Fulani v. Federal Election Com'n, 97-1466
| Decision Date | 23 June 1998 |
| Docket Number | No. 97-1466,97-1466 |
| Citation | 147 F.3d 924 |
| Parties | Lenora B. FULANI For President Committee and Lenora B. Fulani, Petitioners, v. FEDERAL ELECTION COMMISSION, Respondent. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
On Petition for Review of an Order of the Federal Election Commission.
Arthur R. Block, Washington, DC, argued the cause and filed the briefs for petitioners.
Richard B. Bader, Associate General Counsel, Federal Election Commission, argued the cause for respondent, with whom Lawrence M. Noble, General Counsel, and Vivien Clair, Attorney, Washington, DC, were on the brief.
Before: SILBERMAN, WILLIAMS and RANDOLPH, Circuit Judges.
Opinion for the Court filed by Circuit Judge SILBERMAN.
Lenora B. Fulani and Fulani for President Committee (collectively, Fulani) seek review of the Federal Election Commission's determination that they must repay approximately $120,000 in matching payments to the United States Treasury. We deny the petition.
Fulani sought the 1992 presidential nomination of the Democratic party, the New Alliance party, and several other independent parties. She received approximately $2,000,000 from the United States Treasury pursuant to the Presidential Primary Matching Payment Account Act, 26 U.S.C. §§ 9031-9042 (1994). Eligible candidates are entitled to receive payments matching individual contributions up to $250, subject to a ceiling, but they may use matching funds only for "qualified campaign expenses." See id. §§ 9034, 9042(b); see generally Simon v. FEC, 53 F.3d 356 (D.C.Cir.1995); Robertson v. FEC, 45 F.3d 486 (D.C.Cir.1995).
The Act directs the FEC to audit each matching funds recipient and the Commission has established detailed examination procedures by regulation. See 11 C.F.R. pt. 9038 (1992). 1 Fieldwork--an inspection of the candidate's books and records--is the first step in that process. After the FEC completed its fieldwork with respect to Fulani's campaign records, it prepared and approved an interim audit report. The Commission's preliminary calculations contained therein indicated Fulani owed $1,394. Cash contributions to a candidate are not eligible to be matched with federal funds, and Fulani had purchased money orders, which may be matched, to be exchanged for cash from contributors who did not have checks. But she could not account for some of these money orders. Fulani promptly repaid the $1,394. The Commission approved a final audit report containing an "initial repayment determination," see id. § 9038.1(d)-(e), equal to the already repaid dollar amount a few months later. If a candidate chooses to contest the FEC's initial repayment determination, she is provided the opportunity to submit written materials (and may also request oral hearing) for the Commission to consider before it issues a "final repayment determination"; the initial determination otherwise becomes final 30 days after the candidate is served with written notice. See id. § 9038.2(c). Fulani--having already repaid the amount in question--did not contest.
The Commission, however, decided to hold its final determination in abeyance. It received information from a former Fulani campaign worker that called into question the accuracy of the documentation that it reviewed during the fieldwork phase of its audit. The Commission began an investigation pursuant to part 9039 of its regulations, which authorizes inquiries on the basis of information received from outside sources, then issued subpoenas and ordered depositions of campaign staff and vendors. But Fulani and some of the vendors she had used either complied incompletely or resisted--Fulani's campaign manager and the Committee's treasurer even asserted the Fifth Amendment privilege against self-incrimination. The Commission was forced to seek judicial enforcement of its subpoenas, which it obtained from the district court in the Southern District of New York on several occasions. On August 3, 1995, before some of those subpoenas were enforced, the FEC issued a second initial repayment determination, this time in the amount of $612,557.32. Fulani contested, and in its final repayment determination, the FEC reduced the amount that she owed to $117,269.54--$18,767.99 in non-qualified disbursements to the National Alliance; $73,750.55 in unsubstantiated payments to individuals by check; $1,394 in lost money orders (carried over from the prior repayment determination), and $22,357 in excess matching funds. 2 Fulani sought rehearing, which the Commission denied. Her petition for review of the Commission's order followed.
Fulani raises three challenges to the Commission's authority to have issued the second repayment determination and alternatively argues the Commission's findings that she owes $18,767.99 in non-qualified disbursements to vendors and $73,750.55 in unsubstantiated payments to individuals by check are unreasonable. We consider petitioner's challenges to the Commission's authority first.
The Matching Payment Act requires that "the Commission shall conduct a thorough examination and audit of the qualified campaign expenses of every candidate and his authorized committees who received payments." 26 U.S.C. § 9038(a) (1994). The FEC is instructed to determine whether matching payments to a candidate exceeded her entitlement, or if the candidate used matching funds to defray non-qualified campaign expenses, and must notify the candidate of a repayment obligation no later "than 3 years after the end of [the matching payment] period." Id. § 9038(c). Fulani claims that the Act contemplates only one repayment determination and therefore the Commission had no authority to take a second bite of the apple. The Commission's regulation, which allows it to "mak[e] additional repayment determinations ... after it has made a final determination ... where there exist facts not used as the basis for a previous final determination," see 11 C.F.R. § 9038.2(f), is therefore ultra vires. 3 We agree with the Commission, however, that the statute is silent on the point and its regulation represents a permissible construction under Chevron. 4
Petitioner next argues that the FEC had no authority to hold in abeyance its first repayment determination because, by operation of its own regulations, the determination became final when Fulani did not object to the FEC's first initial repayment determination within 30 days from the time she was served with written notice. See 11 C.F.R. § 9038.2(c)(1). We are puzzled as to why the Commission declared that it was staying the first repayment determination when, as discussed above, its own regulation explicitly authorizes it to make additional repayment determinations on the basis of new facts. It is clear that the Commission treated its first repayment determination--which Fulani had already settled--as final during its second investigation. It did not reexamine the facts relating to the lost money orders, and devoted only one summary paragraph to the matter in its 90-page statement setting forth the legal and factual basis for its second final repayment determination. The Commission used the new information it had received only to investigate other of Fulani's expenses. Under these circumstances, we agree with the Commission's counsel that it makes no difference whether the first repayment determination is viewed as having been suspended until the second initial determination issued on August 3, 1995, or as becoming final prior to the supplementary determination.
Finally, petitioner argues that even if the Commission is entitled to make a second repayment determination, it was not issued within the three-year period as the statute requires. The parties agree that the Commission had until August 20, 1995 to notify Fulani of any repayment determination. Fulani claims, however, that the August 3 repayment determination, which imposed on Fulani an obligation to repay monies to the United States Treasury, was not the product of a "thorough examination and audit," and should be regarded as bogus--a figure drawn up just to meet the deadline. To be sure, the initial figure considerably exceeded the final determination. We can certainly imagine circumstances in which it might be successfully argued that the Commission's initial determination figure is not legitimate, but that is not this case. In light of the difficulties the Commission encountered in investigating Fulani's expenses, it cannot be blamed for drawing all inferences against Fulani. When a candidate seeks to frustrate and delay a government investigation, it can hardly be heard to complain that the product is insufficiently thorough.
We turn, then, to petitioner's challenges to the disallowed expenses. Fulani argues that the Commission unreasonably concluded that her payments to the National Alliance weekly newspaper were non-qualified expenses. The Commission's initial repayment determination charged that the entire $75,062.50 Fulani had paid to the National Alliance failed to qualify. Fulani's only explanation was that those payments represented newspaper purchases, but the former campaign worker who had brought the new evidence to the Commission's attention testified that the newspaper was given to the public for free. The Commission ruled that Fulani therefore had not carried her burden of proving that her disbursements were qualified campaign expenses. See 11 C.F.R. § 9033.11(a). Fulani contested, and this time submitted an affidavit of a person familiar with the business of the National Alliance. He indicated that the paper sold for 50 cents, according to the masthead, and that Fulani purchased at the bulk rate of 35 cents a copy. The FEC accepted Fulani's bulk purchase rationale, but noted that according to the masthead, the bulk rate was actually only 15 cents per copy, so Fulani had overpaid by 20 cents per paper. The...
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