-rHE FEDERAL ELECTION

COMMISSION

1325 KStreet N.w'r Washington, D.C. 20463

Volume 7, Number 5 May 

The FEC will send notices on reporting requirements and

filing dates to a/l individuals on the ballot in the election.

All other committees supporting candidates in the

Mississippi special election should contact the Commission

for more information on required reports. Call 202/523-

4068 or toll-free 800/424·9530.

3

No

Pag

contin

AO 1980-145: Mail Solicitation to Retire

Primary Debts

Mr. Lou Frey could solicit funds to retire debts of 

Senate primary campaign by issuing a fundraising le

using Congressman Bill Young's letterhead and signed 

Bill Young. Contributions solicited were subject to 

Act's prohibitions and limits for the primary.

Date Made

AOR Subject Public

ADVISORY OPINIONS: SUMMARIES

An Advisory Opinion (AO) issued by the Commis

provides guidance with regard to the specific situa

described in the AOR. Any qualified person who 

requested an AO and acts in accordance with the opin

will not be subject to any sanctions under the Act. O

persons may rely on the opinion if they are involved 

specific activity which is indistinguishable in all mate

aspects from the activitv discussed in the AO. Those s

ing guidance for their own activity, however, should con

the full text of an AO and not rely only on the summ

given here.

1981-18 Solicitation and receipt of 4/15/81

contributlons by separate

segregated fund with single

account for federal/nonfederal

elections.

ADVISORY OPINION REQUESTS

Advisory Opinion Requests (AOR's) pose questions 

the application of the Act or Commission Regulation

specific factual situations described in the AOR. The 

lowing chart lists recent AOR's with a brief description 

the subject matter, the date the requests were made pu

and the number of pages of each request. The full tex

each AOR is available to the public in the Commissi

Office of Public Records.

Practicing law Institute

The Corporation in Politics

San Francisco, California

Charles N. Steele, General Counsel

Contact: 212/765-5700, ext. 216

5/21·22

PUBLIC APPEARANCES

In keeping with its objective of making information available to the public, the Commission accepts

invitations to address public gatherings. This column

lists upcoming scheduled Commission appearances,

the name of the sponsoring organization, the location

of the event, the name of the Commission's speaker

and the telephone number of the organization. For

additional information on any scheduled appearance,

please contact the sponsoring organization.

SPECIAL ELECTION IN MISSISSIPPI

Mississippi will hold a special election in its fourth

Congressional district to fill the seat vacated by Congressman Jon Hinson. The special election isscheduled for June

23, 1981. If no candidate receives a majority of the votes in

this election, a special runoff election will be held on July

7, 1981, for the top two vote getters in the June 23 election. The principal campaign committees of candidates

running in the special election must file the appropriate preand post-election reports in addition to their semiannual

reports. All other political committees which support

candidates in the election (and which do not report on

a monthly basis) must also follow this reporti n9 schedule.

•

•
The Act and Commission Regulations require that such

solicitations 'include a sponsorship statement that adequately identifies the personts) who paid for or authorized

the solicitation. Although the statement need not appear on

the front face or page of the solicitation, it must appear

clearly and conspicuously in the solicitation. 2 U.S.C.

§441 d(a)(1) and 11 CFR 11O,11(a)(1). Mr. Frey complied

with this requirement by printing on a contributor card

enclosed with the letter a notice stating that the fundraiser

was "Paid for by the Frey for Senate Committee," (Date

Issued: March 19, 1981; Length: 3 pages}

AO 1981·6: loan by State PAC

. to Affiliated Federal PAC

Sunklst Growers, Inc.'s separate segregated fund for sta

and local elections {the state PACI automatically becomes 

political committee when it makes a loan to the corpor

tion's separate segregated fund for federal elections (th

federal PAC). In this case..the state PAC would have to:

1. Register, file reports and operate as a political comm

tee under the Act; and

2. Dispose of any contributions not permissible under th

Act (e.g., corporate contributions). 2 U.S.C. §§433 an

434; 11 CFR 104.12.

2

The RECORD is published by the Federal Election Commission, 1325 K Street, N.W., Washington, D.C. 20463. Commissioners are: John Warren McGarry, Chairman; Frank P. Reiche, Vice Chairman; Joan D, Aikens, Thomas E. Harris,'

Vernon W rnomson: Robert O. Tiernan,' William F. Hildenbrand, Secretary ot the Senate, Ex Officio; Edmund L.

Henshaw, Jr., Clerk of the House of Representatives, Ex Officio. For more information, call 202/523-4068 or toll-free

800/424·9530.

Under the Act, a loan is considered a "contribution" to th

extent of the outstanding balance. 2 U.S.C. §431(8)(A)(

The state PAC's loan to the federal PAC would therefo

trigger the state PAC's status as a "political committe

because the separate segregated fund of a corporation mu

register and report as a committee when it makes contrib

tions of any amount in connection with federal elections. 

U.S.C. § §441 blb) and 431(4}(B).

The Commission noted that any interest income the feder

PAC earned on a treasury bill it purchased with the loa

would not have to be allocated between the federal an

state PACs. (Date Issued: March 16, 1981; Length: 2 page

Po$, an agent of her committee, Ms. O'Reilly could, howeve

eccept the loan if it were not cosigned by a third par

because:

1. The loan would be explicitly exempted from the defin

tion of "contribution" under 11 CFR 100.7(bl(11I sinc

it would be made in the ordinary course of business; an

2. The loan would be considered M,. 0'Reilly's "person

funds," which she could use to make unlimited contr

butions to and expenditures on behalf of her ow

campaign. 11 CFR 110.10. (Date Issued: March 1

1981; Length: 3 pages)

AO 1981·8: Cosigned Bank loan Used by

Candidate to Retire Campaign Debts

If a $20,000 bank loan to retire debts of Kathlee

O'Reilly's campaign committee (the committee) is cosigne

by a third party, the loan would result in an excessiv

contribution from ·the cosigner. Since the cosigner 

considered a contributor, he or she is limited to signing o

the loan up to $1,000. Therefore, if cosigners are require

for the loan, at least 20 individuals who have not contrib

uted to the committee for this election must cosign th

$20,000 loan to make sure that no single individual make

The Commission did not comment on whether an advertiser an excessive contribution to the committee,

could claim his or her advertising costs as a business

expense since that issue is beyond its jurisdiction. Commissioners Thomas E. Harris and Robert O. Tiernan filed a

dissenting opinion. (Date Issued: March 24, 1981; Length:

6 pages, including dissenting opinion)

The Party COUld, however, allocate expenses of publishing

The Spokesman between those costs related to covering

state and local elections and those related to covering

federal elections. Costs of federal election communications

would have to be paid with funds from the Party's federal

campaign committee (t.e., the account containing, only

funds permissible under the Actl. Costs allocable to this

account could be determined by the formula spelled out in

section 106.1 (e) of Commission Regulations or could be

based on the proportion of column inches in The Spokesman related to all federal elections or candidates, as a

group.

AO 1981-3: Advertising Fees for State Party

Magazine Considered "Contributlons"

Fees paid for ads placed in the Wyoming Democratic

Party's official magazine, The Spokesman, constitute

"contributions" to the Partv to the extent The Spokesman

is published to influence federal elections or in connection

with federal elections. Under the circumstances, advertising

fees received from corporations and labor organizations

would constitute prohibited contributions to the Party,

Fees from lawful sources (e.g., individuals, sale proprietorships and partnerships) would be subject to the Act's

contribution limits.
•

•

. AO 1981-13: Funds Raised for Former Senator's

Legal Defense Fund

Donations made by corporations and individuals to a legal

defense' fund (the fund) established for former Senator

Frank E. Moss would not be subject to the Act's limits or

prohibitions on contributions, Nor would the fund be

considered a political committee subject to the Act's

registration and reporting requirements.

Donations to the fund would be used to pay legal fees

incurred bv Mr, Moss as the result of a law suit brought

against him after he had been defeated in the Senate race.

Since the donations would not be made to influence his

election to federal office, donations to the fund or disbursements from it would be outside the Act's purview.

(Mr. Moss has not been a candidate for any office since

leaving the U.S. Senate in January 1977.l

The Commission expressed no opinion on the application

of tax or other federal laws to the fund since they are

beyond its jurisdiction. (Date Issued: March 16, 1981;

Length: 2 pages)

AO 1981-15: Disposition of Former Candidate's

Excess Campaign Funds

Approximately $35,000 in excess campaign funds of the

Citizens for Spellman Committee, the principal campaign

committee of former Congresswoman Gladys Spellman,

may be disposed of by:

1. Transferring $1,000 to Friends of Reuben Spellman,*

the principal campaign committee for Mrs. Spellman's

husband; and

2. Distributing the funds to Mrs. Spellman's staff.

Because Mrs. Spellman was a member of Congress on

January 8, 1980, her excess funds may be converted to

such "personal uses."

A transfer of the funds directly to Mr. Spellman would also

constitute a personal use of the funds by the former Congresswoman. Mr. Spellman could use an unlimited amount

of such funds for campaign purposes if they were his

"personal funds" at the time he became a candidate, i.e., if

he had "legal and rightful title" to the funds and "the right

of beneficial enjoyment, under applicable state law, and .•.

legal right of access to or control over" the funds at the

time he became a candidate. 11 CFR 110.10(b)(2J, Otherwise the funds would be considered a contribution from

Mrs: Spellman and, as SUCh, would be subject to the per

election limits.

The Commission did not decide who had authority to

dispose of the excess funds since the Act and Commission

Regulations leave to the campaign staff and candidate the

responsibility for decidi n9 who has dsclslon-rnakl ng authority. (Date Issued: March 26,1981; Length: 4 pages)

*Mr. Spellman campaignad in Maryland's special primarV' ejection

for the Congressional seat formerlv held bv his wife.

3

In recent weeks, the Public Communications Office 

received inquiries on how political committees may ter

nate their registration and, hence, their reporting obl

tions under the Act. The folloWing article is offered 

response to these questions. For further information, 

the Commission on its toll-free line: 800/424-9530.

LIQUIDATING DEBTS

Debts Forgiven

If a committee fails to pay a campaign debt in a tim

fashion consistent with normal business or trade practi

the debt in effect becomes a contribution made by 

creditor to the committee, unless the creditor has mad

commercially reasonable attempt to collect the debt. 

CFR 100.7(a)(4}. Contributions made under such circu

stances may violate the Act. For example, if a commit

indebted to a corporation fails to pay the debt, the d

may result in a prohibited contribution from the corpo

tion. Or, as another example, continued nonpayment o

debt owed to a person who may lawfully make contri

tions may cause the creditor to exceed the Act's $1,000 

election contributor limit.

Rules for Corporate Creditors. A corporate creditor m

not forgive debts for less than the amount owed unless 

creditor and debtor have treated the debt in a commercia

reasonable mannner, This means that:

1. Credit was extended "in the ordinary course of b

ness" with terms substantially similar to those granted 

nonpolitical debtors of similar credit risk;

2. The debtor made all reasonable efforts to retire the de

and

3. The creditor pursued remedies in a manner similar 

those used to seek payment from nonpolitical debto

11 CFR 114.10.

If a debt owed to a corporation is settled for less than 

amount owed and the debtor wishes to terminate 

reporting status, the corporate creditor and/or deb

(committee) must file a Statement of Settlement with 

FEC for Commission approval before the commit

terminates. This Statement must include:

1. The initial terms of credit;

2. The steps the debtor took to extinguish the debt;

3. The remedies pursued by the creditor; and

4. The terms of settlement. 11 CF R 114.10.

Rules for Noncorporete Creditors. A noncorporate cred

may demonstrate to the Commission that it has mad

"commercially reasonable attempt" to collect a debt ow

to it by a committee, and thereby settle the debt with

the settlement being considered a contribution, provi

that: the credit was extended in connection with provid

goods and/or services to a political committee in the nor

contin
course of business or professional enterprise. (A debt

involving only the lending of money could not, therefore,

be forgiven without a contribution being made.]

The settlement of any debt owed to a noncorporate

creditor by a committee is subject to FEC approval if

either:

1. The amount of the debt forgiven causes the creditor to

exceed contribution limitations (when added to any

other contributions made by the creditor to the same

candidate); or

2. The creditor wishes to regard the entire amount of the

forgiveness as a debt settlement (and so notifies the

Commission), rather than as a contribution in kind.

In either case, a Statement of Settlement similar to that

required when corporate debts are settled (above) would

have to be submitted to the Commission by the creditor

and/or debtor. (Directive 3, May 10, 1978.l

Reporting Debts Forgiven. Once a debt is forgiven, it must

be reported on the appropriate debt schedule (Schedule C

and/or D): 11 CFR 104.11(a). In addition, the forgiven

amount must be itemized as an in-kind contribution on

Schedules A and 8. 11 CFR 104.13.

Contributions Received to Retire Debts

Subject to the guidelines below, candidates may receive

contributions after an election to retire campaign debts.

Contributions designated for debt retirement are itemized

on Schedule A of Form 3 or 3X. The year and type of

election for which the contribution is designated [e.q,, 1980

primary election) must also be reported on Schedule A.

Candidates may receive contributions after the general

election to retire either primary or general election debts,

provided the donor designated the contribution for the

specific debt being retired (primary or general). Such

contributions count against the contribution limits applicable to the designated election and the year in which the

election was held. 11 CFR 110.1(a)(2). Moreover, the

contributions may not exceed the net outstanding debt of

the election for which they are received.

Undesignated contributions received after the general

election are presumed to be for a future primary election

and count against the limits applicable to the future election. 11 CFR 110.1(a)(2).

Debts Assumed by Current

Campaign Committee

A candidate's current campaign committee may consolidate the debts of his/her former campaign with its own

financial activities. If the committee wishes to raise contributions which count against the limit for the previous

campaign, the contributions must be designated for that

purpose. (All undesignated contributions count toward the

"Outstanding loans are reported on Schedule C. All other debts

and obligations are reported on Schedule D.

4

committee's current llrnlt.) The current campaign com

mittee then uses separate contribution schedules (Schedu

A's) to identify respectively contributions received to retir

debts of the former campaign committee and contribution

to the current campaign committee. In addition, th

current campaign committee must file separate debt sche

ules (Schedules C and/or D) identifying the debts of th

former campaign until they are retired. The former cam

paign committee may terminate once its debts and an

cash-on-hand have been consolidated with the curre

campaign committee's records and reports.

Alternatively, the candidate may maintain two committee

and continue to file separate, semiannual reports for his/h

former campaign committee until the debts for that ele

tion are extinguished. (See AO's 1980-43, 1980-143 an

1977-52; 11 CFR 104.11;and 2 U.S.C. §434(al(2)(B).)

In either case, debts of a former campaign assumed by th

candidate's current campaign committee may be defraye

with the current committee's campaign funds. If the fund

consist solely of contributions raised for the candidate

current campaign, they do not count against any donor

contribution limit for the former campaign. (See AO

1980-32,1980-143; 2 U.S.C. §439a; 11 CFR 113.2.)

USING EXCESSCAMPAIGN FUNDS

Contributions received by the candidate or his/h

committee which, in the candidate's view, exceed th

amount of funds needed to defray campaign expenditur

may be used for the following purposes:

1. Future election. 11 CFR 110,3(a)(2)(iiO and (iv).

2. Defrayal of federal officeholder expenses." 11 CF

113,2(a).

3. Donations to charity. 11 CFR 113.2(b).

4. Unlimited contributions to national, state or loc

party committees. 11 CFR 113.2(c).

5. Repayment of loans made by the candidate to his/h

committee. 11 CFR 113,2(d).

6. Retiring debts of the candidate's former campaig

committee.

7. Any other lawful purpose, except personal use....... 

CFR 113,2(d).

TERMINATING REPORTING STATUS

Termination by Political Committees

A political committee may terminate its registratio

(and reporting obligations) only when all its debts an

obligations have been extinguished and after it no longe

intends to receive any contributions or make any disburse

ments. A principal campaign committee may termina

**Funds used for this purpose may be subject to taxation and 

applicable House and Senate Rules.

• ....The prohibition on using excess funds for personal use does n

apply to candidates who were Members of Congress on Janua

8, 1980,
•

only when it has satisfied these requirements and when all

the debts of any affiliated authorized committees have been

extinguished. 11 CF R 102.3.

Political committees terminate their reporting status by

filing a Termination Report. It may be filed at any time on

FEC Form 3 (or 3Xj or by a written statement containing

the same information. 11 CFR 102.3(a). The Termination

Report must disclose:

1. All receipts and disbursements not previously reported,

including an accounting of the retirement of all debts;

and

2. The disposition of all residual funds.

Administrative Termination by FEC

The Commission, upon its own initiative or upon the

request of a political committee, may administratively

terminate a committee's reporting obi igations if the cornmittee's financial activity has been minimal during the

previous year. For details on administrative termination,

consult 11 CFR 102.4.

READER'S DIGEST ASSOC., INC. v, FEC

On March 19, 1981, the U.S. District Court for the

Southern District of New York denied a preliminary

injunction sought by the Reader's Digest Association, Inc.

(RDA) to bar an FEC investigation of RDA. The FEC had

initiated the investigation as the result of a complaint

brought against plaintiff in August 1980. The complaint

alleged that RDA had violated 2 U.S.C. §441b(a) by

making an "illegal corporate expenditu re to negatively

influence" the 1980 Presidential elections. On November

11, 1980, the Commission found "reason to believe"

that RDA may have violated §441 b(a) by distributing a

video tape to major media outlets that provided a computer

reenactment of Senator Edward Kennedy's automobile

accident at Chappaqulddick. RDA had produced the tape in

connection with the publication of an article on the accident, which appeared in Reader's Digest in February 1980,

The court noted that the FEC's finding did not mention

expenditures for researching and puolisnlnq the article

itself.

The FEC sent the publishing company a letter requesting

answers to 15 questions concerning the content of the

video tapes, how RDA had obtained the tapes and what use

RDA had made of them. The FEC did not order a reply to

its questions; nor did it issue a subpoena.

RDA's Claims

In its suit asking the court to bar the FEC investigation,

RDA contended that responding to the FEC's investigation

would have a "chilling effect" on its First Amendment

5

right to comment freely on newsworthy events. Plain

asserted that publishers would be more reluctant to take 

controversial political stories if they resulted in cos

time-consuming FEC investigations, Moreover, plain

claimed that expenditures for the tapes were news st

expenditures explicitly exempted from the definition 

"contribution" or "expenditure" by 2 U.S.C. §431(9)

(il. As such, the tapes constituted a type of press activ

beyond the scope of FEC regulation.

FEC's Argument

The FEC, on the other hand, contended that its inve

gation was still in the preliminary stage, a fact that p

cluded any detrimental effect on RDA's news operatio

Moreover, the FEC pointed out that since the Act's 

forcement procedures provided RDA with an opportun

to respond to FEC findings at each stage of the investi

tion, the issues raised by plaintiff were not ripe for co

action, The FEC further contended that the investigat

was lawful and should not be barred.

District Court Ruling

The district court said that, "There should be no qu

tion that the FEC is authorized by statute to pursue 

investigation at least for the limited purpose of determin

whether the press exemption is applicable." Specifica

the court noted that the FEC's investigation must f

determine " ... whether the press entity is owned b

political party or candidate and whether the press en

{was] acting as a press entity in making the distribut

complained of ... or whether it was acting in a manner 

related to its publishing function."

The court noted that the FEC had limited the scope of 

investigation to distribution of the video tapes, suggest

to the court the FEC's recognition that the research 

publication of the article were on their face exempt fu

tions. The court therefore concluded that there 

" .• , no basis to grant the injunction sought by RDA •

as long as the FEC investigation asked" ... the limi

question of whether RDA was acting in its magaz

publisher capacity in distributing the tape, so as to de

mine whether the press exemption is applicable, and so l

as the investigation does not address itself to issues bey

this proper subject:'

Pending a determination of whether RDA's distribution 

the tapes is covered by the news story exemption, the co

believed that certain types of questions would be bey

the permissible scope of an FEC investigation as, 

example, inquiries into the information sources for the t

or what uses others made of the tape. The court 

however, approve the Commission's questions concern

distribution of the tape and its request for a copy of 

tape,

The court noted that RDA could reapply for an injunc

if the FEC pursued its investigation beyond the permiss

scope outlined in its opinion.

contin
BREAD PAC v. FEC

In its December 5, 1980, ruling on Bread PAC, et al. v,

FEC (Civil Action CA No. 77·C-947), the U.S. Court of

Appeals for the Seventh Circuit, sitting en bane, upheld the

constitutionality of Section 441b(b)(4)(D) of the Act

aqalnst challenges brought by the National Lumber and

Building Dealers Assoc. and the National Restaurant Assoc.,

both trade associations, and by Bread Political Action

Committee, the Restaurateurs Political Action Committee

and the Lumber Dealers Political Action Committee, all

separate segregated funds of trade associations. Plaintiffs

have asked the Supreme Court to review the appeals court's

decision. The Commission has filed a motion asking the

Court to either dismiss plaintiffs' appeal or to affirm

the opinion of the appeals court.

In filing their suit with the U.S. District Court for the

Northern District of Illinois on April 5, 1977, plaintiffs had

asked the district court to enjoin the FEe from enforcing

§441b(b)(4)(D) or, in the alternative, to certify constitutional questions to the appeals court, pursuant to 2 U.S.C.

§437h. The district court certified the following constitutional questions:

1. Whether 2 U.S.C. §441b(b)(4)(0), both facially and as

applied, infringes plaintiffs' right of assemblyguaranteed

by the FilOt Amendment . . . ?

2. Whether 2 U.S.C. §441b(b)(4)(0), both facially and as

applied, deprives plaintiffs of libeny without due process of law in violation of the Fihh Amendment . . . ?

3. Whether the failure of the Federal Election Campaign

Act, as amended, 2 U.S.C. §431 er seo., to define the

term 'solicitation' infringes plaintiffs' right of assembly

guaranteed by the First Amendment ... or deprives

plaintiffs of ttsenv without due process of law in violation of the Fifth Amendment• . . ?

4. Whether the failure of the Federal Election Campaign

Act. as amended, 2 U.S.C. §431 et seq., to define the

term 'trade association' as used in 2 U.S.c. §441b(b)(4)

(0), violates the due processclauseof the Fifth Amendment ... ?

District Court Ruling

The district court ruled in September 1977 that plaintiffs lacked standing to bring suit under the Act's expedited

review procedures. The court held that only the following

types of plaintiffs had standinq to bring suit under 2 U.S.C.

§437h(a): the national committee of a political party.

individuals eligible to vote in Presidential elections and the

FEC. On January 12, 1979, the appeals court overturned

the district court's decision in response to an interlocutory

appeal filed by plaintiffs. The appeals court ruled that

plaintiffs did have standing to bring suit under the expedited review procedures. It remanded the case to the

district court for further fact finding and certification of

the constitutional questions. These constitutional challenges were then certified to the appeals court for its

decision (see above),

Appeals Court Ruling

As to the issue of plaintiffs' standing to bring suit under

2 U.S.C. §437h(al, the court declined to overrule its

earlier decision that §437h(a) did not limit parties who

may utilize the expedited review procedures.

6

As to constitutional challenges brought by plaintiffs, th

court rejected their claim that §441b{b)(4)(D) infringed o

their First Amendment rights by requirin9 that plaintif

obtain the prior approval of a member corporation 

solicit the corporation's stockholders, executive and admi

istrative personnel and their families. The court found th

there had been no showing that this restriction on tra

association solicitations " ... has had or could have an

prior restraining effect whatsoever on the free flow 

political information and opinion by trade associatio

or their political action committees. II The court noted th

plaintiffs were " . . . free to solicit any individual . . . to jo

their trade association." Moreover, once he or she became 

member of the association, the individual could" .. . b

solicited for contributions without limit under §441 bi

(4)(D)." Thus, the court concluded that the challenge

provision was ,.... a very narrowly drawn aspect of 

statutory scheme carefully designed to balance a compellin

governmental interest [i.e., the prevention of the appea

ance or actuality of corruption in federal elections cause

by large contributions] and jealously guarded First Amen

ment freedoms."

The court also rejected plaintiffs' claim that §441b(b)(4

(01 unconstitutionally discriminated against trade associ

tions. The court found the exact opposite to be true an

concluded that plaintiffs' arqurnent was " ... largely prem

ised ... on a misreading of the statute." Specifically th

court noted that, although trade associations may no

solicit contributions from a member corporation's er

ployees without the corporation's prior approval, trad

associations are granted more avenues for sol icitation tha

are corporations. "Incorporated trade associations, becaus

they are corporations, have precisely the same solicitatio

rights under paraqraqhs (A) and (B) [of 2 U.S.C. §441 bIb

(4}] as do other corporations .. . . Moreover, trade associ

tions are also membership organizations or corporation

without capital stock and are therefore provided precise

the same solicitation rights as they have under paragrap

(C) [i.e., solicitation of their individual membersJ ...

Finally, trade associations are provided under paragraph (D

with an additional group of potential solicitees [i.e., th

stockholders, executive and administrative employees o

corporate members and their families] ."

The court also rejected plaintiffs' claims that, in failin

to define the terms "solicitation" and "trade association."

§441b(bIl4)(D) abridged their First and Fifth Amendmen

rights. The court found that the term "solicitation" had 

widely accepted meaning and that rules and statutes usin

the term had been uniformly upheld. The court furthe

held that Commission advisory opinions, which had rule

on whether certain communications constituted solicita

tions under the Act, were not inconsistent. Rather, th

opinions (AO's 1979-13 and 1979·66) had ruled on differ

ent types of communications by corporate and trad

association separate segregated funds. Similarly, the cour

noted that the FEe had adhered to the "plain and ordinar

meaning of trade association" as defined by Commissio

Regulations at 11 CFR 114.8(a) and (g)(11.
•

•

•

COMMITTEE FOR JIMMY CARTER v. FEC

On March 2, 1981, the U.S. Court of Appeals for the

District of Columbia Circuit dismissed Committee for

Jimmy Carter v. FEC (Civil Action No. 79-2425). The

Court's action came in response to an agreement for dismissal of the appeal. filed by the parties on February 20,

1981. This agreement resulted from the Commission's

acceptance of the plaintiff's offer to settle the suit.

Petitioners had originally filed the suit on December 3,

1979, challenging an FEC decision to deny matching funds

to the Committee for Jimmy Carter (the Committee], the

principal campaign committee of former President Carter's

1976 primary campaign. In its suit, the Committee asserted

that the Commission had acted arbitrarily, capriciously and

contrary to law in certifying only $88,293.92 of the

$185,749 in matching funds requested by the Committee in

July 1979. The Commission argued that it was bound by its

regulations (11 CFR 133.3(d) and (e))' to certify only

those funds the Committee needed to reti re the legitimate

debts of Mr. Carter's primary campaign. The Commission

therefore asserted that, if it had granted the Committee's

entire request, it would have acted contrary to law by

sanctioning an improper use of primary matching funds.

Specifically, the Committee had stated in its request for

primary matching funds that it planned to use the amount

withheld by the Commission ($97,456.08) for the following expenditures. In the Commission's view, none of these

constituted qualified campaign expenses.

Approximately $78,000 would be transferred to former

President Carter's 1976 general election committee (the

1976 Democratic Presidential Campaign Committee).

The general election committee would, in turn, use the

funds to defray legal and compliance costs of the general

election campaign, including nearly $50,000 in repayments of public funds Mr. Carter had accepted for the

campaign."" (The repayment represented approximately

$22,000 the Committee had spent on nonqualified

campaign expenses and approximately $27,000 in

interest income it had earned on invested public funds.]

$19,500 would be used to replace funds that the Committee had previously transferred to Mr. Carter's 1976

general election committee in 1978 and 1979, despite

the fact that the Committee itself had continued to

incur debts during this period.

The Committee argued that the transfers to the 1976

general election committee were part of an ongoing transfer

authorization granted by the Commission in February

1977. Th is authorization had allowed the Comm ittee to

transfer $500,000 in private contributions to the compliance fund of the general election committee. These

contributions were received after Mr. Carter's nomination

to the Presidency in July 1976. Moreover, the Committee

argued that the Commission's partial denial of the certification violated §134.3(c)(2) of FEC Regulations, the provi-

"The FEe Prescribed revised regulations in Mav 1979. Section

133.3(d) is now 9034.1 (a) and 'Section 133.3(el is now

9034.1!bl.

....Under the Presidential Election Campaign Fund Act, major

party nominees are eligible for public grants of $20 million (plus

a cost-of-llvlnq adjustment) to finance their general election

campaigns.

7

slon in effect during the 1976 elections. The Comm

claimed that this provision entitled it to receive matc

funds up to the full amount of its outstanding debts on 

date Mr. Carter was nominated for the Presidency, reg

less of whether it received any private contributions 

that date.**"

The Commission maintained, however, that the tran

authorization had terminated in August 1977 when 

Committee repaid $126,515 in matching funds to the 

Treasury. The Commission noted that it had requested 

repayment because it had certified the funds on the un

standing that the Committee planned to transfer $500

in private contributions to the compliance fund for 

general election committee. The Committee had, how

transferred only $300,000.

In the agreement settling the Committee's claim for m

ing funds, the Commission agreed to certify $65,650.0

the Committee, an amount equivalent to qualified 

expenses the Committee had incurred through Febr

1981. The Commission expressly conditioned this certi

tion on the Committee's consent to:

Use the funds solely to pay its own outstanding 

paign debts;

Request no further matching funds and terminate

Execute and file the agreement for dismissal of the 

with the court of appeals.

...... Under the revised regulation (11 CFR 9034) prescribed in 

1979. Presidential primary candidates are entitled to con

receiving matching funds after their date of lnetlqlbllitv o

the combined total of their matching funds and private c

butions does not cover outstanding debts.

FELICE GELMAN AND CITIZENS

FOR LAROUCHE v. FEC

On March 11, 1981, the U.S. District Court for 

District of Columbia denied plaintiffs' motion to find 

FEC in contempt of court for failing to obey the Co

October 24, 1980, order in the suit, Felice Gelman 

Citizens for LaRouche v, FEC (Civil Action No. 80·24

In that order, the Court ruled that, although the Com

sion had undertaken an investigation pursuant to 26 U

§9039(b), the FEC had to notify the Citizens 

LaRouche Committee of any investigations conducte

contributors to Mr. Laflouche's 1980 primary camp

pursuant to 2 U.S.C. §437g(a)(2). (For a summary o

suit, see pages 7-8 of the December 1980 Record.) Pur

to the Court's order, the FEC undertook no further in

gations into the Committee's affairs.

In denying plaintiffs' motion, the court noted that 

investigation cited by the LaRouche Committee i

contempt of court motion referred to a separate inve

tion the Commission had undertaken in March 1

pursuant to 2 U.S.C. §437g(a)(2L That investig

resulted from the Audit Division's identifying a matc

fund contribution that the LaRouche Committee may 

submitted with false documentation. The Court obse

that the FEC had afforded plaintiffs the required n

before proceedinq with this investigation.
GEORGE C. FINN v. FEC

On March 15, 1981, the U.S. District Court for the

District of Columbia dismissed with prejudice George C.

Finn, et et. v: FEC (Civil Action No. 80-26751. The FEC

had asked for dismissal on January 22, 1981,

Plaintiffs' suit resulted from activities of their independent

political orqanizatlon., the Flying Finn Twin Corporation,

which plaintiffs had incorporated under Nevada law in

September 1980. Through the corporation, plaintiffs had

planned to sell T-shirts and other campaign paraphernalia to

raise funds for contributions to various Republican candidates campaigning in the 1980 general elections. In seeking

publicity for their venture, plaintiffs had unsuccessfully

attempted to win the support of the campaign staff of

Republican party nominee Ronald Reagan. President

Reagan's staff had not cooperated with plaintiffs because of

the Act's prohibition against coordination of campaign

expenditures by independent groups and a candidate's

campaign staff. 2 U.S.C. §431 (17).

Plaintiffs then filed suit on October 20, 1980, seeking a

declaratory judgment from a three-judge court that the

following sections of the election law were unconstitutional:

26 U.S.C. §9042, which, in part, imposes criminal

penalties on "any officer or member of any political

committee who knowingly consents to any expenditure"

in violation of the spending limits established for publicly funded Presidential nominees; and

2 U.S.C. §441a, which places dollar limits on contributions and certain expenditures made on behalf of federal

candidates.

In its motion to dismiss the suit, the FEC asked the court

to rule that plaintiffs had failed to present a case or controversy ripe for adjudication by the court or, alternatively,

had failed to state a claim on which relief could be granted.

District Court's Ruling

The court confirmed the FEC's claim that plaintiffs' suit

did not present a case or controversy ripe for the court's

decision, Citing Martin Tractor Co. v, FEC, the court said

the FEC was" ... not presently involved in any enforcement proceeding concerning the plaintiffs, nor has the

Commission ever made a determination that plaintiffs'

proposed activities are unlawful. The Finns never asked the

Commission whether their venture would subject them to

possible liability. Accordingly, the plaintiffs' fear of punishment represents nothing more than a 'mere possibility,'

certainly not the amount of future injury needed to present

a justiciable case or controversy," The court also found that

the plaintiffs had failed to state a claim on which 'relief

could be granted.

8

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~_~~ __ ".~.;;..~ ,-">~~~ --'_~, _:........c~. _ "--L-c,~_ .",_ ~,~ ,,,.4. ~x;..:."'.;: 

SUMMARY OF MUR's

Selected compliance cases, which have been closed an

put on the public record, are summarized in the Recor

Compliance matters stem from possible violations of th

Federal Election Campaign Act of 1971, as amended, whic

come to the Commission's attention either through form

complaints originating outside the Commission or by th

FEC's own monitoring procedures. The Act gives the FE

the exclusive jurisdiction for the civil enforcement of th

Act. Potential violations are assigned case numbers by th

Office of General Counsel and become "Matters Und

Review" (MUR's). All MUR investigations are kept con

fidential by the Commission, as required by the Act.

MUR's may be closed at anyone of several points durin

the enforcement process, including when the Commissio

Determines that no violation of the Act has occurred;

Determines that there is no reason to believe or n

probable cause to believe a violation of the Act h

occurred;

Enters into a conciliation agreement with the respon

dent;

Finds probable cause to believe a violation has occurre

and decides to sue; or

Decides at any point during the enforcement process t

take no further action.

After the MUR is closed and released by the Office o

General Counsel, the Commission makes the MUR fil

available to the public. This file contains the complain

the findings of the General Counsel's Office and the Com

mission's actions with regard to the case, including the fu

text of any conciliation agreement. The Commission

actions are not necessarily based on, or in agreement with

the General Counsel's analysis.

Selection of MUR's for summary is made only from MUR

closed after January 1, 1979. The Record article does no

summarize every stage in the compliance process. Rathe

the summary provides only enough background to .rnak

clear the Commission's final determination. The full text o

these MUR's and others which were closed between 197

and the present are available for review and purchase in th

Commission's Public Records Office.

MUR 1195: Bank Loan to

Presidential Primary Candidate

On June 4, 1980, the Commission determined that ther

was no reason to believe that a Presidential primary earn

paign committee had violated the Act by taking out ban

loans secured by future matching payments and artwor

donated by an artist.

Complaint: On March 24, 1980, the principal campaig

committee of a Presidential primary candidate filed 

complaint that made the following two allegations:
•

1. A bank loan of $800,000 to the principal campaign

committee of another Presidential primary candidate

(the Committee) was a prohibited corporate contribution (in violation of 2 U.S.C. §441b(a)} because the loan

was not made in the "ordinary course of business" since:

the bank normally did not make loans to political

committees;

the interest on the loan was not sufficiently high;

and

the agreement to secure the loan by matchi ng fund

payments was concluded at a time when the Committee had not yet been certified to receive such funds.

2. Prints donated to the Committee by an artist and to be

used as collateral for an additional bank loan of

$100,000 were excessive contributions (in violation of 2

U.S.C. §441a(a)) because the prints were valued at

$300,000. Alternatively, if the Commission considered

the value of the artwork to be less th an $1,000, then the

collateral was insufficient for the loan, again indicating

that the loan was not made in the "ordinary course of

business."

General Counsel Reports: The General Counsel explained

that the complainant had concluded that the bank normally

did not make loans to political committees because it had

unsuccessfully tried to secure a loan from the same bank.

The General Counsel stated, however, that neither the Act

nor Commission Regulations require lending institutions to

grant every political committee's request for a loan simply

because the institution has granted a Joan to another polltical campaign. Moreover, even if the Commission could

impose a "fairness doctrine" on lending institutions,

problems would arise in applying this doctrine retroactively

to the loan application made by the respondent.

Concerning the charge that the interest rate was not high

enough, the General Counsel found that there was no basis

to believe the rate was lower then the "usual or customary"

rate for similar loans, since the interest rate on the loan had

been .5 percent higher than the prime rate in effect for

commercial loans of 90·day maturities. Moreover, a review

of loan agreements entered into by other banks and Presidential campaign committees revealed that several had been

negotiated at the prime rate, or below.

With regard to the allegation that future matching payments did not ensure repayment, the General Counsel

noted that lending institutions customarily secure loans on

the expectation of future earn ings, thereby indicating such

a practice was within the "ordinary course of business."

Moreover, other Presidential primary candidates had

secured loans based on the expectation of receiving matching funds prior to the Commission's certification of their

eligibility. The Counsel also noted that, as an additional

precaution, the Committee had designated the bank as the

beneficiary of a $150,000 life and accident insurance policy

on the candidate.

As to the artwork donated by an artist, the General Counsel

pointed out that the prints, valued at $300,000, were

sufficient collateral for an additional $100,000 loan. At the

same time, he noted that, pursuant to prior Commission

determinations, the donation of artwork did not represent

an excessive contribution by the artist to the Committee.

The Commission had previously stated that, although

9

the supplies used to create a donated artwork were con

butions, the artistic service itself (and the resulting artwo

were not. (See Advisory Opinion 1979-35, issued Aug

17, 1979. and Commission Regulations at 11 CFR 100.7

(3).) In this instance, the complaint did not allege that 

artist's suppl ies had exceeded the $1,000 contribution li

or that the Committee had not reimbursed the artist for 

supplies.

The General Counsel recommended that there was 

reason to believe the Act had been violated.

Commission Determination: On June 4, 1980, the Comm

sion found no reason to believe that:

1. The bank or the Committee had violated 2 U.S

§441b(a);

2. The artist had violated 2 U.S.C. §441a(a)(1)(A); or

3. The Committee had violated 2 U.S.C. §441a(f),

Commissioner Frank P. Reiche dissented from the majo

decision.

MUR 1298: Corporate Payment of Transportation

Used by Presidential Candidate

On October 30, 1980, the Commission determined t

there was no reason to believe that a Presidential candid

had violated the Act when, in 1975, he used an airpl

paid for by a corporation to conduct a speaking tour t

was intended to build party support.

Complaint: An individual claimed that, while on a c

paign fundraising tour in September 1975, a Presiden

primary candidate and his campaign committee (the C

mittee) had knowingly accepted an in-kind corpo

contribution when they used an airplane rented b

corporation to make a speaking tour through four sta

The complaint states that the contribution was excessive 

violation of 2 U.S.C. §441a), that it was a prohib

corporate contribution (in violation of 2 U.S.C. §44

and that it was never reported by the Committee (in vi

tion of 2 U.S.C. §434(b)(2)}.

General Counsel Reports: As a corporation did in fact 

for the airplane rental and a luncheon, the investiga

focused on whether the corporate expenditures were m

"in connection with" the candidate's 1976 Presiden

campaign. The Committee claimed that the tour was m

for party fundraising and that the Committee received 

contributions or fundraiser proceeds as a result of the t

This statement was consistent with Committee records.

In addressing the issue of whether the candidate's speec

on the tour "influenced" his election, the Commi

referred to MUR 21, AO 1975·13 and AO 1975-72, wh

state that an address by a Presidential candidate befo

large number of people is a campaign speech unless it:

1. Is given before January 1 of the election year;

2. Is delivered for partv-buildlnq purposes; and

3. Is not intended to influence the candidate's election.

The General Counsel concluded that the Evansville lun

eon. one of several events included on the tour, was o

attended by people traveling. with the candidate. Theref

contin
since the candidate's speech was not attended by enough

people to influence his candidacy, the corporation could

not have made an in-kind contribution to his campaign.

Similarly, the Counsel concluded that two Dayton speeches

were not given in connection with his election. A Dayton

fundralser was clearly meant for party-building purposes

and, in a second Dayton appearance, the candidate repeatedly denied his candidacy. With regard to a speech in

Chicago, the General Counsel had no specific information

on the content of the speech or the size of the audience.

Even if the Chicago address had been a campaign speech,

however, the General Counsel concluded that the corporate

payments for the airplane were not campaign contributions

because they had not been made in connection with the

Chicago speech. Rather, the payments were made as part of

an agreement to provide the candidate with transportation

to and from Dayton, Ohio. The trip to Chicago, which Involved no additional expense, was merely the final return

portion of the Dayton fundraising tour.

The General Counsel recommended that the Commission

find no reason to believe that a violation had occurred.

Commission Determination: Dn October 30, 1980, the

Commission voted to find no reason to believe that:

1. The corporation had violated 2 U.S.C. §441 b; and

2. The Presidential primary candidate or his campaign

committee had violated 2 U.S.C. § §434(b), 441a or

441b.

FCC REPORTS

ON POLI"fICAL BROADCASTING

DURING 1980 ELEC"fIONS

The Federal Communications Commission (FCC)

recently released a report on its administration of pol itical

broadcasting laws during the 1979-1980 election cycle. The

report discussed several issues that relate to legal provisions

within the jurisdiction of the Federal Election Commission.

They are detailed below.

Candidate Debates

The FCC regulates broadcast time provided for the

'debates. Under the Fairness Doctrine, an FCC licensee that

provides broadcast time for a candidate must provide the

candidate's opponent with equal broadcast opportunities.

The FCC noted that the news story provision exernpti ng

coverage of candidate debates from the Fairness Doctrine

raised "some inherent difficulties" when applied on a

case- by-case basis. In particular, the FCC noted that it was

difficult to determine whether a broadcaster" ... chooses

to cover a debate because of his reasonable good faith

judgment that it is newsworthy [the standard for the news

story exemption], and not for the purpose of giving a

political advantage to any candidate."

10

Impact of Independent Expenditure Committees

on Political Broadcasting Laws

The FCC noted that" ... for the first time the Commis

sion [FCC] was faced with the implications of large broad

cast purchases by entities outside the control and authori

zation of any candidate." The report focused on th

following issues raised by independent expenditure groups

1. Free Equal Access for Candidate When Independen

Group Purchases Time for Opponent. In Septembe

1980, the Carter/Mondale Reelection Committee sough

a declaratory ruling from the FCC that it was entitled t

a free broadcast opportunity equal to that purchased fo

Ronald Reagan by an independent expenditure commit

tee. The Carter/Mondale Committee contended that

since the Reagan campaign did not have to pay for th

advertising on its behalf, the Carter/Monda Ie Committe

should not have to use limited public funds to pay for it

advertising. The FCC ruled, however, that the Commit

tee was not eligible for a free equal broadcast oppor

tunity. (FCC ruling at 80 FCC 2d 409(1980).) The FC

concluded that the broadcaster's determination o

whether free equal opportunities must be made availabl

to a candidate's opponent should be based on th

broadcaster's role in presenting the advertising

" ... Where the licensee himself presents a program

featuring a candidate and merely sells spots around th

program, free equal opportunities must be afforded. O

the other hand ... where a spot or larger block of tim

is sold to the candidate, an authorized agent or any thir

person ... free time need not be afforded." The Carter

Mondale Committee subsequently filed an appeal wit

the U.S. Court of Appeals for the D.C. Circuit, opposin

the FCC's ruling, but withdrew the appeal after the FC

filed its brief.

2. Equal Access for Independent Expenditure Groups. Th

FCC determined that an independent - expenditur

committee supporting a candidate may request an equa

opportunity to respond to political advertising pu

chased by an independent committee supporting th

candidate's opponent. Basing its determination on 

previous ruling, the FCC found that a broadcaster mus

make available for purchase equal opportunities t

supporters or spokespersons of a candidate if it has sol

broadcast time to the supporters or spokespersons of th

candidate's opponent. See the FCC's ruling on Nichola

Zapple (23 FCC 2d 707(1970)).

3. Charges for Political Advertising by Independen

'!=xpenditure Groups. The FCC has not formally ruled o

whether political advertising purchased by committee

not authorized by candidates should be made availabl

at the same low rate as advertising sold to authorize

candidate committees. The report stated, however, tha

the availability of this low rate should be limited to 

candidate's authorized agents or committees.

4. Advertising Nor Authorized or Controlled by the Cand

date Represented. The FCC noted that, under its curren

provisions, the candidate's control or authorization of 

political advertisement was not a factor in determinin

whether equal access should be provided to his/he

opponent. Rather, the FCC allotted equal access to th

opponent when the ad clearlv identified the candi

date's image and/or voice to the audience. The FC

noted that this standard raised problems when applied t

advertising sponsored by independent expenditur
•

groups. For example, if an independent expenditure

committee supporting candidate A purchased broadcast

time for an ad that "clearly included A's image or voice,

but did not accurately represent his views on issues,

would A's opponents be eligible for equal broadcast

exposure? Similarly, if candidate A's image Or voice

were presented in a derogatory manner to discredit A,

would A's opponent (or the opponent's supporters) be

eligible to purchase equal broadcast exposu re?

Sponsorship Identification

Section 73.1212teJ of FCC rules and Sections 102.16

and 110.11 "of FEC Regulations require clear identification

of persons or groups sponsoring political advertising. The

report noted that the FCC had received numerous inqui

and complaints concerning such authorization noti

"The major concerns have been the length of time that 

identification appears on a television screen, whether 

size of typeface is sufficiently large enough for the aver

viewer to read, and whether the Commission [FCC] sho

require audio as well as visual identification for televis

viewers." The report pointed out that the problem 

clearly identifying sponsors had been augmented 

numerous independent expenditure groups that had p

chased political advertising during the 19aOelection per

"In these cases the risk of the audience not knowing 

whom it is being persuaded becomes increasingly m

critical."

Candidates Raised Spent

By Office

House $145.1 $137.3

Senate 107.4 105.2

By Party Affiliation

Democrat 129.3 124.5

Hapubllcan 122.0 116.8

By Candidate Status

Incumbent 113.9 106.2

Challenger 93.5 91.9

• Open Seat 45.1 44.4

TOTAL $252.5 $242.5

HOUSE AND SENATE CANDIDATE

SPENDING, 1979-60

11

The chart below provides information on the total financial

activity of Congressional campaigns during the 1979-80

election cycle. The figures, given in millions of dollars,

include financial activity in primary, special, runoff and

general elections. These totals are not adjusted for transfers

between committees within a campaign. Therefore, they

tend to be inflated. Adjusted receipts and expenditures for

the 1979·80 election cycle will be provided when all information has been computerized.

CAMPAIGN FINANCES OF 1979·60

CONGRESSIONAL CAMPAIGNS

Almost $250 million was raised and spent by U.S. House

and Senate candidates seeking election during 1980, according to a statistical study released by the Commission on

March 29, 1981. The study, which is based on year-end

reports filed with the Commission, provides an overview of

total receipts and expenditures for all House and Senate

campaigns during the entire 1979-80 election cycle.

•
Audit

8. Republican National Committee

Expsnditu res

Date Made

Public

3/10/81

TO THE

AUDITS

PUBLIC

RELEASED

The Federal Election Campaign Act, as amended (the

Actl gives the Commission authority to audit campaigns of

all Presidential candidates who receive public funds, and the

campaigns of other political committees. Final audit reports

are available to the press through the Press Office and to

the general public through the Office of Public Records.

The following is a chronological listing of audits released

between February 9 and April 15, 1981.

9. The Dole for President Committee, 3/10/81

Inc. (Addendum to Final Audit Report)

10. Association of State Democratic 3/19/81

Chairpersons

11. The ~er.ConnaIlYCommittee 3/24/81

12. Citizens for LaRouche 4/15/81

(Post-Primary Audit Report)

Audit

1. 1978 Eisenhower Silver Jubilee

Dinner

2. John Hemenway for Congress

Committee

3. The 1980 Republican Presidential

Unity Committee

4. Democratic National Committee

5. DNC Services Corporation

6. National Education Association

Political Action Committee

7. Young Republican National

Federation

FEDERAL ELECTION COMMISSION

1325 K STREET, NW

WASHINGTON, DC 20463

OFFICIAL BUSINESS

Date Made

Public

2/9/81

2/20/81

2/26/81

3/9/81

3/9/81

3/9/81

3/10/81

12

FINAL 1975-1980 AUDIT

REPORTS AVAILABLE

During March 1981, the Commission announced that a

microfilm cartridge of all FEC audit reports issued between

1975 and 1980 is now available for review and purchase in

the FEC's Public Records Office. A comprehensive index

with cross references to candidates and states named in the

reports prefaces the microfilm cartridge.

A complete set of the audit reports may be obtained on one

microfilm cartridge for a cost of $10.00. Paper copies of

individual audit reports may be obtained at 10 cents per

page. Checks should be made payable to the Federal

Election Commission and sent to the Public Records

Office, Federal Election Commission, 1325 K Street, N.W.

Washington, D.C. 20463. For further information, call

523-4181 or toll free 800/424·9530.

FIRST CLASS MAIL

POSTAGE & FEES PAID

FEC

WASHINGTON, D.C.

PERMIT NO. G·31