Federal Election Commission

Public Hearing on Agency Practices and Procedures January 14-15, 2009

Wednesday, January 14, 2009 P R O C E E D I N G S current commissioner, Ellen Weintraub. The comments received during the 2003 9th Floor Meeting Room CHAIRMAN WALTHER: Good review were considered by the Commission 999 E Street, N.W. morning. The special session of the and as a result, the Commission adopted a Washington, DC 20463 Federal Election Commission for number of new policies and procedures, Wednesday, January 14 and Thursday some of which are referenced in the COMMISSION MEMBERS: January 15, 2009, will please come to Federal Register Notice for this hearing. order. I'd like to welcome everyone to this We are here today to continue that STEVEN T. WALTHER, Chairman hearing on the Commission's policies, process, asking once again for feedback on MATTHEW S. PETERSEN, Vice practices and procedures. how we have been fulfilling our mission Chairman I'm Steve Walther, Chairman of and more importantly, how we can improve CYNTHIA L. BAUERLY, Commissioner the Commission. I will begin by it going forward. The three basic questions CAROLINE C. HUNTER, Commissioner introducing my colleagues at the table. for which we seek answers are, how can we ELLEN L. WEINTRAUB, Commissioner On my left is Vice Chairman Matt make our process more transparent? How DONALD F. McGAHN II, Commissioner Petersen. On my right is Commissioner can we make it more fair? And how can Cindy Bauerly. Further on the left is we make it more efficient? ALSO PRESENT: Commissioner Caroline Hunter and further This hearing invites comment on on the right is Commissioner Ellen the broadest scope of Commission THOMASENIA P. DUNCAN, General Weintraub, who presided over our hearing activities since its inception over 30 years Counsel in 2003 when she was Chair of the ago. It is fitting that we do this now. The ANN MARIE TERZAKEN, Associate Commission. On the far left, or far right, Commission has the benefit of realizing General Counsel for Enforcement however you want to look at it, is the how helpful a hearing can be from its JOSEPH F. STOLTZ, Acting Staff immediate past chair, Commissioner Don previous experience in 2003. Director McGahn. But much has changed since then. Also sitting with us on the right, With the passage of the Bipartisan WITNESSES: the far right, is General Counsel Tommie Campaign Reform Act, the passage of the JAN WITOLD BARAN, Wiley Rein, LLP Duncan, and on her left is Ann Marie Honest Leadership and Openness in ROBERT F. BAUER, Perkins Coie, LLP Terzaken, from our Office of General Government Act, the advent of new uses of JAMES BOPP, JR., James Madison Center Counsel. And on my far left is Joseph the Internet and new ways of funding for Free Speech Stoltz, who is our Acting Staff Director. campaigns, and the welcome explosion in JOSEPH M. BIRKENSTOCK, Caplin & The issues we are discussing the number of contributors, we must Drysdale today were included in a notice of public constantly look at new ways to ensure our DAVID M. MASON, Former FEC hearing and request for comments mission is being fulfilled. Chairman published in the Federal Register on The fact that we have the most SCOTT E. THOMAS, Dickstein Shapiro, Monday, December 8, 2008. The notice new Commissioners at one time since the LLP; Former FEC Chairman was signed by our immediate past formation of the FEC is further reason to MARC E. ELIAS, Perkins Coie, LLP chairman, Don McGahn, who is a strong take a fresh look at all our operating WILLIAM J. McGINLEY, Patton Boggs, supporter of this initiative. components from A to Z. This is the start LLP The Commission plays a unique of such a process. HANS A.von SPAKOVSKY, Former role in administering and enforcing the In addition to this exercise by Commissioner federal campaign finance laws and is which we hear from the public, I have BRIAN G. SVOBODA, Perkins Coie, LLP considering this review -- conducting this asked Mr. Stoltz and Ms. Duncan to review LAURENCE E. GOLD, Lichtman Trister review to consider issues that require our internal procedures in the areas of their & Ross, PLLC, AFL- CIO reexamination or adaptation of our policies, respective jurisdictions within the agency ROBERT K. KELNER, Covington & practices and procedures. so that we will contemporaneously have Burling, LLP This hearing is the second of its the benefit of our internal expertise on how kind. The Commission conducted a similar to improve this agency. They readily review of its procedures in 2003, although agreed to do so and have already narrower in scope. That particular hearing undertaken to form internal committees to was conducted, as I mentioned, by our accomplish a complete review of our

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) procedures. This will be done in time for are those of the Commissioners and the that proceeding, and there is an element of consideration as part of this proceeding. Commissioners alone, not those of the familiarity. We appreciate all of the people staff. They operate at the direction of the I remember there was a topic of who took the time and effort to comment Commissioners and we take total how respondents should be designated and particularly those of you who are responsibility for our operation. I ask your when a complaint is received, whether the appearing here today as witnesses to give comments today will take that into complaint should be distributed to anybody us the benefit of your expertise and consideration. whose name was mentioned in the experience. We are aware the timing of I would like to describe briefly the complaint at all or whether they ought to be this initiative has been inconvenient for format we will be following today and a little more focused. Of course, as a result some and appreciate very much the time tomorrow. We expect a total of 16 of those hearings, the Commission did you have taken to be here today. It will witnesses who have been divided into six adopt a new procedure focusing on who make a difference. panels. Each panel will have five to ten would be receiving a copy of the In consideration of the issues of minutes to make an opening statement. We complaint. hardship and inconvenience, and to be have a light system at the witness table to Also six years ago, we talked assured we will be able to receive input help keep track of your time, but we will about whether there ought to be from those who were unable to participate not use it unless our internal discipline opportunities for hearings before this because of the holidays, I am asking for a breaks down. agency, particularly with respect to re-opening of the time for written comment The balance of the time is probable cause proceedings and the until midnight Wednesday, February 18, reserved for questioning by the Commission, in my opinion, wisely 2009. This will allow the commenters to Commissioners, our General Counsel and decided to experiment with that and has have the benefit of the written comments our staff director. It is our hope that the adopted procedures for opportunities for received so far and an opportunity to panelists will have roughly an equal probable cause hearings. review the transcript of these proceedings, amount of time to provide their views. We A third topic that was discussed which should be on our website by January have a busy day ahead of us and appreciate six years ago was whether to allow motions 30. everyone's cooperation in helping us stay and if so, under what circumstances, and I So without objection from my on schedule. see that that topic is covered again in the colleagues, I will ask the Office of General And with that, once again, I'd like Federal Notice for this hearing. As we Counsel to prepare a notice to that effect to to welcome you. Thanks for being here. urged the Commission then and urge again be placed in the Federal Register as soon as I'd like to introduce our first panel, today, there ought to be opportunities for possible. Jan Baran, Robert Bauer and James Bopp, motions to be filed before the agency. We have already received pointed Jr. Again, thanks for being here. We will Finally, even six years ago, we criticism and strong suggestions in written begin alphabetically with Mr. Baran. had discussions about access to the comments that precede this hearing and we MR. BARAN: Thank you, Mr. depositions and document production in the will hear more of the same today, as we Chairman, and good morning, course of investigations and allowing should, and we ask that no quarter be Commissioners and Counsel and Mr. respondents to have access to the material given. We also accept favorable comment Stoltz, who I remember from my brief that the Counsel’s office would be relying whenever possible. I note that some was tenure here at the Commission back in the on for any recommendations for probable given, for which we express appreciation. Stone Age. It's always been an honor to cause. However, as we go forward today, have worked at the Commission, There has been progress in that let me note at the outset my view, one that I particularly in the formative stages of the area. I know that there's more access to am confident is shared by all the agency. deposition transcripts today than there was Commissioners. We have the benefit of I would like to acknowledge the then. the most loyal, dedicated and professional presence of one of my partners, Carol A lot of the proceedings six years staff members that any agency could ask Laham, who also worked here at the ago did focus also on a series of for. There are people here who have been Federal Election Commission and is part of recommendations that were promulgated at the Commission their entire professional the Wiley Rein Election Law and by the American Bar Association in 1982. lives, ever since the days of the inception Government Ethics Group, which -- which Some of those may be a little outdated, of this agency, such as Joe Stoltz. Also submitted the comments in this proceeding. may not be relevant, but I urge the Scott Thomas, who only recently left the As some of you may know, for me Commission just to take a look at some of agency, is here today to help improve the this is déjà vu not only having worked here, those issues that were addressed by the Commission. Mary Dove, our Commission but also having testified on the subject ABA Section of Administrative Law, secretary, has been here for many years, matter six years ago when Commissioner which I note at that time was chaired by a but we are not counting them. Weintraub was chairing the proceedings. then relatively obscure law professor by the They love this agency. Any As part of that, I sort of reviewed what I name of Antonin Scalia, and it was his criticism, many of which are well deserved, said then, what subjects were covered in group that approved those or shortcomings, of which there are many, recommendations.

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009)

Our purpose is today, I don't want before you is that at the end of the day, the the Congress, they find especially hard to repeat, we've already submitted in our viability of the campaign finance regime, delivered to it by the hand of written comments. But I look forward to the sustainability of the regime for reasons administrators. discussing those and answering any that I'll just very briefly mention, really And when I say filling-in, I'm not questions that any of the Commissioners depends on very rich procedural talking only about law being made by may have on them. But we did try to protections and that it will enhance the rulemaking. I'm talking about, frankly, the repeat some of our recommendations and Commission's enforcement effort to have de facto rulemaking that takes place in the improve on those and also focus on some those protections in place. enforcement process and in the advisory of the additional topics that were raised in I received some e-mail traffic, opinion process, and some would say the notice, particularly with respect to the because on my site I posted some elsewhere in the operation of the agency. Reports Analysis Division. commentary about this proceeding and This filling-in takes place in areas of I look forward to your questions. some of the comments that have been filed considerable sensitivity to the political Thank you. with the Commission. I've received some process: fundraising and get-out-the-vote CHAIRMAN WALTHER: Thank e-mail traffic suggesting that by arguing activity and issue advertising and so forth. you, Mr. Baran. Mr. Bauer? due process issues, defense counsel come And so there is a natural resistance MR. BAUER: I'm not quite sure in here essentially with the view that they that develops to having the agency starting how this works. I'm trying to -- the can hobble the Commission's enforcement to move beyond what people believe the microphone. mission, that everything here is sort of a statute on its face or the regulations on Thank you very much. I plot to make it impossible for you to put their face plainly prescribe and expand the appreciate the opportunity to testify. As our clients away for life, which some reach of the law into these delicate areas of you know, our group, the Political Law people believe they richly deserve. And political activity. Group at Perkins Coie, filed comments, that is -- The only way to make that detailed comments and I want to make a MR. BARAN: Your clients. bearable, if you will, and I think that really few preliminary remarks that are not MR. BAUER: Well, your clients the future viability of campaign finance duplicative, that don't go over the same too, frankly. regulation depends upon it, is for the material that you have before you in (Laughter.) agency to have a set of procedures, writing. MR. BAUER: My clients only do procedural protections, transparency First of all, I want to thank the the things that your clients have blazed a protections, and due process protections Commission for holding this hearing, trail on. that I think will ultimately make it much commend the Commission and the staff for (Laughter.) easier for that filling-in process to take working hard on these issues. I note that MR. BAUER: The pioneer law place and be accepted by the regulated the agenda has been -- the witnesses have breaker on my left here. And the person community and help the statute both grow been carefully and the panel carefully who then couches a defense in First and at the same time grow in a fashion that organized by age in descending order. I am Amendment terms on my right. people believe to be fair and orderly. So I here on behalf of the three grumpy old men In any event, the long and short of don't see a conflict between the filling-in to talk about our extensive experience with it is, the agency finds itself in this difficult activity on the one hand and the due these issues that are before the agency. position where it's an administrative agency process concerns that are so pronounced in But I did want to make a few like any other which tries to fill in the gap. this proceeding before you on the other. general remarks that are not reflected in the It takes a congressional enactment and then There is one piece of this in partner submission on behalf of the it applies it and stretches it and expands it particular I just wanted to address in Political Law Group. What I wanted to do as new facts and circumstances develop closing, which is the piece of due process was to try to address the view that and new forms of conduct emerge in the argument and the reaction to it that centers somehow there is a tension here, sort of a political process. on the risk of delay. Very often what you fatal tension between, on the one hand, But that's what makes this such a hear is that everything defense counsel enforcement, and on the other hand, this delicate task, because as we all know, comes before you and asks for, you know, sort of procedural reforms and due process campaign finance enactments really take hearings and additional extensions of time, concerns that dominate so much of the place by wide consensus. There are always and the opportunity to file motions and commentary before the Commission in this significant partisan and ideological whatever, means that wrongdoing gets proceeding. divisions in the enactment of campaign punished late. It seems to me that that is -- has to finance reforms because they touch so There is obviously in some places be seen in a different perspective, which is actively a political nerve. a tremendous hunger to see campaign to say, I do not believe that the So the administrative filling-in finance violations, if they are perceived to Commission faces a stark choice between process is necessarily contentious and it's be occurring, addressed immediately, if effective enforcement on the one hand and particularly contentious because that which possible in the same cycle they're plentiful due process protections on the the regulatory community finds hard occurring, so that those who engage in this other. In fact, the view that I'd like to put enough being delivered to it by the hand of

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) conduct don't wind up getting away, if you testimony regarding how this agency may Commission's investigation and ultimate will, with regulatory murder. better serve its important function. prosecution of the Christian Coalition in a I think that that is a mistake in Introspection is often not easy and case culminating in 1999, which during the view of what this agency can accomplish. some people interpret it as hey, come and investigation stage and ultimately the To the extent that the agency has been criticize us. I don't look at it that way. I litigation stage, involved 81 depositions successful and the statute has been see us as trying to help you with an ranging from Ralph Reed, who was successfully administered, it is because important -- important job and we executive director of the Christian over time in the aggregate with cumulative appreciate the opportunity. Coalition, his temporary secretary, to the impact, the decisions that the agency has I'd like to start with first then past-President of the United States, taken in a variety of areas, including principles, not to disappoint Bob Bauer, and frankly, everyone in between. through this filling-in process, has taken and that is, this agency operates within the There's no question that -- and of hold in the regulated community and has context of the First Amendment, which course, ultimately the result was served to mold compliance behavior. says Congress shall make no law abridging vindication of the Coalition in court. So in It may be that every now and then the freedom of speech and association and that case is a stark example of how the there is some pioneering scofflaw that you press and the right as citizens to petition procedure itself is punishment. have to chase and you catch up with the the government. I think derived from these first scofflaw late and the penalties that you Much of that activity is subject to principles, a couple of operating principles, assess strike people as being too small, but regulation under the Federal Election if you will, one is the Commission should you will have made your point. You have Campaign Act and, of course, the courts apply the law only in the most compelling marked the ground. You will have have made clear that in order to subject that circumstances, and secondly, that they changed the calculus, if you will, by which activity to regulation, it requires a should take every effort to relieve the actors make choices about what they can or compelling justification. So regulation is regulatory burden of the process in which cannot do, and it does mean that, in the the exception, not the rule, under the First the Commission subjects the people in aggregate over time, the enforcement Amendment and so I think terminology seeking to enforce the law. behavior, the enforcement program of the such as regulated community or the FEC Now let me comment on agency does, I think, become an effective regulations permit speech or assembly or investigations, rulemakings and motions. one. petitioning the government reflect a First, investigation. What I found is that So yes, a process with oral mindset that is not in accordance with the there is a culture in the General Counsel’s hearings and motions and sort of more First Amendment and the law as the office that they take the decision of the flexibility, the extensions of time and a Constitution requires this agency to Commission to find "reason to believe" variety of things that you see before them, conduct itself. seriously, not as an institution of an will mean more time built in for the Now it is true that we got off track investigation, but as a mandate for the resolution of cases. But getting it right and with McCain-Feingold. Ninety pages of General Counsel’s office now to prove that then ultimately making the decision that statutes, 1,000 pages of FEC regulations a violation has in fact taken place. you make, will mean the regulated and their justifications, much of which was They also may approach these community you're addressing will accept it upheld in McConnell, suggests -- it might matters with a certain preconceived idea more. There will be less confrontation suggest that the regulated community and about a set of facts that they believe with the agency, more acceptance of the the Commission permitting certain speech occurred in the circumstance and they set mission and over time, the rules that you may be more in accord with what the court about to prove that those facts actually did articulate, the legal standards that you are is looking for at this situation. occur. It seems to me the proper mindset sort of broadcasting to the community and I mean those were the sort of of people who have been asked by this making known, will have an impact on the glory days of the regulators. Well, I think Commission to investigate potential conduct of political actors. the court is getting back on track with a violations of the law is not to act as a Those are my few opening faithful interpretation of the First prosecutor during the investigation so you remarks and with that I close and thank you Amendment and the cases Randall v. can prove a preconceived set of facts, but again for having us. Sorell, Wisconsin Right to Life v. FEC and should be seeking out the truth as to what CHAIRMAN WALTHER: Thank Davis v. FEC. One of the statements that I actually occurred and then apply the law to you very much. Mr. Bopp. Thank you for think should be a watchword for this those -- to that discovered -- those coming as far as you did and glad you Commission and for the discovered facts. could be here today. way we look at campaign finance I think this will enhance the ability MR. BOPP: Thank you very regulation is a statement by Chief Justice of the Commission to actually find actual much, Mr. Chairman, Commissioners. I Roberts that "the tie goes to the speaker" in violations of the law while at the same time appreciate the opportunity to testify today this regime of the First Amendment. relieving the regulatory burden on those and I also particularly appreciate your Now in addition, we need to falsely accused and of course, we all know willingness to consider comments and recognize that procedure is punishment. that in -- there's a chapter in every The classic example, of course, is this candidate's manual on how to conduct your

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) campaign, which is when to file your Second is that the only way that the rules that govern this Commission, if federal election complaint and how to get this Commission can adopt a rule of law is three members decide they're not going to the maximum advantage by the accusation. by rulemaking. Of course, 437f(b) enforce a particular enforcement, a policy So the Commission is often being provides that "any rule of law which is not that has been enforced in the past, it's -- attempted to be used for partisan political stated in this Act or in Chapter 95, or changed, and that's perfectly appropriate -- purposes to win elections during a Chapter 96, of Title 26 may be initially CHAIRMAN WALTHER: Mr. campaign and as a result, many of these proposed by the Commission only as a rule Bopp, you're a little over the 10-minute -- accusations are simply political posturing or regulation pursuant to the procedures MR. BOPP: Okay, can I have one and the Commission needs to approach that established in Section 438(d) of this title. more minute? with the understanding that that is Now looking at many of the CHAIRMAN WALTHER: Of something that may very well occur. writings of the Commission, you would not course, sure. The second thing is rulemaking. know that, of course, is part of the law that MR. BOPP: Thank you. Now here I think the Commission needs to binds this Commission, because the CHAIRMAN WALTHER: take the current state of the law seriously Commission is often through various Anybody that comes from Indiana -- and I think there have certainly been mechanisms citing as if they are, you MR. BOPP: Thank you for your examples where the Commission -- and know, court precedents: advisory opinions; indulgence. So there was nothing improper there seems to be in fact, I would say, a conciliation agreements; statements of or untoward in a change in enforcement of mindset of the Commission historically -- reasons; Office of General Counsel reports; policy that some Commissioners who have I'm not saying this Commission, but the as if they establish rules of law that are the authority to do so have in fact Commission historically -- which is to precedent in future -- in future implemented. always expand its jurisdiction, to always considerations of the Commission, and But the criticism really should take court cases to -- as another opportunity nothing could be further from the truth. have been directed at the failure of this to expand the jurisdiction, prepared to rest None of those are law. None of Commission to adopt PAC regulations. In the FEC regulations on the slimmest reed those are precedent. None of those other words, that was the thing that should of possible constitutional justification. establish law that binds anyone, including have happened. If this Commission had A classic example, of course, is those who want to exercise their First adopted -- and this is one of the few times I 100.22(b), which has been struck down by Amendment free speech rights. agree with the regulators, because the the 4th Circuit and the 1st Circuit and the Now it is true that it is appropriate Shays lawsuit was trying to get the Southern District in New York. The to cite an advisory opinion when we're Commission to adopt regulations in this Commission in dealing with those cases considering -- considering one to cite a area -- that would have been the proper said well, we won't enforce it in the 1st previous one and say well, the facts -- are way to establish an enforcement policy, Circuit and the 4th Circuit and the Southern the facts similar enough that we have would have been by establishing District of New York, relying upon, of already created a safe harbor for this set of regulations. course, a 9th Circuit decision, Furgatch v. facts? But -- or are the facts sufficiently Then of course those regulations FEC, which you now decide to apply different that we have a new question would have bound all Commissioners to throughout the United States. before the Commission? Because that's all apply until changed. So I consider that a I mean, I wonder why -- wasn't it AOs do is if the facts are materially good example of the Commission’s that they -- the 9th Circuit decision in identical, you've created a safe harbor that thinking or at least some Commissioners’ Furgatch was treated as only the law in the other people can rely upon. But it states no thinking that rules of law have been 9th Circuit as opposed to historically. And rules. established by conciliation agreements, by then, of course, that error was compounded Now also in this regard, recent enforcement policies, rather than rely on when the 9th Circuit itself explained in Statements of Reasons I think misdirected rulemaking, which I think needs to be California Pro-Life Council that Furgatch criticism, and the criticism was directed at done. required "explicit words" of advocacy of some members of the Commission who So I'll defer other comments and I election or defeat, which the Commission apparently have voted not to, in the appreciate the opportunity to speak. just has treated as a non-case. Statements of Reasons opinions, to CHAIRMAN WALTHER: Thank I mean, you have the 9th Circuit continue to apply the enforcement policy you very much, Mr. Bopp. We appreciate explaining that its own precedent that this on tax status that the Commission applied your being here. Commission has relied upon requires according to the Statements of Reasons in At this time, let me call on the explicit words and again, nothing happens investigations resulting out of the 2004 Commissioners who may have questions of as far as the Commission is concerned. election. any of the panelists. I'm just going to The regulation still is sitting there being Now I say this is misdirected for suggest it is possible, but not always, but employed when I suppose some apt several reasons. First, if the Commission is be mindful of when you're asking questions opportunity or possible excuse of relying upon an enforcement policy, well not to -- and I'd like to hear from each of constitutionality can be found. then that enforcement policy is going to be the panelists -- unless it's important -- so changed at any time. And of course under

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) that we can continue to direct questions in there is some plausible merit to a particular complaint there is not a violation. Because a more precise way. complaint. it would serve both the legal purpose of Let me start with Vice Chairman, In that regard, it would be nice if protecting First Amendment rights that any questions? they would provide the Commission and cannot be abridged except for compelling VICE CHAIRMAN PETERSEN: the respondent who has to respond to the justification and would not drag people into Thank you, Mr. Chairman. Mr. Baran, I'm complaint with some specifics, with some a process where the process itself is the interested in the recommendation that you support, with some actual facts, and in fact, punishment. had in your written comments that four a direct allegation that a particular person is MR. BAUER: I agree with the additional criteria should be included in the alleged to have violated the law. suggestion that complainants have to be complaint, namely that it should clearly We have represented clients who specific and it ought to be very clear that identify each person or entity who has were the subject apparently of some they have a responsibility to bring alleged to have committed a violation, complaints where the allegations were so something before the Commission that is statements not based on personal ambiguous, so amorphous and so adequately supported by criteria that are knowledge should be accompanied by an unsupported that it really puts the well advertised in advance. identification of the source of information, respondent and their counsel in a difficult I also think that to the extent that a that a clear -- excuse me, a clear and position when responding and it puts the complaint kind of squeezes right through, it concise recitation of the facts which Commission in somewhat of a difficult sort of barely passes that threshold that describe a violation of a statute or position as well. there is before you, at least in my regulation should be included, and that So everybody wants to experience, are relatively easily identified. there should be documentation of the concentrate on complaints that raise issues And it would be helpful to the respondent supporting facts alleged. of merit. That will trigger the use of the to have those disposed of very quickly Currently under our regulations, Commission's resources. It will require because I think it will be very clear which those are discretionary, recommended but respondents to pull their attention from ones can be quickly disposed of and that not mandatory, and you recommended either campaigning or whatever else they're helps with the problem that Jan suggested those should be made mandatory. doing, if they're not politicians, and it that the complaint gets the headline and Addressing an issue that Mr. Bopp brought would be nice to tell a complainant who then many years pass before it turns out up that in order for the Commission to doesn't provide a sufficient complaint, that it wasn't given much credence by the focus on the cases that are most compelling here's your complaint, here's our agency. and also to relieve the regulatory burden, requirements. If you add some more beef - VICE CHAIRMAN PETERSEN: it's certainly been a concern of mine that - you're not rejecting it forever; you're just Okay, thank you. If I can just ask another are there -- are the resources and the time saying, please resubmit with the criteria question of Mr. Bauer. In the comments of both the Commission and respondents that we have in our regulation. that were submitted by you and your being wasted as a result of politically VICE CHAIRMAN PETERSEN: colleagues, it was repeated often that the motivated and otherwise frivolous If I might ask the other panelists as well, enforcement process, the Audit process and complaints? are there other suggestions that you may also through RAD, that they should not be I first of all just wanted to ask have or recommendations that the making law through those processes. from your experience if the abuse of the Commission ought to consider on how to at I was just wondering if you might complaint process through frivolous and the outset be able to filter out those that are expand upon that comment and explain to politically motivated complaints, is it a non-meritorious and clearly frivolous from us the extent to which that's been a problem serious, wide-ranging and extensive those that really do demand Commission in the past? problem? attention and that should proceed; are there MR. BAUER: Well, let me be MR. BARAN: I think it's a any suggestions you have on how we -- are very clear about one thing. What I tried to serious problem. I think that there is with there any policies we may want to institute say in my opening remarks is that I think some regularity, and I think Bob Bauer in order to filter out those more effectively that this particular complication is built even suggested that complaints get filed in and efficiently? into your mission. It's just something you the heat of a campaign in order to grab a MR. BOPP: I do think the have to manage. I don't think that our headline. I mean, we've all seen that. A presumption that the Commission employs suggestion was that people were running complaint appears on page one of the local should not be that there's a violation amuck and making law left and right paper and two years later the dismissal, if it because somebody's filed a complaint. So I everywhere without regard to what their appears at all, is buried in the back of the do agree with Jan that there needs to be statutory responsibilities were. paper. significant factual support that is verifiable But there is and needs to be, I Now the fact that a complaint may that -- in order to institute an investigation. think -- and part of the answer of this is be politically motivated does not So presumptions often help, you making sure that there are very, very clear necessarily mean it has no merit and our know, sort of positive purposes and the procedures with respondents giving recommendations are geared towards positive purpose of presumptions here adequate notice of exactly what's taking requiring a complainant to demonstrate that would serve that because you filed a place. That works in some phases of what

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) you do and there were some areas of where there between process and the speed with reason to believe finding, with the factual you operate, and it's probably less of an which a respondent in that type of situation determination, and the respondent says answer in others, but I do think people do might want to have a matter addressed. well, this reason to believe finding was have to be mindful, the various So I'd like some additional input based on a misunderstood predicate. We'd departments need to be mindful. on what does that option look like? Is it -- like to file a motion to the Commission to I believe our perception -- some of is a motion to dismiss appropriate at the reconsider that finding because they went us in the defense bar who represent -- that time the response is due? Is it in addition off into this direction. Jim did not like -- have referred to as the to the response? Because I can envision a We think that a motion would be regulated community, I think if you keep situation where a motion to dismiss is filed, appropriate, for example, under those on saying that, people will be demanding the Commission thinks there may be a little circumstances. And secondly, as I testified refunds shortly, so stop. Stop. more meat to the complaint than that and six years ago, there also is perhaps an But in any event, I think mindful wants to look at it in the reason to believe opportunity for a motion, an appropriate that the way in which rules are made does stage and a response at that point in time motion, when the Commission, after matter. Jim says, I think correctly, that would be helpful to a quick dismissal. having found reason to believe, and then rules are supposed to be made through the So yes, I'm curious as to what you for whatever reason decides to take no rulemaking process. Now the reality is that -- how you envision that process would further action in that case, for the in the world of administrative law making, look like, if there would be alternatives, if respondent to file an appropriate motion there is regulatory creep from a number of they would be staggered -- about what that and say we would like you to reconsider directions and it's not always contained process might be. your reason to believe finding because through the formal rulemaking process and MR. BARAN: I'll be glad to perhaps you have found that it's invalid, it's it's fundamental to the way that respond first. Our approach was bifurcated unsupported after acquiring some more administrative agencies operate. in the following fashion. Number one, we information. But a key sensitivity to that, I think that part of this problem can be So those are two circumstances think, is required and so what we're calling addressed by adopting formally those where we think it would be appropriate for on the agency, in our comments, to do is to criteria as to the sufficiency of a complaint a respondent to have an opportunity to file raise the awareness that we sometimes so that you basically return a complaint that a motion and for the Commission to perceive expectations articulated to us that simply doesn't meet that criteria. provide for such motions in its regulations. sound very much like an expansion of Now that presumably would be a MR. BAUER: I think both those existing rules, so the new standards of very prompt response if that were the case. suggestions are constructive. I think that liability are not processed in the ordinary You get a complaint in here. Within five there are -- there's obviously the danger, I course, as we would see it, not with days you determine it's insufficient. You can see, from the regulator's point of view, opportunities for us to participate in return it to the complainant. If need be, that you have a flood of motions coming in commenting on what's emerging. you make an announcement, the complaint and it complicates the good business of VICE CHAIRMAN PETERSEN: was not accepted without prejudice. actually processing a case to a conclusion That's all I have for right now. In terms of a motion, we focused and you've referred to that by saying, you CHAIRMAN WALTHER: Thank further on the process in the following know, if you give us a response, rather than you. Commissioner Bauerly, any fashion. Number one, the Commission filing a motion, we might be in a better questions? under the procedures has a right to accept a position to actually get to the end of the COMMISSIONER BAUERLY: complaint, review the complaint, review case. So I think that is certainly the case. Thank you, Mr. Chairman. My question is, the respondent's response and then But I think as with any other each of you commented on motion practice determine whether there's a reason to reform, you are going to test what works and the area that I'd like to discuss in a believe a violation has occurred. and what doesn't. And so it seems to me little bit more specificity is with respect to We all know that that is simply a that beginning by identifying some types of the suggestion of a motion to dismiss or threshold decision to initiate some inquiry motions that you will entertain for some very early-on dispositive type to get more facts. And as the Commission reconsideration, for dismissal, a motion motion. itself has recommended to Congress, that like the one that Jan suggested actually I think it addresses one of the terminology is bad, reason to believe. In wipes the slate clean, if there was no basis concerns you raised, both Mr. Bauer and fact, it imparts to the public that there has for RTB as subsequently determined, so Mr. Baran, about the complaint gets the been some formal determination of guilt that the respondent doesn't wind up quite headline and the dismissal comes much and the Commission has recommended that frankly having that reflected in the later. And if we're really arguing with that terminology be changed. television advertisement later, I think politically motivated complaints that don't But let's assume that that doesn't would be helpful and I think it would have have any merit, that are only politically happen. And so you have a respondent a salutary effect on Commission practice motivated, as opposed to perhaps with this reason to believe finding and at and I think it would also reduce some of politically motivated and have substantive some point, either because the respondent the unintended consequences of what the merit, it seems to me that there is a tension receives the explanation of the basis for the agency does for political actors who kind

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) of get bruised by this process and theory was advanced against an early client through an enforcement action, that is unnecessarily tarred by it. of mine and the -- a then- member of the where this importance of due process MR. BOPP: I think those are very General Counsel’s office, long departed -- becomes so critical. useful suggestions, but I see it as a way of by the way, not from this world, but from You actually got -- delays, but it is cutting short an investigation during the the agency -- said to me at the time that -- crucial to the acceptance of what the reason to believe stage in order to reduce when I expressed a surprise because I didn't agency is doing that there be a sense that the situations in which the procedure is the see any basis in the regulations for what the respondents are being fully heard and punishment. Because right now it's really was being argued. He said well, the not being sort of rushed into a position hard to stop an ongoing investigation. conduct of your client has become grist for where it has to accept because, for There's no actual direct mechanism and the the regulatory mill. Those were his exact example, it doesn't wish to litigate liability direct mechanism would be a motion to words, the conduct of your client has based on rules that are essentially being dismiss or maybe more properly a motion become grist for the regulatory mill. promulgated post-hoc. for summary judgment, as we experience in And the notion was, we're COMMISSIONER HUNTER: If civil procedure in federal court and state educating ourselves about how people are I could follow up, so maybe I -- but how court. sort of finding their way around what would that affect -- so let's assume that the In other words, it's a way to stop appears to be the barriers in the law and agency is aware, they are keenly aware that open-ended investigations because they are this enforcement process is one of the ways they are in unchartered grounds, that they not fruitful, and of course, those motions that we're doing that. We may come to a proceed and there is, let's assume, are utilized in order for that very purpose in conclusion that we can fairly say that even sufficient due process and the defense has a court. Discovery is burdensome. It can be though technically speaking you have a seat at the table and all those sorts of a punishment itself. You need to pass defense, it's not an adequate defense and procedures that you have taken care of; certain thresholds in order to do that and I for our purposes, we're going to try to force we're still dealing with the situation that think that the -- I think people would a settlement. there is some law being created in the benefit and the Commission would benefit That is obviously very dangerous regulatory context. by cutting short investigations that are territory. I think when I say that -- and this MR. BAUER: Yes, and it seems obviously not fruitful. is a very large topic -- the Commission has to me that the Commission needs CHAIRMAN WALTHER: Okay, to be keenly sensitive to that. If it appears periodically to take stock of that and at this time, let me call on Commissioner that this is what has taken place, I think the initiate proceedings that the entire Hunter. Commission has to step back and bring the regulatory community can participate. COMMISSIONER HUNTER: entire topic up for the regulated community COMMISSIONER HUNTER: Thank you, Mr. Chairman. My question is as opposed to, if you will, have a black Okay. Thank you. for Mr. Bauer. In response to something market of lawmaking develop where at MR. BOPP: Can I comment on Vice Chair Petersen asked you, you said a some point everybody wakes up and says that? I think it has to go farther that. I little while ago that it's anticipated that in hey, we thought that X was permissible and mean, what Bob Bauer has described is administrative agencies, there will be now it turns out through a rulemaking absolute antithetical to the First regulatory creep, but that the agencies process -- excuse me, through an Amendment. And this -- as opposed to should have a keen sensitivity to what is enforcement process, that actually it's other agencies, this Commission operates emerging with respect to civil law and that prohibited, and by the way, because it under the strictures of the First Amendment sort of thing. emerges from the enforcement process that because if you are being subject to a My question for you is, that seems X is prohibited, the actual contours of the proscription by law because of your to make sense particularly for the defense prohibition may not be terribly clear. conduct that you don't know about and counsel who's involved in that matter. But I mean, it doesn't emerge the way you're just getting hammered post -- you what about those who aren't -- don't have a a rule does and there's an awful lot of know, ex post facto, and in some cases, seat at the table, who weren't provided an uncertainty about how what the post-hoc as well, that chills political opportunity to give comment for that issue Commission articulates in one enforcement speech. that's emerging, should that emerging legal action is likely to be applied in future cases There's a First Amendment value theory be then precedential on the rest of with similar conduct. So I think the agency that's at stake here and I think a classic the so-called regulated community? needs to have a sensitivity that in a example is the use of the enforcement MR. BAUER: Well that's particular area, sensitivity to the possibility mechanism to establish PAC status. I think obviously one of the problems with having that it is engaged in setting to chart new that's been a classic example that this rules start to sort of fully develop through, rulemaking paths. Commission -- has occurred at this for example, the MUR or the enforcement And then the second point I made Commission. And then ultimately using process. I remember years ago when I first was obviously for the purposes of that conciliation agreements as precedent for practiced, as a matter of fact, it was in -- it immediate respondent who's facing that rules of law that are now going to be was one of the first cases I handled before sort of quasi-rulemaking activity around a applied in 2008 and 2010 and whatever. the Commission in '77 or '78, a particular particular enforcement action, conducted

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009)

Number one, it chills political someone in the bar come in and actually winds up arriving at one number rather speech and number two is its inherent want to rely on Furgatch. than another and again, from the standpoint complexity, that is, people like Bob or Jan But it touches on an area that you of shoring up the agency's credibility on may know about this regulatory creep and know is near and dear to my heart, which is these sorts of issues, just sort of having can advise people, that people that don't bringing greater transparency to the penalty people feel the processes -- they can touch hire them -- and of course that throws just system. You have recommended that and that makes sense to them, I think that another blanket of chill on everybody's drawing on Furgatch when imposing would be a useful step forward. activity. penalties, that we make clear how we are COMMISSIONER Well gee whiz, something can be considering each of the four factors that are WEINTRAUB: And would it -- and I'll happening out there we're just not familiar laid out in that case, the good or bad faith actually toss this one out to anyone who with, which means we're going to be of the defendants, the injury to the public, wants to answer it -- would it make it easier hammered further. And I know in my own the defendant's ability to pay, the necessity for us to conciliate if people actually practice, how can a lawyer from Terre of vindicating the Commission's authority. understood the basis of the penalties, if Haute, Indiana with a 13-member law firm And as you also know, I've been they could see it in black and white? and I have no clients in Terre Haute? It's an advocate of actually publishing the MR. BAUER: In my view it because people seek out experts and that whole penalty schedule. So I'm wondering might cause -- panel members here can itself is a burden on the First Amendment. how this suggestion interacts with that. obviously add if they will. My view is it COMMISSIONER HUNTER: Would this be in place of publishing a would because anything that reduces Thank you. penalty schedule? You think we should do appreciably the feeling that you are MR. BARAN: Can I briefly also this or at least do this even if we don't do dealing, if you will, out of the shadows, is add my two cents, which is that that? Or would it be something that we going to reduce some of the tensions that I enforcement is the worst vehicle to create would do in addition to that? Help me out think can complicate the negotiation and new legal principles because you're not here. retard progress toward a settlement. articulating the specific standards if you do MR. BAUER: No, it's a good COMMISSIONER that, and number two, the object of question. I'm not even sure all my WEINTRAUB: Any of your colleagues on enforcement basically on both sides is colleagues at the firm would answer it the the panel want to comment? settlement. same way. MR. BARAN: I think you can So you have respondents, a COMMISSIONER look to your late filing penalty system and respondent, or maybe a handful of WEINTRAUB: I'll ask them all. ascertain how respondents react to that respondents perhaps after an election, MR. BAUER: You'll have that compared to your regular process. You perhaps they've lost and they've got this opportunity. I think that at a minimum this have the flexibility to impose these FEC enforcement case and they're basically makes sense, because we're dealing here penalties. You have a very detailed responding by saying what's it going to cost with how the penalty would be applied in a regulation that says if you do X, this is me to get this off my back and hopefully I particular case. I understand the agency going to be the penalty, this is the way we have enough money in my campaign fund may confront other issues in determining calculated it, and so there is a sense of to pay you so you'll go away. whether its full set of sort of formal predictability and a lack of any feeling that Now that's not a way to enunciate policies and procedures for applying the the Commission is being arbitrary. rulemaking and rules. The correct way is penalties, the penalty schedule and the Now you have to reconcile the the way that Jim has articulated which is criteria for applying them sort of desire of having predictable penalties with you have a rulemaking proceeding and then generically where they're making that the nature of the statute which says you're everybody gets to comment. Then the available, is acceptable. supposed to negotiate and conciliate, which Commission can publish a final rule that I know there are a whole host of suggests that there is supposed to be a back everyone knows what the rule is. issues -- articulated by Commissioners over and forth. It's sort of like purchasing a MS. HUNTER: Thank you. time about publishing the penalties, the house, I'll offer you this, no I'm going to CHAIRMAN WALTHER: At actual sort of whole process that you have accept that and so forth. this point, let me move through the internally for applying penalties. But at But I think in general my reaction Commissioners if I can. Because of time least in the individual case, I think having after all these years is that it would be a lot limits we only have 20 minutes left. It's some -- and over time by the way, that will easier to have some published document moving along pretty fast. Commissioner help people sort of somewhat decide for that articulates what the basis is for Weintraub? your penalty schedule, I assume, or your penalties on the part of the Commission, in COMMISSIONER penalty process, I assume, having some lieu of requiring all of us private WEINTRAUB: Thank you, Mr. Chairman. explanation of how it was arrived at in the practitioners to research all of your It's déjà vu all over again, gentlemen. Nice particular case. conciliation agreements and try and discern to see you. I wanted to ask -- I can't resist I think a measure of transparency which cases are similar to the ones that asking you, Mr. Bauer, about your citation would be greatly appreciated. There are a we're involved in and how were the of Furgatch, which is so unusual to see lot of questions about how the Commission settlements and conciliation agreements

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) resolved in those other cases and try and MR. BAUER: --that you would is one sort of standard. It also has to look put together a chart of what we think are find that it is just -- it is a popular myth to at private campaigns, which some would comparable penalties. say that the agency over time doesn't have argue may be a little bit different standard. I mean, that's a lot of make work. an effect on how compliance practices The one theme I've seen pop out of the You probably have all that here internally, evolve and how organizations comply. It's comments is the notion that maybe some so you might as well -- simply not true. sort of hearing in the audit stage would COMMISSIONER Look at the expansion of the make sense because inevitably an audit has WEINTRAUB: I hope. campaign finance law. I mean, since you to audit the campaign through some sort of MR. BARAN: -- share it with the have the grumpy old men in front of you, I legal lens. world. can tell you we came to town in 1977. The question really isn't so much COMMISSIONER There's no bar. Thirty-one years later, that there has to be some legal lens but who WEINTRAUB: But you raise an there are a significant number of decides the legal lens and then when? And interesting issue which is does that then practitioners and firms in this town and I think we've all seen situations where an interfere with our statutory obligation to what do they do? They advise people on audit report comes through and there's a conciliate, if they publish a schedule and the federal campaign finance laws. disputable question of law. Without sort of say well, here are the penalties and then They do so because their clients spending all the time talking about what is we're forced to conciliate but we're going to are trying to understand what the agency’s the problem, I think we all see that that is have to depart from the schedule? expectations are and conform their something that no one really wants to have MR. BARAN: You can always expectations -- conform their conduct to happen. conciliate without penalties -- those expectations. So I think this whole How do we correct that and -- (Laughter.) cost of doing business, wrongdoers try to well, first, do we need to correct it? And COMMISSIONER figure out what they can get away with, two, if we think we do need to correct it, WEINTRAUB: And sometimes we do. they pay the ticket and then they go about how do we -- how do we ensure that Audit CHAIRMAN WALTHER: Mr. doing what they're going to do, is a very is not being seen as doing things other than Bopp, you can add to that. primitive picture of how things operate in auditing? They need to do their job and it's MR. BOPP: No, I agree. the real world. sometimes troubling that they get blamed CHAIRMAN WALTHER: I'm sure you can find examples of for essentially doing their job on some Commissioner, are you done? it, but I can give you my impression that legal framework that is fuzzy, which is COMMISSIONER the examples of the opposite far outweigh much more to blame to me of others in the WEINTRAUB: I just wanted to, one them. building, not necessarily the auditors. follow-up on the cost of doing business CHAIRMAN WALTHER: Do So any thoughts on audit? Why argument, which is a counter argument that you agree? don't I start with Mr. Baran, who has been is raised and has been raised by some of the MR. BARAN: I agree -- through some audits. commenters, at least one of the COMMISSIONER MR. BARAN: I can tell you that commenters of this proceeding, that if we WEINTRAUB: About Washington? from my experience, I really don't enjoy let everybody know exactly what the CHAIRMAN WALTHER: The representing clients in audits. I can recall penalty is, roughly what the penalty is, then three nods from three grouchy old men. when the audit of the 1988 Bush Campaign they will just kind of calculate that in as a COMMISSIONER was completed and we had a very thorough cost of doing business and it will not have - WEINTRAUB: I just want to compliment meeting with your highly professional and - our penalties will cease to have a Mr. Bopp on his font, 14-point font, very qualified auditors for about three hours deterrent effect. nice. sometime in 1989 or 1990, and after MR. BAUER: First of all, it MR. BOPP: It's the only way I listening to all the recitation of all the depends on what the penalty is. Some can read it. issues that came out of that audit, people will calculate the cost of doing CHAIRMAN WALTHER: notwithstanding our years of trying to business and find it high. I also think -- I Commissioner McGahn? comply with all your rules, I just got up don't think enough very good sort of COMMISSIONER McGAHN: and said, can we take a break? The one empirical work has been done on this, but I Thank you. I'd like to shift topics and then reaction I had was, thank God, we won. really do think that if you have somebody come back to some of the discussion we Because I can't imagine going through that who is charged with writing the history of had on RTB. But before we get to the RTB process having lost. federal campaign finance law enforcement, threshold, a lot of cases come out of Audit In terms of the legal issues that which Jan has indicated he would like to do or out of internal referrals and that sort of come up in the course of an audit, my only in retirement, by the way, and we're thing and we read your comments, there's suggestion is that if there are disputed legal looking forward to that multi-volume some common themes there. issues, they really ought to be referred to treatise -- Audit is a division that has to do the General Counsel’s office for separate MR. BARAN: Yes, exactly right - quite a bit. It has to look at the public consideration, which I think the - financing of presidential campaigns, which Commission is able to do in the course of

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) its powers to consider from internal many, many inquiries from Reports Commission's website, to a later date information whether or not there is a Analysis which correctly and reasonably because of a hurricane. violation of a legal issue that needs to be point out discrepancies of somebody's Once the recipients of these pursued. If there's a potential violation, it report. You've got one total figure reported inquiries from Reports Analysis called up goes through the MUR process. If there's a in one report and that figure changes in their analysts and said well, our disputed legal issue, it presumably goes your next report, can you please explain? contribution is valid, it wasn't made after a into the rulemaking process so you can That's not what our comments primary date because the primary date was resolve the legal issue, if that's the problem. were directed at. What our comments were changed, so therefore, your question was I think the danger with trying to directed at were those two occasions in inaccurate based on the Commission's own do it in some other fashion through the which RFAIs are sent out, which don't information, they were instructed, you still audit procedure itself is that it encumbers seem to be based on any discerned have to respond. the audit report. It creates issues that discrepancy with the complaint or which And again, the committee says should be resolved in other proceedings are sent out with an inaccurate premise. well oh my God, we've got an RFAI here, and it probably makes it much more The two examples that we provided in our it's going to be part of your audit criteria contentious and problematic for both the comments was number one, the habit of and it shouldn't have been sent out in the Commission and the persons or RAD, the Reports Analysis Division, first place and Reports Analysis wouldn't organizations being audited. sending out inquiries to all committees on retract the letter or the inquiry as well. MR. BAUER: I agree with those some periodic basis, perhaps every year or So I don't know what the comments. every other year, that asks the committee resolution to any of those issues are. MR. BOPP: To take it a little bit repeatedly over the course of many years, Perhaps calming people down and saying further, I would say that it's almost literally please confirm that what you have said in well, don't worry about these redundant or impossible for any campaign or PAC to your reports is accurate. inaccurate requests, they don't affect comply with FEC requirements. If they There's no suggestion that there's whether or not you get audited is one were -- and if audited to the degree that I any contradiction or inaccuracy internally answer. The other is, is there a procedure have seen on some occasions, wanting to with the report, but just kind of please once in which these types of inquiries can be see every check of every donor over the again, that apply, that you don't have retracted? But they are causing some alarm last X number of years, which is often certain administrative costs, for example. and confusion in the community. hundreds of thousands, that a -- that the So that -- we don't understand the reason COMMISSIONER McGAHN: Is rules have become so difficult and complex for that. It alarms committees who get this there a concern that audit points are being and the time frames so narrow and in large part because the, again, regulated accumulated for these sorts of requests that demanding that an organization that wants community -- I use that term with some don't seem, based on your comments, to to conduct its activity in an efficient and trepidation having heard Jim -- knows that have a statutory or regulatory basis -- cost-effective manner cannot comply, and part of your mysterious audit criteria is MR. BARAN: Absolutely, that the cost of compliance is nearly RFAIs, and a number of RFAIs, they go because the community believes that one prohibitive. out to these reporting committees and so basis for an audit is the frequency and the So I think what the audit process the treasurers get all freaked out and they nature of these so-called RFAIs. That is a has shown in addition to your point, which say well we're getting these RFAIs and concern, especially when they don't believe is a very valid one, I think that it has they don't seem to be pointing to any that the inquiry is warranted in the first demonstrated that the complexity of the problem in our report and they're just place. record keeping and reporting requirements basically asking us to respond again, which COMMISSIONER McGAHN: have reached the point where very few we will gladly do with some burden or What -- in your experience, what is the entities can ever be expected to pass a real inconvenience that we have. On the course of action that if you are in a thorough audit. record, everyone can see there is an RFAI situation where you feel like maybe there's COMMISSIONER McGAHN: which was not prompted apparently by any been some audit points assessed that maybe Which transitions to the step before you get mistake. shouldn't have been assessed and you end to Audit, the Reports Analysis Division. And the second type of inquiry up in an audit and that sort of thing and you Mr. Baran, you had quite a few comments that we pointed out in our comments was think that maybe there was some -- there's about some things. Again, it hits a theme one which was based on an inaccurate no procedure, motion or anything where that seems to go across party lines and premise. In this recent election, several you can actually get to the Commission what law firm you're with, but the notion of committees received inquiries based on the currently, correct? -- reports and this notion of “please making of a contribution allegedly after the MR. BARAN: Correct. Well, we confirm that your report is correct as filed” primary date of a Louisiana election, even don't know what the audit criteria are to and that sort of thing, could you elaborate though that Louisiana election date was begin with. That's not shared. I'm not on that a little bit? subsequently postponed, as announced suggesting that that ought to be shared. It's MR. BARAN: We focused on a elsewhere on the Federal Election not necessarily something that has to be couple of issues. And by the way, there are

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) publicized. The Internal Revenue Service thinking of the case where it's a solicitation -- and that's one of the reasons why I'm certainly doesn't. of soft money by federal officials on the worried to some extent that this whole But it seems to me that this issue website of a gubernatorial candidate. discussion does wind up getting is one for internal review by the There was a contribute link and oversimplified. Commission to examine the circumstances then the solicitation actually occurred on It seems to me, number one, in the under which these types of letters are going the next page once you went through the ordinary course and the course of the out, perhaps categorize them so that they contribute page. There's a 5-0 statement -- enforcement process, there are going to be don't wind up being sent out if they are a 5-0 vote for -- four people joined a decisions reached which may not be inaccurate, number one, and number two, if certain Statement of Reasons. Does that technically precedent, but they are going to they are sent out, don't incorporate that into create a new rule that then the regulated be viewed as setting up standards of your audit criteria, whatever that community or those who are not political conduct or setting out for this prohibited mysterious standard may be. committees and that are not yet regulated zone, and they're going to be read that way CHAIRMAN WALTHER: I have or do not choose to be regulated so thus by the regulatory community, they should a question. We have five minutes left. they're not in the regulated community, is be read that way by the regulatory Commissioner, are you done? that now a binding norm? That's actually community, they should have an impact on COMMISSIONER McGAHN: I the distinction I'm hearing. how they conduct themselves. guess I am now, yes. I mean, when you argue about this Obviously as these standards CHAIRMAN WALTHER: My on a campaign, you're a political committee develop, the agency has to be sensitive to questions will be short. Go ahead. Go for already, so the regulated community tag the potential that there's been significant it. doesn't offend. When you represent new rulemaking in an area. That is to say, COMMISSIONER McGAHN: primarily grassroots organizations, you when I say rulemaking, I'm talking in the Mr. Bopp -- don't want to be regulated. But anyway, fashion in which you were just describing CHAIRMAN WALTHER: -- does that create a binding norm that now the 5-0 vote, that is to say, it has some back. folks can rely on and say this is now a effect on how people view where the law is COMMISSIONER McGAHN: permitted course of conduct that we can act going and they -- the Commission may be What's precedent and what's not precedent? on this and this is something we can take to at that point, I think, well advised to look at Is there such a thing as a precedent in the the bank? -- starting to look more formally and administrative world? Let me come at it MR. BOPP: No. No, and I systematically what they're doing through a from a different perspective. I agree that certainly wouldn't advise a client to rely rulemaking process. merely because one settles a case should upon it, that sort of development. Under But I don't see how I can't tell my not create a binding norm on the next the law there's only two things you can rely clients if you reach a judgment on a fellow who comes through because there's upon. One is the statute and regulations relatively simple set of facts -- and by the all kinds of reasons why. You can't and the second is if your fact pattern fits a way, I recall that MUR very clearly, necessarily make new rules of law that then safe harbor that has been adopted through because I had a client, as a matter of fact -- people are supposed to know about because an advisory opinion. I commend you for your sense of decision- they go through MURs on our website, Those are the only things that you making in the process. which now, post-AFL-CIO, should be have legal -- you can rely upon legally. Of COMMISSIONER McGAHN: I redacted, but which contained not a lot of course, the Commission, through changes was not here. information. of persuasion or changes of personnel, their MR. BAUER: That's true. Now So now looking at old MURs, or approach is varied on all of these issues that I think about it, it could have turned at least more recent MURs that have gone historically and I'm, of course, aware of out differently. But in any event -- through the AFL-CIO-style scrub, many of those changes. (Laughter.) sometimes is -- it's easier to sort of So no, and though I do think that MR. BAUER: But in any event, ascertain the future from the Quatrains of the Commission seems to think that we my -- Nostradamus than figuring out what a ought to view it that way to a certain COMMISSIONER McGAHN: I certain MUR means because of the extent, I think that's erroneous. I think the guess it would have been 6-0. redactions. Commission should be very forthright in MR. BAUER: Exactly correct. But you have a situation where saying that they -- that these do not create But I think that there is something there there is a statement of reason and you precedence, that unfortunately the opposite that the Commission should prescribe to mentioned those are not -- those are not is true. that I think is meaningful and I'll just -- I precedent. But let's say you have a MR. BAUER: Chairman Walther, believe whether it's a 5-0 vote to enforce or situation, and I'm thinking of a couple do you mind if I -- a 5-0 vote to decline to enforce, it's a different cases, where a certain fact pattern CHAIRMAN WALTHER: Not a meaningful event and it clearly constitutes comes before the Commission and the bit. what Commissioner Hunter referred to as Commission maybe rejects a Counsel’s MR. BAUER: I apologize. I sort of regulatory creep we're starting to see recommendation unanimously. I'm couldn't disagree with Jim more. I think if evolve.

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009)

I close with simply a comment CHAIRMAN WALTHER: Thank CHAIRMAN WALTHER: Mr. that Jan Baran made in my presence many you, Mr. Bopp. We're out of time. Let me Bopp, do you have a quick response? years ago when Commissioner Aikens was ask the General Counsel and the staff, the MR. BOPP: Yes, a quick here and the Commission decided that the staff director, if you have any quick response. First is if you have higher Commissioners would issue Statements of questions. We'll need to make it quick standards for finding reason to believe, Reasons, which was brand new, and we because it's important to stay on time. Ms. you're going to reduce the number of were chatting about this with Duncan? investigations in which you'll have to deal Commissioner Aikens and Mr. Baran said, MS. DUNCAN: Thank you, Mr. with motions. So I think those two go hand I'm going to open up new -- a new three- Chairman. I do have just a few quick in hand. ring notebook, meaning I'm going to start questions. Welcome to the panel. The second thing is, is that collecting Statements of Reasons and I wanted to follow-up and explore motions do cost money to be -- by clients, putting them in a three-ring notebook. a bit more the conversation that we've been so I don't see them being done frivolously. Why would he put together a having about motions and your And the fact if they are successful in three-ring notebook? Because he was recommendations to expand the terminating an investigation, actually there going to advise clients on the basis of what Commission's motions practice. If the will be time freed up rather than pursuing a he read in the Statement of Reasons. Commission does decide to expand its fruitless investigation, that there will be COMMISSIONER McGAHN: practice, given the five-year statute of time freed up by the General Counsel’s The point of my question was not the limitations and the limited resources of office to deal with more pressing matters. I Statement of Reasons versus a new rule. OGC and the Commission, how would you think there's cost savings on both sides of CHAIRMAN WALTHER: Our as regular practitioners before the agency this. time is up too, so let's -- the answer will advise the Commission about preventing a CHAIRMAN WALTHER: Thank have to be pretty quick, because we only culture of motions practice? And by that I you. get a five-minute break. mean a culture in which it becomes MR. BARAN: Even though legal MR. BOPP: I think the problem standard to file every motion because your fees in Terre Haute, I understand, are as with the approach of Bob is two things. clients expect you to file every motion high as those in Washington. One, you do have a way of announcing a because your colleagues are filing every (Laughter.) rule. If the Commission is unanimous, motion that might be available to you? MR. BAUER: Mr. Walther has adopt a regulation and then everyone would The second part of that question, pointed out he doesn't have any clients in know it. You wouldn't have to go and perhaps you can answer it together, is Terre Haute. searching through Statements of Reasons. if in fact again, the Commission adopts an CHAIRMAN WALTHER: I'm But the other thing is, is that expanded motions practice, would you be going to just -- I'm going to ask you two makes -- Statements of Reasons become supportive of an aspect of that practice that questions, but I'm not going to have time to meaningful then in terms of future conduct required consultation between respondent's get answers. One of the questions I have is of people potentially subject to the law. counsel and the Office of General Counsel we do move from investigative stage to an That makes this inside baseball. In other prior to the filing of motions so as to adversarial stage at some point. words, you have to hire expensive D.C. narrow the issues or to even come to a Unfortunately, the statutory guidance is not counsel in order to find out if you can determination that the motion is clear when that takes place. We feel -- we mention a candidate's name. You have to unnecessary or could be unopposed? need to believe that privately it would be hire expensive D.C. counsel if you want to MR. BARAN: I would -- closer to the adversarial moment, but as a talk about issues. CHAIRMAN WALTHER: I'll practice in the Commission, we're just Let's say that you're in 2008 remind you of time. beginning the true investigative stage. election and some are going to rely on this MR. BARAN: Yeah. I have two I'm wondering if some -- written tax status thing and ran screaming from our quick responses. One is that of course comments afterwards if you might consider democracy and be fearful that they'll be anything you try in this area I would when that best moment might be, whether hammered as a PAC, but the insiders know recommend you do it on a trial basis, just it could be more clear notice around the there's been a change on the Commission like you did with your hearings for adversarial stage. I can see a 12(b)(6) or Statement of Reasons or a General probable cause and see how it works. But motion early on just to test the merits of Counsel report that means that actually you secondly, I think that there would be a time what they're facing, maybe shortly after the can do it now, as has been suggested for motions that could be specified in the response from the respondent. But then apparently by some Commissioners that consultation with Counsel’s office, I think you get to the -- motion -- in an adversarial there's been a change in enforcement would be fruitful. Whether it needs to be stage after the Commission has already had position. mandatory, I would want to think about a chance to do some investigation. So I That couldn't be a worse possible that. welcome your comments -- any comments situation when you're talking about the CHAIRMAN WALTHER: Mr. on that. First Amendment and the involvement of Stoltz? The next question I would have is 300 million people in our political system. MR. STOLTZ: I'll -- a couple of you have made motions -- to

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) the Department of Justice anymore than CHAIRMAN WALTHER: Let's certainly a lot left to be discussed. I think you should. There should be a lot of clarity get started. We'll start first with Mr. an opportunity for questions and between the relationship between the Birkenstock. perspectives to be shared directly from the Commission and the Department of Justice. MR. BIRKENSTOCK: First, Commission and with the requester would I've had the experience of meeting with the thanks. I certainly appreciate the only add, I think, to the process. It would Department of Justice during my first term opportunity to come and share some make it a little more thorough, make sure of 25 months and you know, there is -- perspectives. I'm not going to go through that issues are not overlooked. time to report knowing and willful matters an extensive prepared set of -- the topics, I think it would also help from the to the Department of Justice. mostly just not to reiterate what I've requester's perspective to really get near the This is a big thing. What level of already submitted in writing and certainly window into the thinking of the proof must we really have at that time? to save some time. Commission. The actual opinion that The Department would like to know as The areas in which I focused, I comes back is obviously what binds, but it much as they can or if they can, but in chose primarily because one of the can be a bit of a black box, frankly, to look fairness, when do we do this? I'd welcome concerns that I've had from the outside at this from the outside and wonder why your comments on that because we do need looking in with the FEC is that the did we get the result that we got? Was it a to meet again with the Attorney General etiological battles sometimes overwhelm balance of these competing pressures? Did and begin a fresh comment period on how some of the trees, so to speak. Some of the one just overwhelm the other? What was to address this issue and to look at a smaller items can kind of get lost a little really part of that? Memorandum of Understanding that serves bit, I think, in the kinds of topics that I think a hearing on the record the test of time, that could be approved. maybe Jim Bopp was kind of going with the opportunity for other commenters In my book, at that point, if we through earlier. to comment, disagree or agree or what have think we're about to turn it over to the The really large First Amendment you, I think would add a lot to that process. Department of Justice to let the counsel for questions, important as they are, kind of On the enforcement piece, there's the respondent know, by the way, anything leave to the side sometimes some smaller, sort of been a very technical, I actually further you say may be used against you, is more technical changes that could make a think, kind of small scale changes that I not here or there. I'm not sure we do a lot of progress. The two that I had in mind think the Commission might not appreciate great job at that. Those are comments that are the two that I kind of singled out, this what a difference it can make to a I have. idea here's the advisory opinion process respondent in an enforcement action. But Finally, I want to thank you all and a little bit of predictability, particularly the very end of the process, what happens very much for being here. It's been a great at the end of an enforcement action. in almost every instance, is that the conversation and discussion. I wish we Just really quickly to recapitulate, conciliation agreement is worked out with had more time, but we don't. The written what I had in mind with the advisory OGC. It exists. You more or less expect final comment period, if you've got more to opinion hearings, and those of you who that to be the outcome that you get, but it say after you're here, I will listen to have been on the practitioner side can becomes kind of a black box again. comments -- so thank you very much. identify with this, is really a singular It becomes this--we just don't (A brief recess was taken.) experience to sit in the audience as your know. We think it will come up on this questions are being discussed, knowing the date. It may get kicked down the street a CHAIRMAN WALTHER: I'd answers very often to some of the questions little bit. All of that process is, I think, like to begin. We'll resume our hearing and that are being posed among the perfectly fair. The institution needs to have thank you very much for being here. We Commission, and yet be in a position to be the flexibility to take these things up when had a very good and interesting kind of --the potted plant, as Brendan it gets there, but from the respondent's conversation with three panelists and we're Sullivan would have put it. perspective, this is not a court. This is not going to do the same with you. It's great to I think a hearing of some kind, the kind of thing that's out to a jury that have you here, our former servants of the and I'm going to reoffer at least some needs to deliberate and think things over FEC. perspectives of what that might look like, and they may come back guilty, they may We have Mr. Joseph Birkenstock, but the overall idea is that particularly for come back not guilty. former Commissioner Mason, David those requests -- and I really am kind of More, I think looking at just a red Mason, and Scott Thomas. I didn't tell drawing on the VoterVoter experience in light, green light judgment on a pending Scott Thomas that I had the privilege to be particular -- there's a lot I think could be consideration agreement, the timing of that in his office and I have the same 30-year- gained from real dialogue between the I think could be better shared with the old lampshades when you started here, the Commission as a group and the requester respondent. They could get, I think, some same 30-year-old television set, the same individually. slightly more formalized sense that we 30-year-old couch and so if you walk in I think OGC serves a critical expect this conciliation agreement to come there, you'll just be like old home. function and it serves it well in taking those up on the Tuesday meeting. You will be MR. THOMAS: Old home, that's first cracks at it, you know, the draft and notified if it doesn't. good to know. the fact gathering process, but there's

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009)

Once it's approved, we in practice some level of persuasive precedent at least, think, is roughly analogous to the RTB tend to get very good courtesy notices from I think the regulated community and the stage and so I think if you said yes, OGC about what the conclusion is and clients I think that a lot of us represent respondents can propose to dismiss or can when it's been reached. But it is a courtesy would -- I was thinking that as kind of offer whatever other motions they want to notice and I think for the business going from confusion to chaos. It's offer and they should offer them with their managers sometimes that represent these difficult to know where things are going to reply. respondents, that just doesn't cut a lot of come out in the ordinary course if these And by the way, if it gets that far, ice. To say listen, we expect to get this prior decisions, Statements of Reasons and you're going to have another chance at the notice, is different than saying there's a no outcomes have no precedential value response to the probable cause brief. By policy, there's some formalized process and I think we can be left really grasping at concentrating the motion practice on those from the Commission that will let you straws. areas where the Commission already has to know. But I'll conclude there and move have them out or before it, I think you We will give you that kind of along. avoid potentially creating procedural notice. You'll not learn about this through CHAIRMAN WALTHER: Thank hurdles or barriers. the press or your customers won't learn you very much. Mr. Mason, former I do suggest that you leave some about it. Your investors won't learn about Commissioner Mason. room for people to put in motions at other it. You'll get the chance to share this news MR. MASON: Thank you, Mr. times, but you describe them as before people are finding out about it Chairman and with all the other panelists, I extraordinary and not try to predict every through avenues that make them think am delighted to be here. I hope what I've circumstance in which they might come up. you're trying to hide something from them. written and have to say is of some I think the description of extraordinary and A couple other quick points that assistance to you. the notice that you would allow them will I'll make that I didn't mention in my I had one comment about the pop let people who aren't insiders know well, remarks, the schedule of fines in the sua culture reference I put earlier in my okay, you can at least try, but make it clear sponte process in particular is one that I testimony, so I'll start with that and that is that those would be exceptional rather than think has left the sua sponte process really just do it. The point is that after 10 years normal. not very attractive. It seems to me as a of going through this with Commissioner I addressed in my testimony a practitioner that there are a lot of matters Weintraub at one point and other suggestion for how you might consider -- that might be best addressed through the discussions about procedural changes, handle reconsideration motions at the RTB sua sponte process, but without knowing looking back on that, I think you have a lot stage by an analogy to the process that what that schedule is, the business more to lose by failing to act than you do already exists for advisory opinions and I managers again or the clients are kind of by acting, and that is, there are bad things. think that's a good one because it's already left thinking, I get the upside to some You could change procedures and it could there in the regs, yet it was rarely used in degree. I get the -- we get to resolve the increase the time it takes to process MURs the AO process because people who had uncertainty. We know that this matter will or you could end up with other problems. gotten opinions realized well, they already come up rather than kind of waiting to see But the natural tendency in a had this before, then they considered all if a complaint gets filed or something. bureaucracy and even more on a six- this stuff and I've got to change somebody's They really can't say with real member commission where everybody's mind now and so they knew they had to confidence exactly what that outcome is got an equal voice is to delay and to stick have a pretty good argument. So that going to look like. I think a schedule by precedent. I think to the extent that you structure is out there. would help incentivize the sua spontes in a can reach any consensus, you should go I also think allowing for hearing at way that I think would be kind of helpful. ahead and make changes, knowing that you AOs is a good idea and I would really The final point I will make is can go back and change them later. almost put it in two parts. There are some about MURs as precedent, which – the On a couple of the particular advisory opinions which almost beg for a earlier panel discussed that. How did -- the points, I want to start on motions and a hearing process and that is the issues are dialogue about that between Jim Bopp and couple of, I believe, Chairman Walther and genuinely new and uncertain in allowing Bob Bauer, I find myself agreeing with a couple other witnesses already referred in some kind of testimony, and perhaps even Bob. The reason, I think, is that in any some part to the Federal Rules of Civil allowing commenters to come for five instance where prior Commission decisions Procedure, and what sort of occurred to me minutes or so and make a point might be are kind of unmoored, if they are not after going through the process and the appropriate. precedent, for example, as I took Jim to be questions about particular motions is that There's another set that Joe just supporting, I would find it extremely hard what may be more important than the referred to which are the questions that to offer clients a lot of confidence about particular motions you allow or provide for come up at the table and why can't we just whatever outcomes they could expect. is the timing and procedure for any motion. get the requesting counsel up here to the If these were kind of random data So I suggest an analogy to Federal table and ask them. I think you ought to points that didn't fit into any coherent Rule 12(b), which requires that all defenses provide for both, and that is to say, I think whole, if they did not, for example, have be joined in the first reply. That stage, I you ought to provide for hearings in some

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) instances where the Commissioners think mean, there's certainly some public -- So that's the number one job. The they would be useful. And in other additional public information that's put out number two job, though, is to actually instances I think where questions come up there, but I don't think it's critical enforce the law. You're always going to and the counsel is present, you ought to information to people understanding the have situations where some folks don't like have a procedure where a Commissioner process of filing. If that is one of the things the law, don't respect the law, so that's your can just ask and have them come up and that's getting in the way of reasonable job. You here are responsible for answer a question. resolution of those issues, then I think you representing the public in making these On penalties, I again addressed ought to consider whether or not that's laws work. that in the written statement. I just wanted useful or not. Number three, keep in mind your to address the cost of doing business Second, and Commissioner role. This is something that I got into quite argument because that's prominent in Thomas can speak to this, if he wishes, in a bit sometimes with my colleagues, but I everyone's mind. In my experience, I don't more detail, early in my tenure on the always felt our job as Commissioners was think that is a major factor in changing Commission, the Commission considered to enforce the law that Congress passed. people's behavior. In fact, my observation the RAD review process in detail at Congress gets to make the laws and the was it didn't matter how low the penalty Commission meetings every two years. courts are the places where the was, a penalty of any size was very We stopped doing that at some point and I constitutionality is decided. So the FEC is annoying to people. They didn't want to wasn't sorry, because it was a lot of work left with the role of enforcing the law as pay it for a whole lot of different reasons and a lot of detail. Congress wrote it and if others want to try and so I don't think that by disclosing But there again, and I don't know to have parts of the law declared something about the penalty structure or what's been done in the last six months or unconstitutional, that's fine. They can do schedule you would be giving people the so, but that may be one procedure that you that as a defense in enforcement cases and green light to go ahead and violate in one want to go through just to get a good grip in other forums, but the FEC should be particular area or another. on, okay, what the standards are and how ready to defend the law as passed by On timeliness, I want to they work. Congress and as written by Congress. emphasize the utility of deadlines and I I think that concludes everything So that's the general philosophical suggested some particular ones for the that I wanted to highlight and I'd be happy approach that I always tried to apply as a enforcement process and also for this to answer your questions. Commissioner and I think it's constructive. hearing and this structure, but in my CHAIRMAN WALTHER: That keeps you in a proper role. experience thinking back to when we had Thanks very much. Mr. Thomas, former Motions and so on to reconsider, I statutory deadlines or judicial deadlines, Commissioner Thomas. think if you agreed about the due process they almost always worked and that would MR. THOMAS: Thank you, Mr. concerns, my first recommendation is to go to the AO process where we have that Chairman, and members of the build on these kinds of motions, perhaps 60-day deadline and it's routine in that, or Commission, thank you for letting me more so than oral hearings. I might prove to BCRA, which was a big tough job, but come. I will apologize in advance. I have the point today. Sometimes oral we were able to meet that statutory a bit of a cold I am coming off of and I had presentations can generate more confusion deadlines, or to judicial deadlines. a contact lens malfunction yesterday so I than clarity. The written word, with If you're concerned about time am wearing my goggles that are a few unlimited thought, tends to be more precise limits, then the only remedy that I know of prescriptions old and I can't see very well, and you can, it seems to me, ordinarily get is to impose deadlines and there's going to even with them on. I may not be all that across a point with clarity better with the be a certain degree of arbitrariness in terms spectacular in my performance today. written word. of the precise deadline that you choose, but You need to be congratulated for Oral presentations also, if you people will work to that deadline. If you're undertaking this exercise. It's always good think about it, have elements of favoritism concerned about that, I would recommend to keep your eyes open and look for good, built in. Possibly you might find some it. new, fresh ideas. folks coming in trying to intimidate you. There was some discussion of I would just make initially a point Given their connection you might find all RAD inquiries at the earlier procedure and that I don't know how many times you're sorts of efforts to basically lead you astray I'd just make two observations about that. going to hear it. But I think if I were to in an oral presentation. So my preference, One is there's no reason that I know of that rank your number one job, it would be to if you're going to focus on due process RAD RFAIs are published. They were try to make the law clear. If you make the concerns, would be that you generate published starting early in the agency's law clear, people will follow it as a general opportunities for these written motions for history at a time when everything was rule, I have found, and indeed the clients on reconsideration at whatever stage you think published, so pre-AFL-CIO for instance, this side of the world now, I've seen that is appropriate. and that was just the practice of the people are pretty much afraid of the law Another point I wanted to make Commission. and they do want to comply if they can just initially is just that you're in for a lot of But I'm not sure what purpose is figure out what the rules are. criticism when you take the step to have a served by the publication of the RFAIs. I hearing like this and I don't want you to

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) ever lose track of the -- sight of the fact that proposal, you could probably help foster a whatever definition you use for staleness I don't think this agency really has any sense of confidence that you've done these days. history of showing bias in its prosecution. something rationally. If you tried to put So you could sort of build in a I don't think this agency really has any sort into those letters something that explains periodic review process and that sort of of history of staff hiding information from the general factors that went into helps everybody. The staff doesn't much Commissioners or not presenting calculating the civil penalty, I don't think like it, but on balance, it sort of is a vehicle arguments to Commissioners. there's anything wrong with that because for prodding everyone to bring all the I recall on some occasions we people might appreciate knowing well, we enforcement cases sort of into a general would have an instance where it turned out took into account the amount of the sort of consensus discussion about what that maybe inadvertently a response from violation, we took into account the fact that ought to be moved and what maybe is the respondent had not been attached or this had elements of being knowing and causing some problems in terms of delays. circulated in some fashion, but generally, willful, if that's the case. So just an idea. Those are as you all know, the materials the I mean, you could certainly do additional ideas that I have. A couple of respondents submit are circulated to those kinds of things that might help in that them I haven't seen in the written Commissioners. regard. That wouldn't be the same thing as comments. Thank you. If I'm wrong, if there's a problem just putting out there the actual mechanical CHAIRMAN WALTHER: Thank there, then maybe you should focus on just formulas for how you calculate your civil you very much. I'm going to start -- maybe working out with staff to make sure that penalties; I'm not in favor of that. we'll start -- a different approach this time. nothing is withheld from you. That would There might be some other things Commissioner Weintraub? be a simple way to sort of address that you could do. I see from my side of the COMMISSIONER concern if it's in fact legitimate, but I don't aisle or from my side of the political WEINTRAUB: I had a feeling you were have a general sense that that is a real practice that you are kind of floating out going to start with me. The reality is, I problem. Yet you're hearing a lot of there not knowing where a matter is at the don't actually have a lot to ask this panel criticism suggesting that somehow staff is Commission and maybe there could be because I feel like I've had -- it's delightful trying to hide the ball from you something done to every, say, 30 days, to see you, but I feel like I've had so many Commissioners. have the staff have an obligation to notify opportunities over the years, particularly Bottom line, most of what you're respondent's counsel maybe where things with all due respect, Chairman, with Scott doing I think is perfectly good and okay. It are in a general sense. and Dave, to talk through a lot of these has developed over a long period of time I don't know if that will actually issues. and you have a lot of bright people who solve any problems, but there's just this I am gratified, though, because on have come through and served as sense of kind of helplessness and the the publication of the penalty schedule, Commissioners over time and on balance clients are always wondering where is my David and I started out in different places, you have all been very conscious of the case, where is my case and we never have but I see you coming around to my point of need for due process and fairness. the ability to sort of find out other than a view on that, that perhaps a little bit more That said, this is, as I said, a good phone call. transparency in that would be a good thing. opportunity to look for good suggestions. There might be something where So I appreciate that. Just off the top of my head, some things we could sort of get a little bit more I think you started changing your that I didn't put in my little list that I've assurance and comfort level if that were mind right as you were about to leave, but seen in other comments or just thought-- built in. it was too late to do me any good. I got making public a compliance manual. I But anyway, those are just some one more vote before I could do anything think that probably would be a good step, ideas. The one that I offer somewhat with it. make it available to the public, something hesitatingly is the old system, we used to I do want to -- maybe what I'd like that summarizes the actual written call it the MURquistion. That was a to do right now is just take the opportunity procedures along the enforcement road or process where we basically said okay, to say just very briefly a couple of say the Audit road or the ADR road. cases aren't moving as quickly as we would comments that arise more out of the Most of that stuff you got up there like, as people on the outside would like. previous panel because -- and it sort of on your website; it's fairly well explained. Let's let Commissioners identify cases that follows off some of what you guys were But things like motion procedure, if you're they're interested in and ask that they be saying. In the previous panel there were going to go down that road, that would be brought to the table every so often. You some comments about presumptions that -- obviously something that would be very could do this on a periodic basis, however sort of the notion that the staff all presume helpful to have out there, any compliance you wanted to set it up. everybody is guilty and that their job is to manual that's available to people trying to At the same time, with your prove them so. represent respondents. priority system, you would have an I really -- and I know you guys I think maybe you could go down opportunity to have a discussion of those know this because you've been here. That's the road of trying when you send a letter to cases that are starting to get stale within really not what goes on. In fact, we put up someone with a consuming issue, a on our website -- and I have a pretty color

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) chart that shows how often we actually do CHAIRMAN WALTHER: -- MR. BIRKENSTOCK: May I add find -- take no further action or dismiss. I Commissioner McGahn? something quickly? mean, I know for members of the bar, it's COMMISSIONER McGAHN: COMMISSIONER McGAHN: the old feeling every time your case is up Thank you. Mr. Thomas, your comments, Sure. Thank you for asking. there, you feel like everybody's out to get you mentioned maybe with respect to MR. BIRKENSTOCK: On the you. But in fact, there's a whole lot of motions and that sort of thing, instituting a idea of -- I understand Scott's concern cases out there that Counsel very trial program on internal referrals where about delay in the process, but I guess the reasonably recommends that we take no you actually get a chance to file a brief or perspective I think that I have is that a further action and usually the Commission do something before the RTB vote so you MUR can turn into a multi-year process. says yeah, you're right, and the numbers are don't receive a package in the mail that Typically it does. Probably when it's any actually fairly striking on that. says welcome to RTB. real question or there's more contentious I guess I'll -- Scott, you're the only Thoughts on that and if you could fact gathering, something to be done and person I think in the entire panoply of sort of articulate why that may be a good some opportunity to have a two-week witnesses who's not really in favor of idea and then why there may be some opportunity, some window within which publishing the penalty schedule, so if you downsides, what we need to look out for as you can do more than what I think happens want to take on that cost of doing business far as efficiency and that kind of thing. in practice, which is in the back and forth argument, I'll give you your shot here. MR. THOMAS: Like all of these with the RAD analyst, you try to kind of MR. THOMAS: Argument 37. suggestions that you either build in a nudge them along to say, now look, if COMMISSIONER motion for reconsideration or an oral you're going to ask OGC about this, make WEINTRAUB: Right. presentation, this is one where if you build sure that they know A, B, C and D and you MR. THOMAS: Well, I won't an A step where before you get to the kind of try to -- because you have no other belabor it. I think that you could have a reason to believe determination based on a options, you just hope and I think expect or blend, if you will, and it's sort of what I referral from RAD, you're going to give hope really that there is going to be some alluded to in talking about maybe the some sort of written notice to the potential extra information brought into that letters you send folks. If you wanted to respondents, it's going to slow things down, determination and only what RAD might basically let everybody know, and it's I suppose. That's the downside. understand. already pretty much out there in various And so you're just weighing I think that's worth two weeks. I places, but let people know what factors against the downside the benefits you understand the idea of the delay, but one, you take into account, the amount of would get from that. And I think that -- these tend to be very large matters. I think money spent impermissibly. You could again, with a trial program, you could test the kind of delay that this would introduce take into account the money that as a result it out and see. It seems to me logical that if on a percentage basis would be very small was impermissibly raised. You could take you give someone at least just a summary and I think the bang would be worth the into account the staleness of the matter. notice that this is about to go to the RTB buck, so to speak. You could take into account whether it was process, you might be giving notice to COMMISSIONER McGAHN: a widespread practice, whether it was a someone who up to that point has never My thought is, and see if this makes some repeated practice. even had any counsel about it, so it gives sense. You have an internal referral. That You could sort of let out that these him notice that woe, this is getting worse paperwork's already done, so regardless of are the kinds of factors that -- here, yes, maybe I should get some legal whether or not you allow a brief to be filed COMMISSIONER advice, people who can help me figure out isn't going to change that work being done WEINTRAUB: Scott, I think you just did. whether or not there's some way to address in that time. Counsel still has to prepare You let the cat out of the bag. the Commission on the legal points and some sort of recommendation. We still MR. THOMAS: Did I do that? maybe in terms of identifying the vote on the RTB. Can we have that tape? So, but anyway, I appropriate mitigating factors that the Those respondents in that situation think you could go down that road and you Commission historically is receptive to. take the language in the cover letter that could sort of let people have an So, at a minimum, it might give says you can provide any materials within appreciation of the factors that have gone people a better chance to represent 15 days even though it really doesn't matter into calculation of the penalty without themselves and of course, there's the at that point. It matters to sort of shaping going so far as to sort of show percentages benefit to you. In some circumstances, it the case. and so on. gives you a chance to understand all the It's really just where you put the I mean, we all know that the way surrounding mitigating circumstances. vote. If you put the vote before or after you have to calculate the penalties involves Maybe there was a lousy treasurer. Maybe they get to file what they're going to file a lot of percentage work and so I think there was some sort of reason that this anyway, and it's really just moving the vote there's a middle ground that could be committee fouled up. back two weeks. It doesn't seem to add worked out, be very -- be beneficial to So if you can understand that time to what's already -- the work product's people out there without going too far. going in, it might help you fashion your already going to be done regardless. It's initial proposal for conciliation.

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) just when the Commission actually pulls The legal issues that people are seems like we know someone knows the the trigger one way or another. talking about, that's typically what comes answer, but we'd like to hear it from them. Does that make sense timing up there. So you have Audit notifying But I also, if we were to wise? them and you have OGC review and you establish some sort of pilot, as I think the MR. THOMAS: I think that that's have an opportunity in the response to the Commission's general approach is, to start true and so if you tailor it that way, I don't Interim Audit Report for the audited with something small and see how it works really see that it would be a problem, and I committee to be heard. So all this is going and make modifications and make bigger, think there are enough benefits you can on but the audited committee doesn't feel just thinking about the numbers of advisory probably -- you can achieve it. like they've had a full opportunity, and I opinions that we do consider each year, it You don't want to lose sight of the think that's where something like a hearing fluctuates a little bit, but for example, in fact, though, that if you're going to go at the final audit stage could come in and 2006, we had about 30. In 2007, we had down the road and sort of formalize the they could then come in and present their about 25. opportunity to have motions for case. I'm trying to understand how we reconsideration, there's still after the fact, I I know of at least one case that would fit a hearing into each of those cases. suppose, an opportunity for someone who ended up in a fairly sizeable enforcement At what stage do you think it would be at that point gets word that they've just had matter, and I asked the Counsel about it useful? Would it be at the public -- the the FEC find RTB to file some sort of later on because it was obvious to me open meeting where the Commission response. But as you point out, you're sitting on the Commission that the considers adopting a proposed advisory going to have -- you're potentially building Commission had reviewed this twice opinion or would it be earlier in the in an opportunity to get in essence that kind during the audit and it had come to the process? I'd be interested in your thoughts of information beforehand and what's the conclusion twice that yeah, what the on that. harm really in trying to get that kind of auditor said was sort of where the MR. BIRKENSTOCK: Sure, information to help you if it's not going to Commission was on it. thanks. I think the first answer that I have really create an extensive delay? They sort of fought it and it is making sure that you wouldn't. So for all COMMISSIONER McGAHN: degenerated into an enforcement matter 30 or 25 or 50, whatever number that you Audits, Commissioner Mason, you and it ended up with a big penalty of have, it seems to me not all of those would commented that a committee should be something that could have been fixed in the require really open-ended kind of hour-, given the opportunity to have some kind of audit process at relatively low cost. So I two-hour hearing. I think former presence at maybe the final stage or asked them later on, why -- you know, why Commissioner Mason made a great point something. Do you think that would be did you go this far? And the answer was about how if there is any opportunity just helpful and if so, why? well because we didn't feel like we had to have the respondent appear at the open MR. MASON: I do thank you and been heard. meeting in which it's discussed, that seems one of the things that came up in the first So that was the suggestion and to me to have very little time or process. panel, I think Commissioner Weintraub again, with the -- I was a skeptic about the But provided if you did need to do addressed that and that runs through this hearing process because I thought too something with respect to every AOR, that whole -- what's underneath the discussion many people would want hearings and at that stage just having availability only to about due process is a desire on the part of they'd take too long, and I'm persuaded by respond to questions perhaps but not to do campaigns and parties and other people the probable cause hearings that there's a an independent presentation or kind of who are affected by this process to feel like way to do it where not everybody asks, open up process for the respondent to be they're being heard. where not everybody asks gets a hearing, proactive, but only available so to speak to A lot of this suspicion about well, so there's a flaw in it. answer questions from the Commission, you know, we send the brief into OGC and But in fact, I think it's been very the idea that I had or that I find more they kind of hide it. Well, they don't hide beneficial and hasn't slowed the process appealing is that any of those matters in it. Commissioners get all of the paperwork down unacceptably and I don't know why that subset of those 25 or 30, or whatever it that comes in and I made a practice of you couldn't build that same process into is, that really are the difficult, fully novel, going through the files and I suspect most the audits at the Final Audit Report stage. heavy lifting questions, it's up to the other Commissioners do too. CHAIRMAN WALTHER: Commission. If the Commission feels that So people are heard, but it's -- I Thanks. Commissioner, are you ready for - a hearing would be helpful, well then, there think it's relevant to the Commission's - Commissioner Bauerly? you go. You have a hearing. consideration that you keep getting COMMISSIONER BAUERLY: I think some level of open- feedback, that they don't feel like they're Thank you. I'd like to discuss the endedness is important such that the being heard. In the audit process where suggestion for hearings for advisory respondent -- rather the requester is not the you have the Interim Audit Report, that's opinions and I appreciate that because in only person whose perspectives are sought the opportunity for the audited party to be my own experience in a short -- relatively or who are made available, but the heard. short time compared to some of the folks in Commission could also choose among this room, there have been times when it commenters so that there could be other

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) people appearing at that hearing only to the where the Commission approves doing it. I substance of that opinion. But coming out extent they've already filed written don't know that I would want to open it up 10 days before the election on a question comments. as a right of a requester to actually make a that really I think my first letter went in the And again, I think from a process presentation. earlier part of July, was really not a perspective, you could streamline it by But you could open up as a right, I meaningful opportunity. having some requirement in it, but the think very easily, the opportunity for the That was a business that I thought discussion at the hearing would be limited requester to be present in the event the had a really clever idea. It still has a very only to those topics or arguments that were Commission has questions. That's kind of clever idea. But the time that it took to already addressed in the written comments. what I -- most amusingly, one of those complete that request, you know, for a lot So someone trying to file maybe -- instances where we would have some sort of reasons that I think are legitimate and file is maybe an appellate court concept. of factual question and we could see that understandable, they were left then without But this is not an opportunity to raise brand counsel and the representative of the a meaningful outcome. They were really new arguments and try to throw a wrench requester is sitting there in the audience not given much of an opportunity to run a into the timing of the works. But you had and we sort of well, should we take a business this year, based on how much an opportunity to address it in writing. break? time it took. I think Scott's right that by and Then there would be some sort of I think the concern that I would large you can give more thought to what direction to the Counsel’s office to go talk have is that what I would hope to do at you put into a written submission, but I to the requester and the Counsel’s office these hearings is shortcut that process and think also sometimes that means you get would then come back with, I've just gotten actually try to get within the 60 days rather less candor. You get kind of the finely it on good authority, and so we would go than have this become something that leads sanded version instead of what I think can through that little dance. to additional rounds of drafting or be sometimes a more productive top of the So maybe, as a pilot program, that rethinking of things in ways that would head, back and forth kind of process. would be a very easy thing to do, just only add time. So I think to narrow that down, suggest that respondents would be allowed So I think it's fair to say that the not every AOR needs a hearing and it to respond to Commissioners’ questions at Commission could ask for an extension as should be up to the Commission to pick a meeting where the advisory opinion is part of that process, but I guess maybe I'm which ones it feels would benefit from it. discussed. I think that would be a good just trying to kind of set out a marker that I COMMISSIONER BAUERLY: step. don't think it's unfair for a respondent to Commissioners Mason and Thomas, I COMMISSIONER BAUERLY: say look, with all due respect, no, we just would appreciate your thoughts on that as As we've been discussing, deadlines are can't afford an extension. We're entitled to well, from your perspective on both sides sometimes important because it prompts answers under the statute and we need one, of the table, if you have any. actual action. There are times when we are and leave it at that. MR. MASON: I think Joe has it up against that 60-day deadline, an open COMMISSIONER BAUERLY: about right in terms -- and again, by meeting for which the advisory opinion I'm sure I'm out of time, but just one analogy to the probable cause hearing, that consideration schedule is sometimes very comment on that. That's one of my not every probable cause brief gets a close to that deadline. questions about where in this process, request for a hearing, not every hearing If we have an incidence where we because it seems to me given human that's asked for is granted. allow requestors' counsel to provide us nature, we will be considering these close I think as a procedural matter, with some answers that may change the to that 60-day deadline at the open meeting, because of the 60-day deadline, you would thinking on that, I would anticipate that we so if there is a hearing opportunity, that's probably need to have requesters ask for a might need some additional time at that why I was asking about the timing of it. hearing when they put in the request, point. Is that, do you think, a valid reason It needs to happen early in the because that's going to mean you're going for asking and perhaps getting an extension process to answer factual questions which to have to move the deadlines, the internal from requestors' counsel? necessarily affect -- may affect an outcome. deadlines, back by 10 days or whatever is MR. MASON: Can I just point MR. BIRKENSTOCK: I -- going to be necessary to get that done. out that if requestor's counsel are there to CHAIRMAN WALTHER: We're But as long as the Commission answer questions, he would presumably -- going to move forward. I'm going to have stays in control of the requests on which he or she would presumably also be able to to -- hearings are granted, I don't think you need discuss an extension right then and there. MR. BIRKENSTOCK: Yeah, I'm to worry too much about having -- to MR. THOMAS: Yes, exactly. sorry. schedule 30 hearings a year. MR. BIRKENSTOCK: I certainly CHAIRMAN WALTHER: Put it MR. THOMAS: I agree. I think don't disagree. But one of the reasons I there quick, please. it could be manageable and you could try it wanted to choose this topic was again the MR. BIRKENSTOCK: Which is as a pilot program. I think that probably experience with the voter/voter advisory basically that I completely agree this the main thing you would want to do is try opinion. The client, I think I can say, was should not be a fact-gathering process. to limit the opportunities, those situations certainly pleased with the outcome and the Where I think this should be most useful is

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) in those instances where you have multi-factor test, just leave the decision- panel, they may need to set the factual competing drafts, for example, and the maker, the court, the Commissioners, record straight that there may be a factual respondent -- the requestor rather, you got a whoever it is, with a whole lot of predicate in the factual and legal analysis chance to make a comment about a discretion, is to go ahead and say, okay, a which is incorrectly stated. particular draft, but that gets less and less standard reporting violation is worth 90 So I just wanted to get your meaningful as the back and forth happens percent of the maximum penalty. thoughts and further opinions on having a between the Commission and OGC and That's not the number, but you get motion to dismiss or a motion for no RTB. some of those succeeding drafts you don't my point, that to sort of put in a rough I think it could be styled in many different get much of a meaningful chance to offer a level, and most of the time what the ways, but the necessity and importance of perspective on. Commission is dealing with are mitigating having that sort of a motion post-RTB? So it has to be at the -- I think, it factors. So most of the time the MR. THOMAS: Mr. Vice would be most efficient in the latter stages Commission is going to be content with Chairman, I think that on balance it is of the process, not as a fact-gathering item. something less than that and that would worth maintaining the practice. I think you If you can clarify one or two points, that's give, I think, the respondent some might want to put it in a form of a pilot fine. But I think it's most useful as a means assurance that okay, this is -- now I program. As a practical matter, I recall that to speak to some of the issues involved in understand that when I commit this type of even for internally generated matters, the these competing drafts. violation, the Commission normally Commission had found reason to believe CHAIRMAN WALTHER: considers 25 percent of the amount in the letters say something to the effect, if Thanks. We'll move on to Commissioner violation to be about the appropriate you wish to submit a response, please do so Hunter. penalty and they're giving us some credit in the next number of days. COMMISSIONER HUNTER: for good faith or whatever and so they're In a way that's a kind of a motion Thank you. Quick question for asking for 20 percent and I feel good about for reconsideration, so in the internally Commissioner Mason. It's the same one that. generated process it's kind of there, I think. that Commissioner Weintraub asked the I think that's where you want to be But if you modified that for some reason previous panel, which is how do you think and that's why the suggestion that releasing and taken it out, then I'd say do something making the fine schedule public would the percentages that apply to different types to allow that opportunity for a motion for affect conciliation agreements, excuse me, of violations might actually be helpful in reconsideration if that's what it's styled. conciliation negotiations? the conciliation process. In the complaint context, I noted MR. MASON: The concern I had COMMISSIONER HUNTER: with interest a comment from the Center and still have to a degree, if you made Thank you. for Competitive Politics. I hope I got that everything public, which is to say, you got CHAIRMAN WALTHER: right. Their suggestion is that the FEC is a list of violations categorized and Thanks. Mr. Vice Chairman? being unfair because sometimes when it percentages assigned to that and then VICE CHAIRMAN PETERSEN: gets to the reason to believe determination aggravating and mitigating factors and in Thank you, Mr. Chairman. First question it is -- its staff had gone out and looked on some areas that's far more developed than regards a motion for reconsideration at the the Internet and has looked in newspapers in other areas. There are problem areas opposed RTB stage. Both former and has gathered some additional that are probably never going to be fully Chairman -- former Commissioner and information to help the Commission resolved, such as how you deal with the Chairman Thomas and former analyze whether to find reason to believe. substantive violations also triggered a Commissioner Mason speak to that issue There's a suggestion that that's reporting violation, and whether you and talk about the necessity for building in somehow unfair, but that's the way to double or stack a reporting penalty or sort procedural safeguards to make sure it resolve that. Your suggestion, an of put it in as a lesser included offense or doesn't turn into a delaying tactic. opportunity to have a motion for how you handle that. But first of all, let me just ask reconsideration after the reason to believe But my concern about releasing what you think about the idea in general. determination I think makes that a fair every detail is that the conciliation Is it a good idea to have that? Just to process. negotiations could easily devolve into an betray my personal bias, it seems like while I would caution against the argument over the Commission's penalty it’s true that a respondent has an approach suggested by that commenter schedule and I think conciliation needs to opportunity to respond to a complaint, that though because I don't want the be focused on what the respondent did in may not always be sufficient because then Commission to shut itself off from dealing with the Commission about okay, what the Commission finds persuasive, common knowledge. I don't want the was that okay or not and how bad of a what facts or what legal theories they find Commission to become known as the, I'll problem was it? most compelling that they will then put into try to stay away from an unfortunate The suggestion I made is actually their factual and legal analysis, can't always acronym, but the Federal Stupid a little bit different than what a couple of be anticipated by the respondent and that Commission. You don't want to do that. the other panelists said and rather than rely once they see that analysis, and I think as You want to take advantage of information on factors which are still very fuzzy in a brought out by Mr. Baran on the earlier that's out there.

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009)

To be honest, the counsel for CHAIRMAN WALTHER: Thank hearing that might contemplate formal respondents, they have access to the you. Mr. Stoltz? presentations by advisory opinion Internet. They have access to the very MR. STOLTZ: If I might explore requestors might have the unintended same data and research. So I think it's a a little bit the Audit hearing concept, which consequence of turning what I think is now good balance if you build in this motion for we've heard from several commenters, but I a semi-collaborative process between the reconsideration in the complaint process would be very interested in some Office of General Counsel and requestors because it would alleviate that concern. observations from some folks that were into more of an adversarial process? MR. MASON: I agree for pretty here for a long time and know the process MR. BIRKENSTOCK: Certainly much the reasons that you stated, Mr. Vice intimately. a fair question. I think in candor I would Chairman, and also to go back to the point At what point would you see it acknowledge that there's a possibility that that what a lot of this is about is giving happening, before the report's released, this can become an opportunity to leave the people assurance that they're being heard after the report's released, more like the collaborative stage and enter some kind of and the formal process is what does that Title 26 hearing process or something disagreement stage. and the assurance that even, for instance, if different; if you could make some I think, in balance, though, my the motion is not replied to, that it goes suggestions? response would be that that's not unfair, through the Commissioners and that they MR. THOMAS: Well, Mr. Acting that if in fact there is a disagreement made a decision on it is a beneficial to add staff director. Nice to see you. I would between the requestor and OGC, it can be to the process. say, generally speaking, you reserve the honest and legitimate and sincere. I think I do think that occasionally there's hearing process for somewhere later in the having an opportunity to air that and even a genuine degree of surprise that a link, so I would say that it's most logical if you engage in a back and forth in front of complaint was kind of vague and I agree that when you're coming down to it where the Commission about that, I think is more with former Commissioner Thomas that it's you're at your final audit stage and you're good than bad. I think it might, as you put fine to go out and look on the Internet or having a deliberation on the final audit it, leave kind of a semi-collaborative the newspaper or whatever and it's true that findings, that would be where you would process to the side. counsel's -- that respondent's counsel had offer someone an opportunity to send a But I think at bottom maybe that's access to that, but they may not even have representative in and have a discussion. the reason that this is necessary. Not to put it together. The back and forth discussion is kind of go too far with it, but one of the In other words, the Commission helpful in some context. I've had some concerns I had about the advisory opinion may have been making a logical link or experience with that. I'm not sure that process is that the role of OGC is really assumption that was not clear from the anything I said was really helpful, but if it's paramount. It becomes up to OGC to get complaint and so it's cases such as those helpful to Commissioners, I mean, that's to that first bite of the apple and submit its where I think the motion for me the most significant thing. draft first and that can really, you know, reconsideration could be useful, sometimes The Commissioners are the ones load the rest the process with an initial almost necessary for fairness purposes and who have the ultimate decision-making perspective that can be hard to turn, a sometimes helpful to the Commission authority. So I would say later in the super-tanker kind of analogy. because what you may also find is that two process, maybe during that meeting Once you get the inertia moving in events or two facts that you thought were discussion of the Final Audit Report is best the direction of a draft, it can be hard to get linked somehow, and there's a simple if that's going to be built in. it changed. I guess what I'm driving at is explanation out there and then it would MR. BIRKENSTOCK: I would that I think for the community it would be help you in the discovery process even if it agree that just before the final -- or after the helpful to have an opportunity to get into weren't enough to convince you to Final Audit Report has been prepared and the engagement at that point, but again, reconsider at the start. just before or as the Commission is with OGC present. This is not outside the VICE CHAIRMAN PETERSEN: considering it would be the appropriate existing process or a replacement of it; this I appreciate that last comment you made place to build it in. is kind of alongside the existing process. that how this -- how these can often help MR. STOLTZ: Thank you. MS. DUNCAN: Just one follow- the Commission out. There's been a lot of CHAIRMAN WALTHER: up to that question. concern raised, and I think legitimately so, Anything further? CHAIRMAN WALTHER: Sure. that building in additional motions could MR. STOLTZ: No. MS. DUNCAN: Which is do you result in delay, but on the other hand, in CHAIRMAN WALTHER: Ms. know whether that kind of a process would many cases, it may actually build in Duncan? be consistent with the process that other efficiencies by focusing the Commission MS. DUNCAN: Thank you, Mr. administrative agencies use when they are on the most relevant, factual and legal Chairman, and welcome to the panel. considering a request for opinion and issues that are in a particular matter. So I Mr. Birkenstock, I wondered if we issuing opinions? appreciate that comment as well. might explore a bit your recommendation MR. BIRKENSTOCK: That's a That's all I have. about advisory opinion hearings and I good question. We didn't really look at wonder if you could comment on whether a what other agencies are doing. We took a

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) pretty hard look at the FECA itself to make go ahead and get this thing over with or get providing respondents some indication of sure that we weren't suggesting something it focused down? where you are on these things. But I think to the Commission that it simply didn't But I don't see how the current that that's why I've tried to suggest maybe have the power to do. process or the current way we've treated there's a middle road where you can give We concluded that the that has been inadequate because when people some comfort that these are the Commission does have the power to people submitted those, they're circulated kinds of factors we take into account, but incorporate these kinds of processes. But to the Commission so it comes to the don't give them the specific penalties. the answer to your question is no, I really Commissioners' attention and if they feel And I have been in discussions don't know what other agencies do along like there should be a discussion, there can with clients where you go through this these lines. be a discussion. painful recitation of what the law is and MS. DUNCAN: If I might ask MS. DUNCAN: Thank you, and then they say, okay, so what are the former Commissioner Mason one question, one final question for former penalties? And there's that -- it's a frank which is we've talked a bit more on this Commissioner Thomas which revisits the assessment. They sort of want to get your panel about motions at the RTB stage, but area of publishing civil penalties. best idea of okay, what if we want to go other commenters have suggested that there You said in your -- civil penalty forward and what are we going to pay in might be motions even during the schedule. You said in your comment that terms of penalty? investigative stage. there's an element of deterrence that comes I mean, it's real. It's -- I've seen it. Your comment said those with leaving the potential penalty So that's kind of where I'm coming from on motions, however styled, are occasionally somewhat mysterious and I know we've that. informative, but rarely useful. I wondered talked about this a bit, but I wonder if you MR. BIRKENSTOCK: Can I add if you might elaborate on that? could say from your point of view as a quickly once again? I just want -- I think MR. MASON: The two types of current practitioner and advisor of clients a it's important not to overlook in the situations that I can recall that triggered little bit more about the notion that there is discussion of this kind of interim rule effect those sorts of motions effectively during some deterrence that comes as a result of of enforcement actions, that what it is that the course of investigation were a new not having a fully public civil penalty we are deterring is political activity. legal development, such as the schedule? There are laws that regulate that Millionaires’ Amendment case and my MR. THOMAS: All I have to do and those laws are important, but at comment as to those is the Commissioners to say to a client that they better pay bottom, I just think it's really critical -- lead -- the Commission is well aware when it attention is refer them to the Freddie Mac a little bit back to the -- sort of the loses a Supreme Court case and civil penalty. They go nuts when they hear weightier concepts are thrown around the immediately goes on to consider the about the size of the Freddie Mac civil earlier panel. But the laws that this agency implications of that and so on. penalty, considering what was going on. administers govern core constitutional So those aren't really necessary, There is a very, I don't know, I rights and to the extent unclear or vague though there's no harm certainly in call it the crazy factor maybe. But if there's laws or concepts are deterring people from allowing a respondent to submit a motion an element of mystery there, I think that engaging in those activities, there's a baby and it's possible, for instance, that there people are in a sense always thinking, I being thrown out with that bath water and I could be a case involving a state campaign might end up with the Freddie Mac civil just think it's very important to keep that in finance agency or something like that that penalty. mind. would almost fall into a notice of additional I was thinking this was -- this CHAIRMAN WALTHER: Thank authority type of situation. hearing was coming up and I knew this was you. We've got a couple questions. It The other situation that I've seen going to be a topic on the agenda, that I came to me when somebody commented used is where effectively there's a would -- be at a Supreme Court argument that what they'd really like to be able to do discovery dispute. We already have a and Justice Marshall was going after in the negotiation process, if it just looked process for motions to quash and so on like someone and he was basically talking like it wasn't quite working out, that they that and so perhaps those should be pushed about the element of deterrence. And he really thought it was a fair offer, fair to that way, but essentially, where there's just said, here by the sword of Damocles, and make a motion directly to the Commission, been a contentious investigation and this poor attorney didn't really have a clue to approve a compromise. respondent's counsel is kind of fed up, where he was going at with this and he MR. THOMAS: I think implicit those are the ones that I found informative said, you know what's significant about in that is there is some sense that somehow also. that, sword of Damocles, it's that it's this Counsel’s office is not taking offers or But again, where do you go with hanging there, it's just hanging in there; suggestions from respondents to the that because it's -- I think it's useful for you never know what's going to fall down Commissioners. I'm sure there are respondent's counsel to have a way to and take your head -- that's kind of the discussions where the FEC's counsel are in present that feeling of frustration to the concept. discussions with respondent's counsel and Commission and sometimes it may then I mean, you obviously don't want offers come and go and suggestions come spark a discussion about, well, how do we to go so far with that that you just ignore and go and I suppose that you really should

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) scratch at that to see if it really is a commenters, even I think Mr. Bopp, you can always try to have discussions with problem. suggested four Commissioners before it the Department of Justice. I think they do If you think it is a problem, then actually counts as a motion, might be the have a fair argument that they could change maybe you could adopt some additional way to do it. things and it did back in -- onto their platter guidance to the Counsel’s office that I'm going to depart a little bit from a lot more cases that are reachable in terms whatever the offer is in conciliation, let us the comments that you made just because of the Federal Campaign Finance statutes. know. Keep us apprised of what offers are of the experience you've had on the It reflected intention of Congress out there on the table. Commission and ask you because we didn't that they wanted some criminal The Counsel’s office might not get a lot of comments in detail about our enforcement of these kinds of things. So I much like that, but I don't think that on relationship with the Department of Justice think it would be fair to understand that balance it would be something that would and you were -- particularly the bread and butter cases that really undermine the process too much. MR. MASON: What Justice handles, they handle the clear-cut CHAIRMAN WALTHER: Any relationship? cases. They handle those conduit schemes comments on that? (Laughter.) that are fairly clear-cut and that require a MR. MASON: If I might, Mr. CHAIRMAN WALTHER: There lot of investigation sometimes. Chairman, it was my impression that the you go. Commissioner Thomas, you were But traditionally they have left to Counsel’s office generally followed a probably there when that MOU was the FEC all of the legally complex cases, policy that if a respondent in negotiations actually entered into. So I would like to express advocacy, coordination. You don't wanted an agreement or a proposal put tap your experience and thoughts over the see the Department of Justice going after before the Commission, that that would be years on how we can, as people say, those kinds of matters and so you've kind circulated. improve the relationship, what relationship of been left with a lot of that kind of I've seen nods from the current do we want to improve and how we go material on your platter. Commissioners, and so I'd just like to about it? I don't know if there's an answer suggest that this may be simply a matter of I had some questions about when in any of that, but it just strikes me that it clarifying what policies are to assure we begin to feel a need to notify the never hurts to have discussions with Justice people again that they're being heard. I Department of Justice, do we concurrently to see if you can work out a better think the balance you want to strike is you have to notify the respondents that we're understanding of when you notify each don't want to move too quickly to where it's moving in that direction because thereafter other and you certainly should think about the six of you and not the Counsel’s office the temperature may quickly change? whether there maybe is a step where you on behalf of you collectively doing the MR. THOMAS: As a matter of start notifying respondents that there are negotiations, but I think to the extent that practice, it is very awkward to be in the some potential legal rights here. you have a policy like that, simply stating it business of starting a civil investigation I'm sure you probably have publicly and saying when negotiations are and then all of a sudden realizing that this researched this, but there are some cases going on at probable cause at pre-probable may be something you do want to send out there that talk about the due process cause, they're going to be handled by the over to Justice, we probably should let the rights that people have at stake if the FEC Counsel’s office, but if a respondent wants respondents know. But there already is. starts investigating civilly using civil a particular offer to be presented or You could clarify by explaining discovery techniques and then basically circulated to the Commissioners it will be somewhere in your Enforcement Manual, hands that information over to the circulated. for example, that there is this Department of Justice. And it gets to be a I think that gives people the interconnection. Many of these statutes are question of well, did the FEC and the assurance that they need without -- and I jointly enforced and you could explain, this Department of Justice coordinate that in think the trick to it is not causing that to is where the Justice Department's advance or not? trigger an automatic calendaring of that on jurisdiction kicks in, so these are the kinds Anyway, that was part of the the agenda. In other words, if it's of cases that potentially they're going to be reason the FEC kept its distance when they circulated and Commissioners look at it looking at. That puts people on notice. started an investigation, because we were and say that's not good enough, sorry, you I was thinking that this has really fearful that we might in some fashion be shouldn't have to come to a formal been a process over the years that has been tainting the Department of Justice Commission meeting simply because the self-regulating because as you probably investigation if we were asked to hand over external party submitted a motion. have all experienced by now, at a certain all of that information, because it sets up I think that's the balance where point if a matter gets serious enough, the that easy due process defense. you get into the -- into delaying tactics. respondents through their counsel start CHAIRMAN WALTHER: CHAIRMAN WALTHER: That saying, Fifth Amendment, FEC go away, Commissioner Mason? is -- from counsel of the requestor or I'm not talking to you. MR. MASON: I think the argument on probable cause. It takes two So as a practical matter on a lot of problem that I have seen on the part of the Commissioners before it can get on the those cases, it does get kicked over to the Justice Department is that it's been difficult calendar at that point. Anyways, some Department of Justice. So I would say that to get them to deal on a reciprocal basis. In

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) other words, they're very interested in at referral to the Justice Department is that CHAIRMAN WALTHER: I what point is the trigger that they're either you don't have to proceed with conciliation. think that's true. I didn't mean to confine it notified or have a case turned over or So under the statute, once you find to a respondent or a deposition, just whatever, and the problem that I saw from probable cause, you are compelled to conditions that get you there. a perspective of sitting on the Commission proceed to conciliation. But if you make a I'm done with any questions. We is that a lot of times a case would go over referral, you are not compelled to proceed have five minutes left. Anyone else have a there and nothing would happen either for a to conciliation. question to ask? Any further comments long time or ever. So what that would suggest is that that any of you would like to make on any The Commission retained some there is some sense in which that referral is of the topics that have been raised? interest in the civil potential for the case protected from disclosure and normally in a MR. BIRKENSTOCK: If we do and so I think the trick to getting criminal investigation process, you might have just a couple minutes. I won't take all somewhere with the Justice Department not want to know -- the target know -- to five. There was a point later on when and I would be to get them to recognize in a let them know. pick up kind of where Commissioner material and an operational and genuine So I think what you may want to Weintraub started earlier about responding way that okay, yes, BCRA changed things, think about is that you may have an to the earlier panel. Among the comments I agree with that, and the criminal standard obligation to suspend the civil investigation that Jim Bopp made was the idea that was -- criminal bar was lowered some and at that point and Justice normally asks you adding additional procedural steps to the the Commission might be able to find ways to do that. But in terms of notice, the enforcement process only raises the to move cases in different ways or to a statute would seem to suggest that maybe expense of that process. different stage than they traditionally have. you're not obligated to give the respondent I don't disagree with that as a But what needs to come back with notice for reasons that you would factual matter, and I didn't hear him that is a more robust information feedback understand under the terms of the criminal acknowledge, perhaps not surprisingly, was in terms of well, yeah, we're definitely process. that by definition the kinds of enforcement interested or not, we're not within a time CHAIRMAN WALTHER: That's matters in which those steps would be frame that the Commission could then go a touchy question. If you stumble along used, were not talking about the individual on and pursue its interest. through a deposition and then all of a that put a bumper sticker up and a sign CHAIRMAN WALTHER: If we sudden you run across some testimony without the disclaimer and so forth. did that, what would we do with the under oath that there's a clear knowing and There are anecdotes where that respondent at that point? willful violation, I think it may be treading happens. But I think the other thing that MR. MASON: I agree -- to notify on somewhat unclear waters to then -- but might need to be kept in mind here is that the respondent. One of the other in any event, to know exactly then when by definition, the large expensive commenters was very upset about why you you start that deposition, when you've enforcement matters, we're also talking would find RTB or knowing and willful given notice, when we talk to the about large expensive undertakings, you violation at the RTB stage, and this is Department of Justice or come back to the know, six, seven digits being spent on the precisely the reason why. Commission and know that the Department ad and out of that pool of money, if 1 or 2 Historically speaking, the of Justice wants us to refer as many as percent ends up getting spent either Commission's been very reluctant to make possible to them if possible, it's a mindset prospectively on counseling or after the probable cause findings at RTB without we've been faced with. fact on protection in the legal process, that first having notified them. In fact, we get MR. MASON: Mr. Chairman, I doesn't strike me as unfair or inappropriate. the due process argument, well gosh, don't know what your experience has been, I just didn't get that recognized in you've been investigating for two years and but I've never seen a smoking gun the earlier panel, so I can throw that out. you never told us until now. But we were deposition in an FEC -- you know, the CHAIRMAN WALTHER: Thank looking into a knowing and willful indications of knowing and willful you very much. Anything further, the violation, so that's why the Commission violations have come somewhere else and counsel or Commissioners? If not, I have a has done that. so while it's theoretically possible, I agree question. Does anybody have any tickets It's been my experience that with you, and they're touchy circumstances, to the inauguration? counsel know unmistakably that a knowing most of the time the information comes in (Laughter.) and willful violation means the potential of an interview with a third party or in the CHAIRMAN WALTHER: Just criminal activity and referral to Justice. So complaint or in other material that's out thought I'd try. We'll talk afterwards. If I think that's your first trigger. In other there. not, thank you very much and it's great to words, if you find knowing and willful And so I think the problem may have all of you here; it certainly was. RTB, they already know that and I don't be a -- something like that could occur, but We're in recess until 2:00. know that you need to spell that out. I think more often you're dealing with (Whereupon, at 1:03 p.m., a In terms of the statute, the only discovery of someone other than the luncheon recess was taken.) indication I see about what you need to do respondent. about it is the actual statutory effect of the

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009)

A F T E R N O O N S E S S I O N comments that touch on a number of make sure that your cash-on-hand different areas. I wanted to emphasize balanced. CHAIRMAN WALTHER: We'll three of them for you in my opening It goes way, way beyond that into resume the special session of the Federal remarks. how you spent your money, whether you Election Commission on our policies and The first is a place where I think if spent your money lawfully, unlawfully, are procedures. there is one thing that the Commission hybrid ads legal or illegal, are You three got an e-mail. I don't could do to improve its process and [unintelligible] -- are phone banks paid for know if you got it or not, but you were sent procedures I would encourage you to start under one legal regime or another? So one just to let you know kind of what the and that is the manner in which audits are these are sweeping, sweeping audits that go policy would be as far as going forward, processed and handled by the Commission. on for a long period of time. At the and we would ask each of you to make And by the way, this is not meant to be conclusion of them, the process that is some comments in five to 10 minutes, or critical of the Audit Division or the job that afforded to you is relatively meager when less if you desire, and then we'll move they do, because they are, of course, compared to the process, for example, in through the various Commissioners. operating within a statutory and a the complaint process when as a practical Thank you very much for being regulatory and a traditional regime that matter the results are -- can be equally bad here. It's really most appreciated that exists. and in some cases, worse. you're here on such short notice. We're But as I look back in preparation So I have had several experiences dealing with so many different issues that for this hearing, I look back and realize that where an audit precedes a de facto finding we ask you to provide information on. though the General Counsel’s office has that the Commission has made that my We'll start, we have Marc Elias, been the focus of a lot of time and attention client has violated the law in a process in William J. McGinley and Hans A. von in reforming process and procedures, there which I have very, very few rights to refute Spakovsky here at the panel and I'm going has been relatively less emphasis or time that. Then I am referred to the General to ask Mr. Elias to begin, since we're doing spent on understanding how the audit Counsel’s office as if this is now going to this in alphabetical order. Thanks. process impacts the regulated community be a blank slate, as if now I'm going to get MR. ELIAS: I will try to be brief and in some respects, there are fewer my opportunity to convince a Commission and use less than the allotted time, which I committees touched by audits than are that has already been through a several- promise every time I appear before you and touched by complaints and notice for year process, that everything they've done I never do, but hope springs eternal. example. The impact that it has on the so far, everything included so far is wrong. I'm Marc Elias. I'm a partner at regulated community when they are It's simply unrealistic and I would the law firm of Perkins Coie, and let me audited is in time -- at times frankly argue it's unfair. Perhaps even more unfair start by stating that comments and the catastrophic. is, and I've complained about this publicly testimony I'm giving are those of myself The FEC -- an FEC audit, for before, so none of this should be new to and not of any of my clients. those of you who are not here and have any of you, is then the Audit Division itself As you know, a number of my never been through it, is equivalent to those at the staff level decides that one of my colleagues from Perkins Coie are testifying life audits that the IRS did and drew so clients has violated the law and indeed, the as well, so each of us, at least speaking for much criticism for. It is not “let us come in Commission disagrees. myself, I am testifying in my individual and spend a few weeks talking to you and Nevertheless, the Commission has capacity and will be happy to answer any looking at some records.” It is “give us formed this odd tradition of the public questions that you may have. every piece of paper that the committee has record reflecting a determination that my Let me first start by congratulating ever generated over a cycle.” client has violated the law. It's simply not the Commission on doing this. It is an We will look at every check. We true. When the Commission found that it exceptional thing for an agency, not just will look at every disbursement. We will would "accept" a finding that Senator the whole timely rulemakings as this look at every invitation. We will question Kerry's presidential campaign violated the agency has done now over the course of the everything and anything you have done law, I don't know what that means. last five years since McCain-Feingold was during the course of this election cycle. It The Commission, I believe, passed, but it is even more extraordinary is extremely burdensome. unanimously in some certain instances, for it to take the time to do a rulemaking or Now coupled with the declined to find a violation of law and yet it a hearing such as this where it looks not to burdensomeness is also what can best be accepted both findings from the Audit define what the legal standard is externally, described as an opaque decision-making Division. It's not clear what that means but it allows those of us on this side of the regime whereby you sit and give and give that it was accepted when in fact the table to come in and tell you what we think and give information that goes well beyond Commission itself voted not to find that about various ways in which the what one might consider to be a financial those were violations of law. Commission itself operates. audit, because after all, this is not an audit So I think if I had one thing I You deserve an enormous amount in what again, what most people who have could leave you with it is to do the same of credit for that, each and every one of not been through them would think of an type of introspection on the audit process you. We have submitted lengthy audit, which is they add up the numbers to that you have already done that led to good

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) reforms in the MUR process, things like counsel to answer questions that the I did not have the opportunity to the opportunity for oral hearing, things like Commission has. submit written comments, so I will the opportunity to make sure that Finally, with respect to the last probably take a little bit more time than respondents have a chance to have their thing I will mention is just motions practice Mr. Elias in talking on some of these arguments heard directly by the that has become more and more common to issues. But primarily -- Commission. file motions with the Commission. It has CHAIRMAN WALTHER: -- you I would ask that -- I would suggest become somewhat informal, an ad hoc weren't here this morning, but we are going that those types of processes be brought process, and I do think the Commission to extend the time for giving written into the audit process as well. would benefit and the regulated community comments to February 18. Two other small -- smaller would benefit from a more regular system MR. McGINLEY: Wonderful. matters. One, again, I have nothing but to know what motions are filed when and CHAIRMAN WALTHER: I'm good things to say about the way in which how they are -- how they are ruled upon. not trying to shortcut you. I just wanted to the advisory opinion process works at this That's kind of the big three I let you know. agency. It is a process that many of you wanted to hit in my opening statement, but MR. McGINLEY: I'll take that know I make regular use of and the reason I'd be happy to answer any questions opportunity. why is because it is, along with your people have. CHAIRMAN WALTHER: Just rulemakings, the thing that works the best. CHAIRMAN WALTHER: Thank what I'm trying to -- I could have -- I have MURs that you very much. Mr. McGinley? MR. McGINLEY: Thank you, sit here for near generations while I'm MR. McGINLEY: Thank you, Mr. Chairman. I wish -- I would like to trying to figure out how to get it out the Mr. Chairman. I also appreciate the point out that one of the things that a lot of other end. But by golly, I submitted an opportunity to provide some testimony on the regulated community cries out for is advisory opinion and within 60 days, I these important matters here today. Similar clarity on the regulations. Ambiguity -- have an answer. You guys, with one of to Marc, I'd like to put on the record that ambiguity, excuse me, in a statute or them this summer, I think within two just my comments today reflect my own regulation really needs to go in favor of the weeks we had an answer and the General experience as a practitioner before the speaker or the political participant -- is that Counsel’s office and the Commission Commission and do not necessarily reflect from my microphone or somebody else's? deserve a lot of credit for that. It is a the views of any of my clients. COMMISSIONER process that works that things move As an initial matter, I would like WEINTRAUB: Anybody that's got a quickly through it. to express my appreciation to the Blackberry, turn it off. My only comment is I have Commission for opening up this round of MR. McGINLEY: And the several times been in a bizarre discussions with the regulated community Commission regulations really do need to circumstance where I am sitting not 10 feet because I think they do bring to the provide clear notice on a number of these back and you all are debating what it is the forefront some important topics and some important issues. What activities are going requestor means or wants. I am sitting issues that have long been debated and to to be prohibited? What activities are going there waving saying I could tell you. I have this type of public airing of these to fall within the regulatory scheme of the could actually -- I could actually just shout issues, I think is important. Commission? it out. I could tell you what the answer is, I also have sympathy for the Otherwise, a lot of people are but then I might be removed by a guard. Commission and in fact the staff of the going to be left on the sidelines of the So what you will do to make Commission that has the important political process. I mean, you've seen a matters slightly odder is you will adjourn responsibilities that are outlined under the number of instances and articles from the so that you can then send a staffer out into Act and the Commission regulations last election cycle where people wanted to the hall to ask me the question that you because they do operate at the important speak out on important issues. People were could have just asked me 10 feet away intersection of politics and law. looking to address federal issues that from here. And we know that there is an touched upon federal officeholders who So my suggestion would be that important balancing act that's going to happened to be candidates at the time. during the AO process, counsel be happen there, because as we all know, the As we all know, the Congress permitted to sit at this table with their Commission regulates activity that touches does stay in session longer. It cuts deeper microphones turned off, microphones core First Amendment rights. It's both the into the election season and in fact, there turned off, but if there is a question that the speech rights and the associational rights. are now on a routine basis lame-duck Commission has, they be permitted to It's important to remember that as sessions. But groups, citizens groups, trade answer it, because I think there are times the Commission begins to take a candid associations, labor unions I would even where you adjourn or have to later come look at some of the enforcement matters, add, and others are looking to address these back to advisory opinions that you could the audit procedures, the advisory opinion important issues and they do need to air just simply get through if there is an procedures, ADR and some of the other advertisements. They do need to be able to opportunity for the requestor or requestor's responsibilities of the Commission going engage the public on a discussion of the forward throughout all of this. issues which necessarily touches upon

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) federal officeholders who happen to be greater procedural safeguards. Increase the Heritage Foundation, where I am now. candidates. opportunities for respondents to present And I hate to say that I agree with Marc So giving some clear guidance as their case directly to the Commission Elias because that will probably get me in to some of the rules that are governing without the filter of the Office of General trouble in some of the political circles I'm these types of important activities I think is Counsel interpreting or summarizing the in. a premium and something that the arguments of the respondent. But I do agree with him. When I Commission should really focus on. And It seems that there are a number of was coming up with my written comments, this is not an effort to provide an procedural steps where the Office of I came up with probably about two dozen opportunity for circumvention of the Act or General Counsel has the opportunity to things that I think you could address. But the regulations. Instead it's giving people present their case directly to the your problem is you're very busy and you clear notice what's prohibited and what's Commission and they do their best and don't have the time to do all that. permitted in the political sphere. they use their best efforts to summarize the So I narrowed it down to about Also during the past couple of issues that the respondent believes are seven issues, most of which involve cycles, we've seen a number of court important in their written submissions. including the due process on how you do decisions where some of the Commission's But I think that the Commission enforcement in other matters. And while most important regulations have been would benefit from a full airing of the facts some people might think that inputting due thrown out for one reason or another. This and the respondents' positions in process will slow down what you do, I has happened late into the cycle. This is enforcement matters so that they can reach actually think it improves the efficiency of not something that the Commission bears the right conclusion in some of these what you do and can make things faster. responsibility for, but when the matters. And it's always important to I think your role is made more coordination rules are thrown out late in a remember that during the enforcement difficult by the practical problems in cycle, and I have to say that the old rules process, even if somebody is ultimately enforcement because, frankly, the Federal are in effect, but directing the Commission found or to have the case dismissed, the Election Campaign Act is an overly or putting the Commission in the position process is the penalty. complex, ambiguous and confusing statute of deciding whether to appeal this, this There are many instances where which is something that most of the critics promotes uncertainty and confusion in the going through the discovery process takes overlook. regulated community. money, takes resources away from Second, I think you should keep in Also, the use of the enforcement individuals and organizations that they mind that most of your critics from process to make new law seems to be could have devoted to political speech. advocacy organizations have never something that has become the focus of CHAIRMAN WALTHER: Your represented any actual respondents before great debate over the past couple of years. time is a little over actually. That's where the FEC and enforcement actions and We've seen a number of areas where people written comments help, because sometimes therefore, they have no first-hand have decided that they wanted to air you get the benefit of a longer speech, knowledge or understanding of how the advertisements or engage in activities that because you can still give us written enforcement process works or how it discuss a number of important issues that comments. should work. And frankly, they don't have also involve federal officeholders and MR. McGINLEY: Absolutely. much concern over the due process rights candidates. CHAIRMAN WALTHER: And of respondents. If the Commission wishes to make we'll have plenty of questions, but that is That being said, and we need to a new law, if the Commission wishes to the -- to move along in about a 5- or 10- talk to about the seven issues very quickly, promulgate a new regulation, the regulated minutes basis. So Mr. von Spakovsky, it's I always thought it was just ridiculous that community would benefit from the notice great to see you here. when you were considering an advisory procedures and the common procedures so MR. von SPAKOVSKY: Thank opinion at a public hearing, if we had that everybody has clear notice as to what's you, Mr. Chairman, the Commissioners. I questions about the factual circumstances going to be prohibited and what's going to appreciate being invited back to speak and which the General Counsel didn't know the be permitted under the new regulatory I guess I could say that since I'm no longer answer to, we could not simply ask Marc regime. a public official, I can finally tell you Elias sitting in the audience to answer the It also creates an unfair burden to exactly what I think about things. But then question. those individuals or organizations that are Chairman -- I think you should change your the subject of the enforcement matters that CHAIRMAN WALTHER: Why procedures so that once, as you know, what are used to break new ground in the don't you do that for a change? happens is the General Counsel gives a regulation of political activity. So we think MR. von SPAKOVSKY: I was presentation on the advisory opinion and I that the notice and comment procedures going to say, Chairman Walther and think what you ought to do is give the would provide -- is the proper route to go Commissioner Weintraub, and I used to do requestors the option, you know, five ahead and do that. that anyway when I was a public official. minutes, 10 minutes, to sit here at the table Also we believe that respondents I do need to make clear I'm here and after the General Counsel has made a in enforcement matters should be afforded as a private citizen and not on behalf of the presentation, if the requestor wants to, they

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) can come up here and make a quick investigations if you believe they're going person's already been prosecuted, convicted presentation in which they say, we too far afield and are too broad. and the judge has already sentenced them. completely agree with the General Deposition practices. As you And of course, us being there at the same Counsel's view of this, or they say, we know, the FEC used to refuse to give the time a judge is sentencing them is the disagree with the draft AO and here's why. depositions of respondents to respondents. perfect time for the FEC to be there The advantage of that is that it's You changed that. Now when you send a because you can try to persuade the judge going to give you all the full facts and probable cause brief out to respondents, in addition to criminal penalties he should information you need so that you can make they are able to request from the General also impose civil penalties. an opinion, plus if you have questions that Counsel copies of any depositions or other Also in the past, unfortunately the General Counsel can't answer, the documents that the conclusions of the DOJ has -- Main Justice has been requestor or his counsel sitting out here, General Counsel that you have violated the extremely reluctant to move for an can answer those questions. Act are based on. exception under rule 6 of the Criminal That is actually going to speed up Look, the enforcement process Rules of Procedure to get an exception to the process, because as you know, in many here is a -- you act like administrative law the grand jury secrecy requirement. instances, we would table the AO until the judges. It's an adjudicative process. There are a couple of cases in the FEC's next public meeting so that those questions Respondents are entitled to not just those history where the local U.S. Attorney was could get answered. Well, you won't have depositions and documents, but any willing to do that and got us information to table the draft AOs because you're going exculpatory information that OGC has that allowed the FEC to do an to have the requestor right here. I think it's developed and they should be able to get investigation. But for whatever reasons, an easy and quick improvement to the due documents, depositions and other things Main Justice is against doing that and that process of the situation. that throw reasonable doubt at any frankly needs to change so that you can do I also completely agree that you conclusions they have violated the law. joint investigations. need to formalize the motions process. It's You asked a question about Settlements and penalties. I think extremely difficult for respondents to have whether you should take into account you should cease sending out letters of a frivolous case -- complaint dismissed pending dates for elections when you are admonishment. The statute is very specific before they unfairly incur a great deal of deciding to release information, closing of on how you can penalize someone with time, resources and attorneys fees and FEC a file, filing suit. To that I think you civil penalties if they violate the law. It investigation and it's virtually impossible should just say no. The FEC has a great doesn't say anything about being issued -- for respondents to bring to the attention of history of making enforcement decisions being able to issue letters of the Commissioners a problem regarding the on a non-partisan basis. All of you know admonishment. scope of the investigation. that most of the decisions are unanimous. I do not think you should be If they believe -- look, I'll be the There are a number of cases where applying some kind of indeterminate first to tell you, I think the Office of you split enforcement cases of less than 1 penalty that is not authorized by statute. General Counsel acts in good faith in doing percent and you look at the long history. I And you know, if you think someone has these investigations, but the discretionary think if you start taking into account violated FECA, then vote that way and authority on enforcement rests with you. pending elections, you endanger that impose a civil penalty. If you don't think You are the ones who are answerable to the process. I think when you close a file, you they have violated the law or you don't public and to Congress, not the Office of release the documents. It doesn't matter think a civil penalty should be paid, then General Counsel, and you should have a what's happening in the outside world. close -- dismiss the case and close it. But method for people to be able to file, for Same decision if you're going to don't send out letters of admonishment example, motions for protective orders, decide to sue someone because they won't when the statute doesn't authorize it. similar to what happens in federal court, if settle. You do it as soon as you make the Sampling. The use of sampling, I they believe that requests for information, decision. Doesn't matter what the outside would agree, is a good tool for the Audit subpoenas for documents, depositions, are world is saying. Division to use when it is auditing trying to get information that is not relevant The Memorandum of campaign organizations, particularly to the investigation, that is too broad and Understanding with the Department of because of the voluminous amount of the too voluminous. Justice, I think that does need to be records. However, while it may be a viable Those motions ought to be served amended. You have two problems. The tool to use when doing an audit, I do not on both the Office of General Counsel and FEC and DOJ do not do enough work on believe it should be used to calculate the the secretary of the Commission so that joint investigations when there are both penalty that is due for a violation of the you're made immediately aware of it and criminal and civil penalties, one because law. you can make a decision. DOJ is often reluctant to send any If a federal law enforcement I don't think this is going to delay information to the FEC because they say agency is determined to fine an individual, the enforcement process. I think it's going well it's privileged. an organization that is engaged in political to speed it up because you will be able to Often times by the time you find activity that is normally protected by the restrict or cut down the size of out about it and DOJ sends it over, the First Amendment, no penalty should be

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) calculated based on only a sample and an COMMISSIONER McGAHN: COMMISSIONER McGAHN: estimate of the amount of wrongdoing. It Appreciate it. Where to begin? Where to But let's kind of focus on some actually should only be based on the actual begin? Admonishment, could that be done concrete things we can do to get at that. wrongdoing found by the FEC's lawyers, in conciliation, people are willing to agree We've had some testimony this morning investigators and auditors. to be admonished as some sort of pseudo that I think answers that question, at least Reports Analysis. The regulated penalty; do you think that's within the in the minds of some of the commenters, community's most common interaction statute? It's really more to Hans. right? Some of these -- there's the view with the agency -- MR. ELIAS: Go ahead. that some of these MURs are precedent so CHAIRMAN WALTHER: MR. von SPAKOVSKY: you have to script the conciliation Excuse me, Mr. von Spakovsky, we're over Certainly when you're holding -- when agreement a certain way so that the public your 10 minutes. I'm just wondering at this you're in conciliation with a respondent has notice and that's a question that will point if we shouldn't begin the questions. you're basically holding a gun to their head. take days to debate, whether or not that's MR. von SPAKOVSKY: I'll be I'm not sure they're going to -- that's what really the case. done -- you were going to say, Marc, wasn't it? But talking about conciliation, if CHAIRMAN WALTHER: Sure, MR. ELIAS: I have to say, one of you do get in a spot where you feel like this go ahead. the criticisms which I left out of my oral is getting silly and you're just not MR. von SPAKOVSKY: -- with presentation, can't we just settle cases? Do communicating with counsel in a way that this last -- this last item. RAD, the Reports my clients have to wear scarlet letters? Do you think is effective, what can you do as a Analysis Division, has the most contact they need to stand up and give speeches lawyer to move it along? Can you take it with the regulated community everyday -- I before -- write on the blackboard 100 to the Commission? What's the perception turned my Blackberry off, so it wasn't me -- times, I will not illegally coordinate, I will out there? and when do they do that? Well, it's all the not illegally coordinate, and by the way, I'll It seems like there's an ad hoc way time when they issue requests for do a better job seeking best efforts? where you can maybe send an offer to the additional information or RFAIs. Why do we need to admonish? Commission, but that's not really written Now they do that based on Why do we need to admit and -- why can't down anywhere. What -- as a practical guidelines that you issue and you approve. we just settle cases? More -- I waste so matter, what can we do about all of this But -- and again, I think they act in good much time negotiating with the staff over that you're talking about? Marc? faith when they're trying to do that. But whether it's the Commission contends that MR. ELIAS: Oh, yes, sorry, I again, the current procedures vest a lot of it has enough evidence and we believe that thought you had heard enough from me. discretion in the RAD staff and I think that they don't. Why can't we just settle cases? Yeah, there are times when we send offers discretionary -- those determinations need Every other agency you go and directly to the Commission. I think the to be made by the Commissioners. you settle a case. The FEC, it's like a staff generally views that as an active, open What I think you should do is moral judgment. It's if my client doesn't aggression, so it is -- to say that it's most people outside the agency don't know admit that they are bad people. Maybe we frowned upon is an understatement. the Commissioners set up committees, two should just have -- just begin by saying, COMMISSIONER McGAHN: Commissioners each, to monitor major we're bad people. Okay, we're bad people So if we codify it somewhere, whether a areas, litigation, regulations. You need a because we engaged in political speech. policy statement or reg or something, committee that monitors the Reports For that, we are sorry. We never should would you think that would mitigate your Analysis Division, meets monthly, takes a have done that. perception, whether reasonable or look at and has a report on all of the RFAIs We did the unthinkable, we ran unreasonable, that it's seen as an act of that are issued and why they're being for federal office. We tried to support a aggression? I mean, if the Commission issued. candidate of our choice and for that, we are formally says, you can do this? That will allow you to proactively eternally sorry and we're bad people. Why MR. ELIAS: Yeah, I think that fix problems that are occurring in the do we need to admonish people? would help. I think having some reporting area because you're going to find COMMISSIONER McGAHN: mechanism for either the staff to be more out about it and know about it and you'll be Marc. empowered to settle cases or for a able to fix the problem and I think it will MR. ELIAS: Let's just settle commissioner, maybe an individual improve things. cases. commissioner, maybe a group of That's all I have, Mr. Chairman. COMMISSIONER McGAHN: Commissioners or maybe some meeting of Thank you. Marc, we have very limited time. I Commissioners, to meet to settle cases CHAIRMAN WALTHER: Thank appreciate all that. It sounds like some of would be helpful. Because a lot of times I you very much. Mr. McGahn? our executive sessions and I appreciate you can settle a felony murder trial with a COMMISSIONER McGAHN: reading my script. single prosecutor in the U.S. Attorneys Am I first? (Laughter.) Office and yet when I try to settle a $8,000 CHAIRMAN WALTHER: disclaimer violation, I am told "the You're up first, if you wish to be so. Commission feels very strongly."

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009)

Then I'll say to the lawyer, really, know, with an understanding that look, MR. ELIAS: I do think that there the Commission really thinks very -- you're going to devote some of your remains a reticence in some quarters to COMMISSIONER McGAHN: I resources to compliance. I think in those share information with the respondent, stay up at night worrying about -- situations maybe the Commission or the whether it is deposition transcripts at MR. ELIAS: And then it will be, OGC should be more flexible in putting certain phases. The sua sponte policy had well I'll check with my supervisor and then respondents back into the ADR track an unintended negative consequence, the supervisor will check with their because it's going to help the respondent in which is we went from a circumstance supervisor and then they'll run it by the the long run. where you were trying to encourage people Commission. So having some process by COMMISSIONER McGAHN: to come in on their own to settle their own which either the staff is empowered to Should respondents be able to request claims to now people bringing in sua simply settle cases or if it requires those ADR? spontes to essentially get other people in levels of whatever, then maybe having a MR. McGINLEY: Yes. trouble. process where a commissioner, there's like COMMISSIONER McGAHN: That person who is getting in an emergency settlement commissioner Should -- I guess the burden should be on trouble doesn't get a copy of the sua sponte who can be brought in and who's them in some sort to explain why they and they don't get a vote and they don't get empowered to just settle cases. But things should qualify for ADR? A simple request a complaint. They don't get any of the -- for ADR doesn't really get us anywhere. normal process they get. I think that it's COMMISSIONER McGAHN: I MR. McGINLEY: That's correct unfortunate that you wind up in some of volunteer. and you can look at the published these situations where you could facilitate MR. McGINLEY: I'd actually Commission precedent both in the ADR cases moving quicker through the system if like to just kind of weigh in on this and track, which I understand the Commission you just said to the respondent, obviously echo some of the comments that Marc and the OGC attorneys will tell you don't -- you're not going to share work product, made, but also say that in many instances, doesn't have any precedential value. But you're not going to share things that are what you have is a situation where the eventually you begin to develop a body of sensitive. respondent and the OGC have decided -- precedent, of situations that you can look at But there's no reason why in an you know, they've come to an agreement where similarly situated respondents, it was enforcement context you wouldn't want to on the facts of the matter and you can apply decided that they would benefit from the give the respondent, here's the evidence, the law. education and the training and perhaps here's why we think you violated the law. But what the difference is in the devoting additional resources to To tell me well don't worry, it's all penalty amount or some of the language. I compliance as opposed to just penalizing contained in the General Counsel's report, think that standardizing some type of them and doing what Marc said is make everything you need to know is in the procedure where the respondent can bring them go write 50 times on the board, I was General Counsel's report, well with all due this matter or their version of events a bad organization. respect, I'd like to see the raw deposition directly to the Commission would actually COMMISSIONER McGAHN: transcripts myself rather than assume that benefit both the Commission and the Speaking of writing on the board, everything that's relevant is in the General respondent because it may cut down on the something that Hans had talked about was Counsel's report. resources of the Commission that get that one of the positive changes from the So I do think that sharing more devoted to these extended and protracted last time the Commission had a hearing information earlier in the process would negotiations, but also the -- of the was the deposition procedures, you get a help settle cases. To get to something that respondent in trying to negotiate these copy of your transcript. The notion of Commissioner von Spakovsky said, it types of settlement. giving over transcripts at the probable actually would make it not more And one other thing that I'd like to cause stage probably makes a lot of sense, burdensome; it would actually make the add in addition to your admonishment, but the reality is, very few cases get to the process move more quickly. there may be situations where a matter was probable cause stage because there's a lot CHAIRMAN WALTHER: Let's originally put down the enforcement matter of pre-probable cause conciliation. see -- Commissioner Weintraub? track, but after the facts are developed and Given that that occurs, how do we COMMISSIONER everything is looked at and if you look at then allow respondents to get information WEINTRAUB: Thank you, Mr. Chairman, the published Commission precedent, this that may be there? We just hope it's and welcome. As with the last panel, I feel matter is more suited for ADR where the disclosed under the conciliation umbrella? like some of you I've been having these focus is more on not only helping the Help me think through situations where it's discussions with for years in other contexts, respondents understand what went wrong, pre-probable cause, you're trying to so on the AOs -- but what are the tools that the Commission conciliate and you're in this -- you're in this MR. von SPAKOVSKY: Except can help provide to ensure that this doesn't vortex of you really don't want to go to now you can outvote me. happen in the future? briefs, but you think there may be a legal COMMISSIONER So you see a lot of the respondents issue that you disagree on? Help my WEINTRAUB: Well, I could always end up in the Commission training or, you thinking in this. outvote you if I could talk some other

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) people into agreeing with me. But on the happens to be running for office, therefore saying about other motions. I was just AOs we always agreed, on the notion that there must be coordination, because we're trying to figure out if they wanted to we needed to provide some process for you assuming we're in constant contact. And so experiment with some kind of motions and to answer the question when you're out there's really no evidence for the not other kind of motions, is there -- is there waving your hands around. coordination case to go forward in that type there a real need to have a motion to Before you started, Mr. Elias, I of fact pattern and I think that there should dismiss at the same point when you're predicted that you would be more animated be some opportunity for the respondent always filing a response anyway; are we than your partner and you can go back and who receives one of these complaints to going to get something else out of that? tell him that that was indeed the case. have the opportunity to present to the MR. McGINLEY: I might just MR. ELIAS: -- point. Commission the reasons why they should add one more thing. The motion to dismiss COMMISSIONER not go forward with the investigation. may not just come at the complaint phase. WEINTRAUB: No, you never do. You COMMISSIONER I mean, it may come when you get the facts never do. Motion practice, is there -- I'm WEINTRAUB: Why can't you do that in or legal analysis that's supposed to justify trying to figure out whether there is a real the response? the RTB finding. So when the respondent reason to have a motion to dismiss at the MR. McGINLEY: Because we do reads that, they should -- they may be -- beginning stage of a complaint, because as do it in the response, but I also think that you may be able to standardize some type you know, frequently when we get the there's the opportunity where it's the of practice where they come back to you. response, it will include a request that we question and answer session where you It may be a motion to reconsider, a motion dismiss. I mean, that's sort of what the may have some questions that we may be to dismiss, or they can come before you response -- that is the best possible able to answer. and say, here's where we disagree with this response for the respondent to its -- to its COMMISSIONER and this is why and this is why you should response is if we agree with them and say WEINTRAUB: You're assuming that you not proceed with the investigation in this yeah, we're going to dismiss this. get a hearing on your motion. matter. Is there any other -- do we get any MR. McGINLEY: That's what I MR. von SPAKOVSKY: The other benefit from having a formal motion would advocate. only thing I would say about formalizing it rather than just packaging that in the way it COMMISSIONER is as you know, not everyone who appears generally is now in the response? And let WEINTRAUB: Because that's a separate before this Commission can afford Marc me, by the way, in response to something question. We could have motion practices Elias, who has practiced a long time and that Mr. McGinley said earlier, you know, without hearings also. knows he can file these kind of motions, just because you send your brief or your MR. McGINLEY: Do you want - even though there's no formal policy. argument or your response to the Counsel’s - And lots of people get lawyers or office, please don't assume that we're not MR. ELIAS: I was going to say, I on their own who don't necessarily know reading it. We really do read what you just -- I don't want this -- to narrow to just the procedures, unless you formalize it so have to say. motions to dismiss. My point about they can see it up on the web and they see So if that's your goal is to make motions practice was not just motions to that they can file these kind of motions, sure that we're reading it, if you feel dismiss. It's actually -- I have filed over they may not realize they can do that. So I comfortable that we're reading it anyway, the years, I've filed motions to quash, think you should -- you should formalize it. put that issue aside if there's some other motions to reconsider, motions to consider COMMISSIONER benefit to having it by a formal motion. new evidence, motions for summary WEINTRAUB: The only other thing I Anybody? judgment, motions to dismiss, motions for wanted to ask you about is, and I suspect I MR. McGINLEY: I would a more definite statement. may not be able to get anybody to budge on actually -- I would actually argue yes. I I have filed all kinds of motions this, is whether there may be some benefit think that there is some benefit for and you know what, they're no place to be in some circumstances to a letter of providing for some type of standardized found in your little orange book or admonishment, and maybe the problem is procedure for a motion to dismiss at the whatever color it is this -- over the word. Maybe we could word them complaint phase. I mean, many times these COMMISSIONER differently. complaints are filed for political reasons, WEINTRAUB: We read them all. But let's say we get a sua sponte. for the press headlines, et cetera. MR. ELIAS: Right, but wouldn't Somebody comes in, small dollar value They allege a violation, but really it be better than me just ad hoc filing these violation, but they found out that somebody there are no facts to back it up or the facts motions for there to actually be a system by in their organization, rogue employee was that are stated or the newspapers that are -- which if I want to file a motion to breaking the law and now they found it and articles that are attached to the complaint reconsider, there's a process for doing so as they want to come to the FEC and tell us really don't get you to the evidentiary opposed to me just putting it on a caption that they're going to clean up and do better. threshold to initiate an investigation. and firing it off? It's not -- we don't want to issue a I played touch football with COMMISSIONER penalty. For one thing, because they came somebody when I was six years old who WEINTRAUB: No, I hear what you're in on a sua sponte basis and we want to

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) give them credit for that. Or it's a low questions of law with a process that you COMMISSIONER BAUERLY: dollar amount anyway and we just don't understood, and especially at the Thank you, Mr. Chairman. Mr. von think it's worth it. And we don't want to congressional level. I mean, at the Spakovsky, I have a question for you that I engage in a protracted process where presidential level they go in knowing think will help make the world right again, they're going to have to spend a lot of what's coming their way. But at the because I believe you disagree with Mr. money on lawyers to represent them. congressional level, they may hear that Elias on this point and maybe Mr. We just want to have some kind of there's going to be an audit. They believe McGinley has an opinion on this as well. acknowledgement that yes, that's a that what's going to happen is some people It's about the timing of releasing violation of the law and we appreciate your are going to come in and figure out whether the Commission's conclusions, the telling us about it and we want everybody or not money was embezzled, money was proximity to an election which is -- which else to know that that's a violation of the spent, whether the cash-on-hand is really the respondent may either feel is a good or law. Any value in that? there or whether there are in fact 50 yard a bad thing depending on the outcome, MR. von SPAKOVSKY: If the signs left put up that were paid for. They whether opponents made or the statute authorized you to do that, perhaps. think they're going to be audited and in complainant who filed the case, they feel But in this matter, I'm a strict fact, what they often times confront are it's a good or a bad thing, and I would like constructionist because -- Interim Audit Reports that present novel to hear a little bit more about your views on COMMISSIONER legal issues. what considerations, if any, the WEINTRAUB: I'm shocked. Yes, you are given an opportunity Commission should take with respect to MR. von SPAKOVSKY: Look, to respond to them, but you are responding timing. FECA, as you know from the lawsuits that essentially back. You're not assigned to the MR. von SPAKOVSKY: I think this agency has fought, FECA covers an General Counsel’s office. You're not you should have a standard internal rule on area that gets the most protection under the responding to the Commission in the sense how quickly you release to the public a Constitution in the First Amendment. If that you're going to get an opportunity to closed file and you should stick to that rule you think a violation really doesn't deserve be heard. You're responding back to the and not take in anything outside going on a civil penalty, fine. Vote to find that they Audit Division that has in whatever fashion like elections into consideration, because if violated FECA, but it's not sufficient to the Audit Division makes these decisions you start taking that into consideration, the impose a civil penalty. and I have some questions about that, Commissioners are going to inevitably get That's what the statute authorizes because Lord knows, there have been times into fights over this about whether it should you to do. It doesn't authorize you to issue where I've had conversations with the be released or not. a letter of admonishment or something like auditors and I might, but you know when Well, if the release -- if the finding that. we get to the Commission, they're not was that a candidate didn't violate the law, COMMISSIONER going to agree with this. well you know, some Commissioners may WEINTRAUB: Do you think that would I don't know that this is our say yeah, we got to release that right away be different -- you think that would be position, thinking well, how do you have a and others say well no, we probably actually different if we voted to say there's position that you know that the shouldn't release it this close to the election been a violation of the law here as opposed Commission is not going to accept? So it's because it may affect it. to we're admonishing you for violating the a weird process. You don't -- if at the RTB You're going to get into -- you're law? stage the Commission doesn't agree with going to get into all kinds of arguments MR. von SPAKOVSKY: I think the General Counsel’s office, it gets about this and even if -- even if you're it is because you're saying it's a minor -- it's dismissed. The process just ends. doing what you think is the right thing to such a minor violation that we don't think a And yet, audit sort of continues do in the final decision, it really has no civil penalty should be paid. Again, I think along, continues along until you get this partisanship in it. The outside world may it is different because as I said, the statute audit report, which like I said, now features not see it that way because there are always doesn't authorize you to issue a letter of the we don't agree with you, but we are circumstances that occur that can, as I well admonishment. going to allow them to stand its findings know from experience, it can make CHAIRMAN WALTHER: -- at anyway, which is frankly, I think not only something that the Commissioners did this point, Commissioner Hunter. not in the statute, I think it's an affront. It's entirely trying to comply with the law and COMMISSIONER HUNTER: an affront to the respondent. It's an affront, people on the outside look at it and say oh, Thank you. My question is for Mr. Elias I think frankly, to the Commission that they did that for partisan reasons. about the audit process. Could you tell -- there are these findings that the It just -- it opens up this huge talk to us a little bit about the Interim Audit Commission has voted down. Pandora's Box that I think you should avoid procedures and our -- my understanding is You get a chance to say you're as much as possible. that the respondents do have an opportunity sorry, but it's not the same as in the COMMISSIONER BAUERLY: to file a brief at that point. enforcement process. Mr. Elias? MR. ELIAS: They do, but you CHAIRMAN WALTHER: Is MR. ELIAS: I do think that there are -- you are often times arguing over there any -- Commissioner Bauerly? are some -- that the flip side to that is that

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) there can be a perception, whether accurate proximity to an election that says this all the inventory is where it's supposed to or not, that the Commission or the committee did this wrong and they'll state be. Commission staff is leveraging the election that there's hundreds of thousands of But if it's going to go beyond that, in the process. There's also just some dollars at issue even though the if it's going to go beyond an audit and it's practical workload considerations. Commission has told them to go back and going to go into whether or not my clients The complaint gets filed in 2004, reevaluate the issue. acted lawfully, then there needs to be a and the Commission staff decides that I think that brings up the revised audit process where the October of 2008 is a great time to decide fundamental question, and I've heard it Commissioners own it, not that they sit that I have 20 days to respond. So the debated in prior Commissions, is the back and say oh geez, it's another audit ethics process, as many of you know, has a Commission receiving an audit report or is report, that they own it in the same way moratorium around the elections where the Commission adopting an audit report? that you own the enforcement process. simply things don't happen, where there are I think that that's one of the fundamental You're in the innards of it and you're not, no matter how meritorious or non- issues that the Commission is going to have making decisions about what the law is and meritorious, they're just blackout periods. to grapple with in the audit process and is not. I think that some consideration for determine whether the Commissioners In my experience, that simply both workload and also the question of themselves are taking ownership of that doesn't go on right now in the audit process whether or not there was a leveraging report or if they're simply receiving the and Bill is exactly right about that. going on would be worthwhile for the report of the staff. MR. McGINLEY: I would also Commission to consider. MR. ELIAS: I think that Mr. just add that I think maybe the -- in MR. McGINLEY: I would agree McGinley is 100 percent correct and I think reviewing the audit process itself, giving with that, with Mr. Elias' comments on that that it is a mess currently. It is just an the subject of the audit an opportunity to point, but I would also extend it to the absolute mess. I remember during the address the Commission, whether it's at the outer process, which would be the Kerry/Edwards audit that I keep alluding Interim Audit Report stage before a draft publication of the Final Audit Report for to, there was some congressional candidate, final report is prepared for the consideration by the Commission or the I meant to go look him up. There was a Commission's review, or some other point Commission in fact holding a meeting on a Republican congressional candidate who in the process where the subject of the audit Final Audit Report. was also going through -- was also having can come forward and explain their side of Because as we've seen in the audit their audit heard that day and I remember the story I think would be helpful to the process, the audit process is really saying to a number of people in advance, I Commission for the audit process. becoming, as Marc has pointed out said, as bad as I feel for John Kerry and I might add that if the audits are numerous times here today, it's that the John Edwards, he has a lawyer here who's going to become part of the fact-finding for audit process is almost becoming the fact- fighting this who knows this process, who future enforcement actions, then it may be finding process for initiating an the Commissioners will -- will listen to worth pulling the audits back, the final -- enforcement action down the road. For all whether they agree with me or not and that the consideration of the Final Audit Report the procedural problems that Marc has was a presidential campaign. from the public hearing and consider it an identified, that process is not fair to the This poor congressional candidate executive session. Then it can release the subject of the audit if they need an doesn't stand a chance. He doesn't stand a Final Audit Report after you've flushed out opportunity to respond. chance. He's out in some place in America. the facts, flushed out the legal theories and You often see times in the audit He lost. He was a losing Republican put it on the public record. process where the exit conference is going candidate. He lost his election. A bunch of CHAIRMAN WALTHER: Thank to identify certain issues and they're going auditors came in, tore up the place, looked you. Thanks -- to get modified in the Interim Audit Report at every receipt, came in, sent in an audit MR. von SPAKOVSKY: I just and based upon the response of the report and my guess is the Commission -- want to say, I actually agree with this and I respondent, then the Final Audit Report each of the Commissioners probably spent think at the Interim Audit stage -- may go off in a completely different less than 10 minutes considering whether CHAIRMAN WALTHER: You direction and the subject of the audit is or not that congressional candidate got a guys have agreed on a lot today. going to want to have an opportunity to fair shake. MR. von SPAKOVSKY: Yeah, weigh in on that and they're going to start And that thing comes -- and I the campaign organization needs to have firing off letters to the auditors, cc'ing the think this comes flying through the process. the ability to appear here at this table and Commission trying to get their case before It is the Commission needs to own the argue about why they think the audit is consideration of the Final Audit Report. audit report or, or, or it needs to make an incorrect and the findings the Interim In some instances, we've seen that audit about auditing, not about whether my Audit's made. Mr. Chairman and the Commission has actually disagreed clients obeyed the law, not about whether Commissioner Weintraub, remember that with the conclusions of the auditors and my clients followed the disclaimer we had this debate when I was on the sent it back to them. Nonetheless, you requirements, but about whether or not all Commission about findings of the Audit have this piece of paper out there in close the money is where it's supposed to be and

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009)

Division that the Commissioners did not violation of FECA has occurred and while complaints, but I think -- I think they have agree on. they're signed and sworn to and notarized, been -- that they are fearful of simply Again, I would go back to you are in 11 CFR, Section 111.4 it says that they dismissing complaints that are clearly the interpreters of the law in whether should -- that they should clearly identify frivolous because they're afraid that the someone has violated it or not. If you vote each person or entity who is alleged to have Commissioners may get upset. I think they and believe that a recommended audit committed a violation of the -- if need to be empowered more to be able to finding of a violation of law is in fact not a statements are not based upon personal do that. violation of law, that needs to disappear knowledge, they should be accompanied by I'm not quite sure how you do that from the Final Audit Report, because you an identification of a source of information, internally, but that's one of the keys to this. decided there was no violation of the law. that there should also be a clear and concise MR. ELIAS: This is -- I think It is a -- it is a discredit and a recitation of the facts which describe a adding those procedures are fine, but I discourtesy to the people being audited to violation of statute or regulation, and that it think people would be able to jump through have some interim report say well, we should be accompanied by any those hoops and you'd still have frivolous think you violated the law when in fact the documentation supporting the facts alleged. complaints. To me the question of people who are the auditors of this agency As I mentioned, these are frivolous complaints is sort of the mirror to make that decision say no, there was no currently discretionary but not -- they're image of how we settle cases and I don't violation of the law. encouraged, but they're not mandatory. know, having never worked at the FEC, CHAIRMAN WALTHER: Thank Mr. Baran said that if these were to become what the internal process is. you very much -- at this point. Okay, Vice mandatory this would serve as an effective I mentioned maybe it's the Chairman? filter so that we could -- so that if a appointment of a single Commissioner. VICE CHAIRMAN PETERSEN: complaint didn't contain these elements, But there has to be a way. I mean, there Thank you, Mr. Chairman. On the first they would be returned to the complainant has to be a way that some of these panel this morning, we were talking about as not being a sufficient complaint before a complaints I get, that someone in OGC or a a recommendation that was given to us by General Counsel's report has to be prepared single Commissioner or someone can, Jan Baran regarding initial complaint and before a respondent's counsel has to whether they contain those four elements or processing. He talked about that in 11 prepare a response and take the time and not, simply look at this and say you know CFR, Section 111.4, there are four resources that are necessary. what, this is not a -- this is going nowhere, additional criteria for a complaint that -- as So I just wanted to throw that out so we're just going to dismiss this. We're the language says, that a complainant and see what you think about that just going to -- we're going to dismiss it off should conform to. suggestion. And as I mentioned, are there the top before we waste any time and These are discretionary at this other suggestions you might have about energy on this. time, but his recommendation was that other tools that the Commission might be I think that the will to do that is these should be mandatory and this would able to use to -- even before we get to an more important than any regulatory change. serve as a filter at the outset so that RTB vote, are there are tools we could MR. McGINLEY: I would agree frivolous complaints could be dealt with consider using to filter out frivolous with that, but I'd half jokingly state maybe quickly so that they don't have to go complaints or ones that are just purely we should turn the complaint process into through and go to an RTB vote, that they politically motivated and that really have something similar to the advisory opinion would be disposed of before even that time. no legal merit? request process, where you almost get the I just wanted to pose to you, to all MR. von SPAKOVSKY: I think mini discovery before the advisory opinion three of you if you wish, what you think you should give serious consideration to is accepted. Can you flesh out the facts about this recommendation and what other doing that. Some of the complaints that here or what information do you have on suggestions you might have for the come in are based on somebody just this point that the Commission can Commission, what other tools we might reading a newspaper story and having spent consider and so that maybe those four want to consider using to at the threshold the last couple of years dealing with points, if the staff is somehow empowered get rid of complaints that really have no reporters. If a story -- if a reporter gets -- if to send it back to the complainant and say merit to them whatsoever so that not only 50 percent of what's in a story is the truth, well what else do you have here, I think Commission resources, but respondent that's pretty good. I think you should give may be a worthwhile exercise. resources don't get wasted. serious consideration to that. I think it would save Commission MR. McGINLEY: Maybe you Also quite frankly, we have resources and I also believe it would save could -- maybe you could summarize his certain ways in OGC -- the potential respondent's resources if comments since we didn't have the COMMISSIONER somebody has just filed a complaint just to opportunity -- WEINTRAUB: The reporters are laughing file a complaint and not alleged any true VICE CHAIRMAN PETERSEN: at you behind you. violations. Let me just say, in addition to the -- in (Laughter.) VICE CHAIRMAN PETERSEN: addition to the statutory requirements that MR. von SPAKOVSKY: There Just one other brief question. I don't know they be filed by a person who believes a are lawyers in OGC who deal with those if any of you were here on the prior panel.

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009)

Former Commissioner Mason, in speaking that they have decreed in RAD that we will shared from the investigative file before the about requests for additional information, do it this way until we tell you to do it that probable cause stage? letters from RAD, raised the question that way. MR. ELIAS: Absolutely. I think he didn't -- or raised the point that he didn't I just wonder to what extent the I was responding to a question about think that publicizing those letters really Commission is voting on those decisions, depositions specifically and then took it accomplished any purpose. because if they're not, then I think we have somewhat broadly. But obviously there are I wanted to get your thoughts on a problem. If they are, then it would be going to be constraints on you. The most that and also just your thoughts on the way nice to have that be some public obvious one is I think the last one you -- in the comments that were filed by Mr. acknowledgement of that. But there is mentioned where it's 6C material from the Elias and his colleagues raised the definitely -- there are definitely times Department of Justice and there's some -- question, of concerns about some of the where you're getting "advice" from RAD. there's some restriction that it's under. bases on which letters from the Reports Well, advice from RAD is nice except if My experience with matters Analysis Division have been sent. So I you don't take their advice, you get a nasty before the FEC is that I rarely run across wanted to give you that opportunity to talk letter in the public record and you get circumstances where that is -- where that's about that general issue, but also the threatened with audit, which is on to the an issue. But if it's an issue it's a genuine specific proposal about whether or not is next phase of the process. one. Multiple respondents again, that is there a purpose served by having these So I do have concerns about that often times worked around because requests for additional information made and think that there needs to be more obviously often times the respondents are public? Commission involvement in that. willing to consent to it. MR. ELIAS: Yeah. Since I only CHAIRMAN WALTHER: Thank But there are certainly issues that wanted to come with a limited number of you. I'm going to move on if that's okay at have to be -- have to be addressed. I think grievances, I didn't mention the RAD this time. Ms. Duncan? it's more of a mindset question than it is a letters, but since you ask. There is a MS. DUNCAN: Thank you, Mr. question of an absolute rule. somewhat ad hoc quality to them at times. Chairman, and good afternoon to the panel. MS. DUNCAN: Thank you. Let I have noted over the years that at Mr. Elias, I wanted to explore a bit more me, if I may just ask -- any given time if I advise a client to with you about your recommendation or CHAIRMAN WALTHER: Sure. include the name of a candidate or not in a suggestion that the Office of General MS. DUNCAN: -- a question or joint fundraising committee between a Counsel share more information from the two about the advisory opinion process. In party and a candidate, I have a 50/50 shot investigative file before the probable cause your written comments, Mr. Bauer, you of either getting the following. You appear to believe stage. mentioned that -- to be an authorized committee without the There are some immediate MR. ELIAS: Elias. name of a candidate, or you appear to have concerns that come to my mind about MS. DUNCAN: I'm sorry. Did I included the name of the candidate sharing substantial or large -- substantial call you Mr. Bauer twice? improperly. amounts or all of the information from the MR. ELIAS: You did. No, once. So it appears that sometimes RAD investigative files and they probably come MS. DUNCAN: Oh, just once. does want them in, sometimes RAD doesn't to your mind as well. Some have to do I'm sorry. want them in. It kind of runs hot and cold. with confidentiality if we're dealing with MR. ELIAS: It's okay. I take it as There is a -- there are times where you multiple respondents. Other concerns have a compliment. wind up talking to the Reports Analysis to do with potentially diminishing the MS. DUNCAN: We like him too. Division about why they are telling you to likelihood that other witnesses will We like -- do something some way and you are left cooperate or respond to our informal MR. ELIAS: You like him better. feeling unsatisfied. discovery requests or subpoenas. MS. DUNCAN: Some days we Yet one of the reasons why I file Other concerns that come to mind do. so many advisory opinion requests is have to do with diminishing potentially the (Laughter.) because I believe very strongly that the six likelihood of interagency cooperation and I MR. ELIAS: I believe that. of you who sit before me who have been mean by that the Department of Justice MS. DUNCAN: But today it's appointed by the President of the United sharing information with us if it's been pretty equal. States, confirmed by the United States concerned that that information will then be MR. ELIAS: Most -- Senate, and taken an oath to administer and shared with respondents. MS. DUNCAN: I do apologize. I uphold the Federal Election Campaign Act, I don't imagine that you agree do apologize. You mentioned in your have the statutory obligation and right to necessarily on the conclusion to this, but I written comments what we call I guess the interpret the Act. wondered if you would agree that those stalking horse AOs, these situations where That is not true for the folks who kinds of concerns have to be balanced advisory opinion requests are used as an sit in RAD, just as it is not true for the against your suggestion, valid suggestion I offensive weapon against political folks who sit in the Audit Division. In both think, that some information might be adversaries and they're not potentially valid cases, you get the impression sometimes requests. I just wanted to ask you and the

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) rest of the panel whether you think that is a completeness of requests. I just wondered, metaphorically since I wasn't in the room, -- how significant of a problem you think particularly you Mr. Elias, because you with a group of auditors in 2005, and that is and if so, what can the Commission may have had much more experience with explained that the Bush/Cheney Campaign do to ferret out those kinds of potentially this, we have -- we currently have a had run 40-some odd million dollars worth false requests and what should they do practice of OGC informally taking draft of hybrid advertising. Now I have no about them? advisory opinion requests and speaking doubt that at every stage in the process, the MR. ELIAS: I think it's an issue with requestors about those drafts before Commissioners were alerted that this was and I think it's frankly usually an issue that they’re even submitted as formal requests. going on. the Commission is aware of and makes -- I wondered if you could comment But it was not until years later that because I have seen the Commission read on whether you think that's helpful and Mr. Josefiak and the Bush/Cheney them out when it chooses to do so and I whether you think that might potentially be Campaign and the RNC had an opportunity have seen the Commission proceed where a substitute for the publication of criteria to actually have the Commission vote on it, pretty much everyone in the room knows for completeness or at least alleviates and even at that point, the finding was that's what's going on but there's been a partially the need for that? accepted by the Commission even though it decision made to let the process move MR. ELIAS: Yeah, I think the was defeated by the Commission. I just forward. reason for having the criteria is that as think that that is a tension that ultimately I don't think ferreting it out is several of you have noted, not every doesn't serve anyone well. particularly difficult. It's usually fairly advisory opinion comes before you from I mean if the Commission's obvious to all what is going on. It's just a counsel who deals with you. Reading the position was that splitting ads 50/50 is question of whether or not the Commission advisory opinion requests and the lawful, then that is something that would decides that that's something that they wish correspondence that you have, as I try to do have benefited from an early determination, to entertain or not. I don't know what your for all advisory opinions, there is you can not a late one, and would have benefited perspective on this is. see that some people have an easier time from an audit report that did not reflect a MR. McGINLEY: I guess I agree navigating that process than others do. finding, if in fact the Commission found -- with those comments. I mean I don't think It just struck us as we put together six of them found that it was not a violation it's any type of widespread problem. I do these comments that it might -- it might of law. think that in those instances where it may aid, much like someone commented that So the fact that they have access be a possibility I think is pretty obvious on well I know you can file these motions to the information I don't think -- I don't the face of the request what's happening even though they're not in the rules. Others think substantively addresses the concerns there. will have a harder time knowing that. It that I've expressed. But I do believe that in some just struck us that it might aid the process MR. STOLTZ: Thank you. instances it really does kind of answer to have those criteria spelled out. It has not MR. McGINLEY: I would also some questions, although I do believe that been a problem for us, but -- agree with that because I think there's a the regulatory requirements for submitting MS. DUNCAN: Thank you. difference between making available the a request do seem to provide some type of CHAIRMAN WALTHER: Mr. subject of the audit's response or arguments filter that the Commission can use to try Stoltz? that they're presenting to the auditors and ferret out those types of situations. MR. STOLTZ: Thank you. Mr. versus basically putting it before the So I mean, it just can't be a Elias, you and the auditors certainly have Commission and giving that party an hypothetical and it can't be a third-party been on the opposite sides of a number of opportunity to address the questions that request, et cetera. So if you mechanically issues over the years and I guess it's no the Commission may have and also to apply those criteria, I think you're probably surprise we don't always agree. explain some of the novel legal theories going to be able to weed out most of those. Do you think it would be helpful that seem to be popping up more and more MR. von SPAKOVSKY: I don't to people who go through the audit process in the audit process. have anything to add to that other than I to understand how many points along the I think that if the Commission is don't think it's that big of a problem, but way that the Commission actually does get going to have this type of process at the there's nothing really you can do about it. I involved, for example, the responses that probable cause phase in the enforcement don't think there's any kind of rule you can are filed to exit conferences are made matter in dealing with novel legal issues, I formalize. I think the Commissioners and available to Commissioners, responses to think because of the public nature of the General Counsel will just have to use your the Interim Audit Reports are made audit process and the Final Audit Report, et best judgment, discretion to try to weed available to Commissioners, the audit cetera, that it would benefit the those out. procedures are approved in advance? Commission to hear both sides of the issue MS. DUNCAN: One final Is part of this a matter of just not especially where novel legal theories are question about the advisory opinion enough information being out there? presented in the audit process, such as process. The Perkins Coie comments also MR. ELIAS: I don't -- with all hybrid ads or any others. suggested that we might benefit from a due respect, I don't think it is. Tom publication of a transparent criteria for the Josefiak sat down, I imagine

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009)

MR. ELIAS: If I could just troubled by the constant view that in the is someone going to be empowered to supplement my answer with just one final early stage of the complaint how to resolve know it when they see it? statement. cases that cry out for perhaps dismissal and If that's the case, then I think you MR. STOLTZ: Please do. perhaps not for earlier attention at the very will solve a lot of problems. You won't MR. ELIAS: I also question, and least. You can file a motion to dismiss, solve all of them, but you will solve a lot of I mentioned this a few times and I think it what is it, a 12(b) motion, when there's no -- you'll solve a lot of problems. may have been viewed as rhetorical, but it's other facts? Just -- claim, premature relief The question is right now, who is not really rhetorical. I question whether or can be granted or the equivalent of FEC that person? Who is -- my sense is that a not the audit process ought to include that jargon, or is it akin to summary judgment complaint gets filed and I don't know if it's type of matter. The fact is, the Democratic or what? Jeff Jordan. It used to be Jeff Jordan -- is it Party knew that George Bush was doing Because we haven't even started still Jeff Jordan? Okay. this. If we believed it to be a violation of the investigative stage yet, so it's an COMMISSIONER the law, we could have filed a complaint. awkward procedure in which you entertain WEINTRAUB: He's right behind you. Common Cause, the Center for the motion to include the Commission. On MR. ELIAS: Takes it and sends it Responsive Politics, they knew that the the other hand, sometimes you know it out and then it goes into a pile and it sits in Bush Campaign was doing this. If they when you see it. This is a case that needs that pile for some period of time until it's believed it to be a violation of law, they to probably get dumped, but if you don't activated, reviewed by someone. The could have filed a complaint. Any citizen know exactly why and at least you want to question is, is there -- whether it is Mr. could have filed a complaint. We just make sure you have done a modicum of Jordan or someone else who has the talked about frivolous complaints. investigation. authority to look at this and say you know It's not clear to me why in the But I'm wondering if some kind of what, this is just -- this is just nothing and context of an audit where I think most a summary jurisdiction procedure or we ought to just move this summarily. I people again would be shocked, most summary procedure might work in a given think it's just the will to do that. people who have not been through it would case, whether it's ADR or some other to CHAIRMAN WALTHER: Ms. be shocked to know how legally intensive bring this to a more quick resolution. Do Duncan and then it will be the end of our these become. It's not trying to find out you have any thoughts on that, that rather discussion. whether or not the Bush/Cheney than run through the gamut of our usual MS. DUNCAN: This is actually Campaign's treasurer stole money. It's not procedures for the important cases whereby not a question, but just to shed some more trying to figure out whether or not the there could be some kind of informal light on the process and that it entails more Bush/Cheney Campaign really had 623 discovery to verify a few facts, or not, if than putting something in a pile and computers that they said they had, which is the law makes any kind of intelligent waiting, and that is that we do have a pretty what I think most people envision an audit judgment as to where the case ought to go detailed process for the review of being. through some kind of a structure that might complaints as they come in. We review It is these audits wind up quickly just work in other cases like that? them according to the regulatory criteria diverting off of audits and into questions Any comment? Mr. Elias? that the vice chairman has talked about in like, are hybrid ads legal or not, and it MR. ELIAS: I -- some of his questions. strikes me that there is a separate track if CHAIRMAN WALTHER: I Those criteria are not applied in a there are concerns about those kinds of know you want to work this out, figure out mandatory fashion, but we do review them issues to be handled, but they ought not to how to do this, but procedurally makes a against those criteria and a great number of be central to audits. But that's again, that's difficult situation when there's not much pieces of paper that come into the door just another point. investigation, somebody who's kind of an don't meet the minimum qualifications for CHAIRMAN WALTHER: Thank amateur files kind of a defective complaint, a complaint and they are handled you very much. I think we've been through but on the other hand, you know it would appropriately and not as a complaint. those hybrid ads ad nauseam and that's a have been done right by Mr. Elias or MR. ELIAS: No, I wasn't -- very difficult question on how to balance others. It would have been done right and MS. DUNCAN: I know and I the independence of the auditor with the the other elements of the violation would wasn't -- I just wanted to make sure, I opinion of the Office of General Counsel have been in there. wasn't suggesting that you were suggesting and then come to us for hopefully a MR. ELIAS: Like I said, I keep -- something wrong about it, but just to get resolution, which has been very difficult I keep being drawn back to my sense, information on the record about the process for us in that particular case. having never worked at the Commission, and the fact that there are a good number of It took a lot of hard thinking is the that it is -- it's not necessarily something things that purport to be complaints that we best way to work that one out. Do you that gets fixed in the rules. It's something actually don't treat as complaints and then have any other questions? that gets fixed in the sort of the role or the that doesn't actually even take into account MR. STOLTZ: No. attentiveness. I mean, I think that there are, those things that are made complaints, but CHAIRMAN WALTHER: as you say, a number of these that you then are dismissed at the recommendation Because I have a couple. I've been know it when you see it and the question is, of Counsel’s office because of the fact that

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) they are low rated under our EPS system or in, when you send it to the respondent, As it turns out, pretty much by the they -- or they are -- or the Commission they're going to have to hire Marc or Bill time we're through with everybody, we're finds no RTB at our recommendation as and spend the damn money to put up a always at the end of the time. well. response to it and wasting time and So to begin, we have Brian G. MR. ELIAS: See, I guess that's -- resources. Svoboda, Lawrence E. Gold and Robert K. I guess that's what I'm -- that's the point If you tell them it's frivolous, Kelner. Thank you all very much for being that I'm getting at and maybe I stated too we're going to dismiss it, then they can here. Your comments were very, very colloquially. It is at the rating system send you a short one-sentence response interesting so we look forward to hearing phase stage that it seems to me that more saying thank you very much and they don't what each of you has to say. We'll start than setting up a new process, it is have to spend the time and money to do it. alphabetically with Mr. Gold. They have empowering that if something meets a That's one way of getting these out of -- it opposite -- Mr. Gold, please begin. certain place in the rating, it just does. I gets around the statute. MR. GOLD: Thank you, Mr. mean, it just quickly -- we may dismiss CHAIRMAN WALTHER: I Chairman. I appreciate the opportunity to some that were meritorious, but we're just missed a little bit of the comment -- appear this afternoon. I appear in two going to -- we're just going to make a comments because I was looking for the capacities, one as associate General determination that someone's going to be statute. In 437(g) it says, before the Counsel for the AFL-CIO and the other as able to rate say X, whatever -- you know, Commission votes -- on the complaint, of counsel to Lichtman Trister & Ross, rates a seven, whatever it is. other than the vote to dismiss, any persons where I represent a number of And then it can move out the door so notified shall have the opportunity to organizations that have business before the and the Commission won't second guess it demonstrate in writing to the Commission Commission, have been -- are regulated by and this Commissioner won't spend a lot of within 15 days after the -- after notification the Commission and have had experience time revisiting it and I think that that's that no action should be taken against this in enforcement proceedings, audits and probably more practical than setting up a person on the basis for a complaint. other matters. new standard for summary judgment or Technically it does imply that we can rule This is a very important dismissal. immediately to dismiss just like that on any undertaking and I appreciate that it has CHAIRMAN WALTHER: given case. begun and really does merit a Unfortunately, our time is up. Some ad MR. von SPAKOVSKY: I commensurate process, I think, of public hoc buzzer here. acknowledge that, but I'm not sure that comment and participation and very MR. von SPAKOVSKY: Do you given the internal processes here that you carefully considered Commission review. want a quick answer on that or not? all could get it in front of you at a meeting As I said in previous writings, I CHAIRMAN WALTHER: Real at the executive session to do that vote think the notice and comment and hearing quick, sure. within 15 days. And so a way of doing it I schedule that was announced here was MR. von SPAKOVSKY: Okay. think is the procedure that I just identified. rather abrupt given the scope of what is The problem is, and I think the way you CHAIRMAN WALTHER: I being undertaken and the timing was could solve it is, look your problem is the understand. Ms. Terzaken, did you have unfortunate, overlapping with the holidays statute. The statute requires you to send a any questions; it looks like you might and the like, at a time when there was complaint to the target of the investigation, have? really no externally imposed time table that the respondent, even if -- as soon as it MS. TERZAKEN: No. the Commission had to respond to. comes in, you say it's frivolous. CHAIRMAN WALTHER: Okay. CHAIRMAN WALTHER: I think you could solve that Well, thank you very much. This has been Forgive me for interrupting. We did decide problem by setting up a procedure so that if really informative. Thanks everyone for to extend the comment period to February OGC thinks that a matter is frivolous and being here today. 18. Were you about to say that? I didn't they quickly send a notice up to the (A brief recess was taken.) know if you had heard that. Commissioners saying, we've gotten these MR. GOLD: No. Thank you. I five complaints, these two we believe are CHAIRMAN WALTHER: We'll just heard that on the break and I appreciate frivolous, you know, one paragraph begin again. We're 15 minutes behind that and I was going to say I think that's a summary of why, if none of you raise an schedule so that won't detract from the good move and will give others and me an objection, then when OGC sends the other time we have, but -- we'll be asking opportunity to provide, I think, more complaint to the respondent, they can put each of you to make your opening considered analyses of some of the things in the letter, by statute we're required to comments from five to ten minutes, not you're inquiring into. send you a copy of this complaint, but we more, and then Commissioners will have I hope it also presages some want -- you should know that we believe truncated questions and to the extent there's additional hearings, opportunities, more it's frivolous and we intend -- we're going time at the end, there hasn't really been focused hearings perhaps on particular to dismiss it. any, but then we can open it up a little issues that are of particular concern or that The point of that is that even if more for a period of discussion. you really do intend to take action about in you think it's frivolous and then it comes order to focus and give you more precise

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) information and feedback about the be accepted as true and unless based on a Secondly, I think the Commission Commission's operations. complainant's personal knowledge, a should formalize the motion for Then I hope you will use policy source of information reasonably giving reconsideration process regarding RTBs, as statements or rulemaking as appropriate in rise to a belief in the truth of the allegations several commenters have suggested. order to explicate new standards and must be identified. Finally, I believe it would be important to explain changes in procedures as a result of The statement of policy that the improve the motion to quash process. As I this process. If at all possible, I would Commission issued a year ago March said, when a subpoena issues, it is well suggest that you aim to complete that purports in some respects, I think, to after the race is in investigation and in my process this year during 2009, before we're broaden what the six Commissioners experience, subpoenas are often really into another election year. As former unanimously stated just a few years before. incredibly broad, going way beyond the Commissioner Mason noted in his That statement said that the Commission four corners of a complaint, the RTB comments, I think you should make had found reason to believe in cases where finding and anything that's reasonably changes as you go along, implement as you the available evidence in the matter is at related to it. go along, rather than wait to the end of least sufficient to warrant conducting an I've been in a position to file a some process. investigation and where the seriousness of motion to quash. They're always denied My written comments submitted the alleged violation warrants either further and from what I know from others is I make a number of recommendations, investigation or immediate conciliation. think they are always denied or virtually admittedly without much, if any, I think that may be an apparently always denied. explanation due to the time constraints that settled but important change. It is not a I think there should be an I was under. What I address in just these reason to investigate standard unless opportunity in appropriate cases for the opening comments very briefly are two Congress changes the statute and I think respondent to present argument before the topics and then I certainly look forward to that's really very important. Commission on a motion to quash. The responding to questions about anything that I believe at the RTB stage the Commission ought to issue a reasoned I've submitted or anything at all pertaining Commission should find either reason to decision on a motion to quash rather than to the notice that issued last month. believe and then initiate investigation have the Office of General Counsel, which The two areas I'd like to comment reasonably and then conciliate or dismiss is really an adversary party, inform the on briefly are the reason to believe process for prudential reasons or find no RTB. The respondent that the motion has been and Reports Analysis Division. RTB is the one thing in that policy statement last year denied. I think a fresh look ought to be critical juncture in the enforcement process. that I think really does capture the meaning taken at the discovery that is initiated with If it issues, that's the first time a respondent of the RTB standard is the description of an RTB to make sure that it is gets notice of the Commission's legal what a no reason to believe finding means. commensurate with the complaint and the thinking and understanding or analysis of There are three examples, which I won't RTB finding. the facts that have been presented, and it's quote here, but they're on page 12546 of On the Reports Analysis Division, inevitably accompanied of course by a the Federal Register. in his comments, former Commissioner subpoena, often a very broad one seeking The -- I guess one thing I would von Spakovsky said that "there's very little documents and sworn answers to written suggest, that there should not be supervision by the Commissioners of questions. admonishments issued at the time of a RAD's activities." I don't know how true So one of the most important reason to believe finding. There should be that is, but it seems to me that it shows in issues there is, is what is the standard? The no adverse finding at reason to believe that the way that RAD operates. statute of course says that the standard at closes the case. I think that is -- does not I think it's very important to give the RTB stage is reason to believe that a respect the due process rights of a RAD a complete and critical review. It is person has committed or is about to respondent in the proceeding. the one Commission office that every commit a violation of the Act and the By the same token, just a few regulated committee deals with and for Commission has in several enforcement other points about RTB. I think them, in many respects, RAD is the public cases, explicated what that means. complainants should be held very strictly to face of the Commission because that's the I would refer the Commission to a the obligation in the regulations to clearly point where they have contact with the Statement of Reasons issued by all six identify respondents in a case under Commission regularly in filing their reports Commissioners at the time in MUR 5141 in 111.4(d)(1). Only the Commission itself and getting feedback from them. 2002. It stated, to summarize, that the and not the Office of General Counsel But I find RAD to be a very Commission finding requires an should be able to add respondents at that frustrating and inscrutable office. There is affirmative vote of four of its members and stage and by the four votes required, as in inadequate opportunity for informed is proper only if the complaint sets forth other matters, and a respondent should engagement with analysts. There is a sufficient specific facts which, if proven never be advised for the first time that it is presumption often that every contact with true, would constitute a violation of the act. a respondent by receiving an RTB finding, RAD -- presumption on their part -- that A complainant's unwarranted legal and that's a circumstance that I've every contact has to be on the record and conclusions from asserted facts would not experienced as counsel.

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) there's a reluctance to give advice and testify. As others have said today, I because the Commission treats its feedback. commend the Commission for holding this guidelines for making penalty assessments The letters are often opaquely, hearing and taking a critical look at its own as a state secret, the incentives for alarmingly and poorly written and I think procedures. regulated committees and corporations to especially intimidating for committees that I think it's fair to say that the FEC self-disclose violations where self- do not have regular counsel. They often do is the most criticized, vilified and disclosure is not required by law, are not identify the entries and reports that are misunderstood of all federal agencies, with greatly reduced. This is so because if a at issue. They assert standards and the probable exception of the IRS. As you respondent cannot assess with reasonable requirements that are not found anywhere know all too well, there is a constant confidence the level of fine that it will else in the Commission's regulations or drumbeat of vitriol directed at this agency receive upon making a self-disclosure, it formal guidance. from the editorial pages of major national will often decide not to self-disclose. They sometimes suddenly assert newspapers, from self-described The Commission later -- a few positions about entries and manners of government reform groups and from years ago to formulate a policy statement description that have never previously been partisan political forces. on public -- on voluntary disclosures, advanced, even where a committee has The usual critique is that the promising a 25 to 75 percent reduction in done it the same way for years. And agency is paralyzed by partisanship, fines for those who self-disclose. I'd be perhaps worst of all, they never unwilling or unable to apply the law curious to learn how much of an uptick you substantively, I mean never, in my without regard to its partisan effect. I don't actually saw in self-disclosures. I suspect experience anyway, substantively respond subscribe to this critique, as I think it not much, because what good is a 75 to a legal objection or a legitimate legal misstates ideological conflicts rooted in percent reduction in my fine if I can't tell in contention that is raised objecting to a serious disagreements about the scope of advance what dollar figure the Commission requirement or a request or a position that's the First Amendment from your will be starting from? asserted in an RFAI. partisanship, but I do believe that the If the Commission is free simply Either they ignore it and just don't Commission's sometimes opaque -- a word to ratchet up the initial assessment so as to pursue the matter or they will ignore it and we've heard several times today -- and offset the promised reduction, then the rather robotically repeat the same request in unpredictable approach to its mission incentive to self-disclose under the new a subsequent RFAI regarding a subsequent underlines public confidence and policy ends up being meaningless. report without regard and without any empowers the Commission's bitterest Other federal agencies understand notice at all that you have an intervening, critics. this fundamental logic. Numerous carefully considered position to express to The Commission could do much agencies have published their guidelines them. to blunt the public criticism by revamping for determining penalties. Details are CHAIRMAN WALTHER: Mr. its procedures so as to enhance due process provided in my written testimony, but Gold your time is close to up. protections for respondents and to increase examples include the Export MR. GOLD: Okay, I just have the transparency of its decision-making, Administration, OFAC, the Nuclear one more point, that is that I think OGC while at the same time strengthening Regulatory Commission, the Office of the should be engaged when there is a legal penalties for the most serious violations of Controller of the Currency, the EPA and objection or a legal contention raised in the Federal Election Campaign Act. I have actually just the other day, U.S. Customs response to an RFAI and OGC should some specific suggestions. and Border Protection, which now has its engage, at least informally, with the First, it is time that the own method of determining penalties. committee at that point and there ought to Commission lifted the veil of secrecy that It is sometimes said that if the be a substantive response in writing to any has for so long shrouded the process by FEC were to open up the black box and kind of legal objection. which the Commission determines the fines reveal how it determines penalties, bad I think what this speaks is that the that are to be imposed in the enforcement actors would be able to calculate their Commission ought to really take another cases. For years practitioners have been likely penalties and simply figure it into the look at the standards for these reports, pondering how the Commission comes up cost of doing business. But such conscious perhaps have a running of frequently asked with its initial assessment of penalties. dealing of the system would open the questions portion on the website. And There appears to outsiders to be little respondent to a charge that he acted certainly, and final point, is that there rhyme or reason to these assessments. knowingly and willfully, triggering a should be no referrals from RAD to They sometimes seem to be influenced by possible criminal prosecution, which is a enforcement without notice to the relative factors such as the size or pretty strong deterrent. committee and some opportunity for the prominence of the respondent or the Moreover, if it's felt that committee to be engaged. Thank you. respondent's reputational or political transparently informing the public of the CHAIRMAN WALTHER: Thank vulnerability than by objective quantifiable penalties that it faces provided in FECA you very much. Mr. Kelner? factors. would result in insufficient deterrence, then MR. KELNER: Chairman Penalties in like cases do not the solution is to stiffen the penalties, not to Walther, I appreciate this opportunity to always appear to be consistent. Moreover, conceal them from public view.

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009)

If you need statutory authority to I believe it's an appropriate arrangement to CHAIRMAN WALTHER: stiffen penalties, then seek it. But the continue. Sounds like you've heard that a few times. penalty regime itself must be transparent, Thank you very much. MR. SVOBODA: It has and did coherent and predictable both for reasons CHAIRMAN WALTHER: Thank happen a few times. That shouldn't be a of fundamental fairness and to ensure that you very much. Mr. Svoboda? respondent's first interaction with the the agency is viewed as effective. MR. SVOBODA: Thank you agency. If there is an assertion that The Commission's current very much, Commissioner, and thank you somebody has violated the law, the person approach of shrouding the penalty process also to the staff who helped put this has, I think, ought to have the ability to say in mystery encourages the public to suspect together. I'm very -- I think it's a good idea in the first instance why that isn't so. I that the Commission actually has no idea that the Commission chose to do this today. mean, to explain why the complaint, if you how it calculates penalties, that the I think it's good, irrespective of how well or will, is deficient as a matter of law or as a penalties are plucked from thin air based on how poorly you think the procedures are matter of fact. what the Commission thinks it can achieve working, from time to time to just kind of So there are those blind spots that rather than based on identifiable law. towel off and take a look with some happen from time to time in the This is just the sort of thing that distance at what you've been working with enforcement process. They happen also undermines public confidence and makes these past several years and see if it's from time to time in the audit process, not some critics think that the FEC is a quasi- working exactly the way that you would so much at the early stages, because the political organization where penalties are like it to work and the way in fact I think audit process works rather well in terms of handed out in a smoke-filled room guided everybody intended when the Act was having informal and direct contact between by politics, not by law. I don't believe written and when the rules were written. committee representatives and the auditors that's the case, but the public can't be So with that perspective in mind, I on the ground, so if you ever want quality faulted for drawing that inference from the thought I would relay just a few time with your government, the audit Commission's reluctance to explain its own observations on some of the expectations process is certainly the way to go. procedures. that practitioners like myself and people But particularly at the moment Second, and relatedly, the like our clients I think tend to have of the when the matter is just teed up to the Commission should abandon its current agency and its procedures and as Commission for final decision, that practice of using the early stages of the touchstones, if you will, for evaluating just moment when the Final Audit Report is put process to make findings of knowing and how well or how poorly we're doing. on a Commission agenda or put on the willful intent. I don't believe that at the Hopefully these are expectations I think public record, there are moments, for RTB stage it is ever appropriate -- that everybody in the room would share to example, where a finding may emerge CHAIRMAN WALTHER: Mr. some degree, but they're useful touchstones between the Interim Audit Report stage and Kelner, I'm going to remind you to cease perhaps to evaluate how we're doing. the Final Audit Report stage where the quickly and then -- one more comment -- -- The first expectation I think my finding's significantly different or there's a questions. clients and a lawyer like me would have is significant legal issue involved and then MR. KELNER: Okay, if I could that they would have the chance to be heard you're counsel to a respondent that is make one more point with respect to the by the Commission before something bad looking down the barrel of potentially DOJ's comments submitted to the FEC. I happens to them at the agency level. The hundreds of thousands of dollars, or if not don't believe that anything in a bipartisan process, at least the enforcement process, is millions of dollars, in potential liability, campaign or format necessitates changes to structured so that that happens, as is the you want to scream to someone and say, the relationship between DOJ and the FEC. audit process and as are other processes in stop, wait, can we figure out -- you know, BCRA did stiffen penalties, but Congress the agency. can we talk this through? took no action to change the concurrent But it doesn't always work quite But the process, and here I'm jurisdiction of the agencies or the relation that way in practice and I think it's worth careful to say the process doesn't lend itself of the two agencies and I would refer you devoting some sustained thought to those as neatly to that. The process is designed for analogy to the relationship between the instances where perhaps it doesn't. So for basically to operate in stages where Securities and Exchange Commission and example, there are times when an entity, a comments are funneled to the staff and the DOJ, which is actually quite similar to political committee, a person, may get a ultimately to the Commission and doesn't the current relationship between the FEC letter from the Commission informing them lend itself as well to the -- sort of these and the DOJ. that through the exercise of supervisory significant issues at the 11th hour. In the case of SEC investigations, responsibilities, the Commission's found So that's the first broad sometimes the SEC refers matters to reason to believe that a violation has expectation I guess that my clients and the Justice, sometimes not. Sometimes they do occurred and extending them the people like me would tend to have, which investigations jointly if SEC approves it, opportunity to settle at what I am sure is a is, will we have a chance to be heard before sometimes not. I believe that's the low, low bargain price, discounted as Rob something bad happens to us? arrangement in effect the FEC has now and Kelner observed, from somewhere. The second is the expectation that we would be able to present our arguments

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) to the Commission, directly to the moments of supreme awkwardness, I been submitted, the legal arguments are not Commission with the confidence that we'll would imagine, for the agency and engaged, they're not dealt with. be -- we'll be heard. Now informally, the certainly for the respondents because it I think frankly it's because there's agency works rather well, I think, in that places additional burdens in terms of not an expectation that they ought to be regard. I mean, I get the sense as a protecting our confidentiality rights on the dealt with because of the architecture of practitioner that when I submit a brief of Act -- under the Act. I mean a MUR how the process is devised and the fact that significance in the matter that that brief is process is confidential until it's concluded, basically the Commission is being made available to Commissioners and that but an audit process of course is public presented at the end of the day Commissioners read it and that when it is concluded. dispassionately with an analysis of the Commissioners react to it as they react to It can intersect also from time to issues in the case. it, but that there's some cognizance that is time with RAD, which may be issuing It would be helpful to the there. guidance on these very same questions that transparency of the process for So I came to you not with a are a point of very wide dispute in a MUR. practitioners like myself and our clients to complaint, that somehow information is So the Commission, and it's a rare event, be able to see that our arguments were withheld from the Commission or the but it happens often enough that the read, that they were agreed with or Commission lacks an adequate factual Commission should devote some attention disagreed with and why they were basis to see the arguments. But it's to it, at least to manage this process of disagreed with, if in fact they were. It may important to know that the process is not making sure that the enforcement process is be that there's something we hadn't thought structured so that that is indeed even top dog, if you will, in terms of making of before. I'd like to think that's not the supposed to happen. sure that respondents are having their rights case, but it would be nice to see that in the Again, the process is structured so protected and having the issue surfaced and process. that practitioners like myself and the resolved in the way that they ought to be So those are just some basic respondents whom we represent deal in the entitled to through the protections of that expectations that guide at least my thinking first instance with interlocutors, if you will, process. as the Commission has this hearing and I who are presenting and relaying our Then the last expectation I think appreciate your hearing from the last position to the Commission. And often that my clients and practitioners like I witness on the last panel of the first day. times these interlocutors, not because would have is that we're able to understand It's a daunting task and heavy they're bad people and not because they're why the Commission did what it did. I responsibility. Thank you. taking bad positions, are propounding talked a moment ago about the fact, for CHAIRMAN WALTHER: Thank positions that are quite different than ours. example, that we submit briefs in you very much. Commissioner Bauerly, They disagree with our positions. enforcement matters to the General any questions? So would it perhaps be more Counsel, they're relayed to the Commission COMMISSIONER BAUERLY: appropriate for the Commission to have a and then at some time we see a General It's random selection here. I'm used to my process where at least formally you're Counsel's factual and legal analysis that colleagues on the end -- guaranteed at certain stages of the process discusses it. CHAIRMAN WALTHER: -- the ability to file a brief directly with the One of the things though that has COMMISSIONER BAUERLY: Commission that's read directly by always struck me as odd is that the factual The chairman is entitled to keep us all on Commissioners? and legal analysis, and I think it's because our toes; I appreciate that. I -- we talked The third broad expectation, that of the expectations the Commission sets for earlier in the day about appropriate places the enforcement process, when you're the General Counsel, are they're styled as for opportunities to be heard and we sort of facing a MUR, when you're a respondent in dispassionate understandings or get slightly different versions from each a MUR, is not going to be conducted dispassionate statements of what the law is witness depending on who is addressing through the back door, if you will. and they seldom if ever engage directly the the issue and in an effort to sort of get as Because the Commission has different arguments that counsel may make in a case. broad of a perspective as possible, I'd like divisions and because they do different So you may have a MUR, for to hear your perspectives on the stages for things, there are moments from time to example, with an immensely complicated some of these things. time where these different divisions may be legal question like who is a political I think, Mr. Svoboda, you said in active in the same transaction or the same committee, what is or isn't major purpose? an audit context you think at that final audit legal issue. What is or isn't express advocacy? And hearing it would be the appropriate place. I So you may have a client, for you may have a firm like -- like our firm was wondering if any of the other panelists example, who is a respondent in a MUR that submits a brief that argues these -- that -- and if you'd like to expand on that, I'd and at the same time, that client has been makes the arguments on these legal issues appreciate it. Because I think -- I think we selected for audit in that same election in great detail and then you'll see a General all share the view that we certainly should cycle, and so these same legal issues are Counsel's report or factual and legal try to find ways for people to have more being dealt with in two different forums at analysis that it's as if the brief had never opportunities to be heard, but finding that the same time, and that can create some

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) place in time in the process is an important COMMISSIONER BAUERLY: chance to comment on it, the Commission consideration. Well, and you're going to have to take my has a chance to consider the comments and So we want to make sure we're word for it that I read all the footnotes too, figure out what to do about it, that's getting that right if we do adopt some sort but at some point, I'm not quite sure, but I conducive toward sorting through those of pilot program or something like that. So just want to make sure I understand what various complicated, very technical issues. I'd be interested in your comments on the will make you happy. Because I'll be blunt, if we don't point in time in an audit process where that MR. SVOBODA: There's two have the opportunity to weigh in on those would be most useful to either -- to the moments when it's most important for me who communicate with them, you do the respondents and to the process. to make sure that we're communicating natural thing, which is to defer to the staff MR. SVOBODA: Thank you, with you. The first is at the interim stage who are going to be the only other people Commissioner. I came into the room where we have the first crack at what the who are going to understand these issues actually as the last panel was beginning to Audit Division's findings are and we agree and the technical nature and who may be touch on this subject. I heard Mr. Stoltz or disagree or dispute those findings. That coming down in a very different place from and Mr. Elias' colloquy about the is where you are most likely in the first where we are. information that the audit staff does instance to see a complex legal issue. So So to have kind of that safety produce to the Commission during the that's the first stage. valve built in there at the end of the process process from time to time. The second is before the Final is very important to us. So for example, I heard Mr. Stoltz Audit Report is issued, because as we CHAIRMAN WALTHER: We say that the Interim Audit response is talked about earlier, audit reports are a have -- go ahead. provided to Commissioners as well as other work in progress. They continue to work COMMISSIONER BAUERLY: I materials in the process. I think that's on them after fieldwork's done and the just wanted to know if there was -- if any good. I'd like to be able to know as a interim report is done and there can be of the other panelists had either different practitioner and tell my client with moments where a very significant issue can approaches or anything to add? certainty that those -- that those documents, emerge only at the Final Audit Report MR. KELNER: Commissioner, I the Interim Audit response and other stage. agree with Brian. I think it is at the final significant documents made available in Audit has been fairly decent audit stage and it makes sense for there to the audit on legal issues, are in fact being informally about talking with attorneys like be an oral appearance. But I would presented to the Commission. us and giving us a chance to talk with them highlight one other point, which is that it's I think it would be worth perhaps directly about it. But there may be issues not just the subject of the audit who is at looking at the rules and in particular the from time to time that we feel we need to risk at that stage, but often there are third limits on ex parte communications, which communicate very loudly and clearly with parties mentioned in audit reports, and I've are quite broadly drawn at present, to see if you. had this experience several times, where there is not perhaps an opportunity I had an audit. I won't say exactly I'm representing not the client that's being formally and transparently and with the which one it was, but about two or three audited, but some other entity who it turns awareness of everybody on the years ago, where the big finding in the out is essentially accused of wrongdoing in Commission and ultimately on the public audit with the potential of a -- with a an audit report, doesn't learn about it until record, but to make those sorts of potential of a high six figure repayment and after the audit report has been adopted by presentations available directly to the the biggest issue at the end of the day in the the Commission when a subsequent Commission. audit report did not come up until well after enforcement action begins. To answer your question directly, the preliminary audit report had been So I would advocate that when I think there's -- concluded. there are suggestions of wrongdoing that COMMISSIONER BAUERLY: That was a moment where while might point to a subsequent MUR, anybody Can I just interrupt you for a second, we had a chance to converse with staff who is the target of those allegations ought because I want to make sure I understand? about it, staff I think had a view of how to be invited to appear, and I'm talking You're talking about the written they thought it ought to go and we had a about parties that don't even have written submissions? Because you said -- you say quite different view and it was very urgent submissions. So this really would be their directly, but I think Commissioner to us to be able to make sure that the only opportunity to weigh in before the Weintraub mentioned earlier in the day, we Commission were aware of our views. audit is actually accepted. get to see the -- it's not -- we don't only get It was also, and this happens in CHAIRMAN WALTHER: Mr. the staff of this agency's view of the matter. audit quite a bit, there's a really Gold? We see it directly, so I'm just trying to complicated technical issue both of law and MR. GOLD: Yeah, I generally make sure I understand what extra you are just in terms of making the numbers work, agree that at the Final Audit Report stage, looking for? so having a safety valve, if you will, in that not before, I think is urgently -- the Final MR. SVOBODA: You may see it process where there's some space between Audit Report stage you ought to consider directly. We can never know for sure that when the Final Audit Report's submitted to some kind of pilot program that's modeled you have in fact seen it directly. the Commission, when a respondent has a on the probable cause hearings where at the

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) request -- not an automatic grant of an respondent in pre-probable cause investigations, that there are other ways opportunity to appear -- but at the request conciliation and to try to drive the that they will get the message loud and of the audited committee and with at least respondent towards a generous settlement clear that you are being investigated for a two Commissioners agreeing that it would offer whereupon the language magically potential knowing and willful violation, but be useful, there ought to be that disappears. it doesn't necessarily need to be within the opportunity to directly engage. I've seen that with increasing formal finding of the Commission in order I accept that you're reading what frequency. I think it's really a serious for you to get that message? is being submitted. I think that's obviously abuse of the process and more to the point, MR. KELNER: I agree. It's clear very important not just in the audit stage, completely inconsistent with the statutory from the context. It also becomes clear in but in other contexts as well. But why not concept of reason to believe. oral discussions with the staff. consider a pilot program here and just see VICE CHAIRMAN PETERSEN: VICE CHAIRMAN PETERSEN: how it goes? Earlier today, I don't know if you were If I can just shift gears and just ask a quick CHAIRMAN WALTHER: here, former Commissioner Mason touched question. It's been suggested that Thanks very much. Mr. Vice Chairman? briefly upon the issue of knowing and Commissioners should worry first and VICE CHAIRMAN PETERSEN: willful findings at the reason to believe foremost about enforcing the law and not Thank you, Mr. Chairman. Mr. Kelner, stage, saying that it merely is giving notice worrying about -- worrying less about First during your opening statement, because of to a respondent that this could give them an Amendment considerations, that that's strictures of time, you were about ready to indication right from the outset that they're something for the court to consider and less touch upon a point that you discuss in your being investigated for a knowing and something that the Commissioners should submission which I found very interesting willful violation. be worrying about. about knowing and willful at the reason to Could that same notice be I just wanted to ask any of the believe stage and I just wanted to give you provided through some other mechanism witnesses on the panel if they would -- if the opportunity to kind of flesh out what other than through a formal finding of they had any thoughts on what sort of you had started in your opening statement. reason to believe that there was a knowing considerations the Commissioners should MR. KELNER: I appreciate that. and willful violation? have from a First Amendment perspective The problem is that the reason to believe MR. KELNER: Absolutely. For when we are making our decisions? stage is supposed to be a stage at which the one thing, it's usually apparent from the MR. KELNER: If I can address Commission is simply deciding to open an way the reason to believe letter is crafted it. I don't really think there's much of a investigation. And that in fact is the that the allegations are suggesting some choice for Commissioners. I think you all position that the Commission itself has kind of knowledge or some kind of intent. probably take an oath to the Constitution taken and several years ago it asked But actually, including the language you when you are sworn into office. I don't Congress to actually change the have in the Commission vote to include think any federal officer really has a choice terminology in the statute, no longer to say that language in the letter, I think creates but to consider the constitutional reason to believe, but to say something like much more of a presumption. I think also implications of any governmental action, reason to begin an investigation. it puts something on the public record most especially an enforcement action. Even though that's the case, even which would be permanently threatening VICE CHAIRMAN PETERSEN: though everybody understands that reason and damaging almost regardless of what Okay, any other thoughts? to believe is simply the opening of an happens later on in the process. MR. GOLD: Yes. Clearly the investigation, we do from time to time see And so I think that's highly Commission is a creature of the Congress the Commission make findings in a reason prejudicial to innocent respondents so to and the statute is a creature of the Congress to believe letter that there's reason to speak and I frankly don't buy the notion and where the statute is clear you’ve got to believe that the respondent acted that it's doing the respondent a favor by follow the statute even if you harbor knowingly and willfully, which is making sure they're fully alert. I think concerns about its consistency with the Commission argot for at a minimum a respondents tend to be fully alert to the First Amendment. substantial increase in the civil penalties exposure that they face. They can talk to But in the ordinary course of what but in fact a predicate for a criminal their lawyers about that. I think in fact this you do day to day, whether it's in prosecution. language is used to provide leverage to the enforcement matters or in advisory I think there's really no basis in staff in pre-probable cause conciliation opinions, or the like, insofar as there is law for the Commission to be making negotiations. ambiguity, which there often is as you findings at that very early stage in the VICE CHAIRMAN PETERSEN: know from some of the key concepts of the proceeding regarding the state of mind of So from your perspective, just to reiterate, statute and in your own written -- in the respondent. you believe that there are less formal crafting your own regulations, I think you I also think that we have more and means? Rather than voting RTB, there are certainly have to take First Amendment more frequently seen those kinds of all sorts of ways and that you believe from considerations into account. findings in a reason to believe letter used the perspective of one who's represented A number of Commissioners in really to threaten or intimidate the clients who have been the subject of such the past have done so quite eloquently and

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) been also faithful to their obligation to First Amendment rights of people like our I mean, the way this works enforce the law as written. So I think it's clients. theoretically is you are an impartial expert something that has to be at the forefront of We spend money -- they spend agency that accepts dispassionate advice what you consider, not only because that's money on lawyers like us to defend from your impartial, dispassionate General your duty, but I think as a very practical themselves that they otherwise would be Counsel and in solonic fashion makes matter, as you know, just about everything spending to influence votes or to promote rational decisions about the administration you do is scrutinized by all sorts of people, their issues on issues of public concern. of campaign finance law and the deciding including practitioners, professional critics VICE CHAIRMAN PETERSEN: of particular matters. and the like, for whether you're going too Thank you. COMMISSIONER far, whether it's consistent with the First CHAIRMAN WALTHER: WEINTRAUB: Always. Amendment and rightly so. Commissioner Weintraub. MR. SVOBODA: In fact It should be -- it should be COMMISSIONER however, the way it works however as a subjected to that scrutiny because it's a WEINTRAUB: Thank you, Mr. Chairman. practical matter in not all MURs, but peculiarly sensitive statute and area that Brian, it sounds like you would just feel MURs involving close legal issues or we're involved with here. So I think you better if you could file your papers directly complicated legal issues or charged need to be very mindful of that. with us and send them directly to our matters, is it's an adversarial process. I VICE CHAIRMAN PETERSEN: offices; is that really what you're saying? mean, there is an attorney in the Office of Thank you. Mr. Svoboda. Putting aside the issue of potentially having General Counsel who believes that my MR. SVOBODA: It's a difficult -- hearings at the -- before we issue Final client has done wrong. I have a client on it's a difficult riddle for you because on the Audit Reports, because I think a number of the other hand who believes that they one hand you do, as the other commenters people have suggested and I think that it's a haven't done wrong. have said, need to be sensitive to these First really -- it's an idea that I would support. We are arguing back and forth with each Amendment issues. On the other hand, the But am I hearing you right, you other. court is not going to defer to your opinions just want to send it right to us? The question is, how do you take - of constitutional law. MR. SVOBODA: Yeah. I mean, - in those circumstances, how do you So the question is how do you to be honest with you. There are moments account for the adversarial nature of that manage that and how do you bring that and there have been moments in audits and process and really tee up decisions for the sensitivity to the process? I think you do it in MURs where a matter has come up that Commission in a way that's most in two ways. The first is I think we felt that it was urgent to want to illuminating for the Commission's own substantively to approach the -- to approach communicate to the Commission. It has decision making? particularly close or ambiguous questions always been a source of some internal That's not an easy question again with restraint. debate in our office because we read and because you have kind of a square peg, When the Commission has the are aware of the ex parte rules and we want round hole situation in terms of how the opportunity on the one hand to take an to respect those rules and we don't want to statute's devised and how it works often in expansive and imaginative and aggressive deal with this process in a way that's at all practice. But it's worth thinking about and view of a vague statute on the one hand and inappropriate. how you accommodate to some degree that to take a more sparing, more restrained, But you may be dealing with -- reality. And you've taken some steps to do more narrowly focused view of that same first off, you may have such a divergence that. statute on the other, I think the Constitution of position between our clients on the one The probable cause hearing, for and those sorts of concerns are going to hand and the General Counsel on the other example, process I think is one way in push the Commission in that -- in a latter that there is real conflict going on there. which that happens that really when you direction. And second, you may have matters that are think about it is the first and only way that That's in fact what courts say you so important to our clients that it's the rules or policies provide for respondent ought to do, that you ought to be construing important that we speak clearly and be direct communication with the statutes to avoid constitutional difficulties heard. We need to be able to tell them that Commissioners, where I can write you rather than maximize them. I think it also we've spoken clearly and have been heard. something or look you in the eye and know goes, however, to the rigor of your COMMISSIONER that I am communicating directly with you. procedures, what we're talking about here WEINTRAUB: You always speak clearly, COMMISSIONER today, which is because you're dealing with Brian. You can tell them I said so. WEINTRAUB: I'm glad you like it. I such sensitive First Amendment issues, that MR. SVOBODA: It also goes to a wrote that policy. And I said it somewhat you ought to be looking with more rigor point where I think there is a difference and frivolously, but I do have a track record of and more care in terms of how enforcement it's worth reflecting on it here today. There being in favor of these due process actions get commenced, how subpoenas get is a difference between, I think, how the protections and I am without doubt the -- issued, how these sorts of adverse actions agency conceives itself and how the agency well easily the longest standing, but get taken that in a very real way burden the is conceived by statute and how the agency probably the most ardent advocate over the actually works in actual practice.

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) years for more transparency, particularly in a few years ago that this is just the MR. KELNER: It's a sign of bad our penalty determinations. beginning of an investigation -- faith because if there was really a I don't share Mr. Kelner's view COMMISSIONER substantial reason to find knowing and that this is suddenly if we have more WEINTRAUB: But sometimes we know willful intent, I wouldn't expect it to drift transparency and more due process that more at the beginning than at other times. off so readily and easily in the course of suddenly people are going to like us out MR. KELNER: You don't know negotiations over dollar figures, which there, particularly the editorial boards. I what you know at the beginning. You does in fact happen. think it will have -- you guys might like us shouldn't, in my view, in my humble COMMISSIONER better, but the editorial boards will be opinion, that the outset of an investigation WEINTRAUB: Because sometimes we completely unmoved by our having a more where you are just opening the might view it as if there's a high enough transparent and fair process. investigation. dollar figure, it represents an Mr. Kelner, you raised this issue COMMISSIONER acknowledgement that this is a very serious and Commissioner Petersen, Vice WEINTRAUB: You don't know that violation and we recognize that it's Chairman Petersen talked about it a little somebody's plead guilty if that's part of the extraordinarily difficult. But you believe bit, about the knowing and willful at the complaint and we have documentation of there hasn't already been a guilty plea RTB phase. Sometimes we get things that? entered to get someone to admit to a where -- and traditionally I have been very MR. KELNER: There may be knowing and willful violation of the law loathe to making that finding at the RTB very few cases like that, but I am also because they know they will have criminal phase because I share the trepidation that aware of quite a number of cases where liability down the road. someone must feel when they get a finding, there was no guilty plea. My point here is that I really do even if it's explained to them that this is a COMMISSIONER take fairly strong exception to some of the very preliminary finding, that the WEINTRAUB: Okay. characterizations that you had in your government has made -- had made a MR. KELNER: And where there testimony of us throwing in the knowing -- finding, there's reason to believe that they was at that stage of the investigation and willful and don't blame the staff, knowingly and willfully violated the laws. relatively little reason for the Commission because we vote for it -- going in knowing So I've always been hesitant to do to know definitively one way or the other. and willful at the outset so that we can that. I hear what you say that people can I think the danger is if you start trying to ratchet up your penalty or hiding the tell because the argument is they need the make these decisions about when it's penalties so that when you come in on a notice, that they might have criminal appropriate and when it's not, there is a sua sponte basis we can play bait and liability here. I'm sure they can tell if great incentive to include these findings at switch and we secretly know that we would they're advised by sophisticated counsel that extremely early stage of the have given you a lower penalty, but since like the three of you, but not everybody is, investigation because it so facilitates we're going to have to honor that sua so I think there's that. OGC's position in pre-probable cause sponte policy now, we're going to have to Sometimes we actually get a conciliation talks. jack it up at the beginning so that we can complaint after somebody has pled guilty And indeed the proof of the pretend to be lowering it. to violating the law, to criminally violating pudding is that the knowing and willful We really don't play games like the laws, pretty good evidence at the RTB finding sometimes magically drops away as that with the penalties and I take -- and I'm phase that there's been knowing and willful those negotiations -- surprised to hear you of all people say it conduct or there's evidence of concealment COMMISSIONER because I know that one of your partners is that they -- which strongly suggests that WEINTRAUB: Are we bound by it very well versed in what happens internally they knew what they were doing was forever if once we find it we have to go at this building. If you believe that, I urge wrong and they tried to bury it by having forward with it? you to go talk to him because I'm sure that false receipts and, you know, like in a MR. KELNER: That's exactly the he will tell you that those things don't corporate reimbursement case, somebody point, is that you are finding it at a stage happen. would describe something as a bonus when where you're really not in a position to say I understand the concerns about it actually was a reimbursement for a one way or the other because it's the outset the lack of transparency in the penalty campaign contribution. of the investigation. process and as I said, I have been the Are there no circumstances where COMMISSIONER strongest advocate for making it more at the preliminary phase we might have WEINTRAUB: You're suggesting that transparent so you can see it and reason to believe that someone knowingly once we -- once we make that finding and understand it better. and willfully violated the law? suppose we have some -- we think we have But please do not assume that MR. KELNER: Not unless you enough evidence at the very outset to do it, because for historical reasons it has not want to fundamentally re-conceive what that once we make that finding if we then been transparent that there are bad motives reason to believe is. If in fact the are willing to negotiate over the terms of going on and people are playing games Commission still takes the position it took the conciliation, are willing to drop that with you and playing bait and switch and out, but some of it is a sign of bad faith. that there is bad faith in the negotiations,

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) because that, I can assure you, certainly on Does that make sense? Do you Audit Division, but RAD, and I think that a lawyer's part, and I make a personal want me to say it again because it sort of -- really is something that ought to be representation to you on behalf of every and we've had good internal conversations addressed, is that I feel it's a one-way legal decision that I've participated in, that I have with the General Counsel’s office about conversation and obviously or hopefully never seen that happen. this and I think that their view is they don't RAD is consulting with the Office of MR. KELNER: I think there's a think that's inappropriate to address your General Counsel on questions on issues, difference between bad faith, which is not legal arguments. I don't know why they but we never, never hear that. what I'm suggesting, and incentives in the haven't done that on paper in the past. It I had a situation where we went system to game the system, and this goes didn't make any sense to me when I first back and forth with RAD in this almost on both sides. It goes on the side of got here and it still doesn't. Orwellian, frankly, circumstance because defense counsel and it goes on the side of One of the things that some people the responses -- again, it was as I said prosecutors or regulators. in the Office of General Counsel have before, robotic repetition of a position CHAIRMAN WALTHER: We're suggested is that many of your arguments about the same issue, but in a different going to have to keep moving through the are responded to over the telephone. I don't report. And the next thing I knew, the Commission in order to finish up, but go know if that's accurate or if you feel it's a committee was being audited for that ahead. I can see the colloquy is necessary proper way of explaining away your legal without any real engagement or insufficient still, but -- theories. But the truth of that is we don't engagement, and that's not right. MR. KELNER: I think that when see records of the telephone conversations, MR. SVOBODA: Two quick the system allows for findings like nor do I think we want to. comments on that, Commissioner. The knowing and willful intent to be included at So I think in my personal view, it first is with respect to Audit. Audit the very earliest stage in the investigation, makes me anyway less likely to rely on the actually is fairly good about that, at least in it creates unhealthy incentives for the General Counsel's argument because I can't the text of the audit reports. You read negotiation process that follows. I don't see where they have addressed your legal Final Audit Reports for example, and it's think you have to believe that there's bad arguments. And again, this is something like a blow by blow. The auditors faith to believe that human beings on one that I've talked to them about. They're presented X to Mr. Svoboda, he sat mutely side of the negotiation or the other react to aware of my position and we've had with his eyes widening as we said it in the those incentives. I do believe I've seen that productive conversations. Interim Audit Report. in the course of dealings with the But I do think that would be very (Laughter.) Commission and other administrative helpful not only to the transparency of the CHAIRMAN WALTHER: That's bodies. process, but I think it would help assure automatically in the typewriter. COMMISSIONER you that in fact not only have we seen your MR. SVOBODA: So the audit WEINTRAUB: I guess we're just going to legal briefs, but we've seen the General report's pretty good about that. With have to disagree on that, but do go talk to Counsel, how they respond to your legal respect to the General Counsel's briefs and your partner about it. brief. the factual legal analysis, I was speaking MR. KELNER: I will do that. MR. GOLD: I'm not sure I've principally about complex legal issues CHAIRMAN WALTHER: ever had an experience of dealing with the where you may have a question, a first Commissioner Hunter? Office of General Counsel on the phone on impression or a rule, a really big question COMMISSIONER HUNTER: the substance of a response to a complaint. like for example, is my client a political Okay, I'm reluctant to summarize what I think what would be helpful is in talking committee or not? anybody has said here, but I think that Mr. about transparency is for us to know And I may have a very technical Svoboda and Mr. Gold said that they both exactly when in each process the argument, one that I'd like to think was believe that the Counsel’s office and then Commission does see what we submit. kind of creative perhaps where I try to to some extent the Audit Division doesn't That's -- we know in the enforcement argue why this or that doctrine of ever address respondent's legal issues. process it's at the RTB stage, it should be. constitutional law might prohibit that I think a combination of that You had motion to quash, if the classification from being applied to me. comment and the exchange with Commission decides that, probable cause, But you may actually read the General Commissioner Weintraub, perhaps one the Commission decides that. Counsel's report at the end of the day or the thing that the exchange where she said is It's not so clear in other contexts probable cause brief and not see an all you want some assurance that we and it will be helpful just to say where the engagement of that. Commissioners read your legal briefs, Office of General Counsel gets to make the I think your premise is correct or maybe those concepts combined that I can "final" decision along the path essentially what I think your premise to be is correct see where respondents don't have any without your involvement -- it would be that the process would be aided by having assurance that we both see and read it if the very simple for you to just say that on the that sort of direct exchange, so at least if legal analysis given to the Commission record as where that -- where that happens. the General Counsel and thus ultimately following their -- your briefs never That would be very useful. What the Commission disagrees with me, it's acknowledge your legal arguments. I was talking about earlier was not the

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) clear that they have and it's clear why they How do we fix that though people and just throw it around privately did. without the Commission micromanaging for a couple of hours. I don't think that's an COMMISSIONER HUNTER: RFAIs because 99 percent of the RFAIs ex parte problem. Be creative. Thank you. ask legitimate questions about the cash-on- COMMISSIONER McGAHN: CHAIRMAN WALTHER: hand, doesn't add up from the last report. Next question and maybe start with Mr. Commissioner McGahn. How do we put something in place, if you Kelner. There's been a lot of discussion COMMISSIONER McGAHN: have any thoughts on that? And if you about reason to believe and what it means. Thank you. A couple questions. First an don't have them today, the comment period It's always struck me odd when folks talk observation which may help. Having only is open, maybe supplement. But think about 12(b)(6) and what's the standard and recently joined the Commission, there were about sort of proactive ways to get at these that kind of thing. It's not really a 12(b)(6) many things that I thought, some of them I problems, because the comments seem very right, because that's all the facts? You still think, that echo what I'm hearing here similar across the board. assume them to be true when there's a legal and it was a confusion as to what the The next step is going to be okay, cause of action, but that's not what we do Commission actually reads and when it so what do we do about? here. That's not what the statute says we reads it, particularly in the case of Audit. MR. GOLD: I'd be glad. I think I do here. It's not what the reg says we do I didn't realize that the would be glad to supplement written here and said facts have to be pled with Commission sees in some instances Interim comments on February 18 that I don't have some sort of specificity. Audit Reports and that kind of thing and a total -- I don't understand enough perhaps It's under oath. none of that is particularly a state secret, it's on how you operate internally to be very The response tends to conclude just the Commission's never really told specific. But it seems to me you've had affidavits or some sort of representations anybody on the outside, so there's a lot of committees of the Commission on different that the facts are not correct, so there are confusion out there and a lot of frustration. matters. Set up on a trial task force to just factual issues at the preliminary stage that I can sense it here where folks say, review what they do and task some people sounds a lot more like the old fashioned well gee, we filed this brief and we're not to look at all the RFAIs issued in a fact pleading that still is present in some sure if you read it and folks who have been particular month, responses. state courts. here say of course we read it, why are they I would be glad to give you A lot of us fancy guys in D.C. saying this? Well because there's a examples, possibly, probably, although it's always think in terms of Federal Rules of disconnect here between the agency and the all in the public record, of these exchanges Civil Procedure, but in state court, it's been public and maybe this hearing is a first step I'm referring to where it's just again and markedly similar to sort of the speaking to try to tear down that wall, so to speak. again. It's absurd and I think it's an demurrer standard or that kind of thing that So the folks who deal with the embarrassment to the Commission when the various states have. agency understand a little bit more about people look at this and it's a waste of time. Any thoughts on, as a litigator, the inner workings and I think that makes - I think you just set up something what sort of standard may really apply that - if that happens, I think that moves the internally and I agree, many of the we can maybe look to, already existing process along, because I feel when people questions they'll find legitimately there has areas that are consistent with the statute feel like they're being heard in some form been an excess contribution. They identify and the regs here? or another tend to be a little more the particular entry, that's easy. But so MR. KELNER: Yeah, I don't cooperative and you can get to the heart of often, it's this generalized oh, and this has think it's a 12(b)(c) -- a 12(b)(6) question. the matter a little bit quicker. to do with what you reveal about union I think it's more the nature of whether or That's my sermon. My questions members, let's say, who break the $200 not the well pleaded complaint. Under the first, just briefly, because we don't have a threshold and you'll get a general letter Federal Rules of Civil Procedure, one lot of time, I don't have a lot of time. With saying you haven't told us enough about needs to make specific factual allegations. respect to RAD, from Mr. Gold, any what their occupations are, a fairly useless In a different context the courts have suggestions on how to get at this issue, but admittedly explicit requirement. sometimes even required so-called because I have seen this as well? I used to What are you -- what's your best heightened pleading requirements. This is represent party committees and we would efforts policy here? And you've already all before you really get to the 12(b)(6) always get to the RFAI that says your answered that question for that -- that union stage. reports show that you have made both -- has already answered that question in the COMMISSIONER McGAHN: coordinated independent expenditures for last year with a written description of its Of rule 9, for example. the same candidate, please establish that best efforts policy, which it used. That's MR. KELNER: Rule 9. So I they were truly independent. the sort of thing, just some kind of internal think the question here, has somebody Now that's wholly inappropriate in task force that just gets into it. submitted a complaint where they've made an RFAI. I mean, that's -- case right on And call on -- I think you can coherent factual allegations with some real point. It's a constitutional right to do both have an informal engagement with apparent substance on the face of the and that's mini discovery. So I'm very committees, practitioners like us and just complaint? And if not, and I think this is sympathetic to that. say, look we'd like to have a meeting for the point that Jan Baran was making pretty

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) well this morning, if not, then it's regulation, that advisory -- themselves, MR. KELNER: It might have appropriate under existing regulations although they are often treated as precedent been a few years ago, but I think in really for the Commission simply to return as a practical matter and they're very conjunction with the Commission's policy the complaint and say, this is not well important, is not the same thing. But we on voluntary disclosures, no. My argument pleaded, without prejudice to it being look to -- it's not -- there's not a lot of case is that it was a good thing that the resubmitted if the complainant is able to law about a lot of issues that the Commission adopted a policy on voluntary submit a coherent and particularized Commission deals with, there just isn't. disclosures, offering 25 percent and 75 complaint. So we do work very closely at percent off for a voluntary disclosure, but COMMISSIONER McGAHN: advisory opinions and MURs. If there is a that there is one more step that has to be Any other thoughts on that from the other -- and we'll quote them. I think we have taken to make that work, which is that one two? No? The other topics come up about the right as a practical matter and you as -- has to understand what the starting dollar the idea of MURs as precedent and it gets in terms of enforcement, what policies, and figure is. somewhat metaphysical, but the question I your priorities, they're important and they I think when you put those two have is the sense out there is if the are de facto precedent even if they may not together, that you would see -- I'm not Commission in certain instances chooses be strictly -- but at some point, as Rob saying everybody is going to self-disclose, not to pursue a certain kind of conduct or Kelner says, they do become -- the agency but I think you will see an increase in self- on its facts dismisses the case or whatnot, at its legal peril will suddenly reverse itself. disclosures. I think that's the reason that what is the significance of that legally not I think it's really important that other agencies have done this. This is not a in terms of judicial precedence, but let's say you explain very clearly what you're doing totally abstract argument. We can look at Administrative Procedures Act or whatnot. and why you're doing it and we have a right the experience of other federal agencies. I know the FCC has had a couple to rely on it. Yes, it's often in basically You can talk to those agencies and find out court cases recently where circuit courts accepting or endorsing General Counsel what their experience has been. have said they hadn't enforced a certain reports, but that then becomes the voice of I think what they will tell you is kind of rule because they were being a little the Commission. So there is a burden that they have seen an increase, for more cognizant of First Amendment, but there. example, at EPA and some of these other then end in enforcing it. It was thrown out MR. SVOBODA: I do agree with agencies, in voluntary self-disclosures as arbitrary and capricious. Does that have that. where the regulated community both any application here to this agency? CHAIRMAN WALTHER: Let understands that they will get credit for the MR. KELNER: I think it does. me ask -- finish your question -- Mr. self-disclosure and understands what the Courts in APA cases have held that if there Stoltz? starting point is for the penalty calculation. is a long period in which an agency has MR. STOLTZ: I think my MS. DUNCAN: Thank you, that's adopted a certain position as a practical concerns have been covered, thank you. helpful. With respect to other agencies, matter in adjudications in enforcement CHAIRMAN WALTHER: Okay, have you found agencies that are closely actions, even if that position is not reflected Ms. Duncan? similarly situated to this agency that have in the regulation, not reflected in a policy MS. DUNCAN: Thank you, Mr. had the experience of publicizing civil statement, but where there's a consistent Chairman. Just one question. Good penalty formulas? pattern and practice, the agency cannot afternoon to the panelists. I wanted to MR. KELNER: I don't think, and suddenly depart from that practice. explore a follow-up question with you, Mr. I'd be interested in your view, but I don't And it makes logical sense Kelner, about the relationship between sua think there is something materially because you want the regulated community sponte submissions and the publication of different about the FEC from other to be on notice as to what the rules are. civil penalty formulas. agencies in this context, in the context of And after some indeterminate period of It seemed that you were saying what drives decisions about voluntary self- time where an agency has taken a particular that publicizing civil penalty formulas disclosures. I think what drives those position in enforcement actions, the might be a good idea in part because decisions pretty much comes down to what regulated community comes to view that as respondents might take that into account risk do we face if we don't self-disclose? the law. with potential respondents in determining What benefits do we gain if we do self- In APA cases the courts on a whether they would make a sua sponte disclose? couple of occasions at the circuit court submission and in fact that might Again, I'm talking about a context level have in fact said it has become the encourage more sua sponte submissions. where you don't have a legal obligation to law. It's arbitrary and capricious for the I was just wondering whether it self-disclose. That analysis I don't agency to depart from a long-held position might go in the other direction as well in personally think is going to vary greatly whether or not embodied in regulations or a that if they see those potential penalties and from agency to agency, so in that respect, I policy statement. they're determining whether to make a don't think any of these agencies that I cite MR. GOLD: The statute of submission, if those penalties are perceived in my written testimony are materially course says that you can only -- I'm as being particularly high, could it be a different from this one. paraphrasing -- establish rules here by discouragement to a submission?

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009)

Obviously there are many respects penalty guidelines have specifically case law under the FECA that talks about in which EPA is different from the FEC, included that factor. Certainly in the that. It's the Furgatch case and the four but none that I think are material to this federal courts in the criminal cases under factors that the court is supposed to topic. the sentencing guidelines, that is taken, consider when imposing penalties. MS. DUNCAN: Thank you. accounted. I don't think it's necessarily And that as a practitioner is one of CHAIRMAN WALTHER: If we appropriate to impose a huge financial fine the oddities I guess I find about the were to publish our civil penalties, would on somebody's who's destitute, for administrative process of trying to you suggest we do it in a range and then example, an individual. negotiate conciliation and trying to mention that there are factors that may There are other ways of imposing negotiate penalties, which is what is from adjust within the range, or how would you penalties. So I think it's appropriate to time to time the seeming disconnect suggest we approach the just difficult thing consider and I think there are other between what may be obtainable in a court that we have not been able to do over examples of agencies that have considered applying those factors and what is being years? it. presented in conciliation. MR. KELNER: Right. It's not CHAIRMAN WALTHER: Mr. And certainly, understanding the easy, and I understand that. The way other Gold, Mr. Svoboda, on those issues? metric that is generating that number out of agencies have done it typically is to MR. GOLD: I believe you ought the Commission in the first instance is identify different kinds of violations, sort to publish something about the penalty helpful to us as practitioners to understand of put them in buckets and then say, if standards. I also think that you ought to exactly where it's coming from and what you're in this bucket, here are the four publish the -- what are the thresholds for the basis is. Because there are times I think factors that we will consider and here's a your audits, what goes into the decision to where penalties are discussed in the worksheet that actually -- some agencies audit a particular committee. administrative process that probably can't actually have a worksheet that sort of gives The statute does not require that to be gotten in civil litigation or would have a you a diagram of how this works, and we'll be confidential. I think that would be very difficult chance of being gotten. give you a rating under each of these helpful. In my experience, committees try CHAIRMAN WALTHER: This factors. to comply with the statute and the most wasn't addressed in your comments, but in Yeah, there might be a range. It frustrating thing is when they are suddenly terms of being able to deal with situations might not be a fixed starting figure. confronted with something, they didn't and -- percentage wise, but it's not There's also usually an out. Usually the realize the gravity of it, or they're uncommon to find that committees have no policy says this is how we'll do it unless in confronted with a confusing letter, as I money after elections and then our work is extraordinary cases we decide not to do it described in our RFAI. done, but there really is no basis to have a this way. So it's not sort of permanently I think also there's a -- it's not as if deterrent factor because the committee's binding, but over time, people get the Commission knows all this and gone and the treasurer may not still be experience with whether the agency's everybody outside the Commission doesn't around. actually following the policy and usually know it. At this point, you have a number But do you think there is any they are followed. of ex-Commissioners, ex-General Counsel, merit to strengthening the liability or CHAIRMAN WALTHER: We ex-staff, who do know these things and are responsibility of those who are handling got criticized awhile back because we took now representing parties. They may not be funds for the campaign and are responsible into consideration the fact that somebody disclosing that, but they do have the benefit for the way that they are dealt with so that couldn't pay, a group with financial of that knowledge. it touches people in a more personal hardship or the party, and the records show It seems to me that that has not responsibility perspective? that an adjustment was made and the caused the system to crash. There are a lot MR. SVOBODA: That strikes me factors taken into consideration. of organizations that are not represented actually as a sort of question that Congress Somebody felt it was unfair that -- of before the Commission or represented has considered and probably ought to course have a higher penalty just because it before the Commission by counsel who are consider, to be real honest, because you had a -- do you have any thoughts on how not doing this as a substantial part of their have a statute that prescribes who we could approach issues like inability to practice and it seems to me that respondents are and limits them to those pay a fine if we did have a schedule like information would be -- ought to be fairly being penalized and you have the that? communicated to the public. Commission's policy statement on treasurer MR. KELNER: I think it's I think the net effect of it would be liability, which actually I think I and most entirely appropriate to consider ability to to bolster compliance, I really do. of us in the community have found to work pay and either not to impose a fine or to CHAIRMAN WALTHER: And actually fairly well in terms of delineating impose a lesser fine where there is no respect for the system. Mr. Svoboda? when you have an individual or genuine ability to pay. I think that's a common MR. SVOBODA: Commissioner, personal risk and when you have an practice. I think to go to your point on whether you individual who doesn't. I know that some of the other can take into consideration the means of I worked as a legislative aide on federal agencies that have published their the respondent, I mean, there actually is campaign finance issues about 10, 11 years

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) back and there were -- when McCain- Thursday, January 15, 2009 Tommy Duncan, both from the Office of Feingold was in its embryonic stages there General Counsel. were discussions about that, do you 9th Floor Meeting Room Thank you very much for being consider making campaign managers 999 E Street, N.W. here today, we really do appreciate it. We liable? Do you consider making candidates Washington, DC 20463 are looking forward to ways that we can liable? improve the agency and its operations. We And I can tell you, that's the third COMMISSION MEMBERS: received a number of very helpful rail of legislative and enforcement decision STEVEN T. WALTHER, Chairman comments yesterday. We had a very full in this area of law and it strikes me as the MATTHEW S. PETERSEN, Vice day, and we appreciate it very much. I am classic sort of decision that Congress Chairman sorry that Whitney Wyatt Burns is not here, probably ought to consider. CYNTHIA L. BAUERLY, Commissioner but she announced that she will be unable CHAIRMAN WALTHER: Any CAROLINE C. HUNTER, Commissioner to attend because she is feeling ill today. further comments from the other panelists ELLEN L. WEINTRAUB, Commissioner For those of you who weren't here on the issue? DONALD F. McGAHN II, Commissioner yesterday, we reopened the time for written MR. GOLD: I agree it's a comment until Wednesday, February 18, legislative issue. ALSO PRESENT: 2009, in order to allow comments and have CHAIRMAN WALTHER: We THOMASENIA P. DUNCAN, General the benefit of the written comments have three few minutes left if anybody has Counsel received so far, and the opportunity to any further comments, we can sure do that. ANN MARIE TERZAKEN, Associate review the transcript of these proceedings, We started a few minutes late, so we're a General Counsel for Enforcement which should be on the Web site by little later than what we planned, but if JOHN GIBSON, Deputy Staff Director, January 30. there's nothing more, then we conclude this Chief Compliance Officer Thank you very much. We are panel and also the meeting. ALEC PALMER, Deputy Staff Director, going to hear from Alan Cox and Cleta But thank you very much for Chief Intelligence Officer Mitchell. We will begin with Mr. Cox. being here. It was very educational for us MR. COX: Good morning. I am and very, very helpful. We appreciate it. WITNESSES: Reid Cox, legal director of the Center for And don't forget that there is some REID ALAN COX, Center for Competitive Competitive Politics. I wish to applaud the time left to make written comments to Politics Commission for not only engaging in this follow-up. Thanks very much. CLETA MITCHELL, Foley & Lardner, introspective project but also for making a I'd like to ask you if there are any LLP number of improvements to its policies, matters that we need to -- there are no such CLAY JOHNSON, The Sunlight practices and procedures over the last five- matters. Okay, the meeting is adjourned. I Foundation plus years. take that back. I think the meeting is There can be no doubt that the recessed until tomorrow morning at 10:00. P R O C E E D I N G S Commission was listening to the comments (Whereupon, at 5:03 p.m., the submitted and the remarks made when it meeting was continued.) CHAIRMAN WALTHER: Good last invited discussion of its enforcement morning, everyone. We are now convening procedures in 2003. The success of those CERTIFICATE OF REPORTER again the special session of the Federal changes since that hearing have Election Commission for Thursday, demonstrated that additional transparency I, JENNIFER O’CONNOR, the officer January 15. Today is a continuation of the in notice and process can benefit both the before whom the foregoing testimony was hearing we began yesterday on the Commission and those subject to its taken, do hereby testify that the testimony Commission's policies, practices and jurisdiction. However, there remain many of witnesses was taken by me procedures. more improvements that can be made, and I stenographically and thereafter reduced to a I am Steve Walther, Chairman of welcome the opportunity to be part of the transcript under my direction; that said the Commission, just to remind you of that. discussion here today. record is a true record of the testimony On the left is Matt Petersen, our Vice As I know you understand, the given by the witness; that I am neither Chairman. To my right is Cynthia Bauerly, Commission plays a unique role among counsel for, nor related to, nor employed and to her right is Ellen Weintraub, the agencies because it regulates conduct that by any of the parties to the action in which Chair of the 2003 hearing on evaluation of is not only constitutionally protected but is this testimony was taken; and further, that I the policies and procedures. Second on the at the heart and forms the essential am not a relative or employee of any left is Commissioner Caroline Hunter, and foundation of a healthy democracy, and attorney or counsel employed by the parties after that left is former chairman, Don that is political speech and association. hereto nor financially or otherwise McGahn. On the far left we have John What is more, the Commission is interested in the outcome of the action. Gibson, who is sitting in for our acting staff often the first and last word with respect to ______director and head of compliance. To the just how fully and freely members of the JENNIFER O’CONNOR far right is Ann Marie Terzaken and then regulated community can exercise their

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) political rights, because in the vast majority process and even experiment with hearings forward with the enforcement proceeding of cases, the Commission is the arbiter that at the reason-to-believe stage and in at the probable cause stage. ever speaks on whether someone has connection with motions in the I know that the Commission violated federal election law. enforcement process. believes that there are obviously timeliness Here I note, and have I noted in I think this does a couple of concerns sometimes with additional my comments, that when Brad Smith, things. One, in the enforcement process, it procedure. I actually think more often than former Chairman of the Commission, allows respondents to make sure they get not that that is a false dichotomy because in testified before Congress in 2003, he used their views before the Commission on facts getting more information there will be statistics to show that over 95 percent of and law unfiltered by the Office of General efficiencies picked up in the enforcement cases, ninety-six percent of cases never Counsel, so that they really not only feel process, but I think this is one of the make it past the Federal Election like they have the opportunity to be heard reasons that access should be given at the Commission in enforcement matters, so but understand that what they feel are their end of the investigation and before the start essentially you are going to determine the best arguments are really reaching the of the probable-cause briefing, because if political rights of these organizations that Commission's ears, and that way the that access is given before the Office of are subject to your jurisdiction. Commission can really fully evaluate what General Counsel files its probable cause Thus, in making the determination the arguments are on the merits and making brief, that is time that can be used by the of what federal election law requires, and decisions as to whether to go forward in respondent in familiarizing itself with those when you do this, regardless of whether it enforcement proceedings. documents and incorporating them into is through enforcement, audit, reporting or In the audit and advisory opinion their response. advisory opinion processes, I think it is processes, I think the same things are true, Third, I think the Commission really important that both the regulated and as we mentioned in other parts of our needs to continue to be more rigorous, and community's interest and the Commission's comments, I think in the audit process, admittedly, there have been a lot of interest that all of the facts, arguments and there has been a blurring of the line of improvements here since 2003, but more law at issue be completely aired. I think it enforcement and audit, and so this is yet rigorous in reviewing and processing is especially important, in fact, probably another reason it would be appropriate to complaints. I think this was one of the maybe of ultimate importance to the have a hearing on the audit processes comments taken up yesterday with Jan Commission that it is completely aired, so especially when many findings state Baran at the first panel, but I really do that you are making your decisions with violations or say that there are purported think the four criteria, I think they are at your eyes wide open. violations of the law. 111.4(d), the Commission really needs to So, that is why I really continue to In the advisory opinion process, I look at and return complaints to believe that more transparency, more notice think you probably more than me certainly, complainants when -- basically as I say in and more process for the regulated but there are any number of times when the my comments, not only does the complaint community doesn't just benefit the public, person who submitted the advisory opinion need to state a claim, it needs to support the but benefits the Commission. request is sitting in the audience and the claim. So it is really more rigorous than I have provided probably pretty Commission is having a discussion and what a 12(b)(6) standard is in civil extensive comments on what my views are there is an obvious question that needs to procedure. There needs to be more there. to the Commission in my written be answered and it can't be answered I think this would help on the comments, and I just want to highlight four because the person who has all of the efficiency end. One of the problems that areas where I think the Commission could factual information is sitting in the you have on an efficiency end is people are make significant strides in providing audience and is not being able to testify. using the complaint process as means to additional notice, transparency and process. Second, with regard to the political ends either by filing frivolous First, I think one of the big enforcement process, I think it is important complaints or even if they are not frivolous successes that came out of the 2003 in following up on the Commission's complaints, filing complaints that would hearings was the hearing process that has change after 2003 in allowing deponents not necessarily be filed but for wanting to been added or if possible at the probable access to their depositions, that at the get into the media and to attack their cause stage of the enforcement probable cause stage when the opponents. If the Commission reviews proceedings. I believe that a direct contact investigation has ended, respondents need complaints more rigorously and does not with the Commission in its processes is to be able to have access to all documents allow that to happen, it will take away that important so that the Commission produced and all depositions taken as a part incentive. understands what position respondents are of the enforcement process. Also with regard to the complaint in and what their arguments are, not only in This is the only way they can process, even if a complaint can meet the the enforcement process but also in the mount a full and fair defense, and in fact it standard to state a claim and support the audit processes and the advisory opinion is the only way the Commission can claim, if the response shows that the process, so my biggest suggestion would be understand -- and this is why it is so complaint should not move forward, the that you expand the hearings into the audit important for the Commission going Commission needs to be more rigorous in process and into the advisory opinion forward -- whether they should move

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) voting to find no reason to believe and comments, I will just highlight a few terms of conciliation agreements, for dismissing the complaint. things. I will supplement my comments, so example. You don't have any idea what the Finally, I think the Commission thank you for extending the deadline. I just penalty schedule is, you don't have any needs to seriously consider confidentiality ran out of energy to talk about software, idea how it is arrived at, you don't have any in the enforcement process and, quite Web site, Web searches, so I will send you idea -- I love it when OGC says, well, you frankly, also in the audit process. This some additional comments on those things. can't say that in your contention paragraph, again goes back to the idea of complaints I want to turn my attention to four and I say, well, the agency gets to say what being politically driven, and the idea here is areas. The first is to reiterate that this its contentions are. Respondents should be that I think the Commission should really agency is consumed with, dedicated to, and able to say here is what we contend send a signal to complainants that under premised upon process, so talking about the happened. We disagree with your analysis 437g(a)(12), they are essentially violating procedures and practices is fundamental to or your statements about what happened. that section by publicly and --releasing this agency because this agency is Then we are told that the agency - their complaints publicly because, as you responsible for oversight of what I call the - we have language that we are required to know, when you submit a complaint it rules of political engagement. use. We can't let you say that. We can't let triggers a notification from the I look around the room and I see you make that contention. My favorite Commission to the respondent, and is what people who have been practitioners. You then is to say, even after we have agreed on that the confidentiality section says, and so know that the whole issue of raising and a dollar figure, arrived at in some Ouija I don't really understand why the spending money and engaging in political Board manner, but if you do want say that, Commission should not make it clear that speech, whether it is with a campaign, an it will cost you. So know you will pay for complainants also should not be violating individual donor, an organization, an issue sentences, pay for words if you want to say the confidentiality that should be ensured group, it all has to do with the process of that. Well, we will have to go back and see to respondents. being engaged in the political process, and if we can pay more, maybe we can say that. I am sure we have a lot to discuss so it is very important that the policies and I find that a little objectionable. here. Let me just leave it at that. practices of the Commission are attentive The thing that I think is important, CHAIRMAN WALTHER: Thank to the very fundamental notion that we are all of this, is to publish the enforcement you very much, Mr. Cox. all about process here. The process is the manual so that we will know there is not Ms. Mitchell? substance. this secret process somehow that exists MS. MITCHELL: Thank you, So, with that, I reiterate what I internally and only if you have somehow Mr. Chairman, members of the said in 2003, which is that fundamental due worked for the agency at some period in Commission. It is hard to imagine that it process, notice and hearing, is vital to the your career do you have any idea what it is. has been six years since we had a hearing proper functioning of this agency. I don't think that is fair. It is not due on this previously. I remember it well, In that regard, I want to reiterate process. It doesn't guarantee due process to with Chairman Weintraub, and I was just what I said in 2003 and what I think would the entire regulated community and the thinking that if it were giving birth to a solve a great many of the issues that practitioners. child, that child would have started school practitioners face, and that is publication of In that regard, I have included in this year, but I do want to take a moment to the procedures manual, the black book that my testimony on page 4, I have copied commend the Commission -- I did in my we hear about, but only when you go to from the Commission's Web site the chart written testimony give the Commission work for the Commission, somehow, do showing the time lines of an enforcement grades -- I went back and looked at my you have access and are privileged to see proceeding, and you will note, as I did, in earlier comments and I graded the this star chamber document. Maybe it is highlighting where there are several Commission, and essentially I want to say one of those things that once published, questions that the Commission has this: people will say there is not much to this propounded with regard to time limits and I think the Commission has made after all. response times and extension of deadlines, yeoman strides in addressing some of the It is the kind of thing that in and the blanks that exist where the ball is in real serious, philosophical opposition to engaging with the Office of General the Commission's court, so you have fifteen procedural due process that I thought Counsel -- I don't know whether these days to file a response to a complaint, and existed at the time. I think the Office of procedures are also applicable to other then for reason to believe findings and General Counsel, with some very few but divisions of the agency because actually I investigations, it is blank. notable exceptions, the staff works very have never seen the enforcement manual, One of the single most hard to try to be accommodating within the so I don't know, but I will say this, that it is aggravating things about dealing with the parameters, which I will talk about frustrating to deal with the Office of agency is not to have heard a word for momentarily, but I do want to comment General Counsel and to be told we can't do months or years and to get a letter saying, and commend the Commission on the that because our manual, our procedures we want you to respond, usually about two progress that has been done. don't let us do that. weeks before an election several cycles There is much work to be done. Well, it would be nice to know later, and being told you have to respond Without going through all of my what do your procedures let you do? In within 15 days, and we might give you an

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) extension. It is preposterous to say that Department of Justice eventually for the from the outside that audit is a form of somehow the burden of timeliness rests on DOJ case which they prosecuted, and the enforcement? the respondents. perpetrator -- we had been through the FBI MR. COX: I think that is So I would argue that, at least, investigation. probably right. Certainly when final audit respondents ought to be given some The defendant, not respondent, reports are stating purported violations of percentage of the time, if not an equivalent defendant had been investigated, had pled the law and you see referrals to the Office amount of time, that the Commission and guilty and was in jail before the of General Counsel on the Web site, I think the Office of General Counsel has had to Commission -- before we got our first word that is certainly enforcement. I think even do whatever it has done, particularly with from the Commission, and frankly, I will probably the audit process, the way it respect to filing a brief. always believe, based on conversations, functions, essentially functions like an I concur with the testimony and that part of the reason that the committee investigation leading up to a reason-to- the comments of my colleagues yesterday was subject to what I call double jeopardy believe finding anyway so, I think the and Mr. Cox as well, saying we should be because then the committee was punished quick answer to that is yes. entitled as respondents to copies of the because of the criminal acts that had been COMMISSIONER MCGAHN: documents on which the OGC is relying for perpetrated upon it, and in no small part we You also said that there is a false its findings, whether it is probable cause or queried about why it was that the dichotomy between efficiency and I would RTB, but it doesn't do you a whole lot of committee went to the Department of say due process, but you didn't use that good if you are supposed to file a response Justice before coming to the Commission. word. That is something I agree with, in within a very compressed time period when Now, I don't know whether there that I find since I have been here, the more the agency has had months if not years to are personality problems or -- I cannot material I can read, the better I know what develop whatever it is you have just gotten understand why the Commission has not is going on, and that is from both sides, but in the mail. entered into a memorandum of could you elaborate on your views for that? I think that is a really serious issue understanding, but there needs to be a I am only one person, but I found it curious in terms of timeliness. I don't think you delineation of responsibility. It doesn't that you had the same point. can look at the timeliness issue and only mean that both agencies don't share MR. COX: I think from a very look at extensions in times and deadlines responsibility in some regards, but frankly, basic standpoint, the Commission is the for respondents. I think there must be I think this is a really important element decision maker, not the Office of General some equivalent courtesies, at least, given with the criminalization of activities under Counsel. The Commission is the decision to respondents, and the Commission is BCRA. maker. So it is important that there be under no such time pressures. With that, I will be submitting contact directly in the enforcement process CHAIRMAN WALTHER: I note additional comments on some of the other from respondents or for that matter in the that you have four different areas. I didn't areas. The Commission cast a very broad audit process, from those being audited write down one, two, three, four, but the net for this hearing, and I appreciate very with the Commission itself and not that due process concept, the enforcement much the opportunity to be here. their positions be filtered always through manual -- CHAIRMAN WALTHER: We the Office of General Counsel. MS. MITCHELL: Time lines, have a Memorandum of Understanding. It That is a very basic proposition of and then I will come to my last one. was entered into quite some time ago. It is process that is not always adhered to here, And that is, I would urge the on the Web site, but we do have a desire to so basically the outside regulated Commission to enter into and publish a put a little meat on the bones in terms of community often has to rely upon the memorandum of understanding with the the process ourselves, and so hopefully we Office of General Counsel, who has their Department of Justice. I was glad that Mr. will be able to make some headway with own interests, quite frankly, and often Donsanto submitted comments to this that. adversarial interest to them, in making sure effect. I have many concerns that the Yesterday I jumped over people, their positions are represented before the Commission has failed to enter into a but if anybody is ready right now to ask Commission, who is the decision maker, memorandum of understanding. I am not questions, I will call first. If not, I will call and I would again emphasize here as I did sure why that has been the case since on former Chairman McGahn and ask if he in my opening comments and in my written BCRA was enacted, but I think that it has any questions of the witnesses, and if comments, it is often the only decision that matters to know when something is or is he doesn't -- the regulated community ever received on not going to be referred to the Department COMMISSIONER MCGAHN: I whether they violated the law or not. I of Justice. do, but it is a multiple-part question. Just think that is very basic. I have had at least one experience demonstrating my thinking ability. Rarely The other reason I think there is a where there was an embezzlement. There do I have the answers though. false dichotomy between process and was -- as would be appropriate, the Mr. Cox, you said that the line timeliness or efficiency is that I think what committee referred to it local enforcement, between audit and subsequent enforcement the Commission will find, I am hoping, is they referred it to main Justice, and we proceedings has blurred. Is it your view that if they offer more process and more provided all of the information to the direct contact, and by receiving more

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) information, they will be able to move the way to resolve this without subjecting community and where can you provide enforcement process or the audit process yourself to that? more transparency, more process, more along because the issues will be clearer at So if there were a way for people opportunity for voluntary compliance. earlier points in the proceedings, and they to know, here is the process, here is what I reiterate something I said six years ago: I can then make a determination, thus you are subjected to, again, coming back to never have a client that comes in and says, terminating, whether it is an investigation publication of the enforcement procedures how can we break the law and get away or making a decision to move forward to and the penalty procedures, the formula, all with it? They say, I want to participate in the next part of the process, without having of those things, the more transparency, I do the process. How do we do it within the to have months and months and months of believe and concur with other commenters confines of the law? I don't want to go to further investigation that may be totally that you would have more voluntary jail. That is what they always say. There unwarranted, or maybe unnecessary. compliance, and asking for ADR should be is no intent -- maybe there is with some COMMISSIONER MCGAHN: a part of that, that if you come in and people, but certainly not in my experience. Ms. Mitchell, how are you? voluntarily say, we made a mistake, and we So, the ways we can make this MS. MITCHELL: Fine, thank would like to try to resolve this as quickly agency, which is all about process, more you, Mr. McGahn. and painlessly as possible -- but what transparent and more palatable, I am not COMMISSIONER MCGAHN: happens is you file an amendment, you saying make it easier, but voluntary In your comments you brought up ADR, could be subject to an enforcement action. compliance, what are the ways we can and you indicated you think that maybe You report a violation that was unknowing, encourage and incentivize people, if they respondents should be able to ask for ADR, you are in for five years of misery. make a mistake, admit it, come in, have the and that is not the policy now. Why is that COMMISSIONER MCGAHN: opportunity to correct that? Again, something that we should consider? And There is a concern. You have reporting transparency should be the object here. then, (2), if we consider it in a way that is issues. Is it better to deal with the CHAIRMAN WALTHER: Thank consistent with your suggestion, what campaign early in some sort of corrective you very much. I am going to ask Ms. would be the criteria, if you know what the action, a la ADR, or is it better to refer to Weintraub for questions. criteria would be, what kind of cases, full enforcement? It seems it is better to COMMISSIONER simply dollar amount, or is it more the type get the campaigns in early rather than later. WEINTRAUB: I am so glad I don't have a of legal issues, reporting issues, any If what you are saying is folks are child entering kindergarten as a result of thoughts on what should go there? so afraid to do amendments they are that hearing six years ago. MS. MITCHELL: Well, I don't willing to take their chances just rolling I want to thank Mr. Cox for his incredibly want to foreclose the possibility of other them into the next report, whether it is detailed and thoughtful comments, which criteria, but I do think that a respondent -- reported data or is something that actually were among the more thorough comments look, there is a process penalty. If can, if you really know what you are doing, we received, and I suspect you had somebody files a complaint against you have an effect on subsequent reports, you conversations with people who used to be which can be completely frivolous, but if it are saying it is to the point where people in this building because you seem to be gets past the RTB stage, you are done. are afraid to file amendments. That is not very well informed, and I appreciate that. As I said in my comments, I good. I think one of the lessons of this would be very curious to see some statistics MS. MITCHELL: That is not hearing is that we do need to have more -- you did them, very good -- about after good, but that is what the system is. Even transparency because there are so many RTB, how many things are ultimately -- the IRS lets you file amendments, for misunderstandings out there, and people maybe I am not privy to that, but the fact is crying out loud, and you don't always have who had experience with us many years that there is a process penalty, there is an the information, or you get the bank ago and had a bad experience still carry expense, there is a time consumption, and statement and there is something that you that around with them. so if there are respondents who are willing didn't know. Well, there is this I would 100 percent agree that if to say at the outset, I will enter into ADR presumption that you are supposed to know we had a case that was so stale that it was and I will pay an amount to be done with everything when you file the report. There sitting around two years after the complaint this, then I don't know why that wouldn't is no opportunity for extensions until you was filed and nothing happened, then we be something that people could offer to do. get the additional information. It used to should dismiss it, but that has not ever I do think that sua sponte kinds of be I would always say file the report, we happened in my tenure, and I don't think it issues should be available to people who will file an amendment later. I don't say has happened this century. Maybe in the admit and come in and agree they made a that any more because I think it is bad old days once upon a time, I don't mistake. I think one of the egregious malpractice. know. problems with the agency is that, as I said I think the ability to step back -- MS. MITCHELL: I have one. I before, no good deed goes unpunished. I and I would urge the Commission to really will move to dismiss it tomorrow. have quit advising clients to file think big picture, and instead of tweaking COMMISSIONER amendments to reports because it is like this or that, maybe think through from start WEINTRAUB: I would be interested in points on your driver's license. Is there a to finish the interactions of the regulated hearing about the details because it is my

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) understanding we have dramatically I think the hearings have been a COMMISSIONER reduced the time on prosecuting cases. We big success. I take some pride in that WEINTRAUB: Before they send it to us -- used to have a policy on stale cases that we because I pushed the policy, and it was I think that is all we would accomplish. would kick them after 18 months. drafted in my office and I am told that I can People would say, I am about to file this MS. MITCHELL: We are way say that, we have had 10 requests, we complaint with the FEC. If we said you past that. accepted six, and we have had six of these can't say anything when you file it, you COMMISSIONER hearings. wouldn't have that press conference. I WEINTRAUB: I would be interested to I will say that people don't always agree that many, many, many of the hear about that. This is on our Web site, help themselves at these hearings. Not complaints are politically motivated. but I will be happy to hand it to you, data everybody has come in and really Those are the people who have incentive to on how often we dismiss or make no persuaded people that, wow, they were on be watching the other guy, but a number of reason to believe or take no further action the right side and we were wrong. So I them have validity anyway. It is true they after the reason to believe, and it is data would advise anybody in the regulated are politically motivated, but sometimes going back to 2003. community to think about whether they they are right. I think there is only a couple of will actually advance their cause in these MR. COX: It is a fine line and in years where there weren't -- where that hearings, but they have been helpful and the comments we mention that they have a didn't happen more often than not, and in interesting and informative, and I am First Amendment right to obviously discuss some cases it is dramatically more often. certainly open to expanding them to other the issue, but if the complaint process is In 2007 we dismissed, had no reason to settings. supposed to be confidential, and if the believe or took no further action in ninety- Like I said, there are a lot of Commission is very concerned about that, I eight cases as opposed to sixty-seven cases misunderstandings out there. Some people think it does need to look at whether it that we actually had a conciliation seem to think that we keep the penalties so shouldn't do something or at least tackle the agreement. It happens all the time. that it enhances our budget. It doesn't, we issue of complainants essentially making I think that a lot of the people who don't keep any of the penalties. We don't public that the Commission is going to come and testify here, the really savvy do random audits, haven't since 1979, I notify respondents, like the statute says, by inside-Washington lawyers who are, think. We can't fight statutes. I know there making the complaint process public. frankly, expensive are consulted most often is a lot of misunderstanding out there, and CHAIRMAN WALTHER: I am on the complicated cases for the big that is why we need more transparency. going to ask. We are running short on players, the ones that are less likely to just They are a fair issue to raise, and I think we time. go away, because they are bigger and more need to address that. COMMISSIONER complicated and they are more savvy I am really intrigued, Mr. Cox, by WEINTRAUB: The chart in our brochure players, so you may have a misperception your suggestion that we should somehow with the time lines, that is not just a based on the fact that you have more enforce the confidentiality provisions statutory time line; that is a summary of complicated cases because the people with against the complainants. How would we what the statute says, and the statute is the easier problems are not going to consult do that? Do you want us to sue them? silent in some areas, and that is why the you or some of the fine practitioners we MR. COX: Well, if you look at chart is silent. It is not a conspiracy to hide had here yesterday, so I think sometimes the statute -- information. people have the wrong perception about COMMISSIONER MS. MITCHELL: I understand that. WEINTRAUB: I know what you are that, but I am saying that there needs to be Many, many people have talked saying. Practically speaking, getting some recognition that this is a hurry up and about wanting to get unfiltered access to people to not announce they have just filed wait game. the Commission. I want to assure you, and a complaint -- COMMISSIONER I assured people yesterday, that there is not MR. COX: The first step you WEINTRAUB: I get that. a document in this building that we don't could take is when someone files a MS. MITCHELL: And it is very have access to. Commissioners frequently complaint, you could send a letter or make distressing. start with the respondent's answer or the it clear on the Web site, that the complaint CHAIRMAN WALTHER: We respondent's brief because it is a good way should not be made public and you can will come back to these after we get to figure out what are the key issues in the state the statute, but one of the points here through all of the commissioners. case. We have those documents, we read is that there is a lot of concern about Commissioner Hunter? those documents. I think that we might confidentiality that was mentioned in MS. HUNTER: I have so many want to consider amending our practices so questions through the notice, but clearly the questions I don't know where to start, but I that they are literally filed with us, so that very first place where confidentiality for will bring up one or two quick issues. people will know they come into our respondents is given up is that most -- One is, Ms. Mitchell, you office. They do, but apparently people many times complainants are politically mentioned you are telling people not to don't know about it. motivated, and before they send it out to amend. There has to be a better way to you, they run to the media. deal with this, to balance -- the OGC would

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) say we have to have some kind of penalty political decisions. They are trying to do audit report is published, and I guess the in order for people to realize there is a the best that they can do. Campaigns reason I am hesitating a little bit is I think consequence for not filing something, but devote varying degrees of resources to the this is also one of the problems of the at the same time it makes no sense for whole compliance and reporting arena, and blurring of the line in the enforcement somebody not to be able to say, I made an that is usually the prime determinant of process and audit process. honest mistake, I am putting it on the what they do. One of our main comments with public record. But even the best, well-oiled regard to the audit process is that I am wondering if you could think campaign makes mistakes. When the sometimes final audit reports are made more, maybe submit comments later, about presidential campaign of Barack Obama is public that state purported violations when what is the best way around that. Maybe it accepting contributions from O.J. Simpson not all of the enforcement decisions have is ADR, I don't know, but I think it is fair and Bart Simpson, it tells me that no matter been made. to say campaigns don't want to admit a how sophisticated you are, there are going Our concern here would be that it mistake. Nobody wants to even say my to be mistakes. Is that a violation? I don't seems to us that that should not occur, that original report was filed inaccurately, and know. This is not a good system. This the final audit report should not become a so, therefore, they have no incentive to do isn't good. That is what I am saying. finalized public audit document until all the that. Even if they have to amend the report CHAIRMAN WALTHER: enforcement decisions that need to be made and file something that says, I made a Should we move on? have been made. mistake, that seems to be at least a step MS. HUNTER: Just one more That is why I say -- I guess I am a forward, to say we originally messed up. comment. I like your suggestion to look at little confused as to -- if we are using the They are already admitting that they made this from the big picture because often the system that is already in place, I think you a violation when they admit it, so why go people that are doing their part of the job, may even need a hearing after the final through the whole big process of here at the agency, they are doing it the audit report if there is still enforcement that punishment and conciliation when they way they are supposed to. But nobody is is ongoing, but in terms of -- it seems to me admitted up front that they failed to report looking at it from the big picture. I think that the most important part for the hearing something? that is a good suggestion. is that in the audit process, that hearing MS. MITCHELL: I am not sure CHAIRMAN WALTHER: should be at a point at which it can affect that it is admitting a violation if you admit Commissioner Bauerly? the final product, which would have to be the report to more accurately reflect the COMMISSIONER BAUERLY: I before the final audit report occurs. information you have now that you may would like to ask a couple of questions of COMMISSIONER BAUERLY: not have had at the time. I think that the Mr. Cox. You had detailed comments Ms. Mitchell do you have any thoughts? attitude is and the conclusion is, and I have about process, and I appreciate that. I share MS. MITCHELL: With respect to heard it many times, that that act of Commissioner Weintraub's concern that audits and enforcement? amendment is admitting a violation, and I there seems to be a concern about what COMMISSIONER BAUERLY: think there needs to be, look, I don't know type of information commissioners have And particularly the timing of a hearing. what the point schedule is for generating an access to. There is a gap in understanding, MS. MITCHELL: I think as part audit based on how many amendments you so we need to do a better job of letting the of the stepping back and looking at the big file. That is a secret. I don't know. We public know, about the fact that we do have picture, the reason the public doesn't can guess, but I don't know at what dollar access to the legal and factual analysis that understand what it is you have access is to level it generates an audit. I don't know. I the respondents do submit. because it is a secret. am guessing. I am guessing. There is a lot of discussion about COMMISSIONER BAUERLY: But what I do know from having direct access to the Commission, It is not a secret. We both just told you experience is that at a certain point, it is at and if there are additional ways we can do what it is. And people yesterday explained a certain dollar level it is deemed a serious that, if that is through a -- that is important, it. If it has been a secret until now, it is no violation that goes to enforcement or so but I think it is important that we do a longer a secret. many amendments triggers an audit better job of letting people know of what MS. MITCHELL: I have had a somehow. That is a secret from my we do have access to already. number of conversations with OGC and practitioner perspective. I would like to talk about, over the been told, we already considered that I think that transparency and last day and this morning we talked about argument and rejected it. So you have a making that public and letting people can the audit process in particular, and I am sense that you are really submitting your know so they can make a judgment and wondering if you have thoughts at what brief to your opposing counsel. know -- and if you do make a mistake, if point in time -- there seems to be two I don't know -- just because you you do find -- look, in my experience logical places, the interim report and the have access to it, I don't know -- do you campaigns, and maybe this is different with final audit report, as to where that hearing always read it, do you always read other people's clients, but usually whoever might make some sense. everything? That seems to me to be is assigned to do the reporting is not MR. COX: Let me say two something that is attended to for every somebody who is basically making the big things. I think it has to be before the final commissioner. You submit it to OGC and

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) then you wait and you wait, and then the COMMISSIONER MCGAHN: COMMISSIONER PETERSEN: next thing you hear is from OGC, and all of But there are comments that are prepared I think I should have taken that opportunity the dealings with the Commission are done that are put on the packet with the counsel's to be skipped in the order. by OGC. So if there is a perception that recommendation, which does not go public First of all, I commend both of our there is a filter between respondents and until the end of the MUR. Once the case is witnesses for the fine comments they have the Commission, it is because there is. closed, it goes public. To sit up here and prepared and for the useful information What you have access to and what you do say there is not -- contained within them. with that is up to you. It is a secret process. COMMISSIONER BAUERLY: I I have a question for Mr. Cox. In the COMMISSIONER BAUERLY: am not saying there is not a factual and section dealing with motions before the Let's follow your own logic. If you were legal analysis. Commission, you state and emphasize that allowed to submit directly to the secretary's COMMISSIONER MCGAHN: -- you recommend that we expand the office for direct circulation to the This is the confusion. scope of what motions we will consider, commissioners, you would have to rely on COMMISSIONER BAUERLY: and you say at a minimum a process should the good faith of the six people sitting Ms. Mitchell asked me if there was a cover be provided for motions to quash before of you that we take our jobs memo that characterizes what the subpoenas. seriously and do that. I am not sure what respondents thought. There is a factual and You are not the only witness who the difference in that process would be. legal analysis because they have received submitted comments to the Commission You still have to trust that we are doing our it. We have access to the document as it who has emphasized motions to quash jobs to the best of our ability. was filed by the respondent. subpoenas as being the most important one. MS. MITCHELL: Here is a MS. DUNCAN: If I might try to I was wondering if you might expand on question that I have that I do not know the provide some clarity on this for the public why you think that one is so vital. answer to, and maybe you can enlighten record. As you know, the general counsel's MR. COX: I think one of the me. office provides respondents a brief problems that we have in the enforcement When I submit my brief to the indicating that they are -- we are prepared process is the length to which it goes on, OGC and then it goes to the Commission, to recommend to the Commission a finding quite frankly. I actually was going to say does the OGC write any comments about of probable cause to believe. this -- I think it was when Commissioner what I write? Does it -- don't you get a After that respondents have an Weintraub was talking -- about the memorandum of some kind arguing -- I opportunity to submit a brief. That brief timeliness improvements that the don't know who gets the last word. Do I goes directly to the Commission without Commission has made. get a copy of everything that OGC gives to any analysis done by the Office of General One response that I would make to you? Counsel. The Commission is able to that is if you are litigating in Federal Court, COMMISSIONER BAUERLY: I consider the brief. The Office of General often Federal Court trial litigation doesn't do not know what you get a copy of it. Counsel considers the brief, and then it go on as long as investigations go on in this MS. MITCHELL: All I get is the writes a recommendation to the Commission, even if they are complex RTB, factual legal analysis and then the Commission as to whether it recommends investigations, complex cases in Federal probable cause brief. That is all I get. I probable cause to believe. That Court, for instance in the Eastern District don't get the documentation. You may get recommendation takes into account of Virginia where I happen to reside, is on it. I don't get it. I don't get any respondent's brief and relies heavily on our the rocket docket. Even if you have a commentary that OGC makes or any initial brief. After the close of the case, complex case, it goes through in a year, not summaries, any memoranda that are that brief is made public as is the rest of the two years or five years. provided to you that I don't see. That is materials in the case. That report to the One of the reasons I think the why I think that there is this sense that Commission recommending probable cause motion to quash subpoenas or, for that there is a filter, because I think there is, I or not is made public. matter, any motions involving discovery don't know that because it is a secret, but if MS. MITCHELL: It just does related to the enforcement process are you want me not to think that, maybe we seem to me that since that is going to be important is it really hurts efficiency, it should make it public. made public, it would seem proper that the seems to me, and one way of dealing with COMMISSIONER BAUERLY: other materials of the case ought to be this may be to allow some of those things You asked a question about whether we see made public to the respondents before it is to happen before the Commission rather your raw document as you submit it, and over. than having to go to court. we do. There is no character, there is not a CHAIRMAN WALTHER: I am Now, I guess you can say the cover memo that says this is a good brief or going to call on John Gibson who is response to that could be, well, someone a bad brief. We see the document. You are Director of Compliance to see if he has any could still go to court, the Commission right, OGC has provided a factual legal questions -- Mr. Vice Chairman, I could determine whatever they wanted and analysis. Their view of -- but we do not -- apologize. determine they might still be able go to we do not have to rely on OGC to read the court, but what I am thinking is if you documents ourselves. believe that you have been heard by the

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009)

Commission and fully aired, that I think a investigation to the Office of General MR. COX: I am kind of on the lot of those will not go to court. Counsel, but if it is hearing motions to fence. I actually do believe obviously in a Quite frankly, I think there are quash subpoenas or to protect privileged lot of transparency. The concern that I also cost reasons for doing this. I imagine documents from respondents, it is yet have about publishing the civil fines the cost of having a hearing on quashing or another time that it will come before the schedule would be that it would end up privilege, whatever it is, in discovery and Commission to have a check-in of how this ratcheting up fines and not allowing the investigations would be much less MUR is going. Commission enough discretion when expensive in front of the Commission than COMMISSIONER PETERSEN: necessary. I want to echo what Cleta had filing an action in Federal Court. I think As part of this motion and other motions, said earlier, and that is that I think my that is the main reason. how part is it from your perspective that viewpoint of those members of the COMMISSIONER PETERSEN: not only you are able to file a paper with it, regulated community as a whole is they are If I can have Ms. Mitchell comment. As but you actually have access to the trying to comply with the law and to the one who has represented several commissioners to have a direct exchange? best extent they can fully and freely respondents in MURs, is this a motion that MS. MITCHELL: I just happen exercise their public rights, and so I don't you support and have you had concerns to think -- I think that is important, and I see -- I understand when there is a about the scope of subpoenas that your think setting aside some days for that kind violation, there has to be consequences to clients have received in the past? of practice is an important thing because, that, but I don't think that in general there MS. MITCHELL: Yes, in the again, you have a sense then that there is a should be heavy handed penalties, so my past, and there is a way to have a motion neutral arbiter. The most frustrating thing concern about publishing a civil fine docket where you would set aside a certain is to think that the decisions are being schedule is it would have the effect of time each month where there are discovery made by your opposing counsel. firming up or even ratcheting up the disputes or privilege issues or those kinds MR. COX: We have seen this penalties being paid across the board by the of things where the Commission could exchange today about what the community, and that is a concern that I perhaps dispense with those on a more Commission understands it has access to have. expedited basis, but I think stepping back and sees and does review and what the So, I think by not publishing it, and thinking about, just because the regulated community believes is being the Commission is able to exercise Commission has done it a certain way for a seen. I think that only emphasizes the discretion based on the facts and very long time doesn't mean that the point that, really, there is a kind of a gulf in circumstances, and my hope is that if my Commission needs to continue these things this hearing that the regulated community understanding of people trying to comply the way it has done all these years. understands or believes how they are being with the law is correct, that often the Thinking in different terms, what heard unfiltered by the Commission, and I Commission is exercising discretion are the things we could do to make it more think if you can actually create more downward rather than upward. transparent, to expedite, to deal with these opportunities so that that gulf is breached CHAIRMAN WALTHER: One procedural things at the Commission level by true appearances before the commission, of the reasons given yesterday is if we offer so that we can dispense with some of these I think that aids everyone. a discount in a certain matter, whether it is issues more expeditiously. I think those CHAIRMAN WALTHER: Thank sua sponte, people don't know where the are all things that the Commission should you, Vice Chairman. Sorry I missed you discount is coming from, so it is maybe not undertake to do. there. an inducement to get a discount, but you It is trying to deal with that while Mr. Gibson. don't know what it is from exactly, so we you have a train moving ninety miles an MR. GIBSON: I don't have any sense that on behalf of clients there is a hour down the track with all of the other questions, but I do look forward to frustration on the part of clients that they things the Commission has to do, but I receiving your comments. I do thank you don't know how we make it up. They want think this is really important and I would for your comments. Thank you. counsel to say this is where they are echo Mr. Cox's comments as well as those CHAIRMAN WALTHER: I have heading, but we have these factors, so let's comments I have read from my colleagues a question to Mr. Cox. We heard yesterday take a crack at mitigation. of yesterday. at some length about almost pretty close to How do you respond to that issue MR. COX: If I could add one unanimous comment that we should make about convincing someone to look into other thing, one of the reasons it is a public civil fines approach, and then I conciliation without knowing where we important to have motions dealing with note that you are not in favor of that, and, have a starting point? Are you on the other discovery with the Commission is it is yet of course, it has been that way in the side of the fence now? another opportunity for the Commission as agency for many years and I am tilting MR. COX: This was a tough a decision maker in the enforcement toward the publication, but I am very issue for me. My initial read was let's process to keep a tab on the cases that are interested to hear both sides of the publish everything out there, out in the sun, in the enforcement process. argument here at this point, and give us throw open the doors. My concern is I know the Commission generally your best thinking on that. essentially that if you publish whatever the grants a broad amount of discretion in the sentencing guidelines are -- you see this in

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) the criminal law, this is a good analogy -- you don't know the MURs -- I know former MS. DUNCAN: It sounds like is that the criticism that happens when Chairman McGahn not too long ago, we you think it would be worthwhile to look at judges depart downward from sentencing couldn't find a MUR, except that he those agencies if in fact they are analogous, guidelines is they are going easy on crime, remembered that there was a MUR out if in fact there is such a high proportion of and my concern is, and this is why I am on there somewhere. That is great if you have the matters before them being resolved the fence, my concern is if you depart people who lived this, but for someone before the adjudicative stage. You don't downward and in my view are having to do who wants to get some general guidance, if have to agree or not agree with that. so often because people are really not that you don't know the MURs or you don't Let me ask you one other question culpable for violations, then you are in a have a binder, you are looking at the about your recommendation here. I think situation you have to be careful of what penalty amounts as opposed to an issue on in your written comments you conditioned you ask for. That is what, I guess, my 527s or something, the average lawyer is the access to the investigative materials on concern is. quite handicapped without spending some not having an objection from the General MS. MITCHELL: I think that one money. Counsel, and I just wondered if you could of the ways to address that -- I don't There seems to me some benefit to elaborate on that as to what would be disagree with what Mr. Cox is saying. One a starting point. I welcome your thoughts appropriate grounds on which the General of the ways to address that is to say the on that. I made a mistake of calling on Ms. Counsel might object? Commission reserves the right to waive or Duncan. I thought she was going to ask I can think of concerns we would substantially reduce a penalty in the other questions. I welcome any thoughts have about sharing that information that schedule based on the following factors. you have on that one point, and then we have to with confidentiality and One of the factors is we can create will move. diminishing the possibility that witnesses the incentives for sua sponte reporting. MS. DUNCAN: Thank you, Mr. will cooperate, et cetera, but I am What is the basis for arriving at the amount Chairman. Welcome to the panel. wondering what you would have in mind in at issue in the first place, is it through I have one question for Mr. Cox. terms of appropriate considerations. enforcement and audit or is it through filing You are recommending that respondents be MR. COX: I think some of those amendments, is it through self-reporting? I given access to all documents produced and might be appropriate considerations that think there are ways the Commission can all deposition transcripts at the end of the you could bring before the Commission. I reserve the right to itself to waive or investigations, even before the probable think if there are other -- I know I had said substantially reduce any of the penalties in cause briefs are produced. after the investigation is complete, but if it the schedule if these certain factors or I ask this question recognizing the could, for instance, be part of an mitigating circumstances are present, and unique mission of our agency and the types investigation elsewhere that may not be that encourages people to have mitigating of sensitive behavior or activities that we complete but the investigation at the FEC is circumstances. regulate, but I also ask it recognizing that complete, that you are aware of, that there MR. COX: One of the reasons I there are other civil law enforcement is another investigation going on, then guess I am on the fence and believe that agencies where a large percentage of the maybe there are reasons attached to that, maybe it is not essential to publish the civil matters that come before them are resolved but it seems to me when the FEC has fines penalty schedule is that since you before the adjudicative stage, and in that completed its job of investigating, the have indexed MURs and made them way those agencies are similar to this general rule should be that they should available on the Web, I think to a certain agency. have access to that information to make extent you can discover a range of Having said all of that, can you their defense because this is the only information about where you are at by identify any other civil enforcement defense they are going to get to make, doing that. I understand that is more agencies that provide such liberal access to essentially. I think there could be reasons laborious then going to a chart and saying contents of the investigative file at the of confidentiality. you are at the fifteen to $25,000 level and investigative stage as opposed to at the I want to be clear here. When I here you are, but I guess I prefer that adjudicative stage of the resolution of am saying access to documents produced because then it takes care of my other matters? and testimony provided, I am not saying concern, which is that you then don't have MR. COX: No, I am not offhand access to privileged materials that the this. Well, you should have been here and aware of any, but I also wonder, I guess in Commission has developed, or materials you only got half of that, so the response to your question, I also wonder that other government agencies have Commission must be soft on election law whether those other agencies have such a developed. It is literally the fact-based crime or election law violations. high rate, and I mean an exceptionally high evidence from discovery. CHAIRMAN WALTHER: One rate, over ninety-five percent, of not going The reason I included a provision of the issues that comes up when you to court. I understand that there is de novo if the Office of General Counsel objects, consider that is one concern that I have, review available in court, but you are and in fact this is consistent with the policy that you are setting up a situation where essentially the adjudicative stage for that you have with regard to providing you really need an election law expert everyone, and that is, I guess, my point. deponents with their depositions, it seems attorney to help you in a matter because if to me there does need to be an escape valve

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) if there is a good reason, but I don't believe then we were will open it up for questions that campaigns and software vendors send that that escape valve should be used as a and comments. data to you in. general rule to prevent access to factual Bear in mind, none of us are So people who want to see those information. experts in this technological field, so feel filings also have to change their stuff, and There needs to be a really good free to bring it down to the eighth- grade what that means is -- for instance, right legal reason for it, or a good procedural level. now you have a vendor that we know that reason for it, that there is another MR. JOHNSON: Bear in mind has been posting electronic filings investigation ongoing in another agency or also that I am not an expert in the legal erroneously to the FEC for over two years. that -- I think in the case of MURs that field, so bring it down to the eighth-grade This can be a problem for people who want have multiple respondents, you will have level for me when it comes to election law. to view this data. the issue of, well, maybe an investigation CHAIRMAN WALTHER: Please What we recommend is a more with regard to one respondent is over but proceed. standardized and more versatile format an investigation with regard to another MR. JOHNSON: My name is than the custom file format that the FEC respondent is not, and they are interlinked. Clay Johnson. I am from the Sunlight accepts. I am happy to file, I don't know Maybe the appropriate action Foundation. We are a nonpartisan what the language is, but I can send you there then is to postpone the probable cause organization that is dedicated to facilitating memos about what that stuff can be at a briefing in the investigation that is ways to make use the Internet to make later time. completed earlier, and also therefore information about Congress and the federal Second, and this is probably the postpone access to the documents and government more accessible to citizens. most important, the FEC publishes data it depositions taken at that point until the Today I want to talk about two receives in official versions after it has MURs can come together at some point so primary issues. First, I want to talk about been received and gone through some form that you are not compromising the how the FEC can make adjustments to its of internal process at the FEC. This is investigation in those other MURs. data and Web site to further fulfill the where the most need for improvement I think the Commission really FEC's disclosure mandate; and second, I needs to come into play. needs to seriously consider how important want to talk about ways the FEC itself can Presently there are multiple fields it is for that access to be granted. be more transparent to the American like name and occupation and employer, CHAIRMAN WALTHER: Thank people. and the way you publish your data, each you. We have seven minutes left. My first point: Your number 1 field has a certain number of characters that Any further questions? priority in fulfilling your mandate to is allowed in that field, and if, say Any further comments you would publicly disclose campaign finance someone's occupation and employer, the like to make in light of the questions we information should be to provide high- length of their title and employer goes have posed to you? If not, we will let you quality and accurate data to citizens in a beyond the length of that field, that data is off the hook. Thank you very much for the way that is comprehensive and then lost. I personally take great offense to comments and the hard work. understandable. this because if you look for me in the FEC's We will recess now for about ten This involves three things: database, it lists me as technology con, minutes and then we will begin at 11:40. 1) Ensuring that the data that is being instead of technology consultant. (Discussion off the record.) collected is accurate. The answer to this is not to simply (Brief recess.) 2) Publishing the data in a reliable way that just increase the width of the fields. The is accessible. answer is to use more standardized formats CHAIRMAN WALTHER: We 3) Making the FEC's Web site itself more for publishing this data, like XML, will now reconvene. user-friendly. extensible markup language, and I will give We have before us Mr. Clay The first point about ensuring that you whatever you want in terms of Johnson from the Sunlight Foundation. He the data that is being collected is accurate technical support and knowledge. My has proffered comments that are more can best described as garbage in, garbage brain belongs to you as long as you want it. technical in nature on the enforcement out. If you are getting bad data from COMMISSIONER process, but upon taking a look at your campaigns, then you are going to publish WEINTRAUB: Give it to him. report, it is very important to us to consider bad data. As long as the FEC does not MR. JOHNSON: What is some of the points that you made. enforce strict guidelines on how it receives happening is that data is getting lost when You have the luxury that no one compliance data, it won't be able to publish it is being published, so it is nearly else has had because you are all alone, and reliable and accurate data itself. unusable. It is inaccurate and you can't we have allocated for this panel an hour Right now the FEC receives make safe assumptions. and twenty minutes. We had a more filings in what is called a non-standard Finally, my third point is making structured approach, but I will ask you to format that has low versatility. What that the Web site more user friendly. As we give us a short summary of some of the means is that when rules change in the have seen in the last three presidential highlights you would like to make, and FEC, you have to change the file format election cycles, the use of the Internet to make contributions has surged cycle after

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) cycle and, as such, so has the interest over And secondly, on a separate note, What is that based on? Because your Web site and data. as part of the FEC's enforcement and we have what I consider to be pretty Today the FEC's Web site has to compliance duties, senior staff and FEC stringent ex parte rules that require be recognized as the most valuable commissioners routinely meet with disclosure of exactly those sorts of strategic asset your agency has in fulfilling individuals representing candidates, PACs, contacts, and as a result I think that your disclosure mandate and, as such, that campaign committees, corporations or commissioners try pretty hard to avoid its Web team is more than just providing a other entities that are being investigated or doing that. Do you know something I support function. Just as attorneys are have possible knowledge of alleged don't? essential to the FEC's enforcement duties campaign finance violations. MR. JOHNSON: No, no. Please and accountants are critical to the FEC To address the appearance -- and I don't take it as, hey, I know you guys are compliance mandate, the FEC's Web staff am not saying anything is going on wrong meeting with convicted felons and -- what I is instrumental to the core disclosure here. To address the appearance of undue am saying is you meet with people about mission of the agency and must be influence or corruption, it is Sunlight's your issues, whether they are investigations provided with the skills and authority to suggestion that the Commission should or -- make disclosure on its Web site equal to draft regulations that would require COMMISSIONER other critical agency functions. Commissioners and certain senior officials WEINTRAUB: No, not about Improving the Web site involves to report online within seventy-two hours investigations. We have rules against that. two significant changes. First, a shift in any significant contact relating to a request MR. JOHNSON: How do you language that starts speaking to citizens for FEC action. conduct investigations? and not just to lawyers and accountants. If the FEC finds that it does not COMMISSIONER For instance, if I want to search the FEC have the ability to draft such regulations -- WEINTRAUB: Our staff attorneys do. database, my first option on the Web site I don't know that you do -- it should design MR. JOHNSON: I see. right now is to search through candidate a system of voluntary reporting of COMMISSIONER and PAC party summaries. Many people significant contacts. In either case, a WEINTRAUB: I certainly would never don't know what PACs are or what a significant contact is one in which a private meet with counsel to a party that had an summary is. party seeks to influence any official ongoing investigation to talk about that, Some language -- the language on actions, including any advisory, regulatory and if I did I would have to disclose it the Web site right now is highly or enforcement action pending before the under our current rules. I am wondering if specialized, and a recommendation is that Commission. you know something I don't know. you spend some time copywriting with a Thank you. I will be happy to MR. JOHNSON: Then you know copywriter to tailor it to a broader answer any questions. something that I don't know. I will say that audience. COMMISSIONER WALTHER: one of the things we say at the Sunlight Second, a change in technology to Let's start with the commissioners. Foundation is public means online. What make the Web site itself more useful in Commissioner Weintraub. that means is it is not okay to say that a spreading the information. For instance, COMMISSIONER document is public or that a schedule is right now if I do a Google search for Clay WEINTRAUB: I am completely incapable public because it is an in a three-ring binder Johnson, I can take that link and then copy of engaging with you on the tech stuff. somewhere in this building any more. it and paste it in an e-mail or put it on a MR. JOHNSON: That is not true. Technology has required a shift and I think Web site or something like that. Right now I am pretty charming. [Laughter.] Americans are demanding a shift in the when I search the FEC's Web site, I can't COMMISSIONER way they think. If it is public, it has to go do that. I can't search for Clay Johnson as WEINTRAUB: I hope this will be the online, and you might as well consider it an individual contributor on FEC.gov and beginning of a dialogue between you and confidential if it is in a document in the then e-mail that link to someone. I have to Alec Palmer, who is sitting at the table over basement here. e-mail the search form to someone and tell there, who I am pretty confident is the only COMMISSIONER them to type in Clay Johnson. person in this room who really understands WEINTRAUB: That is a very fair point The second thing is to have what what you are talking about, and there are and I agree with that. Do you have a are called APIs, which are ways for other probably some staff people out there too. I definition of significant contact? Is that Web sites to query your database and put hope -- I think you have made what sound based on a regulation of another agency? the information on their pages, so that they like perfectly reasonable suggestions to me. MR. JOHNSON: That is based on can say -- so that I can, say, run a Web site The only thing I really want to ask what my lobbyist told me to say. that says I will search for Clay Johnson and you about is the statement you said at the COMMISSIONER have the contributions listed on my Web end: As part of our enforcement and WEINTRAUB: You know what people site in line. compliance duties, senior staff and FEC think about lobbyists here in Washington. Those are my three big commissioners routinely meet with all of It sounds like it is drawn from regulatory recommendations for you guys for your these individuals that we are enforcing the language. I was wondering if you are Web site. law against. suggesting there is some agency that does

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) this, and we should be modeling ourselves company called Ask.com or Ask Jeeves as for sharing your insight with us. I am sure on them? it was known back in the day. that Mr. Palmer is gratified to hear you call MR. JOHNSON: No. Right now the FEC Web site has on us to spend as many resources and COMMISSIONER several different ways of searching. You devote as much attention to this aspect of WEINTRAUB: Okay. That is it. can search the FEC's Web site, there is a our mission, what we do with the highly CHAIRMAN WALTHER: little box on the top where you can search trained lawyers in OGC and the auditors as Former Chairman McGahn. for anything. You can search for me there. well. We do have an amazing IT staff, and COMMISSIONER MCGAHN: A PDF file of this meeting comes up, and one of the aspects of our Web site that you The fact that you looked at our Web site then you can also go and click on search complimented us on was the map, one of and you didn't understand what our ex parte disclosure databases, and there are different those easy interfaces for the public to use. rules were tells us that they are not methods of searching those databases, so I agree with you that adding plain prominently displayed on the Web site, you can search for individual contributors, language to some of the technical legal which I think is the point you are making, committee filings and stuff like that. terms is an important step and perhaps a if it is not there, someone who is not an The way that is done is actually fairly easy one. FEC junkie is not going to know, which fairly sufficient because you are basically Knowing that given the budget could raise perception issues, so maybe that limiting the scope of what things can be constraints that this agency and the entire should be more prominent on the Web site. searched through, so because of that they federal government is going forward, I MR. JOHNSON: Sure. are more accurate, the less needles in the wonder if you could prioritize what you COMMISSIONER MCGAHN: haystack -- or the less hay in the haystack, think the first step should be in making Believe it or not, one of my degrees the more needles you are going to find. these improvements, because I assure you undergrad was in computer applications, The problem is that the underlying that Mr. Palmer has a long list of things he and once upon a time I could actually data that is coming into the FEC and then would like us to spend resources on, and I program in COBOL C, Fortran -- I could the process that the FEC is using to scrub think we all would like to give him as actually do all that, and my father or clean up that data, you are losing data many as possible, but the Congress hasn't convinced me that computers were just a that is valuable, so when you are searching seen fit to give us all of the money we fad and I should go to law school. I made a against stuff that the FEC has accidentally would like. lot of good life choices, and now here I am. deleted or not publishing any more, it is the So, help us prioritize if you would, [Laughter.] technology con problem. Who knows from your perspective, which of these I was once quoted by a British whether it is a technology contract or changes that are identifiable would best academic saying, I don't understand why consultant? help the public access this information? anyone ever would want to go on the It is worse when you have large MR. JOHNSON: Sounds like two Federal Election Commission [laughter] companies and the company name comes questions. One is prioritize your list of and something about the fox guarding the first, so let's say the name of the company things, and then two is what is the first step hen house, which was of course taken out is Wal-Mart Stores Inc., and the title of the that you think we should take? of context, which actually was submitted as person is Director of Mid-Atlantic Stores. The first step you should take is to a comment in the hearing five years ago. It is very relevant that this person is ask for help, and what that means, right, That is a way of saying I sort of understand Director of the Mid-Atlantic region, but the you don't have a massive budget to hire a some of this, but not really. FEC is only going to publish Director of, or zillion-person technology team to solve all The question I have -- I think Alec Director "O," because that is the character your problems, but you do have a Palmer has done a great job in the last limit. You run the problem of losing data community of interested parties that have several years with the Web site compared that doesn't exist. strong technical advice that are nonpartisan to what the agency used to be like. The It is the same for names. People's that want to help out, and opening up the font was smaller than even the footnotes I names will often be truncated. Over twenty process and asking for help, I think you write, but it seems to me some of the percent of occupation and employers' could get a lot of expertise and maybe even search-engine analogy type stuff is a little names that the FEC is publishing to date some work done inside of the FEC for very tough. Search words like contributions, it contains missing information, information little cost. will come up, there are no words on that has been truncated in some way. That Two, in terms of the priorities, I contribution. I will type a respondent's is the thing -- when it comes to search, you think my second point, publishing the data name in a case I knew existed and I won't be able to search against that data in the most accurate way possible, where couldn't find it. I don't really understand because it doesn't exist any more. all of the data is published accurately and how search engines work and what we can COMMISSIONER MCGAHN: reliably is the most important point I have and improve that so it may give the public That is all I have. to make here today, the reason being, one a better sense of what we do here and how CHAIRMAN WALTHER: Ms. of the organizations we give a grant to is to get access to the information. Bauerly. opensecret.org, which takes FEC MR. JOHNSON: It is a tough COMMISSIONER BAUERLY: information and cleans it up and publishes problem to solve. I used to work for a Thank you, Mr. Chairman, and thank you it.

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They spend a lot of time on this, and change their software and how it works should be some method, for example, in but they also consistently, day after day, in order to post to the Web site -- in order our enforcement database for citizens to be month after month, year after year get more to post information back to the FEC, and easily access classes of case, this is an eyeballs on this data than the FEC does, so sometimes vendors don't do that. excessive contribution case, prohibited one of the things we tell all branches of What is interesting is that because source case, and, again, just following up government is give people access to data in of the technology-con problem, most on what Commissioner McGahn said about a reliable, secure, accurate way, make that people now look to the unofficial filings -- asking you about, since you have an your first point and people will generally that the FEC makes available before they expertise on search engines, again, is get that data in interesting ways in front of get going through the process where there making a change where you could have -- people. is a data loss, and then that data itself is say you wanted to look under a certain Another way you can use to -- and actually not reliable because they are in classification of enforcement case, like an that is crazy, this might be crazy talk for different file formats over the years that excessive contribution case, to have that the FEC -- but here in Washington, D.C., require a huge burden on outside field as a narrowing field so that you could the CTO is named Vivek Kundra, and he organizations in order to parse and then put a name in and see if there are any came in and did something very interesting reconcile with official FEC information. It excessive contribution cases that came up for the District of Columbia, which is he is hard work. It is tough. under that person's name. That does seem said, okay, the District of Columbia CHAIRMAN WALTHER: Mr. like that would be a user- friendly tool -- publishes all this data. The office of the Vice chairman? maybe not for the person being searched, CTO is going to put $50,000 out on the COMMISSIONER PETERSEN: but for the public as a whole. Internet and say whoever can do something Thank you, Mr. Chairman. My original Again, how -- and maybe this is interesting with this data wins this money, question was going to be about the same answer as before, that you just and actually created a contest for people recommendations that we use XML and -- don't know without having had access, but who competed to do interesting things with but we will save that for another time. is that something that is relatively -- could it. You brought up that there are that be remedied fairly simply without too The office of the CTO of the problems with the public linking to our much effort expended? District of Columbia then was able to take data. In a prior life I worked up on the Hill MR. JOHNSON: Probably. all of that software that was generated as its and there were a number of times where Again, I can't give you a definitive answer, own and incorporate it into the dc.gov Web you sent a link to somebody and then they but probably. site. That kind of radical thinking might would click on that link and it would say COMMISSIONER PETERSEN: not be up the FEC's alley, but it is a way of link expired, which would always be I don't have too many other questions. I opening up the process and getting people's aggravating, so when you mentioned that I did greatly appreciate your remarks, and I participation. did clearly understand because I remember think what you have put forward are things At the end of the day, I want to the frustration I had myself. we need to look at very seriously, and I express how interested in this particular What needs to be done, how think you brought up an excellent point that data set I think the American public is. simple of a fix is that? Does that require an the Web site should not be just for the You see it replicated on Web sites across expensive or time-consuming overhaul? election law geeks who understand all the the Internet, and people really want to get MR. JOHNSON: I don't know. It terminology and all the raw data, but this at it. It is a phenomenal service that the is probably simple, but it could be not needs to be something that the public can FEC provides to the American public to do simple. It is sort of like asking me how to use a whole, so I think that point is one I it, and I do not envy your technology team change the spark plugs on a car that I don't appreciate you making. So thanks. because they have a difficult and trying job know or have never seen. I could probably CHAIRMAN WALTHER: Thank and that is why we want to help. figure it out, but I don't know if it has a you. COMMISSIONER WALTHER: sealed engine or not. I don't know how Ms. Duncan? Commissioner Hunter? long I can continue with this metaphor, but MS. DUNCAN: Thank you. I MS. HUNTER: You mentioned the short answer is it is probably pretty appreciated your written submission and there was a vendor who is posting incorrect easy. comments, but I don't have any questions. information on the Web site. Could you I think everything that I have CHAIRMAN WALTHER: We explain what you mean by that? recommended, we are not talking about have Mr. Palmer with us who is head of MR. JOHNSON: I can. The way huge -- we may be talking about massive our technology department, so he will that incoming filings work is that software shifts in terms of technology. I don't know probably have some questions for you that in some form of -- some campaign uses because I don't know much about how will be meaningful for you. some software to manage its contributions internally it works. I just know as a MR. PALMER: Thank you very and then file compliance information with customer of your data I am not satisfied, much, Mr. Chairman. the FEC. and I want to help. Mr. Johnson, thank you very If the FEC changes a rule, then COMMISSIONER PETERSEN: much for being here today, and I appreciate sometimes that vendor needs to go back I appreciated your suggestion that there your comments. All of these are extremely

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) helpful because it gives us leverage to be particularly useful, and by providing your Web site. It is your mandate to able to try to fulfill the mission of the summaries I mean show me a picture of disclose information. agency and move forward. Ted Kennedy and next to Ted Kennedy's To fulfill that mandate you want I want to also pass on my thanks name tell me the percentage of money he to disclose that information and get as to Ms. Miller for her taking the time to able has received from in state and out state. many eyeballs on that information in the to put that document together. I thought it Tell me the percentage of money he has best way possible, and that means making was very insightful and detailed. received from PACs and from individuals, it easy for outside organizations and I want to thank the Commission and start summarizing that information in entities to take the data off of FEC.gov and for their support. They have been ways that are easy to understand. provide it to their readership and whatnot. extremely supportive of the IT initiatives I always like to use the example of I think the API -- building an API for here at the Federal Election Commission ESPN.com as a model for political FEC.gov. would be useful. and that certainly makes our job easier and information because at the end of the day, More useful, though, would be it is much appreciated. the sports industry is really good at changing from the global format that you Some of the questions I have, I providing statistics in a meaningful way. are publishing data in. It doesn't support -- have maybe two or three. You talked about Basically what the FEC right now is if I as a developer, when I first got my the Web site and how we can make it easier providing is the play-by-play of every hands on that, I downloaded it, put it in my and simpler. You mentioned the APIs and major league baseball game since 1975 database software and said why on earth perhaps making the language easier to without a single box score. did someone give 20p dollars to a understand for the common citizen. Can CHAIRMAN WALTHER: That candidate? Why are there 20P dollars? It you share other examples, whether it is is a good analogy. turns out that the file format, COBAL, that navigation techniques or things of that MR. JOHNSON: That kind the FEC uses doesn't support negative nature that may help us? summarization I think would be really numbers, and the P is a code for a way to MR. JOHNSON: Sure. Do you useful. I think paying attention to doing recognize a negative number, but it is mind if I get a little technical? user testing, I don't know if you have done completely [unintelligible]. CHAIRMAN WALTHER: Please that before, but running -- I am not a huge MR. PALMER: That is a good do. proponent of too many focus groups point. That is one of our top priorities now MR. JOHNSON: Doing because you can focus group your design to so we can make the APIs work. something like using RSS, syndication death, but running it through some Talking about RSS, right now we technology, for search would be extremely audiences is also something that would be currently have two feeds, one for the valuable to the community. very useful. treasurers and one for the press. Are there I also think using -- giving people Again, I want to stress that any others? -- I am a fan of one big search box. People opening up the process can often be very MR. JOHNSON: Search. You might not know -- people don't know the rewarding, by saying, publicly, hey, we are can power most of your APIs sometimes difference between a PAC and -- a citizen going to redo the FEC Web site and we through RSS or through Jason or other doesn't know the difference between a PAC want some comments, not only in a hearing things, but in particular with RSS because and other entities, a corporation or even an like this, but from people online, and I people use RSS to do things like subscribe individual. People don't know what PACs know you have taken feedback that way in to blogs and their feeder readers, it allows are. I know that is hard for us all to the past, but to really make a big deal out for non-technical users to interface with an believe, but because of that, it is a high of that being opened. I know Sunlight API technology, so they can keep an eye on barrier to entry to get people to figure out would be encouraged by that and would be contributions as they are being filed what it is they should be searching for. excited by that. through the FEC. I can tell how many When they know what they want MR. PALMER: Let me follow up contributions you have made -- not you, to search for is Wal-Mart, or I want to on the API issue. Do you think it would of but somebody has made, and when there know -- I want to search for my neighbors, more value for us to focus on API, are new contributions coming in, I can see search for my ZIP code. That is a very application program interface, rather than that on the Web and be notified of that just popular one. We found that ninety percent building multiple systems, have more APIs like it would be receiving an e-mail, of the searches on Open Secrets are -- that where people could get to the data and then basically. I think incorporating RSS into could be erroneous statistics, but a large use it as they see fit, do you think the effort search is a very easy way to almost portion is ZIP code searches. People plug would be better spent that way? instantly turn on a virtual API on the FEC's in 20036 and they want to see all of the MR. JOHNSON: I do. It goes to Web site. contributions coming from that particular my first point, one of the points, of look, MR. PALMER: Thank you very ZIP code. the New York Times is always going to -- much. That is all the questions that I have. Providing services around nytimes.com will always have more Thank you. particular legislators and candidates, as eyeballs on it than FEC.gov. I think it is CHAIRMAN WALTHER: I was long as you treat them as the same entity, your mandate, not to drive up traffic on curious to know about the losing of the to summarize the information is also data. In what way is it lost? I gather it is

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) still in the bowels of our computer system, CHAIRMAN WALTHER: It individual donor and all the candidates and but for the public they only get the thirty- does. I know that Open Secrets and other PACs that they have given to on a single five characters or whatever we allot to entities figure out a way to sort this. Not to page is particularly useful. information. Is there an expert that can put them out of business, but it seems to One thing that we really struggle drill down into it? me for the general public, I think if we with at the Sunlight Foundation, I know it MR. JOHNSON: We have the could just focus on students, academics, would be difficult here too, would be name unofficial filings that are posted to the Web people that don't live this life, if they are standardization. People are entering on a site that you all make available, and then doing research, then if we could make it Web form or whatever their contribution you have the data that you are publishing, understandable and get all of the and occupation from an employer. Wal- the official data that is truncated and information, that has to be our charter. Mart is a great example, there could be so missing, and basically what experts try to Disclosure is no good if it is just for the many ways to spell Wal-Mart. There is do is reconcile these two data sets, and it is people that are in the election bar. Wal-Mart Stores Inc., Wal Star Mart, Wal really hard. MR. JOHNSON: I wouldn't Star Mart Stores Inc., and then there are What we will do is we will say worry about putting Open Secrets out of your casual misspellings. How do you this person is Joseph Smith and he lives in business with upgrading your Web site or standardize those names? 30092, and this unofficial filing is Joseph the New York Times out of business with We all know everything I just said Smith and he lives in 30092. The upgrading your Web site. Specifically is Wal-Mart Stores Inc., that is the name of probability is high they are the same what Open Secrets does is it actually adds the legal entity that all of these people are person. Let's merge these two records such more value to the data that FEC puts out by employed by, but how do you make it so that we can get the occupation and doing things like applying industry codes that you -- how do you standardize all employer information or whatever missing to the data so you can see candidate X those names so you can give me a page for information is in one and put it in the other. receives most of their money from the Wal-Mart? You can appreciate the danger of doing banking and finance industry. And I don't Those are really hard problems to things this way because it leads to false think those are things that the FEC should solve. It is something we would love to positives when it comes to identity, be doing or actually has the authority or the think through with you guys as well. That especially if your name is Jim Smith or manpower to do. occupation and employer field that you your last name is Johnson. CHAIRMAN WALTHER: Could provide is, I think, one of the most CHAIRMAN WALTHER: So if be ways we are more facile in the ways we important fields today. For citizen somebody wants that data, or New York sort our data or even legislators on the Hill, watchdogs to keep an eye on that, it is Times or Open Secrets, they have to go when is it coming in, amounts coming in, particularly useful. through that exercise every time? and I do ZIP codes too. It is a matter of CHAIRMAN WALTHER: The MR. JOHNSON: Yes. People inquiry for a lot of people. fixed formats you referred to, where we like Open Secrets and the Sunlight I guess the question I am coming opened our comment up to February 18, Foundation, and the Huffington Post has to is how can we make it more accessible and I am sure you would like to provide done stuff and the New York Times has and easier to sort some of this information, information on technical and non-technical done stuff, they have largely done some whether by date or by person or amount or matters now that you have heard some of things algorithmically, so you can basically geography over a period of time and the matters that are important to us. build on top of it every time and not have perhaps export it to XML or something like We had an occasion where we had to do so much, but it is still problematic that? to digest a massive amount of data of because it yields to data being inaccurate. MR. JOHNSON: The first thing contributions. We had 650,000 new People could associate two Joseph Smiths is publish the full data in a reliable and contributions for just one candidate in one that are not the same Joseph Smith, and accurate way, and bunches of people will month, and I know that -- I don't know to then for years that could exist without figure that out for you. Sunlight will be what extent it strained our system, but do anyone knowing that it had happened. one of them. We will take that and make it you have any input as to capacity? There is a preservation element to sortable and do things interesting MR. JOHNSON: I have sort of a transparency that is important. The ability ourselves. unique perspective on that. Before going to search back in the FEC's data -- 30 years On your side, I can't recommend to Sunlight Foundations, I was one of the is what Open Secrets is providing -- is strongly enough that your first priority founders of Blue State Digital, which significant because it starts telling a story. should be to make the data as accurate and powered Barack Obama contribution If we are layering -- let's say point one complete as they are in the official filings, system. I have been on both sides of this percent of that data from 30 years ago is but then also, you are right, to create problem, oversight and collecting and erroneous and then another point one the interactive experiences on the Web site sending, and it is not an easy problem to next cycle, it begins to add up and become itself, to make it so people can easily solve. scary. access and manipulate this information. Our suggestion from the Sunlight Does that answer your question? Viewing data on a map is particularly Foundation is, again, come up with a useful. I think being able to see an standardized format to post this

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Federal Election Commission: Public Hearing on Agency Practices and Procedures (January 14-15, 2009) information to the FEC Web site, rather ones that looked like it was the full title of than a proprietary and generally closed someone. So, if it was someone like format that you have now, because it is director of Wal-Mart stores and then they difficult for vendors like Blue State Digital had other stuff -- I could be wrong, it could and others to manage that process and be more than twenty percent, but a good actually talk to the FEC. It is something estimate is twenty percent has been that we avidly avoided because we couldn't truncated like that. That was for this cycle figure out, so it was outsourced to other only, though. firms. CHAIRMAN WALTHER: Are I am happy to discuss those there questions from others? problems from both sides of that issue with Alec, do you have further follow- you and to make sure -- like I said, my up? brain is yours. You can use it however you MR. PALMER: I think we will like, but we are here to serve. get together for lunch one day. CHAIRMAN WALTHER: One CHAIRMAN WALTHER: Thank more question from me. I was concerned you very much. It is very helpful to us. about the competitors, other people in the If there is nothing further, that is industry who have software that may not be the end of our hearing on this matter. We reporting it accurately. Is it because, from will be adjourned except that we have a what you are saying, they are not getting hearing this afternoon, and I don't know if information about the rule change, is it it is appropriate to adjourn -- we are hereby because they don't recognize it has an adjourned. impact on their software, and are we -- (Whereupon, at 12:35 p.m., the should we -- hearing was adjourned.) MR. JOHNSON: It is probably all -- it is Murphy's law here, any way it CERTIFICATE OF REPORTER can go wrong, it will go wrong. In this case some people don't update their I, CATHY JARDIM, the officer software enough. If I was in your shoes, before whom the foregoing testimony was what I would be concerned about is if it is taken, do hereby testify that the testimony not coming to the FEC in the appropriate of witnesses was taken by me format, then it didn't come, and treat it as a stenographically and thereafter reduced to a missed filing. Like if I send my tax filings transcript under my direction; that said to the IRS on the back of a napkin, the IRS record is a true record of the testimony will probably audit me or assume I didn't given by the witness; that I am neither pay my taxes. counsel for, nor related to, nor employed The FEC should take, to an by any of the parties to the action in which appropriate extent -- if you filed your this testimony was taken; and further, that I campaign finance disclosure stuff am not a relative or employee of any electronically and didn't file it in the right attorney or counsel employed by the parties format, then you didn't file it, and treat that hereto nor financially or otherwise as such. That will cause vendors to take interested in the outcome of the action. very seriously whether or not their software is posting their stuff appropriately when the ______campaigns call and say why is the FEC on CATHY JARDIM the phone with me saying I didn't send in my filings? CHAIRMAN WALTHER: How do you know that twenty percent is inaccurate? MR. JOHNSON: I opened up the database and counted and searched for every field -- I looked for every record in your database that had the maximum number of characters allotted and then looked through those and subtracted the

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