Campaign Spending Commission

Campaign Spending Commission Meeting
Leiopapa A Kamehameha Building, Room 204
October 8, 2008
10:00 a.m.

Members Present:
Paul Kuramoto, Gino Gabrio, Dean Robb, Michael Weaver
Steven Olbrich – Excused

Staff Present:
Barbara Wong, Tony Baldomero, Grant Tanimoto, Ellen Kojima

Call to Order:
Meeting convened at 10:05 a.m. with Chairperson Kuramoto presiding.

Chair Kuramoto asked that an agenda item, Election of New Officers, be added to Old Business.  A Commission member moved to amend the agenda to add the Election of a New Chair and Vice Chair.  Motion seconded.  Motion carried unanimously.

Consideration of Minutes:
Commissioner Gabrio moved to approve the minutes of August 13, 2008.  Motion seconded by Commissioner Weaver.  Motion carried unanimously.

Old Business:
Noted for the record, the September 10^th meeting was cancelled due to no items on the agenda.

Election of New Chair and Vice Chair -Deferred until all members are present.

New Business:
Dock 08-03 Niel O’Brien v. William Kenoi
Mr. Niel O’Brien and Mr. Brian Kang, Esq., representing William Kenoi present.

Chair Kuramoto noted for the record that a member of Hui Kaulike was a client of his firm in 2004.  However, it was a one-time engagement that would not influence his decisions.

Executive Director Wong presented the background of the complaint, the investigation, and then made a recommendation. 

Mr. O’Brien filed a complaint against William Kenoi alleging failure to disclose non-monetary contributions, use of campaign funds for the lease of real property, receipt of anonymous contributions, and excess contributions from members of Hui Kaulike LCC.

Mr. Kenoi initially failed to disclose the $750 valued monthly use of space for his campaign headquarters as “other receipts” in the Disclosure reports for the July 1 – December 31, 2007 and January 1 – June 30, 2008 reporting periods.  Reports were amended on September 1, 2008 to reflect “other receipts” for the monthly use of the campaign headquarters space.

Mr. Kenoi is the managing member of the three member limited liability company Hui Kaulike, of which he has 1/3 interest.  Hui Kaulike owns the lease interest in the building.  Kenoi, along with Hui Kaulike members Bradley Chong and Todd Eddins agreed they would each have use of approximately 1/3 of the space.  His 1/3 third interest provides for use of about 1,500 square feet for his law practice.  Mr. Kenoi uses 500 square feet of his 1,500 square feet for his campaign headquarters.

Hawaii Administrative Rule 2-14.1-16(e) says that no contribution is to be expended for the lease of real property where the candidate maintains a legal interest, but the rule does not apply here, as no campaign funds were paid to Mr. Kenoi for rental or lease of his campaign headquarters.

Executive Director Wong recommended dismissal of the complaint, and to fine Mr. Kenoi $50 for not initially reporting the “other receipts” of his office space for his campaign headquarters.

Mr. Brian Kang, Esq. representing William Kenoi, stated that there is an agreement between the members of Hui Kaulike LLC to divide the space, and that the contribution should be attributed to Mr. Kenoi as his headquarters is within the space that Mr. Kenoi is entitled to use pursuant to their agreement.

Mr. O’Brien stated that Mr. Kenoi does not have a law office in the space. The law says that LLCs are separate entities from members and that advisory opinion 97-03, which was amended, says that partners and partnerships can make donations separate from the LLC.  Also, that oral agreements between members are not allowable for an LLC. 

Chair Kuramoto said he would like to see that the matter further investigated, regarding the oral agreement and whether the contribution should be attributed to Hui Kaulike.

There was discussion on how an LLC operates and who the contribution should be attributed to.  Mr. O’Brien further stated that the LLC is the legal entity that owns the lease so the LLC made the contribution and Mr. Kenoi had the advantage over other candidates, in that he did not have to pay for space whereas other candidates would have to pay for space.  Mr. Kang, stated whether use of space is unfair to others, is not the commission’s concern.

Commissioner Gabrio, technical argument aside, questions how the public has been harmed, and Commissioner Robb, noted that Mr. Kenoi is not using free space, that he is paying 1/3 of the lease cost and using his space.

Commissioner Gabrio moved to dismiss the complaint and assess a fine of $50 for the unreported other receipt, motion seconded by Commissioner Weaver.  Motion carried (aye-Gabrio, Robb, Weaver / no-Kuramoto)

Draft Concliation Agreement 08-02 Jay Kimura, Friends of Jay Kimura
Proposed conciliation agreement is to settle a self-reported community donation that the committee made during a prohibited period, in violation of section 11-200(b)(3), HRS.  Staff recommends a fine of $150.

Commissioner Gabrio moved to approve conciliation agreement as drafted.  Motion seconded by Commissioner Robb.  Motion carried unanimously.

Communication to Commission:
Import System Launch
The Import System for the Noncandidate Committee Filing System (NCFS) was launched in September, 2008.  It permits data that is entered in accounting spreadsheets to be imported into the NCFS without re-entering all the data.  It was developed at the request of the Hawaii Republican Party and five mainland vendors that specialize in campaign finance reporting.  The system allows noncandidate committees to import contributions received and expenditures made from their existing databases.

Executive Director Wong also noted that two reminders regarding filing of report deadlines were sent to candidates and noncandidate committees.  The two reminders noted the report due date and some initial steps to remember before filing the report, and the second reminder also noted that there would be no further reminders and to check the website for the remainder of the reporting schedules.

Campaign Disclosure Project
This is a survey that has been done annually since 2003.  This year Hawaii is ranked 7^th in the nation with a grade of B.  This survey is based on four categories: campaign disclosure law; electronic filing; disclosure accessibility; and user friendliness.

Status of Legal Challenges to Public Financing Equalizing Funds in Arizona
The Martin v. Brewer case is still ongoing.  Martin, et al. argue that Arizona’s provision of equalizing funds, when nonparticipating candidates spend more than the expenditure  limit and when independent expenditures are made for the public financed candidate’s opponent, is unconstitutional.  The U. S. District Court said it was constitutional and it was appealed to the 9^thCircuit, which said there were constitutional issues and sent it back to the U S District Court of Arizona.

In McComish v. Brewer, the U.S. District Court ruled that equalizing funds in Arizona’s clean elections program are unconstitutional however, it was too late in the primary election to stop the provision of the funds.  This case was brought after the U.S. Supreme Court’s decision in Davis v. F.E.C..

Next Meeting:
Scheduled for Wednesday, November 12, 2008

Commissioner Weaver moved to recess the public session and convene an executive session to consult with attorney regarding pending investigations and late disclosure reports.  Motion seconded by Commissioner Robb.  Motion carried unanimously.

Public session reconvened – 11:52 a.m.

Commissioner Gabrio moved to adjourn meeting.  Motion seconded by Commissioner Robb.  Motion carried unanimously.  Meeting adjourned at 11:55 a.m.