10

11

12

13

14
15
16
17
18
19

publication of this notice, it intends to exercise its discretion in enforcement matters by
naming treasurers as follows:

1. In enforcement actions where a political committee is a respondent, the
Commission will name as respondents the committee and its current treasurer
“in (his or her) official capacity as treasurer.”

2. In enforcement actions where information indicates that treasurer may have
violated a provision of the Act or regulations that applies specifically to
treasurers, or a provision that applies generally to individuals, the Commission
may consider the treasurer a subject to the action “in (his or her) personal

capacity.”

Bradley A. Smith

Chairman

Federal Election Commission
DATED:
BILLING CODE: 6715-01-U

16


10

11

12

13

14

15

16

17

18

contribution); FEC v. Gus Savage for Cong. ’82 Comm., 606 F. Supp. 541, 547 (N.D. Ill.

1985) (“It is the treasurer, and not the candidate, who becomes the named defendant in
federal court, and subjected to the imposition of penalties ranging from substantial fines to
imprisonment.”); 104.14(d) ("Each treasurer of a political committee, and any other person
required to file any report or statement under these regulations and under the Act shall be
personally responsible for the timely and complete filing of the report or statement and for
the accuracy of any information or statement contained in it.") (emphasis added).

Thus, a treasurer may be named as a respondent in a Matter Under Review in his or
her personal capacity, and findings may be made against a treasurer in the same capacity,
when the MUR involves the treasurer’s violation of a legal obligation that the statute or
regulations impose specifically on committee treasurers or when a reasonable inference from
the alleged violation is that the treasurer knew, or should have known, about the facts
constituting a violation.® In practice, however, the Commission intends to consider a
treasurer the subject of an enforcement proceeding in his or her personal capacity only when
available information (or inferences fairly derived therefrom) indicates that the treasurer had
knowledge that his or her conduct violated a duty imposed by law, or where the treasurer
recklessly failed to fulfill his or her duties under the act and regulations, or intentionally

deprived himself or herself of facts giving rise to the violations. If, at any time in the

8 Indeed, if FECA were construed to impose liability on treasurers only in their official
capacities, it would effectively mean that only committees are liable for violations under the
statute — which would have been easy enough for Congress to accomplish by writing the Act
to impose reporting, recordkeeping, and other duties on "committees" rather than
"treasurers." In fact, in some instances, the Act and the Commission’s regulations
specifically impose obligations on committees and committee officers and candidates. See,
e.g. 2 U.S.C. 441a(f) (receipt of excessive contributions), 11 C.F.R. 104.7(b) (best efforts).

10


10

11

12

13

14

15

16

17

18

19

20

21

22

23

FEDERAL ELECTION COMMISSION
11 CFR Part 111
[NOTICE 2004 -]

STATEMENT OF POLICY REGARDING

TREASURERS SUBJECT TO ENFORCEMENT PROCEEDINGS

AGENCY:

ACTION:

SUMMARY:

Federal Election Commission.

Statement of Policy.

The Commission is issuing a Policy Statement to clarify when, in the
course of an enforcement proceeding (known as a Matter Under
Review or “MUR”), a treasurer is subject to Commission action in his
or her official or personal capacity, or both. Under this policy, when
the Commission investigates alleged violations of the Federal Election
Campaign Act, as amended, the Presidential Election Campaign Fund
Act, and the Presidential Primary Matching Payment Account Act
(collectively “the Act” or “FECA”) involving a political committee,
the treasurer will typically be subject to Commission action only in his
or her official capacity. However, when information indicates that a
treasurer has knowingly and willfully violated a provision of the Act or
regulations, or has recklessly failed to fulfill duties specifically
imposed on treasurers by the Act, or has intentionally deprived himself
or herself of the operative facts giving rise to the violation, the
Commission will consider the treasurer to have acted in a personal

capacity and make findings (and pursue conciliation) accordingly.


10

11

12

13

14

15

16

17

18

19

supplemental probable cause brief (incorporating the prior probable cause brief), which states
that the Commission found probable cause to believe against the committee and the
treasurer’s predecessor and will recommend probable cause against the new treasurer. After
receiving a response or waiting until the expiration of the response period, OGC typically
returns to the Commission with a recommendation as to the new treasurer.

When the Commission pursues a current treasurer in his or her official capacity,
successor treasurers will be substituted for the predecessor treasurer. In such cases, the
Commission is pursuing the official position (and, therefore, the entity), not the individual
holding the position. See Will, 491 U.S. at 71. Because an official capacity action is an
action against the treasurer’s position, the Commission may summarily substitute a new
treasurer in his or her official capacity at any stage prior to a finding of probable cause to
believe.'?

When a predecessor treasurer may personally liable, the Commission could pursue the

predecessor treasurer individually, and not substitute the successor treasurer for the

predecessor treasurer individually. See fn. 7; Graham, 473 USS. at 167-68. There would be
no legal basis for imputing personal liability from a predecessor treasurer’s misconduct to a
successor treasurer who did not personally engage in the misconduct.

If the Commission were to pursue a treasurer both officially and personally and this

treasurer is later replaced, the Commission could pursue the predecessor treasurer for any

10 Pursuant to the final policy, the Commission is not legally obligated to undertake the
requirements of 2 U.S.C. 437g(a)(3) when a successor treasurer begins his or her position;
although not legally required to do so, the Commission would intend to inform a new
treasurer of the pending action and make copies of the briefs available to the successor
treasurer.

14


10

11

12

13

14

15

16

17

18

19

20

21

22

23

flexibility in processing its cases, and because the policy statement combined with existing
laws and Commission regulations provide sufficient notice to treasurers of their

responsibilities, the suggested changes were not implemented.

18 The Official/Personal Capacity Distinction

In the seminal case of Kentucky v. Graham, 473 U.S. 159 (1985), the United States
Supreme Court discussed the distinction between official capacity and personal capacity
suits, The Court determined that a suit against an officer in her official capacity “generally
represent[s] only another way of pleading an action against an entity of which an officer is an
agent.” Id. at 165. In other words, an official capacity proceeding “is not a suit against the
official but rather is a suit against the official’s office.” Will v. Mich. Dept. of State Police,
491 U.S. 58, 71 (1989). Accordingly, “an official-capacity suit is, in all respects other than
name, to be treated as a suit against the entity.” Graham, 473 U.S. at 166. Therefore, in an
official capacity suit, the plaintiff seeks a remedy from the entity, not the particular officer
personally.

A “personal-capacity action is . . . against the individual defendant, rather than . . . the
entity that employs him.” Id. at 167-68. Since a “[p]ersonal-capacity suit[] seek[s] to
impose personal liability upon” a particular individual, the individual is the true party in
interest. Id. Liability lies with the particular officer personally, not with the officer’s

position. See id. at 166 n.11 (“Should the official die pending final resolution of a personal-

capacity action, the plaintiff would have to pursue his action against the decedent’s estate.”);

see also Hafer v. Melo, 502 U.S. 21, 27 (1991) (“officers sued in their personal capacity

come to court as individuals”).


10

11

12

13

14

15

16

17

18

“personal” capacity.' Specifically, when a complaint asserts sufficient allegations to warrant
naming a political committee as a respondent, the committee’s current treasurer will also be
named as a respondent in his or her official capacity. In these circumstances, reason-to-
believe and probable cause findings against the committee will also be accompanied by
findings against the current treasurer in his or her official capacity. When the complaint
asserts allegations that involve a past or present treasurer’s violation of obligations that the
Act or regulations impose specifically on treasurers, then that treasurer may, in the
circumstances described below, be named in his or her personal capacity, and findings may
be made against the treasurer in that capacity. Thus, in some matters the current treasurer
could be named in both official and personal capacities. Maintaining the Commission’s
ability to pursue a treasurer as a respondent in either official or personal capacity allows the
Commission discretion to fashion an appropriate remedy for violations of the Act. 2

Notably, political committees are artificial entities that can act only through their
agents, such as their treasurers, and often can be, by their very nature, ephemeral entities that
may exist for all practical purposes for a limited period, such as during a single election
cycle. Due to these characteristics, identifying a live person who is responsible for

representing the committee in an enforcement action is particularly important. Without a live

| The terms “official capacity” and “representative capacity” are generally interchangeable,
as are the terms “personal capacity” and “individual capacity.” See McCarthy v. Azure, 22
F.3d 351, 359 n.12 (1% Cir. 1994).

2 In any scenario, the Commission will, of course, remain free to exercise its prosecutorial
discretion not to pursue a respondent. For example, the Commission, in some cases, may
decide not to pursue a predecessor treasurer who technically has personal liability where the
committee, through its current treasurer, has agreed to pay a sufficient civil penalty and to
cease and desist from further violations of the Act.


10
11
12
13
14
15
16
17
18
19
20
21
22
23

24

DATE:

FOR FURTHER
INFORMATION
CONTACT:

This Policy Statement also addresses situations in which treasurers are
subject to Commission action in both their official and personal
capacities, and situations where successor treasurers are named.

The goal in adopting this policy is to clarify when a treasurer
is subject to Commission action in a personal or official capacity,
while at the same time preserving the Commission’s ability to obtain
an appropriate remedy that will satisfactorily resolve enforcement
matters, or to seek relief in court, if necessary, against a live person.
Importantly, the policy is grounded in the statutory obligations
specifically imposed on treasurers and well-established legal
distinctions between official and personal capacity proceedings.

December 16, 2004.

Peter G. Blumberg, Attomey, 999 E Street, NW, Washington, D.C.

20463, (202) 694-1650 or (800) 424-9530.

SUPPLEMENTARY

INFORMATION:

L Introduction.

The Commission is modifying its current practices to specify more clearly when a

treasurer is subject to a Commission enforcement proceeding in his or her “official” and/or


10

11

12

violations for which he or she is personally liable, and substitute the successor treasurer for
official capacity violations. Absent some independent basis of liability, the Commission does

not intend to pursue intermediate treasurers.'! See Cal. Democratic Party v. FEC, 13

F. Supp. 2d 1031, 1037 (E.D. Cal. 1998) (dismissing individual capacity claims against a
former treasurer because “there is no allegation that [the treasurer] violated any personal
obligation” and dismissing official capacity claims against him “since [he] is no longer
treasurer . . . and thus, is not the appropriate person against whom an official capacity suit can

be maintained . . . .”).'

VII.___Final Statement of Policy

In light of the considerations explained above and after carefully reviewing the

comment submitted on this matter, the Commission hereby announces that, from the date of

'! For example, while Treasurer A is the treasurer for Joe Smith for Congress, a violation
occurs that subjects A to official liability and potentially to individual liability. Treasurer A
would be named in his official capacity and notified in a reason-to-believe notification of the
potential for personal liability. After the enforcement action has begun, Treasurer A resigns
and Treasurer B takes over. The Commission would pursue Treasurer B in her official
capacity, and if the circumstances warranted, Treasurer A in his individual capacity. If
Treasurer B resigns and is succeeded by Treasurer C prior to the conclusion of the
enforcement matter, the Commission would then continue to pursue Treasurer A in his
individual capacity and pursue Treasurer C in her official capacity. Treasurer B would no
longer be named in her official capacity.

12 A deeper examination of the court file indicates that—despite the California Democratic
Party court’s assertion to the contrary—the Commission never actually pled that the treasurer
in this case was personally liable. Rather, the complaint references the treasurer “as
treasurer” and the Commission’s response to the treasurer’s motion to dismiss indicates that
the Commission was pursuing the treasurer “in his official capacity.” Compl., paragraphs 8,
58-59, Prayer paragraphs 1—5; Resp. to Def. Mot. to Dismiss, p. 21. However, the court’s
statement in California Democratic Party underscores the need for the Commission to
delineate more clearly the capacity in which it pursues treasurers.

15


10

11

12

13

14

15

16

17

18

19

circumstances, the Commission may decide to find reason to believe the treasurer has
violated the Act in his or her personal capacity, as well as finding reason to believe the
committee violated the Act.

This statement of policy is intended to provide clearer notice to respondents and the
public as to the nature of the Commission’s enforcement actions, improve the perception of
fairness throughout the regulated community, and merge the Commission’s treasurer
designation into conceptually familiar legal principles for the federal judiciary. The
statement first surveys the law on the official/personal capacity distinction; next, addresses
when the Commission will proceed as to treasurers in their official or personal capacity or
both; and finally, resolves the reoccurring issues of successor treasurers and substitution.

The Commission’s Proposed Statement of Policy Regarding Naming of Treasurers in
Enforcement Matters was published in the January 28, 2004 Federal Register. 69 Federal
Register 4092 (January 28, 2004). One comment was received. The commenter stated that
the Commission’s effort to clarify its treasurer naming policy is welcome, but he made
several recommendations for how the Commission could assist treasurers to better
understand their potential personal liability, such as requiring separate notices in instances
where a treasurer was named in his or her individual and official capacities, and by enacting
the policy’s proposals through a rulemaking, rather than a policy statement. The

commenter’s suggestions were considered, but in order to allow the Commission to retain

3 As discussed infra Part II., the phrases “official capacity” and “personal capacity” are legal
terms of art that permeate such fields as sovereign immunity, bankruptcy, corporations, and
federal procedure. Their usage instantaneously identifies for the judiciary when the
Commission is pursuing treasurers by virtue of their position, rather than by product of their
actions.


AGENDA DOCUMENT NO. 04-115

RECEIVED
+ COERAL ELECTION

COMMISSION.
FEDERAL ELECTION COMMISSION SEGRETA
WASHINGTON, D.C. 20463 200u DEC 10 Pp S 19

DEC 1 0 2004

AGENDA ITEM
For Meeting of|_ /2Z-/-04

SUBMITTED LATE

TO: The Commission

THROUGH: James A. Pehrkoy
Staff Director

FROM: Lawrence H. Norton
General Counsel

Rhonda J. Vosdingh
Associate General Counsel for Enforcement

Peter G. Blumberg P YA &

Attorney

SUBJECT: Treasurer Policy — Official and Individual Capacities

I. Introduction

The Office of General Counsel recommends that the Commission adopt the attached
Statement of Policy Regarding Treasurers Subject to Enforcement Proceedings. The proposed
Statement clarifies when treasurers as respondents are subject to Commission action in their
official capacity as treasurer and when the Commission will name individual treasurers as
respondents in their personal capacity.

A version of the proposed Statement was published in the January 28, 2004 Federal
Register. 69 Federal Register 4092 (January 28, 2004). The published document sought
comments on all aspects of the draft policy, including whether there are circumstances
warranting flexibility in the policy’s application, whether the Commission should consider a
treasurer’s “best efforts” to comply with the law, and whether the Commission should apply this
proposed policy in matters arising out of the Administrative Fines program. One comment, from
Paul E. Sullivan of Foley & Lardner, was received. This memorandum briefly reviews Mr.
Sullivan’s comment and recommends that the Commission adopt the attached Treasurer Naming
Policy. See Attachment.


10

11

12

13

14

15

16

17

18

Clearly indicating that the current treasurer is a party to an enforcement proceeding in
his or her official capacity will improve the Commission’s enforcement of the law in a
number of ways. Most importantly, it clarifies that findings by the Commission (whether
“Reason To Believe” or “Probable Cause To Believe”) or the signing of a conciliation
agreement only concerns the treasurer in his or her capacity as representative of the
committee, not personally. The practice also ensures that a named individual who signs the
conciliation agreement on behalf of the committee (or obtains legal representation on behalf
of the committee) is the one empowered by law to disburse committee funds to pay a civil
penalty, disgorge funds, make refunds, and carry out other monetary remedies that the
committee agrees to through the conciliation agreement.° Also, naming a treasurer (in his or
her official capacity), as opposed to naming simply the office of treasurer or just the
committee, not only provides the Commission with an individual in every instance to serve
with notices throughout the proceeding, but also results in more accountability on behalf of
the committee — that is, a particular person who will ensure that a committee is responsive to
Commission findings.® Finally, specifying whether a treasurer is a party to an enforcement
proceeding in his or her official or personal capacity is consistent with use of these terms as
pleading conventions in court actions. A probable cause finding against a treasurer in his or

her official capacity makes clear to a district court in enforcement litigation that the

5 In the absence of a treasurer, “the financial machinery of the campaign grinds to a halt...
.” FEC v. Toledano, 317 F.3d 939, 947 (Cha Cir. 2003), reh’g denied; see 2 U.S.C. 432(a)
(“No expenditure shall be made... without the authorization of the treasurer or his or her
designated agent.”); 11 CFR 102.7(a) (designation of assistant treasurer).

© Such accountability may be especially helpful in matters involving committees that tend to
be ephemeral — existing for only a short time before permanently disbanding operations.



10

11

12

13

14

15

16

17

The “distinction between claims aimed at a defendant in his individual as opposed to
representative capacity can be found across the law.” McCarthy, 22 F.3d at 360 (citing
numerous Supreme Court, lower court, and state cases referencing differences between
individual and official capacity claims in multiple fields of law).* The official
capacity/individual capacity distinction also carries societal significance. As the McCarthy
court explained:

The ubiquity of the [official capacity/individual capacity] distinction is a

reflection of the reality that individuals in our complex society frequently act

on behalf of other parties—a reality that often makes it unfair to credit or

blame the actor, individually, for such acts. At the same time, the law strikes

a wise balance by refusing automatically to saddle a principal with total

responsibility for a representative’s conduct, come what may, and by declining

mechanically to limit an injured party’s recourse to the principal alone,

regardless of the circumstances.

I. Treasurers in Their Official Capacity

4 See Graham, 473 U.S. at 165 (42 U.S.C. 1983); Stafford v. Briggs, 444 U.S. 527, 544
(1980) (venue determination); Ex Parte Young, 209 USS. 123, 159 (1908) (Eleventh
Amendment); Northeast Fed. Credit Union v. Neves, 837 F.2d 531, 534 (1st Cir. 1988)
(jurisdictional purposes); Pelkoffer v. Deer, 144 B.R. 282, 285-86 (W.D. Pa. 1992)
(bankruptcy); Estabrook v. Wetmore, 529 A.2d 956, 958 (N.H. 1987) (applying doctrine that
acts of a corporate employee performed in his corporate capacity generally do not form the
basis for personal jurisdiction over him in his individual capacity).



10

11

12

13

14

15

16

17

18

19

20

21

22

23

person to provide notice to and/or to attach liability to, the Commission may find itself at a
significant disadvantage in protecting the public interest and in ensuring compliance with the
laws it is responsible for enforcing. By virtue of their authority to disburse funds and file
disclosure reports and to amend those reports, treasurers of committees are in the best
position to carry out the requirements of a conciliation agreement such as paying a civil
penalty, refunding or disgorging contributions, and amending reports.

The Act designates treasurers to play a unique role in a political committee; indeed,
a treasurer is the only office a political committee is required to fill. 2 USS.C. § 432(a).
Without a treasurer, committees cannot undertake the host of activities necessary to carry out
their mission, including receiving and disbursing funds and publicly disclosing their finances
in periodic reports filed with the Commission. Id.; 2 U.S.C. § 434(a)(1). Given this statutory
role, especially the authority to receive and disburse funds (e.g., pay a civil penalty, refund
improper contributions, disgorge ill-gotten funds) on behalf of the committee, designating the
treasurer as the representative of the committee for purposes of compliance with the Act
makes sense.

Although the Commission may be entitled to take action as to a treasurer in both an
official and individual capacity, in the typical enforcement matter the Commission expects
that it will proceed against treasurers only in their official capacities. However, the
Commission will consider treasurers parties to enforcement proceedings in their personal
capacities where information indicates that the treasurer knowingly and willfully violated an
obligation that the Act or regulations specifically impose on treasurers or where the treasurer
recklessly failed to fulfill the duties imposed by law, or where the treasurer has intentionally

deprived himself or herself of the operative facts giving rise to the violation. In these


Memorandum to the Commission
Treasurer Policy — Official and Individual Capacities

Page 4
2. Direct the Office of General Counsel to transmit the Statement of Policy to
Congress in accordance with the Congressional Review Act, 5 U.S.C.
§ 801 et seq.
Attachment

Draft Final Statement of Policy


10

11

12

13

14

15

16

17

18

proceeding, the Commission is persuaded that the treasurer did not act with the requisite state
of mind, subsequent findings against the treasurer will only be made in his or her official
as
capacity.
Should the Commission file suit in district court following a finding of probable cause
against a treasurer in his or her personal capacity, judicial relief, including an injunction and

payment of a civil penalty, could be obtained against the treasurer personally. Graham, 473

US. at 166-168. Likewise, when the Commission obtains relief from a treasurer personally,
the obligation will follow the individual. Thus, when a treasurer in his or her personal
capacity agrees to pay a civil penalty through a conciliation agreement, or is ordered to pay a
civil penalty by a district court, a personal obligation exists to pay the civil penalty. (A
separate civil penalty would likely be assessed against the committee itself.) Likewise, a
cease and desist provision (negotiated through conciliation) or an injunction (imposed by a
district court) against a treasurer in his or her personal capacity will still apply to that
treasurer in the event he or she subsequently becomes treasurer with another committee. Cf.

Sec’y Exch. Comm’n v. Coffey, 493 F.2d 1304, 1311 n.11 (6" Cir. 1974) (“The significance

of naming an officer . . . personally is that ‘otherwise he is bound only as long as he remains
an officer . . ., whereas if he is named [personally] he is personally enjoined without limit of

time.’”) (quoting 6 L. Loss, Securities Regulation 4113 (1969, supp. to 2d ed.)).

° Conversely, when a reason-to-believe finding is made against a treasurer in his or her
official capacity only, but the potential violations at issue involve obligations specifically
imposed by the Act or regulations on treasurers, the notice of the finding will be accompanied
by a letter advising that the Commission could later decide to pursue the treasurer in a
personal capacity if information shows that the treasurer knowingly and willfully violated the
Act, or recklessly failed to fulfill the duties imposed by law, or intentionally deprived himself
or herself of the operative facts giving rise to the violation.

11


10

11

12

13

14

15

16

17

18

19

20

21

22

23

In cases where the treasurer is subject to Commission action in both official and
personal capacities, the respondents could be named as “John Doe for Congress and Joe
Smith, in his official capacity as treasurer and in his personal capacity.” Alternatively, the
respondents could be named as “John Doe for Congress and Joe Smith, in his official
capacity as treasurer” and “Joe Smith, in his personal capacity.” Regardless of the form of
the notification, where a treasurer has been named in both his or her official and personal
capacities, any resulting conciliation agreement would be signed by the treasurer on behalf of

both the committee and the treasurer in his or her personal capacity.

VI. Successor Treasurers/Substitution

An issue closely related to the official/personal capacity distinction is whether a
successor treasurer may be substituted for a predecessor treasurer in a matter under review.
Often the specific individual who was the treasurer at the time of a violation is no longer the
treasurer during the enforcement process. Whether the successor treasurer or the predecessor
treasurer should be named as the respondent depends on whether the Commission is pursuing
the treasurer in his or her official capacity, personal capacity, or both.

Currently, when OGC discovers that a committee has changed treasurers after the date
of the activity on which the finding was based, OGC typically notes the change of treasurer,
the date of the change, the former treasurer’s name, and indicates whether an amendment was
made to the Statement of Organization in OGC’s next report to the Commission. Ifa
treasurer change is made after a finding of reason to believe, then OGC typically includes the
new treasurer and notes the change in its next report on the matter. Ifa treasurer change is

made after a finding of probable cause to believe, OGC sends the new treasurer a

13


Memorandum to the Commission
Treasurer Policy — Official and Individual Capacities
Page 3

statement describes a number of specific statutes and regulations that place responsibilities on
treasurers, and to that extent, the Commission has further identified unique provisions covered by
the policy. Moreover, the attached Policy Statement itself will be published in the Federal
Register, could be placed on the Commission’s website, could be summarized in the FEC
Record, and could be referenced in FEC brochures. Through this Policy Statement, the
Commission would announce its intentions in certain areas rather than attempting an exhaustive
list of factors it can consider in deciding who to name as a respondent, thereby achieving the goal
of notice while retaining flexibility for the Commission, especially given the expectation that the
naming of treasurers in a personal capacity will occur relatively infrequently.

III. Final Statement of Policy

After reviewing the comment received on the Draft Statement, the Office of General
Counsel has prepared a final Statement of Policy regarding the naming of treasurers as
respondents in enforcement matters. The Office of General Counsel recommends that the
Commission issue this Statement of Policy and implement it immediately.

This Office further recommends that the Statement of Policy be transmitted for
publication in the Federal Register as required by the Freedom of Information Act and submitted
to Congress in accordance with the Congressional Review Act (“CRA”). 5 US.C.

§§ 552(a)(1)(D) and 801(a).

This document represents a general statement of policy announcing the general course of
action that the Commission intends to follow. This policy statement does not constitute an
agency regulation requiring notice of proposed rulemaking, opportunities for public participation,
prior publication, and delay in effective date under 5 U.S.C. § 553 of the Administrative
Procedure Act (“APA”). As such, it does not bind the Commission or any member of the general
public. The provisions of the Regulatory Flexibility Act, which apply only when notice and
comment are required by the APA or another statute, are not applicable. Because this non-
binding policy statement is not a “major rule” within the meaning of the CRA and there is no
applicable delay requirement in the Act,! the Statement of Policy may be put into effect
immediately upon its publication in the Federal Register.

Iv. Recommendation

The Office of the General Counsel recommends that the Commission take the following
actions:

1. Approve the attached Statement of Policy for publication in the Federal Register.

‘ We note that the congressional submission requirements and accompanying delay in effective date specified
in 2 U.S.C. § 438(d)(1) and 26 U.S.C. § 9039(c) apply only to a “separable rule of law” and, in any event, were
removed by the Federal Reports Elimination and Sunset Act of 1995, Pub. L. 104-66 (1995).


Memorandum to the Commission
Treasurer Policy — Official and Individual Capacities
Page 2

IL. Discussion of Comment

Mr. Sullivan welcomes the Commission’s effort to clarify its treasurer naming policy and
generally supports the proposal. At the same time, he suggests several changes, both on the
execution of the policy as well as the process for enacting it, that he believes will assist treasurers
to better understand their potential personal liability. While constructive, these suggestions
ultimately are unnecessary.

Specifically, Mr. Sullivan suggests that when a treasurer is a respondent in his or her
official capacity, a reference only to the position of treasurer without including the treasurer’s
name is sufficient. This issue was addressed in the proposed policy statement, where the benefits
of including a specific name were enumerated. For example, the practice ensures that an
individual is empowered by law to disburse civil penalty payments, make disgorgements or
refunds, and carry out other remedies required in conciliation agreements. Also, it is useful to
identify the specific individual who, on behalf of the committee, will be served with notices.
Ensuring that there is a specific person to respond to inquiries and notices on behalf of the
committee also promotes accountability. Finally, it is useful to specify individuals by name in
court pleadings to clarify for the district court the relief being sought. Mr. Sullivan also proposes
that treasurers named in both a personal and an official capacity receive separate notifications
outlining the basis for each finding. The proposed policy statement indicates that the
Commission intends to retain flexibility to process matters on a case-by-case basis, and send
either separate notifications or, in some instances, joint notifications addressing official-capacity
and personal-capacity violations.

Mr. Sullivan also suggests that the policy should affirmatively state that a treasurer found
to have violated the law in his or her official capacity is not personally liable for the payment of
any civil penalties in the event his or her political committee lacks funds to make such a
payment. Mr. Sullivan’s point is already acknowledged in the Policy Statement, where it is noted
that in the post-probable cause to believe stage the Commission would be entitled to civil
penalties only from the political committees when the treasurer has been named a respondent in
an official capacity.

Finally, Mr. Sullivan suggests that a rulemaking on treasurer liability may provide
additional notice to the regulated community and suggests that it would be useful for the
Commission to identify the “unique provisions” for which a treasurer might be pursued in his or
her personal capacity. The proposals regarding when to name a treasurer in his or her personal
capacity are based on the plain letter of the statutes and regulations describing treasurer
responsibilities and obligations; thus, additional rulemaking would be superfluous. As was
pointed out in the draft policy statement, the statute’s use of “treasurers” indicates that Congress
intended treasurer responsibility for certain functions, and the statute constitutes notice to
treasurers. If Congress had intended that only political committees would be held liable for
violations of the Act, it could have easily accomplished this outcome by imposing reporting,
recordkeeping, and other duties on “committees” rather than “treasurers.” The Act and its
implementing regulations are published and readily accessible to treasurers. Further, the policy


10

11

12

13

14

15

16

17

18

Commission is seeking relief against the committee, and would only entitle the Commission

to obtain a civil penalty from the committee. See Graham, 473 US. at 165.

Iv. Treasurers in Their Personal Capacities

The Act places certain legal obligations on committee treasurers, the violation of
which makes them personally liable.” See, e.g., 2 U.S.C. 432(c) (keep an account of various
committee records), 432(d) (preserve records for three years), 434(a)(1) (file and sign reports
of receipts and disbursements). The Commission’s regulations further require treasurers to
examine and investigate contributions for evidence of illegality. See 11 CFR 103.3. Due to
their “pivotal role,” treasurers may be held personally liable for failing to fulfill their
responsibilities under the Act and the Commission’s regulations. See Toledano, 317 F.3d at
947 (“The Act requires every political committee to have a treasurer, 2 U.S.C. 432(a), and
holds him personally responsible for the committee’s recordkeeping and reporting duties,
id. 432(c)(d), 434(a) .... Federal law makes the treasurer responsible for detecting [facial
contribution] illegalities, 11 CFR 103.3(b), and holds him personally liable if he fails to

fulfill his responsibilities, see 2 U.S.C. 437g(d) . . . .”) (emphasis added); see also FEC v.

John A. Dramesi for Cong. Comm., 640 F. Supp. 985 (D.N.J. 1986) (holding treasurer

responsible for failing to “make . . . best efforts to determine the legality of’ an excessive

7 ‘Ifa past or present treasurer violates a prohibition that applies generally to individuals, the
treasurer may be named as a respondent in his or her personal capacity, and findings may be
made against the treasurer in that capacity. In this way, a treasurer would be treated no
differently than any other individual who violates a provision of the Act. The Act and the
Commission’s regulations apply to any “person,” which includes individuals. See, e.g. 2
U.S.C. 432(b) (forward contributions to the committee’s treasurer), 441e (receipt of
contributions from foreign nationals), and 441f (making and knowingly accepting
contributions in the name of another).


10

11

12

13

14

15

16

17

18

19

20

21

22

V. Treasurers in Both Capacities

There will likely be cases in which the treasurer is subject to Commission action in
both his or her official and personal capacity, as explained in supra sections II. and IV. In

such cases, the Commission will clearly designate that the findings are being made against

the treasurer in both capacities. See, e.g., United States v. Johnson 541 F.2d 710, 711 (8"
Cir. 1976) (applying a similar standard in an action involving the Federal Trade Commission
when finding that “(t]he propriety of including a person both as an individual and as a
corporate officer in a cease and desist order has consistently been upheld in instances where

the person included was instrumental in formulating, directing and controlling the acts and

practices of the corporation”) (citing Fed. Trade Comm’n v. Standard Ed. Soc’y, 302 U.S.

112 (1937); Standard Distrib. v. Fed. Trade Comm’n, 211 F.2d 7 (2d Cir. 1954); Benrus

Watch Co. v. Fed. Trade Comm’n, 352 F.2d 313 (ca Cir. 1965)).

For example, if a complaint alleges a violation such as coordination or receipt of
contributions in the name of another, the Commission intends initially to name the treasurer
as a respondent only in his or her official capacity. Notably, in these cases the reporting
violation stems from the same operative facts as the principal violation. Only if the
Commission learns later that the treasurer had knowledge of the operative facts -- for
example, the treasurer knew that an in-kind contribution stemming from coordination went
unreported — or acted recklessly, or intentionally deprived himself or herself of the relevant

facts, might the Commission make findings against the treasurer in his or her personal

capacity.

12