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1993-1: Expenditure Limit for Special Election; Use of Telephone Service to Raise Contributions

Wednesday, February 17, 1993

An advisory opinion has been requested concerning the possible use of an "800" number telephone service for the solicitation of contributions by the committee ("the Committee") authorized by Mayor David N. Dinkins, a prospective 1993 mayoral candidate. The request describes a series of contractual relationships among the Committee and several companies. These companies will provide access to an "800" number, "800" number service, and will make charges to credit card accounts. The Board approves this proposal, based upon the specific facts described in the request,1 subject to the conditions described below, the purpose of which is to ensure compliance with the Campaign Finance Act and Board rules.

As described in the request, callers will make contributions from credit card accounts. The caller will provide relevant credit card account information either through a touch-tone response or by recording an oral message on a magnetic tape. Committee staff will then telephone each caller to obtain information required to be disclosed pursuant to the New York City Campaign Finance Act, Board rules, and State law. Funds drawn from the contributors' credit card accounts will ultimately be forwarded to the Committee.

The Committee asks whether contributions raised through the proposed "800" number plan comply with the requirements of the New York City Campaign Finance Program and may qualify as matchable contributions.

In order to comply with Program requirements, the "800" number plan must include procedures that: (1) verify that each contribution was actually made by its purported contributor and that the funds representing these verified contributions, and only those funds, are actually received by the Committee; and (2) assure that the Committee will meet the public disclosure and recordkeeping requirements of the Program. If the procedures are successful in carrying out these two purposes, then the verified contributions may be matched, as long as they also meet the legal requirements for matchable contributions, and the Committee maintains a record for each contribution sufficient to show that these legal requirements have been met.2

The request describes a fund raising plan in which contributions are charged to credit card accounts and recorded initially not by the Committee itself, but by a sub-sub-contractor, based on information provided by telephone calls. To the extent that there is a risk that the contribution will not be paid, or that it will be paid by someone other than its purported contributor,3 it is the Committee's responsibility to assure that the plan's verification procedures are sufficient to prevent either occurrence and that these procedures are carefully followed.

At a minimum, the following procedures are necessary:

1) Script for Pre-recorded Solicitation. Callers must be asked to provide the credit card company and account number for the account to which the contribution will be charged and the contributor's telephone number(s). The script must inform the caller that the credit card account used must be that of the named contributor and that contributions cannot be accepted under an individual's name unless drawn from that individual's personal account. The script must also make clear that: (i) the Committee will make a verification telephone call to obtain information about the contributor that must be disclosed pursuant to the Campaign Finance Act, as discussed below; and (ii) if the required information is not obtained the Committee is prohibited by law from accepting the contribution.

2) Verifying the Contribution. The Committee may not accept funds representing contributions that have not been verified. To verify the contribution, the Committee must complete the verification telephone call and maintain a verification call record, described below. The verification call must confirm the name and residential address of the contributor, contribution amount, and that the contribution will be paid from the contributor's own account. The Committee must also request the name and address of the contributor's employer, and the contributor's occupation, if the contributor has given more than $99 in total to the campaign. See New York City Administrative Code §3-703(6); Campaign Finance Board Rules 3-03(c)(1)(i), (6); 4-01(b)(4); 4-02(b).

3) Forwarding Verified Contributions to the Committee. The Committee may not receive an amount that exceeds the total of verified contributions (less any fees withheld by the companies). The Committee must not receive any amount representing unverified contributions. These companies may not retain any portion of an unverified contribution in lieu of the fee they would otherwise charge for the services they perform.

4) Disclosure. Funds received as a result of this fund raising plan are "contributions." Administrative Code§3-702(8). The gross amount received from the contributor will be subject to the contribution limit applicable under Administrative Code §3-703(1)(f), regardless of any fees paid to the companies for performance of the services described in the request. The Committee must report the fees to the companies as expenditures.4

The date of receipt for a contribution solicited by "800" telephone fund raising is the date that the funds for a given verified contribution are actually received by the Committee. Rule 1-04(a). This date must be reported in the appropriate disclosure statement for the contributions that are accepted and deposited. Rule 3-03(a). See also Administrative Code §3-703(10); Rule 1-04(b), (c)(2).

5) Recordkeeping. Rule 4-01(b)(2) requires participants to maintain a photocopy of a "monetary instrument" for each contribution. As long as the verification requirements are strictly observed, the equivalent of a credit card slip will suffice to meet this requirement. In addition, for funds raised under the proposed plan, the Committee must keep a record for each verification telephone call, including the name of the person who made the call, the date and time of the verification call, the telephone number called, and the responses to all of the inquiries described on page 3. This record must be signed by the person making the call, affirming that he or she verified the contribution and the information required to be disclosed, and submitted to the Board, like all other required records, upon its request. See Administrative Code §3-703(1)(d); Rules 4-01(a), (b); 4-02; 5-01 (e)(2), (f)(4).5 When funds are forwarded to the Committee, the Committee must keep a record identifying the specific verified contributions and "800" number telephone calls represented by the forwarded funds. Rule 4-01(a).

6) Matchable Contributions. To be matchable, a contribution must be made by a natural person who is a resident of the City of New York. Administrative Code §3-702(3); Rule 5-01(d). The Committee, as described above, must verify that the contribution meets these requirements. The Committee must also verify that the matchable contribution claim is valid, based on all criteria set forth in the Campaign Finance Act and Board rules, including that the credit card account billed for the contribution belongs or is issued to the individual contributor, and not to a business, organization, or other person. Id.

If the Committee adheres to the procedures outlined in this advisory opinion, the verified contributions raised under the proposed "800" number plan will meet the Program's requirements.6

NEW YORK CITY CAMPAIGN FINANCE BOARD

1 The request is reproduced as an appendix to this advisory opinion. This advisory opinion is predicated on the hypothetical facts presented in the request. Any application of this opinion will of course depend on the actual facts of a given case, and even minor changes in the hypothetical facts presented could result in a different opinion.

2 The issue whether funds raised by the proposed "800" number fund raising plan comply with the requirements of Article 14 of the New York State Election Law is beyond the scope of this Advisory Opinion.

3 The Committee may accept a contribution only if it is made from an account in the name of the actual contributor. See Advisory Opinion No. 1989-5 (January 25, 1989).

4 Both fees paid directly by the Committee and fees withheld from funds forwarded must be reported on Campaign Finance Board disclosure schedule E, "Expenditure Payments." The subcontractor disclosure requirements of Rule 3-03(e)(3) and recordkeeping requirements of Rule 4-01(h) will not be applicable unless the contractor pays a subcontractor for the services it performs.

The amounts paid must be at the fair market value for the services provided; otherwise these services will be in-kind contributions to the Committee. See Rule 1-04(g)(2), (3). The Committee must maintain and provide to the Board all documentation relevant to the contractual relationships regarding this fund raising plan and its implementation. Administrative Code §3-703(1)(d); Rules 4-01(a); 4-02.

Because the companies perform inter-related and routinized tasks in delivering the verified contributions to the Committee, they will together be treated as "fundraising agents", for funds raised under the proposed plan. Fundraising agents must be listed on the campaign information form. See Rule 2-04(c). As agents of the Committee, each of these companies must cooperate with requests for information or other inquiries by the Board. Because these companies are fundraising agents, they must not be reported as intermediaries. Rule 3-03(c)(7)(ii).

5 The intentional or knowing furnishing of false information is punishable by civil and criminal penalties. Administrative Code §3-711(1), (3).

6 If a contribution has been verified, received, deposited, and reported, as described above, but is subsequently disputed by the credit card holder, the contribution must be refunded by the Committee, regardless of any restriction otherwise provided pursuant to Rule 1-04(c)(2). The Committee must issue a check payable to the contributor and report the refund on Campaign Finance Board disclosure schedule D, "Contributions Refunded and Other Receipts Adjustments." Any refunds of contributions for which public matching funds were paid will result in a corresponding reduction from future matching funds payments and/or repayment to the Board. Administrative Code §3-702(3); Rule 3-04(c). As discussed above, the Committee may not receive funds representing contributions it has not verified.