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October 19,2011 

Alex Boniewicz 

Audit Division - Federal Election Commission 

999 E Street NW 

Washington, DC 20463 

Re: Response to The Legacy Committee PAC Interim Audit Report dated September 20,2011 

INTRODUCTION 

Thank you for the opportunity to comment on the Federal Election Commission's staff audit of The 

Legacy Committee Political Action Committee. At the outset we wish to state that the stall of the FEC 

we worked with on this audit were highly professional and especially thorough. We believe we were 

completely transparent with the staiT and hope that our cooperation assisted in obtaining a desirable 

result. 

We would like to offer a few words at the outset about Legacy PAC. The facts of the audit show 

that Legacy is a non-connected PAC that is not supported by any sponsoring organization such as a 

labor union or a corporation. There is no permanent staff, office, or office equipment. Legacy was 

fonned in 2007 with a fairly simple intention: to raise funds over a moderate period of time to allow it 

to participate in the General Election of 2008 by making direct contributions to candidates for Federal 

office. As such. Legacy is the epitome of a "grass-roots" attempt to participate in the 2008 Federal 

elections. 

Legacy never intended to engage in any independent expenditures. The problem, however, is that 

the FEC believes, through its staffs interpretation of the rules, that Legacy engaged in widespread 

independent expenditure activity. It really didn't - the communications were all just fundraising letters 

sent to proven donors with no consideration at all to whether the recipient was even a voter. But when 

the staff interpretation of "independent expenditure" is extended to Legacy's fundraising letters, 

special reporting rules, "kick in" that create a monstrous reporting requirement on the committee's 

fimdraising letters, which, once again, is not supported by permanent staff or a large organization. 

Further, because of public disclosures, the FEC staffs interpretation of the applicability of the 

independent expenditure rules to direct mail fundraising misleads the public, and media reporters, to 

erroneously conclude, that Legacy engaged in widespread "independent expenditure" activity when the 

nature of the activity had no regard to whether the recipient was a voter, where they lived, whether 

there was an election date approaching, and so on. Legacy believes that if the FEC truly considers all 

the facts, it should agree, that Legacy's fundraising letters are not independent expenditures and that it 

therefore had no requirement to file the 42 so-called "late reports" il apparently was tardy in filing. 

With Michael Reagan, the son of the former President, acting as a signer for a number ofthe letters, 

Legacy produced a variety of different direct-mail fundraising appeals during the 2008 cycle, 

I 
exclusively by direct-mail, using the tried-and-true method of: test, and roll-out. In this regard. 

Legacy's direct-mail advisors obtained lists of proven donors to Republican and conservative causes 

for the committee, and we tested various different content appeals in the letters to these donors, and 

when there was response data showing success (contributions) to support a "roll-out" ofthe test to the 

whole list of potential donors, we did so. 

The various tests and roll-outs included content with references to elected officials and Presidential 

candidates to clue the recipient audience that Legacy was a conservative Republican PAC worthy of 

their support, but the purpose of the mailings themselves, and the facts surrounding the mailing, was 

not to intervene in any election by engaging in a true independent expenditure (i.e., an election 

communication intended to influence a vote in an election for or against a candidate). The facts 

demonstrate that the timing of all of Legacy's mailings had absolutely no reference to the timing of 

primary elections during 2008; the content of the letters, other than sometimes including some words 

considered "express advocacy" by the FEC, did not urge the recipient audience to vote for any 

particular candidate. Instead, the focus of all the direct-mail was on making a contribution; the 

audience or list of recipient's mailed to was selected for its fundraising value, and with absolutely no 

consideration for its electoral value. For example, absolutely no emphasis was given and no inquiry 

made as to where the mailings would be sent (as in whether or not they were targeted to an electoral 

geography or a primary election state), or whether the recipients were even registered voters. 

Eventually, after several months of testing and rolling-out many mailings, Legacy obtained an 

"excess of revenue" over the cost of the mailings, and on achieving this "tipping point" of excess of 

revenue, funds began to be used to make a number of direct contributions to candidates. As the audit 

demonstrates, Michael Reagan, who signed many of the direct mail packages, received no 

compensation for his support of the PAC. The professionals only received compensation when 

"excess of revenue" was achieved, and even then such compensation was reasonable and did not 

exceed the total of contributions to candidates. Today, Legacy has no funds and no support, and the 

professionals involved in responding to this audit have volunteered all their time to comply with the 

FEC's requests in completing the audit. 

Legacy disagrees that any of its direct-mail fundraising mailings constitute "independent 

expenditures." The Commission defines an "independent expenditure at 11 CFR 100.16 as a 

"communication" "expressly advocating" the election or defeat of a clearly identified candidate. 

While Legacy's mailings mentioned elected officials and candidates, and did include words of express 

advocacy in some of the mailings, taken as a whole. Legacy's mailings cannot be interpreted to be 

"communications" intended to expressly advocate. The facts of the audit demonstrate that the letters 

were clearly not intended to intervene in an election in their own right because they were created and 

sent without regard to an election; they did not include any real markers of a political election 

"persuasion" communication, and could not have any meaningful effect on an election, standing on 

tiieir own, because the timing of the mailings had no bearing on any election and the recipient lists 

selected were not voter files. Thus, tlie expenditures' content, timing and distribution, and audience 

indeed served a fundraising purpose, but not an electoral purpose. The direct-mail "audience's" 

understanding was to be motivated to give a contribution to Legacy; and not to vote for a particular 

candidate. As such, the letters are not independent expenditure "communications." 

The FEC should not discourage "grass-roots" participation in Federal elections. Encouraging more 

public participation rather than less is seen as beneficial by all serious observers of the electoral 

process. Yet the FEC's complicated rules as evidenced in this case make it practically impossible for a 

grass-roots type movement, un-connected to established union or corporate monicd interests, to rise up 

and be involved in the process. The FEC has implemented rules and its staff seems to have developed 
interpretative rules that greatly penalize essentially voluntary efforts to make a non-connected PAC 

meaningful, by burying the activity in expensive - and at the end of the day meaningless - reporting 

requirements, which have the affect of misleading the public as to the nature of the activity engaged in. 

We respectfully request that in this case, the FEC interpret all of Legacy's direct-mailing for what they 

are: fundraising letters, not independent expenditures. This will be a fair result and the right decision. 

RESPONSE TO SUMMARY OF FINDINGS AND RECOMMENDATIONS 

1) Misstatement of Financial Activity 

We have submitted amended reports to correct the misstatements, and have provided the 

auditors with current bank statements to verify that the current balances per our records 

agree/reconcile to the balances per the bank statements. 

Please note that we made every effort to record all transactions and that we believe the 

discrepancies occurred because of the cumbersome processing/reporting of activity by our 

outside vendors who processed the vast majority of our contributions .and disbursements 

activity, and the timing/availability of the details/reports which we received from them. Also, 

please note that the report (on page 4) states: "Based on a limited review of available records, it 

appeared that all contributor information received by flie vendor that processed deposits of 

contributions may not have been forwarded to the vendor responsible for the data entry". 

2) Disclosure of Independent Expenditures - Reporting "Memo** Entries . 

Virtually all of our expenditures were spent on direct mail fundraising. For any one mail piece, 

there were several vendors involved (mail preparation, printing, list rentals, postage, etc.). 

Therefore there were also several invoices that related to any one mail piece. Each invoice had 

to be approved by the committee, then sent to the primary vendor for 

organization/dissemination. Subsequently, the mail piece was disseminated. Timefirames 

varied significantly between approval ofthe invoices, ultimate dissemination ofthe related mail 

pieces, and availability of the dissemination dates to the comimittee for recording the 

expenditures in the committee's records. In many instances, one invoice could also relate to 

more than one mailing. Tiierefore, it was virtually impossible to identify specific invoices with 

the actual dissemination dates of the related mail pieces. As such, the commjttee made the 

decision that it would be most prudent under the circumstances to record all expenditures when 

they were actually made, because it was virtually impossible to identify unpaid invoices with 

the dates the related mail pieces were disseminated. 

3) Disclosure of Independent Expenditures 

Foremost, in our opinion, as stated in the introduction, is that none of the expenditure issues 

raised in the report "influenced the outcome of the election". We have responded several times 

to other FEC requests re: independent expenditures - the substance of our responses (and this 

response as well) is that we believe that our direct mail fundraising letters should be excluded 

from the definition of independent expenditures, and that the intent of the regulation was not to 

include direct mail fundraising expenditures as "independent expenditures". Please note that 

on page 3 of your report, it states: "...only $412,891 of these expenditures appeared to meet 

the definition of independent expenditure..". To us, that suggests that the definition is subject 

to interpretation even within the FEC. 
Following are some of our related comments that were included in previous responses: 

• Political fundraising letters that are not intended to influence a vote, not timed to a 

particular election, but which are intended solely to motivate a.donation for the group (and 

which have words of express advocacy in them) should be excluded from the definition of 

independent expenditures for your extraordinary reporting purposes. When the FEC 

pushes administrative overhead activities like general fundraising into IE status, it creates a 

costly regulatory burden for small donor committees like ours that do not have the 

financial backing, permanent staff, or infrastructure to keep up with the filings. Hardly any 

public purpose is served by the extraordinary reporting requirements imposed on just a 

fundraising letter, and we believe the public is indeed mislead by the artificial inflation in 

dollars spent on what we are required to report as lEs. 

• It was never our intention to do independent expenditures. Even though some of the letters 

contained "words of express advocacy", the mailings were sent only for the purpose of 

raising money so that we could make contributions to candidates in the general election. 

We did not consider them to be "independent expenditures," because their purpose was 

entirely for direct-mail fimdraising to proven commercial conservative fundraising lists 

chosen for their fundraising potential and not for their voting impact. 

• The Legacy Committee PAC expenses incurred for independent expenditures consist of 

mailings to a broad list of potential contributors covering the entire United States in a 

repetitive "test" and "roll-out" program devised by our vendor Response Dynamics. These 

mailings are fundraising letters for the general election that happen to include content that 

is express advocacy. Their only purpose is "general" fundraising for the general election. 

• In our view, characterization of these mailings as "independent expenditures" has the 

effect of greatly overstating and inflating the actual funds used by the organization to 

influence the election by express advocacy. The facts in this matter demonstrate that we 

initially characterized all the letters as "fundraising," and only changed the designation for 

reporting purposes after the FEC staff contacted us and insisted that appeals that included 

words of express advocacy MUST be reported as independent expenditures. We herein 

proffer that parsing the content of the many different letters was not a practical solution for 

our small operation. We therefore made a decision to report ALL the letters as 

"independent expenditures" to placate the FEC staff. However, an unsuspected and 

dangerous result of that decision, (which we felt forced into by the FEC staff) was that it 

pushed the PAC into a reporting requirement it simply could not keep up with. 

• In a discussion during the cycle with the New York Times reporter Michael Lou, he offered 

the opinion to us to the effect that the FEC's reporting requirement on Legacy of these 

entirely fundraising letters as "independent expenditures" had the effect of misleading the 

public into thinking that this type of committee is making significant "fulfillment" 

expenditures when in fact all ofthe funds in the mailing program are simply being used for 

fundraising. We agree with that assessment. 

• Reporter Thomas Edsall of the Hufjfington Post, asked us why the committee had reported, 

on the reports you arc questioning, significant independent expenditures per the FEC forms 

but that he had not seen equal independent expenditure fulfillment. We explained to Edsall 
that the answer to his question was that your requirements had the effect of distorting the 

actual level oflndependent expenditure activity by lumping strictly direct-mail fundraising 

into that category where it contains words of express advocacy. Edsall seemed to agree 

with that assessment in a telephone discussion with James Lacy. Edsell then wrote about 

Legacy and another PAC in a story published August 11, 2008 which states in relevant 

part, in support of Legacy's representations in this audit: 

" As of tlie most recent filing with the Federal Election Commission last June, the 

two PACS had a combined total of $56,906.50 left in the bank, along with debts of 

$15,060, for a net of $41,846.50." 

"Lacy, the treasurer of both committees, contended that there has been little spending 

on actual electioneering activities for a number of reasons. First and foremost, he said, 

"Neither of these two committees has gotten to the so called 'tipping point' where it 

actually has a profit. They haven't got to that point yet." 

"In addition, he said, "The entire effort of these two groups is focused on the general 

election in November, not ear//>r....(emphasls added). Even if revenue was ten times 

what it is ~ or more ~ right now, these groups would not be spending any serious funds 

on advertising, as we are good managers and correctly conclude it would be a complete 

waste of the donors contributions to do so." 

'Finally, according to Lacy, "The economy is in recession and as other parts of the 

economy have been affected, so has political giving through direct-mail. Because of the 

typically smaller margins on direct-mail fundraising, unless response rates and dollar 

amounts are high, the program can lose money. The economy has depressed both 

response rates and dollar amounts of contributions, at least firom what we were hoping 

for." 

"We have to raise a lot of dollars. Voters need a concrete message that is hammered and 

hammered again and again," Lacy said. Because of their weak fundraising this cycle, 

"We can't put together a viable budget," he said, adding almost wistfully, "If a theme 

catches, then we can roll with that." 

MITIGATING FACTORS 

Finally, we wish to inform you that The Legacy Conunittee PAC has made the decision that the 

time requirements, coordination, and record keeping are sadly not worth the effort of continuing to 

participate. We continue to believe that the FEC should reform its excessive reporting requirements 

for grass-roots organizations that engage in direct-mail fundraising - these letters are simply not 

independent expenditures. Nevertheless, we wish to inform you that we plan to terminate the 

committee after the audit is completed. 

In further mitigation. Legacy took steps to quickly and accurately submit amended reports to correct 

the misstatements of fmancial activity and also to provide the auditors with current bank statements 

intended to verify that our records and those of the bank are reconciled. As we stated above, every 

effort was made to accurately record all transactions at the outset, and the discrepancies were a result 

of the cuml)ersome processing and reporting of activity by outside vendors. As soon as the 

discrepancies were pointed out to us, Legacy took the time to make sure all reports were amended in a 
timely manner. We feel that our timely response to FEC inquiries and our complete cooperation with 

the FEC throughout this process, as well as our stated aim to close The Legacy Committee, should be 

considered mitigating factors in considering any civil penalty assessed against Legacy. The FEC has in 

the past acknowledged full cooperation and expeditious compliance with FEC requests to amend 

records as "a mitigating factor in determining an appropriate civil penalty" (Advisory Opinion 1995-

19). We conducted the activity ofthe committee under the impression of our compliance with the FEC, 

and when we were notified of misstatements of financial activity, we cooperated with the FEC's 

investigation. Our aim was to participate fairly in the political process, not to mislead the FEC in any 

manner. While we urge you to find no serious violations ofthe Act and close your file, we also ask that 

our subsequent cooperation with the FEC and efforts to ensure accurate reporting of financial activity 

in the future are considered when assessing any penalty for alleged violations the Act you may (in our 

opinion, erroneously) find. 

Treasurer 

The Legacy Committee Political Action Committee