Campaign Spending Commission

Campaign Spending Commission
Leiopapa A Kamehameha Building, Room 204
November 19, 2014
10:00 a.m.

Commissioners Present:
William Snipes, Tina Gomes, Eldon Ching, Gregory Shoda
Excused – Adrienne Yoshihara

Staff Present:
Kristin Izumi-Nitao, Tony Baldomero, Gary Kam, Ellen Kojima
Deputy Attorney General Valri Kunimoto

Call to Order:
Meeting convened at 10:05 a.m. with Chair Snipes presiding.

Consideration and Approval of Minutes of 10/22/2014 Meeting:
Chair Snipes moved to approve the minutes of October 22, 2014 as amended (Amendment – Page 2, last paragraph concerning Docket No. 15-15 – “Chair Snipes deferred matter until the November meeting based on legal advice that they did not have an unanimous vote (i.e., 3 Commissioner votes) to refer the matter for prosecution.”) Motion seconded by Commissioner Ching. Motion carried unanimously.

New Business
Docket No. 15-59 – In Re the Matter of Hawaii Carpenters Market Recovery Program Fund, Forward Progress, and John White
Present – Leroy Colombe, Attorney representing Hawaii Carpenters Market Recover Program Fund, Forward Progress, and John White (“Respondents”)

General Counsel Kam reported that a complaint was filed alleging that Respondents failed to report a contribution, failed to identify candidates supported or opposed by independent expenditures, and failed to report expenditures.  Respondents have submitted a request that the matter be continued until the December meeting.

Mr. Colombe stated that although the general subject matter behind the complaint is not new to him and that staff explained the matters contained in the complaint, he just received the actual complaint and needed additional time to confer with co-counsel in Washington D.C. who needed to review the matter.

Chair Snipes moved that the matter be continued until the December meeting.  Motion seconded by Vice Chair Gomes.  Motion carried unanimously.

Docket No. 15-13 – In Re the Matter of Sierra Club Hawaii PAC
Present – Anthony Aalto, Chairperson
Zachary McNish, Esq., Executive Committee of Sierra Club of Hawaii and pro bono counsel

General Counsel Kam reported an unnotarized complaint from a candidate was filed alleging that the Sierra Club of Hawaii PAC (“PAC”) (“Respondent”) coordinated campaign materials with a candidate and thus the cost of the campaign material should have been reported as a contribution from the PAC as well as an expenditure by the candidate.  Respondent is a registered noncandidate committee with the Commission making solely independent expenditures.

During the investigation, it was discovered that Respondent used the candidate’s campaign material (i.e., a photograph of the candidate and his family) taken from the candidate’s website on its mailer.  The same photograph was used in the candidate’s own mailer.  Based on HRS §11-363, the reproduction of candidate material should be considered as an in-kind contribution to the candidate.  Respondent spent $3,700 for this mailer.  The candidate being supported by Respondent’s mailer is subject to a contribution limit of $2,000.

Respondent submitted a response from its attorneys.  The response cited statements made by individual FEC Commissioners that the republication of stock photos from the internet was not a contribution to the candidate.  However, General Counsel Kam pointed out that the statements made by the individual Commissioners were rejected during rule making when the FEC did not make an exception to materials in the public domain.  Respondent also argued that since this is the first time the Commission is enforcing HRS §11-363, Respondent should not be fined.

Staff recommended that the Commission make a preliminary determination that probable cause exists to believe a violation of the campaign spending law has been violated and assess an administrative fine of $500 for an excess contribution.

Mr. McNish asked the Commission to consider the following points:  Federal guidance allows the republication of campaign material (i.e., use of stock images through media/press links); 1^st Amendment concerns if the Commission applies HRS §11-363; and, the consequences to the Commission if they deviated from federal guidance and applied Hawaii law.  He asked that if the Commission disagrees with their position that the law be applied prospectively and not retroactively.

General Counsel Kam stated that the Hawaii law is similar to the federal rule and that he was not sure what the federal approach is because there has been no enforcement of the rule.  He stated that the FEC has been deadlocked 3-3 on the issue and he is not aware of them having taken action on this rule. Further, he commented that a candidate will only post what they want the public to see, and republication of that material is only forwarding the image that the candidate wants the public to see. He questioned whether republication of a candidate’s material was truly independent.  Hawaii law makes it an in-kind contribution to the candidate but not an expenditure in the absence of active coordination.  Also, he stated that he does not believe that the law should be applied prospectively because this law has been on the books for awhile.

Chair Snipes asked whether this was a case of first impression.  General Counsel Kam confirmed that this was the first time this issue has been brought to the Commission’s attention.

Commissioner Ching asked whether the candidate supported by Respondent (i.e., Matthew Lopresti) was a member of Respondent’s organization.  Mr. Aalto replied that he was but that he recused himself when he ran for election.  Mr. Aalto further added that Matthew Lopresti had no involvement in the production of their mailer and that he went to Matthew Lopresti’s website to obtain the photo for their mailer.  Mr. Aalto stated that he went to Matthew Lopresti’s opponent’s website (i.e., Rida Cabanilla) but was unable to find an unattractive photo of her for them to use.  General Counsel Kam added that there was no use of the opponent’s candidate material in this case on the mailer in question.

Chair Snipes asked whether the Commission could treat the matter as a teachable moment. Discussion on what options Commission had other than assessing a fine including issuing a cease and desist order.

Vice Chair Gomes commented that the independent expenditure has occurred (i.e., mailer went out in the primary election).

Rida Cabanilla stated that she also filed a complaint regarding this matter and believed that the mailer was a coordinated effort.  She also stated whether it be federal or state statute, the state statute should prevail.  Further, that this was a sensitive matter because it was an adverse piece and that Respondent should be held accountable.  She mentioned that Matthew Lopresti was Respondent’s Executive Director.

Vice Chair Gomes asked Mr. Aalto to confirm whether Matthew Lopresti was involved to which he replied in the negative.

General Counsel Kam noted that there appears to be a suspicion of coordination and the importance of organizations to know that they cannot republish candidate material.  He further reminded the Commission that the photo Respondent selected for their mailer was the same photo that the candidate Matthew Lopresti used for his own campaign thereby furthering that candidate’s message.

Mr. Aalto responded that he was acting in good faith and that other PACs are doing the same thing especially since media links are available on candidate websites.

Chair Snipes moved to make a preliminary determination that probable cause exists that a violation has been committed and that, in lieu of staff’s recommendation to assess a fine, that general counsel craft a cease and desist order that will provide guidance to the parties.  Motion seconded by Vice Chair Gomes.  Motion carried (3-1) with Commissioner Shoda opposing.

Docket No. 15-52 – In Re the Matter of Richard Creagan and Friends of Richard Creagan
Executive Director Izumi-Nitao reported that a complaint was filed alleging that Respondents failed to file the Late Contributions Report.

HRS §§11-333 (c) and 11-228 requires the filing of a late contribution report if a committee receives contributions aggregating more than $500 within fourteen calendar days through four calendar days prior to an election.

A review of the Respondents’ Final Primary Report showed a contribution of $1,000 from Hawaii Ophthalmological PAC which thus required Respondents to file the Late Contributions Report on 8/6/14.

On 9/17/14, Commission staff sent Respondents a “Notice of Fine for Failure to File Late Contribution Report” letter informing them that an administrative fine of $750 was being assessed.

On 9/29/14, Respondents filed the report and contacted Commission staff.  A conciliation agreement was discussed whereupon staff would recommend that the $750 fine be reduced to $250, and that the matter would be placed on the 10/22/14 Commission meeting agenda for consideration.

At the 10/22/14 Commission meeting, Respondents challenged Proposed Conciliation Agreement No. 15-34 and was permitted to withdraw the agreement.  Commissioners informed Respondents that the matter would be handled in the form of complaint and set for the November meeting.

On 10/28/14, Commission staff sent Respondents a copy of the complaint and informed Respondents that the matter would be set on the 11/19/14 Commission agenda.  On 11/18/14, Respondents submitted a response for the Commissioners’ consideration.  Respondents also submitted a fine check of $750 which staff is holding onto pending outcome of this matter.

Staff recommended that the Commission make a preliminary determination pursuant to HRS §11-405(a) that probable cause exists to believe a violation of the campaign spending law has been committed and assess a fine of $750.

Chair Snipes moved to make a preliminary determination that probable cause exists that a violation has been committed and to accept the fine and terms as stated in Docket No. 15-52.  Motion seconded by Vice Chair Gomes.  Motion carried unanimously.

Chair Snipes suggested that going forward, other than brief requests of continuance, the record is whatever it is with the distribution of the agenda and materials to the Commissioners.  He expressed concern that Respondents’ submission of a 9-page letter the day before the meeting is difficult for the Commissioners to review; particularly, if the meeting agenda is heavy.

Executive Director Izumi-Nitao suggested further discussion on the matter because at Sunshine meetings, members of the public attending the meeting may submit and/or ask that materials for agenda items be considered.

Chair Snipes suggested that if that is the case, maybe the agenda item should be moved to the end of the meeting or continued to the next meeting to permit the Commissioners adequate time to review late submitted materials.

Proposed Conciliation Agreements
Executive Director Izumi-Nitao reported that the following proposed conciliation agreements are a result of investigations initiated in October and November 2014 pursuant to HRS §11-314(7) to determine whether there has been a violation of the campaign spending laws.

Conciliation Agreement 15-36  In Re the Matter of Butch Ka’ala Buenconsejo, Ryan Fukushima, and Friends of Ka’ala Buenconsejo
Conciliation Agreement 15-37  In Re the Matter of Hawaii Republicans for Life
Conciliation Agreement 15-38  In Re the Matter of B&C Trucking Co., Ltd.
Conciliation Agreement 15-39  In Re the Matter of Tiffany Edwards Hunt and Friends of Tiffany Edwards Hunt

Respondents have been informed in a letter from Commission staff of the violation, they have been notified of today’s meeting, and they have received a copy of the proposed conciliation agreement.  They have waived the opportunity to explain or otherwise respond to the notice of violation.  Executive Director Izumi-Nitao recommended that the Commission make a preliminary determination of probable cause that a violation has been committed, waive further proceedings, and approve settlement amounts as stated in each of the conciliation agreements.

Vice Chair Gomes moved to make a preliminary determination that probable cause exists that a violation has been committed and to accept the settlement terms and amounts as stated in Conciliation Agreements Nos, 15-36 through 15-39.  Motion seconded by Chair Snipes.  Motion carried unanimously.

CSC Annual Report for FY 2014
Executive Director Izumi-Nitao presented the annual report for the Commission’s approval.  She also noted that the once the report has been approved it will be posted on the Commission’s website.

Chair Snipes asked if there were any questions or comments regarding the report. No questions or comments offered.

Commissioner Shoda moved to approve the Annual Report.  Motion seconded by Chair Snipes.  Motion carried unanimously.

Report on 2014 Annual Online Survey
Executive Director Izumi-Nitao reported that the online survey which featured 37 questions, received 82 responses (only 8% return).  She stated that the report was published on September 15, 2014 and was due on October 15, 2014.

She highlighted some of the information learned from the survey responses:

-Most of the responses came from treasurers and candidates;
-Most obtained campaign finance information from the Commission’s website or from the Commission’s staff/office;
-Most use the Commission website to file reports, followed by viewing reports, and then accessing the candidate committee searchable database;
-47% support public funding;
-Majority do not support increasing the $3 tax check-off;
-55% do not support an appropriation of general funds to see the public funding program continue; and
-55% are concerned about the noncandidate committee independent expenditure activity.

Consideration and Discussion of Commission Legislation for 2015 Legislative Session
General Counsel Kam proposed submission of a bill which the Commission has been submitting since 2012 which requires candidate committees to file the January Supplemental Report regardless of whether it is an election year.

Vice Chair Gomes commented on whether a bill should be proposed to increase the $3 tax check-off or whether the Commission should seek an appropriation.

Old Business
Docket No. 15-15 – In Re the Matter of Pacific Resource Partnership PAC, a Noncandidate Committee, and John White, as its Treasurer and Chairperson, and in his Individual Capacity
Present – Rey Graulty, representing Complainant Governor Cayetano
Leroy Colombe, Attorney representing Respondents

General Counsel Kam reported that Governor Cayetano filed a complaint against Pacific Resource Partnership PAC (“PAC”) and John White (collectively, “Respondents’”) alleging the PAC’s failure to report expenditures made in opposition to his 2012 mayoral candidacy and is seeking to have the complaint referred for prosecution.

At the 10/22/14 Commission meeting, the matter was deferred because there was a lack of a majority to decide the matter.  Since then Respondents have submitted another response which was a part of Commissioner’s meeting material.  Staff’s recommendation of dismissal of the complaint remains.

Mr. Graulty, representing Governor Cayetano who was unable to attend the meeting, presented the Governor’s testimony by reading a written statement prepared by Governor Cayetano stating that the matter should be referred for prosecution because the PAC made expenditures months before filing as a noncandidate committee and intentionally failed to report expenditures they made to consultants and public relation firms.  He also submitted 488 pages of internal emails that revealed the campaign activities of Respondents and others.  He further stated it would be a travesty if the Commission lets the fine imposed and paid for by Respondents stand, and requested that the Commission rescind the fine and refer the complaint to the city prosecutor for evaluation and prosecution as to Respondent John White.

Mr. Colombe, representing Respondents, stated that he strongly disagrees with Governor Cayetano’s testimony; that Respondents did not intend to disrespect the Commission and that this was more of a misstep; and, that they have been fully cooperative with Commission staff by amending reports and paying a fine.  He voiced concern regarding the Commission’s possible criminal referral of a reporting violation which was a simple mistake.  He admitted that a $1,000 or $250 fine is not something that is particularly damaging for his client, but that the remedy and amount of the fine is a legislative matter.

Vice Chair Gomes questioned what “exploratory” meant to Respondents in consideration that they spent $180,000 and whether a $1,000 fine would deter his client’s future behavior.  She further commented that the Commission would like the prosecutor’s office to look into more cases for the Commission.

Mr. Graulty asked that the Commission determine the distinction between express advocacy and opposition research.  He argued that even accepting the limited view of Yamada, as of 2/18/12, Respondents’ campaign against the Governor was in full swing and that it was not exploratory but express advocacy on the part of the Respondents.  Further, with regard to intent, this is a criminal case because Respondent White was involved as evidenced by the 488 emails and purposely omitted reporting the expenditures.

Chair Snipes recapped the following:

-Whether the violation was knowingly, intentional, or reckless;
-That the Commission reserves the authority and right to not accept staff’s recommendation; and
-That if the matter is referred for prosecution and if they decline to take the case, it will be returned to the Commission and they will make an administrative determination.

Commissioner Shoda moved to rescind the assessed fine and that the matter be referred for prosecution.  Motion seconded by Vice Chair Gomes.  Motion carried (3-1) with Commissioner Ching opposing.

Docket No. 15-48 – In Re the Matter of Pacific Resource Partnership PAC and John D. White, Jr.
Present – Leroy Colombe, Attorney representing Respondents

General Counsel Kam reported that a complaint was filed alleging that Pacific Resource Partnership PAC (“PAC”) and John D. White, Jr. (collectively, “Respondents”) failed to report expenditures.  The expenditures were for four (4) campaign mailers in support of Carol Fukunaga, who at the time in 2012, was running in a special election to fill a vacant seat on the Honolulu City Council.  Mr. Colombe responded by informing staff that all of the expenditures for the Fukunaga mailers were contained in three (3) invoices from Mission Control, Inc. totaling $86,182.69. Staff recommended that the Commission assess the PAC a $1,000 fine for the PAC’s failure to report the expenditures or in the alternative refer the matter for prosecution.

At the 10/22/14 Commission meeting, the matter was deferred because a majority of commissioners present could not decide the matter.

Mr. Colombe stated that the invoices for the mailers should have been reported, and agreed that the PAC should be fined for not reporting the expenditures.  Also, he stated that the non-reporting of the expenditures was not an intentional violation and that the matter should not be referred for criminal prosecution.

Commissioner Shoda commented that this case is further evidence of Respondents total disregard of the law.

Commissioner Shoda moved that the matter be referred for prosecution.  Motion seconded by Chair Snipes.  Motion carried (3-1) with Commissioner Ching opposing.

Docket No. 15-32 – In Re the Matter of Gil Kahele, Kaiali’i Kahele, and Friends of Gil Kahele
Present – Stanley Roehrig, Attorney representing Respondents
Senator Gil Kahele
Kai Kahele

General Counsel Kam reported that a complaint was filed alleging that Gil Kahele, Kaiali’I Kahele (“Kai”), and Friends of Gil Kahele (collectively, “Respodents”) used campaign funds to make a donation to a community organization during a prohibited period and in excess of the permitted amount which was not to exceed two times the amount of the candidate’s contribution limit (i.e., $8,000).

General Counsel Kam reported that there are two issues before the Commission concerning a 7/17/14 Pau Hana with Senator Gil Kahele, a benefit concert for the American Cancer Society & Relay for Life at the Hilo Civic Auditorium.  The first concerns an ad disclaimer on the benefit flyer.  This matter was resolved when Respondents paid the $25 administrative fine.  The second concerns the matter of a charitable event (i.e., the American Cancer Society & Relay for Life) which was paid for with Respondents’ campaign funds during a prohibited period and in excess of the permitted amount.  Senator Kahele, who had filed nomination papers, was prohibited from making charitable donations from the date he filed nomination papers to the date of the general election.  Further, a total amount of $14,770.71 was expended which exceeded the permissible amount of $8,000 allotted to Respondents even if they were permitted to make a charitable contribution.

In early discussions Executive Director Izumi-Nitao had with Senator Kahele’s treasurer, Kai Kahele, it was discussed whether this was a political or a charitable event.  Kai stated that this was a charitable event.  When asked how much of the campaign funds were used to put on this event, Kai responded that he did not know what the final cost would be.

On 7/16/14, staff still did not know the cost of the event was, and if staff had known that the cost would be about $15,000, it would have advised Respondents to not go forward with the event.

Respondents submitted a response that argued that the expenses made were campaign related and submitted a $1,000 check for any fine the campaign would be assessed.  This was the first time any mention had been made that this benefit was a campaign event.

Staff recommended that the Commission make a preliminary determination pursuant to HRS §11-405(a) that probable cause exists to believe violations of the campaign spending law had been committed and assess a $1,000 fine for each count (i.e., for a total administrative fine of $2,000) and that the campaign be reimbursed $14,770.71 for using campaign funds to pay for a charitable event made during a prohibited period.

Mr. Stan Roehrig, representing Senator Kahele and Kai Kahele, stated that all the contributions received went to the American Cancer Society and that the expenses made were for political activity held for Senator Kahele at the event.  Also, he noted a 7/9/14 email between Kai and Associate Director Tony Baldomero that Respondents relied on to go forward with the event.

Associate Director Baldomero stated the 7/9/14 email was in reference to the missing disclaimer regarding the ad for the event and not an endorsement to go forward with the event.

Respondents produced a video which they argued showed that it was a political activity for Respondents and not a benefit for the American Cancer Society and that any contributions received went to the American Cancer Society.  In this video, attendees to the event appeared dancing to music in Respondent campaign t-shirts.

After discussion, Respondents agreed to pay a fine of $1,000 for making a charitable donation during a prohibited period and to reimburse Senator Kahele’s campaign fund $3,692.50 (25% of the $14,770.71 campaign expenses made).

Commissioner Shoda moved to make a preliminary determination that probable cause exists that a violation has been committed in Count I, that an administrative fine of $1,000 be assessed in Count I, that Respondent Senator Kahele reimburse his campaign $3,692.50 within two weeks of receipt of order for a prohibited charitable donation in Count I, and that Count II be dismissed.  Motion seconded by Chair Snipes.  Motion carried unanimously.

Docket No. 15-36 – In Re the Matter of Gene Leslie, Laurie Aquino, and Friends of Bucky
Executive Director Izumi-Nitao reported that a complaint was filed alleging that Respondents failed to file the Final Primary Report.

At the 10/22/14 Commission meeting, the matter was continued per Respondents’ request until the November meeting to give Respondents’ time to resolve the matter.  To date, the report has not been filed.

Staff recommends that the Commission make a preliminary determination pursuant to HRS §11-405(a) that probable cause exists to believe a violation of the campaign spending law has been committed, assess a fine of $500, and order that the report be filed within 2 weeks of receipt of the Order.

Chair Snipes moved to make a preliminary determination that probable cause exists that a violation has been committed and to accept the fine and terms as stated in Docket No. 15-36.  Motion seconded by Vice Chair Gomes.  Motion carried unanimously.

Docket No. 15-34 – In Re the Matter of Maui Contractors Association Political Action Committee and Thomas Cook
Executive Director Izumi-Nitao reported that a complaint was filed alleging that Respondents failed to file the Final Primary Report.

At the 10/22/14 Commission meeting, a preliminary determination was made that a violation had been committed, a fine of $500 was assessed, and the Respondents were ordered to file the report within 2 weeks of receipt of the Order.

On 11/13/14, it was determined that Respondent was a $1,000 or less noncandidate committee, and therefore, pursuant to HRS §11-339, need only file the Final Election Period Report which is due on 12/4/14.  Staff recommended that the Commission reconsider its prior Order and dismiss the complaint.

Chair Snipes moved to reconsider and dismiss Docket No. 15-34.  Motion seconded by Commissioner Ching.  Motion carried unanimously.

Report from Executive Director:
Executive Director Izumi-Nitao reported on the following items:

Report on Compliance of Filing Timely Disclosure Reports
No new updates on prior reports.

Update on the Preliminary General Report (due 10/27/14)
-158 total candidate committees were required to file → 5 did not file (represents 3%)
-253 total noncandidate committees were required to file → 9 did not file (represents 4%)

Update on the Late Contributions Report (due 11/3/14)
-50 candidate committees submitted
-36 noncandidate committees submitted

Report on Final Election Period Report (not due until 12/4/14)
-280 candidate committees expected to file
-247 noncandidate committees expected to file

Report on Expenditures of Public Funds Report (not due until 12/4/14)
-17 candidate committees expected to file (to date)

Update of 2014 Election
Deferred until the December Meeting

Discussion and Approval of 2015 Proposed CSC Meeting Dates
The Commission meeting schedule for 2015 was presented for Commissioners’ consideration.  The meeting dates are scheduled for the second Wednesday of each month.  The 2015 schedule did not propose any problems with the Commissioners and will therefore be posted on the Commission’s website.

Chair Snipes moved to convene executive session to consult with attorney.  Motion seconded by Commissioner Ching.  Motion carried unanimously.

Public Session reconvened – 2:50 p.m.

Regarding matters discussed in executive session
-Docket No. 15-29 has been deferred until the December meeting.
-Docket No. 15-31 has been set for the December meeting, public session.

Chair Snipes moved to adjourn meeting.  Motion seconded by Commissioner Ching. Motion carried unanimously.  Meeting adjourned at 2:55 p.m.