November 1, 2012 Ronald M. Jacobs T 202.344.8215 Anthony Herman, Esq. F 202.344.8300 General Counsel [email protected] Federal Election Commission 999 E Street, N.W. Washington, D.C. 20463 Re: Complaint Against Horsford for Congress and the Democratic Congressional Campaign Committee Dear Mr. Herman: Under the Federal Election Campaign Act, candidates pay for their own advertisements and communications. Having others pay for them is an in-kind contribution, subject to strict limits. This is true even for the national party committees; although they have certain coordinated expenditure limits, they cannot spend unlimited sums paying for candidate advertising when done in conjunction with the candidate. This complaint, made pursuant to 2 U.S.C. § 437g(a)(1) by Danny Tarkanian for Congress, alleges that Horsford for Congress (“Horsford”) and the Democratic Congressional Campaign Committee (“DCCC”) have devised a scheme to circumvent this time-honored (and legally mandated) system. Specifically, the DCCC has inserted a small logo in a Horsford ad, added a few fleeting references to “Democrats” when referring to Horsford’s accomplishments, and included small pictures of three Nevada state office holders, two of whom are not on the November ballot, with no identification. Based on an examination of station media buy records, and on Horsford and DCCC FEC reports, it appears that the DCCC has funded anywhere from about two-thirds to one-half of the costs to air this advertisement. Prior Commission guidance about allocating costs of ads requires an allocation “according to the benefit reasonably expected to be derived,” which is generally computed by the amount of time the ad devotes to other candidates and generic party references. Unadorned pictures of office-holders not standing for election this year do not provide any meaningful benefit to those candidates. Small Democratic National Committee (“DNC”) logos do nothing to promote generic Democratic candidates. References to Democrats made in conjunction with an ad that expressly advocates the election of Horsford do not support other Democratic candidates; they reinforce the party identification of Horsford. Even taking these elements together, the ad has, at best, a de minimis value to generic Democratic candidates or state candidates. Yet it appears that the DCCC potentially paid over $800,000 for what is a $1.3 million ad buy. Allowing such a ratio – or really any ratio above a very low threshold – to be used to Anthony Herman, Esq. November 1, 2012 Page 2 fund candidate ads when there is no meaningful discussion of generic or specific candidates would blow away all meaningful limits on party coordinated expenditures and party contributions to candidates. Because the funding ratio does not match the content of the ad, the DCCC’s payments for the ad are in-kind contributions to Horsford that far exceed the limits. Accordingly, both Horsford and the DCCC violated 2 U.S.C. § 441a(a)(2)(A) and the coordinated party limits in 2 U.S.C. §331a(d). To think about it another way, Horsford and the DCCC apparently sat down and developed an ad, or discussed the content, or at least jointly approve the content (they both paid for it) – the hallmark of coordination – and decided that it would be a joint ad that they each paid for. Usually references to candidates in party advertisements are designed by the party and allocated to candidates (or even charged to candidates), not jointly developed by the two to split the costs. Imagine the uproar if a an independent expenditure organization decided to urge voters to elect candidates supporting a certain issue, worked with a candidate to include candidate materials, and then split the costs. That seems to be a fair analogy to what when on here. In addition, the scheme here enabled Horsford and the DCCC to obtain a reduced rate to which they were not entitled. Based on the information obtained from the television stations airing the ad, it appears that because of the small contribution to the ads that Horsford made, the stations provided the airtime at the lowest unit charge, which is significantly lower than the going market rate. As such, through their contrived financing, the DCCC has obtained an impermissible corporate contribution in the form of discounted air time in violation of 2 U.S.C. § 441b. This flagrant disregard for the campaign finance limits eviscerates the well-established contribution limits for parties to candidates, and the Commission should put a stop to this loophole by taking swift action against Horsford and the DCCC. Anthony Herman, Esq. November 1, 2012 Page 3 DISCUSSION 1. The “Fight” Advertisement The 30-second advertisement at issue in this complaint, known as “Fight,” can be seen at http://www.youtube.com/watch?v=gQ_mmbGm2zk&feature=plcp. Shown below are screen- shots of Fight along with the text of the voice-overs and approximate timing. Approximate Voice-Over Screen Capture Time N=narrator; M=male Element voice; F=female voice; Begins H=Steven Horsford 0:00 N: Overcoming adversity 0:02 N: Steven Horsford’s life shapes his fight for Nevada’s future. Anthony Herman, Esq. November 1, 2012 Page 4 0:03 0:06 N: Horsford and Democrats created new Nevada jobs. 0:08 M: Thousands of people are back at work. Anthony Herman, Esq. November 1, 2012 Page 5 0:10 N: Democrats fought for better schools. 0:13 F: Steven Horsford held his ground. 0:15 V: And Democrats know there is more to do to build an economy that will last for the middle class. Anthony Herman, Esq. November 1, 2012 Page 6 0:18 0:21 H: I’m Steven Horsford and I approve this message because people want someone who will fight for them. 0:26 H: It’s what I’ve done all my life and it’s what I’ll do in Congress. Anthony Herman, Esq. November 1, 2012 Page 7 The “D” logo that appears from approximately the six-second mark to the 13-second mark in the ad and then again from the 15 to 18-second mark is the logo of the Democratic National Committee (“DNC”):1 It is not the logo of the DCCC.2 The three faces that appear from the six-second mark to the 13-second mark are apparently candidates and office holders in Nevada. The top picture appears to be that of Mo Dennis, who is an incumbent office holder in Nevada Senate District 2.3 The bottom picture appears to be Ruben Kihuen, an incumbent holder of a seat in the Nevada State Senate (District 10).4 Neither gentleman is on the November 2012 ballot.5 The middle picture appears to be Peggy Pierce, an incumbent member of the Nevada Assembly (District 3) who is on the November, 2012 ballot.6 There is no identification of these individuals in the ad other than by picture. Based on my observation of the Fight video and screen captures, the pictures appear to be less than one- third the height of the screen and are not clear to see. It is my experience that state legislative candidates are not often known to the general public by sight, without some reference to their positions, particularly in off-election years.7 2. Media Buy Information from Stations Based on information from the Tarkanian media buyer, and information obtained from the FCC’s Political File, we have determined that the DCCC and Horsford together purchased air time worth approximately $1,378,663.00 from September 1 through the end of October.8 Horsford alone purchased air time worth $402,773.00 for that same period.9 Together, the 1 http://store.democrats.org/stickers-1.html (all sites last visited November1, 2012, unless otherwise noted) (a copy of which is attached as Exhibit 1). 2 http://www.dccc.org/ (a copy of which is attached as Exhibit 2). 3 http://www.modenis.com/Mo%20Denis%20for%20Senate%20WebHome.html (a copy of which is attached as Exhibit 3). 4 https://twitter.com/RubenKihuen (a copy of which is attached as Exhibit 4). 5 http://leg.state.nv.us/Division/Research/VoteNV/2012Ballot/2012GeneralCandidates.pdf (a copy of which is attached as Exhibit 5). 6 http://www.peggypierce.net/ (a copy of which is attached as Exhibit 6). 7 Declaration of Chris Feist (“Feist Decl.) ¶ attached hereto as Exhibit 7. 8 Feist Decl. ¶ 6; Ex. B. 9 Feist Decl. ¶ 5; Ex. A. Anthony Herman, Esq. November 1, 2012 Page 8 airtime for Horsford’s own advertisements, plus the Fight advertisement came to $1,781,436.00.10 3. Disbursements to Media Buyers Horsford reported paying his media buyer (GMMB, Inc.) $495,016.67 on his October Quarterly FEC report and another $294,974.42 on the Pre-General report. This comes to a total of $789,991.09. His Pre-General report showed cash-on-hand of $48,181.02. Horsford’s 48-Hour Contribution reports show a total of about $115,498 in additional contributions for a total of $163,679.02. If every penny of the cash-on-hand went toward media buys, then his total media buys would be $953,670.11. Subtracting out the amount for his own ads from this figure ($402,773.00), that leaves $550,897.11 for the $1.3 million in purchases for the Fight advertisement. By deduction, that means the DCCC must have paid approximately $827,765.89 for its portion of Fight. Indeed, DCCC reports show payments of $521,154 to the same media buyer (GMMB) for the Pre-General and October Monthly reports. These payments are disclosed as “Generic Cmte.