20463 Volume 17, Number 2

10 FEDEWL ROOISTER NJTICES

6 DEBT SE'l"l'LEMENI' P'ORMS

12 INDEX

10 0DMPLlANCE: MURs Released to the Public

4 AD\1ISQRY OPINIaJS

PAR'lY ACTIVITIES

1 Allocating Expenses Through Ballot

Composition

2 Allocation Training

<nJRT CASES

7 FEC v. Augustine for Congress

7 Stern v. FEe

8 FEe v. political Contri~~tions Data

10 FEe v. Webb for Congress committee

10 New Litigation

6 800 LINE: Staff Advances and Salaries

Ballot Composition Method

Under the ballot composition method,

costs are allocated according to the ratio

of federal offices to total federal and

nonfederal offices expected to be on the

ballot in the next general election in the

state or geographic area in which the party

committee is located. To calculate the

ratio, a commdttee counts the number of

categories of offices on the next general

election ballot. 11 eFR l06.5(d)(1).

The ballot composition ratio is calculated at the beginning of each two-year

federal election cycle. 11 CFR 104.10(b)

(1) • state and local party conmti ttees must

therefore calculate the ratio now, based on

the 1992 general election hallot. This

(continued)

o Generic voter drives costs include voter

identification, voter registration and

get-out-the-vote drives that urge the

public to support a particular party but

do not mention sped fic candidates.

11 CFR 106.5(a)(2)(i) and (iv),

999 E Street NW Washington DC

FEDERAL ELECTION COMMISSION

February 1991

I Not e that FEC rules requi~e that other

allocation methods be applied to different

categories of shared federal and nonfederal

expenses (i.e., fundraising, direct candidate support, exempt party activities).

Note also that the allocation rules apply

to organizations that are not "political

committees," as defined under the Federal

Election Campaign Act, but that conduct

both federal and nonfederal activity. For

complete information on allocation, consult

the Federal Register reprint of the new

allocation rules (55 FR 26058, June 26,

1990) and the Record SUpplement on Allocation, published in NOvember 1990. Both

documents, as well as the new reporting

forms, are available from the Co~ssion.

TO order, call 800/424-9530 or 202/376-

3120.

ALLOCATIOO EXPENSES

'I'HR(XGI BALL01' CCMPOSITIOO

Starting with 1991 activity, registe~ed

state and local party committees that conduct federal and nonfederal activity from

separate accounts must use the ballot composition method to allocate thei~ adfidnisI trative and generic voter drive expenses.

Even if the party corrnnittee plans to report

semiannually during 1991 (instead of monthly), the coIlllli.ttee needs to calculate the

ballot composition ratio now and apply it

to current administrative and generic voter

drive expenses. This article explains how

this is done.

h:lmi.nistrative aJKl

Generic voter Drive Expenses

Registered state and local party

committees that maintain separate federal

and nonfederal accounts must allocate all

of their administrative expenses and

generic voter drive costs according to the

ballot composition method. 11 crn

106.5(d) .

o 1ldmi.nistrative expenses include rent,

utilities, office supplies and salaries.

•
Federal Election caJDi.ssion. 999 E screet, I'M, washington, OC 20463

800/424-9530 202/376-3120 202/376-3136 (TOO)

FEDERAL ELECTION COMMISSIONVolume 17, Numb

(NOTE: Separate allocation training

sessions for PAC staff will be held

later this year in Washington, DC.

Check future issues of the Record

for details.)

Denver, CO, February 7

Dorothy Hutcheon

Des Moines. lA, February 20

Ian Stirton

washington, OC, TO be aruxn.mced

Bobby werfel

Austin, TX, Jl!arch 5

Greg Scott

COlumbus, 00, March 19-20

Janet Hess

AL!DCATIOO" TP.AINlN3 FOR

p.AR.'fi CCI9IIT'l'EES

party committee staff wishing to

attend one of the training sessions

listed below on the new allocation

regulations should call the Information Services Division, 800/424-9530

or 202/376-3120, and ask for the

contact person.

o Both the 1991 and 1992 general electio

ballots to determine the ratio for adm

istrative expenses (i.e., both ballots

are cornbined and treated as one ballot

for purposes of determining the ratdo) 

Two separate Schedules HI would be c

pleted, one for each category of expense

In 1992, these committees would also

use two ratios:

o The 1992 general election ballot for

generic voter drive costs; and

a Again, a combination of the 1991 and 1

ballots (as explained above) for

administrative expenses.

2

~ter J. Stewart, Secretary of the Senate

Ex Officio commdssioner

Donnald It. Anderson, Clerk of the House of

Representatives, Ex Officio Commissioner

John warren McGarry, Chai rman

Joan D. Aikens, Vice Chairman

Lee Ann Elliott

'Ihomas J. Josefiak

Danny L. McDonald

SCott E. 'lbaDas

2Five states hold nonfederal elections for

statewide executive offices in odd-numbered

yeacs: Kentucky, Louisiana, Mississippi,

New Jersey and Virginia.

February 1991

Exception: states Holding

Nonfederal Elections in Odd Years

state and local party committees located in states that hold federal elections

and nonfederal elections (i.e, statiwide

executive offices) in different years must

calculate a separate allocation ratio for

generic voter drive costs incurred during

the nonfederal election year (i.e., the

odd-m.unbered year). The ballot composition

method is still used, but the ratio applied

to generic voter drive expenses is based on

the nonfederal year's general election

ballot. 11 CFR l06.S(d)(2).

For example, to calculate the allocation ratio for expenses incurred in 1991,

these committees would use:

o The 1991 general election ballot to

deterrrune the ratio for genecic votec

drive costs; and

ratio will apply to all the committee's

administrative and generic voter drive expenses incurred throughout the 1991-92

election cycle. (Committees located in

states which hold nonfederal elections in

odd-numbered years, however, allocate their

generic voter drive costs on a different

basis, as explained below.)

FEe Schedule HI provides a worksheet

for state and local party committees to

calculate the ballot composition ratio, as

shown on page 3.

The commdttee divides the subtotal of

federal points (Line 4) by the total federal and nonfederal points (Line 11) to calculate the ratio percentage. The percentage is then applied to every administrative

and generic voter drive expense to determine the federal portion of the expense

(1.e., the portion that must be paid from

federal-account funds).
FEDERAL ELECTION COMMISSION Volume 17, Number 2

~I

STATE AND LOCAL PARTY COMMlTIEES

BAlLOT COMPOSITION

Y CHECK ALL OFFICES APPEARING ON THE NEXT GENERAL ELECTION BALLOT:

1. PRESIDENT 0(1 POINT) "............ N~~SOF I

2.u.s. SENATE , " .0 (1 POINT) , ,••.._."..

3. U.S. CONGRESS ..•................O (1 POINT) .

4. SUBTOTAL - FEDERAL (ADD 1,2,AND 3} .

5.GOVERNOR 0 (1 POINT) LI

6.OTHER STATEWI DE OFFICE(S) .0 (lOR 2POINTS) :=j

7.STATE SENATE 0 (1 POINT) .

9.

a. STATE

LOCAL

REPRESENTATIVE

CANDIDATES _...0

0

(lOR 2

(1 POINT)

POINTS)

~"

, _

10.SUBTOTAL - NON-FEDERAL (ADD 5,6,7.8, AND 9) _

11. TOTAL POINTS (LINE 4- Pl!JS LINE 10) L I

FEDERAL ALLOCATION" LINE 4 DIVIDED BY LINE 11 " '-----------"'----1

3

February 1991

lunless otherwise noted, all offices in the same category count as a total of one point.

For example, on Line 3, all u.s. House seats on the ballot total one point; each seat is not

counted separately.

2Each u.s. Senate seat counts as one point.

3ane point for one office; a maximum of two points for two or more offices. Note that in

states where the governor and lieutenant governor run on a single ticket, the entire ticket

counts as one point under "Governor" (Line 5). By contrast, in states like California,

where the governor and lieutenant governor are elected independently, the office of lieutenant governor may be separately counted as one point under "Other Statewide Office{s)"

(Line 6). A maxinnnn of two points may be counted for this category. Note also that statewide partisan judicial offices should not be counted at all.

4rn the case of state party committees, partisan local offices count as a maximum of one

point. Local party committees, however, may count one point for one office or a maximum of

twa points for two or more offices.
FEDERALELECTION COMMISSION Volume 17, Numb

usual and Nona! Charge

As a general matter, as long as AT&T

or any other cOll{)al\y providing services 

connection with the MultiQuest serviceprovides its usual and normal services a

its usual and normal charge, it will not

make a prohibited corporate contribution

However, because AT&T will rerni t proceed

for 90o-line charges without any guarant

that those charges will actually be paid 

the callers, AT&T could be implicated in

making an unlawful advance of corporate

funds to a conmittee. For example, a

campaign could receive a large volume of

calls just before an event that reflecte

adversely on the campaign, or just befor

the candidate unexpectedly withdrew. un

such circumstances, a large number of

callers might refuse to pay the 900-1ine

charges when they later received their

telephone bills. By forwarding funds th

would never be paid, AT&T would be in th

position of advancing corporate funds.

responses, and may also provide marketing

services to prepare the phone message and

advertise the number.)

The MultiQuest service provides two

basic features: (1) the delivery of tele

phone calls under tariffs filed with the

FOC; and (2) a bill collection service.

AT&T does not bill 900-line callers dire

ly but instead contracts with a Local Ex

change carrier (LEe), such as the Chesapeake & Potomac Telephone Company in the

Washington, D.C. area. The LEe purchase

AT&T's receivables and then collects pay

ments from the callers. Thus, AT&T may

obtain payment from the LEe before some

callers actually pay the LEe for 900-lin

calls. using the payment from the LEe,

AT&T deducts the charges for the MultiQu

service and remdts the remaining funds to

the telephone service bureau. (The serv

bureau then forwards the funds to the

political comndttee.)

EKtension of Credit

Although AT&T expects to contract wi

telephone service bureaus rather than wi

political committees, if it does contrac

directly with a committee, AT&T must require an adequate deposit. This will

ensure that, should the program fail, AT&

will not undergo a loss in the form of

services provided without payment.

2 U.S.C. S441b(b)(2); 11 eFR 100.7(a)(I)

(iii) and 114.1(a)(1). If, however, AT&

contracted with the service bureau, no

deposi t would be necessary (but see

discussion below). The comndttee would

instead pay an adequate deposit to the

service bureau. See AD 1990-1.

4

February 1991

Background: Multi~st service

Using AT&T's MultiQuest 900-line service, a political committee can convey campaign messages, solicit contributions and

obtain callers' opinions on issues. AT&T

does not expect to contract directly with

political commdttees for the MultiQuest

service. Instead, AT&T expects committees

to contract with telephone service bureaus,

which will then contract with AT&T for the

MultiQuest service. (In addition to providing the necessary equipment, telephone

service bureaus coordinate 9QO services by

contracting with telephone companies (like

AT&T) for telephone and billing services.

They typically record and transcribe caller

NJR 1990-29

Deposit in separate segreqate fund (SSF) of

funds originally solicited by 55F, then

transferred to state affiliate, then placed

in escrow. (Date Made Public: December

26, 1990; Length: 5 pages)

.Hm. 1990-30

Designation of post-election contributions

to retire campaign debts. (Date Made

Public: December 2B, 1990; Length: 11

pages)

ItO 1990-14: AT&T's 900-Line

FundraisitlCJ Service

As long as AT&T provides its 900-line fundraising service (MultiQuest) at the usual

and no~l charge, it will not make a

prohibited corporate contribution to the

political committees who use the service.

However, because AT&T remits proceeds from

the calls before the charges have actually

been paid by the callers, AT&T could be

placed in the position of advancing prohibited corporate funds and should therefore

take precautions to avoid such an outcome.

Finally, the Federal Communications Conwission (Fee)-not the FEe-would have to

interpret the language in its regulations

concerning the extension of credit to

candidates.

.ADVISORY OPIN!Cfi SUMl'WUES

.ADVISCJRY OPINIai lU!)JUESTS

Recent requests for advisory opinions

(MRS 1 are listed below. The full text of

each AOR is available for review and comment in the FEC's Public Records Office.
February 1991 FEDERALELECllON COMMISSION Volume 17, Number 2

To avoid this problem, AT&T must monitor political contribution programs more

closely than other programs and should not

remit funds to the service bureau if it

appears that, because of an adverse event,

the standard bad debt allowance may be

exceeded. In addition, AT&T should take

steps to cover such a contingency, such as

by increasing its standard charge for the

MultiQuest service or by requiring a deposit from the service bureau.

FCC Rules

AT&T asked Whether FCC rules at 47 CFR

64.804, Which address the extension of

credit by common carriers (such as AT&T) to

"a candidate or person on behalf of such

candidate," should apply to AT&T's extension of credit to a service bureau that has

itself contracted with a candidate. Howeve r, such a question is beyond the FEC' S

jurisdiction; the interpretation of FCC

regulations must be made by that agency.

(Date Issued: December 19, 1990;

Length: 10 pages)

HJ 1990-25: Parent Cor:poration's <»JUgations to Labor union under

Twice-Yearly Solicitation

provisions

Community psychiatric Centers (CPC), a

parent company, must comply with the twiceyearly solicitation requirements with respect to a labor organization, even though

the union represents employees in only one

business (Belmont) out of about 40 owned by

CPC subsidiaries. CPC must provide the

union with: (1) advance notice of CPC's

intent to conduct a twice-yearly solicitation; and (2) access to the names and addresses of all CPC employees, including

those of CPC subsidiaries and subsidiaryowned businesses. This would be required

even if CPC excluded from its own twiceyearly solicitation the employees of

Community psychiatric Centers of california

(cpccal), the subsidiary that owns Belmont.

Twice-Yearly Solicitation Provisions

Under the Federal Election Campaign Act

and FEC regulations, a corporation may,

twice a year, solicit its employees who are

not executive or administrative personnel

(i.e., employees outside the restricted

class) for contributions to the corporation's separate segregated fund. Simdlarly, a labor organization with members

employed by a corporation may, twice a

year, solicit contributions to the union'S

separate segregated fund from employees of

the corporation who are not union members.

(Twice-yearly solicitations are subject to

5

special procedures: They must be mailed to

the employees' residences, and a custodian

must, be used to collect contributions in

order: to insure the anonymity of employees

who chose not to contribute or who contribute only small amounts.) 2 U.S.C.S441b(b)

(4)(5); 11 eFR 114.6.

Corporation's Obligations to Labor

Organization

A corporation that plans to conduct a

twice-yearly solicitation has certain obligations with respect to any labor orqaniaation representing employees of the corporation or its subsidiaries, branches, divisions-or affiliates. 11 CFR ll4.6{e){3).

Because a corporation's obligations extend

to a labor organization representing any

employees within the corporate structure,

CPC must allow the union representing 40

Belmont employees to have access to the

names and addresses of all 5,800 employees

of CPC and its affiliates, even if CPC excludes from its own twice-yearly solicitation all the employees of CPCCal (the subsidiary that owns Belmont). See AO 1977-

49. Additionally, CPC must give advance

notice of its intent to conduct a twiceyearly solicitation in order to give the

labor organization an opportunity to solicit the corporation's nonunion employees

using the same method. 11 CFR 114.6(e)(4).

The obligation to provide the notice and

the eJl'{lloyee list to the union resides with

CPC, which is the parent corporation.

Limits on union's Access to Method

FEC rules place several limits on the

union'S access to a corporation's twiceyearly solicitation method:

o The union may use the corporation's list

of employee names and addresses only for

the purpose of soliciting contributions

to the union's separate segregated fund.

11 CFR 114.6{e)(2J.

o The corporation, if it does not wish to

disclose the information directly to the

labor union, may provide the mailing list

to an independent mailing service.

11 CFR 114.6{e)(3){ii).

o Although the corporation must bear the

costs of making the employee list available, the union must pay for the costs of

preparing and mailing its solicitation

materials. AD 1977-49.

o Finally, the corporation does not have

any obligation to the uni.on if it does

not conduct a twice-yearly solicitation.

11 CFR 114.6Ie)(3)(iii).

(Date Made Public: December 14, 1990;

Length: 4 pages)
FEDERAL ELECTION COMMISSION Volume 17, Numbe

however, are subject to a $50,000 limit o

campaign spending from personal funds. 

11 CFR 9003.2(c) and 9035.2)

lA debt exceeding $500 must be itemized o

a Schedule D accompanying the report cov

ing the period during which the debt was

incurred. A debt of $500 or less must be

itemized on Schedule D if it has been ou

standing 60 days or: more as of the date

incurred. 11 CrR 104.11(b).

Treablent as Debt and COntribution. 

the committee intends to reimburse the

incHvidual (or candidate ), the amount mu

be treated and reported as a deht as wel

as an in-kind contribution. 11 CFR

116. 5(c) and (e). Reimbursements are re

ported as refunds of contributions and, i

the debt had to be itemized on Schedule D

as repayments made on the debt.

.Advances to CCDDittee: When

ContributiOll5 Do Not Result

Note that, in all cases, the exceptio

described below do not apply to individu

who are acting as commercial vendors sinc

they are covered by the commercial vendo

rules at 11 CFR 116.3 and 116.4. 11 CFR

116.5(a) .

settlement of Debt. In the case of a

terminating commdttee, the individual (o

candidate) may agree to settle the debt f

less than the amount owed, in which case

the committee must include the debt on a

debt settlement statement in complIence

with 11 crn 116.7. A debt settlement

statement is not required if the individu

(or candidate> agrees to forgive the ent

amount of the debt. Please note, howeve

that the individual is under no obligatio

to settle or forgive the debt. 11 CFR

116.5(d).

Exempt Travel and SUbsistence paymen

under 11 CFR 100.7(b) (8), payments made

from an individual's personal funds for h

or her transportation expenses incurred

while traveling on behalf of a candidate 

political party committee are not contrib

tions if they do not exceed $1,000 per ca

didate, per election, or $2,000 per year

for travel on behalf of a party comdttee

This exemption applies to paid carrpaign

workers and volunteers. Section 100.7(b)

(8) also exempts all 'payments by voluntee

for subsistence expenses incidental to

volunteer activity.

6

February 1991

NEN DEBT SEl"I'LEMENl' FaU'IS

committees that wish to terminate are reminded that all debt

settlement requests must be submitted on new FEC Form 8. This form

implements the new debt settlement

rules ,(II CFR Part 116), which becarne effective on October 3, 1990.

To order copies of Form 8 and the

debt settlement rules, call the

CoIllllission. (For a sununary of the

new rules, see the september 1990

Record. )

Advances to Coamittees: When

Contributions Result

S'I2\FF AND Sl\LARIES

The Commission recently promulgated new

regulations that specifically address when

contributions arise in the context of advances to committees by staff and other

individuals. The new regulations also

discuss the treatment of salary payments

owed to committee staff.

This article explains these two provisions, which appear in the new debt settlement rules (11 CFR Part 116).

Gene~l Rule. Section 116.5 clarifies

that, when individuals-including candidates--use their personal funds or personal

credit cards to obtain goods or services

for a political committee, an in-kind contribution to that c~ttee generally results unless the payment is a travel or

subsistence expense covered by one of the

exceptions explained below under "When

Contributions Do Not Result."

For example, an in-kind contribution

results if an individual pays for the

transportation or subsistence expenses of

others or pays for nontravel expenses such

as meeting rooms, office supplies or campaign materials. 11 CPR 100.7(a)(1). In

these cases, the advance (combined with

previous contributions made by the same

individual) may not exceed the individual's

contribution limit for the committee.

(Contributions from the personal funds of

a House or Senate candidate to his or her

own campaign, however, are not subject to

the contribution limits. 11 CFR 110.lO(a).

Publicly funded Presidential candidates,
FEDERAL ELECTION COMMISSION Volume 17, Number 2

STERN v. PEe

On Decembe r 11, 1990, The U.S. Court of

Appeals for the District of columbia Circuit affirmed the district court decision

granting the Commission's motion for judgment on the pleadings. (Civil Action No.

89-5377.) Philip M. stern had claimed that

the General Electric Company (GE) violated

the Federal Election Campaign Act by making

unlawful corporate expenditures for the

establishment, administrative and solicitation expenses of its separate segregated

fund, GE/PAC.

Background: 1ldIlinistrative CClIl'Plaint and.

District Court Decision

Although section 441b(a) of the Federal

Election Caq:>aign Act prohibits corporations from using their general treasury

funds to make contributions or expenditures

in connection with a federal election,

another provision of the Act specifically

excludes from the definitions of contribution and expenditure the use of corporate

treasury funds for "the establishment,

(continued)

FEe v. AInJSTINE FOR C(H;RESS

In September 1988, the U.S. District

Court for the Eastern District of Louisiana

ordered the Augustine for Congress committee and its tceasurer to pay a $20,000

civil penalty for numerous violations of

the Federal Election campaign Act's recordkeeping and repocting provisions. (Civil

Action No. 87-4544). The court also

ordered the committee to file all of its

over-due reports within 15 days of the

order, which was issued on September 23,

1988. Because the defendants failed to

comply with this order, the Commission

petitioned the court on April 23, 1990, for

an order to show cause why the defendants

should not be held in contempt for violating the COUrt order.

In September and November 1990, the

committee filed the missing reports and

signed an order in:which it agreed to pay a

total of $9,450 to the coromission on an

installment plan (the total representing

the $8,000 that remained unpaid on the

$20,000 civil penalty, $1,000 in interest

and $450 in FEC travel expenses). This

agreement became a court order on November

29, 1990. On that date, the court dismissed the Commission's petition for contempt, with prejudice.

7

Reimbursed Travel ani SUbsistence

payments. Under the new rule at 11 CFR

116.5(b), transportation and subsistence

expenses that are incurred and paid for by

an individual while traveling on behalf of

a candidate or party committee and that are

not covered under the 100.7(b)(8J exemption

are not considered contributions as long as

the committee reimburses the2individual within certain time periods:

o In the case of a credit card payment, the

committee must reimburse the individual

within 60 days after the closing date of

the billing statement on which the

charges first appear.

a In all other cases, the committee must

reimburse the individual within 30 days

after the expenses are incurred.

salary Payments Owed to Employees

New section 116.6 clarifies that unpaid

salaries owed to committee staff are not

contributions. Note that this exception

does not apply to paid consultants, who are

treated as commercial vendots under 11 CFR

116.3 and 116.4.

If a political committee does not pay

an employee in accordance with an agreement, the unpaid amount may be treated

either as volunteer services, which are

exempt from the definition of contribution

under 11 CFR 100.7(b)(3), or as a deht.

The services may be converted to volunteer

activity only if the employee signs a

statement agreeing to be considered a volunteer.

If the unpaid amount is treated as a

debt, the amount owed must be reported as

such. Such debts may be settled for less

than the amount owed (in the case of a

terncinating committee) or entirely forgiven. 11 CFR 116.6(b). If settled for less

than the amount owed, the terminating committee must file a debt settlement statement in accordance with 11 CFR 116.8. This

is not required if the debt is entirely

forgiven.

Please note that employees are undec no

obligation to convert their services to

volunteer activity or to settle or forgive

the amount of salary owed. 11 CFR

116.6(b) .

February 1991

2This exception applies to the subsistence

expenses of paid campaign staff; a volunteer's subsistence expenses are covered

under the lOO.7(b)(8) exemption.
February 1991 FEDERAL ELECTION COMMISSION

administration, and solicitation of contributions to a separate segregated fund to be

utilized for political purposes.... " (Emphasis added.) 2 U.S.C. S441b(b)(2)(C).

In his complaints filed with the FEe and

the courts, Mr. Stem alleged that Gl!:jPAC's

contributions were not made for "political

purposes" but, rather, were made to advance

GE's lobbying interests. As a result, he

claimed, GE's funding of the PAC resulted

in prohibited corporate expenditures.

When the Commdssion dismissed his

administrative complaint, finding "no

reason to believe" that GE had violated the

law, Mr. Stern sought judicial review of

the agency's decision. The district court

ruled that the Commission had not acted

contrary to law in dismissing the complaint, holding that GEjPAC's direct

contributions to the campaigns of federal

candidates were permissible under any

construction of "poli tical purposes." The

district court found it unnecessary to

reach the question of whether lobbying was

a permissible activity for a separate

segregated fund, although the court

characterized the Commission's

position--that separate segregated funds

could be used "for any lawful purpose"--as

a reasonable interpretation of the Act.

(Civil Action No. 89-89.)

Appeals Court Decision

In his arguments, Mr. stern claimed

that several types of contributions made by

GEjPAC were not made for "political

purposes":

o Contributions to unopposed candidates or

to those facing weak opposition;

o Contributions made without regard to the

candidate's position on business issues;

o Contributions to opposing candidates in

the same electioni

o Post-election contributions to winners;

and

o contributions to incumbents.

The appeals court examined these claims

but found that the GE/pAC'S contributions

did not violate the Act. Like the district

court, the appeals court found no reason to

reach the question of how the phrase "political purposes" should be interpreted.

"Even under the narrowest possible definition urged by Stern--namely, that segregated funds may be used only' in connection

with an election'-the GEjPAC practices he

challenges do not violate the Act."

8

Volume 17, Numbe

FEe v. POLITICAL C'CNI'RIBU'l'ICNS MTA, INC

on December 19, 1990, the u.s. Distr

Court for the southern District of New Y

granted the commi 55ion' 5 motion for sunun

judgment, finding as reasonable the Comm

sion's determdnation that the sale of con

tributor info~tion by Political Contrib

tions Data, Inc. (PCD) was prohibited by

2 U.S.C. §438{a)(4), the "sale and use re

striction." The court also rejected PeD

Constitutional challenges to that provisi

and to 11 CFR 104.15(c).

Background

Section 438(a)(4) protects informatio

on individual contributors (including

names, addresses, occupations and employ

ers) that is disclosed on reports filed

with the FEe. Under section 438(a)(4),

information copied from such reports "may

not be sold or used by any person for the

purpose of soliciting contributions or fo

commercial purposes..•. " (The names and

addresses of political committees, howev

may be used for solicitation purposes).

In AD 1986-25, issued to Public Data

Access, Inc. (PM.), the Commission deter

rndned that PDA's proposed sale of inform

tion on individual contributors--infocma

tion obtained from FEC reports--would be

for "commercial purposes" and would there

fore violate section 438(a)(4).

After the opinion was issued, PDA

established Public Contributions Data, In

(FCC), a for-profit corporation, which th

sold lists of individual contributor info

mation compiled from FEe reports. On

August 2, 1989, the commission filed sui

alleging that POD had violated section

438(a)(4).

CCmDercial Purpose Prohibition

Scope. The court rejected PCD's argu

ment that section 438(a)(4) should apply

only to c01l1l1ercial list brokers: "There 

no cause to limit the FEC to (PCO's]

craJfilE!d reading of the Act •.•• "

Application to PCD. In AD 1986-25

(requested by PDA), the FEC had determine

that the company's status as a for-profi

corporation raised the presumption of

"commercial purpose." In the present su

however, POD argued that it had never ac

ally earned a profit on the sale of contributor reports because it provided them

to nonprofit, nonpartisan groups at nomi

or reduced prices. The court neverthele

found that the Commission was "ent.it.Led t

rely on POD's for-profit status as an in

cator of its commercial purpose. II The

court also noted evidence showing that PO
FEDERALELECTION COMMISSION

•

February 1991

had sold reports to about 105 different

customers, whereas it gave away reports

to only about a dozen journalists and "a

few" persons in nonprofi t or academic

settings.

Applicability of Media Exeuption. Commission regulations state th~t, as an

exception to the general "sale and use

restriction," the use of information copied

from FEe reports is permissible "in newspapers, magazines, books or other similar

communications.••as long as the principal

purpose of such communications is not to

communicate any contributor information ... for the purpose of soliciting contributions

or for other commercial purposes." 11 CrR

l04.15(c)., In AD 19B6-25, the COmmission

had concluded that PQA's use of contributor

information would not fall under this

exemption because PDA's lists would have a

commercial value to list brokers, among

others, and because the FEe information

contained in the lists was not incidental

to the sale of the communication (as in a

newspaper) but was instead the primary

focus of the communication.

The court found the Commission's conclusion in AO 1986~25 reasonable. The

court also noted the predominance of political entities among POD's paying customers

(about two-thirds were political committees

or consultants) and pointed out that 26 PCD

customers contacted by the FEC said that

they had purchased the reports for solicitation purposes.

Constitutional Challenges

Free speech. PCD argued that section

438(a)(4)'s ban on the publication of contributor information for commercial purposes was a violation of its free speech

rights under the First Amendment. The

court said: "The cases on which PCD primarily relies (for its free-speech argument) .••stand for the rights of traditional

news organizations," which FEC regulations

already exempt from section 43B(a)(4). see

11 CFR 104.1S(c).

The court continued: "The purpose of

[section 438(a)(4)] ...is to prevent harassment of political contributors as a result

of the Act's disclosure provisions." The

court explained that contributors might be

dissuaded from making contributions if they

knew that their names could be commercially

marketed. The court concluded: U[T]he

'commercial purposes' provision serves a

rational purpose and does not impermissibly

infringe on any cognizable free speech

rights. "

9

Volume 17, Number 2

Equal Protection. PCD contended that

the news media exeRq::ltion at 104.15(c)

unconstitutionally discriminates against

non-media entities in violation of the

Equal Protection Clause of the Fourteenth

Amendment.

The court first noted that, even if it

were to strike down the news media exemp--

tion, the ban on the use of reported information for "commercial purposes" would

remain intact and would still apply to POD.

The court, however, found the PCD's Equal

Protection arguments unavailing, citing!

Austin v. Michigan Chamber of Commerce, a

recent supreme Court decision. In that

case, the Supreme Court concluded that a

media exemption under a Michigan State

campa i qn finance law-an exemption that excluded news stories, editorials and commentaries from the definition of campaign

"expenditure"--did not violate the Equal

Protection Clause. The district court

found the High Court's analysis ~equally

applicable to the case at bar••.• (T]he

press in this case plays a 'unique role' in

the context of campaign finance, 'informing

and educating the public, offering criticism, and providing a forum for discussion

and debate.'" (Citing Austin.) The court

said that these press fWlctions "have

already been upheld by the Supreme Court as

substantial goverrunental intecests."

POD also challenged the FEC's ability

to determine the "principal purpose'I behind

a communication, citing cases to support

the view that the governmEnt should not be

in the business of examining the content of

publications. The court found, however,

that the Commission made no suhstant.ive

examination of the content of PCD's ceports

but, rather, looked to criteria that wece

not based on content, i.e., "(1) the corporation'S for-profit status; (2) PCD's

clientele, both actual and potential; and

(3) PCD's willingness to sell reports to

anyone who would pay their fees. II

Finally, the court cejected PCD's

argument that the press should not enjoy

greater access to government information

than the general public. Citing several

SUpreme Court casis, including Austin and

Buckley v. Valeo, the district court said

that "the government may accord the press

special privileges over members of the

general public."

1 U.S. 110 S.Ct. 1391 (1990).

2424 U.s. 1 (1976).
FEDERAL ELECTION COMMISSION

/" -,. -

Volume 17, Numbe

MUR 2804 (case not entirely closed)

Respondents: American Israel Public

Affairs Committee (DC) and 31 other

respondents

COOlplainanb Paul Findley; James E. Akin

George Ball; Richard Curtiss; Robert Hank

Andrew I. Killgore; Orin Parker

Subject: Affiliation; excessive contribu

tions

Disposition: No reason to believe (all

respondents)

JIIJRS RELF.l\SID 'IO mE PUBLIC

Listed below are MURs (FEC enforcemen

cases) recently released for public review

The list is based on the FEC press releas

of December 20 and 21, 1990. Files on

closed MURs are available for review in th

Public Records office.

Unless otherwise noted, civil penalti

resulted from conciliation agreements

reached between the respondents and the

Commission.

FEDERAL ROOISTER l'Vl'IC&S

Copies of Federal Register notices

are available from the Public Records

Office.

I'IURs 2901/2900/2899/2843

Respondents: (a) policy Innovation Polit

cal Action Committee, Susan Armey, treas1990-19

11 erR Parts 100, 106, 110, 9001-9007,

9012 and 9031-9039: Public Financing

of Presidential Primary and General

Election candidates; Notice of Proposed Rulemaking (56 FR 106, January

2, 1991)

I'IUR 2840/PRE--ftUR 202

Respondents: (a) California School Emplo

ees Association (CA); (b) Wally Blice, Jr

(CA); (c) Jesse Jackson for President '88

Howard R. Renzi, treasurer (IL)

CoIlplainant: Sua sponte

SUbject: Prohibited contributions throug

compensation of union employee engaged in

activities on behalf of candidate and

through loan of union furniture

Disposition: (a) $2,500 civil penalty;

(b) $1,200 civil penalty; (c) reason to

believe but took no further action

10

February 1991

FEe v. Mid-1Y:Derica Conservative PAC

The FEC asks the court to declare that

the PAC and its treasurer violated the

Federal Election Campaign Act by failing to

meet the filing deadlines for several

reports. The Commission also asks the

court to: assess a civil penalty against

the defendi!!lnts; permanently enjoin them

from similar future violations of the law;

and award the agency court costs.

U.S. District Court for the Northern

District of Iowa, Eastern Division, Civil

Action No. C90-2093, December 10, 1990.

NEW LITIGATIW

FEe v. WEBB FOR <:IH3RESS CCMUTl'EE

on January 2, 1991, the u.s. District

Court for the Eastern District of North

Carolina, Raleigh Division, granted the

FEC's motion for summary judgment against

William Woodward Webb, a 1986 House candidate, his principal campaign committee and

the commdttee treasurer. (Civil Action No.

89-664-Crv-5-BO.) The court found that

defendants had violated 2 U.S.C. S441a(f)

by knowingly accepting an excessive contribution in the form of a $19,000 loan from

the candidate's mother. Defendants argued

that the loaned funds were not subject to

the contribution limits because they were

Mr. Webb's own funds under the definition

of a candidate's "personal funds" in FEC

rules: ligHts of a personal nature which

had been customarily received prior to

candidacy. " 11 CFR 110.10(b) (2) • The

court ruled that, while Mrs. Webb's loan to

her son "may have been intended to be •.•

similar to those gifts she had given to him

prior to his candidacy, this gift was

distinct in the fact that it was given to

Mr. Webb's election committee and not to

Mr. Webb directly..••Merely because Mr.

Webb had received gifts in the past (from

his mother] it does not follow that this

par:ticular loan was customar:y or: of a

personal nature as required by 11 CFR

110.10(b)(2). This gift was made at the

request of Mr. Webb and as a direct result

of his candidacy." The court also found

that defendants had violated 2 U.S.C.

§434{b) by falsely reporting Mr. Webb,

rather than his mother, as the source of

the $19,000 loan.

The court fined the defendants $5,000

and permanently enjoined them from future

violations of the Federal Election Campaign

Act.
FEDERALELECTION COMMISSION

•

February 1991

ure~ (TX): (b) James R. Lightner (TX);

(c) Congressman Richard K. Arrney (TX);

(d) Susan Anney (TX I; (e) Dick Armey Campaign, Mike Keeling, treasurer (TX); et al.

(f)-( r)

Cextplainant: John Wayne Caton; also FEe

initiated

SUbject: Failure to file reports on time:

reports signed by unauthorized individual;

failure to amend statement of organization

on time; excessive cont~ibutioni failure to

accurately disclose contribution information

Disposition: (a) $3,000 civil penalty;

(b) reason to believe but took no further

action; (c)-(e) took no action; (f)-(r) no

reason to believe

JlnJR 2925

Respondents: (a) Robert Y. Eckels (TX) 1

(b) Reagan-Bush r 84, .scott B. MacKenzie,

treasurer (DC); (e) Richard Brown (TX)

Ccoplainant: Douglas Caddy, Chairman, Halt

IRS Taxpayer Abuse Now! Political Action

Committee (TX)

SUbject: Independent expenditures

Disposition: (a) Reason to believe but

took no furthe~ action; (b) and (c) no

reason to believe

MUR 2985

Respondents: (a) David R. Nagle (OC) i

(b) Nagle Campaign COfllllittee, H. Daniel

Holm, Jr., treasurer (rA): (e) H. Daniel

Holm, Jr. (lA); (d) Edward J. Gallagher,

Jr. (IA)

Complainant: FEC initiated

SUbject: Excessive contributions through

loan endorsements

Disposition: (a) Reason to believe but

took no further action; (b)-(d) $4,000

civil penalty (joint conciliation agreement)

MUR 3000/2879/PRE-MUR 215

Respondents: (a) Congressman wright Appreciation committee, Henry Kerry, treasurer

(TX); (b) Majority congress committee,

Robert N. Reeves, treasurer (TX);

(c) Kenneth C. Hood (TX); et al. (d)-(h)

Complainant: Peter Flaherty, Chairman,

Conservative Campaign Fund, and Kenneth

Boehm, treasurer (DC)

SUbject: Excessive in-kind contributions;

failure to disclose in-kind contributions

Disposition: (a) and (b) $1,500 civil

penalty (joint conciliation agreement):

(c) reason to believe but took no further

action; (d)-(h) no reason to believe

Volume 17, Number2

JIlUR 3021 . Respondents: Ed Finkelstein (AZ)

Complainant: Referred by Election Crimes

Branch, U.S. Department of Justice (DC)

SUbject: Failure to register as candidate;

failure to register and disclose activities

of a candidate committee

Disposition: No probable cause to believe

MUR 3042

Respondents: (a) Robert J. Gigante (NY);

(b) Friends of Bob Gigante, Ralph J.

Giorgio, treasurer (NY)

COJIlplainant: Robert Dawson, Political

Director, National Republican Congressional

Campaign Committee (DC)

SUbject: Failure to file last-minute

contribution reports on time; failure to

provide adequate contributor identification

Disposition: (a) No reason to believe;

(b) $2,000 civil penalty

MUR 3070

Respondents: (a) Sang R. Korman (CA) i

(b) Korman for Congress, Albert T. Nassi,

treasurer (CA); (c) Marathon Communications, Inc. (CA); (d) Robert Lavioe (CA)

Complainant: stephen R. Frank, president,

The Eagle Marketing Group (CA)

Subject: Corporate contributions; candidate loans

Disposition: (a)-(d) No reason to believe

MIJR 3107

Respondents: (a) Mike Pence (IN); (b) The

People for Mike Pence, Michael W. Redford,

treasurer (IN); (c) Rick Hawks (IN);

(d) Rick Hawks for congress committee,

Inc., Larry Stoppenhagen, treasurer (IN),

(e) Kenneth Bell (NC); (f) Ken Bell for

Congress Committee, Mark N. Poovey,

treasurer (NC); (g) Ted Blanton (NC);

(h) Blanton for Congress, Pete Teague,

treasurer (NC)

Oomplainant: Richard Bates, Democratic

Congressional campaign Commdttee (DC)

SUbject: Personal use of campaign funds

Disposition: (a)-{h) Failed to find reason

to believe

IIIUR 3133

Respondents: Enron Political Action

Cormnittee (FKA HNG/lntemorth PAC), Robbie

Leaver, treasurer (TK)

Complainant: FEC initiated

SUbject: Failure to file disclosure report

on time

Disposition: $1,100 civil penalty

11
February 1991 FEDERAL ELECTION COMMISSION Volume 17, Numbe

The first number in each citation

refers to the "number" (month) of the 1991

Record issue in which the article appeared;

the second number, following the colon,

indicates the page number in that issue.

ADVISCltY OPINIam

1990-14t AT&T'S 900-line fun~raising service, 2:4

1990-19: Vendor/committee relationship;

sale and repurchase of fundraising items,

1:8

1990-22: Blue CrossjBlue Shield's solicitation of member plans' personnel, 1:9

1990-25: Parent corporation's obligations

to labor organization under twice-yearly

provisions, 2:5

FEDERALELECTION COMMISSION

999 E Street, NW

Washington, DC 20463

Official Business

CClJR'I' CASES

FEe v ,

- Augustine for Congress, 2:7

- Mid-America Conservative PAC, 2tlO - political Contributions Data, Inc.,

2:8

- webb for Congress Committee, 2:10

v. FEe

----=-Common Cause; National Republican

Senatorial Committee, Appellant (90-

5317), lt7

- Stern, 2:7

800 LINE

Allocating expenses through ballot compo

tion, 2:1

staff advances and salaries, 2:6

Bulk Rate Mail

Postage and Fees Paid

Federal Election Commission

Permit Number G-31