March 1995

Table of Contents

Regulations

Commission Approves Revised

Personal Use Rules

Legislation

FEC Recommends Changes to

Election Law

Audits

4 LaRouche in '92 Final Audit

4 Public Funding

1992 Jerry Brown Campaign

Required to Repay Treasury

Court Cases

5 New Litigation

5 Advisory Opinions

8 Federal Register Notices

Compliance

9 MURs Released to the Public

Statistics

II 1994 Year-End PAC Count

II Index

Federal Election Commission

Regulations

Commission Approves

Revised Personal Use Rules

On February 2, 1995, the Commission approved new rules defining the personal use ban: the Federal

Election Campaign Act (the Act)

prohibits the use of excess campaign

funds to pay for personal expenses.

2 U.S.c. §439a. These rules,

accompanied by an Explanation and

Justification, were published in the

Federal Register on February 9,

1995 (60 FR 7862). I The Commission will publish an Announcement

of Effective Date in the Federal

Register 'after the rules have been

before Congress for 30 legislative

days.

The new rules provide a test to

differentiate legitimate campaign

and officeholder expenses from

personal expenses and include a list

of specific expenses that are considered personal use (they are listed

below under the subhead "Per Se

Personal Use") . Candidates may

reimburse their committees for

certain disbursements that involve

"mixed uses," but such disburse-

(continued on page 2)

J These rules supersede the following

advisory opinions: 1976-17, 1976-53,

1980-49, 1982-64, 1983-1, 1985-22,

1985-42 and 1988-13.

Volume 21, Number 3

Legislation

FEC Recommends Changes

to Election Law

On February 2, the Commission

sent 63 recommendations for

legislative action to the President

and the Congress. The recommendations were submitted in two parts.

Part one contained 20 recommendations focused on improving the

efficiency and effectiveness of the

current law. These recommendations included:

• Waiver authority. Give the Commission the authority to grant

reporting waivers to eliminate

unnecessary reporting, and to

adjust the filing requirements when

warranted.

• Campaign-cycle reporting. Eliminate reporting provisions that

require campaigns to track contributions on both a calendar-year

basis and a pre-election basis.

• Election period limitations.

Replace separate contribution

limits for primary and general

elections with a single annual

limit.

• Commission as sole point of entry

for disclosure documents. Eliminate the requirement for House and

Senate candidates to file reports

with the Clerk of the House and

the Secretary of the Senate,

(continued on page 4)
Federal Election Commission RECORD

Regulation

(continued from page 1)

ments must be itemized in the

committee's reports and accompanied by a brief description of the

activity for which reimbursement

will be made.

Defining Personal Use:

The Irrespective Test

Personal use is any use of funds

in a campaign account of a present

or former candidate to fulfill a

conunitment, obligation or expense

of any person that would exist

irrespective of the candidate's

campaign or responsibilities as a

federal officeholder. The Commission will rely on this "irrespective

test" to identify personal use

expenses. II CFR 113.I(g).

If an expense is the result of

campaign or officeholder activity,

then it falls outside of the personal

use ban. On the other hand, if the

expense would exist even in the

absence of the candidacy or even if

the officeholder were not in office,

then the personal use ban applies.

Federal Election Commission

999 E Street, NW

Washington, DC 20463

800/424-9530

202/219-3420

202/501-3413 (Flashfax Service)

202/219-3336 (TDD)

Danny L. McDonald, Chairman

Lee Ann Elliott, Vice Chairman

joan D. Aikens, Commissioner

john Warren McGarry,

Commissioner

Trevor Potter, Commissioner

Scott E. Thomas, Commissioner

john C. Surina, Staff Director

Lawrence M. Noble, General

Counsel

Published by the Information

Division

Louise D. Wides, Director

Dado Bard, Editor

2

Under this standard, then, the use of

campaign funds to pay for a candidate's personal living expenses is

impermissible since the candidate

would incur such expenses even if

he or she were not running for

federal office.

Per Se Personal Use

The new rules contain the following list of expenses that are personal

use per se. 11 CFR 113.1 (g)(1 )(i).

Campaign funds may not be used to

pay for:

Householdfood items and

supplies. This includes food purchased for day-to-day consumption

in the home, and any supplies

purchased to maintain the household. It does not include food and

supplies for fundraising activities

(even if they take place in the

candidate's home) and refreshments

for campaign meetings. Meal

expenses incurred outside the home

and subsistence travel expenses are

addressed elsewhere in the rules.

Funeral, cremation and burial

expenses. This includes expenses

other than gifts and donations of

nominal value to persons who are

not members of the candidate's

family. 2 Campaign funds may be

used, for instance, to send flowers to

a constituent's funeral.

Clothing. This includes specialized attire for political functions, but

it does not include clothing of de

minimis value such as T-shirts or

caps imprinted with a campaign

slogan.

Tuition payments. The only

exceptions are tuition costs for the

training of campaign staff to perform campaign tasks.

2 Under the Act, the candidate'sfamily

includes: members ofthe immediate

family, regardless ofwhether they are

whole or half blood; relatives through

adoption and marriage ; the candidate's

grandparents; and any person who has

a committed relationship with the

candidate, such as sharing a household

and mutual responsibility for each

other's welfare or living expenses.

March 1995

Mortgage, rent and utility

payments. This includes such

payments with respect to a personal

residence of the candidate or his or

her family, even if part of the

residence is being used by the

campaign. It does not include such

payments with respect to office

space owned by the candidate so

long as the conunittee pays no more

than fair market value. Nor does it

include payments for long distance

calls made for campaign purposes

I from a residence of the candidate or

his or her family.

Entertainment. This includes

admission to sporting events,

concerts, theater and other forms of

entertainment. It does not include

such admission if the entertainment

is part of a specific campaign or

officeholder activity.

Dues, fees and gratuities. This

includes payments to a country club,

health club, recreational facility or

other nonpolitical organization unless the payments are made in connection with a fundraising event that

I takes place on the organization's

premises. It does not include membership dues in an organization that

may offer political contacts, such as

community or civic organizations.

Salary payments to the candidate's

family . Such payments will be considered personal use expenses unless

they reflect the fair market value of

bona fide services rendered to the

campaign.

Legal, Meal, Travel, Vehicle and

Mixed-Use Expenses

Under the new rules, the Commission wilI address payments for

legal services, meals, travel, vehicles

and mixed-use expenses on a caseby-case basis. II CPR 113.1(g)(I)(ii).

The rules and the Explanation and

Justification provide some guidance

in these areas, as discussed below:

Legal expenses. The Commission

recognizes the potential for the legitimate use of campaign funds to

pay for legal expenses incurred via

campaign or officeholder activities.
March 1995

Meal expenses. Campaign funds

may be used to pay for meals during

face-to-face fundraising. In contrast,

a candidate may not use campaign

funds to take his or her family out to

dinner.

Travel expenses. The new rules

prohibit the use of campaign funds

for personal expenses collateral to

campaign- or officeholder-related

travel, unless the committee is

reimbursed.

Vehicle expenses. De minimis

expenses for the personal use of a

vehicle may be paid for with campaign funds. The committee must be

reimbursed for personal use costs if

such use exceeds this amount.

Mixed use. In the event of travel

or vehicle expenses that commingle

personal and campaign or officeholder activity, the benefactor of the

personal use expenses must reimburse the committee the amount in

excess of what the trip would have

cost had it been purely campaign or

officeholder related. This reimbursement does not constitute a contribution. See the section on "New

Reporting Requirement" on this

page.

Other Personal Use Issues

Candidate's salary. The Commission could not determine whether

the use of campaign funds to pay a

salary to a candidate was permissible under the personal use ban.

The new rules do not address this

matter. Third party salary payments,

however, are permissible under

certain circumstances. See the

section on third party payments on

this page.

Charitable donations. Gifts to

charity are not considered personal

use expenses so long as the candidate does not receive compensation

from the recipient organization

before it has expended the entire

amount donated for purposes

unrelated to the candidate's personal

benefit. II CFR 113.I(g)(2).

Transfer of campaign assets. The

sale or transfer of a campaign

asset--either to the candidate or a

third party- does not constitute

personal use as long as the transaction is made at the fair market value.

II CFR 113.I(g)(3).

Gifts. On special occasions,

campaign funds may be used to

purchase gifts or make donations of

nominal value to persons other than

the members of the candidate's

family. 11 CFR I13.1(g)(4).

Third-party payments ofpersonal

use expenses. Generally, when an

entity other than the candidate or the

candidate's committee pays for

personal use expenses, that entity

makes a contribution, subject to the

restrictions and limitations of the

Act. No contribution will result,

however, if the payment would have

been made irrespective of the

candidacy. A third party may make

the following payments without

making a contribution: payments to

a legal expense trust fund established under House and Senate

rules, payments made from the

candidate's personal funds or from

an account the candidate holds

jointly with a family member, and

payments that were made prior to

candidacy. The new rules also state

that compensation payments made

to a candidate by a third party as a

continuance of payments made prior

to candidacy are not considered

contributions so long as such

payments result from bona fide

employment independent of the

candidacy, are exclusively in

consideration of the services provided as part of this employment,

and represent just pay comparable to

that normally received for such

services. 11 CFR 113.I(g)(6).

New Reporting Requirement

When committees itemize a

disbursement for which partial or

total reimbursement is expected

under the new personal use rules,

they must include in the report a

brief explanation of the activity for

which reimbursement will be made.

II CFR I04.3(b)(4)(i)(B).

Federal Election Commission RECORD

This information is to be included

on schedule B of Form 3, and

reimbursements will be reported as

"other receipts" on the detailed

summary page.

A reimbursement by an individual who benefited from the

personal use of campaign funds will

not constitute a contribution under

the Act. However, if the reimbursement is made by a third party, then a

contribution by that person may

result.

Candidate's Routine Living

Expenses

Routine living expenses fall

I under the personal use ban. Campaign funds may not be used to pay

for them. Since living expenses are

not considered expenditures under

the Act, they need not be reported,

provided that they are paid with:

• The candidate's personal funds;

• Funds from an account the candidate holds jointly with a family

member; or

• A family member's funds, provided that the family member paid

for these expenses prior to the

campaign. 11 CFR lOO.8(b)(22).

Permissible Use of Excess

Campaign Funds

The new rules add the following

expenses to the list of permissible

uses of excess campaign funds:

• Travel expenses for a federal

officeholder and an accompanying

spouse, provided that the travel is

undertaken to participate in a

function that is connected to the

officeholder's official responsibilities; and

• Winding down costs of a federal

officeholder's office for a period

of six months after leaving office.

11 CFR 1I3.2(a)(l) and (2).•

3
Federal Election Commission RECORD

Legislation

(continued from page 1)

respectively. This would eliminate

wasted govemment resources and

delays in public disclosure.

• FEC independent authority in all

litigation. Ensure nonpartisan

enforcement of the law by explicitly authorizing the FEC to petition

the Supreme Court for certiorari

under Title 2. The FEC has

independently argued Title 2 cases

before the Supreme Court in the

past, but the recent Supreme Court

ruling in FEC v. NRA Political

Victory Fund (see page I of the

February 1995 Record for a

summary of the decision) requires

a rewording of the legislation in

order for this practice to continue.

The second part includes 43

recommendations conceming areas

of the law that have been problematic. These recommendations focus

on the areas of disclosure, contribution and expenditure limitations,

enforcement and public financing.

In these cases, the Commission

asked Congress to clarify the law or

undertake more comprehensive

reforms...

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4

Audits

LaRouche in '92 Final Audit

On November 30, 1994, the

Commission released the final audit

report on the Democrats for Economic Recovery-LaRouche in '92

committee. The report included an

initial determination that the committee repay $130,227 to the U.S.

Treasury. This determination

became final on January 10, 1995. I

Prior to the report's release, the

committee issued the U.S. Treasury

a $132 ,300 check, anticipating that

its repayment obligation would not

exceed this amount. The Commission notified the Treasury to remit a

$2,073 refund to the committee.

The findings of the report are

summarized below.

Surplus Repayment

The committee received public

monies totaling $568,435. 2 An

evaluation of the committee's assets

and obligations revealed a surplus of

$477,816. The Commission determined that $129,027 of this amount

represented public monies.

26 U.S.c. §9038(b)(3).

I The committee did not dispute the

initial determination ofthe repayment

I within 30 days, and so the repayment

amount became final. 11 CFR

9038.2(c)(1 ).

2The committee received these monies

in 1994, after the 1992 election. On

February 17, 1994, the FEC complied

with a court mandate to certify Mr.

LaRouche as eligible to receive

matching funds. LaRouche v. FEC, 996

I F.2d 1263 (D.C. Cir. 1993), cert.

denied, _U.S.~ 114 S. Ct. 550 (1193).

See page 3 ofthe September 1993

Recordfor a summary ofthe appellate

court ruling. See also page 3 ofthe

April 1994 Recordfor a summary ofthe

Commission's certification offederal

matching funds to Mr. LaRouche.

March 1995

Interest Earned on Investment of

Federal Funds

The committee invested $468,435

of its public matching fund payment; $129,027 of this amount

represented surplus public funds.

The interest eamed on public

monies amounted to $1,200, after

taxes. The Commission added this

amount to the committee's repayment obligation. 11 CFR

9038.2(b)(4)...

Public Funding

I 1992 Jerry Brown Campaign

Required to Repay Treasury

On November 30, 1994, the

Commission made a final determination that Edmund G. Brown and

his 1992 Presidential campaign must

repay $179,049 in public funds to

the U.S. Treasury, representing

$171,136 in excess of the committee's entitlement and $7,913 in

surplus funds. Additionally, the

committee had to make a payment

of $12,757 to the U.S. Treasury for

excessive travel reimbursements

received from the media and for

stale-dated checks. 11 CFR 9034.6(b)

and 9038.6.

The final repayment figure is

based on the committee's Statement

of Net Outstanding Campaign Obligations. 11 CFR 9034.5(a). This

document is a self evaluation of the

committee's financial position on

the candidate's date of ineligibility,

as depicted by the fair market value

of its capital assets, estimated winding down costs, amounts owed to

the committee, and amounts it owed

to vendors and other payees...
March 1995

Court Cases

New Litigation

Condon, et al. v, U.S.A. et al.

Plaintiffs in this case ask the

court to declare that the National

Voter Registration Act (NVRA) is

an unfunded federal mandate that is

unconstitutional, and to enjoin the

defendants from enforcing it.

The State of South Carolina and

its attorney general, Charles Condon, allege that the NVRA violates

the Tenth Amendment by impinging

upon the state's sovereign right to

allocate its budgetary resources as it

determines. The Tenth Amendment

states that powers not delegated to

the federal government and not

prohibited to the states by the

Constitution are reserved to the

states.

The plaintiffs estimate that the

costs of implementing the NVRA in

South Carolina during the first half

of 1995 will exceed $560,000.

Nearly all of these costs are recurring costs associated with the

preparation of a National Voter

Registration Form, the processing

and distribution of this form,

assistance to citizens in completing

the form, and other obligations

imposed upon state agencies by the

NVRA. Plaintiffs state that there has

been no offer or promise of federal

funds to help South Carolina

implement the NVRA's mandates.

Plaintiffs further argue that, as it

would be ineffective and wasteful to

establish one set of forms and rules

for state elections and another for

federal elections, the NVRA in

effect establishes the election

procedure and voter registration

process for all elections held in

South Carolina.

South Carolina would need to

repeal a portion of its constitution

and several statutes in order to

enforce the NVRA.

The Governor of South Carolina

has demonstrated a good faith at-

~em~t to comply with the NVRA by

ISSUing an executive order directing

state agencies to implement those

mandates of the NVRA that incur a

minimal cost to the state.

U.S. District Court for the

District of South Carolina, Columbia Division, No. 3-95-192-0,

January 24, 1995.•

Advisory

Opinions

AO 1994-33

Calling Card Solicitations

VITEL International, Inc., may

offer political committees a calling

card service through which solicitable individuals can make

contributions and receive political

communications. Special considerations apply, however, to trade associations, convention committees and

convention city host committees.

Background

VITEL proposes the following

arrangement. A client committee's

potential contributors would be

offered prepaid calling cards to be

used for making telephone calls and

making contributions to the committee. Participation in the calling card

plan would be strictly voluntary, in

compliance with 11 CFR 114.5(a).

Each calling card holder would have

a unique PIN number. Card holders

wo~ld buy time on their cards by

callmg a telephone number assigned

to the committee; each committee

would have a separate line. This

would be a toll-free call and the card

holder would be connected to a live

operator contracted by VITEL. The

card holder's name, address, employer and credit card number

would be obtained on the first

purchase. The PIN number would be

used for subsequent purchases.

I After a purchase, the card holder

Federal Election Commission RECORD

would have the opportunity to

designate a percentage of the newly

purchased dollar amount as a

contribution, with the telephone

time being reduced correspondingly.

The telephone time and any contribution would be immediately

debited against the caller's credit

I card in separate transactions by a

merchant bank used by VITEL.

Client committees could purchase

additional services for their potential

contributors. For instance, after

entering the PIN number on a touch

tone phone, the caller could access a

menu of options, including a chance

I to hear a weekly message recorded

by the committee or to leave a

message for the committee.

In-kind Corporate Contribution

If a vendor does not receive the

normal and usual charge for services, an illegal in-kind corporate

contribution results. 11 CFR 100.7

(a)(l)(iii)(A).

I . VITEL intends to secure a long

distance rate below the commercial

rate by purchasing telephone time at

a volume discount. VITEL will

negotiate a per minute contract rate

with each client committee for its

calling-card holders. Client committees would shoulder upfront expenses and the contract rate would

c?ver all of VITEL's expenses, plus

yield a reasonable profit. Assuming

that this profit is comparable to the

profit realized from transactions

with nonpolitical customers, and

that the contract rate guarantees a

profit regardless of the success of

the transaction with a particular

political committee, VITEL's

arrangement will not constitute an

in-kind corporate contribution.

Use of Corporate Funds to

Process Credit Card Transactions

VITEL intends to utilize its own

fulfillment and merchant bank

services to process credit card

transactions. Costs for these services

will be passed on to VITEL clients

(either the committee or, in the case

(continued on page 6)

5
Federal Election Commission --- RECORD --------------~~March 1995 '..'::::

Advisory Opinions

(continued from page 5)

of separate segregated funds, the

committee's connected organization) through the contract rate. This

arrangement avoids the impermissible use of corporate funds to

process the credit card transactions.

Impermissible Solicitations and

Political Communications

A corporation or labor organization may use its general treasury

funds to pay for the solicitation of

contributions for its political

committee and for the distribution

of political communications, as long

as both are made only to each

organization's restricted class. I

11 CFR I 14.5(g)(l) and (2).

2 U.S.c. §441b(b)(2)(A) and (4)(A);

11 CFR 114.1(a)(2)(i) and (c),

114.5(g)(l) and 114.3(a).

Since VITEL's arrangement

allows a card holder to contribute

only to the committee which issued

him or her the card, this system

prevents connected organizations

from paying the costs of solicitation

services in support of a political

committee that is not their own, or is

not affiliated with their own committee. Additionally, the assignment

of a unique PIN number to each

solicitable class member avoids the

unlawful distribution of political

communications, since a caller will

not be able to access another

committee's message without a

corresponding PIN number.

However, a trade association's

use of this system to distribute

political messages is problematic.

Unlike other corporate entities, a

trade association may not communicate election advocacy messages to

I A corporation's restricted class

includes its executive and administrative personnel, its stockholders, and the

families ofboth groups. A labor

organization's restricted class includes

its executive and administrative class,

its members, and the families of both

groups.

precisely the same group that it can

solicit for contributions to its

separate segregated fund. Trade

associations providing the message

option, therefore, may issue calling

cards only to individuals who are

eligible to receive both solicitations

and candidate advocacy communications. That group would include

its executive and administrative

personnel, members who are

individuals and the families of both

groups. A trade association may also

send partisan communications to its

representatives at member corporations. Such communications,

however, may not be sent to a

member corporation's restricted

class, although that class may be

solicited provided the corporation

grants the trade association written

permission to do so. For this reason,

trade associations may opt to omit

election advocacy communications

from the VITEL menu so as to allow

a corporate member's restricted

class to participate in the callingcard service.

Recording Contributor

Information

Political committees are required

to disclose the names, addresses,

occupations and employers of their

contributors, along with the date and

amount of each contribution.

11 CFR 104.8(a) and (b).

VITEL's plan to have live

operators obtain contributor information will aide committees in

fulfilling their recordkeeping and

reporting obligations. VITEL,

however, will have to ensure that

this information is provided to client

committees in a timely fashion so

that they can meet FEC reporting

deadlines. Further, VITEL should

suggest to client committees and

corporations that their solicitations

include cautions against imperrnisI sible contributions.

Special Considerations: Party

Convention Committees and City

Host Committees

Party convention committees that

are publicly funded in full may not

accept private contributions. Those

that do not receive full public

funding may accept private contributions subject to the limits and

prohibitions of Title 2. 11 CFR

9008.6(a)(2) and (3). Any agreement between VITEL and a party

convention committee should take

into account the limits on the

amounts that may be raised.

Host committees may only

receive private contributions from

local sources. 11 CFR 9008.52(c)(l)

and (2). VITEL's arrangements with

host committees should include

operator screening of the donor's

address.

Additional Cautions

Different fundraising methods,

such as telephone fundraising, may

have different special requirements

(see advisory opinions 1991-26,

1991-20 and 1991-18).

Additionally, in a footnote in its

advisory opinion request, VITEL

noted that it also anticipated offering this service as a means of raising

"soft money." 2 VITEL assumed that

"soft money" transactions were

outside the jurisdiction of the FEC

and therefore did not provide details

on them. The Commission cautioned

that this assumption was incorrect.

"Soft money" issues are addressed

2 "Soft money" is money that cannot be

used in connection with afederal

election. "Soft money" sources include

corporations, labor organizations and

federal contractors. "Soft money" also

includes funds received from lawful

contributors in excess ofthe contribution limits. The use ofthese funds may

be legal in connection with nonfederal

elections, depending on state and local

laws. But it is a violation offederal

election law to use such moniesfor

federal election purposes. 2 U.S.c.

§441a and b.

6
March /995

at 11 CFR 106.5 and 106.6 and in

advisory opinions 1992-33 and

1992-20.

Date Issued: January 27,1995;

Length : 10 pages...

AO 1994-34

Consolidating Membership

Association PACs Following

a Merger

Because the New York Mercantile Exchange (NYMEX) has

acquired the Commoditi es Exchange

(COMEX) as a subsidiary, their

PACs are affiliated. Consequ entl y,

COMEX PAC ca n be dissolved and

its monies transferred to NYMEX

PAC. Moreover, NYMEX and its

PAC can solicit contributions from

former COMEX PAC contributors

classifie d as "COMEX division

regular mem bers." COM EX division regu lar members are natur al

persons who hold COM EX exchange seats; these memb ers hold

507 of the 772 sea ts on the COMEX

exc hange.

COMEX's Membership

Memb ership associations and

their PACs can only solicit co ntribution s from their members. To be

considered a "memb er" under federal election law, a person must:

• Have a significant financial

attachment to the association in

addition to the mere paym ent of

dues;

• Be entitled to vote directly either

for at least one mem ber who has

full participatory voti ng rights on

the association's highest governing

body, or for those who select at

least one memb er of that body; or

• Be entitled to vote directly for all

of those on the assoc iation's

highest governing body. I I CFR

I 14.I(e)(2).

COMEX reg ular members hold

sea ts on the COME X exc hangecurre ntly sold for approx imately

$125,000 each-which entitles them

to trading rights in commodity exchange contracts. Th eir trading

rights have been expanded since the

merger with NYMEX to includ e

trading privileges in NYMEX itsel f.

Additionally, as a res ult of the

merger, these members have gained

other monetary interests, includ ing

"deferred cas h payments" estimated

at $25,000 per member, and the

right to recei ve pro rata shares of

$20 milli on in deferred payments on

the first four merger anniversaries .

These interests co nstitute a sufficient financial attachment to COMEX

to qualify regul ar memb ers as solicitable members of COM EX under

federal election law.

This status can be affected, however, if the regul ar member leases

his or her sea t on the COM EX exchange. If the lessee has trading

rights but no owners hip rights, the

"member" is the party which holds

the obligation to pay the dues, fees

and other charges assessed during

the term of the lease. If the lessee is

a corporation, however, it should be

noted that a membership association

or its PAC can not sol icit a corporate member or its PACs. 11 CFR

1I4.7(b) and 0).

Affiliation of COMEX PAC and

NYMEXPAC

Following the merger, COMEX

became a subsidiary and div ision of

NYMEX. Und er the law , all PACs

controlled by the same organization

are affili ated . II CFR 100.5(g)(2).

Consequently, COMEX and COMEX

PAC are affiliated with NYMEX

and NYMEX PAC. This permits:

• The unlimited transfer of fund s

between the PACs (I I CFR

1IO.3(c)(l »); and

• The solicitation of COMEX members, asdiscussed, by NYMEX PAC.

In view of this affiliation, the

issue of whether NYMEX can

soli cit COMEX mem bers on the

basis of their membership interests

need not be addresse d.

Date Issu ed: Janu ary 13, 1995 ;

Length : II pages...

Federal Election Commission RECORD

AO 1994-37

Allocating Between Federal

and Nonfederal Campaigns

New York Congressman Charles

Schumer must abide by FEC

allocatio n rules with regard to

ex penses shared by his federal

committee and his nonfederal

explora tory committee. The Congress man wis hes to establi sh a 1996

reelecti on to Congres s committee

(the federal committee) and an

exploratory committee to test the

waters for a possible 1998 gubernatorial bid (the nonfederal committee).

Congressman Schumer proposes

having separa te chairpersons,

treasurers and bank accounts for the

two commi ttees. The committees

will share, however, ce rtain paid

emp loyees and, for some time at

least, the same office space. Congress man Schumer proposes allocating the expenses betw een the two

campaigns acco rding to a formula

based on a ratio of eac h committee's

recei pts to the total receipts.

Federal regulations stipu late that

a candidate with both federal and

state committees must keep them

separa te, and that no fund s, goods or

services may be transferred betw een

or joi ntly used by the separate

committees. II CFR II 0.8(d)(I)

and (2), and I IO.3(c)(5). Personn el

and faciliti es may be shared by the

committees, however, so long as the

expenses are allocated prop erly. II

CFR I IO.8(d)(3). The arra ngement

Congressman Schumer proposes,

therefore, is acce ptable. The method

of allocation, however, is not.

Allocation Rules

Congressman Sch ume r's proposed allocation method wou ld be

appropriate if all expenses were the

direct costs of fundraising even ts.

See II CFR I06.5(a)(2)(ii) and

advisory opi nions 1992-27 and

1992-2. It appears, however, that the

committees at hand will have

significant expenses for other

(continued on page 8)

7
Federal Election Commission RECORD

Adviso Opinions

(continued from page 7)

purposes as well. The method for

determining the proper allocation of

expenses must reasonably reflect the

benefit derived by each campaign

and varies with respect to the type

of expenditure. 11 CFR 106.I(a)(l).

With respect to Congressman

Schumer's committees:

• The expense of shared office

space, furniture and equipment

may be allocated based on the time

used by each committee;

• Shared telephone charges unrelated

to fundraising may be allocated on

a time-based division of the

monthly base charge and the actual

long-distance charges incurred by

each committee;

• Payments to shared personnel for

time not spent on fundraising

activity may be allocated based on

the actual time worked on each

campaign; and

• Shared travel expenses should be

allocated by a specific method

explained at 11 CFR 106.3(b).

Payments

There are three suggested methods of payment for shared expenses.

First, each committee may issue a

check to the payee for its share of

the expense. The federal committee

must report the recipient of each

payment for shared services or

goods.

Federal Register

Federal Register notices are

available from the FEC's Public

Records Office.

1995-5

II CFR Parts 100, 104and 113:

Contribution and Expenditure

Limitations and Prohibitions:

Personal Use of Campaign Funds;

Final Rule (60 FR 7862, February

9, 1995)

8

Alternatively, a separate allocation account can be used. Each

committee transfers its share of the

expense into the allocation account,

which then issues a single check to

the payee. The nonfederal committee may transfer funds into the

allocation account to cover only its

portion of shared expenses. These

transfers are reportable. Funds in the

allocation account may be used only

I to pay for shared expenses.

A third option involves transfers

I from the state committee to the

federal committee's regular operating account. Such transfers may not

exceed the state committee's portion

of the shared expenditure and may

not improperly advance any federal

election costs. Under this arrangement, the federal committee would

then issue the payee a single check.

In addition to reporting this disbursement, the federal committee

must also report all transfers received from the state committee.

Additional Cautions:

Determining What Is Nonfederal

Congressman Schumer proposed

that the following activities be

considered nonfederal and thus

payable by his state committee:

travel outside his Congressional

district, the making of contributions

to candidates seeking office outside

his Congressional district, and

statewide polling.

It can not be assumed that such

activities are undertaken strictly for

nonfederal purposes. In the absence

of specific information, a determination can not be made.

Date Issued: January 13, 1994;

Length: 11 pages...

AO 1994-39

Solicitation ofAffiliates by a

Membership Organization

The National Association of

Surety Bond Producers (NASBP),

and its separate segregated fund,

SuretyPAC, may not solicit its

affiliates. Even though these affiliMarch 19'75

ates pay greater fees than members

do, they are not solicitable based on

NASBP bylaws.

NASBP is a membership organization with 560 members and 105

fee paying affiliates who are mostly

the surety companies that underwrite the surety bonds sold by

NASBP members. These affiliates

pay as much as $5,000 in annual

dues, which is double the maximum

annual dues paid by members.

NASBP argued that these significantly greater fees represented a

serious financial investment in

NASBP, thereby qualifying the

affiliates as members. I

Before considering whether the

affiliates satisfied the FEC's regulatory criteria for membership, the

Commission concluded the affiliates

were not members because NASBP

itself did not treat them as members.

In a letter to the FEC, NASBP's

executive vice president stated that

the "affiliates are not a class of

membership." NASBP bylaws state

that "the Association shall have one

class of member." Not only are

affiliates not included in the definition of this sole class of member,

but they were "intentionally ... not

made a membership category

because of concerns of several

potential affiliates of antitrust

issues." Further, although NASBP

bylaws grant its board of directors

J To be considered a "member" under

federal election law, a person or

organization must satisfy one ofthe

following conditions: (1) have a

significant financial attachment to the

association beyond the payment of

dues; (2) pay dues and be entitled to

vote directly either for at least one

member who has full participatory

voting rights on the association's

highest governing body, or for those

who select at least one member ofthat

body; or (3) be entitled to vote directly

for all ofthose on the association's

highest governing body. 11 CFR

114.1(e)(2).
March 1995

the power to waive the conditions of

membership, the board has chosen

not to exercise this power with

regard to the affiliates.

Given NASBP's treatment of its

affiliates as nonmembers, the

affiliates cannot be considered

members for purposes of federal

election law. They can not, therefore, be solicited. 2 Nor can NASBP

solicit any of the affiliates' employees or stockholders.

In view of this determination, the

Commission did not address the

question of whether the affiliates

would otherwise qualify as members

by virtue of having a "significant

investment" in NASBP, as represented by the fees they pay to the

organization.

Date Issued : January 13, 1995;

Length: 8 pages. ..

AO 1994-40

Storing Records on

Microfilm

The Alliance for American

Leadership, a nonconnected multicandidate PAC, may preserve its

records on microfilm.

The PAC proposes the conversion of its paper records to microfilm in order to save storage space

and preserve records more effectively against fire loss and degradation over time. Once placed on

microfilm, the paper originals would

be destroyed but paper copies of the

records could be reproduced from

the microfilm.

All political committees must

keep records of all contributions

received and disbursements made by

or on the behalf of the committee.

2 u.s.c. §432(c); 11 CFR 102.9(a)

and (b)(1). Committees must also

2Note that NASB? is a membership

association and as such may only

solicit its executive and administrative

personnel, its noncorporate members,

and the families of both groups.

lJ CPR lJ4.7(a).

maintain receipts and invoices from

(or canceled checks issued to) the

payee of any committee disbursement in excess of $200. 11 CFR

102.9(b)(2). Additionally, a committee must preserve bank records,

vouchers, worksheets, receipts, bills

and any other documentation that

may be used to verify the above

information. 11 CFR 104.14(b)(l ).

All of these records must be preserved for at least three years from

the filing of the report to which the

documentation relates. 2 U.S.c.

§432(d); 11 CFR 102.9(c) and

104.14(b)(3).

In a previous similar advisory

opinion, a committee was permitted

to maintain records on magnetic

media, including computer disks,

diskettes and tapes. Advisory

Opinion 1993-4.

The committee must ensure that

the microfilm copies are legible and

complete; they must include any

writing on the front or back or in the

margins of the original document,

and any attachments. The committee

must also provide a usable indexing

and retrieval system.

Date Issued : January 27,1995;

Length: 5 pages...

Advisory Opinion Requests

Advisory opinion requests

(AORs) are available for review and

comment in the Public Records

Office.

AOR 1995-5

Use of FEC contributors list for

mailing of voting record bulletins

featuring members of Congress.

(14th District TRIM Committee;

January 19, 1995; 1 page plus 4-

page attachment)

AOR 1995-6

Publicly traded partnership seeks

waiver of partnership allocation

requirements at 11 CFR 1l0.I (e).

(Red Lion Inns Limited Partnership;

February 14, 1995; 2 pages plus

133-page attachment) ..

Federal Election Commission RECORD

Compliance

MURs Released to the Public

Listed below are summaries of

FEC enforcement cases (Matters

Under Review or MURs) recently

released for public review . This

listing is based on the FEC press

releases of December 30 and

January 13. Files on closed MURs

are available for review in the

Public Records Office.

MUR2602

Respondents (all in AZ):

(a) Rhodes for Congress Committee,

John J. Rhodes, III, treasurer;

(b) Courtland Silver; (c) Anne

Lorenzo O'Neill; et al. (d)- (h)

Complainant: U.S. Attorney,

District of Arizona

Subject: Contributions in names of

others; corporate contributions;

excessive contributions; failure to

report receipts and in-kind contributions; failure to report receipts and

loan accurately; contribution from

national bank

Disposition: (a) $108 ,000 civil

penalty (because of unusual circumstances, respondent to pay only

$25,000 penalty); (b) $4,000 civil

penalty; (c) $1,000 civil penalty ;

(d)-(h) reason to believe but took no

further action

MUR3020

Respondents: (a) Friends of Gary

Hart-88, Inc., Stephen D. Alfers,

treasurer (CO); (b) Albert H.

Gersten, Jr. (CA); (c) The Gersten

Companies, Inc. (CA); (d) Colorado

Democratic State Central Committee (federal and nonfederal accounts), Albert C. Gonzales,

treasurer (CO); (e) YCS Investments, Inc. (CA); et al. (f)-(o)

Complainant: FEC initiated

Subject: Excessive contributions;

corporate contributions; knowing

and willful acceptance of corporate

contributions in name of another

(continu ed on page 10)

9
Federal Election Commission RECORD

Change of Address

Political Committees

Treasurers of registered

political committees automatically receive the Record. A

change of address bya political

committee (or any change to

information disclosed on the

Statement of Organization) must,

by law, be made in writing on

FECForm I or by letter. The

treasurer mustsign the amendment and file it withtheSecretary

of the Senate, the Clerkof the

House or the FEe (as appropriate) and withthe appropriate state

office.

Other Subscribers

Record subscribers whoare not

registered political committees

should include the following

information when requesting a

change of address:

• Subscription number (located on

the upper left comer of the

mailing label);

• Subscriber's name;

• Old address; and

• New address.

Subscribers (other than

political committees) may correct

their addresses by phone as well

as by mail.

10

Compliance

(continued from page 9)

and failure to report the source

correctly; failure to report disbursement accurately; use of nonfederal

funds

Disposition: (a) $30,000 civil

penalty; (b) and (c) $8,000 civil

penalty; (d) $4,000 civil penalty

(e) $250 civil penalty; (f)-(o) reason

to believe but took no further action

MUR 3164

Respondents (all in TO): (a) Sean

D. McDevitt; (b) McDevitt for

Congress, Bruna M. McDevitt,

treasurer; (c) Thomas J. McDevitt;

(d) Bruna M. McDevitt; (e) Draft

McDevitt for Congress, Thomas 1.

McDevitt, treasurer; (f) Little Red

Hen Inc.; (g) First Interstate Bank of

Idaho, N.A.; et al. (h)-U)

Complainant: Conley D. Ward,

Chairman, Idaho State Democratic

Party

Subject: Excessive contributions;

in-kind corporate contributions;

failure to register and report on

time; failure to report contribution;

bank loan

Disposition: (a)-(f) $10,000 civil

penalty; (b) also required to refund

$3,400 in excessive contributions

and reimburse $2,220.91 of corporate contribution; (a) & (g) no

probable cause to believe [re: bank

loan]; (h)- U) no reason to believe

MUR 3848 (see MUR 4054)

Respondents (all in CA): (a) AntiDefamation League of B'nai B'rith ;

(b) Milken Family Foundation; et al.

(c)-(d)

Complainant: Ted 1. Andromidas

(CA)

Subject: Corporate contributions;

failure to register and report

Disposition: No reason to believe

March 1995

MUR3932

Respondents: United Republican

Finance Committee of Contra Costa,

Paul R. Dickey, treasurer (CA)

Complainant: FEC initiated

Subject: Failure to file reports

Disposition: $2,500 penalty

MUR3997

Respondents: Olive Parker for

Congress Committee, Clifford

Lengel, treasurer (FL)

Complainant: FEC initiated

Subject: Failure to file 48-hour

notices (candidate loans)

Disposition: $2,000 penalty

MUR 4054 (see MUR 3848)

Respondents: (a) Anti-Defamation

League of B'n ai B'rith (NY);

(b) Mira Boland (DC)

Complainant: Committee to

Reverse the Accelerating GlobalEconomic and Strategic Crisis: A

LaRouche Exploratory Committee,

Kathy A. Magraw, treasurer (VA)

Subject: Corporate contributions;

failure to register and report

Disposition: No reason to believe

MUR4085

Respondents: Hiram Walker &

Sons, Inc. Political Action Committee, LrC, Cuddeback, treasurer (MI)

Complainant: FEC initiated

Subject: Failure to file report on

time; failure to amend Statement of

Organization

Disposition: $1,000 civil penalty

MUR4154

Respondents: Roth Senate Committee, Thomas P. Sweeney, treasurer

(DE)

Complainant: Sua sponte

Subject: Disclaimer

Disposition: No reason to believe.
March /995

Statistics

1994 Year-End PAC Count

At the end of 1994 , there were

3,954 federally registered PACs.

This figure represents an increase of

21 PACs since midyear 1994 . Over

the course of the year, however, the

number of federally registered PACs

declined by 256.

The table below shows that yearend PAC counts have remained

relatively stable over the last 10

years. The 1994 figure is the lowest

since 1984 , when PACs numb ered

3,803 .

The numb er of PACs does not

necessarily correspond with financial activity, since many regis tered

PACs have little or no activity.

A January 9, 1995, FEC press

release includes statistics on semiannual PAC counts taken since the end

of 1974. To order this press release,

call the Public Records Office: 8001

424-9530 (pre ss 3 on a touch tone

phone) or 202/2 19-4 140...

Index

The first number in eac h citation

refers to the "number" (month) of

the 1995 Record issue in which the

article appeared. The seco nd

number, following the colon,

indicates the page numb er in that

issue. For example, "1 :4" means

that the article is in the Janu ary

issue on page 4.

Advisory Opinions

1994-33: Callin g card solicitations,

3:5

1994-34 : Consolidating membership

association PACs following a

merger, 3:7

1994-37: Allocatin g between federa l

and nonfederal campaigns, 3:7

1994-39: Solicitation of affiliates by

a membership organization, 3:8

1994-40: Storing records on microfilm, 3:9

Federal Election Commission RECORD

Court Cases

FEC v.

- Montoya, 2:7

- NRA Political Victory Fund, 2: 1

v. FEC

- Cond on, 3:5

- Demo cratic Senatorial Campaign

Committee (93-1321),1:10

- Freedom Republicans, 2:6

- Lytle, 1:10, 2:7

- Whitmore, 2:7

- Wilson, 2:7

Reports

Schedule for 1995, 1:4

800 Line Articles

Admini strative Termination, 2: 9

Year-End PAC Counts, 1984-1993

Trade! Corp. w!o

Member/ Coop- Capital NonYear Corporate Labor Health erative Stock connected I Total

1985 1,710 388 695 54 142 1,003 3,992

1986 1,744 384 745 56 151 1,077 4,157

1987 1,775 364 865 59 145 957 4,165

1988 1,816 354 786 59 138 1,115 4,268

1989 1,796 349 777 59 137 1,060 4,178 I

1990 1,795 346 774 59 136 1,062 4,172

1991 1,738 338 742 57 136 1,083 4,094

1992 1,735 347 770 56 142 1,145 4, 195

1993 1,789 337 761 56 146 1,121 4,210

1994 1,660 333 792 53 136 980 3,954

I Nonconnected PACs must use their own funds to pay fundraising and administra -

tive expenses, while the other categories oj PACs have corporate or labor "connected organizations " that are permitted to pay those expensesjor their PACs. On

the other hand, nonconnected PACs may solicit contributions from.the general

publi c, while solicitations by corporate and labor PACs are restricted.

II