UNITED STATES DISTRICT COURT FOR THE DISTRICT OF … · 2. Attached hereto as Exhibit 1 is a true and correct copy of American Action Network’s (“AAN”) Form 9, filed with the

1

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

__________________________________________ ) CITIZENS FOR RESPONSIBILITY AND ) ETHICS IN WASHINGTON, et al., )

) Plaintiffs, ) Civil Action No. 14-1419 (CRC) ) v. ) ) FEDERAL ELECTION COMMISSION, ) ) Defendant, )

) AMERICAN ACTION NETWORK, )

) Intervenor-Defendant. )

__________________________________________)

DECLARATION OF STUART C. MCPHAIL

IN SUPPORT OF PLAINTIFFS’ REPLY IN SUPPORT OF PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT AND IN OPPOSITION TO

DEFENDANTS’ CROSS-MOTIONS FOR SUMMARY JUDGMENT

I, STUART C. MCPHAIL, hereby declare under penalty of perjury pursuant to 28 U.S.C.

§ 1746, that the following is true and correct:

1. I am an attorney licensed to practice law in the States of California and New York

and admitted to practice before this Court pro hac vice. I am counsel of record for Plaintiffs

Citizens for Responsibility and Ethics in Washington and Melanie Sloan. I am personally

familiar with the facts set forth herein, unless the context indicates otherwise.

2. Attached hereto as Exhibit 1 is a true and correct copy of American Action

Network’s (“AAN”) Form 9, filed with the Federal Election Commission (“FEC”) on October

15, 2010, reporting AAN spent $875,000 on electioneering communications but reporting $0 in

Case 1:14-cv-01419-CRC Document 40-1 Filed 04/22/16 Page 1 of 3

2

contributors. The form is available on the FEC’s website at

http://docquery.fec.gov/pdf/743/10931519743/10931519743.pdf.

3. Attached hereto as Exhibit 2 is a true and correct copy AAN’s Form 9, filed with

the FEC on October 15, 2010, reporting AAN spent $850,000 on electioneering communications

but reporting $0 in contributors. The form is available on the FEC’s website at


4. Attached hereto as Exhibit 3 is a true and correct copy AAN’s Form 9, filed with

the FEC on October 14, 2010, reporting AAN spent $1,450,000 on electioneering

communications but reporting $0 in contributors. The form is available on the FEC’s website at


5. Attached hereto as Exhibit 4 is a true and correct copy of an excerpt of the

Jurisdictional Statement filed by the American Civil Liberties Union in McConnell v. FEC, No.

02-1734 (U.S. May 29, 2003), available at https://www.aclu.org/sites/default/files/

field_document/jurisdictionalstatement.pdf and at http://www.fec.gov/law/litigation/24%20---

%2002-1734jurisst%5B1%5D.pdf.

6. Attached hereto as Exhibit 5 is a true and correct copy of the Certification of the

vote of the Commissioners of the FEC in the Matter Under Review 6396 taken on December 3,

2013, as the document appeared on the website

http://eqs.fec.gov/eqsdocsMUR/14044350869.pdf.


Conciliation Agreement entered into between the FEC and the Progress for America Voter Fund

in the Matter Under Review 5487 on February 28, 2007, as it appeared on the website

http://eqs.fec.gov/eqsdocsMUR/00005AA7.pdf.


3

8. Attached hereto as Exhibit 7 is a true and correct copy of the Advisory Opinion

1996-03, issued by the FEC on April 19, 1996, accessible via the FEC’s website at

http://saos.fec.gov/saos/aonum.jsp?AONUM=1996-03.


Statement of Reasons of Chairman Lee E. Goodman and Commissioners Caroline C. Hunter and

Matthew S. Petersen, issued in the Matter Under Review 6396 relating to Crossroads GPS on

March 25, 2014, as it appeared on the website http://eqs.fec.gov/eqsdocsMUR/14044350970.pdf.


Statement of Reasons of Vice Chairman Steve T. Walther, issued in the Matters Under Review

6396 and 6471 relating to the Commission on Hope, Growth, and Opportunity on March 21,

2016, as it appeared on the website http://eqs.fec.gov/eqsdocsMUR/16044386269.pdf.

I declare under penalty of perjury that the foregoing is true and correct. Executed on

April 22, 2016 at Washington, D.C.

/s/ Stuart McPhail Stuart C. McPhail


Exhibit 1


10/15/2010 20 : 23

FEC FORM 924 HOUR NOTICE OF DISBURSEMENTS/OBLIGATIONS FORELECTIONEERING COMMUNICATIONS

1. Individual, Organization or Qualified Nonprofit Corporation Making the Disbursement/Obligations

(a) Name

(b) Address (number and street) 2. FEC Identification Numbercheck if different than previously reported

C(c) City, State and ZIP Code

(e) Occupation(d) Name of Employer or Principal Place of Business

New / /M MM M DD DD Y Y Y YY Y Y Y

3. Is This Statement 4. Covering Period throughor/ /M MM M DD DD Y Y Y YY Y Y Y

Amended

5. (a) Date of Public Distribution(s) (b) Communication Title/ /M MM M DD DD Y Y Y YY Y Y Y

6. The filer is a(n): (a) (b) Qualified Nonprofit Corporation (11 CFR 114.10)Individual (c)Unincorporated Organization

(d) Corporation, Labor Organization or Qualified Nonprofit Corporation making communications under 11 CFR 114.15

(e) Other, specify:

7. Were the disbursements for the electioneering communication made exclusivelyYes No

from donations to a segregated bank account?

8. Custodian of Records

(a) Name

(b) Address (number and street)

(c) City, State and ZIP Code

(d) Name of Employer or Principal Place of Business (e) Occupation

9. Total Donations This Statement

10.Total Disbursements/Obligations This Statement

Under penalty of perjury, I certify that this statement is true, correct and complete.

TYPE OR PRINT NAME OF PERSON COMPLETING FORM

Electronically Filed bySIGNATURE DATE

NOTE: Submission of false, erroneous or incomplete information may subject the person signing this statement to the penalities of 2 U.S.C. 437g.

FE3AN038.PDF FEC FORM 9 (REV. 12/2007)

Image# 10931519743

X

C30001648

AMERICAN ACTION NETWORK

1401 NEW YORK AVENUE NW STE 1200

WASHINGTON DC 20005

1 0 1 2 2 0 1 0

1 0 1 4 2 0 1 0

1 0 1 4 2 0 1 0 EXTREME

X CORPORATION

STEPHANIE FENJIRO


WASHINGTON DC 20005

AMERICAN ACTION NETWORK ADMINISTRATOR

.00

875000.00

STEPHANIE FENJIRO

STEPHANIE FENJIRO 10/15/2010


List of Person(s) Sharing/Exercising Control(use additional pages as necessary)

PAGE

11. Person(s) Sharing/Exercising Control

Transction ID :(a) Name


(c) City, State and Zip Code


FEC FORM 9 (Rev. 12/2007)FE3AN038.PDF

A.

2 / 3

Image# 10931519744

F91.000001

ROBERT COLLINS


WASHINGTON DC 20005

AMERICAN ACTION NETWORK PRESIDENT


SCHEDULE 9-B PAGE

Disbursement(s) Made or Obligations

Full Name (Last, First, Middle Initial) of Payee Date of Disbursement or Obligation

/ /M MM M DD DD Y Y Y YY Y Y Y

Mailing Address of Payee

Amount

Zip CodeCity State

Communication Date

Transction ID :

Name of Employer Occupation / /M MM M DD DD Y Y Y YY Y Y Y

Purpose of Disbursement (including title(s) of communication(s))

Office Sought:Name of Federal Candidate Disbursement/Obligation For:State:House

GeneralPrimarySenateDistrict:

Other (specify)President

Office Sought:Name of Federal Candidate Disbursement/Obligation For:House State:

Senate GeneralPrimaryDistrict:

President Other (specify)

Office Sought:Name of Federal Candidate Disbursement/Obligation For:HouseState:

GeneralSenate PrimaryDistrict:President

Other (specify)

SUBTOTAL of Disbursement/Obligation This Page (optional) .....................................

TOTAL This Period (last page this line number only) .....................................

(carry total from last page to line 10)

FEC FORM 9 (REV. 12/2007)FE3AN038.PDF

875000.00

3 / 3

A.

Image# 10931519745

F93.000001

WF OF R MEDIA

411 BRANCHWAY ROAD

RICHMOND VA 23236

1 0 1 2 2 0 1 0

875000.00

EXTRME

TV AD PROD/AIR TIME PURCHASE

F94.000002

PAUL HODESX

NH

02X

2010

875000.00


Exhibit 2


10/15/2010 21 : 15



(a) Name






Amended




(e) Other, specify:




(a) Name











Image# 10931524628

X

C30001648



WASHINGTON DC 20005

1 0 1 2 2 0 1 0

1 0 1 4 2 0 1 0

1 0 1 4 2 0 1 0 BACKPACK

X CORPORATION

STEPHANIE FENJIRO


WAHSINGTON DC 20005

AMERICAN ACTION NETWORK ADMINISTRATOR

.00

850000.00

STEPHANIE FENJIRO

STEPHANIE FENJIRO 10/15/2010



PAGE







A.

2 / 3

Image# 10931524629

F91.000001

ROB COLLINS


WASHINGTON DC 20005

AMERICAN ACTION NETWORK PRESIDENT


SCHEDULE 9-B PAGE





Amount

Zip CodeCity State

Communication Date

Transction ID :











Other (specify)





850000.00

3 / 3

A.

Image# 10931524630

F93.000001

WF OF R MEDIA

411 BRANCHWAY ROAD

RICHMOND VA 23236

1 0 1 2 2 0 1 0

850000.00

BACKPACK

TV AD PROD/AIR TIME PURCHASE

F94.000002

GERRY CONNOLLYX

VA

11X

2010

850000.00


Exhibit 3


10/14/2010 16 : 45



(a) Name






Amended




(e) Other, specify:




(a) Name











Image# 10931443739

X

C30001648



WASHINGTON DC 20005

1 0 1 3 2 0 1 0

1 0 1 4 2 0 1 0

X corporation

Stephanie Fenjiro


wahsington DC 20005

.00

1450000.00

stephanie fenjiro

stephanie fenjiro 10/14/2010



PAGE







A.

2 / 3

Image# 10931443740

F91.000001

Rob Collins


washington DC 20005


SCHEDULE 9-B PAGE





Amount

Zip CodeCity State

Communication Date

Transction ID :











Other (specify)





1450000.00

3 / 3

A.

Image# 10931443741

F93.000001

WFofR Media

411 Branchway Road

Richmond VA 23236

1 0 1 3 2 0 4 0

1450000.00

tv ad production & air time purchase

1 0 1 4 2 0 1 0

1450000.00


Exhibit 4


No. 02-1734

IN THE SUPREME COURT OF THE UNITED STATES

____________________ AMERICAN CIVIL LIBERTIES UNION, Appellant,

-v- FEDERAL ELECTION COMMISSION, et al., Appellees.

___________________

On Appeal from the United States District Court for the District of Columbia

JURISIDICTIONAL STATEMENT

Joel M. Gora Brooklyn Law School 250 Joralemon Street Brooklyn, NY 11201 718-780-7926 May 29, 2003

Mark J. Lopez (Counsel of Record) Steven R. Shapiro AMERICAN CIVIL LIBERTIES UNION FOUNDATION, INC. 125 Broad Street New York, NY 10004 (212) 549-2608

i


advocacy rule in the first place. And, because it targets “electioneering communications” only if delivered through the broadcast medium, the BCRA additionally raises serious equal protection issues. See, e.g., Arkansas Writers Project, Inc. v. Ragland, 481 U.S. 221 (1987).

2. Both the BCRA and the decision below also ignore a second major holding of Buckley designed to ensure that the campaign finance laws do not sweep into their ambit genuine issue advocacy organizations. In Buckley, the Court held that the statutory definition of a “political committee” must be narrowed to avoid constitutional difficulties. Specifically, the Court held that “[t]o fulfill the purposes of the Act [the disclosure and other obligations of political committees] need only [apply to] organizations that are under the control of a candidate or the major purpose of which is the nomination or election of a candidate.” 424 U.S. at 79. While this case does not represent a direct attempt by the FEC to designate the ACLU as a political committee, defendants contend that ACLU must establish a segregated fund, i.e., a political committee, in order to engage in “electioneering communications.”10 Buckley makes clear, however, that the major purpose test was fashioned by the Court to protect issue organizations that are not political committees from being treated as if they were. To the extent BCRA forces issue advocacy groups whose major purpose is not partisan politics to be treated as political committees in order to speak, then the Act likewise transgresses Buckley=s teachings.

The soundness of this approach was reaffirmed in 10A segregated fund is a political committee under FECA. 2 U.S.C . ' 431 (4)(B). As a consequence, organizations that use a segregated fund must adhere to extensive reporting requirements, staffing obligations, and other administrative burdens. These burdens stretch far beyond the more straightforward disclosure requirements on unincorporated associations. See MCFL, 479 U.S. at 252-253.

19


FEC v. Massachusetts Citizens for Life, 479 U.S. 238, where the Court revisited the regulation of issue advocacy groups whose major purpose is not the partisan election of candidates. The Court repeatedly stressed the importance of the major purpose test as a protection for advocacy organizations. Upholding the right of an incorporated anti-abortion group to engage in express advocacy, the Court first noted that if the group were not incorporated yet made certain express advocacy “expenditures,” the major purpose test would protect the group from being regulated as a political committee.

Second, the Court highlighted in a footnote, id. at 252 n.6, the fact that MCFL was not primarily a partisan political organization:

In Buckley . . . this Court said that an entity subject to regulation as a “political committee” under the Act is one that is either “under the control of a candidate or the major purpose of which is the nomination or election of a candidate.” Id. at 79. It is undisputed on this record that MCLF fits neither of these descriptions. Its central organizational purpose is issue advocacy, although it occasionally engages in activities on behalf of political candidates.

Third, the Court noted with disapproval that the FEC=s effort to equate ideological corporations with for-profit corporations under the Act would mean that “all MCFL independent expenditure activity is, as a result, regulated as though the organization=s major purpose is to further the elections of candidates.” Id. at 253.

Finally, the Court concluded that the government’s

20


legitimate interests could be adequately served by a more narrowly tailored regulation:

[S]hould MCFL=s independent spending become so extensive that the organization=s major purpose may be regarded as campaign activity, the corporation would be classified as a political committee. See Buckley, 424 U.S. at 70. As such it would automatically be subject to the obligations and restrictions applicable to those groups whose primary objective is to influence political campaigns.

479 U.S. at 262.

Buckley and MCFL make clear that the major purpose test was adopted by the Court to protect issue organizations that are not political committees from being treated as if they were. The force of that doctrine is fully applicable here even though the ACLU’s status as a political committee is not directly at issue. To the extent that BCRA would require the ACLU to form a political committee in order to sponsor an occasional “electioneering communication,” the safeguards of the major purpose test are overridden. Both the express advocacy test and the major purpose test thus reflect a single, overriding principle of First Amendment jurisprudence: “When a law burdens core political speech, we apply ‘exacting scrutiny,’ and we uphold the restriction only if it is narrowly tailored to serve an overriding state interest.” McIntyre v. Ohio Elections Commission, 514 U.S. 334, 347 (1995). As first articulated in Buckley and later reaffirmed in MCFL, the express advocacy and major purpose tests are constitutionally compelled limits on the otherwise fatal reach of FECA. They mark the boundaries where permissible campaign finance regulation ends and unfettered issue speech

21


begins. Title II ignores those and other limitations and thereby undermines the First Amendment safeguards that this Court has so carefully erected.

3. The reporting and disclosure requirements for broadcast communications cross the line between disclosure that can be compelled and expressive activities that are entitled to full First Amendment protection. Both before and after Buckley, the Court had powerfully reaffirmed the importance of preserving the right to anonymous political speech as well as the right to privacy of political association. NAACP v. Alabama, 357 U.S. 449 (1958); Talley v. California, 362 U.S. 60 (1960), McIntyre v. Ohio Elections Commission, supra. Buckley, itself, limited the reach of disclosure rules to individuals and groups who contribute to a candidate or expressly advocate the election or defeat of a candidate. 424 U.S. at 74-80. The BCRA disturbs this careful balancing of interests. Even in the limited situations where a non-profit corporation might be permitted to engage in such speech, it must publicly disclose contributors who give a $1,000 or more either to the “electioneering communication” or to the organization itself. Indeed, the disclosures required by ' 201 are almost as onerous and burdensome as those required of regular partisan political committees. In the case of controversial groups, such threatened disclosure can have a deadly chilling effect on the group’s advocacy.

Thus, even in the context of express advocacy, the Buckley Court recognized that association with controversial political organizations carries particular dangers of chilling political speech. 424 U.S. at 74. And, in Brown v. Socialist Workers Campaign Committee, 459 U.S. 87 (1982), the Court ruled that campaign finance disclosure laws cannot be applied to controversial political parties, even those that

22


CONCLUSION For the foregoing reasons, the Court should note

probable jurisdiction.

Respectfully submitted,

Joel M. Gora Mark J. Lopez Brooklyn Law School Counsel of Record 250 Joralemon Street Steven R. Shapiro Brooklyn, NY 11201 AMERICAN CIVIL

LIBERTIES UNION May 29, 2003 FOUNDATION, INC. 125 Broad Street New York, NY 10004 (212) 549-2500

25


Exhibit 5


BEFORE THE FEDERAL ELECTIQN CONDvWSSIQN P«MM)SS l ON

IhtiieMattcrof ) ffl i,:20 ) MUR6396 .

Crossroads Grassroots Policy Strategiies )

CERTlFICAlTpN

I, Sfaelley E. Garr, recording secretaiy of tibe Fedeial Election Conunission executive

session, do hereby certify that on Deceniber 03,2613, the <§pi lss^^^| |^i^l i i^^

'dcdonS'm the aboveri matter: 00. G 1.. . lailed jpfev ' o ^

^ a. iPind; reason to believe that Crossroads Gi assroots Policy Strategie s violated ^ 2U.S.C.§§432,4J3vand434,

^ b. A|q3rove tiie: Factual aiid Legal Analysis as recommended: iii tfae First Genei

Couiisel's Report dated November 21,2012,

c. Autfaoii2» tfae use of compulsory process in this matter

d. Approve tiie appropriate letters.

Commissioners Ravel, V/aither, and Weintraub voted affiimatrvely for the motion.

Commissioners GcNodhiani Hunter, aiid Petersen dissented.

:2. ^ i ^ ^ ^ i ^ i i i 0 ® S

a. Wpsc^ te f i l e j t t i p -

b. ^Send iiPp \Dpra#^

GommissioncFS Goodman, Hunter, Petersen, Ravel, Waltfaer, and Weinti-aub voted

affirmativieily for the decision.

Date §flielleyE. Deputy Seciibtiairy of the CbmiiiiMbh;


Exhibit 6


BEFORE THE FEDERAL ELECTION COMMISSION

In the Matter of 1

1 ) MUR 5487

Progress for America Voter Fund

CONCILIATION AGREEMENT

N 0 0 d

ll

W m

This matter was generated by a complaint filed with the Federal Election Commission

(“the Commission”). See 2 U.S.C. 6 437g(a)( 1). . The Commission found reason to believe that

Progress for America Voter Fund (hereinafter, “PFA-VF”) violated 2 U.S.C. 65 433,434,

44 1 a(f), and 44 1 b(a) of the Federal Election Campaign Act of 197 1, as amended (“the Act”) by

failing to register as a political committee with the Commission, by failing to report

contributions and expenditures, by knowingly accepting contributions in amounts exceeding

$5,000 from individuals, and by knowingly accepting corporate and/or union contributions, and

an investigation was conducted.

NOW, THEREFORE, the Commission and the Respondent, having participated in

informal methods of conciliation, prior to a finding of probable cause to believe, do hereby agree

as follows:

I. The Commission has jurisdiction over the Respondent and the subject matter of

this proceeding.

11. Respondent has had a reasonable opportunity to demonstrate that no action should

be taken in this matter.

111. Respondent enters voluntarily into this agreement with the Commission.

IV. The pertinent facts in this matter are as follows:


MUR 5487 Conciliation Agreement with Progress for America Voter Fund

Factual Background

1 1. PFA-VF was formed as an Internal Revenue Code Section 527

organization on May 27,2004. In its own words, PFA-VF was formed to ‘‘[fJocus primarily on

TV & radio in key battleground states serving as [sic] counter-balance to liberal 527

committees.”

12. PFA-VF has not registered as a political committee with the Federal

Election Commission.

13. Between May 27,2004 and the November 2,2004 General Election,

PFA-VF raised $44.9 million in corporate and individual contributions, over 70% of which came

fiomjust thirteen donors according to IRS reports, and spent $26.4 million on nine television

advertisements in Arkansas, Florida, Iowa, Minnesota, Missouri, Nevada, New Hampshire,

Massachusetts, New Mexico, Ohio, Pennsylvania, Wisconsin and on national cable networks.

14. All of these advertisements praised George W. Bush’s leadership as

President and/or criticized Senator Kerry’s ability to provide similar leadership. Examples of

these television advertisements include:

Finish It

Audio: Announcer: These people want to kill us.

On screen: Images of Mohammed Atta, Osama bin Laden, Khalid Sheik Mohammed, Nick Berg’s killers and victims of terrorist attacks.

Audio: They killed hundreds of innocent children in Russia. Two hundred innocent commuters in Spain. And 3,000 innocent Americans.

On screen: Pictures showing 9/11 attack on Twin Towers and terrorist attacks in Russia and Spain.

Audio: John Kerry has a 30-year record of supporting cuts in defense and intelligence and endlessly changed positions on Iraq.

On screen: Still Picture of Kerry; 30 years of cuts in defense and intelligence.

-5-


I


33. The Commission concludes that PFA-VF spent virtually all of its money

on federal campaign activity. PFA-VF spent $26.4 million out of the $44.9 million it raised

before the 2004 General Election, or nearly 60%, on nine television advertisements run in swing

states that praised George Bush and were critical of John Kerry.

34. PFA-VF spent an additional $1.4 million on Spanish-language television

and radio advertisements in Nevada, New Mexico, and Florida promoting George W. Bush or

the Republican Party and $2.3 million on direct mailings, email communications, and Internet

banner advertisements promoting George Bush in “Ashley’s Story.”

35. PFA-VF also spent at least $20,000 on Internet banner advertisements that

attacked John Kerry.

36. During the entire 2004 election cycle, the only other disbursements made

by PFA-VF were for findraising, administrative costs, and consulting/professional fees.

PFA-VF made no disbursements in connection with state or local elections during the 2004

election cycle.

37. Respondent contends that it made its findraising communications with the

good faith belief that they did not constitute solicitations for contributions under 2 U.S.C.

.. 9 43 1 (8)(A)(i), and firther contends that the language used in its findraising solicitations did not

clearly indicate that the finds received would be targeted to the election or defeat of a specific

federal candidate. In addition, Respondent contends that it made the communications described

herein for the purpose of influencing the issues debate that was heightened during the 2004

Presidential election and with the good faith belief that they did not contain express advocacy

and mobilizing conservative voters. These activities provide the American people with the information they need to see through the misleading public policies and campaign themes of liberal politicians.” Id.

-13-



XII. This Conciliation Agreement constitutes the entire agreement between the parties

on the matters raised herein, and no other statement, promise, or agreement, either written or

oral, made by either party or by agents of either party, that is not contained in this written

agreement shall be enforceable.

FOR THE COMMISSION:

Lawrence H. Norton General Counsel

BY.:

. ,, Associate General Counsel for Enforcement

e . . 1

Date

-16-

I

I

I


Exhibit 7


FEDERAL ELECTION COMMISSION

Washington, DC 20463

April 19, 1996 CERTIFIED MAIL, RETURN RECEIPT REQUESTED ADVISORY OPINION 1996-3 Irwin Gostin The Breeden-Schmidt Foundation PO Box 711718 San Diego, California 92171-1718 Dear Mr. Gostin: This refers to your letters dated March 1 and January 9, 1996 and December 9, 1995, which request advice concerning application of the Federal Election Campaign Act of 1971, as amended ("the Act"), to the possible status of The Breeden- Schmidt Foundation ("the Foundation") as a political committee. You state that the Foundation was established in order to receive a testamentary distribution from Wilmer Breeden. Mr. Breeden left the funds to a friend, in trust, to be used for the purpose of advancing the principles of socialism. You state that since its formation, the Foundation has not solicited nor received funds from any other source. Its only receipts have been income on the investment of the "original charitable contribution" from the estate of Mr.Breeden.1

You explain that periodic distributions are made from Foundation assets for various purposes that its Board of Trustees deem to be in accordance with the principles of the Foundation's creation. The Foundation has made political contributions to Federal candidates in the past and proposes to continue making them, but wishes to know whether this action would cause the Foundation to become a political committee. If it does become a political committee, the Foundation inquires as to the requirements that govern its contributions in Federal elections. The term "political committee" means any committee, club, association, or other group of persons which receives contributions aggregating in excess of $1,000 during a calendar year, or which makes expenditures aggregating in excess of $1,000 during a calendar year. 2 U.S.C. 431(4)(A). The Commission notes, however, that when determining if an entity should be treated as a political committee, the standard used is whether the organization's major purpose is campaign activity; that is, making payments or donations to influence any election to public


office. See 26 U.S.C. 527(e)(1), (2); Advisory Opinions 1995-11 and 1994-25; and Akins v. Federal Election Commission, No. 92- 1864 (D.D.C. March 30, 1994). Appellate court judgment vacated- rehearing en banc granted, No. 94-5088 (D.C. Cir. Jan 26 1996). See also Federal Election Commission v. Massachusetts Citizens for Life, Inc. ("MCFL"), 479 U.S. 238, 262 (1986) (The Court stated that if MCFL's independent expenditures "become so extensive that the organization's major purpose may be regarded as campaign activity, the corporation would be classified as a political committee.") The declaration of trust under which the Foundation was created states that the funds of the Foundation are to be used to:

pay out such sums as contributions and subsidies and for conducting operations themselves to persons, entities and causes advancing the principles of Socialism and those causes related to Socialism. This shall include, but not be limited to, subsidizing publications, establishing and conducting reading rooms, supporting radio, television and the newspaper media and candidates for public office.

You also included information in your request regarding the number of political contributions that the Foundation has made since its formation. The approximate total amounts of various disbursements and political contributions for Federal elections for the years 1990 to 1995 are shown below. The percentages of contributions compared to all outlays is also stated

1990 1991 1992 1993 1994 1995 Total outlays 3,137 14,187 46,608 83,438 47,530 NA "Nonpolitical" donations and programs"3 1,347 12,688 16,878 38,415 19,900 25,500 Taxes/operating expenses 290 499 24,930 41,423 23,530 NA Contributions to State and local candidates 1,000 500 1,000 3,000 1,000 Contributions to Federal candidates 500 500 3,800 600 3,100 1,500 Total 1,500 1,000 4,800 3,600 4 ,100 1,500 contributions % of 48% 7% 10% 4% 9% NA4 total outlays


For the period from 1991 to 1994, the annual amount of the Foundation's political contributions both State and Federal varied from 7% to 10% of total distributions for each year. 5 In Congressional election years (1992 and 1994), the yearly contribution range was 10% and 9% of the total disbursements for the year. In other years, the variation was 7% and 4%. The highest contribution total in any one year was under $5,000 and for a longer six year period (1990 to 1995) contributions totaled $16,500 in Federal and State contributions. It is also relevant that the supporting documents, you provided, do not indicate that the Foundation's disbursements, other than its political contributions, are used in any way related to election campaigns. For example, the documents do not state that the Foundation publishes a newsletter or distributes other materials that feature candidates or Members of Congress. Furthermore, there is no indication that the Foundation attempts to recruit candidates for public office or solicit other personnel to assist as volunteers, or otherwise, in the campaigns of candidates for public office. 6

The pattern of the Foundation's contributions indicates that, while the declaration of trust empowers the Foundation to make political contributions, these have not been of a magnitude, either in absolute terms or in relation to total distributions, to be the Foundation's major purpose. Taking all these factors together, therefore, the Commission concludes that, in the specific circumstances presented in your request, the Foundation's activities would not cause it to be considered a political committee under the Act. The Commission cautions you that this conclusion is valid only insofar as the Foundation does not alter the recent pattern of its activities (including its disbursements).7

Although not explicitly asked in your request, your inquiry raises the issues of attribution of the contributions made by the Foundation. The Commission notes again that the Foundation is the successor in interest to the estate of Mr. Breeden and was created by a testamentary trust. Furthermore, the ability of the Foundation, through its trustees, to make contributions is explicitly limited by the purposes and conditions set forth by Mr. Breeden. In this respect, the situation of the Foundation is somewhat similar, though not identical, to contributions made by the testamentary estate of a decedent. See Advisory Opinions 1983-13, 1986-24, and 1988-8. In these opinions, because the Commission viewed the testamentary estate of a decedent as the successor legal entity to the testator, it applied the Act and its limits to the estate as the alter ego of the living testator. Applying that principle to the specific circumstances here, the Commission concludes that the contributions made by the Foundation should be attributed to the successor in interest to Mr. Breeden and his estate, the Foundation, rather than to the Foundation's trustees. The Commission expresses no opinion regarding any tax ramifications of the Foundation's proposed activities because these issues are not within its jurisdiction. This response constitutes an advisory opinion concerning the application of the Act, or regulations prescribed by the Commission, to the specific transaction or activity set forth in your request. See 2 U.S.C. 437f. . Sincerely, (signed)


Lee Ann Elliott Chairman Enclosures (AOs 1995-11, 1994-25, 1988-8, 1986-24 and 1983-13) 1 Your request states that the Foundation is unincorporated and is not a labor union. Furthermore, the trust documents included with your request state that the Foundation "is not intended to be a charitable trust for tax purposes, although the trustees may, if they unanimously determine, apply for such designation and tax status." 2 Other definitions, not applicable here, apply to separate segregated funds and local committees of political parties. See 2 U.S.C. 431(4)(B), (4)(C). 3 The organizations receiving donations from the Foundation include educational libraries and groups such as the American Civil Liberties Union. Your March 1st response indicates that funds were expended to help programs, meetings and conventions of the Democratic Socialists of America and the Communist Party. However, these groups according to public records did not nominate Federal candidates from 1992 to 1995. Information available to the commission also indicates that these organizations did not nominate state candidates during the same period of time. 4 In conversation with Commission staff, the secretary-treasurer of the Foundation indicated that while complete figures for 1995 were not yet available the amounts spent for administrative expenses and the total outlays of the Foundation would be similar to the 1994 amounts. 5 The Commission notes that the in 1990 political contributions formed 48% of all outlays. However, this statistic is not viewed as significant as it occurred in the initial year of the Foundation's establishment when outlays were, in absolute terms, small compared with subsequent years and the Foundation's disbursement programs were not yet fully developed. 6 The documents also do not indicate that the Foundation sponsors events where candidates appear to speak about campaign issues. 7 Insofar as the activity of the Foundation is to make disbursements, the analysis of its activities has focused on the political contributions the Foundation has made and their relationship to other disbursements. A more extensive and different analysis would be required for other types of organizations, especially for those that promote volunteer activities on public policy issues.


Exhibit 8


FEDERAL ELECTION COMMISSION WASHINGTON, D.C. 20463


IntheMatterof ) ) MUR 6396

^ Crossroads Grassroots Policy Strategies ) IS.

CD CD STATEMENT OF REASONS OF [JJ CHAIRMAN LEE E. GOODMAN AND ^ COMMISSIONERS CAROLINE C. HUNTER AND MATTHEW S. PETERSEN

CD ^ In this matter we must determine if Crossroads Grassroots Policy Strategies

("Crossroads GPS" or "Respondent")! a social welfare organization exempt from taxation under section SO I (c)(4) of the Intemal Revenue Code that made independent expenditures in connection with federal elections in 2010, is a "political committee" under the Federal Election Campaign Act of 1971, as amended ("the Act"). In considering this question, we must heed the limiting constructions that courts have placed on the definition of "political committee"—circumscriptions premised on respect for the First Amendment rights of citizens to associate and speak on political issues and policy.

The agency's controlling statute and court decisions stretching back nearly forty years properly tailor the applicability of campaign fmance laws to protect non-profit issue advocacy groups— both large and small— from burdensome political committee registration and reporting requirements. Such groups are afforded substantial room to discuss the issues they deem salient and even to advocate the election of candidates of their choosing as long as their major purpose is not the nomination or election of federal candidates.'

Under the Commission's case-by-case approach for determining political committee status j Crossroads GPS's major purpose was not the nomination or election of a federal candidate. Rather, its public statements, organizational documents, and overall spending history objectively indicate that the organization's major purpose has been, and continues to be, issue advocacy and grassroots lobbying and organizing.

' As the Supreme Court has explained, "the distinction between discussion of issues and candidates and advocacy of election or defeat of candidates may often dissolve in practical application. Candidates, especially incumbents, are intimately tied to public issues involving legislative proposals and governmental actions. Not only do candidates campaign on the basis of their positions on various issues, but campaigns themselves generate issues of public interest." Buckley v. Valeo, 424 U.S. 1,42 (1976).


Statement of Reasons in MUR 6396 Page 28 of 29

IV. Conclusion

For the above reasons, we voted against the recommendations of the First General Counsel's Report in MUR 6396."^ Given the facts before us. Crossroads GPS was not required to register with the Commission and file reports with the Commission as a political committee.

rs

Qt Q m m

o H

We also note that the Commission maintains broad discretion to dismiss matters as our decisions not to enforce "often involve[] a complicated balancing of a number of factors which are peculiarly within [our] expertise." Heckler v. Chaney, 470 U.S. 821, 831 (1985). For various reasons, including OGC's introduction of new legal theories tiiat attempt to expand the universe of an organization's communications while contracting the period of time for evaluating an organization's spending for that analysis — neither of which were properly noticed, we believe that discretion could properly be applied here.


Statement of Reasons in MUR 6396 Page 29 of 29

00 cn Ql O

LEE E. GOODMAl Chairnian

CAROLINE C. HUNTER Date Commissioner

MATTHSEW Commissioner


Exhibit 9


FEDERAL ELECTION COMMISSION WASHINGTON. D.C. 20463


In the Matters of ) ) MUR 6391 &MUR 6471

Commission on Hope, Growth & ) Opportunity )

STATEMENT OF REASONS OF VICE CHAIRMAN STEVEN T. WALTHER

I. Introduction

Two administrative complaints were filed against the Commission on Hope, Growth & Opportunity ("CHGO"), a District of Columbia non-profit association formed on March 31, 2010 and organized under section 501(c)(4) of the Internal Revenue Code. The first complaint ("DCCC Complaint") was filed on October 7, 2010, by the Democratic Congressional Campaign Committee ("DCCC") and is referenced as Matter Under Review ("MUR") 6391.' The second complaint ("CREW Complaint") was filed on May 23, 2011, and amended ("CREW Amended Complaint") on April 26, 2012 by Citizens for Responsibility and Ethics in Washington ("CREW") and its former Executive Director, Melanie Sloan, and is referenced as MUR 6471.^ The complaints alleged that CHGO violated the Federal Election Campaign Act ("FECA" or the "Act") by (I) failing to properly report its spending on election-related communications, (2) failing to include proper disclaimers on them, and (3) failing to organize, register and report as a political committee.

DCCC alleged that CHGO violated the Act by spending over $600,000 in the 2010 elections to air several advertisements that were either independent expenditures or electioneering communications, and that CHGO failed to report the advertisements and failed to include proper disclaimers.

CREW alleged that CHGO violated the Act by spending over $2.3 million in the 2010 elections to broadcast fifteen advertisements in twelve Congressional races, and that the

' DCCC's FEC complaint is available at http.V/eqs.fec.gov/eqsdocsMUR/l 5044380002.pdf.

^ The CREW Complaint and the CREW Amended Complaint are available at. http://eqs.fec.gOv/eqsdocsMUR/lS044380186.pdf and http://eqs.fec.gov/eqsdocsMUR/15044380263.pdf.

' See 52 U.S.C. § 30102 ("Organization of political committees"), 52 U.S.C. § 30103 ("Registration of political committees") and 52 U.S.C. § 30104 ("Reporting requirements").


MUR 6391 & MUR 6471 (Commission on Hope, Growth & Opportunity) Statement of Reasons of Vice Chairman Steven T. Walther

report as a political committee.'' Regarding the examination of CHGO's "major purpose," it was arbitrary and capricious - and therefore contrary to law - for the Controlling Group to consider and rely upon, for purposes of determining whether to find reason to believe, only an organization's spending on express advocacy in relation to its other spending. The Commission itself has never limited a major purpose to express advocacy communications; indeed, such a narrow focus would effectively eviscerate the statutory test for political committee status, which is triggered when a group receives "contributions" or makes "expenditures" aggregating in excess of $1,000 during a calendar year - since the Commission has consistently interpreted the term "expenditures" to include communications that contain "express advocacy."" The Commission's view that the required major purpose test is not limited solely to communications that contain express advocacy (or its functional equivalent) has been upheld by every court that has reviewed the Commission's case-by-case approach in its 2007 E&J."

OGC went far beyond the call of duty in this case (and what is legally required) by ultimately determining, as part of its investigation of the apparent reporting violation (for which the Controlling Group voted along with the three other Commissioners to authorize an investigation), the precise level of express advocacy spending in proportion to CHGO's total spending. OGC calculated in GCR #3 that CHGO's express advocacy spending amounted to a staggering 61% of its $4.8 million in total spending.

4 The Controlling Group's conclusory dismissal - without explanation - of OGC's express advocacy spending calculation easily meets the "arbitrary and capricious" standard of review. Further, it is not a reasonable justification to vote against finding reason to believe by pointing to factors such as the statute of limitations and the respondent's financial condition, particularly considering that the Controlling Group voted against OGC's reason to believe recommendations more than a year earlier. Although time was running short when the Controlling Group voted against OGC's political committee status recommendations the second time, it was premature to assume - as the Controlling Group appears to have done - that the Commission's enforcement options were completely foreclosed. For example, if the court were to reject the Controlling

" As noted above, OGC stated in GCR #3 that CHGO spent 52,933,631.34 on the production and placement of express advocacy advertisements, which amounted to 61% of its confirmed total of 54,801,000 that it spent over the entire course of its organizational lifetime. OGC further stated that:

We have determined that, under any analysis, CHGO's expenditures reflect that express advocacy was a major purpose of the group - even when resolving any doubts regarding the purpose of the unused funds in favor of CHGO. For instance, if we were to remove from both the express advocacy expenditures and the total expenditures calculations of the amounts of the unused CHGO funds that, according to Mihalke, Reed distributed to Berman and himself to cover fundraising costs, it appears that CHGO's express advocacy spending amounted to 76% of its total of 53,864,906 that it spent over the course of its organizational lifetime.

GCR #3 at 19 (emphasis added).

" See 52 U.S.C. §§ 30101(4)(A) and (17)(A).

" See Free Speech v. FEC, 720 F.3d 788,798 (10th Cir. 2013), cert, denied, 134 S.Ct. 2288 (May 19, 2014); Real Truth About Abortion. Inc. v. FEC, 681 F.3d 544, 556 (4th Cir. 2012), cert, denied, 133 S.Ct. 841 (2013); Shays v. FEC, 511 F. Supp. 2d 19,29-31 (D.D.C. 2007).

Page 15 of 18



Group's rationale and deem the Commission's dismissal as contrary to law, the Commission could then find reason to believe and attempt to conciliate with CHGO through its officers, who have been previously identified and contacted by OGC.

The Controlling Group suggests that further pursuit of CHGO would be an exercise in futility, but since the Commission deadlocked on whether to take appropriate enforcement action (which would include a formal investigation) on CHGO's political committee status, there is no way of knowing the outcome. While a respondent's financial condition or legal status has never served as a bar to Commission enforcement,the Commission may consider such factors and exercise appropriate flexibility during conciliation negotiations. In fact, in 2014, the Controlling Group voted to accept a negotiated settlement with a dissolved non-profit corporation that failed to report its electioneering communications, even though that corporation's resources were severely limited.The non-profit corporation ultimately agreed to pay a small penalty, admit to the violations, and to file all of its required electioneering communication reports.^^

Even if CHGO paid no civil penalty, it may have been possible, for example, to obtain a settlement that would have required it to register with the Commission and file all applicable reports.^' That information would be disclosed too late to have any impact on the 2010 elections

^ On December 27,2013, OGC submined GCR #I to the Commission, which included a link to CHGO's 2011 Form 990 in fn. 7. Footnote 7 of GCR #1 states as follows:

It does not appear that CHGO conducted activities after 2010, as its 2011 tax return reported only $31,000 in expenditures for website maintenance, accounting and legal fees, and compensation to its President and Executive Director. Form 990- Return of Organization Exempt from Income Tax (May 4, 2012), available at http://www.guidestar.org/FinDocuments/201 1/271/920/20 11-27 1 920168-08862c6f-90.pdf.

Although that form listed CHGO's status as "terminated" and stated that CHGO had no remaining assets, there is no way of knowing whether the financial contentions set forth in that form were accurate. Also, the information the Controlling Group belatedly relied upon was the termination statement in CHGO's 2011 Form 990, but that information was made part of the record by OGC on December 27, 2013, as noted. In the intervening time, the Controlling Group voted to find RTB against CHGO (on September 16,2014) even though CHGO was ostensibly terminated and had no money, according to its 2011 IRS form (see Attachment C). If termination was a valid factor - and it was not - it would have been just as valid at the time the Controlling Group voted to find RTB.

" MUR 6413 (Taxpayer Network), file available at http://eqs.fec.gov/eqs/searcheqs?SUBMIT=summary&key=2.

^ In MUR 6413 (Taxpayer Network), the final settlement agreement included the following language:

In ordinary circumstances, the Commission would seek a substantially higher civil penalty based on the violations outlined in this agreement. However, the Commission is taking into account the &ct that Taxpayer Network is a dissolved corporation that represents that it has limited funds and no ability to raise additional funds. Respondent will pay a civil penalty to the Commission in the amount of $5,000, pursuant to 2 U.S.C. § 437g(a)(5)(A).

See Conciliation Agreement in MUR 6413 (Taxpayer Network), dated May 16, 2014, available at http://eqs.fec.gov/eqsdocsMUR/14044353947.pdf.

" Although the federal statute of limitations provision at 28 U.S.C. § 2462 may affect the Commission's ability to obtain civil penalties, it does not foreclose the Commission from seeking equitable relief:

Page 16 of 18


MUR 6391 & MUR 6471 (Commission on Hope, Growth & Opportunity) •Statement of Reasons of Vice Chairman Steven T. Walther

that CHGO sought to influence; however, such disclosure would at least provide a complete public record of CHGO's spending and its sources of financial support. Ultimately, if CHGO failed to file the required reports, the Commission could seek relief in federal court, regardless of the statute of limitations.^* Approving a finding on political committee status would demonstrate that the reason to believe standard concerning this important issue has not been eviscerated and could serve as important public guidance on this issue.

III. CONCLUSION

What separates this case from a typical political committee case is that CHGO has never publicly disclosed any of its spending to the Commission at any time and has never publicly disclosed any information about the sources of its funding, thereby frustrating the public's right to know about the group's spending and funding in connection with federal elections.

In this case, assuming CHGO's 2010 and 2011 tax returns are accurate (see Attachments B and C), CHGO was an entity that was active only during the last (9) months of an election year. All of its funds - except for $31,000 listed on its 2011 tax return - were raised and spent between March 31, 2010 (the date of its formation) and December 31, 2010 (the last day of the 2010 IRS reporting period). Because its only activity appears to have been airing express advocacy and electioneering communications in the months leading up the 2010 general election, all of its contributions and disbursements of over $4.8 million dollars appear to have been directly connected to those advertisements.

Despite its lofty purposes as provided to the IRS (e.g., that CHGO was "created to advance the principle that sustained and expanding growth is central to America's economic future and the well-being of all Americans"),^' the uncontroverted facts show that it was created solely to influence the outcome of federal elections and had no other purpose.

OGC went to great lengths to provide information and analysis to cover all of the various arguments that had been raised on how to analyze political committee status, even though only one was necessary. And OGC concluded by stating in GCR #3 that "under any analysis," it would recommend finding RTB that CHGO may have violated the Act. Because OGC was in the midst of winding up its investigation regarding CHGO's expenditures, the matter was held over twice for short periods with my support; however, in my view, in each instance that the matter came before the Commission, and under any analysis, it was appropriate for the

Except as otherwise provided by Act of Congress, an action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise, shall not be entertained unless commenced within five years from the date when the claim first accrued if, within the same period, the offender or the property is found within the United States in order that proper service may be made thereon.

See, e.g., U.S. v. Banks, 115 F.3d 916 (11"" Cir. 1997) (statute of limitations cannot bar the government's equitable clams under 28 U.S.C. § 2462 when the government is acting in its official enforcement capacity).

" See Attachment A.

Page 17 of 18



Commission to find RTB. The evidence was ultimately conclusive that no other finding was reasonable.

Once CHGO learned that it was the subject of multiple PEG complaints, it quickly (within 18 days) filed its termination report with the IRS. If CHGO's termination report effectively allowed it to dissolve itself and drain its remaining cash assets, this method may become a preferred strategy for any fly-by-night group that - although in existence for a very short period - may exert a large influence on the political process without registering as a political committee with the Commission.

If the court does not find the Commission's failure to find RTB in this matter to be contrary to law, it will be very difficult, I fear, for the EEC to ever be able to effectively enforce issues on finding political committee status - and the reporting value - the right of the voter to be informed - will not be vindicated.

The uncontroverted facts of this matter compel a finding of reason to believe that FECA violations may have occurred in connection with CHGO's alleged political committee status, and any vote against the recommendations was not rationally based, and thus contrary to law. Accordingly, I believe the court should reject the rationale of the Controlling Group SCR as arbitrary and capricious, and therefore contrary to law; if the court agrees, it should remand this matter to the Commission for appropriate proceedings.

For the foregoing reasons, I voted twice to approve the General Counsel's recommendations to find reason to believe that CHGO may have violated the Act by failing to organize, register, and report as a political committee as required by the Act.

Date Steven T. Walther Vice Chairman

Page 18 of 18
