ALJDEC decisions subject to certification as final

18F-002-CCE · Citizens Clean Elections Commission · 2018-02-28

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

In the matter of:

Rubalcava, Jesus

v.

Arizona Citizens Clean Elections Commission.

No. 18F-002-CCE

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: February 12, 2018, at 1:00 p.m.

APPEARANCES: Jesus Rubalcava appeared on his own behalf; the Arizona Citizens Clean Elections Commission (“the Commission”) was represented by Joseph E. La Rue, Esq., Assistant Attorney General.

ADMINISTRATIVE LAW JUDGE: Diane Mihalsky

_____________________________________________________________________

Former Arizona State Representative Jesus Rubalcava appealed a November 22, 2017 Order by the Arizona Citizens Clean Elections Commission (the “Commission”) that found Mr. Rubalcava had violated the Citizens Clean Elections Act (“Act”) and related rules. The Commission ordered Mr. Rubalcava to pay to the Commission a civil penalty in the amount of $52,377.00.

The Commission presented the testimony of Sara Larsen, its Financial Affairs and Compliance Officer, and Tom Collins, its Executive Director, to testify about the Commission’s requirements for Clean Elections candidates and to establish foundation for the documents that evidenced the Commission’s investigation into Mr. Rubalcava’s compliance with the Act and related regulations and submitted 28 exhibits. Mr. Rubalcava testified on his own behalf. Based on the evidence of record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Recommended Order.

FINDINGS OF FACT

Mr. Rubalcava testified that before he became a participating Citizens Clean Elections candidate for the Arizona legislature, he had been elected to the local school board and to the town council. He and his wife have three children.

On or about January 11, 2016, Mr. Rubalcava filed an Application for Certification as a Participating Candidate under the Act with the Secretary of State’s office. In the application, Mr. Rubalcava agreed to comply with the Act and associated regulations.

On January 15, 2016, Mr. Rubalcava and his campaign, Rubalcava for House, were informed that the Commission had approved his Application for Certification as a Participating Candidate. The Commission informed Mr. Rubalcava that going forward, he was required to comply with the Act and Commission rules.

Mr. Rubalcava received $16,044.00 for the primary election and an additional $1,415.00 for the general election. Mr. Rubalcava was unopposed in the general election and subsequently was elected to represent his district in the Arizona legislature.

The agenda for the Commission’s September 15, 2016 public meeting included the item, “Discussion and Possible action on drawing of candidates for a random audit pursuant to Clean Elections Rules.”

Mr. Rubalcava was among the thirteen Citizens Clean Elections candidates whose names were randomly drawn at the September 15, 2016 public meeting of the Commission for an audit of the candidates’ compliance with the Act. The Commission retained the independent auditing firm, Fester & Chapman, P.C. (“Fester & Chapman”), to perform the random audits.

The Commission submitted the 2016 Primary Recap Report that Mr. Rubalcava filed on September 4, 2016, for the reporting period from August 24, 2016, through August 30, 2016, which showed a cash balance of $7,046.72 at the end of the reporting period.

On October 18, 2016, Fester & Chapman’s auditor, Jill Foley, sent an email to Mr. Rubalcava, noting that his campaign’s Primary Recap Report showed an ending cash balance of $7,046.72 and that, although candidates were expected to pay back to the Commission any unused primary election funding, Ms. Foley did not see any evidence that Mr. Rubalcava had ever repaid $7,046.72 to the Commission. Ms. Foley asked Mr. Rubalcava if he could provide some insight on this issue.

Mr. Rubalcava subsequently filed an amended 2016 Primary Recap Report for the period from August 24, 2016, through August 30, 2016, that showed a cash balance at the end of the reporting period of negative $2.44.

Mr. Rubalcava also filed an amended Qualifying Period Recap Report for the period of August 19, 2016, to August 23, 2016, which showed $177.00 in Personal and Family Contributions, $525.00 in Early Contributions, and $60.00 in Small Contributions.

On or about November 1, 2016, Mr. Rubalcava amended the campaign finance report for the period from January 1, 2016, through May 31, 2016. Ms. Larsen testified that the report originally would have been due on June 30, 2016. The amended campaign finance report for the period from January 1, 2016, through May 31, 2016, showed $1,415.00 in qualifying contributions.

On or about December 13, 2016, Fester & Chapman submitted to the Commission a report of its audit of Mr. Rubalcava’s compliance with the Act. Fester & Chapman’s audit revealed that Mr. Rubalcava had made errors that made it difficult to confirm that all transactions had been made for campaign purposes and that some expenditures were unusual.

Ms. Larsen testified that the auditors randomly selected transactions for each candidate from the candidates’ reports and attempted to match the reported transactions to documentation from the candidates’ campaignbank accounts. Ms. Larsen testified that she was notified that Mr. Rubalcava had a high balance in the account, as a result, had been asked whether he had returned funds. Ms. Larsen testified that she was also informed of some unusual transactions.

Ms. Larsen testified that Fester & Chapman’s December 13, 2016 audit of Mr. Rubalcava was presented to the Commission at a live meeting to support a request for a comprehensive audit.

On February 2, 2017, Ms. Larsen sent a letter to Mr. Rubalcava in care of his attorney at the time, informing him that based on the random audit, pursuant to A.A.C. R2-20-402, “the Commission has approved a comprehensive audit and review of your campaign finance activity including your campaign finance reports, campaign bank account, and corresponding documentation for expenditures and contributions.”

On or about April 28, 2017, Fester & Chapman completed a comprehensive audit of Mr. Rubalcava’s campaign finances in which it attempted to align his campaign finance reports with his campaign’s bank account statements and supporting documentation for the reported contributions and expenditures.

Fester & Chapman’s comprehensive audit found that Mr. Rubalcava had made transfers from a separate bank account totaling $1,869.33 into his campaign account, the purpose of which could not be determined, and had made additional deposits, the purpose of which could not be determined, in the amount of $3,945.54.

Fester & Chapman’s comprehensive audit also found that during the general election cycle, between August 31, 2016, and November 8, 2016, the bank account statements for the campaign account showed that Mr. Rubalcava had made a total of $3,677.16 in expenditures. The comprehensive audit also found that Mr. Rubalcava had failed to include on his Campaign Finance Report(s) expenditures of $1,679.53 in September 2016, and $1,150.08 in October 2016.

Fester & Chapman’s comprehensive audit did not find that Mr. Rubalcava ever deposited the $16,044.00 that he received pursuant to the Act for the primary campaign. Fester & Chapman’s comprehensive audit noted according to the bank statements for the campaign account, on June 17, 2017, Mr. Rubalcava transferred $13,280.22 from a personal account.

Fester & Chapman’s comprehensive audit found that according to bank statements for the campaign account, Mr. Rubalcava had made several other transfers from separate accounts, consisting of $2.00 (January 2016), $60.00 (April 2016), $1,190.00 (May 2016), $150.85 (June 2016), $59.00 (July 2016), and $407.48 (October 2016). Fester & Chapman also found that Mr. Rubalcava had made a total of $3,945.54 in deposits whose purpose was not determinable. Fester & Chapman found ATM withdrawals totaling $683.50. Mr. Rubalcava did not provide any documentation to Fester & Chapman or at the hearing to explain or verify that these transactions were for campaign purposes.

Fester & Chapman’s comprehensive audit found that Mr. Rubalcava transferred a total of $604.42 from his campaign finance account into his personal account, that he made $4,653.41 in non-campaign withdrawals, and that he made another $3,635.41 in expenditures whose purpose was not determinable. During the primary, between January 2016, and August 31, 2016, Mr. Rubalcava made total withdrawals in the amounts of $405.22 (January 2016), $24.81 (February 2016), $24.81 (March 2016), $285.84 (April 2016), $574.19 (May 2016), $10,478.63 (June 2016), $4,594.28 (July 2016), and $1,147.54 (August 2016).

Ms. Larsen testified that the Commission’s rules allow candidates to respond to audit findings. On or about April 28, 2017, Mr. Rubalcava filed a written response to Fester & Chapman’s comprehensive audit, stating in relevant part as follows:

I would like to start off by thanking you for the opportunity to participate as a participating candidate in the 2016 Election Cycle. Please acknowledge that I am not by any means challenging the results of the review, nor am I denying any wrong doing. More so, this is acknowledgement that my campaign finances were not effectively run and that my lesson has been learned. Moving forward, should I be given the opportunity, I now know what to do and what not to do.

. . . .

The biggest issue with my campaign was that I used my bank account that linked with my campaign account. For example, I would deposit a check into what I thought was one account and it would end up in another. Another example, I would use my campaign debit card for a transaction and it would withdraw from my personal account. Because this was so confusing to me, I began to use the filing report with the Secretary of State as my accounting and balance.

I was not able to provide additional documentation other than my bank statements for the following reason. I am a Special Education teacher in the Buckeye Elementary School District. When going through my initial audit. I had all of my campaign documents in my classroom. Over holiday break, I was moved into different classrooms 2 times. During this time, many of my personal belongings and documents were misplaced. I still have not been able to locate them.

On or about May 2, 2017, Ms. Larsen send a memorandum to the Commission that summarized the results of the comprehensive audit. Ms. Larsen noted Mr. Rubalcava’s possible violations of A.R.S. §§ 16-941, 16-948(C), and 16-953(A), and A.A.C. R2-20-702 and R2-20-703. Ms. Larsen attached to her memorandum the results of the comprehensive audit.

On or about May 18, 2017, the Commission held a public meeting at which Ms. Larsen and Fester and Chapman’s auditor, Jill Foley, presented the result comprehensive audit to the Commission. Mr. Rubalcava participated telephonically in the meeting. Mr. Rubalcava expressly did not dispute the outcome of the audit.

On or about May 23, 2017, the Commission’s Executive Director, Tom Collins, sent a letter to Mr. Rubalcava, informing him that the Commission had accepted the comprehensive audit and had opened an internal complaint against him as result for his possible violations of the Act and related rules. Mr. Collins attached to the notice Fester & Chapman’s comprehensive audit.

On May 30, 2017, Mr. Rubalcava responded to the complaint, again stating that he was not challenging the results of the comprehensive audit. Mr. Rubalcava included a table of contributions that he accepted in amounts greater than $5.00 between December 18, 2015, and March 4, 2016, explaining that he understood that a candidate “was allowed to receive early contributions with a limit on the amount a candidate could receive.” Mr. Rubalcava attached as exhibits to his response his Amended Report for the period between January 1, 2015, and May 31, 2016, which showed Individual Contributions in the amount of $520.00 and Qualifying Contributions in the amount of $1,415.00.

Mr. Rubalcava stated in his May 30, 2017 response to the complaint that “[a]ccording to the campaign finance reports submitted to the Secretary of State, I did not exceed the amount of the adjusted general election spending limit.” Mr. Rubalcava attached to his response his Amended 2016 Post-Primary Election Report.

On or about June 19, 2017, Mr. Collins on behalf of the Commission issued a Statement of Reasons showing reason to believe that Mr. Rubalcava may have violated the Act and the Commission’s rules.

On June 22, 2017, the Commission held a public meeting during which it discussed the complaint against Mr. Rubalcava for violations of the Act and the Commission’s rules and authorized Mr. Collins on the Commission’s behalf to issue subpoenas for relevant documents and to take testimony under oath.

On June 23, 2017, Mr. Collins on behalf of the Commission sent Mr. Rubalcava a subpoena and a letter in which he stated that Mr. Rubalcava was required to provide documents and information on or before July 10, 2017.

On August 22, 2017, the Commission held a Special Meeting at which Mr. Collins presented the evidence of Mr. Rubalcava’s violation of the Act and the Commission’s rules. Mr. Rubalcava appeared telephonically at the meeting. After Mr. Collins recommended that the Commission require Mr. Rubalcava to repay the funds received for his primary campaign, Mr. Rubalcava stated that he felt that would be unfair because he was trying to gather the information and documents that the Commission had requested, but that he needed additional time to do so. The Commission noted that the subpoena had been served on Mr. Rubalcava on June 23, 2017, and he still had not provided the documents. The Commission determined to require Mr. Rubalcava to repay the funds that his campaign received for the primary campaign.

On August 22, 2017, Mr. Collins on behalf of the Commission issued a Repayment Order that required Mr. Rubalcava to repay the $17,459.00 that he had received within 30 days of the date of the order, plus 10% interest to accrue beginning 30 days after the date of the order if he failed to comply with the order.

Mr. Rubalcava did not comply with or request a hearing to appeal the Commission’s August 22, 2017 Repayment Order.

Mr. Collins on behalf of the Commission subsequently extended the time for Mr. Rubalcava to provide documents and information pursuant to the Commission’s subpoena. On or about September 14, 2017, Mr. Rubalcava sent an email to Mr. Collins to which he attached approximately 112 pages of documents. Mr. Rubalcava stated that “[i]f there isn’t anything for the time, it’s because I was not able to locate it or because it doesn’t exist (such as reimbursements for Gila Bend USD).”

Mr. Collins testified that the documents that Mr. Rubalcava provided in response to the Commission’s subpoena did not resolve concerns about Mr. Rubalcava’s compliance with the Act and the Commission’s rules. Mr. Collins testified that the documents reiterated the same problematic claimed expenses that initially cause Fester & Chapman and the Commission to have concerns. Mr. Collins testified that the subpoenas were meant to help Mr. Rubalcava by requiring him to produce documents that would establish direct campaign expenditures. Mr. Collins testified that Mr. Rubalcava never provided documentation to establish his claimed campaign expenditures to the Commission.

At the Commission’s public meeting on November 16, 2017, Executive Director Mr. Collins presented probable cause that Mr. Rubalcava had violated the Act and the Commission’s rules. The Commission voted to assess a civil penalty in the amount of three times the amount of the August 22, 2017 Repayment Order, or $52,377.00, and to require Mr. Rubalcava to repay the initial amount of $17,459.00 within 30 days.

On November 22, 2018, Mr. Collins on behalf of the Commission issued an Order and Notice of Appealable Agency Action, finding that Mr. Rubalcava had violated the Act and the Commission’s rules and, as a result, assessing a civil penalty in the amount of $53,277.00 against him. On December 22, 2017, the Commission received Mr. Rubalcava request for hearing on the civil penalty.

Mr. Collins testified that the intent of the Act was to break the link between campaign donations and corruption posed by the quid pro quo that donors expect for their contributions. Candidates were not required to participate in the Citizens Clean Elections system or to accept funding from the Commission for their campaigns. However, if a candidate chose to run as a Citizens Clean Election candidate, he was required to comply with the Act and the Commission’s rules.

Mr. Rubalcava testified consistently with his response to the comprehensive audit. Because he already used Wells Fargo for his personal bank account, he chose to also have his campaign bank account at Wells Fargo. Without his knowledge or consent, Wells Fargo linked the two accounts. He kept documentation to support campaign expenditures at his work and during two moves into different classrooms, the documentation was lost, along with other personal possessions. Mr. Rubalcava testified that he was not able to locate witnesses who could have given statements to substantiate some of his claimed campaign expenditures.

Mr. Rubalcava’s attention was drawn to the finding of the comprehensive audit that “[t]he Candidate provided the Campaign bank statements for all months of the election cycle, however the candidate indicated that he was unable to identify or locate any documentation supporting the deposits and withdrawals from the Campaign bank statements.”

Mr. Rubalcava testified that he did incur some campaign expenses. He still has campaign signs in his garage. Mr. Rubalcava testified that he had a good relationship with Ms. Foley, the auditor at Fester & Chapman. Mr. Rubalcava testified that in the initial audit, Ms. Foley asked for documents to substantiate five claimed transactions, but then the criteria changed. Mr. Rubalcava testified that he provided some documents to Ms. Foley, but then she asked for more, which he did not have.

Mr. Rubalcava testified that he received some training for the record-keeping requirements for Citizens Clean Elections candidates, but that because he had to take time from work to receive the training, he had to return to work before completing the training.

Mr. Rubalcava testified that he paid some individuals to canvas for him. Mr. Rubalcava pointed out a payment of $9.78 to Krispy Kreme on March 15, 2016, for donuts for canvassers that he reported. Mr. Rubalcava did not submit a receipt for this expenditure.

Mr. Rubalcava pointed out a receipt for $28.80 from VistaPrint for business card for his campaign that he submitted to the Commission in response to the subpoena. Mr. Rubalcava did not point out where on his campaign finance reports or bank statements this transaction was listed.

Mr. Rubalcava pointed to certain transactions that he had identified in his response to the Commission’s subpoena that he testified were definitely for campaign-related expenses, including $1,375.00, $2,699.00, and $3,374.91 to Factor Sales, who Mr. Rubalcava testified did this campaign’s printing, $800.00 to the Arizona Democratic Party for a van purchase, which Mr. Rubalcava testified was a list of registered Democratic voters to be used in door-to-door campaigning, and meal expenses for campaign workers at Cracker Barrel in the amount of $14.97. Although the list indicated “invoice attached” for most items, Mr. Rubalcava did not call the Administrative Law Judge’s attention to any invoices that corresponded to the claimed amounts or to the campaign finance reports and bank statements that corresponded to these amounts.

Mr. Rubalcava testified that because his district is the second largest district in Arizona, his campaign incurred significant travel expenses. He did not point to any claimed travel expense, corresponding invoice, campaign finance report, or bank statement.

The Commission’s attorney objected to Mr. Rubalcava’s attempt to substantiate his campaign expenditures because he did not appeal the Repayment Order, only the civil penalty. Mr. Rubalcava asked if it was too late to provide documents to substantiate his campaign expenditures, why had the Commission issued the subpoena and caused him to take the time and incur the substantial expense to produce documents that were responsive to the subpoena. Mr. Rubalcava testified that if he had $17,000.00 to repay the funds he had received from the Commission, he would not have run as a Citizens Clean Election candidate. When Mr. Rubalcava testified that he did not know that he could appeal the Repayment Order, his attention was called to Paragraph 12 of the order, which stated that “[i]f Respondent disputes the commission repayment determination, he may request an administrative appeal . . . .”

Ms. Larsen’s summary noted that Fester & Chapman found at least $4,653.41 in non-campaign withdrawals from the campaign bank account, including a payment to Starbucks in Los Angeles on April 25, 2016. Mr. Rubalcava testified that expense was included due to Wells Fargo having linked his campaign and personal bank accounts. Mr. Rubalcava acknowledged that he had agreed to comply with the Act and the Commission’s rules when he signed the Application for Certification as a Participating Candidate, including conducting all business through a single bank account and returning unused funds.

Mr. Rubalcava testified that he intended to comply with the Act and the Commission’s rules, but that he had no control over Wells Fargo. Mr. Rubalcava testified that there were not any unused funds that he could return to the Commission.

CONCLUSIONS OF LAW

Mr. Rubalcava received funding as a Citizens Clean Elections candidate. This matter therefore lies within the Commission’s jurisdiction.

The Commission bears the burden of proof to establish that Mr. Rubalcava violated the Act by a preponderance of the evidence. Mr. Rubalcava bears the burden to establish affirmative defenses and matters in mitigation of the penalty by the same evidentiary standard.

“A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”

The Commission established that Mr. Rubalcava made transfers from a separate bank account into the campaign bank account totaling $1,869.33 and made additional deposits, the purpose of which cannot be determined, into the campaign bank account in the amount of $3,945.54. Mr. Rubalcava’s Amended June 30, 2016 Report stated that he collected $1,415.00 in qualifying contributions, his Amended Qualifying Period Recap Report stated that he received $177.00 in personal and family contributions, $525.00 in early individual contributions, and $60.00 in small contributions. Although the deposits and transfers into the campaign bank account totaled $5,814.87, Mr. Rubalcava reported contributions of only $2,177.00, or $3,637.87 less than the deposits into the account. Mr. Rubalcava’s May 30, 2017 response to the complaint stated that he accepted contributions other than the $5.00 qualifying contributions and attached his campaign finance reports as exhibits. But Fester & Chapman’s comprehensive audit determined that the contributions stated in Mr. Rubalcava’s campaign finance reports did not match the deposits on the bank account statements. The Commission established that Mr. Rubalcava failed to provide sufficient documentation for campaign activity with his campaign finance reports, pursuant to A.A.C. R2-20-703, which supports an inference that a violation has occurred. Because deposits into the campaign bank account exceeded allowable contributions, the Commission established that Mr. Rubalcava violated A.R.S. § 16-941(A)(1) (Count I of the Order and Notice of Appealable Agency Action).

The adjusted general spending limit for Respondent, who was unopposed in the general elections, was set by the number of $5.00 qualifying contributions he submitted multiplied by $5.00. Accordingly, the general election period limit for Mr. Rubalcava was $1,415.00. Fester & Chapman determined that Mr. Rubalcava made a total of $3,677.16 in expenditures from the campaign bank account during the general election period (August 32, 2016, through November 8, 2016). Consequently, Mr. Rubalcava made a total of $2,262.16 in excess expenditures. Although Mr. Rubalcava denied having made excess expenditures in his May 30, 2017 response to the complaint citing his campaign expenditure reports, Fester & Chapman determined that the reports did not correspond to statements for Mr. Rubalcava’s campaign bank account and that Mr. Rubalcava had failed to report a total of $2,829.61 in expenditures that appeared on his campaign account bank statements. Fester & Chapman requested that Mr. Rubalcava provide documentation for the expenditures but, as he testified at the hearing, he informed them that the documentation had been lost when he moved to a new classrooms. As quoted in the margin, A.A.C. R2-20-703(A)(2) required Mr. Rubalcava to keep documentation to support expenditures and A.A.C. R2-20-703(C) required him to promptly repay funds provided under the Act if he could not provide such documentation. The Commission established that Mr. Rubalcava violated A.R.S. § 16-941(A)(4) (Count II of the Order and Notice of Appealable Action).

The Commission established that Respondent received a check in the amount of $16,044.00 for the primary election and deposited the check into another account and later transferred $13,280.22 from his personal account to his campaign finance account. There is no record that the difference of $2,763.78 was ever transferred into the campaign finance account. The auditors noted transfers from a separate bank account into the campaign account totaling $1,869.33 and other deposits with an unknown purpose totaling $3,945.54. The origination and purpose of these deposits cannot be verified because Mr. Rubalcava failed to provide supporting documentation. Mr. Rubalcava failed to establish a petty cash account, yet the auditors found ATM withdrawals totaling $683.50 on the campaign account bank statements that Mr. Rubalcava failed to document on campaign finance reports. Auditors found that Mr. Rubalcava had transferred $604.42 from his campaign account to his personal account, had made $4,653.41 in non-campaign withdrawals from his campaign account, and had withdrawn another $3,635.41 that auditors were unable to determine whether the funds were used for an appropriate campaign expense. Mr. Rubalcava reported $7,046.72 in unspent funds on his Primary Recap Report, but amended the report to claim a negative $2.44 after the auditor requested an explanation. The auditors found that Respondent reported a total of $17,501.51 in expenditures during the primary election period. Since Respondent only could have potentially deposited $18,221.00 into the campaign bank account, based on the total of the $16,044.00 in primary election funding, and the reported $1,415.00 in qualifying contributions, $177.00 in personal and family contributions, $525.00 in early individual contributions, and $60.00 in early contributions, Respondent should have returned to the Commission a minimum of $710.49, as required by A.R.S. § 16-953(A) and A.A.C. R2-20-704(B). The Commission established that Mr. Rubalcava violated A.R.S. § 16-941(A)(5) (Count III of the Order and Notice of Appealable Action).

A.R.S. § 16-941 limits participating candidates’ spending and contributions. , A.R.S. § 16-948(C) requires participating candidates to report the amounts of campaign expenditures and the payees’ full name, street address, and the nature of the goods or services for which compensation was made. A.A.C. R2-20-703 requires participating candidates to report all of this information for any other deposit into or disbursements from the campaign account. A.A.C. R2-20-115 requires that participating candidates maintain books and records of financial transactions in a single location and to make such records available to the Commission upon request. Mr. Rubalcava stated that because he was confused, he began using the campaign reports as his accounting and balance. However, the purpose of the campaign finance reports is to demonstrate compliance with the Act and the Commission’s regulations by providing information that may be reconciled with bank account information and documentation of contributions and expenditures from disinterested third parties to evidence the transactions, not the candidate’s subjective account of his belief or recollection of contributions and expenditures. The auditors found that Respondent failed to report an aggregate of $9,209.72 in expenditures and $4,852.55 in deposits on his campaign finance reports. The auditors could not determine if an additional $1,362.32 was reported because of insufficient records. A.A.C. R2-20-110 requires participating candidates’ campaign finance reports to include all receipts and disbursements for their current campaign account. The comprehensive audit revealed several expenditures that were made and not reported. Respondent referred to his campaign finance reports submitted to the Secretary of State as proof against allegations of excess spending, but information in the reports was from Mr. Rubalcava, rather than based on a record provided by a disinterested third party, and Mr. Rubalcava did not document on his campaign finance reports numerous expenditures and deposits that appeared on the bank account statements. The Commission established that Mr. Rubalcava failed to report expenditures in the amount of $9,209.72 and contributions in the amount of $4,852.55. These amounts are subject to penalty pursuant to A.R.S. § 16-942(B).

The auditors found that Mr. Rubalcava made some possible campaign withdrawals from the campaign bank account and that some of the deposits appeared to be legitimate campaign contributions. But the only receipt that Mr. Rubalcava pointed out at the hearing from a disinterested third party that was for campaign related expenses was the $28.80 from VistaPrint for business cards, which he produced on response to the Commission’s subpoena. The Administrative Law Judge finds that Mr. Rubalcava had the right to present receipts from disinterested third parties to substantiate his claimed campaign expenditures to support his appeal. If Mr. Rubalcava’s failure to appeal the Repayment Order precluded him from presenting any evidence at the hearing on his appeal of the civil penalty that was based on the same charged statutory violations, the appeal and hearing would be a meaningless exercise. However, with the exception of the $28.80 VistaPrint receipt, Mr. Rubalcava failed to present any evidence to support his appeal. Although the Commission could have imposed a greater civil penalty, the Administrative Law Judge recommends that the $52,377.00 penalty be reduced by $86.40, or three times $28.80, for a total civil penalty in the amount of $52,290.60.

RECOMMENDED ORDER

IT IS ORDERED that the Commission shall affirm the finding that Mr. Rubalcava violated A.R.S. § 16-941(A)(1).

IT IS FURTHER ORDERED that the Commission shall affirm the finding that Mr. Rubalcava violated A.R.S. § 16-941(A)(3).

IT IS FURTHER ORDERED that the Commission shall affirm the finding that Mr. Rubalcava violated A.R.S. § 16-941(A)(5).

IT IS FURTHER ORDERED that the Commission shall affirm the finding that Mr. Rubalcava violated the reporting requirements of A.R.S. § 16-948(C) and A.A.C. 2-20-703, R2-20-115, and R2-20-110.

IT IS FURTHER ORDERED that within thirty (30) days of the effective date of the Order entered in this matter, Mr. Rubalcava shall pay to the Commission a civil penalty under A.R.S. § 16-942(B) in the amount $52,290.60.

In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be five days from the date of that certification.

Done this day, February 28, 2018.

/s/ Diane Mihalsky

Administrative Law Judge

Transmitted electronically to:

Thomas Collins, Executive Director

Citizens Clean Elections Commission