[Federal Register Volume 78, Number 13 (Friday, January 18, 2013)]
[Proposed Rules]
[Pages 4081-4090]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-00959]



11 CFR Part 111

[Notice 2013-01]

Request for Comment on Enforcement Process

AGENCY: Federal Election Commission.

ACTION: Request for comments.


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 

DATES: Comments must be received on or before Friday, April 19, 2013. 
The Commission will determine at a later date whether to hold a 

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.



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 
     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

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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 
    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 

    \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).

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) 

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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.

    \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 
(``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.

    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 
    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.

    \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).

    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 
    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\

    \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 

    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 
    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 

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 
    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 
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 

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/
     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 
     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 
    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 
     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 
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 

    \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 
    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 

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 
    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 

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]