Proposed Policy Regarding Self-Reporting of Campaign Finance Violations; (Sua Sponte Submissions), 71090-71093 [E6-20845]
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Federal Register / Vol. 71, No. 236 / Friday, December 8, 2006 / Proposed Rules
regulations on the basis of information
ascertained by the Commission in the normal
course of carrying out its supervisory
responsibilities, or on the basis of a referral
from an agency of the United States or any
State. If the Commission determines by an
affirmative vote of four members that it has
‘‘reason to believe’’ that a respondent
violated the Act or Commission regulations,
the respondent must be notified by letter of
the Commission’s finding(s). 11 CFR
111.9(a).6 The Office of General Counsel will
also provide the respondent with a Factual
and Legal Analysis, which will set forth the
bases for the Commission’s finding of reason
to believe.
After the Commission makes a ‘‘reason to
believe’’ finding, an investigation is
conducted by the Office of General Counsel.,
in which the Commission may undertake
field investigations, audits, and other
methods of information-gathering. 11 CFR
111.10. Additionally, the Commission may
issue subpoenas to order any person to
submit sworn written answers to written
questions, to provide documents, or to
appear for a deposition. 11 CFR 111.11–
111.12. Any person who is subpoenaed may
motion the Commission for it to be quashed
or modified. 11 CFR 111.15.
Following a ‘‘reason to believe’’ finding,
the Commission may attempt to reach a
conciliation agreement with the
respondent(s) prior to reaching the ‘‘probable
cause’’ stage of enforcement (i.e., a preprobable cause conciliation agreement). See
11 CFR 111.18(d). If the Commission is
unable to reach a pre-probable cause
conciliation agreement with the respondent,
or determines that such a conciliation
agreement would not be appropriate, upon
completion of the investigation referenced in
the preceding paragraph, the Office of
General Counsel prepares a brief setting forth
its position on the factual and legal issues of
the matter and containing a recommendation
on whether or not the Commission should
find ‘‘probable cause to believe’’ that a
violation has occurred or is about to occur.
11 CFR 111.16(a).
The Office of General Counsel notifies the
respondent(s) of this recommendation and
provides a copy of the probable cause brief.
11 CFR 111.16(b). The respondent(s) may file
a written response to the probable cause brief
within fifteen days of receiving said brief. 11
CFR 111.16(c). After reviewing this response,
the Office of General Counsel shall advise the
Commission in writing whether it intends to
proceed with the recommendation or to
withdraw the recommendation from
Commission consideration. 11 CFR
111.16(d).
If the Commission determines by an
affirmative vote of four members that there is
‘‘probable cause to believe’’ that a respondent
has violated the Act or Commission
regulations, the Commission authorizes the
Office of General Counsel to notify the
respondent by letter of this determination. 11
CFR 111.17(a). Upon a Commission finding
6 If the Commission finds no ‘‘reason to believe,’’
or otherwise terminates its proceedings, the Office
of General Counsel shall advise the complainant
and respondent(s) by letter. 11 CFR 111.9(b).
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of ‘‘probable cause to believe,’’ the
Commission must attempt to reach a
conciliation agreement with the respondent.
11 CFR 111.18(a). If no conciliation
agreement is finalized within the time period
specified in 11 CFR 111.18(c), the Office of
General Counsel may recommend to the
Commission that it authorize a civil action
for relief in the appropriate court. 11 CFR
111.19(a). Commencement of such civil
action requires an affirmative vote of four
members of the Commission. 11 CFR
111.19(b). The Commission may enter into a
conciliation agreement with respondent after
authorizing a civil action. 11 CFR 111.19(c).
[FR Doc. E6–20844 Filed 12–7–06; 8:45 am]
BILLING CODE 6715–01–P
FEDERAL ELECTION COMMISSION
11 CFR Part 111
[Notice 2006–20]
Proposed Policy Regarding SelfReporting of Campaign Finance
Violations; (Sua Sponte Submissions)
Federal Election Commission.
Draft statement of policy with
request for comments.
AGENCY:
ACTION:
SUMMARY: The Commission is seeking
comments on a proposed policy
statement to clarify and memorialize its
approach to enforcement actions arising
from self-reported violations (also
known as sua sponte submissions). In
order to encourage the self-reporting of
violations about which the Commission
would not otherwise have learned, the
Commission proposes, in appropriate
cases warranting such mitigation, to
offer significantly lower penalties than
the Commission would otherwise have
sought in complaint-generated matters
involving similar circumstances. The
Commission is also outlining a new
expedited procedure that it intends to
use in a limited number of situations
through which the Commission may
allow individuals and organizations that
self-report violations and that make a
complete report of their internal
investigation to proceed directly into
conciliation prior to the Commission
determining whether their conduct may
have violated statutes or regulations
within its jurisdiction. The proposed
policy also addresses various issues that
can arise in connection with parallel
criminal, administrative or civil
proceedings. The Commission requests
comments on this proposed policy.
DATES: All comments must be submitted
on or before January 29, 2007.
ADDRESSES: All comments should be
addressed to Mark Shonkwiler,
Assistant General Counsel, or April
Sands, Attorney, and must be submitted
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in either electronic or written form.
Electronic mail comments should be
sent to selfreportpolicy@fec.gov and
must include the full name, electronic
mail address and postal service address
of the commenter. Electronic mail
comments that do not contain the full
name, electronic mail address and
postal service address of the commenter
will not be considered. If the electronic
mail comments include an attachment,
the attachment must be in the Adobe
Acrobat (.pdf) or Microsoft Word (.doc)
format. Faxed comments should be sent
to (202) 219–3923, with printed copy
follow-up to ensure legibility. Written
comments and printed copies of faxed
comments should be sent to the Federal
Election Commission, 999 E Street,
NW., Washington, DC 20463.
Commenters are strongly encouraged to
submit comments electronically to
ensure timely receipt and consideration.
The Commission will make every effort
to post public comments on its Web site
within ten business days of the close of
the comment period.
FOR FURTHER INFORMATION CONTACT:
Mark D. Shonkwiler, Assistant General
Counsel, or April J. Sands, Attorney,
Enforcement Division, Federal Election
Commission, 999 E Street, NW.,
Washington, DC 20463, (202) 694–1650
or (800) 424–9530.
SUPPLEMENTARY INFORMATION:
I. Goals and Scope of the Policy
The Commission periodically receives
submissions from persons who selfreport statutory or regulatory violations
of which the Commission had no prior
knowledge. The Commission considers
such self-reports (which also are
referred to as sua sponte submissions)
as information ascertained in the normal
course of carrying out its supervisory
responsibilities pursuant to 2 U.S.C.
437g(a)(2), and may investigate if it
determines there is reason to believe a
violation has occurred. The Commission
also investigates complaints reporting
the potentially illegal conduct of
another, submitted pursuant to 2 U.S.C.
437g(a)(1), but which also, by
implication, provide a basis for
investigating the complainant itself.1 As
a general proposition, self-reported
1 If a person who self-reports a violation of the
FECA also makes specific allegations as to other
persons not joining in the submission, and
particularly where the person making the
submission seeks to assign primary responsibility
for the violations to another person (including an
organization’s former officers or employees), the
Commission, acting through its Office of General
Counsel, may advise the self-reporting person that
a portion of the relevant materials should be resubmitted as a complaint to which other persons
would be allowed to respond prior to any findings
by the Commission.
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Federal Register / Vol. 71, No. 236 / Friday, December 8, 2006 / Proposed Rules
matters, when accompanied by full
cooperation, may be resolved more
quickly and on more favorable terms
than matters arising by other means
(e.g., those arising via external
complaints, referrals from other
government agencies, or referrals from
the Commission’s Audit or Reports
Analysis Divisions).2
The Commission recently has seen an
increase in self-reported violations,
which may be attributable, at least in
part, to greater attention being placed on
compliance programs for areas of
potential organizational liability, and
recognition that addressing a problem
through self-auditing and self-reporting
may help minimize reputational harm.
The increase in the number of selfreported matters has highlighted the
need to increase the transparency of
Commission policies and procedures.
Moreover, the Commission seeks to
provide appropriate incentives for this
demonstration of cooperation and
responsibility.
This policy provides an overview of
the factors that influence the
Commission’s handling and disposition
of certain kinds of matters. It should be
noted that while cooperation in general,
and self-reporting in particular, will be
considered by the Commission as
mitigating factors, they do not excuse a
violation of the Act or end the
enforcement process. Also, this policy
does not confer any rights on any person
and does not in any way limit the right
of the Commission to evaluate every
case individually on its own facts and
circumstances.3 Nevertheless, as
explained below, the Commission may
provide appropriate consideration to
respondents who voluntarily disclose
and who fully cooperate with the
Commission’s disposition of the matter.
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II. Self-Reporting of FECA Violations
Self-reporting of violations typically
allows respondents to resolve their civil
liability in a manner which has the
potential to: (1) Reduce the investigative
burden on both the Commission and
themselves; (2) demonstrate their
acceptance of organizational or personal
responsibility and commitment to
internal compliance; and (3) conclude
their involvement in the Commission’s
enforcement process on an expedited
basis. A person who brings to the
Commission’s attention violations of the
FECA and Commission regulations and
2 When violations are found, FECA requires the
Commission to attempt to correct or prevent
violations through conciliation agreements before
suit may be filed in Federal district court.
3 Some violations, for instance, are subject to a
mandatory minimum penalty prescribed by statute.
See 2 U.S.C. 437g(a)(6)(C).
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who cooperates with the resulting
investigation may also receive
appropriate consideration in the terms
of an eventual conciliation agreement.
For example, the Commission may do
one or more of the following:
• Take no action against particular
respondents;
• Offer a significantly lower penalty
than what the Commission otherwise
would have sought in a complaintgenerated matter involving similar
circumstances or, where appropriate, no
civil penalty;
• Offer conciliation before a finding
of probable cause to believe a violation
occurred, and in certain cases proceed
directly to conciliation without the
Commission first finding reason to
believe that a violation occurred (see
discussion below);
• Refrain from making a formal
finding that a violation was knowing
and willful, even where the available
information would otherwise support
such a finding;
• Proceed only as to an organization,
rather than as to various individual
agents or, where appropriate, proceed
only as to individuals rather than
organizational respondents;
• Include language in the conciliation
agreement that indicates the level of
cooperation provided by respondents
and the remedial action taken by the
persons.
III. Factors Considered in Self-Reported
Matters
The Commission may take into
account various factors in considering
how to proceed regarding self-reported
violations. In general, more expedited
processing and a more favorable
outcome will be possible when the selfreporting party can show that upon
discovery of the potential violations,
there was an immediate end to the
activity giving rise to the violation(s);
the Respondent made a timely and
complete disclosure to the Commission
and fully cooperated in the disposition
of the matter; and the Respondent
implemented appropriate and timely
corrective measures, including internal
safeguards necessary to prevent any
recurrence. Further detail as to these
factors is supplied below.
Nature of the Violation
(1) The type of violation: Whether the
violation was (a) Knowing and willful,
or resulted from reckless disregard for
legal requirements or deliberate
indifference to indicia of wrongful
conduct; (b) negligent; (c) an inadvertent
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71091
mistake; or (d) based on the advice of
counsel; 4
(2) The magnitude of the violation:
Whether the violation resulted from a
one-time event or an ongoing pattern of
conduct repeated over an extended
period of time (and whether there was
a history of similar conduct); how many
people were involved in or were aware
of the violation and the relative level of
authority of these people within the
organization; whether individuals were
coerced into participating in the
violation; the amount of money
involved either in terms of absolute
dollar amount or in terms of the
percentage of an entity’s activity; and
the impact the violation may have had
on any Federal election;
(3) How the violation arose: Whether
the conduct was intended to advance
the organization’s interests or to defraud
the organization for the personal gain of
a particular individual; whether there
were compliance procedures in place to
prevent the type of violation now
uncovered and, if so, why those
procedures failed to stop or deter the
wrongful conduct; and whether the
persons with knowledge of the violation
were high-level officials in the
organization.
Extent of Corrective Action and New
Self-Governance Measures
(4) Have all needed investigative and
corrective actions been taken: Whether
the violation immediately ceased upon
its discovery; how long it took after
discovery of the violation to take
appropriate corrective measures,
including disciplinary action against
persons responsible for any misconduct;
whether there was a thorough review of
the nature, extent, origins, and
consequences of the conduct and related
behavior; whether the respondent
expeditiously corrected and clarified the
public record by making appropriate
and timely disclosures as to the source
and recipients of any funds involved in
a violation; whether a Federal political
committee promptly made any
necessary refunds of excessive or
prohibited contributions; and whether
an organization or individual
respondent waived its claim to refunds
of excessive or prohibited contributions
and instructed recipients to disgorge
such funds to the U.S. Treasury.
(5) Have more effective compliance
measures been implemented: Whether
there are assurances that the conduct is
unlikely to recur; whether the
4 A respondent seeking to defend conduct based
on advice of counsel may not simultaneously
withhold documentary or other evidence
supporting that assertion based on the attorneyclient privilege.
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Federal Register / Vol. 71, No. 236 / Friday, December 8, 2006 / Proposed Rules
respondent has adopted and ensured
enforcement of more effective internal
controls and procedures designed to
prevent a recurrence of the violation;
and whether the respondent provided
the Commission with sufficient
information for it to evaluate the
measures taken to correct the situation
and ensure that the conduct does not
recur.
Disclosure and Cooperation
(6) Was the violation fully disclosed to
the Commission: Whether steps were
taken upon learning of the violation;
whether the disclosure was voluntary or
made in recognition that the violation
had been or was about to be discovered,
or in recognition that a complaint was
filed, or was about to be filed, by
someone else; and whether a
comprehensive and detailed disclosure
of the results of its internal review was
provided to the Commission in a timely
fashion;
(7) Was there full cooperation with the
Commission: Whether the respondent
promptly made relevant records and
witnesses available to the Commission,
and made all reasonable efforts to secure
the cooperation of relevant employees,
volunteers, vendors, donors and other
staff without requiring compulsory
process; whether the respondent agreed
to waive or toll the statute of limitations
for activity that previously had been
concealed or not disclosed in a timely
fashion.
The Commission recognizes that all of
the above-listed factors will not be
relevant in every instance of selfreporting of potential FECA violations,
nor is the Commission required to take
all such factors into account. In
addition, these factors should not be
viewed as an exhaustive list. The
Commission will continue to resolve
matters based on the facts and
circumstances of each case.
The Commission seeks to encourage
the self-reporting of violations. To that
end, the Commission will consider
reducing opening civil penalty offers 5
by up to 75%. The amount of the
reduction depends on the facts and
circumstances of a particular case. The
Commission will consider the factors set
forth above. In order to provide more
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5 The
Commission normally applies standard
civil penalty calculations and then adjusts the
figure for aggravating or mitigating circumstances.
For example, if the standard civil penalty
calculation were $20,000 it might be raised for an
aggravating factor, such as failure to timely file an
election sensitive report. Once the initial
calculation is reached, respondents normally
receive a 25% discount off of this penalty for
settling during the pre-probable cause conciliation
stage. Any discounts pursuant to this policy will be
applied after this reduction.
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concrete guidance, the Commission may
establish a policy setting forth the
weight it will give to some of the facts
and circumstances.
The Commission is considering
adopting a policy of granting a civil
penalty reduction of up to 50% to
respondents who meet the following
criteria:
• Respondents alert the Commission
to potential violations before the
violation had been or was about to be
discovered by any outside party,
including the FEC;
• Respondents amend reports or
disclosures to correct past errors, if
applicable;
• Any appropriate refunds, transfers,
and disgorgements are made and/or
waived;
• The violation immediately ceased
upon discovery; and
• Respondents fully cooperate with
the Commission in ensuring that the sua
sponte submission is complete and
accurate and in taking corrective
measures.
The Commission is considering
adopting a policy of granting a civil
penalty reduction of up to 75% to
respondents who meet the above criteria
plus the following criteria:
• Respondents hired independent
experts to conduct a thorough review,
investigation, or audit;
• Respondents provide the
Commission with all documentation of
the experts’ review, investigation, or
audit; and
• Respondents took appropriate
corrective action(s) such as disciplinary
action against any persons responsible
for misconduct and made changes to
internal procedures to prevent a
recurrence of the violation.
Alternatively, the Commission is
considering adopting a policy of
generally granting a civil penalty
reduction of 50% to respondents that
voluntarily self-report violations to the
Commission, and of raising or lowering
that discount depending on the
aggravating and mitigating factors
outlined above. The discount could be
as high as 75% or as low as 25%,
depending on the facts of the case in
question.
The Commission will be the sole arbiter of
whether the facts of each case warrant a
particular reduction in the penalty. The
Commission will generally not give a
respondent the benefit of this policy if the
respondent is the subject of a criminal or
other government investigation. In
considering appropriate penalties, the
Commission will also consider the presence
of aggravating factors, such as knowing and
willful conduct or involvement by senior
officials of an entity. The Commission may
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also consider other factors not enumerated in
this policy for the purposes of applying or
withholding a possible discount.
IV. Fast-Track Resolution
The Commission will generally not
make a reason-to-believe finding or
open a formal investigation for
respondents that self-report violations,
if: (1) All potential respondents in a
matter have joined in a self-reporting
submission that acknowledges their
respective violations of the FECA; (2)
those violations do not appear to be
knowing and willful; and (3) the
disclosure is substantially complete and
the submission reasonably addresses the
significant questions or issues related to
the violation. Accordingly, the
Commission is modifying its current
practice to allow for an expedited FastTrack Resolution (‘‘FTR’’) for a limited
number of matters involving selfreported violations. This procedure
would be available at the Commission’s
discretion, but may be requested by
respondents.
Respondents eligible for the FTR
process will meet with the Office of
General Counsel to negotiate a proposed
conciliation agreement before the
Commission makes any formal findings
in the matter. Although the Commission
is always free to reject or seek
modifications to a proposed conciliation
agreement, it is expected that this
process will allow for more expedited
processing of certain types of violations
where factual and legal issues are
reasonably clear. It also will allow
respondents to resolve certain matters
short of the Commission finding that
there is reason to believe that a violation
has occurred. Examples of matters that
might be eligible for such treatment
include:
• Matters in which an individual
contributor discovers that he or she
inadvertently violated the individual
aggregate election cycle contribution
limit contained in 2 U.S.C. 441a(a)(3);
• Matters in which a political
committee seeks to disclose and correct
relatively straightforward reporting
violations;
• Matters in which a contributor and
a political committee jointly seek to
resolve their liability for a simple and
clearly inadvertent excessive or
prohibited contribution; and
• Matters in which the initial selfreporting submission by the
respondents is so thorough that only
very limited follow-up by the Office of
the General Counsel is necessary to
complete the factual record.
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Federal Register / Vol. 71, No. 236 / Friday, December 8, 2006 / Proposed Rules
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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71093
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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]]>Agencies
[Federal Register Volume 71, Number 236 (Friday, December 8, 2006)]
[Proposed Rules]
[Pages 71090-71093]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-20845]
-----------------------------------------------------------------------
FEDERAL ELECTION COMMISSION
11 CFR Part 111
[Notice 2006-20]
Proposed Policy Regarding Self-Reporting of Campaign Finance
Violations; (Sua Sponte Submissions)
AGENCY: Federal Election Commission.
ACTION: Draft statement of policy with request for comments.
-----------------------------------------------------------------------
SUMMARY: The Commission is seeking comments on a proposed policy
statement to clarify and memorialize its approach to enforcement
actions arising from self-reported violations (also known as sua sponte
submissions). In order to encourage the self-reporting of violations
about which the Commission would not otherwise have learned, the
Commission proposes, in appropriate cases warranting such mitigation,
to offer significantly lower penalties than the Commission would
otherwise have sought in complaint-generated matters involving similar
circumstances. The Commission is also outlining a new expedited
procedure that it intends to use in a limited number of situations
through which the Commission may allow individuals and organizations
that self-report violations and that make a complete report of their
internal investigation to proceed directly into conciliation prior to
the Commission determining whether their conduct may have violated
statutes or regulations within its jurisdiction. The proposed policy
also addresses various issues that can arise in connection with
parallel criminal, administrative or civil proceedings. The Commission
requests comments on this proposed policy.
DATES: All comments must be submitted on or before January 29, 2007.
ADDRESSES: All comments should be addressed to Mark Shonkwiler,
Assistant General Counsel, or April Sands, Attorney, and must be
submitted in either electronic or written form. Electronic mail
comments should be sent to selfreportpolicy@fec.gov and must include
the full name, electronic mail address and postal service address of
the commenter. Electronic mail comments that do not contain the full
name, electronic mail address and postal service address of the
commenter will not be considered. If the electronic mail comments
include an attachment, the attachment must be in the Adobe Acrobat
(.pdf) or Microsoft Word (.doc) format. Faxed comments should be sent
to (202) 219-3923, with printed copy follow-up to ensure legibility.
Written comments and printed copies of faxed comments should be sent to
the Federal Election Commission, 999 E Street, NW., Washington, DC
20463. Commenters are strongly encouraged to submit comments
electronically to ensure timely receipt and consideration. The
Commission will make every effort to post public comments on its Web
site within ten business days of the close of the comment period.
FOR FURTHER INFORMATION CONTACT: Mark D. Shonkwiler, Assistant General
Counsel, or April J. Sands, Attorney, Enforcement Division, Federal
Election Commission, 999 E Street, NW., Washington, DC 20463, (202)
694-1650 or (800) 424-9530.
SUPPLEMENTARY INFORMATION:
I. Goals and Scope of the Policy
The Commission periodically receives submissions from persons who
self-report statutory or regulatory violations of which the Commission
had no prior knowledge. The Commission considers such self-reports
(which also are referred to as sua sponte submissions) as information
ascertained in the normal course of carrying out its supervisory
responsibilities pursuant to 2 U.S.C. 437g(a)(2), and may investigate
if it determines there is reason to believe a violation has occurred.
The Commission also investigates complaints reporting the potentially
illegal conduct of another, submitted pursuant to 2 U.S.C. 437g(a)(1),
but which also, by implication, provide a basis for investigating the
complainant itself.\1\ As a general proposition, self-reported
[[Page 71091]]
matters, when accompanied by full cooperation, may be resolved more
quickly and on more favorable terms than matters arising by other means
(e.g., those arising via external complaints, referrals from other
government agencies, or referrals from the Commission's Audit or
Reports Analysis Divisions).\2\
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\1\ If a person who self-reports a violation of the FECA also
makes specific allegations as to other persons not joining in the
submission, and particularly where the person making the submission
seeks to assign primary responsibility for the violations to another
person (including an organization's former officers or employees),
the Commission, acting through its Office of General Counsel, may
advise the self-reporting person that a portion of the relevant
materials should be re-submitted as a complaint to which other
persons would be allowed to respond prior to any findings by the
Commission.
\2\ When violations are found, FECA requires the Commission to
attempt to correct or prevent violations through conciliation
agreements before suit may be filed in Federal district court.
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The Commission recently has seen an increase in self-reported
violations, which may be attributable, at least in part, to greater
attention being placed on compliance programs for areas of potential
organizational liability, and recognition that addressing a problem
through self-auditing and self-reporting may help minimize reputational
harm. The increase in the number of self-reported matters has
highlighted the need to increase the transparency of Commission
policies and procedures. Moreover, the Commission seeks to provide
appropriate incentives for this demonstration of cooperation and
responsibility.
This policy provides an overview of the factors that influence the
Commission's handling and disposition of certain kinds of matters. It
should be noted that while cooperation in general, and self-reporting
in particular, will be considered by the Commission as mitigating
factors, they do not excuse a violation of the Act or end the
enforcement process. Also, this policy does not confer any rights on
any person and does not in any way limit the right of the Commission to
evaluate every case individually on its own facts and circumstances.\3\
Nevertheless, as explained below, the Commission may provide
appropriate consideration to respondents who voluntarily disclose and
who fully cooperate with the Commission's disposition of the matter.
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\3\ Some violations, for instance, are subject to a mandatory
minimum penalty prescribed by statute. See 2 U.S.C. 437g(a)(6)(C).
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II. Self-Reporting of FECA Violations
Self-reporting of violations typically allows respondents to
resolve their civil liability in a manner which has the potential to:
(1) Reduce the investigative burden on both the Commission and
themselves; (2) demonstrate their acceptance of organizational or
personal responsibility and commitment to internal compliance; and (3)
conclude their involvement in the Commission's enforcement process on
an expedited basis. A person who brings to the Commission's attention
violations of the FECA and Commission regulations and who cooperates
with the resulting investigation may also receive appropriate
consideration in the terms of an eventual conciliation agreement. For
example, the Commission may do one or more of the following:
Take no action against particular respondents;
Offer a significantly lower penalty than what the
Commission otherwise would have sought in a complaint-generated matter
involving similar circumstances or, where appropriate, no civil
penalty;
Offer conciliation before a finding of probable cause to
believe a violation occurred, and in certain cases proceed directly to
conciliation without the Commission first finding reason to believe
that a violation occurred (see discussion below);
Refrain from making a formal finding that a violation was
knowing and willful, even where the available information would
otherwise support such a finding;
Proceed only as to an organization, rather than as to
various individual agents or, where appropriate, proceed only as to
individuals rather than organizational respondents;
Include language in the conciliation agreement that
indicates the level of cooperation provided by respondents and the
remedial action taken by the persons.
III. Factors Considered in Self-Reported Matters
The Commission may take into account various factors in considering
how to proceed regarding self-reported violations. In general, more
expedited processing and a more favorable outcome will be possible when
the self-reporting party can show that upon discovery of the potential
violations, there was an immediate end to the activity giving rise to
the violation(s); the Respondent made a timely and complete disclosure
to the Commission and fully cooperated in the disposition of the
matter; and the Respondent implemented appropriate and timely
corrective measures, including internal safeguards necessary to prevent
any recurrence. Further detail as to these factors is supplied below.
Nature of the Violation
(1) The type of violation: Whether the violation was (a) Knowing
and willful, or resulted from reckless disregard for legal requirements
or deliberate indifference to indicia of wrongful conduct; (b)
negligent; (c) an inadvertent mistake; or (d) based on the advice of
counsel; \4\
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\4\ A respondent seeking to defend conduct based on advice of
counsel may not simultaneously withhold documentary or other
evidence supporting that assertion based on the attorney-client
privilege.
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(2) The magnitude of the violation: Whether the violation resulted
from a one-time event or an ongoing pattern of conduct repeated over an
extended period of time (and whether there was a history of similar
conduct); how many people were involved in or were aware of the
violation and the relative level of authority of these people within
the organization; whether individuals were coerced into participating
in the violation; the amount of money involved either in terms of
absolute dollar amount or in terms of the percentage of an entity's
activity; and the impact the violation may have had on any Federal
election;
(3) How the violation arose: Whether the conduct was intended to
advance the organization's interests or to defraud the organization for
the personal gain of a particular individual; whether there were
compliance procedures in place to prevent the type of violation now
uncovered and, if so, why those procedures failed to stop or deter the
wrongful conduct; and whether the persons with knowledge of the
violation were high-level officials in the organization.
Extent of Corrective Action and New Self-Governance Measures
(4) Have all needed investigative and corrective actions been
taken: Whether the violation immediately ceased upon its discovery; how
long it took after discovery of the violation to take appropriate
corrective measures, including disciplinary action against persons
responsible for any misconduct; whether there was a thorough review of
the nature, extent, origins, and consequences of the conduct and
related behavior; whether the respondent expeditiously corrected and
clarified the public record by making appropriate and timely
disclosures as to the source and recipients of any funds involved in a
violation; whether a Federal political committee promptly made any
necessary refunds of excessive or prohibited contributions; and whether
an organization or individual respondent waived its claim to refunds of
excessive or prohibited contributions and instructed recipients to
disgorge such funds to the U.S. Treasury.
(5) Have more effective compliance measures been implemented:
Whether there are assurances that the conduct is unlikely to recur;
whether the
[[Page 71092]]
respondent has adopted and ensured enforcement of more effective
internal controls and procedures designed to prevent a recurrence of
the violation; and whether the respondent provided the Commission with
sufficient information for it to evaluate the measures taken to correct
the situation and ensure that the conduct does not recur.
Disclosure and Cooperation
(6) Was the violation fully disclosed to the Commission: Whether
steps were taken upon learning of the violation; whether the disclosure
was voluntary or made in recognition that the violation had been or was
about to be discovered, or in recognition that a complaint was filed,
or was about to be filed, by someone else; and whether a comprehensive
and detailed disclosure of the results of its internal review was
provided to the Commission in a timely fashion;
(7) Was there full cooperation with the Commission: Whether the
respondent promptly made relevant records and witnesses available to
the Commission, and made all reasonable efforts to secure the
cooperation of relevant employees, volunteers, vendors, donors and
other staff without requiring compulsory process; whether the
respondent agreed to waive or toll the statute of limitations for
activity that previously had been concealed or not disclosed in a
timely fashion.
The Commission recognizes that all of the above-listed factors will
not be relevant in every instance of self-reporting of potential FECA
violations, nor is the Commission required to take all such factors
into account. In addition, these factors should not be viewed as an
exhaustive list. The Commission will continue to resolve matters based
on the facts and circumstances of each case.
The Commission seeks to encourage the self-reporting of violations.
To that end, the Commission will consider reducing opening civil
penalty offers \5\ by up to 75%. The amount of the reduction depends on
the facts and circumstances of a particular case. The Commission will
consider the factors set forth above. In order to provide more concrete
guidance, the Commission may establish a policy setting forth the
weight it will give to some of the facts and circumstances.
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\5\ The Commission normally applies standard civil penalty
calculations and then adjusts the figure for aggravating or
mitigating circumstances. For example, if the standard civil penalty
calculation were $20,000 it might be raised for an aggravating
factor, such as failure to timely file an election sensitive report.
Once the initial calculation is reached, respondents normally
receive a 25% discount off of this penalty for settling during the
pre-probable cause conciliation stage. Any discounts pursuant to
this policy will be applied after this reduction.
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The Commission is considering adopting a policy of granting a civil
penalty reduction of up to 50% to respondents who meet the following
criteria:
Respondents alert the Commission to potential violations
before the violation had been or was about to be discovered by any
outside party, including the FEC;
Respondents amend reports or disclosures to correct past
errors, if applicable;
Any appropriate refunds, transfers, and disgorgements are
made and/or waived;
The violation immediately ceased upon discovery; and
Respondents fully cooperate with the Commission in
ensuring that the sua sponte submission is complete and accurate and in
taking corrective measures.
The Commission is considering adopting a policy of granting a civil
penalty reduction of up to 75% to respondents who meet the above
criteria plus the following criteria:
Respondents hired independent experts to conduct a
thorough review, investigation, or audit;
Respondents provide the Commission with all documentation
of the experts' review, investigation, or audit; and
Respondents took appropriate corrective action(s) such as
disciplinary action against any persons responsible for misconduct and
made changes to internal procedures to prevent a recurrence of the
violation.
Alternatively, the Commission is considering adopting a policy of
generally granting a civil penalty reduction of 50% to respondents that
voluntarily self-report violations to the Commission, and of raising or
lowering that discount depending on the aggravating and mitigating
factors outlined above. The discount could be as high as 75% or as low
as 25%, depending on the facts of the case in question.
The Commission will be the sole arbiter of whether the facts of
each case warrant a particular reduction in the penalty. The
Commission will generally not give a respondent the benefit of this
policy if the respondent is the subject of a criminal or other
government investigation. In considering appropriate penalties, the
Commission will also consider the presence of aggravating factors,
such as knowing and willful conduct or involvement by senior
officials of an entity. The Commission may also consider other
factors not enumerated in this policy for the purposes of applying
or withholding a possible discount.
IV. Fast-Track Resolution
The Commission will generally not make a reason-to-believe finding
or open a formal investigation for respondents that self-report
violations, if: (1) All potential respondents in a matter have joined
in a self-reporting submission that acknowledges their respective
violations of the FECA; (2) those violations do not appear to be
knowing and willful; and (3) the disclosure is substantially complete
and the submission reasonably addresses the significant questions or
issues related to the violation. Accordingly, the Commission is
modifying its current practice to allow for an expedited Fast-Track
Resolution (``FTR'') for a limited number of matters involving self-
reported violations. This procedure would be available at the
Commission's discretion, but may be requested by respondents.
Respondents eligible for the FTR process will meet with the Office
of General Counsel to negotiate a proposed conciliation agreement
before the Commission makes any formal findings in the matter. Although
the Commission is always free to reject or seek modifications to a
proposed conciliation agreement, it is expected that this process will
allow for more expedited processing of certain types of violations
where factual and legal issues are reasonably clear. It also will allow
respondents to resolve certain matters short of the Commission finding
that there is reason to believe that a violation has occurred. Examples
of matters that might be eligible for such treatment include:
Matters in which an individual contributor discovers that
he or she inadvertently violated the individual aggregate election
cycle contribution limit contained in 2 U.S.C. 441a(a)(3);
Matters in which a political committee seeks to disclose
and correct relatively straightforward reporting violations;
Matters in which a contributor and a political committee
jointly seek to resolve their liability for a simple and clearly
inadvertent excessive or prohibited contribution; and
Matters in which the initial self-reporting submission by
the respondents is so thorough that only very limited follow-up by the
Office of the General Counsel is necessary to complete the factual
record.
[[Page 71093]]
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 self-reporting
person. The possibility of such a resolution is enhanced when the self-
reporting 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 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 self-reported 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
