December 14,2017 M. Wiison Federal Election Commission Jeffs. Jordan
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P0RKINSCOi0 '70013th street, NW O+1.202.6546200 Suite 600 ©+1.202.656.6211 Washington. OC 20005-3960 • perkinscoie.com December 14,2017 M. wiison [email protected] D. +1.202.434.1638 F. +1.202.654.9150 Federal Election Commission Jeffs. Jordan, Assistant General Counsel Office of Complaints Examination and Legal Administration 999 E. Street, NW Washington, DC 20463 Re: MUR 7288 4 !J Dear Mr. Jordan: We write on behalf of the DNC Services Corporation/ Democratic National Committee (the A "DNC") and William Q. Derrough, in his official capacity as treasurer of the DNC (collectively, "Respondents") in the above-referenced matter (the "Complaint"). The Complaint incorrectly alleges that donations made by Team Tom, a Section 527 organization that served as Chairman Perez's campaign organization in the race for DNC chair (the "Campaign"), somehow amounted to Respondents themselves spending "soft money" in violation of the Federal Election Campaign Act of 1971, as amended (the "Act"). Yet, the Complaint sets forth no facts, even if taken as true, that demonstrate that the disbursements by the Campaign were made by the DNC or any individual acting on behalf of the DNC. In fact, the donations were not made by the DNC or on behalf of the DNC, were not made for a DNC purpose, and were not controlled by the DNC. The sole officer of the Campaign and the only person with authority to make disbursements was its Custodian of Records, who was not a DNC employee and did not act at the DNC's direction. Moreover, any involvement of Chairman Perez in Aese donations would have been perfectly permissible because the disbursements were related to the chair's race and were not made on behalf of the DNC itself. The Complaint sets forth no facts that, even if true, would amount to a violation of the Act or the Federal Election Commission ("FEC" or "Commission") regulations by any of the Respondents. The Commission must therefore find no reason to believe a violation occurred and immediately dismiss the Complaint.' 11 C.F.R.§ 111.4(d)(3). Federal Election Conunission December 14,2017 Page 2 FACTUAL BACKGROUND In anticipation of the DNC's 2017 officer elections, many candidates establishf^ and registered Section 527 organizations with the Internal Revenue Service in order to raise and spend funds in connection with their officer campaigns. As an election for a national party office is not an election for a federal office, and the DNC itself did not establish, finance, maintain, or control these 527 organizations, the campaigns did not register with the PEC, were not required to do so, and were not subject to the same contribution limits or source restrictions as the DNC itself. Specifically, the Campaign was established as a Section 527 organization on December 13,2016 to support Tom Perez's candidacy for Chairman of the DNC.^ The DNC had no role whatsoever in the establishment of the Campaign and the sole officer of the Campaign is the Custodian of Records, who was the only person with authority to issue checks or authorize disbursements on its behalf.^ No one serving as a DNC employee or acting on its behalf ever simultaneously served as the Custodian of Records of the Campaign.^ Tom Perez was elected Chairman of the DNC on February 25"", 2017. Following the election, the Campaign began to dispose of excess funds in order to wind down its operations. On March 28*'', 2017 the Campaign disbursed $22,271 to Jamie for DNC Chair, a Section 527 organization established to support Jamie Harrison's candidacy for Chairman of the DNC.^ On April 3"**, 2017, the Campaign disbursed $5,000 to We the DNC, a Section 527 organization established to support Sally Boynton Brown's candidacy for Chairman of the DNC.® Finally, on April b"*, 2017, the Campaign disbursed $5,000 to Jehmu for DNC, a Section 527 organization established to support Jehmu Greene's candidacy for Chairman of the DNC. ^ At the time of each of these three disbursements the Custodian of Records for the Campaign was Jane Farrell, who was neither an employee or agent of the DNC.® ^ See Exhibit A, Team Tom, Internal Revenue Service Form 8871, Notice of Section 527 Status. ^ See id. * See id.-. Exhibit B, Team Tom, Amended Internal Revenue Service Form 8871, Notice of Section 527 Status; Exhibit C, Team Tom, Amended Internal Revenue Service Form 8871, Notice of Section 527 Status. ' See Exhibit D, Jamie for DNC Chair, Internal Revenue Service Form 8871, Notice of Section 527 Status; Exhibit E, Team Tom, Internal Revenue Service Form 8872, Political Organization Report of Contributions and Expenditures. * See Exhibit F, We the DNC, Internal Revenue Service Form 8871, Notice of Section 527 Status; Exhibit E. ' See Exhibit G, Jehmu for DNC, Internal Revenue Service Form 8871, Notice of Section 527 Status; Exhibit E. ' See Exhibit C. PeiMnsCaieLLP Federal Election Commission December 14,2017 Page 3 LEGAL ANALYSIS The Complaint's sole allegation is that there was a violation of the so-called "soft money" restrictions that prohibit national parties from raising and spending "non-federal ftmds."^ However, a complaint must "contain a clear and concise recitation of the facts which describe a violation of a statute or regulation over which the Commission has jurisdiction."'" ] The Act provides that "[a] national committee of a political party... may not solicit, receive, or \ direct to another person a contribution, donation, or transfer of ^ds or any other thing of value, C| or spend any frmds, that are not subject to the limitations, prohibitions, and reporting J requirements of this Act."'' This prohibition also applies to agents of a national conunittee of a political party but onlv where the agent is "acting on behalf of such [] national committee. Accordingly, for the Commission to find reason to believe that a violation occured, the !, Complaint must set forth clear facts that show that either the DNC itself raised or spent non- federal funds or that individuals who did so were acting on behalf of the DNC at the time. It does neither. A. The National Party "Soft Money" Restrictions Do Not Apply to the Campaign As a threshold matter, it is important to note that the national party "soft money" restrictions do not generally apply to organizations set up separately from a party conunittee to raise and spend funds exclusively to support the campaigns of individuals running for national party office. While the "soft money" restrictions do apply to "[a]n entity that is directly or indirectly established, financed, maintained or controlled by a national party committee,"'^ the Caihpaign has never been "established, financed, maintained, or controlled" by the DNC and there are no facts in the Complaint to suggest otherwise. As stated above, there is only one officer at the Campaign that has authority to receive contributions or make disbursements on its behalf and that officer was never simultaneously an officer of the Campaign and an employee or agent of the DNC. Moreover, an organization that exclusively raises and spends funds in connection with a party officer election does not trigger the Act's contribution limits or registration or reporting requirements because it does not accept "contributions" or make "expenditures" as defined by the Act.'^ Under the Act and the Commission's regulations, both "contribution" and "expenditure" are defined in reference to influencing an "election for Federal office," and the ' See Complaint at 4. 11 C.F.R. § 111.4(d)(3). " 52 U.S.C. § 30125(a)(1); see also 11 C.F.R. § 300.10(a). 52 U.S.C. § 30125(a)(2) (emphasis added); see also 11 C.F.R. § 300.10(c). " 11 C.F.R.§ 300.10(c)(2). '*M§§ 100.52; 100.111. FMiinsCoieLLP Federal Election Commission December 14,2017 Page 4 term "Federal office" does not include an officer position at a national party committee.'^ There is no dispute that the Campaign was and is free to generally raise and spend non-federal funds in connection with the race for DNC Chair. B. The Contributions at Issue Were Legitimate Expenditures Made by the Campaign Related to the Race for DNC Chair and There is No Factual Evidence to Show That They Were Made on Behalf of the DNC. The Complaint does not contest that it was wholly appropriate for the Campaign to raise and spend non-federal funds in cormection with the DNC Chair's race, both before and after Chairman Perez was elected, with the exception of the three donations made by the Campaign to Chairman Perez's former opponents. However, there is no legitimate factual basis to support the claim that these three disbursements were made on behalf of the DNC or are otherwise legally distinguishable from the Campaign's other permissible wind down activities. The Complaint weakly tries to twist the fact that a DNC spokesperson answered a question about the donations months after they were made into some kind of indicator of DNC involvement at the time of the disbursements. There is nothing questionable about a DNC staff person fielding a question directed to the DNC or knowing about publicly disclosed donations months after they occurred. Similarly, the Complaint nakedly speculates that a reference to Chairman Perez's "st^' reaching out about the donations must have referred to DNC staff, but "mere speculation" cannot support an FEC complaint.Moreover, the Campaign in fact had its own "staff," which actually made the donations at issue. The donations were issued by the Campaign's Custodian of Records, the only individual authorized to disburse funds on behalf of the Campaign, and there is no specific allegations in the Complaint that the DNC itself was otherwise directing or spending these funds.