December 1994

Table of Contents

Court Cases

I Chamber of Commerce v. FEC

2 FEC v. LaRouche (94-658-A)

6 FEC v. Legi-Tech

6 New Litigation

800 Line

Candidate Committee Termination

and Debt Settlement

Public Fun ding

3 Wilder Repayment Determination

7 Advisory Opinions

8 Federa l Register Notices

Comp liance

10 MURs Released to the Public

II Nonfilers Published

I I Ind ex

Federal Election Commission

Court Cases

Chamber of Commerce of

the U.S.A., et at v, FEC

On October 28, 1994, the U.S.

District Court for the District of

Columbia dismissed this case.

The Chamber of Commerce of

the U.S.A., the American Medical

Association (AMA) and a member

of each organization had asked the

court to declare void the FEe's rule

defining "member of a membership

association," I to enjoin the FEC

from enforcing those provisions and

to certify certain constitutional

questions to the U.S. Court of

Appeals.

The rule challenged in this case

defines a member as a person 2 who:

- Has some significant financial

attachment to the membership

organization;

- Pays a specific amount in dues on

a regular basis and is entitled to

vote for either at least one member

who has full participatory and

(continued on page 2)

I II CFR 100.8(b)(4)(iv) and 114.I(e)(2),

prescribed Nove mber 10, 1993.

2 For purposes offede ral election law, a

person is defined as an individual,

part ners hip or any gro up of persons,

not including the federa l gov ernment.

Volume 20, Number 12

800 Line

Candidate Committee

Termination and Debt

Settlement

This article, written for authorized committees of candidates,

explains how to settle debts and

terminate the committee. It is the

second in a series of three articles

on debt retirement, debt settlement

and termination by candidate

committees. The first article,

"Retiring Campaign Debts," was

published in the November issue.

The third article on administrative

termination will appear in a forthcoming issue.

If you have any questions after

reading this article, call the Information Division at 800/424-9530 (press

1 if using a touch tone phone) or

202/2 19-3420.

Eligibility for Termination

An authorized committee may

terminate its registration and

reporting obligations by filing a

termination report, provided that:

- It has ceased raising and spending

funds (l 1 CFR 102.3(a)(I ) ;

- It has extinguished all debts and. if

the committee is a principal

campaign committee, the debts of

any other committees authorized

by the candidate for the election

(co ntinued 011 pag e 4)
Federal Election Commission RECORD Decembe r 1994

- - - - - --- - - - - - - - - - - - - - - - - - - - - - - -

Court Cases

(continued from page 1)

voting rights on the organization' s

highest governing body, or those

who select at least one member on

the organization' s highest governing body; or

• Votes directly for all of those on

the organization's highest governing body.

Plaintiffs claimed that this rule

improperly prohibits them from

communicating with large segments

of their members, with regard to

endorsing federal candidates, in

violation of the Federal Election

Campaign Act 3 and the First and

Fifth Amendments of the U.S.

Constitution.

The Chamber argued that the rule

prohibits it from communicating

J 2 u.s. C. §§ 441b(b )(4)(C) and

431(9)(8 )(iii).

Federal Election Commission

999 E Street, NW

Washington, DC 20463

800/424-9530

202121 9-3420

202/501- 3413 (Flashfax Service)

202/219-3336 (TDD)

Trevor Potter, Chairman

Danny L. McDonald,

Vice Chairman

Joan D. Aikens,Commissioner

Lee Ann Elliott, Commissioner

John Warren McGarry,

Commissioner

Scott E. Thomas, Commissioner

John C. Surina, Staff Director

Lawrence M. Noble, General

Counsel

Published by the Information

Division

Louise D. Wides, Director

Dario Bard, Editor

2

with almost all of its 220,000

members, who pay dues but do not

enjoy voting privileges. Similarly,

the AMA argued that the rule

prohibits it from communicating

with 44,500 of its members who do

not enjoy voting privileges.

The defendants asked the court to:

• Issue a declaratory judgment that

the final rule is contrary to the

Federal Election Campaign Act;

• Issue a declaratory judgment that

the same final rule violates the

Chamber's, the AMA's and their

members' rights under the First

and Fifth Amendments;

• Enjoin the FEC from enforcing

this final rule in a manner that

prevents the Chamber and the

AMA from communicating

endorsements of federal candidates

to their membership; and

• Immediately certify all constitutional questions alleged in their

complaint to the D.C. Court of

Appeals, en ban co

In dismissing the case, the court

stated that because the plaintiffs had

not suffered any harm by the rule,

this matter was not ripe for review,

and that the plaintiffs lacked standing to bring this action since the rule

does not pose a threat to them.

Additionally, the court held that the

Commission's definition of "member" is entitled to deference and is a

permissible construction of that term

by the Commission.

The plaintiffs filed a notice of

appeal on November 9, 1994.

This case was filed with the U.S.

District Court for the District of

Columbia, October 12,1 994 (No.

94-2184). +

FEe v. LaRouche (94-658-A)

On September 28, 1994, the U.S.

District Court for the Eastern

District of Virginia issued an order

stipulated by the parties holding

Lyndon LaRouche and the LaRouche

Democratic Campaign' jointly and

severally liable for repayment of

$146,464.44 in Presidential primary

matching funds-plus accrued

interest dating from October 22,

1992 (see the July 1994 Record for

a summary of the case). The repayment is to be made to the U.S.

Treasury.

Furthermore, the order stipulates

that a $158,304 .84 check (the

security), given to the court by

Democrats for Economic Recovery-LaRouche in '92,2will be

deposited into an interest-bearing

account and used for the repayment,

if appropriate.

In the stipulation, the FEC agreed

to refrain from all efforts to collect

on the defendants' repayment

obligation until after the Commission issues a final repayment

determination with respect to the

Presidential primary matching funds

received by the LaRouche in '92

committee.

If the FEC's final repayment

determination concludes that the

LaRouche in '92 committee has at

least $ 158,304.84 in excess campaign funds, then the court will

release the security-i- plus interestto the FEC as repayment of the

defendants' repayment obligation.

In this event, the FEC and the

defendants will voluntarily dismiss

all claims and counterclaims associated with this case.

If the FEC's final repayment

determination for the LaRouche in

'92 committee does not conclude

that the committee has at least

$158,304 .84 in excess campaign

funds, then the court will issue the

I Lallouche Democratic Campaign is

Lyndon Lakouche 's 1988 Presidential

primary campaig n committee.

2 Democrats f or Economic RecoveryLakouche in '92 is Lyndon Lakouche 's

1992 authorized Preside ntial campaign

committee.
December /994 Federal Election Commission RECORD

Jones remained at her state job and

worked on the Wilder campaign as

well.

Ms. Jones, as assistant treasurer

for the campaign, drew a $10,000

check and a $5,000 check from the

committee's coffers to pay herself

and Mr. Keough, respectively, for

services rendered. The FEC audit

report treated these payments as

bonus or severance payments, which

are not considered qualified campaign expenses. The committee

argued that these disbursements

were salary payments and therefore

qualified campaign expenses.

Lease Payments

The committee questioned the

way the final audit report valued its

computer assets. The FEC's final

audit report had valued the comput.-

ers at $15,452, comprising $6,938 1D

buyout payments and $8,513 !n

lease payments that the committee

was required to make in connection

with the buyout.

Counsel contended that the value

of the computers should be based

solely on the lease buyout amount.

Counsel added that the committee

had given the computers to campaign employees in lieu of salary

payments. Counsel state? that the

committee would not object to the

Commission's proposed valuation

provided that the value attached to

the computers at the time they were

given to employees was the same as

the value attributed to the computers

at the time they were acquired by

the committee.

Commission Determination

After due consideration of the

oral presentation and any additional

documentation submitted by the

committee within five days of the

hearing, the Commission will issue

a final repayment determination and

a Statement of Reasons regarding

the matters discussed above.•

Severance Payments

Counsel described Governor

Wilder's withdrawal from the 1992

Presidential race on January 8,

1992, as "sudden and unexpected....

It caught his campaign committee

by surprise." Counsel explained that

committee staff members had

reasonably expected to be employed

through March 1992. Counsel stated

that the committee-motivated by

an oral commitment to pay its

workers' salaries and a desire to

treat them fairly, plus a need to

maintain sufficient staff to handle

wind-down activities-issued

checks totaling more than $15,000

as compensation and salary to 12 of

its campaign workers. Counsel

added that five of these individuals

continued working for the committee on a regular basis and the other

seven provided services on an oneall basis.

In light of the foregoing, counsel

contended that some, if not all, of

these payments should be considered qualified campaign expenses.

Salary Payments

Ruth Jones and William Keough

were employed by the Commonwealth of Virginia as members of

Governor Wilder's staff during his

1992 Presidential bid. Mr. Keough

took leave from his state job to work

on the Wilder campaign while Ms.

• The characterization of lease

payments for computer equipment

as capital assets.

A fourth item in the report went

unchallenged-the determination

that the committee incurred a

nonqualified campaign expense

when it reimbursed the Commonwealth of Virginia for costs associated with Governor Wilder's

I personal use of a state plane. . .

Counsel informed the Commission

that the committee does not dispute

this finding and that Governor

Wilder had agreed to reimburse the

committee for the use of the plane .

Public Funding

Hearing on Wilder

Repayment Determination

In an October 5, 1994, presentation regarding repayment issue~,

counsel for the Wilder for President

Committee, Inc ., urged the Commission to eliminate or reduce the

amount of the committee's repayment obligation. The FEC's final

audit report had set the figure at

$31,058.

Counsel focused on three items in

the FEC's final audit report:

• The characterization of severance

payments as nonqualified campaign expenses;

• The characterization of salary

payments made to membe~s of,

then Virginia Governor Wilder s

official staff as nonqualified

campaign expenses; and

FEC a check for that portion of the

security equal to the amount of the

committee's excess campaign funds.

That amount will represent a partial

repayment of the defendants'

repayment obligation. The balance

of the security (including accrued

interest) will be returned to the

LaRouche in '92 committee. In this

event, the FEC may use any available legal procedures to collect the

remaining amount owed by the

defendants.

The Commission reserves the

right to conclude that the LaRouche

in '92 committee's payment to the

court is not a qualified campaign I

expenditure (for the 1992 campaign)

and to contest the sufficiency of the

security to pay the defendants'

obligation. The defendants and the

LaRouche in ' 92 committee reserve

the right to contest any Commission

finding.•

(Court Cases continued on page 6)

3
Federal Election Commission RECORD

800 Line

(continuedfrom page 1)

cycle have also been extinguished

(ll CFR 102.3(a)(l) and (b)) ;

• It does not have any funds or

assets available to pay debts owed

by another committee authorized

by the same candidate , regardless

of the election cycle (11 CFR

116.2(c)(l)(ii)); and

• It is not involved in an ongoing

FEC enforcement matter (MUR),

audit or court case.

Termination Report

If a committee is eligible to

terminate, it may file a termination

report at any time .

When filing a termination report,

the treasurer should che ck the

"Termination Report" box on the

Form 3 Summary Page (Line 4).

The termination report for an

authorized committee must include:

• The disclosure of all receipts and

disbursements not previously

reported;

• A statement explaining how any

excess campaign funds will be

used and, if applicable, whether

the funds will be used for the

individual's duties as a federal

officeholder; 1 and

• A statement, sign ed by the treasurer, verifying that any remaining

noncash assets will not be converted to personal use. 11 CFR

102.3(a).

J Excess campaign funds may be:

contributed to any charity qualified

under 26 U.S.c. §J70(c) of the Internal

Revenue Code; transferred without

limit to any national, state or local

party committee; used to defray the

recipient 's f ederal officeholder expenses; or used f or any lawful purpose

except personal use. 11 CFR 113.2. In

this context, federal office holder mean s

a Member of Congress, the President or

the Vice President. JJ CFR JJ3.I(c).

The Commission is in the process of

revising its regulations on personal use

of campaign funds.

4

After filing a termination report,

however, the committee must

co ntinue to file regularly scheduled

reports until it rece ives notice from

the FEC that the termination report

has been accepted.

Committees That Have Debts

But Want to Terminate

A terminating committee-that

is, a committee that raises contributions and makes expenditures only

I for the purpose of paying debts and

winding-down costs--can eliminate

its debts in one of two ways: It may

assign its debts to another committee of the same candidate , or it may

I settle them for less than the amount

owed. II CFR 116.I(a), 116.2(a)

and 116.2(c)(3). These procedures

are expla ined below.

Assigning Debts to Another

Committee

To expedite termination, an

authorized comm ittee that qualifies

as a terminating committee and has

no cash on hand or assets available

to pay its debts may assign them to

another authorized committee of the

same candidate, provided that: 2

• The assignment is permitted under

appli cable state laws (e.g., laws on

debts and creditors);

• The committee assignin g the debts

was organized for an election

already held;

• No later than 30 days before the

assignment takes effect, the

assi gning committee notifies each

creditor in writing of the name and

address of the committee assuming

the debts; and

• The committee assuming the debts

notifi es the FEC in writing that it

has assumed the oblig ation to pay

and report the debts. (The committee uses separate schedules to

report the debts and the contributions raised to retire them.)

Z Special rules appl y to Presidential

candidate committees receiving public

funds. See 1I CFR II6.2(c)(3).

December 1994

Once the debts are assigned, the

assigning committee may terminate.

11 CFR 116.2(c)(3).

Settling Debts

An authorized committee may

extinguish its debts by settling them

for less than the amount owed if:

• The committee qualifies as a

terminating commi ttee (that is, one

that raises contributions and makes

expenditures onl y for the purpose

of paying debts and wind ing -down

costs);

• The candidate does not have

another authorized committee with

enough fund s to pay all or part of

the debts; and

• The commi ttee files a debt settlement plan (see below), which is

subject to FEC review, and complies with the other rules governing debt settl ement. II CFR

116.I (a), I 16.2(a), 116.2(c)(l ) and

116.7.

Note that a committee may not

terminate until the debt settlement

process is concluded.

Debts Subject to Settlement

The following debts may be

settled for less than the amount

owed in accordance with debt

settlement pro cedures:

• Debts owed to commercial vendors;

• Salary owed to employees;

• Debts arisin g from advances by

individuals (e.g., campaign staff)

using person al funds or credit

cards to pay campaign expen ses ;

and

• Loans owed to political committees or individuals (including the

candidate). 11 CFR 116.7(b).

Debts Owed to Commercial

Vendors. A commercial vendor 3

3A commercial vendor is a business or

an individual who provides goods or

services to a candidate or political

committee and whose usual business is

the provision of those goods or services. JJ CFR JJ6.I(c).
• December /994

(incorporated or unincorporated)

may settle a debt for less than the

amount owed provided that:

• Credit was initially extended in the

ordinary course of business (see

11 CFR 116.3);

• The committee undertook all

reasonable efforts to pay the debt,

such as raising funds, reducing

overhead and liquidating assets;

and

• The vendor pursued remedies to

collect the debt as vigorously as

those pursued to collect debts from

nonpolitical debtors in similar

circumstances. Remedies might

include, for example, late fee

charges, referral to a collection

agency or litigation. 11 CFR

116.4(d). The creditor is not,

however, required to pursue

activities that are unlikely to result

in the reduction of a debt.

Salary Owed to Staff. Unpaid

salary owed to a committee employee may be settled for less than

the amount owed or entirely forgiven, or alternatively it may be

converted to volunteer work if the

employee signs a statement agreeing

to the arrangement. 11 CFR 116.6.

Advances Owed to Staffand

Other Individuals. Advances owed

to the committee may be settled for

less than the amount owed or

entirely forgiven. 11 CFR 116.5(d).

For more information, order the

staff advances handout, which is

available through Flashfax (document 317). The Flashfax number is

202/501-3413.

Loans from Individuals and

Political Committees. Loans (except

bank loans-see below) may also be

settled for less than the amount

owed or entirely forgiven. 11 CFR

100.7(a)(1).

Creditor's Right

A commercial vendor or other

creditor-including a committee

employee-is not requ ired to settle

or forgive debts owed by a committee. 11 CFR 116.4(e), 116.5(d) and

116.6(b).

Debts Not Subject to Settlement

Two categories of debts may not

be settled for less than the amount

owed but must be disclosed in a

debt settlement plan :

• Bank loans (including lines of

credit); 4 and

• Repayment obligations of publicly

funded campaigns. 11 CFR

116.7(c).

Debt Settlement Plans

Debt settlement plans are filed on

FEC Form 8. Step-by-step instructions for completing Form 8 are on

the back of the form. See also the

example of a completed Form 8 in

the Campaign Guide for CongresI sional Candidates and Committees,

pages 56-58.

The Commission recommends

that committees include as many

settlement agreements as possible in

one plan. 11 CFR 116.7(a).

A committee must postpone

making actual payments to creditors

until after the Commission has

reviewed the debt settlement plan.

Moreover, the committee must

continue to report its debts until the

Commission has completed its

review. 11 CFR I 16.7(a) and (d).

Once the Commission has

reviewed the debt settlement plans,

the committee may pay the creditors

the agreed-upon amounts and then

file a termination report.

Bankruptcy

If a candidate or committee is

released from debts through a

bankruptcy court decree pursuant to

11 U.s.c. Chapter 7, the committee

4 The Commission recognizes that,

under extraordinary circumstances.

such as the death or bankruptcy of the

candidate, settlement of a bank loan

may be appropriate. The Commission

will consider specific situations on a

case-by-case basis.

Federal Election Commission RECORD

must include in a debt settlement

plan the court order and a list of the

obligations from which the committee is released. 11 CFR I 16.7(g).

Disputed Debts

A disputed debt is a disagreement

between a creditor and a committee

as to the existence of a debt or the

amount owed. If something of value

was provided, the committee must

continue to report the following

information on Schedule D until the

dispute is resolved:

• The amount the committee admits

is owed;

• The amount the creditor claims is

owed; and

• Any amounts the committee has

paid the creditor.

The committee may note in its

report that disclosure of the disputed

debt is not an admission of liability

or a waiver of its claims against the

creditor.

Note that, in a debt settlement

plan, a terminating committee must

describe any disputed debts and the

committee 's efforts to resolve them .

11 CFR 116.10.

Unpayable Debts

If a committee has an outstanding

debt that is at least two years old

and that cannot be paid because the

creditor has gone out of business or

cannot be located, the committee

may request an FEC determination

that the debt is unpayable. See

11 CFR 116.9 for further details.

Administrative Termination

An authorized committee that is

inactive and wishes to terminate but

cannot reach settlement agreements

with its creditors may ask the FEC

for administrative termination. See

11 CFR 102.4 for further details.

Administrative termination will

be the subject of a future 800 Line

article. ..

5
Federal Election Commission RECORD __

Court Cases

(continu ed from page 3)

FEe v. Legi- Tech, Inc.

On October 12,1994, the U.S.

District Court for the District of

Columbia granted the defendant's

motion to dismiss this case (No . 91-

0213) on the basis of the Court of

Appeals' recent decision in FEe v.

NRA Political Victory Fund (NRA).

The NRA decision stated that the

presence of two Congressionallyappointed ex officio members on the

Commission violated the Constitution's separation of powers. (For a

summary of the appeals court

decision, see the December 1993

Record.) The NRA decision has been

appealed to the Supreme Court.

Following the NRA dec ision , the

Commission excluded the ex officio

members in order to reconstitute

itself as a con stitutionally structured

agency. In its new form, the Commission ratified the actions of the

former FEC. Among the actions

ratified were the enforcement

proceedings against Legi-Tech. The

FEC had found reason to believe

that Legi-Tech had violated 2 U.S.c.

§438(a)(4) by using contributor information copied from FEC reports

for commercial purposes. (For a

summary of the FEC 's suit, see the

March 1991 Record.)

In the court's view, however, the

enforcement proceeding against

Legi-Tech, Inc., was initiated by an

unconstitutional FEC. The court

concluded that based on the rule set

forth in Harp er v. Virginia Depart -

ment ofTaxation-that a newly

enunciated rule of law be given full

retroactive effect to then-pending

cases-the NRA decision requ ires

that the court dismiss this case. •

New Litigation

John K. Addy, et at. v. FEC

Common Cause v. FEC (94-02104)

Plaintiffs in these cases ask the

court to declare the FEC's dismi ssal

of their administrati ve complaints to

6

be contrary to law under 2 U.S.c.

§437g(a)(8)(C). They ask the court

to direct the Commission to initiate,

on an expedited basis, enforcement

proceedings against the Montana

Republican Party (MRP) and the

National Republican Senatorial

Committee (NRSC) for making and

failing to report excessive contributions and expenditures in connection

with Conrad Bums's 1988 U.S.

Senate campaign in Montana.

Plaintiffs alsosask the court to find

that Mr. Bums's campaign violated

the Federal Election Campaign Act

(the Act) by accepting and failing to

report excessive contributions.

Plaintiffs each filed a complaint

for declaratory and injunctive relief

after the FEC failed to find "probable cau se" with regard to the

administrative complaints filed

separately by Mr. Addy and Common Cau se on July 13, 1990, and

December 19, 1990, respe ctively

(MUR 3204 ).

The original MUR complaints

alleged that the NRSC had directed

the MRP to undertake certain

exempt party activities l----campaign

materi als distributed by volunteers

and get-out-the-vote drives-and

then transferred funds to the MRP to

cover their costs, which exceeded

the NRSC's contribution limits.

Expenditures made for these

acti vities are not subject to the Act's

expenditure limits as long as they

comply with the rules at 100.8(b)

(10), (16) and (18), including the

requirement that the activities can

not be fund ed by tran sfers from a

nation al party commi ttee (11 CFR

100.8(b)(16 )(vii) and (18)(vii».

Plaintiffs arg ue that the NRSC's

alleged transfer of funds to the MRP

to pay for these "volunteer materiI Exempt activities include slate cards

and sample ballots. the distribution of

campaign materials by volunteers. and

voter drives. Expenditures made for

these activities are exempt from the

Act's limits. Only state and local party

committees and organizations are

entitled to this exemption.

December / 994 •

als" and "get-o ut-the vote" activities

invalidated the "exempt" status of

these expenditures. Consequently,

state the plaintiffs, the payments in

que stion con stituted coordinated

party expenditures unde r 2 U.S.c.

§441a(d) (not exempt activities).

Neither the MRP nor the NRSC

reported them as such.

The original MUR complaints

additionally alleged that the NRSC

had paid for a poll and the development of a voter list-both of which

benefited Senator Burns-but had

failed to count or report the disbursements as coordinated party

expenditures on behalf of Sen ator

Bums. Finally, according to the

complaints, the NRSC had failed to

charge Senator Burns's campaign

the full costs of a solicitation it had

conducted on his behalf.

The MUR complaints alleged

that, taken together, these activities

caused the MRP, the NRSC and the

Bums campaign to exceed the Act ' s

established limits on contributions

and expenditures.

The General Counsel recom -

mended that the Commission find

probable cause that the MRP and the

NRSC had made excessive contributions and expenditures and had not

reported them ; and that Sen ator

Burns's campaign had know ingly

received excessive contributions and

had failed to report them . The General Counsel also recommended that

the Commission find that certain

violations were "knowing and

willful," justifying the imposition of

severe sanctions as provided for by

the Act. 2 u.s.c. §437g (a)(5)(B).

On August 2, 1984, the Commissioners considered these recommendations and, by a vote of3-2

(Chairman Potte r recused himself) ,

found no "probable ca use" to

believe that the respondent s had

violated the law. The Commission

then dismissed the MUR.

U.S. District Court for the

Distri ct of Columbia Circui t, No.

94-0211 2 and No. 94-02104,

September 30, 1994.
I An independent expenditure is an .

expenditure made without any co~rdl

nation with a candidate's campaign for

a communication which expressly

advocates the election or defeat ofa

clearly identified candidate for federal

office.

FEC v. Christian Action Network,

Inc., et al.

The FEC asks the court to find

that the Christian Action Network,

Inc. (CAN) and its president, Martin

Mawyer, violated provisions of the

Federal Election Campaign Act (the

Act) by:

• Making independent expenditures I

with corporate funds to pay for ads

expressly advocating the defeat of

Bill Clinton;

• Failing to include the appropriate

disclaimer on political ads; and

• Failing to fulfill the reporting

obligations required by the Act

with respect to the expenditures for

the ads.

CAN used more than $60,000 of

its general treasury funds to pay for

television and newspaper ads that

expressly advocated the defeat of

the Democratic Party's 1992

Presidential nominee, Bill Clinton.

These ads constituted independent

expenditures and violated th~ ~ro

vision of the Act which prohibits the

use of corporate funds to influence a

federal election. 2 U.S.c. §44l b(a).

Mr. Mawyer personally violat.ed

2 U.S.c. §441b(a) by consenting to

the use of corporate funds for these

expenditures.

Furthermore, CAN did not

include the proper disclaimer on the

ads. Political communications that

include express advocacy must include clear statements informing the I

public as to who paid for them and

whether or not they were authorized

by any candidate or candidate' s

committee. 2 U.S.c. §44Id. Several

of CAN's ads failed to state that

they were not authorized by any

candidate or candidate's committee.

• December / 994

Lastly, CAN did not fulfill its

I reporting obligations, as requir~d by

2 U.S.c. §434(c). When an entity

other than a political committee

makes independent expenditures

aggregating more than $250 in a

calendar year, the Act requires the

maker of the expenditure to file a

statement with the FEC by the close

of the next reporting period. Furthermore, when an independent

expenditure of $1,000 or more is

made within 2 to 20 days before an

election, the expenditure must be

reported to the FEC within 24 hours.

Some of CAN's expenditures were

made within the 2 to 20 day period.

CAN did not file any of the required

statements and notifications with

respect to the ads in question.

The FEC asks the court to declare

that the defendants committed the

above violations and to:

• Assess civil penalties against CAN

and Mr. Mawyer, for which both

would be jointly and severally

liable, amounting to the greater of

$5,000 or an amount equal to the

dollar amount involved, for each

time an ad was aired and published;

• Assess civil penalties against CAN

amounting to the greater of $5,000

or an amount equal to the dollar

amount involved, for each violation of2 U.S.c. §§44ld and

434(c);

• Order CAN to file the statements

and 24-hour notifications required

by 2 U.S.c. §434(c); and

• Enjoin CAN from using corporate

funds to expressly advocate the

election or defeat of a federal

candidate, from failing to include

the required information on

disclaimers accompanying political

communications, and from failing

to file required statements and

notifications with respect to

expenditures made inconnection

with a federal election.

U.S. District Court for the

Western District of Virginia, No.

94-0082-L, October 18, 1994...

Federal Election Commission RECORD

Advisory

Opinions

AO 1994-27

Solicitation of Employees

Participating in Company

Stock Ownership Plan

The separate segregated fund of

the Consumers Power Company (the

Company) proposed soliciting

contributions from employeesincluding employees of the parent

company, CMS Energy Corporation

(CMS), and its subsidiaries-who

are CMS stockholders by virtue of

their enrollment in the Company's

stock purchase plan (the Plan). Only

certain participants in the Plan,

however, have the "right to receive

dividends," one of the requirements

for stockholder status under FEC

rules. In order to satisfy this requirement, an employee must have

actually withdrawn CMS stock or

must be able to make withdrawals

without significant restrictions.

Background: The Plan

The Plan allows employees to

make contributions from their

salaries to three different investment

funds, one of which invests in CMS

common stock. Employees can

make three different types of

contributions:

• Elective contributions, which can

only be withdrawn in cases of

emergency or heavy financial

need, such as medical expenses or

purchase of a reside~ce .

• Participant contributions, which

are limited to partial withdrawals

once a year; and

• Voluntary contributions, which

may be withdrawn without penalty

at any time.

The Company matches a certain

percentage of employee con.trib~­

tions. These matching contributions

are automatically invested in the

CMS stock fund. An employee is

(continued on page 8)

7
Federal Election Commission RECORD

Advisory Opinions

(contin ued from page 7)

full y vested in matching contribution "units" after seven years of

Company employment and enrollment in the Plan. (Each doll ar

contribut ed is called a unit.) An

employee may withdraw fully

vested units that have been in the

account for two years, but withdr awal causes an automatic suspension from the Plan and a forfeiture

of non vested units.

Definition of Stockholder Applied

to Plan Participants

A corporation (or its SSF) may

solicit its stockholders and their

families as well as the stockholders

and families of its parent and subsidia ries.2 U.S.c. §44lb(b)(4)(A)(i);

II CFR 114.5(g)(l ). In order to be

conside red a solicitable stockholder,

an indi vidual must have (1) a vested

beneficial interest in the stock,

(2) the power to dire ct how the

stock is voted and (3) the right to

receiv e divid ends . 11 CFR 114.1(h).

The first requirement would be

met by employe es who have mad e

contributions to the CMS stoc k fund

sufficient to purchase one share or

who are fully vested in a share of

stock purchased through matching

contributions.

The second requirement would be

met by all participants who have

inve sted in CMS stock (through

Federal Register

Federal Register noti ces are

available from the FEe's Publ ic

Record s Office.

1994-15

I I CFR Part 1: Pri vacy Act;

Implementation (re: IG Records);

Notice of Propo sed Rulemaking

(59 FR 53946 , October 27, 1994)

1994-16

II CFR Part I: Priva cy Act;

Notice of Revised System of

Records (IG)(59 FR 53977,

October 27, 1994)

8

their own or matching contributions)

since they have the right to give

voting instru ctions to a trustee.

The third requ irement-the right

to recei ve dividend s-would be met

by employees who have actually

withdrawn CMS stock from their

accounts. With respect to tho se who

have not withdrawn stoc k, employee s who have made voluntary

contributions to the CMS stock fund

(and may make unrestricted withdrawals) and employees who have

made participant contributions to the

fund (and may mak e partial with -

drawals once a year) have withdrawal rights sufficient to constitute

"the right to rec eive dividends." See

also AO 1988-36 and opinions cited

therein.

By contrast, the restrictions on

withdrawal s by employees who

invest in CMS stock solel y throu gh

elective contributions or matchinzo

contributions are significant.

Elective contributions may be

withdrawn onl y in limited emergency situations, and withdrawal of

matching contributions results in a

suspension from the Plan and

forfeiture of non vested stock.

Onl y employees satisfying all

three requ irem ent s are solicitable as

stockholders. The solicitations must,

of course, meet the requirements for

a proper solicitation under the

statute and regulations. 2 U.S.c.

§441b(b)(3); 11 CFR I 14.5(a).

Date Issued: October 4, 1994;

Length: 5 pages . +

AO 1994·30

Commercial Ventures and

Express Advocacy

Conservative Con cepts, Inc .

(CCI) may adverti se t-shirts expre ssly advocatin g the election of

candidates who espouse a conservative ideolog y, and may sell these tshirts at campaign events , as long as

these activities are merely commercial in nature and not conducted for

the purpose of influencing federal

elections.

December 1994 •

CCI is an Indiana company

whose princi pal business is the

manufacture for sale of assorted

paraphernalia that is generally

deco rated with a logo con veying a

political message . These messages

generally expre ssly advocate the

election of ca ndidates with a

conservati ve ideology, regardl ess of

their party affiliation.

CCI proposed two activities:

• Advertising the t-shirts on the

Mike Pence Show, a radio talk

show, purportedly nonpartisan,

syndicated by Network Indiana

and bro adc ast by 14 of its affiliates; and

• Sellin g the t-shirts at campaign

events.

Radio Advertisements

The proposed radio ads do not

appea r to invo lve any arrangements

with campaigns that would suggest

an election influencing purpose,

instead of one that is merely commerci al. For example, CCI has no

plans to:

• Layout advertisement fund s in

coord ination with a committee;

• Give a portion of the sales proceeds to a candidate committee; or

• Exchange information with a

committee concerning campaign

plans or CCl's sales plans.

Con sequently, the proposed plans

for radi o ads do not appear to be

contributions.

If CCI 's proposed radio ads

constitute inde pendent expenditures,

they would be prohibited because

CCI is a corporation and as such is

proh ibited from making any contributions or expenditures to influ ence

federal ele ctions. I 2 U.S.c. §441 b.

I An independent expenditure is an

expenditure made without any coordination with a candidate 's campaign fo r

a communication which expressly

advocates the election or defeat ofa

clearly identified candidate f or fede ral

office.
• December /994 Federal Election Commission RECORD - - - ---

(If a sole proprietorship made the

expenditure instead of CCI, as CCI

suggests, then an independent

expenditure could be made, and the

appropriate reporting obligations

would have to be fulfilled.)

Although CCI may not make

independent expenditures, it may

pay for uncoordinated ads that

promote the t-shirts (which display

messages that "expressly advocate"

the election or defeat of candidates)

if the ads are merely commercial in

nature.

To qualify as merely commercial

activities, the advertisement and sale

of the t-shirts must be undertaken

for the sake of turning a profit rather

than for the purpose of influencing a

federal election. Commercial

activities, therefore, do not involve

fundraising activity or solicitations

for political contributions.'

CCI's practice of focusing

primarily on candidates who espouse a conservative ideology does

not in and of itself negate the merely

commercial nature of the proposed

activities. Companies often determine to direct their business activities toward one type of political

orientation.

CCI asked whether the Commission's determination in this

advisory opinion would change if

CCI limited itself to shirts for

certain candidates or only featured

one candidate in a given advertisement spot. Doing so would not in

and of itself negate the merely

commercial nature of these activities. To determine whether or not

these activities were merely commercial the Commission would need

to examine CCI's normal business

2 Criteria used to determ ine the

commercial nature ofan activity are

suggested in Advisory Opinion 1989-

21.' (1) Profits generated from the

activity must stay with the busin ess;

(2) none of the proc eeds from the sale

of the merchandise may be given to the

candidate; and (3) the vendor must sell

the merchandise at the usual and

normal charge.

and advertising practices, as well as

any deviation from them, and how

such business and advertising were

usually conducted by businesses not

attached to a campaign.

One aspect of the proposed radio

message would compromise the

merely commercial nature of CCI's

activities, causing them to become

independent expenditures. Certain

phrases proposed by CCI target a

geographic area where a candidate's

constituents reside and offer the

purchaser a motive for buying the

product. A merely commercial

message would not concern itself

with the motive of the purchaser.

For example, CCI's inclusion of

phrasing such as "if you live in the

[D.C. Metro] area and wish to

support [Trevor Potter]...call [this

telephone number] and you can

buy..." a t-shirt expressly advocating Mr. Potter's election, would

compromise the commercial nature

of this activity.'

To avoid a message that invites

support, the radio ad should merely

state that the t-shirts are being

offered for sale, state what is on the

shirt or otherwise describe the shirt,

and then explain how to purchase

the shirt. The restatement of the

message printed on the shirt would

not, by itself, constitute express

advocacy.

Seeking candidate approval to

use his or her name on at-shirt

could compromise the "merely

commercial" nature of the activity.

If CCI sought approval on a basis

related to the election of the candidate, outside the vendor-vendee

arrangement, such action would

I entail "prior consent" by the candidate for activity that could affect his

or her campaign. 11 CFR 109.1 (a).

CCI may, however, communicate with a candidate's campaign for

the purpose of avoiding trademark

or other trade usage conflicts.

Packaging of the ad by the

network would not result in its

J See advisory opinion 1994-30, pages

12-13.

making a contribution or expenditure. Network Indiana would not

make a contribution or expenditure

as long as the sale of advertising

time was made in the ordinary

course of business and involved the

usual and normal charges.

Sale of Merchandise

CCI may sell the t-shirts at

campaign events (e.g., rallies,

debates, joint appearances) provided

that it does not coordinate with the

campaign in deciding which events

to appear at or where to set up its

booth or stand. Doing so could

result in an illegal corporate in-kind

contribution. CCI may contact a

candidate committee to secure a

schedule of campaign events.

In conclusion, CCI may conduct

its proposed activities provided that

they are being undertaken for

merely commercial purposes and

not to influence any candidate's

election or defeat. This advisory

opinion does not comment on any

contacts with candidates beyond

those discussed above.

Date Issued: October 28, 1994;

Length: 11 pages.•

AO 1994-32

Complainants and the

Confidentiality Provisions

Kellie Gasink may freely share

with the public the fact that she has

filed an administrative complaint

with the Commission, the allegations contained in the complaint,

and any other information contained

in or related to the subject matter of

the complaint. Divulging this

information does not violate the

provisions safeguarding the confidentiality of a Matter Under Review

(MUR). 2 U.S.c. §437g(a)(l2)(A)

and 11 CFR 111 .21. These provisions protect the confidentiality of

information connected with any

Commission investigation of a

MUR-for example, a notification

of findings or an action taken by the

(continued on page 10)

9
Federa l Election Comm ission RECORD

Advisory Opinions

(continued / rom page 9)

FEC in connection with the casebut do not apply to the substance of

the complaint.

Ms. Gasink wrote a letter, dated

June 10, 1993, to the Manhattan

District Attorney, making allegations against a past Presidential

campaign for which she had worked

as a volunteer. The letter was made

public and became the subjec t of a

press story. Subsequently, Ms.

Gasink filed a complaint with the

FEC, submitting her June 10 letter

as part of her complaint and reiterating the allegations it contained.

Ms. Gasink asked the Commission whether she could legally

divulge to a news reporter the fact

that she had filed a complaint with

the FEC, and whether she could

provide the reporter further information about her allegations and her

volunteer service for the campa ign

in question.

In the absence of prior advisory

opinions dealing with the issue of

MUR confidentiality, the Commission relied on precedents set in

several previous MURs to formulate

this advisory opinion.' The Commission did not find that the confidentiality provision was violated in

any of these prior enforcement cases

save one. In the excepted case,

persons unknown had revealed to a

newspaper that the Commission had

decided to issue a subpoena in an

open case. In the other MURs, when

the substance of the allegations was

revealed to the public without any

mention of an investigation's

proceedings, the Commission

determined that no violation of the

confidentiality provision had

occurred. The timing of the public

disclosure was not relevant to the

Commission's determinations.

I See MURs 3573. 3170,3169. 3168.

1244 and 298.

10

Ms. Gasink is therefore free to

share her story with the press as

long as she does not discuss any

Commission notification of findings

or any Commission action taken in

the investigation until the case is

closed or the respondent waives the

right of confidentiality.

Date Issued: October 28, 1994;

Length: 4 pages. ...

Alternative Dispositions of

Advisory Opinion Requests

AOR 1994-17

The Commission closed this AOR

without issuing an opinion because

necessary facts were not submitted.

The request concerned the Barca for

Congress Committee's transfer of a

remaining balance in a recount fund.

See Agenda Document #94 -69....

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 October 7 and 18, but it

does not include the 13 MURs in

which the Commission took no

action. Files on closed MURs are

available for review in the Public

Records Office.

MUR 3639

Respondents: California Republican Party, Michael Schroeder,

treasurer

Complainant: Phil Angelides,

former chairman, California Democratic Party

Subject: Improper allocation;

corporate contributions; failure to

disclose debts properly; illegal

December 1994 •

extensions of credit from corporate

vendors

Disposition: No reason to believe

(illegal extensions of credit from

corporate vendors); reason to

believe but took no further action

(other allegations)

MUR 3650

Respondents (all in OH): (a) Mary

Rose Oakar; (b) Mary Rose Oakar

I for Congress Committee, Patrick J.

O'Donnell, treasurer; (c) Helen and

Philip Demio

Complainant: Cuyahoga County

Republican Organization

Subject: Excessive contributions

Disposition: (a) $8,000 penalty;

(b) $8,000 penalty; (c) reason to

believe but took no further action

MUR 3814

Respondents: Caulfield for Congress, Burton 1. Wilner, treasurer

(MO)

Complainant: FEC initiated

Subject: Failure to file 48-hour

notice

Disposition: $500 penalty

MUR 3891

Respondents (all in CA): (a) David

Packard; (b) San Francisco Republican County Central Committee,

John Sidline, treasurer; (c) Santa

Clara County Republican League,

I Carey Heckman, treasurer; et al.

(d)-(f))

Complainant: Center for Responsive Politics (DC)

Subject: $25,000 annual limit;

excessive contributions; depositing

nonfederal funds in federal account

Disposition: (a) $25,000 penalty;

(b)-(c) reason to believe but took no

further action; (d)-(f) no reason to

believe

MUR 4004

Resp ondents: Fields for Congress,

Inc., Gerald G. Hall, treasurer (LA)

Complainant: FEC initiated

Subject: Failure to file 48-hour

notices

Disposition: $3,000 penalty
I The Bryant committee's pre-general election report was received after the 5 p.m.,

November 3 deadline for publication.

Nonfilers Published

The candidate committees listed below failed to file required campaign

finance reports. The list is based on the FEC press releases of October 28 and

November 4. The Commission is required by law to publicize the names of

nonfiling authorized committees. 2 U.S.c. §438(a)(7). The agency pursues

enforcement action against nonfilers on a case-by-case basis ...

Candidate Office Sought Report Not Filed

Auer, Bill House, NJI05 Oct. Quarterly

Pre-General

Barton, Mary C. SenatelIN Pre-General

Breshgold, Michael S. House, MUll Pre-General

Bryant, Leearl A. House, TX/26 Pre -General I

Butler, Tyrone G. House, NY/13 Pre-General

Elkowitz, Dr. Edward B. House, NY105 Pre-General

Frazer, Victor House, VI Oct. Quarterly

Frisa, Dan House, NY/04 Pre-General

Hemeon, Keith 1. House, MNI0 Pre-General

Kelly, Patrick D. House, MOI02 Pre-General

Lamey, George E. House, ILl09 Oct. Quarterly

Pre-General

Lobato, Francesco SenatelNM Pre-General

Manfre, James House, NY102 Pre-General

Mathews, Peter House, CN38 Pre-General

Olson, Robert A. House, MN/03 Oct. Quarterly

Peglow, Edward P. House, PN04 Oct. Quarterly

Pre-General

Podolak, Jurij A. House, PNl1 Pre-General

Valtierra, Steven House, ILl04 Pre-General

• December 1994

MUR4009

Respondents: (a) Watkins Associated Industries, Inc., Employees for

Good Government Committee (Watkins-PAC), T.R. Wade, treasurer

(GA); (b) William A. Freeman (GA);

(c) Bill Watkins (GA); (d) Kimberly

Martin Watkins (GA); (e) W.B.

Watkins, IV (FL); (f) George Watkins (FL); (g) John F. Watkins (FL)

Complainant: FEC initiated

Subject: Excessive contributions

Disposition: (a) $21,500 penalty;

(b)-(g) $1,000 penalties

MUR4025

Respondents: Human Rights

Campaign Fund Political Action

Committee, Timothy McFeeley,

treasurer (DC)

Complainant: FEC initiated

Subject: Failure to file report on time

Disposition: $650 penalty"

Index

The first number in each citation

refers to the "number" (month) of

the 1994 Record issue in which the

article appeared. The second number,

following the colon, indicates the

page number in that issue. For

example, "1:4" means that the

article is in the January issue on

page 4.

Federal Election Commission RECORD

Advisory Opinions

1993-18: Corporate plan to foster

political participation, 2: 1

1993-19: Retiring 1984 Presidential

debt, 1: 13

1993-20: Purchase and distribution

of candidate biography, 2:3

1993-21 : Preemption of Ohio law,

2:4

1993-22: Use of excess funds by

retired House Member, 3:5

1993-23: PAC disaffiliation, 3:6

1993-24: Definition of member, 4:6

1993-25: Preemption of Wisconsin

law restricting contributions from

lobbyists, 3:7

1994-2: Preemption of Minnesota

law restricting contributions from

lobbyists, 5:6

1994-3: Charitable matching plan

for twice-yearly solicitations, 6:4;

correction, 7:6

1994-5: Candidate status, 6:5;

correction, 7:6

1994-6: Charitable matching plan

for twice-yearly solicitations, 7:4

1994-7: Charitable matching plan

for twice-yearly solicitations;

treasurer as custodian, 7:4

1994-8: Campaign's rental of office

space from candidate-owned

corporation, 7:4

1994-9: Transfers from nonfederal

PACs; effect of corporate reorganization on affiliation, 7:5

1994-10: Waiver of bank fees for

political committee borrowers, 8:6

1994-11: SSF activities of federal

contractor partnership, 7:6

1994-12: Definition of member

applied to association's governing

and membership structure, 8:6

1994-13: Video slate card listing

multiple candidates, 7:6

1994-15 : Cable series moderated by

House Member seeking reelection, 8:7

1994-16: PAC contributions refunded to former employees, 8:7

1994-19: Affiliation between

national membership association

and state societies, 9: 10

1994-20: Donation of campaign

asset to local government, 9: 11

(continued on page 12)

II
Federal Election Commission RECORD

Index

(continued from page II)

1994-21 : Solicitation in dues

invoice sent to nonsolicitable

members, 9: I I

1994-22: Campaign's lease of

property owned by candidate,

9: II

1994-23: Payroll deduction authorizations transferred to PAC, 9: 11

1994-25: Corporation handling

convention arrangements as

political committee, 10:7

1994-26: Unsecured lines of credit

obtained before candidacy, 11:7

1994-27: Solicitation of employees

participating in company stock

ownership plan, 12:7

1994-28: Contributions by American Samoans, 11 :8

1994-29: One contribution limit for

candidate seeking nomination by

two parties, 11:8

1994-30: Commercial ventures and

express advocacy, 12:8

1994-31: Disposition of contributions when candidate withdraws

11:8 '

1994-32: Complainants and the

confidentiali ty provisions, 12:9

FEDERAL ELECTION COMMISS ION

999 E Street, NW

Washington, DC 20463

Official Business

Penalty for Private Use, $300 *

Printed on recycled paper

Court Cases

FEC v,

- America's PAC, 8:8

- Christian Action Network, et al.,

12:7

- Committee of 100 Democrats,

II :9

- GOPAC, 6:5

- LaRouche (94-658-A), 7:3; 12:2

- Legi-Tech, 12:6

- Michigan Republican State

Committee, 4:7; 9:8

- National Republican Senatorial

Committee (93-1612), 1:12; 4:7

- Political Contributions Data, Inc.

(PCD), 5:4

- Rodriguez, 6:5

- Survival Education Fund, Inc., 3:1

- Williams, I :12

__v. FEC

- Addy, et al., 12:6

- Akins (92-1864), 5:4

- Albanese, 9:9

- Center for Responsive Politics,

1:12; 9:8

- Chamber of Commerce of the

U.S.A., et al., 12:1

- Common Cause (94-02104), 12:6

- Freedom Republicans, Inc., 3:3

- Froelich, 2:2; 8:9

- Fulani (94-1593), 10:9

December 1994

- Fulani (94-4461), 8:II

- Funk, 10:9

- Jordan, 8:9

- LaRouche (92-1100), I:12

- LaRouche (92-1555), 9:7

- National Republican Senatorial

Committee (NRSC), 5:5; 7:2

- Republican National Committee

(RNC) (94- 1017), 7:3; 9:8

- Whitmore and Quinlan, 9:9

Reports

Schedule for 1994, 1:4; correction,

2:1

- change in Florida and South

Carolina election dates, 4:6

- reporting reminders, April, 3:I;

July, 6:1; October through

January, 9:6; October, 10:1; postelection report, 11:1

Special elections

- Kentucky (2nd District), 5:9

- Oklahoma (6th District), 3:7

- Oklahoma (Senate), 7:2

800 Line Articles

Candidate Committee Termination

and Debt Settlement, 12:I

Help - my report is late, 6:I

Registration by candidates and their

committees, I:14

Retiring campaign debts, 11 :5

Bulk Rate Mail

Postage and Fees Paid

Federal Election Commission

Permit Number G-31