This file contains archived live captions of the open meeting of the Federal Election Commission held on March 09, 2017.  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. This is the open session for Thursday March 9, 2017. At the very outset, I have the very pleasurable item to take up, and that's to talk about one who has worked for us for a few years. This is Lyn's 40th year here. She's been our active inspector general for 27 years. It's the longest service at any time in any agency. She's broken a record. Just the longevity itself is great. But you did not want any fanfare, but thank you for the service you've given to us. In my experience, it's always been very easy to work with you. It's been a very nice experience. I wanted to point out that when she first got here, we should remember the fact that that was our first inspector general. So everything was brand new. Everything had to be thought about how to figure out and how to set it up. That required staffing the office with appropriate skill sets, creating an audit and work universe. She's had to address a number of sensitive issues and discharge her duties with the highest degree of professionalism and trust. In addition to that, she's become a leader, and she has been the chair of the panel, which reviews the recommendations for the position of inspector general which get reviewed, reported, and recommended to the president or not. She's got two children, Kyle and Ryan and Ryan's wife and almost about to become a grandmother. You'll have a new life ahead of you. So thank you so much for everything you've done. We really do appreciate it. I do have a small -- believe me it's small, but a serious little gift for you. If anyone would like to make a comment about your experience with her, please feel free to do that. [ Applause ] 

>> From all of us in the office, we want to thank you for showing us what a good leader is. And the fact that we're 

>> I know everyone feels the same way with respect to what's been said. Thanks very much. We'll go on with regular business now, and thanks again. The first item on the agenda has been the socialist workers party, and that will be postponed until the next session. That goes off of the agenda. At this time we will take up the audit division issue. You may procedural. 

>> Good morning, Mr. Chairman and commissioners. Before you is the audit division recommendation memorandum on the Colorado Republican committee. There are four findings. Finding one, misstatement of financial activity had three parts. The first part was misstatement of financial activity for the audited reports. The second was misstatement of financial activity for the original reports filed. And the third was misstatement of financial activity, unreported bank account. The second finding was reporting of a parent independent expenditures. The third finding was recordkeeping for communications. The fourth finding was failure to item MIZ debts and obligations. As you recall, Colorado Republican committee requested an audit hearing pertaining to findings 1, C, and 4. Our attorney appeared on December 6,2016. As stated, the commission provided CRC an opportunity to submit certain banking documentation for finding 1C, however, we have not received in I documentation from CRC to date and we are prepared to answer any questions you may have 

>> Thank you very much. Any questions? 

>> Thank you, Mr. Chairman, good morning to both of you. When we had this here back in December, it seemed as if the two major issues: The disputed debt and the unreported bank account, after discussing with council for the audited committed and after the interactions and the questions that you had provided, it seemed at that point that we had like a path forward that information was going to be provided to the commission that was going to be able to likely wrap up some of the loose ends. It sounds like the trail went cold in terms of our communications with the audit committee. Perhaps you can flesh out a little bit more the efforts that you've made to communicate with and what sort of responses you've had so that we have a better idea of how that line of communication went dead, you know, in the intervening three months. 

>> Correct. Yes, commissioners, we did send them two e-mails. The first e-mail was immediately following the hearing where we reiterated that the information that we had discussed during the hearing and in particular, the bank account documentation. We did not receive a response. We sent that to the legal council and his e-mail address. And after, after the ADRM was decided there would be this meeting on the ADRM, we sent another e-mail to the treasurer and the legal council, and I did not receive a response. I left a voicemail. And I also contacted the committee yesterday to verify that the legal council has not changed and they did verify that. And they confirmed the e-mail addresses that I was using, but I haven't received any response or contact. 

>> Okay. So it's not just been that they said we've provided you adequate documentation to bolster the claims that we made, but there has been no communication period? 

>> Correct. 

>> It strikes me as odd that a committee would request an audit hearing, appear in person and it looked like we had a pathway to resolve some of the matters or get the documentation that we were seeking and since then we have been able to receive no communication, not with standing your efforts to reach out to them. That puts us in a little bit of a tricky situation. Okay. Thank you for reciting that history for me. 

>> Okay. 

>> Any other questions? Any further discussion? People want to take action? 

>> If I recall the last time we looked at this and if I read the report accurately, we infer this this convention account was created by someone within the party because the bank records were in the party's records. 

>> They were and also the bank account name was in the party's name. 

>> What was the name on this account? 

>> It was called the Colorado state Republican cent a committee, Republican national convention expense account, and it was in the committee's records, provided to us by their accountant. 

>> Why aren't we crediting -- is that -- because of that, is that the evidence we have for not crediting the explanation given by the party chairman? 

>> The explanation given by the party chairman is that this was not their bank account and that it was a separate entity created for a separate entity. But they -- there was no evidence provided from the bank that indicated that this was not their bank account. That this was not Colorado Republican Committee's bank account. That's what we have asked for consistently throughout field work and during the hearing. This account was opened in January 2012, and the first deposit was in April 2012, but the employee identification number for the entity that the committee says this account belongs to wasn't received until June of 2012. 

>> Okay. I take it they still have not amended their reports from 2012 forward? 

>> They have amended their reports. 

>> So they have. I'm sorry. I misread the report. 

>> They haven't amended to correct the cash on hand, the ending cash on hand at the end of the audit period. We just asked for them to make an adjustment to fix a difference between the ending cash on hand and the beginning cash on hand after the -- at the beginning of the next period. So that's the thing... 

>> Let me explain my understanding of the report so you can untangle my misunderstanding. I read it that they did amend their cash on hand numbers for their 2011 report, but they did not do so for their 2012 report? 

>> It's just, there's -- at the end of 2012, they have a certain cash on hand, and the first period, 2013, it won't be the same, their beginning cash on hand. So we asked for them to make an adjustment in the current period, this period, to reconcile that difference. 

>> The current period is the 2016 period? 

>> Correct. They could just make -- 

>> I'm just a little confused. Where does the first incorrect number show up? January 2012? Or January 2013? 

>> 2013. 

>> Okay. So the 2012 reports are accurate? 

>> They were amended. 

>> They were amended. 

>> They were amended, so they -- for the misstatement in finding 1A. 

>> Okay. But they did not amend their to 13 report. 

>> Correct. 

>> Okay. So does that delta -- what was the discrepancy? 

>> $7200. 

>> Only $7200 by the time they get to to 2013. 

>> It's only the ending cash on hand does not agree with the beginning cash on hand for 2013. 

>> I see. That's after they amended the 2012 report? 

>> Correct. 

>> Oh, okay. Does that $7200 hiccup preside throughout all of their reports from January 2013 through today? 

>> It carries through. Since we're not auditing any of the other reports, we just ask them to figure out what the difference would be and make a reconciling adjustment on their most recent report. 

>> Okay. Okay. But you would assume the hiccup is rippled through all their subsequent reports? 

>> Correct. 

>> Unless they start in subsequent years, so there's a hiccup in the 2013 or '14 period. 

>> Right, and we just asked them to explain that. 

>> Okay. At least I understand the dimensions of that issue. And it's $7200? 

>> Correct, the difference. 

>> Let me ask, and some of this is just a reminder for me. The 77 mailers totaling 110,900 -- 

>> The 110,000 is not the 77 mailers. 

>> Can you speak into the microphone? I'm getting old and my hearing isn't as good as it used to be. 

>> The 77 mailers we cannot associate with any amount due to the next finding, which is the recordkeeping. We cannot associate invoice to the mailers. But we had those 77 mailers that had express advocacy. The 110 is separate. We did have invoices and mailers for those pieces, for those dispersements. 

>> So you have invoices and the mail pieces for $110,905 worth of mail? 

>> Correct. 

>> And the only dispute on that number is whether it was exempt volunteer or an independent expenditure? 

>> Correct. 

>> Okay. I remember our discussion with the attorney when he came. What has been their representation as to that thus far? I recall a colloquy with the counsel where we alerted him of the type of evidence that the commission had recognized in the past. An affidavit, for example, that would say we provided you the volunteer sign-in sheets for 20 other direct-mail pieces and programs. This was part of a series, and part of that same volunteer program. We just don't have the sign-in sheets. I remember that colloquy with him. What has been their representation with regard to the $110,000? Is it just that they represented that it's part of the volunteer mail program with no affidavit or other evidence? What's the state of the evidence as to the $110,000 and the claim to be volunteer? 

>> They have not provided any additional documentation to support that. As far as they're concerned, they provided everything they need to provide. 

>> So we have representation or an argument or assertion, but no documentary evidence to support it? 

>> Correct. 

>> Okay. I just wanted to be sure that was the lay of the audit at this point. And tell me about the 77 mailers. Those are different than the 110,000? 

>> Correct. 

>> I misunderstood that. Do we have any aggregate money associated with the 77 mailers? 

>> We cannot associate them with invoices. This is where the next finding comes in with almost $6 million. 

>> That's part of the -- when we're -- that's part of that issue? 

>> Correct. Correct. 

>> Okay. Thank you. I didn't understand that. Now about the radio ads, you're saying there was 100 -- explain to me the difference between the $153,900 in radio ads versus $32,164. I understood there to be $153,900 in radio ads that you considered to be express advocacy that required an independent expenditure report. 

>> Correct. 

>> And is it of that 153, that $32,164 would require a 24-hour report? 

>> Correct. Based on the sis semination date or when we suspect the dissemination occurred. 

>> What evidence do we have of the actual dissemination dates? 

>> We're just basing it on invoice date. The invoice date, which is all we received from the committee. 

>> And is the inference drawn that they were within the 24-hour reporting period because the invoice date falls within that period? 

>> Correct. 

>> That's how you make that inference? 

>> Oh, um, for the radio ads, there was information about when the ads were aired. So we could calculate some of that. 

>> I see. So the 32 is fairly precise. 

>> Correct. 

>> And it's a subset of the $153,900? 

>> Correct. 

>> Okay. 

>> Mr. Chairman, can I take a minute please? 

>> CHAIR: Okay. We'll be back in session in a minute. 

>> I have a question. 

>> CHAIR: Go right ahead. 

>> On page 14 of the draft final audit report, at the bottom, you provide some analysis for 5 direct mail communications. Do you have handy what the actual text of those five direct mail communications was? So the text here says that five direct mail communications contain language that encouraged the reader to vote for Republicans and help repeal Obamacare with various reasons why Obamacare was bad for Colorado and/or America's economy. Did those five mailers, were they identical? 

>> No, they were not identical. 

>> Do you have the text? Do you happen to have the text. 

>> I don't have it with me. 

>> I'm sorry, I didn't alert you earlier. I focused on this late last night, and it caught my eye. 

>> I don't have it with me right now. We can provide it. 

>> Do you recall whether your analysis was that those five direct mail communications contained express advocacy, because they urged the reader to vote Republican? Or because they said repeal Obamacare? In other words, are you reading that as express advocacy with respect to a Republican congressional race or the presidential race or both? 

>> I would think... 

>> I actually have texts of the five communications that you're referring to. 

>> Could you pass them around? 

>> Yes. 

>> Thank you. 

>> And do you know whether the legal analysis is they were express advocacy because they urged someone to vote for Republicans, or was it deemed express advocacy because of a reference to president Obama? 

>> It was a combination. 

>> So you believe calling for repeal of Obamacare would have been express advocacy? Urging voters to vote against Barack Obama? 

>> That would be the effective interpretation, yes. 

>> Okay. And what was the -- can you just read to me what the language for a voting Republican was? Did it say this November vote Republican? Or did it say this November vote for your incumbent Republican congressman? 

>> No, not the latter. 

>> It said vote Republican? 

>> Vote Republican. 

>> Was there a memo to file on this issue. 

>> A legal analysis was presented and the comments on the interim audit report. 

>> Okay. I don't have that. What was the date of that, Joshua? 

>> It actually, through inadvertency did not have a date published on it. But... 

>> Mr. Chairman? 

>> CHAIR: Yes. 

>> What I'm going to suggest is that we move this to the next public meeting, and I would -- it would be my request of the auditors to make one last one at counsel expressing some urgency, to let them know that the commission was expecting some follow-up from him, and that perhaps if there is to be no follow-up, we would appreciate an affirmative e-mail or message that there is to be no more follow-up. Tell him I'd like to know. We entertained him here. We granted him hearing. We had a long colloquy with him. And I'm not demanding certain documents of him, but he did indicate that he might have further material to provide, and we even suggested, for example, on the volunteer exemption, the types of evidence that would satisfy at least some commissioners. I'd just like to know affirmatively, is he going to make any further submissions or not? If he could make a representation one way or the other, that would be helpful. And if I could have the indulgence of the commission for two more weeks, I would like to look at this memorandum and the direct mail pieces to draw a better conclusion of this. I'm not so concerned in the scheme of this audit the effect of five direct mail pieces. It's a very small whisker on the tail of this dog. But I am concerned about the legal conclusion and the broader implications for that 

>> Of course. I understand. 

>> CHAIR: That is fine with me. And thank you very much for your good presentation. It's always really right on and thank you. We'll be back next session. Take care. At this time, there's no further matters to come before us based on the agenda, and Mr. Staff director, are there any other matters entitled to consideration? 

>> Mr. Chairman, there are no other considerations. 

>> CHAIR: Thank you. The meeting is adjourned. [ Meeting adjourned at 10:45 a.m. EST ]