Campaign Spending Commission

Campaign Spending Commission Meeting
Leiopapa A Kamehameha Building, Room 204
May 13, 2009
12:00 p.m.

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

Staff Present:
Barbara Wong, Tony Baldomero, Linda Takushi, Ellen Kojima

Call to Order:
Meeting convened at 12:00 p.m. with Chair Kuramoto presiding.

Chair Kuramoto requested a motion to amend the agenda to consider dockets before discussion on draft advisory opinion.

Commissioner Olbrich moved to amend the agenda to consider dockets before discussion on draft advisory opinion.  Motion seconded by Commissioner Robb.  Motion carried unanimously.

Consideration of Minutes:
Commissioner Olbrich moved to approve the minutes of the April 8, 2009 meeting.  Motion seconded by Commissioner Gabrio.  Motion carried unanimously.

New Business:
Docket No. 09-01   John Lester v. Don Couch
Mr. Don Couch was present to answer questions, if any, regarding Docket Nos. 09-01 and 09-02.

Executive Director Wong noted that the Treasurer for Don Couch, Tina Lia, provided all requested documents and information within a day or two, though usually the same day, including information not required to be recorded by law, names of contributors of $25 or less.

Commissioner Gabrio disclosed that one of the contributors in Docket No. 09-02 is a client of his law firm, but that he does not personally represent that person.

Mr. John Lester filed a complaint alleging that the Don Couch campaign received excess non-resident contributions during the First Preliminary Primary, Preliminary General, Final Election Period and the Late Contribution (General) report, in violation of HRS section 11-204.5.  Staff investigation relied on HRS Section 11-13 to determine residency for individuals and found that the 20% cap was exceeded only during the Final Election Period by $1,495.75.  The Late Contribution report is a subset of the time period covered by the Final Election Period report and  is not considered a “reporting period” report because a candidate could be fined twice for the same contribution.

Staff recommends dismissal of HRS section 11-204.5 allegations for the First Preliminary Primary, Preliminary General and the Late Contribution reports.  Staff further recommends that a fine be assessed for the Final Election Period report, but that a decision on the amount of the fine be deferred until the status of HB 128 is determined.  Wording in the bill clarifies prior law that the Commission has discretion in regards to fines.

Mr. Couch, noted for the record that to his knowledge he thought that both Mr. Goodfellow and Ms. Lloyd were residents of Maui. He said they were both actively involved in the community.

Commissioner Olbrich moved to dismiss allegations with regard to the First Preliminary Primary, Preliminary General and the Late Contribution reports, to make a preliminary determination of probable cause for the Final Election Period report, and that a determination on the fine amount for the Final Election Period report be deferred.  Motion seconded by Commissioner Gabrio.  Motion carried unanimously.

Docket No. 09-02   John Lester v. Don Couch, Michael Rosenfeld
Commissioner Gabrio noted for the record that a contributor to the Couch campaign is a client of his law firm, but that he does not personally represent that person.

Mr. John Lester filed a complaint alleging that Mr. Couch and Mr. Rosenfeld, a contributor to the Couch campaign, violated the law by:  “bundling of campaign contributions by using several entities, attempting to bypass the 20% limit on non-resident contributions, and exceeding the 20% limit on non-resident contribution during a reporting cycle.   The violations are alleged to have occurred during the Supplemental reporting period, November 5 – December 31, 2008.

Mr. Rosenfeld, Honua’ula Partners LLC and Maui R&T Partners, LLC each made a $1,000 contribution to the Couch campaign.  Signatures on the checks appear to be the same or similar and the 3 checks are drafted from 3 different bank accounts on the same date.  Mr. Rosenfeld’s attorney, made written statements that among other things, Rosenfeld did not finance, maintain, or control the two LLCs referenced above.

Staff recommends that the allegations of bundling and attempting to bypass the 20% limit for non-resident contributions against Mr. Couch and Mr. Rosenfeld be dismissed for lack of evidence.

Regarding excess non-resident contributions received by the Couch campaign during the Supplemental reporting period, HRS section 11-204.5 applies to the candidate and not the contributor.  Mr. Couch received $15,195 during the reporting period and 20% of $15,195 is $3,039.  He received $3,000 in non-resident contributions for the reporting period.  Staff recommends dismissal, as he did not exceed the 20% limit for non-resident contributions.

Commissioner Gabrio asked procedurally what the Commission’s practice has been regarding allowing out-of-state attorneys to represent clients by writing letters for them to the Commission.  Executive Director Wong said there is no clear answer to that, as other administrative agencies also have been trying to address the same issues.  The Commission staff will further study this issue and come up with recommendations.

Commissioner Robb moved to accept Executive Director Wong’s recommendation to dismiss all allegations in Docket No. 09-02.  Motion seconded by Commissioner Olbrich.  Motion carried unanimously.

Draft Advisory Opinion 09-01
Parties present were Karl Sandstrom, Esq. of Washington, D.C., William Kaneko, Esq. and Corianne Lau, Esq. representing the requestor for the Advisory Opinion, Congressman Neil Abercrombie.

William Kaneko, Esq. stated to the Commission that Karl Sandstrom, Esq. filed a Petition for Pro Hac Vice admission.  Executive Director Wong confirmed receipt of the Petition and advised that she contacted the Deputy Attorney General who advised that Pro Hac Vice admission was not required to speak at the Commission meeting in regards to an Advisory Opinion.

Chair Kuramoto disclosed that in 1990 or 1992 he was the treasurer for the Mike Liu campaign, who ran against Abercrombie and lost.

Executive Director Wong informed the Commission that a federal elected official requested an advisory opinion as to whether he could transfer his federal campaign funds to his state candidate committee for Governor, either as surplus funds or as his own funds.  The federal elected official filed an Organizational report on the Candidate Filing System on March 9, 2009, for the office of governor.

Executive Director Wong recommended that federal funds are neither the elected official’s own funds nor surplus funds and cannot be transferred to the state committee.  The federal committee could contribute up to $6,000 to the Abercrombie for Governor state candidate committee if the federal committee registered a noncandidate committee.

Further, that the Hawaii Constitution specifies that contribution limitations within Hawaii are determined by State law.  Also, this Commission has previously opined in Advisory Opinion 05-02 that a federal committee must comply with state registration, reporting and contribution limits as a noncandidate committee.  Additionally, Federal law does not preempt state law.  Federal law specifies that federal contributions may be used for donations to state candidates subject to the provisions of state laws.

Moreover, as defined in section 11-191, a federal elected official’s excess funds are not surplus funds and was not raised for an election to a state office.  Also, it is not the elected official’s own funds as his federal campaign funds derived from contributions and are subject to a federal restriction that they can’t be used for personal use.

Karl Sandstrom, Esq. contended that there is no clear public policy or constitutional justification to treat funds differently from an independently wealthy candidate who contributes to his own campaign and a federal elected official who contributes his federal campaign funds to his state campaign.  He further contended that the only justification to disallow transfer of funds is to prevent corruption or the appearance of corruption.

Executive Director Wong advocated the Commission’s responsibility to administer the campaign finance laws within the state.  It is not within the Commission jurisdiction to express opinions on constitutional issues.  Further, the federal elected official has chosen to run for state office and must comply with state laws applicable to state candidates.  The elected official could return contributions to the contributors and request that they make a contribution to his state campaign.

Karl Sandstrom, Esq. argued that under federal law the funds are Congressman Abercrombie’s own funds, which only he controls and can be used for any lawful purpose other than personal use.  The use of federal funds to run for a state office is not considered personal use under federal law.  Further, he questioned the constitutional justification for treating Congressman Abercrombie any differently from other state candidates who can use funds from previous state or county races for their next campaign.  The Commission would need a constitutional justification to say that the funds cannot be transferred.

Commissioner Gabrio asked how Congressman Abercrombie would protect against the out-of-state contribution limits when federal contributions have already been made from out-of-state contributors and how can the same funds be used to run for a state office.  Mr. Sandstrom said that funds have been segregated into three accounts (in-state, out-of-state, and federal PACs).  In regards to out-of state contributions, only those that don’t exceed the limit would be transferred.  Congressman Abercrombie’s federal campaign funds are now his own funds and he has the discretion as to how it is used.

Mr. Sandstrom further argued that the Commission has two choices, to make an interpretation that raises constitutional issues or to make an interpretation that does not raise constitutional issues.  That it is the Commission responsibility to choose the one that does not raise constitutional issues.

Discussion regarding the last section of the draft advisory opinion and Congressman Abercrombie’s response to the draft advisory opinion.  Commissioner Olbrich noted that the opinion is an interpretation of the law and that it is not intended to malign anyone.  Executive Director Wong noted that the Advisory Opinion will apply to all federal elected officials and other states’ candidates who want to transfer funds to a Hawaii candidate committee, and thus policy arguments are not directed at any one person, but for all that the opinion will apply to.

Discussion ensued on who becomes the owner of excess federal funds and the difference between federal and state laws on the use of excess or surplus funds.  There is no Hawaii legislative history defining “own funds” as used in the definition of “contribution.”

Mr. Sandstrom referenced Title 2 section 438a regarding permissible uses, and the prohibited use of excess federal campaign funds for personal use.

Mr. Sandstrom, reiterated that contributors have no influence over Congressman Abercrombie because Abercrombie can do what he wants with the funds, and that the contributors would be surprised to see their names listed as contributors to a state race when they made contributions to a federal race.

Commissioner Gabrio suggested the matter be deferred until the next meeting.  Also, he suggested that briefings be submitted to provide further guidance.

Commissioner Olbrich would like to get an attorney general opinion, as well as guidelines from the Federal Election Commission on what a State can or cannot do in restricting the use of federal campaign funds for a state race.

Corianne Lau, local counsel for Congressman Abercrombie, noted for the record that a Pro Hac  Vice application has been submitted in an abundance of caution in case Mr. Sandstrom’s appearance is considered a practice of law.  She asked for an affirmation from the Commission that there is no problem with his appearance before the Commission.  Commissioner Robb, affirmed that Mr. Sandstrom’s appearance has been accepted as the spokesperson for the person he represents, but advised that the Commission does not determine what is the practice of law.

Commissioner Olbrich asked that the next meeting date be changed as he will be going off-island on June 10, 2009 for a month.  The Executive Director will work on setting another meeting date for June.

Legislative Update – H.B. 1128, HD 2, SD 1, CD2
Deferred until the next meeting.

Next Meeting:
Date to be determined.

Commissioner Gabrio moved to adjourn the meeting.  Motion seconded by Commissioner Robb.  Motion carried unanimously. 

Meeting adjourned at 2:55 p.m.