[Federal Register: January 28, 2004 (Volume 69, Number 18)]
[Proposed Rules]
[Page 4092-4095]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28ja04-14]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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[[Page 4092]]
FEDERAL ELECTION COMMISSION
11 CFR Part 111
[Notice 2004-3]
Proposed Statement of Policy Regarding Naming of Treasurers in
Enforcement Matters
AGENCY: Federal Election Commission.
ACTION: Draft statement of policy with request for comments.
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SUMMARY: The Commission is considering exercising its discretion in
enforcement matters to clarify when it intends to name a treasurer of a
political committee in his or her official capacity as treasurer, and
when it intends to name the treasurer in his or her personal capacity.
For most enforcement matters involving a political committee, the
Commission may decide, as a matter of policy, to name the treasurer in
his or her official capacity. However, where a treasurer has apparently
breached a personal obligation owing by virtue of his or her
responsibilities under the Act and regulations, or a prohibition that
applies to individuals, the Commission may decide to name that
treasurer as a respondent in his or her personal capacity. The
Commission seeks comments on the policy under consideration, and on how
it should exercise its prosecutorial discretion on this subject in
matters arising in its Administrative Fines Program.
DATES: Comments must be submitted on or before February 27, 2004.
ADDRESSES: All comments should be addressed to Peter G. Blumberg,
Attorney, and must be submitted in either electronic or written form.
Electronic mail comments should be sent to treas2004@fec.gov and must
include the full name, electronic mail address and postal service
address of the commenter. Electronic mail comments that do not contain
the full name, electronic mail address and postal service address of
the commenter will not be considered. If the electronic mail comments
include an attachment, the attachment must be in the Adobe Acrobat
(.pdf) or Microsoft Word (.doc) format. Faxed comments should be sent
to (202) 219-3923, with printed copy follow-up to ensure legibility.
Written comments and printed copies of faxed comments should be sent to
the Federal Election Commission, 999 E Street, NW., Washington, DC
20463. Commenters are strongly encouraged to submit comments
electronically to ensure timely receipt and consideration. The
Commission will make every effort to post public comments on its Web
site within ten business days of the close of the comment period.
FOR FURTHER INFORMATION CONTACT: Peter G. Blumberg, Attorney, 999 E
Street, NW., Washington, DC 20463, (202) 694-1650 or (800) 424-9530.
SUPPLEMENTARY INFORMATION:
I. Introduction
The Commission proposes modifying its current practice to name more
clearly treasurers in their ``official'' and/or ``personal''
capacities.\1\ Specifically, when a complaint asserts sufficient
allegations to warrant naming a committee as a respondent, the
committee's current treasurer would also be named as a respondent in
his or her official capacity. In these circumstances, reason-to-believe
and probable cause findings against the committee would also be made as
to the current treasurer in his or her official capacity. When the
complaint asserts allegations that involve a past or present
treasurer's violation of obligations that the Act or regulations impose
specifically on treasurers, or prohibitions that apply to individual
persons, then that treasurer would be named in his or her personal
capacity, and findings would be made against the treasurer in that
capacity. Thus, in some matters the current treasurer could be named in
both official and personal capacities.
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\1\ The terms ``official capacity'' and ``representative
capacity'' are generally interchangeable, as are the terms
``personal capacity'' and ``individual capacity.'' See McCarthy v.
Azure, 22 F.3d 351, 359 n.12 (1st Cir. 1994).
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The proposed policy modification would provide clearer notice to
respondents and the public as to the nature of the Commission's
enforcement actions, improve the perception of fairness among the
regulated community, and merge the Commission's treasurer designation
into conceptually familiar legal principles for the federal
judiciary.\2\ In explaining the proposed policy change, this section
first surveys the law on the official/personal capacity distinction;
next, addresses when treasurers are properly named in their official or
personal capacity or both; and finally, confronts the reoccurring
issues of successor treasurers and substitution.
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\2\ As discussed infra Part II.A., the phrases ``official
capacity'' and ``personal capacity'' are legal terms of art that
permeate such fields as sovereign immunity, bankruptcy,
corporations, and federal procedure. Their usage instantaneously
identifies for the judiciary when the Commission is pursuing
treasurers by virtue of their position, rather than by product of
their actions.
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II. The Official/Personal Capacity Distinction
In the seminal case of Kentucky v. Graham, 473 U.S. 159 (1985), the
United States Supreme Court discussed the distinction between official
capacity and personal capacity suits. The Court determined that a suit
against an officer in her official capacity ``generally represent[s]
only another way of pleading an action against an entity of which an
officer is an agent.'' Id. at 165. In other words, an official capacity
proceeding ``is not a suit against the official but rather is a suit
against the official's office.'' Will v. Mich. Dept. of State Police,
491 U.S. 58, 71 (1989). Accordingly, ``an official-capacity suit is, in
all respects other than name, to be treated as a suit against the
entity.'' Graham, 473 U.S. at 166. Therefore, in an official capacity
suit, the plaintiff seeks a remedy from the entity, not the particular
officer personally.
A ``personal-capacity action is * * * against the individual
defendant, rather than * * * the entity that employs him.'' Id. at 167-
68. Since a ``[p]ersonal-capacity suit[] seek[s] to impose personal
liability upon'' a particular individual, the individual is the true
party in interest. Id. Liability lies with the particular officer
personally, not with the officer's position. See id. at 166 n.11
(``Should the official die pending final resolution of a personal-
capacity action, the plaintiff would have to pursue his action against
the decedent's estate.''); see also Hafer v. Melo, 502 U.S. 21, 27
(1991) (``officers sued in their personal capacity come to court as
individuals'').
[[Page 4093]]
The ``distinction between claims aimed at a defendant in his
individual as opposed to representative capacity can be found across
the law.'' McCarthy, 22 F.3d at 360 (citing numerous Supreme Court,
lower court, and state cases referencing differences between individual
and official capacity claims in multiple fields of law).\3\ The
official capacity/individual capacity distinction also carries societal
significance. As the McCarthy court explained:
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\3\ See Graham, 473 U.S. at 165 (42 U.S.C. 1983); Stafford v.
Briggs, 444 U.S. 527, 544 (1980) (venue determination); Ex Parte
Young, 209 U.S. 123, 159 (1908) (Eleventh Amendment); Northeast Fed.
Credit Union v. Neves, 837 F.2d 531, 534 (1st Cir. 1988)
(jurisdictional purposes); Pelkoffer v. Deer, 144 B.R. 282, 285-86
(W.D. Pa. 1992) (bankruptcy); Estabrook v. Wetmore, 529 A.2d 956,
958 (N.H. 1987) (applying doctrine that acts of a corporate employee
performed in his corporate capacity generally do not form the basis
for personal jurisdiction over him in his individual capacity).
The ubiquity of the [official capacity/individual capacity]
distinction is a reflection of the reality that individuals in our
complex society frequently act on behalf of other parties--a reality
that often makes it unfair to credit or blame the actor,
individually, for such acts. At the same time, the law strikes a
wise balance by refusing automatically to saddle a principal with
total responsibility for a representative's conduct, come what may,
and by declining mechanically to limit an injured party's recourse
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to the principal alone, regardless of the circumstances.
Id.
III. Naming Treasurers in Their Official Capacity
Naming the current treasurer in his or her official capacity would
improve the Commission's enforcement practice in a number of ways. Most
importantly, it would clarify that findings by the Commission (whether
``Reason To Believe'' or ``Probable Cause To Believe'') or the signing
of a conciliation agreement only concerns the treasurer in his or her
capacity as representative of the committee, not personally. The
practice would also ensure that a named individual who signs the
conciliation agreement on behalf of the committee (or obtains legal
representation on behalf of the committee) is the one empowered by law
to disburse committee funds to pay a civil penalty, disgorge funds,
make refunds, and carry out other monetary remedies that the committee
agrees to through the conciliation agreement.\4\ Also, naming a
treasurer (in his or her official capacity), as opposed to naming
simply the office of treasurer or just the committee, not only provides
the Commission with an individual in every instance to serve with
notices throughout the proceeding, but also results in more
accountability on behalf of the committee--that is, a particular person
who will ensure that a committee is responsive to Commission
findings.\5\ Finally, specifying whether a treasurer is named in his or
her official or personal capacity would be consistent with use of these
terms as pleading conventions in court actions. A probable cause
finding against a treasurer in his or her official capacity would make
clear to a district court in enforcement litigation that the Commission
is seeking relief against the committee, and would only entitle the
Commission to obtain a civil penalty from the committee. See Graham,
473 U.S. at 165.
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\4\ In the absence of a treasurer, ``the financial machinery of
the campaign grinds to a halt. * * *'' FEC v. Toledano, 317 F.3d
939, 947 (9th Cir. 2003), reh'g denied; see 2 U.S.C. 432(a) (``No
expenditure shall be made * * * without the authorization of the
treasurer or his or her designated agent.''); 11 CFR 102.7(a)
(designation of assistant treasurer).
\5\ Such accountability may be especially helpful in matters
involving committees that tend to be ephemeral--existing for only a
short time before permanently disbanding operations.
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IV. Naming Treasurers in Their Personal Capacity
The Act places certain legal obligations on committee treasurers,
the violation of which makes them personally liable. See, e.g., 2
U.S.C. 432(c) (keep an account of various committee records), 432(d)
(preserve records for three years), 434(a)(1) (file and sign reports of
receipts and disbursements). The Commission's regulations further
require a treasurer to examine and investigate contributions for
evidence of illegality. See 11 CFR 103.3. Due to their ``pivotal
role,'' treasurers may be held personally liable for failing to fulfill
their responsibilities under the Act and the Commission's regulations.
See Toledano, 317 F.3d at 947 (``The Act requires every political
committee to have a treasurer, 2 U.S.C. 432(a), and holds him
personally responsible for the committee's recordkeeping and reporting
duties, id. 432(c)-(d), 434(a). * * * Federal law makes the treasurer
responsible for detecting [facial contribution] illegalities, 11 CFR
103.3(b), and holds him personally liable if he fails to fulfill his
responsibilities, see 2 U.S.C. 437g(d). * * *'') (emphasis added); see
also FEC v. John A. Dramesi for Cong. Comm., 640 F. Supp. 985 (D.N.J.
1986) (holding treasurer responsible for failing to ``make * * * best
efforts to determine the legality of'' an excessive contribution); FEC
v. Gus Savage for Cong. '82 Comm., 606 F. Supp. 541, 547 (N.D. Ill.
1985) (``It is the treasurer, and not the candidate, who becomes the
named defendant in federal court, and subjected to the imposition of
penalties ranging from substantial fines to imprisonment.''); 104.14(d)
(``Each treasurer of a political committee, and any other person
required to file any report or statement under these regulations and
under the Act shall be personally responsible for the timely and
complete filing of the report or statement and for the accuracy of any
information or statement contained in it.'') (emphasis added). Thus, a
treasurer would be named as a respondent in a MUR in his or her
personal capacity, and findings would be made against a treasurer in
the same capacity, when the MUR involves the treasurer's personal
violation of a legal obligation that the statute or regulations impose
specifically on committee treasurers and when a reasonable inference
from the alleged violation is that the treasurer knew, or should have
known, about the facts constituting a violation.\6\
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\6\ Indeed, if FECA were construed to impose liability on
treasurers only in their official capacities, it would effectively
mean that only committees are liable for violations under the
statute--which would have been easy enough for Congress to
accomplish by writing the Act to impose reporting, recordkeeping,
and other duties on ``committees'' rather than ``treasurers.''
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Similarly, if a past or present treasurer violates a prohibition
that applies to individuals, the treasurer would be named as a
respondent in his or her personal capacity, and findings would be made
against the treasurer in that capacity. In this way, a treasurer would
be treated no differently than any other individual who violates a
provision of the Act.\7\ Should the Commission file suit in district
court following a finding of probable cause against a treasurer in his
or her personal capacity, judicial relief, including an injunction and
payment of a civil penalty, could be obtained against the treasurer
personally. Graham, 473 U.S. at 166-168. In any scenario, the
Commission would, of course, remain free to exercise its prosecutorial
discretion not to pursue a respondent.\8\
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\7\ The Act and the Commission's regulations prohibit any
``person'' which includes individuals, from engaging in certain
kinds of conduct. See, e.g., 2 U.S.C. 432(b) (forward contributions
to the committee's treasurer), 441e (receipt of contributions from
foreign nationals), and 441f (making and knowingly accepting
contributions in the name of another).
\8\ For example, the Commission, in some cases, may decide not
to pursue a predecessor treasurer who technically has personal
liability where the committee, through its current treasurer, has
agreed to pay a sufficient civil penalty and to cease and desist
from further violations of the Act.
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When the Commission obtains relief from a treasurer personally, the
obligation will follow the individual. Thus, when a treasurer in his or
her
[[Page 4094]]
personal capacity agrees to pay a civil penalty through a conciliation
agreement, or is ordered to pay a civil penalty by a district court, a
personal obligation exists to pay the civil penalty. (A separate civil
penalty would likely be assessed against the committee itself.)
Likewise, a cease and desist provision (negotiated through
conciliation) or an injunction (imposed by a district court) against a
treasurer in his or her personal capacity will still apply to that
treasurer in the event he or she moves on to become treasurer with
another committee. Cf. Sec'y Exch. Comm'n v. Coffey, 493 F.2d 1304,
1311 n.11 (6th Cir. 1974) (``The significance of naming an officer * *
* personally is that `otherwise he is bound only as long as he remains
an officer * * *, whereas if he is named [personally] he is personally
enjoined without limit of time.' '') (quoting 6 L. Loss, Securities
Regulation 4113 (1969, supp. to 2d ed.)).\9\
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\9\ In some cases, initially, the Commission does not have
information that would indicate that the Commission should pursue a
treasurer in his or her personal capacity for a violation. However,
at a later stage of the enforcement process, evidence may arise that
indicates that a treasurer is personally liable for a violation. In
these instances, the Commission would exhaust the Act's
administrative prerequisites to suit before filing suit against the
treasurer in his or her personal capacity. See 2 U.S.C. 437g(a)(3);
FEC v. Nat'l Rifle Ass'n, 553 F. Supp. 1331, 1337-38 (D.D.C. 1983).
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V. Naming Treasurers in Both Capacities
Treasurers would be initially generated as respondents in both
their official and personal capacities only with respect to allegations
that directly relate to reporting, recordkeeping, and other duties
specifically imposed by the Act on treasurers. See, e.g., United States
v. Johnson, 541 F.2d 710, 711 (8th Cir. 1976) (applying a similar
standard in an action involving the Federal Trade Commission when
finding that ``[t]he propriety of including a person both as an
individual and as a corporate officer in a cease and desist order has
consistently been upheld in instances where the person included was
instrumental in formulating, directing and controlling the acts and
practices of the corporation'') (citing Fed. Trade Comm'n v. Standard
Ed. Soc'y, 302 U.S. 112 (1937); Standard Distrib. v. Fed. Trade Comm'n,
211 F.2d 7 (2d Cir. 1954); Benrus Watch Co. v. Fed. Trade Comm'n, 352
F.2d 313 (8th Cir. 1965)). However, if the Office of General Counsel
(``OGC'') is persuaded through the respondent's response to the
complaint, or the response to the Factual and Legal Analysis, or the
Respondent's Brief at the Probable Cause stage, or an investigation,
that the treasurer was unaware, and had no reason to know, of the
operative facts giving rise to a violation, OGC would recommend that
findings against the treasurer only be made in his or her official
capacity.
On the other hand, if a complaint alleges a violation such as
coordination or receipt of contributions in the name of another, the
same reasonable inference as to the treasurer's knowledge of the
operative facts would not be drawn as a routine matter. The Commission
proposes with respect to complaints of this nature that the treasurer
would initially be named as a respondent only in his or her official
capacity. Notably, in these cases the reporting violation stems from
the same operative facts as the principal violation. Only if OGC learns
later that the treasurer had knowledge of the operative facts--for
example, the treasurer knew that an in-kind contribution stemming from
coordination went unreported--might the Commission make findings
against the treasurer in his or her personal capacity.
In cases where the treasurer has both official and personal
liability, the respondents would be named as ``John Doe for Congress
and Joe Smith, in his official capacity as treasurer and in his
personal capacity.'' Alternatively, the respondents might be named as
``John Doe for Congress and Joe Smith, in his official capacity as
treasurer'' and ``John Doe, in his personal capacity.'' Where a
treasurer has been named in both his or her official and personal
capacities, any resulting conciliation agreement would be signed by the
current treasurer on behalf of both the committee and the treasurer in
his or her personal capacity.
VI. Successor Treasurers/Substitution
An issue closely related to the official/personal capacity
distinction is whether a successor treasurer may be substituted for a
predecessor treasurer. Often the specific individual who was the
treasurer at the time of a violation is no longer the treasurer when
the Commission undertakes the enforcement process. Whether the
successor treasurer or the predecessor treasurer should be named as the
respondent depends on whether the Commission is pursuing the treasurer
in his or her official capacity, personal capacity, or both.
Under the present practice, when OGC discovers that a committee has
changed treasurers since the point of the underlying violation, OGC
typically notes the change of treasurer, the date of the change, the
former treasurer's name, and indicates whether an amendment was made to
the Statement of Organization in its next report to the Commission. If
a treasurer change is made after a finding of reason to believe, then
OGC typically includes the new treasurer and notes the change in its
next report on the matter. If a treasurer change is made after a
finding of probable cause to believe, OGC sends the new treasurer a
supplemental probable cause brief (incorporating the prior probable
cause brief), which states that the Commission found probable cause to
believe against the committee and the treasurer's predecessor and will
recommend probable cause against the new treasurer. After receiving a
response or waiting until the expiration of the response period, OGC
typically returns to the Commission with a recommendation to find
probable cause to believe against the new treasurer.
When the Commission pursues a current treasurer in his or her
official capacity, any successor treasurer would be substituted for the
predecessor treasurer. In such cases, the Commission is pursuing the
official position (and, therefore, the entity), not the individual
holding the position. See Will, 491 U.S. at 71. Because an official
capacity action is an action against the treasurer's position, the
Commission may summarily substitute a new treasurer in his or her
official capacity at any stage prior to a finding of probable cause to
believe.\10\
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\10\ Pursuant to the proposed policy, the Commission would not
be legally obligated to undertake the requirements of 2 U.S.C.
437g(a)(3) when a successor treasurer undertakes his or her
position; although not legally required to do so, the Commission
would intend to inform a new treasurer of the pending action and
make copies of the briefs available to the successor treasurer.
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When a predecessor treasurer is personally liable, the Commission
would pursue the predecessor treasurer individually, and not substitute
the successor treasurer for the predecessor treasurer individually. See
fn. 7; Graham, 473 U.S. at 167-68. There would be no legal basis for
imputing personal liability from a predecessor treasurer's misconduct
to a successor treasurer who did not personally engage in the
misconduct.
If the Commission were to pursue a treasurer both officially and
individually and this treasurer is later replaced, the Commission would
continue to pursue the predecessor treasurer for any violations for
which he or she is personally liable, and substitute the successor
treasurer for official capacity violations. Absent some independent
basis of liability, the
[[Page 4095]]
Commission would not pursue intermediate treasurers.\11\ See Cal.
Democratic Party v. FEC, 13 F. Supp. 2d 1031, 1037 (E.D. Cal. 1998)
(dismissing individual capacity claims against a former treasurer
because ``there is no allegation that [the treasurer] violated any
personal obligation'' and dismissing official capacity claims against
him ``since [he] is no longer treasurer * * * and thus, is not the
appropriate person against whom an official capacity suit can be
maintained. * * *'').\12\
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\11\ For example, while Treasurer A is the treasurer for Joe
Smith for Congress, a violation occurs that subjects A to official
and individual liability. Treasurer A would be named in both his
official and personal capacities. After the enforcement action has
begun, Treasurer A resigns and Treasurer B takes over. The
Commission should pursue Treasurer A in his individual capacity, and
Treasurer B in her official capacity. If Treasurer B resigns and is
succeeded by Treasurer C prior to the conclusion of the enforcement
matter, the Commission should then continue to pursue Treasurer A in
his individual capacity and pursue Treasurer C in her official
capacity. Treasurer B is no longer named in her official capacity.
\12\ A deeper examination of the court file indicates that--
despite the California Democratic Party court's assertion to the
contrary''the Commission never actually pled that the treasurer in
this case was personally liable. Rather, the complaint references
the treasurer ``as treasurer'' and the Commission's response to the
treasurer's motion to dismiss indicates that the Commission was
pursuing the treasurer ``in his official capacity.'' Compl.,
paragraphs 8, 58-59, Prayer paragraphs 1-5; Resp. to Def. Mot. to
Dismiss, p. 21. However, the California Democratic Party court's
result underscores the need for the Commission to delineate more
clearly the capacity in which it pursues treasurers.
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VII. Proposed Policy
In light of the considerations explained above, the Commission is
considering exercising its discretion in enforcement matters by naming
treasurers as follows:
1. In all enforcement actions where a political committee is a
respondent, name as respondents the committee and its current treasurer
``in (his or her) official capacity as treasurer.''
2. In enforcement actions where a treasurer has apparently breached
a personal obligation owing by virtue of his or her responsibilities
under the Act and regulations, or a prohibition that applies to
individuals, name that treasurer as a respondent ``in (his or her)
personal capacity.''
The Commission invites comments on this policy that is under
consideration. Comments may be submitted on any aspect of the policy
being considered, including:
(A) If the Commission adopts the policy, are there certain
circumstances that warrant flexibility in applying the policy?
(B) Whether, and to what extent, the Commission should consider a
treasurer's ``best efforts'' to comply with the law.
(C) Whether and how to apply the prospective policy in its
Administrative Fines program.
Dated: January 23, 2004.
Bradley A. Smith,
Chairman, Federal Election Commission.
[FR Doc. 04-1790 Filed 1-27-04; 8:45 am]
BILLING CODE 6715-01-P