This file contains archived live captions of the audit hearing of the Federal Election Commission held on December 02, 2021. This file is not a transcript of the meeting, and it has not been reviewed for accuracy or approved by the Federal Election Commission.

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Thank you and good morning. The  audit hearing further and pack committee will now come to order. This hearing will be conducted  for procedural rules for audit hearings  and commission of 2009 double the  commission website. Representing  the committee today for counsel, --  welcome. 

On October 15th of 2021 audit staff email  the final audit report of the audit division to  the committee. On November 1st counsel  requested a hearing on behalf of  the committee which the commission  granted. The committee has stated  that his request is limited to finding  one and three two recordkeeping  and reporting of condo activities. Counsel, for today's hearing  you may make a brief opening statement following your presentation the  Commissioner, the general counsel and staff director have the opportunity to ask questions. At the end of  the hearing you have an opportunity  to make a closing statement. As  stated the audit staff November  8th letter, statements of this errand  should present issues and arguments  that have been brought to the attention  of the audit division.  Absent up request by commission  at the hearing or intervening of  the subsequent response to the draft  report, you may only present issues  and arguments at the hearing that will raise a response. Please proceed with your opening statement. 

Thank you. This  is a little bit unusual. But the  most useful way to present to you  today is to allow, for procedural  respect that this is okay. The most useful way to present  the information to this hearing  is to allow Mr. Zucker. To make a presentation as well. I want to make sure that this is  not just limited  to myself in terms of the presentation  if that is okay.  

That is fine. 

Okay I do not want to be the  only one talking today. Thank you  for the opportunity to bring this  to your attention. I will reserve  most of the time to Mr. Zucker  and I will explain in a moment.  The general concerns here relate  to two main issues. One  is what we believe to be an area  of great uncertainty, along with  fundraising and conduit contributions. Credit cards, and the second major issue is  what we believe to be the major  overreach analysis with the audit  report. And negative president for  people to do fundraising in this  area. I believe the most useful  way for us to give additional information,  we have laid out our legal positions  and our letter requesting this hearing.  The most useful of our time today for us to allow Mr. Zucker to give  background context. And white  started and the framework for  why we are here today. I think  this is a very  unusual situation. I would like  Mr.  Zucker to give commissioners background  to help understand where we are  coming from. And our concern related  to what we present today. I will pass this over  to Mr. Zucker to explain and give  you historical background to the  democracy engine in its path. Jonathan, I will hand it over to you. Thank you very much.  Madam chair, may I speak?  Thank you very much for  giving us this  opportunity. I apologize for the  fact that I am not on video as I  explained, simply do not have the  upstream bandwidth reliably.  So now I am on audio. The auditors seem to be framing  the conclusions of the audit as  a democracy LLC has been set up  as a way to get around democracy  impacts disclosure and recordkeeping  requirements. The reality is the  exact opposite. It was to disclose activity by the LLC  in hindsight as Neil indicates. Probably should  have not been reported in the  first place. In 2009 after 4 years as both COO and CEO  served, the LLC is  a  partnership to build tools to facilitate contributions to candidates. I  was primarily interested in building  tools focused on donors, not recipients.  Focused on issues.  Back in 2009 due to  our existing guidance on for-profit  vendors and handling contributions, and giving donor familiarity we established  a pack. Through  2018 the pack has never made a contribution to the candidate independently  of an EMR, and the only funds that were for  its own use was an initial $5000  donation, deposited into the Citibank  account to cover a handful of operating  expenses. The funds were exhausted  by 2012 and sometime after the account  was closed. Through 2018, the pack  did not have a merchant account of its own to process credit card  donations and conduit activity by  credit card never deposited in  a pack bank account.  In 2011, as the commission was aware  we saw the advisory opinion  2000 1106 for the LLC. Concluded  the donor payments to the LLC was  construction to the committees do  not constitute political activity  requirement by the LLC. In  spite of the conclusions of this  opinion, and an abundance of caution  to accommodate donor comfort with the framework  of earmarked contribution, and the  interest of transparency, the pack  continue to follow the procedures  that have been adopted in 29. Subsequent  to 2018. This  is important but prior to the audit, for reasons having nothing to do  with FEC  regulations but changes  with the visa and MasterCard  brand rules we change the model  for the pack. The pack and opened  up new accounts. Filed amended form  one in September of  2019. Also on mergers. In December 2019 we received  notice of the audit which was triggered  by some amendments to more accurate  activity for the 2018 cycle. In hindsight it is clear now we  should never have been doing any  of the reporting that we were doing.  As the audit progressed I retained  counsel and we in discussions realized  it was incorrect to have reported  this as depository  conduit earmark act cavity. We we  mended the results report this.  Even now we  believe over just disclosing activity and waiting  guidance on the proper way to handle  this credit card conduit activity . I realize that the reporting model in 2019 was long, and we have already changed it.  However it is important not to be  responsible for bad -- that might impact others to  my abundance of caution. A final note  with respect to the recordkeeping, we handed over everything that  was requested of us from detailed reports by the LLC by every donor transaction.  The LLC serving as a vendor.  To the bank account statements to  which the donor funds flow to verify existence of activity. And 
     detailed what portion of each distribution  by the LSA to specific candidates  was activity reported by the pack. 
     The auditors argument that the LLC  account was actually a pack account,  which seems to be the core of the  findings, in my opinion rebutted  by the fact that the LLC has activity  in the same account. Because the  LLC continues to operate as its  for-profit vendor preventing the  services on services to its clients. 
     I apologize for the mistakes that  we made in the result of this entire  audit process, our desire was to  accommodate donors and provide additional  transparency. Issues that have been  raised in the audit are know it  relationship in which the pack operates  currently. At  this point I want to thank you very  much for your time and I look forward  to receiving your guidance in this  matter.  

Thank you for the opening statement. >> Would you like  to jump in?  

That concludes our presentation. 

Thank you. Let me open it up to the commissioners.  Any questions? >> Let me also ask the audit staff .  

 I have a question. For the audit  staff. 
     I have a response to the argument that there  would be pretty significant practical  difficulties maintaining the back  to Kate with no money in it. --  Bank account. I have wanted to both  personally and on behalf of clients . I know there is a statute but is the response to the underlying discretionary point that  was made the response? Why desk  did not have activity but we did  identify activity that we believe  should have been deposited into  the bank account but not  the LLC bank account . And that  was for potential nominees. There 
     should have been, not just from  the statute but from the nominee  funds that DI did report. Do you  have a response? I think factually Jonathan would be  best to answer the question from  a factual perspective. I will defer  to Jonathan. That is factually correct. There were nominee funds to  which contributions were made. 
     Let me ask if there are any further  questions? Mr. Zucker?  Would you care to  make a closing statement?  

Again we appreciate your  time. We want to  make sure that there is clarity, in respect to these issues regarding  to fundraising by organizations  online. Here especially in this  instance, I think the one major  concern we have is that the task  of this obviously is not at issue  -- the commission should consider updates to the bundling regulations.  As they exist right now, written  many years ago before there has  been a huge prevalence of online funding prevalence. They  are not equipped to handle the concept  of online fundraising directly to  candidates. Or a pack never  actually touches money. Abundant regulations have scenarios. One with a pack raises money directly,  or actually handling some kind of commercial paper such as a check I will say most of the online funding for candidates at this time's happening directly to candidates. To the  companies like John. So  I do believe the major issues that we addressed today  and the problems caused by Jonathan's  abundance of caution, were caused  by as Jonathan described guidance.  So we would hope we  can take the opportunity, not only  to resolve the audit but to think  forward about giving more guidance  to the regulating community regarding 
     online fundings directly to candidates. For that I think you for your time. Thank you.  The audio recording will be made with the hearing  post into the commission's website  at the appropriate time. The commission  may rely on the contents of the  audio recording and its consideration  of the issues raised. In any subsequent  action. The  committee may be bound by any representations  made at this hearing today. Thank  you to Mr. Zucker and Mr. before  appearing today. This hearing is  adjourned. Thank you. >> 
     Thank you to Mr. Zucker and this hearing is adjourned.