FEDE R-\l ElEC 1 :\)'- (O,\\\\ISSIOr--< AKOOS838

December 29, 1994

MEMORANDUM

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TO:

FROM:

RON HARRIS

PRESS OFFICER

PRESS OFFICE if/

ROBERT J. COSTA \L~ ~~ , -

ASSISTANT STAFF DIRECTOR

AUDIT DIVISION

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SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON

CLINTON FOR PRESIDENT COMMITTEE

Attached please find a copy of the Final Audit Report

and related documents on Clinton for President Committee,

which was approved by the Commission on Deceaber 27, 1994.

Informational copies of the report have been received by

all parties involved and the report may be released to the

public.

Attachment as stated

cc: Office of General Counsel

Office of Public Disclosure--

Reports Analysis Division

FEe Library
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~..:::

REPORT OF THE AUDIT DIVISIOS

ON

Clinton for President Committee

December 27, 1994

' ..

FEDERAL ELECTION COM~nssIOS

999 E STREET, N.W.

WASHll'./GTON, D.C.

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TABLE OF CONTENTS

CLINTON FOR PRESIDENT COMMITTEE

Page

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Executive Summary

Final Audit Report

Background

Findings

Legal Analysis

Transmittal to Committee ' ---- ~----_---.!_--_._------

Transmittal to Candidate

Chronology

1

5

5

8

143

161

163

165

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FINAL AUDIT REPORT

ON

CLINTON FOR PRESIDENT COMMITTEE

EXECUTIVE SUMMARY

Clinton For President Committee ("Committee") registered

with the Federal Election Commission on August 21, 1991, as the

Clinton Exploratory Committee. The Committee was the principal

campaign committee of then Governor aill Clinton, a candidate

for the 1992 Democratic presidential nominatior..

The audit was conducted pursuant to 26 U.S.C. S9038(a),

which requires the Commission to audit committees that receive

matching funds. The Committee received $12.5 million in

matching funds.

The findings were presented to the Committee at ah exit

··confereri-ceheldat the conclusion of audiCfieldwork(Oct'.6ber

19, 1993) and in the Interim Audit Report approved by the

Commission on April 4, 1994. The Committee's response to the

Interim Audit Report and other information received from the

Committee are included in this report. The Committee disagreed

with most of the Interim Audit Report findings.

The Final Audit Report required the Committee to pay

$1,383,587 to the U.S. Treasury.

The findings contained in the Final Audit Report are

summarized below.

Misstatement of Financial Activity - 2 U.S.C. SS434(b)(1),

(2), and (4). The Committee overstated its 1992 receipts and

disbursements by $116,489 and $322,476, respectively, and

understated its 1992 ending cash by 5206,717. The Committee

filed amended disclosure reports in July 1993 to correct

misstatements.

Itemization of Receipts - 2 U.S.C. S434(b)(3)(A). The

Committee failed to itemize a number of contributions from

individuals and in-kind contributions but corrected the

irregularities in its July, 1993 amendments.

Disclosure of Occupation and Name cf Employer - 2 U.S.C.

S434(b)(3)(A), 2 U.S.C. S431(13)(A), 11 C.F.R. S104.7(a! and

(b). A sample of contributions from individuals the Committee

received revealed that the Committee's itemized entries for such
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contributions failed to disclose the donor's occupation and name

of employer for 49 per cent of the items tested. In addition,

several of the Committee solicitations did not meet the "best

efforts" standard for notifying recipients of the information on

contributors that must be reported by law. The Committee

disclosed additional information in amended reports filed in

July, 1993.

Itemization of Refunds and Rebates - 2 u.S.C.

5434(b)(3)(F). The Committee failed to identify various press

organizations and the Secret Service as the sources of over $2.5

million in travel reimbursements paid to the Committee through

its travel vendor. The Committee filed a series of amended

reports on october 14, 1994. These reports materially correct

the public record. (The Committee also failed to itemize

$11,898 in other refunds and rebates but corrected this problem

in its July 1993 amended reports.)

Excessive Contributions Resulting from Staff Advances - 2

U.S.C. 5441a(a) and 11 CFR 5116.5. Based on information

provided by the Committee it was determined that five

individuals made excessive contributions totaling $58,482.

Contributions Extensions of Credit

and Use 0 Corporate Faciliti-es .1.H<:n~ .1),_!~L<:fR__ 5114.9, and 11 CFR 5116.3. The auditors concluded that the

Committee received a total of $246,162 in apparent excessive or

prohibited contributions resulting from advances or extensions

of credit made outside the ordinary course of business.

Apparent Non-qualified Campaign Expenses - 11 crR

59032.9(a) and 11 crR 59034.4(a). The Commission made an

initial determination that the Committee repay the U.S. Treasury

$270,384 for making the non-qualified campaign expenses listed

below:

1. Duplicate Payments or Overpayments - For making a total

of $39,742 in overpayments to vendors and to the candidate's

general election committee, the Committee was required to make a

pro rata repayment of $16,861.

2. General Election Exoenditures - The Committee was

required to make a $154,740 pro rata repayment for spending

$598,964 to benefit the candidate'S general election campaign.

The general election payments were made for equipment,

facilities, polling, direct mail, media services, and other

miscellaneous expenses. The amount represents an allocation of

the amount originally recommended by the Audit staff.

3. Other Non- ualified Cam ai n Ex enses - The Committee

also had to make a pro raca repayment of 98,-83 fer other

non-qualified campaign expenses totaling $382,366 including

staff bonuses, an unexplained settlement, traveler'S cheques,

and other expenses.
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Matching Funds in Excess of Entitlement - 26 U.S.C.

S9038(b)(1). The Commission could not reach a conclusion on the

Audit staff's recommendation that $3.4 million was repayable.

Also the Commission could not reach a decision on the

matchability of certian post convention contributions. As a

result the Candidate will be reqUired to repay the U.S. Treasury

$1,072,344 in matching funds that exceeded entitlement. This

determination was based on an analysis of the Committee's

Statement of Net Outstanding Campaign Obligations relevant

post-convention contributions up until the Committee ceased

requesting matching funds and matching funds received after the

convention.

Stale-dated Committee Checks - 11 crR S9038.6. Finally,

the Committee was required to pay the u.s. Treasury $40,859,

the value of stale-dated Committee checks still uncashed.
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LC000637

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REPORT OF THE AUDIT DIVISION

ON

CLINTON FOR PRESIDENT COMMITTEE

I. Background

A. Audit Authority

This report is based on an audit of Clinton For

President Committee ("the Committee"). The audit is mandated by

Section 9038(a) of Title 26 of the United States Code. That

section states that "after each matching payment period, the

Commission shall conduct a thorough examination and audit of the

qualified campaign expenses of every candidate and his authorized

committees who received payments under Section 9037." Also

-Se-ct-ion9039{ b) of--the-Uni_ted.__S_tates ~og~amLSection 9038.1 (a) (2)

of the Commission's Regulations state that the-coaaisslonmay--

conduct other examinations and audits from time to time as it

deems necessary.

In addition to examining the receipt and use of Federal

funds, the audit seeks to determine if the campaign has materially

complied with the limitations, prohibitions and disclosure

requirements of the Federal Election Campaign Act of 1971, as

amended ("the Act").

B. Audit Coverage

The audit covered the period from the Committee's

inception, August 21, 1991, through June 30, 1993. During this

period, the Committee reports reflect an opening cash balance of

$-0-, total receipts of $45,341,630, total disbursements of

$43,871,664, and a closing cash balance of $1,686,273.1/ In

addition, a limited review of transactions and a review of

disclosure reports through June 30, 1994 was conducted to gather

information used in the evaluation of the Committee's financial

position and matching fund entitlement.

.U Reported totals do not foot. These amounts were revised via

amended disclosure reports filed on July 2, 1993. (See

Finding II.A.) All figures in this report have been rounded

to the nearest dollar.

Page 5, Approved 12/27/94
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C. campaiqn Organization

The Committee registered with the Federal Election

Commission as the Clinton Exploratory Committee on August 21,

1991. On October 10, 1991 the Committee filed an amended

Statement of Organization to change its name to the Clinton For

President Committee. The Treasurers of the Committee during the

period covered by the audit were Bruce R. Lindsey from August 21,

1991 to September 4. 1991 and Robert A. Farmer from september 4,

1991 to the present. The campaign established Its national

headquarters in Little Rock, Arkansas.

To handle its financial activity, the campaign had a

general operating account from which most disbursements were made,

a payroll account; a draft account; a media account; a collateral

account used for the deposit of Federal funds; a suspense account

used for the deposit of contributions from individuals awaiting

redesianation to the Clinton 'Gore '92 General Election Comoliance

Fund (~Compliance Committee") and a direct mail account which was

inactive. In addition, the Committee maintained a New York

operating account and two fundraising accounts, one located in

Jonesboro, Arkansas and the other in Blytheville, Arkansas.

. The campaign made approximately 29,000 di sburs~ments an{t,.... --'."t'e-ceived:24h"OOO<:otttrfbiiii"ons- -(rom' lSI, a(1~ "p'e r'son's'" - These ,.

contributions totaled $25,197,422.

In addition to contributions, the campaign received

$12,536,135 in matching funds from the United States Treasury.

This amount represents 90.78% of the $13,810,000 maximum

entitlement that any candidate could receive. The candidate was

determined eligible to receive matching funds on November 27,

1991. The campaign made 10 matching funds requests. The

Commission certified 99.2% of the requested amount. For matching

fund purposes, the Commission determined that President Clinton'S

candidacy ended July 15, 1992. This determination was based on

Section 9032(6) of Title 26 of the United States Code which states

that the matching payment period ends "on the date on which the

national convention of the party whose nomination a candidate

seeks nominates its candidate for the office of President of the

United States, ... " see also 11 CFR S9032.6. The campaign

continued to receive matching fund payments through October 2,

1992, to defray expenses incurred before July 15, 1992, and to

help defray the cost of winding down the campaign.

Attachment 1 to this report is a copy of the

Commission's most recent Report on Financial Activity for this

campaign. The amounts shown are as reported to the Commission by

the campaign.

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D. Audit Scope and Procedures

In addition to a review of the qualified campaign

expenses incurred by the campaign, the audit covered the following

general categories:

1. The receipt of contributions or loans in excess of

the statutory limitations (see Finding II.E.);

2. the receipt of contributions from prohibited sources,

such as those from corpo~ations or labor organizations

(see Finding II.F.);

3. proper disclosure of contributions from individuals,

political committees and other entities, to include

the itemization of contributions when required, as

well as, the completeness and accuracy of the

information disclosed (see Finding II.B., C. and D.);

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4 •

5.

6.

7.

8.

proper disclosure of disbursements including the

itemization of disbursements when required, as well

as, the completeness and accuracy of the information

disclosed;

proper disclosure of campaign debts and obligations;

the accuracy of total reported receipts, disbursements

and cash balances as compared to campaign bank records

(see Finding II.A.);

adequate recordkeeping for campaign transactions (see

Finding III.B.);

accuracy of the Statement of Net Outstanding Campaign

Obligations filed by the campaign to disclose its

financial condition and establish continuing matching

fund entitlement (see Finding III.C. & D.);

9. the campaign's compliance with spending limitations;

and

10. other audit procedures that were deemed necessary

under the circumstances.

As part of the Commission's standard audit process, an

inventory of the Committee's records was conducted prior to the

audit fieldwork. This inventory was to determine if the

Committee's records were materially complete and in an auditable

state. The inventory showed that a material portion of the

Committee's records were missing or incomplete. On December 28,

1992, the Committee was sent a letter requesting records

supporting or relating to several areas to be covered by the audit

that had not been provided to the auditors for review during the

?ase 7, Approved l2/27/9~
4

pre-audit inventory. These records included bank records;

workpapers and documentation relating to the Committee's direct

mail and telemarketing programs; workpapers and documentation

detailing the billing and collection for press and Secret Service

travel, as well as, all corporate and charter airline invoices to

include costs for each flight leg and the related passenger

manifest; and, records and workpapers for media purchased by the

Committee. The Committee was afforded 30 days to provide the

additional records. At the end of the 30 day period the records

were judged adequate to commence the audit.

It should be noted that the Committee did not allow the

auditors to have direct access to Committee records. Although

adequate arrangements were negotiated, this restriction added

unnecessary time to the audit process.

Unless specifically discussed below, no material

non-compliance with statutory or regulatory requirements was

detected. It should be noted that the Commission may pursue

further any of the matters discussed in this report in an

enforcement action.

II. Findings and Recommendations - Non-repayment Matters

• •• 101 f ".;.. .. ; ,. t-' "t"; . ... ..... .• ". <.. • -. ... . -. "- l-ssta~elllen ...-o - or: lnancla... ·-Ac-tV1-;r-· ---- -- -------------- --- -----

Sections 434(b}(1}, (2) and (4) of Title 2 of the United

States Code state, in part, that each report shall disclose the

amount of cash on hand at the beginning of each reporting period,

the total amount of all receipts, and the total amount of all

disbursements for the period and calendar year.

The Audit staff reconciled the Committee'S reported

activity to its bank records for the period August 16, 1991

through June 30, 1993. The reconciliation revealed the follOWing

misstatements relative to calendar year 1992.

1. Beginning Balance

The Committee reported a beginning cash balance at

January 1, 1992 of $1,885,699 which was understated by $3,731.

The correct beginning cash balance was $1,889,430.

2. Receipts

The Committee reported total receipts of

$41,785,176 for calendar year 1992. This amount was overstated by

a net amount of $116,489. The correct receipt total was

$41,668,687. Part of the net overstatement resulted from the

Committee'S failure to report in-kind contributions totaling

$16,291 (see Finding II.B.~

Page 8, Afproved 12;27/9~
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3. Disbursements

The total amount of disbursements reported for

calendar year 1992 was $40,944,408 which was overstated by a net

amount of $322,476. The correct disbursement total was

$40,621,932. Although the Committee stated during the pre audit

inventory that all disbursements were itemized on Schedules B-Pi

the summary page schedules and the Schedules B-P (Itemized

Disbursements) for the reports filed covering May, 1992 and July,

1992 were significantly different. Reported disbursements were

overstated by $349,922 for May and were understated by $217,831

for July when compared to bank activity.

4. Ending Balance

The reported ending cash balance at December 31,

1992 of $2,729,468 was understated by $206,717. The correct

ending balance was $2,936,184. This misstatement ~as primarily

due to the effects of the receipt and disbursement misstatements

noted above.

The Committee did not maintain workpapers, bank

reconciliations or other records which demonstrated how the

amounts contained on its disclosure reports were prepared. Absent --- ---- --sucn--information i- -theAudi-t--st~ff-was- not-able-to identify--th1!-------

,- reasons for the misstatements described above.

On July 2, 1993 the Committee filed amended

disclosure reports for each reporting period in calendar year 1992

which materially corrected the misstatements.

,.

In the Interim Audit Report the Audit staff

recommended no further action regarding this matter.

In its response to the Interim Audit Report, the

Committee states that "these misstatements were essentially due to

errors by one of the Committee's computer vendors who failed to

reconcile her records to the accounting data and bank

reconciliation [sic] provided to her by the Committee'S accounting

department."

Although the Audit staff had requested all

workpapers and bank reconciliations during the pre-audit inventory

and during fieldwork, none was provided which related to the

original reports filed with the Commission.

B. Itemization of Receipts

Section 434(b)(3)(A) of Title 2 of the United States

Code states that each report under this section shall disclose the

identification of each person who makes a contribution to the

reporting committee during the reporting period whose contribution

Page 9, Approved 12/2//94
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or contributions have an aggregate amount or value in excess of

$200 within che calendar year, or in any lesser amount if the

reporting committee should so elect, together with the date and

amount of any such contribution.

During a sample review of Committee contributions it was

noted that 8% of the dollar value of contributions tested from

individuals that required disclosure on Schedules A-P were not

itemized. Twelve of the 26 contributions not itemized on

Committee disclosure reports identified in the sample were

received near the end of reporting periods. In addition, 17 of

the sample errors involved contributions received in the June,

July or AugusC, 1992 reporting periods.

Also, as part of the reconciliation of reported activity

to Committee bank records, $50,852 in in-kind contributions were

identified. Of this amount, $16,291 were not found itemized on

the Committee's disclosure reports as required ~y 11 CrR S104.13.

The Committee filed amended disclosure reports for all

of 1991 and 1992 on July 2, 1993. These amended reports

materially corrected the irregularities noted above.

v • In the Interim Audi t Report the Audi t staff recommend.ed '~:"_"' 'c' __ ho'_'fiid:het_a'ction-in'~i::egard t6thtsmatt-e-r." ..•...... ~:.' ~'

In the response to the Interim Audit Report, the

Committee states that it does not agree with the auditors' results

projecting itemization errors of 8%. However, the Committee did

not provide any documentation or other relevant information to

support its position. In addition, the Committee acknowledges

that during June, July and August of 1992, "the Committee

experienced significant difficulties with the vendor preparing the

Primary Committee'S reports." Irrespective of such vendor

problems, the Co~"ittee itself, and its treasurer, have the

responsibility of complying with 2 U.S.C. S434(c'(3)(A) and 11 CFR

Sl04. 3(a)( 4).

C. Disclosure of Occupation and Name of Employer

Section 434(b)(3)(A) of Title 2 of the United States

Code states that each report under this section shall disclose the

identification of each person who makes a contribution to the

reporting committee during the reporting period, whose

contribution or contributions have an aggregate amount or value in

excess of $200 within the calendar year together with the date and

amount of any such contribution.

Section ~31(13)(A\ of Title 2 of the Unlted States Code

states that the term "identification" means in the case of any

individual, the na:::e. the mailing address, and occupation of such

individual, as we:: as the name of his or her emp:oyer.

Page 10, ~proved 12;2~!9~
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Section 104.7(a) and (b) of Title 11 of the Code of

Fede~al Regulations states in pa~t that when the t~easu~e~ of a

political committee shows that best effo~ts have been used to

obtain, maintain and submit the info~mation ~equi~ed by the Act

for the political committee, any ~epo~t of such committee shall be

considered in compliance with the Act. With regard to repo~ting

the identification of each person whose contribution(s) to the

committee and its affiliated committees agg~egate in excess of

$200 in a calenda~ yea~, the treasure~ will not be deemed to have exe~cised best effo~ts to obtain the ~equi~ed information unless

he o~ she has made at least one effo~t pe~ solicitation eithe~ by

a w~itten request or by an oral request documented in writing to

obtain such information f~om the contributor. For purposes of 11

CFR §104.7(b), such effort shall consist of a clear ~equest for

the information (i.e., name, mailing address, occupation, and name

of employer) which ~equest informs the contributor that the

reporting of such information is required by law.

Contributions were tested on a sample basis to determine

if the occupation and name of employer had been reported; and if

not, if best efforts to obtain, maintain and submit the

information were demonstrated. Of the items tested in the sample

that required occupation and name of employer, 49% did not have

the required information. Further, the solicitations that could ------ ------be-associatedwith the contributions did not meet thebest--efforts--__

standard of 11 CFR §104.7(b). On July 1, 1992, the Committee

received a letter from the Commission that pointed out the

Committee's obligation to disclose the full identification of

contributors who donate, in the aggregate, more than $200 or

exercise its best efforts to secure such information. In

addition, the Commission's Reports Analysis Division sent the

Committee several requests for amended disclosure reports that

would supply the missing information.

In response to the notices from the Commission, the

Committee stated that it intends to request this information in

writing from its contributors. During audit fieldwork the

Committee stated that the mailing consisted of approximately

17,000 pieces and was sent in November, 1992. A copy of the

mailing was provided and included a notice informing the

contributor that the requested information is required by law.

The items considered as errors in the sample analysis were

compared to the listing of the individuals who reportedly received

the follow-up mailing. Nearly all of the contributors associated

with identified sample errors were found on the listing. Finally,

a comparison of the sample contributions to the amended disclosure

reports submitted in July of 1993 revealed that the Committee had

provided additional information.

In the Interim Audit Report the Audit staff ~ecommended

no further action in regard to this matter.

?age 11, A??roveC 12!2~. 9~
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The Committee states in its response to the Interim

Audit Report that it "disagrees with this finding." It is stated

further that "best efforts was satisfied prior to the November

1992, mailing. All of the Committee's solicitations included

contributor cards requesting complete contributor information in

compliance with the applicable language in 11 C.F.R. Sl04.7." The

Committee contends that "[Ulnder the regulations in effect in

1991, to 1993, the Committee satisfied the 'b~6t efforts'

requirement if it made one written request per solicitation.

Since all Committee solicitations were accompanied by contributor

cards requesting this information, the Committee's solicitations

fully satisfied this requirement."

The Committee is incorrect in its statement that "All"

of its solicitations requested "complete contributor information

in compliance with the applicable language in 11 C.F.R. Sl04.7."

Several of the Committee's solicitations obtained during audit

fieldwork did not request the name c= employer. ~r state that the

reporting of such information is required by law. One Committee

solicitation contained no request for occupation or name of

employer. In addition, the Committee is erroneous in the

assumption that the Interim Audit Report concludes that best

efforts was demonstrated by the Committee with the November, 1992

mailing. Th~ Interim Audit Report only ackQowledges that the

'mai l'"ing·wa"s·-dorre .. and, ttMt 'ctddi f-;.-o!lal-infoI'ma ~H)n~s·pr(j'l·rl1EKi"bY·-···­

the COlllllli"ttee in amended reports filed on July 2, 1993.

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D. Itemization of Refunds and Rebates

.,.., ... I

c.

Section 434(b)(3)(F) of Title 2 of the United States

Code states that each report under this section shall disclose the

identification of each person who provides a rebate, refund, or

other offset to operating expenditures to the reporting committee

in an aggregate amount or value in excess of $200 within the

calendar year, together with the date and amount of such receipt .

section 431(13)(B) of Title 2 of the United States Code

states in part that in this Act the term "identification" means in

the case of any other person the full name and address of such

person_

The Committee received in excess of $2.5 million in

reimbursements from the press and the Secret Service for travel.

World Wide Travel acted as an agent for the Committee by receiving

reimbursements for travel from the various press organizations and

the Secret Service, depositing these receipts in an escrow account

and ultimately transferring the proceeds, net of any fees charged,

to the Committee's operating account, The reimbursements were

itemized ~n Committee disclosure reports as being from world Wide

Travel which does not accurately disclose the iden~ification of

the persc~ who made the refund pursuant to 2 u"s.~" §434(b)(3)(Fl.

The amended disclosure reports provided no addit~onal information

with respect to press and Secret SerVlce reimbursements.
9

Further the Committee failed to itemize refunds and

rebates (unrelated to press and Secret Service reimbursements

received through world Wide Travel) totaling $11,898 in its

January, 1992 report. These transactions were included on the

July 2, 1993 amended disclosure reports discussed previously.

At the exit conference the Committee stated that it had

received advice from the Commission that press and Secret Service

refunds for travel were not required to be itemized individually

in the Schedule A-F.

In the Interim Audit Report it was recommended that the

Committee amend its reports to disclose as memo entries the

identification (i.e., name, address), date and amount for each

person or organization who made a reimbursement to the Committee

for travel. In addition, it was recommended that any fees paid

with respect to these reimbursements and netted against amounts

received by world Wide Travel should be included as memo

disbursement entries.

The Committee states in its response to the Interim

Audit Report that:

r-'-

~it properly disclosed these reimbursements as

--re'Ceivecf-{romWorldwide Travel 'and that -further

itemization is not required by the Act, regulations or

other Commission precedents."

"2 U.S.C. S 434(a) requires committees to file

reports of receipts and disbursements. Generally all

reporting under the Act, other than debts and

obligations is on a cash basis. The Commission has

addressed a virtually identical issue to this one as to

disbursements made by presidential committees. In AO

1983-25, the Commission concluded that the itemization

of disbursement requirements were met when a publicly

financed campaign reported payments to its media vendor,

and further hold [sic) that the Committee was not

required to itemize payments subsequently made by the

vendor on behalf of the committee. Thus, although

committee vendors are required to maintain documentation

of disbursements made to subvendors on behalf of a

committee, the committee is not required to report or

itemize such disbursements. The collection and receipt

of reimbursements through a third party vendor is

indistinguishable from the situation in AO 1983-25."

"11 C.F.R. § 104.3(a}(4}(v) requires only that a

committee identify each person who provides a rebate,

refund, or other offset to operating expenditures to the

reporting committee in an aggregate amount or value in

excess of $200 within the calendar year. The Committee

satisfied that requirement by reporting the receipt of

press and secret service reimbursements from worldwide

Page 13, .:>;;provEC 12,'2//9-:

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Travel which was operating as a vendor to the Committee

in billing and collectinq press and secret service

reimbursements. All r~cords pertaining to these

collections were made av~ilable for audit as in AO

1983-25. The reporting r~quirements, however, were

fully met by reporting th~ receipts from worldwide. As

in AO 1983-25, the primary Committee's travel vendor was

a distinct legal entity which entered into an arm's

length commercial arrangement with the Committee.

worldwide Travel was neither set up by the Primary

committee, nor was the Primary Committee its only

client. It is and was an ong01ng travel business."

"The Committee sought informal advice from the

audit staff regarding whether these reimbursements must

be itemized and was advised that they need not be. We

believe that advice was fully consistent with the

requirements of S 434(b)(3)(f), § l04.3(a)(4l(v) of the

regulations and AO 1983-25."

"Although, the Primary Committee believes that its

'C reporting was in full compliance with the requirements

,_ of the Act~ the Commit.tee has prepared amendments as '> directed by the auditors itemizing the receipts from

• each press and sec~et service entity to the-,xtent .~ ::_,._'-'''_~l~''-~'-poS:sibl~. :.•'. .•··TheCom.mitte~'!;hail pr'ovide~copies__6f: ''--_

" the revised schedules that have been prepared itemizing

this information. The amendments will be filed as soon

as the revised summary pages and any other necessary

amendments are completed."

Advisory Opinion (nAO") 1983-25 addresses a media

vendor, contracted by a committee to administer its media

production and media buys, and in t.he course of performing its

duties would make disbursements to various advertising entities.

In addition, in AO 1983-25, the follo~ing factors were considered

significant in making its determination: (1) the consultants had

a legal existence that was separate and distinct from the

committee's operations; (2) the consultants' principals did not

hold any committee staff positions; (3) the committee was

conducting arms-length negotiations with the consultants that

resulted in a formal contract; (4) t.he consultants were not

required to devote their full efforts to the contract with the

committee, and the consultants expected to have other media

contracts with other committees and business entities during the

campaign period; and, (5) the committee had no interest in the

consultants' other contracts. In the case at hand, the primary

Committee paid for the chartering of aircraft and maintained

travel manifests, which identified the number of press, secret

service and Committee personnel traveling on a particular trip,

and the cost of each trip. This information was subsequently

provided to Worldwide Travel which acted as a billino and

~ollection agent for the Commlttee. The mon1es rece~ved from

Worldwide did not represent a refund of Committee funds paid to
11

Worldwide Travel for services rendered. The monies represent

refunds for travel incurred by the various press organizations and

Secret Service personnel. Based on its responses and

documentation provided to date, the Committee has not addressed

all the factors noted above. Therefore, the receipts should have

been disclosed as refunds from the organizations which were the

actual source of those funds. The press and Secret Service were

the providers of the refunds to the Committee. Worldwide Travel

was merely a conduit for the receipt of those refunds,

The Committee also states that "informal advice" was

received from the Audit staff. The Audit staff is unaware of any

advice given to the Committee concerning this matter, In

addition, the Committee did not identify the person who provided

this advice.

Although no amended reports were filed with the

Committee's response to the Interim Audit Report, the Committee

has recently filed a series of amended reports on October 14,

1994. These reports aateria1ly correct the public record.

E. Apparent Excessive Contributions from Staff and Other

Individuals

-- -_._- .

r

,

- Section"44-1a-{ a}{ IHA)-of--Title'-2 of-"-the -Unite~'States'­

Code states that no person shall make contributions to any

candidate and his authorized political committees with respect to

any election for Federal office which, in the aggregate, exceed

$1,000.

Section 116.5(b) of Title 11 of the Code of Federal

Regulations states, in part, the payment by an individual from his

or her personal funds, including a personal credit card, for the

costs incurred in providing goods or services to, or obtaining

goods or services that are used by or on behalf of, a candidate or

political committee is a contribution unless the payment is

exempted from the definition of contribution under 11 CFR

100.7(b)(B).

If the payment is not exempted, it shall be considered a

contribution unless, it is for the individual's transportation and

normal subsistence expenses incurred by other than a volunteer,

while traveling on behalf of a candidate or political committee of

a political party; and the individual is reimbursed within sixty

days after the closing date of the billing statement on which the

charges first appear if the payment was made using a personal

credit card, or within thirty days after the date on which the

expenses were incurred if a personal credit card was not used.

"Subsistence expenses" include only expenditures for personal

living expenses related to a particular individual traveling on

committee business such as food or lodging.

Page 15, Approved 12/27/94
12

The Committee's payments of expense reimbursements were

reviewed to determine if contributions had been made. As part of

the Audit staff's analysis, contributions resulting from untimely

reimbursement of expenses incurred by individuals were added to

direct contributions made by these individuals. The review

disclosed that persons were reimbursed for both their own travel

and subsistence expenses as well as expenses for non-travel items

and the subsistence of other persons. In the Interim Audit Report

it was concluded that seven persons made excessive contributions

totaling $75,100~/. At the time of the audit, no expense

reimbursement requests were outstanding. At the exit conference,

the Committee was presented a schedule of these individuals. The

Committee stated at the exit conference that each individual's

circumstance was unique and believed that the Committee had

adequate information to address this matter.

In the Interim Audit Report it was recommended that the

Committee either demonstrate that no contribution occurred with

respect to th~se exppnse rei~~urse~e~ts, includi~9 a demons~ration

that portions of the amounts are exempt from the definition of a

contribution under 11 CFR S100.7(b)(8), or offer any other

information that it believed relevant to the issue.

The Committee states in its response to the Interim

Audit Report t~at "the auditors have -incorrectly categorized them __ : ,-_·_·~=-·_·_!·th'ese·,t:r-ansk.t"ion·s 1 .as·_ek~ss'i.n·and. tintilllely·.reiJUbuis"9lents,._and _

,- the audit analysis o~erstates the amounts of any advance."

..r)

The Committee states further that "[Ojf the seven

persons identified by the auditors, four3/ were Committee staff

and three were unpaid consultants to the-Committee providing

services. As to the staff members, the auditors' computer

print-out provides a cumulative total of all expense

reimbursements received by the individuals without identifying

those which were for personal transportation and subsistence."

The Committee continues that "[K]hen the personal transportation

and subsistence expenses have been subtracted from the analysis,

the contribution figures are dramatically different. The

Committee has prepared a correct analysis accounting for all

permissible advances and reimbursements for transportation and

subsistence expensesi/." [Footnote 3 omitted].

[Footnote 4J - The auditors' analysis of David Wilhelm is skewed

by the inclusion of $6,000 which the Committee decided to

reimburse him for the expenses of his apartment. It would have

been permissible for him to pay these expenses without

reimbursement, but it was also permissible for the Committee to

reimburse him. The timing or this reimbursement is legally

immaterial."

~/ This amour.: :s the sum of the largest outstanding excessive

balance for each individual.

Page 16, Approved 12/27/94
L

.,", '.J I

c13

The Audit staff notes that an explanation of symbols and

methodology used to generate the "computer print-out" was provided

subsequent to the exit conference and again with the Interim Audit

Report that enables the Committee to identify those expenses for

personal transportation and subsistence. In addition, a review of

the Committee's analysis revealed that certain items claSSified as

personal travel and subsistence were for the expenses of persons

other than the individual reimbursed (e.g. food for volunteers)

and the use of "air phone," which are not subject to the 30-60 day

window for reimbursement.

With respect to one individual, Carol Willis, the

committee did provide sufficient documentation which demonstrated

that advances considered excessive contributions in the Interim

Audit Report were immaterial.

With respect to the 56,000 reimbursement to David

Wilhelm for rent, this payment was made at the request of David

Wilhelm in a memo to David Watkins and Eli Segal dated August 15,

1992 for eight months (November, 1991 through June, 1992) rent at

$750 per month. payment was made on August 28, 1992. As noted

above, the Committee states that "it decided to reimburse him for

the expenses of his apartment. It would have been permissible for

.-him-to -pay-these· expenses.withouL.re.1.Jaburse.ent.:."_.'l'be .tOtUlitt.ee.

does not address the reason it wdecided" to reimburse Mr. Wilhelm

although there was no obligation to do so. In an analysis of Mr.

Wilhelm's expenses submitted by the Committee, the Committee lists

the $6,000 rent reimbursement as part of a compensation package;

however, no documentation or agreement was provided to support

such a package. Given the documentation submitted, the $6,000 has

been excluded from this analysis and moved to Section III.B.3.b.,

Campaign Bonuses. This eliminates any excessive contribution by

Mr. Wilhelm.

The Committee contends that "three individuals were

permitted under the Act and regulations to extend credit to the

Committee under the ordinary course of business because as unpaid

consultants they were unincorporated vendors to the campaign under

11 C.F.R. S116.3. Each of the individuals involved volunteered

their uncompensated services to the Committee and billed the

Committee for the costs incurred in connection with providing

those services to the Committee. Each of the individuals involved

has substantial fundraising background and expertise and thus may

be considered an unincorporated commercial vendor. .. Ken Brody,

Shelia Davis Lawrence (whose expenses were reimbursed to her

trust, M.L. Lawrence Trust), and Erskine Bowles were fundraising

consultants to the Committee."

Although the Committee contends that these individuals

are unincorporated vendors with substantial fundraising background

and expertise who extended credit to the Committee i~ thelr

ordinary course of business, i~ failed to provide any

documentation or other relevant information (i.e., list of other

Pa~e 17, ~~proveG 12!27/9~
clients for whom they have performed fundraising services) which

demonstrate that the individuals are unincorporated vendors and

the observed billing practices are in their normal course of their

business. It should be noted that during this period of time, Ken

Brody and Erskine Bowles were investment bankers with the firms of

Goldman Sachs and Company, and Bowles Hollowell Conner and Company

respectively.

Each individual who travelled on behalf of the Committee

was credited with an additional Sl,OOO pursuant to 11 eFR

S100.7(b)(8). Therefore, based on information provided by the

Committee and the additional $1,000 credit per individual for

travel, the Audit staff has determined that five individuals made

excessive contributions totaling $58,482 (see Attachment 2.)

F. Contributions, Extensions of Credit by Commercial

vendors. and Use ~f Corporate Facilities

Secticn 441~i3' 0f Titl~ : ~f ~~~ V~:ted ~t2tes Code

states, in part. that it is unlawful for any corporation or labor

organization to make a contribution in connection with any

election for Federal Office.

Section 441a(a)(1) of Title 2 of the United States Code

_ states, in part, that no per~~m shall make .<;:ol}t:.r.ibu~io.ns to any . •.. ~:_·--:----"can6.i-de te....and__his.·authorized" ct>mini"t-tee' _wl.th '_re9pect":.·to-:an1·--- .

~- election which in the aggregate exceed $1,000.

Section 441a(a)(2)(A) of Title 2 of the United States

Code states, in part, that no multicandidate political committee

shall make contributions to any candidate and his authorized

political committee with respect to any election for Federal

Office which in the aggregate exceed $5,000.

Section 100.7(a)(1), (3), and (4) of Title 11 of the

Code of Federal Regulat:ons state, in par:, that a contribution

includes payments, services or other things of value: Such as a

gift, subscription, loan, advance or deposit of money: the payment

by any person of compensation for the personal services of another

person if those services are rendered without charge to a

political committee, except for legal and accounting services

provided under 11 CFR 100.7(b)(13) or (14); and the extension of

credit by any person unless the credit is extended in the normal

course of business and the terms are substantially similar to

extensions of credit to nonpolitical debtors that are of similar

risk and size of obligation.

Section 116.3(a) and (b) of Title 11 of the Code of

Federal Regulations state, in relevant part, that a commercial

vendor that is not a corporation, and a co,poration in its

capacity as a commercial vendor may extend credit to a candidate,

a political committee 0, another person on beha:: of a candidate

or political committee. An extension 0: c,edit ~ill not be

considered a contribution to the candidate or political committee

PaGe 18, ~croved 12!27!9~

.... .
15

provided that the credit is extended in the ordinary course of the

commercial vendor's!corporation's business and the terms are

substantially similar to extensions of credit to nonpolitical

debtors that are of similar risk and size of obligations,

Further, 11 CFR Sl16,3(c) states that in determining

whether credit was extended in the ordinary course of business,

the Commission will consider:

(ll Whether the commercial vendor followed its established

procedures and its past practice in approving the extension of

credit;

(2) whether the commercial vendor received prompt payment

in full if it previously extended credit to the same candidate or

political committee; and

(3\ whether the extension of credit conformed to the usual

and normal practice in the commercial vendor's trade or industry.

Section 114.9(a) of Title 11 of the Code of Federal

Regulations states, in part, stockholders and employees of a

corporation may make occasional, isolated, or incidental use of

the facilities of a corporation for individual volunteer activity

---in--conneation-wi tl\' :a·-Federal--election'T·---such-persorts-wil:Lbe------__ ·_

required to reimburse the corporation only to the extent that the

overhead or operating costs of the corporation are increased.

A stockholder or employee who makes more than

occasional, isolated, or incidental use of a corporation'S

facilities for individual volunteer activities in connection with

a Federal election is required to reimburse the corporation within

a commercially reasonable time for the normal and usual rental

charge, as defined in 11 CFR lOO.7(a)(1)(iii)(B) for use of such

facili ties.

Sections l14.9(c) and (d) of Title 11 of the Code of

Federal Regulations state, in part, that any person who uses the

facilities of a corporation or labor organization to produce

materials, use telephones, typewriters, or borrow office

furniture, for activity in connection with a Federal election is

required to reimburse the corporation or labor organization within

a commercially reasonable time for the normal and usual charge for

producing such materials in the commercial market, or in the case

of the equipment, the normal rental charge.

Section 114.9(e)(1) of Title 11 of the Code of Federal

Regulations state, in part, that a person traveling on behalf of a

candidate who uses an airplane which is owned or leased by a

corporation other than a corporation licensed to offer commercial

services for travel in connection with a Federal election must, in

advance, reimburse the corporation.

Page 19, ApproveC 12/27/9.:
c

16

During fieldwork the Audit staff identified a number of

corporations and other vendors that were providing services to the

Committee but according to the invoices, generally did not appear

to be billing for anything above their costs. There were no

written contracts provided to the Audit staff for any of the

vendors in this finding except for two lease agreements.

There was a total of 14 vendors that received a total of

$296,355 from the Committee. During the fieldwork, the attorney

for the Committee asserted that much of the activitv would be

permissible under 11 CFR 114.9. A list of th~ venders and

expenditures was given to the Committee at the exit conference on

October 19, 1993.

In the Interim Audit Report, the Audit staff recommended

that the Committee provide additional documentation or any other

comments to demonstrate that the credit extended bv the vendors

was in the normal course of their business, including statements

from the vendor, and th~refore did not represer.t pr~hibited

contributions. The information provided was to lnclude examples

of other customers or clients of similar size and risk for which

similar services have been provided and similar billing

arrangements have been used. Also, information concerning billing

policies for similar clients and work, advance payment policies,

debt collection policies, and billing cycles was requested. The

-.Audi-t. 'staff- -fuF~her--reco1iuae!'lded.tha to, th1! 'Commi tiel! pt'ovide',

documents to support its argument that some of these activities

are permissible under 11 CFR S114.9 or are exempt from the

definition of a contribution under 11 crR S100.7(bl.

Presented below is an explanation for each vendor. The

information in the Interim Audit Report is presented, followed by

the Committee's response and a conclusion.

Goldman Sachs and Company

Before the Committee had a New York office, Goldman

Sachs provided office space to a Committee employee. According to

an April 19, 1993, memorandum in response to Audit staff

questions, "Paul Carey, served as the Northeast finance

coordinator. He reported to Ken Brody, who served voluntarily as

a national finance co-chair and as the New York finance chair from

October, 1991 on. In addition, he was a general partner with

Goldman Sachs through November 30, 1991, and a limlted partner

after that. He was aware of available space at Goldman which the

campaign rented for Paul Carey." Advances by Paul Carey and Ken

Brody are included in Finding II.E. above.

Most of the early expenses were for limousine or taxi

service provided by Goldman Sachs. These expenses ~ere billed and

paid by the Committee timely and are not included in the amount

shown below. The actual offi~e expenses fer Sep:ember, 1991

through December, 1991 were net bllled unti~ February ~9, 1992 and

not paid by the Committee un:il Aprll 16, 1992. The two largest

Page 20, ~~?roved 12/27/9~
17

invoices cover the period December 27, 1991 to March 7, 1992.

They were billed on March 23, 1992 and April 15, 1992. The last

invoice payment was for expenses incurred in October, 1991 but not

billed by the vendor until November 1992. The total amount paid

for these expenses was $16,295.

In response to the Interim Audit Report, the Committee

submitted two affidavits. The first is from Harry Silver, a Vice

President of Goldman, Sachs and Co. He is the Chief Administrator

for the firm's Investment Banking Division. The other affidavit

is from Kenneth Norton, a Vice president with the company and one

of the individuals responsible for the management of the

Accounting Services Department.

According to Mr. Silver, the billing for the office

space and miscellaneous office support services was handled in the

ordinary course of Goldman Sachs business in a manner wholly

consistent with the Division's ordinary commercial practice and

experience. There are no mandatory time parameters within his

Division governing the process of reviewing disbursements and

billing third parties. According to the affidavit, after Mr.

carey's departure, Mr. Silver instructed his staff to collect

market information and make estimates as to the fair market value

for the office space and.office related expenses, and to compile

·-t.he--actual· -costs of the-miscellaneousexpe-nses.

Mr. Norton's affidavit addressed the car service and the

Clinton breakfast in October, 1991. For both, there are no time

parameters governing billing third parties for reimbursement of

the car service and in-house food service incurred by the firm.

According to the affidavit, as a matter of practice and

experience, the processing of general expenses and billing of

third parties ranges anywhere from several months to one year or

more from the time that the expense is actually incurred.

The Commission believes that 11 eFR Sl14.9, by analogy,

applies to partnerships. See AO 1979-22. It appears that Goldman

Sachs has prOVided the use of its facilities to the Committee. In

the view of the Audit Division, the Committee has not demonstrated

that it reimbursed Goldman Sachs for the use of its facilities

"within a commercially reasonable time." 11 eFR Sl14.9(d).

Specifically, the affidavits do not supply any specific examples

of other clients of similar size and risk, examples of similar

types of activity where billings were delayed several months to

over one (1) year or where Goldman Sachs donated its services at

cost.

Manatt, Phelps, Phillips, & Kantor

This firm incurred $120,192 in expenses from September,

1991 to June, 1992. These expenses were billed on July 28, 1992

and paid in two installments of $60,096 each on August 7, and

September 12, 1992. According to the Committee, Mickey Kantor was

the campaign chairman and used employees of the law firm to work

Page 21, Afpro-..e::' 12/27/9~
'-

c.

18

for the Committee. Mr. Kantor volunteered his services but the

firm was reimbursed for the employees' services. In addition to

employees' services, such as secretarial, temporary help and

library research, the firm was reimbursed for expenses incurred

for office rent, meals, telephones, copying and postal services.

The firm appeared to have billed the Committee at cost for certain

items on its invoices.

The Committee submitted additional material on November

10, 1993. According to a memorandum from Manatt, Phelps &

Phillips, ·Our law firm utilizes various billing practices within

our ordinary and normal course of business. One such practice

involves the accumulation of fees and costs during the life of a

project, with the billing at the conclusion of the project."

In response to the Interim Audit Report the Committee

submitted an affidavit from Judi Cunningham, the accounting

manager for Manatt, Phelps & Phillips. According to the affidavit

the fir~ ~illed the Committep C~ January 13. 1992 fe: costs

incurred from September through December, 1991, and sent another

bill on May 31, 1992 for costs incurred from January through April

1992. Ms. Cunningham states that "as of July, 1992, the firm had

not yet received payment for such periodic invoices. As a result,

after consultation with the Campaign, new invoices dated July 28,

.1992 were prepared and forwarded to the Campaign." The July 28, - --~1."9~2-tiill,·'lncludes· ~ht!'previous crrarge'S"a·s-wel-l·-as charges-foY-=Hay'" ~'..•

and June, 1992. According to the Committee, it did not have any

record of receiving the first two billings. The Committee did not

report any debts owed to this firm until August, 1992.

The Committee sent copies of both invoices in question.

The initial invoice dated January 13, 1992 was sent to Manatt,

Phelps' address in Los Angeles to Mickey Kantor. Mr. Kantor was a

partner in the firm. Another invoice dated May 31, 1992 was also

sent to Manett, Phelps, attention Mickey Kantor. The July 28,

1992 bill the Committee finally recognized and paid, was sent to

the Committee in Little Rock, Arkansas. There is no explanation

why Mr. Kantor did not send these earlier invoices on to the

Committee in Little Rock.

In the response, the Committee states that it does not

think it is relevant whether the firm billed on a periodic basis

or not, since it is within the firm's ordinary course of business

to bill at the end of the project. According to the affidavit,

"Pro bono representations typically involve the provision of

volunteer legal services and mayor may not involve the provisions

of costs as well. In those instances where the firm seeks to

recover costs, it is common to bill the costs either periodically

(but not necessarily monthly) or only once, at the end of the

project."

Pace 22, _~pprcveC 12/2'7 '9';
19

It is unde~standable for a firm to bill a client fo~

pe~iodic expenses, yet it appears this firm went to the trouble of

billing the Committee $90 on reb~ua~y 3, 1992 fo~ the use of the

fi~m's boa~d ~oom on reb~ua~y 5th and 6th, 1992. The Committee

does not explain why this vendo~ would no~mally wait to bill

apP~oximately $120,000 in expenses but go to the t~ouble of

billing $90 on a timely basis.

The Commission believes that 11 crR S114.9, by analogy,

applies to partnerships. See AO 1979-22. It appears that Manatt,

phelps, Phillips, and Kanto~ p~ovided the use of its facilities to

the Committee. In the view of the Audit Division, the Committee

has not demonstrated that it ~eimbu~sed Manatt, Phelps, Phillips,

and Kanto~ fo~ the use of its facilities "within a comme~cially

~easonable time." 11 eFR Sl14.9(d). Specifically, the affidavit

does not supply any specific examples of othe~ clients of simila~

size and ~isk, and examples of similar types of activity where

billings we~e delayed several months.

Moza~k P~oductions

Moza~k Productions p~oduced a video for the Committee.

Sta~ting in Feb~ua~y, 1992, Moza~k began paying different

businesses and individuals to p~oduce the video. The last check

written_by Moza~k was on MayA, 1992. Mozark billed the Committae_

$14,019 on May 18, 1992. The Committee reimbursed Kozark on

August 21, 1992. It appears that Mozark is just recovering its

expenses.

The Committee stated at an August 12, 1993 conference

with the auditors, that Har~y Thomason was the produce~ of the

video and volunteered his services. In the Committee's ~esponse

to the exit conference, they stated "Mozark provided production

services to the Committee and billed the Committee in full for

production costs. The personal services of Harry and Linda

Thomason were volunteered under 11 crR SlOO.7Ib)I])."

This statement did not address the question of the

extension of credit in the ordinary course of business.

In response to the Interim Audit Report, the Committee

submitted an affidavit from Har~y Thomason the President of Mozark

Productions. According to Mr. Thomason, it is standa~d

entertainment industry practice for production companies to bill a

client for the direct costs of prepa~ing a video plus a fee for

services of the p~oducers. He and his wife, Linda

Bloodsworth-Thomason volunteered their pe~sonal services in

connection with the production of the videos. The company did not

compensate them fo~ the volunteer services they provided. Mr.

Thomason also states that it is an ordinary business practice for

Mozark to bill at the conclusion of the project. which is

customary in the industry.
, .. -- ----------

20

The personal services of Harry Thomason and Linda

Bloodsworth-Thomason may be volunteered to the Committee, See

11 CFR SlOO.7(b)(3). However, because Mozark Productions provided

other production services to the Committee which are part of its

usual and normal business, the extension of credit for such

services must be made in the ordinary course of business. 11 CFR

Sl16.1(c)(defining commercial vendors); 11 CFR S116.3 (ordinary

course of business standard). The Committee's response did not

give any examples of other clients the company does business with

of similar size and risk for which similar services have been

provided and similar billing arrangements have been used. The

affidavit does not address whether the company requires other

clients to deposit money or make advance payments prior to

services being provided; or, if this is not d~ne, whether the

company normally sends progress billings at different stages of

the project. Mozark does not address its failure to make

follow-up billings and why it took no action to collect this debt.

In the view of the Audit Division, it has not been established

that the extension of credit was made in the ordinary course of

business under 11 eFR Sl16.3.

Walter Kyle

Walter Kyle is an attorney who worked for the Committee

in New Hampshire, starting in October, ~991. He incurred $1,974 ... in-expenses froin Octob'er 24, '1991 to· Febru_ary "24j 1~~. ··F'r"f.)m :'the- •

Committee's Check Request Form, he apparently billed the Committee

on Kay 1 and 4, 1992 and was paid by the Committee on September 3,

1992. He also billed the Committee $13,500 for services between

October, 1991 and Kay, 1992. The invoice is undated, but the

Committee paid Mr. Kyle on September 11, 1992.

In response to the Interim Audit Report, the Committee

submitted an affidavit from Mr. Kyle. He states that his billing

procedures were consistent with the billing practices for other

clients of like size and financial capacity, :~ his work as

plaintiff's attorney, he does not receive payment for services

until after completion of the case. In matters before the United

States Claims Court, his practice bills within 90 days of

completion of the case.

The work described above is not the type of work he

performed for the Committee. Mr. Kyle appeared to be instrumental

in setting up the Committee's New Hampshire offlce. Of the

$13,500 in services paid for, $7,250 was made up of 29 hours work

at $250 an hour for the following: 15 hours to search for NH

headquarters, photographs and review of market conditions; 4 hours

for negotiating the lease and drafting the option agreement; 10

hours for negotiation with the phone company for the 1992 number,

and negotiation with sign companies for refurclshing signs. He

also, billed $6,500 for legal and political consultation between

November. 1991 and May. 199:.

Pace ., . ""t _;poroved 12'27/9~
21

Neither the Committee nor the vendor presented any

information on why the vendor delayed the billing for the $1,974

in expenses. The vendor had made two prior billings to the

Committee, which were not included in the finding, for expenses

incurred in October, 1991 and paid in October, 1991 and January,

1992. He was also reimbursed by the Committee with two drafts for

expenses incurred in January, 1992.

Though part of Mr. Kyle's work would require an

attorney's expertise, it is not the same as being a plaintiff's

attorney or presenting matters before the United States Claims

Court. The response does not address the same type of services

and billings provided by Mr. Kyle to the Committee and similar

clients. Therefore, in the Audit staff's opinion, it has not

established that the extension of credit was in the ordinary

course of business as required by 11 CFR S116.3(c).

Ne~~ark and Company Real Estate, Inc.

The Committee rented office space from this corporation

in New York City starting December 16, 1991. A total of three

offices were rented during the primary campaign and the

convention. The Committee made the following rent payments;

$4,000 on February 3; $750 on March 31; and $750 on April 1, 19~2.

Newmarx.l>entthe.Commi tteea f inalbiUdls.ted._Augus.L.19.,_1992. wHn .. _.. _..._._

a total amount due of $20,730. According to the lease agreement a

$1,500 deposit was due and payable at the time of the execution

and delivery of the lease. It appears the $750 payments made on

March 31 and April 1, 1992 by the Committee were considered

deposits by the vendor. The two payments, totaling $1,500, were

subsequently refunded to the Committee. The August 19, 1992

invoice covered the total rent charges for three offices between

December 16, 1991 and August 15, 1992. If the $4,000 payment is

applied against the earliest rent due, the Committee owed $20,730

for the period from March 1, 1992 to August 15, 1992. The

Committee paid this amount on October 21, 1992.

In response to the Interim Audit Report, the Committee

submitted an affidavit from Margaret Fennelly, a licensed real

estate salesperson associated with the vendor. According to the

affidavit, the vendor did not bill the Committee until August 19,

1992. The reason for the delayed billing is that the parties did

not have an executed lease and the computer system is not equipped

to bill tenants without there being a properly executed lease.

This statement is inconsistent with the information provided by

the Committee during fieldwork. The Committee provided a copy of

the lease it had with the vendor, that was signed only by a

Committee reoresentative. The vendor also billed the Committee at

least three times in February and March, 1992 prior to August 19,

1992 billing demonstrating that the Committee was at some point in

Newmark's billing system. According to the information provided

by the Committee, since this Committee was in the vendor's billing

system, the vendor's normal business practice would have been to

bill the Commlttee on a more frequent basis. The vendor's

Pase 25, '"\- '0' -' .....
affidavit also provides examples of situations when errors

resulted in delayed billing. However, as noted, the explanation

of how this particular situation occurred is not consis~ent with

the documentation gathered during the audit. Therefore, in the

Audit staff's opinion, it has not been established that the

extension of credit was in the ordinary course of business as

required by 11 CFR Sl16.3.

TRADEC

The Committee received invoices from this vendor for

various charges incurred in January, February, and March of 1992.

The charges included travel expenses, office expenses, rent and

professional services. Although the vendor's invoices indicate

"Professional Services($85 per hr. )n, the vendor billed the

Committee at a reduced rate or did not bill the Committee for such

services. Accordinq to vendor invoices noted above, the Committee

incurred actual charges for professional services of $9,308.

However, the Committee was billed o~ly Sl,sno fer professional

services. The difference, $7,808 \$9,306-S1,500), was itemized on

the invoice as "in-kind services." The Committee paid the

expenses for travel, office rent and the reduced charges for

professional services.

When the Audit staff was reviewing this vendor file,·

_~·~~_·_·__·~he"te:was·a.letter··aat-ed P'ebnia rt6 i '~:99 3' 'f"rom th~ CoDimi tt:'lt~t_Q. __·

"C:- TRADEC. The letter contained the following information, RA review

of our records indicates that during January, February, and March

1992, Tradec performed certain services for which you did not bill

the Clinton for President Committee. Federal law prohibits

corporate contributions in connection with federal elections,

including the donation of goods and services. Accordingly in

order to comply with federal regulations, we have enclosed a check

in the amount of $7,807.50 to cover the cost of such services."

,. .

,

.- Additional information subnitted by the Committee on

November 10, 1993, restated the above information, and included

that "[a]ccordingly, there was no extension of credit outside the

normal course of business in the amount of $7,607.50."

In response to the Interim Audit Report, the Committee

submitted an affidavit from Scott Jackson, President of Trade

Development Consortium, Inc. He states that he acted as a finance

co-chairman for the Committee volunteering his time to the

Committee and that he did not receive compensation from the firm

for the time he volunteered to the Committee. "However, pursuant

to my understanding with the Commi~tee, I accounted for my

personal time and the personal time of Patrie Booth spent

supervising the maintenance of a fundraising database and

performing event coordination even though these services qualified

as exempt volunteer services on the invoice, pursuant to 11 C.F.R.

100.7(b)(3). Because of confusio~ o~er the meaning of 'in-kind'

services en the involce the Commlttee paid the $7,608,
23

notwithstanding the fact that such services qualified as exempt

volunteer services pursuant to 11 C.F.R. 100.7(b)(3). Thus, the

Committee paid TRADEC and TRADEC received payment in full even

though it was not required."

The vendor never billed the Committee for the $7,808.

The Audit staff is in agreement with the Committee. According to

the information submitted, TRADEC did not payor incur any

liability to Mr. Jackson or Mr. Booth. Therefore, the Committee

overpaid this corporation by the $7,808. The Committee should

attempt to have the vendor refund this amount. The $7,808 has

been included as an accounts receivable on the Committee's NOCO in

Finding III-C.

American Federation of Teachers

This labor organization paid for an advertisement that

ran in the ~ew York Times on AprilS, 1992. The original invoice

sent to the Committee, dated May 14, 1992 for $12,126 was

apparently filled out incorrectly (bill to name was incorrect).

According to a letter from the American Federation of Teachers

("AFT") dated February 3, 1993, the Committee authorized this paid

political advertisement.~/ A corrected invoice dated February 2,

1993 accompanied this letter. The Committee paid AFT on February -- ----. -- ---1-8, -19-93.---it-should benot-ed t:hat i t __does_noLappeac_that __the _

payment originated from American Federation of Teachers' Committee

on Political Education (Federal Account).

The Committee submitted a letter from the AFT which

stated the same information as above, and also that the AFT did

not realize their mistake until late January, 1993. According to

the Committee, "there was an error in preparation of the original

invoice from AFT. As soon as it was discovered, a new invoice was

issued to the Committee and it was paid promptly. This was fully

in accordan~e with the requirements of 11 CFR S 114.9 and 116.3." .., '- :

In response to the Interim Audit Report, the Committee

submitted an affidavit from Rachelle Horowitz, the political

director of the AFT. The affidavit supports the clerical error

preViously addressed in the finding. The response does not

address the apparent failure to pay the expenses from the American

Federation of Teachers' Committee on Political Education (Federal

Account). Also, the response does not address who in the

Committee authorized the advertisement, or why the Committee did

not estimate the amount of the bill and disclose it as a debt on

their FEC reports.

The ne~spaper advertisement contained the following: "Paid

for and authorized by the Bill Clinton for President

Committee."

Page 27, Approved ~2 27/94
.~ .

.

24

Given the information provided, in the Audit staff's

opinion the transactions discussed above constitute a contribution

from the American Federation of Teachers for the period April,

1992 until February, 1993 in the amount of $12,126 pursuant to 11

CFR S100.7(a)(1).

Occidental Petroleum

The Committee provided the following information in

response to the Audit staff's questions concerning payments to

this vendor. "Jerry Stern was an executive of Occidental

Petroleum Corporation who was a volunteer in the campaign. He

retired from the company at the end of last year (1992). The

payments made to OPC were reimbursements for expenses incurred for

use of Corporate facilities pursuant to 11 C.F.R. Sl14.9(dl."

Most of the expenses paid to Occidental Petroleum were for

secretarial services and other office expenses. The first invoice

received by the Committee was dated April 21. 1992 for office

expenses totaling 53,055 incurred during the peri~d January, 1992

through February 28, 1992. This invoice was paid on May 5, 1992.

The Committee received another invoice dated May 27, 1992 in the

amount of $1,446 for office expenses incurred during the period

March 2, 1992 through March 31, 1992. The Committee paid this

invoice on September 8, 1992. The last billing was for expenses

incurred January 1992 through June 30., 1992. However, most of the

~~._~._._.: __expenses' w_e-re :-ro.r';'Apri1 ·tht'ough·;Tune·;·· ThelOe 'e~penses_. tQt_ci'.I.Jng_·

$7,381 were billed August 31, 1992 and paid October 9, 1992.

,--

'-

:.r

Jerry Stern also received a reimbursement of $4,475 on

August 13, 1992, from the Committee, for expenses incurred in

February, 1992. In addition, a $3,000 charge, also incurred in

February, 1992, appeared to have been paid by Jerry Stern, but

there was no evidence of a reimbursement having been made.

In response to the Interim Audit Report, the Committee

submitted an affidavit from Chester T. Oliver, Director of

Accounting Services of Occidental Petroleum Corporation. Mr.

Oliver states that the vendor is not a commercial vendor and the

corporate headquarters office does not extend credit in the

ordinary course of its business. He continues, "the process was

time consuming because Occidental is not in the business of

providing secretarial assistance, rental of office equipment, and

it is not normal for Occidental to bill for these items in the

course of its business." The Committee also submitted an

affidavit from Gerald M. Stern, adequately documenting the $3,000.

In the Audit staff's opinion, 11 CFR §116.3 does not

apply to Occidental Petroleum since it is a corporation not

engaged in its normal commercial activities. Under 11 CFR

§114.9(al, a corporate executive used the corporation's facilities

for individual activities in connection with a Federal election

and Occidental Petroleum was reimbursed within a commercially

reasonable time.
--~-~-----------------------------'"""'!""!

25

Democratic Party of Arkansas (DPA)

There was a written agreement between the Committee and

the Democratic party of Arkansas signed January 24, 1992. Under

the terms of the agreement the DPA would lease space with

telephones for $10 a day. The DPA sent the Committee an invoice

on May 13, 1993 for $7,718 which covered the conference center for

the period February 10 to July 10, 1992 for $1,360 ($10 x 136

days) and $6,358 in telephone charges. The Committee paid the

entire amount May 19, 1993.

In response to the Interim Audit Report, the Committee

states that administrative error due to a lack of sufficient

personnel and financial resources delayed issuance of the invoice.

They also submitted an affidavit from Greg B. Brown, Treasurer of

the Democratic Party of Arkansas, that supported what the

Committee had said. In fact, Mr. Brown states that it was the

Committee that advised the DPA that they had never received an

invoice.

In the Audit staff's opinion, the Committee has failed

to establish that these charges are exempt from the definition of

a contribution under 11 CFR S100.7. The amount advanced exceeds

the contribution limitation by $2,718 ($7,718 - $5,000

lim!~~~ion). However, based on the Committee's response and_the

relatively small amount of the excessive contribution no further

action is warranted.

The Sutherland Company

During the period October 25, 1991 to June 16, 1992 the

corporation incurred expenses on behalf of the Committee totaling

$29,298. Various invoices detailed charges for travel, printing

telephone, postage, vendor staff coordination of events (including

arrangements, invitations, call books, etc. l, advance work,

contract labor, campaign banners, bumper stickers, fliers,

fundraising and radio advertising. Finally, included in the above

invoices were charges for the use of an aircraft totaling $3,214.

The flights occurred November, 1991 through February 4, 1992, but

were not paid until May, 1992. A later flight in April, 1992 was

not paid until July 2, 1992. The vendor billed the Committee on

January 20, March 6, April 23 and June 15, 1992. During the

period May 5, 1992 through July 2, 1992, the Committee paid

Sutherland Company $29,298.

Not included in the finding, is an early payment to this

vendor for Sutherland Co. services 9/15-10/15/91 for 52,000. The

company apparently made no other billings for its services after

that date.

In response to :he Interim Audit Report, the Committee

submitted an affidavit frc= Tucker Su~herland. The affidavit does

not describe his position ft:th the corporation, but it does state

that Craig Sutherland ran :te corporation'S Aus~in office, and
...,,"

o.

26

left the company in 1992 to join the Committee. He also states

that the primary business of the company is political campaign

consulting and political communications. The Committee's records

show that Craig Sutherland received his first paycheck from the

Committee on December 16, 1991.

According to the affidavit "All credit extended to the

Clinton for President Committee was in the normal course of

business for the Sutherland Company and billed according to our

normal business practices." Mr. Sutherland states, "It is normal

operating procedure for us to bill both political and other

commercial clients on a project basis after the project is

complete and we have collected bills from subcontractors involved

in the project."

According to the affidavit, the corporation does not own

any aircraft. The vendor states that the company arranges for

client transportation for events in its normal course of business.

Based on the response, in the Audit staff's opinion,

it has not been established that the extension of credit was in

the ordinary course of business. 11 CFR Sl16.3(cl .

Hellrinq Lindeman Goldstein and Siegal

", "11'hi"s' law "firm incurr:-eJJ'$S~~620'"for 'exp_enses" thro:ttgh __J_un'e__

15, 1992 in connection with the "organization and management of

Yale Law School Graduates for Bill Clinton". There is a notation

on their invoice for $700 for in-kind contributions. Therefore,

the firm credited this amount against the total expenses. The

firm billed the Committee $5,920 on September 4, 1992 and the

Committee paid the vendor on November 19, 1992.

In response to the Interim Audit Report, the Committee

submitted an affidavit from Robert S. Raymar, an attorney-at-law

in New Jersey and a member of the law firm of Hellring Lindeman

Goldstein and Siegal. According to the affidavit, starting in

November, 1991 he volunteered his free time to the Committee in

connection with the organization and management of the Yale Law

School Graduates for Bill Clinton.

The firm intended to bill the Committee for all

out-of-pocket disbursements and for all other disbursements after

the conclusion of the matter. "This is consistent with the manner

the firm bills numerous matters, including EE£ bono matters,

contingent fee negligence matters, matrimonial matters, and

matters in which the disbursements are not expected to be or do

not prove to be significant."

Concerning the in-kind contribution, Mr. Raymar stated

that on April 3, 1992 and May 16, 1992, he and his wife wrote two

checks totaling $700 payable to the la~ firm fer the firm's

out-of-pocket expenses. According to Mr. Raymar, based cn these

two checks, the firms out of pocket expenses were paid in full

Pc::e 30, ~9.!=!=,r()ved 12/27/94

.'.
27

through April 20, 1992. Both individuals notified the Committee of

their in-kind contributions on April 3, 1992 and May 19, 1992.

The Committee reported the in-kind contributions.

According to the affidavit, the balance of the expenses

were incurred between April 21, 1992 and June 15, 1992, except the

secretarial services of $4,727 which were incurred at some point

between November, 1991 and June 15, 1992.

Initially, Mr. Raymar was going :Q bill the Committee

for expenses incurred between June 15, 1992 and July 15, 1992.

After the convention, he concluded that he "might inadvertently

and inappropriately be allowing the primary election organization

to subsidize the general election campaign." After June 15, 1992,

Mr. Raymar states he turned his efforts to the Democratic National

Committee's general election fundraising and other activities.

On the September 8, 1992 billing, :he firm is also

billing the ONC Victory Fund/Federal Account for $4,741.81 for

expenses incurred from June 16, 1992 to August 31, 1992 in

connection with the Yale Law School Graduates for Victory Fund

'92. According to the affidavit, it took time to properly

allocate the expenses between the two Committees, which is why the

billing wasn't sent until September 8, 1992. The firm also sent

--------additionaLlehters ·requesting payment on October 15', 1992_and_

November 25, 1992.

Given the explanation provided, coupled with the

underlying documents, the relatively small amount and the firm's

subsequent attempts to collect the amount, the Audit Division

believes that no further action is warranted.

Sun Building Associates

The Committee rented office space in Washington, D.C.

from this vendor. There was no written lease agreement and no

deposit apparently required. The Committee occupied the offices

for the first four months of 1992 and made no payments during that

time. The Committee occupied 2,310 square feet for the first

three months and 4,621 square feet in April. The vendor sent

letters on April 8 and April 30, 1992 requesting payment. The

April 30, 1992 letter was sent by attorneys threatening legal

action if the Committee did not vacate the premises. The

Committee paid the full $12,390 on May I, 1992.

In response to the Interim Audit Report, the Committee

submitted an affidavit from Charles A. Trainum, Jr., a managing

general partner of Sun Building Associates. According to the

affidavit, the space the Committee rented ~as vacant from August,

1987, to January, 1992. The Committee only wanted the space

during the duration of the campaign. Mr. Trainum agreed to lease

the Committee some or all of the ninth floor space. It was agreed

that he would try to lease the space on a permanent basis and that

he would require them to vacate the buildlng on 30 days notice.

Pace 31, ..:;';::proveC 12/ 2~ 19';
28

The vendor represents that it customarily rents such vacant space

to short term or temporary tenants based on verbal as opposed to

written agreements. For instance the vendor currently rents space

to a local foundation, on a basis identical to the space rented to

the Committee.

Mr. Trainum continues, that since his law offices are in

the same building, and given the temporary nature of the

arrangement, he decided to handle the billing for the space

himself rather then turn it over to Sun Building Associate's

management agent, Michael Management Company. The Committee was

constantly moving its location on the ninth floor constantly

expanding and contracting its space. Because of this and that he

was busy in his law practice he did not bill the Committee for

rent until April 1, 1992. At that time, after consulting with the

Committee, he determined that the Committee had occupied an

average of one-half of the ninth floor office space.

The Committee contin~e~ to ~ent :h:s space through the

end of July, 1992. Between July and November, 1992, the space was

leased by to the Clinton/Gore '92 Committee (General Committee).

Starting in May, the Committee paid its rent to Michael Management

Company. At the time of its first billing on May 1, the Committee

was billed for the January through April rent, as well as the May

rent. The Committee did not pay this rent until June 23, 1992.

". <D-mce"_t.he_ Commi_ttee __ was 1ate__ makiAg Lts May and__Juhe r_e_nt_~ "_

payments, both payable at the first of each month, it was assessed

a 5% late payment fee on a bill dated July 1, 1992 which was paid

on July 28. The General Committee made prompt monthly payments

after that through November, 1992.

Given the explanation provided, coupled with the

underlying documents, the subsequent action of the vendor with

respect to the May through July rent and the vendor's subsequent

attempts to collect the amount, in the Audit staff's opinion, no

further action is warranted.

O'Keefe Ashenden Lyons & Ward

This firm incurred expenses from October 16, 1991 to

March la, 1992. The firm billed the Committee for their expenses

on March 11 for $2,240 and on March 20, 1992 for $6,418. The

Committee reimbursed the firm S8,658 on September 8, 1992. The

firm's invoice appeared to be just recovering expenses they

incurred. The letter accompanying the March 20, 1992 billing

suggests that the agreement between the firm and the Committee

called for the expenses to be billed only after the Illinois

Primary.

In response to the Interim Audit Report the Committee

submitted an affidavit from J. Michael Heaton a partner in the law

firm. According to the a:fida·::t, :t :s the custom, in the

ordinary course of business, to 0:11 expenses a: the conclusion of

a matter in non-recurring transactions, such as real estate tax,
29

wills, probate, as well as all pro bono work, civic affairs, and

other community relations. The firm usually has no problems

collecting from clients. They have "no standard practice of

actively pursuing collection efforts for sometimes up to a year or

more, a policy adopted by the firm as a matter of business

courtesy conducive to its policy of low-key, non-aggressive client

relations suitable to its practice and clientele." Mr. Kevin M.

O'Keefe volunteered his time and was not compensated by the firm

for his volunteer services.

The Commission believes that 11 CFR Sll4.9, by analogy,

applies to partnerships. See AO 1979-22. It appears that of the

$8,658 reimbursed to this vendor, $2,240 represents the use of

firm facilities. In the view of the Audit Division, the Committee

has not deaonstrated that it reimbursed O'Keefe Ashenden Lyons &

Ward for the use of its facilities "within a commercially

reasonable time." 11 CFR §114.9(d). With respect to the

remaining 55,418 reimc~rsed for travel, in the Audit staff's

opinion, it has not been established that this extension of credit

was in the ordinary course of business pursuant to 11 CFR

5100.7(a)(4). Specifically, the affidavit does not supply any

specific examples of similar types of activity where billings were

delayed several months.

TAC Air

The Committee used an aircraft, owned by TAC Air, which

is a division of Truman Arnold Companies, a corporate entity. TAC

Air is licensed to offer commercial services for travel. A review

of the vendor file indicated that invoices were paid in a timely

manner for the use of this aircraft except for trips taken on

January 27, 1992. The flight itinerary for the January 27th

flights included an invoice from TAC Air dated February 24, 1992,

indicating that Committee personnel traveled to various locations

in South Dakota, and Colorado incurring a liability of $9,370.

Although these flights were made in January, 1992, and invoiced in

February, the Committee did not reimburse TAC Air until August 10,

1992. In addition, it appeared that a liability existed in the

amount of S4,232 for flights taken on May 1, 1992, and invoiced on

May 13, 1992 for which no payment had been found.

The Committee submitted in its response to the Interim

Audit Report the affidavit of James H. Day, Administrative Vice

President of Truman Arnold Companies, ("TAC"). Mr. Day states

that "TAC prOVides various commercial aviation services through

its TAC Air operating division. TAC Air is a licensed air charter

operator .... In addition to the use of TAC Air charter aircraft,

the Committee used TAC's private corporate plane on several

occasions. As required, the Committee paid for the use of the

corporate plane in advance and paid for the use of charter

aircraft subsequent to the flight within the course of TAC Air's

business." Mr. Day states further that "[oJn April 6, 1992 TAC

erroneously applied a SlO,859.00 payment (check 16650) for the use

of the corporate plane to the Committee's charter account. This

;;:p::-:JveC ~2'27/9';
30

credit to the account would have cleared invoice #11390

($9,370.18) in our accounting system and in accordance with our

normal billing procedures no past due notices would have been

mailed to the Committee. Thus, neither TAC Air nor the Committee

would have been aware of the outstanding invoice."

Although, Mr. Day states in his affidavit that "neither

TAC Air nor the Committee would have been aware of the outstanding

invoice," it is noted that the Committee reported the $9,370 as a

debt owed by the Committee in its original disclosure reports

filed with the Commission for reporting periods Febru~[y, 1992

through August, 1992. Finally, Mr. Day states that the April 6,

payment of $10,859 for the USe of the Company's corporate aircraft

was inadvertently applied to the charter account. However, Mr.

Day does not address why TAC did not pursue the balance owed for

the use of the corporate aircraft, although he acknowledges in his

affidavit that payment is "required" to be made in advance for the

use of this aircraft.

In the Audit staff's opinion, it has not been

established that the extension of credit was made in the ordinary

course of business under 11 CFR Sl16.3.

The Committee provided a second affidavit from Mr. Day

which states that a charter flight originally scheduled for May 1,

._•• --.~ .'1992 did' not occur an'd'no -li-abi-l-ityexists in the- amouht-oI-

$4,232. No further action is necessary with respect to this

flight.

'.,{:

As previously mentioned, in the Interim Audit Report,

the Audit staff recommended that the Committee provide additional

documentation or any ether comments to demonstrate that the credit

extended by the vendors was in the normal course of their

business, including statements from the vendors, and did not

represent prohibited contributions. The recommendation stated

that the information provided should include examples of other

customers or clients of similar size and risk for which similar

services have been provided and similar billing arrangements have

been used. Also, information concerning billing policies for

similar clients and work, advance payment policies, debt

collection policies, and billing cycles should be included. The

Audit staff further recommended that the Committee provide

documents to support its argument that some of these activities

are permissible under 11 CFR Sl14.9 or are exempt from the

definition of a contribution under 11 CFR SlOO.7(b).

The Committee did provide affidavits from all the

vendors, but none of the vendors provided specific examples of

other clients or customers as required in the recommendation.

Specifically, in the case of Goldman Sachs and Company, Manatt

Phelps, Phillips and Kantor, and O'Keefe Ashenden Lyons & Ward,

the Audit Division believes that the Committee has not established

that these firms have been reimbursed by the Committee for use of

its facilities "within a commercially reasonable time." 11 CFR

Page 3':, Approved 12/27/9':
31

Sll4.9(d). Additionally, in the view of the Audit Division, it

appears that the American Federation of Teachers has made a

contribution pursuant to 11 CFR S100.7(a)(1).

In the Audit staff's opinion, with respect to Mozark

Productions, Newmark and Company Real Estate, Inc., The Sutherland

Company, Walter Kyle and TAC Air, the Committee did not

demonstrate that the companies followed their established

procedures, their past practice, and whether the extension of

credit conformed to the usual and normal practice in their

business or in their industry as required by 11 CFR Sl16.3. The

Committee has been able to establish that Occidental Petroleum did

not make a contribution under 11 CFR Sl14.9.

In the Audit staff's opinion, the amount of the

contributions made by these 9 vendors, corporation, and

partnerships by virture of their extension of credit and other

advances is $246,162. Attachment 3 contains the contribution

amount for each vendor, corporation, and partnership.

Based on the additional information provided by the

Committee, in the Audit staff's opinion, no further action is

warranted with respect to Occidental Petroleum, the Democratic

party of Arkansas, Hellring Lindeman Goldstein and Siegal, and Sun

Building--Associates. - Since noliabil-ity ex-istedwith--- TRADEC,---

the Audit Division believes that there was no extension of credit

by this vendor to the Committee.

III. Findings and Recommendations Related to Title 26 of the

United States Code

A. Calculation of Repayment Ratio

Section 9038(b)(2)(A) of Title 26 of the United States

Code states that if the Commission determines that any amount of

any payment made to a candidate from the matching payment account

was used for any purpose other than to defray the qualified

campaign expenses with respect to which such payment was made, it

shall notify such candidate of the amount so used, and the

candidate shall pay to the Secretary an amount equal to such

amount.

Section 9038.2(b)(2)(iii) of Title 11 of the Code of

Federal Regulations states, in part, that the amount of any

repayment sought under this section shall bear the same ratio to

the total amount determined to have been used for non-qualified

campaign expenses as the amount of matching funds certified to the

candidate bears to the total amount of deposits of contributions

and matching funds, as of the candidate's date of ineligibility.

The formula and appropriate calculation with respect to

the Committee's receipt activity is as follows:

Pace 35, _~~P?~8Ved 12 2:/9~
32

Total Matching Funds Certified to the

Candidate as of his date of ineligibility - Repayment Percentage

Numerator + total contributions deposited

by the candidate as of his

date of ineligibility

$6,493,027

$6,493,027 + $18,639,995

.258346

cTherefore, the r~payment ratio is 25.8346~

B. Apparent Non-qualified campaign Expenses

section 9032.9(a) of Title 11 of the Code of Federal

Regulations, in part, defines a qualified campaign expense as one

incurred by or on behalf of the candidate from the date the

individual became a candidate through the last day of the

candidate's eligibility; made in connection with his or her

campaign for nornina:ion; and ne:~her the :~~~:~ence n~r the

payment of which constitutes a violation of any law of the United

States or the State in which the expense is incurred or paid.

Section 9033.11(a) of Title 11 of the Code of Federal

Regulations states, in part, that each candidate shall have the

burden of proving t;hat disbursements made by the candidate__0I:_hAs

---ot -he-CCluth-onzed--c-oiliiiii ttee( s r or persons authorized to make

expenditures on behalf of the candidate or committee(s) are

qualified campaign expenses.

Section 9033.11(b)(1) of Title 11 of the Code of Federal

Regulations specifies the record keeping requirements for

disbursements greater than $200.

Section 9033.11(b)(2) of Title 11 of the Code of Federal

Regulations, in part, requires that for all other disbursements a

candidate must present a record disclosing the identification of

the payee, the amount, date and purpose of the disbursement if

made from a petty cash fund, or a canceled check negotiated by the

payee that states the identification of the payee, and the amount,

date and purpose of the disbursement.

Section 9034.4(a) of Title 11 of the Code of Federal

Requlations, states that all co~:ributions received by an

individual from the date he or she becomes a candidate and all

matching payments received by the candidate shall be used only to

defray qualified campaign expenses or to re?ay loans or otherwise

restore funds (other than contributions which were received and

expended to defray qualified campaign expenses) which were used to

defray qualified campaign expenses.

Section 9034.5(c)(1\ and (2) of Title 11 of the Code of

Federal Regulations state, in par:, that t~e term capital asset

means any property used in the operation 0: the campaign whose

purchase price exceeded $2,000 ~he~ acqulred by the committee.
33

Property that must be valued as capital assets under this section

includes, but is not limited to, office equlpment, furniture,

vehicles and fixtures acquired for use in the operation of the

candidate's campaign. A list of all capital assets shall be

maintained by the committee. The fair market value of capital

assets may be considered to be the total original cost of such

items acquired less 40%, to account for depreciation, except that

items acquired after the date of ineligibility must be valued at

their fair market value on the date acquired.

The term other assets means any property acqulred by the

committee for use in raising funds or as collateral for campaign

loans. Other assets must be included on the candidate's statement

of net outstanding campaign obllgations if the aggregate value of

such assets exceeds $5,000. The value of other assets shall be

determined by the fair market value of each item on the

candidate's date of ineligibility or on the date the item is

acquired if acquired after the date of ineligibility.

Section 9003.4(a)(1) of Title 11 of the Code of Federal

Regulations states, in part, that a general election candidate may

incur expenditures before the beginning of the expenditure report

period, if such expenditures are for property, services or

facilities which are to be used in connection with the general

-------~le-ction-and which are uS-edduring the expenditure report-period.-

Such expenditures will be considered qualified campaign expenses.

Examples of such expenditures include but are not limited to:

expenditures for establishing financial accounting systems,

expenditures for organizational planning and expenditures for

polling.

Section 102.10 of Title 11 of the Code of Federal

Regulations, in part, requires all disbursements by a political

committee, except for disbursements from the petty cash fund,

to be made by check or similar draft drawn on accounts established

at the committee's campaign depository or depositories.

1. Duplicate Payments or Overpayments

During the review of the Committee'S vendor files

the Audit staff noted a number of instances where the Committee

had apparently paid the same invoice or charges more than once or

otherwise overpaid a vendor. In some cases payments were made by

both check and draft for the same expenses. In other situations

not all of the payments made were credited to the Committee's

account by a vendor before preparlng subsequent billings. In some

instances the same charges were paid by the Committee more than

once within the same check. In a few cases the vendor credited

overpayments by the Committee t~ charges incurred by the

Clinton/Gore '92 Committee (General Committee). These amounts are

considered to be Accounts Receivable frem the General Committee

and are included on the stateme~t of Net Outstanding Campaign

Obligations (NOCO) at Section I::.C. The remaining amounts are

shown on the NOCO as Accounts Receivable from the vendors

?a~e
34

including those that were recovered after the NOCO date.

Attachment 4 is a listing of the duplicate or overpayments

identified including the status of the amount. A number of the

vendors that are shown on the attachment are also discussed in

part 3 of this finding. The Interim Audit Report noted that,

should additional documentation be made available, some apparent

duplicates may be resolved or additional duplicates identified.

In the Interim Audit Report duplicate or overpayments to 33

vendors totaling $248,226 were identified. The transactions

explained above were presented to the Committee during fieldwork

and at the exit conference. The committee sent in additional

information in response to the exit conference on November 10,

1993. Discussed below are some of the individual items listed on

the attachment as well as information provided by the Committee:

o The Committee was direct billed by Alamo for much of its

rental car usage. A thorough review of the documentation

showed that a number of charges were paid more than once

and as many as 4 times. After this problem was brought to

the Committee's attention, the Committee obtained a

reconciliation of its account from Alamo which indicated

that the duplicate payments were applied to general

election expenses. The reconciliation shows that the

amount due from the General Committee is $43,420. This

amount was reported by the Committee as due from the

---General-Committee.

., .

o

o

The Committee made one payment to Verner Liipfert

Consulting Services, Inc. on October 27, 1992 for $13,846.

This vendor billed the Committee on five different

occasions with each bill reflecting the sum of all

outstanding charges to date. When the Committee paid the

vendor they added the total amount owed from each of the

cumulative invoices. The Committee reported the

overpayment as a receivable and a refund on the Second

Quarter 1993 FEC Report .

C & P Telephone was paid for the same invoice on two

different checks for $3,360 each. We also determined that

the Committee made $10,611 in phone deposits. Of this

amount $2,766 was applied to invoices. The Committee

another $1,534 in refunds. This left a remaining balance

of $6,311 in phone deposits. The Committee submitted

additional documentation that established that $5,800 in

deposits from the Committee was refunded and deposited

into the General Committee accounts on April 27, 1993. In

response to the exit conference, the Committee submitted

additional information that there were additional

overpayments of $3,606, which were also applied to General

Election expenses. A total of $9,406 :S5,800 + $3,606)

was due from the General Committee.

?ace 38, Approved 12!27/9~
·, .~,

o

o

o

35

A payment was made to Southweste~n Bell Telcom on August

19, 1992 fo~ $17,257. Anothe~ payment for $17,054 was

made on October 15, 1992. The same invoices that were

attached to the second check were also associated with the

first check. In the Interim Audit Report it stated that

the $17,054 had been refunded to the Committee. This was

concluded based on the receipt of a refund check in the

amount of $25,115 for Southwestern Bell Tel@com. However,

the Primary Committee subsequently transferred the $25,115

to the General Committee. The General Committee

transferred to the Primary Committee $19,100 received from

Southwestern Bell Telecom for refunds of deposits due the

Primary Committee. These transactions do not resolve the

$17,054 duplicate payment made by the Primary Committee.

Based on the information supplied by the Committee, the

$17,054 is either receivable from the General Committee, a

receivable from the vendor, or a nonqualified campaign

expense paid after the date of ineligibility.

Initially the Strategic Political Response vendor file did

not have any of the invoices associated with the

$2,315,689 in payments to the vendor. The Committee was

able to reconcile this file and determined that this

vendor vas overpaid by $49,856. The Committee obtained a

refund of this amount on August 9, 1993. According to the

TnformaHonsublDiHed in response to the exit conference, -

this vendor would always bill the Committee on an

estimated basis. When the jobs were all completed, a

final account reconciliation was sent to the Co.-ittee on

June 30, 1993. The Committee contends that there was no

way for the Committee to determine the amount of

overpayment until all the jobs were completed. Additional

issues regarding this vendor are discussed in section 2.

of this finding.

Initially the Committee paid Mary Leslie $22,266 for an

invoice dated May 28, 1992 with two checks. These checks

were dated July 10 and August 5, 1992. On August 19,

1992, the Committee paid a duplicate invoice for $17,921

dated May 28, 1992 showing fewer charges. According to

the Committee's response to the exit conference

presentation of this issue, the Committee states that

there was no duplicate payment. "Ms. Leslie applied

payments received to commissions earned rather than to

specific invoices". The Committee sent a memorandum from

Mary Leslie's supervisor, Rahm Emanuel, stating he

authorized payments totaling $90,180 in accordance with

her agreement with the Committee. According to the

Committee, the vendor received $53,049 in commissions.

The Interim Audit Report stated that absent a scatement

from the vendor showing how the funds were applled and

amounts due determined, the amount appears to be a

duplicate payment.
-,. - -,

36

In response to the Interim Audit Report the Committee

submitted an unsigned cont"act with Mary Leslie and

Associates. The contract did not add any additional

information concerning this duplicate payment. The

Committee also states that Ms. Leslie has agreed to submit

an affidavit further clarifying the payments. To date

nothing has been received.

In the Interim Audit Report, the Audit staff

recommended no further action for ~he vendors from whom the

Committee had obtained refunds of 5126,866. For the remaininq

items it was recommended that the Committee submit documentation

that:

1) Demonstrated that $50,358 a?parently owed by vendors were

not duplicated or overpaid.

21 If duplicate payments or o-erpayments were made, refunds

should be obtained from the vendors and the Committee

should report these amounts as receivables from these

vendors.

3) The Committee

.. <:'QJl1IIlJtt!!_e_f9S.

Committee, or

be reimbursed $71,002 by the General

p_rJmiHy__p-a~ents __Le.t!ln_d':td_ t.o __the_.GeneraJ:_

applied to general election expenses.

In response to the Interim Audit Report, the

Committee explained the status of the $50,358 in receivables from

vendors and individuals. The Committee has contacted three

individuals about overpayments totaling $2,208. Two of the

individuals deny any overpayments ~ook place. The third person

was outside the United States and could not respond. The

Committee contends that it should not be required to make

repayments for the $2,208 in overpayments to these individuals,

since it has made reasonable efforts to collect the debts owed the

Committee. The Committee states that it is out the money and has

no prospect of collecting the debt and should be permitted to

write the debts off as bad debts under 11 CFR §9034.5(d) without

penalty. Although the Committee may be correct that it may not be

able to recover the funds at issue, that does not establish that

the payments were qualified campai~n expenses.

The $17,921 receivable from Mary Leslie was

previously addressed. With respect to the remaining amounts, the

Committee states it has received S:~,806 in refunds and is either

waiting for the refund or additional documentation for the

remaining $15,423. Concerning the $71,002 in receivables from the

General Committee, the Committee stated in its response to the

Interim Audit Report and in response to the General Committee's

Interim Audit Report that the Com~:ttee received the entire

S7l,002 from the General Committee. The Committee did not send

any information on the $4,850 poss:ble duplicate payment to W. P.

Malone, Inc. addressed in Finding ::r.B.3.d. of the Interim Audit

Pa.ce
37

Report. Also, as noted in Finding II.F., the Committee overpaid

TRADEC by $7,808 for time volunteered by persons associated with

the firm and not compensated by TRADEC. Since the Committee did

not provide any additional information, this amount is included as

a duplicate or overpayment. As of June 30, 1994, there remained

$65,264 in apparent duplicate payments that are unresolved and

thus non-qualified campaign expenses ($2,208 + $17,921 + $15,423 +

$4,850 + $17,054 + $7,808).

The report considered by the Commission cn December

15, 1994, explained that only those non-qualified campaign

expenses paid while the Committee's accounts contained Federal

funds are subject to repayment pursuant to 11 CFR S9038.2(b)(2).

It was further explained that using a last in first out analysis,

Committee accounts are assuaed to have been purged of Federal

funds at the point where the last matching fund payment to which

the Candidate was entitled was expended. Of the $65,264 at issue,

it was concluded that $39,742 of the expenses were paid while the

Committee's accounts contained Federal funds. Therefore, only

that amount was subject to a pro rata repayment. However, as a

result of Commission actions at the December 15, 1994 meeting the

Candidate's post date of ineligibility entitlement was increased

(See Sections III. 2. and III. D.). with the increase in matching

fund entitlement, the point where the Committee's accounts no

t()n(l~_r _cOlltaJn·..Federal funds occurs later. Given the above tiL__ was calculated that all of the expenses discussed were paid while

the Committee's accounts contain Federal funds and are therefore

subject to repayment.

Recommendation i1

The Audit staff recommends the Commission make an initial

determination that the unrecovered amounts were non-qualified

campaign expenses and the Candidate is required to make a pro rata

repayment of $16,861 ($65,264 x .258346) to the United States

Treasury pursuant to 26 U.S.C. S9038(b)(2). Should any additional

amounts be collected the repayment amount will be adjusted

accordingly.

2. General Election Expenditures

During the Audit staff's review of vendor files,

numerous disbursements were found that appear to be for the

benefit of the general election campaign. These expenses are

grouped into those for equipment and facilities; polling and

direct mail; media services; and miscellaneous.
38

a. Equipmen~ and Facilities

Near the end of May, 1992, the Comm:ttee began

moving into new office space at the Gazette BUilding. It was this

location that the General Committee and Clinton/Gore '92 General

Election Compliance Fund (Compliance Committee) used as their

campaign headquarters during the general election campaign. The

new location provided approximately three times the floor space as

the location used during the primary campaign.

As part of the move to their new location, the

Committee paid I-K Electric Company $79,808 for various wiring

projects. The invoices were paid between July 30 and September 2,

1992, and covered a number of projects. For example the invoices

contained notations such as -INSTALL DATA CABLING NETWORK FOR NEW

HEADQUARTERS (GAZETTE BLDG. 1 FOR 150 WORK STATION LOCATIONS",

"PROVIDE AND INSTALL LANNET DATA NETWORK ELECTRONICS FOR NEW

NETWORK" and "INSTALL VOICE CABLIKG FOR 55 TELEPHONE LOCATIONS".

Although all of the invoices that contain the dates of the work

indicate that it was complete by July 16, 1992, it is apparent

that such services were in preparation for the general election

campaign ..!/

During the primary election the Committee's.

···record4-reflect the purchase- cf-onl!f-slllall -amounts of computer

equipment. Instead, most equipment was leased. Also, the

Committee contracted with a Washington, D.C. firm for computer

services. The firm prepared matching fund submissions including

computer tapes, disclosure reports, and provided the computer

tapes required for the audit. The Committee had a computer

terminal linked with the vendor. During the audit the Committee

requested and was provided copies of the computer files obtained

by the Audit Division directly from the primary vendor.

Therefore, it does not appear that the primary computer files were

loaded onto the Committee's computer system until 1993.

Beginning at the end of May, 1992, the

Committee purchased a large amount of computer equipment (both

personal computers and a larger system) then, in most cases, took

40% depreciation as a primary capital asset, and sold the

equipment to the General Committee for 60% of the purchase price.

Between May 28 and July 15, 1992, the

Committee purchased 50 personal computers, software, and supplies

from The Future Now, Inc .. Between June 1, and August 9, 1992,

the committee paid The Future Now, Inc. $118,742. The General

Committee paid 60% of this amount, excluding sales tax on most

items.

4/ certain electrical work and data installation occ~rred July

10 through July 16, 1992.

Pace 12;'27;9~
39

The same vendor was paid $11,676 for other

equipment invoiced between June 8 and July 15, 1992 with $10,123

of the total invoiced and shipped on July 15, 1992, the

Candidate's date of ineligibility. None of this equipment was

included among the items sold to the General Committee.

As stated above, the Committee purchased a

larger computer system. A July 13, 1992 letter to the "Gov.

Clinton Election Campaign" states that "The Clinton campaign

contracted with ICL to provide a comprehensive system and software

on May 28, 1992. ICL delivered and installed the system on June

25th. Between these two occurrences, ICL loaned the campaign a

Power 6/32 system to function as an interim solution". The letter

goes on to explain that ICL personnel visited campaign

headquarters to provide training and expedite conversion to the

new system.

The majority of the invoices for this computer

system were dated June 24. 1992. In total, the vendor was paid

$272,460 in two installments on August 10 and 21, 1992. Again,

the General Committee paid the Committee 60% of this amount, less

sales tax.

The Committee also purchased computer -~-- -----.equ.ipment__from__W.p_._l1alone"- The_Commi_ttee._paid__ a.$104, 1J5inyoice __

dated June 30, 1992 on August 25, 1992. As with the other

equipment the General Committee paid 60% of the cost.

In addition, W.P. Malone was paid $33,260 on

August 25, and November 9, 1992 for programming services, software

support and consulting for moving the computer operation to the

Gazette Building. The invoices reflect dates up to and including

July 16, 1992. None of the amounts were reimbursed by the General

Committee.

In response to the exit conference discussion

of this matter, the Committee submitted additional information.

The Committee objects to the Audit staff characterization of these

payments as general election expenses. According to the

Committee, the expenses for a new computer system were incurred

well before the end of the primary and were essential to the

smooth operation of the daily responsibilities. The Committee

states that the initial computer system was inadequate for the

Committee's needs in the early months of 1992. The system was

unable to accommodate the Committee's expanding database and

volume of correspondence, as well as to accommodate the

Committee's delegate tracking and communications.

The Committee included a memorandum from the

Director of Computer Operations. She stated that during the early

months of the spring of 1992, the initial system used by the

Committee could not meet the Committee's increased demands. "The

initial system could not accommodate the increased number of

users. It would not allow the Committee to link its personal

Page .. 3, A;pl:"o·:e':: '..2/27/9:'
40

computers with the network. There were major time lags, often

amounting to two days, in the retrieval of information. Back-up

of the Committee's data required four to five days. This

prolonged back-up process compromised the integrity of the

Committee's information. As demands on the system increased,

there was also an increase in computer equipment failure. In

addition, the system's limited resources were strained with

mailings of 5,000 to 6,000 pieces per day. Furthermore, the

system was not able to accommodate the Committre's extensive

delegate work."

She continues that after a thorouoh evaluation

of the systems available, the Committee purchased a comprehensive

computer system and software on May 28, 1992 from ICL, Inc. They

also used a programming consultant from W.P. Malone who helped

design software, hardware and networking packages. The temporary

system was installed on May 30, 1992 and a permanent system was

installed less than one month later. "When a customer purchases a

computer system it is the normal course of business that the

computer company supplies the customer with a temporary system at

time of purchase until the system purchased is ready." The

memorandum goes on to explain that in addition, the Committee

purchased a software maintenance contract and equipment from W.P.

Malone and personal computers and software from Future Now in

---connection-with the new system. It was __also l1eces9ary fo_r.]:=K

Electric to install new wiring to accommodate the new system. The

Audit staff notes that the Committee originally leased its

computer system from W.P. Malone. Invoices associated with the

lease suggest that the leased system was the same model as the

system loaned by ICL, Inc. as an "interim solution." It is not

known if it was the same computer that was obtained through W.P.

Malone. Further, the equipment purchased from W.P. Malone at the

time the new system was acquired was equipment that the Committee

had leased up to that time.

The total amount paid for computer equipment

and related services described above, excluding I-K Electric is

$540,313. The Interim Audit Report concluded that given that the

Committee contracted with a Washington, D.C. firm for much of its

computer work; leased the majority of its computer equipment; that

the purchases were not made and the temporary system not installed

until nearly all primaries were over; the permanent system was not

installed until well after the last primary and approximately two

weeks before the convention, it is apparent that this equipment

was purchased for use in the general election. Therefore, the

entire amount is considered to be a general election expense. The

Committee has been reimbursed $285,924 from the General Committee,

leaving a balance due of 5254,389 plus, $79,808 for rewiring.

In addition to the above, the Committee paid

the entire amount of the rent for July 1992. Fifty percent of the

amount, or S:2,5CO, should be reimbursed by t~e Genera: Com~ittee.
r

.~

. -'

41

Listed below is the information requested in

the Interim Audit Report and a description of the information

provided in response:

(l) provide the following information regarding Equipment and

Facili ties;

o In chronological order, list the various computer systems

and data entry services used by the Committee, the General

Committee, and the Comp2iance Committee at all relevant times

during the campaign. Identify the time periods that the various

systems were used, and how each system was used by the Committee,

and how the systems differed from each other.

In response to the Interim Audit Report the Committee

submitted a chronology of its computer systems (Attachment 5).

The chronology addresses the system used between August of 1991

and May of 1992; the ne~ system, with no distinction between the

temporary and permanent systems, used from May 30, 1992 to

present; services provided by Public Office Corporation beginning

in December of 1991 and continuing to the present, and;

equipment used by the General and Compliance Committees.

o Explain and document the functions of Public Office

Got"poration (POC), with_xespec_t to ser.vices provided to the

Committee. Explain and document whether the functions performed

by POC were performed on any computer system owned or leased by

the Committee. Explain and document whether any POC files were

moved to any computer system owned or leased by the Committee, and

provide the date{s) the transfer occurred.

According to the Committee, this vendor "provided data

processing services for Clinton for President in the area of

producing contribution records and related matching funds

submissions. They also maintained information on cash

disbursements and prepared the FEC monthly compliance reports for

the periods December, 1991 through March, 1993." The Committee

began moving the POC maintained data to Arkansas in late 1992 and

early 1993." POC provided no services to the General Committee or

the Compliance Committee.

o For the listed vendors provide the requested information:

W.P. Malone

-Describe the system (CCI6;32 Superminicomputer and related

items) leased (or purchased) from this vendor by listing the

hardware, software, and peripheral devices making up the

system.

The Committee's response describes the equipment as a Unix

CCI 6;32 runnlng ~? to 128 devlces, with 80 simultaneous

users.
c

42

-Explain and document which primary campaign functions were

actually performed on that computer system, including the

identification of the application (e.g. office automation,

delegate tracking, accounting/general ledger).

The response states that the system ran the office package

including word processing and scheduling, as well as running

the political data base including delegate relations.

-Identify the software used for each function.

-Explaln and document which portion of the leased system

(hardware and software) was acquired by the Committee, the

General Committee, or the Compliance Committee and when these

items were moved to the Gazette Building from the Coamittee's

previous locations.

-Explain and document when that po~tion 0= the W.P Malone

system acquired by the other committees was: purchased;

delivered; installed; and fully operational.

-For all parts of the leased system not acquired by the

Committee or the General Committee, including software,

provide information concerning when the lease was

-discontinued,--if·-and--when-the_equipment._was..DloY'edt~Ltll!!.·.

Gazette Building, and when it was returned to the vendor.

The Committee did not provide any of the detailed information

in its response. The Committee also did not list this

company as a vendor for the General Committee or the

Compliance Committee, but the General Committee paid W.P.

Malone almost $52,000.

ICL, temporary system

-Describe the system borrowed from this vendor by listing the

hardware, software, and peripheral devices making up the

system.

-Explain and document which primary campaign functions were

actually performed on that computer system, including the

identification of the application.

-Identify the software used for each function.

-Explain and document when the temporary system was:

delivered; installed; and fully operational.

-Explain and document which hardware and software, and its

function, was available on this system tha: was not available

on the system leased from W.P. Malone.

-Explain and document which y:lmary campalgn functlons the

system performed that the p:evious system was not performing.

Page ~6, ~proveC ~L, 27'9~
"';.-,-

43

-Explain and document ~hich campaign functions and files were

transferred to this system fro~ any other system and the

date(s) of the transfer.

ICL, permanent system

-Describe the system purchased from this vendor by listing

the hardware, software, and peripheral devices making up the

system.

-Explain and document which primary campaign functions were

actually performed on that computer system, including the

identification of the application.

-Identify the software used for each function.

-Explain and document when the permanent system was: ordered;

paid for; delivered; installed; and fully operational.

-Explain and document which hardware and software, and its

function, was available on this system that was not available

system leased from W.P. Malone, or on the temporary system.

-Explain and document which primary campaign functions the

system -per-formed- that-each of the the _previous _systems __was_

not performing.

-Explain and document which campaign functions and files were

transferred to this system from any other system and the

date(s} of the transfer.

For any other computer system used by the Committee, provide

the same information and documentation specified for the

systems leased from W.P. Malone or purchased from ICL.

The Committee describes the system as "DRS 6000, 386 pc's and

networks. DRS 6000 was originally configured to accomodate

(sic] 150 simultaneous users. Additional computer components

were added during the General Election to ultimately take the

capacity to 300 users." The response also states that the

new system continued to run the office package including word

processing, scheduling, and the political data base for the

balance of the primary and the general election. Further,

the Committee states that the system expansion accommodated

the additional needs of delegate tracking.

With respect to transferring of functions, the Committee

states that "(t]he campaign political office package and

correspondence records were immediately transferred to the

new temporary system. They were then transferred to the

permanent system upon its final installation. Every effort

was made to successfully make the transfer with the minimum

Page , A;::::>rC\'ed 12/27/9.1
C'

......------ --

44

of disruption to daily staff activities." The Committee

further notes that as part of the wind down operation and as

part of the FEC audit, other primary files were moved to this

system.

Little information is provided that distinguishes the

"temporary system" from the "permanent system".

o Explain and document the delegate tracking functions

performed on each of the computer systems discussed above.

Also provide information showing when the delegate tracking

function and the related files were transferred from one

system to the other. Explain the additional capacity for

delegate tracking provided by each successive system.

The Committee provided a memorandum that is entitled

"Evolution of Delegate Operation Clinton Campaign" which

shows levels of staffing and a general description of

computer equipment available. The memorandum states that the

delegate tracking staff used the leased CCl 632 and a

personal computer through most of April of 1992. According

to the memorandum, "[alt the end of April the delegate

operation moved to a separate building because of increasing

staff pressures and an intensifying work loaq which required

--'either--a--sepa r a te-or--la rge r -colllpu te r-system because_the._CCL_

632 system was at it's upper user limit of 80 siaultaneous

users. The delegate computer consultant, Bill Krause, was

unfamiliar with Unix systems and recommended that the 386 Dos

PC become [sic] server for a Novell network with

approximately 10+ PCS which because it was relatively

portable also became the core of the system the campaign put

together at the convention. The DC office retained the 386

Unix pc & 4 terminals. Both systems interfaced imperfectly

with the 632 system because of its limitations on the version

of software it could run."

o Explain and document when general election functions began

to be performed on the system leased from W.P. Malone, the

ICL temporary system and the ICL permanent system. Specify

which functions were performed on each and the date each was

transferred from one system to the other. Estimate and

document the percentage of time that the primary campaign and

the general election campaign used the equipment prior to and

after July 15, 1992.

The Committee response did not provide any of the detailed

information requested above.

o Explain why the Committee took a 40% depreciation on the

computers that were purchased for the primary campaign.
,--

45

In the Committee's response, they state they followed the

Commission's regulation and instructions in the primary

Manual when they transferred this equipment to the General

Committee.

The Committee argues that the Commission adopted the 40%

depreciation provision at 11 CFR 59034.5 to simplify the

transfer of assets between primary and genernl committees

with knowledge that some assets would be purchased early in

the campaign and others later. ~/

The Committee is correct. Ho....·ever, that regulation applies

to the transfer of primary assets. The regulation does not

authorize campaigns to purchase assets for the general

election and, because the assets are purchased before the

date of nomination, pay 40% of the cost from primary funds.

As noted earlier the purchase of assets by the general

election campaign prior to the beginning of the expenditure

report period is anticipated by 11 CFR §9003.4(a)\1).

o Explain and document how the computers and software

purchased from Future Now, In=. furthered the Committee's

primary or convention-related activity. How specifically did

the Committee use the personal computers and software. Also,

--provide information on the $11,676 _in equipment pu_rchased

from this vendor but not bought by the General Commfttee.

The response to the Interim Audit Report did not provide any

of this specific information.

The Committee repeated many of the arguments

made in response to the exit conference that are addressed above.

In addition, the Committee makes a number of specific points that

are addressed below.

o The Committee asserts that the equipment was used during

the primary campaign and that the enhanced computer capacity was

critical to respond to the Committee's increased correspondence

needs, for increased delegate tracking, to support the scheduling

operation, for general political support and for communications.

~/ The Committee continues to argue that lt was not

appropriate to include sales tax in the cost of the assets

transferred. In support of this opinion the Committee

notes Arkansas law concerning when sales tax would be

applicable to a transaction such as the transfer of capital

assets from the primary to the general election committees.

Although the Committee may be correct about Arkansas law

concerning sales tax, 11 CFR §9034.5(c)(1) is intended to

provide a formula for the all~cation of the cost of assets

in limited circumstances. Part of the cost of an asset is

any applicable sales or other tax.
'-~.

46

As noted ea~lie~, the Committee provided little of the specific

information requested in the Interim Audit Report to support its

contention. However, the Committee did provide a memorandum from

Sherry Curry listing the Bimonthly Correspondence Repo~t from

January 1992 to November 1992. Her memorandum shows the increase

in correspondence handled by the leased CCI 632. According to the

documentation, her department handled 3,000 pieces of

correspondence in January, 1992 and it increased to 6,000 in

February, 1992. It remained at approximately this level

throughout the rest of the primary. She points out this is not all

the correspondence handled by the campaign, only the general

correspondence handled by her d~partment.~/

In fact, the documentation indicates that there is not a

significant increase until July, 1992. For the first half of July

the Committee processed over 6,000 pieces of correspondence, but

the number increased to over 9,000 in the second half of July, to

almost 27,000 ~ieces in August, and then it decreased to almost

19,000 in September. It is our opinion that, based on the

documentation submitted by the Committee, the Committee

accomplished its objectives with its old equipment during the

primary period, but would have definitely needed expanded

capabilities during the general election period.

·-·'-With-respect "to delegate "tracking, the informatio.n provided

indicates that at the end of April 1992, that operation was-moved

to a separate location and utilized a personal computer network.

The Committee also notes that this equipment was then used at the

convention. It is agreed that this equipment is a primary

expense. However, information available does not indicate how

much, if any, of the cost of this equipment is included in the

amount addressed above. Therefore no adjustment has been made.

o The Committee also argues that the audit analysis is

inconsistent since the equipment is challenged but not increased

levels of staffing. Although the Committee may be correct that

some staff hired by the Committee may have been working on the

general election, Committee records contain no documentation that

provides information to form a basis for such a challenge.

o Finally, the Committee notes that in May and June 1992, it

considered alternatives to acquiring a new computer system.

However, it was concluded that an upgrade of the existing system

would cost approximately $400,000 and still be unreliable. The

Committee decided to buy the new system with the expectation that

6/ Altho~~~ :~ a memorandum subm::~ed by :~e Committee in

response :2 the ex:t conference, :: s:a:es that mailings of

5,000 to 6,000 pieces per day were being handled. The

relationsh:p between these two memoranda is not clear.
47

"it would be transferred to the General with depreciation of 40%".

It is not argued that the Committee made the ~rong choice.

However the alternative is not relevant to the issue at hand,

since it would also be a general election expense.

In summary, the Committee has made it clear.

that the leased computer system used in the primary was not wholly

satisfactory. The reporting, some accounting, and the matching

funds processes were being handled by an outside vendor on the

vendor's computer system. Further, an important part of the

primary campaign, delegate tracking, was eventually moved to a

personal computer network at a different location and that network

was also used at the convention. It is also apparent that the

fully burdened leased system was not going to be adequate for the

increased levels of activity in the more intense general election

campaign, particularly given that two separate accounting and

reporting systems were to be moved from an outside vendor to an in

house function. Further it would seem only logical that a new

system would necessarily be installed before the convention, given

the likely need to test systems and train staff on the new system,

as well as, transfer files before the general election campaign

was officially under way. Given that, some lead time at a point

when the least disruption of ongoing functions would occur was

critical. It also appears logical that once a system was acquired ___for_the_up-c:o_mi_ng __ general election campaign, some of the remaining

needs of the primarycampaigrl would belloved to the new- syst~m.

Given the above, it was concluded that the new

computer system was a general election expense. Although no

information was available to perform an analysis, it was

acknowledged that some allowance for primary campaign use of the

system may be appropriate. Also, as noted earlier, if any portion

of the cost of the personal computer network acquired for the

delegate tracking staff is included in the amount in question,

that cost would be considered a primary campaign expense.

With respect to the $79,708 for wiring the new

campaign office, the Committee states that "it was incurred and

used during the primary campaign and thus was a qualified campaign

expense by the primary committee." It was agreed that the cost of

the wiring should follow the computer equipment. However, as

explained above, the computer equipment was considered a general

election expense.

The Committee did agree that the $12,500 in

rent was erroneously paid by the Committee.

b. Pollinq and Direct Mail

The Committee conducted a number of opinion

polls between mid-June and the convention. The Committee paid two

firms, Greenberg-Lake The Analysis Group, Inc., and Opinion

Research for work in connection with these polls. Four of the

polls were called national polls and coples of the scripts
48

reviewed by the Audit staff showed that nearly all of the

substantive questions dealt with the then three candidates in the

general election. The remaining polls were referred to as

Convention polls and were conducted during the Democratic National

Convention. As with the national polls, the questions are general

election in nature. opinion Research received 593,904. The

invoices from Greenberg-Lake that could be associated with these

polls total $106,621 including $37,500 in consulting and $12,733

in travel, and are treated as general election expenses.

In response to the presentation cf this matter

at the exit conference, the Committee states that the Audit

Division's position that these are general election expenditures

is without legal and factual basis. The national and convention

polls were conducted in order to ensure delegate support for the

candidate. The Audit staff's position that these polls conducted

in June and July were for the purpose of influencing the general

election is inconsistent with FEC regulations. Under II eFR

5106.4 polls decrease in value and are only worth SO~ after 15

days.

The Committee also submitted a memorandum from

the Executive Director of Greenberg Research Inc. dated November

8, 1993. According to the memo, the majority of the national

surveys testEtd_the viability of different running mates and

whether the delegates wouldsupportthe-potenti-al running-mates.--

The state surveys were used to maintain delegate support in those

states. The convention tracking monitored support and was used

for the delegates and state party chairs to maintain delegate

support.

During the Audit staff's review of the 4

National Surveys, which were comprised of at least 50 questions

each, it was noted that the questions related to comparisons

between the general election candidates ane to various issues.

only 2 of the scripts contained a question (one\ about

vice-presidential candidates. The Committee's argument that the

timing of some polls is such that their value would be

significantly diminished before the date of nomination is not

persuasive. One of the types of pre-expenditure report period

expenses that is specifically permitted pursuant to 11 eFR

§9003.4(a){l) is polling. This regulation gives recognition to

the fact that general electlOn planning musr begin before the

convention and may include the evaluation of polling data.

Therefore, polling data gathered before the date of nomination

concerning genera: elecr:cn candidates and :ssues are useful to

the general election effort. Also, the Committee states that

polls were used to monitor and maintain delegate support, but

failed to provide eviden:e cr documentatic~ which esta~lished how

this was accomplished.

') .... - .
49

In the Interim Audit Report, the Commission

requested the Committee provide documentation to establish how the

results of each of the national surveys was used to test the

viability of different running mates, how the results of each of

the state surveys was used to maintain delegate support in those

states, and how the results of each of the convention polls was

used to monitor support and was used for the delegates and the

state party chairs to maintain delegate support. It was also

recommended that the Committee explain and document any other use

of the polls and provide a breakdown of the costs associated with

each poll, including the Greenberg-Lake consulting and travel

costs. The Committee was to provide information on any use of the

polling results by the General Committee or the Compliance

Committee.

The Committee did not provide the specific

information requested above, but in response to the Interim Audit

Report, the Committee did submit an affidavit from Donita Buffalo

Hicks, Managing Director of Greenberg Research, Inc. formerly

Greenberg-Lake, Inc. According to the affidavit, polls were

performed in order to develop the candidate's message prior to and

during the Convention and present the candidate at the Convention

in order to ensure the necessary delegate support to ensure the

. nomination. The Committee concludes that the pre-Convention

Pf!~io~yas_c_riti_cal for consolidating his support and

demonstrating his-eTeci:aoiTity. -Th-e- -COmmittee--also -submitted--a--- -

letter from Joseph E. Sandler, General Counsel with the Democratic

National Committee (ONC) that states, as of July 13, 1992 then

Governor Clinton had 2,089 delegates formally pledged to him, out

of 2,145 delegates needed to nominate.

The letter does not specify how the ONC

arrived at the number of delegates. According to the publication

Presidential Primaries and Caucuses 1992, A Handbook of Election

Statistics, copyright 1992, Congressional Quarterly, Inc., the

candidate had a total of 2,078 pledged delegates at the end of all

the primaries, caucuses, and conventions. This total does not

include over 1,000 super delegates and uncommitted delegates.

The affidavit by Ms. Hicks continues,

"Convention polling was done each night after prime-time and the

results of the Convention polls were presented each morning to the

party leadership in order to rally the delegates, to assure

delegates that Governor Clinton's popularity was strong and,

accordingly, that he was an electable candidate. In fact, all

polling leading to the Convention was designed to ensure delegate

support by determining whether the Candidate'S message was being

communicated effectively and in order to demonstrate the

Candidate's electability." She goes on to state that prior to the

convention, polls "tested the choice of a vice presidential

nominee by measuring name recognition and public perception of

individual candidates." She also states that polls can be

outdated within a few days.

?age ::u ,
(

50

The candidate was nominated on July 15, 1992.

According to Mr. Sandler's letter to the Committee, the Candidate

had nearly a sufficient number of delegates pledged to him by July

13. The first convention poll was conducted the evening of JUly

13. In the opinion of the Audit staff it is doubtful whether the

polls conducted on the nights of July 13th, 14th, 15th, and 16th

with the results available the next day could have much effect on

the outcome of the candidate's nomination. Most of the democratic

candidates that received matching funds, were no longer seeking

the nomination at the start of the convention, the Candidate

likely had sufficient delegates to secure the nomination by the

evening of July 13. Further, two of the polls were conducted

after the candidate was nominated.

From the information provided by the

Committee, the 4 national polls, including state assessments, were

conducted from mid-June, 1992 through July 8, 1992. According to

the documentation obtained during fieldwork there was a formal

announcement of then Senator Gore as the Vice Presidential

candidate in Little Rock on July 9. The Audit staff concluded

that it was doubtful whether the last poll would have had much

effect on his selection.

The Committee takes the position that the

~udit staff disagrees with 11 eFR S106.4 or refuses to acknowledge

that poll results decrease invalueovef asni:,-[·t periodoftime-.-- -_. -_._---

According to the Committee, "it is difficult to perceive how polls

which are of virtually no value by the date of ineligibility are

for the purpose of influencing the general election." The Audit

staff does acknowledge that polling results depreciate very

quickly. The Committee, however, appears not to acknowledge that

the general election campaign begins before the date of

nomination. It is the Audit staff's opinion that these polls have

little to do with obtaining the nomination, but rather appear to

relate to the campaign for election. Instead, the Committee takes

the position that none of these polls have any value to the

General Committee, when in fact, two of the polls were conducted

after the candidate received the nomination.

The Committee also contends that the

conclusion in the Interim Audit Report is at odds with past

Commission decisions. Specifically the Committee cites the

Reagan-Bush '84 audit where the Commission determined that some

polling and voter registration expenses incurred after a state's

primary were primary expenses. In that case a number of polls

were challenged beginning as much as three months before the

convention. Further, the report does not deal with the content of

the polls. Although the Committee asserts that the questions

asked can not be used to determir.e the purpose of a poll, it is

the only indication available. In the case at hand the polls are

conducted very shortly before the conventio~ and the questions are

indicative of a general election expense. Therefore, the

Commission's action in the Reagan-Bush '84 audit does no: dictate

the result in this case.
51

The Committee also references the Bush/Quayle

'88 audit where certain pre-convention travel expenses were

determined to be primary expenses rather than, as that committee

contended, general election expenses. In that case, the expenses

for campaign appearances before the convention are not covered by

11 CFR S9003.4(a)(1) and therefore are not relevant. The

remaining cases referenced by the Committee are the Dukakis and

Kemp committees dealing with fundraising and state allocation of

office expenses. Neither of these examples are relevant to the

issue at hand.

The Committee also disagreed that 55,985

assigned to the cost of these polls is accurate. The Committee

did not provide any documentation on the cost of each poll as

requested in the Interim Audit Report. An attachment to the

Committee's narrative response prOVides no specific information.

No adjustments have been made absent the requested information.

The Audit staff concluded that the Commi~tee had not responded to

the recommendations in ~he Interlm .~udit· Re·por~ suff~c~ently, to

establish that these polls did not primarily benefit the General

Cbmmi t tee. . • : .

. . Strategic Response (SR) didfundraising... '

"'::..,. '-., ·.;.···Jiia·iling& for~~th' the:-Comm:i:t~"··and- :tbe' COIItp·Hltrtc.· Co"t·~·.: 'The'"

. co'stof two of the mailings were allocated 15% to theCollpliance

Committee and 85% to the Committee. The mailings included letters

that dealt with general election issues, requested a contribution

to the Compliance Committee and included either a lapel pin or a

photograph promised by the Committee as a result of an earlier

contribution. The cost of the mailings was $371,855. As noted,

the Committee paid 85% of the amount.

The Audit staff agrees that an allocation is

appropriate; however, in our opinion, a 50~ allocation ~ould

appear to be more reflective of the·purpose·of the mailing.

In material submitted after the exit

conference of the General Election audit, the Committee submitted

a letter from the vendor that states the allocation was done by

the vendor in accordance with standard accounting practice and

cites American Institute of Certified Public Accountants in their

Statement of Position 87-2. This publication deals wlth

non-profit organizations that distribute materials containing both

a solicitation and educational or program materials. The

statement explains that it does not specify any allocation method

but only provides guidance concerning when an allocation is

appropriate. After reviewing this publication, it is the Audit

staff's opinion that the guidance to, the extent tha~ lt is

relevant to this situatlon, could be interpreted to suggest that

the Complia~ce Committee shou~d pay the enti~e a~oun: .

. Q'

-..
....

In the Interim Audit Report it was concluded that given that FECA

matters are not governed by this accounting publication, that the

purpose of the publication is not wholly on point, the nature of

the guidance contained in the publication, and the dual purpose of

the mailing the 50% allocation is appropriate. Therefore, the

difference between 50% and 85%, or $130,824 is a Compliance

Committee expense.

In response to the Interlm Audit Report, the

Committee disaareed with the Commisslon's concl~slcn that 50%

allocation was'reasonable. The Commlttee states that the

Commission should follow Reaulation 11 CfP §10f.l!a' and allocate

on the basis of "the benefi~ reasonably expected to be derived".

According to the information obtained by the Audit staff during

fieldwork, the two mailings in question took place on August 22

and August 28, 1992, over a month after the candidate received the

nomination. The apparent benefit to the Committee was the

~~l~illme~~ c~ a o~~~~se ~~ ~=~~:ib~~=~s ~~= ~~~~ ~~ :e=e~ve a ~in

or photograph as the result of having made a contribution, and to

thank contributors for their support. The Compliance Committee

had the opportunity to solicit contributions from a group of known

Clinton supporters at a reduced cost. All contributions were

directed to the Compliance Committee. Thus, allocating only 50%

of the cost -to the Compliance Comm~ttee is ,a conservative

approach. 0.:]( 'largerc-empliance, coullilttee allocaUoil coulci 'be~ ,"

supported.

The Committee is also critical of the Audit

staff not following the American Institute of Certified Public

Accountants Statement of Position 87-2. As stated in the Interim

Audit Report, after reviewing this publication, it is the Audit

staff's opinion that the guidance, to the extent that it is

relevant to this situation, could be interpreted to suggest that

the Compliance Committee should pay the entire amount.

The Committee sent an a::ldavit :rom Mitzi

Dudley the treasurer of SR. According to the affidavit, the

production cost for the fulfillment material for the mailing with

the lapel pin was $232,346. (88.9% of the total production costs

of the mailing) and the production cost of the reply elements were

$28,791, or a total cost of $261,137. The affidavit states that

production cost for the fulfillment material for the mailinq

containing the photograph was $106,782 and the General Committee'S

solicitation expense was calculated at $17,872, for a total cost

$124,654. Neither the Committee nor the vendor provided any

documentation to support these amounts. nO~ever, C~ a

reconciliation provided by the vendor at the time of the audit

fieldwork the cost of the mailing that co~tained the lapel pin was

shown at $252,952 and the cost of the ~a::i~g t~at cc~tained the

photograph was $118,903. There is no explanation for the

diffe~e~ce i~ :~e amc~~ts i~ ~~e a:::dav:: a~2 :~~ 2=:~~e~:at:c~

supplied durl~g fieldwcr~. Acccrdi~g to the ve~j:r a~d the
53

Committee, they did overpay this vendor by S12,558 for these

mailings, which was part of the $49,856 refund addressed in

Finding III.B.l. The vendor may have included part of the

overpayment in calculating the $261,137 and the $124,654 totals.

Attachment 6 includes copies of the actual

mailings in question. The letters for both aailings are very

similar. Both had return envelopes that show the Clinton/Gore

Compliance Fund as addressee. Both :nclude a Rapid Response

Action Memo, with the Compliance Fund address, a reference to

George Bush and Dan Quayle, a solici~a~ion to "please make

personal. check out to CLINTON/GORE COMPLIA~CE FUND". The reverse

side of ~he memo requesting contributcr information, once again

requests they make their check payable to the Compliance Committee

and notes that it was authorized and paid by the Compliance

Committee, About 60% to 70% of the letter deals with the general

election. There are two separate requests within the letter for

contributicns t~ the Complia~ce Fu~d. Accc~ding to the vendor,

"the General Committee's sollcitation expense was derived bv

allocating 20 percent of the cost of the le~ter (roughly .

equivalent ,to the percentage of space that the solicitation took

up withi~ the let.ter·) to the solicit,ation."

Based on. the inform.ation prOVided by the '" :·:tdlimrtt:e'e';- trre' 'A,ftttl t" 's"t'i!1 fof "f s bf the" op-1 n1oft' thai:' 'ti\~ '5"0,,- "< .. ' ,,", •

allocation is more than reasonable and consistent with the

Commissions regulations.

This same vendor was paid $69,660 by the

Committee for a compilation of contributors called a "Master

File". With minor exception, all of the invoices are dated after

the date of ineligibility with the majority of the amount billed

between September 17, and December 29, 1992. As noted above, the

Committee's computer work was handled by a ~ashington D.C. firm

~nd ~he Audit staff was provided a master contribu~or file by that

'vendor dudnq t'he audit fieldwork. ,Also as noted, the Committee'

requested and received a magnetic copy of that information from

the Commission. The Interim Audit Report concluded that absent

further information, this expense was a general election expense.

In response to the Interim Audit Report, the

Committee submitted an affidavit from Mitzi Dudley the treasurer

of SR, a division of National Direct Marketing Corporation (NOM).

"All master file work performed and invoiced to the

Primary Committee by Strategic Response ~as performed as

contractually required and in furtherance of our

understanding of Primary Committee purposes. A primary

purpose of a master file is to compile :~ computerized

form all pertinent information on responses to

communica:ions se~t by a partic~la~ e~:::y f~~ :~e

purpose of using those response (sic; :0 deterwine the

nature, frequency and recipients of any further

communlcatlon. A master flle is commonly a master

Page 5"7, A;:proved 12/27/9";

..";
54

record of all donors and other responders to such

communications with a full history of the time and

nature of their responses including, but not limited to,

the date of all responses, the amount of donation made

(if any), and pertinent other information about such

responses (e.g., support for particular positions,

source information denoting the origination of the

responder, and other demographic and behavioral

information attributable to a responder as available).

A master file may be of slgnificant surviving value to

the entity which owns it as it serves a crucial function

as both a historical document as well as providing an

important record 0: those people who are most likely to

respond again in the future. The existence of a master

list of potential future responders is crucial to a

primary Committee who may need to continue soliciting

contributions beyond the candidate'S nomination date to

payoff prima=7 de~~. :~ the ~resen~ case, our

understanding was that the Committee was in fact

concerned that it would have a serious Primary shortfall

and would be forced to raise funds well past the

Convention."

. -expl<3rtadorl"el:

(paragraph 1.2)

created.

Ms. Dudle~'~ affidavit cpntinues with ~n

the'" p"rovlSicn 'in- the "t'lay -1:1:; 1992contr'a~t" .',. :,.

that it believes requires the masterfil.eto· be

(

"The Agreement provides in part: the master file is a

master record of all lists 'names, addresses, and other

information pertaining to names developed hereunder by

the Committee or by NDM [Strategic Response] on the

Committee's behalf, e.g., including but not limited to

lists of the Committee's supporters and

contributors ... '. paragraph 12.{a) makes clear that the

master file 'shall be the property of the

Committee ... '."

The affidavit also explains that responses

from primary solicitations continued to flow into the campaign

through at least November 18, 1992. "After all responses were

keyed as of that date, the master file then needed to be finally

built, cleaned and updated." The processing required to complete

the building of the master file stretched into December and it was

only after the work was complete that the vendor received a bill

from the data processing contractor.

During the audit fieldw~:k the Audit staff

obtained a copy of the contract between SR a~d the Committee.

Paragraph 12 of that contract states:

?a=e
55

"12. OWNERSHIP OF MAILING LISTS

(a) Property of the Committee. All names,

addresses, and ether information pertaining to names

developed hereunder by the Committee or by NDM on the

Committee's behalf, including but not limited to lists

of the Committee's supporters and contributors, and all

rights in all of the foregoing (collectively hereinafter

the 'Lists'). shall be the property 0f the Committee ,

subject, howf>ver, to the provisions of Section 12(bl-(g).

below ...

Se=tions 12(b)-(f) deal with the Committee's

and NDM's use of the list on behalf of the Committee, possible

uses by third parties, possible use by the Democratic National

Committee, the effect of the termination of the agreement, and

other uses. No where in the contract is there'any reference to a

"Master List" or similar listing.

From the information provided during the

fieldwork, the first fundraising mailing by this vendor was May

18, 1992 and the last. July 17 .. ,199.2. .Th;e Commi.ttee pai·d for data

entry and caging of: the. contributions re,teived.·, The ea.r,liest

invoice was dated June 3, 1992 and ~nvoices continued through

N'Ovembe t" 2S.;··1~92." 'The' t=bttmi't~ei!"p~1d O'vlft"'$-l40 (}{)O"'Yo t1:ttt"s '. :

act{vIty,-$SS,(fOO was invoiced,after September 16. In fact they

overpaid by $24,500 that they later recovered as part of the

previously mentioned $49,856 refund. None of these charges are

part of the $69,660 for compiling the master file. From

information obtained during fieldwork, the Compliance Committee's

first invoice for data entry and caging was dated October 21,

1992. The Compliance Committee did its last fundraising mailing

on October 9, 1992. The total amount the Compliance Committee

paid for data entry and caging was approximately S80,OOO. The

Compliance Committee cid not present any information that they

paid for any '~aster File charges.

As previously stated, most of the invoices for

the master file are dated after the Committee received its last

contribution and long after the last solicitation mailing. The

response supports that the Master List project was not an expense

of the Compliance Comoittee. However, the response does not

establish that this project was part of the original contract, or

was related to any Committee fundraising effort. Indeed, the

Committee had concluded that it was solvent in August of 1992.

The creation of a historical record of the contributions to the

Committee, beyond the existing mailing lists, or the preparation

of a data base for fut~re use, either in a f~ture election or by

another entity. is not a "[closts associated with the termination

of political activity, such as the costs of complying with the

post election require~ents of the Act and other necessary

administratIve costs associated with winding down the campaIgn ... n

..,

?a;e
,"'

v·

56

(11 CFR §9034.4(a)(]),i\ Windino Do~n Costs). Therefore, thouqh

not a general election expense ;r an account receivable from the

Compliance Committee, the cost of the Master File is not a

qualified campaign expense.

c. General Election Media Expenses

Both the Committee and the G~neral Committee

utilized the services of the same media firm, Gt~at American

Media, Inc. One of the services that was provid~d was the

production of a biographical fllm about President Clinton entitled

"The Man From Hope".

President Clinton received the Democratic

nomination for President on July 15, 1992. On July 16, prior to

President Clinton's speech accepting the nomination, the film was

shown at the Democratic National Convention. By virtue of when

th~ ~~ln was s~c~~, i~ ~a5 a~a~:a~~e ~~: ~:~adcas: ~y se~era~

television networks as part of thelr convention coverage.

According to Committee records, the total CO$t of producing the

film was $191,2;3 with the Committee paying $161,2:3 and the 1992

Democratic Convention Committee, Inc. (Conve~tion Committee)

paying $30,000. A revised version of this film was aired and paid

for by the D~moc~atic National Committee during the week of August, "~f6-_20'; 1~9Z.·· the cost:'· cif "'the' bt~~lrca'st··wa's"~oh~ideretl:-a' '.' .' ,~,':.:

coordinated party expenditure pursu~nt to 2 U.S.C. J~41a(d). A

revised version was also aired and paid for by the General

Committee during the week of October 9-12, 1992.

The Interim Audit Report concluded that given

no known use of the film during the primary period, all costs

associated with the film are a general election expense.

The Committee's response to the Interim Audit

Report makes a number of arguments concerning the convention film.

First, the Committee states ttat in the Interim Au=:t Report on

the Convention Committee, the auditors took the position that the

portion of the cost paid by the Convention Committee was an

excessive contribution to the Committee. That is incorrect. The

referenced report noted only that the amount paid was considered

an impermissible use of public funds and that the Committee had

paid the remaining charges related to the film. As the Committee

correctly notes, the Commission decided that the portion of the

cost paid by the Convention Committee was an acceptable convention

expense.

The response also alleges that the Committee

was ~OLa at the exit conference for the Ge~eral CO~lt:ee that the

Audit Division's poslticn with :espect to the file vas evolving.

Although the staff does not recall using that term, glven that the

issue was be:r.s consi~ere~ i~ :~~ee a~=:: ~e?8rts, :~:y t~~ ~:

~hlC~ co~ld be dlsc~ssed a: :~e ex:~ con:e:e~ce, :~e s:aff ~as

limited in what cou~d be sa:d~

.. ' ....
57

The Committee also argues that the expense

meets the definition of a qualified campaign expense. In this

regard the Committee's contention depends on the expense being in

connection with the Candidate's campaign for nomination. As

explained in the Interim Audit Report, in the opinion of the Audit

staff, that is precisely where this expense does not meet the

definition. It was not used until after the nomination had

occurred.

The Committee argues that the purpose of the

film was to introduce the Candidate to the convention and that it

is therefore a proper primary expense. Further, the Committee

contends that the Commission has al~ays allowed costs for staff

travel back from the convention to be considered a primary expense

even though those expenses are incurred after the convention. The

Committee is correct about allowing the expenses for staff travel

back from the convention to be considered primary expenses,

althouah incorrect about those ex~er:ses beina inc~rred after the

convention. The expense is incurred before the individual leaves

to attend the convention. None of this changes the fact that the

film was produced to be shown after the nomination and, in the

Audit staffJs opinion, is a geneFal ~lection expe~se.

~he Committee states that in the past, the ., Autllt·&taf.f·-ha5 °M'i: "t:ha'!ll!r{ge'd "such '~pense:s, oO~'~ain ~He o~o.mittlie· 0·.0. !

is correct. If siailar firms nave been produced by ptiaary

committees they have not been identified during the course of the

audits. The Committee continues that if a restriction is to be

placed on the payment for such films to a particular source, it

should be done in the context of a rulemaking. The Commission's

regulations do not attempt to list each and every type of expense

that a primary committee mayor may not pay. There is no need or

practical way to create such a list. The regulations state that

expenses paid by the primary comoittee must be in connection with

the candidate'S campaign for no~ination. This film was created

for uSe ·after the nomt-hation 'had been' awar·ded. Therefore, the

Audit staff concluded that it is not in connection with the

campaign for nomination, but rather a proper general election

expense.

Finally, the Committee disagrees with the

determination of the Candidate's date of ineligibility. It is

argued that the date of the acceptance speech rather than the date

of the vote is the relevant date. The Commission's regulations at

section 9032.6 define the end of the matching payment period for a

candidate seeking the nomination of a party which nominates its

Presidential candidate at a national convention as the date on

which the party nominates its candida~e. The Code or Federal

Regulations at section 9033.5(c) states that the ineligibility

date shall be the last day of the matchlng payment period for the

candidate. These p~~~isions are ::ea: and do nct ~eference the

Cl • --,
' ..r"')

58

date of an acceptance speech. Further, the Comm:ttee was notified

of the date of ineligibility (1/15.-'92) shortly after the

convention and did not object until the response to the Interim

Audit Report.

In support of its theory, the Committee states

that the Commission must defer to party rules on the date of

nomination and submits a letter from the General Counsel of the

Democratic National Committee which the Committee states

establishes the date of ineligibil1ty as July 16. 1992. rather

than July 15. In the letter Counsel states the procedural rules

for the 1992 convention provide that "following the role call vote

on selection of the presidential candidate, the Permanent Chair is

to 'appoint a committee to advise the nominee of his or her

selection, to determine if he or she will accept the nomination

and to invite the nominee to deliver an acceptance speeCh to the

Convention' (emphasis in original text)."

First, contrary to the COmmlttee's statement,

the Commission is not required to defer to party rules, but rather

to follow the provisions of the Act. The Commission's

determination has done that. Second, the quoted section of· tne

party's procedures do not suggest that the nomination is not

"o~ficial" ,un,til the acceptance spe~ch. Instead, the langlolage . -. :sul'poC't's 1.:1ut,· -Co1llmi's~'bi\"'s d~t'ei:mtihl'~i:on 'by- 'rHe r ring'"to l::'h~ ,~' -',-:--

candidate as the "nominee" in two places withiri the one sen~ence~

The Committee offers a number of other

observations concerning the timing of the vote when held late in

the day which could apply equally to the date on which a candidate

makes an acceptance speech.

For the reasons stated above the conclusion

contained in the Interim Audit Report was unchanged in the final

audit report presented for Commission consideration,

In addition to the cost of producing the film

discussed above, a number of other apparent general election media

expenses paid by the Committee were addressed in the Interim Audit

Report. An invoice dated July 20, 1992 for $6,109 for work

relating to focus groups was identified. One of two versions of

the invoice states that the focus groups were "to test general

election messages". Another invoice was for "35mm Film Shoot" at

the Democratic National Convention on July 15 and 16, 1992. These

dates were the Candidate's date of inelioibilitv and the followino

day. The Interim Audit Report concluded"tha~ film taker. on these"

days could have little opportunity te be used in the primary

campaign. The invoice was for $4,950, A third i:1Voice, totaling

$18,990. is one of a number that was bllled to the Committee fer

travel, administrative costs and fees, and some production related

:ter'ls. 'The i~·~roice conta:ns a sta:e:ne::.: :~.a':. "'TH:S I~"lOICE IS

E:-<TIRELY FeR EXPENSES ::-;C:';RRED DUR::-;:; THE PR!MARY PER:CCl".

However, a re~lew c~ :he charces sn=~s :ha: :he :nvcice apoears to

cover the penod July 16, to AugUSt :8, :992 and .s appare~tly a

?a.-::e
" ..

59

general election expense. Finally, the Committee paid an invoice

dated August 20, 1992, that was to "Test Response Spot". The

invoice is addressed to the Clinton/Gore '92 Committee. Absent

further documentation, the $4,106 is included as a general

election expense.

with respect to the "35mm Film Shoot" ($4,950)

the Committee points out that one of the mailings discussed above

included a photo of the Presidential and Vice Presidential

candidates on the podium at the convention that had been proaised.

in an earlier primary solicitation. Although the Committee does

not provide any evidence to show that this expense was for that

photo, it is reasonable to conclude that the two are related. The

Committee's explanation is accepted.

The Committee provided an affidavit from

Annemarie Hannon, controller for Great American Media, Inc. to

address the S18,990 charge for :rave1, administrative fees, and

production. Ms. Hannon states that with the exception $760· in

travel expenses, all of the charges are for primary wprk. She

explains that it is not unusual for billings to be 'delayed d'ue to

. the need to g~ther information from staff and vendors, and await

credit card billings. The vendor provides no .detailed information

to support the explanation and does not explain why the invoice·

.···'in·i:H¢.tt'_s:..~~·~he'-clf8"r-ges ·"r\!;.lat~·tb '&. gene'tal' ~M!c"t·iGlT·pt!ii~ ·:··'

The Committee does not address the remaining

two charges.

The Audit staff concluded that the total

amount of general election media expenses paid by the Committee

was $190,478.

d. Miscellaneous General Election Exoenses

. The ".Interim Audt t Report noted a 'number' 'of

other expenses that were' considered to be general election

expenses paid by the Committee. Each is discussed briefly below:

• • ".0 •

o The Committee purchased 150,000 copies of the book putting

People First invoiced on July 6 and 10, 1992. The total

cost was $110,286. The Committee's records indicated that

it sold 106,000 copies of the book to the General

Committee for $15,900. The value was determined by

multiplying $.25 per copy times 60%, to arrive at $.15 per

copy times 106,000 copies. There are two errors in this

calculation. First, the cost of the books, using the

lower of the two prlces paid by the Committee, was

approximately $.72 per copy. Second, since these books

are not "capital assets" they are not subject to the

depreciation allo~a~~e provided at 11 eFR S9034.S(c1tl).

The General Comm:ttee should have pald S.~2 x 106,000, or

$76,320. Therefore an additional $60,420 is due frc~ the

General Committee.

Pac:e
..-,." . " ", ... .

60

In response to the presentation of thlS matter at the exit

conference, the Committee stated that it did not agree

that there is a receivable from the the General Committee.

In their opinion, the majority of the publications were

used during the primary and the Democratic National

Convention. They also stated that the value of the

publications were not required to be transferred as an

asset to the General Committee pursuant to 11 crR

§9034.S(c) because they are,not capital or other assets.

In total, there were ISO,OOO copies purchased from the

vendor. Of that total, 106,000 were purchased by the

General Committee. If the majority of these books were

used during the primary and convention, it would appear

that 106,000 would not have been available to sell to the

General Committee. No documentation to support the

state~er.t ...?as s'~~~::'~~d. F'..::-:he:. tr.e audit analysis did

not characterize the books as either a capital or other

asset, but rather a general election expense paid by the

Committee.

In response to the Interim Audit Report the Committee

states ,that "[b]ased on t,.he best information ava,ilable to

·_·i1i"e~"·t"olliilll:rt:~~'at·:t"ilis-'.i1me', 'it' apIfearS" tha't"the-~'PalliPhle,is .'

sent to and distributed at the Convention were erroneouslycounted in the inventory prepared by the Primary

Committee". The Committee also objects to referring to

these pamphlets as books. The Committee provided a copy

of the booklet at issue and copies of two brochures of the

same name produced by the General Committee and an

affidavit from Jann Greenland stating that it was her

understanding that the original booklet was for use in the

final stages of the Primary campaign as well as a

promotion piece d~ring the Convention. Further, according

to the Committee, even if some booklets were sold .to the

General Committee, since they weren't used in the general

election, they should not be considered a general election

expense and the Committee should refund the General

Committee the $15,900 paid.

The Audit staff used the word "book" because the

documentation submitted by the Committee during fieldwork

used the term. The information provided does not

establish that the booklets were shipped to the

Convention, that they were not used in the general

election period, or how the inventory prepared after the

Convention could have concluded that 106,000 booklets that

did not exist were in inventory.

At the time ~he C~mn:ttee presen:ed t~e inventory ~~ the

Audit staff, ~he:e did not seen ~~ be any q~es~ion as to

the existence of :~e l06.00C boo~lets sold t~ :he General

Commlttee. At a ffilnimum, the Commlttee could supply an

.~ ".
'.: . .·...t f':: ......-

------------

'-

61

affidavit from Committee personnel responsible for the

inventory to explain whether 106,000 booklets existed or

not. Absent additional information the cost of the

booklets is considered to be a general election expense.

o The Committee contracted with Press Association, Inc. for

a news service. The contract was to run from June 26, to

November 30, 1992. The total cost was $14,753. The

Committee paid $10,003 of this amount. This is considered

a general election expense.

In response to the Interim Audit Report, the Committee

agrees that the Committee has overpaid its portion but

disagrees with the entire amount being a general election

expense. The Response contends that the correct amount of

the overpayment by the Committee was S7,687. That amount

was refunded to the Committee on June 10, 1994. The

Committee did not explain how it arrived at this amount.

Absent additional information, the entire $::,GG3 is

considered a general elec~ion expense.

o T.he CQmmi,ttee chartered aircraft from Air Advantage.

Payment~ via wire transfer were made in advan~e and

.. .. ~~;~~~; ...;~ ~~_e~1-i·l i:~a~l!' \~~~~i:~cii~~t ~~~lt°e~~p~ ;'~~:Q' ''"0 0•• 0 ;

general election cha-rges. - The Co_itt-ee pe-rformed a

reconciliation and determined that $27,222 was due from

the General Committee. In addition, the Committee had

paid $17,000 for a reconfiguration of the aircraft,

bringing the total amount due from the General Committee,

per the Committee's reconciliation, to $44,222.

Subsequently, the Committee concluded that $15,000 of the

$17,000 reconfiguration charge could be considered a

primary expense since the work was done on July 10, 1992

prior to the Candidate's date of i~eligibility. It is

clear that improvement6 to the aircraft yere done in

preparation for the general election campaign. The only

use of the aircraft after July 10, 1992 and before the

Candidate's date of ineligibility was to transport the

Candidate and then Senator Gore to the convention. After

the convention, the aircraft was used in the general

election campaign.

In response to the Interim Audit Report, the Committee

agrees that the S2,000 and the $27,222 were erroneously

paid by the Committee, and notes that the amounts were

reimbursed on January 11 and March 24, 1994. However,

it still disagrees with the S15,000 reconfiguration

charge. Since the reconfiguration cost were incurred on

July 10, 1992 and the airplane was used in the primary, in

the Committee's opinion, the entire costs was allocable to

the primary. The one time use c: the alr~~a:: before the

convention does net justify the a:locatic~ ~: this cost tc

the prlmary.

Page 6S, Approved 12;27/9~

.. :: ... -
o

o

62

The Committee paid Mandarich & Associates $1,720 for

services and expenses. The invoice specifies that the

services were for the "Bill Clinton General Election

Compliance Fund". The Committee recognizes that this

amount requires reimbursement from the Compliance

Committee. In response to the Interim Audit Report, the

Compliance Committee refunded this amount to the Committee

on June 10, 1994.

There is a group of ether payments that are apparently for

the general election campaign. Some of the items are

expenses incurred in the general election period while

others are monthly expenses that should have been

allocated between the primary and general elections

campaigns for July, 1992. The total amount is $20,066.

In response to the Interirr Audit Report, the General

Committee refunded $14,420 on January 11 and March 24,

1994 to the Committee and ~as planning to refund the

remaining $5,646.

In the Intet~m Audit Report, the amount owed.

. to the Committee from the General Committee was $879,361 and the . . !V;~:--",__-"- __""1Ut(jU1jLc!d..!!_ ,!,rdm ·;trll~·· aennpH'l!itce eoWitrttie' YO $ 202", 2~"':' ptl(ii: ttr" " ' .• -.~:.•.-

<. the Commission meeting of DeceDlber 15, 1994,this--aaount--hacrbeen.· ..._-

revised based on the Committee'S response, to $874,411 due from

:>-. the General Committee and $132,544 due from the Compliance

Committee. Of these amounts $51,329 has been refunded by the

General Committee and $1,720 by the Compliance Committee.

The $69,660 for compiling the Master File is

not considered a general election expense or an account receivable

from the Compliance Committee, but a non-qualified campaign

expense.

In the report presented for Commission

consideration, the Audit staff recommended that the Commission

make an initial determination that a pro rata repayment in the

amount of $237,948 is due to the u.s. Treasury pursuant to 11 CFR

§9038.2(b) (2).

However, at the Commission meeting of December

15, 1994, the Commission found many of these expenses to be

similar to the expenses in the Bush-Quayle '92 report approved at

the Commission meeting of December 8,1992. AS a result, some of

the expenses were allocated, 50% to the primary and 50% to the

General Election. The capital assets were allocated 40% to the

primary as permitted by 11 CFR §9034.S(c'. These changes are

detailed on Attachment 7. As of June 30, 1994, there is an

outstanding balance c: $398,480 due from the General Committee and

Sl30,8:~ due frcm t~e Comp::an~e C8~~:t:ee. Tnese amoun:s are
63

shown on the Committee's NOCO statement at III.C. as accounts

receivable and are non-qualified campaign expenses subject to a

ratio repayment unless the amounts are reimbursed to the

Committee.

Also, as noted previously, the candidate's entitlement to

post date of ineligibility matching funds was adjusted in Section

III.D. below. That adjustment causes the point at which the

Committee's accounts no longer contains Federal funds to occur

later than was calculated in the report considered by the·

Commission on December 15, 1994. It is now calculated that all

non-qualified campaign expenses discussed in this section were

paid while the Committee's account contained Federal funds.

Recommendation 12

As a result of the Commission's decisions, the Audit staff

recommends that the Commissicn make an initial determination that

the Candidate is required to make a pro rata repayment to the u.s.

Treasury of $154,740 [($398,480 + $130,824 + $69,660) x .258346]

pursuant to 11 CFR S9038.2(b)(2). This amount may change if the

.ColIHI\ittee demonstrat.es that the Candidate 'Was entitlep. io· a

greater amount than is calculated at Section III.p.

." ;,.... '!: ... .......'

c

'r

a. Kathlyn Graves Escrow Agents

The Committee made a $37,500 payment on

September 2, 1992, to Kathlyn Graves Escrow Agents. The only

documentation in the Committee's records was a canceled check and

a carbon copy of the 'check with the notation "settlement".

According to the Committee, payments were made on behalf of the

Committee for consulting work. The terms are confidential and

can't be made public. There is a written agreement but the terms

of the a-greement can't be made ·public.· "The' terms of the agreementpreclude disclosure. During fieldwork the Committee requested the

attorney who drew up the agreement provide a statement to clarify

the nature of the agreement. This statement was requested again

by the Audit staff at the exit conference.

In response to the exit conference and the

Interim Audit Report, the Committee submitted additional

information but it did not establish this payment as a qualified

campaign expense.

b. Campaign Bonuses

The Committee paid bonuses to various staff

members, firms, and consultants after the date of ineligibility.

Accordin? to the Comn:ttee these bonuses were determ:ned prior to

the date of ineligibi~ity. Any contracts the Committee had with

these individuals did not cover these bonuses. The Committee

stated these were orally agreed to, between the Committee and the

Page 67, At;p::oveO 12/27/9.;
..' "

.~

...

64

individual. Durinq the fieldwork and at the exit conference the

Committee stated they would provide statements with information

about how the amount was arrived at by the Committee. The

statements were to be from either the individual that received the

bonus or the Committee person that arrived at the amounts. There

were a total of 21 entities that received bonuses totaling

$237,750.

After the exit conference presentation of this

matter, the Committee submitted memos from David Watkins for each

of the people receiving a bonus. Basically, each memo gave the

person's position in the campaign, stated that Mr. Watkins

authorized the bonus and that each bonus was determined prior to

the Democratic National Convention. Some bonuses were based on

the recommendation of the immediate supervisor, such as David

Wilhelm, Rahm Emanuel, and Keeley Ardman. These memos do not

establish that the bonuses were in connection with the campaign

:~::- ~'::::;.?~:-:';:.

In response to the Interim Audit Report, the

Committee states that it could find no instance when the

Commission did not permit· bonuses. The Committee state$ that it

'does find instances of the Commission permittin~ other rewards to

. staff.after. the cl9se of the campaign. The response also states' . "'-~r\.t. ·€tt~{'-<::~is:sib;dfa:s" ~nrldf!'i-~'d' ~Man'de \"ay' af:t·E!'r··t"he"'tIa"te··bf ....

ineligibility and the costs of a staff party after the eTe-ctionas

qualified campaign expenses. The Committee did not cite any

specific cases in their response.

In addition, the Committee sUbmitted

information on the individuals and firms that received bonuses.

For Carville and Begala, the Committee submitted an addendum to

their consulting contract. According to this addendum, dated

March 3, 1992, the Committee would pay the firm a bonus of $87,500

if the candidate was nominated by the Democratic National

Convention. The Audit staff notes that. at the end of fieldwork

the Committee stated there were no addenda to this contract. In

the Audit staff's opinion, the Committee has established a

contractual liability that was incurred prior to the date of

ineligibility, and the payment to Carville and Begala is therefore

a qualified campaign expense.

The Committee also submitted an affidavit from

Rahm Emanuel. His affidavit states that he was responsible for

developing and implementing the Committee's national fundraising

campaign. According to :he affidavit, part of Mr. Emanuel's

employment agreement provided for a performance based bonus plan.

The agreement provided for a bonus :0 be paid if fundraising

performance exceeded campaign goals. The affidavit explains that

the Committee and Mr. Wilhelm honored the employment agreement and

~r~v~~ed Mr. E~anuel ~i:~ ~cnus pay~ents o! 552.000. ~either Mr.

Ewanuel 0: ~~e Cc~~:::ee prQvided a~y ~rl::e~ agree~ent.

_e
~":" .:.'.

c ..

65

for Amy Zisook, the Committee submitted an

unsigned draft of a contract with Amy Zisook & Associates,

Inc. (AZA). According to the contract, AZA was to receive $25,000

within 5 days of whichever occurs first: (1) Governor Clinton

suspends his candidacy in the primaries or withdraws from the

presidential primaries; or (2) the agreement is terminated; or (3)

June 11, 1992. The Committee also submitted an affidavit from Amy

Zisook supporting the draft contract. According to Ms. Zisook,

the "contract, which was submitted to the Committee in February,

1992, accurately reflects my verbal agreement with the Committee

regarding payment of professional fees including the $25,000."

The Audit staff requested any contracts the Committee had with AZA

or Amy Ziso~~ during fieldwork but none were provided. In

addition the Committee stated during fieldwork that Ms. Zisook had

an agreement but not in writing. Again, in the Audit staff's

opinion, the Committee has established a contractual liability

that was incurred prior to the date of ineligibility, and is

therefc,e a qualifie~ campaign expense.

For the remaining individ~als, the Committee

submitted an affidavit from David Watkins, Director of Qperations

for t;h,e committe'e. Acc9rding ·to Mr. Watkins, based on' discussions

with Mr. Emanuel before the end of the primary, the bonuses for .

Jim palmei'~ Jooo Frontero, Nancy Jacobson, Patrick DorinsonJ Platt

',' 60rman';,·1'tci!!'Y' .tie s:ti~,' 'l'"e-ti. "'Wal th.;", ,-arld~:hi6n Kahn"" ~e-("-':t>_~~_eJt~oR'~':':'" .:

'--the-lfiilount:-ofmoney raised bytnese people for the Committee and

that the amount raised exceeded each person's individual goal.

The Committee did not supply any information to establish what

each employee's goal was at the beginning of their fundraising

activity or that any agreement for a bonus was part of any

contract with the individuals.

The Committee did not supply any additional

information for the balance of the employees, except for Mr.

Watkin's affidaVit. In that affidavit the bonus payments were

characterized as.'paymentS to bring total compensation uP:'to~ agreed

upon levels. The Audit staff reviewed the employment records

provided during fieldwork to support the Committee's statements.

According to Mr. Watkins, George

Stephanopoulos received his $7,000 bonus in order to bring his

total pay to the agreed salary of $60,000 per year. Mr.

Stephanopoulos signed a contract with the Committee dated November

4, 1991 and was paid $5,000 a month as a consultant. Beginning in

1992, he went on the payroll as a Committee employee at a salary

of $5,000 per month. As with other employee'S of the Committee

in the spring of 1992 he received less than his full paycheck. On

July 28, 1992 he received a paycheck that restored his pay to

$5,000 a month. Mr. Stephanopoulos started ~orking for the

General Committee immediately after the date of ineligibility.

Based on his net pay ~rom the Gene~al Com~~~~ee, it appears his

Pa~e 69, A;proved 12,27, 9~

•...
66

salary was equal to or greater than $5,000 per month. According

to the information supplied during fieldwork, Mr. Stephanopoulos

had already received compensation of at least $60,000 per year

before receiving the $7,000 bonus on November 5, 1992.

According to Mr. Watkins affidavit, Paul

Carey, Rick Lerner, Keeley Ardman, and George Hozendorf, received

bonuses in order to bring their pay during the primary to a

certain monthly rate. For Mr. Carey, the bonus was intended to

bring him up to a "market rate of $3.500 'per month for the period

from November, 1991 through January, 1992." Mr. Carey started in

september, 1991 at a salary of $2.500 per month. In December,

1991, his salary was increased to $3,000 per month. Only if the

Commission permitted the Committee to retroactively increase Mr.

Carey's salary, would he have been entitled to any portion of the

$3,000.

The aff~davit continues tha~, Mr. L~~n~r's

$3,000 bonus was intended to bring Mr. Lerner's "pay to market " rate at $2,500 per month." Mr. Lerner's compensation included

receiving consulting payments of $2,500 per month, one pay check

with.a net ,amount of $761.51, aRd $9,QOO ~n con~u1ting fees·for

fundraising: Since ~his pe\son.received in excess'of $2,SOO'per

month, the explanation of the bonus does not seem to be corre~t. • 0_ "~:''';. '.:•• 'lo1;,& ". .. :..~••:" •• -•••••••• ; ~,,;:,_ ... •• ..:.'·.r.·.·.. ·",..: .. ..... t .~,:' ':~"'-' ...... '. - './- :..~.,"\. ••,~

.-ForKeeleYArdman,Mr:-WatJtlni-swantecCher--- . $7,500 bonus "to bring her average pay during the primary to a

market rate of $3,000 per month". Ms. Ardman started working for

the Committee on September 9, 1991 for $1,500 per month. She

received a raise to $2,400 per month on November 4, 1991. Her

final increase came on May 1, 1992 to $3,000 per month. Like

other employees she received less then her full pay but received a

payment on July 28, 1992 that restored her back pay. Therefore

the purpose of the bonus was to give her a retroactive pay raise

to $3,000 per month from September, 1991 through April 30, :992.

Mr. Watkin's affidavit justified George

Hozendorf's bonus of $5,000 "to bring his rate of pay to $2,500

per month for service from April, 1992 through July, 1992 as well

as to compensate him for an anticipated small period of time

assisting with primary drafts after the end of the primary." This

employee started working for the Committee at a salary of 51,833

per month. His salary remained constant throughout the primary.

The paycheck on July 28, 1992 appears to contain an amount greater

than the amount of his back pay, and could be viewed as covering

any incidental work done for the Committee after the date of

ineligibility. It appears he started working at a higher salary

for the General Committee immediately after the primary.

In the

individual's salaries ~ere

start of their employment.

retroactive pay raises.

Audit staff's opinion, these

ne~o~:a~ed with the Ccrnm:t~ee a: the

T~ere :5 no :~stlflcation f:r ~ranting
67

According to the affidavit, Avis Lavelle was

paid $10,500 as partial compensation as the Press Director of the

Committee prior to the Democratic National Convention. Though the

Committee did not supply any information covering this employee's

starting salary, according to the Committee's records, the first

paycheck was June 30, 1992. She was paid approximately $9,000

after the Democratic convention, before the bonus. Excluding the

$8,000 bonus, for the period of time she worked for the Committee,

she would have h~d a weekly paycheck of over $2,600, making this

person the highest paid employee of the Committee. With the

bonus, the weekly pay would have been over $4,600. This person

started working for the General Committee immediately after the

primary at a salary of approximately $5,000 a month. Apparently,

this person's employment with the Committee was longer than four

weeks, but the Committee has not provided any information

establishing the length of this person's e~ployment..

C~r:stine va~ney's S~2.S00 bonus, according to

Mr. watkin'S, was based on her having "to travel to and stay in

Little Rock, Arkansas more often and for more extensive periods of

time (i.e., more weekend stays) than originally contemplated when

hired. In additiop, ..the bonu~ represented compensation for her,

continuing winddown wor.k after the date of ineligibility." Ms.'

Varney started working f'2:;: th~ ~ommittee on May 1, 19.92,.at a .. '" .~. s'i!"h:ry-of.·~5',8·33pl!t~tl1:··She' _also· g~Tt_ej:t woX"Ung"foL"'the_" -._•••

- Genera1- C-ommft:tee immediately after the. date of ineligibility.

According to the affidavit, Betsy Wright was

Director of Research. Her bonus of $2,250 was to "compensate for

work done during the primary beyond that originally contemplated

when the rate of pay was established." The bonus was based on the

recommendation of David Wilhelm. According to Committee records,

she started working for the Committee at a salary of $6,000 per

month on March 20, 1992. She started working for the General

Committee, for what appears to be the same salary, immediately

after the date ·of ineligibility.

Lisa Shochat was a part-time assistant with

the Committee according to the affidavit. She "received a $1,500

bonus which was payment for work performed for the Committee prior

to the date of ineligibility." From Committee records, she

appears to have been a volunteer for the Committee, receiving a

small amount to cover her expenses while traveling. She started

working for the General Committee on July 31, 1992 with a salary

of $1,000 per month.

Finally, Shannon Tanner received a 52,500

bonus for ·outstanding performance and dedication during the

primary."

Ex~ept for :a~vil:e a~~ Begala and Amy Zisook,

the Comm:ttee has fa:led to establish they had any liability to

pay these bonuses as 0: the date of ineligibility.

...
-------_.... -----_._-~--~~~~~~~~~~~~~~~-----

68

As noted at Finding II.E. above,

reimbursed David Wilhelm $6,000 for apartment rent.

finding the Committee had no obligation to make this

This amount has been added to the other bonuses paid

staff members.

the Committee

In that

payment.

to various

-'" ... ;

The total of non-qualified campaign expenses

for staff bonuses is $131,250. (Attachment 8 pg. 2)

c. Ttaveler's Cheques

During the campaign the Committee purchased

$179,357 in traveler's cheques 'see Attachment 9.) These cheques

were purchased over a period starting February 13, 1992 and ending

July 9, 1992. During fieldwork, the Committee provided the

following information on "Procedures for Issuing Travellers

Checks", in a memorandum dated March 25, 1993.

"After consultation with the Federal Election

Commission, the Clinton for President Committee pegan a policy of

distributing American Express Travellers Cheques. to campaig.n staff

to covet:. l·iving costs associated with campaign-related fi~ld work

d~ring the'primary cam~~igR period. The following di.burs~~ent

procedures were e~~ablished: . • .,.. • ." •• ':I -. ' •• J... -3. "5 .. 4': ,"_c. .•0" .. -~_•• .; .' • ~''' ••' •••":_~ ;",~•• : .?-'_'.• __ ~.~_..: !~__ .:.•.,":_

1) Travelers cheques wquld be used exclusively'

for per diem payments to the campaign's

advance personnel on the road, and all other

compensation such as advance consulting fees

and salaries would be issued on campaign

checks;

." .'

c

2 )

3,

Travelers cheques could not be substituted for

standard campaign drafts or bank checks

intended for e~ent costs or any other non-per

diem expenses on the road;.

Travelers cheques would only be issued out of

the scheduling and advance department and

could not be used for other campaign

activities, i.e. volunteers, headquarters

operations, etc.;"

The Committee did provide a log that was used

when the cheques were issued that details the recipient of the

cheques. the days traveled, the locations, the denomination of the

traveler's cheques, the total amount, date issued, and the

initials of the authorizing official. This information was not

provided for all cheques. In its response to the exit conference,

the Committee stated that the log supported $159,190 in traveler's

checks spen~ d~r:~G t~e campais~. T~e Committee did not explain

27;9';
. c>-

(

69

the difference of over $:0,000, between the $:79,35 7 in traveler's

cheques purchased and the $159,190 in the Committee's log. The

Audit staff was able to determine that the log supports

approximately $158,000.

A review of the log appears to indicate that

in some instances blocks of cheques were issued to individuals,

for amounts greater than a person would need for their per diem.

In these cases, the log does not provide the names of other

individuals that may have eventually received the traveler's

cheques and the days traveled by the individual. It would

therefore appear, that in some instances, the campaign staff

person ~eceiving the travelers cheques is not recorded or the

cheques were used for other than the recipient's per diem. This

amounted to over $40,000 in insufficiently explained cheques in

the log, including 51,620 recorded twice in the log for the same

cheques. The Audit staff considers the use of traveler's cheques

to ~e cas~ disburse~ents i~ vic:ation of 11 C:R S102.10 since the

cheques are not a check or similar draft drawn on an account

established at a Committee campaign depository, and therefore are

non-qualified campaign expenses. Further, the expenditures are

not"documented in accordance with 11 CFR S9033.11 ..

. '. '.' . In r~sponse tq.the Interim Audit.~eporti the

totfMittf!e ',ta'tei;' ii:-:cUs8gr"eeS 'thM~ 'Th~' ·us-e ...6r€tayele·i...·s·..~etfue~--- ." , .... are cash disbursements. However, if they were considered to be

cash disbursements the Committee believes that the disbursements

are adequately documented pursuant to 11 CFR S9033.1l.

The Committee again states that the traveler's

cheque plan was approved by the Audit staff. The Committee has

been unable to locate any contemporaneous evidence of the

approval. The Audit staff has no record or recollection of any

such approval.

The response also states:that the method of

documenting the traveler's cheques is indistinguishable from the

permissible method of documenting petty cash expenditures. It is

also stated that the individual per diem rate was 530 (less than

the $100 limit on petty cash disbursements) and thus the treatment

of traveler's cheques like a petty cash fund is fully consistent

with the Act and regulations. In the Audit staff's opinion the

use of nearly $180,000 in travelers cheques cannot be likened to a

petty cash fund. The log submitted does contain entries

identifying who received the cheques for the majority of the

amount but the amounts are often 1n excess of SlOO,

The Committee also contends that the use of

traveler's cheques can be conside:ed the same as a payment by

"similar draft" from the Committee's depository pursuant to 11 CFR

§:C2.:C. T~e Comm:tcee ex~:a~~s :~a: c~eques ~e,e ~~rchasej from

Worthen Bank, the Committee's de~osltory, by c~ecks dra~n C~ the

Committee's checking account. T~e traveler's c~eq~es are ~:itten

instruments, which are returned to the bank for payment just as
:--..,--

.:: .. - -------

70

checks. The Commi ttee is incor rect. Fi rst, the requi rement is

that the expenditure be made by check or similar draft drawn on an

account established at a campaign depository. These traveler's

cheques are not drawn on a Committee account. Further, the

Committee is not accurate that the traveler's cheques are returned

to worthen Bank. They are sent to American Express. There is no

negotiated instrument available for the Audit staff's review at

the Committee or their depository. The requirement that checks be

drawn on a Committee depository provides records for both

Committee and Commission re~iew.

Finally, the Commlttee states that even if the

traveler's cheq~es are nct consistent with the requirements of 11

CFR Sl02.10, it does not follow that they are undocumented within

the meaning of 11 CFR S9033.11. The Committee goes on to cite the

various types of documentation that may be presented under that

regulation and concludes that the log and Committee per diem

policy complies with two cf the tests. What t~e Committee does

not consider is that in addition to the Ilsted documentation, 11

~FR S9033.11 requires a canceled check negotiated by the payee.

This is not possible when traveler's cheques are used .

. The Commi ttee did '£Iot explain the di fference

in the $179,357 in traveler' ch~ques purchased and the $159,190

•. ~·t-be" :.-t1SmmHJ:~e· ·cTA"i"IIIs :·thl!-·~!t~eI-i!~"'s -ch~q\fe' r~np~'t"t:.';' ~·l\lllCl_.c_-· - .',.':•.•,"•.

J:he'log didn't support $158;000 as claimed in the response. As.

explained in the Interim Audit Report, although the log recorded

approximately $158,000 in traveler's cheques over $40,000 of that

amount was insufficiently explained. The Committee did not

address this problem in their response.

The Audit staff concluded that the use of

travelers cheques were cash disbursements in violation of 11 CFR

§102.10 since the cheques were not a check or similar draft drawn

on an account established at a Co~~ittee ca~?a:gn depository, and

therefore, were non-qual:fied campaign expenses. Further, the

expenditures were not documented in accordance with 11 CFR

S9033.11.

At the Commission meeting of December 15,

1994, the Commission decided to permit the Committee to consider

amounts of $100 or less, per transaction, as a qualified campaign

expense. As a result of this decislon a total of $166,658 was

determined to be non-qualified campaign expenses.

W.P Malone, :nc.

Invoices for leased equipment for .ebruary,

March and April, 1992 totaled 540,;10. Committee records indicate

three payments were made, $10,000 on March 2~, 1992, $15,000 on

June :, 1992 and :5,;10 en August 25. 1992, ~~ich paid the balance

In :U~~. !n ad~:::o~, C~ July :C 1 :~~: :ne C~~~i~:ee palO 54,850

which appears to be a partial payment on the Apr::, 1992 0::1ing.

Therefore, $4,850 represents an apparent dup~:cate payment. The
71

invoice associated with the $4,850 check is the same invoice

associated with the three payments discussed above. The Interim

Audit Report concluded that if the Committee did not provide

additional invoices supporting the $4,850, it would be considered

a duplicate payment, and the amount would be included in section 1

of this finding. Additional issues with respect to this vendor

are discussed in section 2 of this finding.

The Committee did not provide any additional

information in its response to the Interim Atldit Report;

therefore, the $4,850 has been included in section 1 of this

finding.

The Audit staff did not review the Committee's

Third Quarter 1993 FEC Disclosure Report at the time of the audit

fieldwork. However, on that report, the Committee reported paying

W.P. Malone an additional $63,000 in consulting payments. The

Committee did not report a~y debt owed to this vendor on the

Second Quarter 1993 FEC Report. As mentioned in Section 2. of

this finding, all the equipment bought from this vendor was sold

to the General Committee. The Audit staff requested additional

:' documentat.ion that estabJ,.ished that· tbe $6.3',000 in paYII!e.nts were

in connection with tne campaign for nomination. Pending receipt

of that documentat~on, the amount was considered a non-qualified caJllpa_igtl:..-eitPeli5e~. ".... . '.' ._" .,' .•. :"~:" ' •• ~'" .... . .. " "".. •... ,", .. :""

In response to the Interim Audit Report, the

Committee prOVided a copy of a check to this vendor for $50,000

and an invoice from the vendor that states the amount is a

"Deposit toward professional services for June through September,

1993." The Committee did not explain the $13,000 difference but

the Fourth Quarter 1993 FEe Disclosure Report shows a voided check

to the vendor of $13,000. On the same report the Committee

disclosed another $159,695 payment to W.P. Malone. The Committee

later sent a copy of an invoice which stated only that the pay~ent

was for June.through September, 1993 'professional serv~ces. ~ter

the Interim Audit Report was sent to the Committee the Audit staff

reviewed the 1994 Disclosure Reports and noted additional

payments to this vendor for $210,081 and $95,645. The Audit staff

requested additional documentation. The Committee provided an

invoice for the $210,081 that states only that the amount is for

professional services for October, November, and December 1993.

The Committee also provided a copy of the check and an invoice for

the $95,645, which was for professional services for the months of

January and February 1994. Also, on the Second Quarter 1994 FEe

Disclosure Report, the Committee disclosed a debt to this vendor

of $93,436 for computer consulting.

The Committee has not provided any detailed

explanation as to what specific services this vendor is providing

to the C~mmittee c~he~ the~ consulting pay~ents a~d ho~ t~cse

serv:ces relate tc the wi~d down activ::y =f the C8mmit~ee. :he

Committee has continued to pay Public Office Corporation fer

services during the wlndlng down period for database management,

.. ~. -.-
" ,....

72

preparation of FEC reports, equipment ren:al, and other services.

The Audit staff has not included the additional payments and debt

to W.P Malone, Inc. totaling $608,857 in ~inding down expenses on

the NOCO statement in Finding III.C.

e. Miscellaneous

The Committee issued 55,500 in checks from its

New York bank account. The checks were data entered under Harold

Ickes name, b~t the payee on the check is the Clinton ~or

President Committee. Annotations made by the bank with respect to

certain checks appear to indicate that cash was obtained. There

was no documentation except for the cance:ed checks.

Another vendor in Section 1. of this finding

is Carol Willis. There were many reirnburseT.ents to Carol Willis.

However, many of the expenses incurred were actually paid on

c~edit cards ~e~~ngi~~ to ~ilbur T. ?e~~ ~~~ :e=~y 9:c~~lee. The

Audit staff requested documentation that supports when and how Mr.

Peer and Mr. Brownlee were reimbursed by Mr. Willis such as copies

of canceled checks. The expenditures not sufficjently documented

. "total $11,209. " Also, available documentation ~ndicates ~hat a

portion of' this amoun"t may re"present duplicate payments of the

same expenses . .. • • . •_ ",.;. .. - -r;'••• : -:: * ,:..;. ;'/1'" ,,~ '.;. ~".-' ,,- .• ~; ' •• )r- :-... • ',

.In addi tion, the Audit staff requested , .

additional documentatton for the Sheraton Manhattan in the amount

of $6,489 and New England Telephone for $7,000. Documentation for

these vendors appears to be complete~ however, there is no

recognition of payments in these amounts. The disbursements may

be duplicate payments of the same expenses.

In response to the Interim Audit Report, the

Committee stated it has requested information from all the vendors

listed above and wil: submit it as soon as it is available.

The Committee also had parking tickets

totaling $2,129, a stolen fax machine costing $1,207, and lost

radios costing $13,424.

In response to the Interim Audit Report, the

Committee did not address the parking tickets. For the lost and

stolen equipment, the response states that the Committee and its

members exercised great care in the maintenance and security of

leased equipment. The Committee provided a copy of the security

policy used during the general election, which was "the

culmination of the verbal policies promulgated and adhered to

during the Primary." It 1S further stated that "it is the

Committee's position that there was no eviden~e of misconduct or

gross negligence ... and thus it was unnecessary to execute the

Committee's policy c: ~:thho~ding sa:aries ~p~~ :~e discQ~e~y c:

evidence cf misconduc: c: g:055 neg:lge~ce."

.c,
73

The Committee submitted documentation from its

insurance agent that pertained to the General Committee. It is

stated in the documentation that since the cost of commercial

insurance was prohibitive, the only reasonable approach was self

insurance. "A comparison of the losses identified by the Audit

Division to the total monies expended by the Committee for

equipment leases in general and as compared to leases for similar

equipment reveals that the Committee paid a relatively small

amount for the replacement of lost equipment (the amount paid by

the Committee represents only, c081 of the rental equipment fees)".

The Committee did not submit any information on how they arrived

at .08%. The Audit Division doubts the accuracy of this

percentage, since the total equipment stolen or lost was $14,631.

If this represents .08% of the total, the Committees equipment

leases would be $18,288,750 ($14,631/.08\).

AS explained in Section III.B.l., repayment'is

required for non-qualified campaign expenses paid while Committee

accounts contain Federal funds. Of the amounts discussed above,

$47,750 plus the payments to W.P. Malone of $608,857,~ere made

after the Committee's accounts had been purged of Federal funds

and ar~ nof included in the repayment calculation. . . . . ;.. . .

, , " ' As previo,usly stated, exc'ept for the 560'8,857

." .-- --~--'-'."'. co·t1sul:Eing~p~ymeitt:!t-~·t'ti·-.: 1'":- xaiCn·~-, -~. f'he__pretl~eJlS~ tletl!-d·~ :i"ft--tliis-".~, .

section, were addressed during field work and at the exit'

conference. In addition, Committee representatives were provided

schedules detailing these items. All items discussed above in

sections III.B.3.a. to III.B.3.e. are listed on Attachment 8.

In the Interim Audit Report, the Commission

recommended that the Committee provide evidence to demonstrate

that these expenses were qualified campaign expenses. The

Commission further recommended that the Committee demonstrate that

the Kath1yn Graves disbursement was made in connection with

seeking the nomination pursuant to 11 C-FR'§9032.9~a)(2). In

addition, it was recommended that the Committee provide: (1)

evidence showing that the payment of bonuses to staff was a

qualified campaign expense and (2) a pre-established written

Committee policy on bonuses. With respect to the lost equipment,

it was recommended that the Committee provide evidence of the

methods employed by the Committee to safeguard the equipment. In

addition, demonstrate what efforts were made to recover the lost

equipment (i.e., were police reports filed). Finally, provide

documentation which identified the relative value of the lost

equipment to the total value of the equipment leased from the

respective vendors. The Interim Audit Report also stated that

absent such evidence, the Audit staff would recommend that the

Commission make an initial determination that the Committee make a

pro rata repayment of $118,494 [($569,415 - $63,000 - $47,750) x

.258346] to the U~i:ed States Treasury.

Page 77, Approved 12/27/94
Except for the $87,500 payment to Carville &

Begala, and the $25,000 payment to Amy Zisook, the Committee has

not demonstrated that expenses in this finding are qualified

campaign expenses. In addition, the Committee did not provide a

written pre-established campaign policy for bonuses, and did not

provide documentation which identifies the relative value of the

lost equipment to the total value of equipment leased.

In the report considered by the Commission on

December IS, 1994, the Audit staff recommended that based on the

Committee's response to the Interim Audit Report, the Commission

make an initial determination that the Committee was required to

make a pro rata repayment to the U.S. Treasury In the amount of

$89,727 pursuant to 11 CFR S9038.2(b)(2) and (3).

As explained above, the Com~ission decided to

allow a portion of the amount expended by the Committee in the

form of t~avele='s cheques to b~ ccnside~ed ~~al~fied campaiq~

expenses. Also, the candidate's entitlement to post date of

ineligibility matching funds was adjusted in Section III.D. below.

That adjustment causes the poin.t at which the Committee's accounts

no longer cont~ins l~derpl fun4s to be,late; tha~ was calculat~d

. in the report consideted. by th~ Commission on December 15, 19~4.

j.~._.... ,. ... :·i~~~~;~~~~~~i:d'~:~~~6.~i ~~l~h~ U~~~~ ;;~~~~~¥.~~.eC·:~~.·.~~~j! t.

.- Malone) •

Recommendation 13

As a result of the Commission's decisions on December 15,

1994, the Audit staff recommends that the Commission make an

initial determination that the Candidate is required to make a pro

rata repayment to the U.S. Treasury in the amount of $98,783

($382,366 x .258346) pursuant to 11 CFR S9038.2(b)(2) and (3).

t. 0.

.. :-: ..-

..:"") C . Determination of Net OutstaDding Ca~paign Obligations

Section 9034.5(a) of Title 11 of the Code of Federal

Regulations requires that within 15 days after the candidate's

date of ineligibility, the candidate shall submit a statement of

net outstanding campaign obligations which contains, among other

items, the total of all outstanding obligations for qualified

campaign expenses and an estimate of necessary winding down costs.

President Clinton's date of ineligibility was July 15,

1992. The Audit staff reviewed the Committee's financial activity

through June 30, 1994, analyzed winding down costs, and prepared

the Statement of ~et Outstanding Campaign Obligations as of July

15, 1992, which appears below. Additional fieldwork may be

required to assess the impact of future financial activity on the

NOCO Statement.
75

CLINTON FOR PRESIDENT

STATEMENT OF NET OUTSTANDING CAMPAIGN OBLIGATIONS

AS OF JULY 15, 1992

(Determined at June 30, 1994)

Assets:

Cash in Bank

Accounts Receivable

Total Reported Refunds. Rebates. Receivables

Clinton/Gore '92 General Section Expense

Clinton/Gore '92 Compliance Fund

Overpayments/Duplicate Payments

Telephone Deposits

Cap,:aJ Asse:s

:rotal Assets,:

$ 526.906

1.411,043 alb!

398,480 ci

130,824

65,264 c/

43.695 d'

$2,580.852

~-

. '-;.'·'--'E)b1igatitins'?u'

"'-

; ;, ~:_~~.::' -_.._ . .... \' '...... " .

Accounts Payable

Less Non Qualified Campaign Expenses

Contribution Refunds

Clinton/Gore '92 GEC

Unrted States Treasury

(

Winding Down Costs (Based on actl,jal disbursements

07/16/92 thru 06/30/94)

Estimated Winding Down Costs (For the Period from

07/01/94 thru 07/15/95)

Total Obligations:

Net Outstanding Campaign Obligations: (Deficit)

$7,808,624

(256,590)

. .

7,552,034

106,956 ef

43,726 fL

40.859 gL

2,675,057 aJ

465.500 hi

10,884,132

($8.303,280)

Page 79, ;~praved 12/27/94
76

Footnotes to NO CO

This amount includes receipts and disbursements reported on

Committee disclosure reports filed through June 30, 1994 and

the Committee'S response to the Interim Audit Report. The

Audit staff will review additional Committee records to

verify the amounts as necessary,

b/ An account receivable from the u.s. Secret Service in the

amount of $51,531 is uncollectible and is ~~t included in

this amount.

Absent recovery from Clinton/Gore '92 Committee, Clinton/Gore

'92 General Election Compliance Fund and the various vendors

who received overpayments or duplicate payments these amounts

w:ll ~e canside~e~ ~~~-qualifie1 ~aMFa~;~ ~x~e~ses a~d a p~c

rata repay~ent to the Treasury will be requested in the

amount of $153,604.

- '-=-=--~--' -~-~ ~.

~/ This amount includes $43,695 in deposits f~om New. York

Telephone. That amount consists of a receivaple .in t;he

.- amount of $13,095 and unexplained deposits of $30,600. The.

,'.. ··"C'dmmit-eee' w!5'''atte1l'lp't:in~' i:'6 ~ge t:- ad'cti.'ti Oftal~'info-rma't:i'c)J'I''flom

the vendor. In the Committee'S response to the Interim ~udit

Report it did not address these outstanding deposits.

c-

~/

.Y

9/

hi

These are excessive or prohibited contributions that were

deposited on or before July 15, 1992.

These are Primary Committee expenses paid by the General

Committee, This amount includes convention related

expenses ($2,255) fer Julia Payne; an overpayment by the

Gen~ral Committee (57,402) of payroll taxes applied to

amounts owed by the Primary Com!!iittee~ 'an expenditure

($7,565) to Manatt & Phelps for legal services provided to

the Primary Committee; Primary Committee payroll taxes

($354); AT&T Telephone services relative to the

Primary Committee ($22,079); an expenditure to Drummond

Woodson ($308); overpayment to Visa Bankcard Center ($3,129);

overpayment to Worthen Bank Card Center (5576); and a payment

to the Los Angeles Times ($58).

This amount is for stale-dated checks repayable to the United

States Treasury (see Finding I~I,E,),

In the Committee's response to the Interi~ Audlt Report, it

prOVided an updated undocumented winding down estimate of

$1,638,543 which includes legal and accounting fees of

Sl,3C;,250. :: s~c~:= be note~ :hat this ~~~:sed estimate

was provided af~er ~he Comrnit:ee ~as in:c=~ed :hat a

subs~antial repayme,,: ~ay be due for funds received in excess

of the Candldate's entitlement. The Audi: staff finds

Page ~~1 _;;proved 12/2~/9~
these estimates to be unreasonable. We will review the

Committee's disclosure reports and records to compare the

actual figures with our estimates and prepare adjustments as

necessary. Finally, the Committee's third quarter 1994

disclosure report contains winding down expenses totaling

$582,000 including $138,000 paid to W. P. Malone (see section

III.S.3.d.). This amount is significantly more than previous

periods and has not been recognized pending the submission of

documentation and explanations of the amounts.

," ••• "",. ••••• : ••0 -r ...: .-~: .":-.. ': ....• :... ".'W • _ .. .:. • ••

Page 81, A?9roved 12!27!9~
v

-~-:- ;':.:!_~ . '-.

!,......- .•- zJ j

c

78

D. Receipt of Matching Funds in Excess of Entitlement

Section 9034.1(a) of Title 11 of the Code of Federal

Regulations states, in part, that a candidate is entitled to

matching funds for each matchable contribution except that a

candidate who has become ineligible may not receive further

matching payments regardless of the date of deposit of the

underlying contributions if he or she has no net outstanding

campaign obligations.

Section 9034.l\bl of Title 11 of the Code of Federal

Regulations states that if on the date of ineligibility a

candidate has net outstanding campaign obligations as defined

under 11 CFR 9034.5, that candidate may continue to receive

matching payments for matchable contributions received and

deposited on or before December 31 of the Presidential election

year provided that on the date of payment there are remaining net

=~~s~a~ding ca~pa~g~ =bligations, i.e.,o the S~~ =~ ~~ntributions

'received on ~r after the date: of ineligibility plus matching funds

'received on or after the da~e of ineliglbility is less than the

candidate's net o~tstanding campaign obligations. This

.entitlement .will pe equal to the less;er. of: (1) The amount of

contribution~ submitted for matching; or (2) The remaining net

..~utsj:a.I1dir:g ca.1l!l?aig.l1. o?l~q~.~.i<?~s.. .~.. . . ._ . . -.' ....-. . ..-;..." -. '.'~" . " '. ' .." ,. .. . -. - \'.\..... .... '.'....•...•...:, ~.:

. Section 9034·.5(a)(2>'(i) of Title 11 of the Code of·

Federal Regulations in defining cash on hand for purposes of a

committee's Statement of Net Outstanding Campaign Obligations

states that the amount includes cash on hand as of the close of

business on the last day of eligibility including all

contributions dated on or before that date whether or not

submitted for matching.

Section 9038.2(b)(1)(i) of Title 11 of the Code of

federal Regulations states that the Commissio~ may determine that

certain portions of the payments made· to a· candidate from the

matching payment account were in excess of the aggregate amount of

payments to which such candidate was entitled. Examples of such

excessive payments include payments made to the candidate after

the candidate's date of ineligibility where it is later determined

that the candidate had no net outstanding campaign obligations as

defined in 11 erR S9034.5.

Section 9003.3(a)(1)(iiil of Title 11 of the Code of

Federal Regulations (General Election Legal and Accounting

Compliance Fund-Major Party Candidate-Sources of Funds) states, in

part, that funds received after the beginning of the expenditure

report period but which are designated for ~he primary election,

and contributions that exceed the concributor's limit for the

primary election, may be redesignated for the ~egal and accounting

,-o~plia~:e f~~~ and transferred to :r deposited in such fund ,&

the candidate obtai~s the contributcr's redesignation in

Page 82, Approved 12. 27/9~
..-..

79

accordance with 11 CFR Sl10.1. Contributions that de not exceed

the contributor's limit for the primary election may be

redesignated and deposited in the legal and accounting compliance

fund only if:

(A) The contributions represent funds in excess of any

amount needed to pay remaining primary expenses;

(B) The redesignations are received within 60 days of the

Treasurer's receipt of the contributions;

(C) The requirements of 11 CFR S110.1(b\(Sl and (ll

regarding redesignations are satisfied; and

(D) The contributions have not been submitted for matching.

Section 1l0.1(b)(2)(il of the Code of Federal

Regulati8~s defi~es. in part, w~en a cc~tributicn is made with

respect to a particular election. The provision states that in

the case of a contribution designated in writing for a particular

election, the election so ~esignated.

Section 110.1.{bH.4) of the Code of Federal Regulations

. st.a.tes in .part that a con.tri.but~on. is considered to .be designated -"-~-~. -~~: "- ."tot·· a··~"'a1'tici.lnH e 1 itCt i tlh' 'if: ,. ..... ." . '., ..,. . . '. .,~: '." . "'," '. .' ~..:::..

1) The contribution is made by check, money order, or

other negotiable instrument which clearly indicates the particular

election with respect to which the contribution is made;

3) the contribution is redesignated in accordance with

11 CFR 110:I(b~(5).

.-,

2)

signed by the

election with

the contribution is accompanied by a writing,

contributor, which clearly indicates the particular

respect to which the contribution is made; or

The Interim Audit Report concluded that the Committee

had net outstanding campaign obligations on July 15, 1992 of

$7,588,794. The Committee received private contributions totaling

$5,863,410, between July 16, and October 2, 1992. During this

same period of time the Committee received matching fund payments

of $1,431,599 on August 4, 1992, $1,786,327 on September 2, 1992,

and a final payment of $2,825,181 on October 2, 1992.

On August 21, 1992, the Committee opened a checking

account known as the Suspense Account. With minor exception, the

contributions from individuals deposited after August 21, were

deposited into this account. Contributions deposited into this

account were included in the Committee's disclosure reports.

Based c~ our review 8: contributions deposited. it appears that

the Co~ittee obtained redesignaticn letters a~d subsequently

transferred the majority of the contributions to the Compliance

Committee. Relatively few of the contributions were in excess of

Page 83, Approv~ 12/27/94
80

the contributors' primary election contribution limit and the

Committee had remaining primary expenses to be paid. During the

period when the redesignations were being sought for the

contributions deposited into the Suspense Account, the Committee

continued to request and receive matching fund payments based on

NaCO statements that did not recognize contributions deposited

into the Suspense Account. The Committee transferred to the

Compliance Committee contributions totaling $2,444,557. Of the

$2,444,557 transferred, private contributions totaling $1,025,404

were deposited by the Committee after September 2, 199~, the date

on which the Audit staff calculated that the Candldate received

the last matching fund payment to which he was er.tit1ed. Those

contributions deposited after September 2, 1992 are not considered

in the analysis below.

In the Interim Audit Report it was explained that the

Audit staff ~xamined each deposit of contributions between July

16, a~d Oct~~pr :. 1992 t~ deter~in~ the amount ~~ primary

contributions avallable to pay remaining primary election

expenses. In making the determination, any contr:bution that was

in e~ess of the cqntributor's primary election limit was

~xc).uded.· Also . excluded were any cQnt.tibutions that,e'\ten though

deposited into a p~imary' election 'accou~t; showed a payee or other

" notation, that sugge~ted the coot~ibution was meant for the g~nera1

--~-".'--E!"l:e'ctibt'r:or'lIlts''1'Tt' 'any "o"tner ,wi!ly''dt!s"ign'at'ed~-l:ty die '"Contr:t.bu~o1;' ·for-·

the general election. Based upon our review, it was deter.inedthat contributions deposited between July 16, and September 2,

1992, totaling $155,686, could have been transferred to the

Compliance Committee.

Based on the information available at the time of the

Interim Audit Report, a calculation was presented that showed that

as of September 2, 1992, the Committee had received matching funds

in excess of the Candidate'S entitlement in the amount of

$849,172. After that date the Candidate received one matchina

fund payment totaling S2,825,181 bringing the amount of ma~ching

funds received in excess of entitlement to $3,674,353 ($849,172 +

$2,825,181) .

At the exit conference, the Committee's accountant

stated that at a point the Committee determined that it was

solvent and the trans:ers were permissible. The Audit staff noted

that such a calculation worked only if the matching funds to be

generated in the future were considered an accounts receivable.

The Committee's accountant agreed. The Committee strongly

disagreed that any repayment was due.

The inclus:cn of matching funds ~o ~e generated from

future matching fund requests, as an asset, is net appropriate

when determining remalning matching fund entitlement.

;-.... ..
81

In its response to the exit conference, the Committee

again explained that as of a date after the Candidate's date of

ineligibility, it was determined that the Committee no longer had

outstanding campaign obligations in excess of funds available to

pay them.

The Committee goes on to state that "{tlhe Committee

disputes the auditors' assertion that these contributions could

not be redesignated to GELAC. That assertion is contrary to law.

Those contrib~tors properly and legally designated those

contributions 1n writing for GELAC pursuant to 11 CFR Sl10.2 7/ and

the auditors cannot prohibit the Committee from maintaining those

contributions in the GELAC.

"The Committee further disagrees with the auditors'

method of applying contributions and matching funds to determine

when there is no additional entitlement."

With respect to the propriety of the redesignations, the

Interim Audit Report stated that 11 CFR Sl10.1 is not the relevant

regulation. That regulation specifies the procedures and time'

limi tations that apply t? a red~sigoation when a redesignat-io.n is

appropriate. As stated ~bove, 1} CFR J9003.3(a)C1)(iii) ~learly

•... _ states that the redesignations pursued by. the CO!J!lllittee were not

··--···,·".::·... ·perm'i'illH'l-e~·· .'l'hat-'seC:1:·iCUl :s-t1!t:els '1:htl:t obly '·if-nb- relltaiai0'9- '-'-.," : ',.

primary expenses are to 'be paid, may prillary contributions--not---in

excess of the contributors limit be redesignated to the compliance

fund. The definition of remaining primary expenses is clearly

stated in 11 eFR S9034.1(b) which speaks to remaining matching

fund entitlement. That definition states that remaining net

outstanding campaign obligations is the candidate's net

outstanding campaign obligations on the date of ineligibility less

"the sum of the contributions received on or after the date of

ineligibility plus matching funds received on or after the date of

ineligibility." Therefore, in the case of a publicly funded

candidate, the Commissions regulations concerning the receipt of

public funds place limitations on a committee's ability to seek

redesignations of contributions to other elections that are not

contained in the more general application regulations at 11 CFR

SIlO .1.

The Interim Audit Report also explained that the

definition and the calculation of rema101ng entitlement to which

the Committee objects enjoys a long and consistent history in

Commission regulation and practice. This interpretation dates to

a December 1976 memorandum to the Commission proposing an

amendment to then section 134.3(c)(2) of the Commission's

regulations. This proposed regulation stated that "a candidate

2/ The Commictee claimed that it complied with 11 CFR Sl10.2.

We assume that lt meant section 110.1.

.....
_ ~;'~_1 __,__ :,

82

shall be entitled to no further matching funds if, at time of any

submission for certification, the total contributions and matching

funds received after the ineligibility date equals or exceeds the

net obligation outstanding on the date of ineligibility".

The 1979 Explanation and Justification of 11 CFR S9034.1

explains that for candidates who have net outstanding campaign

obligations on the date of ineligibility, "[b]asically, these

candidates are entitled to payments only if the private

contributions received between the date of ineligib~lity and the

date of submission are not sufficient to discharge the net debt".

A simplified example of the calculation presented in the Interim

Audit Report follows this explanation. Finally, it is explained

that the regulation "furthers the policy that the candidate should

use private contributions to discharge campaign obligations

wherever possible". The 1983 Explanation and Justification for

the same provision states that the section had "been revised.to

state that t~ receive matchino funds after the date of

ineligibility, candidates must have net oucscanding campaign:

obligations as of the date of payment rather than the date of

submissio~ Thus, if the candidate's financial position changed

bJi!wee.n .the date .c.f h~s 01; her ·submission. for mat.eh·in.g fun<¥ ~nd

the date pf 'p~yment reducing the candidate's net outstanding .

cam9,aign obli9a~~~ns! ~~at candidate'~ entitlement woul~ be~

.~~ ·ni:l'u'ct!'l:1· ac:x!ot'di"l'\gly"': '!This' sidil" te-tnft>t't::e.~ . the·"-"reqlfl·~.E!nt· .'.

that· private contributions received must be applied to obligations·

prior to the receipt of further matching funds. The 1991

Explanation and Justification for S9003.3 states that

"contributions redesignated must represent funds in excess of any

amount needed to pay remaining primary expenses. If this

requirement is not met, the committee would have to make a

transfer back to the primary account to cover such expenses".

Finally, each edition of the Commission's Financial

Control and Compliance Manual For Presidential Primary Candidates

Receiving PUblic.Financino, beginning ~ith the first in 1979, has,

in some form provided, an explanation and example of the

calculation contained in the Interim Audit Report and again below.

The Interim Audit Report noted that the Committee's

position is inconsistent with the plain meaning of the

Commission's Regulations concerning post ineligibility date

matching fund entitlement as well as the long established

Commission practice and policy.

The recommendation in the Interim Audit Report

concerning this matter requested the Committee provide evidence

demonstrating that it did not receive match1r.g funds 1n excess of

entitlement. Absent such a demonstration, it was stated that the

Audit staff would recommend that the Commission make an initial

determinatic~ that the Coo~:ttee repay S3,6-~.353 to the U.S.

Treasury. Finally it was noted that the amou;.: of the repayment

was subject to change upon further revie~.

'II .....
"="-~-- -

83

In response to the Interim Audit Report the Committee

puts forth several arguments why no repayment is due. To begin

with, the Committee argues that the contributions in question were

not primary contributions but rather were for the most part

undesignated contributions received after the date of the primary

election and, pursuant to the 11 CFR SllO.l, general election

contributions. As general election contributions, the Committee

contends that no redesignations were necessary to transfer the

contributions to the Compliance Committee. The Committee states

that the redesignations were obtained by the vendor who processed

contributions for the Committee without the Committee's knowledge.

The explanation suggests that due to provisions in that vendor's

contract, the vendor stood to gain by sending the redesignation

requests.

In support of their conclusion that no repayment is due,

the Committee, using its interpretation of the provisions 11 CFR

SllO.l, submitted a calculation of the amount that could be

considered general election contributicns without need of

redesignations. In support of this calculation the Committee

response included lists showing the deposit date, number.and

amount that were consid~red.to represent general election

contriputions. The lists we~e divided into three categpries;

contribution checks made payable to Clinton for President with an

:~\1n!i~ned"pfiJl'nlry"t:"Ql'ltri:butbc ea r~"att.liEc:he'd"; 11/· contrl:bv·t!i'Ons·cti'ecltsmade payable to Clinton for- presTdentwithout a contribut-iopcard

attached, and contribution checks made payable to other than

Clinton for President with or without a contribution card

attached. The Committee's analysis includes contributions through

part of January of 1993, well beyond the relevant period for

determining the amount of contributions that must be applied to

the primary debt, and concludes that $2,113,321 in contributions

deposited into primary accounts are actually general election

contributions. The Committee states that copies of the

contribution checks supporting their a~alysis were available for

our review at Committee Counsel's Offices.

The Committee's response goes on to state that the

redesignations received serve to make clear the contributor's

intent in any case where the contributor's intent is unclear from

the contribution check.

.Y Included in this and the followir.? category are checks that

include Clinton for President in the payee. Thus checks

payable to Clinton for President Committee, Bill Clinton

fer Pres:dent, Cl:n:on fer P~eslce~: Ca~pa:gn, and o:~er

similar ccnbinaticns are included.
84

The Audit staff concluded that the Committee's analysis

was not consistent with the provisions of 11 CFR SllO.l, not

consistent with the matching fund regulations and the post date of

ineligibility matching fund entitlement system, and not consistent

with their own treatment of these contributions.

As noted, section 110.1 of the Commission'S regulations

states that to be considered designated to a particular election a

contribution must clearly indicate the election with respect to

which the contribution is made: In the view of the Audit staff

the majority of the contribut10ns in contention are so designated.

By the Committee's calculatior., over 52.2 million of the $2.8

million 1n post date of ineligibility contributions were made

payable to the Committee and 51.6 million of that was photocopied

with a Committee solicitation attached. The Committee and

Compliance Committee have different and distinctive names, Clinton

For President Committee vs. Clinton/Gore '92 General Election

Co~pliance F~nc. ~~~h entity had its f~nd~aising appeals that

made it clear which committee was soliciting the contributions.

Each committee is a separate entity, has separate accounts, files

.separat~ reports with the Commission an~ has differ~nt fund~ng

. sources..•. Therefore, t.he A\ldi t 'staff stat~d. t~at a'. check lIl.'ade. .

'payable to Clinton For Preside'Rt is designated 'in ......ri ting for the'

prima,r;i elec.tion and, ~o con~~ude otherwise would be incon.siste.nt· -~:-~ " ··.with '-btFie f ·pfolltU:ons i"il-<"tlfe '1IIa tclii-ng 'ftllwt 'i:\!iJ'1I~iUons.'" "Afl·-·" .. ·· .. .., ,

explained above, the Commissi"on's 'regulations have for ..many'years'

held that after the date of ineligibility private contributions

must be applied to a campaign's deficit before any matching funds

may be received by the committee. The Staff concluded that to

allow contributions solicited by, made payable to, received by,

and deposited by the primary committee to be transferred wholesale

to the general election compliance fund is completely inconsistent

with the matching fund regulations. Rather than minimize the

amount of post date of ineligibility matching funds paid to a

candidate such a~ interpretation would encourace candidates to

manipulate' their contributiocs in such a way a~ to maximize their

receipt of matching funds.

The Audit staff analysis also concluded that other

sections of the Commission's regulations governing the matching

fund program support the Commission's interpretation. In 11 CFR

S9034.8(c)(7)(iv), it is clear that when dealing with joint

fundraising by pUblicly funded campaigns, contribution checks

made payable to a particular participant are considered to be

earmarked or designated to that participant. The case at hand is

similar. The contribution is made payable to a particular

committee.

Section 9034.5(a)(2)\i) of Title 11 of the Code of

Federal Regulations defines cash on hand to include all

contributior.s dated on cr befo~e the date :f :ne:iaibility. This

includes checks ~eceived ar.8 deposited after :ne date of

ineligibility. The Committee's analysis of their contributions

includes as general election contributions some cont~ibutions

Page 88, Approved l2/27/9~
. : -----

.-

85

dated en or before the date of ineligibility. Finally, section

9034.2 of the Commission's regulations define in part, a matchable

contribution to be one that is dated, physically received and

deposited by the candidate, or any of the candidate's authorized

committees, on or after January 1 of the year immediately

preceding the calendar year of the Presidential election, but no

later than December 31 following the matching payment period, and

made payable to the candidate or his or her authorized committees.

The Audit staff concluded that followlng the Committee's analysis

none of the contributions dated after the date of.ineligibility

would be matchable. To match such contributions would suggest

that contributions intended for the General election and

transferable to the compliance fund could be matched for the

primary committee.

In the opinion of the Audit staff, the Committee's own

analysis was inconsistent with respect to these contributions.

The lists supportir., those ccntributions nade payable to Clinton

For President begin with deposits on August 6, 1992. 7he apparent

reason is that the Committee'S final matching fund submission

contained contributions deposited through Augus~ 5, 1992. A

samp~e of the contr~bu~ions deposited betweeQ tpe da~e of

ineligibility and August.S, 1992, wass~lected and examined to

determine if those contrlbution checks were diffetent with respect . tcf'pay"e'e "o'r ·~~1"ect1on~6~is1."9nat1bn ..... Ncr ·dif&!renc~.·""&.·"1fot@ •. '. Thus.

it appear~ that more significant to the Committee's.analysis, than

an express election designation, is whether the Committee

submitted the contribution for matching. Even more revealing was

a review of the contributions contained on the Coamittee's list of

contributions not made payable to Clinton For President and now

considered general election contributions. First, a number of

contributions are dated before the date of ineligibility and are

therefore considered cash on hand for NOCO purposes. Second, a

spot check of the contributions on this list dated after the date

of ineligibility a~d deposited before August 6, 1992 indicates

that the majority of the contributions were ~ubmitted for matching

and matched. In the opinion of the Audit staff the Committee

cannot have it both ways.

The Committee's response to the Interim Audit Report

goes on to argue that in August of 1992 the Committee made a

calculation of the cut-off date beyond which no further matching

funds would be sought. The Committee contends ~hat this estimate

was made without benefit of hindsight or the results of the audit.

As a result, the Committee states that fewer contributions were

raised for the Compliance Committee than would have been the case

had the Committee known the position that the Commission would

take with respect to post date of ineligibility contributions.

The Committee argues further that to require the Compliance

Committee to transfer the funds back to ~he primary Committee

would esult i~ u~:airness to the Ccn~ittee be:ause it mav leave

insu:f :ient a=ou~: :n the Compllan:e Fund to ?ay contlnu~d

genera election wIndIng down COSLS.

Page 89, Appro,~ l2/2i!9~

. e. .'
8;

"The Committee believes that the Commission's approach in this

regard is inconsistent with the legal concept of 'entitlement.' A

candidate who qualifies for matching funds is entitled to receive

them in an amount equal to matchable contributions raised up to

50\ of the expenditure limitation. 26 U.S.C. S9034. The process

would be far less costly and simpler to administer if the

Commission, as envisioned by the statutory language, were to match

qualifying contributions up to the 50% limitation and seek a ratio

surplus repayment once all obligations have been satisfied. 26

U.S.C. S903B{bl(3\. In fact. if the Commission followed the

statutory scheme it may be possible to resolve the audits within

the six months contemplated in the surplus repayment provision.

I d. "

••°. 0

•

. i .';' • •

Committee counsel's highly optimistic analysis of the

benefits of the recommended change in approach aside, it is noted

that the Commission considered and rejected just such a system in

the ccur~~ of its 1987 a~e~d~ents to th~ Matchi~g :und

Regulations. More recently, a JU~y 8, ~994, oplnion by the U.S.

Court of Appeals for the District of Columbia in Lyndon H.

LaRouche and LaRouche Democratic Campaign 'B8 v. Federal Election

Commission is relevant. In that decisiop the Court quote~ 11 CFR

S9034.I{bl ioncerning the application of private contributioni"to

a candidate's NOCO and states: ,. '. o •• ; .. .. •• • • • ""...,. 0" - ",", • , - _;..,;. : "'r:- ....~..... '". ... °0 .. .:;

c.

c

c

"This language would appear to be dispositive" A

candidate is entitled to receive post-DOl matching payments so

long as net campaign obligations remain outstanding; and the

regulation defines a candidate'S 'remaining(NOCO)' as the

difference between the amount of his original NOCO and 'the sum of

the contributions received ... plus matching funds received.' ...

Whenever the sum of his post-DOl receipts equal the amount of his

NOCO-whether those receipts be in the form of private

contributions or matching payments from the public fisc-his

entitlement to further matching payments comes to an end. Even if

we were to find the regulati·on ambiguous, which "'e do not, we

would still have to accept the Commission's interpretation of

section 9034.1(b) unless we found it 'plainly inconsistent with

the wording of the regulation,' ... which it is not.

"Having concluded that the Commission's interpretation

of its regulations is not merely reasonable, but compelling, we

must determine whether the regulations, as construed, represent a

permissible interpretation of the Act."

"Here, petitioners have failed to cite anything in

either the language or structure of the Act that would render the

Commission's interpretation of section 9033{c}(2) u~reasonable.

To the contrary, its prov:sions make :t clear that Congress wished

to restrict the availability of matching payments to candidates it

considered viable. Thus :~e Act express~y li~:ts the class of

those "...h:::> are el:gible :0: :unds, 26 :':.5.C. § 9C33, and it

withdraws the el:~:bility of canc:dates who fal~ :0 receive at

least ten percent of the vote :n two successive primaries. Id S

Page 9:', ~p:-cved 12:2"7/94
;... ....r••• ":

88

9033(c)(1)(B). Under the circumstances, we fail to discern why it

is impermissible for the Commission to adopt a regulation that

terminates post-DOl matching payments as soon as a candidate has

received sufficient funds from private and public sources to

liquidate his NaCO, whether or not they are so used."

Although President Clinton did not become ineligible due

to a failure to rec~lve 10% of the vote in two consecutive

primaries, once he h~d past the date of ineligibility the

provisions of 11 CFR S9034.1 are applicable and as the Court

concluded, consistent with the statutory scheme.

After considering the Committee's arguments and

examining the documentation assembled by the Committee to support

their calculations, the Audit staff again reviewed the composition

of the S155,686 allowance for contributions transferable to the

Compliance Committee included in the Interim Audit Report

~alcu.la':::'c=-:s.: That a:!,,:,wa.nce included $34,585 i:l exc~ssive

contributions· redesignated to the Compliance Committee, $52,357

specifically designated to the Compliance ·Committee by virtue of

the payee or a notation on the check's memo line, anQ $68,744 in

.oontt~butions that· were made payable to a non~specif~~·p~y~e

(e.g., Bill Clinton,. Clinton Team, Clinton Campaign, etc:) dated

a_fter the date of i~!,:~i.9i?ility ~nd n?t; assoc.iated 1'1ith. ~ny

So'ln~Tt:atrofl.· ~·In fuit'b~ ·~~i~·;'tt:i#a!l·--:te~inea·'t1ilit ...-ni'"··6f:.~hl! ....

contributions in the non-specific payee category. deposited after- -

the date of ineligibility but on or before August 5, 1992 were

submitted for matching and matched. This is in accord with the

Commission's Guideline For Presentation In Good Order and

Regulations which state that a matchable contribution is to be

made payable to the candidate or his or her authorized committees.

Thus it was apparent that the Committee treated contributions with

such payees as primary contributions. The Audit staff could see

no reason to challenge that treatment. The amount that calculated

as transferable to the Compliance Committee from contributions

received and depositec by the Committee betwee~ July 16, and

September 2, 1992 was $99,806. That amount consists of $34,585 in

redesignated excessive contributions, $56,792 in checks made

payable to or otherwise designated to the general election

campaign, and $8,429 in cash contributions identified during the

review of records made available with the Committee's response to

the Interim Audit Report.

For the reasons presented above, the Audit staff

concluded that the Committee has received matching funds in excess

of the Candidate's entitlement. Presented below is a calculation

of the amount as presented to the Commission for consideration.

t

?age ., -.. II' a ...:..- "", ... ""!
89

Net Outstanding Campaign

Obligations(Deficit) at 7,15/92

Private Contributions

(7/16/92-9/2/92)

Matching Fund payment

(8/4/92)

Matching Fund Payment

(9/2/92)

Amount Received in Excess of

Entitlement

($7,878,678)

5,275,920~/

1,431,599

1,786,327

S 615.168

Therefore, it was calculated that as of September 2,

1992, the Candidate had received matching funds in excess of his

entitlement. Afte: that date the Candidate received one

additional matching fund payment in the amount of $2,825,18:

bringing the amount received in excess of entitlement ~o

$3,440,349 ($615,168 + $2,825,181).

In the report considered by the Commission tne Audit

staff recommended that ,the Commission make an initial" , "-~--~'8etl{rin!nllnl)n' tnat 'the:~!tt'e-e'n'li' ,"tequ:rre'(f -tb 'f!e~.~e:On,Hed-','

States Treasury $3,440,349 pursuanttd ~1 CFR S9038~2rb)(11.

During the consideration of the Final Audit Report, the

Commission determined that, consistent with a similar

determination in the audit of the Bush-Quayle campaign, certain

amounts discussed in Section III. B. 2., General Election

Expenditures, were allocable in part to the primary campaign. As

a result, the amount shown on the NOCO statement as receivable

from the General Committee was reduced. This adjustment causes a

$424,602 increase in the Committee's NOCO and matchina fund

entitlement. Further, the Commission considered the question of

the application of private contributions to the Committee's

remaining net outstanding campaign obligations as of the date of

each matching fund payment, versus treating most post date of

ineligibility contributions as containing no election designation

and therefore transferable to the Compliance Committee.

2/ The Committee deposited private contrlDutions totaling

$5,411,443 during t~e period July 16, 1992 to Septembe: 2,

1992. The private contributions noted above are net of

contribution refunes to~aling 535.~:-, and contributic~s

from individuals, to:a::ng $99,806, deposited :n toe

primary accounts tha~ could be transferred to the

Compliance Committee (55,411,443 - 535,717 - $99,806).

Page 93, Approved 12/21,9~

"
, ~.

90

A motion was made to support the Staff analysis

requiring the application of private contributions to remaining

net outstanding campaign obligations before the payment of further

matching funds. That motion failed by a vote of three to three

with Commissioners potter, Elliott and Aikens voting in favor and

Commissioners McDonald, McGarry and Thomas voting against. A

second motion to consider all post date of ineligibility

contributions unmatchable unless specifically designated for the

primary election also failpd by the same vote .

• As a result of these Commission votes, only

contributions deposited through August 5,1992, the last deposit

date for which contributions ~ere ~ubmitted for matching, will be

applied to the remaining net outstanding campaign obligations

prior to subsequent matching fund entitlement determinations.

As compared to the calculation considered by the Commission on

December 15, 1994, $1,943,403 less in private contributions is

aoolied to the Committee's renaininc net outstandina cam03icn

obiigations. Also, post date of ineligibility contributions

deposited on or before that dace will be considered matchable

without a specific election designation. This outcome produces

the fqllowing. enJ:i tl.e!D-ent deternUnation •. " •.

Net.Outstanding. campa1gn Obligations

:" .(oe.Ucft.·j , • t-' 1"./],,5.;'92:, '6ft Ye-H, rid:.:-t .. :.- ~. '

Less:

Private Contributions

(7/16/92-8/5/92)

Matching Fund payment

(8/4/92)

Matching Fund Payment

(9/2/92)

Matching Fund Payment

(10/2/92)

Amount Received in Excess of

Entitlement

3,332,51710/

1,431,599

1,786,327

2,825,181

$1.072.344

10/ The Committee deposited pr~vate contributions totaling

$3,381,102 during the period July 16, 1992 to August 5,

1992. The private contributions noted above are net of

contribution refunds tota:ing 5:2,280, and contribu~ions

:::rom individua::'s, total:r;q 526,305, depos:ted in the

primary accounts that cou:d be transferred to the

Compliance Committee ,53,381,102 - $22,280 - 526,3051.
91

Therefore, as of October 2, 1992, the Candidate had

received matching funds in excess of his entitlement in the amount

of $1,072,344.

Recommendation #4

Given the Commission's actions with respect to this finding,

the Audit staff recommends that the Commission make an initial

determination that the Candidate is required to repay the United

States Treasury 51,072,344 pursuant to 11 crR S 903B.2(bl(1).

E. Stale Dated Committee Checks

Section 9038,6 of Title 11 of the Code of Federal

Regulations states that if the committee has checks outstanding to

creditors or contributors that have not been cashed, the committee

shall notify the Commission. The committee shall inform the

Con~ission of its efforts to locate the payees. if such efforts

have been necessary, and its efforts ~o encourage the payees to

cash the outstanding checks. The committee shall also submit a

check for the total amount of such outstanding checks, payable to

the United States Treasury.

The Audit staff performed bank reconciliations through

:.;" .1une'··3{);··1993 and 'det:e"rm1ned 'that" the- eotal,'amo\mt of···.out·s-tandin9-

checks was $111,673, Of this amount, $79,119 were for checks

dated between November, 1991 and March 19, 1993.

In the Committee's response to the exit conference, it

provided documentation which demonstrated that checks totaling

$9,596 were not outstanding, However, the Committee did not

provide evidence which demonstrates that no liability exists for

those checks still considered outstanding nor were copies

presented of any negotiated replacement checks.

Therefore, in the Interim Audit Report checks totaling

$69,523 ($79,119 - $9,596) were considered outstanding.

In the Interim Audit Report, the Audlt staff recommended

that the Committee present evidence that:

a) The checks are not outstanding (i.e., copies of the

front and back of the negotlated checks); or

b) the outstanding checks are void (copies of the voided

checks with evidence that no obligation exists, or

copies of negotiated replacement checks); or

c' the Committee attempted to locate the payees to

encourage them to cash the outstanding checks or

provide evidence documenting the Con~ittee's efforts to

resolve these items.

Pase 95, Approved 12;27/94
92

The Audit staff added that any information provided

would be reviewed with respect to any amounts which remained

outstanding, a recommendation would be made that the Commission

make an initial determination that the amounts are payable to the

United States Treasury.

In the response to the Interim Audit Report the

Committee voided checks totaling $43,389. Of that amount the

Committee provided evidence that checks totaling $28,618 were

reissu~d and subsequently negctiated by'the payee. Three checks

that were reissued totaling $1,043 were outstanding. The

Committee did nct provide a copy of the voided checks or any

documentation which demonstrates that no liabllity exist for the

remaining checks totaling $13,728.

Finally, ~he Committee states in its response that

letters had been sent for checks:totaling $26,133. Of that amount

two che=~s totali~g S4~ clea:ed the bank a~~ a:e ~~t conside~ed

stale dated. No other documenta~ion or information was provided

by the Commi t tee. " '

In summary, the Audit staff :has aetermined that the'

'revised amount of stale dated outstanding checks is $40,859

:4..: .._.._.•:... :L~~J:_.?2~ •. -.J2~,.6.1~ ~. ~:t~~~;.... ';~r.·.:,":, .... ,.•.•• .• '.:..., .,.-,. '-"~ .••., .~ •.,;.

. Recommendation IS

The Audit staff recommends that the Commission make an

initial determination that $40,859 is payable to the United States

Treasury pursuant to 11 C.F.R. S9038.6.

F. Recap of Amounts Due to the U.S. Treasury

Shown below is a recap of amounts due the U.S. Treasury

as discussed in this report.

Non-qualified Campaign Expenses

Matching Funds in Excess

of Entitlement

Stale Dated Checks

TOTAL

?age 96, Approved l2!27!9~

$ 270,384

1,072,344

40,859

51. 383,587
I

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i.'

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~~~ SO $34,834,932 524.528,807 12&4.544 $20.1132

-- _...•_~ , ---- .-,. $50,821.039 110,785.488 '1.004,352 "'511,003 sell.M8.lIe2 150,358.118

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'143.381

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$:131,0113

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$5,405,720

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11,'74,428

$11.828.288 $11.828.272

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Clinton for President

Final Audit ~eport

Attachment 4

Duplicate payments

RECEIVABLE

DUPLICATE REFUNDED FROK

PAYEE PAYKENTS MOUNTS VENDOR

.. ...:

2,062

4,850

7,808

..

17,054

11,145

$1,200

257

~o ,:0.4S :•.' 577

250

280

19,198 *

49,856

444

S19,021

399

43,420 * 867

2,614

1 AT' T $19,021

2 Airborne Exp~ess 399

3 Alamo 43,420

4 Alltel 867

5 A. B. Data 2,614

6 Bachar, Steven 1,200

7 Brantley Sound Associates 250 250

8 B~dget Rent-A-Car 1,385 1,385

9 Sylites 12,569 1,424 ,~ C , ? Tele~hone 3,606 3,606 * ·11'Carvi.ll-"e and Begala 5.,063 5,063 . '<;11~ EXe:oJ• .t/.TM/1dIlA~rSvs:. r .•'.. ".' ,','4., 7:7~ .. , 4,718 *' . . -.> Gi-bbs , ,Geoffrey .,508, , ..' , ',' .. ' ' "'. 51)8 ." ...:

14 aalicran, ,eharhs 50'0' 5'00. " 'IS Ickes, Harold' '.",.. 2,21~ . ':2,21-6'

..16 Leslie, Mary ,17-,.921, ·17,911

.-;·.. :e,"a-ct1.~~'·Boo~~...l·: ..~:",,,': ,..-, .. ",' :")00, '.~'.... ,. '..;.. ' 1,. 5~2.•.._.. ~' ...... 7"..s9.1.: '" :.. ' ;, . ' ',·V Kerchant's Rent-A....;Car· --2','0,£.8---- --1~·O.l.8--'----·=-·-~... '·· -... A· ...~'"

~otoro1a 4,919 4,919 ~~ Palmer House 6,832 6,832

21 Radisson Botel Atlanta 2,452 2,452

--22 Share Systems 1,394 1,394 , 23 Sheraton Cleveland 6,766 6,766

-·24 Southwestern Bell 17,054

25 Sprint (14,550.09) 19,198

""'26 Strategic Political Response 49,856 - 27 Thomases, Susan 444

'.28 '!'racec. , .7,,808

':_",:2-9. 11tH'ner "Li·ip'fer't :. " '.: :"._," '...•... " 1,0., 046,.. . 30 We-st Coast productions . '" 577

e31 Westin Peachtree Plaza . 250

32 weststates Airlines/Richmor Aviation, 280

33 Wlilis, Carol 2,062

34 W.P. Malone 4,850

35 Zale S. Koff Graphics 257

TOTAL: 260,884 65,264

* THESE PAYMENTS WERE REFUNDED TO THE GENERAL COMMITTEE

CR APPL:ED TO GENERAL ELECTION EXPENSES

Page 119, AF?rov~ 12/27/94
Attacrarent 5

page 1 .'if .3

COMPUTER SYSTEMS trrn..rlAnON

CUNTON FOR PRESIDENT COM1aT1EE, CLINTON/GORE 92

Auew- 1991-Os:tQber 1991

Equipment: 386 PC running 8 devices

Vendor: Malone & Company

FunctioDS performed: Ran Qffice package including word proassing and scheduling; ran ," ,

political dat2 base. Maintained conttibuior information. Supported staff ofl8.

November 199I-Mav 1992

Equipment: Unix CO 6(32 running up to 128 devices. 80 simultancous users. - .. . .-. . . .

Vendor: Malone & Company

'-" Gencnl comspondencc had grown to 1600 letters per week by the end of May

and doubled agaiJ'l in JW\e. Governor Clinton felt it was critical that every letter be answered.

and in a timely manner. This continual growing load of correspondence greatly taxed the

proccssmg power of the CO 6{32 and its software.

The'overall capacity of the CO 6{32 ~m was physically limited to 128 devices (terro.inals,

printers. modems, etc.). Of that number only 80 dcnces could be operated simultancously

without experiencing computer problems such as terrninallockouts, system crashes, processing

celays of up to 30 minutes or more, etc. Backups required manual intervention and took up to a

full week to complete. They wen: obsolete before they were completed. A summary of the

devices supported by the CO 6{32 at various times during this time frame is as fQllows:

Month Terminals Modems Printers Total Devices

December. 1991 36 3 10 49

January, 1992 52 3 12 67

February and March. 1992 64 5 14 83

Apri1.1992 SS 7 18 113

M.ay.1992 91 9 18 118

Service: was required on a recurring basis due to system failures. (Copies Qf sal'tlple service

:-equi.ooements arc ar-..ached.)

Page 120, Approv~ 12/27/94
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Page 2 of 3

Tne ever-growing young suff was familiar with L'1e DOS working environment and needed to be

able to use Novell. &tensive upgrades to both the hard"'-are and software wen: going to be

necessary to accomodate the user needs. Quotes wen: taken regarding the necessary upgrades to

the e:tisti.ng system where it was determined that a new system would actually cost less..

(Upgrades wen: projected to cost in excess of S4OO,OOO and the result would have been I.e:ss

desirable than an entirely new system.) Several consultants wen: involved in the decision

process and all agreed that the new system was the only sensible altemative.

t-.fav:O 1992-present

Equipment: DRS 6000, 386 pc's and :lerwcrks. DRS 6000 was originally configured to

accomodate 150 simultaneous usetS.. AGciitioruU computer coroponerus were added durina the

General Election to uJrimlfely tUe a.pacity to 300 users. > _ _ > _ c:.._ _

Ye.ndors: ICL., L"'lc.-h.a:rd~ md sof:wa."'C. ~!3.1cr.e & Company-hardware and consulting,

Fut'..Jre Now and Complete Computing-pe=na.l computers and software.

.. Fun~tioas PUformed: Continued to ron office' pacbge including'W<:lrd processing-and ..

.'., se1Tedu1lhgas weU'is-nmning-pol:ltiealdattbese fet" balance-of and duri1\g.Gcaenl.. ' Election:... . _ - ._

•. - . ,- . S~ ex~onm.·May,l992~addiaonalu:rerneedsof ... - _ traeking !ielepte:S fOr the Derooe:raae Conv.ention. allowing the delegate ~onto mrar.a; . ,. u:;;i.n& ~~~ ~or~Jl.J;l~~o~~~~e fo:. ~-~ew 'X~rk~~ the Convention.. . ~- _! ~_ • .. - ••• .,0 ~._ .f~ .•. .,? ..... u'_"'~' .._:.~~_~~ ••~:..•. ......:" ... ~'''-:.'

This equipment (tempcxary system) was installed in the Gazette BWIdiiiI=-(IhCCommitt= had outgrown its old space and made the move the the new space effective June 1,

1992.) Installing the new equipment in the old building and moving it to the Gazette Building in

just a few days would not have been cost effective or sensible considering !he tempo of

campaign operations. A temporary system was necessary due to the Committee's urgent

computer needs as indicated by the chart above. The pennanent system was installed tess than

one month later.

The new system required a new nerworking system and extensive rewiring. (I-K

Ele.ct:ric"p~yi~ the 'Wir.....g.) ;.' .. ~:" ... _" ".' .-." • .'~ ••,.....; --'. " ,f ••• "•••••••

. The campaign politic:al q~ package and cocrespoQdence·records were'..

immediately traIlSfemd tQ the new temporary system. They wen: then transferred to the·

permanent system upon its final installation. Every effort was made to successfully make the

transfer with the minimum of disnJpcion to daily staff aetivities.

p.;.....r-....ary records were mai...Tltained and functions performed through tile

Convention after which the GenenLI Election began. Primary political records and other

infocnation were used in the General El.eetion. nus equipment was sold to the Clinton/Gon: '9'2

Committee effective after the Convention.

Clinton for President records previously maintained by Public Office Corporation

as well as detailed oan.sacrion files from World Wide travel were transfeaed to the ICL

equipment as part of the winddown operation. Ameneraents required by FEe auditors related to

press and Secret Service reimbursements &SWell as continuing data to respond to audit questions

and make qt:ar..e:l)· FEC :ilings have been rr:.ain:.a:.'1~

A;col.::.t::.g records to include vender i..-..fonn.aticn and cash disbursements have

been maintai.ned by the Committee on in-house 386 computers..

Page 121, Ap~~O\ied 12/27/9.;

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Actacnm;nc ;)

Page 3 of 3

Data necessary for preparation of amendments nec:essaxy to deb< schedules

originally prepared by POe covering inception through March, 1993 has been reeonstructed by

the Committee. Amended reports were prepared and filed.

Many of the PCs and printers were sold to Transition., staff and others at the end

of the General Election.

Desember 1991-Pn::seDt

Equipment: NtA due to service bureau nar.zre ofs.ervices

Vendor. Public Office Corporation (POC)

FunCtiODS Perl'orm~: P'JbUc Office Corporation provided data proeessing service:s for Clinton

fof President in the area of producing reqm..-ed contnbution records and related matching funds

.submissiOll.$.. J.hey also main~ed iniormatio,n on cash dispurse;roems prepared the fEe

l't1QIUhly eompl.iance reports for the·periods December. 1991 throuih March. 1993. DuriIig late

~992 and early 1993, the Committee began the difficult taSk of movin& the POe maintained data

. tpCommittee c:omputers in Arlculsas. POe has continued to provide minimal service:s as

requested since that time. At present POe still maintains c:ettain duplicate records and answers

... 'u'=U:~C'==~~~~~io~~:~'----~' ',' the relationship terminated other than on an advisory t:.sis as needed during the duration ofthe

audit period.

POC provided no service:s to Clinton/Gore '9'2 or the reWed Compliance

Committee.

.. --....

Jl.:!v 16 1992.?;;sent .

. .... . Clinton/Gore '92 Conunitt.ee: All aecoanting related computer services were perfotmed inhouse on networlc.ed PCs. All FEC compliance reports were prepared intemally by the

Committee from infonnation generated on the accounting depa:tmen1 computers.

Vendo": Future Now, Inc., Complete Computing. Great Plains, Keay for President Committee

CompliaDc:e Committee: All ao:ountinB rela1ed computer services were perfonned in-house on

separate nervororlc.ed PCs. Compliance Committee computers were separately nervororked and

maintained separate from the Clinton/Gore '92 Committee accounting compute~ All FEC

compliance reports were prepared in1emally by the Committee from infontlAtiaI. generated on

the Compliance accounting depanmcnt computers and manual recold:s.

Vendors: Complete Computing, Aristotle Software

(last updated July 3, 1994)

?ase 122, ~proveG 12/27/94
.,\,-~.........,c.

Page 1 of~7""

.....

__ ! .. ~-.. 'e :,r~.J • -- -- ••• ~. '.• ~.,!'~ # ..

?age 123 , Approved. 12'~- I ... ' / 9";

. "

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.'i=i~ Class,

Page 2 of 7

,,.lllll· Pleas- - PlacE

Stam •

Here

.

. '. "..' • "._ ... " _. __.•. -."0. .".~~..' e .. ' :.... ..... ... .. ;',.. !lo•• _~ • .J,.o -0 _ •.:~''''

Bill Clinton

CLIm'ON/GORE COYPUAl'lCB PUHD

Dept. 3224

P,O, Box 8802

Little Rock. AR 72231·8802

'.' . ,.

11.,,1,,1.1,.1,I!.Il.", 111 ..1.1. ,1.11,,".1.11,•• 11

Page 124, Approved 12/27/94
n.~-a._"'IIC.l~",," b.M.

Page 3 nf 7

Number 99430

. ::.. .

. '.

.. .'. ........ '.' , 4-' .. • '

4- • • • :1· _ '.' 1'he attiched offic.'W Pre-con.vention. .,

C1i:nto'D: Team lapel pin has been-sent

__:;;~~ ·· __"-·:ttt~tn_~"~~~~ '."

commitment to our cause.

.

."

.'

: . )

' .. , • t.o •• ' ; '~, ••• '.

1- will never forget your generosity and

speda1 friendship.

~~ '---- I·

~;·~E=:Am=. ~~~7~- ~:-~ IillPr~ :-.........-::.-:.. :-' ... - " II' It is a collectible limited edition and

r-- is only available to those dedicated

.i$l~!V1du-:ls.~hoc~m~~eQt.o.my~.'..:,'

;.,; '.' pte-<onvention campaign. . '. " . ." . . '." ".

(-;-'<
Page 4 r'lf i

, R:\PI1) RESI\ )NSf ,,\t :TIt.:)>J )'1\-.\ \I..)

V"

, "

, To: Bill Clinton ,Clin~on/Gore,O:Jl'I'Iplian(e,Funcl'

112 West 3rd Street

P.O, Box 8802

little Rock. AR 72231

From: I!fr. Sample A.· Sample

," 12,3 AAy.· St~eet ," : . ,AnytoWQ~ OS ,.QOO.oO ...OOOO

..

~?~_ . -. __ -:",_--!.~~:_:.1'~:._';':' •.._'; •.:._~w.';; ..:· ._- _ .,.. " "":' /.- -1 ••

.-. Yes, Bill, we ~ust be fullv pre~~! .

....... "... .:.' .•'t:'- - r: ..... 'f ........~. " ..

I agree George Bush and Dan Quayle have nothing to run on and. because of this, we can expect more

~Willie Honon" style anaclcs this year-and much worse.

I ha\'e rushed my personal check made out to the special CUl'."TON/GORE COMPLIANCE FlJND

In the amount of:

[ J S25 [ ) $50 [ 1 $100 [ 1 $250 [ 1 Other $ _

" 'f?lb..: mat !",~C:'>c<\;""rt'!oJl'oJO"''GORE.COM~..;qf'l...""D and t'tt\lm w'"'' :"'\lS ActlOl'l Memo '" thuncloot-d tt'.Y1:lopt. Thar.i.s,) : , ......... . ..' ... . . -.... .... .. . . .. . ~. ...... : "'- . . .

123~Sb7a--31ab00010000X

Page 126, Apprc\~ 12/27j9~ ..,
...,,---......... ,........... Page 5 ('If 7

--. --~. --~...... --;:::;----"- - .

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... .. , ....

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The Federal Election Commission requires the following infonnation:

Name: _

Home Address: -,- _

-. Ckc~patKn>~ ..~--:.-'·"-·~· -_.,-,-'--:.--,"--",>,;,.'--'-.'-'~~~'-'-'...;_--'-_.:....."'----....oi'--...:.., """""-_-.;.;,. '. " ,i:

Please make your Personal check out to the OimonJGore Compliance Fund. Corporate contributioN

are prohibited by law. Political contnbutions are not tax deductible. '

_ ..............a.-e-e-......

Page 127, Approved 12/27/94 ., '1

.. ~:-

,.' ....
,;." : :..3":'"7'e:' r. -:.M.

3.<;e ";

BILLCUNTON

Hr. Sa.p1e A. S..p1e

1234 Any 5UHt

Any town , US 0ססoo·ססOO

Dear Hr. 5aap1e,

Auaust 21, 1992

7:1~.uI

I'. pl.ased to present you vitb your li.lted edition, l~divldually

nu~bered Pre·Convention Te.. lapel pln.

And thouah it eaD't possibly "&sure up to tbe debt of t~ I oye you,

your pin represents tvO very i.portant thines.

Pirst, it recornize. you for st&ndina vith .. early and investine your

faith ill our COllllOn UILSI and values. lIeUe.... ¥be I tell you, the poyer

of your conviction strenrtbened and helped sustall1 ay OVII faitb ~~d ~liefs in

the face of so=etimes lTeat adversity these past sollths.

. . Amr second, it· S iiven-in:!"ecorni tion of the' pneroWi financial support

. yOll, p.tOYld~ -;I pre.·convet\tloo c4BP&~iJ:'. Contributions ·lin YOU.l;.S i!\£used ."

our ed~rt 10'.1 th til. c.r1ti~ nSQurces w needed te uapdl!' hard tllroup .

JUlIe and ..r~y July. You.l!&de it possible for .. to c!?G=icate o.ur ~ss...

of cllanie rirht up to thl aceent .u. Gon and I joined IwIds in Mey Tork CHi

and officially laUllched our jtoeral elecloa uapaira. 'And Yhat a laWlch it

.~;..:.. "':~_~~_~--"__.~~_~:_ ~_..:~!~!~.i-~""" .. '~ .. _' .- -.-..: ..~.:..- .. ' :-'.0··" .- ::. - -~ .. ~~.: :~ v-:a,.·:·.:· #'•••..:•••

There's 'no doubt in uy lIiDd, w would IIOt have .chi the succuses VI

have, vithout the co..itaent and e.rly support of Pre·Convention Te.. -.abers

11lte you.

we would not have retired our pre'convention uapalrn debt. lle ¥Ould not

be this far ahead in the public opinion polls. And Ross Perot's backers would

not !Ie co.tlll: our vay in drov.. the vay they have in recent clays.

c

But we can't rest euy = the piM w've ade. Tou knov hoy volatile

elections are the.. days and you knov ex.ctly vhat ItiDd of bLse, IUtter

tactics "e C&n upect fro. our opposition .'. especially nc". vhen' they're . ~inr-.Sl:ared.'· ' : .• " .•., .. '. '... . .

You played. pivotal role ia our pre'convention eaapai(ll. Nov, I'.

aslting you to aaltlI an ....u bia-er coatribution &S VI .ave forvard.··

This yur Ye Ii.ply eaD't Lfford to alloy Geer... lush and his cyni~

crev of lIepUYe caa~lrn uperts to ret in our vay. too ~ch is .t stak.e.

':'00 II'U~ ::~s to be done to re;>&~ r the d~ the aua!l Pruide."'Icy ~.a.s

inflicted OIl this country.

And all indication.s suaut w eaD upe<t the wnt fro- th.. and the

soe.: G«oril Bush bas no record to t"'I1Il 011 and no plan for AMrica's futur••

The lov roaeS 1s the only road be eaD talte.

(Nut P&&e pleas.)
...::.::.lC'T.ent: tlt\

Page 7 of 7

Mr. Suple A. Supl.

Aupst 21, 1992

Pqe tvo

He ean't defend rolling up the bi~st budget defieits and national debt

in Ameriean history•••or breaking his proaise on taxes••.or i rsina himself

in vorld affairs while Aaerieans lost jobs and their hope for the future here

at hOllle.

Our recent Democratie Presidential Noainees learned the lessons of

ftYillie Borton· and the Republican attack apparatus the hard way. iell, it

von't happen this time around ., not if you'll help .. nov.

That'S vhy I'm askint you and all your fellov Pre·Convention Ta.. members

to assist the call1pai~ in developing a high· tech rapid response and counter

tactical operations capability. And one of the keys to this eritical campaign

initiative is fully fundint the CLIN'TOK/GOU COKPLIANCll PIJHD. That'l ¥here ve

need your help the IIIOst.

Your qonation vill help pay for ski:led election la~iers to ee:~~:

against th~ nuisance tacti~s; bOgUs' legal ch~tlenges, and baseless allegations . 've lye'" cOile ·t()" expect'ftca 't'ht!'othU S19. And.- "trte~ 1:1. need 'the'"Cc*putet pove~

necessary 'to put tiuge volumes of key inforSatlon at their fingertips to fight . back '\lith the'bets, fast, before any d..... ,is do~. .•

.'-. ,'.... ,But''l'''.~t4J:.t QU4_l..1_~ •• Ye-~ be r ..••h •. -"om. "~~e ,ve knov Bush. ,,-~--,-',:-.-'- e'__ ;; .• d-' h ," f~·'il·l" ..- '':'_'. '~''''Y~t':''-'~'''''' ..'" _;.~~--.~....'r.....:,·.. · ..... ' ... ". Quay..e. an - t e-resto --t.--v--.-e"'""CI-out-o~. cOllVent..oa·GII_U!e· ·___ :_ ',' ". , attack.---

Just re..aber, Geor,e Bush has stated he'll "do whatever it takas to

vin. to And, I think., this is one ti_ when we can take hi. at his word.

Please act today and give as generously as you can. Y. have no tiee to

lose if ve're truly serious about vinning on the third of November.

c

lJ~

c

_. -;"."- Q'

7';ri;;~· Bill Clinton

P.S. In addition to its ItHpsalt.e value, your Pre·Convention Teaa lapel pin

and individual pin nUllber "ill serve as a special credential and security pass

to a .. me.bers only·· inaugural victory ce:e~ration next January in

Yashington.

before !! eelebrat., '!! ~I And so, Mr. Suple, help us shut dow

the Republiean "attack apparatus· by support~ our rapid response capability.

Please, fill out the enclosed Aetion MeAl) and 11&11 it back vith your &eDerous

contribution to the CLINTON/GORB COIU'LIA.'lCB FUND. Tb&nItsI
n t t:.acr.me.nt. ot)

Page 1 of 7

..dillun

TEAM

TtZ IOf:STRl ...,..,....rlIl:XX ' _"<SoU I'Zi'll'

- .'

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.. . .:-t-: _,'':'7- '~'.•- :~ •.• :.·i -.' ,i. :.- :. ._ --.:.: .....•....,.. .. ~"-1'~. ~'.~~ .:.. :;.,.;. ..~, "i...,- .,.-. " .. , - - ------------- -- ---- ----- - ------------- - --- -------- ----------- - - - - - -

CLINTON PRE-CONVENTION TIM!

. ENCLOSED: Official 1.992 I' i

t Nomination AcreptaflcePl1'0togmph:..~J '-..

lobe 31~2O'

Oo:sv. """" Lor_ ,. - ?kl. I.R~",31Sj

<:'-''' "!:.s

\buc:4. aft...&R:

ON POSTMASTER:

~~ DO NOT BENO.

'..

Page 130, ~?ro,~ 12/27/9~
",

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Page 131, Approved 12/27/94
.'"'\.c::...:tl...-.'j,~.t. co

Pa<;e 3 :)f 7

••-:"'•• ". "•• ; ·o,_ .. b- !:..."_ ; "' "" 'to> _~ ••.•~.

;;'. Ta:' ..BiU Clin'ton' ..'. . .. ', ,

. Chnrori/Gore Comphance Fuhd'

,'. '112 Wesdrtl street

P.O, Box 8802'

'," < , ••.'d,::i.~,Roc,k•.A:R}.23-1_.,: Jot _:~. '-:'" -" t .......:-::..:'

-from: 'Mr. sa.pie:-A~ S~mp1e­ . 123 My Street .

Mytovn, US 00000-0000

-, -

J J S)~

,~ Yes, Bill, we muse t-e full\" prepared:

I agre1: George Bush and Dan Quayle have nothing to run on and. because of this. we can expect more

""X/dile Horron" style attacks thIS \'ear-and much worse,

I have rushed my pe~nal check made out to the special CLINTON/GORE COMPLlA.'>;CE F1..;-SD

In the amount of:

J .l'~~O .- '" .. t ] SlOO." [ 1 -:S.~~O' ,l ] ~th~r S.-_,""._-'-_

iPlnoc make pn>Oh.11 check out <0 Q;I~'TONIGOR£ COMPUANCE R..'ND:on<! """"' Wlth thll Acnon Momo '" dv oncIaoed ","'-<lope nww~)

123~Sb7!--31!b00010000X

'..:
.--

Attachment 68

?aqe 6 --)f 7

fir. S&apl. A. Saapl.

August 28, 1992

Pace two

Be can't defend rollin( up the biggest budget deficits and national debt

in Aaerican history•••or breat1aa his prOld•• on taxes•••or i...rsinc hiaself

in vcrld affairs vhile Aaericans lost jobs and their hope for the future her.

at ha.e.

OUr recent Democratic Presidential Noainees learned the lessons of

"Villie Borton" and the Republican attack apparatus the hard vay. Vell, it

von't happen this ti.. around not if you'll help De nov.

That's vhy If. askin( you and all your fellow Pre·Convention Team .~mbers

to assist our CaJIpaip in developin( a high· tech, rapid response and counter·

tactical operations eap&hili~. ADd on. of the keys to this tritie&! caapaip

initiative is ful1¥ fundin( the CLINTON/GORE COMPLIANCB PUND. That's where ve

need your help the BOst.

" Your -donation vill help pay for skflled- election lawyers to dderid '-' - ap1nsr :the-llu1"sance-tac t fes, . bOluS lq-al' "'Challenres, 'ami .ba.seless -&llept ionS , ve'ye come to expect'froa the.other'stde;'· Ahd they'll need -the eoapU1er pover' . nel!e5sary ta put·h.... toluaes' of· Itey 'infoqia-tlon at ..tn.ir fiQSUtips, so that"

ve can f{aht'back v1th 'the f.c'tS, fast, before any daare is done •

•. . . r:-' _•. ' ".- __ ·:.·~Bu t:'~~~~ act :'q~l'ill~:" bec~~i·>;i •..;~~~,~'aua1t.-, ' .t1l'.... ie'h"O"f"~:"~-"""::

th.. 9tll'be eoaifti out of their convection CD the attack. -

Just r....ber, Gearae Blah has stated he'll ·do vhatever it takes to

vin"· And I think this is one ti.. vhen ve can take hi. at his vord.

Please act today, and aive as generously as you can. Ve have no time to

lose if ve're truly serious about winning on the third of November.

...,,~ ..

: . t" •.

'Jaraest Regards,

•••• '';. J -:- : : IV . :', ......,., . . . ~~

Bill Clinton

P.S. If recent history has taught us anything, it's that we .ust be prepared

for our opposition's unscrupulous tactics.

And so, Hr. Saaple, help us shut down the Republican "attack apparatus·

by supportinr our rapid response capability. Please fill out the enclosed

Action Heao and mail it ~ck vith your generous contribution to the

CLINTON/GOD COKlLUNCI PUND. Thanks I
'"""-' '.-

-

.....,. .".. ..

.~.

'i !

Att.aCl'1l1ll!!nt liB

Pay-e 7 C'lf 7

Page 136, Appro,cd ~2, 27/94
Clinton tor President

fin.l Audit R•• port

() :). t'\ / f': ? I: .~,' :)"'~ , t·

J

/r

e

\

prerundln9 :

Attach••nt '1

P090 1 ot 2

...

'~i "MoUNT OU. .......OUNT OUt

A"OU~T;. PAI 0 y noM TH. PROM TIlE

BY a.URAL GENERAL COMPLIAnCE I

VENDoR COST COMIU1'TEI \ CflHKIT'T1t1 PUND

-~_._---------- --------------_._-- ----------- ----l:f---- ----- --- -_._----- ---------- .'"

t;IJIJ [II,.. t:NT .-.HI> ,,,,cII.I'rr!::!]; , .....

\

'tJ .-- .---- . ,".---- . -. -,. <. ~u :

,q rlll:urA Now. I lie. 113,616 65',411 60' 2. 121

CD P'u ': u r 4 11I0\01', Illc. shipped 1/!5 11,616 .. a 100\ 11 • "., 6 ..... Future Now. I II c: • shlpp.d 1/1~ ~, 066 I '1.", It9. 100' 2. 172 w

oJ IeL. Inc. 212,460 1~~" 041 ~O~ 8.429

,r,' r -l'l El.ct.ric 'Q,801 .' a ~D_ 19. '04

L1ttl. Rock N,,"'ftpap.rrl '1-" 0 , 12 • 50 a '0

Ij W. 1'. H410ne 104,115 :61', 50~ 60\ a

()

-, : 33,160 0 ~u 16.6JO

'1' n, o'. l

f-' POLLIN<i ANU IJIRF.CT MAIL ... '" - ._-- ._~-----

--------- , .. t--) '. (ir •• nbllrq-La)i;" 9Q,306 ... o , SO \ H,6SJ oj

9,315 . 0 , \.0 (i-I.. ConvantllJIl SurvftY .. " 100.\ 9, J15

J. opinion ReB8dtch . 0,450 0 50\ 41,J25

O-R Convention Pole 13 7/l S. S,930 , 0 I DO.' S,930

O~R ronvent1.un PQ1. 14 1/16 4,594 0 100\ 4, ~94

I l 1II t ft<J 1 C Polltical R•• pon~. : ' 200,484

,.

GI::NEnAL ELF.rT:ON MEllIA EXP~~o/lES ;.

------~ -------------~---

flJCUII GrQups .- 6,109 ., 100\ ., 0 6.109

Md. t I ') III 1I0po' 161,273 t 0 ~O,' 80.631

Test H It'Jp. Sp" t 4,106 .• 0 100\ 4, 106

Admin }/ I S thlQuqh 8/18 t 18,990

'.- ,.. 0 100\ 18, "0

','
CI tntllil ror llt"1II1d.nt

I"llIal Audit UHport

(), "

,j

"

" ,

"

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, !' ? !~ \;: f\

/ ,S';

I,

i~I.' i:

, '

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" Attach•• nt '7

Paq. "1 or

pretundlnq

"

CIlHHITTEE

AMOUNt ()UE

FROM TilE

,"UKPLtl\Nct:

rUnD

11£NERAL

AMllUHT DUE

AMOUNT PAID rnO.. THE , , BY Q~~IRAL

COKHITTEI , I ,

----~~--~~~--r-; - VENDOR COST

'tJ

UJ ,n

(])

>-'

w

(Xl

MI:'Cf;1.l.ANEOUS GENERAL !XP£"9E5

Air Advantage 7/10/92 R.con~lli.

!lorton 8roth_rll

Pres! Association, Inc.

;

. " i , 1'1,000 l,OOO lOU 15,000 " ' 76,320 1 '/ 900 LOO' 60,420

'1,,681 1'00' 2,116

Ij

o

~.

OTHER

nl\u f't'I}~fI/nlllfi Shiald

La Ihtpo's Office

'.

: )"

: :'.'.

J. H'

2,39'

>-'

IV".

IV

--J

'"\D

,I. r.t; .. s :

S1JB-"tolfA1.: I

!

..

J98,480 200, U 4

:;lrat"'Jlr: I'olltlcal R.llpona. Hast .. , F11 ... 1)9,6f.0

T~A~:

;

J98,480

.~'''''''' . 110,81'

due fro. the Co.dl(lnc.:.t~n~ 'but

Unl,ald ~al't5 taK. 1

"a'llint r.pl.aent. on. h.rt July rent.

Acknowlodq.,d by CQ •• itt..~·.:

Ttll" dmount is not capsidured

\

LS non-qualifi.d.

'~

" "

'.. '. ,"

.'

'. • I

"

. . ::' , .;::'1
Clinton for President

Final Audit Report

Non-Qualified Campaign Expense

NAME

Attachment 8

page 1 of 2

AMOUNT

'\ . ~~ ". .

Graves, Kathlyn; Escrow Agent

Ickes, Harold

Malone, W.P.

Sheraton Manhattan W~l1is, ~arol . Worthen National Bank " New England Teleph6ne.

Parling Tlcket·s

Stolen Fax Machine

Lost Radios

$37,500

5,500

608,857

6,489

.... ""'l ........

..~,~:..J"j

166,658

""·,000'"

2;1:29 . 1,201" " 13,424 . "

-.~ :.~ ! -:\.-A.:.: ~.:: ": :-.. "..t ;. 'lo •• '.'r:-•• ':;.'.,l•. -:.).;.,. _:.. _ ~.iIiiJi( .••.• ' ...••• '.';: :.._ ':- I"~:'.

PAGE TOTAL:

Page 13~, Approved 12/27/94

$859,973
Clinton for President

Final Audit Report

Attachment 8

page 2 of 2

Non-Qualified Campaign Expense

Bonuses Paid Post 001

NAME AMOUNT

1,5C:

7,000

'2 ;501) ... . .........'

12,500

2',250 .:

3,000 . 2,500

3'#~bo: .·.•t· . ',• • .'-t':. i ... ' ... '.'

2,500 ----- " "'_

3,000

2,500

3,000

2,500

2,500

2,500

$6,000

52,000

7,500

5,000

8,'000

.' ~:- ... : .

David Wilhelm

Rahm Emanuel

Keeley Ardman

George Hozendorf

Avis Lavelle

.L.isa Shoce::

.G.eo.r.lie .?~!!Eha.noP.Qulos .. 'Shannon Tapn~r . . .... ' < •.

·Christi.ne Varney. . . .

Bet'5y' wright

Paul C9rey

.J~iVl J'AlJller~. -~~-_·---,-~1~'·;'·:':__~-··· llrck--Le"rtuir--- ~~; C'" ~~~.~~ ',:~_.<"J' . .... :\..-..c. '.".;"

John Frontero

Nancy Jacobson

Patrick Dorinson

Matt Gorman

Mary Leslie

Terri Walters

Simon Kahn

.' . 13.1 ,250." .. ~. .

c:

TOTAL: $991,223
Clinton for President

Final Audit Report

Attachment 9

page 1 of 1

Worthen National Bank Listing of Traveler's Cheques

....... ..

'. ,

..'.... . -"'" ~.- .

r . ;.~ ...... 'd .'

ChecK I

6369

6511

7036

7354

7406

7628

7629

7820

a0.40

8~"8~

8726

'. 88io .

9025 , ...~~.. " .. _~.318 ., 94.29:

9651

9749

10185

10367

10530

10799

10949

Date

02/13/92

02/17/92

03/03/92

03/09/92

03/11/92

03/19/92

03/19/92

03/26/92

.. OY31/92

04/16/92

04123/92

04/27/92

05/01/92

. 05/.~/92. ..JJ5ZJ..,/9"2-

OS/22/g2--

OS/28/92

06/15/92

06/22/92

06/26/92

07/06/92

07/09/92

Total:

AIllount

4,040

10,100

8,080

3,000

5,050

3,030

8,080

5,050

20,695

, 5,000

5,.0.50.

lO','1.{) 0

10,.1:00

" .'..l.O'0; 1~~ ' . . _ •• • .. .1. ,:tv... :: " '. . '1.·. .., ·i......... '0••: ....1. ,:' .' :=

-10 ,-100 --~--------------_

10,100

10,100

5,050

5,050

5,050

16,332

179,357

.'

?ace l~l, ~?rc,ed 12/27/94
". '. "

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.... .... .... ., ; .

'<:::"-+

-~. ~~.... '-~~'; ~~ ...

...._..

.. ~' I" ;. -0; •

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Page 142, Approved 12/27/94

.' ...
FEDERAL ELECTION COMMISSION

November 3, 1994

..' .'t •• - ."~' ......"' '. -;.••••~. • .../ .. .-

irector

Robert J. Cost

Assistant S

Audit DiviBTr-_._L

Peter G. Bluaber~~ Attorney ~\fe>1.:?

Abel Montez ~~ Attorney ry /V\

Andre Pineda Ui) pw qJ~g Attorney P" I

SUBJECT: proposed Final Audit Report on Clinton for President

Committee (LRA t449/AR t94-l7) ~.

THROUGH:

TO:

. FROM: .

c

,.

I • INTRODUCTION

The Office of General Counsel bas'reviewed the proposed

Final Audit Report on the Clinton for President Committee (Wthe

Primary Committee W ) submitted to this Office on August 26, 1994.

The following memorandum Buaaarizes our comaents on the proposed

Report. We concur with findings in the proposed Final Audit

Report which are not discussed separately in the follOWing

Page 1~3, .~r8ved 12/27/94
.........

Final Audit aeport

Clinton for President Committee

(LRA t449/AR 194-17)

Page 2

memorandum.l/ If you have any questions concerning our

comments, please contact Peter G. Blumberg, the lead attorney

assigned to this audit.

II. ITUIZATION OF REFUNDS AND REBATES (11.0.)

The proposed report raises the issue of whether the primary

Committee is required to itemize refunds and rebates made by

various entities to its travel agent, Worldwide Travel, Inc.

(·worldwide"). The primary Committee argues that it was not

required to do so, and cites AdVisory Opinion ("AO") 1983-25 as

support for its position. The proposed report, however,

concludes that AO 1983-25 is not relevant, and further states

that AO 1983-25 cannot be extended to non-med~a vendors.

In AO 1983-25, the Commission found that a committee may . report its payments to media consultants as expenditures, and

that payments by media consultants to other persons, which are the~ used to Furchase services or products used i~ connection

witb' the·cons\.Iltants' contract. need riot.be separately rep·orted . ...... " "" 'The ·co1D.litssi'on· nOted" the foll'tlwii'lg. t'a-ctot',,· a$ Ugrti Ci"can't· "il'l' ,- '. ..•. ,.

'ma)dn~ this' d~ter.in'atiOn:·(l)'the'consultants had a legal'

existence' that was ,tutparate and -ois-tinot ftOlll the committee'S . operations; (2) the consultants' principals did not hold any

--".;_:. _.....:., ,~~~t~.~s.t;!~~.pq.!l.i~~iqn'j,(3.l, tJle... ~~~i~t_t:~4t .•¥~,s ~li~t-.i~SJ,.- " r ~.·, i!".-•

.:.. ' -: . ;--- --aTIIiJr-.Len'j"b-rre90t!ations 'Y1ththe consultant'S that ·r••\,l)'_~,(L1.I!..._ , -~

'. formal contract, (4) the consultants were not required to devote '--

their "full efforts- to the contract with the Committee, and the

consultants expected to have other media contracts with other

committees and business entities during the campaign period; and

(5) the committee had no interest in the consultants' other

contracts.

'''''

We disagree with the proposed report's conclusion that AO

1983-25 is not relevant to itemizations made by Worldwide, and c~nno~..be extended to.non-~~dia ,,:en~ors. ·To tJ:l~ contr~ry,.,!e . . , ..-. lSe"!ieve that ~O 1983-t5" is' r~levant -to de"termine WhHl1e'r ·th..·· . '..

Primary Coamittee is r~quired to report refunds and'rebates for

travel expenditures. AO 1983-25 contains no language limiting

its scope solely to media vendors, and AO 1983-25 factors have

been applied by the Commission to determine the legitimacy of a

non-media business vendor. See AO 1994-25. As such, we believe

that AO 1983-25 allows the primary Committee, subject to the

above-stated factors, to contract with non-media vendors to

perform caapaign activities without requiring the primary

Committee to itemize and report vendor payments from

third-party sources.

!/ We recommend that the Commission consider this document in

open session since the discussion i6 not exempt from disclosure '~-:::e, the Co~:::'ssion's Su~s!':::-:e "",'plations. 11 C.F.R. S 2.4.

Parenthetical references are to the placement of the findings in

the proposed report.
--_._~'- ...

.... '''\

c

Final Audit Report

Clinton for pre.ident Co.-itte.

(LRA t449/AR 194-17)

Page 3

Notwithstanding the applicability of AD 1983-25 to the

Primary Committee, we not. that the Primary Committee re.pon.e

states that it satisfied the reporting obligations of AD 1983-25

without including supporting documentation. We beli.ve,

however, that if .uch documentation is provided, the Primary

Committee may be able to .ati.fy the above-.tated factors.

III. EXTENSIONS OF CREDIT BY CDKKERCIAL VENDORS (II.F.)~/

The proposed report addresses the primary Committee's

payments totaling $296,355 to 14 individuals, organizations, and

corporations. Some of these payments appear to be contributions

under 11 C.F.R. S 100.7(a)(1).3/ The i.sue is whether the

primary Committee has demonstrat.d that the transactions

follow.d the dictates of 11 C.F.R. SS 116.3 or 114.9, and,

therefore, are exempt from the Wcontribution" definition. See

11 C.F.R. S 100.7(a)(1). Due to the type of transaction, some

of the expenses fall within the ambit of 11 C.F.R. S 116.3,

while others fall under 11 C.F.R. S 114.9. Pursuant to

11 C. F. R"'S 116.3, . an incorporated and unincorporated commercial

vendor may' extend credit to a political committee and the credit

will not be considered a con~ribution if it is provided in the

ordinary course of business. Bowever, the focus of 11 C.F.R.

.. ~,$. 11.~. 9. .i!l- .011 tp,. ,.use, of. C1orP9rate.;~nd,;J.abos ..tacUit.i.....in-: -. connect-ion-wi-th- ar.deral--.l.ction.nd whether .r.iabur••••nti. made within a co..eTcially reasonable time for the normal and

usual r.ntal ch.rge •

We concur with the report's analysis of the trans.ction

involving Tradec because the services provided appear to qualify

as exempt volunteer services pursuant to 11 C.F.R.

S 100.7(b)(3). We conclude that the transaction involving

Occidental Petroleum should be analyzed under 114.9 bec.use a

corporate executive used the corporation's facilities for

individual volunteer activit~es in connection with a Federal

election. We believe that the transactions involving Kozark

productions, Walter ~yle, Newmark and Company Real Estate, Inc.,

~/ We suggest that you change this heading in your report

to wContributions, Extensions of Credit by Commercial

Vendors, and Use of Corporate Facilities,· because this

section involves all three areas.

3/ We recommend that you revise your report in the Manatt

Phelps discussion on page 16 by removing any references about

the $90 bill because it is of no legal significance .

Page .=-.pp::oved 12: r;, 9';
--

·-'''~V ....IIWUIII ,",u I'lUUWI;"l; .,J. ~o.ta

Final Audit Report

Clinton for President Committee

(LRA t449/AR 194-17)

Page 4

The Sutherland Company, Sun Building Associates,4/ and TAC Air

should be analyzed under section 116.3 because tnese entities

are ·commercial vendors" that provided goods and .ervices. See

11 C.F.R. SS 116.3(a)-(b) and 116.1(c).~/

Bowever, we believe that the Primary Committee has failed

to prove that it complied with section 116.3(c) or 114.9. The

affidavits provided by the individuals, organizations and

corporations insufficiently address whether the dictates of the

Commission's regulations were followed. In many cases, the

affidavits' explain in general terms that the vendors followed

their established procedures and past practice in approving the

extension of credit. Nevertheless, the vendQrs have not

provided the underlying documents to support their claims. See, ~, primary Committee Response, !xhibit 7. In other ---

ir?Idavits, the vendors state that their terms with the Primary

Committee were substantially-similar to extensions of credit to

nonpolitical debtors that are of similar risk and size of

obligation,_ but failed ~o give specifice~ampl~s cf those '

. de?to,rs: as ;ec.oinl~u~~?ed .,in. thE! ~n~.e.r~m.c:r~~t .... s.ee,: ~,.. .'

··Pr'-IlaT.y ~o"mlIu.the Respons•.,E'xhi..Qlt,15.§/ - In otnec af.rraavit-s,

4/ We 'recommend that you revise' your report in the Sun

i.uj li:l~.E\.g~~~.~iatlt!J·cU~~u~;on..on~.~~.,.~"I;).y, '":eh:a~iD9--t:""·: -" ...-'>0-,.• ,•. -iK)-r~.-.t.qulrementTs).-- to'-·conslderation(s)· in accordance

with the language of 11 C.F.R. S 116.3(c).

5/ We conclude that the American Federation of Teachers,

Democratic Party of Arkansas, Goldman Sachs and Company,

Bellring Lindeman Goldstein and Siegal, Manatt, Phelps,

Phillips & Kantor, and O'~eefe Ashenden Lyons & Ward cannot

be analyzed under section 116.3. These entities do not

appear to be ·commercial vendors" because the services that

they provided are not the sort qf services that they prev.ide.

in theij': "usual.qd .n(i~.mal ..b\l&..i"nes-&,-" 11· C. F~a .. S J.l.6 .1,(·(],)·..·· .. These t[ansactf~s'cinnot be'analyzed under section<114.9,~ •

because these entities' are not "corporations" or "labor

organizations." See 11 C.F.R. S 114.9. The American

Federation of Teacner's transaction cannot be analyzed under

section 114.9, because the use of the labor organization's

facility is not involved.

6/ In contrast, the proposed Final Audit Report for

Clinton/Gore '92 General Election Committee (the "General

Committee") identifies an apparent prohibited contribution

from Chambers Associates. In response to the Interim Audit

Report, the General Committee submitted a detailed affidavit

from Chambers Associates that names other clients with the

same billing arrangement as the General Committee. In

addition, the vendor provided copies of its balance sheets

and aCCC~D:S re:eivab:e schedules tc document the lnformatlon

contained in the affidavit. The proposed Final Audit Report

states that the General Committee has demonstrated that this

?ace -.- ..!.~c, A;~r~veC 12 '27!9~
",,-.

('

.........., ....1......v "''''........ "" "'. """'. ""a

Final Audit Report

Clinton for President Committee

(LRA t449/AR t94-17)

Page 5

the vendors state that they followed usual and normal practice

in the vendors' trade or industry by billing at the end of the

project. Bowever, the vendors fail to provide the underlying

documents to support these claims or the names of other

customers. See,~, Primary Committee Response, Exhibit 16.

Bowever, ve note tnat some of the credit extensions involve

relatively small amounts of money and the period of credit

extension is not particularly long, so we believe that the Audit

Division could recommend no further action in those situations.

IV. APPARENT NON-QUALIFIED CAMPAIGN EXPENSES (III.B.3.)

The proposed report recommends that the Commission

make an initial determination that the primary Committee repay

$106,453 to the United States Treasury for nonqualified campaign

expenses. These expenses inClude disbursements for legal and

professional vork, employee bonuses, duplicate payments to

various vendors, lost equipment and traveler's checKs.II

We concur with the Audit Division', conclusion that $37,500 paid'~~ Kathlyn Graves Escrov Agent vas not a qualified campaign

expense. The Primary Committee submitted a canceled check with

the notation -settlement." Given that the vord "settlement" did

not disclose the -purpose- of the disbursement as defined by 11

.·F $ .9.~~.3. l,l( b >.< 3.1 .the .A~~j,t .Divisi0t; r.ecomme!?d,d.. ~ha~. the .. ' --PrtaaTY-Coaaitteeprovidemore -documentat::..on. The Primary--- _

Committee then provided a letter from the Committee'S general

counsel, who stated that -the payment vas made pursuant to a

consulting arrangement vith a former employee of the Committee,

and the related agree.ent is subject to a confidentiality

provision.- The Primary Committee requests that the letter not

be subject to pUbic disclosure under the Freedom of Information

Act. If the letter is subject to disclosure, the Primary

Committee requests that the letter be returned.

(Footnote 6 continued from previous page)

billing did not constitute an extension of credit.

71 We also generally concur vith the report's conclusions that

uncollected duplicate payments are not qualified campaign

expenses. However, we recoomend that y~u place a:: the

uncollectible duplicate payments on the Primary Committee's

Statement of Net Outstanding Campaign Obligations (-NOCO

Statement") as an accounts receivable. This will ensure that

any efforts made by the Committee to collect the duplicate portion

of the payment vill be consistent vith the efforts deemed

sufficient to conclude that the duplicate payment expenses are

qualified campaign expenses. Com~are 11 c.r.R. S 9034.5(d)

(documentation requirements relatlng to col1ectibility of accounts

receivable) with 11 C.F.R. S 9033.11 (documencatic~ requirements

relating to proving disbursements are qualified campaign

expen5e5) .
" .

fiiV.W&._U\oI\l_ I..U &\"1........... tJ" ,""g.~.

Final Audit Report

Clinton for President Committee

(LRA t449/AR 194-17)

Page 6

In the cover .e.orandum, you ask whether the Commission

will be able to honor the attorney's request to keep his letter

fro. public disclosure. You also ask whether the letter may be

referred to in the Final Audit Report. This Office believes

that because of the Freedom of Information Act's strong

presumption in favor of di.closur.,8/ the Commission would be

required to disclose the l.tter if It were in our pos••••ion as

part of the Final Audit Report. Although parties to •

"settl.m.nt· can agree to keep matters ·confidential,·

infqrmation us.d as a basis for audit findings may b••ubject to

disclosure. See 11 C.F~R. S 9038.1(e).9/ We believe that the

Primary Committee's initial deci.ion to-enter into such a

settlement agreement placed a legal impediment on its burden of

proving that the disbursement was a qualified campaign expense.

See 11 C.r.R. SS 9033.l(b)(I)-(2). Thul, the Primary Committee

may not be able to demonstrate that a ·settlement" is a

·purchase" of "goods or services." 11 C.F.R.

S 9033.11(b)(3)(ii). The letter is and the underlying

docu~entation ar~ essenti~l, to determine whether the expenditure

wa.s a qU~,lifie~ campai!1n,.u.pense'l2/.,If th~ Primary Committ~e

. '.; pittclsts In' i"tl' c11iim 'tha,t 'thl._, t'~«n.action'!=onst'itutu' ~' -' "'"

qualifi.~·campai9n .xp.nse, the audit and repayment process

,-', require.that'the'expense be verifiecf.and.di'&closed.•• such.: 11.

C.F.R. 'S 90'38.1(e)("],) .. If the lette, cannot'be used ,in the'

.;,~ .~.,'~ ,,_,:,,~up},t''pr,oc:e~.s., ,~ p~i!'lary, ~ommH~ee.,,:y~ll be,,;!quit~, ~9-.~" if., .~, r.~:.;.:': -~.:::" , ;- pra -rata-repayment (or thetfxpend1-ture~111In accordanc.._with__ , ",'.__

: ...-

--'-

8/ State v. Ra , 502

U.S. I64, (1991)(Court states: en rema1ns with the

agency when it seeks to justify the redaction of identifying

information in a particular document as well as when it seeks

to withhold an entire docuaent.").

21 See generally Bacon v. Secretar of Air rorce, 785

F. SUP!?,. p',55, ~~.I?~. Ol).io ,~ 91) (sett~,~~e,r.t.t~\lll~ ar a ,

r'etal:i6tot'y 'disc;har'ge' 'sui t ' can' be kept' confidenti a'l if the ,' ..

parties agree to do so), aff'd 7 F.3d 232 (6th 'Cir. 1993).

lQ/ The FOlA section 552(b)(7)(C) exemption cited by the

attorney is clearly inapplicable because his letter was

generated in an administrative, rather than in a law

enforcement, context. See 5 U.S.C. S 552(b)(7)(C). Because

we do not possess the actual settlement agreement, we are

unable to determine for ourselves whether the "privacy"

exemptions of 5 U.S.C. S 552(b){6), also cited by the

attorney, would be applicable to the agreement and to the

attornev's letter. See qenerallv United States Deot. of

State v~ Washington POSt Co., 456 U.S. 595 (1982)."

111 Although the Primary Committee may choose to make the pro

rata repayment fer tr.e expendit~:e, this d~es net abroga:e its

obligation to "furnish to the Commission all documentation

relating to disbursements and receipts .... " 11 C.F.R. S 9033.1.

'"
• •• .,."" "'UU'lJ1. \0. "'. \..0.1:..

Final Audit Report

Clinton for President Committee

(LRA 1449/AR 194-17)

Page 8

lost radios valued at $13,424.14/ The Primary Committee contends

that it was not commercially feasible to have purchased

insurance to cover such losses. Moreover, the Primary Committee

contends that due to the prohibitive cost of such commercial

insurance, its only alternative was self-insurance.

A committee's decision to purchase or not purchase

commercial insurance is a relevant factor in determining whether

a committee made a "good faith" effort to safeguard its

equipment. See Memorandum to Robert J. Costa, Re: Committee on

Arrangements-ror the 1992 Republican National Convention --

Legal Comments on Proposed Interim Audit Report (September 17,

1993), at 4-7.15/ Although a committee's purchase of commercial

insurance provIaes some evidence that it has taken steps to

safeguard its equipment, the documentation provided by the

Primary Committee to demonstrate that commercial insurance was

cost prohibitive refers not to the Primary committee, but to the

General Committee. See Primary Committee Response, Exhibit 33

(Marsh & McLennan Memorandums dated June 22, 1994). The Primary

Committee asserts that it had verbal policifS which were

promulgated and adhered to during the primary campaign to

safeguard its equipment. The Primary Committee, however,

provides no documentation to support this assertion other than

the General Committee's "Loss Prevention Policy," which it

c;la,i,as. re.~ltltd f.~om..these J"rbal po1Lcies. Additi-onally, the

Pri-.ar-y ·Co_ittee provided no documentation demonstrating--wnatefforts it aade to locate the lost and stolen equipment, nor did

it provide documentation demonstrating that no fraud or abuse

occurred. See Memorandum to Robert J. Costa, Be: Co_ittee on

Arrangements-!or the 1992 Republican National Convention -- Legal Comments on Proposed Interim Audit Report (September 17,

1993), at 4-7. Therefore, the Primary Committee should be

required to make a pro rata repayment to the united States

Treasury for the value of the lost and stolen equipment.

v. APPARENT NON-QUALIFIED CAMPAIGN EXPENSES -- GENERAL

ELECTION EXPENDITURES (III.B.2.)

The proposed report finds that the Primary Committee made

various expenditures for goods and services that were for the

benefit of the General Committee or the Clinton/Gore '92 General

14/ We note that the lost equipment itself is similar to the

rost equipment at issue in the audit of the Committee on

Arrangements for the 1992 Republican National Convention where the

Commission determined that the loss was a permissible use of

funds. See 11 C.!".!\.. S 9008.5(a).

15/ The Interim Audit Report for the Committee on Arrangements

IOr the 1992 Republican National Convention was interpreting

permissible uses for convention expenditures. Compare 11 C.F.R.

S 9008.6(a) (permissible use of convention expenses) with

11 C.r.R. S 9032.9(a) (qualified campaign expensesi. ----

?age
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rinal Audit Report

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(LRA t449/AR 194-17)

Page 9

Election Compliance rund ("the GELAC"). The report notes that

the primary Committee incurred costs for items such as computers

and polling in the last weeks prior to the candidate'. date of

ineligibility ("DOl") when most or all state primary elections

had been held.16/ The report reasons that the purchase of

certain goods and .ervices aade so late in the primary campaign

could have no other purpose than to be pre-expenditure report

period expense. for the general election committees. Since the

costs were not incurred in connection with seeking the

noaination, the report recommends that the Commission make an

initial determination that the Primary Committee repay the

Treasury $237,948.17/

i·

The Primary Committee urges the application of essentially

a "bright line" test baaed on the date of a candidate'S

nomination to .upport it. position that the expenses in question

were qualified campaign expenses for the primary election. The

Primary Committee argues that costs for goods and services

incurred before. QOI and used. befo~e 001 a~e qu~lified campaign

expenAes. With regard to theexpen~iture~ fot.eq~iRment .and . faeiliths '(e:<;j;'; Ji&infiam~ ·co-.putets, pet,!ohal computers, :

. printer~; keyooajds, monitors, .odems, software), the .Primary

Co.-ittee argua. that the expenditures vere qualified campaign

expenses for the prlmary election because the goods were

. , :- .p~.cb~e4" a.e9,.v~e.cl"~{or~tb.~ DOh '-"hue...~he::~i"ty- Co-.1tt~e·" ---·-'---con~enas-tbat as Ii primary asset, it was pera1tted to sell the

equipment to the General Coamittee at a 40\ depreciation, the

required price pursuant to 11 c.r.a. S 9034.5.

With regard to the polling expenditures, the Primary

Committee argues that the expenditures vere qualified campaign

expenses because the polls were conducted prior to the 001 and

concerned issues related to the seeking of the nomination. In

addition, the Primary Committee contends that the polls had a

limited shelf life ~hich had expired by the time the general

el.e9tioI1 .cam]?aiqn t?egao: The. ~riWlry Co~i.l:t~e 1\s.s~rts··~~t:. the'

Commission has ack.nowledged the. limited lSh~lf life bf polls in

its own regulations. See 11 C.F.R. S 106.4(g). .

16/ State primary elections vere held through June 9, 1992. The

candidate's DO! was July 15, 1992.

.......

17/ The report concludes that the expenditures are qualified

campaign expenditures for the General Committee, and rather than

require the Primary Committee repay the United States Treasury,

the General Committee can also choose to reimburse the Primary

Committee for the expenditures the General Committee should have

made. Bowever, the expenditures that should have been made by the

General Committee will place the General Committee in excess of

its expenditure limitation by $68~,220 if the General Committee

sakes the reimbursement, as noted in the proposed rinal Audit

Report for the General Committee.
c

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(LRA t449/AR t94-1i)

Page 10

We believe that the standard advocated by the Primary

Committee would enable a primary committee to use private

contributions and public matching funds to pay a portion of the

general election campaign expenses, thus circumventing the

general election expenditure limitation and the law'l

prohibition on receipt of private contributions by pUblicly

funded general election candidates. 2 U.S.C. S 441a(b)(1)(B);

26 U.S.C. S 9003(b)(1) and (2). Moreover, such an

interpretation il inconsistent with 11 C.r.R. S 9003.4(a)(1),

which permits general election campaigns to incur expenseI prior

to the beginning of the expenditure report period. This

regulation would not be necessary if all expenditure. made prior

to the primary date of ineligibility were qualified campaign

expenses of the primary committee, even if the expenditures

related to the general election.

Bowever, our analysis differs from that of the Audit

Division because we believe that some of the expenditures may

have had a .dual purpose for the primary Committee and the

General Committee, and those expenditures could be allocated

between the two c6mmittees if the purpose is documented. The

central issue rlised is whether the expenditures were made Rin

connection •. , with [the primary] campaign for nominationR or

Rincurred to further a candidate'S (general! campaign for _. c' ..•lec.tion tQ the Office ,.of .P.,.rei..ident ..•.. - . - ..-Com,pare ..l1 C..,:.R.. _ ---'---S9"032 ~9 (a)(2) (defining-quaUtiedcampaignexpenses_!ocprimary__ committees) with 11 C.F.R. S 9002.11(a)(1) (defining qualified

campaign expenses for general committees).

A -bright line- test based lolely on the date that an

expenditure is incurred has never been applied by the Commission

to determine whether a particular expense is a qualified

campaign expense for the primary or general election. Rather,

the two key elements for assessing qualified campaign expenses

are timing and the subject matter requirement of Rmade in

connection with- or -incurred to further.- 11 C.F.R.

'SS 9032.9(a}(2) and 9002.1l(a}(1}. It is not sufficient merely

for an expenditure to be incurred prior to the candidate's date

of ineligibility to be considered a qualified campaign

expenditure. Rather, the correct standard for determining

whether an expenditure is a qualified campaign expense relies on

both the timing of the expenditure and the nature of the

expenditure. See AO 1984-15.

The Commission has previously considered the purposes of

expenditures when allocating costs between primary and general

presidential committees. In the Reagan Bush '84 audit, the

Commission concluded that certain specific expenditures for

polling, consulting, and voter registration incurred prior to

the candidate's 001 and apparently related to the general

election campaign could be considered qualified campaign

expenses of the primary committee since the purpose of the

expenditures related to -delegate tracking.- Final Audit

Report on Reagan Bush '84 Primary (July i, 1986). Bowever, the

?ac:e 152, rl;;;Jr::;ved 12/27/9-1
ft.moranaum ~o KOD.r~ J. co.~a

Pinal Audit aeport

Clinton for President Committee

(LRA '449/~ 194-17)

Page 11

Reagan Bush general committee also reimbursed the primary

committee $64,000 for telemarketing expenditures incurred prior

to the candidate's date of ineligibility, and the CommiSSion

allocated costs between the committees for advertising

production costs incurred during the primary campaign for

certain advertisements used during both the primary and general

campaigns, thus demonstrating that the timing of the expenditure

alone doe. not determine whether it is related to the primary or

general election. Id.; Statement of Reasons supporting Pinal

Repayment DeterminatIon in aeagan-Bush '84 General, at 9-12

(July II, 1988). This precedent supports examining all of the

particular facts surrounding an expenditure.

Moreover, matters concerning coordinated party

expenditures, which involve pUblicly-financed presidential

campaigns and expenditure limitations, are analogous to the

issue of qualified campaign expenses presented here. In

situations involving coordinated party expenditures, the

commission has considered·.not only the J;.iming,· but also the purp~se.~f ~xpe~ditu~e~:~h~n ~et~rm~~ing ~o.~hich .~lection an . ., e~penditurit' .shou~d' be ·.• ttr!bute~L .AO t984~is. , For examp.l~,· in

AO 1984-15, the Commission noted that ~hile -timing is

relevant,- coordinated party expendltures are not restricted to'

tfie time period between t~e nominati~n and the general election, ~,.~.'.. . and j..~ woul.d. ~,inc.QA.a.i.$Unt!.:· ~i tho tA& pu~pas..· o~ tb...1i.....~·_.·~ ;." . -"on c'oo-r'drriil-i.-d'-.=ipendit,fres' to -permi t expenditures ude'pdor'-'--

to nomination but with the purpose and effect of influencing the

outcome of the presidential general election to escape this

limitation.- AO 1984-1S.

It is possible that some of the expenditures at issue were

intended, in part, for activities related to securing the

candidate's nomination. With regard to capital assets

determined to be primary committee assets, we believe the

Commission would have to a.llocate those expenditures pursuant to

.the me~hod-,.us,ed for deprf:ci~t~n9 capita,). a~.s.ets. under 11 C.r.R.

S 9034·:S(c)(l).· For 'the 'purpose, of'calculatfng a committee's

NOCO Statement, primary committees are permitted to take at

least a 40\ depreciation on -any property used in the operation

of the campaign whose purchase price exceeded $2,000 when

acquired by the committee.- 11 C.F.R. S 9034.5(c)(1).

There is a question whether the expenditures for computer

equipment are qualified campaign expenses for the Primary

Committee. Many of the Primary Committee's computer

requirements (processing matching fund submissions, preparing

disclosure reports, scheduling travel plans) were handled by

outside vendors such as Public Office Corporation and Worldwide

Travel, Inc. throughout the course of the campaign. However,

the primary Committee asserts that it used the computer

equipment to: (1) increase its correspondence capability and

activity; and (2) engage in "delegate tracking" in preparation

Paae lS3, Ap?roved 12!27/9~
"-

.....

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(LRA i449/AR i94-17)

Page 12

for the convention.l81 Additionally, the Primary Committee

asserts that its previous computer system often malfunctioned

because it could not handle all the necessary users, and

therefore, a replacement was sought. Finally, the Primary

Committee notes that all its existing files were transferred to

the new mainframe system once it came on-line prior to DOl.

As documentary support for these arguments, the Primary

Committee produced three memoranda regarding the computer system

from Sherry Curry, a Primary Committee staff member to 8arbara

Yates, the Primary Committee's accountant. One memorandum,

dated June 27, 1994, states that the Primary Committee purchased

the new mainframe computer to increase user capacity since the

leased system could only handle 80 devices (terminals, modems,

printers) before suffering breakdowns, and the primary Committee

submitted three sample computer repair work orders from these

breakdowns. Once the new mainframe came on-line, more devices

could be operated at the same time. Similarly, in a June 24,

1994 memoranda from Ms~ Curry to Ms. vates, it is stated that

the Pri.ma.ry CQ~ittee'.s incoJ!l~~'3" correspondenc,: .level .was .. increa~ing and because of the need to te~pond, the Primar~

Committee neede~ greater computer capacity. The memorandum

includes a list of the biweekly incominq correspondence amounts

demonstrating that in the last two weeks before ~he 001, the

0. _.J .". in,cCW.i.ng ..co.t:.J;.&pondf.nc:.~1.v..l·~in~.a••d.:.to 6,o-36·.iIUloamg: . --l'feces,--up -from-approxiAately3-iOOO incoming pieces over the

previous biweekly periods dating back to February I", 1992.19/

Primary Committee Response, Exhibit 21. Finally, a third

memorandum asserts that delegate tracking and convention

operations vere performed on certain unspecified personal

computers. It appears that the Primary Committee is referring

to the personal computers purchased from Future Now, Inc.

..... :. ".

c

The Primary Committee response to the interim report and

the computer vendors' invoices indicate that the IeL, Inc.

mainfram~ computer came on-line at least on ~une 25, 1992, and.

that "the" primary Committee files were inserted on this system.

Thus, there is evidence that the Primary Committee had the

18/ Based on the Primary Committee'. descriptions in their

response to the interim report, "delegate tracking" on the

computer system apparently would include using computers to

prepare correspondence to the delegates, and to log phone calls

aade to delegates. The Primary Committee response appears to also

indicate that computers were used for general convention

preparation and logistics.

19/ However, the memorandum does not indicate the subject matter

01 the incoming correspondence (~ contributions, bills,

letters), whether the Primary Committee answered the

correspondence at the same level that it was incomi~g, and how the

computer system would be used to process either incoming or

outgoing mail.
Memorandum to ~obert J. Costa

Final Audit Report

Clinton for President Committee

(LRA 1449/AR 194-17)

Page 13

equipment before 001, during the timeframe from June 25, 1992

through July 15, 1992.20/ Similarly, it appears that the only

peripherals that the PrImary Committee possessed at the end of

the campaign were the W.P. Malone peripherals it owned from JUly

11, 1992 on.21/ Additionally, it appears that the Future Now,

Inc. per.onar-computers were u.ed in the convention operationa.22/

The facts at i.sue pre.ent difficult question. concerning

how to distinguish legitimate primary campaign activity fro.

activity that is geared towards the general election campaign.

In the instant matter, it is clear that the computer equipment

was used extensively throughout the general election campaign.

There is also some evidence that the Primary Committee had lIost

of the computer equipment in its possession prior to 001.

Bowever, the evidence submitted to demonstrate the extent to

which the Primary Committee used the computer equipment is

limited. The documentation submitted to date consists of

unsworn memoranda produced in response to the interim report.

Given the limited ~nformation provided and the ~uestions that

. r.ma.in. regardipg tone .comput4!r ~yste.m,. ,the .p.r~a~y. Com.;:it.tee .. ~. should be .required .to provide documentation ~ith.more ~robative

value suc~ as sworn affidavits and.cont,mporaneous documentation

or lIemora1)da. ror· example, the Primary Co_ittee could provide

.- . delegate tracking reports produced by the system add ____ .._..... L_,i c~Pfth~n'siv~. cOiIIpu-te r··.a.illtertanetr'1·..eorda...... .-1 It .,..... -Pdauy. . '.

COlllllittee can provide-' additional docwaentation deaonatrat-ing---its

use of the computer system, we believe that the costs'lncurred

C> for the systell would be qualified campaign expenses for the

Primary Co_ittee and the value of the asset deterained pursuant

... ..;.. ..."

,,.., '''; ;

c20/ We note there is a dispute over when the new system came

on-line. The primary Committee ordered the new lIainframe cOllputer

from ICL, Inc. on May 28, 1992 (invoice date), but the permanent

equipment· vas only installed on June 25, 1992, The primary

Committe~ aS5ert5 that IC~, InG: provided it a loaner during the

interim period, but this assertion is undocuaented. Thus, it

appears that the nev mainframe was installed only two weeks prior

to the start of the convention.

21/ We note that the devices that the priaary Committee appears

to have agreed to purchase on June 30, 1992 (invoice date) from

W.P. Malone for $104,174 were actually being leased by the Primary

Committee up to July 11, 1992 since the purchase invoice and lease

invoices list the exact same equipment. So, it appears that the

primary Committee only became the owner of these goods at the time

the convention started (or owned and lea.ed the equipment

concurrently) .

22/ The costs for fifty-one personal computers ordered from

FUture NOW, Inc. were incurred by the Primary Committee on May 29,

1992 (invoice date). Additional personal computers ~ere ordered

by the Primary Committee from Future Now, Inc. and delivered on

June 23, 1992, June 29, 1992, and July 15, 1992.
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(LRA t449/AR 194-17)

Page 14

to section 9034.S(c)(1) of the Commission's regulations for

purposes of the Primary Coamittee's NOCO Statement.

We concur with the proposed report's conclusion that the

polling expenses paid by the primary Committee to Greenberg-Lake

($108,622) and Opinion Re.earch Calling ($93,904) are general

election campaign expen.e.. Polling expenditure. are

specifically provided for in 11 C.F.R. S 9003.4(a)(1) as

qualified campaign expen.e. for the general election. The polls

concerned the general election it.elf in that they mea.ured the

candidate's popularity versus the other likely candidates in the

general election, George Bush and Ross Perot.23/ Indeed, two of

the polls were taken after the roll call vote-ror the nomination

was completed at the convention. With regard to the primary

Committee'. argument that the polls decrease in value at a rapid

rate, we view this as irrelevant since we view the polls ••

general election expenses.

We concur with the repor~'s treatment of the expenditures

.' f9r. va.;ious servi;-ce.5 (~, e~p~!1d.it~re~ to .A.i~.Adv~nl;age a~d

I.'l'\ •. Electric) tnat were proVided to the Primary. Conit·tee wh1ch'

seem to'h~ve been 'only for the'incidental benefit of the priaary

Committee. An example of this is the reconfiguration of the

candidate's airplane just prior to the convention. The a~tual

..- ;........ ._J;k a~r~:tQ:_.bave .b¥.q-....c.ompl.c.t..e<i :pr.i~r .to- ~pe .. OQnveI}ti~_ .'

----Ifowever-,··the ·reconfi<]Ured-plane-was-used.oril.yonce_prior..to.DOI.•. _

With these types of expenditures, we recommend that the Primary

Committee be allowed to reiaburse the General Committee to

account for the Primary Committee's use.

Finally, we concur that all costs associated with the

biographical film about the candidate entitled -The Man From

Bope- are general election expenses. In Reagan-Bush '84, the

Commission specifically addressed the issue of commercial

production costs associated with a television commercial

produced by ~he p~imary co~ittee but aired.puring the general

election. statement of ~easons supporting Final Repayment

Determination in Reagan-Bu5h '84 General, at 9-12 (July 11,

1988). The Commission concluded that the date of broadcast for

media projects (i.e., the date when commercials, films, etc. are

aired or broadcasted), not the date of production, determines

whether such projects are primary or general election

23/ The Commission has in the past viewed the content of the

expenditure to determine the purpose of that expenditure. See AO

1984-15 (after scrutiny of the content of certain television--

commercials, the Commission concludes that ~(tJhe clear imy~rt and

purpose of the these proposed advertisements is to diminish the

support for any Democratic Party presidential nominee ... ~).

Page _::s, ~prc\""eC 12/2"7/9";
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Final Audit Report

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(LRA 1449/AR 194-17l

Page 15

expenditures.24/ ·The "an from Bope- film was shown at the

convention after the candidate was nominated, as well as on

several subsequent datea.25/ Therefore, these expenses are not

qualified campaign expenses for the primary election.

VI. RECEIP'l' OF KATCBIRG FORDS IR EXCESS or ENTITLEJlE'N'1'

(III.D.l

The proposed report recommends that the Commission make an

initial repayment determination of $3,464,150 on the basis that

the Primary Committee received public funds in excess of its

entitlement. The report notes that the Primary Committee

received certain contributions and then redesignated the

contributions to the G~LAC in a manner inconsistent with the

Coamission's regulations at 11 C.l.R. S 9003.3(a)(1)(iii) since

the Primary Committe. had remaining debts to satisfy at the time

of the redesignations. The report seeks to treat the

contributions as primary contributions, nullifying the

impermissibl& redesignations. When ~he subject contributions

Lre applied to the.Primary Committ~e~s Noeo S~atemept as aQ

'a~set; the furid~ aecrease" the Committee's net outstanding "

campaign obligations and results in the repayment to the United

States Treasury'based on receiving funds in excess of the .

Primary Committee's e~titlement.26/

. '.. .. ., " . . .. 'L~ ••• ' 0;.-' '" : ...

24/ The Commission concluded that the commercial at issue aired

repeatedly during the general election campaign, despite the

primary Committee'. arguments to the contrary. Reagan-Bush '84

statement of Reasons, p. 11. There, the Commission rejected the

primary committee's assertion that production costs should only be

allocated to the primary campaign.

25/ The Primary Committee contests the Commission's determination

that the candidate's DOl is JU~y 15, 1992. The 001 .is the -date

'on which the party nominates its candidate.- 11 C.F.R.

S 9032.6(a). Although the Commission has not defined the word

"nomination,- the Commission has previously viewed the completion

of a convention roll call vote which nominates a candidate as the

"nomination.- The Primary Committee's suggestion to defer to a

political party's definition of the term -nomination- will lead to

inconsistent applications since every party could define it

differently. Moreover, the Commission notified the Primary

Committee by letter dated August 4, 1992 that July 15, 1992 was

the DOl, and the Primary Committee did not object to this

determination until now. As a result, we concur with the proposed

report's conclusion that the DO! vas July 15, 1992, the date that

the convention roll call vote nominating the candidate was

completed.

26/ The proposed Fina: Audit Report for the General Committee

recommend; that the GE~C reimburse the Primary Committee for the

improperly redesignated funds.
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Clinton for President Co_itt••

(LRA t449/AR 194-17)

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In re.pon8~ to the interim report, the Primary Co_itte.

argues that the subject contributions were undesiqnated, and

thus, under 11 C.r.R. S 110.1(b)(2)(ii), could be viewed a.

GELAC contributions since they were received after the

candidate'. DOl. The Priaary Committee contends that the

redesignations were perforaed by aistake by a foraer vendor.

The priaary Co.-ittee further a ••erts that it should not be

penalized for setting a cut-off date for receiving contributions

in the belief that it has no remaining debts ·without the

benefit of hindsight.- primary Coaaittee Re.ponse, at 40. In

this respect, the Primary Committee chaIlenqes'the Commis.ion

practice of applying private contributions against a deficit on

its NOCO Statement prior to applying matching funds against the

deficit. The primary Co..ittee believes that if anticip&ted

matching funds were applied against its deficit al reflee~ed on

the NOCO Stateaent, it would have been permitted to aake the

redesignations.

. We CO?cU~ ~ith the report that the P!imary Committee

received'matching fu~ds. in excess of'its entitlement. The

o CS"terllfnation; of" whli-tbera 'c6tl~rtbuUon-11;'. ',delfigh~Ud" fen a"

particular election' turn.s· on the con'tributor' s donati VI! "inttmt.

See.AO 1990-30. Arguably, the contributions in question were

aiSiqnated to the priaary Committee since they were aade payable

.. t9-.·.~ipt·9n ~~r.. ~r.'j.d~t·.. q,r,;~J.i~if.r..•~tity. ~Qcl .t:,fcei'{.td. ~b.~... ... . ' -tlie-~r'lllary-Co_'it tee -Dad-outstanding-debts .2'7/~Se~-Il-t.r.R.--· .

S 110.1(b)(4)(i). The Coamission has perllitted ---

publicly-financed presidential caapaigns to treat contributions

received post-DOl as priaary receipts and subait thell for

aatching if they have outstanding debts. rurther, Cosaission

regulations condition redesignations of a primary co_ittee's

contributions on the fact that the contributions represent funds

in excess of the amount needed to pay rellaining primary debts,

thus, it is anticipated that a primary committee will continue

to receive private contributions designated to it after DOl.

~. 1;l c; ..F. R. S 9003. 3. a )( 1 ) i i )'. . .

The Primary Committee benefited from this apprbach,

receiving public funds for contributions received post-DOl that

were virtually identical to these at issue here. The Primary

Committee has not advanced a credible reason for distinguishing

between the post-DOl contributions submitted for Ilatching and

those contributions that it now claims were contributions to the

GELAC. We do not believe that the Primary Coamittee can apply

the designation rules in a manner that will allow it to

arbitrarily claim that certain contributions are primary

contributions that are matchable and reverse its position to

increase its entitle.ent to public funds by claiaing that

27/ We recommend that you attach to your report an exhibit

demonstrating the amounts of contributions designated for each

specific entity (~, Bill Clinton, Bill Clinton for president,

Bill Clinton for President Committee, Team Clinton).

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• 0 •

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Reaoranaua to RObert J. co.~a

Pinal Audit Report

Clinton for President Committee

(LRA t449/AR t94-17)

Page 17

aiailarly designated contributions are designated to the GELAC.

The designation rules do not operate to thus allow a committe.

to aanipulate its entitlement to public funds.

The Primary Coaaittee's argument that matching funds be

counted into the NOCO Stat.ment as of the time of submission,

ratber than receipt of such funds, vould also allow the Priaary

Co.-ittee to manipulate its entitlement to pUblic funds. The

Primary Committee's claim that the Commission's NOCO Statement

calculation system is unfair is based solely on the fact the

primary Committee miscalculated its remaining entitlement and

expenditures. The Commission's regulations account for the fact

that there may be miscalculations in the NOCO Statement because

the Primary Committee is required to submit a revised NOCO

stat.ment with each submission for matching funds after DOl and

the Primary Committee will be required to make a repayment if it

it later determined that the payments exceeded the Primary

Co.-ittee's net outstanding campaign obligations_ 11 C.r.R.

U .9034.5{f)(1)- and 9038.2(0)(1)\i).

~_ ' _ ~'. ":. ':." • -,0-' •• ' .- : " ' • .," •• "

.... Furthe,..,. while . tr~at.in9 future. matching -funds as an. accounts.~eceivable to eliminate its ~ebts, the Primary ..

Co.-ittee neverthe-rein 5ubmi·tted a NOCO Statement ihdicatfng

that it vas in a deficit posicion so that it would be enti~led

~:~::., :",t-o_·~.~~··~~ am:1.(;i;p..ted 1Utl~.:i,ag.•~\lPd.&: ... 'Thia:, pl.Il.c:..':, t1;l.+ ...'.'" .-."

',' . Primary co_ittee in the contradictory position of asserting---·'

that it has debts and does not have debts in order to obtain the

C' maximum benefits of the public financing process. The

coasis.ion'. regulations do not contemplate treating future

matching funds as an accounts receivable on the NOCO Statement.

The accounts receivable (or amounts owed) that can be listed as

assets on the NOCO Statement generally include credits, refunds

of deposits or rebates from qualified campaign expenditures. 11

C.F.R. S 9034.5(a)(2)(iii) (discussing calculation of NOCO

statements). The result of including anticipated matching funds

.as an ..as~et is. t:hat .t;he. pr~!D-ary .~QIIlJIlittee .is. able to.incr!!ase .. '-r: its entitlement based on speculation that the -contributions will

in fact be matched. 11 C.F.R. S 9034.5(a).

. .'

.~. .....

; c

.
Page 160, Approved 12/27/94
.. \'" '.

LrDecember 27, 1994

Mr. J. L. "SKip" Rutherford, Treasurer

Clinton For President Committee

c/o Ms. Lyn Utrecht

Oldaker, Ryan & Leonard

818 Connecticut Avenue, N. W.

Washington, D. C. 20006

Dear Mr. Rutherford:

Attached please find the Final Audit Report on Clinton For

President Committee. The Commission approved this report on

December 27, 1994. As noted on page 4 of this report, the

Commission may pursue any of the matters discussed in an

'--enforcement- -act-ion.· - -- - _

In accordance with 11 CFR 9038.2(c)(1) and (d)(l), the

Commission has made an initial determination that the Candidate

is required to repay to the Secretary of the Treasury $1,383,587

within 90 days after service of this report (March 30, 1995).

Should the Candidate dispute the Commission's determination

that a repayment is required, Commission regulations at 11 CFR

S9038.2(c)(2) provide the Candidate with an opportunity to

submit in writing, within 30 calendar days after service of the

Commission's notice (January 30, 1995), legal and factual

materials to demonstrate that no repayment, or a lesser

repayment, is required. Further, 11 CFR S9038.2(c)(31 permits a

candidate who has submitted written materials to request an

opportunity to make an oral presentation in open session based

on the legal and factual materials submitted.

The Commission will consider any written legal and factual

materials submitted by the Candidate within the 30 day period in

making a final repayment determination. Such materials may be

submitted by counsel if the Candidate so elects. If the

Candidate decides to file a response to the initial repayment

determination, please contact Kim L. Bright-Coleman of the

Office of General Counsel at (202) 219-3690 or toll free at

(800) 424-9530. If the Candidate does not dispute this initial

determination within the 30 day period provided, it will be

considered final.

?a~e 161, Approved 12/27/94
Letter to Mr. J. L. "Skip" Rutherford, Treasurer

Page 2

The Commission approved Final Audit Report will be placed

on the pUblic record on December 29, 1994. Should you have any

questions regarding the public release of this report, please

contact Ron Harris of the Commission's Press Office at (202)

219-4155.

Any questions you may have related to matter covered during

the audit or in the audit report should be directed to Joe

Stoltz, Russ Bruner or Leroy Clay of the Audit jlvision at (202)

219-3720 or toll free at (800) 424-9530.

Sincerely,

-:&J~_ , 1 I.

Robert J.ta ..

Assistant Staff Director

Audit Division

. A.ttac:pment.j!s !?tated ----'-~----~:~ ------- ~- ~-_.

cc: Lyn Utrecht, Esq.

Page 162, Apprc\'"e-.:: :. 2/ 27/9-i
-.

December 21, 1994

The Honorable William J. Clinton

c/o Ms. tyn Utrecht

Oldaker, Ryan & Leonard

818 Connecticut Avenue, N. W.

washington, D. C. 20006

Dear Mr. President:

Attached please find the Final Audit Report on Clinton For

President Committee. The Commission approved this report on

December 21, 1994. As noted on page 4 of this report, the

Commission may pursue any of the matters discussed in an

enforcement action.

In accordance with -fl- erR 91l3~; 2(c)(1) and--(d} (l),-thL

Commission has made an initial determination that you are

required to repay to the Secretary of the Treasury $1,383,587

within 90 days after service of this report (Karch 30, 1995).

Should you dispute the Commission's determination that a

repayment is required, Commission regulations at 11 CFR

S9038.2(c}(2} prOVide you with an opportunity to submit in

writing, within 30 calendar days after service of the

Commission's notice (January 30, 1995), legal and factual

materials to demonstrate that no repayment, or a lesser

repayment, is required. Further, 11 CFR S903B.2(c}(3} permits a

candidate who has submitted written materials to request an

opportunity to make an oral presentation in open session based

on the legal and factual materials submitted.

The Commission will consider any written legal and factual

materials submitted by you within the 30 day period in making a

final repayment determination. Such materials may be submitted

by counsel if you so elect. If you decide to file a response to

the initial repayment determination, please contact Kim L.

Bright-Coleman of the Office of General Counsel at (202)

219-3690 or toll free at (SOO) 424-9530. If you do not dispute

this initial determination within the 30 day period provided, it

will be considered final.

Page 163, Approved 12/27/94
Letter to The Honorable William J. Clinton

Page 2

The Commission approved Final Audit Report will be placed

on the public record on December 29, 1994. Should you have any

questions regarding the public release of this report, please

contact Ron Harris of the Commission's Press Office at (202)

219-4155.

Any questions you may have related to matter covered during

the audit or in the audit report should be directed to Joe

stoltz, Russ Bruner or Leroy Clay of the Audit Division at (202)

219-3720 or toll free at (800) 424-9530.

Sincerely, ---/8 /' /1/ L--/"'

Robert J. osta

Assistant Staff Director

Audit Division

cc: Lyn Utrecht, Esq.

. '. ....

r

Page 16~, A~P~0ved 12/27/94
CHRONOLOGY

CLINTON FOR PRESIDENT COMMITTEE

pre-audit Inventory Commenced

Audit Fieldwork

Interim Audit report to

the Committee

Response Received to the

Interim Audit Report

Final Audit Report Approved

Page 165, .;;;;~r-cve::; 12:27, :;>.;

12/7/92

2/2'93 - 8/31/93

4/4/94

7/6/94

12/27/94
FEDERAL ELECTION COMMISSION

WASH1N<;TON 0 C 204lI3

'i ;.-

I'lEJIlORANOW.

TO:

rROK:

DATE:

SUBJECT:

COll!.lllissioners

Staff Director Surina

General Counsel Noble

Assistant Staff Director Costa

Press Officer Barris

~g 'Marjorie W. Emmons/Bonnie J. Ross *'\JJ' Sec retary of the COllllllission \~. . . -oecelilb.r-16-~--199(---- - -- -- - ----- ----- - - -- ----------------

Statement of Reasons For Clinton Campaign Audit

Attached is a copy of the Statement of Reasons for the

Clinton Campaign Audit signed by Commissioners McDonald,

McGarry, and Thomas. This was received in the Commission

lD Secretary's Office on Friday, December 16, 1994 at 12:40 p.m.

Attachment
FEDERAL ELECTION CO,\'1MISSION

W"SHINCTON 0 C ~J

STATEMENT OF COMMISSIONERS McDONALD, McGARRY,

AND THOMAS REGARDING CLINTON CAMPAIGN AUDIT

We write this short statement to explain our principal

reasons for disagreeing with the staff's recommendation to treat

about $1.5 million in funds raised by the Clinton campaign after

the nomination as primary committee assets. The staff's

recommendation would have resulted in an additional repayment

obligation in that amount on the theory that the primary campaign

debt was $1.5 million smaller and matching funds given to the

campaign to pay its debts should be returned.

First, as a matter of law, this is a case of first

impression. The Coaaission has never addressed whether

contributions coming in after the noaination with som.-

indications they were intended for the primary, but without the

specific signed writing required for proper designation as such

(.ee 11 C.r.R. S110.1(b)(4) and Advisory Opinion 1990-30, 2 Fed.

Elec. Camp. Fin. Guide (CCH) , 6006), must be treated as primary

campaign assets. The staff felt that because the checks were

made payable to various names such as ·Clinton for president

Campaign,· the legal requirement for a proper designation as a

primary contribution was met. We think the regulation and

advisory opinion cited necessitate clearer words of designation

for a particular election than that. Also, we disagree that the

solicitation materials which appear to have generated Bome of the

contributions at issue satisfy the designation standard without a

contributor's signature. Maybe the regulation and advisory

opinion shouldn't have been made so strict, but the signature

requirement is there.

Second, assuming the contributions at issue didn't have to

be treated as primary assets, we faced the policy issue or--

whether the Clinton campaign should be forced to treat them as

such nonetheless. Because the actual intent of these

post-nomination donors was ambiguous at best, because the

technical requirements for designation as primary donations were

not met, and because the use of public funds (rather than private

contributions) to pay campaign expenses is the very essence of

the public funding program, we felt it inappropriate to account

for these funds in a way that would deprive the Clinton campaign

of the use of public funds to pay legitimate post-primary debts.

The funds at issue, which came in after the nomination, which
".

- 2 -

subsequent to receipt were confirmed in writing by the donors to

be intended for the general election legal and accounting

compliance fund (GELAC), and which were not subaitted for primary

campaign matching funds, shouldn't be reconfigured as primary

campaign assets, we believe.

The staff was of the view that if we don't treat the funds

moved to the GELAC as primary assets, we should treat other

post-nomination contributions submitted for priaary matching as

non-matchable and recoup any associated matching funds. This

struck us as a "Catch 22" argument. In our view, the

contributions submitted for matching can and should be treated

differently. First. the Clinton campaign concedes that such

contributions must apply as a primary asset, thereby reducing

post-nomination entitlement for matching funds. Further, the

Commission's longstanding practice, apparently, has been to treat

such contributions as matchable even though the technical

requirements for written designation have not been met.

What is the impact of our approach? Taxpayer funds, rather

than privately raised dollars, are used to pay primary campaign

expenses-- a result that furthers the public financing concept.

The funds at issue are left available to the GELAC to pay for

complying with the many complexities of the law-- again a result

that furthers the public financing concept because it insures

that caildidates continue to uopt for public rather than private financing. .. ..---..

Our approach does not undermine the responsibility of the

agency to insure that public funds are not spent for things that

have no relation to the primary campaign or that are not properly

documented. Hundreds of thousands of dollars in the Clinton and

Bush campaigns are being treated as non-qualified for these

reasons. Nor does our approach undermine our review of campaigns

to insure that the state-by-state and overall spending limits are

adhered to by the publicly funded campaigns. The audit reports

demonstrate this. All our approach does is allow the use of more

public funding dollars to pay for legitimate primary campaign

expenses of a publicly funded campaign. As a er of policy,

we think that is a better resu than the al tive.

I<-/~-Cf'i Date Date

t E. Thomas

Commissioner
FEDERAL ELECTIO-" CO,'''115510'-

---"--"

"

=-.D ••

Statement of Reasons

Final Audit Report of the Clinton for President Committee

Commissioners Joan D. Aikens. Lee Ann Elliott, Trevor Potter

On December 15, 1994, the Federal Election Commission

considered the Final Audit Report on the Clinton for President

Committee. Unfortunately, a major recommendation in this Report

that required the Clinton Committee to make a substantial

repayment of taxpayer funds was blocked by three Commissioners.

This unprecedented action involved the Clinton Committee'S

receipt of matching funds from the U.S. Treasury in excess of

its entitlement. The.Commission's Audit Division found, and the

General Counsel agreed, that the Clinton Committee improperly

diverted over a million dollars in private contributions from

. the. P.rimar;:y Committe.e to s~parate _.~leg,l and, a<;~Q.\JQ.):inq {UJ;1d"

---fo-r-the-Genera-I--El:ection. Bowever, the law requires these '_, _

private contributions be used to pay th~ remaining debts of the

primary committee.

The effect of this impermissible transfer was to

artificially inflate the Primary Committee's debt. This caused

the u.s. Treasury to make an overpayment of taxpayer funds to

the Committee to cover that debt. Accordingly, the Audit

Division and General Counsel recommended the Committee repay

$2.9 million to the u.s. Treasury. We voted for this

recommendation because this result was clearly required by the

Commission's regulations and previous presidential audits. We

regretfully conclude that our three colleagues' failure to

adhere to these rules, and their vote against this

recommendation, can only be considered arbitrary and capricious.

I. Commission Regulations and Procedures Required

the Clinton Committee Make a Repayment

The Commission's regulations at 9034.1(b) limit the amount

of public funds a candidate may receive after the nomination to

the net debt outstanding at the time a matching fund payment is

received. To arrive at this debt calculation, all public and

private contributions are subtracted from debts outstanding.

Any net debt remaining would increase the candidate's
statement of Reasons

Clinton for President Committee

by Commissioner Joan D. Aikens,

Commissioner Lee Ann Elliott and

Commissioner Trevor Potter

Page 2

entitlement to public funds to pay the debt. The long history

of this regulation makes it clear that it was designed to

encourage the payment of campaign debts, to the extent possible,

with private contributions.ll

Commission regulations at part 9003.3(a)(1)(iii) also

clearly state: Contributions that are made after the convention

but which are designated for the primary election, and

contributions that exceed the contributor's limit for the

primary election may be redesignated for the legal and

accounting compliance fund if the candidate obtains the

contributor'S redesignation in accordance with 11 C.F.R. 110.1.

Contributions that do not exceed the contributor'S limit for the

primary election may be redesignated and deposited in the legal

and accounting compliance fund only if:

'(A1The contribu'io.ns. re.present .funds in f!xcess of any

amount needed to pay remaining ptimaryexpenses;.••

11 The requirement at 11 C.F.R. S 9034.1(b) that private

contributions be used to pay a committee's debts was recently

upheld in Lyndon B. LaRouche: LaRouche Democratic Campaign '88

v. FEC, 28 F.3d 137 (D.C. Cir. 1994). In LaRouche, the Court

stated "the language (of 9034.1(b» would appear to be

dispositive. A candidate is entitled to receive post-DOl

matching payments so long as net campaign obligations remain

outstanding, and the regulation defines a candidate's remaining

[NaCO] as the difference between the amount of his original NOCO

and the sum of the contributions received ... plus matching funds

received::: -Whenever the sum of his post-DOl receipts equal the

amount of his NaCO-whether those receipts be in the form of

private contributions matching payments~rom the puEIic

fisc - his entitlement to further matching payments comes to

Even if we were to find the regulation ambiguous, which we

~not, we would still have to accept the Commission's

interpretation of section 9034.1(b) unless we found it plainly

inconsistent with the wording of the reT~lation, which it is

not. 28 F.3d at 140 (emphasis added).
Statement of Reasons

Clinton for President Committee

by Commissioner Joan O. Aikens,

Commissioner Lee Ann Elliott and

Commissioner Trevor Potter

Page 3

(0) The contributions have not been submitted for

matching.

(emphasis added'.

This regulation was approved on a 6-0 vote by the

Commission after the 1988 election cycle when a similar issue

arose in the Oukakis audit. This regulation vas designed to

more clearly state the consistent position taken by the

Commission from the first publicly financed election in 1976.

In noting the need for this clearer regulation, Commissioner

Thomas pointed out during the Oukakis audit that:

On its face. the (former) regulation would seem to allow

the redesignation of post-primary designated contributions

if the primary would have a debt afterward. However, it

,. .wO_ulcl.'be inconsistent.. ..,ith· the Co_ission·s C"On9ressional

mandate to allow a coufttee to, in ''-.'s'-nce ,create--debt -

that would lead to entitlement for post ineligibility

matching funds. In other words a committee should not be

able to claim a net debt and hence entitlement to post

ineligibility matching funds if it dissipated its

permissible primary contributions to do so. Taken to its

extreme, a committee could redesignate all of its unmatched

contributions ... and unnecessarily create a huge deficit

with a resulting claim for matching funds.

The current language of 9003.3(a)(1)(iii) pertaining to

redesignation of post-primary designated contributions,

effective Aoril 8, 1987, evolved from a somewhat similar

provision in the previous version of 11 C.F.R. 9003.3.

However, the prior version made clear that such

redesignations were permissible only if the primary

committee retained sufficient funds to pay its

remaining debts.

Contributions which are made after the beginning of the

expenditure period but which are designated for the primary

election may be deposlted in the legal and accounting

compliance fund: provided that the candidate already has

sufficient funds to pay any outstanding campaign

obligations lncurred during the primary campaign ...

[11 C.F.R. 9003.3(a)(1)(iiil (effective July 11, 1983).J
Statement of ~ea.ons

Clinton for President Committee

by Commissioner Joan D. Aikens

Commissioner Lee Ann Elliott and

Commissioner Trevor Potter

Page 4

Though the current language did not retain this protective

phrasing, there appears to have been no intent to alter

the prior approach .... Indeed. as noted, it would be

contrary to public policy to allow the creation of debt and

the consequent entitlement to post ineligibility matching

funds. Accordingly, the Committee should be permitted to

redesignate and transfer-out to the GELAC only so much of

the contributions as would not leave the Committee in a

net debt position. The remaining amount in question, .•.

cannot be redesignated and transferred-out, must be repaid

by GELAC, and must :herefore be included in Committee's

cash on hand figure.~/

In order to clarify any ambiguity that may have occurred

during the 1988 Presidential audits, the Commission revised its

, presidential regulations for 1992 to make absolutely clear that - c---- public_a_pd_private lIoney be used· for debt' reti rement, and that

.:;- there iSliaited peniiifsibility ands-everal prerequisites--for---

any redesignation of private funds. See 11 c.r.~. 9003.3(a)(1)

(iii) and 9034.l(b).

II. Application of These ~ules to the Clinton Coaaittee

By splitting 3-3 on two repayment motions, the Commission

failed to apply these regulations to the Clinton Committee. For

example, there is no question that on the date of ineligibility

(i.e., the date of Clinton'S nomination, July 15, 1992), the

Committee had a debt of over $7 million. Solicitations prior to

July IS had clearly solicited funds for the primary campaign and

all contributions received were made payable to the primary

Committee, and deposited into the primary account. Those

solicitations reminded the contributor that the contribution

could be matched. In fact, the last primary solicitation sent

on July 17, which solicited funds to retire the primary debt,

again reminded the contributor that the contribution could be

matched·l/

2/ Quote of Commissioner Scott Thomas from the Final Audit

Report on the Dukakis for President Committee, approved by

Commission 6-0.

l/ Subsequent sollcita:ions were mailed for contribu:icns to

the General Election Legal and Accounting and Compliance Fund

(the GELAC). Those contributions are not at issue here.
Statement of Reasons

Clinton for President Committee

by Commissioner Joan D. Aikens,

Coamissioner Lee Ann Elliott and

Commissioner Trevor Potter

page 5

.., ..

c

Contributions deposited by the Primary Committee from

these solicitations totaled $5,863,410 between July 16 and

October 2, 1992. In that same time frame, the Committee

submitted final matching requests totaling $6,046,107. The

Committee received this inflated amount because they did not

apply all of their private funds to their net outstanding

campaign obligations. Instead, the primary Committee sought

redesignations from their contributors and transferred

$2,444,557 to the GELAC. This is in direct contravention of the

Commission's regulations governing matching funds. 9034.1(b).

In other words, the Committee took contributor checks

directly in response to primary solicitations, deposited them

into the primary account and submitted $2,600,519 for matching

funds while at the same time taking other contributions from the

same solicitations and, claiming they were intended for the

GELAC, transferred them to th~ Legal and Accounting Compliance

-tund .

In the Final Audit report, the Audit Division correctly

recommended that the candidate had exceeded his entitlement to

further matching funds as of the date on which private

contributions and matching funds could have retired all debts.

This was in accord with the previously cited public funding

regulations, their Explanation and Justification, and the

Presidential Compliance Manual. The amount the Audit Division

calculated the Committee received in excess of its entitlement

on this issue was over $2.9 million. The Audit Division

recommended this amount must be repaid to the U.S. Treasury.

The Office of General Counsel fully concurred with this

recommendation.

In discussing this finding, our colleagues argued that

because of the general redesignation language at 11 C.F.R.

S 110.1 and the fact that the Committee had received

redesignations from many of the contributors, that we should

recognize the "contributors' intent" and allow the Committee to

transfer the funds to the GELAC.

We believe their analysis is faulty in that it fails to

take into account the speclfic language of the regulations

concerning outstanding debts from a Presidential primary at

SS 9003.3(a)(1)liii) and 9034.llbl.
Statement of Reasons

Clinton for president Committee

by Commissioner Joan O. Aikens,

Commissioner Lee Ann Elliott and

Commissioner Trevor Potter

Page 6

However, our colleagues' and the Committee's argument went

even farther ~han simple redesignation. They argued that these

contributions were not specifically designated for the primary

in the first place but were intended for the GELAC despite the

fact that some of these contributions were solicited by the

Primary Committee to retire primary debt; and all specifically

indicated on the solicitation that the contributions were

matchable; and the cheeks vere made to the order of the Priaary

Committee and were deposited in a Primary Committee account.

The re6u:~ of the Commission's failure to approve Audit's

recommendation left us in the impossible position of accepting

the Committee's argument that contributions deposited after the

convention were not primary contributions, but rather were

undesignated contributions received after the primary election,

and pursuant to 11 C.F.R. 110.1 were automatically general

.el_ectioncontributions. This apparently holds true despite the

facttt'iat cClntiibtitions receiVed as part of thenllle

solicitations were in fact deposited by the Priaary Committee

and matched with public funds!

Following the 3-3 split on the Audit's recommendation,

which had the effect of calling these funds contributions for

the GELAC, the General Counsel and Audit Division recommended

that the funds received after the DOl that were matched should

be declared ineligible for matching because (as our colleagues

had just argued) they too were not designated for the primary.

This recommendation was made because the contributions

transferred by the Clinton Committee to the GELAC and the

contributions that were retained by the primary committee and

submitted for matching were indistinguishable in every way:

they were solicited by the same mailing, mailed to the same

address, made payable to the same committee and received at the

same time. This motion recognized that if some of these

contributions were not designated for the primary, then none

were. Accordingly, the Committee would have had to make a

repayment of the amount that was mismatched with public funds.

Incredibly, this motion also failed on a 3-3 partisan split.
Statement of Reasons

Clinton for President Committee

by Commissioner Joan D. Aikens

Commissioner Lee Ann Elliott and

Commissioner Trevor Potter

page 7

And so the Committee has it both ways. Contributions the

Committee received after the convention were considered primary

contributions that were matched with public funds used to pay

primary debts, while other contributions also received after the

convention from the same solicitations were considered

undesignated or redesignated to the GELAC -- all at the whim of

the Committee.

We see no legal or logical way that these post convention

contributions can be both matchable primary contributions and at

the Committee'S discretion also be undesignated contributions

to the GELAC. Such a scheme allowed the Clinton Committee to

manipulate its cash balance and debts to receive public aoney

to which it was not entitled. In its 19 year history, the

Commission has never tolerated such a result. The Commission's

failure to demand repayment of this public money is inconsistent

with Commission precedent and squarely at odds with the plain ---lan-guage-o-f -tne--statute -a-nd-requlaHons,- ls-aroitrary -ariii---- ._.-

capricous, and contrary to law. Failure to approve either of

the two motions completely undermines the integrity of the

presidential Public Funding system and viII place this agency in

an untenable position in trying to enforce the law in future

elections.

III. The Clinton Co.-ittee's Real Entitlement to Public Roney.

In their Statement of Reasons, Commissioners KcGarry,

McDonald and Thomas make the extraordinary statement that their

votes to block repayment actually "furthers the public financing

concept" (emphasis in original) because it pumps more taxpayer

money into the Clinton campaign than the rules allow. Their

argument is that if public financing is good, then more public

financing must be better. This philosophy, of course, turns

Congress' limited public financing statutes for the primaries

and the Commission's audit rules upside down: for in every

Presidential audit, until this one, the Commission has sought to

protect taxpayer funds by requiring Committees prove they were

fully entitled to the matching funds they received.
Statement of Reasons

Clinton for President Committee

by Commissioner Joan D. Aikens

Commissioner Lee Ann Elliott and

Commissioner Trevor Potter

Page 8

, '

We believe that, at a minimum, Congress should be consulted

before the Commission turns a conditional grant of public funds

into a flat entitlement for maximum financing. furthermore,

such a drastic change of course should be subject to the notice

and comment and other protections of a rulemaking. Finally, it

is grossly improper to adopt such a free-spending standard for

only one candidate (the current President of the United States),

while every other campaign in the same cycle has been held to a

different and stricter rule. Such a singular and capricious

result is inappropriate and does not "further" the concept of

public financing. Instead, it destroys the public's confidence

that its money will be audited in a non-partisan manner and the

rules scrupulously followed when it is given to any presidential

campaign.

tUhl1~~ Lee Ann Elliott

Commissioner

Trevor Potter _

Chairman

Date

Date
ItEMORAHDUR

FEDERAL elECTION COMMISSION

W"SHINe; tON. 0 C 20'1»

-

~~ -; __OIl .....

TO:

FROM:

OA'1'E:';;- .

SUBJECT: .

Commissioners

Staff Director Surina

General Counsel Noble

Press Officer Barris . ,

~~ .Marjorie ~. Emmons'~Bonnie J::;o'ss

'r-secretary of the Commission ~.

"•.··Decelll.be r·.~ t 19...94 • - - 0 - _ ... ::.~ -....:.-_••~_:-. -=- . -. ,.' ....:".

-----

Statement of Reasons:.. Final Audit -Repoi~on----- -

the Clinton for President Committee

.,: .

c

Attached is a copy of the Statement of Reasons for the

Final Audit Report on the Clinton for President Committee

signed by Commissioners Aikens, Elliott and Potter. This was

'received in the Commission Secretary's.Office.on Thursday,

December 29, 1994 at 3:51 p.m.

Attachment

c: V. Convery, OGC
FEDERAL ELECTION COMMISSION

Statement of Reasons

Final Audit Report of the Clinton for President Committee

Commissioners Joan D. Aikens, Lee Ann Elliott, Trevor Potter

On December lS, 1994, the Federal Election Commission

considered the Final Audit Report on the Clinton for President

Committee. Unfortunately, a major recommendation in this Report

that required the Clinton Committee to make a substantial

repayment of taxpayer funds was blocked by three Commissioners.

This unprecedented action involved the Clinton Co.-ittee'.

receipt of matching funds from· the U.s. Treasury in excess of -o·c;.-;.-~·-~ -tts-antHleOtft.--'-'lhe---Ci::i_1·• .-totl'_If_",,-11c:!!tDivia ion found, imd ··tll' .. '. General Counsel agreed, that the Clintoncouitte.- 1llpropeilydiverted over a million dollars in private contributions from

the primary Committee to a separate -legal and accounting fundfor the General Election. However, the law requires these

private contributions be used to pay the remaining debts of the

primary co_ittee.

'- .

The effect of this impermissible transfer was to

artificially inflate the Primary Committee's debt. This caused

the u.s. Treasury to make an overpayment of taxpayer funds to

the Gommittee to cover that debt. Accordingly, the Audit

Division and General Counsel recommended the Committee repay

$2.9 million to the U.S. Treasury. We voted for this

recommendation because this result was clearly required by the

Co_ission's regulations and previous presidential audits. We

regretfully conclude that our three colleagues' failure to

adhere to these rules, and their vote against this

recommendation, can only be considered arbitrary and capricious.

I. co_ission Regulations and Procedures Required

the Clinton Co.-ittee Make a Repayaent

The Commission's regUlations at 9034.1(bj limit the amount

of public funds a candidate may receive after the nomination to

the net debt outstanding at the time a matching fund payment is

received. To arrive at this debt calculation, all public and

private contributions are subtracted from debts outstanding.

Any net debt remaining would increase the candidate'S
Statement of Reasons

Clinton for president Committee

by Commissioner Joan D. Aikens,

Commissioner Lee Ann Elliott and

Commissioner Trevor Potter

page 2

---- ---.--:-. --...__ .. -:"~-

'- .

entitlement to public funds to pay the debt. The long history

of this regulation makes it clear that it was designed to

encourage the payment of campaign debts, to the extent possible,

with private contributions.ll

Commission regulations at part 9003.3(a)(1)(ii1) also

clearly state: Contributions that are made after the convention

but which are designated for the primary election, and

contributions that exceed the contributor's limit for the

• primary electioR' may be redes:i.goated for the legal and.

accounting compliance fund if the candidate obtains' the.

contributor'S redesignation in accordance with 11 C.F.R. 110.1.

Contributions that do not exceed the contributor'S limit for the

pri~ary electi~n may be redesignated and deposited in the legal

a-rid -aecountio-q"t:o'apllancefund .only i f.:... ~. '. : . '.- .....

(A) The contributions represent funds in excess of any

amount needed to pay remaining primary expenses; .••

11 The requirement at 11 C.F.R. S 9034.l(b) that private

contributions be used to pay a committee's debts was recently

upheld in Lyndon R. LaRouche; LaRouche Democratic Campaign '88

v. FEC, 28 F.3d 137 (D.C. Cir. 1994). In LaRouche, the Court

stated "the language (of 9034.l(b)) would appear to be .

dispositive. A candidate is entitled to receive post-DOl

matching payments so long as net campaign obligations remain

outstanding, and the regulation defines a candidate's remaining

[NaCO) as the difference between the amount of his original NaCO

and the sum of the contributions received ... plus matching funds

received~ -Whenever the sum of his post-DOl receipts equal the

amount of his NaCO-whether those receipts be in the fora of

private contributions or matching payaents froa the puEIic

fisc - his entitlement to further matchini payments comes to

end. Even if we were to find the regulat on aabiguous, which we

ao-not, we would still have to accept the Commission'S

interpretation of section 9034.l(b) unless we found it plainly

inconsistent with the wording of the regulation, which it is

not. 28 F.3d at 140 (emphasis added).

\. .....
Statement of Reasons

Clinton for President Committee

by Commissioner Joan D. Aikens,

Commissioner Lee Ann Elliott and

Commissioner Trevor Potter

page 3

IF.!

c·

." -Or

(0) The contributions have not been submitted for

matching.

(emphasis added),

This regulation was approved on a 6-0 vote by the

Commission after the 1988 election cycle when a similar issue

arose in the Dukakis audit. This regulation was designed to

more clearly state the consistent position taken by t~e

Commission from the first publicly financed election in 1976.

In noting the need for this clearer regulation, Commissioner

Thomas pointed out during the Dukakis audit that:

... -0' Ort ·its __ face, __the.J.fo.l"mer)· regulaH,.-on- would ••em =to' aLlov

the redesignation of-·post='-priaary-deSi<;nated-contt1:but-ions-·

if the primary would have a debt afterward. However, it

would be inconsistent with the Coamission's congressional

mandate to allow a committee to, in essence, create debt

that would lead to entitlement for post ineligibility

matching funds. In other words a committee should not be

able to claim a net debt and hence entitlement to post

ineligibility matching funds if it dissipated its

permissible primary contributions to do so. Taken to its

extreme, a committee could redesignate all of its unmatched

contributions '" and unnecessarily create a huge deficit

with a resulting claim for matching funds.

The current language of 9003.3(a)(1)(iii) pertaining to

redesignation of post-primary designated contributions,

effective April 8, 1987, evolved from a somewhat similar

provision in the previous version of 11 C.r.R. 9003.3.

However, the prior version made clear that such

redesignations were permissible only if the primary

committee retained sufficient funds to pay its

remaining debts.

Contributions which are made after the beginning of the

expenditure period but which are designated for the primary

election may be deposited in the legal and accounting

compliance fund: provided that the candidate already has

sufficient funds to pay any outstanding campaign

obligations incurred during the primary campaign ...

l11 C.F.R. 9003.3(a)(1)(iii) (effective July 11, 1983). J

...... ,;
Statement of Reasons

Clinton for President Committee

by Commissioner Joan D. Aikens

Commissioner Lee Ann Elliott and

Commissioner Trevor Potter

Page 4

• r· .,

Though the current language did not retain this protective

phrasing, there appears to have been no intent to alter

the prior approach .... Indeed, as noted, it would be

contrary to public policy to allow the creation of debt and

the consequent entitlement to post ineligibility matching

funds. Accordingly, the Committee should be permitted to

redesignate and transfer-out to the G!LAC only so much of

the contributions as ~~uld ~~t lea•• the Com=:ttee in a

ne~ debt position. The remaining amount in question, ....

cannot be <edesignated'and transferred~out,.must be repaid

by'GELAC, and must therefore be included in Committee'~

cash on hand fi.gure.~/

:~F--.. _:._.<:~·."-·.:-;.~,~r..d.~r t? ~~~.r~~Y any .i!lmb.i.9.uHY ~hat .~ax. hav~ .o~curr,ed '<' . 'duri~g tne 19S! +Pre5fden~ia1.-audltll,·the 'Cdililissi on' 'rifYi!O~~__J.t&

Presidential regulations for 1992 to aake absolutely clear that

pUblic and private money be used for debt retirement, and that

there is-limited permissibility and several prerequisites for

any redesignation of private funds. See 11 C.F.R. 9003.3(a)(1)

(iii) and 9034.1(b).

....

.......

!.r'....

II. Application of These Rules to the Clinton Co.-ittee

By splitting 3-3 on two repayment motions, the Commission

faile9 to ~pply these regulations to the Cl~nton Committee. For

exa~ple, there is no question that On the d~te of ineligibility'

(i.e., the date of Clinton'S nomination, JUly lS, 1992), the

Committee had a debt of over $7 million. Solicitations prior to

July 15 had clearly solicited funds for the primary campaign and

all contributions received were made payable to the Primary

Committee, and deposited into the primary account. Those

solicitations reminded the contributor that the contribution

could be matched. In fact, the last primary solicitation sent

on July 17, which solicited funds to retire the primary debt,

again reminded the contributor that the contribution could be

matched·i/

2/ Quote of Commissioner Scott Thomas from the Final Audit

Report cn the Oukakis for President Committee, approved by

Commission 6-0.

i/ Subsequent solicitations ~ere malled for contributions to

the General Election Legal and Accounting and Compliance Fund

(the GELAC). Those contributions are not at issue here.
statement of Reasons

Clinton for President Committee

by Commissioner Joan D. Aikens,

Commissioner Lee Ann Elliott and

Commissioner Trevor Potter

page 5

Contributions deposited by the Primary Committee from

these solicitations totaled $5,863,410 between July 16 and

October 2, 1992. In that same time frame, the Committee

submitted final matching requests totaling $6,046,107. The

Committee received this inflated amount because they did not

apply all of their private funds to their net outstanding

campaign obligations. Instead, the Primary Committee sought

redesignations from the~r ~ontributcrs a~= transferred

$2,444,557 to the GELAC. This is in direct contravention of the

Commission'S regulations governing matching funds. 9034.1(b).

In other words, the Committee tooK contributor checks

directly in response to primary solicitations, deposited thea

;.~into_ the p~ima_r~ accaunt.~t:d.submi.~ted$2,~00,51.9.for matching

funds while at the saaet"i'metaltirig ocner contributi"ons _"fr_o~ the'

same solicitations and, claiming they were intended for the ---

GELAC, transferred them to the Legal and Accounting Compliance

Fund.

In the Final Audit report, the Audit Division correctly

recommended that the candidate had exceeded his entitlement to

further matching funds as of the date on which private

contributions and matching funds could have retired all debts.

This was in accord with the previously cited public funding

regulations, their Explanation and Justification, and the

Presidential Compliance Manual. The amount the Audit Division

calculated the Committee received in excess of its entitlement

on this issue was over $2.9 million. The Audit Division

recommended this amount must be repaid to the U.S. Treasury.

The office of General Counsel fully concurred with this

recommendation.

In discussing this finding, our colleagues argued that

because of the general redesignation language at 11 C.F.R.

S 110.1 and the fact that the Committee had received

redesignations from many of the contributors, that we should

recognize the Rcontributors' intent R and allow the Committee to

transfer the funds to the GELAC.

We believe their analysis is faulty in that it fails to

take into account the specific langua~e 0: the regulations

concerning outstandlng debts from a Presidentiai primary at

SS 9003.3(a)(1)(iii) ar:d 9034.1(b).
Statement of Reasons

Clinton for president Committee

by Commissioner Joan O. Aikens,

Commissioner Lee Ann Elliott and

Co.-issioner Trevor Potter

Page 6

However, our colleagues' and the Committee's argument went

even farther than simple redesignation. They argued that these

contributions were not specifically designated for the primary

in the first place but were intended for the GELAC despite the

fact that some of these contributions were solicited by the

Primary Committee to retire primary debt; and all specifically

indicated on the solicitation that the contributions were

~a~~hable; and the checks were made to the order of the primary

Committee and were deposited in a Primary Committee account. • • • •• ~. 4 ..

'The re'sult of the commissioc's fail~re to'approve .Audi.·t's

~ecommendation left us in the impossible position of accegting

.... the COlDJllittee's argument that contributions deposited after the

.'.. '. convention 'W.ere not pri.mary contributions, but rather 'Were

.--;: .•,.-."';' -undes1.gnat:ed;·conllrfbu~ioni' ·citce !Vee} a f,te: 1" the 'pc.i.IIa ry -.le-9t-ion, .....

and pursuant to 11 C.l.R. 110.1 were autoaatlcallygeneral--' '

election contributions. This apparently holds true despite the

fact that contributions received as part of the sallle

solicitations vere in fact deposited by the Primary Committee

and matched 'With public funds!

c·

Following the 3-3 split on the Audit's recommendation,

which had the effect of calling these funds contributions for

the GELAC, the General Counsel and Audit Division recommended

that the funds received after the DOI that were matched should

be declared ine}igibi~ lor· ~atching b~&u5e (~s.our colleague~. had just argued) they too were not designated for the primary~

This recommendation was made because the contributions

transferred by the Clinton Committee to the GELAC and the

contributions that were retained by the primary committee and

submitted for matching were indistinguishable in every way:

they were solicited by the same mailing, mailed to the same

address, made payable to the same committee and received at the

same time. This motion recognized that if some of these

contributions were not designated for the primary, then none

were. Accordingly, the Committee would have had to make a

repayment of the amount that was mismatched with public funds.

Incredibly, this motion also failed on a 3-3 partisan split.
Statement of Reasons

Clinton for President Committee

by Commissioner Joan D. Aikens

Commissioner Lee Ann Elliott and

Commissioner Trevor Potter

Page 7

,-

~.

And so the Committee has it both ways. Contributions the

Committee received after the convention were considered primary

contributions that were matched with public funds used to pay

primary debts, while other contributions also received after the

convention from the same solicitations were considered

undesignated or redesignated to the GELAC -- all at the whim of

the Commi ttee.

We see no legal or logical way that these post convention

contributions can be both matchable primary contributions and at

the C~mnittee's discretion also be undesignated contributions

to the GELAC. Such a scheme allowed the Clinton Committee to

manipulate its cash balance and debts to receive public money

'. --'.towhich i.t was not enti,tled. ,In its 19 year history, the

commission has never tolerated &ucha result. - The--ColllJllissionLsfailure to demand repayment of this public money is inconsistent

with Commission precedent and squarely at odds with the plain

language of the statute and regulations, is arbitrary and

capricous, and contrary to law. Failure to approve either of

the two motions completely undermines the integrity of the

presidential Public Funding system and will place this agency in

an untenable position in trying to enforce the law in future

elections.

III. The Clinton Committee's Real Entitlement to Public Koney.

In their Statement of Reasons, Commissioners McGarry,

McDonald and Thomas make the extraordinary statement that their

votes to block repayment actually "furthers the public financing

concept" (emphasis in original) because it pumps more taxpayer

money into the Clinton campaign than the rules allow. Their

argument is that if public financing is good, then more public

financing must be better. This philosophy, of course, turns

Congress' limited public financing statutes for the primaries

and the Commission's audit rules upside down: for in every

presidential audit, until this one, the Commission has sought to

protect taxpayer funds by requiring Committees prove they were

fully entitled to the matching funds they received.
Statement of Reasons

Clinton for President Committee

by Commissioner Joan D. Aikens

Commissioner Lee Ann Elliott and

Commissioner Trevor Potter

page 8

. .

. .....,.......:.w.. ... . ,a 0.;_ :. '\ . .. ....,: .;......

We believe that, at a minimum, Congress should be consulted

before the Commission turns a conditional grant of public funds

into a flat entitlement for maximum financing. Furthermore,

such a drastic change of course should be subject to the notice

and comment and other protections of a rulemaking. Finally, it

is grossly improper to adopt such a free-spending standard for

only one candidate (the current President of the United States), ~hi:e e~ery other ca~paign in ~he same cycle has been held to a

different and stricter rule. Such a singular and capricious

result is -inapp<opriete· and. d.ces 119t ",l"-ftiu!r"....the concel?t. of., .. public financing. Instead,. it destroys the public's confidence

that its money will be audited in a non-partisan maQner and the.

'rules scrupulously followed when it is giVen to any pr~sidentiil

~~m~a~gn: .\~.

c

Joan D. Aikens

Commissioner

"

~~~h<.A d'1 , \qq, ±

Date

'0 ' ....

tUhu {£t:/'~ Lee Ann Elliott

Commissioner

Date

'.

Trevor Potter

Chairman

Date