NOV 1 2 2004 1 FEDERAL ELECTION COMMISSION 2 999 E Street, N.W. 3 Washington, D.C. 20463 4 5 FIRST GENERAL COUNSEL’S REPORT 6 7 MUR: 5410 8- DATE COMPLAINT FILED: February 13,2004 9 DATE OF NOTIFICATION: February 23,2004 10 DATE ACTIVATED: May 10,2004 11 12 EXPIRATION OF SOL: July 11,2008 13 14 15 COMPLAINANT: Tim Timoney, Chairman, 16 Democratic Party of Sangamon County 17 18 RESPONDENTS: James D. Oberweis 19 Oberweis for U.S. Senate 2004, Inc. and 20 Richard G.Hawks, as treasurer 21 Oberweis Dairy, Inc. 22 23 RELEVANT STATUTES 24 AND REGULATIONS 2 U S.C. 8 441b I25 2 U.S C. 8 434(b) 26 11 C.F.R. 8 109.21 27 ‘ 11 C.F.R. 9 114.9 28’ 29 INTERNAL REPORTS CHECKED: Disclosure Reports 30 31 FEDERAL AGENCIES CHECKED: None 32 33 I. INTRODUCTION 34 The complaint alleges that James D. Oberweis knowingly and willfully used the corporate 35 funds of Oberweis Dairy, Inc. to finance his federal campaign in violation of 2 U.S.C. 5 441b. 36 Mr. Oberweis is Chairman of Oberweis Dairy, Inc. {“Oberweis Dairy”) and was a 2004 candidate 37 for U.S. Senate in Illinois. Oberweis Dairy is a family-owned business that processes and 38 delivers milk products directly to homes in Illinois, Indiana, and Missouri, and maintains 32 ice 39 cream and dairy stores in the Chicago and St. Louis metropolitan areas. MUR 5410 T First General Counsel’s Report 1 The complaint alleges that Oberweis Dairy ran coordinated television advertisements 2 featuring Mr. Oberweis and targeting Illinois voters within 120 days of the March 16,2004, 3 pnmary election. The complaint further alleges that Oberweis for U.S.Senate 2004, Inc. 4 (“Oberweis Committee”) used Oberweis Dairy products and facilities for “meet and greet” events 5 and a campaign-sponsored sweepstakes without paying for them. Finally, the complaint argues 6 the violations were knowing and willful because Mr. Oberweis and his committee sought the 7 advice of counsel before engaging in the illegal activity.’ 8 Based on the available information, it appears that at least one Oberweis Dairy 9 advertisement was a prohibited coordinated communication under 11 C.F.R. 3 109.21? 10 However, the information does not show that goods and services provided by Oberweis Dairy to 11 the Oberweis Committee were prohibited in-hnd contributions pursuant to 2 U.S.C. 8 441b. 12 Accordingly, we recommend the Commission find reason to believe respondents violated 13 2 U.S C. 88 441b and 434(b) in connection with the coordinated communication. 14 15 ~~~ ~ I The complaint alleges that the activity at issue is similar to MUR 4340 (TWEEZERMAN Corp ) and MUR 39 18 (Hyatt Legal Services), prior enforcement actions involving the candidate’s use of his company to influence the election Because these matters were decided under the pre-BCRA coordination standards, their analyses do not apply to this matter 2 The U S District Court for the District of Columbia recently found defective several Commission regulations, including the coordinated content regulations at 11 C F R 5 109.21(c), however, the court did not enjoin the Commission from enforcing the regulations See Shuys v F E C ,---F Supp 2d ---,2004 WL 2097498 (D D.C. Sept 18,2004) (NO CIV A 02-1984 (CKK))(granting in part and denying part the respective parties’ motions for summary judgment) The court subsequently denied the Commission’spetition for a stay pending appeal but confirmed that the regulations were still in effect See Shuys v F E C ,Civ No 02-1984 (CKK), slip op at 2 (DDC Oct 19,2004) MUR 5410 3 First General Counsel’s Report 1 11. FACTUAL AND LEGAL ANALYSIS 2 A. Oberweis Dairy, Inc. Appears to Have Run At Least One Television 3 Advertisement that was a “Coordinated Communication” under 11 C.F.R. 4 0 109.21. 5 6 Under the Act, corporations may not make contnbutions “in connection with” a federal 7 election and corporate officers may not consent to such contributions. 2 U.S.C. 8 441b(a). c 8 Moreover, federal candidates and political committees may not knowingly accept or receive such 9 contnbutions. Id. A contribution includes a gift, subscnption, loan, advance, or deposit of 10 money or anything of value made by any person for the purpose of influencing a Federal election. 11 2 U.S.C. 5 431(8)(A)(i). The term “anything of value” includes in-kind contributions. 11 C.F.R. 12 8 100.52(d)(1). 13 The Act defines in-lund contnbutions as, inter alia, expendtures made by any person “in 14 cooperation, consultation, or concert, with, or at the request or suggestion of, a candidate, his 15 authonzed political committees, or their agents.” 2 U.S.C. 8 441a(a)(7)(B)(i). Following the 16 enactment of the Bipartisan Campaign Reform Act of 2002 (“BCRA”), the Commission 17 promulgated a new “coordinated communication” regulation at 11 C.F.R. 5 109.21. Under this 18 regulation, a communication is coordinated if it: (1) is paid for by a person other than the 19 candidate or candidate’s committee; (2) satisfies one or more of the four content standards set 20 forth at 11 C.F.R. 8 109.21(c); and (3) satisfies one or more of the six conduct standards set forth 21 at 11 C.F.R. 8 109.21(d). 22 In the summer of 2003, Oberweis Dairy, under the guidance of President and CEO Robert 23 Renaut, began its first television advertisement campaign in its 75-year history. The campaign 24 consisted of four television advertisements that awed in the Chicago area on local and cable MUR 5410 4 First General Counsel’s Report 1 television shows.3 Oberweis Dairy acknowledges that it ran one of the four television 2 advertisements, “Sunny Side Up,” in December 2003 and January 2004, which was within 120 3 days of the March 16,2004, primary election. Oberweis Dairy claims that none of the other 4 three advertisements ran within the 120-day period and so do not fall within the definition of 5 prohibited coordinated communications. In the absence of conflicting information about the 6 ending airdates of the other three advertisements, those advertisements do not appear to meet any 7 of the content requirements of 11 C.F.R. 8 109.21(c) and thus our reason to believe 8 recommendation is not based on them. Accordingly, the legal analysis focuses solely on the 9 “Sunny Side Up” advertisement. 10 la The “Sunny Side Up” Advertisement Meets the first Prong of the 11 Coordination Test at 11 CaFaRa 0 109a21a 12 13 Oberweis Dairy admits that it paid for the production and ainng of the television 14 advertisement. Oberweis Dairy Response at 3. Thus, the advertisement meets the first prong of 15 the coordination test at 11 C.F.R. 5 109.2l(a)(l)(communications paid for by a person other than 16 the candidate or candidate’s committee). 17 2a The “Sunny Side Up” Advertisement Appears to Meet the Content 18 Requirement of 11 CaFaRa 0 109a21(~)a 19 20 The goal of the content standard is to establish a bright line test that requires “as little 21 charactenzation of the meaning or the content of communication, or inquiry into the subjective 22 3 The ads, entitled “Grandpa,” “Love at First Sight,” “Sunny Side Up,” and “It’s Your Morning,” all feature Chairman Jim Oberweis as spokesperson for the company Complaint Attachment B “Grandpa” featured Oberweis talking to his granddaughter “Love at First Sight” showed a pair of high school students who find love at an Oberweis Dairy Store “Sunny Side Up” featured Jim Oberweis making breakfast for a pair of home delivery customers. In “It’s Your Morning,” an Oberweis driver brings his customers the morning paper and pours cream in their coffee MUR 5410 5 First General Counsel’s Report 1 effect of the communication on the reader, viewer, or listener as possible.” Explanation & 2 Justification, Coordinated and Independent Expenditures, 68 Fed. Reg. 421-01,430 (Jan. 3, 3 2003) (“Coordination E&J”). Thus, under 11 C.F.R. 5 109.21(c), a communication satisfies the 4 content standard if it: (1) is an electioneering communication; (2) disseminates or republishes 5 campaign matenals; (3) expressly advocates the election or defeat of a clearly identified 6 candidate; or (4) is a public communication that (1) refers to a political party or clearly identified 7 candidate for Federal Office, (ii) is disseminated within 120 days of an election, and (iii) is 8 targeted to voters in the junsdiction of the clearly identified candidate. As discussed below, 9 based on the currently available information, this fourth content standard applies to the “Sunny 10 Side Up” advertisement. 11 C.F.R. 5 109.21(~)(4). 11 As a threshold matter, the advertisement appears to be a public communication. 12 Respondents state that “Sunny Side Up . was broadcast in the television markets encompassing 13 Champaign, Spnngfield, Peona and Bloomington, Illinois.” Oberweis Dairy Response at 3. A 14 news report attached to the complaint states that Oberweis Dairy ads were aired on television and 15 cable, during programs “such as The Today Show and The Oprah Winfrey Show, and cable 16 networks including HGTV, Lifetime, TLC and The Food Channel.” Complaint, Attachment B at 17 1. Thus, this advertisement meets the definition of a public communication because it was 18 disseminated “by means of any broadcast, cable, or satellite communication.” 11 C.F.R.