Daily Rules, Proposed Rules, and Notices of the Federal Government
The Commission periodically receives submissions from persons who self-report statutory or regulatory violations of which the Commission had no prior knowledge. The Commission considers such self-reports (which also are referred to as
The Commission recently has seen an increase in self-reported violations, which may be attributable, at least in part, to greater attention being placed on compliance programs for areas of potential organizational liability, and recognition that addressing a problem through self-auditing and self-reporting may help minimize reputational harm. The increase in the number of self-reported matters has highlighted the need to increase the transparency of Commission policies and procedures. Moreover, the Commission seeks to provide appropriate incentives for this demonstration of cooperation and responsibility.
On December 8, 2006, the Commission published a proposed policy statement on self-reporting of violations. See Proposed Policy Regarding Self-Reporting of Campaign Finance Violations (Sua Sponte Submissions), 71 FR 71090 (December 8, 2006). The comment period ended on January 29, 2007. Two comments were received. One of the comments supported the proposed policy and suggested some minor revisions. The other comment opposed the proposed policy.
This policy provides an overview of the factors that influence the Commission's handling and disposition of self-reported matters. It should be noted that while cooperation in general, and self-reporting in particular, will be considered by the Commission as mitigating factors, they do not excuse a violation of the Act or end the enforcement process. Also, this policy does not confer any rights on any person and does not in any way limit the right of the Commission to evaluate every case individually on its own facts and circumstances.
Self-reporting of violations typically allows respondents to resolve their civil liability in a manner which has the potential to: (1) Reduce the investigative burden on both the Commission and themselves; (2) demonstrate their acceptance of organizational or personal responsibility and commitment to internal compliance; and (3) conclude their involvement in the Commission's enforcement process on an expedited basis. As a result, a person who brings to the Commission's attention violations of the FECA and Commission regulations and who cooperates with any resulting investigation will also generally receive appropriate consideration in the terms of an eventual conciliation agreement. For example, the Commission may do one or more of the following:
• Take no action against particular respondents;
• Offer a significantly lower penalty than what the Commission otherwise would have sought in a complaint-generated matter involving similar circumstances or, where appropriate, no civil penalty;
• Offer conciliation before a finding of probable cause to believe a violation occurred, and in certain cases proceed directly to conciliation without the Commission first finding reason to believe that a violation occurred;
• Refrain from making a formal finding that a violation was knowing and willful, even where the available information would otherwise support such a finding;
• Proceed only as to an organization rather than as to various individual agents or, where appropriate, proceed only as to individuals rather than organizational respondents;
• Include language in the conciliation agreement that indicates the level of cooperation provided by respondents and the remedial action taken.
Additionally, in cases where the submission includes privileged or sensitive information, the Commission may work with the submitter to protect privileged information from public disclosure while still allowing the Commission to verify the sufficiency of the submission.
The Commission may take into account various factors in considering how to proceed regarding self-reported violations. In general, more expedited processing and a more favorable outcome will result when the self-reporting party can show that upon discovery of the potential violations, there was an immediate end to the activity giving rise to the violation(s); the respondent made a timely and complete disclosure to the Commission and fully cooperated in the disposition of the matter; and the respondent implemented appropriate and timely corrective measures, including internal safeguards necessary to prevent any recurrence. Further detail as to these factors is supplied below.
The Commission recognizes that all of the above-listed factors will not be relevant in every instance of self-reporting of potential FECA violations, nor is the Commission required to take all such factors into account. In addition, these factors should not be viewed as an exhaustive list.
The Commission will generally reduce opening civil penalty offers by between 25% and 75% compared with identical matters arising from a complaint or by other means. The amount of the reduction depends on the facts and circumstances of a particular case. The Commission will consider the factors set forth above.
Absent unusual circumstances, the Commission will grant a civil penalty reduction of 50% to respondents who meet the following criteria:
• Respondents alert the Commission to potential violations before the violation had been or was about to be discovered by any outside party, including the Commission;
• The violation immediately ceased and was promptly reported to the Commission upon discovery;
• Respondents take appropriate and prompt corrective action(s) (e.g., changes to internal procedures to prevent a recurrence of the violation; increased training; disciplinary action where appropriate);
• Respondents amend reports or disclosures to correct past errors, if applicable;
• Any appropriate refunds, transfers, and disgorgements are made and/or waived; and
• Respondents fully cooperate with the Commission in ensuring that the
In addition, the Commission may grant a civil penalty reduction of up to 75% to respondents for violations in
The required scope of the review, investigation or audit will depend on the circumstances. For example, if an organization discovers that an employee, stockholder or member may have reimbursed political contributions with organization funds, the Commission would consider a thorough review to include: Identification of all political contributions made by the suspect employee subsequent to and for at least three years prior to the suspected reimbursement (and extending further if additional suspect contributions are found); a review of contributions by anyone associated with the organization (including, but not limited to, relatives and subordinates) corresponding in time or recipient to the suspected reimbursed contributions; a review of the organization's compensation (especially bonus) and expense reimbursement policies and
The Commission will be the sole arbiter of whether the facts of each case warrant a particular reduction in the penalty. The Commission will generally not give a respondent the benefit of this policy if the respondent is the subject of a criminal or other government investigation. In considering appropriate penalties, the Commission will also consider the presence of aggravating factors, such as knowing and willful conduct or involvement by senior officials of an entity.
The Commission will generally not make a reason-to-believe finding or open a formal investigation for respondents that self-report violations, if: (1) All potential respondents in a matter have joined in a self-reporting submission that acknowledges their respective violations of the FECA; (2) those violations do not appear to be knowing and willful; (3) the submission is substantially complete and reasonably addresses the significant questions or issues related to the violation; and (4) the factual and legal issues are reasonably clear. Accordingly, the Commission is modifying its current practice to allow for an expedited Fast-Track Resolution (“FTR”) for a limited number of matters involving self-reported violations. This procedure is available at the Commission's discretion, but may be requested by respondents.
Respondents eligible for the FTR process will meet with the Office of General Counsel to negotiate a proposed conciliation agreement before the Commission makes any formal findings in the matter. Although the Commission is always free to reject or seek modifications to a proposed conciliation agreement, it is expected that this process will allow for more expedited processing of certain types of violations where factual and legal issues are reasonably clear. It also will allow respondents to resolve certain matters short of the Commission finding that there is reason to believe that a violation has occurred. Examples of matters that might be eligible for such treatment include:
• Matters in which an individual contributor discovers that he or she inadvertently violated the individual aggregate election cycle contribution limit contained in 2 U.S.C. 441a(a)(3);
• Matters in which a political committee seeks to disclose and correct relatively straightforward reporting violations;
• Matters in which a contributor and a political committee jointly seek to resolve their liability for a simple and inadvertent excessive or prohibited contribution; and
• Matters in which the initial self-reporting submission by the respondents is sufficiently thorough that only very limited, if any, follow-up by the Office of the General Counsel is necessary to complete the factual record.
The Commission recognizes that persons self-reporting to the Commission may face special concerns in connection with parallel criminal investigations, State administrative proceedings, and/or civil litigation. The Commission expects that persons who self-report to the Commission will inform the Commission of any existing parallel proceedings. The Commission encourages persons who self-report to the Commission also to self-report related violations to any law enforcement agency with jurisdiction over the activity. This will assist the Commission, where appropriate and possible, in working with other federal, state, and local agencies to facilitate a global and/or contemporaneous resolution of related violations by a self-reporting person. The possibility of such a resolution is enhanced when the self-reporting person expresses a willingness to engage other government agencies that may have jurisdiction over the conduct and to cooperate with joint discovery and disclosure of facts and settlement positions with respect to the different agencies.
In situations where contemporaneous resolution of parallel matters is not feasible, the Commission will consider whether terms contained in a conciliation agreement with the Commission may affect potential liability the same respondent realistically faces from another agency. In appropriate cases, where there has been self-reporting and full cooperation, the Commission may agree to enter into conciliation without requiring respondents to admit that their conduct was knowing and willful, even where there is evidence that may be viewed as supporting this conclusion. The Commission has followed this practice in several self-reported matters where the organizational respondents promptly self-reported and took comprehensive and immediate corrective action that included the dismissal of all individual corporate officers whose actions formed the basis for the organization's potential knowing and willful violation.
The Commission has the statutory authority to refer knowing and willful violations of the FECA to the Department of Justice for potential criminal prosecution, 2 U.S.C. 437g(a)(5)(C), and to report information regarding violations of law not within its jurisdiction to appropriate law enforcement authorities. 2 U.S.C. 437d(a)(9). The Commission will take into consideration the fact of self-reporting in deciding whether to refer a matter. However, the Commission will not negotiate whether it refers, reports, or otherwise discusses information with other law enforcement agencies. Although the Commission cannot disclose information regarding an investigation to the public, it can and does share information on a confidential basis with other law enforcement agencies.
The Commission seeks to encourage the self-reporting of violations. To that end, the Commission has adopted this policy that explains that
This notice represents a general statement of policy announcing the general course of action that the Commission intends to follow. This policy statement does not constitute an agency regulation requiring notice of proposed rulemaking, opportunities for public participation, prior publication, and delay in effective date under 5 U.S.C. 553 of the Administrative Procedures Act (“APA”). As such, it does not bind the Commission or any member of the general public. 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.