[Federal Register Volume 69, Number 18 (Wednesday, January 28, 2004)]
[Proposed Rules]
[Pages 4092-4095]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-1790]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 69, No. 18 / Wednesday, January 28, 2004 / 
Proposed Rules  

[[Page 4092]]



FEDERAL ELECTION COMMISSION

11 CFR Part 111

[Notice 2004-3]


Proposed Statement of Policy Regarding Naming of Treasurers in 
Enforcement Matters

AGENCY: Federal Election Commission.

ACTION: Draft statement of policy with request for comments.

-----------------------------------------------------------------------

SUMMARY: The Commission is considering exercising its discretion in 
enforcement matters to clarify when it intends to name a treasurer of a 
political committee in his or her official capacity as treasurer, and 
when it intends to name the treasurer in his or her personal capacity. 
For most enforcement matters involving a political committee, the 
Commission may decide, as a matter of policy, to name the treasurer in 
his or her official capacity. However, where a treasurer has apparently 
breached a personal obligation owing by virtue of his or her 
responsibilities under the Act and regulations, or a prohibition that 
applies to individuals, the Commission may decide to name that 
treasurer as a respondent in his or her personal capacity. The 
Commission seeks comments on the policy under consideration, and on how 
it should exercise its prosecutorial discretion on this subject in 
matters arising in its Administrative Fines Program.

DATES: Comments must be submitted on or before February 27, 2004.

ADDRESSES: All comments should be addressed to Peter G. Blumberg, 
Attorney, and must be submitted in either electronic or written form. 
Electronic mail comments should be sent to [email protected] and must 
include the full name, electronic mail address and postal service 
address of the commenter. Electronic mail comments that do not contain 
the full name, electronic mail address and postal service address of 
the commenter will not be considered. If the electronic mail comments 
include an attachment, the attachment must be in the Adobe Acrobat 
(.pdf) or Microsoft Word (.doc) format. Faxed comments should be sent 
to (202) 219-3923, with printed copy follow-up to ensure legibility. 
Written comments and printed copies of faxed comments should be sent to 
the Federal Election Commission, 999 E Street, NW., Washington, DC 
20463. Commenters are strongly encouraged to submit comments 
electronically to ensure timely receipt and consideration. The 
Commission will make every effort to post public comments on its Web 
site within ten business days of the close of the comment period.

FOR FURTHER INFORMATION CONTACT: Peter G. Blumberg, Attorney, 999 E 
Street, NW., Washington, DC 20463, (202) 694-1650 or (800) 424-9530.

SUPPLEMENTARY INFORMATION:

I. Introduction

    The Commission proposes modifying its current practice to name more 
clearly treasurers in their ``official'' and/or ``personal'' 
capacities.\1\ Specifically, when a complaint asserts sufficient 
allegations to warrant naming a committee as a respondent, the 
committee's current treasurer would also be named as a respondent in 
his or her official capacity. In these circumstances, reason-to-believe 
and probable cause findings against the committee would also be made as 
to the current treasurer in his or her official capacity. When the 
complaint asserts allegations that involve a past or present 
treasurer's violation of obligations that the Act or regulations impose 
specifically on treasurers, or prohibitions that apply to individual 
persons, then that treasurer would be named in his or her personal 
capacity, and findings would be made against the treasurer in that 
capacity. Thus, in some matters the current treasurer could be named in 
both official and personal capacities.
---------------------------------------------------------------------------

    \1\ The terms ``official capacity'' and ``representative 
capacity'' are generally interchangeable, as are the terms 
``personal capacity'' and ``individual capacity.'' See McCarthy v. 
Azure, 22 F.3d 351, 359 n.12 (1st Cir. 1994).
---------------------------------------------------------------------------

    The proposed policy modification would provide clearer notice to 
respondents and the public as to the nature of the Commission's 
enforcement actions, improve the perception of fairness among the 
regulated community, and merge the Commission's treasurer designation 
into conceptually familiar legal principles for the federal 
judiciary.\2\ In explaining the proposed policy change, this section 
first surveys the law on the official/personal capacity distinction; 
next, addresses when treasurers are properly named in their official or 
personal capacity or both; and finally, confronts the reoccurring 
issues of successor treasurers and substitution.
---------------------------------------------------------------------------

    \2\ As discussed infra Part II.A., the phrases ``official 
capacity'' and ``personal capacity'' are legal terms of art that 
permeate such fields as sovereign immunity, bankruptcy, 
corporations, and federal procedure. Their usage instantaneously 
identifies for the judiciary when the Commission is pursuing 
treasurers by virtue of their position, rather than by product of 
their actions.
---------------------------------------------------------------------------

II. The Official/Personal Capacity Distinction

    In the seminal case of Kentucky v. Graham, 473 U.S. 159 (1985), the 
United States Supreme Court discussed the distinction between official 
capacity and personal capacity suits. The Court determined that a suit 
against an officer in her official capacity ``generally represent[s] 
only another way of pleading an action against an entity of which an 
officer is an agent.'' Id. at 165. In other words, an official capacity 
proceeding ``is not a suit against the official but rather is a suit 
against the official's office.'' Will v. Mich. Dept. of State Police, 
491 U.S. 58, 71 (1989). Accordingly, ``an official-capacity suit is, in 
all respects other than name, to be treated as a suit against the 
entity.'' Graham, 473 U.S. at 166. Therefore, in an official capacity 
suit, the plaintiff seeks a remedy from the entity, not the particular 
officer personally.
    A ``personal-capacity action is * * * against the individual 
defendant, rather than * * * the entity that employs him.'' Id. at 167-
68. Since a ``[p]ersonal-capacity suit[] seek[s] to impose personal 
liability upon'' a particular individual, the individual is the true 
party in interest. Id. Liability lies with the particular officer 
personally, not with the officer's position. See id. at 166 n.11 
(``Should the official die pending final resolution of a personal-
capacity action, the plaintiff would have to pursue his action against 
the decedent's estate.''); see also Hafer v. Melo, 502 U.S. 21, 27 
(1991) (``officers sued in their personal capacity come to court as 
individuals'').

[[Page 4093]]

    The ``distinction between claims aimed at a defendant in his 
individual as opposed to representative capacity can be found across 
the law.'' McCarthy, 22 F.3d at 360 (citing numerous Supreme Court, 
lower court, and state cases referencing differences between individual 
and official capacity claims in multiple fields of law).\3\ The 
official capacity/individual capacity distinction also carries societal 
significance. As the McCarthy court explained:
---------------------------------------------------------------------------

    \3\ See Graham, 473 U.S. at 165 (42 U.S.C. 1983); Stafford v. 
Briggs, 444 U.S. 527, 544 (1980) (venue determination); Ex Parte 
Young, 209 U.S. 123, 159 (1908) (Eleventh Amendment); Northeast Fed. 
Credit Union v. Neves, 837 F.2d 531, 534 (1st Cir. 1988) 
(jurisdictional purposes); Pelkoffer v. Deer, 144 B.R. 282, 285-86 
(W.D. Pa. 1992) (bankruptcy); Estabrook v. Wetmore, 529 A.2d 956, 
958 (N.H. 1987) (applying doctrine that acts of a corporate employee 
performed in his corporate capacity generally do not form the basis 
for personal jurisdiction over him in his individual capacity).

    The ubiquity of the [official capacity/individual capacity] 
distinction is a reflection of the reality that individuals in our 
complex society frequently act on behalf of other parties--a reality 
that often makes it unfair to credit or blame the actor, 
individually, for such acts. At the same time, the law strikes a 
wise balance by refusing automatically to saddle a principal with 
total responsibility for a representative's conduct, come what may, 
and by declining mechanically to limit an injured party's recourse 
---------------------------------------------------------------------------
to the principal alone, regardless of the circumstances.

Id.

III. Naming Treasurers in Their Official Capacity

    Naming the current treasurer in his or her official capacity would 
improve the Commission's enforcement practice in a number of ways. Most 
importantly, it would clarify that findings by the Commission (whether 
``Reason To Believe'' or ``Probable Cause To Believe'') or the signing 
of a conciliation agreement only concerns the treasurer in his or her 
capacity as representative of the committee, not personally. The 
practice would also ensure that a named individual who signs the 
conciliation agreement on behalf of the committee (or obtains legal 
representation on behalf of the committee) is the one empowered by law 
to disburse committee funds to pay a civil penalty, disgorge funds, 
make refunds, and carry out other monetary remedies that the committee 
agrees to through the conciliation agreement.\4\ Also, naming a 
treasurer (in his or her official capacity), as opposed to naming 
simply the office of treasurer or just the committee, not only provides 
the Commission with an individual in every instance to serve with 
notices throughout the proceeding, but also results in more 
accountability on behalf of the committee--that is, a particular person 
who will ensure that a committee is responsive to Commission 
findings.\5\ Finally, specifying whether a treasurer is named in his or 
her official or personal capacity would be consistent with use of these 
terms as pleading conventions in court actions. A probable cause 
finding against a treasurer in his or her official capacity would make 
clear to a district court in enforcement litigation that the Commission 
is seeking relief against the committee, and would only entitle the 
Commission to obtain a civil penalty from the committee. See Graham, 
473 U.S. at 165.
---------------------------------------------------------------------------

    \4\ In the absence of a treasurer, ``the financial machinery of 
the campaign grinds to a halt. * * *'' FEC v. Toledano, 317 F.3d 
939, 947 (9th Cir. 2003), reh'g denied; see 2 U.S.C. 432(a) (``No 
expenditure shall be made * * * without the authorization of the 
treasurer or his or her designated agent.''); 11 CFR 102.7(a) 
(designation of assistant treasurer).
    \5\ Such accountability may be especially helpful in matters 
involving committees that tend to be ephemeral--existing for only a 
short time before permanently disbanding operations.
---------------------------------------------------------------------------

IV. Naming Treasurers in Their Personal Capacity

    The Act places certain legal obligations on committee treasurers, 
the violation of which makes them personally liable. See, e.g., 2 
U.S.C. 432(c) (keep an account of various committee records), 432(d) 
(preserve records for three years), 434(a)(1) (file and sign reports of 
receipts and disbursements). The Commission's regulations further 
require a treasurer to examine and investigate contributions for 
evidence of illegality. See 11 CFR 103.3. Due to their ``pivotal 
role,'' treasurers may be held personally liable for failing to fulfill 
their responsibilities under the Act and the Commission's regulations. 
See Toledano, 317 F.3d at 947 (``The Act requires every political 
committee to have a treasurer, 2 U.S.C. 432(a), and holds him 
personally responsible for the committee's recordkeeping and reporting 
duties, id. 432(c)-(d), 434(a). * * * Federal law makes the treasurer 
responsible for detecting [facial contribution] illegalities, 11 CFR 
103.3(b), and holds him personally liable if he fails to fulfill his 
responsibilities, see 2 U.S.C. 437g(d). * * *'') (emphasis added); see 
also FEC v. John A. Dramesi for Cong. Comm., 640 F. Supp. 985 (D.N.J. 
1986) (holding treasurer responsible for failing to ``make * * * best 
efforts to determine the legality of'' an excessive contribution); FEC 
v. Gus Savage for Cong. '82 Comm., 606 F. Supp. 541, 547 (N.D. Ill. 
1985) (``It is the treasurer, and not the candidate, who becomes the 
named defendant in federal court, and subjected to the imposition of 
penalties ranging from substantial fines to imprisonment.''); 104.14(d) 
(``Each treasurer of a political committee, and any other person 
required to file any report or statement under these regulations and 
under the Act shall be personally responsible for the timely and 
complete filing of the report or statement and for the accuracy of any 
information or statement contained in it.'') (emphasis added). Thus, a 
treasurer would be named as a respondent in a MUR in his or her 
personal capacity, and findings would be made against a treasurer in 
the same capacity, when the MUR involves the treasurer's personal 
violation of a legal obligation that the statute or regulations impose 
specifically on committee treasurers and when a reasonable inference 
from the alleged violation is that the treasurer knew, or should have 
known, about the facts constituting a violation.\6\
---------------------------------------------------------------------------

    \6\ Indeed, if FECA were construed to impose liability on 
treasurers only in their official capacities, it would effectively 
mean that only committees are liable for violations under the 
statute--which would have been easy enough for Congress to 
accomplish by writing the Act to impose reporting, recordkeeping, 
and other duties on ``committees'' rather than ``treasurers.''
---------------------------------------------------------------------------

    Similarly, if a past or present treasurer violates a prohibition 
that applies to individuals, the treasurer would be named as a 
respondent in his or her personal capacity, and findings would be made 
against the treasurer in that capacity. In this way, a treasurer would 
be treated no differently than any other individual who violates a 
provision of the Act.\7\ Should the Commission file suit in district 
court following a finding of probable cause against a treasurer in his 
or her personal capacity, judicial relief, including an injunction and 
payment of a civil penalty, could be obtained against the treasurer 
personally. Graham, 473 U.S. at 166-168. In any scenario, the 
Commission would, of course, remain free to exercise its prosecutorial 
discretion not to pursue a respondent.\8\
---------------------------------------------------------------------------

    \7\ The Act and the Commission's regulations prohibit any 
``person'' which includes individuals, from engaging in certain 
kinds of conduct. See, e.g., 2 U.S.C. 432(b) (forward contributions 
to the committee's treasurer), 441e (receipt of contributions from 
foreign nationals), and 441f (making and knowingly accepting 
contributions in the name of another).
    \8\ For example, the Commission, in some cases, may decide not 
to pursue a predecessor treasurer who technically has personal 
liability where the committee, through its current treasurer, has 
agreed to pay a sufficient civil penalty and to cease and desist 
from further violations of the Act.
---------------------------------------------------------------------------

    When the Commission obtains relief from a treasurer personally, the 
obligation will follow the individual. Thus, when a treasurer in his or 
her

[[Page 4094]]

personal capacity agrees to pay a civil penalty through a conciliation 
agreement, or is ordered to pay a civil penalty by a district court, a 
personal obligation exists to pay the civil penalty. (A separate civil 
penalty would likely be assessed against the committee itself.) 
Likewise, a cease and desist provision (negotiated through 
conciliation) or an injunction (imposed by a district court) against a 
treasurer in his or her personal capacity will still apply to that 
treasurer in the event he or she moves on to become treasurer with 
another committee. Cf. Sec'y Exch. Comm'n v. Coffey, 493 F.2d 1304, 
1311 n.11 (6th Cir. 1974) (``The significance of naming an officer * * 
* personally is that `otherwise he is bound only as long as he remains 
an officer * * *, whereas if he is named [personally] he is personally 
enjoined without limit of time.' '') (quoting 6 L. Loss, Securities 
Regulation 4113 (1969, supp. to 2d ed.)).\9\
---------------------------------------------------------------------------

    \9\ In some cases, initially, the Commission does not have 
information that would indicate that the Commission should pursue a 
treasurer in his or her personal capacity for a violation. However, 
at a later stage of the enforcement process, evidence may arise that 
indicates that a treasurer is personally liable for a violation. In 
these instances, the Commission would exhaust the Act's 
administrative prerequisites to suit before filing suit against the 
treasurer in his or her personal capacity. See 2 U.S.C. 437g(a)(3); 
FEC v. Nat'l Rifle Ass'n, 553 F. Supp. 1331, 1337-38 (D.D.C. 1983).
---------------------------------------------------------------------------

V. Naming Treasurers in Both Capacities

    Treasurers would be initially generated as respondents in both 
their official and personal capacities only with respect to allegations 
that directly relate to reporting, recordkeeping, and other duties 
specifically imposed by the Act on treasurers. See, e.g., United States 
v. Johnson, 541 F.2d 710, 711 (8th Cir. 1976) (applying a similar 
standard in an action involving the Federal Trade Commission when 
finding that ``[t]he propriety of including a person both as an 
individual and as a corporate officer in a cease and desist order has 
consistently been upheld in instances where the person included was 
instrumental in formulating, directing and controlling the acts and 
practices of the corporation'') (citing Fed. Trade Comm'n v. Standard 
Ed. Soc'y, 302 U.S. 112 (1937); Standard Distrib. v. Fed. Trade Comm'n, 
211 F.2d 7 (2d Cir. 1954); Benrus Watch Co. v. Fed. Trade Comm'n, 352 
F.2d 313 (8th Cir. 1965)). However, if the Office of General Counsel 
(``OGC'') is persuaded through the respondent's response to the 
complaint, or the response to the Factual and Legal Analysis, or the 
Respondent's Brief at the Probable Cause stage, or an investigation, 
that the treasurer was unaware, and had no reason to know, of the 
operative facts giving rise to a violation, OGC would recommend that 
findings against the treasurer only be made in his or her official 
capacity.
    On the other hand, if a complaint alleges a violation such as 
coordination or receipt of contributions in the name of another, the 
same reasonable inference as to the treasurer's knowledge of the 
operative facts would not be drawn as a routine matter. The Commission 
proposes with respect to complaints of this nature that the treasurer 
would initially be named as a respondent only in his or her official 
capacity. Notably, in these cases the reporting violation stems from 
the same operative facts as the principal violation. Only if OGC learns 
later that the treasurer had knowledge of the operative facts--for 
example, the treasurer knew that an in-kind contribution stemming from 
coordination went unreported--might the Commission make findings 
against the treasurer in his or her personal capacity.
    In cases where the treasurer has both official and personal 
liability, the respondents would be named as ``John Doe for Congress 
and Joe Smith, in his official capacity as treasurer and in his 
personal capacity.'' Alternatively, the respondents might be named as 
``John Doe for Congress and Joe Smith, in his official capacity as 
treasurer'' and ``John Doe, in his personal capacity.'' Where a 
treasurer has been named in both his or her official and personal 
capacities, any resulting conciliation agreement would be signed by the 
current treasurer on behalf of both the committee and the treasurer in 
his or her personal capacity.

VI. Successor Treasurers/Substitution

    An issue closely related to the official/personal capacity 
distinction is whether a successor treasurer may be substituted for a 
predecessor treasurer. Often the specific individual who was the 
treasurer at the time of a violation is no longer the treasurer when 
the Commission undertakes the enforcement process. Whether the 
successor treasurer or the predecessor treasurer should be named as the 
respondent depends on whether the Commission is pursuing the treasurer 
in his or her official capacity, personal capacity, or both.
    Under the present practice, when OGC discovers that a committee has 
changed treasurers since the point of the underlying violation, OGC 
typically notes the change of treasurer, the date of the change, the 
former treasurer's name, and indicates whether an amendment was made to 
the Statement of Organization in its next report to the Commission. If 
a treasurer change is made after a finding of reason to believe, then 
OGC typically includes the new treasurer and notes the change in its 
next report on the matter. If a treasurer change is made after a 
finding of probable cause to believe, OGC sends the new treasurer a 
supplemental probable cause brief (incorporating the prior probable 
cause brief), which states that the Commission found probable cause to 
believe against the committee and the treasurer's predecessor and will 
recommend probable cause against the new treasurer. After receiving a 
response or waiting until the expiration of the response period, OGC 
typically returns to the Commission with a recommendation to find 
probable cause to believe against the new treasurer.
    When the Commission pursues a current treasurer in his or her 
official capacity, any successor treasurer would be substituted for the 
predecessor treasurer. In such cases, the Commission is pursuing the 
official position (and, therefore, the entity), not the individual 
holding the position. See Will, 491 U.S. at 71. Because an official 
capacity action is an action against the treasurer's position, the 
Commission may summarily substitute a new treasurer in his or her 
official capacity at any stage prior to a finding of probable cause to 
believe.\10\
---------------------------------------------------------------------------

    \10\ Pursuant to the proposed policy, the Commission would not 
be legally obligated to undertake the requirements of 2 U.S.C. 
437g(a)(3) when a successor treasurer undertakes his or her 
position; although not legally required to do so, the Commission 
would intend to inform a new treasurer of the pending action and 
make copies of the briefs available to the successor treasurer.
---------------------------------------------------------------------------

    When a predecessor treasurer is personally liable, the Commission 
would pursue the predecessor treasurer individually, and not substitute 
the successor treasurer for the predecessor treasurer individually. See 
fn. 7; Graham, 473 U.S. at 167-68. There would be no legal basis for 
imputing personal liability from a predecessor treasurer's misconduct 
to a successor treasurer who did not personally engage in the 
misconduct.
    If the Commission were to pursue a treasurer both officially and 
individually and this treasurer is later replaced, the Commission would 
continue to pursue the predecessor treasurer for any violations for 
which he or she is personally liable, and substitute the successor 
treasurer for official capacity violations. Absent some independent 
basis of liability, the

[[Page 4095]]

Commission would not pursue intermediate treasurers.\11\ See Cal. 
Democratic Party v. FEC, 13 F. Supp. 2d 1031, 1037 (E.D. Cal. 1998) 
(dismissing individual capacity claims against a former treasurer 
because ``there is no allegation that [the treasurer] violated any 
personal obligation'' and dismissing official capacity claims against 
him ``since [he] is no longer treasurer * * * and thus, is not the 
appropriate person against whom an official capacity suit can be 
maintained. * * *'').\12\
---------------------------------------------------------------------------

    \11\ For example, while Treasurer A is the treasurer for Joe 
Smith for Congress, a violation occurs that subjects A to official 
and individual liability. Treasurer A would be named in both his 
official and personal capacities. After the enforcement action has 
begun, Treasurer A resigns and Treasurer B takes over. The 
Commission should pursue Treasurer A in his individual capacity, and 
Treasurer B in her official capacity. If Treasurer B resigns and is 
succeeded by Treasurer C prior to the conclusion of the enforcement 
matter, the Commission should then continue to pursue Treasurer A in 
his individual capacity and pursue Treasurer C in her official 
capacity. Treasurer B is no longer named in her official capacity.
    \12\ A deeper examination of the court file indicates that--
despite the California Democratic Party court's assertion to the 
contrary''the Commission never actually pled that the treasurer in 
this case was personally liable. Rather, the complaint references 
the treasurer ``as treasurer'' and the Commission's response to the 
treasurer's motion to dismiss indicates that the Commission was 
pursuing the treasurer ``in his official capacity.'' Compl., 
paragraphs 8, 58-59, Prayer paragraphs 1-5; Resp. to Def. Mot. to 
Dismiss, p. 21. However, the California Democratic Party court's 
result underscores the need for the Commission to delineate more 
clearly the capacity in which it pursues treasurers.
---------------------------------------------------------------------------

VII. Proposed Policy

    In light of the considerations explained above, the Commission is 
considering exercising its discretion in enforcement matters by naming 
treasurers as follows:
    1. In all enforcement actions where a political committee is a 
respondent, name as respondents the committee and its current treasurer 
``in (his or her) official capacity as treasurer.''
    2. In enforcement actions where a treasurer has apparently breached 
a personal obligation owing by virtue of his or her responsibilities 
under the Act and regulations, or a prohibition that applies to 
individuals, name that treasurer as a respondent ``in (his or her) 
personal capacity.''
    The Commission invites comments on this policy that is under 
consideration. Comments may be submitted on any aspect of the policy 
being considered, including:
    (A) If the Commission adopts the policy, are there certain 
circumstances that warrant flexibility in applying the policy?
    (B) Whether, and to what extent, the Commission should consider a 
treasurer's ``best efforts'' to comply with the law.
    (C) Whether and how to apply the prospective policy in its 
Administrative Fines program.

    Dated: January 23, 2004.
Bradley A. Smith,
Chairman, Federal Election Commission.
[FR Doc. 04-1790 Filed 1-27-04; 8:45 am]
BILLING CODE 6715-01-P