[Federal Register Volume 74, Number 131 (Friday, July 10, 2009)]
[Rules and Regulations]
[Pages 33140-33143]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-16422]


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FEDERAL ELECTION COMMISSION

11 CFR Part 111

[Notice 2009-12]


Procedural Rules for Audit Hearings

AGENCY: Federal Election Commission.

ACTION: Rule of Agency Procedure.

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SUMMARY: The Federal Election Commission (``Commission'') is

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instituting a program that provides committees that are audited 
pursuant to the Federal Election Campaign Act of 1971, as amended 
(``FECA'') with the opportunity to have a hearing before the Commission 
prior to the Commission's adoption of a Final Audit Report. Similar to 
the Commission's current program for hearings at the probable cause 
stage of the enforcement process, audit hearings will provide audited 
committees with the opportunity to present oral arguments to the 
Commission directly and give the Commission an opportunity to ask 
relevant questions prior to adopting a Final Audit Report. Further 
information about the procedures for the audit program is provided in 
the supplementary information that follows.

DATES: Effective July 27, 2009.

FOR FURTHER INFORMATION CONTACT: Joseph F. Stoltz, Assistant Staff 
Director, Audit Division, 999 E Street, NW., Washington, DC 20463, 
(202) 694-1650 or (800) 424-9530.

SUPPLEMENTARY INFORMATION: The Commission is instituting a program to 
afford committees that are the subject of a Commission audit the 
opportunity to participate in hearings (generally through counsel) and 
present oral arguments directly to the Commissioners prior to any 
Commission adoption of an audit report that includes findings that 
assert a potential violation of law.

I. Background

    On June 11, 2003, the Commission held a hearing concerning its 
enforcement procedures. The Commission received comments from the 
public, many of which argued for increased transparency in Commission 
procedures and expanded opportunities to contest allegations. Comments 
and statements for the record are available at: http://www.fec.gov/agenda/agendas2003/notice2003-09/comments.shtml. In response to issues 
raised at the hearing, the Commission issued new rules of agency 
procedure. See Statement of Policy Regarding Deposition Transcripts in 
Nonpublic Investigations, 68 FR 50688 (Aug. 22, 2003); Statement of 
Policy Regarding Treasurers Subject to Enforcement Proceedings, 70 FR 3 
(Jan. 3, 2005).
    On December 8, 2006, the Commission published a proposal for a 
pilot program for probable cause hearings, and sought comments from the 
public. See Proposed Policy Statement Establishing Pilot Program for 
Probable Cause Hearings, 71 FR 71088 (Dec. 8, 2006). The comment period 
on the proposed policy statement closed on January 5, 2007. The 
Commission received four comments, all of which endorsed the proposed 
pilot program for probable cause hearings. These comments are available 
at: http://www.fec.gov/law/policy.shtml#proposed under the heading 
``Pilot Program for Probable Cause Hearings.''
    On February 8, 2007, the Commission decided by a vote of 6-0 to 
institute the pilot program. The program went into effect on February 
16, 2007. The pilot program was designed to remain in effect for at 
least eight months, after which time a vote would be scheduled on 
whether the program should continue. The Commission found that the 
pilot program had been successful and the Commission announced that the 
program would become permanent. See Procedural Rules for Probable Cause 
Hearings, 72 FR 64919 (Nov. 19, 2007).
    On December 8, 2008, the Commission issued a notice of public 
hearing and request for public comment on its compliance and 
enforcement processes. Agency Procedures (Notice of Public Hearing and 
Request for Public Comments), 73 FR 74495 (Dec. 8, 2008). On January 
14-15, 2009, the Commission received comment and testimony regarding 
procedures and processes that it uses to resolve cases. At that time, 
many commenters praised the probable cause hearing program and some 
requested that a similar procedure be adopted with respect to other 
Commission processes, including audits. The comments received by the 
Commission, as well as the transcript of the hearing are available at: 
http://www.fec.gov/law/policy/enforcement/publichearing011409.shtml.
    One of the questions specifically set forth in the Notice of public 
hearing and request for public comments was whether respondents should 
be given the opportunity to appear before the Commission at times such 
as when the Commission is considering audit reports that state 
violations of law. See 73 FR 74495, 97. Several commenters supported 
providing an opportunity for committees being audited to be heard 
directly by the Commission before the Commission issues a Final Audit 
Report. Based upon its experience with the probable cause hearing 
program, and public comments regarding hearings during the audit 
process, the Commission is instituting a new rule of agency procedure 
to expand the Commission's hearing procedures to include audits in 
which one or more findings assert a potential violation of law.

II. Procedures for Audit Hearings

A. Opportunity To Request a Hearing

    The Commission is issuing a new rule of agency procedure allowing a 
committee that is being audited by the Commission's Audit Division to 
request a hearing prior to the Commission's adoption of a Final Audit 
Report when the Audit Division staff's draft Final Audit Report 
concludes that the committee violated FECA or Commission regulations. 
Currently, once the Audit Division completes its field work, it 
conducts an exit conference at which it presents its preliminary 
findings to the audited committee. Based upon the field work and the 
committee's response at the exit conference, the Audit Division 
prepares an interim or preliminary audit report that, in certain 
situations, the Commission considers in executive session prior to the 
report being sent to the committee being audited.\1\ The committee then 
has the opportunity to respond in writing. The Audit Division then 
prepares a draft Final Audit Report for Commission consideration. If 
one or more Commissioners object to such report, the matter is 
discussed and decided in an open meeting of the Commission.
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    \1\ Pursuant to the Commission's regulations, the Audit Division 
prepares ``interim'' audit reports in Title 2 matters and 
``preliminary'' audit reports in Title 26 matters.
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    While all written submissions provided during the audit process are 
considered by the Commission under current practice, the Commission 
wishes to provide those being audited with an opportunity to address 
the Commission directly and in person, before the Commission considers 
adopting any Audit Division findings that a violation of the Act or 
Commission regulations occurred. Upon preparing its draft Final Audit 
Report, which takes into consideration the committee's exit conference 
discussion and response to the interim or preliminary audit report, the 
Audit Division will provide the audited committee with a copy of its 
draft Final Audit Report. In audits where the Audit Division recommends 
the Commission adopt findings that a violation of the Act or Commission 
regulations occurred, it shall attach a cover letter informing the 
committee of the opportunity to provide a written response and request 
an oral hearing before the Commission. Moreover, if the Office of 
General Counsel has provided any legal advice on the draft Final Audit 
Report, the Audit Division shall provide a copy of the Office of 
General Counsel's legal

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memorandum to the committee. Within 15 days after receiving the draft 
Final Audit Report and any corresponding legal memoranda, the audited 
committee may respond in writing, and include a written request for a 
hearing. Any request for a hearing must be in writing and filed with 
the committee's response. Requestors who are unable to appear 
physically at a hearing may participate remotely, subject to the 
Commission's technical capabilities. Requestors wishing to participate 
remotely are advised to notify the Commission Secretary when they 
submit their written request for a hearing.
    Hearings are voluntary, and the Commission will draw no adverse 
inference based on the committee's request for, or waiver of, such a 
hearing. Each request for a hearing must state with specificity why the 
hearing is being requested and what issues the committee expects to 
address. Absent good cause, to be determined at the sole discretion of 
the Commission, late requests will not be accepted. Committees are 
responsible for ensuring that their requests are timely received. The 
Commissioners shall be notified of any such request within 5 days of 
receipt of the response. The Commission will grant a request for an 
oral hearing if any two Commissioners agree that a hearing would help 
resolve significant or novel legal enforcement issues or significant 
questions about the application of the law to the facts. The Commission 
will inform the committee whether the Commission is granting the 
committee's request within 30 days of receipt of the request.

B. Hearing Procedures

    The purpose of an oral hearing is to provide an audited committee 
with an opportunity to present their arguments in person to the 
Commissioners when the Audit Division staff's draft alleges that the 
committee violated FECA or Commission regulations, but before the 
Commission adopts the Final Audit Report. Consistent with current 
Commission regulations, a committee may be represented by counsel, at 
the committee's own expense, or may appear pro se at the oral hearing. 
See 11 CFR 111.23. Committees (or their counsel) will have the 
opportunity to present their arguments. Commissioners will have the 
opportunity to pose questions to the audited committee, or their 
counsel, if represented.
    At the hearing, committees are expected to raise only issues that 
were identified in their hearing request. Similarly, absent extenuating 
circumstances, committees may not introduce any new documents at the 
hearing that were not previously provided to the Audit Division. 
Committees may discuss any issues presented in the Audit Division 
staff's draft Final Audit Report, and the request for a hearing should 
include specific citations to any authorities (including prior 
Commission actions) on which the committee is relying or intends to 
cite at the hearing. If audited committees discover new information 
after submission of their response to the draft Final Audit Report or 
need to raise new arguments for similarly extenuating circumstances, 
they should notify the Commission as soon as possible prior to the 
hearing. Commissioners may ask questions on any matter related to the 
audit and committees are free to raise any germane new issues in 
response.
    Committees should notify the Secretary of the Commission at least 
one week prior to the scheduled date of the hearing if they intend to 
use charts, handouts, or audio-visual aids during their presentation to 
the Commission, to allow the Commission time to coordinate the handling 
of these arrangements with the court reporter and the Commission 
Secretary.
    When non-final audit matters include information entitled to 
exemption under the Sunshine Act, a hearing will occur in an executive 
session of the Commission, and only the committee and their counsel may 
attend. Attendance by any other parties must be approved by the 
Commission in advance.
    The Commission will determine the format and time allotted for each 
hearing at its discretion. Among the factors that the Commission may 
consider are agency time constraints, the complexity of the issues 
raised, and the extent of the Commission's interest. The Commission 
will determine the amount of time allocated for each portion of the 
hearing; the time limit may vary from hearing to hearing. The 
Commission anticipates that most hearings will begin with a brief 
opening statement by the committee or its counsel. Thereafter, 
Commissioners will have the opportunity to pose questions to the 
audited committee, and Commissioners may ask questions designed to 
elicit clarification from the Office of General Counsel or Office of 
the Staff Director. The General Counsel and the Staff Director will 
have the opportunity to pose questions to the audited committee, or 
their counsel, if represented. Hearings will normally conclude with 
closing remarks from the committee or its counsel.
    Third-party witnesses may not be called to testify at an oral 
hearing. However, the Commission may request that the committee submit 
supplementary information or briefing after the hearing. The Commission 
discourages voluminous submissions. Supplementary information may be 
submitted only upon Commission request and no more than ten days after 
such a request from the Commission, unless the Commission's request for 
information imposes a different, Commission-approved deadline. 
Materials requested by the Commission and materials considered by the 
Commission in making its determination may be made part of the public 
record. See Statement of Policy Regarding Disclosure of Closed 
Enforcement and Related Files, 68 FR 70426 (Dec. 18, 2003).
    When the hearing is held in an executive session, the Commission 
will have transcripts made of the hearings. The transcript will become 
part of the record of the audit and may be relied upon for Commission 
determinations. Committees may be bound by any representations made by 
the committee or its counsel at the hearing. The Commission will make 
the transcripts available to the committee for inspection as soon as 
practicable after the hearing, and committees may purchase copies of 
the transcript. Transcripts may be made public after the matter is 
closed in accordance with Commission policies on disclosure. 
Additionally, the Committee's response to the draft Final Audit Report 
will be placed on the public record as part of the file of the Final 
Audit Report.

C. Scheduling of Hearings

    The Commission will seek to hold the hearing in a timely manner 
after receiving a committee's request for a hearing. The Commission 
will attempt to schedule the hearing at a mutually accepted date and 
time. If a committee is unable to accommodate the Commission's 
schedule, however, the Commission may decline to hold a hearing. The 
Commission reserves the right to reschedule any hearing. Where 
necessary, the Commission reserves the right to request from a 
committee an agreement tolling any upcoming deadline, including any 
statutory deadline or other deadline found in 11 CFR part 111.

D. Pilot Program

    The Commission shall evaluate this new program, and consider 
whether it should, by an affirmative four votes of the Commission, be 
discontinued or modified. After one calendar year, the program shall 
continue as a pilot program until such time that the

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Commission either terminates it by an affirmative four votes or makes 
it permanent by an affirmative four votes.

E. Conclusion

    This notice establishes rules of agency practice or procedure. This 
notice does not constitute an agency regulation requiring notice of 
proposed rulemaking, opportunities for public comment, prior 
publication, and delay effective under 5 U.S.C. 553 of the 
Administrative Procedures Act (``APA''). 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.

    Dated: July 7, 2009.

    On behalf of the Commission.
Steven T. Walther,
Chairman, Federal Election Commission.
[FR Doc. E9-16422 Filed 7-9-09; 8:45 am]
BILLING CODE 6715-01-P