MINUTES FOR OCTOBER 23, 2019 MEETING

From Hawaii Campaign Spending Commission

Posted on Nov 21, 2019

Docket No. 20-09 – In Re the Matter of John Carroll, Alice Paet-Ah Sing, and Friends for John Carroll

Executive Director Izumi-Nitao reported that a complaint had been filed against Respondents John Carroll, Alice Paet-Ah Sing, and Friends for John Carroll for the failure to report contributions and expenditures as well as prohibited expenditures.

Respondent Carroll is the candidate and Respondent Paet-Ah Sing was the treasurer at the time of the alleged violation of the candidate committee called Friends for John Carroll.

Pursuant to HRS §§11-331 and 11-335, Respondents were required to file complete and accurate reports that disclose the committee’s contributions and expenditures for the reporting period and election period. On 10/1/19, Respondents amended and filed two (2) reports reporting 5 contributions totaling $535 which were not previously or timely reported.  On 10/1/19, Respondents amended and filed four (4) reports reporting 34 expenditures totaling $2,004.76 expenditures which were not previously or timely reported.

On 10/2/19, Commission staff sent Respondents a letter via first class mail informing them that a fine of $1,500 (i.e., $250 per schedule for unreported contributions and expenditures) would be imposed for the unreported contributions in the original filing of the 2nd Preliminary Primary Report and Final Primary Report as well as the unreported expenditures in the original filing of the 1st Preliminary Primary Report, 2nd Preliminary Primary Report, Final Primary Report, and Preliminary General Report.  The deadline to pay the fine was 10/16/19.  Respondents did not pay the fine.

Pursuant to HRS §11-382(3), campaign funds shall not be used for personal expenses.  Under HAR §3-160-42(b)(6), “personal expenses” means expenses that would exist irrespective of a candidate’s campaign to seek the nomination or election to office or being elected to an office.  Respondents reported a monthly charge of $14.65 to Netflix on 6/19/18 (1st Preliminary Primary Report), 7/17/18 (2nd Preliminary Primary Report), and 8/17/18 (Preliminary General Report) for “online research” for a total expense of $43.95.

On 10/3/19, Commission staff sent Respondents a letter via first class mail informing them that a fine of $21.98 (i.e., 50% of the prohibited expense) and personal reimbursement of $43.95 to Respondent Friends for John Carroll would be assessed for the prohibited expenditures and that the deadline to pay the fine and personally reimburse the campaign was 10/17/19.

On 10/7/19, Respondent Carroll acknowledged notification of the campaign finance violations and informed Commission staff that he would like to challenge the violations.

On 10/8/19, Commission staff sent Respondents a copy of the complaint and informed them that the matter would be set on the 10/23/19 Commission Agenda.

Executive Director Izumi-Nitao recommended that the Commission make a preliminary determination, pursuant to HRS §11-405(a), that probable cause exists to believe that a violation of the campaign spending law has been committed, assess an administrative fine of $1,521.98, order that the fine be deposited into the general fund of the state pursuant to HRS §11-410(e), and order that Respondent Carroll personally reimburse $43.95 to the committee within 20 days of receipt of the Order.

Respondent John Carroll was present and stated that he accepts responsibility for what happened and asked for mercy.  He stated that Eric Ryan should pay the fines because the violations involved his actions.  He further commented that he did not want to go to the police to seek criminal charges because Eric Ryan has done good things for the committee in the past.

General Counsel Kam stated that Eric Ryan is not on the complaint because he is not on the Organizational Report of the candidate committee, and thus, not an officer of the candidate committee.  Also, Respondent Carroll expressed reluctance to pursue a criminal case against Ryan.

Vice Chair Shoda commented that he appreciated that Respondents corrected their reports and was saddened to have to assess a fine for correcting reports, but that it was important that when Respondents filed their reports, their report should have been true and accurate so the public had the correct information at that time.

Commissioner Tsuji moved to make a preliminary determination that probable cause exists that a violation had been committed and to accept the fine and terms stated in the complaint.  Motion seconded by Commissioner Lum.  Motion carried (4-0).

2018: Will Disbarred Lawyer John Carroll Exploit Trump Loving Hawaii Republicans to Win Gubernatorial Nomination?

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Docket No. 20-05 – In Re the Matter of Shirlene DelaCruz Ostrov, Marilyn Moniz, Hawaii Republican Party, and Annie Chan

Executive Director Izumi-Nitao reported that a complaint had been filed against Respondents Shirlene DelaCruz Ostrov, Marilyn Moniz, Hawaii Republican Party, and Annie Chan for the failure to report contributions and expenditures as well as for an excess contribution.

Respondent Hawaii Republican Party is a registered noncandidate committee that is a political party that satisfies the requirements of HRS §11-61, and thus, is subject to an aggregate $25,000 contribution limit per person in any two-year election period under HRS §11-360(a).

In the last amended Organizational Report filed with the Commission, Respondent Ostrov is listed as the chairperson and Respondent Moniz is identified as the treasurer of Respondent noncandidate committee.

HRS §11-331(b) provides that every report required to be filed by a noncandidate committee shall be certified as complete and accurate by the chairperson and treasurer.  HRS §11-335 requires the authorized person in the case of a party to file reports that disclose all contributions received and expenditures made.

On 8/28/19, Respondents amended and filed four (4) reports reporting a total of twenty (20) contributions totaling $1,044.35 which were not previously or timely reported.  On this same date, Respondents amended and filed four (4) reports reporting a total of eleven (11) expenditures totaling $9,084.25 which were not previously or timely reported.

On 9/3/19, Commission staff sent Respondents a letter via first class mail informing them that a fine of $2,000 (i.e., $250 per schedule for unreported contributions and expenditures) would be imposed for the unreported contributions in the original filing of two (2) Supplemental Reports (1/1/17-6/30/17 and 7/1/17-12/31/17), Preliminary Primary Report (1/1/18-7/27/18), and 2nd Preliminary General Report (9/27/18-10/22/18) as well as the unreported expenditures in the original filing of two (2) Supplemental Reports (1/1/17-6/30/17 and 7/1/17-12/31/17), Preliminary Primary Report (1/1/18-7/27/18), and 2nd Preliminary General Report (9/27/18-10/22/18).  The letter informed Respondents that they could avoid the complaint process by waiving their rights to be heard at a HRS chapter 92 public meeting and a HRS chapter 91 contested case hearing, and voluntarily paying the $2,000 fine by 9/17/19.

In a letter dated 9/17/19, Respondents asked the Commission to reconsider the proposed fine of $2,000 “in light of the efforts made by the [Hawaii Republican] Party to be in compliance, the mitigating factors surrounding the oversights, including the fact that the [Hawaii Republican] Party self-reported, and the hardship that would be suffered by the [Hawaii Republican] Party if it is required to pay the fines as currently assessed.”

HRS §11-364(a) provides that any noncandidate committee that is a political party that receives in the aggregate of more than $25,000 per person in a two-year election period “shall return any excess contribution to the contributor within thirty days of receipt of the excess contribution.  Any excess contribution not returned to the contributor shall escheat to the Hawaii election campaign fund.”  Subsection (b) further provides that a “noncandidate committee that complies with this section prior to the initiation of administrative action shall not be subject to any fine under section 11-410.”

HRS §11-361(a) provides that “[a]ll contributions and expenditures of a person whose contributions and expenditures are financed, maintained, or controlled by any corporation, labor organization, association, party, or any other person, including any parent, subsidiary, branch, division, department, or local unit of the corporation, labor organization, association, party, political committees established and maintained by a national political party, or by any group of those persons shall be considered to be made by a single person.”

Upon review of Respondents’ reports filed with the Commission, Commission staff found a $25,000 contribution on 8/30/17 and an $11,000 contribution on 9/25/18 from Respondent Annie Chan.  The $11,000 check was drawn upon the account of KC Realty, LLC.  Subsequent discussions with Respondents revealed that Respondent Chan finances, maintains, and controls KC Realty, LLC, and thus, under HRS §11-361(a), an aggregate contribution of $36,000 was made within the two-year election period to Respondent Hawaii Republican Party thereby exceeding their contribution limit of $25,000 by $11,000.  Respondent Hawaii Republican Party did not return the excess contribution to Respondent Chan within 30 days of receipt.

On 9/10/19, Commission staff sent Respondents a letter via first class mail informing them that Respondent Chan made an excess contribution to their committee.  The letter informed Respondents that they could avoid the complaint process by waiving their rights to be heard at a HRS chapter 92 public meeting and a HRS chapter 91 contested case hearing, and voluntarily escheating the $11,000 excess contribution by 9/24/19.  The letter also informed Respondents that a $1,000 administrative fine would be assessed against the excess contributor Respondent Chan.

On 9/10/19, Commission staff sent Respondent Annie Chan a letter via first class mail informing her of her excess contribution to Respondents.  The letter informed Respondent Chan that she could avoid the complaint process by waiving her rights to be heard at a HRS chapter 92 public meeting and a HRS chapter 91 contested case hearing, and voluntarily paying the $1,000 fine.  Respondent Chan was further informed that Respondent Hawaii Republican Party would be paying her fine which could be reduced through a Conciliation Agreement process if she so chose.

In a letter dated 9/24/19, Respondents asked the Commission to reconsider and rescind the excess contribution.  In the alternative, Respondents requested that they be able to return the excess contribution to Respondent Chan and reduce the excess contributor fine to $333.33 because the error was unintentional.

With respect to the excess contribution, Respondents and Respondent Chan were informed of the possibility of a Conciliation Agreement to reduce the fine from $1,000 to $333.33 which was ultimately rejected by Respondents to pursue the instant complaint.

On 10/16/19, Commission staff sent Respondents and Respondent Chan a copy of the Complaint and set the matter on the 10/23/19 Campaign Spending Commission Agenda.

Executive Director Izumi-Nitao recommended that the Commission make a preliminary determination, pursuant to HRS §11-405(a), that probable cause exists to believe that violations of the campaign spending law have been committed, assess an administrative fine of $2,000 against Respondents, assess an administrative fine of $1,000 against Respondent Chan, order that the fines be deposited into the general fund of the state pursuant to HRS §11-410(e), order Respondents to escheat $11,000 to the Hawaii Election Campaign Fund, and order that Respondent Hawaii Republican Party amend their report to reflect that KC Realty, LLC, made an $11,000 contribution to them on 9/25/18 rather than Respondent Chan within 2 weeks of receipt of the order.

Respondent Shirlene Ostrov and Respondent Marilyn Moniz were present at the Commission meeting.  Respondent Ostrov admitted to the violations but sought mitigation.  She stated that she is new to politics and that it has been a huge learning curve.  She stated that the party wants to comply and a large part of their budget is used for professional services to comply with the laws.  Respondent Ostrov commented that many of these violations occurred before her time as committee chair, that it took several months to identify the problems, and that they self-reported the errors.  With respect to Respondent Chan, she stated that Annie Chan is a generous donor and that the checks and balances in the electronic filing system did not capture the excess contribution.  Respondent Ostrov asked for mercy and reduction of the fines.

Discussion ensued on whether Respondents obtained campaign finance training which they said they did.  Chair Luke commented that he appreciated Respondents willingness to come forward, self-report their errors, and stay in compliance.  Respondent Ostrov stated that it is the party’s position that candidates must obtain campaign finance training if they want the party’s endorsement.

Vice Chair Shoda asked about the checks and balances of the electronic filing system.  Associate Director Baldomero said that Respondents entered a different address for Respondent Chan (i.e., one in Hawaii and one in California) which is why the system did not capture the excess contribution.  Executive Director Izumi-Nitao pointed out that the one from California from Annie Chan was actually from KC Realty, LLC which should have been the appropriate contributor entry in the first place.  Discussion ensued on whether the excess $11,000 contribution could be returned to Respondent Chan to which Commission staff commented that it was beyond the 30 days permitted by statute.

Respondent Moniz commented that she is thankful that the party has cleaned up its records and appreciated Commission staff’s assistance.

Commissioner Tsuji stated that he would like to reduce the fine for failure to report contributions and expenditures from $2,000 to $1,000.  Discussion ensued about reducing the fine.  Vice Chair Shoda commented that he liked the idea of reducing the fine in consideration of the Respondents’ commitment to making it mandatory for candidates to attend campaign finance training if they want the party’s endorsement.  Chair Luke agreed.

Commissioner Tsuji moved to make a preliminary determination that probable cause exists that a violation had been committed and to accept the fine and terms stated in the complaint with the exception of reducing the fine to $1,000 for failure to report contributions and expenditures.  Motion seconded by Commissioner Lum.  Motion carried (4-0).

read … CSC Minutes of Oct 23, 2019