Campaign Spending Commission

Campaign Spending Commission
Leiopapa A Kamehameha Building, Room 204
June 14, 2017
9:00 a.m.

Commissioners Present
Bryan Luke, Adrienne Yoshihara, Gregory Shoda, Eldon Ching, Kenneth Goodenow

Commissioners Excused
None

Staff Present
Kristin Izumi-Nitao, Tony Baldomero, Gary Kam, Sandrina Lee, Jessica Richey
Supervising Deputy Attorney General Pat Ohara and Deputy Attorney General Valri Kunimoto

Call to Order
Chair Luke called the meeting to order at 9:05 a.m.

Chair Luke thanked Vice Chair Yoshihara for her years of service as a Commissioner and Vice Chair.  He stated that her term ends on June 30^th, but hopes that the Governor will reappoint her to serve another four year term.

Chair Luke asked for a motion to convene Executive Session pursuant to HRS §92-5(a)(4), to consult with the Commission’s attorneys on questions and issues pertaining to the Commission’s powers, duties, privileges, immunities, and liabilities concerning the debriefing of Civil No. 15-1-1147-06, The Committee to Elect Julia Allen, et al. v. Campaign Spending Commission, et al., and a discussion of the attorney-client relationship.

Chair Luke commented that the Commission is meeting in Executive Session because the Commission agreed to pay the Yamada judgment and the Julia Allen settlement as set forth in H.B. 1022, and because State funds were being used to pay these matters, HRS requires that the Commission be debriefed by the Attorney General’s Office.

Mr. Michael Palcic stated that he objected and wanted to receive a public apology in the Julia Allen matter.

Chair Luke stated that the Executive Session concerns a discussion of the attorney-client relationship with respect to what transpired in the Julia Allen matter which is within the purview of the law, and that the facts in the case were not being disputed.

Mr. Michael Palcic requested to be on the agenda in July to discuss the Julia Allen matter.  Chair Luke stated that his request would be taken under advisement.

Commissioner Goodenow moved to convene to Executive Session for the aforementioned reason.  Motion seconded by Vice Chair Yoshihara.  Motion carried (5-0).

*Public Session reconvened at 10:25 a.m.  Elections Assistant Sandrina Lee was excused from the meeting.

Consideration and Approval of Minutes on 5/10/17
Chair Luke asked for comments or changes.

Deputy Attorney General Kunimoto commented that she disagreed with the last sentence in the first paragraph on page 8 and asked that the sentence read as follows:  “By settling this case for nuisance value only.”  She stated that the remaining part of the sentence, characterizing the Attorney General’s legislative testimony on the Julia Allen claim as being that the Commission acted unreasonably, in bad faith, or that the electronic filing system was inadequate, was inaccurate.  These were allegations asserted by the Appellants and not a representation from the Attorney General’s Office.

General Counsel Kam stated that the sentence in question concerns a quote from Chair Luke which was stated at the last meeting, and therefore, any objection should have been noted at that meeting and that it cannot be altered in minutes of the meeting at this time.

Deputy Attorney General Kunimoto asked if the legislative testimony could be attached to this meeting’s minutes to reflect the Attorney General Office’s amended testimony.

Chair Luke called for a motion to approve the minutes.

Vice Chair Yoshihara moved to approve the minutes of 5/10/17.  Motion seconded by Commissioner Shoda.  Motion carried (5-0).

New Business
*Proposed Conciliation Agreement No. 17-69 – In Re the Matter of Bryan Hoernig
Executive Director Izumi-Nitao reported that on or about April 2017, she initiated an investigation of Respondent.  She reported the following:
–     Respondent owns Honolulu Hardwoods, Inc. which is a Hawaii noncandidate committee that registered with the Commission on or about 4/11/17
–     Respondent was a contributor to Djou for Mayor, a candidate committee for Charles Djou, who was a mayoral candidate for the City and County of Honolulu, a four-year nonstatewide office, in the 2016 election
–     Respondent made a personal contribution and two business contributions from Honolulu Hardwoods, Inc. to Djou for Mayor
–     Pursuant to HRS §11-357(a)(2), the contribution limit for Djou for Mayor was $4,000 during an election period
–     Djou for Mayor reported receiving: 1) $1,000 contribution from Respondent on or about 7/20/16 in his personal capacity; 2) $3,000 contribution from Respondent on or about 9/20/16 from his business; and 3) $500 contribution from Respondent on or about 10/27/16 from his business
–     HRS §11-361(a) provides that:  “All contributions and expenditures of a person whose contributions or expenditures are financed, maintained, or controlled by any corporation, labor organization, association, party, or any other person, including any parent, subsidiary, branch, division, department, or local unit of the corporation, labor organization, association, party, political committees established and maintained by a national political party, or by any group of those persons shall be considered to be made by a single person.”
–     On or about 4/10/17, Commission staff contacted Respondent and confirmed that Respondent controlled the political spending of Honolulu Hardwoods, Inc., and therefore, Respondent’s personal and business contributions to Djou for Mayor were made by a single person pursuant to HRS §11-361(a)
–     Respondent made a total contribution of $4,500 to Djou for Mayor which means Respondent exceeded Djou for Mayor’s contribution limit by $500
–     Respondent did not knowingly, intentionally, or recklessly violate HRS §11-357(a)(2)
–     HRS §11-364(a) provides that “[a]ny excess contribution not returned to the contributor within thirty days shall escheat to the Hawaii election campaign fund”
–     The $500 excess contribution was not returned within thirty days
–     Respondent acknowledges that an excess contribution was made in violation of HRS §11-357(a)(2)
–     Djou for Mayor escheated the $500 excess contribution to the Hawaii Election Campaign Fund
–     Pursuant to the Commission’s administrative fine guidelines, a fine of $200 was assessed against Respondent for the $500 excess contribution

Executive Director Izumi-Nitao recommended that the Commission make a preliminary determination of probable cause that a violation had been committed, waive further proceedings, and approve the settlement amount of $66.67 in this proposed agreement.

Executive Director Izumi-Nitao noted that this was the first time that this present composition of Commissioners have seen this kind of conciliation agreement and stated that it had been presented 5 times before in the 2012 election – 2 times for individual excess contributors and 3 times for business excess contributors.  She further noted that the conciliation agreement was mentioned in the standardized excess contribution and escheat letter issued by the Commission.

Commissioner Shoda moved to approve the proposed conciliation agreement.  Motion seconded by Commissioner Ching.  Motion carried (5-0).

*Docket No. 17-32 – In Re the Matter of Randy Gonce v. Friends of Rida Cabanilla
General Counsel Kam reported that a complaint had been filed by Randy Gonce against the Friends of Rida Cabanilla for the failure to report a $200 contribution made on 5/6/16 to the Friends of Mark Hashem in violation of HRS §11-333(b)(3).  He stated that Representative Hashem and Respondent acknowledged to Commission staff that the $200 contribution was made and that Respondent did not report the expenditure in her Supplemental Report.  As such, General Counsel Kam recommended that the complaint be sustained and that the Commission issue a preliminary determination of probable cause that a violation had been committed.  He further recommended that the Commission assess an administrative fine in the amount of $250 against Respondent and order Respondent to amend its report.

Commissioner Ching moved to make a preliminary determination that probable cause exists that a violation had been committed and to accept the fine and terms stated in the complaint.  Motion seconded by Vice Chair Yoshihara.  Motion carried (5-0).

Old Business
*Docket No. 17-36 – In Re the Matter of University of Hawaii Professional Assembly – PAC
General Counsel Kam reported that a complaint had been filed by Executive Director Izumi-Nitao against University of Hawaii Professional Assembly – PAC for making excess contributions to a candidate committee in violation of HRS §§11-357 and 11-363.  He reported the following:

• Respondent is a noncandidate committee that is registered with the Commission
• The Commission received 6 mailers in support of candidate Dale Kobayashi who ran in the 2016 election for the House of Representatives, District 23 (Manoa)
• These mailers were paid for by Respondent without the candidate’s approval
• Respondent reported: 1) $15,000 independent expenditure paid to Daylight Communications, Inc. on 6/30/16 for mailers in support of Dale Kobayashi; 2) $19,736.47 independent expenditure paid to Daylight Communications, Inc. on 8/8/16 for mailers in support of Dale Kobayashi; and 3) $2,000 contribution to Dale Kobayashi on 6/8/16
• Pursuant to HRS §11-357(a)(1), the $2,000 contribution to Dale Kobayashi was the maximum amount Respondent could have given to this candidate
• All of the independent mailers paid for by Respondent contained the same photograph of Dale Kobayashi that appeared in the candidate’s 3 social media campaign accounts
• HRS §11-363(a) provides: “The financing by any person of the dissemination, distribution, or republication, in whole or in part, of any broadcast or any written or other campaign materials prepared by the candidate, candidate committee, or agents shall be considered to be a contribution to the candidate.”
• Under HRS §11-363(a), the cost of Respondent’s mailers in support of Dale Kobayashi in the amount of $34,736.47 is deemed to be a contribution to the candidate
• Under HRS §11-357(a)(1), the contribution limit for candidate Dale Kobayashi was $2,000
• Respondent made a $2,000 contribution directly to candidate Dale Kobayashi’s campaign
• Respondent’s payment for the dissemination, distribution, or republication of Dale Kobayashi’s campaign photograph was an excess contribution in the amount of $34,736.47

General Counsel Kam recommended that pursuant to HRS §11-405(a), the Commission make a preliminary determination of probable cause that the Hawaii campaign finance law has been violated, assess a fine in the amount of $1,000 against Respondent, and order that any and all administrative fine be deposited in the state general fund pursuant to HRS §11-410(e).

General Counsel Kam stated that the same complaint had been filed against the Sierra Club in 2014 and Forward Progress in 2015.

Respondent’s attorney, Mr. Wade Zukeran, responded that he filed a response with the Commission on 6/9/17.  He stated that there are 2 issues that he would like the Commission to consider.  First, there was no intent by Respondent to disseminate, distribute, or republish the candidate’s message.  He argued that the issue deals with a headshot of the candidate that covered very little space within the content of their mailers (i.e., 1% to 3.2%) and that the photograph did not convey the candidate’s message unlike the image involved in the Sierra Club case which showed the candidate and his family thereby conveying a message of supporting family values.

Secondly, Mr. Zukeran stated that HRS §11-363(a) is unclear as applied to images and photographs that are publicly available.  He argued that the federal law does not find reproduction of an image to be a violation.  Further, he maintained that Respondent altered the candidate’s photograph by adding pixels to the image for better resolution such that it was not the same image from the candidate’s website.

Mr. Zukeran asked that the matter be dismissed and that the Commission not find that the Hawaii campaign finance law had been violated.

Commissioner Ching asked if there was any question that the candidate’s photograph came from the candidate committee’s website.  Mr. Zukeran replied no and confirmed that the image was from the candidate’s Facebook website.

Vice Chair Yoshihara commented that after Sierra Club and Forward Progress, they cannot find that there was no campaign finance violation.  Mr. Zukeran responded that the facts in this matter are distinguishable because there was no intent to communicate the candidate’s message.  Vice Chair Yoshihara stated that this factor is not required by law.  Mr. Zukeran commented that it is an important factor and more about conveying Respondent’s message to the public.

Commissioner Shoda asked whether Respondent was aware of the Commission’s prior decisions.  Mr. Zukeran said no.  Commissioner Shoda asked Commission staff if the prior decisions were noticed in the Commission’s newsletters.  General Counsel Kam responded yes.  Commissioner Shoda stated that he was not sure what more the Commission could do.

With respect to Respondent’s first issue, General Counsel Kam stated that there is no distinction between an image and a message.  Both are campaign material.  He argued that this matter concerns the same photograph used by the candidate in 3 social media accounts which was used by Respondent in 6 mailers to which they spent over $34,000.  He maintained that Respondent should not be able to use an image that the candidate chose to use, and thus prefers, and that it would not be unreasonable for a PAC to spend the money to come up with its own artwork.  General Counsel Kam said that this was the 3^rd complaint in this area, that HRS §11-363(a) is not ambiguous, and that there are no legal exceptions if an image is publicly available on a website.

Commissioner Goodenow inquired about the de minimus argument.  General Counsel Kam replied that this is a federal doctrine that the FEC has applied but that an agency can choose not to follow.  Furthermore, even if the de minimus argument is applied, in the authorities cited by Respondent, the amount was $800 and not $34,000.  Mr. Zukeran stated that the image in the federal case took 1/4 or 1/6 of the entire surface of the ad which the FEC found insignificant in contrast to this case whereupon the image was 1% of the entire surface of the ad.

Commissioner Goodenow moved to make a preliminary determination that probable cause exists that a violation had been committed and to accept the fine and terms stated in the complaint.  Motion seconded by Vice Chair Yoshihara.  Motion carried (5-0).

*Consideration, Discussion, and Approval of Amendments to the Commission’s Administrative Fine Guidelines
Executive Director Izumi-Nitao stated that this matter was continued from the 3/8/17 and 5/10/17 Commission meetings to permit staff time to submit a recommendation.  She stated that she had 2 areas she would like to discuss.  First, with respect to graduated fines for ad disclaimers, she recommended that there be a fine of $25 for the 1^st offense, $50 for the 2^nd offense, and $100 for the 3^rd offense.  She further stated that at any time staff may recommend a criminal referral subject to the Commission’s approval if the facts suggest that the violation was intentional, knowing, or reckless.

Commissioner Goodenow asked about submitting legislation to change the statute.  Executive Director Izumi-Nitao acknowledged that that would be ideal but that staff had no recommendation because of the difficulty in applying fines to an area that is so diverse in ad mediums as well as in consideration of balancing deterrence with compliance.

Chair Luke commented that he understood that there are many ways in which ads are conducted.

Commissioner Shoda suggested that they consider $5,000 for the 3^rd offense and $500 for the 2^nd offense for better deterrence and that it would be more in line with the laws.

Chair Luke stated that most committees that have violated this more than 1-2 times has done so unknowingly so he did not think going to $5,000 for the 3^rd offense was necessary.  He further stated that it is more about getting the conduct to stop and the ad corrected than the money.

Commissioner Shoda commented that if the fine had been larger, a criminal referral could be avoided.

General Counsel Kam stated that quick compliance should be sought and that if the fine is $5,000, the matter will result in an administrative hearing.

Vice Chair Yoshihara agreed that the law should be clarified and that the amounts for the 2^nd and 3^rd violation as proposed by staff should be higher.

General Counsel Kam commented that this discussion is being triggered by one case that came before the Commission.

Commissioner Goodenow moved to approve a fine of $25 for the 1^st violation, $100 for the 2^nd violation, and $500 for the 3^rd violation.  Motion seconded by Vice Chair Yoshihara.  Motion carried (5-0).

Further discussion ensued concerning application of these guidelines.  It was generally decided that the 4^th violation would result in a complaint being brought before the Commission for them to decide.  It was further decided that conciliation agreements may be offered for the 1^st and 2^nd violations only as in other cases such as late reports.  Also, the fine structure would not be contained per medium (e.g., mailers, TV ads, radio ads, Internet) and it would not retoll for each new election period.

There was discussion as to when a violation would be deemed to be a 2^nd or 3^rd offense.  It was generally decided that repeated failures to properly include ad disclaimers would result in higher fines.  Ultimately, a criminal referral may be recommended if the violation was intentional, knowing, or reckless.

Ms. Melissa Vomvoris suggested that there should be some kind of notice as to the increased fines in the Commission’s violation letter as well as a suggestion to the committee to pull any pending ads if they lacked the disclaimer.  Her recommendation was well received by the Commission and would be adopted.

*Discussion and Update of Commission Legislation and/or Other Campaign Finance Related Bills/Resolutions for the 2017 Legislative Session
General Counsel Kam stated that the Commission has 4 bills pending before the Governor and that he had bill review scheduled with the Governor at 1 p.m. today.

Commissioner Goodenow asked about the Governor’s deadline to veto bills.  He was informed that it was 6/26/17.

Report from Executive Director
Update on Gubernatorial Appointment of New Commissioners
Executive Director Izumi-Nitao reported that there was no update.

Report on Compliance of Filing Timely Disclosure Reports
Executive Director Izumi-Nitao reported that the only area that requires an update concerns the Commission orders that were referred to the Attorney General’s Office – Civil Recoveries Division (“AG-CRD”).  AG-CRD reported that out of the 13 referrals, 5 have not been resolved (i.e., Henry Kahula, Creighton Higa, Eric Ryan, Raymond Banda, and Junior Mataafa).

In the matter regarding Henry Kahula, Executive Director Izumi-Nitao reported that staff recently learned that the candidate passed away in February 2017 and that the treasurer may have moved to the mainland.  She indicated that she would be bringing the 6 dockets to the July Commission meeting for their consideration to dismiss based on this information.

Chair Luke asked for a motion to convene Executive Session to:  (1) Consider and approve Executive Session minutes from the Commission meeting on 5/10/17; and (2) Pursuant to HRS §92-5(a)(4), to consult with the Commission’s attorney on questions and issues pertaining to the Commission’s powers duties, privileges, immunities, and liabilities concerning Docket No. 17-24 – In Re the Matter of Alan Arakawa and Friends of Alan Arakawa for the prohibited use of campaign funds.

Vice Chair Yoshihara moved to convene to Executive Session for the aforementioned reasons.  Motion seconded by Commissioner Goodenow.  Motion carried (5-0).

Public Session reconvened at 12:39 p.m.

Commissioner Goodenow moved to adjourn the meeting.  Motion seconded by Vice Chair Yoshihara.  Motion carried (5-0).  Meeting adjourned at 12:40 p.m.

Next Meeting:
Scheduled for Wednesday, July 12, 2017.