Volume 17, Number 1

8 1\IJY'ISOOY OPINIC6S

7 COMMISSIONERS: 1991 Of~icers Elected

camT CASES7 Cammon Cause v. FEC, NRSC Appellant

10 CCtlPLUNCE: MURs Released to the Public

3 IlEl'ORl'lI«i: Reports Due in 1991

I PUBLIC FUNDING: 1992 Shortfall

TABLE OF <INl'mTS

RmULATIOOS6 proposed Changes to Public Funding Rules

Matching Fund PaymentsUnder the public funding law, if there

is insufficient money in the Fund to coverall entitlements, the conventions and thegeneral election nomdnees receive priorityover primary candidates. In the event of a1992 shortfall, the Department of the

(continued)

1990. (see Agenda Document #90-110 forfurther details, including the assumptionsused in developing the current estimatesand possible revisions to the matching fundcertification process should a shortfalloccur. )

The new information suggests that thevolume of dollars checked off by taxpayerson their 1990 returns has remained aboutthe same as in the previous year. Never­theless, it appears that a shortfall ofpublic funds will occur in the 1992 Presi­dential election cycle unless Congressintervenes. Due to changing economicconditions, the Consumer Price Index hasincreased more than originally expected.Because payments from the Fund are indexedto inflation while the one-dollar taxcheckoff is not, the- recent jump in infla­tion has caused the Commission to project alarger shortfall for the 1992 electionsthan previously estimated.

FEDERAL ELECTION COMMISSION

999 EStreet NW Washington DC 20463January 1991

ALLOCATICti 'I'RAINItI3 FOO.PARTY CCIIMI'l"l'EES

During January through March,the Commission will be conductingtraining sessions for party COI:IIIlit­tees on the new allocation rules.Committee staff wishing to attendone of the training sessions listedbelow should call the InformationServices Division, 800/424-9530 or202/376-3120, and ask for thecontact person.

New York, NY, January 22-23Kathlene MartinBoston, Mo, January 24Patricia ttieinDenver, 00, February 1Dorothy HutcheonDes Moines, lA, February 20Ian StirtonAustin, TX, March 5Greg ScottColumbus. 00, March 19-20 (tentative)Janet Hess

SiKJRTFAIJ.. IN PRESIDENTIALCAMPAI~ FUm: 1992

In its meeting of November 29, 1990,the Commission considered revised Presi­dential Election Campaign Fund projectionsfor the 1992 election cycle. The latestprojections show that the Fund's deficitcould reach $6 million by th~ end of the1992 election year. However, in the firstthree months of 1992--a critical time forcampaigns--primary candidates could beshort-changed approximately $15 million,depending on how the u.s. Department ofTreasury handles disbursements from theFUnd. The overall projected cost for the1992 primary candidates, conventions andgeneral election candidates is $187million. These projections are based oninformation available as of November 25,

Fede:cal Election Conmission, 999 E St:ceet, HW, Washington, DC 20463800/424-9530 202/376-3120 202/376-3136 (TOO)

FEDERAL ELECTION COMMISSION Volume 17, Number 1

<:aoparison. The 85-percent methoddiffers from the set-aside method in thatprimary candidates would receive a greaterproportion of their matching funds betweenJanuary and April 1992, during the activeprimary season. For example, under theset-aside approach, candidates wouldreceive approximately 67 percent of match­ing funds certified during those months.By contrast, under the second approach,candidates would receive as percent oftheir January-through-April certifications.The drawback to the second method is thedifficulty in predicting the correctpercentage, and the consequences of settingthe percentage too high (with funds runningout in ApriljMay) or too low (with fundsleft over in August that could have beendistributed dU5ing the active primarycampaign period).

Beginning in June 1992, cumulativepayments under the set-aside approach wouldexceed those under the 85 percent method.By September, cumulative payments underboth methods would reach equali ty .

05--Percent Method. Under the secondapproach, an attempt would be made toestablish an optimal percentage of paymentsto primary candidates, a percentage thatwould remain constant from January throughAugust 1992, the date of the last conven­tion. Thereafter, payments would be on a"pay as you go" basis. The fixed percent­age would be based on estimated futurecheckoff deposits to the Fund through July1992 and anticipated payments to primarycandidates. Based on the FEC AuditDivision's projections, the fixedpercentage would be about 85 percent (90percent minus a 5 percent cushion). Inother words, 1992 primary candidates wouldreceive 85 cents for every dollar o~ match­able funds certified from January throughAugust. As with the set-aside method,discussed above, the 85-percent methodwould eventually result in the full paymentof matching fund certifications by spring1993.

Walter J. stewart, Secretary of the Senate,Ex Officio Commissioner

oonnald K. Anderson, Clerk of the House ofRepresentatives, Ex Officio Commissioner

2

Jolm warren P1cGany, ChairmanJoan D. Aikens, Vice ChairmanLee Ann Elliott'lhomas J. JosefiakDanny L. McDonaldScott E. '1b.omas

January 1991

1The $114 million represents the estimated$112.98 million needed for the generalelection candidates and about $1.08 millionneeded for the nominating conventions ofthe major parties. The major parties willreceive most of their funding--an estimated$21.52 million--in July 1991; the 1992 pay­ment represents a cost-oE-living adjustmentto the convention entitlements based on the1991 inflation factor.

Treasury will have to decide how to handlematching fund payments to primary candi­dates. In its November meeting, theCommission discussed two possibleapproaches.

set--Aside Method. One way to handlethe shortfall would be a "pay as you gallmethod under which Treasury wouldreserve--or set aside--sufficient publicfunds to cover the 1992 entitlements to theconvention committees and the generalelection nominees at the beginning of theelection year. If this were tohappen--i.e., if Treasury were to set asidethe estimated $114 million needed tosatisfYlthe convention and general electionfunding --only $12.6 million would beavailable for early January 1992 matchingfund payments, currently estimated at $19.5million. The unpaid portion from the earlyJanuary payments ($6.9) plus the remainderof January certifications ($5.5) would bedefrayed in February on a proportionalbasis using January check-off deposits(estimated at $109,562). Unpaid certifica­tion amounts would continue to carryoverto the next month and, when added to thatmonth's certifications, would be paid on apro rata basis from check-off funds depos­ited that month. The Fund would probablynot have a balance sufficient to pay thefull amount of accumulated carryovers untilspring 1993 (assuming that the TreasuryDeparbnent found that the use of 1993checkoff deposits for 1992 entitlements wasan acceptable practice).

FEDERAL ELECTION COMMISSION Volume 17, Number 1

New Form 3X: Special Note to PACsand party CoPmittees

starting with 1991 activity, PACs andparty committees must file their reports onthe revised Form 3X. The Detailed SummaryPage of the revised form contains certainchanges that correspond to the new alloca­tion rules, which became effective January1, 1991. In the first reporting noticesent to committees for disclosure of 1991activity, the Commission will enclose therevised Form ax as well' the new Schedule Hforms. These schedules must be used bycommittees reporting allocated activity.For more information on the allocationrules, including the new reporting require­ments, see the November 1990 Supplement onAllocation. (Additional copies are avail­able from the FEC.)

Please note that the new allocationreporting rules apply only to politicalcommittees that have both federal andnonfederal accounts. committees that donot maintain nonfederal accounts mustnevertheless use the revised 3X DetailedSummary Page, since the line numbers havechanged.

(continued)

REPORTS OOE IN 1991

Reports Covering 1991 ActivityTo find out what reports your commi ttee

must file to report 1991 activity, checkthe Reporting Frequency Chart on page 5.Then check the accompanying Reporting DatesCharts. Please note that if any specialelections are held in 1991, committeesactive in those elections may have to filespecial election reports, as explainedbelow.

Year-EOO. Reports Covering 1990 ActivityAll committees must file a 1990 year­

end report due January 31, 1991. Thecoverage and reporting dates are found in achart on page S.

Please note that the 1990 year-endreport is the last report PACs and partyc~ttees will file on the old Form 3X;see special note below.

mitted to Congress similar suggestions toremedy the Presidential Fund shortfall.See the May 1990 Record.}

3

January 1991

commission Discussion ofLegislative Action

Even with an education program, how­ever, it now appears that a '1992 shortfallmay be inevitable unless Congress inter­venes. The Commission discussed possibleemergency legislative recommendations thatwould alleviate the shortfall. Among therecommendations discussed at the November29 meeting were:o An emergency appropriation of funds to

compensate for the 1992 shortfall;a The elimination of the Presidential

convention committee entitlements, there­by freeing approximately $22.6 millionthat could be used to finance theprimaries;

o The adjustment of the checkoff amount bythe inflation factor, thereby increasingthe total amount checked off.

o The replacement of the checkoff with anentitlement approach.

No recommendations were adopted at themeeting. (In March 1990. the agency trans-

ccmnission ActionIn addition to coordinating with the

Department of the Treasury, the Commissionhas communicated with the Internal RevenueService on the shortfall issue and hasconducted an outreach effort--includingcongressioqal testimony, speeches, newsreleases and articles--to alert Congress,the press and the public to the Presiden­tial funding shortfall. The Commission hasalso been researching public understandingof the Presidential checkoff on the taxforms. Using the results of this research,the agency plans to sponsor an educationprogram to inform the public about thedollar checkoff, e.g., how it works, wherethe money goes, etc.

Department of Treasury's NPRMThe Department of the Treasury is the

agency responsible for deciding how to dealwith the potential shortfall in the Fund.On December 13, 1990, the· Treasury Depart­ment's Internal Revenue Service published aNotice of Proposed Rulemaking (NPRM) seek­ing comments on draft regulations thatwould establish procedures for making pri­mary matching fund payments from the Fundin the event of a shortfall (see 55 FR51301). The IRS proposes a set-asidemethod similar to the one described above.The Commission plans to comment on therulemaking notice before the February 11/1991, conmsnt deadline. The Conmissionalso plans to testify at the IRS publichearing on the proposed rules scheduled forFebruary 11, 1991 (see 55 FR 51303).

FEDERAL ELECTION COMMISSIONJanuary 1991

CoDmittees Active in Special ElectionsCommittees authorized by candidates

running in any 1991 special election mustfile pre- and post-special electionreports, in addition to regularly scheduledreports. 11 CFR 104.5(h).

PACS and party connittees supportingcandidates running in special elections mayalso have to file special election reports,unless the committee is filing on amonthly, rather than semiannual, basis.11 CFR 104.5(c)(3) and 104.5(hl.

The Record will publish specialelection reporting requirements if anyspecial elections are scheduled during1991.

Late FilingThe Federal Election Campaign Act does

not permit the Commission to grant exten­sions of filing deadlines under any circum­stances. Failure to file a report on timecould result in enforcement action by theCommission.

Reporting LabelsShortly before a reporting deadline,

the Commission mails each committee treas­urer a reporting notice and the appropriatereporting form. Treasurers should use thepeel-off label from the mailing envelope tocomplete Line 1 of the reporting form.Corrections to the committee's name oraddress should be made directly on thelabel, but note that the committee mustalso file an amended statement of Organiza­tion to reflect a change in address or anyother change in the information previouslydisclosed on the Statement. Such amend­ments must be filed within 10 days of thechange. 11 CFR 102.2(a)(2).

For further information on reporting,call the FEe: 800/424-9530 or 202/376­3120.

Where to FileListed below are the offices where

committee treasurers must file FEe reports.Please note that a list of state filingoffices is available from the Commission.

House and Senate candidate CODmi.ttees.principal campaign committees of House andSenate candidates file with the Clerk ofthe House or the Secretary of the Senate,as appropriate. 11 CFR 105.1 and 105.2.Addresses:o Clerk of the House, Office of Records and

Registration, 1036 Longworth House OfficeBuilding, washington, DC 20515-6612; or

4

Volume 17, Number 1

a Secretary of the Senate, office of PublicRecords, 232 Hart senate Office Building,Washington, DC 20510-7116.

The principal campaign committee mustalso simultaneously file a copy of everyreport and statement with the Secretary ofState (or other designated officer) of thestate in which the candidate seeks (orsought) election. 2 U.S.C. §439(a)(2)(B).

Note that other authorized committeesof the same candidate file their reportswith the principal campaign committee,which then files these reports, along withits own, with the appropriate federal andstate offices. The principal campaigncommittee must also file a consolidatedreport on Form 3z. 11 eFR 102.1(b) and104.3(f).

Presidential Committees. principalcampaign commdttees of Presidential candi­dates file with the FEC, 999 E Street, NW,washington, DC 20463. 11 CFR 105.3. Theprincipal campaign committee must simul­taneously file a copy of each report andstatement with the Secretary of State (orequivalent officer) of the each state inwhich the cormnittee makes expenditures.11 CFR 108.2. Other authorized committeesof the same candidate file their reportswith the principal campaign committee,which then files their reports, along withits own, wi th the appropriate federal andstate offices. 11 CFR 102.1{b) and104.3{f). The principal campaign committeemust also file a consolidated report onForm 3P.

PACs and party Coomittees. Generally,PACs and party committees file with theFEC, 999 E street, NW, washington, DC20463. 11 CFR 105.4. There are, however,two exceptions: Committees supporting onlyHouse candidates file with the Clerk of theHouse; those suppOrting only Senate can­didates file with the Secretary of thesenate. 11 CFR 105.1 and 105.2. Theaddresses for these offices are given underthe instructions for House and Senatecommittees, above.

PACs and party committees nrost simul­taneously file copies of reports andstatements with the Secretary of state (orother designated officer), as follows:a Co~ttees making contributions or expen­

ditures in connection with House andSenate campaigns file in the state inwhich the candidate seeks election. Thecommittee is required to file only thatportion of the report applicable to thecandidate in that state. 2 u.S.C.§439(a)(2)(B) .

FEDERAL ELECTION COrvlMISSIONJanuary 1991

Filing Date1

4/15/917/15/9110/15/911/31/92

2/20/913/20/914/20/915/20/916/20/917,120/918/20/919/20/9110/20/9111/20/9112/20/911/31/92

Volume 17, Number 1

1/1-3/314;1-6/307;1-9/3010;1-12/31

Pericxi Covered Filing Date1

Period Covered

'od ed 'I" telPer1 Cover F1 10g Da

1/1-1131~/1-2126

3/1-3/314/1-4/305/1-5/316/1-5/307/1-7/318/1-8/319/1-9/3010/1-10/3111/1-11/3012/1-12/31

1/1/91-6/30/91 7/31/917/1/91-12/31/91 1/31/92

closing date 1/31/91of last reportthrough12/31/90

Report

1st Quarter2nd Quarter3rd QuarterYear-end

1991 Quarterly Reports (option available toPresidential CODIDittees only)

FebruaryMarchAprilMayJuneJulyAugustSeptemberOctoberNovemberDecemberYear-end

1Reports sent by registered or certifiedmail must be postmarked by the filing date;otherwise they must be received by thatdate. 11 CFR 104.5(e).

Report

Mid-yearYear-end

1991 Monthly Reports

Report

1991 Semiannual Reports

Report Period Covered Filing Date1

Year-end

REPORTIOO llA.TES CHARTS

1990 Year-end Beport (all coaadttees)

5

1Not e: All committees must also file a1990 year-end report, due 1/31}91.

2Including committees of candidates retir­ing debts from a previous election orrunning for a future election.

3presidential committees wishing to changetheir filing frequency during 1991 shouldnotify the Commission.

4pACS and party committees wishing tochange their filing frequency during 1991must notify the Commission in writing whenfiling a report under the committee'scurrent schedule. A committee may changeits filing frequency only once a year.11 eFR 104.5(c).

Reporting Frequency

PresidentialCandidateCoIllllittees

Type of Semi-Filer annual Quarterly Monthly

House/Senate ICandidate 2committees

PACS or partyCommittees

-/ ---or-- -/(Choice)3

II --------or------- -/

__________I_(_Ch_O_i_C_e_}_4 _

o Cormdttees making contributions or expen­ditures in connection with Presidentialcandidates file in the states in whichthe Presidential committee and the donorcommittee have their headquarters.11 ern 108.4,

1991 REPORTIOO~~

FEDERAL 8£CTION COrvlMISSION Volume 17, Number 1

Proposed Change Affecting All CcDnittee6:Redesignations and Reattributions

To monitor compliance with the 60-daytime period for obtaining reattributionsand redesignations of contributions, aproposed change to 11 eFR 110.1(1) wouldrequire committees to retain documentationdemonstrating that the redesignation orreattribution was received within the 60­day deadline.

o Candidate agreements;o Projected deficiency in the Presidential

Election campaign Fund (see article onpage 1);

a High error rates in matching fundsubmissions;

o Inclusion of computer tapes or diskettesin matching fund submissions, if thecommittee has computerized itscontributor records;

o Matching of redesignated and reattributedcontributions;

a Application of the 10 percent rule indetermining a primary candidate's date ofineligibility;

o Contributions received by a candidate whocontinues to campaign after his or herdate of ineligibility;

o Documentation of qualified campai90expenses allocated to particular states;

o Transfers and loans from a candidate'spublicly funded committee to a committeeauthorized by the candidate for adifferent election;

o Reimbursements by media personnel and theSecret service for travel costs;

a Joint fundraising;a Subpoenas issued during Commission

audits;o Double counting of repayable amounts;o Repayment of interest received on public

funds;o Repayments for exceeding both the state

and the overall spending limits; and -o Notification of repayment determinations

and failure to provide needed records.

6

January 1991

CC»IMI!NI'S soo:;m' C6 PROPOSED~'10 PUBLIC FDWCIN3 :ROLES

On January 2, 1991, the Commissionpublished a Notice of Proposed Rulemakingin the Federal Register seeking conments onproposed changes to the public financingrules for Presidential primary and generalelection candidates. The Commission alsoseeks comments on a proposed change to thegeneral regulations that would affect alltypes of conunittees. Written comments onthe rulemakiog notice will be due 00

February 19, 1991. To order a copy of theFederal Register notice, call the FEC'sInformation Services Division (800/424­9530; 202/376-3120).

Based on its experience in administer­ing the 1988 public financing program, theCommission proposed several modificationsto its regulations at 11 CFR Parts 9001­9007, 9012 and 9031-9039. These regula­tions implement 26 U.S.C. Chapters 95 and96, the public financing statutes. l More­over ,one proposed change implementing theFederal Election Campaign Act (Title 2 ofthe united States Code) would also affectnon-Presidential candidates and committees.

Listed beiow are the topics addressedin the proposed ru1emaking.

Proposed Changes to the PresidentialPublic Funding program.

The Rulemaking Notice proposessubstantive changes in two areas thataffect primary election candidates:o The allocation of expenditures to the

state spending lim!ts; ando The fundraising exemption from the state

spending limits.other changes are proposed in the

following areas:

1Please note that, on October 3, 1990, theCommdssion prescribed final rules regardingthe format of coqruterized informationsubm~tted during the audit process bypublicly funded Presidential candidates.See 55 FR 40377; see also the summary inthe August 1990 Record. Note also that theCommission recently published a rulemakingnotice seeking comments on proposed changesto the rules governing publicly fundedPresidential nominating conventions. see55 FR 34267, August 22, 1990; see also thesurrmary in the OCtober 1990 ~cord.

Volume 17, Number 1

FEe ELECTS NDl OFFICERSon December IB, 1990, the Commission

unanimously elected the 1991 officers:John Warren McGarry as Chairman and Joan D.Aikens as Vice Chairman. Mr. McGarrysucceeds former Chairman Lee Ann Elliott;Mrs. Aikens succeeds Mr. McGarry as ViceChaieman.

Commissioner MCGarry, a Democrat, wasfirst appointed to the Commission in 1978,after serving as Special Counsel on Elec­tions to the House Administration Commdt­tee. Before that, he combined private lawpractice with service as Chief Counsel forthe Special Committee to InvestigateCampaign Expenditures-~a House commdtteecreated every two years through 1972 tooversee House elections. Before his workwith Congress, Mr. McGarry served as Assis­tant Attorney General for Massachusetts.

Mr. McGarry graduated cum laude fromHoly Cross College, performed graduate waekat Boston University and earned a J.D.degree from Georgetown university LawSchool. He was reappointed to the Commis­sion in 19B3 and 1989. His current term asCommissioner expires in 1995.

Commissioner Aikens, one of the origi­nal members of the Commission, was firstappointed in 1975. Before her appointment,Mrs. Aikens was an executive with LewHodges Communications, a public relationsfirm in Valley Forge, pennsylvania. Shewas also a member of the pennsylvaniaRepublican State Committee, president ofthe Pennsylvania Council of RepublicanWOmen and on the Board of Directors of theNational Federation of Republican Women.

A native of Delaware County, pennsyl­vania .. Mrs. Aikens has been active in avariety of volunteer organizations. She iscurrently a member of the CommonwealthBoard of the Medical College of Pennsyl­vania and a member of the Board ofDirectors of Ursinus college, where shereceived her B.A. and an honorary Doctor ofLaw degree. Most recently reappointed tothe Commission in'1989, Mrs. Aikens'current tenn expires in 1995.

7

FEDERAL ELECTION COMMISSIONJanuary 1991

I For a summary of the district courtdecision, see the March 1990 Record.

2FEC v. NRSC, Civil Action No. 90-2055 (GAG), August 24, 1990i see the october1990 Record for a summary of this suit.

~ CAUSE v. FEC;Nl\.TICNU. REPUBLICAN SEN\'lURIAL CCMlITrEE,APPELI:.MT (90-5317)

on November 13, 1990, the U.s. Court ofAppeals for the District of Columbia, in aper curiam decision, ruled that thedistrict court had properly denied as moota motion to intervene filed by the NationalRepublican Senatorial committee (NRSC).

on August 20, 1990, NRSC filed a motionwith the U.s. District Court for theDistrict of Columbia seeking to intervenein COlmllon cause v. FEe (Civil Action No.89-0524'(GN3»). NRSC wished to intervenein the case to oppose a motion filed byCbmmon Cause seeking enforcement of amandate issued by the court in January1990. In its January decision, the courthad declared that the Commission'sdismissal of an administrath'e complaintfiled by Common Cause against NRSC wascontrary to law. The court remanded thecase to the FEC with instructions to 1conform with the court's declaration. InJune 1990, Common Cause asked the court toenforce that mandate by requiring the FECeither to reach a conciliation agreementwith NRSC or file an enforcement actionagainst the cOlllnittee. Common cause with­drew its motion as moot on AuguSt 24, whenthe FEC filed suit against NRSC. In lightof Conanon Cause's withdrawal of its motion,the district court ruled that the case wasclosed and that NRSC's motion to intervenein the motion was therefore moot.

The appeals court, granting the FEC'smotion for summary affirmance, upheld thedistrict court order denying NRSC's motionto intervene. The appeals court notedthat NRSC's motion, although it criticizedthe January order, sought to intervene onlyfor the purpose of opposing -Common Cause'smotion, which was later withdrawn. Thecourt also noted that "NRSC is currentlyable to challenge the Federal ElectionCommission's allegations of election viola­tions in [FEC v. NRSC} ••. , which remainspending in district court."

FEDERAL ELECTION COMMISSION Volume 17, Number 1

IThe Commission noted that this advisoryopinion does not reach any issues concern­ing the committee's debts for campaignservices. The opinion also does notaddress the prospective conduct of thecommittee, as the committee is not arequester. 11 CFR 112.1(b).

would resell the goods to raise funds.!under the proposal, Suarez would purchase .­the items from the suppliers and sell them _to the committee at a profit. The commit-tee would pay Suarez for the items inadvance and then sell them at a mark-up,using the profits to repay campaign debts.Suarez would repurchase any items not soldby the committee within a commerciallyreasonable time. Suarez would then marketthe repurchased items to the general publicand to other political committees whocontracted with Suarez for the same type of"sale-far-resale" arrangement. AlthoughSuarez does not normally sell merchandisefor resale, the corporation plans to makesuch arrangements with other politicalconanittees t pending Commission approval ofthe proposal.

Under the Federal Election campaignAct, corporations are prohibited frommaking contributions or expenditures inconnection'with a federal election.2 U.S.C. §441b{a). Contributions andexpenditures are defined to include"anything of value" given in connectionwith a federal election, including goodsand services provided at less than theusual and normal charge. 2 U.S.C. S441b(b)(2)~ 11 eFR 100.7{a)(1) (ii1)(B) and114.1(a)(1).

In determining whether vendor/committeefundraising arrangements result incontributions from the vendor, theCommission has considered whether thecommittee--rather than the vendor--assumesthe financial risk of the venture. ADs1990-1 and 1989-21; see also ADs 1988-17,1979-36 and 1976-50. The Suarez proposalmeets this concern, in part, because thecommittee wi11 :o Pay for the goods in advance; ando Exercise complete control over the goods,

including the assumption of marketingcosts.

TWo other conditions, however, shouldalso be met:o If Suarez repurchases any items (those

that the co~ttee is unable to sell),the repurchase price may not be higherthan the usual and normal chargeprevailing at the time of repurchase

8

January 1991

AD\7ISORY OPINICfi SU'lMARIES

ADVISORY OPINI~~

Recent requests for advisory opinions(AORs) are listed below. The full text ofeach AOR is available for public review andcomment in the FEe's Public Records Office.

AOR 1990-27Transfer to party committeets federalaccount of funds mistakenly deposited innonfederal account. (Date Made Public:December 5, 1990; Length: 2 pages)

NJ 1990-19: Vendoc/COIIlIlittee Relationship:sale and Repurchase ofFund.caising Items

The Suarez Corporation may sell jewelr::y andsimilar items to a campaign committee,which will resell the items for profit;SUarez may also repurchase the items,subject to 'certain restrictions. To ensurethat a corporate contribution does notresult from the transactions, certainconditions must be met: (1) The committeemust pay Suarez in advance for the goods;(2) in the event the goods are repurchasedby Suarez, the repurchase price must notexceed the usual and normal charge thenprevailing and must be reduced by anyadnUnistrative costs incurred by Suarez;and (3) Suarez must make the proposed planavailable, on equal terms, to both poEti­cal and nonpolitical customers.

suarez, a mail order business, normallyretails merchandise such as jewelry, coinsand medals t which it obtains from suppliersat the fair market cost. In order to helpa campaign committee that now owes Suarez$82,OOO--a debt incurred through a divisionof Suarez that provides advice to candi­dates--SUarez proposes a new venture: Itwould sell merchandise at a reduced priceto the political committee, which in turn

1\OR 1990-28Telephone secvlce bureau's provision of900-1ine fundraising services to commit­tees. (Date Made public: December 7,1990~ Length: 16 pages)

AOR 1990-26Campaign committee's liquidation of asset(computer). (Date Nade Public: December3, 1990~ Length: 1 page)

FEDERAL ELEC1l0N COMMISSIONJanuary 1991

(even if the original price paid by theconunittee was higher) i and

o The repurchase price must be reduced bythe administrative costs incurred bySuarez in selling and taking back theitems, costs that Suarez will nntotherwise recapture fr01l\ the committee.

Finally, in approving vendor/committeerelationships, the Commdssion has alsorequired the vendor to charge the committeethe same charge offered to nonpoliticalcustomers in the ordinary course of .business. ADs 1989-14, 1985-28, 1982-30and 1978-45. In this regard, the Suarezproposal must also meet the followingcondi tions:o Suarez must make all features of the

proposed plan (including the wholesaleprice and repurchase provisions I avail­able to nonpolitical customers on thesame tenms Offered to politicalcustomers; and

o The plan must conform to the normalindustry practice of companies engaged involume sales of jewelry and similar mer­chandise. See AD 1979-36.

The Suarez Corporation's failure tocomply with the conditions set forth in theadvisot"y opinion will result in prohibitedin-kind contributions , (Date Issued:November 15, 1990; Length: 5 pages)

NJ 1990-22: Blue Cross/Blue Shield'sSolicitation of Member Plans"Personnel

Blue Cress and Blue Shield Association(BCBSA), a nonprofi t corporation, maysolicit PAC contributions from theexecutive and administrative persormel ofits Regular Member plans since these plansfunction as affiliated local units ofBCB$A. If affiliation between BCBSA andthe Plans did not exist, the plans'executive and administrative personnelcould not be solicited for contributions toBCSSA's PAC, not ever. under the collectionagent rules.

Affiliation RulesBCBSA is a national association that

licenses Blue Cross and Blue Shield Plansthroughout the United States. CurrentlySCBSA has 74 Regular Member Plans, eachorganized locally. (8CBSA has other typesof Member plans, but its advisory opinionrequest related only to Regular MemberPlans.) Under FEC regulations, a corpora­tion may solicit contributions to itsseparate segregated fund from the executiveand administrative personnel (and families)of any affiliated organizations. 11 CPR

9

Volume 17, Number 1

114.5(g)(1). The Federal Election CampaignAct and FEe rules treat a corporation andits lllocal units" as affiliated; theregulations clarify that a "local uni t n

may, under certain conditions, include afranchisee, licensee or state or regionalassociation. 2 U.S.C. s441a(a)(5)i 11 CFR100.5(9)(2) and 110.3(a)(1)(ii). The regu­lations also provide specific factors theCommission may examine to determine whetheraffiliation exists between organizations-­such as BCBSA and its Member Plans-thatare not auto~ticallyaffiliated by virtueof a parent/subsidiary relationship.Several of these factors are present in therelationship between BSBSA and its RegularMember Plans, as explained below. 11 CFRlOO.5{g)(4)(ii)(Bl, (C), (E) and (I)j seealso 11 CFR 110.3(a)(3)(1i).o Factor 1: The organization has the

authority to direct or participate in thegovernance of the other organizations.BCBSA exerts substantial control over theoperations of the Member Plans by requir­ing adherence to all its membershipstandards and by subjecting the Memberplans to close scrutiny.

o Factor 2: 'lbe organization has theauthor!ty to hire, demote or otherwisecontrol the officers of the otherorqanizations. Although BCBSA does notselect the individuals to run the Plans,it does exert control over the composi­tion of the plans' governing boards.

o Factor 3: '!be orqanizations have COOIOOIlor ovedapping officers indicative of afonml 0[" ongoing relationship. Thecomposition of BCBSA's own Board ofDirectors--pred~inantlycomposed of PlanCEOs--denotes an overlap of officersindicative of such a relationship. SeeAD 1983-46.

a Factor 4: '!'he organization has an activeor significant role in the fomation ofthe other organizations. In orner forMember Plans to function as Blue Cross/Blue Shield plans, they must be admittedfor membership and licensed to operate byBCMSA.

In addition to these factors thatindicate affiliation, the Blue Cross andBlue Shield system appears to operate as asingle corporate entity. Subscribers~eceive uninterrupted medical coverageregardless of the geographic area oftreatment, and there are certain signifi­cant centralized operations within thesystem.

Therefore, based on the informationpresented in the request, the RegularMember Plans are affiliates of BCBSA,

(cont.inued)

FEDERAL ELECTION COMMISSION Volume 17, Number 1

MUR 1866Respondents: (a) New York State Conserva­tive party State Committee/1984 VictoryFund, Vincent G. Downing, Jr., treasurer;(b) Sullivan for Senate Committee, JosephM. SUssillo, treasurer (NY)CoIIplainant: Muriel F. Siebert and whitneyNorth Seymour, Jr. (NY)SUbject: Excessive contributions; failureto disclose in-kind contributionDisposition: (al U.S. district court judg­ment: $15.000 civil penalty; (b) concilia­tion agreement: $5~OOO civil penalty

SUbject: DisclaimerDisposition: U.S. district court judgment: ....$3,000 civil penalty (case was closed in ..,1987)

MUR 2345Respondents~ Republican State Coromittee ofDelaware-1984 Victory CoImtittee, JohnShopa, treasurerComplainant: FEC initiatedSubject: Excessive contributions; exces­sive and unauthorized coordinated expendi­tures; inadequate reporting; use of non­federal account containing impermissiblefundsDisposition: $9,000 civil penalty

I'lUR 2636 eRespondents: (a) National Secori typolitical Action Committee, Elizabeth 'I.Fediay, treasurer (DC) (re: The PAC'sspecial project, "Americans For Bush" l; etal. (b)-(h) ­Coqtl.ainant: Jan W. Baran, GeneralCounsel, George Bush for president, Inc.(DC)Subject: Disclaimer; failure to reportcontributions accuratelyDisposition: (al $6,000 civil pen~lty;

(b}-(h) no reason to believe

I'lUR 2691Respondents: (a) Dave Moss (AZ); (b) DaveMoss for U.S. Congress, Dave MosS,treasurer (AZ)

Complainant: John Parsons (AZ)SUbject: Destruction of campaign records;inaccurate reporting; failure to report ontime; failure to file disclosure reportswith the Office of the Arizona Secretary ofStateOisposi tion: (a) No probable cause tobelieve; (b) $1,500 civil penalty

l'IUR 2752Respondents: (a) Jerry Yudelson (CA);(b) yudelson for Congress, Jessica Stuart,treasurer (CA)

10

January 1991

Collecting Agent RulesIf BCBSA and the regular member Plans

were not affiliated, the Plans could notfunction as collecting agents for contri­butions to BCBSA's PAC. Under 11 CFRl02.6(b)(1), a collecting agent must, bydefinition, be affiliated with the con­nected orgenization or with the PAC. Thus,the collecting agent regulations do notexpand an organization's solicitable class.

(Date Issued: November 15, 1990;Length: 8 pages)

functioning in effect as local units ofSCBSA. SCBSA may therefore solicit theexecutive and administrative personnel ofRegular Member Plans for contributions toBCBSA! s PAC.

I'IJRS RE:LF.N;ED TO THE PUBLICListed below aCe MURs (FEe enforcement

cases) recently released for public review.The list is based on the FEC press releasesof November 16 and 20, and December 3,1990. Files on closed MURs are availablefor review in the Public Records Office.

Unless otherwise noted, civil penaltiesresulted fram conciliation agreementsreached between the respondents and theCommission.

IlIlJR 1818Respondents: (a) Ingham County DemocraticFederal Campaign Fund (MI)~ (b) friends ofBob Carr, Dennis M. Ritter, treasurer (MI];(c) Riegle for Senate in '82 Committee,M.P. patten, treasurer (MI); (d) HowardWOlpe campaign Committee, wayne M. Deering,treasurer (MI)cqU,ainant; FEe initiatedSUbject: Excessive contributions; failureto file reports; failure to report completeinformation on contributionsDisposition: (a) $2,000 civil penalty~

(b) $250 civil penalty; (e) reason tobelieve but take no further action;(d) $250 civil penalty (case was closed in1986)

MUR 1835Respondents: National ConservativePolitical Action Committee, Leif E. Noren,treasurer, and Americans to Re-ElectPresident Reagan (VA)OXlplainant: Refer ral by U.S. Departmentof Justice, Public Integrity Section

FEDERAL ELECTION COMMISSIONJanuary 1991

Complainant: Robert K. Dornan (CA)SUbject: DisclaimerDisposition: (a) No reason to believe;(h) $400 civil penalty

MUR 2771Respondents: (a) Democratic SenatorialCampaign Committee, G. Wayne Smith, treas­urer (DC); (b) Committe on Letter Carrierspolitical Education, Florence Johnson,treasurer (DC); (c) John P. Vinich (WY):(d) John P. Vinich for U.S. SenateCommittee, Mabel vinich, treasurer (WY)i(e) united Steelworkers of America Politi­cal Action Fund, Local Union 13214 (ILlComplainant: Jann L. Olsten, ExecutiveDirector, National Republican senatorialCampaign Committee (DC)SUbject: Disclaimer:; prohibited unioncontributions; excessive contributionsDisposition: (a) $1,000 civil penalty;(b) $750 civil penalty; (c) no reason tobelieve; (d) and (e) reason to believe buttook no further action

MUR 2932Respondents: (a) Terry Gaudet andAssociates, Inc. (LA); (b) Terry Gaudet(lA); (c) Beverly Gaudet (IA)Cc::JDplainant: Refecral by Defense ContractAudit Agency (VA)SUbject: Prohibited corporate and govem­ment contractor contributions; contribu­tions in the name of anotherDisposition: (a)-(c) No probable cause tobelieve

MUR 2936Res[XJJXlents: (a) Republican National Com­mittee (DC)i (b) Carroll County RepublicanCentral Commi t tee (FederaI Account), LouisE. Wiser, Jr., treasurer (MO); (c) Gary W.Bauer (MO); (d) Helen Delich Bentley (MO);(e) Richard P. Taylor (MO); (f) James F.Keenan (SC)aonplainant: Carroll County RepublicanCentral Committee (Federal Account), suas~nte -S ject: Failure to forward contributionswithin time limit; failure to maintaincontribution records; failure to disclosecontributor identities; inaccurate andincomplete reportingDisposition: (a) $1,427 civil penalty;(b) reason to believe but took no furtheraction; (c) $1,000 civil penalty; (d)­(f) reason to believe but took no furtheraction

11

Volume 17, Number 1

MUR 3047Respondents: (a) simon for Senate, EdwardT. Joyce, treasurer (IL); et al. (b)-(d)Complainant: John J. CUrry, Jr. (IL)Subject: Excessive contributions through aconduit; corporate contribution throughimproper sale of campaign assetsDisposition: (a)-(d) No reason to believe

MlJR 3055Respondents: Friends of Senator DavidKarnes Committee, Jon D. Hoffmaster,treasurer (NE)Complainant: FEC initiatedSUbject: Excessive contributionsDisposition: $1,000 civil penalty

I«JR 3060/3052Respondents: (a) Scott E. sidwell (NE);(b) Sidwell for Congress, Mary S. Berglund,treasurer (NE); et al. (c)-(elComplainant: Bill Haivala (NE)SUbject: Excessive contributions; failureto disclose in-kind contributionsDisposition: (a)-(e) No reason to believe

MUR 3073Respondents: Voluntary Contributors forBetter Government: A program of Employeesof International Paper, Arthur W. Brownell,treasurer (DC)Complainant: FEe initiatedSubject: Failure to tl::ansfer contributionsfrom corporate treasury account to PACaccount in a timely fashionDisposition: $3,500 civil penalty

.KUR 3080Respondents: (a) Phillip Klinger (IA);(b) Klinger, Robinson, McCuskey & Ford(IA); (c) Fred F. Ertl, Jr. (IA); (d) TheErtl company, Inc., George Volanakis,President (IA)C~lainant: Carolyn Seeley, CampaignManager, Ertl for Congress (IA)Subject: Corporate contributions/expendi­turesDisposition: (a)-(c) No reason to believe;(d) reason to believe but took no furtheraction

I«JR 3084Respondents: The Ray Ellison Industries,Inc. Political Action Committee, Walter E.Neilsen, treasurer (TX)Complainant: FEC initiatedSUbject: Excessive contributionsDisposition: $1,600 civil penalty

(continued)

FEDERAL ELECTIOI\J COlVlrvIISSIOI\J Volume 17, Number 1

KJR 3116Respondents: Democratic Party of Oklahoma, ...Maxine F. McFalls, treasurer (OK) ...,Complainant: FEC initiatedSUbject: Failure to report on timeDisposition: $750 civil penalty

Bulk Rate MailPostageand Fees Paid

Federal Election CommissionPermitNumberG-31

I'tlJR 3120Respondents: National Republican Senator­ial committee, James L. Hagen, treasurer(DC)

CCIllPlainant: Gary J. LaPaille, Chairman,Democratic party of Illinois (IL)SUbject: DisclaimerDisposition: No reason to believe

Official Business

FEDERAL ELECTION COMMISSION999 E Street, NW

Washington, DC 20463

JIIJR 3094Respondents: William Lehman campaign FundCommittee, Edward Mahler, treasurer (FL)Complainant: Earl Rodney (FL)SUbject: Failure to file disclosurereports with the Florida Secretary of StateDisposition: No reason to believe

I'tlJR 3092Respondents: Kasten for Senate Conuni ttee I

Inc., John sturm, treasurer (WI)CcsIplainant: Marvin J. Freedman (WI)SUbject: DisclaimerDisposition: No reason to believe

, Jaouary 1991