Policy statement on treasurer’s best efforts

On May 31, 2007, the Commission approved a Policy Statement clarifying its enforcement policy regarding political committees and treasurers’ compliance with the Federal Election Campaign Act’s (the Act) recordkeeping and reporting requirements.

The Act provides that a committee’s reports and records will be deemed in compliance with campaign finance laws if the treasurer demonstrates that best efforts were used to obtain, maintain and submit the information required under the Act. 2 U.S.C. §432(i). In the past, the Commission has interpreted this provision as applying only to a treasurer’s efforts to obtain required information from contributors, and not to maintaining information or submitting reports. 11 CFR 104.7.

However, the U.S. District Court for the District of Massachusetts determined in Lovely v. FEC that the Commission should also consider whether a treasurer used best efforts when trying to file a timely report. The Commission’s policy statement makes clear that the Commission intends to apply the best efforts provision to obtaining, maintaining and submitting all information and records to the Commission, consistent with the court’s decision in Lovely v. FEC.

Background

In previous enforcement actions, the Commission has interpreted the “best efforts” defense as limited to a treasurer’s attempts to obtain, maintain and disclose the name, address, occupation and employer of donors who contribute more than $200 per year. 11 CFR 104.7(b). This interpretation grew out of an example contained in the provision’s legislative history that explained how the test would be applied to a committee’s attempts to report a contributor’s occupation and name of employer.

Lovely v. FEC involved a political committee’s challenge to an administrative fine the Commission assessed for late filing. The committee argued that it had made “best efforts” to file the report on time and that this constituted a valid and complete defense against the fine. The court concluded that the statutory language at 2 U.S.C. §432(i) requires the Commission to entertain a “best efforts” defense in the administrative fines context.¹ In reaching this decision, the court drew on other aspects of the provision’s legislative history, and specifically noted the 1979 amendments to the Act that made the best efforts defense applicable to the entire statute.

Policy statement

Although the court decision in Lovely v. FEC only concerned permissible defenses within the Administrative Fine Program, the Commission has decided to adopt the court’s interpretation of the best efforts defense with regard to other enforcement matters. Thus, this Policy Statement notifies the public and the regulated community that the Commission will now apply the best efforts defense to efforts made to obtain and maintain all information required by the Act and to submit the required information in disclosure reports. 2 U.S.C. §432(i) and 11 CFR 104.7.² The best efforts defense is an affirmative defense, and the burden rests with the political committee and its treasurer to present evidence sufficient to demonstrate that best efforts were made. The Commission does not intend to consider the best efforts defense unless a respondent asserts the facts that form the basis of that defense. Under the new policy, the Commission will generally conclude that, when a committee fails to obtain, maintain or submit information or reports, it can show “best efforts” if it establishes that:

• At the time of its failure, the committee took relevant precautions, such as double checking recordkeeping entries, regular reconciliation of committee records with bank statements and regular backup of all electronic files;
• The committee trained staff responsible for obtaining, maintaining and submitting campaign finance information in the Act’s requirements and in the committee’s procedures and recordkeeping and filing systems;
• The failure was a result of reasonably unforeseen circumstances beyond the committee’s control, such as the failure of FEC computers or FEC-provided software, severe weather or other disaster-related incidents, a widespread Internet disruption that was not caused by any failure of the committee’s computer systems or Internet service provider or delivery failures caused by mail/courier services, such as the U.S. Postal Service or Federal Express; and
• Upon discovering the failure, the committee promptly took all reasonable additional steps to expeditiously file any unfiled reports and correct any inaccurate reports.

In contrast, the Commission will generally conclude that a committee has not met the best efforts standard if the committee’s failure to obtain, maintain or submit information or reports is due to:

• Unavailability, inexperience, illness, negligence or error of the committee’s staff, agents, counsel or connected organization;
• The failure of the committee’s computer system;
• Delays caused by the committee’s vendors or contractors;
• Failure to know or understand the Act’s requirements; or
• Failure to use filing software properly.

The Policy Statement took effect on June 7, 2007, and was published in the June 7, 2007, Federal Register (72 FR 31438). The complete text is available on the FEC website.

¹ The court remanded the case to the Commission for further proceedings. On remand, the Commission determined that the committee had failed to show best efforts, and left the administrative fine in place. See the May 2004 Record, page 4.

² The Policy Statement applies only to matters in the FEC’s traditional enforcement, audit and Alternative Dispute Resolution programs and does not affect the Administrative Fine Program. The Commission recently amended its administrative fines regulations to address the Lovely court’s decision. See the May 2007 Record.