This file contains archived live captions of the open meeting of the Federal Election Commission held on November 17, 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, everyone. The open meeting of the Federal Election Commission for November 17, 2016, will now come to order. First item on the agenda, item one, draft Êadvisory opinion 16-16. Submitted by Gary Johnson 2012. And current agenda document 16-61-A. We have Jessica Selinkoff and Robert Knop from the Office of the General Counsel to Geoff a presentation. Before we launch in, we have late submitted documents, Mr. ÊVice chairman. >> Mr. Chairman, I move to suspend the rules on the submission of the agenda documents in order to consider the late documents. Agenda document 16-61-A, revised draft A and 1557B, O0 -- >> Any discussion on that motion? If noting with all those Êin favor indicate by saying aye? Any posed? 6-0. Now to miss Selinkoff to give a presentation on the Gary Johnson request. >> Good morning, agenda document 16-61-A presents a draft advisory opinion in response to Gary Johnson 2012. A publicly funded presidential Êcampaign committee. After an audit the commission determined that Governor Johnson must repay approximately $300,000 to the United States Treasury. They asked questions recording the sources and amounts of funds it may raise and use to pay these debts. The Êdraft concludes that the committee may accept funds from individuals currently allowed to contribute to candidates but who were prohibited sources, either federal contractors or foreign nationals, in 2012. The committee may accept contributions for treasury Êrepayment subject to source and amount limitations and may accept donations for civil penalties without record for the draft. And the third party's payment directly to the Commission is subject to the same source and amount limitations and the same reporting Êrequirements as payments received by the committee directly The Commission received no comments on the request for the draft and are available for questions. >> Thank you. Any discussion on this advisory opinion request? Hearing none, do we have a motion? ÊMr. Vice Chairman. >> Mr. Chairman, I move to move agenda document 16-61-A, draft A. >> Any discussion? If not, all those in favor indicate by saying aye. That carries by 6-0 picture thank you, miss Selinkoff. Move to item two, draft advisory, 16-17, submitted Êby the Libertarian Party of Michigan. Joseph Wenzinger and Bob Knop to give a presentation. Please begin. >> Good morning, chairman and Commissioners. This is a draft response to advisory opinion request submitted by the Libertarian Party of Michigan executive Êincorporated. Asked whether under the act it qualifies as a state party committee as the Libertarian Party. They say they do conclude as a state party because in addition to placing a federal candidate on a ballot and being recognized as an affiliate, the Êstate committee provided articles of incorporation and by laws showing it's commensurate with the functions of a political party at the state level. We did not receive any comments. I'm happy to answer any questions you may have. >> Thank you for the presentation. ÊAny questions or discussion? Hearing none, do we have a moti Mr. Vice Chairman. >> Pardon me. I'm still chewing on this lifesaver. I hereby approve for the 16-59-A, draft A. >> Any discussion on that motion? None, all those in favor indicate by saying aye. Ê >> Aye. >> Any opposed? That motion carried 6-0. Mr. Wenzinger, item number three, draft advisory 2016-18, submitted by the Ohio Green party. And considering agenda item No. 16-60-A. >> This is a draft response to an advisory opinion submitted by the Ohio Êgreen party. They ask whether it qualifies as a state party committee of the national green party. The requester is a party because in addition to placing a federal candidate on a ballot and being recognized as an affiliate by the national committee, they Êprovided a constitution and by laws showing it is responsible for activities commensurate with the day-to-day activities at the state level. We did not receive any comments on the draft. And I'm happy to answer any questions you might have. >> Thank you for Êthat presentation. Any questions of counsel or discussion on the draft? Hering none, do we have a motion? >> Yes, move to approve agenda document 16-60-A. >> Any discussion? All those in favor say aye. Any opposed? Carries by 6-0. In Wenzinger, you may qualify Êas a veteran AO council. Gloves are off in the future. Turn now to -- we have Joanna Waldstreicher and Bob Knop. >> Agenda document 16-56-A is the draft response to an advisory committee request submitted by the Libertarian Party of Colorado. They ask whether Êunder the act if it qualifies as the state committee of a national political party. The draft concludes it is because the Libertarian Party national is a political party. They are part of the official structure of the national Libertarian Party and responsible Êfor the day-to-day operation of the party at the state level. No comments on the request or draft and I'm happy to answer questions. >> Thank you for the presentation. Questions of counsel or discussion on this request? Hearing none, Mr. Vice Chairman do we Êhave a motion. >> A move to approve 16-56-A draft A. >> Any discussion on that motion? Hearing none, all those in favor indicate by saying aye. Any opposed? That carries by 6-0. Thank you. Now turn to item five, 2016-20, submitted by Christoph -- how? >> I Êbelieve it's Milnarchik. >> Okay. We havester Garry and Neven Stipanovic. You may begin. >> Good morning, commissioners. Agenda document 16-57-A, 16-57-A-1, 16-57-B, responding to a request. The requester is the sole member of Christoph LLC, a single member ÊVirginia LLC that's not elected to be treated as a corporation. Through Christoph LLC he provides advice and consulting on government contracts. They are currently negotiating a contract with the Federal Government. He asks whether he, as the sole member, Êmay make contributions from his personal funds. Drafts A and A-1 conclude he may not make contributions from his personal funds because under commission regulations a single member LLC that's not treated as a corporation for federal income tax purposes is Êdisregarded as an entity. B says he may because he and the LLC are separate entities under state law and thus he is a member of an organization that is a federal contractor. We received one comment on the request and one comment on the draft. Thank you and ÊI would be happy to address any questions you may have. >> Thank you for that presentation. Any questions of counsel or discussion among commissioners? I'll just state at the outset, and I mentioned this to the Vice Chairman that I'm not prepared to vote on Êthis one today. This matter -- and I talked to them also about the time implications. From what I understand the 60 days run on November 28th. And our next open meeting is on December 1st. So if we were to consider it or vote on it in a future meeting we would Êneed a small extension of three days. If that's not granted we'd obviously have to resolve this on Tally between now and then. As I was going through this one, this one proved to be a little more going on here than when I originally -- when I originally looked Êat it. Seemed more straightforward. Not being a tax lawyer, not being expert in the ways of LLCs and what the implications are of LLCs being taxed as corporations versus LLCs being taxed as partnerships or single member LLCs that opt not to be taxed as corporations, Êbecoming disregarded entities. Which is the case here. It's in a little bit -- we have with respect to the federal contractor contribution ban, we have two different provisions that are relevant to this discussion. And the first is in section 115.5 which says Êthat individuals or sole proprietors who are federal contractors are prohibited from making contributions. But in section 115.6 it says stockholder officers or employees of corporations or employees or members of an unincorporated organization, labor organization, Êor other group or organization, which is a federal contractor may make contributions or expenditures. So this LLC, this disregarded entity, is a little bit of an odd creature. On the one hand, for tax purposes it -- all of the assets and -- all the assets Êare owned by the single member. And therefore would appear to fall into the ban in 115.5. However, from a liability perspective it is considered a separate entity. And so a single member -- there's the argument that it could be considered an organization and Êthat he is -- that the single member is a -- would be able to avail themselves of making a contribution on 115.6. This is a -- like I said, a pretty complicated issue. This issue was addressed to some extent in the Wagner case on what LLCs may or may not be Êable to do in -- with respect to the federal contractor ban. And we have received at least one comment on this. But I'm hopeful, and to anyone who may be listening and has expertise or thoughts or ideas on this, some additional comment if any were to flow Êin here I think would be helpful. Because I think this is -- this is a bit of a -- an unusual request and one that we've never had to deal head on. So I'm going to not be prepared to vote on it today. And hopefully we can get an extension from Mr. Milarnichik. ÊIf not, we will try to resolve this by the 28th when the 60 day period would run. Commissioner. >> Thank you, Mr. Chairman. Well, I was prepared to vote -- I didn't realize we weren't going to vote today. I was prepared to vote for the revised draft A which Êis substantially similar to the original draft A, but response with the comment of the requester who said certain facts were not quite right. And I think that the -- I disagree that this is, you know, really something brand new. I think it is largely substantially Êsimilar to advisory opinion 2009-902, patriot network. Issues related to government contractors who operate as -- through LLCs or -- I want to say small government contractors. But, you know, individuals similar to this. I think were raised in the Wagner case. ÊAnd, you know, they had some very sympathetic plaintiffs for the argument that these kind of folks shouldn't be covered by the federal contractor ban in the same way as, you know, big corporations are. And yet the court upheld the federal contractor ban in Êthe Wagner case. None of those arguments seemed to work. So I think that -- I looked at draft B, which tries to separate out this person and what he does with his personal funds from the LLC which is really just an alter-ego for that same person and strikes Ême that it's elevating form over substance. You know, if you want to vote for that I guess you can. But I don't -- I don't really think it holds up. There's a comment that we have received on the substance of all of this. And I take it you're sort of asking Êfor somebody on the other side of the issue to come in and give you some backup, and maybe somebody will do that. There are certainly folks out there who are always happy to come up with a rationale for not enforcing the campaign finance laws. But I don't Êthink this is a tough one, personally. >> I'll just make -- just a couple responses. That's not what I'm asking for, is for backup. I'm not -- I was supportive of draft B going out to see -- what's that? >> B or A? >> Draft B. >> Oh, sorry -- >> Going -- making Êit public to get some feedback. It shouldn't be read as that's my final position at all. But I am interested, considering that -- I think that this is a little bit more of a new situation. I think true patriot network, in that particular case the issue was Êif the LLC itself makes a contribution. In this case the individual wants to make a contribution out of personal funds, and what are the implications of the fact that he's a government contractor. I take it you would say that's a distinction without a difference. ÊMay be relevant or not. True patriot may govern in this case. But I wanted to have a little more time to chew on that thought. Commissioner Goodman. >> You say that this is not something brand new, and yet in the Wagner case it was the argument of the plaintiffs Êthere that the contractor ban was unconstitutional because it was underinclusive. Because individuals could set up LLCs and that was a constitutional flaw in the ban. And this commission and its Office of general counsel conceded the argument that individuals Êcould set up corporate entities and LLCs and maintain their first amendment right to give. And the court even noted that concession by this agency in the Wagner court. Here's what the court said, although the FEC's briefs accepted the plaintiff's description Êof the regulatory treatment of individuals who establish LLCs, the agency later submitted a post-argument letter clarifying that the commission itself, quote, has not addressed the application of FECs contractor prohibition to individuals who is the sole member Êof an LLC that is a federal contractor. Now, we all recall the circumstances under which our office of general counsel was directed to send the letter. And oral argument that our office of general counsel conceded they could set up the entities and maintain Êtheir rights nonetheless to give because there is a separateness. By law this LLC is not the alter-ego for debts, contracts, a whole host of purposes. This entity is not the alter-ego. That's why they have the LLC construct. This is a case of first impression. ÊAnd I believe it would behoove us to take time to get this right and not to blithely conclude that this has been previously decided by this commission. >> I would just turn to you and would ask you if there was any problems with you being able to reach out Êto this requester to find out if we could get that extra time and if we could figure that out sooner rather than later. That would obviously impact how we proceed from here. Whether or not we need to do this on tally, or decide at the next December 1st open Êmeeting. >> We'll reach out to him. >> Okay. Any other discussion on this matter? If none, we will hold this either until the next meeting or resolve this by tally by the November 28th deadline. Thank you. The draft -- as the agenda indicates the draft advisory Êopinion 2016-21. Great America PAC, that is going to be held until the next meeting. That takes us to agenda item number seven, proposed amendments, set forth in agenda document 16-55-A. Sure. We will hold consideration of the proposed amendments to directive Ê52 until the December 1st meeting as well. Which brings us to item number eight, the report on the Utah Republican party. We have a whole host from the audit division, misSmith, miss Morcomb. I will turn it over to whomever was going to reach for the microphone. Ê >> Good morning, commissioners. Before you is the proposed final audit report on the Utah Republican party. It consists of six findings. Receipt of prohibited contributions, misstatement of financial activity reason recordkeeping for employees, reporting of Êdebts and obligations and apparent excessive contributions staff advance. We are available to answer any questions you may have. Thank you. >> Thank you for that presentation. Do we have any questions or discussion? I believe -- anyone can correct me if I'm Êwrong -- but I believe the only issue that is a sticking point in this is finding number four regarding recordkeeping and that I think that there's unanimity as to findings one through three and five and six. And that if we had a motion as to those we could Ê-- we would, I think, have unanimity. And then if there's a follow-up motion on the finding as is on finding four, and then if there's not a consensus as to that, there would be a third motion which I think is consistent with some of the ways that we've handled Êthis recordkeeping issue in the past. Commissioner. >> Thank you, Mr. Chairman. I'm just -- I didn't realize what the -- there was no information provided on what the objection was about. There were five votes for this and one objection. And we found out last Ênight what the issue was. I looked at it and I sort of thought that might be the issue. But we didn't confirm it until late in the day yesterday. And I -- I think we find ourselves in a procedural posture that we have not found ourselves in before on an audit Êreport where the -- we get an audit division recommendation memorandum from our staff. And it presents us with certain legal conclusions. So as we recommend that the commission approve the following conclusions. The following findings. And that passed unanimously. ÊThat was approved. So the commission is already approved these legal conclusions. And usually that's the point where the objection comes in. No, we don't approve those conclusions, so we're going to -- we need to have the final audit report prepared differently. ÊThis is the first time that the audit division recommendation on legal findings has been approved and then at this last stage of the approving the final audit report the commission has balked and said no, no, we want basically a do-over on the conclusions Êwe approved in the ADRM. I don't think that's happened before. Don't misunderstand me. I'm not saying that I'm necessarily going to object, but I would -- I would like a little bit more time to think about procedurally how to go about doing this. Because this Êis -- because we checked, and this is actually never happened before. >> Yes, commissioner Goodman. >> I'm not sure what posture was before us in audit memorandum of the Kentucky state democratic executive committee. But there I have a certification. We thought Êwe were in line with the procedure taken there. So there the certification, March 10, 2015, shows that the commission failed by a vote of 3-3 to approve the recommendation for the recordkeeping for employees finding as set forth in agenda document No. 15-12-A Êset forward in the amendment to include the $257,000 paid to contract workers. And decided by 6-0 to approve the recommendation as to the recordkeeping as to a different dollar amount and to direct the audit division to include -- now, how is that different Ê-- >> That was at the ADRM stage. >> So you're saying I missed the boat? >> Well, I'm saying that -- well, yeah. But, you know, and maybe it's fixable. But I just want a little bit more time to think about procedurally how to do that. Because that is the juncture Êat the ADRM. You're right. Substantively we have addressed this issue before. But that's where we address it is at that point in the process. And once the conclusions have been -- the legal findings very approved in the ADRM, I don't think we have ever had Êan occasion to go back and redo them. So I just want a little bit more time to think about that procedurally. >> Okay. And we can pick this up then at the next meeting and figure out -- we can be in consultation with the Office of General counsel to figure Êout the best way to address this. I think you may be right. This may be the first time we have done it at that stage. Why don't we take the time between now and the next meeting and figure out the best procedural mechanism to go forward to ensure that -- >> ÊI don't know if we need to reconsider the ADRM. I'm not sure. Just never happened before. >> I know I have been accused of objecting at the interim stage too often to the consternation of many commissioners -- >> No, no -- >> I have been accused of objecting Êtoo soon in the auditing process. I may have come in too late. I will preserve my objections at the earliest possible stage henceforth. >> Just to be clear because we have this, you know, I never liked this convoluted audit process with its multiple stages. ÊBut this took us a year to negotiate this. This was before you got here, commissioner Goodman. But it took a year to negotiate directorrive 70. And there's an interim audit report and then subsequent -- and that's the part where we usually let the process Êplay out. Because it gives the person -- the committee being audited -- an opportunity to respond and for us to consider their responses. And then there's an audit division recommendation which presents us with proposed legal conclusions and a draft report. ÊI continually get confused as to whether that's the draft report or the proposed report. And then after we approve those legal findings, the staff prepares -- what? Draft or the proposed at that point? >> Because the interim report, then the draft final audit Êreport. Then the final. >> And then the final, right. It's a -- it's a -- like I said, not -- the process is a little bit too convoluted for my taste. But it's that ADRM where commissioners weigh in if they want to object to the final conclusions. Like I said, ÊI just they that procedurally we are not in a substantively new place, just procedurally -- >> Commissioner -- >> If it proves necessary and that was ADRM was by a 6-0 vote, I would vote we reconsider the vote by which we approved the ADRM. I'll do that at Êthe appropriate time. >> Pick this up next time, and in the meantime we can discuss the most prudent way to proceed and to ensure that we can wrap this up in a way that's satisfactory to the procedural concerns that we have here as well as the substantive Êconcerns. So before we wrap up, since this last item actually involved a -- an entity from the state of Utah, I want to take a point of personal privilege and mention that 31 years ago this month actually I was a sophomore at Springville high school in Springville, ÊUtah. And we won our first state football championship of all time. [ Laughter ] And may surprise some of you to know I was not actually on that team. [ Laughter ] I otherwise look like I might have the build of a middle linebacker, but, no, basketball was Êmore my sport. And I just want to mention that tomorrow the mighty Red Devils of Springville, Utah, will be taking on East High School. Played at Rice ECAles stadium, the home of the University of Utah. And they're going for number two. So I want to send my Êbest wishes to the ripen red rage from Utah and say good luck -- >> Where is Springville, Utah? >> Springville is just near Provo. So about 15 minutes away from BYU. So commissioner? >> I just want to say, then, that when I was at Bayside High School in Queens, ÊI'm not going to say how many years ago, we were the city champs in football and I was not on the football team. >> Mr. Chairman. >> Commissioner Goodman. >> In 1982 this month I was on the football team that lost in the state championship. [ Laughter ] In Êthe AAA division of the State of Virginia. I was a GW Danville and we lost to the Hampton Crabbers 15-9. And I believe there were four or five NFL players on that high school football team. >> My high school was led by future NFL quarterback Scott Mitchell. ÊHe led us to that moment of glory, so I guess I both unearthed pleasant and bitter memories. But like I said, I wish them all the best tomorrow. Hope they can bring home the state championship. Mr. Palmer, do we have any management or administrative matters. Ê >> What football team were you on? >> It would be hockey. >> Mr. Chairman, I won't say the year, but my high school won the city championship in hockey and I was on the team. >> All right. >> And I'm happy to report I amazingly have all my teeth as well. Mr. ÊChairman, no additional matters. >> All right. Hearing none, this meeting is adjourned.