Campaign Spending Commission

Campaign Spending Commission
Leiopapa A Kamehameha Building, Room 204
November 8, 2017
9:00 a.m.

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

Commissioners Absent
None

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

Guest
Cecelia Chang, Director of the Center for Alternative Dispute Resolution, State of Hawaii

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

Old Business
*Consideration, Discussion, and Decision Making of Strategic Plan
Ms. Cecelia Chang, Director of the Center for Alternative Dispute Resolution (“CADR”), continued the facilitated discussion with the Commission to review and modify the current strategic plan.

Director Chang reminded everyone about the ground rules as well as voting by majority or consensus.  She then resumed discussion on the strategic plan that required discussion and approval:

Goal – Upgrade the training for and ability of the committees to comply with campaign finance laws.  After discussion, the Commission decided to revise this goal and its accompanying objectives (5-0) to read:

“To provide training, education, and access to committees for purposes of compliance with, and increasing awareness of, campaign finance laws and rules.

• Offer and provide training on campaign finance laws and rules.

• Provide educational and informational materials on how to comply with campaign finance laws and rules.

• Evaluate the effectiveness of and explore (and implement as needed) new methods of training, education, and communication of information.

• Direct the committees to the Commission’s website and continue to improve web-based information as well as other social media applications.

• Encourage the committees to contact the Commission and/or visit the Commission’s office to assist in compliance with campaign finance laws and rules.

• Issue advisory opinions as requested.”

Goal – To increase public education, awareness, and access.  After discussion, the Commission decided to revise this goal and its accompanying objectives (5-0) to read:

“To increase education, awareness, and access for the public.

• Inform and educate the public about campaign finance laws and rules.

• Explore and implement improvements to the Commission’s online presence and other media applications to provide the public with campaign finance committee data and information.”

Goal – Increase and stabilize the Commission’s institutional capacity to carry out its mission.  After discussion, the Commission decided to revise this goal and its accompanying objectives (5-0) to read:

“To ensure organizational and institutional sustainability.

• Monitor funding and develop proposals to stabilize funding as needed.

• Provide Commissioner and staff development.

• Develop and implement plans for the continuity of operations.

• Monitor compliance with the strategic plan and annually report to the Commission, committees, and the public.”

Discussion resumed concerning the term of years for the strategic plan.  The Commission decided that the revised plan would become effective January 1, 2018 and that there would be no end date as the plan was deemed to be a living document which could be revisited at any time by the Commission.  The Commission further decided that the goals would continue to not be enumerated or assigned a value as well as the font and icons associated with the goals would be left to the discretion of Commission staff.

Executive Director Izumi-Nitao stated that staff would clean up the plan and send it to everyone for final review before it is posted on the Commission’s website.

Consideration and Approval of Minutes of Meeting on 10/11/17
Chair Luke asked for comments or changes.  There were none.  Chair Luke called for a motion to approve the minutes.

Vice Chair Goodenow moved to approve the minutes of the 10/11/17 meeting.  Motion seconded by Commissioner Yoshihara.  Motion carried (4-0).  Commissioner Ching abstained for not attending the 10/11/17 meeting.

New Business
*Docket No. 18-05 – In Re the Matter of Byron Young and Friends of Byron Young
Executive Director Izumi-Nitao reported that a complaint had been filed against candidate and treasurer Byron Young as well as the candidate committee called Friends of Byron Young for the late filing of the Supplemental Report in violation of HRS §§11-333 and 11-334(b).

HRS §§11-333(a) and 11-334(a) require that the candidate and treasurer timely file the Supplemental Report.  Pursuant to HRS §11-331, Respondents’ Supplemental Report covering the period 1/1/17 to 6/30/17 was due on 7/31/17.  Respondents did not file this report by the deadline.  On 8/1/17, Commission staff sent Respondents a letter via first class mail informing them that the Supplemental Report was not filed and that a fine would be imposed.  This letter was addressed to Respondents at the addresses listed on their Organizational Report.  On 8/4/17, Commission staff called Respondent Young to remind him to file the Supplemental Report.  Respondent Young informed Commission staff that he thought he was no longer required to file reports since he was not going to run for office again.  Commission staff informed Respondent Young that he is required to file reports with the Commission until he terminated his committee registration.  Respondent Young responded that he wanted to terminate his registration and was then instructed by Commission staff on how to terminate.  Respondent Young told Commission staff that he was in Texas and was not going to make filing the Supplemental Report a priority.

On 8/16/17, Respondents had not filed the report so Commission staff called him.  Respondent Young informed Commission staff that he had closed his committee’s bank account.  He further mentioned that he was in Houston receiving medical treatment.  Commission staff received Respondent Young’s permission to have his wife Jennifer Young who was with him help file the report.  In explaining to Jennifer Young about filing the report, Commission staff noted entries which resulted in an incorrect surplus of campaign funds which were then corrected and resulted in a zero surplus/deficit report.  Commission staff further explained to Jennifer Young about the termination process as well as the possibility of a conciliation agreement.  On 8/16/17, with Commission staff’s assistance, Respondents electronically filed the Supplemental Report.

On 8/16/17, Commission staff sent Respondents a notice of fine for late report letter via first class mail notifying them that a fine of $200 was assessed against them for the late filing of the report as well as Proposed Conciliation Agreement No. 18-01 which reduced the $200 fine to $66.67 for their consideration and notified them that the matter would be set on the 9/6/17 Commission Agenda.  On 9/6/17, at a duly noticed Commission meeting, the Commission approved Proposed Conciliation Agreement No. 18-01.

On 9/6/17, Commission staff sent Respondents Conciliation Agreement No. 18-01 and Order which had been approved.  The Order stated that Respondents’ failure to pay the $66.67 fine would be considered to be a breach of the Conciliation Agreement and Respondents would be assessed the original amount of the fine (i.e., $200) pursuant to appropriate proceedings.  Respondents did not pay the reduced fine nor sign Conciliation Agreement No. 18-01.

On 9/28/17, Commission staff called Respondent Young about whether he would be complying with Conciliation Agreement No. 18-01 and, if not, then the fine would revert back to $200.  Respondent Young said that he had not checked his mail, but that all his mail had been forwarded to a correct address.  He said that he would contact the Commission if he did not receive the Conciliation Agreement.  Commission staff told Respondent Young that he needed to amend his Organizational Report to account for any new address.  Notably, Commission staff never had its letters to Respondents returned as undeliverable mail.

On 10/16/17, 10/19/17, and 10/20/17, Commission staff called Respondent Young to inquire about the Conciliation Agreement and payment and left him a voicemail with a reminder that if he did not comply with the terms of the Conciliation Agreement, a complaint would be filed and the original fine amount would be sought.

On 10/20/17, Commission staff emailed Respondent Young and included Conciliation Agreement No. 18-01 as an attachment with the additional option of offering eSign.  A reminder that a complaint would ensue with the original fine amount of $200 was included in the email message.  Respondents did not voluntarily pay the late report fine nor sign Conciliation Agreement No. 18-01.

On 10/27/17, Commission staff sent Respondents a copy of the Complaint and set the matter on the 11/8/17 Campaign Spending Commission Agenda.

Executive Director Izumi-Nitao recommended that pursuant to HRS §11-405(a), the Commission issue a preliminary determination of probable cause that the Hawaii campaign finance law had been violated, assess an administrative fine in the amount of $200 against Respondents, 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 administrative penalties be deposited in the general fund pursuant to HRS §11-340(g).

Vice Chair 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 Yoshihara.

Commissioner Yoshihara asked whether there were mitigating circumstances concerning Respondent Young’s health condition.  Administrative Assistant Richey stated that 9/28/17 was the last time that Respondents answered their phone.  Further, she mentioned that she gave them extra time to fulfill the terms of the Conciliation Agreement due to the storm that was in Houston.  Administrative Assistant Richey noted that neither Respondent nor his wife contacted the Commission staff.  Respondent’s wife Jennifer Young was not listed on the Organizational Report and could not be contacted directly.

Executive Director reported that this was the first time that the Commission staff offered an eSign option for a Conciliation Agreement.  Additionally, Commission staff went above and beyond to try to get the Respondents to comply.  Commissioner Yoshihara acknowledged that it was the Respondents’ responsibility to let the Commission staff know the payment status or the status of Respondents’ circumstances.

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

*Consideration, Discussion, and Approval of Commission Legislation for 2018
General Counsel Kam presented proposed Commission legislation for the 2018 Legislative Session for consideration, discussion, and approval.  He stated that he was recommending to resubmit 5 and revise 2 of the 7 proposals which were introduced in the last legislative session.

CSC-01 (18) (H.B. 283, H.D. 1 / S.B. 440) – Amends HRS §11-410 by raising the amount of fine that can be assessed against a Super PAC (that receives at least one contribution of more than $10,000 from one person or has made expenditures of more than $10,000 in aggregate, in an election period) from $1,000 to $5,000 and permits 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.

General Counsel Kam proposed a new version of the bill that retains the same amendments to the fines, but deletes the proviso in HRS §11-410(a) that deems as violators “individual directors, officers, or agent of the corporation, organization, association, or labor union, who have knowingly authorized, ordered, or done any of the acts constituting the violation.”  Instead, the new proposal amends HRS §11-410(c) to allow the Commission to order that a fine assessed against a noncandidate committee be paid from the personal funds of an officer of the noncandidate committee.  He explained that this was the same treatment given to candidate committees.  Further, General Counsel Kam stated that the new bill deletes the provision authorizing the Commission to assess the cost of investigative services and bank fees for subpoenaed records against violators.  He explained that staff did not believe this was necessary because the trust fund was no longer required to pay for the administrative costs of the office.

CSC-02 (18) (H.B. 284 / S.B. 441) – 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 makes more sense and makes the statement of information timelier to the public.  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-03 (18) (H.B. 285 / S.B. 442) – Amends HRS §11-412(b) by providing that the 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-04 (18) (H.B. 286 / S.B. 443) – Amends HRS §11-322(a) by deleting the requirement that candidates provide the names and addresses of each contributor who contributed, in the aggregate, more than $100 since the last election and the date and amount of the contribution in the organizational report.  The Organizational Report format is not designed to accept contribution information and contributions are already reported in periodic disclosure reports.

CSC-05 (18) (H.B. 287 / S.B. 444) – Amends HRS §11-323(a) by deleting the requirement that noncandidate committees provide the names and addresses of each contributor who contributed, in the aggregate, more than $100 since the last election and the date and amount of the contribution and the requirement for SuperPACs to provide information about their top contributors in the organizational report.  The Organizational Report format is not designed to accept contribution information and contributions are already reported in periodic disclosure reports.  Also, SuperPACs must disclose information about their top contributors in their periodic disclosure report as well as identify them in disclaimers for advertisements and in statements of information for electioneering communications.

CSC-06 (18) (H.B. 288 / S.B. 445) – Amends HRS §11-324(e) by requiring treasurers of candidate and noncandidate committees to keep information about the name, address, employer, and occupation of all contributors.  Presently, the statute only requires treasurers of candidate committees to keep information on the name and address of contributors of more than $25, and only treasurers of noncandidate committees to keep information on the employer and occupation of their contributors.

General Counsel Kam is proposing a new version that deletes the requirement that treasurers of candidate committees keep information about the employer and occupation of the contributors from the start because these committees must report the employer and occupation of contributors of more than $1,000, and this has not been a problem.  Treasurers of noncandidate committees, however, will continue to keep information about the employer and occupation of contributors because their reporting threshold is lower (i.e., $100).

CSC-07 (18) (H.B. 289, H.D. 1 / S.B. 446) – Amends HRS §11-339 by requiring candidates who do not intend to spend or receive more than $1,000, to notify the Commission of this intention by June 30th of an election year, and noncandidate committees who do not intend to spend or receive more than $1,000, to notify the Commission of this intention by the 5th day before the due date of the Preliminary Primary Report.  This way, Commission staff will know not to pursue these committees for late or unfiled reports, short of the Final Election Period Report.  Presently, staff spends a lot of time trying to get committees to file reports, including the filing of complaints, only to be told after weeks/months later that they will not exceed $1,000 in spending.  If staff knows that these committees do not intend to spend more than $1,000, staff will not have to chase after them until the Final Election Period Report.

Vice Chair Goodenow moved to approve the 2018 Commission legislation.  Motion seconded by Commissioner Ching.  Motion carried (5-0).

Commissioner Ching commented on whether a grace period should be implemented for late reports.  General Counsel Kam replied that HRS §11-340 does not permit this consideration.  Commissioner Yoshihara stated that if a grace period is allowed, then committees will file up to that grace period making time deadlines useless.  Associate Director Baldomero stated that he saw comments in the annual online survey asking for a grace period.  Executive Director Izumi-Nitao stated that the 2016 election was the first election ever that candidates running for office filed their reports and paid their fines.  She opined that this compliance may be the result of the years of enforcement actions taken by the Commission.

*Report on 2017 Annual Online Survey
Associate Director Baldomero reported on the results of the Commission’s 2017 Annual Online Survey results.  He stated that the purpose of the survey is to help evaluate the effectiveness of Commission operations and communications for fiscal year 2017 (i.e., July 1, 2016 through June 30, 2017) as well as provide the Commission with any feedback in areas that we administer and regulate for improvement in fiscal year 2018 and beyond.  He made the following remarks:

• This was the 6th year of the survey
• The survey was launched on 9/11/17 and closed on 10/31/17 (i.e., 51 total days versus 38 days which is the average over the last 6 years)
• Total outreach via Eblast was 822 (also posted on CSC website, Facebook, and Twitter)
• Eblast list was comprised of 319 candidate committees, 256 noncandidate committees, and 247 public subscribers
• There were 125 total responses (highest number of responses was in 2016 with 140) with an 84% survey completion rate
• 8 minutes was the typical time spent completing the survey (CSC estimate was 5-10 minutes)
• Reminders sent via Eblast, Facebook, and Twitter on 9/25/17, 10/9/17, and 10/23/17
• Survey comprised of 6 sections and 38 survey questions (29 multiple choice, 9 open-ended)

Associate Director Baldomero went through each of the 6 sections of the survey:

1 – Background Information Highlights (5 Questions)

• Responders were mostly treasurers from candidate committees and noncandidate committees as well as candidates on the island of Oahu with a wide-range of experience with a majority of them either in the 1-3 years or more than 10 years range
• 82% filed CSC reports electronically, 65% have been involved in campaign activities, and 56% have made a contribution or loan to a candidate committee so this was an experienced group

2 – Communication/Access Highlights (5 Questions)

• 91% responded that the CSC website was the #1 source for obtaining information followed by phone calls or office visits (77%), Eblasts (60%) and Guidebooks/Manuals (58%)
• eSign was mostly used to file the Electronic Filing Form followed by Fundraiser Notices
• Social media engagement was still lacking, but 88% were email subscribers who received Eblasts (i.e., so most of the responders came from Eblast outreach versus the CSC website, Facebook, and Twitter posts)

3 – Education/Training Highlights (11 Questions)

• 58% never attended CSC training classes so perhaps this was not a favorable method or classes were not at a convenient time/location
• For those who attended training, most of them said that it had been more than 3 years since their last class
• About 50% have viewed CSC guidebooks and manuals
• Electronically filing disclosure reports followed by viewing candidate committee disclosure reports and reporting schedules drove people to the CSC website
• Of the 64% who said that they use the searchable database, 95% said it was a helpful tool that was mainly used to search contributor names and how much money they gave to candidates
• The candidate and noncandidate committee data visualization apps were not as popular as the searchable database with 46% who said they had used it

4 – Compliance/Enforcement Highlights (5 Questions) 

• Majority were a compliant group having always filed their reports on time (58%), never entered into a Conciliation Agreement (74%), and never had a complaint filed against them (79%)

5 – Public Funding Highlights (5 Questions)

• Only a small number (16%) have qualified for and received public funding with 23% of those receiving the maximum amount
• 69% supported public funding

6 – Other Highlights (7 Questions)

• 49% have been checking off the $3 tax check-off, 80% knew that the $3 check-off did not affect their tax liability, and 76% responded that they would help us and remember to check the $3 check-off on their next state income tax form
• 65% said they would support a general fund appropriation to see public funding continue
• 55% responded that Super PACs were not a concern

Associate Director Baldomero asked if there were any questions.  There were none.

*Presentation and Discussion of Online Payments of Administrative Fines
Associate Director Baldomero presented an alternative approach for committees to make payments for campaign finance violations through PayPal to commence 1/1/18.

Commissioner Yoshihara asked why the Commission staff wanted to use PayPal versus any other entity to accept credit card payments.  Associate Director Baldomero replied that staff chose PayPal because it was the most recognizable and user friendly application for the committees and staff.  Further, Associate Director Baldomero stated that the federal government and the State of Hawaii Department of Health use PayPal.  He noted that other state agencies use Hawaii Information Consortium (‘HIC”) which is a customized system that would take time to build at a cost to the Commission.

Associate Director Baldomero discussed the steps that committees would need to follow to make an online payment:

1. The Commission would send the committee a letter containing the website link to make its online payment.  The letter would explain that the committee has the option to pay its fine by check, money order, cash, or alternatively, it could pay online via PayPal.
2. If the committee chose to make its payment online, it would go to the website, enter the committee name, and click on the Pay Now button.  The committee name would need to be entered correctly so that the Commission staff knows where to attribute their payment.
3. The Pay Now button would send them to the PayPal website.  On this screen, the committee would enter the payment amount and click Continue.
4. The committee could pay using a PayPal or a guest account.  If the committee paid using a PayPal account, it could use a credit or debit card, Automated Clearing House (“ACH”), or its PayPal balance.  If, on the other hand, the committee paid as a guest, it could only use a credit or debit card.  Once the committee has chosen which method it would use to pay (i.e., PayPal account or guest account), then it would enter the appropriate information (i.e., debit/credit card information, ACH information, etc.).  Finally, the committee would enter its email address and click Pay Now.
5. The committee would receive a PayPal confirmation at the email address they provided and Commission staff would receive an email informing them that a payment was made.  The Commission staff would then attribute the payment accordingly.

Associate Director Baldomero reported that there would be no fee for the committees to use this alternative option for paying administrative fines.  However, the Commission would absorb the fee of 2.9% of the total payment plus $0.30 for each transaction.  Further, he stated his belief that if the Commission were to pass off the fee to the user, it would kill the program.  Vice Chair Goodenow asked if there would be any legal issues for the Commission accepting the fee.  Associate Director Baldomero replied that currently the Commission pays for fees on other services (e.g., Xerox machine and postage machine) and that the PayPal fee would just be another administrative fee paid for by the Commission.

Vice Chair Goodenow asked if the payments received would be only for general fund payments. Associate Director Baldomero replied in the negative.  He explained that the PayPal option could also be used for trust fund payments.

Chair Luke asked what the cost would be if 100% of payments received were done through PayPal.  Associate Director Baldomero replied that he reviewed the payments made over nine years and on average the fee would be $2,000 assuming all committees opted to make their payment online.

Associate Director Baldomero reported that he spoke with the Department of Budget and Finance (“B&F”) as well as the State Procurement Office to set up this online payment method.  Discussion ensued about other agencies that used online payment methods.  Executive Director Izumi-Nitao reported that the agencies that used the HIC payment method have a customized system which costs more.  Associate Director Baldomero added that HIC is an approved state vendor.  Because PayPal is not an approved state vendor, we must keep the fees under $2,500.

Chair Luke expressed his concern about the possibility that the fees could exceed $2,500 in the 2018 election.  Associate Director Baldomero explained that he wanted to control the use of PayPal via the fine letters sent to the committees instead of putting a PayPal button on the Commission’s website.  Executive Director Izumi-Nitao added that if the fee gets close to $2,500, the Commission staff would revise the fine letters and stop accepting online payments.  She further mentioned that the estimated fees presented by Associate Director Baldomero is based on  the assumption that all committees would be paying their fines online.  She commented that in reality it was not expected that 100% of committees would be using this online payment feature.  Executive Director Izumi-Nitao told the Commissioners that she believes it is worth piloting this alternative payment method to attempt to decrease the number of complaints and achieve a higher level of compliance.

Associate Director Baldomero explained the steps that Commission staff would take to attribute the online payment:

1. Once the committee makes the online payment, the money would be transferred from the Commission’s PayPal account into a First Hawaiian Bank (“FHB”) sub-account which was set up by B&F so that the internet was not directly tied to the Hawaii Election Campaign Fund (“HECF”) account.  B&F would then automatically swipe the money from the FHB account on a daily basis into the state’s general fund.
2. Once the payment was made, the email sent to the committees would be their official receipt; thereby, replacing the extra step that staff typically has to take which is to write out a receipt for the payment and send it to the committee in the mail.
3. Commission staff would generate a Treasury Deposit Receipt (“TDR”) to log the payments received and attribute them to the general fund or HECF account followed by a Journal Voucher (“JV”) to reflect the PayPal transaction fee.  Currently, Commission staff does the TDRs, but the JVs would be an additional step.

Vice Chair Goodenow moved to approve the alternative payment method.  Commissioner Shoda seconded.  Motion carried (5-0).

Report from Executive Director
Report on Compliance of Filing Timely Disclosure Reports
Executive Director Izumi-Nitao reported that there are 3 candidate committees and 4 noncandidate committees who have not filed the Supplemental Report which was due on 7/31/17.  She reported that these committees have been previously referred to the Attorney General – Civil Recoveries Division (“AG-CRD”) for collections.

As for the Commission orders that were previously referred to AG-CRD, Executive Director Izumi-Nitao had no new update (i.e., 4 of the 14 referrals have not been resolved — Henry Kahula, Creighton Higa, Raymond Banda, and Junior Mataafa).

2017 COGEL Conference Update
Executive Director Izumi-Nitao reported that she will be attending along with Associate Director Baldomero and Chair Luke the December 3-6, 2017 COGEL Conference in Toronto, Canada.  She stated that they will report their observations and findings concerning the conference to the Commission at the 12/13/17 meeting.  Lastly, she commented that 5 members from the Hawaii State Ethics Commission including Executive Director Dan Gluck as well as Executive Director Jan Yamane from the Honolulu Ethics Commission will also be traveling to the conference.

Chair Luke asked for a motion to convene Executive Session to consider and approve Executive Session minutes from the Commission meeting on 10/11/17.

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

Public Session reconvened at 11:45 a.m.

Vice Chair Goodenow moved to adjourn the meeting.  Motion seconded by Commissioner Yoshihara.  Motion carried (5-0).  Meeting adjourned at 11:45 a.m.

Next Meeting:
Scheduled for Wednesday, December 13, 2017.