DAVID KRIKORIAN Cindnnati, OH 45243-2206 May 25,2012

0 -.1 DAVID KRIKORIAN Z' C-_ 1 "• 1 Cindnnati, OH 45243-2206 o> May 25,2012 I OfiBce of General Counsel J Federal Election Commission o 999 E Street, NW Washington, D.C. 20463 RE: Supplemental Information in respect to MUR 6494 I am writing to provide you with additional information regarding your ongoing investigation into Rep. Jean Schmidt, MUR 6494. i On April 30,2012 Rep Schmidt filed a quarterly report with the House Ethics Committee regarding the activities of her legal expense fund.' The report shpw^ that Rep. Schmidt has raised $5000 toward the nearly half a million dollars of illegal payments made on her behalf.^ As demonstrated in my origind complaint, it is irrefutable that the payments made by the Turkish Coalition of America constitute campaign contributions. There are a few specific issues to which I would like to direct your attention. L AOR 2011-20 Since the filing of my complaint and the initiation of MUR 6494, Rep. Schmidt has submitted and withdrawn a letter requesting permission to use campaign funds to refund portions of the payments at issue in MUR 6494 ("AOR 2011-20**)- While the Conunission has been less than candid regarding the conditions under which AOR 2011-20 was withdrawn from the EEC website, it seems clear that it was removed, at least in part, due to a determination that Mr. Gieenberg, one of the subjects of the complaint underlying MUR 6494, was less than completely forthright with the Conunission in the AOR 2011-20 letter.' Specifically, failing to inform the Commission that the legal fees Greenberg claimed to be seeking to pay had in fact already been paid by the Turkish Coalition of America ("TCA**). ' Jean Schmidt, Letter to House Ethics Committee dated April 29,2012 (Signed by Rep. Schmidt April 30,2012). A copy of which is attached hereto as Exhibit A. ' Id. and Cincinnati Enquirer, "Schmidt reports one donation for her legal expense fiind" Available online at http://cincinnatixomAIogs/poIltics/2012/OSA)1 /schmidt-reports-one-donation-fbr-her-!egal- expense-fund/. A copy ofwhich is attached hereto as Exhibits. ' AOR 2011-20 was removed from the FEC website on the afternoon of October 26,2011 yet Rep. Sclunidt*s attorn^ did not inform the FEC that she was withdrawing the request until November 10, 2011. Thus it seems that the AOR was removed finom the website for some reason other than Rep. Schmidt*s withdraw two weeks later. Office of General Counsel Supplement to MUR 6494 P^e2of7 As noted in my public comment submitted to and received by the Commission prior to the removal of AOR 2011-20 from the FEC website, AOR 2011-20 is little more than an admission by Schmidt for Congress to the charges underlying MUR 6494. That is, that the legal expenses which TCA paid, were campaign related. As such, the payments constitute campdgn contributions under the andysis of Advisory Opinion 2006-22 wherein payments to attorneys for campaign related legal services were found to constitute campaign contributions. II. IRS Determination Included in my ori^nal complaint letter initiating MUR 6494 were copies of complaints filed with the IRS regarding the non-reporting of the payments at issue in this investigation. For, it is axiomatic that such payments, if they are not campaign contributions the payments would necessarily have been income to Rep. Schmidt. Recently, I received a letter ifom the IRS which I took to mean that the IRS that will not be pursuing an action for non-reporting of income and/or non-payment of taxes on said income.^ While the FEC may not be bound by the determinations I of the IRS, it would seem that Rep. Schmidt must be bound by such determinations. In order for the Commission to come to a complete understanding of Rep. Schmidt's position regarding the status of these payments, the Commission must review the communications between Rep. Schmidt and the IRS. It would seem that Rep. Schmidt must necessarily have argued against a finding of income by pointing to the campaign related nature of the payments - thus arguing for and accepting the position that the payments by TCA were in feet campaign contributions. Therefore, I respectfully suggest to the Commission that as part of tiiis investigation the Conunission reviews copies of all communications between Rq). Schmidt and her agents and the Internal Revenue Service regarding tiiis payment scheme. in. Rep. Schmidt's own admissions that the Attornq^s were retained by Schmidt for Congress In reviewing the deposition testimony of Rep. Schmidt fijom August 24,20091 discovered testimony by Rep. Schmidt in which she unambiguously states that the attorney for whom TCA paid were retained by Schmidt for Congress, not Rep. Schmidt personally. Q. Have you retained Mr. Brey and Mr. Fein personally, or is it the campaign that has retained them? A. The campaign has retained them. Q. They work for the campaign? A. Yes.® Letter from IRS Whistleblower Office to David Krikorian April 27.2012. Attached as Exhibit C. Schmidt deposition at p. 113. lines 14-19. Emphasis added. The entirety of Rep. Schmidt's deposition testimony is attached as Exhibit D. Office of General Counsel » Supplement to MUR 6494 Page 3 of7 Thus, by her own words. Rep. Schmidt has indisputably corroborated the basic contention of my complaint: that the Turkish Coalition of America, a tax-exempt SO1(c)(3) corporation, illegally paid campaign expenses of Schmidt for Congress; that those contributions were excessive; and that Schmidt for Congress violated Federal law by accepting the contributions and failing to rqport the contributions. IV. Conversion of Campaign Resources to Personal Use In light of the Rep. Schmidt's swom testimony that the attorneys were retained by Schmidt for Congress, if Rep. Schmidt argues that the legal expenses paid by TCA were not campaign related, then she has de jure admitted that she converted campaign resources to g1 personal use in violation of Federal Law. The legal services provided by Messrs. Fein, Brey, 0 Saltzman, et al. are undeniably campaign resources as the attorneys were retained by the campaign. Moreover, with respect to the civil litigation, vdien Rep. Schmidt initially filed suit against me claiming defamation, she sought $8.6 Million dollars in compensatory and punitive damages. She brougiht the case in her name alone. Thus, had she prevailed, she would have personally benefitted to the tune of $8.6 Million from the legal services of attorneys retained by Schmidt for Congress. The law is clear, campaign resources are not to be used in the fiulherance s of personal financial gain. By utilizing attorneys retained by her campaign committee in an attempt at personal gain. Rep. Schmidt converted campaign resources for personal use. The Ethics Committee, in providing an opportunity for Rep. Schmidt to utilize a legal erqrense fund to refund the illegal paym^ts, attempted essentially to recreate the circumstances of AO 1997-27, wherein then Congressman, now Speaker, Boehner sought to use campaigii funds in furtherance of a potential lawsuit regarding the interception of a telephone conversation. While in many ways the use of campaign funds to pay legal expenses and the use of a legal expense fund are analogous, there are very real and important differences between the situation addressed in AO 1997-27 a:^ the immediate investigation into Rep. Schmidt. Specifically, Rep. Boehner sought out permission prior to initiating litigation. Rep. Schmidt did not; Rep. Boehner provided full disclosure of the facts surrounding his proposed use of campaign funds for litigation related expenses while Rep. Schmidt still lias not given a complete account of her understanding and intentions of the payment scheme of her legal expenses; and perhaps most importantly, at no time did Rep. Boehner stand to benefit personally firom the litigation, whereas Rep. Schmidt initiated the litigation for the purpose of personal gain to the tune of some $8.6 MUlion. It was not until after the Ethics Committee was alerted to the illegal payment scheme that Rep. Schmidt was forced to acknowl^ge the illegal payment and in exchange for being allowed to use the proceeds of a legal expense fund to refund the illegal payments Rep. Schmidt agreed not to personally benefit from foe outcome of foe litigation. It is important to note that foe lawsuit, in which Jean Schmidt personally was foe only Plaintiff, was filed in June of 2010. It was not until August 16,2011 that Rep. Schmidt enter^ into an agreement whereby she would not personally benefit from foe outcome of foe litigation. This agreement essentially mirrors foe agreement of AO 1997-27. Office of General Counsel Supplement to MUR 6494 P^e4of7 Hence, while it is certainly true that Rep. Schmidt ultimately did agree not to seek personial gain fiom the lawsuit, she did in &ct initiate the lawsuit for the purpose of personal gain, and continued on that purpose for over a year before establishing a legal expense fund. Further, just eight months after agreeing not to seek personal gain fiom the lawsuit. Rep. Schmidt, dismissed the case. Thus, for the first 15 of the 23 months drat the lawsuit was active. Rep. Schmidt sought personal gain. puitheTi when asked to identify special damages suffered by Rep. Schmidt to justify such an enormous award. Rep. Schmidt pointed to costs incurred by Schmidt for Congress in the 2008 election. One Interrogatory question and Rep. Schmidt's answer thereto provides ample evidence that Rep. Schmidt converted to personal use the resources of the campaign: [ijdentify the basis and evidence relied upon for [Ms. Schmidt] to allege in her Complaint that each defamatory statement damaged [Ms.

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