November 1994

Table of Contents

Reports

I Post-Election Report Due

2 Updated Form 3 and 3X Reporting

Packets

Regulations

FEC Proposes Changes to

Disclaimer Rules

3 FEC Seeks Comments on Public

Funding Rules

Compliance

2 Corporation and Directors Pay

$57,000 Penalty for Making

Foreign National Contributions

2 MURs Released to the Public

4 Federal Register Notices

800 Line

5 Retiring Campaign Debts

7 Advisory Opinion s

Audits

9 FEC Releases Audits on BushQuayle Fundraiser and Hagelin

Campaign

Court Cases

9 FEC v. Committee of 100

Democrats

Statistics

10 PAC Contributions Track 1992

Levels

] I Index

Federal Election Commission

Reports

Post-Election Report Due

December 8

The 30-day post-el ecti on report

for the November 8 general election

must be filed by the following

comm ittees:

• All register ed PACs and party

comm ittees (both quarterly and

monthl y filers I) eve n inacti ve

committees; and

• Authorized committees of federa l

candidates in the general e lection,

including committees of unopposed cand idates.

The report covers activity from

the closing date of the committee's

last report throu gh November 28.

The report must reach the appropriate federal and state filin g offices

by Thursday, December 8. If sent by

regist ered or certifi ed mail, however, the report will be filed on time

if postm arked by December 8.•

(Reports continued on page 2)

I The post -general election report is

fi led in lieu ofthe Decemb er monthly

repo rt.

Volume 20, Number 11

Regulations

FEC Proposes Changes

to Disclaimer Rules

The FEC seeks comments from

I the public on proposed changes to

the disclaimer regul ations at II CFR

110.11. Written comme nts should

be submitted by Dec emb er 5, 1994,

to Susan E. Propper, Assistant

General Coun sel, 999 E Street, NW,

I Washington, DC 20463 . The

proposed rules were published in the

Federal Regist er on October 5 (59

FR 50708). Copies of the notic e

may be ordered from the FEe's

Publ ic Records Office. Ca ll 800/

424- 9530 (then press 3 if using a

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

(continued on page 3)

Need FEe Material

in a Hurry?

Use the FEe's Flashfax service

to obtain FEC material fast. It operates 24 hours a day, 7 days a

week. Over 300 FEC documents-reporting forms, brochures, FEC regulations-ean be

faxed almost immediately.

Use a touch tone phone to dial

202/501-3413 and follow the instructions. To order a complete

menu of Flashfax documents,

enter document number 4]] at the

prompt.
Federal Election Commission RECORD

Reports

(con tinued fro m page 1)

Updated Form 3 and 3X

Reporting Packets

The FEC has updated the Form 3

and Form 3X packets with new

cover pages briefly describing each

form and schedule within.

The Form 3X packet, used by

party committees, PACs and other

unauthorized committees, now

includes Schedule C-l , the form

used to report bank loans and lines

of credit.

The Form 3 packet, used by

authorized candidate committees,

now contains Form 6 for disclosure

of 48-hour notices on contributions.

(The packet already includes

Schedule C-I.)

Please note that the forms and

schedules themselves have not

changed. The FEC will continue to

distribute the old Form 3X and 3

packets (with Schedule C-I and

Form 6 as separate enclosures) until

the supply is exhausted. •

Federal Election Commission

999 E Street, NW

Washington, DC 20463

800/424-9530

202/219-3420

202/501-34 13 (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

Stephanie Fitzgerald, Editor

2

Compliance

Corporation and Directors

Pay $57,000 Penalty for

Making Foreign National

Contributions

A Hawaiian subsidiary of Japanese corporations and its Japanese

directors agreed to pay a $57,000

penalty for making $12,652 in

contributions that violated the ban

on foreign national contributions.

FEC Chairman Trevor Potter said

that the case represented "another

significant step in the Commission' s

enforcement of the prohibition on

contributions by foreign nationals in

U.S. elections." An earlier case on

foreign national contributions, MUR

2892, resulted in penalties totaling

$162,225. (See the September

Record )

In the current case, MUR 3460,

the five directors of Sports Shinko

(Pukalani) Co., Ltd.-four of whom

were Japanese citizens-passed a

resolution authorizing a "contribution committee" to make political

and charitable contributions from an

account containing $50,000. The

one director who was not a foreign

national was appointed as the sole

member of the committee. Between

1990 and 1991, the firm's treasurer-also a foreign nationalissued checks totaling $12,500 to

Hawaiian state and local campaigns

and authorized the committee

I member/director to sign the checks.

The treasurer also made an in-kind

contribution of $152 from the firm

to a local candidate.

The Commission found that the

decision by the foreign national

directors to form and fund a committee and to appoint the committee

constituted sufficient foreignnational involvement to violate the

Federal Election Campaign Act as

I interpreted by FEC regulations and

advisory opinions. Under FEC rules,

foreign nationals are prohibited

from participating, directly or

November 1994

indirectly, in decisions concerning

the making of contributions or the

administrat ion of a political committee, including the selection of

individuals to operate the committee. 11 CFR 110.4(a)(3). See also

AOs 1992-16 and 1990-8. •

MURs Released to the Public

Listed below are FEC enforcement cases (Matters Under Review

or MURs) recently released for

public review. They are based on

the FEC press releases of September

15, 22 and 30.

1 Files on closed

MURs are available for review in

the Public Records Office.

MUR 3102

Respondents: (a) ACT UP(AIDS

Coalition to Unleash Power)/DC;

(b) ACT UP/San Francisco;

(c) Dallas Gay Alliance; (d) Tarrant

County Gay Alliance (TX);

(e) Dallas Tavern Guild; et al. (f)-

(h)

Complainant: Conservative

Campaign Fund (DC)

Subject: Failure to register and

report; failure to report independent

expenditures; disclaimer; corporate

expenditures

Disposition: (a)-(e) Reason to

believe but took no further action;

(f)-(g) took no action; (h) no reason

to believe

MURs 3204/3087IPre-MUR 263

Respondents: (a) National Republican Senatorial Campaign Committee, Sonya M. Vasquez, treasurer

(DC); (b) Republican National

Committee, William J. McManus,

treasurer (DC); (c) Montana Republican State Central Committee,

Shirley J. Warehime, treasurer;

(d) Conrad BurnslUS Senate, Jim

Swain, treasurer (MT); et al. (e)-(h)

(continu ed on page 10)

I Not included here are the 39 MURs

listed in the September 1 press release

in which the Commission took no action

orfound reason to believe but took no

f urther action.
November 1994

Regulations

(continued fr om page 1)

The disclaimer regul ations are

based on 2 U.S.c. §441d(a). Under

that provision, a communication that

(1) expressly advocates the election

or defeat of a clearly identified

candidate or (2) solicits contributions must contai n a discla ime r if

the communication is co nveyed

throu gh general publ ic pol itical

advertising such as television, radio,

newspapers, magazines and direct

mailings.

Major changes in the proposed

disclaimer rules are highli ghted

below.

Definition of Direct Mailing

The proposed rules define "direct

mailin g" for purp oses of the disclaimer requirement to mean any

ma iling of over 50 substantially

similar piec es of mail.

Presumption of Express Advocacy

A communication paid for by an

auth orized candidate committee

would be presumed to contain

express advoc acy if it mentioned the

cand idate. The presumption of

express advocacy would also apply

to party committee advertisements

that referred to a clearl y identified

candidate. In both cases, the presumption would be rebuttable, since

certain commun ications-for

example, newspaper ads offering

sympathy on a candidate's bere avement-would clearly not convey

express advocacy .

This change was proposed to

enhance disclosure and to eliminate

problems the Commission has

encountered when trying to det ermine whether spec ific communications contained express adv ocacy

and therefore requi red a discl aimer.

An alternative approach would be

to require disclaimers on all publicly

advertised communications by

politi cal committees, regardless of

whether the y include express

advocac y. Th e Commission seeks

comme nts on whether the statute

could be interpreted to requ ire this.

Communications Paid for by

Candidate Committees

Lik e the current rule, the disclaimer for a publicly advertised

communication paid for by an

authorized committee of a candidate

would simply have to state "Paid for

by [name of authori zed committee]"

as lon g as the communication

referred to that candidate only.

Under a new provision, candidate

committees would be required to

include approp riate discl aimers on

campaign materi als produced and

distributed under the "coattail"

exemption of 11 CFR 100 .8(b)(17 ).

Communications Paid for by

Party Committees

Party committees would be

required to include discl aimers in

communications that qualified as

exempt party acti vities under

I I CFR JOO.8(b )(10), (16) and ( 18)

(i.e., slate ca rds, campaign materi als

and voter driv es in support of the

Presid enti al ticket).

The prop osed rules would clarify

that, in the case of an ad vertisement

made as a coordinated (§44 1a(d))

expenditure, the disclaimer must

name the party committee that

actually pa id for the ad, even if the

committee made the expenditure

using the §44 Ia(d) limit assigned to

it by another part y co mmittee.

The Commission is seeking

comments on wheth er the currently

required authorization stateme nt

("a nd author ized by...") should be

dropped or modified in the case of

party committee ads that refer to a

clearl y identified candidate before

the party's candidate is nominated.

Solicitations by Unauthorized

Committees

Under the prop osed rule s,

solicitations con veyed through

public political advertising by part y

committees, PACs and other unauthorized committee s would not need

an authorization stateme nt unless

Federal Election Commission RECORD

they referred to a clearly identified

cand idate. (The current rules requi re

an author iza tion statement in such

solicitatio ns if express advocacy is

pres ent. ) Under any circumstances,

however , the solicitation would still

require a notice stating who paid

for it.

Display of Disclaimer

A disclaimer would fail to be

clearly and conspicuously displayed

I under the proposed rules, if it

appe ared in small type compared

with the rest of the publication, if it

was otherwise difficult to read or if

it was easily ove rlo oked. Co nsistent

with agency pre cedent, each item

intended for separate public distri -

buti on in a package of mater ials

would have to include a disclaimer.

Exceptions

The proposed rules would

continue to exempt sma ll items (e.g.

buttons, pens) from the disclaim er

requirement as well as items on

which the displ ay would be impractical (e.g., water towers, skyw riting). The proposed rules would

additionally exempt checks , receipts

and similar item s.

Comments are sought regard ing

how T-shirts, baseball caps and

other wearing app arel should be

treated for purp oses of the disclaimer requ irement. Th e prop osed

rules do not contain any language

requ iring such item s to display a

disclaimer. •

FEC Seeks Comments

on Public Funding Rules

On October 6, the Commission

published a notice of propose d

rulemaking seeking public comme nt

on possibl e changes to the regulation s gov erning the public funding

of Presidenti al primary and general

ele ction candidates (59 FR 5 I006 ).

Written comments are due

December 5 and should be sent to:

I Susan E. Propper, Assistant General

(continued on page 4,
Federal Election Commission RECORD

Regulations

(continued from page 3)

Counsel, 999 E Street, NW, Washington, DC 20463. The Federal

Register notice can be ordered from

the FEC's Public Records Office .

Listed below are some of the

issues addressed in the notice of

proposed rulemaking.

• Negligent Handling ofPublic

Funds. The proposed rules would

clarify that the cost of items lost or

misplaced due to the campaign's

negligence will be considered

nonqualified campaign expenses,

which are subject to pro-rata

repayment to the U.S. Treasury .

The Commission seeks comments

on what factors it should consider

when making repayment determinations based on negligence.

• Closed Captioning. In 1992,

Congress amended the public

funding statute to require publicly

funded campaigns to use closed

captioning in their television

commercials. The proposed rules

would incorporate this change.

• Media Reimbursements. The

proposed rules would clarify the

rules governing media and Secret

Service reimbursements to the

campaign for transportation and

related services.

• Use ofGovernment Vehicles and

Accommodations. The proposed

rules would address questions that

have arisen in this area, such as

how to determine whether a stop is

campaign related (and would therefore require reimbursement to the

government for the use of the

vehicle or accommodation) .

• Winding-Down Costs. The proposed rules seek comments on

whether there should be a cap on

winding-down costs and postcampaign bonuses and gifts paid

with public funds.

• Reporting. The proposed rules

would require canceled checks for

all disbursements over $200 and

alphabetical listings of names

disclosed on receipt, disbursement

4

and debt schedules, if generated

from computer data.

• Statistical Sampling to Project

Excessive or Prohibited Contributions; Payment to Treasury. The

proposed rules would incorporate

the Commission's current policy of

using a statistical sampling technique to evaluate a campaign's

compliance with the contribution

limits and prohibitions. The

regulations would clarify that the

amount of excessive or prohibited

contributions not resolved within

the time limits will be payable to

the U.S. Treasury.

• Streamlining the Audit Process.

Streamlined procedures applied to

audits of the 1992 campaigns have

expedited the audit process. The

rulemaking seeks comments on

additional ways to speed up audits

of publicly funded committees.

I • Administrative Record. New

regulations would explain which

documents constitute the administrative record for court review of

FEC repayment determinations and

other public funding decisions.

• Debt Collection Act (DCA). The

DCA (31 U.S.c. §3701 et seq.)

would allow the Commission to

deduct delinquent public funding

repayments from any public

funding entitlements the candidate

qualified for in a future election

cycle. However, because the DCA

also has ramifications for the

FEe's enforcement process, the

agency plans to address DCA

issues in an ongoing rulemaking

on enforcement procedures. In the

public funding rulernaking, the

agency seeks comments on a

related issue: Whether interest

should be assessed on late repayments.

• Complete Contributor Identification. The Commission seeks

comments on whether the regulations should require complete

contributor identification of all

matchable contributions exceeding

$200 or, in the alternative, whether

to require committees to demonNovember 1994

strate that they made their best

efforts to obtain the information.

• NOCO Statements. The current

regulations require campaigns of

candidates who have become

ineligible for matching funds to

submit statements of net outstanding campaign obligations (NaCO

statements). The statements are

used to determine whether the

candidate is entitled to receive

additional matching funds to pay

debts and winding-down costs.

The proposed rules would require

campaigns to provide a breakdown

of estimated winding-down costs

and to submit updated NaCO

statements with post-ineligibility

matching fund requests.

• Funding General Election Expenses with Primary Funds. The

law requires that publicly funded

candidates use their primary

funding only for primary expenses.

Questions have arisen in recent

cycles concerning possible misuse

of primary funding to benefit the

candidate's general election

campaign. In this regard, the

agency seeks comments on the

depreciation of primary committee

assets, the treatment of local

campaign offices that remain open

more than 30 days after the

primary election and the treatment

Federal Register

Federal Register notices are

available from the FEC's Public

Records Office.

1994-13

II CFR Parts 9003-9038:

Public Financing of Presidential

Primary and General Election

Candidates; Notice of Proposed

Rulemaking (59 FR51006, October 6, 1994)

1994-14

II CFRPart 110: Communications Disclaimer Requirements;

Notice of Proposed Rulemaking

(59 FR50708, October 5, 1994)
November J994

of travel to a state where the

primary has already been held.

a Con vention Expenses ofPrimary

Candidates. The Commission asks

for comments on whether expenses

incurred by losing primary candidates to attend the national nominating convention should be

considered qualified campaign

expenses.

a Repayment Ratio. A ratio formula

is used to determine the amount of

matching funds (versus private

contributions) that were used to

pay nonqualified campaign

expenses. That amount is repayable to the U.S. Treasury . The

proposed rules suggest revisions to

address those situations where the

formula does not accurately reflect

the ratio of matching funds to

private contributions over the

course of the campaign.

a General Election Legal and

Accounting Compliance Funds

(GELA C Funds). General election

candidates receiving full public

funding must limit campaign

spending to the amount of their

grants and must refrain from

accepting private contributions.

FEC regulations, however, permit

these campaigns to accept private

contributions for their GELAC

funds-accounts used solely to pay

for costs related to compliance

with the federal campaign finance

laws. The Center for Responsive

Politics petitioned the FEC to

repeal these regulations, claiming

that GELAC funds interfere with

achieving the statutory objective of

eliminating the influence of large

contributions. In March 1994, the

FEC published a notice inviting

comments on the petition; the

agency now seeks further comment.

a Gains on the Use of Public Funds.

The proposed rules would expand

the current regulations by requiring

campaigns to repay to the Treasury

any income generated with the use

of public funds, even if the campaign did not intend to earn

income. •

800 Line

Retiring Campaign Debts

This article, written for authorized committees of candidates,

explains the rules on retiring

campaign debts after the election.

Citations are to FEC regulations

and to advisory opinions (AOs)

issued by the Commission. Advisory opinions can be ordered from

the Public Records Office at 10¢ per

page. Call Public Records at 800/

424-9530 (press 3 if using a touch

tone phone) or 202/219-4140.

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.

Reminder: Keep Reporting Debts

A committee must continue to

report its debts and obligations even

if it has no other activity to report. It

may stop reporting only after it has

paid or settled all its debts and

obligations, filed a termination

report and received notice from the

FEC that the report was acceptable .

II CFR 102.3 and J04.11(a). (Debt

settlement and termination will be

discussed in a future article.)

Raising Contributions

to Retire Debts: Basic Rules

When raising contributions to

retire debts after the election, a

campaign J must remember three

general rules:

• First, the contributions are stiII

subject to the limits and the

prohibitions of the Federal Election Campaign Act (the Act), even

if the candidate lost the election

and does not plan to run for a

future federal office. A contribuI As used in this article, "campaign "

means the candidate. the principal

campaign committe e and any other

committees authorized by the candidate

, for the same election.

Federal Election Commissio n RECORD

tion, when added to other contributions from the same donor for the

same election, may not exceed the

donor' s contribution limit. II CFR

110.1 (b)(1), II0.2(b)(I ), II O.4(a),

110.9(a), 114.2(b) and 115.2.

a Second, the contributions must be

specifically designated for the

election by the contributor, who

must note the election (e.g., " 1994

general") on the check or in a

signed statement accompanying

the contribution. 11 eFR 110.1(b)

(2)(i), (b)(4) and 110.2(b)(2)(i),

(b)(4).

a Finally, the contributions may not

exceed the campaign's net debts

outstanding (defined below) for

that election. 11 CFR 110.1 (b)(3)

and 110.2(b)(3).2

Calculating Net Debts

Outstanding

Net debts outstanding consist of

unpaid debts incurred with respect

to the election minus cas h on hand.

a Unpaid debts include all outstanding debts and obligations; the

estimated cost of raising funds to

liquidate outstanding debts; and, in

the case of a terminating committee, estimated winding-down costs

(for example, office rental, staff

salaries, office supplies).

• Ca sh on hand consists of the

resources available to pay the

campaign' s total debts, including

currency, deposited funds,

traveler's checks, certificates of

deposit, treasury bills and amounts

owed to the committee in the form

of credits, refunds, returns and

(continued on page 6)

2A campaign may also raise contributions to retire debts through a joint

[undraising event. Joint fundrais ers,

however, are subject to special regulations at 11 CFR 102.17. See also the

Joint Fundraising Appendix in the

Campaign Guide for Congressional

Candidates and Their Committees, page

63. Presidential committees receiving

publi c funds should consult 11 CFR

9034.8.

5
Federal Election Commission RECORD November 1994

800 Line Selling Campaign Assets tees within that state share the same

(continued fr om page 5) Generally, when a committee contribution limits.) Alternatively,

receivables (or a commercially sells its assets, the proceeds are the party committee may pay the

reasonable estimate of the collect- considered contributions, subject to candidate's creditors. Payments to I the limits and prohibitions. ADs creditors may be considered in-kind iblc amount). II CFR 110.I(b)

(3)(ii). 1991-34 and 1990-3. This is consis- contributions to the candidate,

tent with 11 CFR 100.7(a)(2), which subject to the contribution limits or, A campaign first calculates its provides that the full purchase price in the case of general election

total net debts outstanding as of the for a fundraising item or a ticket to a candidates, coordinated party

day of the election. Thereafter, it fundraising event is a contribution. expenditures, which are subject to

continually adjusts the total as The Commission has, however, the special limits of 2 U.S.c.

additional funds are received and recognized two narrow exceptions §44la(d).4 11 CFR 110.7. spent. 11 CFR llO.l(b)(3)(iii). For to this general rule. Under the two

example, a campaign's net debts situations described below, the sale Using Candidate's Personal

outstanding totaled $30,000 on the of a committee asset does not result Funds

day of the election. In the next in a contribution: House and Senate candidates are

month, the campaign received • The isolated sale of a committee not limited in the amount of per-

$10,000 in additional contributions sonal funds they may loan or

designated for that election. It also asset if the asset was purchased or contribute to their own campaigns.

received a bill that was $2,000 developed for the committee's own II CFR IIO.10(a).5See also the

higher than the campaign previously particular use, rather than for definition of personal funds at

estimated when it originally calcu- fundraising, and the asset has an I I CFR 110.1O(b) and page 11 of

lated its net debts outstanding. The ascertainable market value. ADs the Campaign Guidefor Congrescampaign's adjusted net debts 1989-4 (mailing lists and computer sional Candidates and Committees.

outstanding would be $22,000, hardware) and 1986-14 (campaign If personal funds are loaned, they

calculated as follows: $30,000 van). must be reported as loans from the

(previous net debts) plus $2,000 • The sale of valuable campaign very beginning. This is necessary to

(additional debt) minus $10,000 equipment or leftover campaign distinguish future loan repayments

- (additional contributions). supplies by a candidate committee to the candidate from what would

If, on the same day, a campaign that wishes to terminate and plans otherwise be considered the converreceives several contributions that, to use the proceeds for debt sion of campaign funds to the

together, exceed the amount needed retirement. AD 1992-24 (books) candidate's personal use, which is

to retire the total net debts outstand- and ADs 1990-26 and 1985-1 prohibited. If the campaign is to pay

ing, the campaign may accept a (computers). interest on the loan, the interest rate

proportionate amount of each Under either of these exceptions, must also be reported. 2 U.S.C.

contribution and either refund or a contribution is avoided only if the §439a; 11 CFR 113.2(d); ADs 1991-

seek a redesignation of the exces- purchaser pays no more than the 9, 1986-45 and 1977-58.

sive amounts. Alternatively, the "usual and normal charge"-the

Receiving Transfers campaign may accept some contri- market value or prevailing commerbutions in full and return or refund3 cial rate. 11 CFR 100.7(a)(l )(iii)(B). As a general rule, a candidate

the others or seek redesignations for Any payment exceeding the "usual committee may retire debts by using

them. When seeking redesignations, and normal charge" would be a funds transferred from another

the campaign must comply with the contribution. It would be a prohib- f ederal committee authorized by the

procedures and 60-day time limit at ited one if the purchaser were a same candidate for the same or a

11 CFR 110.1 (b)(5) and 11O.2(b) (5). corporation or other impermissible

See the Campaign Guide f or source.

Candidates and Committees, pages Receiving Party Support J Local parry committees may not make

9 and 10. coordinated parry expenditures without

A political party committee may the prior written authorization ofthe make direct contributions to the national or Slate committee. 11 CFR

J "Returned" means the contributor's campaign to retire campaign debts, 110.7(a)(4) and (c).

check was given back 10 the donor;

as long as they are properly desig- SA Presidential candidate receiving

"refu nded" means the contributor's nated and do not exceed the party public funds, however, may loan or

check was deposited and the amount committee's contribution limit for contribute no more than $50,000 to his

refunded by committee check. 11 CFR that election.(Note that a party's or her own campaign. 11 CFR 9003.2 t

103.3(a). state committee and local commit- (c) and 9035.2.

6
November / 994

different election cycle. However,

the transferring committee must not

have any net debts outstanding.

II CFR 11 6.2(c)(2). Also, special

rules apply if the candidate is

seeking election to more than one

federal office. II CFR l lO.3(c)(5).6

For further information, including

the application of contribution limits

to funds contained in such transfers,

see II CFR llO.3(c)(4) and (5) and

Chapter 8 of the Campaign Guide

fo r Cong ressional Candidates and

Committee s, page 19.

Reminder: Transfers from the

candidate' s nonfederal committee

are prohibited. II CFR IIO.3(d)."

Advisory

Opinions

AO 1994-26

Unsecured Lines of Credit

Obtained Before Candidacy

Scott Douglas Cunningham, a

1994 House candidate, may draw

funds for his campaign on lines of

credit opened with two banks.

Although the security for the credit

(his personal income) does not

specifically meet the criteria in FEC

regulations for assuring repayment,

the draws will not result in prohibited contributions from the banks

because of the special circumstances

in this case: The lines of credit were

opened years before Mr. Cunningham's candidacy and indicate his

longstanding relationship with the

banks. Furthermore, the lines of

credit appear to be standard, with

normal rates and terms.

6 Publicly [un ded Presidenti al campaig ns are subject to f urther restrictions. // CFR 110.3(c)(5)(iii). See also

AOs /990-11 and 1988-5.

Mr. Cunningham's campaign

committee must report draws on the

lines of credit as explained below.

Assurance of Repa yment

A loan-including a line of

credit-from a depository institution

does not result in a contribution if,

among other conditions, it is made

in the "ordinary course of business."

One criteria of the "ordinary course

of business" requirement is that the

loan be made on a basis which

assures repayment. II CFR IOO.7(b)

(II ). See2 U.S.c. §43 1(8)(B)(vii).

To meet the standard for assurance of repayment in FEC regulations, a loan or line of credit must be

secured by either: (I) traditional

collateral with a perfected security

interest; or (2) future receipts such

as contributions, interest income or

(in the case of Presidential candidates) public funds. If future receipts are used as collateral, special

arrangements are necessary. For

example, the lender must have

access to the funds through the

establishment of a separate account

or an assignment by the candidate.

The Commissio n may, however,

consider, on a case-by-case basis,

loans that do not meet these standards in order to determine whether

they were made on a basis which

assures repayment. II CFR IOO.7(b)

(I I)(i) and (ii).

The lines of credit issued to Mr.

Cunningham were made on the basis

of his future income but not under

the special arrangements set forth in

the regulations. Nevertheless, the

lines of credit may be used for

campaign purposes, based on

several factors: First, they do not

appear to have been obtained for

Mr. Cunningham's candidacy and,

in fact, predate his candidacy by at

least five years. Second, they are

evidence of his longstanding

relationship with the banks. Third,

their terms, including interest rates

and other repayment provisions, do

not appear to be out of the ordinary

Federal Election Commission RECORD

or unduly favorable. Finally, the line

of credit agreements appear to be

standard ones issued to other

customers.

Qualified Depository Institutions

A loan or line of credit, in order

to be exempt from the definition of

contribution, must be made by

a state bank, a federally chartered

depository institution (including a

national bank) or a federally insured

depository institution. 11 CFR

IOO.7(b)(II). Mr. Cunningham may

therefore use, for his campaign, the

lines of credit provided by two

national banks, but he may not use a

line of credit from a third provider

that does not appear to be a qualified depository institution.

Reporting Lines of Credit

When a candidate or political

committee first obtains a loan or

establishes a line of credit, the

committee must, in its next report,

file a Schedule C-I disclosing

detailed information on the loan or

line of credit. Because the lines of

credit opened by Mr. Cunningham

were not obtained for his campaign,

his committee does not have to file

Schedule C-I until the reporting

period during which he first makes a

draw on the credit for campaign

purposes. For the same reason, the

lender does not have to certify the

information disclosed on Schedule

C-l. The committee should, however, explain that the line of credit

was obtained well before candidacy,

without anticipation that it would be

used for the campaign. The committee must attach a copy of the

original agreement with up-to-date

amendments or the most recent

document contain ing the terms at

the time of the draw. If any of the

terms change, the changes must be

disclosed on a Schedule C-I filed

with the next report.

The amount and date of the

original draw on a line of credit -

and subsequent draws-must be

(continued on page 8)

7
Federal Election Commission RECORD

Advisory Opinions

(continued from page 7)

reported on Schedule C-I as well as

Schedules A I and C. (Schedule C

shows the total amount owed, the

amount repaid and the remaining

balance.) The committee must

continue to file a Schedule C each

reporting period for which there is

still an amount owed on a line of

credit. II CFR 104.3(d) and 104.ll(a).

If Mr. Cunningham repays the

bank, the committee must report the

payment as an in-kind contribution

to the committee on Schedule A; as

an expenditure to the lender on

Schedule B; and as a reduction to

the amount owed on Schedule C.

Mr. Cunningham, as the candidate, may make unlimited contributions to his campaign from his

personal funds. 11 CFR I IO.IO(a).

However, any money he receives for

the purpose of repaying the lender

would be contributions subject to

the limits and prohibitions of the

federal campaign law.

Date Issued: September 16. 1994;

Length: 6 pages. ..

AO 1994-28

Contributions by American

Samoans

Individuals born in American

Samoa, who are U.S. nationals but

not U.S. citizens, may make contributions to Eni F. H. Faleomavaega,

who is seeking reelection as the

Delegate to the U.S. House of

Representatives from the Territory

of American Samoa. Additionally,

Delegate Faleomavaega may

I The draw must be itemized on a

Schedule A for Line 13(a), "loans made

or guaranteed by the candidate. .. The

bank-not the candidate-must be

report ed as the source of the loan . since

the candidate received the funds as an

agent ofthe campaign II CFR

I02.7(d), I04.3(a)(3)(vii)(B) and

I04.3(a)(4)(iv).

8

contribute personal funds to his own

campaign.

Foreign nationals are prohibited

from making contributions to

candidates for U.S. elective office.

The definition of foreign national

includes individuals who are not

U.S. citizens but specifically

excludes individuals who have been

granted permanent residence in the

United States ("green card" holders). 2 U.S.c. §44Ie.1

American Samoans, by virtue of

their status as U.S. nationals, can be

lawfully admitted for permanent

residence in the United States at any

time, without having to meet

immigration requirements. Their

status, therefore, is the same as that

of foreigners who have been granted

permanent residence in the United

States. Consequently, they are

exempt from the foreign national

prohibition with respect to contributions to candidates for the office of

U.S. Delegate from Samoa.

For the same reason, Delegate

Faleomavaega, who is a U.S.

national but not a U.S. citizen, may

contribute personal funds to his own

campaign.

Date Issued: September 16, 1994;

Length: 4 pages...

AO 1994-29

One Contribution Limit

for Candidate Seeking

Nomination by Two Parties

David Levy, a candidate for the

same House seat in the primaries

held on September 13 by the

Republican and Conservative

Parties, has only one contribution

I The definition offoreign national also

includesforeign principals, as defined

at 22 U.S.c. §611(b) (i.e.. organizations organized under the laws ofa

f oreign country or having their principal pla ce of business in a foreign

country, such as foreig n governments,

politi cal parties. pa rtners hips, assoc iations and corpo rations).

November 1994

limit for the primary election.

Additionally, should he secure the

nomination of either party, Mr.

Levy would have one contribution

limit for the general election.

Because Mr. Levy is seeking

election to only one federal office,

only one limit applies to contributions made with respect to the

primary. See II CFR 11O.1(f) and

110.1U)(3). The fact that Mr. Levy

faced opposition in both parties in

the primary makes no difference in

determining the number of contribution limits that should be applied.

See also AO 1982-47.

Date Issued: September 9, 1994;

Length: 5 pages. ..

AO 1994-31

Disposition of Contributions

When Candidate Withdraws

The Dean Gallo for Congress

Committee, Congressman Gallo's

1994 reelection committee, may

retain general election contributions

made I before his withdrawal from

the election on August 23, about I I

weeks after his primary victory. His

situation is similar to that of primary

election candidates who withdrew

before the primary but were permitted to retain primary contributions

made prior to the withdrawal date.

AOs 1988-41 and 1986-12.

Mr. Gallo's committee may use

the contributions to pay for general

I A contribution is considered to be

"made" when the contributor relinquishes control over it. In the case of a

contribution sent by mail, the postmark

date is the dat e the contribution was

made. II CFR II O.I(b)(6) and

II O.2(b)(6). Ther efore, Mr. Gallo 's

committee may keep contributions

postmarked by August 23, but it must

return those postmarked after that date.

This rule would apply not only to

contributions specifically designated

for the general election but also to

undesig nated contributions made after

the primary.
November 1994

election expenses already incurred.

Any remaining funds may be used

to create a multicandidate committee, since that is a permissible use of

excess campaign funds.'

Date Issued: September 29, 1994; I

Length: 3 pages. Chairman Trevor

Potter filed a dissent (2 pages).

Advisory Opinion Requests

Advisory opinion requests

(AORs) are available for review and

comment in Public Records.

AOR 1994-33

Use of pre-paid long-distance

calling card to make contrib utions.

(VITEL International, Inc.; October

3, 1994; 9 pages)

AOR 1994-34

Solicitation of members of corporation recently merged with another

incorporated membershp organization. (New York Mercantile Exchange ; October II , 1994; 7 pages

plus attachments) ..

Audits

FEe Releases Audits on

Bush-Quayle Fundraiser and

Hagelin Campaign

The Commission recently

released final audit reports on two

committees: the Republican Leadership Fund, a joint fundraising

committee authorized by the BushQuayle '92 Primary Committee; and

Dr. John Hagelin for President, the

Hagelin 1992 Presidential campaign.

2 The simplest option available 10 the

committee is 10 convert from a principal campaign committee to a multicandidat e committee. See AOs / 988-4/ and

/ 985-30; see also AO / 993-22. which

discuss es how the committee would

change its reporting and filing status.

Audit findings are summarized

below. Final audit reports are

available from Public Records.

Republican Leadership Fund

The Republican Leadership Fund

(the committee ) conducted joint

fundraising activities on behalf of

the Bush-Quayle '92 Primary

Committee and the Ohio Republican

Party's federal and state accounts.

The audit report recommended that

the committee make a $26,575

payment to the U.S. Treas ury, I the

amount of excessive contributions it

accepted on behalf of Bush-Quayle

'92 , which received federal matching funds. The audit report additionally noted that the committee failed

to allocate joint fundraising proceeds properly and failed to refund

$8,675 in earmarked contributions

that were not intended for the

fundraiser.

In September 1994, after the final

audit report was released, the

committee made the recommended

payment to the Treasury and also

provided documentation which

indicated that it had refunded the

earmarked contributions.

Dr. John Hagelin for President

The FEC's initial repayment

determination required the Hagelin

campaign to repay $2,907 to the

U.S. Treasury. Dr. Hagelin, the

1992 Presidential candidate of the

Natural Law Party, received

$353,160 in matching funds. The

repayment represented the amount

of matching funds (as opposed to

private contributions) used to pay

$15,215 in nonqualified campaign

expenses identified in the audit. The

audit also found several reporting

errors, which were later corrected

through amended reports. ..

I The recommended payment amount

was originally $28,90 /. However. that

amount was reduced by a $2.362

payment made 10 the U.S. Treasury by

Bush-Quayle '92 in response 10 the

initial audi t report.

Federa l Election Commission RECORD

Court Cases

FEC v, Committee of 100

Democrats

In a court document filed September 13, the parties in this suit

agreed to a schedule for paying the

$5,500 in total penalties owed by

the three defendants: Committee of

100 Democrats, Committee to Elect

Fusco to Congress (formerly, Throw

the Rascals Out) and Dominick A.

Fusco. (Civil Action No. 92-2245.)

The U.S. District Court for the

District of Columbia, on September

30, 1993, had ordered defendants to

comply with the terms of two

conciliation agreements arising from

an FEC enforcement action (MUR

3148). Under one agreement, Mr.

Fusco and the Committee to Elect

Fusco had to pay a $3,500 penalty.

The court additionally ordered each

defendant to pay a $ 1,000 penalty

for violating the conciliation

agreements. Because Mr. Fusco had

signed both agreements, the court

held him "jointly liable" for compliance with the conciliation agreements and payment of the additional

penalties.

The September 1994 stipulation

agreement requires the defendants to

pay the penalties in monthly installments. If payments are late, interest

will accrue on the entire unpaid

balance until it is fully paid. Moreover, if defendants fail to carry out

their Obligations, they will be

required to reimburse the FEC for

costs and attorneys' fees expended

on the case since the September

1993 judgment. ..

9
Federal Election Commission RECORD

Statistics

PAC Contributions Track

1992 Levels

By June 30, 1994-1 8 months

into the 1993-94 electi on cyclePAC contributions to federa l

candid ates had totaled $ 109 .9

million, close to the $ 112.1 million

contributed by PACs during the

same period in the 1991-92 cycle .

(See Table I.)

Of the total contributed in the

curre nt cycle , $ 100.8 was given to

candidates seeking election in 1994,

only a little less than the $ 102.9

million con tributed by PACs to

1992 candidates during the same

peri od in the 1991-92 cycle .

Table 2 compares 18-month PAC

activity over six ele ction cycles. It is

based on a September 19 FEC press

relea se listing PAC campaign

finance data by type of PAC and

providing summary data ove r

several election cycl es. The relea se

is available through Flashfax (call

202/50 1-34 13 and ente r document

629 at the prompt). For mail orders,

call the Public Records Office, 800/

424-9530 (press 3 on a touch tone

phone) or 202/2 19-4140. ...

Compliance

(continued fr om page 2)

Complainants: (a) Common Cause;

(b) Kelly Addy, Speaker of the

Montana House of Represent atives;

(c) Dolores Colburg, Mont ana

Commissioner of Political Practices

Subject: Excessive contributions;

excessive coordinated expenditures;

inadequate disclosure of recei pts

and disbursements; disclaimer;

failure to file reports with state

election office

Disposition: (a)-(d) Reason to

believe but failed to pass motion

fi nding probable cause; (e)-(h) no

reason to believe

MUR 3460

Respondents (all in HI): (a) Sports

Shinko (Pukalani) Co., Ltd. ;

(b) Tomio Kawaskai; (c) Takeshi

Kinoshita; (d) Toshio Kinoshit a

(e) Koich i Soejima; et al. (f)-( p)

Complainant: Allen W. Barr (HI)

Subject: Foreign national contributions; co ntributions in name of

another

Disposition: (a)-(e) $57,000 penalty; (f)-(k) reason to believe but

took no further action; (I)-(m) no

reaso n to believe; (n)-(p) took no

action

November 1994

MUR 3834

Respondents: Hirschfeld for

Congress Citizens Committee,

Rosemary Singer, treasurer (NY)

Complainant: FEC initiated

Subject: Failure to file 48-hour

notices

Disposition: $20,000 penalty

MUR 3839

Respondents: Friends of Newt

Gingrich-1992, Briggs Goggans,

treasurer (GA)

Complainant: FEC initiated

Subject: Failure to file 48-hou r

notices

Disposition: $3,800 penalty

MUR3851

Respondents: San Francisco

Republi can County Central Committee, John Sid line, treasurer

Complainant: FEC initiated

Subject: Failure to file reports on

time; failure to filc report

Disposition: $9,500 penalty

MUR 3925fPre-MUR 250

Respondent: Michael L. Keiser (IL)

Complainant: FEC initiated

Subject: Excessive contributions;

$25,000 annual limit

Disposition: $28 ,000 penalty

Table 1

IS-Month PAC Contributions

to Candidates 1

(Millions of Dollars)

1991-92 1993-94

Incumbents $91.6 $91.1

Challengers $ 8.2 $ 5.5

Open-Seat! $ 12.3 $13.3

Total $ 112.1 $ 109.9

I Lists total PAC contributions made

through June 30 ofthe election cycle to

all f ederal candidates, not just those

seeking election durin g the cycle.

2 Open-sear candidates are those in

races in which no incumbent candidate

seeks election.

10

Table 2

IS-Month PAC Activity 1

(Millions of Dollars)

Election No. of Candidate Ending

Cycle PACs Raised Spent Oiving! Cash Debts

1983-84 3 4,243 $195.5 $148 .3 $ 57.0 $ 78.8 $ 6.0

1985-86 4,421 $254.3 $205 .1 $ 78 .5 $ 102.8 $1 1.2

1987-88 3 4,578 $26 6.7 $215 .5 $ 95.0 $ 119.3 $ 11.7

1989-90 4,590 $275.5 $233.4 $ 101.6 $ 129.3 $ 11.2

1991-92 3 4,585 $283 .6 $247.7 $ 112.1 $ 138.7 $ 10.7

1993-94 4,5 13 $28 5.5 $244.3 $ 109.9 $ 136.1 $ 10.1

I Covers activity from Janua ry I, the year bef ore the election, through June 30 ofthe

election year.

2 Includes PAC contributions to all fede ral candidates, not ju st those seeking

election during the cycle.

J Presidential election years.
November 1994

MUR 3947

Respon den ts: (a) Kerrey for

President , Hugh Westb rook, treasurer (FL); (b) Hugh Westbrook;

(c) Barry Diller (CA)

Complaina nt: FEC initiated

Subject: Excessive co ntributions

Disposition: Reason to believe but

took no further action

MU R 3999

Responde nts: IMPACT, Joseph

Turek, treasurer (IL)

Co mp laina nt: FEC initi ated

Subject: Excessive contributions

Disp osition: $2 ,500 penalty +

Index

The first number in each citatio n

refers to the "number" (mo nth) of

the 1994 Record issue in which the

article appeared. The seco nd number,

followi ng the co lon, indicates the

page number in that issue . For

exa mple, " 1:4" means that the

article is in the January issue on

page 4.

Advisory Opinions

1993-18: Corpora te plan to foster

politica l participation, 2:I

1993- 19: Retiring 1984 Presidential

debt , I :13

1993-20: Purchase and distribution

of can didate 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 Wiscon sin

law restricti ng contributions from

lobbyists, 3:7

1994-2: Preem ption 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 so licitations, 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

cor pora tion, 7:4

1994-9 : Tr ansfers from nonfe deral

PACs; effect of cor pora te reorganization on affi liation, 7:5

1994-10: Waiver of bank fees for

political comm ittee borrowers, 8:6

1994- 11: SSF activi ties of fede ral

contractor partnership, 7:6

1994-1 2: Definition of member

applied to association's governi ng

and mem bership structure, 8:6

1994-13: Video slate card listing

multip le 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

1994-1 9: Affiliation between

nationa l membership association

and state societies, 9: 10

1994-20: Donation of cam paign

asset to local government, 9: I I

1994-21 : Solicitation in dues

invoice se nt to nonsolic itable

members, 9: I I

1994-22: Campaign's lease of

property owned by candidate,

9:11

1994- 23: Payroll dedu ction authorizations transferred to PAC, 9:II

1994-25: Corporation handling

convention arrangements as

political committee, 10:7

1994-26: Unsecured lines of credit

obtaine d before can didacy , 11:7

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

1994-29 : One contribution limit for

candidate seeking nomination by

two parties, 11:8

1994-31: Disposition of contributions when candi date wit hdraws,

11:8

Federal Election Commission RECORD

Court Cases

FEC v.

- Amer ica' s PAC, 8:8

- Commi ttee of 100 Dem ocrats,

11:9

- GOPAC, 6:5

- LaRouche (94-658-A), 7:3

- Mich igan Repub lican State

Committee, 4:7; 9:8

- National Republican Senatorial

Committee (93- 16 12), 1:12; 4:7

I - Political Contributions Data, Inc.

(PCD), 5:4

- Rodri guez, 6:5

- Survival Educa tion Fund, Inc., 3:1

- Williams, I:12

v. FEC

- Akin s (92- 1864), 5:4

- Albanese, 9:9

- Cen ter for Responsive Politics,

1:12; 9:8

- Freedom Republicans, Inc., 3:3

- Froelich, 2:2; 8:9

- Fulani (94- 1593), 10:9

- Fulani (94-446 1), 8:11

- Funk, 10:9

- Jord an, 8:9

- LaRouche (92- 1100), I :12

- LaRouche (92- 1555), 9:7

- National Republican Senatorial

Com mittee (NRSC), 5:5; 7:2

- Republican National Committee

(RNC ) (94-10 17), 7:3; 9:8

- Whitmore and Quinlan, 9:9

Reports

Sched ule for 1994, 1:4; correction,

2:1

- change in Florida and South

Carol ina election da tes, 4:6

- reporting reminders, April, 3: I;

July, 6:I; October through

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

Special elections

- Kentu cky (2nd Distri ct), 5:9

- Ok lahoma (6th District), 3:7

- Okl ahoma (Senate), 7:2

800 Line Articles

Help - my report is late, 6:1

Registration by candidates and their

committees, I: 14

Retiring campaign debts, 11:5

11