Federal Election Com'n v. Gus Savage for Congress, 84 C 1076.

• Decision Date: 12 April 1985
• Docket Number: No. 84 C 1076.,84 C 1076.
• Parties: FEDERAL ELECTION COMMISSION, Plaintiff, v. GUS SAVAGE FOR CONGRESS '82 COMMITTEE and Thomas J. Savage, Treasurer, Defendants.
• Court: U.S. District Court — Northern District of Illinois

606 F. Supp. 541

FEDERAL ELECTION COMMISSION, Plaintiff, v. GUS SAVAGE FOR CONGRESS '82 COMMITTEE and Thomas J. Savage, Treasurer, Defendants.

No. 84 C 1076.

United States District Court, N.D. Illinois, E.D.

April 12, 1985.

Robert E. Pease, Federal Election Com'n, Richard B. Bader, Charles N. Steele, Washington, D.C., for plaintiff.

Robert C. Howard, Robert M. Weissbourd, Hartunian, Futterman & Howard, Chicago, Ill., for defendants.

MEMORANDUM

LEIGHTON, District Judge.

This is a Rule on defendants Gus Savage for Congress '82 Committee ("Committee") and Thomas J. Savage, as Treasurer, to show cause why they should not be held in civil and criminal contempt for violating an order of this court. On June 8, 1984, a default judgment was entered against defendants, directing them to file all outstanding reports required by the Federal Election Campaign Act of 1971, as amended, 2 U.S.C. § 431 et seq. (the "Act"), and to pay a civil penalty of $5,000. When defendants failed to comply with the order, plaintiff Federal Election Commission ("FEC") moved for the Rule; it relied on the enforcement section of the Act, which provides in pertinent part:

If the Commission determines after an investigation that any person¹ has violated an order of the court ... it may petition the court for an order to hold such person in civil contempt, but if it believes the violation to be knowing and willful it may petition the court for an order to hold such person in criminal contempt.

2 U.S.C. § 437g(a)(11).

The Rule was issued on September 12, 1984; defendants were not present, but on September 21, they appeared and responded. Plaintiff was directed to file a traverse to defendants' response, focusing on legal and factual issues before the court. Both parties were allowed to submit legal memoranda addressing issues thus presented, including whether the sanction of contempt should be imposed.

An additional hearing was held on October 19, 1984. Mr. Savage informed the court that defendants were in full compliance with the default judgment order; thus, under the circumstances, they believed further sanctions were unnecessary. The FEC did not dispute this but argued that the delay in compliance had caused substantial harm and warranted a finding of contempt. The court was told that there was no decided case under the contempt provisions of the Act, and that this was the first time the FEC had sought such a sanction for recordkeeping violations of the federal election laws.

Evidence has been presented, arguments having been made, oral and written presentations have been submitted to the court; the only issue to be resolved is whether defendants' conduct merits a finding of contempt in this case. That issue arises out of the following facts.

I

U.S. Rep. Gus Savage (D., Chicago) is a member of the United States House of Representatives from the Second Congressional District in Illinois.² In 1982, after becoming a candidate for that office, he designated a political committee to serve as his principal campaign committee, the Gus Savage for Congress '82 Committee, as required by the Act, 2 U.S.C. § 432(e)(1). The Act also requires that every political committee shall have a treasurer. 2 U.S.C. § 432(a). Political committees and treasurers are liable for reporting requirements under the Act. 2 U.S.C. § 434. Gus Savage's son, Thomas J. Savage, was asked to serve as treasurer of his father's committee. Thomas J. Savage is neither lawyer nor accountant. By his own account, he had little familiarity with the pertinent accounting principles and practices, or with the complex reporting provisions of the Act; he had no legal expertise, and had a poor understanding of what his obligations as treasurer of a major political campaign committee would entail. Nonetheless, he consented to act in that capacity for his father.

After the 1982 election, it came to the attention of the FEC that certain irregularities existed with regard to the Committee's and treasurer Savage's responsibilities under the Act.³ The agency therefore began an investigation of the matter. Under provisions of the statute, the FEC must follow certain steps when it instigates an investigative procedure. These include:

1. a determination that it has reason to believe a violation has occurred or is about to occur, and the provision of notice and an opportunity to comment to the respondent, 2 U.S.C. § 437g(a)(2);

2. an investigation of the allegations by the FEC, id.;

3. a determination that there is probable cause to believe that a violation has occurred or is about to occur after receiving a brief from the general counsel and a response from the alleged violator, 2 U.S.C. § 437g(a)(3); and

4. an attempt for at least 30 days to correct or prevent the alleged violations by informal means of conference, conciliation, and persuasion, 2 U.S.C. 437g(a)(4)(A)(i).

Only after the FEC exhausts these steps and affirmatively votes, by at least 4 of its members, may it institute a civil action for relief, including an application to a federal court for a permanent or temporary injunction, restraining or any other appropriate order. 2 U.S.C. § 437g(a)(6)(A). See Federal Election Commission v. National Rifle Association of America, 553 F.Supp. 1331, 1332-33 (D.D.C.1983).

The FEC appears to have followed required procedure before instituting suit in this case. On April 21, 1983, it opened a Matter Under Review (MUR) against the Committee and its treasurer. (MUR is the FEC designation for a Commission investigation of possible violations under the Act.) On June 14, 1983, it found "reason to believe" that defendants had violated the Act by not filing the July '82 Quarterly Report, the October '82 Quarterly Report, the 12 Day Pre-General Election Report, the 30 Day Post-General Election Report, and the 1982 Year End Report, as required by 2 U.S.C. § 434. Defendants were notified by mail of the FEC's findings.

On October 18, 1983, after the FEC had received no response from the Committee or its treasurer, it found "probable cause" to believe that defendants had violated 2 U.S.C. § 434(a)(2) by failing to file the required reports.⁴ This finding was mailed to defendants, as was the FEC's proposed conciliation agreement. That agreement, dated October 21, 1983, and addressed to Thomas J. Savage, proposed a settlement of the matter if Savage would agree to file the reports in question, and to pay a civil penalty of $2,500.

After 30 days when this "informal attempt" at conciliation failed to elicit a response, the FEC, on February 2, 1984, instituted civil suit against defendants, pursuant to 2 U.S.C. § 437g(a)(6)(A). The suit sought injunctive relief and a declaratory judgment to the effect that the Committee and Thomas J. Savage, as Treasurer, had violated the recordkeeping provisions of the Act. Defendants were served with a summons and complaint on March 28, 1984, and April 3, 1984.⁵

On March 9, 1984 (subsequent to the filing of the complaint, but prior to service), defendants filed a Termination Report with the FEC, itemizing lists of receipts, disbursements, loans, and other obligations for the period from July, 1981, through March, 1983. The 30-page report, filled out in longhand and signed by Thomas J. Savage, included eight pages of itemized receipts detailing over 90 contributions from persons other than political committees; six pages of itemized receipts from other political committees; one page of itemized receipts from political party committees; a page of itemized receipts detailing loans made or guaranteed by the candidate; and nine pages of itemized disbursements representing operating expenditures for the period 1981-83. Subsequent correspondence from the FEC identified inaccuracies in this Report, and directed defendants to file an amendment to the Report correcting these problems.⁶

In the meantime, defendants failed to file a timely answer to the complaint; and on May 15, 1984, the FEC moved for a default judgment. The motion was heard by the court on May 25, 1984; defendant Thomas J. Savage, unrepresented by counsel, appeared on behalf of himself and the Committee. Mr. Savage explained that the reason he had not answered was his having filed the Termination Report which he believed satisfied his and the Committee's obligations under the Act. This court explained to Mr. Savage that, without regard to what he had filed with the FEC, he had a legal obligation to file an answer to the complaint. The court then asked Mr. Savage if he understood, and he stated that he did. The hearing was continued until June 8, 1984, to provide defendants with an additional 10 days to answer the complaint.

While the court had sought to explain to Mr. Savage that the filing of reports with the FEC in no way satisfied defendants' obligations to file an answer in this lawsuit, it soon became clear that those words had fallen on deaf ears. On May 28, 1984, during the 10 day period in which they were to answer the FEC's complaint, defendants instead presented the FEC with their 16 page Amended Report of Receipts and Disbursements of the Committee. The report responded to deficiencies cited by the FEC in the original report, and included an itemized list of receipts and disbursements covering the Committee's activities for the period July, 1981, through December, 1981.⁷

No answer to the complaint in this court was filed, however. Accordingly, when the FEC renewed its motion for default judgment on June 8, 1984, the court granted it, ordering defendants to file, within 30 days, the required reports, and to pay a civil penalty of $5,000. Defendant Thomas J. Savage was not present on that date. At the expiration of the 30 days, when neither reports had been filed, nor fine paid, the FEC informed defendants that in the absence of immediate compliance, it would seek criminal and civil sanctions against them in this court. When the FEC received no reply to this communication, it moved for the Rule...