July 2003 Federal Election Commission Volume 29, Number 7

Table of Contents

Court Cases

1 Beaumont et al, v. FEC

Reports

1 July Reporting Reminder

2 Principal Campaign Committees

Must File Form 3Z-1

Compliance

2 Change in Letter Notification

Procedures

4 Advisory Opinions

Election Administration

5 Revised National Mail Voter

Registration Form Released for

Comment

Administrative Fines

6 Committees Fined for Late and

Nonfiled Reports

Hearings

7 FEC Holds Public Hearing on

Enforcement Procedures

8 FEC Holds Public Hearing on

Presidential Public Funding and

National Conventions

Alternative Dispute Resolution

10 ADR Program Update

Outreach

11 Campaign Finance Law

Conferences in Chicago and San

Diego

11 State Outreach Program

11 Index

Compliance Reports

July Reporting Reminder

The following reports are due in

July:

• All authorized committees must

file a quarterly report by July 15.

The report covers financial activity

from April 1 (or the day after the

closing date of the last report)

through June 30.

• National party committees, political action committees following a

monthly filing schedule and state,

district and local party committees

that engage in reportable federal

election activity must file a

monthly report by July 20. This

report covers activity for the

month of June.

• All other filers must submit a midyear report by July 31, covering

financial activity from January 1

(or the day after the closing date of

the last report) through June 30.

New Reporting Forms and

Software

The Commission has approved

new and revised reporting forms and

software that conform to the reporting requirements of the Bipartisan

Campaign Reform Act of 2002. All

committees, individuals and other

persons must use the new and

revised forms for all reports. Paper

copies of these forms have been sent

Court Cases

Christine Beaumont, et al.

v. FEC

On June 16, 2003, the U.S.

Supreme Court, overruling the U.S.

Court of Appeals for the 4th Circuit,

held that the prohibition on contributions by corporations is constitutional as applied to nonprofit

MCFL-type advocacy corporations,

such as North Carolina Right to

Life, Inc.

Background

Under the Federal Election

Campaign Act (the Act) corporations and labor organizations are

prohibited from making contributions or expenditures in connection

with a federal election. 2 U.S.C.

§441b. In FEC v. Massachusetts

Citizens for Life (MCFL), the

Supreme Court concluded that 2

U.S.C. §441b could not constitutionally prohibit certain nonprofit

corporations from making independent expenditures. 479 U.S. 238

(1986). MCFL was exempt from

this ban because it had the following

features:

• It was formed to promote political

ideas and did not engage in

business activities;

• It did not have shareholders or

other persons who had a claim on

its assets or earnings, or who had

(continued on page 2) (continued on page 2)
Federal Election Commission RECORD July 2003

2

Federal Election Commission

999 E Street, NW

Washington, DC 20463

800/424-9530

202/694-1100

202/501-3413 (FEC Faxline)

202/219-3336 (TDD for the

 hearing impaired)

Ellen L. Weintraub, Chair

Bradley A. Smith, Vice Chairman

David M. Mason, Commissioner

Danny L. McDonald,

 Commissioner

Scott E. Thomas, Commissioner

Michael E. Toner, Commissioner

James A. Pehrkon, Staff Director

Lawrence H. Norton, General

 Counsel

Published by the Information

 Division

Greg J. Scott, Assistant Staff

 Director

Amy Kort, Editor

http://www.fec.gov

to registered political committees

who file on paper, and may also be

downloaded from the Commission’s

web site at http://www.fec.gov/

reporting.html. Instructions for

filling out the new and revised

forms are also available at this web

address.

For electronic filers, the software

formats for FECFile, the FEC’s free

reporting software, are now available and may be downloaded at

http://www.fec.gov/elecfil/

electron.html. Electronic filers using

commercial software should contact

their vendors to obtain the updated

format for their software. Please

note that under the Commission’s

mandatory electronic filing regulations, individuals and organizations

that receive contributions or make

expenditures in excess of $50,000 in

a calendar year—or expect to do

so—must file all reports and statements with the FEC electronically.

Electronic filers who instead file on

paper or submit an electronic report

that does not pass the Commission’s

validation program will be considered nonfilers and may be subject to

enforcement actions, including

administrative fines.

Senate committees and other

committees that file with the

Secretary of the Senate are not

subject to the mandatory electronic

filing rules, but may file an unofficial electronic copy of their reports

with the FEC in order to speed

disclosure. All reports, whether they

are filed with the FEC or with the

Secretary of the Senate, must be

filed using the new and revised

reporting forms and/or software.

Additional Information

For more information on 2003

reporting dates:

• See the reporting tables in the

January 2003 Record;

• Call and request the reporting

tables from the FEC at 800/424-

9530 (press 1, then 3) or 202/694-

1100;

• Fax the reporting tables to yourself

using the FEC’s Faxline (202/501-

3413, document 586); or

• Visit the FEC’s web site at

www.fec.gov/pages/charts.htm to

view the reporting tables online.✦

—Amy Kort

Reports

(continued from page 1)

Principal Campaign

Committees Must File FEC

Form 3Z-1

Principal campaign committees

of candidates running in 2004 must

file FEC Form 3Z-1 as part of their

2003 July Quarterly and Year-End

reports. 11 CFR 104.19. The

information provided on Form 3Z-1

allows opposing candidates to

compute their “gross receipts

advantage,” which is used to

determine whether a candidate is

entitled to increased contribution

and coordinated party expenditure

limits under the “Millionaires’

Amendment.” 2 U.S.C. §§441a(i)

and 441a-1. Form 3Z-1 is included

in the FEC Form 3 package, and

need only be filed with the July 15

quarterly report and year end report

for the year preceding the general

election for the office the candidate

seeks.✦

—Amy Kort

Compliance

Change in Letter Notification

Procedures

A business process reengineering

study of the Reports Analysis

Division (RAD) was conducted in

2002. One of the procedural changes

suggested to streamline RAD’s

processes, help optimize workflow

and increase efficiency was the

elimination of the second Request

for Additional Information (RFAI)

sent to committees following a nonresponse or inadequate response to

the initial RFAI.

Beginning with the review of the

2003-2004 election cycle reports,

committees will only receive one

RFAI, but will have thirty days in

which to respond to the inquiry.

Since second notices will not be sent

to committees that fail to adequately

respond, the letter will encourage

committees to call their Reports

Analyst to discuss the nature of their

response and whether further

clarification or action by the committee is necessary. Extensions of

time in which to respond will not be

granted.✦

—Reports Analysis

Division

Court Cases

(continued from page 1)

other disincentives to disassociate

themselves from the organization;

and

• It was not established by a business corporation or labor union

and had a policy of not accepting

donations from such entities.
July 2003 Federal Election Commission RECORD

3

(continued on page 4)

political committee “stretch far

beyond the more straightforward

disclosure requirements of unincorporated associations.” The court

concluded that, as a nonprofit

advocacy group, the “NCRL is more

akin to an individual or an unincorporated advocacy group than a forprofit corporation.”

The court also ruled that the

prohibition on corporate contributions was unconstitutional as applied

to NCRL. The court reasoned that

the same rationale the Supreme

Court used to find the ban on

independent expenditures unconstitutional as applied to MCFL also

applied to contributions. The court

found that contributions by an

MCFL-type corporation carried no

greater risk of political corruption

than did independent expenditures

by such an organization.

Supreme Court Decision

The case was appealed to the

Supreme Court solely on the issue

of the constitutionality of the ban

against contributions from nonprofit

advocacy corporations.1

 The Court

agreed to hear the case because on

this issue the U.S. Court of Appeals

for the 4th Circuit was in conflict

with the U.S. Court of Appeals for

the 6th Circuit.

The Court began its decision by

noting that federal law has banned

corporations from contributing

directly to federal candidates for

nearly 100 years. Over the years the

Court had reasoned this prohibition

against corporations is intended to:

• Prevent corruption and the appearance of corruption2

 by ensuring

that corporate earnings are not

turned into political war chests;

• Protect individuals who have paid

money into a corporation from

having their funds used to support

candidates to whom they may be

opposed; and

• Hedge against the use of corporations as illegal conduits for circumventing the contribution limits.

The Court then noted that its

decision in FEC v. National Right to

Work Committee (National Right to

Work)3 “all but decided the issue

against NCRL’s position.” See FEC

v. National Right to Work Committee, 459 U.S. 197 (1982). The Court

explained that in National Right to

Work it specifically rejected

NCRL’s arguments that deference to

Congress on the proper limits of

corporate contributions depended

upon the details of a corporation’s

form or its affluence. The Court also

explained that its decision in MCFL,

which NCRL and the U.S. Court of

Appeals for the 4th Circuit had relied

upon in their reasoning, undermined

NCRL’s arguments, noting that in

MCFL the Court concluded that

restrictions “on contributions

require less compelling justification

1 The Court noted that as a result it had

no occasion to address whether NCRL

was entitled to an MCFL-type exception

to the ban on corporate independent

expenditures. The Court also quoted

from its decision in MCFL noting that

MCFL’s formal policy against accepting donations from corporations was

“essential to our holding.”

2 The Court quoted from its decision in

FEC v. Colorado Federal Republican

Campaign Committee that it understood corruption to mean “not only

quid pro quo agreements, but also

undue influence on an officeholder’s

judgment, and the appearance of such

influence.” See FEC v. Colorado

Federal Republican Campaign Committee 533 U.S. 431.

3 National Right to Work addressed a

nonstock corporation’s ability to solicit

contributions from outside of its

membership. The Court concluded that

a solicitation to any individual who had

at one time contributed to the PAC,

regardless of whether or not he or she

was a member, went beyond the

permissible solicitation of members

provided for by 441b.

Commission regulations at 11

CFR 114.10 establish a test based

on these features to determine

whether a corporation qualifies for

the exemption.

North Carolina Right to Life,

Inc., a nonprofit advocacy corporation, three of its officers and Christine Beaumont, a North Carolina

voter (NCRL), filed suit against the

FEC asking the court to declare

441b and its implementing regulations overly broad and unconstitutional and issue a permanent

injunction barring the FEC from

enforcing the Act and these regulations against the plaintiffs.

District Court Decision. On

January 24, 2001, the U.S. District

Court for the Eastern District of

North Carolina, Northern Division,

permanently enjoined the Commission from relying on, enforcing or

prosecuting against the plaintiffs

violations of 441b. The court also

permanently enjoined the Commission from enforcing against the

plaintiffs Commission regulations

that:

• Prohibit all corporations from

making contributions (11 CFR

114.2(b)); and

• Create an exemption from the ban

on corporate expenditures for

certain MCFL-type nonprofit

corporations, for which the NCRL

did not qualify because it accepted

a small amount of corporate

donations. 11 CFR 114.10.

Appeals Court Decision. The

Commission appealed the district

court decision, and on January 25,

2002, the U.S. Court of Appeals for

the 4th Circuit found that a complete

ban on corporate contributions and

expenditures in connection with

federal elections, with an exception

to the corporate expenditure ban “so

narrow that NCRL does not fit into

it,” burdened the plaintiffs’ First

Amendment speech and association

interests. The appeals court also

found that the reporting requirements and administrative burdens

associated with maintaining a
Federal Election Commission RECORD July 2003

4

than restrictions on independent

spending.”

According to the Court, ruling in

favor of NCRL would mean recasting its understanding of the “risks of

harm” of corporate political contributions, their “expressive significance” and the deference owed to

Congress on how to treat them.

NCRL argued that contributions by

MCFL-type corporations posed no

potential threat to the political

system, and the governmental

interest in combating corruption was

not sufficiently strong to warrant the

Act’s broad prohibition against

contributions from MCFL-type

corporations. The Supreme Court, in

rejecting this argument, noted that

nonprofit advocacy corporations,

“like their for-profit counterparts,

benefit from significant ‘statecreated advantages’ and may well be

able to amass substantial ‘political

war chests.’” Additionally, the

Court stated that nonprofit corporations are “no less susceptible than

traditional business corporations to

misuse as conduits for circumventing the contribution limits imposed

on individuals.”

NCRL also argued that the Act’s

ban on corporate contributions

should be subject to a strict level of

constitutional scrutiny because it

bans corporations from making

contributions rather than merely

limiting them from doing so. The

Court also rejected this argument

noting that in reviewing political

financial restrictions, “the level of

scrutiny is based on the importance

of the ‘political activity at issue’ to

effective speech or political association.” The Court determined that

contribution restrictions “have been

treated as merely ‘marginal’ speech

restrictions” and therefore are

constitutional if they are “‘closely

drawn’ to match a ‘sufficiently

important interest.’” Additionally,

the Court pointed out that recognizing that the “degree of scrutiny runs

Court Cases

(continued from page 3)

on the nature of the activity regulated is the only practical way to

square two leading cases,” National

Right to Work and MCFL.

Moreover, the Court stated that

NCRL’s contention that the corporate prohibition is unconstitutional

because it is not sufficiently closely

drawn rests on a false premise in

that the prohibition is not a complete

ban but rather contains significant

exceptions, including allowing

corporations and unions to pay for

the administrative expenses of their

PACs. Finally, the Court noted that

in National Right to Work, which

was decided by a unanimous

Supreme Court in 1982, it thought

that the regulatory burdens placed

on PACs were insufficient to make

them unconstitutional as an advocacy corporation’s sole avenue for

making contributions. “There is no

reason to think the burden on

advocacy corporations is any greater

today,” the Court concluded, “or to

reach a different conclusion here.”

Having found that the prohibition

on corporate contributions is

constitutional as applied to NCRL,

the Supreme Court ordered that the

judgment of the U.S. Court of

Appeals for the 4th Circuit in

Beaumont v. FEC be reversed.✦

—George Smaragdis

Advisory

Opinions

AO 2003-6

Transfer of Payroll

Deduction Authorization

Between Affiliated SSFs

The separate segregated fund

(SSF) of Public Service Enterprises

Group, Inc. (PSEG PAC) may

receive a transfer of payroll deduction authority from its subsidiary’s

SSF as long as employees participating in payroll deduction are

notified at least 30 days before the

transfer that all contributions are

voluntary and that they may stop

contributing at any time or change

the amount of their contribution.

Background

Commission regulations allow

the use of a payroll deduction plan

to collect voluntary contributions to

a corporation’s SSF. 11 CFR

114.5(k)(1). Corporations may also

use a payroll deduction plan to

facilitate contributions from the

restricted class of its subsidiaries. 11

CFR 114.5(g)(1).

PSE&G is a wholly owned

subsidiary of Public Services

Enterprise Group, Inc. (PSEG).

PSE&G has facilitated contributions

from the restricted class of PSEG’s

many subsidiaries to PSE&G’s

separate segregated fund (PEGPAC)

through a payroll deduction plan.

PEGPAC intends to terminate and

transfer its payroll deduction

authority to PSEG PAC. Before

doing so, they will send a letter to

those employees who participate in

payroll deduction that informs them

that all contributions are voluntary

and that the employee may stop

contributing or change the amount

that they give.

Analysis

Because PSE&G is a wholly

owned subsidiary of PSEG, their

SSFs are affiliated. 100.5(g)(2).

When the SSFs of each are affiliated, either a parent company or a

subsidiary may establish and finance

a payroll deduction plan to facilitate

contributions to an affiliated SSF.

AOs 1987-34 and 1982-34.

The Commission permits transfers of payroll deduction authority

when the transfer is between

affiliated committees, provided the

employees are given advance notice

that their contributions are voluntary

and that they may revoke the payroll

authorization without reprisal. AOs

1997-25, 1994-23 and 1991-19.

The notice must include all of the

necessary disclaimers, including

notification of PSEG PAC’s political purpose and the employees’
July 2003 Federal Election Commission RECORD

5

Advisory Opinion Requests

AOR 2003-17

Use of campaign funds to pay

former candidate’s legal fees

stemming from alleged criminal

activity (James W. Treffinger, May

14, 2003)

AOR 2003-18

Defeated primary candidate’s use

of general election contributions

remaining after unsuccessful refund

attempt to contribute to nonprofit

foundation (Senator Bob Smith,

May 16, 2003)✦

AO 2003-7

State Leadership PAC

Refunding Nonfederal Funds

The Virginia Highlands Advancement Fund (VHAF), a so-called

“527 organization” administered

and supervised by a member of the

U.S. House of Representatives, may

dispose of nonfederal funds it

unexpectedly received after the

Bipartisan Campaign Reform Act’s

(BCRA) November 6, 2002, effective date by refunding the money to

its donors on a pro-rata basis.

Background

Under the BCRA, any entity

directly or indirectly established,

financed, maintained or controlled

by a federal officeholder may raise

and spend funds in connection with

state and local elections, but only in

amounts and from sources that are

consistent with state law and that do

not exceed the limits and prohibitions of federal law. 2 U.S.C.

§441(e)(1)(B); 11 CFR 300.60(d)

and 300.62. Similarly, federal

officeholders may not receive,

direct, spend or disburse funds in

connection with a state or local

election if the funds are in excess of

the limits and prohibitions of federal

law. 11 CFR 300.62.

VHAF is a state political organization registered in Virginia and is

“administered” and “supervised” by

a Member of Congress. VHAF only

raised nonfederal funds, and it is not

affiliated with or otherwise connected with a federal political

committee. In order to comply with

the BCRA, VHAF spent all of its

right to revoke authorization at any

time without reprisal. 114.5(a)(1)-

(5). Also, in order to provide

adequate time for the contributors to

revoke payroll authorization, the

transfer must occur at least thirty

days after the notice is given to the

employees. AO 1997-25.

Date issued: May 8, 2003;

Length: 6 pages.✦

—Phillip Deen

funds prior to November 6, 2002. In

December 2002, however, VHAF

received a refund of $690.10 from

the IRS for an abated late filing

penalty.

Analysis

The BCRA does not directly

address the receipt of an unexpected

refund of nonfederal funds after

November 6, 2002. However, this

situation is analogous to that faced

by a national party committee with

nonfederal funds remaining after the

BCRA took effect. Commission

regulations provide for a transition

period during which national party

committees could disgorge

nonfederal funds after November 6,

and outline particular methods for

disgorging the funds. 11 CFR

300.12(c). Since refunding monies

to donors was one of the permitted

means of disgorgement, the Commission—drawing an analogy

between VHAF’s situation and these

transition rules—concludes that

VHAF may dispose of the IRS

refund by returning pro-rata portions

of it to VHAF donors.1

Date issued: May 8, 2003;

Length: 4 pages.✦

—Gary Mullen

1 The Commission did not address other

possible uses for the IRS refund.

Revised National Mail Voter

Registration Form Released

for Comment

On June 4, 2003, the Commission

released for public comment an

updated draft of the national mail

voter registration form. The form has

been updated to reflect information

required by the Help America Vote

Act of 2002 (HAVA). Proposed

changes to the form include adding:

• Questions that ask applicants if

they are a U.S. citizen and whether

they will be 18 years of age on or

before election day. Applicants

are instructed not to complete the

form if they checked “No” in

response to either question.

• A statement informing the applicant that if the form is submitted

by mail and he or she is registering

for the first time, appropriate

information must be submitted

with the mail-in registration form

in order to avoid additional

identification requirements when

voting at the polls for the first

time.

• Instructions to address new HAVA

requirements for driver’s license

and/or Social Security number

information when applicants use

these as ID numbers.

Election

Administration

FEC Issues 2002

Annual Report

The Commission’s Annual Report

2002 is now available online. To

view the Annual Report 2002, go

to the Commission’s web site at

http://www.fec.gov/pages/

anreport.htm. Printed copies of

the report will also be available in

July. To order a free copy call

800/424-9530 (pres 1, then 3) or

202/694-1100.

(continued on page 6)
Federal Election Commission RECORD July 2003

6

Committees Fined for

Nonfiled and Late Reports

The Commission recently

publicized its final action on 71 new

Administrative Fine cases, bringing

the total number of cases released to

the public to 590, with $821,520 in

fines collected.

Civil money penalties for late

reports are determined by the

number of days the report was late,

the amount of financial activity

involved and any prior penalties for

violations under the administrative

fines regulations. Penalties for late

reports—and for reports filed so late

as to be considered nonfiled—are

also determined by the financial

activity for the reporting period and

any prior violations. Election

sensitive reports, which include

reports and notices filed prior to an

election (i.e., 12 day pre-election,

October quarterly and October

monthly reports), receive higher

penalties. Penalties for 48-hour

notices that are filed late or not at all

are determined by the amount of the

Administrative

Fines

Committees Fined and Penalties Assessed

 1. American Aids PAC $1,800

2. American Association of Airport Executives

Good Government Committee $468

3. American Society of Cataract & Refractive Surgery PAC

(AKA EYEPAC) $700

4. American Society of Interventional Pain Physicians PAC $250

5. American Textile Manufacturers Institute Inc.

Committee for Good Government $900

 6. American United Life Insurance Company PAC $350

7. America’s Foundation (FKA Fight-PAC) $6,000

8. Association of American Railroads PAC (RAIL PAC) $1,350

 9. Baker Botts Bluebonnet Fund $250

10. Bi-County PAC (FKA Suffolk PAC) $2,000

11. Borski for Congress Committee $975

12. Campbell for Congress 2002 $550

13. Cleve Mobley for Congress $2,400

14. Committee to Elect Helen Rahder

July Quarterly 2002 $900

15. Committee to Elect Helen Rahder

12 Day Pre-Primary 2002 ____1

16. Committee to Elect Trent Franks to Congress $3,500

17. Conservative Leadership PAC $9,0002, 3

18. Council of Insurance Agents & Brokers PAC $825

19. Dan Hagood for Congress Inc. $8,000

20. Democratic Party of Orange County $900

21. Donna 2002 Congressional Campaign Committee $1,000

22. El Paso Municipal Police Officers Association Inc. PAC $1,450

23. Florida Sugar Cane League PAC April Quarterly 2002 $5,625

24. Florida Sugar Cane League PAC July Quarterly 2002 $5,625

25. Friends of Israel PAC FRIPAC $375

26. Friends of John Conyers $5,250

27. Friends of Martin Collen $700

28. Friends of Roger Wicker 2002 $1,000

29. Golden Rule Financial Corporation—PAC $975

30. Harris County Democratic Party $850

1

The Commission took no further action in this case.

2

This penalty was reduced due to the level of activity on the report.

3

This civil money penalty was paid after referral for collection.

Because many states are still

amending and updating their

election laws and procedures to

reflect the new provisions of

HAVA, the Commission has also

provided “default” draft instructions

on ID numbers and first-time voter

ID requirements that states may

incorporate into their instructions.

The deadline for public comments on the draft form was June

26, 2003. The complete draft mail

voter registration form is available

on the FEC web site at http://

www.fec.gov/votregis/pdf/

nvra_form.pdf.✦

—Amy Kort

contribution(s) not timely reported

and any prior violations.

The committees and the treasurers are assessed civil money penalties when the Commission makes its

final determination. Unpaid civil

money penalties are referred to the

Department of the Treasury for

collection.

The committees listed in these

charts, along with their treasurers,

were assessed civil money penalties

under the administrative fines

regulations.

Closed Administrative Fine case

files are available through the FEC

Press Office, at 800/424-9530 (press

2), and the Public Records Office, at

800/424-9530 (press 3).✦

—Amy Kort

Election Administration

(continued from page 5)
July 2003 Federal Election Commission RECORD

7

31. HCR Manor Care PAC $1,000

32. Health Plan PAC of the American Assoc of Health Plans

(FKA Group Health Assoc of Amer PAC) $1,100

33. H & R Block PAC (BLOCK PAC) $350

34. Hispanic Democratic Organization (HDO) Federal PAC $500

35. Indiana Dental PAC $1,000

36. International Union of Operating Engineers

Local 825 Political Action and Education $700

37. IT Group PAC $375

38. Kelly for Congress $1,800

39. KIDSPAC $675

40. Kilpatrick for United States Congress $300

41. Level 3 Communications Inc. PAC $700

42. McCoy for Congress April Quarterly 2002 $5362

43. McCoy for Congress July Quarterly 2002 $9003

44. Montgomery Watson Americas Inc. Employee PAC $2,700

45. New York State Conservative Party $300

46. New York State Public Employees Federation—COPE $1,450

47. Office and Professional Employees International Union—

Voice of the Electorate $1,650

48. Parsons Corporation PAC $2,175

49. Patriot PAC April Quarterly 2002 $350

50. Patriot PAC July Quarterly 2002 $350

51. Petroleum Marketers Association of

America\Small Business Committee $1,450

52. Phil Sudan for Congress $500

53. Prairie Leadership Committee $675

54. PSEA PACE for Federal Elections

(FKA Pennsylvania PACE for Federal Elections) $1,125

55. R I Republican Party $3,500

56. Right to Work PAC $525

57. Society of Thoracic Surgeons PAC (STS PAC) $550

58. Sony Pictures Entertainment Inc. PAC $343

59. South Carolina Credit Union League Inc.

Credit Union Defense Fund $1,500

60. South Carolina Republican Party $1,500

61. Teamsters Joint Council No 53 PAC Drive $650

62. Teamsters Local 745 DRIVE $2,900

63. TECO Energy Inc. Employees’ PAC $1,000

64. Traditional Values Coalition PAC $350

65. ULLICO Inc. PAC (ULLIPAC) $2,400

66. United Assoc/Journeymen/Apprent/Plumb/PipeFitt Ind

of the US/Can Loc 447 Federal Political Action Fund $350

67. Whetstone for Congress $250

68. Wine and Spirits Wholesalers of America Inc. PAC $1,000

69. Women’s Alliance for Israel $2,600

70. ZACOPAC (Zachary Construction Corporation) $2,100

71. Zeneca Inc. PAC $550

Committees Fined and Penalties Assessed, cont.

2

This penalty was reduced due to the level of activity on the report.

3 This civil money penalty has not been collected.

Hearings

FEC Holds Public Hearing

on Enforcement Procedures

On June 11, 2003, the Commission hosted a public hearing concerning potential changes to its

enforcement procedures. Many of

those testifying felt that the Commission should make its procedures

more transparent and take additional

steps to ensure due process for

respondents. Others emphasized the

agency’s obligation to enforce the

law as efficiently and effectively as

possible.

The FEC has exclusive jurisdiction with respect to civil enforcement of the Federal Election

Campaign Act (FECA). Enforcement proceedings (Matters Under

Review or MURs) may begin with

complaints filed by the public or as

a result of internal actions by

Commission staff, including referrals from the Reports Analysis and

Audit Divisions. In addition,

referrals from other agencies and

sua sponte submissions may result

in MURs. (For additional information on the enforcement process,

consult the Commission’s “Filing a

Complaint” brochure, available on

the FEC web site at http://

www.fec.gov/pages/brochures/

complain.htm.)

On May 1, 2003, the Commission

published in the Federal Register a

notice inviting the public and

members of the regulated community to comment on the agency’s

enforcement practices and to testify

at a public hearing. See the June

2003 Record, page 7.

Representatives of national party

committees as well as counsel for

members of the regulated community testified at the hearing, along

with representatives from the Free

Speech Coalition and Conservative

Defense and Education Fund, the

James Madison Center for Free

(continued on page 8)
Federal Election Commission RECORD July 2003

8

the Commission be incorporated as

an essential component of the

proceedings. Other testimony

suggested that the FEC should make

the following changes in the enforcement process:

• Provide more guidance regarding

the complaint process and fine

schedule;

• Clearly define liabilities of the

candidates and committee treasurers;

• Allow respondents to obtain copies

of their depositions during the

investigative process;

• Establish different standards for

naming respondents;

• Consider the timeliness of release

of enforcement findings immediately before an election; and

• Allow respondents greater access

to the Commission’s investigative

files.

Although most of the comments

expressed during the hearing

suggested changes that would

uphold the rights of individuals

directly involved in enforcement

proceedings, Lawrence Noble

(representing the Center for Responsive Politics) suggested that violations of campaign finance law are

not victimless crimes and it is

important to safeguard the public

from such encroachments. He

maintained that the FEC, first and

foremost, is a law enforcement

agency. Furthermore, he emphasized

that the present procedures comply

with due process. However, according to Mr. Noble’s testimony, it is

necessary not only to make the

process more efficient but also to

provide the Commission with

greater ability to enforce the law.

The open forum enabled the

Commission to hear testimony

regarding issues that face members

of the public, counsel who practice

before the Commission and complainants and respondents who

interact with FEC staff. Commissioners expressed their desire to

make the enforcement process more

efficient and effective. The Alternative Dispute Resolution program

was cited as a recent effort to

promote compliance and efficiency.

In addition, Chair Ellen Weintraub

announced at the hearing that the

Commission will add a searchable

MUR database to the agency’s web

site later this year to improve public

access to enforcement documents.

An exhaustive list of hearing

participants and written submissions

is available on the FEC web site at

http://www.fec.gov/agenda/notice2003-09/comments.html.✦

—Michelle L. Ryan

1 The following individuals made oral

submissions during the hearing: Cleta

Mitchell (Foley Lardner), Robert F.

Bauer and Marc Elias (Perkins Coie),

James Bopp (James Madison Center for

Free Speech), Donald F. McGahn II

(National Republican Congressional

Committee), Joseph Sandler and Neil

Reiff (Sandler, Reiff and Young, PC),

Charles R. Spies (Deputy Counsel,

Republican National Committee), and

William J. Olson (The Free Speech

Coalition and Conservative Defense

and Education Fund) and Jan Witold

Baran.

FEC Hearing on Presidential

Public Funding and National

Conventions

The Commission’s proposed

changes to its rules governing

publicly financed Presidential

candidates and national nominating

conventions drew sharply divergent

comments at a June 6, 2003, public

hearing held at the Commission. On

April 23, the Commission released

for public comment proposed

revisions to these rules to implement

relevant provisions of the Bipartisan

Campaign Reform Act of 2002

(BCRA) and to respond to issues

that arose while administering the

public funding program. See the

May 2003 Record, page 1.

Much of the testimony considered how national nominating

conventions could be financed.

Under the BCRA, a national committee of a political party may not

solicit, receive or direct to another

person a contribution, donation or

transfer of funds or anything of

value, or spend any funds that are

not subject to the limits, restrictions

and reporting requirements of the

Federal Election Campaign Act.

This prohibition also applies to

agents acting on behalf of the

national party committee and to

entities directly or indirectly established, financed, maintained or

controlled by a national party

committee. 2 U.S.C. §§441i(a)(1)

and (2).

Speech and the Center for Responsive Politics.1

 Commenters offered

disparate opinions regarding the

effectiveness of existing enforcement procedures, but agreed that the

hearing gave the Commission an

opportunity to examine many

practices and procedures that have

been in place since the FEC’s

founding in 1975.

Much of the testimony related to

protecting the rights of the regulated

community and providing more

substantial guidance regarding

enforcement proceedings and civil

penalties that may be administered

by the Commission. Many participants expressed the underlying need

for more transparency, efficiency,

and access to Commission resources

for individuals involved in enforcement matters. Commenters not only

relayed accounts of previous

experiences with the Commission,

but made tangible suggestions for

improvement.

Cleta Mitchell (representing

Foley Lardner), as well as other

participants, urged the Commission

to recognize that due process is the

most important principle to uphold

during enforcement. Additionally,

Jan Baran, Robert Bauer (representing Perkins Coie), and Charles Spies

(representing the Republican

National Committee) suggested that

oral hearings presentations by

respondents or their counsel before

Regulations

(continued from page 7)
July 2003 Federal Election Commission RECORD

9

donations would be seen if corporate sponsorship of the Olympics

were considered, suggesting that the

cost of putting on any such events

has gone up, while the willingness

of government entities to pay for

such events has gone down.

Representatives from the Center

for Responsive Politics testified in

favor of extending the BCRA’s

restrictions on the activities of

national party committees and

federal candidates and officeholders

to cover convention activities. Paul

Sanford, Director of FECWatch,

suggested that the convention is

inherently a party activity and that

the Commission should revise its

rules to prohibit host committees

from using nonfederal funds for

convention expenses, including the

costs of providing the convention

center and transportation services.

Under Mr. Sanford’s recommended

plan, host committees could still use

nonfederal funds to pay for services

that most directly benefit individual

attendees rather than the national

parties, such as promoting the city

as a convention site and welcoming

attendees to the city.

In contrast, representatives from

the Democratic National Committee, the Republican National Committee, the Boston Host Committee

and New York Host Committee,

among others ,questioned whether

the BCRA should have any effect on

nominating conventions and argued

that these activities are not in

connection with an election. For

example, Cheryl Cronin, representing the Boston Host Committee,

testified that Congress would have

addressed host committees in the

BCRA had it intended for convention activities to be altered. She

argued that host committees are not

political committees and are not an

agent of or established, maintained

or financed by any national party

committee. Thomas Josefiak,

representing the Republican National Committee, further argued

that host committees are generally

considered charities by the IRS and

that, as a result, their funding should

not be restricted and federal officeholders should be able to solicit on

their behalf.

In addition, Ms. Cronin and

Kenneth Gross, who represented the

New York Host Committee, both

recommended that the Commission

remove its prohibition on donations

to host committees from individuals,

corporations and unions that are not

“local.” Donald McGahn, representing a federal officeholder, agreed

with Ms. Cronin and Mr. Gross that

the Commission should dispense

with the “local rule,” and also

testified in opposition to proposed

rules that would regulate private

events held in the convention city to

which candidates and officeholders

are invited, such as corporate and

union events held around the time of

the convention.

Witnesses on both sides of the

debate questioned whether any

changes to the rules should be made

to affect the 2004 conventions.

In addition to these comments,

speakers addressed a number of

other issues raised in the NPRM,

including:

• Winding-down costs of publicly

funded presidential campaigns;

• Primary expenditure limitations

and repayments;

• Permissible uses of General

Election Legal and Accounting

Compliance (GELAC) funds

consistent with the BCRA;

• Quarterly and monthly reporting

requirements for Presidential

candidates;

• Several specific issues related to

expenditures by campaigns,

including salaries to candidates,

gifts and bonuses and press

reimbursement for travel costs;

• Mitigating the effect of a potential

shortfall in the Presidential primary matching payment account;

• Expenditures by a multicandidate

political committee for qualified

campaign expenses of a presidential candidate; and

In the NPRM, the Commission

sought comments on whether host

committees and municipal funds for

national nominating conventions are

“agents” of a national party committee or are directly or indirectly

established, financed, maintained or

controlled by that committee. The

BCRA also prohibits an entity

directly or indirectly established,

financed, maintained or controlled

by, or acting on behalf, a federal

candidate or officeholder from

raising or spending nonfederal funds

in connection with a federal election. 2 U.S.C. §441i(e)(1). The

NPRM requested comments on

whether expenses of a host or

municipal committee are in connection with a federal election.

In contrast, convention committees, as they have been organized in

the past, have been directly or

indirectly established, financed,

maintained or controlled by a

national party committee. Thus, one

proposal would ban convention

committees from raising and

spending nonfederal funds. The

NPRM also sought comments on

whether this prohibition would bar

convention committees from

accepting many of the in-kind

donations typically provided by host

committees and municipal funds.

At the hearing, Steve Weissman,

Associate Director of the Campaign

Finance Institute, presented data

from a study his organization had

prepared showing a sizeable increase in spending on the national

nominating conventions and private

funding of host committees by

corporations and large donors from

1980 to 2004. Others, however,

disputed any implication that such

spending was politically motivated.

Robert Bauer from Perkins Coie

argued that corporate sponsorship of

the conventions is part of a larger

general trend in increased corporate

sponsorship. Joseph Sandler,

representing the Democratic National Committee and Democratic

National Convention Committee,

testified that a similar increase in (continued on page 10)
Federal Election Commission RECORD July 2003

10

dressed to the satisfaction of the

complainant. (ADR 098; MUR 5290)

5. The Commission reached

agreement with Dunn Lampton for

Congress and its treasurer Wayne

Hutchinson regarding the respondents’ failure to provide contributor

information, report contributions

and accurately report disbursements

on its FEC disclosure reports. The

respondents agreed to pay a $500

civil penalty and to work with the

Reports Analysis Division to

terminate the committee. (ADR 102)

6. The Commission closed the

case involving Pat Ahumada for

Congress, its treasurer Herbert G.

Ames and Pat Ahumada, Jr. The

case involved allegations that the

respondents failed to file timely

reports. The respondents contended

that they attempted to comply with

the Act at all times. The ADR

Office recommended that the

Commission close the case and

expend no further resources on this

matter. (ADR 109; MUR 5137)

7. The Commission closed the

case involving Ian Hoffman and

allegations concerning a fraudulently obtained court judgment for

the payment of salary for campaign

services. The ADR Office recommended that the Commission close

the case and expend no further

resources on this matter, given that

violations of the Act were not substantiated. (ADR 111; MUR 5317)

8. The Commission closed the

case involving Chapman for Congress and its treasurer Norma

Minnis concerning allegations that

the respondents violated the Act’s

disclaimer rules on approximately

fifty copies of a flyer distributed at

an association conference. The ADR

Office recommended that the

Commission close the case and

expend no further resources on this

matter. (ADR 115; MUR 5318)

9. The Commission closed the

case involving Friends of Bennie

Thompson, its treasurer Reuben V.

Anderson and Isaac Byrd, Esq. The

case involved alleged violations of

contribution limits and failure to

Regulations

(continued from page 9)

• Audits of host committees and

municipalities.

The complete list speakers’

comments1

 from this hearing are

available on the FEC web site at

http://www.fec.gov/pdf/nprm/

public_financing/comments.html.✦

—Amy Kort

1 The following individuals testified at

the hearing: Donald McGahn (National

Republican Congressional Committee),

Robert Bauer (Perkins Coie), Paul

Sanford (FECWatch, Center for

Responsive Politics), Steve Weissman

(Campaign Finance Institute), Kenneth

Gross and Ki Hong (New York City

Host Committee), Cheryl Cronin and

David Passafaro (Boston Host Committee), Joseph Sandler and Neil Reiff

(Democratic National Committee,

Democratic National Convention

Committee), Thomas Josefiak and

Charles Spies (Republican National

Committee).

ADR Program Update

The Commission recently

resolved 11 additional cases under

the Alternative Dispute Resolution

(ADR) program. The respondents,

the alleged violations of the Federal

Election Campaign Act (the Act)

and the penalties assessed are listed

below.

1. The Commission closed the

case involving Ron Kirk, the Ron

Kirk for Senate Committee and its

treasurer Paul Wagemen. The case

involved allegations that the respondents solicited unlawful contributions for a primary runoff election

and a fundraiser when the press

reported that the committee did not

carry debt from the primary election. The respondents noted previAlternative

Dispute

Resolution

ous reports of debt and that the

solicitation was for legal fundraising

for the runoff election. The ADR

Office recommended that the

Commission close the case and send

an appropriate letter. (ADR 073;

MUR 5253)

2. The Commission reached

agreement with Citizens BankIllinois N.A., the Berwyn Regular

Democratic Organization and its

treasurer Fred Turner, concerning

contributions from a national bank.

Citizens Bank agreed to pay a $500

civil penalty and to distribute to its

officers a memorandum reiterating

the guidelines for national banks’

participation in politically related

activities. Berwyn Regular Democratic Organization and Mr. Turner

agreed to pay a $500 civil penalty

and to distribute a memorandum to

all organization staff and volunteers

on the organization’s current mailing

list detailing appropriate solicitations

on contributions and expenditures.

(ADR 089; MUR 5292)

3. The Commission closed the

case involving Kevin Kelly for

Congress and its treasurer Richard

Young, the Michigan Democratic

State Central Committee and its

treasurer Roger Winkelman, and the

11th District Democratic Committee

and its treasurer Barbara Johnson.

The case involved allegations of

excessive contributions, which the

respondents effectively argued were

timely refunded. The ADR Office

recommended that the Commission

close the case and send an appropriate letter. (ADR 094; MUR 5314)

4. The Commission closed the

case involving allegations that

Kaiser Permanente-Colorado failed

to provide its employees’ union with

payroll deduction for voluntary

contributions to the union’s separate

segregated fund (SSF) similar to

that provided to company executives

and administrative staff for contributions to the corporation’s SSF.

The ADR Office recommended that

the Commission take no further

action in this case because the issue

raised in this matter had been ad-
July 2003 Federal Election Commission RECORD

11

Outreach

Campaign Finance Law

Conferences in Chicago and

San Diego

In September and October the

Commission will hold conferences

for House and Senate campaigns,

political party committees and

corporations, labor organizations,

trade associations, membership

organizations and their respective

PACs. The conferences will consist

of a series of workshops conducted

by Commissioners and experienced

FEC staff who will explain how the

federal campaign finance law, as

amended by the Bipartisan Campaign Reform Act of 2002 (BCRA),

applies to each of these groups.

Workshops will specifically address

rules for fundraising and reporting,

and will explain the new provisions

of the BCRA. A representative from

the IRS will also be available to

answer election-related tax questions.

Conference in Chicago

The Commission will hold a

conference in Chicago, IL, September 9-10, 2003, at the Millennium

Knickerbocker Hotel. The registration fee for this conference is $385,

which covers the cost of the conference, materials and meals. A $10

late fee will be assessed for registration forms received after August 18.

The Millennium Knickerbocker

Hotel is located at 163 E. Walton

Place. A room rate of $169 per night

is available to conference attendees

who make room reservations on or

before August 18 and identify

themselves as attending the FEC

conference. Call 800/621-8140 or

312/751-8100 to make reservations.

Conference in San Diego

The FEC will hold a conference

in San Diego, CA, October 28-29,

2003, at the Hyatt Regency Islandia.

The registration fee is $385, which

cover the cost of the conference,

materials and meals. A $10 late fee

The first number in each citation

refers to the “number” (month) of

the 2003 Record issue in which the

article appeared. The second

number, following the colon,

indicates the page number in that

issue. For example, “1:4” means

that the article is in the January

issue on page 4.

Advisory Opinions

2002-12: Disaffiliation of corporations and their PACs, 2:8

2002-14: National party

committee’s lease of mailing list

and sale of ad space and trademark license, 3:5

2002-15: Affiliation of trade associations, 4:8

Index

will be assessed for registration

forms received after October 6.

The Hyatt Regency Islandia is

located at 1441 Quivira Road. A

room rate of $159 per night is

available for conference attendees

who make reservations on or before

October 6. To make reservations

call 800/233-1234 and state that you

are attending the FEC conference.

Registration Information

Conference registration information will available online in July.

Conference registrations will be

accepted on a first-come, firstserved basis. Attendance is limited

to two attendees per organization.

FEC conferences are selling out

quickly this year, so please register

early. For registration information:

• Call Sylvester Management

Corporation at 800/246-7277;

• Visit the FEC web site at http://

www.fec.gov/pages/

infosvc.htm#Conferences; or

• Send an e-mail to

toni@sylvestermanagement.com.✦

—Amy Kort

report contributions. The respondents contend that they have no

information on the alleged in-kind

contributions. The ADR Office

recommended that the Commission

close the case and expend no further

resources on this matter. (ADR 116;

MUR 5319)

10. The Commission closed an

additional case involving Chapman

for Congress and its treasurer

Norma Minnis concerning allegations that the respondents violated

the Act’s disclaimer rules on

approximately fifty copies of a flyer

distributed at an association conference. The ADR Office recommended that the Commission close

the case and expend no further

resources on this matter. (ADR 117;

MUR 5320)

11. The Commission closed the

case involving Votenet Solutions,

Inc., concerning the respondent’s

alleged failure to forward contributions timely to the recipient committee. The respondent contends that

the untimely distribution of the

contribution occurred due to a

technological difficulty and was

corrected as soon as it became

apparent. The ADR Office recommended that the Commission close

the case and expend no further

resources on this matter. (ADR 124;

MUR 5339)✦

—Amy Kort

FEC to Hold State

Outreach Training

FEC staff will visit Austin, TX,

Denver, CO, and Nashville, TN,

in August to hold free training

sessions for federal candidates,

party committees and PACs.

Additional information on these

sessions will be available on the

FEC web site at http://

www.fec.gov/pages/

infosvc.htm#Conferences. To

register, call 800/434-9530 (press

1, then 3) or send an e-mail to

info@fec.gov. (continued on page 12)
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Federal Election Commission RECORD July 2003

2003-1: Nonconnected committee’s

allocation of administrative

expenses, 4:9

2003-2: Socialist Workers Party

disclosure exemption, 5:1

2003-3: Solicitation of funds for

nonfederal candidates by federal

candidates and officeholders, 6:1

2003-4: Corporation’s matching

charitable contribution plan, 6:3

2003-6: Transfer of payroll deduction authority, 7:4

2003-7: State leadership PAC’s

refund of nonfederal funds, 7:5

Compliance

ADR program cases, 2:11; 3:3;

5:10; 7:10

Letter notification procedures, 3:2

Administrative Fine program cases,

1:25; 2:13; 3:4; 5:7; 7:6

MUR 5187: Corporate reimbursements of contributions, 1:22

MUR 5208: Facilitation by national

bank, 2:1

MUR 5270: Failure to accurately

report disbursements and cash-onhand, 6:7

Public hearing on enforcement

procedures, 6:7; 7:7

Court Cases

_____ v. FEC

– Cunningham, 1:19

– Greenwood for Congress, 4:4

– Hawaii Right to Life, Inc., 1:20

– Lovely, 3:4

– Luis M. Correa, 5:5

– McConnell et al., 6:1

FEC v. _____

– Beaumont, 1:20; 7:1

– California Democratic Party, 5:5

– Fulani, 2:8

– Freedom’s Heritage Forum, 2:8;

5:5

– Toledano, 1:20

Regulations

Administrative fines, final rules, 4:1

BCRA reporting, final rules, 1:14

BCRA technical amendments, 2:6

Biennial limit, clarification, 2:1

Brokerage loans and credit lines, 2:4

Contribution limits increase, 1:6

Contribution limits and prohibitions;

delay of effective date, 2:6

Coordinated and independent

expenditures, final rules, 1:10

Disclaimers, fraudulent solicitation,

civil penalties and personal use of

campaign funds, final rules, 1:8

Leadership PACs, NPRM, 2:4

Millionaires’ Amendment, interim

final rules, 2:2

Public Presidential funding and

conventions, NPRM, 5:1; postponement of hearing date, 6:9;

public hearing, 7:8

Reports

April reporting reminder, 4:1

Draft forms and e-filing formats

available for public comment, 1:2

Filing form 3Z-1, 7:2

New forms available, 3:1

July reporting reminder, 7:1

Reports due in 2003, 1:3

Statements of Candidacy/Organization for authorized committees, 3:2

Texas special election reporting, 4:4

Index

(continued from page 11)