Campaign Spending Commission

Campaign Spending Commission Meeting
Leiopapa A Kamehameha Building, Room 204
July 16, 2009
10:00 a.m.

Commissioners Present:
Paul Kuramoto, Steven Olbrich, Gino Gabrio, Dean Robb, Michael Weaver

Staff Present:
Barbara Wong, Grant Tanimoto, Ellen Kojima, Linda Takushi

Call to Order:
Meeting convened at 10:00 a.m. with Chair Kuramoto presiding.

Consideration of Minutes:
Commissioner Gabrio moved to approve the minutes of the June 4, 2009.  Motion seconded by Commissioner Robb.  Motion carried unanimously.

New Business:
Docket No. 09-03  F.M. Scotty Anderson v. Leon Rouse
Chair Kuramoto noted for the record that he is acquainted with witnesses, Ms. Karen Iwamoto and Ms. Audrey Hidano, and that this won’t affect his ability to rule fairly on this docket.

Mr. F.M. Scotty Anderson filed a complaint against Mr. Leon Rouse alleging that when he and members of the Building Industry Association visited Representative Cabanilla’s State office with a list of bills they were interested in, Mr. Rouse told the group that unions bring checks, while business groups just give a kiss. Mr. Anderson and the other members believed that the statement implied or suggested that they should give money if they wanted more attention.

The applicable law that that was allegedly violated was Hawaii Revised Statutes (HRS) section 11-203.5, fundraising on state property by soliciting money in connection with an election campaign is prohibited.  The issue is whether Mr. Rouse was soliciting a contribution in connection with an election campaign.  Staff recommends finding a preliminary determination of probable cause that a violation of section, HRS 11-203.5 has occurred and a fine be assessed.

Chair Kuramoto noted the Commission has a choice of four determinations: to dismiss, to further investigate, to make a determination of probable cause, or to refer to the appropriate prosecuting authority.  Commissioners Robb and Olbrich brought up a discussion on procedures if a determination of probable of cause is made and on the level of evidence needed for a Commission determination (by a preponderance of the evidence) and by the prosecutor in a criminal matter (beyond a reasonable doubt).  Commissioner Weaver asked for clarification on referral to the Prosecutor.  Executive Director Wong a referral can be made when the Commission believes the respondent may have intentionally, knowingly, or recklessly committed the violation.

Mr. Rouse stated that in hindsight it was not a statement that he should have made, and that he was only trying to help them.  Also, that he was not soliciting a contribution for Rep. Cabanilla, as he is not a member of her campaign committee, and that the statement was a generic statement and was misconstrued. He said they left before he could explain.

Mr. Anderson reiterated that Mr. Rouse told the group that unions bring checks, while business groups just give a kiss, and that never in all his years dealing with the legislature did he hear such a statement.  He asked Mr. Rouse to repeat his statement and Mr. Rouse did.  He also stated that Mr. Rouse’s statement indicated to him and the other members from the Building Industry Association that those who give money would have the influence.  He said he didn’t necessarily want him fined but did not want this to happen again.

There was further discussion on the elements of the violation.

Commissioner Olbrich moved to dismiss the complaint.  Motion seconded by Commissioner Gabrio.  Motion carried. (4-ayes / 1-no (Kuramoto)

Old Business:
Advisory Opinion 09-01
Chair Kuramoto noted for the record that the meeting originally scheduled for June 10th was changed to June 8th to include Commissioner Olbrich.  Mr. Karl Sandstrom, Esq. could not make June 8th, so the date was then changed to June 4th (2009).

Attorneys for the Abercrombie for Governor Committee withdrew their first advisory opinion request which was submitted on April 22, 2009.  The first request would have required the Commission to render an advisory opinion on or before July 10, 2009.  The Abercrombie for Governor Committee attorneys submitted a second advisory opinion request on May 27, 2009 and agree that the Commission’s 90-day period for rendering an opinion begins on May 27, 2009.  (Mr. Sandstrom affirmed)

Before discussion began, Chair Kuramoto also clarified for the record that advisory opinions are rendered on whether the facts and circumstances of a particular case constitute or will constitute a violation of the campaign spending laws.  Also, that the advisory opinion may apply to other candidates with similar facts and circumstances.

Chair Kuramoto noted initial arguments have been heard at the prior meeting.  The second supplemental memorandum from Mr. Karl Sandstrom and his proposed draft advisory opinion have been reviewed by the commission members.

Executive Director Wong noted a correction on page 3 of the current draft-under heading B, reference made to Hawaii Constitution, Article 6 should read Article 2, Section 6.  Further noted that items deleted from the first draft include HRS section 11-202, false name and comments on constitutional issues.  There is an addition on page 6, for the argument regarding own funds.

Mr. Karl Sandstrom and Mr. William Tam, Esq. represented requestor, Abercrombie for Congress Committee.

Mr. Tam noted for the record that in an abundance of caution they obtained from the court pro hac vice admission for Mr. Sandstrom to represent the Abercrombie committee.

Mr. Sandstrom contended that the second draft advisory opinion is creating a rule and section 11-193(a)(16), does not allow the commission to issue rules through an advisory opinion.  He argued the advisory opinion creates a two-part test as to what “own funds” are.  In Davis v. F.E.C., the only basis upon which contributions can be limited is to prevent corruption or the appearance of corruption.  Individuals can use funds they have dominion over as they cannot be corrupted by their own funds.  Congressman Abercrombie is no different from any other state candidate who wants to transfer his own funds from one election to another.  The State of Hawaii has concluded that there is no corruption associated with the transfer of campaign funds from one state campaign to the candidate’s next state campaign.

Commissioner Olbrich contended on page 6 of the second draft advisory opinion provides a list of things that excess federal funds cannot be used for, which indicates that the funds are not personal funds.  Mr. Sandstrom replied that Hawaii does not have a definition of “own funds.” Mr. Sandstrom further stated that Congressman Abercrombie should be able to transfer his federal campaign funds as he has more discretion over these funds then any other candidate has over theirs.

Mr. Sandstrom asked Chair Kuramoto whether the Attorney General opinion would be made a part of the pubic record.  Chair Kuramoto responded that the question has been asked previously by Mr. Sandstrom and that the Commission staff responded in writing that it would not be made public.  Also, the Commission stands by its previous statement that the opinion is privileged communication.  Mr. Sandstrom, stated that they were interesting in knowing because if the attorney general has taken a similar position in this matter as Abercrombie, then the Commission should not come up with a restrictive reading of contribution, as there may be constitutional implications.

There was discussion on the Commission’s ability to issue advisory opinions.  Commissioner Robb stated that the Commission would have a difficult time writing advisory opinions if the Commission can’t provide an interpretation of words in the statute.

Mr. Sandstrom argued there is no basis in the statutes or regulations for the current reading.  He asked what the constitutional justification is for the current draft.  Commissioner Robb asked how the Commission could ever render an opinion if it could not determine the meaning of words in the statute such as “own funds” that are not otherwise defined in the statute.  Commissioner Robb asked if Mr. Sandstrom knew of any case precedent or of any other state statute that defines “surplus funds” leftover from a campaign as “own funds”.  Mr. Sandstrom was not sure, but said the term “own funds” is not widely used.  Further, that Federal law 439a gives the candidate the right to dispose of funds. Mr. Sandstrom also stated that in this case, the owner is identified as Congressman Abercrombie because no one else has dominion over the funds to determine how they are disposed.  Commissioner Olbrich contended that federal rules prohibit certain uses. Mr. Sandstrom asked whether personal use restrictions should change the legal analysis.  He further argued that courts have said the task is not to restrict money in politics; the task is to implement laws to prevent corruption and the appearance of corruption.

Chair Kuramoto understood the request to ask whether a local committee can accept funds from a federal committee, not whether Congressman Abercrombie could deposit a personal check into the local committee.  Discussion ensued regarding  why federal law prohibits the use of state surplus funds for a federal election, and so why shouldn’t the converse apply, in that a state prohibit the transfer of federal funds to a state campaign.  It was mentioned the federal restriction may be due to some states allowing corporate contributions. Mr. Sandstrom argued Hawaii law does explicitly prohibit the transfer of federal funds to state campaigns and that it is a stretch to think that is what the legislature intended.  Federal law does not prohibit the transfer, and a rule was promulgated.

Commissioner Robb said that “office,” as defined by state law, excludes federal office.  Mr. Sandstrom mentioned that a recent Supreme court case regarding political subdivision, NAMUDNO, made a broad reading of the law to avoid any constitutional issues.

Mr. Sandstrom further offered that Hawaii amended the definition of “office” not contemplating this situation, and it was passed after the federal act was passed.  Most laws are about reducing the time candidates spend with donors and allowing more time with the people, and allowing Congressman Abercrombie to transfer the funds would allow him more time with the people.

Commissioner Robb stated that the monies that Congressman Abercrombie claims as his own funds were raised during the course of a campaign.  Under Hawaii law monies raised during a course of a campaign are not a candidate’s personal monies once the campaign is over, and it only can be used for another campaign or donated to a charitable organization.  The rationale is that a state or county government might say they don’t want surplus funds raised under another system’s rules or regulations transferred into their state.  The State should have the right to say how monies are raised and spent.  Mr. Sandstrom argued that the legislature did not make that judgment, they only made clear that candidates running for a federal office don’t need to register and report with the state.

Mr. Tam stated that Abercrombie’s federal campaign contributions had to do with congressional action and had nothing to do with Hawaii, so there was no danger of influence.

Commissioner Gabrio said Mr. Sandstrom indicated at a previous meeting that the Abercrombie federal committee would be willing to segregate out-of-state funds.  Mr. Sandstrom responded that the committee would be willing, but noted that Hawaii’s non-resident contribution law raises constitutional concerns and they reserve the right to challenge the law.

Discussion continued on surplus funds, own funds and the F.E.C. Puerto Rico case in regard to this matter.

Ms. Pam Smith, representing herself as a disclosure reports preparer, offered comments that the funds Congressman Abercrombie would be transferring would not be his own funds, but that of his federal campaign committee and should not be allowed to be transferred to the state campaign committee.  She also contended that the funds were raised and reported under different rules, and if transfer was allowed, it would be reported in the name of Congressman Abercrombie and not the original contributor.  Whereas, if it was raised for a state campaign there would be a clear trail of were the monies came from.  Ms. Smith asked that Commissioners consider acceptance of Ms. Wong’s recommendation to deny transfer of federal campaign funds to a state campaign.

Executive Director Wong responded to Mr. Sandstrom’s comments and Mr. Sandstrom’s second supplemental submission as folllows:  disagreeing that the advisory opinion creates a rule and is a test.  Contended that the advisory opinion only responds to the specific facts and circumstances in the request. Also, that the Federal Election Campaign Act prohibits the transfer of state campaign funds to a federal campaign not only because of corporate contributions, but also because the linking of funds to their sources would be difficult and it would be difficult for the FEC to monitor and enforce.  That segregating out-of-state funds is not a solution as they would most likely file a lawsuit challenging the constitutionality of the non-resident contribution law and that Mr. Tam’s argument that contributions to Abercrombie’s federal campaign have to do with Congress and have nothing to do with Hawaii was wrong, as a review of Abercrombie’s federal disclosure reports show some of his federal contributors do business or exist in Hawaii.

Additionally, that the argument that Federal candidates can even determine disposition of their funds upon death, Executive Director Wong responded that FEC Advisory Opinion 1992-14 specifically mentions there was no testamentary device involved and that it was merely a letter saying the candidate wanted funds going to a charitable organization.  She also said the FEC has many advisory opinions issued on what personal use is. FEC Advisory Opinion 2000-40 states that if a permissible personal use is not listed in the Code of Federal regulations, a determination is made on case by case basis.  Further, that the canon of constitutional doubt is inapplicable here in part because there is no grave and doubtful constitutional questions from the statutory construction. Also, Davis is inapposite as it involves a millionaire’s personal funds, not raised from contributions, and thus does not involve corruption of the appearance of corruption.

Commissioner Gabrio asked questions about the Puerto Rico case.

In response to Mr. Sandstrom prior argument that the statute vests in the officeholder the power to use and dispose of surplus funds which is the essence of ownership.  Executive Director Wong countered that in Black’s Law Dictionary, ownership rights are defined as general, permanent, and inheritable. Further, in response to Mr. Sandstrom’s Equal protection and First Amendment Constitutional arguments citing the Davis case, that Congressman Abercrombie’s funds were provided by contributions to his federal campaign and are not his own funds, and that state and county candidates raised their funds under Hawaii campaign laws.  Also in regards to free speech, that excess federal campaign funds could be returned to contributors and then contributors could be asked to contribute to the governor’s race.

Executive Director Wong recommends approval of the second draft advisory opinion.

Discussion by the Commissioners ensued.  There was a consensus that the Commissioners need more time to consider their decision and to decide what the contents of the advisory opinion should be.  Commissioner Gabrio noted that he would like to remove the statement referring to income tax.  Executive Director Wong also noted that if the transfer is allowed, the requestor also asked what the candidate’s election period would be since he just ran for Congress.

Commissioner Gabrio noted he was not sure if it would be permissible but suggested something in the nature of a conciliation agreement in which the parties stipulate that an advisory opinion would not be issued and agree that the law would not be enforced against the particular individual under particular parameters, and would agree that they won’t challenge the non-resident law, and that the party would withdraw the advisory opinion request.

Executive Director Wong stated that the Commission is required to render an opinion within 90-days after all information necessary to issue an opinion is obtained.  If an opinion is not rendered then the federal funds could transfer and there would be no violation.

For the next meeting, the Commission staff will have different drafts for consideration, any further comments should be submitted directly to the Executive Director, not to be discussed or disseminated among Commissioners, and the Executive Director will discuss with the General Counsel, alternative ways the matter could be resolved.

Executive Director Wong, concluded that funds are either Congressman Abercrombie’s own funds or not, and  we should not be concerned with who the contributor was or how much or from what state.

Matter deferred until the August meeting.

Update of H.B. 128
Governor vetoed H.B. 128.  The Senate voted 22-3 to override the veto.  The House was 1 vote short of overriding the veto.

Commissioner Gabrio thanked the staff for its effort and voiced his disgust with the Governor’s veto of H.B. 128 and with the legislature’s failure to override the veto.

Update on Blade Servers
With the help of many, the blades have been purchased and FY 09 funds have been encumbered for the purchase.

Next Meeting:
Scheduled for Wednesday, August 12, 2009 at 10:00 a.m.

Commissioner Weaver moved to convene an executive session to consult with attorney.  Motion seconded by Commissioner Gabrio.  Motion carried unanimously.

Public session reconvened at 12:48 p.m.

Commissioner Weaver moved to adjourn the meeting.  Chair Kuramoto seconded.  Motion carried unanimously.

Meeting adjourned at 12:50 p.m.