United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 27, 2005 Decided March 3, 2006
No. 04-1311
LAROUCHE’S COMMITTEE FOR A NEW BRETTON WOODS,
PETITIONER
v.
FEDERAL ELECTION COMMISSION,
RESPONDENT
Petition for Review of an Order of the Federal Election
Commission.
Robert P. Trout, Washington, D.C., argued the cause for
petitioner. With him on the briefs was John Thorpe Richards,
Jr., Washington, D.C.
Colleen T. Sealander, Associate General Counsel, Federal
Election Commission, argued the cause for respondent. With
her on the brief were Lawrence H. Norton, General Counsel,
Richard B. Bader, Associate General Counsel, and Holly J.
Baker, Attorney.
Before: GINSBURG, Chief Judge, and HENDERSON and
GRIFFITH, Circuit Judges.
Opinion for the Court filed by Circuit Judge GRIFFITH.
2
GRIFFITH, Circuit Judge: Petitioner LaRouche’s Committee
for a New Bretton Woods (the “LaRouche Committee” or
“Committee”) was the principal campaign committee for
Lyndon H. LaRouche Jr.’s bid for the Democratic party
presidential nomination in 2000. Pursuant to the Presidential
Primary Matching Payment Account Act (the “Act”), see 26
U.S.C. § 9033(a)(1)-(3); 11 C.F.R. § 9033.1(b)(3)-(5), the
LaRouche Committee received $222,034 in federal matching
funds from the Federal Election Commission (the “FEC”) in
connection with “mark-up charges” paid to vendors affiliated
with LaRouche. FEC regulations place upon a campaign that
receives federal funds the burden to prove that a challenged
payment is a “qualified campaign expense[].” 11 C.F.R.
§ 9033.11(a). After an audit and hearing, the FEC determined
that the LaRouche Committee failed to carry its burden to prove
that the mark-up charges were reasonable and ordered the
Committee to repay the $222,034. The Committee offered no
evidence before the FEC that established either the basis or the
reasonableness of the mark-up charges. We conclude, therefore,
that the FEC’s order to the Committee to repay the matching
funds used for the mark-up charges was not “arbitrary,
capricious, an abuse of discretion, or otherwise not in
accordance with law,” 5 U.S.C. § 706(2)(A), nor “unsupported
by substantial evidence.” Id. § 706(2)(E). We deny the petition
for review with respect to the repayment order. The LaRouche
Committee also challenges the FEC’s denial of its motion for
reconsideration of the repayment order. We dismiss this portion
of the petition for lack of jurisdiction because the LaRouche
Committee’s “intent to seek review” cannot “be fairly inferred
from the petition for review or from other contemporaneous
filings.” Entravision Holdings, LLC v. FCC, 202 F.3d 311, 313
(D.C. Cir. 2000); see also Fed. R. App. P. 15(a)(2)(C).
3
I.
During the 2000 presidential campaign, the LaRouche
Committee received $1,448,389 in federal matching funds. The
Committee spent the bulk of these funds for advertising and
fund-raising services by seven vendors that LaRouche and
several of his political associates created in the mid-1980’s to
provide and distribute material advocating LaRouche’s political,
philosophical, and scientific views.1 LaRouche was the vendors’
sole client. Some of these vendors had provided services to
LaRouche’s 1988, 1992, and 1996 presidential campaigns.
There were three components to the LaRouche Committee’s
payments to the vendors during the 2000 campaign: (1) an
amount resulting from an “activity ratio”2 applied to “baseline
costs”3; (2) fixed monthly fees ranging from $150 to $750; and
(3) a “mark-up” to the “activity ratio” amount.4 The first two
1
The seven vendors were American System Publications, Inc.,
Eastern States Distributors, Inc., EIR News Services, Inc., Hamilton
Systems Distributors, Inc., Mid-West Circulation Corp., Southeast
Literature Sales, Inc., and Southwest Literature Distributors, Inc.
2
The “activity ratio” attempted to capture the ratio of
campaign versus non-campaign activities performed by the vendors on
behalf of LaRouche. The LaRouche Committee defined it as “the
number of contributions raised for the Committee through use of the
[vendors’] facilities [divided] by the total of all sales and contribution
transactions for the distribution company.”
3
“Baseline costs” included “vendor costs implicated when
volunteers used corporate facilities, (e.g., offices, office equipment,
cars, phones, postage) or provided services to further Lyndon
LaRouche’s presidential campaign.”
4
The mark-up was 80% from July 1997 through September
1999, 50% for the last three months of 1999, and 0% during 2000 (for
4
components are not at issue here. The mark-up payments are.
The FEC audited the LaRouche Committee following the
2000 campaign and issued a Preliminary Audit Report on July
17, 2002, and a Final Audit Report on May 1, 2003. Both
reports found that the mark-ups were not qualified campaign
expenses because the “proferred reasons for the mark-up were
not supported by the facts.” Under the Act, a campaign must
return to the U.S. Treasury matching funds that are not spent as
qualified campaign expenses. See 26 U.S.C. § 9038(b)(1), (2).
The FEC auditors ordered the Committee to repay the matching
funds used for the mark-ups. On July 8, 2003, the LaRouche
Committee requested an administrative review of the Final
Audit Report and a hearing before the FEC. During the course
of the hearing, held on September 17, 2003, the LaRouche
Committee submitted a declaration from William J. Caldwell, a
Certified Public Accountant, in an effort to explain the mark-up
expenses. In supplemental materials submitted on September
26, 2003, the LaRouche Committee also stated that the mark-ups
included: “1) costs not included in the vendors’ baseline
charges and highly variable costs that were underestimated; 2)
compensation for one-time start up costs and intangibles; 3)
advance payment/bad debt reserves; and 4) a small profit.”
On March 11, 2004, the FEC issued its Repayment
Determination and ordered the LaRouche Committee to repay
$222,034. The $222,034 figure consisted of (a) $67,988 of
public funds used by the LaRouche Committee for payments
that were not qualified campaign expenses,5 and (b) $154,046 in
an average of 32% per year).
5
Over the course of the 2000 presidential campaign, the
Committee overpaid vendors by $241,519. The FEC determined that
28.15% of this overpayment was through public funds. The FEC
therefore concluded that the LaRouche Committee owed “a pro-rata
5
matching funds received in excess of LaRouche’s entitlement.6
Both components of the repayment result from the FEC’s
determination that the vendor mark-ups were not qualified
campaign expenses.
The FEC set forth six factors that influenced its
determination: (1) the LaRouche Committee “did not provide
any verifiable basis for the mark-up charges it used;” (2) many
of the indirect costs cited by the Committee to “justify the mark-
up would appear to have already been captured by the activity
ratio;” (3) the probability of default was low given the
Committee’s history with the vendors, a factor that would refute
the need for a mark-up charge; (4) the Committee’s failure to
provide records “to explain and support [its] general categorical
descriptions of unidentified and hidden vendor costs;” (5) the
Committee’s failure “to produce any document by which the
[FEC] can either quantify the mark-up charges or determine the
reasonableness of . . . mark-up charges proffered;” and (6) the
Committee’s inability to “justify the original, frontloaded 80%,
50% and 0% mark-up structure.”
The Committee petitioned the FEC to reconsider its order
on two grounds. First, it contested the FEC’s calculation of the
amount of the repayment. The FEC granted rehearing on this
issue and affirmed its order that the Committee repay $222,034.
Second, the Committee sought an adjustment of the repayment
repayment of $67,988 ($241,519 x .2815) to the United States
Treasury.”
6
Disallowing the mark-up expenses reduced the Committee’s
net outstanding campaign obligations on October 2, 2000 to $9,226.
However, the LaRouche Committee received matching fund payments
after October 2, 2000 totaling $163,272. The FEC thus concluded that
the LaRouche Committee received $154,046 ($163,272 - $9,266) of
public funds in excess of LaRouche’s entitlement.
6
amount based on repayments requested from its vendors in the
wake of the FEC’s order. The FEC denied reconsideration of
this issue. The Committee petitions this Court for review of the
FEC’s repayment order and the denial of the motion for
reconsideration. We deny the petition for review with respect to
the repayment order and dismiss, for lack of jurisdiction, the
challenge to the FEC’s denial of the motion for reconsideration.
II.
The Presidential Primary Matching Payment Account Act
provides partial federal financing for the campaigns of eligible
candidates. 26 U.S.C. §§ 9031-9042. Candidates may only use
federal funds to defray “qualified campaign expenses,”7 id.
§ 9042(b), and must repay any funds that the Commission finds
were used for another purpose, id. § 9038(b)(2). Candidates
must prove that the matching funds are spent on “qualified
campaign expenses,” id. § 9033.11(a), and agree in writing to
“keep and furnish to the Commission all documentation relating
to disbursements and receipts,” id. § 9033.1(b)(5), as well as any
“other information the Commission may request,” id.
7
26 U.S.C. § 9032 defines the term “qualified campaign
expense” as
a purchase, payment, distribution, loan, advance, deposit, or
gift of money or of anything of value—
(A) incurred by a candidate, or by his authorized
committee, in connection with his campaign for
nomination for election, and
(B) neither the incurring nor payment of which
constitutes a violation of any law of the United States
or of the State in which the expense is incurred or
paid . . . .
7
§ 9033.1(b).
The Act requires the Commission to audit every publicly-
funded campaign. 26 U.S.C. § 9038(a). The Commission has
adopted detailed procedures for these audits. After examining
a candidate’s books, records, and personnel, the FEC issues a
Preliminary Audit Report and affords the candidate an
opportunity to respond. See 11 C.F.R. § 9038.1(c)(1)-(2). The
Commission then issues a Final Audit Report that contains a
repayment determination. See id. § 9038.1(d)(1). The candidate
may seek administrative review. See id. § 9038.2(c)(2). As part
of this review, a candidate may request an oral hearing. See id.
§ 9038.2(c)(2)(ii). Following review, the FEC issues a
Repayment Determination with a Statement of Reasons. See id.
§ 9038.2(c)(3). The candidate may file a petition for rehearing
before the FEC, limited to “new questions of law or fact that
would materially alter the Commission’s . . . repayment
determination.” Id. § 9038.5(a). Here, the LaRouche
Committee exercised its right to challenge the FEC’s
determinations during every step of the audit process, including
at an oral hearing.
Section 9041 of the Act, 26 U.S.C. § 9041, directs that we
review the repayment decisions of the FEC under the arbitrary
and capricious standard of the Administrative Procedure Act.
See 5 U.S.C. § 706(2)(A); Comm. to Elect Lyndon La Rouche v.
FEC, 613 F.2d 834, 845-46 (D.C. Cir. 1979). We must “hold
unlawful and set aside agency action, findings, and conclusions
found to be . . . arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law,” 5 U.S.C. § 706(2)(A), or
“unsupported by substantial evidence.” Id. § 706(2)(E).
“Under this highly deferential standard of review, the court
presumes the validity of agency action . . . and must affirm
unless the [agency] failed to consider relevant factors or made
a clear error in judgment.” Cellco P’ship v. FCC, 357 F.3d 88,
8
93-94 (D.C. Cir. 2004) (citation and quotation marks omitted).
Our task is limited and familiar. “A court cannot substitute its
judgment for that of an agency . . . and must affirm if a rational
basis for the agency’s decision exists.” Bolden v. Blue Cross &
Blue Shield Ass’n, 848 F.2d 201, 205 (D.C. Cir. 1988) (citation
omitted).
The Committee argues that the FEC’s repayment order was
arbitrary and capricious because it failed to credit the
uncontested affidavit of an expert that the challenged vendor
mark-up expenses were normal and usual charges and failed to
acknowledge that the mark-ups were a necessary means to
comply with the limitations on corporate campaign contributions
imposed by 2 U.S.C. § 441b. We conclude that the Committee’s
arguments are without merit.
After allowing the LaRouche Committee ample opportunity
on three occasions to try to prove the mark-up charges were
qualified campaign expenses, the FEC properly found that the
LaRouche Committee “failed to produce any document by
which the Commission can either quantify the mark-up charges
or determine the reasonableness of . . . the . . . mark-up charges
proffered by the [LaRouche Committee].” The Committee
argues this determination was wrong because it “completely
overlooked the expert testimony provided in the Declaration of
William J. Caldwell.” The Committee asserts that the
uncontroverted Caldwell declaration established that the mark-
up charges were reasonable.
The record shows, however, that the Commission
considered the Caldwell declaration: the FEC’s Statement of
Reasons specifically recognized that the Committee alleged that
a “15% mark-up is standard” and cites the Caldwell declaration
as “Attachment 2 at 165-66.” Although the Commission did
not discuss the declaration in its decision, an agency “is not
9
obliged to summarize in its decision the contents of all of the
documents in the record before it.” SBC Commc’ns Inc. v. FCC,
56 F.3d 1484, 1492 (D.C. Cir. 1995). The passing reference to
the declaration in the Commission’s decision is hardly
surprising. The declaration is immaterial and unsubstantiated,
provides no information about the actual mark-up expenses, and
does nothing more than opine that the type of mark-up charged
by these LaRouche-affiliated vendors is “reasonable for the
market.” In reaching this ungrounded conclusion, the
declaration fails to provide any supporting evidence or
documentation. Mr. Caldwell fails to mention even a single
example of a company or firm that collects a similar mark-up.
The declaration failed to provide the FEC with “relevant
factors” regarding the mark-up charges. See Cellco P’Ship, 357
F.3d at 94.
The LaRouche Committee argues that the FEC cannot
ignore an “uncontroverted affidavit presented by a campaign,”
citing Robertson v. FEC, 45 F.3d 486 (D.C. Cir. 1995). As we
have just shown, the FEC did not ignore the Caldwell
declaration. In any event, Robertson provides no help to the
Committee. In Robertson, we overturned an FEC determination
because the Commission ignored an affidavit from an affiant
who had personal factual knowledge about material events at
issue in the case. Id. at 492-93. Here, by contrast, Mr.
Caldwell’s declaration does not provide factual information
about which he has first-hand knowledge—rather, it simply
contains his general, unsubstantiated, and conclusory opinion
that the charged mark-up was reasonable.
The Committee also argues that its payment of the mark-up
charges was a qualified campaign expense because it was
compelled by § 441b(a) of the Federal Election Campaign Act
of 1971 (“Campaign Act”), 2 U.S.C. §§ 431-455, which
prohibits corporations from making “a contribution or
10
expenditure in connection with any [federal] election” and also
prohibits “any candidate, political committee, or other person
[from] knowingly . . . accept[ing] or receiv[ing] any contribution
prohibited by this section.” The Campaign Act defines
“contribution or expenditure” as “any direct or indirect payment,
distribution, loan, advance, deposit, or gift of money, or any
services, or anything of value . . . to any candidate, campaign
committee, or political party or organization, in connection with
any election to any of the offices referred to in this section.” Id.
§ 441b(b)(2). The Committee claims that the mark-ups were
simply the vendors’ attempt to avoid an underpayment that
would violate § 441b.
This argument misses the mark. The FEC has not
concluded that mark-up charges can never be qualified
campaign expenses. In fact, the Commission expressly
recognized that “there are indirect and hidden costs inherent in
many commercial transactions, and that vendors may mark-up
charges in order to cover such costs and to make a profit.” The
issue here is not whether mark-up charges may ever be qualified
campaign expenses. They may. Rather, the issue here is the
Committee’s failure to provide the FEC “any verifiable basis for
the mark-up charges it used.” The Committee did not carry its
burden of showing that the FEC has “failed to consider relevant
factors or made a clear error in judgment,” see Cellco P’ship,
357 F.3d at 94, in its determination that the Committee must
repay the federal funds spent in connection with the mark-ups.
Faced with such a failure, we see nothing that is “arbitrary,
capricious, an abuse of discretion, or otherwise not in
accordance with law” in the FEC’s repayment determination. 5
U.S.C. § 706(2)(A).
Finally, we turn to the Committee’s argument that the FEC
arbitrarily and capriciously denied its petition for rehearing,
which we also reject. Rule 15(a) of the Federal Rules of
11
Appellate Procedure requires that a petition for review “specify
the order or part thereof to be reviewed.” Fed. R. App. P.
15(a)(2)(C). “Failure to specify the correct order can result in
dismissal of the petition.” Entravision Holdings, 202 F.3d at
312. “A mistaken or inexact specification of the order to be
reviewed will not be fatal to the petition, however, if the
petitioner’s intent to seek review of a specific order can be fairly
inferred from the petition for review or from other
contemporaneous filings, and the respondent is not misled by the
mistake.” Id. at 313 (collecting cases).
By its terms, the Committee’s petition to this Court sought
review only of the repayment order and not of the denial of its
motion for reconsideration. Its only mention of the denial of
that motion in its petition for review was a passing reference in
its recitation of the procedural history of this case: “[the
Committee had] filed a timely motion for reconsideration of the
March 11, 2004 decision on March 31, 2004, which was denied
by the commission in a letter dated August 10, 2004.” Referring
to the denial without expressly seeking review is inadequate.
The “other contemporaneous filings,” the Petitioner’s Statement
of Issues To Be Raised on Appeal and the Docketing Statement,
both filed on October 18, 2004, make no reference to the motion
for reconsideration. The Petitioner’s Statement of Issues To Be
Raised on Appeal does not refer to the August 10, 2004 order.
The Docketing Statement only lists the March 11, 2004,
repayment order under the heading “Rulings Under Review”
and, in the space after “Give date(s) of order(s),” states
“3/11/04; 8/10/04.” Such a passing reference is inadequate. On
March 1, 2005, the Committee filed a merits brief with this
Court which added–for the first time–the FEC’s denial of the
petition for rehearing to the list of “Rulings Under Review” and
which briefed additional issues related to the petition for
rehearing.
12
We are without jurisdiction to review the FEC’s denial of
the Committee’s motion to reconsider the repayment order
because we cannot infer an “intent to seek review” from the
insufficient references in the petition for review and docketing
statement. See Entravision Holdings, 202 F.3d at 312-13; Fed.
R. App. P. 15(a)(2)(C). The Committee’s late attempt to raise
this issue in its merits brief was well past the thirty days allowed
for seeking review in this Court. See 26 U.S.C. § 9041(a).
III.
For the foregoing reasons, we deny the petition for review
with respect to the repayment order and dismiss, for lack of
jurisdiction, the Committee’s challenge to the denial of the
motion for reconsideration.
So ordered.