[Federal Register Volume 72, Number 60 (Thursday, March 29, 2007)]
[Rules and Regulations]
[Pages 14662-14668]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-5730]
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FEDERAL ELECTION COMMISSION
11 CFR Part 111
[Notice 2007-7]
Best Efforts in Administrative Fines Challenges
AGENCY: Federal Election Commission.
ACTION: Final Rules and Transmittal of Rules to Congress.
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SUMMARY: The Federal Election Commission is revising its regulations to
amend four aspects of its Administrative Fines Program (``AFP''), a
streamlined process through which the Commission assesses civil money
penalties for late filers and non-filers under the Federal Election
Campaign Act of 1971, as amended (``FECA''). First, the Commission is
revising its rules regarding the permissible grounds for challenging a
proposed civil money penalty by clarifying the scope of the defense
based on factual errors. Second, the Commission is incorporating a
defense for political committees that demonstrate that they used their
best efforts to file reports timely. Third, the Commission is revising
its rules regarding its final determinations to clarify when the
Commission finds that no violation has occurred. Lastly, the rules are
being amended to explain that the Commission's statement of reasons for
its final decision in an AFP matter usually consists of the reasons set
forth by the Commission's reviewing officer as adopted by the
Commission. The supplementary information that follows provides further
information.
EFFECTIVE DATE: April 30, 2007.
FOR FURTHER INFORMATION CONTACT: Mr. J. Duane Pugh Jr., Acting
Assistant General Counsel, or Ms. Margaret G. Perl, Attorney, 999 E
Street, NW., Washington, DC 20463, (202) 694-1650 or (800) 424-9530.
SUPPLEMENTARY INFORMATION: Through the AFP, the Commission may assess a
civil money penalty for a violation of the reporting requirements of 2
U.S.C. 434(a) (such as not filing or filing late) without using the
traditional enforcement procedures reserved for more serious violations
under 2 U.S.C.
[[Page 14663]]
437g. See 2 U.S.C. 437g(a)(4)(C).\1\ Congress intended the Commission
to process these straightforward violations through a ``simplified
procedure'' that would ease the enforcement burden on the Commission.
See H.R. Rep. No. 106-295, at 11-12 (1999). The rules governing the AFP
create a streamlined procedure that balances the respondent's rights to
notice and opportunity to be heard with the need to operate the AFP in
an expeditious manner without undue administrative burden. See
Explanation and Justification for Final Rule on Administrative Fines,
65 FR 31787, 31788 (May 19, 2000) (``Admin Fines E&J'').\2\
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\1\ The AFP applies to violations of the reporting requirements
by political committees and their treasurers. See 11 CFR 111.30.
\2\ The AFP is set to expire on December 31, 2008. See Pub. L.
No. 109-115, sec. 721, 119 Stat. 2396, 2493-94 (2005); Final Rule on
Extension of Administrative Fines Program, 70 FR 75717 (Dec. 21,
2005) (extending the sunset date in 11 CFR 111.30 to Dec. 31, 2008).
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When the Commission finds reason to believe (``RTB'') that a
political committee and its treasurer (``respondents'') violated the
reporting requirements, the respondents may challenge the finding and
the proposed civil money penalty only for certain specified reasons.
See revised 11 CFR 111.35. The Commission's reviewing officer considers
the challenge and forwards a recommendation to the Commission. See 11
CFR 111.36(e). After considering the challenge, the reviewing officer's
recommendation, and any subsequent comments from the respondent
regarding the recommendation, the Commission makes a final
determination. See revised 11 CFR 111.37. The Commission assesses civil
money penalties based on published penalty schedules set forth in 11
CFR 111.43. Respondents may challenge the Commission's final
determination in U.S. District Court. See 2 U.S.C. 437g(a)(4)(C)(iii);
11 CFR 111.38.
In Lovely v. FEC, 307 F. Supp. 2d 294 (D. Mass. 2004), a political
committee challenged a civil money penalty assessed by the Commission
through the AFP. The political committee argued that it had used its
best efforts to file the report in question and that this constituted a
valid and complete defense under FECA's ``best efforts'' provision in 2
U.S.C. 432(i). See Lovely, 307 F. Supp. 2d at 299. Section 432(i)
provides that ``[w]hen the treasurer of a political committee shows
that best efforts have been used to obtain, maintain, and submit the
information required by this Act for the political committee, any
report or any records of such committee shall be considered in
compliance with [FECA].'' 2 U.S.C. 432(i).\3\ The Lovely court
concluded that the plain language of FECA requires the Commission to
consider the ``best efforts'' defense in the AFP, and that the record
in the Lovely case did not establish whether the Commission had
considered that defense. See Lovely, 307 F. Supp. 2d at 300-01. The
court remanded the case to the Commission for further proceedings. See
id. at 301. On remand, the Commission determined that the political
committee had failed to show it used best efforts to file timely and
confirmed the earlier imposition of the civil money penalty. See
Statement of Reasons in Administrative Fines Case 549 (Oct. 4, 2005),
available at http://www.fec.gov/law/law_rulemakings.shtml under the
heading ``Best Efforts in Administrative Fines Challenges.''
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\3\ The Commission had long interpreted the ``best efforts''
safe harbor to be limited to political committees' obligation to
report certain substantive information that may be beyond the
control of the committees to obtain. See 11 CFR 104.7 (defining
``best efforts'' for purposes of obtaining and submitting
contributor information). The Commission is currently considering in
a separate proceeding whether to revise its application of this
provision in enforcement matters outside the scope of the AFP. See
Proposed Statement of Policy Regarding Treasurer's Best Efforts to
Obtain, Maintain, and Submit Information as Required by the Federal
Election Campaign Act, 71 FR 71084 (Dec. 8, 2006). The Commission
anticipates issuing a final policy statement this year.
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Although the Lovely decision did not directly challenge the AFP
rules, and did not affect the validity of 11 CFR 111.35 or the
Commission's consideration of any other AFP matters, the Commission
opted to open a rulemaking by publishing a Notice of Proposed
Rulemaking on December 8, 2006, to seek public comment on proposed
revisions to the AFP based on the court's concerns. See Notice of
Proposed Rulemaking for Best Efforts in Administrative Fines
Challenges, 71 FR 71093 (Dec. 8, 2006) (``NPRM''). The Commission
received two comments, which are available at http://www.fec.gov/law/law_rulemakings.shtml under the heading ``Best Efforts in
Administrative Fines Challenges.''\4\ One comment made several
recommendations as to how the Commission could further clarify the
``best efforts'' defense by incorporating the business management
concept of ``best practices'' regarding corporate operation, financial
controls, risk prevention and risk assessment, while the other comment
was not relevant to this rulemaking.
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\4\ The Internal Revenue Service did not comment on the NPRM.
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After consideration of the relevant comment, the Commission has
decided to revise its rules governing the AFP in four ways, as
described below: (1) Clarifying the scope of the ``factual errors''
defense; (2) incorporating a ``best efforts'' defense for challenges to
RTB findings; (3) clarifying when the Commission may find that no
violation has occurred in an AFP matter; and (4) explaining the
procedure for issuing Commission statements of reasons for AFP final
determinations. These changes address the concerns raised by the Lovely
court and provide greater clarity regarding permissible grounds for
challenging an RTB finding. The revisions are substantially similar to
those proposed in the NPRM.
Under the Administrative Procedure Act, 5 U.S.C. 553(d), and the
Congressional Review of Agency Rulemaking Act, 5 U.S.C. 801(a)(1),
agencies must submit final rules to the Speaker of the House of
Representatives and the President of the Senate and publish them in the
Federal Register at least 30 calendar days before they take effect. The
final rules that follow were transmitted to Congress on March 23, 2007.
Explanation And Justification
I. Revised 11 CFR 111.35--Respondent Challenges to Reason To Believe
Finding or Proposed Civil Money Penalty
Revised section 111.35 sets forth the requirements for AFP
respondents' challenges to RTB findings and proposed civil money
penalties. Revised section 111.35(a) is clarified so that it applies
only to respondents that seek to challenge an RTB finding or proposed
civil money penalty.\5\ The Commission is reorganizing and clarifying
section 111.35 so that respondents may easily identify the basis for
challenges in the AFP. See revised 11 CFR 111.35(b).
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\5\ The revisions to section 111.35(a) did not alter the basic
timing requirement that a respondent must file a challenge with the
Commission within forty (40) days of when the Commission issues its
reason to believe finding. See revised 111.35(a); Admin Fines E&J,
65 FR at 31789.
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A. Revised 11 CFR 111.35(b)(1)--Changes to the ``Factual Errors''
Defense
The NPRM sought comment on proposed clarifications to the ``factual
errors'' defense and asked whether the regulation should include
examples of the types of factual errors that would suffice as grounds
for challenging an RTB finding. See NPRM, 71 FR at 71094. The comment
did not address this issue. The Commission has decided to revise
[[Page 14664]]
the rule regarding the ``factual errors'' defense as proposed in the
NPRM, except for stylistic changes. The revised rule states that the
facts alleged to be in error must be facts upon which the Commission
relied in its RTB finding. See revised 11 CFR 111.35(b)(1). Thus, a
respondent may not challenge an RTB finding based on factual errors
that are irrelevant to the Commission's actual RTB finding, such as
errors in the RTB finding regarding individual names or titles of
committee staff.
The revised rule provides two examples of the type of factual
errors that would properly support a challenge: the respondent was not
required to file the report in question, and the respondent did in fact
timely file as described in 11 CFR 100.19. See revised 11 CFR
111.35(b)(1). For example, a political committee that is not subject to
electronic filing requirements could challenge an RTB finding and
proposed civil money penalty under section 111.35(b)(1) by showing that
the paper copy was filed on time and the Commission relied on the
factual error that the committee was required instead to file
electronically. See 11 CFR 104.18(a). As referenced in the rule's
second example, Commission rules currently state that certain reports
are ``timely filed'' if they are deposited as registered or certified
mail with the U.S. Post Office, as Priority Mail or Express Mail
through the U.S. Post Office, or with an overnight delivery service to
be delivered the next business day with a postmark no later than 11:59
p.m. EST on the filing date. See 11 CFR 100.19(b). Thus, a respondent
who is not required to file electronically could challenge an RTB
finding based on evidence that it deposited the report in the proper
manner pursuant to section 100.19(b) on the filing date, even if the
Commission did not receive the report because of a delivery failure by
the U.S. Post Office or other delivery service. The Commission
emphasizes that the revisions to section 111.35(b)(1) do not create any
new ``factual errors'' defenses, but simply recognize the types of
errors that the Commission has accepted previously as a defense in the
AFP.
B. Revised 11 CFR 111.35(b)(3)--``Best Efforts'' Defense
The NPRM also sought comment on whether to replace the
``extraordinary circumstances'' defense in the prior rule with a ``best
efforts'' defense for challenging an RTB finding based upon 2 U.S.C.
432(i). See NPRM, 71 FR at 71094-95 and former 11 CFR
111.35(b)(1)(iii). The comment generally supported the idea of a ``best
efforts'' defense. The Commission has decided to adopt the Lovely
court's interpretation of 2 U.S.C. 432(i) and to incorporate a ``best
efforts'' defense into the AFP. It appears in revised 11 CFR
111.35(b)(3) and is the same as the proposed rule, except for the
changes noted below. The ``best efforts'' defense in the revised rule
completely replaces the prior ``extraordinary circumstances'' defense
because the two defenses are largely coextensive. The Commission
reiterates its policy determination, as stated in the initial
rulemaking for the AFP, that respondents' defenses in the AFP should be
limited because the complete and timely disclosure of the political
committee's financial activity is a ``cornerstone of campaign finance
law.'' See Admin Fines E&J, 65 FR at 31789.
The Lovely court recognized that the Commission could ``refine by
regulation what best efforts means in the context of submitting a
report.'' Lovely, 307 F. Supp. 2d at 300. In exercising its authority
to interpret how to incorporate a ``best efforts'' defense into the AFP
rules, the Commission is mindful of the statutory terms chosen by
Congress. As also explained by the Commission in its statement of
reasons in the Lovely case after remand, section 432(i) creates a safe
harbor for treasurers who demonstrate that best efforts have been used
to submit reports required by FECA. ``Best'' is an adjective of the
superlative degree. Therefore, best efforts requires more than ``some''
or ``good'' efforts. Section 432(i)'s use of the phrase ``best
efforts,'' instead of a ``good faith'' standard, means that an AFP
respondent cannot rely upon the state of mind of the committee's
treasurer or staff to claim this defense.\6\ Instead, the Commission's
revised rule at 11 CFR 111.35(b)(3), which sets forth the ``best
efforts'' defense, focuses on actions taken by the respondent committee
or treasurer to comply with reporting deadlines.
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\6\ See Statement of Reasons in Administrative Fines Case 549
(Oct. 4, 2005).
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The ``best efforts'' defense is described in the revised rule as a
two-part test. The AFP respondent must demonstrate that: (1) The
respondent was prevented from filing in a timely manner by ``reasonably
unforeseen circumstances that were beyond the control'' of the
respondent; and (2) the respondent filed the report in question no
later than 24 hours after the end of the reasonably unforeseen
circumstances preventing the timely filing. See revised 11 CFR
111.35(b)(3). The Commission believes this test is straightforward and
should be easy for respondents to understand and document in their
written responses. The final rule differs slightly from the proposed
rule, which would have stated that the respondent must be prevented
from filing in a timely manner by ``unforeseen'' circumstances. The
Commission is making this change to emphasize that the ``best efforts''
defense is an objective test, which uses a reasonable person standard
and does not depend upon the committee's treasurer or staff's
subjective ability to foresee a particular circumstance. The examples
included in the rule in 11 CFR 111.35(c) and (d), described below,
illustrate how this defense operates as an objective test.
Under the first part of the defense, the respondent bears the
burden of showing that the reasonably unforeseen circumstances in fact
prevented the timely and proper filing of the required report. The NPRM
requested public comment regarding whether the Commission should apply
a ``but for'' or ``contributing factor'' test for determining whether a
respondent was prevented from timely filing under the rule. See NPRM,
71 FR at 71095. The comment did not address this issue. The Commission
has decided that this rule requires a strict causal relationship
between the circumstances described in the challenge (such as a natural
disaster) and the respondent's inability to file the report timely. It
is not sufficient for reasonably unforeseen circumstances to make it
merely more difficult than usual for the respondent to file on time.
The circumstance must cause the respondent to be unable to file in a
timely and proper manner, despite the respondent attempting to use all
available methods of filing. ``Best efforts'' is a high standard set by
FECA, and the Commission reminds respondents that there are multiple
ways for a committee to file required reports properly and timely. See,
e.g., 11 CFR 100.19(b) (political committees not required to file
electronically may file on paper by hand delivery, first class,
registered, certified, Priority or Express U.S. Mail, or overnight
delivery service); 11 CFR 104.18 (mandatory electronic filings accepted
through the Commission's filing system via internet, modem, or by
submission of diskette or CD). If the respondent is prevented from
using one method of filing by a problem (such as a technical problem
with the Commission's modems), the respondent cannot claim the ``best
efforts'' defense if it did not attempt to use other available methods
to file timely (such as
[[Page 14665]]
submission on a diskette or CD).\7\ Therefore, to satisfy the ``best
efforts'' defense, a respondent must demonstrate that it attempted to
use all available methods to file, but that timely filing by each
method was prevented by the reasonably unforeseen circumstances beyond
the control of the respondent.
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\7\ The Commission's guidance and instructions to political
committees required to file electronically makes clear that if a
report is successfully uploaded and accepted by the Commission, a
confirmation receipt (including a validation number) is immediately
sent to the committee via e-mail, fax or both. If a committee does
not receive such a receipt, the committee should not assume the
filing was received and should contact the Commission's technical
support personnel. See, e.g., ``Frequently Asked Questions About
Electronic Filing,'' available at http://www.fec.gov/support/faq_filing.shtml (last visited Mar. 16, 2007); ``Common Electronic
Filing Mistakes,'' available at http://www.fec.gov/elecfil/mistakes.shtml (last visited Mar. 16, 2007).
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The direct causal link between the reasonably unforeseen
circumstances and the ability of the respondent to file the report also
underlies the second part of the test for the ``best efforts'' defense.
A respondent must show that the report was properly filed no later than
24 hours after the resolution of the circumstances preventing the
timely filing. When the situation (such as a problem with Commission
computers) is resolved, the Act's high standard of ``best efforts''
requires that the respondent file the report within a reasonably short
period of time. The NPRM requested public comment regarding whether the
24-hour period in the proposed rule was appropriate for the ``best
efforts'' defense. See NPRM, 71 FR at 71095. The comment did not
address this issue. The Commission has determined that a 24-hour period
best serves the interest in disclosure of the information as soon as
practicable after the circumstances preventing the timely disclosure
are resolved.
C. Examples of Circumstances Under the ``Best Efforts'' Defense
To provide further guidance to respondents regarding the scope of
the ``best efforts'' defense, the revised rule includes examples of
circumstances that will be considered ``reasonably unforeseen and
beyond the control of the respondent,'' and examples of circumstances
that will not be considered ``reasonably unforeseen and beyond the
control of the respondent.'' See revised 11 CFR 111.35(c) and (d). The
comment argued that the rule should not be limited to examples of
defenses that would be unacceptable under the new ``best efforts''
defense, but should also include examples of defenses that would meet
the new defense to provide guidance to committees and treasurers. The
revised rule provides such illustrations. The examples of defenses in
the revised rule are the same as proposed in the NPRM, except as noted
otherwise below. Both sets of examples in revised section 111.35(c) and
(d) are non-exhaustive lists and should not be read to override the
general requirements of the defense in revised section 111.35(b)(3) as
discussed above.
1. Revised 11 CFR 111.35(c)--Reasonably Unforeseen Circumstances Beyond
Respondents' Control
Revised section 111.35(c) provides three examples of circumstances
that the Commission will consider ``reasonably unforeseen and beyond
the control'' of the respondent under a ``best efforts'' defense. The
first example is that a failure of Commission computers or Commission-
provided software, despite the respondent seeking technical assistance,
caused the respondent's untimely electronic filing. See revised 11 CFR
111.35(c)(1). This example is similar to the example in the prior
rules, in which a failure of Commission computers satisfied the
``extraordinary circumstances'' defense. See former 11 CFR
111.35(b)(4)(iv); Admin Fines E&J, 65 FR at 31790 (``Any failure of the
Commission's system that prevents committees from filing their reports
when due would be recognized as an extraordinary circumstance beyond
the respondents' control.'').\8\ The revised rule differs from the
proposed rule by including the respondent's seeking technical
assistance as part of the example. Consistent with the prior defense
based on Commission computer failures, the revised example clarifies
that political committees must use all Commission resources available
to aid with electronic filing, such as technical support manuals and
personnel, before a respondent will be considered ``prevented'' from
timely filing by Commission computer or software failures. Thus, any
failure of Commission computers, servers, filing system or Commission-
provided software of sufficient severity that it results in a
respondent being unable to file, despite the respondent seeking
assistance from the Commission's technical support personnel, is a
reasonably unforeseen circumstance beyond the respondent's control.
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\8\ In order to satisfy the prior ``extraordinary
circumstances'' defense, the failure of Commission computers had to
last at least 48 hours. See former 11 CFR 111.35(b)(1)(iii). The new
``best efforts'' defense does not contain any minimum time period
for the ``reasonably unforeseen circumstances that were beyond the
control'' of the respondent. See revised 11 CFR 111.35(b)(3).
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The second example in revised section 111.35(c)(2) is a
``widespread disruption of information transmissions over the Internet
not caused by any failure of the Commission's or respondent's computer
systems or Internet service provider.'' This example covers
circumstances in which technological problems at a third-party hub or
information transfer location, rather than the Commission's or
respondent's computer systems, caused widespread communication failures
on the Internet that left the respondent unable to send, or the
Commission unable to receive, an electronically filed report. This
failure to transmit information must occur irrespective of any failures
of the Commission's or respondent's computer systems or Internet
service providers. If a respondent demonstrates such a widespread
disruption of information transmissions occurred, the Commission will
consider it ``reasonably unforeseen circumstances that were beyond the
control'' of the respondent. As with all the examples in revised
section 111.35(c)(2), the respondent bears the burden of showing that
these reasonably unforeseen circumstances in fact prevented the
respondent from filing timely, despite attempts to file by any
available alternative methods permitted under Commission
regulations.\9\ This example has been refined from the proposed rule to
clarify the types of transmission failures contemplated.
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\9\ The Commission's electronic filing manuals detail step-by-
step instructions for the various methods of acceptable electronic
filing via the Internet, modem, or by saving the report to a
diskette or CD. See, e.g., ``FECFile User Manual for Candidate
Committees,'' available at http://www.fec.gov/elecfil/authorized_manual/manual.shtml (last visited Mar. 16, 2007).
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The final example in the rule states that a ``[s]evere weather or
other disaster-related incident'' is a reasonably unforeseen
circumstance beyond the control of the respondent. See revised 11 CFR
111.35(c)(3). Under the prior rule, the Commission deemed certain
weather conditions (lasting more than 48 hours) met the ``extraordinary
circumstances'' test, explaining that ``natural disasters where a
committee's office is located in the disaster area and the committee
cannot timely file a report because of lack of electricity or flooding
or destruction of committee records'' would satisfy the defense. See
previous 11 CFR 111.35(b)(1)(iii); Admin Fines E&J, 65 FR at 31790. The
revised rule permits such severe weather-related events occurring at
the respondent's or Commission's location
[[Page 14666]]
to form the basis for a ``best efforts'' defense. The Commission is not
defining with specificity the level of severity for weather or other
disaster-related incidents in revised section 111.35(c)(3) because a
respondent's challenge must show that the weather or disaster-related
incident in fact prevented the respondent from filing timely. Given
that the effects upon the respondent of each weather or disaster-
related incident will vary, the Commission will evaluate the particular
facts contained in individual challenges, instead of mandating such
details in a rule of general application.
2. Revised 11 CFR 111.35(d)--Circumstances That Are Not Reasonably
Unforeseen or Beyond Respondents' Control
Revised section 111.35(d) includes a non-exhaustive list of
circumstances that are not considered ``reasonably unforeseen and
beyond the control'' of the respondent, and will not support a ``best
efforts'' finding. See revised 11 CFR 111.35(d)(1) through (6). All but
two of these examples are drawn from the list of events that did not
constitute ``extraordinary circumstances'' under the Commission's prior
rule: Negligence; delays caused by committee vendors or contractors;
illness, inexperience or unavailability (including death) of the
treasurer or other staff; and committee computer, software or Internet
service provider failures. Compare revised 11 CFR 111.35(d)(1) through
(4) with former 11 CFR 111.35(b)(4). One example concerns Internet
service provider failures. See revised 11 CFR 111.35(d)(4). The
proposed rule described this example as failures of committee computers
or software. The final rule also includes Internet service provider
failures. Because many Internet service providers are available, a
failure limited to one provider is not a defense for late filing or not
filing. The revised rule adds two examples to this list based upon the
Commission's experience with respondent challenges in the AFP: A
failure to know filing dates and a failure to use Commission software
properly. See revised 11 CFR 111.35(d)(5) and (6).
Under the revised rule, a respondent's challenge will not succeed
if its ``best efforts'' defense is based on any of these circumstances
as the cause of the failure to file timely. The Commission notes that
the examples in revised section 111.35(d) are not exhaustive, but are
illustrative of the types of situations that are not reasonably
unforeseen and beyond the respondent's control. The Commission strongly
encourages all political committees to name assistant treasurers and
have additional staff available so that their ability to file reports
on time will not be compromised due to the unavailability or
inexperience of the treasurer or other staff. See Final Rules on
Administrative Fines, 68 FR 12572, 12573 (Mar. 17, 2003) (adding staff
``inexperience'' and ``unavailability'' as examples of circumstances
that will not be considered ``extraordinary'' under former 11 CFR
111.35(b)(4)(iii)).
The Commission's implementation of the ``best efforts'' defense set
forth in this revised rule serves as a proxy for the factual
investigation of a respondent's internal practices regarding filing of
reports that would ordinarily be necessary to determine whether such
practices were sufficient to constitute best efforts. The comment
argued that the Commission should conduct a full examination of the
business models and management procedures of each committee to
determine whether the committee implemented proper back-up systems and
other measures reflecting management ``best practices'' in the relevant
industry to reduce the risk of a late filing. However, such an
investigation would be resource-intensive for the Commission,
burdensome for the respondent, and inappropriate in the AFP, which is a
streamlined procedure created by Congress to alleviate the Commission's
enforcement burden for routine and minor filing violations. Absent
reasonably unforeseen circumstances that were beyond the control of the
respondent, the Commission sees no reason why political committees
cannot file reports on time.\10\ Thus, the Commission's implementation
of the ``best efforts'' defense appropriately incorporates a statutory
``best efforts'' standard, while taking into account the unique
streamlined nature of the AFP.
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\10\ See Admin Fines E&J, 65 FR at 31790 (stating that political
committees should be aware of their reporting duties and noting that
the Commission makes efforts to send reminders of deadlines and
political committees have ample time from the end of the reporting
period to the filing deadline to prepare and file reports).
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D. Revised 11 CFR 111.35(e)--Factual Basis for Challenge
The Commission is adding paragraph (e) to 11 CFR 111.35 to require
that the respondent's written response must detail the factual basis
supporting its challenge. Furthermore, respondents must provide
supporting documentation for their challenges. The comment did not
address this provision, which is identical to the proposed rule.
The three defenses specified in sections 111.35(b)(1) through (3)
(factual error, miscalculation of civil money penalty, and best
efforts) are the only permissible grounds for challenging the
Commission's RTB finding or proposed civil money penalty, and a
respondent's written response must be based on one of these grounds to
be considered by the reviewing officer and the Commission. Respondents
bear the burden of showing that a permissible defense is satisfied.\11\
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\11\ The Commission considers affidavits more persuasive
evidence than unsworn statements submitted in support of the
respondent's challenge.
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II. Revised 11 CFR 111.37--Commission Review of Respondent's Challenge
and Reviewing Officer's Recommendation
A. Revised 11 CFR 111.37(b)--Commission Finding That No Violation Has
Occurred
Revised section 111.37 sets forth procedures regarding the
Commission's final determination for AFP matters upon receipt of the
respondent's challenge and the reviewing officer's recommendation. See
revised 11 CFR 111.37(a) through (d). The NPRM sought comment on
proposed revisions to section 111.37(b) regarding Commission
determinations that no violation has occurred where the RTB finding is
based on a factual error, and where the respondent demonstrated it used
best efforts to file timely. See NPRM, 71 FR at 71095. The comment did
not address these rules. The Commission is revising section 111.37(b)
to clarify that the existence of factual errors or a finding of best
efforts are complete defenses. Thus, if one of these defenses is
satisfied, the Commission will conclude that no violation of FECA has
occurred. Please note that the defense based on an incorrect basis for
calculating the civil money penalty (section 111.35(b)(2)) is a defense
only as to the amount of the civil money penalty and does not serve as
a basis for a finding of no violation under the AFP.
B. Revised 11 CFR 111.37(d)--Commission Statement of Reasons in AFP
Final Determinations
The NPRM sought comment on proposed revisions to section 111.37(d)
to make clear that the reasons for the reviewing officer's
recommendation regarding the challenge, unless modified or rejected by
the Commission, will serve as the Commission's statement of reasons
regarding the final determination in the AFP matter.\12\ See NPRM, 71
FR at 71095. This proposed
[[Page 14667]]
revision addresses the Lovely court's concerns that it was unclear what
constituted the statement of reasons for the Commission's final
determination in that matter. The comment did not address this issue.
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\12\ These revisions do not affect any statements of reasons the
Commissioners may issue in enforcement matters under review.
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The Commission is revising section 111.37(d) to indicate that,
unless otherwise indicated by the Commission, the statement of reasons
for the Commission's final determination in an AFP matter consists of
the reasons provided by the reviewing officer for the recommendation,
if approved by the Commission. See Lovely, 307 F. Supp. 2d at 301
(stating that the Commission's ``adoption of a reviewing officer's
recommendation may suffice in some circumstances''). Statements setting
forth additional or different reasons may also be issued. The revised
rule also recognizes that the Commission may modify or reject the
reviewing officer's recommendation in whole or in part. See 11 CFR
111.37(d). In such cases, the Commission will indicate the grounds for
its action and it or individual Commissioners may issue one or more
statements of reasons.
Former section 111.37(d) provided that the Commission could
determine that a violation of 2 U.S.C. 434(a) had occurred, but waive
the civil money penalty because the respondent demonstrated the
existence of ``extraordinary circumstances'' under former section
111.35(b)(1)(iii). See former 11 CFR 111.37(d). As discussed above, the
Commission is removing the ``extraordinary circumstances'' defense and
replacing it with a ``best efforts'' defense in revised section
111.35(b)(3). Under 2 U.S.C. 432(i), if the Commission determines that
the treasurer used best efforts in compliance with this rule, there is
no violation of FECA and the Commission will so notify the respondent
pursuant to revised section 111.37(b). See revised 11 CFR 111.37(b).
Therefore, the Commission need not retain the former section 111.37(d).
Certification of No Effect Pursuant to 5 U.S.C. 605(b) (Regulatory
Flexibility Act)
The Commission certifies that the attached final rules will not
have a significant economic impact on a substantial number of small
entities. The basis for this certification is that any individuals and
not-for-profit entities affected by these rules are not ``small
entities'' under 5 U.S.C. 601(6). The definition of ``small entity''
does not include individuals, and classifies a not-for-profit
enterprise as a ``small organization'' if it is independently owned and
operated and not dominant in its field. 5 U.S.C. 601(4). The rules
apply to all types of political committees and their treasurers. State
political party committees are not independently owned and operated
because they are not financed and controlled by a small identifiable
group of individuals, and they are affiliated with the larger national
political party organizations. In addition, the State political party
committees representing the Democratic and Republican parties have a
major controlling influence within the political arena of their State
and are thus dominant in their field. District and local party
committees are generally considered affiliated with the State
committees and need not be considered separately. To the extent that
any State party committees representing minor political parties or any
other political committees might be considered ``small organizations,''
the number that would be affected by this rule is not substantial.
Furthermore, any separate segregated funds affected by these rules
are not-for-profit political committees that do not meet the definition
of ``small organization'' because they are financed by a combination of
individual contributions and financial support for certain expenses
from corporations, labor organizations, membership organizations, or
trade associations, and therefore are not independently owned and
operated. Most of the other political committees affected by these
rules are not-for-profit committees that do not meet the definition of
``small organization.'' Most political committees are not independently
owned and operated because they are not financed by a small
identifiable group of individuals. Most political committees rely on
contributions from a large number of individuals to fund the
committees' operations and activities.
The final rules also do not impose any additional restrictions or
increase the costs of compliance for respondents within the AFP.
Instead, the final rules provide additional defenses available to
political committees and their treasurers, thereby potentially
increasing the number of situations in which the Commission assesses no
civil money penalty. Moreover, these rules apply only in the AFP, where
penalties are proportionate to the amount of a political committee's
financial activity. Any political committee meeting the definition of
``small entity'' would be subject to lower fines than larger committees
with more financial activity. Therefore, the final rules will not have
a significant economic impact on a substantial number of small
entities.
List of Subjects in 11 CFR Part 111
Administrative practice and procedures, Elections, Law enforcement.
0
For the reasons set out in the preamble, the Federal Election
Commission is amending subchapter A of chapter I of Title 11 of the
Code of Federal Regulations as follows:
PART 111--COMPLIANCE PROCEDURE (2 U.S.C. 437g, 437d(a))
0
1. The authority citation for part 111 is revised to read as follows:
Authority: 2 U.S.C. 432(i), 437g, 437d(a), 438(a)(8); 28 U.S.C.
2461 nt.
0
2. Section 111.35 is revised to read as follows:
Sec. 111.35 If the respondent decides to challenge the alleged
violation or proposed civil money penalty, what should the respondent
do?
(a) To challenge a reason to believe finding or proposed civil
money penalty, the respondent must submit a written response to the
Commission within forty (40) days of the Commission's reason to believe
finding.
(b) The respondent's written response must assert at least one of
the following grounds for challenging the reason to believe finding or
proposed civil money penalty:
(1) The Commission's reason to believe finding is based on a
factual error including, but not limited to, the committee was not
required to file the report, or the committee timely filed the report
in accordance with 11 CFR 100.19;
(2) The Commission improperly calculated the civil money penalty;
or
(3) The respondent used best efforts to file in a timely manner in
that:
(i) The respondent was prevented from filing in a timely manner by
reasonably unforeseen circumstances that were beyond the control of the
respondent; and
(ii) The respondent filed no later than 24 hours after the end of
these circumstances.
(c) Circumstances that will be considered reasonably unforeseen and
beyond the control of respondent include, but are not limited to:
(1) A failure of Commission computers or Commission-provided
software despite the respondent seeking technical assistance from
Commission personnel and resources;
(2) A widespread disruption of information transmissions over the
Internet not caused by any failure of the Commission's or respondent's
computer systems or Internet service provider; and
[[Page 14668]]
(3) Severe weather or other disaster-related incident.
(d) Circumstances that will not be considered reasonably unforeseen
and beyond the control of respondent include, but are not limited to:
(1) Negligence;
(2) Delays caused by committee vendors or contractors;
(3) Illness, inexperience, or unavailability of the treasurer or
other staff;
(4) Committee computer, software or Internet service provider
failures;
(5) A committee's failure to know filing dates; and
(6) A committee's failure to use filing software properly.
(e) Respondent's written response must detail the factual basis
supporting its challenge and include supporting documentation.
0
3. In section 111.37, paragraphs (b) and (d) are revised to read as
follows:
Sec. 111.37 What will the Commission do once it receives the
respondent's written response and the reviewing officer's
recommendation?
* * * * *
(b) If the Commission, after reviewing the reason to believe
finding, the respondent's written response, and the reviewing officer's
written recommendation, determines by an affirmative vote of at least
four (4) of its members, that no violation has occurred (either because
the Commission had based its reason to believe finding on a factual
error or because the respondent used best efforts to file in a timely
manner) or otherwise terminates its proceedings, the Commission shall
authorize the reviewing officer to notify the respondent by letter of
its final determination.
* * * * *
(d) When the Commission makes a final determination under this
section, the statement of reasons for the Commission action will,
unless otherwise indicated by the Commission, consist of the reasons
provided by the reviewing officer for the recommendation, if approved
by the Commission, although statements setting forth additional or
different reasons may also be issued. If the reviewing officer's
recommendation is modified or not approved, the Commission will
indicate the grounds for its action and one or more statements of
reasons may be issued.
Dated: March 22, 2007.
Robert D. Lenhard,
Chairman, Federal Election Commission.
[FR Doc. E7-5730 Filed 3-28-07; 8:45 am]
BILLING CODE 6715-01-P