Campaign Finance Board v. Gerson & Friends for Gerson OATH Index No. 2421/14 (Feb. 19, 2016)*

Transcription

1 Campaign Finance Board v. Gerson & Friends for Gerson OATH Index No. 2421/14 (Feb. 19, 2016)* Petitioner proved that respondents campaign maintained excess petty cash, consultant fees for absentee ballot education were not exempt from expenditure limits, and respondents were ineligible for public matching funds. Civil penalties of $49,722 recommended. *Board adopted ALJ s recommendation for all penalties except for one for exceeding the expenditure limit. Total Board penalty is $49,948. NEW YORK CITY OFFICE OF ADMINISTRATIVE TRIALS AND HEARINGS In the Matter of CAMPAIGN FINANCE BOARD Petitioner - against - ALAN J. GERSON & FRIENDS FOR GERSON Respondents KEVIN F. CASEY, Administrative Law Judge REPORT AND RECOMMENDATION Petitioner, the Campaign Finance Board ( the Board or petitioner ), brought a proceeding seeking $432,297 in penalties from respondents Alan J. Gerson ( Gerson ) and Friends for Gerson ( the Campaign ) for violating the Campaign Finance Act ( the Act ), during Gerson s unsuccessful campaign for re-election to the City Council in See Admin. Code (Lexis 2015); 52 RCNY (Lexis 2015). The parties sought a pre-trial ruling on eight contested issues, which were addressed in a memorandum decision. Campaign Finance Bd. v. Gerson & Friends for Gerson, OATH Index No. 2421/14, mem. dec. (Sept. 8, 2015). Familiarity with that decision is presumed and those findings are incorporated here. After that decision, the parties agreed to rely on written submissions instead of a trial. Petitioner submitted affirmations from one of its attorneys, Bethany Perskie, and one of its auditors, Danielle Willemin. Respondents submitted a letter from one of their attorneys, James O Gara, affirmations from attorneys Michael Connoly and

2 - 2 - Albert Gavalis, and affidavits from Gerson and campaign supporters John Quinn, Chung Seto, Po-Ling Ng, Terri Cude, Avi Turkel, Lawrence Goldberg, Siegrid Raible, Michael Connolly, and Jerry Skurnick. For the reasons below, I find that respondents maintained excess petty cash, could not exclude consultant fees from campaign spending limits, and were ineligible to receive public matching funds, and I recommend civil penalties of $49,722. ANALYSIS To qualify for public matching funds, candidates for local elected office must comply with contribution limits, expenditure limits, and reporting obligations. See, e.g., Admin. Code 3-703(1)(d) (candidates must obtain and furnish... any information requested about contributions and expenditures and provide documentation and other proof of compliance ). Prior to the 2009 election, petitioner s staff had repeated communication with respondents regarding documentation issues. After a post-election audit, petitioner s staff sent a draft audit report to respondents, who did not reply. Petitioner s staff later issued a notice of alleged violations with recommended penalties totaling $432,297. Based on additional information and documents that respondents have provided, petitioner now seeks penalties totaling $111,774 (Perskie Aff. 27). Besides the issues discussed in the earlier memorandum decision, the parties seek a ruling on three remaining issues. Excess petty cash Under petitioner s rules, Candidates may maintain a petty cash fund of no more than $500 out of which they may make disbursements not in excess of $100 to any person or entity per purchase or transaction. 52 RCNY 4-01(e)(2). If there is a petty cash fund, candidates must maintain a petty cash journal including the name of every person or entity to whom any disbursement is made, as well as the date, amount, and purpose of the disbursement. 52 RCNY 4-01(e)(2). Petitioner alleged that respondents maintained a petty cash fund in excess of $500. Respondents conceded that they occasionally had more than $500 of petty cash (O Gara Letter at 1; Quinn Aff. 4-5). According to respondents, it paid less than $100 each to at least 30

3 - 3 - individuals who distributed flyers on or before the primary on September 15, 2009 (Quinn Aff. 3-5). To pay those individuals, many of whom did not have bank accounts, respondents cashed a $2,800 check payable to cash on September 24, 2009 (Quinn Aff. 4-5). Respondents asserted that they had more than $500 in petty cash only when necessary to meet immediate legitimate personal cash expenses, nobody received more than $100, and all funds were distributed within 24 hours of the withdrawal from the Campaign s bank account (O Gara Letter at 1). The unrefuted evidence showed that respondents violated petitioner s rule against maintaining more than $500 in petty cash. Limits on petty cash help ensure that money is spent on permissible campaign expenses. Respondents claim that it needed cash to pay for the distribution of flyers is not a defense and the failure to provide detailed records makes such a claim difficult to verify. Permitting respondents to maintain excess petty cash would give them an advantage over other campaigns that distributed flyers without violating petty cash limits. This specification should be sustained. Consultant fees for absentee ballot education I previously found that expenses incurred to inform voters that Gerson was still a candidate for office, after his name had been omitted from absentee ballots, were campaign expenditures that are counted toward spending limits and not exempt ballot status expenses. Gerson, OATH 2421/14, mem. dec. at 8, citing 52 RCNY 1-08(d)(1) (all expenditures made for the purpose of promoting or facilitating a candidate s nomination or election must be counted towards the expenditure limit). There is a limited exception to the expenditure limits for litigation costs to determine a candidate s ballot status. Admin. Code 3-706(4)(a). Petitioner found that $42,000 paid to a law firm to litigate Gerson s ballot status were exempt from the expenditure limit, but an additional $30,000 paid to a consultant to inform the electorate that Gerson was still a candidate, was not exempt. Gerson, OATH 2421/14, mem. dec. at 9. Respondents renewed their argument that the $30,000 in consulting fees were exempt but did not cite any additional statute, rule, or case law (O Gara Letter at 1). Instead, they relied on an affidavit from a long-time consultant who stated that absentee ballot education is a term of political parlance (Skurnick Aff. 1, 4). In Skurnick s opinion, where a candidate s name is erroneously omitted from absentee ballots, the cost of telling voters that the candidate is still

4 - 4 - running for office is a public information effort and public service, rather than an ordinary campaign expense (Skurnick Aff. 6-7). Respondents argued that counting absentee ballot education expenses as campaign expenditures caused significant disparity among candidates (Skurnick Aff. 8). Payments to a consultant to educate the electorate, and absentee voters in particular, promote the candidate s election. Petitioner properly classified those payments as campaign expenditures. As petitioner noted, many candidates may be at a disadvantage due to circumstances beyond their control, but expenditures made to address that imbalance must be made within the confines of the law (Perskie Aff. 16). The statutory definition of campaign expenditures is broad; the exception for ballot status expenditures is narrow. There is no exception for absentee ballot education. Hence, respondents payments to a consultant, to inform the public that Gerson remained a candidate for office, were campaign expenditures. Documentation for campaign contributions To obtain public matching funds, campaigns must maintain and provide detailed records for each contribution received. Admin. Code 3-703; 52 RCNY 3-03(c). The evidence showed that nearly half of respondents records contained errors. Due to that high error rate, petitioner deemed respondents ineligible for public matching funds. Gerson, OATH 2421/14, mem. dec. at Respondents have now provided additional documentation, with statements from individuals familiar with specific contributions. According to respondents, more than half of the contribution cards that petitioner rejected were, in fact, valid (O Gara letter at 2). After reviewing this new information, petitioner validated 12 contributions that were previously deemed invalid. Despite the new information and the validation of 12 additional contributions, petitioner contends that 160 of the 363 contribution claims submitted by respondents had one or more errors, for an error rate in excess of 40% (160/363) (Willemin Aff. 44). A review of respondents submissions shows that petitioner s analysis is correct.

5 - 5 - a. Seto affidavit Seto organized fundraising events for Gerson in Chinatown and prepared pre-printed contribution cards in Chinese and English. He claimed that the campaign manager told him that petitioner had approved the contribution cards. Seto asserted that 37 contribution cards were rejected by petitioner because the word cash was handwritten next to the amount contributed. The handwritten notations were made by campaign volunteers when the contribution was made at the fundraising event (Seto Aff. 7). According to Seto, another 14 contribution cards were disallowed on the grounds that indicating the ticket price, and the number of tickets purchased, was insufficient documentation. For each of those cards, the total contribution was handwritten in the upper left corner. Seto asserted that cash contributions were affixed to those contribution cards with paper clips and it was the usual practice of Gerson s mother to separate the cash from the card and write cash, along with the total contribution, in the corner (Seto Aff ). Petitioner questioned the reliability of Seto s vague recollection of a conversation with the campaign manager. According to petitioner, it had no record of any approval of the format of respondents contribution cards. On the contrary, petitioner s staff notified respondents several months before the fundraising events that there was a problem with the contribution cards that did not clearly indicate whether contributions were made by cash, check, or money order (Willemin Aff. 9, Ex. 1). To qualify for matching funds, participants must maintain and furnish documentation required by petitioner. Admin. Code 3-703(1)(d),(g). Contribution cards must be completed contemporaneous with the transaction, and signed and dated by the contributor. 52 RCNY 4-01(a), (b)(3)(ii). Participating campaigns must disclose the amount of each contribution, whether it was made by cash or check, and such other information as the Board may require. 53 RCNY 3-03(c)(1)(ii), (iii), (viii). Petitioner also informed campaigns that each contribution card must be completed by the contributor. Gerson, OATH 2421/14, mem. dec. at 17. Respondents proof, second-hand recollections of events that occurred years ago, failed to show who made the handwritten entries or when they were made. People affiliated with the campaign, rather than the contributors, wrote cash or the total contribution on cards. Seto did not identify any of the campaign volunteers who wrote on the 37 cards or specify exactly when they wrote on the cards. The evidence suggests the handwritten information was added after the

6 - 6 - contribution cards were signed; otherwise, the information could have been entered by the contributors. For the 14 cards where Gerson s mother reportedly wrote cash and the total contribution, Seto appears to acknowledge that such information was added after the contributors signed the cards. Because respondents failed to show that the contribution cards were completed contemporaneous with the transactions, petitioner properly concluded that respondents documentation was inadequate. Seto asserted that copies of checks were inadvertently omitted from another 11 contribution cards that were submitted to petitioner (Seto Aff. 10). He stated that the checks were attached to the contribution cards that were collected by the campaign manager and that Gerson s mother separated the checks from the cards when she logged all of the contributions in a ledger (Seto Aff. 10). Seto believed that copies of the missing checks were included in materials for the post-election audit but were among the items that were lost or stolen from the campaign manager s home after he was arrested (Seto Aff. 11). For 10 of the 11 missing checks, respondents provided petitioner with copies of checks obtained from Chase Bank (Seto Aff , Exs. G). For 9 contributions, where respondents have now provided copies of checks, petitioner has accepted them as valid contributions (Willemin Aff. 14). Petitioner found that the documentation for two other contributions was insufficient. For one, the check amount differed from the previously reported contribution; for the other, respondents did not provide a check copy (Willemin 14). Petitioner s rules require campaigns to keep copies of contribution checks. 52 RCNY 4-01(b)(2). Where such documentation is unavailable, petitioner will accept a signed statement from the contributor confirming the date, amount, and form of contribution (Willemin Aff. 16, Ex. 2). Based on the evidence presented, petitioner properly concluded that respondents have now adequately documented 9 out of 11 of these contributions. Respondents failed to provide either copies of matching checks or other suitable documentation for the other two contributions that Seto claimed were made by check. Seto also stated that an unspecified number of other claims were rejected because the contribution cards were missing a contributor s business address (Seto Aff. 13). According to Seto, contributors were required to provide a business or residential address, some of the

7 - 7 - employers, such as NYU s School of Medicine, were so well-known that a street address was superfluous, and all contributors provided a business or phone number (Seto Aff. 13). Petitioner rebutted Seto s claims by noting that its rules require reporting of the contributor s occupation, employer, and business for all contributions totaling more than $ RCNY 3-03(c)(6). More importantly, petitioner stated that its calculation of documentation error rate did not include contributions where the only error was failure to include a business address. Because petitioner only included more serious violations when calculating the error rate, evidence regarding missing business addresses was not relevant (Willemin Aff. 17). The evidence supports petitioner s assertion that contributions that lacked a business address, without any other deficiencies, were not counted as errors for the purpose of calculating the error rate (Loprest Reply Aff. 4-5, Ex. 3). Thus, Seto s allegations regarding these contributions are not relevant to any contested issue. In sum, for 9 contributions cited by Seto, petitioner has properly re-classified them as valid claims. Seto s remaining allegations do not affect the error rate. b. Ng affidavit Ng, a campaign volunteer and activist in Manhattan s Chinese-American community, testified that many elderly contributors were retirees who did not speak English and contributed cash because they did not have checking accounts. In 20 instances, contributors filled out contribution cards and volunteers assisted them. According to Ng, the cards were completely filled out at the fundraising event (Ng. Aff. 6). On the bottom of the cards there was a preprinted sentence Cash is accepted with a limit of $100 (Ng. Aff 19). Someone circled the word cash (Ng. Aff. 7). For three other contributions, Ng asserted that the contributions were valid because they were supported by contribution cards with pre-printed boxes denoting the method of payment and for each contribution the box for cash was checked (Ng. Aff. 8; Ex. B). But for each of those contributions respondents also submitted a contribution card without pre-printed boxes for the method of payment and the word cash was circled in a sentence on the bottom of the page. Ng s affidavit apparently referred to replacement contribution cards. Petitioner countered that it cannot verify when the word cash was circled and, based upon the similarity of the cards, it appears that the same person circled the word cash on each

8 - 8 - card (Willemin Aff ). With regard to the three replacement cards, petitioner contends that the handwriting on all three was the same and differs from the handwriting on the original cards. Thus, petitioner maintains that the replacement cards were invalid because they were not completed by the contributors (Willemin Aff. 20). Ng s allegations, made several years after the events at issue, failed to make up for the deficiencies in the contribution cards that he referenced. Though Ng claims that 20 cards were completely filled out at the time of the event, his affidavit does not name the person who circled each card. Nor does Ng make clear that the word cash was circled contemporaneously with the contributor signing the card. As for the three replacement cards, it appears that the contributors signed the replacement cards; however, all of the other information on each replacement card was completed by someone else. Ng s affidavit provides no information about who completed the replacement cards or when they were completed. On this record, petitioner has reason to doubt that the cards were completed contemporaneous with the transaction. Thus, petitioner reasonably concluded that the documentation was inadequate. 52 RCNY 4-01(a), (b)(3)(ii). c. Cude affidavit Respondents argued that 8 contribution cards were improperly rejected because the home addresses listed on the contribution cards were not residential addresses (O Gara Letter at 2). Cude, a Democratic district leader in downtown Manhattan, stated that the addresses at issue were widely known as mixed-used buildings where individuals and families resided (Cude 3-4). Petitioner countered that respondents were advised they could have documented this claim with letters from the contributors or publicly available records, and respondents failed to do so (Willemin Aff. 25). Moreover, petitioner alleged that claims that were rejected solely due to a discrepancy regarding the home address were not included as errors for the purpose of calculating the contribution error rate (Willemin Aff. 24). The evidence supports petitioner s assertion that contribution cards with an incorrect residential address, without any other deficiencies, were not counted as errors in the error rate calculation (Loprest Reply Aff. 4-5, Ex. 3). Thus, respondents allegations for these claims are not relevant to any contested issue.

9 - 9 - d. Turkel affidavit Respondents argued that 8 contribution cards, reflecting contributions made during a fundraising event in February 2009, were improperly denied due to missing employment information (O Gara Letter at 2). Turkel, an attorney and campaign volunteer, recalled that the event was a combined birthday party for himself and fundraiser for Gerson (Turkel Aff. 6). He knew all of the contributors and provided their business addresses, which were inadvertently omitted in a party atmosphere (Turkel Aff. 9-17). Petitioner replied that respondents failed to provide the missing information during their on-line reporting and errors concerning business addresses, without more, were not included when calculating the error rate (Willemin Aff. 27). The evidence supports petitioner s argument. For each of the contributions cited by Turkel, there was an independent basis to deem the claim invalid, besides the missing business address. For example, one contribution was deemed invalid because the contribution amount was not specified and another was deemed invalid because no copy of a check was provided (Turkel Aff., Ex. A; Loprest Reply Aff., Ex. 3, contributions 131, 143). Thus, even accepting the new information provided by respondents, the contributions were inadequately documented. e. Raible affidavit Raible averred that her husband, an attorney who died in 2011, wrote a check for $500 to Gerson s 2009 campaign. According to Raible, her husband had one checking account which he used for personal and business purposes, and all of his political contributions were from that account. Even though the check that he wrote was written from the account of Dudley Gaffin, Attorney at Law, and had his business address rather than his home address, Raible stated that the check would have been of a personal nature (Raible Aff. 4). Petitioner replied that it instructed respondents in July 2009, that a check from a combined personal and business account must be accompanied by an affirmation that there were sufficient personal funds in the account to cover the check and that the contribution would not be claimed as a tax deduction. Those instructions included a sample letter (Willemin 30, Ex. 6). Raible s affidavit, written six years after the fact, was untimely and insufficient. It does not demonstrate that the contributor had sufficient personal funds available in his account to cover the check. Nor does it address the tax deduction. Because respondents failed to provide

10 required information at the time, and has yet to do so, petitioner disallowed it. See 52 RCNY 5-01(d)(22) (among relevant factors in denying a matching fund claim and projecting error rate is whether contribution checks are drawn on business accounts, or accounts that bear indicia of being business accounts, such as the contributor's professional title ). f. Connolly affirmation Connolly, who hosted a fundraising event at his home in June 2009, stated that all of the contributions received were for Gerson s re-election and two checks were inadvertently made out to Friends of rather than Friends for Gerson (Connolly, Aff. 6). Petitioner argued that contribution checks must be made out to the participating campaign (Willemin 32); 52 RCNY 5-01(d)(19) (checks made payable to other entities are not eligible for matching funds). As previously noted, this basis for denying matching funds appears to have been hypertechnical. Gerson, OATH 2421/14, mem. dec. at 18. However, petitioner pointed out that its staff notified respondents of the discrepancy, and provided guidance on how to cure the error, on seven occasions from April to June 2009 (Willemin 33). Where respondents persistently failed to correct an error, petitioner does not have to ignore it. In any event, even if respondents were given credit for these two contribution checks, the error rate would still be over 40%, and respondents would be ineligible for matching funds. FINDINGS AND CONCLUSIONS 1. Respondents maintained petty cash in excess of $ Consultant fees for absentee ballot education are campaign expenditures that may be counted towards the expenditure limit. 3. Respondents were not entitled to public matching funds because they provided inadequate documentation for more than 40% of their campaign contributions. RECOMMENDATION Petitioner requested civil penalties of $111,774 for the proven violations. Respondents sought a lesser penalty based on mitigating circumstances. In light of the mitigation presented, a lesser penalty is appropriate.

11 Section 3-711(1) of the Administrative Code authorizes civil penalties of up to $10,000 for each violation of the Act or petitioner s rules. Candidates and campaigns that exceed the expenditure limits are also subject to civil penalties of up to three times the total excess expenditures. Admin. Code 3-711(2)(a). Petitioner s penalty request included $19,036 in civil penalties for violations of rules regarding reporting requirements, contribution restrictions, and petty cash limits. Petitioner also seeks $92,738 in civil penalties for excess expenditures. A list of all the penalty requests is attached as Exhibit A. The penalty request of $19,036 for violating reporting requirements, contribution restrictions, and petty cash limits is consistent with baseline penalties for each violation as set forth in petitioner s penalty guidelines for the 2009 elections (Perskie Aff. 20, Ex. A). See Admin. Code 3-711(1) (authorizing petitioner to publish a schedule of civil penalties). The baseline penalties are appropriate in most cases, with variations only in unusual circumstances (Perskie Aff., Ex. A at 5). Petitioner s staff has limited authority to recommend penalties above or below the baseline amounts (Perskie Aff., Ex. A at 8). Based on the entire record, including this tribunal s findings and recommendation, the Board has broader authority to consider mitigating circumstances, such as illness, family emergencies, inability to access campaign records, employee who stole campaign records, etc. (Perskie Aff. 20, Ex. A at 8-9). Respondents do not dispute most of the individual penalty recommendations. However, they contend that a $2,796 penalty for failing to respond to the draft audit report was excessive. That amount reflects the baseline penalty, 1% of aggregate contributions or expenditures, for a complete failure to respond. Respondents claimed that a lower penalty of $388,.02% of aggregate receipts or campaign spending, the baseline amount for submitting a late response, is more appropriate (Resp. Mem. at 55-56; Resp. Reply Mem. at 31-32). Petitioner properly treated respondents actions as a failure to respond, rather than a delayed response. As explained in the commentary to the penalty guidelines, petitioner s staff may recommend a penalty consistent with the baseline for failure to respond where a campaign responds in a wholly inadequate manner (Perskie Aff., Ex. 1 at 29). Petitioner issued the draft audit report on March 17, 2011, with a due date of April 18, Respondents requested and received an extension to July 18, 2011, but they missed the deadline and did not contact petitioner s staff again until March 12, 2013, after petitioner sent a penalty notice and a final

12 recommendation memo (Perskie Aff. 19). Ignoring the draft audit report for more than two years is a wholly inadequate response and equivalent to no response at all. See Matter of Vanel v. NYC Campaign Finance Bd., 40 Misc.3d 1238(A) (Sup. Ct. N.Y. Co. 2013) (upholding enhanced penalty for failure to return excess contribution, where overage was not returned prior to notification by petitioner). Respondents also contend that petitioner is seeking to penalize them twice for the same act because in-kind payments by Gerson are treated as excess expenditures as well as excess contributions (Resp. Mem. at 43, 49-50). It appears that $33,400 of campaign expenses that Gerson paid out of his own funds in September 2009 were included in the excess expenditure total and the excess contribution amount (Loprest Aff., Exs. 34, 36). However, even if that amount was excluded from the contribution total, Gerson exceeded the contribution limit by more than $60,000, which would result in the same baseline penalty recommendation of $10,000. Hence, respondents will not be penalized twice for the same conduct. As for the aggregate penalty, a substantial penalty is warranted because there were a wide variety of violations and respondents repeatedly ignored requests for additional information. Respondent Gerson, an experienced candidate who has successfully received public matching funds in the past, should be well aware of the spending limits, contribution restrictions, and reporting requirements. The largest component of the total penalty is for exceeding the expenditure limit, which is an especially serious violation because it gives a campaign a permanent advantage over its opponents that cannot be cured. Matter of Kaufman for Council, CFB Opinion No at 1 (Aug. 14, 2008) (emphasizing the importance of spending limitations and noting that there is no maximum penalty amount for exceeding expenditure limitations); Matter of Friends of Leroy Comrie, CFP Op. No (July 1, 2003) ( The expenditure limit provisions of the Act are crucial to its effectiveness ). Despite the severity of the violations, respondents contend that the following mitigation should be considered: Respondents did not receive any matching funds. Respondents did not engage in any intentional wrongdoing. In the midst of the campaign, the Board of Elections and a rival candidate initiated legal proceedings to keep Gerson s name from appearing on the ballot.

13 Despite an order from Supreme Court, New York County, that Gerson s name should be on all ballots, the Board of Elections failed to include his name on absentee ballots. During the campaign, Gerson contracted swine flu and had to delegate many campaign activities. In February 2011, one month before petitioner issued the draft audit report, the campaign manager was arrested for acts unrelated to the campaign. The campaign manager was later convicted and sentenced to state prison. Campaign records were lost or destroyed during the police search of the campaign manager s home or later vandalism of the abandoned home. From April 2010 to December 2012, the following people became seriously ill and passed away: respondent s mother and campaign secretary Sophie Gerson; campaign treasurer Lew Todd; and campaign special counsel Dudley Griffin. Other campaigns from the same election year received lesser penalties for similar violations. (Resp. Mem. at 10-11; Resp. Reply Mem. at 32; O Gara Letter at 4). Not all the factors cited by respondents are mitigating. For example, respondents argued that, had they received public matching funds, they would have been able to repay Gerson s loans and in-kind contributions and might not have exceeded the contribution or expenditure limits. This claim lacks merit. Petitioner instructed all campaigns that public matching funds are not guaranteed. Respondents, in particular, could not have reasonably expected to receive public matching funds due to their numerous reporting violations. Nor is the lack of malicious intent a mitigating factor. Petitioner s penalty guidelines and baseline penalties presume that rule violations are unintentional (Perskie Aff., Ex. A at 5); see also Matter of Friends of Green 2001, CFB Op. No (Feb. 6, 2013) (ordering campaign to repay $71,902 in public funds; rejecting claims that lack of available funds, relative insignificance of amount compared to total campaign receipts, and exemplary compliance with

14 rules were mitigating factors). Petitioner s staff may recommend a penalty above the baseline amount for willful or reckless disregard of the rules, but it does not seek such penalties here (Perskie Aff., Ex A at 5). Cf. Matter of Espada 2001 v. NYC Campaign Finance Bd., 59 A.D.3d 57, 60-61, 67 (1st Dep t 2008) (upholding $61,750 in penalties where violations included improper campaign contributions that led to criminal convictions for larceny and perjury). Many of the other facts cited by respondents are undisputed and mitigating. For example, it was beyond respondents control that the Board of Elections erred and omitted Gerson s name from the absentee ballots. It is also likely that the arrest and conviction of the campaign manager caused significant disruption. Furthermore, Gerson credibly set forth in a detailed affirmation, the serious illnesses and deaths of key campaign personnel, including his mother, had a devastating impact (O Gara Letter, Gerson Aff ). Though most campaigns and candidates suffer setbacks, the unique combination of extraordinary misfortune that befell respondents strongly favors a reduced civil penalty. Moreover, it appears that the requested penalty for exceeding the expenditure limit is disproportionate to penalties for similar violations committed by at least two other campaigns during the 2009 election cycle. Respondents presented evidence that another campaign exceeded the expenditure limit by $33,516 and the Board assessed a penalty of only $11,172, one-third of the excess expenditure, because the overage resulted solely from fundraising expenditures in furtherance of failed bid for borough president and provided little or no benefit to the candidate s city council campaign (Resp. Mem., Ex. 19). Another campaign was penalized $25,325 the same amount as the excess expenditure without any discussion of mitigation (Resp. Mem., Ex. 20). Based on the limited record, it is unclear whether those cases are entirely similar to respondents case, but they reflect the Board s ability to impose penalties below the baseline recommendation of three dollars for every one dollar of excess expenditures. To give appropriate weight to the mitigating circumstances and to bring respondents total penalty in line with penalties imposed upon other campaigns during the same election cycle, the penalty for excess expenditures should be one-for-one, rather than three-for-one, for each dollar that respondents spent over the limit. Based on the most detailed submission provided by

15 petitioner, that amount should be $30,686 (Loprest Aff. 46(i), Ex. 36 ( Primary Election Expenditure Calculation)). 1 In sum, a substantial penalty is warranted, but respondents have presented some compelling mitigation. Accordingly, I recommend a penalty of $30,686 for exceeding the expenditure limit and the baseline penalties of $19,036 for the other violations, for a total penalty of $49,722. Kevin F. Casey Administrative Law Judge February 19, 2016 SUBMITTED TO: ROSE GILL HEARN Chair APPEARANCES: BETHANY PERSKIE, ESQ. Attorney for Petitioner KELLEY DRYE & WARREN, LLP Pro Bono Attorneys for Respondents BY: JAMES V. O GARA, ESQ. 1 In its most recent submission, petitioner requested a penalty of $92,738 (3 x $30,912.66) for excess expenditures (Perskie Aff. 25). Because petitioner does not clearly show how it concluded that respondents exceeded the expenditure limit by $30,912, I will rely on petitioner s previous, more detailed claim that respondents exceeded the expenditure limit by $30,686 (Loprest Aff. 46(i)).

16 Exhibit A Petitioner s Civil Penalty Request $ 200 Failure to report disbursements accurately 2,000 Failure to properly report and account for loans and loan repayments 20 Failure to properly report an in-kind contribution 750 Accepting a $500 contribution from an unregistered political committee 40 Failing to report specific transactions accurately 2,250 Accepting over-the-limit doing business contributions 550 Accepting contributions or loans from corporations, limited liability companies, or partnerships 200 Failure to provide a timely response to a request for post-election audit documentation 230 Maintaining a petty cash fund in excess of $500 2,796 Failure to respond to draft audit report 10,000 Accepting over-the-limit contributions from a single source 92,738 Exceeding the expenditure limit $111,774 Total request (Perskie Aff ).

17 Summary of Final Board Determination Alan Gerson Candidate, 2009, City Council District 1 Program participant: $0 in public funds received 2 1. Accepting over-the-limit doing business contributions $2,250 Campaigns may not accept contributions from individuals or entities that have business dealings with New York City government (the "City") in excess of the applicable Doing Business contribution limit for the entire election cycle. See Admin. Code 3-702(8), (18), (20), 3-703(1-a), (1-b); Board Rules 1-04(c)(1), (h). The Doing Business limit for contributions to City Council candidates in the 2009 election was $250. See Admin. Code 3-703(1-a), (1-b). When a candidate receives a contribution in excess of the limit for contributions from contributors who have business dealings with the City, the candidate must return the excess portion to the contributor by bank check or certified check made out to the contributor within twenty days of being notified by the CFB. See Board Rule 1-04(c)(1). The Campaign accepted two contributions in excess of the doing business limit. It refunded the over-the-limit portion of one contribution after the statutory deadline and did not refund the over-the-limit portion of the other. The Board assessed a penalty of $2,250 for these violations. 2. Failing to accurately report disbursements, $200 resulting in a 17.13% variance Campaigns are required to report every contribution, loan, receipt, and disbursement. See 3-703(6); Board Rule The Campaign's bank records and information submitted showed a 17.13% variance between total reported monetary disbursements and total debits documented in bank statements. The Board assessed a penalty of $200 for this violation. 3. Failing to properly report and account for loans $2,000 and loan repayments Campaigns must properly report and provide documentation for loans and loan repayments, such as evidence of the source of each loan, to the CFB upon request. See Admin. Code 3-703(l)(d), (g); Board Rule 4-01(g). In addition, campaigns must provide copies of 2 Mr. Gerson elected to have a proceeding before the Office of Administrative Trials and Hearings ("OATH"). On February 19, 2016, Judge Kevin F. Casey issued a final report and recommendation in the matter of Campaign Finance Board v. Alan Gerson and Friends for Gerson (OATH Index No. 2421/14). The Board's final determination reflects Judge Casey's recommendation for all penalties except the one for exceeding the expenditure limit.

18 - 2 - checks, bills, or other documentation to verify all transactions reported in their disclosure statements. See Admin. Code 3-703(l)(d), (g); Board Rule A loan not repaid by the day of the election is considered a contribution subject to the contribution limit. Loans that are forgiven or settled for less than the amount owed are also considered contributions. See Admin. Code 3-702(8); Board Rules 1-05(a), (j). The Campaign submitted two loan agreements. The first was a personal loan of $45,075 from J.P. Morgan Chase to the Candidate ("Loan 1"). The second was a loan from the Candidate to the Campaign ("Loan 2"), which contained an interest provision. The Campaign failed to report the principal portion of each payment as a loan repayment and the interest portion as an expenditure. Additionally, the interest for months in which the Campaign did not make payments under the terms of Loan 2 was not properly reported as an outstanding liability. The Campaign also did not report a loan payment of $8,000 that appeared on its bank statement. The Board assessed a penalty of $2,000 for these violations. 4. Accepting over-the-limit contributions $10,000 Campaigns may not accept contributions from a single source in excess of the applicable contribution limit for the entire election cycle. See Admin. Code 3-702(8), 3-703(l)(f), (11), (12); Board Rules 1-04(c)(1), 1-04(h), 1-07(c). The contribution limit for City Council candidates in the 2009 election was $2,750, and the contribution limit for candidates contributing to their own campaigns was $8,250. Admin. Code 3-703(1)(f). If a campaign accepts an overthe-limit contribution, it must return the excess portion to the contributor. See Board Rule 1-04(c)(1). The Campaign accepted aggregate contributions totaling $110, from the Candidate, exceeding the contribution limit for candidates contributing to their own campaigns by $102, The Campaign also reported a $33,000 bank check as an expenditure, but the check did not originate from the bank accounts listed in the Candidate's Certification. The check is considered an over-the-limit in-kind contribution, exceeding the applicable contribution limit by $30,250. The Board assessed a penalty of $10,000 for these violations. 5. Failing to report an in-kind contribution $20 Campaigns are required to report all in-kind contributions received. See Admin. Code 3-703(6); Board Rule In-kind contributions are goods or services provided to a campaign for free, paid by a third party, or provided at a discount not available to others. The amount of the in-kind contribution is the difference between the fair market value of the goods or services and the amount the campaign paid. See Admin. Code 3-702(8); Board Rules 1-02, 1-04(g). The Campaign provided an invoice from MarketxMarket totaling $1,363.92, but reported a payment of $565. The $ balance is considered an in-kind contribution.

19 - 3 - The Board assessed a penalty of $20 for this violation. 6. Accepting contributions from corporations, limited $550 liability companies, or partnerships Campaigns may not accept, either directly or indirectly, a campaign contribution or loan from any corporation. See Admin. Code 3-703(1)(1); Board Rule 1-04(e). This prohibition also applies to contributions received after December 31, 2007 from any partnership, limited liability partnership, or limited liability company. See New York City Charter 1052(a)(13); Admin. Code 3-703(1)(1); Board Rule 1-04(c), (e). The Campaign accepted three contributions totaling $375 from corporations. It refunded one contribution promptly and the other two after the deadline. The Board assessed a penalty of $550 for these violations. 7. Accepting a contribution from an unregistered $750 political committee Campaigns may not accept a contribution from a political committee unless the committee is registered with the CFB within ten days of receipt of the contribution. See Admin. Code 3-703(k), 3-707; Board Rule l-04(d). The Campaign accepted and did not return a $500 contribution from Friends of Silver, an unregistered political committee. The Board assessed a penalty of $750 for this violation. 8. Failing to accurately report specific transactions $40 Campaigns are required to accurately report every contribution, loan, receipt, and disbursement. See Admin. Code 3-703(6); Board Rule The Campaign did not properly report or provide documentation for two receipts totaling $800. The Board assessed a penalty of $40 for these violations. 9. Exceeding the expenditure limit $30,912 Candidates who participate in the Campaign Finance Program must abide by limits on the amount of money they spend on their campaigns. See Admin. Code 3-703(1)(i), 3-706, 3-711(2)(a); Board Rules 1-05(d), (1). The expenditure limit for candidates running for City Council in the 2009 general election was $161,000. See Admin. Code 3-706(1)(a). The Campaign exceeded the primary election expenditure limit by $30, (19.2%). In recognition of the significant difficulties faced by the Campaign, the Board affirmed Judge

20 - 4 - Casey's recommendation to base the penalty on the amount of the overage, rather than using the multiplier normally applied pursuant to the Penalty Guidelines. The Board assessed a penalty of $30,912 for this violation. 10. Maintaining a petty cash fund greater than $500 $230 Campaigns are prohibited from maintaining more than $500 in a petty cash fund. See Board Rule 4-01(e)(2). The Campaign issued a $2,800 check made out to "cash" from its bank account, which constitutes a petty cash fund exceeding $500. The Board assessed a penalty of $230 for this violation. 11. Failing to respond timely to a request for post-election $200 audit documentation Every campaign is required to maintain records, such as copies of checks, bills, and other documentation, that enable CFB staff to verify the contributions and expenditures reported in the campaign's disclosure statements. See Admin. Code 3-703(1)(d), (g); Board Rule Campaigns are required to furnish such records to CFB staff upon request. See Admin. Code 3-703(1 )(d), (g). Every campaign is subject to a post-election audit by the CFB, for which they must furnish certain records, regardless of whether the campaign received public funds. See Admin. Code 3-703(11), (12), 3-710(1), 3-719(1)(b); Board Rule 4-05(a). CFB staff notified the Campaign that the Campaign's initial response to the post-election documentation request was inadequate and requested additional documentation. The Campaign submitted additional documentation four days after the deadline. The Board assessed a penalty of $200 for this violation. 12. Failing to respond to the Draft Audit Report $2,796 Campaigns are required to respond to the Draft Audit Report ("DAR") by the due date. See Admin. Code 3-703(1)(d), (g), (11), 3-708(5), 3-710(1), 3-711(1); Board Rules 1-09(a), 4-01, Failing to respond to the DAR imposes significant burdens on CFB staff and frustrates the purpose of the Act's disclosure requirements. The Campaign did not respond to the DAR. The Board assessed a penalty of $2,796 for this violation.