Minutes for November 16, 2016 Meeting

Posted on Dec 7, 2016 in Minutes

Campaign Spending Commission
Leiopapa A Kamehameha Building, Room 204
November 16, 2016
10:00 a.m.

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

Commissioners Absent
None

Staff Present
Kristin Izumi-Nitao, Tony Baldomero, Gary Kam, Jessica Richey
Deputy Attorney General Valri Kunimoto

Call to Order
Chair Luke called the meeting to order at 10:07 a.m.

Consideration and Approval of Minutes on 10/12/16
Chair Luke asked for comments or changes.  Vice Chair Yoshihara sought the following amendments:

  • Page 2, 5th paragraph, 1st sentence, to read: “Vice Chair Yoshihara asked General Counsel Kam to refresh the Commissioners regarding the facts in Sierra Club.”
  • Page 4, 1st paragraph, 3rd sentence, to read: “Regarding #1, he stated that there were multiple attempts to conceal the true contributor’s name and questioned why the check was made to an individual, not a candidate committee, makes reference to an “honorarium,” and is from a non-profit organization that cannot make contributions to candidates.”

Chair Luke called for a vote to approve the minutes as amended.

Commissioner Shoda moved to approve the minutes of 10/12/16 as amended.  Motion seconded by Commissioner Ching.  Motion carried (4-0).  Commissioner Goodenow abstained due to his absence at the 10/12/16 meeting.

 New Business
**Chair Luke asked to take Docket No. 17-18 – In Re the Matter of Jarrett Keohokalole, James Frizzell, and Friends of Jarrett Keohokalole out of order because Respondent Keohokalole was present and asked Commissioners to be taken out of order.

 Vice Chair Yoshihara moved to take Docket No. 17-18 out of order.  Motion seconded by Commissioner Shoda.  Motion carried (5-0).

*Docket No. 17-18 – In Re the Matter of Jarrett Keohokalole, James Frizzell, and Friends of Jarrett Keohokalole
Executive Director Izumi-Nitao reported that a complaint had been filed against Jarrett Keohokalole, James Frizzell, and Friends of Jarrett Keohokalole (“Respondents”) for the failure to file the Late Contributions Report.

Respondent Keohokalole ran unopposed in the 2016 election for House District 48.  Pursuant to HRS §§11-333(c) and 11-338, Respondents are required to timely file a late contributions report if the committee receives contributions from any person aggregating more than $500 within 14 calendar days through 4 calendar days prior to any election on or before the 3rd calendar day prior to the election.  Because the primary election was on 8/13/16, committees receiving contributions over $500 between 7/30/16 through 8/9/16, were required to file the Late Contributions Report on 8/10/16.

A review of Respondents’ Final Primary Report which was due on 9/2/16 showed a contribution of $1,200 from the Hawaii Association of Realtors that was received by Respondents on 8/3/16.  Pursuant to HRS §11-338(a), Respondents were required to file the Late Contributions Report on 8/10/16.

On 9/27/16, Commission staff sent Respondents a “Notice of Fine for Failure to File Late Contributions Report” via first class mail informing them of their failure to file the Late Contributions Report and that an administrative fine of $750 was being assessed pursuant to HRS §11-410(a).  This letter was addressed to Respondents at the addresses listed on their Organizational Report.  On 9/27/16, Commission staff also contacted Respondents to inform them of this report which Respondents filed that day.

On 10/6/16, Respondent Keohokalole came to the Commission’s office and informed staff that he would like to seek a fine reduction.  Because Respondents had previously filed late reports, they were not eligible for a conciliation agreement to reduce the fine.  As such, staff informed him that a complaint would be filed and that it would be placed on the 11/16/16 Commission Agenda.

For these reasons, Executive Director Izumi-Nitao recommended that the Commission make a preliminary determination of probable cause that the Hawaii campaign spending law has been violated pursuant to HRS §11-405(a), assess an administrative fine of $750 for the violation, order that the fine be paid from the candidate’s personal funds if the candidate committee’s funds are insufficient to pay the fine, and order that any and all fines be deposited in the general fund pursuant to HRS §11-410(e).

Respondent Keohokalole thanked the Commissioners for taking his matter out of order.  He stated that they made a mistake and failed to file this report.  He said that there was no intent to mislead the Commission and asked for leniency.  He further added that the fine amounts to more than two-thirds of the amount he received and that he filed the Late Contributions Report as soon as he was notified by the Commission.  Lastly, he stated that he had only two late reports and had run unopposed in the election.

Commissioner Goodenow stated that the fine amount of $750 for not filing the Late Contributions Report is based on the application of HRS §11-410 and is set forth on the Commission’s administrative fine table.  Respondent Keohokalole asked that the fine be based on the application of HRS §11-340(b).

Discussion ensued as to why HRS §11-340(b) was not applicable to this violation.  General Counsel Kam explained that the Late Contributions Report is a special report governed by HRS §11-338 which provides that this report is in addition to any other report required to be filed and only needs to be filed by committees that receive contributions from any person aggregating more than $500 within 14 calendar days through 4 calendar days prior to any election.  In this case, because Respondents received a $1,200 contribution on 8/3/16 which was within the time period specified for filing the Late Contributions Report, Respondents should have filed this report which would have disclosed this contribution prior to the election rather than after the election.  He further added that it does not make sense to apply HRS §11-340(b) given the higher minimum fine for reports that are due closer to the election set forth in subsection (c) (i.e., 2nd Preliminary Primary Report and Preliminary General Report).  The Late Contributions Report discloses contributions made closest to the election and it is crucial that disclosure of big money (i.e., more than $500) is reported.  If HRS §11-340(b) were applied, a fine of $300 would have been assessed for this report filed 48 days late.

Mr. Michael Palcic commented that the statute provides that the fine may be assessed, if any.

Vice Chair Yoshihara 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 Commissioner Goodenow.  Motion carried (5-0).

Respondent Keohokalole commented that he understands the situation that the Commission is trying to address and will comply, but that this kind of standardizing of fines is not going to prevent committees from manipulating the reporting of contributions.

**Resumed New Business

Executive Director Izumi-Nitao stated that the next sixteen (16) matters concern either the failure to file or the late filing of the Late Contributions Report which was due on August 10, 2016, the Final Primary Report which was due on September 2, 2016, the 1st Preliminary General Report which was due on October 3, 2016, the 2nd Preliminary General Report which was due on October 31, 2016, and/or the Preliminary General Report which was due on October 31, 2016.  These proposed Conciliation Agreements were a result of investigations pursuant to HRS §11-314(7) to determine whether there had been a violation of the Hawaii campaign spending laws.  The committees in all matters have been informed of the violation(s) in a letter from Commission staff.  Further, they have been notified of today’s meeting and received a copy of the proposed Conciliation Agreement.  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 amounts stated in each of the proposed agreements.

*Proposed Conciliation Agreement No. 17-27 – In Re the Matter of Friends of Grace Manipol-Larson
Executive Director Izumi-Nitao explained that this proposed conciliation agreement concerns the late filing of the Final Primary Report and requests that they assess a reduced fine from $200 to $70.  Chair Luke asked if there were any comments or questions.  There were none.  Chair Luke called for a vote.

Vice Chair Yoshihara moved to approve proposed Conciliation Agreement No. 17-27.  Motion seconded by Commissioner Goodenow.  Motion carried (5-0).

*Proposed Conciliation Agreement No. 17-28 – In Re the Matter of Local Union 1186 IBEW PAC
Executive Director Izumi-Nitao explained that this proposed conciliation agreement concerns the late filing of the 1st Preliminary General Report and requests that they assess a reduced fine from $900 to $450.  Chair Luke asked if there were any comments or questions.  There were none.  Chair Luke called for a vote.

Commissioner Goodenow moved to approve proposed Conciliation Agreement No. 17-28.  Motion seconded by Vice Chair Yoshihara.  Motion carried (5-0).

*Proposed Conciliation Agreement No. 17-29 – In Re the Matter of Friends of Yuki Lei Sugimura
Executive Director Izumi-Nitao explained that this proposed conciliation agreement concerns the failure to file the Late Contributions Report and requests that they assess a reduced fine from $750 to $250.  Upon being notified of the need to file the Late Contributions Report, Respondents filed the report.  Chair Luke asked if there were any comments or questions.  There were none.  Chair Luke called for a vote.

Vice Chair Yoshihara moved to approve proposed Conciliation Agreement No. 17-29.  Motion seconded by Commissioner Goodenow.  Motion carried (5-0). 

**Chair Luke asked to take Docket No. 17-24 – In Re the Matter of Alan Arakawa and Friends of Alan Arakawa out of order because Respondents were present and asked Commissioners to be taken out of order.

Vice Chair Yoshihara moved to take Docket No. 17-24 out of order.  Motion seconded by Commissioner Shoda.  Motion carried (5-0).

*Docket No. 17-24 – In Re the Matter of Alan Arakawa and Friends of Alan Arakawa
General Counsel Kam reported that a complaint had been filed against Alan Arakawa and Friends of Alan Arakawa (“Respondents”) for the prohibited use of campaign funds.

Upon reviewing Respondents’ expenditures for the period of November 5, 2014 to June 30, 2015, Commission staff noted numerous payments for “advertising” that staff believed needed further investigation.  Staff’s main concern was whether the expenditures for advertising should be described as either expenditures for charitable or community service contributions, which are limited by amount and time period by HRS §11-381(a)(3), or personal expenses, which are prohibited by HRS §11-382(3).  Since staff continues to investigate the advertising expenditures that perhaps should have been reported as charitable contributions, this complaint only addresses the 9 expenditures for advertising that staff believes were for personal expenses.  The former group of advertising expenditures will be addressed in a later complaint if warranted.  Respondents have agreed to this separation of issues.

The 9 counts in the complaint deal with expenditures that Respondents reported as being “directly related to candidate’s campaign” under the category of “advertising.”  Respondents explained that these expenditures supported two softball teams that Respondent Arakawa sponsors and plays on (i.e., Dragons and Hard Luck).  Respondents maintain that the expenditures are advertising because the team’s uniforms and shirts are emblazoned with “Friends of Alan Arakawa.”

General Counsel Kam informed the Commission that the 9 counts represent expenditures that are personal expenses pursuant to HRS §11-382(3) and Hawaii Administrative Rules (“HAR”) §3-160-42(b) which are expenses that exist irrespective of a candidate’s campaign to seek the nomination or election to office or being elected to office.  HAR §3-160-42(b)(6) provides that personal expenses include expenses for entertainment or sporting events.  Further, a candidate cannot use campaign funds to support a recreational organization whose beneficiaries include the candidate under HAR §3-160-41(b)(1) if the organization is established by the candidate or candidate committee.  Respondent Arakawa is a player on the Dragons and Hard Luck softball teams and benefits from the purchase of equipment for the team (i.e., Count 1 – purchase of 2 bats ($399.98); Count 2 – purchase of caps and balls ($679.16); Count 3 – purchase of uniforms ($539.44); Count 4 – purchase of socks ($58.26); Count 5 – purchase of socks ($33.24); Count 6 – purchase of shirts ($879.16); and Count 8 – purchase of softballs ($250)) and the payment of entrance fees for softball tournaments (i.e., Count 7 – tournament entrance fee ($350); and Count 9 – tournament entrance fee ($200)).  General Counsel Kam stated that the definition of advertising according to campaign finance laws under HRS §11-302 is any communication that (1) identifies a candidate directly or by implication and (2) advocates or supports the nomination or election of the candidate.  He stated that none of the purchases in the 9 counts qualified as advertising under HRS §11-302 and were all personal expenses which are prohibited under HRS §11-382(3).

For these reasons, based on what the Commission has done in the past, General Counsel Kam recommended that the Commission make a preliminary determination of probable cause that the Hawaii campaign spending law has been violated pursuant to HRS §11-405(a), assess an administrative fine of $1,694.62 for the violations (which is 50% of the total amount of prohibited expenditures), order that the fine be paid from the candidate’s personal funds if the candidate committee’s funds are insufficient to pay the fine, order that any and all fines be deposited in the general fund pursuant to HRS §11-410(e), and order that Respondents reimburse the campaign with personal funds in the amount of $3,389.24.

Mr. David Minkin, Esq., and Mr. Peter Hamasaki, Esq., counsel representing Respondents, were present with Respondent Mayor Arakawa.

Commissioner Ching asked to be recused from this matter as Mr. Peter Hamasaki, Esq. is his business attorney.

Mr. Minkin stated that they received the complaint from Commission staff late and wanted to make sure that the Commission received their response dated 11/15/16 to which Chair Luke responded that they did.  As to the complaint, Mr. Minkin offered the following comments:

  • There were 7 bats and only 1 was used by Respondent Arakawa.
  • Respondent Arakawa did not play on the Dragons softball team but was their manager.
  • The expenditures were not personal expenses but were for advertising to get Respondent Arakawa’s name out there for potential statewide office consideration.
  • Community contributions are allowed where the candidate is involved.
  • Campaign funds may be used for campaign clothing.
  • The expenditures could be considered as providing a mixed benefit to Respondent Arakawa but that the personal use should be considered de minimis. In 2015, there were 21 players on the Dragons softball team and Respondent Arakawa was only 1 player which represents less than 5% so the $3,389.24 divided by 21 is approximately $26.90 per month, and thus, plainly below the de minimis amount.
  • Commission staff’s reference to sporting events is misleading because it refers to the purchase of tickets to attend the sporting event.

He then asked the Commission to dismiss the complaint.

Respondent Arakawa stated that although he is term limited as a mayor in Maui County, he may look to state or federal office.  As such, building good relationships and goodwill in the community is important.  He stated that there are not many opportunities for statewide advertising so when the opportunity for him to sponsor a softball team came up in early 2015 (because the former sponsor had passed away), he took it.  In sponsoring a softball team, the league requires you to outfit 24 other people on the team including equipment so these expenses are necessary and do not benefit him alone.  He told the Commission that he should be treated fairly and should not be singled out and penalized since there are other legislators and elected officials doing the same thing.

Discussion ensued as to what is advertising under campaign finance laws.  General Counsel Kam stated that the 9 expenditures did not meet the definition of advertising under HRS §11-302 because either there was no clear identification of the candidate (e.g., bats and socks) nor a call for his election or defeat (e.g., jersey with “Vote for” or “Elect” Friends of Alan Arakawa”).  At this point, photos of the Hard Luck and Dragons softball team in their uniforms were distributed.

Commissioner Shoda asked Respondent Arakawa if he played on the softball teams.  Respondent Arakawa replied that he is the coach/manager of the Dragons and has been a playing member of Dragons and Hard Luck.  Discussion ensued in participating on recreational teams or attending sporting events where the candidate personally benefits from it as a player or a team manager.  Respondent Arakawa stated that he played in situations when there were injured players.

Mr. Minkin stated that these are not personal expenses but constitute advertising much like corporate sponsors who defray costs such as Meadow Gold who helps pay for AYSO soccer uniforms.  General Counsel Kam stated that the issue is not corporate sponsorships (i.e., Coca Cola) where the use of corporate treasury funds are involved, but whether you can use campaign funds pursuant to specific campaign finance laws to pay for these expenditures.

Commissioner Goodenow posed a hypothetical of being asked to pay $3,000 to attend the Okinawan chamber of commerce’s annual event whereupon your committee would be recognized as a sponsor in the brochures and posters.  The $3,000 contribution could be used by the chamber of commerce to pay for food or tablecloths/decorations.  General Counsel Kam stated that this brings us to the other matters not contained in the complaint, but the analysis would depend on whether the Okinawan chamber of commerce considered the $3,000 a gift to which typically a donation letter would be generated by the community organization to the committee.  Respondent Arakawa expressed his concern that Commission staff is asking his committee to obtain tax donation receipts from these organizations.  Respondent Arakawa stated that when his committee is approached by community organizations, it had to be for advertising.

Commissioner Shoda expressed his concern that Respondent Arakawa personally benefited from these expenses and that there is a prohibition against using campaign funds for sporting events and entertainment.

Vice Chair Yoshihara stated that these expenses do not conform to the statutory definition of advertising.

Mr. Minkin replied that even if these expenses were not advertising, they were not personal expenses and should be considered de minimis.  He further stated that under HAR §3-160-42(b)(7), campaign funds may be used to pay for membership dues or other expenses in a community or civic organization where the candidate is directly involved in the activities of the organization.  Vice Chair Yoshihara disagreed with the application of subsection (7) to these expenditures and requested to discuss with the Commission’s attorney questions regarding the priority and proper application of the laws regarding advertising, sponsorship, and personal use.

Respondent Arakawa commented that the intent of campaign finance rules is to bring order to how people campaign and that action should be taken if committees are deliberately trying to hide something, abuse or take advantage of the system, or defraud the Commission.

Chair Luke disagreed with Respondent Arakawa and stated that the Commission is there to make sure committees’ expenditures are transparent.

Commissioner Shoda commented that it is difficult to unravel the issues in this complaint because it deals with past practice which has not been addressed.  He stated that he thinks that it is inappropriate to spend campaign funds in a sporting event in which you participate.

Respondent Arakawa asked if the expenses would be fine if he quit the team.  Commissioner Shoda responded that the Commission would still have to address whether the expenses are charitable/community donations or advertising.

Vice Chair Yoshihara moved to continue the matter until the next Commission meeting on 12/7/16 to consult with Commission attorneys on questions and issues pertaining to the Commission’s powers, duties, privileges, immunities, and liabilities concerning the application of laws and rules.  Motion seconded by Commissioner Goodenow.  Motion carried (4-0) (Commissioner Ching recused).

**Resumed New Business – Proposed Conciliation Agreements

*Proposed Conciliation Agreement No. 17-30 – In Re the Matter of The Dow AgroSciences LLC Employee Political Action Committee (AgPAC)
Executive Director Izumi-Nitao explained that this proposed conciliation agreement concerns the late filing of the 1st Preliminary General Report and requests that they assess a reduced fine from $300 to $100.  Chair Luke asked if there were any comments or questions.  There were none.  Chair Luke called for a vote.

Vice Chair Yoshihara asked to be recused from this matter as her firm represents Respondents.

Commissioner Shoda moved to approve proposed Conciliation Agreement No. 17-30.  Motion seconded by Commissioner Ching.  Motion carried (4-0) (Vice Chair Yoshihara recused).

*Proposed Conciliation Agreement No. 17-31 – In Re the Matter of Dow AgroSciences
Executive Director Izumi-Nitao explained that this proposed conciliation agreement concerns the late filing of the Final Primary Report and the 1st Preliminary General Report and requests that they assess a reduced fine from $200 to $70 for the Final Primary Report and $300 to $150 for the 1st Preliminary General Report for a total fine of $220.  Chair Luke asked if there were any comments or questions.  There were none.  Chair Luke called for a vote.

Vice Chair Yoshihara asked to be recused from this matter as her firm represents Respondents.

Commissioner Ching moved to approve proposed Conciliation Agreement No. 17-31.  Motion seconded by Commissioner Shoda.  Motion carried (4-0) (Vice Chair Yoshihara recused).

*Proposed Conciliation Agreement No. 17-32 – In Re the Matter of Hawaii Operating Transporters PAC
Executive Director Izumi-Nitao explained that this proposed conciliation agreement concerns the late filing of the 1st Preliminary General Report and requests that they assess a reduced fine from $337.50 to $112.50.  Chair Luke asked if there were any comments or questions.  There were none.  Chair Luke called for a vote.

Commissioner Shoda moved to approve proposed Conciliation Agreement No. 17-32.  Motion seconded by Commissioner Ching.  Motion carried (5-0).

*Proposed Conciliation Agreement No. 17-33 – In Re the Matter of Friends of Joan Hood
Executive Director Izumi-Nitao explained that this proposed conciliation agreement concerns the failure to file the Late Contributions Report and requests that they assess a reduced fine from $750 to $375.  Upon being notified of the need to file the Late Contributions Report, Respondents filed the report.  Chair Luke asked if there were any comments or questions.  There were none.  Chair Luke called for a vote.

Vice Chair Yoshihara moved to approve proposed Conciliation Agreement No. 17-33.  Motion seconded by Commissioner Shoda.  Motion carried (5-0).

*Proposed Conciliation Agreement No. 17-34 – In Re the Matter of Pacific Links US Services
Executive Director Izumi-Nitao explained that this proposed conciliation agreement concerns the late filing of the 1st Preliminary General Report and requests that they assess a reduced fine from $300 to $100.  Chair Luke asked if there were any comments or questions.  There were none.  Chair Luke called for a vote.

Commissioner Shoda moved to approve proposed Conciliation Agreement No. 17-34.  Motion seconded by Vice Chair Yoshihara.  Motion carried (5-0).

*Proposed Conciliation Agreement No. 17-35 – In Re the Matter of Hawaii Pest Control Association PAC
Executive Director Izumi-Nitao explained that this proposed conciliation agreement concerns the late filing of the 1st Preliminary General Report and requests that they assess a reduced fine from $300 to $150. Chair Luke asked if there were any comments or questions.  There were none.  Chair Luke called for a vote.

Vice Chair Yoshihara moved to approve proposed Conciliation Agreement No. 17-35.  Motion seconded by Commissioner Shoda.  Motion carried (5-0).

*Proposed Conciliation Agreement No. 17-36 – In Re the Matter of Ocean Tourism Coalition PAC
Executive Director Izumi-Nitao explained that this proposed conciliation agreement concerns the late filing of the 1st Preliminary General Report and requests that they assess a reduced fine from $300 to $150. Chair Luke asked if there were any comments or questions.  There were none.  Chair Luke called for a vote.

Commissioner Shoda moved to approve proposed Conciliation Agreement No. 17-36.  Motion seconded by Vice Chair Yoshihara.  Motion carried (5-0).

*Proposed Conciliation Agreement No. 17-37 – In Re the Matter of Roofing Contractors Association of Hawaii PAC
Executive Director Izumi-Nitao explained that this proposed conciliation agreement concerns the late filing of the 1st Preliminary General Report and requests that they assess a reduced fine from $300 to $150. Chair Luke asked if there were any comments or questions.  There were none.  Chair Luke called for a vote.

Vice Chair Yoshihara moved to approve proposed Conciliation Agreement No. 17-37.  Motion seconded by Commissioner Shoda.  Motion carried (5-0).

*Proposed Conciliation Agreement No. 17-38 – In Re the Matter of Subcontractors Association of Hawaii PAC
Executive Director Izumi-Nitao explained that this proposed conciliation agreement concerns the late filing of the 1st Preliminary General Report and requests that they assess a reduced fine from $300 to $150. Chair Luke asked if there were any comments or questions.  There were none.  Chair Luke called for a vote.

Commissioner Shoda moved to approve proposed Conciliation Agreement No. 17-38.  Motion seconded by Vice Chair Yoshihara.  Motion carried (5-0).

*Proposed Conciliation Agreement No. 17-39 – In Re the Matter of Lihue Pharmacy, Inc.
Executive Director Izumi-Nitao explained that this proposed conciliation agreement concerns the late filing of the 1st Preliminary General Report and requests that they assess a reduced fine from $300 to $150. Chair Luke asked if there were any comments or questions.  There were none.  Chair Luke called for a vote.

Commissioner Shoda moved to approve proposed Conciliation Agreement No. 17-39.  Motion seconded by Vice Chair Yoshihara.  Motion carried (5-0).

*Proposed Conciliation Agreement No. 17-40 – In Re the Matter of Young Brothers, Ltd. Political Action Committee
Executive Director Izumi-Nitao explained that this proposed conciliation agreement concerns the late filing of the 2nd Preliminary General Report and requests that they assess a reduced fine from $300 to $150. Chair Luke asked if there were any comments or questions.  There were none.  Chair Luke called for a vote.

Commissioner Shoda moved to approve proposed Conciliation Agreement No. 17-40.  Motion seconded by Vice Chair Yoshihara.  Motion carried (5-0).

*Proposed Conciliation Agreement No. 17-41 – In Re the Matter of Friends of Laura Thielen
Executive Director Izumi-Nitao explained that this proposed conciliation agreement concerns the late filing of the Preliminary General Report and requests that they assess a reduced fine from $300 to $100.  Chair Luke asked if there were any comments or questions.  There were none.  Chair Luke called for a vote.

Commissioner Shoda moved to approve proposed Conciliation Agreement No. 17-41.  Motion seconded by Vice Chair Yoshihara.  Motion carried (5-0).

*Proposed Conciliation Agreement No. 17-42 – In Re the Matter of Auto Body & Painting Association Political Action Committee
Executive Director Izumi-Nitao explained that this proposed conciliation agreement concerns the late filing of the 2nd Preliminary General Report and requests that they assess a reduced fine from $300 to $150. Chair Luke asked if there were any comments or questions.  There were none.  Chair Luke called for a vote.

Commissioner Shoda moved to approve proposed Conciliation Agreement No. 17-42.  Motion seconded by Vice Chair Yoshihara.  Motion carried (5-0).

*Docket No. 17-22 – In Re the Matter of Tracy Arakaki and Friends of Tracy Arakaki for Aiea
Executive Director Izumi-Nitao reported that a complaint had been filed against Tracy Arakaki and Friends of Tracy Arakaki for Aiea for the failure to file the Late Contributions Report.

Respondent Arakaki ran in the 2016 election for House District 33.  Pursuant to HRS §§11-333(c) and 11-338, Respondents are required to timely file a late contributions report if the committee receives contributions from any person aggregating more than $500 within 14 calendar days through 4 calendar days prior to any election on or before the 3rd calendar day prior to the election.  Because the primary election was on 8/13/16, committees receiving contributions over $500 between 7/30/16 through 8/9/16, were required to file the Late Contributions Report on 8/10/16.

A review of Respondents’ Final Primary Report which was due on 9/2/16 showed a contribution of $1,000 from X-Ring Security & Firearms and a $650 contribution from Violet Arakaki that were received by Respondents on 8/1/16.  Pursuant to HRS §11-338(a), Respondents were required to file the Late Contributions Report on 8/10/16.

On 9/28/16, Commission staff sent Respondents a “Notice of Fine for Failure to File Late Contributions Report” via first class mail informing them of their failure to file the Late Contributions Report and that an administrative fine of $750 was being assessed pursuant to HRS §11-410(a).  This letter was addressed to Respondents at the addresses listed on their Organizational Report.  On 10/6/16, Respondents’ former treasurer Karen Arakaki called Commission staff and obtained assistance in filing the Late Contributions Report.

On 10/24/16 and 10/25/16, Commission staff called Respondents regarding payment of the fine.  Respondents did not pay the fine so on 10/26/16, Commission staff sent Respondents a copy of the complaint and set the matter on the 11/16/16 Commission Agenda.

For these reasons, Executive Director Izumi-Nitao recommended that the Commission make a preliminary determination of probable cause that the Hawaii campaign spending law has been violated pursuant to HRS §11-405(a), assess an administrative fine of $750 for the violation, order that the fine be paid from the candidate’s personal funds if the candidate committee’s funds are insufficient to pay the fine, and order that any and all fines be deposited in the general fund pursuant to HRS §11-410(e).

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 Commissioner Ching.  Motion carried (5-0).

*Docket No. 17-03 – In Re the Matter of Robert Lefton vs. Mark Kaniela Ing
General Counsel Kam reported that Robert Lefton filed a complaint against Respondent Mark Kaniela Ing for his failure to file a Notice of Intent to Hold a Fundraiser.  The complaint alleged that Respondent held a fundraiser on 6/6/16 but did not timely file a notice of intent to hold a fundraiser in violation of HRS §11-342.

Pursuant to HRS §11-342, a notice of fundraiser must be filed with the Commission before the fundraiser is held.  Respondent Ing filed a fundraiser notice with the Commission on 6/5/16 for a fundraiser to be held on 6/5/16.  Because 6/5/16 was a Sunday, the Notice of Intent to Hold a Fundraiser should have been filed with the Commission before 4:30 p.m. on the last business day prior to the fundraiser.  Thus, the notice should have been filed with the Commission on Friday 6/3/16.  Commission staff sent Respondents a notice of fine for the late filing of the fundraiser notice.

On 6/28/16, Respondent Ing appeared at the Commission’s office.  He explained that the fundraiser notice was incorrect and that the fundraiser was held on 6/6/16.  As proof, Respondent Ing provided Commission staff with an email dated 6/4/16 inviting people to attend his fundraiser on 6/6/16 at 6-8 p.m. at Kauhale Makai, 938 S. Kihei Road.  On 6/28/16, Respondent Ing filed an amended fundraiser notice to reflect the proper date of the fundraiser.  Commission staff removed the original fundraiser notice that was posted on 6/6/16 with the amended notice filed on 6/28/16.  This may have led Mr. Lefton to believe that the fundraiser notice was filed 22 days after the fundraiser.

Because the notice was therefore filed on time pursuant to HRS §11-342, General Counsel Kam recommended that the complaint be dismissed.

Commissioner Goodenow moved to dismiss the complaint.  Motion seconded by Commissioner Ching.  Motion carried (5-0). 

*Report on 2016 Annual Online Survey
Executive Director Izumi-Nitao reported that the Commission’s 2016 Annual Online Survey was published on 9/15/16 and closed on 10/15/16.  The total possible outreach was 918 which consists of 414 candidate committees, 258 noncandidate committees, and 246 public members.  The Commission received 140 responses which represents 15% of our total outreach.

Executive Director Izumi-Nitao stated that this is the 5th year of the survey and presented highlights from each category.

1 – Background Info highlights

  • Mostly treasurers followed by candidates completed this survey
  • 49% were from candidate committees (32% were from noncandidate committees)
  • 60% of the responses were from Oahu
  • 50% have had a CSC relationship for less than 3Y and 50% have had a CSC relationship for more than 3Y
  • 2/3 of the responders have filed CSC reports, been involved in campaign activities, or made a contribution or loan to a candidate committee so this is an experienced group

2 – Communication/Access highlights

  • Website continues to be #1 source for obtaining information closely followed by phone calls and office visits. Guidebooks, manuals, & eblasts are also popular.
  • eSign was mostly used for electronic filing forms
  • Social media engagement is still lacking

3 – Education/Training highlights

  • 47% never attended CSC training so perhaps not a favorable method or classes not at convenient time/location
  • About ½ have viewed guidebooks/manuals
  • Filing reports followed by viewing candidate committee reports and accessing reporting schedules seem to drive people to our website
  • The searchable database is a helpful tool that is being used to obtain information — mainly to search contributors names and how much they gave to candidates

4 – Compliance/Enforcement highlights

  • Majority are a compliant group having always filed their reports on time (under 56%), never entered into a Conciliation Agreement, and never had a complaint filed against them

5 – Public Funding highlights

  • Majority support public funding but only a small number have qualified/received public funding (15%)

6 – Other highlights

  • Majority knew that CSC operations depends on the $3 tax check-off, that the $3 tax check-off did not affect their tax liability, that they will check the $3 tax check-off, and that they would support a general fund appropriation to see public funding continue
  • Concern over Super PACs is split in half

Executive Director Izumi-Nitao stated that generally speaking, the survey results look very similar to the results of the 2015 survey and that many responders commented on the exceptional assistance and courteousness provided by staff.  The results will be published on the Commission’s website.

*Consideration, Discussion, and Approval of Commission Legislation for 2017 Legislative Session
General Counsel Kam presented proposed Commission legislation for the 2017 Legislative Session.

  • CSC-01 (17) – Amends HRS §11-334 by clarifying the language pertaining to the due dates of disclosure reports for candidates. The proposal also makes clear that the Supplemental Report due on January 31st must be filed every year and not just “after an election year.”  This will be our 6th try at the Legislature.
  • CSC-02 (17) – Amends HRS §11-340 to make it clear that unpaid expenditures are to be excluded from the calculation of maximum fines. Requires the Commission to publish the names of noncandidate committees who fail to file a report on its website.  The Commission is already required to publish the names of candidate committees who fail to file a report.
  • CSC-03 (17) – Amends HRS §11-340(c) to add the new 2nd Preliminary General Report due on October 1st of an election year for noncandidate committees in the schedule of fines ($300 minimum).
  • CSC-04 (17) – Amends HRS §11-410 by raising the amount of fine that can be assessed against a Super PAC from $1,000 to $5,000 and to permit the fine to be up to three times the amount of the unlawful contribution or expenditure. Also, allows the Commission to recover its costs of investigative services and bank fees for subpoenaed records from violators.
  • CSC-05 (17) – Amends HRS §11-341 (electioneering communications) by changing “disclosure date” to when the electioneering communication is publicly distributed rather than when the contract for the electioneering communication is executed. This is in line with federal law and makes more sense.  Also, deletes “communications that constitute expenditures by the expending organization” from the exceptions to the definition of “electioneering communications” to make it clear that candidate and noncandidate committees are required to file statements of information.
  • CSC-06 (17) – Amends HRS §11-412(b) to provide that the applicable statute of limitations for criminal prosecution of campaign spending violations shall not commence until the Commission’s discovery of the offense. This amendment was recommended by the Attorney General’s Office – Criminal Justice Division.
  • CSC-07 (17) – Amends HRS §11-322(a) by deleting the requirement that contributions be reported in the organizational report of candidate committees. There is no space in the organizational report to list contributions.  The Commission has not required candidates to report contributions in the organizational report.
  • CSC-08 (17) – Amends HRS §11-323(a) by deleting the requirement that contributions be reported in the organizational report of noncandidate committees. There is no space in the organizational report to list contributions.  The Commission has not required noncandidate committees to report contributions in the organizational report.
  • CSC-09 (17) – Amends HRS §11-324(e) to require treasurers to keep information about the employer and occupation of contributors to candidates, in addition to contributors to noncandidate committees.
  • CSC-10 (17) – Amends HRS §11-339 to require candidates who do not intend to have more than $1,000 in activity to provide notice to the Commission of such intent by June 30 of an election year and to require noncandidate committees who do not intend to have more than $1,000 in activity to provide notice to the Commission of such intent by the 5th calendar day prior to the due date of the Preliminary Primary Report.
  • CSC-11 (17) – Amends HRS §11-363 by placing the treatment of the payment for the republication of a candidate’s campaign material by a person in a separate subsection for clarity and to add four allowable uses of a candidate’s campaign material which is line with federal law.

General Counsel Kam reported that the Attorney General’s Office had comments and proposed revisions concerning CSC-04 and CSC-06 that he would like to discuss with them, and therefore, would like to bring back before the Commission at the next meeting.

Vice Chair Yoshihara inquired about the reason behind CSC-02.  General Counsel Kam stated that the proposal would codify Commission practice in treating unpaid expenditures in the computation of a late report fine.  Vice Chair Yoshihara expressed the fact that this proposal was in contrast to the Commission’s decision in the Julia Allen contested case matter.

Deputy Attorney General Kunimoto commented on CSC-05.  She thought the language was confusing.  General Counsel Kam agreed to review the proposal and resubmit for the Commissioners’ consideration at the next meeting.

General Counsel Kam asked the Commission to approve CSC-01, CSC-03, CSC-07, CSC-08, CSC-09, CSC-10, and CSC-11 to permit him to seek the proposals’ introduction in the 2017 Legislative Session.  He will work on the remaining bills with consultation with the Attorney General’s Office (where applicable) for the Commissioners’ consideration at the next meeting on 12/7/16.

Vice Chair Yoshihara moved to approve the aforementioned proposals.  Motion seconded by Commissioner Goodenow.  Motion carried (5-0). 

Old Business
*Docket No. 17-11 – In Re the Matter of Hawaii Electrical Workers, Local 722 and Rodney Capello
Executive Director Izumi-Nitao reported that a complaint had been filed against Hawaii Electrical Workers, Local 722 and treasurer Rodney Capello for the failure to file the Preliminary Primary Report (reporting period 1/1/16 to 7/29/16) which was due on 8/3/16.

Executive Director Izumi-Nitao reported this matter was continued from the last two meetings to permit Commission staff to better understand the facts behind this noncandidate committee which was dissolved by its parent union due to misuse of funds around May 2016.

Since the last two meetings, Commission staff has been working with Respondents’ treasurer Rodney Capello and attorney Randal Yoshida who does not represent Respondents but is assisting their sister organization.  With the production of their bank records, Commission staff assisted Respondents in filing and amending the committee’s reports to date.  It is staff’s recommendation that Respondents qualify for the $1,000 or less category such that they would only have to file the Final Election Period Report under HRS §11-339 thereby making the instant complaint moot.  Executive Director Izumi-Nitao recommended that the complaint be dismissed.

Commissioner Goodenow moved to dismiss the complaint.  Motion seconded by Commissioner Shoda.  Motion carried (5-0).

Report from Executive Director
Report on Compliance of Filing Timely Disclosure Reports
With respect to the Commission orders that were referred to the Attorney General’s Office – Civil Recoveries Division (“AG-CRD”), AG-CRD generated a spreadsheet with the status of each case.  There appear to be 3 referrals which were resolved and 8 referrals that are outstanding.

As for the report on compliance of filing timely disclosure reports in 2016, Executive Director Izumi-Nitao reported that:

-For the Preliminary General Report (reporting period 8/14/16 to 10/24/16) which was due on 10/31/16:

  • 2 out of 127 candidate committees did not file
  • As of today, all candidate committees have filed
  • On 11/2/16, CSC tweeted that for the first time ever, all candidates on the 2016 ballot have filed their reports

-For the 2nd Preliminary General Report (reporting period 9/27/16 to 10/24/16) which was due on 10/31/16:

  • 11 out of 245 noncandidate committees did not file
  • As of today, only 4 have not filed

-Upcoming reports:

  • Late Contribution/Expenditure Report which was due on 11/7/16
  • Final Election Period Report which is due on 12/8/16
  • Expenditure of Public Funds Report which is due on 12/8/16
  • Supplemental Report which is due on 1/31/17

Issuance of Certification of Compliance with Office of Elections & County Clerks
Commission staff is in communication with the Office of Elections and the county clerks concerning certification of elected officials.  Beginning the week of 11/21/16, CSC staff will send memos to the Office of Elections and the county clerks certifying which elected officials have turned in their campaign spending reports and paid their fines (if any).  By law, certification is necessary if the elected official is to be sworn into office.

Update on the 2016 Election
Executive Director Izumi-Nitao reported that staff composed 2 memos – one for successful candidates and one for unsuccessful candidates – that were sent to all candidates to guide them as to next steps in compliance with campaign finance laws.  The memo to successful candidates was sent by mail on 11/10/16 and the memo to unsuccessful candidates was sent by mail on 11/14/16.

Associate Director Baldomero reported the following:

  • There were 104 out of 128 seats in the State of Hawaii up for election
  • Breakdown of the 2016 election winners: 85 seats went to incumbents (82%) and 9 incumbents were defeated (8%)
  • $170,407.49 was disbursed in public funding to 26 candidates of whom 11 won the election and 2 were new candidates
  • There is $1.2 million in the Hawaii Election Campaign Fund
  • There were 247 fundraiser notices filed for fundraisers held in 2016 (versus 291 in the 2014 election) — 16 were from Kirk Caldwell and 12 were from Charles Djou
  • There are 263 registered noncandidate committees with the Commission which includes 17 Super PACs
  • There were 5 new Super PACs registered for the 2016 election
  • There were 35 ballot issues but no ballot issue committees registered (versus 13 in the 2014 election that spent $12.5 million)

Chair Luke asked for a motion to convene Executive Session to:  (1) Consider and approve Executive Session minutes from the Commission meeting on 10/12/16; (2) Pursuant to HRS §92-5(a)(5), to investigate proceedings regarding criminal misconduct in Docket No. 17-23 concerning a candidate committee’s failure to include advertisement disclaimers pursuant to HRS §11-391; and (3) Pursuant to HRS §92-5(a)(4), to consult with the Commission’s attorneys on questions and issues pertaining to the Commission’s administrative and/or criminal remedies for campaign finance violations.

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

Public session reconvened at 1:42 p.m.

Chair Luke moved to adjourn the meeting.  Motion seconded by Commissioner Goodenow.  Motion carried (5-0).  Meeting adjourned at 1:42 p.m.

Next Meeting:
Scheduled for Wednesday, December 7, 2016.