Best Efforts in Administrative Fines Challenges, 71093-71096 [E6-20735]
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V. Parallel Proceedings
The Commission recognizes that
persons self-reporting to the
Commission may face special concerns
in connection with parallel criminal
investigations, State administrative
proceedings, and/or civil litigation. The
Commission expects that persons who
self-report to the Commission will
inform the Commission of any existing
parallel proceedings. The Commission
encourages persons who self-report to
the Commission also to self-report
related violations to any law
enforcement agency with jurisdiction
over the activity. This will assist the
Commission, where appropriate and
possible, in working with other Federal,
State, and local agencies to facilitate a
global and/or contemporaneous
resolution of related violations by a selfreporting person. The possibility of such
a resolution is enhanced when the selfreporting person expresses a willingness
to engage other government agencies
that may have jurisdiction over the
conduct and to cooperate with joint
discovery and disclosure of facts and
settlement positions with respect to the
different agencies.
In situations where contemporaneous
resolution of parallel matters is not
feasible, the Commission will consider
whether terms contained in a
conciliation agreement with the
Commission may affect potential
liability the same respondent
realistically faces from another agency.
In appropriate cases, where there has
been self-reporting and full cooperation,
the Commission may agree to enter into
conciliation without requiring
respondents to admit that their conduct
was ‘‘knowing and willful,’’ even where
there is evidence that may be viewed as
supporting this conclusion. (The civil
penalty, however, may be based on
‘‘knowing and willful’’ conduct.) The
Commission has followed this practice
in several self-reported matters where
the organizational respondents
promptly self-reported and took
comprehensive and immediate
corrective action that included the
dismissal of all individual corporate
officers whose actions formed the basis
for the organization’s potential
‘‘knowing and willful’’ violation.
The Commission, which has the
statutory authority to refer ‘‘knowing
and willful’’ violations of the FECA to
the Department of Justice for potential
criminal prosecution, 2 U.S.C.
437g(a)(5)(C), and to report information
regarding violations of law not within
its jurisdiction to appropriate law
enforcement authorities, 2 U.S.C.
437d(a)(9), will not negotiate whether it
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refers, reports, or otherwise discusses
information with other law enforcement
agencies. Although the Commission
cannot disclose information regarding
an investigation to the public, it can and
does share information on a confidential
basis with other law enforcement
agencies.
VI. Conclusion
In light of the considerations
explained above, the Commission is
considering issuing a policy statement
to clarify how it exercises its discretion
in enforcement matters involving selfreported violations of the FECA. The
Commission invites comments on any
aspect of the proposed policy statement,
including:
(A) Whether and to what extent the
Commission should consider the
various factors described above, and/or
other factors, in resolving self-reported
violations of the FEC; and
(B) Whether and how to apply the
new proposed Fast Track Resolution
process in resolving self-reported
violations of the FECA.
Dated: December 1, 2006.
Michael E. Toner,
Chairman, Federal Election Commission.
[FR Doc. E6–20845 Filed 12–7–06; 8:45 am]
BILLING CODE 6715–01–P
FEDERAL ELECTION COMMISSION
11 CFR Part 111
[Notice 2006–22]
Best Efforts in Administrative Fines
Challenges
Federal Election Commission.
Notice of proposed rulemaking.
AGENCY:
ACTION:
SUMMARY: The Federal Election
Commission seeks public comment on
proposed revisions to its regulations
regarding the Commission’s
administrative fines program. The
administrative fines program is a
streamlined process through which the
Commission finds and penalizes
violations of 2 U.S.C. 434(a), which
requires committees registered with the
Commission to file periodic reports.
Current Commission regulations set
forth several grounds upon which a
respondent may base a challenge to an
administrative fine. The proposed
regulations replace the current
‘‘extraordinary circumstances’’ defense
with a ‘‘best efforts’’ defense. The
proposed regulations would also
provide for Commission statements of
reasons on administrative fines final
determinations. The Commission has
made no final decision on the issues
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presented in this rulemaking. Further
information is provided in the
supplementary information that follows.
DATES: Comments must be received on
or before January 8, 2007.
ADDRESSES: All comments must be in
writing, must be addressed to Mr. J.
Duane Pugh Jr., Acting Assistant
General Counsel, and must be submitted
in either e-mail, facsimile, or paper copy
form. Commenters are strongly
encouraged to submit comments by email to ensure timely receipt and
consideration. E-mail comments must
be sent to either afbestefforts@fec.gov or
submitted through the Federal
eRegulations Portal at https://
www.regulations.gov. If e-mail
comments include an attachment, the
attachment must be in either Adobe
Acrobat (.pdf) or Microsoft Word (.doc)
format. Faxed comments must be sent to
(202) 219–3923, with paper copy followup. Paper comments and paper copy
follow-up of faxed comments must be
sent to the Federal Election
Commission, 999 E Street, NW.,
Washington, DC 20463. All comments
must include the full name and postal
service address of the commenter or
they will not be considered. The
Commission will post comments on its
Web site after the comment period ends.
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: Under the
administrative fines program, 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.
2 U.S.C. 437g(a)(4)(C). Congress
intended the Commission to process
these straightforward violations through
a ‘‘simplified procedure’’ that would
ease the enforcement burden on the
Commission. H.R. Rep. No. 106–295 at
11 (1999). In the final rules establishing
and governing the administrative fines
program, the Commission created a
streamlined procedure that balances the
respondent’s rights to notice and
opportunity to be heard with the
Congressional intent that the
administrative fines program work in an
expeditious manner to resolve these
reporting violations without additional
administrative burden. Final Rule on
Administrative Fines, 65 FR 31787–88
(May 19, 2000).
The Federal Election Campaign Act
(‘‘FECA’’) provides that ‘‘[w]hen the
treasurer of a political committee shows
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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).1 The current
administrative fines regulations
enumerate grounds upon which a
respondent may challenge a
Commission determination that an
administrative fine should be imposed,
but a best efforts defense is not
explicitly listed among these grounds.
In Lovely v. FEC, 307 F. Supp. 2d 294
(D. Mass. 2004), the court addressed a
political committee’s challenge to an
administrative fine assessed by the
Commission for the committee’s failure
to timely file a report. The committee
argued that it had made best efforts to
file the report and that this constituted
a valid and complete defense to the fine.
The court concluded that the plain
language of the Act requires the
Commission to entertain a best efforts
defense in the administrative fines
context, and that it was unclear from the
record in the Lovely case whether the
Commission had considered the best
efforts defense raised by the committee.
The court remanded the case to the
Commission for further proceedings.2
On remand, the Commission
determined that the committee had
failed to show best efforts and left the
administrative fine in place.
Commission’s Statement of Reasons in
Administrative Fines Case #549 on
Remand From the United States District
Court for the District of Massachusetts,
Oct. 4, 2005, available at https://
www.fec.gov/members/toner/sor/
soraf549.pdf.
The proposed regulations would
explicitly incorporate a best efforts
defense into the process for challenging
an administrative fine, would clarify the
scope of the ‘‘factual errors’’ defense,
and would provide for statements of
reasons for administrative fines final
determinations. These proposed
changes are intended to address the
concerns raised by the Lovely court as
well as to provide greater clarity
1 The Commission has long interpreted the ‘‘best
efforts’’ provision as a statutory safe harbor limited
to political committees’ obligation to report certain
substantive information that may be beyond the
control of the committees to obtain. 11 CFR 104.7
(defining ‘‘best efforts’’ for purposes of obtaining
and submitting contributor information).
2 The Lovely case did not involve a challenge to
the validity of the administrative fines program
rules, and those rules have continued in full force
and effect since the district court order. However,
the court stated 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.
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regarding permissible grounds for
challenging administrative fines.
I. 11 CFR 111.35—Grounds for
Challenging an Administrative Fines
Reason To Believe Finding
Under the administrative fines
regulations, if the Commission
determines that it has reason to believe
(‘‘RTB’’) that a committee has failed to
timely file a required report, it notifies
the respondent of this finding and of the
proposed civil penalty. 11 CFR 111.32.
The Commission makes RTB findings
based on an internal process that
identifies late filers. The amount of the
penalty is determined using the
schedules at 11 CFR 111.43. Following
an RTB finding, a respondent has forty
days to challenge the alleged violation.
11 CFR 111.35. Challenges are reviewed
by Commission staff and ultimately
decided by the Commission. 11 CFR
111.36, 111.37.
The current regulations set forth three
permissible grounds upon which to
challenge an administrative fines RTB
finding. Respondents are permitted to
challenge administrative fines on the
basis of ‘‘factual errors,’’ the improper
calculation of a penalty, or
‘‘extraordinary circumstances that were
beyond the control of the respondent
and that were for a duration of at least
48 hours and that prevented the
respondent from filing the report in a
timely manner.’’ 11 CFR 111.35(b)(1).
The regulations also provide examples
of situations that will not be considered
‘‘extraordinary circumstances,’’
including negligence, problems with
vendors or contractors, illness,
inexperience, or unavailability of staff,
and computer failures (except failures of
the Commission’s computers). 11 CFR
111.35(b)(4).
This NPRM proposes a revision of 11
CFR 111.35 that clarifies the scope of
the regulation’s ‘‘factual errors’’ defense
and also replaces the ‘‘extraordinary
circumstances’’ defense with a best
efforts defense.
A. 11 CFR 111.35(b)(1)(i)—Changes to
the ‘‘Factual Errors’’ Defense
The proposed regulation retains a
‘‘factual errors’’ defense, currently at 11
CFR 111.35(b)(1)(i), but clarifies the
boundaries of this defense by stating
that the facts alleged to be in error must
be facts upon which the Commission
relied in its RTB finding. Proposed 11
CFR 111.35(b)(1). The proposed
regulation also provides two examples
of such factual errors: that the
respondent was not required to file the
report in question, and that the
respondent did in fact timely file as
described in 11 CFR 100.19. Id. For
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instance, a paper filer that has ‘‘timely
filed’’ a report under the definition in 11
CFR 100.19 would be considered to
have timely filed for purposes of the
administrative fines program. This
would be true even if the Commission
does not ultimately receive the filing,
due, for instance, to errors by the
overnight delivery service or in the
handling of the mail. The Commission
seeks comment on this approach.
Should other types of factual errors be
allowed as grounds for challenge to the
finding of a violation? Should the
regulation include additional examples
of qualifying factual errors?
B. 11 CFR 111.35(b)(1)(iii)—Replacing
the ‘‘Extraordinary Circumstances’’
Defense With a Best Efforts Defense
The proposed regulation replaces the
‘‘extraordinary circumstances’’ defense
currently at 11 CFR 111.35(b)(1)(iii)
with a best efforts defense. The
proposed regulation makes clear that a
respondent may base a challenge to an
administrative fine on a showing that
respondent made best efforts to timely
file the report in question. To show that
it made best efforts to timely file, a
respondent would be required to
demonstrate that both (i) Respondent
was prevented from filing in a timely
manner because of unforeseen
circumstances that were beyond the
control of the respondent, and (ii)
respondent filed the report in question
within 24 hours of the respondent’s no
longer being prevented from filing.
Proposed 11 CFR 111.35(b)(3). The
proposed regulation gives two examples
of unforeseen circumstances that were
beyond the control of the respondent: a
failure of Commission computers,
Commission software, or the internet;
and severe weather or other disasterrelated incident. Proposed 11 CFR
111.35(c). The proposed regulation also
gives examples of circumstances that
will not be considered unforeseen and
beyond the control of the respondent,
including negligence; delays caused by
committee vendors or contractors;
illness, inexperience, or unavailability
of the treasurer or other staff; committee
computer or software failures; a
committee’s failure to know filing dates;
or a committee’s failure to use FEC
filing software properly. Proposed 11
CFR 111.35(d). Like the current
regulations, the proposed regulations
would require a respondent to explain
the factual basis supporting the
respondent’s challenge. Proposed 11
CFR 111.35(e).
The best efforts defense set forth in
the proposed regulation would serve as
a proxy for a full factual investigation of
a respondent committee’s internal
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practices regarding filing of reports and
an analysis of whether such practices
were sufficient to constitute best efforts.
Such an investigation would be
particularly burdensome in the context
of the administrative fines program,
which is meant to be a ‘‘streamlined
procedure.’’ Final Rule on
Administrative Fines, 65 FR at 31787.
The Commission seeks comment on
the proposed best efforts defense. Will
the proposed test serve as a sufficient
proxy for a full best efforts
investigation? Are there other
circumstances not contemplated by the
proposed regulations that could prevent
a respondent from timely filing,
notwithstanding the respondent having
taken best efforts to ensure that the
report would be timely filed? Should
the Commission apply a ‘‘but for’’ test,
a ‘‘contributing factor’’ test, or some
other test for determining whether a
respondent was prevented from timely
filing by particular circumstances?
Should the Commission retain an
extraordinary circumstances defense?
Should the Commission entertain
defenses based on extreme financial
hardship? Should the regulations be
more specific as to what constitutes
computer or Internet failures, or severe
weather or disaster? Should the list of
circumstances that will not be
considered unforeseen and beyond the
control of the respondent be expanded
or contracted, and if so by which
elements? Should the 24 hour period be
longer or shorter, or should committees
be required to file as soon as would be
practicable? What sort of supporting
evidence should a respondent be
required to provide? Are there other
important factors that the Commission
should incorporate into a best efforts
defense? Alternatively, should the
Commission refrain from adding a
specific best efforts defense to the
administrative fines regulation? Does
Lovely preclude this approach?
II. 11 CFR 111.37—Commission Action
on Administrative Fines Challenges
Section 111.37 of the Commission’s
rules guides Commission decisions
regarding the final determination of
administrative fines challenges. The
proposed regulations direct the
Commission to conclude that no
violation has occurred if the
Commission based its RTB finding on a
factual error or if the respondent made
best efforts to timely file. Proposed 11
CFR 111.37(b). The proposed
regulations also include a new section
111.37(d), which makes clear that the
staff recommendation regarding the
challenge, including any changes made
by the Commission, will serve as the
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Commission’s statement of reasons
regarding the administrative fine at
issue. This change is intended to satisfy
the Lovely court’s concern that, in that
case, the Commission had issued no
opinion or statement of reasons along
with its final determination. Lovely, 307
F. Supp. 2d at 301. Finally, the
proposed regulations amend section
111.37(d) to eliminate reference to the
‘‘extraordinary circumstances’’ defense,
which would no longer be applicable.
The Commission seeks comment on
these changes. Are there additional
conforming amendments required to
implement the proposed best efforts
defense?
Certification of No Effect Pursuant to 5
U.S.C. 605(b) (Regulatory Flexibility
Act)
The Commission certifies that the
attached proposed rules would not, if
promulgated, 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 that would be
affected by these proposed rules are not
‘‘small entities’’ under 5 U.S.C. 601. The
definition of ‘‘small entity’’ does not
include individuals, but classifies a notfor-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). 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
proposed rule is not substantial.
Furthermore, any separate segregated
funds that would be affected by these
proposed 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
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71095
therefore are not independently owned
and operated. Most of the other political
committees that would be affected by
these proposed 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. In
addition, most political committees rely
on contributions from a large number of
individuals to fund the committees’
operations and activities.
The proposed rules also would not
impose any additional restrictions or
increase the costs of compliance for
respondents within the administrative
fines program. Instead, the proposed
rules would provide additional defenses
available to respondents in the
administrative fines program, thereby
and potentially increasing the situations
in which the Commission imposes no
civil money penalty. Moreover, the
proposed rules would apply only in the
administrative fines program, 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
attached proposed rules, if promulgated,
would 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.
For the reasons set out in the
preamble, the Federal Election
Commission proposes to amend
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))
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.
2. Section 111.35 is revised to read as
follows:
§ 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 days of the Commission’s
reason to believe finding.
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(b) The respondent’s written response
must establish at least one of the
following grounds for challenging the
reason to believe finding and/or civil
money penalty:
(1) The Commission’s reason to
believe finding is based on a factual
error. Examples of a factual error
include, but are not limited to, that the
committee was not required to file or
that the committee timely filed as
described in 11 CFR 100.19 (such as by
timely depositing a paper filing with an
overnight delivery service);
(2) The Commission improperly
calculated the civil money penalty; or
(3) The respondent made best efforts
to file in a timely manner in that:
(i) The respondent was prevented
from filing in a timely manner because
of unforeseen circumstances that were
beyond the control of the respondent;
and
(ii) The respondent filed within 24
hours thereafter.
(c) Circumstances that will be
considered unforeseen and beyond the
control of respondent include, but are
not limited to, a failure of Commission
computers, Commission-provided
software, or the Internet, and severe
weather or other disaster-related
incident.
(d) Circumstances that will not be
considered unforeseen and beyond the
control of respondent include, but are
not limited to, negligence; delays caused
by committee vendors or contractors;
illness, inexperience, or unavailability
of the treasurer or other staff; committee
computer or software failures; a
committee’s failure to know filing dates;
or a committee’s failure to use filing
software properly.
(e) Respondent’s written response
must detail the factual basis supporting
the grounds and include any supporting
documentation.
3. In § 111.37, paragraphs (b) and (d)
are revised to read as follows:
§ 111.37 What will the Commission do
once it receives the respondent’s written
response and the reviewing officer’s
recommendation?
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(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
made best efforts to file in a timely
manner) or otherwise terminates its
proceedings, the Commission shall
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authorize the reviewing officer to notify
the respondent by letter of its final
determination.
*
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*
(d) When the Commission makes a
final determination under this section,
the statement of reasons for the
Commission action consists of the
reasons provided in the reviewing
officer’s recommendation, if adopted by
the Commission, subject to any
Commission amendments, additions,
substitutions, or statements of reasons.
Dated: November 30, 2006.
Michael E. Toner,
Chairman, Federal Election Commission.
[FR Doc. E6–20735 Filed 12–7–06; 8:45 am]
BILLING CODE 6715–01–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2006–26462; Directorate
Identifier 2006–NM–221–AD]
RIN 2120–AA64
Airworthiness Directives; Empresa
Brasileira de Aeronautica S.A.
(EMBRAER) Model ERJ 170–100 LR,
–100 STD, –100 SE, –100 SU, –200 LR,
–200 STD, and –200 SU Airplanes and
Model ERJ 190 Airplanes
Federal Aviation
Administration (FAA), Department of
Transportation (DOT).
ACTION: Notice of proposed rulemaking
(NPRM).
AGENCY:
SUMMARY: The FAA proposes to adopt a
new airworthiness directive (AD) for
certain EMBRAER Model ERJ 170–100
LR, –100 STD, –100 SE, –100 SU, –200
LR, –200 STD, and –200 SU airplanes
and Model ERJ 190 airplanes. This
proposed AD would require inspecting
to determine the part number and serial
number of the deployment actuator of
the ram air turbine (RAT) and related
investigative and corrective actions if
necessary. This proposed AD results
from reports that the RAT may not fully
deploy due to galling between the
piston rod and gland housing of the
deployment actuator. We are proposing
this AD to prevent the RAT from failing
to deploy, which could result in loss of
control of the airplane during in-flight
emergencies.
We must receive comments on
this proposed AD by January 8, 2007.
ADDRESSES: Use one of the following
addresses to submit comments on this
proposed AD.
DATES:
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• DOT Docket Web site: Go to
https://dms.dot.gov and follow the
instructions for sending your comments
electronically.
• Government-wide rulemaking Web
site: Go to https://www.regulations.gov
and follow the instructions for sending
your comments electronically.
• Mail: Docket Management Facility,
U.S. Department of Transportation, 400
Seventh Street, SW., Nassif Building,
Room PL–401, Washington, DC 20590.
• Fax: (202) 493–2251.
• Hand Delivery: Room PL–401 on
the plaza level of the Nassif Building,
400 Seventh Street, SW., Washington,
DC, between 9 a.m. and 5 p.m., Monday
through Friday, except Federal holidays.
Contact Empresa Brasileira de
Aeronautica S.A. (EMBRAER), P.O. Box
343–CEP 12.225, Sao Jose dos Campos–
SP, Brazil, for service information
identified in this proposed AD.
FOR FURTHER INFORMATION CONTACT:
Todd Thompson, Aerospace Engineer,
International Branch, ANM–116,
Transport Airplane Directorate, FAA,
1601 Lind Avenue, SW., Renton,
Washington 98057–3356; telephone
(425) 227–1175; fax (425) 227–1149.
SUPPLEMENTARY INFORMATION:
Comments Invited
We invite you to submit any relevant
written data, views, or arguments
regarding this proposed AD. Send your
comments to an address listed in the
ADDRESSES section. Include the docket
number ‘‘FAA–2006–26462; Directorate
Identifier 2006–NM–221–AD’’ at the
beginning of your comments. We
specifically invite comments on the
overall regulatory, economic,
environmental, and energy aspects of
the proposed AD. We will consider all
comments received by the closing date
and may amend the proposed AD in
light of those comments.
We will post all comments we
receive, without change, to https://
dms.dot.gov, including any personal
information you provide. We will also
post a report summarizing each
substantive verbal contact with FAA
personnel concerning this proposed AD.
Using the search function of that Web
site, anyone can find and read the
comments in any of our dockets,
including the name of the individual
who sent the comment (or signed the
comment on behalf of an association,
business, labor union, etc.). You may
review the DOT’s complete Privacy Act
Statement in the Federal Register
published on April 11, 2000 (65 FR
19477–78), or you may visit https://
dms.dot.gov.
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Agencies
[Federal Register Volume 71, Number 236 (Friday, December 8, 2006)]
[Proposed Rules]
[Pages 71093-71096]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-20735]
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FEDERAL ELECTION COMMISSION
11 CFR Part 111
[Notice 2006-22]
Best Efforts in Administrative Fines Challenges
AGENCY: Federal Election Commission.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Federal Election Commission seeks public comment on
proposed revisions to its regulations regarding the Commission's
administrative fines program. The administrative fines program is a
streamlined process through which the Commission finds and penalizes
violations of 2 U.S.C. 434(a), which requires committees registered
with the Commission to file periodic reports. Current Commission
regulations set forth several grounds upon which a respondent may base
a challenge to an administrative fine. The proposed regulations replace
the current ``extraordinary circumstances'' defense with a ``best
efforts'' defense. The proposed regulations would also provide for
Commission statements of reasons on administrative fines final
determinations. The Commission has made no final decision on the issues
presented in this rulemaking. Further information is provided in the
supplementary information that follows.
DATES: Comments must be received on or before January 8, 2007.
ADDRESSES: All comments must be in writing, must be addressed to Mr. J.
Duane Pugh Jr., Acting Assistant General Counsel, and must be submitted
in either e-mail, facsimile, or paper copy form. Commenters are
strongly encouraged to submit comments by e-mail to ensure timely
receipt and consideration. E-mail comments must be sent to either
afbestefforts@fec.gov or submitted through the Federal eRegulations
Portal at https://www.regulations.gov. If e-mail comments include an
attachment, the attachment must be in either Adobe Acrobat (.pdf) or
Microsoft Word (.doc) format. Faxed comments must be sent to (202) 219-
3923, with paper copy follow-up. Paper comments and paper copy follow-
up of faxed comments must be sent to the Federal Election Commission,
999 E Street, NW., Washington, DC 20463. All comments must include the
full name and postal service address of the commenter or they will not
be considered. The Commission will post comments on its Web site after
the comment period ends.
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: Under the administrative fines program, 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. 2 U.S.C.
437g(a)(4)(C). Congress intended the Commission to process these
straightforward violations through a ``simplified procedure'' that
would ease the enforcement burden on the Commission. H.R. Rep. No. 106-
295 at 11 (1999). In the final rules establishing and governing the
administrative fines program, the Commission created a streamlined
procedure that balances the respondent's rights to notice and
opportunity to be heard with the Congressional intent that the
administrative fines program work in an expeditious manner to resolve
these reporting violations without additional administrative burden.
Final Rule on Administrative Fines, 65 FR 31787-88 (May 19, 2000).
The Federal Election Campaign Act (``FECA'') provides that ``[w]hen
the treasurer of a political committee shows
[[Page 71094]]
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).\1\ The current
administrative fines regulations enumerate grounds upon which a
respondent may challenge a Commission determination that an
administrative fine should be imposed, but a best efforts defense is
not explicitly listed among these grounds.
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\1\ The Commission has long interpreted the ``best efforts''
provision as a statutory safe harbor limited to political
committees' obligation to report certain substantive information
that may be beyond the control of the committees to obtain. 11 CFR
104.7 (defining ``best efforts'' for purposes of obtaining and
submitting contributor information).
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In Lovely v. FEC, 307 F. Supp. 2d 294 (D. Mass. 2004), the court
addressed a political committee's challenge to an administrative fine
assessed by the Commission for the committee's failure to timely file a
report. The committee argued that it had made best efforts to file the
report and that this constituted a valid and complete defense to the
fine. The court concluded that the plain language of the Act requires
the Commission to entertain a best efforts defense in the
administrative fines context, and that it was unclear from the record
in the Lovely case whether the Commission had considered the best
efforts defense raised by the committee. The court remanded the case to
the Commission for further proceedings.\2\ On remand, the Commission
determined that the committee had failed to show best efforts and left
the administrative fine in place. Commission's Statement of Reasons in
Administrative Fines Case #549 on Remand From the United States
District Court for the District of Massachusetts, Oct. 4, 2005,
available at https://www.fec.gov/members/toner/sor/soraf549.pdf.
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\2\ The Lovely case did not involve a challenge to the validity
of the administrative fines program rules, and those rules have
continued in full force and effect since the district court order.
However, the court stated 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.
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The proposed regulations would explicitly incorporate a best
efforts defense into the process for challenging an administrative
fine, would clarify the scope of the ``factual errors'' defense, and
would provide for statements of reasons for administrative fines final
determinations. These proposed changes are intended to address the
concerns raised by the Lovely court as well as to provide greater
clarity regarding permissible grounds for challenging administrative
fines.
I. 11 CFR 111.35--Grounds for Challenging an Administrative Fines
Reason To Believe Finding
Under the administrative fines regulations, if the Commission
determines that it has reason to believe (``RTB'') that a committee has
failed to timely file a required report, it notifies the respondent of
this finding and of the proposed civil penalty. 11 CFR 111.32. The
Commission makes RTB findings based on an internal process that
identifies late filers. The amount of the penalty is determined using
the schedules at 11 CFR 111.43. Following an RTB finding, a respondent
has forty days to challenge the alleged violation. 11 CFR 111.35.
Challenges are reviewed by Commission staff and ultimately decided by
the Commission. 11 CFR 111.36, 111.37.
The current regulations set forth three permissible grounds upon
which to challenge an administrative fines RTB finding. Respondents are
permitted to challenge administrative fines on the basis of ``factual
errors,'' the improper calculation of a penalty, or ``extraordinary
circumstances that were beyond the control of the respondent and that
were for a duration of at least 48 hours and that prevented the
respondent from filing the report in a timely manner.'' 11 CFR
111.35(b)(1). The regulations also provide examples of situations that
will not be considered ``extraordinary circumstances,'' including
negligence, problems with vendors or contractors, illness,
inexperience, or unavailability of staff, and computer failures (except
failures of the Commission's computers). 11 CFR 111.35(b)(4).
This NPRM proposes a revision of 11 CFR 111.35 that clarifies the
scope of the regulation's ``factual errors'' defense and also replaces
the ``extraordinary circumstances'' defense with a best efforts
defense.
A. 11 CFR 111.35(b)(1)(i)--Changes to the ``Factual Errors'' Defense
The proposed regulation retains a ``factual errors'' defense,
currently at 11 CFR 111.35(b)(1)(i), but clarifies the boundaries of
this defense by stating that the facts alleged to be in error must be
facts upon which the Commission relied in its RTB finding. Proposed 11
CFR 111.35(b)(1). The proposed regulation also provides two examples of
such factual errors: that the respondent was not required to file the
report in question, and that the respondent did in fact timely file as
described in 11 CFR 100.19. Id. For instance, a paper filer that has
``timely filed'' a report under the definition in 11 CFR 100.19 would
be considered to have timely filed for purposes of the administrative
fines program. This would be true even if the Commission does not
ultimately receive the filing, due, for instance, to errors by the
overnight delivery service or in the handling of the mail. The
Commission seeks comment on this approach. Should other types of
factual errors be allowed as grounds for challenge to the finding of a
violation? Should the regulation include additional examples of
qualifying factual errors?
B. 11 CFR 111.35(b)(1)(iii)--Replacing the ``Extraordinary
Circumstances'' Defense With a Best Efforts Defense
The proposed regulation replaces the ``extraordinary
circumstances'' defense currently at 11 CFR 111.35(b)(1)(iii) with a
best efforts defense. The proposed regulation makes clear that a
respondent may base a challenge to an administrative fine on a showing
that respondent made best efforts to timely file the report in
question. To show that it made best efforts to timely file, a
respondent would be required to demonstrate that both (i) Respondent
was prevented from filing in a timely manner because of unforeseen
circumstances that were beyond the control of the respondent, and (ii)
respondent filed the report in question within 24 hours of the
respondent's no longer being prevented from filing. Proposed 11 CFR
111.35(b)(3). The proposed regulation gives two examples of unforeseen
circumstances that were beyond the control of the respondent: a failure
of Commission computers, Commission software, or the internet; and
severe weather or other disaster-related incident. Proposed 11 CFR
111.35(c). The proposed regulation also gives examples of circumstances
that will not be considered unforeseen and beyond the control of the
respondent, including negligence; delays caused by committee vendors or
contractors; illness, inexperience, or unavailability of the treasurer
or other staff; committee computer or software failures; a committee's
failure to know filing dates; or a committee's failure to use FEC
filing software properly. Proposed 11 CFR 111.35(d). Like the current
regulations, the proposed regulations would require a respondent to
explain the factual basis supporting the respondent's challenge.
Proposed 11 CFR 111.35(e).
The best efforts defense set forth in the proposed regulation would
serve as a proxy for a full factual investigation of a respondent
committee's internal
[[Page 71095]]
practices regarding filing of reports and an analysis of whether such
practices were sufficient to constitute best efforts. Such an
investigation would be particularly burdensome in the context of the
administrative fines program, which is meant to be a ``streamlined
procedure.'' Final Rule on Administrative Fines, 65 FR at 31787.
The Commission seeks comment on the proposed best efforts defense.
Will the proposed test serve as a sufficient proxy for a full best
efforts investigation? Are there other circumstances not contemplated
by the proposed regulations that could prevent a respondent from timely
filing, notwithstanding the respondent having taken best efforts to
ensure that the report would be timely filed? Should the Commission
apply a ``but for'' test, a ``contributing factor'' test, or some other
test for determining whether a respondent was prevented from timely
filing by particular circumstances? Should the Commission retain an
extraordinary circumstances defense? Should the Commission entertain
defenses based on extreme financial hardship? Should the regulations be
more specific as to what constitutes computer or Internet failures, or
severe weather or disaster? Should the list of circumstances that will
not be considered unforeseen and beyond the control of the respondent
be expanded or contracted, and if so by which elements? Should the 24
hour period be longer or shorter, or should committees be required to
file as soon as would be practicable? What sort of supporting evidence
should a respondent be required to provide? Are there other important
factors that the Commission should incorporate into a best efforts
defense? Alternatively, should the Commission refrain from adding a
specific best efforts defense to the administrative fines regulation?
Does Lovely preclude this approach?
II. 11 CFR 111.37--Commission Action on Administrative Fines Challenges
Section 111.37 of the Commission's rules guides Commission
decisions regarding the final determination of administrative fines
challenges. The proposed regulations direct the Commission to conclude
that no violation has occurred if the Commission based its RTB finding
on a factual error or if the respondent made best efforts to timely
file. Proposed 11 CFR 111.37(b). The proposed regulations also include
a new section 111.37(d), which makes clear that the staff
recommendation regarding the challenge, including any changes made by
the Commission, will serve as the Commission's statement of reasons
regarding the administrative fine at issue. This change is intended to
satisfy the Lovely court's concern that, in that case, the Commission
had issued no opinion or statement of reasons along with its final
determination. Lovely, 307 F. Supp. 2d at 301. Finally, the proposed
regulations amend section 111.37(d) to eliminate reference to the
``extraordinary circumstances'' defense, which would no longer be
applicable.
The Commission seeks comment on these changes. Are there additional
conforming amendments required to implement the proposed best efforts
defense?
Certification of No Effect Pursuant to 5 U.S.C. 605(b) (Regulatory
Flexibility Act)
The Commission certifies that the attached proposed rules would
not, if promulgated, 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 that would be
affected by these proposed rules are not ``small entities'' under 5
U.S.C. 601. The definition of ``small entity'' does not include
individuals, but 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). 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 proposed rule is not substantial.
Furthermore, any separate segregated funds that would be affected
by these proposed 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 that would be affected by these proposed 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. In addition, most political committees rely on
contributions from a large number of individuals to fund the
committees' operations and activities.
The proposed rules also would not impose any additional
restrictions or increase the costs of compliance for respondents within
the administrative fines program. Instead, the proposed rules would
provide additional defenses available to respondents in the
administrative fines program, thereby and potentially increasing the
situations in which the Commission imposes no civil money penalty.
Moreover, the proposed rules would apply only in the administrative
fines program, 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 attached proposed rules, if promulgated, would 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.
For the reasons set out in the preamble, the Federal Election
Commission proposes to amend 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))
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.
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 days of the Commission's reason to believe
finding.
[[Page 71096]]
(b) The respondent's written response must establish at least one
of the following grounds for challenging the reason to believe finding
and/or civil money penalty:
(1) The Commission's reason to believe finding is based on a
factual error. Examples of a factual error include, but are not limited
to, that the committee was not required to file or that the committee
timely filed as described in 11 CFR 100.19 (such as by timely
depositing a paper filing with an overnight delivery service);
(2) The Commission improperly calculated the civil money penalty;
or
(3) The respondent made best efforts to file in a timely manner in
that:
(i) The respondent was prevented from filing in a timely manner
because of unforeseen circumstances that were beyond the control of the
respondent; and
(ii) The respondent filed within 24 hours thereafter.
(c) Circumstances that will be considered unforeseen and beyond the
control of respondent include, but are not limited to, a failure of
Commission computers, Commission-provided software, or the Internet,
and severe weather or other disaster-related incident.
(d) Circumstances that will not be considered unforeseen and beyond
the control of respondent include, but are not limited to, negligence;
delays caused by committee vendors or contractors; illness,
inexperience, or unavailability of the treasurer or other staff;
committee computer or software failures; a committee's failure to know
filing dates; or a committee's failure to use filing software properly.
(e) Respondent's written response must detail the factual basis
supporting the grounds and include any supporting documentation.
3. In Sec. 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 made 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 consists of
the reasons provided in the reviewing officer's recommendation, if
adopted by the Commission, subject to any Commission amendments,
additions, substitutions, or statements of reasons.
Dated: November 30, 2006.
Michael E. Toner,
Chairman, Federal Election Commission.
[FR Doc. E6-20735 Filed 12-7-06; 8:45 am]
BILLING CODE 6715-01-P