FEC Seal




Statement for the Record in Audits of

Clinton/Gore and Dole/Kemp Campaigns


Scott E. Thomas

Vice Chairman


          On December 10, 1998, the Federal Election Commission (“FEC” or “Commission”) approved a motion rejecting certain staff recommendations for repayment of public funds in the audits of the 1996 Clinton and Dole campaigns.  The repayment recommendations in question stemmed from party ads that would cause excessive spending if attributed to the candidates’ campaigns.


This vote, although unanimous, reflected several different rationales among the six voting commissioners.  The media reports and editorials following the vote did not capture the distinctions and nuances involved.   It is for that reason I offer the following preliminary statement explaining my vote and my avid dissent from the legal theory underlying the vote of three of my colleagues.


          I clearly indicated during the previous two days of discussion my agreement that certain of the ads in question should be attributed to the candidates’ campaigns, and should generate a repayment to the extent excessive expenditures resulted.  I further indicated, however, that some of the ads fell short of being attributable to the candidates’ campaigns.  Moreover, I believed the national parties were legally free to use their available coordinated expenditure allowances for any of the ads.  Where the parties so chose, the ads should not be attributable to the candidates’ campaigns.  Thus, on the motion proffered, I voted in the affirmative because the motion was to reject the staff’s repayment recommendation that encompassed all the ads in question.


          It would have been an exercise in futility to attempt separate votes on whether to seek repayment with regard to each of the ads in question.  The previous day, December 9, three commissioners (Mason, Wold and Elliott) indicated they would not vote to seek repayment relating to excessive spending by a primary campaign under any circumstances.  Thus, even if at least four commissioners believed certain ads should count toward a candidate’s spending ceiling, there would be no repayment because, according to these three



commissioners, any repayment order for excessive primary campaign spending would be beyond the FEC’s authority.  See Agenda Docs. 98-92 and 98-92A.


          Faced with the reality of no repayment at all regarding excessive spending generated by the party ads, the question remained whether to debate further for hours—perhaps days—about “determining” some or all of the ads to be in-kind contributions for purposes of the audit report.  See, e.g., Report of the Audit Division on Clinton/Gore Primary Committee, Inc. at 43.  In view of the need to complete the audits in time to meet the three-year statute of limitations,[1] and in view of the awkwardness of publicly discussing matters that would now only  have relevance to potential confidential compliance determinations,[2] commissioners opted to instead direct the Audit Division to revise the report to simply clarify that the factual and legal analysis therein regarding the party ads does not reflect any commissioner determinations.[3]


The net result of the votes taken on December 9 and 10 is that any repayment stemming from the party ads is off the table, and any further action regarding the ads will occur, if at all, in the context of a compliance action.  Without presaging whether any findings of civil violation will be made, it is theoretically possible the FEC will press forward in the enforcement track and obtain civil penalties or some other form of monetary or injunctive relief.  The doom and gloom described by commentators is perhaps premature.


Regardless, several important points should be made about the view taken by three commissioners that no repayment whatsoever may be required for excessive spending by a primary candidate.   I find this approach plainly contrary to public policy, in flat violation of majority-passed FEC regulations, and far less justified by the statute than the agency’s long-held interpretation.


It is hardly compatible with the presidential public funding program to  allow a candidate who spends above the spending ceiling to escape repayment of the public funds that were constructively involved.  This is just as true in the primary matching fund program as it is in the general election program where major party candidates have been given a full grant.   In both situations, public funds should be recovered where they were used to get to the spending ceiling but not needed.  In other words, a campaign should be forced to return to the Treasury the amount of public funds used getting to the limit that corresponds to the amount of private funds otherwise spent to go above the ceiling. Where campaigns cheat on the spending ceilings, they should disgorge any public funds not needed to get to the ceiling in the first place.[4]  


The so-called “mixed pool theory” in the matching fund context properly addresses this public policy.  By treating all available resources as fungible—just as all the expenditures making up the spending total are fungible—the Commission properly requires repayment of the portion of any excess spending that corresponds to the public funds ratio.  Importantly, the “mixed pool theory” only works if all resources—public funds, private contributions deposited, and in kind contributions—are included.  Just as in kind contributions must be counted as part of the expenditure total, they must be counted as part of the receipt total. Only this way does the ratio accurately reflect the overall financial support provided to a campaign and the relative importance of public funding to an impermissible expense.  It wouldn’t make sense to have a repayment ratio generate a larger repayment than actually was justified.[5] 


Apart from undermining the public policy rationale for seeking repayment of primary matching funds constructively used for excessive spending, my three colleagues side-stepped a Commission regulation explicitly treating excessive spending as a non-qualified expense that generates repayment.[6]  Commissioners cannot simply disobey a duly-promulgated regulation interpreting the statute.   See 2 U.S.C. 437c(b), 437d(8), 438(a)(8).  Even if a commissioner believes the majority that passed the regulation misinterpreted the statute, the regulation is still the law of the land until rescinded by a majority vote.[7]  Thus, in the audits at hand, my colleagues were badly in error in when arguing that the agency has no authority to order repayments from primary campaigns that exceed the spending limit.


This error was compounded by a statutory construction that is less plausible than the statutory construction reflected for years in the FEC’s regulation.  The mere fact that the primary-related provisions[8] do not contain a distinct repayment clause regarding excessive spending like that found in the general-related provisions[9] suggests only that in the few years after the general-related provisions were enacted the drafters realized that excessive spending was itself a non-qualified expense already covered by a separate repayment clause.[10]  Moreover, one could argue the qualified campaign expense limitation


at 26 U.S.C. 9035, which says “[n]o candidate shall knowingly incur qualified campaign expenses in excess of the expenditure limitation” at 2 U.S.C. 441a(b)(1)(A), suggests on its face that anything incurred beyond that amount would not be deemed “qualified.”[11]  To adopt a tortured construction that would leave the FEC with authority to seek repayments for general election overspending, but not for primary election overspending, is far less logical than these simple interpretations.


The approach adopted by my three colleagues has caused a serious breach in the public funding program.   Recouping public funds that were constructively used in excessive spending is the most basic of principles.  While it is true that the FEC can attempt to secure some form of relief in the compliance track, the burden of proof, standard of review, and procedural posture would be different.  Moreover, there is no good reason to simply ‘pass’ on the excessive expenditure repayment process in the 1996 election cycle when it has been followed in previous cycles with judicial approval.[12]  It makes the FEC look somewhat lawless.


      12/23/98                                                             /  s  /

_____________                                              __________________________

Date                                                              Scott E. Thomas, Vice Chairman     




[1] 26 U.S.C. 9007(c); 9038(c).

[2] See 2 U.S.C. 437g(a)(12)(A).

[3] The FEC also voted on December 9 to treat any RNC ads run before the convention nomination as primary-related, rather than general-related.  This was to afford equal treatment with the DNC whose ads were subjected by the staff to an FEC regulation allocating to the primary any communications not exclusively general-related.  Common sense dictates that the RNC ads run before the nomination were no more exclusively general-related than those of the DNC.

[4] All expenditures should be deemed equally responsible for causing the overage; without the early spending, the later spending would not cause a problem.  In the general election context, where it is obvious that funding other than the full grant was used to cause excessive expenditures, it is likewise obvious that the campaign had enough funding to reach the spending limit without the full public grant.  That is the rationale for recouping an amount of public funds equal to the overspending.  It is as if the spending from private sources took the campaign to the limit, and the campaign then used public funds to go over the limit.  Similarly, in the primary election context, it is as if purely private funding equal to the amount of the overage was used to get to the limit and the mix of private and public funding was used for the overage.  Thus, the FEC recoups the public funding portion.

[5] Commissioners who relied on Kennedy for President v. FEC, 734 F.2d 1558 (D.C. Cir. 1984), for the proposition that the mixed pool theory only applies where expenditures made from committee accounts are involved are way off base.  Though the case hammered home the proposition that only an amount representing public funds can be recouped for non-qualified expenses in the matching fund context, it in no way suggested in-kind contributions are not to be included in the mixed pool.  Indeed, as the General Counsel noted at n. 2 of Agenda Document 98-95, the D.C. Circuit indicated clearly that such contributions are to be included.  734 F.2d at 1562 n. 5.

  Nor do the FEC’s regulations using the term “deposits” to explain the ratio calculation, 11 C.F.R. 9038.2(b)(2)(iii), mandate exclusion of in-kind contributions.  In kind contributions are treated as though they were standard contributions of money that were simultaneously used for an expenditure.  See 11 C.F.R. 104.13(a).  Thus, where the regulations refer to “deposits to all candidate accounts”  when calculating the repayment ratio, in kind contributions must be included.  If there were any doubt about the Commission’s intent, it is resolved by the example in the Commission-approved Financial Control and Compliance Manual (1996) at pp. 67 and 68 where in kind contributions are expressly included in total deposits when calculating the repayment ratio.

  To conclude that in kind contributions should be excluded from the mixed pool theory would encourage candidates to urge potential donors to subsidize with in kind contributions non-qualified expenses of all sorts (e.g., traffic fines, cell phones that will ‘disappear,’ etc.).  This would automatically free the campaign of any obligation to make any restitution of public funds, even though the in kind donor could just as well have been paying for the cost of any qualified campaign expense and standard contribution deposits could just as well have been paying for the non-qualified costs.  To avoid such chicanery, to prevent mind-numbing calculations separating out all reportable in-kind contributions, and to reflect the fact that such contributions indeed are but one component of the financial support provided, they should  be included in the mixed pool theory.   

[6] 11 C.F.R. 9034.4(b) provides:  Non qualified campaign expenses—(1) General.  The following are examples of disbursements that are not qualified campaign expenses.  (2) Excessive expenditures.  An expenditure which is in excess of any of the limitations under 11 CFR. Part 9035 shall not be considered a qualified campaign expense.”  The regulations further specify that repayment determinations for excessive spending are contemplated.  11 C.F.R. 9038.2(b)(2)(ii)(A).

[7] Validly adopted regulations have the force and effect of law.  Accardi v. Shaughnessy, 347 U.S. 260 (1954).  Accord United States v. Nixon, 418 U.S. 683, 695 (1974)(“So long as this regulation is extant it has the force of law.”).  Put another way:

It is elementary that an agency must adhere to its own rules and regulations.  Ad hoc departures from those rules, even to achieve laudable aims, cannot be sanctioned, Teleprompter Cable Systems v. FCC, 543 F.2d 1379, 1387 (D.C.Cir. 1976), for therein lies [sic] the seeds of destruction of the orderliness and predictability which are the hallmarks of lawful administrative action.  Simply stated, rules are rules, and fidelity to the rules which have been properly promulgated, consistent with applicable statutory requirements, is required of those to whom Congress has entrusted the regulatory missions of modern life.

Reuters Ltd. v. FCC, 781 F2d 946, 950-952 (D.C.Cir. 1986)(opinion of J. Starr).

[8] 26 U.S.C. 9038(b)(2).

[9] 26 U.S.C. 9007(b)(2) and (4).

[10] By requiring repayment for non-qualified expenses, 26 U.S.C. 9038(b)(2), by clarifying that qualified campaign expenses do not include expenses incurred or paid in violation of any federal law, 26 U.S.C. 9032(9)(B), and by specifying at 2 U.S.C. 441a(b)(1) that “expenditures” in excess of the limit are prohibited, Congress provided explicit statutory authority for repayment stemming from excessive spending in the primary process.

[11] My colleagues argue that the use of the phrase “qualified campaign expenses in excess of the expenditure limitation” in 9035 is a sign that Congress did not contemplate treating excess spending as non-qualified.  Yet, that simply writes off other parts of the law.  Congress meant what it said when it excluded from the definition of “qualified campaign expense” any expenses paid in violation of federal law.  Why ascribe to Congress an extremely unlikely approach:  depriving the FEC of authority to recoup public dollars that were constructively misused?

  The drafters needed to clarify that only those expenses related to the presidential nomination campaign would count toward the expenditure limit, yet they also needed to ensure that anything above the limit would generate a repayment.  Saying a candidate shall not make “qualified campaign expenses” above the limit served the first purpose, while saying anything above the  limit was not a “qualified campaign expense” served the second purpose.  Hence the awkward combination of 9032(9), 9035(a), and 9038(b)(2).  Perhaps the drafters felt this approach was better because in the general-election provisions enacted several years earlier there was no separate provision setting a spending limit the exceeding of which would be a violation of law and hence a non-qualified expense.  See Pub. L. 92-178, 85 Stat. 497, Title VIII (1971), reprinted in Legal History of the Presidential Election Campaign Fund Act (GPO 1984), Vol. II at 2596.  In the 1974 Amendments which added the primary election provisions, a spending limit was included not just once, but twice, at what is now 2 U.S.C. 441a(b) and at 26 U.S.C. 9035(a).  See Pub. L.. 93-433, 885 Stat. 1263, 101(a), 408(c), reprinted in Legislative History of Federal Election Campaign Act Amendments of 1974 (GPO 1977) at 1135, 1169.   

[12] Kennedy for President v. FEC, 734 F.2d 1558 (D.C.Cir. 1984), approved recouping matching funds for spending in excess of the state-by-state limits for a 1980 cycle campaign.  Accord, John Glenn Presidential Committee v. FEC, 822 F.2d 1097 (D.C.Cir. 1987), vis a vis a 1984 campaign; Robertson v. FEC, 45 F.3d 486 (D.C.Cir. 1995), vis a vis a 1988 campaign.