ALJDEC decisions subject to certification as final

03A-02036-CCE · Citizens Clean Elections Commission · 2003-06-09

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

IN THE MATTER OF:

MATT SALMON. | | No. 03A-02036-CCE

ADMINISTRATIVE LAW JUDGE DECISION | | | | | | HEARING: The hearing was conducted on May 6, 2003. The record was kept open until May 20, 2003 to allow the parties to file post-hearing memoranda, if desired. APPEARANCES: The Appellant, Matt Salmon, was represented by his attorney, Timothy J. Casey, Esq. The Arizona Citizens Clean Elections Commission was represented by its attorney, Charles Wirken, Esq. ADMINISTRATIVE LAW JUDGE: Brian Brendan Tully _____________________________________________________________________ Evidence and testimony were presented and, based upon the entire record, the following Findings of Fact, Conclusions of Law and Recommended Order are made:

FINDINGS OF FACT

1. The Appellant, Matt Salmon, was a Republican Party candidate for governor of the State of Arizona in the 2002 primary and general elections. 2. On February 27, 2003, the Arizona Citizens Clean Elections Commission (“Commission”) issued a written Order and Notice of Civil Penalties to Appellant in the amount of $10,000.00 for failing to comply (albeit unintentionally) with the reporting requirements set forth in the Citizen Clean Elections Act (“Act”) during the 2002 Republican Party’s primary election for governor. The Appellant timely filed an appeal of that Order and Notice of Civil Penalties.

The Arizona Clean Elections Commission and the Citizens Clean Election Act

3. The Commission is a state governmental agency established pursuant to the Act. 4. The Commission is required to adopt rules to implement the reporting requirements of A.R.S. § 16-958(D) and (E) and to enforce the provisions of the Act by monitoring the required reports and financial records of political candidates to ensure that equalization or “matching fund’ monies are paid promptly to opposing publicly-funded candidates under A.R.S. §16-952. 5. The Commission is consists of five members. In 2002, the Commission was comprised of Commissioners Ruth S. Jones, who served as Chairperson, L. Gene Lemon, David G. McKay, Ermila Jolley and Kathleen S. Detrick. In 2003, the Commission was comprised of Commissioners L. Gene Lemon, who served as Chairperson, Kathleen S. Detrick, Ruth S. Jones, Carl E. Lopez and David G. McKay. 6. Colleen Connor is the duly appointed Executive Director of the Commission. She is a non-practicing member of the State Bar of Arizona. Ms. Connor is an expert in Arizona election laws. 7. The Commission, its Executive Director and its staff have the authority to monitor, investigate and enforce Arizona’s campaign finance laws. The Commission has the statutory authority to impose financial fines on candidates and campaigns, remove a candidate from the ballot, and require the disqualification of a candidate or the ultimate winning candidate’s forfeiture of office if the Commission concludes that a candidate’s campaign financial disclosures are not in compliance with the Act’s requirements. 8. The Commission has the statutory authority to investigate candidates and their campaigns for possible violations of the Act. 9. The Commission promulgated rules to instruct candidates and committees regarding the requirements for reporting campaign activity.

10. The Commission’s staff has the authority to initiate or generate recommendations that the Commission investigate a candidate’s compliance with the Act. 11. The Act established a campaign financing system to provide public funding to qualified candidates running for legislative and statewide offices. The public funding comes from surcharges imposed on civil and criminal fines and penalties, voluntary donations from the public, contributions collected by clean elections candidates, and fees imposed upon lobbyists. 12. To be certified as a clean elections candidate, a candidate must obtain a predetermined number of $5.00 qualifying contributions from constituents. 13. Once qualified, clean elections candidates must follow strict contribution and spending limits, as well as reporting requirements, and participate in required debates. 14. The Act also impacts candidates who elect not to receive public funding to conduct their campaigns. Under the Act, non-participating candidates are subject to specific reporting requirements. The Commission is responsible for ensuring that non-participating candidates comply with the Act’s requirements. 15. When primary election expenditures by non-participating candidates reach certain “trigger” amounts, the Act requires non-participating candidates to file trigger reports: (a) on the first of each month before the beginning of the primary election period; (b) each Tuesday after the primary election period begins, which in this case was July 9, 2002; and (c) daily during the last two weeks before the primary election. 16. The Commission and the Secretary of State’s Office coordinated the publication of the Arizona Campaign Finance Handbook, April 2002, which set forth instructions for filing campaign finance reports and recording transactions. The Handbook was written by the Campaign Finance Supervisor, a position in the Secretary of State’s Office that is funded by the Commission. 17. The Commission and the Secretary of State’s Office also provided candidate and committee training classes throughout the year to facilitate compliance with the campaign finance laws. 18. The Secretary of State’s Office is required to provide campaign finance software to all candidate committees. All statewide and legislative office candidates are required to use the software to file their campaign finance reports electronically. 19. The Handbook describes the essential elements of reporting, including “how to” directions on using the campaign finance software. The campaign finance software prompts the user to enter information, such as the campaign’s contributions or expenditures, based on the nature of the transaction. 20. The campaign finance software was programmed to alert non-participating candidates to file additional reports upon reaching certain thresholds for reporting expenditures prior to the primary election. If the software is opened and updated with committee activity on a daily basis, then the committee would be alerted when a triggering threshold had been reached. In calculating total campaign expenditures, the software was programmed to add the total amount of expenditures, other than a contract, promise, or agreement to make an expenditure reported pursuant to A.R.S. § 16- 915(A)(4)(a), and the total amount of campaign debts and extensions of credit owed by the candidate reported pursuant to A.R.S. § 16-915(A)(16). 21. Unless exempt pursuant to A.R.S. § 16-903, all candidate campaign committees for statewide and legislative offices registered in Arizona must file six campaign finance reports pursuant to A.R.S. § 16-913, also referred to as period reports, reflecting all campaign activity during the prescribed time period. The six campaign finance reports filed pursuant to A.R.S. § 16-913 are required to include the reporting data set forth in A.R.S. § 16-915(A). 22. The Act requires non-participating candidates to file additional reports based on the occurrence of a triggering event. Pursuant to A.R.S. § 16-941(B)(2), non-participating candidates are required to file an original campaign finance report whenever expenditures on behalf of the candidate, from the beginning of the election cycle to any date up to primary day, exceed seventy percent of the original primary election spending limit applicable to a participating candidate seeking the same office. For gubernatorial candidates, seventy percent of the original primary spending limit is $286,970.00. 23. After a non-participating candidate has filed an original report, that candidate must file a supplemental report when previously unreported expenditures exceed $25,000.00 24. Before the beginning of the primary election period, July 9, 2002, a non-participating candidate was required to file the original report or supplemental reports on the first of each month after the candidate’s previously unreported expenditures exceeded the trigger amount. After July 9, 2002, the non-participating candidate was required to file the original or supplemental reports on any Tuesday after the candidate’s previously unreported expenditures exceeded the trigger amount. 25. All candidates were required to file reports on January 31, 2002, and June 30, 2002, as well as a pre-primary report, a post-primary report, a pre-general report and a post-general report. For non-participating candidates, these reports must repeat and include the detailed reporting of contributions and expenditures already included on trigger reports.

Commission’s Compliance with Auditor General Recommendations

26. The Arizona Auditor General conducted a compliance and control review of the Commission following the 2000 election. 27. In a report dated January 10, 2002, the Auditor General found that the Commission did not monitor compliance reports required to be filed by non- participating candidates. The report noted:

“As a result…, opposing clean elections candidates may not have received equalization monies in time to fully benefit their campaigns. For example, a nonparticipating candidate could delay filing until near the end of an election period to prevent a clean elections opponent from receiving timely equalization monies.”

28. The Auditor General recommended that the Commission ensure that reports filed by non-participating candidates are submitted by the deadlines established in the Act and assess penalties for noncompliance. 29. In accordance with the recommendation and pursuant to A.R.S. § 16- 956(B)(2), the Commission monitored all campaign finance reports to ensure that non-participating candidates filed finance reports by the established deadlines, and initiated enforcement actions when reports were not timely filed. 30. The Commission also established written policies and procedures to ensure correct calculations of matching funds provided to participating candidates. The written policies and procedures provided instructions to Commission employees on the process to analyze campaign finance reports, and instructions for calculating equalization payments with the calculations verified by a second employee. The Commission’s written procedure provides that during the primary election period, the “Commission will calculate expenditures based on the following line items from non-participating candidates’ campaign finance reports, summary page, campaign to date column:

• Expenditures for operating expenses • Value of In-kind expenditures • Outstanding Debts.”

Appellant’s 2002 Republican Primary Election Campaign

31. The Appellant was a non-participating candidate in the 2002 Republican Primary Election for governor. 32. The Salmon for Governor Committee (“SFG”) is an Arizona political committee as defined in A.R.S. § 16-901, and was formed pursuant to Arizona law for purposes of influencing the results of an election. 33. Two other Republican candidates, Betsey Bayless and Carol Springer, opposed the Appellant for the party’s nomination in the primary election. Both Ms. Bayless and Ms. Springer were participating candidates. 34. On or about July 3, 2002, Ms. Bayless was approved for clean elections funding and received $409,950.00 from the Commission, the amount equal to the original primary election spending limit for candidates for governor.

35. On or about August 19, 2002, Ms. Springer was approved for clean elections funding and received $409,950.00 from the Commission, the amount equal to the original primary election spending limit for candidates for governor. 36. Ms. Bayless and Ms. Springer were eligible to receive additional funds from the Commission during the primary election period, which started on July 9, 2002, based on the expenditures made by Appellant. After Appellant’s spending exceeded the original spending limit of $409,950.00, the Commission would provide the participating candidates an amount equal to Appellant’s expenditures in excess of the original spending limit. 37. In late August 2002, Appellant and SFG undertook a review of their campaign reporting procedures in anticipation of the upcoming 24-hour reporting requirements for the 2002 primary election cycle. Appellant and SFG evaluated Arizona’s election law regarding whether SFG’s reporting of certain amounts paid by campaign staff and volunteers in cash or on their credit cards and subsequently submitted to SFG for reimbursement met the requirements of the Act. 38. The internal review lead to a decision by Appellant and SFG to report reimbursed expenditures as of the date incurred by the staff member or volunteer rather than the date paid by SFG. 39. Accordingly, on August 21, 2002, SFG amended its prior campaign finance reports and re-reported previously reported expenditures to reflect the dates on which the underlying transactions occurred. 40. On August 22, 2002, SFG campaign manager spoke to Executive Director Connor to explain the amendments and the reasons behind them, and to solicit guidance from the Commission as to which generally accepted accounting methodology it desired all campaigns, whether using clean elections funds or not, to use in the future treatment of credit card reimbursements. 41. On August 23, 2002, various SFG volunteer and paid staff members met with Ms. Connor and delivered approximately twelve (12) volumes of SFG’s campaign finance records to the Commission. 42. Ordinarily, State Elections Director Jessica Funkhouser would have rendered a determination on the foregoing issue. However, Ms. Funkhouser recused herself on August 23, 2002, citing the appearance or a conflict of interest based on her then-employment with Secretary of State Betsey Bayless. At issue at this time was whether there was reasonable cause to believe that a campaign finance reporting violation within the Secretary of State’s jurisdiction occurred based upon the SFG’s August 21, 2002, amended report. 43. Following her recusal, Ms. Funkhouser appointed Ms. Connor as a deputy Secretary of State to perform the Secretary of State’s duties under A.R.S. § 16-924. 44. On August 24, 2002, Ms. Connor requested that SFG attend the Commission’s public hearing on August 27, 2002 to explain to the Commission and its staff the accounting issues used in past SFG’s reports and in SFG’s August 21, 2002 amended report. The Commission designated this inquiry as MUR (Matter under Review) No. 02-0035. Ms. Connor further advised SFG that the Commission was making the aforementioned request due to the Commission staff’s lack of expertise in the area of generally accepted accounting methodologies and their application to election law in the context of campaign finance reporting. 45. On August 26, 2002, Ms. Connor notified SFG that Commission Deputy Director Matthew Shaffer, a holder of a Masters of Business Administration degree in Finance, would present the staff’s analysis to the Commission on MUR No. 02-0035 at the August 27, 2002, public hearing. This analysis also would include a recommendation to the Commission as to whether there was reasonable cause to believe that a violation by Appellant and SFG had occurred sufficient to justify further examination in a formal investigation. 46. Also on August 26, 2002, SFG filed with the Commission a document entitled “Report for the Arizona Clean Elections Commission” explaining its accounting methodology used in prior reports. SFG representatives met with Ms. Connor and Mr. Shaffer to review this report, hear Mr. Shaffer’s analysis and to offer to respond to any additional questions from Commission staff. SFG also notified the Commission that the same reporting issue created by the “cash” versus “accrual” accounting methodologies might repeat itself as SFG continued to receive receipts for transactions that occurred in earlier reporting periods and that SFG would immediately report those expenses, even if not paid until a later date, unless the Commission advised as to a different preference. 47. On August 27, 2002, the Commission met in a public meeting and received Ms. Connor’s report on MUR No. 02-0035. Mr. Shaffer presented the staff’s analysis of the accounting methodology used by SFG and the reasonableness and legal propriety of using either the “cash” or “accrual” accounting methods in the election law reporting context. 48. During the course of its August 27, 2002, public meeting, the Commission found that Appellant had filed $31,358.63 three days late in MUR No. 02-0035. The Commission was led to believe that amount was a single expenditure made on August 12, 2002, which should have been reported on August 13, 2002, but was not reported until August 16, 2002. Because it was thought to be a single expenditure, reported only a few days late, and Appellant had no prior enforcement action before the Commission, the Commission found reason to believe that a violation occurred, but closed the matter without assessing a civil penalty. 49. Also during the August 27, 2002 public meeting, the Commission found no reason to believe that a violation occurred when SFG amended its campaign finance reports on August 21, 2002 to provide specific expenditure amounts rather than aggregate amounts. 50. During the August 27, 2002 Commission meeting, an unidentified Commissioner stated on the record that “the Salmon campaign has done, in my own personal opinion, quite an honest, forthright, thorough job of sorting out this issue, at least with regard to what has transpired thus far, and has furnished very useful information and helpful suggestions in terms of how we might straighten it out going forward.” 51. Later that same day after the Commission meeting, Ms. Connor met privately with the recused Secretary of State employee Jessica Funkhouser. This meeting was for the purported purpose of providing Ms. Connor with “technical assistance to accurately read the information generated by the electronic filing spreadsheet for this matter.” 52. According to a memorandum written by Ms. Conner, the recused Ms. Funkhouser “gave me [Ms. Connor] her working papers for the Article I inquiry [MUR No. 02-0035], and indicated that Matt’s [Mr. Shaffer’s] statement [to the Commission at the August 27, 2002 public meeting] that both accounting methods were acceptable was inaccurate. I [Ms. Connor] agreed and asked her to let me make a copy of the papers that she had brought with her.” It is unclear why Ms. Connor did not receive Ms. Funkhouser’s working papers at the time the latter recused herself on August 23, 2002 and appointed Ms. Connor a deputy Secretary of State. 53. Almost immediately after Ms. Connor’s meeting with Ms. Funkhouser, Ms. Connor confronted Mr. Shaffer concerning his investigation and analysis on MUR No. 02-0035. Ms. Connor rejected the prior staff analysis submitted to the Commission under her direction and supervision, and told Mr. Shaffer that the Commission would open a new investigation (MUR No. 02-0036) on the very same subject of the Appellant’s campaign finance reporting. 54. Ms. Connor reassigned Mr. Shaffer. Mr. Shaffer was subsequently terminated from employment. 55. Prior to his reassignment, Mr. Shaffer had the sole responsibility for the disbursement of matching funds to qualified participating candidates. He was delegated that duty by Ms. Connor. 56. There is credible evidence that matching funds were not distributed to qualified participating candidates to equalize debt incurred by non- participating candidates prior to August 27, 2002. For example, Appellant presented the Affidavit of Louise Daggs dated September 2, 2002. Ms. Daggs was a participating candidate in the Republican Party election for the Arizona House of Representatives. She had been advised by Mr. Shaffer and an unnamed Commission staff member that matching funds would not be dispersed until the non-participating candidate’s debt was paid. 57. After August 27, 2002, qualified participating candidates were dispersed matching funds for debts incurred by non-participating candidates. On that date Ms. Daggs received matching funds to equalize the debt incurred by her nonparticipating opponent. 58. On August 30, 2002, Ms. Connor issued a written Statement of Reasons of Executive Director in MUR No. 02-0036, involving the second investigation of Appellant by the Commission’s staff. In that report, Ms. Connor wrote that “the staff is making a Reason to Believe recommendation to the Commission based upon the accrual accounting method to commence an investigation into this matter to determine if there have been reporting violations by the Salmon campaign.” 59. On September 4, 2002, at a Commission public hearing, Ms. Connor recommended to the Commission that it open a new investigation (MUR No. 02-0036) into Appellant’s campaign reporting, and retain outside/independent accounting auditors for assistance. 60. On September 4, 2002, at a Commission public hearing, the Commission found reason to believe that $147,511.49 of Appellant’s campaign expenditures had been reported late based upon the presentation made by Commission staff. 61. Based on the Reason to Believe finding, the Commission sent Appellant an Order Requiring Compliance dated September 5, 2002 in accordance with A.R.S. § 16-957(A). Pursuant to the Order Requiring Compliance, Appellant was ordered to provide an explanation to the Commission, enter into a public administrative settlement with the Commission or comply with A.R.S. §§ 16-941(B)(2) and 16-958(A) within 14 days of the date of the order. 62. In accordance with A.A.C. R2-20-209(A), the Commission proceeded with an investigation of the expenditures that the Commission found reason to believe were in violation of the Act. Accordingly, the Commission requested the accounting firm of Field, Sarvas, King & Coleman, P.C., which is now known as Sarvas, King & Coleman, P.C. (jointly referred to as “Auditors”), to audit the $147,511.49 of Appellant’s campaign expenditures.

The Auditors’ Findings

63. Debi Tobin, who is a certified public accountant, performed the requested audit. 64. On October 18, 2002, the Auditors issued a preliminary audit report to the Commission. The preliminary audit report confirmed that the Commission had requested the Auditors to “review specific expenditures reported by” Appellant and SFG “to determine whether they were reported timely under the accrual basis of accounting”. 65. The preliminary audit report stated that it “has become abundantly clear to us during the course of this investigation and during our other engagements with the Commission that the campaign finance laws, applicable to both ‘participating’ and ‘non-participating’ candidates, are very complicated and quite often confusing.” 66. The preliminary audit report also stated that the “interpretation of the reporting requirements and compliance with such requirements can be confusing, even to accountants and certainly to campaign personnel. The Commission should give consideration to developing uniform reporting standards and providing training to campaign Committee personnel responsible for campaign finance reporting.” 67. During the course of their analysis of Appellant’s campaign financial reports, Auditors segregated financial data into two categories: (a) expenditures reported 10 days or less after the required reporting date; and (b) expenditures reported greater than 10 days after the required reporting date. The preliminary audit report explains that these two categories were used “in an effort to recognize the fact that there is sometimes a lag between the time goods are received or services are provided and the time an invoice is actually issued by the vendor and received by the Committee.” 68. The Auditors’ use of the above two categories in its analysis appears reasonable and appropriate. 69. The preliminary audit report concluded that “we found no evidence to suggest that [Appellant or SFG] engaged in any activities designed to deliberately not report its expenditures in the correct reporting period.” 70. The preliminary audit report further concluded that “$31,237.41 was reported 10 days or less (after the required reporting date) and $67,047.46 was reported greater than 10 days after the required reporting date.” 71. The preliminary audit report noted that “included in the $67,047.46…is the $31,358.63 previously addressed by the Commission on August 27, 2002, as MUR No. 02-0035.” 72. Appellant contends that analyzing the Audit Report and eliminating the expenditures reported in the correct period, the expenditures incurred but reported 10 days or less after the required reporting date, the in- kind expenditure previously addressed and resolved by the Commission in MUR No. 02-0035, the sum of $28,175.57 in expenditures was reported by Appellant using the accrual basis of accounting. 73. Based on the cash basis of accounting used by Appellant, the sum of $3,471.57 was reported late. 74. On November 21, 2002, Appellant submitted a response to the preliminary audit report. Appellant asserted that neither the cash basis nor the accrual basis of accounting, is not specified for the appropriate reporting of expenditures. Further, Appellant argued that the accounting methodology is unclear because [t]he provisions of Article 1 do not treat unpaid campaign obligations as expenditures for reporting purposes.” 75. Arizona’s campaign finance laws regarding the contents of campaign finance reports do not use the accounting terminology of accrual basis or cash basis. Such accounting terminology is not necessary because the campaign finance statutes, the reporting software and the training materials specify a method of accounting and the transactions that must be reported by a candidate. But the campaign finance laws contain elements of both accounting methodologies that are complicated to reconcile when reporting. 76. It is, therefore, unclear why the Commission directed the Auditors to specifically use the accrual basis of accounting, rather than the campaign finance statutes, the reporting software and the method of accounting contained in the training materials, when it assigned the Auditors to review specific expenditures reported by SFG in the total amount of $147,511.49. 77. After considering Appellant’s response, the Auditors issued a final audit report dated January 20, 2003. No changes were made to its preliminary audit report. 78. On January 28, 2003, the Commission approved the final audit report. 79. On January 31, 2003, Ms. Connor sent Appellant the Probable Cause Recommendation Brief. 80. When Appellant did not respond to the Probable Cause Recommended Brief, Ms. Connor advised the Commission on February 21, 2003 that she intended to proceed with the recommendation that the Commission find probable cause that Appellant failed to timely report campaign expenditures totaling $98,529.46, in violation of A.R.S. §§ 16-941(B)(2) and 16- 958(A), and that a civil penalty in the amount of $10,000.00 should be assessed against Appellant for the unintentional reporting violations. 81. Ms. Connor’s recommendation included an assessment of a civil penalty for the $31,359.02 reporting that was three days late in MUR 02-0035. The Commission had declined to issue a civil penalty in that matter on August 27, 2002. 82. On February 25, 2003, the Commission found probable cause that Appellant failed to timely report campaign expenditures totaling $98,529.46, in violation of A.R.S. §§ 16-941(B)(2) and 16-958(A). The Commission also authorized the assessment of a $10,000.00 civil penalty against Appellant for unintentional reporting violations. 83. On February 27, 2003, the Commission issued a written Order and Notice of Civil Penalties to Appellant. 84. Appellant timely requested an appeal of the Commission’s Order and Notice of Civil Penalties.

Hearing

85. The complexity of the election campaign finance laws has been acknowledged by the Commission, Commission staff members, the Commission’s Auditors, and the Auditor General. 86. The Commission in MUR 02-0035 ruled that Appellant was three days late in reporting $31,359.02. It further ruled that no civil penalty should be assessed against Appellant in that matter. The Administrative Law Judge finds that because this issue was previously determined in MUR 02-0035, it should not have been included within the scope of MUR 02-0036. 87. After removing the scope of MUR 02-0035 from MUR 02-0036, it is determined that Appellant did fail to timely file his expenditure reports. 88. Based upon the evidence of record, Appellant is found to have failed to timely file his expenditure reports in an amount not less than the sum of $3,471.75 using the cash basis of accounting as calculated by Appellant and not more than the sum of $66,925.85 using the accrual basis of accounting as calulated by Ms. Tobin after subtracting the amount addressed in MUR 02-0035. 89. It is undisputed that Appellant’s untimely filings were unintentional. He self-reported to the Commission by filing his amended financial reports in August. The Appellant and SFG were very cooperative with the Commission and Commission staff. 90. Appellant’s failure to file his reports timely, albeit unintentionally, warrants the imposition of a civil penalty. However, the assessment of a $10,000.00 fine, while clearly within the authority of the Commission appears extremely high given the totality of the evidence of record.

CONCLUSIONS OF LAW

1. Pursuant to A.A.C. R2-19-119(A), Appellant has the burden to prove, by the preponderance of the evidence, that the Commission improperly assessed a civil penalty against the Appellant in the amount of $10,000.00. The preponderance of the evidence standard “basically requires the party with the burden of persuasion to convince the trier of fact that the existence of the fact in question is more probable than its nonexistence.” J. LIVERMORE, R. BARTELS, AND A.H. HAMEROOF, LAW OF EVIDENCE § 301.1 (2000). 2. In MUR 02-0035, the Commission issued a final administrative decision. Pursuant to A.R.S. § 41.1092.09, that decision was not subject to review by the Commission’s Executive Director, Ms. Connor. There was no rehearing or review of the Commission’s final administrative decision in MUR 02-0035 pursuant to A.R.S. § 41-1092.09. There is no evidence of a judicial appeal of the Commission’s final administrative decision in MUR 02-0035. Therefore, MUR 02-0036 could not reconsider the issues in MUR 02-0035. 3. The evidence of record is adequate to establish that Appellant violated the provisions of A.R.S. §§ 16-941(B)(2) and 16-958(A) as described in the above-provided Findings of Fact. 4. The Commission may make a public finding that a candidate violated the Act by failing to comply with the Act’s reporting requirements, and the Commission may issue an order assessing a civil penalty in accordance with A.R.S. §§ 16-942, 16-957(B) and A.A.C. R2-20-217(A). 5. Pursuant to A.R.S. § 16-942(B), the civil penalty for a violation by or on behalf of any candidate of any reporting requirement imposed by the Act shall be $320.00 per day for candidates for statewide office. No civil penalty imposed by the Commission shall exceed twice the amount of expenditures or contributions not reported. A.R.S. § 16-942(B). That statutory provision also provides that the candidate and the candidate’s campaign account shall be jointly and severally responsible for any civil penalty imposed. 6. By administrative rule A.A.C. R2-20-222, the Commission imposed a cap on the civil penalty imposed for an unintentional violation of the Act. “A civil penalty negotiated by the Commission or imposed by a court for a violation of the Act shall not exceed the greater or $10,000.00 or an amount equal to any contribution or expenditure involved in the violation.” 7. It is concluded by the Administrative Law Judge that there are strong matters in mitigation to be considered when contemplating the assessment of a civil penalty against Appellant:

a) That the failure to report timely was an unintentional act by Appellant. b) That Appellant voluntarily amended his campaign finance reports on the advice of legal counsel c) The complex nature of the election financing laws, especially the accounting methodology to be used to report expenditures and disbursements. d) That Appellant and SFG worked in good faith with the Commission and the Commission’s staff. e) That Appellant’s primary and general election campaign had expenditures of almost two million dollars which, with the exception of MUR 02-0035 and MUR 02-0036 findings of late filings of financial reports, were timely reported to the Commission.

8. It is concluded that Appellant’s acts or omissions in MUR 02-0036 are not so egregious as to warrant the assessment of a civil penalty against Appellant in an amount that would equal the highest dollar penalty ever issued by the Commission against a non-participating candidate, and that a significantly lower civil penalty should be assessed. The evidence of record contains a range of values for the late reported expenditures in MUR 02-0036 using both the cash basis of accounting and the accrual methodology. It is concluded that the lower amount of that range, being $3,471.75, represents a fair level of civil penalty to assess against Appellant in MUR 02-0036

RECOMMENDED ORDER

In view of the foregoing, it is recommended that the Arizona Citizens Clean Elections Commission amend MUR 02-0036 to withdraw the allegations contained in the previously voted upon MUR 02-0035, and make a public finding that the Appellant committed an unintentional violation of A.R.S. §§ 16-941(B) and 16-958(A) in MUR 02-0036. It is further recommended that the Arizona Citizens Clean Elections Commission assess a civil penalty in the amount of $3,471.75 against Appellant and his campaign account, jointly and severally. Done this day, June 9, 2003

______________________________________ Brian Brendan Tully Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 2003, to:

Colleen Connor, Executive Director Citizens Clean Elections Commission ATTN: Paula Ortiz 4001 North 3rd Street, Suite 200 Phoenix, Arizona 85012

By ___________________________ -----------------------

Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826