[Federal Register Volume 78, Number 13 (Friday, January 18, 2013)]
[Proposed Rules]
[Pages 4081-4090]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-00959]
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FEDERAL ELECTION COMMISSION
11 CFR Part 111
[Notice 2013-01]
Request for Comment on Enforcement Process
AGENCY: Federal Election Commission.
ACTION: Request for comments.
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SUMMARY: The Federal Election Commission is requesting comment on
certain aspects of its enforcement process. First and foremost, the
Commission welcomes public comment on whether this agency is doing an
effective job in enforcing the Act and Commission regulations.
Additionally, the Commission is currently reviewing and seeks public
comment on: Its policies, practices, and procedures during the
enforcement process stage set forth in 2 U.S.C. 437g(a)(1), prior to
the Commission's determination of whether there is ``reason to
believe'' that a person has committed, or is about to commit, a
violation of the Federal Election Campaign Act of 1971, as amended, 2
U.S.C. 431 et seq. (``FECA'' or ``the Act'') and/or the Commission's
implementing regulations; and the Commission's authority under 2 U.S.C.
437g(a)(5) to seek civil penalties from respondents pursuant to a
finding of ``probable cause to believe'' that a respondent has violated
the Act and/or Commission regulations, as well as the Commission's
practice of seeking civil penalties prior to a finding of probable
cause.
DATES: Comments must be received on or before Friday, April 19, 2013.
The Commission will determine at a later date whether to hold a
hearing.
ADDRESSES: All comments must be in writing. Comments may be submitted
electronically via email to process@fec.gov. Commenters are encouraged
to submit comments electronically to ensure timely receipt and
consideration. Alternatively, comments may be submitted in paper form.
Paper comments must be sent to the Federal Election Commission, Attn.:
Commission Secretary, 999 E Street NW., Washington, DC 20463. All
comments must include the full name and postal service address of the
commenter, and of each commenter if filed jointly, or they will not be
considered. The Commission will post comments on its Web site at the
conclusion of the comment period.
FOR FURTHER INFORMATION CONTACT: Mr. Stephen A. Gura, Deputy Associate
General Counsel for Enforcement, 999 E Street NW., Washington, DC
20463, (202) 694-1650 or (800) 424-9530.
SUPPLEMENTARY INFORMATION:
Background
I. Past Commission Hearings and Enforcement Process Reforms
The Commission is currently reviewing, and seeks public comment on,
certain enforcement policies, practices, and procedures. The Commission
will use the comments received to determine whether its policies,
practices, or procedures should be adjusted, and whether rulemaking in
these areas is advised. The Commission has made no decisions in these
areas and may choose to take no action. The Commission last conducted a
comprehensive review of its enforcement policies, practices, and
procedures, among other issues, in late 2008 and early 2009. See Agency
Procedures, 73 FR 74494 (Dec. 8, 2008). Comments filed in the 2008/2009
review, as well as a transcript of the public hearing, are available on
the Commission's Web site at http://www.fec.gov/law/policy/enforcement/publichearing011409.shtml. Subsequent to that review, the Commission
adopted or formalized several procedures
[[Page 4082]]
pertaining to the advisory opinion, audit, enforcement, and reports
analysis processes, as well as providing greater transparency of the
agency's enforcement procedures. These procedures include, in
chronological order:
The Commission instituted a program that provides
political committees that are audited pursuant to the Act with the
opportunity to have a hearing before the Commission prior to the
Commission's adoption of a Final Audit Report. Similar to the
Commission's program for hearings at the probable cause stage of the
enforcement process, audit hearings provide audited committees with the
opportunity to present oral arguments to the Commission directly and
give the Commission an opportunity to ask relevant questions prior to
adopting a Final Audit Report. See Commission's Procedural Rules for
Audit Hearings, 74 FR 33140 (July 10, 2009), available at http://www.fec.gov/law/cfr/ej_compilation/2009/notice_2009-12.pdf.
The Commission adopted a new agency procedure that
provides respondents in internally generated enforcement matters
brought under the Act with notice of the referral and an opportunity to
respond thereto, prior to the Commission's consideration of whether
there is reason to believe that a violation of the Act has been or is
about to be committed by such respondent. This program provides
respondents procedural protections similar to those of respondents in
complaint-generated matters. See Commission's Procedure for Notice to
Respondents in Non-Complaint Generated Matters, 74 FR 38617 (Aug. 4,
2009), available at http://www.fec.gov/law/cfr/ej_compilation/2009/notice_2009-18.pdf.
The Commission amended its procedures for probable cause
hearings to provide that Commissioners may ask questions designed to
elicit clarification from the Office of General Counsel (``OGC'') or
Office of the Staff Director during the hearings. These hearings, if
the request is granted, take place before the Commission considers the
General Counsel's recommendation on whether or not to find probable
cause to believe a violation has occurred. See Amendment of Agency
Procedures for Probable Cause Hearings, 74 FR 55443 (Oct. 28, 2009),
available at http://www.fec.gov/law/cfr/ej_compilation/2009/notice_2009-24.pdf.
The Commission resumed its practice of placing all First
General Counsel's Reports on the public record, whether or not the
recommendations in these First General Counsel's Reports are adopted by
the Commission. The Commission will place all First General Counsel's
reports on the public record in closed matters prospectively and
retroactively, while allowing the Commission to reserve the right to
redact portions as necessary. See Statement of Policy Regarding Placing
First General Counsel's Reports on the Public Record, 74 FR 66132 (Dec.
14, 2009), available at http://www.fec.gov/law/cfr/ej_compilation/2009/notice_2009-28.pdf.
The Commission adopted, made public, and recently updated
a ``Guidebook for Complainants and Respondents on the FEC Enforcement
Process'' (``Current Enforcement Guidebook''). This guide was first
approved and placed on the Commission's Web site in December 2009 and
updated in May 2012. See http://www.fec.gov/em/respondent_guide.pdf.
The Current Enforcement Guidebook summarizes the Commission's general
enforcement policies and procedures and provides a step-by-step guide
through the Commission's enforcement process. It is designed to assist
complainants and respondents and to educate the public concerning FEC
enforcement matters.
The Commission issued a directive providing written
guidelines on providing status reports to respondents and the
Commission in enforcement matters and accelerating the processing of
matters that are statute of limitations-sensitive. See FEC Directive
68, Enforcement Procedures (Dec. 31, 2009), available at http://www.fec.gov/em/directive_68.pdf.
The Commission issued a directive on how the Office of
Compliance may seek formal or informal legal guidance from OGC
regarding questions of law that arise from the review of reports filed
with the Commission or in the course of an audit of a political
committee. See FEC Directive 69, FEC Directive on Legal Guidance to the
Office of Compliance, available at http://www.fec.gov/directives/directive_69.pdf.
The Commission issued a directive on how the Audit staff
prepares and the Commission considers audit reports produced during the
various stages of an audit. See FEC Directive 70, FEC Directive on
Processing Audit Reports (Apr. 26, 2011), available at http://www.fec.gov/directives/directive_70.pdf.
The Commission established a formal procedure to provide
respondents in enforcement matters with relevant documents and other
information obtained as a result of an investigation during the
enforcement process. These documents and information are generally
available by request from the respondent when the Commission enters
into conciliation or proceeds to the probable cause stage of the
enforcement process. See Agency Procedure for Disclosure of Documents
in the Enforcement Process, 76 FR 34986 (June 15, 2011), available at
http://www.fec.gov/law/cfr/ej_compilation/2011/notice_2011-06.pdf.
The Commission adopted a procedure providing for a means
by which persons and entities may have a legal question considered by
the Commission earlier in both the report review process and the audit
process. Specifically, when the Office of Compliance requests that a
person or entity take corrective action during the report review or
audit process, if the person or entity disagrees with the request based
upon a material dispute on a question of law, the person or entity may
seek Commission consideration of the issue pursuant to this procedure.
See Commission's Policy Statement Regarding a Program for Requesting
Consideration of Legal Questions by the Commission, 76 FR 45798 (Aug.
1, 2011), available at http://www.fec.gov/law/cfr/ej_compilation/2011/notice_2011-11.pdf.
The Commission adopted procedures to formalize the
agency's practice, following probable cause briefs, of providing
respondents with a copy of OGC's notice to the Commission advising the
Commission whether it intends to proceed with its recommendation to
find probable cause. Additionally, these procedures allow a respondent
to request an opportunity to reply to the notice, if the notice
contains new facts or new legal arguments. See Agency Procedure
Following the Submission of Probable Cause Briefs by the Office of
General Counsel, 76 FR 63570 (October 13, 2011), available at http://www.fec.gov/law/cfr/ej_compilation/2011/notice_2011-15.pdf.
The Commission announced that it is now beginning to
provide respondents an explanation in writing of the method used to
determine the Commission's opening settlement offers at the
conciliation stage of certain enforcement matters. See http://www.fec.gov/press/press2012/20120112openmeeting.shtml.
The Commission recently made public several documents
relating to its enforcement and compliance practices following a
November 3, 2011 oversight hearing before the Subcommittee on Elections
of the House of
[[Page 4083]]
Representatives Committee on House Administration. Those documents
included various enforcement materials, including the 1997 enforcement
manual (which has not been formally updated and contains much
information that has been superseded), Reports Analysis Division
procedures, and Audit Division documents. See Documents on Enforcement
& Compliance Practices, available at http://www.fec.gov/law/procedural_materials.shtml.
II. Ongoing Reviews of Enforcement Procedures
The 1997 enforcement manual recently placed on the Commission's Web
site was compiled as an informal internal guide not intended for public
release, was never formally reviewed or adopted by the Commission, was
seldom updated, and has been largely superseded. OGC is now in the
process of drafting and making public an enforcement procedures manual
(``Enforcement Procedures Manual'' or ``Manual'') to guide the
Enforcement Division during the course of the agency's enforcement
process. The purpose of the Manual is to aid enforcement staff in the
consistent, fair, effective and efficient performance of their
important public responsibilities in administering the Act, with the
goal of serving as a reliable source of information regarding all
aspects of the enforcement process. The Commission is seeking public
comment on whether certain of its policies, practices and procedures
related to the enforcement process should be adjusted, whether
rulemaking in this area is advised, and what other considerations
should be given to the contents of the Manual. The Commission has made
no decisions on these issues and may choose to take no action.
III. General Goals
The FECA grants to the Commission ``exclusive jurisdiction with
respect to civil enforcement'' of the provisions of the Act and
Chapters 95 and 96 of Title 26. 2 U.S.C. 437c(b)(1). Enforcement
matters may be initiated by the Commission as a result of complaints
from the public, referrals from the Reports Analysis and Audit
Divisions, referrals from other agencies, and sua sponte submissions.
Enforcement matters are generally administered by the Office of General
Counsel pursuant to the procedures set forth in 2 U.S.C. 437g, but are
also processed by the Office of Alternative Dispute Resolution and the
Office of Administrative Review. See 2 U.S.C. 437g(a)(4)(C); 11 CFR
111.30-111.46; http://www.fec.gov/em/adr.shtml; http://www.fec.gov/af/af.shtml. During the enforcement process, the Office of General Counsel
reviews and makes recommendations to the Commission regarding the
disposition of enforcement matters, and investigates and conciliates
matters on behalf of the Commission. Stages of the enforcement process
may include Reason to Believe (``RTB''), an investigation, pre-probable
cause conciliation, probable cause, probable cause conciliation, and
litigation. The Current Enforcement Guidebook provides a full
description of the Commission's administrative enforcement process. See
http://www.fec.gov/em/respondent_guide.pdf.
The Commission specifically seeks comment from complainants and
respondents who directly interact with the FEC, committee treasurers,
and other parties who may become involved in the enforcement process.
The Commission seeks general comments on whether the agency is
effectively enforcing the Act and Commission regulations and whether
certain of the FEC's enforcement procedures and practices unduly limit
or expand procedural protections and, if so, how those enforcement
procedures might be improved to increase efficiency and adequately
address the Commission's interest in enhancing compliance with the Act.
The Commission is not interested, with respect to this proceeding, in
complaints or compliments about individual matters or FEC employees,
and it seeks input only on structural, procedural, and policy issues.
In that regard, the Commission also seeks comment about practices
and procedures used by other administrative agencies when acting in an
enforcement capacity. For example, do such agencies provide greater or
lesser procedural protections? The Commission is also interested in any
studies, surveys, research or other empirical data that might support
changes in its enforcement procedures, as well as any relevant judicial
decisions pertaining to administrative agencies.
The Commission requests those who submit comments to be cognizant
that certain proposals may implicate statutory requirements, such as
confidentiality mandates. See 2 U.S.C. 437g(a)(12). Thus, the
Commission would appreciate participants specifying in their written
remarks whether their proposals are compatible with current statutes or
would require legislative action.
Topics for Specific Comments
As stated, as an initial matter, the Commission requests public
comment on whether this agency is doing an effective job of enforcing
the Act and Commission regulations.
IV. Enforcement Process at the Pre-RTB Stage
The Act provides that complaints alleging a violation of the Act or
Commission regulations shall be in writing, signed and sworn to by the
person filing the complaint, notarized, and made under penalty of
perjury. 2 U.S.C. 437g(a)(1). Respondents who are alleged in a
complaint to have committed such a violation have the opportunity to
respond in writing as to the allegations. Id. Following the receipt of
a response, the General Counsel may recommend to the Commission whether
or not to find RTB that there has been a violation of the Act. 11 CFR
111.7(a). Commission regulations also empower ``the General Counsel
[to] recommend in writing that the Commission find reason to believe *
* *, '' not only based on a complaint, but also ``[on] the basis of
information ascertained by the Commission in the normal course of
carrying out its supervisory responsibilities.'' 11 CFR 111.8(a).
Following an affirmative vote of four or more of its members
determining that there is RTB that a respondent has committed, or is
about to commit, a violation, the Commission ``shall make an
investigation of such alleged violation.'' 2 U.S.C. 437g(a)(2). An RTB
finding is not a finding that the respondent violated the Act. It
simply means that the Commission believes a violation may have
occurred. An RTB finding is generally followed by either an
investigation of the matter or an offer of pre-probable cause
conciliation.\1\
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\1\ See Statement of Policy Regarding Commission Action in
Matters at the Initial Stage in the Enforcement Process, 72 FR
12545, 12545-46 (Mar. 16, 2007).
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A. Complaint Generated Matters
Most of the Commission's enforcement matters are externally
generated based on complaints submitted by individuals pursuant to the
requirements of 2 U.S.C. 437g(a)(1). Prior to the Commission's RTB
determination in a complaint-generated matter, OGC makes a
recommendation to the Commission as to whether, based on the
complaint(s) and response(s) in a given matter, there is sufficient
information to support an RTB finding. In the course of developing its
RTB recommendation, OGC may reference publicly available information,
including public information not contained in either the complaint(s)
or
[[Page 4084]]
response(s).\2\ Public sources for these additional facts have
included, among other things, Internet Web sites (most frequently, the
Commission's own Web site), media reports, subscription databases,
public information filed with other governmental entities, and
respondents' own public statements and Web sites.\3\ Additionally, OGC,
in its RTB recommendations to the Commission, analyzes the facts
presented in the case under all relevant legal theories, not solely
those theories specifically articulated in the complaint or addressed
in the response.
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\2\ See, e.g., id. at 12546 (relying on ``publicly available
information'' in making determination at pre-RTB stage); see also
Enforcement Procedure 1992-10 (Subject: News Articles), Enforcement
Procedure 1989-6 (Subject: Miscellaneous Information), available at
http://www.fec.gov/pdf/Additional_Enforcement_Materials.pdf
(``Where publically available information from state election
reports or from state or federal agencies is needed in the context
of a MUR, you do not have to wait until RTB has been found to seek
that information. You should try and obtain that information before
RTB and include it in your analysis.'').
\3\ The 1997 Enforcement Manual provided the following, non-
comprehensive list of publicly available sources to be consulted
before OGC made its initial recommendation: WESTLAW/LEXIS; Dun &
Bradstreet; Newspaper Articles; FEC Press Office; Martindale
Hubbell; State Corporate Divisions; State Ethics/Political Reporting
Agencies; and Reference Material. See 1997 Enforcement Manual,
Chapter 2 at 5-6, available at http://www.fec.gov/pdf/1997_Enforcement_Manual.pdf.
The Commission may, on occasion, receive non-public information
from a governmental agency (typically the U.S. Department of
Justice) that may serve as a basis for an internally generated
complaint or related to a complaint-generated matter in which the
Commission has not yet made any findings. However, under the
Commission's Procedure for Notice to Respondents in Non-Complaint
Generated Matters (described supra), a DOJ or other law enforcement
agency referral will be provided to the respondent if OGC intends to
initiate an enforcement proceeding based on it. 74 FR 38617-18. In
cases where, due to law enforcement purposes, the referral document
may not be provided to a respondent, OGC will provide the respondent
with a letter containing sufficient information regarding the facts
and allegations to afford the respondent an opportunity to show that
no action should be taken. Id. at 38618.
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The Commission seeks comment on two of OGC's current practices
related to the pre-RTB stage of the enforcement process as it is set
forth under 2 U.S.C. 437g(a) and Part 111 of the Commission's
regulations.
First, in a complaint-generated matter, do the Act and Commission
regulations contemplate a Commission finding of RTB based on, or that
takes into account, publicly available information not referenced or
included in the complaint and response? Do the statute and regulations
contemplate a Commission finding of RTB based solely on the allegations
and information set forth in the complaint(s) and response(s)? Do the
statute and regulations require the Commission to ignore publicly
available information that may be material to the issue of RTB? Would
that include public information disclosed as required by the Act and
posted on the Commission's own Web site? Should exculpatory facts
obtained by the Commission at the pre-RTB stage be considered along
with the pending complaint?
The Commission's practice of considering material not specifically
referenced or included in a complaint is supported by the case law. In
the In re FECA Litigation decision,\4\ the U.S. District Court for the
District of Columbia interpreted 2 U.S.C. 437g(a)(1) and (a)(2) as
requiring the Commission ``to take into consideration all available
information concerning the alleged wrongdoing'' when making its RTB
determination in a complaint-generated matter. 474 F. Supp. at 1046
(emphasis added). See also Antosh v. FEC, 599 F. Supp. 850 (D.D.C.
1984) (holding that Commission's dismissal of a complaint was arbitrary
and capricious where the Commission failed to consider relevant
information available in a committee's disclosure reports revealing
that alleged violations were ``more egregious than the Commission
realized''). 599 F. Supp. at 855.
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\4\ 474 F. Supp. 1044, 1046 (D.D.C. 1979) (``[I]t seems clear
that the Commission must take into consideration all available
information concerning the alleged wrongdoing. In other words, the
Commission may not rely solely on the facts presented by the sworn
complaint when deciding whether to investigate. Although the facts
provided in a sworn complaint may be insufficient, when coupled with
other information available to the Commission gathered either
through similar sworn complaints or through its own work the facts
may merit a complete investigation * * * [I]t is clear that a
consideration of all available information material is vital to a
rational review of Commission decisions.'') (emphasis added).
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Should the Commission, through OGC, maintain a practice consistent
with the case law? If the Commission ``may not rely solely on the facts
presented by the sworn complaint when deciding whether to
investigate,'' what is the minimum factual information it must consider
when making an RTB determination pursuant to 2 U.S.C. 437g(a)(2)? For
example, does the current practice afford respondents sufficient
opportunity to address facts and legal theories not contained in the
complaint in the course of the Commission's deliberations on finding
RTB?
Also, does the current practice conflict with the statutory and
regulatory language that the Commission ``shall make an investigation
of such alleged violation'' after a finding of RTB by an affirmative
four votes of the Commission? Does the use of facts obtained from
Internet searches (including the Commission's own Web site),
respondents' own public statements and Web sites, media reports,
subscription databases, and public information filed with the
Commission or other governmental entities in the Commission's
deliberations constitute an investigation that must be preceded by a
finding of RTB? Concerning the use of facts obtained from the public
record, should the Commission draw guidance from the evidentiary
practice in litigation of taking judicial notice? Would such facts
include those created or controlled by the respondent, such as
information on a respondent's own Web site or a respondent's other
public statements?
Second, do the Act and Commission regulations contemplate--or
implicitly require--a Commission finding of RTB in appropriate
circumstances based on legal theories not alleged in the complaint?
In making an RTB recommendation to the Commission, OGC may include
legal theories related to the facts of the case that were not
specifically alleged in the complaint or addressed in the response, but
which are directly related to the facts alleged. Do the statute and
regulations require the Commission to ignore additional potential
violations that are supported by the facts but not specifically alleged
in the complaint? OGC has recently adopted the practice of notifying
respondents of such legal theories and affording respondents with an
opportunity to respond. Does OGC's current practice afford respondents
sufficient opportunity to address additional legal theories not
specifically contained in the complaint in the course of the
Commission's deliberations on finding RTB? Does the requirement that
the Commission ``set forth the factual basis for such alleged
violation,'' 2 U.S.C. 437g(a)(2), adequately ensure the fairness of the
enforcement process by providing respondents an opportunity to address
these additional legal theories after a reason to believe finding?
B. Internally Generated Matters
Alternatively, the Act provides that RTB may be found ``on the
basis of information ascertained in the normal course of carrying out
[the Commission's] supervisory responsibilities.'' See 2 U.S.C.
437g(a)(2). As noted, the Commission's regulations further provide
that, ``[o]n the basis of information ascertained by the Commission in
the normal course of carrying out its supervisory responsibilities, or
on the basis of a referral from an agency of the United States or of
any state, the General
[[Page 4085]]
Counsel may recommend in writing that the Commission find [RTB] that a
person or entity has committed or is about to commit a violation'' of
the Act or regulations. 11 CFR 111.8(a).
The primary types of internally generated matters are (a) those
based on referrals from within the Commission (internally generated
from RAD or the Audit Division), (b) those based on referrals from
other government agencies, and (c) those that are part of ongoing
matters. The Commission also processes sua sponte submissions, i.e.,
voluntary submissions made by persons who believe they may have
violated campaign finance laws, but which may contain allegations
against other parties that result in a separate enforcement matter with
additional respondents.
Before the Commission votes on OGC's recommendations as to any
referral, respondents will have an opportunity to review and respond to
the referral. See Commission's Procedure for Notice to Respondents in
Non-Complaint Generated Matters, 74 FR 38617 (Aug. 4, 2009). The
statute and Commission regulations do not restrict what information the
Commission may consider in its supervisory responsibilities.\5\
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\5\ The regulations do specify that, prior to taking action
against any person who has failed to file certain disclosure
reports, the Commission shall notify that person. See 11 CFR
111.8(c).
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Additionally, in Directive 6, entitled ``Handling of Internally
Generated Matters,'' the Commission in 1978 specified the following
non-exhaustive sources as falling within the scope of 2 U.S.C.
437g(a)(2): (1) Referrals from the Commission's operating divisions
(i.e., Audit, Reports Analysis, and Public Disclosure); (2) referrals
from other government agencies and government documents made available
to the public or to the Commission; (3) Commission-authorized non-
routine reviews of reports and other documents, provided that it is
based on a uniform policy of review of a particular category of
candidates or other reporting entities or a category of reports, for
the purpose of ascertaining specific types of information; and (4) news
articles and similar published sources, considering such factors as the
particularity with which the alleged violations are set out in such
sources and whether such allegations are supported by in-house
documents. See Directive 6, available at http://www.fec.gov/directives/directive_06.pdf.
Does the current practice of bringing to the Commission's attention
media reports and publicly available information filed with the
Commission or other governmental entities comport with Directive 6 with
respect to the permissible sources of information the Commission may
consider in its RTB determination? Does Directive 6 itself properly set
forth the scope of information the Commission may consider in its RTB
determination pursuant to the statute and regulations? Are there other
sources of information that the Commission needs or should consider in
its normal course during the pre-RTB stage, beyond those in Directive
6?
At the RTB stage, OGC's recommendations may take into account the
types of information referred to in Directive 6. Should the reliance on
this type of information in the Directive 6 context--that is,
internally generated matters--inform OGC's recommendations in
complaint-generated matters? Should OGC use relevant publicly available
information to support its recommendations, or do the statute,
regulations, Directive 6, or other Commission procedures or policies
require such information to form the basis of a separate (or
complementary) internally generated matter? What benefits and drawbacks
would result from generating an additional enforcement matter beyond
the complaint-generated matter compared with relying on such
information in assessing the complaint? Under the Commission's recently
formalized procedures discussed above, should respondents continue to
be informed of, and given the opportunity to respond to, relevant
publicly available information that OGC may use to support its RTB
recommendations? See Agency Procedure for Notice to Respondents in Non-
Complaint Generated Matters, 74 FR 38617 (Aug. 4, 2009). Should OGC's
recently implemented informal policy of doing so be formalized by the
Commission?
C. Specific Proposals
In light of the issues discussed above, the Commission seeks
comment on several approaches the agency could take with respect to
OGC's pre-RTB process, as well as any approach not set forth below.
1. Approaches To Use of Factual Information Beyond Complaint
The Commission could maintain its current approach as reflected in
Directive 6 and the Policy Statement on the Initial Stages of
Enforcement. What are the advantages and disadvantages to this current
practice?
Another approach the Commission could consider is to discontinue
its current practice of taking into consideration in its RTB
determination any relevant publicly available information that is not
specifically included in complaints and responses. Assuming that
Directive 6 is consistent with the Act and Commission regulations, and
notwithstanding that it currently applies only to internally generated
matters, should the Directive limit OGC's use of publicly available
information not included in complaints and responses? For example,
Directive 6 states that non-routine reviews of reports or other
documents (``reports and other documents'' is not defined) available to
the Commission require ``specific prior approval of the Commission.''
Moreover, even with Commission authorization, such reviews are
appropriate only for a ``particular category of candidates or other
reporting entities or a review of a category of reports for specific
types of information.'' In other words, should Commission-authorized
reviews of reports or other documents outside the scope of complaints
be generalized and not be used to supplement particular complaints?
Additionally, Directive 6 states that news articles and other
similar published accounts may constitute the source of internally
generated MURs, depending on such factors as the ``particularity with
which the alleged violations are set out in the article'' and
``supported by in-house documents.'' Unlike reviews of internal
Commission reports and documents, Directive 6 does not address whether
news articles and similar materials may be used to supplement existing
complaints because the Directive primarily addresses internally
generated matters. The Commission requests comment on whether these
aspects of Directive 6 suggest that the Commission should refrain from
considering relevant public information that is not specifically set
forth in complaints and responses. How should Directive 6 be amended to
achieve greater efficiency and fairness? What if the Commission
uncovers facts that are exculpatory and undercut the allegations?
Should the Commission ignore all relevant public information regardless
of whether it is inculpatory or exculpatory? If the Commission may
institute enforcement actions based on reviews of news media, are there
other constraints on which articles or allegations can give rise to
enforcement actions? For example, would unsourced or anonymous
allegations constitute a ``complaint of a person whose identity is not
disclosed,'' which would preclude the Commission from taking
[[Page 4086]]
action on those allegations? See 2 U.S.C. 437g(a)(1).
Assuming, under either approach, that the Commission maintains its
practice of using news articles as a basis for internally generated
enforcement matters, the Commission seeks comment on whether separate
internally generated matters should be initiated on the basis of
information outside a complaint that OGC gathers during the pre-RTB
process, whereupon a separate notification letter would be sent to
respondents setting forth the additional information as well as legal
theories that OGC is considering. Should OGC be required to receive
specific prior approval of the Commission in order to take into
consideration relevant public information outside a complaint during
the pre-RTB process? Should Directive 6 be modified to provide OGC with
authority to consider relevant publicly available information? The
Commission requests comment on whether such an approach, if adopted,
should be limited in the scope of the additional facts and legal
theories that OGC may consider and ask respondents to address. In other
words, should there be a requirement that such additional information
and/or theories be closely related or pertinent to the original
complaint?
2. Scope of Legal Theories Presented in Complaint
The Commission recognizes that complainants may not possess broad
or detailed knowledge of the Act or regulations and that the
regulations merely require a complaint to recite facts, whether on the
basis personal knowledge or information and belief, that describe a
violation of law under the Commission's jurisdiction (citations to the
law and regulations are not necessary but helpful), similar to notice
proceedings in civil litigation. Accordingly, the Commission seeks
comment as to when legal theories supporting OGC's RTB recommendations
should be considered violations alleged in the complaint or whether
they are otherwise appropriate to use to support the recommendations.
For example, if there is a secondary violation that flows from a set of
facts alleged, but the complaint does not specifically allege that
violation, should the Commission consider an RTB recommendation on the
secondary violation (e.g., when the complaint alleges that a corporate
contribution was made in the form of a coordinated advertisement, but
the same facts also show that the cost of the ad was not disclosed as
required by 2 U.S.C. 434 and did not contain a disclaimer as required
by 2 U.S.C. 441d)? If not, should the Commission seek further input
from a complainant to determine whether he or she intended to allege a
potential secondary violation based on the facts presented in the
complaint? Under what circumstances should the Commission consider
seeking further input from complainants?
Alternatively, the Commission could retain its existing approach of
integrating relevant publicly available information and/or additional
legal theories not specifically included in complaints and responses
into existing complaint-generated matters. However, the Commission is
considering whether and under what circumstances to apprise respondents
of such information or theories. One such approach was discussed, but
not voted on (and remains pending before the Commission), at the open
meeting of December 1, 2011. See ``Agency Procedure for Notice to Named
Respondents in Enforcement Matters of Additional Material Facts and/or
Additional Potential Violations,'' dated November 10, 2011, available
at http://www.fec.gov/agenda/2011/mtgdoc_1165.pdf. Under that
proposal, a respondent would be given written notice by OGC in the
event that OGC intends to include in its RTB recommendation to the
Commission (1) any additional facts or information known to OGC and not
created by or controlled by the respondent, which are deemed to be
material to the RTB recommendation, and (2) any potential violation of
the Act and/or the regulations that may not have been specifically
alleged in the complaint or included in the referral notification, and
the facts and arguments supporting the RTB recommendation on the
additional potential violation. The proposal specified that, within 10
days from receipt of the OGC notice, the respondent may submit a
written statement demonstrating why the Commission should take no
action based on the additional material facts or with regard to any
potential violation. See id.
The Commission requests comment on the merits of the above-
mentioned approaches, as well as any others, including whether they are
consistent with the enforcement process set forth in the Act and
regulations, and which if any should be adopted.
V. Civil Penalties and Other Remedies
A. Background
After the Commission finds RTB, conducts an investigation, and
finds probable cause to believe that a respondent has violated the Act
and Commission regulations, the Act requires the Commission to attempt
to enter into a conciliation agreement with respondents. 2 U.S.C.
437g(a)(4). This conciliation agreement may include a requirement that
the respondent pay a civil penalty. 2 U.S.C. 437g(a)(5). Conciliation
agreements may require respondents to pay civil penalties in the
following amounts:
For violations that are not knowing and willful, a penalty
not to exceed the greater of $7,500 or an amount equal to any
contribution or expenditure involved in the violation;
For violations that are knowing and willful, a penalty not
to exceed the greater of $16,000 or an amount equal to 200 percent of
any contribution or expenditure involved in the violation;
For knowing and willful violations of 2 U.S.C. 441f
(contributions made in the name of another), a penalty not less than
300 percent of the amount involved in the violation and not more than
the greater of $60,000 or 1,000 percent of the amount involved in the
violation.
2 U.S.C. 437g(a)(5)(A) and (B). The dollar amounts set forth above are
indexed for inflation. See 28 U.S.C. 2461; see also 11 CFR 111.24.
Although the Commission is not required to enter into settlement
negotiations unless and until it makes a finding of probable cause, as
a matter of practice, when appropriate, the Commission attempts to
settle matters with respondents prior to such a finding (``pre-probable
cause conciliation''). 11 CFR 111.18(d). In most cases the Commission
will have already made an RTB finding; however, it may also enter into
mutually acceptable ``fast-track'' settlements prior to any finding for
persons who file complete sua sponte submissions and fully cooperate
with the Commission, as described in the Commission's Policy Regarding
Self-Reporting of Campaign Finance Violations (Sua Sponte Submissions),
72 FR 16695 (Apr. 5, 2007), also available at http://www.fec.gov/law/cfr/ej_compilation/2007/notice_2007-8.pdf. The Commission generally
will propose civil penalties at the pre-probable cause stage based on
the same schedule set forth in the Act, as well the Commission's own
precedents (explained more fully below), with the exception that the
Commission generally will offer a 25 percent pre-probable cause
``discount'' to incentivize early settlement.
The Commission recently has announced that it is providing to
respondents, in writing, the method used to determine the Commission's
[[Page 4087]]
opening settlement offers at the conciliation stage of certain
enforcement matters. See News Release, Jan. 12, 2012, available at
http://www.fec.gov/press/press2012/20120112openmeeting.shtml. Should
discussions of how opening settlement offers are calculated be included
in enforcement documents made public at the close of a matter, or
should such calculations be redacted pursuant to the provisions of 2
U.S.C. 437g(a)(4)(B)(i)? Would it be fair for all who are subject to
enforcement proceedings before the Commission to know how the
Commission has dealt with penalties as to those similarly situated?
As discussed above, the Commission recently made available to the
public several internal documents relating to the enforcement process,
including a chart entitled, ``Calculating Opening Settlement Offers for
Non-Knowing and Willful Violations'' available at http://www.fec.gov/pdf/Additional_Enforcement_Materials.pdf. This chart is a compilation
of the base formulas that have been used by the Commission to calculate
opening settlement offers in prior enforcement MURs. OGC created the
chart to ensure that its recommendations regarding civil penalty
amounts were consistent with the Commission's previous decisions
regarding opening settlement offers. Depending on the circumstances of
the matter (including aggravating and mitigating factors), OGC has
recommended, and the Commission has authorized, penalties either higher
or lower than those set forth in the chart. The information in the
chart reflects opening settlement offers and not amounts that result
after negotiations with a respondent. Moreover, this chart reflects
past practice and does not necessarily reflect the most current
practice at the Commission, given that the Commission may use its
discretion to apply a new base formula for a particular violation.
Final Conciliation Agreements approved by the Commission, which are the
product of negotiations between OGC staff and respondents that result
in mutually acceptable settlements, may contain civil penalties that
are lower than the Commission's opening offers. The Commission makes
final settlement amounts public by placing approved Conciliation
Agreements on its Web site.
As set forth in the released chart, OGC generally recommends that
the Commission approve agreements with opening offers based on formulas
previously approved by the Commission. The civil penalty information
below has been compiled from the above-described chart (superseded
violations are omitted; knowing and willful violations generally result
in a multiplier being added to the following penalties):
Violations of 2 U.S.C. 432(b)(2) (collecting agent's
failure to timely forward contributions)--20 percent of the amount of
the contributions at issue.
Violations of U.S.C. 432(b)(3) (commingling of campaign
funds)--no standard practice.
Violations of 2 U.S.C. 432(c)(5) (recordkeeping)--base
statutory penalty when part of more significant reporting violations.
Violations of 2 U.S.C. 432(d) (preservation of records)--
no separate penalty for violations arising out of same transactions.
Violations of 2 U.S.C. 432(e)(1) (late filing of statement
of candidacy)--$500.
Violations of 2 U.S.C. 432(h)(1) (campaign depositories)--
no standard practice.
Violations of 2 U.S.C. 432(h)(2) (excess cash
disbursements)--no standard practice.
Violations of 2 U.S.C. 433 (late or non-filing of
statements of organization)--$500 for authorized committees when
violation arises in context of late statement of candidacy; $0 for
unauthorized committees that are found to be political committees, plus
applicable penalty for failure to file reports.
Violations of 2 U.S.C. 434(a) (failure to file/timely file
reports)--administrative fines plus 25 percent; pre-probable cause
discount does not apply.
Violations of 2 U.S.C. 434(b) (failure to report or
properly report transactions)--the greater of 15 or 20 percent of the
amount at issue, or the base statutory penalty, with a maximum cap of
$250,000; with respect to taking the gross or net amount for
misstatements of financial activity, the Commission has used both
approaches. (For knowing and willful reporting violations, the penalty
is the greater of $11,000 or 200 percent of the amount in violation.)
For reporting errors resulting from misappropriation of committee
funds, the Commission generally has used administrative fines plus 25
percent, but has not penalized committees that can show they had all of
the internal controls set forth in the Commission's 2007 safe harbor
(72 FR 16695 (Apr. 5, 2007)). For self-reported increased activity
cases, the Commission also generally has applied administrative fines
plus 25 percent, with no pre-probable cause discount, in accordance
with a policy adopted by the Commission in executive session on March
16, 2007. (The policy may be found at page 224 of the PDF file
available at http://www.fec.gov/pdf/Additional_Enforcement_Materials.pdf. )
Violations of 2 U.S.C. 434(c) (failure to file 24-hour
independent expenditure reports)/434(g) (failure to file 48-hour
independent expenditure reports)--administrative fines plus 25 percent,
with no pre-probable cause discount.
Violations of 2 U.S.C. 438(A)(4) (prohibition on sale and
use of contributor information)--no standard practice.
Violations of 2 U.S.C. 439a(b) (personal use of campaign
funds)--100% of amount in violation.
Violations of 2 U.S.C. 441a(a)(1) and (2) (making
excessive contributions)--50 percent of excessive amount when not
refunded; 25 percent of excessive amount when refunded.
Violations of 2 U.S.C. 441a(a)(3) (making contributions in
excess of annual/biennial limits)--100% of excessive amount.
Violations of 2 U.S.C. 441a(f) (receipt of excessive
contributions)--50 percent of excessive amount when not refunded or not
cured by redesignation/reattribution; 25 percent of excessive amount
when refunded or cured by redesignation/reattribution. (In several
recent matters, the Commission's practice may have been to apply a 20
percent penalty for excessive contributions cured by redesignation/
reattribution.)
Violations of 2 U.S.C. 441b (making and accepting
prohibited corporate contributions)--50 percent of contribution when
not refunded; 25 percent when refunded. An additional base statutory
penalty is added if the contributor is a government contractor (2
U.S.C. 441c).
Violations of 2 U.S.C. 441b/114.2(f) (corporate
facilitation)--100 percent of amount of facilitated contributions for
facilitator; 50 percent of unrefunded facilitated contributions for
recipient.
Violations of 2 U.S.C. 441d(a) (missing disclaimer)--20
percent of cost of communication or $5,500 if cost is unavailable.
Violations of 2 U.S.C. 441d(c) (incomplete disclaimer)--10
percent of cost of communication or $2,750 if cost is unavailable.
Violations of 2 U.S.C. 441d(d) (``stand by your ad''
disclaimer)--25 percent of cost of communication.
Violations of 2 U.S.C. 441e (foreign national
contributions)--100 percent of contribution amount.
Violations of 2 U.S.C. 441e (contributions in the name of
another)--the greater of 100 percent of
[[Page 4088]]
contribution amount or base statutory penalty.
Violations of 2 U.S.C. 441h (fraudulent misrepresentation
of campaign authority)--no standard practice.
Violations of 2 U.S.C. 441i(e)(1)(A) (Federal candidates
soliciting, accepting, directing, transferring, or spending non-Federal
funds)--no standard practice.
In addition, particularly in the context of reporting violations,
OGC has recommended the following mitigating factors in some cases:
Respondent cooperates in rectifying the violations.
Inaccurate or incomplete reports were amended after the
complaint or referral but before RTB.
The matter was a sua sponte submission.
Missing information from a report was disclosed
nevertheless in another report before the election.
Respondent lacks knowledge of Commission rules and
procedures.
OGC also has recommended the following aggravating factors:
Respondent previously entered into a conciliation
agreement or was reminded or cautioned of the same or similar
violations.
A reporting error or omission was made on an election-
sensitive report.
B. Comments Sought
1. Penalty Formulas
The Act speaks of a penalty ``amount equal to any contribution or
expenditure involved in the violation.'' 2 U.S.C. 437g(a)(5)(A). In the
context of knowing and willful violations of 2 U.S.C. 441f, the Act
more generally refers to ``the amount involved in the violation.'' 2
U.S.C. 437g(a)(5)(B). Based on the Act, the Commission frequently uses
the concept of ``amount in violation'' (``AIV'') in determining
penalties. For example, for a misreporting violation, the Commission
may consider the AIV to be the amount of financial activity not
reported or misreported, and derive a penalty based on the AIV. The
Commission seeks comment on whether the use of AIV is proper and/or
consistent with the Act. Are there any violations for which AIV is not
appropriate? What is the appropriate determination of AIV (e.g., is the
cost of a communication or the breadth of distribution an appropriate
measure of AIV in the context of a disclaimer or reporting violation)?
Although the Commission has made variations of civil penalty
calculations public, both through release of OGC's compiled civil
penalty chart and through letters accompanying conciliation agreements,
should the Commission continue to make public ongoing developments
regarding civil penalties? If so, in what form should the Commission
release this information: in a chart, through individual letters, or in
some other manner? Would it be preferable for the Commission to adopt a
chart--or guidelines--binding on itself and its staff? Finally, the
Commission requests comments on any and all of the specific penalty
formulas referenced above. Are the penalties appropriate for the
violations?
2. Disgorgement
The Commission also requests comment on its practice of seeking
disgorgement in addition to penalties for certain violations.
Disgorgement is a form of equitable relief that seeks to deprive a
wrongdoer of unjust enrichment. SEC v. First Financial Corp., 890 F.2d
1215, 1231 (D.C. Cir. 1989). The Act authorizes the Commission to seek
equitable relief in court if it is unable to correct or prevent a
violation of the Act. 2 U.S.C. 437g(a)(6); FEC v. Christian Coalition,
965 F. Supp. 66, 70-72 (D.D.C. 1997). Beyond its power to seek
equitable relief in court, the Commission is required to ``attempt * *
* to correct or prevent such violation by informal methods of
conference, conciliation, and persuasion * * *'' 2 U.S.C.
437g(a)(4)(A). Thus, disgorgements required through the enforcement
process may be viewed both as a derivative of the Commission's
authority to seek equitable relief in court and as a means of
``correcting or preventing'' violations under the Act.
In the context of Commission enforcement actions, when the
Commission determines that a committee has accepted or received a
prohibited contribution in violation of the Act, the Commission has
asked the committee to disgorge the contribution to the U.S. Treasury
once the committee learns the contribution was improper, in addition to
paying a civil penalty based on a percentage of the amount of the
prohibited contribution. In the context of excessive contributions, the
Commission occasionally also has offered the committee that received
the excessive contribution the option to refund the excessive amount or
to disgorge it to the U.S. Treasury, in addition to paying a civil
penalty based on a percentage of the excessive amount. However, in
matters involving the receipt of prohibited or excessive contributions
made in the name of another, see 2 U.S.C. 441f, the Commission
generally does not make findings against recipient committees when they
have not had knowledge of the true source of funds.
Typically, the Commission's proposed conciliation agreements for
respondents who made an impermissible contribution require the
respondent to waive its right to a refund and request the recipient
committee to disgorge the amount of the contribution to the U.S.
Treasury.\6\ If the recipient committee were allowed to keep a
prohibited or excessive contribution, then the Commission would, in
essence, be permitting the committee to use impermissible funds to
influence elections. Also, since the civil penalty will generally be a
lower figure than the amount of impermissible funds, a committee that
has violated the Act could effectively use those funds to pay the
penalty.
---------------------------------------------------------------------------
\6\ In these contexts, the Commission has sought disgorgement
when it has received a waiver from the contributor. Statement of
Policy Regarding Self-Reporting of Campaign Finance Violations (Sua
Sponte Submissions), 72 FR 16695, 16697 (Apr. 5, 2007) (assessing
sufficiency of sua sponte submission based on, inter alia, ``whether
an organization or individual respondent waived its claim to refunds
of excessive or prohibited contributions and instructed recipients
to disgorge such funds to the [United States] Treasury'') (basing
reduction of civil penalty on ``[a]ny appropriate refunds,
transfers, and disgorgements'' as a basis for assessing compliance
with sua sponte policy).
---------------------------------------------------------------------------
In Fireman v. U.S., 44 Fed. Cl. 528 (1999), the plaintiff was
prosecuted and pled guilty to making contributions in the names of
others and making excessive contributions to two federal candidate
committees, served a criminal sentence, and paid a $5 million fine. In
addition, the Commission directed the candidate committees that
accepted the excessive contributions to disgorge the $69,000 excessive
amount of the plaintiff's contributions. Id. at 530. The plaintiff
sought to recover the $69,000 amount under the theory of illegal
exaction. Id. at 534. In ruling on the government's motion to dismiss
for failure to state a claim under Federal Rules of Civil Procedure
Rule 12(b)(6), the Court of Federal Claims held that the plaintiff had
stated a proper cause of action. Id. at 538. Solely for the purpose of
settling the action, the government and the plaintiff subsequently
entered into a settlement whereby the government agreed to return the
$69,000 to the plaintiff. See Fireman v. U.S., available at http://www.fec.gov/law/litigation_CCA_F.shtml#fireman.
In light of the Fireman litigation, is the Commission's practice of
seeking disgorgement of prohibited or excessive contributions proper?
Should it make a difference if the Commission asks the source of the
excessive or prohibited
[[Page 4089]]
contribution to voluntarily waive its right to any refund? Is it
appropriate for the Commission, when negotiating with the source of the
impermissible contribution, to enter into an agreement that requires
the source to voluntarily waive its right to a refund and to notify all
recipient committees of its waiver? Should the recipient committees
instead be directed to return the impermissible contribution to the
original source? Should disgorgement be considered an ``equitable
remedy'' as opposed to a fine or penalty, and therefore not limited by
the general five-year statute of limitations at 28 U.S.C. 2462, which
by its terms applies only to civil fines, penalties and forfeitures?
Does the pronouncement in FEC v. Christian Coalition, 965 F. Supp. at
71, that 28 U.S.C. 2462 ``provides no such shield from declaratory or
injunctive relief'' apply to disgorgement?
3. Penalty Schedule
The Commission also seeks comment on whether reliance on a penalty
schedule would be appropriate, particularly in light of the courts'
admonitions that ``[t]he statutory language `makes clear [that] [t]he
assessment of civil penalties is discretionary.''' FEC v. Kalogianis,
2007 WL 4247795 at *6 (M.D. Fla. 2007) (quoting FEC v. Friends of Jane
Harman, 59 F. Supp. 2d 1046, 1058 (C.D. Cal. 1999)); see also FEC v.
Ted Haley Cong. Comm., 852 F.2d 1111, 1116 (9th Cir. 1988) (``A court's
discretion on civil penalties is reviewed under an abuse of discretion
standard.''). In order to ensure consistency, should a penalty chart be
viewed as a standard from which deviations must be justified? Would the
penalty chart outlined above provide the Commission sufficient
discretion to consider the particulars of a violation? Would the use of
the chart result in unfair treatment of respondents, particularly
novice and unsophisticated actors? Are the mitigating and aggravating
factors set forth in OGC's internal guidance appropriate? Should other
factors, such as whether the candidate won or lost the election (or
dropped out of the race), the margin of victory or defeat, intent to
run again in the future, or campaign resources, be considered? Could
consistency be maintained through an alternative approach to penalty
calculation, or are the current opening offer formulas needed to
maintain consistency? Are other options available under the Act?
Should the Commission not accept civil penalties less than a
certain percentage of the amount in violation, to ensure that penalties
exceed the ``cost of doing business'' for the particular respondent
involved? See, e.g., MUR 5440 (The Media Fund) (civil penalty
approximately 1% of amount in violation of over $55 million). Do low
civil penalties in Commission settlements, which are generally made
public at the close of a matter long after the election at issue is
over, erode compliance incentives and encourage potential violators to
ignore the Act and Commission regulations?
The total civil penalties in OGC enforcement matters has decreased
substantially over the past several fiscal years, as follows:
$5,563,069 in 2006; $4,038,478 in 2007; $2,385,043 in 2008 (the
Commission lacked a quorum for approximately 6 months in 2008 and was
thus unable to take actions such as accepting settlements and closing
enforcement cases); $807,100 in 2009; $672,200 in 2010; and $527,125 in
2011. See http://www.fec.gov/press/press2011/FEC_Joint_Statement-Nov3.pdf at 11; http://www.fec.gov/em/enfpro/enforcestatsfy03-08.pdf;
http://www.fec.gov/em/enfpro/enforcestatsfy09-10.pdf. Should the
Commission be concerned about the downward trend in the collection of
civil penalties, or can the decrease be explained by factors other than
the Commission's enforcement decisions (e.g., court cases striking down
portions of the Act and regulations; increased use of Alternative
Dispute Resolution)?
In the context of penalties sought by the Commission in litigation
pursuant to 2 U.S.C. 437g(a)(6) due to unsuccessful attempts at
conciliation, the courts have set forth the following factors for
determining the appropriate penalty: (1) The good or bad faith of the
respondents; (2) the injury to the public; (3) the respondent's ability
to pay; and (4) the necessity of vindicating the authority of the
responsible federal agency. FEC v. Furgatch, 869 F.2d 1256 (9th Cir.
1989) (affirming a $25,000 penalty sought by the Commission); FEC v.
Kalogianis, 2007 WL 4247795 (M.D. Fla. 2007) (reducing a nearly
$300,000 penalty sought by the Commission to $7,000); and FEC v.
Harman, 59 F. Supp. 2d 1046 (C.D. Cal. 1999) (holding that payment of a
penalty and disgorgement were not required due to technical nature of
violations).
Additionally, the courts have cited defendant's state of mind when
committing the violation. Kalogianis, 2007 WL 4247795 at *6; Harmon, 59
F. Supp. 2d at 1058. Does the penalty chart in its current form provide
for sufficient consideration of these factors? Should these factors,
set forth by the courts in the context of enforcement matters that have
proceeded to litigation, also be applied to the Commission's probable
cause conciliation process under 2 U.S.C. 437g(a)(5), as well as the
Commission's practice of seeking pre-probable cause conciliation? Would
the Commission be better served by replacing the current penalty chart
with an approach that begins at a baseline of zero and builds up to an
appropriate penalty based on the factors identified by the courts?
Alternatively, instead of using penalty formulas that, as reflected in
the current schedule, may be substantially lower than the statutory
penalties, should the Commission start with the penalties set forth at
2 U.S.C. 437g(a)(5) and work downward based on mitigating factors?
Also, should the Commission continue its current policy of offering a
25% pre-probable cause discount to the calculated penalty? Does a 25%
discount appropriately incentivize early settlement or would
respondents be sufficiently motivated to settle at the RTB stage with a
lesser or no discount?
VI. Alternative Dispute Resolution
A. Background
The Commission established the Alternative Dispute Resolution
Office (``ADRO'') in October 2000 as authorized by the Administrative
Dispute Resolution Act of 1996, 5 U.S.C. 571-584, which required
Federal agencies take steps to promote the use of ADR. The Commission's
ADR program was designed to enhance compliance by encouraging
settlements outside the agency's regular enforcement context. By
expanding the tools for resolving complaints and internal referrals,
the program was aimed at improving the Commission's ability to process
complaints and resolving matters more rapidly using fewer resources.
Other benefits include saving costs and time for respondents whose
cases are processed by ADRO. Respondents are afforded the opportunity
to settle cases before the Commission makes any finding of a violation,
providing an attractive incentive to engage in good faith negotiations
with ADRO. The Commission has included a comprehensive description of
its ADR program on the Web site. See http://www.fec.gov/em/adr.shtml.
Although the Commission received several comments on the ADR
program during its 2009 enforcement hearing, no substantive changes
have been made to the program since that time. See Agency Procedures
Recommendations, available at http://www.fec.gov/law/policy/enforcement/2009/recommendationsummary.pdf. For
[[Page 4090]]
example, a recommendation to set guidelines for negotiating penalties
and other remedial measures has yet to be considered by the Commission.
See id. at 2. Accordingly, the Commission believes it may be beneficial
to revisit certain of those issues and to address other relevant ADR
topics.
B. Proposals and Issues To Consider
1. Commission Approval or Rejection of ADR Settlements
From the time the ADR program was implemented in 2000, the
Commission's only options when reviewing ADR settlements have been
either to (1) accept the agreement without revisions or (2) reject the
agreement in its entirety and dismiss the matter. This policy has the
advantage of giving ADRO wide latitude to fashion agreements without
Commission involvement--thereby speeding up the process--while
providing respondents with a unique incentive by assuring that any
agreement they sign will represent the end of the case (respondents may
be more likely to use the ADR program if they can be confident their
settlements are not subject to renegotiation). The obvious disadvantage
is that Commission is boxed in; since it cannot direct ADR to
renegotiate an agreement it finds unpalatable, its role as final agency
arbiter is arguably undermined. Also, a respondent may be unduly
benefited if, for example, an agreement with a stiff penalty is
dismissed because the Commission does not like certain language
contained therein.
The Commission seeks comment on its ``accept or dismiss'' policy to
determine whether the advantages outweigh the disadvantages and how the
policy might be revised to strike a more appropriate balance. For
example, the Commission could simply vote on whether to instruct ADRO
to renegotiate problematic aspects of a settlement upon the motion of
one Commissioner. If a more narrowly tailored approach is deemed
preferable, ADRO could inform respondents at the start of higher
priority ADR matters (e.g., where the amount in violation appears to be
above a particular amount) that the Commission reserves the right to
direct ADRO to renegotiate any ADR settlement brought before it.
2. Civil Penalties
Similar to the civil penalty issues raised above concerning the
traditional enforcement process, the Commission seeks comment on the
penalty scheme used by ADRO so the Commission can better evaluate the
program's effectiveness. The main objective should be to achieve a
balance so that penalties are sufficiently low for respondents to
prefer participating in the ADR program rather than being subject to
OGC processing, yet high enough to deter future violations and promote
compliance. The Commission recognizes that ADR tends to focus more on
non-monetary ``behavioral'' remedies in its settlements and may offer a
wider array of settlement options to respondents than does OGC (e.g.,
attendance at a Commission-sponsored workshop), but the importance of
securing civil penalties to modify behavior should not be understated,
even in cases where the amounts in violation are comparatively low.
Although respondents may be quick to make counteroffers with very small
and often no penalties, the Commission is not necessarily served well
by accepting such offers. In order for terms of settlement to serve as
meaningful deterrents, the penalty should at least exceed the ``cost of
doing business'' for the particular respondent involved. There still
may be sound reasons why ADR settlements often contain no or minimal
penalty amounts, but perhaps there should be a fuller airing of the
reasons for accepting such terms so that the Commission can determine
whether the proper balance of program objectives is being achieved and
maintained.
As it has recently done with OGC's civil penalty calculations as
discussed above, the Commission is considering whether to apprise
respondents of its ``opening offer settlement'' formulas for the
typical violations it encounters. ADRO currently employs a penalty
formula scheme resembling a scaled-back version of the formulas used by
OGC. After a respondent agrees in writing to ``buy in'' to the ADR
process, ADRO generally communicates an opening offer by telephone (in
contrast with OGC-drafted written agreements containing opening offers
approved by the Commission) and negotiates terms to include in a
written settlement. Although the ADR program was set up to operate
without extensive Commission involvement--thus promoting faster
resolution of cases--it may nevertheless be in the Commission's
interest for ADRO to inform it of the parameters for negotiation before
it begins settlement negotiations. Currently, both the opening and
negotiated figures are simultaneously presented to the Commission along
with an agreement already signed by the respondent; the Commission does
not have any prior opportunity to review the opening offer as it does
with OGC reports recommending conciliation. The Commission could
consider having ADRO provide a proposed penalty amount in its
assignment memorandum to the Commission, since the amount in violation
is generally clear at that time. The memoranda could be circulated on a
no-objection basis to maintain efficiency (it is currently circulated
on an informational basis). The Commission recognizes that including
such information may increase the likelihood of Commission objections
and thus slow down the ADR process; accordingly, the Commission seeks
comment on how to maintain adequate oversight of ADRO's civil penalty
regime.
VII. Other Issues
The Commission welcomes comments on other issues relevant to these
enforcement policies and procedures, including any comments concerning
how the FEC might increase the fairness, transparency, efficiency and
effectiveness of the Commission.
Dated: January 11, 2013.
On behalf of the Commission.
Donald F. McGahn II,
Vice Chairman, Federal Election Commission.
[FR Doc. 2013-00959 Filed 1-17-13; 8:45 am]
BILLING CODE 6715-01-P