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April 1985

FEDERAL ELECTION COMMISSION

1325 K Street NW Washington DC 20463 Volume 11 , Numbe

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INTERVIEW WITH CHAIRMAN

ON COMMISSION'S 10TH ANNIVBRSARY

To mark the Commission's lOth anniversary, which occurs on April 14, the

Record interviewed Commission Chairman

John Warren McGarry. We asked several

questions about the Commission's experience over the past decade. His remarks

follow:

What do you think has been the Commission's most important achievement during

the past ten years?

Meaningful disclosure. The purpose,

the thrust and the goal of the Act is

disclosure. The Commission has achieved

this goal in a magnificent manner. For

example, you can get information on independent expenditures made to support or

oppose eandidatesj you can find out about

communication costs that corporations and

labor organizations make to their restricted classes; you can identify what

PACs have contributed. This is all meaningful. Beyond that, the information is

available and accessible. You don't have to

go to some archive and spend money or

perform manual research. At the Commission, the most important information is

readily accessible through computer printouts. In my opinion, the Com mission has

carried out disclosure in a manner that

surpasses the expectations of even the

most ardent supporters of election reform.

Many commentators have observed that

the most important part or the election

law is disclosure. In what way does disclosure serve the public interest?

Disclosure leads to confidence security, stability on the part of the electorate,

Even though people may not utilize the

information, it's pretty widely known that

the data is available. There is as a result . " a genume sense of accountability and responsibility on the part of elected officials.

This has restored the public's confidence in

the electoral process. Confidence had

plummeted at the time of the Watergate

scandal. Today, disclosure allows the voter

to make an informed judgment about cancontinued on p. 2

SUPREME COURT RULES

ON 26 U.S.C. 59012(0

Many calls have been received regarding 

impact of the Supreme Court's March 18 decis

striking down 26 U.S.C. S9012(f) as unconst

tional. The next issue of the Record will su

marize that decision (FEC v. NCPAC et al.),

Unfortunately, several accounts of that de

sion incorrectly reported the Court's ruling. T

inquiries generated by this misreporting sugg

that a brief comment on what the Court did 

say is in order.

First, eontributiom to a Presidential can

date accepting general election funding are s

prohibited. The Court decision only addressed 

dependent expenditures made by political co

mittees to further the election of such a Pr

dential candidate.

Second, all contribution limits remain 

force. Some reports have misconstrued 

Court's decision to mean that limits govern

individual contributions to political action co

mittees have now been lifted. As noted above, 

contribution limits were not at issue in this cas

TABLE OF CONTENTS

1 Interview with Chairman

800 LINE

I Supreme Court Rules on 26 U.S.C. S9012(f)

REGULATIONS

3 Sunshine Rules

3 Testing-the-Waters Rules

4 Repayment Rules

4 OPINIONS

INFORMATION

6 Computer Access in Alabama

7 COURT CASES

7 COMPLIANCE
April 1985 FEDERAL ELECTION COMMISSION \k)lume 11 ,Numoo

2

The Record is published by the Federal Election Commission, 1325 K Street, N.W., Washington,

D.C. 20463. Commissioners are: John Warren McGarry, Chairman; Joan D. Aikens, Vice Chairman;

Lee Ann Elliott; Danny Lee McDonald; Thomas E. Harris; Frank P. Reiche; Jo-Anne Coe,

Secretary of the Senate, Ex Officio; Benjamin J. Guthrie, Clerk of the House of Representatives,

Ex Officio. For more information, call 202/523-4068 or toll-free 800/424-9530.

INTERVIEW WITH CHAIRMAN

continued from p.l

didates, The voter knows where the candidates'

money comes from and how it is spent.

Some critics have suggested that the Commission's powers be limited to disclosure alone. In

other words, they would like to see the Commission stripped of its enforcement powers. Do you

think this would be advisable!

No, I don't. I think it would be most unfortunate. It would bode ill for the election reform

law, which I think has been been successful. One

dramatic lesson from Watergate and the very

reason for the Commission (and I had a ringside

seat for all this) is the need for enforcement.

Though we had an excellent, all encompassing

election reform law, when the Watergate bubble

burst, the confidence of the American public

plummeted; we realized that the election law was

not being enforced. We recognized that an independent election commission was needed not just

to administer the law but to enforce it. The best

example is the Internal Revenue Service. On April

15, in any post office in the country, people are

falling over one another to file tax returns, because people are vividly aware that the IRS will

enforce the law; and if they don't file, there will

be penalties. Without enforcement, you wouldn't

get disclosure. The law would not be observed.

Without Watergate, there would have been no

Commission, and the FECA would have gone the

way of the Corrupt Practices Act (of 1925),

creating deep distrust among the American

people.

Some have eriticized the Commission for taking

too long to process outside complaints. Has this

been a problem? If so, do you foresee any solution?

I think it is a continuing problem, and I can

understand that outsiders feel there's a delay in

processing complaints. But many people are not

aware of the problems confronting the Commission in this area. The Act is replete with a

panoply of procedural safeguards, which in themselves cause delays. Respondents often have sophisticated attorneys, well versed in adversarial

procedure. The Commission sometimes finds itself

'in the position of having to fight for every inch of

ground in its effort simply to get information

needed to process a case properly.

Interrogatories, subpoenas, legal procedures

to enforce subpoenas---all these take time. In

one case, the court sat on a subpoena enfor

ment matter for two years. There was nothing t

Commission could do. By the time the Comm

sion resolves a compliance matter, a year m

have passed. But at other government agenc

and in the private sector, similar cases may 

strung out over two or three years.

The Commission is constantly mindful of t

need to find ways to speed things up. We have, 

example, developed a three- track system .

processing cases (ranging from the simple to t

complex). The simpler cases are moved with d

patch. I think we have made great strides 

improving the process in the last two years, b

we continue to review our procedures, looking 

ways to improve them in any way we can.

What do you believe is the most difficult probl

facing the Commission today?

My answer is twofold: Insufficient fund

and trying to strike a balance between our duty 

enforce the law and the need to encourage par

cipation in the political process. Let me spe

about funding, first.

Campaign spending has skyrocketed. In 19

campaign spending exceeded $1 billion. The 

creased activity impacts directly on the Comm

sion. Voluminous reports are filed with us, cre

ing more work for those who review reports, au

campaigns and handle compliance. Despite th

we have had to battle to get enough funds to 

our job. Staff has been cut from 282 to 245, a

we have had to reduce basic programs. For e

ample, we no longer enter into the compu

information about individual contributions of b

tween $200 and $500. We used to. Similarly, 

are unable to monitor aggregate contributions 

individuals that exceed the annual limit 

$25,000. Nevertheless, despite our limited fun

ing, we have had dramatic increases in product

ity. We have a young, dedicated staff; we ha

done well, but we're hurting. A lot of the cri

cism leveled at the Com mission could be ov

come with proper funding.

The second problem, and of equal imp

tance, is the difficulty of trying to balance o

duty to enforce the law with the need to do so 

a manner that increases citizen participation 

elections. Most of the people we deal with a

volunteers. Although we must enforce the law, 

is important that we not be intrusive or disru

tive. We must enforce the law with grace a

avoid tipping the scales in favor of one candid

over another. We. know the law is complex; 
FEDERAL ELECTIOI\J COMMISSION \blume 11, Numte

*The final proposed rules exclude a list 

criteria, contained in the notice of proposed ru

making, for determining which activities are p

missible lU1der the exemption. The agency c

cluded that these factors were too general 

vague to be of use to individuals looking 

guidelines to operate within the exemption.

Contribution LimitslProhibitions

Under the proposed rules, the contribut

limits and prohibitions of the Act apply to fu

used for testing the waters. (Under the curr

rules, funds received or expended for testing 

waters become reportable contributions and 

penditures only after the individual become

candldate.)

SUNSHINE REGULATIONS:

SECOND RULEMAKING NOTICE

AND HEARING

On March 13, 1985, in response to

comments on its first notice of proposed

rulemaking, the Com mission published a

second rulemaking notice in the Federal

Register to seek additional com ments on

possible revisions to its Sunshine regulations. See 11 CFR Parts 2 and 3. At the

same time, the Commission announced

that, on April 24, it will hold a public

hearing on the proposed revisions. See 50

Fed. Reg. 10066.

Those interested in testifying at the

hearing should so indicate on their written

comments. Comments or questions on the

proposed revisions should be submitted to

Ms. Susan E. Propper, Assistant General

Counsel, by April 12. Ms. Propper may be

contacted at 202/523-4143 or by writing

the Commission at 1325 K Street, N.W.,

Washington, D.C. 20463.

oral statements that referred to him/her a

candidate for a particular office.

o The individual conducted activities shortly 

fore an election or over a protracted period 

time.

o The individual sought ballot access.

Three other examples, contained in the c

rent rules. have been incorporated into the 

vised regulations. They are: the use of pu

political advertising to publicize the individu

campaign, the raising of funds in excess 

amounts reasonably required for exploratory a

vities and the amassing of funds to be used af

candidacy is established.*

Minor Teclmical Amendments

The proposed rules make clear that the pro

sion governing the contribution exempt

contin

3

April 1985

When Testing-the-Waters Exemptions

Do Not Apply

The revised rules include new examples of

activities that would indicate an individual had

decided to become a candidate and hence was no

longer testing the waters. For example, an individual would be considered a candidate if:

o The individual made, or authorized, written or

Testing-the-Waters Activities

Under the regulations, testing-the-waters

activities are explicitly limited to activities designed to evaluate a potential candidacy. Examples of such permissible activities provided in

the current regulations and retained in the proposed rules include: expenses for conducting a

poll, telephone calls and travel undertaken to

determine whether an individual should become a

candidate.

TESTING-THE-WATERS RULES SENT

TO CONGRESS

On March 8, 1985, the Commission transmitted to Congress revised rules governing "testing-the-waters" activities. Although the election

law establishes automatic dollar thresholds for

attaining candidate status, the Commission has

provided limited exceptions to these automatic

thresholds through its regulations. These exceptions permit an individual to test the feasibility of

a campaign for federal office without becoming a

candidate under the election law. Commonly referred to as "testing-the-waters" exceptions,

these rules exclude from the definitions of "contribution" and "expenditure," respectively. those

funds received and payments made to determine

whether an individual should become a candidate.

See 11 CFR 100.7(b)(l), 100.8(b)(l) and 101.3.

The proposed rules, summarized below, may

be prescribed 30 legislative days after their transmittal to Congress. They were published in the

March 13, 1985, issue of the Federal Register (50

Fed. Reg. 9992).

would be unfortunate if we enforced it in such a

way as to chill participation. So, we do our very

best to provide our constituents with information,

to help them understand the law; but we don't do

enough with outreach because of insufficient

funding.

These are two very real problems that the

Commission constantly wrestles with. We are very

mindful of the fact that they require a great deal

of effort and attention, and we try to give them

that.

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April 1985 FEDERAL ELECTION COMMISSION \blume 11, Numt

(l00.7(b)(l» applies only to "funds received" for

testing the waters and the provision governing the

expenditure exemption (100.8(b)(l» applies only to

"payments made" for testing the waters. Both

provisions cross reference the reporting requirements for individuals who subsequently become

candidates. See 11 CFR 101.3.

FEC RESUBMITS REPAYMENT RULES TO

CONGRESS

On March 5, 1985, the Commission resubmitted to Congress revised regulations governing

the repayment of public funds used by publicly

funded. Presidential candidates for nonqualified

campaign expenses. II CFR Parts 9007 and 9038.

(For a summary of the proposed rules, see page 1

of the August 1984 Record.) The FEC originally

submitted the proposed rules to Congress on

August 17, 1984. However, the 30 legislative days

had not expired when Congress adjourned on

October 12, 1984. The agency therefore resubmitted the rules.

The proposed rules will make the FEC's repayment formula consistent with recent decisions

by the U.S. Court of Appeals for the D.C. Circuit

in Kenne for President v. FEC and Reagan for

President v. FEC. See page 4 of the September

1984 Record for a summary of these suits.)

Rather than stipulating full repayment of nonqualified expenses, the revised repayment formula

will require a partial repayment based on the

ratio of federal funds to total funds received by

the candidate (both private and federal funds).

The revised rules were published in the Federal

Register on March 8, 1985. (50 Fed. Reg. 942I)

Copies are available from the Public Communications Office. Call 202/523-4068 or, toll free,

800/424-9530.

ADVISORY OPIMION REQUFSI'S

The following chart lists recent requests for

advisory opinions (AORs). The full text of each

AOR is available to the public in the Commission's Office of Public Records.

AOR Subject

1985-9 Excess campaign funds used to establish

university scholarship fund or professorial chair. (Date made publics February

21, 1985; Length: 1 page)

4

AOR SWject

1985-10 Deceased candidate's loan to campa

liquidated by his estate. (Date made p

lic: February 26, 1985; Length: I pa

plus 3-page supplement)

1985-11 Eligibnity of trade association's perso

members for PAC solicitations. (D

made public: March 8, 1985; Length 

pages, plus 17-page supplement)

ADVISORY OPINIONS: SUMMARIF8

An Advisory Opinion (AO) issued by the C

mission provides guidance with regard to 

specific situation described in the AOR. A

qualified person who has requested an AO 

acts in accordance with the opinion will not 

subject to any sanctions under the Act. Ot

persons may rely on the opinion if they 

involved in a specific activity which is indis

guishable in all material aspects from the activ

discussed in the AO. Those seeking guidance 

their own activity, however, should consult 

full text of an AO and not rely only on 

summary given here.

AO 1985-1: Candidate Committee's Liquidati

of campaign Asset Prior to

Termination

Before terminating, the Ratchford for Cong

Committee (the Committee), the principal ca

paign committee for former Representat

Ratchfordts unsuccessful reelection campaign 

1984, may sell its computer system to such pot

tial buyers as private citizens, former staff m

bers or state committees, provided:

o The purchaser pays no more than the usual 

normal charge for the system (i.e., the 

market price for the same type of equipmen

the same condition); and

o The Committee terminates within a reasona

time after the sale is completed.

Once it has sold the computer system, in orde

terminate, the Committee may use the proce

from the computer system sale, along with ot

excess campaign funds, for those purposes sa

tioned by the election law. See 2 U.S.C. §439a.

The Commission noted that this opin

might not apply if the Committee sold the co

puter system but remained in existence as eit

a multleandldate committee or an authorized c

didate committee for a future election. In 

previous advtsory opinion, AO 1983-2, for 

ample, the Commission decided that, if an 

going political committee sold computer servic

the service fees would be considered contributi

to the Committee, which are subject to 

election law's prohibitions and limits. (D

issued: Febroary 28, 1985; Length: 3 pages)
FEDERAL ELECTION COIVIIVlISSIOI\J \blume 11, NumtE

AO 1985-4: Payments to senator for Universit

Seminars Not Considered

Honorarium

Payments which Senator Charles MeC. Math

receives from Northeastern University for co

ducting a series of undergraduate seminars 

governmental and public affairs each year a

considered stipends, which are excluded from t

definition of honoraria. See 11 CFR llO.12(c)(

(Under an ongoing agreement with the universi

Senator Mathias has conducted the seminars 

the last 10 years.) Accordingly, the payments a

continu

financial activity which occurred since the co

mittee's last report -- the July 1981 semiannu

report. Moreover, the federal committee shou

continue to file reports if, in any subseque

reporting period, it receives funds, makes d

bursements or otherwise changes the status of 

debts. The federal committee should also revi

and amend its statement of organization, if a

propriate. See II CFR 102.2(a).

The Commission expressed no opinion on t

application of state laws to the proposed tran

fens) because the Act does not supercede sta

provisions governing disposition of state campai

funds. Nor did the Commission address releva

state and federal tax rules because they are n

within its jurisdiction. (Date issued: February 2

1985; Length: 5 pages)

AO 1985-3: Contributions to State Campaign

by American Subsidiary of Foreign

Corporation

Mr. Rod Diridon, a California state official, m

accept contributions for future state campaig

from a Delaware corporation, UTDC, Inc. (uSA

which is an American subsidiary of a forei

corporation, UTDC-Canada, provided:

o UTDC-Canada does not directly or indirec

provide the funds Cor the contributions; and

o Neither UTDC-Canada nor any other Core

national exercises any decision-making role 

control over the distribution of the contrib

tions.

California law does not prohibit corporations fro

contributing to candidates Cor state and loc

office. Moreover, although section 441e of t

Act prohibits foreign nationals from making co

tributions in connection with any United Sta

election, this prohibition does not apply to UTD

Inc. (USA) because it is organized under Delawa

law, with its principal place of business in t

United States. See AO 1983-31.

Commissioner Frank P. Reiche filed a co

curring opinion. Commissioners Thomas E. Har

and Danny L. McDonald filed a joint disse

(Date issued: March 4, 1985; Length: 6 pag

including concurrence and joint dissent)

5

April 1985

Federal Committee's Requirements

On the next regularly scheduled report. the

reactivated federal committee should disclose the

transfers as a "miscellaneous receipt" from the

state committee. For examplez. if the transfer is

made between January 1 and June 30, 1985, the

federal committee would disclose the transfer on

the July 1985 semiannual report, along with any

State Campaign FW1tts Transferred

to 1918 Congressional campaign

for Debt Retirement

Mr. Jim Shaffer, a Pennsylvania state senator,

may transfer funds from his former campaign for

state office (the state committee) to hIS unsuccessful campaign for federal office in 1918 (the

federal committee) to help retire the federal

committee's remaining debts (Le., $26,950 which

Mr. Shaffer had loaned the committee). The proposed transfer is permissible even though the

Commission administratively terminated the federal committee in December 1981. The transfer

would void that termination, thus reactivating the

Committee's reporting responsibilities. See 11

CFR 102.4 and 1l0.l(g); AO 1981-22.

Since the state com mittee and the reactivated federal committee are considered affiliated

committees by virtue of Mr. Shaffer's control

over both of them, unlimited funds may be transferred between the two committees. The Act and

Commission Regulations impose certain requirements on both committees, however, depending on

the amount of funds transferred between them.

State Committee's Requirements

If Mr. Shaffer transfers more than $1,000

from the state committee to the federal committee during the year, the state committee must

register and report as a "political committee"

under the Act. 2 U.S.C. §43l(4)(A); 11 CFR 100.5

and 102.6(a). On its first report, the state committee, newly registered as a political committee,

must disclose the amount transferred as cash on

hand, itemizing these funds, where appropriate,

on the basis of "last in, first on hand." 2 U.S.C.

§434(b). If it transfers the funds in a single

transaction, the state committee should file only

one report, using it as both the initial and terminating report. Otherwise, the state committee

should file reports for any SUbsequent reporting

period during which it is financially active.

The state committee must exclude any prohibited contributions from the funds transferred

to the federal committee. Similarly, the state

committee must exclude from the transfer any

contributions Which, when added to contributions

already made by the same donor to the federal

committee, would cause the donor to exceed

contribution limits. 2 U.S.C. S44Ia(a)(1) and (2).

On the same report, the state committee

must also disclose the transfer of these funds to

its affiliated federal committee.

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AO 1985-2:

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April 1985 FEDERALELECllON COMMISSION

not subject to the $2,000 limit placed on an honorarium accepted by a federal officeholder.

2 U.S.C. S44li. (Date issued: February 14, 1985;

Length: 2 pages)

AO 1985-5: Contributions Made Before but

Received After General mection

Campaign

Since the Committee to Re-elect Joe Kolter (the

Committee), Representative Kolter's principal campaign committee for his 1984 reeleetlon campaign, has no outstanding general election debts,

contributions received after the general election

count toward the contributor's limit for Rep.

Kolter's 1986 primary campaign. Moreover, if

total contributions received by the Committee

after the 1984 general election exceed $5,000,

Mr. Kolter would become a candidate for the 1986

election cycle and might have to amend his FEC

Form 1 accordingly. See 11 CFR 100.3 and 101.1.

Accordingly, a $4,800 contribution received

after the general election from the United Auto

Workers Voluntary Community Action Program

(UAW V CAP) counts against the $5,000 limit for

the 1986 primary election. Intending that the

contribution be for the 1984 general election,

UAW V CAP dated the check October 29 and

mailed it before the November 6 election. Nevertheless, the contribution counts against UAW V

CAP's limit for Mr. Kolter's 1986 primary because

the Committee did not receive or deposit the

check until the day after the election, and the

Committee had no outstanding debts at that time.

The Commission noted that questions posed

by the Committee with regard to two UAW V

CAP contributions received before the 1984 general election did not qualify for consideration as

part of the advisory opinion request because they

concerned only past, rather than future, campaign

aetlvlty, See 11 CFR 112.I(b). Commissioner

Thomas E. Harris filed a concurring opinion. (Date

issued: March 6, 1985; Length: 10 pages, including

concurrence)

AO 1985-6: Affiliation of Local Union's PAC

with PACs of Affiliated

Intemational Union

Even though the separate segregated fund of

Laborers Local 91, the Laborers Local 91 Political

Action Fund (the Fund), has been established,

operated and supported exclusively by the local

union's members, the Fund is considered to be

affiliated with any separate segregated fund established by the local union's international affiliate, Laborers International Union (IJU). Under the

Act and FEC Regulations, certain categories of

political committees (e.g., the separate segregated funds of unions) are considered affiliated

merely by virtue of the affiliation between their

connected organizations. As affiliated commit6

'vblume 11, Numi

tees, the Fund and any separate segreg

fund(s) established by IJU are subject to a si

contribution limit on both the contributions 

receive and the contributions they give. 2 U.

S441a(a)(5); 11 CPR 100.5(g)(2)(i)(B) and 110

(I )(ii)(B).

Reporting Requirements

For reporting purposes, the Fund must fu

tion as a separate committee, filing reports 

closing its own receipts and disbursements

addition, on its Statement of Organization (F

Form I), the Fund must identify any sepa

segregated funds established by LIU as affili

committees. 11 CFR 102.2(b)(I)(ii). (Date iss

February 28, 1985; Length: 3 pages)

FEC SELECTS ALABAMA

FOR STATE ACCESS TEST

On March 1, 1985, the Commission and 

bama Secretary of State Don Siegelman i

gurated a computer program which provides 

Alabama state office with direct computer a

to FEC campaign finance information. Other 

ticipants in the FEC computer access program 

clude the campaign records offices for Califor

Colorado, Georgia, illinois, Massachusetts 

Washington.

Each of the state offices has a comp

terminal which is linked, via a national telec

munications system, to the FEC's computer. 

though all state election offices maintain co

of reports filed by political committees activ

federal elections in their respective states, t

offices with computer access to the FEC o

enhanced research opportunities. Here, the pu

and the press can quickly pinpoint informatio

any federal candidate or committee, and 

avoid spending hours copying information f

reports. For example, the researcher can obta

printout for a particular candidate indicating 

amounts the candidate received from poli

committees. In addition to on-line computer 

formation, the state offices also maintain p

copies of other FEC indexes and campaign fin

reports. (For a full description of FEC infor

tion made available to the state offices, see p

4 of the October 1984 Record.)

Listed below are state offices which 

provide direct computer access to FEC camp

finance information. Note that the informatio

obtained by contacting the state offices r

than the FEC.
April 1985 FEDERAL ELECTION COMMISSION \.bIume 11 ,Numta-

Office of the Secretary of State

•

State Capitol, Room 103

Montgomery, Alabama- 36130

205/261-3126

Office of the Secretary of State

107 South Broadway, Room 4001

Los Angeles, California 90012

213/620-3104

Office of the Secretary of State

1230 J Street, Room 219

Sacramento, California 95814

916/322-4880

Office of the Secretary of State

1560 Broadway Street, Suite 200

Denver, Colorado 80202

303/866-2021

Office of the Secretary of State

State Capitol, Room 110

Atlanta, Georgia 30334

404/656-2871

illinois State Board of Elections

201 North Wells Street, Suite 500

Chicago, Illinois 60606

312/793-6440

•

Office of the Secretary of State

1701 McCormack Building

One Ashburton Place

Boston, Massachusetts 02108

617/727 -2832

Washington Public Disclosure Commission

403 Evergreen Plaza

Olympia, Washington 98504

206/753-1111

NEW LITIGATION

FEC v. National Congressional Club

Failing to resolve a complaint through the

informal conciliation process mandated by the

election law (2 U.S.C. S437g(a}(4)(A)(i», the Commission seeks action against the National Congressional Club (NCC), a multicandidate political

committee, NCC's treasurer and executive director, R.E. Carter Wrenn, and Jefferson Marketing,

•

Inc. (JMI), a North Carolina corporation that

provides media services to political committees.

Specifically, the FEC petitions the court to:

o Declare that, since NCC and JMI operated as a

single organization during North Carolina's 1982

7

Congressional elections, NCC violated the law

reporting requirements by failing to disclos

JMPs receipts and disbursements (2 U.S.C

§434);

o Order NCC and its treasurer to disclose JMP

financial activity on amended NCC reports;

o Declare that JMI violated the law's ban o

corporate contributions by charging the Gibso

Committee, a 1982 Congressional campaign

less than the fair market value for JMI's se

vices (2 U.S.C. §441b(a»;

o Order each of the defendants to pay the U.

Treasurer a civil penalty consisting of th

greater of $5,000 or an amount equal to an

contribution or expenditure which resulted from

their violations of the election law; and

o Enjoin NCC, its treasurer and JMI from furthe

violations of the election law.

U.S. District Court for the Eastern Distri

of North Carolina, Civil Action No. 85-242-CIV

5, February 7, 1985.

MUR 1509: Loan Endorsements 88 Excessive

Contributiom to Congressional

Campaign

On December 24, 1984, the Commission entere

into a conciliation agreement with the princip

campaign committee of a 1982 House candida

(the Committee) and six individuals who, alon

with the House candidate, had endorsed ban

loans for the candidate's primary and primar

runoff campaigns. Each loan endorser had violate

the election law by exceeding the law's contribu

tion limits in varying amounts. The Committe

had violated the law by accepting the excessiv

contributions.

Intemally Generated Matter

Under the election law, an endorsement o

guarantee of a loan counts as a contribution from

the endorser or guarantor to the extent of his/h

portion of the outstanding balance of the loan. 

U.S.C. §43I(8)(A)(i); 11 CFR 100.7(a)(I)(i)(C

Consequently, the portion of a candidate loa

endorsed by an individual may not exceed $1,00

for each election (Le., a primary, a prima

runoff, another special election or a general ele

tion).

The Committee reported that it had becom

aware of potential violations when it received 

routine inquiry from the FEC's Reports Analys

Division concerning the Committee's inadequa

reporting of its loans. In a "statement of facts" 

the Commission, the Committee said that, durin

1982, the candidate had obtained a series of loan

continu
April 1985 FEDERAL ELECTION COMMISSION Vb/ume 11, Numb

(totalling $77~700) from a commercial bank for

use in his 1982 House campaign. Each of the notes

was eosigned by the candidate and one or more of

his supporters, resulting in the endorsers' violation

of the election law's contribution limits. The

Committee admitted that it had inadvertently

violated the election law "for the three-month

period that the original promissory notes were

outstanding. II During July 1982, the Committee

had tried to rectify the apparent violations by

restructuring the loans. By increasing total endorsers to 63, the Committee claimed that each

cosigner's portion of loan endorsements would be

within the law's $1,000 limit.

Based on the Committee's statement of'

facts, the General Counsel recommended that the

agency:

o Find reason to believe that the Committee had

violated 2 U.S.C. §441a(f) by accepting excessive contributions in the form of loan endorsements; and

o Initiate an investigation into this matter.

The Commission adopted the recommendation on

December 6, 1982.

General Counsel's Report

In response to inquiries from the General

Counsel, on February 18 and 28, 1983, the Committee supplied additional information identifying: the seven original loan endorsers, the specific

loans they had endorsed, the portion of each loan

which each endorser had endorsed, as well as the

dates and terms of each bank loan. Based on this

FEDERAL ELECTION COMMISSION

1325 K Street, N.W.

Washington, D.C.20463

Official Business

information, the General Counsel determined 

the Committee's treasurer and five other in

duals had eoslgned 11 campaign loans tota

$77,700. Six individual loan endorsements 

resulted in excessive contributions amountin

$41,852. (Five of the endorsers had also m

direct contributions to the Committee.) The 

eral Counsel therefore reeom mended that 

Commission find reason to believe that:

o Six of the loan endorsers had violated 2 U

§441a(a)(I)(A) by making excessive cont

tions to the candidate in the form of 

endorsements; and

o The Committee had violated 2 U.S.C. §44

byaeeepting the excessive contributions.

The General Counsel recommended that the C

mission find no reason to believe that a sev

endorser named in the Committee's statem

had violated the law because he had not exce

the contribution limits. On April 13, 1983, 

Commission accepted the General Counsel's 

commendations.

Commission Determination

On February 14, 1984, the Commission f

probable cause to believe that the respond

had violated the election law. On Decembe

1984, the Commission entered into a concili

agreement with the respondents in Which 

agreed not to undertake any activity in Vi

of the election law. In addition, the Comm

agreed to pay a $2,500 civil penalty to the 

Treasurer.

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Permit No. G-31