members of both FCC and Co-ops—

does not signify affiliation.1

Date Issued: January 17, 1997;

Length: 6 pages. ✦

1

 Seven of the 230 entities that are

represented by FCC have voting

memberships with Co-ops, which has

80 voting members.
Federal Election Commission RECORD March 1997

10

AO 1996-52

Use of Excess Campaign

Funds for Refund/

Resolicitation Program

Robert E. Andrews for Congress,

the principal campaign committee

for Robert Andrews’s 1996 reelection effort in the First District of

New Jersey, may move excess

campaign funds from his committee

accounts to state and federal accounts being established for future

elections without violating the Federal

Election Campaign Act (the Act).

Andrews for Congress’s excess

funds from the 1996 election are

divided into two accounts: one

contains contributions from individuals and one contains contributions from PACs. The committee

wants to identify those contributors

who most recently gave to the

campaign committee. Once that has

been done, the committee wants to:

• Refund contributions of some

individuals and then solicit them

for contributions for a state

committee set up by Mr. Andrews

in support of his 1997 candidacy

for Governor of New Jersey and

• Transfer excess funds in the PAC

account to an account containing

PAC contributions that will be part

of Andrews for Congress in 1998,

Congressman Andrews’s principal

campaign committee for the next

federal election cycle.

The Commission responded to

three questions related to this activity.

Do future expenditures from the

two accounts come first from the

oldest contributions received by

Andrews for Congress? Do transfers

from the 1996 campaign fund to the

state committee come first from the

oldest contributions received? No

provisions in the Act or agency

regulations expressly address the

sequence in which funds in a

campaign account are depleted

when established committees make

expenditures and other disbursements.

the state ballot. It has set criteria for

party membership and its bylaws

establish an executive committee

and party officers. Thus, Reform

Party/AR satisfies the first requirement of state political committee

status as its actions show activity

that is commensurate with day-today operations.

Reform Party/AR also meets the

second requirement of ballot access.

In addition to gaining ballot access

in the 1996 general election for the

Reform Party’s Presidential and

Vice Presidential contenders, Ross

Perot and Pat Choate, Reform Party/

AR successfully secured ballot

access for Tony J. Huffman, a

candidate for the U.S. Congress who

qualified as a candidate under 2

U.S.C. §431(2), and who registered

and filed campaign finance reports

with the Commission. Reform

Party/AR also secured ballot access

in 1996 for an additional Congressional candidate, two candidates for

state office and five candidates

vying for local offices.

The fact that the National Reform

Party has not received status as

either a national party or a national

committee has no bearing on the

decision about Reform Party/AR’s

state committee status.1 AO 1996-

43.

In addition to qualifying as a state

committee of a political party,

Reform Party/AR qualifies as a

political party.

Date Issued: January 10, 1997;

Length: 4 pages. ✦

Advisory Opinions

(continued from page 9)

The Commission’s general

practice, however, is to treat the

funds in a committee’s accounts as

those most recently received by that

committee. The implication then is

that the committee makes its

disbursements from the oldest

contributions, i.e., those that have

been in the account the longest.

That practice would also apply to

funds transferred to a state political

committee.

May the committee select certain

contributors to whom it would offer

refunds and then solicit them for

campaign contributions for a

gubernatorial campaign committee?

The Act places three general limits

on the use of excess campaign

funds. 2 U.S.C. §439a. Excess funds

may be used to defray ordinary

expenses incurred in connection

with the duties of a federal officeholder; as a contribution to an IRSrecognized nonprofit organization;

or for any other lawful purpose,

including transfers to national, state

and local political committees, so

long as contributions are not converted to personal use.

The proposed refund and

resolicitation plan is permissible

under the third category—funds

used “for any lawful purpose”—

because it represents an effort to use

excess campaign funds in a future

campaign for state office. AOs

1993-10, 1986-5 and 1980-113.

May Andrews for Congress trace

the most recent contributors to each

of its separate accounts, or must it

identify the most recent contributors

irrespective of whether their contributions were deposited in the

individuals account or the PAC

account? The committee may

separately trace the most recent

contributions from the two accounts.

But, in doing so, Andrews for

Congress may not alter the number

or identity of individual contributors

who will be eligible for refunds. Put

another way, the pool of contributors eligible to receive refunds must

come from those who gave to the

1

 A group claiming to represent the

National Reform Party has submitted

an advisory opinion request to the FEC

concerning its status as a national

committee of a political party. See AOR

1996-47 in the December 1996 Record.
March 1997 Federal Election Commission RECORD

11

Advisory Opinion Requests

Advisory Opinion requests are

available for review and comment in

the Public Records Office.

AOR 1997-1

Use of excess campaign funds to

establish charitable foundation

(Former Congressman Tom Bevill,

January 27, 1997; 2 pages plus 9-

page attachment)

AOR 1997-2

Use of campaign funds for congressional retreat fees and travel expenses (The Congressional Institute,

The Aspen Institute and Congressmen David Skaggs and Ray

LaHood, February 4, 1997; 5 pages

plus 4-page attachment) ✦

Index

The first number in each citation

refers to the “number” (month) of

the 1997 Record issue in which the

article appeared. The second number,

following the colon, indicates the

page number in that issue. For

example, “1:4” means that the

article is in the January issue on

page 4.

Advisory Opinions

1996-35: Status of Green Party as

national committee, 1:10

1996-42: SSF disaffiliation following corporate spin off, 1:11

1996-45: Use of campaign funds,

1:12

1996-48: Application of “news

story” exemption, 2:5

1996-49: Affiliation between PAC

of joint venture partnership and

SSF of corporate partner, 3:7

1996-50: Disaffiliation of SSFs, 3:9

1996-51: Qualification as state

committee of political party, 3: 9

1996-52: Resolicitation of excess

campaign funds for nonfederal

campaign, 3:10

Court Cases

FEC v. _____

– Christian Action Network, 1:5

– DSCC (95-2881), 3:2

– Fund For a Conservative Majority,

1:5

– McCallum, 2:4

– Parisi, 1:4

– Williams, 2:3

_____ v. FEC

– Akins et al., 2:1

– Bush-Quayle ‘92 Primary Committee, 3:5

– DCCC (96-0764), 1:4

– DNC (96-2506), 1:5

– DSCC (96-2184), 1:2

– Hooker, 1:5

– NRCC (96-2295), 1:2

– Reilly, 1:4

– RNC (94-5248), 2:5

committee last, and their contributions must equal the amount of

excess funds in the individuals

account. PAC funds that are to be

transferred to the PAC account

created for the 1998 election cycle

may not be included in this individual contributor identification

and refund process.

Committees are required to

report refunds as offsets to contributions and must itemize refunds of

those contributions that were

itemized when they were initially

received. 2 U.S.C. §434(b), (b)(5).

Authorized committees also are

required to identify each person

who receives a refund. 11 CFR

104.3(b)(4)(v).

Date Issued: January 17, 1997;

Length: 5 pages. ✦

Reports

Electronic Filing, 2:1

Schedule for 1997, 1:6

Special Election, Texas, 3:6

800 Line

Debt settlement and committee

termination, 1:8

New Address for

House Resource

Center

 The Legislative Resource

Center, the part of the Office of

the Clerk of the House that serves

as the disclosure arm of the U.S.

House of Representatives, has a

new address and telephone

number. The Resource Center is

now at:

 B-106

 Canon House Office Building

 Washington, DC 20515

 The new telephone number is

202-226-5200. The address

change went into effect on

February 24.

 Although all House candidates,

their principal campaign

committees and committees

supporting only House candidates

now file disclosure forms directly

with the FEC (Public Law 104-

79), House members still must

file personal financial statements

and certain other disclosure

information with the Clerk of the

House. The Resource Center is

electronically linked to the FEC’s

database of disclosure

information.
FEDERAL ELECTION COMMISSION

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Washington, DC 20463

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Printed on recycled paper

Federal Election Commission RECORD March 1997

Change of Address

Political Committees

Treasurers of registered political committees automatically receive the Record. A change of address by a

political committee (or any change to information disclosed on the Statement of Organization) must, by law, be

made in writing on FEC Form 1 or by letter. The treasurer

must sign the amendment and file it with the Secretary of

the Senate, the Clerk of the House or the FEC (as appropriate) and with the appropriate state office.

Other Subscribers

Record subscribers who are not registered political

committees should include the following information

when requesting a change of address:

• Subscription number (located on the upper left corner

of the mailing label);

• Subscriber’s name;

• Old address; and

• New address.

Subscribers (other than political committees) may

correct their addresses by phone as well as by mail.