Campaign Spending Commission

Campaign Spending Commission
Leiopapa A Kamehameha Building, Room 204
December 17, 2014
9:00 a.m.

Commissioners Present:
William Snipes, Eldon Ching, Gregory Shoda, Adrienne Yoshihara
Tina Gomes – arrived at 10:15 a.m.

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

Call to Order:
Meeting convened at 9:10 a.m. with Chair Snipes presiding.

Consideration and Approval of Minutes of 11/19/2014 Meeting:
Commissioner Shoda moved to approve the minutes of November 19, 2014.  Motion seconded by Commissioner Ching.  Motion carried (3-0) with Commissioner Yoshihara abstaining.

New Business
Proposed Conciliation Agreement 15-40 – In Re the Matter of Hawaii Operating Engineers Industry Stabilization Fund
Executive Director reported that the proposed conciliation agreement is a result of an investigation initiated pursuant to HRS §11-314(7) to determine whether there has been a violation of the campaign spending laws.

Respondent has 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 the settlement amount of $150 as stated in the conciliation agreement.

Chair Snipes moved to make a preliminary determination that probable cause exists that a violation had been committed and to accept the settlement terms and amount as stated in Conciliation Agreement 15-40.  Motion seconded by Commissioner Yoshihara.  Motion carried (4-0).

Draft Advisory Opinion No. 15-01 – GCA of Hawaii Inquiry
General Counsel Kam reported that this request is a follow–up to Commission Advisory Opinion No. 13-02.  The GCA is forming a noncandidate committee and is seeking advice on whether five sources of non-dues revenue could be used to fund a noncandidate committee.

Advisory Opinion No. 13-02 advised that any direct funds from government contractors, who are barred from giving contributions, cannot be used to fund a noncandidate committee.

Draft Advisory Opinion No. 15-01 addresses each source of non-dues revenue and finds that the sources are permissible because the connection to government contractors is indirect.

Chair Snipes moved to approve draft Advisory Opinion No. 15-01 as circulated by General Counsel Kam.  Motion seconded by Commissioner Yoshihara.  Motion carried (4-0).

Repeal of Advisory Opinion No. 05-02
Advisory Opinion No. 05-02 provides that federal PACs that contribute more than $1,000 in an election period must register and report with the Commission.  They are subject to the contribution limit of $1,000 per person per election and must report its contributions under the federal contributor’s names and not the PAC.

During the past election period, staff receive inquiries from federal PACs asking whether they needed to report individual contributions to their PAC for any contributions the PAC may make to candidates in Hawaii.  In discussions with the Attorney General’s Office, staff was informed that the PAC would only need to report the true contributor to the candidate, which would be the PAC.  Thus, the Attorney General’s Office recommended that the Commission repeal Advisory Opinion No. 05-02.

When asked by Commissioner Yoshihara if the Attorney General’s opinion was in writing, Deputy Attorney General Kunimoto stated that there is no written opinion and that its opinion is based on the status of the law.

Chair Snipes moved to repeal Advisory Opinion No. 05-02.  Motion seconded by Commissioner Yoshihara.  Motion carried (4-0).

Discussion regarding the federal law requiring Super PACs to disclose their donors.  General Counsel Kam noted that it depends on the type of organization.  Organizations that are primarily engaged in political activities are required to register and report with the IRS.  He stated that the Commission does not regulate entities created under federal law, but we do regulate federal entities that give to state and local candidates or noncandidate committees.

Old Business:
Docket No. 15-47 taken out of order –

Docket No. 15-47 – In Re the Matter of Alex Sonson, Jimmy Van Bokhoven, and Friends of Sonson
Executive Director Izumi-Nitao reported that a complaint was filed alleging Respondents’ failure to timely file the Final Primary Report.  At the 10/22/14 Commission meeting, a preliminary determination was made that a violation had been committed and a fine of $1,159.99 was assessed.

On 11/7/14, Respondent Van Bokhoven, treasurer for the candidate committee, called Commission staff saying that he had been sick and requested that the fine be reduced.  Executive Director Izumi-Nitao informed him that he could ask the Commission to reconsider their Order.  He submitted a letter dated 11/10/14 for the Commission’s consideration.  Respondents were not present at the meeting.

Chair Snipes stated that a payment plan would be fine, but that he saw no reason to reduce the amount of the fine assessed.

Chair Snipes moved to amend the Order to allow for a payment plan.  Motion seconded by Commissioner Ching.  Motion carried (4-0).

After discussion on whether the Order needed to be amended, it was agreed that the original Order stands and staff will contact Respondent to discuss a payment plan.

Docket No. 15-27 – In Re the Matter of Poverty Free Hawaii
Executive Director Izumi-Nitao reported that a complaint was filed alleging Respondents’ failure to file the Preliminary Primary and Final Primary Reports.  At the 9/10/14 Commission meeting, a preliminary determination was made that a violation had been committed, a fine of $500 for each report was assessed, and Respondents were ordered to file the reports within 2 weeks of receipt of the Order.

On 11/12/14, it was determined that Respondent was a $1,000 or less noncandidate committee, and therefore, pursuant to HRS §11-339, Respondent only needed to file the Final Election Period Report.  Respondents have filed the report and is seeking to terminate their registration.  Staff recommended that the Commission reconsider its prior Order and dismiss Docket No. 15-27.

Commissioner Yoshihara moved to reconsider the Order.  Motion seconded by Chair Snipes.  Motion carried (4-0).

Chair Snipes moved to dismiss Docket No. 15-27, pending termination of the committee’s registration.  Motion seconded by Commissioner Yoshihara.  Motion carried (4-0).

Docket No. 15-7 taken out of order —

Docket No. 15-7 – In Re the Matter of Cherish Almeida, China-Lyn Almeida, and T.E.A.M. Cherish – Cherish Almeida
Executive Director Izumi-Nitao reported that a complaint was filed alleging Respondents’ failure to file the 1^st Preliminary Primary Report.  At the 7/31/14 Commission meeting, a preliminary determination was made that a violation had been committed and a fine of $200 was assessed.

On 10/22/14, Executive Director Izumi-Nitao spoke to Respondent and it was determined that Respondent was a $1,000 or less candidate committee, and therefore, pursuant to HRS §11-338, Respondent only needed to file the Final Election Period Report.

Staff recommended that the Commission reconsider its prior Order and dismiss Docket No. 15-7.

Commissioner Yoshihara moved to reconsider the Order and dismiss Docket No. 15-7, pending payment of any fines and termination of the committee’s registration.  Motion seconded by Chair Snipes.  Motion carried (4-0).

Consideration and Discussion of Commission Legislation for 2015 Legislative Session
General Counsel Kam reported that the proposed submission is a bill that 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 (i.e., removes “after an election year” from the January 31^st due date).

With Commission’s approval, the proposal will be submitted to the House Speaker and Senate President.

Chair Snipes moved to approve the 2015 legislation.  Motion seconded by Commissioner Yoshihara.  Motion carried (4-0).

Docket No. 15-31 taken out of order —

Docket No. 15-31 – In Re the Matter of Terez Amato Lindsey vs. Anthony (Tony) Austin and YNotAustin, Inc.
Present – Respondent Anthony Austin

General Counsel Kam reported that Terez Amato filed a complaint against the committee’s treasurer, Respondent Anthony (Tony) Austin, for unauthorized use of campaign funds and filing a false report.

At the 11/19/14 Commission meeting, this matter was heard in Executive Session.  Staff recommended that the matter be referred for prosecution because Respondent Austin intentionally violated the campaign spending law, but the majority voted to bring the matter into open session to consider administrative penalties.

Staff submitted a memorandum of potential administrative fine options for the Commission to consider:

Count I – Use of campaign funds for personal expense
Commission guidelines provide for a fine of 25% of the prohibited expenditure (i.e., $77.32) and personal reimbursement or up to 3 times the amount of the prohibited expense (i.e., $231.96).

Staff recommended that if the complaint is not referred for prosecution that Respondent Austin be assessed a fine of 3 times the amount of the expense (i.e., $231.96).

Count II – False Report
Commission guidelines provide for a $250 fine per report.

Staff recommended that if the complaint is not referred for prosecution that Respondent Austin be assessed a fine of $500 because he filed the report 2 days before the due date and before receiving additional expense information.  After receiving the additional information, he did not amend the report.  An amended report was filed by the candidate.

Respondent Austin stated that no evidence had been presented to show that there was any wrongdoing.

Chair Snipes stated that although something inappropriate has occurred, it did not rise to the level of criminal conduct.

General Counsel Kam reported that in this case, the focus was on the intentional nature of the violation.  Respondent was told not to spend campaign funds and he did.

Chair Snipes moved to find probable cause exists to believe that Respondent Austin violated campaign finance laws and to accept staff’s recommendation concerning administrative fine assessments: Count I – a fine of 3 times the amount of the expenditure (i.e., $231.96) and Count II – $500 for filing a false report.

In response to General Counsel Kam’s statement that as treasurer he did something without the candidate’s permission, Respondent Austin stated that he did not disregard the candidate.  He said that the candidate never told him he could not spend campaign funds for a meal.  He received an email from Chairperson Joseph Ritter which told him he could not spend campaign funds, and in reading the HRS, it is his understanding that the treasurer and the candidate committee are responsible for any expenditures made, not the chairperson.  He further stated that the complaint is that he spent monies on a personal meal not an unauthorized expense.  Commissioner Ching noted that the unauthorized expense of campaign funds for the meal made it a personal expense.  Respondent Austin stated that he used campaign funds ($5) for chips and drinks so he did it before.

General Counsel Kam clarified that Ms. Amato was with Chairperson Ritter when the email saying that Respondent Austin could not use campaign funds for a meal was sent, that she did not authorize the expense, that Respondent Austin did not respond back to the email, and that it was the committee’s position that no campaign funds were to be used at restaurants or bars.

Respondent Austin responded that in another email he told the candidate that he would take the Oahu volunteers out for a meal.  He further argued that as treasurer he follows the law and that he did not intentionally break the law.

Chair Snipes asked whether there would be a second to the motion made. Motion seconded by Commissioner Shoda.  Motion carried (3-1) with Commissioner Ching opposing.

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

Report on Final Election Period Report (due on 12/4/14)
-280 candidate committees to file
-38 candidates did not file by 12/4/14
-As of today, 21 still have not filed
-247 noncandidate committees to file
-19 committees did not file by 12/4/14
-As of today, 8 still have not filed

Report on Expenditures of Public Funds Report (due on 12/4/14)
-17 candidate committees filed the report

Supplemental Report (due on 2/2/15)
-About 600 committees expected to file with 2 different reporting periods:
11/5/15 – 12/31/14 Candidates that were in the 2014 election
7/1/14 – 12/31/14   Candidates that did not run in the 2014 election

Update on 2014 Election
Associate Director Baldomero provided a statistical snapshot of the 2014 election (see hand-out):

Items 1-6
-298 candidate ran for 102 seats up for election in 2014
-12 candidates unopposed
-11 incumbents did not run
-84 of the 91 incumbents running were re-elected

Item 7  Expenditure Limit
-160 of 298 candidates filed the Affidavit to Agree with Expenditure Limit
-24 of 91 incumbents filed the Affidavit

Item 8  Statement of Intent
-50 of 298 candidates indicated their intent to seek public funding

Item 9  Public Funds Disbursed
-$234,864.92 in public funds disbursed to 24 candidates

Item 10 Fundraisers
-291 fundraiser notices filed for fundraisers held in 2014
-Governor Abercrombie held 25 fundraisers prior to the primary
-David Ige held 4 fundraisers prior to the primary & 17 fundraisers after the primary

Report on 2014 COGEL Conference
Executive Director Izumi-Nitao reported that there were 350 participants and that she, Gary Kam, Les Kondo (State Ethics Executive Director and General Counsel), and Senator Les Ihara attended from Hawaii.  The conference continues to provide invaluable information and gives us an opportunity to learn about other campaign finance offices, litigation, legislation, and new developments and trends.

She further reported that for this year’s conference, she was a part of the Program Committee and moderated 2 panels (“Managing Millennials” and “Sitting on a Data Mine”), and that she has been nominated and approved for the 2014-2018 Steering Committee.

She reported that Hawaii continues to be well placed in the campaign finance world.  She stated that the areas Hawaii continues to excel in include mandatory electronic filing, data visualization, and enforcement efforts.  Areas that Hawaii needs to be aware of include mobile apps and coordination of independent expenditures.

The next COGEL Conference is scheduled for December 6-9, 2015 in Boston, Massachusetts.

Chair Snipes called for a 5 minute recess. Meeting reconvened at 10:15 a.m. (Vice-Chair Gomes arrived at the meeting)

General Counsel Kam reported on two topics of interest at the COGEL Conference – Super PACs and the coordination issue (i.e., use of material from a candidate’s website).

For Super PACs who are organized under 501(c) of the IRC, their major purpose cannot be political.  However, the IRS is not enforcing the non-political major purpose mandate against Super PACs at this time.

Another topic of interest was the coordination issue, which is also a national issue.  The IRS has the same rule as Hawaii with some exceptions, but the FEC is not enforcing the rule because they do not have a majority of members that support enforcement of the rule.

Return to Docket No. 15-59 —

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 Recovery Program Fund, Forward Progress, and John White (“Respondents”)

Commissioner Yoshihara recused herself from matters having to do with Hawaii Carpenters Market Recovery Program Fund, Forward Progress and John White (“Respondents”).  She and Mr. Leroy Colombe, attorney for Respondents, are partners in the law firm Chun Kerr, LLP.

At the 11/19/14 Commission meeting, per Respondents’ request the matter was continued until the December meeting.

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.

The complaint contains 3 counts:

Count I alleges that the Hawaii Carpenters Market Recovery Program Fund failed to register and report the $5,000 contribution made to Good Beginnings Alliance, a ballot issue committee.  Staff recommended a total fine of $1,100 for failing to register and report.

Count II alleges that Forward Progress, an independent expenditure committee, failed to identify a candidate supported by an independent expenditure.  Staff recommended a fine of $1,000 for failing to identify the candidate supported or opposed.

Count III alleges that Forward Progress failed to report independent expenditures spent on mailers in opposition of a candidate.  Staff recommended a fine of $1,000 for failing to report expenditures.

Mr. Colombe stated that with regard to Count I, the issue is whether the definition of expenditure incorporates the definition of contributions.  There are two separate definitions in the law and they are very similar.  But the law is clear that registration is required only if expenditures are made.  The Hawaii Carpenters Market Recovery Program Fund only made a contribution to the Good Beginnings Alliance.  Further, he stated that there are 3 major policies that should be considered: 1 – Identify individuals who contributed funds; 2 – Public information or how monies are spent; and 3 – Making sure contributors comply with contribution limits.  Number 3 does not apply, as there are no limits on ballot issue committees, and Good Beginnings Alliance’s reports provide information on monies received and how it was spent.  He asked that the Commission not assess a fine in Count I because of the ambiguity of the law.

For Counts II and III, Mr. Colombe maintained that mistakes were made in recordkeeping.  Because Respondents have cooperated with staff, provided requested information, and amended required reports, Respondents do not oppose nor dispute the assessed fines.

He further commented on the matter of referral.  He stated that Respondents’ actions should not be interpreted as a plot to get around the law.  H also noted that staff’s recommendation only references “reckless” conduct, that their errors were not significant in consideration of the bigger picture, that they filed their reports on time, and that the focus should be a statutory fix to the penalties rather than a criminal referral.   He asked that the Commission focus their energy on getting the legislature to make changes to the law concerning the amount of fines the Commission can assess.

Commissioner Shoda asked whether their argument was that reporting of the contribution was not required.

Mr. Colombe stated that HRS §11-321(g) requires the filing of an organizational report of either receiving contributions or making or incurring expenditures of more than $1,000.  The entity making expenditures is Good Beginning Alliance.  The Hawaii Carpenters Market Recovery Program Fund only made a contribution.  There are two different definitions for contributions and expenditures, but if staff’s interpretation is that it is not two different things, Respondents will accept staff’s interpretation.

General Counsel Kam stated that the definition of expenditure covers the contribution made by Hawaii Carpenters Market Recovery Program Fund.  It has been the practice that when a contribution over $1,000 has been made to a candidate or noncandidate committee, staff will seek the registration of the contributor unless it is an individual making a contribution of their own personal funds.

Executive Director Izumi-Nitao stated that staff has been advised by the Attorney General’s Office that contributions in excess of $1,000 trigger the registration requirement.

Chair Snipes commented to arguments made on page 9 of Respondents’ letter dated 12/11/14 that the focus of the Commission’s actions are based on the content and volume of Respondents’ speech.  He recalls the Commissioners voicing concern on the number of violations and questions as to pattern and practice.  He disagrees with the statement that the Commission is punishing content and volume.

Mr. Colombe stated that the amounts have factored in the Commission’s deliberation and asked that the Commission treat their actions as a “teachable moment.”

Vice Chair Gomes asked how could they treat this as a teachable moment.  Mr. Colombe responded that they have learned from their mistakes, that they have gotten additional help with the reporting, and that they will be hiring and securing additional levels of compliance to get their act together to get past their sloppiness.

Commissioner Ching moved to accept staff recommendation of fines:  Count I – $1,100 for failure to register and report $5,000 contribution; Count II – $1,000 for failure to identify name of candidate supported or opposed; and Count III – $1,000 for failure to report expenditure.  Motion seconded by Commissioner Shoda.  Motion carried unanimously.

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

Public Session reconvened – 11:15 a.m.

Next Meeting:
Scheduled for Wednesday, January 14, 2015 at 9:00 a.m.

Chair Snipes moved to adjourn meeting.  Motion seconded by Commissioner Yoshihara. Motion carried unanimously.  Meeting adjourned at 11:20 a.m.