[Federal Register: April 5, 2007 (Volume 72, Number 65)]
[Rules and Regulations]
[Page 16695-16699]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05ap07-2]
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FEDERAL ELECTION COMMISSION
11 CFR Part 111
[Notice 2007-8]
Policy Regarding Self-Reporting of Campaign Finance Violations
(Sua Sponte Submissions)
AGENCY: Federal Election Commission.
ACTION: Statement of Policy.
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SUMMARY: In order to encourage the self-reporting of violations about
which the Commission would not otherwise have learned, the Commission
will generally
[[Page 16696]]
offer penalties between 25% and 75% lower than the Commission would
otherwise have sought in identical matters arising by other means. The
Commission will also use a new expedited procedure 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. This policy also addresses
various issues that can arise in connection with parallel criminal,
administrative or civil proceedings.
DATES: Effective April 5, 2007.
FOR FURTHER INFORMATION CONTACT: Mark 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 matters,
when accompanied by full cooperation, will be resolved more quickly and
on more favorable terms than identical 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.
On December 8, 2006, the Commission published a proposed policy
statement on self-reporting of violations. See Proposed Policy
Regarding Self-Reporting of Campaign Finance Violations (Sua Sponte
Submissions), 71 FR 71090 (December 8, 2006). The comment period ended
on January 29, 2007. Two comments were received. One of the comments
supported the proposed policy and suggested some minor revisions. The
other comment opposed the proposed policy.
This policy provides an overview of the factors that influence the
Commission's handling and disposition of self-reported 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\
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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. As a result, a person who brings to the
Commission's attention violations of the FECA and Commission
regulations and who cooperates with any resulting investigation will
also generally 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;
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.
Additionally, in cases where the submission includes privileged or
sensitive information, the Commission may work with the submitter to
protect privileged information from public disclosure while still
allowing the Commission to verify the sufficiency of the submission.
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 result 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.
[[Page 16697]]
Nature of the Violation
(1) The type of violation: Whether the violation was knowing and
willful, or resulted from reckless disregard for legal requirements or
deliberate indifference to indicia of wrongful conduct; negligent; an
inadvertent mistake; or 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) The origin of the violation: 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) Investigative and corrective actions: 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) Post-discovery compliance measures: Whether there are
assurances that the conduct is unlikely to recur; whether the
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) Full disclosure of the violation 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) 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.
IV. Reduction in Penalties for Self-Reporting Matters
The Commission will generally reduce opening civil penalty offers
by between 25% and 75% compared with identical matters arising from a
complaint or by other means. The amount of the reduction depends on the
facts and circumstances of a particular case. The Commission will
consider the factors set forth above.
Absent unusual circumstances, the Commission will grant a civil
penalty reduction of 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 Commission;
The violation immediately ceased and was promptly reported
to the Commission upon discovery;
Respondents take appropriate and prompt corrective
action(s) (e.g., changes to internal procedures to prevent a recurrence
of the violation; increased training; disciplinary action where
appropriate);
Respondents amend reports or disclosures to correct past
errors, if applicable;
Any appropriate refunds, transfers, and disgorgements are
made and/or waived; and
Respondents fully cooperate with the Commission in
ensuring that the sua sponte submission is complete and accurate.
In addition, the Commission may grant a civil penalty reduction of
up to 75% to respondents for violations in sua sponte submissions based
on other factors such as submissions that were uncovered as a result of
independent experts that were hired by respondents to conduct a
thorough review, investigation or audit, or an equally comprehensive
internal review, investigation or audit. In order to receive this
reduction, respondents must also meet the above criteria for a 50%
reduction and provide the Commission with all documentation of the
experts' review, investigation, or audit.\5\
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\5\ As discussed above, the Commission will, where appropriate,
work with the submitter to protect privileged information from
public disclosure.
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The required scope of the review, investigation or audit will
depend on the circumstances. For example, if an organization discovers
that an employee, stockholder or member may have reimbursed political
contributions with organization funds, the Commission would consider a
thorough review to include: Identification of all political
contributions made by the suspect employee subsequent to and for at
least three years prior to the suspected reimbursement (and extending
further if additional suspect contributions are found); a review of
contributions by anyone associated with the organization (including,
but not limited to, relatives and subordinates) corresponding in time
or recipient to the suspected reimbursed contributions; a review of the
organization's compensation (especially bonus) and expense
reimbursement policies and
[[Page 16698]]
practices for the relevant periods to identify potential contribution
reimbursements. Similarly, if an organization discovers it has
misstated financial information on its reports, the Commission would
consider a through review to include: An audit reconciling bank and
internal financial records with FEC reports for the period in which the
error was discovered, any subsequent reporting periods, and prior
reporting periods for at least a year prior to the error (and extending
further if additional errors are found); a review addressing internal
controls and reporting procedures and identifying weaknesses
contributing to the errors and remedies for those weaknesses.
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.
V. 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; (3) the submission is substantially complete and
reasonably addresses the significant questions or issues related to the
violation; and (4) the factual and legal issues are reasonably clear.
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 is
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 inadvertent
excessive or prohibited contribution; and
Matters in which the initial self-reporting submission by
the respondents is sufficiently thorough that only very limited, if
any, follow-up by the Office of the General Counsel is necessary to
complete the factual record.
VI. 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 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 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). The
Commission will take into consideration the fact of self-reporting in
deciding whether to refer a matter. However, the Commission 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.
VII. Conclusion
The Commission seeks to encourage the self-reporting of violations.
To that end, the Commission has adopted this policy that explains that
sua sponte submissions will, in general, receive more expedited
processing and more favorable outcomes than identical matters arising
by other means.
This notice represents a general statement of policy announcing the
general course of action that the Commission intends to follow. This
policy statement does not constitute an agency regulation requiring
notice of proposed rulemaking, opportunities for public participation,
prior publication, and delay in effective date under 5 U.S.C. 553 of
the Administrative Procedures Act (``APA''). As such, it does not bind
the Commission or any member of the general public. The provisions of
the Regulatory Flexibility Act, 5 U.S.C. 605(b), which apply when
notice and comment are required by the APA or another statute, are not
applicable.
[[Page 16699]]
Dated: March 27, 2007.
Robert D. Lenhard,
Chairman, Federal Election Commission.
[FR Doc. E7-6185 Filed 4-4-07; 8:45 am]
BILLING CODE 6715-01-P