This file contains archived live captions of the open meeting of the Federal Election Commission held on February 11, 2016.  This file is not a transcript of the meeting, and it has not been reviewed for accuracy or approved by the Federal Election Commission.


>> Good morning. The open meeting of the federal election commission for Thursday, February 11th, 2016 is now in order. Thank you for your patience. There have been some late negotiations and discussions and some drafts that are currently being printed and will shortly be distributed and discussed, so we figure let's get underway, and we should have those momentarily. First motion is on late submitted documents, which there are several. Mr. Vice Chairman.
   >> I move to suspend the rules of agenda documents in order to consider the late submission of the following documents; agenda document number 16, which is draft day of the NSAO. Agenda document number 16-OH-B. Agenda document number 15-69D, which is draft D of Hillary for America AO.
   >> Is there any discussion on the motion?
   >> Excuse me. I think it is 1607-B.
   >> 1607-E?
   >> 1607-A and 1607-B.
   >> I have that. What did I say?
   >> I believe you said 1608-B.
   >> Okay, pardon me. The first document will be 1607-A, and the second will be 1607-B. Sorry about that.
   >> All right. Thank you for that. Um, all those in favor, say I. Any opposed?
   >> I.
   >> The motion passes by a vote of six to zero.
   >> I move that the Commission approve the minutes -- I further move that the commission approve the minutes of the open meeting of January 14th, 2016, set forth in the agenda document.
   >> For that motion, is there any discussion? If none, all those in favor, indicate by saying I. Madam Secretary, the motion passes by a vote of six to zero. The draft that we are waiting on relates to the second item on our agenda today, the draft 2015-14, Hillary for America, and, so, um, I would recommend that we switch up the order here and that we consider draft advisory opinion 2015-16 first, and then as we get the drafts, we can then come back to the Hillary for America advisory opinion. I apologize for messing up your plans, but stick around, and we will get to that advisory opinion soon. So, without objection, we will turn to Mr. Backer. He is here on behalf of the requester, and please take a seat at the table. Good morning.
   >> Good morning. Agenda document 1607-A and B present two draft advisory opinions in response to a request by Innis for Congress. He was a candidate in 2014. He lost the primary election, and his committee now asks two questions about contributions for the general election in which he did not participate that it received prior to the primary election loss. First, the committee asks whether it may pay legal accounting, compliance and transaction costs that it traces to the general election contributions from those contributions. Both drafts conclude that it may not. Second, the committee asked whether it may donate to charity those general election contributions it has been unable to refund. Draft A concludes the committee may not, and draft B concludes the committee may. The commission received one comment from the requester, and I'm available to answer any questions you may have.
   >> Thank you. Is there any discussion or questions for requester? Mr. Vice Chairman.
   >> Are you still pursuing the issue of whether or not those costs can be recovered?
   >> The part that's covered under question one, yes we are.
   >> Okay, let me ask some questions then. You say these are unique costs.
   >> Mm-hmm.
   >> But, um, the list that I see is, um, they consist of transactions and specific costs. Are we talking about for people?
   >> Yes.
   >> So, these unique costs are only expenses incurred by those four people.
   >> Yes, because all others have been refunded, but it would have a broader application. I would suggest that there's broader application here, that if it works for these four people in this situation, it should probably work in general for anybody else, but we're only asking about for these four people.
   >> This is a precursor to a future policy, whereby all these expenses can be picked up and there wouldn't be a full refund.
   >> I would suggest so, but we're only asking about these specific four.
   >> Bet let's talk about this. What we're basically asking is were the people entitled a full refund, right?
   >> Yes.
   >> The check processing fees was how much?
   >> I don't know the answer on each of these individually.
   >> How about the transfer fees?
   >> I'd have to go back and look, but between 3.5 and 4.5 percent depending on what kind of credit card it was processed on.
   >> What happened in this case?
   >> There's credit card transactions that are made. The check transactions are a separate question, but there's credit card transactions that are made, and each individual transaction has a per transaction processing cost charged by the credit card vendor, so there's a percentage of fees, and it varies slightly based on whether it's a Visa, Mastercard, or whatever, and so each individual transaction has a unique transaction processing cost that we would argue should not be refunded because it's already been spent, and then separately, there's, well, that's sort of the major component, and the second part was fundraisers who are compensated for the solicitation of these general election fees are paid for the successful solicitation, that percentage should be deducted as well, and in that case, I'd have to double-check, but I'm pretty sure the fundraiser was making either 10 or 15 percent, and I think it's 10 percent.
   >> And then we'll go back. Is there a bounced check fee here?
   >> Not on these transactions that I'm aware of. We want to be inclusive of it, just in case we miss some transactional items.
   >> Okay, but you're only talking about four people.
   >> Right. There aren't any bounced checks on these four.
   >> So what would be the purpose of asking for it?
   >> We wanted to be inclusive of the kinds of transactions that we think ought to be permissible, even if it's not specifically permissible to these four, if it happens, we wanted to have that as sort of part of the answer.
   >> But we don't have a true legal issue there?
   >> In regards to the bounced fees, probably not, but there's broader implications to the outcome on this question, as you noted.
   >> Yes. The fundraising commissions in connection with these matters for each of the four contributors, they had a deduction to the commission, or to the campaign because there was a commission paid?
   >> Yes. So, there was a payment made to the fundraiser on the solicitation, the successful solicitation of these fees. Those funds came out of the primary contribution, or the amount of the primary contribution as opposed to the specific general election funds.
   >> And how much were those, do you know?
   >> I'm almost certain it's 10 percent. There was at one point a separate piece that was 15 percent, but I think these are within the 10 percent bucket.
   >> And were the four contributors contributing equal amounts?
   >> No. I don't have the exact numbers in front of me, but there were four different contributions. I think, um, one was 2600, one was 1,000 or 2,000, one was 1400. It was different amounts.
   >> Then, um, why do you say these are unique? Does it make a difference in the analysis?
   >> Yes. When I say unique, I mean it's unique to that specific individual contribution, so it's not, for example, so, we know for a fact that this $1,000 contribution has a credit card processing cost of $15.32, because we can look at a specific credit card bill and find that transaction. We know that individual contribution of $1,000 caused a $100 transaction processing fee, or, sorry, a fundraising fee, so it's unique to that individual transaction. I can imagine that there are plenty of fees that might be assessed to a campaign that are not specific to a contribution. So, for example, if a fundraiser gets a bonus for raising $100,000, even if it includes general election funds, that bonus wouldn't be tied to a specific general election contribution, it's to a general course of performance. I think there's a lot of activity that might fall within that non-specific, non-unique category, but there are transactions that occur purely because it's a general election contribution, and it's specific to one particular general election contribution only.
   >> And that applied in these four cases?
   >> Yes.
   >> Okay. Did any of these donors give any money to the primary?
   >> All of them did.
   >> Now, the transfer fees, tell me about what happened with respect to these four donors.
   >> And I'm going to, I'm not sure what you mean, what transfer fees we're talking about. I think there might have been a --
   >> I mean, you're talking about in the sense that you confirm that those are items, you know, confirming a telephone conversation you had with our office. Not our office, the Walther office, but ODC or something.
   >> I'm not entirely sure, but generally, it's the cost of the solicitation, the successful solicitation of the contribution. There's the cost of the processing of the contribution by a credit card. To the extent that there would be a transfer fee, a cost of transaction, taking that amount of money that's going in and moving it from one account to another, that may be a transfer fee. I'm not entirely sure, looking back, what specific piece of it we're discussing, but again, we're mainly interested, or we're only interested in the fees that are specific to the individual contributions that are traceable to this, to these individual contributions, so there might be, I can't think of anything off the top of my head, maybe we had a Fedex check, that would be a transaction. If we had one specific check and we're paying for that, arguably, that might be a fee. If we're doing two checks, it wouldn't be unique, but again, I'm not entirely sure what specifically we talked about about transfer fees.
   >> Okay, so this is unclear, check processing fees?
   >> Right.
   >> A check or a credit card, which ones are we talking about here?
   >> Credit card processing fees, to the extent there might have been HCH processing fees, which are the drafting of, when money automatically goes from one bank account to another, those are separate kinds of processing fees. They're the same in nature, but they're HCH fees as opposed to check processing fees.
   >> Were there check processes fees with respect to these four?
   >> I don't believe so. I believe these were all credit card processing.
   >> So, let me see, account maintenance fees, check processing fees, transfer fees, bounced check fees, and fundraising commissions. So, which ones apply to this case?
   >> To these specific four transactions, credit card processing fees, fundraising commission.
   >> That is not listed.
   >> The credit card processing fees?
   >> Yeah.
   >> I think that would be probably the processing fees at large, because processing fees would relate to both credits cards or HCH transactions.
   >> Okay. All right, so, which ones are we actually talking about then?
   >> The credit card processing fees, which are part of the processing fee category, the fundraising fees that are related to each individual contribution being raised. I don't believe, in this specific case, there were any bounced check related fees. I'd have to double-check, but I don't think that was the case. I know we've had, that client had checks that bounced and caused a fee, and of course, legal accounting and compliance costs, generally, maintenance fees, that relates to the existence of the bank account, solely that the fact that the account exists, there's a fee that was assessed for that.
   >> For a checking account?
   >> Just for the existence of this checking account. We're talking a very modest amount of money, but it's only, I mean, in the sense of, like, it's a couple of dollars.
   >> Those aren't unique, are they?
   >> No, but they are uniquely traceable to only the existence of the general election account, and, so, again, while, you know, we think there are specific transactions here, but there's potentially broader implications, and we wanted to be overinclusive rather than underinclusive.
   >> Well, when you go to write a check, how are you going to make a deduction to these four people? I gather the exact amount of $8,000 that these people are entitled a refund, less whatever we say can be deducted. Is that correct?
   >> Yes. The goal is to, anything that could be deducted would then be, in effect, transferred from the general to the primary account, and then the balance would then be donated to a charity.
   >> Um, I may come back to that, but let me ask you this in connection with the efforts to obtain a refund. What efforts were made to obtain a refund?
   >> To make the refunds? First, we issued a check to the contributors. Those checks were not to be cashed or deposited, and then we made phone calls, either the compliance team or the campaign team called in individual donors, and then there was a second issuing of the checks. The donors are not responsive, and, look, to be honest, I'm not entirely sure why. If somebody sent me that check, I'd be quick to deposit it, but for whatever reason, these amounts have been mailed out to them twice, they haven't responded. They've not bounced back to them, so somebody's getting this mail and just not processing it on the individual donor side. To be honest, it was a very surprising thing. I really didn't expect this to happen. I have another client that this occurred with, and in talking to my peers in the service side of the industry, this apparently happens every now and again. Any committee that raises any amount of money seems to have donors where they have to make refunds for the general, they have donors that just don't deposit refund checks.
   >> Well, you've got their address, right?
   >> Yeah, and we've sent checks to them by mail.
   >> The same address that they used when they made their first contribution?
   >> Yes. Well, it would have been mailed to the address that we have that they would have given us when they were completing the donor information for us to perform our best efforts compliance, so that would have been the address that we would have mailed it to, and I'm pretty sure on all of these, we asked has there been any change in the address, are you aware of anything, and no one was aware of any change of address. You know, I find it really weird, to be honest with you, that they're getting checks and not depositing it. On the other hand, you know, people who cut $2600 checks probably have a different set of concerns than I do, so.
   >> But if you go spend the money for returning it to charity to the government and they go to cash the check, they won't have any money.
   >> Well, we will, of course, cancel the checks. I mean, those checks are not stale-dated anyway, they're more than 90 days old, so we haven't canceled them to date, but we probably would before we donated to charity.
   >> So they'd lose their opportunity for a refund.
   >> Yes, to the extent that they've sat on that opportunity for almost two years now.
   >> Okay.
   >> In fairness, about a year and a half. I think the primary was in May of $14, so it's slightly less than two years.
   >> Well then, um, if you got $8,000 and there's only four people, couldn't somebody pick up the phone? You're the treasurer, correct?
   >> Yes.
   >> I didn't realize that, I just learned that this morning, but you're in charge of all this money?
   >> Yes, and we've, phone calls have been made to each of these donors unsuccessfully.
   >> By you?
   >> No, the campaign staff, the candidate himself. They weren't able to get ahold of anybody.
   >> Nobody picked up the phone? All four of them?
   >> Apparently not, and again, voicemails, I'm told voicemails were left. It's weird. I don't really understand why people aren't taking these checks that we're sending to them, and by all indication, the addresses are correct. Short of showing up on their doorsteps, we're not sure what to do, and I'm pretty sure that would violate something about petty cash.
   >> All right. So, what, um, what possible legal theory do you have that these people, there should be a deduction from whatever they're entitled to in the way of refund? Because I assume what you do is send them a check for the full amount?
   >> We would, well, um, setting aside the request, we sent them checks for the full amount. If you were to agree with our legal theory on this, then we would, I guess we would, again, send them a check for the discounted amount, though, again, if you also agree with our request in part two of this, we would deduct the fee amount and then just donate the rest to the charity, so I guess it depends whether you agree with section two or not, but if you agree with one and not two, we would issue a new check for the difference between the amount that they contributed and the fees that were paid for that contribution, and then if you agree with part two, we're going to skip that step, because they clearly don't care, and they've twice ignored us.
   >> So, in the future, you give a full refund and thus they don't cash it, and then if they ask for it, you only give them partial? Or in the future, would you be deducting anytime there's a refund, no matter how much, $100,000, $200,000 to 50 or 100 people or more, it'll be a unique cost deduction all the way through before they get the full refund?
   >> Yes, I would say that under the theory under part one, the processing cost of contributions, well, frankly, a committee would have that choice. They could choose to just make a full refund, and I can see a lot of situations where the candidates are going to do that anyway because it's a good business practice in the sense of if you're running for office, you're soliciting contributions, you want to keep your donors happy, and you might run again, so I think a lot of people will still choose to fully refund to the extent they're able to. I also think, however, that campaigns are going to be well-advised to deduct the amount of the processing fees that they're being assessed for these general election contributions and spend those funds on the general, on those costs, where at a minimum, put them aside somewhere to make that determination later, but I would suggest that the processing fees and the fundraising costs should be paid out and that at the committee's discretion, they should be able to make a refund of the rest of the contribution less those uniquely traceable costs.
   >> Okay, so we're really talking about a whole new process for everybody.
   >> I don't know how new it necessarily is. I think from an accounting perspective, it's a pretty straight forward process from the treasury side. You know you have a contribution and it's going to the general, you know how much the credit card cost of that is, and you know what you're paying the fundraisers, so they will have a primary and general account, and you would cut the fundraising commission out of the general account, the credit card processing is a little more complicated, because you only get one merchant account, but you could fairly easily look at how much was charged on each individual transaction and then move those funds from the general to the primary account. So, I don't think it creates a lot of burden at all. To the extent that the commission felt that those individual transactions needed to be reported, it's very easy to report as well, particularly for online contributions, where most commercial vendors that I've seen candidates in political committees use track the cost of each individual contribution's fees. So, I know, you know, the 4.5 percent, or a fixed fee, or the merchant platform, whatever they're charging, I can fairly easily export a file and see that data, so there's not a lot of difficulty in terms of the accounting side.
   >> Okay, so, some people pay by credit card, some pay by check, some pay by other means. Are we really talking about the so-called unique situation, or just in general?
   >> I think --
   >> It seems like you might be talking about --
   >> To the extent we're talking about individual processing costs, I think it has to be related to the specific individual transaction. So, for example, we encourage our clients who, there's a lot of firms who do this, and they physically open envelopes and process checks, and they bill flat fees or they bill per transaction fees, or they can bill hourly. If it's hourly, I don't see how it's reasonably traceable, if it's a flat fee, I don't see how it's reasonably traceable, but to the extent they're saying, hey, these are your primary contribution checks, these are your general election contribution checks, and I'm making this number up, we charge you 17 cents per deposit, we know exactly how much costs in terms of processing fees, and I think that piece of it should be able to be deducted from any potential refund, and again, setting aside the legal accounting and compliance cost argument of question one, these uniquely traceable costs are something I think ought to be paid out of those funds, and there's a fun legal argument as to why, actually.
   >> Let's have it.
   >> So, in fact, there's two. The first is it's pretty clear that if a candidate receives a contribution for $2700 by credit card, the credit card processing cost has to come out of that $2700, they can't get a $2700 contribution and a $100 fee on top, so the value of a contribution is the sum of the contribution itself and the processing cost involved in it, and, you know, I'm sure everyone on the receiving side would love to be able to charge the amounts on top, but the law is fairly clear in this, and with the exception that it's miscited in the index, we can't find the exact site, but it's pretty clear that any credit card processing on my contributions coming in come s out of the amount I'm receiving, and, so, the problem that you then have is I'm getting, I'm going to use rounder numbers, just for ease here, $2500 in the primary, $2500 in the general is coming at the same time, I'm paying a 5 percent credit card processing fee on this, it happens to be a flat transaction fee, so this bucket of money here, I had $2500, the cost of processing that is $125, but I'm not paying it out of here, I'm paying it out of the primary election account, and, so, the value of this contribution is actually $2500 plus the $125 at the time that it's made. Now, the fact that it's not, I may not actually get to spend this money, I may not be able to use it doesn't change the fact that there's a processing cost involved in it, and, so, this bucket of money is more than the value that is permissible for the contribution if I'm forced to pay the contribution fees out of this bucket of money, and then there's a more FLAUSical approach, that these are the buckets that I'm allowed to engage in in this matter. I'm allowed $2500 a speech related to your general election, $2500 worth of speech here. I'm reducing the amount of speech that I get in this bucket, which I think matters a little bit more for the primary in order to subsidize this other bucket of speech. So, I think what ends up happening is you're taking permissible amounts of speech that you're allowed to have in the primary and you're losing that speech, you're not able to engage in that $125 worth of associational speech, and, so, I think that is part of a philosophical problem, with preventing the fees related to the contribution from coming out of the contribution themselves.
   >> Well, I think that's not one for today, but it seems to me you could direct them to give you money in a certain way where there wouldn't be those fees, or you could find a variety of ways to acquiring monies without having to pay a professional, but if you can do that, somebody says they're entitled to make a contribution, part of the expense of the campaign is just what happens in the campaign, you know, so. Let me ask you this, on your reports at this point, it only shows there's $57 in the account.
   >> In the primary account, yes.
   >> Okay. Is there any account that shows there's $8,000 there?
   >> There's a, um --
   >> That's reported to the FEC?
   >> There should be, on the reports, there's a primary account and a general election account. The primary has $57, and the general election account has approximately $8,000 in it, so it should be on the report as received. It actually might not be, because when we cut the checks originally, we would have recorded that disbursement, and we haven't canceled those checks, so I guess in that sense, those checks are not going to show up on the report, because we haven't canceled them yet, hoping, you know, they'll actually do something with them. So, once we cancel those checks, we would then have to reapply those funds back into the FEC report.
   >> Okay, so these have been out for how long?
   >> The second round of checks, certainly over a year. They would have been issued prior to the end of 2014.
   >> Okay. So, anytime there's a check out for no matter how long, a certain length of time, it's never shown as coming through? Or how does it work?
   >> The FEC report or --
   >> You know, if you get, if the check comes through, then that's when you show it?
   >> Um, well, when we cut the check, the refund check, we're reporting it as the date that we're issuing the refund, so that comes off the cash balance in the report. When we cancel the check, then we're essentially applying a, we're removing that transaction, so it adds money back into the cash on-hand balance, and so the fact that, um, you know, technically, it's not there, but we also have cash sitting in the bank account as a practical matter, and obviously, we have to continue having reporting obligations until this gets resolved.
   >> That's all I have right now.
   >> Um, Commissioner Goodman.
   >> Yes. Mr. Backer, um, so you have $57 in your primary account, and you have $8,000 in your general election account.
   >> Actually, no. There's a completely unrelated problem where there's a little bit less than $8,000 in that account, but essentially, there's $8,000 that should be in the general, and there's $57.16 in the primary.
   >> But for this issue, this Committee wants to terminate.
   >> Oh, yes. There's another outstanding debt that we're negotiating with the debtor, and the debtor, of course, keeps pointing out, but, you know, what about all this money that you have? Because they're aware of this particular situation.
   >> You mean the creditor?
   >> Yes, the creditor is aware that the committee exists, they're aware of the situation, but they still want to get paid, so we're negotiating the resolution of that. So, I don't know, if we resolve this, it gets us that much closer.
   >> But since you can't resolve this, you're stuck in limbo, I take it.
   >> Yes.
   >> And the committee stays open and has to continue filing reports with the FEC.
   >> Yes.
   >> Has to continue incurring services to do so.
   >> Yes.
   >> Monthly bank fees to do so, right?
   >> Not anymore. It did, but it no longer has monthly bank fees.
   >> But there is an overhead?
   >> Yes. It's getting a lot of free legal service out of it.
   >> I was going to say, who's paying for your fees to be here today on how to resolve this problem?
   >> Nobody. We just want to get this resolved.
   >> You're implying a kind service?
   >> Yes.
   >> Essentially, right?
   >> As do a lot of my peers.
   >> So, the law said that your committee could raise these general election funds prior to the primary.
   >> Yes.
   >> You probably had a first amendment right to do it, too.
   >> Yes.
   >> Probably, right?
   >> I would say so.
   >> I can't prevent you from talking about and supporting a future general election candidacy, but the law said you could raise it, and now the law says, um, but you can't spend any of it, you have to refund it because you lost, and yet you're left with all these administrative costs to deal with the money that the law said that you could raise.
   >> Yes, and that exists only because we raised that law.
   >> It's a fairly irrational regulatory result, isn't it?
   >> It is, and interestingly, it creates an odd tension in the law, because for the law to be internally consistent, if contributions include the value of the processing cost but we're not allowed to, you're getting this resulting contribution additional value on to the general election contribution, in essence, it's not internally consistent for the law to say that and then also prevent us from deducting those fees, and so it actually, for the law to be internally consistent, we have to deduct it, and I noticed in draft B, on the various places in part one, or the answer to part one where it talks about it, I don't think there's a clear prohibition on the ability to spend these funds in this way for this particular purpose. I think the purpose of the law is to prevent people from using general election funds to go out and spend money on primary activity, but arguably, there's no part of the primary activity. I think it would be a little bizarre, but nothing technically stops a candidate from raising money just for the general election and raising no primary funds whatsoever.
   >> Right. Um, this is a regulatory catch-22 that we have debated in other contexts. You know, I'll just alert you that I'm in a minority opinion about this, and that's why you are not seeing a yes to your question number one, but I believe this regulatory is a problem, and I've exhorted my colleagues to address it a different way in the past, and I've been unsuccessful, but that's why you're not seeing a yes draft right now on that.
   >> Are there any further questions or discussion?
   >> Is this money going to the debtor or charity?
   >> Charity. Actually, sorry, any processing fees that we're allowed to separate out, that's going to go to the debtor, but while it's important, it's a relatively small amount of money, because we've already paid the fundraising fee, the credit card processing fee. It's about 15 percent, so we're looking at about $1200 that would be separated out, and that would go to the debtor, and then the balance of the debt would be, you know, we're negotiating how to resolve that, but any funds that are the processing fees, those are going straight to the debtor, and the rest of the non-refundable general election contributions are going to some charity.
   >> One other question. I'm sorry.
   >> Mr. Goodman?
   >> If you were informed that you could terminate this committee today, would you still want your advisory opinion answered on what you could do with the money with a shut-down and terminated committee?
   >> I would want it, just because I think it's important to know whether you are or are not compliant with the law. We have three-year recordkeeping requirements, we want to be able to document our compliance with the law, in case down the road, there's an audit, so I think it's important to have an advisory opinion, even if we are able to terminate.
   >> I would encourage you to call Debbie Kachona and talk about your termination options, okay?
   >> Any further discussion or questions? At this point, I know that Commissioner Walther, I know he had several questions that he obviously asked, and there had been some question as to whether or not we might want to vote today or whether or not there would be rather a preference to vote either at a future meeting or even on tally, because I believe that the 60-day deadline runs on Tuesday, next Tuesday?
   >> The 16th, after the holiday.
   >> February 16th, so I just want to give my colleagues preference.
   >> I have no problem with holding it over and voting by tally or whichever way is appropriate.
   >> Vice Chairman, what would your preference be? I think that the information that you've provided, I think some of my colleagues would like to chew on that, and the question I would ask of you, Mr. Backer, is would we, if we were to go beyond Tuesday and consider this and vote in a live meeting like this, we would need to get an extension, so I guess I'd first ask if you would be willing to grant that extension till the next meeting, or if you wouldn't, if we could resolve it by tally before Tuesday.
   >> My client would be happy to agree to an extension. Ironically enough, yesterday, we filed a notice of, a petition for rule-making about creating time for public comments, so you have two opinions now, others might want to comment as well, and if there's any additional information we could provide based on these questions, I think an extension would be fine.
   >> Okay. So, um, we'll then hold this matter over for discussion at the next meeting, which will be on the 25th, and, so, um, agreeable to hold it till the 25th, Mr. Backer? Do you need to first inquire with your client?
   >> We can go ahead. I mentioned this would be a possibility, so the client is fine with extension in the hopes of quickly terminating.
   >> All right. Vice Chairman Walther.
   >> Yes. The only reason I brought it up, but in connection with your compensation, have you been compensated at all?
   >> I was paid for by the committee when the committee had funds in the primary account, but I have not been compensated for a long time on the matter, and we don't expect to be compensated on this either.
   >> All right. Is there anything further? If not, then we will hold over this discussion until the 25th. Thank you very much, Mr. Backer.
   >> Thank you.
   >> We'll now turn back to agenda item number two, which is draft advisory opinion 2015-14, and we have Mr. Burrconand Ms. Lopez on behalf of the requester, and please join us at the table.
   >> I'm guessing that the original motion on late submitted documents didn't include this latest draft, because it wasn't in front of us at that point, so I could make the motion, if you want.
   >> It did.
   >> It's included? Even though it didn't exist yet? Wow.
   >> It existed, we just didn't have copies of it.
   >> That's very cool. That's awesome. Thank you. Good job.
   >> All right, we have Mr. Knop from general council on this, and if there been been some developments since we last discussed this, why don't you update us on the status of this request.
   >> Thank you, and good morning, commissioners. Before you is agenda document 1569. The requester, again, asks whether Depau University may provide -- both drafts A and B. It concluded that the provision of a stipend is permissible under the act for legal and compliance services, but not for the student's other work for the campaign, and those drafts concluded the provision of academic credit is permissible for all the student's work. Draft C conclued the provision of a stipend is permissible under the act for all of the student's work, and now, the late breaking development is drafts D and E, which conclude that provision of the stipend is permissible because the stipend is provided for a bona fide educational subjective. They received two comments on the requests and two comments on the draft. Thank you. I'll be happy to address any questions.
   >> Thank you for that. As you can see, there's been very little activity going on with respect to this draft since we last discussed this in this meeting. First of all, I would just ask if any of my colleagues have questions or have any discussion. Commissioner Hunter?
   >> Thank you, and thank you for your patience on this one, and thanks to my colleagues for their willingness to work with us on this, in particular Commissioner Goodman has worked hard to get a draft with four votes. I have a couple of questions. One of them is a very quick factual one, and then a couple of legal issues. First, is my understanding correct that if a student at DePaw is in the extended studies program, wait, let me rephrase that. If a student at DePaw could apply for a stipend through the grant program, regardless of whether or not they're getting credit through the extended studies program, is that correct?
   >> That's correct.
   >> Okay, so you don't have to be getting credit to be getting the grant?
   >> You do not.
   >> Thank you. Then my other, the other comment I'd like to make, I don't know if this really changes where we go on draft D or not, but, um, we've talked about the last, what we call boiler plate, in the advisory opinions that we've released here, which is, of course, just a reiteration of the statute, and obviously, we give guidance when people come in with a specific question, and, so, generally speaking, we provide the relevant legal analysis, what's the statement of the law, you know, often, we cite the statute, the regs, and then sometimes, the EMJ, and then we apply that law to the facts presented, and then one of the sentences says any person involved in a specific transaction or activity, which is indistinguishable and all its material aspects from the transaction or activity with respect to which this advisory opinion is rendered may rely on this advisory opinion. So, the issue here is that, not so much for DePaw and the student here, because hopefully, we'll be able to give an answer today to your specific request, but that sentence has to mean something, and, so, other people who are reading this have to be able to rely on what our legal analysis is to answer their question, and the threshold issue is what is a material aspect here? And, so, I was a little bit more interested, and apparently, it wouldn't garner four votes, to be a little bit more broad in the legal principle here, to say that as long as there's a bona fide educational purpose, a student would be getting, would be able to provide services to a campaign because the services weren't for the purchase of helping the campaign, they were instead for educational benefit. In my read of draft D, it's a little bit more narrow than that, so I'm just kind of thinking through, under draft D, what is a material aspect, and we've answered the question on credit, so that's not material for this conclusion, and the second question is whether or not this program is offered through a university, and whether or not that's a material aspect to draft E, and, um, I guess that question is more properly directed to my colleague, so that's why I waited, is because I'm trying, I don't know if you want to take a stab at that, that's fine with me, but is there anything, you know, specific about a university that makes that a material aspect of this decision? If you want to take a stab at that one.
   >> And, first off, thanks to all the commissioners for working very hard on this and for hopefully getting us a yes answer that we can bring back to the student today. I think in our latest round of comments, we tried to set forth a framework that could answer the question and address your concern, Commissioner Hunter, about sort of future guidelines, knowing that, obviously, the answer is limited to this request, and I think we believe that we sort of picked out two kind of important features here. One was the clear bona fide educational purpose that we thought sort of shone through the entire request, and we set forth a couple of criteria that we thought demonstrated that bona fide educational purpose, which, you know, part of which was the importance of this to the curriculum, part of which was the sort of status of the university and the tax rules under which it operated, and part of which was, um, really the methodology by which these awards are granted, the rubric that's used, and the objective nature of it, which does not focus on whether or not the ultimate entity for which the student is interning is a political committee or not. Um, but we sort of viewed those as proof points for a standard of bona fide educational purpose. The other point that we thought was particularly material that relates to that but maybe is slightly different is the fact that the expenses here, or the amount of the stipend, is actually clearly not tied to any amount of hours worked, it is really not compensation for the services, it is tied to the expenses that the student incurs, and in fact doesn't even reach that amount, and we found that to be persuasive, just under the statute which talks about compensation for personal services, that here, it is clear that there is no tie between the amount of the stipend and the amount of hours worked, which is more sort of typical for a compensation arrangement.
   >> Thank you.
   >> Commissioner Weintraub.
   >> Thank you, Mr. Chairman. I want to particularly thank Mike Calum boand Tom Moore on my staff, who really persevered through this long after, I think, commissioners were ready to throw in the towel. Two fine public servants. A debt of gratitude for all the effort they put in.
   >> Absolutely.
   >> For me, um, well, let me clarify one of the facts. Did Ms. Otelin get credit for her participation, for the experience that she had on the campaign?
   >> She did.
   >> She did, okay. And, um, it's part of DePaw's program that, excuse me, sorry, I'm a little bit hoarse. It's part of the program that in order to graduate, students have to participate in a couple of these experiential learning programs, is that right?
   >> That's correct. You have to complete two extended studies credits over the course of your four years.
   >> Um, I mean, we get into these debates, you know, it happens from time to time, and it's always a little bit frustrating for me, because somebody comes in, and they try and construct a nice, tight request that they think ought to, you know, get the commission's support, and, um, some commissioners have balked at providing an answer that's specific to the request that's in front of us, which is what the AO process was designed for. It says in the statute people have a specific transaction that they want to ask the commission about, they can come in and get an advisory opinion, and it's for the benefit of those requesters, and yes, other people who are in a situation that is materially indistinguishable, that's a pretty high standard, from that person can also rely on that advisory opinion. To me, it is significant that it's a university and that it's a 501-C-3, as they pointed out last time. The fact that it's a 501-C-3 demonstrates that this organization cannot participate in any kind of political activity, and we say in draft E that, um, both the extended studies program and the grant program are conducted in a non-partisan manner and not for the purpose of advancing political goals. I think if we were to issue an opinion that was more broad in its language and said, as long as you've got an educational purpose, you can provide a stipend to someone for their political work, we would find all sorts of organizations out there, 501-C-4's and other groups, who would be happy to setup a program, and I'm sure they would consult with lawyers and put bells and whistles on it and say that this was all a good learning experience, but the bottom line would be that staff would be provided to campaign without the campaign having to pay for that staff, some other person would be paying for it, probably someone that we'll never know about, it could turn into another way for dark money to be going into the campaigns and subsidizing the work of campaign organizations. I didn't see much of a risk of that happening here, but if we were to issue a more broad-based answer, I do think that would be a risk, and that's why, you know, you think draft D looks like a lot, you have no idea how many drafts went back and forth before we got to draft D, and I think that was my number one concern, that while I think that in this context, a student who's participating in a degree program in a university, that has this kind of stipend program available for internships of all kinds, it's not limited to political internships, where we're allowing Ms. Otelin to get this stipend puts her on equal footing with all of her other peers who are participating in internships for non-political organizations, she's required to have some kind of an internship, a couple of them in order to graduate. It's, as I said, a broad-based program that's not setup to put people in political intern ships. As you pointed out, the subsistent stipend doesn't depend on how many hours she worked or the entity with which she is placed as an intern or the economic value of the work that she's performing there, and I'm satisfied under all of those circumstances that it would be a pretty convoluted way for somebody to try and provide staff to political committees to try and fund a broad-based internship program like this at a university that is providing interns to all sorts of organizations. So, I think that the opportunities for mischief are pretty slim in this situation. Are there other kinds of internship programs that might also be okay even though they might be materially distinguishable from this? Sure, but those aren't in front of us now. You know, we have to deal with the situation that's in front of us, and when other situations come up, we can deal with those situations. If you're worried about, um, if you want to consider it on a more broad-based way and we want to ask council to draft an NPRM, you know, to provide more broad-based guidance in a rule-making context, we could do that. I'm not sure that would be the, that I think that ought to be our highest rule-making priority right now, I can think of a few other things that I'd put in front of that, but you know, I'm willing to consider that if what you're concerned about is issuing broad-based guidance, but that's not what we're here to do today. We're here to provide an answer, and I'm hopeful that, as I said, with a lot of effort from staff behind the scenes and with the guidance of our general council's office, that I'm hopeful that we will finally get to a yes answer, but I'm here to answer this question and not to, I'm not concerned about what other people are going to be doing, because if they are doing something that's different from this, they're going to have to come in and ask themselves, or, you know, they can, nobody's required to come in and ask for an advisory opinion, but it only applies to people who are, the requester themselves as someone who is in a materially indistinguishable situation.
   >> Commissioner Hunter.
   >> The language actually says indistinguishable in all material aspects, so I think we owe it to the public to say what is material in our legal conclusion, and your answer was helpful, because now I have a better sense of what's material to you. It's material to you that it has to be a university, has to be a 501-C, they provide all kinds of different internships, and some of the other stuff that you said. I don't necessarily agree that those are, that those should all be material, but I hear where you're coming from. I think what you're saying is that in order for it to be a bona fide program, that's the material part for this analysis. It's material to you, in order to be bona fide, those things have to be, those things have to happen. I just disagree that it has to be a university in order to be bona fide, and again, yes, it's a university that's asking the question, but we have to tell the public which part of it is material to our legal analysis, and I think I heard you say that the reason that it being a university is material to you, to speak to the bona fide nature of it, is because it's less likely that there's sort of dark money going through a university?
   >> I think you and I just understand these words differently. It's not, somebody out there who is in a situation that is indistinguishable in all material aspects from this can rely on this. That doesn't mean we're saying no to everybody else on the planet, but what is material, what is a material aspect of this is, you're still looking at it in a rule-making context, what's the broad-based rule that people can derive from this. There may not be a broad-based rule that people can derive from this. I'm not interested in issuing a broad-based rule in this context, I don't think that's what advisory opinions are for.
   >> I think you're right, that we just interpret this provision differently, and we probably have for a long time. I mean, thankfully, a lot of our AOs aren't terribly controversial, so we are able to spell out the legal standard, and then I went back and looked at a bunch of old ones, and that's pretty common, where I think we start, are you okay? You look like you're about to pass out.
   >> Thank you. I'm fine. Thank you.
   >> Where I think it starts to get dicy is, you know, this starts to look more like the Bob Kerry AO, the one that we talked about in a different, it seems like a year ago, but that was, I think a few weeks ago, where that was just a one-off advisory opinion, and that one even went as far as to say this is only for this guy in this situation at this time in history, and this, yes, this AO doesn't have that, but this really does, to me, seem like we're just answering the question for that one person, which I understand, that's not a problem for you, I understand where you're coming from, I just disagree with that, and I think we owe it to the public to not say you have to come in and get dragged into this place and, you know, pay a lawyer and come, what, is this the third time you've been here? Come here multiple times to get an answer. People should be able to look at it and say, oh, I know what's material and what's not, and if there's a material part, if I'm trying to do a program and there's something that's, make sure I get the words right, indistinguishable in a material aspect, then I do have to come to the commission, but I'm still not really understanding why it's material in a legal sense, that it's a university. One of the programs that I was thinking about is, I think it's called Close-up, or there's all kinds of different programs here in Washington where they bring interns in from all over the country, and I think we had an intern here from that program, and I don't know if they get credit or not. My understanding is they don't always get credit, and it's not through the university, it's through a non-profit organization that's not a university, and, so, I would think that those programs are also for an educational benefit, but those kinds of programs, my understanding is they wouldn't be protected by this AO, and I know you asked the question about the credit, is the credit a material aspect for you?
   >> The fact that she's engaged in a university program and she is, um, getting credit and that it's a graduation requirement, all of that goes to demonstrate the educational value of this.
   >> So it is material, in this case?
   >> I think the language on indistinguishable and all its material aspects, that is a factual, not a legal question. It's not for people to try and derive some broad legal principle from this, they have to look at whether their factual situation is indistinguishable in all its material aspects. Now, it could be that somebody else would be in a situation that was, in fact, distinguishable in some of its material aspects, and it might still be fine, but that's not the purpose of this advisory opinion, to give that kind of guidance to everybody in the world who might be setting up an educational program. That's for rule-making. I'm happy to engage in that process, if you want to, but that's not what we're doing today.
   >> Right. I mean, again, we just disagree, because I don't think we should be saying, and maybe not quite saying this, that everybody should have to come in and ask the question, if their stuff is different enough, and I do think that it is relevant to the legal principle here, and unfortunately, draft E doesn't really have, it has a bit of a legal principle, but it is baked into this program, and that's part of the reason I'm having a hard time with it, and that's what we've been sort of going back and forth over since the last time you guys were here, because your original draft, um, Commissioner Weintraub, is similar to draft E, because you've always said you do want to just answer the question for universities, and we were trying to pull you away from that, and I guess it wasn't all that successful.
   >> Well, as I said, I think once you start stepping away from the universities, if we were to issue a broad-based ruling that says as long as you've got an educational purpose, you're home-free, I think that we're going to see, if we were to issue that advisory opinion, all those groups out there would setup educational programs that, you know, they would have a learning component, I'm sure, but I think most people would look at it and say you're really just trying to supplement the staffing budget of the campaigns, and that is what I am not willing to do.
   >> Sorry, Lee keeps humming in my ear.
   >> You want to entertain all of us? Got a good song?
   >> So close and yet so far. (Laughing.)
   >> It came to my mind last night, and I haven't been able to get it out of my mind.
   >> He's singing it to me, and it's not helpful. (Laughing.)
   >> The draft that I circulated at some point, you know, does have just a generic legal principle and then applies the facts here to that statement. It says that the commission finds that DePaw's status as an acreted university creates a presumption -- so, I agree with you that, you know, the fact that it is accredited, not-for-profit university, it establishes bona fides more than just some fly by the night group, and, so, we applied the legal analysis to it and said it's a presumption. We can change the word presumption, but the legal principle in the draft that I was trying to sell was educational subsistent stipends for the purpose of assisting students in fulfilling bona fide academic objectives and not for the purpose of providing personal services to campaigns are not "compensation for personal service." I know you have an issue with that last part, but something along those lines, where it's a general statement of the law, and then it's applied to say, yes, universities, sort of probably more than anyone else, are a bona fide program, but it keeps the powder dry for people who want to argue or rely on something and say at a later point that their situation is materially indistinguishable.
   >> Other further comments? Discussion? Vice Chairman Walther.
   >> Let me ask you this. I gather you had a chance to review this draft?
   >> Mm-hmm.
   >> Okay. Um, a couple of questions. What would stop, taking this into consideration, and this does remind me of a law school play, where this guy's getting arrested, and he says what about Escobedo? And he says what's your name, and the guy went to jail. So, here, I think we should look beyond that kind of scenario and say, okay, what about the Smith brothers, who might want to give $900 million to one particular campaign? And so they go to a number of universities who might be inclined to support a program like this and offer significant amounts of money for kids to participate. So, it may not be partisan by the university, but, um, the result is clearly a partisan one. Huge amounts of money spent, say it's a, this isn't confined to this particular campaign, it's confined to anybody who wants to help in a campaign, regardless of whether you're a candidate or not. So, the super pack, I assume, could participate fully in this and fully fund universities. Universities or institutions, I see there's not a clarity there, but to fund that so that they have youth that are participating, and again, here, just like for eight weeks, a contribution of $3,000, little less than the minimum wage, throughout the country who are using that money for those kind of purposes, and I see in the one missile that came through, if we deny this, that we would be hurting people of color, but I think the point would be that some campaigns can't afford to do something like this, and some people can, so I'm not sure that if you're looking at the parody involved there, some campaigns, you know, have a lot of money, and some do not, so it may be that the campaigns that have the most money or the super packs that have the most money have the most opportunity to have programs like this to allow kids to participate in programs designed just for those campaigns. There's no doubt here that those who are working for this particular program are going to work for one specific campaign, so, um, you can say it's not conductive in a non-partisan manner, but it certainly has those effects. Those are my concerns. Do you have any thoughts about how can that seepage of political money potentially come through the whole system, never to be reported, necessarily?
   >> I think under the --
   >> How can we take a look at that issue?
   >> I mean, I think under the standards set forth in draft D or draft E, the program that you described, Commissioner, would not be permissible and clearly would not be permissible. I mean, I think a, regardless of, you know, which commissioners think whether particular facts are material to the ultimate determination that the program itself is for a bona fide educational purpose and not for a political purpose, there is broad agreement that that is, has to be the applicable standard, and the program that you described is, you know, sounds like an earmarked grant program that is specifically for a political purpose, that it may not specify the campaign that is the beneficiary, but if a donor goes to a university and says we want to provide X amount of money specifically to put kids on campaigns, we're not within this advisory opinion, because this program is absolutely not that. This is a program that clearly does not favor participation in campaigns versus participation in other opportunities with non-profits and government.
   >> So, in this particular case, this particular campaign, Hillary for America, the person participating could work for Bernie Sanders?
   >> In this particular campaign, the fact that they had applied for Hillary Clinton versus Bernie Sanders versus VNRA versing working for a local government is immaterial.
   >> Sorry I'm bringing up names.
   >> My point is yes, but not only between candidates, but between political committees and non-profit and governments, and this is a pre-existing program that its rubric for deciding who gets these stipends, it does not take into account whether or not the person wants to participate in a political campaign versus take advantage of another opportunity, and I think that is actually the, if anything is material in this opinion, it is that particular standard and set of facts around it.
   >> So does that mean that the student can, in this particular case, if we grant this, could work for any campaign?
   >> They would have to apply and go through the process, but I'm confident, after reviewing the program and after reviewing the rubric, that the particular campaign for which they applied would have no impact on the decision that the university had made.
   >> That's the point though. I mean, this isn't the global election foundation, saying, hey, here's ten programs, let your students participate in whatever campaign they want to participate in for eight weeks and come back with your report and you'll get credit for it. There's only one campaign that that can apply in this particular case, right? Especially since we're limiting it to the facts.
   >> I'm slightly confused as to whether you're asking whether or not someone could work for another campaign or whether a program that limits the grant money to campaigns generally is permissible, because under this opinion, I do not think that a program that is specifically aimed towards working on campaigns in general would be permissible. It is explicit here that this is limited to those who are, a program that is existing for educational purposes, not for the purpose of putting people on campaigns.
   >> Could I just follow-up on that though? It was suggested by Vice Chair Walther that the Smith brothers are giving that money, but the school already has an established internship program, and, so, who's going to make the decision that it's a bona fide educational objective? When the school says this is a bona fide objective, here, go ahead, have this internship money, and yet it actually comes from this group that is prescribing a certain outcome.
   >> May I interject? By referring to Smith brothers, were you alluding to any set of brothers?
   >> I didn't allude to anybody. It was Mr. Vice Chair who raised that issue, not me. I'm just trying to follow-up on, you know, what I see as the concern, because this answer to number two is that the stipends here are provided to students for bona fide educational objectives, and I don't know exactly how, I mean, while the school might indicate that and they might have an existing program, we don't know, really, whether it's actually, in fact, and I don't think that it applies to your situation, we're looking at, you know, how this is going to be read, given the discussion that we've had today already, in the future, the fact that the school describes it that way, we're just going to, the FEC would just have to accept that, I presume, because they're characterizing that program that way.
   >> I don't think the FEC would have to accept it. I think, here, we present it in detail, the methodology that was used and the rubric that was used to make these determinations, and if the rubric that was used is that you are more likely to get this if you work for a political campaign than not, then I think we'd have a different set of facts here, and if it was, you know, if that was influenced by donor preference or for whatever reason, we'd have a different set of facts here. Here, we have a rubric and a system that treats applicants who want to work for a political campaign no differently than applicants who want to work for a non-profit or a governmental entity, and it is that parody in terms of how these decisions are made that, I think more than anything here, is the driving fact, and if that piece changed, then we wouldn't be living under this advisory opinion.
   >> And I think that's the important point to bring up here, is that advisory opinions, we're under strict time deadlines, the process doesn't afford, you know, a fact-finding component. We accept the facts as presented, and the degree of protection afforded by an advisory opinion is only, um, it only covers the situation that was represented accurately. If it turns out the facts they present to us are completely at odds with the reality, then the protection of the advisory opinion is minimal, at best, and I think that's something we have to rely on. It's not the case that if you can somehow and mislead the commission into issuing an advisory opinion, that somehow they snuck a fast ball by us and now they can do whatever they want. That's not the case under our process. I mean, your representations, we take them as accurate, and so long as they're accurate, then that protection would apply, and if they're not, there are no guarantees after that point. Are there further comments? I'll just, first of all, echo what Commissioner Weintraub said about the stellar work done by Tom Moore and Mike Calumbow in terms of keeping this train on the tracks, and as drafts have been exchanged, as ideas have been, you know, discussed, um, you know, as you've heard, just in the time we've been discussing this advisory opinion, um, there's been concerns about, um, about answering the question too narrowly or answering the question too broadly, and, um, the hope is that we have the goldy locks draft right here, that we answer, we can thread the needle without having to go too broad or too narrow, so that the concerns that, you know, the commissioners who may hopefully form a majority on this can have their concerns addressed with respect to this particular request, but also allow for the possibility that we're going to have others who may have different scenarios that they would like to present before the commission, and I think that there was a concern that we might bind our hands one way or the other, so I think that there has been a, I think, a delicate balancing act throughout this whole process, and I can support draft D, which has come in. Like any compromise draft, I think we all may be equally unsatisfied with certain aspects of what we would consider to be the ideal draft, but I think it gets us there, I think it's enough, and at the appropriate time, I'll be willing to support it. Is there any further discussion?
   >> I, um, again, my concern is regardless of how it's phrased, I think it certainly is applicable to any super pack or anybody else to be involved in exactly the same way this is involved. I'm concerned about the movement of money into the academic system in this way. I wouldn't be opposed to a rule-making. It's clear law right now, it's been good since 1982, I don't think we should change it, and so I'm going to move it at the appropriate time to approve draft A.
   >> Commissioner Weintraub.
   >> I just want to say, I respect my colleagues' point of view, but like council, I do not think this opens the doors to super packs setting up internships. That's not what, those aren't the facts that are in front of us, I think that would be plainly materially distinguishable from the situation that we have in front of us, and, um, I would, I just think that's an entirely different ball of wax. I wouldn't support it if I thought it said that.
   >> Vice Chairman Walther?
   >> One more word. I don't think it makes any difference in the way this would be applied, depending on who is the party that's try ing to promote the program. In other words, there is this feeling that, you know, that would not be legitimate campaign work if it were somebody other than maybe a particular campaign, but good foundations, super packs or others who are involved would still be able to participate in a program like this, the way I understand it, and, so, as a result, I don't think we should embark on that without more clarity and more specific guidance, if that's, if we're going to move away from the, I think fairly clear, opinion that we already have.
   >> Commissioner Weintraub?
   >> Again, because I don't want this to be misconstrued in a way that neither the Vice Chairman nor I would support, I respect your concerns about that, but I do not think, the scenario that you're describing is not the scenario that is in front of us, and I just want to be really, really clear that when I vote for draft D, it will be on the understanding that that scenario is materially distinguishable from the one that is described here and wouldn't be covered by this AO.
   >> Commissioner Ravel?
   >> I'd just like to concur with my esteemed Vice Chair on this matter, because I think there's too great a concern, it's quite clear that corporate contributions are not appropriate, and this would open the door to situations, we don't know, under any circumstance, whether or not a valid internship, where it's funded and how it's funded, and, so, there's nothing in this draft that you're talking about that would proclude that actually, and not that they would necessarily say specifically that it must be the only internship that goes for political activity, so I am, too, concerned about the potential ramifications of this, given the clear law that we have, and, so, I will support Vice Chair's motion.
   >> Commissioner Weintraub.
   >> I respect my colleagues' position, but I am a little bit concerned that they are going to be encouraging people to read this broader than it is understood by the people who are voting for it, than it's understood by council. Council is sitting there, shaking his head. That would be, that would introduce new facts that are certainly not before us and are not part of what's going on here today, and in fact, I don't hear anybody at the table who is even contemplating voting for this suggesting that that would be okay. I've heard other kinds of scenarios raised, you know, the Close-up Foundation or other types of groups, but the notion of, um, a super pack funding internships --
   >> I didn't use the word super pack.
   >> Or a corporation coming in and trying to funnel money for a particular ideological group or campaign, that's just not what we have in front of us.
   >> Any further discussion? Commissioner Hunter?
   >> I agree with Commissioner Weintraub, but it is kind of nice to hear it could be read more broadly.
   >> No, it can't. (Laughing.)
   >> So, it might be helping me, but, um, I'm just curious about this, because I think, you know, corporations donate to universities all the time.
   >> Correct. That's right.
   >> And, so, does that mean that the president of a university can't endorse a candidate? Because maybe his university is, you know, propped up by corporate contributions, and what about professors? Can they say, gee, I think, you know, Hillary's a better candidate than Bernie for all of these reasons? I don't know where that takes you, if we start really looking into who funds universities in this country. I'm just confused. Who knew? I guess some people don't believe in the first amendment on college campuses, but that takes it to a whole new level. That, to me, seems so far-fetched that I don't know where it leads.
   >> Commissioner Goodman?
   >> We aren't legislators and we aren't legislating here, but there are legislative presumptions, you know, about what the bona fide educational purpose is. Let me just give just some context. You know, I went to the University of Virginia, and I studied under Larry Sabado, who has tried to teach generations of young people that politics is a good thing and you should engage and get involved, and he has students that come from southwest Virginia, and I came from a poor part of the state, and he tries to place those people in governmental congressional offices, in campaigns, in the governor's office. He pushes these young people out to go engage in the political process generally, at non-profit advocacy organizations, and sometimes, he has to try to find them stipends of money to get them engaged, and it shouldn't be offensive to the law that for that overriding and manifest educational objective, a few of the kids, instead of going to work in the governor's office or congressional office, end up on a state-wide campaign, and, um, so, that is not why I'm voting for this, but that informs my judgment of the purpose for which this money is being spent and that it is not for the purpose of influencing these elections, and, so, on that, I hope we would entertain a motion. I want to give Commissioner Walther his opportunity to make a motion.
   >> Is there any further discussion or are we ready to go to motions? Commissioner Walther, would you like to make a motion?
   >> Adoption of draft A?
   >> All right, is there any discussion on the motion? If none, all those in favor say I. Those opposed, no. Madam Secretary, the motion fails by a vote of two to four, with Vice Chairman Walther and Commissioner ravel voting I, and Commissioners Weintraub, Goodman, Hunter and myself voting no. Do we have another motion? Commissioner Weintraub.
   >> Thank you, Mr. Chairman. I moved option of draft E as set forth in agenda document number 15-69E.
   >> Thank you. Commissioner Hunter.
   >> I just went back through it, and I think that some of the things that might be material aspects to certain of us sort of in our heads aren't necessarily spelled out in the black and white on the piece of paper, and, so, um, you know, I mentioned this story to a few people, I was at the Iowa caucus a few weeks ago on vacation, at my own expense, and ran into somebody who was, um, an intern for one of the campaigns, and I'm not going to say which campaign, you know, I don't know all the details, but I'm quite sure that, um, you know, she was sent through a different program that, you know, wanted her to experience elections, and she helped one of the candidates, and everybody in the airport, we were stuck in the airport for most of the day, thought that she had a pretty cool story, and she was really excited, I don't think she really cared all that much about who she was working for, it was more of an experience of seeing what it was like to knock on doors and get out to vote and all this kind of stuff, and I didn't ask her if she was getting academic credit, but I don't think she was, I'm pretty sure she wasn't, and, so, I have just been very interested in not foreclosing this, because I think it's cleaner legally to state the principle and all the things I said before, but I don't think that the words on the paper, you know, tie this to you have to have gotten credit, you have to go to a college, you have to go through a program with a college who requires you to take two independent extended studies things. I don't think that that requires you here. I do think that this probably does, um, you know, cabinate it a little bit more than I want ed to, but it does give some opportunity for other people to read this and have a program to involve students in our political process, so I will support it.
   >> Commissioner Weintraub.
   >> I just want to be really, really clear about this. If you, as I read this, you know, it's part of the analysis, the program is administered for the sole purpose of assisting students with an educational experience, we're talking about students and what they need to graduate. If I do not read this as applying to anybody outside of the university context, that doesn't mean it's illegal outside of the university context, it just means it's distinguishable, that's not covered by this AO. Those people are no worse off tomorrow than they were yesterday, they're just wherever they are, and they're making whatever determinations they're making as to what they're doing is okay, but the fact that this is a university-based program is plainly stated, is significant and material to me. If you think this says something else, we, you know, this has been the problem all along, is whether we actually have a meeting of the minds. I'm willing to support this because it has all those facts in here, and I want to be very clear that I do think they're material.
   >> Um, if we could take just a brief recess. We have a motion on the table, and, um, we will vote on that motion. So, we'll take a brief recess. (Recess.)...:
   >> That's definitely an acceptable excuse.
   >> Thank you. (Laughing.)
   >> I know you're in your recovery phase, so not a problem at all. We are now back in session. We have a motion on the table, moving draft E. Commissioner Hunter?
   >> Thank you, again, for your time and your patience. I think, without getting into all of it again, I'm just going to vote yes for the words on the paper.
   >> All right. Is there any further discussion? If none, all those in favor, indicate by saying I. Those opposed, no. Madam Secretary, the motion passes by a vote of four to two, with Commissioners Weintraub, Goodman, Hunter and myself in favor, and Commissioners Ravel and Vice Chairman Walther opposed. Thank you very much, Mr. Burrcon, for not only your patience here today, but also for the materials that you've provided, which have been very helpful in moving this process along. So, thank you very much.
   >> We appreciate all your consideration and hard work on this. Thank you.
   >> We will now turn to item number four, which is the audit division recommendation memorandum on the Oklahoma Democratic Party, which is audit 12-06. We will have a presentation from, is it Krussiah, and we're also joined by Ms. Holloway. I don't know who wants to take the lead, but please proceed at your convenience.
   >> Morning, commissioners. Before you is the audit division's recommendation memorandum for the Oklahoma Democratic Party, and it consists of four findings. The findings are the statement of financial activity for receipts and disbursements, misstatements of financial activity for leaven funds, reporting of debts and obligations, and recordkeeping for employees. We are available for you to answer any questions.
   >> All right, thank you for that presentation. Are there any questions or any comments? Commissioner Goodman.
   >> Listen, we've discussed this, just help me understand, the draft final audit report from the audit division on the Oklahoma Democratic Party, so the DFR itself, was, I take it, provided to council or to the party of the Oklahoma Democratic Party, right?
   >> Correct.
   >> Okay. What is the significance and reason of stating at the bottom of page 1, so part one, background, page 1, under commission guidance, the last sentence on the page, "this audit report does not include any findings or recommendations with respect to Oklahoma Democratic Party employees paid with 100 percent federal funds and reported as such." What's the significance of that? What did that sentence mean?
   >> It means that although the committee is required to maintain pay roll laws for all employees, the commission has decided it will not pursue whether the committee paid with 100 percent and reported it as such. So, if that was the case as of the date of the then there would be no payroll finding.
   >> Okay, so if I'm Mr. Reef and I received this, it would be fair for me to conclude, oh, the audit report is not going to recommend or make findings with respect to these people, to this payroll.
   >> If that's the way the committee reported it before the audit notification letter.
   >> I'm just saying I was given a copy, I'm putting myself in the shoes of the Oklahoma Democratic Party, and I received a DFR to give me notice of where the audit is headed, give me an opportunity to respond, to request a hearing, all the rights that we grant these folks, and I'm told, this audit report does not include any findings to employees paid with 100 percent of funds. Now, we've confirmed that they paid 100 percent federal funds.
   >> Correct.
   >> And it's a given that they didn't keep the logs, I understand that. Then we receive a memorandum at the commission, dated December 7, 2015, and on page 2 of the memorandum to the commission, so the DFR went to Oklahoma Democratic Party.
   >> Yes.
   >> Then the memo is written to the commission, right, after that?
   >> And after the committee has a chance to respond to it, yes.
   >> And they didn't respond?
   >> No, they did respond.
   >> Okay, did they say please don't make a finding as to payroll logs? (Laughing.)
   >> No.
   >> Because they probably weren't alerted that it was going to be a finding.
   >> Well, they did not request a hearing, and they also, um, filed a report stating their leaven activity and moved the remainder to $10,000 in payroll to schedule B.
   >> Right, and then a memo comes to the commission, at the bottom of page 2, says "the audit staff recommends that the commission find that the Oklahoma Democratic Party failed to maintain monthly payroll logs, totaling $201550." Now, I'm not disputing, although there is some misunderstanding, I understand, understand, because I wasn't here, about what the commission meant by pursue, and whether it just meant enforce, or whether it meant make the finding as well, but let's just focus on the mixed signals that the commission has sent to the Oklahoma Democratic Party on page 1 of the DFR they received and then the memorandum that post-dates it to the commission that does recommend a finding with that respect. It just seems like it was a bit unfair to them. I don't know what response they would have made, whether they would have come and asked, please don't make a finding as to that. I assume council is sophisticated. Mr. Reef is sophisticated, he understands there's probably not to be any further pursuit based on such a finding, because all the money was paid 100 percent from federal.
   >> Correct. Yes.
   >> I just note that it looks a little unfair to tell, to send someone a signal that there is to be no recommendation or finding and then to recommend to the commission that we make the finding, and I can see how that could have, um, in the volume of audits and the reports, it just, these two little sentences contradict each other. I guess I just commend the commission consideration, that we did not tell the Oklahoma Democratic Party that we were getting ready to make that, that the audit staff would make the recommendation that the commission would make the finding. So, it just seemed like it was a bit unfair, as I read it. I thought I would feel a little bit sandbagged by that. Yes ma'am?
   >> Well, the language that's coming from, in the audit report, on page 1, that's the same language as in every audit report that contains a payroll finding. It's also information that we do discuss with the committee, usually starting at the entrance, throughout the work, we also present it at the conference, so we always make them aware of the regulations in this commission guidance, the language as it pertains to payroll finding, so they've always been aware of that, and like I say, it's in every version of the report, and this report is consistent with past audit reports in similar situations, where the committee, at the time of the audit, reported payroll on H-4, and then after the audit, removed the payroll to schedule B, and the ADRM would have the same recommendation.
   >> Well, let me read on, because later in the DFR, under finding four, recordkeeping for employees, it tells this narrative history of the amendments.
   >> Correct.
   >> But it draws no conclusion when you reach the end of it on page 14. It talks about how all the funds were verified that they were paid 100 percent with federal funds, it gives the committee credit for implementing new procedures to keep logs, it says they complied with the interim audit report, but it doesn't make a final finding that, by the way, after all you've been through and after all the reports you've amended, and after all the verification we've done, there's, nonetheless, going to be a finding that you failed to keep the logs. I mean, it's not clear in the finding, so I'm just saying, as a layreader, if I read this, I would say, yeah, that's all, pages 12 to 14 is all accurate, that all happened, that's a nice narrative, that's the story of our audit, but I rely on page 1 that says there's to be no finding on that, and then you write a memo to the commission that says, oh, make a finding for failure to keep the logs. Now, we may have done this this way a dozen of times, or maybe 24 times, but, um, this one's the one that caught my eye, and we ought to fix it here somehow. So, I'm just looking to fix this somehow, and since I saw it and we know it and we're speaking about it publically, my recommendation would be let's just take, in this instance, let's take finding four out, and then maybe we can write these clearer for people in the future, to make quite clear that there is going to be a recommended finding for failure to keep the logs.
   >> I guess my only concern with that is we do clearly articulate, my apaleagys.
   >> Not a problem.
   >> We do clearly articulate on page 13 what the legal standard is, and in the past, with some of the other committees, where they've been impacted and it actually was highlighted as a finding, now we're going to differ for the same cycle, and I guess that, to me, is concerning.
   >> Commissioner Weintraub.
   >> Thank you. Um, I appreciate the point that my colleague is making, and I know you weren't here when we started going down this road, but, you know, this is a path that we decided to pursue, it's sort of a compromise path, it recognizes that there's nothing in the regulation that exempts a committee like this from keeping these logs. I mean, we can't say that they did it right exactly, it's just that it's sort of a no harm, no foul kind of situation, where they decide they don't want to keep the logs, and they're just going to pay for everything out of federal funds and report it that way, you know, we're not going to ding them further on that, and this is, you know, this is the path that we have pursued, I don't know how many audits, and I'm quite sure that some of those audits involve the same council. In fact, maybe the first one that we started down this road on involved the same council. I can't remember off the top of my head, but, um, I'm fairly confident that he would not be sandbagged by this, and his client would not be sandbagged, because he knows this is the way we handle these, and I share Ms. Orrock's concern about our suddenly deviating from a path where we're making findings within the same cycle one way for one committee and another way for another committee.
   >> If I can just follow-up on that, did we make findings, and it's been a few years, so I just can't recall the audits that have arisen out of the particular audit cycle, after we voted back in 2012, to say that we were no longer going to enforce the failure to maintain the logs for employees that are paid with 100 percent federal funds, were there subsequent audits where we still made the finding and those just weren't referred? Or were the audits that occurred, arose out of the same cycle prior to that vote? I just can't remember off the top of my head.
   >> Any subsequent audits after the decision was made, we never looked for the recordkeeping for the 100 percent federal employees. In these situations, what is happening is they didn't initially report them that way, so when we went out there, we had a finding, and in response to that finding, at the interim stage, the committees have come back and moved the reporting to 100 percent federal on schedule B, and so that's where the rub is, really. This action is taking place after the interim audit report.
   >> Can I jump in?
   >> Yes. Commissioner Goodman.
   >> Did I hear you correctly, that had they reported this as 100 percent federal from the inception --
   >> Correct.
   >> The auditors walked in the door, they wouldn't even look for the logs?
   >> That's right.
   >> Okay, well then, hold on, so this is a little different than some of the others, it strikes me. Here, they may have misreported early, it got us looking, it got the log problem into the audit report, but it turned out that it was paid all federal anyway, and, so, what changes the reporting of it, but the reality of where the funds came from, and so why do we need to make the finding to treat them equally, to treat them like other people who paid 100 percent federal? Their problem was they misreported it to begin with, as allocated.
   >> Commissioner Weintraub?
   >> That's sort of what we do. When people get it wrong in the first instance and then they fix it in the course of the audit, we note that in the audit report, and we do make findings about people who did it wrong originally, they fixed it, obviously, that would be a mitigating factor, if we were going to do anything else, but I think we're being consistent here with how we treat other committees that start out misreporting, and then by the end of the audit, they've unwounded and recorded it.
   >> Commissioner Weintraub, here, they didn't fix the underlying problem of where the money came from. They always paid 100 percent federal money. There was never a time where they subsidized their federal payroll with state money.
   >> I heard the auditors say they moved the money.
   >> No, the money was always 100 percent federal. It was the way it was reported.
   >> They misreported as allocated, and they said, whoops, we should have reported this as 100 percent federal. That's what got our auditors looking at it and steered down this road to begin with. Maybe there's a finding of a reporting problem here, but had they reported the true facts initially, accurately, we would have never even looked for the logs, because under the policy that the commission adopted, we would have never even looked for the logs.
   >> This is a reporting finding.
   >> This is a log finding.
   >> Typically, when something is presented at the interim report, we don't change the title of the finding, we just draw it out with an explanation as to what happened, so it's no different than a misstatement here. We did the same thing. If we go there and the committees are misstated, we put in a recommendation for them to correct their reports, they do, and that's how we, but it stays in the audit report.
   >> One way to resolve this, what's the next final audit report?
   >> Proposed final audit report would be next.
   >> When they write that, we could approve this with an instruction to remove this finding from that report, to remove a finding on failure to keep logs, because all is well that ends well, because, in fact, there never really was a problem under commission policy.
   >> Vice Chairman Walther.
   >> I have a little reluctance. I'm wondering if there could be a footnote and go on with this.
   >> Typically, it's at the stage where it's at the proposed final audit report, where the commission then, if it's not enough votes for it, it goes to other issues.
   >> It could go to other issues. We noted this because of the initial report, we later found it was a reporting issue, not a payment problem, and therefore, we moved it to other issues, and in other words, we could approve this whole audit report, and then with instructions, that in the proposed final audit report, um, that this log issue be moved to other issues, along with the narrative, by the way, of how it came about. That's fine with me.
   >> Right, and I would almost seek guidance from OJC. My understanding is if you approved at this point, we would still go forward with our proposed final audit report, as audit sees fit, which is current, and then if the votes weren't there, it automatically goes to other issues. Is that correct?
   >> Would you take a strong suggestion about what you should see as fit? (Laughing.)
   >> So, and again, my one concern with this is the consistency factor. With the language that we used, it's the same because we draw it from each and every report.
   >> Okay, let me ask you, what if we were to split three and three on this one finding now at this stage? Would it automatically go to other issues in the proposed final audit reports?
   >> I think so, but I would highlight to my peer.
   >> I see that we're having, is there anything that we should, that would help us out in our consideration?
   >> I didn't hear the question. I was talking.
   >> What light can you shed on this issue for us?
   >> The time is now?
   >> Yes.
   >> I don't know that we have to split over this. I hope I've convinced somebody that this, there's no their there, and we would be treating them the same as other people who spent 100 percent federal funds. So, I don't know that it has to be a split.
   >> I notice you're seeking recommendation.
   >> Yes. Thank you. I also wanted to point out that we did have a case in audit from the 2010 cycle where the committee did originally report payroll on schedule H-4, then once the audit commenced, they moved it on to schedule B, but that remained the finding in the audit report. The commission approved that the committee failed to maintain the payroll logs for the original payroll.
   >> Was this issue discussed this way?
   >> And was the approval before the November 28th, 2012 vote that we took as a commission? Do we know when that was approved? Ms. Orrock?
   >> The final audit report was approved on March 18th, 2014.
   >> Okay, so after. Okay.
   >> It may not have been noted as a problem, and now we see it, we should catch it when we see it.
   >> Yeah, I mean, the question is, going forward, how are we going to, I mean, I completely agree with my colleague, Commissioner Goodman, that there's no harm here, and, so, it seems that there should be some recognition in the PFAR regarding that fact, because when you read this as it is, it looks like there's a recordkeeping violation, but I also understand the concerns about consistency, and, so, I'm wondering, um, you know, well, not only consistency, but that there was a, I mean, this really is less of a failure to keep logs, and it was more of an initial to accurately report the funding for these employees. Trying to figure out what's the best way to skin this cat.
   >> Well, I think two things. I mean, you know, there could be clarification in the PFAR going forward with the language on the commission guidance page to probably more clearly reflect where the situation is and pair it up with what's actually in the finding of the report as well. You know, going three and three, that's their decision. As far as the audit goes, I think there was clarification on the most recent audit program. The subject was brought up, and it was addressed there.
   >> So this really will be the last time that, I mean, you don't think the changes to the audit book --
   >> No, I think the, it's still going to be addressed the same way. If we go out there and there's no records there for employees that are on H-4, it's still going to show up, and if the committee amends in response to the audit, it'll still be there, you know, the same way. I think, um, moving forward, we probably, like I said, massage that language a little bit better to pair up with the guidance section on page 14.
   >> I mean, I have the same concern that Commissioner Goodman has, that what purpose does a finding have in that, I mean, oh, let me just finish my thought. I'll forget it if I don't. Um, while it's true that the reg does require these, that these logs be maintained, um, it's not a statutory requirement, it's a requirement to assist the commission in being able to identify whether or not employees were, um, you know, whether or not they had the right to split between potential, you know, to ensure that there was no subsidization of non-federal monies being used for employees who should have been paid with just federal funds or whether they, you know, if there was an oversubsidization of non-federal funds for these employees, and when 100 percent of the money that paid these individuals, it comes from federal funds, there's just no concern over the statutory requirement that gave rise to this regulatory requirement, and, so, in that particular instance, what's the purpose of having a finding?
   >> Well, remember, when we first get out there, there is no, there weren't any records, and when we compared it to how the independent employees were reported, we looked for the record, and there was nothing there. It's only after the audit that the committee has taken action, which kind of changes the narrative.
   >> Okay. Um, we'll turn to Mr. Holloway.
   >> I just want to make a point that, you know, I think the real rub here, as Tom is describing it, is that normally when the auditors go out, they are, you know, they're trying to determine if the records are actually there, and if the records are not there, then, of course, yes, that's a finding for recordkeeping. What makes this case a little bit different, I think the issue is whether or not they actually had to keep the records, because what we're saying is that they were paid with 100 percent federal, they were, in fact, and so maybe the argument is that they never actually had to keep the records for that, so I think that's what the real issue is. What you're looking at, this is not the normal recordkeeping finding, because the issue is being raised whether or not they actually ever had to keep the records, and, so, what the committee is actually doing, basically, I think what we're challenged with is whether or not the committee could change their mind and say, oh, we just reported it incorrectly, we're just going to call this, everything, 100 percent federal. So, I think that's what the real rub is.
   >> Okay. Vice Chairman Walther?
   >> It seemed to me we kind of created this situation when we decided we would essentially waive or overlook when the finding was it was 100 percent federal, so that's what we do now, but if somebody, my concern is that when you get on the field, you might find yourself a whole slew of things that, ultimately, could be corrected, but you have to, as a matter of profession, note everything that you find not to be correct, and they sometimes get corrected, sometimes they don't, but I don't think it's good for our process to then go back and delete them or erase them or that kind of thing, but to the extent they could be clarified later, then no harm, no foul. I think the public or their council would certain ly understand that, certainly in this case. Everybody knows now that we overlook records if it's 100 percent federal, that's what we do. So, I'm concerned about trying to, um, take this one incident and then developing a process that wouldn't be very workable, and you might get out in the field and find a whole slew of things, and then it comes back and you have to start erasing things, and I don't think that would be a good idea. So, I don't know in this particular case if that's what we're talking about. I guess my thought is you put a footnote in the final thing, or I guess we could move the other issues, but it seems kind of clumsy when it's just a matter of how we're trying to, I wouldn't call it clean up, to try and emphasize the fact that that was just something that was overlooked early on. You know, when you left the field, did you know, what did you know?
   >> We didn't know until the response.
   >> Until later, yeah.
   >> Commissioner Weintraub?
   >> Thank you. I agree with Commissioner Walther. I think this is consistent, what staff is proposing is consistent with the way they normally handle something that gets fixed in the course of the audit. Now, I open this to whether maybe you want to change the title of the finding to, um, reporting, make it a reporting finding rather than a recordkeeping finding. Do you think that would be more accurate? Reporting of payroll? I don't know, but, I mean, it does seem to me that they did have a mistake, and they fixed it, which is good, and we're happy that they fixed it, but,

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