Larouche's Comm. for a New Bretton Woods v. F.E.C.

• Decision Date: 03 March 2006
• Docket Number: No. 04-1311.,04-1311.
• Parties: LAROUCHE'S COMMITTEE FOR A NEW BRETTON WOODS, Petitioner v. FEDERAL ELECTION COMMISSION, Respondent.
• Court: U.S. Court of Appeals — District of Columbia Circuit

439 F.3d 733

LAROUCHE'S COMMITTEE FOR A NEW BRETTON WOODS, Petitioner v. FEDERAL ELECTION COMMISSION, Respondent.

No. 04-1311.

United States Court of Appeals, District of Columbia Circuit.

Argued September 27, 2005.

Decided March 3, 2006.

Petition for Review of an Order of the Federal Election Commission.

Robert P. Trout, Washington, D.C., argued the cause for petitioner. With him on the briefs was John Thorpe Richards, Jr., Washington, D.C.

Colleen T. Sealander, Associate General Counsel, Federal Election Commission, argued the cause for respondent. With her on the brief were Lawrence H. Norton, General Counsel, Richard B. Bader, Associate General Counsel, and Holly J. Baker, Attorney.

Before: GINSBURG, Chief Judge, and HENDERSON and GRIFFITH, Circuit Judges.

Opinion for the Court filed by Circuit Judge GRIFFITH.

GRIFFITH, Circuit Judge.

Petitioner LaRouche's Committee for a New Bretton Woods (the "LaRouche Committee" or "Committee") was the principal campaign committee for Lyndon H. LaRouche Jr.'s bid for the Democratic party presidential nomination in 2000. Pursuant to the Presidential Primary Matching Payment Account Act (the "Act"), see 26 U.S.C. § 9033(a)(1)-(3); 11 C.F.R. § 9033.1(b)(3)-(5), the LaRouche Committee received $222,034 in federal matching funds from the Federal Election Commission (the "FEC") in connection with "mark-up charges" paid to vendors affiliated with LaRouche. FEC regulations place upon a campaign that receives federal funds the burden to prove that a challenged payment is a "qualified campaign expense[]." 11 C.F.R. § 9033.11(a). After an audit and hearing, the FEC determined that the LaRouche Committee failed to carry its burden to prove that the mark-up charges were reasonable and ordered the Committee to repay the $222,034. The Committee offered no evidence before the FEC that established either the basis or the reasonableness of the mark-up charges. We conclude, therefore, that the FEC's order to the Committee to repay the matching funds used for the mark-up charges was not "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law," 5 U.S.C. § 706(2)(A), nor "unsupported by substantial evidence." Id. § 706(2)(E). We deny the petition for review with respect to the repayment order. The LaRouche Committee also challenges the FEC's denial of its motion for reconsideration of the repayment order. We dismiss this portion of the petition for lack of jurisdiction because the LaRouche Committee's "intent to seek review" cannot "be fairly inferred from the petition for review or from other contemporaneous filings." Entravision Holdings, LLC v. FCC, 202 F.3d 311, 313 (D.C. Cir. 2000); see also Fed. R. App. P. 15(a)(2)(C).

I.

During the 2000 presidential campaign, the LaRouche Committee received $1,448,389 in federal matching funds. The Committee spent the bulk of these funds for advertising and fund-raising services by seven vendors that LaRouche and several of his political associates created in the mid-1980's to provide and distribute material advocating LaRouche's political, philosophical, and scientific views.¹ LaRouche was the vendors' sole client. Some of these vendors had provided services to LaRouche's 1988, 1992, and 1996 presidential campaigns.

There were three components to the LaRouche Committee's payments to the vendors during the 2000 campaign: (1) an amount resulting from an "activity ratio"² applied to "baseline costs"³; (2) fixed monthly fees ranging from $150 to $750; and (3) a "mark-up" to the "activity ratio" amount.⁴ The first two components are not at issue here. The mark-up payments are.

The FEC audited the LaRouche Committee following the 2000 campaign and issued a Preliminary Audit Report on July 17, 2002, and a Final Audit Report on May 1, 2003. Both reports found that the mark-ups were not qualified campaign expenses because the "proffered reasons for the mark-up were not supported by the facts." Under the Act, a campaign must return to the U.S. Treasury matching funds that are not spent as qualified campaign expenses. See 26 U.S.C. § 9038(b)(1), (2). The FEC auditors ordered the Committee to repay the matching funds used for the mark-ups. On July 8, 2003, the LaRouche Committee requested an administrative review of the Final Audit Report and a hearing before the FEC. During the course of the hearing, held on September 17, 2003, the LaRouche Committee submitted a declaration from William J. Caldwell, a Certified Public Accountant, in an effort to explain the mark-up expenses. In supplemental materials submitted on September 26, 2003, the LaRouche Committee also stated that the mark-ups included: "1) costs not included in the vendors' baseline charges and highly variable costs that were underestimated; 2) compensation for one-time start up costs and intangibles; 3) advance payment/bad debt reserves; and 4) a small profit."

On March 11, 2004, the FEC issued its Repayment Determination and ordered the LaRouche Committee to repay $222,034. The $222,034 figure consisted of (a) $67,988 of public funds used by the LaRouche Committee for payments that were not qualified campaign expenses,⁵ and (b) $154,046 in matching funds received in excess of LaRouche's entitlement.⁶ Both components of the repayment result from the FEC's determination that the vendor mark-ups were not qualified campaign expenses.

The FEC set forth six factors that influenced its determination: (1) the LaRouche Committee "did not provide any verifiable basis for the mark-up charges it used;" (2) many of the indirect costs cited by the Committee to "justify the mark-up would appear to have already been captured by the activity ratio;" (3) the probability of default was low given the Committee's history with the vendors, a factor that would refute the need for a mark-up charge; (4) the Committee's failure to provide records "to explain and support [its] general categorical descriptions of unidentified and hidden vendor costs;" (5) the Committee's failure "to produce any document by which the [FEC] can either quantify the mark-up charges or determine the reasonableness of . . . mark-up charges proffered;" and (6) the Committee's inability to "justify the original, frontloaded 80%, 50% and 0% mark-up structure."

The Committee petitioned the FEC to reconsider its order on two grounds. First, it contested the FEC's calculation of the amount of the repayment. The FEC granted rehearing on this issue and affirmed its order that the Committee repay $222,034. Second, the Committee sought an adjustment of the repayment amount based on repayments requested from its vendors in the wake of the FEC's order. The FEC denied reconsideration of this issue. The Committee petitions this Court for review of the FEC's repayment order and the denial of the motion for reconsideration. We deny the petition for review with respect to the repayment order and dismiss, for lack of jurisdiction, the challenge to the FEC's denial of the motion for reconsideration.

II.

The Presidential Primary Matching Payment Account Act provides partial federal financing for the campaigns of eligible candidates. 26 U.S.C. §§ 9031-9042. Candidates may only use federal funds to defray "qualified campaign expenses,"⁷ id. § 9042(b), and must repay any funds that the Commission finds were used for another purpose, id. § 9038(b)(2). Candidates must prove that the matching funds are spent on "qualified campaign expenses," id. § 9033.11(a), and agree in writing to "keep and furnish to the Commission all documentation relating to disbursements and receipts," id. § 9033.1(b)(5), as well as any "other information the Commission may request," id. § 9033.1(b).

The Act requires the Commission to audit every publicly-funded campaign. 26 U.S.C. § 9038(a). The Commission has adopted detailed procedures for these audits. After examining a candidate's books, records, and personnel, the FEC issues a Preliminary Audit Report and affords the candidate an opportunity to respond. See 11 C.F.R. § 9038.1(c)(1)-(2). The Commission then issues a Final Audit Report that contains a repayment determination. See id. § 9038.1(d)(1). The candidate may seek administrative review. See id. § 9038.2(c)(2). As part of this review, a candidate may request an oral hearing. See id. § 9038.2(c)(2)(ii). Following review, the FEC issues a Repayment Determination with a Statement of Reasons. See id. § 9038.2(c)(3). The candidate may file a petition for rehearing before the FEC, limited to "new questions of law or fact that would materially alter the Commission's. . . repayment determination." Id. § 9038.5(a). Here, the LaRouche Committee exercised its right to challenge the FEC's determinations during every step of the audit process, including at an oral hearing.

Section 9041 of the Act, 26 U.S.C. § 9041, directs that we review the repayment decisions of the FEC under the arbitrary and capricious standard of the Administrative Procedure Act. See 5 U.S.C. § 706(2)(A); Comm. to Elect Lyndon La Rouche v. FEC, 613 F.2d 834, 845-46 (D.C. Cir. 1979). We must "hold unlawful and set aside agency action, findings, and conclusions found to be . . . arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law," 5 U.S.C. § 706(2)(A), or "unsupported by substantial evidence." Id. § 706(2)(E). "Under this highly deferential standard of review, the court presumes the validity of agency action . . . and must affirm unless the [agency] failed to consider relevant factors or made a clear error in judgment." Cellco P'ship v. FCC, 357 F.3d 88, 93-94 (D.C. Cir. 2004) (citation and quotation marks omitted). Our task is limited and familiar. "A court cannot substitute its judgment for that of an agency . . . and must affirm if a rational basis for the agency's decision exists." Dyer v. Blue Cross & Blue Shield Ass'n, 848 F.2d 201, 205 (D.C. Cir. 1988) (citation omitted).

The Committee argues that the FEC's repayment order was arbitrary...