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EXHIBIT 1

Case 1:10-cv-01350-RMC Document 13-1 Filed 12/21/10 of 63

EXHIBIT 2


EXHIBIT 3


1234S67891011121314IS161718192021222324252627282930313233343536373839404142

FEDERAL ELECTION COMMISSION999 E Street, N.W.

Washington, D.C 20463

FIRST GENERAL COUNSEL'S REPORT

COMPLAINANT:

RESPONDENTS:

RELEVANT STATUTES:

INTERNAL REPORTS CHECKED:

FEDERAL AGENCIES CHECKED:

MUR: 5908DATE SUBMITTED: March 14.2007DATES OF NOTIFICATION: March 19.2007,June 20,2007, July 26.20071

RESPONSES RECEIVED: April 30,2007, August6,2007DATE ACTIVATED: June 18,2007

EXPIRATION OF SOL: October 1,2011

Citizens for Responsibility and Ethics inWashington

Duncan Hunter;Hunter for President, Inc. and Bruce Young, in hisofficial capacity as Treasurer, andPeace Through Strength Political Action Committeeand Meredith G. Kelley, in her official capacity asTreasurer

2U.S.C.54312U.S.C.§4322U.S.C.§4332U.S.C.§4342U.S.C.§441a11C.F.R.§ 100.7211 CP.R.§ 100.13111CF.R.§ 110.211CFJI.§ 104.311C.F.R.§ 104.9

Disclosure Reports

None

1 Although the initial notification was sent only to Peace Through Strength Politic*! Action Committee, furtherreview of the complaint revealed the need to notify I>nx»n Hunter, and later, Hunter for President


MURS908Firet General Counsel's ReportPage 2

1 I. INTRODUCTION

2 This complaint involves allegations that Duncan Hunter and his Leadership PAC, Peace

3 Through Strength Political Action Committee C'PTS PAC1), violated various provisions of the

4 Federal Election Campaign Act of 1971, as amended, ("the Act") in connection with PTS PAC's

5 activities in support of Hunter's 2008 Presidential campaign. Specifically, Complainant alleges

6 that: (1) PTS PAC expended more than $5,000 to publicize Hunter's intention to run for

7 President and, therefore, should have registered as Hunter's principal campaign committee; (2)

8 Duncan Hunter, through PTS PAC, accepted contributions to support his candidacy that were in

9 excess of the legal limit while "testing the waters" to determine whether he would run for

10 President; (3) once Hunter officially became a candidate and registered a principal campaign

11 committee, PTS PAC made excessive in-kind contributions to Hunter for President, Inc.

12 C"Hunter for President") by paying for advertisements to promote Hunter's Presidential

13 campaign; and (4) PTS PAC failed to report disbursements for television advertisements

14 featuring Duncan Hunter that aired in the early primary states of Iowa and New Hampshire in

15 December of 2006.

16 PTS PAC generally denied the allegations made in the complaint and contends that the

17 advertisements it aired did not contain express advocacy or an electioneering message, and were

18 property reported as disbursements by the PAC. PTS PAC did not address the allegation that it

19 funded Hunter's travel for'testing the waters" activities. See Complaint H 8,25-27. Duncan

20 Hunter did not submit a response to the complaint Hunter for President did not respond other

21 than to state that PTS PAC had previously responded.


MURS906Fint General Counsel's ReportPage 3

1 Although we conclude that the television ads that are the primary focus of the complaint

2 did not constitute an in-kind contribution to Hunter's presidential campaign or cause Hunter to

3 trigger candidate status, it appears that other PTS PAC disbursements did lead to violations of

4 the Act. Based on the complaint, the response, and publicly available information, we

5 recommend the Commission find:

6 (1) Reason to believe that Duncan Hunter violated 2 U.S.C. § 432(eXl) by7 failing to timely file a Statement of Candidacy and also violated 11 C.F.R.8 §§ 100.72 and 100.131 by failing to maintain records of contributions9 received and expenditures made while he was "testing the waters'* to

10 determine whether he would become a candidate for President;

11 (2) Reason to believe that Hunter for President, Inc. and Bruce Young, in his12 official capacity as Treasurer, violated 2 U.S.C. § 434(aX3) by failing to13 report contributions received and expenditures made by Hunter during theu "testing the waters" period after it registered as Hunter's principal15 campaign committee and was required to file reports of receipts and16 disbursements with the Commission;

17 (3) Reason to believe that Peace Through Strength Political Action Committee18 and Meredith O. Kelley, in her official capacity as Treasurer, violated19 2 U.S.C. § 441a and 11 C.F.R. § 110.2(b)(l) by making excessive in-kind20 contributions to Duncan Hunter for his Presidential campaign and that21 Duncan Hunter and Hunter for President, Inc. and Bruce Young, in his22 official capacity as treasurer, violated 2 U.S.C. § 441a(f) by accepting23 excessive contributions; and

24 (4) Take no action at this time regarding the allegation that Peace Through25 Strength Political Action Committee and Meredith G. Kelley, in her26 official capacity as Treasurer, violated 2 U.S.C. § 434(b) and 11 CJ.R.27 §§ 104.3(b) and 104.9(a) by failing to report disbursements for television28 advertisements run in Iowa and New Hampshire in December of 2006.


MUR5908Pint General Counsel's ReportPage 4

1 II. FACTS

2 Duncan Hunter is a member of Congress from California's 52nd Congressional District.2

3 He is also currently a candidate for President. Hunter's campaign website indicates that his

4 candidacy is focused on the issues of "border enforcement," the "war on terror," and "fair trade."

5 See www.gohunter08.com.

6 Hunter registered his Presidential exploratory committee with the Commission on

7 January 8,2007, filed his Statement of Candidacy on January 23,2007, and registered his

8 principal campaign committee for his Presidential campaign, Hunter for President, with the

9 Commission on January 25,2007. Various news reports, however, indicate that Hunter was

10 publicly speaking about his bid for the Presidency as early as October 2006. Other news reports

11 also indicate that Hunter was traveling to early primary states in support of his bid for the

12 Presidency as early as October 2006 through January 23,2007, the date he filed his Statement of

13 Candidacy with the Commission.3 Although it appears that Hunter was "testing the waters" for a

14 Presidential bid, or perhaps, had already become a candidate under the Act from October 2006

15 through January 2007 (when he registered his principal campaign committee). Hunter for

16 President did not report any contributions received or expenditures made by Hunter.

2 Mr. Hunter has, however, announced his intention to retire at the end of the current term and is not running forreelection to his Congressional seat3 He reportedly traveled to states such as South Carolina. New Hampshire, and Iowa, fee John Van Doom. DuncanHunter's hard mad ahead. North County Times, Dec. 6,2006, at www.ncthnes.oom; Jason Spencer, 2008Pieiidential fiinjidjfc Iftmes to Town. GoUpatMc.com, Dec. 11,2006, at www.goupttatexom; Associated Press. laIowa. Hunter Touts Strong Defense. The Des Moines Register, Dec. 16,2006, at www.deamoiiieireguter.com;James PindelU Hunter to visit NJL for fJrrttiiMiinMMMMincmg prudential ambition The Boston Globe, Jan. 5,2007, at www.boston.com.


MUR5908Pint General Counsel's ReportPage5

1 PTS PAC is a nonconnected, multi-candidate political committee that registered with the

2 Commission in 2002. Duncan Hunter is the honorary chairman of PTS PAC, which appears to

3 function as his Leadership PAC. PTS PAC also focuses on defense, border security, and trade

4 issues. See PTS PAC Response. During approximately the last quarter of 2006, PTS PAC raised

5 $150,422 and spent $101,148. PTS PAC made $90,570.26 in disbursements in South Carolina,

6 New Hampshire, and Iowa - the states Hunter reportedly traveled to in support of his Presidential

7 bid - from October 2006 through January 25,2007.

8 At the end of 2006 and into early 2007, PTS PAC ran the three different television ads

9 specifically mentioned in the complaint.4 In each of the three ads, Duncan Hunter introduces

10 himself, without reference to his status as a candidate, and then proceeds to discuss either

11 immigration or trade with China. See Attachment 1 (Scripts for Commercials). PTS PAC

12 reported disbursements for media buys in South Dakota and South Carolina, which appear to

13 have been made to purchase air time to run these ads.5 According to the complaint, PTS PAC

14 also reportedly ran ads in Iowa and New Hampshire, although they did not report any

15 disbursements for media buys in those states for December 2006. However, PTS PAC did report

4 The advertisements may be viewed at www.peaoethrougjiiiicqgthpK.com.5 The disbursements were reported u being made to various television stations in bodi states and described as "PACmedia advertisements" or "PAC media services." Various news reports seem to indicate that those were die only adsbeing ran by the PAC at the time.


MURS908Pint General Counsel's ReportPage6

1 disbursements to television stations in Iowa and New Hampshire in its Mid-Year 2007 report.6

2 HI. ANALYSIS

3 A. Duncan Hunter's Candidacy

4 1. "Testing the Waters"

5 Under the Act, an individual becomes a candidate for federal office (and thus triggers

6 registration and reporting obligations under the Act) when his or her campaign either receives

7 $5,000 in contributions or makes $5,000 in expenditures. 2 U.S.C. § 431(2). There is, however,

8 a limited exception for amounts raised and spent while an individual is "testing the waters" in

9 order to decide whether to become a candidate. In such cases, the Commission's regulations

10 provide that the terms "contribution" and "expenditure" do not include funds received or

11 payments made solely to determine whether an individual should become a candidate. 11 C.F.R.

12 §§ 100.72(a) and 100.131 (a). Thus, before making a final decision as to whether to become a

13 candidate, an individual may raise or spend more than $5,000 without triggering candidate status

14 if his or her activities are permissible "testing the waters" activities, which include, but are not

15 limited to, conducting polls, making telephone calls, and travel. Id, Only funds permissible

16 under the Act may be used for such activities. Id.

17 However, when an individual raises or spends more than $5,000 and engages in activities

18 indicating that he or she has decided to run for a particular office, or activities relevant to

19 conducting a campaign, the individual is deemed to have crossed the line from "testing the

20 waters" to "candidate" status under the Act These activities include, but are not limited to:

1PTS PAC repotted two disbursements made on January 19,2007, one to a television station in Iowa and one to atelevision station in New Hampshire, lor TAG media advertisements."


MURS908Pint General Counsel** ReportPage?

1 using general public political advertising to publicize the individual's intention to campaign for

2 federal office; raising funds in excess of what could reasonably be expected to be used for

3 exploratory activities or activities designed to amass funds to be spent after becoming a

4 candidate; making or authorizing written or oral statements that refer to the individual as a

5 candidate for a particular office; or conducting activities in close proximity to the election or over

6 a protracted period of time. 11 C.F.R. §§ 100.72(b) and 100.131(b).

7 At an October 30,2006 news conference, Hunter told the audience "As I finish my final

8 two yean as chairman of the Armed Services Committee and serve you, I am also going to be

9 preparing to run for president of the United States in 2008." William Finn Bennett, Hunter

10 announces possible run for president. North County Times, Oct 30,2006, at www.nctimes.com.

11 When asked "why are you running" in an interview with a Newsweek reporter that same week,

12 Hunter answered directly, without denying that he was running, "because I believe national

13 security and a strong military are more important issues now than they have ever been." Jamie

14 Reno. O&A: Duncan Hunter on '08 White House Bid. Newsweek. Oct. 31.2006. at

15 www.msnbc.msn.com. In that same interview. Hunter stated that "while I've announced that I

16 am preparing to run for president, I have not made a formal announcement of my candidacy.

17 This gives me a chance to make another speech." Id.

18 It appears that Hunter was also traveling to early primary states to publicize his

19 Presidential campaign* and/or gauge support for his campaign, during the October 2006 through

20 January 2007 period. In one trip to South Carolina, Hunter attended a reception "orchestrated by

21 [the] Spartanburg County Republican Party Chairman" where he apparently discussed what his

22 goals would be as president Jason Spencer. 2008 Presidential Cjnffldaft ^omeg to Town.


MUR5906Firtt General Counsel's ReportPage 8

1 GoUpstate.com, Dec. 11,2006, at www.goupstate.com. According to the news article, Hunter

2 paid for the reception, and told attendees "I'm just asking me [sic] to keep you [sic] on your

3 radar, because I'm going to be running.11 Id. (emphasis added). Hunter also told attendees: "I

4 have the conservative ideas which are worth more than money, with respect to national defense,

5 my border fence and the two-way street on trade. That's a message that will resonate with South

6 Carolina, and gives me an excellent chance to win." Id. (emphasis added). Another article

7 talked about Hunter's first visit to Iowa in December 2006, reporting that he attended a pancake

8 breakfast and a pheasant hunt and discussed his presidential campaign. Associated Press. In

9 Iowa. Hunter Touts Strong Defense. The Des Moines Register, Dec. 16,2006, at

10 www.desmoinesregjster.com. Hunter also traveled to New Hampshire prior to filing his

11 Statement of Candidacy. One article about his New Hampshire trip stated that during that trip

12 Hunter "called himself the most conservative Republican in the Presidential sweepstakes. That,

13 he said, 'gives me a chance,' despite his low name recognition.11 John DiStaso, California rep

14 touts conservative appeal. The Manchester Union Leader, Jan. 9,2007, at www.unionleader.com.

15 Based on Hunter's October 30,2006 statement and the interview that followed, it appears

16 that Hunter had already decided to become a candidate as of that date.7 This conclusion is also

17 supported by the statements Hunter made in trips to early primary states in December 2006. He

18 advertised his intention to the public in a press conference and made statements acknowledging

19 himself to be a candidate in media interviews. Having apparently already made the decision to

20 run for President and advertising that decision to the general public, the only remaining question

7 In MUR 5363 (Sharpton), the Conuniukm determined that Rev. Sharpton had become a candidate when he crossedthe contribution and expenditure threshold and published a book hi which he unequivocally referred to himself as acandidate for President, even though he made statements after uwpublkartkm of the took that he WMdeclared as a candidate" and had "not decided finally*1 whether to run.


MURS908Pint General Counsel'! ReportPage 9

1 is when did he raise or spend $5,000 in support of his campaign. Once he received $5,000 in

2 contributions or made $5,000 in expenditures for his Presidential campaign, he became a

3 "candidate" under the Act and was required to register and report as such with the Commission.

4 2. Candidate Status

5 Achieving "candidate" status triggers registration and reporting requirements for the

6 candidate and for his or her principal campaign committee. Within 15 days of becoming a

7 candidate, the individual must file a Statement of Candidacy with the Commission that

8 designates the candidate's principal campaign committee. 2 U.S.C. § 432(eXl); see also

9 11 GF.R. §101. l(a). The principal campaign committee must file a Statement of Organization

10 no later than ten days after it has been designated by the candidate, 2 U.S.C. § 433(a), and must

11 also, in the case of a principal campaign committee for a Presidential candidate, file timely

12 financial disclosure reports as required by 2 U.S.C. § 434(aX3). All reportable amounts from the

13 beginning of the "testing the waters" period must be reported on the first financial disclosure

14 report filed by such committee, even if the amounts were received or expended prior to the

15 current reporting period. Seell GF.R. §§ 104.3(a) and (b).

16 If an individual who has been "testing the waters" subsequently becomes a candidate,

17 funds received or payments made for "testing the waters" are contributions and expenditures

18 subject to the reporting requirements of the Act. 11C.RR. §§ 100.72(a)andl00.131(a). Such

19 contributions and expenditures must be reported with the first report filed by the principal

20 campaign committee of the candidate, regardless of the date the funds were received or the

21 payments made. Id. Accordingly, once Hunter became a candidate, his principal campaign


MURS908First General Counsel's ReportPage 10

1 committee was responsible for reporting all of the campaign-related expenses that he incurred

2 during the "testing the waters" period.

3 Although Hunter undoubtedly incurred expenses in connection with his travel from

4 October through December 2006, Hunter for President reported no contributions or expenditures

s for that time period. It is unknown whether he was raising any money for his Presidential

6 campaign during that time period. Hunter for President only reported two contributions and one

7 expenditure prior to January 25,2007 (all three occurring in January of 2007). It seems highly

8 unlikely, however, that he would have incurred no other expenses and raised no other money

9 between his October 30,2006 announcement and filing his Statement of Candidacy in January

10 2007.

11 Therefore, we recommend that the Commission find reason to believe that Duncan

12 Hunter violated 2 U.S.C. § 432(eXD and 11 C.F.R. §§ 100.72 and 100.131 by failing to report

13 contributions received and expenditures made by Duncan Hunter while he was "testing the

14 waters'1 for a Presidential bid.

is B. Hunter for President: Duty to Report Contributions and Expenditures

16 While it is the candidate's responsibility to keep a record of contributions received and

17 expenditures made while "testing the waters," those contributions and expenditures must be

18 reported once he or she officially becomes a candidate and registers a principal campaign

19 committee with the Commission. 11 C.RR. §§ 100.72 and 100.131. The duty to file reports of

20 rcceir^ and disbursements then fdls on the pri^ 2U.S.C.

21 § 434(aX3); see also 11 C.FH. §§ 104.3(a) and (b). As noted above. Hunter for President did not

22 report any contributions or expenditures for the period from October 2006 through December


MUR5908Pint General Counicl's ReportPage 11

1 2006 when it appears that Hunter was either "testing the waters'* or already a candidate.

2 Therefore, we also recommend that the Commission find reason to believe that Hunter for

3 President, Inc. and Bruce Young, in his official capacity as Treasurer, violated 2 U.S.C.

4 §434(aX3).

5 C. PTS PAC: Excessive In-Kind Contributions and Duty to Report6 Expenditures

7 1. Hunter's Travel

8 While the available information shows that Hunter for President failed to report

9 disbursements related to Hunter's travel to publicize his Presidential campaign from October

10 2006 through the beginning of January 2007, PTS PAC did report disbursements which may be

11 related to Hunter's travel during this period. Specifically, PTS PAC reported $20,185.26 in

12 expenditures for food and beverage and "media services" in South Carolina in December 2006.

13 According to news reports, Hunter was in South Carolina probably at least twice during the

14 month of December. See John Van Doom. Duncan Hunter's hard road ahead. North County

15 Times, Dec. 5,2006, at www.nctimes.com; Jason Spencer, 2008 Presidential Candidate Comes

16 tpTown. GoUpstate.com, Dec. 11,2006, at www.goupstate.com. Therefore, it appears that PTS

17 PAC may have paid some of Hunter's expenses for "testing the waters" and/or when he had

18 already become a candidate but had not filed a Statement of Candidacy.

19 Therefore, we recommend that the Commission find reason to believe that Peace Through

20 Strength Political Action Committee and Meredith G. Kelley, in her official capacity as

21 Treasurer, violated 2 U.S.C. § 44la and 11 C.F.R. § 110.2(b)(l) by making excessive in-kind

22 contributions to Duncan Hunter for his Presidential campaign and that Duncan Hunter and


MUR5908Pint General Counsel's ReportPage 12

1 Hunter for President, Inc. and Bruce Young, in his official capacity as treasurer, violated

2 2 U.S.C. § 441a(f) by accepting excessive contributions.

3 2. Television Advertisements

4 Complainant alleges that PTS PAC ran three television advertisements "designed to

5 publicize Rep. Hunter's intention to campaign for federal office by introducing him to early

6 primary voters" in South Dakota, South Carolina, Iowa, New Hampshire, and North Carolina in

7 late 2003 and early 2004. Complaint at 130. The response to the complaint provided scripts of

8 the advertisements described in the complaint. Attachment 1. A review of these ads reveals that

9 although Hunter is identified (both by being the pictured speaker in the ad and stating either "I'm

10 Duncan Hunter" or "I'm Congressman Duncan Hunter"), there is no mention of Hunter as a

11 current candidate for federal office or of any election. Each ad focuses on an issue similar to the

12 issues highlighted in Hunter's presidential campaign platform (border security or trade with

13 China), but they are the issues on which PTS PAC appears to have focused since its inception.8

14 Therefore, they are the type of ads Hunter would be expected to do for PTS PAC even if

15 he was not running for President. Although the ads were run in many of the states Hunter

16 appears to have traveled to in order to publicize and promote his Presidential campaign,

1 If ft is determined that Hunter was already a candidate at the time the ads were Tint tired, which appears to hivebeen December 2006, then the ads might be subject to an analysis to determine whether they were coordinatedconununicitioni with Hunter is • candidate. However, while the payment and conduct prongi of the coordinationregulation might be met, a review of the ads and the timing of the airing of the ads show that the content prongcannot be met (The ads do not contain express advocacy, and at the time otey were apparently aired, did not fallwithin the time periods for electioneering communications or the 120 day period for a public communicationreferencing a Presidential candidate.) See 11CPJL § 109.21(c).


MUR5908First Genenl Counsel's ReportPage 13

1 apparently in somewhat close proximity to Hunter being in the state, we cannot conclude that the

2 ads were for the purpose of influencing a federal election.9

3 The complaint also alleges that PTS PAC violated the Act by failing to report

4 expenditures made for television advertisements aired in Iowa and New Hampshire in December

5 of 2006. It appears that the content of these ads is the same as the three ads discussed above and

6 in the complaint. According to news reports, PTS PAC began airing a television ad on border

7 control in Iowa, New Hampshire, and South Carolina on December 19,2006. See Jessica

8 Holzer, The 2008 ad blitz begins. The Hill, March 1,2007, at www.thehill.com. Although PTS

9 PAC reported expenditures to television stations in South Carolina on its 2006 Year-End Report,

10 it did not report expenditures made to Iowa and New Hampshire television stations until January

11 19,2007 in its 2007 Mid-Year Report.10 Therefore, it appears that PTS PAC reported payments

12 for advertisements aired in Iowa and New Hampshire.

13 However, since the descriptions of the disbursements in the PAC's disclosure reports are

14 not detailed enough to conclusively prove that these disbursements were for the ads at issue in

15 the complaint, we recommend that the Commission take no action at this time with regard to the

* In paragraph 20 of the factual section of the complaint, Complainant claims (based on a news article attached asExra'bitHtotheccfliplum)thatuatttethrwWMURPAC's website directed readers to 'please visit Duncan Hunter for President 2006,' and provided a direct hyperlinkto Hunter for President's website, www .fonunteiOSxoin. ...PTS PAC husiiKe removed the inessa^from its website." Aside from Complainant's allegation relying solely on the one news article, we have noinformation regarding the presence of the hyperlink on PTS PAC's website. If, during the course of theinvestigation, we discover any evidence indicating that the hyperlink was on PTS PAC's website for a substantialamount of time or was coordinated with the candidate, we will then make Ae appropriate recotnmeridatkxi to theCommission.10 ITS PAC reported a January 19,2O)7 disbursement in themedia advertisement" PTS PAC also reported a January 19,2007 disbursement in the amount of $5.000 toWMUR-TV in New Hampshire for "PAC media advertisement'1


MUR5908First General Counsel's ReportPage 14

1 allegation that Peace Through Strength Political Action Committee and Meredith G. Kelley, in

2 her official capacity as Treasurer, violated 2 U.S.C. § 434(b) and 11 C.F.R. §§ 104.3(b) and

3 104.9(a) by failing to report disbursements for television advertisements in Iowa and New

4 Hampshire in December of 2006. If we uncover any additional information which suggests that

5 the disbursements reported on the 2006 Year-End or 2007 Mid-Year reports are not connected to

6 the ads at issue here, we will make appropriate recommendations to the Commission.

7 IV. PROPOSED COURSE OF ACTION

8 We believe a limited investigation will be required in this case in order to establish: (1)

9 when Mr. Hunter made his decision to run for President, (2) when he raised or spent $5,000

10 towards that effort

11

12

13

14

15

16 Although these questions should easily

17 be answered through informal discovery, we should be prepared to issue interrogatories and

18 subpoenas if the information is not forthcoming. Accordingly, this Office requests that the

19 Commission authorize the use of compulsory process in this matter.

20


MUR5908Pint General Counter i ReportPigelS

1 V. RECOMMENDATIONS

23456719

1011121314IS1617111920212223242526272S293031323334353637383940414243

1. Find reason to believe that Duncan Hunter violated 2 U.S.C. § 432(eXl) and11 C JML §§ 100.72 and 100.131, and 2 U.S.C. § 441a(f);

2. Find reason to believe that Hunter for President, Inc. and Bruce Young, m his officialcapacity as Treasurer, violated 2 U.S.C. §§ 434(a)(3) and 441a(i);

3. Fird reason to bcUeve that Peace Trirough StrongMeredith G. Kelley, in her official capacity as Treasurer, violated 2 U.S.C. §441a andllCJJt§110.2(bXl);

4. Take nO aCtiOn at thiS tittle V** *eo»wl t« th» •llmmtfmi that PMA* Tkmnolt StrmnaAt

Political Action CommitteeTreasurer, violated 2 U.S.C.

5. Approve the attached Factut

. Authorize the use or compul

7. Approve the appropriate let!

M£-DSDate

\

and Meredith O. Kelley, in her official capacity as§ 434(b) and 1 1 C.FJL f § 104.3(b) and 104.9(a);

d and Legal Analyses;

Isoiy process m this matter; and

tors.

Thomasenia P. DuncanGeneral Counsel

\Ub\^- W' U^^JV^-.KamleenMGurthActing Associate General Counsel for

AflaflC U« SPOBKWIiBfActing Deputy Associate General Counsel

Audra L. Wassom ^~"* -̂Attorney


x>-0

oo

MUR5908Pint GeaenlCoumeri ReportPtgc16

12 Attachments:3 1-Scripts of Commercials45


SCRIPTS FOR PEACE THROUGH COMMERCIALS

Serin! for Peace Through Strenoth - Border Fence

I'm Duncan Hunter. We built this double fence here at the Mexican border in San Diego andreduced the smuggling of hundreds of thousands of people and tons of drugs by more than 90%.The fence works and the new law provides for it to be buih 700 miles across Arizona, NewMexico and Texas. Join with me, Duncan Hunter, in Peace Tlmnigh Strength. Let's make surethat Homeland Security builds the border fence. It works and h's the law.

Script for Peace Through Strength — Submarine

I'm Congressman Duncan Hunter. A lew weeks ago when the Song Class Chinese submarineemerged next to one of our aircraft carriers, abom 80 miles off Okirjawa, it showed the Arflericanpeople what the Chinese were buying with American trade dollars. They 're cheating on trade,and they're buying ships and planes and missiles with our money, as well as taking millions ofjobs. Jotaine at Peace TfamujhStrengu for nfr

Script for PMCC Through Strength —

I'm Congressman Duncan Hunter. Americans start a football game with a clean Scoreboard butChma starts a game agamst our busiiiesseswim^ They give a 17 percentsubsidy to their guys, they penalize our giryslTpercemanddevalwihefrcOTThat's cheating and China is buying ships and planer American trade dollars.Join me at Peace Through Strength for fair trade.

Pat*


EXHIBIT 4


BEFORE THE FEDERAL ELECTION COMMISSION

In the Matter of ))

Duncan Hunter, )) MURS908

Hunter for President, Inc. and Bruce Young,)in his official capacity as Treasurer; )

)Peace Through Strength Political Action )

Committee and Meredith G. Kelley, )in her official capacity as Treasurer )

GENERAL COUNSEL'S REPORT #2

I I. ACTIONS RECOMMENDED

2

3

4

S

6

7

8

9 (4) Find no reason to believe PTS PAC violated the Act with respect to allegations

10 concerning its television advertisements.

11 n. INTRODUCTION

12 Between November 2006 and January 2007, PTS PAC, a non-connected leadership PAC

13 formed and controlled by then-Congressman Duncan Hunter, paid approximately $10,200 for

14 travel expenses incurred by Hunter while he made public appearances in connection with his yet-


MUR 5908 (Hunter)General Counsel's Report #2

1 to-be officially declared candidacy for the 2008 Republican presidential nomination. These

2 expenses, which were never reimbursed to PTS PAC, were not reported as in-kind campaign

3 contributions by Hunter's presidential exploratory committee or principal campaign committee

4 after he filed his Statement of Candidacy and registered his campaign committees on January 23

5 and 25,2007, respectively.

6 The Commission found reason to believe that PTS PAC made excessive contributions to

7 the Hunter Committee, in violation of 2 U.S.C. § 441a(aX2). and that Hunter and the Hunter

8 Committee accepted and failed to report these excessive in-kind contributions in violation of

9 2 U.S.C. §§ 441a(t) and 434(b). See MUR 5908 Factual and Legal Analyses. Because of

10 uncertainty as to whether the previously unrepoited in-kind contributions may have triggered

11 Hunter's candidate status prior to mid-January 2007, the Commission also found reason to

12 believe that Hunter and the Hunter Committee failed to timely file its Statement of Candidacy,

13 Statement of Organization and disclosure reports, as required by 2 U.S.C. §§ 432(eXl) and

14 434(a), and authorized an investigation. HunterF&LAat?.

15 During the investigation, Respondents submitted documents and written responses to our

16 requests for information, including affidavits from Duncan Hunter, Committee Treasurer Bruce

17 Young, and Roy Tyler, Hunter's assistant and supporter. See Hunter RTB Response dated April

18 8,2009; PTS PAC RTB Response dated April 9,2009; Consolidated Supp. RTB Response dated

19 May 27,2009. In addition to reviewing Respondents' submissions, we examined disclosures of

20 receipts and disbursements related to activities by Hunter and PTS PAC for the November 2006

21 through January 2007 time period. The investigation confirmed mat PTS PAC violated 2 U.S.C.

22 §§ 441a(aX2) and 434(b), by making and failing to report excessive in-kind contributions to the

23 Hunter Committee and that Hunter and the Hunter Committee violated 2 U.S.C. §§ 441a(f) and



1 434, by accepting and failing to report PTS PAC's excessive in-kind contributions. It also

2 appears that Hunter and the Hunter Committee should have filed a Statement of Candidacy as

3 required by 2 U.S.C. § 432(eXl) at least a week earlier than the actual filing on January 23,

4 2007.

5 The First General Counsel's Report recommended that the Commission take no action at

6 that time with regard to the complaint's allegations as to a series of PTS PAC television

7 advertisements about immigration and national security issues that were run in several early

8 2008 primary states in December 2006 and January 2007. See First OCR at 3,12-14. Although

9 the content and timing of the advertisements appeared to have some nexus with Hunter's soon-

10 to-be declared campaign, in that they were narrated by Hunter and aired in some of the primary

11 states, was not sufficient basis for this Office to recommend the Commission find reason to

12 believe the advertisements violated the Act. The investigation has produced no additional basis

13 for finding advertisements violated the Act Accordingly, we now recommend that the

14 Commission find no reason to believe PTS PAC violated the Act with respect to these television

15 advertisements.

16

17

18

19

20

21 IIL FACTUAL BACKGROUND

22 Duncan Hunter was a member of Congress representing California's 52nd Congressional

23 District, and a candidate for the 2008 presidential election. Peace Through Strength PAC is a


MUR 5908 (Hunter)General Counsel's Report 12

1 non-connected, multi-candidate political committee established by Hunter as his Leadership

2 PAC and has been registered with the Commission since 2002. Duncan Hunter is the honorary

3 chairman of PTS PAC, which states mat its mission focuses on defense, border security, and

4 trade issues.

5 From November 2006 through early January 2007, Duncan Hunter travelled to key

6 presidential primary states, and gave speeches on homeland security, foreign trade and

7 immigration policies, which were topics central to his presidential campaign platform, as well as

8 the stated mission of PTS PAC. Although the responses to the complaint argued that the travel

9 was on behalf of PTS PAC, during the investigation Hunter acknowledged that his "interest in

10 running for President was no secret and was the subject of much discussion," during each of

11 these PTS PAC funded trips. Affidavit of Duncan Hunter ("Hunter Aff.") at 1. Hunter also

12 acknowledges that he selected Iowa, New Hampshire and South Carolina as speaking venues

13 was because he "was preparing for the Presidential race,*1 and that the media reports about

14 statements he made with regard to running for the Republican presidential nomination (that were

15 recited in some detail in the Commission's Factual and Legal Analysis) were "accurate." Id In

16 his affidavit Hunter states, "Obviously, my Presidential interests were known and reported by the

17 news." Id

18 Hunter admits that he used the PTS PAC funded trips to publicize his candidacy, test his

19 speaking points, and gauge support for his presideritial campaign. Hunter likened his experience

20 in running for president to that of when he joined the Army, and compares the public and media

21 events mat occurred before formally announcing his candidacy to the "basic training" a soldier

22 undertakes m order to be fully prepared for military service. Id

4



1 PTS PAC paid for all of the expenses related to Hunter's travel to these events, totaling

2 approximately $ 10,200, none of which were reimbursed by the Hunter Committee. By January

3 5,2007, Hunter had accepted more than $5,000 hi in-kind contributions from PTS PAC.1 Hunter

registered his presidential exploratory committee with the Commission on January 12,2007,

filed his Statement of Candidacy on January 23,2007, and registered his principal campaign

6 committee for his presidential campaign, Hunter for President, Inc., with the Commission on

7 January 25,2007. The Committee filed its first disclosure report on April 15,2007.

8 Chart A below lists the public events to which Hunter travelled during the relevant time

9 period and the expenditures incurred in connection therewith, provided by the Hunter

10 Committee's Treasurer in response to our investigation.

11 Chart A

DatesNov. 20, 2006

Nov. 28, 2006-Dec. 1.2006

Dec. 9-1 1.2006

Dec. 13-17, 2006

Jan. 5-8. 2007

Jan. 12-16.2007

EvMt/Locatira

Dallas. TXSpeeches/TourChanotte, NC snd Chaneston« SCRsceptioD/MeednsjNorth nd South CarolinaPheasant Hunt/Meetings/

lowiWbvriwtmm/ttmAit* nmmice

MeetinsjS/MirchCohnnbia,SCTOTAL

Committee Exoeaditarei$189

$809

$1,027

$1,545

$4,857

$1,816

$10043

12 The Committee admits that all of the expenditures were paid by PTS PAC and were not

13 reimbursed by the Hunter Committee. Young Aff. at 1-2.

14 On November 20,2006, Hunter travelled to Dallas, Texas to "talk to a group of political

15 leaders and pastors" about border patrol and immigration issues. Hunter Aff. at 1. He states the

'In its ree«M) to believe filings the Commisriondmade the decision to nm as a camUto for pieai^


MUR 5908 (Hunter)General Counsel1! Report #2

1 trip's puiposc was to gauge support for a proposed border fwicc law. Id. The trip was paid for

2 by PTS PAC and reportedly cost $189. Affidavit of Bruce Young ("Young Aff"), Attachment

3 4.

4 On November 28,2006 through December 1,2006, Hunter travelled to North and South

5 Carolina for several events at which he shared his views on public policy issues. Hunter Aff. at

6 1. During the trip, including in a speech at Charleston Southern University, Hunter indicated that

7 he was running for president. See Consolidated Supp. RTB Response at 3. Hunter also visited

8 with Congressman Robin Hayes (N.C. 8th Cong. Dist) and toured the NUCOR Steel facility. Id.

9 During this trip, Hunter developed the script for his "China is cheating on trade, with national

10 security implications" commercials, which later aired in several presidential primary states. The

11 entire trip was funded by PTS PAC and cost $809. Young Aff., Attachment 4. Hunter returned

12 to North and South Carolina, on December 9-11,2006, for several meetings and a reception

13 hosted by the Spartanburg County Republican Party Chairman. PTS PAC Response, Attachment

14 7. This trip was also funded by PTS PAC and cost $1,027. Young Aff. at Attachment 4.

15 From December 13 through December IS, 2006, Hunter travelled to Iowa for several

16 events, including a pheasant hunt with "U.S. military veterans of Iraq and Afghanistan." Hunter

17 Aff. at 1. Though Hunter asserts that the pheasant hunt served only as an opportunity to honor

18 veterans with no political purpose, he announced the event on a local radio broadcast while

19 discussing his presidential campaign platform issues. Id; see also Affidavit of Roy Tyler

20 CTyierAff.") at 1. Hunter also met with Congressman Steve King (Iowa 5* Cong. Dist) and

21 other political leaders, and attended a pancake breakfaM during which he discussed his

22 presidential campaign. Hunter Aff. at 1. All expenses were paid by PTS PAC and totaled

23 $1,545. Young Aff. at Attachment 4.



1 From January S through January 8,2007, Hunter travelled to New Hampshire, to gauge

2 receptivity to his message on trade. Hunter Aff. at 1. He also toured the Wilcox Company, a

3 manufacturer of high tech weapons systems for the military, had public events at several

4 restaurants, and did interviews on local television and radio stations. Id. PTS PAG paid for the

5 trip, which cost $4,857. Young Aff. at Attachment 4.

6 In January 12 through January 16,2007, Hunter returned to South Carolina for the "Stand

7 Up for Life*1 march and rally, where he participated as a special guest Consolidated Supp. RTB

8 Response, Attachment 7. During the visit, Hunter also met with the First Vice Chairman of the

9 South Carolina Republican Party, and was interviewed by local television and radio stations, as

10 well as the Glenn Beck Radio Show. Id. PTS PAC paid for the trip, which cost $1,816. Young

11 Aff. at Attachment 4.

12 IV. ANALYSIS

13 A. in? PAC's Encash* In-Kind Contributions

14 If an individual who has been "testing the waters'1 subsequently becomes a candidate, the

15 Act provides that all funds received or payments made during the "testing the waters" period

16 comply with the limitations and prohibitions of the Act, and must be reported on their campaign

17 committee's first disclosure report. See 2 U.S.C. §§ 441a(aX2) and 434(a).

18 The Act also states that no multicandidate political committee shall make contributions to

19 any candidate and his authorized political committee, which in the aggregate, exceeds $5,000 per

20 calendar year, see 2 U.S.C. § 441a(aX2XA), and no candidate or political committee shall

21 knowingly accept contributions in violation of the limitations and prohibitions of the FECA.

22 2U.S.C.f441a(f).


MUR 5908 (Hunter)Genera) Counsel's Report #2

1 PTS PAC and the Hunter Committee admit that PTS PAC paid for all expenses

2 associated with Hunter's travel and participation in public events during the November 2006 -

3 January 2007 time period. PTS PAC RTB Response at 3-4, Young Aff. at 1-2. These

4 expenditures totaled approximately $ 10,243, which resulted in in-kind contributions that

5 exceeded the limitations set forth in the Act by $5,243. Young Aff., Attachment 2.

6 Although Respondents initially maintained that the travel and events at issue were related

7 only to PTS PAC activities, Hunter admits that his presence hi the early primary states during the

8 relevant time period was aimed at raising his national profile and testing public response to his

9 presidential platform, because "that is where the national media focus was." Hunter Aff. at 1.

10 Hunter's acknowledgement that his presence in primary states was to capture media attention

11 and the national spotlight, in connection with his upcoming presidential candidacy, undercuts

12 any claim that the trips were solely on behalf of PTS PAC.

13 Without abandoning their position, the Hunter Committee has suggested that the

14 expenditures be allocated on a 40%-60% basis, with the larger percentage attributable to PTS

15 PAC, but offer no basis for this ratio as opposed to any other. See Young Aff. at TI8-9.

16 Respondents provide no evidence to demonstrate that Hunter would have been present at any of

17 (hose events, absent the presidential campaign.2 These events were integral parts of Hunter's

18 preparations to run for president because they served as venues for publicizing his campaign

19 platform and for increasing his support and national profile in the primary states, without serving

20 any other purpose.

a In fret, the pheasant hunt is the only evert thet Hunter hid prtcipitod in dirtig prior yean, when there wti nopmidontiil cempeign (although the other hunting eventi occumd in the non-prnnery etetei ofdliHwiui, Annum,New Mexico md Texas). WUle we iiilsjhicQiiiideri reductionthe Hunter Committee prove the reined expendrara were facuned white HutePAC durinnen, at this point we recommend 100% (11110111100 to the Hunter Committee.



1 The information gathered from the investigation supports the conclusion that Peace

2 Through Strength Political Action Committee and Meredith G. Kelley, in her official capacity as

3 Treasurer, violated 2 U.S.C. § 441a and 11 C.F.R. § 110.2(bXl) by making excessive in-kind

4 contributions to Duncan Hunter for his presidential campaign and that Duncan Hunter and

5 Hunter for President, Inc. and Bruce Young, in his official capacity as Treasurer, violated

6 2 U.S.C. § 44la(f) by accepting excessive contributions from Peace Through Strength Political

7 Action Committee.

8 B. Ranter's Status is Presidential Candidate

9 The Act states that an individual becomes a candidate for federal office, thus triggering

10 the Act's registration and reporting obligations, when his or her campaign either receives $5,000

11 in contributions or makes $5,000 in expenditures. 2U.S.C. §431(2). As an exception to this

12 general rule, an individual may raise or spend more than $5,000 without triggering candidate

13 status only if he or she is engaged in permissible "testing the waters" activities, which include,

14 but are not limited to, conducting polls, making telephone calls and travel, and if the individual

15 gives no indication that a decision to run has already been made. See 11 C.F.R. §§ 100.72(a) and

16 100.131(a).

17 Although he claims that the decision to become a candidate was not made until he

18 officially announced his candidacy on January 25,2007, Duncan Hunter acknowledges in his

19 affidavit that the selection of the events and forums was based on the upcoming presidential

20 primaries in those states. Therefore, as the Commission determined on January 28,2009, Hunter

21 decided to run for president no later man December 11,2006, and became a candidate when he

22 received at least $5,000 in in-kind contributions ftom PTS PAC, on or about January 5,2007.

23


MUR 5908 (Hunter)General Counwl'i Report #2

1 C. Reporting Violation

2 The Act provides that a political committee must file reports of all receipts and

3 disbursements, including contributions from other political committees. See 2 U.S.C. § 434(a) &

4 (b). Once an individual achieves candidate status by raising or spending more than $5,000 and

5 engaging in activities indicating that he or she has decided to run for a particular office, the

6 candidate and his committee are subject to registration and reporting requirements of the Act.

7 Within fifteen days of becoming a candidate, the individual must file a Statement of

8 Candidacy with the Commission that designates the candidate's principal campaign committee.

9 2 U.S.C. § 432(eXl); see oho 11 C.F.R. § 101.l(a). The principal campaign committee must file

10 a Statement of Organization no later than ten days after it has been designated by the candidate,

11 2 U.S.C. § 433(a), and disclose all reportable amounts from the beginning of the "testing the

12 waters" period in the first financial disclosure report filed by me committee, regardless of the

13 date the funds were received or the payments made. See 2 U.S.C. § 434(aX3), 11 C.F.R.

14 § 104.3(a) and (b). The candidate has a duty to maintain a record of contributions received and

5S expenditures made while "testing the waters," and report those contributions and expenditures

16 once he or she registers his or her principal campaign committee with (he Commission.

17 11 C.F.R. §§ 100.72 and 100.131.

18 Although Hunter achieved candidate status as early as January S, 2007 and should have

19 filed his Statement of Candidacy within fifteen days, he did not file his Statement of Candidacy

20 until January 23,2007.3 Because the Statement of Candidacy was only three days late, a period

21 significantly shorter periods than the late-filed Statements of Candidacy for which the

22 Commission sought a $500 penalty inMURs 5363 (Sharpton) and 5693 (Aronsohn), we are not

1 Tlie Committee filed to Statement of Organization on Jam^ 25,2007, whk* it within 10 dayi of the date theStatement of Candidacy should have been filed.

10



1 recommending the Commission pursue a civil penalty for these violations. The Committee did

2 not file any disclosure reports with the Commission until it filed its 2007 April Quarterly Report,

3 and disclosed no receipts or disbursements for activity prior to January 20,2007. The

4 investigation concluded that the Hunter Committee received approximately $10,200 in-kind

5 contributions that remain unreported. Thus, the investigation confirmed that Duncan Hunter and

6 Hunter for President, Inc. and Bruce Young, in his official capacity as Treasurer, violated 2

7 U.S.C. §§ 432(eXl), 433(a) and 434(a) by failing to file a Statement of Candidacy and disclosure

8 reports within the time period required by the Act. Additionally, the facts demonstrate that

9 Peace Through Strength Political Action Committee and Meredith O. Kelley, in her official

10 capacity as Treasurer, failed to report its in-kind contributions to the Hunter Committee, in

11 violation of 2 U.S.C. § 434(b).

12 D. Television Advertisement!

13 The Commission previously took no action regarding the allegation that PTS PAC paid

14 for television advertisements that were "designed to publicize Hunter's intention to campaign for

5S federal office," or the claim that PTS PAC failed to disclose advertisements that aired in Iowa

16 and New Hampshire in December 2006.4 Hunter F&LA at 5-7. We found no new information

17 to suggest that the PTS PAC's advertisements were in-kind contributions or coordinated with the

18 Hunter Committee, or that PTS PAC improperly reported expenditures related to these

19 advertisements.

20 Chart B below reflects all of the media buys made by PTS PAC during 2006-2007 and

21 the dates of disbursements for those buys, as disclosed by PTS PAC to the Commission:

4 TTie first media buy dubunemeoti were reported by IH9PACinili2007Mid-YevRe|Wftlwhhtiiefiist<hleiofdubunement in low* nd New Hampshire being Jmuary 19,2007, for media id buyt in both

11


MUR 5908 (Hunter)General Counsel*! Report 02

I ChartB

NraberofAd BoysIS23

2

Stan

South CarolinaIowaNew HanpiniRSouth DakotaNorth CarolinaDistrict of ColumbiaCaliforniaMwUaanOreson

DbbirMBMatDatM

12/14/06-2/267071/19/07 ft 2/7/071/19/07. 2/5/07 A 2/7/0712/14/0612/19/061/22/07 A 2/1 3/071/29/074/25/074/30/07

Total Amouit of•MBâVM^MAÂAMiÛHDinMBMIB$99.94025$10.510S1.S08.7S$1.000$5.005S10.06S! 11.515$10.150$10.000

2 The Peace Through Strength commercials carried the themes of maintaining the U.S.

3 industrial base, securing our borders, and staying strong militarily that were promoted by PTS

4 PAC and the campaign. Notwithstanding the peripheral impact on Hunter's profile in the

5 presidential contest, PTS PAC's advertisements were nonetheless legitimate expressions of PTS

6 PAC's longstanding policy positions and consistent with its mission. Id Though the television

7 advertisements are narrated by Hunter, the advertisements did not expressly advocate the

8 election of Hunter and promoted policy positions supported by PTS PAC since its inception.

9 Additionally, the media ad buys did not meet the Act's coordination test because they did not air

10 within 120 days of the election, see 11 C.F.R. § 109.21(c), or even correlate with Hunter's

11 presence in the primary states. PTS PAC F&LA at 5-6. The television advertisements did not

12 begin airing until mid-to-late December 2006, while Hunter's public activities and statements

13 supporting his presidential bid began as early as November 2006. • Also, the television

14 advertisements aired in several jurisdictions that were not early primary states (e.g., South

5S Dakota, North Carolina, Michigan, Oregon, and the District of Columbia), and to which he did

16 not travel or make public appearances or statements on behalf of the campaign.

17 While the themes in the PTS PAC advertisements are similar to me issues promoted by the

18 Hunter campaign, they did not expressly advocate his election and were not coordinated with the

12



1 campaign. Finally, though the Complaint alleged that the PTS PAC's television advertisements

2 were run in Iowa and New Hampshire in December 2006, our review of Respondents'

3 submissions did not uncover any new information to support this allegation, or the claim that

4 PTS PAC failed to disclose all of its media buys. In consideration of these facts, we now

5 recommend the Commission find no reason to believe that the allegations that Peace Through

6 Strength Political Action Committee and Meredith O. Kelley, in her official capacity as

7 Treasurer, violated 2 U.S.C. §§ 434(b) and 441a(aX2) and 1 1 C.F.R. § 104.3(b).

9

10

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MUR590S (Hunter)General Counsel's Report #2

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16 VL RECOMRffypATIONS1718192021

2223242526

27 3. Find no icason to betieve that Peace Through St̂ ^28 aoiMenxttthG.KeUey, in her official capacty^29 §§434(b) and 441 a(a)^) with reject to the tdevision advertisements;

IS


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IS161718192021222324252627

MUR 5908 (Hunter)General Counsel* i Report #2

S. Approve the appropriate letters.

Date

Thomasenia P. DuncanGeneral Counsel

Kathleen GuithDeputy Associate General Counsel forEnforcement

Marie D.ShonkwilerAssistant General Counsel

Attorney

16


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